<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE , 1998
REGISTRATION NO. 333-49715
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ALADDIN GAMING ENTERPRISES, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
NEVADA 6719 88-0379695
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) Number)
</TABLE>
------------------------------
831 PILOT ROAD
LAS VEGAS, NEVADA 89119
(702) 736-7114
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
------------------------------
RICHARD J. GOEGLEIN
ALADDIN GAMING ENTERPRISES, INC.
831 PILOT ROAD
LAS VEGAS, NEVADA 89119
(702) 736-7114
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------------
Copies to:
WALLACE L. SCHWARTZ, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 735-3000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to rule 434,
please check the following box. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER WARRANT OFFERING PRICE FEE
<S> <C> <C> <C> <C>
Warrants to purchase Class B
Common Stock...................... 2,215,000 $6.77 $15,000,000 $4,425.00
Class B Common Stock(2)............. 2,215,000 $0.001 $2,215 $0.65
Total -- -- 15,002,215 $4,425.65
</TABLE>
(1) Estimate solely for the purpose of computing the registration fee in
accordance with Rules 457(g) and (i) of the Securities Act, based on the
book value of the Warrants registered hereunder and the amount payable on
exercise of such Warrants.
(2) Such shares of Class B Common Stock are issuable upon exercise of the
Warrants registered hereunder. This Registration Statement also covers such
shares as may be issuable pursuant to anti-dilution adjustments.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION DATED JUNE , 1998
PROSPECTUS
[LOGO]
2,215,000 WARRANTS TO PURCHASE SHARES OF CLASS B COMMON STOCK OF
ALADDIN GAMING ENTERPRISES, INC.
------------
This Prospectus relates to the 2,215,000 warrants (the "Warrants") of
Aladdin Gaming Enterprises, Inc., a Nevada corporation (the "Issuer") to
purchase Class B non-voting common stock, no par value, (the "Common Stock") of
the Issuer. The Warrants are exercisable at any time on or after the Separation
Date (as defined herein) at an exercise price of $0.001 per Warrant Share (as
defined herein), subject to adjustment, and, unless exercised, will expire on
March 1, 2010. The Warrants were originally issued and sold on February 26, 1998
(the "Issue Date") to the Initial Purchasers (as defined herein) pursuant to an
offering (the "Offering") by Aladdin Gaming Holdings, LLC, a Nevada
limited-liability company ("Holdings"), Aladdin Capital Corp., a Nevada
corporation ("Capital" and together with Holdings, the "Note Issuers") and the
Issuer, (the Issuer, together with the Note Issuers, the "Aladdin Parties") of
221,500 Units (the "Units") each consisting of $1,000 principal amount at
maturity of 13 1/2 Senior Discount Notes (the "Notes") due 2010 of the Note
Issuers and 10 Warrants, and were simultaneously sold by the Initial Purchasers
in transactions exempt from the registration requirements of the Securities Act
of 1933, as amended (the "Securities Act") in the United States to persons
reasonably believed to be qualified institutional buyers as defined in Rule 144A
under the Securities Act.
The number of shares of Common Stock purchasable upon the exercise of the
Warrants and the Exercise Price (as defined herein) will be subject to
adjustment on the occurrence of certain events (subject to certain exceptions)
including (i) the payment by the Issuer of dividends (and other distributions)
in shares of any class of the Issuer's capital stock ("Issuer Stock"), (ii)
subdivisions, combinations and reclassifications of Issuer Stock, (iii)
issuances to all holders of Issuer Stock of rights, options, or warrants
entitling them to subscribe for Issuer Stock or of securities convertible into
or exchangeable for Issuer Stock for a consideration per share of Issuer Stock
which is less than the current market price per share of Issuer Stock and (iv)
the distribution to all holders of Issuer Stock of any of the Issuer's assets,
debt securities or any rights or warrants to purchase such securities (excluding
those rights and warrants referred to in clause (iii) above and excluding cash
dividends less than a specified amount).
The net proceeds from the Offering together with the proceeds from the other
Funding Transactions (as defined herein), including the new $410.0 million Bank
Credit Facility (as defined herein) entered into by Aladdin Gaming, LLC (the
"Company"), a Nevada limited-liability company and a wholly-owned subsidiary of
Holdings and $80.0 million available under the FF&E Financing (as defined
herein), will be used to finance the development, construction and opening of a
hotel and casino, the Aladdin Hotel and Casino in Las Vegas, Nevada (the
"Aladdin"). Pursuant to the Disbursement Agreement (as defined herein), all of
the proceeds from the Offering must be expended before any of the proceeds of
the Bank Credit Facility may be disbursed. The security interests in the
Company's assets relate to substantially all of the Company's assets and such
assets are therefore subject to liens, pledges and other encumbrances for the
benefit of third parties.
The Company is in the development stage and has no assets or operations
other than its interests in the Aladdin, and activities in connection with the
Aladdin's development. Therefore, the Company will have no significant revenues
until the Aladdin becomes operational. It is expected that the Aladdin will
become operational in the first four months of the year 2000. Upon completion of
the Aladdin, the Company will be highly leveraged with substantial fixed debt
service obligations in addition to operating expenses, and is expected to have
$430.0 million of outstanding indebtedness on a consolidated basis, including
$410.0 million outstanding under the Bank Credit Facility and an aggregate of
$20.0 million outstanding under the loan portion of the FF&E Financing. The FF&E
Financing will also consist of $60.0 million of operating leases. Upon the
opening of the Aladdin, the Company is also expected to have an aggregate of
$10.0 million available under a working capital facility. The indebtedness of
Holdings and the Company, including the Notes, collectively, is expected to
represent 95% of their total capitalization as of the opening of the Aladdin.
The Issuer's sole material asset is its interest in the Holdings Group (as
defined herein), which has substantial leverage and so could experience
difficulties servicing its indebtedness.
Following the Registration Statement (as defined herein) being declared
effective by the Securities and Exchange Commission (the "Commission") the
Warrants and Warrant Shares may be offered and sold from time to time by holders
thereof or by their transferees, pledgees, donees, or successors (collectively
the "Selling Holders") pursuant to this Prospectus. The Warrants and the Warrant
Shares may be sold by the Selling Holders from time to time directly to
purchasers or through agents, underwriters or dealers. See "Plan of
Distribution". If required, the names of any such agents or underwriters
involved in the sale of the Warrants and the Warrant Shares and the applicable
agent's commission, dealer's purchase price or underwriters' discount, if any,
will be set forth in an accompanying supplement to this Prospectus. The Selling
Holders will receive all of the net proceeds from the sale of the Warrants and
the Warrant Shares and will pay all underwriting discounts, selling commissions
and transfer taxes, if any, applicable to any such sales. In accordance with the
terms of the Warrant Registration Rights Agreement (as defined herein) the
Issuer will pay other expenses incident to any such registration of the Warrants
and the Warrant Shares. The Selling Holders and any broker dealers, agents or
underwriters that participate in the distribution of the Warrants and the
Warrant Shares may be deemed to be "underwriters" within the meaning of the
Securities Act. See "Plan of Distribution" for a description of indemnification
arrangements.
SEE "RISK FACTORS" BEGINNING ON PAGE 15 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE WARRANTS OR WARRANT
SHARES.
-----------------
THE WARRANTS AND THE WARRANT SHARES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION OR
REGULATORY AUTHORITY, NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION OR REGULATORY AUTHORITY PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
NEITHER THE NEVADA GAMING COMMISSION NOR THE NEVADA STATE GAMING CONTROL BOARD
HAS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR THE INVESTMENT
MERITS OF THE SECURITIES OFFERED HEREBY. ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.
-----------------------
The date of this Prospectus is , 1998.
<PAGE>
AVAILABLE INFORMATION
The Issuer has filed with the Commission a Registration Statement on Form
S-1, including exhibits thereto, (collectively, the "Registration Statement")
under the Securities Act, with respect to the Warrants and the Warrant Shares to
which this Prospectus relates. This Prospectus does not contain all the
information set forth in the Registration Statement to which reference is hereby
made. Any statements made in this Prospectus concerning the provisions of
certain documents are not necessarily complete and, in each instance, reference
is made to the copy of such document filed as an exhibit to the Registration
Statement.
The Registration Statement may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549 and will be available for
inspection and copying at the regional offices of the Commission located at 7
World Trade Center, New York, New York 10048 and at Citicorp Center, 500 West
Madison Street (Suite 1400), Chicago, Illinois 60661. Copies of such material
may also be obtained from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The Issuer is
not currently subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Upon the Commission
declaring the Registration Statement effective, the Issuer will become subject
to such requirements, and in accordance therewith will file periodic reports and
other information with the Commission. The Commission maintains a Web site that
contains reports, proxy and information statements and other information
regarding registrants, such as the Issuer, that file electronically with the
Commission and the address of such site is http://www.sec.gov.
No person has been authorized to give any information or to make any
representation concerning the Warrants or the Warrant Shares other than those
contained herein and, if given or made, such other information or representation
should not be relied upon as having been authorized by the Issuer.
------------------------
DISCLOSURE REGARDING FORWARD
LOOKING STATEMENTS
This Prospectus contains certain statements that are "forward looking
statements." Those statements include, among other things, the discussions of
the business strategies of the Aladdin Parties and the Company (as defined
herein) and expectations concerning future operations, margins, profitability
and liquidity and capital resources. Forward looking statements are included in
"Prospectus Summary," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and elsewhere in this Prospectus. Although
the Issuer believes that the expectations reflected in such forward looking
statements are reasonable, the Issuer does not give any assurance that such
expectations will prove to be correct. Generally, these statements relate to
business plans or strategies, projected or anticipated benefits or other
consequences of such plans or strategies of the Aladdin Parties and the Company
or financial projections involving anticipated revenues, expenses, earnings,
levels of capital expenditures or other aspects of operating results. All phases
of the operations of the Aladdin Parties and the Company are subject to a number
of uncertainties, risks and other influences, many of which are outside the
control of the Aladdin Parties and the Company and any one of which, or a
combination of which, could materially affect the results of operations of the
Aladdin Parties and the Company and whether the forward looking statements made
herein ultimately prove to be accurate. Important factors that could cause
actual results to differ materially from the Issuer's expectations are disclosed
in "Risk Factors" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
------------------------
CERTAIN DEFINITIONS
REFERENCES IN THIS PROSPECTUS TO (I) "HOLDINGS" REFER TO ALADDIN GAMING
HOLDINGS, LLC, A NEVADA LIMITED-LIABILITY COMPANY; (II) "CAPITAL" REFER TO
ALADDIN CAPITAL CORP., A NEVADA CORPORATION WHOLLY-OWNED BY
i
<PAGE>
HOLDINGS; (III) "ISSUER" REFER TO ALADDIN GAMING ENTERPRISES, INC., A NEVADA
CORPORATION, THE SOLE ASSET OF WHICH IS A 25% MEMBERSHIP INTEREST IN HOLDINGS;
(IV) "NOTE ISSUERS" REFER TO HOLDINGS AND CAPITAL, COLLECTIVELY; (V) "ALADDIN
PARTIES" REFER TO HOLDINGS, THE ISSUER AND CAPITAL, COLLECTIVELY; (VI) THE
"COMPANY" REFER TO ALADDIN GAMING, LLC, A NEVADA LIMITED-LIABILITY COMPANY WHICH
PLANS TO DEVELOP, CONSTRUCT AND OPERATE THE ALADDIN; (VII) "HOLDINGS GROUP"
REFER TO EACH OF HOLDINGS AND ITS SUBSIDIARIES; (VIII) "LONDON CLUBS" REFER TO
LONDON CLUBS INTERNATIONAL, PLC, A UNITED KINGDOM PUBLIC LIMITED COMPANY AND
(IX) "LCNI" REFER TO LONDON CLUBS NEVADA INC., AN INDIRECT WHOLLY OWNED
SUBSIDIARY OF LONDON CLUBS. ALADDIN HOLDINGS, LLC ("AHL"), WHICH IS 95% OWNED BY
THE TRUST UNDER ARTICLE SIXTH U/W/O SIGMUND SOMMER (THE "TRUST"), DIRECTLY OWNS
98.7% OF THE MEMBERSHIP INTERESTS OF SOMMER ENTERPRISES, LLC ("SOMMER
ENTERPRISES"), A NEVADA LIMITED-LIABILITY COMPANY, AND INDIRECTLY OWNS
APPROXIMATELY 71% OF THE MEMBERSHIP INTERESTS OF HOLDINGS PRIOR TO THE EXERCISE
OF THE WARRANTS.
ii
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION (INCLUDING FINANCIAL
INFORMATION) APPEARING ELSEWHERE IN THIS PROSPECTUS.
THE ISSUER
The Issuer is an indirect subsidiary of AHL and was incorporated for the
sole purpose of issuing the Warrants and Warrant Shares. The sole material asset
of the Issuer is 25% of the Holdings Common Membership Interests (as defined
herein). Holdings is a holding company, the material assets of which are 100% of
the outstanding Common Membership Interests and 100% of the outstanding Series A
preferred interests of the Company (the "Series A Preferred Interests"). The
Warrants entitle the holders thereof to purchase an aggregate of 2,215,000
shares of Common Stock of the Issuer, representing a 40% economic interest in
the Issuer, at an exercise price of $0.001 per Warrant Share, subject to
adjustment, and representing an indirect interest of 10% of the outstanding
Holdings Common Membership Interests on a fully-diluted basis as of the Issue
Date, after giving effect to such issuance. The Warrants are exercisable at any
time on or after the Separation Date and, unless exercised, will expire on March
1, 2010.
THE COMPANY
The Company plans to develop, construct and operate a new hotel and casino,
the Aladdin, as the centerpiece of an approximately 35 acre world-class resort,
casino and entertainment complex (the "Complex") located on the site of the
original Aladdin hotel and casino in Las Vegas, Nevada, a premier location at
the center of Las Vegas Boulevard (the "Strip"). The Aladdin has been designed
to include a luxury themed hotel of approximately 2,600 rooms (the "Hotel"), an
approximately 116,000 square foot casino (the "Casino"), an approximately
1,400-seat production showroom and seven restaurants. The Casino's main gaming
area will contain approximately 2,800 slot machines, 87 table games, keno and a
race and sports book facility. Included on a separate level of the Casino will
be a 15,000 square foot luxurious gaming section (the "Salle Privee") which is
expected to contain an additional 20 to 30 high limit table games and
approximately 100 high limit slot machines. The Salle Privee will cater to
wealthy clientele and be operated and marketed in conjunction with London Clubs,
a prestigious, multi-national casino operator which caters to international
premium players. The Complex, which has been designed to promote Casino traffic
and to provide customers with a wide variety of entertainment alternatives, will
comprise (i) the Aladdin; (ii) a themed entertainment shopping mall with
approximately 522,000 square feet of retail space (the "Desert Passage"); (iii)
a second hotel and casino, with a music and entertainment theme (the "Music
Project"); (iv) a newly renovated 7,000-seat Theater of the Performing Arts (the
"Theater"); and (v) an approximately 4,800-space car parking facility (the
"Carpark" and, together with the Desert Passage, the "Mall Project"). The Mall
Project and the Music Project will be separately owned by affiliates of the
Company. The Company's business and marketing strategies are expected to
capitalize on the Complex's premier location, its superior designed, mixed-use,
themed development, and strong strategic partnering with highly successful
public companies. The grand opening date for the Aladdin and the Mall Project is
currently anticipated to occur during the first four months of the year 2000,
with the opening of the Music Project expected to occur within six months after
the opening of the Aladdin.
The Company's management team is led by Chief Executive Officer Richard J.
Goeglein, the former President and Chief Executive Officer of Harrah's Hotels
and Casinos and President and Chief Operating Officer of Holiday Corp., who
during his term at Harrah's oversaw the expansion of the Harrah's brand,
including the development of Harrah's Hotel and Casino in Atlantic City.
Assisting Mr. Goeglein as Senior Vice President of the Company and
President/Chief Operating Officer of the Aladdin Hotel and Casino is James H.
McKennon, who as President and Chief Operating Officer of Caesars Tahoe was
instrumental in its financial turnaround and as President of Caesars World
International Marketing Corp. was responsible for the global marketing of the
Caesars brand.
It is expected that approximately $75 million will be spent on theming in
the Aladdin and the Desert Passage, of which approximately $35 million will be
spent by the Company on the Aladdin. This theming
1
<PAGE>
will create an environment in the Aladdin that will be based upon the Legends of
the 1001 Arabian Nights, including the intriguing tales of Aladdin, Ali Baba and
the 40 Thieves, Sinbad and other legendary stories woven around ancient wealth
and wonders. The Aladdin's exterior will be designed to include a highly
articulated streetscape, a themed Casino exterior shaped like a Bedouin tent,
fountains, walkways, sculptures and an outdoor restaurant. The sophisticated
interior of the Aladdin will utilize rich colors, textures and design, enhancing
the fantasy of a mystical romantic time and place. A significant feature of the
Desert Passage will be the themed area to be known as the "Lost City." The "Lost
City" is expected to contain a re-creation of an ancient mystical mountain city
and will house a variety of specialty shops and restaurants underneath a
10-story high ceiling. The Company believes that the Aladdin, with its unique
theme, together with the Desert Passage, will ensure its place as a "must-see"
destination in one of the world's largest entertainment cities.
The Company believes that upon completion, the Aladdin, the Mall Project and
the Music Project together will constitute one of the largest and best-planned
integrated, mixed-use entertainment resorts in the world. Aladdin Bazaar
Holdings, LLC ("Bazaar Holdings"), a subsidiary of the Trust, and TH Bazaar
Centers Inc. ("THB"), a subsidiary of TrizecHahn Centers Inc. ("TrizecHahn"),
have entered into a joint venture agreement and formed Aladdin Bazaar, LLC
("Bazaar") to develop, construct, own and operate the Mall Project. TrizecHahn
is the principal retail subsidiary of TrizecHahn Corporation, one of the largest
publicly-traded real estate companies in North America. The Desert Passage is
expected to include an array of high-fashion specialty stores, exotic boutiques,
themed restaurants, cafes and other entertainment offerings. The Desert Passage
will be directly connected to the Casino to maximize Casino traffic.
Aladdin Music Holdings, LLC ("AMH"), a wholly owned subsidiary of the
Company, and a subsidiary of Planet Hollywood International, Inc. ("Planet
Hollywood") have entered into a binding memorandum of understanding (the "Music
Project Memorandum of Understanding") and formed Aladdin Music, LLC ("Aladdin
Music"), which will own and develop the Music Project. The Music Project
Memorandum of Understanding is subject to the finalization of financing
commitments. Planet Hollywood is a creator and worldwide developer of themed
restaurants and consumer brands, most notably "Planet Hollywood" and the
"Official All Star Cafe." Planet Hollywood has announced that it intends to
position a brand of music-themed entertainment venues as its third major brand.
The Music Project, which will be managed by the Company, is expected to include
an approximately 1,000 room hotel, a 50,000 square foot casino, four
restaurants, including a music-themed restaurant which will feature its own
1,000-person nightclub, a health spa and an outdoor swimming pool. As part of
the development of the Complex, the Company expects to indirectly contribute to
Aladdin Music $21.3 million in cash and land having an appraised fair market
value of $15.0 million in exchange for a preferred membership interest in
Aladdin Music and to lease to Aladdin Music the existing 7,000-seat Theater for
a nominal amount. It is anticipated that Aladdin Music will carry out an
approximately $8 million renovation of the Theater, improving its decor, light
and sound systems and other facilities. A further distinguishing feature of the
Music Project is the anticipated active involvement of famous artists and
celebrities, some of whom are expected to be stockholders of Planet Hollywood
(or its affiliates), participate in the marketing of Planet Hollywood's
music-themed brand and perform at the Theater or make other personal appearances
at the Music Project. The Music Project, with its music and entertainment theme,
will complement the Aladdin and it is expected that together the two hotels will
offer an excitement and variety of entertainment alternatives that will further
distinguish the Complex from other venues on the Strip.
The development of the Aladdin commenced during the first quarter of 1998.
The original Aladdin hotel and casino closed for business on November 25, 1997
and the original facility was demolished on April 27, 1998. The development of
the Mall Project is expected to commence during the second quarter of 1998,
followed thereafter by the expected commencement of the development of the Music
Project in the second half of 1998.
2
<PAGE>
STRENGTHS
The Company believes that several important advantages will contribute
significantly to the success of the Aladdin:
PREMIER LOCATION. The Aladdin's 800 feet of Strip frontage is located on
the section of the Strip between Flamingo Road at the north and Tropicana
Boulevard at the south. Based upon independent research and assuming completion
of the Bellagio, Paris and Venetian development projects, the average vehicular
traffic that will pass the Complex each day is expected to be approximately
54,000.
Another major feature of the Complex will be its easy access from Las Vegas'
McCarran International Airport ("McCarran Airport"), only 2.5 miles away.
According to the Las Vegas Convention and Visitors Authority (the "LVCVA"), the
number of visitors to Las Vegas has increased at a steady and significant rate
for the last 15 years, growing from approximately 10 million in 1980 to
approximately 19 million in 1990 to over 30 million in 1997, with approximately
47% of these visitors in 1997 arriving by air through McCarran Airport. McCarran
Airport, the tenth busiest airport in the United States, is currently in the
process of expanding its capacity through the addition of 26 new gates, and it
is expected that following completion thereof, the number and percentage of
visitors arriving in Las Vegas by air will further increase, making easy access
from McCarran Airport to Las Vegas' resorts even more crucial.
MASTER-PLANNED, MIXED-USE DEVELOPMENT. The Aladdin has been carefully and
strategically designed to promote Casino traffic. Each element of the Complex
has been sited and planned in a manner that maximizes pedestrian and vehicular
traffic so as to facilitate access to and from the Complex, as well as
circulation between the different parts of the Complex, with the Casino being
the nexus for the vast majority of pedestrian traffic. Significant portions of
the Desert Passage and all of the Theater's entrances and exits will be accessed
through, or be adjacent to, the Casino. The Casino will be located in front of
the Hotel, and unlike many of the newer projects on the Strip, will provide easy
access for pedestrians without requiring long walks into the Complex. Pedestrian
visitors to the Aladdin entering from the Aladdin's 800 feet of Strip frontage
will be able to enter the Hotel directly through the Casino or through the
Desert Passage entrances. Through the use of a circular internal roadway, guests
arriving by limousine, car service, taxi or private vehicle will be able to
enter the Complex directly and easily from the Strip and Harmon Avenue.
Furthermore, by the use of bridges and access ways, pedestrians will not be
required to cross roadways while moving between different attractions on the
Complex, thus facilitating ease of movement between the various parts of the
Complex and the Strip.
UNIQUE ENTERTAINMENT FACILITIES. The Aladdin is expected to benefit from
the Casino traffic generated from the broad variety of entertainment facilities
located throughout the Complex. The Aladdin will be adjacent to the existing
Theater, which is expected to continue to be used to hold major concerts and
theatrical performances and is one of the few venues of its size and type in
Nevada. The Theater's approximately $8 million renovation is expected to
transform it into a first-class venue and provide an additional source of
visitor traffic to the Complex.
The Aladdin will include a 1,400-seat showroom featuring a 1001 Arabian
Nights-themed production show on its mezzanine level, with elegant, exotic
costuming, music, lighting and choreography. In addition, the Desert Passage
will be designed to engage the customer in a themed shopping, entertainment and
dining experience. Of the approximately 522,000 square feet of retail space
within the Desert Passage, it is anticipated that approximately 25% will be
devoted to high pedestrian traffic generating food, beverage and entertainment
experiences. Furthermore, the Music Project is expected to contain a
1,000-person nightclub featuring regular live performances.
PRESTIGIOUS STRATEGIC PARTNERS.
The Company and the Complex will benefit from important relationships with
several prominent public companies, as follows:
3
<PAGE>
- - LONDON CLUBS INVESTMENT. London Clubs, a prestigious multi-national casino
operator, indirectly owns 25% of the outstanding common membership interests
of Holdings ("Holdings Common Membership Interests"). London Clubs had an
equity market capitalization of over $461 million on May 29, 1998. London
Clubs has extensive experience in the international marketing of casinos to
premium players and maintains a strong presence in the United Kingdom (where
it controls the largest share of the London casino market), Europe, Asia and
the Middle East. In addition to its 25% ownership of the outstanding
Holdings Common Membership Interests, London Clubs, through LCNI, will
direct the operations of, and act as marketing consultant to, the Salle
Privee. The Company believes that the Salle Privee will be the first of its
kind in the United States managed by a European operator and based on the
European concept of full service gaming areas for premium players. The Salle
Privee's primary business and marketing focus will be to access London
Clubs' worldwide base of upscale casino clientele.
- - JOINT VENTURE WITH PLANET HOLLYWOOD. Through a subsidiary, Planet Hollywood
has agreed to be a 50% partner (on a fully diluted basis) in the Music
Project. Planet Hollywood is a creator and worldwide developer of consumer
brands, most notably "Planet Hollywood" and the "Official All Star Cafe,"
that capitalize on the universal appeal of the high energy environment of
movies, sports and other entertainment-based themes. The Company believes
that the exposure generated by the Music Project will enhance the Aladdin by
providing immediate excitement and press coverage for the Complex. Planet
Hollywood had an equity market capitalization of over $824 million on May
29, 1998.
- - STRATEGIC RELATIONSHIP WITH TRIZECHAHN. The Mall Project will be owned,
developed and operated by Bazaar, a joint venture between Bazaar Holdings
and THB, a subsidiary of TrizecHahn. TrizecHahn is a wholly-owned subsidiary
of TrizecHahn Corporation, one of the largest publicly traded real estate
companies in North America. TrizecHahn Corporation had an equity market
capitalization of over $3.1 billion on May 29, 1998. TrizecHahn was the
developer of Horton Plaza in San Diego, Bridgewater Commons in New Jersey,
Valley Fair in San Jose and Park Meadows in Denver. Investors should note
that TrizecHahn has announced that it is considering selling its operating
portfolio of regional shopping centers and on April 6, 1998 announced the
sale of 20 regional shopping centers for over $2.5 billion. See "Risk
Factors--Completion of the Mall Project and the Music Project." While
TrizecHahn's announcement is limited to the sale of its current operating
portfolio of regional shopping centers, there can be no assurance that
TrizecHahn will not similarly decide to sell its interest in the Desert
Passage. Accordingly, investors cannot be assured that TrizecHahn will own
and operate the Desert Passage once it becomes operational, and as a result,
pedestrian traffic to the Aladdin may decrease.
STRATEGY
The Company's business and marketing strategies are expected to capitalize
on the Complex's premier location, its superior designed, mixed-use themed
development and strong strategic partnering with highly successful public
companies.
CREATE A "MUST-SEE" DESTINATION. The Company believes that the Aladdin,
with its unique design, together with the Desert Passage and the Music Project
will ensure its place as a "must-see" destination in one of the fastest growing
entertainment cities in the world. The Aladdin theme will be supported by a
sophisticated interior design enhancing the fantasy of a mystical and romantic
time and place. The Aladdin's main Casino traffic will be driven not only by
Hotel guests, but also by the customers directly attracted from the Strip.
Visitor traffic to the Aladdin will also be enhanced by the Desert Passage and
the adjoining Music Project.
TARGETED MARKET POSITIONING. The Company intends to focus on three
different market segments to attract customers to the Aladdin:
- - UPSCALE CLIENTELE. The Hotel will be designed to appeal to an upscale
clientele, providing the amenities and level of service such high-end guests
expect. Each of the Hotel's approximately 2,600 guest rooms
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<PAGE>
will have an area of not less than 450 square feet--exceeding that of the
average Las Vegas hotel room of approximately 360 to 400 square feet--and
24% of the Hotel's guest rooms will have an area exceeding 620 square feet.
The Hotel's room inventory for the upscale market is expected to include 624
"king parlors" and suites, ranging from 585 to 1,162 square feet. The Hotel
will provide extensive recreational facilities and amenities for its guests,
including a 20,000 square foot health spa with steam, sauna and massage
services and an outdoor swimming-pool complex surrounded by gardens and
fountains. The Company intends to promote the Aladdin's many features to the
upscale market through a variety of media, including high-end print
publications, travel agents and events sponsorships. A targeted-relationship
marketing program is expected to ensure clientele retention and repeat
visitation.
- - INTERNATIONAL PREMIUM PLAYER CLIENTELE. The focus of the Salle Privee's
business will be the wealthy clientele that form the core of London Clubs'
business in London and elsewhere. The Hotel will include 30 suites primarily
for use by Salle Privee clientele, including 25 "Salle Privee suites"
(ranging from 815 to 930 square feet) and five "mega-suites" (ranging from
2,125 to 3,500 square feet). The Company will maintain the Salle Privee's
premium player atmosphere through more sophisticated dining options, higher
table limits and more formal levels of service and dress.
- - UPPER-MIDDLE MARKET CLIENTELE. The Hotel's variety of guest rooms, six of its
seven restaurants and the 1,400-seat production showroom, combined with the
heavily themed Casino, Theater and Desert Passage, are expected to appeal
broadly to the upper-middle market guest. Additionally, cooperative
advertising and promotion through various media, such as television, radio
and print, will be used to promote the Complex to the upper-middle market.
Furthermore, the Music Project is expected to attract younger, affluent
customers to the Complex through, among other things, its music and
entertainment-based theme.
LEVERAGE FROM STRATEGIC RELATIONSHIPS. The Company and its affiliates have
chosen as strategic partners an experienced team of retail, casino and themed
entertainment developers and operators. The Company intends to utilize the
unique expertise of its partners from the preliminary development stages of the
Complex through its promotion and operation.
- - DEVELOPMENT EXPERTISE. In establishing a strategic relationship with
TrizecHahn, the Company has obtained the knowledge, skills and capital of a
partner who has expertise in the coordination, construction and completion
in a timely manner of large, high quality projects.
- - MANAGEMENT AND OPERATING ABILITIES. The Complex is expected to benefit from
the experience of TrizecHahn, London Clubs and Planet Hollywood in its
operations. Through its management and ownership of shopping centers,
TrizecHahn has demonstrated its ability to successfully design, configure
and attract high quality tenants to its retail shopping projects. London
Clubs has extensive experience in the international marketing and operation
of casinos, in particular to premium players. In addition, Planet Hollywood
has successfully grown its concepts to 87 company-owned and franchised
Planet Hollywood and Official All Star Cafe units (as of December 31, 1997)
since commencing business in 1991.
- - CAPITALIZING ON BRAND NAMES. With access to some of the most well-known names
in their respective markets, the Company expects to capitalize on the
worldwide brand recognition of Planet Hollywood, London Clubs and
TrizecHahn, creating unique opportunities for the Complex.
- - ACCESSING NEW CLIENT BASE. London Clubs and Planet Hollywood are expected to
provide the Complex with access to market segments which the Company
believes have not been extensively penetrated by other hotel/casinos in Las
Vegas. London Clubs provides the Aladdin with a substantial network of
international premium players and superb promotional opportunities.
Furthermore, it is expected that Planet Hollywood will introduce a younger,
affluent clientele to the Complex through, among other things, celebrity
involvement in the Music Project.
5
<PAGE>
CAREFULLY MANAGE CONSTRUCTION COSTS AND RISKS. The Company anticipates the
total cost of developing, financing, constructing and opening the Aladdin to be
approximately $790 million (excluding the Company's $21.3 million planned
indirect cash contribution and $15.0 million appraised fair market value land
contribution to Aladdin Music as part of the development funds for the Music
Project). As part of the Company's strategy of carefully managing construction
costs and risks, the Company has hired Tishman Construction Corporation of
Nevada ("Tishman"), to be the construction manager. Tishman is a subsidiary of
Tishman Realty & Construction Co. Inc., a privately held company with extensive
experience in building quality hotels and casinos. As construction manager,
Tishman will advise with respect to scheduling, administration and reporting in
connection with the construction activities of the Design/ Builder (as defined
herein). In addition, the following arrangements have been made to ensure the
full and timely completion of the Aladdin.
- - BANK COMPLETION GUARANTY AND NOTEHOLDER COMPLETION GUARANTY. The Trust,
London Clubs and Bazaar Holdings have entered into a completion guaranty
(the "Bank Completion Guaranty") for the benefit of the lenders under the
Bank Credit Facility (the "Bank Lenders"), under which they have agreed to
guarantee, among other things, the completion of the Aladdin. The Bank
Completion Guaranty, is not subject to any maximum dollar limitations. The
Trust, London Clubs and Bazaar Holdings have also entered into a limited
completion guaranty for the benefit of the holders of the Notes (the
"Noteholder Completion Guaranty"), under which they have guaranteed
completion of the Aladdin, subject to certain important exceptions,
limitations and qualifications. None of Holdings, the Issuer nor the holders
of Warrants or Warrant Shares is a party to the Bank Completion Guaranty or
the Noteholder Completion Guaranty. No financial information regarding the
Trust is publicly available for the purpose of evaluating the Trust's
creditworthiness and, accordingly, purchasers of Warrants or Warrant Shares
should not rely upon the Trust's performance under the Bank Completion
Guaranty of Noteholder Completion Guaranty when making their investment
decision. See "Risk Factors--Limitations Under Bank Completion Guaranty and
Noteholder Completion Guaranty," "Description of Noteholder Completion
Guaranty and Disbursement Agreement--Noteholder Completion Guaranty" and
"Description of Certain Indebtedness and Other Obligations--Completion
Guaranty."
- - DESIGN/BUILD CONTRACT. Fluor Daniel, Inc. (the "Design/Builder") is the
design/builder for the Aladdin. The Design/Builder has entered into a
guaranteed maximum price design/build contract (subject to increases based
on scope changes) with the Company to design and construct the Aladdin (the
"Design/Build Contract"). The Design/Build Contract provides the
Design/Builder with incentives for completing the Aladdin ahead of schedule
and within budget and for payment of liquidated damages to the Company for
certain delays. The Design/Build Contract is guaranteed by Fluor Corporation
("Fluor"), the parent of the Design/Builder, pursuant to the Fluor Guaranty
(as defined herein). See "Certain Material Agreements--Design/Build
Contract."
- - MALL FINANCING AND MALL GUARANTY. Bazaar has entered into a building loan
agreement with Fleet National Bank ("Fleet," and together with any other
lenders in a financing syndicate to be formed, the "Mall Lenders"), and
Fleet as administrative agent for a credit facility to fund the construction
of the Mall Project (the "Mall Financing"). Furthermore, TrizecHahn,
TrizecHahn Office Properties, Inc. ("THOP"), an affiliate of TrizecHahn, the
Trust, Bazaar Holdings and AHL have agreed to guarantee completion of the
Mall Project and Bazaar's indebtedness to the Mall Lenders until certain
earnings and loan to value targets have been met (collectively, the "Mall
Guaranty"). Investors should note that TrizecHahn has announced that it is
considering selling its operating portfolio of regional shopping centers and
on April 6, 1998, announced the sale of 20 regional shopping centers for
over $2.5 billion. While TrizecHahn's announcement is limited to the sale of
its current operating portfolio of regional shopping centers, there can be
no assurance that TrizecHahn will not similarly decide to sell its interest
in the Desert Passage. Accordingly, investors cannot be assured that
TrizecHahn will own and operate the Desert Passage once it becomes
operational, and as a result, pedestrian traffic to
6
<PAGE>
the Aladdin may decrease. See "Risk Factors--Completion of the Mall Project
and the Music Project."
MANAGEMENT AND DEVELOPMENT TEAM
The Complex is being developed by a team with broad expertise in each of the
elements of the Complex and which, collectively, have a proven track record in
constructing, completing and operating significant hotel casino projects.
MANAGEMENT TEAM. The management team of the Company, which will develop and
operate the Aladdin and the Music Project, comprises a unique combination of
executives with an average of more than 20 years' experience in the management
of hotels, casinos, restaurants and large real estate projects. The team
includes:
- - Jack Sommer, Chairman of the Company, who has been a full-time resident of
Las Vegas since 1988 and has more than 25 years of experience as a developer
of real estate including luxury projects such as North Shore Towers, in
Queens County, New York, The Sovereign at 425 East 58th Street in Manhattan
and 280 Park Avenue, an 820,000 square foot office building in Manhattan
formerly owned and currently partially occupied by the Bankers Trust
Company.
- - Richard J. Goeglein, Chief Executive Officer, President and a director of the
Company who has spent over 28 years in the hotel/casino and food service
industries. Mr. Goeglein has served as President and Chief Executive Officer
of Harrah's Hotels and Casinos and as President and Chief Operating Officer
of Holiday Corp. (the parent company of Holiday Inns, Harrah's, Hampton Inns
and Embassy Suites). Mr. Goeglein oversaw the acquisition of Harrah's and
the development of some of Harrah's most successful projects, including
Harrah's Hotel and Casino in Atlantic City, and its expansion into Southern
Nevada.
- - James H. McKennon, Senior Vice President of the Company and President/Chief
Operating Officer of the Aladdin Hotel and Casino, whose career spans over
21 years in the hotel and casino industry in a variety of executive
positions, including as President and Chief Operating Officer of Caesars
World International Marketing Corp. Mr. McKennon was also President and
Chief Operating Officer of Caesars Tahoe for 4 years and was instrumental in
its financial turnaround.
- - Cornelius T. Klerk, Senior Vice President/Chief Financial Officer of the
Company, has over 19 years experience in the hotel and casino industry both
at the corporate and property level, including as Vice President/Finance of
the Hilton Hotels Gaming Division from 1993 to 1997. Mr. Klerk also served
in a variety of senior financial management positions during the development
and operation of Harrah's Hotel and Casino in Atlantic City and Harrah's
Trump Plaza (now Trump Plaza) in Atlantic City.
DEVELOPMENT TEAM. The Company and its affiliates have been involved in the
design of the Complex for over 24 months and have assembled a development team
with proven experience in the development of high quality resort projects. The
team includes:
- - Tishman, the construction manager for the Aladdin. Tishman or its affiliates
have developed or built over 30,000 hotel rooms nationwide, including the
Golden Nugget and the Trump Castle Hotel and Casino in Atlantic City, the
400-room expansion of Harrah's Hotel and Casino in Atlantic City, the 2,300
room Walt Disney World Dolphin and Swan Hotel and Convention Complex and the
1,200 room Sheraton Chicago Hotel.
- - The Design/Builder, a subsidiary of Fluor. The Design/Builder is recognized
internationally as an industry leader in providing architectural,
engineering and construction services, including resort projects such as the
Guest Inn Timika in Indonesia, the Pan Pacific Hotel in Malaysia and the
Hyatt Regency Greenville Hotel.
- - ADP/FD of Nevada, Inc. ("ADP"), the Complex architect and an indirect
subsidiary of Fluor. ADP is wholly owned by ADP Marshall, Inc. ("ADP
Marshall"), which is well-known for its architecture work
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<PAGE>
and mixed-use projects. Its architecture client list includes Princess
Hotels, Inc. (Scottsdale and Acapulco) and Carefree Resorts (The Boulders,
The Peaks, Carmel Valley Ranch).
- - THB, a wholly-owned subsidiary of TrizecHahn and the joint venture partner of
ABH in the Mall Project. Prior to its recently announced sale of 20 regional
shopping centers, TrizecHahn owned and managed 27 regional shopping centers
in major markets throughout the United States, comprising over 25 million
square feet.
- - Brennan Beer Gorman Monk/Interiors ("BBGM"), the interior designer for the
Aladdin. BBGM specializes in hospitality design and has experience in
casinos, restaurants, retail, spa/fitness centers and specialty theme
projects, including the recently renovated and expanded Caesars Atlantic
City hotel, Mohegan Sun Casino and TropWorld. BBGM's hotel projects have
included the St. Regis, the Plaza and the Sheraton Hotel & Towers in New
York City.
8
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[LOGO]
9
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USE OF PROCEEDS
No proceeds will be received by the Issuer from the registration or sale of
the Warrants or the Warrant Shares pursuant to the Registration Statement. The
gross proceeds from the sale of the Units were $115.0 million. The net proceeds
(net of discounts for Initial Purchasers (as defined herein) and estimated
Offering expenses) together with the proceeds from the other Funding
Transactions are being used to develop, construct, equip and open the Aladdin
and to fund the Company's cash contribution to Aladdin Music with respect to the
Music Project.
Upon or prior to consummation of the Offering, (i) the proceeds from the
sale of the Units were allocated between the Notes and the Warrants, (ii) Sommer
Enterprises (a) contributed a portion of the Contributed Land (as defined
herein) and $7.0 million consisting of the benefit of certain predevelopment
costs incurred by AHL to the Issuer in exchange for Class A Common Stock in the
Issuer and (b) contributed a portion of the Contributed Land to Holdings in
exchange for Holdings Common Membership Interests, (iii) the Issuer contributed
the portion of the Contributed Land, the benefit of the predevelopment costs
received from Sommer Enterprises and the net proceeds allocable from the sale of
the Warrants to Holdings in exchange for Holdings Common Membership Interests,
(iv) Holdings contributed the Contributed Land appraised at $150.0 million,
approximately $42 million in cash from the London Clubs Contribution (as defined
herein) and the $7.0 million consisting of the benefit of certain predevelopment
costs incurred by AHL to the Company in exchange for Common Membership Interests
of the Company, and (v) Holdings contributed $115.0 million in cash, consisting
of the net proceeds of the sale of the Units and approximately $8 million from
the London Clubs Contribution, to the Company in exchange for Series A Preferred
Interests of the Company ((iv) and (v) collectively, the "Equity and Series A
Preferred Interest Financing"). The London Clubs Contribution, together with a
portion of the net proceeds of the Offering, were expended on the Issue Date (as
defined herein) to repay certain existing indebtedness assumed by the Company in
connection with the Sommer Equity Financing (as defined herein) and to pay
certain accrued expenses and certain fees and expenses incurred in connection
with the Funding Transactions. The remaining net proceeds from the Offering
(approximately $35 million) were deposited in a segregated escrow account ("the
Note Construction Disbursement Account") which was pledged as collateral for the
benefit of the holders of the Notes, pending disbursement of such funds pursuant
to the Disbursement Agreement (as defined herein). The liquidation preference of
the Series A Preferred Interests held by Holdings will at all times equal the
Accreted Value (as defined herein) of the Notes.
Prior to or contemporaneously with the Offering, the following other
arrangements (together with the Offering, the "Funding Transactions") for the
financing by the Company of the Aladdin were consummated: (i) the Sommer Equity
Financing and the indirect equity contribution to Holdings by London Clubs of
$50.0 million in cash (the "London Clubs Contribution") in exchange for Holdings
Common Membership Interests; (ii) the closing of the $410.0 million Bank Credit
Facility between the Company and the funding of the Term B Loan (as defined
herein) and the Term C Loan (as defined herein) thereunder into the Cash
Collateral Account (as defined herein) and (iii) execution and delivery of a
commitment letter by the Company for one or more leases or loans in the
aggregate amount of $80.0 million, covering the Specified Equipment and the
Gaming Equipment (each as defined herein), to be used in the Aladdin (the "FF&E
Financing"). See "Controlling Stockholders--Equity and Series A Preferred
Interest Financing," "Description of Certain Indebtedness and Other
Obligations--Bank Credit Facility" and "--FF&E Financing."
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SOURCES AND USES OF FUNDS
The estimated sources and uses of funds raised for the development,
construction, equipping and opening of the Aladdin are as follows (in millions):
<TABLE>
<CAPTION>
SOURCES USES
- --------------------------------------------------------- ---------------------------------------------------------
<S> <C> <C> <C>
Bank Credit Facility(1)....................... $ 410.0 Hotel and Casino(7)........................... $ 295.6
FF&E Financing(2)............................. 80.0 Off-Site Improvements(8)...................... 6.8
Senior Discount Notes due 2010(3)............. 115.0 Reimbursable Site Work Expenses(6)............ 14.2
Land Contribution(4).......................... 150.0 Furniture, Fixtures and Equipment and
Cash Contribution(5).......................... 57.0 Gaming Equipment(9)........................... 107.5
Anticipated Site Work Land(10)...................................... 135.0
Reimbursement(6)............................ 14.2 Retire Existing Debt(11)...................... 74.5
Capitalized Interest, Net(12)................. 44.0
Pre-Opening Costs and Expenses................ 16.9
Reimbursement of Pre-development Costs(13).... 3.9
Working Capital(14)........................... 15.0
Construction and FF&E Contingency(15)......... 31.8
Land Investment in Music Project(16).......... 15.0
Cash Equity Investment in Music Project(17)... 21.3
Financing Fees and Expenses(18)............... 44.7
--------- ---------
Total Sources................................. $ 826.2 Total Uses.................................... $ 826.2
--------- ---------
--------- ---------
</TABLE>
- ------------------------
(1) The Company entered into the Bank Credit Facility with the Bank Lenders. The
Bank Credit Facility, which closed concurrently with the closing of the
Offering, consists of: (a) a term loan of $136.0 million ("Term A Loan")
which matures seven years after the initial borrowing date; (b) a term loan
of $114.0 million ("Term B Loan") which matures eight and one-half years
after the initial borrowing date; and (c) a term loan of $160.0 million
("Term C Loan", and collectively with the Term A Loan and the Term B Loan,
the "Loans") which matures ten years after the initial borrowing date. The
Term B Loan and Term C Loan were funded into the Cash Collateral Account on
the Issue Date, and subject to satisfaction of the conditions in the
Disbursement Agreement, are expected to be drawn down beginning in June 1998
(being approximately four months after the Issue Date). It is anticipated
that the Company will begin to draw down the Term A Loan, subject to
satisfaction of the conditions in the Disbursement Agreement, in December
1999 (being approximately 21 months after the Issue Date). See "Risk
Factors--Conditions to Draw Down of Funds Under Funding Transactions." All
of the Loans will convert from construction loans into amortizing loans on
the Conversion Date (as defined herein), with substantial amounts due during
the final six quarters of the Term B Loan and the Term C Loan. The Company
has the option to pay interest at either LIBOR or the alternate base rate
("ABR") published by The Bank of Nova Scotia ("Scotiabank"), in each case
plus certain margins. See "Description of Certain Indebtedness and Other
Obligations--Bank Credit Facility."
(2) The Company has entered into a commitment letter with the FF&E Lender (as
defined herein) for provision of the FF&E Financing. The FF&E Financing is
expected to consist of $60.0 million of operating leases and $20.0 million
in loans and is expected to be used by the Company to obtain the Gaming
Equipment and Specified Equipment. See "Description of Certain Indebtedness
and Other Obligations--FF&E Financing."
(3) Represents the gross proceeds of the Offering, which, net of expenses of
approximately $8 million, were contributed, together with approximately $8
million in cash received pursuant to the London Clubs Contribution, by
Holdings to the Company in exchange for Series A Preferred Interests.
(4) The land on which the Aladdin, the Music Project and the Plant (as defined
herein) will be built, including adjacent land of approximately 0.8 acres,
comprises a total of approximately 22.75 acres (the "Contributed Land") and
was contributed to the Company by Holdings in exchange for Common Membership
Interests. The Contributed Land has an appraised fair market value of $150.0
million (book value of $33.6 million as of December 31, 1997). Approximately
18 acres of the Contributed Land, having an appraised fair market value of
$135.0 million, have been retained by the Company
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and approximately 4.75 acres of the Contributed Land, having an appraised
fair market value of $15.0 million, will be contributed to Aladdin Music for
the Music Project.
(5) Represents (i) a $50.0 million cash contribution by London Clubs in exchange
for 25% of the Holdings Common Membership Interests and (ii) a $7.0 million
deemed equity contribution by the Issuer in exchange for Holdings Common
Membership Interests, consisting of certain pre-development costs incurred
by AHL in 1996, 1997 and 1998.
(6) Pursuant to the Site Work Agreement, the Company has agreed to complete the
construction of, among other things, certain shared structural space (the
"Mall Shared Space"), construction of which will commence prior to the
initial funding of the Mall Financing. Bazaar has agreed to reimburse the
Company for up to $14.2 million (including interest) of the costs associated
with such construction upon the completion of the Mall Shared Space. See
"Certain Material Agreements--Construction, Operation and Reciprocal
Easement Agreement and Related Agreements."
(7) Represents (i) the guaranteed maximum price of construction of the Aladdin
pursuant to the Design/ Build Contract of $267.0 million, less the
contingency allowance of $6.8 million and expected reimbursement from Bazaar
of $13.6 million (net of approximately $0.6 million of interest) as set
forth in note (6) above; (ii) approximately $35 million for theming the
Aladdin; (iii) $11.7 million for professional fees and disbursements; and
(iv) $2.3 million for permits and taxes. See "Risk Factors-- Completion of
the Mall Project and the Music Project." The Design/Build Contract contains
financial incentives for the Design/Builder to complete the Aladdin within
the construction budget and in a timely manner, as well as liquidated
damages payable to the Company for certain unexcused delays. See "Risk
Factors--Risks of New Construction," "--Risks Under Design/Build Contract
and Fluor Guaranty" and "Certain Material Agreements--Design/Build
Contract."
(8) Represents the cost of off-site improvements, including overhead pedestrian
walkways and widening of certain streets, for those parts of the Project
Site (as defined herein) on which the Aladdin will be built.
(9) Includes $26.5 million of gaming equipment and $81.0 million of furniture,
fixtures and other equipment (including the Specified Equipment consisting
of new furniture and equipment other than gaming equipment).
(10) Represents the appraised fair market value of the land on which the Aladdin
and the Plant will be built, together with adjacent land of approximately
0.8 acres.
(11) Represents the retirement on the Issue Date of $68.7 million of existing
indebtedness on the Contributed Land (with an interest rate of LIBOR plus
650 bps) and $5.8 million of existing debt owed by the Trust to GW Vegas LLC
("GW Vegas"), assumed by the Company as part of Holdings' equity
contribution to the Company.
(12) Represents capitalized gross interest under the Bank Credit Facility of
$57.4 million and capitalized gross interest of $2.4 million from leasing
expenses in connection with the FF&E Financing, from the date of the
Offering until the estimated completion of the Aladdin in the first four
months of the year 2000, net of interest income anticipated to be earned
upon the investment in cash equivalents of the funds (assumed to be at 5%
per annum) from the proceeds of the Offering and the proceeds of the Term B
Loan and Term C Loan.
(13) Represents $3.0 million of certain predevelopment costs incurred by AHL and
reimbursed on the Issue Date and up to $0.9 million of certain
predevelopment costs expected to be incurred and reimbursed over the
expected construction period.
(14) Represents cash on hand, inventories, deposits and other cash balances
required for the opening of the Aladdin.
(15) Comprises (i) the $6.8 million contingency included in the guaranteed
maximum price set forth in the Design/Build Contract and (ii) the $25.0
million general project contingency (collectively, the "Contingency").
(16) Represents the appraised fair market value of the approximately 4.75 acres
of land on which the Music Project will be built, which land will be
contributed by the Company to AMH in exchange for common membership
interests in AMH.
(17) Represents cash to be contributed by the Company to AMH in exchange for
common membership interests in AMH.
(18) Represents fees in connection with the organization of the Company and the
financing of the Aladdin, including approximately $8 million in expenses
incurred in connection with the Offering.
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<PAGE>
THE WARRANTS AND WARRANT SHARES
The Warrants were originally issued by the Issuer in the Offering, pursuant
to which 221,500 Units were issued and sold. Each Unit consists of $1,000
principal amount of Notes and 10 Warrants. The Notes and the Warrants will be
separately transferable, in accordance with the Indenture (as defined herein),
upon the filing of the Registration Statement at the option of the holders
thereof. The Registration Statement applies solely to the Warrants and the
Warrant Shares. The registration of the Warrants and the Warrant Shares is
intended to satisfy certain obligations of the Issuer under a registration
rights agreement with respect to the Warrants (the "Warrant Registration Rights
Agreement") among the Issuer and Merrill Lynch, Pierce, Fenner and Smith
Incorporated, Credit Suisse First Boston Corporation, CIBC Oppenheimer Corp. and
Scotia Capital Markets (USA) Inc. (the "Initial Purchasers"), dated the Issue
Date. There will be no proceeds to the Issuer from the registration or
subsequent sale of the Warrants or Warrant Shares.
<TABLE>
<S> <C>
Issuer....................... Aladdin Gaming Enterprises, Inc.
Number of Warrants........... The Warrants entitle the holders thereof to acquire an
aggregate of 2,215,000 shares of Common Stock of the Issuer
(40% of the economic interest in the Issuer) representing an
indirect interest in 10% of the outstanding Holdings Common
Membership Interests on a fully-diluted basis after giving
effect to such issuance.
Exercisability; Expiration... The Warrants are exercisable at any time on or after the
Separation Date (as defined herein) and prior to March 1,
2010.
Exercise Price............... Each Warrant entitles the holder thereof to purchase one
share of Common Stock of the Issuer at an exercise price of
$0.001 per share, subject to adjustment.
Anti-Dilution Provisions..... The Warrants have customary anti-dilution provisions. Such
anti-dilution provisions are also reflected in the documents
pertaining to the Holdings Common Membership Interests.
Warrant Shares............... The Warrants entitle the holders thereof to acquire
non-voting Common Stock of the Issuer. Shares of Common
Stock of the Issuer or any successor entity and any other
securities or property issuable or deliverable upon exercise
of the Warrants are collectively referred to herein as the
"Warrant Shares." The Issuer is a corporation, the sole
material asset of which is 25% of the outstanding Holdings
Common Membership Interests. The Warrants represent an
effective 10% interest in the outstanding Holdings Common
Membership Interests, on a fully-diluted basis after giving
effect to such issuance, and the Trust (through Sommer
Enterprises) owns interests which represent an effective
58.5% interest in the outstanding Holdings Common Membership
Interests on a fully-diluted basis, (44.5% held by a direct
ownership and 14.0% held by an indirect equity ownership
through the Issuer).
Equity Participation The Issuer, the Warrant Agent for and on behalf of the
Agreement.................. holders of the Warrants and Warrant Shares, the Trust,
London Clubs and Holdings have entered into the Equity
Participation Agreement (as defined herein) which provides
(among other things) (a) for the grant of certain
"tag-along" rights to the holders of Warrant Shares in
respect of sales by Sommer Enterprises or LCNI, directly or
indirectly, of Holdings Common Membership Interests; (b) for
rights of holders of the Warrant Shares to participate in an
initial public offering on the same terms and conditions as
LCNI and Sommer Enterprises and (c) that the Warrant holders
will have the right to convert their Warrant Shares into
Common Membership Interests in the Company in the event that
the Issuer takes certain actions, including certain mergers
</TABLE>
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<TABLE>
<S> <C>
or consolidations, disposition of all or substantially all
of the Issuer's assets, transfers of the Issuer's Holdings
Common Membership Interests, certain recapitalizations of
the Issuer, voluntary dissolution or liquidation of the
Issuer, repurchases of the Issuer's stock which is not
pro-rata among the stockholders, and certain issuances of
the Issuer's stock. See "Certain Material Agreements--Equity
Participation Agreement."
Tag Along.................... The Equity Participation Agreement provides, among other
things, that upon certain sales by Sommer Enterprises or
LCNI of Holdings Common Membership Interests, the holders of
Warrant Shares will be permitted to sell a pro rata share of
their Warrant Shares on the same terms and conditions as the
sale by Sommer Enterprises, LCNI or Holdings, as the case
may be.
Holdings Common Membership
Interests.................. The Holdings Operating Agreement (as defined herein)
contains provisions mirroring the "tag-along" rights set
forth in the Equity Participation Agreement and the
anti-dilution provisions set forth in the Warrant Agreement.
Holders of Warrant Shares do not have any voting rights
through the Issuer's ownership of Holdings Common Membership
Interests. Upon a default under the Keep-Well Agreement (as
defined herein) a resulting decrease or increase in the
percentage interest in Holdings indirectly held by the Trust
or London Clubs will not affect the percentage of Holdings
Common Membership Interests held by the Issuer.
Qualified Public Offering.... A Qualified Public Offering is a public offering of common
stock registered under the Securities Act and resulting in
proceeds of at least $50.0 million. The Issuer, Holdings or
another entity which controls the Company (each, an "IPO
Entity") may effect a public offering of common stock
registered under the Securities Act so long as prior to such
public offering, London Clubs, the Trust, or the
beneficiaries of the Trust (whether current or contingent)
as of the date hereof which control AHL or Sommer
Enterprises, and holders of the Warrants and Warrant Shares
each hold, directly or indirectly, their respective equity
interests in the IPO Entity. London Clubs, the Trust, or the
beneficiaries of the Trust (whether current or contingent)
as of the date hereof which control AHL or Sommer
Enterprises, and the IPO Entity will use their reasonable
best efforts to effect such public offering such that
holders of the Warrants and Warrant Shares will not
recognize income gain or loss for federal income tax
purposes (other than as a result of a sale of their Warrant
Shares in such public offering) and holders of the Warrants
and the Warrant Shares will be subject to federal income tax
in the same manner and at the same times as would have been
the case if the Warrants were originally issued by the IPO
Entity.
</TABLE>
For additional information regarding the Warrants and Warrant Shares see
"Description of the Warrants," "Description of Capital Stock" and "Certain
United States Federal Income Tax Considerations."
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RISK FACTORS
PROSPECTIVE INVESTORS ARE STRONGLY CAUTIONED THAT AN INVESTMENT IN THE
WARRANTS AND THE WARRANT SHARES INVOLVES A HIGH DEGREE OF RISK. THE ABILITY OF
THE ALADDIN PARTIES TO CAUSE THE COMPLETION OF AND TO SUCCESSFULLY OPERATE THE
ALADDIN IS SUBJECT TO AN UNUSUAL NUMBER OF MATERIAL RISKS AND UNCERTAINTIES. THE
CONTINGENCIES AND OTHER RISKS DISCUSSED BELOW COULD AFFECT THE ALADDIN PARTIES
IN WAYS NOT PRESENTLY ANTICIPATED AND THEREBY MATERIALLY AFFECT THE VALUE OF THE
SECURITIES OFFERED HEREBY. A CAREFUL REVIEW AND UNDERSTANDING OF EACH OF THE
RISK FACTORS SET FORTH BELOW, AS WELL AS THE OTHER INFORMATION CONTAINED IN THIS
PROSPECTUS, IS ESSENTIAL FOR AN INVESTOR SEEKING TO MAKE AN INFORMED INVESTMENT
DECISION WITH RESPECT TO THE WARRANTS AND THE WARRANT SHARES.
SUBSTANTIAL LEVERAGE
The Issuer's sole material asset is its interest in the Holdings Group,
which has substantial leverage and so could experience difficulties servicing
its indebtedness.
The Issuer does not have any material assets other than its ownership of 25%
of the Holdings Common Membership Interests. Holdings does not and may not in
the future have any material assets other than its ownership of 100% of the
Common Membership Interests in the Company and its ownership of 100% of the
Series A Preferred Interests in the Company, and does not and may not in the
future have any material operations or revenues (other than income derived from
its interest in the Company). Accordingly, the ability of the Holdings Group to
pay principal, interest, premium, if any, or any other payment obligations on
its indebtedness will be completely dependent on the operations of the Company.
The Holdings Group is, and upon completion of the Aladdin will be, highly
leveraged with substantial fixed debt service obligations in addition to
operating expenses, and is expected upon completion of the Aladdin to have
approximately $583 million of outstanding indebtedness, including $410.0 million
outstanding under the Bank Credit Facility, approximately $153 million
outstanding under the Notes (representing the approximate Accreted Value (as
defined in the Indenture) thereof on April 30, 2000) and an aggregate of $20.0
million outstanding under the loan portion of the FF&E Financing. Such
indebtedness is expected to represent 95% of the total capitalization of the
Holdings Group as of the opening of the Aladdin and require annual debt service
payments ranging from $58.9 million to $91.6 million, depending on the year. Of
such aggregate indebtedness, approximately $430 million will be indebtedness of
the Company and not Holdings. The FF&E Financing will also consist of $60
million of operating leases. The Company will be required to pay $13.6 million
in minimum lease payments annually under the lease portion of the FF&E
Financing. Upon the opening of the Aladdin, the Company is expected to have an
aggregate of $10 million available under a working capital facility. In
addition, the Indenture allows the Company to incur additional indebtedness
under certain circumstances. See "Description of Certain Indebtedness and Other
Obligations--Senior Discount Notes." The degree to which the Holdings Group is
leveraged could have important consequences to the holders of the Warrants and
Warrant Shares, including, but not limited to, the following: (i) increasing the
Holdings Group's vulnerability to adverse general economic and industry
conditions; (ii) affecting the proportion of the Holdings Group's operating cash
flow required to pay principal, interest and other amounts on indebtedness,
thereby reducing the funds available for operations and dividends or
distributions to equity holders; and (iii) impairing the Holdings Group's
ability to obtain additional financing for future working capital expenditures,
acquisitions or other general corporate purposes.
INABILITY TO REPAY DEBT
The Holdings Group will be entirely dependent on the operations of the
Aladdin in order to repay its debt.
Pending the opening of the Aladdin, which is expected to occur in the first
four months of the year 2000, it is currently anticipated that the Company will
have no operations other than activities in connection with the development of
the Aladdin. The ability of the Holdings Group to pay principal, interest and
other amounts payable under its various debt facilities will be dependent upon
the successful completion of the Aladdin and the Company's future operating
performance which is dependent upon a
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number of factors, many of which are outside the Holdings Group's control,
including the successful completion of the Mall Project, prevailing economic
conditions and financial, business, regulatory and other factors affecting the
Company's operations. If the Company is unable to complete the Aladdin within
its construction budget or, once operating, is unable to generate sufficient
cash flow, it could be required to adopt one or more alternatives, such as
obtaining additional financing to the extent permitted by the Indenture and the
Bank Credit Facility, reducing or delaying planned construction or capital
expenditures, restructuring debt or obtaining additional equity capital. There
can be no assurance that any of these alternatives could be effected on
satisfactory terms, and the inability to acquire additional financing could
materially and adversely affect the Holdings Group and the Issuer and so the
value of the Warrants and the Warrant Shares.
Additionally, there can be no assurance that the Aladdin will be able to
attract a sufficient number of patrons to achieve the level of activity
necessary to permit the Holdings Group to meet its payment obligations in
connection with the Funding Transactions and any other indebtedness or
obligations of the Holdings Group. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and "Description of Certain
Indebtedness and Other Obligations."
CONDITIONS TO DRAW DOWN OF FUNDS UNDER FUNDING TRANSACTIONS
There are significant conditions to the draw down of funds under the terms
of the various Funding Transactions. The aggregate amount of financing subject
to conditions was $496 million as of May 29, 1998, comprising $410 million under
the Bank Credit Facility, $6 million from the proceeds of the Offering and $80
million under the FF&E Financing. Failure by the Company to meet any of these
conditions could have a material adverse effect on its ability to complete the
Aladdin.
Financing for the construction and development of the Aladdin and of the
other components of the Complex has been provided by multiple parties,
including, with respect to the Aladdin, the holders of the Notes, the Bank
Lenders and the FF&E Lender, and with respect to the Mall Project, the Mall
Lenders.
Concurrent with the closing of the Offering, the Company and Holdings
entered into the Disbursement Agreement with the Trustee (for the benefit of the
holders of the Notes) and Scotiabank, as Administrative Agent under the Bank
Credit Facility, Disbursement Agent on behalf of the Bank Lenders and the
holders of the Notes, and as securities intermediary (the "Securities
Intermediary") and U.S. Bank National Association as servicing agent (the
"Servicing Agent"). Pursuant to the Disbursement Agreement, the proceeds from
the Offering of the Notes that were not expended on the Issue Date (being
approximately $35 million) were deposited in the Note Construction Disbursement
Account, which was pledged to the Disbursement Agent for the benefit of the
holders of the Notes. Disbursements from the Note Construction Disbursement
Account are subject to the conditions established in the Disbursement Agreement.
On the Issue Date, the proceeds of the Term B Loan and Term C Loan were
deposited in the Cash Collateral Account, which was pledged to the Disbursement
Agent for the benefit of the Bank Lenders. Disbursements from the Cash
Collateral Account and advances of the Term A Loan are also subject to
conditions established in the Disbursement Agreement. The significant conditions
on the Bank Lenders' obligations to fund or provide advances, include, among
other things, (i) that all of the proceeds of the Offering have been disbursed,
(ii) the absence of any material adverse change in the financial condition,
business, property or prospects and the ability of the Company and the Project
Parties (as defined herein) to perform in all material respects their respective
obligations under the Operative Documents (as defined herein) to which they are
a party, (iii) the absence of any default or an event of default with respect to
material Operative Documents which would be reasonably likely to cause a
material adverse effect on the financial condition, business, property or
prospects of the Company or to the Company's knowledge, of the Project Parties
and their ability to perform in all material respects their respective
obligations under the Operative Documents to which they are a party, (iv) there
being no failure on the part of the Company to keep the Bank Credit Facility In
Balance (as defined herein), and (v) compliance by the Guarantors (as
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defined herein) under the Bank Completion Guaranty and London Clubs and AHL, as
Sponsors (as defined herein), under the Keep-Well Agreement. See "Description of
the Noteholder Completion Guaranty and Disbursement Agreement--Disbursement
Agreement."
The Company does not expect to draw down any funds under the Bank Credit
Facility until June 1998 (approximately four months after the Issue Date). If
the Company fails to satisfy the conditions to the draw down of funds under the
Bank Credit Facility, alternative sources of funding will need to be obtained
and/ or the Trust, Bazaar Holdings and London Clubs will be required to make
cash contributions to the Company pursuant to the Bank Completion Guaranty in
order for the Company to complete the Aladdin. The failure of the Company to
satisfy the conditions to the drawdown of funds under the Bank Credit Facility
could have a material and adverse effect on the Company's ability to complete
the Aladdin and so the value of the Warrants and Warrant Shares.
General Electric Capital Corporation (the "FF&E Lender") has entered into a
commitment letter to provide the $80.0 million of aggregate financing required
to acquire the Specified Equipment and Gaming Equipment. The availability of the
FF&E Financing is subject to certain conditions, including negotiation of
definitive agreements and successful completion of due diligence. Prior to or
upon completion of the Aladdin, the Company is expected to finalize arrangements
for the FF&E Financing. However, if the Company is unable to finalize the FF&E
Financing for any reason, the financial position and results of operations of
the Company, and so the Aladdin Parties and holders of Warrants or Warrant
Shares, could be materially and adversely affected.
There can be no assurance that each lender will perform its obligations or
observe the limitations on the exercise of remedies as set forth under such
agreements. Failure of any one or more of the lenders to perform under the
Disbursement Agreement could materially and adversely affect the Company, the
Aladdin Parties and holders of Warrants or Warrant Shares. In addition,
financing by multiple lenders with security interests that are interrelated by
use or location of the underlying collateral may result in increased complexity
in a debt restructuring or other workout of the Company.
LIMITATION ON ACCESS TO CASH FLOW OF SUBSIDIARIES; HOLDING COMPANY STRUCTURE
The Bank Credit Facility and the Indenture impose substantial restrictions
on the ability of the Company and Holdings, respectively, to make distributions
to their equity holders. Accordingly, holders of Warrant Shares are limited in
their ability to receive dividends and other distributions from Enterprises.
The Issuer does not have any material assets other than its ownership of 25%
of the Holdings Common Membership Interests. Holdings is a holding company, and
its ability to make distributions to the Issuer is dependent upon the receipt of
distributions from its direct and indirect subsidiaries. Holdings does not have
and may not in the future have any material assets other than its ownership of
100% of the Common Membership Interests and 100% of the Series A Preferred
Interests of the Company.
The Company is a party to the Bank Credit Facility which imposes substantial
restrictions, including the satisfaction of certain financial conditions, on the
Company's ability to make distributions to Holdings. Holdings is a party to the
Indenture which imposes substantial restrictions, including the satisfaction of
certain financial covenants, on Holdings' ability to make distributions to the
Issuer. The ability of the Company to comply with such conditions in the Bank
Credit Facility and of Holdings to comply with such conditions in the Indenture
may be affected by events that are beyond the control of Holdings. If the
maturity of loans under the Bank Credit Facility or the Notes were to be
accelerated, all indebtedness outstanding thereunder would be required to be
paid in full before the Company or Holdings, as applicable, would be permitted
to distribute any assets or cash to its members. In addition, certain remedies
available to the Bank Lenders under the Bank Credit Facility could constitute
Events of Default under the Indenture and so cause acceleration of the Notes. In
such circumstances there can be no assurance that the assets of the Company
would be sufficient to repay all of such outstanding debt and then to make
distributions to Holdings to enable Holdings to meet its obligations under the
Indenture. Future
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borrowings by the Company can also be expected to contain restrictions or
prohibitions on distributions by the Company to Holdings and by Holdings to the
Issuer.
The Holdings Operating Agreement and the Company Operating Agreement (as
defined herein) also contain restrictions on distributions on the Holdings
Common Membership Interests and the Common Membership Interests, respectively.
In particular, no distributions, other than distributions to cover any tax
liability in respect of any Holdings Interests (as defined herein) may be made
on Holdings Common Membership Interests while any Holdings Series A Preferred
Interests (as defined herein) or Holdings Series B Preferred Interests (as
defined herein) are outstanding. Further, distributions by the Company (other
than distributions to cover tax liability) on Common Membership Interests are
also limited while Series A Preferred Interests are outstanding. Such
restrictions could materially and adversely affect holders of Holdings Common
Membership Interests such as the Issuer, and holders of Common Stock (such as
the Warrant Shares) and the Warrants. In addition, the Indenture contains
limitations on Holdings' ability to make distributions to its members. As a
result, the amount of distributions made to the Issuer, and therefore dividends
to the holders of Warrant Shares and other stockholders, will effectively be
restricted by the terms of the Indenture. Such restrictions could materially and
adversely affect returns available to holders of Warrant Shares and so the value
of the Warrants and Warrant Shares.
Any right of Holdings to receive assets of any of its subsidiaries upon such
subsidiary's liquidation or reorganization will be effectively subordinated to
the claims of that subsidiary's creditors, except to the extent, if any, that
Holdings itself is recognized as a creditor of such subsidiary, in which case
the claims of Holdings would still be subordinate to the claims of such
creditors who hold security in the assets of such subsidiary to the extent of
such assets and to the claims of such creditors who hold indebtedness of such
subsidiary senior to that held by Holdings.
CONTROLLING STOCKHOLDERS; LACK OF VOTING POWER FOR WARRANT SHARES
The Warrant Shares will have no voting power, and accordingly decisions in
relation to Enterprises will be made by its other shareholders.
AHL owns 98.7% of the common membership interests of Sommer Enterprises, a
Nevada limited-liability company. Sommer Enterprises owns 100% of the issued and
outstanding Class A Common Stock (as defined herein) and the Common Stock of the
Issuer, prior to the exercise of the Warrants, and the Issuer holds 25% of the
Holdings Common Membership Interests. The remaining Holdings Common Membership
Interests are held approximately 47.0% by Sommer Enterprises, 25.0% by LCNI and
3.0% by GAI, LLC ("GAI"), a Nevada limited-liability company 100% beneficially
owned by Richard J. Goeglein, the Chief Executive Officer and a director of the
Company. Accordingly, AHL, through Sommer Enterprises, indirectly owns 98.7% of
the Issuer (prior to the exercise of the Warrants) and approximately 71.1% of
the Holdings Common Membership Interests. London Clubs, through LCNI, owns 25%
of the Holdings Common Membership Interests. Accordingly, AHL and London Clubs
(the "Controlling Stockholders") control the business, policies and affairs of
Holdings, and so the Company, including the election of directors and managers
and major corporate transactions of the Company.
If all of the Warrants are exercised, the holders of Warrant Shares will own
50% of the issued and outstanding Common Stock, representing an indirect
economic interest in 10% of the outstanding Holdings Common Membership
Interests. However, the holders of the Common Stock are not entitled to vote on
any matter submitted to the Issuer's shareholders, including the election of
directors of the Issuer, and will receive limited minority shareholder
protections. Accordingly, holders of Class A Common Stock will be able, without
the approval of the holders of the Common Stock, subject to applicable law, to
(i) amend the Issuer's Articles of Incorporation and Bylaws; (ii) effect mergers
and certain other major corporate transactions; (iii) elect the Issuer's
directors and (iv) otherwise control the outcome of virtually all matters
submitted to a general shareholder vote. Accordingly, even if all of the
Warrants are exercised, the Trust, through AHL and Sommer Enterprises, will
nevertheless continue to retain control of the Issuer and the Controlling
Stockholders will nevertheless continue to retain control of Holdings, and so
the
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Company, and the holders of Warrant Shares will be limited in their ability to
exercise any degree of control whatsoever over the Issuer, and so Holdings and
the Company. See "Certain Material Agreements--Equity Participation Agreement."
Under the Holdings Operating Agreement, if the Trust fails to make its
required 75% contribution for any amounts required to be made under the Bank
Completion Guaranty, LCNI (rather than Sommer Enterprises through the Issuer)
will have certain rights to control the Board of Managers of Holdings and LCNI
and Sommer Enterprises will each have equal direct or indirect voting rights in
deciding matters with respect to Holdings. Furthermore, if AHL fails to make its
required 75% contributions for any amounts required to be made under the
Keep-Well Agreement, LCNI (in addition to any rights London Clubs may have
against AHL and Sommer Enterprises, which may include the ability of London
Clubs to obtain ownership of Sommer Enterprises' equity interests in the Issuer)
through the Issuer or otherwise will have the right to control the Board of
Managers of Holdings and increase its Holdings Common Membership Interests up to
a total of 72% of the Holdings Common Membership Interests, and Sommer
Enterprises' Holdings Common Membership Interests will correspondingly decrease,
subject to receipt of Gaming Approvals. For a description of certain
relationships between the Company, AHL and LCNI, see "Controlling Stockholders"
and "Certain Transactions."
ABSENCE OF DIVIDENDS AND DISTRIBUTIONS
The Company currently intends to retain all earnings for reinvestment.
Consequently, none of the Issuer, Holdings, or the Company plans to pay any
dividend or make any distributions on its common stock or membership interests.
None of the Issuer, Holdings or the Company has ever paid any dividends or
distributions on its common stock or membership interests and (except for
distributions to cover any tax liability in respect of Holdings Interests and
distributions on the Series A Preferred Interests) none of the Issuer, Holdings
or the Company has any plans to pay any dividends or distributions on its common
stock or membership interests in the foreseeable future. Except as stated in the
preceding sentence, the Company currently intends to retain all earnings for
reinvestment in its business and repayment of indebtedness. The Bank Credit
Facility, the Indenture, the Company Operating Agreement and the Holdings
Operating Agreement restrict the payment of distributions by the Company and
Holdings. Such restrictions could materially and adversely affect the Issuer's
ability to pay dividends on, and the value of, the Warrant Shares and so the
value of the Warrants. See "Dividends and Distributions", "Certain Material
Agreements--Holdings Operating Agreement" and "--Company Operating Agreement"
and "Description of Certain Indebtedness and other Obligations--Bank Credit
Facility" and "--Senior Discount Notes."
RISKS OF NEW CONSTRUCTION
Most large scale construction projects involve significant risks and
unforeseen contingencies. As a result, the estimated cost of the Aladdin project
may exceed current projections.
Major construction projects (and particularly one of the anticipated size
and scale of the Aladdin) entail significant risks, including shortages of
materials or skilled labor, unforeseen engineering, environmental and/or
geological problems, work stoppages, weather interference, unanticipated cost
increases and unavailability of construction equipment. Construction, equipment
or staffing problems or difficulties in obtaining any of the requisite licenses,
permits, allocations or authorizations from regulatory authorities could
increase the total cost, delay, or prevent the construction or opening of the
Aladdin or the other components of the Complex or otherwise affect their
respective design and features.
The anticipated costs and opening dates for the Aladdin are based on
budgets, conceptual design documents (not all of which will be finalized at the
commencement of construction) and schedule estimates prepared by the Company
with the assistance of the architects and contractors described herein. See
"Business--Design and Construction Team." Under the terms of the Design/Build
Contract, the Design/Builder is responsible for all construction costs covered
by the Design/Build Contract that are in
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excess of the guaranteed maximum price of $267.0 million, subject to certain
qualifications. Pursuant to the Fluor Guaranty, Fluor has made certain
guarantees regarding the Design/Builder's performance under the Design/Build
Contract. However, the Design/Build Contract provides that the guaranteed
maximum price will be equitably adjusted on account of (i) changes in the design
documents at the request of the Company; (ii) changes requested by the Company
in the scope of the work to be performed pursuant to the Design/Build Contract;
and (iii) natural disasters, casualties and certain other "force majeure" events
beyond the reasonable control of the Design/Builder. If any such events occur,
the construction costs which must be borne by the Company may increase. As a
result, the actual price paid for the construction of the Aladdin may increase.
The Design/Build Contract requires that all subcontractors engaged by the
Design/ Builder to perform work and/or supply materials in connection with the
construction of the Aladdin post bonds, at the discretion of the Company and the
Design/Builder, guaranteeing timely completion of work and payment for all labor
and materials. Nevertheless, there can be no assurance that the Aladdin will
commence operations on schedule, that construction costs for the Aladdin will
not exceed budgeted amounts or that the Design/Builder will not challenge
aspects of the guaranteed maximum price. Failure to complete the Aladdin on
budget or on schedule may have a material adverse effect on the Company, and so
the Aladdin Parties. The Aladdin is expected to be completed in the first four
months of the year 2000.
COMPLETION OF THE MALL PROJECT AND THE MUSIC PROJECT
There can be no assurance that the Mall Project or the Music Project will be
completed and the failure of such projects to be completed could have a material
adverse effect on the Aladdin and so Enterprises and the holders of Warrant
Shares.
A principal part of the Complex will be the Mall Project, which is comprised
of the Desert Passage and the Carpark, and the Music Project (including the
Theater). The Company's business plan assumes that the Desert Passage and the
Music Project will attract a substantial flow of pedestrian traffic to the
Casino and that the Carpark will provide essential parking facilities for both
overnight and casual guests at the Aladdin. However, the Company will neither
develop nor own the Desert Passage, the Carpark or the Music Project and the
completion of the Aladdin is not contingent on their completion. Failure of the
Mall Project or the Music Project to be developed or to become operating in a
timely manner will have a material adverse effect on the Company and the Aladdin
Parties. Investors should note that the funding arrangements for the completion
of the Music Project have not been finalized, and there can be no assurance that
such funding arrangements will be finalized at any time, or that the Mall
Project or Music Project will be completed.
The Mall Project will be developed and owned by Bazaar. Bazaar is
37.5%-owned by Bazaar Holdings, which is indirectly controlled by the Trust and
therefore is an affiliate of the Issuer. Bazaar Holdings and THB have entered
into an operating agreement (as amended, the "Bazaar LLC Operating Agreement")
under which each party has agreed to cooperate in the development and operation
of the Mall Project, and Bazaar Holdings, THB and THOP have provided certain
undertakings to effect the development of the Mall Project in an agreed manner
and time frame. See "Certain Material Agreements--Bazaar LLC Operating
Agreement."
Bazaar and the Mall Lenders have entered into a building loan agreement for
the Mall Financing. Funding under the Mall Financing is subject to certain
conditions. If Bazaar fails to satisfy the conditions to the draw down of funds
under the Mall Financing, alternative sources of funding will need to be
obtained. TrizecHahn, THOP, the Trust, Bazaar Holdings and AHL have agreed to
guarantee the completion of the Mall Project and Bazaar's indebtedness to the
Mall Lenders pursuant to the Mall Guaranty. Neither the Company nor any of the
Aladdin Parties is a party to the Bazaar LLC Operating Agreement, the Mall
Guaranty or the Mall Financing and so neither the Company nor any of the Aladdin
Parties may enforce or prevent the amendment or cancellation of any of the
rights or obligations thereunder. In addition, there can be no assurance that
TrizecHahn, THOP, the Trust, Bazaar Holdings and AHL will be in a position to
comply with their obligations under the Mall Guaranty. If the Mall Project is
not completed, the Company believes that it may need to incur additional costs
to complete the
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construction of the Aladdin, depending on the Aladdin's stage of construction.
If the Mall Project is abandoned after the construction of certain shared
structural space has begun, the Company believes that the costs of completing
the shared structural space (which would be used as retail space) and demolition
and construction expenses necessary to convert the site of the Mall Project into
surface parking would be approximately $23 million (including the $14.2 million,
including interest, no longer being reimbursed by Bazaar pursuant to the Site
Work Agreement).
The success of the Mall Project, which is expected to be completed in the
first four months of the year 2000, will depend significantly on the skills and
experience of TrizecHahn in the management of entertainment shopping malls such
as the Mall Project. However, under the Bazaar LLC Operating Agreement, THB is,
in certain circumstances, entitled to dispose of its interests in the Mall
Project on or after the opening of the Mall Project. Accordingly, there can be
no assurance that, after such date, TrizecHahn will continue to manage, or hold
an equity interest in, the Mall Project. In addition, on March 5, 1998,
TrizecHahn announced that it is considering the sale of its operating portfolio
of regional shopping centers and on April 6, 1998 announced the sale of 20
regional shopping centers for over $2.5 billion. TrizecHahn has indicated that
its planned sales will not include TrizecHahn's portfolio of development
projects, including the Desert Passage. Although TrizecHahn has indicated that
it will proceed with and have sufficient financial resources to complete the
Desert Passage even if a sale of its entire operating portfolio were to be
consummated, no assurance can be made that TrizecHahn will be in a position to
satisfy its obligations under the Bazaar LLC Operating Agreement. While
TrizecHahn's announcement is limited to the sale of its current operating
portfolio of regional shopping centers, there can be no assurance that
TrizecHahn will not similarly decide to sell its interest in the Desert Passage.
Accordingly, investors cannot be assured that TrizecHahn will own and operate
the Desert Passage once it becomes operational, and as a result, pedestrian
traffic to the Aladdin may decrease.
The Music Project is expected to be completed by October of the year 2000
and developed and owned by Aladdin Music. Pursuant to the London Clubs Purchase
Agreement, London Clubs, through its wholly owned subsidiary LCNI, has agreed
that so long as Aladdin Music obtains financing for the Music Project on terms
satisfactory to LCNI and provided that certain other conditions are met, Aladdin
Music may develop and own the Music Project in accordance with the terms
described herein. If such conditions are not met, LCNI has the right to select
the method in which it will participate in the Music Project, if at all. There
can be no assurance that the conditions will be satisfied. If the conditions are
not satisfied, there can be no assurance that the Music Project will proceed as
described herein, or at all.
As currently anticipated, the Company and Planet Hollywood intend to operate
the Music Project in a manner conducive to the joint achievement of the
Company's and Aladdin Music's business objectives. While the Company has signed
the Music Project Memorandum of Understanding with Planet Hollywood in
connection with the development, construction and operation of the Music
Project, funding for the Music Project has not yet been finalized and certain
significant matters, such as the appointment of a general contractor to
construct the Music Project, remain incomplete. If the Mall Project is not
completed, it may not be feasible to develop the Music Project. If the Music
Project is not completed, the Company intends to apply a portion of the funds
which it has allocated for its equity contribution to Aladdin Music to the
renovation of the Theater. However, without the support of Planet Hollywood
through the Music Project, the Company may not be able to attract the same
quality of performers to the Theater as it may otherwise have been able to
attract. Further, even if the Music Project is completed, there can be no
assurance that the Music Project will be operated in a manner conducive to the
achievement of the Company's business objectives. In addition, the Music Project
and its owners must receive all required Gaming Approvals (as defined herein)
from the Nevada Gaming Authorities (as defined herein) in order to conduct
gaming operations.
There can be no assurance (i) that Bazaar or Aladdin Music will have or
obtain sufficient funding to finance the development and operation of the Mall
Project or the Music Project, respectively; (ii) that the Desert Passage or the
Music Project will be completed; (iii) that if completed, the Desert Passage or
the Music Project will attract the number and types of customers expected by the
Company; or (iv) that if
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completed, the Music Project and its owners will obtain all required Gaming
Approvals or that if obtained, they will be obtained on a timely basis. Failure
of Bazaar or Aladdin Music to develop and operate the Mall Project or the Music
Project, respectively, in the manner currently expected could materially and
adversely affect the success of the Aladdin and the financial position and
results of operations of the Company, and so the Aladdin Parties.
COMPLETION OF ENERGY PLANT
Although the obligations of the Energy Provider (as defined herein) to
complete the Plant in accordance with the Development Agreement (as defined
herein) are guaranteed by Unicom (as defined herein), there can be no assurance
that the Energy Provider will perform its obligations under the Development
Agreement (as defined herein) or that Unicom will perform its obligations under
the Unicom Guaranty (as defined herein).
Energy will be provided to certain parts of the Complex by an energy plant
to be developed and constructed pursuant to the Development Agreement. The
Company has entered into the Development Agreement with Northwind Aladdin LLC
(the "Energy Provider"), a subsidiary of UT Holdings Inc. ("UTH"). UTH is a
subsidiary of Unicom Corporation ("Unicom"). Pursuant to the Development
Agreement, the Energy Provider will develop and construct the Plant (as defined
herein) to serve the energy requirements of certain parts of the Complex. See
"Certain Material Agreements--Development Agreement." The design and
construction of the Plant will be at the sole cost and expense of the Energy
Provider, however, the Energy Provider shall not be responsible for costs in
excess of $40.0 million unless agreed to by the Energy Provider. The obligations
of the Energy Provider to complete the Plant in accordance with the Development
Agreement and in a manner capable of delivering the energy requirements of such
parts of the Complex in accordance with the Energy Service Agreement (as defined
herein) are guaranteed by the Energy Provider's ultimate parent, Unicom. Unicom
has agreed that if for any reason the Energy Provider shall fail or be unable to
punctually and fully perform or cause to be performed any of its obligations
under the Development Agreement, Unicom shall perform or cause to be performed
such obligations promptly upon demand. Unicom's obligations are limited to an
amount equal to $30.0 million (or, under certain circumstances, an amount less
than $30.0 million) and shall not be reduced until Substantial Completion (as
defined herein) of the Plant.
There can be no assurance that the Energy Provider will perform its
obligations under the Development Agreement, or that Unicom will perform its
obligations under the Unicom Guaranty. Failure of the Energy Provider or Unicom
to perform its obligations under the Development Agreement and Unicom Guaranty
or failure of the Energy Provider to perform its obligations under the Energy
Service Agreement, will materially and adversely affect the Company, the Aladdin
Parties and holders of the securities offered hereby. In addition, the Company
may have to make alternative arrangements for the provision of energy for the
Complex. There can be no assurance that such arrangements could be made, or if
made, on terms favorable to the Company.
RISKS OF NEW VENTURE
The Company is a development stage company with no prior history. Therefore,
there can be no assurance that it will be able to manage and operate a
hotel/casino on a profitable basis.
The Issuer's sole material asset is its 25% interest in the Holdings Common
Membership Interests. Holdings' material assets are its interests in the
Company. Accordingly, the Issuer's sole material asset is its indirect ownership
of 25% of the interests in the Company. The Company is a development stage
company formed to develop and operate the Aladdin. The Company has no history of
operations and has never been involved in developing, constructing or operating
a hotel/casino project. Although certain members of the Company's management
have experience developing and operating large scale hotels and casinos, none of
these individuals has developed or operated a development of the anticipated
size of the Aladdin, and only certain of these individuals have worked together
with certain other members of the Company's
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management team in developing or operating similar projects, none of such
projects being the anticipated size of the Aladdin. See "Management."
The operation of the Aladdin will be subject to significant business,
economic, regulatory and competitive uncertainties and contingencies, many of
which will be beyond the control of the Company and the Aladdin Parties. No
assurances can be given that the Company will be able to manage the Aladdin on a
profitable basis or attract a sufficient number of guests, gaming customers and
other visitors to the Aladdin to make its various operations profitable
independently or as a whole or to enable the Note Issuers and the Company to pay
the principal of and interest on the Notes and the Bank Credit Facility. The
Company will need to recruit a substantial number of new employees prior to the
opening of the Aladdin at a time when other major facilities may be approaching
completion and also recruiting employees. There can be no assurance that the
Company will be able to recruit a sufficient number of qualified employees.
Furthermore, it is not known to what extent such employees will be covered by
collective bargaining agreements, as that will be a determination ultimately
made by such employees. See "Business--Employees."
The opening and operation of the Aladdin will be contingent upon the receipt
of all regulatory licenses, permits, approvals, registrations, findings of
suitability, orders and authorizations from the Nevada Gaming Authorities (as
defined herein) (collectively, "Gaming Approvals") by the Company, Holdings and
its owners. The scope of the approvals required to construct and open the
Aladdin is extensive, and the failure to obtain or maintain such approvals could
prevent or delay the completion or opening of all or part of such facilities or
otherwise affect the design and features of the Aladdin. In particular, the
Company will be required to apply for and obtain approvals from the Nevada
Gaming Authorities with respect to the construction, design and operational
features of the Casino related to surveillance of gaming areas. In addition, the
Company will need to apply for and obtain, prior to commencement of gaming
activities at the Casino, a nonrestricted gaming license and Gaming Approvals
from the Nevada Gaming Authorities with respect to the operation of the Casino
and no assurances can be given that such Gaming Approvals will be obtained, or
that if obtained, they will be obtained on a timely basis. Failure by the
Company to obtain any such Gaming Approvals could materially and adversely
affect the Company's financial position and results of operations. In connection
with the Company's receipt of Gaming Approvals, its members and their owners and
affiliates will also have to obtain applicable Gaming Approvals and no
assurances can be given that such Gaming Approvals will be obtained or if
obtained, that they will be obtained on a timely basis. See "--Government
Regulation" and "Regulation and Licensing." Capital will also be subject to
being called forward for a finding of suitability as a co-issuer of the Notes
and the New Notes (as defined herein) in the discretion of the Nevada Gaming
Authorities.
LACK OF DIVERSIFICATION; DEPENDENCE ON SINGLE SITE
Neither the Issuer, Holdings nor the Company anticipates having material
assets or operations other than their respective interests in the Aladdin.
Accordingly, they are subject to greater risks than a geographically diversified
gaming operation.
The Issuer does not currently anticipate having material assets and
operations other than its interest in Holdings and Holdings does not currently
anticipate having material assets and operations other than its interests in the
Company. In addition, the Company does not currently anticipate having material
assets and operations other than the Aladdin and its membership interests in and
advances to AMH, a wholly owned subsidiary of the Company which will own a 50%
interest in the Music Project (on a fully diluted basis) through Aladdin Music.
Accordingly, the Aladdin Parties and the Company will be subject to greater
risks than a geographically diversified gaming operation, including, but not
limited to, risks related to local economic and competitive conditions, changes
in local and state governmental laws and regulations (including changes in laws
and regulations affecting gaming operations and taxes) and natural and other
disasters. The Company's, and so the Issuer's, principal sources of income
following completion of the Complex will be the Aladdin, and, to a lesser
extent, fees received from Aladdin Music for the provision of management
services with respect to the Music Project. Accordingly, the ability of the
Issuer to pay dividends to holders of Warrant Shares will be directly dependent
on the success of the Aladdin and, to a lesser extent, the Music Project.
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CERTAIN BANKRUPTCY CONSIDERATIONS
The structure of the Holdings Group and the fact that Holdings and the
Company are limited-liability companies provides certain bankruptcy risks to
holders of securities.
SUBSTANTIVE CONSOLIDATION
Under the Bankruptcy Code, it is possible that if AHL, the Company, the
Issuer, London Clubs, the Trust, Holdings or Capital, or any of their affiliates
(the "Affiliated Parties") becomes a debtor under applicable bankruptcy law, a
bankruptcy court could order substantive consolidation of the assets and
liabilities of any or all Affiliated Parties. Substantive consolidation is an
equitable, fact-based remedy, not prescribed by statute, with respect to which
the court has considerable discretion. While the separate legal existence of
each Affiliated Party and its observance of certain formalities and operating
procedures could effectively preclude, based on the present state of the case
law (i) a finding that the assets of an Affiliated Party is property of the
bankruptcy estates of any of the other Affiliated Parties and (ii) the
substantive consolidation of the assets and liabilities of an Affiliated Party
with those of any of the other Affiliated Parties, there can be no assurance
that substantive consolidation would not occur. In addition, there can be no
assurance that during litigation of such issues, delays will not occur in
payments of indebtedness, even if the court ultimately rules against substantive
consolidation, or that parties in interest might determine to settle such issues
to avoid the expense and delay of litigation. If the court concludes there is
substantive consolidation, however, payments of indebtedness could be delayed or
reduced, which in turn could delay distributions (if any) to equity holders,
including holders of Warrant Shares.
LIMITED-LIABILITY COMPANIES
Holdings and the Company are limited-liability companies organized under the
laws of the State of Nevada. Limited-liability companies ("LLCs") are relatively
recent creations not only under the laws of the State of Nevada but also under
the laws of other jurisdictions. Generally stated, LLCs are intended to provide
both the limited liability of the corporate form for their members and certain
advantages of partnerships, including "pass-through" income tax treatment for
members, and thus have attributes of both corporations and partnerships. Given
their recent creation, LLCs and their members have been involved in relatively
few bankruptcy cases as debtors, and there has been little reported judicial
authority addressing bankruptcy issues as they pertain to LLCs. Moreover, the
existing judicial authority on such issues in bankruptcies of analogous entities
(e.g. partnerships) is not well settled. Consequently, a bankruptcy of Holdings
or the Company, its members or any of their affiliates, may be litigated and
decided in the absence of dispositive judicial precedent, and thus, no assurance
can be made as to any particular outcome.
COMPLEXITIES RELATING TO MULTIPLE SECURED LENDERS
All of the Company's assets are subject to first priority liens, either to
the Bank Lenders under the Bank Credit Facility or the FF&E Lender under the
FF&E Financing. The FF&E Lender's security interests relate to assets to be used
in the Aladdin, which is pledged to the Bank Lenders. The existence of multiple
secured lenders could cause complexities in and prolong the duration of
bankruptcy proceedings or a debt restructuring of the Company, which in turn
could delay distributions to the direct and indirect holders of membership
interests in the Company, such as Holdings, Enterprises and holders of Warrant
Shares.
RISKS UNDER DESIGN/BUILD CONTRACT AND FLUOR GUARANTY
Certain obligations of the Design/Builder under the Design/Build Contract
are guaranteed by Fluor (the "Fluor Guaranty"). A default by either the
Design/Builder under the Design/Build Contract or Fluor under the Fluor Guaranty
could result in the Aladdin not being completed on schedule and have a material
adverse effect on the Company and the Aladdin Parties. If a bankruptcy case were
to be commenced voluntarily by or involuntarily against Fluor, remedies
available under the Fluor Guaranty would be limited or unavailable. The Fluor
Guaranty does not cover cost increases caused by certain acts commonly referred
to as "force majeure."
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CHANGE OF CONTROL
Upon a Change of Control (as defined in the Indenture), each holder of the
Notes will have the right, at such holder's option, to require the Note Issuers
to purchase the Notes owned by such holder at a price equal to 101% of the
Accreted Value thereof plus accrued and unpaid interest, if any, and Liquidated
Damages (as defined in the Indenture), if any, to the date of purchase. There
can be no assurance that the Note Issuers will have sufficient funds to purchase
the Notes after such a Change of Control. In addition, upon a change of control
(as defined in the Bank Credit Facility) all amounts outstanding under the Bank
Credit Facility will immediately become due and payable. There can be no
assurance that the Company will have sufficient funds to repay the Bank Credit
Facility or any other indebtedness that becomes due as a result of such event.
See "Description of Certain Indebtedness and Other Obligations--Bank Credit
Facility."
OPERATING RESTRICTIONS
The terms of the Indenture, the Bank Credit Facility and the other
agreements governing the indebtedness of the Company impose significant
operating and financial restrictions on the Company and the Aladdin Parties.
Such restrictions significantly limit or prohibit, among other things, the
incurrence of certain additional debt, distributions, transactions with
affiliates of the Company and Holdings and the sale of certain assets. These
restrictions, in combination with the degree to which the Company is leveraged,
could limit the ability of the Company to respond to market conditions or meet
extraordinary capital needs or could otherwise restrict corporate activities.
There can be no assurances that such restrictions will not materially and
adversely affect the ability of the Company to finance its future operations or
capital needs and the operation of its business. See "Description of Certain
Indebtedness and Other Obligations."
POSSIBLE CONFLICTS OF INTEREST
Potential for conflicts of interest exists between the Aladdin, on the one
hand, and the other businesses to be operated on the Complex, and such conflicts
may adversely effect the Company, Holdings and Enterprises.
The Trust is expected to hold significant interests in all of these
businesses. Mr. Jack Sommer, who is Chairman and a director of the Company and
Holdings and President of the Issuer, Mr. Ronald Dictrow, who is Executive Vice
President/Secretary and a director of the Company and Holdings and a Secretary
and director of the Issuer, are also directors of Bazaar. In addition, certain
directors and executives of the Company and Holdings are currently and are
likely to continue to be, directors and executives of Aladdin Music, which will
develop and own the Music Project. Further, it is expected that in addition to
managing the Aladdin, the Company or one of its affiliates, will also manage the
Music Project. The objectives for each of these businesses may at times differ
and such differences may be material. In addition, all such businesses will
share the use of certain facilities on the Complex, including vehicular and
pedestrian traffic ways, the Carpark and certain utilities (such as the Plant,
which will provide energy to the Complex). For these reasons, potential exists
for conflicts of interest, including in relation to the division of management
time between each of these businesses, splitting of costs of shared facilities
and the sharing of future business opportunities arising in connection with the
Complex.
For example, certain directors of Holdings may be faced with a potential
conflict of interest arising from their interests in and relationship with the
Aladdin and the other projects at the Complex. These include the following:
- decisions to direct customers to the Aladdin, the Music Project or the
Mall Project
- allocations of costs and expenses relating to the REA (as defined herein)
and Energy Services Agreement
- cost allocations during construction for areas such as the Carpark, the
Plant and pedestrian traffic ways
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- cost allocations for shared general and administrative services such as
accountancy, purchasing and warehousing, human resources and legal
To the Issuer's knowledge, there is no Nevada authority addressing the issue
of whether a person acting as a promoter (in this case, AHL), owes fiduciary
duties to the entity, its owners or investors.
In addition, Planet Hollywood, which is a 50% shareholder in Aladdin Music
(on a fully diluted basis) and the developer of the Music Project, is not
contractually restricted or otherwise prevented from developing other music or
entertainment theme hotel casinos in Las Vegas. The development of a competing
Planet Hollywood-owned hotel in Las Vegas could give rise to conflicts of
interest for Planet Hollywood and could materially and adversely affect the
Music Project and so Aladdin Music, the Company and the Aladdin Parties.
London Clubs may have a potential conflict of interest arising from its
relationship with the Company. This includes possibly directing clientele to its
other interests worldwide instead of the Aladdin and focusing resources on its
other projects.
The Issuer believes that the agreements executed by London Clubs in
connection with the Aladdin deal with this conflict by providing London Clubs
with financial incentives which are dependent on certain financial goals being
obtained by the Company.
SHARED FACILITIES
Because the Aladdin, the Mall Project and the Music Project will share
certain operational facilities (the "Shared Facilities"), the construction of
all such projects will include the construction of the Shared Facilities in
sizes and/or capacities that will be sufficient for all such projects together,
but are in excess of what is minimally required for the Aladdin. The Shared
Facilities will include certain shared structural space, the Strip facade and
related retail areas of the Complex. The Company will bear the full cost of
constructing the Shared Facilities. However, Bazaar will be obligated to
reimburse the Company for a portion of the construction costs related to the
Shared Facilities if the Mall Project is completed. It is estimated that
Bazaar's share of the cost of constructing the Shared Facilities will be $14.2
million, including interest. If Bazaar is unable to obtain financing for the
Mall Project, it is unlikely that Bazaar will be able to reimburse the Company
for its share of the construction costs related to the Shared Facilities
pursuant to the Site Work Agreement.
LIMITATIONS UNDER BANK COMPLETION GUARANTY AND NOTEHOLDER COMPLETION GUARANTY
The Trust, London Clubs and Bazaar Holdings have entered into the Bank
Completion Guaranty and the Noteholder Completion Guaranty for the benefit of
the Bank Lenders and the Noteholders, respectively. Failure by the parties to
perform their obligations under these agreements could result in the Aladdin not
being completed in a timely manner, or at all.
Pursuant to the Bank Completion Guaranty, the Trust, London Clubs and Bazaar
Holdings have agreed among other things jointly and severally to guarantee the
development, construction and equipping of the Aladdin for the benefit of the
Bank Lenders. None of the holders of the Warrants, Warrant Shares, Holdings or
the Issuer is a party to the Bank Completion Guaranty, however, the Trust,
Bazaar Holdings and London Clubs have entered into the Noteholder Completion
Guaranty for the benefit of the holders of the Notes, subject to certain
important qualifications, limitations and exceptions. The Noteholder Completion
Guaranty contains certain intercreditor provisions which significantly limit the
rights of the State Street Bank and Trust Company, as trustee under the
Indenture (the "Trustee") and the holders of the Notes, including certain
standstill periods during which the Trustee and the holders of the Notes may not
enforce the Noteholder Completion Guaranty or seek remedies thereunder, even if
there is a default under the Bank Completion Guaranty and the Bank Lenders are
no longer advancing funds. See "Description of Noteholder Completion Guaranty
and Disbursement Agreement--Noteholder Completion Guaranty."
The Bank Completion Guaranty entered into by the Trust, Bazaar Holdings and
London Clubs requires that if the Company has insufficient funds available to
complete the Aladdin, the Trust, Bazaar
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Holdings and London Clubs must contribute cash to the Company to enable such
completion, subject to certain qualifications. None of the holders of Warrants
or Warrant Shares, Holdings or the Issuer is party to the Bank Completion
Guaranty and, accordingly, none of them may enforce any rights thereunder. In
addition, none of the holders of Warrants or Warrant Shares, Holdings or the
Issuer is party to the Noteholder Completion Guaranty and, accordingly, none of
them may enforce any rights thereunder. The parties to the Bank Completion
Guaranty have limited obligations under the Bank Completion Guaranty until and
unless the proceeds of the Funding Transactions are, in the aggregate,
insufficient to cover the construction cost increases covered by the Bank
Completion Guaranty. The Bank Completion Guaranty terminates upon the
indefeasible payment and performance of the Guaranteed Obligations (as defined
herein). See "Description of Certain Indebtedness and Other Obligations--Bank
Completion Guaranty."
Neither the Bank Completion Guaranty nor the Noteholder Completion Guaranty
contain restrictions on the ability of the parties thereto to incur indebtedness
junior in respect of right of payment to the Guaranteed Obligations (excluding
certain types of indebtedness). While such parties have informed the Company
that they believe they will be able to perform their respective obligations
thereunder, no assurance can be given that they will have available the
financial resources if they are called on under the Bank Completion Guaranty or
the Noteholder Completion Guaranty. If the Trust and Bazaar Holdings fail to
perform their obligations under the Bank Completion Guaranty or the Noteholder
Completion Guaranty, London Clubs is, in certain circumstances, entitled
(through its affiliates) to exercise equal voting power to the Trust and its
affiliates in the affairs of Holdings. If the parties under the Bank Completion
Guaranty or the Noteholder Completion Guaranty are unable to perform their
respective obligations thereunder, it may be an Event of Default under the
Indenture and the Bank Credit Facility and the Aladdin may not be completed. In
addition, should certain London Clubs specified exceptional events (a "Specified
Event") under the Bank Completion Guaranty occur, at the option of the required
lenders, such Specified Event shall constitute an event of default under the
Bank Completion Guaranty and consequently under the Bank Credit Facility, and
the Bank Lenders, without any further notice to a Guarantor, shall be entitled
to exercise all rights and remedies available under the Bank Completion Guaranty
and any other Loan Documents. See "Description of Certain Indebtedness and Other
Obligations--Bank Completion" for a description of such Specified Events.
Certain historical financial information concerning London Clubs is included
herein to assist investors in evaluating the ability of London Clubs to perform
its obligations under the Bank Completion Guaranty and the Noteholder Completion
Guaranty. Such information has been prepared in accordance with United Kingdom
generally accepted accounting principles ("U.K. GAAP"), which principles are not
consistent with, and materially differ from, United States generally accepted
accounting principles ("U.S. GAAP"). With respect to the historical financial
information of London Clubs included herein, such differences relate (among
other things) to depreciation and amortization, valuation of fixed assets,
recognition of deferred taxes, accounting for employee stock options, and
accounting for pension costs. In making their investment decision, investors
should consider that if such financial information of London Clubs was restated
in accordance with U.S. GAAP, there are likely to be material differences from
such information as stated in accordance with U.K. GAAP. Such differences would
have no material effect on London Clubs' cash flows or liabilities and,
accordingly, also would have no material impact on its ability to meet its
obligations.
The U.K. Chancellor of the Exchequer has proposed to increase the highest
marginal rate of gaming duty (tax on casino betting profits) from 33 1/3% to
40%. If the proposed tax increase were to be enacted into law, London Clubs
could suffer a reduction of profits. The proposed tax increase is not certain to
be enacted, or if enacted, in the form in which it has been proposed.
The Trust, which is indirectly a controlling stockholder of Enterprises,
Holdings, Capital and the Company, is a joint and several guarantor (together
with London Clubs and Bazaar Holdings) under each of the Bank Completion
Guaranty and the Noteholder Completion Guaranty. In addition, the Trust and AHL
are guarantors of all Bazaar's obligations under the Mall Financing.
Furthermore, the Trust is expected to be an obligor under a keep-well agreement
expected to be entered into with respect to the Music Project (the "Music
Keep-Well Agreement"). No financial information regarding the Trust is publicly
available for the purpose of evaluating the Trust's creditworthiness and,
accordingly, purchasers of
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Warrants or Warrant Shares should not rely upon the Trust's performance under
the Bank Completion Guaranty or the Noteholder Completion Guaranty when making
their investment decision.
RISK OF NON-PERFORMANCE UNDER KEEP-WELL AGREEMENT
Under the Keep-Well Agreement (as defined herein), AHL, London Clubs and
Bazaar Holdings have agreed to ensure the Company's compliance with certain
financial ratios. There can be no assurance that the parties will have available
sufficient financial resources if they are called on to make payments under the
Keep-Well Agreement. Failure of any of the parties to the Keep-Well Agreement to
comply with their material obligations under the Keep-Well Agreement could have
a material and adverse effect on the Company and the Aladdin Parties, and will
constitute a default under the Bank Credit Facility and the Indenture.
AHL, London Clubs and Bazaar Holdings have agreed pursuant to an agreement
(the "Keep-Well Agreement") to contribute, if required, funds to the Company to
ensure the Company's compliance with certain financial ratios and other
requirements under the Bank Credit Facility, subject to certain conditions.
Neither Holdings, the Issuer nor the holders of Warrants or Warrant Shares is a
party to the Keep-Well Agreement. The Keep-Well Agreement does not constitute a
guaranty of the obligations of the Company under the Bank Credit Facility, the
Notes or otherwise. In particular, under the Keep-Well Agreement, the parties to
the Keep-Well Agreement are not required to contribute an aggregate of more than
$150.0 million to the Company ($30.0 million in any fiscal year), and are not
required to contribute any amounts to the Company on or after the earlier of the
date on which the Company, without the benefit of cash contributions from the
Controlling Stockholders or their affiliates, complies with all of the financial
covenants set forth in the Bank Credit Facility for six consecutive quarterly
periods from and after the Conversion Date (as defined herein) or the date on
which the aggregate outstanding principal amounts of the Bank Credit Facility
are reduced below certain amounts and prior to certain dates.
While the parties to the Keep-Well Agreement have informed the Company that
they believe they will be able to perform their obligations under the Keep-Well
Agreement, no assurance can be given that they will have available sufficient
financial resources if they are called on to make payments under the Keep-Well
Agreement. The obligations of London Clubs under the Keep-Well Agreement are
subordinated to other obligations of London Clubs under certain of its
pre-existing senior debt facilities. Furthermore, although the obligations of
London Clubs under the Keep-Well Agreement are guaranteed by certain
subsidiaries of London Clubs, such subsidiaries also currently guarantee senior
existing indebtedness of London Clubs. In addition, there are certain
restrictions on each of the parties' to the Keep-Well Agreement ability to incur
indebtedness or sell or transfer assets. If a party defaults in its obligations
under the Keep-Well Agreement, such party's (or its affiliate's) interest in
Holdings could be subject to dilution, which dilution could affect that party's
(or its affiliate's) ability to control or direct the policies of Holdings and
so the Company. Failure of each of the parties to the Keep-Well Agreement to
comply with their material obligations under the Keep-Well Agreement could have
a material and adverse effect on the Company and the Aladdin Parties, and will
constitute a default under the Indenture. The payments and issuance of
additional securities will be subject to the prior approval of the Nevada Gaming
Authorities. See "Controlling Stockholders--Keep-Well Agreement."
Certain historical financial information concerning London Clubs is included
herein to assist investors in evaluating the ability of London Clubs to perform
its obligations under the Keep Well Agreement. Such information has been
prepared in accordance with United Kingdom generally accepted accounting
principles ("U.K. GAAP"), which principles are not consistent with, and
materially differ from, United States generally accepted accounting principles
("U.S. GAAP"). With respect to the historical financial information of London
Clubs included herein, such differences relate (among other things) to
depreciation and amortization, valuation of fixed assets, recognition of
deferred taxes, accounting for employee stock options, and accounting for
pension costs. In making their investment decision, investors should consider
that if such financial information of London Clubs was restated in accordance
with U.S. GAAP, there are likely to be material differences from such
information as stated in accordance with U.K. GAAP. Such differences would have
no material effect on London Clubs' cash flows or liabilities and, accordingly,
also would have no material impact on its ability to meet its obligations.
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The U.K. Chancellor of the Exchequer has proposed to increase the highest
marginal rate of gaming duty (tax on casino betting profits) from 33 1/3% to
40%. If the proposed tax increase were to be enacted into law, London Clubs
could suffer a reduction of profits. The proposed tax increase is not certain to
be enacted, or if enacted, in the form in which it has been proposed.
The Trust, which is indirectly a controlling stockholder of Enterprises,
Holdings, Capital and the Company, is a joint and several guarantor (together
with London Clubs and Bazaar Holdings) under each of the Bank Completion
Guaranty and the Noteholder Completion Guaranty. In addition, the Trust and AHL
are guarantors of all Bazaar's obligations under the Mall Financing.
Furthermore, the Trust is an obligor under the Music Keep-Well Agreement. No
financial information regarding the Trust is publicly available for the purpose
of evaluating the Trust's creditworthiness and, accordingly, purchasers of
Warrants or Warrant Shares should not rely upon the Trust's performance under
the Bank Completion Guaranty or the Noteholder Completion Guaranty when making
their investment decision.
DEPENDENCE UPON KEY MANAGEMENT AND LACK OF EXPERIENCED PERSONNEL
The Company is dependent to a large extent on the services of its senior
management. There can be no assurance that such individuals will remain with the
Company, and if such members of senior management do not remain with the
Company, the Company will be required to hire individuals with adequate
experience to replace such members of management on comparable terms, and no
assurances can be made as to the Company's ability to do so.
The ability of the Company to maintain its competitive position is dependent
to a large degree on its ability to retain the services of its senior management
team, including Jack Sommer, Richard Goeglein and James McKennon. Although
certain of the senior managers of the Company have employment agreements with
the Company, there can be no assurance that such individuals will remain with
the Company. The loss of the services of any of these individuals or an
inability to attract and retain additional senior management personnel could
have a material adverse effect on the operation of the Aladdin. There can be no
assurance that the Company will be able to retain its existing senior management
personnel or to attract additional qualified senior management personnel. See
"Management."
Until construction of the Aladdin is close to completion, the Company
believes that it will not require extensive operational management and,
accordingly, has kept and intends to keep its permanent staff at relatively
minimal levels. However, the Company will be required to undertake a major
recruiting and training program prior to the opening of the Aladdin at a time
when other major new facilities may be approaching completion and also
recruiting employees. While the Company believes that it will be able to attract
and retain a sufficient number of qualified individuals to operate the Aladdin
on acceptable terms, the pool of experienced gaming and other personnel is
limited and competition to recruit and retain gaming and other personnel is
likely to intensify as more casinos are opened. No assurance can be given that
such employees will be available to the Company for use in managing the Aladdin.
RISK OF OVERCAPACITY; COMPETITION AND PLANNED CONSTRUCTION IN LAS VEGAS
Construction of several new major resort projects could lead to increased
competition and overcapacity in the Las Vegas hotel/casino market. As a result,
the operations and profitability of the Company could be adversely affected.
The hotel/casino industry is highly competitive. Hotels located on or near
the Strip ("Strip Hotels") compete with other Strip Hotels and with other major
hotels in downtown Las Vegas. The Aladdin will also compete with a large number
of other hotels and motels located in and near Las Vegas. According to the Las
Vegas Convention and Visitors Authority (the "LVCVA"), as of December 31, 1997,
there were 105,347 hotel and motel rooms in the Las Vegas area. Direct
competitors of the Company will include theme-oriented mega-resorts on the Strip
such as Caesars Palace Hotel, The Mirage, Treasure Island Hotel and Casino, New
York-New York Hotel and Casino and the MGM Grand Hotel and Casino. Many
competitors of the Company are subsidiaries or divisions of large public
companies and may have greater financial and other resources than the Company.
In addition, the construction of several new major resort
29
<PAGE>
projects that will compete with the Company and the expansion of several
existing resorts have commenced construction or have recently been announced.
These include the planned Bellagio, Paris Casino Resort, Mandalay Bay and
Venetian Casino Resort, all currently under construction. Additionally,
expansions have recently been completed at Caesars Palace Hotel and Harrah's Las
Vegas. These projects and others are expected to add approximately 20,000 hotel
rooms to the Las Vegas inventory by 1999. According to the LVCVA, in 1997 the
number of hotel rooms in Las Vegas rose to over 105,000, a gain of 6.3%, while
the number of visitors rose by only 2.8% to approximately 30 million.
Accordingly, while hotel occupancy rates currently stand at 90.3%, a comparison
with hotel occupancy rates from 1994 shows only a slight increase. The future
operating results of the Company, and so the Aladdin Parties, could be
materially and adversely affected by such competitors and excess Las Vegas room
and gaming capacity. Such competition and increased supply with steady visitor
counts has affected and may continue to affect room prices, occupancy rates and
profits.
The hotel/casino operations of the Company will also compete, to some
extent, with other hotel/casino facilities in Nevada and in Atlantic City, with
hotel/casino facilities elsewhere in the world and with state lotteries. In
addition, certain states have recently legalized, and others may or are likely
to legalize, casino gaming in specific areas, and passage of the Indian Gaming
Regulatory Act in 1988 has led to rapid increases in American Indian gaming
operations. The Company expects many competitors to enter such new jurisdictions
that authorize gaming, some of which competitors may have greater financial and
other resources than the Company and the legalization of casino gaming in or
near any metropolitan area from which the Company intends to attract potential
customers could have a material adverse effect on the business of the Company.
Although the Company is unaware of any particular legislation to legalize casino
gaming in or near metropolitan areas which could attract potential customers
from the Aladdin, such proliferation of gaming activities could significantly
and adversely affect the business of the Company, and so the Aladdin Parties.
See "Business--The Las Vegas Market."
The Desert Passage will compete with retail malls in or near Las Vegas,
including the Fashion Show Mall, the Forum Shops at Caesars Palace and retailers
in theme-oriented mega resorts, all of which may attract consumers away from the
Desert Passage and so the Complex.
GOVERNMENT REGULATION
The gaming operations of the Aladdin and ownership of securities of the
Issuer will be subject to extensive regulation and discretionary oversight by
the Nevada Gaming Authorities. Changes in regulations or the denial or
revocation of a Gaming Approval could have a material adverse effect on the
Company and the Aladdin Parties.
The gaming operations and the ownership of securities of the Company and the
Holdings Group will be subject to extensive regulation by the Nevada Gaming
Authorities. The Nevada Gaming Authorities will have broad authority with
respect to licensing and registration of entities and individuals involved with
the Company and the Holdings Group.
The Issuer may be required to disclose the identities of the holders of the
Warrants and Warrant Shares to the Nevada Gaming Authorities upon request. The
Nevada Commission (as defined herein) may, in its discretion, require the holder
of any security of a Registered Company (as defined herein), such as the
Warrants and the Warrant Shares, to file an application, be investigated and be
found suitable to own the security of a Registered Company. If the Nevada
Commission determines that a person is unsuitable to own such security, then
pursuant to the Nevada Act (as defined herein), the Registered Company can be
sanctioned, including the loss of its approvals if, without the prior approval
of the Nevada Commission, it: (i) pays to the unsuitable person any dividend,
interest, or any distribution whatsoever; (ii) recognizes any voting right by
such unsuitable person in connection with such securities; (iii) pays the
unsuitable person remuneration in any form, or (iv) makes any payment to the
unsuitable person by way of principal, redemption, conversion, exchange,
liquidation, or similar transaction.
Each holder of the Warrants and the Warrant Shares shall be deemed to have
agreed (to the extent permitted by law) that if the Nevada Gaming Authorities
determine that a holder or beneficial owner of the Warrants and the Warrant
Shares must be found suitable, and if such holder or beneficial owner either
30
<PAGE>
refuses to file an application or is found unsuitable, such holder shall, upon
request of the Issuer, dispose of such holder's Warrants and the Warrant Shares
within 30 days after receipt of such request or such earlier date as may be
ordered by the Nevada Gaming Authorities. The Issuer will also have the right to
call for the redemption of the Warrants and the Warrant Shares by any holder at
any time to prevent the loss or impairment of a Gaming Approval or an
application for a Gaming Approval, at a redemption price equal to the cost paid
by such holder. The beneficial owners of the Warrants and Warrant Shares will be
subject to the requirement of obtaining Gaming Approvals in the discretion of
the Nevada Gaming Authorities. Any beneficial owner of more than 10% of the
voting securities of the Issuer will be required to obtain a Gaming Approval.
However, the Warrants are exercisable only into non-voting shares of common
stock of the Issuer.
The Nevada Gaming Authorities may also, among other things, revoke the
license of any entity licensed by the Nevada Gaming Authorities (a "Company
Licensee") or the registration of a Registered Company or any entity registered
as an intermediary company or a holding company of a Company Licensee. In
addition, the Nevada Gaming Authorities may revoke the license or finding of
suitability of any officer, director, manager, member, controlling person,
shareholder, noteholder or key employee of a licensed or registered entity. If
Gaming Approvals of the Company or Holdings were revoked for any reason, the
Nevada Gaming Authorities could require the closing of the Casino, which would
result in a material adverse effect on the Company and the Aladdin Parties. The
Company, and certain of its officers, directors, manager, members and key
employees, have applied for licensing with the Nevada Gaming Authorities. Also,
the Company possesses or has applied for all necessary state and local
government approvals, licenses and permits, other than Gaming Approvals,
necessary to open and operate the facility.
In addition, any future public offering of debt or equity securities by the
Company, the Note Issuers or the Issuer, including the Exchange Offer (as
defined herein), any Qualified Public Offering and the issuance of Common Stock
of the Issuer upon the exercise of the Warrants, if the securities or the
proceeds from the sale thereof are intended to be used to pay for construction
of, or to acquire an interest in, any gaming facilities in Nevada, to finance
the gaming operations of an affiliated company or to retire or extend
obligations incurred for any such purpose, requires the prior approval of the
Nevada Commission or, a ruling from the Chairman of the Nevada Board (as defined
herein) that such approval is not required. See "Regulation and Licensing" and
"Description of Indebtedness and Other Obligations--Senior Discount Notes."
LACK OF PUBLIC MARKET FOR THE WARRANTS AND WARRANT SHARES
There are currently no established trading markets for the Warrants and the
Warrant Shares. Therefore, there can be no assurance as to the liquidity of any
such trading market, if a trading market were to develop, or that an active
market for such securities will develop at all.
The Warrants and Warrant Shares are each new issues of securities for which
there is currently no trading market. There can be no assurance regarding the
future development of a market for the Warrants or Warrant Shares, or the
ability of the holders of the Warrants or Warrant Shares to sell such
securities, or the price at which such holders may be able to sell such
securities. If such a market were to develop, the Warrants and Warrant Shares
could trade at prices that may be higher or lower than the price paid by selling
holders of Warrants or Warrant Shares depending on many factors, including
prevailing interest rates, the Aladdin Parties' operating results and the market
for similar securities. Each of the Initial Purchasers has advised the Aladdin
Parties that it currently intends to make a market in the Warrants and Warrant
Shares. However, the Initial Purchasers are not obligated to do so and any
market making in respect to such securities may be discontinued at any time
without notice. Therefore, there can be no assurance as to the liquidity of any
trading market for the Warrants and Warrant Shares or that an active trading
market for such securities will develop. The Aladdin Parties do not intend to
apply for listing or quotation of the Warrants and Warrant Shares, on any
securities exchange or stock market. The Warrants and the Warrant Shares are
currently eligible for trading in the Private Offerings, Resales and Trading
through Automated Linkages ("PORTAL") market. Following the Registration
Statement being declared effective by the Commission, the Warrants and the
Warrant Shares will not be eligible for PORTAL trading.
31
<PAGE>
USE OF PROCEEDS
No proceeds will be received by the Issuer from the registration or
subsequent sale of the Warrants or Warrant Shares pursuant to the Registration
Statement. The gross proceeds from the sale of the Units were estimated to be
$115.0 million. The net proceeds (net of Initial Purchasers' discounts and
estimated Offering expenses) together with the proceeds from the other Funding
Transactions are being used to develop, construct, equip and open the Aladdin
and to fund the Company's cash contribution to Aladdin Music with respect to the
Music Project.
Upon or prior to the consummation of the Offering (i) the proceeds from the
sale of the Units were allocated between the Notes and the Warrants, (ii) Sommer
Enterprises (a) contributed a portion of the Contributed Land and $7.0 million
consisting of the benefit of certain predevelopment costs incurred by AHL to the
Issuer in exchange for Class A Common Stock in the Issuer and (b) also
contributed a portion of the Contributed Land to Holdings in exchange for
Holdings Common Membership Interests, (iii) the Issuer contributed the portion
of the Contributed Land and the benefit of the predevelopment costs received
from Sommer Enterprises and the net proceeds allocable from the sale of the
Warrants to Holdings in exchange for Holdings Common Membership Interests, (iv)
Holdings contributed the Contributed Land appraised at $150.0 million,
approximately $42 million in cash from the London Clubs Contribution and $7.0
million consisting of the benefit of certain predevelopment costs incurred by
AHL to the Company in exchange for Common Membership Interests of the Company,
and (v) Holdings contributed $115.0 million in cash, consisting of the net
proceeds of the sale of the Units and approximately $8 million from the London
Clubs Contribution, to the Company in exchange for Series A Preferred Interests
of the Company. The London Clubs Contribution, together with a portion of the
net proceeds of the Offering, were expended on the Issue Date to repay certain
existing indebtedness assumed by the Company in connection with the Sommer
Equity Financing and to pay certain accrued expenses and certain fees and
expenses incurred in connection with the Funding Transactions. The remaining net
proceeds from the Offering (approximately $35 million) were deposited in the
Note Construction Disbursement Account. The liquidation preference of the Series
A Preferred Interests held by Holdings will equal at all times the Accreted
Value of the Notes.
Prior to or contemporaneously with the Offering the following other Funding
Transactions for the financing by the Company of the Aladdin were consummated:
(i) the Sommer Equity Financing and an indirect equity contribution to Holdings
by London Clubs of $50.0 million in cash in exchange for Holdings Common
Membership Interests; (ii) the closing of the $410.0 million Bank Credit
Facility and the funding of the Term B Loan and the Term C Loan thereunder into
the Cash Collateral Account and (iii) execution and delivery of a commitment
letter for the FF&E Financing, consisting of one or more leases or loans in the
aggregate amount of $80.0 million, covering the Specified Equipment and the
Gaming Equipment, to be used in the Aladdin. See "Controlling
Stockholders--Equity and Series A Preferred Interest Financing," "Description of
Certain Indebtedness and Other Obligations--Bank Credit Facility" and "--FF&E
Financing."
SOURCES AND USES OF FUNDS
The estimated sources and uses of funds for the development, construction,
equipping and opening of the Aladdin are as follows (in millions):
<TABLE>
<CAPTION>
SOURCES USES
- ---------------------------------------------------------- ----------------------------------------------------------
<S> <C> <C> <C>
Bank Credit Facility(1)........................ $ 410.0 Hotel and Casino(7)............................ $ 295.6
FF&E Financing(2).............................. 80.0 Off-Site Improvements(8)....................... 6.8
Senior Discount Notes due 2010(3).............. 115.0 Reimburseable Site Work Expenses(6)............ 14.2
Land Contribution(4)........................... 150.0 Furniture, Fixtures and Equipment and
Cash Contribution(5)........................... 57.0 Gaming Equipment(9)............................ 107.5
Anticipated Site Work Reimbursement(6)......... 14.2 Land(10)....................................... 135.0
Retire Existing Debt(11)....................... 74.5
Capitalized Interest, Net(12).................. 44.0
Pre-Opening Costs and Expenses................. 16.9
Reimbursement of Predevelopment Costs(13)...... 3.9
Working Capital(14)............................ 15.0
Construction and FF&E Contingency(15).......... 31.8
Land Investment in Music Project(16)........... 15.0
Cash Equity Investment in the Music
Project(17).................................. 21.3
Financing Fees and Expenses(18)................ 44.7
--------- ---------
Total Sources.................................. $ 826.2 Total Uses..................................... $ 826.2
---------
--------- ---------
---------
</TABLE>
32
<PAGE>
(1) The Company entered into the Bank Credit Facility with the Bank Lenders. The
Bank Credit Facility, which closed concurrently with the closing of the
Offering, consists of three separate term loans. Term A Loan comprises a
term loan of $136.0 million and matures seven years after the initial
borrowing date. Term B Loan comprises a term loan of $114.0 million and
matures eight and one-half years after the initial borrowing date. Term C
Loan comprises a term loan of $160.0 million and matures ten years after the
initial borrowing date. The Term B Loan and Term C Loan were funded on the
Issue Date into the Cash Collateral Account, and subject to satisfaction of
the conditions in the Disbursement Agreement, are expected to be drawn down
beginning approximately four months after the Issue Date. It is anticipated
that the Company will begin to draw down the Term A Loan, subject to
satisfaction of the conditions in the Disbursement Agreement, approximately
21 months after the Issue Date. See "Risk Factors--Drawn Down of Funds Under
Funding Transactions." All of the Loans will convert from construction loans
into amortizing loans on the Conversion Date. The Company has the option to
pay interest at either LIBOR or Scotiabank's ABR, in each case plus certain
margins. See "Description of Certain Indebtedness and Other
Obligations--Bank Credit Facility."
(2) The Company entered into a commitment letter with the FF&E Lender for
provision of the FF&E Financing. The FF&E Financing consists of $60.0
million of operating leases and $20.0 million in loans and is expected to be
used by the Company to obtain the Gaming Equipment and Specified Equipment.
See "Description of Certain Indebtedness and Other Obligations-- FF&E
Financing."
(3) Represents the gross proceeds of the Offering, which, net of expenses of
approximately $8 million, were contributed, together with approximately $8
million in cash received pursuant to the London Clubs Contribution, by
Holdings to the Company in exchange for Series A Preferred Interests.
(4) The land on which the Aladdin, the Music Project and the Plant will be
built, including adjacent land of approximately 0.8 acres, comprises a total
of approximately 22.75 acres (the "Contributed Land") and was contributed to
the Company by Holdings in exchange for Common Membership Interests. The
Contributed Land has an appraised fair market value of $150.0 million (book
value of $33.6 million as of December 31, 1997). Approximately 18 acres of
the Contributed Land, having an appraised fair market value of $135.0
million, will be retained by the Company and approximately 4.75 acres of the
Contributed Land, having an appraised fair market value of $15.0 million,
will be used for the Music Project.
(5) Represents (i) a $50.0 million cash contribution by London Clubs in exchange
for 25% of the Holdings Common Membership Interests and (ii) a $7.0 million
deemed equity contribution by the Issuer in exchange for Holdings Common
Membership Interests, consisting of certain pre-development costs incurred
by AHL in 1996, 1997 and 1998.
(6) Pursuant to the Site Work Agreement, the Company has agreed to complete the
construction of, among other things, the Mall Shared Space, construction of
which will commence prior to the initial funding of the Mall Financing.
Bazaar has agreed to reimburse the Company for up to $14.2 million
(including interest) of the costs associated with such construction upon the
completion of the Mall Shared Space. See "Certain Material
Agreements--Construction, Operation and Reciprocal Easement Agreement and
Related Agreements."
(7) Represents (i) the guaranteed maximum price of construction of the Aladdin
pursuant to the Design/Build Contract of $267.0 million, less the
contingency allowance of $6.8 million and expected reimbursement from Bazaar
of $13.6 million (net of approximately $0.6 million of interest) as set
forth in note (6) above; (ii) approximately $35 million for theming the
Aladdin; (iii) $11.7 million for professional fees and disbursements; and
(iv) $2.3 million for permits and taxes. See "Risk Factors-- Completion of
the Mall Project and the Music Project." The Design/Build Contract contains
financial incentives for the Design/ Builder to complete the Aladdin within
the construction budget and in a timely manner, as well as liquidated
damages payable to the Company for certain unexcused delays. See "Risk
Factors--Risks of New Construction," "Risks Under Design/Build Contract and
Fluor Guaranty" and "Certain Material Agreements--Design/Build Contract."
(8) Represents the cost of off-site improvements, including overhead pedestrian
walkways and widening of certain streets, for those parts of the Project
Site on which the Aladdin will be built.
(9) Includes $26.5 million of gaming equipment and $81.0 million of furniture,
fixtures and other equipment consisting of new furniture and equipment other
than gaming equipment).
(10) Represents the appraised fair market value of the land on which the Aladdin
and the Plant will be built, together with adjacent land of approximately
0.8 acres.
(11) Represents the retirement on the Issue Date of $68.7 million of existing
indebtedness on the Contributed Land with an interest rate of LIBOR plus 650
bps and $5.8 million of existing debt owed by the Trust to GW Vegas, assumed
by the Company as part of Holdings' equity contribution to the Company.
(12) Represents capitalized gross interest under the Bank Credit Facility of
$57.4 million and capitalized gross interest of $2.4 million from leasing
expenses in connection with the FF&E Financing, from the date of the
Offering until the estimated completion of the Aladdin in the first four
months of the year 2000, net of interest income anticipated to be earned
upon the investment in cash equivalents of the funds (assumed to be at 5%
per annum) from the proceeds of the Offering and the proceeds of the Term B
Loan and Term C Loan.
(13) Represents $3.0 million of certain predevelopment costs incurred by AHL and
reimbursed at closing and up to $0.9 million of certain predevelopment costs
expected to be incurred and reimbursed over the expected construction
period.
(14) Represents cash on hand, inventories, deposits and other cash balances
required for the opening of the Aladdin.
(15) Comprises (i) the $6.8 million contingency included in the guaranteed
maximum price set forth in the Design/Build Contract and (ii) the $25.0
million general project contingency.
(16) Represents the appraised fair market value of the approximately 4.75 acres
of land on which the Music Project will be built, which land will be
contributed by the Company to AMH in exchange for common membership
interests in AMH.
(17) Represents cash to be contributed by the Company to AMH for common
membership interests in AMH.
(18) Represents fees in connection with the organization of the Company and the
financing of the Aladdin, including approximately $8 million for expenses
incurred in connection with the Offering.
33
<PAGE>
CAPITALIZATION
THE ISSUER
The following table sets forth the capitalization of the Issuer as of
December 31, 1997 and as of the Issue Date. This table should be read in
conjunction with the more detailed information and financial statements
appearing elsewhere in this Prospectus. See "Use of Proceeds" and "Description
of the Warrants and Warrant Shares."
<TABLE>
<CAPTION>
AS OF AS OF
DECEMBER 31, 1997 THE ISSUE DATE
------------------- ---------------
<S> <C> <C>
(IN MILLIONS)
Long-term debt: ............................................................... $-- $--
------ ------
Members' Equity:
Class A Common Stock(1)...................................................... -- 0.4
Class B Common Stock......................................................... -- --
Additional Paid-in Capital(2)................................................ -- 15.0
------ ------
Total Members' Equity...................................................... -- 15.4
------ ------
Total Capitalization........................................................... $-- $15.4
------ ------
------ ------
</TABLE>
- --------------------------
(1) Represents: (i) the $6.3 million book value of the Contributed Land (such
land having an appraised fair market value of $28.1 million), net of
approximately $12.9 million of existing indebtedness repaid from the
proceeds of the Offering, and (ii) a $7.0 million deemed equity contribution
consisting of certain predevelopment costs incurred by AHL in 1996, 1997 and
1998.
(2) Represents $15.0 million of the gross proceeds of the Offering allocated to
the sale of the Warrants.
34
<PAGE>
HOLDINGS AND SUBSIDIARIES
The following table sets forth the consolidated capitalization of Holdings
at December 31, 1997, as of the Issue Date after giving effect to the Offering
and upon the consummation of the Funding Transactions (assuming all of the
Funding Transactions occurred on the Issue Date). The Issuer's sole material
asset is 25% of the Holdings Commmon Membership Interests. This table should be
read in conjunction with the more detailed information and financial statements
appearing elsewhere in this Prospectus. See "Use of Proceeds" and "Description
of Certain Indebtedness and Other Obligations."
<TABLE>
<CAPTION>
AS OF AS OF UPON CONSUMMATION
DECEMBER 31, 1997 THE ISSUE DATE OF THE FUNDING TRANSACTIONS
--------------------- --------------- ---------------------------
<S> <C> <C> <C>
(IN MILLIONS)
Long-term debt:
Company:
Bank Credit Facility(1)........................... $ -- $ 274.0 $ 410.0
FF&E Financing(2)................................. -- -- 20.0
--- ------ ------
Total Long-term Debt............................ -- 274.0 430.0
--- ------ ------
Holdings:
Senior Discount Notes due 2010(3)................. -- 100.0 100.0
Holdings and subsidiaries:
Total Long-term Debt and Senior Discount Notes.... -- 374.0 530.0
Members' Equity(4)(5)............................... -- 30.8 30.8
--- ------ ------
Total Capitalization................................ $ -- $ 404.8 $ 560.8
--- ------ ------
--- ------ ------
</TABLE>
- --------------------------
(1) The Company entered into the Bank Credit Facility with the Bank Lenders. The
Bank Credit Facility, which closed concurrently with the closing of the
Offering, consists of three separate term loans. Term A Loan comprises a
term loan of $136.0 million and matures seven years after the initial
borrowing date. It is anticipated that the Company will begin to draw down
the Term A Loan, subject to satisfaction of the conditions in the
Disbursement Agreement, approximately 21 months after the Issue Date. Term B
Loan comprises a term loan of $114.0 million and matures eight and one-half
years after the initial borrowing date. Term C Loan comprises a term loan of
$160.0 million and matures ten years after the initial borrowing date. The
Term B Loan and Term C Loan (comprising $274.0 million in aggregate) were
funded on the Issue Date, and subject to satisfaction of the conditions in
the Disbursement Agreement, are expected to be drawn down beginning in June
1998 (being approximately four months after the Issue Date). All of the
Loans will convert from construction loans into amortizing loans on the
Conversion Date, with substantial amounts due during the final six quarters
of the Term B Loan and the Term C Loan. The Company has the option to pay
interest at either LIBOR or Scotiabank's ABR, in each case plus a certain
margin. See "Description of Certain Indebtedness and Other Obligations--Bank
Credit Facility."
(2) The Company entered into a commitment letter with the FF&E Lender for
provision of the FF&E Financing. The FF&E Financing consists of $20.0
million in loans and $60.0 million in operating leases and is expected to be
used by the Company to obtain the Gaming Equipment and Specified Equipment.
The FF&E Financing will begin to be funded six months prior to the opening
of the Aladdin. See "Description of Certain Indebtedness and Other
Obligations--FF&E Financing."
(3) The Notes have an initial Accreted Value of $115.0 million which equals the
gross proceeds of the Offering, such gross proceeds, net of expenses of
approximately $8 million, were contributed, together with approximately $8
million in cash received pursuant to the London Clubs Contribution, by
Holdings to the Company in exchange for Series A Preferred Interests. The
Aladdin Parties have allocated $100.0 million of the gross proceeds of the
Offering to the Notes and $15.0 million of such proceeds to the Warrants.
See "Use of Proceeds" and "Certain United States Federal Income Tax
Considerations."
(4) Represents: (i) the $33.6 million book value of the Contributed Land (such
land having an appraised fair market value of $150.0 million) and $15.0
million of the gross proceeds of the Offering allocated by the Aladdin
Parties to the sale of the Warrants and contributed by the Issuer to
Holdings for Holdings Common Membership Interests, net of approximately $69
million of indebtedness and $5.8 million of debt owed to GW Vegas and repaid
from the proceeds of the Offering, (ii) a $50.0 million cash contribution to
Holdings by London Clubs in exchange for 25% of the Holdings Common
Membership Interests, and (iii) a $7.0 million deemed equity contribution by
the Issuer, consisting of certain predevelopment costs incurred by AHL in
1996, 1997 and 1998.
(5) Does not include any ascribed value for the Bank Completion Guaranty.
35
<PAGE>
DIVIDENDS AND DISTRIBUTIONS
The Issuer does not anticipate paying any dividends on any Issuer Stock
(including the Warrant Shares) in the foreseeable future. The timing, amount and
form of distributions, if any, will depend, among other things, on the Company's
results of operations, financial condition, cash requirements and other factors
deemed relevant by the Company Board. The Issuer's ability to make any future
cash distributions or payments to holders of Issuer Stock, including the Warrant
Shares, will depend on the Issuer's receipt of cash distributions on its
Holdings Common Membership Interests, which in turn will depend on Holdings'
receipt of cash distributions on its Common Membership Interests from the
Company. The Company Operating Agreement and the Holdings Operating Agreement
restrict the ability of the Company and Holdings to make cash distributions on
the Common Membership Interests and Holdings Common Membership Interests,
respectively, prior to payment of distributions on preferred membership
interests, except for distributions to cover any tax liability in respect of
Holdings Common Membership Interests. The Bank Credit Facility and the Indenture
also contain significant restrictions on the ability of the Company and Holdings
to make distributions to members. See "Certain Material Agreements--Company
Operating Agreements," and "-- Holdings Operating Agreement" and "Description of
Certain Indebtedness and Other Obligations -- Bank Credit Facility" and "--
Senior Discount Notes."
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
DEVELOPMENT ACTIVITIES
The Issuer is an indirect subsidiary of AHL and was incorporated in December
1997 for the sole purpose of issuing the Warrants and Warrant Shares. The sole
material asset of the Issuer is 25% of the Holdings Common Membership Interests
which represents an indirect interest to the Warrant holders of 10% of the
outstanding Holdings Common Membership Interests on a fully diluted basis.
Holdings is a holding company, the material assets of which are 100% of the
outstanding Common Membership Interests and 100% of the outstanding Series A
Preferred Interests of the Company. The Company was organized in January 1997.
Since that time and until the Issue Date, the Company's activities have been
carried on by AHL on the Company's behalf. To date, the Company's activities
have principally been limited to arranging the design, construction and
financing of the Aladdin (including the Funding Transactions) and applying for
certain permits, licenses and approvals necessary for the development and
operation of the Aladdin. The Company plans to develop, construct and operate
the Aladdin as the centerpiece of an approximately 35 acre world-class resort,
casino and entertainment complex located on the site of the existing Aladdin
hotel and casino (the "Project Site"). The Aladdin will be situated at a premier
location at the center of the Strip in Las Vegas, Nevada. The original Aladdin
hotel and casino was built on the Project Site in 1966. The Theater was added in
1976. The Project Site was purchased by the Trust, through a
predecessor-in-interest to AHL, in December 1994. To maintain certain tax
attributes obtained in connection with the Trust's acquisition of the Project
Site, the original hotel and casino continued to be leased by JMJ, Inc., the
company which leased the Project Site from the former owners. On April 27, 1998,
the original Aladdin hotel and casino was demolished to clear the Project Site
for the development of the Complex. The Aladdin is currently expected to open in
the first four months of the year 2000.
RESULTS OF OPERATIONS
The Aladdin Parties and the Company have had no significant operations to
date. Certain financial statements for the Issuer and Holdings (on a
consolidated basis), Capital and the Company are included herein. Such
historical operating results are not indicative of future operating results.
Future operating results of the Company, which will be relevant to the
ownership and operation of the Aladdin and so the Issuer, are subject to
significant business, economic, regulatory and competitive uncertainties and
contingencies, many of which are beyond the control of the Company and the
Aladdin Parties. While the Company believes that the Aladdin will be able to
attract a sufficient number of patrons and achieve the level of activity
necessary to permit the Note Issuers and the Company to meet their payment
obligations on their indebtedness and Holdings to make cash distributions on the
Holdings Common Membership Interests, no assurances can be given that they will
be able to do so.
LIQUIDITY AND CAPITAL RESOURCES
The approximately $790 million necessary to fund the development, financing,
construction and opening of the Aladdin (excluding the Company's $21.3 million
planned indirect cash contribution and $15.0 million appraised fair market value
land contribution to Aladdin Music, as part of the development funds for the
Music Project) will be derived from a combination of (i) borrowings of up to
$410.0 million under the Bank Credit Facility; (ii) operating lease and loan
obligations aggregating $80.0 million under the FF&E Financing; (iii) the Equity
and Series A Preferred Interest Financing, comprising an equity contribution by
London Clubs of $50.0 million in cash, $7.0 million in pre-development costs
incurred by AHL in 1996 and 1997, $150.0 million appraised fair market value in
land by Holdings and $115.0 million of gross proceeds from the Offering; and
(iv) anticipated reimbursement pursuant to the Site Work Agreement of $14.2
million, including interest. See "Use of Proceeds."
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On the Issue Date the Company entered into the Bank Credit Facility with the
Bank Lenders. The Bank Credit Facility consists of three separate term loans.
Term A Loan comprises a term loan of $136.0 million and matures seven years
after the initial borrowing date. Term B Loan comprises a term loan of $114.0
million and matures eight and one-half years after the initial borrowing date.
Term C Loan comprises a term loan of $160.0 million and matures ten years after
the initial borrowing date. The Term B Loan and the Term C Loan were funded on
the Issue Date into the Cash Collateral Account, and subject to satisfaction of
the conditions in the Disbursement Agreement, are expected to be drawn down
beginning in June 1998 (approximately four months after the Issue Date). It is
anticipated that the Company will begin to draw down the Term A Loan, subject to
satisfaction of the conditions in the Disbursement Agreement in December 1999
(approximately 21 months after the Issue Date). See "Risk Factors-- Conditions
to Drawdown of Funds under Funding Transactions." All of the Loans will convert
from construction loans into amortizing loans on the Conversion Date, with
substantial amounts due during the final six quarters of the Term B Loan and the
Term C Loan. The Company has the option to pay interest at either LIBOR or
Scotiabank's ABR, in both cases plus certain margins. See "Description of
Certain Indebtedness and Other Obligations--Bank Credit Facility."
On the Issue Date, the Note Issuers issued the Notes pursuant to the
Offering. The Notes mature on March 1, 2010. The initial Accreted Value of the
Notes was $519.40 per $1,000 principal amount at maturity of the Notes. The
Notes accrete at 13 1/2% (computed on a semi-annual bond equivalent basis) based
on the initial Accreted Value, calculated from the Issue Date. The Notes will
accrete to an aggregate principal amount of $221.5 million by March 1, 2003.
Cash interest will not accrue on the Notes prior to March 1, 2003. Commencing on
September 1, 2003, cash interest on the Notes will be payable, at a rate of
13 1/2% per annum, semiannually in arrears on March 1 and September 1 of each
year until maturity. See "Description of Certain Indebtedness and Other
Obligations--Senior Discount Notes."
The FF&E Financing provides for the operating lease financing of up to $60.0
million and loans of $20.0 million to obtain the Gaming Equipment and the
Specified Equipment. Under the terms of the FF&E Financing, repayments of
principal and interest are due in quarterly installments. The FF&E Financing is
secured by all of the Gaming Equipment and Specified Equipment financed pursuant
thereto. See "Description of Certain Indebtedness and Other Obligations--FF&E
Financing."
Pursuant to the Equity and Series A Preferred Interest Financing, Holdings
contributed to the Company the following property: (a) approximately $107
million in cash (comprising net proceeds from the Offering), (b) an
approximately 22.75 acre portion of the Project Site upon which the Aladdin, the
Music Project and the Plant will be built (together with adjacent land of
approximately 0.8 acres), which has an appraised fair market value of $150.0
million, (c) $7.0 million in the form of certain pre-development costs incurred
by AHL in 1996 and 1997, and (d) the London Clubs Contribution, consisting of
$50.0 million in cash.
The Trust, Bazaar Holdings and London Clubs have entered into the Bank
Completion Guaranty for the benefit of the Bank Lenders, and the Noteholder
Completion Guaranty for the benefit of the holders of the Notes, pursuant to
which the Trust, Bazaar Holdings and London Clubs are required, whenever there
are certain construction cost increases in connection with the work to be
performed pursuant to the Design/Build Contract, and subject to certain
qualifications, to contribute cash to the Company to fund all such increases in
construction costs. Neither the Issuer, holders of Issuer Stock (such as the
Warrant Shares) nor holders of the Warrants is party to, or entitled to enforce
the Bank Completion Guaranty or Noteholder Completion Guaranty. See "Risk
Factors--Limitations Under Bank Completion Guaranty and Noteholder Completion
Guaranty," "Description of Certain Indebtedness and Other Obligations--Bank
Completion Guaranty" and "Description of Noteholder Completion Guaranty and
Disbursement Agreement--Noteholder Completion Guaranty."
AHL, London Clubs, and Bazaar Holdings have entered into the Keep-Well
Agreement for the benefit of the Bank Lenders. Pursuant to the Keep-Well
Agreement, AHL, London Clubs and Bazaar
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Holdings have agreed to contribute funds to the Company to ensure the Company's
compliance with certain financial ratios and other requirements under the Bank
Credit Facility for the period up to the earlier of the date on which the
Company complies with all the financial covenants set forth in the Bank Credit
Facility for six consecutive quarterly periods from and after the Conversion
Date or the date on which the aggregate outstanding principal amounts of the
Bank Credit Facility are reduced below certain amounts and prior to certain
dates, subject to certain conditions. See "Controlling Stockholders--Keep-Well
Agreement."
The funds provided by the Funding Transactions are expected to be sufficient
to develop, complete and commence the operations of the Aladdin, assuming no
delays or construction cost overruns which (i) are not covered by the $31.8
million Contingency or (ii) Fluor and/or the Design/Builder are not responsible
for pursuant to the Fluor Guaranty and the Design/Build Contract, respectively.
As of May 31, 1998, the Company expended $1.7 million of the Contingency. The
Company does not expect that additional external funding will need to be
obtained in order to develop and commence the operations of the Aladdin.
Following the commencement of operations of the Aladdin, the Company expects
to fund its operating and capital needs, as currently contemplated, with $15.0
million of working capital from the Funding Transactions and operating cash
flows. In addition, upon the opening of the Aladdin, the Company is expected to
have an aggregate of $10.0 million available under a working capital facility.
Although no additional financing is contemplated, the Company will seek, if
necessary and to the extent permitted under the Indenture and the terms of the
Bank Credit Facility, additional financing through additional bank borrowings or
debt or equity financings. There can be no assurance that additional financing,
if needed, will be available to the Company, or that, if available, the
financing will be on terms favorable to the Company. There can also be no
assurance that estimates by the Company of its reasonably anticipated liquidity
needs are accurate or that new business developments or other unforeseen events
will not occur, resulting in the need to raise additional funds.
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BUSINESS
OVERVIEW OF THE COMPLEX
The Company plans to develop, construct and operate the Aladdin as the
centerpiece of an approximately 35 acre world-class resort, casino and
entertainment complex located on the site of the existing Aladdin hotel and
casino in Las Vegas, Nevada, a premier location at the center of the Strip. The
Aladdin has been designed to include a luxury theme hotel of approximately 2,600
rooms, an approximately 116,000 square foot casino, an approximately 1,400-seat
production showroom and seven restaurants. The Casino's main gaming area will
contain approximately 2,800 slot machines, 87 table games, keno and a race and
sports book facility. Included on a separate level of the Casino will be the
15,000 square foot luxurious Salle Privee, which is expected to contain an
additional 20 to 30 high denomination table games and approximately 100 high
denomination slot machines. The Salle Privee will cater to wealthy clientele and
be operated and marketed in conjunction with London Clubs, a prestigious,
multi-national casino operator which caters to international premium players.
The Complex, which has been designed to promote Casino traffic and to provide
customers with a wide variety of entertainment alternatives, will comprise (i)
the Aladdin; (ii) the themed entertainment Desert Passage shopping mall with
approximately 522,000 square feet of retail space; (iii) the Music Project,
which will be a second hotel and casino with a music and entertainment theme;
(iv) the newly renovated 7,000-seat Theater; and (v) the approximately
4,800-space Carpark. The Mall Project and the Music Project will be separately
owned by affiliates of the Company. The Company's business and marketing
strategies are expected to capitalize on the Complex's premier location, its
superior designed, mixed-use, themed development, and strong strategic
partnering with highly successful public companies. The grand opening date for
the Aladdin and the Mall Project is currently anticipated to occur during the
first four months of the year 2000, with the opening of the Music Project
expected to occur within six months after the opening of the Aladdin.
The Company's management team is led by Chief Executive Officer Richard J.
Goeglein, the former President and Chief Executive Officer of Harrah's Hotels
and Casinos and President and Chief Operating Officer of Holiday Corp., who
during his term at Harrah's oversaw the expansion of the Harrah's brand,
including the development of Harrah's Hotel and Casino in Atlantic City.
Assisting Mr. Goeglein as Senior Vice President of the Company and
President/Chief Operating Officer of the Aladdin Hotel and Casino is James H.
McKennon, who as President and Chief Operating Officer of Caesars Tahoe was
instrumental in its financial turnaround and as President of Caesars World
International Marketing Corp. was responsible for the global marketing of the
Caesars brand.
It is expected that approximately $75 million will be spent on theming in
the Aladdin and the Desert Passage, of which approximately $35 million will be
spent by the Company on the Aladdin. This theming will create an environment in
the Aladdin that will be based upon the Legends of the 1001 Arabian Nights,
including the intriguing tales of Aladdin, Ali Baba and the 40 Thieves, Sinbad
and other legendary stories woven around ancient wealth and wonders. The Aladdin
theme will be carefully crafted through the interior and exterior architecture
of the facility. The Aladdin's exterior will be designed to include a highly
articulated streetscape, a themed Casino exterior shaped like a Bedouin tent,
fountains, walkways, sculptures and an outdoor restaurant. The sophisticated
interior of the Aladdin will utilize rich colors, textures and design, enhancing
the fantasy of a mystical romantic time and place. A significant feature of the
Desert Passage will be the themed area to be known as the "Lost City." The Lost
City is expected to contain a re-creation of an ancient mystical mountain city
and will house a variety of specialty shops and restaurants underneath a
10-story high ceiling. The Company believes that the Aladdin, with its unique
theme, together with the Desert Passage and Music Project, will ensure its place
as a "must-see" destination in one of the world's largest entertainment cities.
The Company believes that upon completion, the Aladdin, the Mall Project and
the Music Project together will constitute one of the largest and best-planned
integrated, mixed-use entertainment resorts in
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the world. Bazaar Holdings, a subsidiary of the Trust, and THB, a subsidiary of
TrizecHahn, have entered into a joint venture agreement and formed Bazaar to
develop, construct, own and operate the Mall Project. TrizecHahn is the
principal retail subsidiary of TrizecHahn Corporation, one of the largest
publicly-traded real estate companies in North America. The Desert Passage is
expected to include an array of high-fashion specialty stores, exotic boutiques,
theme restaurants, cafes and other entertainment offerings. The Desert Passage
will be directly connected to the Casino to maximize Casino traffic.
AMH and a subsidiary of Planet Hollywood have entered into the Music Project
Memorandum of Understanding, relating to the ownership and development of the
Music Project. The Music Project Memorandum of Understanding is subject to the
finalization of financing commitments. Planet Hollywood is a creator and
worldwide developer of themed restaurants and consumer brands, most notably
"Planet Hollywood" and the "Official All Star Cafe." Planet Hollywood has
announced that it intends to position a brand of music-oriented entertainment
venues as its third major brand. The Music Project, which will be managed by the
Company, is expected to include an approximately 1,000 room hotel, a 50,000
square foot casino, four restaurants, including a music-themed restaurant which
will feature its own 1,000-person nightclub, a health spa and an outdoor
swimming pool. As part of the development of the Complex, the Company expects to
indirectly contribute to Aladdin Music $21.3 million in cash and land having an
appraised fair market value of $15.0 million in exchange for a preferred
membership interest and to lease the existing 7,000-seat Theater to Aladdin
Music for a nominal amount. It is anticipated that Aladdin Music will carry out
an approximately $8 million renovation of the Theater, improving its decor,
light and sound systems and other facilities. A further distinguishing feature
of the Music Project is the anticipated active involvement of famous artists and
celebrities, some of whom are expected to be stockholders of Planet Hollywood
(or an affiliate), participate in the marketing of the Music Project brand and
perform at the Theater or make other personal appearances at the Music Project.
The Music Project, with its music and entertainment theme, will complement the
Aladdin and it is expected that together the two hotels will offer an excitement
and variety of entertainment alternatives that will further distinguish the
Complex from other venues on the Strip.
The development of the Aladdin commenced during the first quarter of 1998.
The existing Aladdin hotel and casino closed for business on November 25, 1997
and the original facility was demolished on April 27, 1998. The development of
the Mall Project is expected to commence during the second quarter of 1998,
followed thereafter by the expected commencement of the development of the Music
Project in the second half of 1998.
PREMIER LOCATION
The Aladdin's 800 feet of Strip frontage is located on the section of the
Strip between Flamingo Road at the north and Tropicana Boulevard at the south.
Based upon independent research and assuming completion of the Bellagio, Paris
and Venetian development projects, average vehicular traffic that will pass the
Complex each day is expected to be approximately 54,000.
AIRPORT ACCESS. Another major feature of the Complex will be its easy
access from Las Vegas' McCarran Airport, only 2.5 miles away. According to the
LVCVA, the number of visitors to Las Vegas has increased at a steady and
significant rate for the last 15 years, growing from approximately 10 million in
1980 to approximately 19 million in 1990 to over 30 million in 1997, with
approximately 47% of these visitors in 1997 arriving by air through McCarran
Airport. McCarran Airport, the tenth busiest airport in the United States, is
currently in the process of expanding its capacity through the addition of 26
new gates, and it is expected that following completion thereof, the number and
percentage of visitors arriving in Las Vegas by air will further increase,
making easy access from McCarran Airport to Las Vegas' resorts even more
crucial.
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VEHICLE ACCESS. The Complex will also offer easy access from other major
Las Vegas attractions, including the Las Vegas Convention Center, Hughes Center
office park, and the University of Nevada Las Vegas, the site of the Thomas &
Mack arena, via the main vehicular access on Harmon Avenue. As part of the
Complex, Harmon Avenue, which borders the Project Site, is expected to become a
major east/west thoroughfare and be widened from its existing four lanes to six
lanes. These improvements will allow visitors to access the Aladdin's
approximately 5,000 car spaces (including the approximately 4,800-space Carpark)
without having to traverse the traffic congestion on the Strip, but while still
utilizing major freeways and roads. In addition, by the use of a circular
internal roadway, guests arriving by limousine, car service or private vehicles
will be able to enter the Complex directly and easily from the Strip, Audrie
Lane and Harmon Avenue, further distinguishing the Hotel from many of its
competitors.
PEDESTRIAN ACCESS. The main entrance to the Aladdin will be located on the
Strip. The Complex's 800 feet of Strip frontage will provide pedestrians with
easy access to the Casino and the Desert Passage. A signaled crosswalk is
expected to be installed on the Strip to provide pedestrians with easy access
from the Bellagio. In addition, overhead pedestrian walkways have been
designated for at least two segments of the Harmon Avenue/Strip intersection
that will facilitate pedestrian traffic to the Aladdin.
MASTER-PLANNED, MIXED-USE DEVELOPMENT
The Aladdin has been carefully and strategically designed to promote Casino
traffic by an experienced and dedicated team with extensive backgrounds in real
estate development and construction; hotel, casino and restaurant operations;
and retail development and management. Each element of the Complex has been
sited and planned in a manner that maximizes pedestrian and vehicular traffic so
as to facilitate access to and from the Complex, as well as circulation between
the different parts of the Complex. The combination of the two distinct hotels
and casinos (catering to different but complementary market segments), the Mall
Project, the Theater and the Salle Privee will make the Complex a unique
integration of high-end and upper-middle market uses that benefit each other and
distinguish the Complex from other resorts on the Strip.
The Casino will be located in front of the Hotel, and unlike many of the
newer projects on the Strip, will provide easy access for pedestrians without
requiring long walks into the Complex. The Casino will be the nexus for the vast
majority of pedestrian traffic in the fully integrated Complex, including the
Desert Passage, the Music Project, and the Theater. Significant portions of the
Desert Passage and all of the Theater's entrances and exits will be accessed
through, or be adjacent to, the Casino. The Complex's 800 feet of Strip frontage
will provide pedestrians with easy access to the Casino and the Desert Passage
from the Strip. Pedestrian visitors to the Aladdin entering from the Strip will
be able to enter directly through the Casino or through the Desert Passage
entrances.
Another feature of the design of the Complex which will further distinguish
the Aladdin from its competitors will be the ease of both vehicular and
pedestrian traffic flow. Through the use of a circular internal roadway, guests
arriving by limousine, car service or private vehicle will be able to enter the
Complex directly and easily from the Strip and Harmon Avenue. Furthermore, by
the use of bridges and access ways, pedestrians will not be required to cross
roadways while moving between different attractions on the Complex, thus
facilitating ease of movement between various parts of the Complex and the
Strip.
UNIQUE ENTERTAINMENT FACILITIES
The Aladdin is expected to benefit from the Casino traffic generated from
the broad variety of entertainment facilities located throughout the Complex.
The Aladdin will be adjacent to the existing Theater, which will continue to be
used to hold major concerts and theatrical performances, and is one of the few
venues of its size and type in Nevada. The Company expects to lease the existing
Theater for a nominal amount to Aladdin Music, which intends to carry out an
approximately $8 million renovation of
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the Theater, improving its decor, light and sound systems and other facilities.
The Theater's renovation is expected to transform it into a first-class venue
and provide an additional source of visitor traffic to the Complex. Under the
Theater Lease (as defined herein), the Company will retain certain rights to use
the Theater for Company-promoted events at agreed commercial rates.
The Aladdin will also include a 1,400-seat showroom which will provide live
nightly entertainment on its mezzanine level for the Hotel, Casino, Desert
Passage and other guests. The showroom will feature a 1001 Arabian Nights-themed
production show, including elegant, exotic costuming, music, lighting and
choreography. Furthermore, the Music Project will contain a 1,000-person
nightclub featuring regular live performances.
The Desert Passage will be designed to engage the customer in a themed
shopping, entertainment and dining experience. Of the approximately 522,000
square feet of retail space within the Desert Passage, it is anticipated that
approximately 25% will be devoted to high pedestrian traffic-generating food,
beverage and entertainment experiences. A significant feature of the Desert
Passage will be the themed area to be known as the "Lost City." The "Lost City"
is expected to contain a re-creation of an ancient mystical mountain city and
will house a variety of specialty shops and restaurants underneath a 10-story
high ceiling.
PRESTIGIOUS STRATEGIC PARTNERS
The Company has assembled a unique combination of partners for the
development of the Complex - London Clubs, TrizecHahn, Planet Hollywood and
Unicom Corporation. These partners bring a wealth of knowledge, capital,
networks and experience to the Complex.
LONDON CLUBS INVESTMENT. London Clubs, a prestigious multi-national casino
operator, owns through LCNI 25% of the outstanding Holdings Common Membership
Interests. London Clubs had an equity market capitalization of over $461 million
on May 29, 1998. As reflected on pages A-16 and A-39 hereof, respectively,
London Clubs' Cash Flow From Operating Activities for the 53 weeks ended March
30, 1997 was L44.8 million and for the 26 weeks ended September 28, 1997 was
L6.8 million. London Clubs believes that based on its current financial
condition and business operations, it will be able to meet its commitments under
the Bank Completion Guaranty, the Noteholder Completion Guaranty and the
Keep-Well Agreement. London Clubs has extensive experience in the international
marketing of casinos to premium players and maintains a strong presence in the
United Kingdom (where it controls the largest share of the London casino
market), Europe, Asia and the Middle East. In addition to its 25% ownership of
the outstanding Holdings Common Membership Interests, London Clubs, through
LCNI, will direct the operations of, and act as marketing consultant to, the
Salle Privee, the luxurious 15,000 square foot gaming area to be located on the
mezzanine level of the Casino which will be designed to cater to the needs of
the international premium-play guest. The Company believes that the Salle Privee
will be the first of its kind in the United States managed by a European
operator and based on the European concept of full service gaming areas for
premium players. The Salle Privee's primary business and marketing focus will be
to access London Clubs' worldwide member base of upscale casino clientele. Salle
Privee Hotel guests will be escorted through a private entrance to a dedicated
registration lobby and then taken via a private elevator to the Salle Privee's
five private floors of suites at the apex of the Aladdin's main tower. Once
there, the 24-hour butler and concierge will cater to the care and comfort of
the Salle Privee guest. In the elegantly appointed Salle Privee casino, the
customer may dine in the 100-seat exclusive restaurant, offering fine cuisine
from around the world.
London Clubs provides the Aladdin with an extensive international network of
premium casino players, having established substantial goodwill and customer
loyalty from high-end customers in the United Kingdom, Europe, Asia and the
Middle East. In addition, London Clubs is an experienced service provider to
high-end gaming customers and brings a wealth of knowledge to the Aladdin in
building and maintaining relationships with and customer loyalty from such
clientele. London Clubs also provides the
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Company with superb promotional opportunities, not only by word of mouth through
its network of contacts, but also through international sporting sponsorships,
including horse racing and motor racing, which are well recognized in the United
Kingdom, Cyprus, Hong Kong, Dubai and Malaysia, and its international print
publications, which are distributed to members worldwide utilizing London Clubs'
substantial database of premium clientele.
JOINT VENTURE WITH PLANET HOLLYWOOD. Through a subsidiary, Planet Hollywood
has agreed to be a 50% partner (on a fully diluted basis) in the Music Project.
Planet Hollywood is a creator and worldwide developer of consumer brands, most
notably "Planet Hollywood" and the "Official All Star Cafe," that capitalize on
the universal appeal of the high energy environment of movies, sports and other
entertainment-based themes. As of December 31, 1997, there were 78 Planet
Hollywood brand restaurants and nine Official All Star Cafe brand restaurants
worldwide. Planet Hollywood has announced that it intends to position its brand
of music-themed entertainment venues as its third major brand. A distinguishing
feature of the Music Project is the anticipated active involvement of famous
artists and celebrities, some of whom are expected to be stockholders of Planet
Hollywood, participate in the marketing of Planet Hollywood's music-oriented
brand and help generate significant media attention and publicity. Planet
Hollywood plans to utilize its strategy of celebrity involvement with its
music-themed brand. The Company believes this exposure will enhance the Aladdin
by providing immediate excitement and press coverage for the Complex. Planet
Hollywood had an equity market capitalization of over $824 million on May 29,
1998.
STRATEGIC RELATIONSHIP WITH TRIZECHAHN. The Mall Project will be owned,
developed and operated by Aladdin Bazaar, a joint venture between Bazaar
Holdings and TBH, a wholly-owned subsidiary of TrizecHahn. TrizecHahn is a
wholly-owned subsidiary of TrizecHahn Corporation, one of the largest publicly
traded real estate companies in North America, with an equity market
capitalization of over $3.1 billion on May 29, 1998.
TrizecHahn was the developer of the Fashion Show Shopping Mall on the Strip
and other major shopping malls including Horton Plaza in San Diego, Bridgewater
Commons in New Jersey, Valley Fair in San Jose and Park Meadows in Denver. The
Company believes that TrizecHahn's proven ability in designing well laid-out
retail centers, attracting high quality tenants and successfully promoting and
operating its retail projects will benefit the Aladdin by attracting a
consistent stream of visitors to the Complex and its various attractions.
Investors should be aware that TrizeHahn has announced that it is considering
selling its operating portfolio of regional shopping centers and on April 6,
1998 announced the sale of 20 regional shopping centers for over $2.5 billion.
While TrizecHahn's announcement is limited to the sale of its current operating
portfolio of regional shopping centers, there can be no assurance that
TrizecHahn will not similarly decide to sell its interest in the Desert Passage.
Accordingly, investors cannot be assured that TrizecHahn will own and operate
the Desert Passage once it becomes operational, and as a result, pedestrian
traffic to the Aladdin may decrease. See "Risk Factors--Completion of the Mall
Project and the Music Project."
ENERGY PLANT CONTRACT WITH ENERGY PROVIDER. The Energy Provider is a
subsidiary of UTH. The predecessor entity of UTH was founded in 1993 to develop
district energy projects, and UTH has developed the largest district cooling
system in the world, located in Chicago, Illinois. UTH is also a partner in
energy ventures in Boston, Houston and Windsor, Ontario. The Energy Provider's
obligations under the Development Agreement up to $30.0 million will be
guaranteed by its ultimate parent, Unicom. Unicom, which is listed on the New
York Stock Exchange, had an equity market capitalization of over $7.6 billion on
May 29, 1998. See "Risk Factors--Completion of the Energy Project."
CLOSE RELATIONSHIP BETWEEN MANAGEMENT AND OWNERS. On completion, it is
expected that the Complex will be one of only two independently constructed
hotel, casino and retail major Strip projects in Las Vegas (the other being the
Venetian Hotel and Casino). All other major competitors of the Aladdin are
corporate projects, such as the Bellagio, owned by Mirage Resorts, Inc. and
Paris Casino owned by Hilton.
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Management believes that the close relationship between the Company's members
and management will be conducive to more efficient decision making and
ultimately assist in the successful development and operation of the Complex.
STRATEGY
The Company's business and marketing strategies are linked together by the
Complex's premier location, its superior design, mixed-use theme development and
strong strategic partnering with highly successful public companies.
CREATE A "MUST-SEE" DESTINATION. The Company believes that the Aladdin,
with its unique, well-executed design, together with the Desert Passage and the
Music Project (including the newly renovated Theater), will ensure its place as
a "must-see" destination in one of the fastest growing entertainment cities in
the world. The Aladdin theme will be supported by a sophisticated interior
design enhancing the fantasy of mystical and romantic time and place. The
Aladdin's main Casino traffic will be driven not only by Hotel guests, but also
by the customers directly attracted from the Strip. Visitor traffic to the
Aladdin will also be enhanced by the attractiveness of the Desert Passage. With
the addition of the Music Project, which will address a somewhat younger
clientele, the Complex will have a combined room count of approximately 3,600
rooms and appeal to a broader customer demographic.
MARKET POSITIONING. The Company intends to focus on three different market
segments to attract customers to the Aladdin:
- UPSCALE CLIENTELE. The Hotel will be designed to appeal to upscale
clientele, providing the amenities and level of service such high-end
guests expect. In particular, each of the Hotel's approximately 2,600
guest rooms and suites will have an area of not less than 450 square
feet--exceeding that of the average Las Vegas hotel room of approximately
360 to 400 square feet--and 24% of the Hotel's guest rooms and suites will
have an area exceeding 620 square feet. The Hotel's room inventory for the
upscale market will include 400 "king parlors" (ranging from 620 to 680
square feet), 136 "tower end-cap suites" (ranging from 732 to 1,162 square
feet) and 58 "center king suites" (585 square feet). Each of the rooms and
suites will have a large four or five fixture bathroom with a separate
shower, bathtub, up to two washbasins and an enclosed watercloset. A
special feature of each of the rooms and suites will be the added width
given to the interior design allowing for a more residential feel. The
Hotel will provide extensive recreational facilities for its guests,
including a 20,000 square foot health spa with steam, sauna and massage
services and an outdoor swimming-pool complex located above the Desert
Passage and surrounded by gardens and fountains. The Company intends to
promote the Hotel's many features to the upscale market through a variety
of media, including high-end print publications, travel agents and events
sponsorships. A targeted relationship marketing program is expected to
ensure clientele retention and repeat visitation.
- INTERNATIONAL PREMIUM PLAYER CLIENTELE. The Company believes that the
Salle Privee will be the first of its kind in the United States managed by
a European operator and based on the European concept of full-service
gaming areas for premium players. The focus of the Salle Privee's business
will be the wealthy clientele that form the core of London Clubs' business
in London and elsewhere. The Hotel will include 30 suites primarily for
use by Salle Privee clientele, including 25 "Salle Privee" suites (ranging
from 815 to 930 square feet) and five "mega-suites" (ranging from 2,125 to
3,500 square feet). The Company will maintain the Salle Privee's premium
player atmosphere through more sophisticated dining options, higher table
limits and more formal levels of service and dress.
- UPPER-MIDDLE MARKET CLIENTELE. The Hotel's variety of guest rooms, six of
its seven restaurants and the 1,400-seat production showroom, combined
with the heavily-themed Casino, Theater and
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Desert Passage, are expected to appeal broadly to the upper-middle market
guest. In addition, the Music Project is expected to appeal to the
upper-middle market by attracting younger, affluent customers to the
Complex through its music and entertainment-based theme. The Music Project
is expected to include an approximately 1,000 room hotel, four
restaurants, including a music-themed restaurant which will feature its
own 1,000-person nightclub, a health spa and outdoor swimming pool,
together with a 50,000 square foot casino. The Theater, which will be a
major feature of the Complex, will be central to the Company's promotional
strategies for this market segment, with publicity expected to be gained
through the booking of popular performers, many of which are expected to
be broadcast live to Planet Hollywood's other music-themed entertainment
venues. Cooperative advertising and promotion through various media, such
as television, radio and print, will be used to promote the Complex to the
upper-middle market.
LEVERAGE FROM STRATEGIC RELATIONSHIPS. The Company and its affiliates have
chosen as strategic partners an experienced team of retail, casino and themed
entertainment developers and operators. The Company intends to utilize the
unique expertise of its partners from the preliminary development stages of the
Complex through its promotion and operation.
- DEVELOPMENT EXPERTISE. In establishing a strategic relationship with
TrizecHahn, the Company has obtained the knowledge, skills and capital of
a partner who has expertise in the coordination, construction and
completion in a timely manner of large, high quality projects.
- MANAGEMENT AND OPERATING ABILITIES. The Complex will benefit from the
experience of TrizecHahn, London Clubs and Planet Hollywood in its
operations. Through its management and ownership of several shopping
centers, TrizecHahn has demonstrated its ability to successfully design,
configure and attract high quality tenants to its retail shopping
projects. London Clubs has extensive experience in the international
marketing and operation of casinos, in particular to premium players. In
addition, Planet Hollywood has successfully grown its concepts to 87
company-owned and franchised Planet Hollywood and Official All Star Cafe
units (as of December 31, 1997) since commencing business in 1991.
- CAPITALIZING ON BRAND NAMES. With access to some of the most well-known
names in the relevant markets, the Company expects to capitalize on the
worldwide brand recognition of Planet Hollywood, London Clubs and
TrizecHahn.
- ACCESSING NEW CLIENT BASE. London Clubs and Planet Hollywood are expected
to provide the Complex with access to market segments which the Company
believes have not been extensively penetrated by other hotel/casinos in
Las Vegas. London Clubs provides the Aladdin with one of the best networks
of international premium players in the world and superb promotional
opportunities. Furthermore, it is expected that Planet Hollywood will
introduce a younger, affluent clientele to the Complex through, among
other things, celebrity involvement in the Music Project.
CAREFULLY MANAGE CONSTRUCTION COSTS AND RISKS. The Company anticipates the
total cost of developing, financing, constructing and opening the Aladdin to be
approximately $790 million (excluding the Company's $21.3 million planned
indirect cash contribution and $15.0 million appraised fair market value land
contribution to Aladdin Music as part of the development funds for the Music
Project). As part of the Company's strategy of carefully managing construction
costs and risks, the Company has hired Tishman, a privately held company with
extensive experience in building quality hotels and casinos, to be the
construction manager. As construction manager, Tishman will advise with respect
to scheduling, administration and reporting in connection with the construction
activities of the Design/Builder. In addition, the following arrangements have
been made to ensure the full and timely completion of the Aladdin.
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BANK COMPLETION GUARANTY AND NOTEHOLDER COMPLETION GUARANTY. The Trust,
London Clubs and Bazaar Holdings have entered into the Bank Completion Guaranty
for the benefit of the Bank Lenders, under which they have agreed, among other
things, to guarantee the completion of the Aladdin. The Bank Completion
Guaranty, which became effective as of the closing of the Offering, is not
subject to any maximum dollar limitations. The Trust, London Clubs and Bazaar
Holdings have entered into the Noteholder Completion Guaranty for the benefit of
the holders of the Notes, under which they guarantee completion of the Aladdin,
subject to certain important exceptions, limitations and qualifications. Neither
Holdings, the Issuer nor the holders of the Warrants or Warrant Shares are party
to the Bank Completion Guaranty or Noteholder Completion Guaranty. No financial
information regarding the Trust is publicly available for the purpose of
evaluating the Trust's creditworthiness and, accordingly, purchasers of Warrants
or Warrrant Shares should not rely upon the Trust's performance under the Bank
Completion Guaranty of Noteholder Completion Guaranty when making their
investment decision. See "Risk Factors--Limitations Under Bank Completion
Guaranty and Noteholder Completion Guaranty," "Description of Certain
Indebtedness and Other Obligations--Bank Completion Guaranty" and "Description
of Noteholder Completion Guaranty and Disbursement Agreement--Noteholder
Completion Guaranty."
DESIGN/BUILD CONTRACT. Fluor Daniel, Inc. is the design/builder for the
Aladdin. The Design/Builder has entered into a guaranteed maximum price
design/build contract (subject to scope changes) with the Company to construct
the Aladdin. The Design/Build Contract provides the Design/Builder with
incentives for completing the Aladdin ahead of schedule and within budget and
for payment of liquidated damages to the Company for certain delays. The
Design/Build Contract is guaranteed by Fluor Corporation, the parent of the
Design/Builder, pursuant to the Fluor Guaranty. See "Certain Material
Agreements-- Design/Build Contract."
MALL FINANCING AND MALL GUARANTY. Bazaar has entered into a building loan
agreement with the Mall Lenders to fund the construction of the Mall Project.
Furthermore, TrizecHahn, THOP, the Trust, Bazaar Holdings and AHL have agreed to
guarantee completion of the Mall Project and Bazaar's indebtedness to the Mall
Lenders until certain earnings and loan to value targets have been met. Funding
under the Mall Financing is subject to certain conditions. See "Risk
Factors--Completion of the Mall Project and the Music Project" and "Certain
Material Agreements--Mall Financing."
THE ALADDIN
OVERVIEW. The Aladdin will comprise the Hotel and the Casino and will be
owned, developed and operated by the Company. The Aladdin will be constructed of
high quality materials, including floors covered in stone, marble and granite
set in intricate patterns; carpeting of wool axminster; and wall surfaces of
covered architectural veneers, tiles of stone, ceramic and mosaic. The main
ceiling treatment will combine actual tent drape with texture and design of a
matching motif.
THE ALADDIN HOTEL. The Hotel building is expected to comprise a 34-story,
400 foot main tower attached to two 17 story towers. The approximately
2,600-room Hotel room inventory will include standard rooms, 400 "king parlors"
(ranging from 620 to 680 square feet), 136 "tower end-cap suites" (ranging from
732 to 1,162 square feet), 58 "center king suites" (585 square feet), 25 "Salle
Privee Suites" (ranging from 815 to 930 square feet) and five "mega-suites", the
largest of which will be approximately 3,500 square feet. The design and
furnishings of the rooms will be spacious and luxurious, with appointments
inspired by the Aladdin theme. All guest rooms will include such amenities as a
dual line phone in the bathroom and two additional dual line speakerphones with
modem hook-up. The king parlors, tower end-cap, center king and Salle Privee
suites and the mega-suites will include a king-size or two queen-size beds, with
over-sized bathrooms featuring a separate bathtub and shower, dual sinks,
enclosed watercloset and, for the center king, Salle Privee and mega-suites,
such amenities as a separate living area with a fully-stocked minibar and a work
area with modem hook-up, fax machine/printer and video telephone technology. The
suites will be
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designed to accommodate informal business meetings involving both business
travelers and convention attendees. Approximately 93 of the suites will be of a
larger size, allowing for the possibility of casually entertaining up to forty
persons in the living area. The main tower will also house luxury suites
designed for Salle Privee and other VIP guests, including premium casino players
and convention and trade show attendees who require additional space for
entertaining.
The Hotel is expected to provide extensive recreational facilities designed
to pamper its guests, including a 20,000 square foot health spa with steam,
sauna and massage services and an outdoor swim-ming-pool complex located above
the Desert Passage and surrounded by gardens and fountains.
The Aladdin is expected to include seven restaurants, with combined seating
capacity for over 2,300 customers, offering a wide range of dining selections.
Food service facilities at the Aladdin will include a buffet and food plaza
seating 800 customers, a 24-hour casual dining facility seating 575 customers
and a high-energy restaurant with indoor and outdoor seating which will overlook
the Strip and be located on the Casino level. This "al fresco" dining
experience, one of the first on the Strip, will further distinguish the Aladdin
from its competitors and will provide a lively attraction for pedestrians
traversing the Strip. The mezzanine level, which will offer a panoramic view of
the main casino floor, will feature a themed restaurant of 150 seats and a
steakhouse of 150 seats, both of which will offer indoor and outdoor terrace
dining. A Sushi/Chinese noodle shop with 50 seats and a casual dining/coffee bar
will complete the food offerings on the mezzanine. There will also be a poolside
restaurant with capacity to seat 150 people. To ensure consistent, high quality
service throughout the Aladdin, the Company will own and operate all food
service facilities in the Aladdin (other than the exclusive Salle Privee
restaurant, which will be operated by London Clubs).
THE SHOWROOM. In keeping with the Aladdin's Arabian Nights theme, the
Aladdin will include, on its mezzanine level, a 1,400-seat showroom which will
provide nightly entertainment for Hotel, Casino and other guests. The showroom
will feature a 1001 Arabian Nights-theme production show including elegant,
exotic costuming, music, lighting and choreography.
CONVENTION, MEETING AND RECEPTION FACILITIES. The Aladdin is expected to
include on the mezzanine floor of the main building over 70,000 square feet of
convention, conference, trade show and reception facilities, including a 28,500
square foot main ballroom, 25,600 square feet of pre-function space and 17,400
square feet of breakout space in 16 separate rooms. These facilities will be
made available for business and other conventions, trade shows, private
receptions and conferences throughout the year. The Company believes that
convention, meetings and special events customers will represent an important
market for the Aladdin, helping the Hotel obtain consistently high occupancy
rates and levels. See "-- Guest Mix--Conventions, Meetings and Special Events
Customers."
GUEST MIX. The Hotel guest mix, in order of magnitude, is expected to
include free and independent travelers, targeted casino customers (both
complimentary and at casino rates), convention, meetings and special events
customers, and tour and travel customers. Of these groups, all but one
(convention, meeting and special events customers) generally have substantial
leisure time to take advantage of the Complex's many attractions. According to
the LVCVA, approximately 72% of the visitors to Las Vegas came to Las Vegas for
vacation and pleasure in 1997.
The planned guest mix by category is as follows:
<TABLE>
<CAPTION>
SEGMENT MIX
- ------------------------------------------------------------------------------------ -------------
<S> <C>
Free and Independent Travelers...................................................... 30%
Casino Customers.................................................................... 30%
Convention/Meeting.................................................................. 20%
Tour & Travel....................................................................... 20%
</TABLE>
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FREE AND INDEPENDENT TRAVELERS. Free and independent travelers will be the
primary focus of the Complex with its array of resort services including
luxurious rooms, swimming pool and spa, fine restaurants (both in the Hotel,
Casino and the Desert Passage), extensive retail opportunities, and the multiple
entertainment offerings of the Theater, the Aladdin/Arabian Nights production
show and the Desert Passage. Free and independent travelers include persons who
travel to Las Vegas from throughout the world who are not affiliated with a
traveling group and make their reservations at the property of their choice.
These travelers are characterized by travel budgets higher on average than the
typical "tour group" traveler budget. They generally pay higher room rates, are
predominantly weekend customers and have a relatively high non-gaming budget but
still spend more money on gaming activities than the typical Las Vegas visitor.
Management believes the Aladdin's emphasis on high-quality accommodation and an
upscale integrated entertainment complex will broadly appeal to this market.
CASINO CUSTOMERS. Casino customers will be drawn from the upscale,
international premium and upper-middle segments of the market. Utilizing both
the resources of London Clubs and those internal to the Company, the Casino
marketing network will cover Europe, the Middle East, the Pacific Rim, Mexico
and Latin America, as well as the United States. The Company believes that the
Aladdin's high levels of service, distinctive and private accommodations and the
Salle Privee and its amenities will help differentiate it from its competitors.
Where appropriate, management will offer complementary suites to high quality,
repeat casino players and other premium players. In addition, the Casino will
offer a range of popular gaming alternatives, designed to attract the
upper-middle market guest.
CONVENTIONS, MEETINGS AND SPECIAL EVENTS CUSTOMERS. Conventions, meetings
and special events customers are expected to fill the mid-week time periods when
the demand by free and independent travelers is lower. Las Vegas is currently
the largest trade show market and the fourth largest convention market in the
United States, with Las Vegas hotels obtaining premium occupancy rates during
large conventions. By utilizing the Aladdin's 70,000 square feet of convention
and meeting space, the Aladdin will focus on groups that have both a good hotel
and gaming revenue profile. Demand for convention and meeting room nights will
be supplemented by convention guests being displaced from neighboring hotels.
TOUR AND TRAVEL CUSTOMERS. The tour and travel market consists of customers
who utilize "packages" to reduce the cost of travel, lodging and entertainment.
According to the LVCVA, approximately 28% of Las Vegas' visitors utilized such
tour packages in 1997. These "packages" are produced by wholesalers and travel
agents and emphasize mid-week stays in Las Vegas. Management believes that it
will be able to capture a significant portion of this market segment by offering
the extensive facilities (including non-gaming attractions and amenities) of the
Complex to tour and travel visitors during off-peak periods. The tour and travel
market will be utilized to fill rooms mid-week with nominal room blocks on the
weekends when demand by free and independent travelers is at its peak. With the
upper-middle and upscale focus of the Hotel, the Aladdin will focus on the
higher-end tour and travel guest from both domestic and international tour
operators.
THE CASINO. A highly-themed approximately 116,000 square foot casino will
be at the center of the Complex. The Casino's main gaming area will contain
approximately 2,800 slot machines, 87 table games, keno and a race and sports
book facility. Included on a separate level of the Casino will be the luxurious
15,000 square foot Salle Privee, which is expected to contain an additional
approximately 100 high limit slot machines and 20 to 30 high limit table games.
The Salle Privee will cater to wealthy clientele and will be operated and
marketed in conjunction with London Clubs, a prestigious, multi-national casino
operator which caters to international premium players. The Casino will be
located in front of the Hotel, and unlike many of the newer projects on the
Strip, will provide easy access for pedestrians without requiring long walks
into the Complex. The Casino will be the nexus for the vast majority of
pedestrian traffic on the fully integrated Complex, including the Desert
Passage, the Music Project and the Theater. The Casino's exterior will be
designed in the style of a large Bedouin sheik's tent, helping to introduce the
Aladdin theme to visitors even before they reach the Complex. On entering the
Casino, patrons will be surrounded
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by the Aladdin theme through sculptured surroundings, rich fabrics, strategic
lighting and music, evoking the mystery and luxury of the Legends of the 1001
Arabian Nights. At the center of the Casino will be "Scheherazade's Palace," a
series of themed architectural elements of domes, arches, and 65 foot polished
stone columns. The main level of Scheherazade's Palace will have a bar and live
entertainment lounge overlooking the Casino and across to the Mezzanine level.
THE SALLE PRIVEE AND THE SALLE PRIVEE MANAGEMENT AGREEMENT. A distinctive
feature of the Casino will be the Salle Privee, located on the mezzanine level
which will be designed to cater to the needs of the international premium guest.
The Salle Privee will contain 20 to 30 high limit table games including
baccarat, double zero roulette, single zero roulette and blackjack, and
approximately 100 high limit slot machines.
The Company believes that the Aladdin's Salle Privee will be the first of
its kind in the United States managed by a European operator and based on the
European concept of a luxurious, full-service, gaming area for international and
domestic premium players. The focus of the Salle Privee's business will be the
wealthy clientele that form the core of London Clubs' business in London and
elsewhere. The Company will maintain the Salle Privee's premium player
atmosphere through more sophisticated dining options, higher table limits and
more formal levels of service and dress.
The Company believes that the Salle Privee will prove to be a significant
attraction for premium players to stay at the Hotel and play at the Casino. In
order to take full advantage of this potential, the Company has entered into a
consulting and marketing services agreement (the "Salle Privee Management
Agreement") with London Clubs, one of the Controlling Stockholders, under which
London Clubs will promote the Salle Privee, marketing this aspect of the Aladdin
through its international network of premium casino customers. See "Certain
Material Agreements -- Salle Privee Management Agreement."
With an equity market capitalization of over $461 million as of May 29,
1998, London Clubs has extensive experience in the international marketing of
casinos to premium players. London Clubs operates seven casinos in London, one
in Cannes, France, three in Egypt and one in Lebanon. Each of London Clubs'
casinos offer their own individual style, but with comparable internationally
recognized standards of service. In recent years, London Clubs has embarked upon
a period of expansion, acquiring the Park Tower Casino in London's Knightsbridge
in October 1995 and re-opening and managing the casino operations of the famous
Casino du Liban in Lebanon in December 1996.
London Clubs maintains a strong presence in the United Kingdom (where it
controls a leading share of the London casino market), Europe, Asia and the
Middle East. Its international sporting sponsorships, including horse racing and
motor racing, are widely recognized, particularly in the United Kingdom, Cyprus,
Hong Kong, Dubai and Malaysia. In addition, London Clubs produces a print
publication for its clientele utilizing its substantial database of premium
customers which is a valuable means of direct communication with its clientele
worldwide. Each issue features developments in London Clubs' clubs, lifestyle
articles, member profiles and a popular social diary.
Under the Salle Privee Management Agreement, London Clubs will earn an
incentive fee based on the operating performance of the Salle Privee. As a
result of London Clubs' substantial network of casino players in the United
Kingdom, Europe, Asia and the Middle East and management's own extensive network
in North and South America and the Pacific Rim, the Company believes that the
Salle Privee will provide the Aladdin with a significant competitive advantage
over other hotels and casinos on the Las Vegas Strip in attracting customers
from the profitable international premium player market. Through London Clubs'
involvement in the promotion of the Salle Privee, its equity interest in
Holdings and its commitment to the Aladdin (demonstrated in part by the
Keep-Well Agreement and the Completion Guaranty), the Company also believes that
the Aladdin's international profile and financial stability will be
significantly strengthened.
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THE MALL PROJECT
OVERVIEW. Located on the Complex adjacent to the Aladdin will be the Desert
Passage, a shopping mall with approximately 522,000 square feet of retail space,
and the approximately 4,800-space Carpark, each of which will be developed,
owned and operated by Bazaar, a joint venture between Bazaar Holdings and THB, a
wholly-owned subsidiary of TrizecHahn. TrizecHahn has extensive experience in
developing retail properties, and prior to its recently announced sale of 20
regional shopping centers, TrizecHahn owned and managed 27 regional centers
throughout the United States, comprising over 25 million square feet.
TrizecHahn is a wholly-owned subsidiary of TrizecHahn Corporation, one of
the largest publicly traded real estate companies in North America, with an
equity market capitalization of over $3.4 billion as of April 2, 1998. Investors
should note that TrizecHahn has announced that it is considering selling its
operating portfolio of regional shopping centers and on April 6, 1998 announced
the sale of 20 regional shopping centers for over $2.5 billion. While
TrizecHahn's announcement is limited to the sale of its current operating
portfolio of regional shopping centers, there can be no assurance that
TrizecHahn will not similarly decide to sell its interest in the Desert Passage.
Accordingly, investors cannot be assured that TrizecHahn will own and operate
the Desert Passage once it becomes operational, and as a result, pedestrian
traffic to the Aladdin may decrease. See "Risk Factors--Completion of the Mall
Project and the Music Project."
THE DESERT PASSAGE. The Desert Passage entertainment shopping mall will
constitute a key aspect of the Complex, and, like the Aladdin, will be heavily
themed on the Arabian Nights legends. With a strong presence and entrances on
the Strip, the Desert Passage will wrap around the Casino and Hotel buildings
and the Theater. The Desert Passage will consist of two stories of prime retail
space in the area closest to the Strip, reducing to one-level in the areas near
the rear of the Hotel, the Carpark and the Music Project. While the Desert
Passage will be of a similar size to the successful Forum Shops at Caesars
Palace, it will not be set back from the Strip, but will instead be located
close to the Strip, allowing passing pedestrian traffic to gain easy access.
Pedestrian visitors to the Aladdin entering from the Strip will be able to enter
directly through the Casino or through the Desert Passage entrances and
significant portions of the Desert Passage will flow directly into the Casino.
It is expected that the Desert Passage will provide a steady source of
pedestrians and Hotel guests to the Complex, many of whom it is expected will
also want to visit the Casino or dine at the Hotel.
The Desert Passage will be designed to engage the customer in a highly
themed shopping, entertainment and dining experience. Of the approximately
522,000 square feet of retail space within the mall, it is anticipated that
approximately 25% will be devoted to high pedestrian traffic-generating food,
beverage and entertainment experiences. The food service facilities located in
the Desert Passage will consist predominantly of establishments which complement
the dining alternatives in the Aladdin. A significant feature of the Desert
Passage will be the themed area to be known as the "Lost City." The "Lost City"
is expected to contain a re-creation of an ancient mystical mountain city and
will house a variety of specialty shops and restaurants underneath a 10-story
high ceiling.
CARPARK. As part of the Mall Project, Bazaar will develop an approximately
4,800-space carpark facility, to be located at the rear of the Complex, together
with an additional approximately 350 surface level parking spaces. The Carpark
will be accessible from Audrie Lane, the same street from which the Paris Casino
public carpark will be accessed, and from the circular internal roadway on the
Complex (accessible from Harmon Avenue and the Strip) which will provide direct
vehicular access to the Hotel. The Carpark will be directly linked through the
Desert Passage to the Hotel and Casino and the Music Project. Bazaar is
considering retaining an independent management company to operate the Carpark.
The Carpark and related surface level parking areas will include certain car
parking spaces to be used principally for valet parking. In addition, in
connection with the development of the Aladdin, parking facilities for
approximately 500 vehicles will be developed beneath the Hotel.
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THE MUSIC PROJECT
THE MUSIC PROJECT HOTEL AND CASINO. The Music Project is the second stage
of development to the Complex. The Music Project will involve the development of
a second hotel and casino, with a music and entertainment theme, on the
southeast edge of the Complex on the corner of Audrie Lane and Harmon Avenue.
AMH and a subsidiary of Planet Hollywood have entered into the Music Project
Memorandum of Understanding to own and operate the Music Project, subject to
finalization of financing, with each joint venture partner holding a 50%
interest (on a fully-diluted basis). See "Risk Factors--Completion of the Mall
Project and the Music Project" and "Certain Material Agreements--Music Project
Memorandum of Understanding."
The Music Project is expected to include an approximately 1,000 room hotel,
four restaurants, including a music-themed restaurant which will feature its own
1,000-person nightclub with regular live entertainment, a health spa and outdoor
swimming pool, together with a 50,000 square foot casino. The Music Project will
aim to expand the market by having a different theme and attracting a different
market segment to the Aladdin. The Music Project is expected to appeal to the
upper-middle market, attracting younger, affluent customers to the Complex
through its music and entertainment-based theme. In order to enhance the
Complex, the Music Project is intended to be integrated through walkways,
bridges and the internal circular roadway with the Aladdin, the Desert Passage
and the Carpark, providing yet another attraction on the Complex and
contributing to its mixed-use nature.
Through a subsidiary, Planet Hollywood will be a 50% partner (on a fully
diluted basis) in the Music Project. Planet Hollywood is a creator and worldwide
developer of consumer brands, most notably "Planet Hollywood" and the "Official
All Star Cafe," that capitalize on the appeal of the high-energy environment of
movies, sports and other entertainment-based themes. As of December 31, 1997,
there were 78 Planet Hollywood brand restaurants and nine Official All Star
Cafes brand restaurants worldwide. Planet Hollywood has announced that it
intends to position a brand of music-themed hotels and entertainment venues as
its third major brand. A distinguishing feature of the Music Project is the
anticipated active involvement of famous artists and celebrities, some of whom
are expected to be stockholders of Planet Hollywood, participate in the
marketing of Planet Hollywood's music-themed brand, perform at the Theater or
make other personal appearances at the Music Project, and help to generate
significant media attention and publicity. Brand recognition is expected to be
further enhanced through the high visibility of Planet Hollywood's music brand's
merchandise, such as jackets, T-shirts, sweatshirts and hats. The Company
believes this exposure will enhance the Aladdin by providing immediate
excitement and press coverage for the Complex.
It is currently anticipated that construction of the Music Project will
commence during the second half of 1998. Neither the development of the Aladdin
nor the Mall Project is contingent on the development of the Music Project.
THEATER OF THE PERFORMING ARTS. The Aladdin and the Desert Passage will be
adjacent to the Theater, a 7,000-seat entertainment facility that will be
accessible through the Casino. The Theater is an entertain-ment auditorium with
high-quality sight lines and acoustics and, with its 15,000 square foot stage,
is one of the few venues of its size and type in Nevada. As part of the
development of the Complex, the Company intends to enter into a 69-year lease of
the existing Theater for a nominal amount with Aladdin Music, which expects to
carry out an approximately $8 million renovation of the Theater, improving its
decor, light and sound systems and other facilities. The renovation will also
allow the Theater to be condensed into a smaller, approximately 2,000-seat
auditorium for more intimate performances. The Company will retain certain
rights to use the Theater for Company-promoted events at agreed commercial
rates.
In the past the Theater has hosted major concert artists, championship
boxing matches and Broadway shows and it is expected that the Theater will
continue to be used to hold major concerts and theatrical performances. The
renovation and integration of the Theater into the first class resort Complex is
expected to provide another source of visitor traffic to the Complex.
52
<PAGE>
THE LAS VEGAS MARKET
OVERVIEW. Las Vegas is one of the fastest growing entertainment markets in
the country. Las Vegas hotel occupancy rates are among the highest of any major
market in the United States. According to the LVCVA, the number of visitors
traveling to Las Vegas has increased at a steady and significant rate for the
last ten years from 16.2 million in 1987 to 30.4 million visitors in 1997, a
compound annual growth rate of 6.5%. Aggregate expenditures by these visitors
increased at a compound annual growth rate of 10.2% from $8.6 billion in 1986 to
approximately $25 billion in 1997. Although the number of visitors to Las Vegas
has increased, there has been a greater increase in the supply of hotel rooms.
Such competition and increased supply, with steady visitor counts, has affected
and may continue to affect room prices, occupancy rates and profits. See "Risk
Factors--Risk of Overcapacity; Competition and Planned Construction in Las
Vegas."
EXPANDING HOTEL AND GAMING MARKET. Las Vegas has one of the strongest and
most resilient hotel markets in the country and is the largest gaming market in
the world. The number of hotel and motel rooms in Las Vegas has increased by
71.6% from 61,394 in 1988 to 105,347 in 1997. Major properties on the Strip
opening over this time period include the Mirage, Excalibur, MGM Grand, Treasure
Island, the Luxor, Monte Carlo and New York New York. In addition, a number of
existing properties on the Strip embarked on expansions including Harrah's Las
Vegas, Caesars Palace, Circus Circus and the Luxor. Despite this significant
increase in the supply of rooms in Las Vegas, hotel occupancy rates exceeded on
average 90.4% for the years 1990 to 1996, averaged 93.4% in 1996 and averaged
90.3% in 1997. By the end of 1999, it is estimated that approximately 20,000
additional hotel rooms will be opened on the Strip, including the Bellagio, the
Venetian, Mandalay Bay and Paris resorts, all of which are currently under
construction.
53
<PAGE>
VISITOR STATISTICS
LAS VEGAS VISITOR VOLUME
A trend analysis of the Las Vegas visitor volume for the past ten years is
presented in the following chart. The number of visitors to Las Vegas has grown
by 77.1% since 1988.
<TABLE>
<CAPTION>
VISITOR PERCENTAGE
YEAR VOLUME CHANGE
- --------- ------------- -----------
<S> <C> <C>
1988 17,199,808 6.1%
1989 18,129,684 5.4%
1990 20,954,420 15.6%
1991 21,315,116 1.7%
1992 21,886,865 2.7%
1993 23,522,593 7.5%
1994 28,214,362 19.9%
1995 29,002,122 2.8%
1996 29,636,361 2.2%
1997 30,464,635 2.8%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MILLIONS
<S> <C>
1988 17.2
1989 18.1
1990 21.0
1991 21.3
1992 21.9
1993 23.5
1994 28.2
1995 29.0
1996 29.6
1997 30.5
</TABLE>
SOURCE: Las Vegas Convention and Visitors Authority
54
<PAGE>
VISITOR STATICSTICS
VISITOR DOLLAR CONTRIBUTION (INCLUDES GAMING REVENUES)
Tourists and conventioneers spent approximately $25.0 billion in the Las
Vegas area during 1997. An analysis of the visitor dollar contribution since
1988 for Las Vegas is presented below.
<TABLE>
<CAPTION>
VISITOR
DOLLAR PERCENTAGE
YEAR CONTRIBUTION CHANGE
- --------- ------------------ -----------
<S> <C> <C>
1988 $ 10,039,448,236 16.7%
1989 11,912,941,021 18.7%
1990 14,320,745,600 20.2%
1991 14,326,553,719 0.0%
1992 14,686,644,065 2.5%
1993 15,127,266,781 3.0%
1994 19,163,212,044 26.7%
1995 20,686,800,160 8.0%
1996 22,533,257,750 8.9%
1997 24,952,188,808 10.7%
</TABLE>
PER VISIT EXPENDITURES EXCLUDING GAMING FOR 1997:
Trade show delegates: $1,517 Convention/meeting delegates: $963
Tourists: $551
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
BILLIONS
<S> <C>
1988 $ 10.0
1989 $ 11.9
1990 $ 14.3
1991 $ 14.3
1992 $ 14.7
1993 $ 15.1
1994 $ 19.2
1995 $ 20.7
1996 $ 22.5
1997 $ 25.0
</TABLE>
SOURCE: Las Vegas Convention and Visitors Authority
55
<PAGE>
ROOM INVENTORY
NUMBER OF HOTEL/MOTEL ROOMS
The total hotel/motel room inventory for Las Vegas increased by 43,953 rooms
from 1988 to 1997. This represents a percentage increase of 71.6%. The inventory
analysis follows.
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE
YEAR HOTEL/MOTEL ROOMS CHANGE
- --------- ----------------- -----------
<S> <C> <C>
1988 61,394 5.0%
1989 67,391 9.8%
1990 73,730 9.4%
1991 76,879 4.3%
1992 76,523 (0.5%)
1993 86,053 12.5%
1994 88,560 2.9%
1995 90,046 1.7%
1996 99,072 10.0%
1997 105,347 6.3%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
1988 61,394
<S> <C>
1989 67,391
1990 73,730
1991 76,879
1992 76,523
1993 86,053
1994 88,560
1995 90,046
1996 99,072
1997 105,347
</TABLE>
SOURCE: Las Vegas Convention and Visitors Authority
56
<PAGE>
AIRPORT STATISTICS
TOTAL ENPLANED AND DEPLANED PASSENGERS
Since 1988, the total number of passengers enplaning and deplaning at
McCarran International airport has increased by 87%.
<TABLE>
<CAPTION>
TOTAL ENPLANED/ PERCENTAGE
YEAR DEPLANED PASSENGERS CHANGE
- --------- ------------------- -----------
<S> <C> <C>
1988 16,231,199 4.2%
1989 17,106,948 5.4%
1990 19,089,684 11.6%
1991 20,171,557 5.7%
1992 20,912,585 3.7%
1993 22,492,156 7.6%
1994 26,850,486 19.4%
1995 28,027,239 4.4%
1996 30,459,965 8.7%
1997 30,305,822 (0.5%)
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MILLIONS
<S> <C>
1988 16.2
1989 17.1
1990 19.1
1991 20.2
1992 20.9
1993 22.5
1994 26.9
1995 28
1996 30.5
1997 30.3
</TABLE>
SOURCE: McCarran International Airport
57
<PAGE>
AUTOMOBILE TRAFFIC
AVERAGE DAILY TRAFFIC (ALL FOUR DIRECTIONS COMBINED)
The Nevada Department of Transportation provides average daily traffic
counts on the four principal highways servicing travelers to and from Las Vegas.
The traffic counters are located on I-15 South (MEASURING SOUTHERN CALIFORNIA
TRAFFIC), I-15 North (MEASURING UTAH TRAFFIC), US 95 North (MEASURING TONOPAH,
RENO TRAFFIC), and US 95 South (MEASURING ARIZONA TRAFFIC). The figures reported
include both inbound and outbound traffic.
<TABLE>
<CAPTION>
TOTAL PERCENTAGE
YEAR VEHICLES CHANGE
- --------- ----------- -----------
<S> <C> <C>
1988 41,234 7.4%
1989 45,222 9.7%
1990 48,607 7.5%
1991 50,150 3.2%
1992 51,411 2.5%
1993 53,467 4.0%
1994 56,875 6.4%
1995 58,917 3.6%
1996 59,777 1.5%
1997 63,261 5.8%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
THOUSANDS
<S> <C>
1988 41.2
1989 45.2
1990 48.6
1991 50.2
1992 51.4
1993 53.5
1994 56.0
1995 58.9
1996 59.8
1997 63.3
</TABLE>
SOURCE: Nevada Department of Transportation
58
<PAGE>
GAMING REVENUE
CLARK COUNTY GROSS GAMING REVENUE
A summary of the gross gaming revenue in Clark County for the period
covering 1988 through 1997 is shown in the following table.
<TABLE>
<CAPTION>
GROSS PERCENTAGE
YEAR GAMING REVENUE CHANGE
- --------- --------------- -----------
<S> <C> <C>
1988 3,136,901,000 12.5%
1989 3,430,851,000 9.4%
1990 4,104,001,000 19.6%
1991 4,152,407,000 1.2%
1992 4,381,710,000 5.5%
1993 4,727,424,000 7.9%
1994 5,430,651,000 14.9%
1995 5,717,567,000 5.3%
1996 5,783,735,000 1.2%
1997 6,152,415,000 6.4%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
BILLIONS
<S> <C>
1988 3.1
1989 3.4
1990 4.1
1991 4.2
1992 4.4
1993 4.7
1994 5.4
1995 5.7
1996 5.8
1997 6.2
</TABLE>
SOURCE: Nevada State Gaming Control Board
59
<PAGE>
Gaming has continued to be a strong and growing business in Las Vegas.
According to the LVCVA, Clark County gaming revenues have increased at a
compound annual rate of 7.3% from approximately $2.8 billion in 1986 to
approximately $6.1 billion in 1997. As a result of the increased popularity of
gaming, Las Vegas has sought to increase its popularity as an overall vacation
resort destination. Management believes that the growth in the Las Vegas market
has been enhanced as a result of a dedicated program by the LVCVA and major Las
Vegas hotels to promote Las Vegas as a major vacation and convention site, the
increased capacity of McCarran Airport and the introduction of large, themed
destination resorts in Las Vegas. Notwithstanding, there has recently been
volatility in stock prices of Las Vegas-based gaming companies. The Issuer
believes this volatility is a result of a perceived saturation of the Las Vegas
market and uncertainty arising from the Asian economic downturn and its effect
on Asian gaming customers.
GROWTH OF LAS VEGAS RETAIL SECTOR AND NON-GAMING REVENUE EXPENDITURES. The
Las Vegas market continues to evolve from its historical gaming focus to a
broader entertainment offering. In addition to the traditional attractiveness of
gaming, the market is continuing to expand to include retail, sporting
activities, major concerts and other entertainment facilities. This
diversification has contributed to the growth of the market and broadened the
universe of individuals who would consider Las Vegas as a vacation destination.
The more diversified entertainment offerings present significant growth
opportunities.
An increasing number of destination resorts are developing non-gaming
entertainment to complement their gaming activities in order to draw additional
visitors. According to the LVCVA, while gaming revenues in Clark County have
increased from approximately $2.8 billion in 1986 to $6.1 billion in 1997, the
percentage of an average tourist's budget spent on gaming has declined from
32.6% in 1986 to 25.8% in 1996 with non-gaming tourist revenues increasing from
$5.8 billion in 1986 to $16.7 billion in 1996. The newer large theme destination
resorts have been designed to capitalize on this development by providing better
quality sleeping rooms at higher rates and by providing expanded shopping,
dining and entertainment opportunities to their patrons in addition to gaming.
LAS VEGAS AS A CONVENTION CENTER ATTRACTION. Las Vegas is one of the
largest convention and trade show destinations in the country. In 1987,
approximately 1.7 million persons attended conventions in Las Vegas providing
approximately $1.2 billion in non-gaming convention revenue. In 1997, the number
of convention attendees increased to more than 3.5 million, providing $4.4
billion in non-gaming convention revenue. Las Vegas offers convention and trade
shows unique infrastructure for handling the world's largest shows, including a
concentration of high-end hotel rooms located on the Strip, two convention
centers with a total of over 2.3 million square feet of convention and
exhibition space and unparalleled entertainment options. The proposed expansion
of the Las Vegas Convention Center ("LVCC") and the planned construction of the
Congress Center will further increase convention and exhibit space. Management
believes that Las Vegas will continue to evolve as one of the country's
preferred convention destinations.
MCCARRAN AIRPORT EXPANSION. During the past five years, the facilities of
McCarran Airport, the tenth busiest airport in the United States, have been
expanded to accommodate the increased number of airlines and passengers which it
services. The number of passengers traveling through McCarran Airport has
increased from approximately 15.6 million in 1987 to approximately 30.3 million
in 1997, a compound annual growth rate of 6.7%. According to the LVCVA, in 1997
visitors to Las Vegas arrived by the following methods of transportation: 47% by
air; 41% by auto; 6% by bus; and 5% by recreational vehicle. An approximately
$500 million expansion project at McCarran Airport is scheduled for completion
in 1998. Long-term expansion plans for McCarran Airport provide for additional
runways, three new satellite concourses, 65 additional gates, improved public
transportation, roads and other infrastructure leading from McCarran Airport to
the Strip and other facilities which would allow McCarran Airport to
significantly increase visitor capacity. To the extent that McCarran Airport is
not expanded in accordance with its plans, the occupancy rates and average daily
hotel room rates in Las Vegas could be adversely affected due to the planned
construction of new hotel rooms. During the first quarter of 1998, visitor
60
<PAGE>
counts at McCarran Airport were down 4.1% from the same period in 1997. Airline
traffic is a significant contributor to the overall visitor volume to Las Vegas,
as approximately 44% of visitors arrive by air. A reduction in visitation to the
market could result in lower average room rates, lower hotel occupancy
percentages and reduced revenues for the Company.
STATISTICS ON THE LAS VEGAS GAMING INDUSTRY. The following table sets forth
certain information derived from published reports of the LVCVA and the Nevada
State Gaming Control Board concerning Las Vegas Strip gaming revenues and
visitor volume and hotel data for the years 1986 to 1997. As shown in the table,
the Las Vegas market has achieved significant growth in visitor volume and
tourist revenues and favorably absorbed significant additional room capacity
despite the occurrence of a series of adverse economic, regulatory and
competitive events during the past decade such as the recession of the early
1990s, the expansion of gaming into new jurisdictions, the modification of
existing regulations in other jurisdictions and the expansion of Native American
gaming.
61
<PAGE>
HISTORICAL DATA FOR LAS VEGAS GAMING INDUSTRY(1)
<TABLE>
<CAPTION>
1987 1988 1989 1990 1991 1992 1993 1994
--------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Las Vegas Visitor Volume..... 16,216,102 17,199,808 18,129,684 20,954,420 21,315,116 21,886,865 23,522,593 28,214,362
Percentage Change............ 6.7% 6.1% 5.4% 15.6% 1.7% 2.7% 7.5% 19.9%
Total Visitor
Expenditures(2)............ $8,602,966 $10,039,448 $11,912,941 $14,320,746 $14,326,554 $14,686,644 $15,127,267 $19,163,212
Percentage Change............ 15.3% 16.7% 18.7% 20.2% 0.0% 2.5% 3.0% 26.7%
Las Vegas Convention
Attendance................. 1,677,716 1,702,158 1,508,842 1,742,194 1,794,444 1,969,435 2,439,734 2,684,171
Percentage Change............ 10.4% 1.5% (11.4)% 15.5% 3.0% 9.8% 23.9% 10.0%
Las Vegas Hotel Occupancy
Rate....................... 87.0% 89.3% 89.8% 89.1% 85.2% 88.8% 92.6% 92.6%
Las Vegas Hotel/Motel Room
Supply..................... 58,474 61,394 67,391 73,730 76,879 76,523 86,053 88,560
Percentage Change............ 3.5% 5.0% 9.8% 9.4% 4.3% (0.5)% 12.5% 2.9%
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Las Vegas Visitor Volume..... 29,002,122 29,636,631 30,464,635
Percentage Change............ 2.8% 2.2% 2.8%
Total Visitor
Expenditures(2)............ 20,686,800 22,533,258 24,952,189
Percentage Change............ 8.0% 8.9% 10.7%
Las Vegas Convention
Attendance................. 2,924,879 3,305,507 3,519,424
Percentage Change............ 9.0% 13.0% 6.5%
Las Vegas Hotel Occupancy
Rate....................... 91.4% 93.4% 90.3%
Las Vegas Hotel/Motel Room
Supply..................... 90,046 99,072 105,347
Percentage Change............ 1.7% 10.0% 6.3%
</TABLE>
- ------------------------
(1) Sources: LVCVA and Nevada State Gaming Control Board for the fiscal years
ended December 31.
(2) In thousands.
62
<PAGE>
CONSTRUCTION SCHEDULE AND BUDGET
The development of the Aladdin commenced during the first quarter of 1998.
The original Aladdin hotel and casino closed for business on November 25, 1997
and the implosion of the original facility occurred on April 27, 1998. The
development of the Mall Project is expected to commence during the second
quarter of 1998, followed soon thereafter by the commencement of the development
of the Music Project in the second half of 1998. The Company anticipates the
cost of developing, financing, constructing and opening the Aladdin to be
approximately $790 million (excluding the Company's $21.3 million planned
indirect cash contribution and $15.0 million appraised fair market value land
contribution to Aladdin Music, as part of the development funds for the Music
Project). Pursuant to the Design/Build Contract, the Design/Builder has
committed itself to a 26 month work schedule to complete the Aladdin, subject to
certain scope changes. An equitable adjustment in the Contract Date (as defined
herein) and guaranteed maximum price will be made for changes that either
increase or decrease the Design/Builders' time for performance and/or cost of
construction. See "Certain Material Agreements--Design/Build Contract." The
Company believes that the construction budget is reasonable and the Design/Build
Contract sets forth a procedure designed to ensure the timely completion of the
Aladdin. However, given the risks inherent in the construction process, it is
possible that construction costs could be significantly higher than budget and
that delays could occur. If construction costs do exceed the amounts set forth
in the construction budget, it is expected the potential sources to pay such
excess include (a) the $31.8 million Contingency; (b) the Trust, London Clubs
and Bazaar Holdings pursuant to their obligations under the Bank Completion
Guaranty; and (c) the Design/Builder, a subsidiary of Fluor, pursuant to its
liability under the Design/Build Contract, which liability is guaranteed by
Fluor pursuant to the Fluor Guaranty. As of May 31, 1998, the Company has
expended $1.7 million under the Contingency. See "Risk Factors--Risks of New
Construction" and "--Risks Under Design/Build Contract and Fluor Guaranty" and
"Certain Material Agreements."
The Mall Project is not being developed by the Company, but is being
developed by Bazaar. The Mall Project is budgeted to cost approximately $259.0
million, all of which amount will be paid by Bazaar. Upon completion of the Mall
Financing, TrizecHahn, the Trust, Bazaar Holdings and AHL agreed to guarantee
completion of the Mall Project and Bazaar's indebtedness to the Mall Lenders
until certain earnings and loan to value targets have been met. See "Risk
Factors--Risk of New Construction" and "--Completion of the Mall Project and the
Music Project," "Use of Proceeds" and "Certain Material Agreements--Bazaar LLC
Operating Agreement."
The Aladdin, together with the Mall Project, will be developed as the first
phase of a planned two-phase redevelopment of the Complex. In the second phase,
Aladdin Music will develop the Music Project which, like the Mall Project, will
be financed independently and such financing will not be guaranteed by the
Company. On commencement of construction of the Music Project, the Company is
required to transfer ownership of the land parcel upon which the Music Project
will be built to Aladdin Music. The opening of the Music Project is expected to
occur within six months after the opening of the Aladdin. See "Risk
Factors--Completion of the Mall Project and the Music Project," "--Possible
Conflicts of Interest" and "Certain Material Agreements--The Music Project
Memorandum of Understanding."
The completion and full operation of the Aladdin is not contingent upon the
subsequent financing or completion of the Mall Project or the Music Project.
Investors should note that funding arrangements for the completion of the Music
Project have not yet been finalized and funding under the Mall Financing is
subject to certain conditions, and there can be no assurance that such funding
arrangements for the Music Project will be finalized at any time or that the
Mall Project or Music Project will be completed. See "Risk Factors--Completion
of the Mall Project and the Music Project."
63
<PAGE>
DESIGN AND CONSTRUCTION TEAM
The Company has assembled what it believes to be a highly qualified team of
specialists to design and construct the Aladdin.
TISHMAN. Tishman has been appointed as the construction manager for the
Aladdin. Tishman is a privately-held construction firm. Tishman or its
affiliates have built or renovated over 30,000 hotel rooms nationwide, including
the 500-room, one million square foot Golden Nugget hotel and casino in Atlantic
City, the 635-room, two million square foot Trump Castle Hotel and Casino in
Atlantic City, the 400-room expansion of Harrah's Hotel and Casino in Atlantic
City, the 2,300-room Walt Disney World Dolphin and Swan Hotel and convention
complex, the 1,200-room Sheraton Chicago Hotel & Towers, the 800-room Hilton in
Walt Disney World Village and the 600-room Westin Rio Mar Beach Resort & Country
Club.
Entertainment projects built by Tishman include Caesars Magical Empire in
Las Vegas, several Official All Star Cafes throughout the United States, the
Goodwill Games '98 Aquatics Center, Pacific Park in California, restoration of
the New Amsterdam Theater in New York and EPCOT Center in Orlando, Florida.
FLUOR DANIEL. Fluor Daniel, Inc. is the design/builder for the Aladdin. The
Design/Builder is a subsidiary of Fluor, a Fortune 500 Company offering
architectural, engineering, construction management, construction and
maintenance services to projects around the world. The Design/Builder has been
ranked the number one engineering and construction company in the United States
based on total revenue by Engineering News-Record for nine of the last ten
years. In October 1997, the Design/Builder was recognized by Fortune as the most
admired public engineering firm in the world. The Design/Builder has entered
into a guaranteed maximum price Design/Build Contract (subject to scope changes)
with the Company to design and construct the Aladdin. The Design/Build Contract
provides the Design/Builder with incentives for completing the Aladdin ahead of
schedule and within budget and for payment of liquidated damages to the Company
for certain delays. The Design/Build Contract is guaranteed by Fluor, the parent
of the Design/Builder, pursuant to the Fluor Guaranty. See "Certain Material
Agreements-- Design/Build Contract." On May 29, 1998, Fluor had an equity market
capitalization of over $3.9 billion.
ADP/FD OF NEVADA, INC. ADP, an indirect subsidiary of Fluor, will be the
Complex architect. ADP is wholly-owned by ADP Marshall, Inc. ("ADP Marshall").
ADP Marshall, which is based in Phoenix, Arizona, is well-known for its
architecture work and mixed-use projects. Such projects include resorts, hotels,
timeshare/vacation ownership, gaming, mixed-use/planning, recreational (golf
clubs, spas, tennis centers, etc.) and specialty entertainment/retail/restaurant
projects. Among ADP Marshall's many award-winning efforts are Five Star ranked
properties. Its client list includes Princess Hotels, Inc. (Scottsdale and
Acapulco), Carefree Resorts (The Boulders, The Peaks, Carmel Valley Ranch) and
PGA Family Golf Center (Scottsdale).
ADP's philosophy is that design and systems efficiency must support the
operations of a project, especially where the client has a long-term involvement
in the completed development. The firm aims to establish strong client
relationships by thoroughly understanding its clients' needs, the intricacies of
their operations and their development, financial and market specific goals.
TRIZECHAHN. THB, a wholly-owned subsidiary of TrizecHahn, is the joint
venture partner of Bazaar Holdings in the Mall Project. Prior to its recently
announced sale of 20 regional shopping centers, TrizecHahn owned and managed 27
regional centers in major markets throughout the United States, comprising over
25 million square feet and was one of the largest owners, developers and
managers of regional shopping centers in the United States. Investors should
note that TrizecHahn has announced that it is considering selling its entire
operating portfolio of regional shopping centers and on April 6, 1998 announced
the sale of 20 regional shopping centers for over $2.5 billion. While
TrizecHahn's announcement is limited to the sale of its current operating
portfolio of regional shopping centers, there can be no assurance that
TrizecHahn will not similarly decide to sell its interest in the Desert Passage.
Accordingly,
64
<PAGE>
investors cannot be assured that TrizecHahn will own and operate the Desert
Passage once it becomes operational, and as a result, pedestrian traffic to the
Aladdin may decrease. See "Risk Factors-- Completion of the Mall Project and the
Music Project."
BBGM. The interior designer for the project, BBGM, specializes in
hospitality design and has experience in casinos, restaurants, retail,
spa/fitness centers and specialty/theme projects. BBGM's experience includes the
recently renovated and expanded Caesars Atlantic City hotel, casino, restaurants
and public space. Other projects have included the Mohegan Sun Casino in
Connecticut and TropWorld in Atlantic City. BBGM's hotel projects have included
the St. Regis, The Plaza and the Sheraton Hotel & Towers located in New York
City.
THE ENERGY PROVIDER. The Energy Provider, a wholly-owned subsidiary of UTH,
will be the energy provider for certain parts of the Complex, including the
Aladdin. The predecessor to UTH was founded in July 1993 as a subsidiary of
Unicom to develop district energy projects. Unicom, which is listed on the New
York Stock Exchange, had an equity market capitalization of over $7.6 billion on
May 29, 1998. Unicom is also the parent of Commonwealth Edison Company, one of
the largest electric utilities in the United States. Since 1993, UTH has
developed the largest district cooling system in the world, located in Chicago,
Illinois, and is a partner in energy ventures in Boston, Houston and Windsor,
Ontario.
OPERATIONAL FACILITIES
The Complex has been designed to include certain operational facilities and
advantages which will assist the Company in providing a high level of service to
guests.
SERVICE FACILITIES. The north side of the Complex will border on a service
road, which will include service elevators, loading docks, receiving and
purchasing facilities and storage areas. These service facilities will be
located near the majority of the Complex's restaurants and food service areas,
which will be the principal users of such facilities.
ELEVATOR BANKS. The Hotel will be designed so that elevator banks are
located at strategic locations, enabling Hotel guests and employees to access
the Hotel guest areas easily. Within the Hotel, special waiter elevators will
provide waiters with direct access from Hotel kitchens to rooms and suites,
allowing guests to receive full room service on a timely basis.
ENERGY. The Complex, once fully constructed, will require substantial
amounts of electricity, hot and cold water and heating and cooling. For this
purpose, the Company has entered into certain agreements with the Energy
Provider for the supply of electricity and heating and cooling to certain parts
of the Complex. The Energy Provider has agreed to provide the Aladdin with all
its electricity, heating and cooling needs, as specified by the Company, from
the date of completion of the Aladdin. Pursuant to the Development Agreement, in
order to supply the Aladdin's energy requirements, the Energy Provider has
agreed to construct and operate, at its own cost, a thermal energy plant (the
"Plant") on an approximately 0.64 acre portion of the Complex (the "Plant
Site"). The Energy Provider's obligations under the Development Agreement are
guaranteed up to $30.0 million by the Energy Provider's ultimate parent, Unicom,
one of the largest electric utility companies in the United States. See "Certain
Material Agreements--Development Agreement," "--Unicom Guaranty" and "--Energy
Service Agreement."
The Music Project will also use electricity, hot and cold water and heating
and cooling supplied by the Energy Provider. TrizecHahn will utilize the Plant
for the provision of electricity and cold water for the Mall Project.
SECURITY. The Aladdin will include state-of-the-art security systems,
including internally operated camera surveillance systems for the Casino. The
Company will employ extensive supervision and accounting procedures to control
the handling of cash in the Casino. These measures will include security
personnel, closed-circuit television for observation of critical areas of the
casino, locked cash boxes,
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independent auditors and observers, strict sign-in and sign-out procedures which
ensure, to the extent practicable, that gaming chips issued by and returned to
the Casino cashiers' cages are accurately accounted for, and procedures for the
regular observation of gaming employees.
EMPLOYEES
The Company anticipates that immediately prior to completion of the Aladdin,
it will employ approximately 3,600 employees in connection with the Aladdin. The
Company will be required to undertake a major recruiting and training program
prior to the opening of the Aladdin at a time when other major new facilities
may be approaching completion and also recruiting employees. The Company
believes it will be able to attract and retain a sufficient number of qualified
individuals to operate the Aladdin. However, there can be no assurance that it
will be able to do so. Furthermore, the Company does not know whether or to what
extent such employees will be covered by collective bargaining agreements, as
that determination will be ultimately made by such employees.
SERVICE MARKS
On the Issue Date, AHL transferred to the Company four federally registered
service marks involving the word "Aladdin" and used in connection with the
provision of casino and casino entertainment services and hotel and restaurant
services (the "Marks"). Two of the Marks were registered on July 13, 1993, a
third on July 29, 1993 and the fourth on August 24, 1993. A statement of
continuing use with respect to each of the Marks must be filed with the United
States Patent and Trademark Office (the "PTO") between the fifth and sixth
anniversary of the date such Mark was registered in order to maintain the
effectiveness of the registration with respect to such Mark. Although the
Company will not be using the Marks during the period of the Aladdin's
construction, the Company does not expect that this will adversely affect the
registration of the Marks, provided that the reason for the non-use of the Marks
is explained to the PTO at the time the statement of continuing use is filed.
Each of the registrations for the Marks has a duration of ten years and, unless
renewed, will expire on the tenth anniversary of such Mark's date of
registration. The Company has recorded its ownership of the Marks with the PTO.
A lien on the Marks was granted to the Bank Lenders on the Issue Date. See
"Description of Certain Indebtedness and Other Obligations--Bank Credit
Facility."
INSURANCE
Prior to the commencement of operation of the Aladdin, the Company intends
to obtain the types and amounts of insurance coverage that it considers
appropriate for a company in its business. While management intends to ensure
that the Company's insurance coverage will be adequate, if the Company were held
liable for amounts exceeding the limits of its insurance coverage or for claims
outside of the scope of its insurance coverage, the Company's business and
results of operations could be materially and adversely affected.
With respect to the construction of the Aladdin, the Company and the
Design/Builder have elected to implement a controlled insurance program (the
"CIP") whereby the Design/Builder will provide General Liability, Workers'
Compensation, Excess Liability, Contractual Liability, Builders Risk and Transit
coverages for the Design/Builder and all subcontractors. The Company will pay
the Design/Builder for all premiums and costs associated with the CIP. Where
necessary, the Company will be named as a named insured or as an additional
insured on each policy procured by the Design/Builder pursuant to the CIP. In
addition, in lieu of procuring a liquidated damages insurance policy or a
business interruption insurance policy to compensate for late completion of the
Aladdin, the Company has paid the Design/Builder $2.0 million as a bonus
advance. The Design/Builder may elect to purchase liquidated damages insurance
or it may elect to self-insure. In either event, the Design/Builder is entitled
to keep the bonus advance if the Aladdin is finished on or before the date set
for Substantial Completion (as defined herein) (the "Contract Date"). As a
further bonus, the Design/Builder will receive $100,000 for each day, up to but
not
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to exceed 90 days, that the Aladdin is substantially completed in advance of the
Contract Date. If the Aladdin is not substantially completed by the Contract
Date, the Design/Builder must pay back the advance bonus plus $100,000 per day
commencing on the first day following the Contract Date and continuing up to 90
days thereafter. See "Certain Material Agreements--Design/Build Contract."
LITIGATION
The Company and the Aladdin Parties are not currently party to any pending
claim or legal action. However, Mr. Jack Sommer, who is the Chairman of the
Holdings Board and the Company Board (each as defined herein), a director of
Holdings, Capital, the Company and the Issuer, and a trustee of the Trust, and
the other trustees of the Trust are currently co-defendants in a legal action
relating to the original Aladdin hotel and casino. See "Controlling
Stockholders--Trust Litigation."
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REGULATION AND LICENSING
The ownership and operation of casino gaming facilities in the State of
Nevada are subject to: (i) the Nevada Gaming Control Act and the regulations
promulgated thereunder (collectively, the "Nevada Act"); and (ii) various local
regulations. The operation of the Casino by the Company will be subject to the
licensing and regulatory control of the Nevada Gaming Commission (the "Nevada
Commission"), the Nevada State Gaming Control Board (the "Nevada Board"), and
the Clark County Liquor and Gaming Licensing Board (the "CCLGLB"). The Nevada
Commission, the Nevada Board, and the CCLGLB are collectively referred to as the
"Nevada Gaming Authorities."
The laws, regulations and supervisory procedures of the Nevada Gaming
Authorities are based upon declarations of public policy that are concerned
with, among other things: (i) the prevention of unsavory or unsuitable persons
from having a direct or indirect involvement with gaming at any time or in any
capacity; (ii) the establishment and maintenance of responsible accounting
practices and procedures; (iii) the maintenance of effective controls over the
financial practices of licensees, including the establishment of minimum
procedures for internal fiscal affairs and the safeguarding of assets and
revenues, providing reliable record keeping and requiring the filing of periodic
reports with the Nevada Gaming Authorities; (iv) the prevention of cheating and
fraudulent practices; and (v) providing a source of state and local revenues
through taxation and licensing fees. Any change in such laws, regulations and
procedures could have a material adverse effect on the proposed gaming
operations of the Aladdin and the financial condition and results of operations
of the Company and so the Holdings Group.
As operator and manager of the Aladdin, the Company will conduct
nonrestricted gaming operations at the Casino and so will be required to be
licensed by the Nevada Gaming Authorities. A nonrestricted gaming license
permits the holder to operate sixteen or more slot machines, or any number of
slot machines with at least one table game. The gaming license will require the
periodic payment of fees and will not be transferable. No person will be able to
become a member of, or receive any percentage of the profits of, the Company
without first obtaining Gaming Approvals. In connection with licensing of the
Company, Holdings will be required to be registered and found suitable as a
holding company of the Company and to be licensed as a member of the Company. In
connection with the registration and licensing of Holdings as a holding company
and a member, each direct and indirect owner of Holdings, including, but not
limited to, the Issuer, London Clubs, LCNI, London Clubs Holdings Ltd. (a wholly
owned subsidiary of London Clubs and the holding company for LCNI) AHL, the
Trust, Sommer Enterprises, GAI and their respective owners (all such parties
collectively, the "Aladdin Owners") will be required to obtain from the Nevada
Gaming Authorities applicable Gaming Approvals. Capital will also be subject to
being called forward for a finding of suitability as a co-issuer of the Notes
and the New Notes in the discretion of the Nevada Gaming Authorities.
Upon the effectiveness of the Exchange Offer, Holdings will be a "publicly
traded corporation" as that term is defined in the Nevada Act. If the Company
becomes an IPO Entity, it will also become a "publicly traded corporation" as
that term is defined in the Nevada Act. In order for a company that is a
publicly traded corporation to receive a gaming license, the Nevada Commission
must exempt the company from a regulatory provision in the Nevada Act which
makes publicly traded corporations ineligible to apply for or hold a gaming
license. However, the Nevada Commission has exempted companies from this
provision in the past and has granted gaming licenses to publicly traded
corporations. If the Company becomes an IPO Entity, the Company intends to apply
for an exemption from this eligibility requirement (the "Exemption") in
connection with its application for a gaming license. In connection with
licensing and receipt of the Exemption, the Issuer Holdings, London Clubs and
the Company will each also be required to be registered by the Nevada Commission
as a publicly traded corporation (a "Registered Company"). The following
regulatory requirements will be applicable to the Company, Holdings and the
Aladdin Owners upon their receipt of all necessary Gaming Approvals from the
Nevada Gaming Authorities. The Company, Holdings and the Aladdin Owners have not
yet obtained from the Nevada Gaming Authorities the Gaming Approvals required in
order for the Company to conduct gaming operations at the Aladdin
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and there can be no assurances given that such Gaming Approvals will be
obtained, or that they will be obtained on a timely basis. There can also be no
assurances that the Company's officers, managers and key employees will obtain
Gaming Approvals from the Nevada Gaming Authorities.
As a Registered Company and Company Licensee, the Company will be required
to periodically submit detailed financial information and operating reports to
the Nevada Commission and furnish any other information that the Nevada
Commission may require. No person may become a member of, or receive any
percentage of profits from a Company Licensee without first obtaining licenses
and approvals from the Nevada Gaming Authorities.
The Nevada Gaming Authorities may investigate any individual who has a
material relationship to, or material involvement with, the Company, Holdings
and the Aladdin Owners to determine whether such individual is suitable or
should be licensed as a business associate of a Company Licensee. Officers,
managers and certain key employees of the Company and Holdings must file
applications with the Nevada Gaming Authorities and will be required to be
licensed by the Nevada Gaming Authorities in connection with the Company's
application. The Nevada Gaming Authorities may deny an application for licensing
or a finding of suitability for any cause they deem reasonable. A finding of
suitability is comparable to licensing, and both require submission of detailed
personal and financial information followed by a thorough investigation. The
applicant for licensing or a finding of suitability, or the gaming licensee by
whom the applicant is employed or for whom the applicant serves, must pay all
the costs of the investigation. Changes in licensed positions must be reported
to the Nevada Gaming Authorities, and in addition to their authority to deny an
application for a finding of suitability or licensure, the Nevada Gaming
Authorities have jurisdiction to disapprove a change in a company position.
If the Nevada Gaming Authorities were to find an officer, manager or key
employee of the Company or Holdings unsuitable for licensing or to continue
having a relationship with the Company or Holdings, the Company or Holdings, as
the case may be, would have to sever all relationships with such person. In
addition, the Nevada Commission may require the Company or Holdings, as the case
may be, to terminate the employment of any person who refuses to file
appropriate applications. Determinations of suitability or of questions
pertaining to licensing are not subject to judicial review in Nevada.
The Company will be required to submit detailed financial and operating
reports to the Nevada Commission. Substantially all material loans, leases,
sales of securities and similar financing transactions by the Company will be
required to be reported to or approved by the Nevada Commission.
If it were determined that the Nevada Act was violated by the Company or
Holdings, the Gaming Approvals they hold could be limited, conditioned,
suspended or revoked, subject to compliance with certain statutory and
regulatory procedures. In addition, the Company, Holdings and the persons
involved could be subject to substantial fines for each separate violation of
the Nevada Act at the discretion of the Nevada Commission. Further, a supervisor
could be appointed by the Nevada Commission to operate the Aladdin and, under
certain circumstances, earnings generated during the supervisor's appointment
(except for the reasonable rental value of the Aladdin) could be forfeited to
the State of Nevada. Limitation, conditioning or suspension of any Gaming
Approval or the appointment of a supervisor could (and revocation of any Gaming
Approval would) materially adversely affect the gaming operations of the Aladdin
and the financial position and results of operations of the Company and the
Aladdin Parties.
Any beneficial holder of a Registered Company's voting or non-voting
securities (including warrants exercisable into such securities), regardless of
the number of shares owned, may be required to file an application, be
investigated, and have his suitability as a beneficial holder of the Registered
Company's securities determined if the Nevada Commission has reason to believe
that such ownership would otherwise be inconsistent with the declared policies
of the state of Nevada. The applicant must pay all costs of investigation
incurred by the Nevada Gaming Authorities in conducting any such investigation.
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The Nevada Act requires any person who acquires beneficial ownership of more
than 5% of a Registered Company's voting securities (including warrants
exercisable into voting securities) to report the acquisition to the Nevada
Commission. The Nevada Act requires that beneficial owners of more than 10% of a
Registered Company's voting securities apply to the Nevada Commission for a
finding of suitability within thirty days after the Chairman of the Nevada Board
mails the written notice requiring such filing. Under certain circumstances, an
"institutional investor," as defined in the Nevada Act, which acquires more than
10%, but not more than 15%, of the Registered Company's voting securities
(including warrants exercisable into voting securities) may apply to the Nevada
Commission for a waiver of such finding of suitability if such institutional
investor holds the voting securities for investment purposes only. An
institutional investor shall not be deemed to hold voting securities for
investment purposes unless the voting securities were acquired and are held in
the ordinary course of business as an institutional investor and not for the
purpose of causing, directly or indirectly, the election of a majority of the
members of the board of directors of the Registered Company, and change in the
Registered Company's corporate charter, bylaws, management, policies or
operations of the Registered Company, or any of its gaming affiliates, or any
other action which the Nevada Commission finds to be inconsistent with holding
the Company's voting securities for investment purposes only. Activities which
are not deemed to be inconsistent with holding voting securities for investment
purposes only include: (i) voting on all matters voted on by stockholders or
interest holders; (ii) making financial and other inquiries of management of the
type normally made by securities analysts for informational purposes and not to
cause a change in its management, policies or operations; and (iii) such other
activities as the Nevada Commission may determine to be consistent with such
investment intent. If the beneficial holder of voting securities who must be
found suitable in a corporation, partnership or trust, it must submit detailed
business and financial information including a list of beneficial owners. The
applicant is required to pay all costs of investigation.
Any person who fails or refuses to apply for a finding of suitability or a
license within thirty days after being ordered to do so by the Nevada Commission
or the Chairman of the Nevada Board, may be found unsuitable. The same
restrictions apply to a record owner if the record owner, after request, fails
to identify the beneficial owner. Any stockholder or beneficial owner found
unsuitable and who holds, directly or indirectly, any beneficial ownership of
the common stock or other equity securities of a Registered Company beyond such
period of time as may be prescribed by the Nevada Commission may be guilty of a
criminal offense. The Registered Company is subject to disciplinary action if,
after it receives notice that a person is unsuitable to be a stockholder or to
have any other relationship with the Company, the Registered Company (i) pays
that person any dividend, distribution or interest upon voting securities of the
Registered Company, (ii) allows that person to exercise, directly or indirectly,
any voting right conferred through securities held by that person, (iii) pays
remuneration in any form to that person for services rendered or otherwise, or
(iv) fails to pursue all lawful efforts to require such unsuitable person to
relinquish his voting securities including, if necessary, the immediate purchase
of said voting securities for cash at fair market value. The holders of the
Warrants and the Warrant Shares will be subject to being called forward for a
finding of suitability in the discretion of the Nevada Commission.
The Company will be required to maintain a current members' ledger in Nevada
that may be examined by the Nevada Gaming Authorities at any time. The Nevada
Commission has the power to require that their respective members' certificates
bear a legend indicating that such securities are subject to the Nevada Act. It
is unknown at this time whether the Nevada Commission will impose this
requirement on the Company.
After becoming a Registered Company, the Issuer, London Clubs, the Company
and Holdings may not make a public offering of any securities (including, but
not limited to, the Common Stock of the Issuer upon the exercise of the
Warrants) without the prior approval of the Nevada Commission if the securities
or the proceeds therefrom are intended to be used to construct, acquire or
finance gaming facilities in Nevada, or to retire or extend obligations incurred
for such purposes. Such approval, if given, does not constitute a finding,
recommendation or approval by the Nevada Commission or the Nevada Board as to
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the accuracy or adequacy of the prospectus or the investment merits of the
securities. Any representation to the contrary is unlawful.
The regulations of the Nevada Board and the Nevada Commission also provide
that any entity which is not an "affiliated company," as such term is defined in
the Nevada Act, or which is not otherwise subject to the provisions of the
Nevada Act or such regulations, such as the Issuer, which plans to make a public
offering of securities intending to use such securities, or the proceeds from
the sale thereof for the construction or operation of gaming facilities in
Nevada, or to retire or extend obligations incurred for such purposes, may apply
to the Nevada Commission for prior approval of such offering. The Nevada
Commission may find an applicant unsuitable based solely on the fact that it did
not submit such an application, unless upon a written request for a ruling, the
Nevada Board Chairman has ruled that it is not necessary to submit an
application. The sale of securities pursuant to the Warrant Shelf Registration
Statement (the "Warrant Public Offering") will qualify as a public offering. The
Issuer has filed a written request (the "Ruling Request") with the Nevada Board
Chairman for a ruling that it is not necessary to submit the Warrant Public
Offering for prior approval. No assurance can be given that the Ruling Request
will be granted or that it will be considered on a timely basis. If the Nevada
Board Chairman rules that approval of the Warrant Public Offering is required,
the Issuer will file an application for such approval. If the Ruling Request is
not granted, the Warrant Public Offering could be significantly delayed while
the Issuer seeks approval of the Nevada Board and the Nevada Commission for the
Warrant Public Offering. No assurance can be given that approval of the Warrant
Public Offering, if required, will be granted. If Holdings or the Company shall
become an IPO Entity prior to receiving its Gaming Approvals, they intend to
file a Ruling Request with the Nevada Board Chairman for a ruling that it is not
necessary to submit the Qualified Public Offering for prior approval. No
assurance can be given that such a Ruling Request will be granted or that it
will be considered on a timely basis. If the Nevada Board Chairman rules that
approval of the Qualified Public Offering is required, the Company or Holdings,
as applicable, will file an application for such approval. If the Ruling Request
is not granted, the Qualified Public Offering could be significantly delayed
while the Company or Holdings seeks approval of the Nevada Board and the Nevada
Commission for the Qualified Public Offering. No assurance can be given that
approval of the Qualified Public Offering, if required, will be granted.
Changes in control of a Registered Company through merger, consolidation,
stock or asset acquisitions, management or consulting agreements, or any act or
conduct by a person whereby he obtains control, may not occur without the prior
approval of the Nevada Commission. Entities seeking to acquire control of a
Registered Company must satisfy the Nevada Board and Nevada Commission in a
variety of stringent standards prior to assuming control of such Registered
Company. The Nevada Commission may also require controlling stockholders,
officers, directors and other persons having a material relationship or
involvement with the entity proposing to acquire control, to be investigated and
licensed as part of the approval process relating to the transaction.
The Nevada legislature has declared that some corporate acquisitions opposed
by management, repurchases of voting securities and corporate defense tactics
affecting Nevada gaming licensees, and Registered Companies that are affiliated
with those operations, may be injurious to stable and productive corporate
gaming. The Nevada Commission has established a regulatory scheme to ameliorate
the potentially adverse effects of these business practices upon Nevada's gaming
industry and to further Nevada's policy to: (i) assure the financial stability
of corporate gaming operators and their affiliates; (ii) preserve the beneficial
aspects of conducting business in the corporate form; and (iii) promote a
neutral environment for the orderly governance of corporate affairs. Approvals
are, in certain circumstances, required from the Nevada Commission before the
Registered Company can make exceptional repurchases of voting securities above
the current market price thereof and before a corporate acquisition opposed by
management can be consummated. The Nevada Act also requires prior approval of a
plan of recapitalization proposed by the Registered Company's Board of Directors
in response to a tender offer
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made directly to the Registered Company's stockholders or interest holders for
the purposes of acquiring of the Registered Company.
License fees and taxes, computed in various ways depending on the type of
gaming or activity involved, are payable to the State of Nevada and to Clark
County, Nevada. Depending upon the particular fee or tax involved, these fees
and taxes are payable either monthly, quarterly or annually and are based upon
either: (i) a percentage of the gross revenues received; (ii) the number of
gaming devices operated; or (iii) the number of table games operated. A casino
entertainment tax also will also be paid by the Company where certain
entertainment is provided in a cabaret, nightclub, cocktail lounge or casino
showroom in connection with admissions and the serving or selling of food,
refreshments or merchandise.
Any person who is licensed, required to be licensed, registered, required to
be registered, or is under common control with such persons (collectively,
"Licensees"), and who proposes to become involved in a gaming venture outside of
Nevada, is required to deposit with the Nevada Board and thereafter maintain, a
revolving fund in the amount of $10,000 to pay the expenses of investigation by
the Nevada Board of their participation in such foreign gaming. The revolving
fund is subject to increase or decrease at the discretion of the Nevada
Commission. Thereafter, Licensees are also required to comply with certain
reporting requirements imposed by the Nevada Act. Licensees are also subject to
disciplinary action by the Nevada Commission if they knowingly violate any laws
of the foreign jurisdiction pertaining to the foreign gaming operation, fail to
conduct the foreign gaming operation in accordance with the standards of honesty
and integrity required of Nevada gaming operations, engage in activities or
enter into associations that are harmful to the State of Nevada or its ability
to collect gaming taxes and fees, or employ, contract with or associate with a
person in the foreign operation who has been denied a license or a finding of
suitability in Nevada on the ground of personal unsuitability.
The sale of alcoholic beverages by the Company on the premises of the
Aladdin is also subject to licensing, control and regulation by the CCLGLB. All
licenses are revocable and are not transferable. The CCLGLB have full power to
limit, condition, suspend or revoke any such license, and any such disciplinary
action could (and revocation would) have a material adverse effect on the
financial position and results of operations of the Company and the Aladdin
Parties.
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MANAGEMENT
The following table sets forth the executive officers and the directors of
the Company, which will own, develop and operate the Aladdin, and of the Issuer,
Holdings and Capital. A "director" of the Company or Holdings, as such term is
used in this Prospectus, shall refer to a person who sits on the Board of
Managers of the Company (the "Company Board") or Holdings (the "Holdings
Board").
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------------- --- ------------------------------------------------------------
<S> <C> <C>
Jack Sommer.................................. 51 Chairman of the Company Board and the Holdings Board;
Director of the Issuer and Capital; President of the Issuer
Richard J. Goeglein.......................... 64 Chief Executive Officer and President of the Company,
Holdings and Capital; Director of the Company, Holdings and
Capital
Ronald Dictrow............................... 54 Executive Vice President/Secretary and Director of the
Company, Holdings and Capital; Director and Secretary of the
Issuer
Alan Goodenough.............................. 54 Director of the Company, Holdings and Capital
G. Barry C. Hardy............................ 50 Director of the Company, Holdings and Capital
James H. McKennon............................ 44 Senior Vice President of the Company, Holdings and Capital;
President/Chief Operating Officer of the Aladdin Hotel and
Casino
Cornelius T. Klerk........................... 44 Senior Vice President/Chief Financial Officer/ Treasurer of
the Company, Holdings and Capital; Treasurer of the Issuer
Lee A. Galati................................ 55 Senior Vice President/Human Resources of the Company,
Holdings and Capital
Jose A. Rueda................................ 61 Senior Vice President/Electronic Gaming of the Company,
Holdings and Capital
David Attaway................................ 43 Senior Vice President of the Company, Holdings and Capital;
President and Chief Operating Officer of the Music Project
Patricia Becker.............................. 46 Senior Vice President/General Counsel of the Company,
Holdings and Capital
</TABLE>
JACK SOMMER is the Chairman of the Holdings Board and the Company Board,
director of the Issuer and Capital and President of the Issuer. Mr. Sommer has
been a full time resident of Las Vegas since 1988. Mr. Sommer is both a trustee
and contingent beneficiary of the Trust. He has over 25 years of experience in
developing residential and commercial real estate, including luxury residential
projects such as North Shore Towers, in Queens County, New York, and The
Sovereign at 425 East 58th Street in Manhattan. The Sommer family has been in
the real estate development business for over 100 years, operating for part of
that time as Sommer Properties ("Sommer Properties") founded by Mr. Sommer's
father (who passed away in 1979), and which is controlled by Mr. Sommer and his
mother, Mrs. Viola Sommer. Other well known developments of Sommer Properties
have included 280 Park Avenue, Manhattan, an 820,000 square foot office building
in Manhattan formerly owned and currently partially occupied by the Bankers
Trust Company; 135 West 50th Street, Manhattan, an 800,000 square foot office
building also known as the AMA Building; and 600 Third Avenue, Manhattan, a
500,000 square foot office building. Sommer Properties has also developed over
35,000 single family homes, primarily in New Jersey.
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RICHARD J. GOEGLEIN is Chief Executive Officer and a director of the
Company, Holdings and Capital. Mr. Goeglein has spent over 28 years in the
hotel/casino and food service industry. He was an Executive Vice President and a
member of the Board of Directors of Holiday Inns and Holiday Corp. from 1978
through 1987 and led the management team that consummated the 1980 acquisition
of Harrah's Hotels and Casinos ("Harrah's") for Holiday Inns. Mr. Goeglein
subsequently served as President and Chief Executive Officer of Harrah's from
1980 to the Fall of 1984 and as President and Chief Operating Officer of Holiday
Corp. (the parent company of Holiday Inns, Harrah's, Hampton Inns and Embassy
Suites) from October 1984 through 1987. From 1988 to 1992, Mr. Goeglein
participated in several corporate turnarounds in the technology and consumer
services fields. In 1992, Mr. Goeglein formed Gaming Associates, Inc. ("Gaming
Associates") to take management control of Dunes Hotel and Casino in Las Vegas
and to prepare a plan of closure for and carry out the closure of the property.
He remains a principal of that company. Gaming Associates provided consulting
services to the lodging and gaming industries. Mr. Goeglein recently served as a
member of the Gaming Oversight Committee of Marriott Corporation ("Marriott")
and through Gaming Associates, provided consulting services to Marriott's gaming
operations situated outside of the United States through December 1997. Mr.
Goeglein is also a director of Hollywood Park, Inc.
RONALD DICTROW is Executive Vice President/Secretary and a director of the
Company, Holdings and Capital and a director and Secretary of the Issuer. Mr.
Dictrow spent the first 12 years of his professional career as a CPA with the
New York accounting firm of David Berdon & Company and has a master's degree in
accounting and taxation. In 1979, he was hired by Sigmund Sommer as Controller
with financial responsibility for all of Mr. Sommer's properties. In 1984, Mr.
Dictrow became Treasurer and Chief Financial Officer of the Trust with the
additional responsibility for the operations and management of these properties.
Mr. Dictrow is an advisor and consultant to Mrs. Viola Sommer and has been an
officer and director of Sovereign Apartments, Inc., a New York City cooperative
apartment building since 1979. Mr. Dictrow has had business dealings with the
Sommer family for over 20 years.
ALAN GOODENOUGH is a director of the Company, Holdings and Capital. Mr.
Goodenough, who is chief executive officer of London Clubs, has over 30 years of
experience in the leisure and gaming industry, having worked as a public company
director and at other senior levels with several major public leisure and casino
companies in the United Kingdom. In 1990 Mr. Goodenough founded Lyric Hotels
Limited, a United Kingdom hotel company, raising over $40 million from United
Kingdom-based institutions. He remains Chairman of the Lyric Group which
currently operates three and four star hotels throughout England. As chief
executive officer of London Clubs, Mr. Goodenough was instrumental in that
company's initial public offering on the London Stock Exchange in June 1994. Mr.
Goodenough is also presently a fellow of the United Kingdom Hotel and Catering
Institute and a member of the Institute of Directors of England and Wales.
G. BARRY C. HARDY is a director of the Company, Holdings and Capital. Mr.
Hardy has served as Finance Director of London Clubs since 1989. Before joining
London Clubs, Mr. Hardy had extensive business experience in the leisure and
gaming industries. Such experience included executive level positions with
Pleasurama, plc where he held the offices of Development Director, Group Finance
Director and Company Secretary. In addition, Mr. Hardy was actively involved in
the development of Pleasurama's leisure and casino interests. In 1988, after the
acquisition of Pleasurama by Mecca Leisure Ltd., Mr. Hardy was appointed to
Mecca's Board as Managing Director of its casino division.
JAMES H. MCKENNON is Senior Vice President of the Company, Holdings and
Capital and President/ Chief Operating Officer of the Aladdin Hotel and Casino.
Mr. McKennon's career spans over 21 years in the hotel and casino industry in a
variety of executive positions. He was President and Chief Operating Officer of
Caesars World International Marketing (the casino marketing division of Caesars
World) from 1994 to 1996 and served as the President and Chief Operating Officer
of Caesars Tahoe from 1991 to 1994. Mr. McKennon first joined Caesars as the
Senior Vice President-Hotel Operations for Caesars Palace in
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Las Vegas, a position he held until his promotion in 1991. From 1976 to 1988 he
held a variety of managerial positions at both the property and corporate level
for Westin Hotels.
CORNELIUS T. KLERK is the Senior Vice President/Chief Financial Officer of
the Company, Holdings and Capital and Treasurer of the Issuer. He has over 19
years of experience in the hotel and casino industry both at the corporate and
property level. From 1993 to 1997 Mr. Klerk was Vice President--Finance for
Hilton Gaming Division (the gaming division of Hilton Hotels Corporation
("Hilton")). In that position he was responsible for the financial oversight of
all gaming properties owned and operated by Hilton. He was employed by Harrah's
from 1979 to 1985 and again from 1989 to 1993 in a variety of financial
management positions ranging from Casino Controller for Harrah's Atlantic City
to Vice President, Finance--Southern Nevada. From 1985 to 1987, Mr. Klerk was
Vice President of Gilpin, Peyton and Pierce, a regional advertising agency and
from 1987 to 1989, he was Corporate Controller for Forte Hotels International in
San Diego, California. Mr. Klerk was previously a CPA with the accounting firm
of Price Waterhouse.
LEE A. GALATI is the Senior Vice President/Human Resources of the Company,
Holdings and Capital. Mr. Galati has 22 years of human resources experience in a
variety of industries in both the public and private sectors. He was most
recently the Director of Human Resources for Sky Ute Casino in Durango, Colorado
from 1996 to 1997. Mr. Galati served as the Director of Human Resources for La
Plata County, Colorado from 1993 to 1995. From 1990 to 1993, Mr. Galati served
as an adjunct professor in the School of Business at Fort Lewis College in
Durango, Colorado. His experience also includes serving as Director of
Operations Support Services and Human Resources for Northern Telecom in San
Diego from 1984 to 1990 as well as Director of Human Resources for Beckman
Instruments in Fullerton, California from 1980 to 1984. Mr. Galati earned a
Masters in Human Resources and Organization Development from the University of
San Francisco in 1984.
JOSE A. RUEDA is the Senior Vice President of Electronic Gaming for the
Company, Holdings and Capital. Mr. Rueda's 28 years experience in the gaming
industry includes gaming operations as well as the sale and distribution of
gaming equipment. He was the Vice President, North East Region of Mikohn Gaming
Corporation from 1995 to 1997. Mikohn is a leading supplier of gaming equipment
to the casino industry. Prior to joining Mikohn, Mr. Rueda was with Harrah's for
24 years in a variety of management positions that included Director of Slot
Operations, Harrah's Atlantic City, from 1986 to 1994; Vice President of
Gaming/Slots, Harrah's Corporate from 1984 to 1986; Vice President of
Operations, Harrah's at Trump Plaza from 1983 to 1984 and Vice President of
Gaming, Harrah's Corporate from 1980 to 1983. Mr. Rueda has extensive experience
in property research and development along with creative product positioning. He
holds a business management degree from the University of Nevada at Reno.
DAVID ATTAWAY is the Senior Vice President of the Company, Holdings and
Capital and President and Chief Operating Officer of the Music Project. Mr.
Attaway has 17 years experience in the entertainment, hotel and casino industry
in a variety of executive positions. He joined Caesars Tahoe in 1986 and held
the following positions during his 12 year tenure: Senior Vice President and
General Manager from 1996 to 1998; Senior Vice President of Casino Operations
and Marketing, 1996 and Senior Vice President of Marketing, 1992 to 1996. Prior
to joining Caesars Tahoe, Mr. Attaway was the Director of Marketing and Finance
for Lawlor Event Center in Reno, Nevada from 1983 to 1985. He held management
positions with Five Flag Center in Dubuque, Iowa from 1981 to 1983. Mr. Attaway
holds a Bachelors Degree in Theater Management from Ohio University and he
completed the Masters Program in Marketing at the same institution.
PATRICIA BECKER is the Senior Vice President/General Counsel of the Company,
Holdings and Capital. Ms. Becker currently is a director of Powerhouse
Technologies, Inc. and Fitzgeralds Gaming Corporation and chairs the Compliance
Committee for both companies. From 1993 to 1995, Ms. Becker was Chief of Staff
for Nevada Governor, Bob Miller. From 1985 to 1993 Ms. Becker was with Harrah's
Hotels and Casinos, where she held the position of Senior Vice President and
General Counsel. Prior to joining
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Harrah's, she was a member of Nevada State Gaming Control Board. She holds a
Juris Doctorate degree from California Western School of Law.
COMMITTEES
There are currently no committees of the board of directors of the Issuer
(the "Issuer Board"). The Holdings Operating Agreement provides that there will
be Executive Management Committees which will be responsible for the day to day
management of Holdings and the Company. The Executive Management Committee of
the Company includes the following persons: the President and Chief Executive
Officer of the Company, the Chief Financial Officer of the Company, the
President and Chief Operating Officer of the Aladdin, the President and Chief
Operating Officer of the Music Project, the Senior Vice President of Human
Resources of the Company, the Senior Vice President of Electronic Gaming of the
Company, the Senior Vice President/General Counsel of the Company and the
Managing Director of the Salle Privee. See "Certain Material
Agreements--Holdings Operating Agreement." The Holdings Board may also establish
committees of the Holdings Board as it may deem necessary or advisable. Each of
London Clubs and Sommer Enterprises is entitled to have one of its nominee
Holdings Board members on each such committee. Presently, no committees of the
Holdings Board have been established.
COMPENSATION
The following table summarizes the compensation earned during 1997 by the
Company's, Holdings' and Capital's Chief Executive Officer and the only other
executive officer of the Company, Holdings, Capital or the Issuer who earned
over $100,000 in 1997.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1) LONG-TERM COMPENSATION(1)
--------------------------------- ------------------------------------------
NAME AND PRINCIPAL OTHER ANNUAL RESTRICTED STOCK
OCCUPATION(2)(3) SALARY COMPENSATION AWARDS OTHER
- ------------------------------- ---------- --------------------- ------------------- ---------------------
<S> <C> <C> <C> <C>
Richard J. Goeglein; Chief
Executive Officer............ $ 650,000(4) --(5) $ 0(6) $16,343(7)
James H. McKennon; Senior Vice
President.................... $ 243,750(8) --(9) $ 0(10) $635(7)
</TABLE>
- ------------------------------
(1) All of the executive officers of the Company, Holdings and Capital (other
than Mr. Dictrow) are compensated by the Company. Mr. Dictrow is principally
employed by the Trust and is compensated by the Trust. Compensation has been
paid on the Company's behalf by AHL since the Company's inception in January
1997.
(2) The executive officers of the Issuer received no compensation from the
Issuer in 1997.
(3) No other executive officer of the Company, Holdings or Capital received a
total annual salary and bonus exceeding $100,000 in 1997 from the Company,
Holdings or Capital.
(4) Includes $150,000 paid to GAI in 1997 for consulting fees.
(5) GAI purchased vested Holdings Common Membership Interests representing 3% of
the outstanding Holdings Common Membership Interests for $1,800. The price
paid by GAI for such interests was equal to the fair market value of such
interests at the time of purchase. The aggregate amount of all perquisites
and other personal benefits received by Mr. Goeglein in 1997 was less than
$50,000.
(6) Mr. Goeglein purchased unvested Holdings Common Membership Interests
representing 2% of the outstanding Holdings Common Membership Interests for
a purchase price of $1,200. Such interests had a fair market value of $1,200
on the date of purchase and vest on the earlier of (a) July 1, 2002 and (b)
the date on which such interests become publicly traded.
(7) Represents life insurance premiums paid on behalf of the executive in 1997.
(8) Mr. McKennon's employment with the Company began mid-year 1997. Mr.
McKennon's Employment Agreement provides for an annual salary of $325,000
per year ($350,000 effective April 1998), plus certain other benefits. See
"--Employment Agreements."
(9) The aggregate amount of all perquisites and other personal benefits received
by Mr. McKennon were less than 10% of the salary and bonus he was paid in
1997.
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(10) Mr. McKennon purchased unvested Holdings Common Membership Interests
representing approximately 1.0% of the outstanding Holdings Common
Membership Interests for a purchase price of $600. Such interests had a fair
market value of $600 on the date of purchase. Twenty-five percent of such
interests vest on the date of the opening of the Aladdin and an additional
25% vests on each annual anniversary of such opening date.
EMPLOYMENT AGREEMENTS
Richard J. Goeglein, James H. McKennon, Cornelius T. Klerk, Lee A. Galati
and Jose A. Rueda (the "Officers") each signed an employment agreement (each, an
"Employment Agreement") with the Company during 1997. David Attaway and Patricia
Becker are currently negotiating employment agreements with the Company which
are expected to be comparable to the employment agreements discussed herein. The
terms of the Employment Agreements were amended on February 26, 1998, such that
Holdings became a party and the Officers contributed their Restricted Membership
Interests in the Company to Holdings in return for Restricted Membership
Interests in Holdings. The initial term of Mr. Goeglein's Employment Agreement
is five years and six months, and the remaining Officers' Employment Agreements
have an initial duration of four years. Pursuant to each Employment Agreement,
the Officers have such authority, responsibilities and duties as are customarily
associated with their positions with the Company. The Employment Agreements
provide that, during the term of their employment, the Officers will devote
their full time, efforts and attention to the business and affairs of the
Company.
The terms of the Employment Agreements provide for an annual base salary for
Mr. Goeglein, Mr. McKennon, Mr. Klerk, Mr. Galati and Mr. Rueda of $500,000
($600,000 after the opening of the Aladdin), $325,000 ($350,000 effective April
1998), $200,000, $150,000 and $250,000, respectively, plus any bonus granted by
the Board of Directors based on relevant criteria and performance standards. All
of the Officers have been receiving and are expected to continue to receive
their compensation from the Company, except that prior to the Issue Date, such
amounts have been and will continue to be paid by AHL on the Company's behalf.
Mr. Goeglein's Employment Agreement provides for annual bonuses based upon "on
target" performances, ranging from 50% to 75% of his base salary, and is subject
to certain tax provisions. The Company Board will consider increases to the
Officers' base salary no less frequently than annually, commencing at the end of
each Officer's first employment year. Any increase in base salary shall be
within the sole discretion of the Company Board. The Employment Agreements
provide that the Officers' salary cannot be reduced. After the initial term of
Mr. Goeglein's Employment Agreement, the Company has agreed to retain Mr.
Goeglein as a consultant to the Company for an additional five years at $100,000
per year. The Officers are entitled to receive other employee benefits from the
Company, such as health, pension and retirement and reimbursement of certain
expenses.
Pursuant to the terms of the Employment Agreements, as amended, Mr.
Goeglein, Mr. McKennon, Mr. Klerk, Mr. Galati and Mr. Rueda have purchased for a
total purchase price of $1,200, $600, $450, $150 and $450, respectively,
unvested Common Membership Interest which were contributed to Holdings on
February 26, 1998 in return for unvested Holdings Common Membership Interests
representing approximately 2.0%, 1.0%, .75%, .25% and .75% (subject to dilution
upon exercise of the Warrants, whether vested or unvested at such time),
respectively of the Holdings Common Membership Interests (the "Restricted
Membership Interests"), subject to the receipt of applicable Gaming Approvals.
The Officers' Restricted Membership Interests will be diluted upon exercise of
the Warrants so that Sommer Enterprises and the Officers share pro rata the
ultimate dilutive effect of the exercise of the Warrants. Sommer Enterprises'
percentage interest will be adjusted upward to the same degree. Enterprises'
interest in Holdings will be unaffected by the vesting of the Officers'
Restricted Membership Interests. Except with respect to Mr. Goeglein, during the
terms of the Employment Agreements, 25% of each Officer's Restricted Membership
Interests vest on the date of the opening of the Aladdin, and a further 25% vest
on each annual anniversary of the opening of the Aladdin. If the Company
continues to employ each Officer after the expiration of the term of each
Officer's Employment Agreement, 25% of the Officer's Restricted Membership
Interests will continue to vest on each anniversary of the opening date until
such interests are fully vested. After the terms of the Employment Agreements,
if the Company does not continue to employ
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the Officer other than for Cause, or if the Officer no longer continues his
employment for Good Reason, only an additional 25% of the Officer's Restricted
Membership Interests vests. Mr. Goeglein's Restricted Membership Interests are
expected to become fully vested at the earlier of July 1, 2002 and the date on
which such interests become publicly traded, conditioned upon Mr. Goeglein's
continued relationship with the Company. If an Officer's employment with the
Company and Holdings terminates, the Company and Holdings are expected to have
the right to repurchase any unvested portion of the Officer's Restricted
Membership Interest for an amount equal to the purchase price originally paid by
the Officer for the Common Membership Interest. Under certain circumstances as
set forth in the Employment Agreements, including if an initial public offering
with respect to the Restricted Membership Interests has not occurred prior to
the full vesting of such interests, the Officers have the right to sell their
vested Restricted Membership Interests to Holdings at fair market value (subject
to the receipt of applicable Gaming Approvals and to certain restrictions on
restricted payments set forth in the Indenture and the Bank Credit Facility). If
Holdings does not satisfy its obligation to purchase the Restricted Membership
Interests within seven days, the Officers have the right to require the Company
to purchase such interests at fair market value (subject to certain restrictions
on Restricted Payments set forth in the Indenture). After the Company has
satisfied its obligation to purchase the Restricted Membership Interests,
Holdings has the right to call such interests from the Company for nominal
consideration. If, prior to the date of an initial public offering with respect
to the Restricted Membership Interests, an Officer is terminated for Cause,
except with respect to Mr. Goeglein, the Company and Holdings have the right to
purchase any vested Restricted Membership Interests from the Officers at two
times the original price paid by the Officer for such interests, (in each case
with corresponding rights in Holdings to purchase the Common Membership
Interests which correspond to such Restricted Membership Interests for nominal
consideration).
The Employment Agreements may be terminated by the Company with or without
Cause (as defined in each Employment Agreement) or by the Officers for Good
Reason (as defined in each Employment Agreement). If an Officer is terminated
for Cause, he shall be entitled only to such salary, bonus and benefits then
accrued or vested. If an Officer is terminated without Cause or upon a Change in
Control (as defined in the Employment Agreements), the Officer shall be entitled
to such salary, bonus and benefits he would have been entitled for the remainder
of the four-year term or twelve months, whichever is longer (in the case of Mr.
Goeglein, any such amount remaining in connection with his term plus certain
other amounts).
Each Officer has agreed not to compete with the Company during the term of
the Employment Agreements (plus one additional year if the Officer was
terminated for Cause) and has agreed to refrain from certain other activities in
competition with the Company.
Each of the Employment Agreements provides that the Company shall indemnify
and hold the Officers harmless to the fullest extent permitted by Nevada law
against costs, expenses, liabilities and losses, including reasonable attorney's
fees and disbursements of counsel, incurred or suffered by the Officer in
connection with his services as an employee of the Company during the term of
the respective Employment Agreement.
Mr. Goeglein's Employment Agreement provides Mr. Goeglein with relocation
expense reimbursement, an interest-free mortgage loan of up to $500,000, and
certain excise tax gross-up provisions.
GAI CONSULTING AGREEMENT
The Company has entered into a consulting agreement (as amended, the
"Consulting Agreement") with GAI, LLC ("GAI"), a Nevada limited-liability
company 100% beneficially owned by Richard Goeglein, which was subsequently
amended on February 26, 1998 to add Holdings as a party and pursuant to which
amendment GAI contributed its Common Membership Interests in the Company to
Holdings in return for Holdings Common Membership Interests. Pursuant to the
Consulting Agreement, GAI will render such consulting services as are reasonably
requested by the Company Board until June 30, 2002.
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During the term of the Consulting Agreement, the Company shall pay GAI a
retainer of $12,500 each month as payment for remaining on call to provide
services and expertise for such month. In addition, GAI purchased a 3% Common
Membership Interests in the Company which was contributed to Holdings on
February 26, 1998 in return for a 3% Holdings Common Membership Interest (the
"GAI Membership Interest") for a purchase price of $1,800. The GAI Membership
Interest is fully vested and is subject to certain anti-dilution provisions
contained in the Consulting Agreement (but subject to dilution upon exercise of
the Warrants). In addition, (a) if Richard Goeglein is terminated from his
employment with the Company other than for "Cause" or voluntarily terminates for
"Good Reason" (as such terms are defined in Mr. Goeglein's Employment Agreement
with the Company) after the consummation of the Funding Transactions and the
Offering or (b) if an initial public offering in respect of the GAI Membership
Interest has not occurred prior to July 1, 2002, GAI has the right to sell any
shares purchased under the Consulting Agreement back to Holdings at their fair
market value at the time of such sale (subject to the receipt of applicable
Gaming Approvals and to certain restrictions on restricted payments set forth in
the Indenture and the Bank Credit Facility). If Holdings does not satisfy its
obligation to purchase the GAI Membership Interest within seven days, GAI has
the right to require the Company to purchase such interests at fair market
value. After the Company has satisfied its obligation to purchase the GAI
Membership Interest, Holdings will have the right to call such interests from
the Company at nominal value.
Pursuant to the Consulting Agreement, GAI has certain "piggyback"
registration rights with respect to its interests purchased pursuant to the
Consulting Agreement. Holdings has agreed to indemnify GAI, its legal counsel
and independent accountants against all expenses, claims, losses, damages and
liabilities which may arise out of certain acts or omissions committed in
connection with the registration of such membership interests, and, in
connection with certain acts or omissions not committed in connection with the
registration of such membership interests, to the same extent that other senior
management and directors of the Company and Holdings are indemnified.
BONUS AND INCENTIVE PLANS
The Company and Holdings currently do not have any bonus or incentive plans.
However, the Company anticipates adopting such a plan at such time as it may
deem appropriate (subject to supermajority approval by the Holdings Members (as
defined herein), such approval not to be unreasonably withheld). It is expected
that the terms of any such plan would be comparable to those customary in the
industry.
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CONTROLLING STOCKHOLDERS
OVERVIEW
AHL owns 98.7% of the common membership interests of Sommer Enterprises, a
Nevada limited-liability company. Sommer Enterprises currently owns 100% of the
Issuer Stock and, on a fully diluted basis assuming full exercise of the
Warrants, will own 60% of the Issuer Stock (comprising 100% of the Issuer's
Class A Common Stock, no par value, and 50% of the Common Stock). The Holdings
Common Membership Interests are held, 25.0% by the Issuer, 47.0% by Sommer
Enterprises, 25.0% by London Clubs, through LCNI, and the remaining 3.0% by GAI.
Holdings owns all of the outstanding Common Membership Interests and Series A
Preferred Interests of the Company.
AHL, which indirectly owns approximately 71.1% of the Common Membership
Interests and Series A Preferred Interests, is a 95%-owned subsidiary of the
Trust, a private New York discretionary trust, the trustees of which are Mrs.
Viola Sommer, Mr. Eugene Landsberg and Mr. Jack Sommer and the beneficiaries of
which are certain members of the Sommer family. The Sommer family has been in
the business of developing residential and commercial real estate, predominantly
in the metropolitan areas of the States of New York and New Jersey, for over 100
years. The former Aladdin hotel and casino located on the Project Site was
acquired by a predecessor-in-interest to AHL in December, 1994. Mr. Jack Sommer
and the other trustees of the Trust are currently co-defendants in a legal
action relating to the acquisition of the Project Site in December, 1994. See
"--Trust Litigation".
There is a potential conflict of interest for the Trust with respect to its
indirect interest in the Mall Project, on the one hand, and its indirect
interest in the Aladdin on the other hand. If the Trust directs attention to
operations at the Mall Project and to increasing customers to the Desert
Passage, it may decrease the pedestrian traffic to the Aladdin, which could have
a material adverse effect on operations of the Company, and accordingly Holdings
and Enterprises.
London Clubs (together with AHL, the "Controlling Stockholders") owns 25% of
the Holdings Common Membership Interests through subsidiaries. On the opening
date of the Aladdin, 0.5% of the Holdings Common Membership Interests will be
transferred from London Clubs to Sommer Enterprises and, upon the vesting of
certain employees' membership interests in Holdings, London Clubs' percentage of
the Holdings Common Membership Interests, and Sommer Enterprises' percentage of
the Holdings Common Membership Interests, will be further diluted
proportionately to account for such vesting, subject to applicable Gaming
Approvals. London Clubs is one of the world's leading casino operators, with
seven casinos in London (including Les Ambassadors Club and the Ritz Club), one
in Cannes, France, three in Egypt and one in Lebanon. Each of London Clubs'
casinos offers its own individual style, but with the same
internationally-recognized standards of service.
In recent years, London Clubs has embarked upon a period of expansion,
acquiring the Park Tower Casino in London's Knightsbridge in October 1996 and in
December 1996 re-opening and managing the casino operations of the famous Casino
du Liban in Lebanon. On May 29, 1998 London Clubs had an equity market
capitalization of over $461 million. London Clubs is listed on the London Stock
Exchange. See "Risk Factors--Controlling Stockholders" and "--Possible Conflicts
of Interest."
HOLDINGS OPERATING AGREEMENT
The members of Holdings (the "Holdings Members") are parties to the Holdings
Operating Agreement which sets forth their agreement as to the relationships
between Holdings and the Holdings Members and among the Holdings Members
themselves and as to the conduct of the business and internal affairs of
Holdings and its subsidiaries. For a summary of certain key provisions of the
Holdings Operating Agreement, see "Certain Material Agreements--Holdings
Operating Agreement."
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EQUITY AND SERIES A PREFERRED INTEREST FINANCING
Concurrent with or prior to the Offering, the following contributions were
made in order to effect the equity and Series A Preferred Interest contribution
to the Company by Holdings: (i) Sommer Enterprises (a) contributed a portion of
the Contributed Land and $7.0 million consisting of the benefit of certain
predevelopment costs incurred by AHL to the Issuer in exchange for Class A
Common Stock in the Issuer and (b) contributed a portion of the Contributed Land
to Holdings in exchange for Holdings Common Membership Interests, (ii) the
Issuer contributed the portion of the Contributed Land and the benefit of the
$7.0 million of certain predevelopment costs received from Sommer Enterprises
and the net proceeds allocable from the sale of the Warrants to Holdings in
exchange for Holdings Common Membership Interests ((i) and (ii) collectively,
the "Sommer Equity Financing"), (iii) Holdings contributed the Contributed Land
appraised at $150.0 million, approximately $42 million from the London Clubs
Contribution and the $7.0 million consisting of the benefit of certain
predevelopment costs incurred by AHL to the Company in exchange for Common
Membership Interests in the Company and (iv) Holdings contributed $115.0 million
in cash, consisting of the net proceeds of the sale of the Units and
approximately $8 million of the London Clubs Contribution, to the Company in
exchange for Series A Preferred Interests of the Company.
LAND APPRAISAL. The Project Site represents the Company's most material
asset. The Bank of Nova Scotia, as arranger of the Bank Credit Facility retained
HVS International, a division of Hotel Consulting, Inc., to prepare and deliver
an appraisal of the Project Site and the Hotel/Casino (the "Appraisal"). The
Appraisal was completed and delivered to the Bank of Nova Scotia and the Company
on October 7, 1997. The Appraisal states that as of August 7, 1997, the "market
value" of the Project Site was $180.0 million and of the site on which the
Aladdin and the Plant will be built (as well as an adjacent approximately 0.8
acre portion of the Project Site) was $135.0 million.
KEEP-WELL AGREEMENT
AHL, Bazaar Holdings and London Clubs (collectively, the "Sponsors") have
entered into the Keep-Well Agreement in favor of the Administrative Agent and
the Bank Lenders. Neither the Issuer, Holdings nor holders of the Warrants or
Warrant Shares are party to the Keep-Well Agreement. Capitalized terms used and
not defined in this section have the meanings assigned to such terms in the
Keep-Well Agreement.
The Keep-Well Agreement is the joint and several agreement of the Sponsors
to make certain quarterly Cash Equity Contributions (as defined below) to the
Company from and after the Conversion Date if the Company fails to comply with
the Minimum Fixed Charges Coverage Ratio set forth in the Bank Credit Facility.
The Bank Credit Facility defines the Minimum Fixed Charges Coverage Ratio as the
ratio of the Company's EBITDA for any period of four consecutive fiscal quarters
to the Company's fixed charges for such period. For the Company's first three
fiscal quarters after the Conversion Date, the Minimum Fixed Charges Coverage
Ratio shall be calculated by annualizing the Company's Minimum Fixed Charges
Coverage Ratio for such fiscal quarters.
The Cash Equity Contributions to the Company shall be in an amount that,
when added to the Company's EBITDA for the four quarter period ending on the
last day of such fiscal quarter, would rectify such breach. In no event shall
the aggregate Cash Equity Contributions required to be made by the Sponsors in
any fiscal year of the Company exceed $30.0 million. The $30.0 million annual
limitation on Cash Equity Contribution shall not apply to, or in any way limit,
any obligation of the Sponsors to pay the Accelerated Payment Amount (as defined
below).
The Cash Equity Contributions are cash contributions by the Sponsors to the
Company in exchange for Holdings Series A Preferred Interests or Holdings Series
B Preferred Interests having terms and conditions satisfactory to the Bank
Lenders (including, without limitation, no mandatory redemption provisions and
no requirements for the distribution of cash). The Holdings Operating Agreement
makes
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provision for adjustment of the proportion of Holdings Common Membership
Interests held by Sommer Enterprises and London Clubs for circumstances where
the portion of payment made by either Sponsor is in excess of 25% with respect
to London Clubs and 75% with respect to Sommer Enterprises. The Cash Equity
Contributions and the issuance of Holdings Common Membership Interests or the
Holdings Series A Preferred Interests and Holdings Series B Preferred Interests
will require the approval of the Nevada Gaming Authorities.
Cash Equity Contributions made under the Bank Completion Guaranty will not
count for purposes of the Keep-Well Agreement, and vice-versa.
The Keep-Well Agreement will terminate (the "Keep-Well Termination Date") on
the date which is the earliest of (i) the day on which full and indefeasible
payment of the Obligations of the Company under the Bank Credit Facility has
been made to reduce the commitments of the Bank Lenders thereunder (the
"Commitments") to $145.0 million or less, (ii) the last day of the period of six
consecutive fiscal quarters from and after the Conversion Date during which the
Company has satisfied each of the financial covenants set forth in the Bank
Credit Facility (without giving effect to any payments to or investments by the
Sponsors in or for the benefit of the Company), (iii) the date on which both of
the following shall have been satisfied: (a) construction of the Aladdin and
renovation of the Theater have been completed in accordance with the terms of
the Bank Credit Facility and (b) the Commitments and the aggregate outstanding
principal amount of the Obligations under the Bank Credit Facility shall have
been reduced to an amount not in excess of a certain amount specified for such
date pursuant to a schedule of the 20 quarters following the Conversion Date,
(iv) the date on which the Sponsors shall have made full payment of the
Accelerated Payment Amount (as defined below) or (v) in the case of London Clubs
only, the date on which it shall have made full payment of the Accelerated
Payment Amount in respect of certain London Clubs specified events.
The Accelerated Payment Amount is, as of any date, an amount equal to the
sum of (a) the product of (i) $7.5 million times (ii) the number of scheduled
quarterly amortization payments remaining under the Bank Credit Facility (which
have not been paid by or on behalf of the Company) plus (b) any accrued and
unpaid amounts owed by the Sponsors under certain provisions of the Keep-Well
Agreement; provided, however, that at no time shall the Accelerated Payment
Amount exceed the lesser of (x) the outstanding Obligations of the Company under
the Bank Credit Facility and (y) $150.0 million plus amounts due under clause
(b) above, minus the product of (A) $7.5 million and (B) the number of complete
calendar quarters that have elapsed since the Conversion date which is six
calendar quarters after the Conversion Date.
The maximum amount of the Accelerated Payment Amount will be $150.0 million
plus any unpaid Cash Equity Contributions previously required to be made under
the Keep-Well Agreement. The maximum amount of the Accelerated Payment Amount
shall decrease by $7.5 million for each quarterly amortization payment which is
paid or prepaid.
Should certain specified exceptional events under the Keep-Well Agreement
occur, London Clubs is obligated to pay the Accelerated Payment Amount. The
specified exceptional events will include breaches by London Clubs of various
financial covenants and a covenant limiting the amount of secured debt which
London Clubs can incur, as well as certain events which will be triggered if
other indebtedness of London Clubs is accelerated or if London Clubs becomes
insolvent. Any such payments by London Clubs shall be used to repay bank
indebtedness under the Bank Credit Facility.
The obligations of London Clubs under the Keep-Well Agreement are
subordinated to other obligations of London Clubs under certain of its
pre-existing senior debt facilities. In addition, obligations of London Clubs
under the Keep-Well Agreement are guaranteed by certain subsidiaries of London
Clubs, which subsidiaries currently guarantee other indebtedness of London
Clubs.
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Pursuant to the Salle Privee Management Agreement, London Clubs will receive
certain fees in consideration for its obligations under the Keep-Well Agreement.
See "Certain Transactions--Other Payments to Controlling Stockholders."
The Keep-Well Agreement contains representations and warranties, covenants
and events of default that are customary for the type of transaction.
TRUST LITIGATION
Mr. Jack Sommer, who is a trustee of the Trust, and the other trustees of
the Trust, are co-defendants in a legal action relating to the existing Aladdin
hotel and casino commenced by members of the Aronow family (the "Aronow
Plaintiffs") in May 1995 in the Supreme Court of the State of New York, County
of New York. In their complaint, the Aronow Plaintiffs allege that Mr. Jack
Sommer and the Aronow Plaintiffs were parties to a joint venture to acquire and
develop the existing Aladdin hotel and casino and that Mr. Sommer breached such
alleged agreement when the Trust acquired an interest in the Aladdin hotel and
casino in December, 1994. The Aronow Plaintiffs are seeking (among other
remedies) to impress a constructive trust upon the Trust's interest in the
Aladdin hotel and casino, an accounting, compensatory damages of not less than
$200.0 million and punitive damages of not less than $500.0 million.
Mr. Sommer and the trustees of the Trust have informed the Company that they
intend to vigorously defend such action. However, in the event that the action
is successful, the Trust might be required to pay substantial damages and/or the
Aronow Plaintiffs might be entitled to part of the Trust's interest in the
Aladdin hotel and casino. An adverse decision could have a material and adverse
effect on the Company and the Aladdin Parties.
Mr. Sommer and the other trustees of the Trust were also co-defendants in a
legal action commenced by Edward Kanbar, Romano Tio and Adina Winston (the
"Kanbar Plaintiffs" and together with the Aronow Plaintiffs, the "Plaintiffs")
in January 1997 in the Supreme Court of the State of New York, County of New
York. In their complaint, the Kanbar Plaintiffs alleged that they were partners
in an alleged partnership with Joseph Aronow, which partnership was formed to
seek and develop business opportunities with Mr. Sommer. The Kanbar Plaintiffs
were seeking (among other remedies) to impress a constructive trust upon the
Trust's interest in the Aladdin hotel and casino, compensatory damages of not
less than $20.0 million and punitive damages of not less than $50.0 million. On
January 15, 1998, the court granted the trustees of the Trust's motion to
dismiss this action in its entirety.
In 1988, the Trust and two related entities commenced an action in the
Southern District of New York against certain entities owned and controlled by
Bronfman family interests (the "Bronfman Defendants") alleging, among other
things, that the Bronfman Defendants committed violations of Rule 10b-5 under
the Securities Exchange Act of 1934, as amended, as well as multiple breaches of
fiduciary duties as general partner of a partnership in which the Trust owns
limited partnership interests. Relief requested includes an accounting,
imposition of a constructive trust and damages in excess of $100.0 million.
The Bronfman Defendants have asserted counterclaims against plaintiffs and
certain Sommer family members individually alleging causes of action for breach
of contract, fraud and various related torts. The Bronfman Defendants claim
damages in excess of $100.0 million.
The trustees of the Trust have informed the Company that they intend to
vigorously defend the counterclaim. However, in the event the Bronfman
Defendants are successful, the Trust might be required to pay substantial
damages. An adverse decision could have a material and adverse effect on the
Trust.
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CERTAIN TRANSACTIONS
SALLE PRIVEE MANAGEMENT AGREEMENT
The Company, London Clubs and LCNI are parties to the Salle Privee
Management Agreement which relates to the Salle Privee. Under the Salle Privee
Management Agreement, London Clubs has agreed to guaranty the obligations of
LCNI. In consideration for the services to be furnished by London Clubs under
the Salle Privee Management Agreement, the Company will pay to London Clubs a
performance-based incentive fee (the "Incentive Marketing and Consulting Fee")
calculated as follows: (i) 10% of the Salle Privee EBITDA (defined in the Salle
Privee Management Agreement to mean gross revenue attributable to the Salle
Privee, less all costs and expenses directly attributable to the Salle Privee),
up to and including $15.0 million of EBITDA; plus (ii) 12.5% of the Salle Privee
EBITDA, in excess of $15.0 million, up to and including $17.0 million; plus
(iii) 25% of the Salle Privee EBITDA, in excess of $17.0 million, up to and
including $20.0 million; plus (iv) 50% of the Salle Privee EBITDA, in excess of
$20.0 million. The foregoing thresholds will be adjusted in accordance with
consumer price index changes every five years. See "Certain Material
Agreements--Salle Privee Management Agreement."
OTHER PAYMENTS TO CONTROLLING STOCKHOLDERS
In consideration for certain expenses incurred by the Trust prior to the
Issue Date relating to the management and coordination of the development of the
Aladdin, the Company reimbursed $3.0 million to the Trust on the Issue Date. In
addition, the Company will reimburse certain ongoing out-of-pocket expenses of
the Trust relating to the development of the Aladdin, not to exceed $0.9
million.
In consideration for its obligations under the Keep-Well Agreement and
related arrangements, under the London Clubs Purchase Agreement, the parties
agreed that London Clubs receive (a) an initial fee of 1.0% of the Company's
indebtedness with respect to a $265.0 million portion of the Bank Credit
Facility, which is supported and enhanced by the Keep-Well Agreement (such fee
was paid on the Issue Date) and (b) an annual fee of 1.5%, payable in arrears,
of the Company's annual average indebtedness with respect to a $265.0 million
portion of the Bank Credit Facility, which is supported and enhanced by the
Keep-Well Agreement for each relevant twelve month period ending on an
anniversary of the closing date of the Bank Credit Facility, which amount shall
reflect the extent, if any, by which the obligations under the Keep-Well
Agreement are reduced or eliminated over time (such fees accrue from the closing
date of the Bank Credit Facility, and shall be paid from available proceeds
after the opening date of the Aladdin).
KEEP-WELL AGREEMENT
On the Issue Date, the Sponsors entered into the Keep-Well Agreement in
favor of the Administrative Agent and the Bank Lenders. The Keep-Well Agreement
is the joint and several agreement of the Sponsors to make certain quarterly
Cash Equity Contributions to the Company from and after the Conversion Date if
the Company fails to comply with certain financial ratios set forth in the Bank
Credit Facility. See "Controlling Stockholders--Keep-Well Agreement."
BANK COMPLETION GUARANTY AND NOTEHOLDER COMPLETION GUARANTY
On the Issue Date, the Trust, London Clubs and Bazaar Holdings entered into
the Bank Completion Guaranty in favor of the Bank Lenders. Pursuant to the Bank
Completion Guaranty, the parties guaranteed, among other things, the timely
completion of the Aladdin. The Bank Completion Guaranty is not subject to any
maximum dollar limitations. On the Issue Date, the Trust, London Clubs and
Bazaar Holdings also entered into the Noteholder Completion Guaranty for the
benefit of the holders of the Notes. Neither Holdings, the Issuer nor holders of
the Warrants or the Warrant Shares are party to the Bank Completion Guaranty or
Noteholders Completion Guaranty. See "Risk Factors--Limitations Under
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Bank Completion Guaranty and Noteholder Completion Guaranty," "Description of
Noteholder Completion Guaranty and Disbursement Agreement--Noteholder Completion
Guaranty" and "Description of Certain Indebtedness and Other Obligations--Bank
Completion Guaranty."
ARRANGEMENTS WITH RICHARD GOEGLEIN AND GAI
The Company has entered into the Consulting Agreement with GAI. Pursuant to
the Consulting Agreement, GAI will render such consulting services as are
reasonably requested by the Board of the Company until June 30, 2002. During the
term of the Consulting Agreement, the Company shall pay GAI a retainer of
$12,500 per month as payment for remaining on call to provide services and
expertise for such month. Pursuant to the Consulting Agreement, GAI purchased 3%
of the Common Membership Interests in the Company (which were contributed to
Holdings on February 26, 1998 for a 3% interest in Holdings) for $1,800. Such
membership interest is fully vested, subject to certain anti-dilution
provisions, put rights and certain "piggyback" registration rights. See
"Management--GAI Consulting Agreement." In addition, Mr. Goeglein's Employment
Agreement provides Mr. Goeglein with relocation expense reimbursement, an
interest free mortgage loan of up to $500,000 and certain excise tax gross-up
provisions.
MUSIC PROJECT MANAGEMENT AGREEMENT AND DEVELOPMENT AGREEMENT
It is anticipated that Aladdin Music will contract with the Company for the
construction, development and day-to-day management and operations of the Music
Project and the Theater and certain promotional development and the services,
pursuant to a development agreement (the "Music Project Development Agreement")
and a management agreement (the "Music Project Management Agreement"), each in
form and substance satisfactory to Aladdin Music and the Company. The terms of
the Music Project Management Agreement are expected to be at least as favorable
to the Company as those which are available from an independent third party
vendor. See "Certain Material Agreements--Music Project Memorandum of
Understanding."
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following tables set forth certain information with respect to the
beneficial ownership of and the capital stock of the Issuer and the membership
interests of Holdings by (i) each person who, to the knowledge of the Aladdin
Parties, beneficially owns more than 5% of the outstanding capital stock or
membership interests (as the case may be); (ii) the directors of the Issuer and
Holdings; (iii) all executive officers of the Issuer and Holdings named in
"Management"; and (iv) all directors and executive officers of the Issuer and
Holdings, respectively, as a group. Neither the capital stock of the Issuer is,
nor the membership interests of Holdings are, presently listed or traded on any
securities exchange or securities market.
<TABLE>
<CAPTION>
ALADDIN GAMING ENTERPRISES, INC.
----------------------------------------------------------------------------------
COMMON STOCK
----------------------------------------------------------------------------------
PRIOR TO EXERCISE ASSUMING FULL EXERCISE PRIOR TO EXERCISE OF THE
OF THE WARRANTS--CLASS A OF THE WARRANTS--CLASS A WARRANTS-CLASS B COMMON
COMMON STOCK(6) COMMON STOCK(6)(7) STOCK
-------------------------- -------------------------- --------------------------
NUMBER OF PERCENTAGE OF NUMBER OF PERCENTAGE OF NUMBER OF PERCENTAGE OF
SHARES CLASS SHARES CLASS SHARES CLASS
NAME OF BENEFICIALLY BENEFICIALLY BENEFICIALLY BENEFICIALLY BENEFICIALLY BENEFICIALLY
BENEFICIAL OWNER OWNED OWNED OWNED OWNED OWNED OWNED
- -------------------------------------- ----------- ------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Viola Sommer, Jack Sommer and
Eugene Landsberg, as trustees of the
Trust(1)(2)......................... 1,093,103 98.7% 1,093,103 98.7% 2,186,205 98.7%
Jack Sommer(1)(2)..................... 1,093,103 98.7% 1,093,103 98.7% 2,186,205 98.7%
Ronald Dictrow(3)..................... 14,398 1.3% 14,398 1.3% 28,795 1.3%
Cornelius T. Klerk(4)................. 0 0.0% 0 0.0% 0 0.0%
All Directors and Executive
Officers as a group(5).............. 1,107,500 100.0% 1,107,500 100.0% 2,215,000 100.0%
<CAPTION>
ASSUMING FULL EXERCISE
OF THE WARRANTS--CLASS B
COMMON STOCK(6)(7)
----------------------------
NUMBER OF PERCENTAGE OF
SHARES CLASS
NAME OF BENEFICIALLY BENEFICIALLY
BENEFICIAL OWNER OWNED OWNED
- -------------------------------------- ----------- ---------------
<S> <C> <C>
Viola Sommer, Jack Sommer and
Eugene Landsberg, as trustees of the
Trust(1)(2)......................... 2,186,205 49.4%
Jack Sommer(1)(2)..................... 2,186,205 49.4%
Ronald Dictrow(3)..................... 28,795 *
Cornelius T. Klerk(4)................. 0 0.0%
All Directors and Executive
Officers as a group(5).............. 2,215,000 50.0%
</TABLE>
- ------------------------
* Represents less than one percent of the outstanding shares of Class B Common
Stock.
(1) The Trust has an option to acquire 5% of the common membership interests in
AHL from GW Vegas (representing all of GW Vegas' common membership interests
in AHL). Such option is exercisable at any time prior to December 2001. The
address of the Trust is 280 Park Avenue, New York, New York.
(2) Mr. Jack Sommer, who is Chairman and a director of the Company and Holdings
and a director of Capital and the Issuer, is a trustee and contingent
beneficiary of the Trust. Mrs. Sommer, Mr. Sommer and Mr. Landsberg are each
deemed to beneficially own the same interest as the Trust owns in the Issuer
because each of them is a trustee of the Trust.
(3) Mr. Ronald Dictrow is the Secretary and a director of the Issuer. Mr.
Dictrow's address is 280 Park Avenue, New York, New York.
(4) Mr. Cornelius Klerk is the Treasurer of the Issuer. Mr. Klerk's address is
831 Pilot Road, Las Vegas, Nevada.
(5) The directors of the Issuer are Messrs. Sommer and Dictrow. The executive
officers of the Issuer are Messrs. Sommer, Dictrow and Klerk.
(6) The Class A Common Stock and Class B Common Stock in the Issuer held by
Sommer Enterprises were on the closing date pledged to the Bank Lenders.
(7) Upon the exercise of the Warrants, holders of the Warrant Shares will own
50.0% of the outstanding Class B Common Stock and 0.0% of the outstanding
Class A Common Stock of the Issuer.
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<TABLE>
<CAPTION>
ALADDIN GAMING HOLDINGS, LLC
------------------------------------------------------------------------
PERCENTAGE OWNERSHIP OF HOLDINGS PERCENTAGE OWNERSHIP OF HOLDINGS
COMMON MEMBERSHIP INTERESTS COMMON MEMBERSHIP INTERESTS
NAME OF BENEFICIALLY OWNED PRIOR TO BENEFICIALLY OWNED ASSUMING FULL
BENEFICIAL OWNER EXERCISE OF THE WARRANTS(9) EXERCISE OF THE WARRANTS(10)
- ------------------------------------------ ----------------------------------- -----------------------------------
<S> <C> <C>
Viola Sommer, Jack Sommer and Eugene
Landsberg, as trustees of the
Trust(1)(2)............................. 71.1% 61.6%
Jack Sommer(2)............................ 71.1% 61.6%
London Clubs(3)........................... 25.0% 25.0%
Alan Goodenough(3)........................ 0.0% 0.0%
G. Barry.................................. 0.0% 0.0%
C. Hardy(3)............................... 0.0% 0.0%
Ronald Dictrow(4)......................... * *
Richard J. Goeglein(5)(7)................. 3.0% 2.6%
James H. McKennon(6)(7)................... 0.0% 0.0%
Cornelius T. Klerk(6)(7).................. 0.0% 0.0%
Jose A. Rueda(6)(7)....................... 0.0% 0.0%
Lee A. Galati(6)(7)....................... 0.0% 0.0%
All Directors and Executive Officers as a
group (eight persons)(8)................ 75.0% 65.0%
</TABLE>
- ------------------------------
* Represents less than one percent of the outstanding Holdings Common
Membership Interests.
(1) The Trust has an option to acquire 5% of the common membership interests in
AHL from GW Vegas (representing all of GW Vegas' common membership interests
in AHL). Such option is exercisable at any time prior to December, 2001. The
address of the Trust is 280 Park Avenue, New York, New York.
(2) Mr. Jack Sommer, who is Chairman and a director of the Company and Holdings
and a director of Capital and the Issuer, is a trustee and contingent
beneficiary of the Trust. Mrs. Sommer, Mr. Sommer and Mr. Landsberg are each
deemed to beneficially own the same interest as the Trust owns in Holdings
because each of them is a trustee of the Trust.
(3) Mr. Alan Goodenough is Chief Executive Officer of London Clubs and a
director of the Company and Holdings. As of March 16, 1998, Mr. Goodenough
held approximately 202,000 ordinary shares (representing less than one
percent of the share capital) of London Clubs. Mr. Barry Hardy is Finance
Director of London Clubs and a director of the Company and Holdings. As of
March 16, 1998, Mr. Hardy held approximately 901,000 ordinary shares
(representing less than one percent of the share capital) of London Clubs.
As of March 16, 1998, Mr. Hardy also held options to purchase 516,395
ordinary shares (options to purchase 512,400 ordinary shares presently
exercisable) of London Clubs. The address of London Clubs is 10 Brick
Street, London, W1Y, 8HQ, United Kingdom.
(4) Mr. Ronald Dictrow is a director of the Issuer and the Executive Vice
President/Secretary and a director of the Company, Holdings and Capital. Mr.
Dictrow's address is 280 Park Avenue, New York, New York.
(5) Mr. Richard J. Goeglein, who is Chief Executive Officer, President and a
director of the Company, Holdings and Capital, beneficially owns 100% of
GAI, which holds 3% of the Holdings' Common Membership Interests. Mr.
Goeglein's address is 831 Pilot Road, Las Vegas, Nevada.
(6) The address of Messrs. McKennon, Klerk, Rueda and Galati is 831 Pilot Road,
Las Vegas, Nevada.
(7) Messrs. Goeglein, McKennon, Klerk, Rueda and Galati have rights to acquire
beneficial ownership of Holdings Common Membership Interests representing an
aggregate of 4.75% of such interests (prior to exercise of the Warrants) and
4.12% of such interests (assuming full exercise of the Warrants), which
rights do not vest within 60 days. See "Management--Employment Agreements."
(8) The directors of Holdings are Messrs. Sommer, Goodenough, Dictrow, and
Goeglein. The executive officers of Holdings are Messrs. Goeglein, Dictrow,
McKennon, Klerk, Rueda and Galati.
(9) Holdings owns 100% of the Common Membership Interests and Series A Preferred
Interests of the Company. The Common Membership Interests were, on closing
of the Bank Credit Facility, pledged to the Bank Lenders. The Series A
Preferred Interests were, on the closing of the Offering, pledged to the
Trustee for the benefit of the Holders.
(10) The Issuer owns 25% of the Holdings Common Membership Interests. Upon full
exercise of the Warrants, holders of the Warrant Shares will indirectly own
10% of the outstanding Holdings Common Membership Interests.
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[LOGO]
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ALADDIN BAZAAR, LLC OWNERSHIP STRUCTURE
[LOGO]
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DESCRIPTION OF CAPITAL STOCK
The Issuer's Articles of Incorporation, as amended, authorize the issuance
of 10,000,000 shares of Issuer Stock without par value, of which 2,000,000
shares are designated as Class A Voting Common Stock (the "Class A Common
Stock") and 8,000,000 shares are designated as the Common Stock, which is the
Class B Non-Voting Common Stock. As of the date hereof, the Issuer had 1,107,500
shares of Class A Common Stock issued and outstanding and 2,215,000 shares of
Common Stock issued and outstanding.
THE CLASS A COMMON STOCK
Each holder of Class A Common Stock is entitled to one vote per share
owned of record on all matters that are voted on by stockholders. All
stockholder action requires the affirmative vote of a majority of the voting
power of the issued and outstanding Class A Common Stock except for the removal
of a director from office which requires a vote of not less than two-thirds of
the voting power of the issued and outstanding Class A Common Stock. The Class A
Common Stock bears no preemptive rights and is not subject to redemption. Once
the subscription price of any share of Class A Common Stock has been paid, such
share becomes non-assessable. Holders of Class A Common Stock are entitled to
receive dividends if, as and when declared by the Issuer's Board of Directors
and such dividends may be paid in cash, property, shares of corporate stock, or
any other medium.
THE COMMON STOCK
Except as may otherwise be provided by Nevada law, the holders of Common
Stock have no right to vote on any matters that are voted on by Issuer's
stockholders including, without limitation, any election or removal of
directors. However, holders of Warrants and Warrant Shares are entitled to
certain minority protections pursuant to the Equity Participation Agreement. See
"Certain Material Agreements--Equity Participation Agreement." In all other
matters, holders of Common Stock and Class A Common Stock have the same rights,
privileges and restrictions and rank equally, share ratably and are identical in
all respects as to all matters, including rights to dividends, rights in
liquidation and the non-assessability of shares.
THE WARRANTS
On February 26, 1998, the Issuer issued 2,215,000 Warrants which entitle
the holders thereof to purchase an aggregate of 2,215,000 shares of Common Stock
at an exercise price of $0.001 per share, subject to certain adjustments (the
"Exercise Price"). The Warrants become exercisable at any time on or after the
Separation Date and, unless exercised, the Warrants will automatically expire on
March 1, 2010 (the "Expiration Date"). The holders of Warrants have no right to
receive dividends and are not entitled to share in the assets of the Issuer in
the event of liquidation, dissolution or winding up of the Issuer's affairs. The
Issuer has authorized for issuance such number of shares of Common Stock as
shall be issuable upon the due exercise of all outstanding Warrants.
RESTRICTIONS ON INTERESTED TRANSACTIONS
Pursuant to Nevada law, each director is subject to restrictions relating to
the misappropriation of corporate opportunities by such director or such
director's affiliates. Nevada law requires that a transaction with the Issuer in
which a director or officer of the Issuer has a direct or indirect interest is
not voidable by the Issuer solely because of the director's or officer's
interest in the transaction if (i) the material facts of the transaction and the
director's or officer's interest therein are disclosed to or known by the
directors or a committee noted in the minutes, and the transaction is approved,
authorized, or ratified by the disinterested directors, (ii) the material facts
of the transaction and the director's or officer's interest therein are
disclosed to or known by the stockholders entitled to vote and the transaction
is approved or ratified by the stockholders, (iii) the material facts are not
disclosed or known to the director or officer at
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the time the transaction is brought before the directors for action, or (iv) the
transaction is established to have been fair to the Issuer at the time it was
authorized or approved.
NEVADA ANTI-TAKEOVER LEGISLATION
Nevada's Combinations with Interested Stockholders statute (NRS
SectionSection78.411-78.444), which applies to Nevada corporations having at
least 200 stockholders, prevents an "interested stockholder" and an applicable
Nevada corporation from entering into a "combination" unless certain conditions
are met. A "combination" means any merger or consolidation with an "interested
stockholder," or any sale, lease exchange, mortgage, pledge, transfer or other
disposition, in one transaction or a series of transactions, with an "interested
stockholder" having: (i) an aggregate market value equal to 5% or more of the
aggregate market value of the assets of the corporation, (ii) an aggregate
market value equal to 5% or more of the aggregate market value of all
outstanding shares of the corporation, or (iii) 10% or more of the earning power
or net income of the corporation. An "interested stockholder" means a person
who, together with affiliates and associates, beneficially owns (or within the
prior three years, did beneficially own) 10% or more of the voting power of the
corporation. A corporation to which this statute applies may not engage in a
"combination" within the three years after the interested stockholder acquired
its shares unless the combination or purchase is approved by the board of
directors before the interested stockholder acquired such shares. If this
approval is not obtained, then after the expiration of the three-year period,
the business combination may be consummated with the approval of the board of
directors or a majority of the voting power held by disinterested stockholders,
or if the consideration to be paid by the interested stockholder is at least
equal to the highest of: (i) the highest price per share paid by the interested
stockholder within the three years immediately preceding the date of the
announcement of the combination or in the transaction in which it became an
interested stockholder, whichever is higher, (ii) the market value per share of
common stock on the date of announcement of the combination and the date the
interested stockholder acquired the shares, whichever is higher, or (iii) for
holders of preferred stock, the highest liquidation value of the preferred
stock, if it is higher.
Nevada's Acquisition of Controlling Interest statute (NRS
SectionSection78.378-78.3793) applies only to Nevada corporations with at least
200 stockholders, including at least 100 stockholders of record who are Nevada
residents, and which conduct business directly or indirectly in Nevada. As of
the date of this Prospectus, the Issuer does not have 100 stockholders of record
who are residents of Nevada, although there can be no assurance that in the
future the Acquisition of Controlling Interest statute will not apply to the
Issuer.
The Acquisition of Controlling Interest statute prohibits an acquiror,
under certain circumstances, from voting its shares of a target corporation's
stock after crossing certain ownership threshold percentages, unless the
acquiror obtains approval of the target corporation's disinterested
stockholders. The statute specifies three thresholds: one-fifth or more by less
than one-third, one-third but less than a majority, and a majority or more, of
the outstanding voting power. Once an acquiror crosses one of the above
thresholds, those shares in an offer or acquisition and acquired within 90 days
thereof become "Control Shares" and such Control Shares are deprived of the
right to vote until disinterested stockholders restore the right. The
Acquisition of Controlling Interest statute also provides that in the event
Control Shares are accorded full voting rights and the acquiring person has
acquired a majority or more of all voting power, all other stockholders who do
not vote in favor of authorizing voting rights to the Control Shares are
entitled to demand payment for the fair value of their shares in accordance with
statutory procedures established for dissenters' rights.
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DESCRIPTION OF THE WARRANTS
The Warrants were issued pursuant to a Warrant Agreement (the "Warrant
Agreement") between the Issuer and State Street Bank and Trust Company, as
warrant agent (the "Warrant Agent"). The following summary of certain provisions
of the Warrant Agreement and the Warrants does not purport to be complete and is
qualified in its entirety by reference to the Warrant Agreement and the
Warrants, including the definitions therein of certain terms.
GENERAL
The Warrants entitle the holders thereof to purchase an aggregate of
2,215,000 shares of Common Stock at the Exercise Price, subject to adjustment.
The Warrants are exercisable at any time on or after the Separation Date prior
to March 1, 2010. Unless exercised, the Warrants will automatically expire on
the Expiration Date. The Warrants entitle the holders thereof to purchase in the
aggregate 40% of the outstanding Common Stock of the Issuer, representing an
indirect interest in 10% of the outstanding Holdings Common Membership Interests
on a fully diluted basis as of the date of issuance after giving effect to such
issuance.
The Warrants may be exercised at any time on or after the Separation Date
by surrendering to the Issuer at the office of the Warrant Agent the Warrant
certificates evidencing such Warrants with the accompanying form of election to
purchase properly completed and executed, together with payment of the Exercise
Price. Payment of the Exercise Price may be made in the form of cash or a
certified or official bank check payable to the order of the Issuer. Upon
surrender of the Warrant certificate and payment of the Exercise Price, the
Warrant Agent will deliver or cause to be delivered, to or upon the written
order of such holder, a stock certificate representing the number of whole
Warrant Shares or other securities or property to which such holder is entitled
under the Warrant Agreement and the Warrants, including, without limitation, any
cash payment to adjust for fractional interests in Warrant Shares issuable upon
such exercise in accordance with the Warrant Agreement. If less than all of the
Warrants evidenced by a Warrant certificate are to be exercised, a new Warrant
certificate will be issued for the remaining number of Warrants.
No fractional Warrant Share will be issued upon exercise of the Warrants.
If any fraction of a Warrant Share would, except for the foregoing provision, be
issuable on the exercise of any Warrants (or a specified portion thereof), the
Issuer shall pay an amount in cash equal to the current market price per Warrant
Share, as determined on the day immediately preceding the date the Warrant is
presented for exercise, multiplied by such fraction, computed to the nearest
whole U.S. cent.
Certificates for Warrants have been and will be issued in registered form
only, and no service charge will be made for registration of transfer or
exchange upon surrender of any Warrant certificate at the office of the Warrant
Agent maintained for that purpose. The Issuer may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration, transfer or exchange of Warrant certificates.
The holders of the Warrants have no right to receive dividends. The
holders of the Warrants are not entitled to share in the assets of the Issuer in
the event of liquidation, dissolution or winding up of the Issuer's affairs.
In the event of taxable distribution to holders of Issuer Stock which
results in an adjustment to the number of Warrant Shares or other consideration
for which a Warrant may be exercised, the holders of the Warrants may, in
certain circumstances, be deemed to have received a distribution subject to
United States federal income tax as a dividend. See "Certain United States
Federal Income Tax Considerations."
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SEPARATION
Each Warrant was originally issued as part of a Unit consisting of: (i)
$1,000 principal amount at maturity of Notes of the Note Issuers; and (ii) 10
Warrants to purchase 10 shares of Common Stock. Pursuant to the terms of the
Indenture and the Warrant Agreement, the Notes and the Warrants were to become
separately transferable on the "Separation Date," being the earliest of: (i)
September 1, 1998; (ii) the date on which a registration statement with respect
to the Notes or a registration statement with respect to the Warrants and the
Warrant Shares was filed with the Commission under the Securities Act; (iii) the
occurrence of a Change of Control (as defined in the Indenture) or a sale or
recapitalization of the Issuer, Holdings or the Company occurs (a "Triggering
Event"); (iv) 30 days after a Qualified Public Offering; (v) the occurrence of
an Event of Default (as defined in the Indenture); or (vi) such earlier date as
determined by Merrill Lynch & Co. in its sole discretion. The Separation Date
occurred on filing of the Registration Statement.
NO VOTING RIGHTS
Neither the holders of the Warrants nor, prior to a Qualified Public
Offering, the holders of the Warrant Shares will have any right to vote on any
matter submitted to shareholders, including any right to vote for the election
of directors of the Issuer. Upon the consummation of a Qualified Public
Offering, holders of the Warrant Shares will have full voting rights as
shareholders of the IPO Entity. Prior to the Issue Date, the Trust, Sommer
Enterprises, London Clubs, LCNI, the Issuer and the Warrant Agent on behalf of
the holders of Warrants and Warrant Shares entered into the Equity Participation
Agreement under which the parties agreed that they would not effect a Qualified
Public Offering unless the Trust and London Clubs (directly or indirectly) and
the holders of the Warrants and the Warrant Shares each hold their respective
equity interests in the IPO Entity.
ADJUSTMENTS
The number of shares of Common Stock purchasable upon the exercise of the
Warrants and the Exercise Price both will be subject to adjustment in certain
events (subject to certain exceptions) including (i) the payment by the Issuer
of dividends (and other distributions) on Issuer Stock payable in Issuer Stock,
(ii) subdivisions, combinations and reclassifications of Issuer Stock, (iii) the
issuance to all holders of Issuer Stock of rights, options or warrants entitling
them to subscribe for Issuer Stock or of securities convertible into or
exchangeable for Issuer Stock, for a consideration per share of Issuer Stock
which is less than the current market price per share of such Issuer Stock and
(iv) the distribution to all holders of Issuer Stock of any of the the Issuer's
assets, debt securities or any rights or warrants to purchase securities
(excluding those rights and warrants referred to in clause (iii) above and
excluding cash dividends less than a specified amount). In addition, the
Exercise Price may be reduced in the event of purchases of Issuer Stock pursuant
to a tender or exchange offer made by the Issuer or any subsidiary thereof at a
price greater than the sale price of such Issuer Stock at the time such tender
or exchange offer expires.
No adjustment in the Exercise Price will be required unless such
adjustment would require an increase or decrease of at least 1% in the Exercise
Price; PROVIDED, HOWEVER, that any adjustment which is not made will be carried
forward and taken into account in any subsequent adjustment.
In the case of certain consolidations or mergers of the Issuer, or the
sale of all or substantially all of the assets of the Issuer to another
corporation, each Warrant shall thereafter be exercisable for the right to
receive the kind and amount of shares of stock or other securities or property
to which such holder would have been entitled as a result of such consolidation,
merger or sale had the Warrants been exercised immediately prior thereto.
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AUTHORIZED SHARES
The Issuer has authorized for issuance such number of shares of Common
Stock as shall be issuable upon the due exercise of all outstanding Warrants.
Such shares of Common Stock, when paid for and issued, will be duly and validly
issued, fully paid and non-assessable, free of preemptive rights and free from
all taxes, liens, charges and security interests with respect to the issue
thereof (other than any such tax, lien, charge or security interest imposed upon
or granted by the holder of the Common Stock).
AMENDMENT
From time to time, the Issuer and the Warrant Agent, without the consent
of the holders of the Warrants, may amend or supplement the Warrant Agreement
for certain purposes, including curing defects or inconsistencies or making
changes that do not materially adversely affect the rights of any holder. Any
amendment or supplement to the Warrant Agreement that has a material adverse
effect on the interests of the holders of the Warrants shall require the written
consent of the holders of a majority of the then outstanding Warrants (excluding
Warrants held by the Issuer or any of its affiliates). The consent of each
holder of the Warrants affected shall be required for any amendment pursuant to
which the Exercise Price would be increased or the number of Warrant Shares
purchasable upon exercise of Warrants would be decreased (other than pursuant to
adjustments provided in the Warrant Agreement).
GOVERNING LAW
The Warrant Agreement and the Warrants are governed by, and construed in
accordance with, the laws of the State of New York without regard to the
principles of conflicts of law thereof.
ADDITIONAL INFORMATION
Any holder of Warrants or prospective investor may obtain a copy of the
Warrant Agreement and the Warrant Registration Rights Agreement without charge
by writing to Aladdin Gaming Enterprises, Inc., c/o Aladdin Gaming, LLC, 831
Pilot Road, Las Vegas, Nevada 89119; Attention: Corporate Secretary.
REPORTS
Whether or not the Issuer is subject to the reporting requirements of the
Exchange Act, the Issuer shall cause copies of (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if the Issuer was required to file such
forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" that describes the financial condition and results of
operations of the Holdings Group, and, with respect to the annual information
only, a report therein by the Issuer's certified independent accountants and
(ii) all current reports that would be required to be filed with the Commission
on Form 8-K if the Issuer was required to file such reports, in each case within
the time periods specified in the Commissions's rules and regulations, to be
filed with the Commission (to the extent permitted) and the Warrant Agent and
mailed to the holders of the Warrants at their addresses appearing in the
registrar of Warrants maintained by the Warrant Agent to the same extent as such
reports are furnished to the holders of the Notes in accordance with the
Indenture.
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DESCRIPTION OF NOTEHOLDER COMPLETION GUARANTY
AND DISBURSEMENT AGREEMENT
NOTEHOLDER COMPLETION GUARANTY
The Trust, London Clubs and Bazaar Holdings (collectively, the
"Guarantors") have entered into a guaranty of performance and completion (the
"Noteholder Completion Guaranty") in favor of the Trustee (for the benefit of
the Noteholders). The following summary of the material terms and provisions of
the Noteholder Completion Guaranty does not purport to be a complete summary of
the Noteholder Completion Guaranty and is qualified in its entirety by reference
to the Noteholder Completion Guaranty, including definitions of certain terms
used below. The Noteholder Completion Guaranty provides that the Guarantors
jointly and severally guarantee, among other things, to the Trustee (for the
benefit of the Noteholders) and covenant and agree to make any and all payments
to or on behalf of the Company as may be necessary in order to permit and assure
that:
(i) the Company will promptly carry out the work required for the
construction of the Aladdin with due diligence and continuity, in an
expeditious and first-class workmanlike manner in accordance with the
Approved Plans and Specifications (as defined below) in all material
respects and will correct as soon as possible any material defect in
such work or material deviation from the Approved Plans and
Specifications;
(ii) the Company will punctually pay all costs, expenses and liabilities
incurred by the Company in connection with the construction of the
Aladdin in accordance with the Approved Plans and Specifications, and
all claims and demands for labor, material and services incurred by the
Company prior to completion of the work and in connection with cost
overruns of any type and all amounts which the Company may be required
to pay from time to time in order to keep the project "In Balance" as
such term is defined in the Noteholder Completion Guaranty;
(iii) the Company will complete the construction of the required Minimum
Aladdin Facilities on schedule and in accordance with the Approved
Plans and Specifications lien-free other than Permitted Liens;
(iv) the Company will provide the expertise necessary to supervise such work
at no cost to the Trustee;
(v) in the event the Guarantors fail to pay and/or perform their respective
obligations under the Noteholder Completion Guaranty, the Trustee (in
addition to any other rights and remedies afforded by applicable law)
may pay and perform the Guaranteed Obligations on behalf of the
Guarantors, in which case the Guarantors, upon demand, must reimburse
the Trustee for all costs, expenses and liabilities incurred in
connection therewith; and
(vi) the Guarantors shall pay the Trustee all reasonable out-of-pocket costs
and expenses of the Trustee in connection with the enforcement of the
Noteholders' rights and remedies under the Noteholder Completion
Guaranty.
The obligations of the Guarantors under the Noteholder Completion Guaranty
are subject to certain important qualifications. In particular, the Trustee may
not exercise any rights or declare any default under the Noteholder Completion
Guaranty and shall not pursue any remedies thereunder including, but not limited
to demanding payment or performance during any period that the Bank Completion
Guaranty is in effect and the Guarantors thereunder have not been released in
writing by the Bank Lenders. Notwithstanding the foregoing, however, the Trustee
shall be permitted to exercise any and all rights, declare a default, commence
enforcement proceedings and pursue any and all remedies under the Noteholder
Completion Guaranty:
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(i) at any time prior to the date that any funds have been advanced or
disbursed to the Company pursuant to the Bank Credit Facility;
(ii) at any time prior to Completion and from after the date on which all
indebtedness evidenced and secured by the Bank Credit Facility has been
indefeasibly paid in full and the Bank Lenders have released the
Guarantors in writing from their obligations under the Bank Completion
Guaranty; and
(iii) at any time after which all of the following events have occurred and
are continuing:
(a) an event of default under the Bank Completion Guaranty has occurred
and is continuing and such event of default has remained uncured for
the number of applicable Trigger Days (as defined herein);
(b) a Funding Cessation (as defined herein) has occurred and is
continuing for the aggregate number of applicable Trigger Days;
PROVIDED, HOWEVER, in no event shall aggregate Funding Cessations
exceed 180 days in the aggregate (which shall be extended for the
number of days during which a Force Majeure Event (as defined below)
or Insolvency Proceeding of the Company which impairs the Bank
Lenders directly or indirectly from enforcing the Bank Completion
Guaranty has occurred and is continuing which such extension shall
terminate upon the filing by the Bank Lenders of an action against
the Guarantors under the Bank Completion Guaranty to enforce the
obligations of the Guarantors thereunder which are susceptible of
performance notwithstanding the Insolvency Proceeding of the Company)
in any consecutive 365 day period; and
(c) the construction work which has been substantially completed in
accordance with the Approved Plans and Specifications (as certified
by the Construction Consultant) on the date in question has not
progressed to the stage of completion set forth for such date
(subject to any extensions based upon Force Majeure Events or an
Insolvency Proceeding of the Company which impairs the Bank Lenders,
directly or indirectly, from enforcing the Bank Completion Guaranty
has occurred and is continuing, which such extension shall terminate
upon the filing by the Bank Lenders of an action against the
Guarantors under the Bank Completion Guaranty to enforce the
obligations of the Guarantors thereunder which are susceptible of
performance notwithstanding the Insolvency Proceeding of the Company)
in the Construction Benchmark Schedule (as defined in the Noteholder
Completion Guaranty).
The Noteholder Completion Guaranty also provides that performance in all
material respects of the obligations of the Guarantors under the Bank Completion
Guaranty (as in effect on the Issue Date, or as may be amended from time to time
so long as in connection with each such amendment the Construction Consultant
certifies to the Trustee that, after giving effect to such amendment, (i) the
Minimum Aladdin Facilities are still capable of being completed by the Operating
Deadline, and (ii) the Guarantors have consented to such amendment) shall be
deemed to be performance of the corresponding obligations under the Noteholder
Completion Guaranty and performance in all material respects of the obligations
of the Guarantors under the Noteholder Completion Guaranty shall be deemed to be
performance of the corresponding obligations under the Bank Completion Guaranty.
Under the Noteholder Completion Guaranty, the Trustee covenants and agrees
that (i) the right of the Trustee to demand payment and/or performance of the
obligations under the Noteholder Completion Guaranty, to exercise any rights,
remedies and options and/or to commence enforcement proceedings under the
Noteholder Completion Guaranty shall be subject to the delivery by the Trustee
of a written notice to the Administrative Agent no later than 10 business days
prior to the making of such demand for payment and/or performance, exercise of
rights remedies and options, or commencement of enforcement proceedings, as
applicable, (ii) the Bank Lenders shall have all rights at law and equity
including, without
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limitation, the right to seek an injunction or other extraordinary remedy to
prevent or prohibit the making of any demand for payment and/or performance,
exercise of rights remedies and options, or commencement of enforcement
proceedings by the Trustee which is in contravention of the "standstill"
provisions of the Noteholder Completion Guaranty described above, and (iii) the
Noteholder Completion Guaranty shall not have been amended, modified, and/or
amended and restated without the prior written consent of the Administrative
Agent in its sole discretion; provided that the consent of the Administrative
Agent shall not be required in connection with to corrective amendments required
to be made to the Noteholder Completion Guaranty as and when corresponding
amendments are made to the Bank Completion Guaranty.
In addition, the Trustee on its own behalf and on behalf of the
Noteholders has covenanted and agreed that the rights, remedies and options of
the Trustee under the Noteholder Completion Guaranty in no way restrict the
rights and remedies of the Administrative Agent and the Bank Lenders under the
Bank Credit Facility or any security therefor including, without limitation, the
right to commence and prosecute to completion enforcement of the Bank Credit
Facility and any documents evidencing or securing the obligations under the Bank
Credit Facility. The Trustee agreed on its own behalf and on behalf of the
Noteholders that no Person shall have any right whatsoever to interpose a right
of offset, defense, claim or counterclaim with respect to any enforcement of the
Bank Credit Facility documents based upon a claim that the Trustee has the right
to performance of the guaranteed obligations before such enforcement can be
commenced or prosecuted or judgment thereon can be executed by or on behalf of
the Bank Lenders.
"Approved Plans and Specifications" shall mean all plans, specifications,
design documents, schematic drawings and related items for the design,
architecture and construction of the Aladdin, as delivered to the Trustee on the
Issue Date, as the same may be (x) finalized in a manner that reflects a natural
evolution of their status on the date hereof and in a manner consistent with the
standards set forth in the Credit Agreement with respect to the Bank Credit
Facility (the "Bank Credit Agreement") and (y) amended in accordance with the
Bank Credit Agreement.
"Construction Benchmark Schedule" shall have the meaning set forth in the
Noteholder Completion Guaranty and the Bank Credit Agreement.
A "Funding Cessation" shall occur at any time that funds are unavailable
to the Company (from any source whatsoever) to fund draws under the Bank Credit
Facility in an amount equal to 75% of the draw request in question or the
Construction Consultant fails to deliver the On Schedule Certificate as
contemplated by the Engagement Letter among Rider Hunt (NV) L.L.C., the
Administrative Agent, the Disbursement Agent, the Trustee, and others.
"Force Majeure Event" shall mean any event which is defined as a "Force
Majeure" in the Design/ Build Contract and/or that causes a delay in the
construction of the Aladdin and is outside the Company's control but only to the
extent (a) such event does not arise out of (i) the negligence, willful
misconduct or inefficiencies of the Company, (ii) late performance by the
Design/Builder or ADP, (iii) any cause or circumstances resulting in delays,
stoppage or any other interference with the construction of the Aladdin caused
by the insolvency, bankruptcy or any lack of funds by the Company, any of the
other Project Parties (as defined herein), the Energy Provider, Unicom, and/or
ADP, or (iv) delays, stoppage or other interference with the construction of the
Aladdin caused by the insolvency, bankruptcy or any lack of funds by Bazaar,
Aladdin Music and/or the construction contractors and project architects with
respect to the Mall Project, the Music Project and/or the Energy Project, and
(b) such event consists of an Act of God (such as tornado, flood, hurricane,
etc.), fires and other casualties; strikes, lockouts or other labor disturbances
(except to the extent taking place at the Project Site only); riots,
insurrections or civil commotions; embargoes, shortages or unavailability of
materials, supplies, labor, equipment and systems that first arise after the
Issue Date, but only to the extent caused by another act, event or condition
covered by this clause (b); sabotage; vandalism; the requirements of law,
statutes, regulations and other legal requirements enacted after the Issue Date
(unless the Company should, in the exercise of due diligence
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and prudent judgment, have anticipated such enactment); orders or judgments; or
any similar types of events, provided, that (x) the Company has sought to
mitigate the impact of the delay, (y) any delay resulting from the foregoing
shall not exceed 365 days, and (z) the period during which a Force Majeure Event
exists shall commence on the date that the Company has given the Trustee and the
Administrative Agent written notice describing in reasonable detail the event
which constitutes a Force Majeure Event and the Trustee and the Administrative
Agent have confirmed the existence of such Force Majeure Event on the date of
such notice and shall end on the date that such Force Majeure Event no longer
exists, whether or not notice is given to the Trustee and the Administrative
Agent, as determined by the Construction Consultant.
"Trigger Days" shall be defined as follows:
(i) an aggregate of 60 calendar days during any period in which the Bank
Lenders have disbursed more than $1 and up to and including $35.0
million of the Bank Credit Facility to the Company;
(ii) an aggregate of 90 calendar days during any period in which the Bank
Lenders have disbursed more than $35.0 million and up to and including
$70.0 million of the Bank Credit Facility to the Company;
(iii) an aggregate of 120 calendar days during any period in which the Bank
Lenders have disbursed more than $70.0 million and up to and including
$110.0 million of the Bank Credit Facility to the Company; and
(iv) an aggregate of 180 calendar days during any period in which the Bank
Lenders have disbursed more than $110.0 million of the Bank Credit
Facility to the Company.
DISBURSEMENT AGREEMENT
The Company, Holdings, Scotiabank, as the Administrative Agent under the
Bank Credit Facility, the Trustee, Scotiabank, as the Disbursement Agent on
behalf of the Bank Lenders and the Trustee (the "Disbursement Agent"), and as
Securities Intermediary and the Servicing Agent entered into the Disbursement
Agreement concurrently with the closing of the Offering. The following summary
of the material provisions of the Disbursement Agreement does not purport to be
a complete summary of the Disbursement Agreement and is qualified in its
entirety by reference to the Disbursement Agreement, including the definitions
therein of certain terms used below. Capitalized terms that are used hereunder
but not otherwise defined in this Prospectus have the meanings assigned to them
in the Disbursement Agreement.
Pursuant to the Disbursement Agreement, on the Issue Date approximately
$35 million of the net proceeds of the Offering were deposited into the Note
Construction Disbursement Account, which is subject to the sole dominion and
control of the Disbursement Agent on behalf of the Trustee (for the benefit of
the Noteholders) and the proceeds from the Term B Loan and the Term C Loan were
advanced to the Company and thereafter deposited by the Company into the Cash
Collateral Account, which will be subject to the sole dominion and control of
the Disbursement Agent on behalf of the Bank Lenders who have made the Term B
Loans and the Term C Loans. All funds in the Note Construction Disbursement
Account are pledged to the Disbursement Agent for the benefit of the Trustee to
secure repayment of the Notes and all funds in the Cash Collateral Account are
pledged to the Disbursement Agent to secure repayment of the Term B Loans and
Term C Loans. The Disbursement Agreement establishes the conditions to, and the
sequencing of, the making of disbursements of the proceeds of the Offering, the
funds from the Term B Loan and Term C Loan and the advances of the Term A Loan
and from other sources. Pursuant to the Disbursement Agreement, (i) all of the
proceeds from the Offering must be expended before any proceeds from the Term B
Loan and Term C Loan may be disbursed; (ii) the proceeds from the Term B Loan
and the Term C Loan will be disbursed pro rata; and (iii) advances under the
Term A Loan will only be made after all of the proceeds of the Term B Loan and
Term C Loan are
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expended (other than to fund draws under Letters of Credit which are issued as
part of the Bank Credit Facility). The drawdown of funds under the FF&E
Financing will not be subject to the provisions of the Disbursement Agreement.
The Disbursement Agreement authorizes disbursement from the Note
Construction Disbursement Account and the Cash Collateral Account only upon the
satisfaction of various conditions precedent set forth in the Disbursement
Agreement. These conditions include, among other things:
(i) delivery by the Company of a disbursement request and certificate
certifying as to, among other things, (a) the application of funds to be
disbursed, (b) the substantial conformity of construction undertaken to
date with the Approved Plans and Specifications, as amended from time to
time, in accordance herewith, (c) the expectation that the Aladdin will
be completed by the Operating Deadline, (d) the accuracy of the budget
for the construction of the Aladdin, as amended from time to time in
accordance with the Bank Credit Agreement, (e) the sufficiency of
remaining funds to complete the Aladdin by the Operating Deadline, (f)
compliance with line item budget allocations, taking into account
allocations for contingencies; (g) the accuracy of the representations
and warranties contained in the Disbursement Agreement, the other Loan
Documents, the Bank Completion Guaranty, the Noteholder Completion
Guaranty, and the other material project documents (collectively, the
"Operative Documents"), as if made on such date (except those that
relate to a different date) unless the failure of the foregoing to be
the case would not have a material adverse effect on the financial
condition, business, property, prospects or the ability of the Company,
and to the Company's knowledge each of AHL, Holdings, London Clubs,
LCNI, Design/Builder and Fluor (collectively, the "Project Parties") to
perform in all material respects their respective obligations under the
Operative Documents to which they are a party; (h) the Operative
Documents continue to be in full force and effect and (i) the absence of
an event of default with respect to certain material covenants in the
Operative Documents which would be reasonably likely to cause a material
adverse effect on the financial condition, business, property, prospects
or the ability of the Company or (to the Company's knowledge) any of the
Project Parties to perform their respective obligations under the
Operative Documents to which they are a party;
(ii) the absence of any default or an event of default (each as defined in
the Bank Credit Agreement) with respect to the Operative Documents
which would be reasonably likely to cause a material adverse effect on
the financial condition, business, property or prospects of the
Company, or to the Company's knowledge of the Project Parties and their
ability to perform in all material respects their respective
obligations under the Operative Documents to which they are a party;
(iii) delivery by the Construction Manager, the Construction Consultant and
the Project Architect of certificates corroborating various matters set
forth in the Company's disbursement request and certificate;
(iv) compliance by the Guarantors under the Bank Completion Guaranty and
London Clubs and AHL, as Sponsors, of their respective obligations
under the Keep-Well Agreement;
(v) receipt by the Company of the governmental approvals required to be in
effect at such time;
(vi) delivery by the Company to the Disbursement Agent of the acknowledgment
of payment and lien releases required under the Disbursement Agreement;
(vii) the procurement of all insurance policies required under the
Disbursement Agreement, including required endorsements,
(viii) the absence of pending material litigation which materially and
adversely affects the financial condition, business, property,
prospects or ability of the Company or the Project Parties to
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perform in all material respects their respective obligations under the
Operative Documents to which they are a party;
(ix) all of the documents evidencing the Disbursement Agent's security
interest in the proceeds, if any, in the Note Construction Disbursement
Account (for the sole and exclusive benefit of the Trustee and the
Noteholders) and in the Series A Preferred Interests, and the Bank
Lenders' security interest in the collateral pledged as security under
the Bank Credit Facility being in full force and effect;
(x) the absence of any material adverse change in the financial condition,
business, property, prospects or the ability of the Company and the
Project Parties to perform in all material respects their respective
obligations under the Operative Documents to which they are a party;
(xi) delivery of title insurance endorsements which increase the amount of
title insurance coverage by the amount of such advances and which
insure the first priority of the Deed of Trust;
(xii) payment of all applicable fees and expenses; and
(xiii) delivery of amounts required in order for the Project Budget and all
contingencies and reserves to be In Balance.
The Disbursement Agreement establishes procedures for the approval by the
Bank Lenders of amendments to the Approved Plans and Specifications. Pursuant to
the Disbursement Agreement, the Approved Plans and Specifications may be amended
by the Company, the Guarantors and the Bank Lenders at any time so long as in
connection with each such amendment, the Construction Consultant certifies to
the Trustee that (i) after giving effect to the amendment, the Approved Plans
and Specifications (as so amended) continue to call for the construction of the
Aladdin Minimum Facilities; (ii) after giving effect to the amendment, the
Approved Plans and Specifications (as so amended), will continue to permit the
Aladdin Minimum Facilities to be completed on or prior to the Operating
Deadline, and (iii) the Guarantors have consented in writing to such amendment.
Pursuant to the Disbursement Agreement, with the approval of each
disbursement, the Construction Consultant (to the extent that the circumstances
factually permit the Construction Consultant to do so in good faith) has agreed
to provide the Lenders and the Trustee with a certificate which provides in
substance that as of such date the Minimum Aladdin Facilities continue to be
capable of being completed in accordance with the Approved Plans and
Specifications on or before the Operating Deadline (the "On Schedule
Certificates"). In addition, the Administrative Agent has agreed to send to the
Trustee a copy of each written notice of any default or event of default under
the Bank Credit Agreement which the Administrative Agent sends to the Company.
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DESCRIPTION OF CERTAIN INDEBTEDNESS AND OTHER OBLIGATIONS
The following discussion summarizes the material terms of certain material
financing agreements which are either in place or are currently being negotiated
between the Company (and/or the Controlling Stockholders) and various other
parties. This summary does not purport to be complete and is qualified in its
entirety by reference to the full agreements described herein once finalized and
executed. Capitalized terms used but not otherwise defined herein shall have the
meaning ascribed to such terms in the agreement being described (unless
otherwise indicated).
BANK CREDIT FACILITY
GENERAL DESCRIPTION OF THE BANK CREDIT FACILITY. The Company has entered
into the Bank Credit Facility with a syndicate of lenders (the "Bank Lenders"),
Scotiabank, as Administrative Agent, CIBC Oppenheimer Corp., as the
documentation agent ("Documentation Agent"), and Merrill Lynch Capital
Corporation ("Merrill"), as the syndication agent ("Syndication Agent"). The
Bank Credit Facility, which comprises senior secured construction/term loan
facilities, consists of three construction/term loans: (i) the $136.0 million
Term A Loan that has a stated maturity date of seven years from the closing date
of the Bank Credit Facility (the "Bank Closing Date"), (ii) the $114.0 million
Term B Loan that has a stated maturity date of eight and one half years from the
Bank Closing Date, and (iii) the $160.0 million Term C Loan that has a stated
maturity date of ten years from the Bank Closing Date (each term loan, a
"Loan"). The Loans will convert from construction loans into amortizing term
loans on a date (the "Conversion Date") which is the earlier of (x) the issuance
of a permanent certificate of occupancy for the Aladdin (which must include
appropriate parking facilities) and operating permits for the Plant or (y) the
completion of the Aladdin and the Plant as determined by the Administrative
Agent and the Construction Consultant. The proceeds of the Bank Credit Facility
shall be used by the Company to finance a portion of the main Project Costs. The
maximum amount of the Bank Credit Facility is $410.0 million plus, subject to
certain conditions, certain additional amounts as described under "Description
of the Notes--Certain Covenants."
On the date on which the initial Advance was made, the Bank Lenders that had
committed to make the Term B Loan and the Term C Loan, advanced their respective
committed amounts thereof to an account (the "Cash Collateral Account") over
which the Disbursement Agent has dominion and control over, and a perfected
first security interest for the benefit of the Bank Lenders which have advanced
the Term B Loan and the Term C Loan. The proceeds of the Term B Loan and the
Term C Loan will not be disbursed from the Cash Collateral Account until all of
the proceeds of the Offering have been expended, and the proceeds of the Term B
Loan and the Term C Loan shall be fully disbursed from the Cash Collateral
Account prior to any advance of the Term A Loan (other than advances of the Term
A Loan which are made to reimburse Scotiabank (in such capacity, the "LC
Issuer") for disbursements made in respect of Letters of Credit which have been
drawn upon). Disbursements from the Cash Collateral Account (with respect to the
Term B Loan and the Term C Loan) and advances of the Term A Loan shall be made
in accordance with the Disbursement Agreement but no advances under the Bank
Credit Facility shall be made on or after the Conversion Date.
LETTERS OF CREDIT. The Bank Credit Facility provides that the Company may
from time to time (prior to a certain period preceding the Conversion Date)
request that one or more letters of credit (the "Letters of Credit") be issued
or extended if required as a deposit by suppliers and/or contractors providing
materials to the Aladdin; PROVIDED, HOWEVER, no Letter of Credit shall be issued
for the Gaming Equipment and Specified Equipment which is covered by the FF&E
Financing. The aggregate amount of such Letters of Credit shall not exceed $20.0
million.
MATURITY DATE OF THE BANK CREDIT FACILITY. The entire outstanding principal
balance of the Loans, together with all unpaid interest thereon and other
amounts due to the respective Bank Lenders under the
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documents pursuant to which the Loans were made (the "Loan Documents") is due
and payable in immediately available funds on the stated maturity date of each
Loan.
The maturity dates of the Loans shall be the earlier of (a) the date upon
which the Loans become immediately due and payable by reason of the occurrence
of an event of default under the Loan Documents (beyond the expiration of
applicable grace, notice and cure periods) and (b) the above mentioned stated
maturity date for each Loan.
INTEREST RATE. At the Company's option, the Loans will bear interest at
either Scotiabank's (i) alternate base rate (the "Alternate Base Rate" or "ABR")
or (ii) reserve adjusted LIBOR plus, in each case, the applicable following
margins.
(a) In the case of the Term A Loan and prior to the date on which is 6
months after the Conversion Date, the following margin applies: Alternate
Base Rate +200 bps and reserve adjusted LIBOR +300 bps.
(b) As regards the Term A Loan, from and after the date which is six
months after the Conversion Date, the applicable margin set forth in the
currently effective compliance certificate applies:
<TABLE>
<CAPTION>
ALTERNATE BASE
TOTAL DEBT TO EBITDA RATE LIBOR
- ----------------------------------------------------------- ------------------ ------------
<S> <C> <C>
greater than or equal to 4.0x.............................. +175 bps +275 bps
less than 4.0x and greater than or equal to 3.5x........... +150 bps +250 bps
less than 3.5x and greater than or equal to 3.0x........... +100 bps +200 bps
less than 3.0x and greater than or equal to 2.5x........... +75 bps +175 bps
less than 2.5x............................................. +50 bps +150 bps
</TABLE>
(c) With respect to the proceeds of the Term B Loan and the Term C Loan
which are being held in the Cash Collateral Account, the Alternate Base Rate
margin shall be +100 bps and the reserve adjusted LIBOR margin is +200 bps.
(d) With respect to all portions of the Term B Loan and the Term C Loan
which have been disbursed from the Cash Collateral Account, the Term B Loan
and Term C Loan will bear interest based at either LIBOR or the Alternate
Base Rate, in both cases, plus a certain margin.
OPTIONAL PREPAYMENTS. The Bank Credit Facility allows the Company to
prepay, at its option, certain of the Loans under certain conditions.
SCHEDULED AMORTIZATION. From and after the Conversion Date, the principal
amount of the Bank Credit Facility will be amortized (the "Scheduled
Amortization") on certain scheduled quarterly dates (ranging from 20 scheduled
quarters for the Term A Loan, 26 scheduled quarters for the Term B Loans and 32
scheduled quarters for the Term C Loan) and in certain amounts (ranging from
$4.0 million to $10.0 million per quarter for the Term A Loan, $300,000 to $20.0
million per quarter for the Term B Loan, and $400,000 to $25.5 million per
quarter for the Term C Loan).
MANDATORY PREPAYMENTS. From and after the Conversion Date, the Company
shall make mandatory prepayments of principal (the "Mandatory Prepayments") in
addition to the Scheduled Amortization on certain scheduled quarterly dates and
in certain amounts based on a percentage of the Excess Cash Flow from the
Aladdin. In addition to the foregoing payments and the Scheduled Amortization,
the entire outstanding principal balance of the Bank Credit Facility shall
become immediately due and payable (and any outstanding Letters of Credit shall
be cash collateralized) and the obligation of any Bank Lender which has
committed to make a Term A Loan or participate in the Letters of Credit shall
automatically terminate (a) upon a sale, transfer or conveyance of or borrowing
against (whether or not secured by) the Aladdin not otherwise permitted by the
Loan Documents, (b) a change in control (as defined in the Bank Credit Facility)
or (c) if no disbursement of any proceeds of the Term B Loan or the Term C Loan
is made
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from the Cash Collateral Account within twelve months after the Bank Closing
Date (subject to Force Majeure Events). Subject to certain Bank Lenders' rights
to elect not to receive a Mandatory Prepayment, Mandatory Prepayments of the
Bank Credit Facility will be applied in the inverse order against the Scheduled
Amortization PRO RATA among the Term A Loan, the Term B Loan and the Term C
Loan. The Loan Documents provide, in relevant part, that the amount of any
Mandatory Prepayment of the Term B Loan and the Term C Loan which is due from
the Company with respect to a change of control of the Company or the interests
of the Sponsors (excluding a transfer of the Sponsor interests resulting from
the exercise of warrants issued in connection with the Notes) shall be 101% of
the principal amount of the Term B Loan and the Term C Loan.
COMMITMENT FEE. From and after the Bank Closing Date and until the
Conversion Date, a non-refundable fee (the "Term A Loan Commitment Fee") in the
amount of 0.5% per annum of the unfunded portion of the Term A Loan shall accrue
on the daily average unfunded portion of the Term A Loan. The Term A Loan
Commitment Fee shall be payable to the Bank Lenders which have made a commitment
to make the Term A Loan on the last business day of each calendar quarter in
arrears in proportion to their respective unfunded commitments of the Term A
Loan.
SECURITY. As security for the Bank Credit Facility, the Company has entered
into a deed of trust in favor of the Bank Lenders securing the Notes and all
obligations of the Company under the Loan Documents, encumbering the Aladdin
(including any and all leasehold interests) as a first priority lien, subject
only to those title exceptions approved by the Administrative Agent.
The Company has also assigned all present and future of leases, rents,
issues and profits in favor of the Bank Lenders, assigning to the Bank Lenders
such leases pertaining to the Aladdin, including the Ground Leases and the
Theater Lease and, to the extent they are assignable, the contracts, agreements,
proposals, permits, approvals, plans and specifications pertaining to the
Aladdin.
In addition, the Company has entered into security agreements granting to
the Bank Lenders a continuing first priority security interest in all accounts,
accounts receivable, all reserves, all licenses (other than liquor licenses and
those granted pursuant to Gaming Approvals to the extent they cannot be
assigned), Specified Equipment and Gaming Equipment installed in, affixed to,
placed upon and used in connection with the Aladdin which are owned or leased by
the Company (subject to the rights of the FF&E Lender under the FF&E Financing),
the Marks and all other tangible or intangible personal property owned by the
Company.
As further security for the Bank Credit Facility, (a) AHL has entered into a
pledge and security agreement pledging all of its interest in Sommer Enterprises
to the Bank Lenders; (b) Sommer Enterprises has entered into a pledge and
security agreement pledging all of its interests in the Issuer and Holdings to
the Bank Lenders; (c) the Issuer has entered into a pledge and security
agreement pledging all of its interests in Holdings (other than the interests
relating to the Warrants which have been issued by the Issuer in connection with
the Offering) to the Bank Lenders; (d) Holdings has entered into a pledge and
security agreement pledging all of its interest in the Company to the Bank
Lenders other than the Series A Preferred Interests; (e) the Company has entered
into a pledge and security agreement pledging all of its interest in AMH to the
Bank Lenders; and (f) AMH has entered into a pledge and security agreement
pledging all of its interest in Aladdin Music to the Bank Lenders; (g) LCNI has
entered into a pledge and security agreement pledging all of its interest in
Holdings to the Bank Lenders; and (h) Holdings has entered into a pledge and
security agreement pledging all of its interest in Capital to the Bank Lenders.
The pledges of the equity securities of those entities registered as holding
companies or licensed by the Nevada Commission will require the approval of the
Nevada Commission in order to remain effective. In addition, if such companies
are registered and licensed (as applicable), separate approvals will be required
to foreclose on the pledges and such approvals will require the licensing of the
Bank Lenders unless such requirement is waived by the Nevada Gaming Authorities
upon application by the Bank Lenders. Furthermore, if the Company is licensed by
the Nevada Gaming Authorities at any time during the term of
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the Bank Credit Facility, the Bank Lenders will be subject to being called
forward by the Nevada Gaming Authorities, in their descretion, for licensing or
a finding of suitablility as lenders to a Company Licensee.
IN BALANCE REQUIREMENTS. The Bank Credit Facility and the Disbursement
Agreement include loan balancing provisions requiring the Company to deposit
additional monies into the Cash Collateral Account if the Administrative Agent
and the Bank Lender's Consultant reasonably determine that the Bank Credit
Facility is not "In Balance." The Bank Credit Facility will be considered "In
Balance" when undisbursed portions of the Bank Credit Facility allocated to each
line item category in the Budget equals or exceeds such line item category,
contingency requirements have been satisfied and the guaranteed maximum price is
in effect.
AFFIRMATIVE COVENANTS. The Bank Credit Facility contains customary
affirmative covenants for the type of transaction proposed, including, without
limitation, the following: (a) the Company will construct the Aladdin and
perform all the work required under the other Loan Documents, (b) the Company
will operate the Aladdin as a first-class casino hotel, (c) the Company will
maintain adequate reserves and (d) the Company will provide the Administrative
Agent with certain financial information.
NEGATIVE COVENANTS. The Bank Credit Facility contains customary negative
covenants for the type of transaction proposed, including, without limitation,
the following: (a) restrictions on the incurrence of debt, sale leasebacks and
contingent liabilities; (b) restrictions on making dividends or similar
distributions; (c) restrictions on the incurrence of liens or other
encumbrances; (d) restrictions on the sale of assets or other similar transfers;
(e) restrictions on investments or acquisitions; (f) restrictions on mergers,
consolidations and similar combinations; (g) restrictions on transactions with
affiliates; (h) limitations on capital expenditures; (i) restrictions on
adjustments or reallocations against line items in the Budget; and (j)
restrictions on any amendment or modification of certain material agreements.
Any restrictions on the transfer of and agreements not to encumber the equity
securities of any registered holding company of the Company will require the
approval of the Nevada Commission in order to remain effective.
FINANCIAL COVENANTS. The Bank Credit Facility contains certain financial
covenants, including, without limitation, the following: minimum fixed charge
coverage; minimum interest coverage; maximum debt to EBITDA; minimum EBITDA and
minimum net worth.
EVENTS OF DEFAULT. The Bank Credit Facility contains events of default
customary for the type of transaction proposed including, without limitation, a
cross-default to other indebtedness or agreements of the Company, London Clubs,
the other Sponsors and the Guarantors under the Bank Completion Guaranty.
SENIOR DISCOUNT NOTES
GENERAL DESCRIPTION OF THE NOTES. Pursuant to an Indenture dated as of
February 26, 1998 (the "Indenture"), the Note Issuers issued 221,500 $1,000
principal amount at maturity of 13 1/2% Senior Discount Notes due 2010 (the
"Notes"). The Notes were issued as part of 221,500 Units, each Unit consisting
of one Note and 10 Warrants. Pursuant to their terms the Notes and Warrants
became separately transferrable on the Separation Date, which date occurred upon
filing of the Registration Statement and the registration statement with respect
to the New Notes (the "Exchange Offer Registration Statement") with the
Commission.
MATURITY. The Notes mature on March 1, 2010.
ACCRETED VALUE AND INTEREST. The initial Accreted Value of the Notes was
$519.40 per $1,000 principal amount at maturity of the Notes. The Notes accrete
at 13 1/2% (computed on a semi-annual bond equivalent basis) based on the
initial Accreted Value, calculated from February 26, 1998 (the "Issue Date").
The Notes will accrete to an aggregate principal amount of $221.5 million by
March 1, 2003. Cash interest will not accrue on the Notes prior to March 1,
2003. Commencing on September 1, 2003, cash
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<PAGE>
interest on the Notes will be payable, at a rate of 13 1/2% per annum,
semiannually in arrears on March 1 and September 1 of each year until maturity.
SECURITY. The Notes are secured by a first priority pledge of the proceeds
deposited in the Note Construction Disbursement Account and by a first priority
pledge of all of the issued and outstanding Series A Preferred Interests.
SERIES A PREFERRED INTERESTS. On the Issue Date, the Series A Preferred
Interests had a liquidation preference of $115.0 million. The liquidation
preference of the Series A Preferred Interests accretes on a semi-annual bond
equivalent basis using a 360 day year comprised of twelve 30-day months. On
March 1, 2003, the liquidation preference of the Series A Preferred Interests
will be $221.5 million. All Series A Preferred Interests are held by Holdings
and pledged to the Trustee for the benefit of the holders of the Notes. From and
after September 1, 2003, distributions on the Series A Preferred Interests will
be payable in cash. Holdings is obligated under the Indenture to utilize such
cash distributions to make payments on the Notes.
The Series A Preferred Interests are mandatorily redeemable on March 1,
2010. After March 1, 2003, the Series A Preferred Interests are redeemable at
the option of the Company, so long as the proceeds thereof are used by Holdings
to make a redemption of the Notes or an offer to purchase Notes, in each case,
in accordance with the terms of the Indenture. See "--Optional Redemption" and
"--Gaming Redemption." Except for the pledge to the Trustee for the benefit of
the holders of the Notes, the exercise of remedies in respect of such pledge or
any transfer after foreclosure under such pledge, the Series A Preferred
Interests are nontransferable.
OPTIONAL REDEMPTION. The Notes are redeemable at the option of the Note
Issuers, in whole or in part, on or after March 1, 2003, at a declining premium
to their Accreted Value, plus accrued and unpaid interest and Liquidated Damages
(as defined in the Indenture), if any, to the date of redemption.
Notwithstanding the foregoing, on or prior to March 1, 2001, the Note Issuers
may redeem up to an aggregate of 35% of the Accreted Value of the Notes at a
redemption price of 113 1/2% of the Accreted Value thereof, plus Liquidated
Damages, if any, thereon to the redemption date, with the proceeds of a
Qualified Public Offering resulting in aggregate net proceeds of at least $50.0
million.
GAMING REDEMPTION. The Notes are subject to mandatory disposition and
redemption requirements following certain determinations by any Gaming
Authority.
CHANGE OF CONTROL. Upon the occurrence of a Change of Control (as defined
in the Indenture) of Holdings, the holders of the Notes have the right to
require the Note Issuers to purchase their Notes at a price equal to 101% of the
Accreted Value thereof, plus accrued and unpaid interest and Liquidated Damages,
if any, thereon to the date of purchase.
COVENANTS. The Indenture contains certain covenants that (subject to
certain exceptions) restrict the ability of the Note Issuers and certain of
their subsidiaries to, among other things: (i) make restricted payments; (ii)
incur additional Indebtedness (as defined in the Indenture) and issue preferred
stock; (iii) incur Liens (as defined in the Indenture); (iv) pay dividends or
make other distributions; (v) enter into mergers or consolidations; (vi) enter
into certain transactions with affiliates; or (vii) enter into new lines of
business. See "Risk Factors."
EVENTS OF DEFAULT. The Indenture provides for customary events of default,
including: (i) default for 30 days or more in the payment when due of interest
on, or Liquidated Damages, if any, with respect to, the Notes; (ii) default in
payment when due of the Accreted Value of or premium, if any, on the Notes;
(iii) failure by the Note Issuers to comply with certain covenants; (iv) default
under certain other indebtedness of Holdings or its restricted subsidiaries
(subject to certain grace periods and minimum thresholds); (v) failure by
Holdings or any of its restricted subsidiaries to pay certain final judgments;
(vi) certain events of bankruptcy or insolvency with respect to Holdings or any
of its significant subsidiaries; (vii) certain defaults
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under the Keep-Well Agreement which remain uncured for 180 days, or in the
performance of the Noteholder Completion Guaranty; (viii) certain breaches by
Holdings of the pledge agreements securing the Notes; (ix) the termination or
unavailability of the Bank Credit Facility in certain circumstances prior to the
date the Aladdin is Operating; (x) (a) failure of the Desert Passage to be
Operating on or prior to 90 days after the date the Aladdin becomes Operating
and (b) at any time thereafter and prior to the date on which the Desert Passage
becomes Operating, the Company's fixed charge coverage ratio for its most
recently ended four full fiscal quarters is not at least 1.75 to 1.0; (xi) after
the Aladdin becomes Operating, revocation, termination, suspension or other
cessation or suspension of gaming operations for a period of more than 90 days
at the Aladdin; (xii) the failure of the Aladdin to be Operating by the
Operating Deadline; (xiii) the transfer of the Aladdin Site as a result of the
exercise of remedies by the Bank Lenders or the acceptance by the Bank Lenders
of a deed in lieu of foreclosure; and (xiv) the transfer of the Common
Membership Interests as a result of the exercise of remedies by the Bank Lenders
in respect of the pledge of such Common Membership Interests pursuant to Bank
the Lender's security documents.
REGISTRATION RIGHTS. Pursuant to a registration rights agreement (the "Note
Registration Rights Agreement") dated as of February 26, 1998 between the Note
Issuers and the Initial Purchasers, the Note Issuers agreed to (a) file within
45 days after the Issue Date with the Commission the Exchange Offer Registration
Statement with respect to an offer to exchange the Notes (the "Exchange Offer")
for new notes of the Note Issuers with terms substantially identical to the
Notes (the "New Notes") (except that the New Notes generally will not contain
terms with respect to restrictions on the resale or transfer thereof) and (b)
use their reasonable best efforts to cause such Exchange Offer Registration
Statement to become effective under the Securities Act within 150 days after the
Issue Date. In the event that applicable law or interpretations of the staff of
the Commission do not permit the Note Issuers to effect the Exchange Offer, or
if certain holders of the Notes (having a reasonable basis to do so) notify the
Note Issuers that they are not permitted to participate in, or would not receive
freely traceable New Notes pursuant to, the Exchange Offer, the Note Issuers
will use their reasonable best efforts to cause to become effective a
registration statement (the "Shelf Registration Statement") with respect to the
resale of the Notes. The Note Issuers, under certain circumstances, will be
required to pay certain liquidated damages if the Note Issuers are not in
compliance with certain of their obligations under the Note Registration Rights
Agreement.
Contemporaneously with the filing of the Registration Statement with the
Commission, the Note Issuers filed the Exchange Offer Registration Statement
with the Commission relating to the Exchange Offer. The Note Issuers expect to
complete the Exchange Offer in August, 1998.
For purposes of the Notes, "Accreted Value" means, (i) as of any date of
determination prior to March 1, 2003, with respect to any Note, the sum of (a)
the initial offering price (which shall be calculated by discounting the
aggregate principal amount at maturity of such Note at a rate of 13 1/2% per
annum, compounded semi-annually on each March 1 and September 1 from March 1,
2003 to the date of issuance) of such Note and (b) the portion of the excess of
the principal amount of such Note over such initial offering price which shall
have been accreted thereon through such date, such amount to be so accreted on a
daily basis at a rate of 13 1/2% per annum of the initial offering price of such
Note, compounded semi-annually on each March 1 and September 1 from the date of
issuance of the Notes through the date of determination, computed on the basis
of a 360-day year of twelve 30-day months and (ii) as of any date of
determination on or after March 1, 2003, with respect to any Note, $1,000.
FF&E FINANCING
LEASE FACILITY. The Company has entered into a commitment letter for a
lease facility (the "Lease Facility") with the FF&E Lender for the purpose of
acquiring approximately $60 million of new furniture and equipment (other than
gaming equipment) for the Aladdin. The Lease Facility is expected to contain
provisions as described herein and is structured as a lease intended for
security (the "Lease"). The Company will be considered the owner of the
Specified Equipment (as defined herein) for tax purposes and the lease will be
treated as an operating lease for accounting purposes. The lease will commence
on
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the date on which the Aladdin will be completed (the "Construction Completion
Date" or the "Basic Lease Term Commencement Date") and will terminate three
years from the Basic Lease Term Commencement Date (the "Basic Lease Term"),
however, the Lease may be renewed up to two one-year renewals from the end of
the Basic Lease Term (the "Renewal Lease Term").
Payments will be made quarterly, in arrears, calculated such that there will
be 80% amortization of principal at the end of the Basic Lease Term and the
maximum two Renewal Lease Terms. The remaining balloon payment will be twenty
percent of the principal.
A lease rental factor (the "Lease Rental Factor") will be calculated to be
5.6639% of 100% of the Company's acquisition cost of the Specified Equipment up
to $60.0 million (the "Lease Funding Amount") per quarter. The Lease Rental
Factor was calculated at an interest rate of 10.444% which represents a spread
of 478 bps over the reserve adjusted 90-day LIBOR (the "Base Index") (5.9375%).
Five days prior to the Basic Lease Term Commencement Date, the Lease Rental
Factor will be adjusted and calculated on the basis of the floating rate Base
Index plus the higher of (a) 478 bps, or (b) the weighted average spread used to
calculate the interest rate on the Bank Credit Facility plus 125 bps, and such
spread shall be maintained throughout the Basic Lease Term and any available
Renewal Lease Terms. The Lease Rental Factor will be adjusted quarterly based on
changes to the Base Index.
Subject to the satisfaction of the conditions precedent and to there being
no default, the FF&E Lender will commence funding of deliveries of the Specified
Equipment and/or the Gaming Equipment (as defined herein) up to six months prior
to the Construction Completion Date (the "Interim Funding Date").
An interim lease funding amount (the "Interim Lease Funding Amount") of up
to $60.0 million will be available, subject to no default then having occurred
and continuing under the Company's financing, construction or other material
agreements, and satisfaction of all conditions precedent to funding. Advances of
the Interim Lease Funding Amount shall be made once per month during the Interim
Funding Period. Any Interim Lease Funding Amount advanced under the Lease
Facility shall be made under an interim schedule, which shall be converted to a
final schedule under the Lease on the Basic Lease Term Commencement Date.
The interim lease repayment terms (the "Interim Lease Repayment Terms") will
be floating rate interest-only payments due monthly in arrears during the period
from the Interim Funding Date through the Construction Completion Date (the
"Interim Funding Period") based on the Interim Lease Funding Amount. At the
Company's option, interest will be calculated at either (a) the reserve adjusted
30-day LIBOR on the date of determination ("30-day LIBOR") plus the higher of
(i) 478 bps, or (ii) the weighted average spread used to calculate the interest
rate of the Bank Credit Facility plus 125 bps, or (b) the prime rate published
in the Wall Street Journal on the date of the determination (the "Prime Rate")
plus 275 bps, and such spread shall be fixed throughout the Interim Funding
Period, and 30-day LIBOR or the Prime Rate will be adjusted monthly based on
changes thereto.
Subject to certain provisions, at the end of the Basic Lease Term or any
Renewal Lease term, the Company may (i) purchase all, but not less than all, of
the Specified Equipment at a fixed purchase price, estimated to represent the
Specified Equipment's then fair value, (ii) renew the Lease for all, but not
less than all, of the Specified Equipment for up to two additional one-year
terms, or (iii) return all, but not less than all, of the Specified Equipment to
the FF&E Lender subject to certain return conditions, including payment of a
contingent rental amount.
Upon termination of the Lease at the end of the Basic Lease Term or any
Renewal Lease term, should the Specified Equipment be returned to the FF&E
Lender by the Company, the FF&E Lender will calculate a contingent rental for
the full lease term, on a quarterly basis, based on certain factors.
TERM LOAN FACILITY. The Company has entered into a commitment letter for an
approximately $20 million five year term loan facility (the "Term Loan
Facility") with the FF&E Lender for the purposes
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of purchasing new gaming equipment for the Aladdin. The Term Loan Facility is
expected to contain terms as described herein. The term loan commencement date
is the Construction Completion Date (the "Term Loan Commencement Date").
Payments shall be made quarterly, in arrears, calculated such that principal
will be amortized as follows:
<TABLE>
<CAPTION>
QUARTER PERCENT AMORTIZATION
- --------- ---------------------
<S> <C>
1-4 3.25
5-8 3.5
9-12 4.0
13-16 4.5
17-19 4.75
20 24.75
</TABLE>
The interest rate (the "Interest Rate") will be calculated five days prior
to the Term Loan Commencement Date on the basis of the floating rate Base Index
plus the higher of (a) 478 bps, or (b) the weighted average spread used to
calculate the interest rate on the Bank Credit Facility on such date plus 125
bps, and such spread shall be maintained throughout the five year term. The
Interest Rate will be adjusted quarterly, based on changes to the Base Index, if
applicable.
An interim term loan funding amount (the "Interim Term Loan Funding Amount")
of up to $20.0 million will be available, subject to no default then having
occurred and continuing under the Company's financing, construction or other
material agreements and satisfaction of all conditions precedent to funding.
Advances of the Interim Term Loan Funding Amount shall be made once per month
during the Interim Funding Period. An Interim Term Loan Funding Amount advanced
under the Term Loan Facility shall be evidenced by an interim promissory note,
which shall be converted to a final promissory note on the Term Loan
Commencement Date.
The interim term loan repayment terms (the "Interim Term Loan Repayment
Terms") will be floating rate interest-only payments due monthly in arrears
during the Interim Funding Period based on the Interim Term Loan Funding Amount.
At the Company's option, interest will be calculated at either (a) the 30-day
LIBOR plus the higher of (i) 478 bps, or (ii) the weighted average spread used
to calculate the interest rate of the Bank Credit Facility plus 125 bps, or (b)
the Prime Rate plus 275 bps, and such spread shall be fixed throughout the
Interim Funding Period and 30-Day LIBOR or the Prime Rate will be adjusted
monthly based on changes thereto.
SECURITY. The security interests granted by the Company will be a first
priority security interest in a pool of new furniture and equipment (other than
gaming equipment) (the "Specified Equipment"), and specified new gaming
equipment including gaming devices such as slot machines, cashless wagering
systems and associated equipment (the "Gaming Equipment"), and assignment of all
improvements and/or additions to the Specified Equipment and the Gaming
Equipment hereafter acquired. The Specified Equipment and the Gaming Equipment
will be required to be free of all junior liens or encumbrances. Any and all
existing and to be issued obligations of the Company shall acknowledge that the
Term Loan Facility and the Lease Facility have a first priority lien on the
Gaming Equipment and the Specified Equipment. During the Interim Funding Period,
the Company shall assign to the FF&E Lender its rights under the purchase
contracts for the Specified Equipment.
CONDITIONS PRECEDENT. The FF&E Financing is subject to customary conditions
precedent.
COVENANTS AND EVENTS OF DEFAULT. Except for covenants related to the
Specified Equipment or the Gaming Equipment, the covenants and events of default
in the FF&E Financing will be similar to those in the Bank Credit Facility. The
disposition of collateral consisting of Gaming Equipment is subject to the
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requirements of the Nevada Act, including the approval of the Nevada Board or
the licensing of the Lenders before foreclosure, taking possession or other
disposition of such Gaming Equipment.
BANK COMPLETION GUARANTY
The Trust, London Clubs and Bazaar Holdings (collectively, the
"Guarantors") have entered into a guaranty of performance and completion (the
"Bank Completion Guaranty") in favor of each of the Administrative Agent and the
Bank Lenders. The Bank Completion Guaranty provides that the Guarantors jointly
and severally guarantee to the Bank Lenders under the Bank Credit Facility,
among other things (the "Guaranteed Obligations"), that:
(i) the Company will promptly carry out the work required for the
redevelopment of the Aladdin in accordance with the approved plans and
specifications and to correct as soon as possible any material defect in
such work or material deviation from the approved plans and
specifications;
(ii) the Company will punctually pay all costs, expenses and liabilities in
connection with the redevelopment of the Aladdin, including all
construction period interest incurred on the Bank Credit Facility,
prior to completion of the work and in connection with cost overruns of
any type;
(iii) the Company will complete the redevelopment lien-free and on schedule;
(iv) the Company will provide the expertise necessary to supervise the
redevelopment of the Aladdin at no cost to the Bank Lenders;
(v) in the event the Guarantors fail to pay their respective obligations
under the Bank Completion Guaranty, the Bank Lenders may pay and perform
the Guaranteed Obligations on behalf of the Guarantors, in which case
the Guarantors, upon demand, must reimburse the Bank Lenders all cost,
expenses and liabilities in connection with the completion of the
redevelopment of the Aladdin; and
(vi) the Guarantors shall pay the Bank Lenders all reasonable out-of-pocket
costs and expenses of the Bank Lenders in connection with the
enforcement of the Bank Lenders' rights and remedies under the Bank
Completion Guaranty.
The Bank Completion Guaranty has (i) negative covenants which, among other
things, prohibit the Guarantor from incurring certain liens and certain types of
indebtedness and (ii) affirmative covenants which, among other things, require
that each of the Guarantors provide certain financial information and maintain
the corporate existence of each Guarantor and its subsidiaries.
Should certain London Clubs specified exceptional events (a "Specified
Event") under the Bank Completion Guaranty occur, at the option of the required
lenders, such Specified Event shall constitute an event of default under the
Bank Completion Guaranty and consequently under the Bank Credit Facility, and
the Bank Lenders, without any further notice to a Guarantor, shall be entitled
to exercise all rights and remedies available under the Bank Completion Guaranty
and any other Loan Documents.
The following is a summary of the Specified Events:
(i) any time London Clubs fails to comply with certain covenants,
including but not limited to financial covenants, in the Bank Completion
Guaranty and to the extent such non-compliance is curable, such
non-compliance is not cured within twenty-five (25) days;
(ii) any borrowed money for a sum in excess of L2,500,000 or the
equivalent in any other currency of London Clubs or any material subsidiary
has by reason of breach or default become due and payable prior to its
stated maturity or due date or if such borrowed money is not paid at the
maturity thereof or due date therefor, or if payable on demand, is not paid
on demand;
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(iii) London Clubs or any material subsidiary becomes insolvent or
applies for or consents to the appointment of a liquidator, receiver or
trustee in bankruptcy or similar official or London Clubs or any material
subsidiary fails generally to pay its debts as and when they become due;
(iv) a petition is presented (but only if such petition remains
undischarged 90 days after presentation thereof) or a meeting is convened or
an order is made or other action or proceedings are taken with a view to the
appointment of an administrator, winding-up, liquidation or dissolution of
London Clubs or any material subsidiary or London Clubs or any material
subsidiary stops or threatens to stop payments generally or ceases or
threatens to cease to carry on its business or a substantial part thereof or
London Clubs or any material subsidiary merges, consolidates or amalgamates
with any other company or entity in a transaction not otherwise permitted
under the L65,000,000 Facilities Agreement among, London Clubs, various
banks and National Westminster PLC (the predecessor-in-interest to the The
Bank of Nova Scotia) as arranger and agent;
(v) a distress, execution or other legal process is levied against any
of the assets of London Clubs or any material subsidiary and is not
discharged or paid out within 90 days, except where such distress, execution
or legal process is in the reasonable opinion of the required lenders being
contested in good faith by London Clubs or the relevant material subsidiary;
or
(vi) an encumbrancer takes possession or a receiver or an administrative
receiver is appointed of the whole or any substantial part of the assets or
undertaking of London Clubs or any material subsidiary.
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CERTAIN MATERIAL AGREEMENTS
The following discussion summarizes the material terms of certain material
agreements which have been entered into or are currently being negotiated
between the Company (and/or the Controlling Stockholders) and various other
parties. This summary does not purport to be complete and is qualified in its
entirety by reference to the full agreements described herein once finalized and
executed. Capitalized terms used but not otherwise defined in this Prospectus
shall have the meaning ascribed to such terms in the agreement being described
(unless otherwise indicated).
AGREEMENTS WITH RESPECT TO THE ALADDIN
HOLDINGS OPERATING AGREEMENT
The Holdings Members have entered into an operating agreement (the "Holdings
Operating Agreement") setting forth their agreement as to the relationships
between Holdings and the Holdings Members and among the Holdings Members
themselves and as to the conduct of the business and internal affairs of
Holdings. The following is a summary of certain key provisions of the Holdings
Operating Agreement.
PURPOSE. Holdings was organized for the purposes of developing,
constructing, financing, owning and operating hotels and casinos and related
businesses and to engage in such other lawful enterprises as may be incidental
or appurtenant thereto.
CLASSES OF INTERESTS. Holdings is capitalized with three classes of shares
(which represent units of membership interests in Holdings): Common Shares (the
"Holdings Common Membership Interests"), Series A Preferred Shares (the
"Holdings Series A Preferred Interests") and Series B Preferred Shares (the
"Holdings Series B Preferred Interests" and together with the Holdings Common
Membership Interests and the Holdings Series A Preferred Interests, the
"Holdings Interests"). Holdings' authorized capital stock consists of 10,000,000
Holdings Common Membership Interests, 1,500,000 Holdings Series A Preferred
Interests and 1,500,000 Holdings Series B Preferred Interests.
Holdings will periodically distribute cash, to the extent available, to the
holders of Holdings Common Membership Interests (or, if any such holder is a
pass-through entity, its equity interest holders) to the extent of the increase
in their cumulative United States federal, state or local income tax liability
in respect of their interests in Holdings for such period and make any
additional distributions of cash to Holdings Members that may be necessary to
cover United States federal, state or local income taxes arising from the
ownership of an interest in Holdings. No other distributions shall be made to
any Holdings Interests until all distributions to cover tax liability in respect
of any Holdings Interests for such period have been made.
The Holdings Series A Preferred Interests will be issued to LCNI or Sommer
Enterprises in consideration for any payment required pursuant to the Bank
Completion Guaranty, the Noteholder Completion Guaranty or the Keep-Well
Agreement (or a payment to the Company to cover any EBITDA shortfall under the
Bank Credit Facility) which is made by Sommer Enterprises, LCNI or their
respective affiliates to the Company where such payment is not required to be
made to pay down the Company's bank debt pursuant to Section 13 of the Keep-Well
Agreement. Except for distributions to cover any tax liability in respect of any
Holdings Interests, the Holdings Series A Preferred Interests will have a
distribution, redemption and liquidation preference over all Holdings Common
Membership Interests and Holdings Series B Preferred Interests. To the extent of
any net profits left to be allocated after special allocations, the capital
account in respect of the Holdings Series A Preferred Interests will cumulate
and compound semi-annually at the rate of 12% per annum on the capital account
balance in respect thereof at the time of compounding and, subject to the
limitations on Restricted Payments set forth in the Indenture, will be paid when
a supermajority of the Holdings Board determines that there is sufficient cash
available to do so. Holdings Series A Preferred Interests will be automatically
redeemed when distributions have been made to the extent of the capital account
balance in respect thereof. Should Holdings liquidate at any time prior to the
redemption of the Holdings Series A Preferred Interests, the Holdings Series A
Preferred Interests will be entitled to a distribution of cash, to the extent
available, before any distributions are made
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to the Holdings Series B Preferred Interests or Holdings Common Membership
Interests, in an amount equal to the capital account of the Holdings Series A
Preferred Interests.
The Holdings Series B Preferred Interests will be issued to LCNI in the
event of and in exchange for a payment required by London Clubs to pay down the
Company's bank debt pursuant to Section 13 of the Keep-Well Agreement. Except
for distributions to cover any tax liability in respect of any Holdings
Interests, the Holdings Series B Preferred Interests will have a distribution,
redemption and liquidation preference over all Holdings Common Membership
Interests. To the extent of any net profits left to be allocated after special
allocations and allocations to Holdings Series A Preferred Interests, the
capital account in respect of Holdings Series B Preferred Interests will
cumulate and compound quarterly at a rate equal to the rate on the bank debt of
the Company which was paid down by the payment required pursuant to the
Keep-Well Agreement, such rate to be applied to the capital account balance in
respect of the Holdings Series B Preferred Interests at the time of compounding
and, subject to the limitations on Restricted Payments set forth in the
Indenture, will be paid when a supermajority of the Holdings Board determines
that there is sufficient cash available to do so after all Holdings Series A
Preferred Interests have been redeemed. Holdings Series B Preferred Interests
will be automatically redeemed when distributions have been made to the extent
of the capital account balance in respect thereof. Should Holdings liquidate at
any time prior to the redemption of the Holdings Series B Preferred Interests,
the Holdings Series B Preferred Interests will be entitled to a distribution of
cash, to the extent available, before any distributions are made to the Holdings
Common Membership Interests, in an amount equal to the capital account of the
Holdings Series B Preferred Interests.
Other than distributions to cover any tax liability in respect of any
Holdings Interests, the Holdings Common Membership Interests will be entitled to
distributions only after all discretionary and mandatory distributions have been
made to all other interests in Holdings.
The Indenture contains restrictions on the payment of distributions to the
Holdings Interests.
Distributions to all Holdings Interests are payable only out of the assets
of Holdings at the time of such distribution, and in no event shall any holder
of an interest in Holdings be obligated to make a contribution to Holdings for
the payment of distributions.
Except for matters affecting rights of the holders of Holdings Series A
Preferred Interests and Holdings Series B Preferred Interests to distributions,
including upon redemption, (which may not be diminished or affected without the
vote of the holders of at least two-thirds of the issued and outstanding shares
of the affected class) and matters affecting the anti-dilution protections,
rights to move their investment directly into Holdings in certain circumstances
and tag-along participation rights of the holders of the Warrants and the
Warrant Shares (which may not be amended without the consent of the Issuer), all
management and voting rights are vested in the Holdings Common Membership
Interests.
ADJUSTMENTS IN INTERESTS. Subject to the receipt of applicable Gaming
Approvals, the percentages of the Holdings Common Membership Interests held
directly by each Holdings Member (each, a "Holdings Percentage Interest") will
be adjusted by the issuance of additional Holdings Common Membership Interests
and/or cancellation of issued and outstanding Holdings Common Membership
Interests in the following circumstances:
(i) on the opening date of the Aladdin (the "Opening Date") LCNI's
Holdings Percentage Interest shall be decreased by 0.5% and Sommer
Enterprises' Holdings Percentage Interest shall be increased by 0.5%;
(ii) in the event of defaults in payment of a Holdings Member's or its
Affiliates' share of payments required pursuant to the Keep-Well Agreement
(or payments to the Company to cover any EBITDA shortfall under the Bank
Credit Facility), the defaulting Holdings Member's Holdings Percentage
Interest shall be reduced and the non-defaulting Holdings Member's Holdings
Percentage Interest shall be increased by 1, 1.5 or 2 times (depending on
whether the defaulting Holdings
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Member is in default for 30 days, 45 days or 60 days from the date of such
default) multiplied by a dilution fraction, the numerator of which is the
delinquent contribution and the denominator of which is $200 million;
(iii) upon the exercise of any Warrants, the relative Holdings
Percentage Interests of all Holdings Members other than LCNI and the Issuer
will be adjusted so that all such Holdings Members share proportionately the
dilutive effect of such exercise on their directly and indirectly held
Holdings Percentage Interests (unvested Holdings Common Membership Interests
will also be adjusted thereupon);
(iv) upon any adjustment of the Issuer's Holdings Percentage Interest
pursuant to the Warrant Agreement (which may occur in the event of:
dividends or distributions by Holdings; subdivisions or combinations of
Holdings Common Membership Interests; issuance of Holdings Common Membership
Interests or any rights to purchase Holdings Common Membership Interests for
less than fair value; and similar events that typically trigger
anti-dilution protection adjustments for holders of warrants), the Holdings
Percentage Interest of the Holdings Members other than the Issuer will be
correspondingly adjusted to accommodate such adjustment in the Issuer's
Holdings Percentage Interest, so that all such Holdings Members share
proportionately the effect of such adjustment on their directly and
indirectly held Holdings Percentage Interest (unless such Holdings Members
agree to some other arrangement for sharing such effect); and
(v) Upon vesting of any Restricted Membership Interests, the Percentage
Interests of LCNI and Sommer Enterprises shall be reduced so that LCNI bears
25% of the dilutive effect thereof (assuming that no adjustments of the type
described in (iii) above have occurred) and Sommer Enterprises bears all the
remaining dilutive effect thereof, and their capital amounts shall be
correspondingly reduced to accommodate the capital account of the new
member.
In certain circumstances provided in the Equity Participation Agreement,
the holders of Warrants and Warrant Shares will have the right to move their
investment directly into Holdings, in which event the Percentage Interest of the
Issuer will be reduced to accommodate such interest.
SPECIAL CAPITAL ACCOUNT ADJUSTMENT. Upon the redemption of any Notes by
Holdings, upon receipt of applicable Gaming Approvals, Sommer Enterprises'
capital account in Holdings in respect of its Holdings Common Membership
Interests will be reduced by the product of LCNI's Holdings Percentage Interest
at the time of such redemption multiplied by the Accreted Value on the Issue
Date of the Notes being redeemed and LCNI's capital account shall be increased
by the same amount.
SUPERMAJORITY APPROVALS. The following actions by Holdings or the Company
will require approval of the holders of at least 80% of the Holdings Common
Membership Interests:
(i) the admission of a new Holdings Member, the acceptance of any
capital contributions not provided for in the Holdings Operating Agreement,
the Bank Completion Guaranty, the Noteholder Completion Guaranty, the
Keep-Well Agreement or the Contribution Agreement (as defined in the
Holdings Operating Agreement), or the issuance of additional shares or
securities of Holdings convertible into or exchangeable for shares or the
granting of any options or other rights to acquire from Holdings, or other
obligation of Holdings to issue, any shares or securities convertible into
or exchangeable for shares (other than in respect of the matters referred to
in item (xvi), below); (ii) other than distributions by subsidiaries of
Holdings or Priority Distributions to Holdings Common Membership Interests
or distributions to cover any tax liability in respect of any Holdings
Interests, any declaration, setting aside or payment of any distribution;
(iii) any voluntary dissolution or liquidation of Holdings or the Company or
the sale of all or substantially all of the assets of Holdings and the
Company; (iv) any merger or consolidation of Holdings with any person; (v)
any amendment to the articles of Holdings or the Holdings Operating
Agreement; (vi) (A) during the period that the Keep-Well Agreement is in
force, the creation, incurrence, assumption or guarantee of any indebtedness
(excluding obligations under leases made in the ordinary course of business)
and (B) after the
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Keep-Well Agreement is no longer in force, the creation, incurrence,
assumption or guarantee of any indebtedness (excluding obligations under
leases made in the ordinary course of business) in excess of $10 million in
any individual transaction (such threshold limit to be increased at the end
of each fiscal year by an amount determined by the Holdings Board to
correspond to increases in consumer prices in the United States for such
fiscal year); (vii) the creation of any lien, pledge or other security
interest in assets of Holdings or any subsidiary of Holdings securing
indebtedness of any third party which is not for the benefit of any business
carried on by Holdings or the Company; (viii) the commencement of a
voluntary case under Title 11 of the United States Code entitled
"Bankruptcy" (the "Bankruptcy Code") or any other voluntary proceeding under
any debtor relief laws or any voluntary general assignment for the benefit
of creditors; (ix) any material transactions (other than transactions
provided for in Sections 6.7(a) or 6.9 of the London Clubs Purchase
Agreement) between Holdings or the Company, on the one hand, and any
Holdings Member or any affiliate of any Holdings Member, on the other hand;
(x) any entry into any new business opportunity unrelated to the Aladdin;
(xi) the appointment or removal of Holdings' independent auditors; (xii) any
material amendment to, or any material waiver under, the Bazaar Lease (such
consent not to be unreasonably withheld); (xiii) any material amendment to,
or any material waiver under, the Reciprocal Easement Agreement (such
consent not to be unreasonably withheld); (xiv) any arrangement or agreement
for Holdings to pay a salary to any Holdings Member or any affiliate of any
Holdings Member (other than pursuant to the Consulting and Employment
Agreements and other than in respect of the matters referred to in (xvi),
below); (xv) the employment of any member of an Executive Management
Committee (as defined herein) of Holdings or the Company or any material
amendment to the terms of employment of any such person; (xvi) the adoption
of, or any material amendment to, any employee benefit, profit sharing,
incentive, bonus, pension, retirement or employee stock option plans (such
consent not to be unreasonably withheld in the context of industry
practice); (xvii) any license of the Aladdin trademark to any person other
than a subsidiary of Holdings or in connection with the Complex and the
operations in respect thereof (such consent not to be unreasonably
withheld); (xviii) any contract (including leases) outside the ordinary
course of business or for capital expenditure not included in Holdings'
annual budgets (such consent not to be unreasonably withheld); and (xix) the
initiation or settlement of any material litigation outside the ordinary
course of business and the selection of counsel therefor (such consent not
to be unreasonably withheld).
Unless London Clubs has appointed a majority of the Holdings Board, the
above supermajority approval rights will cease in the event that London Clubs is
bankrupt or responsible for an event of default under the Keep-Well Agreement,
the Bank Completion Guaranty or the Noteholder Completion Guaranty.
London Clubs will also have broad approval and consultation rights in
respect of material contracts and decisions relating to the Redevelopment (as
defined in the Holdings Operating Agreement), including (without limitation)
relating to certain aspects of the construction phase of the Aladdin, the Mall
Project and the Music Project.
MANAGEMENT. The business and affairs of Holdings are managed by the
Holdings Board, which holds Board meetings at least quarterly. Holdings' Board
consists of three nominees of the Issuer and two nominees of London Clubs, each
of which shall serve for a 3 year term unless they resign, are removed or are
otherwise disqualified to serve at an earlier time. The initial members of the
Holdings Board (the "Holdings Board Members") are Jack Sommer, Ronald B. Dictrow
and Richard J. Goeglein as appointees of the Issuer and Alan L. Goodenough and
G. Barry C. Hardy as appointees of London Clubs. Jack Sommer is Chairman of the
Holdings Board. A Holdings Board Member appointed by London Clubs and a Holdings
Board Member appointed by the Issuer will have the right to be on each committee
of the Board. The Holdings Board Members may be removed at any time by their
appointing Holdings Member. In the event of a vacancy on the Holdings Board, the
Holdings Member who appointed the previous Holdings Board Member shall appoint
the new Holdings Board Member.
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In certain circumstances related to (i) a failure to make its share of
payments under the Bank Completion Guaranty and the Keep-Well Agreement, or (ii)
the requirement to make a certain level of payments under the Keep-Well
Agreement (other than payments caused by certain losses of the Salle Privee),
whether or not London Clubs and Sommer Enterprises each pay their share of such
payments, Sommer Enterprises shall cause the Issuer to change the composition of
Holdings' Board by the appointment of new Holdings Board Members designated by
the non-defaulting Holdings Member and/or the removal of Holdings Board Members
appointed by the defaulting Holdings Member and/or the appointment of a new
independent Board Member designated by the non-defaulting Holdings Member. If a
Holdings Member holding a majority of Holdings Common Membership Interests has
defaulted in its payment obligations under the Keep-Well Agreement, the Bank
Completion Guaranty or the Noteholder Completion Guaranty, London Clubs and
Sommer Enterprises also will be required to vote all Holdings Common Membership
Interests owned or controlled by them so that they have equal voting power as
Holdings Members.
The Holdings Members will agree to take all necessary action to ensure that
each Holdings Member shall have identical rights to those they have in respect
of Holdings with respect to the board of management (or comparable bodies) and
management of the Company.
TRANSFERS OF SHARES. Except for transfers pursuant to the Loan Documents,
transfers of Holdings Common Membership Interests are only permitted:
(i) to affiliates of the transferring Holdings Member or persons approved by
all Holdings Members holding Holdings Common Membership Interests;
(ii) to persons other than certain prohibited transferees after giving other
Holdings Members holding Holdings Common Membership Interests a right of first
refusal and the right to tag-along ratably; and
(iii) in some circumstances related to estate planning by Holdings Members.
Certain transfers in ownership interests in Holdings Members holding
Holdings Common Membership Interests and in any entity owning a majority of a
Holdings Member (other than London Clubs) holding Holdings Common Membership
Interests are also prohibited without first affording the other Holdings Members
holding Holdings Common Membership Interests a right of first refusal over such
Holdings Member's Holdings Common Membership Interests. The exercise and
transfer of Warrants or the transfer of Warrant Shares will not be restricted by
this provision.
Holdings or its nominee have the right to call a Holdings Member's Holdings
Common Membership Interests (but not the Holdings Common Membership Interests
held by Enterprises) at seventy-five percent of the fair market value of such
Holdings Common Membership Interests if there is (i) a change in control of such
Holdings Member, other than a permitted transfer of an ownership interest in a
Holdings Member as described above or a change in control of London Clubs, (ii)
a transfer of Holdings Common Membership Interests by such Holdings Member in
breach of the Holdings Operating Agreement or (iii) a breach by such Holdings
Member of the non-compete covenants described below.
INITIAL PUBLIC OFFERING. The Holdings Operating Agreement provides that the
Holdings Members anticipate executing an initial public offering ("IPO") as soon
as it is commercially reasonable to do so after the Opening Date. Sommer
Enterprises and LCNI have rights to demand an IPO if one has not occurred within
3 years of the Opening Date, although Sommer Enterprises may defer such a demand
by LCNI for up to a year. The members or stockholders of the IPO entity
immediately prior to the IPO will enter into a Stockholders and Registration
Rights Agreement substantially in the form scheduled to the Holdings Operating
Agreement providing for arrangements between such members or stockholders as to
certain management matters, transfer restrictions, tag along rights and
registration rights.
If permitted by law and market requirements, LCNI and Sommer Enterprises
have rights to acquire additional Holdings Common Membership Interests (or their
equivalents in an IPO Entity) as part of or prior to an IPO at a price based on
the IPO price discounted to reflect the absence of underwriting fees and costs.
LCNI also has rights to effect purchases from Holdings or Sommer Enterprises to
maintain a Percentage Interest of 20% or more.
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LIABILITY, EXCULPATION AND INDEMNIFICATION. The Holdings Operating
Agreement contains provisions relieving members, officers, employees and the
Holdings Board Members and those of Holdings' subsidiaries from certain
liability, fiduciary duties and conflicts and will also provide for various
indemnities to such persons, payment of expenses and provision of errors and
omissions insurance.
GAMING MATTERS. Admission of new Holdings Members, transfers of Holdings
Interests and payment of distributions by Holdings will be subject to receipt of
Nevada Gaming Approvals. Holdings Members and their affiliates, directors and
employees will cooperate to obtain applicable Gaming Approvals from the Nevada
Gaming Authorities, as necessary. If Nevada gaming problems arise prior to a
finding of unsuitability by the Nevada Gaming Authorities, a Holdings Member
causing such problem (or whose director, officer or affiliate caused such
problem) shall cooperate to remedy it, and, if not remedied, may be forced to
sell its Holdings Common Membership Interests to Holdings or its nominee at fair
market value.
NON-COMPETE. LCNI and Sommer Enterprises have agreed that they and their
affiliates will refrain from certain competitive activities (with appropriate
geographic and temporal limitations and exceptions for certain existing
activities of their affiliates), unless Holdings (without the participation of
the Holdings Member affected or its nominee Holdings Board Members) has first
refused to pursue such activities.
TERM. Holdings shall continue until December 1, 2097, or such other time as
agreed in writing by all Holdings Members. In the event of the death or
bankruptcy of a Holdings Member, Holdings and the other Holdings Members will
have certain rights to purchase such bankrupt or deceased member's Holdings
Common Membership Interests.
COMPANY OPERATING AGREEMENT
Holdings and the Company have entered into an operating agreement (the
"Company Operating Agreement") which sets forth provisions governing the conduct
of the business and internal affairs of the Company. The following is a summary
of certain key provisions of the Company Operating Agreement.
PURPOSE. The Company was organized for the purposes of developing,
constructing, financing, owning and operating hotels and casinos and related
businesses and to engage in such other lawful enterprises as may be incidental
or appurtenant thereto.
CLASSES OF INTERESTS. The Company is capitalized with two classes of shares
(which represent units of membership interests in the Company): Common
Membership Interests and Series A Preferred Interests. The Company's authorized
capital stock will consist of 10,000,000 Common Membership Interests and
1,150,000 Series A Preferred Interests.
The Series A Preferred Interests have a distribution, redemption and
liquidation preference over the Common Membership Interests. Beginning in the
sixth year after the initial issuance of the Series A Preferred Interests,
periodic distributions of cash, to the extent available, will be made by the
Company first to the Series A Preferred Interests in an amount equal to the
interest payable on the Notes for such period and, prior to the end of the
twelfth year after the issuance of the Series A Preferred Interests, the Company
will distribute cash, to the extent available, in redemption of the Series A
Preferred Interests in an amount equal to their redemption preference. The
redemption preference of the Series A Preferred Interests will accrete so that
such preference will, at all times, equal the Accreted Value of the Notes (plus
any premium payable to the holders of the Notes). In addition, should the
Company liquidate at any time prior to the redemption of the Series A Preferred
Interests or should all or any part of the Series A Preferred Interests be
redeemed prior to the end of the twelfth year after their issuance as a result
of the Change of Control Payment, the Series A Preferred Interests shall be
entitled to a distribution of cash, to the extent available, before any
distributions are made to any other classes of Interests, in an amount equal to
their liquidation preference which will accrete so that such preference at all
times equals the Accreted Value of the Notes (plus any premium payable to the
holders of the Notes) at such time.
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After all discretionary or required distributions of cash are made to the
Series A Preferred Interests for any period, the Company will distribute cash,
to the extent available, to the holders of Common Membership Interests to the
extent of the increase in the cumulative United States federal, state or local
income tax liability of such holders of Common Membership Interests (or, if any
such holder is a pass-through entity, its equity interest holders) in respect of
their interests in the Company for such period and make any additional
distributions of cash to Members that may be necessary to cover United States
federal, state or local income taxes arising from ownership of an interest in
the Company ("Company Tax Distributions").
After distributions to the Series A Preferred Interests and Company Tax
Distributions, the Board will make a priority distribution of cash, to the
extent available, on the Common Membership Interests to permit Holdings to
satisfy any additional obligations it may have to make payments on the Notes
("Priority Distributions to Common Interests").
MANAGEMENT. The business and affairs of the Company are managed by the
Company's Board. Pursuant to the Holdings Operating Agreement, the Holdings
Members will have identical rights with respect to the Company's Board and
management as they have in respect of the Holdings Board and management.
The Company's Board is responsible for establishing and overseeing all
policies and procedures in connection with the operation of the Company's
business, but shall delegate the day-to-day management responsibility to an
executive management committee (the "Executive Management Committee"). The
Executive Management Committee includes the following persons: the President and
Chief Executive Officer of the Company, the Chief Financial Officer of the
Company, the Senior Vice President of the Company who is the President and Chief
Operating Officer of the Aladdin, the Senior Vice President of the Company who
is the President and Chief Operating Officer of the Music Project and Casino,
the Senior Vice president Human Resources of the Company, the Senior Vice
President Electronic Gaming of the Company and the Managing Director of the
Salle Privee.
LIABILITY, EXCULPATION AND INDEMNIFICATION. The Company Operating Agreement
contains provisions relieving members, officers, employees and the members of
the Company's Board ("Company Board Members") and those of the Company's
subsidiaries from certain liability, fiduciary duties and conflicts and will
also provide for various indemnities to such persons, payment of expenses and
provision of errors and omissions insurance.
TERM. The Company shall continue until January 24, 2097, or such other time
as agreed in writing by all Company Members.
EQUITY PARTICIPATION AGREEMENT
The Issuer, Sommer Enterprises, LCNI and the Warrant Agent, for and on
behalf of the holders of the Warrants and the Warrant Shares, have entered into
an agreement (the "Equity Participation Agreement") under which (a) the parties
agreed that they will not effect a public offering of common stock of any IPO
Entity unless LCNI, Sommer Enterprises and the holders of the Warrants and
Warrant Shares each are given the right to hold their respective equity
interests in the IPO Entity; (b) the Issuer agreed that prior to any such public
offering (or if the Issuer is the IPO Entity, at all times), it will not become
an "investment company" (as that term is defined in the Investment Company Act
of 1940, as amended) required to register under that Act (c) the parties granted
the holders of the Warrant Shares certain rights to participate in the tag along
arrangements under the Holdings Operating Agreement and agree to effect certain
adjustments to the percentage ownership of Holdings Common Membership Interests
and certain redemptions of Warrant Shares to give effect to such tag along
rights, as described below and (d) the Warrant holders will have the right to
convert their Warrant Shares into Common Membership Interests in the Company in
the event that the Issuer takes certain actions, including certain mergers or
consolidations, disposition of all or substantially all of the Issuer's assets,
transfers of Issuer's Holdings Common
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Membership Interests, certain recapitalizations of Issuer, voluntary dissolution
or liquidation of Issuer, repurchases of Issuer's stock which is not pro-rata
among the stockholders, and certain issuances of Issuer's stock.
Pursuant to the Equity Participation Agreement, holders of Warrant Shares
are entitled to cause the Issuer to partially exercise its rights to participate
in certain sales by Holdings Members of Holdings Common Membership Interests to
a non-affiliated party. The proceeds of any such sale of Holdings Common
Membership Interests by the Issuer will be used to redeem the Common Stock in
the Issuer of such holders who elected to exercise such rights.
Holders of Warrants and Warrants Shares should note, however, that under the
Indenture certain sales of Holdings Common Membership Interests could constitute
a change of control under the Indenture. In that event, Holdings would be
required to redeem the Notes at a redemption price equal to 101% of their
Accreted Value.
SALLE PRIVEE MANAGEMENT AGREEMENT
The Company, London Clubs and a subsidiary of London Clubs, LCNI, are
parties to the Salle Privee Management Agreement in respect of the Salle Privee.
Under such agreement, LCNI will (a) provide advice and consulting services
regarding the development and fitting out of the Salle Privee, (b) provide
certain worldwide marketing and promotional services in relation to the Salle
Privee and (c) direct the operations of the Salle Privee in accordance with
certain policies and procedures developed by LCNI in consultation with the
Company, and in accordance with the Company's budgets and marketing plans. Under
such agreement, London Clubs has agreed to guaranty the obligations of LCNI.
OPERATIONS AND MANAGEMENT. Under the Salle Privee Management Agreement,
LCNI will direct the operations of the Salle Privee in consultation with the
Executive Management Committee of the Company. LCNI will also provide worldwide
marketing and promotional services targeted at its international clientele,
including a plan for cross-marketing the Salle Privee with London Clubs' and its
affiliates' other gaming facilities throughout the world.
CREDIT MANAGEMENT/GAMING LIMITS. The Salle Privee will be subject to the
Company's financial control facilities and credit management will be
administered by the Company's central credit oversight committee, in
consultation with LCNI. Basic risk management policies regarding gaming limits
and credit facilities for the Salle Privee will be established by the Company's
Board based upon the input and recommendations of LCNI. LCNI will have the right
to permit certain clientele from time to time to exceed the normal wagering
limits. In consideration for such flexibility, LCNI has agreed to reimburse the
Company for any net losses suffered by the Company in connection with such
above-limit wagering.
LONDON CLUBS FEE. In consideration for the services to be furnished by
London Clubs under the Salle Privee Management Agreement, the Company will pay
to London Clubs an Incentive Marketing and Consulting Fee calculated as follows:
(i) 10% of the Salle Privee EBITDA (defined in the Salle Privee Management
Agreement as gross revenues attributable to the Salle Privee, less all costs and
expenses directly attributable to the Salle Privee), up to and including $15.0
million in Salle Privee EBITDA; plus (ii) 12.5% of the Salle Privee EBITDA, in
excess of $15.0 million, up to and including $17.0 million; plus (iii) 25% of
the Salle Privee EBITDA, in excess of $17.0 million, up to and including $20.0
million; plus (iv) 50% of the Salle Privee EBITDA, in excess of $20.0 million.
The foregoing thresholds will be adjusted in accordance with consumer price
index changes every five years.
TERM. The term of the Salle Privee Management Agreement is sixty-nine (69)
years unless terminated earlier by either party after the other's default, in
connection with Nevada or United Kingdom gaming problems, by mutual agreement,
by a party upon London Clubs, LCNI's or the Company's bankruptcy or upon LCNI no
longer having an equity interest in Holdings.
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LONDON CLUBS PURCHASE AGREEMENT
Pursuant to an Amended and Restated Purchase Agreement dated as of February
26, 1996 by and among London Clubs, LCNI, AHL, Sommer Enterprises, the Trust and
the Company (the "London Clubs Purchase Agreement") LCNI acquired 25.0% (subject
to adjustment pursuant to the Holdings Operating Agreement as described above)
of the Holdings Common Membership Interests for a purchase price of $50.0
million.
The Music Project is expected to be developed and owned by Aladdin Music.
Pursuant to the London Clubs Purchase Agreement, London Clubs, through its
wholly owned subsidiary LCNI, has agreed that so long as Aladdin Music obtains
financing for the Music Project on terms satisfactory to LCNI, and provided that
certain other conditions are met, Aladdin Music may develop and own the Music
Project in accordance with the terms described herein. If such conditions are
not met, LCNI has the right to select the method in which it will participate in
the Music Project, if at all. See "Risk Factors--Completion of the Mall Project
and the Music Project."
Pursuant to the London Clubs Purchase Agreement, the Company has reimbursed
the Trust on the Issue Date $3 million for certain costs relating to the
development of the Aladdin incurred by the Trust during 1996 and 1997 and has
agreed to reimburse the Trust for out of pocket expenses of the Trust related to
the development of the Aladdin after the Issue Date not to exceed $900,000.
In consideration for its obligations under the Keep-Well Agreement and
related arrangements, under the London Clubs Purchase Agreement, the parties
have agreed that London Clubs will receive (a) an initial fee of 1.0% of a
$265.0 million portion of the Company's bank debt which is supported and
enhanced by the Keep-Well Agreement (such fee to be payable on the closing date
of the Bank Credit Facility), and (b) an annual fee of 1.5%, payable in arrears,
of the Company's annual average indebtedness with respect to a $265.0 million
portion of the Company's bank debt which is supported and enhanced by the
Keep-Well Agreement for each relevant twelve month period ending on an
anniversary of the Bank Closing Date, which amount shall reflect the extent, if
any, by which the obligations under the Keep-Well Agreement are reduced or
eliminated over time (such fees shall accrue from the closing date of the Bank
Credit Facility and shall be paid from available proceeds after the opening date
of the Aladdin).
DESIGN/BUILD CONTRACT
OVERVIEW. The Company and the Design/Builder have entered into the
Design/Build Contract for the design and construction of the Aladdin, the strip
facade and related retail space of the Mall Project (the "Work") for a
guaranteed maximum price ("GMP"). The GMP is guaranteed by the Design/Builder to
be a maximum of $267.0 million. The GMP includes the Design/Builder's Fee (as
defined in the Design/Build Contract), the cost of the Design/Builder's
Controlled Insurance Program ("CIP") and the Design/ Builder's costs necessarily
incurred by Design/Builder in the proper performance of its design/build
obligations under the Design/Build Contract (such costs collectively, the
"Costs"). The Design/Builder's Fee shall be the lesser of (a) the lump sum fixed
amount of $13.6 million and (b) 6.5% of the aggregate of all trade subcontracts
plus the price of any trade work performed by the Design/Builder. The Design/
Builder's General Conditions Costs shall not exceed the total sum of $22.0
million. Any costs incurred in excess of $22.0 million are nonreimbursable and
will be paid by the Design/Builder. The Costs shall not be higher than prices
and rates approved in advance by the Company, unless the Design/Builder has
received the Company's prior written consent to incur premium expenses. The
Costs include only: (i) labor costs for the Design/Builder in connection with
the Work; (ii) trade subcontract costs; (iii) costs of materials and equipment
incorporated in the completed construction; (iv) costs of other materials and
equipment, temporary facilities and related items; (v) miscellaneous costs, such
as premiums for insurance not covered by the CIP, but required by the
Design/Build Contract, sales, use or similar taxes, fees and assessments
associated with permits, licenses and inspections that are the responsibility of
the Design/Builder; (vi) other costs incurred in the performance of the Work and
to the extent approved in advance in writing
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by the Company; and (vii) costs associated with emergency repairs to damaged,
defective or nonconforming Work.
As an incentive to control costs, the Company has agreed to pay the
Design/Builder 60% of the aggregate net savings made by the Design/Builder in
incurring costs below the trade budget of $230.0 million with respect to labor,
equipment and materials from the various subcontractors and vendors performing
work under the Design/Build Contract. The Design/Builder will be liable for any
costs exceeding the GMP, unless the Company changes the scope of the Work. If
the Company requests certain changes to the scope of the Work, then pursuant to
the Bank Completion Guaranty, the Trust, Bazaar Holdings and London Clubs have
jointly and severally agreed, whenever there is a construction cost increase
caused by any such change, and subject to certain qualifications, to contribute
cash to the Company to fund such increases.
COMPENSATION FOR EARLY/LATE COMPLETION. In lieu of the Company procuring,
at the Design/Builder's cost, a liquidated damages insurance policy or a
business interruption insurance policy to compensate the Company for late
completion of the Work, the Company has paid the Design/Builder $2.0 million as
a bonus advance (the "Bonus Advance"). The Design/Builder may use the Bonus
Advance to buy liquidated damages insurance or it may choose to self-insure. In
either event, the Design/Builder can keep the Bonus Advance if the project is
finished on or before the date set for Substantial Completion. The Substantial
Completion Date (as defined in the Design/Build Contract) is 790 calendar days
from either January 12, 1998 or the date notice to proceed is received from the
Company, whichever is later. Said period is referred to in the Design/Build
Contract as the "Contract Time" and may only be adjusted in accordance with the
Design/Build Contract. As a further bonus, the Design/Builder shall be entitled
to receive $100,000 for each day, up to but not to exceed 90 days, that the Work
is substantially completed in advance of the date of Substantial Completion.
If the Design/Builder fails to achieve Substantial Completion of the Work
within the Contract Time, the Design/Builder must pay back the $2.0 million
Bonus Advance to the Company. Furthermore, the Design/Builder must pay the
Company, as liquidated damages, $100,000 per day starting on the first day after
the Substantial Completion date and continuing up to, but not exceeding, 90 days
thereafter.
PAYMENT. The Design/Builder must make an itemized application for payment,
on or about the 25th day of each month, based on an approved schedule of values
certified by the Design/Builder and ADP and supported by such data to
substantiate the Design/Builder's right to payment. Simultaneously with each
payment the Design/Builder must and must cause all subcontractors and vendors to
waive their mechanics lien rights for the labor, equipment and materials covered
by the payments made to the Design/Builder. The Design/Builder agrees to pay
when due all bills for labor, materials, equipment or services connected with
the Work. If a person or entity who provided any service, labor, equipment or
materials to the Design/ Builder in connection with the Complex files a lien
against the Company's property, the Design/Builder shall promptly bond the lien
with a legally sufficient undertaking. The Company may also deduct the amount of
the lien from any payments due to the Design/Builder until such lien is bonded
or otherwise discharged. The Company is entitled to retain 10% of all monies due
to the Design/Builder under the monthly applications for payment (excluding the
Design/Builder's fee and General Conditions) until the Work is 50% complete. The
Design/Builder may, at its sole cost and expense, substitute an irrevocable
letter of credit for any retainage held by the Company or on the Company's
behalf.
WARRANTIES AND GUARANTEES. The Design/Builder's construction warranties
and/or guarantees extend for one year after the Substantial Completion date. The
Design/Builder guarantees that its construction workmanship shall conform to
good construction practices applicable to projects of this type and that the
Work shall comply with the Design/Build Contract requirements, all applicable
laws, codes and regulations. The Design/Builder also guarantees that all
materials, equipment and supplies incorporated into the Work will be new, of the
best quality of the kind specified in accordance with industry standards, and
shall be fit for its intended purpose. Furthermore, the Design/Builder warrants
that: (i) the Design/Builder and
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its subcontractors are experienced, qualified and, where required by law,
licensed to perform their respective portions of the Work; and (ii) the design
of the Work will be in accordance with all agreed upon requirements, and all
applicable federal, state and local codes, rules, ordinances and regulations.
The Design/Builder agrees to prosecute the enforcement of all subcontractor and
vendor warranties at its sole costs and expense during the one year period after
the Substantial Completion Date. The Design/Builder shall assign to the Company
all subcontractor or vendor warranties and/or guarantees still surviving and in
effect more than one year after the Substantial Completion Date. The
Design/Builder's warranties and/or guarantees exclude damages or defects caused
by modifications to the Work directed by the Company and not performed by the
Design/Builder or its subcontractors, if the modifications to the Work were
performed without the knowledge and written consent of the Design/Builder. The
Design/Builder's warranty shall not apply to damages or defects caused by
ordinary wear and tear, insufficient maintenance, improper operation or improper
use by the Company.
INSURANCE. The Company and the Design/Builder have elected to implement the
CIP whereby the Company shall pay the Design/Builder for all associated premiums
to provide the following insurances: General Liability, Workers' Compensation,
Excess Liability, Contractual Liability and All Risk Builder's Risk for the
Company, the Design/Builder and all subcontractors of every tier. The
Design/Builder agreed that, where necessary or requested, each policy it
procures will identify the Company as either a Named Insured or an Additional
Insured and must contain full waivers of subrogation. The following is a
synopsis of the coverage for each of the required policies:
- - WORKERS' COMPENSATION. The Workers' Compensation policy covers liability
imposed by the workers' compensation and/or occupational disease statute of
the State of Nevada and any other state or governmental authority having
jurisdiction or related to the Work being performed. Employers' liability is
limited to $1.0 million bodily injury per accident per employee, $1.0
million bodily injury per disease per employee and $1.0 million policy limit
by disease. The extensions of coverage include other states, voluntary
compensation and employer's liability coverage, 60 day notice of
cancellation except 10 days for non-payment, Borrower/Servant coverage as
necessary, designated work place endorsement, alternate employer endorsement
and amendment of Notice of Occurrence.
- - COMMERCIAL GENERAL LIABILITY INSURANCE. Commercial General Liability
Insurance shall be provided with a combined single limit for bodily injury
and property damage of not less than $2.0 million per occurrence with a $2.0
million annual aggregate. Coverage includes, but is not limited to, personal
injury liability, blanket contractual liability covering contractual
liability assumed under the Design/ Build Contract, employees included as
additional insureds, broad form property damage liability, cross liability,
incidental medical malpractice coverage, excavation, collapse and
underground hazard. Extensions of coverage includes blanket waiver of
subrogation, fellow employee amendment-supervisor and above, unintentional
errors and omissions, stop gap liability for monopolistic fund states,
cancellation and non-renewal-60 days, except 10 days for non-payment,
amendment of notice of occurrence, contingent loading and unloading of
vehicles-excess, limitation of coverage to designated premises of project
and absolute asbestos exclusion.
- - EXCESS INSURANCE. Design/Builder shall provide excess insurance on a
following form basis with limits for bodily injury and property damage of
not less than $100.0 million per occurrence and annual aggregate. This
insurance policy or policies will contain three years extended coverage on
products and completed operations after that portion of the Complex is put
to its intended use or a notice of final completion of the Work has been
issued by the Company, whichever occurs last.
- - RISK OF LOSS. The Design/Builder shall insure for all risk of loss to
property of the Company, the Design/Builder or any subcontractor on a
"completed value basis." The Design/Builder's risk of loss under the
Design/Build Contract is limited to all work in place, and all materials and
equipment not in place but stored on or off the work site and intended for
permanent use therein. Furthermore, the Design/Builder agrees to insure or
self-insure all inland or ocean transit damage losses (in excess of
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carrier liability) to the property of the Company and to the property
purchased for the account of the Company for incorporation in the Work.
ADDITIONAL INSURANCE. Additionally, the Design/Builder has agreed to
procure and maintain the following, which is not included in the CIP: (i)
Automobile Liability Insurance, with limits of not less than $1.0 million
combined single limit for bodily injury and property damage; (ii) "all risk"
coverage the Design/Builder may deem necessary for protection against loss of
owned or rented capital equipment and tools, including any tools owned by
mechanics, and any tools, equipment, scaffolding, staging, towers and forms
owned or rented by it or its subcontractors; (iii) "Off-Site Work," including
Workers' Compensation and Commercial General Liability Insurance; (iv) umbrella
liability in excess of Employer's Liability, General Liability and Automobile
Liability (no more restrictive than the underlying insurance) with limits of
$5.0 million; and (v) a project-specific insurance policy for errors and
omissions in the amount of $5.0 million from ADP. The policy referred to in (v)
is subject to the Company's review and approval and covers all aspects of the
design of those parts of the Complex covered by the Work.
TERMINATION OF CIP. In the event of non-enrollment or termination of the
CIP, the Design/Builder and/or its subcontractors agree to provide, pay for, and
maintain in effect the following types of coverage with insurance companies
satisfactory to the Company: Commercial General Liability Insurance, Workers'
Compensation, Automobile Liability Insurance, Tools and Equipment Floater
Policy, Insurance for "Off-Site Work," and Umbrella Liability. For all of these
policies the Design/Builder must obtain a waiver of subrogation against the
Company and all other named insureds and their agents and employees.
INDEMNIFICATION. The Design/Builder agrees and will cause each of its
subcontractors and vendors to agree in writing to defend, indemnify and hold
harmless to the fullest extent permitted by law the Company from and against all
liability incurred by the Company in the defense, settlement or satisfaction of
any claim of third parties which arise or are alleged to arise out of any
negligence, act or omission by the Design/Builder, subcontractor, or vendor or
their employees or agents or which arise or are alleged to arise from the
performance of the Work or any warranty and/or guarantee work pursuant to the
Design/Build Contract or any subcontract or purchase order with any
subcontractor or vendor. Neither the Design/ Builder nor any of its
subcontractors or vendors agree to indemnify the Company to the extent harm
results from the Company's gross negligence or willful misconduct, or where
indemnity is precluded pursuant to the applicable provisions of the laws of the
State of Nevada.
FORCE MAJEURE. Any delays in or failure of performance by either the
Company or the Design/Builder arising from a "Force Majeure" occurrence, which
includes, but is not limited to, labor disputes, civil disturbances, riots,
fire, weather which is both severe and unusual, governmental actions, acts of
war, or acts of God, shall not constitute a default under the Design/Build
Contract. A Force Majeure occurrence shall not constitute a waiver of either
party's obligations under the Design/Build Contract; however, time adjustments
shall be made to the Contract Time.
CANCELLATION OF DESIGN/BUILD CONTRACT. The Design/Build Contract may be
canceled for convenience by the Company in whole or in part, at any time, and
due to any circumstances by written notice. After such cancellation, the
Design/Builder shall do only such work as may be necessary to preserve and
protect the Work already in progress. The Design/Builder shall make every
reasonable effort to process cancellation, upon terms least costly to the
Company, of all existing orders to vendors and subcontractors. Upon such
cancellation, the Design/Builder agrees to waive any claims for delays,
acceleration, disruptions, or consequential damages, direct or indirect,
including, but not limited to, loss of anticipated income or profits and
unabsorbed or unrealized overhead for home office or field office on account
thereof, and agrees that the sole remedy is to receive payment of: (i) the
contract sum earned for work completed and accepted, equivalent to the portion
of the Work partially completed, based on the percentage of the Work performed
using the approved schedule of values for the Design/Builder's monthly payment
requisition, (ii) the actual reasonable cost incurred by the Design/Builder in
securing and protecting the Work in progress against loss, damage or
deterioration, (iii) reasonable demobilization costs, (iv) standby costs,
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(v) reasonable cancellation or deferment charges of suppliers, (vi) the actual
cost to the Design/Builder of materials, and equipment in possession of the
Company not sold or disposed of, and left at the Project Site, (vii) all actual
costs associated with relocation of key personnel, who were specially
transferred by the Design/Builder to Las Vegas specifically for the Work, and
(viii) other special reasonable costs and fees for terminating or suspending the
Work, preserving the Work accomplished, and turning such Work product over to
the Company.
CLAIMS AND DISPUTES. All claims arising under the Design/Build Contract
shall be directed by the Design/Builder in the first instance to the entity that
is the on-site representative of the Company promptly after the claim arises.
The decision of the Company's on-site representative may be appealed by notice
in writing directly to the Company. If the Company has not made a decision in
writing within 10 days thereafter, either party may invoke arbitration. Any
controversy, claim, or dispute arising out of or in connection with the
Design/Build Contract shall, upon the written request of either party, be
settled by arbitration in accordance with the Construction Industry Rules and
the Supplementary Procedures for Large, Complex Disputes of the American
Arbitration Association then in effect. The judgment of the award may be entered
in any court having jurisdiction thereof. All arbitration hearings shall be held
in Las Vegas, Nevada and will be administered by the Nevada Regional Office of
the American Arbitration Association.
FLUOR GUARANTY
In lieu of performance and payment bonds, Fluor has entered into the Fluor
Guaranty. Fluor has made certain guarantees regarding the performance by the
Design/Builder of all the Design/Builder's obligations under the Design/Build
Contract. The Fluor Guaranty is absolute, irrevocable and continuing. If
Design/Builder fails to perform any of its obligations under the Design/Build
Contract, or commits any breach, Fluor shall immediately take such steps as may
be necessary to have the Design/Builder perform the Design/Builder's obligations
under the Design/Build Contract, or remedy any breach or take such steps as may
be necessary itself, or through a third party other than the Design/Builder, to
perform all of the Design/Builder's obligations under the Design/Build Contract,
or to remedy any breach. The Company is not required to proceed first or at all
against the Design/Builder or any other person before enforcing the terms of the
Fluor Guaranty.
ENERGY AGREEMENTS
Pursuant to a development agreement (the "Development Agreement"), the
Energy Provider will design, engineer, procure and construct a facility (the
"Plant") capable of serving the Company's specified electricity requirements,
chilled water requirements and hot water requirements (collectively, the
"Services") of certain parts of the Complex. Pursuant to an energy services
agreement (the "ESA"), the Energy Provider will own and operate the Plant to
distribute the Services to the Aladdin and the Music Project for an initial
twenty year term. TrizecHahn will utilize the Plant for the provision of
electricity and cold water for the Mall Project.
DEVELOPMENT AGREEMENT
The Company has entered into a Development Agreement with the Energy
Provider, pursuant to which the Energy Provider will develop and construct the
Plant to serve the energy requirements of certain parts of the Complex. Once
developed and constructed in accordance with the Development Agreement, the
Plant will supply the Services to such parts of the Complex pursuant to the
Energy Service Agreement, described below. The design and construction of the
Plant will be at the sole cost and expense of the Energy Provider; provided,
however, the Energy Provider shall not be responsible for costs in excess of $40
million unless agreed to by the Energy Provider. Specifically, the Energy
Provider will be responsible, at its sole cost and expense, for, among other
things: (i) designing, engineering, procuring, constructing, start-up, and
performance testing of the Plant; (ii) compliance with applicable Laws and
Government
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Approvals; (iii) safeguards for the protection of the Plant; (iv) obtaining all
necessary construction materials, equipment and supplies; (v) providing all
necessary labor and personnel; (vi) developing and complying with a Quality
Control and Inspection Program; and (vii) completing the Plant in accordance
with the schedule set forth in the Development Agreement. As discussed below,
payments to the Energy Provider for the Capacity Charge (as defined herein)
under the Energy Service Agreement will be based, in part, on the costs incurred
by the Energy Provider for the design and construction of the Plant.
The Energy Provider will appoint a Project Manager who will be responsible
for daily supervision of all activities relating to the design and construction
of the Plant. The Project Manager will serve as a single point of contact for
the Company with the Energy Provider. The Energy Provider also will develop a
Project Plan, which will be comprised of a schedule for the development and
construction of the Plant. The Project Plan will include a definition of the
work to be completed as well as a schedule of milestones and Critical Path
Activities. In consultation with the Company, the Energy Provider will prepare a
request for proposals for an Engineering, Procurement and Construction
Contractor ("EPC Contractor"), and will solicit bids from at least three
qualified contractors. From the bids that are received that are acceptable to
the Company, the Energy Provider will retain an EPC Contractor. The EPC
Contractor will provide a guaranteed maximum price for the design and
construction of the Plant. The Energy Provider and the EPC Contractor will then
prepare design development plans and specifications for the Plant. The Plant
will be constructed in accordance with such plans and specifications. The
Company has the right to inspect all of the work performed and to comment on all
aspects of the design and construction of the Plant.
In the event the Energy Provider has failed to achieve Critical Path
Activities when and as set forth in the Project Plan, and the Company reasonably
and in good faith believes that such failure is reasonably likely to prevent the
Energy Provider from achieving Substantial Completion by the Substantial
Completion Deadline and Final Completion by the Final Completion Deadline, the
Company may so inform the Energy Provider. If the Energy Provider does not
improve performance to the Company's satisfaction, the Company may require an
increase in the Energy Provider's labor force, number of shifts, overtime
operations, days of work per week and/or equipment, all costs of which shall be
borne by the Energy Provider. The Energy Provider also will have a Contingency
Plan in place which provides for the rental by the Energy Provider of
transportable boiler and chiller plants to ensure delivery of hot water and
chilled water in accordance with the terms of the Energy Service Agreement in
the event completion of the Plant is delayed for any reason. Unless the delay is
due to a Force Majeure Event or the fault of the Company, the Contingency Plan
will be implemented at the Energy Provider's sole cost and expense.
If the Energy Provider is in default of its obligations pursuant to the
Development Agreement and the Energy Provider either fails to cure such default
within ten days or fails to satisfy the Company that the default can be cured
within a time period reasonably satisfactory to the Company and promptly
commences and pursues remedial action, the Company may terminate the Development
Agreement. As explained below, Unicom, the Energy Provider's ultimate parent,
has guaranteed completion of the Plant in accordance with the Development
Agreement up to a maximum liability of $30.0 million. See "--Unicom Guaranty."
Upon the Company's termination of the Development Agreement, Unicom Corporation
either will complete the Plant in accordance with the terms of the Development
Agreement or will pay up to $30.0 million to have the Plant so completed.
In the event the performance of the Company or the Energy Provider is
delayed or prevented due to a Force Majeure Event (as defined in the Energy
Service Agreement) and such delay or prevention could not reasonably be avoided
or mitigated, the party claiming such delay or prevention will be excused from
performing its obligations under the Development Agreement for the period of
delay or interruption caused by the Force Majeure Event. Within 72 hours after a
party does become or should become aware of a Force Majeure Event, such party
will notify the other. Within seven days of such notice, the party claiming the
Force Majeure Event will deliver a notice to the other describing the
anticipated impact of the Force Majeure Event and within 10 days of the end of
the Force Majeure Event will provide a notice of extension of its obligations.
If the parties disagree as to the latter notice and are unable to resolve their
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dispute, the dispute will be resolved in accordance with the dispute resolution
provisions of the Development Agreement, described below.
The Company will not be responsible for the Work or for the Energy
Provider's failure to perform the Work in accordance with the terms of the
Development Agreement. Nor will the Company be responsible for the acts or
omissions of the Energy Provider or its agents, contractors or employees. The
Company assumes no responsibility for injury or claims resulting from failure of
the Work to comply with applicable Laws or Government Approvals or from Defects
or Deficiencies.
The Company and the Energy Provider agree to cooperate and to communicate
with each other concerning the terms of the Development Agreement and other
matters relating to the Plant. If a dispute arises between the Company and the
Energy Provider, the parties jointly may request that the dispute be resolved by
arbitration in accordance with the provisions of the Commercial Arbitration
Rules of the American Arbitration Association. If the parties do not agree to
submit the dispute to arbitration, either party may bring the dispute to any
court of competent jurisdiction for resolution. The Development Agreement will
be governed by and construed in accordance with the laws of the State of Nevada.
Neither the Company nor the Energy Provider may assign its interest or
delegate its duties under the Development Agreement without the prior written
consent of the other (not to be unreasonably withheld), except that either party
may assign its interest in the Development Agreement if a concurrent assignment
of its interests in the ESA has been made pursuant to the ESA to the same
entity.
LEASE
Pursuant to a lease (the "Lease"), the Company has leased the Plant Site to
the Energy Provider for a fixed monthly base rent of $1.00. The Lease, which has
a 20-year term and provides for 5-year renewal terms, is a "net" lease, pursuant
to which the Energy Provider will pay all Impositions. The Energy Provider may
not use the Plant Site to provide services other than the Services without the
prior consent of the Company. In the event the Company gives such consent, the
fixed monthly base rent will be adjusted and other reasonable modifications will
be made to the Lease.
UNICOM GUARANTY
The obligations of the Energy Provider to complete the Plant in accordance
with the Development Agreement and in a manner capable of delivering the energy
requirements in accordance with the Energy Service Agreement are guaranteed by
the Energy Provider's ultimate parent, Unicom ("the Unicom Guaranty"). Unicom
agrees that the Unicom Guaranty shall be a continuing guaranty and that the
Company shall not be required to prosecute enforcement or other remedies against
the Energy Provider or any other guarantor of the Energy Provider's obligations
before calling on Unicom for performance. Unicom agrees that if for any reason
the Energy Provider shall fail or be unable to punctually and fully perform or
cause to be performed any of its obligations under the Development Agreement,
Unicom shall perform or cause to be performed such obligations promptly upon
demand. Unicom's obligations are limited to an amount equal to $30.0 million
dollars (or, under certain circumstances, an amount less than $30.0 million) and
shall not be reduced until Substantial Completion of the Plant. Upon Substantial
Completion, the Unicom Guaranty shall be reduced by the amount invested by the
Energy Provider, except that ten percent shall be retained to provide assurance
that Final Completion shall occur in accordance with the milestone schedule
under the Development Agreement.
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ENERGY SERVICE AGREEMENT
The Company and the Energy Provider have agreed to the form of an energy
service agreement (the "ESA"), which is currently attached as an exhibit to the
Development Agreement. The ESA is expected to contain provisions as described
herein. The ESA sets forth the rights and obligations of the Company and the
Energy Provider relating to, among other things, the development, testing,
commissioning, operation and maintenance of the Plant; the making of Capacity
and Consumption Payments; risk allocation in the event of a force majeure;
events of default; rights of early termination and the consequences thereof;
liability and indemnity obligations; and assignment and transfer of interests
thereunder. The initial term of the ESA is twenty years from the Commencement
Date, with three five-year renewal terms.
CONDITIONS PRECEDENT. The obligations of the Company and the Energy
Provider under the ESA are subject to the satisfaction of various conditions
precedent, a number of which have already been satisfied. The Company expects
that all remaining conditions precedent will be timely satisfied in the ordinary
course of business.
OPERATION, MAINTENANCE AND REPAIR. The ESA requires that the operation,
maintenance and repair of the Plant be conducted in accordance with applicable
laws and regulations and the Project Scope, as defined in the ESA. The Energy
Provider will be required to have its personnel on duty at the Plant twenty-four
hours per day, seven days per week. The ESA sets forth a scheduling procedure
for scheduled maintenance. Inspection, testing, preventive and corrective
maintenance, repairs, replacements and improvements of the Plant will be carried
out during such scheduled maintenance periods.
PAYMENTS. The ESA provides for a two-part price structure consisting of a
capital component (the "Capacity Charge") to be paid monthly whether Services
are taken or not by the Complex and an energy component (the "Consumption
Charge") to be paid monthly for Services actually taken by the Complex. The
capital component will be paid in advance. The energy component will be paid in
arrears. The Capacity Charge and the Consumption Charge are expected to be
adjusted annually by reference to the Consumer Price Index or a similar index.
FORCE MAJEURE. Each party will be excused from performance of its
respective obligations under the ESA if performance of such obligations is
materially and adversely affected by a Force Majeure Event, although each party
is obligated to take reasonable steps to restore its ability to perform. Force
Majeure Events are circumstances that, by the exercise of reasonable diligence,
the party is unable to overcome or prevent. Force Majeure Events include, but
are not limited to, acts of God, war, civil commotion, embargoes, epidemics,
fires, cyclones, droughts and emergencies other than those caused by the
negligence or wilful misconduct of the party claiming a Force Majeure Event.
DEFAULTS. The ESA divides events of default into Energy Provider events of
default and Complex events of default. A party receiving notice of certain
defaults has thirty days to cure such default. If not cured within such time
period, an uncured default may lead to the termination of the ESA.
ENERGY PROVIDER DEFAULTS. If at any time after the Commencement Date the
Energy Provider fails to provide Services in accordance with the ESA (a
"Performance Failure"), the Energy Provider is required to: (i) provide
immediate notice to the Complex and provide the Complex with a corrective action
plan consistent with a contingency plan to be developed prior to the
Commencement Date; (ii) use best efforts to correct or cure such Performance
Failure; and (iii) provide immediate access to the Complex and work together
with the Complex to identify the source of the Performance Failure. After a
Performance Failure has existed for thirty two (32) consecutive hours, or thirty
two (32) hours of any forty eight hour (48) period, the Complex will: (i) be
entitled to assume control of the Plant and maintain such control until such
Performance Failure has been cured or corrected and take any action reasonably
intended to cure or correct such failure at the Energy Provider's expense; (ii)
be entitled to an abatement of the Capacity Charge for the affected Service;
(iii) have the right to hire, at the Energy Provider's expense, an
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independent consultant to review the circumstances surrounding the Performance
Failure and make written recommendations as to a corrective action to be
implemented at the Energy Provider's sole expense; and (iv) in the event the
Energy Provider fails to promptly implement the consultant's recommendations, be
entitled to terminate the ESA and purchase the Plant from the Energy Provider.
In the event the ESA is terminated pursuant to an Energy Supplier Default, the
purchase price for the Plant shall be equal to the Energy Provider's depreciated
basis calculated on a twenty year straight line method in the Plant, less any
costs incurred for required repair and/or maintenance.
OPTION TO PURCHASE. The Company shall possess a continuing option to
purchase the Plant at any time prior to the termination of the ESA, exercisable
by written notice given to the Energy Provider not less than one year prior to
the date upon which such purchase shall close as specified in the notice. It is
a condition to the Energy Provider's obligation to consummate the sale that the
Company shall assume, indemnify and hold the Energy Provider harmless from all
obligations of the Energy Provider accruing after the closing under all
contracts and agreements with respect to the Plant under which any performance
obligations will continue following such sale. At the closing, the Energy
Provider will assign and the Company will be obligated to assume all such
contracts and agreements.
ASSIGNMENT AND TRANSFER. Neither the Company nor the Energy Provider shall
be permitted under the ESA to assign or transfer its rights under the ESA
without the prior written consent of the other. Notwithstanding this, the ESA
provides that the Company may assign its rights to any affiliate and that both
the Company and the Energy Provider may assign their respective rights under the
ESA to lenders to whom either party provides a security interest in their
respective properties in connection with financing each of the properties. In
addition, the Energy Provider is prohibited from effecting changes in its
ownership, except that it may issue ownership interests to certain specified
entities which are public utilities or affiliates thereof.
DISPUTE RESOLUTION. In the event of a dispute under the ESA, either party
may at any time refer the dispute to be settled by binding arbitration pursuant
to the Commercial Arbitration Rules of the American Arbitration Association.
CONSTRUCTION, OPERATION AND RECIPROCAL EASEMENT AGREEMENT AND RELATED AGREEMENTS
The Company, Bazaar, AMH and the Energy Provider (collectively, the "REA
Parties") have entered into (except with respect to the Energy Provider, who is
not a signatory but is bound by) the Construction, Operation and Reciprocal
Easement Agreement (the "REA"). AMH is expected to assign its rights and
obligations under the REA to Aladdin Music, and Aladdin Music is expected to
assume such rights and obligations, upon execution of the Aladdin Music
Operating Agreement. The REA sets forth agreements among the REA Parties
regarding, among other things, easements, construction standards and
requirements, encroachments, use and operating covenants, maintenance
requirements, insurance requirements, casualty and condemnation and the sharing
of certain facilities and costs relating thereto. The REA has been recorded in
the Official Records of Clark County, Nevada and the agreements therein will run
with the land, affecting subsequent owners and lessees thereof.
The Site Work Development and Construction Agreement (the "Site Work
Agreement") entered into among the Company, AHL and Bazaar provides, among other
things, that the Company and AHL will, at their cost and expense, perform
certain demolition work and certain site work including certain infrastructure
improvements and the construction of the initial building shell for the Aladdin
Improvements (as defined herein) and the Bazaar Improvements (as defined
herein). The Site Work Agreement also provides that Bazaar will contribute
approximately $14.2 million (including interest) (the "Bazaar Site Work
Contribution") to the cost of the site work. In addition, subject to the
satisfaction of certain conditions of Scotiabank, it is intended by the parties
that the Company will be responsible for costs in excess of $36 million in
connection with the construction of the Carpark. The Site Work Agreement further
provides that the Company will construct the Aladdin Improvements and Bazaar
will construct the Bazaar
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Improvements in accordance with a certain construction schedule and pursuant to
good and workmanlike standards and with first-class materials.
The Site Work Agreement and the REA provide that the Company will: (i)
construct a first-class hotel and casino facility (the "Aladdin Improvements")
on the Gaming Site (as defined in the REA); (ii) lease the Bazaar Site (as
defined in the REA) to Bazaar, which covenants to construct and operate a
first-class Retail Facility (as defined in the REA) and related improvements
(the "Bazaar Improvements"); (iii) lease the Aladdin Music Site (as defined in
the REA) to AMH, which covenants to construct and operate a first-class hotel
and casino facility (i.e., the Music Project hotel and casino); and (iv) lease
the Utility Site (as defined in the REA) to the Energy Provider, which covenants
to construct and operate a central utility plant (the "Central Utility Plant").
The Bazaar Improvements include the Carpark and additional surface-level parking
facilities beneath and adjacent to the Retail Facility for approximately 350
motor vehicles (the "Common Parking Area").
The REA also provides that Bazaar grants, as to its ownership or leasehold
interest in its tract, to the other REA Parties, as to their ownership or
leasehold interests in their tracts, a non-exclusive easement for automobile
parking in and on the Common Parking Area. The use and operation of the Common
Parking Area is also subject to the Common Parking Area Use Agreement (the
"Parking Agreement") entered into between the Company and Bazaar, pursuant to
which Bazaar covenants to maintain and operate the Common Parking Area for the
non-exclusive use of all the REA Parties. The Parking Agreement provides, among
other things, that the Company (i) will pay a fee of $3.2 million per year,
payable monthly and adjusted annually pursuant to a consumer price index-based
formula, for usage of the Common Parking Area, (ii) will pay its proportionate
share of the operating costs attributable to the Common Parking Area, and (iii)
has the right to assign a portion of its usage rights and obligations to Aladdin
Music, although such assignment may not relieve the Company of any of its
obligations in connection therewith. If and when Planet Hollywood's subsidiary
becomes a member of Aladdin Music, the Parking Agreement, by its terms, shall be
amended and restated to add Aladdin Music as a party, and the Company's
proportionate share of the operating costs attributable to the Common Parking
Area shall be reduced.
The REA contains agreements pursuant to which the REA Parties, as to their
ownership or leasehold interests in their respective tracts, grant to the other
REA Parties, as to their ownership or leasehold interests in their respective
tracts, easements for, among other things, (i) vehicular and pedestrian access,
(ii) installation and operation of utilities, (iii) construction, (iv) common
structural support, (v) installation and maintenance of exterior lights to
highlight grantees' buildings, (vi) truck loading, (vii) encroachments and the
maintenance thereof, (viii) roof space for the installation and operation of
certain telecommunication and ventilation equipment, (ix) setbacks, (x)
maintenance and construction of grantees' buildings, (xi) construction and
operation of a proposed monorail and (xii) signage.
The REA sets forth covenants among the REA Parties to, among other things,
(i) perform the construction of the Redeveloped Aladdin (as defined in the REA)
in accordance with first-class standards, (ii) cooperate with one another and
with each REA Party's architects, engineers and contractors and (iii) exchange
certain plans and specifications and other information. Certain modifications of
any REA Party's plans or specifications will be subject to certain approval
rights of certain other affected REA Parties. The REA also provides that the
Company may construct certain optional improvements, including an office tower
and/or time-share facilities.
Pursuant to the terms of the REA, the Company has covenanted that it shall
complete (subject to force majeure) the Aladdin Improvements, and Bazaar has
covenanted that it shall complete (subject to force majeure) the Bazaar
Improvements, on or before the First Scheduled Opening Date (as defined in the
Site Work Agreement). Similarly, AMH has covenanted that it shall complete the
Music Project hotel and casino on or before the Second Scheduled Opening Date
(which is currently anticipated to be six (6) months after the First Scheduled
Opening Date).
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The REA provides that, subject to certain operational requirements of the
other REA Parties, each REA Party will operate the improvements on its tract in
a first-class manner, as more particularly set forth in the REA.
The REA contains agreements among the REA Parties to maintain their
improvements in good order and in first-class condition, reasonable wear and
tear excepted. The REA also allocates responsibility among the REA Parties to
maintain the Common Area (as defined in the REA) of the Site (as defined in the
REA). Responsibility for the payment of the costs for such Common Area
maintenance is allocated proportionately; and the Company has the right to
assign a portion of its payment obligation to AMH, although such assignment may
not relieve the Company of any of its obligations in connection therewith.
The REA contains provisions requiring that in the event of any casualty or
condemnation, each REA Party shall, at its cost and expense, restore the
improvements located on its respective tract or tracts, including the Common
Area thereon, regardless of the availability of insurance proceeds or
condemnation awards; provided, however, that (a) with respect to damage or
condemnation affecting the Common Parking Area, the costs and expenses in excess
of available insurance proceeds or condemnation awards shall be shared by each
REA Party in accordance with its respective tract's proportionate share of
parking spaces required in accordance with local law, and (b) certain
restoration obligations expire 25 years (or such longer period approved by the
REA Parties) after the Second Scheduled Opening Date.
The REA contains provisions establishing self-help remedies for REA Parties
affected by an REA Party's failure to meet its maintenance or restoration
obligations set forth in the REA.
Certain disputes between the REA Parties that arise under the REA are,
pursuant to the REA, to be decided pursuant to binding arbitration, as more
particularly set forth in the REA. The REA Parties' maximum liability to one
another under the REA is limited to such REA Parties' interests in the
Redeveloped Aladdin, as more particularly set forth in the REA.
AGREEMENTS RELATING TO THE MALL PROJECT OR THE MUSIC PROJECT
BAZAAR LLC OPERATING AGREEMENT
TH Bazaar Centers Inc. ("THB"), a wholly owned subsidiary of TrizecHahn, and
Bazaar Holdings (collectively, the "Bazaar Members") are parties to the Bazaar
LLC Operating Agreement setting forth their agreement as to the relationship
between Bazaar and the Bazaar Members and among the Bazaar Members themselves as
to the conduct of the business and internal affairs of Bazaar. The Bazaar
Operating Agreement may be amended or terminated by the Bazaar Members without
the consent of any of the Aladdin Parties, London Clubs, the Company, or the
holders of the Notes or the Warrants.
MANAGEMENT. Pursuant to the Bazaar LLC Operating Agreement, the business
and affairs of Bazaar shall be managed by a board of managers (the "Bazaar
Board"), consisting of four members (each, a "Bazaar Board Member"). Each Bazaar
Member has designated two Bazaar Board Members and may, from time to time,
change its designated representatives on the Bazaar Board. The number of
representatives on the Bazaar Board may be increased by the Bazaar Board so long
as each Bazaar Member maintains an equal number of representatives.
Notwithstanding the foregoing, if any Bazaar Member acquires or obtains a
greater than their current interest in Bazaar, then such Bazaar Member shall
have the right to designate a majority of the representatives on the Bazaar
Board, and the number of representatives selected by the other Bazaar Member
shall be reduced proportionately.
MALL GUARANTY. Subject to certain conditions, THB's parent, TrizecHahn,
THOP, Bazaar Holdings, AHL and the Trust have agreed to jointly and severally
assume recourse liability and enter into the Mall Guaranty in favor of the Mall
Lender upon completion of the Mall Financing, until certain earnings and loan to
value targets have been met.
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TRANSFER RESTRICTIONS. The Bazaar LLC Operating Agreement contains
customary restrictions on the transfer of interests by Bazaar Members. In
particular, no Bazaar Member may transfer its interests to a Prohibited
Transferee without the prior consent of the other Bazaar Members.
The term "Prohibited Transferee" includes: (a) any owner, operator or
manager of any resort hotel located in Clark County, Nevada, (b) any shopping
center owner, manager and/or developer if THB will continue to be a Bazaar
Member following the transfer, (c) any person or entity primarily engaged in the
business of owning or operating a casino or other similar type of gambling
facility, (d) any person who has been found unsuitable or has withdrawn an
application to be found suitable by the Nevada Gaming Authorities, or (e) FOCUS
2000, Inc., a Nevada corporation, or the then current owner or lessee of the
real property located at the northeast corner of the Strip and Harmon Avenue, in
Las Vegas, Nevada.
MARKETING AND SALE OF THE MALL PROJECT. Commencing on the fifth anniversary
of the opening of the Mall Project and continuing for five years, any Bazaar
Member (the "Selling Member") holding a 50% or greater interest in Bazaar may
cause Bazaar to offer the Mall Project for sale on the open market by delivering
written notice to the other Bazaar Member (the "Non-Selling Member"). If any
offer is received that the Selling Member desires to accept, the Selling Member
must give written notice specifying all terms of the proposed sale to the
Non-Selling Member, who shall have 30 days to elect to purchase the entire
interest at the terms specified in the notice; provided however, that if THB is
the Selling Member, then Bazaar Holdings, as Non-Selling Member, shall (subject
to certain conditions) have the additional option to purchase 12.5% of the
interest in Bazaar for the appropriate allocable share of the purchase price
(and other fees specified on such notice).
TERM. Bazaar will continue to operate as a limited liability company until
December 31, 2099, unless earlier dissolved or extended by unanimous agreement
of the Bazaar Members.
MALL FINANCING
Bazaar has entered into a building loan agreement with the Mall Lenders and
Fleet as Administrative Agent (the "Mall Agent") for the Mall Financing, whereby
the Mall Lenders will agree to lend up to $194.0 million to Bazaar to finance
the Mall Project. The proceeds from the Mall Financing will be used for the
construction of the themed Desert Passage, expected to contain approximately
522,000 square feet of retail space, and the approximately 4,800-space Carpark.
The Mall Project is expected to open by April of the year 2000, as such date may
be extended for force majeure events.
TERM. The Mall Financing has a stated maturity of five years from closing.
Bazaar shall have two one-year extension options if certain conditions are
satisfied and at the end of the initial five year term, any unfunded commitment
amount will be automatically cancelled.
AMORTIZATION AND PREPAYMENT. The Mall Financing will be interest-only
during the initial term. During the extension terms, Bazaar will be required to
amortize principal based on 25-year (during the first extension term) and
24-year (during the second extension term) mortgage-style amortization and an
interest rate derived based on the then prevailing 10 year Treasury rate plus
150 bps.
FEES. Bazaar will be required to pay a fee of 10 bps per annum on the
unfunded loan amount. Such fee shall be computed on an actual/360-day basis and
shall be payable quarterly in arrears from and after the closing.
SECURITY. The loan is secured by a deed of trust, assignment of leases and
rents and security agreement which shall be a first lien on Bazaar's interest in
the premises on which the Mall Project is built and the Mall Project itself.
COVENANTS. The Mall Financing contains a project financial covenant based
on loan to value and customary affirmative and negative covenants typical for
this type of transaction.
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EVENTS OF DEFAULT. The Mall Financing provides that all customary events of
default for similar loan transactions, consistent with the following, shall
constitute events of default under the loan documents, including: (i) (a)
insolvency or bankruptcy of the Borrower, TrizecHahn or THOP (and, under certain
circumstances, Bazaar Holdings), (b) breach of THOP and TrizecHahn guarantor
covenants or (c) judgements against TrizecHahn in excess of $25.0 million
individually or in the aggregate (which are not discharged or appealed within 60
days) and (ii) failure to pay debt service within five days after due.
CONDITIONS PRECEDENT. The Mall Financing provides that the Mall Agent's
obligation to make the initial advance of the Mall Financing is subject to the
satisfaction of certain conditions, including, among other things (i) that
Scotiabank consent to an amended Site Work Agreement, that provides that the
Company will be responsible for costs in excess of $36 million in connection
with the construction of the Carpark and (ii) that the contribution of a minimum
of 25% of total project costs be contributed as up-front equity prior to funding
of the loan, of which at least $35.0 million of such investment shall be in the
form of cash expended in the Mall Project.
MUSIC PROJECT MEMORANDUM OF UNDERSTANDING
The Company and Planet Hollywood have entered into a Memorandum of
Understanding and Letter of Intent, dated as of September 2, 1997, as amended by
a letter agreement dated as of October 15, 1997 (as so amended, the "Music
Project Memorandum of Understanding") in connection with the formation of a
joint venture between subsidiaries of the Company and Planet Hollywood to own,
develop and operate the Music Project. The Music Project Memorandum of
Understanding is intended to be a binding agreement (subject to certain limited
conditions) with respect to certain matters regarding the formation and
operation of Aladdin Music, however the parties have agreed to use their best
efforts promptly to complete and execute all agreements and other documents that
may be reasonably necessary to carry out the provisions of the Music Project
Memorandum of Understanding. The Company anticipates that such agreements will
include the following-described agreements, although the terms described below
are subject to further revision and may be modified by the Company and Planet
Hollywood prior to the execution of definitive documentation.
ALADDIN MUSIC OPERATING AGREEMENT. It is expected that AMH and a subsidiary
of Planet Hollywood (the "Music Project Members") will enter into an operating
agreement (the "Aladdin Music Operating Agreement") to govern the operations of
Aladdin Music. The Company has formed AMH, which it anticipates will hold (on a
fully diluted basis through shares and warrants) a 50% member interest in
Aladdin Music. Prior to the exercise of its warrants (the "Music Project
Warrants"), AMH will own a 49% preferred membership interest ("Music Preferred
Shares") and a 49% common membership interest ("Music Common Shares") in Aladdin
Music, however, exercise of the Music Project Warrants will increase AMH's
percentage interest in Aladdin Music to 50%. Planet Hollywood, through a
subsidiary (the "Planet Hollywood Member"), will initially hold the remaining
interests in Aladdin Music.
CAPITAL CONTRIBUTIONS. Through AMH, the Company is expected to contribute
to Aladdin Music (i) a ground lease, at nominal rent, of the approximately 4.75
acre parcel of land for the Music Project (including a right to acquire the fee
interest in such land upon the receipt by the Company of necessary permits and
subdivision approvals) and (ii) $21.3 million in cash. The contribution value of
the ground lease will be $20.0 million. The Planet Hollywood Member will
contribute cash to Aladdin Music in the amount of $41.3 million. The
contributions of the Music Project Members will be made immediately prior to, or
concurrently with, the closing of construction financing with respect to the
Music Project, however certain pre-development costs of Aladdin Music incurred
with respect to the Music Project will be contributed to Aladdin Music prior to
such date. These predevelopment costs include design, architecture and
organization costs.
SHARES. Aladdin Music is expected to have two classes of shares (which
represent units of membership interests in Aladdin Music): Music Common Shares
and Music Preferred Shares (collectively, "Music
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Project Shares"). The above-described contributions of the Music Project Members
will be deemed contributions in respect of Music Preferred Shares. Except with
respect to distributions to cover tax liability of Music Project Members (or, if
any Music Project Member is a pass-through entity, its equity interest holders)
arising from their interest in Music, the Music Preferred Shares will have
distribution, redemption and liquidation preferences over all Music Common
Shares. Rights to allocations to the capital account and distributions in
respect of the Music Preferred Shares will cumulate (but not compound) quarterly
at the rate of 12% per annum on the capital account balance in respect thereof.
Preferred distributions to the Planet Hollywood Member will have priority of
payment over preferred distributions to AMH. In addition, to the extent that
there is insufficient cash available for distribution to make such preferred
distributions, the amounts which are not distributed will accrue (but not
compound) for the benefit of the party entitled thereto. Distributions of such
accrued amounts to the Planet Hollywood Member will have priority over
distributions to AMH.
MANAGEMENT AND DAY-TO-DAY OPERATIONS. Management of Aladdin Music will be
the responsibility of a board of managers (the "Music Project Board"), comprised
initially of four members designated by the Planet Hollywood Member and three
members designated by AMH, until AMH exercises its warrants for the acquisition
of additional Music Project Shares, at which time the Music Project Board will
be comprised of four representatives each of AMH and the Planet Hollywood
Member. Major decisions of the Music Project Board will require the vote of a
supermajority of the board members. All decisions other than such major
decisions will be delegated to an operating committee comprised of two
representatives each of AMH and the Planet Hollywood Member (the "Operating
Committee"). The development of the Music Project and renovation of the Theater
will be coordinated by the Company under the Music Project Development
Agreement. Day-to-day management and operation of the Music Project and the
Theater will be delegated to the Company under the Music Project Management
Agreement.
TRANSFERS OF SHARES. Transfers of Music Project Shares will only be
permitted:
(i) to affiliates of Music Project Member, LCNI, or persons approved by
a majority of the interests held by Music Project Members; and
(ii) to persons other than certain prohibited transferees after giving
other Music Project Members a right of first negotiation for the acquisition
of such Shares.
LIABILITY, EXCULPATION AND INDEMNIFICATION. The Aladdin Music Operating
Agreement will contain provisions relieving the Music Project Members, officers,
employees and Music ProjectBoard Members and Operating Committee members from
certain liability, fiduciary duties and conflicts and will also provide for
various indemnities to such persons in respect of payment of expenses and errors
and omissions insurance.
GAMING MATTERS. Capital contributions, admission of new Music Project
Members, transfers of shares and payment of distributions by Aladdin Music will
be subject to receipt of Nevada Gaming Approvals. Music Project Members and
their affiliates, directors and employees will cooperate to obtain Gaming
Approvals from the Nevada Gaming Authorities, as necessary. If Nevada gaming
problems arise prior to a finding of unsuitability by the Nevada Gaming
Authorities, the Music Project Member causing such problem (or whose director,
officer or affiliate caused such problem) shall cooperate to remedy it and, if
not remedied, may be forced to sell its Music Project Shares to Aladdin Music or
its designee at fair market value.
TERM. Aladdin Music shall continue until January 24, 2097, or such other
time as agreed in writing by all Members.
THE MUSIC PROJECT DEVELOPMENT AGREEMENT. Aladdin Music intends to contract
with the Company for the development of the Music Project and the Theater
renovation pursuant to a development agreement (the "Music Project Development
Agreement") on terms, and in form and substance, satisfactory to
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Aladdin Music and the Company. Pursuant to the Music Project Development
Agreement, the Company will agree to provide services with respect to such
development and renovation, including (a) the selection of contractors,
subcontractors and the professional team including architects, engineers,
surveyors, designers, decorators and other technical and professional
consultants; (b) the negotiation on behalf of Aladdin Music of the agreements
under which the contractors, subcontractors and the professional team are to be
retained by Aladdin Music; (c) the supervision of the preparation of preliminary
and final plans, including landscaping, interior design and graphics; and (d)
the preparation of preliminary cost estimates and projections of cash flow
requirements covering the development costs during the Development Period, and
the preparation and updating from time to time of the development budget;
subject, in each case, to certain approval rights of Aladdin Music.
REIMBURSEMENT UNDER MUSIC PROJECT DEVELOPMENT AGREEMENT. The Company will
be reimbursed for its costs and expenses in connection with its activities under
the Music Project Development Agreement.
TERMINATION. Each of the Company and Aladdin Music are anticipated to have
certain limited termination rights with respect to the Music Project Development
Agreement. Any termination of the Music Project Development Agreement will
entitle the Company to terminate the Music Project Management Agreement.
INDEMNIFICATION. Aladdin Music shall indemnify and hold the Company
harmless from claims arising out of the performance by Company of services under
the Music Project Development Agreement. The Company shall indemnify and hold
Aladdin Music harmless from and against any and all claims arising from or in
connection with the Company's gross negligence or willful misconduct.
MUSIC PROJECT MANAGEMENT AGREEMENT. Aladdin Music intends to contract with
the Company for the day-to-day management and operations of the Music Project
and the Theater and certain promotional services, pursuant to a management
agreement in form and substance satisfactory to Aladdin Music and the Company
(the "Music Project Management Agreement"). The terms of the Music Project
Management Agreement are expected to be on terms at least as favorable as those
which would be available from an independent third party vendor.
COMPENSATION UNDER MUSIC PROJECT MANAGEMENT AGREEMENT. The Music Project
Management Agreement will provide for the provision of management services by
the Company for the Music Project and the Theater in exchange for a base
management fee (the "Base Management Fee"), payable quarterly, equal to 1.50% of
the net revenue from the Music Project and the Theater and for an additional
management fee (the "Incentive Management Fee"), payable quarterly, equal to 6%
of the Management Excess Net Revenue (which is the amount obtained by dividing
(i) the amount of quarterly Adjusted Music EBITDA in excess of the Adjusted
Management EBITDA Threshold by (ii) Profit Margin). "Adjusted Music EBITDA"
means for any period Aladdin Music's earnings before (i) deductions for
interest, taxes, depreciation and amortization, (ii) payment of the Incentive
Management Fee, the Incentive Marketing Fee, and (iii) payment of leases for
furniture, fixtures or equipment. "Profit Margin" means for any quarter,
quarterly Adjusted EBITDA divided by quarterly Net Revenue. "Incentive Marketing
Fee" means an additional marketing fee, payable quarterly from Aladdin Music to
Planet Hollywood pursuant to the Marketing and Consulting Agreement (as defined
herein) between Aladdin Music and Planet Hollywood, equal to 6% of the Marketing
and Consulting Excess Net Revenue. "Marketing and Consulting Excess Net Revenue"
means the amount obtained by dividing (i) the amount of quarterly Adjusted
EBITDA in excess of the Adjusted Marketing EBITDA Threshold by (ii) the Profit
Margin. The "Adjusted Management EBITDA Threshold" means quarterly Adjusted
EBITDA of $10.0 million. The "Adjusted Marketing EBITDA Threshold" means
quarterly Adjusted EBITDA of $8.75 million. The Incentive Management Fee shall
at all times (including, without limitation, if the Adjusted Management EBITDA
Threshold is met or if there is sufficient cash available for distribution) be
subordinate to debt service. To the extent that the Adjusted Management EBITDA
Threshold is met but there is insufficient cash available for distribution for
the payment of any or all of such Incentive Management Fee and the payment of
the Incentive
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Marketing Fee, or if Aladdin Music is otherwise restricted by a lender from
paying such fees, the Incentive Management Fee shall be subordinate to the
payment of the Incentive Marketing Fee. Incentive Management Fees which are due
but not paid shall accrue (together with interest thereon) for the benefit of
the Company. The Incentive Management Fee shall not be payable to the Company
for any quarter in which the Adjusted Management EBITDA Threshold is not
achieved. In addition, pursuant to the Music Project Management Agreement, the
Company shall provide certain services to the Music Project and the Theater,
including, without limitation, accounting and financial services, MIS, general
management and investor relation services, promotional services and other agreed
upon services in the ordinary course of business by the Company for the Music
Project and the Theater in exchange for reimbursement of the fully allocated
cost of such services.
TERM. The term of the Music Project Management Agreement shall be thirty
(30) years, subject to an option on the part of the Company to extend the term
for three successive ten year periods.
TERMINATION FEE. In the event that the Music Project Management Agreement
is terminated by Aladdin Music prior to the expiration of its term (including
extension options) and prior to the time that the Music Project Warrants may be
exercised, then (except under certain circumstances) the Company shall be paid a
termination fee of $50.0 million and AMH shall have the right to put its
investments in Aladdin Music to Planet Hollywood for an amount equal to such
investment's fair market value. Once AMH is able to exercise the Music Project
Warrant, all provisions relating to the termination fee and fair market purchase
option shall terminate.
THE MARKETING AND CONSULTING AGREEMENT. Aladdin Music intends to contract
with Planet Hollywood and an affiliate of Planet Hollywood for the provision of
certain marketing and consulting services to be provided to the Music Project
and for the license to Aladdin Music of all rights to the trademarks, tradenames
and related agreements which are necessary or desirable to operate and maintain
a "music-themed" hotel and restaurant on the Music Project land, pursuant to a
marketing and consulting agreement in form and substance satisfactory to Planet
Hollywood and Aladdin Music (the "Marketing and Consulting Agreement"). The
Marketing and Consulting Agreement is expected to provide for the provision of
marketing and consulting services by Planet Hollywood (and/or its affiliates)
for the Music Project in exchange for a base fee (the "Base Marketing Fee"),
payable quarterly, equal to 2.00% of the Music Project's quarterly Net Revenue
and for an additional marketing fee (the "Incentive Marketing Fee"), payable
quarterly, equal to 6% of the Marketing and Consulting Excess Net Revenue. The
Incentive Marketing Fee shall not be payable for any quarter in which the
Adjusted Marketing EBITDA Threshold is not achieved. In addition, to the extent
that the Adjusted Marketing EBITDA Threshold is met but there is insufficient
cash available for distribution for the payment of any or all of such fees, or
if Aladdin Music is otherwise restricted by a lender from paying the Incentive
Marketing Fee, the Incentive Marketing Fee shall accrue (together with interest
thereon) for the benefit of Planet Hollywood. In addition to the Base Marketing
Fee and the Incentive Marketing Fee, the Marketing and Consulting Agreement
shall provide that Planet Hollywood shall be reimbursed, on a quarterly basis,
for its costs and expenses under the Marketing and Consulting Agreement in an
amount equal to 0.5% of quarterly Net Revenue, without supporting documentation
as well as for certain other approved expenses. The Marketing and Consulting
Agreement is further expected to provide that Planet Hollywood shall be
restricted from allowing the use or operation of similar "music concept" themed
restaurants at any location in Clark County, Nevada, other than at the Music
Project.
THE GROUND LEASE. AMH intends to assign its ground lease (the "Music
Project Lease") of the site designated for the Music Project to Aladdin Music.
The Music Project Lease is for nominal rent and includes the right of the lessee
to acquire fee title to the Music Project land upon completion of the division
of the Project Site into separate legal parcels. Pursuant to the Music Project
Lease, Aladdin Music shall be required to cooperate with such division and to
fund its pro rata share of the costs thereof, based upon the ratio that the
acreage of the Music Project land bears to the total acreage of the Project
Site.
134
<PAGE>
THE THEATER LEASE. The Company is expected to enter into a lease agreement
(the "Theater Lease") with respect to the Theater pursuant to which, among other
matters, (i) Aladdin Music shall lease the Theater from the Company for a period
of at least 69 years on a "triple-net" basis, for nominal rent, (ii) the Company
shall have certain rights with respect to the lease-back of the Theater, (iii)
certain provisions shall be made relating to the promotional and security
services for the Theater, (iv) Aladdin Music shall agree to renovate the Theater
prior to the opening of the Aladdin and to maintain the Theater in a "first
class" condition during the term of the Theater Lease.
MUSIC PROJECT FINANCING
Prior to the commencement of the development of the Music Project, Aladdin
Music is expected to enter into a commitment letter for a credit facility with a
syndicate of lenders whereby the lenders will agree to finance the construction
of the Music Project. Currently, Aladdin Music is considering several proposals
for such financing.
135
<PAGE>
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
The following discussion is a summary of certain material federal income tax
considerations relevant to the acquisition, ownership and disposition of the
Warrants by a U.S. Holder. A "U.S. Holder" means a holder of a Warrant which is
(i) an individual who is a citizen or resident of the United States for federal
income tax purposes, (ii) a corporation or partnership created or organized in
the United States or under the laws of the United States or any state thereof
(including the District of Columbia), (iii) an estate (other than a foreign
estate) or (iv) any trust if a court within the United States is able to
exercise primary supervision over the administration of the trust and one or
more United States persons have the authority to control all substantial
decisions of the trust.
This summary is based upon current laws, regulations, rulings and judicial
decisions some of which are not clear and all of which are subject to change,
possibly with retroactive effect. Any such change could affect the continuing
validity of this discussion. In addition, the validity of the conclusions
contained in this summary depends upon the accuracy of representations made by
officers of Holdings and projections prepared by the financial advisors to
Holdings in connection with the Offering.
This summary does not purport to consider all the possible federal income
tax consequences of the purchase, ownership or disposition of the Warrants and
is not intended to reflect the particular tax position of any beneficial owner.
It addresses only U.S. Holders who hold the Warrants as capital assets and does
not address beneficial owners that may be subject to special tax rules, such as
foreign holders, banks, insurance companies, dealers in securities or
currencies, purchasers that hold the Warrants as a hedge against currency risks
or as part of a straddle with other investments or as part of a "synthetic
security" or other integrated investment (including a "conversion transaction")
comprised of a Warrant and one or more other investments, or purchasers that
have a "functional currency" other than the U.S. dollar. In addition, the
discussion does not address any aspect of state, local or foreign taxation.
HOLDERS OF THE WARRANTS ARE URGED TO CONSULT THEIR TAX ADVISORS CONCERNING
THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF ACQUIRING, OWNING, AND
DISPOSING OF THE WARRANTS AS WELL AS THE APPLICATION OF STATE, LOCAL, AND
FOREIGN INCOME AND OTHER TAX LAWS.
ISSUE PRICE
On the Issue Date the issue price of the Unit was allocated between the
Notes and the Warrants based on their relative fair market values. Holders who
purchased a Unit at original issue for its issue price have an initial tax basis
for the Warrants equal to the Warrants' issue price. With respect to the $519.40
issue price per Unit, Holdings has allocated $67.72 to the Warrants, which
represents their issue price. This allocation reflects Holdings' judgement as to
the relative value of the Note and Warrants at the time of issuance. The
allocation is binding on a U.S. Holder unless such U.S. Holder explicitly
discloses a different allocation on an attachment to its tax return for the
taxable year that includes the acquisition date of the Unit. The allocation is
not, however, binding on the IRS and there can be no assurance that the IRS
would not challenge this allocation or that such a challenge, if made, would not
be upheld in court.
TAXATION OF WARRANTS
CHARACTERIZATION OF THE WARRANTS. Although the matter is not free from
doubt, and the form of the Warrants may be respected for federal income tax
purposes, it is possible that the Warrants would be treated for federal income
tax purposes as the shares of Common Stock of the Issuer which such Warrants
entitle the holder to purchase due to, among other things, their minimal
Exercise Price and lack of any meaningful contingency. Although it is thus
unclear whether the Warrants will be treated as warrants or
136
<PAGE>
stock for federal income tax purposes, the following discussion assumes that the
Warrants would be properly characterized as warrants and describes, as
appropriate, any differing federal income tax treatment that would result if the
Warrants are treated as stock.
EXERCISE. A holder of a Warrant generally will not recognize gain or loss
upon exercise of the Warrant. The holder's federal income tax basis in the stock
received will be equal to the holder's federal income tax basis in the Warrant
immediately prior to exercise (i.e., in the case of an initial purchaser in the
Offering, the portion of the cost of the Unit allocable to the Warrant), plus
the amount of cash paid upon exercise. The holding period of the stock acquired
upon exercise of the Warrant will begin on the day after the date of exercise of
the Warrant and will not include the period during which the Warrant was held.
If the Warrants are treated as stock from the date of issuance, the holder would
not recognize any gain or loss on the exercise of the Warrants, and the holding
period of the stock received would include the entire period during which the
Warrant was held.
ADJUSTMENTS. An adjustment to the exercise price of the Warrants made
pursuant to the anti-dilution provisions of the Warrants may, in certain
circumstances, result in constructive distributions to the holders of the
Warrants which could be taxable as dividends to the holders under Section 305 of
the Code. A holder's federal income tax basis in the Warrants generally would be
increased by the amount of any such dividend. The consequences of such an
adjustment generally should not differ if the Warrants are recharacterized as
stock on the date of issuance.
DISPOSITION. Upon a sale, exchange or other taxable disposition of a
Warrant or Warrant Shares, a holder generally will recognize gain or loss for
federal income tax purposes in an amount equal to the difference between (i) the
sum of the amount of cash and fair market value of any property received upon
such sale, exchange or other disposition and (ii) the holder's adjusted tax
basis in the Warrant or Warrant Shares being sold. Any gain or loss recognized
upon a sale, exchange or disposition of Warrants or Warrant Shares would be
long-term capital gain or loss if the Warrant or stock was held by the holder
for more than one year at the time of sale or exchange. In the case of an
individual holder of a Warrant or Warrant Shares, the maximum federal income tax
rate applicable to net long-term capital gains is twenty-eight percent (28%) if
the Warrant or Warrant Shares were held for greater than one year but less than
eighteen months and twenty percent (20%) if the Warrant or Warrant Shares were
held for more than eighteen months. The consequences of a sale or disposition to
the holder should not differ (except potentially as to holding periods--See
Taxation of Warrants--Exercise above) if the Warrants are recharacterized as
stock on the day they are issued.
LAPSE. Upon the lapse of a Warrant, a holder will recognize a capital loss
equal to such holder's adjusted tax basis in the Warrant. If the Warrant was
treated as stock on the date of issuance, and the Warrant was never exercised,
the treatment of such Warrant generally should not differ.
137
<PAGE>
PLAN OF DISTRIBUTION
The Warrants and the Warrant Shares may be sold from time to time to
purchasers directly by the Selling Holders. Alternatively, the Selling Holders
may from time to time offer the Warrants or the Warrant Shares to or through
underwriters, broker/dealers or agents, who may receive compensation in the form
of underwriting discounts, concessions or commissions from the Selling Holders
or the purchasers of such securities for whom they may act as agents. The
Selling Holders and any underwriters, broker/dealers or agents that participate
in the distribution of Warrants or the Warrant Shares may be deemed to be
"underwriters" within the meaning of the Securities Act and any profit on the
sale of such securities and any discounts, commissions, concessions or other
compensation received by any such underwriter, broker/ dealer or agent may be
deemed to be underwriting discounts and commissions under the Securities Act.
The Warrants and the Warrant Shares may be sold from time to time in one or
more transactions at fixed prices, at prevailing market prices at the time of
sale, at varying prices determined at the time of sale or at negotiated prices.
The sale of the Warrants and the Warrant Shares may be effected in transactions
(which may involve crosses or block transactions) (i) on any national securities
exchange or quotation service on which such securities may be listed or quoted
at the time of sale, (ii) in the over-the-counter market, (iii) in transactions
otherwise than on such exchanges or in the over-the-counter market or (iv)
through the writing of options. At the time a particular offering of the
Warrants or the Warrant Shares is made, a supplement to this Prospectus (a
"Prospectus Supplement"), if required, will be distributed which will set forth
the aggregate amount of Warrants or Warrant Shares being offered and the terms
of the offering, including the name or names of any underwriters, broker/dealers
or agents, any discounts, commissions and other terms constituting compensation
from the Selling Holders and any discounts, commissions or concessions allowed
or reallowed or paid to broker/dealers. Each broker/dealer that receives the
Warrants or Warrant Shares for its own account pursuant to this Prospectus must
acknowledge that it will deliver the Prospectus and any Prospectus Supplement in
connection with any sale of such Warrants or Warrant Shares.
To comply with the securities laws of certain jurisdictions, if applicable,
the Warrants and Warrant Shares will be offered or sold in such jurisdictions
only through registered or licensed brokers or dealers. In addition, in certain
jurisdictions the Warrants and Warrant Shares may not be offered or sold unless
they have been registered or qualified for sale in such jurisdictions or any
exemption from registration or qualification is available and is complied with.
The Selling Holders will be subject to applicable provisions of the Exchange
Act and the rules and regulations thereunder, which provisions may limit the
timing of purchases and sales of any of the Warrants or Warrant Shares by the
Selling Holders. The foregoing may affect the marketability of such securities.
Pursuant to the Warrant Registration Rights Agreement, certain expenses of
the registration of the Warrants and Warrant Shares hereunder will be paid by
the Company, including, without limitation, Commission filing fees and expenses
of compliance with state securities or "blue sky" laws; provided, however, that
the Selling Holders will pay all underwriting discounts, selling commissions and
transfer taxes, if any applicable to any sales pursuant to the Registration
Statement. The Issuer has agreed to indemnify the Selling Holders against
certain civil liabilities, including certain liabilities under the Securities
Act, and the Selling Holders will be entitled to contribution in connection with
any such registration and any sales pursuant thereto. The Company will be
indemnified by the Selling Holders severally against certain civil liabilities,
including certain liabilities under the Securities Act, or will be entitled to
contribution in connection with any such registration and any sales pursuant to
the Registration Statement.
LEGAL MATTERS
Certain legal matters in connection with the registration of Warrants
pursuant to this Prospectus will be passed upon for the Issuer by Skadden Arps,
Slate, Meagher & Flom L.L.P. and in connection with the
138
<PAGE>
Warrant Shares by Schreck Morris, Las Vegas, Nevada. Certain matters with
respect to tax issues will be passed upon by Skadden, Arps, Slate, Meagher &
Flom LLP.
EXPERTS
The balance sheets of the Issuer, Holdings, Capital and the Company as of
December 31, 1997 and the statements of changes in equity and cash flows of each
such entity for the period from their inception to December 31, 1997, together
with the notes thereto, appearing in this Prospectus, have been audited by
Arthur Andersen LLP, independent public accountants, as set forth in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
The financial statements of London Clubs as of March 30, 1997 and March 24,
1996 and for the 53 week period ended March 30, 1997, and the 52 week period
ended March 24, 1996 included in this Prospectus have been so included in
reliance on the report of Price Waterhouse, independent accountants, given on
the authority of said firm as experts in accounting and auditing.
With respect to the unaudited consolidated financial information of London
Clubs for the 26 week periods ended September 28, 1997 and September 22, 1996
included in this Prospectus, Price Waterhouse reported that they have applied
limited procedures in accordance with professional standards for a review of
such information. However, their separate report dated December 5, 1997 states
that they did not audit and they do not express an opinion on that unaudited
consolidated financial information. Price Waterhouse has not carried out any
significant or additional audit tests beyond those which would have been
necessary if their report had not been included. Accordingly, the degree of
reliance on their report on such information should be restricted in light of
the limited nature of the review procedures applied. Price Waterhouse is not
subject to the liability provisions of Section 11 of the Securities Act of 1933
for their report on the unaudited consolidated financial information because
that report is not a "report" or a "part" of the registration statement prepared
or certified by Price Waterhouse within the meaning of Sections 7 and 11 of the
Act.
139
<PAGE>
INDEX TO HISTORICAL FINANCIAL INFORMATION OF THE
ALADDIN PARTIES AND THE COMPANY
Set forth below is certain historical financial information concerning the
Company and the Aladdin Parties. Potential investors should note that the
Aladdin Parties and the Company are development stage companies and the attached
financial information is not indicative of future results of operations.
<TABLE>
<CAPTION>
<S> <C>
Aladdin Gaming Holdings, LLC
Report of Independent Public Accountants................................................................. F-4
Consolidated Balance Sheet............................................................................... F-5
Consolidated Statement of Members' Equity................................................................ F-6
Consolidated Statement of Cash Flows..................................................................... F-7
Notes to Consolidated Financial Statements............................................................... F-8
Financial Statements as of March 31, 1998................................................................ F-11
Aladdin Capital Corp.
Report of Independent Public Accountants................................................................. F-20
Balance Sheet............................................................................................ F-21
Statement of Stockholders' Equity........................................................................ F-22
Statements of Cash Flows................................................................................. F-23
Notes to Financial Statements............................................................................ F-24
Financial Statements as of March 31, 1998................................................................ F-26
Aladdin Gaming, LLC
Report of Independent Public Accountants................................................................. F-31
Balance Sheet............................................................................................ F-32
Statement of Members' Equity............................................................................. F-33
Statement of Cash Flows.................................................................................. F-34
Notes to Financial Statements............................................................................ F-35
Financial Statements as of March 31, 1998................................................................ F-37
Aladdin Gaming Enterprises, Inc.
Report of Independent Public Accountants................................................................. F-46
Balance Sheet............................................................................................ F-47
Statement of Stockholders' Equity........................................................................ F-48
Statement of Cash Flows.................................................................................. F-49
Notes to Financial Statements............................................................................ F-50
Financial Statements as of March 31, 1998................................................................ F-52
</TABLE>
F-1
<PAGE>
(This page intentionally left blank.)
F-2
<PAGE>
ALADDIN GAMING HOLDINGS, LLC
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1997
F-3
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Members of
Aladdin Gaming Holdings, LLC and subsidiaries:
We have audited the accompanying consolidated balance sheet of ALADDIN
GAMING HOLDINGS, LLC (a Nevada Limited-Liability Company) and SUBSIDIARIES, as
of December 31, 1997, and the related consolidated statements of members' equity
and cash flows for the period from inception (December 1, 1997) through December
31, 1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Aladdin Gaming Holdings, LLC
and subsidiaries, as of December 31, 1997, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
January 15, 1998, except
for Note 6, as to which
the date is February 26, 1998
F-4
<PAGE>
ALADDIN GAMING HOLDINGS, LLC
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1997
<TABLE>
<S> <C>
ASSETS
Cash................................................................................ $ 6,895
---------
Total Assets.................................................................... $ 6,895
---------
---------
LIABILITIES AND MEMBERS' EQUITY
Due to Sommer Trust................................................................. $ 1,245
Advances to purchase membership interests........................................... 2,850
Members' equity..................................................................... 2,800
---------
Total Liabilities and Members' Equity........................................... $ 6,895
---------
---------
</TABLE>
The accompanying notes are an integral part of this consolidated financial
statement.
F-5
<PAGE>
ALADDIN GAMING HOLDINGS, LLC
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF MEMBERS' EQUITY
FOR THE PERIOD FROM INCEPTION (DECEMBER 1, 1997)
THROUGH DECEMBER 31, 1997
<TABLE>
<S> <C>
BALANCE, December 1, 1997........................................................... $ --
Members' contribution............................................................... 2,800
---------
BALANCE, December 31, 1997.......................................................... $ 2,800
---------
---------
</TABLE>
The accompanying notes are an integral part of this consolidated financial
statement.
F-6
<PAGE>
ALADDIN GAMING HOLDINGS, LLC
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (DECEMBER 1, 1997)
THROUGH DECEMBER 31, 1997
<TABLE>
<S> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Due to Sommer Trust............................................................... $ 1,245
Members' contributions............................................................ 2,800
Advances to purchase membership interests......................................... 2,850
---------
INCREASE IN CASH AND CASH EQUIVALENTS............................................... 6,895
CASH AND CASH EQUIVALENTS, December 1, 1997......................................... --
---------
CASH AND CASH EQUIVALENTS, December 31, 1997........................................ $ 6,895
---------
---------
</TABLE>
The accompanying notes are an integral part of this consolidated financial
statement.
F-7
<PAGE>
ALADDIN GAMING HOLDINGS, LLC
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. ORGANIZATION AND BUSINESS
Aladdin Gaming Holdings, LLC, a Nevada limited-liability company ("Gaming
Holdings"), was established on December 1, 1997. Gaming Holdings is owned by
Aladdin Gaming Enterprises, Inc. (25%), a Nevada corporation, Sommer
Enterprises, LLC (72%), a Nevada limited-liability company, and GAI, LLC (3%), a
Nevada limited-liability company. See Note 5 regarding the agreement to purchase
membership interests. Aladdin Holdings, LLC, a Delaware limited liability
company ("Holdings"), indirectly holds a majority interest in Gaming Holdings.
The members of Holdings are the Trust Under Article Sixth u/w/o Sigmund Sommer
(the "Sommer Trust") which holds a 95% interest in Holdings, and GW Vegas, LLC,
a Nevada limited-liability company ("GW"), a wholly owned subsidiary of Trust
Company of the West ("TCW"), which holds a 5% interest in Holdings.
Distributions shall be made in accordance with the respective ownership
interests subject to Gaming Holdings' operating agreement.
Since the planned principal operations had not commenced as of December 31,
1997, Gaming Holdings has accounted for its operations as a development stage
company. There were no operations during the period from inception (December 1,
1997) through December 31, 1997 and hence no statement of income has been
prepared.
2. PRINCIPLES OF CONSOLIDATION AND PRESENTATION
The consolidated financial statements include the accounts of Gaming
Holdings and its subsidiaries. All significant intercompany accounts and
transactions are eliminated in consolidation.
Gaming Holdings' wholly owned subsidiaries are Aladdin Capital Corp., a
Nevada corporation, and Aladdin Gaming, LLC, a Nevada limited-liability company.
3. INCOME TAXES
Gaming Holdings will file federal information tax returns only. Each member
reports taxable income or loss on their respective tax returns.
4. PURCHASE OF RESTRICTED MEMBERSHIP INTERESTS
Certain members of Gaming Holdings' executive management have purchased
unvested restricted membership interests in 4.75% of Gaming Holdings' stock.
These membership interests will vest over approximately a four-year period. As
of December 31, 1997, none of these membership interests had vested.
5. COMMITMENTS
On September 24, 1997 Gaming Holdings, the Sommer Trust, Holdings, Sommer
Enterprises, London Clubs International plc, a company registered in the United
Kingdom ("London Clubs") and London Clubs Nevada Inc. ("LCNI") entered into a
purchase agreement (subsequently amended) providing for the acquisition by LCNI
of 25 percent of Gaming Holdings' common membership interests for a purchase
F-8
<PAGE>
ALADDIN GAMING HOLDINGS, LLC
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
5. COMMITMENTS (CONTINUED)
price of $50.0 million. LCNI's obligation to purchase such membership interests
is subject to the satisfaction or waiver of various conditions.
6. SUBSEQUENT EVENTS
Private Offering
On February 26, 1998, Gaming Holdings, Aladdin Capital Corp. ("Capital" and,
together with Gaming Holdings, the "Issuers") and Aladdin Gaming Enterprises,
Inc. consummated a private offering (the "Offering") under Rule 144A of the
Securities Exchange Act of 1933. The private offering consisted of 221,500 units
(the "Units"), each unit consisting of (i) $1,000 principal amount at maturity
of 13 1/2% Senior Discount Notes due 2010 (the "Notes") of Gaming Holdings and
Capital and (ii) 10 Warrants (the "Warrants") to purchase 10 shares of Class B
non-voting Common Stock, no par value, of Aladdin Gaming Enterprises, Inc.
The initial accreted value of the Notes is $519.40 per $1,000 principal
amount at maturity of the Notes. The Notes will mature on March 1, 2010. The
Notes will accrete at 13 1/2% (computed on a semi-annual bond equivalent basis)
based on the initial accreted value, calculated from February 26, 1998. Cash
interest on the Notes will not accrue prior to March 1, 2003. Thereafter, cash
interest on the Notes will accrue at the rate of 13 1/2% per annum based on the
accreted value at maturity of the Notes and will be payable semi-annually in
arrears on March 1 and September 1 of each year, commencing on September 1,
2003.
The Notes are secured by a first priority pledge of all amounts held in a
segregated construction disbursement account (the "Note Construction
Disbursement Account") and by a first priority pledge of all of the issued and
outstanding Series A Preferred Interests of Gaming Holdings in Aladdin Gaming,
LLC. The Note Construction Disbursement Account is comprised of approximately
$35 million remaining proceeds from the Offering, after the application of the
net proceeds to repay certain previously existing indebtedness and certain fees
and expenses.
The Indenture to the Notes contains certain covenants that (subject to
certain exceptions) restrict the ability of the Issuers and certain of their
subsidiaries to, among other things: (i) make restricted payments; (ii) incur
additional indebtedness and issue preferred stock; (iii) incur liens; (iv) pay
dividends or make other distributions; (v) enter into mergers or consolidations;
(vi) enter into certain transactions with affiliates or (vii) enter into new
lines of business.
Equity Contributions
On February 26, 1998, LCNI contributed $50.0 million ("London Clubs
Contribution") for 25% of Gaming Holdings common membership interests. Sommer
Enterprises, LLC contributed a portion of land in exchange for common membership
interests in Gaming Holdings. Aladdin Gaming Enterprises, Inc. contributed the
portion of land and $7.0 million of predevelopment costs, which were originally
received from Sommer Enterprises, Inc. and the net proceeds (approximately $15
million) allocable from the sale of
F-9
<PAGE>
ALADDIN GAMING HOLDINGS, LLC
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
6. SUBSEQUENT EVENTS (CONTINUED)
the Warrants to Gaming Holdings in exchange for 25% of the common membership
interests in Gaming Holdings.
Investments
Gaming Holdings contributed the land appraised at $150.0 million,
approximately $42 million in cash from the London Clubs Contribution and the
$7.0 million of predevelopment costs in exchange for 100% of the common
membership interests in Aladdin Gaming, LLC. Gaming Holdings also contributed
$115 million in cash, consisting of the net proceeds of the sale of the Units
and approximately $8 million from the London Clubs Contribution to Aladdin
Gaming, LLC in exchange for 100% of the Series A Preferred Interests.
F-10
<PAGE>
ALADDIN GAMING HOLDINGS, LLC
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
AS OF MARCH 31, 1998
F-11
<PAGE>
ALADDIN GAMING HOLDINGS, LLC
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
AS OF MARCH 31, 1998
<TABLE>
<CAPTION>
MARCH 31, 1998
--------------
<S> <C>
(UNAUDITED)
ASSETS
Cash.............................................................................................. $ 406,559
Property and equipment:
Land............................................................................................ 33,407,500
Furniture and equipment......................................................................... 546,976
Construction in progress........................................................................ 13,492,315
Capitalized interest............................................................................ 544,283
--------------
Total property and equipment................................................................ 47,991,074
--------------
Other assets:
Restricted cash................................................................................. 308,293,229
Restricted land................................................................................. 6,842,500
Other assets.................................................................................... 1,964,435
Debt issuance costs, net of accumulated amortization of $285,255 as of March 31, 1998........... 36,884,511
--------------
Total other assets.......................................................................... 353,984,675
--------------
Total assets................................................................................ $ 402,382,308
--------------
--------------
LIABILITIES AND MEMBER'S EQUITY
Current liabilities:
Current maturities of long-term debt............................................................ $ 187,324
Payable to related parties...................................................................... 360,629
Obligation to transfer land..................................................................... 6,842,500
Accrued expenses................................................................................ 4,352,850
--------------
Total current liabilities................................................................... 11,743,303
--------------
Long-term debt.................................................................................... 375,749,612
Advances to purchase membership interests......................................................... 2,850
Members' equity:
Common membership interest...................................................................... 28,607,979
Accumulated Deficit............................................................................. (13,721,436)
--------------
Total members' equity....................................................................... 14,886,543
--------------
Total liabilities and members' equity....................................................... $ 402,382,308
--------------
--------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-12
<PAGE>
ALADDIN GAMING HOLDINGS, LLC
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND FOR THE PERIOD
FROM INCEPTION (DECEMBER 1, 1997) THROUGH MARCH 31, 1998
<TABLE>
<CAPTION>
FOR THE PERIOD
DECEMBER 1, 1997
(INCEPTION)
THROUGH
MARCH31, 1998 MARCH 31, 1998
-------------- ------------------
<S> <C> <C>
(UNAUDITED) (UNAUDITED)
Pre-opening costs.......................................................... $ 11,462,928 $ 11,462,928
Other (income) expense:
Interest income.......................................................... (1,584,938) (1,584,938)
Interest expense......................................................... 4,387,729 4,387,729
Less: Interest capitalized............................................... (544,283) (544,283)
-------------- ------------------
Total other (income) expense......................................... 2,258,508 2,258,508
-------------- ------------------
Net loss................................................................... $ (13,721,436) $ (13,721,436)
-------------- ------------------
-------------- ------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-13
<PAGE>
ALADDIN GAMING HOLDINGS, LLC
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF MEMBERS' EQUITY
FOR THE PERIOD FROM DECEMBER 31, 1997
THROUGH MARCH 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
ALADDIN GAMING
SOMMER ENTERPRISES, LONDON CLUBS
ENTERPRISES, LLC INC. NEVADA, INC. GAI, LLC TOTAL
---------------- --------------- ------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1997........ $ 669 $ 331 $ -- $ 1,800 $ 2,800
Net loss.......................... $ (6,449,075) $ (3,430,359) $ (3,430,359) $ (411,643) $ (13,721,436)
Members' contributions............ (47,317,023) 28,247,202 50,000,000 -- 30,930,179
Members' equity costs............. (1,092,750) (581,250) (581,250) (69,750) (2,325,000)
---------------- --------------- ------------- ----------- --------------
BALANCE, MARCH 31, 1998........... $ (54,858,179) $ 24,235,924 $ 45,988,391 $ (479,593) $ 14,886,543
---------------- --------------- ------------- ----------- --------------
---------------- --------------- ------------- ----------- --------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-14
<PAGE>
ALADDIN GAMING HOLDINGS, LLC AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND FOR THE PERIOD
FROM INCEPTION (DECEMBER 1, 1997) THROUGH MARCH 31, 1998
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE PERIOD
ENDED DECEMBER 1, 1997
MARCH 31, 1998 (INCEPTION)
-------------------- THROUGH
MARCH 31, 1998
(UNAUDITED) ------------------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net loss.............................................................. $ (13,721,436) $ (13,721,436)
Increase in other assets.............................................. (1,964,435) (1,964,435)
Amortization of debt costs............................................ 285,255 285,255
Amortization of original issue discount............................... 1,388,083 1,388,083
Increase in accrued expenses.......................................... 4,352,850 4,352,850
Increase in accrued fee to related party.............................. 359,384 359,384
-------------------- ------------------
Net cash used in operating activities................................... (9,300,299) (9,300,299)
-------------------- ------------------
Cash flows from investing activities:
Payments for construction in progress and capitalized interest........ (7,036,598) (7,036,598)
Increase in restricted cash........................................... (308,293,229) (308,293,229)
-------------------- ------------------
Net cash used in investing activities................................... (315,329,827) (315,329,827)
-------------------- ------------------
Cash flows from financing activities:
Proceeds from issuance of notes....................................... 100,047,100 100,047,100
Proceeds from long-term debt.......................................... 274,000,000 274,000,000
Repayment of long-term debt........................................... (45,223) (45,223)
Debt issuance costs................................................... (37,169,766) (37,169,766)
Members' contributions................................................ 65,000,000 65,002,800
Repayment of existing debt............................................ (74,477,321) (74,477,321)
Members' equity costs................................................. (2,325,000) (2,325,000)
Payable to related parties............................................ -- 1,245
Advances to purchase membership interests............................. -- 2,850
-------------------- ------------------
Net cash provided by financing activities............................... 325,029,790 325,036,685
-------------------- ------------------
Net increase in cash.................................................... 399,664 406,559
Cash at the beginning of the period..................................... 6,895 --
-------------------- ------------------
Cash at the end of the period........................................... $ 406,559 $ 406,559
-------------------- ------------------
-------------------- ------------------
Cash paid for interest, net of amount capitalized....................... $ 364,756 $ 364,756
Non-cash investing and financing activities:
Members' contributions -- book value
Land................................................................ 33,407,500 33,407,500
Construction in progress............................................ 7,000,000 7,000,000
Equipment acquired equal to assumption of debt........................ 546,976 546,976
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-15
<PAGE>
ALADDIN GAMING HOLDINGS, LLC
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
1. ORGANIZATION AND BUSINESS
Aladdin Gaming Holdings, LLC, a Nevada limited company ("Gaming Holdings"),
was established on December 1, 1997. Gaming Holdings was initially owned by
Aladdin Gaming Enterprises, Inc. (25%), a Nevada corporation, Sommer
Enterprises, LLC (72%), a Nevada limited-liability company, and GAI, LLC (3%), a
Nevada limited- liability company. On February 26, 1998, (a) London Clubs
Nevada, Inc., (LCNI) contributed $50.0 million for a 25% interest of Gaming
Holdings common membership interests, (b) Sommer Enterprises, LLC contributed
land for common membership interests in Gaming Holdings and (c) Aladdin Gaming
Enterprises, Inc. contributed land, $7.0 million of predevelopment costs and
$15.0 million in cash for common membership interests in Gaming Holdings. After
such contributions, Sommer Enterprises, LLC owns 47% and LCNI owns 25% of Gaming
Holdings with the remaining membership interests unchanged.
Aladdin Holdings, LLC, a Delaware limited liability company ("Holdings"),
indirectly holds a majority interest in Gaming Holdings. The members of Holdings
are the Trust Under Article Sixth u/w/o Sigmund Sommer (the "Sommer Trust")
which holds a 95% interest in Holdings, and GW Vegas, LLC, a Nevada
limited-liability company ("GW"), a wholly owned subsidiary of Trust Company of
the West ("TCW"), which holds a 5% interest in Holdings.
Distributions shall be made in accordance with the respective ownership
interests subject to the Company's operating agreement.
Gaming Holdings, through its subsidiaries, plans to develop, construct and
operate a new hotel and casino, the Aladdin Hotel and Casino (the "Aladdin"), as
the centerpiece of an approximately 35 acre world-class resort, casino and
entertainment complex in Las Vegas, Nevada. The resort will be located at the
center of Las Vegas Boulevard ("the Strip").
2. PRINCIPLES OF CONSOLIDATION AND PRESENTATION
The consolidated financial statements include the accounts of Aladdin Gaming
Holdings, LLC and its subsidiaries (collectively known as the "Company"). All
significant intercompany accounts and transactions are eliminated in
consolidation.
Gaming Holding's wholly owned subsidiaries are Aladdin Capital Corp., a
Nevada corporation, and Aladdin Gaming, LLC, a Nevada limited-liability company.
3. PREOPENING EXPENSES
The Company expenses preopening costs in the period during which they were
incurred.
4. INCOME TAXES
The Company will file federal information tax returns only. Each member
reports taxable income or loss on their respective tax returns.
F-16
<PAGE>
ALADDIN GAMING HOLDINGS, LLC
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 (CONTINUED)
5. PURCHASE OF RESTRICTED MEMBERSHIP INTERESTS
Certain members of Aladdin Gaming Holdings, LLC's executive management have
purchased unvested restricted membership interests in 4.75% of Gaming Holdings,
LLC. These membership interests will vest over approximately a four-year period
beginning at the opening of the Aladdin Hotel and Casino. As of March 31, 1998,
none of these membership interests had vested.
6. PRIVATE OFFERING
On February 26, 1998, Gaming Holdings, Aladdin Capital Corp. ("Capital" and,
together with Gaming Holdings, the "Issuers") and Aladdin Gaming Enterprises,
Inc. consummated a private offering (the "Offering") under Rule 144A of the
Securities Act of 1933. The private offering consisted of 221,500 units (the
"Units"), each unit consisting of (i) $1,000 principal amount of maturity of
13 1/2% Senior Discount Notes due 2010 (the "Notes") of Gaming Holdings and
Capital and (ii) 10 Warrants (the "Warrants") to purchase 10 shares of Class B
non-voting Common Stock, no par value, of Aladdin Gaming Enterprises, Inc.
The initial accreted value of the Notes was $519.40 per $1,000 principal
amount at maturity of the Notes. The Notes will mature on March 1, 2010. The
Notes will accrete at 13 1/2% (computed on a semi-annual bond equivalent basis)
based on the initial accreted value, calculated from February 26, 1998. Cash
interest on the Notes will not accrue prior to March 1, 2003. Thereafter, cash
interest on the Notes will accrue at the rate of 13 1/2% per annum based on the
accreted value at maturity of the Notes and will be payable semi-annually in
arrears on March 1 and September 1 of each year, commencing on September 1,
2003.
The Notes are secured by a first priority pledge of all amounts held in a
segregated construction disbursement account (the "Note Construction
Disbursement Account") and by a first priority pledge of all of the issued and
outstanding Series A Preferred Interests of Aladdin Gaming, LLC held by Gaming
Holdings. As of March 31, 1998, the Note Construction Disbursement Account
comprised approximately $32.9 million remaining proceeds from the Offering,
after the application of the net proceeds to repay certain previously existing
indebtedness and certain fees and expenses.
The Indenture to the Notes contains certain covenants that (subject to
certain exceptions) restrict the ability of the Issuers and certain of their
subsidiaries to, among other things: (i) make restricted payments; (ii) incur
additional indebtedness and issue preferred stock; (iii) incur liens; (iv) pay
dividends or make other distributions; (v) enter into mergers or consolidations;
(vi) enter into certain transactions with affiliates or (vii) enter into new
lines of business.
7. LONG-TERM DEBT
On February 26, 1998, Aladdin Gaming, LLC entered into a $410.0 million
Credit Agreement with various financial institutions and the Bank of Nova Scotia
as the administrative agent for the lenders. The Credit Agreement consists of a
Term A loan of $136.0 million, a Term B loan of $114.0 million and a Term C loan
of $160.0 million. Both the Term B and Term C loans were funded by the lenders
on February 26, 1998 and the funds are held by Aladdin Gaming, LLC for the
future development of the Aladdin. Under the Credit Agreement, the funds cannot
be utilized until the proceeds from the private offering are
F-17
<PAGE>
ALADDIN GAMING HOLDINGS, LLC
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 (CONTINUED)
7. LONG-TERM DEBT (CONTINUED)
completely exhausted and certain other conditions to disbursement have been
satisfied. As of March 31, 1998, the Term A Loan has not been funded.
The Term B loan is for a maximum term of 8.5 years from the date of funding
and the Term C loan is for a maximum of 10 years. The Term B loan bears interest
at rate of 7.883% until the funds are utilized for the project at which time the
rate increases to 9.383%. The Term C loan bears interest at a rate of 8.485%
until the funds are utilized for the project at which time the rate increases to
10.485%. In addition to quarterly interest payments, each loan has various
principal payment requirements once the Aladdin is completed and operating.
Except in the case of defaults, no principal repayments are required prior to
the opening of the Aladdin.
8. RESTRICTED LAND
Approximately 12.4 acres of land was deeded to Aladdin Gaming, LLC on
February 26, 1998, with an obligation to transfer such land to Aladdin Bazaar,
LLC at a future date. Aladdin Bazaar, LLC intends to construct and operate a
themed entertainment shopping mall and a 4,800 space car parking facility (the
"Mall Project"). The Mall Project is expected to be an integral part of the
Aladdin entertainment complex.
9. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." SFAS No. 130 requires companies to classify items of other
comprehensive income by their nature in a financial statement and display the
accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity sections of a statement of
financial position, and is effective for financial statements issued for fiscal
years beginning after December 15, 1997. The Company has adopted SFAS No. 130,
during the three-month period ended March 31, 1998 and has determined that such
adoption will not result in comprehensive income different from net income as
reported in the accompanying financial statements.
In June 1997, the FASB issued SFAS no. 131, "Disclosure About Segments of an
Enterprise and Related Information." SFAS No. 131 establishes additional
standards for segment reporting in financial statements and is effective for
fiscal years beginning after December 15, 1997. The Company currently operates
as one segment.
F-18
<PAGE>
ALADDIN CAPITAL CORP.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1997
F-19
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Board of Directors and Stockholders of
Aladdin Capital Corp.:
We have audited the accompanying balance sheet of ALADDIN CAPITAL CORP. (a
Nevada Corporation), as of December 31, 1997, and the related statements of
stockholders' equity and cash flows for the period from inception (December 1,
1997) through December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Aladdin Capital Corp., as of
December 31, 1997, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
January 15, 1998, except
for Note 3, as to which
the date is February 26, 1998
F-20
<PAGE>
ALADDIN CAPITAL CORP.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
AS OF DECEMBER 31, 1997
<TABLE>
<S> <C>
ASSETS
Cash................................................................................ $ 1,000
---------
Total Assets...................................................................... $ 1,000
---------
---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Common Stock, no par value, 2,500 shares authorized, issued and outstanding......... $ 1,000
---------
Total Liabilities and Stockholders' Equity........................................ $ 1,000
---------
---------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-21
<PAGE>
ALADDIN CAPITAL CORP.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (DECEMBER 1, 1997)
THROUGH DECEMBER 31, 1997
<TABLE>
<CAPTION>
SHARES
ISSUED AMOUNT TOTAL
--------- --------- ---------
<S> <C> <C> <C>
BALANCE, December 1, 1997............................................................ -- $ -- $ --
Issuance of common stock............................................................. 2,500 1,000 1,000
--------- --------- ---------
BALANCE, December 31, 1997........................................................... 2,500 $ 1,000 $ 1,000
--------- --------- ---------
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-22
<PAGE>
ALADDIN CAPITAL CORP.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (DECEMBER 1, 1997)
THROUGH DECEMBER 31, 1997
<TABLE>
<S> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of stock............................................... $ 1,000
---------
INCREASE IN CASH AND CASH EQUIVALENTS............................................... 1,000
CASH AND CASH EQUIVALENTS, December 1, 1997......................................... --
---------
CASH AND CASH EQUIVALENTS, December 31, 1997........................................ $ 1,000
---------
---------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-23
<PAGE>
ALADDIN CAPITAL CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. ORGANIZATION AND BUSINESS
Aladdin Capital Corp., a Nevada corporation ("Capital"), was established on
December 1, 1997. Capital is wholly owned by Aladdin Gaming Holdings, LLC, a
Nevada limited-liability company ("Gaming Holdings"). Aladdin Holdings, LLC, a
Delaware limited liability company ("Holdings"), indirectly holds a majority
interest in Gaming Holdings. The members of Holdings are the Trust Under Article
Sixth u/w/o Sigmund Sommer (the "Sommer Trust") which holds a 95% interest in
Holdings, and GW Vegas, LLC, a Nevada limited-liability company ("GW"), a wholly
owned subsidiary of Trust Company of the West ("TCW"), which holds a 5% interest
in Holdings.
Since the planned principal operations had not commenced as of December 31,
1997, Capital has accounted for its operations as a development stage company.
There were no operations during the period from inception (December 1, 1997)
through December 31, 1997 and hence no statement of income has been prepared.
2. INCOME TAXES
Capital accounts for income taxes using the liability method as set forth in
Statement of Financial Accounting Standards No. 109, ACCOUNTING FOR INCOME
TAXES. Under the liability method, deferred taxes are provided based on the
temporary differences between the financial reporting basis and the tax basis of
Capital's assets and liabilities.
There was no income tax expense or benefit recorded for the period from
inception (December 1, 1997) through December 31, 1997 as Capital is a
development stage company and operations have not yet commenced.
3. SUBSEQUENT EVENTS
Private Offering
On February 26, 1998, Gaming Holdings, Capital (together with Gaming
Holdings, the "Issuers") and Aladdin Gaming Enterprises, Inc. consummated a
private offering (the "Offering") under Rule 144A of the Securities Exchange Act
of 1933. The private offering consisted of 221,500 units (the "Units"), each
unit consisting of (i) $1,000 principal amount at maturity of 13 1/2% Senior
Discount Notes due 2010 (the "Notes") of Gaming Holdings and Capital and (ii) 10
Warrants (the "Warrants") to purchase 10 shares of Class B non-voting Common
Stock, no par value, of Aladdin Gaming Enterprises, Inc.
The initial accreted value of the Notes is $519.40 per $1,000 principal
amount at maturity of the Notes. The Notes will mature on March 1, 2010. The
Notes will accrete at 13 1/2% (computed on a semi-annual bond equivalent basis)
based on the initial accreted value, calculated from February 26, 1998. Cash
interest on the Notes will not accrue prior to March 1, 2003. Thereafter, cash
interest on the Notes will accrue at the rate of 13 1/2% per annum based on the
accreted value at maturity of the Notes and will be payable semi-annually in
arrears on March 1 and September 1 of each year, commencing on September 1,
2003.
The Notes are secured by a first priority pledge of all amounts held in a
segregated construction disbursement account (the "Note Construction
Disbursement Account") and by a first priority pledge of all of the issued and
outstanding Series A Preferred Interests of Gaming Holdings in Aladdin Gaming,
F-24
<PAGE>
3. SUBSEQUENT EVENTS (CONTINUED)
LLC. The Note Construction Disbursement Account is comprised of approximately
$35 million remaining proceeds from the Offering, after the application of the
net proceeds to repay certain previously existing indebtedness and certain fees
and expenses.
The Indenture to the Notes contains certain covenants that (subject to
certain exceptions) restrict the ability of the Issuers and certain of their
subsidiaries to, among other thing: (i) make restricted payments; (ii) incur
additional indebtedness and issue preferred stock, (iii) incur liens; (iv) pay
dividends or make other distributions; (v) enter into mergers or consolidations;
(vi) enter into certain transactions with affiliates or (vii) enter into new
lines of business.
F-25
<PAGE>
ALADDIN CAPITAL CORP.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
AS OF MARCH 31, 1998
F-26
<PAGE>
ALADDIN CAPITAL CORP.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
AS OF MARCH 31, 1998
<TABLE>
<S> <C>
ASSETS
Cash................................................................................ $ 1,000
---------
Total Assets.................................................................. $ 1,000
---------
---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Common Stock, no par value, 2,500 shares authorized, issued and outstanding......... $ 1,000
---------
Total Liabilities and Stockholders' Equity.................................... $ 1,000
---------
---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-27
<PAGE>
ALADDIN CAPITAL CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
1. ORGANIZATION AND BUSINESS
Aladdin Capital Corp., a Nevada corporation ("Capital"), was established on
December 1, 1997. Capital is wholly owned by Aladdin Gaming Holdings, LLC, a
Nevada limited-liability company ("Gaming Holdings"). Aladdin Holdings, LLC, a
Delaware limited liability company ("Holdings"), indirectly holds a majority
interest in Gaming Holdings. The members of Holdings are the Trust Under Article
Sixth u/w/o Sigmund Sommer (the "Sommer Trust") which holds a 95% interest in
Holdings, and GW Vegas, LLC, a Nevada limited-liability company ("GW"), a wholly
owned subsidiary of Trust Company of the West ("TCW"), which holds a 5% interest
in Holdings.
Capital was formed for the sole purpose of being a joint issuer of the
13 1/2% Senior Discount Notes due 2010 (See "Private Offering"). There were no
operations or cash transactions during the period from December 31, 1997 through
March 31, 1998 and hence no statement of income or cash flows has been prepared.
2. INCOME TAXES
Capital accounts for income taxes using the liability method as set forth in
Statement of Financial Accounting Standards No. 109, ACCOUNTING FOR INCOME
TAXES. Under the liability method, deferred taxes are provided based on the
temporary differences between the financial reporting basis and the tax basis of
Capital's assets and liabilities.
There was no income tax expense or benefit recorded for the period from
inception (December 1, 1997) through March 31, 1998 as Capital is a development
stage company and operations have not yet commenced.
3. PRIVATE OFFERING
On February 26, 1998, Gaming Holdings, Capital (together with Gaming
Holdings, the "Issuers") and Aladdin Gaming Enterprises, Inc. consummated a
private offering (the "Offering") under Rule 144A of the Securities Act of 1933.
The private offering consisted of 221,500 units (the "Units"), each unit
consisting of (i) $1,000 principal amount of maturity of 13 1/2% Senior Discount
Notes due 2010 (the "Notes") of Gaming Holdings and Capital and (ii) 10 Warrants
(the "Warrants") to purchase 10 shares of Class B non-voting Common Stock, no
par value, of Aladdin Gaming Enterprises, Inc.
The initial accreted value of the Notes was $519.40 per $1,000 principal
amount at maturity of the Notes. The Notes will mature on March 1, 2010. The
Notes will accrete at 13 1/2% (computed on a semi-annual bond equivalent basis)
based on the initial accreted value, calculated from February 26, 1998. Cash
interest on the Notes will not accrue prior to March 1, 2003. Thereafter, cash
interest on the Notes will accrue at the rate of 13 1/2% per annum based on the
accreted value at maturity of the Notes and will be payable semi-annually in
arrears on March 1 and September 1 of each year, commencing on September 1,
2003.
The Notes are secured by a first priority pledge of all amounts held in a
segregated construction disbursement account (the "Note Construction
Disbursement Account") and by a first priority pledge of all of the issued and
outstanding Series A Preferred Interests of Aladdin Gaming, LLC held by Gaming
Holdings. As of March 31, 1998, the Note Construction Disbursement Account
comprised approximately
F-28
<PAGE>
ALADDIN CAPITAL CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998 (CONTINUED)
3. PRIVATE OFFERING (CONTINUED)
$32.9 million remaining proceeds from the Offering, after the application of the
net proceeds to repay certain previously existing indebtedness and certain fees
and expenses.
The Indenture to the Notes contains certain covenants that (subject to
certain exceptions) restrict the ability of the Issuers and certain of their
subsidiaries to, among other things: (i) make restricted payments; (ii) incur
additional indebtedness and issue preferred stock; (iii) incur liens; (iv) pay
dividends or make other distributions; (v) enter into mergers or consolidations;
(vi) enter into certain transactions with affiliates or (vii) enter into new
lines of business.
4. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." SFAS No. 130 requires companies to classify items of other
comprehensive income by their nature in a financial statement and display the
accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity sections of a statement of
financial position, and is effective for financial statements issued for fiscal
years beginning after December 15, 1997. The Company has adopted SFAS No. 130,
during the three-month period ended March 31, 1998 and has determined that such
adoption will not result in comprehensive income different from net income.
In June 1997, the FASB issued SFAS no. 131, "Disclosure About Segments of an
Enterprise and Related Information." SFAS No. 131 establishes additional
standards for segment reporting in financial statements and is effective for
fiscal years beginning after December 15, 1997. The Company currently operates
as one segment.
F-29
<PAGE>
ALADDIN GAMING, LLC
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1997
F-30
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Members of
Aladdin Gaming, LLC:
We have audited the accompanying balance sheet of ALADDIN GAMING, LLC (a
Nevada Limited-Liability Company), as of December 31, 1997, and the related
statements of members' equity and cash flows for the period from inception
(January 24, 1997) through December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Aladdin Gaming, LLC, as of
December 31, 1997, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
January 15, 1998, except
for Note 4, as to which
the date is February 26, 1998.
F-31
<PAGE>
ALADDIN GAMING, LLC
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
AS OF DECEMBER 31, 1997
<TABLE>
<S> <C>
ASSETS
Cash................................................................................ $ 5,650
---------
Total Assets...................................................................... $ 5,650
---------
---------
LIABILITIES AND MEMBERS' EQUITY
Due to Aladdin Gaming Holdings, LLC................................................. $ 4,650
Members' equity..................................................................... 1,000
---------
Total Liabilities and Members' Equity............................................. $ 5,650
---------
---------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-32
<PAGE>
ALADDIN GAMING, LLC
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF MEMBERS' EQUITY
FOR THE PERIOD FROM INCEPTION (JANUARY 24, 1997)
THROUGH DECEMBER 31, 1997
<TABLE>
<S> <C>
BALANCE, January 24, 1997........................................................... $ --
Members' contribution............................................................... 1,000
---------
BALANCE, December 31, 1997.......................................................... $ 1,000
---------
---------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-33
<PAGE>
ALADDIN GAMING, LLC
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (JANUARY 24, 1997)
THROUGH DECEMBER 31, 1997
<TABLE>
<S> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Due to Aladdin Gaming Holdings, LLC............................................... $ 4,650
Members' contributions............................................................ 1,000
---------
INCREASE IN CASH AND CASH EQUIVALENTS............................................... 5,650
CASH AND CASH EQUIVALENTS, January 24, 1997......................................... --
<CAPTION>
---------
<S> <C>
CASH AND CASH EQUIVALENTS, December 31, 1997........................................ $ 5,650
---------
---------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-34
<PAGE>
ALADDIN GAMING, LLC
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. ORGANIZATION AND BUSINESS
Aladdin Gaming, LLC, a Nevada limited-liability company (the "Company"), was
established on January 24, 1997. The Company is wholly owned by Aladdin Gaming
Holdings, LLC, a Nevada limited-liability company ("Gaming Holdings"). Aladdin
Holdings, LLC, a Delaware limited liability company ("Holdings"), indirectly
holds a majority interest in Gaming Holdings. The members of Holdings are the
Trust Under Article Sixth u/w/o Sigmund Sommer (the "Sommer Trust") which holds
a 95% interest in Holdings, and GW Vegas, LLC, a Nevada limited-liability
company ("GW"), a wholly owned subsidiary of Trust Company of the West ("TCW"),
which holds a 5% interest in Holdings.
The Company term is 100 years. Distributions shall be made in accordance
with the respective ownership interests subject to the Company's operating
agreement.
Since the planned principal operations had not commenced as of December 31,
1997, the Company has accounted for its operations as a development stage
company. There were no operations during the period from inception (January 24,
1997) through December 31, 1997 and hence no statement of income has been
prepared.
2. INCOME TAXES
The Company will file federal information tax returns only. Each member
reports taxable income or loss on their respective tax returns.
3. COMMITMENTS
The Company has entered into a consulting agreement with GAI, LLC to render
consulting services as are reasonably requested by the Board of the Company
until June 30, 2002.
The Company has entered into a commitment letter with an equipment finance
company for provision of approximately $80.0 million of financing to obtain
gaming and other specified equipment. The financing will be comprised of $60.0
million of operating leases and $20.0 million in loans.
The Company has entered into a commitment letter with certain bank lenders
for the provision of a bank credit facility. The facility will consist of three
separate term loans (Term Loan A, B and C) of $136.0 million, $114.0 million and
$160.0 million, respectively. Term A, B and C Loans will mature seven, eight and
one-half and ten years after their respective borrowing dates, respectively.
4. SUBSEQUENT EVENTS
Private Offering
On February 26, 1998, Gaming Holdings, Aladdin Capital Corp. ("Capital" and,
together with Gaming Holdings, the "Issuers") and Aladdin Gaming Enterprises,
Inc. consummated a private offering (the "Offering") under Rule 144A of the
Securities Exchange Act of 1933. The private offering consisted of 221,500 units
(the "Units"), each unit consisting of (i) $1,000 principal amount at maturity
of 13 1/2% Senior Discount Notes due 2010 (the "Notes") of Gaming Holdings and
Capital and (ii) 10 Warrants (the "Warrants") to purchase 10 shares of Class B
non-voting Common Stock, no par value, of Aladdin Gaming Enterprises, Inc.
The initial accreted value of the Notes is $519.40 per $1,000 principal
amount at maturity of the Notes. The Notes will mature on March 1, 2010. The
Notes will accrete at 13 1/2% (computed on a semi-annual bond equivalent basis)
based on the initial accreted value, calculated from February 26, 1998. Cash
interest on the Notes will not accrue prior to March 1, 2003. Thereafter, cash
interest on the Notes will
F-35
<PAGE>
ALADDIN GAMING, LLC
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
4. SUBSEQUENT EVENTS (CONTINUED)
accrue at the rate of 13 1/2% per annum based on the accreted value at maturity
of the Notes and will be payable semi-annually in arrears on March 1 and
September 1 of each year, commencing on September 1, 2003.
The Notes are secured by a first priority pledge of all amounts held in a
segregated construction disbursement account (the "Note Construction
Disbursement Account") and by a first priority pledge of all of the issued and
outstanding Series A Preferred Interests of Gaming Holdings in the Company. The
Note Construction Disbursement Account is comprised of approximately $35 million
remaining proceeds from the Offering, after the application of the net proceeds
to repay certain previously existing indebtedness and certain fees and expenses.
The Indenture to the Notes contains certain covenants that (subject to
certain exceptions) restrict the ability of the Issuers and certain of their
subsidiaries to, among other things: (i) make restricted payments; (ii) incur
additional indebtedness and issue preferred stock; (iii) incur liens; (iv) pay
dividends or make other distributions; (v) enter into mergers or consolidations;
(vi) enter into certain transactions with affiliates or (vii) enter into new
lines of business.
Equity Contributions
Gaming Holdings contributed land appraised at $150.0 million, approximately
$42 million in cash from a contribution from London Clubs Nevada Inc. ("LCNI")
and $7.0 million of predevelopment costs in exchange for 100% of the common
membership interests in the Company. Gaming Holdings also contributed $115
million in cash, consisting of the net proceeds of the sale of the Units and
approximately $8 million from LCNI to the Company in exchange for 100% of the
Series A Preferred Interests.
Bank Indebtedness
On February 26, 1998, the Company entered into the bank credit facility for
$410 million as discussed above in Note 3.
F-36
<PAGE>
ALADDIN GAMING, LLC
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
AS OF MARCH 31, 1998
F-37
<PAGE>
ALADDIN GAMING, LLC
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
AS OF MARCH 31, 1998
<TABLE>
<CAPTION>
MARCH 31, 1998
--------------
<S> <C>
(UNAUDITED)
ASSETS
Cash.............................................................................................. $ 405,314
Property and equipment:
Land............................................................................................ 33,407,500
Furniture and equipment......................................................................... 546,976
Construction in progress........................................................................ 13,492,315
Capitalized interest............................................................................ 398,160
--------------
Total property and equipment................................................................ 47,844,951
--------------
Other assets:
Due from Parent (Aladdin Gaming Holdings, LLC).................................................. 32,882,836
Restricted cash................................................................................. 275,405,744
Restricted land................................................................................. 6,842,500
Other assets.................................................................................... 1,964,434
Debt issuance costs, net of accumulated amortization of $167,849 as of March 31, 1998........... 26,004,300
--------------
Total other assets.......................................................................... 343,099,814
--------------
Total assets...................................................................................... $ 391,350,079
--------------
--------------
<CAPTION>
LIABILITIES AND MEMBER'S EQUITY
<S> <C>
Current liabilities:
Current maturities of long-term debt............................................................ $ 187,324
Payable to related parties...................................................................... 359,384
Obligation to transfer land..................................................................... 6,842,500
Accrued expenses................................................................................ 3,627,849
--------------
Total current liabilities................................................................... 11,017,057
--------------
Long-term debt.................................................................................... 274,314,429
Members' equity:
Preferred membership interest................................................................... 115,047,100
Common membership interest...................................................................... 3,333,563
Accumulated Deficit............................................................................. (12,362,070)
--------------
Total members' equity....................................................................... 106,018,593
--------------
Total liabilities and members' equity....................................................... $ 391,350,079
--------------
--------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-38
<PAGE>
ALADDIN GAMING, LLC
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND FOR THE PERIOD
FROM INCEPTION (JANUARY 24, 1997) THROUGH MARCH 31, 1998
<TABLE>
<CAPTION>
MARCH 31, 1998 FOR THE PERIOD
-------------- JANUARY 24, 1997
(INCEPTION)
(UNAUDITED) THROUGH
MARCH 31, 1998
------------------
(UNAUDITED)
<S> <C> <C>
Pre-opening costs............................................................. $ 11,462,928 $ 11,462,928
Other (income) expense:
Interest income............................................................. (1,584,938) (1,584,938)
Interest expense............................................................ 2,882,240 2,882,240
Less: Interest capitalized.................................................. (398,160) (398,160)
-------------- ------------------
Total other (income) expense.............................................. 899,142 899,142
-------------- ------------------
Net loss...................................................................... $(12,362,070) $ (12,362,070)
-------------- ------------------
-------------- ------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-39
<PAGE>
ALADDIN GAMING, LLC
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF MEMBERS' EQUITY
FOR THE PERIOD FROM DECEMBER 31, 1997
THROUGH MARCH 31, 1998
(UNAUDITED)
<TABLE>
<S> <C>
BALANCE, DECEMBER 31, 1997.................................................... $ 1,000
Net loss...................................................................... (12,362,070)
Member's contribution -- preferred interest................................... 115,047,100
Member's contribution -- common interest...................................... 3,332,563
-----------
BALANCE, MARCH 31, 1998....................................................... 106,018,593
-----------
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-40
<PAGE>
ALADDIN GAMING, LLC
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND FOR THE PERIOD
FROM INCEPTION (JANUARY 24, 1997) THROUGH MARCH 31, 1998
<TABLE>
<CAPTION>
FOR THE PERIOD JANUARY
FOR THE THREE MONTHS 24,
ENDED 1997 (INCEPTION) THROUGH
MARCH 31, 1998 MARCH 31, 1998
(UNAUDITED) (UNAUDITED)
-------------------- ------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss....................................................... $ (12,362,070) $ (12,362,070)
Increase in other assets....................................... (1,964,434) (1,964,434)
Amortization of debt costs..................................... 167,849 167,849
Increase in accrued expenses................................... 3,627,849 3,627,849
Increase in accrued fee to related party....................... 359,384 359,384
-------------------- -------------
Net cash used in operating activities............................ (10,171,422) (10,171,422)
-------------------- -------------
Cash flows from investing activities:
Payments for construction in progress and capitalized
interest..................................................... (6,890,475) (6,890,475)
Increase in restricted cash.................................... (275,405,744) (275,405,744)
-------------------- -------------
Net cash used in investing activities............................ (282,296,219) (282,296,219)
-------------------- -------------
Cash flows from financing activities:
Proceeds from long-term debt................................... 274,000,000 274,000,000
Repayment of long-term debt.................................... (45,223) (45,223)
Debt issuance costs............................................ (26,172,149) (26,172,149)
Member's contributions......................................... 77,972,163 77,973,163
Payable/(Receivable) from/to parent (Aladdin Gaming Holdings,
LLC)......................................................... (33,887,486) (33,882,836)
-------------------- -------------
Net cash provided by financing activities........................ 292,867,305 292,872,955
-------------------- -------------
Net increase in cash............................................. 399,664 405,314
Cash at the beginning of the period.............................. 5,650 --
-------------------- -------------
Cash at the end of the period.................................... $ 405,314 $ 405,314
-------------------- -------------
-------------------- -------------
Cash paid for interest, net of amount capitalized................ $ 364,756 $ 364,756
Non-cash investing and financing activities:
Member's contributions -- book value
Land......................................................... 33,407,500 33,407,500
Construction in progress..................................... 7,000,000 7,000,000
Equipment acquired equal to assumption of debt................. 546,976 546,976
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-41
<PAGE>
ALADDIN GAMING, LLC
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
1. ORGANIZATION AND BUSINESS
Aladdin Gaming, LLC, a Nevada limited company (the "Company"), was
established on January 24, 1997. The Company is wholly owned by Aladdin Gaming
Holdings, LLC, a Nevada limited-liability company ("Gaming Holdings"). Aladdin
Holdings, LLC, a Delaware limited liability company ("Holdings"), indirectly
holds a majority interest in Gaming Holdings. The members of Holdings are the
Trust under Article Sixth u/w/o Sigmund Sommer (the "Sommer Trust") which holds
a 95% interest in Holdings, and GW Vegas, LLC, a Nevada limited-liability
company ("GW), a wholly owned subsidiary of Trust Company of the West ("TCW),
which holds a 5% interest in Holdings.
The Company term is 100 years. Distributions shall be made in accordance
with the respective ownership interest subject to the Company's operating
agreement.
The Company plans to develop, construct and operate a new hotel and casino,
the Aladdin Hotel and Casino (the "Aladdin"), as the centerpiece of an
approximately 35 acre world-class resort, casino and entertainment complex in
Las Vegas, Nevada. The resort will be located at the center of Las Vegas
Boulevard ("the strip").
2. PRE-OPENING EXPENSES
The Company expenses pre-opening costs in the period during which they were
incurred.
3. INCOME TAXES
The Company will file federal information tax returns only. Each member
reports taxable income or loss on their respective tax returns.
4. COMMITMENTS
The Company has entered into a consulting agreement with GAI, LLC to render
consulting services as are reasonably requested by the Board of the Company
until June 30, 2002.
The Company has entered into a commitment letter with an equipment finance
company for provision of approximately $80.0 million of financing to obtain
gaming and other specified equipment. The financing will be comprised of $60.0
million of operating leases and $20.0 million in loans.
5. PRIVATE OFFERING
On February 26, 1998, Gaming Holdings, Aladdin Capital Corp. ("Capital" and,
together with Gaming Holdings, the "Issuers") and Aladdin Gaming Enterprises,
Inc. consummated a private offering (the "Offering") under Rule 144A of the
Securities Act of 1933. The private offering consisted of 221,500 units (the
"Units"), each unit consisting of (i) $1,000 principal amount of maturity of
13 1/2% Senior Discount Notes due 2010 (the "Notes") of Gaming Holdings and
Capital and (ii) 10 Warrants (the "Warrants") to purchase 10 shares of Class B
non- voting Common Stock, no par value, of Aladdin Gaming Enterprises, Inc.
The initial accreted value of the Notes was $519.40 per $1,000 principal
amount at maturity of the Notes. The Notes will mature on March 1, 2010. The
Notes will accrete at 13 1/2% (computed on a semi-annual bond equivalent basis)
based on the initial accreted value, calculated from February 26, 1998. Cash
F-42
<PAGE>
ALADDIN GAMING, LLC
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1998
5. PRIVATE OFFERING (CONTINUED)
interest on the Notes will not accrue prior to March 1, 2003. Thereafter, cash
interest on the Notes will accrue at the rate of 13 1/2% per annum based on the
accreted value at maturity of the Notes and will be payable semi-annually in
arrears on March 1 and September 1 of each year, commencing on September 1,
2003.
The Notes are secured by a first priority pledge of all amounts held in a
segregated construction disbursement account (the "Note Construction
Disbursement Account") and by a first priority pledge of all of the issued and
outstanding Series A Preferred Interests of Aladdin Gaming, LLC held by Gaming
Holdings. As of March 31, 1998, the Note Construction Disbursement Account
comprised approximately $32.9 million remaining proceeds from the Offering,
after the application of the net proceeds to repay certain previously existing
indebtedness and certain fees and expenses. This amount is reflected on the
Company's balance sheet as Due from Parent (Aladdin Gaming Holdings, LLC), as
the funds are held by the parent company until disbursed.
The Indenture to the Notes contains certain covenants that (subject to
certain exceptions) restrict the ability of the Issuers and certain of their
subsidiaries to, among other things: (i) make restricted payments; (ii) incur
additional indebtedness and issue preferred stock; (iii) incur liens; (iv) pay
dividends or make other distributions; (v) enter into mergers or consolidations;
(vi) enter into certain transactions with affiliates or (vii) enter into new
lines of business.
6. LONG-TERM DEBT
On February 26, 1998, Aladdin Gaming, LLC entered into a $410.0 million
Credit Agreement with various financial institutions and the Bank of Nova Scotia
as the administrative agent for the lenders. The Credit Agreement consists of a
Term A loan of $136.0 million, a Term B loan of $114.0 million and a Term C loan
of $160.0 million. Both the Term B and Term C loans were funded by the lenders
on February 26, 1998 and the funds are held by Aladdin Gaming, LLC for the
future development of the Aladdin. Under the Credit Agreement, the funds cannot
be utilized until the proceeds from the private offering are completely
exhausted and certain other conditions to disbursement have been satisfied. As
of March 31, 1998, the Term A Loan has not been funded.
The Term B loan is for a maximum term of 8.5 years from the date of funding
and the Term C loan is for a maximum of 10 years. The Term B loan bears interest
at rate of 7.883% until the funds are utilized for the project at which time the
rate increases to 9.383%. The Term C loan bears interest at a rate of 8.485%
until the funds are utilized for the project at which time the rate increases to
10.485%. In addition to quarterly interest payments, each loan has various
principal payment requirements once the Aladdin is completed and operating.
Except in the case of defaults, no principal repayments are required prior to
the opening of the Aladdin.
7. RESTRICTED LAND
Approximately 12.4 acres of land was deeded to the Company on February 26,
1998, with an obligation to transfer such land to Aladdin Bazaar, LLC at a
future date. Aladdin Bazaar, LLC intends to construct and operate, a themed
entertainment shopping mall and a 4,800-space car parking facility (the "Mall
Project"). The Mall Project is expected to be an integral part of the Aladdin
entertainment complex.
F-43
<PAGE>
ALADDIN GAMING, LLC
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1998
8. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." SFAS No. 130 requires companies to classify items of other
comprehensive income by their nature in a financial statement and display the
accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity sections of a statement of
financial position, and is effective for financial statements issued for fiscal
years beginning after December 15, 1997. The Company has adopted SFAS No. 130,
during the three-month period ended March 31, 1998 and has determined that such
adoption will not result in comprehensive income different from net income as
reported in the accompanying financial statements.
In June 1997, the FASB issued SFAS no. 131, "Disclosure About Segments of an
Enterprise and Related Information." SFAS No. 131 establishes additional
standards for segment reporting in financial statements and is effective for
fiscal years beginning after December 15, 1997. The Company currently operates
as one segment.
F-44
<PAGE>
ALADDIN GAMING ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1997
F-45
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Board of Directors and Stockholders of
Aladdin Gaming Enterprises, Inc.:
We have audited the accompanying balance sheet of ALADDIN GAMING
ENTERPRISES, INC. (a Nevada Corporation), as of December 31, 1997, and the
related statements of stockholders' equity and cash flows for the period from
inception (December 3, 1997) through December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Aladdin Gaming Enterprises,
Inc., as of December 31, 1997, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
January 15, 1998, except
for Note 4, as to which
the date is February 26, 1998.
F-46
<PAGE>
ALADDIN GAMING ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
AS OF DECEMBER 31, 1997
<TABLE>
<S> <C>
ASSETS
Cash................................................................................ $ 669
Investment in subsidiary............................................................ 331
---------
Total Assets.................................................................... $ 1,000
---------
---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Common Stock, no par value, 2,500 shares authorized, 1 share issued and
outstanding....................................................................... $ 1,000
---------
Total Liabilities and Stockholders' Equity...................................... $ 1,000
---------
---------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-47
<PAGE>
ALADDIN GAMING ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (DECEMBER 3, 1997)
THROUGH DECEMBER 31, 1997
<TABLE>
<CAPTION>
SHARES
ISSUED AMOUNT TOTAL
--------- --------- ---------
<S> <C> <C> <C>
BALANCE, December 3, 1997............................................................ -- $ -- $ --
Issuance of common stock............................................................. 1 1,000 1,000
--------- --------- ---------
BALANCE, December 31, 1997........................................................... 1 $ 1,000 $ 1,000
--------- --------- ---------
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-48
<PAGE>
ALADDIN GAMING ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (DECEMBER 3, 1997)
THROUGH DECEMBER 31, 1997
<TABLE>
<S> <C>
CASH FLOWS USED FOR INVESTING ACTIVITIES:
Investment in subsidiary........................................................... $ (331)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of stock................................................ 1,000
---------
INCREASE IN CASH AND CASH EQUIVALENTS................................................ 669
CASH AND CASH EQUIVALENTS, December 3, 1997.......................................... --
---------
CASH AND CASH EQUIVALENTS, December 31, 1997......................................... $ 669
---------
---------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-49
<PAGE>
ALADDIN GAMING ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. ORGANIZATION AND BUSINESS
Aladdin Gaming Enterprises, Inc., a Nevada corporation ("Enterprises"), was
established on December 3, 1997. Enterprises holds a 25% interest in Aladdin
Gaming Holdings, LLC, and is wholly owned by Sommer Enterprises, LLC, a Nevada
limited-liability company ("Sommer Enterprises"). Aladdin Holdings, LLC, a
Delaware limited liability company ("Holdings"), holds a majority interest in
Sommer Enterprises. The members of Holdings are the Trust Under Article Sixth
u/w/o Sigmund Sommer (the "Sommer Trust") which holds a 95% interest in
Holdings, and GW Vegas, LLC, a Nevada limited-liability company ("GW"), a wholly
owned subsidiary of Trust Company of the West ("TCW"), which holds a 5% interest
in Holdings.
Enterprises' interest in Aladdin Gaming Holdings, LLC has been accounted for
under the equity method.
Since the planned principal operations had not commenced as of December 31,
1997, Enterprises has accounted for its operations as a development stage
company. There were no operations during the period from inception (December 3,
1997) through December 31, 1997 and hence no statement of income has been
prepared.
2. INCOME TAXES
Enterprises accounts for income taxes using the liability method as set
forth in Statement of Financial Accounting Standards No. 109, ACCOUNTING FOR
INCOME TAXES. Under the liability method, deferred taxes are provided based on
the temporary differences between the financial reporting basis and the tax
basis of Enterprises' assets and liabilities.
There was no income tax expense or benefit recorded for the period from
inception (December 3, 1997) through December 31, 1997 as Enterprises is a
development stage company and operations have not yet commenced.
3. AGREEMENTS
Enterprises will enter into a Shareholders' Agreement with the Sommer Trust
providing that the Sommer Trust shall have the right to elect the Board of
Directors of Enterprises and otherwise manage the day to day affairs of
Enterprises unless and until a qualified public offering occurs or the Sommer
Trust no longer owns any equity in Enterprises.
4. SUBSEQUENT EVENTS
Private Offerings
On February 26, 1998, Gaming Holdings, Aladdin Capital Corp. ("Capital" and,
together with Gaming Holdings, the "Issuers") and Enterprises consummated a
private offering (the "Offering") under Rule 144A of the Securities Exchange Act
of 1933. The private offering consisted of 221,500 units (the "Units"), each
unit consisting of (i) $1,000 principal amount at maturity of 13 1/2% Senior
Discount Notes due 2010 (the "Notes") of Gaming Holdings and Capital and (ii) 10
Warrants (the "Warrants") to purchase 10 shares of Class B non-voting Common
Stock, no par value, of Enterprises.
F-50
<PAGE>
ALADDIN GAMING ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 (CONTINUED)
4. SUBSEQUENT EVENTS (CONTINUED)
The initial accreted value of the Notes is $519.40 per $1,000 principal
amount at maturity of the Notes. The Notes will mature on March 1, 2010. The
Notes will accrete at 13 1/2% (computed on a semi-annual bond equivalent basis)
based on the initial accreted value, calculated from February 26, 1998. Cash
interest on the Notes will not accrue prior to March 1, 2003. Thereafter, cash
interest on the Notes will accrue at the rate of 13 1/2% per annum based on the
accreted value at maturity of the Notes and will be payable semi-annually in
arrears on March 1 and September 1 of each year, commencing on September 1,
2003.
The Notes are secured by a first priority pledge of all amounts held in a
segregated construction disbursement account (the "Note Construction
Disbursement Account") and by a first priority pledge of all of the issued and
outstanding Series A Preferred Interests of Gaming Holdings in Aladdin Gaming,
LLC. The Note Construction Disbursement Account is comprised of approximately
$35 million remaining proceeds from the Offering, after the application of the
net proceeds to repay certain previously existing indebtedness and certain fees
and expenses.
The Indenture to the Notes contains certain covenants that (subject to
certain exceptions) restrict the ability of the Issuers and certain of their
subsidiaries to, among other things: (i) make restricted payments; (ii) incur
additional indebtedness and issue preferred stock; (iii) incur liens; (iv) pay
dividends or make other distributions; (v) enter into mergers or consolidations;
(vi) enter into certain transactions with affiliates or (vii) enter into new
lines of business.
Equity Contributions
On February 26, 1998, Sommer Enterprises, LLC contributed a portion of land
and $7.0 million of predevelopment costs in exchange for 100% of the Class A
Common Stock in Enterprises. Enterprises contributed the portion of land, the
$7.0 million of predevelopment costs and the net proceeds (approximately $15
million) allocable from the sale of the Warrants to Gaming Holdings in exchange
for 25% of the common membership interests in Gaming Holdings.
F-51
<PAGE>
ALADDIN GAMING ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
AS OF MARCH 31, 1998
F-52
<PAGE>
ALADDIN GAMING ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
MARCH 31, 1998
<TABLE>
<CAPTION>
MARCH 31, 1998
(UNAUDITED)
--------------
<S> <C>
ASSETS
Cash.............................................................................................. $ 669
Investment in unconsolidated Affiliate............................................................ 24,235,924
--------------
$ 24,236,593
--------------
--------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Common Stock, Class A, no par value, 2,000,000 shares authorized, 1,107,501 shares issued and
outstanding as of March 31, 1998................................................................ $ 4,416,734
Common Stock, Class B, no par value and non- voting 8,000,000 shares authorized, 2,215,000 shares
issued and outstanding as of March 31, 1998..................................................... 8,831,468
Additional Paid-in Capital........................................................................ 15,000,000
Accumulated Deficit............................................................................... (4,011,609)
--------------
$ 24,236,593
--------------
--------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-53
<PAGE>
ALADDIN GAMING ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND FOR THE PERIOD
FROM INCEPTION (DECEMBER 3, 1997) THROUGH MARCH 31, 1998
<TABLE>
<CAPTION>
FOR THE PERIOD
DECEMBER 3, 1997
(INCEPTION)
THROUGH
MARCH 31, 1998 MARCH 31, 1998
-------------- ------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Equity in loss of unconsolidated affiliate.................................... $ (3,430,359) $ (3,430,359)
Income tax expense (benefit).................................................. -- --
-------------- ------------------
Net loss.................................................................. $ (3,430,359) $ (3,430,359)
-------------- ------------------
Basic loss per share.......................................................... $ (2.27) $ (2.27)
Shares used in per share calculation.......................................... 1,513,584 1,513,584
Dilutive loss per share....................................................... $ (2.27) $ (2.27)
Shares used in per share calculation.......................................... 1,513,584 1,513,584
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-54
<PAGE>
ALADDIN GAMING ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM DECEMBER 31, 1997
THROUGH MARCH 31, 1998
<TABLE>
<CAPTION>
ADDITIONAL
COMMON STOCK COMMON STOCK PAID RETAINED
CLASS A CLASS B IN CAPITAL EARNINGS TOTAL
-------------- -------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1997......... $ 1,000 $ -- $ -- $ -- $ 1,000
Net loss........................... -- -- -- (3,430,359) (3,430,359)
Issuance of Class A common stock,
1,107,500 shares issued.......... 4,415,734 -- -- -- 4,415,734
Issuance of Class B common stock,
2,215,000 shares issued.......... -- 8,831,468 -- -- 8,831,468
Issuance of Warrants to purchase
Class B common stock, 2,215,000
Warrants issued.................. -- -- 15,000,000 -- 15,000,000
Equity costs from unconsolidated
affiliate........................ -- -- -- (581,250) (581,250)
-------------- -------------- -------------- ------------- -------------
BALANCE, MARCH 31, 1998............ $ 4,416,734 $ 8,831,468 $ 15,000,000 $ (4,011,609) $ 24,236,593
-------------- -------------- -------------- ------------- -------------
-------------- -------------- -------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-55
<PAGE>
ALADDIN GAMING ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND FOR THE PERIOD
FROM INCEPTION (DECEMBER 3, 1997) THROUGH MARCH 31, 1998
<TABLE>
<CAPTION>
(UNAUDITED)
(UNAUDITED) FOR THE PERIOD
FOR THE THREE DECEMBER 3, 1997
MONTHS ENDED (INCEPTION) THROUGH
MARCH 31, 1998 MARCH 31, 1998
-------------- -------------------
<S> <C> <C>
Cash Flows used for Investing Activities:
Investment in unconsolidated affiliate...................................... $(15,000,000) $ (331)
Cash Flows From Financing Activities:
Proceeds from the issuance of stock......................................... -- 1,000
Proceeds from the Issuance of Warrants...................................... 15,000,000 --
-------------- ------
Increase in Cash and Cash Equivalents......................................... -- 669
Cash on Cash Equivalents at Beginning of Period............................... 669 --
-------------- ------
Cash and Cash Equivalents at End of Period.................................... $ 669 $ 669
-------------- ------
-------------- ------
Non-cash investing and financing activities:
Equity Contributions -- Non cash............................................ 13,247,202 --
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-56
<PAGE>
ALADDIN GAMING ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
1. ORGANIZATION AND BUSINESS
Aladdin Gaming Enterprises, Inc., a Nevada corporation ("Enterprises"), was
established on December 3, 1997. Enterprises holds a 25% interest in Aladdin
Gaming Holdings, LLC ("Gaming Holdings") and is wholly owned by Sommer
Enterprises, LLC, a Nevada limited- liability company ("Sommer Enterprises").
Aladdin Holdings, LLC, a Delaware limited liability company ("Holdings"), holds
a majority interest in Sommer Enterprises. The members of Holdings are the Trust
Under Article Sixth u/w/o Sigmund Sommer (the "Sommer Trust") which holds a 95%
interest in Holdings, and GW Vegas, LLC, a Nevada limited-liability company
("GW"), a wholly owned subsidiary of Trust Company of the West ("TCW"), which
holds a 5% interest in Holdings.
Enterprises' interest in Aladdin Gaming Holdings, LLC has been accounted for
under the equity method.
Enterprises has no other business or activities other than its investment in
Aladdin Gaming Holdings, LLC which is a development stage company. Aladdin
Gaming Holdings, LLC through its subsidiaries plans to develop, construct and
operate a new hotel and casino, the Aladdin Hotel and Casino (the "Aladdin") as
the centerpiece of an approximately 35 acre world-class resort, casino and
entertainment complex in Las Vegas, Nevada.
2. INCOME TAXES
Enterprises accounts for income taxes using the liability method as set
forth in the Statement of Financial Accounting Standards No. 109, ACCOUNTING FOR
INCOME TAXES. Under the liability method, deferred taxes are provided based on
the temporary differences between the financial reporting basis and the tax
basis of Enterprises' assets and liabilities.
There was no income tax expense or benefit recorded for the period from
inception (December 3, 1997) through March 31, 1998 as Enterprises is a
development stage company and the realization of any deferred tax asset is
uncertain.
3. AGREEMENTS
Enterprises will enter into a Shareholders' Agreement with the Sommer Trust
providing that the Sommer Trust shall have the right to elect the Board of
Directors of Enterprises and otherwise manage the day to day affairs of
Enterprises unless and until a qualified public offering occurs or the Sommer
Trust no longer owns any equity in Enterprises.
4. PRIVATE OFFERINGS
On February 26, 1998, Gaming Holdings, Aladdin Capital Corp. ("Capital" and,
together with Gaming Holdings, the "Issuers") and Enterprises consummated a
private offering (the "Offering") under Rule 144A of the Securities Act of 1933.
The private offering consisted of 221,500 units (the "Units"), each unit
consisting of (i) $1,000 principal amount at maturity of 13 1/2% Senior Discount
Notes due 2010 (the "Notes") of Gaming Holdings and Capital and (ii) 10 Warrants
(the "Warrants") to purchase 10 shares of Class B non-voting Common Stock, no
par value, of Enterprises.
F-57
<PAGE>
ALADDIN GAMING ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1998
4. PRIVATE OFFERINGS (CONTINUED)
The initial accreted value of the Notes was $519.40 per $1,000 principal
amount at maturity of the Notes. The Notes will mature on March 1, 2010. The
Notes will, accrete at 13 1/2% (computed on a semi-annual bond equivalent basis)
based on the initial accreted value, calculated from February 26, 1998. Cash
interest on the Notes will not accrue prior to March 1, 2003. Thereafter, cash
interest on the Notes will accrue at the rate of 13 1/2% per annum based on the
accreted value at maturity of the Notes and will be payable semi-annually in
arrears on March 1 and September 1 of each year, commencing on September 1,
2003. $15.0 million of the offering proceeds were allocated to the Warrants
based on the estimated fair market value of the Warrants.
The Notes are secured by a first priority pledge of all amounts held in a
segregated construction disbursement account (the "Note Construction
Disbursement Account") and by a first priority pledge of all of the issued and
outstanding Series A Preferred Interests in Aladdin Gaming, LLC held by Gaming
Holdings.
The Indenture to the Notes contains certain covenants that (subject to
certain exceptions) restrict the ability of the Issuers and certain of their
subsidiaries to, among other things: (i) make restricted payments, (ii) incur
additional indebtedness and issue preferred stock; (iii) incur liens; (iv) pay
dividends or make other distributions; (v) enter into mergers or consolidations;
(vi) enter into certain transactions with affiliates or (vii) enter into new
lines of business.
5. EQUITY CONTRIBUTIONS
On February 26, 1998, Sommer Enterprises, LLC contributed a portion of land
and $7.0 million of predevelopment costs in exchange for 100% of the Class A
Common Stock in Enterprises. Enterprises contributed the portion of land, the
$7.0 million of predevelopment costs and the net proceeds $15.0 million
allocable from the sale of the Warrants to Gaming Holdings in exchange for 25%
of the common membership interests in Gaming Holdings.
6. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." SFAS No. 130 requires companies to classify items of other
comprehensive income by their nature in a financial statement and display the
accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity sections of a statement of
financial position, and is effective for financial statements issued for fiscal
years beginning after December 15, 1997. Enterprises has adopted SFAS No. 130,
during the three-month period ended March 31, 1998 and has determined that such
adoption will not result in comprehensive income different from net income as
reported in the accompanying financial statements.
In June 1997, the FASB issued SFAS No. 131, "Disclosure About Segments of an
Enterprise and Related Information." SFAS No. 131 establishes additional
standards for segment reporting in financial statements and is effective for
fiscal years beginning after December 15, 1997. Enterprises currently operates
as one segment.
F-58
<PAGE>
ANNEX A
CERTAIN HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF LONDON CLUBS
London Clubs owns 25% of Holdings and, as described on pages 24 and 25, has
entered into the Bank Completion Guaranty, the Noteholder Completion Guaranty
and the Keep-Well Agreement in connection with the construction of the Aladdin.
Following is certain historical consolidated financial information of London
Clubs. The Registrant does not intend to provide this information in its
periodic filings following this registration statement. The 1996 and 1997 full
year financial information for London Clubs set forth herein has been extracted
from the 1997 London Clubs' financial statements included on pages A-4 to A-33.
The 1995 financial information for London Clubs set forth herein has been
extracted from the published audited accounts of London Clubs. The unaudited
interim financial information for the 6 months ended September 28, 1997 set
forth herein has been extracted from the unaudited interim financial statements
of London Clubs included on pages A-34 to A-42. The interim financial statements
are unaudited; however in the opinion of management, such financial statements
include all adjustments necessary to present the financial statements on a basis
consistent with the audited annual accounts. Potential investors should note
that such information has been calculated and presented in accordance with
United Kingdom generally accepted accounting principles, which are not
consistent with, and materially differ from, United States generally accepted
accounting principles. Such information is expressed in thousands of United
Kingdom pounds sterling (L'000).
INDEX TO HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF LONDON CLUBS
INTERNATIONAL, PLC
<TABLE>
<S> <C>
Consolidated Profit and Loss Data for the 52 weeks ended March 26, 1995 and March 24,
1996, the 53 weeks ended March 30, 1997 and the 26 weeks ended September 28, 1997
(unaudited)........................................................................ A-2
Consolidated Balance Sheet Data at March 26, 1995, March 24, 1996, March 30, 1997 and
September 28, 1997 (unaudited)..................................................... A-3
Directors' Report and Accounts for the 53 weeks ended March 30, 1997................. A-4
Interim Report 1997.................................................................. A-34
</TABLE>
A-1
<PAGE>
LONDON CLUBS INTERNATIONAL, PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
(IN THOUSANDS OF POUNDS STERLING)
<TABLE>
<CAPTION>
(UNAUDITED)
26 WEEKS ENDED
52 WEEKS ENDED 52 WEEKS ENDED 53 WEEKS ENDED SEPTEMBER 28,
MARCH 26, 1995 MARCH 24, 1996 MARCH 30, 1997 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Turnover........................................ L155,675 L167,357 L179,489 L85,697
Operating Costs................................. (123,627) (133,078) (143,092) (71,385)
-------------- -------------- -------------- -------
Operating profit................................ 32,048 34,279 36,397 14,312
Net interest payable............................ (2,643) (1,007) (1,154) (843)
-------------- -------------- -------------- -------
Profit on ordinary activities before taxation... 29,405 33,272 35,243 13,469
Tax on ordinary activities...................... (11,119) (11,985) (12,588) (3,608)
-------------- -------------- -------------- -------
Profit on ordinary activities after taxation.... 18,286 21,287 22,655 9,861
Dividends paid and proposed..................... (9,465) (10,970) (11,679) (3,856)
-------------- -------------- -------------- -------
Transfer to reserves............................ L8,821 L10,317 L10,976 L6,005
-------------- -------------- -------------- -------
-------------- -------------- -------------- -------
</TABLE>
A-2
<PAGE>
LONDON CLUBS INTERNATIONAL, PLC
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS OF POUNDS STERLING)
<TABLE>
<CAPTION>
(UNAUDITED)
AT MARCH 26, AT MARCH 24, AT MARCH 30, AT SEPTEMBER 28,
1995 1996 1997 1997
------------ ------------ ------------ ----------------
<S> <C> <C> <C> <C>
Fixed assets......................................... L137,284 L160,191 L224,312 L237,617
Current assets:
Stocks............................................. 934 1,158 1,353 1,333
Debtors............................................ 5,095 8,523 11,818 17,923
Cash at bank and in hand........................... 31,743 29,886 34,872 38,718
------------ ------------ ------------ --------
Total Current Assets............................. 37,772 39,567 48,043 57,974
Creditors (amounts falling due within one year)...... (53,975) (51,369) (62,287) (50,489)
------------ ------------ ------------ --------
Net current assets/(liabilities)................... (16,203) (11,802) (14,244) 7,485
Total assets less current liabilities.............. 121,081 148,389 210,068 245,102
------------ ------------ ------------ --------
Creditors (amounts falling due after one year)....... (16,292) (32,722) (24,816) (48,059)
Provisions for liabilities and charges............... (113) (517) (317) (647)
------------ ------------ ------------ --------
L104,676 L115,150 L184,935 L196,396
------------ ------------ ------------ --------
------------ ------------ ------------ --------
Capital and reserves:
Called up share capital............................ 3,538 3,539 7,078 7,345
Share premium...................................... 78,014 78,067 74,528 80,103
Other reserves..................................... 30,337 30,337 91,088 91,088
Profit and loss account............................ (7,213) 3,207 12,241 17,860
------------ ------------ ------------ --------
L104,676 L115,150 L184,935 L196,396
------------ ------------ ------------ --------
------------ ------------ ------------ --------
</TABLE>
A-3
<PAGE>
LONDON CLUBS INTERNATIONAL PLC
DIRECTORS' REPORT AND ACCOUNTS
for the
53 weeks ended 30 March 1997
Registered number: 2862479
A-4
<PAGE>
DIRECTOR'S REPORT
The directors have pleasure in presenting their report and the audited
financial statements of London Clubs International plc and its subsidiary
undertakings for the 53 weeks ended 30 March 1997.
PRINCIPAL ACTIVITIES
The Group's principal activities are the operation of casinos.
The Group operates seven casinos in London, one casino in Cannes, France and
three casinos in Egypt. In addition, the Group has management concessions in
respect of casinos on three cruise liners. On 4 December 1996, the Casino du
Liban in Beirut opened for which the Group has a management contract.
A non binding letter of intent between the Company and the Aladdin Gaming
Corporation was signed in January 1997 in relation to a proposed investment by
the Group in the Aladdin hotel and casino complex in Las Vegas.
On 1 May 1997, the Company completed the purchase of the freehold of 50 St
James's Street, London W1, for a total consideration of L13.5 million.
RESULTS AND DIVIDENDS
The Group's profit on ordinary activities after taxation was L22,655,000
(1996 L21,287,000). The directors propose a final dividend of 5.625 pence net
per ordinary share amounting to L7,260,000. This, together with the interim
dividend of 2.625 pence net per ordinary share paid on 31 January 1997, makes a
total of 8.25 pence net per ordinary share for the year. The final dividend, if
approved, will be paid on 31 July 1997 to shareholders on the register at the
close of business on 6 June 1997.
The retained profit transferred to reserves amounted to L10,976,000 (1996
L10,317,000).
DIRECTORS
The directors who have served since 25 March 1996 are as follows:
Sir Timothy Kitson
A L Goodenough
Sir Gordon Booth (retired 5 December 1996)
P Byrne
G B C Hardy
R R C Hobbs
T Hodgson
R A Wood
At the forthcoming annual general meeting Mr. A L Goodenough and Mr. G B C
Hardy retire by rotation pursuant to the Articles of Association and, being
eligible, offer themselves for re-election.
Both Mr. Goodenough and Mr. Hardy have service agreements with the Company
which are terminable in two years' notice.
The interests of the directors in the share capital of the Company are set
out in note 6 to the financial statements.
During their period in office, no director has had a material interest,
directly or indirectly, at any time during the year in any contract significant
to the business of the Group.
A-5
<PAGE>
DIRECTOR'S REPORT (CONTINUED)
SUBSTANTIAL INTERESTS
As at 18 May 1997 the Company had received notification of the following
interests exceeding 5 percent of the Company's share capital:
<TABLE>
<S> <C>
Mercury Asset Management plc.......... 19.03%
Schroder Investment Management
Limited............................... 12.52%
Jupiter Asset Management Limited...... 7.68%
</TABLE>
SHARE CAPITAL
Changes to the share capital of the Company are set out in note 17 to the
financial statements. Approval will be sought at the forthcoming annual general
meeting to renew the authority granted to the directors to allot unissued
ordinary shares in the capital of the Company and to obtain authority to allot
shares for cash otherwise than to existing shareholders pro-rata to their
holdings.
Resolution 6 will renew the directors' authority to allot relevant
securities up to an aggregate nominal amount of L2,335,698 representing 33 per
cent of the current issued share capital (being 46,713,960 ordinary shares).
Resolution 7 is a Special Resolution to renew the directors' authority under
Section 95 of the Companies Act 1985 to allot a limited number of shares for
cash up to an aggregate nominal amount of L355,893 representing 5 percent of the
current issued ordinary share capital of the Company (being 7,077,875 ordinary
shares).
The proposed authorities conform with the guidelines issued by the
institutional investment protection bodies to ensure that existing shareholders'
interests are safeguarded and, if granted, will expire at the earlier of the
conclusion of the annual general meeting in 1998 and the date fifteen months
from the date the requisite authorities are granted.
SHARE BASED INCENTIVE SCHEMES
It is proposed to introduce a share based long term performance plan for
executive directors and senior management of the Group and a savings related
share scheme for all UK employees. Details of the two schemes, together with the
notice convening the necessary extraordinary general meeting to seek
shareholders' approval thereof will be sent to shareholders in due course.
SUPPLIER PAYMENT TERMS
It is the Group's policy and practice to agree appropriate payment terms and
conditions individually with its suppliers, having regard to the spirit of the
CBI's Prompt Payers Code. The average number of days outstanding for trade
creditors at 30 March 1997 was 32. This figure takes into account the overseas
operations, but excludes the effect of certain demand payments.
EMPLOYMENT OF DISABLED PERSONS
The Group recognises its obligations towards disabled persons and endeavours
to provide as much employment as the demands of the Group's operations and the
abilities of disabled persons allow.
Applications for employment from disabled persons are studied with care and
every effort is made to find them, and any existing employees who become
disabled, appropriate work and training where it is needed.
A-6
<PAGE>
DIRECTOR'S REPORT (CONTINUED)
EMPLOYEE INVOLVEMENT
The Group is committed wherever possible to employee consultation and
thereby to their involvement in the development of the Group's operations.
CHARITABLE DONATIONS
Charitable donations amounting to L48,000 (1996 L30,000) were paid during
the year.
TAXATION STATUS
The Company is not a close company for taxation purposes.
AUDITORS
Price Waterhouse have expressed their willingness to continue as auditors
and a resolution concerning their re-appointment will be proposed at the
forthcoming annual general meeting.
BY ORDER OF THE BOARD
R I Talbot
SECRETARY
20 May 1997
A-7
<PAGE>
REPORT OF THE REMUNERATION COMMITTEE
TERMS OF REFERENCE
The remuneration committee comprises all the non-executive directors of the
Company and is chaired by Mr. R. R. C. Hobbs. It is responsible for deciding on
all elements of the remuneration of the executive directors, including base
salaries, performance related bonuses, share based incentive schemes and other
benefits.
COMPENSATION POLICY
The compensation of the executive directors is set by the remuneration
committee of the Board. It is the policy of the committee to provide an overall
remuneration and benefits package to enable it to attract and retain a high
calibre group of senior management who hold the necessary 'White Certificates'
required under the Gaming Act and who are capable of delivering the strategic
objectives of the Group on behalf of the shareholders.
The company has complied throughout the year with Section A of the Best
Practice Provisions annexed to the London Stock Exchange Listing Rules. In
framing its compensation policy, the committee has given full consideration to
Section B of the best practice provisions annexed to the Listing Rules of the
London Stock Exchange.
The remuneration of the directors is shown in note 5 to the financial
statements.
SALARIES
These reflect the executives' experience, responsibility and commitment.
Basic salary levels are measured against those paid in comparable gaming
companies.
Subject to there being no material increase in anticipated levels of
inflation or changes in responsibilities, it is intended that the executive
directors' current basic salaries will not be reviewed until September 1998.
BONUS AND SHARE BASED INCENTIVE SCHEMES
The executive directors hold options in the Company's approved executive
share option scheme introduced at the time of its flotation in June 1994.
The exercise of the options granted under the scheme is conditional upon the
achievement of specified demanding performance criteria.
Details of the options granted to executive directors under the executive
share option scheme are shown in note 6 to the financial statements.
The Group remains committed to the principal of relating a substantial
proportion of the total remuneration of senior management to the Group's long
term financial performance and has established various incentive bonus schemes
covering both executive directors and senior management.
The remuneration committee has reviewed the basis of the long term
incentivisation of executive directors and concluded that the current long term
bonus arrangements should be discontinued as from 30 March 1997 and that no
further options should be granted under the current Company share option scheme.
It is intended that these arrangements be replaced by a combination of an annual
bonus scheme based on single year performance providing comparable rewards for
the achievement of annual targeted profits and a proposed share based long term
performance plan which has been developed in consultation
A-8
<PAGE>
REPORT OF THE REMUNERATION COMMITTEE (CONTINUED)
with the Company's advisors. The Company also intends to introduce a savings
related share scheme for all UK employees in which the executive directors will
be able to participate.
Details of the two schemes together with the notice convening the necessary
extraordinary general meeting to seek shareholders' approval thereof will be
sent to shareholders in due course.
PENSIONS
Three directors have personal pension arrangements which were in place prior
to their joining the Group and to which the Group makes an annual contribution
payment.
Mr. P. Byrne is an executive member of the main London Clubs contributory
pension scheme.
None of the non-executive directors participate in the Company pension
arrangements nor do they receive any contribution towards pension provision.
SERVICE CONTRACTS
All the executive directors, with the exception of Mr. T. Hodgson, have
service contracts which may be terminated on two years notice. Mr. Hodgson has a
service contract for a fixed term of three years expiring on 6 June 1997.
The present service contracts came into effect upon the flotation of the
Company in June 1994. In establishing the notice periods prescribed within the
contracts, the committee were mindful of the need to protect shareholders'
interests by ensuring continuity of appropriately experienced and licensed
management post-flotation.
Mr. A. L. Goodenough and Mr. G. B. C. Hardy retire by rotation at the
forthcoming annual general meeting. At the date of the meeting, Mr. Goodenough
and Mr. Hardy will be entitled to a notice period of two years.
OTHER BENEFITS
Each executive director is provided with a fully expensed car, permanent
health insurance, life assurance and family medical insurance.
R. R. C. Hobbs
CHAIRMAN OF THE REMUNERATION COMMITTEE
20 May 1997
A-9
<PAGE>
CORPORATE GOVERNANCE
The Board complies with the recommendations of the Code of Best Practice
("the Code") issued in 1992 by the Committee on the Financial Aspects of
Corporate Governance (the Cadbury Committee). The Group complies and has fully
complied throughout the accounting period, with all the current requirements of
the Code and the Annual Report includes all the disclosures currently required
by the Code.
GOING CONCERN
The directors have a reasonable expectation that the Company and the Group
have adequate resources to continue in operational existence for the foreseeable
future. For this reason, they continue to adopt the going concern basis in
preparing the financial statements.
INTERNAL FINANCIAL CONTROLS
The directors are required to ensure that the Group's systems of internal
control are appropriate given the scale and type of risk being managed, the
likelihood of the risk materialising and the cost of implementing the controls
necessary to manage the risk. The existence of appropriate internal controls
provides reasonable assurance that the Group's operations are efficiently and
effectively managed, that internal financial controls are in place and that the
Group complies with its legal and regulatory obligations. However, any such
system can only provide reasonable, and not absolute, assurance against
misstatement or loss.
The Group has a well defined operational/management hierarchy and
organisational structure. Terms of reference exist for all principal committees
within the Group and the roles and responsibilities of senior executives and key
members of staff are clearly defined.
The Board meets regularly throughout the year and is responsible for the
overall Group strategy, approval of major capital expenditure, financing
arrangements, the establishing and monitoring of internal controls and
compliance with gaming regulations. The Board has also established separate
audit, nomination, remuneration and compliance committees, the members of which
are set out on page 9.
The Company's internal financial control and monitoring procedures include:
- clear responsibilities on the part of management for the maintenance of
appropriate financial controls and the production of accurate and timely
financial management information;
- the control of key financial risks through authorisation levels,
segregation of duties and written procedures manuals where relevant;
- the preparation of detailed monthly budgets and the comparison by
management of trading results and cash flows against budget on a regular
basis;
- the review of internal financial controls by the audit committee in
consultation with the external auditors.
The Group operates in a highly regulated environment and an independent
compliance function reporting to the compliance committee has been developed to
ensure adherence with all local and national requirements and the Group's own
gaming procedures. Audits of all gaming operations take place at regular
intervals and their recommendations are presented to the compliance committee.
The Board has reviewed the effectiveness of the Group's system of internal
financial controls for the period covered by the financial statements. In
addition, the gaming activities of the Group are also subject to review by the
Gaming Board in the U.K. and by the relevant government authorities for the
overseas operations.
A-10
<PAGE>
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors are required by the Companies Act 1985 to prepare financial
statements for each financial year which give a true and fair view of the state
of affairs of the Company and the Group as at the end of the financial year and
of the profit or loss for the financial year.
The directors have prepared the financial statements on pages A-13 to A-33
on a going concern basis and consider that the Group has used appropriate
accounting policies, consistently applied and supported by reasonable and
prudent judgements and estimates and that all accounting standards which they
consider to be applicable have been followed.
The directors have responsibility for ensuring that the Group keeps
accounting records which disclose with reasonable accuracy the financial
position of the Group and which enable them to ensure that the financial
statements comply with the Companies Act 1985.
The directors have general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the Group and to prevent and
detect fraud and other irregularities.
REPORT BY THE AUDITORS TO THE DIRECTORS OF LONDON CLUBS INTERNATIONAL PLC ON
CORPORATE GOVERNANCE MATTERS
In addition to our audit of the financial statements we have reviewed your
statement on page A-10 concerning the Group's compliance with the paragraphs of
the Cadbury Code of Best Practice specified for our review by the London Stock
Exchange and the adoption of the going concern basis in preparing the financial
statements. The objective of our review is to draw attention to non-compliance
with Listing Rules 12.43(j) and 12.43(v), if not otherwise disclosed.
BASIS OF OPINION
We carried out our review having regard to guidance issued by the Auditing
Practices Board. That guidance does not require us to perform the additional
work necessary to, and we do not, express any opinion on the effectiveness of
either the Group's system of internal financial control or corporate governance
procedures nor on the ability of the Group to continue in operational existence.
OPINION
In our opinion, your statements on internal financial control and on going
concern on page A-10, have provided the disclosures required by the Listing
Rules referred to above and are consistent with the information which came to
our attention as a result of our audit work on the financial statements.
In our opinion, based on enquiry of certain directors and officers of the
Company and examination of relevant documents, your statement on page A-10
appropriately reflects the Group's compliance with the other aspects of the Code
specified for our review by Listing Rule 12.43(j).
PRICE WATERHOUSE
CHARTERED ACCOUNTANTS
London
20 May 1997
A-11
<PAGE>
The following represents the statutory audit report of Price Waterhouse,
London, whose audit was performed in accordance with generally accepted auditing
standards of the United Kingdom (UK). The accompanying financial statements have
been prepared in accordance with UK generally accepted accounting principles.
REPORT OF THE AUDITORS TO THE MEMBERS OF LONDON CLUBS INTERNATIONAL PLC
We have audited the financial statements on pages A-13 to A-33 which have
been prepared under the historical cost convention, as modified by the
revaluation of certain fixed assets, and the accounting policies set out on
pages A-18 and A-19.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
As described on page A-11, the Company's directors are responsible for the
preparation of the financial statements. It is our responsibility to form an
independent opinion, based on our audit, on those statements and to report our
opinion to you.
BASIS OF OPINION
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination on a test basis of
evidence relevant to the amounts and disclosures in the financial statements. It
also includes an assessment of the significant estimates and judgements made by
the directors in the preparation of the financial statements and of whether the
accounting policies are appropriate to the Company's circumstances, consistently
applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
OPINION
In our opinion the financial statements give a true and fair view of the
state of affairs of the Company and the Group as at 30 March 1997 and of the
profit and cash flows of the Group for the period then ended and have been
properly prepared in accordance with the Companies Act 1985.
PRICE WATERHOUSE
CHARTERED ACCOUNTANTS
AND REGISTERED AUDITORS
London
20 May 1997
A-12
<PAGE>
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE 53 WEEKS ENDED 30 MARCH 1997
<TABLE>
<CAPTION>
53 WEEKS ENDED 52 WEEKS ENDED
30 MARCH 1997 24 MARCH 1996
--------------------- ---------------------
NOTES L'000 L'000 L'000 L'000
-----
<S> <C> <C> <C> <C> <C>
Turnover..................................................... 2 179,489 167,357
Operating costs
Gaming taxation............................................ (51,708) (47,772)
Other...................................................... (74,134) (71,381)
--------- ---------
(125,842) (119,153)
---------- ----------
Gross profit................................................. 53,647 48,204
Administrative expenses
Exceptional bid costs...................................... (1,080) --
Other...................................................... (16,170) (13,925)
--------- ---------
(17,250) (13,925)
---------- ----------
Operating profit............................................. 3 36,397 34,279
Net interest payable......................................... 7 (1,154) (1,007)
---------- ----------
Profit on ordinary activities before taxation................ 2 35,243 33,272
Tax on ordinary activities................................... 8 (12,588) (11,985)
---------- ----------
Profit on ordinary activities after taxation................. 22,655 21,287
Dividends paid and proposed.................................. 9 (11,679) (10,970)
---------- ----------
Transfer to reserves......................................... 18 10,976 10,317
---------- ----------
Earnings per share........................................... 10 16.0p 15.0p
---------- ----------
Earnings per share before exceptional bid costs.............. 10 16.8p 15.0p
---------- ----------
</TABLE>
The notes on pages A-18 to A-33 form part of these financial statements.
A-13
<PAGE>
CONSOLIDATED BALANCE SHEET
AS AT 30 MARCH 1997
<TABLE>
<CAPTION>
NOTES 30 MARCH 1997 24 MARCH 1996
----- -------------------- --------------------
<S> <C> <C> <C> <C> <C>
L'000 L'000 L'000 L'000
Fixed assets
Tangible assets............................................. 11 219,646 159,496
Investments................................................. 12 4,666 695
--------- --------- --------- ---------
224,312 160,191
Current assets
Stocks...................................................... 1,353 1,158
Debtors..................................................... 13 11,818 8,523
Cash at bank and in hand.................................... 34,872 29,886
--------- ---------
48,043 39,567
Creditors (amounts falling due within one year)............... 14 (62,287) (51,369)
--------- --------- --------- ---------
Net current liabilities....................................... (14,244) (11,802)
--------- ---------
Total assets less current liabilities......................... 210,068 148,389
Creditors (amounts falling due after one year)................ 15 (24,816) (32,722)
Provision for liabilities and charges......................... 16 (317) (517)
--------- ---------
184,935 115,150
--------- ---------
--------- ---------
Capital and reserves
Called up share capital..................................... 17 7,078 3,539
Share premium............................................... 18 74,528 78,067
Merger reserve.............................................. 5,352 5,352
Revaluation reserve......................................... 18 85,736 24,985
Profit and loss account..................................... 13 12,241 3,207
--------- ---------
184,935 115,150
--------- ---------
--------- ---------
</TABLE>
Approved on behalf of the Board on 20 May 1997.
Sir Timothy Kitson
G B C Hardy
DIRECTORS
The notes on pages A-18 to A-33 form part of these financial statements.
A-14
<PAGE>
COMPANY BALANCE SHEET
AS AT 30 MARCH 1997
<TABLE>
<CAPTION>
30 MARCH 1997 24 MARCH 1996
-------------------- --------------------
NOTES L000 L000 L000 L000
-----
<S> <C> <C> <C> <C> <C>
Fixed assets
Tangible assets................................................. 11 2,807 --
Investments..................................................... 12 27,457 27,457
--------- --------- --------- ---------
30,264 27,457
Current assets
Debtors......................................................... 13 73,069 58,304
Cash at bank and in hand........................................ 15,368 11,865
--------- ---------
88,437 70,169
Creditors (amounts falling due within one year)................... 14 (24,447) (9,602)
--------- --------- --------- ---------
Net current assets................................................ 63,990 60,567
--------- ---------
Total assets less current liabilities............................. 94,254 88,024
Provision for liabilities and charges............................. 16 -- (765)
--------- ---------
94,254 87,259
--------- ---------
--------- ---------
Capital and reserves
Called up share capital......................................... 17 7,078 3,539
Share premium................................................... 18 74,528 78,067
Profit and loss account......................................... 18 12,648 5,653
--------- ---------
94,254 87,259
--------- ---------
--------- ---------
</TABLE>
Approved on behalf of the Board on 20 May 1997
Sir Timothy Kitson
G B C Hardy
DIRECTORS
The notes on pages A-18 to A-33 form part of these financial statements.
A-15
<PAGE>
CONSOLIDATED CASH FLOW STATEMENT
FOR THE 53 WEEKS ENDED 30 MARCH 1997
<TABLE>
<CAPTION>
53 WEEKS ENDED 52 WEEKS ENDED
30 MARCH 1997 24 MARCH 1996
-------------------- --------------------
NOTES L'000 L'000 L'000 L'000
-----------
<S> <C> <C> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES............................. 21 44,806 26,849
Return on investments and servicing of finance.................. 22 (1,165) (2,200)
Taxation........................................................ (11,791) (8,861)
Capital expenditure and financial investment.................... 22 (8,645) (3,685)
Acquisitions and disposals...................................... 22 -- (15,644)
Equity dividends paid........................................... (11,148) (9,906)
--------- ---------
CASH INFLOW/(OUTFLOW) BEFORE USE OF LIQUID RESOURCES AND
FINANCING...................................................... 12,057 (13,447)
Management of liquid resources.................................. 22 18
Financing--Issue of shares...................................... -- 54
--(Decrease)/Increase in debt........................... (6,200) 11,000
--------- ---------
(6,200) 11,054
--------- ---------
INCREASE/(DECREASE) IN CASH IN THE PERIOD....................... 5,875 (2,393)
--------- ---------
</TABLE>
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
FOR THE 53 WEEKS ENDED 30 MARCH 1997
<TABLE>
<CAPTION>
53 WEEKS 52 WEEKS
ENDED 30 ENDED 24
MARCH MARCH
1997 1996
--------- ---------
L'000 L'000
<S> <C> <C>
INCREASE/(DECREASE) IN CASH IN THE PERIOD.................................................... 5,875 (2,393)
Cash outflow/(inflow) from movement in debt.................................................. 6,200 (11,000)
Cash inflow from decrease in liquid resources................................................ (18) --
Other non cash changes....................................................................... (379) (5,652)
Translation differences...................................................................... (871) 536
--------- ---------
MOVEMENT IN NET DEBT IN THE PERIOD........................................................... 10,807 (18,509)
NET (DEBT)/FUNDS AT BEGINNING OF PERIOD...................................................... (8,667) 9,842
--------- ---------
NET FUNDS/(DEBT) AT END OF PERIOD............................................................ 2,140 (8,667)
--------- ---------
</TABLE>
The notes on pages A-18 to A-33 form part of these financial statements.
A-16
<PAGE>
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
FOR THE 53 WEEKS ENDED 30 MARCH 1997
<TABLE>
<CAPTION>
53 WEEKS ENDED 52 WEEKS ENDED
30 MARCH 1997 30 MARCH 1996
--------------- ---------------
<S> <C> <C>
L'000 L'000
Profit on ordinary activities after taxation..................................... 22,655 21,287
Unrealised surplus on revaluation of properties.................................. 60,751 --
Exchange adjustments on foreign currency net investment.......................... (1,942) 103
------ ------
Total recognised gains and losses for the period............................. 81,464 21,390
------ ------
------ ------
</TABLE>
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
FOR THE 53 WEEKS ENDED 30 MARCH 1997
<TABLE>
<CAPTION>
53 WEEKS ENDED 52 WEEKS ENDED
30 MARCH 1997 30 MARCH 1996
-------------- --------------
<S> <C> <C>
L'000 L'000
Profit on ordinary activities after taxation..................................... 22,655 21,287
Dividends........................................................................ (11,679) (10,970)
------- -------
10,976 10,317
Unrealised surplus on revaluation of properties.................................. 60,751 --
Exchange adjustments on foreign currency net investment.......................... (1,942) 103
Issue of share capital........................................................... -- 54
------- -------
Net addition to shareholders' funds.............................................. 69,785 10,474
Opening shareholders' funds...................................................... 115,150 104,676
------- -------
Closing shareholders' funds.................................................. 184,935 115,150
------- -------
------- -------
</TABLE>
The notes on pages A-18 to A-33 form part of these financial statements.
A-17
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
(A) ACCOUNTING CONVENTION
The financial statements have been prepared under the historical cost
convention as modified by the revaluation of short leasehold properties and in
accordance with applicable accounting standards.
(B) CONSOLIDATION
The consolidated accounts include the results and net assets of the Company
and its subsidiary undertakings. Subsidiary undertakings acquired are
consolidated from the effective date of acquisition.
(C) TURNOVER
Turnover represents gaming income and also includes management contract
income, membership subscriptions and catering revenues.
(D) FIXED ASSETS AND DEPRECIATION
Fixed assets are stated at cost or valuation.
The short leasehold properties from which the Group conducts its casino
operations are carried at open market value on an existing use and fully
operational basis, including the benefit of casino licences. Formal professional
revaluations of the U.K. casinos are undertaken on at least a triennial basis
and the resultant valuations is included in the balance sheet unless the surplus
or deficit is immaterial.
The directors review the valuations each year and it, in their opinion,
there is any diminution in value, it is charged either to the revaluation
reserve or the profit and loss account as appropriate. In the directors'
opinion, on the basis of this review, the residual disposal value of the
properties and the benefit of casino licences attaching to those properties is
at least equal to their book value.
All leases have an unexpired term of less than twenty years and the values
of the leaseholds excluding the benefit of the casino licences are depreciated
over the remaining term of the lease. Other assets are depreciated over their
estimated useful lives on the following bases;
Fixtures and fitting--10% to 20% straight line.
Motor Vehicles--25% reducing balance.
(E) INVESTMENTS
Investments, including investments in subsidiary undertakings are valued
individually at the lower of cost and directors' valuation.
(F) TAXATION
The charge for taxation is based on the profit for the period and takes into
account taxation deferred because of timing differences between the treatment of
certain items for taxation and accounting purposes unless there is reasonable
probability that the deferred tax will not crystallise in the foreseeable
future.
(G) STOCKS
Stocks, which comprise consumables, are valued at the lower of cost and
estimated net realisable value.
A-18
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
1. ACCOUNTING POLICIES (CONTINUED)
(H) TRADE DEBTORS
Trade debtors include debtors of the overseas casino operations (where
deferred payment is permitted) net of provisions raised for any amounts
considered unlikely to be recoverable.
In the U.K., full provision is charged to the profit and loss account for
all unpaid gaming cheques net of any amounts recovered up to the date of
approval of the accounts.
(I) EXCHANGE RATES
Transactions in foreign currencies are translated into sterling at the rates
ruling at the date of transaction. Monetary assets and liabilities denominated
in foreign currencies at the balance sheet date and results of overseas
operations are translated at the year end exchange rate.
Exchange differences arising from the translation of the opening net assets
of overseas subsidiaries and any foreign currency borrowings used to acquire
overseas assets are dealt with as a movement in reserves. All other exchange
differences are taken to the profit and loss account.
(J) LEASES
The rental charges in respect of operation leases are taken to the profit
and loss account on a straight line basis over the life of the lease.
(K) PENSION COSTS
The Group operates a pension scheme covering the majority of employees.
Pension costs are assessed in accordance with the advice of independent
actuaries. Variations from the regular pensions cost are spread on a systematic
basis over the estimated average remaining service lives of employees. The
scheme is funded by payments to trustee administered fund completely independent
of the Group's finances.
2. SEGMENTAL ANALYSIS
Operations by geographical segment:
<TABLE>
<CAPTION>
53 WEEKS ENDED 52 WEEKS ENDED
30 MARCH 1997 24 MARCH 1996
-------------- --------------
<S> <C> <C>
L'000 L'000
TURNOVER
Europe....................................................................... 157,471 147,863
Middle East.................................................................. 22,018 19,494
------- -------
179,489 167,357
------- -------
------- -------
</TABLE>
A-19
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
2. SEGMENTAL ANALYSIS (CONTINUED)
<TABLE>
<CAPTION>
53 WEEKS ENDED 52 WEEKS ENDED
30 MARCH 1997 24 MARCH 1996
-------------- --------------
<S> <C> <C>
L'000 L'000
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
Europe....................................................................... 34,712 32,719
Middle East.................................................................. 1,685 1,560
------- -------
Operating profit............................................................. 36,397 34,279
Interest receivable.......................................................... 1,663 2,044
Interest payable............................................................. (2,817) (3,051)
------- -------
Profit on ordinary activities before taxation................................ 35,243 33,272
------- -------
------- -------
</TABLE>
For the purposes of the segmental analysis all head office costs have been
allocated to Europe.
Substantially all of the net assets of the Group are located in Europe.
Substantially all of the Group's turnover, operating profit and net assets
relate to the operation of casinos.
3. OPERATING PROFIT
Operating profit is stated after charging:
<TABLE>
<CAPTION>
53 WEEKS ENDED 52 WEEKS ENDED
30 MARCH 1997 24 MARCH 1996
-------------- --------------
<S> <C> <C>
L'000 L'000
Employee costs (see note 4)................................................... 44,594 40,564
Operating lease rentals on properties........................................ 8,395 7,839
Operating lease rentals on equipment......................................... 620 683
Depreciation................................................................. 3,418 3,470
Auditors' remuneration
Audit services........................................................... 198 203
Exceptional bid costs........................................................ 1,080 --
Other........................................................................ 33,079 32,547
------- -------
91,384 85,306
------- -------
Shown as:
Operating costs.............................................................. 74,134 71,381
Administrative expenses...................................................... 17,250 13,925
------- -------
91,384 85,306
------- -------
------- -------
</TABLE>
Audit fees for the company were L15,000 (1996: L15,000). Non-audit fees for
the group and company were L489,000 (1996: L244,000) and L300,000 (1996:
L20,000) respectively. A proportion of the non-audit fees for the current year
relates to work in respect of the bid for Capital Corporation plc.
The exceptional bid costs represent professional and other costs incurred in
respect of the bid for Capital Corporation plc which lapsed on 7 April 1997,
following referral to the Monopolies and Mergers Commission.
Other costs include catering costs, the net movement in provisions for
gaming cheques, marketing expenditure, irrecoverable VAT, other establishment
costs and professional fees.
A-20
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
4. EMPLOYEE INFORMATION
<TABLE>
<CAPTION>
53 WEEKS ENDED 52 WEEKS ENDED
30 MARCH 1997 24 MARCH 1996
-------------- --------------
<S> <C> <C>
L'000 L'000
Employee costs (including directors):
Wages and salaries........................................................... 38,963 35,117
Social security costs........................................................ 4,403 4,465
Other pension costs.......................................................... 1,228 982
------- -------
44,594 40,564
------- -------
------- -------
Average number of employees by geographic location
Europe....................................................................... 1,865 1,833
Middle East.................................................................. 380 385
------- -------
2,245 2,218
------- -------
------- -------
</TABLE>
5. DIRECTORS' REMUNERATION
<TABLE>
<CAPTION>
53 WEEKS ENDED 52 WEEKS ENDED
30 MARCH 1997 24 MARCH 1996
--------------- ---------------
<S> <C> <C>
L'000 L'000
Payments to non-executive directors.............................................. 128 169
Salaries, allowances and taxable benefits........................................ 824 718
Bonuses--payments on account under long term
bonus scheme........................................................ 405 405
--payments on discontinuance of long term bonus scheme.................... 1076 --
Pension contributions............................................................ 100 87
----- -----
2,533 1,379
----- -----
----- -----
</TABLE>
Note: Bonuses in respect of prior years that are payable on discontinuance of
the long term bonus scheme were fully provided in the results of those years and
do not impact on the reported results for the current year.
The remuneration of the Chairmen and of the highest paid director is given
below:
<TABLE>
<CAPTION>
HIGHEST
PAID
CHAIRMEN DIRECTOR
------------------------ -----------
<S> <C> <C> <C>
1997 1996 1997
----- ----- -----
<CAPTION>
L'000 L'000 L'000
<S> <C> <C> <C>
Salaries, allowances and taxable benefits........................................... 61 60 263
Bonuses--payment on account under long term bonus
scheme................................................................. -- -- 150
--payment on discontinuance of long term bonus
scheme................................................................. -- -- 394
Pension contributions............................................................... -- -- 44
-- --
---
61 60 851
-- --
-- --
---
---
<CAPTION>
<S> <C>
1996
-----
L'000
<S> <C>
Salaries, allowances and taxable benefits........................................... 219
Bonuses--payment on account under long term bonus
scheme................................................................. 150
--payment on discontinuance of long term bonus
scheme................................................................. --
Pension contributions............................................................... 36
---
405
---
---
</TABLE>
The remuneration of the Chairmen for 1996 relates to Sir Gordon Booth up to 31
March 1995, when he stood down as Chairman, and to Sir Timothy Kitson from that
date.
A-21
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
5. DIRECTORS' REMUNERATION (CONTINUED)
The remuneration of the directors, excluding pension contributions, is given
below:
<TABLE>
<CAPTION>
30 MARCH 1997 24 MARCH 1996
------------------- -------------------
<S> <C> <C>
NUMBER NUMBER
L5,000 - L10,000.............................................. -- 1
L15,001 - L20,000............................................. 1 --
L20,001 - L25,000............................................. -- 3
L25,001 - L50,000............................................. 2 --
L50,001 - L55,000............................................. -- 1
L55,001 - L60,000............................................. -- 1
L60,001 - L65,000............................................. 1 --
L250,001 - L255,000........................................... -- 3
L365,001 - L370,000........................................... -- 1
L490,001 - L495,000........................................... 1 --
L495,001 - L500,000........................................... 1 --
L500,001 - L505,000........................................... 1 --
L805,001 - L810,000........................................... 1 --
</TABLE>
The value of all the elements of remuneration received by each director in
respect of the 53 weeks to 30 March 1997 was as follows:
<TABLE>
<CAPTION>
FEES AND BENEFITS TOTAL
SALARY (I) (II) IN KIND PENSION 1997
----------- --------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
L'000 L'000 L'000 L'000 L'000 L'000
EXECUTIVE
A.L. Goodenough................................... 244 150 394 19 44 851
(CHIEF EXECUTIVE)
P. Byrne.......................................... 173 85 230 11 8 507
(GROUP OPERATIONS DIRECTOR)
G B C Hardy....................................... 173 85 232 15 31 536
(FINANCE DIRECTOR)
T. Hodgson........................................ 173 85 220 16 17 511
(COMPLIANCE AND SECURITY DIRECTOR)
NON-EXECUTIVE
Sir Timothy Kitson................................ 61 -- -- -- -- 61
(CHAIRMAN)
Sir Gordon Booth.................................. 17 -- -- -- -- 17
R R R C Hobbs..................................... 25 -- -- -- -- 25
R A Wood.......................................... 25 -- -- -- -- 25
P J Harper........................................ -- -- -- -- -- --
M Seal............................................ -- -- -- -- -- --
<CAPTION>
TOTAL
1996
---------
<S> <C>
L'000
EXECUTIVE
A.L. Goodenough................................... 405
(CHIEF EXECUTIVE)
P. Byrne.......................................... 258
(GROUP OPERATIONS DIRECTOR)
G B C Hardy....................................... 280
(FINANCE DIRECTOR)
T. Hodgson........................................ 267
(COMPLIANCE AND SECURITY DIRECTOR)
NON-EXECUTIVE
Sir Timothy Kitson................................ 60
(CHAIRMAN)
Sir Gordon Booth.................................. 32
R R R C Hobbs..................................... 25
R A Wood.......................................... 25
P J Harper........................................ 6
M Seal............................................ 21
</TABLE>
- ------------------------
(i) payments on account under long term bonus scheme
(ii) payments on discontinuance of long term bonus scheme
The Company introduced a long term bonus scheme at the time of the flotation
in June 1994. Bonuses were payable to each of the executive directors based upon
the cumulative operating profits of the Group for an initial measurement period
represented by the four financial years ended March 1998. However, following a
review by the remuneration committee of the long term incentivisation of the
executive
A-22
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
5. DIRECTORS' REMUNERATION (CONTINUED)
directors, and the subsequent proposal to introduce a new long term incentive
plan for executive directors and senior managers, the directors' long term bonus
scheme was discontinued as at 30 March 1997.
Three of the executive directors were entitled to a bonus equal to 100 per
cent. of their salaries for each financial year provided that the targeted
cumulative operating profit was achieved. One executive director was entitled to
a bonus equal to 125 per cent. of salary providing the same condition was met.
The targeted operating profits, as determined by the remuneration committee for
each of the years, subsequently exceeded.
Payments on account, equal to 50% of the full bonus entitlements, were made
in respect of each financial year provided that at least 75% of the targeted
operating profit was achieved for that year. Whilst it was not possible to
determine whether the targeted cumulative profit for the measurement period
would be achieved, provision was nonetheless made in the financial statements
for the full potential liability.
The figures disclosed as bonuses for the 52 weeks ended 24 March 1996, which
amounted to a total of L405,000, represent the payments on account under the
long term bonus scheme in respect of the results for that year. Similar payments
on account are due as at 30 March 1997 in respect of the results for the year
then ended. Bonuses accrued, but not previously paid, in respect of the three
financial years ended 30 March 1997, which become payable upon the
discontinuance of the long term bonus scheme, are shown separately in the tables
on the previous page.
6. DIRECTORS' INTEREST
(a) The interests of the directors and their immediate families in the share
capital of the Company at the end of the year and at the beginning of the year
were as follows:
<TABLE>
<CAPTION>
30 MARCH 1997 24 MARCH 1996
-------------------- --------------------
ORDINARY SHARE ORDINARY SHARE
SHARES OPTIONS SHARES OPTIONS
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
P Byrne........................................... 280,000 512,400 140,000 256,200
A L Goodenough.................................... 202,228 622,400 101,114 311,200
G B C Hardy....................................... 901,048 512,400 480,524 256,200
R R C Hobbs....................................... 98,800 -- 49,400 --
T Hodgson......................................... 207,048 512,400 103,524 256,200
Sir Timothy Kitson................................ 40,800 -- 20,400 --
R A Wood.......................................... 10,000 -- 5,000 --
</TABLE>
The interests represent ordinary shares of 5p each and options over ordinary
shares.
All the options were granted on 6 June 1994 under the London Clubs
International plc executive share option scheme. As a result of the one for one
bonus issue on 26 July 1996, the number of shares under option doubled and the
option price was adjusted from 218.5p to 109.25p. The options are exercisable
between June 1997 and June 2004.
They may only be exercised if the total shareholder return on an investment
in the Company's shares between the date of grant and the intended exercise date
is at least 75 per cent. of the returns of the FTSE 100 Index for the same
period. Where the return is between 75 per cent. and 100 per cent. of the FTSE
100 Index, then options may be exercised over an equivalent proportion of
ordinary shares.
The mid market price of the Company's shares as at 30 March 1997 was 417p.
The range of share prices during the 53 weeks to 30 March 1997 was between 254p
and 418p.
A-23
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
6. DIRECTORS' INTEREST (CONTINUED)
The share prices, where appropriate, have been adjusted to reflect the one
for one bonus issue in July 1996.
(b) Other than as stated above, none of the directors nor any member of
their immediate families at 30 March 1997 had any interest in the share capital
of the Company. No changes in details have occurred between 30 March 1997 and 20
May 1997.
(c) The Company's Register of Directors' Interests contains full details of
directors' shareholdings and options to subscribe for ordinary shares.
7. NET INTEREST PAYABLE
<TABLE>
<CAPTION>
53 WEEKS ENDED 52 WEEKS ENDED
30 MARCH 1997 24 MARCH 1996
--------------- ---------------
<S> <C> <C>
L'000 L'000
Interest payable on bank loans................................................... 2,817 3,051
Interest receivable
- --on fixed asset investment...................................................... (303) --
- --other.......................................................................... (1,360) (2,044)
------ ------
Net interest payable............................................................. 1,154 1,007
------ ------
------ ------
</TABLE>
8. TAXATION
<TABLE>
<CAPTION>
53 WEEKS ENDED 52 WEEKS ENDED
30 MARCH 1997 24 MARCH 1996
--------------- ---------------
<S> <C> <C>
L'000 L'000
UK corporation tax at 33% (1996;33%) on the taxable profit for the period........ 12,341 11,603
Deferred taxation................................................................ (200) 337
Overseas taxation................................................................ 618 622
Prior year adjustments........................................................... (171) (577)
------ ------
12,588 11,985
------ ------
------ ------
</TABLE>
Movements in deferred taxation are explained in note 16.
9. DIVIDENDS
<TABLE>
<CAPTION>
53 WEEKS ENDED 52 WEEKS ENDED
30 MARCH 1997 24 MARCH 1996
-------------- --------------
<S> <C> <C>
L'000 L'000
Dividends on equity shares
Interim 2.625p per share (1996; 2.5p) paid on 31 January 1997.................. 3,716 3,538
Final 5.825p per share (1996;5.25p) proposed to be paid on 31 July 1997........ 7,963 7,432
------- -------
11,679 10,970
------- -------
------- -------
</TABLE>
The prior year comparative for dividends per share have been restated to reflect
the one for one bonus issue on 26 July 1996.
A-24
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
10. EARNINGS PER SHARE
Earnings per ordinary share for each year have been calculated on profit on
ordinary activities after taxation and dividend by the weighted average number
of ordinary shares in issue during the period. The weighted average number of
shares has been adjusted to reflect the one for one bonus issue on 26 July 1996.
Fully diluted earnings per share, taking into account all options over the
Company's shares, is not materially different to basic earnings per share.
The earnings and weighted average number of shares used in the calculation
of earnings per share were as follows:
<TABLE>
<CAPTION>
53 WEEKS ENDED 52 WEEKS ENDED
30 MARCH 1997 24 MARCH 1996
-------------- --------------
<S> <C> <C>
Earnings per ordinary share(p)................................................... 16.0 15.0
Earnings (L'000)................................................................. 22,655 21,287
Weighted average number of shares ('000)......................................... 141,557 141,557
------- -------
------- -------
</TABLE>
Earnings per share before exceptional bid costs have been calculated as 16.8
pence per share. This figure is based upon the profit after taxation but before
exceptional bid costs of 23,735,000 and on 141,557,000 ordinary shares. The
exceptional bid costs, for Capital Corporation pic to 7 April 1997, being the
date on which the offer lapsed. No tax credit is assumed to arise on the bid
costs.
11. TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
FIXTURES,
FITTINGS
SHORT AND ASSETS IN
LEASEHOLD MOTOR COURSE OF
GROUP PROPERTIES VEHICLES CONSTRUCTION TOTAL
----------- ----------- ------------- ---------
<S> <C> <C> <C> <C>
L'000 L'000 L'000 L'000
COST OR VALUATION
At 24 March 1996.................................... 159,257 18,151 -- 177,408
Revaluation......................................... 60,751 -- -- 60,751
Additions........................................... 134 1,268 2,977 4,379
Disposals........................................... -- (232) -- (232)
Transfers........................................... (1,242) 1,242 -- --
Exchange movement................................... (1,251) (725) -- (1,976)
----------- ----------- ----- ---------
At 30 March 1997.................................... 217,649 19,704 2,977 240,330
----------- ----------- ----- ---------
DEPRECIATION
At 24 March 1996.................................... 8,798 9,114 -- 17,912
Charge for year..................................... 1,463 1,955 -- 3,418
Disposals........................................... -- (74) -- (74)
Transfers........................................... (152) 152 -- --
Exchange movement................................... (80) (492) -- (572)
----------- ----------- ----- ---------
At 30 March 1997.................................... 10,029 10,655 -- 20,684
----------- ----------- ----- ---------
NET BOOK VALUE
At 30 March 1997.................................... 207,620 9,049 2,977 219,646
----------- ----------- ----- ---------
At 24 March 1996.................................... 150,459 9,037 -- 159,496
----------- ----------- ----- ---------
</TABLE>
A-25
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
11. TANGIBLE FIXED ASSETS (CONTINUED)
The short leasehold properties from which the Group conducts its casino
operations are carried at open market value on an existing one and fully
operational basis, including the benefit of casino licences.
In line with the Group's policy to revalue at least triennially, the
directors have included the Group's U.K. short leasehold properties at the
amount determined by G L Hearn & Partners (Chartered Surveyors) as at 30 March
1997. The resultant change in value is reflected within the revaluation reserve.
The next such valuation is due to take place in March 2000.
The value of short leasehold properties on an historical cost basis
comprises assets with a cost of L131.9 million (1996 L134.3 million) and
accumulated depreciation of L10.0 million (1996 L8.8 million). The net book
value of the short leasehold properties, on an historical cost basis, is L125.5
million (1996 L125.5 million).
No provision has been made for the potential liability to taxation on
capital gains which could arise if the short leasehold properties held as fixed
assets were sold at the amounts at which they have been revalued and included in
these accounts as the directors have no current intentions of selling these
assets with gaming licences attached.
COMPANY
The Company acquired fixed assets with a cost of L2,807,000 during the
period, of which L2,776,000 are classified as assets in course of construction.
No depreciation has been charged on the amount.
12. INVESTMENTS
GROUP
<TABLE>
<CAPTION>
FLOATING RATE
NOTES INVESTMENT TOTAL
--------------- ----------- ---------
<S> <C> <C> <C>
L'000 L'000 L'000
At 24 March 1996.............................................................. -- 695 695
Additions..................................................................... 3,981 295 4,276
Exchange movement............................................................. (305) -- (305)
----- ----- ---------
At 30 March 1997.............................................................. 3,676 990 4,666
----- ----- ---------
</TABLE>
A subsidiary undertaking, London Clubs (Overseas) Limited, holds 12.5 cent,
of the issued share capital of Abela Tourism and Development Company SAL
("ATDC"). ATDC is incorporated in Lebanon and has a management concession for
the Casino du Liban complex in Beirut.
During the period, the Company subscribed for floating rate notes issued by
Casino du Liban, which have a nominal value of US $6 million.
COMPANY
<TABLE>
<CAPTION>
30 MARCH 1997 24 MARCH 1996
--------------- ---------------
<S> <C> <C>
L'000 L'000
Shares in Group undertakings...................................................... 27,457 27,457
------ ------
</TABLE>
A-26
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
12. INVESTMENTS (CONTINUED)
Principal subsidiary undertakings of the Company are noted below:
<TABLE>
<CAPTION>
COUNTRY OF
INCORPORATION PERCENTAGE
OF COUNTRY OF PRINCIPAL OF VOTING
PRINCIPAL SUBSIDIARY UNDERTAKING REGISTRATION OPERATION ACTIVITY SHARES HELD
- -------------------------------------------- ------------- ---------- -------------------------- -----------
<S> <C> <C> <C> <C>
London Clubs Holdings Limited*.............. England England Holding company 100%
London Clubs Management Limited............. England England Management company 100%
Ritz Club (London) Limited.................. England England Gaming casino 100%
Les Ambassadeurs Club Limited............... England England Gaming casino 100%
Rendezvous Club (London) Limited............ England England Gaming casino 100%
Zealcastle Limited.......................... England England Gaming casino 100%
Palm Beach Club Limited..................... England England Gaming casino 100%
The Sportsman Club Limited.................. England England Gaming casino 100%
Golden Nugget Club Limited.................. England England Gaming casino 100%
London Clubs (Overseas) Limited............. England England Holding company 100%
LCL (France) SA et cie...................... France France Gaming casino 100%
Inter Casino Management (Egypt) Limited..... Isle of Man Egypt Gaming casino 100%
Mayfair Maritime Casinos Limited............ Gibraltar Gibraltar Ships casino operations 100%
Six Hamilton Place Limited.................. England England Banqueting operation 100%
</TABLE>
- ------------------------
(All companies owned indirectly except *)
13. DEBTORS
<TABLE>
<CAPTION>
GROUP COMPANY GROUP COMPANY
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
30 MARCH 1997 24 MARCH 1996
---------------------- ----------------------
L'000 L'000 L'000 L'000
Trade debtors............................................................. 2,137 3 4,639 --
Amounts due from group companies.......................................... -- 68,663 -- 56,903
Other debtors............................................................. 5,211 2,333 1,219 517
Prepayments and accrued income............................................ 2,479 79 1,781 --
ACT recoverable........................................................... 1,991 1,991 884 884
--------- ----------- --------- -----------
11,818 73,069 8,523 58,304
--------- ----------- --------- -----------
--------- ----------- --------- -----------
</TABLE>
The ACT recoverable is receivable after more than one year.
A-27
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
14. CREDITORS (AMOUNTS FALLING DUE WITHIN ONE YEAR)
<TABLE>
<CAPTION>
GROUP COMPANY GROUP COMPANY
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
30 MARCH 1997 24 MARCH 1996
---------------------- ----------------------
L'000 L'000 L'000 L'000
Short term element of bank loan (see note 15)........................... 5,916 -- 5,831 --
Loan notes (see note 15)................................................ 2,000 -- -- --
Trade creditors......................................................... 1,715 255 1,479 174
Amounts due to group companies.......................................... -- 12,320 -- 925
Corporation tax......................................................... 15,622 -- 14,268 --
ACT payable............................................................. 2,920 2,920 884 884
Gaming taxation payable................................................. 10,528 -- 5,520 --
Other tax including social security..................................... 194 -- 1,330
Interest payable........................................................ 16 -- 156 --
Other creditors and accruals............................................ 15,413 989 14,469 187
Proposed dividend....................................................... 7,963 7,963 7,432 7,432
--------- ----------- --------- -----
62,287 24,447 51,369 9,602
--------- ----------- --------- -----
--------- ----------- --------- -----
</TABLE>
15. CREDITORS (AMOUNTS FALLING DUE AFTER ONE YEAR)
<TABLE>
<CAPTION>
GROUP COMPANY GROUP COMPANY
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
30 MARCH 1997 24 MARCH 1996
---------------------- ----------------------
L'000 L'000 L'000 L'000
Bank loan
Repayable between one and two years................................... 6,031 -- 5,916 --
Repayable between two and five years.................................. 14,785 -- 20,806 --
Deferred consideration.................................................. 4,000 -- 6,000 --
--------- ----- --------- -----
24,816 -- 32,722 --
--------- ----- --------- -----
--------- ----- --------- -----
</TABLE>
The bank loan is secured by means of fixed and floating charges over all
U.K. leasehold properties, together with a floating charge over all assets of
the Company and all its present and future U.K. subsidiaries. Interest was
payable at LIBOR plus 1 per cent with a small variable adjustment.
On 11 April 1997, the Company completed a supplemental agreement, whereby
all outstanding facilities were replaced by a Revolving Credit Facility. The
Revolving Credit Facility is available until 11 April 2002. Interest is payable
at LIBOR plus 0.65 per cent, with a small variable adjustment. Advances are
available in foreign currencies which may be used to finance overseas
investments.
Until 29 September 1998, a certain proportion of the loan is subject to
interest rate cap based on LIBOR of 9 per cent.
The deferred consideration is payable based upon the cumulative results of
Zealcastle Limited for the three years ending 1 October 1998. Provision has been
made for the maximum amount payable. During the year, loan notes with a value of
L2 million were issued in settlement of part of the liability. These loan notes
are disclosed within creditors falling due within one year.
A-28
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
16. PROVISIONS FOR LIABILITIES AND CHARGES
The amount of deferred taxation which has been provided in the financial
statements is as follows:
<TABLE>
<CAPTION>
GROUP COMPANY
----------- -----------
<S> <C> <C>
L'000 L'000
Deferred tax liability at 24 March 1996........................................................ 517 765
Credit for the period.......................................................................... (200) (765)
--- ---
Deferred tax liability at 30 March 1997........................................................ 317 --
--- ---
--- ---
</TABLE>
Comprising:
GROUP
<TABLE>
<CAPTION>
30 MARCH 1997 24 MARCH 1996
------------------------------ ------------------------------
PROVIDED UNPROVIDED PROVIDED UNPROVIDED
----------- ----------------- ----------- -----------------
<S> <C> <C> <C> <C>
L'000 L'000 L'000 L'000
Accelerated capital allowances........... 607 (23) 568 (28)
Short term timing differences............ (290) -- (51) (25)
-- --
--- ---
317 (23) 517 (53)
-- --
-- --
--- ---
--- ---
</TABLE>
COMPANY
The only deferred tax liabilities for the Company relate to short term
timing differences. There are no unprovided deferred tax liabilities.
17. SHARE CAPITAL
The following information relates to the share capital of the Company during
the period.
<TABLE>
<CAPTION>
30 MARCH 1997 24 MARCH 1996
------------------------ ------------------------
NUMBER L'000 NUMBER L'000
------------- --------- ------------- ---------
<S> <C> <C> <C> <C>
Authorised
Ordinary shares of 5p each...................................... 233,565,100 11,678 233,565,100 11,678
Issued, allotted and fully paid
Ordinary shares of 5p each...................................... 141,557,502 7,078 70,778,751 3,539
</TABLE>
On 26 July 1996, 70,778,751 ordinary shares were allotted by way of a one
for one bonus issue. The issued share capital of the company was increased to
L7,077,875 by the capitalisation of the sum of L3,538,938 standing to the credit
of the share premium account.
At 30 March 1997 there were outstanding options to subscribe for 6,989,600
ordinary shares (1996 3,504,800) under the London Clubs International plc
executive share option scheme, which are exercisable between June 1997 and June
2004. The number of options increased by a factor of two following the one for
one bonus on 26 July 1996.
A-29
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
18. RESERVES
<TABLE>
<CAPTION>
GROUP AND
COMPANY
-----------
<S> <C> <C>
L'000
SHARE PREMIUM ACCOUNT
At 24 March 1996........................................................ 78,067
Bonus issue (see note 17)............................................... (3,539)
-----------
Balance at 30 March 1997................................................ 74,528
-----------
-----------
GROUP
-----------
L'000
REVALUATION RESERVE
At 24 March 1996........................................................ 24,985
Revaluation during the period........................................... 60,751
-----------
Balance at 30 March 1997................................................ 85,736
-----------
-----------
GROUP COMPANY
--------- -----------
L'000 L'000
PROFIT AND LOSS ACCOUNT
At 24 March 1996........................................................ 3,207 5,653
Retained profit for the period.......................................... 10,976 6,995
Exchange movement....................................................... (1,942) --
--------- -----------
Balance at 30 March 1997................................................ 12,241 12,648
--------- -----------
--------- -----------
</TABLE>
As permitted by Section 230 of the Companies Act 1985, the Company's profit
and loss account is not separately presented. The amount of the Company's
retained profit for the peroid is L6,995,000 (1996 L4,130,000).
19. CAPITAL COMMITMENTS
At 30 March 1997 the Group had capital commitments contracted for but not
provided of L396,260 (1996 L4.0 million).
20. OPERATING LEASE COMMITMENTS
<TABLE>
<CAPTION>
GROUP COMPANY GROUP COMPANY
--------- ------------- --------- -------------
<S> <C> <C> <C> <C>
30 MARCH 1997 24 MARCH 1996
------------------------ ------------------------
L'000 L'000 L'000 L'000
Operating lease commitments on land and buildings payable within one year
for leases expiring:
within one year.......................................................... 1,381 -- -- --
between one and five years............................................... 4,337 -- 5,785 --
after five years......................................................... 3,453 723 2,697 --
--------- --- --------- ---
9,171 723 8,482 --
--------- --- --------- ---
--------- --- --------- ---
</TABLE>
A-30
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
20. OPERATING LEASE COMMITMENTS (CONTINUED)
<TABLE>
<CAPTION>
GROUP COMPANY GROUP COMPANY
--------- ------------- --------- -------------
<S> <C> <C> <C> <C>
30 MARCH 1997 24 MARCH 1996
------------------------ ------------------------
L'000 L'000 L'000 L'000
Operating lease commitments on plant and equipment payable within one year
for leases expiring:
within one year.......................................................... 131 -- 97 --
between one and five years............................................... 302 -- 561 --
--------- --- --------- ---
433 -- 658 --
--------- --- --------- ---
--------- --- --------- ---
</TABLE>
21. RECONCILIATION OF OPERATING PROFIT TO OPERATING CASH FLOW
<TABLE>
<CAPTION>
53 WEEKS ENDED 52 WEELS ENDED
30 MARCH 1997 24 MARCH 1996
--------------- ---------------
<S> <C> <C>
L'000 L'000
Operating profit................................................................. 36,397 34,279
Depreciation charges............................................................. 3,418 3,470
Loss on sale of fixed assets..................................................... 75 128
Exchange movement................................................................ 305 --
Increase in stock................................................................ (195) (178)
Increase in debtors.............................................................. (784) (2,339)
Increase/(Decrease) in creditors................................................. 5,590 (8,511)
------ ------
Net cash inflow from operating activities........................................ 44,806 26,849
------ ------
------ ------
</TABLE>
A-31
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
22. ANALYSIS OF CASH FLOWS FOR HEADINGS SUMMARISED IN THE CASH FLOW STATEMENT
<TABLE>
<CAPTION>
30 MARCH 1997 24 MARCH 1996
-------------------- --------------------
<S> <C> <C> <C> <C>
L'000 L'000 L'000 L'000
Returns on investments and servicing of finance
Interest received....................................................... 1,360 2,044
Interest paid........................................................... (2,525) (4,244)
--------- --------- --------- ---------
Net cash outflow for returns on investments and servicing of finance...... (1,165) (2,200)
--------- --------- --------- ---------
Capital expenditure and financial investments
Purchase of tangible fixed assets....................................... (4,379) (3,064)
Purchase of fixed asset investment...................................... (4,276) (695)
Proceeds of tangible fixed asset sales.................................. 10 74
--------- --------- --------- ---------
Net cash outflow for capital expenditure and
financial investment..................................................... (8,645) (3,685)
--------- --------- --------- ---------
Acquisitions and disposals
Purchase of subsidiary undertaking...................................... -- (8,089)
Net overdrafts acquired with subsidiary................................. -- (7,555)
--------- --------- --------- ---------
Net cash outflow for acquisitions and disposals........................... -- (15,644)
--------- --------- --------- ---------
Management of liquid resources
Purchase and sale of securities......................................... 18 --
--------- --------- --------- ---------
Net cash inflow from management of liquid resources....................... 18 --
--------- --------- --------- ---------
Financing
Issue of ordinary share capital......................................... -- 54
Debt due within a year
--repayment of unsecured loan......................................... (6,200) (5,850)
--loan finance raised................................................. -- 16,850
--------- --------- --------- ---------
Net cash (outflow)/inflow from financing.................................. (6,200) 11,054
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
23. ANALYSIS OF NET FUNDS
<TABLE>
<CAPTION>
EXCHANGE
AT OTHER NON MOVEMENT AT
24 MARCH CASH AND CHANGES IN 30 MARCH
1990 CASHFLOW CHANGES MARKET VALUES 1997
----------- --------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C>
L'000 L'000 L'000 L'000 L'000
Cash in hand and at bank............................ 29,886 5,875 -- (889) 34,872
Debt due after one year............................. (32,722) -- 7,906 -- (24,816)
Debt due within one year............................ (5,831) 6,200 (8,285) -- (7,916)
Current asset investment............................ -- (18) -- 18 --
----------- --------- ----------- ------- -----------
(8,667) 12,057 (379) (871) 2,140
----------- --------- ----------- ------- -----------
----------- --------- ----------- ------- -----------
</TABLE>
A-32
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
24. PENSIONS
The principal pension scheme operated by the Group is a defined benefits
scheme providing benefits based on final pensionable salary. The assets of this
scheme are held in a separate trustee administered fund.
The latest formal actuarial valuation of the fund was at 31 March 1995 using
the projected unit method. The assumptions which have the most significant
effect on the results of the valuation are the relative rates of return on the
investments of the fund compared with increases in pay and pensions. It was
assumed for this purpose that, on average, the annual return on investments
would exceed increases in pay by 4 per cent. until 31 March 1997 and by 2 per
cent. thereafter and would exceed increases in pensions by 4 per cent.
At the date of the latest formal actuarial valuation, the market value of
the assets of the fund was L31.3 million. The valuation showed that the assets
represented 111 per cent. of the benefits that have accrued to members. Taking
this surplus into account, the actuary has recommended a future contribution
rate for the Group as follows: from 1 April 1998 to 31 March 1999 10.0 per cent.
of pensionable pay; from 1 April 1999 to 31 March 2005 11.9 per cent. of
pensionable pay and from 1 April 2005 15.0 per cent of pensionable pay. Death in
service benefits, professional fees and other expenses are paid by the pension
scheme.
The pension charge for the year was L1,122,000 (1996 L885,000) which was
paid to the fund.
In addition the company makes contributions in respect of individual
personal pension schemes. The annual contribution for the year was L106,000
(1990 L69,000).
25. SUBSEQUENT EVENT
On 1 May 1997, the Company completed the purchase of the freehold of 50 St.
James's Street, London W1, for a total consideration of L13.5 million. The
business of Ritz Club (London) Limited will be transferred to these premises in
June 1998.
A-33
<PAGE>
LONDON CLUBS
INTERNATIONAL
INTERIM REPORT 1997
A-34
<PAGE>
INTERIM STATEMENT
FINANCIAL RESULTS
We are pleased to report that business volumes in the first half of the year
were once again at record levels. The house win in London was, however,
negatively affected by the volatility which can occasionally occur at the upper
level of the market and this resulted in a lower than normal win to drop
percentage.
This in turn contributed substantially to a decrease in turnover from
L94,342,000 to L85,697,000 and caused profit before interest and tax to fall
from the record level of L19,897,000 in the prior year to L14,312,000. Group
earnings per share were 6.9p before exceptional costs compared with 8.9p in the
prior year.
It is the group's experience that short term volatility in win percentage is
corrected over a longer period of time and will return to its normal level. We
are pleased to report that since the half year business levels have been strong
with an improved win percentage, and as a result, the cumulative win in our
London casinos to the end of November has exceeded that for the same eight month
period in the prior year.
DIVIDEND
The interior dividend will be maintained at 2.625p (1996:2.625p) and will be
paid on 30 January 1998 to shareholders on the register at 30 December 1997.
TRADING COMMENTARY
The total volume of business in our London casinos was again strong with an
increase in drop of 4%. Les Ambassadeurs produced yet another excellent
performance with win, drop and attendance ahead of the record prior year. At the
opposite end of the market spectrum, the Golden Nugget also enjoyed a better
half year with drop and win much improved. The Sportsman traded close to
expectations and at similar levels to the previous year whilst the Palm Beach
fell a little behind on win and drop although with improved attendances. The
Park Tower continued to trade satisfactorily although not at last year's
exceptional levels.
Good fortunes were enjoyed by a number of major customers at both the Ritz
and more unusually at the Rendezvous which resulted in poor win percentages at
both of these clubs and served to depress the group win percentage.
The half year profit contribution from our up market casinos was 53% with
47% coming from the middle and lower market casinos. This compares with the 52%
and 48% of last year.
Overseas, the Casino du Liban made a first full half year contribution
having opened in December 1996. The business has performed well and in
accordance with our expectations, with slot and table game areas benefiting from
a high level of attendance.
In Egypt, our casinos also trade well with Taba once again performing
strongly, while Cairo produced another consistent performance. In France, the
Cannes casino enjoyed a higher level of income and this, combined with
operational improvements, led to an increased half year contribution.
OUTLOOK IN THE UNITED KINGDOM AND OVERSEAS
We were surprised and disappointed that our all share offer for Capital
Corporation Plc was blocked on the recommendation of the MMC in August of this
year. However, excellent progress has been made on other strategic initiatives
and the group's overall progress will not therefore be inhibited as a result of
the authorities' decision.
In London, work on our two development projects at 50 St. James Street and
at Old Park Lane, which will accommodate the relocation of the Ritz and
Rendezvous casino businesses respectively, is proceeding
A-35
<PAGE>
INTERIM STATEMENT (CONTINUED)
well. Gaming licences have been granted for both the new locations and the
expanded facilities will offer considerable improvements for our customers and
greater operational efficiency.
We remain concerned at the delay in the implementation of material changes
to the UK gaming legislation but, together with other members of the British
Casino Association, continue to discuss with the Government at every opportunity
ways in which changes can be expedited to allow our industry to remain
internationally competitive.
Overseas, our intention to expand the group's interests and continue to
reduce our dependence upon the upper London market has advanced significantly
with the completion of the Aladdin negotiations. Work is due to commence upon
the Aladdin site in Las Vegas immediately and the recently announced involvement
of the Planet Hollywood group at this prestigious development is particularly
positive. Shareholders will be receiving a circular setting out the details of
and seeking their approval for this exciting opportunity.
In South Africa, joint venture proposals have been submitted to the Gautcog
gaming authorities for casino operations in Central Johannesburg and at the Vaal
River, a tourist centre close to Johannesburg. We intend to take minority equity
positions and participate in the management of the casinos if the tenders are
successful. The results of these applications should be known in the early part
of 1998.
In recent years we have committed substantial resources to developing our
overseas strategy. These efforts have significantly raised the group's
international profile and as a result we are increasingly being approached to
take part in high calibre opportunities.
Since the first half, overall levels of activity have continued to be good
throughout the group. In our London casinos, despite press reports to the
contrary, there has been a good level of premium player activity and an improved
win percentage has resulted in a higher level of win than in the same period in
1996. For the eight months of the financial year to date, the group's London
table win is now at a level which exceeds that experienced in the prior year.
In the Lebanon, trading is continuing strongly and the international
showroom at the Casino du Liban is nearing completion. The recent political
unrest and terrorist activity in Egypt is clearly unsettling and we continue to
watch events closely but so far no negative effect upon our business has been
detected. Cannes is now trading in its traditionally quiet period which will
continue for the remainder of the financial year. The number of ships on which
we operate casinos has reduced in recent years and, in view of the marginal
nature of this activity, we have now agreed with Cunard to cease remaining
operations early in the new year.
The trading volatility which we experienced in London in the first half of
the year and the disappointing lack of progress in respect of United Kingdom
gaming deregulation underlines the rationale for our international growth
strategy. We have a number of excellent overseas projects in progress and these
will be pursued aggressively.
DIRECTORS AND EMPLOYEES
The Company wishes to promote share participation by employees to encourage
loyalty and identification with the success of the Group. It is therefore
proposed that an Inland Revenue approved Sharesave Scheme be introduced in which
all eligible UK employees will be invited to participate. A circular has been
sent to shareholders setting out the details of the Scheme and requesting their
approval thereto.
Once again we would like to record our thanks to all of the group's
employees for their individual contributions during the half year.
<TABLE>
<S> <C>
Sir Timothy Kitson Alan Goodenough
CHAIRMAN CHIEF EXECUTIVE
5 December 1997
</TABLE>
A-36
<PAGE>
CONSOLIDATED PROFIT AND LOSS ACCOUNT (UNAUDITED)
<TABLE>
<CAPTION>
26 WEEKS 26 WEEKS 53 WEEKS
ENDED ENDED ENDED
28 SEPTEMBER 22 SEPTEMBER 30 MARCH
1997 1996 1997
------------- ------------- -----------
<S> <C> <C> <C>
L'000 L'000 L'000
Turnover................................................................. 85,697 94,342 179,489
Operating costs:
- -- Gaming taxation....................................................... (24,823) (28,412) (51,708)
- -- Other................................................................. (37,493) (38,003) (74,134)
------------- ------------- -----------
Gross profit............................................................. 23,381 27,927 53,647
Administrative expense:
- -- Exceptional costs in respect of abortive bid for Capital Corporation
Plc..................................................................... (109) -- (1,080)
- -- Other................................................................. (8,960) (8,030) (16,170)
------------- ------------- -----------
Profit before interest and taxation...................................... 14,312 19,897 36,397
Net interest payable..................................................... (843) (770) (1,154)
------------- ------------- -----------
Profit on ordinary activities before taxation............................ 13,469 19,127 35,243
Tax on ordinary activities............................................... (3,608) (6,493) (12,588)
------------- ------------- -----------
Profit on ordinary activities after taxation............................. 9,861 12,634 22,655
------------- ------------- -----------
Dividends
Dividend proposed/paid on ordinary shares of 2.625p per share
(1996:2.625p interim 8.25p full year)................................... (3,856) (3,716) (11,679)
------------- ------------- -----------
Transfer to reserves..................................................... 6,005 8,918 10,976
------------- ------------- -----------
Earnings per share....................................................... 6.8p 8.9p 16.0p
------------- ------------- -----------
Earnings per share before exceptional costs in respect of the abortive
bid..................................................................... 6.9p 8.9p 16.8p
------------- ------------- -----------
</TABLE>
See notes 3 and 4 for details of earnings per share and dividends respectively.
A-37
<PAGE>
CONSOLIDATED BALANCE SHEET (UNAUDITED)
<TABLE>
<CAPTION>
28 SEPTEMBER 22 SEPTEMBER 30 MARCH
1997 1996 1997
------------ ------------ -----------
L'000 L'000 L'000
<S> <C> <C> <C>
Fixed Assets
Tangible assets........................................................ 232,912 157,991 219,646
Investments............................................................ 4,705 4,676 4,666
------------ ------------ -----------
237,617 162,667 224,312
Current Assets
Stocks................................................................. 1,333 1,077 1,353
Debtors................................................................ 17,923 11,248 11,818
Cash at bank and in hand............................................... 38,718 36,103 34,872
------------ ------------ -----------
57,974 48,428 48,043
Creditors (amounts falling due within one year).......................... (50,489) (59,034) (62,287)
------------ ------------ -----------
Net current assets/(liabilities)....................................... 7,485 (10,606) (14,244)
------------ ------------ -----------
Total assets less current liabilities.................................. 245,102 152,061 210,068
------------ ------------ -----------
Creditors (amounts falling due after one year)........................... (48,059) (27,775) (24,816)
Provision for liabilities and charges.................................... (647) (550) (317)
------------ ------------ -----------
196,396 123,736 184,935
------------ ------------ -----------
------------ ------------ -----------
Capital and reserves
Called up share capital................................................ 7,345 7,078 7,078
Share premium.......................................................... 80,103 74,528 74,528
Other reserves......................................................... 91,088 30,337 91,088
Profit and loss account................................................ 17,860 11,793 12,241
------------ ------------ -----------
196,396 123,736 184,935
------------ ------------ -----------
------------ ------------ -----------
</TABLE>
A-38
<PAGE>
CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)
<TABLE>
<CAPTION>
26 WEEKS 26 WEEKS 52 WEEKS
ENDED 28 ENDED 22 ENDED 30
SEPTEMBER SEPTEMBER MARCH 1997
1997 1996 -------------
------------- ------------- L'000
L'000 L'000
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
(NOTE 5)............................................................ 6,755 23,452 44,806
Return on investments and servicing of
Finance............................................................. (875) (624) (1,165)
Taxation............................................................ (1,667) (810) (11,791)
Capital expenditure and financial investment........................ (15,435) (4,632) (8,645)
Equity dividends paid............................................... (7,963) (7,432) (11,148)
------------- ------------- -------------
CASH (OUTFLOW)/INFLOW BEFORE USE OF LIQUID
RESOURCES AND FINANCING............................................. (19,185) 9,954 12,057
Management of liquid resources........................................ 385 -- 18
Financing--issue of shares............................................ 5842 -- --
--increase/(decrease) in debt................................. 16,894 (3,100) (6,200)
------------- ------------- -------------
22,736 (3,100) (6,200)
------------- ------------- -------------
INCREASE IN CASH FOR THE PERIOD....................................... 3,936 6,854 5,875
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT (UNAUDITED)
<TABLE>
<CAPTION>
26 WEEKS 26 WEEKS 53 WEEKS
ENDED 28 ENDED 22 ENDED 30
SEPTEMBER SEPTEMBER MARCH 1997
1997 1996 -----------
------------- ------------- L'000
L'000 L'000
<S> <C> <C> <C>
INCREASE IN CASH IN THE PERIOD........................................... 3,936 6,854 5,875
Cash (inflow)/outflow from movement in debt.............................. (16,894) 3,100 6,200
Cash inflow from decrease in liquid resources............................ (385) -- (18)
Other non cash changes................................................... 567 1,801 (379)
Translation differences.................................................. 295 (637) (871)
------------- ------ -----------
MOVEMENT IN NET DEBT IN THE PERIOD....................................... (12,481) 11,118 10,807
NET FUNDS/(DEBT) AT BEGINNING OF PERIOD.................................. 2,140 (8,667) (8,667)
------------- ------ -----------
NET (DEBT)/FUNDS AT END OF PERIOD........................................ (10,341) 2,451 2,140
------------- ------ -----------
------------- ------ -----------
</TABLE>
A-39
<PAGE>
NOTES TO THE INTERIM FINANCIAL INFORMATION (UNAUDITED)
1. BASIS OF PREPARATION
The interim financial information has been prepared in accordance with the
accounting policies set out in the statutory accounts of London Clubs
International plc and its subsidiaries for the 53 weeks ended 30 March 1997. The
unaudited interim financial information has been approved by the directors and
reviewed by the auditors.
The statutory accounts of London Clubs International plc and its
subsidiaries for the 53 weeks ended 30 March 1997 have been filed with the
Registrar of Companies and contained no qualifications nor statements under
Section 237 of the Companies Act 1985.
2. TAXATION
The charge for taxation has been calculated on the basis of the taxable
results for the period, after taking appropriate account of permanent and timing
differences, assuming a UK corporation tax rate of 31% (1996: 33%).
The current period tax charge includes a credit of L805,000 relating to
adjustments in respect of prior years.
3. EARNINGS PER ORDINARY SHARE
Earnings per ordinary share for each period have been calculated on profit
on ordinary activities after taxation divided by the weighted average number of
ordinary shares deemed to be in issue during the period. During the 26 weeks to
28 September 1997 the company's issued share capital was increased by 5,347,200
ordinary shares arising from the exercise of options under the company's
executive share option scheme.
The earnings and weighted average number of shares used in the calculation
of basic earnings per share were as follows:
<TABLE>
<CAPTION>
26 WEEKS 26 WEEKS 53 WEEKS
ENDED ENDED ENDED
28 SEPTEMBER 22 SEPTEMBER 30 MARCH
1997 1996 1997
------------ ------------ -----------
<S> <C> <C> <C>
Earnings per ordinary share (p).......................................... 6.8 8.9 16.0
Earnings (L'000)......................................................... 9,861 12,634 22,655
Weighted average number of shares ('000)................................. 141,785 141,557 141,557
</TABLE>
Earnings per ordinary share before exceptional bid costs in respect of the
abortive bid for Capital Corporation Plc have been calculated as 6.9 pence per
share for the 26 weeks ended 28 September 1997 and as 16.8 pence per share for
the 53 weeks ended 30 March 1997. These figures are based upon the profit after
taxation but before exceptional bid costs of L9,970,000 and of L23,735,000 for
the respective periods noted above. The weighted average number of shares used
in the calculations for each period are the same as set out in the above table.
No tax credit is assumed to arise on the bid costs.
4. DIVIDENDS
The interim dividend of 2.625p net per share will be paid on 30 January
1998. The net cost of L3.856 million appears in the consolidated profit and loss
account for the 26 weeks ended 28 September 1997.
A-40
<PAGE>
NOTES TO THE INTERIM FINANCIAL INFORMATION (UNAUDITED) (CONTINUED)
5. RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
<TABLE>
<CAPTION>
26 WEEKS 26 WEEKS 53 WEEKS
ENDED ENDED ENDED
28 SEPTEMBER 22 SEPTEMBER 30 MARCH
1997 1996 1997
------------- ------------- -----------
L'000 L'000 L'000
<S> <C> <C> <C>
Operating profit before interest and taxation............................ 14,312 19,897 36,397
Depreciation............................................................. 1,918 2,092 3,418
Loss/(gain) on sale of fixed assets...................................... 3 (5) 75
Exchange movements....................................................... (39) 74 305
Movement in stocks....................................................... 20 81 (195)
Movement in debtors...................................................... (6,545) (3,542) (784)
Movement in creditors.................................................... (2,914) 4,855 5,590
------ ------ -----------
Net cash inflow from operating activities................................ 6,755 23,452 44,806
------ ------ -----------
------ ------ -----------
</TABLE>
A-41
<PAGE>
The following represents the review report issued by Price Waterhouse,
London to the Board of Directors of London Clubs International plc. The review
was undertaken in accordance with guidance issued by the Auditing Practices
Board in the United Kingdom (UK). The accompanying interim financial information
has been prepared in conformity with UK generally accepted accounting
principles.
REVIEW REPORT BY THE AUDITORS TO THE BOARD OF
DIRECTORS OF LONDON CLUBS INTERNATIONAL PLC
We have reviewed the interim financial information for the 26 weeks ended 28
September 1997, set out on pages A-37 to A-41 which is the responsibility of,
and has been approved by, the Directors. Our responsibility is to report on the
results of our review.
Our review was carried out having regard to the Bulletin "Review of Interim
Financial Information", issued by the Auditing Practices Board. This review
consisted principally of applying analytical procedures to the underlying
financial data, assessing whether accounting policies have been consistently
applied, and making enquiries of group management responsible for financial and
accounting matters. The review excluded audit procedures such as tests of
controls and verification of assets and liabilities and was therefore
substantially less in scope than an audit performed in accordance with Auditing
Standards. Accordingly we do not express an audit opinion on the interim
financial information.
On the basis of our review:
- in our opinion the interim financial information has been prepared using
accounting policies consistent with those adopted by London Clubs
International plc and its subsidiaries in the financial statements for the
53 weeks ended 30 March 1997, and
- we are not aware of any material modifications that should be made to the
interim financial information as presented.
PRICE WATERHOUSE
CHARTERED ACCOUNTANTS
London
5 December 1997
A-42
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE ISSUERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO BUY THE WARRANTS OR THE WARRANT SHARES IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN AFFAIRS OF
THE ALADDIN PARTIES SINCE THE DATE HEREOF.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary.............................. 1
Risk Factors.................................... 15
Use of Proceeds................................. 32
Capitalization.................................. 34
Dividends and Distributions..................... 36
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 37
Business........................................ 40
Regulation and Licensing........................ 68
Management...................................... 73
Controlling Stockholders........................ 80
Certain Transactions............................ 84
Security Ownership of Certain Beneficial
Owners........................................ 86
Description of Capital Stock.................... 90
Description of the Warrants..................... 92
Description of Noteholder Completion Guaranty
and Disbursement Agreement.................... 95
Description of Certain Indebtedness and Other
Obligations................................... 101
Certain Material Agreements..................... 111
Certain United States Federal Income Tax
Considerations................................ 136
Plan of Distribution............................ 138
Legal Matters................................... 138
Experts......................................... 139
Index to Historical Financial Information of the
Aladdin Parties and the Company............... F-1
Annex A
Certain Historical Consolidated Financial
Information of London Clubs................. A-1
</TABLE>
[LOGO]
2,215,000 WARRANTS TO
PURCHASE SHARES OF COMMON STOCK OF
ALADDIN GAMING ENTERPRISES, INC.
---------------------
PROSPECTUS
----------------------------
, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCES AND DISTRIBUTION.
The following expenses (other than the SEC filing fee) are estimated.
<TABLE>
<S> <C>
SEC Registration Fee.............................................. $ 4,425
Accounting Fees and Expenses...................................... $ 12,000
Printing and Engraving Expenses................................... $ 48,000
Legal Fees and Expenses (other than blue sky)..................... $ 175,000
Blue Sky Fees and Expenses........................................ $ 10,000
Transfer Agent and Registrar Fees................................. $ 1,500
Miscellaneous Expenses............................................ $ 5,000
---------
Total............................................................. $ 255,925
---------
---------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The following summary of material provisions of the Articles of
Incorporation and Bylaws of Aladdin Gaming Enterprises, Inc. (the "Issuer") and
Nevada law does not purport to be complete and is subject to and qualified in
its entirety by reference to Nevada law and the text of the Issuer's Articles of
Incorporation and Bylaws, which have been filed as exhibits to this Registration
Statement.
The Issuer's Articles of Incorporation provide that no officer or director
will be personally liable to the Issuer or any stockholder for damages for
breach of fiduciary duty as a director or officer, except for (i) acts or
omissions which involve intentional misconduct, fraud or knowing violation of
the law, or (ii) the payment of distributions in violation of Nevada Revised
Statutes ("NRS") Section78.300.
Additionally, the Issuer's Bylaws limit the liability of its directors and
officers (and, by action of the board of directors, its employees, and other
persons) to the fullest extent permitted by Nevada law. If the Nevada law is
subsequently amended to permit further limitation of personal liability of
directors and officers, the liability of the Issuer's directors and officers
will be eliminated or limited to the fullest extent permitted by Nevada law, as
amended. Nevada law permits corporations to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (except in an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with the action, suit or proceeding if he acted in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the corporation and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. This
same permissible indemnification is not allowed as to any action or suit by or
in the right of the corporation if the person has been adjudged by a court
(after exhaustion of all appeals) to be liable to the corporation or for amounts
paid in settlement to the corporation, unless and only to the extent that a
court determines upon application that in view of all the circumstances of the
case, the person is fairly and reasonably entitled to indemnity for such
expenses, as the court deems proper. To the extent that a director, officer,
employee or agent of the corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding described above, or in
the defense of any claim, issue or matter therein, Nevada law requires that he
must be indemnified by the corporation against expenses, including attorneys'
fees, actually and reasonably incurred by him in connection with that defense.
II-1
<PAGE>
The Issuer's Bylaws further provide that the Issuer may purchase and
maintain insurance or make other financial arrangements for such indemnification
and that such indemnification shall continue as to any indemnitee who has ceased
to be a director or officer and shall inure to the benefit of his heirs,
executors and administrators.
The inclusion of the permissive indemnification provision in the Issuer's
Bylaws may have the effect of reducing the likelihood of derivative litigation
against directors and may discourage or deter stockholders or management from
bringing a lawsuit against directors for breach of their duty of care, even
though such an action, if successful, might otherwise have benefitted the Issuer
and its stockholders.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Securities Act") may be permitted to directors,
officers or persons controlling the registrants pursuant to the foregoing
provisions, the Issuer has been informed that in the opinion of the Securities
and Exchange Commission (the "Commission") such indemnification is against
public policy as expressed in the Securities Act and is therefore unenforceable.
Pursuant to the registration rights agreement (the "Registration Rights
Agreement") relating to the Warrants (the "Warrants") to acquire Class B Common
Stock of the Issuer and the Class B Common Stock of the Issuer into which the
Warrants are exercisable, the holders of such securities and certain
underwriters, broker dealers and the Initial Purchasers (as defined herein) have
agreed to indemnify the directors, officers and controlling persons of the
registrant against certain liabilities, costs and expenses that may be incurred
in connection with the registration of such securities, to the extent that such
liabilities, costs and expenses that may be incurred in connection with the
registration of such securities arise from an omission or untrue statement
contained in information provided to the registrant by a holder of such
securities, underwriter, broker dealer or Initial Purchaser.
The Purchase Agreement, dated as of February 18, 1998 among Aladdin Gaming
Holdings LLC, Aladdin Capital Corp. and the Issuer (collectively, the "Unit
Issuers") and Merrill Lynch, Pierce, Fenner and Smith Incorporated, Credit
Suisse First Boston Corporation, CIBC Oppenheiner Corp. and Scotia Capital
Markets (USA) Inc. (the "Initial Purchasers"), contains provisions by which the
Initial Purchasers agree to indemnify the Unit Issuers (including their
respective officers, directors, employees, agents and controlling persons)
against certain liabilities.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ---------- --------------------------------------------------------------------------------------------------------
<C> <S>
TRIANGLE.31 Articles of Incorporation of Aladdin Gaming Enterprises, Inc. ("Enterprises").
TRIANGLE.32 Amendment No. 1 to Articles of Incorporation of Enterprises.
TRIANGLE.33 Articles of Organization of Aladdin Gaming Holdings, LLC ("Holdings").
TRIANGLE.34 Articles of Incorporation of Aladdin Capital Corp. ("Capital").
TRIANGLE.35 Articles of Organization of Aladdin Gaming, LLC (the "Company").
TRIANGLE.36 Bylaws of Enterprises.
+3.7 Operating Agreement of Holdings.
TRIANGLE.38 Bylaws of Capital.
TRIANGLE.39 Operating Agreement of the Company.
TRIANGLE.41 Warrant Agreement, dated February 26, 1998, among Enterprises and State Street Bank and Trust Company,
as Warrant Agent (the "Warrant Agent").
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ---------- --------------------------------------------------------------------------------------------------------
<C> <S>
TRIANGLE.42 Warrant Registration Rights Agreement dated February 26, 1998, among Enterprises and the Initial
Purchasers (as defined).
TRIANGLE.43 Equity Participation Agreement, dated February 26, 1998, among Sommer Enterprises, LLC, Enterprises,
London Clubs Nevada, Inc. ("LCNI") and the Trustee (as defined).
+5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP regarding legality of securities being registered.
+5.2 Opinion of Schreck Morris regarding legality of the securities being registered.
+8.1 Opinion of Skadden, Arps, Slate, Meagher and Flom LLP regarding certain tax matters.
TRIANGLE.101 Indenture, dated February 26, 1998, among Holdings, Capital and State Street Bank and Trust Company, as
trustee (the "Trustee").
TRIANGLE.102 Note Registration Rights Agreement, dated February 26, 1998, among Holdings, Capital and the Initial
Purchasers.
+10.3 Noteholder Completion Guaranty, dated February 26, 1998, among the Trust Under Article Sixth u/w/o
Sigmund Sommer, London Clubs International plc ("London Clubs"), Aladdin Bazaar Holdings, LLC and the
Trustee.
+10.4 Disbursement Agreement, dated February 26, 1998, among Holdings, the Company, the Bank of Nova Scotia,
as Administrative Agent under the Bank Credit Facility, Disbursement Agent, and Securities Intermediary,
U.S. Bank National Association as Servicing Agent and the Trustee.
+10.5 The LLC Interest Pledge and Security Agreement, dated February 26, 1998, between Holdings and the
Trustee.
+10.6 The Holdings Collateral Account Agreement, dated February 26, 1998, between Holdings and the Trustee.
TRIANGLE.107 Subsidiary Guaranty, dated February 26, 1998, among subsidiaries of London Clubs and the Trustee.
TRIANGLE.108 Amended and Restated London Clubs Purchase Agreement, dated February 26, 1998, among LCNI, London Clubs,
Holdings, Aladdin Holdings, LLC, the Company, Sommer Enterprises, LLC and the Trust Under Article Sixth
u/w/o Sigmund Sommer.
TRIANGLE.109 Closing Schedules to Amended and Restated London Clubs Purchase Agreement.
TRIANGLE.1010 Contribution Agreement, dated February 26, 1998, among the Trust Under Article Sixth u/w/o Sigmund
Sommer, Aladdin Holdings, LLC, Sommer Enterprises, LLC, London Clubs and LCNI.
TRIANGLE.1011 Salle Privee Agreement, dated February 26, 1998, among the Company, LCNI and London Clubs.
10.12 [RESERVED]
+10.13 Credit Agreement, dated February 26, 1998, among the Company, a syndicate of lenders (the "Bank
Lenders"), The Bank of Nova Scotia as Administrative Agent, Merrill Lynch Capital Corporation as
Syndication Agent and CIBC Oppenheimer Corp. as Documentation Agent.
+10.14 Bank Completion Guaranty, dated February 26, 1998, among the Trust Under Article Sixth u/ w/o Sigmund
Sommer, London Clubs, Aladdin Bazaar Holdings, LLC and the Bank Lenders.
+10.15 Keep-Well Agreement, dated February 26, 1998, among Aladdin Holdings, LLC, London Clubs and Aladdin
Bazaar Holdings, LLC.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ---------- --------------------------------------------------------------------------------------------------------
<C> <S>
TRIANGLE.1016 Design/Build Contract, dated December 4, 1997, between the Company and Fluor Daniel, Inc.
+10.17 Amendment No. 1 to Design/Build Contract, dated January 21, 1998, between the Company and Fluor Daniel,
Inc.
+10.18 Amendment No. 2 to Design/Build Contract, dated January 28, 1998, between the Company and Fluor Daniel,
Inc.
+10.19 Fluor Guaranty, dated December 4, 1997, between the Company and Fluor Corporation.
+10.20 Site Work, Development and Construction Agreement, dated February 26, 1998, among the Company, Aladdin
Bazaar, LLC and Aladdin Holdings, LLC.
+10.21 Construction, Operation and Reciprocal Easement Agreement, dated February 26, 1998, among the Company,
Aladdin Bazaar, LLC and Aladdin Music Holdings, LLC.
+10.22 Common Parking Area Use Agreement, dated February 26, 1998 between the Company and Aladdin Bazaar, LLC.
*10.23 Music Project Lease, dated February 26, 1998, between the Company and Aladdin Music Holdings, LLC.
+10.24 Mall Project Lease, dated February 26, 1998, between the Company and Aladdin Bazaar, LLC.
+10.25 Deed of Trust, Assignment of Rents and Leases, Fixture Filing and Security Agreement, dated February 26,
1998, made by the Company to Stewart Title of Nevada, as trustee for the benefit of the Bank of Nova
Scotia.
TRIANGLE.1026 Development Agreement, dated December 3, 1997, between the Company and Northwind Aladdin, LLC.
*10.27 Energy Service Agreement, dated , 1998, between the Company and Northwind Aladdin, LLC.
TRIANGLE.1028 Energy Lease, dated December 3, 1997, between the Company and Northwind Aladdin, LLC.
TRIANGLE.1029 Unicom Guaranty, dated December 3, 1997, between Unicom Corporation and the Company.
TRIANGLE.1030 Limited Liability Company Agreement of Aladdin Bazaar, LLC, dated September 3, 1997, between TH Bazaar
Centers Inc. and Aladdin Bazaar Holdings, LLC.
TRIANGLE.1031 First Amendment to the Limited Liability Company Operating Agreement of Aladdin Bazaar, LLC, dated
October 16, 1997.
+10.32 Music Project Memorandum of Understanding and Letter of Intent, dated September 2, 1997, between the
Company and Planet Hollywood International, Inc.
+10.33 Amendment to Music Project Memorandum of Understanding and Letter of Intent, dated October 15, 1997,
between the Company and Planet Hollywood International, Inc.
TRIANGLE.1034 GAI Contribution and Amendment Agreement, dated February 26, 1998, among the Company, Holdings and GAI,
LLC.
TRIANGLE.1035 Goeglein Contribution and Amendment Agreement, dated February 26, 1998, among the Company, Holdings and
Richard J. Goeglein.
TRIANGLE.1036 McKennon Contribution and Amendment Agreement, dated February 26, 1998, among the Company, Holdings and
James H. McKennon.
TRIANGLE.1037 Klerk Contribution and Amendment Agreement, dated February 26, 1998, among the Company, Holdings and
Cornelius T. Klerk.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ---------- --------------------------------------------------------------------------------------------------------
<C> <S>
TRIANGLE.1038 Galati Contribution and Amendment Agreement, dated February 26, 1998, among the Company, Holdings, and
Lee A. Galati.
TRIANGLE.1039 Rueda Contribution and Amendment Agreement, dated February 26, 1998, among the Company, Holdings and
Jose A. Rueda.
+10.40 GAI Consulting Agreement, dated July 1, 1997, between GAI, LLC and the Company as amended as of January
1998.
+10.41 Employment and Consulting Agreement, dated July 1, 1997, between the Company and Richard J. Goeglein as
amended as of January 1998.
+10.42 Employment Agreement, dated July 28, 1997, between the Company and James H. McKennon.
+10.43 Employment Agrement, dated July 28, 1997, between the Company and Cornelius T. Klerk.
+10.44 Employment Agreement, dated August 19, 1997, between the Company and Lee A. Galati.
+10.45 Employment Agreement, dated July 1, 1997, between the Company and Jose A. Rueda.
TRIANGLE.1046 FF&E Commitment Letter, dated January 23, 1998, between the Company and General Electric Capital
Corporation.
+10.47 Mall Commitment Letter, dated December 29, 1997, between Aladdin Bazaar, LLC and Fleet National Bank, as
Administrative Agent.
TRIANGLE.1048 Purchase Agreement, dated February 18, 1998, among Enterprises, Holdings, Capital, Aladdin Holdings,
LLC, the Trust Under Article Sixth u/w/o Sigmund Sommer, London Clubs and Merrill Lynch, Pierce, Fenner
& Smith Incorporated, Credit Suisse First Boston Corporation, CIBC Oppenheimer Corp. and Scotia Capital
Markets (USA) Inc. (the "Initial Purchasers").
+10.49 Contributed Land Appraisal prepared by HVS International.
+10.50 Second Amendment to Limited Liability Company Agreement of Aladdin Bazaar, LLC, dated May 1998.
+23.1 Consent of Arthur Andersen LLP.
TRIANGLE.232 Consent of Price Waterhouse.
+23.3 Consent of Schreck Morris (included in exhibit 5.1).
+23.4 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in exhibits 5.1 and 8.1).
TRIANGLE.235 Awareness Letter from Price Waterhouse.
</TABLE>
- ------------------------
+ Filed herewith.
* To be filed by amendment.
TRIANGLE Previously filed.
II-5
<PAGE>
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement (i) to include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933, (ii)
to reflect in the Prospectus any facts or events arising after the effective
date of the Registration Statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the Registration
Statement. Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities offered would
not exceed that which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than 20 per
cent change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement, and (iii) to include any material information with respect to the
plan for distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) To file a post-effective amendment to the registration statement to
include any financial statements required by Rule 3-19 of Regulation S-X at
the start of any delayed offering or throughout a continuous offering.
(b) The undersigned registrant hereby undertakes to supplement the
prospectus, after the expiration of the subscription period, to set forth the
results of the subscription offer, the transactions by the underwriters during
the subscription period, the amount of unsubscribed securities to be purchased
by the underwriters, and the terms of any subsequent reoffering thereof. If any
public offering by the underwriters is to be made on terms differing from those
set forth on the cover page of the prospectus, a post-effective amendment will
be filed to set forth the terms of such offering.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrants pursuant to the foregoing provisions, or otherwise, the
Registrants have been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrants of expenses
incurred or paid by a director, officer or controlling person of the Registrants
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrants will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The registrant hereby undertakes to supply by means of a post-effective
amendment all information concerning a transaction, and the company being
acquired involved therein, that was not the subject of and included in the
Registration Statement when it became effective.
II-6
<PAGE>
(d) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial BONA FIDE offering thereof.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Las Vegas,
State of Nevada on June 5, 1998.
<TABLE>
<S> <C> <C>
ALADDIN GAMING ENTERPRISES, INC.
By: /s/ Jack Sommer
-----------------------------------------
Jack Sommer
PRESIDENT/DIRECTOR
</TABLE>
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Cornelius T. Klerk and Ronald Dictrow, and each
of them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for and in his name, place and stead, in any
and all capacities to sign any or all amendments (including post-effective
amendments) to this Registration Statement and any or all other documents in
connection therewith, and to file the same, with all exhibits thereto, with the
Securities and Exchange Commission granting unto said attorneys-in-fact and
agents authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as might or could be done in person, hereby ratifying and confirming
all said attorneys-in-fact and agents or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
/s/ JACK SOMMER
- ------------------------------ President/Director June 5, 1998
Jack Sommer
/s/ RONALD DICTROW
- ------------------------------ Secretary/Director June 5, 1998
Ronald Dictrow
/s/ CORNELIUS T. KLERK
- ------------------------------ Treasurer June 5, 1998
Cornelius T. Klerk
II-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
- --------- -----
<C> <S> <C>
TRIANGLE.31 Articles of Incorporation of Aladdin Gaming Enterprises, Inc. ("Enterprises").
TRIANGLE.32 Amendment No. 1 to Articles of Incorporation of Enterprises.
TRIANGLE.33 Articles of Organization of Aladdin Gaming Holdings, LLC ("Holdings").
TRIANGLE.34 Articles of Incorporation of Aladdin Capital Corp. ("Capital").
TRIANGLE.35 Articles of Organization of Aladdin Gaming, LLC (the "Company").
TRIANGLE.36 Bylaws of Enterprises.
+3.7 Operating Agreement of Holdings.
TRIANGLE.38 Bylaws of Capital.
TRIANGLE.39 Operating Agreement of the Company.
TRIANGLE.41 Warrant Agreement, dated February 26, 1998, among Enterprises and State Street Bank and Trust
Company, as Warrant Agent (the "Warrant Agent").
TRIANGLE.42 Warrant Registration Rights Agreement dated February 26, 1998, among Enterprises and the Initial
Purchasers (as defined).
TRIANGLE.43 Equity Participation Agreement, dated February 26, 1998, among Sommer Enterprises, LLC,
Enterprises, London Clubs Nevada, Inc. ("LCNI") and the Trustee (as defined).
+5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP regarding legality of securities being
registered.
+5.2 Opinion of Schreck Morris regarding legality of the securities being registered.
+8.1 Opinion of Skadden, Arps, Slate, Meagher and Flom LLP regarding certain tax matters.
TRIANGLE.101 Indenture, dated February 26, 1998, among Holdings, Capital and State Street Bank and Trust
Company, as trustee (the "Trustee").
TRIANGLE.102 Note Registration Rights Agreement, dated February 26, 1998, among Holdings, Capital and the
Initial Purchasers.
+10.3 Noteholder Completion Guaranty, dated February 26, 1998, among the Trust Under Article Sixth
u/w/o Sigmund Sommer, London Clubs International plc ("London Clubs"), Aladdin Bazaar Holdings,
LLC and the Trustee.
+10.4 Disbursement Agreement, dated February 26, 1998, among Holdings, the Company, the Bank of Nova
Scotia, as Administrative Agent under the Bank Credit Facility, Disbursement Agent, and
Securities Intermediary, U.S. Bank National Association as Servicing Agent and the Trustee.
+10.5 The LLC Interest Pledge and Security Agreement, dated February 26, 1998, between Holdings and
the Trustee.
+10.6 The Holdings Collateral Account Agreement, dated February 26, 1998, between Holdings and the
Trustee.
TRIANGLE.107 Subsidiary Guaranty, dated February 26, 1998, among subsidiaries of London Clubs and the
Trustee.
TRIANGLE.108 Amended and Restated London Clubs Purchase Agreement, dated February 26, 1998, among LCNI,
London Clubs, Holdings, Aladdin Holdings, LLC, the Company, Sommer Enterprises, LLC and the
Trust Under Article Sixth u/w/o Sigmund Sommer.
TRIANGLE.109 Closing Schedules to Amended and Restated London Clubs Purchase Agreement.
TRIANGLE.1010 Contribution Agreement, dated February 26, 1998, among the Trust Under Article Sixth u/w/o
Sigmund Sommer, Aladdin Holdings, LLC, Sommer Enterprises, LLC, London Clubs and LCNI.
TRIANGLE.1011 Salle Privee Agreement, dated February 26, 1998, among the Company, LCNI and London Clubs.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
- --------- -----
<C> <S> <C>
10.12 [RESERVED]
+10.13 Credit Agreement, dated February 26, 1998, among the Company, a syndicate of lenders (the "Bank
Lenders"), The Bank of Nova Scotia as Administrative Agent, Merrill Lynch Capital Corporation as
Syndication Agent and CIBC Oppenheimer Corp. as Documentation Agent.
+10.14 Bank Completion Guaranty, dated February 26, 1998, among the Trust Under Article Sixth u/w/o
Sigmund Sommer, London Clubs, Aladdin Bazaar Holdings, LLC and the Bank Lenders.
+10.15 Keep-Well Agreement, dated February 26, 1998, among Aladdin Holdings, LLC, London Clubs and
Aladdin Bazaar Holdings, LLC.
TRIANGLE.1016 Design/Build Contract, dated December 4, 1997, between the Company and Fluor Daniel, Inc.
+10.17 Amendment No. 1 to Design/Build Contract, dated January 21, 1998, between the Company and Fluor
Daniel, Inc.
+10.18 Amendment No. 2 to Design/Build Contract, dated January 28, 1998, between the Company and Fluor
Daniel, Inc.
+10.19 Fluor Guaranty, dated December 4, 1997, between the Company and Fluor Corporation.
+10.20 Site Work, Development and Construction Agreement, dated February 26, 1998, among the Company,
Aladdin Bazaar, LLC and Aladdin Holdings, LLC.
+10.21 Construction, Operation and Reciprocal Easement Agreement, dated February 26, 1998, among the
Company, Aladdin Bazaar, LLC and Aladdin Music Holdings, LLC.
+10.22 Common Parking Area Use Agreement, dated February 26, 1998 between the Company and Aladdin
Bazaar, LLC.
*10.23 Music Project Lease, dated February 26, 1998, between the Company and Aladdin Music Holdings,
LLC.
+10.24 Mall Project Lease, dated February 26, 1998, between the Company and Aladdin Bazaar, LLC.
+10.25 Deed of Trust, Assignment of Rents and Leases, Fixture Filing and Security Agreement, dated
February 26, 1998, made by the Company to Stewart Title of Nevada, as trustee for the benefit of
the Bank of Nova Scotia.
TRIANGLE.1026 Development Agreement, dated December 3, 1997, between the Company and Northwind Aladdin, LLC.
*10.27 Energy Service Agreement, dated , 1998, between the Company and Northwind Aladdin, LLC.
TRIANGLE.1028 Energy Lease, dated December 3, 1997, between the Company and Northwind Aladdin, LLC.
TRIANGLE.1029 Unicom Guaranty, dated December 3, 1997, between Unicom Corporation and the Company.
TRIANGLE.1030 Limited Liability Company Agreement of Aladdin Bazaar, LLC, dated September 3, 1997, between TH
Bazaar Centers Inc. and Aladdin Bazaar Holdings, LLC.
TRIANGLE.1031 First Amendment to the Limited Liability Company Operating Agreement of Aladdin Bazaar, LLC,
dated October 16, 1997.
+10.32 Music Project Memorandum of Understanding and Letter of Intent, dated September 2, 1997, between
the Company and Planet Hollywood International, Inc.
+10.33 Amendment to Music Project Memorandum of Understanding and Letter of Intent, dated October 15,
1997, between the Company and Planet Hollywood International, Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
- --------- -----
<C> <S> <C>
TRIANGLE.1034 GAI Contribution and Amendment Agreement, dated February 26, 1998, among the Company, Holdings
and GAI, LLC.
TRIANGLE.1035 Goeglein Contribution and Amendment Agreement, dated February 26, 1998, among the Company,
Holdings and Richard J. Goeglein.
TRIANGLE.1036 McKennon Contribution and Amendment Agreement, dated February 26, 1998, among the Company,
Holdings and James H. McKennon.
TRIANGLE.1037 Klerk Contribution and Amendment Agreement, dated February 26, 1998, among the Company, Holdings
and Cornelius T. Klerk.
TRIANGLE.1038 Galati Contribution and Amendment Agreement, dated February 26, 1998, among the Company,
Holdings, and Lee A. Galati.
TRIANGLE.1039 Rueda Contribution and Amendment Agreement, dated February 26, 1998, among the Company, Holdings
and Jose A. Rueda.
+10.40 GAI Consulting Agreement, dated July 1, 1997, between GAI, LLC and the Company as amended as of
January 1998.
+10.41 Employment and Consulting Agreement, dated July 1, 1997, between the Company and Richard J.
Goeglein as amended as of January 1998.
+10.42 Employment Agreement, dated July 28, 1997, between the Company and James H. McKennon.
+10.43 Employment Agrement, dated July 28, 1997, between the Company and Cornelius T. Klerk.
+10.44 Employment Agreement, dated August 19, 1997, between the Company and Lee A. Galati.
+10.45 Employment Agreement, dated July 1, 1997, between the Company and Jose A. Rueda.
TRIANGLE.1046 FF&E Commitment Letter, dated January 23, 1998, between the Company and General Electric Capital
Corporation.
+10.47 Mall Commitment Letter, dated December 29, 1997, between Aladdin Bazaar, LLC and Fleet National
Bank, as Administrative Agent.
TRIANGLE.1048 Purchase Agreement, dated February 18, 1998, among Enterprises, Holdings, Capital, Aladdin
Holdings, LLC, the Trust Under Article Sixth u/w/o Sigmund Sommer, London Clubs and Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Credit Suisse First Boston Corporation, CIBC
Oppenheimer Corp. and Scotia Capital Markets (USA) Inc. (the "Initial Purchasers").
+10.49 Contributed Land Appraisal prepared by HVS International.
+10.50 Second Amendment to Limited Liability Company Agreement of Aladdin Bazaar, LLC, dated May 1998.
+23.1 Consent of Arthur Andersen LLP.
TRIANGLE.232 Consent of Price Waterhouse.
+23.3 Consent of Schreck Morris (included in exhibit 5.1).
+23.4 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in exhibits 5.1 and 8.1).
TRIANGLE.235 Awareness Letter from Price Waterhouse.
</TABLE>
- ------------------------
+ Filed herewith.
* To be filed by amendment.
TRIANGLE Previously filed.
<PAGE>
OPERATING AGREEMENT
OF
ALADDIN GAMING HOLDINGS, LLC,
A NEVADA LIMITED LIABILITY COMPANY
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS
1.1 Above Limits Gaming . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.2 Above Limits Gaming Losses. . . . . . . . . . . . . . . . . . . . . . .2
1.3 Above Limits Gaming Period. . . . . . . . . . . . . . . . . . . . . . .2
1.4 Above Limits Gaming Wins. . . . . . . . . . . . . . . . . . . . . . . .2
1.5 Accepting Members . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.6 Adjusted Capital Account Deficit. . . . . . . . . . . . . . . . . . . .2
1.7 Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.8 Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.9 Aladdin Development . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.10 Aladdin Gaming. . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.11 Aladdin Holdings. . . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.12 Applicable Percentage . . . . . . . . . . . . . . . . . . . . . . . . .3
1.13 Articles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.14 Assumed Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.15 Available Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.16 Bank Financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.17 Bank Lenders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
1.18 Bankruptcy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
1.19 Bazaar. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
1.20 Bazaar Lease. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
1.21 Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
1.22 Board Member. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
1.23 Board Supermajority . . . . . . . . . . . . . . . . . . . . . . . . . .4
1.24 Call. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
1.25 Capital Account . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
1.26 Capital Contribution. . . . . . . . . . . . . . . . . . . . . . . . . .5
1.27 Caused. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
1.28 Certificate of Shares . . . . . . . . . . . . . . . . . . . . . . . . .5
1.29 Change in Control . . . . . . . . . . . . . . . . . . . . . . . . . . .5
1.30 Code. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
1.31 Common Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
1.32 Completion Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . .5
1.33 Completion Guaranty Loan. . . . . . . . . . . . . . . . . . . . . . . .5
1.34 Completion Guaranty Payment . . . . . . . . . . . . . . . . . . . . . .5
1.35 Completion Guaranty Payment Due Date. . . . . . . . . . . . . . . . . .6
i
<PAGE>
1.36 Contributing Obligor. . . . . . . . . . . . . . . . . . . . . . . . . .6
1.37 Contribution Agreement. . . . . . . . . . . . . . . . . . . . . . . . .6
1.38 Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
1.39 Covered Person. . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
1.40 Credit Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . .6
1.41 Cumulative Tax Liability Account. . . . . . . . . . . . . . . . . . . .6
1.42 Delinquent Amount . . . . . . . . . . . . . . . . . . . . . . . . . . .6
1.43 Dilution Fraction . . . . . . . . . . . . . . . . . . . . . . . . . . .6
1.44 Disassociated Member. . . . . . . . . . . . . . . . . . . . . . . . . .7
1.45 Discount Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
1.46 Distribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
1.47 EBITDA Factor . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
1.48 EBITDA Shortfall Due Date.. . . . . . . . . . . . . . . . . . . . . . .7
1.49 EBITDA Shortfall Loan.. . . . . . . . . . . . . . . . . . . . . . . . .7
1.50 EBITDA Shortfall Payments.. . . . . . . . . . . . . . . . . . . . . . .7
1.51 Employment and Consulting Agreements. . . . . . . . . . . . . . . . . .7
1.52 Equity Participation Agreement. . . . . . . . . . . . . . . . . . . . .8
1.53 Event of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . .8
1.54 Exchange Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
1.55 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
1.56 Gaming Problem. . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
1.57 Gross Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . . .8
1.58 Hotel and Casino EBITDA Difference. . . . . . . . . . . . . . . . . . .9
1.59 Hotel and Casino Percentage . . . . . . . . . . . . . . . . . . . . . .9
1.60 Hotel and Casino Projected EBITDA . . . . . . . . . . . . . . . . . . .9
1.61 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
1.62 IPO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.63 IPO Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.64 Keep Well Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.65 Keep Well Due Date. . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.66 Keep Well Loan. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.67 Keep Well Payment . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.68 LCI Parent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.69 LCI Purchase Agreement. . . . . . . . . . . . . . . . . . . . . . . . 10
1.70 Majority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.71 Majority Member . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.72 Member. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.73 Member Nonrecourse Debt . . . . . . . . . . . . . . . . . . . . . . . 11
1.74 Member Nonrecourse Debt Minimum Gain. . . . . . . . . . . . . . . . . 11
1.75 Member Nonrecourse Deductions . . . . . . . . . . . . . . . . . . . . 11
1.76 Minimum Gain. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ii
<PAGE>
1.77 Mountain Spa Resort . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.78 Net Above Limits Gaming Losses. . . . . . . . . . . . . . . . . . . . 11
1.79 Nevada Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.80 Nevada Commission . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.81 Nevada Gaming Authorities . . . . . . . . . . . . . . . . . . . . . . 11
1.82 Non-Contributing Obligor. . . . . . . . . . . . . . . . . . . . . . . 12
1.83 Non-Default Keep Well Trigger . . . . . . . . . . . . . . . . . . . . 12
1.84 Non-Exercise Notice . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.85 Nonrecourse Deductions. . . . . . . . . . . . . . . . . . . . . . . . 12
1.86 Normal Gaming Limits. . . . . . . . . . . . . . . . . . . . . . . . . 12
1.87 Notice of Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.88 NRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.89 Offer Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.90 Offered Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.91 Offeror . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.92 Officers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.93 Opening Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.94 Oversubscribed Tag Along Member . . . . . . . . . . . . . . . . . . . 12
1.95 Parking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.96 Percentage Interest . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.97 Permitted Transferee. . . . . . . . . . . . . . . . . . . . . . . . . 13
1.98 Person. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.99 Preferred Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.100 Profits and Losses. . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.101 Prohibited Transferee . . . . . . . . . . . . . . . . . . . . . . . . 14
1.102 Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.103 Proportionate Percentage. . . . . . . . . . . . . . . . . . . . . . . 15
1.104 Purchase Option . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.105 Purchasing Member . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.106 Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.107 Reciprocal Easement Agreement . . . . . . . . . . . . . . . . . . . . 15
1.108 Records Office. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.109 Redevelopment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.111 Refusal Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.112 Related Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.113 Restricted Membership Interests . . . . . . . . . . . . . . . . . . . 16
1.114 Remaining Tag Along Shares. . . . . . . . . . . . . . . . . . . . . . 16
1.115 Salle Privee Agreement. . . . . . . . . . . . . . . . . . . . . . . . 16
1.116 Salle Privee Amount . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.117 Salle Privee EBITDA Difference. . . . . . . . . . . . . . . . . . . . 16
1.118 Salle Privee Facilities . . . . . . . . . . . . . . . . . . . . . . . 16
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1.119 Salle Privee Percentage . . . . . . . . . . . . . . . . . . . . . . . 16
1.120 Salle Privee Projected EBITDA . . . . . . . . . . . . . . . . . . . . 17
1.121 Second Hotel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.122 Secretary of State. . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.123 Securities Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.124 Selling Member. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.125 Series A Invested Capital.. . . . . . . . . . . . . . . . . . . . . . 17
1.126 Series A Preferred Return . . . . . . . . . . . . . . . . . . . . . . 17
1.127 Series B Preferred Shares . . . . . . . . . . . . . . . . . . . . . . 17
1.128 Series B Invested Capital . . . . . . . . . . . . . . . . . . . . . . 17
1.129 Series B Preferred Rate.. . . . . . . . . . . . . . . . . . . . . . . 17
1.130 Series B Preferred Return . . . . . . . . . . . . . . . . . . . . . . 18
1.131 Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
1.132 Shopping Center . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
1.133 Stockholders and Registration Rights Agreement. . . . . . . . . . . . 18
1.134 Subsidiary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
1.135 Substituted Member. . . . . . . . . . . . . . . . . . . . . . . . . . 18
1.136 Supermajority . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
1.137 Tag Along Members . . . . . . . . . . . . . . . . . . . . . . . . . . 18
1.138 Tag Along Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
1.139 Tag Along Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
1.140 Tag Along Period. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
1.141 Tag Along Price Per Share . . . . . . . . . . . . . . . . . . . . . . 19
1.142 Tag Along Sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
1.143 Tag Along Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
1.144 Tag Along Transferee. . . . . . . . . . . . . . . . . . . . . . . . . 19
1.145 Tax Matters Partner . . . . . . . . . . . . . . . . . . . . . . . . . 19
1.146 Timeshare Parcel. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
1.147 Total Common Shares . . . . . . . . . . . . . . . . . . . . . . . . . 19
1.148 Transfer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
1.149 Transferor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
1.150 Treasury Regulations. . . . . . . . . . . . . . . . . . . . . . . . . 19
1.151 Trigger Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
1.152 Triggering Member . . . . . . . . . . . . . . . . . . . . . . . . . . 20
1.153 Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
1.154 Ultimate Percentage Interest. . . . . . . . . . . . . . . . . . . . . 20
1.158 Upstream Notice of Offer. . . . . . . . . . . . . . . . . . . . . . . 20
1.159 Upstream Offeror. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
1.160 Upstream Ownership Interest . . . . . . . . . . . . . . . . . . . . . 20
1.161 Upstream Transferor . . . . . . . . . . . . . . . . . . . . . . . . . 20
1.162 Warrants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
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1.163 Warrant Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 21
1.164 Warrant Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE II
INTRODUCTORY MATTERS
. . . . . . . . . . . . . . . . . . . . .
2.1 Records Office. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.2 Other Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.3 Resident Agent and Registered Office. . . . . . . . . . . . . . . . . 21
2.4 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.5 No State Law Partnership; No Liability to Third Parties . . . . . . . 21
ARTICLE III
INTERESTS AND ADJUSTMENTS IN INTERESTS
3.1 Member's Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.2 Classes of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.3 Completion Guaranty Payments. . . . . . . . . . . . . . . . . . . . . 23
3.4 Keep Well Payments. . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.5 EBITDA Shortfall Payments . . . . . . . . . . . . . . . . . . . . . . 27
3.6 Other Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.7 Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.8 UCC Election. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE IV
CAPITAL ACCOUNTS
4.1 Initial Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.2 Capital Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.3 General Rules for Adjustment of Capital Accounts. . . . . . . . . . . 31
4.4 Special Rules With Respect to Capital Accounts. . . . . . . . . . . . 33
4.5 Rights With Respect to Capital; Interest. . . . . . . . . . . . . . . 33
4.6 Additional Capital Contributions. . . . . . . . . . . . . . . . . . . 33
4.7 Adjustment of Capital Accounts On Redemption of Discount Not. . . . . 33
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ARTICLE V
PROFITS AND LOSSES
5.1 Profits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.2 Losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.3 Special Allocations . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.4 Section 704(c) Allocation . . . . . . . . . . . . . . . . . . . . . . 36
5.5 Federal Income Tax. . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE VI
DISTRIBUTIONS
6.1 Tax Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.2 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.3 Limitations on Distribution . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE VII
MEMBERS
7.1 Powers of Members . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.2 Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . 39
7.3 Compensation of Members . . . . . . . . . . . . . . . . . . . . . . . 39
7.4 Action by the Members . . . . . . . . . . . . . . . . . . . . . . . . 39
7.5 Member Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.6 LCI Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.7 Meetings of Members . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.8 Waiver of Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.9 Adjourned Meetings and Notice Thereof . . . . . . . . . . . . . . . . 43
7.10 Action by Written Consent . . . . . . . . . . . . . . . . . . . . . . 43
7.11 Telephonic Meetings . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.12 Quorum. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
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ARTICLE VIII
RESIGNATION, TRANSFER OF SHARES,
CHANGE IN CONTROL, TRUST MEMBERS
8.1 Resignation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
8.2 Transfers of Interests. . . . . . . . . . . . . . . . . . . . . . . . 44
8.3 Right of First Offer and Last Refusal . . . . . . . . . . . . . . . . 44
8.4 Tag Along Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . 46
8.5 Transfers To Permitted Transferees. . . . . . . . . . . . . . . . . . 47
8.6 Transfer of Ownership Interests in Members. . . . . . . . . . . . . . 47
8.7 Call. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
8.8 Conveyance to Living Trust. . . . . . . . . . . . . . . . . . . . . . 49
8.9 Gaming Control Act. . . . . . . . . . . . . . . . . . . . . . . . . . 49
8.10 Further Restriction on Transfer of Shares . . . . . . . . . . . . . . 49
ARTICLE IX
BOARD OF MANAGERS
9.1 Board of Managers . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.2 Powers and Duties of the Board. . . . . . . . . . . . . . . . . . . . 52
9.3 Election of Officers. . . . . . . . . . . . . . . . . . . . . . . . . 52
9.4 Removal, Resignation and Vacancies. . . . . . . . . . . . . . . . . . 52
9.5 Meetings of the Board . . . . . . . . . . . . . . . . . . . . . . . . 53
9.6 Compensation of Board Members; Compensation of Officers . . . . . . . 54
9.7 Expense Reimbursements. . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE X
ACCOUNTING, RECORDS AND BANK ACCOUNTS
10.1 Records and Accounting. . . . . . . . . . . . . . . . . . . . . . . . 54
10.2 Access to Accounting Records. . . . . . . . . . . . . . . . . . . . . 54
10.3 Annual Tax Information. . . . . . . . . . . . . . . . . . . . . . . . 55
10.4 Obligations of Members to Report Allocations. . . . . . . . . . . . . 55
10.5 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
10.6 Tax Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
10.7 Taxation as a Partnership . . . . . . . . . . . . . . . . . . . . . . 55
10.8 Tax Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
vii
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ARTICLE XI
IPO
11.1 IPO Timing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
11.2 Pre-IPO Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . 56
11.3 Incorporation of Partnership. . . . . . . . . . . . . . . . . . . . . 57
ARTICLE XII
DISSOLUTION OF THE COMPANY AND
TERMINATION OF A MEMBER'S INTEREST
12.1 Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
12.2 Death of a Member; Continuation . . . . . . . . . . . . . . . . . . . 57
12.3 Company's Option To Purchase Bankrupt Member's Interest . . . . . . . 57
12.4 Members' Option to Purchase Bankrupt Member's Interest. . . . . . . . 58
12.5 Distribution on Dissolution and Liquidation . . . . . . . . . . . . . 59
ARTICLE XIII
LIABILITY, EXCULPATION AND INDEMNIFICATION
13.1 Exculpation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
13.2 Fiduciary Duty. . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
13.3 Outside Businesses. . . . . . . . . . . . . . . . . . . . . . . . . . 61
13.4 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
13.5 Indemnity for Actions By or In the Right of the Company. . . . . . . 61
13.6 Indemnity If Successful . . . . . . . . . . . . . . . . . . . . . . . 62
13.7 Determination of Right to Indemnification . . . . . . . . . . . . . . 62
13.8 Advance Payment of Expenses . . . . . . . . . . . . . . . . . . . . . 62
13.9 Other Arrangements Not Excluded . . . . . . . . . . . . . . . . . . . 63
13.10 Errors and Omissions Insurance. . . . . . . . . . . . . . . . . . . . 63
13.11 Property of the Company . . . . . . . . . . . . . . . . . . . . . . . 64
13.12 Violation of this Agreement . . . . . . . . . . . . . . . . . . . . . 64
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ARTICLE XIV
GAMING MATTERS
14.1 LICENSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
14.2 NOMINEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
14.3 GAMING PROBLEM. . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
ARTICLE XV
NON-COMPETE
15.1 LCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
15.2 SOMMER ENTERPRISES. . . . . . . . . . . . . . . . . . . . . . . . . . 66
15.3 REASONABLE TERMS. . . . . . . . . . . . . . . . . . . . . . . . . . . 66
ARTICLE XVI
MISCELLANEOUS PROVISIONS
16.1 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
16.2 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
16.3 MEMBERSHIP CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . 67
16.4 COMPLETE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . 67
16.5 AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
16.6 APPLICABLE LAW; JURISDICTION. . . . . . . . . . . . . . . . . . . . . 68
16.7 INTERPRETATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
16.8 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
16.9 FACSIMILE COPIES. . . . . . . . . . . . . . . . . . . . . . . . . . . 68
16.10 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
16.11 WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
16.12 NO THIRD PARTY BENEFICIARIES. . . . . . . . . . . . . . . . . . . . . 69
ix
<PAGE>
OPERATING AGREEMENT
OF
ALADDIN GAMING HOLDINGS, LLC,
A NEVADA LIMITED LIABILITY COMPANY
This Operating Agreement of Aladdin Gaming Holdings, LLC, a Nevada
limited liability company (the "Company"), is made and entered into as of this
26 day of February, 1998, by and between Sommer Enterprises, LLC, a Nevada
limited liability company ("Sommer Enterprises"), London Clubs Nevada Inc., a
Nevada corporation ("LCI"), Aladdin Gaming Enterprises, Inc., a Nevada
corporation ("Aladdin Enterprises"), GAI, LLC, a Nevada limited liability
company ("GAI"), and, from and after the vesting of their Interests as provided
in their respective Employment and Consulting Agreements (as herein defined),
Richard J. Goeglein ("Goeglein"), James H. McKennon ("McKennon"), Cornelius T.
Klerk ("Klerk"), Jose A. Rueda ("Rueda") and Lee Galati ("Galati")
(collectively, the "Parties").
R E C I T A L S
A. Sommer Enterprises formed the Company on December 1, 1997
pursuant to the provisions of Chapter 86 of the Nevada Revised Statutes;
B. On or prior to the date hereof the Parties have made the Capital
Contributions set forth opposite their respective names on Schedule 1 in
exchange for the number of Common Shares set forth opposite their respective
names on Schedule 1, and, to the extent that they hold Shares that have vested,
such Parties have been admitted as Members of the Company; and
C. The Parties desire by this Agreement to set forth their agreement
as to the relationships between the Company and the Members, and among the
Parties themselves and as to the conduct of the business and the internal
affairs of the Company.
THEREFORE, in consideration of the mutual covenants, agreements and
promises made herein, the Parties agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
1.1 ABOVE LIMITS GAMING. "Above Limits Gaming" means all wagers made
in the Salle Privee Facilities during the Above Limits Gaming period by any
Person who has been granted the right by LCI Parent to exceed the Normal Gaming
Limits.
1.2 ABOVE LIMITS GAMING LOSSES. "Above Limits Gaming Losses" means,
with respect to a specified Quarter, the aggregate of the amounts won by
customers from Aladdin Gaming in respect of Above Limits Gaming in such Quarter.
1.3 ABOVE LIMITS GAMING PERIOD. "Above Limits Gaming Period" means,
with respect to a particular Person, the period during which LCI Parent has
granted such Person the right to exceed the Normal Gaming Limits.
1.4 ABOVE LIMITS GAMING WINS. "Above Limits Gaming Wins" means, with
respect to a specified Quarter, the aggregate of the amounts lost by customers
to Aladdin Gaming in respect of Above Limits Gaming in such Quarter.
1.5 ACCEPTING MEMBERS. "Accepting Members" has the meaning ascribed
thereto in Section 8.3.
1.6 ADJUSTED CAPITAL ACCOUNT DEFICIT. "Adjusted Capital Account
Deficit" means, with respect to any Member, the deficit balance, if any, in such
Member's Capital Account as of the end of the relevant Fiscal Year, after giving
effect to the following adjustments:
(a) increase such Capital Account by any amounts which such
Member is obligated to contribute to the Company pursuant to the terms of this
Agreement or otherwise, or is deemed to be obligated to contribute pursuant to
Treasury Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and
(b) reduce such Capital Account by the amount of the items
described in Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
The foregoing definition of Adjusted Capital Account Deficit is
intended to comply with the provisions of Treasury Regulations Section
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
1.7 AFFILIATE. "Affiliate" means, with respect to a specified
Person, any other Person who or which is (a) the principal of the specified
Person, (b) directly or indirectly
2
<PAGE>
Controlling, Controlled by or under common Control with the specified Person,
or (c) any member, director, officer, manager, relative or spouse of the
specified Person; PROVIDED that, in no event shall (i) the holders of Warrants
or Warrant Shares be Affiliates of Sommer Enterprises by reason of ownership of
such Warrants or Warrant Shares or (ii) Goeglein or GAI, LLC be Affiliates of
Sommer Enterprises; and PROVIDED further that immediate family members of Viola
Sommer shall be deemed to be Affiliates of Sommer Enterprises, Aladdin Holdings
and the Trust.
1.8 AGREEMENT. "Agreement" means this Operating Agreement, as
amended from time to time.
1.9 ALADDIN DEVELOPMENT. "Aladdin Development" means the land and
existing improvements on an approximately 35 acre site located at 3667 Las Vegas
Boulevard South, Las Vegas, Nevada.
1.10 ALADDIN GAMING. "Aladdin Gaming" means Aladdin Gaming, LLC, a
Nevada limited liability company.
1.11 ALADDIN HOLDINGS. "Aladdin Holdings" means Aladdin Holdings,
LLC, a Delaware limited liability company.
1.12 APPLICABLE PERCENTAGE. "Applicable Percentage" has the meaning
ascribed thereto in Section 8.3.
1.13 ARTICLES. "Articles" means the Articles of Organization of the
Company, as amended from time to time.
1.14 ASSUMED RATE. "Assumed Rate" shall initially mean 40%. The
Board may adjust this rate upward or downward from time to time to avoid any
material discrepancy between the prevailing Assumed Rate and the effective
average rate of tax applicable to taxable income allocated from the Company to
Sommer Enterprises or LCI (whichever is higher). For this purpose, the
effective average rate of tax of Sommer Enterprises or any other pass-through
entity for tax purposes shall be determined by reference to the Members thereof.
1.15 AVAILABLE CASH. "Available Cash" means cash available in the
accounts of the Company, less reasonable reserves established by the Board based
on an assessment of the Company's needs for the payment of Company expenses,
operations and contingencies.
1.16 BANK FINANCING. "Bank Financing" means the financing under a
senior credit facility in the amount of $410 million effective as of the date
hereof between Aladdin Gaming as borrower and the Bank Lenders.
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1.17 BANK LENDERS. "Bank Lenders" means a syndicate of lenders,
including The Bank of Nova Scotia, Canadian Imperial Bank of Commerce and
Merrill Lynch Capital Corporation.
1.18 BANKRUPTCY. "Bankruptcy" means, and a Member shall be referred
to as a "Bankrupt Member" upon, (a) the entry of a decree or order for relief
against the Member by a court of competent jurisdiction in any voluntary or
involuntary case brought by or against the Member under any bankruptcy,
insolvency or similar law (collectively, "Debtor Relief Laws") generally
affecting the right of creditors and relief of debtors now or hereafter in
effect; (b) the appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator or other similar agent under applicable Debtor Relief Laws
for the Member or for any substantial part of the Member's assets or property;
(c) the ordering of the winding up or liquidation of the Member's affairs; (d)
the filing of a petition by or against the Member in any such voluntary or
involuntary bankruptcy case, which petition remains not dismissed for a period
of 180 days or which is not dismissed or suspended pursuant to Section 305 of
the Federal Bankruptcy Code (or any corresponding provision of any future United
States Bankruptcy Law); (e) the consent by the Member to the entry of an order
for relief in a voluntary or involuntary case under any Debtor Relief Laws or to
the appointment of, or the taking of any possession by, a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar agent under any
applicable Debtor Relief Laws for the Member or for any substantial part of the
Member's assets or property; or (f) the making by the Member of any general
assignment for the benefit of the Member's creditors.
1.19 BAZAAR. "Bazaar" means Aladdin Bazaar, LLC, a Nevada limited
liability company.
1.20 BAZAAR LEASE. "Bazaar Lease" means the Lease dated on or about
the date hereof between Aladdin Gaming and Bazaar.
1.21 BOARD. "Board" means the Board of Managers of the Company, as
provided for in Section 9.1.
1.22 BOARD MEMBER. "Board Member" means a member of the Board.
1.23 BOARD SUPERMAJORITY. "Board Supermajority" means an affirmative
vote at a duly constituted meeting of the Board of at least eighty percent of
the Board Members.
1.24 CALL. "Call" has the meaning ascribed thereto in Section 8.7.
1.25 CAPITAL ACCOUNT. "Capital Account" means, with respect to any
Member or Disassociated Member, the capital account maintained for such Member
or Disassociated Member as set forth in Section 4.2 after giving effect to the
adjustments set forth in Sections 4.3 and 4.4.
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1.26 CAPITAL CONTRIBUTION. "Capital Contribution" means the total
amount of cash and the agreed fair market value (net of liabilities) of any
property contributed at any time to the capital of the Company by a Member.
1.27 CAUSED. "Caused" means, with respect to a Person, that such
Person has caused an Event of Default by breach or non-performance of a term,
provision or covenant of any of the Keep Well Agreement, a Completion Guaranty
or the Credit Agreement; PROVIDED that a Person shall not be found to have
Caused an Event of Default as a result of such Person's or its Affiliates'
Control of the Company or Aladdin Gaming.
1.28 CERTIFICATE OF SHARES. "Certificate of Shares" means a
certificate of the Company representing Shares in the Company.
1.29 CHANGE IN CONTROL. "Change in Control" means, in respect of a
Member, the occurrence of circumstances such that a Prohibited Transferee,
directly or indirectly, Controls such Member.
1.30 CODE. "Code" means the Internal Revenue Code of 1986, as amended
from time to time, or any corresponding United States federal tax statute
enacted after the date of this Agreement. A reference to a specific section of
the Code refers not only to such specific section but also to any corresponding
provision of any United States federal tax statute enacted after the date of
this Agreement, as such specific section or corresponding provision is in effect
on the date of application of the provisions of this Agreement containing such
reference.
1.31 COMMON SHARES. "Common Shares" means Shares with rights and
obligations as provided in Section 3.2(b).
1.32 COMPLETION GUARANTY. "Completion Guaranty" means (a) the
Guaranty of Completion and Performance dated as of the date hereof, made by the
Trust, Aladdin Bazaar Holdings, LLC and LCI Parent in favor of the Bank Lenders,
(b) the Guaranty of Completion and Performance dated as of the date hereof, made
by the Trust, Aladdin Bazaar Holdings, LLC and LCI Parent in favor of the
holders of the Discount Notes and (c) a Guaranty of Completion and Performance
to be entered into after the date hereof by the Trust, Aladdin Bazaar Holdings,
LLC and LCI Parent in favor of a Contingent Guarantor (as shall be defined in
such Guaranty of Completion and Performance).
1.33 COMPLETION GUARANTY LOAN. "Completion Guaranty Loan" has the
meaning ascribed thereto in Section 3.3.
1.34 COMPLETION GUARANTY PAYMENT. "Completion Guaranty Payment" has
the meaning ascribed thereto in Section 3.3.
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1.35 COMPLETION GUARANTY PAYMENT DUE DATE. "Completion Guaranty
Payment Due Date" has the meaning ascribed thereto in Section 3.3.
1.36 CONTRIBUTING OBLIGOR. "Contributing Obligor" has the meaning
ascribed thereto in Sections 3.3, 3.4 and 3.5.
1.37 CONTRIBUTION AGREEMENT. "Contribution Agreement" means the
Contribution Agreement dated as of the date hereof between the Trust, Aladdin
Holdings, Sommer Enterprises, LCI and LCI Parent.
1.38 CONTROL. "Control" means the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of a
Person, whether through ownership of voting securities, by contract or
otherwise, and "Controlling" and "Controlled" shall have corresponding meanings.
1.39 COVERED PERSON. "Covered Person" means (a) a Member or any
Affiliate of a Member, (b) any officers, directors, shareholders, members,
controlling Persons, partners, employees, representatives or agents of a Member
or a Board Member, (c) any Board Member, officer, employee, representative or
agent of the Company or its Affiliates, or (d) any Person who was, at the time
of the act or omission in question, a Person described in any of the preceding
clauses (a) through (c).
1.40 CREDIT AGREEMENT. "Credit Agreement" means the Credit Agreement
in respect of the Bank Financing dated as of the date hereof between Aladdin
Gaming and the Bank Lenders.
1.41 CUMULATIVE TAX LIABILITY ACCOUNT. "Cumulative Tax Liability
Account" means, with respect to each Member for any Quarter, the product of (a)
the Assumed Rate and (b) the excess of the cumulative amount of federal taxable
income or gain expected to be allocated to such Member in respect of its Common
Shares for such Quarter and actually allocated or expected to be allocated for
all prior Quarters pursuant to Article V, over the cumulative amount of federal
taxable loss or deduction allocated to such Member in respect of its Common
Shares for such Quarter and actually allocated or expected to be allocated for
all prior Quarters pursuant to Article V.
1.42 DELINQUENT AMOUNT. "Delinquent Amount" has the meanings ascribed
thereto in Sections 3.3, 3.4 and 3.5.
1.43 DILUTION FRACTION. "Dilution Fraction" has the meaning ascribed
thereto in Sections 3.4 and 3.5.
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1.44 DISASSOCIATED MEMBER. "Disassociated Member" means the
transferee of a Member's Shares, or a personal representative or heir or legatee
of such Member, who is not admitted to the Company as a Member.
1.45 DISCOUNT NOTES. "Discount Notes" means 13.5% senior discount
notes, accreting to an aggregate principal amount of $221.5 million at maturity,
due 2010 issued by the Company and Aladdin Capital Corp. on or about the date
hereof.
1.46 DISTRIBUTION. "Distribution" means a distribution of cash or
other property made by the Company with respect to Shares, including upon
dissolution or liquidation of the Company or in respect of a redemption of
Shares, but shall not mean payments or transfers of cash or other property to
Members for reasons other than their ownership of Shares.
1.47 EBITDA FACTOR. "EBITDA Factor" means, with respect to a
specified Quarter, a factor equal to 1.00 minus the fraction the numerator of
which is the Hotel and Casino Percentage for such Quarter and the denominator of
which is the Salle Privee Percentage for such Quarter; PROVIDED that if the
Salle Privee Percentage exceeds the Hotel and Casino Percentage for that
Quarter, the EBITDA Factor shall be zero.
1.48 EBITDA SHORTFALL DUE DATE. "EBITDA Shortfall Due Date" has the
meaning ascribed thereto in Section 3.5.
1.49 EBITDA SHORTFALL LOAN. "EBITDA Shortfall Loan" has the meaning
ascribed thereto in Section 3.5.
1.50 EBITDA SHORTFALL PAYMENTS. "EBITDA Shortfall Payments" has the
meaning ascribed thereto in Section 3.5.
1.51 EMPLOYMENT AND CONSULTING AGREEMENTS. "Employment and Consulting
Agreements" means (a) the Employment and Consulting Agreement effective January
1, 1997 entered into by and among Goeglein, the Company, Aladdin Gaming and
Aladdin Holdings as amended on January 30, 1998 and February 26, 1998, (b) the
Consulting Agreement effective January 1, 1997 entered into by and among GAI,
the Company, Aladdin Gaming and Aladdin Holdings as amended on January 30, 1998
and February 26, 1998, (c) the Employment Agreement effective April 15, 1997
entered into by and among McKennon, the Company, Aladdin Gaming and Aladdin
Holdings as amended on February 26, 1998, (d) the Employment Agreement effective
July 1, 1997 entered into by and among Klerk, the Company, Aladdin Gaming and
Aladdin Holdings as amended on February 26, 1998, (e) the Employment Agreement
effective July 1, 1997 entered into by and among Rueda, the Company, Aladdin
Gaming and Aladdin Holdings as amended on February 26, 1998, (f) the Employment
Agreement effective July 1, 1997 entered into by and among Galati, the Company,
Aladdin Gaming and Aladdin Holdings as amended on February 26, 1998.
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1.52 EQUITY PARTICIPATION AGREEMENT. "Equity Participation Agreement"
means the Equity Participation Agreement dated as of the date hereof among
Sommer Enterprises, Aladdin Enterprises, LCI and State Street Bank and Trust
Company as warrant agent.
1.53 EVENT OF DEFAULT. "Event of Default" means any of (a) an Event
of Default under the Credit Agreement, (b) a Specified Event under any
Completion Guaranty or the Keep Well Agreement or (c) any breach or default
under the Keep Well Agreement or any Completion Guaranty, in each case pursuant
to which the Bank Lenders, the holders of the Discount Notes or the Contingent
Guarantor (as defined in the relevant Completion Guaranty) have exercised any
rights or remedies under any of the Credit Agreement, a Completion Guaranty or
the Keep Well Agreement, but shall exclude any of the foregoing events which
only gives rise to a payment by LCI Parent pursuant to Section 13 of the Keep
Well Agreement.
1.54 EXCHANGE ACT. "Exchange Act" means the Securities Exchange Act
of 1934, as amended.
1.55 FISCAL YEAR. "Fiscal Year" means the period commencing on
January 1 of each calendar year and terminating on December 31 of the same
calendar year, or such other period as determined by the Board and permitted by
the Code, the Treasury Regulations or any other applicable laws.
1.56 GAMING PROBLEM. "Gaming Problem" means circumstances such that
any Member, any Affiliate of any Member or any Related Party of any Member or of
any Affiliate of any Related Party may preclude or materially delay, impede or
impair the ability of the Company or Aladdin Gaming to obtain or retain any
licenses required by the Nevada Gaming Authorities for the conduct of business
of the Company, Aladdin Gaming and their Subsidiaries, or such as may result in
the imposition of materially burdensome terms and conditions on any such
license.
1.57 GROSS ASSET VALUE. "Gross Asset Value" means, with respect to
any Company asset, the asset's adjusted basis for federal income tax purposes,
except as follows:
(a) the initial Gross Asset Value of any asset contributed by a
Member to the Company shall be the fair market value of such asset on the date
of contribution; PROVIDED, that the Gross Asset Value of any asset (other than
cash) contributed by a Member shall be as set forth on Schedule 1;
(b) the Gross Asset Value of all Company assets shall be
adjusted to equal their respective fair market values as of the following times:
(i) the acquisition of an additional Interest by any new or existing Member in
exchange for more than a de minimis Capital Contribution; (ii) the distribution
by the Company to a Member of more than a de minimis amount of Company property
as consideration for an Interest; and (iii) the liquidation of the Company
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within the meaning of Treasury Regulations Section 1.704-1(b)(2)(ii)(g);
PROVIDED, however, that the adjustment pursuant to clauses (i) and (ii) shall be
made only if the Board reasonably determines that such adjustments are necessary
or appropriate to reflect the relative economic interests of the Members in the
Company;
(c) the Gross Asset Value of any Company asset distributed to
any Member shall be adjusted to equal the fair market value of such asset on the
date of the Distribution; and
(d) the Gross Asset Values of the Company assets shall be
increased (or decreased) to reflect any adjustments to the adjusted basis of
such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to
the extent that such adjustments are taken into account in determining Capital
Accounts pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m);
PROVIDED, however, that Gross Asset Values shall not be adjusted pursuant to
this paragraph (d) to the extent the Board determines that an adjustment
pursuant to paragraph (b) is necessary or appropriate in connection with a
transaction that would otherwise result in an adjustment pursuant to this
paragraph (d).
If the Gross Asset Value of an asset has been determined or adjusted
pursuant to paragraphs (a), (b) or (d) above, such Gross Asset Value shall
thereafter be adjusted by the depreciation taken into account with respect to
such asset for purposes of computing Profits and Losses.
1.58 HOTEL AND CASINO EBITDA DIFFERENCE. "Hotel and Casino EBITDA
Difference" means, with respect to a specified Quarter, (a) the Hotel and Casino
Projected EBITDA for such Quarter, less (b) the EBITDA (as determined in
accordance with the Keep Well Agreement) attributable to the Aladdin Hotel and
Casino (exclusive of the Salle Privee Facilities) for such Quarter; PROVIDED
that if such amount is negative, the Hotel and Casino EBITDA Difference shall be
zero.
1.59 HOTEL AND CASINO PERCENTAGE. "Hotel and Casino Percentage"
means, with respect to a specified Quarter, the fraction, expressed as a
percentage, the numerator of which is the Hotel and Casino EBITDA Difference for
such Quarter and the denominator of which is the Hotel and Casino Projected
EBITDA for such Quarter.
1.60 HOTEL AND CASINO PROJECTED EBITDA. "Hotel and Casino Projected
EBITDA" means, with respect to a specified Quarter, the projected EBITDA for the
Aladdin Hotel and Casino (exclusive of the Salle Privee Facilities) for such
Quarter, as set forth on Schedule 2.
1.61 INTEREST. "Interest" means the entire ownership interest of a
Member in the Company at any time, including the right of such Member to any and
all benefits to which a
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Member may be entitled as provided under the NRS and in this Agreement and
includes ownership interests in respect of both Common Shares and Preferred
Shares.
1.62 IPO. "IPO" means the initial underwritten offering pursuant to
which common shares of IPO Corporation become registered under Section 12(g) of
the Exchange Act.
1.63 IPO CORPORATION. "IPO Corporation" means the entity which itself
or through its Subsidiaries carries on the business of the Aladdin Hotel and
Casino and whose common shares become registered under Section 12(g) of the
Exchange Act in connection with the IPO.
1.64 KEEP WELL AGREEMENT. "Keep Well Agreement" means the Keep-Well
Agreement dated as of the date hereof made by Aladdin Holdings, Aladdin Bazaar
Holdings, LLC and LCI Parent in respect of the Bank Financing in favor of the
Bank Lenders.
1.65 KEEP WELL DUE DATE. "Keep Well Due Date" has the meaning
ascribed thereto in Section 3.4.
1.66 KEEP WELL LOAN. "Keep Well Loan" has the meaning ascribed
thereto in Section 3.4.
1.67 KEEP WELL PAYMENT. "Keep Well Payment" has the meaning ascribed
thereto in Section 3.4.
1.68 LCI PARENT. "LCI Parent" means London Clubs International,
p.l.c., a company registered in England and Wales.
1.69 LCI PURCHASE AGREEMENT. "LCI Purchase Agreement" means the
Purchase Agreement dated as of September 24, 1997, as amended on October 16,
1997, November 18, 1997, December 1, 1997 and February 16, 1998 and amended and
restated on February 26, 1998 among the Company, Aladdin Gaming, LCI, LCI
Parent, Sommer Enterprises, the Trust and Aladdin Holdings.
1.70 MAJORITY. "Majority" means an affirmative vote or consent of the
Member or Members owning an aggregate of more than fifty percent of the
Percentage Interests.
1.71 MAJORITY MEMBER. "Majority Member" means either (if any) (a)
Sommer Enterprises, if designees of Sommer Enterprises (whether through Aladdin
Enterprises appointing its designees pursuant to Section 9.1 or otherwise)
constitute a majority of the Board or (b) LCI, if designees of LCI (whether
through Aladdin Enterprises appointing its designees pursuant to Section 9.1 or
otherwise) constitute a majority of the Board.
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1.72 MEMBER. "Member" means a Person who has been admitted to the
Company as a member in accordance with the NRS and this Agreement.
1.73 MEMBER NONRECOURSE DEBT. "Member Nonrecourse Debt" has the
meaning set forth in Treasury Regulations Section 1.704-2(b)(4) for "partner
non-recourse debt".
1.74 MEMBER NONRECOURSE DEBT MINIMUM GAIN. "Member Nonrecourse Debt
Minimum Gain" means an amount, with respect to each Member Nonrecourse Debt,
equal to the Minimum Gain that would result if such Member Nonrecourse Debt were
treated as a nonrecourse liability of the Company, determined in accordance with
Treasury Regulations Sections 1.704-2(i)(3).
1.75 MEMBER NONRECOURSE DEDUCTIONS. "Member Nonrecourse Deductions"
has the meaning set forth in Treasury Regulations Sections 1.704-2(i)(l) and
1.704-2(i)(2) for "partner non-recourse deductions".
1.76 MINIMUM GAIN. "Minimum Gain" means the amount determined by
computing, with respect to each nonrecourse liability of the Company, the amount
of gain (of whatever character), if any, that would be realized by the Company
if it disposed (in a taxable transaction) of the Property subject to such
liability in full satisfaction thereof, and by then aggregating the amounts so
computed as set forth in Treasury Regulations Sections 1.704-2(b)(2) and
1.704-2(d).
1.77 MOUNTAIN SPA RESORT. "Mountain Spa Resort" means the hotel, spa
and casino resort being developed by Mountain Spa Development, Inc. and its
Affiliates known as the "Mountain Spa Resort" located in Las Vegas, Nevada.
1.78 NET ABOVE LIMITS GAMING LOSSES. "Net Above Limits Gaming Losses"
means, with respect to a specified Quarter, the amount, if any, by which Above
Limits Gaming Losses exceeds Above Limits Gaming Wins for such Quarter.
1.79 NEVADA ACT. "Nevada Act" means the Nevada Gaming Control Act (or
any successor statute), and any rules or regulations promulgated thereunder.
1.80 NEVADA COMMISSION. "Nevada Commission" means the Nevada Gaming
Commission.
1.81 NEVADA GAMING AUTHORITIES. "Nevada Gaming Authorities" means the
Nevada Commission, the Nevada State Gaming Control Board and any other
applicable governmental or administrative state or local agency involved in the
regulation of gaming or gaming activities in the State of Nevada.
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1.82 NON-CONTRIBUTING OBLIGOR. "Non-Contributing Obligor" has the
meanings ascribed thereto in Sections 3.3, 3.4 and 3.5.
1.83 NON-DEFAULT KEEP WELL TRIGGER. "Non-Default Keep Well Trigger"
means the occurrence of payments pursuant to the Keep Well Agreement, exclusive
of any and all Salle Privee Amounts, (a) exceeding $8.125 million in each of two
successive Quarters, (b) exceeding in the aggregate $18.28 million over three or
fewer successive Quarters, or (iii) exceeding in the aggregate $30.0 million
over four or fewer successive Quarters.
1.84 NON-EXERCISE NOTICE. "Non-Exercise Notice" has the meaning
ascribed thereto in Section 12.3.
1.85 NONRECOURSE DEDUCTIONS. "Nonrecourse Deductions" has the meaning
set forth in Treasury Regulations Section 1.704-2(b)(1) and 1.704-2(c).
1.86 NORMAL GAMING LIMITS. "Normal Gaming Limits" means the gaming
limits as established from time to time by Aladdin Gaming and LCI Parent in
respect of the Salle Privee Facilities.
1.87 NOTICE OF OFFER. "Notice of Offer" has the meaning ascribed
thereto in Section 8.3.
1.88 NRS. "NRS" means the Nevada Revised Statutes, as amended from
time to time.
1.89 OFFER PRICE. "Offer Price" has the meaning ascribed thereto in
Section 8.3.
1.90 OFFERED SHARES. "Offered Shares" has the meaning ascribed
thereto in Section 8.3
1.91 OFFEROR. "Offeror" has the meaning ascribed thereto in Section
8.3.
1.92 OFFICERS. "Officers" means the officers of the Company, as
elected by the Board from time to time.
1.93 OPENING DATE. "Opening Date" means the date of the opening of
the Aladdin Hotel and Casino after completion of the Redevelopment.
1.94 OVERSUBSCRIBED TAG ALONG MEMBER. "Oversubscribed Tag Along
Member" has the meaning ascribed thereto in Section 8.4.
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1.95 PARKING. "Parking" means the multi-level parking structure and
other parking areas for approximately 4,800 motor vehicles to be developed by
Bazaar and the Company as part of the Redevelopment.
1.96 PERCENTAGE INTEREST. "Percentage Interest" means, with respect
to a specified Member, the proportionate share of such Member's Common Shares in
the Company, computed by dividing the number of Common Shares held by such
Member by the Total Common Shares.
1.97 PERMITTED TRANSFEREE. "Permitted Transferee" means, with respect
to a particular Member, a Person other than a Prohibited Transferee who is (a)
an Affiliate of the Member which, other than in respect of immediate family
members of Viola Sommer and Jack Sommer, is approved by the other Members in
writing, such approval not to be unreasonably withheld or delayed, (b) a wholly
owned subsidiary of the Member, (c) another Member (other than Goeglein,
McKennon, Klerk, Rueda and Galati) or (d) any other Person approved in writing
by all the other holders of Common Shares.
1.98 PERSON. "Person" means a natural person, any form of business or
social organization and any other nongovernmental legal entity, whether domestic
or foreign, including, but not limited to, a corporation, partnership,
association, trust, unincorporated organization, estate or limited liability
company.
1.99 PREFERRED SHARES. "Preferred Shares" means Series A Preferred
Shares or Series B Preferred Shares, as the context requires.
1.100 PROFITS AND LOSSES. "Profits" and "Losses" mean, for any
applicable period, an amount equal to the Company's taxable income or loss for
such year or period, determined in accordance with Code Section 703(a) (for this
purpose, all items of income, gain, loss, or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in taxable
income or loss), with the following adjustments:
(a) any income of the Company that is exempt from gross income
for federal income tax purposes and not otherwise taken into account in
computing Profits or Losses shall be included in computing Profits or Losses;
(b) any expenditures of the Company that are described in Code
Section 705(a)(2)(B) or that are treated as expenditures described in that Code
Section pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(i) and not
otherwise taken into account in computing Profits or Losses shall reduce Profits
or Losses;
(c) in the event that the Gross Asset Value of any Company asset
is adjusted pursuant to clause (b), (c) or (d) of the definition thereof, such
adjustment shall be taken
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into account as gain or loss from disposition of such asset for purposes of
computing Profits and Losses;
(d) gain or loss resulting from a disposition of property with
respect to which gain or loss has been recognized for federal income tax
purposes shall be computed by reference to the Gross Asset Value of the property
disposed of, notwithstanding that the adjusted tax basis of such property
differs from such value;
(e) an amount equal to the depreciation, depletion,
amortization, and gain or loss or other cost recovery reduction allowable with
respect to an asset for such Fiscal Year or other period, determined in a manner
consistent with Treasury Regulations Section 1.704-1(b)(2)(iv)(g) shall be taken
into account in computing Profits or Losses; and
(f) notwithstanding any other provisions of this definition, any
items of income, gain, loss or deduction which are specifically allocated shall
not be taken into account in computing Profits or Losses.
1.101 PROHIBITED TRANSFEREE. "Prohibited Transferee" means (a)
any owner, operator or manager of a hotel or casino competitive with Aladdin
Gaming in locations where Aladdin Gaming or any of its Affiliates has hotel or
casino operations (other than Viola Sommer and Jack Sommer and their immediate
family members, Sommer Enterprises and its Affiliates or LCI and its
Affiliates), (b) any "non-profit" or "not-for-profit" corporation, association,
trust, fund, foundation or other similar entity organized and operated
exclusively for charitable purposes that qualifies as a tax-exempt entity under
applicable federal and state tax law or corresponding foreign law, (c) any
federal, state, local or foreign governmental agency, instrumentality or other
similar entity, (d) any Person primarily engaged in the business of owning or
operating a casino or other similar type of gambling facility (other than Viola
Sommer and Jack Sommer and their immediate family members, Sommer Enterprises
and its Affiliates or LCI and its Affiliates), (e) any Person that has been
convicted of a felony, (f) any Person regularly engaged in or affiliated with
the production or distribution of alcoholic beverages, (g) any Person who has
been found unsuitable or has withdrawn an application to be found suitable by
the Nevada Gaming Authorities, (h) FOCUS 2000, Inc. or the then current owner or
lessee (unless such owner or lessee is an Affiliate of a Member) of the real
property located at the northeast corner of Las Vegas Boulevard and Harmon
Avenue, in Las Vegas, Nevada, or (i) any Person if the consummation of a
Transfer to such Person would result in a breach of or violation in any transfer
restrictions contained in any loan documentation (including the Completion
Guaranty and the Keep Well Agreement) relative to any indebtedness encumbering
all or any portion of the Aladdin Development, and such transfer restrictions
are not waived by the applicable lender(s).
1.102 PROPERTY. "Property" means all assets of the Company,
including all real, personal and intangible property, or any portion thereof.
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1.103 PROPORTIONATE PERCENTAGE. "Proportionate Percentage" means,
as to each Tag Along Member, the quotient obtained (expressed as a percentage)
by dividing the number of Common Shares owned by such Tag Along Member by the
aggregate number of Common Shares owned by all Tag Along Members.
1.104 PURCHASE OPTION. "Purchase Option" has the meaning ascribed
thereto in Section 12.3.
1.105 PURCHASING MEMBER. "Purchasing Member" has the meaning
ascribed thereto in Section 12.4.
1.106 QUARTER. "Quarter" means any three month period commencing
on January 1, April 1, July 1 or October 1 of any year during the term of this
Agreement.
1.107 RECIPROCAL EASEMENT AGREEMENT. "Reciprocal Easement
Agreement" means the Construction, Operation and Reciprocal Easement Agreement
by and among Aladdin Gaming, Bazaar and Aladdin Music, LLC dated on or about the
date hereof.
1.108 RECORDS OFFICE. "Records Office" means the records office
of the Company maintained in the State of Nevada.
1.109 REDEVELOPMENT. "Redevelopment" means (a) the redevelopment
of the existing Aladdin hotel and casino to include a total of approximately
2,600 rooms and approximately 116,000 square feet of main casino space; (b) the
development of the Shopping Center and the Parking; (c) the development of the
Salle Privee Facilities; and (d) the construction, fitting out and furnishing of
all or any part of the foregoing.
1.110 REDEVELOPMENT DOCUMENT. "Redevelopment Document" means (a)
any and all material contracts and agreements relating to the construction phase
of the Redevelopment or any part thereof, (b) any and all material contracts and
agreements relating to the financing of the Redevelopment or any part thereof,
(c) any and all budgets relating to the construction phase of the Redevelopment
or any part thereof and (d) any and all material plans and specifications
relating to the Redevelopment or any part thereof.
1.111 REFUSAL PERIOD. "Refusal Period" has the meaning ascribed
thereto in Section 8.3.
1.112 RELATED PARTY. "Related Party" means, in respect of a
Member, its Affiliates, and such Member's and its Affiliates' respective
shareholders, partners, members, directors, managers and officers.
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1.113 RESTRICTED MEMBERSHIP INTERESTS. "Restricted Membership
Interests" means any unvested Interests issued pursuant to the Employment and
Consulting Agreements.
1.114 REMAINING TAG ALONG SHARES. "Remaining Tag Along Shares"
has the meaning ascribed thereto in Section 8.4.
1.115 SALLE PRIVEE AGREEMENT. "Salle Privee Agreement" means the
agreement dated as of the date hereof between LCI, LCI Parent and Aladdin Gaming
with respect to the construction, operation, maintenance and marketing of the
Salle Privee Facilities.
1.116 SALLE PRIVEE AMOUNT. "Salle Privee Amount" means with
respect to a specified Quarter, an amount equal to the product of (a) the Salle
Privee EBITDA Difference for such Quarter and (b) the EBITDA Factor for such
Quarter.
1.117 SALLE PRIVEE EBITDA DIFFERENCE. The "Salle Privee EBITDA
Difference" means, with respect to a specified Quarter, the (a) the Salle Privee
Projected EBITDA for such Quarter, less (b) the EBITDA (as determined in
accordance with the Keep Well Agreement) attributable to the Salle Privee
Facilities for such Quarter, after deducting or excluding therefrom, as the case
may be, any Net Above Limits Gaming Losses for such Quarter which LCI Parent has
paid (or, to the extent acceptable to the Bank Lenders, guaranteed) pursuant to
the Salle Privee Agreement; PROVIDED that, if such amount is negative, the Salle
Privee EBITDA Difference shall be zero.
1.118 SALLE PRIVEE FACILITIES. "Salle Privee Facilities" means
facilities open to the public at large, consisting of (a) a gaming facility,
containing approximately 20 to 30 high limit tables and approximately 100 high
limit slot devices, located on the mezzanine level directly above the main
gaming floor of the Aladdin hotel and casino;(b) a super-premium gourmet
restaurant facility, located adjacent to and as part of the gaming facility of
the Salle Privee Facilities and containing a separate kitchen, a bar,
approximately 25 dining tables inside the restaurant, as well as several
additional dining tables located in a roof garden accessible through the
restaurant;(c) an exclusive hospitality facility comprising approximately 25
double-module luxury suites, 5 triple-module suites, a concierge facility and
guest bar and lounge, to be located in the main tower of the Aladdin hotel and
casino;(d) a separate entrance and reception area for guests of the Salle Privee
Facilities, offering secure and discrete access for arrivals and departures; and
(e) vertical and horizontal circulation infrastructure providing for private
elevator access to the hospitality facility and private corridor access from the
hospitality facility to the gaming facility of the Salle Privee Facilities.
1.119 SALLE PRIVEE PERCENTAGE. "Salle Privee Percentage" means,
with respect to a specified Quarter, the fraction, expressed as a percentage,
the numerator of which is the Salle Privee EBITDA Difference for such Quarter
and the denominator of which is the Salle Privee Projected EBITDA for such
Quarter.
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1.120 SALLE PRIVEE PROJECTED EBITDA. "Salle Privee Projected
EBITDA" means, with respect to a specified Quarter, projected EBITDA for the
Salle Privee Facilities for the applicable Quarter, as set forth on Schedule 3.
1.121 SECOND HOTEL. "Second Hotel" means a second hotel and
casino separately themed to the Aladdin hotel and casino to be developed on the
Aladdin Development with approximately 1,000 rooms and approximately 50,000
square feet of casino space.
1.122 SECRETARY OF STATE. "Secretary of State" means the office
of the Nevada Secretary of State.
1.123 SECURITIES ACT. "Securities Act" means the Securities Act
of 1933, or any similar federal statute, and the rules and regulations of the
Securities and Exchange Commission thereunder, all as shall be in effect at the
time.
1.124 SELLING MEMBER. "Selling Member" has the meaning ascribed
thereto in Section 8.4.
1.125 SERIES A INVESTED CAPITAL. "Series A Invested Capital"
means, with respect to each Member, the cumulative capital contributions of that
Member in respect of the Series A Preferred Shares as reflected on Schedule 1,
as the same may be amended from time to time, less cumulative amounts
distributed pursuant to Section 6.2(b).
1.126 SERIES A PREFERRED RETURN. "Series A Preferred Return"
means, as of any date of determination, with respect to a holder of Series A
Preferred Shares, an amount equal to twelve percent per annum, cumulative and
compounded semi-annually, on the amount of the holder's Series A Invested
Capital, from the date of the initial Capital Contribution in respect of such
Series A Preferred Shares to the date of determination (taking into account, as
appropriate, payments pursuant to Section 6.2(a) with respect to such Series A
Preferred Return).
1.127 SERIES B PREFERRED SHARES. "Series B Preferred Shares"
means cumulative and compounding preferred Shares with rights and obligations as
provided in Section 3.2(d).
1.128 SERIES B INVESTED CAPITAL. "Series B Invested Capital"
means, with respect to each Member, the cumulative capital contributions of that
Member in respect of the Series B Preferred Shares as reflected on Schedule 1,
as the same may be amended from time to time, less cumulative amounts
distributed pursuant to Section 6.2(d).
1.129 SERIES B PREFERRED RATE. "Series B Preferred Rate" means
with respect to each holder of Series B Preferred Shares, an interest rate equal
to the weighted average interest rate from
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time to time of the debt under the Bank Financing which was repaid with the
funds paid to or on behalf of Aladdin Gaming for the relevant Series B Preferred
Shares.
1.130 SERIES B PREFERRED RETURN. "Series B Preferred Return"
means, as of any date of determination, with respect to a holder of Series B
Preferred Shares, an amount equal to the Series B Preferred Rate, cumulative and
compounded semi-annually, on the amount of the holder's Series B Invested
Capital, from the date of the initial Capital Contribution in respect of such
Series B Shares to the date of determination (taking into account, as
appropriate, payments pursuant to Section 6.2(c) with respect to such Series B
Preferred Return).
1.131 SHARE. "Share" represents a share of an Interest in the
Company held by a Member, and includes Preferred Shares and Common Shares.
1.132 SHOPPING CENTER. "Shopping Center" means a themed
entertainment shopping center containing approximately 462,000 square feet of
gross leasable area to be developed by Bazaar as part of the Redevelopment.
1.133 STOCKHOLDERS AND REGISTRATION RIGHTS AGREEMENT.
"Stockholders and Registration Rights Agreement" means a Stockholders and
Registration Rights Agreement to be entered into by certain of the stockholders
of the IPO Corporation prior to the IPO, substantially, in the form set forth in
Exhibit A.
1.134 SUBSIDIARY. "Subsidiary" means (subject to the second
sentence of this definition), with respect to a specified Person, any other
entity of which securities or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other Persons performing
similar functions are at the time directly or indirectly owned by the specified
Person. Unless a contrary intention is indicated in this Agreement, any
reference to a Subsidiary shall mean a Subsidiary of the Company, which shall
include Aladdin Gaming and, if Aladdin Gaming owns more than fifty percent of
the common stock of Aladdin Music Holdings, LLC, Aladdin Music Holdings, LLC,
but (notwithstanding the foregoing sentence) shall not include Aladdin Music,
LLC or any Subsidiary of Aladdin Music, LLC.
1.135 SUBSTITUTED MEMBER. "Substituted Member" means the
transferee of a Member's Shares, or a permitted successor or assign of such
Member who is admitted to the Company as a Member.
1.136 SUPERMAJORITY. "Supermajority" means an affirmative vote or
consent of the Member or Members owning an aggregate of at least eighty percent
of the Percentage Interests.
1.137 TAG ALONG MEMBERS. "Tag Along Members" has the meaning
ascribed thereto in Section 8.4.
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1.138 TAG ALONG NOTICE. "Tag Along Notice" has the meaning
ascribed thereto in Section 8.4.
1.139 TAG ALONG OFFER. "Tag Along Offer" has the meaning ascribed
thereto in Section 8.4.
1.140 TAG ALONG PERIOD. "Tag Along Period" has the meaning
ascribed thereto in Section 8.4.
1.141 TAG ALONG PRICE PER SHARE. "Tag Along Price Per Share" has
the meaning ascribed thereto in Section 8.4.
1.142 TAG ALONG SALE. "Tag Along Sale" has the meaning ascribed
thereto in Section 8.4.
1.143 TAG ALONG SHARES. "Tag Along Shares" has the meaning
ascribed thereto in Section 8.4.
1.144 TAG ALONG TRANSFEREE. "Tag Along Transferee" has the
meaning ascribed thereto in Section 8.4.
1.145 TAX MATTERS PARTNER. "Tax Matters Partner" means the Person
designated as Tax Matters Partner pursuant to Section 10.5.
1.146 TIMESHARE PARCEL. "Timeshare Parcel" has the meaning
ascribed thereto in the LCI Purchase Agreement.
1.147 TOTAL COMMON SHARES. "Total Common Shares" means all issued
and outstanding Common Shares.
1.148 TRANSFER. "Transfer" means any transfer, sale, conveyance,
distribution, hypothecation, pledge, encumbrance, assignment or other disposal,
either voluntary or involuntary.
1.149 TRANSFEROR. "Transferor" has the meaning ascribed thereto
in Section 8.3.
1.150 TREASURY REGULATIONS. "Treasury Regulations" means the U.S.
federal income tax regulations promulgated by the U.S. Treasury Department under
the Code and codified at Title 26 of the Code of Federal Regulations, as amended
from time to time.
1.151 TRIGGER EVENT. "Trigger Event" has the meaning ascribed
thereto in Section 8.7.
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1.152 TRIGGERING MEMBER. "Triggering Member" has the meaning
ascribed thereto in Section 8.7.
1.153 TRUST. "Trust" means Trust Under Article Sixth u/w/o
Sigmund Sommer, a New York trust.
1.154 ULTIMATE PERCENTAGE INTEREST. "Ultimate Percentage
Interest" means, with respect to a specified Person, the aggregate directly and
indirectly held Percentage Interest of such Person, calculated by adding (a)
such Person's Percentage Interest, plus (b) the percentage of the issued and
outstanding shares (class A voting common stock and class B non-voting common
stock) in the capital of Aladdin Enterprises owned by such Person multiplied by
Aladdin Enterprises' Percentage Interest.
1.155 UNPAID PREFERRED RETURN. "Unpaid Preferred Return" means,
with respect to any Series A Preferred Shares or Series B Preferred Shares, at
any time of determination, the excess, if any, of (i) the Series A Preferred
Return or Series B Preferred Return, as relevant, with respect to such Shares,
over (ii) the cumulative Distributions made pursuant to section 6.2(a) or (c),
as appropriate, through such time with respect to such Shares.
1.156 UNRECOVERED SERIES A INVESTED CAPITAL. "Unrecovered Series
A Invested Capital" means, at any time of determination, and with respect to any
Member, the Series A Invested Capital less the cumulative Distributions, if any,
theretofore made pursuant to section 6.2(b) through such time.
1.157 UNRECOVERED SERIES B INVESTED CAPITAL. "Unrecovered Series
B Invested Capital" means, at any time of determination, and with respect to any
Member, the Series B Invested Capital less the cumulative Distributions, if any,
theretofore made pursuant to section 6.2(d) through such time.
1.158 UPSTREAM NOTICE OF OFFER. "Upstream Notice of Offer" has
the meaning ascribed thereto in Section 8.6.
1.159 UPSTREAM OFFEROR. "Upstream Offeror" has the meaning
ascribed thereto in Section 8.6.
1.160 UPSTREAM OWNERSHIP INTEREST. "Upstream Ownership Interest"
has the meaning ascribed thereto in Section 8.6.
1.161 UPSTREAM TRANSFEROR. "Upstream Transferor" has the meaning
ascribed thereto in Section 8.6.
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1.162 WARRANTS. "Warrants" means warrants issued by Aladdin
Enterprises on or about the date hereof to purchase class B non-voting common
stock in the capital of Aladdin Enterprises.
1.163 WARRANT AGREEMENT. "Warrant Agreement" means the Warrant
Agreement dated the date hereof among Aladdin Enterprises, the Company and State
Street Bank and Trust Company as warrant agent.
1.164 WARRANT SHARES. "Warrant Shares" means class B non-voting
common stock in the capital of Aladdin Enterprises issued upon the exercise of
any Warrants.
ARTICLE II
INTRODUCTORY MATTERS
2.1 RECORDS OFFICE. The Company shall continuously maintain in the
state of Nevada a Records Office, which may, but need not be, a place of its
business in the state of Nevada, at which it shall keep all records identified
in NRS 86.241. As of the date hereof, the Records Office shall be 2810 West
Charleston Boulevard, Suite F-58, Las Vegas, Nevada 89102. The Records Office
may be changed to another location within the State of Nevada as the Board may
from time to time determine.
2.2 OTHER OFFICES. The Company may establish and maintain other
offices at any time and at any place or places as the Members may designate or
as the business of the Company may require.
2.3 RESIDENT AGENT AND REGISTERED OFFICE. The resident agent for
service of process shall be as set forth in the Articles. The resident agent
may be changed as the Board may from time to time determine. The Company shall
have as its registered office in the state of Nevada the street address of its
resident agent.
2.4 PURPOSE. The Company is organized for the purpose(s) of
developing, constructing, financing, owning and operating hotels and casinos and
related businesses and to engage in such other lawful enterprises as may be
incidental or appurtenant to the foregoing.
2.5 NO STATE LAW PARTNERSHIP; NO LIABILITY TO THIRD PARTIES. The
Members intend that the Company not be a partnership (including, without
limitation, a limited partnership) or joint venture, and that no Member be a
partner or joint venturer of any other Member, for any purposes other than
federal, state and local tax purposes, and this Agreement not be construed to
suggest otherwise. No Member shall be liable for the debts, obligations or
liabilities of the Company, including under a judgment decree or order of a
court.
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2.6 LEGEND. In addition to any legend required pursuant to Section
3.8, each Certificate of Shares shall bear the following legend: "The securities
represented by this certificate are subject to that certain operating agreement
of the company dated February 26, 1998 (the "Operating Agreement") and the
provisions set forth therein, including, without limitation provisions relating
to: (a) the voting rights of the members, (b) circumstances under which
distributions to the members may be diverted and (c) circumstances under which
the interests of the members may be subject to mandatory transfer. A copy of
the Operating Agreement is available for inspection at the company's registered
office during regular business hours".
ARTICLE III
INTERESTS AND ADJUSTMENTS IN INTERESTS
3.1 MEMBER'S INTEREST. A Member's Interests shall for all purposes
be personal property. A Member shall have no interest in specific Company
assets or property, including any assets or property contributed to the Company
by such Member as part of any Capital Contribution.
3.2 CLASSES OF SHARES. (a) The Shares shall be divided between
Common Shares, Series A Preferred Shares and Series B Preferred Shares.
(b) There shall be authorized 10,000,000 Common Shares. Each of
such Shares shall have identical rights and terms in all respects except as
specifically set forth in this Agreement. The Common Shares shall have rights
to an allocation of Profits and Losses and to any Distributions as may be
authorized under this Agreement and under the NRS. Except as specifically
provided in this Agreement or under the NRS, the Common Shares collectively
shall have all management and voting rights of the Company.
(c) There shall be authorized 1,500,000 Series A Preferred
Shares. Each of such Shares shall have identical rights and terms in all
respects. The Series A Preferred Shares shall have rights to an allocation of
Profits and Losses, other allocations and any Distributions as may be authorized
under this Agreement and under the NRS. Except as specifically provided in this
Agreement or the NRS, the Series A Preferred Shares shall not have management or
voting rights under the NRS or otherwise.
(d) There shall be authorized 1,500,000 Series B Preferred
Shares. Each of such Shares shall have identical rights and terms in all
respects. The Series B Preferred Shares shall have rights to an allocation of
Profits and Losses and to any Distributions as may be authorized under this
Agreement and under the NRS. Except as specifically provided in this Agreement
or the NRS, the Series B Preferred Shares shall not have management or voting
rights under the NRS or otherwise.
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3.3 COMPLETION GUARANTY PAYMENTS. (a) Any payment required pursuant
to the Completion Guaranty ("Completion Guaranty Payments") by LCI Parent or the
Trust shall be made by them in the proportions as provided in the Contribution
Agreement. Series A Preferred Shares shall be issued in consideration for such
payments to LCI, in the case of a payment by LCI Parent, or to Sommer
Enterprises, in the case of a payment by the Trust, at the rate of one Series A
Preferred Share per $100 paid. The Company shall issue such Series A Preferred
Shares and shall establish and credit a Capital Account for the relevant Member
in respect of such Preferred Shares in the amount of the relevant payment.
(b) Without limiting Section 3.3(a) or the Contribution
Agreement, if either LCI Parent or the Trust (the "Non-Contributing Obligor")
fails to make its share of a Completion Guaranty Payment as provided in the
Contribution Agreement (the "Delinquent Amount"), then the other such Person
(the "Contributing Obligor") may, in addition to any and all other rights and
remedies the Contributing Obligor may have at law and in equity, in addition to
its payment obligations under the Contribution Agreement, pay as provided in the
Completion Guaranty an additional amount equal to the Delinquent Amount, and
such payment of the amount equal to the Delinquent Amount shall be treated as a
recourse loan (a "Completion Guaranty Loan") by the Contributing Obligor to the
Non-Contributing Obligor on the terms and conditions provided in the
Contribution Agreement. As of the date of any advance of a Completion Guaranty
Loan, the Non-Contributing Obligor, shall be deemed to have paid to Aladdin
Gaming an amount equal to the principal amount of such Completion Guaranty Loan
and Series A Preferred Shares shall be issued to LCI or Sommer Enterprises (as
the case may be) pursuant to Section 3.3(a). Until any and all Completion
Guaranty Loans are repaid in full, LCI, if LCI Parent is the Non-Contributing
Obligor, or Sommer Enterprises, if the Trust is the Non-Contributing Obligor,
shall draw no further Distributions in respect of any Shares or shares in
Aladdin Enterprises, and all cash or property otherwise distributable to such
Member with respect to any Shares or shares in Aladdin Enterprises shall be paid
to the Contributing Obligor in repayment of the outstanding balance of the
Completion Guaranty Loan, with such funds being applied first to reduce any and
all interest accrued on such Completion Guaranty Loan and then to reduce the
principal amount thereof. Any amounts so applied shall be treated, for all
purposes under this Agreement, as having actually been distributed to LCI, if
LCI Parent is the Non-Contributing Obligor, or to Sommer Enterprises, if the
Trust is the Non-Contributing Obligor, and applied to repay the outstanding
Completion Guaranty Loan.
(c) In order to secure the repayment of any and all Completion
Guaranty Loans made to the Non-Contributing Obligor, LCI, if LCI Parent is the
Non-Contributing Obligor, or Sommer Enterprises, if the Trust is the
Non-Contributing Obligor, hereby grants a security interest and continuing lien
in favor of the Contributing Obligor in and to all Shares and any shares in
Aladdin Enterprises held by such Person at any time, and hereby irrevocably
appoints the Contributing Obligor, and any of the Contributing Obligor's
respective agents, officers, or employees, as such Person's attorneys-in-fact,
with full power to prepare, execute, acknowledge, and deliver, as applicable,
all documents, instruments and agreements memorializing or securing such
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Completion Guaranty Loans including, without limitation, such Uniform Commercial
Code financing and continuation statements, pledge or security agreements,
mortgages and other security instruments as may be reasonably appropriate to
perfect and continue the security interest in favor of the Contributing Obligor;
PROVIDED that such security interest and continuing lien shall be (i)
subordinated to the security interests and liens granted in favor of the Bank
Lenders pursuant to the Loan Documents (as defined in the Credit Agreement) and
the Contributing Obligor shall not enforce any such security interest or
continuing lien until all Loans (as defined in the Credit Agreement) and other
Obligations (as defined in the Credit Agreement) have been paid in full in cash,
all Letters of Credit (as defined in the Credit Agreement) have been terminated
or expired and all Commitments (as defined in the Credit Agreement) have been
terminated under the Credit Agreement (PROVIDED that to the extent any
distributions on any relevant shares or membership interests are permitted to be
made to the holder(s) thereof under the Loan Documents, the Contributing Obligor
shall be permitted to enforce its security interest and continuing lien thereon,
including, without limitation, diverting distributions thereon to the
Contributing Obligor), and (ii) suspended for any period in which an Event of
Default exists which was Caused by the Contributing Obligor or its Affiliates.
(d) If an Affiliate of the Majority Member (if any) fails to make
its pro rata share of any Completion Guaranty Payment as required by the
Contribution Agreement, then, provided that (i) the Contributing Obligor or its
Affiliates have not Caused an existing Event of Default and (ii) the
Contributing Obligor does not already have an Ultimate Percentage Interest
greater than fifty percent, from the date on which the relevant Completion
Guaranty Payment would have been past due if not paid (the "Completion Guaranty
Payment Due Date") until such payments are made, the Non-Contributing Obligor
and its Affiliates shall vote their Common Shares and, if applicable, shall
cause Aladdin Enterprises to vote its Common Shares so that (taking into account
any Common Shares held by the Contributing Obligor or its Affiliates) the
Contributing Obligor controls fifty percent of the voting power of the Total
Common Shares.
3.4 KEEP WELL PAYMENTS. (a) Any payment required pursuant to the Keep
Well Agreement ("Keep Well Payments") by LCI Parent or Aladdin Holdings shall be
made by them in the proportions as provided in the Contribution Agreement.
Where such payments are required other than pursuant to Section 13 of the Keep
Well Agreement, Series A Preferred Shares shall be issued in consideration
therefor to LCI, in the case of a payment by LCI Parent, or to Sommer
Enterprises, in the case of a payment by Aladdin Holdings, at the rate of one
Series A Preferred Share per $100 paid. Where such payments are required to be
made by LCI Parent pursuant to Section 13 of the Keep Well Agreement, Series B
Preferred Shares shall be issued in consideration therefor to LCI at the rate of
one Series B Preferred Share per $100 paid. The Company shall issue such Series
A Preferred Shares or Series B Preferred Shares and shall establish and credit a
Capital Account for the relevant Member in respect of such Preferred Shares in
the amount of the relevant payment.
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(b) Without limiting Section 3.4(a) or the Contribution
Agreement, if either LCI Parent or Aladdin Holdings (the "Non-Contributing
Obligor") fails to make its share of a payment required under the Keep Well
Agreement as provided in the Contribution Agreement (the "Delinquent Amount"),
then the other such Person (the "Contributing Obligor") may, in addition to any
and all other rights and remedies the Contributing Obligor may have at law and
in equity, in addition to its payment obligations under the Contribution
Agreement, pay as provided in the Keep Well Agreement an additional amount equal
to the Delinquent Amount, and such payment of the amount equal to the Delinquent
Amount shall be treated as a recourse loan (a "Keep Well Loan") by the
Contributing Obligor to the Non-Contributing Obligor, on the terms and
conditions provided in the Contribution Agreement. As of the date of any
advance of a Keep Well Loan, the Non-Contributing Obligor shall be deemed to
have paid to Aladdin Gaming an amount equal to the principal amount of such Keep
Well Loan and Series A Preferred Shares or Series B Preferred Shares (as the
case may be) shall be issued to LCI or Sommer Enterprises (as the case may be)
pursuant to Section 3.4(a). Until any and all Keep Well Loans are repaid in
full, LCI, if LCI Parent is the Non-Contributing Obligor, or Sommer Enterprises,
if Aladdin Holdings is the Non-Contributing Obligor, shall draw no further
Distributions in respect of any Shares or shares in Aladdin Enterprises, and all
cash or property otherwise distributable to such Member with respect to Shares
or shares in Aladdin Enterprises shall be paid to the Contributing Obligor in
repayment of the outstanding balance of the Keep Well Loan, with such funds
being applied first to reduce any and all interest accrued on such Keep Well
Loan and then to reduce the principal amount thereof. Any amounts so applied
shall be treated, for all purposes under this Agreement, as having actually been
distributed to LCI, if LCI Parent is the Non-Contributing Obligor, or to Sommer
Enterprises, if Aladdin Holdings is the Non-Contributing Obligor, and applied to
repay the outstanding Keep Well Loan.
(c) In order to secure the repayment of any and all Keep Well
Loans made to the Non-Contributing Obligor, LCI, if LCI Parent is the
Non-Contributing Obligor, or Sommer Enterprises, if Aladdin Holdings is the
Non-Contributing Obligor, hereby grants a security interest and continuing lien
in favor of the Contributing Obligor in and to all Shares and any shares in
Aladdin Enterprises held by such Person at any time, and hereby irrevocably
appoints the Contributing Obligor, and any of the Contributing Obligor's
respective agents, officers, or employees, as such Person's attorneys-in-fact,
with full power to prepare, execute, acknowledge, and deliver, as applicable,
all documents, instruments and agreements memorializing or securing such Keep
Well Loans including, without limitation, such Uniform Commercial Code financing
and continuation statements, pledge or security agreements, mortgages and other
security instruments as may be reasonably appropriate to perfect and continue
the security interest in favor of the Contributing Obligor; PROVIDED that such
security interest and continuing lien shall be (i) subordinated to the security
interests and liens granted in favor of the Bank Lenders pursuant to the Loan
Documents (as defined in the Credit Agreement) and the Contributing Obligor
shall not enforce any such security interest or continuing lien until all Loans
(as defined in the Credit Agreement) and other Obligations (as defined in the
Credit Agreement) have been paid in full in
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cash, all Letters of Credit (as defined in the Credit Agreement) have been
terminated or expired and all Commitments (as defined in the Credit Agreement)
have been terminated under the Credit Agreement (PROVIDED that to the extent any
distributions on any relevant shares or membership interests are permitted to be
made to the holder(s) thereof under the Loan Documents, the Contributing Obligor
shall be permitted to enforce its security interest and continuing lien thereon,
including, without limitation, diverting distributions thereon to the
Contributing Obligor), and (ii) suspended for any period in which an Event of
Default exists which was Caused by the Contributing Obligor or its Affiliates.
(d) If either LCI Parent or Aladdin Holdings is a
Non-Contributing Obligor by reason of its failure to make its pro rata share of
any Keep Well Payment as required by the Contribution Agreement and a Keep Well
Loan has been made by the Contributing Obligor to the Non-Contributing Obligor
for such Delinquent Amount pursuant to Section 3.4(b), then, provided that the
Contributing Obligor or its Affiliates have not Caused an existing Event of
Default, the directly held Percentage Interest of LCI, if LCI Parent is the
Non-Contributing Obligor, or of Sommer Enterprises, if Aladdin Holdings is the
Non-Contributing Obligor, shall be decreased, and the directly held Percentage
Interest of LCI or Sommer Enterprises, as the case may be, shall be
correspondingly increased, as of the date the relevant Keep Well Payment would
have been past due if not paid (the "Keep Well Due Date"), by an amount
(expressed as a percentage) equal to either (i) in the case of a failure by the
Non-Contributing Obligor to pay the Delinquent Amount within thirty business
days of the Keep Well Due Date, the fraction (the "Dilution Fraction") (A) the
numerator of which is the Delinquent Amount, and (B) the denominator of which is
$200 million, or (ii) in the case of a failure by the Non-Contributing Obligor
to pay the Delinquent Amount within forty-five business days of the Keep Well
Due Date, one and a half times the Dilution Fraction, or (iii) in the case of a
failure by the Non-Contributing Obligor to pay the Delinquent Amount within
sixty business days of the Keep Well Due Date, two times the Dilution Fraction.
The Parties agree that after the directly held Percentage Interest of LCI, if
LCI Parent is the Non-Contributing Obligor, or Sommer Enterprises, if Aladdin
Holdings is the Non-Contributing Obligor, is reduced to zero pursuant to the
foregoing sentence of this Section 3.4(d), if such Party holds any shares in
Aladdin Enterprises, a number of such shares shall be transferred to LCI or
Sommer Enterprises (as the case may be), with class A voting common stock being
transferred first and then class B non-voting common stock being transferred, in
order to give effect to the adjustments pursuant to the foregoing sentence by
thereby reducing and increasing the such Parties' Ultimate Percentage Interests
instead of their directly held Percentage Interests.
(e) If an Affiliate of the Majority Member (if any) fails to make
its pro rata share of any Keep Well Payment as required by the Contribution
Agreement, then, provided that (i) the Contributing Obligor or its Affiliates
have not Caused an existing Event of Default and (ii) the Contributing Obligor
does not already have an Ultimate Percentage Interest greater than fifty
percent, from the Keep Well Due Date until such payments are made, the
Non-Contributing Obligor and its Affiliates shall vote their Common Shares and,
if applicable, shall cause Aladdin Enterprises
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to vote its Common Shares so that (taking into account any Common Shares held by
the Contributing Obligor or its Affiliates) the Contributing Obligor controls
fifty percent of the voting power of the Total Common Shares.
(f) Nothing in this Agreement shall give LCI or any of its
Affiliates or any other Person whatsoever any right or claim whatsoever against
the Trust for any reimbursement or other payment in connection with obligations
under the Keep Well Agreement.
3.5 EBITDA SHORTFALL PAYMENTS. (a) Any payment required pursuant to
Section 1(b) of the Contribution Agreement ("EBITDA Shortfall Payments") by LCI
Parent or the Trust shall, unless otherwise agreed by the Trust and LCI Parent,
be made by them in the proportions as provided in the Contribution Agreement.
Series A Preferred Shares shall be issued in consideration therefor to LCI, in
the case of a payment by LCI Parent, or Sommer Enterprises, in the case of a
payment by the Trust, at the rate of one Series A Preferred Share per $100 paid.
The Company shall issue such Series A Preferred Shares and shall establish and
credit a Capital Account for the relevant Member in respect of such Preferred
Shares in the amount of the relevant payment.
(b) Without limiting Section 3.5(a) or the Contribution
Agreement, if either LCI Parent or the Trust (the "Non-Contributing Obligor")
fails to make its share of an EBITDA Shortfall Payment (the "Delinquent
Amount"), then the other such Person (the "Contributing Obligor") may, in
addition to any and all other rights and remedies the Contributing Obligor may
have at law and in equity, in addition to its payment obligations under the
Contribution Agreement, pay to Aladdin Gaming an additional amount equal to the
Delinquent Amount, and such payment of the amount equal to the Delinquent Amount
shall be treated as a recourse loan (an "EBITDA Shortfall Loan") by the
Contributing Obligor to the Non-Contributing Obligor, on the terms and
conditions provided in the Contribution Agreement. As of the date of any
advance of a EBITDA Shortfall Loan, the Non-Contributing Obligor shall be deemed
to have paid to Aladdin Gaming an amount equal to the principal amount of such
EBITDA Shortfall Loan and Series A Preferred Shares shall be issued to LCI or
Sommer Enterprises (as the case may be) pursuant to Section 3.5(a). Until any
and all EBITDA Shortfall Loans are repaid in full, LCI, if LCI Parent is the
Non-Contributing Obligor, or Sommer Enterprises, if the Trust is the
Non-Contributing Obligor, shall draw no further Distributions in respect of any
Shares or shares in Aladdin Enterprises, and all cash or property otherwise
distributable to such Member with respect to Shares or shares in Aladdin
Enterprises shall be paid to the Contributing Obligor in repayment of the
outstanding balance of the EBITDA Shortfall Loan, with such funds being applied
first to reduce any and all interest accrued on such EBITDA Shortfall Loan and
then to reduce the principal amount thereof. Any amounts so applied shall be
treated, for all purposes under this Agreement, as having actually been
distributed to LCI, if LCI Parent is the Non-Contributing Obligor, or to Sommer
Enterprises, if the Trust is the Non-Contributing Obligor, and applied to repay
the outstanding EBITDA Shortfall Loan.
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(c) In order to secure the repayment of any and all EBITDA
Shortfall Loans made to the Non-Contributing Obligor, LCI, if LCI Parent is the
Non-Contributing Obligor, or Sommer Enterprises, if the Trust is the
Non-Contributing Obligor, hereby grants a security interest and continuing lien
in favor of the Contributing Obligor in and to all Shares and any shares in
Aladdin Enterprises held by such Person at any time, and hereby irrevocably
appoints the Contributing Obligor, and any of the Contributing Obligor's
respective agents, officers, or employees, as such Person's attorneys-in-fact,
with full power to prepare, execute, acknowledge, and deliver, as applicable,
all documents, instruments and agreements memorializing or securing such EBITDA
Shortfall Loans including, without limitation, such Uniform Commercial Code
financing and continuation statements, pledge or security agreements, mortgages
and other security instruments as may be reasonably appropriate to perfect and
continue the security interest in favor of the Contributing Obligor; PROVIDED
that such security interest and continuing lien shall be (i) subordinated to the
security interests and liens granted in favor of the Bank Lenders pursuant to
the Loan Documents (as defined in the Credit Agreement) and the Contributing
Obligor shall not enforce any such security interest or continuing lien until
all Loans (as defined in the Credit Agreement) and other Obligations (as defined
in the Credit Agreement) have been paid in full in cash, all Letters of Credit
(as defined in the Credit Agreement) have been terminated or expired and all
Commitments (as defined in the Credit Agreement) have been terminated under the
Credit Agreement (PROVIDED that to the extent any distributions on any relevant
shares or membership interests are permitted to be made to the holder(s) thereof
under the Loan Documents, the Contributing Obligor shall be permitted to enforce
its security interest and continuing lien thereon, including, without
limitation, diverting distributions thereon to the Contributing Obligor), and
(ii) suspended for any period in which an Event of Default exists which was
Caused by the Contributing Obligor or its Affiliates.
(d) If either LCI Parent or the Trust is a Non-Contributing
Obligor by reason of its failure to make its pro rata share of any EBITDA
Shortfall Payment as required by the Contribution Agreement and an EBITDA
Shortfall Loan has been made by the Contributing Obligor to the Non-Contributing
Obligor for such Delinquent Amount pursuant to Section 3.5(b), then, provided
that the Contributing Obligor or its Affiliates have not Caused an existing
Event of Default, the directly held Percentage Interest of LCI, if LCI Parent is
the Non-Contributing Obligor, or of Sommer Enterprises, if the Trust is the
Non-Contributing Obligor, shall be decreased, and the directly held Percentage
Interest of LCI or Sommer Enterprises, as the case may be, shall be
correspondingly increased, as of the date the relevant EBITDA Shortfall Payment
would have been past due if not paid (the " EBITDA Shortfall Due Date"), by an
amount (expressed as a percentage) equal to either (i) in the case of a failure
by the Non-Contributing Obligor to pay the Delinquent Amount within thirty
business days of the EBITDA Shortfall Due Date, the fraction (the "Dilution
Fraction") (A) the numerator of which is the Delinquent Amount, and (B) the
denominator of which is $200 million, or (ii) in the case of a failure by the
Non-Contributing Obligor to pay the Delinquent Amount within forty-five business
days of the EBITDA Shortfall Due Date, one and a half times the Dilution
Fraction, or (iii) in the case of a failure by the Non-Contributing Obligor to
pay the
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Delinquent Amount within sixty business days of the Keep Well Due Date, two
times the Dilution Fraction. The Parties agree that after the directly held
Percentage Interest of LCI, if LCI Parent is the Non-Contributing Obligor, or
Sommer Enterprises, if the Trust is the Non-Contributing Obligor, is reduced to
zero pursuant to the foregoing sentence of this Section 3.5(d), if such Party
holds any shares in Aladdin Enterprises, a number of such shares shall be
transferred to LCI or Sommer Enterprises (as the case may be), with class A
voting common stock being transferred first and then class B non-voting common
stock being transferred, in order to give effect to the adjustments pursuant to
the foregoing sentence by thereby reducing and increasing the such Parties'
Ultimate Percentage Interests instead of their directly held Percentage
Interests.
3.6 OTHER ADJUSTMENTS. (a) On the Opening Date LCI's Percentage
Interest shall be decreased by 0.5% and Sommer Enterprises' Percentage Interest
shall be correspondingly increased by 0.5%.
(b) Upon (i) the vesting of Common Shares pursuant to any
Employment and Consulting Agreement, (ii) the exercise of any employee options
to purchase Common Shares or (iii) any other issuance of Common Shares after the
date hereof in accordance with this Agreement, Schedule 1 shall be updated to
include such new Common Shares and any Capital Contributions in connection
therewith and to reflect the changes in the Percentage Interests of the Members
resulting therefrom.
(c) Upon the exercise of any Warrants, the Percentage Interests
of all Members other than LCI and Aladdin Enterprises as well as the Restricted
Membership Interests shall be adjusted so that all such Members and holders of
Restricted Membership Interests shall bear the dilutive effect of such exercise
equally in proportion to their Ultimate Percentage Interests (or intended
Ultimate Percentage Interests upon vesting in the case of holders of Restricted
Membership Interests). The Parties acknowledge that consequential adjustments
to such Percentage Interests may be necessary, and if so shall occur, upon the
vesting of any Restricted Membership Interests to give effect to such equal
sharing of such dilutive effect.
(d) The Parties acknowledge that adjustments to the Percentage
Interest of Aladdin Enterprises shall occur in certain circumstances as provided
in the Warrant Agreement. Upon any such adjustment, the Percentage Interests of
all Members other than Aladdin Enterprises as well as the Restricted Membership
Interests shall be adjusted so that all such Members and holders of Restricted
Membership Interests shall bear the dilutive effect or the benefit of such
adjustments equally in proportion to their Ultimate Percentage Interests (or
intended Ultimate Percentage Interests in the case of the holders of Restricted
Membership Interests). The Parties acknowledge that consequential adjustments
to such Percentage Interests may be necessary, and if so shall occur, upon the
vesting of any Restricted Membership Interests to give effect to such equal
sharing of such dilutive effect or benefit.
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(e) Upon the vesting of any Restricted Membership Interest, in
addition to any necessary consequential adjustments to the Members' Percentage
Interests pursuant to Sections 3.6(c) and (d), (i) the Percentage Interest of
Aladdin Enterprises shall not change; (ii) the Percentage Interest of LCI shall
be reduced by twenty-five percent of the dilutive effect of such vesting
(assuming, in the case of a vesting of a Restricted Membership Interest after
any Warrants have been exercised, that no adjustment to the Restricted
Membership Interest had occurred pursuant to Section 3.6(c)) and (iii) Sommer
Enterprises' Percentage Interest shall be reduced to bear the remaining dilutive
effect of such vesting, and the Capital Accounts of LCI and Sommer Enterprises
shall be reduced pro-rata in proportion to such reductions in Percentage
Interest to take account of any Capital Account to be established pursuant to
the relevant Employment and Consulting Agreement for the holder of such
Restricted Membership Interest upon the vesting of such Restricted Membership
Interest.
(f) Upon any Warrantholder validly exercising a right to
exchange its Warrants or Warrant Shares into Common Shares pursuant to Section 4
of the Equity Participation Agreement, the Company shall (subject to such
Warrantholder agreeing in writing to be bound by this Agreement) issue such
Common Shares to such Warrantholder as provided in the Equity Participation
Agreement, and admit such Warrantholder as a Member, and shall reduce Aladdin
Enterprises' Percentage Interest thereupon to ensure that Aladdin Enterprises
bears all of the dilutive effect of such issuance.
(g) No adjustments shall be made to the Capital Accounts of
Members with respect to any of the adjustments in Percentage Interests provided
for in this Section 3.6.
3.7 ADJUSTMENTS. Following any adjustments of the Percentage
Interests of any Members pursuant to this Article III, the Common Shares issued
and outstanding shall be adjusted, Schedule 1 shall be updated and the Members
shall cooperate with the Company as necessary to amend, cancel or issue
Certificates accordingly. Notwithstanding anything else herein to the contrary,
any issuance of Shares and adjustment of Percentage Interests pursuant to this
Article III shall be subject to receipt of all approvals required by the Nevada
Act (such approval to be obtained as soon as reasonably practicable). In the
event that any Distributions are declared on the Shares during the period that
such approvals are pending under the Nevada Act, then to the extent permitted by
the Nevada Act and other applicable law the amount of such Distributions in
respect of the Shares to be transferred, issued or cancelled (without
duplication) shall be held in an escrow account by the Company until such
approvals are obtained, at which time such amount shall be paid to the new
holder of such Shares.
3.8 UCC ELECTION. The Company hereby irrevocably elects that all
membership interests in the Company shall be securities governed by Article 8 of
the Uniform Commercial Code. Each Certificate of Shares shall bear the
following legend: "This certificate evidences an interest in Aladdin Gaming
Holdings, LLC and shall be a security for purposes of Article 8 of the Uniform
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Commercial Code." No change to this provision shall be effective until all
outstanding Certificates of Shares have been surrendered for cancellation and
any new Certificates of Shares thereafter issued shall not bear the foregoing
legend.
ARTICLE IV
CAPITAL ACCOUNTS
4.1 INITIAL CAPITAL. As of the date hereof the capital of the
Company shall be the Capital Contributions of the Members on or prior to the
date hereof in such amounts or value as are set forth opposite the name of each
Member on Schedule 1, such Capital Contributions made in exchange for the Shares
indicated on Schedule 1. No such initial Capital Contributions shall be
accepted by the Company and no Shares shall be issued until all necessary
approvals under the Nevada Act are obtained with respect to such Capital
Contribution and issuance of Shares.
4.2 CAPITAL ACCOUNTS. Capital Accounts shall be established on the
Company's books representing the Members' respective Capital Contributions to
the Company. A separate Capital Account shall be maintained for each Member
and, for book purposes, separated into a contribution account and an income
(loss) account for each class of Shares held by each Member at any time
maintained in accordance with the accounting methods elected to be followed by
the Company. The Capital Account of each contributing Member shall be credited
with the amount of such Member's initial Capital Contribution and any subsequent
Capital Contributions upon receipt thereof by the Company (including payments
pursuant to the Completion Guaranty and Keep Well Agreement); PROVIDED, however,
that the Capital Account of a Member shall not be credited with the amount of
any Capital Contribution until all necessary approvals under the Nevada Act are
obtained with respect to such initial Capital Contribution.
4.3 GENERAL RULES FOR ADJUSTMENT OF CAPITAL ACCOUNTS. Subject to
Section 4.4, the Capital Account of each Member shall be:
(a) increased by:
(i) the amount of the Member's cash contributions to the
Company;
(ii) the agreed fair market value of any property
contributed by the Member to the Company (net of liabilities secured by any
such contributed property that the Company is considered to assume or take
subject to for purposes of Code Section 752);
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(iii) the amount of Profits allocated to the Member
pursuant to Article V or other provisions of this Agreement and any items
in the nature of income or gain which are specially allocated to the
Member;
(iv) the amount of any Company liabilities assumed by the
Member; and
(v) any other increases required by this Agreement or the
Treasury Regulations; and
(b) decreased by:
(i) all amounts paid or distributed to the Member, other
than amounts required to be treated as a payment for property or services
under the Code;
(ii) the agreed fair market value of any property
distributed in kind to the Member pursuant to this Agreement (net of any
liabilities secured by such distributed property that such Member is
considered to assume or take subject to for purposes of Code Section 752);
(iii) the amount of Losses allocated to the Member pursuant
to Article V or other provisions of this Agreement and any items in the
nature of expenses or losses which are specially allocated to the Member;
(iv) the amount of any liabilities of the Member assumed
by the Company; and
(v) any other decreases required by this Agreement or the
Treasury Regulations.
In the event that any Shares are Transferred in accordance with the
terms of this Agreement (except with respect to Transfers referred to in Section
3.6), the transferee shall succeed to the Capital Account of the transferor to
the extent it relates to the transferred Shares.
Before decreasing a Member's Capital Account with respect to the
distribution of any property to such Member, all Members' accounts shall be
adjusted to reflect the manner in which the unrealized income gain, loss, and
deduction inherent in such property (that has not been previously reflected in
the Members' Capital Accounts) would be allocated among the Members if there
were a taxable disposition of such property by the Company on the date of
distribution, in accordance with Treasury Regulations Section
1.704-1(b)(2)(iv)(e).
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4.4 SPECIAL RULES WITH RESPECT TO CAPITAL ACCOUNTS. (a)
Notwithstanding any other provision of this Agreement, each Member's Capital
Account shall be maintained and adjusted in accordance with the Code and the
Treasury Regulations, including Treasury Regulations Section 1.704-1(b)(2)(iv)
and appropriate adjustments to the Capital Accounts permitted in the case of a
Member who receives the benefit of any special basis adjustments under Code
Sections 734, 743 and 754. In determining the amount of any liability for
purposes of Sections 4.3(a) and 4.3(b), there shall be taken into account Code
Section 752(c) and any other applicable provisions of the Code and the Treasury
Regulations.
(b) For purposes of computing the balance in a Member's Capital
Account no credit shall be given for any Capital Contribution which such Member
is to make until such Capital Contribution is actually received by the Company.
(c) All provisions of this Agreement relating to the maintenance
of Capital Accounts are intended to comply with Treasury Regulations Section
1.704-1(b) and shall be interpreted and applied in a manner consistent with such
Treasury Regulations. The Members shall make any appropriate modifications in
the event unanticipated events might otherwise cause this Agreement not to
comply with Treasury Regulations Section 1.704-1(b).
4.5 RIGHTS WITH RESPECT TO CAPITAL; INTEREST. No Member shall have
the right to withdraw or receive any return of such Member's Capital
Contribution, and no Capital Contribution must be returned in the form of
property other than cash except as specifically provided herein. No interest
shall be paid or credited to the Members on their Capital Accounts or upon any
undistributed profits left on deposit with the Company.
4.6 ADDITIONAL CAPITAL CONTRIBUTIONS. Except as specifically
provided in this Agreement, the Keep Well Agreement, the Keep Well Agreement or
the Contribution Agreement, (a) no Member shall be required to make an
additional Capital Contribution to the Company, or to make any loan (or cause
any loan to be made) to the Company, and (b) no Member shall have the right to
make an additional Capital Contribution to the Company without the consent of
the Company.
4.7 ADJUSTMENT OF CAPITAL ACCOUNTS ON REDEMPTION OF DISCOUNT NOTES.
After the redemption of any Discount Notes, and immediately prior to (a) any
material Distribution in redemption or liquidation of the Common Shares held by
Sommer Enterprises or LCI (or other substantial Distribution with respect to
such Shares as to which the adjustment would have material effect), or (b) any
merger or incorporation of the Company, or similar transaction preparatory to an
IPO, and with effect to the determination of the entitlement of the parties in
any transaction described in (a) or (b), Sommer Enterprises' Capital Account in
respect of its Common Shares shall be reduced by an amount equal to the product
of LCI's Percentage Interest at the time of such redemption multiplied by the
accreted value on the issue date of the Discount Notes redeemed, and
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LCI's Capital Account shall be increased by the same amount. Immediately prior
to an adjustment to the relative Capital Accounts of Sommer Enterprises and LCI
pursuant to this Section 4.7, each asset of the Company shall be deemed to have
been sold at its fair market value, and Profits and Losses recognized upon such
deemed sale shall be allocated in accordance with Article V. Sommer Enterprises
and LCI shall mutually agree on an appropriate method for an equivalent payment
or transfer of value with respect to any redemption of Discount Notes which
takes place at the time of or after the Company has been merged or incorporated,
such payment or transfer of value to be made reasonably promptly at the time of
or after any such redemption.
ARTICLE V
PROFITS AND LOSSES
5.1 PROFITS. After giving effect to the special allocations set
forth in Section 5.3, Profits for any Fiscal Year shall be allocated in the
following order and priority:
(a) first, to the Members holding Series A Preferred Shares to
the extent of and in proportion to the excess of the sum of (A) the cumulative
Series A Preferred Return of the relevant Member from the commencement of the
Company through the last day of the relevant Fiscal Year, plus (B) the
cumulative Losses allocated to such Member pursuant to Section 5.2(c) for all
prior Fiscal Years, over (ii) the cumulative Profits allocated to such Member
pursuant to this Section 5.1(a) for all prior Fiscal Years; and
(b) second, to the Members holding Series B Preferred Shares to
the extent of an in proportion to the excess of the sum of (A) the cumulative
Series B Preferred Return of the relevant Member from the commencement of the
Company through the last day of the relevant Fiscal Year, plus (B) the
cumulative Losses allocated to such Member pursuant to Section 5.2(b) for all
prior Fiscal Years, over (ii) the cumulative Profits allocated to such Member
pursuant to this Section 5.1(b) for all prior Fiscal Years;
(c) third, to the Members holding Common Shares to the extent of
any excess of (i) the cumulative losses allocated to the Member's Common Shares
over (ii) the sum of the cumulative allocations of Profits, pursuant to this
Section 5.1(c), with respect to such Shares; and
(d) the balance, if any, among the Members holding Common Shares
in proportion to their Percentage Interests.
5.2 LOSSES. After giving effect to the special allocations set forth
in Section 5.3, Losses for any Fiscal Year shall be allocated in the following
order and priority:
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(a) first, to the Members holding Common Shares, to reverse any
excess of (i) the sum of the cumulative allocations of Profits, pursuant to
Section 5.1(c), with respect to such Shares, over (ii) the cumulative allocation
of Losses with respect to such Shares, in proportion to and to the extent of
such excess;
(b) second, to the Members holding Common Shares in proportion
to, and to the extent of, the Member's Capital Account with respect to the
Common Shares;
(c) third, to the Members holding Series B Preferred Shares to
the extent of the Members' Capital Accounts with respect to the Series B
preferred Shares;
(d) fourth, to the Members holding Series A Preferred Shares to
the extent of the Members' Capital Account with respect to the Series A
Preferred Shares; and
(e) the balance, if any, among the Members holding Common Shares
in proportion to their Percentage Interests.
5.3 SPECIAL ALLOCATIONS. (a) MINIMUM GAIN CHARGEBACK. Except as
provided in Treasury Regulations Section 1.704.2(f), notwithstanding any other
provision of this Article V, if there is a net decrease in Minimum Gain during
any Fiscal Year, each Member shall be specially allocated items of Company
income and gain for such Fiscal Year (and, if necessary, subsequent years) in
proportion to and to the extent of an amount equal to such Member's share of the
net decrease in Minimum Gain determined in accordance with Treasury Regulations
Section 1.704-2(g). Items to be so allocated shall be determined in accordance
with Treasury Regulations Sections 1.704-2(f)(6) and 1.704-2(j)(2). This
Section 5.3(a) is intended to comply with the "minimum gain chargeback"
provisions of Treasury Regulations Section 1.704-2(f) and shall be interpreted
consistently therewith.
(b) MEMBER MINIMUM GAIN CHARGEBACK. Except as provided in
Treasury Regulations Section 1.704-2(i)(4), notwithstanding any other provision
of this Article V, if there is a net decrease in Member Nonrecourse Debt Minimum
Gain attributable to a Member Nonrecourse Debt during any Fiscal Year of the
Company, each Member who has a share of the Member Nonrecourse Debt Minimum Gain
attributable to such Member Nonrecourse Debt, determined in accordance with
Treasury Regulations Section 1.704-2(i)(5), shall be specially allocated items
of income and gain for such year (and, if necessary, subsequent years) in an
amount equal to such Member's share of the net decrease in Member Nonrecourse
Debt Minimum Gain attributable to such Member Nonrecourse Debt, determined in
accordance with Treasury Regulations Sections 1.704-2(i)(4). Allocations
pursuant to the previous sentence shall be made in proportion to the respective
amounts required to be allocated to each Member pursuant thereto. The items to
be so allocated shall be determined in accordance with Treasury Regulations
Sections 1.704-2(i)(4) and 1.704-2(j)(2). This Section 5.3(b) is intended to
comply with the "minimum gain
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chargeback" requirement of Treasury Regulations Section 1.704-2(i)(4) and shall
be interpreted consistently therewith.
(c) QUALIFIED INCOME OFFSET. In the event any Member
unexpectedly receives any adjustments, allocations or distributions described in
clauses (4), (5) or (6) of Treasury Regulations Section 1.704-1(b)(2)(ii)(d),
items of income and gain shall be specially allocated to each such Member in an
amount and manner sufficient to eliminate, to the extent required by the
Treasury Regulations, the Adjusted Capital Account Deficit created by such
adjustments, allocations or distributions of such Member as quickly as possible.
Allocation pursuant to this Section 5.3(c) shall be made only if and to the
extent that such Member would have an Adjusted Capital Account Deficit after all
other allocations provided for in this Article V have been tentatively made as
if this Section 5.3(c) were not in the Agreement. This Section 5.3(c) is
intended to constitute a "qualified income offset" within the meaning of
Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(3).
(d) GROSS INCOME ALLOCATION. In the event any Member has a
deficit Capital Account at the end of any Fiscal Year which is in excess of the
sum of (i) the amount such Member is obligated to restore pursuant to any
provision of the Agreement and (ii) the amount such Member is deemed to be
obligated to restore pursuant to the penultimate sentences of Treasury
Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), each such Member shall be
specially allocated items of income and gain in the amount of such excess as
quickly as possible, provided that an allocation pursuant to this Section 5.3(d)
shall be made only if and to the extent that such Member would have a deficit
Capital Account in excess of such sum after all other allocations provided for
in this Article V have been made as if Sections 5.3(c) and 5.3(d) were not in
this Agreement.
(e) MEMBER NONRECOURSE DEDUCTIONS. Any Member Nonrecourse
Deductions for any Fiscal Year or other period shall be specially allocated to
the Member who bears (or is deemed to bear) the economic risk of loss with
respect to the Member Nonrecourse Debt to which such Member Nonrecourse
Deductions are attributable in accordance with Treasury Regulations Section
1.704-2(i)(1).
(f) NONRECOURSE DEDUCTIONS. Nonrecourse Deductions for any year
shall be specially allocated among the Members pro rata in proportion to their
Percentage Interests.
(g) REGULATORY ALLOCATIONS. Any special allocation of items
pursuant to this Section 5.3 shall be taken into account in determining
subsequent allocations pursuant to Sections 5.1 and 5.2 so that the cumulative
net amount of all items allocated to each Member shall, to the extent possible,
be equal to the amount that would have been allocated to such Member if there
had never been any special allocation pursuant to this Section 5.3.
5.4 SECTION 704(C) ALLOCATION. For tax purposes, all items of
income, gain, loss, deduction, expense and credit, other than tax items
corresponding to items allocated pursuant to
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Section 5.3, shall be allocated in the same manner as are Profits and Losses;
PROVIDED that in accordance with Code Section 704(c) and the Treasury
Regulations promulgated thereunder, income, gain, loss and deduction with
respect to property contributed to the capital of the Company shall, solely for
tax purposes, be allocated among the Members so as to take account of any
variation between the adjusted basis of such property for federal income tax
purposes and its fair market value. In the event that any asset of the Company
is revalued pursuant to this Agreement in accordance with Section 704 of the
Code and the regulations thereunder, subsequent allocations of income, gain,
loss and deduction with respect to such asset shall take account of any
variation between the adjusted basis of such asset for federal income tax
purposes and its fair market value in the same manner as under Code Section
704(c) and the Treasury Regulations promulgated thereunder. Any elections or
other decisions relating to allocations referred to in this Section 5.4 shall be
made by the Board in any manner that reasonably reflects the purpose and
intention of this Agreement; PROVIDED that the Company elects to apply the
traditional method described in Treasury Regulations Section 1.704-3(b) without
curative allocations; PROVIDED, however, that curative allocations as described
in Treasury Regulations Section 1.704-3(c) shall be made with respect to $7
million of prepaid costs contributed to the Company by Aladdin Enterprises.
Allocations pursuant to this Section 5.4 are solely for purposes of federal,
state and local taxes and shall not affect, or in any way be taken into account
in computing, any Member's Capital Account or share of Profits, Losses, other
items, or distributions pursuant to any provision of this Agreement.
5.5 FEDERAL INCOME TAX. It is the intent of the Company and its
Members that the Company will be governed by the applicable provisions of
Subchapter K of Chapter 1 of the Code.
ARTICLE VI
DISTRIBUTIONS
6.1 TAX DISTRIBUTIONS. (a) No later than thirty days following the
end of each Quarter, the Company shall, to the extent of Available Cash, make a
Distribution of cash pro-rata to each Member (based on the balance in each
Member's Cumulative Tax Liability Account) to the extent that the balance in
that Member's Cumulative Tax Liability Account (determined as of the end of such
Quarter) exceeds the cumulative Distributions of cash made to such Member
pursuant to this Section 6.1. In computing the Cumulative Tax Liability Account
of LCI for this purpose, the amount of LCI's federal taxable income or gain
allocated or expected to be allocated for any Quarter shall be increased by 25
percent of the increase in LCI's federal taxable income resulting from the
applicability of section 163(i) of the Code to the income and deductions
allocated, or expected to be allocated (as appropriate) to LCI.
(b) The Distribution to Aladdin Enterprises under Section 6.1(a)
shall be increased to the extent necessary to finance the increase in Aladdin
Enterprise's tax liability resulting
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from the applicability of Section 163(i) of the Code to the income and
deductions allocated, or expected to be allocated (as appropriate) to
Enterprises.
(c) Subject to making the current and anticipated Distributions
provided for in Sections 6.1(a) and (b), at the discretion of the Board and to
the extent of remaining available cash the Company may make a Distribution to
Sommer Enterprises to the extent that a payment is required at such time under
the Tax Indemnification Agreement dated February 26, 1998 among the Trust,
Sommer Enterprises and LCI.
(d) Amounts distributed pursuant to this Section 6.1 shall be
treated as non-interest bearing advances of Distributions under Section 6.2, and
shall be taken into account in determining the amount of future Distributions
under Section 6.2.
6.2 DISTRIBUTIONS. Subject to having made all Distributions provided
for in Section 6.1 and subject to Section 7.5, additional Distributions shall be
made Quarterly as determined by the Board, subject to the following order of
priority:
(a) first, to the Members holding Series A Preferred Shares in
proportion to their Unpaid Preferred Return with respect to such Shares until
the balance of the Unpaid Preferred Return with respect to such Shares is zero;
(b) second, to the Members holding Series A Preferred Shares in
proportion to their Unrecovered Series A Invested Capital until the balance of
the Unrecovered Series A Invested Capital is zero;
(c) third, to the Members holding Series B Preferred Shares in
proportion to their Unpaid Preferred Return with respect to such Shares until
the balance of the Unpaid Preferred Return with respect to such Shares is zero;
(d) fourth, to the Members holding Series B Preferred Shares in
proportion to their Unrecovered Series B Invested Capital until the balance of
the Unrecovered Series B Invested Capital is zero; and
(e) the balance, if any, among the Members holding Common Shares,
in proportion to their Percentage Interests.
6.3 LIMITATIONS ON DISTRIBUTION. Notwithstanding any other provision
of this Agreement, the Company shall not make any Distribution if such
Distribution would violate the NRS, the Nevada Act or other applicable law or
would cause a breach or default under any agreement or instrument to which the
Company is a party or by which the Company or any of its
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assets are bound, but shall instead make such Distribution as soon as
practicable after the making of such Distribution would not cause such
violation, breach or default.
ARTICLE VII
MEMBERS
7.1 POWERS OF MEMBERS. Except as provided in Section 7.4, Members
shall not have the authority to bind the Company by virtue of their status as
Members.
7.2 LIMITATION OF LIABILITY. No Member shall be individually liable
under a judgment, decree or order of a court, or in any other manner, for a
debt, obligation or liability of the Company or any other Member, except as
provided by law or in an agreement signed by the Member to be charged. No
Member shall be required to loan any funds to the Company, nor shall any Member
be required to make any contribution to the Company, nor shall any Member be
subject to any liability to the Company, the other Members, or any third party,
solely as a result of a Member's negative Capital Account balance.
7.3 COMPENSATION OF MEMBERS. Subject to Section 7.5, the Company
shall have authority to pay to any Member a reasonable salary for said Member's
services to the Company. It is understood that the salary paid to any Member
under the provisions of this Section 7.3 shall be determined without regard to
the income of the Company and shall be considered as an operating expense of the
Company and shall be deducted as an expense item in determining Profits and
Losses.
7.4 ACTION BY THE MEMBERS. Except as otherwise specifically provided
in this Agreement, all actions of the Members shall be taken by the Members in
proportion to their Percentage Interests at the time of the action taken.
Except as otherwise specifically provided herein, the Members may vote, approve
a matter or take any action by the vote of the Members at a meeting at which a
quorum is present, in person or by proxy, or without a meeting by written
consent as provided in Section 7.10. The vote or written consent of a Majority
shall be required to approve any matter or to take any action at any meeting of
Members at which a quorum is present, unless a greater or lesser vote or consent
is provided for by this Agreement or required by the NRS.
7.5 MEMBER APPROVAL. (a) Subject to Section 7.5(b) and except as
otherwise specifically provided for in this Agreement, any of the following
actions by the Company or any Subsidiary shall require the vote or consent in
writing of a Supermajority:
(i) except as contemplated in the Equity Participation
Agreement, the admission of a new Member, the acceptance of any Capital
Contributions not provided for in this Agreement, the Completion Guaranty,
the Keep Well Agreement or the Contribution
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Agreement, or the issuance of additional Shares or securities of the
Company or Aladdin Gaming convertible into or exchangeable for Shares or
the granting of any options or other rights to acquire from the Company or
Aladdin Gaming, or other obligation of the Company or Aladdin Gaming to
issue, any Shares or securities convertible into or exchangeable for Shares
(other than in respect of the matters referred to in Section 7.5(a)(xvi)
for which Section 7.5(a)(xvi) shall govern), except for any such
acceptance, issuance or grant provided for in the Employment and Consulting
Agreements;
(ii) other than (A) dividends and distributions by
Subsidiaries, or (B) Distributions referred to in Sections 6.1 and 12.5,
any declaration, setting aside or payment of any Distribution;
(iii) any voluntary dissolution or liquidation of the Company
or any Subsidiary or the sale of all or substantially all of the assets of
the Company and its Subsidiaries;
(iv) any merger or consolidation of the Company or any
Subsidiary with any Person;
(v) any amendment to the Articles or this Agreement or the
adoption of or amendment to the Articles of Organization or Operating
Agreement of any Subsidiary;
(vi) (A) during the period that the Keep Well Agreement is in
force, the creation, incurrence, assumption or guarantee of any
indebtedness (excluding obligations under leases made in the ordinary
course of business) and (B) after the Keep Well Agreement is no longer in
force, the creation, incurrence, assumption or guarantee of any
indebtedness (excluding obligations under leases made in the ordinary
course of business) in excess of $10 million in any individual transaction
(such threshold limit to be increased at the end of each Fiscal Year by an
amount determined by the Board to correspond to increases in consumer
prices in the United States for such Fiscal Year);
(vii) the creation of any lien, pledge or other security
interest in assets of the Company or any Subsidiary securing indebtedness
of any third party which is not for the benefit of any business carried on
by the Company or any Subsidiary;
(viii) the commencement of a voluntary case under Title 11 of
the Untied States Code entitled "Bankruptcy" or any other voluntary
proceeding under any Debtor Relief Laws or any voluntary general assignment
for the benefit of creditors;
(ix) any material transactions (other than transactions
provided for in Sections 6.7(a) or 6.9 of the LCI Purchase Agreement)
between the Company or any
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Subsidiary, on the one hand, and any Member or any Affiliate of any Member,
on the other hand;
(x) any entry into any new business opportunity unrelated to
the Aladdin Development;
(xi) the appointment or removal of the Company's or its
Subsidiaries' independent auditors;
(xii) any material amendment to, or any material waiver under,
the Bazaar Lease (such consent not to be unreasonably withheld);
(xiii) any material amendment to, or any material waiver under,
the Reciprocal Easement Agreement (such consent not to be unreasonably
withheld);
(xiv) any arrangement or agreement for the Company or any
Subsidiary to pay a salary to any Member or any Affiliate of any Member
(other than pursuant to the Employment and Consulting Agreements and other
than in respect of the matters referred to in Section 7.5(a)(xvi) for which
Section 7.5(a)(xvi) shall govern);
(xv) the employment of any member of the Executive Management
Committee of Aladdin Gaming or any material amendment to the terms of
employment of any such Person, including the Employment and Consulting
Agreements;
(xvi) the adoption of, or any material amendment to, any
employee benefit, profit sharing, incentive, bonus, pension, retirement or
employee stock option plans (such consent not to be unreasonably withheld
in the context of industry practice);
(xvii) any license of the Aladdin trademark to any Person other
than a Subsidiary or otherwise in connection with operations of any Person
in connection with the Aladdin Development (such consent not to be
unreasonably withheld);
(xviii) any contract (including leases) outside the ordinary
course of business or for capital expenditure not included in the Company's
annual budgets (such consent not to be unreasonably withheld); and
(xix) the initiation or settlement of any material litigation
outside the ordinary course of business and the selection of counsel
therefor (such consent not to be unreasonably withheld).
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(b) Without limiting Articles VIII and XIV, Section 7.5(a) shall
be of no further force and effect in the event that LCI (i) has Caused an Event
of Default or (ii) is a Bankrupt Member; PROVIDED that Section 7.5(a) shall
continue to be of force and effect at such time if LCI is the Majority Member.
(c) Notwithstanding any other provision of this Agreement, the
rights of the holders of any class of Preferred Shares to Distributions pursuant
to this Agreement may not be diminished or adversely affected without the vote
of the holders of at least two-thirds of the issued and outstanding Shares of
that class.
(d) Notwithstanding any other provision of this Agreement,
Sections 3.6(d) and (f) and 8.4 may not be amended without the written consent
of Aladdin Enterprises.
7.6 LCI CONSENT. (a) In addition to any other requirements under
this Agreement or the NRS, the Company shall not enter into, or make any
material amendment to or material waiver under, any Redevelopment Document or
any part thereof (other than transactions provided for in Sections 6.7(a) or 6.9
of the LCI Purchase Agreement) without the consent of LCI or a Board Member
appointed by LCI. In addition, LCI shall have the rights in respect of
consultation and approval (a) in respect of the Redevelopment as provided in
Section 6.5 of the LCI Purchase Agreement, (b) in respect of the Second Hotel as
provided in Section 6.7(c) of the LCI Purchase Agreement and (c) in respect of
the Timeshare Parcel as provided in Section 6.9(b) of the LCI Purchase
Agreement; PROVIDED that such rights shall not extend to matters relating to
operation and maintenance of the Redevelopment, the Second Hotel or the
Timeshare Parcel. Without limiting Articles VIII and XIV, this Section 7.6
shall be of no further force and effect if Sommer Enterprises is the Majority
Member and LCI (i) has Caused an Event of Default, or (ii) is Bankrupt.
(b) Without limiting any of the foregoing, (i) any change order
in the budget or the plans and specifications relating to the construction and
fitting out of the Salle Privee Facilities shall require the approval of LCI in
its sole discretion and (ii) any change order in the budget or the plans and
specifications relating to the construction phase of the Redevelopment, or any
part thereof, which is in excess of $1 million or any change order of $1
million or less, to the extent such changes cumulatively exceed $10 million
shall be subject to LCI's approval, such approval not to be unreasonably
withheld.
7.7 MEETINGS OF MEMBERS. Meetings of the Members for any purpose may
be called at any time by the Board or by one or more Members holding in the
aggregate more than a ten percent Percentage Interest. Except in special cases
where other express provision is made by the NRS, written notice of each
meeting, signed by a Board representative or by a Member or Members, as the case
may be, shall be given to each Member entitled to vote. All notices shall be
sent in accordance with Section 16.1 to each Member entitled thereto not less
than ten (except in respect of an adjournment of a meeting of the Members) nor
more than sixty days before each
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meeting, and shall specify the place, date and time of such meeting, as well as
the purpose or purposes for which the meeting is called.
7.8 WAIVER OF NOTICE. The transactions carried out at any meeting of
the Members, however called and noticed or wherever held, shall be as valid as
though carried out at a meeting regularly called and noticed if (a) all of the
Members holding Common Shares are present at the meeting or (b) a quorum of the
Members is present and if, either before or after the meeting, each of the
Members holding Common Shares who are not present signs a written waiver of
notice or a consent to holding such meeting or an approval of the minutes
thereof, which waiver, consent or approval shall be filed with the other records
of the Company or made a part of the minutes of the meeting; PROVIDED that no
Member holding Common Shares attending such meeting without notice protests
prior to the meeting or at its commencement that notice was not given to such
Member.
7.9 ADJOURNED MEETINGS AND NOTICE THEREOF. Any Members' meeting,
whether or not a quorum is present, may be adjourned from time to time by the
vote of a majority of Members holding Common Shares present in person or
represented by proxy, but in the absence of a quorum no other business may be
transacted at any such meeting. When any Members' meeting is adjourned for five
days or more, notice of the adjourned meeting shall be given as in the case of
an original meeting, otherwise it shall not be necessary to give any notice of
an adjournment or of the business to be transacted at an adjourned meeting other
than by announcement at the meeting at which such adjournment is taken.
7.10 ACTION BY WRITTEN CONSENT. Any action which may be taken at a
meeting of Members may be taken by the Members without a meeting if authorized
by the written consent of Members holding at least a Majority, or such other
greater or lesser Percentage Interest as is provided for in this Agreement or
required by the NRS. Whenever action is taken by written consent, a meeting of
Members need not be called nor notice of meeting given. The written consent may
be executed in one or more counterparts and by facsimile, and each such consent
so executed shall be deemed an original. A copy of such consent shall be sent
to each Member holding Common Shares.
7.11 TELEPHONIC MEETINGS. Members may participate in a meeting of the
Members by means of a telephone conference or similar method of communication by
which all individuals participating in the meeting can hear each other.
Participation in a meeting pursuant to this Section 7.11 constitutes presence in
person at the meeting.
7.12 QUORUM. A Majority, represented in person or by proxy, shall
constitute a quorum for the transaction of business. Except as specifically
provided in this Agreement, each Member shall be entitled to vote in proportion
to such Member's Percentage Interest, provided that if, pursuant to the NRS or
the terms of this Agreement, a Member is not entitled to vote on a specific
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matter, then such Member's vote and Percentage Interest shall not be considered
for purposes of determining whether a quorum is present or whether approval by
the vote of the Members has been obtained in respect of such specific matter.
ARTICLE VIII
RESIGNATION, TRANSFER OF SHARES,
CHANGE IN CONTROL, TRUST MEMBERS
8.1 RESIGNATION. A Member may not resign from the Company before the
dissolution and winding up of the Company, subject to the provisions of Chapter
463 of the NRS or other applicable law. Except as specifically provided in this
Agreement, any right of a Member under applicable law to demand a return of that
Member's Capital Contribution prior to dissolution is hereby waived.
8.2 TRANSFERS OF INTERESTS. (a) The Common Shares of each Member are
personal property, and such Shares may be Transferred only as provided in this
Agreement and any attempt to Transfer other than as provided in this Agreement
shall be null and void and of no effect whatsoever. If a Member Transfers any of
its Common Shares to any Person pursuant to the provisions of this Article VIII,
in addition to any other requirements under this Agreement, no such Transfer
shall be effective unless and until the proposed transferee (i) notifies the
Company in writing of such Transfer, and (ii) agrees in writing to be bound by
the terms and provisions of and to assume all obligations of the transferor and
to be subject to all obligations with respect to voting, adjustments to
Percentage Interests, and restrictions (including all security interests) to
which the transferor was and is subject under the Articles and this Agreement.
Any new Member shall pay any reasonable expenses in connection with admission as
a new Member, including the costs associated with any approval required by the
Nevada Act. In addition, no Person shall be admitted as a Member until all
approvals required by the Nevada Act are obtained.
(b) Except as specifically provided in this Agreement, a Member
may not Transfer any Preferred Share to any Person other than a Permitted
Transferee without the consent of a Supermajority and any attempt to do so shall
be null and void and of no effect whatsoever.
8.3 RIGHT OF FIRST OFFER AND LAST REFUSAL. (a) Any Member (a
"Transferor") who wishes to Transfer any or all of its Common Shares (the
"Offered Shares") to any Person other than a Permitted Transferee shall, prior
to soliciting or pursuing any offer from any Person, by written notice, offer
the other Members holding Common Shares the right to purchase such Offered
Shares at a stated price (the "Offer Price"). For the period (a "Refusal
Period") of sixty days following receipt of such offer each other Member may
purchase that percentage of the Offered Shares which is equal to the percentage
of the Total Common Shares (excluding the Offered Shares) owned by each such
Member ("Applicable Percentage"). To the extent any Member shall fail to
purchase the
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Applicable Percentage of the Offered Shares prior to the expiration of the
Refusal Period, the Members accepting the offer ("Accepting Members") may
purchase such Shares on a pro rata basis in proportion to the number of Common
Shares owned by each of them. If any of the Offered Shares remain unsold
thereafter, the Transferor may for a period of six months from the expiration of
the Refusal Period solicit and pursue offers at or above the stated per Share
price in the written notice in the foregoing procedure for such remaining
Offered Shares from non-Member third Parties who are not Prohibited Transferees.
(b) Except for Sections 3.7, 8.9 and 8.10, nothing in this
Agreement shall prohibit or restrict a Transfer of Common Shares (i) in
connection with the adjustments in Percentage Interests provided in Article III,
(ii) pursuant to the Employment and Consulting Agreements or (iii) in connection
with the purchase of Common Shares from Aladdin Gaming by the Company pursuant
to the Operating Agreement of Aladdin Gaming following the Transfer of such
Common Shares to Aladdin Gaming pursuant to the Employment and Consulting
Agreements; PROVIDED that Transfers referred to in clauses (ii) and (iii)
immediately above shall be subject to Section 8.2(a)(ii).
(c) Any Member who, having followed the procedure in Section
8.3(a), shall subsequently receive a bona fide offer from any Person (the
"Offeror") who is not a Prohibited Transferee for the purchase of all or any
portion of its Common Shares shall, prior to accepting such offer, provide
written notice (the "Notice of Offer") thereof to each other Member holding
Common Shares, which notice shall set forth the terms and conditions of the
offer so received, including the per Share purchase price and the identity of
the Offeror. Following the delivery to the other Members holding Common Shares
of the Notice of Offer, each other Member may purchase its Applicable Percentage
during a thirty day Refusal Period on the terms set forth in the Notice of
Offer. To the extent any Member shall fail to purchase its Applicable
Percentage prior to the expiration of the Refusal Period, the Accepting Members
may purchase such Shares on a pro rata basis in proportion to the number of
Common Shares owned by each of them (and the foregoing procedure shall be
repeated in respect of any Shares not purchased until all Accepting Members have
had an opportunity to purchase any remaining Shares).
(d) Subject to Sections 8.2, 8.4 and 8.5, if all or any of the
Offered Shares shall remain unsold after completion of the procedures set forth
in Sections 8.3(a) and (b), the Transferor may sell such remaining Offered
Shares to the Offeror within six months of the completion of such procedures on
terms no more favorable than those set forth in the Notice of Offer; PROVIDED
that the Offeror is not a Prohibited Transferee. To the extent any of the
Offered Shares are not sold in accordance with the foregoing, the Members shall
continue to have a right of first refusal under this Section 8.3 with respect to
any Transfers to any Person which are subsequently proposed by such Transferor.
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(e) The closing of a purchase by a Member under this Section 8.3
shall occur within the Refusal Period or at such later date when all approvals
required by the Nevada Act are obtained (such approvals to be obtained as soon
as is reasonably practicable). At such closing the Transferor and the relevant
Accepting Member (and any or all other Members, as may be required) shall
execute an assignment and assumption agreement and any other instruments and
documents as may be reasonably required by such Member to effectuate the
transfer of such Shares free and clear of any liens, claims or encumbrances,
other than as specifically permitted hereunder. Any Transfer to any Person
which does not comply with the provisions of this Section 8.3, other than a
Transfer expressly provided for in the other provisions of this Agreement, shall
be null and void and of no effect whatsoever.
8.4 TAG ALONG RIGHTS. (a) No Member may, alone or in concert with any
other Member, in any transaction or series of related transactions, Transfer any
Common Shares to another Person or Persons other than a Transfer to a Permitted
Transferee if, after giving effect to such Transfer of Common Shares, such
Person or Persons together with their Affiliates would own in the aggregate an
amount of Common Shares greater than ten percent of the Total Common Shares
(such Transfer being referred to herein as a "Tag Along Sale"), except in
accordance with the procedures set forth in this Section 8.4.
(b)(i) If a Member (a "Selling Member") proposes to make a Tag
Along Sale the Selling Member shall first deliver to each other Member holding
Common Shares a written notice (the "Tag Along Notice"), which shall
specifically identify the proposed transferee or transferees (the "Tag Along
Transferee"), the number of Common Shares being Transferred (the "Tag Along
Shares"), the purchase price per Share therefor ("Tag Along Price Per Share"),
and a summary of the other material terms and conditions of the proposed Tag
Along Sale, and shall contain an offer (the "Tag Along Offer") by the Tag Along
Transferee to each Member holding Common Shares other than the Selling Member,
which shall be irrevocable for a period of twenty days after the delivery
thereof (the "Tag Along Period"), to purchase such Member's Common Shares at a
price per share equal to the Tag Along Price Per Share and upon all such other
terms offered by the Tag Along Transferee to the Selling Member including,
without limitation, those set forth in the Tag Along Notice.
(ii) The Tag Along Offer may be accepted in whole or in part at
the option of each of the Members. Notice of a Member's intention to accept a
Tag Along Offer, in whole or in part, shall be evidenced by a writing signed by
such Member and delivered to the Selling Member, the Tag Along Transferee and
the Company prior to the end of the Tag Along Period, setting forth the amount
of Common Shares that such Member elects to sell.
(iii) Upon the expiration of the Tag Along Period, the Tag Along
Shares shall be allocated among the Selling Member and the other Members who
have accepted the Tag Along Offer in whole or part (collectively, the "Tag Along
Members") as follows: (A) First, each Tag
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Along Member shall be entitled to sell no more than its Proportionate Percentage
of the Tag Along Shares; (B) second, if an amount of Tag Along Shares has not
been allocated for sale pursuant to clause (A) (the "Remaining Tag Along
Shares"), each Tag Along Member (an "Oversubscribed Tag Along Member") which had
accepted the Tag Along Offer with respect to an amount of Tag Along Shares in
excess of the amount of Common Shares allocated to it for sale under clause (A)
shall be entitled to sell an amount of Remaining Tag Along Shares equal to no
more than its Proportionate Percentage (treating only Oversubscribed Tag Along
Members as Tag Along Members for these purposes) of the Remaining Tag Along
Shares; and (C) third, the process set forth in clause (B) shall be repeated
with respect to any amounts of Tag Along Shares not allocated for sale until the
Tag Along Shares are allocated for sale in their entirety.
(c) All sales of Common Shares to the Tag Along Transferee shall
be consummated contemporaneously at the offices of the Company on the later of
(i) a mutually satisfactory business day as soon as practicable, but in no event
more than thirty days after the expiration of the Tag Along Period, (ii) the
closing date, if any, set forth in the Tag Along Notice, (iii) the fifth
business day following the expiration or termination of all waiting periods
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
applicable to such sales, and (iv) the date when all approvals in respect of
such sales required by the Nevada Act are obtained (such approvals to be
obtained as soon as is reasonably practicable). The delivery of certificates or
other instruments evidencing the Tag Along Shares as allocated pursuant to this
Section 8.4 duly endorsed for Transfer shall be made on such date against
payment of the purchase price for such Shares.
(d) The Parties acknowledge the rights of the holders of
Warrants and Warrant Shares under the Equity Participation Agreement to
participate in the arrangements in this Section 8.4.
8.5 TRANSFERS TO PERMITTED TRANSFEREES. Subject to Section 8.2, a
Member may Transfer its Common Shares, or any part thereof, at any time to a
Permitted Transferee, and shall not be required to comply with the procedures
set forth in Sections 8.3 and 8.4 in respect of such Transfers.
8.6 TRANSFER OF OWNERSHIP INTERESTS IN MEMBERS. (a) Except for (i)
the Transfer of any Warrants and, the issuance or Transfer of Warrant Shares,
(ii) any change in any ownership interest in LCI Parent, (iii) any Transfer to a
revocable, inter vivos trust of which the transferee is the sole trustee and of
which the transferee and/or his or her family is a beneficiary or (iv) any
purchase of any interest in Aladdin Holdings by the Trust, in respect of each of
which this Section 8.6 shall not apply, any Transfer or issuance of any
ownership interest in any holder of Common Shares or in any entity that directly
or indirectly owns a majority ownership interest in a holder of Common Shares
(an "Upstream Ownership Interest"), other than to a Permitted Transferee, shall
be prohibited unless in compliance with the procedures and requirements set
forth in this Section
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8.6. Notwithstanding any other provision of this Agreement, no Upstream
Ownership Interest shall be Transferred or issued until all approvals required
by the Nevada Act are obtained.
(b) Any holder of any Upstream Ownership Interest in any holder
of Common Shares or in any entity that owns a majority ownership interest in a
holder of Common Shares (an "Upstream Transferor") who shall receive a bona fide
offer from any Person (an "Upstream Offeror") who is not a Prohibited Transferee
for the purchase of all or any portion of its Upstream Ownership Interest shall,
prior to accepting such offer, provide written notice (the "Upstream Notice of
Offer") thereof to each other holder of Common Shares, which notice shall set
forth the terms and conditions of the offer so received, including the purchase
price and the identity of the Upstream Offeror. Following the delivery to the
other holders of Common Shares of the Upstream Notice of Offer, each other
holder of Common Shares may purchase the percentage of the Common Shares
indirectly owned by the Upstream Transferor equal to the percentage of the Total
Common Shares (excluding the Common Shares indirectly owned by the Upstream
Transferor) owned by each such other holder of Common Shares during a thirty day
Refusal Period on terms equivalent to those set forth in the Upstream Notice of
Offer in respect of the Upstream Ownership Interest. To the extent any holder
of Common Shares shall fail to purchase such percentage prior to the expiration
of the Refusal Period, the accepting holders of Common Shares may purchase such
Common Shares on a pro rata basis in proportion to the number of Common Shares
owned by each of them.
(c) The closing of a purchase by a Member under this Section 8.6
shall occur within the Refusal Period or at such later date when all approvals
required by the Nevada Act are obtained (such approvals to be obtained as soon
as practicable). At later of the expiration of the Refusal Period and the
Closing of the sales of Common Shares under this Section 8.6, the Upstream
Transferor may sell the Upstream Ownership Interest to the Upstream Offeror on
terms no more favorable than those set forth in the Upstream Notice of Offer (as
adjusted for any sales of Common Shares under this Section 8.6); PROVIDED that,
if any Common Shares remain owned by the Person in whom the Upstream Ownership
Interest exists, the Upstream Offeror is not a Prohibited Transferee. To the
extent any of the Upstream Ownership Interests are not sold in accordance with
the foregoing within six months after giving the Upstream Notice of Offer, the
holders of Common Shares shall continue to have a right of first refusal under
this Section 8.6 with respect to any Transfers to any Person which are
subsequently proposed by such Upstream Transferor.
8.7 CALL. After the occurrence of (a) any Change In Control with
respect to a Member (other than a Transfer of an Upstream Ownership Interest
permitted under Section 8.6), (b) any Transfer in breach of Section 8.6, or (c)
any breach of Article XV (each, a "Trigger Event"), the Company (acting without
the Member to which the Trigger Event relates (the "Triggering Member") or Board
Members appointed by the Triggering Member) shall have an irrevocable right (the
"Call") to purchase, or have its nominee purchase, within ninety days after the
Company's first knowledge of such Trigger Event (other than knowledge imputed
from the Triggering Member or
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Board Members appointed by the Triggering Member), all of the Triggering
Member's Common Shares for a cash purchase price equal to seventy-five percent
of the fair market value of such Common Shares at such time, as determined after
the exercise of the Call by an independent qualified appraiser appointed by the
Company (acting without the Triggering Member or the Board Members appointed by
such Triggering Member appointed by the Triggering Member). The fees and
expenses of such appraiser shall be paid by the Triggering Member and its
determination of fair market value shall be conclusive and binding on the
Company and the Triggering Member. The Call may be exercised within the ninety
day exercise period by delivery of a written notice by the Company to the
Triggering Member and the other Members holding Common Shares stating that the
Company is exercising its Call and specifying the identity of the Person that
will be purchasing the Shares; PROVIDED that the Triggering Member shall have
thirty days from receipt of such written notice to cure the Trigger Event and
thereby avoid a purchase of its Common Shares under this Section 8.7. The
closing of the purchase of such Common Shares shall take place on a date to be
designated by the Company within thirty days of the determination of the fair
market value of the Common Shares.
8.8 CONVEYANCE TO LIVING TRUST. (a) The foregoing notwithstanding,
any Member shall be entitled to Transfer all such Member's Common Shares or
Preferred Shares, without consideration, to a revocable, INTER VIVOS trust of
which the Member is trustee and of which the Member and/or his or her family is
a beneficiary, without obtaining the consent of the other Members; provided,
however, that transfers pursuant to this Section 8.8 shall not be effective
until all approvals required under the Nevada Act are obtained. Transfers
pursuant to this Section 8.8 shall be subject to Section 8.2.
(b) When any such trustee becomes a Member, such trustee shall
be a Member not individually but solely as a trustee, in the exercise of and
under the power and authority conferred upon and vested in such trustee.
Nothing contained in this Agreement shall be construed as creating any personal
liability for any such trustee to pay any amounts required to be paid hereunder,
or to perform any covenant, either express or implied, contained herein. The
claim of any such liability is hereby expressly waived by the other Members.
Any liability of any Member which is a trust (whether to the Company or to any
third person) shall be a liability to the full extent of the trust estate and
shall not be a personal liability of any trustee, grantor or beneficiary of any
trust.
(c) Any successor trustee or co-trustee of any trust which is a
Member shall be entitled to exercise the same rights and privileges and be
subject to the same duties and obligations as the predecessor trustee. As used
in this Section 8.8, the term "trustee" shall include any and all such successor
trustees.
8.9 GAMING CONTROL ACT. Notwithstanding any other provision of this
Agreement, no Shares or other ownership interest in the Company, and no Upstream
Ownership Interest, shall
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be issued or Transferred in any manner whatsoever except in compliance with the
provisions of the Nevada Act.
8.10 FURTHER RESTRICTION ON TRANSFER OF SHARES. In addition to the
other restrictions set forth in this Agreement, no Member may assign, convey,
sell, encumber or in any way alienate all or any part of such Member's Shares,
if the Shares to be assigned, conveyed, sold or encumbered, when added to the
total of all other Shares assigned, conveyed, sold or encumbered in the
preceding twelve months, would result in the termination of the Company under
Code Section 708, if such termination will result in adverse tax consequences to
the non-transferring Member.
ARTICLE IX
BOARD OF MANAGERS
9.1 BOARD OF MANAGERS. (a) Except for matters expressly requiring
the approval of the Members (or a percentage or class of the Members) pursuant
to this Agreement or the NRS, the business and affairs of the Company shall be
managed by a Board of Managers pursuant to this Article IX. Subject to the
provisions of the Nevada Act and except as specifically provided in this
Agreement, the Board Members shall each serve for a three year term or until
such Board Member shall resign or be removed or otherwise disqualified to serve,
or until such Board Member's successor shall have been appointed.
(b) The Members agree to take all necessary action such that each
Member shall have rights identical to those set forth in this Article IX with
respect to the boards of management (or comparable bodies) and management of the
Subsidiaries.
(c) Subject to the remaining provisions of this Section 9.1, the
Members shall appoint five Board Members as follows: (i) Aladdin Enterprises
shall appoint three Board Members (who shall be deemed to have been designated
by the Person who Controls Aladdin Enterprises) and (ii) LCI shall designate and
appoint two Board Members. On the date hereof the Board Members shall be: Jack
Sommer, Ronald B. Dictrow and Richard J. Goeglein as Aladdin Enterprises
appointees and Alan L. Goodenough and G. Barry C. Hardy as LCI appointees. Each
of Aladdin Enterprises and LCI shall have the right to have one of the Board
Members appointed by it on any committee of the Board. The first Chairman of
the Board shall be Jack Sommer. In the event of the resignation or removal of
Jack Sommer as the Chairman of the Board prior to the Opening Date, the
successor Chairman of the Board shall be a Person with a substantially similar
or higher level of experience as Jack Sommer with respect to the development of
commercial properties and shall be appointed by Aladdin Enterprises subject to
the approval of LCI, such approval not to be unreasonably withheld.
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(d) Provided that the Member with the highest Percentage
Interest, other than the Majority Member (if any) and its Affiliates have not
Caused an existing Event of Default and have paid their pro rata share (as
provided in the Contribution Agreement) of all Completion Guaranty Payments up
to such time, if the Majority Member or its Affiliates fails to pay their pro
rata share (as provided in the Contribution Agreement) of any two separate
Completion Guaranty Payments, then such Majority Member shall remove, or (if
such Majority Member Controls Aladdin Enterprises) such Majority Member shall
cause Aladdin Enterprises to remove, from the Board one of the Board Members
designated by such Majority Member, as of the relevant second Completion
Guaranty Payment Due Date, and such Party removing a Board Member shall appoint
a new independent Board Member agreed by the remaining Board Members who shall
be Chairman of the Board.
(e) Provided that the Member with the highest Percentage
Interest, other than the Majority Member (if any) and its Affiliates have not
Caused an existing Event of Default under the Keep Well Agreement and have paid
their pro rata share (as provided in the Contribution Agreement) of all Keep
Well Payments up to such time, if the Majority Member or its Affiliates (i)
fails to pay their pro rata share (as provided in the Contribution Agreement) of
a Keep Well Payment (provided that no alterations to the Board have occurred
pursuant to Section 9.1(d)) such Majority Member shall remove, or (if such
Majority Member Controls Aladdin Enterprises) such Member shall cause Aladdin
Enterprises to remove, from the Board one of the Board Members designated by
such Majority Member, as of the relevant Keep Well Due Date and such Party
removing a Board Member shall appoint a new independent Board Member agreed by
the remaining Board Members who shall be Chairman of the Board and (ii) fails to
make its pro rata share (as provided in the Contribution Agreement) of a second
Keep Well Payment, the independent Board Member shall be removed from the Board
and such Party removing a Board Member shall appoint a new Board Member
designated by the Member holding the highest Percentage Interest, other than any
Majority Member, as of the relevant second Keep Well Due Date and such new Board
Member shall be Chairman of the Board.
(f) Provided (i) that Sommer Enterprises and its Affiliates (if
LCI is the Majority Member) or LCI and its Affiliates (if Sommer Enterprises is
the Majority Member) have not Caused an existing Event of Default under the Keep
Well Agreement and has paid their pro rata share (as provided in the
Contribution Agreement) of all Keep Well Payments up to such time and (ii) no
alterations to the Board have occurred pursuant to Section 9.1(d) or (e), if
there is a Non-Default Keep Well Trigger, the Majority Member shall, or (if such
Majority Member Controls Aladdin Enterprises) such Majority Member shall cause
Aladdin Enterprises to, remove one of the Board Members designated from the
Board as of the commencement of the Non-Default Keep Well Trigger and designate
a new independent Board Member who shall be Chairman of the Board; PROVIDED
that, if Jack Sommer is Chairman of the Board at such time, Jack Sommer shall
remain as Chairman of the Board. At any time after the occurrence of a
Non-Default Keep Well Trigger, upon the occurrence of four successive Quarters
when no payments are due (other than any Salle Privee
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Amount) under the Keep Well Agreement, then the Party who removed the Board
Member shall restore to the Board a designee of the Member which originally
designated such Board Member who was removed and shall remove the independent
Board Member, if any, designated pursuant to the preceding sentence.
9.2 POWERS AND DUTIES OF THE BOARD. The Board (or any Officer acting
at the direction of the Board) shall manage the business affairs of the Company.
The Board shall have the general powers and duties of management typically
vested in a director or board of directors of a corporation, and all powers and
duties necessary, advisable or convenient to administer and operate the business
and affairs of the Company, and such other powers and duties as may be
prescribed by the Members or implied by law. Subject to the provisions of this
Agreement, such powers and duties shall include, without limitation, the
following: (i) to select and remove all Officers (as more fully described in
Section 9.3), agents and employees of the Company, prescribe such powers and
duties for them as may be consistent with law, the Articles and this Agreement,
and fix their compensation; (ii) to borrow money and incur indebtedness on
behalf of the Company for the purposes of the Company, and to cause to be
executed and delivered therefor, in the name of the Company, promissory notes,
bonds, debentures, deeds of trust, mortgages, pledges, hypothecations or other
evidence of debt and securities; (iii) to change the principal office of the
Company from one location to another within Nevada and to establish from time to
time one or more subsidiary offices of the Company; and (iv) to enter into or
commit to any agreement, contract, commitment, instrument, deed, mortgage or
obligation on behalf of the Company for any Company purpose.
9.3 ELECTION OF OFFICERS. Subject to the applicable provisions of
the Nevada Act, the Board may from time to time elect such Officers as the Board
shall deem appropriate. Subject to the provisions of this Agreement, the Board
may confer upon any of the Officers such duties, authority and titles as the
business of the Company may require in the reasonable judgment of the Board
(including the authority to represent and bind the Company in accordance with
the scope of the particular duties involved and such other general powers and
duties of a type similar to those typically vested in an officer of a
corporation). The Officers shall serve at the sole discretion of the Board.
9.4 REMOVAL, RESIGNATION AND VACANCIES. (a) A Board Member may be
removed at any time for any reason (i) by Aladdin Enterprises, if such Board
Member was appointed by Aladdin Enterprises and (ii) by LCI, if such Board
Member was appointed by LCI. In addition, a Majority may remove any Board
Member for incapacity to carry out, or acting with malfeasance in connection
with, his or her duties, powers or obligations hereunder. In the event any
Person elected to serve as a Board Member at any time is found by the Nevada
Gaming Authorities to be unsuitable to hold a gaming license, such Person shall
thereupon automatically cease to be a Board Member without any further action
and a substitute Board Member shall be appointed in accordance with Section
9.4(c).
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(b) Any Board Member may resign at any time by giving written
notice to the Company and the Members. Any such resignation shall take effect
at the date of the receipt of such notice or at any later time specified
therein; and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
(c) Subject to the applicable provisions of the Nevada Act, any
vacancy on the Board shall be filled by the appointment of a successor Board
Member. Such successor Board Member shall be (i) appointed by Aladdin
Enterprises if such successor Board Member's predecessor was appointed by
Aladdin Enterprises and (ii) appointed by LCI if such successor Board Member's
predecessor was appointed by LCI.
9.5 MEETINGS OF THE BOARD. (a) PLACE AND TIME OF MEETINGS. The
meetings of the Board shall be held at least quarterly at the Records Office,
unless some other place is designated in the notice of the meeting. Meetings of
the Board shall be held at such times as is determined by the Board; PROVIDED
that one meeting of the Board shall be held in New York, New York in each Fiscal
Year unless the Members agree otherwise in writing. Accurate minutes of any
meeting of the Board shall be maintained by the Officer designated by the Board
for such purpose.
(b) SPECIAL MEETINGS; NOTICE. Special meetings of the Board for
any purpose may be called at any time by any Board Member. At least forty-eight
hours written notice of the time and place of a special meeting of the Board
shall be delivered personally to the Board Members at their last known business
addresses as it is shown on the records of the Company or personally
communicated to them by a Board Member or officer of the Company by telegraph or
facsimile. Such telegraphing, faxing or delivery shall be considered due, legal
and personal notice to such Board Member.
(c) WAIVER OF NOTICE. The transactions carried out at any
meeting of the Board, however called and noticed or wherever held, shall be as
valid as though had at a meeting regularly called and noticed if: (i) all Board
Members are present at the meeting or (ii) if a majority of the Board Members
are present and if, either before or after the meeting, those not present sign a
waiver of notice of such meeting or a consent to holding the meeting or an
approval of the minutes thereof, which waiver, consent or approval shall be
filed with the other records of the Company or made a part of the minutes of the
meeting; PROVIDED that no Board Member attending such meeting without notice
protests prior to the meeting or at its commencement that notice was not given
to him or her.
(d) ACTION BY WRITTEN CONSENT. Any action required or permitted
to be taken by the Board may be taken without a meeting and will have the same
force and effect as if taken by a vote of the Board Members at a meeting
properly called and noticed, if authorized by the written consent of all, but
not less than all, of the Board Members. In no instance where action is
authorized by written consent need a meeting of the Board be called or noticed.
A copy of the
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action taken by written consent shall be filed with the records of the Company.
The written consent may be executed in one or more counterparts and by
facsimile, and each such consent so executed shall be deemed an original.
(e) QUORUM. Three incumbent Board Members present in person or
by proxy shall be necessary to constitute a quorum for the transaction of
business at any meeting of the Board. Except as otherwise provided in this
Agreement or by the NRS, the action of a majority of the Board Members present
in person or by proxy at any meeting at which there is a quorum, when duly
assembled, is valid. A meeting at which a quorum is initially present may
continue to transact business, notwithstanding the withdrawal of Board Members,
if any action taken is approved by a majority of the required quorum for such
meeting.
(f) TELEPHONIC MEETINGS. Board Members may participate in a
meeting of the Board by means of a telephone conference call or similar method
of communication so long as all Persons participating in the meeting can hear
one another. Participation in a meeting of the Board pursuant to this Section
9.5(f) constitutes presence in person at the meeting.
9.6 COMPENSATION OF BOARD MEMBERS; COMPENSATION OF OFFICERS. The
Company shall not pay any Board Member in their capacity as a Board Member any
salary or other benefits, other than such insurance and/or indemnification as
may be determined by the Board and is permitted under the Articles, this
Agreement and the NRS. The Company shall pay to each Officer such salary and
other benefits as shall be approved from time to time by the Board.
9.7 EXPENSE REIMBURSEMENTS. The Company shall reimburse the Board
Members for all expenses reasonably incurred by the Board Members on behalf of
the Company or in connection with the performance of the obligations of the
Board Members hereunder.
9.8 EMPLOYMENT AND CONSULTING AGREEMENTS. The Parties acknowledge
that the Company has entered into the Employment and Consulting Agreements and
that such Employment and Consulting Agreements shall prevail notwithstanding any
other provision of this Agreement other than Section 3.6.
ARTICLE X
ACCOUNTING, RECORDS AND BANK ACCOUNTS
10.1 RECORDS AND ACCOUNTING. The books and records of the Company
shall be kept, and the financial position and the results of its operations
recorded, in accordance with the accounting methods elected to be followed by
the Company for federal income tax purposes. The books and records of the
Company shall reflect all Company transactions and shall be appropriate and
adequate for the Company's business.
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10.2 ACCESS TO ACCOUNTING RECORDS. All accounting books and records
of the Company and its Subsidiaries, including files, tax returns and
information, shall be maintained at an office of the Company or at the Records
Office. Each Member, and its duly authorized representative, agent or attorney,
upon written demand providing at least five days notice, shall have access to
such books and records and the right to inspect, examine and copy them (at such
Member's expense) at reasonable times during normal business hours. The rights
authorized by this Section 10.2 may be denied to a Member upon such Member's
refusal to provide to the Company an affidavit stating that such inspection,
extracts or audit is not desired for any purpose not related to the Member's
interest in the Company as a Member.
10.3 ANNUAL TAX INFORMATION. The Board shall use its best efforts to
cause the Company to deliver to each Member within ninety days after the end of
each Fiscal Year all information necessary for the preparation of such Member's
federal income tax return. Federal, state and local tax returns of the Company
shall be prepared or caused to be prepared and filed in a timely manner by the
Board.
10.4 OBLIGATIONS OF MEMBERS TO REPORT ALLOCATIONS. The Members are
aware of the income tax consequences of the allocations made by this Agreement
and hereby agree to be bound by the provisions of this Agreement in reporting
their shares of the income and loss for income tax purposes.
10.5 TAX MATTERS. Sommer Enterprises is hereby designated "Tax
Matters Partner" (as that term is defined in Code Section 6231) and is
authorized to represent the Company in connection with all tax examinations and
proceedings (whether judicial or administrative) and to oversee the Company's
tax affairs all in a manner consistent with the best interests of the Company;
PROVIDED that if Sommer Enterprises is the Tax Matters Partner it shall keep LCI
reasonably informed as to the status of any audit of the Company's tax affairs
by any taxing authority and shall not settle any audit or other controversy
without the consent of LCI, such consent not to be unreasonably withheld. The
Members agree to cooperate with the Tax Matters Partner and to do or refrain
from doing any or all things reasonably required by the Tax Matters Partner in
connection with any such examinations or proceedings. The Board may from time
to time designate any other Member to serve as "Tax Matters Partner".
10.6 TAX ELECTIONS. The Board may in its discretion determine whether
or not to make any available elections pursuant to the Code.
10.7 TAXATION AS A PARTNERSHIP. The Company shall be treated as a
partnership for United States federal income tax purposes and each Member agrees
not to take any action inconsistent with the Company's classification as a
partnership for United States federal, state or local income tax purposes.
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10.8 TAX REPORTING. The Company shall timely file such tax returns
and information reports as required by the Code and applicable foreign, state
and local taxing jurisdictions. Each income tax return of the Company shall be
delivered to LCI for its review at least [thirty] days prior to earlier of (a)
the final due date (with extensions) of such return or (b) the date such return
is to be filed. If LCI objects in writing to the reporting of any item on any
such income tax return, the Company shall not finalize the form of such return
without the written consent of LCI, such consent not to be unreasonably
withheld. If no agreement is reached with respect to an item contained in any
such return prior to fifteen days prior to the final due date (with extensions)
of such return, the Company's position with respect to such item shall be
reflected on the final form of the return provided an independent nationally
recognized accounting firm mutually selected by LCI and the Company, at the
Company's expense, determines that the Company has a reasonable basis for its
reporting position with respect to the item.
ARTICLE XI
IPO
11.1 IPO TIMING. (a) The Parties anticipate that an IPO will be
executed as soon as it is commercially reasonable to do so after the Opening
Date.
(b) If an IPO has not taken place within three years from the Opening
Date, Sommer Enterprises and LCI shall each have the right to demand that such
an IPO be executed; PROVIDED that at the time of the demand such party and its
Affiliates have a Percentage Interest equal to at least twenty percent, and
PROVIDED further that Sommer Enterprises or LCI, as the case may be, first
submits to the Board a letter from a reputable, nationally recognized
underwriter stating that the public sale of such shares is economically and
commercially feasible, and PROVIDED further that Sommer Enterprises shall have
the right to defer such an IPO demanded by LCI for up to twelve months if, in
the reasonable opinion of Sommer Enterprises, it is commercially reasonable to
do so and if and for so long as Sommer Enterprises is the Majority Member.
(c) Concurrently with or prior to any IPO the Members shall enter into
the Stockholders and Registration Rights Agreement governing their rights and
obligations as members or stockholders of the IPO Corporation.
11.2 PRE-IPO PURCHASES. (a) LCI and Sommer Enterprises will,
immediately prior to, or as part of, the IPO, be entitled (subject to the market
requirements in respect of such IPO and subject further to any restrictions
imposed by any law including the Nevada Act) acquire additional Common Shares in
the IPO Corporation, at a mutually agreeable price (based on the IPO price
discounted to reflect the absence of underwriters' fees and costs).
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(b) Notwithstanding Sommer Enterprises' rights under Section 11.2
(a), LCI shall have the right to purchase at a mutually agreeable price (based
on the IPO price discounted to reflect the absence of underwriters' fees and
costs) from either (at the option of Sommer Enterprises) the IPO Corporation
pursuant to Section 11.2(a) or from Sommer Enterprises immediately prior to or
as part of, the IPO, Common Shares in the IPO Corporation sufficient for it to
maintain a holding of more than twenty percent of the common shares of IPO
Corporation after the IPO.
11.3 INCORPORATION OF PARTNERSHIP. In connection with an IPO, if the
Company changes its classification for federal income tax purposes from a
partnership to an association (or publicly traded partnership) taxable as a
corporation, the Members hereto acknowledge that it is intended that such change
be effected as a tax-free incorporation and each Member shall, to the extent
commercially feasible, use its best efforts to effect such intent.
ARTICLE XII
DISSOLUTION OF THE COMPANY AND
TERMINATION OF A MEMBER'S INTEREST
12.1 DISSOLUTION. The Company shall be dissolved and its affairs
wound up (a) at the time specified in the Articles or (b) upon the written
agreement of all of the Members, in which event the Members will proceed with
reasonable promptness to liquidate the Company. The death, insanity,
retirement, resignation, expulsion, Bankruptcy or dissolution of any Member, or
the occurrence of any other event which terminates a Member's continued
membership in the Company shall not, in and of itself, cause the dissolution of
the Company.
12.2 DEATH OF A MEMBER; CONTINUATION. After the death of a Member,
the deceased Member shall cease to be a Member and the personal representative
of the deceased Member and, after the distribution of the deceased Member's
estate, the deceased Member's heirs or legatees (in place and instead of the
personal representative), shall have no right to participate in the management
of the business and affairs of the Company, but shall be Disassociated Members
and entitled only to receive distributions and any other share of profits to
which the deceased Member would have been entitled under this Agreement and the
NRS but for the death of such Member; PROVIDED that if a majority of the
remaining Members consent, the personal representative of the deceased Member
and, after the distribution of the deceased Member's estate, the deceased
Member's heirs and legatees (in place and instead of the personal
representative), shall succeed to the Shares of the deceased Member as a
Substituted Member or Substituted Members.
12.3 COMPANY'S OPTION TO PURCHASE BANKRUPT MEMBER'S INTEREST. Upon
the institution of a Bankruptcy by or against a Member, the Company shall have
the option (the "Purchase Option"), exercisable by written notice to all the
Members within 120 days of the date the Bankruptcy petition is filed by or
against the Bankrupt Member, to purchase the Bankrupt
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Member's Common Shares, subject, however, to receipt of all required approvals
under the Nevada Act (such approvals to be obtained as soon as reasonably
practicable), for an agreed upon price, or if no price can be agreed upon, for
the fair market value of such Common Shares at the time of such Bankruptcy, as
determined by an independent qualified appraiser appointed by unanimous
agreement by the Members, including the Bankrupt Member. If they cannot agree
on an appraiser, the Members not including the Bankrupt Member and its
Affiliates, on the one hand, and the Bankrupt Member, on the other hand, shall
each select an appraiser, which appraisers together shall select a third
appraiser, which third appraiser shall determine the fair market value of such
Common Shares, which determination shall be binding upon the Parties. If the
Company elects to exercise the Purchase Option, it shall pay the agreed price or
the fair market value, as the case may be, of the Bankrupt Member's Shares to
the Bankrupt Member, in cash, within such 120-day period or at such later time
as all approvals required under the Nevada Act are obtained. If the Company
elects to not exercise the Purchase Option, the Company shall notify the Members
including the Bankrupt Member of its decision in writing (the "Non-Exercise
Notice"), within such 120-day period.
12.4 MEMBERS' OPTION TO PURCHASE BANKRUPT MEMBER'S INTEREST. Upon the
institution of a Bankruptcy by or against a Member, if the Company does not
exercise the Purchase Option, the Members not including the Bankrupt Member
shall have the right to purchase the Bankrupt Member's Common Shares, subject,
however, to receipt of all required approvals under the Nevada Act (such
approvals to be obtained as soon as reasonably practicable), for an agreed upon
price, or if no price can be agreed upon, for the price previously determined
under the independent appraisal procedure in Section 12.3 or, if no such price
has been so determined, for the fair market value of such Shares at the time of
such Bankruptcy, as determined by an independent qualified appraiser appointed
by the Members, including the Bankrupt Member. If they cannot agree on an
appraiser, the Members not including the Bankrupt Member and its Affiliates, on
the one hand, and the Bankrupt Member, on the other hand, shall each select an
appraiser, which appraisers together shall select a third appraiser, which third
appraiser shall determine the fair market value of such Common Shares, which
determination shall be binding upon the Parties. The Member or Members wishing
to purchase all or a part of the Shares of the Bankrupt Member (each, a
"Purchasing Member") shall pay the agreed price or the fair market value of such
Shares to the Bankrupt Member, in cash, by the earlier of (a) 120 days after the
Company delivers the Non-Exercise Notice to the Members, and (b) 240 days after
the date the Bankruptcy petition is filed by or against the Bankrupt Member;
PROVIDED, that such purchase shall not occur until all approvals required under
the Nevada Act are obtained. Each Purchasing Member must notify the other
Members of such Purchasing Member's desire to purchase all or a portion of the
Bankrupt Member's Shares in writing by the earlier of (x) twenty days after the
Company delivers the Non-Exercise Notice to the Members, and (y) 140 days after
the date the Bankruptcy petition is filed by or against the Bankrupt Member.
Unless they agree otherwise, if there is more than one Purchasing Member, each
Purchasing Member may purchase up to the proportion of the Bankrupt Member's
Shares that such Purchasing Member's Percentage Interest bears to the Ultimate
Percentage Interests of all Purchasing Members (if any Purchasing Member elects
to Purchase less than its full entitlement
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hereunder the other Purchasing Members may purchase such entitlement pro rata).
If no remaining Member wishes to purchase the Bankrupt Member's Shares, or the
Purchasing Members do not purchase the Bankrupt Member's Shares within the
earlier of the time periods set forth above, then all rights to purchase the
Bankrupt Member's Shares pursuant to this Section 12.4 shall terminate and the
Bankrupt Member shall retain such Shares as a Disassociated Member.
12.5 DISTRIBUTION ON DISSOLUTION AND LIQUIDATION. In the event of the
dissolution of the Company for any reason, the business of the Company shall be
continued to the extent necessary to allow an orderly winding up of its affairs,
including the liquidation and termination of the Company pursuant to the
provisions of this Section 12.5, as promptly as practicable thereafter, and each
of the following shall be accomplished:
(a) holders of a Supermajority of the Common Shares shall elect
or appoint a liquidator;
(b) the liquidator shall cause to be prepared a statement
setting forth the Property and liabilities of the Company as of the date of
dissolution, a copy of which statement shall be furnished to the Members;
(c) the Property of the Company shall be liquidated by the
liquidator as promptly as possible, but in an orderly and businesslike manner.
The liquidator may, in the exercise of its business judgment, determine not to
sell all or any portion of the Property, in which event such Property shall be
distributed in kind based upon fair market value as of the date of such
distribution;
(d) any Profits or Losses realized by the Company upon the sale
of its Property shall be recognized and allocated to the Members in the manner
set forth in Article V; and
(e) the proceeds of sale and all other Property of the Company
shall be applied and distributed as follows and in the following order of
priority:
(i) to the expenses of liquidation;
(ii) to the payment of the debts and liabilities of the
Company (including loans from Members);
(iii) to the setting up of any reserves which the
liquidator shall determine to be reasonably necessary, for such period as
the liquidator shall deem advisable, for contingent, unliquidated or
unforeseen liabilities or obligations of the Company or the Members arising
out of or in connection with the Company. Such reserves shall be held by
the liquidator or paid over to a bank or title company selected by it, to
be held by such bank
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or title company as escrow holder or liquidator for the purposes of
disbursing such reserves to satisfy the liabilities and obligations
described above;
(iv) to the holder of the Series A Preferred Shares to
the extent of its Capital Account balance in respect of the Series A
Preferred Shares;
(v) to the holders of the Series B Preferred Shares to
the extent of their pro rata share of the Capital Account balance in
respect of the Series B Preferred Shares; and
(vi) the balance (including amounts released from any
unnecessary reserves set up pursuant to Section 12.5(e)(iii)), if any,
after giving effect to all contributions, distributions and allocations for
all periods, to the holders of Common Shares pro rata in proportion to
their positive Capital Account balances.
Each Member understands and agrees that by accepting the provisions of
this Section 12.5 setting forth the priority of the distribution of assets of
the Company to be made upon a liquidation, such Member expressly waives any
right which it, as a creditor of the Company, might otherwise have to receive
distributions of assets pari passu with the other creditors of the Company in
connection with a distribution of assets of the Company in satisfaction of any
liability of the Company, and hereby subordinates to said creditors any such
right.
ARTICLE XIII
LIABILITY, EXCULPATION AND INDEMNIFICATION
13.1 EXCULPATION. (a) No Covered Person shall be liable to the
Company or any other Covered Person for any loss, damage or claim incurred by
reason of any act or omission performed or omitted by such Covered Person in
good faith on behalf of the Company and in a manner reasonably believed to be
within the scope of authority conferred on such Covered Person by this
Agreement, the Board or an appropriate Officer or employee of the Company,
except that a Covered Person shall be liable for any such loss, damage or claim
incurred by reason of such Covered Person's gross negligence, fraud or willful
misconduct.
(b) A Covered Person shall be fully protected in relying in good
faith upon the records of the Company and upon such information, opinions,
reports or statements presented to the Company by any Person as to matters the
Covered Person reasonably believes are within such other Person's professional
or expert competence, including information, opinions, reports or statements as
to the value and amount of the assets, liabilities, Profits or Losses or any
other facts pertinent to the existence and amount of assets from which
distributions to Members might properly be paid.
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13.2 FIDUCIARY DUTY. To the extent that, at law or in equity, a
Covered Person has duties (including fiduciary duties) and liabilities relating
thereto to the Company or to any Member, then, to the fullest extent permitted
by applicable law, a Covered Person acting under this Agreement shall not be
liable to the Company or to any Member for its good faith acts or omissions in
reliance on the provisions of this Agreement. The provisions of this Agreement,
to the extent that they restrict the duties and liabilities of a Covered Person
otherwise existing at law or in equity, are agreed by the Parties to replace
such other duties and liabilities of such Covered Person.
13.3 OUTSIDE BUSINESSES. Subject to Article XV and to any other
agreement to the contrary, any Covered Person, Member or Affiliate thereof may
engage in or possess an interest in other business ventures of any nature or
description, independently or with others, similar or dissimilar to the business
of the Company, and the Company and the Members shall have no rights by virtue
of this Agreement in and to such independent ventures or the income or profits
derived therefrom, and the pursuit of any such venture, even if competitive with
the business of the Company, shall not be deemed wrongful or improper. Subject
to any agreement to the contrary, no Covered Person, Member or Affiliate thereof
shall be obligated to present any particular investment opportunity to the
Company even if such opportunity is of a character that, if presented to the
Company, could be taken by the Company, and any Covered Person, Member or
Affiliate thereof shall have the right to take for its own account (individually
or as a partner or fiduciary) or to recommend to others any such particular
investment opportunity.
13.4 INDEMNITY. The Company does hereby indemnify and hold harmless
each Covered Person who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, except an action by or in the right
of the Company, by reason of the fact that he or she is or was a Member,
Affiliate, Board Member, Officer, employee or agent of the Company, or is or was
serving at the request of the Company as manager, member, director, officer,
employee or agent of another limited-liability company, corporation,
partnership, joint venture, trust or other enterprise against expenses,
including attorneys' fees, judgment, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection with the action,
suit or proceeding, if he or she acted in good faith and in a manner which he or
she reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement or conviction, or
upon a plea of nolo contendere or its equivalent, does not, of itself, create a
presumption that the Covered Person did not act in good faith and in a manner
which he or she reasonably believed to be in or not opposed to the best
interests of the Company, and that, with respect to any criminal action or
proceeding, he or she had reasonable cause to believe that his or her conduct
was unlawful.
13.5 INDEMNITY FOR ACTIONS BY OR IN THE RIGHT OF THE COMPANY. The
Company does hereby indemnify each Covered Person who was or is a party or is
threatened to be made a
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party to any threatened, pending or completed action or suit by or in the right
of the Company to procure a judgment in its favor by reason of the fact that he
or she is or was a Member, Affiliate, manager, Board Member, Officer, employee
or agent of the Company, or is or was serving at the request of the Company as a
director, manager, officer, employee or agent of another limited-liability
company, corporation, partnership, joint venture, trust or other enterprise
against expenses, including amounts paid in settlement and attorneys' fees
actually and reasonably incurred by him or her in connection with the defense or
settlement of the action or suit, if he or she acted in good faith and in a
manner which he or she reasonably believed to be in or not opposed to the best
interests of the Company. Indemnification may not be made for any claim, issue
or matter as to which such Covered Person has been adjudged by a court of
competent jurisdiction, after exhaustion of all appeals therefrom, to be liable
to the Company or for amounts paid in settlement to the Company, unless and only
to the extent that the court in which the action or suit was brought or other
court of competent jurisdiction determines upon application that, in view of all
the circumstances of the case, he or she is fairly and reasonably entitled to
indemnity for such expenses as the court deems proper.
13.6 INDEMNITY IF SUCCESSFUL. To the extent that a Covered Person has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Sections 13.4 and 13.5, or in defense of any claim,
issue or matter therein, the Company does hereby indemnify such Covered Person
against expenses, including attorneys' fees actually and reasonably incurred by
it in connection with the defense.
13.7 DETERMINATION OF RIGHT TO INDEMNIFICATION. Any indemnification
under Sections 13.4 and 13.5, unless ordered by a court or advanced pursuant to
Section 13.8 below, must be made by the Company only as authorized in the
specific case upon a determination that indemnification of the Covered Person is
proper in the circumstances. The determination must be made:
(a) by a Majority at a meeting at which a quorum is present,
which quorum must consist of Members who (and who's Affiliates) were not parties
to the action, suit or proceeding; or
(b) by independent legal counsel in a written opinion, (i) if a
Majority at a meeting at which a quorum is present so orders, which quorum must
consist of Members who (and who's Affiliates) were not parties to the action,
suit or proceeding, or (ii) if at a meeting of the Members, a quorum consisting
of Members who (and who's Affiliates) were not parties to the action, suit or
proceeding cannot be obtained.
13.8 ADVANCE PAYMENT OF EXPENSES. The expenses of Members and Board
Members incurred in defending a civil or criminal action, suit or proceeding
shall be paid by the Company as they are incurred and in advance of the final
disposition of the action, suit or
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proceeding, upon receipt of an undertaking by or on behalf of the Member or
Board Member to repay the amount if it is ultimately determined by a court of
competent jurisdiction that he or she is not entitled to be indemnified by the
Company. The provisions of this subsection do not affect any rights to
advancement of expenses to which personnel of the Company other than Members or
Board Members may be entitled under any contract or otherwise by law.
13.9 OTHER ARRANGEMENTS NOT EXCLUDED. The indemnification and
advancement of expenses authorized in or ordered by a court pursuant to this
Article XIII:
(a) do not exclude any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under the Articles or
any agreement, vote of Members, or disinterested Board Members, if any, or
otherwise, for an action in their official capacity or an action in another
capacity while holding their office, except that indemnification, unless ordered
by a court pursuant to Section 13.5 or for the advancement of expenses made
pursuant to Section 13.8, may not be made to or on behalf of any Member or Board
Member if a final adjudication establishes that their acts or omissions involved
intentional misconduct, fraud or a knowing violation of the law which was
material to the cause of action; and
(b) continue for a Person who has ceased to be a Member, Board
Member, Officer, employee or agent and inures to the benefit of his or her
heirs, executors and administrators.
13.10 ERRORS AND OMISSIONS INSURANCE. (a) The Company may
purchase and maintain insurance or (by a Board Supermajority) make other
financial arrangements on behalf of any Covered Person for any liability
asserted against him or her and liability and expenses incurred by him or her in
his or her capacity as a Board Member, an officer, director, employee or agent
of the Company or of another entity at the request of the Company, or arising
out of his or her status as such, whether or not the Company has the authority
to indemnify him or her against such liability and expenses.
(b) The other financial arrangements made by the Company
pursuant to Section 13.10(a) may include (i) the creation of a trust fund; (ii)
the establishment of a program of self-insurance; (iii) the security of its
obligation of indemnification by granting a security interest or other lien on
any assets of the Company; and (iv) the establishment of a letter of credit,
guaranty or surety. No financial arrangement made pursuant hereto may provide
protection for a person adjudged by a court of competent jurisdiction, after
exhaustion of all appeals therefrom, to be liable for intentional misconduct,
fraud or a knowing violation of law, except with respect to the advancement of
expenses or indemnification ordered by a court.
(c) In the absence of fraud, no Board Member or Member approving
the insurance or financial arrangement made pursuant to this Section 13.10 shall
be subject to personal
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liability for such action, even if the Board Member approving the insurance or
other financial arrangement is a beneficiary of the insurance or other financial
arrangement.
13.11 PROPERTY OF THE COMPANY. Any indemnification under this
Article XIII shall be satisfied solely out of the Property of the Company.
13.12 VIOLATION OF THIS AGREEMENT. Any Member who commits fraud
or otherwise violates any of the terms, conditions and provisions of this
Agreement will keep and save harmless the Property and the Company, and will
indemnify the Company and the other Members from any and all claims, demands and
actions of every kind and nature whatsoever which may arise out of or by reason
of such fraud or violation.
ARTICLE XIV
GAMING MATTERS
14.1 LICENSING. (a) The Members and their Related Parties will
be subject to the provisions of the Nevada Act and to the licensing and
regulatory control of the Nevada Gaming Authorities. Each Member acknowledges
that, in order for the Company to carry on its business, each Member and its
Related Parties may be required to submit personal history and financial
information to, and be found suitable by, the Nevada Gaming Authorities and
gaming authorities of other jurisdictions. If required by the Nevada Gaming
Authorities or gaming authorities of other jurisdictions, each Member shall, and
shall cause its respective Related Parties to, (i) promptly submit such personal
history and financial history, (ii) cooperate in any investigation and (iii)
diligently seek a finding of suitability.
(b) Each Member shall be responsible for paying or causing to be
paid all of its and its Related Parties' costs and expenses in connection with
obtaining, attempting to obtain or retaining a license in accordance with this
Article XIV.
(c) In addition, the Company anticipates that in due course the
Company may register pursuant to Section 12(g) of the Exchange Act. From and
after such registration under the Exchange Act (i) any Person who acquires more
than five percent of the Total Common Shares shall promptly report the
acquisition to the Nevada Commission in a filing prepared in accordance with
applicable law and (ii) beneficial owners of more than ten percent of the Total
Common Shares must apply to the Nevada Commission for a finding of suitability
within thirty days after the Chairman of the Nevada State Gaming Control Board
mails written notice requiring such filing. Notwithstanding the foregoing, any
member who (i) acquires more than ten percent, but not more than fifteen
percent, of the Total Common Shares, (ii) holds such Shares for investment
purposes only, and (iii) qualifies as an "Institutional Investor" as such term
is defined in the Nevada Act, may
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apply to the Nevada Commission for a waiver of such finding of suitability, and
need not apply for such finding of suitability if such waiver is granted.
14.2 NOMINEES. If any Share(s) shall be held in trust by an agent
or by a nominee, the record holder must, immediately upon the request of the
Nevada Gaming Authorities, disclose to said authorities the identity of the
beneficial owner of any such Share(s). Each record owner of any Share must
comply with all applicable rules and regulations of the Nevada Gaming
Authorities.
14.3 GAMING PROBLEM. In the event the Board shall determine, in
good faith, based upon verifiable information and specific provisions of the
applicable gaming statutes and rules promulgated thereunder or upon specific
information received from the Nevada Gaming Authorities, that a Gaming Problem
exists, then the Company shall provide written notice to the applicable Member
requesting that such Member provide for the elimination of the Gaming Problem,
and:
(a) (i) if the Gaming Problem is caused by a director,
officer or manager or trustee of such Member, such Member shall terminate the
employment of such Person and (ii) if the Gaming Problem is caused by a
shareholder, partner, member or beneficiary, of such Member, such Member shall
either purchase such Person's ownership or other interest in such Member or
require such Person to transfer its ownership or other interest to a trust or
other entity (if any) that would eliminate the Gaming Problem; or
(b) after providing the applicable Member with ninety days to
eliminate such Gaming Problem, the Company shall redeem or have other Persons
purchase all of the Shares held or owned by such Member at a redemption price
equal to the fair market value of such Shares, as determined by an independent
qualified appraiser appointed by the Company and the applicable Member or, if
there is a Majority Member, by the applicable Member and the Member with the
highest Percentage Interest (other than the applicable Member). If they cannot
agree on an appraiser, the such persons shall each select an appraiser, which
appraisers together shall select a third appraiser, which third appraiser shall
determine the fair market value of such Shares, which determination shall be
binding upon the Parties. Subject to the applicable provisions of the Nevada
Act, the foregoing right of redemption shall be exercised upon twenty days'
prior written notice to the applicable Member. On and after the date set forth
in such notice as the date of redemption, all rights of such Member as a Member
of the Company shall cease and terminate and the such Member's Shares shall no
longer be deemed outstanding.
ARTICLE XV
NON-COMPETE
15.1 LCI. So long as LCI is a Member and for a period of one year
thereafter, LCI agrees that, other than through the Company, LCI and its
Affiliates shall not, directly or indirectly,
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engage in the development of or own, operate, lease, manage, control, invest in,
act as consultant or advisor to or otherwise assist any Person that engages in
the development or operation of gaming operations which (a) involve or are in
any way associated with golf resorts located in Clark County, Nevada or (b)
involve or are in any way associated with operations of a type similar to the
Salle Privee Facilities located in Las Vegas, Nevada, without the consent of the
Company; PROVIDED that LCI and its Affiliates may own and/or operate a casino
and/or hotel project in Las Vegas, Nevada that is so involved or associated if
they first provide to the Company detailed written descriptions of such proposed
venture (including financial analysis and projections) and offer the Company the
opportunity to invest equally with and on substantially the same terms as LCI
and its Affiliates, and the Company (by way of the Board excluding the Board
Members appointed by LCI) declines such opportunity or fails to take up such
opportunity within a reasonable time period.
15.2 SOMMER ENTERPRISES. So long as Sommer Enterprises is a Member
and for a period of one year thereafter, Sommer Enterprises agrees that, other
than through the Company, Sommer Enterprises and its Affiliates shall not,
directly or indirectly, engage in the development of or own, operate, lease,
manage, control, invest in, act as consultant or advisor to or otherwise assist
any Person that engages in the development or operation of any casino and/or
hotel project in Las Vegas, Nevada, other than the Mountain Spa Resort; PROVIDED
that Sommer Enterprises and its Affiliates may own and/or operate a casino
and/or hotel project in Las Vegas, Nevada if such opportunity has been offered
to the Company and LCI, or the Board Members other than the Board Members
appointed by Sommer Enterprises, have caused the Company to decline to take up,
or to fail to pursue, such opportunity.
15.3 REASONABLE TERMS. (a) LCI and Sommer Enterprises acknowledge
and agree that the covenants set forth in this Article XV are reasonable in
geographical and temporal scope and in all other respects and that the other
Parties would not have entered into this Agreement but for the covenants
contained in this Article XV.
(b) If, at the time of enforcement of this Article XV, a
court shall hold that the duration, scope, or area restrictions stated herein
are unreasonable under the circumstances then existing, the Parties agree that
the maximum duration, scope, or area reasonable under such circumstances shall
be substituted for the stated duration, scope, or area.
(c) LCI and Sommer Enterprises recognize and affirm that in
the event of a breach of any provision of this Article XV the exercise of the
Call under Section 8.7 and money damages would both be inadequate and the
damaged party would have no adequate remedy at law. Accordingly, the Company
and the Parties hereto shall have the right, in addition to any other rights and
remedies existing in their favor, to enforce their rights under this Article XV
not only by the exercise of the Call under Section 8.7 and an action or actions
for damages, but also by an action or actions for specific performance,
injunction and/or equitable relief in order to enforce or prevent any violations
(whether anticipatory, continuing or future) of the provisions of this Article
XV.
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ARTICLE XVI
MISCELLANEOUS PROVISIONS
16.1 NOTICES. All notices to be given hereunder shall be in
writing and shall be addressed to the party at such party's last known address
or facsimile number appearing on the books of the Company. If no such address
or facsimile number has been provided, it will be sufficient to address any
notice (or fax any notice that may be faxed) to such party at the Records Office
of the Company. Notice shall, for all purposes, be deemed given and received,
(a) if hand-delivered, when the notice is received, (b) if sent by an
internationally recognized delivery service, when the notice is received, or (c)
if sent by facsimile, when the facsimile is transmitted and confirmation of
complete receipt is received by the transmitting party during normal business
hours. If any notice is sent by facsimile, the transmitting party shall send a
duplicate copy of the notice to the Parties to whom it is faxed by regular mail.
If notice is tendered and is refused by the intended recipient, the notice shall
nonetheless be considered to have been given and shall be effective as of the
date of such refusal. The contrary notwithstanding, any notice given in a
manner other than that provided in this Section 16.1 that is actually received
by the intended recipient shall be deemed an effective delivery of such notice.
Any party may, at any time, by giving ten days written notice to the Company,
designate a new address for the giving of notice to such party.
16.2 INSURANCE. The Company shall carry insurance in such amounts
as deemed appropriate by the Board and as may be required by lenders or contract
(including, without limitation, liability insurance).
16.3 MEMBERSHIP CERTIFICATES. The Company shall issue a
Certificate to each Member to represent such Member's Shares in the Company upon
execution of this Agreement and the payment of the Capital Contributions by such
Member. The Company shall issue a new Certificate in place of any previously
issued if the record holder of the Certificate (a) presents proof by affidavit,
in form and substance satisfactory to the Board, that a previously issued
Certificate has been lost, destroyed or stolen, or (b) if requested by the
Board, delivers to the Company a bond, in form and substance reasonably
satisfactory to the Board, with such surety or sureties and with fixed or open
penalty as the Board may direct in its reasonable discretion, to indemnify the
Company against any claim that may be made on account of the alleged loss,
destruction or theft of the Certificate. If a Member fails to notify the
Company within a reasonable time after it has knowledge of the loss, destruction
or theft of a Certificate, and a transfer of the Member's Shares represented by
that Certificate is registered before receiving such notification, the Company
shall have no liability with respect to any claim against the Company for such
transfer or for the issuance of a new Certificate consistent with such
registration.
16.4 COMPLETE AGREEMENT. This Agreement, together with the
Articles to the extent referenced herein, constitute the complete and exclusive
agreement and understanding of the
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Members with respect to the subject matter contained herein. This Agreement and
the Articles replace and supersede all prior agreements, negotiations,
statements, memoranda and understandings, whether written or oral, by and among
the Members or any of them.
16.5 AMENDMENTS. This Agreement may be amended by the Members only
if all of the Members agree to the proposed amendment and such amendment is set
forth in a writing signed by all Members making express reference to this
Agreement and expressly stating that such writing is an amendment of this
Agreement; PROVIDED that this Agreement, including Schedule 1, shall be amended
to reflect any admission of a new Member, Transfer of Shares or change in
Percentage Interests pursuant to the terms of this Agreement.
16.6 APPLICABLE LAW; JURISDICTION. This Agreement and the rights
and obligations of the Parties hereto shall be interpreted and enforced in
accordance with and governed by the laws of the State of Nevada without regard
to the conflict laws of that State. Each party further agrees that service of
any process, summons, notice or document by U.S. registered mail to its
respective address set forth in this Agreement shall be effective service of
process for any action brought against it in connection with this Agreement in
said court.
16.7 INTERPRETATION. The headings in this Agreement are inserted
for convenience only and are in no way intended to describe, interpret, define,
or limit the scope, extent or intent of this Agreement or any provisions
contained herein. In the interpretation of this Agreement, the singular may be
read as the plural, and VICE VERSA, the neuter gender as the masculine or
feminine, and VICE VERSA, and the future tense as the past or present, and VICE
VERSA, all interchangeably as the context may require in order to fully
effectuate the intent of the Parties and the transactions contemplated herein.
16.8 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which shall
be deemed to constitute one and the same instrument, and it shall be sufficient
for each party to have executed at least one, but not necessarily the same,
counterpart.
16.9 FACSIMILE COPIES. Facsimile copies of this Agreement or of
any counterpart, and facsimile signatures hereon or on any counterpart, shall
have the same force and effect as originals.
16.10 SEVERABILITY. If any provision of this Agreement, or any
application thereof, should be held by a court of competent jurisdiction to be
invalid, void, illegal or unenforceable to any extent, that provision shall be
deemed severable and the remainder of this Agreement, and all applications
thereof, shall not be affected, impaired or invalidated thereby, and shall
continue in full force and effect to the fullest extent permitted by law.
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16.11 WAIVERS. No waiver of any of the provisions of this Agreement
shall be deemed, or shall constitute, a waiver of any other provision, whether
or not similar, nor shall any waiver constitute a continuing waiver, and no
waiver shall be binding unless evidenced by an instrument in writing and
executed by the Party making the waiver, expressly making reference to this
Agreement and to the matter being waived and expressly stating that it is a
waiver.
16.12 NO THIRD PARTY BENEFICIARIES. This Agreement is made solely
among and for the benefit of the Members and their respective successors and
assigns, and no other Person shall have any rights, interest or claims hereunder
or be entitled to any benefits under or on account of this Agreement as a third
party beneficiary or otherwise.
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IN WITNESS WHEREOF, this Agreement was executed as of the date
first-above written.
SOMMER ENTERPRISES, LLC
By:
-------------------------------
Name: Jack Sommer
Title: Manager
LONDON CLUBS NEVADA INC.
By:
-------------------------------
Name: Linda Lillis
Title: Assistant Secretary
ALADDIN GAMING ENTERPRISES, INC.
By:
-------------------------------
Name: Jack Sommer
Title: Chairman and President
GAI, LLC
By:
-------------------------------
Name: Richard J. Goeglein
Title:
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----------------------------------
RICHARD J. GOEGLEIN
----------------------------------
JAMES H. MCKENNON
----------------------------------
CORNELIUS T. KLERK
----------------------------------
JOSE A. RUEDA
----------------------------------
LEE GALATI
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SCHEDULE 1
CAPITAL STRUCTURE
<TABLE>
<CAPTION>
INITIAL SERIES A SERIES B
CAPITAL CAPITAL PERCENTAGE COMMON PREFERRED PREFERRED
MEMBER CONTRIBUTION ACCOUNT INTEREST SHARES SHARES SHARES
- ------ ------------ ------- -------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Sommer Enterprises 81.3% of the Aladdin $95,000,000 47% 470,000 0 0
Development
Aladdin Enterprises $7 million predevelopment $50,000,000 25% 250,000 0 0
costs, $15 million cash
and 18.7% of the Aladdin
Development
LCI $50,000,000 $49,000,000 25% 250,000 0 0
GAI 3% interest in Gaming $6,000,000 3% 30,000 0 0
Goeglein 2% unvested interest in Gaming -- 0% 20,000(unvested) 0 0
James H. McKennon 1% unvested interest in Gaming -- 0% 10,000(unvested) 0 0
Cornelius T. Klerk .75% unvested interest in Gaming -- 0% 7,500(unvested) 0 0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INITIAL SERIES A SERIES B
CAPITAL CAPITAL PERCENTAGE COMMON PREFERRED PREFERRED
MEMBER CONTRIBUTION ACCOUNT INTEREST SHARES SHARES SHARES
- ------ ------------ ------- -------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Jose A. Rueda .75% unvested interest in Gaming -- 0% 7,500(unvested) 0 0
Lee Galati .25% unvested interest in Gaming -- 0% 2,500(unvested) 0 0
</TABLE>
<PAGE>
SCHEDULE 2
QUARTERLY BREAKDOWN HOTEL AND CASINO PROJECTED EBITDA
(IN $ MILLIONS)
Year Q1 Q2 Q3 Q4
- ---- -- -- -- --
2000 $ 32.40 $ 32.40 $ 32.40 $ 32.40
2001 $ 33.35 $ 33.35 $ 33.35 $ 33.35
2002 $ 35.01 $ 35.01 $ 35.01 $ 35.01
2003 $ 36.20 $ 36.20 $ 36.20 $ 36.20
2004 $ 37.42 $ 37.42 $ 37.42 $ 34.72
2005 $ 42.06 $ 42.06 $ 42.06 $ 42.06
2006 $ 43.33 $ 43.33 $ 43.33 $ 43.33
2007 $ 44.64 $ 44.64 $ 44.64 $ 44.64
<PAGE>
SCHEDULE 3
QUARTERLY BREAKDOWN OF SALLE PRIVEE PROJECTED EBITDA
(IN $ MILLIONS)
Year Q1 Q2 Q3 Q4
- ---- -- -- -- --
2000 $ 3.03 $ 2.02 $ 2.02 $ 3.03
2001 $ 3.12 $ 2.08 $ 2.08 $ 3.12
2002 $ 3.21 $ 2.14 $ 2.14 $ 3.21
2003 $ 3.31 $ 2.20 $ 2.20 $ 3.31
2004 $ 3.41 $ 2.27 $ 2.27 $ 3.41
2005 $ 3.51 $ 2.34 $ 2.34 $ 3.51
2006 $ 3.61 $ 2.41 $ 2.41 $ 3.61
2007 $ 3.72 $ 2.48 $ 2.48 $ 3.72
<PAGE>
EXHIBIT A
FORM OF STOCKHOLDERS AND REGISTRATION
RIGHTS AGREEMENT
<PAGE>
EXHIBOT A TO ALADDIN GAMING HOLDINGS,
LLC OPERATING AGREEMENT
FORM OF STOCKHOLDERS AND REGISTRATION RIGHTS AGREEMENT
[ALADDIN GAMING, INC.]
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
CORPORATE GOVERNANCE
2.1 Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2 Supermajority Required on Certain Matters. . . . . . . . . . . . . . . 8
2.3 Executive Management Committee. . . . . . . . . . . . . . . . . . . . . 9
2.4 Vacancies; Removal. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.5 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.6 Directors' Indemnification. . . . . . . . . . . . . . . . . . . . . . . 10
2.7 Quorum Requirements and Actions by the Board. . . . . . . . . . . . . . 10
2.8 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE III
RESTRICTIONS ON SALES OF STOCK BY STOCKHOLDERS
3.1 No Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.2 Permitted Transferees . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.3 Agreement to be Bound . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.4 Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE IV
TAG ALONG RIGHTS
4.1 Tag Along Sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.2 Tag Along Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.3 Tag Along Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.4 Exempted Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE V
HOLDBACK AGREEMENT
5.1 Holdback. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE VI
DEMAND REGISTRATION RIGHTS
6.1 Request by the Stockholders . . . . . . . . . . . . . . . . . . . . . . 13
6.2 Registration Statement Form . . . . . . . . . . . . . . . . . . . . . . 15
6.3 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.4 Effective Registration Statement. . . . . . . . . . . . . . . . . . . . 15
<PAGE>
6.5 Priority in Requested Registrations . . . . . . . . . . . . . . . . . . 15
6.6 Underwriters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE VII
INCIDENTAL REGISTRATION
7.1 Right to Include Registrable Securities . . . . . . . . . . . . . . . . 16
7.2 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.3 Priority in Incidental Registrations. . . . . . . . . . . . . . . . . . 17
7.4 Underwriters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VIII
REGISTRATION PROCEDURES
8.1 Registration Procedures . . . . . . . . . . . . . . . . . . . . . . . . 18
8.2 Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.3 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE IX
INDEMNIFICATION
9.1 Indemnification by the Company. . . . . . . . . . . . . . . . . . . . . 22
9.2 Indemnification by the Sellers. . . . . . . . . . . . . . . . . . . . . 23
9.3 Notices of Claims, Etc. . . . . . . . . . . . . . . . . . . . . . . . . 24
9.4 Other Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.5 Contribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.6 Limitation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE X
RULE 144
10.1 Rule 144 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE XI
LEGEND
11.1 Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
11.2 Termination of Requirement . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE XII
REPRESENTATIONS AND WARRANTIES
12.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . 29
<PAGE>
ARTICLE XIII
NON-COMPETE
13.1 LCI. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
13.2 Sommer Enterprises . . . . . . . . . . . . . . . . . . . . . . . . . . 30
13.3 Reasonable Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE XIV
MISCELLANEOUS
14.1 Duration of Agreement. . . . . . . . . . . . . . . . . . . . . . . . . 31
14.2 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . 31
14.3 Amendment and Waiver . . . . . . . . . . . . . . . . . . . . . . . . . 31
14.4 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
14.5 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
14.6 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . 32
14.7 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
14.8 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
14.9 Descriptive Headings . . . . . . . . . . . . . . . . . . . . . . . . . 33
14.10 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
14.11 Survival of Representations and Warranties . . . . . . . . . . . . . . 34
14.12 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
<PAGE>
THIS STOCKHOLDERS AND REGISTRATION RIGHTS AGREEMENT, dated as of
__________________ (this "AGREEMENT"), by and among [Aladdin Gaming, Inc.], a
Nevada corporation (the "COMPANY") and [the stockholders of the Company
immediately prior to the IPO].
W I T N E S S E T H :
WHEREAS, the shareholders of the Company have determined that it is in
their best interest to execute an initial public offering ("IPO") of the shares
of common stock of the Company; and
WHEREAS, such shareholders deem it to be in their best interests to
enter into an agreement establishing and setting forth their agreement with
respect to certain rights and obligations associated with ownership of shares of
common stock in the capital of the Company following the IPO.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements herein set forth, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. As used herein, the following terms shall have the
following meanings:
"A DIRECTORS" has the meaning ascribed thereto in Section 2.1.
"AFFILIATE" means with respect to a specified Person, any other Person
who or which is (a) the principal of the specified Person, (b) directly or
indirectly Controlling, Controlled by or under common Control with the specified
Person or (c) any member, director, officer, manager, relative or spouse of the
specified Person.
"BAZAAR LEASE" means the lease dated February 26, 1998 between the
Company and Aladdin Bazaar, LLC.
"B DIRECTOR" has the meaning ascribed thereto in Section 2.1.
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"BOARD" shall mean the Board of Directors of the Company.
"CEO" means the chief executive officer of the Company, from time to
time.
"COMMON STOCK" means the Common Stock, par value per share,
of the Company.
"COMMON STOCK EQUIVALENTS" means securities convertible into, or
exchangeable or exercisable for, Common Stock.
"CONTROL" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of a Person,
whether through ownership of voting securities, by contract or otherwise, and
"Controlling" and "Controlled" shall have corresponding meanings.
"DESIGNATING PARTY" means, (a) with respect to any A Director, Sommer
Enterprises and (b) with respect to any B Director, LCI.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, or any
similar Federal statute, and the rules and regulations of the SEC thereunder,
all as in effect at the time. Reference to a particular section of the
Securities Exchange Act of 1934 shall include a reference to the comparable
section, if any, of any such similar Federal statute.
"EXECUTIVE MANAGEMENT COMMITTEE" has the meaning ascribed thereto in
Section 2.3.
"IPO" means the initial underwritten offering pursuant to which the
Common Stock becomes registered under Section 12 of the Securities Exchange Act
of 1934, as amended.
"LCI" means London Clubs Nevada Inc., a Nevada corporation, and its
permitted successors and assigns who are Stockholders at the relevant time.
"LITIGATION" has the meaning ascribed thereto in Section 14.10.
"OTHER STOCKHOLDERS" means, with respect to any Stockholder, all
Stockholders of the Company other than such Stockholder.
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"OVERSUBSCRIBED TAG ALONG STOCKHOLDER" has the meaning ascribed
thereto in Section 4.2.
"PERMITTED TRANSFEREE" "Permitted Transferee" means, with respect to
a particular Stockholder, a Person other than a Prohibited Transferee who is (a)
an Affiliate of the Stockholder which, other than in respect of immediate family
members of Viola Sommer or Jack Sommer, is approved by the other Stockholders in
writing, such approval not to be unreasonably withheld or delayed, (b) a wholly
owned Subsidiary of the Stockholder, (c) another Stockholder or (d) any other
Person approved in writing by all the other Stockholders.
"PERSON" means any individual, corporation, limited-liability company,
limited or general partnership, joint venture, association, joint-stock company,
trust, unincorporated organization or government or any agency or political
subdivisions thereof.
"PRIMARY REGISTRABLE SECURITIES" has the meaning ascribed thereto in
Section 7.1.
"PROHIBITED TRANSFEREE" means (a) any owner, operator or manager of a
hotel or casino competitive with the Company in locations where the Company or
any of its Affiliates has hotel or casino operations (other than Viola Sommer
and Jack Sommer and their immediate family members, Sommer Enterprises and its
Affiliates or LCI and its Affiliates) (b) any "non-profit" or "not-for profit"
corporation, association, trust fund, foundation or other similar entity
organized and operated exclusively for charitable purposes that qualifies as a
tax exempt entity under applicable federal and state tax law or corresponding
foreign law, (c) any federal, state, local or foreign governmental agency,
instrumentality or other similar entity, (d) any Person primarily engaged in the
business of owning or operating a casino or other similar type of gambling
facility (other than Viola Sommer and Jack Sommer and their immediate family
members, Sommer Enterprises and its Affiliates or LCI and its Affiliates), (e)
any Person that has been convicted of a felony, (f) any Person who has been
found unsuitable or has withdrawn an application to be found suitable by the
Nevada Gaming Authorities, (g) Focus 2000, Inc., or the then current owner or
lessee of the real property located at the north-east corner of Las Vegas
Boulevard and Harmon Avenue, in Las Vegas, Nevada, (h) any member of Aladdin
Bazaar, LLC, a Nevada limited liability company or any Affiliate of any such
member; or (i) any owner or opera-
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tor of a distillery, winery, brewery or distributorship of alcoholic beverages.
"PROPORTIONATE PERCENTAGE" means, as to each Tag Along Stockholder,
the quotient obtained (expressed as a percentage) by dividing the number of
shares of Common Stock owned by such Tag Along Stockholder by the aggregate
number of shares of Common Stock owned by all Tag Along Stockholders.
"PUBLIC SALE" means a Sale pursuant to a bona fide underwritten public
offering pursuant to an effective registration statement filed under the
Securities Act or pursuant to Rule 144 under the Securities Act (other than in a
privately negotiated Sale).
"RECIPROCAL EASEMENT AGREEMENT" means the Construction, Operation and
Reciprocal Easement Agreement by and among the Company, Aladdin Bazaar, LLC and
Aladdin Music, LLC dated February 26, 1998.
"REGISTRABLE SECURITIES" means any issued and outstanding shares of
Common Stock. As to any particular Registrable Securities, once issued such
securities shall cease to be Registrable Securities when (a) a registration
statement with respect to the sale of such securities shall have become
effective and such securities shall have been disposed of in accordance with
such registration statement, (b) they shall have been distributed to the public
pursuant to Rule 144 (or any successor provision) under the Securities Act, (c)
they shall have been otherwise Sold, new certificates for them not bearing a
legend restricting further transfer shall have been delivered by the Company and
subsequent disposition of them shall not require registration or qualification
of them under the Securities Act or any similar State law then in force, or (d)
they shall have ceased to be outstanding.
"REGISTRATION EXPENSES" means all expenses incident to the Company's
performance of or compliance with Articles VI, VII and VIII, including, without
limitation, (a) all registration, filing and NASD fees, (b) all fees and
expenses of complying with securities or blue sky laws, (c) all word processing,
duplicating and printing expenses, (d) all messenger and delivery expenses, (e)
the fees and disbursements of counsel for the Company and of its independent
public accountants, including the expenses of any special audits or "cold
comfort" letters required by or incident to such perfor-
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mance and compliance, (f) the fees and disbursements of any one counsel and any
one accountant retained by the holder or holders of more than fifty percent
(50%) of the Registrable Securities being registered, (g) premiums and other
costs of policies of insurance against liabilities arising out of the public
offering of the Registrable Securities being registered if the Company desires
such insurance, and (h) any fees and disbursements of underwriters customarily
paid by issuers or sellers of securities, but excluding underwriting discounts
and commissions and transfer taxes, if any; PROVIDED that, in any case where
Registration Expenses are not to be borne by the Company, such expenses shall
not include salaries of Company personnel or general overhead expenses relating
to liability insurance required by underwriters of the Company or other expenses
for the preparation of financial statements or other data normally prepared by
the Company in the ordinary course of its business or which the Company would
have incurred in any event.
"REMAINING TAG ALONG STOCK" has the meaning ascribed thereto in
Section 4.2.
"REQUISITE SHARE NUMBER" means at least twenty-three percent (23%) of
the Registrable Securities.
"SALLE PRIVEE FACILITIES" means facilities open to the public at
large, consisting of: (a) a gaming facility, containing approximately 20 to 30
high limit tables and approximately 100 high limit slot devices, located on the
mezzanine level directly above the main gaming floor, (b) a super-premium
gourmet restaurant facility located adjacent to and as part of the gaming
facility of the Salle Privee Facilities and containing a separate kitchen, a
bar, approximately 25 tables inside the restaurant, as well as several
additional dining tables located in a roof garden accessible through the
restaurant, (c) an exclusive hospitality facility comprising approximately 25
double-module luxury suites, 5 triple-module suites, a concierge facility and
guest bar and lounge, located in the main tower of the Aladdin hotel and casino,
(d) a separate entrance and reception area for guests of the Salle Privee
Facilities, offering secure and discreet access for arrivals and departures, and
(e) vertical and horizontal circulation infrastructure providing for private
elevator access to the hospitality facility and private corridor access from the
hospitality facility to the gaming facility of Salle Privee Facilities.
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"SEC" means the Securities and Exchange Commission.
"SECTION 6.1 NOTICE" has the meaning ascribed thereto in Section 6.1.
"SECTION 6.1 REQUEST" has the meaning ascribed thereto in Section 6.1.
"SECTION 7.1 NOTICE" has the meaning ascribed thereto in Section 7.1.
"SECTION 7.3 SALE NUMBER" has the meaning ascribed thereto in Section
7.3.
"SECURITIES ACT" means the Securities Act of 1933, or any similar
Federal statute, and the rules and regulations of the SEC thereunder, all as the
same shall be in effect at the time. References to a particular section of the
Securities Act shall include a reference to the comparable section, if any, of
any such similar Federal statute.
"SELL" as to any Stock, means to sell, or in any other way directly or
indirectly transfer, assign, distribute, pledge, encumber or otherwise dispose
of, either voluntarily or involuntarily; and the terms "SALE" and "SOLD" shall
have correlative meanings.
"SELLING STOCKHOLDER" has the meaning ascribed thereto in Section 4.2.
"SOMMER ENTERPRISES" means Sommer Enterprises, LLC and its permitted
successors and assigns who are Stockholders at the relevant time.
"STOCK" means (a) any Common Stock and (b) any Common Stock
Equivalents, in each case, whether owned on the date hereof or acquired
hereafter.
"STOCKHOLDERS" means the parties to this Agreement (other than the
Company) and any other subsequent holder of Stock who agrees to be bound by the
terms of this Agreement.
"STOCKHOLDERS' REGISTRABLE SECURITIES" has the meaning ascribed
thereto in Section 7.1.
"SUBSIDIARY" means, with respect to a specified Person, any other
entity of which securities or other
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ownership interests having ordinary voting power to elect a majority of the
board of directors or other Persons performing similar functions are at the time
directly or indirectly owned by the specified Person. Unless a contrary
intention is indicated in this Agreement, any reference to a Subsidiary shall
mean a Subsidiary of the Company.
"TAG ALONG NOTICE" has the meaning ascribed thereto in Section 4.2.
"TAG ALONG OFFER" has the meaning ascribed thereto in Section 4.2.
"TAG ALONG PERIOD" has the meaning ascribed thereto in Section 4.2.
"TAG ALONG PRICE PER SHARE" has the meaning ascribed thereto in
Section 4.2.
"TAG ALONG SALE" has the meaning ascribed thereto in Section 4.1.
"TAG ALONG STOCK" has the meaning ascribed thereto in Section 4.2.
"TAG ALONG STOCKHOLDERS" has the meaning ascribed thereto in Section
4.2.
"TAG ALONG TRANSFEREE" has the meaning ascribed thereto in Section
4.2.
"THIRD PARTY" means any Person other than a Stockholder or the
Company.
ARTICLE II
CORPORATE GOVERNANCE
Each Stockholder agrees to take all actions required to be taken in
its capacity as a shareholder of the Company or otherwise, including, without
limitation, (a) to appear, or cause an individual holding its proxy to appear,
at all annual and special meetings of shareholders of the Company, and to vote,
or cause an individual holding its proxy to vote, all of its shares of Common
Stock, (b) to sign a unanimous resolution of the shareholders of the Company,
having the same effect as a
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vote of shareholders at a meeting of the shareholders of the Company, and (c) to
cause its representative or the Board to take action or refrain from taking
action in its capacity as a director, in order to effect and/or maintain the
following:
2.1 BOARD. The Board shall be comprised of seven (7) members. In
connection with any election for members of the Board, the slate of directors
recommended by the Board to Stockholders for election as directors shall consist
of: four (4) representatives designated by Sommer Enterprises (the "A
DIRECTORS"), two (2) representative 2 designated by LCI (the "B DIRECTOR") and
one (1) independent director agreed upon by Stockholders holding at least
two-thirds of the Common Stock held by the Stockholders; PROVIDED that:
(a) LCI shall not have the right to designate B Directors in the slate
of directors recommended by the Board to Stockholders for election as directors,
and the Stockholders (including LCI) shall use their best efforts to remove the
B Directors from office, if the shares of Common Stock held by LCI shall be less
than (i) 20% of the total issued and outstanding shares of Common Stock, or (ii)
25% of the shares of Common Stock held by Sommer Enterprises;
(b) Sommer Enterprises shall not have the right to designate A
Directors in the slate of directors recommended by the Board to Stockholders for
election as directors, and the Stockholders (including Sommer Enterprises) shall
use best efforts to remove the A Directors from office, if the shares of Common
Stock held by Sommer Enterprises shall be less than 20% of the total issued and
outstanding shares of Common Stock; and
(c) if, pursuant to the Operating Agreement of Aladdin Gaming
Holdings, LLC, LCI is the Majority Member (as defined in such Operating
Agreement) of Aladdin Gaming Holdings, LLC on the date hereof, subject to
paragraphs (a) and (b) of this proviso, LCI shall designate four (4) B
Directors, Sommer Enterprises shall designate two (2) A Directors and one (1)
independent director shall be agreed upon by Stockholders holding at least
two-thirds of the Common Stock held by the Stockholders.
2.2 SUPERMAJORITY REQUIRED ON CERTAIN MATTERS. The Company and its
Subsidiaries shall not take any of the following actions unless Stockholders
owning an
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aggregate of more than 80% of the Common Stock that is held by the Stockholders
consent in writing to such action:
(a) the issuance of additional shares of the Company or
securities of the Company convertible into or exchangeable for shares of
the Company or the granting of any options or other rights to acquire from
the Company, or other obligation of the Company to issue, any shares of the
Company or securities convertible into or exchangeable for shares of the
Company (other than in respect of matters referred to in Section 2.2(p) for
which Section 2.2(p) shall govern);
(b) any voluntary dissolution or liquidation of the Company or
any Subsidiary or the sale of all or substantially all of the assets of the
Company and its Subsidiaries;
(c) any merger of consolidation of the Company with any Person;
(d) any amendment to the Certificate or By-laws of the Company;
(e) the creation, incurrence, assumption or guarantee of any
indebtedness (excluding obligations as lessee under leases made in the
ordinary course of business) in any individual transaction in excess of the
threshold limit in force as of the date hereof under Section 7.5(a)(vi)(B)
of the Operating Agreement of Aladdin Gaming Holdings, LLC (such threshold
limit to be increased annually by an amount to be determined by the Board
to correspond to increases in consumer prices in the United States for each
year).
(f) the creation of any lien, pledge or other security interest
in assets of the Company or any Subsidiary securing indebtedness of any
third party which is not for the benefit of any business carried on by the
Company and its Subsidiaries;
(g) other than dividends and distributions by Subsidiaries, the
declaration,
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setting aside or payment of any dividends or other distributions on shares;
(h) the commencement of a voluntary case under Title 11 of the
United States Code entitled "Bankruptcy" or any other voluntary proceeding
under and laws relating to bankruptcy or insolvency or any assignment for
the benefit of creditors;
(i) the employment of any member of the Executive Management
Committee or any material amendment to the terms of employment of any such
Person;
(j) any material transactions between the Company or any
Subsidiary, on the one hand, and any Stockholder or any Affiliate of any
Stockholder, on the other hand;
(k) any entry into any new business opportunity unrelated to the
Aladdin hotel and casino and the second hotel;
(l) the appointment or removal of the Company's independent
auditors;
(m) any material amendment to, or any material waiver under, the
Bazaar Lease (such consent not to be unreasonably withheld);
(n) any material amendment to, or any material waiver under, the
Reciprocal Easement Agreement (such consent not to be unreasonably
withheld);
(o) any arrangement or agreement for the Company to pay a salary
to any Stockholder or any Affiliate of any Stockholder (other than in
respect of the matters referred to in Section 2.2(q) for which Section
2.2(q) shall govern);
(p) the adoption of, or any material amendment to, any employee
benefit, profit sharing, incentive, bonus, pension, retirement or employee
stock option plans (such consent not to be unreasonably withheld in the
context of industry practice);
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(q) any license of the Aladdin trademark to any Person other
than a Subsidiary (such consent not to be unreasonably withheld);
(r) any contract (including leases) outside the ordinary course
of business or for capital expenditure not included in the Company's annual
budgets (such consent not to be unreasonably withheld); and
(s) the initiation or settlement of any material litigation
outside the ordinary course of business and the selection of counsel
therefor (such consent not to be unreasonably withheld).
2.3 EXECUTIVE MANAGEMENT COMMITTEE. The Board shall delegate
day-to-day management responsibility of the Company to a committee of management
(the "EXECUTIVE MANAGEMENT COMMITTEE") to include of the following persons: the
president and chief executive officer of the Company, the chief financial
officer of the Company, the senior vice president of the Company who is the
president and chief operating officer of the Aladdin hotel and casino, the
senior vice president of the Company who is the president and chief operating
officer of the second hotel and casino, the senior vice president human
resources of the Company, the senior vice president electronic gaming of the
Company and the managing director of the Salle Privee Facilities.
2.4 VACANCIES; REMOVAL. If any director shall cease to serve as a
director of the Company for any reason, the vacancy resulting thereby shall be
filled by another person selected by its Designating Party or by the holders of
two-thirds of the Common Stock if so appointed, as the case may be. Upon the
request of a Designating Party for the removal of a director designated by it,
the Stockholders shall use best efforts to cause such director to be removed
from office.
2.5 EXPENSES. The Company shall pay the reasonable out-of-pocket
expenses incurred by each of the directors in connection with performing his or
her duties as a member of the Board, including, without limitation, the
reasonable out-of-pocket expenses incurred by such person attending meetings of
the Board or any committee thereof or meetings of any board of directors or
other
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similar managing body (and any committee thereof) of any subsidiary of the
Company.
2.6 DIRECTORS' INDEMNIFICATION. (a) The Company shall obtain and
cause to be maintained in effect, with financially sound insurers, a policy of
directors' and officers' liability insurance covering each of the directors in
an amount of at least $__________.
(b) The Certificate of Incorporation, By-Laws and other
organizational documents of the Company shall at all times, to the fullest
extent permitted by law, provide for indemnification of, advancement of expenses
to, and limitation of the personal liability of, the members of the Board and
such other persons, if any, who, pursuant to a provision of such Certificate of
Incorporation, By-Laws or other organizational documents, exercise or perform
any of the powers or duties otherwise conferred or imposed upon members of the
Board.
2.7 QUORUM REQUIREMENTS AND ACTIONS BY THE BOARD. The By-laws of the
Company shall provide that a simple majority of the Board shall constitute a
quorum for the transaction of any business of the Company at meetings of the
Board.
2.8 COOPERATION. Each Stockholder shall vote all of its Common
Shares and shall take all other necessary or desirable actions within its
control (including, without limitation, attending all meetings in person or by
proxy for purposes of obtaining a quorum and/or executing all written consents
in lieu of meetings as applicable), and the Company shall take all necessary and
desirable actions within its control (including, without limitation, calling
special Board and Stockholder meetings), to effectuate the provisions of this
Article II.
ARTICLE III
RESTRICTIONS ON SALES OF STOCK BY STOCKHOLDERS
3.1 NO SALES. Subject to the remaining provisions of this Article
III, no Stockholder shall Sell any Stock (a) prior to the consummation of an
IPO, other than to a Permitted Transferee in accordance with the terms hereof,
or (b) without first, if applicable, complying with the provisions of Article
IV. Notwithstanding any
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other provision of this Agreement, in no event shall any Stockholder Sell any
Stock to a Prohibited Transferee.
3.2 PERMITTED TRANSFEREES. Subject to Section 3.3, and
notwithstanding Article IV, a Stockholder may Sell its Stock, or any part
thereof, at any time to a Permitted Transferee.
3.3 AGREEMENT TO BE BOUND. Anything contained in this Agreement to
the contrary notwithstanding, except in connection with a Public Sale, any
transferee (who is not already a Stockholder) of Stock from a Stockholder shall
upon consummation of, and as a condition to, such Sale execute and deliver to
the Company (which the Company shall then deliver to all other Stockholders) an
agreement pursuant to which such transferee agrees to be bound by the terms of
this Agreement, and such transferee shall thereafter be deemed to be a
Stockholder for all purposes of this Agreement.
3.4 VIOLATION. Any Sale or attempted Sale of Stock in violation of
any provision of this Agreement shall be void, and the Company shall not record
such Sale on its books or treat any purported transferee of such Stock as the
owner of such Stock for any purpose.
ARTICLE IV
TAG ALONG RIGHTS
4.1 TAG ALONG SALE. Subject to Section 4.4, no Stockholder may,
alone or in concert with any Other Stockholder, in any transaction or series of
related transactions, Sell any Stock to another Person or Persons if, after
giving effect to such Sale of Stock (whether as a result of such Sale or
otherwise), such Person or Persons together with their Affiliates would own in
the aggregate an amount of Common Stock greater than 10% of the outstanding
Common Stock (such Sale being referred to herein as a "TAG ALONG SALE"), except
in accordance with the procedures of this Article IV.
4.2 TAG ALONG PROCEDURE. (a) If a Stockholder (a "SELLING
STOCKHOLDER") proposes to make a Tag Along Sale the Selling Stockholder shall
first deliver to each Other Stockholder a written notice (the "TAG ALONG
NOTICE"), which shall specifically identify the proposed transferee or
transferees (the "TAG ALONG TRANSFEREE"),
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the amount and type of Stock proposed to be Sold (the "TAG ALONG STOCK"), the
purchase price per share therefor ("TAG ALONG PRICE PER SHARE"), and a summary
of the other material terms and conditions of the proposed Tag Along Sale, and
shall contain an offer (the "TAG ALONG OFFER") by the Tag Along Transferee to
each Other Stockholder, which shall be irrevocable for a period of 20 days after
the delivery thereof (the "TAG ALONG PERIOD"), to purchase such Other
Stockholder's Stock at a price per share equal to the Tag Along Price Per Share
and upon all such other terms offered by the Tag Along Transferee to the Selling
Stockholder including, without limitation, those set forth in the Tag Along
Notice.
(b) The Tag Along Offer may be accepted in whole or in part at the
option of each of the Other Stockholders. Notice of an Other Stockholder's
intention to accept a Tag Along Offer, in whole or in part, shall be evidenced
by a writing signed by such Other Stockholder and delivered to the Selling
Stockholder, the Tag Along Transferee and the Company prior to the end of the
Tag Along Period, setting forth the amount and type of Stock that such Other
Stockholder elects to Sell.
(c) Upon the expiration of the Tag Along Period, the Tag Along Stock
shall be allocated among the Selling Stockholder and the Other Stockholders
electing to participate in the Tag Along Sale (collectively, the "TAG ALONG
STOCKHOLDERS") as follows: (i) First, each Tag Along Stockholder shall be
entitled to Sell its Proportionate Percentage of the Tag Along Stock; (ii)
second, if an amount of Tag Along Stock has not been allocated for Sale pursuant
to clause (i) (the "REMAINING TAG ALONG STOCK"), each Tag Along Stockholder (an
"OVERSUBSCRIBED TAG ALONG STOCKHOLDER") which had offered to Sell an amount of
Tag Along Stock in excess of the amount of Stock allocated for Sale to it in
accordance with the allocation set forth in clause (i) shall be entitled to Sell
an amount of Remaining Tag Along Stock equal to its Proportionate Percentage
(treating only Oversubscribed Tag Along Stockholders as Tag Along Stockholders)
of the Remaining Tag Along Stock; and (iii) third, the process set forth in
clause (ii) shall be repeated with respect to any amounts of Tag Along Stock not
allocated for Sale until the Tag Along Stock is allocated for Sale in its
entirety.
4.3 TAG ALONG CLOSING. All Sales of Stock to the Tag Along
Transferee shall be consummated contemporaneously at the offices of the Company
on the later of (a)
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a mutually satisfactory business day as soon as practicable, but in no event
more than 30 days after the expiration of the Tag Along Period, (b) the closing
date, if any, set forth in the Tag Along Notice, (c) the fifth business day
following the expiration or termination of all waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, applicable to
such Sales, and (d) the date when all approvals in respect of such Sales
required by the Nevada Gaming Control Act (or any successor statute) and any
rules or regulations promulgated thereunder are obtained (such approvals to be
obtained as soon as is reasonably practicable). The delivery of certificates or
other instruments evidencing the Tag Along Stock as allocated pursuant to
Section 4.2(c) duly endorsed for transfer shall be made on such date against
payment of the purchase price for such Stock.
4.4 EXEMPTED SALES. The requirements of this Article IV shall not
apply to (a) any Sale of Stock by a Selling Stockholder to any Permitted
Transferee of such Stockholder or (b) any Sale of Stock by a Stockholder in a
Public Sale.
ARTICLE V
HOLDBACK AGREEMENT
5.1 HOLDBACK. Each Stockholder agrees that, to the extent requested
in writing by a managing underwriter of a Public Sale effected pursuant to a
registration under Articles VI or VII, it will not Sell any Stock (other than as
part of such Public Sale) during the time period reasonably requested by the
managing underwriter, not to exceed two years.
ARTICLE VI
DEMAND REGISTRATION RIGHTS
6.1 REQUEST BY THE STOCKHOLDERS. Upon the written request (a
"SECTION 6.1 REQUEST") of one or more Stockholders holding Common Stock
representing in aggregate at least the Requisite Share Number requesting that
the Company effect the registration under the Securities Act of all or part of
such Stockholders' Registrable Securities and specifying the intended method of
disposi-
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tion thereof, the Company will promptly give written notice of such requested
registration (a "SECTION 6.1 NOTICE") to all registered holders of Registrable
Securities, and thereupon the Company will, subject to the terms of this
Agreement, use its best efforts to effect, as promptly as practicable, the
registration under the Securities Act of:
(a) the Registrable Securities that the Company has
been requested to register by the Section 6.1 Request,
(b) all other Registrable Securities that the Company
has been requested to register by any Other Stockholder by written
request given to the Company within fifteen business days after the
giving of the Section 6.1 Notice (which request shall specify the
intended method of disposition of such Registrable Securities), and
(c) all shares of Common Stock which the Company or
any Third Party may elect to register in connection with the offering
of Registrable Securities pursuant to this Section 6.1,
all to the extent requisite to permit the disposition (in accordance with the
stated intended methods thereof) of the Registrable Securities and the
additional shares of Common Stock, if any, so to be registered; PROVIDED that
(i) the Company shall not be required to effect any registration of Registrable
Securities pursuant to this Section 6.1 within a period of six months after the
effective date of any other registration statement of the Company filed pursuant
to this Section 6.1 or Section 7.1 (other than registration statements on Form
S-4 or Form S-8, or any successor or similar forms), (ii) the Company shall not
be obligated to effect more than a total of four registration statements
pursuant to this Section 6.1, (iii) the Company may postpone filing a
registration statement relating to a registration request under this Section 6.1
twice within a period of twelve months, for a reasonable period (not in excess
of 90 days), (iv) at the request of either Sommer Enterprises or LCI, whichever
is entitled to designate four (4) representatives on the Board pursuant to
Section 2.1, provided that such party believes it to be commercially reasonable
to so request, the Company shall defer a registration pursuant to a Section 6.1
Request and (vi) prior to LCI or Sommer
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Enterprises, whichever is only entitled to designate two (2) representatives on
the Board pursuant to Section 2.1, making any Section 6.1 Request, such party
must first submit to the Board a letter from a reputable, nationally recognized
underwriter stating that a Public Sale is economically feasible. Any
Stockholder may, during any such postponement, revoke such registration request
by providing written notice to the Company and such request shall thereafter not
be counted as a registration request pursuant to this Article VI.
6.2 REGISTRATION STATEMENT FORM. Registrations under this Article VI
shall be on such appropriate registration form of the SEC for the disposition of
the Registrable Securities as shall be selected by the Company and shall be
reasonably acceptable to any Stockholders who are the registered holders of
Registrable Securities participating in the registration representing in the
aggregate at least the Requisite Share Number.
6.3 EXPENSES. The Company shall pay all Registration Expenses in
connection with each registration requested pursuant to this Article VI;
PROVIDED that each Stockholder shall pay all underwriting discounts and
commissions and transfer taxes, if any, relating to the sale or disposition of
such Stockholder's Registrable Securities pursuant to a registration statement
requested pursuant to this Article VI.
6.4 EFFECTIVE REGISTRATION STATEMENT. A registration requested
pursuant to this Article VI shall not be deemed to have been effected unless a
registration statement with respect thereto has become effective; PROVIDED that
(a) a registration statement that does not become effective after the Company
has filed a registration statement with respect thereto by reason of the refusal
to proceed of the Stockholder or Stockholders who made the Section 6.1 Request
with respect thereto (other than a refusal to proceed based upon the written
advice of counsel relating to a matter with respect to the Company) shall be
deemed to have been effected by the Company unless such Stockholder or
Stockholders shall have elected to pay all Registration Expenses in connection
with such registration and (b) after a registration has become effective the
offering of Registrable Securities pursuant to such registration is interfered
with by any stop order, injunction or other order or requirement of the SEC or
any other governmental agency or court, such registration will be deemed not to
have been effected.
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6.5 PRIORITY IN REQUESTED REGISTRATIONS. If the managing underwriter
for a requested registration pursuant to this Article VI shall advise the
Company in writing that, in its opinion, the number of securities requested to
be included in such registration exceeds the number that can be sold in an
orderly manner in such offering within a price range acceptable to the
Stockholder or Stockholders who made the Section 6.1 Request, then the Company
will include in such registration, to the extent of the number which the Company
is so advised can be sold in such offering, (a) first, Registrable Securities,
if any, the Company proposes to Sell, (b) second, Registrable Securities
allocated pro rata among all Stockholders requesting that Registrable Securities
be included in such registration on the basis of the relative number of shares
of such Registrable Securities each such Stockholder has requested to be
included in such registration, and (c) third, Registrable Securities, if any,
any Third Party proposes to Sell.
6.6 UNDERWRITERS. If a requested registration pursuant to this
Article VI involves an underwritten offering, the Company shall have the right
to select the investment banker(s) that shall manage the offering.
ARTICLE VII
INCIDENTAL REGISTRATION
7.1 RIGHT TO INCLUDE REGISTRABLE SECURITIES. If the Company at any
time proposes to register any Registrable Securities (the "PRIMARY REGISTRABLE
SECURITIES") under the Securities Act, whether or not for sale for its own
account (other than a registration on Form S-4 or Form S-8, or any successor or
similar forms and other than pursuant to a registration under Section 6.1), it
will each such time promptly give written notice to all Stockholders who hold of
record any Registrable Securities of its intention to do so, of the registration
form of the SEC that has been selected by the Company and of such Stockholders'
rights under this Section 7.1 (the "SECTION 7.1 NOTICE"). The Company will use
its best efforts to effect the registration of all Registrable Securities that
the Company is requested in writing, within 15 business days after the Section
7.1 Notice is given (which request shall specify the Registrable Securities
intended to be disposed of by such holder and the intended method of disposition
thereof), to register by
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the Stockholders thereof (the "STOCKHOLDERS' REGISTRABLE SECURITIES"); PROVIDED
that if, at any time after giving written notice of its intention to register
the Primary Registrable Securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason either not to register or to delay registration
of the Primary Registrable Securities, the Company may, at its election, give
written notice of such determination to all such Stockholders who requested
registration and, thereupon, (a) in the case of a determination by the Company
not to register any of the Primary Registrable Securities, the Company shall be
relieved of its obligation to register any Stockholders' Registrable Securities
in connection with such abandoned registration (but not from its obligation to
pay expenses in connection therewith), without prejudice, however, to the rights
of Stockholders under Article VI and (b) in case of a determination by the
Company to delay registration of the Primary Registrable Securities, the Company
shall be permitted to delay the registration of any Stockholders' Registrable
Securities for the same period as the delay in registering the Primary
Registrable Securities. No registration effected under this Article VII shall
relieve the Company of its obligations to effect registrations upon request
under Article VI.
7.2 EXPENSES. The Company shall pay all Registration Expenses in
connection with each registration requested pursuant to this Article VII;
PROVIDED, HOWEVER, that each Stockholder shall pay all underwriting discounts
and commissions and transfer taxes, if any, relating to the sale or disposition
of such Stockholder's Registrable Securities pursuant to a registration
statement requested pursuant to this Article VII.
7.3 PRIORITY IN INCIDENTAL REGISTRATIONS. If the managing
underwriter for a registration pursuant to this Article VII that involves an
underwritten offering shall advise the Company in writing that, in its opinion,
the number of securities requested to be included in such registration exceeds
the number (the "SECTION 7.3 SALE NUMBER") that can be sold in an orderly manner
in such offering within a price range acceptable to the Company, the Company
shall include in such offering (a) first, all the securities the Company
proposes to register for its own account, (b) second, to the extent that the
Registrable Securities to be included by the Company are less than the Section
7.3 Sale Number, all Registrable Securities requested to be included by all
Stockholders and (c)
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to the extent that the Registrable Securities to be included by the Company and
all other Stockholders are less than the Section 7.3 Sale Number, all
Registrable Securities requested to be included by Third Parties, PROVIDED that,
if the number of such Registrable Securities exceeds the Section 7.3 Sale Number
less the number of securities included pursuant to clause (a) then the number of
such Registrable Securities included in such registration shall be allocated pro
rata among all requesting Stockholders, on the basis of the relative number of
shares of such Registrable Securities each such Stockholder has requested to be
included in such registration.
7.4 UNDERWRITERS. If a requested registration pursuant to this
Article VII involves an underwritten offering, the Company shall have the right
to select the investment banker(s) that shall manage the offering.
ARTICLE VIII
REGISTRATION PROCEDURES
8.1 REGISTRATION PROCEDURES. If and whenever the Company is required
to use its best efforts to effect or cause the registration of any Registrable
Securities under the Securities Act as provided in this Agreement, the Company
will, as soon as practicable:
(a) prepare and file with the SEC (in any event within 60 days after
the end of the period within which requests for registration may be given to the
Company) the requisite registration statement to effect such registration and
thereafter to use its best efforts to cause such registration statement to
become and remain effective; PROVIDED that the Company may discontinue any
registration of its securities that is being effected pursuant to Article VII at
any time prior to the effective date of the registration statement relating
thereto;
(b) prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective for such period
(which shall not exceed 120 days after such registration statement becomes
effective) as any seller of such Registrable Securities shall request and to
comply with the provisions of the Securities Act with
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respect to the Sale of all securities covered by such registration statement
during such period;
(c) furnish to each seller of Registrable Securities covered by such
registration statement and each underwriter, if any, of the securities being
Sold by such seller such number of conformed copies of such registration
statement and of each amendment and supplement thereto (in each case including
all exhibits), such number of copies of the prospectus included in such
registration statement (including each preliminary prospectus and summary
prospectus), in conformity with the requirements of the Securities Act, and such
other documents as such seller and underwriter may reasonably request in order
to facilitate the Public Sale of the Registrable Securities owned by such
seller;
(d) use its best efforts to register or qualify all Registrable
Securities covered by such registration statement under such other securities
laws or "blue sky" laws of such jurisdictions as any sellers of Registrable
Securities representing in the aggregate at least the Requisite Share Number or
any managing underwriter shall reasonably request, and do any and all other acts
and things that may be necessary or advisable to enable such seller and each
managing underwriter, if any, to consummate the disposition in such
jurisdictions of such Registrable Securities owned by such seller; PROVIDED that
the Company shall not for any such purpose be required to qualify generally to
do business as a foreign corporation in any jurisdiction wherein it would not
but for the requirements of this subsection (d) be obligated to be so qualified,
to subject itself to taxation in any such jurisdiction or to consent to general
service of process in any such jurisdiction;
(e) notify each seller of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of any discovery by the
Company that the prospectus, as then in effect, includes an untrue statement of
a material fact or omits to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and at the request of
any such seller promptly prepare and furnish to such seller a reasonable number
of copies of a prospectus supplemented or amended so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not
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include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading;
(f) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC, and make available to its security holders, as
soon as reasonably practicable, an earning statement covering the period of at
least twelve months, but not more than eighteen months, beginning with the first
day of the Company' first full calendar quarter after the effective date of the
registration statement, which earning statement shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder;
(g) use its best efforts to cause all Registrable Securities covered
by such registration statement to be listed on the principal securities exchange
on which similar equity securities issued by the Company are then listed or
eligible for listing, if any, if the listing of such securities is then
permitted under the rules of such exchange;
(h) provide a transfer agent and registrar for all Registrable
Securities covered by such registration statement not later than the effective
date of such registration statement;
(i) in connection with any underwritten offering, enter into an
underwriting agreement with the underwriter of such offering in the form
customary for such underwriter for similar offerings, including such
representations and warranties by the Company, provisions regarding the delivery
of opinions of counsel for the Company and accountants' letters, provisions
regarding indemnification and contribution, and such other terms and conditions
as are at the time customarily contained in such underwriter's underwriting
agreements for similar offerings (the sellers of Registrable Securities which
are to be distributed by such underwriter(s) may, at their option, require that
any or all of the representations and warranties by, and the other agreements on
the part of, the Company to and for the benefit of such underwriter(s) shall
also be made to and for the benefit of such sellers of Registrable Securities
and such sellers of Registrable Securities shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriter(s) other than repre-
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sentations, warranties or agreements regarding such sellers and such sellers'
intended methods of distribution);
(j) upon receipt of such confidentiality agreements as the Company
may reasonably request, make available for inspection by any seller of
Registrable Securities covered by such registration statement and by any
attorney, accountant or other agent retained by any such seller, all pertinent
financial and other records, pertinent corporate documents and properties of the
Company and its subsidiaries, and cause all of the Company's and its
subsidiaries' officers, directors and employees to supply all information
reasonably requested by any such seller, attorney, accountant or agent in
connection with such registration statement; and
(k) permit any holder of Registrable Securities who, in the sole
judgment, exercised in good faith, of such holder, might be deemed to be a
controlling person of the Company, to participate in the preparation of such
registration or comparable statement and to require the insertion therein of
material, furnished to the Company in writing, that in the judgment of such
holder, as aforesaid, should be included.
8.2 INFORMATION. The Company may require each seller of Registrable
Securities covered by the registration statement to furnish to the Company such
information regarding such seller and the distribution of its Registrable
Securities as the Company may from time to time request in writing.
8.3 COOPERATION. Each holder of Registrable Securities agrees that
upon receipt of any notice from the Company of the kind described in Section
8.1(e), such holder will forthwith discontinue disposition of Registrable
Securities pursuant to the registration statement covering such Registrable
Securities until such holder's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 8.1(e), and, if so directed by the
Company, such holder will deliver to the Company (at the Company's expense) all
copies, other than permanent file copies then in such holder's possession, of
the prospectus covering such Registrable Securities that was in effect prior to
such amendment or supplement. In the event the Company shall give any such
notice, the period set forth in Section 8.1(b) shall be extended by the number
of days during the period from and including the date of the giving of such
notice pursuant to Section
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8.1(e) to and including the date when each seller of Registrable Securities
covered by such registration statement shall have received the copies of the
supplemented or amended prospectus contemplated by Section 8.1(e).
ARTICLE IX
INDEMNIFICATION
9.1 INDEMNIFICATION BY THE COMPANY. In the event of any registration
of any securities of the Company under the Securities Act pursuant to Articles
VI or VII, the Company will, and hereby does, indemnify and hold harmless, to
the extent permitted by law, the seller of any Registrable Securities covered by
such registration statement, its directors and officers or general and limited
partners (and the directors and officers thereof), each Person who participates
as an underwriter, if any, in the offering or sale of such securities and each
Person, if any, who controls such seller or any such underwriter within the
meaning of the Securities Act, against any and all losses, claims, damages or
liabilities, joint or several, and expenses to which such seller, or any such
director or officer or general or limited partner or any such underwriter or
controlling Person may become subject under the Securities Act, common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions or proceedings in respect thereof) arise out of or are based upon (a)
any untrue statement or alleged untrue statement of a material fact contained in
any registration statement under which such securities were registered under the
Securities Act or the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, (b) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus, together with the
documents incorporated by reference therein (as amended or supplemented if the
Company shall have filed with the SEC any amendment thereof or supplement
thereto), if used prior to the effective date of such registration statement, or
contained in the prospectus, together with the documents incorporated by
reference therein (as amended or supplemented if the Company shall have filed
with the SEC any amendment thereof or supplement thereto), or any omission or
alleged omission to state therein a material fact required to be stated
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therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading or (c) any violation by
the Company of any federal, state or common law rule or regulation applicable to
the Company and relating to action required of or inaction by the Company in
connection with any such registration, and the Company will reimburse such
seller and each such director, officer, general or limited partner, underwriter
and controlling Person for any legal or any other expenses reasonably incurred
by any of them in connection with investigating or defending any such loss,
claim, damage or liability (or action or proceeding in respect thereof);
PROVIDED that the Company shall not be liable to any such seller or any such
director, officer, general or limited partner, underwriter or controlling Person
in any such case to the extent that any such loss, claim, damage or liability
(or action or proceeding in respect thereof) or expense arises out of or is
based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement or in any such preliminary,
final or summary prospectus, or amendment thereof or supplement thereto, in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of any such seller or any such director, officer,
general or limited partner, underwriter or controlling Person, specifically
stating that it is for use in the preparation thereof; and PROVIDED FURTHER that
the Company will not be liable to any Person who participates as an underwriter
in the offering or sale of Registrable Securities, if any, or any other Person,
if any, who controls such underwriter within the meaning of the Securities Act,
under the indemnity agreement in this Section 9.1 with respect to any
preliminary, final or summary prospectus or the final prospectus as amended or
supplemented as the case may be, to the extent that any such loss, claim, damage
or liability of such underwriter or controlling Person results from the fact
that such underwriter Sold Registrable Securities to a person to whom there was
not sent or given, at or prior to the written confirmation of such Sale, a copy
of the final prospectus or of the final prospectus as then amended or
supplemented, whichever is most recent, if the Company has previously furnished
copies thereof to such underwriter and such final prospectus, as then amended or
supplemented, has corrected any such misstatement or omission. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of such seller or any director, officer, general or limited partner,
underwrit-
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er or controlling Person and shall survive the transfer of the Registrable
Securities by such seller.
9.2 INDEMNIFICATION BY THE SELLERS. The Company may require, as a
condition to including any Registrable Securities in any registration statement
filed in accordance with Articles VI or VII, that the Company shall have
received an undertaking reasonably satisfactory to it from the prospective
seller of such Registrable Securities and any underwriter, to indemnify and hold
harmless (in the same manner and to the same extent as set forth in Section 9.1)
the Company and its directors and officers and each Person controlling the
Company within the meaning of the Securities Act and all other prospective
sellers and their directors, officers, general and limited partners and
respective controlling Persons with respect to any statement or alleged
statement in or omission or alleged omission from such registration statement,
any preliminary, final or summary prospectus contained therein, or any amendment
or supplement thereto, if, and only if, such statement or alleged statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company or its representatives by or on
behalf of such seller or underwriter specifically stating that it is for use in
the preparation of such registration statement, preliminary, final or summary
prospectus or amendment or supplement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of the
Company or any of the prospective sellers or any of their respective directors,
officers, general or limited partners or controlling Persons and shall survive
the transfer of such securities by such seller.
9.3 NOTICES OF CLAIMS, ETC. As soon as possible after the
commencement of any action or proceeding against an indemnified party hereunder
with respect to which a claim for indemnification may be made pursuant to this
Article IX, such indemnified party will, if a claim in respect thereof is to be
made against an indemnifying party, give written notice to the latter of the
commencement of such action; PROVIDED that the failure of any indemnified party
to give notice as provided herein shall not relieve the indemnifying party of
its obligations under the preceding paragraphs of this Article IX, except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. If any such claim or action shall be brought against an
indemnified party, and it shall notify the indemnifying party there-
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of, the indemnifying party shall be entitled to participate therein, and, to the
extent that it wishes, jointly with any other similarly notified indemnifying
party, to assume the defense thereof with counsel reasonably satisfactory to the
indemnified party; PROVIDED that the indemnifying party shall not be entitled to
so participate or so assume the defense if, in the indemnified party's
reasonable judgment, a conflict of interest between the indemnified party and
the indemnifying party exists in respect of such claim. After notice from the
indemnifying party to such indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Article IX for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof; PROVIDED that the sellers and their respective officers, directors,
general and limited partners and controlling Persons or the Company and its
officers, directors and controlling Persons, as the case may be, shall have the
right to employ one counsel to represent such indemnified parties if, in such
indemnified parties' reasonable judgment, a conflict of interest between the
indemnified parties exists in respect of such claim, and in that event the fees
and expenses of such separate counsel shall be paid by the indemnifying party;
and PROVIDED FURTHER that if, in the reasonable judgment of any of the
indemnified parties, a conflict of interest exists between such indemnified
parties and any other indemnified parties, such indemnified parties shall be
entitled to additional counsel or counsels and the indemnifying party shall be
obligated to pay the fees and expenses of such additional counsel or counsels.
No indemnifying party, without the consent of the indemnified party, will
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release from all liability in respect to such
claim or litigation. No indemnified party shall consent to entry of any
judgment or enter into any settlement of any such action the defense of which
has been assumed by an indemnifying party without the consent of such
indemnifying party.
9.4 OTHER INDEMNIFICATION. Indemnification similar to that specified
in the preceding paragraphs of this Article IX (with appropriate modifications)
shall be given by the Company and each seller of Registrable Securities with
respect to any required registration or
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other qualification of securities under any State securities and "blue sky"
laws.
9.5 CONTRIBUTION. If the indemnification provided for in this
Article IX is unavailable or insufficient to hold harmless an indemnified party,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of the losses, claims, damages, liabilities
or expenses referred to in Sections 9.1 or 9.2 in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one
hand and the indemnified party on the other hand in connection with statements
or omissions which resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the indemnifying party or the
indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statements or
omission. The parties hereto agree that it would not be just and equitable if
contributions pursuant to this Section 9.5 were to be determined by pro rata
allocation or by any other method of allocation of Registrable Securities which
does not take account of the equitable considerations referred to in the first
sentence of this Section 9.5; PROVIDED that the Company and each holder of
Registrable Securities agree with each other and the underwriters of the
Registrable Securities, if requested by such underwriters, that the
underwriters' portion of such contribution shall not exceed the underwriting
discount. The amount paid by an indemnified party as a result of the losses,
claims, damages or liabilities referred to in the first sentence of this Section
9.5 shall be deemed to include any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any
action or claim (which shall be limited as provided in the preceding sentence
and in Section 9.3 if the indemnifying party has assumed the defense of any such
action in accordance with the provisions thereof) which is the subject of this
Section 9.5. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation. Promptly after receipt by an indemnified party under this
Section 9.5 of notice of the commencement of any action against
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such party in respect of which a claim for contribution may be made against an
indemnifying party under this Section 9.5, such indemnified party shall notify
the indemnifying party in writing of the commencement thereof if the notice
specified in Section 9.3 has not been given with respect to such action;
PROVIDED that the omission to notify the indemnifying party shall not relieve
the indemnifying party from any liability which it may have to any indemnified
party otherwise under this Section 9.5, except to the extent that the
indemnifying party is actually prejudiced by such failure to give notice.
9.6 LIMITATION. Notwithstanding anything in this Article IX to the
contrary, no indemnifying party (other than the Company) shall be required
pursuant to this Article IX to contribute any amount in excess of the amount by
which (a) in the case of a seller of Registrable Securities, the proceeds
received by such indemnifying party from the sale of Registrable Securities in
the offering to which the losses, claims, damages or liabilities of the
indemnified parties relate, or (b) in the case of an underwriter, the total
price at which the Registrable Securities purchased by it and distributed to the
public were offered to the public, exceeds, in any such case, the amount of any
damages which such seller or underwriter has otherwise been required to pay the
Company or any underwriter by reason of such untrue or alleged untrue statement
or omission.
ARTICLE X
RULE 144
10.1 RULE 144. If the Company shall have filed a registration
statement pursuant to the requirements of Section 12 of the Exchange Act or a
registration statement pursuant to the requirements of the Securities Act, the
Company covenants that it will file the reports required to be filed by it under
the Securities Act and the Exchange Act (or, if the Company is not required to
file such reports, it will, upon the request of any holder of Registrable
Securities, make publicly available other information), and it will take such
further action as any holder of Registrable Securities may reasonably request,
all to the extent required from time to time to enable such holder, subject to
the terms and provisions of this Agreement to sell shares of Registrable
Securities without registration under the Securities Act within
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the limitation of the exemptions provided by (a) Rule 144 under the Securities
Act, as such Rule may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the SEC. Upon the request of any holder of
Registrable Securities, the Company will deliver to such holder a written
statement as to whether it has complied with the requirements of this Article X.
LEGEND
11.1 LEGEND. Each Stockholder and the Company shall take all such
action necessary (including exchanging with the Company certificates
representing shares of Stock issued prior to the date hereof) to cause each
certificate representing outstanding shares of Stock to bear a legend containing
the following words:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE
OFFERED, SOLD, PLEDGED, EXCHANGED, TRANSFERRED OR OTHERWISE
DISPOSED OF EXCEPT IN COMPLIANCE WITH SUCH ACT."
"IN ADDITION, THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO THE RESTRICTIONS ON TRANSFER SET FORTH IN THE
STOCKHOLDERS AND REGISTRATION RIGHTS AGREEMENT DATED AS OF
__________________ BY THE COMPANY AND THE PARTIES THERETO, A COPY
OF WHICH IS ON FILE IN THE OFFICE OF THE COMPANY."
11.2 TERMINATION OF REQUIREMENT. The requirement that the above
securities legend be placed upon certificates or instruments evidencing shares
of Stock shall cease and terminate upon the earliest of the following events:
(a) when such securities are Sold in a Public Sale or (b) when such securities
are Sold in any other transaction if the seller delivers to the Company an
opinion of its counsel, which counsel and opinion shall be reasonably
satisfactory to the Company, or a "no-action" letter from the staff of the SEC,
in either case to the effect that such legend is no longer neces-
30
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sary in order to protect the Company against a violation by it of the Securities
Act upon any sale or other disposition of such securities without registration
thereunder. Upon the consummation of any event requiring the removal of a
legend hereunder, the Company, upon the surrender of certificates or instruments
containing such legend, shall, at its own expense, deliver to the holder of any
such securities as to which the requirement for such legend shall have ceased
and terminated, one or more new certificates or instruments evidencing such
securities not bearing such legend.
ARTICLE XII
REPRESENTATIONS AND WARRANTIES
12.1 REPRESENTATIONS AND WARRANTIES. Each party hereto represents
and warrants to the other parties hereto as follows:
(a) it has full power and authority to execute, deliver and
perform its obligations under this Agreement;
(b) this Agreement has been duly and validly authorized,
executed and delivered by it, and constitutes a valid and binding
obligation of it, enforceable against it in accordance with its terms
except to the extent that enforceability may be limited by bankruptcy,
insolvency or other similar laws affecting creditors' rights
generally;
(c) the execution, delivery and performance of this Agreement by
it does not (i) violate, conflict with, or constitute a breach of or
default under its organizational documents, if any, or any material
agreement to which it is a party or by which it is bound, or (ii)
violate any law, regulation, order, writ, judgment, injunction or
decree applicable to it;
(d) no consent or approval of, or filing with, any governmental
or regulatory body is required to be obtained or made by it in
connection with the transactions contemplated hereby; and
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(e) it is not a party to any agreement which is inconsistent
with the rights of any party hereunder or otherwise conflicts with the
provisions hereof.
ARTICLE XIII
NON-COMPETE
13.1 LCI. So long as LCI is a Stockholder and for a period of one
year thereafter, LCI agrees that, other than through the Company, LCI and its
Affiliates shall not, directly or indirectly, engage in the development of or
own, operate, lease, manage, control, invest in, act as consultant or advisor to
or otherwise assist any Person that engages in the development or operation of
gaming operations which (a) involve or are in any way associated with golf
resorts located in Clark County, Nevada, or (b) are located in Las Vegas, Nevada
and involve or are in any way associated with operations of a type similar to
the Salle Privee Facilities located in Las Vegas, Nevada, without the consent of
the Company; PROVIDED that LCI and its Affiliates may own and/or operate a
casino and/or hotel project in Las Vegas, Nevada that is so involved or
associated if they first provide to the Company detailed written descriptions of
such proposed venture (including financial analysis and projections) and offer
the Company the opportunity to invest equally with and on substantially the same
terms as LCI and its Affiliates, and the Company (by way of the Board, excluding
the B Directors) declines such opportunity or fails to take up such opportunity
within a reasonable time period.
13.2 SOMMER ENTERPRISES. So long as Sommer Enterprises is a
Stockholder and for a period of one year thereafter, Sommer Enterprises agrees
that, other than through the Company, Sommer Enterprises and its Affiliates
shall not, directly or indirectly, engage in the development of or own, operate,
lease, manage, control, invest in, act as consultant or advisor to or otherwise
assist any Person that engages in the development or operation of any casino
and/or hotel project in Las Vegas, Nevada, other than the Mountain Spa Resort;
PROVIDED that Sommer Enterprises and its Affiliates may own and/or operate a
casino and/or hotel project in Las Vegas, Nevada if such opportunity has been
offered to the Company and LCI or the members of the Board other than
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the A Directors have caused the Company to decline to take up, or to fail to
pursue, such opportunity.
13.3 REASONABLE TERMS. (a) LCI and Sommer Enterprises acknowledge
and agree that the covenants set forth in this Article XIII are reasonable in
geographical and temporal scope and in all other respects and that the Other
Stockholders would not have entered into this Agreement but for the covenants
contained in this Article XIII.
(b) If, at the time of enforcement of this Article XIII, a court
shall hold that the duration, scope, or area restrictions stated herein are
unreasonable under the circumstances then existing, the parties agree that the
maximum duration, scope, or area reasonable under such circumstances shall be
substituted for the stated duration, scope, or area.
(c) LCI and Sommer Enterprises recognize and affirm that in the
event of a breach of any provision of this Article XIII money damages would be
inadequate and the damaged party would have no adequate remedy at law.
Accordingly, the Company and the Other Stockholders shall have the right, in
addition to any other rights and remedies existing in their favor, to enforce
its rights under this Article XIII not only by an action or actions for damages,
but also by an action or actions for specific performance, injunction and/or
equitable relief in order to enforce or prevent any violations (whether
anticipatory, continuing or future) of the provisions of this Article XIII.
ARTICLE XIV
MISCELLANEOUS
14.1 DURATION OF AGREEMENT. The rights and obligations of a
Stockholder under this Agreement shall terminate at such time as such
Stockholder no longer is the beneficial owner of any Stock.
14.2 FURTHER ASSURANCES. At any time or from time to time after the
date hereof, the parties agree to cooperate with each other and, at the request
of any other party, to execute and deliver any further instruments or documents
and to take all such further action as the other party may reasonably request in
order to evi-
33
<PAGE>
dence or effectuate the consummation of the transactions contemplated hereby and
to otherwise carry out the intent of the parties hereunder.
14.3 AMENDMENT AND WAIVER. Except as otherwise provided herein, no
modification, amendment or waiver of any provision of this Agreement shall be
effective against the Company or any Stockholder unless such modification,
amendment or waiver is approved in writing by the Company and the Stockholders.
The failure of any party to enforce any of the provisions of this Agreement
shall in no way be construed as a waiver of such provisions and shall not affect
the right of such party thereafter to enforce each and every provision of this
Agreement in accordance with its terms.
14.4 SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
14.5 ENTIRE AGREEMENT. Except as otherwise expressly set forth
herein, this Agreement and the documents contemplated hereby embody the complete
agreement and understanding among the parties hereto with respect to the subject
matter hereof and supersedes and preempts any prior understandings, agreements
or representations by or among the parties, written or oral, which may have
related to the subject matter hereof in any way.
14.6 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
this Agreement shall bind and inure to the benefit of and be enforceable by the
Company and its successors and assigns and each Stockholder and their respective
successors, assigns, heirs and personal representatives, so long as they hold
Stock. Except pursuant to a Sale of Stock in compliance with this Agreement
(other than pursuant to a Public Sale), no Stockholder shall have the right to
assign its rights and obligations under this Agreement without the consent of
each of the other Stockholders.
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14.7 REMEDIES. Each Stockholder shall be entitled to enforce its
rights under this Agreement specifically to recover damages by reason of any
breach of any provision of this Agreement and to exercise all other rights
existing in their favor. The parties hereto agree and acknowledge that money
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that each party may in its sole discretion apply to any court of
law or equity of competent jurisdiction for specific performance and/or
injunctive relief in order to enforce or prevent any violation of the provisions
of this Agreement.
14.8 NOTICES. Any notice provided for in this Agreement shall be in
writing and shall be either personally delivered, mailed first class mail
(postage prepaid) or sent by reputable overnight courier service (charges
prepaid) or sent by facsimile transmission to:
(a) in the case of a Stockholder, such address as indicated by the
Company's records, or at such address or to the attention of such other person
as the recipient party has specified by prior written notice to the sending
party; and
(b) in the case of the Company, at:
[Aladdin Gaming, Inc.]
[Address]
Attn:
Telephone:
Facsimile:
Notices will be deemed to have been given hereunder when delivered
personally, three days after deposit in the U.S. mail, one business day after
deposit with a reputable overnight courier service and when receipt of facsimile
transmission is acknowledged.
14.9 DESCRIPTIVE HEADINGS. The descriptive headings of the several
sections and paragraphs of this Agreement are inserted for reference only and
shall not limit or otherwise affect the meaning hereof.
14.10 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Nevada without giving
effect to the principles of conflicts of law. Each of the parties hereto hereby
irrevocably and unconditionally consents to submit to the exclusive jurisdiction
of the courts of the State
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<PAGE>
of Nevada and of the United States of America, in each case located in Clark
County, for any action, proceeding or investigation in any court or before any
governmental authority ("LITIGATION") arising out of or relating to this
Agreement and the transactions contemplated hereby (and agrees not to commence
any Litigation relating thereto except in such courts), and further agrees that
service of any process, summons, notice or document by U.S. registered mail to
its respective address set forth in this Agreement shall be effective service of
process for any Litigation brought against it in any such court. Each of the
parties hereto hereby irrevocably and unconditionally waives any objection to
the laying of venue of any Litigation arising out of this Agreement or the
transactions contemplated hereby in the courts of the State of Nevada or the
United States of America, in each case located in Clark County, and hereby
further irrevocably and unconditionally waives and agrees not to plead or claim
in any such court that any such Litigation brought in any such court has been
brought in an inconvenient forum.
14.11 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained herein or made in writing by any party
in connection herewith shall survive the execution and delivery of this
Agreement, regardless of any investigation made by or on behalf of any party.
14.12 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more of the counterparts have been signed by
each party and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
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<PAGE>
IN WITNESS WHEREOF, this Agreement was executed and delivered as of
the date first above written.
[ALADDIN GAMING, INC.]
By:
--------------------------------
Name:
Title:
[STOCKHOLDERS]
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SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
919 Third Avenue
New York, New York 10022
DIRECT DIAL
212-735-2640
DIRECT FAX
212-735-2000
June 8, 1998
Aladdin Gaming Enterprises, Inc.
831 Pilot Road
Las Vegas, Nevada 89119
Ladies and Gentlemen:
Re: Aladdin Gaming Enterprises, Inc.
Registration Statement (333-49715)
We have acted as special counsel to Aladdin Gaming Enterprises, Inc., a
corporation organized under the laws of the State of Nevada (the "Company"), in
connection with the registration under the Securities Act of 1933, as amended
(the "Act"), of 2,215,000 Warrants (the "Warrants") to purchase shares of Class
B Common Stock, no par value, of the Company (the "Warrant Shares"). The
Warrants were issued pursuant to a Warrant Agreement (the "Warrant Agreement")
dated as of February 26, 1998 between the Company and State Street Bank and
Trust Company ("State Street"), as Warrant Agent for the benefit of the holders
of the Warrants (in such capacity, the "Warrant Agent").
This opinion is being furnished in accordance with the requirements of Item
601(b)(5) of Regulation S-K under the Act.
In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of (i) the Registration
Statement on Form S-1 (File No. 333-49715) as filed with the Securities and
Exchange Commission (the "Commission") on April 9, 1998 under the Act and
Amendment No. 1 thereto with which this opinion is being filed (such
Registration Statement, as so amended, being hereinafter referred to as the
<PAGE>
ALADDIN GAMING ENTERPRISES, INC.
June 8, 1998
Page 2
"Registration Statement"); (ii) the Warrant Agreement; (iii) the form of the
Warrants, included as an exhibit to the Warrant Agreement and (iv) the Warrant
Registration Rights Agreement dated February 26, 1998 among the Company and
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Credit Suisse First Boston
Corporation, CIBC Oppenheimer Corp. and Scotia Capital Markets (USA) Inc. (the
"Warrant Registration Rights Agreement"). We have also examined originals or
copies, certified or otherwise identified to our satisfaction, of such other
records of the Company and such agreements, certificates or records of public
officials, certificates of officers or representatives of the Company,
respectively, and such other documents, certificates and records as we have
deemed necessary or appropriate as a basis for the opinions set forth herein.
The documents described in clauses (ii) and (iii) are referred to herein as the
"Operative Documents."
In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures (including endorsements), the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as certified or photostatic
copies and the authenticity of the originals of such copies. In making our
examination of executed documents (including the Operative Documents), we have
assumed that the parties thereto (including the Company) had the power,
corporate or other, to enter into and perform all obligations thereunder and
have also assumed the due authorization by all requisite action, corporate or
other, and execution and delivery by such parties of such documents and (except
to the extent specifically set forth below) that such documents constitute valid
and binding obligations of such parties. In providing the opinion set forth
below, we have also assumed that the execution and delivery by the Company of
the Operative Documents and the performance by the Company of its obligations
thereunder do not and will not violate, conflict with, or constitute a default
under (i) any agreement or instrument to which the Company or any of its
properties is subject, (ii) any law, rule, or regulation to which the Company or
its properties is subject (except that we do not make the assumption set forth
in this clause (ii) with respect to those laws, rules and regulations of the
State of New York and of the United States of America which, in our experience,
are normally applicable to transactions of the type contemplated by the
Operative
<PAGE>
ALADDIN GAMING ENTERPRISES, INC.
June 8, 1998
Page 3
Documents (other than securities or anti-fraud laws of any jurisdiction), but
without our having made any special investigation concerning any other laws,
rules or regulations), (iii) any judicial or regulatory order or decree of any
governmental authority or (iv) any consent, approval, license, authorization or
validation of, or filing, recording or registration with any governmental
authority. As to any facts material to the opinion expressed herein which were
not independently established or verified, we have relied upon oral or written
statements and representations of officers and other representatives of the
Company and the Warrant Agent and others.
Members of our firm are admitted to the bar in the State of New York, and
we express no opinion as to the laws of any other jurisdiction, including,
without limitation, the laws of the State of Nevada, other than the laws of the
United States of America, to the extent referred to specifically herein.
Based upon and subject to the limitations, qualifications, exceptions and
assumptions set forth herein, we are of the opinion that the Warrants constitute
valid and binding obligations of the Company, entitled to the benefits of the
Warrant Agreement and enforceable against the Company in accordance with their
terms, except that (A) the enforcement thereof may be subject to, or limited by,
(i) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
other similar laws now or hereafter in effect relating to or affecting
creditors' rights generally and (ii) general principles of equity (regardless of
whether such enforceability is considered in a proceeding at law or in equity)
and (B) the rights to indemnification and contribution contained in the Warrant
Registration Rights Agreement may be limited by state or federal securities laws
or the public policy underlying such laws.
We hereby consent to the filing of this opinion with the Commission as an
exhibit to the Registration Statement. We also consent to the reference to our
firm in the Registration Statement and in the related Prospectus as the same
appears under the caption "Legal Matters." In giving this consent, we do not
<PAGE>
ALADDIN GAMING ENTERPRISES, INC.
June 8, 1998
Page 4
thereby admit that we are included in the category of persons whose consent is
required under Section 7 of the Act or the rules and regulations of the
Commission.
Very truly yours,
/S/ SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP
<PAGE>
SCHRECK MORRIS
1200 Bank of America Plaza
300 South Fourth Street
Las Vegas, Nevada 89101
June 8, 1998
Aladdin Gaming Enterprises, Inc.
831 Pilot Road
Las Vegas, Nevada 89119
Ladies and Gentlemen:
We have acted as special Nevada counsel to Aladdin Gaming Enterprises,
Inc., a Nevada corporation (the "Company") in connection with the
registration under the Securities Act of 1933, as amended (the "Act"), of (i)
an aggregate of 2,215,000 shares of the Company's Class B non-voting common
stock, no par value per share (the "Warrant Shares") issuable upon the
exercise of 2,215,000 warrants (the "Warrants") originally issued and sold on
February 26, 1998 pursuant to an offering by Aladdin Gaming Holdings, LLC, a
Nevada limited-liability company, Aladdin Capital Corp., a Nevada
corporation, and the Company, and (ii) the Warrants to purchase the Warrant
Shares, pursuant to the Company's Registration Statement on Form S-1 filed
with the Securities and Exchange Commission (the "Commission") on April 9,
1998 (File No. 333-49715), and Amendment No. 1 thereto with which this
opinion is being filed (such Registration Statement, as so amended, being
hereinafter referred to as the "Registration Statement").
For the purpose of rendering this opinion, we have examined originals,
or copies certified or otherwise identified to our satisfaction as being true
copies of such records, documents, instruments and certificates as, in our
judgment, are necessary or appropriate to enable us to render the opinions
set forth below, including but not limited to the following:
(i) the Registration Statement;
(ii) that certain Warrant Agreement dated as of February 26, 1998 by and
between the Company and State Street Bank and Trust Company, as warrant agent
(the "Warrant Agreement");
(iii) the form of the Warrants included as an exhibit in the Warrant
Agreement;
<PAGE>
Aladdin Gaming Enterprises, Inc.
June 8, 1998
Page 2
(iv) the Company's Articles of Incorporation and Bylaws, as amended to
date; and
(v) certain resolutions of the Board of Directors of the Company
authorizing the Company's execution, delivery and performance of its
obligations under the Warrant Agreement.
We have made such legal and factual examinations and inquiries as we
have deemed necessary or appropriate for purposes of this opinion. We have
been furnished with, and with your consent have relied upon, certificates and
assurances of officers and other representatives of the Company and of public
officials as we have deemed necessary for the purpose of rendering the
opinions set forth herein. As to questions of fact material to our opinions,
we have also relied upon the statements of fact and the representations and
warranties as to factual matters contained in the documents we have examined,
however, except as otherwise expressly indicated, we have not been requested
to conduct, nor have we undertaken, any independent investigation to verify
the content or veracity thereof or to determine the accuracy of any
statement, and no inference as to our knowledge of any matters should be
drawn from the fact of our representation of the Company.
Without limiting the generality of the foregoing, in our examination of
documents, we have assumed without independent verification, that (i) each
natural person executing any such document hassufficient legal capacity to do
so, (ii) all documents submitted to us as originals are authentic, the
signatures on all documents that we examined are genuine, and all documents
submitted to us as certified, conformed, photostatic or facsimile copies
conform to the original document, and (iii) all corporate records made
available to us by the Company and all public records we have reviewed are
accurate and complete.
Based upon the foregoing, and subject to the qualifications, exceptions
and assumptions set forth herein, and having regard to legal considerations
and other information that we deem relevant, we are of the opinion that:
1. The Warrant Shares have been duly authorized by the Company and,
when and to the extent the Warrant Shares are issued and sold in the manner
set forth in the Warrant Agreement and the Registration Statement upon
exercise of the Warrants, the Warrant Shares will be validly issued, fully
paid and non-assessable.
2. The Warrant Agreement and the Warrants issued pursuant thereto have
been duly authorized, executed and delivered by the Company.
We are qualified to practice law in the State of Nevada. The opinions
set forth herein are expressly limited to the laws of the State of Nevada and
we do not purport to be experts on, or to express any opinion herein
concerning, or to assume any responsibility as to the applicability to or the
effect on any of the matters covered herein of, the laws of any other
jurisdiction. We express no
<PAGE>
Aladdin Gaming Enterprises, Inc.
June 8, 1998
Page 3
opinion concerning, and we assume no responsibility as to laws or judicial
decisions related to, or any orders, consents or other authorizations or
approvals as may be required by, any federal law, including any federal
securities law, or any state securities or Blue Sky laws.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and the reference to this firm therein and in the
related Prospectus as the same appears under the caption "Legal Matters". In
giving this consent, we do not admit that we are in the category of persons
whose consent is required under Section 7 of the Act or the rules and
regulations of the Commission promulgated thereunder.
Yours very truly,
/s/ Schreck Morris
SCHRECK MORRIS
<PAGE>
Aladdin Gaming Enterprises, Inc.
831 Pilot Road
Las Vegas, Nevada 89119
Dear Ladies and Gentlemen:
You have requested our opinion regarding the discussion of the material
United States federal income tax considerations under the heading "Certain
United States Federal Income Tax Considerations" in the Prospectus (the
"Prospectus") which will be included in the Registration Statement on Form
S-1 (the "Registration Statement") filed by Aladdin Gaming Enterprises, Inc.
(the "Issuer") on the date hereof with the Securities and Exchange Commission
(the "Commission") under the Securities Act of 1933, as amended (the
"Securities Act"). The Prospectus relates to the 2,215,000 warrants to
purchase Class B non-voting common stock, no par value, of the Issuer. This
opinion is delivered in accordance with the requirements of Item 601(b)(8) of
Regulation S-K under the Securities Act.
We have reviewed the Prospectus and such other materials as we have
deemed necessary or appropriate as a basis for our opinion described herein,
and have considered the applicable provisions of the Internal Revenue Code of
1986, as amended (the "Code"), Treasury regulations promulgated thereunder,
pertinent judicial authorities, interpretive rulings of the Internal Revenue
Service and such other authorities as we have considered relevant all as in
effect on the date hereof. It should be noted that statutes, regulations,
judicial decisions and administrative interpretations are subject to change
at any time and, in some circumstances, with retroactive effect. A change in
the authorities upon which our opinion is based could affect our conclusions.
Based upon the foregoing, it is our opinion that the statements made
under the heading "Certain United States Federal Income Tax Considerations"
in the Prospectus, to the extent that they constitute matters of law or legal
conclusions, are correct in all material respects.
In accordance with the requirements of Item 601(b)(23) of Regulation S-K
under the Securities Act, we hereby consent to the use of our name under the
heading "LEGAL OPINIONS" in the Prospectus and to the filing of this opinion
as an
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Exhibit to the Registration Statement. In giving this consent, we do not
thereby admit that we are within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933 or the rules and
regulations of the Commission promulgated thereunder.
Very truly yours,
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Noteholder Completion Guaranty
GUARANTY OF PERFORMANCE AND COMPLETION
THIS GUARANTY OF PERFORMANCE AND COMPLETION, dated as of February 26, 1998
is made by LONDON CLUBS INTERNATIONAL PLC, a company registered in England and
Wales under company number 2862479 ("London Clubs"), THE TRUST UNDER ARTICLE
SIXTH U/W/O SIGMUND SOMMER (the "Trust") and ALADDIN BAZAAR HOLDINGS, LLC, a
Nevada limited liability company ("ABH"; ABH, the Trust and London Clubs are
individually called a "Guarantor" and collectively called the "Guarantors"), in
favor of State Street Bank and Trust Company (the "Discount Note Indenture
Trustee"), for the benefit of the Noteholders (as defined below).
WITNESSETH:
WHEREAS, the Discount Note Indenture Trustee, Aladdin Gaming
Holdings, LLC ("Holdings") and Aladdin Capital Corp. ("Capital," and together
with Holdings, collectively, the "Note Issuers") have entered into an indenture
(the "Indenture") dated as of even date herewith; and
WHEREAS, certain Discount Notes will be issued pursuant to the
Indenture; and
WHEREAS, pursuant to that certain credit agreement, dated as of even
date herewith (together with all amendments and other modifications, if any,
from time to time thereafter made thereto, the "Credit Agreement"), among
Aladdin Gaming, LLC, a Nevada limited liability company (the "Borrower"), the
various lending institutions (individually a "Lender" and collectively the
"Lenders") as are, or may from time to time become, parties thereto and The Bank
of Nova Scotia ("Scotiabank") as the Administrative Agent for the Lenders,
Merrill Lynch Capital Corporation ("Merrill Lynch") as the Syndication Agent for
the Lenders, CIBC Oppenheimer Corp. as the Documentation Agent for the Lenders,
and Scotiabank and Merrill Lynch as Arrangers, the Lenders have extended
Commitments to make Loans to the Borrower and to issue Letters of Credit for the
account of the Borrower; and
WHEREAS, the proceeds from the issuance of the Discount Notes and
the Loans are to be advanced to the Borrower pursuant to the terms of that
certain Disbursement Agreement dated of even date herewith (together with all
amendments and other modifications, if any, from time to time thereafter made
thereto, the "Disbursement Agreement") among the Borrower, Holdings, Scotiabank,
as the Administrative Agent, the Discount Note Indenture Trustee and Scotiabank,
as the Disbursement Agent and the initial Securities Intermediary and U.S. Bank
National Association as the Servicing Agent; and
WHEREAS, as a condition precedent to the effectiveness of the Credit
Agreement, the Guarantors are required to execute and deliver a Guaranty of
Performance and Completion dated as of even date herewith (the "Completion
Guaranty") in favor of each of the
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Administrative Agent and the Lenders and certain subsidiaries of London Clubs
(the "Subsidiary Guarantors") have agreed to guarantee fully and unconditionally
the payment of London Clubs' obligations under the Completion Guaranty pursuant
to a separate guaranty agreement of even date herewith (the "Subsidiary Bank
Guaranty"; together with the Completion Guaranty, collectively, the "Bank
Guaranty"); and
WHEREAS, as a condition precedent to the effectiveness of the
Indenture and the issuance of the Discount Notes, the Guarantors are required to
execute and deliver this Guaranty of Performance and Completion and the
Subsidiary Guarantors have agreed to guarantee fully and unconditionally the
payment of London Clubs' obligations under this Guaranty of Performance and
Completion pursuant to a separate guaranty agreement of even date herewith (the
"Subsidiary Guaranty"; together with this Guaranty of Performance and
Completion, this "Noteholder Completion Guaranty"); and
WHEREAS, the Guarantors have duly authorized the execution, delivery
and performance of this Guaranty of Performance and Completion and the
Subsidiary Guarantors have duly authorized the execution, delivery and
performance of the Subsidiary Guaranty; and
WHEREAS, it is in the best interests of the Guarantors to execute
this Guaranty of Performance and Completion and the Subsidiary Guarantors to
execute the Subsidiary Guaranty inasmuch as the Guarantors and the Subsidiary
Guarantors will derive substantial direct and indirect benefits from the
issuance of the Discount Notes.
NOW THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, and in order to induce the Discount Note Indenture
Trustee to enter into the Indenture, the Guarantors agree, for the benefit of
the Discount Note Indenture Trustee (for the benefit of the Noteholders), as
follows:
1. Definitions. Capitalized terms not otherwise defined in this Noteholder
Completion Guaranty shall have the meanings set forth in Appendix A
hereto. As used herein, the following terms shall have the meanings set
forth below.
"Additional Amounts" is defined in Section 15(a)(iii).
"Approved Plans and Specifications" shall mean "Plans and Specifications."
"Bank Guaranty" is defined in the eighth recital.
"Bankruptcy Code" shall mean Title 11 of the United States Code as amended
from time to time.
"Consolidated Intangibles" means, at a particular date, all assets of a
Guarantor and its consolidated Subsidiaries, determined on a consolidated
basis, that would, in conformity
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with GAAP, as applicable, be classified as intangible assets, including,
without limitation, unamortized debt discount and expense, unamortized
organization and reorganization expense, costs in excess of the fair
market value of acquired companies, patents, trade or service marks,
franchises, trade names, goodwill and, from and after March 30, 1997, the
amount of all write-ups in the book value of assets resulting from any
revaluation thereof.
"Consolidated Tangible Assets" means, at a particular date, the amount
equal to (a) the amount which would be included as assets on the
consolidated balance sheet of a Guarantor and its consolidated
Subsidiaries as at such date in accordance with GAAP, minus (b)
Consolidated Intangibles.
"Construction Benchmark Schedule" means the schedule attached hereto as
Schedule 7.
"Credit Agreement" is defined in the sixth recital.
"Dormant Subsidiary" means any Subsidiary of a Guarantor which has no
operating assets or property and conducts no business.
"Enforcement Costs" means all reasonable out-of-pocket costs and expenses
of the Discount Note Indenture Trustee in connection with the enforcement
of the rights and remedies of the Discount Note Indenture Trustee under
this Noteholder Completion Guaranty and any amendment, waiver or consent
relating hereto including, without limitation, reasonable attorneys' fees
and costs and expenses, court costs and filing fees in addition to all
other amounts due hereunder whether or not such Enforcement Costs are
incurred in one or more proceedings.
"Funding Cessation" means any time that funds are unavailable to the
Borrower (from any source whatsoever) to fund draws under the Credit
Agreement in an amount equal to 75% of the draw request in question or the
Construction Consultant fails to deliver the On Schedule Certificate as
contemplated by the Construction Consultant Engagement Agreement and the
Disbursement Agreement.
"GAAP" means the generally accepted accounting principles as in effect
from time to time in the United Kingdom with respect to London Clubs and
in the United States with respect to the other Guarantors, as the case may
be.
"Guaranteed Obligations" means the obligations of the Guarantors under
Section 2.
"Guarantor" is defined in the preamble.
"Guaranty Deposit Account" is defined in Section 4(a).
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"Indenture" is defined in the first recital.
"Insolvency Proceeding" means any case or proceeding, voluntary or
involuntary, under the Bankruptcy Code, or any similar existing or future
law of any jurisdiction, foreign, state or federal, relating to
bankruptcy, insolvency, reorganization or relief of debtors.
"Leases" means, collectively, all agreements relating to the use,
occupancy and possession of space with respect to the Main Project entered
into by the Borrower and a tenant from time to time.
"Material" means material in relation to the business, operations,
affairs, financial condition, assets, properties, or prospects of a
Guarantor and its Subsidiaries taken as a whole.
"Material Subsidiary" means each of the Subsidiaries of London Clubs that
are party to that certain Subsidiary Guaranty dated as of June 30, 1997
guaranteeing the obligations of London Clubs under the Note Agreements.
Each Material Subsidiary of London Clubs as of the date hereof is listed
on Schedule 1 hereof.
"Minimum Aladdin Facilities" has the meaning ascribed to it in the
Indenture.
"Note Agreements" means the several identical Note Purchase Agreements
dated as of June 30, 1997 among London Clubs and the purchasers named
therein relating to London Clubs' $50,000,000 aggregate principal amount
of 7.74% Guaranteed Senior Notes due 2004 and as the same may be modified
by amendments that would not, in the aggregate, have the effect of making
London Clubs' obligations thereunder materially more onerous (it being
understood and agreed that any amendment, supplement or modification that
increases the amount of the obligations of London Clubs thereunder shall
be deemed material).
"Noteholder Completion Guaranty" is defined in the ninth recital
"Noteholders" means the holders of the Discount Notes.
"NRS" is defined in Section 4(a).
"Operating Deadline" means the date which is 28 months following the
Effective Date, provided, that if a Force Majeure Event occurs, the
Operating Deadline shall be extended for the amount of time such Force
Majeure Event exists but in no event shall the Operating Deadline be
extended past the date which is 40 months after the Effective Date.
"Release Date" is defined in Section 3(a)(ii).
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"Subsidiary Bank Guaranty" is defined in the eighth recital.
"Subsidiary Guarantors" is defined in the eighth recital.
"Subsidiary Guaranty" is defined in the ninth recital.
"Taxes" is defined in Section 15(a).
"Tax Refund" is defined in Section 15(c).
"Trigger Days" means
(i) an aggregate of 60 calendar days during any period in which
the Lenders have disbursed more than $1 and up to and
including $35.0 million of the Commitments to the Borrower;
(ii) an aggregate of 90 calendar days during any period in which
the Lenders have disbursed more than $35.0 million and up to
and including $70.0 million of the Commitments to the
Borrower;
(iii) an aggregate of 120 calendar days during any period in which
the Lenders have disbursed more than $70.0 million and up to
and including $110.0 million of the Commitments to the
Borrower; and
(iv) an aggregate of 180 calendar days during any period in which
the Lenders have disbursed more than $110.0 million of the
Commitments to the Borrower.
2. Guaranty of Completion and Performance. The Guarantors, jointly and
severally, absolutely, unconditionally and irrevocably, on the terms and
subject to the conditions set forth herein, covenant and guarantee to the
Discount Note Indenture Trustee (for the benefit of the Noteholders) and
covenants and agrees to make any and all payments to or on behalf of the
Borrower as may be necessary in order to permit and assure that:
(i) the Borrower shall (A) prosecute the Work and the construction
of the Main Project to Final Completion with due diligence and
continuity, in an expeditious and first-class workmanlike manner,
(B) cause the Work and the construction of the Main Project to be
performed and the Main Project to be constructed, equipped and
completed in compliance with the Plans and Specifications in all
material respects and in compliance in all material respects with
the provisions of the Reciprocal Easement Agreement, the Site Work
Agreement, all Environmental Laws and all Legal Requirements, and
(C) correct or cause to be corrected as soon as possible any
material defect in the Main Project and the
5
<PAGE>
Work (including, without limitation, any material defect in
workmanship or quality of construction or materials) or any material
departure or variation from the Final Plans and Specifications, the
requirements of the Reciprocal Easement Agreement and/or the Site
Work Agreement not made pursuant to Change Orders approved in
writing by the Construction Consultant and the Administrative Agent
in accordance with the Credit Agreement and the Disbursement
Agreement; and
(ii) the Borrower shall punctually pay, discharge and/or contribute,
as appropriate, (A) any and all costs, expenses and liabilities
incurred by the Borrower for or in connection with the Final
Completion of the Work and the Main Project, (B) all claims and
demands for labor, materials and services incurred by the Borrower
for or in connection with the Final Completion of the Work and the
Main Project which are or may become due and payable, or, if unpaid,
are or may become Liens on the portion of the Site or any portion
thereof owned by the Borrower, (C) all payments to be made for work
to be performed by the Borrower under Leases or under the Reciprocal
Easement Agreement or the Site Work Agreement for Tenant
Improvements, (D) Impositions and premiums for insurance prior to
the Final Completion of the Work, (E) all amounts which the Borrower
may be required to pay from time to time in order to keep the Main
Project Budget In Balance, and (F) all amounts needed to cause the
Work to be performed within the Construction Benchmark Schedule; and
(iii) the Borrower shall perform the Work and complete construction
of the required Minimum Aladdin Facilities on schedule and in
accordance with the Plans and Specifications Lien-free other than
Permitted Liens and the portion of the Site owned by the Borrower
shall be and remain free and clear of all Liens arising from the
furnishing of materials, labor or services for or in connection with
the performance of the Work and the Main Project; and
(iv) the Borrower shall provide the expertise necessary to supervise
performance of the Main Project and the Final Completion of Work at
no cost to the Discount Note Indenture Trustee; and
(v) in the event the Guarantors hereunder shall fail or refuse to
pay or perform the Guaranteed Obligations under this Noteholder
Completion Guaranty, the Discount Note Indenture Trustee (in
addition to any other rights and remedies afforded by applicable
law) may pay or perform or cause the payment and performance of the
Guaranteed Obligations on behalf of the Guarantors hereunder in
which case the Guarantors, upon demand by the Discount Note
Indenture Trustee, shall pay any and all costs, expenses and
liabilities for such costs and expenses in connection with the
performance of the Final Completion of the Main Project, or cause
any Lien in connection with the Final Completion thereof or any
claim or demand for the payment of the cost of the Final Completion
of the main Project to be bonded,
6
<PAGE>
discharged, released or paid, and shall reimburse the Discount Note
Indenture Trustee for all sums paid and all costs, expenses or
liabilities incurred by the Discount Note Indenture Trustee in
connection therewith; and
(vi) the Guarantors shall pay the Enforcement Costs.
3. Restrictions on Exercise of Rights and Remedies by the Discount Note
Indenture Trustee.
(a) Except as expressly set forth in this Section 3(a), the Guarantors
shall have no obligation to pay and/or perform any of the Guaranteed
Obligations and the Discount Note Indenture Trustee covenants and
agrees not to demand payment and/or performance of any of the
Guaranteed Obligations or exercise any rights, remedies or options
under this Noteholder Completion Guaranty or commence any
enforcement proceedings hereunder during any period that the Bank
Guaranty is in effect and the Guarantors have not been released in
writing by the Lenders; provided, however, the Discount Note
Indenture Trustee shall be permitted to demand payment and/or
performance of the Guaranteed Obligations and exercise all rights,
remedies and options and commence enforcement proceedings under this
Noteholder Completion Guaranty:
(i) at any time prior to the date on which any funds have been
advanced or disbursed to the Borrower pursuant to the Credit
Agreement and the Disbursement Agreement;
(ii) at any time prior to Completion and, from and after the date
(a "Release Date") on which all of the indebtedness evidenced
and secured by the Loan Documents has been indefeasibly paid
in full and the Lenders have released the Guarantors in
writing from their obligations under the Bank Guaranty;
(iii) at any time after the date on which all of the following
events have occurred and are continuing:
(A) an event of default under the Bank Guaranty has occurred
and is continuing and such event of default has remained
uncured for the number of applicable Trigger Days;
(B) a Funding Cessation has occurred and is continuing for
the aggregate number of applicable Trigger Days set
forth in the definition of Trigger Days; provided,
however, in no event shall aggregate Funding Cessations
exceed 180 days in the aggregate (which shall be
extended for the number of days during which a Force
Majeure Event and/or an Insolvency Proceeding of the
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<PAGE>
Borrower which impairs the Lenders directly or
indirectly from enforcing the Bank Guaranty has occurred
and is continuing, which such extension shall terminate
upon the filing by the Lenders of any action against the
Guarantors under the Bank Guaranty to enforce the
obligations of the Guarantors thereunder which are
susceptible of performance notwithstanding such
Insolvency Proceeding) in any consecutive 365 day
period; and
(C) the Work which has been substantially completed in
accordance with the Plans and Specifications (as
certified by the Construction Consultant) on the date in
question has not progressed to the stage of completion
set forth for such date (subject to any extensions based
upon Force Majeure Events or an Insolvency Proceeding of
the Borrower which impairs the Lenders directly or
indirectly from enforcing the Bank Guaranty, which such
extension shall terminate upon the filing by the Lenders
of any action against the Guarantors under the Bank
Guaranty to enforce the obligations of the Guarantors
thereunder which are susceptible of performance
notwithstanding such Insolvency Proceeding) in the
Construction Benchmark Schedule.
(b) Notwithstanding anything to the contrary in this Noteholder
Completion Guaranty, performance in all material respects of the
obligations of the Guarantors under Section 2 of the Bank Guaranty
(as in effect on the date hereof, or as may be amended from time to
time so long as in connection with each such amendment the
Construction Consultant certifies to the Discount Note Indenture
Trustee that, after giving effect to such amendment, (i) the Minimum
Aladdin Facilities are still capable of being completed by the
Operating Deadline and (ii) the Guarantors have consented to such
amendment) shall be deemed to be performance of the Guaranteed
Obligations hereunder and performance in all material respects of
the Guaranteed Obligations of the Guarantors hereunder shall be
deemed to be performance of the corresponding obligations under the
Bank Guaranty.
(c) As a material inducement to the Lenders to consent to the delivery
of this Noteholder Completion Guaranty by the Guarantors, the
Discount Note Indenture Trustee covenants and agrees that (i) the
right of the Discount Note Indenture Trustee to demand payment
and/or performance of the Guaranteed Obligations, to exercise any
rights, remedies and options and/or to commence enforcement
proceedings under this Noteholder Completion Guaranty shall be
subject in all events to the delivery of a written notice to the
Administrative Agent no later than 10 Business Days prior to the
making of such demand for payment and/or performance, exercise of
rights, remedies and options, or commencement of
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enforcement proceedings, as applicable, (ii) the Lenders shall have
all rights at law and equity including, without limitation, the
right to seek an injunction or other extraordinary remedy to prevent
or prohibit the making of any demand for payment and/or performance,
exercise of rights, remedies and options, or commencement of
enforcement proceedings by the Discount Note Indenture Trustee which
is in contravention of Section 3(a), and (iii) this Noteholder
Completion Guaranty shall not be amended, modified, and/or amended
and restated without the prior written consent of the Administrative
Agent in its sole discretion provided that the consent of the
Administrative Agent shall not be required in connection with
corrective amendments required to be made to this Noteholder
Completion Guaranty as and when corresponding amendments are made to
the Bank Guaranty.
4. Payment Provisions. Subject to Nevada Gaming Laws (once the Borrower has
been licensed), all payments required to be made by the Guarantors
pursuant to Section 2 hereof shall be deemed to be capital contributions
to Holdings and shall be made subject to the following terms:
(a) The Guarantors shall make cash payments in the amounts required
under Section 2 hereof into an interest-bearing deposit account
designated and controlled exclusively by the Discount Note Indenture
Trustee (the "Guaranty Deposit Account") in which the Discount Note
Indenture Trustee is hereby granted a security interest. The
Guaranty Deposit Account is intended to be a "deposit account" for
the purposes of Nevada Revised Statutes ("NRS") 40.430.4(g) and
Section 9301(g) of the California Uniform Commercial Code. Such
funds shall be held in the Guaranty Deposit Account as collateral
for the Guaranteed Obligations of the Guarantors under this
Noteholder Completion Guaranty and shall be applied to payment of
the Guaranteed Obligations.
(b) The cash payments into the Guaranty Deposit Account and the funds
therein for the purpose of paying the Guaranteed Obligations under
this Noteholder Completion Guaranty shall be free and clear of any
third party claims thereto, including any claims by the Borrower as
a third party beneficiary under this Noteholder Completion Guaranty.
The Guarantors and the Discount Note Indenture Trustee specifically
agree that the Borrower is not an intended third party beneficiary
to this Noteholder Completion Guaranty and that neither the Borrower
nor any other Person which is not party to this Noteholder
Completion Guaranty (other than successors and assigns of the
Discount Note Indenture Trustee) shall have any rights under this
Noteholder Completion Guaranty.
5. Continuation of Guaranty. In the event that Holdings or its subsidiaries
are in default under the Indenture or the Noteholders have exercised their
acceleration rights thereunder, this Noteholder Completion Guaranty shall
remain in full force and effect.
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Subject to the provisions of Section 11 hereof, upon the indefeasible
payment and performance of the Guaranteed Obligations by the Guarantors,
this Noteholder Completion Guaranty shall terminate.
6. Proof of Damages. If the Guarantors shall at any time or from time to time
fail to perform or comply with any of the Guaranteed Obligations contained
herein, then in each such case (i) it shall be assumed conclusively
without necessity of proof that such failure by the Guarantors was the
sole and direct cause of the Discount Note Indenture Trustee failing to
receive such payment when due (to the extent of the failure of the
Guarantors to perform the Guaranteed Obligations contained herein)
irrespective of any other contributing or intervening cause whatsoever,
and (ii) the Guarantors further irrevocably waive to the fullest extent
permitted by law any right or defense the Guarantors may have to cause the
Discount Note Indenture Trustee to prove the cause or amount of such
damages or to mitigate the same.
7. Rights of the Discount Note Indenture Trustee. To the extent permitted by
the Nevada Gaming Laws, each Guarantor authorizes the Discount Note
Indenture Trustee in its sole discretion to perform any or all of the
following acts during such time as the Discount Note Indenture Trustee has
the right to demand payment and performance of the Guaranteed Obligations,
all without notice to the Guarantors (but with notice being given to the
Administrative Agent as required by Section 3(c) of this Noteholder
Completion Guaranty) and without affecting the payment and performance of
the Guaranteed Obligations by the Guarantors:
(a) From and after the time that the Discount Note Indenture Trustee is
permitted to demand payment or performance of the Guaranteed
Obligations under the Noteholder Completion Guaranty, the Discount
Note Indenture Trustee may take and hold security for the Guaranteed
Obligations and for the Note Issuer's obligations under the
Indenture and the Discount Notes, accept additional or substituted
security for any of the foregoing, and subordinate, exchange,
enforce, waive, release, compromise, fail to perfect and sell or
otherwise dispose of any such security.
(b) The Discount Note Indenture Trustee may direct the order and manner
of any sale of all or any part of any security now or later to be
held for this Noteholder Completion Guaranty and may also bid at any
such sale.
(c) The Discount Note Indenture Trustee may substitute, add or release
any one or more Guarantors or endorsers.
(d) The Discount Note Indenture Trustee may release the Note Issuers of
their liability for their obligations under the Indenture.
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(e) The Discount Note Indenture Trustee may extend other credit to the
Note Issuers, their Affiliates and any of the Guarantors or their
respective Affiliates and may take and hold security for the credit
so extended, all without affecting the Guarantors' liability under
this Noteholder Completion Guaranty.
(f) The Discount Note Indenture Trustee and the Noteholders may advance
additional funds to the Note Issuers, the Guarantors and their
respective Affiliates for any purpose.
8. Noteholder Completion Guaranty to be Absolute. The Guarantors expressly
agree that for as long as the obligations of the Guarantors under the Bank
Guaranty and the Guaranteed Obligations hereunder remain unperformed, the
Guarantors shall not be released from the Guaranteed Obligations hereunder
by or because of:
(a) Any act or event which might otherwise discharge, reduce, limit or
modify the Guaranteed Obligations;
(b) Any waiver, extension, modification, forbearance, delay or other act
or omission of the Discount Note Indenture Trustee, or any failure
to proceed promptly or otherwise as against the Note Issuers, any
Guarantor or any security; or
(c) Any action, omission or circumstance which might increase the
likelihood that the Guarantors may be called upon to perform under
this Noteholder Completion Guaranty or which might affect the rights
or remedies of the Guarantors as against the Note Issuers or any
Guarantor; or
(d) Any dealings occurring at any time between the Borrower, the Note
Issuers, the Lenders, the Discount Note Indenture Trustee, the
Noteholders or the Guarantors with respect to amendments to the Bank
Guaranty, the Credit Agreement, the other Loan Documents, the Loans,
the Indenture, the Discount Notes or otherwise, as the case may be.
The Guarantors hereby expressly waive and surrender any defense to their
liability under this Noteholder Completion Guaranty based upon any of the
foregoing acts, omissions, agreements, waivers or matters.
9. Guarantors' Waivers. The Guarantors waive:
(a) All statutes of limitations as a defense to any action or proceeding
brought against the Guarantors by the Discount Note Indenture
Trustee, to the fullest extent permitted by law;
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<PAGE>
(b) Any right they may have to require the Discount Note Indenture
Trustee to proceed against the Note Issuers or to pursue any other
remedy in their power to pursue;
(c) Any defense based on any claim that the Guaranteed Obligations
exceed or are more burdensome than those of the Note Issuers under
the Indenture;
(d) Any defense based on: (i) any legal disability of the Note Issuers,
(ii) any discharge, modification, impairment or limitation of the
liability of the Note Issuers under the Indenture from any cause,
whether consented to by the Discount Note Indenture Trustee or
arising by operation of law or from any Insolvency Proceeding, (iii)
any rejection or disaffirmance of the Discount Notes or any security
held for the Discount Notes in any Insolvency Proceeding and (iv)
the Guarantors' rights under NRS 104.3605, the Guarantors
specifically agreeing that this clause (iv) shall constitute a
waiver of discharge under NRS 104.3605;
(e) Any defense based on any action taken or omitted (other than gross
negligence or willful misconduct) by the Discount Note Indenture
Trustee in any Insolvency Proceeding involving the Note Issuers,
including any election to have a claim allowed as being secured,
partially secured or unsecured, any extension of credit by the
Discount Note Indenture Trustee to the Note Issuers in any
Insolvency Proceeding, and the taking and holding by the Discount
Note Indenture Trustee of any security for any such extension of
credit;
(f) All presentments, demands for performance, notices of
nonperformance, protests, notices of protest, notices of dishonor,
notices of acceptance of this Noteholder Completion Guaranty and of
the existence, creation, or incurring of new or additional
indebtedness, and demands and notices of every kind;
(g) Any defense based on or arising out of any defense that the Note
Issuers may have to the payment or performance of their obligations
under the Indenture or any portion of such obligations; and
(h) Any defense or benefit based on NRS 40.430 and judicial decisions
relating thereto and NRS 40.451 et seq. and judicial decisions
relating thereto, the Guarantors agreeing that the waiver in this
clause (h) is intended to take advantage of the two (2) waivers
permitted by NRS 40.495 (1) and (2) to the maximum extent permitted.
10. Waivers of Subrogation and Other Rights.
(a) Upon the occurrence of any event of default hereunder, the Discount
Note Indenture Trustee in its sole discretion, without prior notice
to or consent of the
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Guarantors, may elect to: (i) foreclose either judicially or
nonjudicially against any real or personal property security, if
any, for the obligations under the Indenture, (ii) accept a transfer
of any such security in lieu of foreclosure, (iii) make any
accommodation with the Note Issuers or any Guarantor, or (iv)
exercise any other remedy against the Note Issuers or any Guarantor
or any security. No such action by the Discount Note Indenture
Trustee shall release or limit the liability of the Guarantors, who
shall remain liable under this Noteholder Completion Guaranty after
the action, even if the effect of the action is to deprive the
Guarantors of any subrogation rights, rights of indemnity, or other
rights to collect reimbursement for any sums paid to the Discount
Note Indenture Trustee, whether contractual or arising by operation
of law or otherwise. The Guarantors expressly waive any defenses or
benefits that may be derived from NRS Section 40.451, et seq. and
judicial decisions relating thereto, or comparable provisions of
Nevada law which are comparable to California Civil Procedure ss.ss.
580a, 580b, 580d, or 726 or comparable provisions of the laws of any
other jurisdiction, and all other suretyship defenses they otherwise
might or would have under Nevada law or other applicable law. The
Guarantors expressly agree that under no circumstances shall they be
deemed to have any right, title, interest or claim in or to any real
or personal property, if any, to be held by the Discount Note
Indenture Trustee or any third party after any foreclosure or
transfer in lieu of foreclosure of any security for the Guaranteed
Obligations or the obligations under the Indenture.
(b) Regardless of whether the Guarantors may have made any payments to
the Discount Note Indenture Trustee under this Noteholder Completion
Guaranty, the Guarantors hereby waive: (i) all rights of
subrogation, all rights of indemnity, and any other rights to
collect reimbursement from the Note Issuers for any sums paid to the
Discount Note Indenture Trustee, whether contractual or arising by
operation of law (including the Bankruptcy Code) or otherwise, (ii)
all rights to enforce any remedy that the Discount Note Indenture
Trustee may have against the Note Issuers or any other Person, and
(iii) all rights to participate in any security now or later to be
held by the Discount Note Indenture Trustee for the obligations
under the Indenture. The waivers given in this Section 10(b) shall
be effective until the obligations under the Indenture have been
indefeasibly paid and performed in full.
(c) The Guarantors understand and acknowledge that if the Discount Note
Indenture Trustee forecloses judicially or nonjudicially against any
real property or personal security, if any, for the Guaranteed
Obligations or the obligations under the Indenture, that foreclosure
could impair or destroy any ability that the Guarantors may have to
seek reimbursement, contribution or indemnification from the
Borrower or the Note Issuers or others based on any right the
Guarantors may have of subrogation, reimbursement, contribution or
indemnification for any
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amounts paid by the Guarantors under this Noteholder Completion
Guaranty. The Guarantors further understand and acknowledge that in
the absence of this Section 10, such potential impairment or
destruction of the Guarantors' rights, if any, may entitle the
Guarantors to assert a defense to this Noteholder Completion
Guaranty. By executing this Noteholder Completion Guaranty, the
Guarantors freely, irrevocably and unconditionally: (i) waive and
relinquish that defense and agree that the Guarantors will be fully
liable under this Noteholder Completion Guaranty even though the
Discount Note Indenture Trustee may foreclose judicially or
nonjudicially against any real property security, if any, for the
obligations under the Indenture; (ii) agree that the Guarantors will
not assert that defense in any action or proceeding which the
Discount Note Indenture Trustee may commence to enforce this
Noteholder Completion Guaranty; and (iii) acknowledge and agree that
this waiver is a material part of the consideration which they are
receiving for entering into the transactions contemplated hereby.
11. Revival and Reinstatement. If the Discount Note Indenture Trustee is
required to pay, return or restore to any of the Guarantors any amounts
previously paid with respect to the Guaranteed Obligations because of any
Insolvency Proceeding of any of the Guarantors, any stop notice or any
other reason, the Guaranteed Obligations shall be reinstated and revived
and the rights of the Discount Note Indenture Trustee shall continue with
regard to such amounts, as though they had never been paid.
12. Representations and Warranties. Each Guarantor hereby represents and
warrants unto the Discount Note Indenture Trustee (for the benefit of the
Noteholders) as follows:
(a) The most recent audited consolidated balance sheet of London Clubs
and ABH and its respective consolidated Subsidiaries (in the case of
ABH, as of December 31, 1996 and in the case of London Clubs, as of
March 30, 1997) and the related consolidated statements of earnings
and stockholders' equity (or profit and loss in the case of London
Clubs) and of cash flows for the fiscal year ended on such date,
reported on by such Guarantor's independent public accountants,
copies of which have heretofore been furnished to the Discount Note
Indenture, are complete and correct and present fairly (or give a
true and fair view of in the case of London Clubs) the consolidated
financial condition of such Guarantor and its consolidated
Subsidiaries as at such date, and the results of their operations
(or consolidated profit and loss in the case of London Clubs) and
their consolidated cash flows for the fiscal year then ended. The
unaudited consolidated balance sheet of such Guarantor and its
consolidated Subsidiaries as at September 30, 1997 and the related
unaudited consolidated statements of earnings and of cash flows for
the nine-month period (or, in the case of London Clubs, six month
period) ended on such date, certified by a Authorized Representative
of such Guarantor, are complete and correct and present fairly (or
give a true and fair view of in the case of London Clubs) the
consolidated financial condition of such
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Guarantor and its consolidated Subsidiaries as at such date, and the
consolidated results of their operations and their consolidated cash
flows for the nine-month period (or, in the case of London Clubs,
six-month period) then ended (subject to normal year-end audit
adjustments). All such financial statements, including the related
schedules and notes thereto, have been prepared in accordance with
GAAP or UK GAAP, as applicable, applied consistently throughout the
periods involved (except as approved by such accountants or
Authorized Representative, as the case may be, and as disclosed
therein).
(b) Since December 31, 1996, in the case of ABH and since March 30, 1997
in the case of the Trust, there has been no development or event
which has had or could reasonably be expected to have a Material
Adverse Effect.
(c) Each of such Guarantor and its Subsidiaries (a) is duly organized,
and, to the extent applicable, validly existing and in good standing
under the laws of the jurisdiction of its organization, (b) has the
corporate or other power and authority, and the legal right, to own
and operate its property, to lease the property it operates as
lessee and to conduct the business in which it is currently engaged,
(c) to the extent applicable, is duly qualified as a foreign
corporation or company or trust and in good standing, under the laws
of each jurisdiction where its owner ship, lease or operation of
property or the conduct of its business requires such qualification
and (d) by Opening Date, is in compliance with all material Legal
Requirements except where failure to comply with any of the
foregoing could not individually or in the aggregate reasonably be
expected to have a Material Adverse Effect.
(d) Each of such Guarantors has the corporate or other power and
authority, and the legal right, to make, deliver and perform this
Noteholder Completion Guaranty and to provide the undertakings
hereunder and has taken all necessary corporate or other action to
authorize the execution, delivery and performance of this Noteholder
Completion Guaranty. No consent or authorization of, filing with or
other act by or in respect of, any Governmental Instrumentality or
any other Person is required to be obtained or made, as the case may
be, by such Guarantor in connection with this Noteholder Completion
Guaranty or with the execution, delivery, performance, validity or
enforceability of this Noteholder Completion Guaranty by or against
such Guarantor, except as has been obtained and remains in full
force and effect on the date hereof, other than certain Nevada
Gaming Laws approvals, as applicable. This Noteholder Completion
Guaranty has been duly executed and delivered on behalf of such
Guarantor. This Noteholder Completion Guaranty constitutes a legal,
valid and binding obligation of such Guarantor enforceable against
it in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors'
rights generally and by
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general equitable principles (whether enforcement is sought by
proceedings in equity or at law).
(e) Each Subsidiary Guarantor has the corporate power and authority, and
the legal right, to make, deliver and perform the Subsidiary
Guaranty and to provide the undertakings thereunder and has taken
all necessary corporate action to authorize the execution, delivery
and performance of the Subsidiary Guaranty. No consent or
authorization of, filing with or other act by or in respect of, any
Governmental Instrumentality or any other Person is required to be
obtained or made, as the case may be, by such Subsidiary Guarantor
in connection with the Subsidiary Guaranty or with the execution,
delivery, performance, validity or enforceability of the Subsidiary
Guaranty by or against such Subsidiary Guarantor, except as has been
obtained and remains in full force and effect on the date hereof,
other than certain Nevada Gaming Laws approvals, as applicable. The
Subsidiary Guaranty has been duly executed and delivered on behalf
of each Subsidiary Guarantor. The Subsidiary Guaranty constitutes a
legal, valid and binding obligation of each Subsidiary Guarantor
enforceable against it in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and by general equitable principles
(whether enforcement is sought by proceedings in equity or at law).
(f) The execution, delivery and performance of this Noteholder
Completion Guaranty by the Guarantors and the execution, delivery
and performance by the Subsidiary Guarantors of the Subsidiary
Guaranty will not (i) violate any Legal Requirement or obligation of
such Guarantor or Subsidiary Guarantor, (ii) result in, or require,
the creation or imposition of any Lien on any of its properties or
revenues pursuant to any such Legal Requirement or obligation or
(iii) conflict with or result in a breach of any of the terms,
conditions or provisions of any order, judgment, decree or ruling of
any court, arbitrator or Governmental Instrumentality applicable to
such Guarantor or Subsidiary Guarantor.
(g) Schedule 2 contains (except as noted therein) complete and correct
lists of each of London Clubs' and ABH's Subsidiaries (other than
Dormant Subsidiaries), showing, as to each Subsidiary, the correct
name thereof, the jurisdiction of its organization, and the
percentage of shares of each class of its capital stock or similar
equity interests outstanding owned by such Guarantor and each other
Subsidiary of such Guarantor. All of the outstanding shares of
capital stock or similar equity interests of each Subsidiary shown
in Schedule 2 as being owned by such Guarantor and its Subsidiaries
have been validly issued, are fully paid and nonassessable and are
owned by such Guarantor or another Subsidiary free and clear of any
Lien (except as otherwise disclosed in Schedule 2). Each Subsidiary
identified in Schedule 2 is a corporation or other legal entity duly
organized,
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validly existing and in good standing under the laws of its
jurisdiction of organization, and is duly qualified as a foreign
corporation or other legal entity and is in good standing in each
jurisdiction in which such qualification is required by law, other
than those jurisdictions as to which the failure to be so qualified
or in good standing could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the
business, assets, debt service capacity, property or financial
condition, operations or prospects of such Subsidiary. Each such
Subsidiary has the corporate or other power and authority to own or
hold under lease the properties it purports to own or hold under
lease and to transact the business it transacts and proposes to
transact. No Subsidiary identified in Schedule 2 is a party to, or
otherwise subject to any legal restriction or any agreement (other
than this Noteholder Completion Guaranty, the agreements listed on
Schedule 2, restrictions imposed by and approvals required under the
Nevada gaming Laws and customary limitations imposed by corporate
law statutes) restricting the ability of such Subsidiary to pay
dividends out of profits or make any other similar distributions of
profits to its Guarantor parent or any of such Guarantor's
Subsidiaries that owns outstanding shares of capital stock or
similar equity interests of such Subsidiary.
(h) Except as disclosed in Schedule 3, there are no actions, suits or
proceedings pending or, to the knowledge of any Guarantor,
threatened against or affecting such Guarantor or any Subsidiary or
any property of such Guarantor or any Subsidiary in any court or
before any arbitrator of any kind or before or by any Governmental
Instrumentality that, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect. Neither
any Guarantor nor any Subsidiary is in default under any term of any
agreement or instrument to which it is a party or by which it is
bound, or any order, judgment, decree or ruling of any court,
arbitrator or Governmental Instrumentality or is in violation of any
applicable law, ordinance, rule or regulation (including without
limitation Environmental Laws) of any Governmental Instrumentality,
which default or violation, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
(i) Except as disclosed in Schedule 3A, each Guarantor and its
Subsidiaries have filed all material tax returns that are required
to have been filed in any jurisdiction, and have paid all material
taxes shown to be due and payable on such returns and all other
material taxes and assessments levied upon them or their properties,
assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have become
delinquent, except for any taxes and assessments (i) the non-payment
of which could not reasonably be expected to have a Material Adverse
Effect or (ii) the amount, applicability or validity of which is
currently being contested in good faith by appropriate proceedings
and with respect to which such Guarantor or a Subsidiary, as the
case
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may be, has established adequate reserves in accordance with GAAP.
Each Guarantor knows of no basis for any other tax or assessment
that could reasonably be expected to have a Material Adverse Effect.
The charges, accruals and reserves on the books of each Guarantor
and its Subsidiaries in respect of governmental or other taxes for
all fiscal periods are adequate.
(j) Each Guarantor and its Subsidiaries have adequate and appropriate
insurance with respect to their respective properties and businesses
against such casualties and contingencies, of such types, on such
terms and in such amounts (including deductibles, co-insurance and
self-insurance) to the extent this is customary in the case of
entities of established reputations engaged in the same or a similar
business and similarly situated, except where the failure to so
maintain insurance, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
(k) Each of London Clubs, ABH and its Subsidiaries have good and
sufficient title to their respective properties that individually or
in the aggregate are Material, including all such properties
reflected in the most recent audited balance sheet referred to in
clause (a) hereof or purported to have been acquired by such
Guarantor or any Subsidiary after said date (except as sold or
otherwise disposed of in the ordinary course of business), in each
case free and clear of Liens prohibited by this Noteholder
Completion Guaranty. All leases that individually or in the
aggregate are material are valid and subsisting and are in full
force and effect in all material respects.
(l) Except as disclosed in Schedule 4,
(i) each Guarantor and its Subsidiaries own or possess all
licenses, permits, franchises, authorizations, patents,
copyrights, service marks, trademarks and trade names, or
rights thereto, that individually or in the aggregate are
material, without known conflict with the rights of others;
(ii) to the best knowledge of each Guarantor, no product or such
Guarantor infringes in any material respect on any license,
permit, franchise, authorization, patent, copyright, service
mark, trademark, trade name or other right owned by any other
Person; and
(iii) to the best knowledge of each Guarantor, there is no material
violation by any Person of any right of such Guarantor or any
of its Subsidiaries with respect to any patent, copyright,
service mark, trademark, trade name or other right owned or
used by such Guarantor or any of its Subsidiaries.
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<PAGE>
(m) Except as described therein, Schedule 5 sets forth a complete and
correct list of all outstanding Indebtedness of each of London Clubs
and ABH and its Subsidiaries as of September 30, 1997, since which
date there has been no material changes in the amounts, interest
rates, sinking funds, installment payments or maturities of the
Indebtedness of such Guarantor or its Subsidiaries. Neither any such
Guarantor nor any Subsidiary is in default and no waiver of default
is currently in effect, in the payment of any principal or interest
on any Indebtedness of such Guarantor or such Subsidiary and no
event or condition exists with respect to any Indebtedness of any
such Guarantor or any Subsidiary in an aggregate principal amount in
excess of $1,500,000 that would permit (or that with notice or the
lapse of time, or both, would permit) one or more Persons to cause
such Indebtedness to become due and payable before its stated
maturity or before its regularly scheduled dates of payment. Except
as disclosed in Schedule 5, neither any such Guarantor nor any
Subsidiary has agreed or consented to cause or permit in the future
(upon the happening of a contingency or otherwise) any of its
property, whether now owned or hereafter acquired, to be subject to
a Lien not permitted by Section 14(a), as applicable.
(n) Neither any Guarantor nor any Subsidiary is subject to regulation
under the Investment Company Act of 1940, as amended, the Public
Utility Holding Company Act of 1935, as amended, or the Federal
Power Act, as amended.
(o) Neither any Guarantor nor any Subsidiary has knowledge of any claim
or has received any notice of any claim, and no proceeding has been
instituted raising any claim against such Guarantor or any of its
Subsidiaries or any of their respective real properties now or
formerly owned, leased or operated by any of them or other assets,
alleging any damage to the environment or violation of any
Environmental Laws, except, in each case, such as could not
reasonably be expected to result in a Material Adverse Effect.
(p) Each Guarantor's ownership interest in the Borrower as of the date
hereof is set forth on Schedule 6.
(q) London Clubs has delivered to the Administrative Agent true, correct
and complete copies of all material documents, instruments, opinions
and certificates with respect to the Existing Senior Debt.
13. Affirmative Covenants. Until all of the Guaranteed Obligations have been
indefeasibly paid and performed, each Guarantor (other than London Clubs)
agrees as follows:
(a) (i) ABH shall furnish to the Discount Note Indenture Trustee:
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(A) as soon as available, but in any event within 120 days
after the end of each fiscal year of ABH, a copy of the
consolidated and consolidating balance sheet of ABH and
its consolidated Subsidiaries as at the end of such year
and the related consolidated and consolidating
statements of earnings and stockholders' equity and of
cash flows for such year, setting forth in each case in
comparative form the figures for the previous year,
reported on without a "going concern" or like
qualification or exception, or qualification arising out
of the scope of the audit, by independent certified
public accountants of nationally recognized standing;
and
(B) as soon as available, but in any event not later than 60
days after the end of each of the first three quarterly
periods of each fiscal year of ABH, (x) the unaudited
consolidated and consolidating balance sheet of ABH and
its consolidated Subsidiaries as at the end of such
quarter and in comparative form the figures for the end
of the previous fiscal year, (y) the unaudited
consolidated and consolidating statement of earnings of
ABH and its consolidated Subsidiaries for such quarter
and the portion of the fiscal year through the end of
such quarter, and in comparative form the figures for
the previous year and (z) the consolidated and
consolidating statement of cash flows of ABH and its
consolidated Subsidiaries for the portion of the fiscal
year through the end of such quarter, and in comparative
form the figures for the previous year, certified by an
Authorized Representative of ABH as being fairly stated
in all material respects when considered in relation to
the consolidated and consolidating financial statements
of ABH and its consolidated Subsidiaries (subject to
normal year-end audit adjustments);
all such financial statements to be complete and correct in
all material respects and to be prepared in reasonable detail
and in accordance with GAAP applied consistently throughout
the periods reflected therein and with prior periods (except
as approved by such accountants or officer, as the case may
be, and disclosed therein).
(ii) The Trust shall furnish the Discount Note Indenture Trustee all
financial information that the Trust is providing to any other
creditor in connection with the Main Project, the Mall Project,
and/or the Music Project.
(b) Each Guarantor shall furnish to the Discount Note Indenture Trustee,
within thirty days after the same are sent, copies of all financial
statements and reports which such Guarantor sends to its
stockholders, and, within thirty days after the same are
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filed, copies of all financial statements and reports which such
Guarantor may make to, or file with, the Securities and Exchange
Commission or any successor or analogous Governmental
Instrumentality. Each Guarantor shall furnish to the Discount Note
Indenture Trustee with reasonable promptness such additional
financial and other information as the Discount Note Indenture
Trustee may from time to time reasonably request.
(c) ABH shall keep true and correct books of records and account in
conformity with GAAP and all Legal Requirements and permit the
Discount Note Indenture Trustee:
(i) No Event of Default - if no event of default under this
Noteholder Completion Guaranty or the Bank Guaranty then
exists, at the expense of the Discount Note Indenture Trustee
and upon reasonable prior notice to such Guarantor, to visit
the principal executive office of such Guarantor and to
discuss the affairs, finances and accounts of such Guarantor
and its Subsidiaries with such Guarantor's officers, all at
such reasonable times and as often as may be reasonably
requested in writing; and
(ii) Event of Default - if an event of default under this
Noteholder Completion Guaranty or the Bank Guaranty then
exists, at the expense of such Guarantor to visit and inspect
any of the offices of properties of such Guarantor or any
Subsidiary, to examine their respective books and records and
to make copies and extracts therefrom, and to discuss their
respective affairs, finances and accounts with their
respective officers and independent public accountants, all at
such reasonable times and as often as may be requested.
A Guarantor shall not be under any obligation under this Noteholder
Completion Guaranty to provide information pursuant to the last
sentence of Section 13(b) or pursuant to this Section 13(c) if
disclosure of such information, on the written advice of such
Guarantor's counsel provided to such Guarantor, would be prohibited
by law or by decree of any Governmental Instrumentality or arbitral
body or by the terms of any obligation of confidentiality contained
in any agreement binding upon such Guarantor and not entered into in
contemplation of this Section 13(c).
(d) ABH shall promptly give notice to the Discount Note Indenture
Trustee of:
(i) any breach by ABH of any of the Guaranteed Obligations;
(ii) any (a) default or event of default under any material
obligation of ABH or any of its Subsidiaries or (b)
litigation, investigation or proceeding which
21
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may exist at any time between ABH or any of its Subsidiaries
and any Governmental Instrumentality, which in either case, if
not cured or if adversely determined, as the case may be,
could reasonably be expected to have a Material Adverse
Effect;
(iii) any material litigation or proceeding affecting ABH or any of
its Subsidiaries; and
(iv) any development or other event which could reasonably be
expected to have a Material Adverse Effect.
Each notice pursuant to this clause (d) shall be accompanied by a
statement of an Authorized Representative of ABH setting forth
details of the occurrence referred to therein and stating what
action ABH or any of its Subsidiaries proposes to take with respect
thereto.
(e) ABH will cause each of its Subsidiaries to comply with all laws,
ordinances or governmental rules or regulations to which each of
them is subject, including, without limitation, Environmental Laws,
and will obtain and maintain in effect all licenses, certificates,
permits, franchises and other governmental authorizations necessary
to the ownership of their respective properties or to the conduct of
their respective businesses, in each case to the extent necessary to
ensure that non-compliance with such laws, ordinances or
governmental rules or regulations or failures to obtain or maintain
in effect such licenses, certificates, permits, franchises and other
governmental authorizations could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
(f) Each Guarantor will and will cause each of its Subsidiaries to
maintain, with institutions it reasonably believes to be financially
sound insurers, insurance with respect to their respective
properties and businesses against such casualties and contingencies,
of such types, on such terms and in such amounts (including
deductibles, co-insurance and self-insurance if adequate reserves
are maintained with respect thereto) as is customary in the case of
entities of established reputations engaged in the same or similar
business and similarly situated.
(g) Each Guarantor will and will cause each of its Subsidiaries to
maintain and keep, or cause to be maintained and kept, their
respective properties in reasonably good repair, working order and
condition (other than ordinary wear and tear), so that the business
carried on in connection therewith may be properly conducted at all
times, provided that this Section shall not prevent a Guarantor from
discontinuing the operation and maintenance of or the liquidation of
any Dormant Subsidiary and shall not prevent a Guarantor or any
Subsidiary from discontinuing the operation and the maintenance of
any of its properties if such discontinuance is
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<PAGE>
desirable in the conduct of its business and such Guarantor has
concluded that such discontinuance could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
(h) Each Guarantor will and will cause each of its Subsidiaries to file
all material tax returns required to be filed in any jurisdiction
and to pay and discharge all material taxes, assessments,
governmental charges, or levies shown to be due and payable on such
returns and all other taxes imposed on them or any of their
properties, assets, income or franchises, to the extent such taxes
and assessments have become due and payable and before they have
become delinquent and all claims for which sums have become due and
payable that have or might become a Lien on properties or assets of
such Guarantor or any Subsidiary, provided that neither a Guarantor
nor any Subsidiary need to pay any such tax or assessment or claims
if (i) the amount, applicability or validity thereof is contested by
such Guarantor or such Subsidiary on a timely basis in good faith in
appropriate proceedings and such Guarantor or a Subsidiary has
established adequate reserves therefor in accordance with GAAP on
the books of such Guarantor or such Subsidiary or (ii) the
nonpayment of all such taxes and assessments in the aggregate could
not reasonably be expected to have a Material Adverse Effect.
(i) Each Guarantor will at all times preserve and keep in full force and
effect its corporate or other existence. ABH will at all times
preserve and keep in full force and effect the corporate existence
of each of its Subsidiaries (other than Dormant Subsidiaries or
unless merged into ABH or a Subsidiary) and all licenses, consents,
certificates and authorizations of ABH and its Subsidiaries unless,
in the good-faith judgment of ABH, the termination of or failure to
preserve and keep in full force and effect such corporate existence,
licenses, consents, certificates and authorizations could not,
individually or in the aggregate, have a Material Adverse Effect.
(j) Each Guarantor will, and will cause each of its Subsidiaries to,
keep proper books of record and account in accordance with GAAP as
applied in the jurisdiction of its incorporation as such Guarantor
may deem appropriate from time to time.
(k) Neither ABH nor any of its Subsidiaries will engage in any business
if, as a result, the general nature of the business, taken on a
consolidated basis, which would then be engaged in by ABH and its
Subsidiaries would be materially changed from the general nature of
the business engaged in by ABH and its Subsidiaries as of the date
hereof.
14. Negative Covenants. At all times prior to indefeasible payment and
performance of the Guaranteed Obligations by the Guarantors hereunder:
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(a) ABH will not, and will not permit any of its Subsidiaries to,
directly or indirectly create, incur, assume or permit to exist
(upon the happening of a contingency or otherwise) any Lien on or
with respect to any property or asset except:
(i) any Lien arising by operation of law (except for real property
taxes) which secures amounts not more than 45 days overdue or,
if so overdue, are being contested on a timely basis in good
faith and in appropriate proceedings;
(ii) any Lien imposed on ABH or any of its Subsidiaries in relation
to its purchase of goods, products or supplies in the ordinary
course of business;
(iii) any rights of set-off in the normal course of trading or of
any bank or financial institution or combination of accounts
arising in favor of such bank or financial institution as a
result of the day-to-day operation of banking arrangements,
including, without limitation, rights of set-off granted to
such bank or financial institution in respect of the issuance
of letters of credit, or as a result of any currency or
interest rate hedging operations carried out in the ordinary
course of business, in each case, provided that there is no
agreement to confer a security interest;
(iv) statutory Liens of landlords, Liens over goods or documents of
title arising in the ordinary course of documentary credit
transactions and Liens of carriers, warehousemen, mechanics,
materialmen and other similar Liens, in each case, incurred in
the ordinary course of business;
(v) Liens for taxes, assessments or other governmental charges
which are not yet due and payable;
(vi) Liens incurred or deposits made in the ordinary course of
business (A) in connection with workers' compensation,
unemployment insurance and other types of social security or
retirement benefits, or (B) to secure (or to obtain letters of
credit that secure) the performance of tenders, statutory
obligations, surety bonds, appeal bonds, bids, leases (other
than capital leases), performance bonds, purchase,
construction or sales contracts and other similar obligations,
in each case not incurred or made in connection with the
borrowing of money, the obtaining of advances or credit or the
payment of the deferred purchase price of property;
(vii) leases or subleases granted to others, easements,
rights-of-way, restrictions and other similar charges or
encumbrances, in each case incidental to, and not interfering
with, the ordinary conduct of business of ABH and its
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<PAGE>
Subsidiaries, provided that such Liens do not, in the
aggregate, materially detract from the value of such property;
(viii) any Lien not otherwise permitted by clauses (i) through (vii)
above, provided that on the date any Indebtedness secured by
any such Lien, is created, incurred, assumed or guaranteed by
ABH or any of its Subsidiaries, and immediately after giving
effect thereto and to the concurrent retirement of any other
Indebtedness, the sum of (A) the aggregate principal amount of
all Indebtedness secured by Liens pursuant to this clause
(viii) plus (B) all unsecured Indebtedness of ABH and its
Subsidiaries that is senior in any respect in right of payment to the
obligations of ABH hereunder, does not exceed 25% of the Consolidated Tangible
Assets of ABH as of such date; and
(ix) any Lien set forth on Schedule 3, in the case ABH.
(b) ABH will not, and will not permit any of its Subsidiaries to,
directly or indirectly create, incur, assume or suffer to exist any
secured or unsecured Indebtedness that is senior in any respect in
right of payment to the Guaranteed Obligations of ABH hereunder
(excluding any Indebtedness secured by Liens pursuant to clauses (i)
through (vii) of Section 14(a) hereof but including any Indebtedness
secured by Liens pursuant to clause (viii) of Section 14(a) hereof)
if the aggregate amount of all such senior Indebtedness described in
this clause (b) would exceed 25% of the Consolidated Tangible Assets
of ABH as of such date.
15. Payments Free and Clear of Taxes, etc. Each Guarantor hereby agrees that:
(a) All payments by such Guarantor hereunder shall be made free and
clear of and without deduction for any present or future income,
excise, stamp or franchise taxes and other taxes, fees, duties,
withholdings or other charges of any nature whatsoever imposed by
any taxing authority, but excluding franchise taxes and taxes
imposed on or measured by the Discount Note Indenture Trustee's net
income or receipts (such non-excluded items being called "Taxes").
In the event that any withholding or deduction from any payment to
be made by a Guarantor hereunder is required in respect of any Taxes
pursuant to any applicable law, rule or regulation, then such
Guarantor will
(i) pay directly to the relevant authority the full amount
required to be so withheld or deducted;
(ii) promptly forward to the Discount Note Indenture Trustee an
official receipt or other documentation satisfactory to the
Discount Note Indenture Trustee evidencing such payment to
such authority; and
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(iii) pay to the Discount Note Indenture Trustee such additional
amount or amounts ("Additional Amounts") as are necessary to
ensure that the net amount actually received will equal the
full amount that would have been received had no such
withholding or deduction been required.
Moreover, if any Taxes are directly asserted against the Borrower or
the Discount Note Indenture Trustee with respect to any payment
received hereunder, the Discount Note Indenture Trustee may pay such
Taxes and the Guarantor will promptly pay such Additional Amounts
(including any penalties, interest or expenses ) as are necessary in
order that the net amount received after the payment of such Taxes
(including any Taxes on such Additional Amounts) shall equal the
amount that would have been received had no such Taxes been
asserted.
(b) If the Guarantor fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Discount Note Indenture
Trustee the required receipts or other required documentary
evidence, the Guarantor shall indemnify the Borrower, the Discount
Note Indenture Trustee for any incremental Taxes, interest or
penalties that may become payable by the Borrower, the Discount Note
Indenture Trustee as a result of any such failure.
(c) In the event that an Additional Amount is paid by a Guarantor for
the account of the Discount Note Indenture Trustee and the Discount
Note Indenture Trustee is entitled to a refund of the Tax (a "Tax
Refund") to which such payment is attributable, then the Discount
Note Indenture Trustee shall take all reasonable steps which are
necessary to obtain such Tax Refund, including filings such forms,
certificates, documents, applications or returns as may be required
to obtain such Tax Refund. If the Discount Note Indenture Trustee
subsequently receives such a Tax Refund, then the Discount Note
Indenture Trustee shall reimburse such amount.
(d) Without prejudice to the survival of any other agreement of the
Guarantors hereunder, the agreements and obligations of the
Guarantors contained in this Section 15 shall survive the payment in
full of the obligations under the Indenture.
16. Judgment. Each Guarantor hereby agrees that:
(a) If, for the purposes of obtaining judgment in any court, it is
necessary to convert a sum due hereunder in United States Dollars
into another currency, such Guarantor agrees, to the fullest extent
permitted by law, that the rate of exchange used shall be that at
which in accordance with normal banking procedures the Discount Note
Indenture Trustee could purchase United States Dollars with such
other currency on the Business Day preceding that on which final
judgment is given.
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(b) The obligation of each Guarantor in respect of any sum due from it
hereunder shall, notwithstanding any judgment in a currency other
than United States Dollars, be discharged only to the extent that on
the Business Day following receipt by the Discount Note Indenture
Trustee of any sum adjudged to be so due in such other currency the
Discount Note Indenture Trustee may, in accordance with normal
banking procedures, purchase United States Dollars with such other
currency; in the event that the United States Dollars so purchased
are less that the sum originally due to the Discount Note Indenture
Trustee in United States Dollars, the Guarantor, as a separate
obligation and notwithstanding any such judgment, shall indemnify
and hold harmless the Discount Note Indenture Trustee and such
holder against such loss, and if the United States Dollars so
purchased exceed the sum originally due to the Discount Note
Indenture Trustee in United States Dollars, the Discount Note
Indenture Trustee shall remit to such Guarantor such excess.
17. Breaches by Any Guarantor. If, at any time that the Discount Note
Indenture Trustee has the right to demand payment and performance of the
Guaranteed Obligations in accordance with Section 3(a) of this Noteholder
Completion Guaranty and, prior to the indefeasible payment and performance
thereof, any of the Guarantors breaches the Guaranteed Obligations (after
the expiration of applicable grace, notice and/or cure periods), then, at
the option of the Discount Note Indenture Trustee, an event of default
shall exist under this Noteholder Completion Guaranty and the Discount
Note Indenture Trustee, without any further notice to any of the
Guarantors or any other Person, shall be entitled to exercise all rights
and remedies available hereunder but only to the extent permitted under
Section 3(a) hereof, and at law and equity.
18. Miscellaneous Provisions.
(a) This Noteholder Completion Guaranty shall be binding upon the
Guarantors and their permitted successors, transferees and assigns
and shall inure to the benefit of and be enforceable by the Discount
Note Indenture Trustee and its respective successors, transferees
and assigns; provided, however, that the Guarantors may not assign
any of their Guaranteed Obligations hereunder without the prior
written consent of the Discount Note Indenture Trustee, and the
Discount Note Indenture Trustee may not assign this Noteholder
Completion Guaranty or any of its rights, remedies or options
hereunder without the prior written consent of the Administrative
Agent in its sole discretion. The Lenders shall be third party
beneficiaries of this Section 18(a) and shall have all rights at law
and equity to the enforcement hereof.
(b) No amendment to or waiver of any provision of this Noteholder
Completion Guaranty, nor consent to any departure by any Guarantor
herefrom, shall in any event be effective unless the same shall be
in writing and signed by the Discount
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Note Indenture Trustee and, with respect to amendments, consented to
by the Administrative Agent in its sole discretion, and then such
waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.
(c) All notices and other communications hereunder to the Guarantors
shall be in writing (including telefacsimile) and mailed or
telecopied or delivered to them, addressed to them at the address
set forth below their signatures hereto or at such other addresses
as shall be designated by such Guarantor in a written notice to the
Discount Note Indenture Trustee at the address set forth below their
signatures hereto complying as to delivery with the terms of this
Section. All such notices and other communications shall, when
mailed or telecopied, respectively, be effective when deposited in
the mails or transmitted, addressed as aforesaid. All notices to the
Administrative Agent under this Noteholder Completion Guaranty shall
be addressed to The Bank of Nova Scotia, 580 California Street, San
Francisco, California 94104, Attn.: Alan Pendergast, Facsimile No.
(415) 397-0791 with a copy to Mayer, Brown & Platt, 1675 Broadway,
New York, NY 10019, Attn: Douglas Wisner, Esq., Facsimile No. (212)
262-1910. A copy of all notices to ABH and the Trust shall be sent
to Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New
York, New York 10022, Attn.: Wallace L. Schwartz, Esq., Facsimile
No. (212) 735-2000. A copy of all notices to London Clubs shall be
sent to Ohrenstein & Brown, LLP, 230 Park Avenue, New York, New York
10169, Attn.: Peter J. Kiernan, Esq., Facsimile No. (212) 557-0910
and to Lionel, Sawyer & Collins, 300 South 4th Street, Suite 1700,
Las Vegas, Nevada 89101, Attn.: Greg Giordano, Esq., Facsimile No.
(702) 383-8845.
(d) No failure on the part of the Discount Note Indenture Trustee to
exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial
exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right. The remedies
herein provided are cumulative and not exclusive of any remedies
provided by law.
(e) Section captions used in this Noteholder Completion Guaranty are for
convenience of reference only, and shall not affect the
construction of this Noteholder Completion Guaranty.
(f) Wherever possible each provision of this Noteholder Completion
Guaranty shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Noteholder
Completion Guaranty shall be prohibited by or invalid under such
law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Noteholder
Completion Guaranty.
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(g) THIS NOTEHOLDER COMPLETION GUARANTY SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW
YORK. THIS NOTEHOLDER COMPLETION GUARANTY AND THE INDENTURE
CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH
RESPECT TO THE SUBJECT MATTER HEREOF.
(h) ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS NOTEHOLDER COMPLETION GUARANTY, OR ANY COURSE
OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN)
OR ACTIONS OF THE DISCOUNT NOTE INDENTURE TRUSTEE OR THE GUARANTORS
SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE
STATE OF NEW YORK IN THE CITY OF NEW YORK OR IN THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED,
HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY PROPERTY MAY
BE BROUGHT, AT THE OPTION OF THE DISCOUNT NOTE INDENTURE TRUSTEE, IN
THE COURTS OF ANY JURISDICTION WHERE SUCH PROPERTY, IF ANY, MAY BE
FOUND. THE GUARANTORS HEREBY EXPRESSLY AND IRREVOCABLY SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN THE CITY OF
NEW YORK AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET
FORTH ABOVE AND IRREVOCABLY AGREE TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. THE GUARANTORS
FURTHER IRREVOCABLY CONSENT TO THE SERVICE OF PROCESS BY REGISTERED
MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITH OUT THE
STATE OF NEW YORK. THE GUARANTORS HEREBY EXPRESSLY AND IRREVOCABLY
WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH
THEY MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY
SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY
CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. TO THE EXTENT THAT THE GUARANTORS HAVE OR HEREAFTER MAY
ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY
LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR
TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH
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<PAGE>
RESPECT TO THEMSELVES OR THEIR PROPERTY, THE GUARANTORS HEREBY
IRREVOCABLY WAIVE SUCH IMMUNITY IN RESPECT OF THE GUARANTEED
OBLIGATIONS UNDER THIS NOTEHOLDER COMPLETION GUARANTY AND THE
INDENTURE.
(i) THE GUARANTORS HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION
WITH, THIS NOTEHOLDER COMPLETION GUARANTY, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS
OF THE DISCOUNT NOTE INDENTURE TRUSTEE OR THE GUARANTORS. THE
GUARANTORS ACKNOWLEDGE AND AGREE THAT THEY HAVE RECEIVED FULL AND
SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION
IS A MATERIAL INDUCEMENT FOR THE DISCOUNT NOTE INDENTURE TRUSTEE TO
ENTER INTO THE INDENTURE.
(j) Limitation on Liability. Notwithstanding anything to the contrary in
this Noteholder Completion Guaranty, it is understood that no claim
shall be made by the Discount Note Indenture Trustee or any of its
affiliates against the Guarantors or any of their affiliates,
directors, employees, attorneys or agents for any special, indirect,
consequential or punitive damages in respect of any breach or
wrongful conduct (whether or not the claim therefor is based on
contract, tort or duty imposed by law), in connection with, arising
out of or in any way related to the transactions contemplated by
this Noteholder Completion Guarantee or any act or omission or event
occurring in connection therewith.
(k) No Restriction on Rights and Remedies of Administrative Agent and
Lenders. Notwithstanding anything to the contrary in this Noteholder
Completion Guaranty, the Discount Note Indenture Trustee on its own
behalf and on behalf of the Noteholders covenants and agrees that
this Noteholder Completion Guaranty and the rights, remedies and
options of the Discount Note Indenture Trustee hereunder in no way
restrict the rights and remedies of the Administrative Agent and the
Lenders under the Credit Agreement and the other Loan Documents
including, without limitation, the right to commence and prosecute
to completion enforcement of any or all of the Loan Documents. The
Discount Note Indenture Trustee on its own behalf and on behalf of
the Noteholders agrees that no Person shall have any right
whatsoever to interpose a right of offset, defense, claim or
counterclaim with respect to any enforcement of one or more of the
Loan Documents based upon a claim that the Discount Note Indenture
Trustee has the right to performance of the Guaranteed Obligations
before such enforcement can
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<PAGE>
be commenced or prosecuted or judgment thereon can be executed by or
on behalf of the Lenders. The Lenders shall be third party
beneficiaries of this Section 18(k) and shall have all rights at law
and equity to the enforcement hereof.
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IN WITNESS WHEREOF, the Guarantors have caused this Noteholder Completion
Guaranty to be duly executed and delivered by their officers thereunto duly
authorized as of the date first above written.
ALADDIN BAZAAR HOLDINGS, LLC
By: ALADDIN MANAGEMENT CORPORATION
By: /s/ Jack Sommer
--------------------------------------
Title:
Address: 280 Park Avenue
New York, N.Y. 10017
Attention: Ron Dictrow
Telecopy: 212-661-0844
THE TRUST UNDER ARTICLE SIXTH UNDER THE
WILL OF SIGMUND SOMMER
By: /s/ Viola Sommer
--------------------------------------
Viola Sommer
Title: Trustee
By: /s/ Eugene Landsberg
--------------------------------------
Eugene Landsberg
Title: Trustee
Address: 280 Park Avenue
New York, N.Y. 10017
Attention: Ron Dictrow
Telecopy: 212-661-0844
<PAGE>
LONDON CLUBS INTERNATIONAL PLC
By: /s/ G. Barry Hardy
--------------------------------------
G. Barry Hardy
Title: Director
Address: 10 Brick Street
London WI Y 8HQ
England
Attention: Linda M. Lillis
Telecopy: 011-44-171-493-6981
STATE STREET BANK & TRUST COMPANY
AS TRUSTEE
By: /s/ Ruth A. Smith
--------------------------------------
Title: Vice President
Address: Two International Place
Boston, M. A. 02110
Attention: Corporate Trust Department
Telecopy: 617-664-5371
<PAGE>
SCHEDULE 1
MATERIAL SUBSIDIARIES
34
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SCHEDULE 2
SUBSIDIARIES
(other than Dormant Subsidiaries)
35
<PAGE>
SCHEDULE 3
LITIGATION
36
<PAGE>
SCHEDULE 4
LICENSES, PERMITS, ETC.
37
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SCHEDULE 5
EXISTING INDEBTEDNESS
38
<PAGE>
SCHEDULE 6
OWNERSHIP OF BORROWER
39
<PAGE>
SCHEDULE 7
CONSTRUCTION BENCHMARK SCHEDULE
40
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APPENDIX A
To Guaranty of Performance and Completion
DEFINITIONS
Defined Terms. The following terms (whether or not italicized) when used in the
Guaranty of Performance and Completion, including its preamble and recitals,
shall, except where the context otherwise requires, have the following meanings
(such meanings to be equally applicable to the singular and plural forms
thereof):
"ABH" means Aladdin Bazaar Holdings, LLC, a Nevada limited-liability
company.
"Additional Contract Certificate" means an Additional Contract Certificate
substantially in the form of Exhibit Y to the Credit Agreement.
"Administrative Agent" is defined in the preamble of the Credit Agreement
and includes each other Person as shall have subsequently been appointed as the
successor Administrative Agent pursuant to Section 9.4 of the Credit Agreement.
"Affected Lender" is defined in clause(a) of Section 4.11 of the Credit
Agreement.
"Affiliate" means, relative to any Person, any other Person which,
directly or indirectly, controls, is controlled by or is under common control
with such Person (excluding, however, any trustee under, or any committee with
responsibility for administering, any Plan). With respect to any Lender,
Approved Fund, or Issuer, a Person shall be deemed to be "controlled by" another
Person if such other Person possesses, directly or indirectly, power to vote 51%
or more of the securities (on a fully diluted basis) having ordinary voting
power for the election of directors, managing general partners or managers, as
the case may be. With respect to all other Persons, a Person shall be deemed to
be "controlled by" another Person if such other Person possesses, directly or
indirectly, power
(a) to vote 10% or more of the securities (on a fully diluted basis)
having ordinary voting power for the election of directors, managing
general partners or managers, as the case may be; or
(b) to direct or cause the direction of the management and policies
of such Person whether by contract or otherwise.
"Affiliate Transaction" is defined in Section 7.2.13 of the Credit
Agreement.
"Agent" means the Administrative Agent, the Syndication Agent and/or the
Documentation Agent, as the context may require.
A-1
<PAGE>
"AHL" means Aladdin Holdings, LLC, a Delaware limited liability company.
"AHL Pledge Agreement" means, on any date, the Pledge Agreement executed
and delivered by an Authorized Representative of AHL pursuant to clause (d) of
Section 5.1.3 of the Credit Agreement, as originally in effect on the Closing
Date, in substantially the form of Exhibit E-2 to the Credit Agreement and as
thereafter from time to time amended, supplemented, amended and restated or
otherwise modified.
"Aladdin Bazaar" means Aladdin Bazaar, LLC, a Delaware limited liability
company.
"Aladdin Music" means Aladdin Music, LLC, a Nevada limited-liability
company.
"Aladdin Parties" means, collectively, the Borrower, Holdings, Capital,
Enterprises, Sommer Enterprises, AHL, Aladdin Music, AMH, ABH and the Trust.
"Alternate Base Rate" means, on any date and relative to all Base Rate
Loans, a fluctuating rate of interest per annum (rounded upward, if necessary,
to the next highest 1/16 of 1%) equal to the higher of
(a) the Base Rate in effect on such day; and
(b) the Federal Funds Rate in effect on such day plus 1/2 of 1%.
Changes in the rate of interest on that portion of any Loans maintained as Base
Rate Loans will take effect simultaneously with each change in the Alternate
Base Rate. The Administrative Agent will give notice promptly to the Borrower
and the Lenders of changes in the Alternate Base Rate.
"AMH" means Aladdin Music Holdings, LLC, a Nevada limited-liability
company.
"AMH Pledge Agreement" means, on any date, the Pledge Agreement executed
and delivered by an Authorized Representative of AMH pursuant to clause (g) of
Section 5.1.3 of the Credit Agreement, as originally in effect on the Closing
Date, in substantially the form of Exhibit E-3 to the Credit Agreement and as
thereafter from time to time amended, supplemented, amended and restated or
otherwise modified.
"Applicable Base Rate Margin" means, (w) relative to any Term B Loan and
Term C Loan, the proceeds of which on any date are being held in the Bank
Proceeds Account, 1.00% per annum, (x) relative to any Term B Loan, the proceeds
of which on any date have been advanced to the Borrower from the Bank Proceeds
Account, 2.50% per annum, (y) relative to any Term C Loan, the proceeds of which
on any date have been advanced to the Borrower from the Bank Proceeds Account,
3.00% per annum and (z) relative to any Term A Loan, (1) on any date prior to
the date which is six months after the Conversion Date, 2.00% per annum and (2)
on
A-2
<PAGE>
any date from and after the date which is six months after the Conversion Date,
the per annum percentage set forth below opposite the Total Debt to EBITDA Ratio
set forth in the Current Compliance Certificate:
Applicable Base Rate
Total Debt to EBITDA Ratio Margin
- ----------------------------------------- ----------------------
>= 4.0:1 1.75%
>= 3.5:1 and < 4.0:1 1.50%
>= 3.0:1 and < 3.5:1 1.00%
>= 2.5:1 and < 3.0:1 0.75%
< 2.5:1 0.50%
"Applicable LIBO Rate Margin" means, (w) relative to any Term B Loan and
Term C Loan, the proceeds of which on any date are being held in the Bank
Proceeds Account, 2.00% per annum, (x) relative to any Term B Loan, the proceeds
of which on any date have been advanced to the Borrower from the Bank Proceeds
Account, 3.50% per annum, (y) relative to any Term C Loan, the proceeds of which
on any date have been advanced to the Borrower from the Bank Proceeds Account,
4.00% per annum and (z) relative to any Term A Loan, (1) on any date prior to
the date which is six months after the Conversion Date, 3.00% per annum and (2)
on any date from and after the date which is six months after the Conversion
Date, the per annum percentage set forth below opposite the Total Debt to EBITDA
Ratio set forth in the Current Compliance Certificate:
Applicable LIBO Rate
Total Debt to EBITDA Ratio Margin
- ----------------------------------------- ----------------------
>= 4.0:1 2.75%
>= 3.5:1 and < 4.0:1 2.50%
>= 3.0:1 and < 3.5:1 2.00%
>= 2.5:1 and < 3.0:1 1.75%
< 2.5:1 1.50%
"Applicable Percentage" means the percentage of Direct Costs actually paid
or payable by the Borrower to the Design/Builder pursuant to the Design/Build
Contract or, if applicable, to a Contractor or Subcontractor pursuant to a
Contract after taking into account the Retainage Amount.
A-3
<PAGE>
"Approved Equipment Funding Commitment" means, collectively, (x) the GECC
Commitment and (y) any replacement of the GECC Commitment from an institutional
or other lender approved by the Administrative Agent in its reasonable
discretion if (1) such commitment is in form and substance reasonably
satisfactory to the Administrative Agent and does not include any material
conditions to funding that are not included in the GECC Commitment and (2) the
lender providing such commitment executes an intercreditor agreement
substantially similar to the GECC Intercreditor Agreement.
"Approved Fund" means, relative to any Lender that is a fund that invests
in bank loans, any other fund that invests in bank loans and is advised or
managed by the same investment advisor as such Lender or by an Affiliate of such
investment advisor.
"Appurtenant Rights" means (x) all agreements, easements, rights of way or
use, rights of ingress or egress, privileges, appurtenances, tenements,
hereditaments and other rights and benefits at any time belonging or pertaining
to the Site or the Improvements, including the use of any streets, ways, alleys,
vaults or strips of land adjoining, abutting, adjacent or contiguous to the Site
and (y) all permits, licenses and rights, whether or not of record, appurtenant
to the Site.
"Architect of Record" means ADP/FD of Nevada, Inc.
"Architect's Agreement" means, collectively, the agreements pursuant to
which architects, engineers and other design professionals have agreed with the
Borrower to provide services in connection with the Main Project.
"Architect's Closing Certificate" means a closing certificate in the form
of Exhibit Q-3 to the Credit Agreement.
"Arranger" means Scotiabank or Merrill Lynch.
"Arrangers' Fee Letter" means the confidential letter agreement, dated
December 4, 1997, among the Borrower, the Sponsors and the Arrangers.
"Assignee Lender" is defined in Section 10.11.1 of the Credit Agreement.
"Assignment of Contracts" means an assignment of any and all contracts,
agreements, proposals, Permits (to the extent such Permits are assignable),
approvals (to the extent such approvals are assignable), Plans and
Specifications pertaining to the Hotel/Casino Component, whether now existing or
subsequently entered into by the Borrower, including the Approved Equipment
Funding Commitments and the rights of the Borrower thereunder, management
contracts, the Contracts, development rights, consents (to the extent
assignable), architectural, engineering and leasing documents and such other
documents as may be designated by the Administrative Agent. Such Assignment of
Contracts shall include appropriate continuation agreements by the Contractors
and/or Subcontractors thereunder.
A-4
<PAGE>
"Assignment of Consulting Agreement" means, on any date, the Assignment of
Consulting Agreement, as originally in effect on the Closing Date, between the
Borrower, AHL and the Administrative Agent and as thereafter from time to time
amended, supplemented, amended and restated or otherwise modified in accordance
with the terms of the Credit Agreement.
"Assignment of Design/Build Contract" means, on any date, the Assignment
of Design/Build Contract, as originally in effect on the Closing Date, between
the Borrower and the Administrative Agent and as thereafter from time to time
amended, supplemented, amended and restated or otherwise modified in accordance
with the terms of the Credit Agreement.
"Assignment of Project Management Agreement" means, on any date, the
Assignment of Project Management Agreement, as originally in effect on the
Closing Date, between AHL and the Administrative Agent and as thereafter from
time to time amended, supplemented, amended and restated or otherwise modified
in accordance with the terms of the Credit Agreement.
"Assignment of Salle Privee Agreement" means, on any date, the Assignment
of Salle Privee Agreement, as originally in effect on the Closing Date, between
the Borrower and the Administrative Agent and as thereafter from time to time
amended, supplemented, amended and restated or otherwise modified in accordance
with the terms of the Credit Agreement.
"Authorized Representative" means, relative to any Person, those of its
officers or managing members (in the case of a limited liability company) whose
signatures and incumbency shall have been certified to the Administrative Agent
and the Lenders in a certificate of such Person delivered to the Administrative
Agent.
"Available Funds" means, from time to time, the sum of (u) the aggregate
of the unutilized Commitments (excluding, however, the Commitments of all
Defaulting Lenders) under the Bank Credit Facility, plus (v) the aggregate of
the amounts on deposit in the Borrower's Funds Account, the Construction Note
Disbursement Account and all Anticipated Earnings thereon, plus (w) the
aggregate of the amounts on deposit in the Guaranty Deposit Account, the Cash
Management Account, the Bank Proceeds Account, the Loss Proceeds Account and the
Interest Payment Account, plus (x) so long as (1) no default under the Site Work
Agreement and the Mall Project Loan and no Default under the Credit Agreement
have occurred and are continuing at the relevant time of computation, (2)
advances of the Mall Project Loan have commenced on or before June 30, 1998 and
have continued in accordance with the approved draw schedule for the Mall
Project Loan, (3) advances of the Mall Project Loan to reimburse the Borrower in
accordance with the Site Work Agreement are made within 45 days after the
Construction Consultant and the Owner Representative have approved the work to
be completed by the Borrower pursuant to the Site Work Agreement, the aggregate
amounts payable to the Borrower by Aladdin Bazaar pursuant to Section 4.5 of the
Site Work Agreement, plus (y) the lesser of (1) the aggregate of the amounts
available to be drawn under all Approved Equipment Funding Commitments and (2)
the aggregate amount of Remaining Costs on the date
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of calculation for the Equipment Component (as in effect from time to time),
plus (z) the aggregate amount of Main Project Costs which the Design/Builder
and/or Fluor have agreed or confirmed in writing, to the reasonable satisfaction
of the Disbursement Agent, that they are responsible for paying (on a timely
basis relative to the Main Project's cash needs) from their own funds but which
they have not yet paid.
"Bank Credit Facility" means the Term A Loan Commitment, the Term B Loan
Commitment and the Term C Loan Commitment.
"Bank Proceeds Account" means the account established by the Borrower with
the Disbursement Agent pursuant to the Borrower Collateral Account Agreement
into which the proceeds of the Loans shall be deposited by the Administrative
Agent from time to time.
"Base Rate" means, at any time, the rate of interest then most recently
established by the Administrative Agent in New York, New York as its base rate
for U.S. dollars loaned in the United States. The Base Rate is not necessarily
intended to be the lowest rate of interest determined by the Administrative
Agent in connection with extensions of credit.
"Base Rate Loan" means a Loan bearing interest at a fluctuating rate
determined by reference to the Alternate Base Rate.
"Board of Managers" means (x) for so long as the Borrower is a
limited-liability company, the Board of Managers appointed pursuant to the
Organizational Documents of the Borrower or (y) otherwise, the Board of
Directors of the Borrower.
"Borrower" is defined in the preamble of the Credit Agreement.
"Borrower Collateral Account Agreement" means, on any date, the Borrower
Collateral Account Agreement, as originally in effect on the Closing Date, among
the Borrower, the Disbursement Agent and the Securities Intermediary and as
thereafter from time to time amended, supplemented, amended and restated or
otherwise modified in accordance with the terms of the Credit Agreement.
"Borrower Common Membership Interest" means a Common Share as defined in
the Organizational Documents of the Borrower.
"Borrower Pledge Agreement" means, on any date, the Pledge Agreement
executed and delivered by an Authorized Representative of the Borrower pursuant
to clause (f) of Section 5.1.3 of the Credit Agreement, as originally in effect
on the Closing Date, in substantially the form of Exhibit E-1 to the Credit
Agreement and as thereafter from time to time amended, supplemented, amended and
restated or otherwise modified.
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"Borrower Series A Preferred Membership Interests" means the Series A
Preferred Shares as defined in the Organizational Documents of the Borrower.
"Borrower's Closing Certificate" means a closing certificate in the form
of Exhibit Q-1 to the Credit Agreement.
"Borrower's Completion Certificate" means a certificate in the form of
Exhibit S-1 to the Credit Agreement.
"Borrower's Final Completion Certificate" means a certificate in the form
of Exhibit U-1 to the Credit Agreement.
"Borrower's Funds Account" is defined in the Borrower Collateral Account
Agreement.
"Borrowing" means the Loans of the same type and, in the case of LIBO Rate
Loans, having the same Interest Period made by all Lenders required to make such
Loans on the same Business Day and pursuant to the same Borrowing Request in
accordance with Section 2.1 of the Credit Agreement.
"Borrowing Request" means a Loan request and certificate duly executed by
an Authorized Representative of the Borrower substantially in the form of
Exhibit L-1 to the Credit Agreement.
"Building Department" means the Clark County Building Department.
"Business Day" means
(a) any day which is neither a Saturday or Sunday nor a legal
holiday on which banks are authorized or required to be closed in Las
Vegas, Nevada or New York, New York; and
(b) relative to the making, continuing, prepaying or repaying of any
LIBO Rate Loans, any day described in clause (a) on which dealings in
Dollars are carried on in the London interbank eurodollar market.
"Capital" means Aladdin Capital Corp., a Nevada corporation.
"Capital Expenditures" means, for any period, the aggregate amount of all
expenditures (other than any residual purchase payments under the FF&E Leases)
of the Borrower and the other Aladdin Parties for fixed or capital assets made
during such period which, in accordance with GAAP, would be classified as
capital expenditures.
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"Capital Stock" means, relative to any Person, any and all shares,
interests (including Membership Interests), participations or other equivalents
(however designated, whether voting or non-voting) of such Person's capital,
whether now outstanding or issued after the Effective Date.
"Capitalized Lease Liability" means, relative to any Person, any monetary
obligation of such Person under any leasing or similar arrangement which, in
accordance with GAAP, would be classified as a capitalized lease, and, for
purposes of this Agreement and each other Loan Document, the amount of such
obligation shall be the capitalized amount thereof, determined in accordance
with GAAP, and the stated maturity thereof shall be the date of the last payment
of rent or any other amount due under such lease prior to the first date upon
which such lease may be terminated by the lessee without payment of a premium or
a penalty.
"Carpark" is defined in clause (b) of the fourth recital of the Credit
Agreement.
"Cash Contributions to Capital" means optional contributions (other than
Cash Equity Contributions as defined in the Keep-Well Agreement), including to
cure a Default that would otherwise exist under the Loan Documents, made by the
Sponsors in cash to the Borrower, which contributions were (x) not made as a
loan, (y) made in exchange for Borrower Series A Preferred Membership Interests
and (z) made on terms and conditions satisfactory to the Administrative Agent as
determined on good faith in its sole discretion.
"Cash Equivalent Investment" means, at any time, (u) United States
Dollars, (v) securities issued or directly and fully guaranteed or insured by
the United States Government or any agency or instrumentality thereof (provided
that the full faith and credit of the United States is pledged in support
thereof) having maturities of not more than six months from the date of
acquisition, (w) certificates of deposit and eurodollar time deposits with
maturities of six months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any domestic commercial bank having capital and
surplus in excess of $500 million and a Thompson Bank Watch Rating of "B" or
better, (x) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in item (v) and (w) entered into
with any financial institution meeting the qualifications specified in item (w),
(y) commercial paper having the highest rating obtainable from Moody's Investors
Service, Inc. or Standard & Poor's Corporation and in each case maturing within
six months after the date of acquisition and (z) money market funds at least 95%
of the assets of which constitute Cash Equivalents of the kinds described in
items (w)-(y) of this definition.
"Casino" is defined in clause (a) of the fourth recital of the Credit
Agreement.
"CERCLA" is defined in clause (a) of the definition of "Environmental
Law".
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"CERCLIS" means the Comprehensive Environmental Response Compensation
Liability Information System List.
"Change in Control" means at any time,
(a) the failure of the Trust or the beneficiaries or remaindermen of
the Trust to (i) directly own, free and clear of all Liens (other than
Liens in favor of the Administrative Agent for the benefit of the Secured
Parties), all of (A) the Membership Interests of AHL not otherwise owned
by GW Vegas, LLC on the Effective Date or (B) following the dissolution of
the Trust and AHL, the Membership Interests of Sommer Enterprises not
otherwise owned by Ronald B. Dictrow on the Effective Date or (ii)
otherwise have the ability to elect the managers of (A) AHL or (B)
following the dissolution of the Trust and AHL, Sommer Enterprises;
(b) the failure of AHL or following the dissolution of the Trust and
AHL, the beneficiaries or remaindermen of the Trust to directly own, free
and clear of all Liens (other than Liens in favor of the Administrative
Agent for the benefit of the Secured Parties), 98.66% of the Membership
Interests of Sommer Enterprises or otherwise have the ability to elect the
managers of Sommer Enterprises;
(c) the failure of Sommer Enterprises to directly own, free and
clear of all Liens (other than Liens in favor of the Administrative Agent
for the benefit of the Secured Parties), 47.00% of the Membership
Interests of Holdings (except that (v) on the Opening Date, the percentage
interest of Sommer Enterprises in the Holdings Common Membership Interests
may be increased by 0.5% provided that the percentage interest of LCNI
therein is decreased by a corresponding amount (w) in the event of a
default by London Clubs in payment of its share of amounts due under the
Keep-Well Agreement, the percentage interest of Sommer Enterprises in the
Holdings Common Membership Interests may be increased by 1, 1.5 or 2 times
(depending on whether London Clubs is in default for 30 Business Days, 45
Business Days or 60 Business Days from the date of such default,
respectively) multiplied by a dilution fraction (the "Dilution Fraction"),
the numerator of which is the delinquent contribution and the denominator
of which is $200,000,000 provided that the percentage interest of LCNI
therein is decreased by a corresponding amount, (x) in the event of a
default by AHL in its share of amounts due under the Keep-Well Agreement,
the percentage interest of LCNI in the Holdings Common Membership
Interests may be increased by 1, 1.5 or 2 times (depending on whether AHL
is in default for 30 Business Days, 45 Business Days or 60 Business Days
from the date of such default, respectively) multiplied by the Dilution
Fraction provided that the percentage interest of Sommer Enterprises
therein is decreased by a corresponding amount), (y) in the event of any
vesting of any unvested Membership Interests in Holdings pursuant to an
Employment Agreement, Sommer Enterprises may be diluted thereby and (z)
upon the exercise of the Warrants, the dilutive effect of such exercise
directly and indirectly on the Membership Interests in Holdings) or
otherwise for
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Sommer Enterprises and LCNI to have the ability to elect the board of
managers of Holdings or for either of them to have the ability
individually or collectively to elect the board of managers of Holdings;
(d) except for Capital Stock of Enterprises issued in connection
with the exercise of Warrants, the failure of Sommer Enterprises to
directly own, free and clear of all Liens (other than Liens in favor of
the Administrative Agent for the benefit of the Secured Parties), all of
the Capital Stock of Enterprises or otherwise have the ability to elect
the members of the Board of Directors of Enterprises;
(e) the failure of Enterprises to directly own, free and clear of
all Liens (other than Liens in favor of the Administrative Agent for the
benefit of the Secured Parties), at least 25% of the Membership Interests
of Holdings (except for any adjustments upon the exercise of any Warrants)
or individually or collectively with Sommer Enterprises and LCNI to have
the ability to elect the managing member of Holdings;
(f) the failure of Holdings to directly own, free and clear of all
Liens (other than Liens in favor of the Administrative Agent for the
benefit of the Secured Parties), all of the Borrower Common Membership
Interests or otherwise to have the ability to elect the managing member of
the Borrower;
(g) the failure of Holdings to directly own, free and clear of all
Liens (other than Liens in favor of the Discount Note Indenture Trustee
for the benefit of the Discount Noteholders), the Borrower Series A
Preferred Membership Interests unless the failure to own the Borrower
Series A Preferred Membership Interests results from the exercise by the
Discount Note Indenture Trustee of the Lien in favor of the Discount Note
Indenture Trustee for the benefit of the Discount Noteholders;
(h) the failure of Holdings to directly own, free and clear of all
Liens (other than Liens in favor of the Administrative Agent for the
benefit of the Secured Parties), all of the Capital Stock of Capital or
otherwise have the ability to elect all of the members of the Board of
Directors of Capital;
(i) the failure of the Borrower to directly own, free and clear of
all Liens (other than Liens in favor of the Administrative Agent for the
benefit of the Secured Parties), all of the Membership Interests of AMH or
otherwise to have the ability to elect the managing member of AMH;
(j) the failure of AMH to directly own, free and clear of all Liens
(other than Liens in favor of the Administrative Agent for the benefit of
the Secured Parties), at least 49% of the Membership Interests of Aladdin
Music or otherwise to have the ability to elect the managing member of
Aladdin Music;
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(k) the failure of LCNI to directly own, free and clear of all Liens
(other than Liens in favor of the Administrative Agent for the benefit of
the Secured Parties), at least 25.0% of the Holdings Common Membership
Interests (except that (v) on the Opening Date, the percentage interest of
LCNI in the Holdings Common Membership Interests may be decreased by 0.5%
provided that the percentage interest of Sommer Enterprises therein is
increased by a corresponding amount (w) in the event of a default by
Sommer Enterprises in payment of its share of amounts due under the
Keep-Well Agreement, the percentage interest of LCNI in the Holdings
Common Membership Interests may be increased by 1, 1.5 or 2 times
(depending on whether Sommer Enterprises is in default for 30 Business
Days, 45 Business Days or 60 Business Days from the date of such default,
respectively) multiplied by the Dilution Fraction, provided that the
percentage interest of Sommer Enterprises therein is decreased by a
corresponding amount, (x) in the event of a default by LCNI in payment of
its share of amounts due under the Keep-Well Agreement, the percentage
interest of Sommer Enterprises in the Holdings Common Membership Interests
may be increased by 1, 1.5 or 2 times (depending on whether LCNI is in
default for 30 Business Days, 45 Business Days or 60 Business Days from
the date of such default, respectively) multiplied by the Dilution
Fraction provided that the percentage interest of LCNI is decreased by a
corresponding amount) and (y) in the event of any vesting of unvested
membership interests in Holdings pursuant to an Employment Agreement, LCNI
may be diluted thereby and (z) upon the exercise of the Warrants, the
dilutive effect of such exercise directly and indirectly on the Membership
Interest of Holdings) or otherwise for LCNI and Sommer Enterprises to have
the ability to elect the board of managers of Holdings;
(l) until such time as London Clubs has paid and performed, in all
material respects, its obligations under the Completion Guaranty and the
Keep-Well Agreement (or the Completion Guaranty and the Keep-Well
Agreement have expired or terminated), the failure of London Clubs to
directly own all of the Capital Stock of London Clubs Holdings or
otherwise have the ability to elect all members of the Board of Directors
of London Clubs Holdings;
(m) the failure of London Clubs to own directly or indirectly all of
the Capital Stock of LCNI or otherwise have the ability to elect all
members of the Board of Directors of LCNI; or
(n) any "Change of Control" under (and as defined in) the Discount
Note Indenture.
"Change Order" means, at any time, an adjustment made to the Guaranteed
Maximum Price or the Design/Build Contract Time with respect to changes in the
Work which increase or decrease the time of performance or the actual cost to
the Design/Builder of the Work.
"CIBC" is defined in the preamble of the Credit Agreement.
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"Clark County Code" is defined in clause (b) of Section 7.1.19 of the
Credit Agreement.
"Closing" is defined in Section 5.1 of the Credit Agreement.
"Closing Date" means the Business Day, if any, prior to the Term B and
Term C Loan Commitment Termination Date, on which the conditions in Article V of
the Credit Agreement are satisfied.
"Code" means the Internal Revenue Code of 1986, and the regulations
thereunder, in each case as amended, reformed or otherwise modified from time to
time.
"Commitment" means, as the context may require, a Term A Loan Commitment,
a Term B Loan Commitment, a Term C Loan Commitment or a Letter of Credit
Commitment made by a Lender under the Credit Agreement.
"Commitment Amount" means, as the context may require, the Term A Loan
Commitment Amount, the Term B Loan Commitment Amount, the Term C Loan Commitment
Amount or the Letter of Credit Commitment Amount.
"Commitment Letter" means the Commitment Letter, dated December 4, 1997,
between the Arrangers, the Borrower and the Sponsors as thereafter from time to
time amended.
"Commitment Termination Date" means, as the context may require, the Term
A Loan Commitment Termination Date or the Term B Loan and Term C Loan Commitment
Termination Date.
"Commitment Termination Event" means
(a) the occurrence of any Event of Default described in clauses (a)
through (e) of Section 8.1.10 of the Credit Agreement; or
(b) the occurrence and continuance of any other Event of Default and
either (x) the declaration of all or any portion of the Loans to be
immediately due and payable pursuant to Section 8.3 of the Credit
Agreement or (y) the giving of notice by the Administrative Agent, acting
at the direction of the Required Lenders, to the Borrower that the
Commitments have been terminated.
"Common Parking Area Use Agreement" means the Common Parking Area Use
Agreement to be entered into between the Borrower and Aladdin Bazaar in form and
substance satisfactory to the Administrative Agent determined in good faith in
its sole discretion, and as thereafter from time to time amended, supplemented,
amended and restated or otherwise modified in accordance with the terms of the
Credit Agreement.
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"Completion" means that each of the following has occurred:
(a) the construction of the Hotel/Casino and any Tenant Improvements
have been completed substantially in accordance with the Credit Agreement,
the Plans and Specifications, the provisions of the Reciprocal Easement
Agreement applicable to the Hotel/Casino and all of the other Operative
Documents to the extent that the development, construction, use or
operation of the Hotel/Casino are affected thereby, except for the Main
Project Punchlist Items applicable to the Hotel/Casino, and in substantial
compliance with all Legal Requirements pertaining to the construction of
the Hotel/Casino so as to allow the Hotel/Casino to be utilized for its
intended purpose;
(b) reasonable and safe means of access and facilities necessary for
the use and occupancy of the Hotel/Casino have been installed and are
operational including corridors, elevators, stairways, heating,
ventilation, air conditioning, sanitary, water and electrical facilities
and all security systems and life safety systems required by the Plans and
Specifications, the Reciprocal Easement Agreement, the other Operative
Documents and all Legal Requirements and that the Borrower has made
arrangements (from the Energy Project or an alternative source) to obtain
reliable electrical and other utility services at appropriate levels
required to start up, operate and maintain the Hotel/Casino in a safe,
efficient and reliable manner; and
(c) there are no outstanding claims or Liens by any Contractor or
Subcontractor or any other Person against any portion of the Hotel/Casino
Component except for Permitted Liens and Permitted Encumbrances.
"Completion Certificate" means, collectively, the Borrower's Completion
Certificate and the Construction Consultant's Completion Certificate in the form
of Exhibits S-1 and S-2 to the Credit Agreement, respectively.
"Completion Date" means the date on which Completion occurs but in no
event shall the Completion Date extend beyond the Outside Completion Deadline,
time being of the essence as to the Borrower.
"Completion Guarantor" means, jointly and severally, each of London Clubs,
ABH and the Trust.
"Completion Guaranty" means, on any date, the Guaranty of Performance and
Completion, as originally in effect on the Closing Date, by the Completion
Guarantors in favor of the Lenders substantially in the form of Exhibit C to the
Credit Agreement and as thereafter from time to time amended, supplemented,
amended and restated or otherwise modified.
"Complex" is defined in the fourth recital of the Credit Agreement and is
more fully described in Exhibit N-2 to the Credit Agreement.
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"Compliance Certificate" means a certificate duly completed and executed
by an Authorized Representative of the Borrower substantially in the form of
Exhibit R to the Credit Agreement, as amended, supplemented, amended and
restated or otherwise modified from time to time, together with such changes
thereto as the Administrative Agent may from time to time reasonably request for
the purpose of monitoring the Borrower's compliance with the financial covenants
contained in the Credit Agreement.
"Consent" means a consent, substantially in the form of Exhibit I to the
Credit Agreement, to the collateral assignment by the Borrower of the Main
Project Documents.
"Construction Benchmark Schedule" means the schedule for construction and
completion of each Construction Component, the Main Project as a whole and the
other work that the Borrower is required to perform pursuant to the Operative
Documents in substantially the form of Exhibit X-1 to the Credit Agreement (as
amended from time to time in accordance with the terms of the Credit Agreement)
which (w) shall demonstrate that Substantial Completion will occur on or before
the Outside Completion Deadline, (x) includes a statement from the Owner
Representative and the Design/Builder that the Construction Benchmark Schedule
is realistic and can be adhered to (subject to Force Majeure Events) in
completing the Main Project in accordance with the Plans and Specifications, (y)
shows on a monthly basis the anticipated progress of the Work and other
activities pertaining to the construction of the Hotel/Casino Component, the
Energy Project Component and Theater renovations, and (z) the Construction
Consultant has reviewed and certified in the Construction Consultant's Closing
Certificate that the statement from the Owner Representative in item (x) is
reasonable and that it is appropriate for the Administrative Agent to rely
thereon and on the other schedules and benchmarks set forth in the Construction
Benchmark Schedule.
"Construction Component" means the Hotel/Casino Component, the Energy
Project Component or the Equipment Component.
"Construction Consultant" means Rider Hunt (NV), L.L.C. or any other
Person designated from time to time by the Administrative Agent to serve as the
Construction Consultant under the Credit Agreement and the Disbursement
Agreement.
"Construction Consultant Engagement Agreement" means the Engagement
Letter, dated as of January 28, 1998, by and among the Construction Consultant,
the Borrower, the Administrative Agent, the Disbursement Agent and the Discount
Note Indenture Trustee.
"Construction Consultant's Closing Certificate" means a closing
certificate in the form of Exhibit Q-2 to the Credit Agreement.
"Construction Consultant's Completion Certificate" means a certificate in
the form of Exhibit S-2 to the Credit Agreement.
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"Construction Consultant's Final Completion Certificate" means a
certificate in the form of Exhibit U-2 to the Credit Agreement.
"Construction Consultant's Report" means a report of the Construction
Consultant delivered to the Disbursement Agent and the Administrative Agent
pursuant to Section 3.1.10 of the Disbursement Agreement which shall include an
analysis of the Plans and Specifications, the Main Project Budget, the
Construction Benchmark Schedule, the Contracts, to the extent available, the
construction and renovation of the Theater the construction of the Energy
Project to be performed by the Energy Provider under the Energy Project Ground
Lease and the Energy Project Development Agreement, and all other reports
submitted to the Administrative Agent and stating, among other things, that (x)
the Construction Consultant has reviewed the Main Project Documents, the Plans
and Specifications, and other material information deemed necessary by the
Construction Consultant for the purpose of evaluating whether the Main Project
can be constructed and completed in the manner contemplated by the Operative
Documents and (y) based on its review of such information, the Construction
Consultant is of the opinion that the Main Project can be constructed in the
manner contemplated by the Operative Documents and, in particular, that the Main
Project can be constructed and completed in accordance with the Main Project
Documents and the Plans and Specifications within the parameters set by the
Construction Benchmark Schedule and the Main Project Budget. Such report shall
contain an analysis reasonably satisfactory to the Administrative Agent
demonstrating the adequacy of the Main Project Budget to complete the Main
Project (and any improvements to be completed by the Borrower pursuant to the
Reciprocal Easement Agreement) in accordance with the Construction Benchmark
Schedule, confirmation that the Construction Benchmark Schedule is realistic,
and verifying that the information delivered by the Borrower relating to the
Complex and any improvements to be completed by the Borrower pursuant to the
Reciprocal Easement Agreement are accurate.
"Construction Expenses" means all Main Project Costs, excluding, however,
Pre-Opening Expenses, Debt Service due and payable after the Conversion Date and
Issuance Fees and Expenses.
"Construction Note Disbursement Account" is defined in the Holdings
Collateral Account Agreement.
"Contingent Liability" means, relative to any Person, any agreement,
undertaking or arrangement by which such Person guarantees, endorses or
otherwise becomes or is contingently liable upon (by direct or indirect
agreement, contingent or otherwise, to provide funds for payment, to supply
funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor
against loss) the Indebtedness of any other Person (other than by endorsements
of instruments in the course of collection), or guarantees the payment of
dividends or other distributions upon the shares of any other Person. The amount
of any Person's obligation under any Contingent Liability shall (subject to any
limitation set forth therein) be deemed to be the outstanding principal amount
of the debt, obligation or other liability guaranteed thereby.
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"Continuation/Conversion Notice" means a notice of continuation or
conversion and certificate duly executed by an Authorized Representative of the
Borrower substantially in the form of Exhibit M to the Credit Agreement.
"Contract" means any contract entered into from time to time by the
Borrower with any Contractor for performance of services or sale of goods or
services in connection with the design, engineering, installation, construction,
operation or maintenance of the Main Project, including all warranties and
guarantees.
"Contract Amendment Certificate" means a Contract Amendment Certificate
substantially in the form of Exhibit Z to the Credit Agreement.
"Contractor" means any architect, consultant, designer, contractor,
subcontractor, supplier, laborer or any other Person engaged by the Borrower in
connection with the design, engineering, installation and construction of the
Main Project (excluding, however, the Design/Builder).
"Controlled Group" means all members of a controlled group of corporations
and all members of a controlled group of trades or businesses (whether or not
incorporated) under common control which, together with the Borrower, are
treated as a single employer under Section 414(b) or 414(c) of the Code or
Section 4001 of ERISA.
"Conversion Date" means the date on which either of the following first
occurs:
(a) the relevant Governmental Instrumentality issues a Main Project
Certificate of Occupancy (which must include appropriate parking
facilities) and operating permit for the Energy Project; or
(b) the Administrative Agent and the Construction Consultant
determine that Completion of the Main Project has occurred.
"Credit Extension" means, as the context may require,
(a) the making of a Loan by a Lender; or
(b) the issuance of any Letter of Credit, or the extension of any
Stated Expiry Date of any existing Letter of Credit, by an Issuer.
"Credit Extension Request" means, as the context may require, any
Borrowing Request or Letter of Credit Issuance Request.
"Current Compliance Certificate" means the Compliance Certificate most
recently delivered by the Borrower to the Administrative Agent pursuant to
clause (d) of Section 7.1.1 of
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the Credit Agreement. Changes in the Applicable Base Rate Margin or Applicable
LIBO Rate Margin resulting, after the Conversion Date, from a change in the
Total Debt to EBITDA Ratio shall become effective upon delivery by the Borrower
to the Administrative Agent of a new Compliance Certificate pursuant to clause
(d) of Section 7.1.1 of the Credit Agreement. If the Borrower shall fail to
deliver a Compliance Certificate within the number of days after the end of any
Fiscal Quarter as required pursuant to clause (d) of Section 7.1.1 of the Credit
Agreement (without giving effect to any grace period), the Applicable Base Rate
Margin or Applicable LIBO Rate Margin, as the case may be, from and including
the first day after the date on which such Compliance Certificate was required
to be delivered to but not including the date the Borrower delivers to the
Administrative Agent a Compliance Certificate shall conclusively equal the
highest Applicable Base Rate Margin or Applicable LIBO Rate Margin, as the case
may be, set forth in the definition of such term.
"Debt Service" means all principal repayments or interest and other
amounts payable or accrued from time to time under any Loan Document or the
Approved Equipment Funding Commitments.
"Deed of Trust" means, on any date, the Deed of Trust, Assignment of Rents
and Leases, Security Agreement and Fixture Filing in the form of Exhibit B to
the Credit Agreement, as originally in effect on the date on which it is
recorded, made by the Borrower, as trustor, to the trustee named therein, for
the benefit of the Administrative Agent and the Lenders, as beneficiaries
covering the Site and as thereafter from time to time amended, supplemented,
amended and restated or otherwise modified.
"Default" means any Event of Default or any condition, occurrence or event
which, after notice or lapse of time or both, would constitute an Event of
Default.
"Defaulting Lender" means any Lender with respect to which a Lender
Default is in effect.
"Desert Passage" is defined in clause (b) of the fourth recital of the
Credit Agreement.
"Design/Build Contract" means, on any date, the Design/Build Contract, as
originally in effect on the Closing Date, between the Borrower and the
Design/Builder and as thereafter from time to time amended, supplemented,
amended and restated or otherwise modified in accordance with the terms of the
Credit Agreement.
"Design/Build Contract Time" is defined in Section 14.1 of the
Design/Build Contract.
"Design/Builder" means Fluor Daniel, Inc., a California corporation.
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"Design/Builder Consent and Acknowledgment" means the Consent and
Acknowledgment by the Design/Builder in favor of the Lenders and the
Administrative Agent dated as of the Closing Date.
"Design/Build Final Completion" means "Final Completion" as defined in
Section 31.9 of the General Conditions annexed to the Design/Build Contract as
Attachment D.
"Development Agreement" means, on any date, the Aladdin Hotel & Casino
Agreement, dated March 18, 1997, among Holdings, Aladdin Management Corporation
and the County of Clark, as assigned by Holdings and Aladdin Management
Corporation to the Borrower, and as thereafter from time to time amended,
supplemented, amended and restated or otherwise modified in accordance with the
terms of the Credit Agreement.
"Direct Costs" means all Main Project Costs expended or incurred by the
Borrower for labor, services, materials, tools, utilities, equipment, fixtures
and furnishings in connection with the construction of the Main Project all as
set forth on the Main Project Budget.
"Disbursement Agent" means Scotiabank, in its capacity as the disbursement
agent under the Disbursement Agreement and its successors in such capacity.
"Disbursement Agreement" means, on any date, the Disbursement Agreement,
as originally in effect on the Closing Date, among the Borrower, Holdings, the
Administrative Agent, the Discount Note Indenture Trustee, the Disbursement
Agent, the Servicing Agent and the Securities Intermediary and as thereafter
from time to time amended, supplemented, amended and restated or otherwise
modified.
"Disclosure Schedule" means the Disclosure Schedule attached to the Credit
Agreement as Schedule I, as it may be amended, supplemented, amended and
restated or otherwise modified from time to time by the Borrower with the
written consent of the Administrative Agent and the Required Lenders.
"Discount Note" means the 13 1/2% Series A and B Senior Discount Notes due
2010 of Holdings and Capital issued on the Closing Date for gross proceeds of
$115,000,000.
"Discount Note Indenture" means, on any date, the Indenture relating to
the Discount Notes, as originally in effect on the Effective Date, among
Holdings, Capital and the Discount Note Indenture Trustee and as thereafter from
time to time amended, supplemented, amended and restated or otherwise modified
in accordance with the terms of the Credit Agreement.
"Discount Note Indenture Trustee" means State Street Bank and Trust
Company, in its capacity as the indenture trustee for the Discount Noteholders
under the Discount Note Indenture.
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"Discount Note Offering Circular" means the offering memorandum, dated
February 14, 1998, with respect to the units, consisting of the Discount Notes
offered by Holdings and Capital and the Warrants offered by Enterprises.
"Discount Note Purchase Agreement" means the Purchase Agreement with
respect to the Discount Notes and Warrants, dated as of February 18, 1998, among
Holdings, Capital, Enterprises, AHL, the Trust and Merrill Lynch and First
Boston (as representatives of the several initial purchasers).
"Discount Noteholder" means the duly registered holder of a Discount Note.
"Documentation Agent" is defined in the preamble of the Credit Agreement.
"Dollar" and the symbol "$" mean lawful money of the United States.
"Downgraded Lender" is defined in clause (b) of Section 4.11 of the Credit
Agreement.
"EBITDA" means, for the Borrower only, for any applicable period, the sum
(without duplication) of
(a) Net Income for such period,
plus
(b) the amount deducted by the Borrower, in determining Net Income
for such period, representing
(i) Interest Expense of the Borrower;
plus
(ii) the amount deducted, in determining Net Income, of all
federal, state and local income taxes (whether paid in cash or
deferred) of the Borrower or, if the Borrower is treated as a
pass-through entity or is not treated as a separate entity for
United States federal income tax purposes, the amount of Restricted
Payments made by the Borrower in accordance with clause (c) of
Section 7.2.6 of the Credit Agreement, subject to the terms of the
Credit Agreement;
plus
(iii) depreciation of assets of the Borrower;
plus
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<PAGE>
(iv) amortization;
plus
(v) the amount of Cash Equity Contributions (as defined in the
Keep-Well Agreement);
plus
(vi) the amount of Cash Contributions to Capital;
provided, however, that in computing EBITDA for purposes of determining the
"Total Debt to EBITDA Ratio" in clause (h)(i)(B) of Section 7.2.6 of the Credit
Agreement or the amount of "Excess Cash Flow", the "Applicable Base Rate Margin"
or the "Applicable LIBO Rate Margin", subclauses (b)(v) and (b)(vi) shall be
excluded from such computation; provided further, however, that in computing
EBITDA for any period commencing on the Conversion Date and ending as of the
close of any Fiscal Quarter on or prior to the first anniversary of the
Conversion Date, EBITDA for such period shall equal the product of (x) the sum
of the amounts determined pursuant to clauses (a) and (b) for such period
multiplied by (y) a fraction, the numerator of which is equal to 365 and the
denominator of which is equal to the number of days that have elapsed in such
period.
"Effective Date" means the date the Credit Agreement becomes effective
pursuant to Section 10.8 thereof.
"Employment Agreement" means, collectively, (u) the Amended Employment and
Consulting Agreement among Holdings, the Borrower and Richard J. Goeglein
effective January 1, 1997, (v) the Amended Employment Agreement among Holdings,
the Borrower and James H. McKennon effective April 15, 1997, (w) the Amended
Employment Agreement among Holdings, the Borrower and Cornelius T. Klerk
effective July 1, 1997, (x) the Amended Employment Agreement among Holdings, the
Borrower and Lee A. Galati effective July 1, 1997, (y) the Amended Employment
Agreement among Holdings, the Borrower and Jose A. Rueda effective July 1, 1997
and (z) the Amended Consulting Agreement between GAI, LLC, Holdings and the
Borrower effective January 1, 1997.
"Energy Project" is defined in clause (e) of the fourth recital of the
Credit Agreement.
"Energy Project Commitment" means the commitment (as set forth in the
letter agreement, dated October 21, 1997, between the Energy Project Provider
and AHL) of the Energy Project Provider to enter into the Energy Project Ground
Lease, the Energy Project Development Agreement and the Energy Project Service
Agreement.
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<PAGE>
"Energy Project Completion" means that
(a) the construction of the Energy Project has been completed
substantially in accordance with the Energy Project Ground Lease and the
provisions of the Reciprocal Easement Agreement applicable to the Energy
Project except for any punchlist items applicable to the Energy Project
and in substantial compliance with all Legal Requirements pertaining to
the construction of the Energy Project so as to allow the Energy Project
to be utilized for its intended purposes;
(b) reasonable and safe means of access and facilities necessary for
the use and operation of the Energy Project have been installed and are
operational;
(c) the Borrower has certified to the Administrative Agent that (1)
arrangements have been made to obtain reliable electric and other utility
services at the appropriate levels required for the operation of the
Hotel/Casino and, to the extent applicable, other parts of the Complex
that are subject to the Energy Service Agreement, (2) all other conditions
precedent in the Energy Project Ground Lease relating to construction,
installation, start-up and test activities have been satisfied in all
material respects, and (3) there are no outstanding claims or Liens by any
contractor or subcontractor or any other Person against any portion of the
Energy Project Component except for Permitted Liens and Permitted
Encumbrances.
"Energy Project Component" means the portion of the Complex described in
Exhibit N-9 to the Credit Agreement.
"Energy Project Development Agreement" means, on any date, the Development
Agreement, as originally in effect on the Closing Date, between the Borrower and
the Energy Project Provider and as thereafter from time to time amended,
supplemented, amended and restated or otherwise modified in accordance with the
terms of the Credit Agreement.
"Energy Project Easements" means the easements appurtenant, easements in
gross, license agreements and other right running for the benefit of the Energy
Project Provider and/or appurtenant to the Energy Project Ground Lease,
including those certain easements and licenses described in each Title Policy.
"Energy Project Ground Lease" means, on any date, the Ground Lease, as
originally in effect on the Effective Date, between the Borrower and the Energy
Project Provider and as thereafter from time to time amended, supplemented,
amended and restated or otherwise modified in accordance with the terms of the
Credit Agreement.
"Energy Project Guarantor" means Unicom Corporation, an Illinois
corporation.
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<PAGE>
"Energy Project Guaranty" means the Guaranty, dated as of December 3,
1997, executed by the Energy Project Guarantor to and for the benefit of the
Borrower and as thereafter from time to time amended, supplemented, amended and
restated or otherwise modified in accordance with the terms of the Credit
Agreement.
"Energy Project Provider" means Northwind Aladdin, LLC, a Nevada
limited-liability company.
"Energy Project Service Agreement" means, on any date, the Energy Services
Agreement, as originally in effect on the Effective Date, between the Borrower
and the Energy Project Provider and as thereafter from time to time amended,
supplemented, amended and restated or otherwise modified in accordance with the
terms of the Credit Agreement.
"Enterprises" means Aladdin Gaming Enterprises, Inc., a Nevada
corporation.
"Enterprises Pledge Agreement" means, on any date, the Pledge Agreement
executed and delivered by an Authorized Representative of Enterprises pursuant
to clause (e) of Section 5.1.3 of the Credit Agreement, as originally in effect
on the Closing Date, in substantially the form of Exhibit E-4 to the Credit
Agreement and as thereafter from time to time amended, supplemented, amended and
restated or otherwise modified.
"Environmental Claim" means any and all obligations, liabilities, losses,
administrative, regulatory or judicial actions, suits, demands, decrees, claims,
liens, judgments, warning notices, notices of noncompliance or violation,
investigations, proceedings, removal or remedial actions or orders, or damages
(foreseeable and unforeseeable, including consequential and punitive damages),
penalties, fees, out-of-pocket costs, expenses, disbursements, attorneys' or
consultants' fees, relating in any way to any Environmental Law or any Permit
issued under any such Environmental Law including (x) any and all Claims by
Governmental Instrumentalities for enforcement, cleanup, removal, response,
remedial or other actions or damages pursuant to any applicable Environmental
Law and (y) any and all Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief resulting from
Hazardous Substances or arising from alleged injury or threat of injury to
health, safety or the environment.
"Environmental Consultant" means ERM-Northeast, Inc., or any other Person
designated from time to time by the Administrative Agent in its sole discretion
to serve as the Environmental Consultant.
"Environmental Indemnity" means, on any date, the Environmental Indemnity
Agreement, as originally in effect on the Effective Date, from the Borrower, the
Trust and London Clubs for the benefit of the Administrative Agent on behalf of
the Lenders in the form of Exhibit K to the Credit Agreement and as thereafter
from time to time amended, supplemented, amended and restated or otherwise
modified.
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<PAGE>
"Environmental Law" means any of:
(a) the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended (42 U.S.C. Section 9601, et seq.)
("CERCLA");
(b) the Federal Water Pollution Control Act (33 U.S.C. Section 1251,
et seq.) ("Clean Water Act" or "CWA");
(c) the Resource Conservation and Recovery Act (42 U.S.C. Section
6901, et seq.) ("RCRA");
(d) the Atomic Energy Act of 1954 (42 U.S.C. Section 2011, et seq.);
(e) the Clean Air Act (42 U.S.C. Section 7401, et seq.);
(f) the Emergency Planning and Community Right to Know Act (42
U.S.C. Section 11001, et seq.);
(g) the Federal Insecticide, Fungicide, and Rodenticide Act (7
U.S.C. Section 136, et seq.) ("FIFRA");
(h) the Oil Pollution Act of 1990 (P.L. 101-380, 104 Stat. 486);
(i) the Safe Drinking Water Act (42 U.S.C. Sections 300f, et seq.)
("SDWA");
(j) the Surface Mining Control and Reclamation Act of 1974 (30
U.S.C. Sections 1201, et seq.);
(k) the Toxic Substances Control Act (15 U.S.C. Section 2601, et
seq.) ("TSCA");
(l) the Hazardous Materials Transportation Act (49 U.S.C. Section
1801, et seq.) ("HMTA");
(m) the Uranium Mill Tailings Radiation Control Act of 1978 (42
U.S.C. Section 7901, et seq.) ("UMTRCA");
(n) the Occupational Safety and Health Act (29 U.S.C. Section 651,
et seq.) ("OSHA");
(o) the Nevada Hazardous Materials law (NRS Chapter 459);
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<PAGE>
(p) the Nevada Solid Waste/Disposal of Garbage or Sewage law (NRS
444.440 to 444.650, inclusive);
(q) the Nevada Water Controls/Pollution law (NRS Chapter 445A);
(r) the Nevada Air Pollution law (NRS Chapter 445B);
(s) the Nevada Cleanup of Discharged Petroleum law (NRS 590.700 to
590.920, inclusive);
(t) the Nevada Control of Asbestos law (NRS 618.750 to 618.850);
(u) the Nevada Appropriation of Public Waters law (NRS 533.324 to
533.4385, inclusive);
(v) the Nevada Artificial Water Body Development Permit law (NRS
502.390);
(w) the Nevada Protection of Endangered Species, Endangered Wildlife
Permit (NRS 503.585) and Endangered Flora Permit law (NRS 527.270); and
(x) all other Federal, state and local Legal Requirements which
govern Hazardous Substances, and the regulations adopted and publications
promulgated pursuant to all such foregoing laws;
in each case as amended by an amendment thereto or succeeded by a successor law,
statute or regulation thereto.
"Environmental Matter" means any:
(a) release, emission, entry or introduction into the air including
the air within buildings and other natural or man-made structures above
ground;
(b) discharge, release or entry into water including into any river,
watercourse, lake or pond (whether natural or artificial or above ground
or which joins or flows into any such water outlet above ground) or
reservoir, or the surface of the riverbed or of other land supporting such
waters, ground waters, sewer or the sea;
(c) deposit, disposal, keeping, treatment, importation, exportation,
production, transportation, handling, processing, carrying, manufacture,
collection, sorting or presence of any Hazardous Substance (including, in
the case of waste, any substance which constitutes a scrap material or an
effluent or other unwanted surplus substance arising from the application
of any process or activity (including making it reusable or
A-24
<PAGE>
reclaiming substances from it) and any substance or article which is
required to be disposed of as being broken, worn out, contaminated or
otherwise spoiled);
(d) nuisance, noise, defective premises, health and safety at work,
industrial illness, industrial injury due to environmental factors,
environmental health problems (including asbestosis or any other illness
or injury caused by exposure to asbestos) or genetically modified
organisms;
(e) conservation, preservation or protection of the natural or
man-made environment or any living organisms supported by the natural or
man-made environment; or
(f) other matter howsoever directly affecting the environment or any
aspect of it.
"Equipment Component" means the equipment, fixtures and other items
described in Exhibit N-10 to the Credit Agreement.
"Equity Interest" means, relative to any Person, Capital Stock and all
warrants, options or other rights to acquire Capital Stock (excluding, however,
any debt security that is convertible into, or exchangeable for, Capital Stock)
of such Person.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute thereto of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA also refer to any successor sections thereto.
"ERISA Plan" means any employee benefit plan (x) maintained by the
Borrower or any member of the Controlled Group, or to which the Borrower or any
member of the Controlled Group contributes or is obligated to contribute, for
its employees and (y) covered by Title IV of ERISA or to which Section 412 of
the Code applies.
"Event of Default" is defined in Section 8.1 of the Credit Agreement.
"Event of Loss" means, relative to any property or asset (tangible or
intangible, real or personal), (x) any loss, destruction or damage of such
property or asset, (y) any actual condemnation, seizure or taking by exercise of
the power of eminent domain or otherwise of all or a part of such property or
asset, or confiscation of all or a part of such property or asset or the
requisition of the use of all or a part of such property or asset or (z) any
settlement in lieu of item (y).
"Excess Cash Flow" means, for any Fiscal Quarter, the excess (if any), of
(a) EBITDA for such Fiscal Quarter
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<PAGE>
over
(b) the sum (during such Fiscal Quarter) of
(i) Interest Expense of the Borrower actually paid in cash by
the Borrower;
plus
(ii) scheduled payments, to the extent actually made, of the
principal amount of the Loans pursuant to Section 3.1.1 of the
Credit Agreement and scheduled payments, to the extent actually
made, with respect to the FF&E Financing;
plus
(iii) the amount of all federal, state and local income taxes
(whether paid in cash or deferred) of the Borrower paid in cash by
the Borrower or, if the Borrower is treated as a pass-through entity
or is not treated as a separate entity for United States federal
income tax purposes, the amount of Restricted Payments made in cash
by the Borrower in accordance with clause (c) of Section 7.2.6 of
the Credit Agreement, subject to the terms thereof;
plus
(iv) the amount of all Restricted Payments on the Borrower
Series A Preferred Membership Interests made in accordance with
clause (d) of Section 7.2.6 of the Credit Agreement;
plus
(v) Capital Expenditures actually made or reserved by the
Borrower.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Indebtedness" means Indebtedness of the Borrower in existence on
the Effective Date (after giving effect to payment of Indebtedness that is being
discharged and retired on the Closing Date, including all Indebtedness to be
Paid) and identified in item (b) of Section 7.2.2 ("Existing Indebtedness") of
the Disclosure Schedule.
"Federal Funds Rate" means, for any period, a fluctuating interest rate
per annum equal for each day during such period to
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<PAGE>
(a) the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by
federal funds brokers, as published for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve
Bank of New York; or
(b) if such rate is not so published for any day which is a Business
Day, the average of the quotations for such day on such transactions
received by the Administrative Agent from three federal funds brokers of
recognized standing selected by it.
"Fee Letter" means, the Arrangers' Fee Letter or the Scotiabank Fee
Letter.
"FF&E" means all furnishings, fixtures and equipment other than the
Specified Equipment and the Gaming Equipment.
"FF&E Financing" means the incurrence of Indebtedness, the proceeds of
which are utilized solely to finance or refinance the acquisitions of (or the
incurrence of Capitalized Lease Liabilities by the Borrower with respect to) the
Gaming Equipment and the Specified Equipment.
"FF&E Lease" means one or more leases entered into by the Borrower giving
rise to synthetic lease liabilities to one or more lessors (the "FF&E Lessors")
covering a portion of the FF&E, the Specified Equipment and/or the Gaming
Equipment.
"FF&E Lease Document" means the FF&E Lease and any other document executed
and delivered by the Borrower and the FF&E Lessors in connection therewith, as
the same may be amended, supplemented, amended and restated, replaced or
otherwise modified from time to time in accordance with the terms of the Credit
Agreement.
"FF&E Lessor" is defined in the definition of "FF&E Lease".
"FF&E Reserve" is defined in Section 7.1.3 of the Credit Agreement.
"Final Completion" means that (r) Design/Build Final Completion shall have
occurred, (s) Energy Project Completion shall have occurred, (t) Theater
Renovation Completion shall have occurred, (u) all other construction work with
respect to the Main Project shall have been substantially completed in
accordance with the Main Project Document applicable thereto so as to allow such
improvements to be utilized for their intended purposes and in substantial
compliance with all Legal Requirements applicable thereto, (v) each of the Hotel
Casino, the Energy Project and the Theater shall have received a permanent Main
Project Certificate of Occupancy from the Building Department and the Energy
Project shall have received all Permits required by the Governmental
Instrumentality having or asserting jurisdiction over the operation of the
Energy Project (and a copy of each such certificate shall have been delivered to
the Administrative Agent), (w) a Notice of Completion shall have been posted
with respect to
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<PAGE>
Hotel/Casino, the Energy Project and the Theater, as required, and recorded in
the Office of the County, (x) the Borrower shall have delivered to the
Administrative Agent its Final Completion Certificate certifying to the extent
set forth therein that all Main Project Punchlist Items have been completed, (y)
the Construction Consultant shall have delivered to the Administrative Agent its
Final Completion Certificate in which it verifies the statements in items (r),
(s), (t), (u), (v), and (w) and certifies that it is appropriate for the
Administrative Agent to rely on the Final Completion Certificate of the Borrower
delivered to the Administrative Agent pursuant to item (x) and (z) the Mall
Project Parcel and the Music Project Parcel shall be separate legal parcels in
accordance with Section 7.1.19 of the Credit Agreement.
"Final Completion Certificate" means a Borrower's Final Completion
Certificate or a Construction Consultant's Final Completion Certificate in the
form of Exhibit U-1 or Exhibit U-2 to the Credit Agreement.
"Final Completion Date" means the date on which Final Completion occurs.
"Final Plans and Specifications" means, relative to any particular portion
of the Work or other improvement, Plans and Specifications for such portion
which (x) have received final approval from all Governmental Instrumentalities
required to approve such Plans and Specifications prior to completion of the
Work or improvements and (y) contain sufficient specificity to permit the
completion of such portion of the Work or other improvements.
"Fiscal Quarter" or "FQ" means a calendar quarter ending on the last day
of March, June, September or December; references to a FQ with a following
number (e.g., FQ1) refer to the number of Fiscal Quarters then to have elapsed
in whole or in part since the Conversion Date.
"Fiscal Year" means any period of twelve consecutive calendar months
ending on December 31; references to a Fiscal Year with a number corresponding
to any calendar year (e.g., the "1998 Fiscal Year") refer to the Fiscal Year
ending on December 31 of such calendar year.
"Fleet Commitment" means, on any date, the Commitment Letter, as
originally in effect on the Effective Date, between Fleet National Bank and
Aladdin Bazaar and as thereafter from time to time amended, supplemented,
amended and restated or otherwise modified in accordance with the terms thereof.
"Fluor" means Fluor Corporation, a California corporation.
"Fluor Guaranty" means, on any date, the Fluor Guaranty, as originally in
effect on the Effective Date, by Fluor in favor of the Borrower and as
thereafter from time to time amended, supplemented, amended and restated or
otherwise modified in accordance with the terms of the Credit Agreement.
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<PAGE>
"Force Majeure Event" means any event which is defined as "Force Majeure"
in the Design/Build Contract and/or that causes a delay in the construction of
the Main Project and is outside the Borrower's control but only to the extent
(a) such event does not arise out of (w) the negligence, willful
misconduct or inefficiencies of the Borrower, (x) late performance by the
Design/Builder or the Architect of Record, (y) any cause or circumstance
resulting in delays, stoppage or any other interference with the
construction of the Main Project caused by the insolvency, bankruptcy or
any lack of funds by the Borrower, any other Project Party, the Energy
Provider, the Energy Project Guarantor and/or the Architect of Record or
(z) delays, stoppage or other interference with the construction of the
Main Project caused by the insolvency, bankruptcy or any lack of funds by
Aladdin Bazaar, Aladdin Music and/or the construction contractors and
project architects with respect to the Mall Project, the Music Project
and/or the Energy Project; and
(b) such event consists of an act of God (such as tornado, flood,
hurricane, etc.), fires and other casualties; strikes, lockouts or other
labor disturbances (except to the extent taking place at the Site only);
riots, insurrections or civil commotions; embargos, shortages or
unavailability of materials, supplies, labor, equipment and systems that
first arise after the Effective Date, but only to the extent caused by
another act, event or condition covered by this clause (b); sabotage;
vandalism; the requirements of law, statutes, regulations and other Legal
Requirements enacted after the Effective Date (unless the Borrower should,
in the exercise of due diligence and prudent judgment, have anticipated
such enactment); orders or judgments; or any similar types of events;
provided, however, that (x) the Borrower has sought to mitigate the impact of
the delay, (y) any delay resulting from the foregoing shall not exceed 365 days
and (z) the period during which a Force Majeure Event exists shall commence on
the date that the Borrower has given the Administrative Agent written notice
describing in reasonable detail the event which constitutes a Force Majeure
Event and the Administrative Agent has confirmed the existence of such Force
Majeure Event on the date of such notice and shall end on the date that such
Force Majeure Event no longer exists, whether or not notice is given to the
Administrative Agent, as determined by the Construction Consultant.
"F.R.S. Board" means the Board of Governors of the Federal Reserve System
or any successor thereto.
"GAAP" is defined in Section 1.4 of the Credit Agreement.
"GAI, LLC" means GAI, LLC, a Nevada limited-liability company.
"Gaming Equipment" means the gaming equipment and gaming devices which are
regulated gaming devices under any Nevada Gaming Law (such as slot machines,
cashless
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wagering systems and associated equipment) together with all improvements and/or
additions thereto financed by the $20,000,000 term loan facility under the GECC
Commitment.
"Gaming License" means any and all duly issued and valid licenses,
approvals, registrations, findings of suitability and authorizations relating to
gaming at the Hotel/Casino under the Nevada Gaming Laws or required by the
Nevada Gaming Authorities or necessary for the operation of gaming at the
Hotel/Casino.
"GECC" means General Electric Capital Corporation.
"GECC Commitment" means the commitment of GECC to enter into a $60,000,000
synthetic lease facility and a $20,000,000 term loan facility pursuant to that
certain commitment letter, dated as of January 23, 1998, between the Borrower
and GECC.
"GECC Intercreditor Agreement" means the Intercreditor Agreement to be
entered into between GECC and the Administrative Agent, initially in the form
approved by the Administrative Agent determined in good faith in its sole
discretion, and as from time to time thereafter amended, supplemented, amended
and restated or otherwise modified.
"Governmental Instrumentality" means any national, state or local
government (whether domestic or foreign), any political subdivision thereof or
any other governmental, quasi governmental, judicial, public or statutory
instrumentality, authority, body, agency, bureau or entity (including the Nevada
Gaming Authorities, any zoning authority, the Federal Deposit Insurance
Corporation, the Comptroller of the Currency or the F.R.S. Board, any central
bank or any comparable authority) or any arbitrator with authority to bind a
party at law.
"Ground Lease" means, collectively, the Mall Project Ground Lease, the
Music Project Ground Lease and the Energy Project Ground Lease.
"Guaranteed Maximum Price" means the total costs payable by the Borrower
to the Design/Builder for the Work, which costs shall not exceed $267,000,000,
except as adjusted in accordance with the Credit Agreement and the Design/Build
Contract.
"Guaranty Deposit Account" is defined in the Borrower Collateral Account
Agreement.
"Hazardous Substances" means (statutory acronyms and abbreviations having
the meaning given them in the definition of "Environmental Laws") substances
defined as "hazardous substances," "pollutants" or "contaminants" in Section 101
of the CERCLA; those substances defined as "hazardous waste," "hazardous
materials" or "regulated substances" by the RCRA; those substances designated as
a "hazardous substance" pursuant to Section 311 of the CWA; those substances
defined as "hazardous materials" in Section 103 of the HMTA; those substances
regulated as a hazardous chemical substance or mixture or as an imminently
hazardous chemical substance or mixture pursuant to Sections 6 or 7 of the TSCA;
those
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substances defined as "contaminants" by Section 1401 of the SDWA, if present in
excess of permissible levels; those substances regulated by the Oil Pollution
Act; those substances defined as a pesticide pursuant to Section 2(u) of the
FIFRA; those substances defined as a source, special nuclear or by-product
material by Section 11 of the AEA; those substances defined as "residual
radioactive material" by Section 101 of the UMTRCA; those substances defined as
"toxic materials" or "harmful physical agents" pursuant to Section 6 of the
OSHA); those substances defined as hazardous wastes in 40 C.F.R. Part 261.3;
those substances defined as hazardous waste constituents in 40 C.F.R. Part
260.10, specifically including Appendices VII and VIII of Subpart D of 40 C.F.R.
Part 261; those substances designated as hazardous substances in 40 C.F.R. Parts
116.4 and 302.4; those substances defined as hazardous substances or hazardous
materials in 49 C.F.R. Part 171.8; those substances regulated as hazardous
materials, hazardous substances or toxic substances in 40 C.F.R. Part 1910;
those substances defined as hazardous materials, hazardous substances or toxic
substances in any other Environmental Laws; and those substances defined as
hazardous materials, hazardous substances or toxic substances in the regulations
adopted and publications promulgated pursuant to said laws, whether or not such
regulations or publications are specifically referenced herein.
"Hedging Liability" means, relative to any Person, any liability of such
Person under any currency exchange agreement, interest rate swap agreement,
interest rate cap agreement or interest rate collar agreement, or any other
agreement designed to protect such Person against fluctuations in interest rates
or currency exchange rates including the Rate Protection Agreement.
"herein", "hereof", "hereto", "hereunder" and similar terms contained in
this Agreement or any other Loan Document refer to this Agreement or such other
Loan Document, as the case may be, as a whole and not to any particular Section,
paragraph or provision of this Agreement or such other Loan Document.
"Holdings" means Aladdin Gaming Holdings, LLC, a Nevada limited-liability
company.
"Holdings Collateral Account Agreement" means, on any date, the Holdings
Collateral Account Agreement, as originally in effect on the Closing Date,
between Holdings, the Securities Intermediary and the Disbursement Agent, for
the benefit of the Discount Note Indenture Trustee, and as thereafter from time
to time amended, supplemented, amended and restated or otherwise modified in
accordance with the terms of the Credit Agreement.
"Holdings Common Membership Interest" means a Common Share as defined in
the Organizational Documents of Holdings.
"Holdings Pledge Agreement" means, on any date, the Pledge Agreement
executed and delivered by an Authorized Representative of Holdings pursuant to
clause (a) of Section 5.1.3 of the Credit Agreement, as originally in effect on
the Closing Date, in substantially the form of Exhibit E-5 to the Credit
Agreement and as thereafter from time to time amended, supplemented, amended and
restated or otherwise modified.
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"Holdings Series A Preferred Membership Interests" means the Series A
Preferred Shares as defined in the Organizational Documents of Holdings and
issued to LCNI or Sommer Enterprises pursuant thereto in consideration for any
payments to the Borrower required by London Clubs, the Trust or AHL pursuant to
the Keep-Well Agreement, the Completion Guaranty or the Noteholder Completion
Guaranty, as the case may be, when such payments are Cash Equity Contributions
(as defined in the Keep-Well Agreement).
"Holdings Series B Preferred Membership Interests" means the Series B
Preferred Shares as defined in the Organizational Documents of Holdings and
issued to LCNI or Sommer Enterprises pursuant thereto in consideration for any
payments to the Borrower required by London Clubs, the Trust or AHL pursuant to
the Keep-Well Agreement when such payments are Cash Equity Contributions (as
defined in the Keep-Well Agreement).
"Hotel" is defined in clause (a) of the fourth recital of the Credit
Agreement.
"Hotel/Casino" is defined in clause (a) of the fourth recital of the
Credit Agreement.
"Hotel/Casino Component" means the portion of the Complex described in
Exhibit N-8 to the Credit Agreement.
"Hotel/Casino Component Funding Source" means the Land Equity, the London
Clubs Contribution, the proceeds of the Borrower Series A Preferred Membership
Interests, the Loans, the Approved Equipment Funding Commitments, the amounts
payable to the Borrower by Aladdin Bazaar pursuant to Section 4.5 of the Site
Work Agreement, together with any amounts payable under the Completion Guaranty
from time to time.
"Impermissible Qualification" means, relative to the opinion or
certification of any independent public accountant as to any financial statement
of the Borrower, any other Aladdin Party, LCNI, London Clubs Holdings or London
Clubs, any qualification or exception to such opinion or certification
(a) which is of a "going concern" or similar nature;
(b) which relates to the limited scope of examination of matters
relevant to such financial statement; or
(c) which relates to the treatment or classification of any item in
such financial statement and which, as a condition to its removal, would
require an adjustment to such item the effect of which would be to cause
the Borrower to be in default of any of its obligations under Section
7.2.4 of the Credit Agreement.
"Imposition" means any real estate tax, payment in lieu of taxes or other
assessment levied, assessed or imposed against the portion of the Site owned by
the Borrower, and any water
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rates, sewer rentals or other governmental, municipal or public dues, charges or
impositions, of every nature and to whomever assessed, that may now or hereafter
be levied or assessed upon the portion of the Site owned by the Borrower, or
upon the rents, issues, income, proceeds or profits thereof, whether the
Imposition is levied directly or indirectly against such portion of the Site
owned by the Borrower or as excise taxes or income taxes.
"Improvement" means any building, structure or other improvements to be
located or constructed on the Main Project Parcel.
"In Balance" will be deemed to exist when (x) the Unallocated Contingency
Balance equals or exceeds the Required Minimum Contingency, (y) after giving
effect to the requested Credit Extension, the Available Funds allocated to each
Line Item Category equals or exceeds for such Line Item Category the aggregate
of (1) the costs required to complete such Line Item Category, (2) the Retainage
Amount to be paid to Persons who have supplied labor or materials in connection
with such Line Item Category and (3) the amount required to pay interest and all
other amounts due under the Credit Agreement and the Approval Equipment Funding
Commitments at the maximum rate of interest set forth in the Main Project Budget
through the Conversion Date and (z) the Guaranteed Maximum Price remains in
effect.
"including" and "include" means including, without limiting the generality
of any description preceding such term, and, for purposes of this Agreement and
each other Loan Document, the parties hereto agree that the rule of ejusdem
generis shall not be applicable to limit a general statement, which is followed
by or referable to an enumeration of specific matters, to matters similar to the
matters specifically mentioned.
"Indebtedness" means, relative to any Person, without duplication:
(a) all obligations of such Person for borrowed money and all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments;
(b) all obligations, contingent or otherwise, relative to the face
amount of all letters of credit (or reimbursement agreements in respect
thereof), whether or not drawn, and banker's acceptances issued for the
account of such Person;
(c) all obligations of such Person as lessee under leases which have
been or should be, in accordance with GAAP, recorded as Capitalized Lease
Liabilities;
(d) all other items which, in accordance with GAAP, would be
included as liabilities on the liability side of the balance sheet of such
Person as of the date at which Indebtedness is to be determined;
(e) net liabilities of such Person under all Hedging Liabilities;
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(f) whether or not so included as liabilities in accordance with
GAAP, all obligations of such Person to pay the deferred purchase price of
property or services, and indebtedness (excluding, however, prepaid
interest thereon) secured by a Lien on property owned or being purchased
by such Person (including indebtedness arising under conditional sales or
other title retention agreements), whether or not such indebtedness shall
have been assumed by such Person or is limited in recourse; and
(g) all Contingent Liabilities of such Person in respect of any of
the foregoing.
For all purposes of this Agreement, (x) the Indebtedness of any Person shall
include the proportion of Indebtedness of any partnership in which such Person
is a general partner or joint venturer with liability for the entire
indebtedness of the joint venture and (y) the amount of any Indebtedness
outstanding as of any date shall be (1) the accredited value thereof, in the
case of Indebtedness issued with original issue discount and (2) the principal
amount thereof, together with any interest thereon that is more than 30 days
past due, in the case of any other Indebtedness.
"Indebtedness to be Paid" means the Indebtedness identified in Item 5.1.10
on the Disclosure Schedule.
"Indemnified Liability" is defined in Section 10.4 of the Credit
Agreement.
"Indemnified Party" is defined in Section 10.4 of the Credit Agreement.
"Independent Consultant" means the Construction Consultant, the Insurance
Consultant, the Environmental Consultant or their successors engaged pursuant to
the Credit Agreement.
"Indirect Cost" means any Main Project Cost which is not a Direct Cost,
including appraisal fees, the Term A Loan Commitment Fee, the Term B and Term C
Loan Commitment Fee, the fees set forth in the Fee Letters, interest on the
Loans prior to the Conversion Date, brokers' commissions, fees of the
Independent Consultants, insurance during construction, surety bond premiums,
cost of surveys, Impositions during construction, title examination and title
insurance premiums, recording expenses in connection with the Deed of Trust and
other Security Documents and fees and disbursements of the attorneys for the
Administrative Agent.
"Instrument" means any contract, agreement, indenture, mortgage, deed of
trust, document or writing (whether by formal agreement, letter or otherwise)
under which any obligation is evidenced, assumed or undertaken, or any Lien (or
right or interest therein) is granted or perfected.
"Insurance Consultant" means Sedgwick of Tennessee, Inc. or its successor
appointed pursuant to Section 9.8 of the Credit Agreement.
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"Insurance Requirement" means any provisions of any insurance policy
covering or applicable to the Borrower, the Main Project or any portion thereof,
all requirements of the issuer of any such policy and all orders, rules,
regulations and other requirements of the National Board of Fire Underwriters
(or any body exercising similar functions) applicable to or affecting the Main
Project or any portion thereof, any use or condition thereof or the Borrower.
"Interest Coverage Ratio" means, at the close of any Fiscal Quarter, the
ratio computed for the period consisting of such Fiscal Quarter (or such shorter
portion of any Fiscal Quarter after the occurrence therein of the Conversion
Date and each of the three immediately prior Fiscal Quarters (or such lesser
number of Fiscal Quarters to have closed since the Conversion Date) of:
(a) EBITDA for such period
to
(b) Interest Expense of the Borrower for such period;
provided, however, that in computing the Interest Coverage Ratio for any such
period ending on or prior to the first anniversary of the Conversion Date, the
amount determined pursuant to clause (b) shall equal the product of (x) the
Interest Expense for such period multiplied by (y) a fraction, the numerator of
which is equal to 365 and the denominator of which is equal to the number of
days that have elapsed in such period.
"Interest Expense" means, for any period, the aggregate cash interest
expense (net of cash interest income) of the Borrower (including, to the extent
the Borrower has any Contingent Liability in respect of such interest expense,
the interest expense of other Persons) for such period, as determined in
accordance with GAAP, including the portion of any payments made in respect of
Capitalized Lease Liabilities allocable to interest expense, but excluding,
however, deferred financing costs and other non-cash interest expense.
"Interest Payment Account" means the account established by the Borrower
with the Disbursement Agent pursuant to the Borrower Collateral Account
Agreement into which the proceeds of the Loans shall be deposited by the
Administrative Agent from time to time.
"Interest Period" means, relative to any LIBO Rate Loan, the period
beginning on (and including) the date on which such LIBO Rate Loan is made or
continued as, or converted into, a LIBO Rate Loan pursuant to Section 2.3 or
Section 2.4 of the Credit Agreement and shall end on (but exclude) the day which
numerically corresponds to such date one, two, three, six or, if then generally
available from all Lenders, twelve months thereafter (or, if such month has no
numerically corresponding day, on the last Business Day of such month), as the
Borrower may select in its relevant notice pursuant to Section 2.3 or Section
2.4 of the Credit Agreement; provided, however, that
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(a) the Borrower shall not be permitted to select Interest Periods
to be in effect at any one time which have expiration dates,
(a) in the case of Term A Loans made or maintained as
LIBO Rate Loans, occurring on more than eight different dates,
(b) in the case of Term B Loans made or maintained as
LIBO Rate Loans, occurring on more than four different dates, and
(c) in the case of Term C Loans made or maintained as
LIBO Rate Loans, occurring on more than four different dates;
(b) if such Interest Period would otherwise end on a day which is
not a Business Day, such Interest Period shall end on the next following
Business Day (unless such next following Business Day is the first
Business Day of a calendar month, in which case such Interest Period shall
end on the Business Day next preceding such numerically corresponding
day); and
(c) no Interest Period for any Loan may end later than the Stated
Maturity Date for such Loan.
"Investment" means, relative to any Person,
(a) any loan or advance made by such Person to any other Person
(including Affiliates) (excluding, however, commission, travel, petty cash
and similar advances to officers and employees made in the ordinary course
of business);
(b) any Contingent Liability of such Person incurred in connection
with loans or advances described in clause (a);
(c) any ownership or similar interest held by such Person in any
other Person; and
(d) any other item that is or would be classified as an investment
on a balance sheet of such Person prepared in accordance with GAAP.
The amount of any Investment shall be the original principal or capital amount
thereof less all returns of principal or equity thereon and shall, if made by
the transfer or exchange of property other than cash, be deemed to have been
made in an original principal or capital amount equal to the fair market value
of such property at the time of such Investment. If Holdings or any Subsidiary
of Holdings sells, assigns, transfers or otherwise disposes of any Equity
Interests of any direct or indirect Subsidiary of Holdings such that, after
giving effect thereto, such Person is no longer a Subsidiary of Holdings,
Holdings or such Subsidiary shall be deemed to have made an Investment on the
date of such sale, assignment, transfer or other disposition equal to the fair
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market value of the Equity Interests of such Subsidiary not sold, assigned,
transferred or otherwise disposed of in an amount determined as provided in
clause (d) of Section 7.2.6 of the Credit Agreement.
"Issuance Fee or Expense" means any fee or expense incurred by the
Borrower in connection with the raising of debt or equity to finance the Main
Project which is paid on or before the Closing Date as more fully set forth on
Schedule IX to the Credit Agreement.
"Issuer" means Scotiabank in its capacity as issuer of the Letters of
Credit. At the request of Scotiabank, another Lender or an Affiliate of
Scotiabank may issue one or more Letters of Credit under the Credit Agreement.
"Keep-Well Agreement" means, on any date, the Keep-Well Agreement, as
originally in effect on the Closing Date, by the Sponsors and ABH in favor of
the Lenders substantially in the form of Exhibit D to the Credit Agreement and
as thereafter from time to time amended, supplemented, amended and restated or
otherwise modified.
"Knowledge" of any Obligor means, at any time and relative to any matter,
knowledge which the Authorized Representatives of such Obligor would have after
inquiring of the current employees of such Obligor and its Subsidiaries who
would reasonably be expected to have knowledge regarding such matter, whether or
not such Authorized Representatives actually made inquiry of such employees.
"Land Equity" is defined in clause (a) of the fifth recital of the Credit
Agreement.
"LCNI" means London Clubs Nevada Inc., a Nevada corporation.
"LCNI Pledge Agreement" means, on any date, the Pledge Agreement executed
and delivered by an Authorized Representative of LCNI pursuant to clause (b) of
Section 5.1.3 of the Credit Agreement, as originally in effect on the Closing
Date, in substantially the form of Exhibit E-6 to the Credit Agreement and as
thereafter from time to time amended, supplemented, amended and restated or
otherwise modified.
"Legal Requirement" means, relative to any Person or property, all laws
(including Nevada Gaming Laws, if applicable), statutes, codes, regulations,
rules, acts, ordinances, permits, licenses, authorizations, directions and
requirements of all Governmental Instrumentalities, departments, commissions,
boards, courts, authorities, agencies, officials and officers, and any deed
restrictions or other requirements of record, applicable to such Person or such
property, or any portion thereof or interest therein or any use or condition of
such property or any portion thereof or interest therein (including those
relating to zoning, planning, subdivision, building, safety, health, use,
environmental quality and other similar matters).
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"Lender" is defined in the preamble of the Credit Agreement and, in
addition, shall include any commercial bank or other financial institution that
becomes a Lender pursuant to Section 10.11.1 of the Credit Agreement.
"Lender Assignment Agreement" means a lender assignment agreement
substantially in the form of Exhibit H to the Credit Agreement.
"Lender Default" means (x) the refusal (which has not been retracted) of a
Lender to make available its portion of any Borrowing or to fund its portion of
any unreimbursed payment under Section 2.6.1 of the Credit Agreement or (y) a
Lender having notified the Administrative Agent or the Borrower that it does not
intend to comply with its obligations under Section 2.3 or under Section 2.6.1
of the Credit Agreement, in either case, as a result of the appointment of a
receiver or conservator with respect to such Lender at the direction or request
of any regulatory agency or authority.
"Lender's Environmental Liability" means any and all losses, liabilities,
obligations, penalties, claims, litigation, demands, defenses, costs, judgments,
suits, proceedings, damages (including consequential damages), disbursements or
expenses of any kind or nature whatsoever (including reasonable attorneys' fees
at trial and appellate levels and consultants' and experts' fees and
disbursements and expenses incurred in investigating, defending against or
prosecuting any litigation, claim or proceeding) which may at any time be
imposed upon, incurred by or asserted or awarded against any Lender or any of
such Lender's parent and subsidiary corporations, and their Affiliates,
shareholders, directors, officers, employees, and agents in connection with or
arising from:
(a) any Hazardous Substances on, in, under or affecting all or any
portion of any property of the Borrower, any of the Borrower's
Subsidiaries or Aladdin Bazaar, the groundwater thereunder, or any
surrounding areas thereof to the extent caused by Releases from the
Borrower, any of the Borrower's Subsidiaries, any other Aladdin Party or
Aladdin Bazaar or any of their respective properties;
(b) any misrepresentation, inaccuracy or breach of any warranty,
contained or referred to in Section 6.12 of the Credit Agreement;
(c) any violation or claim of violation by the Borrower, any of the
Borrower's Subsidiaries, any other Aladdin Party or Aladdin Bazaar of any
Environmental Laws; or
(d) the imposition of any Lien for damages caused by or the recovery
of any costs for the cleanup, release or threatened release of Hazardous
Substances by the Borrower, any of the Borrower's Subsidiaries, any other
Aladdin Party or Aladdin Bazaar, or in connection with any property owned
or formerly owned by the Borrower, any of the Borrower's Subsidiaries, any
other Aladdin Party or Aladdin Bazaar, as the case may be.
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"Lender's Tax" is defined in Section 4.6 of the Credit Agreement.
"Letter of Credit" is defined in Section 2.1.2 of the Credit Agreement.
"Letter of Credit Commitment" means, (x) relative to an Issuer, such
Issuer's obligation to issue Letters of Credit pursuant to Section 2.1.2 of the
Credit Agreement and (y) relative to each Lender (other than the Issuer) that
has a Term A Loan Commitment, the obligation of such Lender to participate in
Letters of Credit pursuant to Section 2.6.1 of the Credit Agreement.
"Letter of Credit Commitment Amount" means, on any date, a maximum amount
of $20,000,000, as such amount may be permanently reduced from time to time
pursuant to Section 2.2 of the Credit Agreement.
"Letter of Credit Disbursement" is defined in Section 2.6.2 of the Credit
Agreement.
"Letter of Credit Disbursement Date" is defined in Section 2.6.2 of the
Credit Agreement.
"Letter of Credit Issuance Request" means a Letter of Credit request and
certificate duly executed by an Authorized Representative of the Borrower
substantially in the form of Exhibit L-2 to the Credit Agreement.
"Letter of Credit Outstandings" means, on any date, an amount equal to the
sum of
(a) the then aggregate amount which is undrawn and available under
all issued and outstanding Letters of Credit,
plus
(b) the then aggregate amount of all unpaid and outstanding Letter
of Credit Reimbursement Obligations.
"Letter of Credit Reimbursement Obligation" is defined in Section 2.6.3 of
the Credit Agreement.
"Letter of Credit Stated Expiry Date" is defined in Section 2.6 of the
Credit Agreement.
"LIBO Rate" means, relative to any Interest Period for LIBO Rate Loans,
the rate of interest equal to the average (rounded upwards, if necessary, to the
nearest 1/16 of 1%) of the rate per annum at which Dollar deposits in
immediately available funds are offered to the Administrative Agent in the
London, England interbank market as at or about 11:00 a.m. London, England time
two Business Days prior to the beginning of such Interest Period for delivery on
the first day of such Interest Period, and in an amount approximately equal to
the amount of the LIBO Rate Loans and for a period approximately equal to such
Interest Period.
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"LIBO Rate Loan" means a Loan bearing interest, at all times during an
Interest Period applicable to such Loan, at a fixed rate of interest determined
by reference to the LIBO Rate (Reserve Adjusted).
"LIBO Rate (Reserve Adjusted)" means, relative to any Loan to be made,
continued or maintained as, or converted into, a LIBO Rate Loan for any Interest
Period, a rate per annum (rounded upwards, if necessary, to the nearest 1/16 of
1%) determined pursuant to the following formula:
LIBO Rate = LIBO Rate
(Reserve Adjusted) --------------------------------
1.00 - LIBOR Reserve Percentage
The LIBO Rate (Reserve Adjusted) for any Interest Period for LIBO Rate Loans
will be determined by the Administrative Agent on the basis of the LIBOR Reserve
Percentage in effect, and the applicable rates furnished to and received by the
Administrative Agent from the Lenders, two Business Days before the first day of
such Interest Period.
"LIBOR Reserve Percentage" means, relative to any Interest Period for LIBO
Rate Loans, the reserve percentage (expressed as a decimal) equal to the maximum
aggregate reserve requirements (including all basic, emergency, supplemental,
marginal and other reserves and taking into account any transitional adjustments
or other scheduled changes in reserve requirements) specified under regulations
issued from time to time by the F.R.S. Board and then applicable to assets or
liabilities consisting of or including "Eurocurrency Liabilities", as currently
defined in Regulation D of the F.R.S. Board, having a term approximately equal
or comparable to such Interest Period.
"Lien" means, relative to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell or give a security interest
therein).
"Line Item" means each of the individual line items set forth in the Main
Project Budget.
"Line Item Category" means each of the following line item categories of
the Main Project Budget:
(a) Construction Costs;
(b) Indirect Costs;
(c) Indirect Fees;
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(d) General FF&E;
(e) Gaming Equipment;
(f) Owner FF&E;
(g) Theming;
(h) Project Contingency;
(i) Mall Project Reimbursement;
(j) Capitalized Interest;
(k) Fees/Other Expenses;
(l) Retirement of Existing Debt;
(m) Retirement of Partnership Debt;
(n) Pre-Opening Expenses;
(o) Working Capital;
(p) Investment in Aladdin Music; and
(i) Land/Infrastructure Contract.
"Loan" means a Term A Loan, a Term B Loan or a Term C Loan of any type.
"Loan Document" means, collectively, the Credit Agreement, the Notes, the
Letters of Credit, each Pledge Agreement, each Rate Protection Agreement, each
Borrowing Request, each Letter of Credit Issuance Request, the Security
Agreement, the Keep-Well Agreement, the Completion Guaranty, the GECC
Intercreditor Agreement, the Trademark Security Agreement, the Deed of Trust,
the Disbursement Agreement, the Mall Project Completion Assignment, the Fee
Letters, the Environmental Indemnity, the Assignment of Contracts, the
Assignment of Consulting Agreement, the Assignment of Design/Build Contract, the
Assignment of Salle Privee Agreement, the Assignment of Project Management
Agreement, the Borrower Collateral Account Agreement, the Holding Collateral
Account Agreement, the Servicing and Collateral Account Agreement, the
Design/Builder Consent and Acknowledgment and any other agreement, certificate,
document or Instrument delivered in connection with the Credit Agreement and
such other agreements, whether or not specifically mentioned herein or therein.
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"London Clubs" means London Clubs International, plc, a company registered
in England and Wales.
"London Clubs Contribution" means the $50,000,000 cash contribution by
London Clubs indirectly through London Clubs Holding and LCNI in consideration
for Common Membership Interests in Holdings.
"London Clubs Holdings" means London Clubs Holdings, Ltd., a company
registered in England and Wales.
"London Clubs Parties" means, collectively, London Clubs and LCNI.
"London Clubs Purchase Agreement" means the Amended and Restated Purchase
Agreement, dated the Effective Date, among London Clubs, LCNI, AHL, Sommer
Enterprises, the Trust, Holdings and the Borrower as originally in effect on the
Effective Date and as thereafter from time to time amended, supplemented,
amended and restated or otherwise modified in accordance with the terms of the
Credit Agreement.
"Loss Proceeds" is defined in Section 7.1.20 of the Credit Agreement.
"Loss Proceeds Account" is defined in the Borrower Collateral Account
Agreement.
"Main Project" is defined in clause (a) of the fourth recital of the
Credit Agreement.
"Main Project Budget" means a budget in substantially the form of Exhibit
X-2 to the Credit Agreement (as amended from time to time in accordance with
Section 7.2.18 of the Credit Agreement) which shall include (w) a breakdown of
all Direct Costs and Indirect Costs by Line Item Categories as set forth on the
Trade Detail Report, together with a schedule of costs by trades and Main
Project Costs (including Main Project Costs incurred prior to, as well as after,
the Effective Date, the Pre-Opening Expenses, the Issuance Fees or Expenses,
Debt Service and initial working capital required to operate the Main Project on
and after the Opening Date) which (1) are to be paid from the Hotel/Casino
Component Funding Sources and (2) are to be constructed and paid for by the
Borrower pursuant to the Site Work Agreement for improvements to the Mall
Project, (x) a schedule setting forth the FF&E which is to be purchased from the
proceeds of the Loans (which FF&E shall not include any Gaming Equipment and/or
Specified Equipment), (y) a drawdown schedule for Advances necessary to achieve
Final Completion and such other information relative to such Main Project Costs
and the funding thereof as the Administrative Agent may reasonably require and
(z) a balanced statement of sources and uses of proceeds (and any other funds
necessary to complete the Main Project), broken down by Construction Component
and Line Item. The Main Project Costs shall not exceed $724,000,000.
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"Main Project Budget/Schedule Amendment Certificate" means a Main Project
Budget/Schedule Amendment Certificate substantially in the form of Exhibit X-3
to the Credit Agreement.
"Main Project Certificate of Occupancy" means a permanent or temporary
certificate of occupancy, in either case, for the portion of the Main Project
specified in such certificate of occupancy issued by the Building Department
pursuant to applicable Legal Requirements which permanent or temporary
certificate of occupancy shall permit such portion of the Main Project to be
used for its intended purposes, shall be in full force and effect and, in the
case of a temporary certificate of occupancy, if such temporary certificate of
occupancy shall provide for an expiration date, any Main Project Punchlist Items
which must be completed in order for such temporary certificate of occupancy to
be renewed or extended shall be completed no later than 15 days prior to the
applicable expiration date.
"Main Project Costs" means all costs incurred or to be incurred in
accordance with the Main Project Budget in connection with the development,
design, engineering, procurement, installation, construction, Final Completion
and opening of the Main Project, including:
(a) all costs incurred under the Design/Build Contract and the
Contracts;
(b) interest accruing under the Credit Agreement, the other Loan
Documents and the Approved Equipment Funding Commitments prior to the
Conversion Date;
(c) reasonable financing and closing costs related to the Main
Project until the Conversion Date, including insurance costs (including,
with respect to directors and officers insurance, costs relating to such
insurance extending beyond the Conversion Date), guarantee fees, legal
fees and costs and expenses, financial advisory fees and expenses,
technical fees and expenses (including fees and expenses of the
Construction Consultant, the Environmental Consultant and the Insurance
Consultant), commitment fees, management fees, agency fees (including fees
and expenses of the Disbursement Agent and the Administrative Agent),
interest, taxes (including value-added tax and Restricted Payments made in
accordance with clause (c) of Section 7.2.6 of the Credit Agreement) and
other out-of-pocket expenses payable by the Borrower under all documents
related to the financing and construction of the Main Project until the
Conversion Date;
(d) the costs of acquiring Permits for the Main Project prior to the
Final Completion Date (including Permits required for the operation of the
Main Project subsequent to the Final Completion Date);
(e) costs incurred in settling insurance claims in connection with
Events of Loss and collecting Loss Proceeds;
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(f) amounts due under the Energy Project Service Agreement prior to
the Conversion Date; and
(g) without duplication, working capital costs.
"Main Project Document" means, collectively, the Design/Build Contract,
the Fluor Guaranty, the Contracts, the Energy Project Service Agreement, the
Energy Project Ground Lease, the Mall Project Ground Lease, the Music Project
Ground Lease, the Theater Lease (if entered into), the Reciprocal Easement
Agreement, the Common Parking Area Use Agreement, the Site Work Agreement, the
Project Management Agreement, the Development Agreement or any other document or
agreement entered into on, prior to or after the Effective Date, relating to the
development, construction, maintenance or operation of the Main Project (other
than the Loan Documents and the Discount Note Trust Indenture), as the same may
be amended from time to time in accordance with the terms and conditions of the
Credit Agreement and thereof.
"Main Project Easement" means any easement appurtenant, easement in gross,
license agreement or other right running for the benefit of the Borrower or
appurtenant to the Main Project Parcel, including those easements and licenses
described in the Reciprocal Easement Agreement and each Title Policy.
"Main Project Intended Use" means each intended use of the Main Project,
as more particularly set forth on Exhibit O to the Credit Agreement.
"Main Project Parcel" means the portion of the Site described on Exhibit
N-3 to the Credit Agreement together with the Main Project Easements.
"Main Project Punchlist Completion Certificate" means the Main Project
Punchlist Completion Certificate substantially in the form of Exhibit V to the
Credit Agreement.
"Main Project Punchlist Item" means any minor or insubstantial detail of
construction or mechanical adjustment, the non-completion of which, when all
such items are taken together, will not interfere in any material respect with
the use or occupancy of any portion of the Main Project for its intended
purposes or the ability of the owner of the Main Project or the Energy Project
Provider, as applicable, to perform work that is necessary or desirable to
prepare such portion of the Main Project for such use or occupancy; provided,
however, that, in all events, "Main Project Punchlist Items" shall include the
items set forth in the punchlist to be delivered by the Borrower in connection
with Substantial Completion (as defined in the Design/Build Contract) and all
items that are listed on the "punchlists" furnished by the Building Department,
the Nevada Department of Transportation or the Clark County Department of Public
Works in connection with, or after, the issuance of a temporary Main Project
Certificate of Occupancy for the portion of the Main Project covered thereby as
those that must be completed in order for the Building Department to issue a
permanent Main Project Certificate of Occupancy.
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"Main Project Security" means all real and personal property which is
subject or is intended to become subject to the security interests or liens
granted by any of the Operative Documents.
"Major Contractor" means a Contractor who is party to a Material Main
Project Document.
"Mall Project" is defined in clause (b) of the fourth recital of the
Credit Agreement.
"Mall Project Completion Assignment" means, on any date, the Mall Project
Completion Assignment, as originally in effect on the Closing Date, from
Holdings in favor of the Lenders substantially in the form of Exhibit G to the
Credit Agreement and as thereafter from time to time amended, supplemented,
amended and restated or otherwise modified.
"Mall Project Easement" means any easement appurtenant, easement in gross,
license agreement or other right running for the benefit of Aladdin Bazaar or
appurtenant to the Mall Project Parcel, including those certain easements and
licenses described in the Reciprocal Easement Agreement and each Title Policy.
"Mall Project Ground Lease" means, on any date, the Lease, as originally
in effect on the Effective Date, between the Borrower and Aladdin Bazaar and as
thereafter from time to time amended, supplemented, amended and restated or
otherwise modified in accordance with the terms of the Credit Agreement.
"Mall Project Parcel" means the portion of the Site described on Exhibit
N-4 to the Credit Agreement, together with the Mall Project Easements.
"Mall Project Parcel Creation Date" means the date on which the Mall
Project Parcel is created in accordance with clause (b) of Section 7.1.19 of the
Credit Agreement.
"Mandatory Prepayment" is defined in clause (c) of Section 3.1.1 of the
Credit Agreement.
"Material Adverse Effect" means (x) a material adverse effect on the
financial condition, business, property, prospects of the Borrower or on its
ability to perform in all material respects its obligations under any Operative
Document to which it is a party, (y) a material adverse effect on the financial
condition, business, property, prospects and ability of any other Project Party
to perform in all material respects its obligations under any Operative Document
to which it is a party or (z) a material impairment of the validity or
enforceability of, or a material impairment of the rights, remedies or benefits
available to the Administrative Agent, the Issuer or the Lenders under the
Credit Agreement or any other Operative Document; provided, however, that
whenever the term "Material Adverse Effect" is used in a representation or
warranty made by the Borrower,
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such representation or warranty as it relates to clause (y) above shall be
deemed to have been made to the Borrower's Knowledge.
"Material Main Project Document" means the Mall Project Ground Lease, the
Music Project Ground Lease, the Reciprocal Easement Agreement, the Site Work
Agreement, the Common Parking Area Use Agreement, the Energy Project Ground
Lease, the Energy Project Service Agreement, the Theater Lease, the Design/Build
Contract, the Fluor Guaranty, the Project Management Agreement, the Development
Agreement any other material agreement, certificate, document or Instrument
delivered in connection with or by the Borrower and any other Person to any
Material Main Project document and such other agreements, whether or not
specifically mentioned herein or therein and, without duplication, any Main
Project Document with a total contract amount in excess of $2,500,000.
"Membership Interest" means, relative to any Person which is a limited
liability company, a membership interest or a limited liability company
interest, as the case may be, of such Person.
"Merrill Lynch" is defined in the preamble of the Credit Agreement.
"Minimum Fixed Charge Coverage Ratio" means, as of the close of any Fiscal
Quarter, commencing with the close of the Fiscal Quarter in which the Conversion
Date occurs, the ratio computed for the period consisting of such Fiscal Quarter
(or such shorter period of any Fiscal Quarter after the occurrence therein of
the Conversion Date and each of the three immediately prior Fiscal Quarters (or
such lesser number of Fiscal Quarters to have closed since the Conversion Date)
of:
(a) EBITDA (for all such Fiscal Quarters or such shorter period, as
the case may be and determined for any period ending on or prior to the
first anniversary of the Conversion Date, consistently with the proviso to
the definition of "EBITDA");
to
(b) the sum (for all such Fiscal Quarters or such shorter period, as
the case may be) of
(i) Interest Expense;
plus
(ii) scheduled principal repayments of the Loans pursuant to
clauses (b) and (c) of Section 3.1.1 of the Credit Agreement after
giving effect to any reductions in such scheduled principal
repayments attributable to any optional or
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mandatory prepayments of the Loans and scheduled payments made with
respect to the FF&E Financing;
plus
(iii) the amount of all federal, state and local income taxes
(whether paid in cash or deferred) of the Borrower paid by the
Borrower or, if the Borrower is treated as a pass-through entity or
is not treated as a separate entity for United States federal income
tax purposes, the amount of Restricted Payments made by the Borrower
in accordance with clause (c) of Section 7.2.6 of the Credit
Agreement, subject to the terms thereof, in each case, in cash
during such Fiscal Quarters;
plus
(iv) Restricted Payments of the types described in clause (d)
of Section 7.2.6 of the Credit Agreement made in cash during such
Fiscal Quarters;
plus
(v) Capital Expenditures of the Borrower actually made or
reserved during all such Fiscal Quarters pursuant to Section 7.2.7
of the Credit Agreement;
provided, however, that in computing the Minimum Fixed Charge Coverage Ratio for
any such period ending on or prior to the first anniversary of the Conversion
Date, the amount determined pursuant to clause (b) shall equal the product of
(x) the sum of the amounts determined pursuant to clause (b) for such period
multiplied by (y) a fraction, the numerator of which is equal to 365 and the
denominator of which is equal to the number of days that have elapsed in such
period.
"Moody's" means Moody's Investors Service, Inc., a Delaware corporation,
or any successor thereto.
"Music Investment Prepayment" is defined in clause (d) of Section 3.1.1 of
the Credit Agreement.
"Music Project" is defined in clause (c) of the fourth recital of the
Credit Agreement.
"Music Project Easement" means any easement appurtenant, easement in
gross, license agreement or other right running for the benefit of Aladdin Music
or appurtenant to the Music Project Parcel, including those certain easements
and licenses described in the Reciprocal Easement Agreement and each Title
Policy.
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"Music Project Ground Lease" means, on any date, the Lease, as originally
in effect on the Effective Date, between the Borrower and Aladdin Music and as
thereafter from time to time amended, supplemented, amended and restated or
otherwise modified in accordance with the terms of the Credit Agreement.
"Music Project Parcel" means the portion of the Site described on Exhibit
N-5 to the Credit Agreement, together with the Music Project Easements.
"Music Project Parcel Creation Date" means the date on which the Music
Project Parcel is created in accordance with clause (c) of Section 7.1.19 of the
Credit Agreement.
"Net Distribution Amount" means, for any period, the amount of fees paid
to AMH under any keep-well agreement relating to the Music Project and then paid
as distributions in cash to the Borrower by AMH to the extent permitted
thereunder.
"Net Income" means, for any period, the aggregate of all amounts
(including extraordinary losses) which, in accordance with GAAP, would be
included in determining net income on the financial statements of the Borrower
for such period (excluding, however, (x) all amounts in respect of any
extraordinary gains and any non-cash income and (y) net income of any
Subsidiary, other than any Net Distribution Amount paid in cash to the Borrower
during such period).
"Net Worth" means the net worth of the Borrower determined in accordance
with GAAP.
"Nevada Gaming Authority" means the Nevada Gaming Commission, the Nevada
State Gaming Control Board or the Clark County Liquor and Gaming Licensing
Board.
"Nevada Gaming Law" means the Nevada Gaming Control Act, as codified in
Chapter 463 of the NRS, as amended from time to time, and the regulations of the
Nevada Gaming Commission promulgated thereunder, as amended from time to time,
and Clark County Code Sections 8.04.010 to 8.04.310 and 8.20.010 to 8.20.580, as
amended from time to time.
"Non-Defaulting Lender" means and includes each Lender other than a
"Defaulting Lender".
"Note" means a Term A Note, a Term B Note, a Term C Note or a Registered
Note.
"Note Construction Disbursement Account" is defined in the Holdings
Collateral Account Agreement.
"Noteholder Completion Guaranty" means, on any date, the Noteholder
Completion Guaranty, as originally in effect on the Effective Date, by the
Completion Guarantors in favor of the Discount Note Indenture Trustee (for the
benefit of the Discount Noteholders) as thereafter
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from time to time amended, supplemented, amended and restated or otherwise
modified in accordance with the terms of the Credit Agreement.
"NRS" means Nevada Revised Statutes.
"Obligations" means (x) all loans, advances, debts, liabilities and
obligations, howsoever arising, owed by the Borrower under the Credit Agreement
to any Lender of every kind and description (whether or not evidenced by any
note or instrument and whether or not for the payment of money), direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, pursuant to the terms of the Disbursement Agreement, any of
the Loan Documents or any of the other Operative Documents, including all
interest, fees, charges, expenses, attorneys' fees, consultants' fees and
accountants' fees chargeable to the Borrower in connection with such Person's
dealings with the Borrower and payable by the Borrower under the Credit
Agreement or thereunder; (y) any and all sums advanced by the Lenders in order
to preserve the Main Project Security or preserve any Secured Parties' security
interest in the Main Project Security, including all protective advances; and
(z) in the event of any proceeding for the collection or enforcement of, or any
"working out" of, the Obligations after an Event of Default shall have occurred
and be continuing, the reasonable expenses of retaking, holding, preparing for
sale or lease, selling or otherwise disposing of or realizing on the Main
Project Security, or of any exercise by any Secured Party of its rights under
the Operative Documents, together with reasonable attorneys' fees and court
costs.
"Obligor" means, as the context may require, the Borrower, each other
Aladdin Party, LCNI, London Clubs Holdings, London Clubs, each Sponsor, each
Completion Guarantor and each other Person (other than the Agents, the Issuer or
any Lender) to the extent such Person is obligated under the Credit Agreement or
any other Operative Document.
"Ongoing Investment" is any Investment listed in Item 7.2.5(a) on the
Disclosure Schedule.
"On Schedule Certificate" means a certificate in the form of Exhibit AA to
the Credit Agreement.
"Opening Condition" means, collectively, the following:
(a) Substantial Completion shall have occurred;
(b) the Hotel/Casino shall have received a Main Project Certificate
of Occupancy from the Building Department (and a copy of such certificate
shall have been delivered to the Administrative Agent);
(c) each remaining Main Project Punchlist Item with respect to the
Hotel/Casino and the completion thereof shall be such that it will not
interfere with or disrupt the
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operation of the Main Project for its intended purposes or detract from
the aesthetic appearance of the Main Project other than to a de minimis
extent, as reasonably determined by the Owner Representative and confirmed
by the Construction Consultant;
(d) the failure to complete each remaining Main Project Punchlist
Item would not interfere with or disrupt the operation of the Main Project
for its intended purposes or detract from the aesthetic appearance of the
Main Project other than to a de minimis extent, as reasonably determined
by the Owner Representative and confirmed by the Construction Consultant;
and
(e) the Borrower shall have available a fully trained staff to
operate the Hotel/Casino in accordance with first-class industry standards
for a hotel/casino operation of similar size and location.
"Opening Date" means the date on which all of the Opening Conditions are
satisfied.
"Operating" means the first time that (t) all Gaming Licenses have been
granted and are not then revoked or suspended, (u) all Liens (other than
Permitted Liens) related to the development, construction, and equipping of the
Main Project have been paid or, if payment is not yet due or if such payment is
contested in good faith by Borrower, either (1) sufficient funds remain in the
Construction Note Disbursement Account to discharge such Liens or (2) such Liens
have been bonded, (v) the Construction Consultant, the Design/Builder and the
Architect of Record shall have delivered one or more certificates to the
Administrative Agent each certifying that the Main Project is Complete in all
material respects in accordance with the Plans and Specifications and all
applicable Legal Requirements, (w) the Main Project is in a condition (including
installation of FF&E) to receive invitees in the ordinary course of business,
(x) gaming and other operations in accordance with applicable Legal Requirements
are open to the general public and are being conducted at the Hotel/Casino, (y)
a Main Project Certificate of Occupancy has been issued for the Main Project by
the Building Department and (z) a notice of completion of the Main Project has
been duly recorded.
"Operating Costs" means all actual cash costs incurred by the Borrower and
related to the operation of the Main Project or any portion thereof in the
ordinary course of business, including costs incurred for labor, consumables,
utility services and all other operation-related costs; provided, however, that
(x) Operating Costs shall not include non-cash charges (including depreciation
and amortization) and (y) Debt Service shall constitute Operating Costs from and
after the Conversion Date but not prior to such date.
"Operative Document" means any Loan Document or Main Project Document.
"Organizational Document" means, relative to any Obligor, as applicable,
its certificate or articles of incorporation, by-laws, certificate of
partnership, partnership agreement, certificate of formation, articles of
organization, operating agreement, limited liability company or
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operating agreement and all shareholder agreements, voting trusts and similar
arrangements applicable to any of such Obligor's partnership interests, limited
liability company interests or authorized shares of capital stock.
"Outside Completion Deadline" means the date which is 28 months following
the Effective Date, time being of the essence; provided, however, if a Force
Majeure Event occurs, then the Borrower shall be permitted to extend the
Completion Date for up to one year subject to the satisfaction by the Borrower
of the conditions to such extension as set forth in the definition of "Force
Majeure Event".
"Owner Representative" means Tishman Construction Corporation of Nevada.
"Participant" is defined in Section 10.11.2 of the Credit Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Pension Plan" means a "pension plan", as such term is defined in Section
3(2) of ERISA, which is subject to Title IV of ERISA (excluding, however, a
multiemployer plan as defined in Section 4001(a)(3) of ERISA), and to which the
Borrower or any corporation, trade or business that is, along with the Borrower,
a member of a Controlled Group, may have liability, including any liability by
reason of having been a substantial employer within the meaning of Section 4063
of ERISA at any time during the preceding five years, or by reason of being
deemed to be a contributing sponsor under Section 4069 of ERISA.
"Percentage" means, relative to any Lender, the applicable percentage
relating to Term A Loans, Term B Loans or Term C Loans, as the case may be, as
set forth opposite its signature to the Credit Agreement under the applicable
column heading or as set forth in a Lender Assignment Agreement under the
applicable column heading, as such percentage may be adjusted from time to time
pursuant to Lender Assignment Agreement(s) executed by such Lender and its
Assignee Lender(s) and delivered pursuant to Section 10.11.1 of the Credit
Agreement. A Lender shall not have any Commitment to make Term A Loans, Term B
Loans or Term C Loans, as the case may be, if its percentage under the
applicable column heading is zero percent (0%).
"Permit" means any material building, construction, land use,
environmental or other permit, license, franchise, approval, consent and
authorization (including central bank and planning board approvals from
applicable Governmental Instrumentalities and approvals required under the
Nevada Gaming Law) required for or in connection with the construction,
ownership, use, occupation and operation of the Main Project and the
transactions provided for in the Credit Agreement and the other Operative
Documents.
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"Permitted Encumbrance" means any encumbrance against all or a portion of
the Site as set forth in Exhibit BB to the Credit Agreement.
"Permitted Exception" means any exception to title to all or a portion of
the Site as set forth in Exhibit CC to the Credit Agreement.
"Permitted Lien" means any of the following types of Liens (excluding,
however, any such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the
Internal Revenue Code or by ERISA, any such Lien relating to or imposed in
connection with any Environmental Claim and any such Lien expressly prohibited
by any applicable terms of any of the Operative Documents or the Discount Note
Indenture):
(a) Liens in favor of the Borrower;
(b) Liens to secure the performance of statutory obligations, surety
or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business or in the construction of the
Main Project; provided, however, that the Borrower has obtained a title
insurance endorsement insuring against losses arising therewith or, if
such Lien arises after completion of the Main Project, the Borrower has
bonded such Lien within a reasonable time after becoming aware of the
existence of such Lien;
(c) Liens securing the Obligations under the Operative Documents;
(d) Liens existing on the Effective Date and set forth in Item 7.2.3
of the Disclosure Schedule;
(e) (x) Liens for Impositions or (y) statutory Liens of landlords,
and carriers', warehousemen's, mechanics', suppliers', materialmen's,
repairmen's or other similar Liens arising in the ordinary course of
business or in the construction of the Main Project, in the case of each
of items (x) and (y), with respect to amounts that either (1) are not yet
delinquent or (2) are being diligently contested in good faith by
appropriate proceedings, provided, however, that, in each case, any
reserve or other appropriate provision as shall be required in conformity
with GAAP shall have been made therefor;
(f) easements, rights-of-way, avigational servitude, restrictions,
minor defects or irregularities in title and other similar charges or
encumbrances which do not interfere in any material respect with the
ordinary conduct of business of the Borrower;
(g) Liens created by the Reciprocal Easement Agreement;
(h) Liens created by the Disbursement Agreement;
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(i) licenses of patents, trademarks and other intellectual property
rights granted by the Borrower in the ordinary course of business;
(j) any judgment attachment or judgment Lien not constituting an
Event of Default;
(k) subject to the terms of the GECC Intercreditor Agreement, Liens
to secure all obligations under the FF&E Financing; provided, however,
that (x) the principal amount of such Indebtedness does not exceed the
cost (including sales and excise taxes, installation and delivery charges
and other direct costs of, and other direct expenses paid or charged in
connection with, such purchase) of the FF&E purchased or leased with the
proceeds thereof and (y) the aggregate principal amount of such
Indebtedness including any Permitted Refinancing Indebtedness incurred to
refinance or replace any Indebtedness secured by such Lien does not exceed
$80,000,000 (including obligations characterized as operating leases or
other off-balance sheet financing arrangements) outstanding at any time;
(l) Liens securing obligations arising under the Contribution
Agreement and between the parties thereto so long as such Liens cannot be
enforced by the holder thereof until all Obligations have been paid in
cash in full, all Letters of Credit have been terminated or expired and
all Commitments have terminated provided, however, that to the extent any
distributions on any relevant Capital Stock or Membership Interests, as
the case may be, are permitted to be made to the shareholders or members,
as the case may be, in respect thereof under the Loan Documents, such
holder shall be permitted to enforce such Liens (including by causing the
redirection of any such distribution to such holder);
(m) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, trade contracts, performance and return-of-money
bonds and other similar obligations (excluding, however, obligations for
the payment of borrowed money), incurred in the ordinary course of
business so long as no foreclosure, sale or similar proceedings have been
commenced with respect to any portion of the Main Project Security on
account thereof, (x) for amounts not yet overdue or (y) for amounts that
are overdue and that (in the case of any such amounts overdue for a period
in excess of 5 days) are being contested in good faith by appropriate
proceedings, so long as (1) such reserves or other appropriate provisions,
if any, as shall be required by generally accepted accounting principles
shall have been made for any such contested amounts, and (2) in the case
of a Lien with respect to any portion of the Main Project Security, such
contest proceedings conclusively operate to stay the sale of any portion
of the Main Project Security on account of such Lien;
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(n) Liens for taxes, assessments or governmental charges or claims
the payment of which is not, at the time due and payable or which is being
contested in good faith by appropriate governmental proceedings promptly
instituted and diligently contested, so long as (x) such reserve or other
appropriate provision, if any, as shall be required in conformity with
generally accepted accounting principles shall have been made therefor
through an allocation in the Trade Detail Report and (y) in case of any
charge or claim which has or may become a Lien against any of the Main
Project Security, such contest proceedings conclusively operate to stay
the sale of any portion of the Main Project Security to satisfy such
charge or claim;
(o) Liens created by the Common Parking Area Use Agreement; and
(p) Liens created pursuant to Permitted Refinancing Indebtedness
which is incurred to refinance Indebtedness which has been secured by a
Lien and is permitted under Section 7.2.2 of the Credit Agreement and
which has been incurred in accordance with such Section; provided,
however, that such Liens do not extend to cover any property or assets of
the Borrower not already securing the Indebtedness so refinanced.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Borrower issued in exchange for, or the net proceeds of which are used to
extend, refinance, renew, replace, defease or refund other Indebtedness of the
Borrower; provided, however, that (u) the principal amount of such Permitted
Refinancing Indebtedness does not exceed the principal amount plus accrued
interest on the Indebtedness so extended, refinanced, renewed, replaced,
defeased or refunded (plus the amount of reasonable expenses incurred in
connection therewith), (v) such Permitted Refinancing Indebtedness has a final
maturity date later than the final maturity date of, and has a Weighted Average
Life to Maturity equal to or greater than the Weighted Average Life to Maturity
of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded, (w) such Indebtedness is incurred by the Borrower as the Obligor on
the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded, (x) the security, if any, for the Permitted Refinancing Indebtedness
shall be the same as that for the Indebtedness being refinanced (except to the
extent that less security is granted to holders of such refinancing
Indebtedness), (y) the holders of the Permitted Refinancing Indebtedness are not
afforded covenants, defaults, rights or remedies more burdensome to the obligor
or obligors than those contained in the Indebtedness being refinanced and (z)
the Permitted Refinancing Indebtedness is subordinated to the same degree, if
any, as the Indebtedness being refinanced.
"Person" means any natural person, corporation, limited liability company,
partnership, joint venture, joint stock company, firm, association, trust or
unincorporated organization, government, governmental agency, Governmental
Instrumentality, court or any other legal entity, whether acting in an
individual, fiduciary or other capacity.
"Plan" means any Pension Plan or Welfare Plan.
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"Planet Hollywood" means Planet Hollywood International, Inc.
"Plans and Specifications" means all plans, specifications, design
documents, schematic drawings and related items for the design, architecture and
construction of the Main Project that are listed on Schedule VII to the Credit
Agreement, as the same may be (x) finalized in a manner that reflects a natural
evolution of their status on the date of the Credit Agreement and in a manner
consistent with the standards set forth in Section 7.2.17 of the Credit
Agreement and (y) amended in accordance with Section 7.2.17 of the Credit
Agreement.
"Pledge Agreement" means, as the context may require, the Holdings Pledge
Agreement, the LCNI Pledge Agreement, the Sommer Enterprises Pledge Agreement,
the AHL Pledge Agreement, the Enterprises Pledge Agreement, the Borrower Pledge
Agreement or the AMH Pledge Agreement.
"Pledged Entity" means, at any time, each Person in respect of which the
Lenders have been granted, at such time, a security interest in and to, or a
pledge of, any of the issued and outstanding interests or shares of Capital
Stock of such Person.
"Preferred Stock" means any Equity Interest with preferential right of
payment of dividends or distributions, as applicable, or upon liquidation,
dissolution or winding up.
"Pre-Opening Expense" means any expense of the type listed in Schedule
VIII to the Credit Agreement.
"Pre-Opening Revenues" means all operating revenues received by the
Borrower with respect to the Main Project prior to the Opening Date.
"Process Agent" is defined in Section 10.14 of the Credit Agreement.
"Project Management Agreement" means, on any date, the Project Management
Agreement, as originally in effect on the Effective Date, between AHL and the
Owner Representative and as thereafter from time to time amended, supplemented,
amended and restated or otherwise modified in accordance with the terms of the
Credit Agreement.
"Project Party" means the Borrower, AHL, Sommer Enterprises, Capital,
Holdings, London Clubs, LCNI, the Design/Builder or Fluor.
"Quarterly Payment Date" means the last Business Day of each March, June,
September and December.
"Rate Protection Agreement" means any interest rate swap, cap, collar or
similar agreement entered into by the Borrower in respect of the Loans pursuant
to the terms of the Credit Agreement under which the counterparty to such
agreement is (or, at the time such Rate
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Protection Agreement was entered into, was) a Lender or an Affiliate of a Lender
reasonably acceptable to the Administrative Agent.
"Real Property" means, relative to any Person, such Person's present and
future right, title and interest (including any leasehold estate) in
(a) any plots, pieces or parcels of land;
(b) any improvements, buildings, structures and fixtures now or
hereafter located or erected thereon or attached thereto of every nature
whatsoever;
(c) any other interests in property constituting appurtenances to
the Site, or which hereafter shall in any way belong, relate or be
appurtenant thereto; and
(d) all other rights and privileges thereunto belonging or
appertaining and all extensions, additions, improvements, betterments,
renewals, substitutions and replacements to or of any of the rights and
interests described in clause (c).
"Realized Savings" means:
(a) the portion of any decrease to the Guaranteed Maximum Price
retained or to be retained by the Borrower in accordance with the
provisions of Attachment H to the Design/Build Contract in the "Cost of
the Work" (as defined in Section 3 of Attachment G to the Design/Build
Contract) contemplated by a Line Item but only to the extent that the
Guaranteed Maximum Price has been reduced as a result of such decrease in
the anticipated "Cost of the Work" as approved in writing by the
Design/Builder and such reduction is confirmed by the Construction
Consultant;
(b) with respect to the Construction Period Interest Line Item, a
decrease in the anticipated cost of construction period interest resulting
from (x) a decrease in the interest rates payable by the Borrower prior to
the date which is six months after the Conversion Date as determined by
the Administrative Agent with the reasonable concurrence of the Borrower
taking into account the current and future anticipated interest rates and
the anticipated times and amounts of draws under the Bank Credit Facility
for the payment of Main Project Costs or (y) the anticipated Conversion
Date being earlier than the date set therefor in the Construction
Benchmark Schedule as determined by the Owner Representative with the
reasonable concurrence of the Construction Consultant; and
(c) with respect to any other Line Item, the amount by which the
total cost allocated to such Line Item exceeds the total cost incurred by
the Borrower to complete all aspects of the Work contemplated by such Line
Item which amount shall not be established until the Borrower has actually
completed 90% of all such Work;
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in each case, which is documented by the Borrower in a Realized Savings
Certificate substantially in the form of Exhibit W to the Credit Agreement, duly
executed and completed with all exhibits and attachments thereto.
"Reciprocal Easement Agreement" means, on any date, the Construction,
Operation and Reciprocal Easement Agreement, as originally in effect on the
Effective Date, by and among the Borrower, Aladdin Bazaar and AMH and as
thereafter from time to time amended, supplemented, amended and restated or
otherwise modified in accordance with the terms of the Credit Agreement.
"Register" is defined in clause (b) of Section 2.8 of the Credit
Agreement.
"Registered Note" is defined in Section 2.8 of the Credit Agreement, in
the form of Exhibit A-4 to the Credit Agreement (as such promissory note may be
amended, endorsed or otherwise modified from time to time).
"Release" means a "release", as such term is defined in CERCLA.
"Remaining Costs" means, without duplication, the sum of (w) the costs
required to achieve Final Completion plus (x) the Retainage Amounts to be paid
to Persons who have supplied labor or materials in connection with such line
item, plus (y) the amount required to pay fees and interest at the maximum rate
of interest set forth in the Loan Documents (after giving effect to the Rate
Protection Agreement) through the date which is six months after the Conversion
Date plus (z) the Required Minimum Contingency.
"Required Lenders" means, at any time,
(a) Non-Defaulting Lenders holding at least 66 2/3% of the sum of
the aggregate outstanding principal amount of the Loans then held by such
Lenders plus the participation interests of such Lenders in the Letter of
Credit Outstandings, or
(b) if no Loans or Letter of Credit are then outstanding, Lenders
having at least 66 2/3% of the Commitments;
provided, however, that (x) amendments affecting only one class of Lenders (with
a class for each of the Term A Lenders, the Term B Lenders and the Term C
Lenders) will require the approval of the Non-Defaulting Lenders holding 66 2/3%
or more of the principal amount of the Loans, Letters of Credit or, if
applicable, Commitments for such class and (y) the consent of all of the
Non-Defaulting Lenders in the same class and of all Non-Defaulting Lenders in
all classes shall be required with respect to the matters set forth in Section
10.1 of the Credit Agreement.
"Required Minimum Contingency" means (w) during the first month after the
Effective Date, no less than $24,000,000, (x) during the second month after the
Effective Date, no less than
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$23,000,000, (y) during the third month after the Effective Date, no less than
$22,000,000 and (z) thereafter the product of (1) $25,000,000 reduced by (2) the
$25,000,000 multiplied by the percentage completed in respect of such Line Item
Category on the date that the Advance is made.
"Required Scope Change Approval" means, relative to each proposed Scope
Change, the consent of the Administrative Agent.
"Restricted Payment" is defined in clause (b) of Section 7.2.6 of the
Credit Agreement.
"Retainage Amount" means, at any given time, amounts which have accrued
and are owing under the terms of the Design/Build Contract, a Contract or a
Subcontract, as the case may be, for work or services already provided but which
at such time (and in accordance with the terms of the Design/Build Contract, the
Contract or Subcontract, as the case may be) are being withheld from payment to
the Design/Builder, a Contractor or a Subcontractor, as the case may be, until
certain subsequent events (e.g., completion benchmarks) have been achieved under
the Design/Build Contract or relevant Contract or Subcontract.
"Reviewing Accountant" means Arthur Andersen LLP or any nationally
recognized firm of independent public accountants subsequently selected by the
Borrower with the consent of the Administrative Agent from time to time (which
shall not be unreasonably withheld or delayed), as auditors of the Borrower.
"S&P" means Standard & Poor's Ratings Group, Inc., a New York corporation,
or any successor thereto.
"Salle Privee Agreement" means, on any date, the Salle Privee Agreement,
as originally in effect on the Effective Date, between the Borrower, LCNI and
London Clubs and as thereafter from time to time amended, supplemented, amended
and restated or otherwise modified in accordance with the terms of the Credit
Agreement.
"Scheduled Amortization" is defined in clause (b) of Section 3.1.1 of the
Credit Agreement.
"Scope Change" means any change in the "Services" or "Work".
"Scotiabank" is defined in the preamble of the Credit Agreement.
"Scotiabank Fee Letter" means the confidential letter agreement, dated
December 4, 1997, among the Borrower, the Sponsors and Scotiabank.
"SEC" means the Securities and Exchange Commission.
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"Secured Party" means the Lenders, the Issuer, the Agents, each
counterparty to a Rate Protection Agreement that is (or at the time such Rate
Protection Agreement was entered into, was) a Lender or an Affiliate thereof
reasonably acceptable to the Administrative Agent and, in each case, each of
their respective successors, transferees and assigns.
"Security Agreement" means, on any date, the Security Agreement executed
and delivered by an Authorized Representative of the Borrower pursuant to
Section 5.1.5 of the Credit Agreement, as originally in effect on the Closing
Date, in substantially the form of Exhibit F to the Credit Agreement and as
thereafter from time to time amended, supplemented, amended and restated or
otherwise modified.
"Services" is defined in Section 1.7 of the Design/Build Contract.
"Servicing and Collateral Account Agreement" means, on any date, the
Servicing and Collateral Account Agreement, as originally in effect on the
Closing Date, among the Disbursement Agent, the Borrower and the Servicing Agent
and as thereafter from time to time amended, supplemented, amended and restated
or otherwise modified in accordance with the terms of the Credit Agreement.
"Shoulder Space" means the property and space described in Exhibit N-6 to
the Credit Agreement.
"Site" is defined in the fourth recital of the Credit Agreement and is
more fully described in Exhibit N-1 to the Credit Agreement.
"Site Easement" means any easement appurtenant, easement in gross, license
agreement and other right running for the benefit of the Borrower, the Main
Project, the Mall Project and the owner of the Mall Project, the Music Project
and the owner of the Music Project, the Energy Project and the lessee of the
Energy Project or appurtenant to the Site, including those certain easements and
licenses described in the Title Policy.
"Site Work Agreement" means, on any date, the Site Work Development and
Construction Agreement, as originally in effect on the Effective Date, among the
Borrower, AHL and Aladdin Bazaar and as thereafter from time to time amended,
supplemented, amended and restated or otherwise modified in accordance with the
terms of the Credit Agreement.
"Solvency Certificate" means a solvency certificate to be executed and
delivered by the chief financial or accounting Authorized Representative of the
Borrower substantially in the form of Exhibit P to the Credit Agreement.
"Solvent" means, relative to any Person and its Subsidiaries on a
particular date, that on such date (w) the fair value of the property of such
Person and its Subsidiaries on a consolidated basis is greater than the total
amount of liabilities, including contingent liabilities, of such Person
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and its Subsidiaries on a consolidated basis, (x) the present fair salable value
of the assets of such Person and its Subsidiaries on a consolidated basis is not
less than the amount that will be required to pay the probable liability of such
Person and its Subsidiaries on a consolidated basis on its debts as they become
absolute and matured, (y) such Person does not intend to, and does not believe
that it or its Subsidiaries will, incur debts or liabilities beyond the ability
of such Person and its Subsidiaries to pay as such debts and liabilities mature
and (z) such Person and its Subsidiaries on a consolidated basis are not engaged
in a business or transaction, and such Person and its Subsidiaries on a
consolidated basis are not about to engage in business or a transaction, for
which the property of such Person and its Subsidiaries on a consolidated basis
would constitute an unreasonably small capital.
"Sommer Enterprises" means Sommer Enterprises, LLC, a Nevada
limited-liability company.
"Sommer Enterprises Pledge Agreement" means, on any date, the Pledge
Agreement executed and delivered by an Authorized Representative of Sommer
Enterprises pursuant to clause (c) of Section 5.1.3 of the Credit Agreement, as
originally in effect on the Closing Date, in substantially the form of Exhibit
E-7 to the Credit Agreement and as thereafter from time to time amended,
supplemented, amended and restated or otherwise modified.
"Specified Equipment" means the portion of the new FF&E together with all
improvements and/or additions thereto covered by an FF&E Lease and financed by a
portion of the FF&E Financing.
"Sponsor" means AHL or London Clubs.
"Stated Amount" of each Letter of Credit means the total amount available
to be drawn under such Letter of Credit upon the issuance thereof.
"Stated Maturity Date" means
(a) with respect to all Term A Loans, the date which is the seventh
anniversary of the Closing Date;
(b) with respect to all Term B Loans, the date which is 8.5 years
after the Closing Date; and
(c) with respect to all Term C Loans, the tenth anniversary of the
Closing Date.
"Subcontract" means a contract between the Design/Builder and a
Subcontractor which has been entered into in accordance with the Design/Build
Contract.
"Subcontractor" is defined in the Design/Build Contract.
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"Subsidiary" means, relative to any Person, any corporation, partnership
or other business entity of which more than 50% of the outstanding capital stock
(or other ownership interest) having ordinary voting power to elect the board of
directors, managers or other voting members of the governing body of such Person
(irrespective of whether at the time Capital Stock (or other ownership interest)
of any other class or classes of such Person shall or might have voting power
upon the occurrence of any contingency) is at the time directly or indirectly
owned by such Person, by such Person and one or more other Subsidiaries of such
Person, or by one or more other Subsidiaries of such Person. Except as otherwise
indicated herein, references to Subsidiaries refer to Subsidiaries of the
Borrower.
"Substantial Completion" means that (x) the conditions set forth in the
definition of "Completion" have occurred, (y) "Substantial Completion" (as such
is defined in Section 31.8 of the General Conditions annexed to the Design/Build
Contract as Attachment D) has occurred and (z) a Main Project Certificate of
Occupancy has been issued and is outstanding for the Hotel/Casino.
"Survey" means, collectively, the surveys required by Section 3.1.24 of
the Disbursement Agreement.
"Syndication Agent" is defined in the preamble of the Credit Agreement.
"Tax" means any federal, state, local, foreign or other tax, levy, impost,
fee, assessment or other government charge, including income, estimated income,
business, occupation, franchise, property, payroll, personal property, sales,
transfer, use, employment, commercial rent, occupancy, franchise or withholding
taxes, and any premium, including interest, penalties and additions in
connection therewith.
"Tax Amount" means, relative to any period, without duplication, the
increase in the cumulative United States federal, state and local income tax
liability of the holders of Equity Interests in the Borrower (or if the holder
is a pass-though entity for United States income tax purposes, the direct or
indirect holders of its equity interests subject to United States, state and
local income tax) in respect of such interests for such period, plus any
additional amounts payable to such holders for taxes arising from ownership of
such Equity Interests.
"Tenant Improvement" means (x) the portion of the construction to be
performed by or on behalf of the Borrower in the interior of the Main Project
pursuant to a lease to adapt the same for the initial use and occupancy by the
tenant under such lease or (y) if a tenant under a Lease undertakes to complete
the work to the portion of the Main Project covered by such Lease, any
allowances or payments advanced to such Person by the Borrower.
"Term A Lender" means any Lender which has made a Term A Loan Commitment
or holds a Term A Loan.
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"Term A Loan" is defined in Section 2.1.1 of the Credit Agreement.
"Term A Loan Commitment" means the aggregate principal amount of Term A
Loans which the Term A Lenders are obligated to make pursuant to Section 2.1.1
of the Credit Agreement. The Term A Loan Commitment shall not exceed
$136,000,000.
"Term A Loan Commitment Amount" means, on any date, relative to any Term A
Lender, the portion of the Term A Loan Commitment of such Term A Lender reduced
by the principal amount of any Term A Loans made by such Term A Lender as of
such date. The portion of the Term A Loan Commitment of each Term A Lender is
set forth below such Term A Lender's signature to the Credit Agreement or in a
Lender Assignment Agreement.
"Term A Loan Commitment Fee" is defined in Section 3.3.1 of the Credit
Agreement.
"Term A Loan Commitment Termination Date" means the earlier of
(a) the Term B and Term C Loan Commitment Termination Date (if the
Term B Loans and Term C Loans have not been made on or prior to such
date);
(b) the Conversion Date; and
(c) the date on which any Commitment Termination Event occurs.
Upon the occurrence of any event described in clause (a) or (b), the Term A Loan
Commitments shall terminate automatically and without any further action.
"Term A Note" means, on any date, a promissory note of the Borrower
payable to any Term A Lender, in the form of Exhibit A-1 to the Credit Agreement
(as such promissory note may thereafter from time to time be amended,
supplemented, amended and restated, endorsed or otherwise modified), evidencing
the aggregate Indebtedness of the Borrower to such Term A Lender resulting from
outstanding Term A Loans, and also means all other promissory notes accepted
from time to time in substitution or replacement therefor or renewal thereof.
"Term B and Term C Loan Commitment Fee" is defined in Section 3.3.1 of the
Credit Agreement.
"Term B and Term C Loan Commitment Termination Date" means the earlier of
(a) February 27, 1998; and
(b) the date on which any Commitment Termination Event occurs.
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Upon the occurrence of any event described in clause (a) or (b), the Term B Loan
Commitments and the Term C Loan Commitments shall terminate automatically and
without any further action.
"Term B Lender" means any Lender which has made a Term B Loan Commitment
or holds a Term B Loan.
"Term B Loan" is defined in clause (a) of Section 2.1.3 of the Credit
Agreement.
"Term B Loan Commitment" means the aggregate principal amount of Term B
Loans which the Term B Lenders are obligated to make pursuant to clause (b) of
Section 2.1.3 of the Credit Agreement. The Term B Loan Commitment shall not
exceed $114,000,000.
"Term B Loan Commitment Amount" means, on any date, relative to any Term B
Lender, the portion of the Term B Loan Commitment of such Term B Lender reduced
by the principal amount of any Term B Loans made by such Term B Lender as of
such date. The portion of the Term B Loan Commitment of each Term B Lender is
set forth below such Term B Lender's signature to the Credit Agreement or in a
Lender Assignment Agreement.
"Term B Note" means, on any date, a promissory note of the Borrower
payable to any Term B Lender, in the form of Exhibit A-2 to the Credit Agreement
(as such promissory note may thereafter from time to time be amended,
supplemented, amended and restated, endorsed or otherwise modified), evidencing
the aggregate Indebtedness of the Borrower to such Term B Lender resulting from
outstanding Term B Loans, and also means all other promissory notes accepted
from time to time in substitution or replacement therefor or renewal thereof.
"Term C Lender" means any Lender which has made a Term C Loan Commitment
or holds a Term C Loan.
"Term C Loan" is defined in clause (b) of Section 2.1.3 of the Credit
Agreement.
"Term C Loan Commitment" means the aggregate principal amount of Term C
Loans which the Term C Lenders are obligated to make pursuant to clause (c) of
Section 2.1.3 of the Credit Agreement. The Term C Loan Commitment shall not
exceed $160,000,000.
"Term C Loan Commitment Amount" means, on any date, relative to any Term C
Lender, the portion of the Term C Loan Commitment of such Term C Lender reduced
by the principal amount of any Term C Loans made by such Term C Lender as of
such date. The portion of the Term C Loan Commitment of each Term C Lender is
set forth below such Term C Lender's signature to the Credit Agreement or in a
Lender Assignment Agreement.
"Term C Note" means, on any date, a promissory note of the Borrower
payable to any Term C Lender, in the form of Exhibit A-3 to the Credit Agreement
(as such promissory note may thereafter from time to time be amended,
supplemented, amended and restated, endorsed or
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otherwise modified), evidencing the aggregate Indebtedness of the Borrower to
such Term C Lender resulting from outstanding Term C Loans, and also means all
other promissory notes accepted from time to time in substitution or replacement
therefor or renewal thereof.
"Theater" is defined in clause (d) of the fourth recital of the Credit
Agreement.
"Theater Lease" means, on any date, the Lease, to be entered into between
the Borrower and Aladdin Music covering the Theater Space as the same may be
amended, supplemented, amended and restated, replaced or otherwise modified from
time to time in accordance with the terms of the Credit Agreement.
"Theater Renovation Completion" means that each of the following has
occurred:
(a) the renovation of the Theater has been completed substantially
in accordance with the Credit Agreement, the Plans and Specifications, the
provisions of the Reciprocal Easement Agreement applicable to the Theater
and all of the other Operative Documents to the extent that the
development, renovation, use or operation of the Theater are affected
thereby, except for the Main Project Punchlist Items applicable to the
Theater and in substantial compliance with all Legal Requirements
pertaining to the renovation of the Theater so as to allow the Theater to
be utilized for its intended purpose;
(b) reasonable and safe means of access and facilities necessary for
the use and occupancy of the Theater have been installed and are
operational including corridors, elevators, stairways, heating,
ventilation, air conditioning, sanitary, water and electrical facilities
and all security systems and life safety systems required by the Plans and
Specifications, the Reciprocal Easement Agreement, the other Operative
Documents and all Legal Requirements; and
(c) there are no outstanding claims or Liens by any Contractor or
Subcontractor or any other Person against any portion of the Hotel/Casino
Component except for Permitted Liens and Permitted Encumbrances.
"Theater Space" means the property and the space described in Exhibit N-7
to the Credit Agreement.
"Title Insurer" means, collectively, Stewart Title Guaranty Company and
Lawyers Title Insurance Corporation.
"Title Policy" means each lenders A.L.T.A. policy of title insurance
issued by the Title Insurer as of the Effective Date, as provided in Section
3.1.25 of the Disbursement Agreement, including all amendments thereto,
endorsements thereof and substitutions or replacements therefor.
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"Total Debt" means, on any date, the outstanding principal amount of all
Indebtedness of the Borrower of the type described in clauses (a), (b) and (c)
of such definition and (without duplication) any Contingent Liability in respect
of any of the foregoing of any other Person.
"Total Debt to EBITDA Ratio" means, as of the close of any Fiscal Quarter,
commencing with the close of the Fiscal Quarter in which the Conversion Date
occurs, the ratio of
(a) Total Debt outstanding on the last day of such Fiscal Quarter
to
(b) EBITDA computed for the period consisting of such Fiscal Quarter
(or such shorter portion of any Fiscal Quarter after the occurrence
therein of the Conversion Date) and each of the three immediately
preceding Fiscal Quarters (or such lesser number of Fiscal Quarters to
have closed since the Conversion Date) and determined for any period
ending on or prior to the first anniversary of the Conversion Date,
consistently with the proviso to the definition of the term "EBITDA".
"Trade Detail Report" means a Trade Detail Report in the form of Exhibit
DD to the Credit Agreement.
"Trademark Security Agreement" means, on any date, the Trademark Security
Agreement executed and delivered by an Authorized Representative of the Borrower
pursuant to Section 5.1.6 of the Credit Agreement, as originally in effect on
the Closing Date, in substantially the form of Exhibit B to the Security
Agreement and as thereafter from time to time amended, supplemented, amended and
restated or otherwise modified.
"Transaction" means the transactions contemplated by the Discount Note
Indenture and the Operative Documents.
"Trust" means the Trust under Article Sixth u/w/o Sigmund Sommer.
"Trust Estate" is defined in the Deed of Trust.
"type" means, relative to any Loan, the portion thereof, if any, being
maintained as a Base Rate Loan or a LIBO Rate Loan.
"UCC" means the Uniform Commercial Code of the jurisdiction the law of
which governs the document with respect to the term used.
"Unallocated Contingency Balance" means (w) during the first month after
the Effective Date, the greater of (1) $24,000,000 or (2) the Unallocated
Contingency Calculation, (x) during the second month after the Effective Date,
the greater of $23,000,000 or (2) the Unallocated
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Contingency Calculation, (y) during the third month after the Effective Date,
the greater of $22,000,000 or (2) the Unallocated Contingency Calculation, and
(z) thereafter, from time to time, the Unallocated Contingency Calculation.
"Unallocated Contingency Calculation" means an amount equal to (x)
$25,000,000 minus (y) the product of (1) $25,000,000 multiplied by (2) the
percentage of construction completed on the date that the Advance is to be made,
as determined by the Construction Consultant.
"United States" or "U.S." means the United States of America, its fifty
states and the District of Columbia.
"Unsuitable Lender" is defined in clause (c) of Section 4.11 of the Credit
Agreement.
"Voting Stock" means, with respect to any Person, Capital Stock of any
class or kind ordinarily having the power to vote for the election of directors,
managers or other voting members of the governing body of such Person.
"Warrant" means the warrants issued by Enterprises on February 18, 1998
which, if exercised, will in the aggregate for all such warrants entitle the
holders thereof to acquire an aggregate of not more than 2,215,000 shares of the
Capital Stock of Enterprises representing an indirect interest in not more than
10% of the Holdings Common Membership Interests, plus, warrants for up to
1,107,500 shares of the Capital Stock of Enterprises which may be issued in
connection with the Mall Project credit enhancement on terms substantially the
same as the Warrants issued by Enterprises on February 18, 1998.
"Weighted Average Life to Maturity" means, relative to any Indebtedness at
any date, the number of years (calculated to the nearest one-twelfth) obtained
as the quotient of (x) the sum of the product of (1) the amount of each then
remaining installment, sinking fund, serial maturity or other required payments
of principal, including payment at final maturity, in respect thereof,
multiplied by (2) the number of years (calculated to the nearest one-twelfth)
that will elapse between such date and the making of such payment divided by (y)
the then outstanding principal amount or liquidation preference, as applicable,
of such Indebtedness.
"Welfare Plan" means a "welfare plan", as such term is defined in Section
3(1) of ERISA.
"wholly-owned" means, with respect to any direct or indirect Subsidiary,
any Subsidiary all of the outstanding common stock (or similar equity interest)
of which (other than any director's qualifying shares or investments by foreign
nationals mandated by applicable laws) is owned directly or indirectly by the
Borrower.
"Work" is defined in Section 1.7 of the Design/Build Contract.
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- -------------------------------------------------------------------------------
DISBURSEMENT AGREEMENT
among
ALADDIN GAMING, LLC,
as the Borrower,
THE BANK OF NOVA SCOTIA,
as the Administrative Agent,
STATE STREET BANK AND TRUST COMPANY
as the Discount Note Indenture Trustee,
ALADDIN GAMING HOLDINGS, LLC,
as Holdings,
THE BANK OF NOVA SCOTIA,
as the Disbursement Agent,
THE BANK OF NOVA SCOTIA,
as the Securities Intermediary
and
U.S. BANK NATIONAL ASSOCIATION,
as the Servicing Agent
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
DISBURSEMENT AGREEMENT
THIS DISBURSEMENT AGREEMENT (the "Disbursement Agreement"), dated as of
February 26, 1998, is entered into by and among ALADDIN GAMING, LLC, a Nevada
limited liability company (the "Borrower"), THE BANK OF NOVA SCOTIA, a Canadian
chartered bank, as the initial Administrative Agent, STATE STREET BANK AND TRUST
COMPANY, as the initial Discount Note Indenture Trustee (the "Discount Note
Indenture Trustee"), ALADDIN GAMING HOLDINGS, LLC, a Nevada limited liability
company ("Holdings"), THE BANK OF NOVA SCOTIA, a Canadian chartered bank, as the
initial Disbursement Agent (the "Disbursement Agent"), THE BANK OF NOVA SCOTIA,
a Canadian chartered bank, as the initial Securities Intermediary (the
"Securities Intermediary") and U.S. BANK NATIONAL ASSOCIATION, a national
banking association organized under the laws of the United States of America, as
the initial Servicing Agent (the "Servicing Agent").
RECITALS
A. The Project. The Borrower proposes to develop, construct and operate
the Aladdin Hotel and Casino (the "Main Project"), a large-scale theme hotel,
casino, retail, meeting and entertainment complex and to refurbish or cause the
refurbishment of the Theater with related heating, ventilation and air
conditioning and power station facilities to be developed at the Site as more
particularly described in Exhibit A hereto.
B. Design/Build Contract. The Borrower and the Design/Builder are
parties to the Design/Build Contract pursuant to which the Design/Builder,
subject to certain conditions, limitations and exclusions, will construct the
Main Project on a guaranteed maximum price basis. The Design/Builder's
obligations under the Design/Build Contract are guaranteed by Fluor as and to
the extent provided in the Fluor Guaranty.
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C. Credit Agreement. Concurrently herewith, the Borrower, the Agents and
the Lenders have entered into the Credit Agreement pursuant to which the Lenders
have agreed, subject to the terms thereof and hereof, to provide the Bank Credit
Facility to the Borrower in an aggregate amount not to exceed $410,000,000 to
finance the Main Project Costs, as more particularly described therein. The
Completion Guarantors, jointly and severally pursuant to the Completion
Guaranty, have guaranteed the completion of the Main Project under the Credit
Agreement.
D. Discount Note Indenture. Concurrently herewith, Holdings, Capital and
the Discount Note Indenture Trustee have entered into the Discount Note
Indenture pursuant to which Holdings and Capital will issue the Discount Notes.
The net proceeds of the Discount Notes will be applied by the Borrower to the
development, construction, equipping and opening of the Main Project in an
aggregate amount of approximately $111,000,000.
E. Energy Project Provider. Concurrently herewith, the Borrower and the
Energy Project Provider have entered into the Energy Project Ground Lease and
the Energy Project Development Agreement pursuant to which the Energy Project
Provider has agreed, subject to the terms thereof, to construct, test and
operate the Energy Project. Pursuant to the Energy Project Ground Lease and the
Energy Project Service Agreement, the Energy Project Provider will pay for and
construct the Energy Project and, upon completion thereof, will operate and
maintain it to provide electricity, chilled water and hot water to the Main
Project. In addition, if certain conditions are met, the Energy Project
Provider may enter into an energy services agreement to supply similar services
to the Mall Project and the Music Project.
F. Theater Lease. The Borrower is negotiating with Aladdin Music to
enter into the Theater Lease which Theater Lease will provide for the renovation
of the decor, light and sound systems, and other facilities of the existing
Theater and, upon completion of such renovations, Aladdin Music will operate and
maintain the Theater in accordance with the Theater Lease.
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G. GECC Commitment. Concurrently herewith, the Borrower and GECC have
entered into the GECC Commitment pursuant to which GECC has agreed, subject to
the terms thereof, to enter into the synthetic lease facility and term loan
covering the Gaming Equipment and the Specified Equipment.
H. Purpose. The parties are entering into this Disbursement Agreement in
order to set forth, among other things, (a) the conditions precedent to the
Initial Advance and conditions precedent to Advances and (b) the mechanics for
and allocation of the Borrower's requests for Advances.
AGREEMENT
NOW, THEREFORE, in consideration of the Borrower depositing the London
Clubs Contribution into the Borrower's Funds Account, the Lenders entering into
the Credit Agreement and the other Loan Documents, the Discount Note Indenture
Trustee entering into the Discount Note Indenture, the Disbursement Agent and
the Administrative Agent entering into this Agreement, the Securities
Intermediary entering into the Borrower Collateral Account Agreement, Holdings
entering into this Agreement and the Holdings Collateral Account Agreement and
depositing the proceeds from the sale of the Discount Notes into the
Construction Note Disbursement Account, and the Servicing Agent entering into
the Servicing and Collateral Account Agreement and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties agree as follows:
ARTICLE 1. - DEFINITIONS; RULES OF INTERPRETATION
a. Definitions. Capitalized terms used in this Disbursement Agreement
and its exhibits shall have the meanings given in Appendix A hereto. To the
extent such terms are defined by reference to the Loan Documents, such terms
shall continue to have their original definitions notwithstanding any
termination, expiration or amendment of such agreements. As used herein, the
following terms (whether or not italicized) shall have the meanings set forth
below (such meanings to be equally applicable to the singular and plural forms
thereof):
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"Accounts" means the Bank Proceeds Account, the Term B Sub-Account,
the Term C Sub-Account, the Borrower's Funds Account, the Collection Account,
the Disbursement Account, the Construction Note Disbursement Account, the
Guaranty Deposit Account, the Interest Payment Account, the Loss Proceeds
Account, the Servicing Agent's Accounts and any other accounts established
pursuant to the Borrower Collateral Account Agreement.
"Accounts Collateral" is defined in Section 5.1.1.
"Advance" means (y) with respect to the Bank Credit Facility, an
advance of the Bank Credit Facility, and (z) with respect to amounts on deposit
in the Accounts, a release of funds from such Account, in each case, made
pursuant to Article 2 of this Disbursement Agreement and the Credit Agreement
under which all or any part of such Advance is requested.
"Advance Request" means an advance request and certificate in the form
of Exhibit F.
"Advance Confirmation Notice" is defined in Section 2.4.3(a).
"Advance Date" means the date on which an Advance is required to be
deposited in the Collection Account pursuant to Section 2.4.4(a).
"Anticipated Earnings" means, at any time, relative to the Borrower's
Funds Account, the Bank Proceeds Account, the Construction Note Disbursement
Account, the Guaranty Deposit Account, the Loss Proceeds Account, the Interest
Payment Account, the Term B Sub-Account, the Term C Sub-Account, the Servicing
Agent's Disbursement Account and the Cash Management Account, respectively, the
amount of investment income which the Borrower reasonably determines (with the
reasonable concurrence of the Administrative Agent, the Construction Consultant
and the Disbursement Agent) will be paid on the deposits in each such Account
through the Opening Date, taking into account the current and future anticipated
rates of return on Cash Equivalent Investments in such Accounts and the
anticipated times and amounts of
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draws from each such Account for the payment of Main Project Costs.
"Borrower's Insurance Broker's Closing Certificate" means a
certificate in the form of Exhibit B-2.
"Cash Management Account" is defined in the Servicing and Collateral
Account Agreement.
"Claims" is defined in Section 7.15.2.
"Collection Account" is defined in the Scotiabank Collateral Account
Agreement.
"Confidential Information" is defined in Section 7.17.
"Construction Consultant's Certificate" means a certificate in the
form of Exhibit C.
"Credit Agreement" means on any date, the Credit Agreement, as
originally in effect on the Closing Date among the Borrower, Scotiabank,
individually and as an Arranger and the Administrative Agent, Merrill Lynch,
individually and as an Arranger and the Syndication Agent, CIBC Oppenheimer
Corp., as the Documentation Agent, and the various financial institutions, as
the Lenders, and as thereafter from time to time amended, supplemented, amended
and restated or otherwise modified.
"Disbursement Account" is defined in the Scotiabank Collateral Account
Agreement.
"Facility" or "Facilities" means, as the context may require, the Bank
Credit Facility and the Discount Note Indenture.
"Facility Agreements" means, collectively, the Credit Agreement and
the Discount Note Indenture.
"Final Advance Request" is defined in Section 2.4.2(a).
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"Final Notice of Advance Request" is defined in Section 2.4.2(b).
"Indemnitee" is defined in Section 7.15.2.
"Initial Advance" means the first Advance of the Term B Loan and the
Term C Loan in accordance with the Disbursement Agreement and the Credit
Agreement.
"Insurance Consultant's Closing Certificate" means a certificate in
the form of Exhibit B-1.
"Issue Date" is defined in the Discount Note Indenture.
"Loss Proceeds Account" is defined in the Borrower Collateral Account
Agreement.
"Minimum Aladdin Facilities" means, with respect to the Hotel/Casino,
at least 2,465 operating slot machines, 91 operating gaming tables, an operating
keno lounge, 1,870 restaurant seats, 1,750 usable parking spaces, 2,210 hotel
rooms fit to receive guests and all banking, coin, security and other ancillary
equipment and facilities necessary to operate the Hotel/Casino on a 24 hour per
day, seven days a week basis.
"Notice of Advance Request" means a certificate in the form of Exhibit
G.
"Overnight Funds" is defined in the Servicing and Collateral Account
Agreement.
"Phase I Report" is defined in Section 3.1.36.
"Preliminary Advance Request" is defined in Section 2.4.1(a).
"Preliminary Notice of Advance Request" is defined in Section
2.4.1(b).
"Rating Agency" means either of Moody's or S&P.
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"Required Completion Amount" is defined in Section 2.9 (a).
"Scotiabank Collateral Account Agreement" means that certain
Scotiabank Collateral Account Agreement of even date herewith among the
Borrower, the Disbursement Agent and The Bank of Nova Scotia, as depository.
"Securities Intermediary" is defined in the preamble.
"Servicing Agent" means U.S. Bank National Association and its
successors and assigns.
"Servicing Agent's Accounts" means the Servicing Agent's Disbursement
Account, the Cash Management Account, the Servicing Agent's Payroll Account and
any other accounts established pursuant to the Servicing and Collateral Account
Agreement.
"Servicing Agent's Disbursement Account" is defined in the Servicing
and Collateral Account Agreement.
"Servicing Agent's Payroll Account" is defined in the Servicing and
Collateral Account Agreement.
"Six Month Certificate" means a certificate in the form of Exhibit H.
"Stop Funding Notice" is defined in Section 2.4.3(c).
"Stop Funding Request" is defined in Section 2.4.4(c).
"Term B Sub-Account" is defined in the Borrower Collateral Account
Agreement.
"Term C Sub-Account" is defined in the Borrower Collateral Account
Agreement.
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b. Cross-References. Unless otherwise specified, references in this
Disbursement Agreement to any Article or Section are references to such Article
or Section of this Disbursement Agreement and, unless in any Article, Section or
definition to any item, paragraph or clause are references to such item,
paragraph or clause of such Article, Section or definition.
c. Conflict with a Facility Agreement. This Disbursement Agreement and
each of the Facility Agreements are being drafted concurrently and each are
intended to cover the respective matters specifically set forth therein. In the
case of any express conflict between the terms of this Disbursement Agreement
and the terms of any Facility Agreement, the terms of this Disbursement
Agreement shall control.
ARTICLE 2. - FUNDING
a. Representations Regarding Main Project Status. The parties hereto
acknowledge that construction of the Main Project has commenced prior to the
date hereof and that, in connection therewith, the Borrower has entered into
certain Contracts, the Design/Builder has engaged certain Subcontractors, and
the Borrower has incurred and paid for certain Main Project Costs. In order to
account for such construction activity for purposes of the funding procedures
and mechanics set forth herein, the Borrower has certified and made certain
representations in the Borrower's Closing Date Certificate as to various facts
pertaining to the status of the Main Project, including, without limitation, the
work performed, the Contracts entered into and the Main Project Costs incurred
to date. The Construction Consultant has confirmed such certifications and
representations of the Borrower to the extent set forth in the Construction
Consultant's Closing Certificate.
b. Advances; Availability; Amount of Advances.
i. Generally. Each of the Lenders shall make or cause to be made
Advances under the Bank Credit Facility to the Borrower in accordance with and
pursuant to the terms of the Credit Agreement and the applicable provisions of
this Disbursement Agreement. The Initial
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Purchasers shall purchase the Units consisting of the Discount Notes and the
Warrants with net proceeds in the amount of approximately $111,000,000.
Enterprises shall contribute the net proceeds from the sale of the Warrants to
Holdings in exchange for equity interests in Holdings. Holdings, in turn, shall
use the proceeds from the sale of the Notes, the aforementioned contribution to
Holdings from Enterprises and a portion of the Equity Contribution of LCNI to
purchase from the Borrower the Series A Membership Interests from the Borrower
for the aggregate purchase price of $115,000,000.
ii. Availability. Subject to the satisfaction of all conditions precedent
listed in Article 3 and the other terms and provisions of this Disbursement
Agreement, and, if applicable, the Credit Agreement, the Disbursement Agent
shall make or cause to be made Advances from the Accounts (other than the
Construction Note Disbursement Account) and the Servicing Agent shall make or
cause to be made Advances from the Servicing Agent's Accounts, in each case
pursuant to Section 2.3. Advances shall be made no more frequently than once in
any 30-day period; provided, however, that the Advances and transfers of funds
contemplated in Section 2.7 shall be disregarded for purposes of this sentence.
iii. GECC Commitment.
(1) The parties hereto acknowledge that financing of the costs of
acquisition and installation of the Gaming Equipment and the Specified Equipment
will be made available to the Borrower through the GECC Commitment, subject to
Section 2.2.3(b), and that advances of funds under the GECC Commitment will not
be made pursuant to this Disbursement Agreement but, instead, will be made
pursuant to separate agreements entered into between the Borrower and GECC. In
order to account for such funding commitments for purposes of tracking the
progress and status of the Main Project hereunder, including the amount of
Available Funds from time to time, (i) GECC has agreed, pursuant to the GECC
Commitment, among other things, to notify the Disbursement Agent from time to
time of the amounts drawn and amounts available to be drawn under the GECC
Commitment, (ii) the Borrower has represented that the Main Project Budget, the
Construction Benchmark Schedule and the Plans and Specifications
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include and reflect the work to be performed in connection with the Equipment
Component, (iii) the Advance Requests to be submitted by the Borrower hereunder
require the Borrower, among other things, to certify as to the Main Project
Costs incurred and work from time to time performed in connection with the
Equipment Component, and (iv) the Construction Consultant has confirmed and will
confirm the Borrower's certifications and representations to the extent set
forth in the Construction Consultant's Closing Certificate and in the other
certificates to be submitted by the Construction Consultant hereunder from time
to time.
(2) The parties further acknowledge that the GECC Commitment requires
that the Main Project be no more than six months from satisfying the Opening
Conditions before any advances may be made thereunder. At such time as the
Borrower believes that the Main Project is within six months of satisfying the
Opening Conditions, the Borrower shall request that the Construction Consultant
issue the Six Month Certificate. Should the Construction Consultant concur with
the Borrower's determination (which concurrence shall not be unreasonably
withheld or delayed), the Borrower shall cause the Construction Consultant to
issue promptly the Six Month Certificate.
iv. Advances for Direct Costs. No Advance will be made for any Direct
Costs unless the work and materials and the amount of the Direct Costs thereof
are set forth in the Main Project Budget as Line Items (or portions thereof) to
be funded from the Borrower's Funds Account, the Construction Note Disbursement
Account, the Bank Proceeds Account or, if applicable, the Bank Credit Facility.
Advances for Direct Costs with respect to the trade or any portion of
construction covered by any of the Line Items (or portions thereof) in the
Project Budget to be funded from such Accounts or, if applicable, the Bank
Credit Facility shall not exceed the amount calculated as follows:
(1) the total Direct Costs as set forth as a Line Item in the Main
Project Budget to perform and complete the trade or portion of construction
covered by such Line Item shall be multiplied by the stage of completion of such
trade or portion of construction (expressed as a percentage) as determined by
the
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Construction Consultant; provided, however, if the value of the work in place
with respect to such Line Item is less than the foregoing result, the value of
work in place with respect to such Line Item shall be substituted for the
foregoing result;
(2) the result of (a) shall be multiplied by the Applicable
Percentage; provided, however, if the Design/Builder has delivered a clean,
unconditional and irrevocable letter of credit from an issuer reasonably
satisfactory to the Administrative Agent naming the Administrative Agent as the
beneficiary thereunder in the face amount of the Applicable Percentage together
with the Design/Builder's certification that no Retainage Amount is being
withheld from any Subcontractor which is to receive payment from the Advance for
which request has been made, the result of (a) shall be multiplied by 100%; and
(3) the amounts previously advanced for such Direct Costs as set
forth in such Line Item shall be subtracted from the result in (b). The
balance, if any, shall be the maximum amount to be included in an Advance to or
on behalf of the Borrower for payment of such Direct Costs included in such
Advance Request. The Advance shall be funded from the Borrower's Funds Account,
the Bank Proceeds Account, the Construction Note Disbursement Account and the
Bank Credit Facility, as applicable, in accordance with Section 2.5 of this
Disbursement Agreement.
v. Advances for Indirect Costs. To the extent that any Advance Request
shall include Indirect Costs, the Disbursement Agent will, upon satisfaction of
the applicable conditions set forth in this Disbursement Agreement and the
Credit Agreement, include the full amount of such Indirect Costs in an Advance
if (a) such Indirect Costs are set forth in the Main Project Budget as a portion
of the Main Project Costs to be funded from the Borrower's Funds Account, the
Construction Note Disbursement Account, the Bank Proceeds Account or, if
applicable, the Bank Credit Facility and (b) the Disbursement Agent has received
satisfactory evidence that such Indirect Costs are then due and payable.
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vi. Advances for Unincorporated Materials. To the extent that any Advance
Request shall include any amount in respect of materials not yet incorporated
into the Main Project, the Disbursement Agent will, upon satisfaction of the
applicable conditions set forth in this Disbursement Agreement and the Credit
Agreement, include such amount in an Advance only if (x) such amount is not
greater than $10,000,000 per Contract and the aggregate amount advanced pursuant
to this Section 2.2.6 as to which materials have not been so incorporated into
the Main Project is not greater than $25,000,000 and (y) the following
provisions are satisfied, as applicable:
(1) with respect to building materials, components or systems which
have been completed and are not otherwise subject to subsection (b) of this
Section 2.2.6, (i) such materials, components or systems are stored in a secure
area and are protected from theft, vandalism and weather conditions to the
reasonable satisfaction of the Administrative Agent and the Construction
Consultant, (ii) the Administrative Agent and the Construction Consultant shall
have received satisfactory evidence that such materials, components or systems
are adequately insured for the benefit of the Lenders, (iii) the Borrower has
provided the Administrative Agent and the Construction Consultant with a
detailed inventory of such stored materials, components and systems and the
Construction Consultant has verified that such inventory items are stored as
herein required and (iv) the Borrower shall have granted the Lenders a perfected
and continuing first security interest in such stored materials, components and
systems prior to or simultaneously with the making of any such Advance; and
(2) with respect to progress payments to a supplier of components or
systems to be used in the Main Project, (i) the Borrower shall have provided the
Administrative Agent and the Construction Consultant with a copy of the purchase
order or Contract covering such component or system (and all amendments thereto
or modifications thereof) which shall not require any deposit in excess of 25%
(unless otherwise approved by the Administrative Agent) of the purchase price
thereof, (ii) as collateral security, the Borrower shall have assigned such
purchase orders or contracts, as the case may be, to
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the Lenders, (iii) the Borrower shall have provided evidence satisfactory to the
Administrative Agent and the Construction Consultant that such components or
systems are adequately insured for the benefit of the Lenders and (iv) if
susceptible of being subjected to a security interest, the Borrower shall have
granted the Lenders a perfected and continuing first security interest in such
components or systems prior to or simultaneously with the making of any such
Advance.
(3) No portion of any Advance which is funded from the Bank Proceeds
Account or from a Term A Loan shall be used as a down payment for the Gaming
Equipment or the Specified Equipment which is to be leased under an FF&E Lease
or financed by the credit facilities contemplated by the Approved Equipment
Funding Commitments.
vii. Advances for the Investment in Aladdin Music. Notwithstanding
anything to the contrary in this Disbursement Agreement or any of the other Loan
Documents, no Advance shall be made for the Line Item in the Main Project Budget
entitled "Investment in Aladdin Music, LLC" until such time as the
Administrative Agent has approved in its sole discretion the financing and
capitalization of the Music Project and the renovations to be made to the
Theater pursuant to the Theater Lease. If the Borrower does not enter into the
Theater Lease, (x) there shall be no Advance for any investment in Aladdin
Music, (y) the amount set forth in the Main Project Budget as the "Investment in
Aladdin Music, LLC" shall be applied by the Borrower to pay for the costs of
renovation of the Theater (based upon a renovation budget approved by the
Administrative Agent in its sole discretion), and (z) the Term A Loan Commitment
shall be reduced dollar-for-dollar by the amount remaining in such Line Item
after the costs of the renovation of the Theater have been paid.
viii. Advances for Interest. The principal amount of the Bank Credit
Facility includes amounts payable as interest thereon. Such interest shall be
advanced by the Disbursement Agent for payment in accordance with this
Disbursement Agreement and the other Loan Documents. The Disbursement Agent
will not be obligated
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to make any Advance for interest from and after the Conversion Date.
c. Accounts.
i. Borrower's Funds Account. On or prior to the Closing Date, there
shall be established the Borrower's Funds Account pursuant to the Borrower
Collateral Account Agreement. The Borrower's Funds Account shall be subject to
the sole dominion and control of the Disbursement Agent. There shall be
deposited into the Borrower's Funds Account (t) the London Clubs Contribution,
(u) all amounts received by the Borrower from Holdings in exchange for the
issuance of Borrower Series A Preferred Membership Interests, (v) all
reimbursements received by the Borrower from Aladdin Bazaar for construction
performed by the Borrower on or about the Mall Project pursuant to the Site Work
Agreement, (w) all amounts received as liquidated damages under the Design/Build
Contract, (x) all amounts received under the Fluor Guaranty, (y) all Pre-Opening
Revenues and (z) all other funds or amounts received by the Borrower and not
otherwise provided for in this Disbursement Agreement. Subject to the
provisions of Section 5.1 and the Borrower Collateral Account Agreement, amounts
on deposit in the Borrower's Funds Account shall be (x) (1) transferred first to
the Collection Account and in turn thereafter transferred to the Disbursement
Account and then to the Servicing Agent's Disbursement Account to pay Main
Project Costs in accordance with Section 2.4.4, (2) transferred first to the
Collection Account and in turn thereafter transferred to the Disbursement
Account and then to the Cash Management Account to pay Main Project Costs in
accordance with Section 2.3.4 and/or (3) applied to repayment or prepayment of
the Obligations in accordance with the applicable provisions of the Credit
Agreement and (y) on the Final Completion Date applied as provided in Section
2.8. The deposit of funds into the Borrower's Funds Account shall not create,
vest in, or give the Borrower any rights to such funds and the Borrower shall
have no right to draw, obtain the release of or otherwise use such funds until
(x) the requirements of Section 2.4.4 have been satisfied and (y) the conditions
set forth in Sections 3.1 and 3.2 have been satisfied or waived in writing in
accordance with the terms hereof.
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All amounts deposited into the Borrower's Funds Account may be invested by the
Securities Intermediary in Permitted Investments in accordance with Section 5.3
and the Borrower Collateral Account Agreement. Any interest which is paid on
such deposited amounts shall be deposited into the Borrower's Funds Account
until applied as provided in this Disbursement Agreement.
ii. Collection Account. On or prior to the Closing Date, there shall
be established the Collection Account pursuant to the Scotiabank Collateral
Account Agreement. The Collection Account shall be subject to the sole dominion
and control of the Disbursement Agent. There shall be deposited into the
Collection Account (x) all Term A Loans (except for any Term A Loan which is
being advanced as the Required Completion Amount (as defined in clause (a) of
Section 2.8) in which case such Term A Loan shall be deposited into the Bank
Proceeds Account) advanced from time to time by the Lenders (and/or withdrawn
from the Bank Proceeds Account) and (y) all funds withdrawn by the Disbursement
Agent from the Borrower's Funds Account, the Loss Proceeds Account, the Guaranty
Deposit Account, and the Interest Payment Account, in each case pursuant to
Section 2.4.4. Subject to the provisions of Section 5.1 and the Borrower
Collateral Account Agreement, amounts on deposit in the Collection Account shall
be (x) transferred first to the Disbursement Account and then to the Servicing
Agent's Disbursement Account to pay for Main Project Costs in accordance with
Section 2.4.4 and/or (y) transferred to the Disbursement Account and then to the
Cash Management Account to pay for or reimburse the Borrower for the payment of
Main Project Costs in accordance with Section 2.3.4. On the Final Completion
Date, funds remaining in the Collection Account shall be applied as provided in
Section 2.8. The deposit of funds into the Collection Account shall not create,
vest in, or give the Borrower any rights to such funds and the Borrower shall
have no right to draw, obtain the release of or otherwise use such funds until
(x) the requirements of Section 2.4.4 have been satisfied and (y) the conditions
set forth in Sections 3.1 and 3.2 have been satisfied or waived in writing in
accordance with the terms hereof. In the event that any funds deposited into
the Collection Account are, for any reason, (x) not withdrawn therefrom
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pursuant to Section 2.4.4 on the day on which they are deposited, or (y) are
returned thereto from the Disbursement Account, such funds shall, on the next
day, be withdrawn from the Collection Account and (1) in the case of funds
advanced by the Lenders or withdrawn from the Bank Proceeds Account, the Loss
Proceeds Account, the Guaranty Deposit Account or the Interest Payment Account,
deposited into the Account from which such funds were withdrawn and (2) in the
case of funds advanced by the Disbursement Agent from the Borrower's Funds
Account, returned to the Borrower's Funds Account. No amounts deposited into
the Collection Account may be invested.
iii. Disbursement Account. On or prior to the Closing Date, there
shall be established the Disbursement Account pursuant to the Scotiabank
Collateral Account Agreement. The Disbursement Account shall be subject to the
sole dominion and control of the Disbursement Agent. On each Advance Date,
funds shall be withdrawn from the Collection Account and deposited into the
Disbursement Account in accordance with Section 2.4.4. Subject to the
provisions of Section 5.1 and the Borrower Collateral Account Agreement, amounts
on deposit in the Disbursement Account shall be (x) transferred to Servicing
Agent's Disbursement Account to pay for Main Project Costs in accordance with
Section 2.6 and/or (y) transferred to the Cash Management Account to pay for or
reimburse the Borrower for the payment of Main Project Costs in accordance with
Section 2.3.4. On the Final Completion Date, funds remaining in the
Disbursement Account shall be applied as provided in Section 2.8. The deposit of
funds into the Disbursement Account shall not create, vest in, or give the
Borrower any rights to such funds and the Borrower shall have no right to draw,
obtain the release of or otherwise use such funds until (x) the requirements of
Section 2.4.4 have been satisfied and (y) the conditions set forth in Sections
3.1 and 3.2 have been satisfied or waived in writing in accordance with the
terms thereof. In the event that any funds deposited into the Disbursement
Account are, for any reason, not withdrawn therefrom pursuant to Section 2.6 on
the day on which they are deposited, such funds shall, on the next day, be
withdrawn from the Disbursement Account and returned to the Collection Account.
No amounts deposited into the Disbursement Account may be invested.
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iv. Cash Management Account. On or prior to the Closing Date, there
shall be established the Cash Management Account pursuant to the Servicing and
Collateral Account Agreement. On the Closing Date $750,000 shall be transferred
from the Borrower's Funds Account to the Cash Management Account (such amount
may be increased to $5,000,000 when Advances of the Term B Loan and Term C Loan
commence). The Borrower shall be permitted from time to time to replace amounts
drawn from the Cash Management Account net of interest earned by including a
request to such effect in an Advance Request (which request shall include proof
of payment of all amounts withdrawn from the Cash Management Account); provided,
however, prior to the time that the Cash Management Account is funded from the
Bank Proceeds Account or Term A Loan the amount to be replaced may include the
face amount of checks which have been issued by the Borrower in accordance with
this Section 2.3.4 but which have not yet been presented for payment. Subject
to the provisions of Section 5.1 and the Servicing and Collateral Account
Agreement, the Borrower shall be permitted from time to time to draw checks on
and otherwise withdraw amounts on deposit in the Cash Management Account to pay
due and payable Main Project Costs allocated to the Main Project in accordance
with the terms hereof; provided, however, if the Cash Management Account is
funded from the Bank Proceeds Account or Term A Loans, the Borrower shall only
pay for Main Project Costs therefrom which are to be paid from the Loans or the
Bank Proceeds Account as set forth in the Main Project Budget and in accordance
with the Credit Agreement. Except as set forth in the immediately preceding
sentence, the deposit of funds into the Cash Management Account shall not
create, vest in, or give the Borrower any rights to such funds and the Borrower
shall have no right to draw, obtain the release of or otherwise use such funds
until (x) the requirements of Section 2.4.4 have been satisfied and (y) the
conditions set forth in Sections 3.1 and 3.2, as the case may be, have been
satisfied or waived in writing in accordance with the terms thereof. On the
Final Completion Date, funds remaining in the Cash Management Account shall be
applied as provided in Section 2.8. All amounts deposited into the Cash
Management Account may be invested in Overnight Funds and in money market
investments of U.S.
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Bank National Association in accordance with Section 2.3.12 and the Servicing
and Collateral Account Agreement.
v. Interest Payment Account. On or prior to the Closing Date, there
shall be established the Interest Payment Account pursuant to the Borrower
Collateral Account Agreement. The Interest Payment Account shall be subject to
the sole dominion and control of the Disbursement Agent. On each Advance Date
until the Conversion Date, funds shall be withdrawn from the Disbursement
Account and deposited into the Interest Payment Account to the extent necessary
to pay interest on, and other amounts payable with respect to, the Bank Credit
Facility as set forth in Advance Requests delivered to the Disbursement Agent
and in accordance with Section 2.7. On the date that interest and any other
amount with respect to the Bank Credit Facility becomes due and payable, such
amount shall be transferred from the Interest Payment Account to the Collection
Account and thereafter to the Disbursement Account for distribution to the
Lenders and/or the Agents entitled to such payment. On the Final Completion
Date, funds remaining in the Interest Payment Account shall be applied as
provided in Section 2.8. The deposit of funds into the Interest Payment Account
shall not create, vest in, or give the Borrower any rights to such funds and the
Borrower shall have no right to draw, obtain the release of or otherwise use
such funds. All amounts deposited into the Interest Payment Account may be
invested by the Securities Intermediary in Permitted Investments in accordance
with Section 5.3 and the Borrower Collateral Account Agreement. Any interest
which is paid on such deposited amounts shall be deposited into the Interest
Payment Account until applied as provided in this Disbursement Agreement.
vi. Bank Proceeds Account; Term B Sub-Account; Term C Sub-Account.
(a) On or prior to the Closing Date, there shall be established
the Bank Proceeds Account pursuant to the Borrower Collateral Account Agreement.
The Bank Proceeds Account shall be subject to the sole dominion and control of
the Disbursement Agent. There shall be deposited into the Bank Proceeds Account
(x) the
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Term B Loans (which in turn shall be transferred to the Term B Sub-Account), the
Term C Loans (which in turn shall be transferred to the Term C Sub-Account) and
any Term A Loan which is not to be transferred to the Collection Account and/or
the Disbursement Account on the same day such Term A Loan is made to the
Borrower and (y) all amounts which are transferred to the Disbursement Account
on the day deposited but are later returned to the Collection Account. There
shall also be deposited into the Bank Proceeds Account the amounts set forth in
Section 2.8(d). Subject to the provisions of Section 5.1 and the Borrower
Collateral Account Agreement, amounts on deposit in the Bank Proceeds Account
shall, from time to time, be transferred to the Collection Account in accordance
with Section 2.5 and thereafter to the Disbursement Account for application to
pay Main Project Costs in accordance with Section 2.4.4 and, on the Final
Completion Date, be applied as provided in Section 2.8. The deposit of funds
into the Bank Proceeds Account shall not create, vest in or give the Borrower
any rights to such funds and the Borrower shall have no right to draw, obtain
the release of or otherwise use such funds until (x) the requirements of Section
2.4.4 have been satisfied and (y) the conditions set forth in Sections 3.1 and
3.2 have been satisfied or waived in writing in accordance with the terms
hereof. All amounts deposited into the Bank Proceeds Account may be invested by
the Securities Intermediary in Permitted Investments in accordance with Section
5.3 and the Borrower Collateral Account Agreement. Any interest which is paid
on such deposited amounts shall be deposited into the Bank Proceeds Account
until applied as provided in this Disbursement Agreement.
(b) On or prior to the Closing Date, there shall be established
as part of the Bank Proceeds Account the Term B Sub-Account and the Term C
Sub-Account pursuant to the Borrower Collateral Account Agreement. The Term B
Sub-Account and the Term C Sub-Account shall be subject to the sole dominion and
control of the Disbursement Agent. There shall be deposited into the Term B
Sub-Account and the Term C Sub-Account the Term B Loans and the Term C Loans,
respectively. Subject to the provisions of Section 5.1 and the Borrower
Collateral Account Agreement, amounts on deposit in the Term B Sub-Account and
the Term C Sub-Account shall, from time to
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time, be transferred pari passu to the Collection Account in accordance with
Section 2.5 and thereafter to the Disbursement Account for application to pay
Main Project Costs in accordance with Section 2.4.4 and, on the Final Completion
Date, be applied as provided in Section 2.8. The deposit of funds into the Term
B Sub-Account and the Term C Sub-Account shall not create, vest in or give the
Borrower any rights to such funds and the Borrower shall have no right to draw,
obtain the release of or otherwise use such funds until (x) the requirements of
Section 2.4.4 have been satisfied and (y) the conditions set forth in Sections
3.1 and 3.2 have been satisfied or waived in writing in accordance with the
terms hereof. All amounts deposited into the Term B Sub-Account and the Term C
Sub-Account may be invested by the Securities Intermediary in Permitted
Investments in accordance with Section 5.3 and the Borrower Collateral Account
Agreement. Any interest which is paid on such deposited amounts shall be
deposited into the Term B Sub-Account or the Term C Sub-Account, as applicable,
until applied as provided in this Disbursement Agreement.
vii. Construction Note Disbursement Account. On or prior to the
Closing Date, there shall be established the Construction Note Disbursement
Account pursuant to the Holdings Collateral Account Agreement. The Construction
Note Disbursement Account shall be subject to the sole dominion and control of
the Disbursement Agent for the benefit of the Discount Note Indenture Trustee.
Holdings shall deposit the proceeds from the sale of the Discount Notes into the
Construction Note Disbursement Account. Subject to the provisions of Section
5.1 and the Holdings Collateral Account Agreement, amounts on deposit in the
Construction Note Disbursement Account shall, from time to time, be transferred
to the Borrower's Funds Account in repayment of an advance in the amount of
$37,000,000 together with interest thereon made by the Borrower to Holdings on
the Closing Date. Thereafter such amounts shall be transferred to the
Collection Account and thereafter (x) to the Disbursement Account and then to
the Servicing Agent's Disbursement Account to pay for Main Project Costs in
accordance with Section 2.4.4 and/or (y) to the Cash Management Account to pay
for or reimburse the Borrower for the payment of Main Project Costs in
accor-
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dance with Section 2.3.4. On the Final Completion Date, any funds
remaining in the Construction Note Disbursement Account shall be transferred to
the Borrower's Funds Account and applied as provided in Section 2.8. The
deposit of funds into the Construction Note Disbursement Account shall not
create, vest in or give the Borrower any rights to such funds and the Borrower
shall have no right to draw, obtain the release of or otherwise use such funds
until (x) the requirements of Section 2.4.4 have been satisfied and (y) the
conditions set forth in Sections 3.1 and 3.2 have been satisfied or waived in
writing in accordance with the terms hereof. All amounts deposited into the
Construction Note Disbursement Account may be invested by the Securities
Intermediary in Permitted Investments in accordance with Section 5.3 and the
Holdings Collateral Account Agreement. Any interest which is paid on such
deposited amounts shall be deposited into the Construction Note Disbursement
Account until applied as provided in this Disbursement Agreement.
viii. Loss Proceeds Account. On or prior to the Closing Date, there
shall be established the Loss Proceeds Account pursuant to the Borrower
Collateral Account Agreement. The Loss Proceeds Account shall be subject to the
sole dominion and control of the Disbursement Agent. There shall be deposited
into the Loss Proceeds Account the Loss Proceeds. Subject to the provisions of
Section 5.1 and the Borrower Collateral Account Agreement, amounts on deposit in
the Loss Proceeds Account shall, from time to time, be transferred to the
Collection Account and thereafter (x) to the Disbursement Account and then to
the Servicing Agent's Disbursement Account to pay for Main Project Costs in
accordance with Section 2.4.4 and/or (y) to the Cash Management Account to pay
for or reimburse the Borrower for the payment of Main Project Costs in
accordance with Section 2.3.4. On the Final Completion Date any funds remaining
in the Loss Proceeds Account shall be applied as provided in Section 2.8. The
deposit of funds into the Loss Proceeds Account shall not create, vest in or
give the Borrower any rights to such funds and the Borrower shall have no right
to draw, obtain the release of or otherwise use such funds until (x) the
requirements of Section 2.4.4 have been satisfied and (y) the conditions set
forth in Sections 3.1 and 3.2 have been satisfied or
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waived in writing in accordance with the terms hereof. All amounts deposited
into the Loss Proceeds Account may be invested by the Securities Intermediary in
Permitted Investments in accordance with Section 5.3 and the Borrower Collateral
Account Agreement. Any interest which is paid on such deposited amounts shall
be deposited into the Loss Proceeds Account until applied as provided in this
Disbursement Agreement.
ix. Guaranty Deposit Account. On or prior to the Closing Date, there
shall be established the Guaranty Deposit Account pursuant to the Borrower
Collateral Account Agreement. The Guaranty Deposit Account shall be subject to
the sole dominion and control of the Disbursement Agent. There shall be
deposited into the Guaranty Deposit Account amounts advanced by or on behalf of
the Completion Guarantors pursuant to the Completion Guaranty. Subject to the
provisions of Section 5.1 and the Borrower Collateral Account Agreement, amounts
on deposit in the Guaranty Deposit Account shall, from time to time, be
transferred to the Collection Account and thereafter (x) to the Disbursement
Account to pay Main Project Costs in accordance with Section 2.4.4 and/or (y) to
the Cash Management Account to pay for or reimburse the Borrower for the payment
of Main Project Costs in accordance with Section 2.3.4. On the Final Completion
Date any funds remaining in the Guaranty Deposit Account shall be applied as
provided in Section 2.8. The deposit of funds into the Guaranty Deposit Account
shall not create, vest in or give the Borrower any rights to such funds and the
Borrower shall have no right to draw, obtain the release of or otherwise use
such funds until (x) the requirements of Section 2.4.4 have been satisfied and
(y) the conditions set forth in Sections 3.1 and 3.2 have been satisfied or
waived in writing in accordance with the terms hereof. All amounts deposited
into the Guaranty Deposit Account may be invested by the Securities Intermediary
in Permitted Investments in accordance with Section 5.3 and the Borrower
Collateral Account Agreement. Any interest which is paid on such deposited
amounts shall be deposited into the Guaranty Deposit Account until applied as
provided in this Disbursement Agreement.
x. Servicing Agent's Disbursement Account. On or prior to the
Closing Date, there shall be established
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the Servicing Agent's Disbursement Account pursuant to the Servicing and
Collateral Account Agreement. The Servicing Agent's Disbursement Account shall
be subject to the sole dominion and control of the Disbursement Agent. On each
Advance Date, funds shall be withdrawn from the Disbursement Account and
deposited into the Servicing Agent's Disbursement Account in accordance with
Section 2.4.4. Amounts on deposit in the Servicing Agent's Disbursement Account
shall be paid to the appropriate Person in accordance with the Servicing and
Collateral Account Agreement. Funds on deposit in the Servicing Agent's
Disbursement Account which have not been withdrawn as of the close of business
on each Business Day during the term of the Servicing and Collateral Account
Agreement may be invested in Overnight Investments in accordance with Section
5.3 and the Servicing and Collateral Account Agreement. On the Final Completion
Date any funds remaining in the Servicing Agent's Disbursement Account shall be
applied as provided in Section 2.8. The deposit of funds into the Servicing
Agent's Disbursement Account shall not create, vest in, or give the Borrower any
rights to such funds and the Borrower shall have no right to draw, obtain the
release of or otherwise use such funds until (x) the requirements of Section
2.4.4 have been satisfied and (y) the conditions set forth in Sections 3.1 and
3.2 have been satisfied or waived in writing in accordance with the terms
hereof. In the event that any funds deposited into the Servicing Agent's
Disbursement Account are, for any reason, not withdrawn therefrom on the day on
which they are deposited, such funds shall, at the close of business on such
day, be transferred to the Servicing Agent's Disbursement Investment Account and
applied in accordance with Section 2.3.11.
xi. Servicing Agent's Payroll Account. On or prior to the Closing
Date, there shall be established the Servicing Agent's Payroll Account pursuant
to the Servicing and Collateral Account Agreement. The Servicing Agent's
Payroll Account shall be subject to the sole dominion and control of the
Disbursement Agent. On each Advance Date, funds for payroll payments shall be
withdrawn from the Disbursement Account and deposited into the Servicing Agent's
Payroll Account in accordance with Section 2.4.4. Amounts on deposit in the
Servicing
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Agent's Payroll Account shall be paid to the appropriate Person in accordance
with the Servicing and Collateral Account Agreement. On the Final Completion
Date any funds remaining in the Servicing Agent's Payroll Account shall be
applied as provided in Section 2.8. The deposit of funds into the Servicing
Agent's Payroll Account shall not create, vest in, or give the Borrower any
rights to such funds and the Borrower shall have no right to draw, obtain the
release of or otherwise use such funds until (x) the requirements of Section
2.4.4 have been satisfied and (y) the conditions set forth in Sections 3.1 and
3.2 have been satisfied or waived in writing in accordance with the terms
hereof. In the event that any funds deposited into the Servicing Agent's
Payroll Account are, for any reason, not withdrawn therefrom on the day on which
they are deposited, such funds shall, as of the close of business on such day,
be transferred to the Servicing Agent's Disbursement Account and applied in
accordance with Section 2.3.11.
d. Mechanics for Obtaining Advances.
i. Preliminary Notices from the Borrower.
(1) Subject to Section 2.2.2, from time to time the Borrower
shall have the right to deliver to the Administrative Agent, the Discount Note
Indenture Trustee (subject to the proviso in the first sentence of Section
2.4.1(b)), the Disbursement Agent, the Servicing Agent and the Construction
Consultant a preliminary Advance Request (each, a "Preliminary Advance Request")
requesting that an Advance be made on or after the fifteenth (15th) Business Day
after delivery of such Preliminary Advance Request.
(2) Concurrently with the delivery by the Borrower of each
Preliminary Advance Request pursuant to subsection (a) above, the Borrower shall
deliver to each of the Administrative Agent, the Discount Note Indenture
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Trustee, the Disbursement Agent, the Servicing Agent and the Construction
Consultant a preliminary Notice of Advance Request (each, a "Preliminary Notice
of Advance Request"); provided, however, from and after the time that all
amounts in the Construction Note Disbursement Account have been advanced, the
Discount Note Indenture Trustee shall no longer be entitled to receive a
Preliminary Advance Request and the only delivery thereof by the Borrower shall
be to the Administrative Agent, the Disbursement Agent, the Servicing Agent and
the Construction Consultant. Such Preliminary Notice of Advance Request shall
reference the requested Advance Date set forth in the Preliminary Advance
Request and shall contain the other information required thereby.
(3) Each Preliminary Advance Request delivered by the Borrower
pursuant to subsection (a) above shall request Advances in order (i) to pay
interest on, and other amounts (other than Scheduled Amortization and Mandatory
Prepayments) due with respect to, the Bank Credit Facility which will become due
and payable on or after the requested Advance Date and prior to the next
succeeding Advance Date, until the earlier of (x) the Conversion Date or (y)
such time as the Main Project is generating cash flow over the amount required
for Operating Costs and Main Project Costs, and/or (ii) to pay other Main
Project Costs estimated to become due and payable on or prior to the requested
Advance Date. The Borrower shall not be permitted to obtain Advances for the
purpose of paying interest due and payable with respect to the Bank Credit
Facility at any time after the Conversion Date. Each such Preliminary Advance
Request shall set forth the payee, broken down by Contractor, Subcontractor and
Line Item. Promptly after delivery of each preliminary Advance Request, the
Borrower, the Disbursement Agent and the Construction Consultant shall review
such Advance Request and attachments thereto to determine whether all required
documentation has been provided. The Borrower and the Construction Consultant
also shall review the work referenced in such Preliminary Advance Request,
including work estimated to be completed through the applicable Advance Date as
such work is being performed.
ii. Final Notices from the Borrower.
(1) The Borrower shall have the right, with respect to each
Preliminary Advance Request delivered in accordance with Section 2.4.1(a) above,
to deliver to the Administrative Agent, the Discount Note Indenture Trustee
(subject to the proviso in the first sentence of Section 2.4.2(b)), the
Disbursement Agent,
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the Servicing Agent and the Construction Consultant a final Advance Request
(each a "Final Advance Request") containing all exhibits, attachments and
certificates required thereby (other than the Construction Consultant's
Certificate), all appropriately completed and duly executed. Each Final Advance
Request shall be delivered no later than nine (9) Business Days prior to the
requested Advance Date (it being understood that the Borrower may, in the Final
Advance Request, request an Advance Date that is later than the date originally
requested pursuant to the Preliminary Advance Request).
(2) Concurrently with the delivery by the Borrower of each Final
Advance Request pursuant to subsection (a) above, the Borrower shall deliver to
each of the Discount Note Indenture Trustee, the Construction Consultant, the
Administrative Agent, the Disbursement Agent and the Servicing Agent (x) the
commitment from each Title Insurer evidencing such Title Insurer's unconditional
agreement to issue an endorsement to the Title Policies on the Advance Date
which conforms to the requirements of Section 3.2.9 and (y) a final Notice of
Advance Request (each, a "Final Notice of Advance Request") appropriately
completed and duly executed; provided, however, the Discount Note Indenture
Trustee shall be entitled to receive a Final Notice of Advance Request only if
it has received a Preliminary Advance Request pursuant to Section 2.4.1(b)
above. Each Final Notice of Advance Request shall state that pursuant to an
Advance Request being concurrently delivered to the Disbursement Agent, the
Borrower is requesting that an Advance be made on the Advance Date set forth in
such Final Advance Request.
(3) Within four (4) days after its receipt of each Final Advance
Request pursuant to subsection (a) above, the Construction Consultant shall
deliver directly to the Disbursement Agent (with a copy to the Borrower) and the
Discount Note Indenture Trustee if the Discount Note Indenture Trustee has
received a Preliminary Advance Request pursuant to Section 2.4.1(b) above its
Construction Consultant's Certificate with respect to such Advance Request,
either approving or disapproving the Advance Request; provided that if the
Construction Consultant disapproves one or more particular payments or
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disbursements to any Contractor or Subcontractor requested by the Advance
Request, but the Advance Request otherwise complies with the requirements
hereof, then the Construction Consultant shall approve the Advance Request and
all payments and disbursements requested therein other than the particular
payments or disbursements so disapproved.
iii. Advance Notices from Disbursement Agent.
(1) Promptly after delivery of each Final Advance Request and
related Final Notice of Advance Request by the Borrower pursuant to Section
2.4.2(a) and (b) above, the Disbursement Agent shall review the same in order to
reconcile the information set forth in the Advance Request with the information
set forth in the related Notice of Advance Request and determine whether all
required documentation has been provided and whether all applicable conditions
precedent pursuant to this Disbursement Agreement have been satisfied. In
particular, and without limiting the generality of the foregoing, the
Disbursement Agent shall independently verify, using information in its
possession and obtained from the Construction Consultant, (i) the Borrower's
calculation of Available Funds, including Anticipated Earnings, set forth in the
Advance Request, (ii) that after giving effect to the requested Advance, the
Available Funds equal or exceed the Remaining Costs, (iii) that the Unallocated
Contingency Balance equals or exceeds the Required Minimum Contingency, (iv)
that the allocation of the requested Advance among the various funding sources
complies with the provisions of Section 2.5, and (v) that the Borrower's
calculation of interest and other amounts to become due and payable on the Bank
Credit Facility from and after the requested Advance Date and prior to the
immediately succeeding Advance Date is accurate. Subject to the other
subsections of this Section 2.4, at such time as the Disbursement Agent has
received the Construction Consultant's Certificate as required by Section
2.4.2(c) and otherwise determines that the applicable conditions precedent set
forth in Article 3 with respect to a requested Advance have been satisfied, but
no less than three (3) Business Days prior to the requested Advance Date, the
Disbursement Agent shall acknowledge receipt of the Notice of Advance Request
and deliver the same to the Borrower and the Servicing Agent
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(as so received and acknowledged, an "Advance Confirmation Notice") and shall
instruct the Construction Consultant to provide the Discount Note Indenture
Trustee (to the extent that the circumstances factually permit the Construction
Consultant to do so in good faith) with an On Schedule Certificate.
(2) In the event that, pursuant to Section 2.4.2(c), the
Construction Consultant approves only a portion of the payments or disbursements
requested by the Advance Request or, if based on its review of the Advance
Request and accompanying Notice of Advance Request, the Disbursement Agent finds
any minor or purely mathematical errors or inaccuracies in the Advance Request
or the Notice of Advance Request (including any inaccuracy in the allocations
made pursuant to Section 2.5 hereof), but the Advance Request and Notice of
Advance Request otherwise conform to the requirements of this Disbursement
Agreement, the Disbursement Agent shall (i) notify the Borrower, the
Administrative Agent, the Discount Note Indenture Trustee (but only so long as
amounts are on deposit in the Construction Note Disbursement Account) and the
Servicing Agent thereof, (ii) revise (to the extent it is able to do so) or
request the Borrower to revise such certificates to remove the request for the
disapproved payment and/or rectify any errors or inaccuracies, (iii) deliver or
request the Borrower to deliver the revised Notice of Advance Request to the
Administrative Agent, the Servicing Agent and the Discount Note Indenture
Trustee (but only so long as amounts are on deposit in the Construction Note
Disbursement Account), and (iv) approve the requested Advance and issue the
Advance Confirmation Notice after making the required revisions (or receiving
from the Borrower the revised certificates) on the basis of the certificates as
so revised. In the event that the Disbursement Agent revises the Advance
Request and Notice of Advance Request, the effect of which is to increase the
amount to be disbursed from the Bank Proceeds Account or, if applicable, to be
advanced as a Term A Loan under the Bank Credit Facility, the amounts of such
increase shall first be made from the Bank Proceeds Account (to the extent of
proceeds therein) and thereafter as a Term A Loan, subject to the terms of the
Credit Agreement. In the event that the Disbursement Agent revises the Advance
Request and Notice of Advance Request, the effect of which is to
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decrease the amounts to be disbursed from the Bank Proceeds Account and/or
advanced as a Term A Loan, the amounts of such decrease shall first reduce the
amount of such Advance to be made as a Term A Loan requested under such Facility
and then reduce the amount of such Advance to be disbursed from the Bank
Proceeds Account. All references to a particular requested Advance, Advance
Request or Notice of Advance Request in the ensuing provisions of this Article 2
shall, to the extent the context so requires, refer to the same as revised or
modified pursuant to the preceding sentence.
(3) In the event that the Disbursement Agent (x) on or prior to
the third Business Day prior to the requested Advance Date determines pursuant
to Section 2.4.3(a) that the conditions precedent to an Advance have not been
satisfied or (y) prior to the time that such Advance has been made receives
notice from the Administrative Agent that an Event of Default has occurred and
is continuing under the Credit Agreement, then the Disbursement Agent shall
notify the Borrower, the Administrative Agent, the Discount Note Indenture
Trustee (but only so long as amounts are on deposit in the Construction Note
Disbursement Account) and the Servicing Agent thereof as soon as reasonably
possible but in no event later than one (1) Business Day after such
determination or receipt, as the case may be (each such notification referred to
herein as, a "Stop Funding Notice"). The Stop Funding Notice shall specify the
conditions precedent which the Disbursement Agent has determined have not been
satisfied and/or shall attach a copy of any notice of default received by the
Disbursement Agent. Upon such written notice from the Disbursement Agent, (u)
none of the Lenders or the Discount Note Indenture Trustee shall have any
obligation to advance their respective Facilities' portion of the requested
Advance other than, with respect to the Lenders, for an Advance to pay interest
on the Bank Credit Facility (but only if so directed by the Administrative
Agent) or, if applicable, to reimburse the Issuer for draws under one or more
Letters of Credit, (v) the Disbursement Agent shall not withdraw any funds from
the Borrower's Funds Account, the Bank Proceeds Account, the Construction Note
Disbursement Account, the Loss Proceeds Account and/or the Guaranty Deposit
Account to satisfy such requested Advance other than for an Advance to pay
interest or any other amount due with respect to
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the Bank Credit Facility or, if applicable, to reimburse the Issuer for draws
under one or more Letters of Credit, (w) the Disbursement Agent shall not
withdraw, transfer or release to the Borrower any funds then on deposit in the
Collection Account or the Disbursement Account, (x) the Servicing Agent shall
not release to any Person any portion of the Advance then on deposit in the
Servicing Agent's Disbursement Account which is covered by the Stop Funding
Notice, (y) the Borrower shall not withdraw, transfer or release any funds then
on deposit in the Cash Management Account to pay for any Main Project Cost which
would have been paid from the Advance covered by such Stop Funding Notice and
(z) any Advance Confirmation Notice issued prior to the issuance of a Stop
Funding Notice (if the Advance to which such Advance Confirmation Notice relates
has not been made) shall become null and void and of no force or effect with
respect to such Advance other than the portion thereof which is advanced to pay
interest on the Bank Credit Facility or, if applicable, to reimburse the Issuer
for draws under one or more Letters of Credit; provided that the nullification
of any such Advance Confirmation Notice shall not affect the obligations of the
Borrower for broken funding costs under the Bank Credit Facility.
(4) At such time, if ever, as (x) the Disbursement Agent (1)
determines that the condition precedent to the requested Advance which had not
been satisfied has become satisfied or (2) receives notice from the
Administrative Agent that such Event of Default no longer exists, as the case
may be, or (y) the Administrative Agent informs the Disbursement Agent that the
event or events giving rise to the Stop Funding Notice have been waived, the
Disbursement Agent shall deliver an Advance Confirmation Notice to the Borrower
and the Administrative Agent.
iv. Provision for Advances.
(1) In the case of an Advance Confirmation Notice issued
pursuant to Section 2.4.3(a) above, on the requested Advance Date, before 11:00
a.m. New York, New York time, the Lenders shall deposit or cause to be deposited
in the Bank Proceeds Account, in immediately available funds, their respective
portion of the requested Advance, as determined pursuant to Section 2.5.1
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and set forth in the related Advance Confirmation Notice; provided, however,
that to the extent that all or a portion of such Advance is to be transferred
to the Disbursement Account by the Disbursement Agent on such Advance Date, such
portion of such Advance shall be deposited into the Collection Account. Upon
confirming that all such funds required to be deposited in the Collection
Account pursuant to the preceding sentence have been deposited, the Disbursement
Agent immediately shall withdraw from the Borrower's Funds Account, the
Construction Note Disbursement Account, the Loss Proceeds Account and the
Guaranty Deposit Account the portion of the Advance to be funded from each such
Account as determined pursuant to Section 2.5 and set forth in the related
Advance Confirmation Notice and deposit such funds in the Collection Account.
Once all such funds have been deposited in the Collection Account, the
Disbursement Agent promptly (subject to Section 2.4.3(b)) shall withdraw such
funds and deposit them in the Disbursement Account. All funds so deposited in
the Disbursement Account shall thereafter be applied as provided in Section 2.7.
With respect to the Initial Advance, the proceeds of the Term B Loan shall be
deposited into the Term B Sub-Account and the proceeds of the Term C Loan shall
be deposited into the Term C Sub-Account and held therein until Advanced in
accordance with the terms of this Disbursement Agreement.
(2) Subject to Section 2.4.3(b), after an Advance Confirmation Notice
has been given, the failure of any Lender to make any Advance under the Bank
Credit Facility shall not relieve any other Lender of its obligation to make any
Advance under the Bank Credit Facility, but no Lender shall be responsible for
the failure of any other Lender to make any Advance. Neither the Disbursement
Agent nor the Administrative Agent shall be responsible for any Lender's failure
to make any required Advance. The Disbursement Agent shall not transfer funds
to the Disbursement Account or allow for the release to the Borrower of any
amounts properly advanced until all Advances requested by the relevant Advance
Request have been deposited in the Collection Account unless the Lenders who
have made the Advances request such release. The withholding of such Advances
by the Disbursement Agent shall not release the Lender which failed to make
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the Advance under the Bank Credit Facility from liability to the other Lenders
and the Borrower.
(3) The Disbursement Agent shall have no liability to the
Borrower arising from any Stop Funding Notice issued pursuant to Section
2.4.3(b) at the request of the Administrative Agent (a "Stop Funding Request"),
whether or not the Administrative Agent was entitled to make any such Stop
Funding Request; provided, however, that nothing herein shall release from
liability the Administrative Agent for issuing the Stop Funding Request if such
issuance constituted an act of gross negligence or willful misconduct on the
part of the Administrative Agent.
v. Change in Facts Certified. The Borrower shall notify the
Disbursement Agent prior to the making of any Advances in the event that any of
the matters to which the Borrower certified in the corresponding Advance Request
is no longer true and correct in all material respects as of the applicable
Advance Date. The acceptance by the Borrower of the proceeds of any Advance
shall constitute a recertification by the Borrower, as of the applicable Advance
Date, of all matters certified to in the related Advance Request.
vi. References to Dates. In the event that any day or date referred
to in the foregoing provisions of this Section 2.4 occurs on a day that is not a
Business Day, the reference shall be deemed to be to the next succeeding
Business Day.
e. Allocation of Advances.
i. Allocations Among Hotel/Casino Component and Equipment Component.
All Main Project Costs allocated pursuant to the Main Project Budget to the
Hotel/Casino Component shall be paid only from Hotel/Casino Component Funding
Sources (other than the Approved Equipment Funding Commitments) and all Main
Project Costs allocated pursuant to the Main Project Budget to the Equipment
Component shall be paid only from the GECC Commitment. The Advance Request
shall specify which costs are to be reimbursed by Aladdin Bazaar pursuant to the
Site Work Agreement. In furtherance of the foregoing
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principle, all Advances to be satisfied from the Hotel/Casino Component Funding
Sources shall be made in the following order of priority:
(1) First, from funds on deposit from time to time in the
Borrower's Funds Account until exhausted;
(2) Second, from funds on deposit from time to time in the
Construction Note Disbursement Account (which funds shall be transferred by the
Disbursement Agent to the Borrower's Funds Account after the purchase by
Holdings of Borrower Series A Preferred Membership Interests) and, if
applicable, thereafter, first from the Guaranty Deposit Account and then from
the Loss Proceeds Account until exhausted;
(3) Third, from the Bank Proceeds Account pari passu from the
funds from time to time in the Term B Sub-Account and the Term C Sub-Account;
and
(4) Then, from the Term A Loan to the extent available to be
drawn under the Bank Credit Facility.
Notwithstanding anything to the contrary in this Disbursement
Agreement (x) in no event shall any Advance of funds in the Term B Sub-Account,
the Term C Sub-Account or from the Term A Loan be made (other than to reimburse
the Issuer for draws under one or more Letters of Credit) until all amounts in
the Construction Note Disbursement Account have been transferred to the
Borrower's Funds Account and applied in accordance with this Disbursement
Agreement and (y) all amounts deposited into the Borrower's Funds Account and
the Loss Deposit Account pursuant to clause (a) of Section 3 of the
Environmental Indemnity shall be used to pay for the Indemnified Obligations (as
such term is defined in the Environmental Indemnity) in accordance with the
Environmental Indemnity.
ii. Post-Advance Reallocations. In the event that at any time the
Disbursement Agent determines that the allocations made in any previous Advance
Requests pursuant to the foregoing provisions of this Section 2.5 were erroneous
or inaccurate, the parties shall cooperate
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to rectify such misallocations by allocating future Advances in a manner that
accounts for the previous misallocation or by using such other methods
reasonably determined by the Disbursement Agent.
f. Disbursements.
i. No later than 2:00 p.m. New York, New York time on the requested
Advance Date, or such later date as may occur pursuant to Section 2.4.4, if the
Disbursement Agent has received funds from each Lender required to make an
Advance pursuant to the relevant Advance Request and transferred the funds as
required for such Advance from the Collection Account to the Disbursement
Account, the Disbursement Agent shall transfer all funds (or where applicable,
the funds as to which the request described in the penultimate sentence of
Section 2.4.4(b) has been made) in the Disbursement Account as follows:
(1) to the extent set forth in the Advance Request, by
disbursement to the Interest Payment Account and the Cash Management Account;
and
(2) with respect to amounts requested by the Advance Request to
be paid to the Design/Builder and/or any Contractors and/or Subcontractors, by
disbursement of such amount from the Disbursement Account at the election of the
Administrative Agent, (i) directly to the payee entitled thereto (by check or by
wire transfer) or (ii) to the Servicing Agent's Disbursement Account for further
distribution by the Servicing Agent in accordance with the Servicing and
Collateral Account Agreement.
ii. All disbursements made pursuant to Section 2.6.1 shall satisfy,
in and of themselves, the obligations of the Disbursement Agent, the
Administrative Agent and each Lender hereunder and under the Credit Agreement
and shall be secured by the Loan Documents to the same extent as if made
directly to the Borrower, regardless of the disposition thereof by the payees of
such disbursements.
g. Payments of Interest and Other Amounts Under the Loan Documents;
Obligatory Advances for Letters of Credit. Until the Conversion Date, the
Borrower shall
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include in each Advance Request delivered pursuant to Sections 2.4.1(a) and
2.4.2(a) a request that an Advance be made to pay the interest and all other
amounts (other than Scheduled Amortization and Mandatory Prepayments) that will
become due and payable under or with respect to the Bank Credit Facility on or
after the requested Advance Date under such Advance Request and prior to the
immediately succeeding Advance Date. Each such Advance Request shall specify
the amount and the date on which such interest or other amount will become due
and payable. If the Borrower fails to set forth such information in any Advance
Request or fails to deliver timely any Advance Request, then, with respect to
the Bank Credit Facility, the Administrative Agent may deliver such information
and a request for payment to the Disbursement Agent upon receipt of which the
Disbursement Agent shall revise the Advance Request and related Notice of
Advance Request to provide for such payment. The Borrower acknowledges that
failure of any notice referenced in this Section to be delivered to the
Disbursement Agent shall not in any way exonerate or diminish the Borrower's
obligation to make all payments under the Bank Credit Facility as and when due.
Subject to the provisions of Section 5.1 and the Borrower Collateral Account
Agreement, the Disbursement Agent shall apply amounts on deposit in the Interest
Payment Account to the payment of interest on the Bank Credit Facility on the
date that the Disbursement Agent is advised such amounts will become due and
payable. The Borrower shall not be permitted to obtain Advances for the purpose
of paying interest or other Debt Service at any time after the Conversion Date.
(1) Notwithstanding anything to the contrary in this
Disbursement Agreement (i) upon any draw of all or a portion of any Letter of
Credit issued by one or more of the Lenders and (ii) payment made with respect
to maturing LIBO Rate contracts, at the option of the Lenders, such draw or
payment, as the case may be, shall be deemed to be a request by the Borrower to
make an Advance hereunder. Any such Advance shall be made in accordance with
the allocations in Section 2.5 and the applicable provisions of the Credit
Agreement.
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h. Completion Date Procedures.
(1) No less than ten (10) Business Days prior to the anticipated
Conversion Date, the Borrower shall deliver to the Construction Consultant, the
Disbursement Agent and the Administrative Agent the Borrower's Completion
Certificate with all attachments thereto. The Borrower's Completion Certificate
shall indicate the anticipated Conversion Date and set forth all the other
information required thereby, including the aggregate amount of Main Project
Costs anticipated to become due and payable after the Conversion Date in order
to achieve Final Completion (the "Required Completion Amount"). The Borrower's
Completion Certificate shall set forth each Hotel/Casino Component Funding
Source's portion of the Required Completion Amount calculated in accordance with
Section 2.5.
(2) The Disbursement Agent, the Administrative Agent and the
Construction Consultant shall review the Borrower's Completion Certificate. In
the event that the Disbursement Agent, the Administrative Agent or the
Construction Consultant discovers any mathematical or other minor errors in the
Borrower's Completion Certificate they shall request the Borrower to revise and
resubmit the certificate. Within five (5) days after its receipt of the
Borrower's Completion Certificate, the Construction Consultant shall deliver to
the Disbursement Agent, the Administrative Agent and the Borrower the
Construction Consultant's Completion Certificate.
(3) Upon receipt by the Disbursement Agent of the Construction
Consultant's Completion Certificate confirming, to the extent required thereby,
the certifications set forth in the Borrower's Completion Certificate, but no
later than three (3) days prior to the Conversion Date, the Disbursement Agent
shall, subject to its approval of the Borrower's Completion Certificate,
countersign the Borrower's Completion Certificate and forward the same to the
Administrative Agent.
(4) On the Conversion Date, not later than 2:00 p.m. New York,
New York time, the Lenders shall deposit or cause to be deposited in the Bank
Proceeds Account the Bank Credit Facility's portion of the
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Required Completion Amount calculated in accordance with Section 2.8 and set
forth in the Borrower's Completion Certificate. Thereafter, the Disbursement
Agent shall withdraw any remaining funds on deposit in the Bank Proceeds Account
and deliver such funds to the Administrative Agent to be applied in accordance
with the Credit Agreement.
i. No Approval of Work. The making of any Advance shall not be deemed an
approval or acceptance by the Disbursement Agent, the Administrative Agent, the
Discount Note Indenture Trustee or any Lender of any work, labor, supplies,
materials or equipment furnished or supplied with respect to the Main Project.
j. Security. The Obligations shall be secured by the Main Project
Security in accordance with the Loan Documents. Further, all funds advanced by
the Lenders to complete the Main Project or to protect the rights and interests
of the Secured Parties under the Loan Documents are to be added to the total
indebtedness secured by the Deed of Trust. All sums so advanced shall be
secured by the Deed of Trust with the same priority of lien as the security for
any other obligations secured thereunder.
ARTICLE 3. - CONDITIONS PRECEDENT TO
THE INITIAL ADVANCE AND SUBSEQUENT ADVANCES
a. Conditions Precedent to the Initial Advance. The Lenders shall have
no obligation hereunder or under the Credit Agreement to make the Initial
Advance until the prior satisfaction of each of the conditions precedent
hereinafter set forth in this Section 3.1. Subject to Section 3.3, by executing
this Disbursement Agreement (or, in the case of the Lenders, by becoming a party
to the Credit Agreement) each of the Administrative Agent and the Lenders shall
be deemed to have confirmed that it has become satisfied that each of the
following conditions precedent to the Initial Advance has been satisfied.
i. Satisfaction of Conditions in the Credit Agreement. All
conditions in Section 5.1 of the Credit Agreement shall be satisfied by the
Borrower or otherwise
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waived in writing by the Administrative Agent in its sole discretion.
ii. Authority of the Borrower. Delivery to the Administrative Agent
of (x) a certified copy of the Organizational Documents of the Borrower,
certified by an Authorized Representative of the Borrower and (y) a copy of one
or more resolutions or other authorizations of the manager of the Borrower
certified by the Authorized Representative of such manager as being in full
force and effect on the Closing Date, authorizing the Advances herein provided
for (subject to satisfaction of the conditions set forth in Article 3), and the
execution, delivery and performance of this Disbursement Agreement and the other
Operative Documents and any instruments or agreements required hereunder or
thereunder to which each such Person is a party.
iii. Incumbency of the Borrower. Delivery to the Administrative Agent
of a certificate from the Borrower, signed by an Authorized Representative of
the Borrower and dated as of the Closing Date, as to the incumbency of the
Person or Persons authorized to execute and deliver this Disbursement Agreement
and the other Operative Documents and any instruments or agreements required
hereunder or thereunder to which each such Person is a party.
iv. Other Parties. With respect to each of the Aladdin Parties
(other than the Borrower), the London Clubs Parties, Aladdin Bazaar, ABH and the
Energy Project Provider, delivery to the Administrative Agent of (w) a certified
copy of the Organizational Documents of such Person, (x) if required by the
Administrative Agent, a certificate issued by the Secretary of State of Nevada
or, if other than the State of Nevada, the state (or country) of formation of
such Person certifying that such Person is in good standing and is qualified to
do business in Nevada and (if applicable) its state (or country) of formation,
(y) a fully executed certificate as to the incumbency of the Persons authorized
to execute and deliver the Operative Documents and any other instruments or
agreements contemplated hereby to which such Person is a party, and (z) a copy
of one or more resolutions for each of the foregoing Persons, certified by the
appropriate officer or manager of such Person as being in full
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force and effect as of the Closing Date, authorizing the execution, delivery and
performance of the Operative Documents and any other instruments and agreements
with respect thereto to which such Person is a party.
v. Corporate Proceedings. All corporate, limited liability company,
partnership and legal proceedings and all instruments in connection with the
transactions contemplated by this Disbursement Agreement and the Loan Documents
shall be reasonably satisfactory in form and substance to the Administrative
Agent and the Administrative Agent shall have received all information, legal
and technical opinions and copies of all documents, including records of
corporate, limited liability company or partnership proceedings and copies of
any approval by any Governmental Instrumentality required in connection with any
transaction herein contemplated, which the Administrative Agent may reasonably
have requested in connection herewith, such documents to be reasonably
satisfactory in form and substance to the Administrative Agent and where
appropriate to be certified by the requisite corporate, limited liability
company or partnership officers or Governmental Instrumentalities.
vi. Insurance.
(1) Policies. Insurance complying with the requirements of
Exhibit E shall be in place and in full force and effect.
(2) The Borrower's Insurance Certificates. Delivery to the
Administrative Agent of (i) the Borrower's Insurance Broker's Closing
Certificate, in substantially the form of Exhibit B-2 attached hereto and
otherwise in form and substance satisfactory to the Administrative Agent, from
the Borrower's insurance broker(s), dated as of the Closing Date and identifying
underwriters, type of insurance, insurance limits and policy terms, listing the
special provisions required as set forth in Exhibit E, describing the insurance
obtained and stating that such insurance is in full force and effect and that
all premiums then due thereon have been paid and that, in the Borrower's
insurance broker's opinion, such insurance complies with Exhibit E, and (ii)
certified copies of all policies evidencing such insurance
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naming the Administrative Agent as loss payee and, with respect to liability
insurance, the Administrative Agent and the Lenders as additional insureds and
otherwise in form and substance satisfactory to the Administrative Agent.
(3) Design/Builder's Insurance Certificates. Delivery to the
Administrative Agent of (x) the Borrower's Insurance Broker's Closing
Certificate, in form and substance satisfactory to the Administrative Agent,
with respect to insurance under the Design/Build Contract, dated as of the
Closing Date and identifying underwriters, type of insurance, insurance limits
and policy terms, listing the special provisions required to be maintained by
the Design/Builder as set forth in the Design/Build Contract, describing the
insurance obtained and stating that such insurance is in full force and effect
and that all premiums then due thereon have been paid and that such insurance
complies with the Design/Build Contract and (y) certified copies of all policies
evidencing such insurance naming the Administrative Agent as loss payee and the
Administrative Agent and the Lenders as additional insureds and otherwise in
form and substance satisfactory to the Administrative Agent.
(4) Insurance Consultant Report. Delivery to the Administrative
Agent of the Insurance Consultant's Closing Certificate with the Insurance
Consultant's report, in form and substance satisfactory to the Administrative
Agent, attached thereto.
(5) Energy Project Provider's Insurance Certificates. Delivery
to the Administrative Agent of (x) a certificate of the Energy Project Provider,
in form and substance satisfactory to the Administrative Agent, with respect to
insurance under the Energy Project Ground Lease, dated as of the Closing Date
and identifying underwriters, type of insurance, insurance limits and policy
terms, listing the special provisions required to be maintained by the Energy
Project Provider as set forth in the Energy Project Ground Lease, describing the
insurance obtained and stating that such insurance is in full force and effect
and that all premiums then due thereon have been paid and that such insurance
complies with the Energy Project Ground Lease and (y) certified copies of all
policies evidencing such insurance naming the Energy
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Project Provider as loss payee and the Administrative Agent and the Lenders as
additional insureds and otherwise in form and substance satisfactory to the
Administrative Agent.
vii. Zoning. The Administrative Agent shall have received a
certificate from the applicable Governmental Instrumentality with respect to the
zoning of the Site, together with an opinion from counsel satisfactory to the
Administrative Agent that the Hotel/Casino, the Mall Project, the Music Project,
and the Energy Project are zoned in a classification which will permit the
construction and use thereof for all purposes intended. The Borrower shall
deliver to the Lenders evidence reasonably satisfactory to the Lenders that the
Hotel/Casino, the Mall Project, the Music Project, and the Energy Project upon
completion thereof will comply with all applicable zoning, subdivision, land
use, environmental, condominium and building statutes, codes, ordinances,
regulations, variances and special regulations.
viii. Operation and Management Plan. The Borrower shall deliver an
operational and management plan for the Hotel/Casino which shall be in form and
content reasonably satisfactory to the Administrative Agent. Such plan shall
specify all payments to be made to the Aladdin Parties and/or the London Clubs
Parties, and Affiliates thereof, all of which shall be reasonably satisfactory
to the Administrative Agent and all of which shall be subject and subordinate in
all respects to all payments to be made under the Loan Documents and the GECC
Commitment and which may be terminated by the Administrative Agent without
premium or penalty after a default exists under the Loan Documents subject,
however, in the case of the Salle Privee Agreement, to the terms of the
Assignment of Salle Privee Agreement and the right of the Borrower to make the
Restricted Payments as set forth in clauses (e) and (f) of Section 7.2.6 of the
Credit Agreement.
ix. Borrower's Closing Certificate. Delivery to the Administrative
Agent of the Borrower's Closing Certificate signed by an Authorized
Representative of the Borrower.
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x. Construction Consultant's Certificates and Report. Delivery to
the Administrative Agent of the Construction Consultant's Closing Certificate
with the Construction Consultant's Report in form and substance satisfactory to
the Administrative Agent, attached thereto.
xi. Certificates and Report from the Architect of Record. Delivery
to the Administrative Agent of the Architect of Record's Closing Certificate in
form and substance satisfactory to the Administrative Agent.
xii. Restrictions on Discount Noteholders. The restrictions on, and
the subordination of the interests of, the Discount Noteholders as set forth in
the Discount Note Indenture shall continue to be in full force and effect and
binding on the Discount Noteholders.
xiii. Fees. All amounts required to be paid to or deposited with the
Disbursement Agent, the Administrative Agent, the Servicing Agent or the
Independent Consultants and all taxes, fees and other costs payable in
connection with the execution, delivery, recordation and filing of the documents
and instruments referred to in this Section 3.1 and in Section 5.1 of the Credit
Agreement, shall have been paid or deposited, as the case may be, in full. The
Borrower shall have paid all fees, expenses and other charges then due and
payable by it under this Disbursement Agreement or the other Loan Documents or
under any agreements between the Borrower and any of the Independent
Consultants.
xiv. Main Project Budget. Delivery to the Administrative Agent and
the Construction Consultant of the Main Project Budget, which Main Project
Budget shall be satisfactory to the Construction Consultant, as and to the
extent certified to in the Construction Consultant's Closing Certificate.
xv. Construction Benchmark Schedule. Delivery to the Administrative
Agent, the providers of the Approved Equipment Funding Commitments and the
Construction Consultant of the Construction Benchmark Schedule, as certified in
the Construction Consultant's Closing Certificate.
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xvi. Events of Default. No Default or Event of Default shall have
occurred and be continuing.
xvii. Permits.
(1) All Permits listed in Exhibit D as required to have been
obtained by the Borrower or any other Person by the Closing Date shall have been
issued and be in full force and effect and not subject to current legal
proceedings or to any unsatisfied conditions (that are required to be satisfied
by the Closing Date) that could reasonably be expected to allow material
modification or revocation, and all applicable appeal periods with respect
thereto shall have expired; and
(2) With respect to any of the Permits described in Exhibit E as
not yet required to be obtained by the Closing Date, (x) each such Permit
(except approval by the applicable Governmental Instrumentalities of the
creation of the Mall Project Parcel and the Music Project Parcel as separate
legal parcels under Nevada subdivision law and Gaming Licenses) is of a type
that is routinely granted on application and (y) no facts or circumstances exist
which indicate that any such Permit will not be timely obtainable without
material difficulty, expense or delay by the Borrower or the applicable Person,
respectively, prior to the time that it becomes required.
xviii. Third Party Consents. Delivery to the Administrative Agent of
any required Consents from (u) the Design/Builder, (v) Fluor, (w) each Major
Contractor that is party to a Contract with the Borrower, (x) the Energy Project
Provider, (y) the Architect of Record, and (z) each other party (other than the
Borrower) to the Material Main Project Documents, each in form and substance
satisfactory to the Administrative Agent.
xix. Representations and Warranties. Both before and after giving
effect to the Initial Advance the following statements shall be true and
correct:
(1) the accuracy of the representations and warranties contained
in Article VI of the Credit Agreement (excluding, however, those contained in
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Section 6.7 of the Credit Agreement) and each other Operative Document as if
made on the date of the Advance (except those that relate to a different date)
unless the failure of the foregoing to be the case would not have a Material
Adverse Effect on the Borrower or, to the Knowledge of the Borrower, the Project
Parties;
(2) except as disclosed by the Borrower to the Agents and the
Lenders pursuant to Section 6.7 of the Credit Agreement there exists
(a) no material litigation which could reasonably be expected to have
a Material Adverse Effect on the Borrower or any other Project Party or which
purports to affect the legality, validity or enforceability of this Disbursement
Agreement or any other Operative Document; and
(b) no material development shall have occurred in any litigation
disclosed pursuant to Section 6.7 of the Credit Agreement which could reasonably
be expected to have a Material Adverse Effect on the Borrower or the Project
Parties;
(3) the absence of any material adverse change in (x) the
financial condition, business, property or prospects of the Borrower or on its
ability to perform in all material respects its obligations under any Operative
Document to which it is a party or (y) the financial condition, business,
property or prospects of any other Project Party affecting its ability to
perform in all material respects its obligations under any Operative Document to
which it is a party or (z) a material impairment of the validity of
enforceability of, or a material impairment of the rights, remedies or benefits
available to the Administrative Agent, the Issuer or the Lenders under this
Disbursement Agreement or any other Operative Document; and
(4) the absence of any default or an event of default with
respect to the Operative Documents which would be reasonably likely to cause a
Material Adverse Effect on the Borrower or, to the Borrower's Knowledge, the
Project Parties.
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xx. Service of Process. Delivery to the Administrative Agent of a
letter from the Process Agent consenting to its appointment by the Aladdin
Parties and the London Clubs Parties, and each other party (other than the
Borrower) to a Material Main Project Document (other than the Design/Builder and
Fluor), in each case in form and substance acceptable to the Administrative
Agent, as each such Person's agent to receive service of process in New York,
New York.
xxi. Utility Availability. The Construction Consultant shall have
become satisfied, as certified in the Construction Consultant's Closing
Certificate, that arrangements, which are reflected accurately in the Main
Project Budget, shall have been or will be made under the Design/Build Contract
or otherwise on commercially reasonable terms for the provision of all services,
materials and utilities necessary for the construction, operation and
maintenance of the Main Project as contemplated by the Operative Documents and
the Plans and Specifications.
xxii. Establishing of Accounts. Each of the Accounts shall have been
established pursuant hereto and the Borrower Collateral Account Agreement and
the Holdings Collateral Account Agreement, and all amounts which are required to
be deposited in such Accounts shall have been deposited therein.
xxiii. Funding of London Clubs Contribution; Proceeds of the Discount
Notes. Delivery to each of the Administrative Agent and the Disbursement Agent
of evidence reasonably satisfactory to each such Person that:
(1) the London Clubs Cash Contribution has been (1) deposited in
the Borrower's Funds Account and/or (2) applied to payment of Main Project
Costs, as certified by the Construction Consultant in the Construction
Consultant's Closing Certificate;
(2) the Discount Notes have been issued and that proceeds
thereof in an amount equal to $115,000,000 have been (1) deposited in the
Construction Note Disbursement Account and/or (2) applied to payment of Main
Project Costs as certified by the Construction
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Consultant in the Construction Consultant's Closing Certificate; and
(3) Land Equity in the amount of $67,000,000 has been
contributed to the Borrower (the valuations of which shall take into account the
subsequent releases of the Music Project Parcel and the reductions of certain
indebtedness), as such amount is increased by cash payments for Main Project
Costs, made by or on behalf of the Borrower in the amount of no less than
$7,000,000, as certified by the Construction Consultant in the Construction
Consultant's Closing Certificate.
xxiv. A.L.T.A. Surveys. The Administrative Agent shall have received
an A.L.T.A. survey of the Site and, if available, the Site Easements,
satisfactory in form and substance to the Title Insurer and the Administrative
Agent, reasonably current and certified to each such Person by a licensed
surveyor satisfactory to each such Person, showing (u) as to the Site, the exact
location and dimensions thereof, including the location of all means of access
thereto and all easements relating thereto and showing the perimeter within
which all foundations are or are to be located; (v) as to the Site Easements,
the exact location and dimensions thereof to the extent capable of being
described, including the location of all means of access thereto, and all
improvements or other encroachments in or on the Site Easements; (w) the
existing utility facilities servicing the Main Project (including water,
electricity, gas, telephone, sanitary sewer and storm water distribution and
detention facilities); (x) that there are no gaps, gores, projections,
protrusions or other survey defects other than the Permitted Exceptions; (y)
whether the Site or any portion thereof is located in a special earthquake or
flood hazard zone; and (z) that there are no other matters that could reasonably
be expected to be disclosed by a survey constituting a defect in title other
than the Permitted Exceptions.
xxv. Title Policies. The Borrower shall have delivered to the
Administrative Agent the Title Policies in the amount of $410,000,000. Each
such Title Policy shall (w) include such endorsements as are reasonably required
by the Administrative Agent, (x) be reinsured by such reinsurance as is
satisfactory to the Administrative
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Agent, (y) be issued by the Title Insurer in form and substance satisfactory to
the Administrative Agent, and (z) insure that:
(1) the Borrower has a good, fee simple title to the Site and
the Site Easements, free and clear of Liens (except the Permitted Liens),
encumbrances (except the Permitted Encumbrances) and other exceptions to title
(except the Permitted Exceptions);
(2) the Energy Project Provider has a good, leasehold interest
to the portion of the Site covered by the Energy Project Ground Lease, free and
clear of Liens (except the Permitted Liens), encumbrances (except the Permitted
Encumbrances) and other exceptions to title (except the Permitted Exceptions);
(3) Aladdin Bazaar has a good, leasehold interest to the portion
of the Site covered by the Mall Project Ground Lease, free and clear of Liens
(except the Permitted Liens), encumbrances (except the Permitted Encumbrances)
and other exceptions (except the Permitted Exceptions);
(4) Aladdin Music has a good, leasehold interest to the portion
of the Site covered by the Aladdin Ground Lease, free and clear of Liens (except
the Permitted Liens), encumbrances (except the Permitted Encumbrances) and other
exceptions to title (except the Permitted Exceptions);
(5) the Deed of Trust is a valid first Lien on the Trust Estate
entitled to the priority described therein, free and clear of all Liens (except
the Permitted Liens), encumbrances (except the Permitted Encumbrances) and
exceptions (except the Permitted Exceptions);
(6) the Lenders have the right to foreclose against the portion
of the Site which is not subject to the Mall Project Ground Lease and the Music
Project Ground Lease and that no forfeiture or right of reversion exists due to
covenants, restrictions or encroachments; and
(7) the Main Project and the Energy Project conform with all
applicable zoning laws.
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xxvi. Searches. The Borrower shall deliver such UCC, bankruptcy,
judgment, federal tax lien, building code violation and other searches of public
records as the Administrative Agent may reasonably require with respect to the
Aladdin Parties, the London Clubs Parties, the Site and the Main Project.
xxvii. Plans and Specifications. The Borrower shall have delivered
the Plans and Specifications to the Construction Consultant for each
Construction Component and the Main Project as a whole in form and substance
satisfactory to the Construction Consultant, as certified to in the Construction
Consultant's Closing Certificate. The improvements to be constructed which
constitute the Hotel/Casino shall be no less than the Minimum Aladdin
Facilities. Subject to (a) finalizing the Plans and Specifications in a manner
that reflects a natural evolution from the Plans and Specifications as of the
Closing Date in a manner consistent with Section 7.1.16 of the Credit Agreement
and (b) submission of the finalized Plans and Specifications to the proper
Governmental Instrumentality for approval, such Plans and Specifications shall
constitute Final Plans and Specifications. Following the review and approval of
the Plans and Specifications, no material modifications may be made thereto
without the prior written consent of the Administrative Agent, which consent
shall not be unreasonably withheld or delayed if, after giving effect thereto,
(x) such modifications do not (1) affect the obligation of the Borrower to
construct Improvements which are not less than the Minimum Aladdin Facilities,
(2) affect the obligation of the Borrower to Complete such Improvements (which
shall not be less than the Minimum Aladdin Facilities) on or before the Outside
Completion Deadline or (3) require any adjustment to the Guaranteed Maximum
Price or the Design/Build Contract Time, (y) the Construction Consultant has
delivered its certificate to the Discount Note Indenture Trustee which confirms
the statements set forth in clause (x), and (z) the Completion Guarantors have
consented in writing to such modifications.
xxviii. Corporation and Capital Structure; Management. The
organizational structure, capital structure and ownership of the Aladdin
Parties, the London
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Clubs Parties, the Design/Builder, Fluor, the Energy Project Provider and the
Mall Project shall be satisfactory to the Administrative Agent. The management
structure of the Aladdin Parties and the London Clubs Parties shall be
satisfactory to the Administrative Agent, and the Administrative Agent shall
have received copies of, and shall be satisfied with the form and substance of,
any and all employment agreements with senior management of the Borrower.
xxix. Real Estate Appraisal. The Administrative Agent shall have
received an appraisal of the Main Project from an independent real estate
appraiser satisfactory to the Administrative Agent, in form, scope and substance
satisfactory to the Administrative Agent and satisfying the requirements of any
applicable laws and regulations.
xxx. Environmental Reports. The Administrative Agent shall have
received reports and other information, in form, scope and substance
satisfactory to the Administrative Agent, regarding Environmental Matters
relating to the Borrower and the Site, which reports shall include (x) a Phase I
environmental assessment for the Site (the "Phase I Report") which (1) conforms
to the ASTM Standard Practice for Environmental Site Assessments: Phase I
Environmental Site Assessment Process, E 1527 and (2) was updated no more than
one month prior to the Closing Date by the Environmental Consultant or another
environmental consulting firm or firms reasonably satisfactory to the
Administrative Agent and (y) a current compliance audit setting forth an
assessment of the Borrower and the Site, current and past compliance with the
Environmental Laws and an estimate of the cost of rectifying any non-compliance
with current Environmental Laws identified therein and the cost of compliance
with reasonably anticipated future Environmental Laws identified therein.
xxxi. Liens. The Borrower shall have delivered or caused to be
delivered to the Administrative Agent:
(1) Unconditional Releases. Duly executed acknowledgments of
payments and unconditional releases of mechanics' and materialmen's liens in
form
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and substance reasonably satisfactory to the Administrative Agent (in
consultation with the Construction Consultant) from the Design/Builder and each
Contractor and Subcontractor for all work, services and materials, including
equipment and fixtures of all kinds, done, performed or furnished for the
construction of the Main Project through the Closing Date with a value or
contract price in excess of $50,000, except for such work, services and
materials the payment for which is being disputed in good faith, by appropriate
means and with appropriate reserves by the Borrower; and
(2) Conditional Releases. Duly executed acknowledgments of
payments and releases of mechanics' and materialmen's Liens in form and
substance reasonably satisfactory to the Administrative Agent (in consultation
with the Construction Consultant) from the Design/Builder and each Contractor
and Subcontractor for all work, services and materials, including equipment and
fixtures of all kinds, done, performed or furnished for the construction of the
Main Project through the Closing Date with a value or contract price in excess
of $50,000, except for work, services or materials the payment for which is
being disputed in good faith, by appropriate means and with appropriate reserves
by the Borrower or which will be discharged after giving effect to such Advance.
xxxii. In Balance Requirement. The Unallocated Contingency Balance
shall equal or exceed the Required Minimum Contingency and the Available Funds
shall equal or exceed the Remaining Costs as determined by the Administrative
Agent and the Construction Consultant.
xxxiii. No Restrictions. No order, judgment or decree of any court,
arbitrator or governmental authority shall purport to enjoin or restrain the
Lenders, the Administrative Agent, the Disbursement Agent and/or the Discount
Note Indenture Trustee from entering into this Disbursement Agreement or any
other documents to which any of them is a party with respect to the transactions
contemplated by this Disbursement Agreement.
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xxxiv. Discount Notes; Preferred Shareholders. The form and
content of the Discount Note Indenture and rights of the Discount Noteholders
and the Series A Preferred Membership Interests thereunder shall be satisfactory
to the Administrative Agent in its sole discretion.
xxxv. Violation of Certain Regulations. The entering into of this
Disbursement Agreement shall not violate any law, including Regulation G,
Regulation T, Regulation U or Regulation X of the Board of Governors of the FRS
Board.
xxxvi. Financial Covenants. Each of the Completion Guarantors
under the Completion Guaranty and the Sponsors under the Keep-Well Agreement
shall be in compliance with all of the financial covenants applicable to it
thereunder, if any.
xxxvii. Initial Advance Prior to February 27, 1998. The Initial
Advance shall have occurred on or before February 27, 1998, time being of the
essence as to the Borrower. If the Initial Advance does not occur by February
27, 1998, as aforesaid, the Lenders shall have the right to terminate the Credit
Agreement, this Disbursement Agreement and all of the other Loan Documents
without any obligation to return or refund any amount paid to the Lenders under
the Loan Documents and/or the Commitment Letter.
xxxviii. Other Documents. The Administrative Agent shall have
received such other documents and evidence as it may reasonably request in
connection with the transactions contemplated hereby.
xxxix. Satisfactory Form and Substance. All documents executed or
submitted pursuant hereto by or on behalf of the Borrower, any of the other
Aladdin Parties, any of the London Clubs Parties and any of the Project Parties
shall be reasonably satisfactory in form and substance to the Administrative
Agent and its counsel and the Administrative Agent and its counsel shall have
received all information, approvals, opinions, documents or instruments as the
Administrative Agent or its counsel may reasonably request.
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xl. Credit Agreement. The Administrative Agent shall have received,
with counterparts for each Lender, the Credit Agreement duly executed by the
parties thereto, which shall be in full force and effect.
b. Conditions Precedent to Advances from the Accounts. The obligation of
the Disbursement Agent to approve Advances (other than, so long as no Default or
Event of Default shall have occurred and be continuing, from the Cash Management
Account for which no approval of the Disbursement Agent is required) and make
disbursements from the Account from time to time is subject to the prior
satisfaction of each of the following conditions precedent:
i. Credit Agreement Conditions to Advances. All conditions to the
making of any Advances as set forth in Section 5.2 of the Credit Agreement shall
be satisfied or otherwise waived in writing by the Administrative Agent in its
sole discretion.
ii. Operative Documents. Each Operative Document and, prior to the
time that an Advance is made from the Bank Proceeds Account or a Letter of
Credit is issued pursuant to the Credit Agreement, the Noteholder Completion
Guaranty shall be in full force and effect, without amendment since the
respective date of its execution and delivery, and in a form which was approved
by the Administrative Agent, except (x) as otherwise permitted pursuant to the
Credit Agreement and (y) to the extent the Borrower has entered into a
replacement Operative Document as permitted by the Credit Agreement or if
pursuant thereto the Borrower is not required to enter into a replacement
Operative Document, and each certificate delivered by the Borrower with respect
to any such document shall be true and correct in all material respects, as
certified by the Borrower in the relevant Advance Request. The Disbursement
Agent shall be entitled to rely on a certification by the Borrower in
determining that this condition has been satisfied unless the Disbursement Agent
shall have actual knowledge that the Borrower's certification is inaccurate.
iii. Representations and Warranties. Both before and after giving
effect to any Advance, the following statements shall be true and correct:
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(1) the accuracy of the representations and warranties contained
in Article VI of the Credit Agreement (excluding, however, those contained in
Section 6.7 of the Credit Agreement), each other Operative Document and, during
such time as the Discount Note Indenture Trustee is entitled to receive a
Preliminary Notice of Advance Request pursuant to Section 2.4.1(a) or Final
Notice of Advance Request pursuant to Section 2.4.2.(b), the Noteholder
Completion Guaranty as if made on the date of the Advance (except those that
relate to a different date) unless the failure of the foregoing to be the case
would not have a Material Adverse Effect on the Borrower or, to the Knowledge of
the Borrower, the Project Parties;
(2) except as disclosed by the Borrower to the Agents and the
Lenders pursuant to Section 6.7 of the Credit Agreement there exists
(a) no material litigation which could reasonably be expected to have
a Material Adverse Effect or which purports to affect the legality, validity or
enforceability of this Disbursement Agreement, any other Operative Document or,
during such time as the Discount Note Indenture Trustee is entitled to receive a
Preliminary Notice of Advance Request pursuant to Section 2.4.1(a) or Final
Notice of Advance Request pursuant to Section 2.4.2.(b), the Noteholder
Completion Guaranty; and
(b) no material development shall have occurred in any litigation
disclosed pursuant to Section 6.7 of the Credit Agreement which could reasonably
be expected to have a Material Adverse Effect on the Borrower or the Project
Parties;
(3) the absence of any material adverse change in (i) the
financial condition, business, property or prospects of the Borrower or on its
ability to perform in all material respects its obligations under any Operative
Document to which it is a party or (ii) the financial condition, business,
property or prospects of any other Project Party affecting its ability to
perform in all material respects its obligations under any Operative
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Document to which it is a party or, during such time as the Discount Note
Indenture Trustee is entitled to receive a Preliminary Notice of Advance Request
pursuant to Section 2.4.1(a) or Final Notice of Advance Request pursuant to
Section 2.4.2.(b), the Noteholder Completion Guaranty or (iii) a material
impairment of the validity of enforceability of, or a material impairment of the
rights, remedies or benefits available to the Administrative Agent, the Issuer
or the Lenders under this Disbursement Agreement, any other Operative Document
or, during such time as the Discount Note Indenture Trustee is entitled to
receive a Preliminary Notice of Advance Request pursuant to Section 2.4.1(a) or
Final Notice of Advance Request pursuant to Section 2.4.2.(b), the Discount Note
Indenture Trustee under the Noteholder Completion Guaranty;
(4) the absence of any default or an event of default with
respect to the Operative Documents or, during such time as the Discount Note
Indenture Trustee is entitled to receive a Preliminary Notice of Advance Request
pursuant to Section 2.4.1(a) or Final Notice of Advance Request pursuant to
Section 2.4.2.(b), the Noteholder Completion Guaranty which would be reasonably
likely to cause a Material Adverse Effect.
The Disbursement Agent shall be entitled to rely on a certification by the
Borrower in the relevant Advance Request in determining that this condition has
been satisfied unless the Disbursement Agent shall have actual knowledge that
the Borrower's certification is inaccurate.
iv. Events of Default. No Default or Event of Default shall have
occurred and be continuing or, after giving effect to such Advance, could
reasonably be expected to result, as certified by the Borrower in the relevant
Advance Request, and no default or event which, with the giving of notice and/or
passage of time, would constitute a default shall have occurred and be
continuing (x) under the Operative Documents (other than the Theater Lease) or,
during such time as the Discount Note Indenture Trustee is entitled to receive a
Preliminary Notice of Advance Request pursuant to Section 2.4.1(a) or Final
Notice of Advance Request pursuant to Section
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2.4.2.(b), the Noteholder Completion Guaranty, (y) by the Borrower under the
Theater Lease, if in effect or (z) by Aladdin Music under the Theater Lease, if
in effect, prior to the completion of the renovations required to be made by
Aladdin Music under the Theater Lease unless such renovations are being
completed by or on behalf of the Borrower in accordance with the Credit
Agreement, this Disbursement Agreement and the Completion Guaranty. The
Disbursement Agent shall be entitled to rely on a certification by the Borrower
in determining that this condition has been satisfied unless the Disbursement
Agent shall (x) have received notice from the Administrative Agent that a
Default an Event of Default has occurred or (y) otherwise shall have acquired
actual knowledge that the Borrower's certification is inaccurate. Prior to the
time that an Advance is made from the Bank Proceeds Account or a Letter of
Credit is issued pursuant to the Credit Agreement, the Disbursement Agent shall
not waive this condition without the written consent of the Discount Note
Indenture Trustee.
v. Notice of Advance Request. The Administrative Agent, and the
Disbursement Agent and the Discount Note Indenture Trustee (but only so long as
amounts are on deposit in the Construction Note Disbursement Amount) shall have
received a Preliminary Notice of Advance Request in accordance with Section
2.4.1(b) and a Final Notice of Advance Request in accordance with Section
2.4.2(b) with respect to the requested Advance.
vi. Advance Request and Certificate. The Borrower shall have
delivered to the Administrative Agent, the Disbursement Agent, the Servicing
Agent and the Discount Note Indenture Trustee (but only so long as amounts are
on deposit in the Construction Note Disbursement Amount) and the Construction
Consultant a Preliminary Advance Request for the requested Advance in accordance
with Section 2.4.1 and a Final Advance Request for the requested Advance in
accordance with Section 2.4.2, in each case, with all attachments, exhibits and
certificates required by Section 2.4.1 or 2.4.2, as the case may be. Such
Advance Request shall request an Advance in an amount sufficient to pay all
amounts due and payable for work performed on the Main Project through the last
day of the period covered by such Advance Request. The
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Disbursement Agent shall have reviewed and evaluated the same as provided in
Section 2.4.3 and, subject to Section 2.4.3(b)(ii), shall not have become aware
of any material error, inaccuracy, misstatement or omission of fact in an
Advance Request or an attachment, exhibit or certificate attached thereto or
information provided by the Borrower upon the request of the Disbursement Agent.
vii. Construction Consultant's Certificate. The Administrative Agent,
the Disbursement Agent and the Discount Note Indenture Trustee (but only so long
as amounts are on deposit in the Construction Note Disbursement Amount) shall
have received the Construction Consultant's Certificate with respect to the
requested Advance as and when required by Section 2.4.2(c), substantially in the
form of Exhibit C, approving (subject to the proviso in Section 2.4.2(c)) the
corresponding Advance Request.
viii. Liens. The Borrower shall have delivered or caused to be
delivered to the Administrative Agent and the Disbursement Agent:
(1) Unconditional Releases. Duly executed acknowledgments of
payments and unconditional releases of mechanics' and materialmen's liens in
form and substance reasonably satisfactory to the Administrative Agent and the
Disbursement Agent (in consultation with the Construction Consultant) from the
Design/Builder and each Contractor and Subcontractor for all work, services and
materials, including equipment and fixtures of all kinds, done, performed or
furnished for the construction of the Main Project through the date on which the
Initial Advance is to be made or, if applicable, through the last day covered by
the immediately preceding Advance Request with a value or contract price in
excess of $50,000, except for such work, services and materials the payment for
which is being disputed in good faith, by appropriate means and with appropriate
reserves by the Borrower; and
(2) Conditional Releases. Duly executed acknowledgments of
payments and releases of mechanics' and materialmen's liens in form and
substance reasonably satisfactory to the Administrative Agent and the
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Disbursement Agent (in consultation with the Construction Consultant) from the
Design/Builder and each Contractor and Subcontractor for all work, services and
materials, including equipment and fixtures of all kinds, done, performed or
furnished for the construction of the Main Project with a value or price in
excess of $50,000 through the date on which the Initial Advance is to be made
or, if applicable, through the last day covered by the immediately preceding
Advance Request, conditioned only upon receiving payment from the proceeds of
the requested Advance, except for work, services or materials the payment for
which is being disputed in good faith, by appropriate means and with appropriate
reserves by the Borrower.
ix. Title Policy Endorsement. The Disbursement Agent shall have
received an endorsement to the Title Policies in the form of a 122 CLTA
Endorsement insuring the continuing first priority of the Lien of the Deed of
Trust as security for the requested Advance on the date such Advance is made and
insuring that (i) as of the date of the Initial Advance or, if applicable, since
the previous Advance (if a subsequent Advance), there has been no change in the
condition of title unless permitted by the Loan Documents, and (ii) there are no
intervening Liens or encumbrances (including inchoate mechanic's liens) which
may then or thereafter take priority over the respective Lien of the Deed of
Trust (other than the Permitted Encumbrances and such intervening Liens or
encumbrances securing amounts the payment of which is being disputed in good
faith by the Borrower, so long as the Disbursement Agent has received
confirmation from the Administrative Agent that the Title Insurers have
delivered to the Administrative Agent an endorsement to the Title Policies
assuring against loss to the Lenders due to the priority of such Lien or
encumbrance). If additional Term B Loans or Term C Loans are being made
pursuant to Section 2.3.4 of the Credit Agreement, the Administrative Agent
shall have received satisfactory assurances from the Title Insurers that the
lien of the Deed of Trust shall continue to be insured by the Title Policies as
a first priority lien against the portion of the Site owned by the Borrower at
such time, and the Title Policies shall be re-issued or re-dated as of the date
the additional Loans are made pursuant to said Section 2.3.4, of the Credit
Agreement with a liability limit
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equal to $415,000,000, subject only to Permitted Encumbrances and Permitted
Exceptions. The Title Policies, as re-issued or re-dated, shall expressly insure
against all mechanics' liens and shall not contain any bankruptcy, fraudulent
conveyance or other creditors' rights exclusion from coverage.
x. Permits. The Borrower shall have certified (and, as set forth in
the Construction Consultant's certificate related to the requested Advance, the
Construction Consultant shall not have become aware of any inaccuracies in the
Borrower's certification) that:
(1) all Permits described in Exhibit D as required to have been
obtained by the Borrower or any other Person by the date of such Advance shall
have been issued and be in full force and effect and not subject to current
legal proceedings or to any unsatisfied conditions (that are required to be
satisfied by the date of the requested Advance) that could reasonably be
expected to allow material modification or revocation, and all applicable appeal
periods with respect thereto shall have expired;
(2) with respect to any of the Permits described in Exhibit D as
not yet required to be obtained, (i) each such Permit is of a type that is
routinely granted on application (except approval by the applicable Governmental
Instrumentalities of the creation of the Mall Project Parcel and the Music
Project Parcel as separate legal parcels under Nevada subdivision law and Gaming
Licenses) and (ii) no facts or circumstances exist which indicate that any such
Permit will not be timely obtainable without material difficulty, expense or
delay by the Borrower or the applicable Person, respectively, prior to the time
that it becomes required; and
(3) with respect to the approval by the applicable Governmental
Instrumentalities of the creation of the Mall Project Parcel and the Music
Project is separate legal parcels under Nevada subdivision law, (i) the status
of such approval and (ii) no facts or circumstances exist which indicate that
any such approval will not be timely obtainable without material difficulty,
expense or delay.
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xi. Additional Documents. With respect to any Operative Documents
entered into or obtained, transferred or required (whether because of the status
of the construction or operation of the Main Project or otherwise) since the
date of the most recent Advance (if a subsequent Advance) there shall be
redelivery of such matters as are described in Section 3.1.1, Section 3.1.4 (to
the extent such Operative Document is, is in substitution of or is a replacement
for another Operative Document) and, if requested by the Administrative Agent or
the Disbursement Agent, Section 5.1.2 of the Credit Agreement, in each case to
the extent not previously addressed. If such delivery or redelivery has not
been made, the portion of the Advance covering any payment to be made pursuant
to such Operative Documents shall not be advanced by the Disbursement Agent
until the conditions set forth herein have been satisfied. If the Theater Lease
has not been previously approved by the Administrative Agent, the Borrower shall
not enter into any such Instrument until so approved by the Administrative
Agent.
xii. Plans and Specifications. The Administrative Agent and the
Construction Consultant shall have received copies of all Plans and
Specifications for each Construction Component and the Main Project as a whole
which, as of the date of the requested Advance Date, constitute Final Plans and
Specifications subject, until such time as all Plans and Specifications have
been prepared and completed by the Architect of Record, to (a) finalizing the
Plans and Specifications in a manner that reflects a natural evolution from the
Plans and Specifications as in effect on the requested Advance Date in a manner
consistent with the standards set forth in Section 7.1.22 of the Credit
Agreement and (b) submission of the finalized Plans and Specifications to the
proper Governmental Instrumentality for approval. The Disbursement Agent may
rely upon the certification of the Borrower set forth in the Advance Request in
order to establish satisfaction of this condition unless the Disbursement Agent
shall have actual knowledge that the Borrower's certification is inaccurate.
xiii. Compliance with Section 2.5. All Advances to be satisfied
from the Hotel/Casino Component
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Funding Sources shall have been funded in the order of priority set forth in
Section 2.5.1.
xiv. Proceeds. All amounts which are required to be deposited into
the Bank Proceeds Account, the Borrower's Funds Account, the Construction Note
Disbursement Account, the Guaranty Deposit Account, the Loss Proceeds Account
have been deposited therein.
xv. Fees and Expenses. The Borrower shall have paid or arranged for
payment out of the requested Advance of all fees, expenses and other charges
then due and payable by it under this Disbursement Agreement and the other Loan
Documents or under any agreements between the Borrower and any of the
Independent Consultants. The Disbursement Agent shall be entitled to rely upon
a certification of the Borrower in the relevant Advance Request in determining
that this condition has been satisfied unless the Disbursement Agent shall have
actual knowledge that the Borrower's certification is inaccurate.
xvi. Insurance. Insurance complying in all material respects with the
requirements of Exhibit E shall be in place and in full force and effect. The
Disbursement Agent shall be entitled to rely upon a certification of the
Borrower in the relevant Advance Request in determining that this condition has
been satisfied unless the Disbursement Agent shall have actual knowledge that
the Borrower's certification is inaccurate.
xvii. Main Project Security. All of the Loan Documents shall
continue to be in full force and effect and all actions necessary or desirable
(including all filings) in the reasonable opinion of the Administrative Agent to
perfect the same as a valid security interest over the Main Project Security
thereunder having the exclusive first priority contemplated therefor by this
Disbursement Agreement and the other Loan Documents shall have been taken or
made. All property, rights and assets required for the Main Project shall be
free and clear of all encumbrances except for the Permitted Encumbrances, the
Permitted Exceptions and the Permitted Liens. The Disbursement Agent shall be
entitled to rely upon a certification of the Borrower in the relevant Advance
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Request in determining that this condition has been satisfied unless the
Disbursement Agent shall have actual knowledge that the Borrower's certification
is inaccurate. During such time as there are proceeds from the Discount Notes
in the Construction Note Disbursement Account, the Holdings Collateral Agreement
and the pledge agreement in favor of the Discount Notes Indenture Trustee
covering the Series A Preferred Interests shall continue to be in full force and
effect.
xviii. In Balance Requirement. The Main Project Budget shall be In
Balance.
xix. No Restriction. No order, judgment or decree of any court,
arbitrator or governmental authority shall purport to enjoin or restrain the
Disbursement Agent and/or any of the Lenders from making the Advance to be made
by it on the requested Advance Date. The Disbursement Agent shall be entitled
to rely upon a certification of the Borrower in the relevant Advance Request in
determining that this condition has been satisfied unless the Disbursement Agent
shall have actual knowledge that the Borrower's certification is inaccurate.
xx. Violation of Certain Regulations. The making of the requested
Advance shall not violate any law, including Regulation G, Regulation T,
Regulation U or Regulation X of the Board of Governors of the F.R.S. Board. The
Disbursement Agent shall be entitled to rely upon a certification of the
Borrower in the relevant Advance Request in determining that this condition has
been satisfied unless the Disbursement Agent shall have actual knowledge that
the Borrower's certification is inaccurate.
xxi. Financial Covenants. Each of the Completion Guarantors under the
Completion Guaranty and the Sponsors under the Keep-Well Agreement shall be in
compliance with all of the financial covenants applicable to it thereunder, if
any.
xxii. Restrictions on Discount Noteholders. The restrictions on,
and the subordination of the interests of, the Discount Noteholders as set forth
in the
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Discount Note Indenture shall continue to be in full force and effect and
binding on the Discount Noteholders.
xxiii. Financial Statements. Delivery to the Administrative Agent
of the financial statements which are required by the Credit Agreement, together
with a certificate from the Person certifying such financial statements and
stating that no Material Adverse Change in the assets, liabilities, operations,
financial condition or prospects of each such Person has occurred since the
dates of the respective financial statements provided to the Administrative
Agent, except as otherwise provided in such certificate.
xxiv. Foundation Surveys. As the foundations for the
Hotel/Casino, the Energy Project and the Shoulder Space are completed from time
to time, the Borrower shall provide a survey thereof satisfactory in form and
substance to the Title Insurer and the Administrative Agent certified to each
such Person by a licensed surveyor reasonably satisfactory to each such Person.
xxv. Delivery of On-Schedule Certificate. The Construction Consultant
shall have delivered an On-Schedule Certificate to the parties (which the
Construction Consultant shall deliver to the parties each month whether or not
an Advance is being made).
c. No Waiver or Estoppel.
i. The making of any Advance hereunder shall not preclude the
Administrative Agent from later asserting (and enforcing any remedies it may
have in connection therewith) that any representation, warranty or certification
made or deemed made by the Borrower in connection with such Advance was not true
and accurate when made. No course of dealing or waiver by the Administrative
Agent or any Secured Party in connection with any condition precedent to any
Advance under this Disbursement Agreement or any other Loan Document shall
impair any right, power or remedy of the Administrative Agent or any Secured
Party with respect to any other condition precedent, or be construed to be a
waiver thereof; nor shall the action of the Administrative Agent or any Secured
Party in respect of any Advance affect or impair any
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right, power or remedy of the Administrative Agent or any Secured Party in
respect of any other Advance.
ii. Unless otherwise notified to the Borrower by the Administrative
Agent or a Secured Party and without prejudice to the generality of Section
3.3.1, the right of the Administrative Agent or any Secured Party to require
compliance with any condition under this Disbursement Agreement or any other
Loan Document which may be waived by the Administrative Agent or such Secured
Party in respect of any Advance is expressly preserved for the purpose of any
subsequent Advance.
ARTICLE 4. - THE DISBURSEMENT AGENT
-----------------------------------
a. Appointment and Acceptance. Subject to and on the terms and
conditions of this Disbursement Agreement, the Discount Note Indenture Trustee,
the Lenders and the Administrative Agent hereby jointly and irrevocably appoint
and authorize the Disbursement Agent to act as their disbursement agent
hereunder. The Disbursement Agent accepts such appointment and agrees to
exercise commercially reasonable efforts and utilize commercially prudent
practices in the performance of its duties hereunder consistent with those of
similar institutions holding collateral, administering construction loans and
disbursing disbursement control funds.
b. Duties and Liabilities of the Disbursement Agent Generally.
i. Commencing upon the execution and delivery hereof, the
Disbursement Agent shall have the right to meet at the Site or elsewhere in Las
Vegas, Nevada periodically at reasonable times (however, no less frequently than
monthly), upon three (3) Business Days' notice, with representatives of the
Borrower, the Construction Consultant, the Design/Builder, the Architect of
Record and such other employees, consultants or agents as the Disbursement Agent
shall reasonably request to be present for such meetings. The Disbursement
Agent may perform such inspections and tests of the Main Project as it deems
reasonably appropriate in the performance of its duties hereunder. In addition,
the Disbursement Agent shall have the right at reasonable times upon prior
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notice to review all information (including Contracts) supporting the amendments
to the Main Project Budget, amendments to any Contracts, the Advance Requests
and any certificates in support of any of the foregoing, to inspect materials
stored on or about the Site then owned by the Borrower, to review the insurance
required pursuant to the terms of this Disbursement Agreement and the other Loan
Documents, to confirm receipt of endorsements from the Title Insurer insuring
the continuing first priority of the Lien of the Deed of Trust as security for
each Advance, and to examine the Plans and Specifications and all shop drawings
relating to the Main Project. The Disbursement Agent is authorized to contact
the Design/Builder, any Contractor or any Subcontractor for purposes of
confirming receipt of progress payments. The Disbursement Agent shall be
entitled to examine, copy and make extracts of the books, records, accounting
data and other documents of the Borrower, including, without limitation, bills
of sale, statements, receipts, conditional and unconditional Lien releases,
contracts or agreements, which relate to any materials, fixtures or articles
incorporated into the Main Project. From time to time, at the request of the
Disbursement Agent, the Borrower shall make available to the Disbursement Agent
a Construction Benchmark Schedule. The Borrower agrees to cooperate with the
Disbursement Agent in assisting the Disbursement Agent to perform its duties
hereunder and to take such further steps as the Disbursement Agent reasonably
may request in order to facilitate the Disbursement Agent's performance of its
obligations hereunder.
ii. In case an Event of Default known to it (or as to which it has
received notice from the Administrative Agent) has occurred (which has not been
cured or waived), the Disbursement Agent shall provide prompt notice to the
Administrative Agent and the Discount Note Trustee of the same (if notice of
such Event of Default was not given by the Administrative Agent to the
Disbursement Agent) and otherwise shall exercise such of the rights and powers
vested in it by this Disbursement Agreement and the documents constituting or
executed in connection with this Disbursement Agreement, and use the same degree
of care and skill in their exercise, as a prudent Person would exercise or use
under the circumstances in the reasonable administration of its own affairs. If
the Disbursement Agent shall not have received instructions from the
Administrative Agent within
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five (5) days after the mailing by the Disbursement Agent of a notice of an
Event of Default to the Administrative Agent, the Disbursement Agent, until
instructed otherwise by the Administrative Agent, may, but shall be under no
duty to, take or refrain from taking such action with respect to such Event of
Default, as it shall deem advisable in the best interests of the Secured
Parties. Notwithstanding the foregoing, during the existence of an Event of
Default, if it has not been instructed otherwise, the Disbursement Agent shall
not in any such event deposit any amounts into the Collection Account, the
Disbursement Account, the Servicing Agent's Disbursement Account or the Cash
Management Account or release any funds to the Borrower.
iii. None of the provisions of this Disbursement Agreement shall
require the Disbursement Agent to expend or risk its own funds or otherwise to
incur any personal financial liability in the performance of any of its duties
hereunder or in the exercise of any of its rights or powers if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
iv. Notwithstanding anything to the contrary in this Disbursement
Agreement, if the Person acting as Disbursement Agent also serves as a
collateral agent, the Administrative Agent, financial advisor, investment
advisor, securities intermediary, Lender under the other Loan Documents or
otherwise, and except if such functions shall be performed by the same group,
agency, branch or division of such Person, the Disbursement Agent shall not be
deemed to have any knowledge of any fact known to such Person in its capacity as
the collateral agent or the Administrative Agent by reason of the fact that the
Disbursement Agent and the collateral agent or the Administrative Agent, as the
case may be, are the same Person. Except as aforesaid, no knowledge of the
collateral agent or the Administrative Agent shall be attributed to the
Disbursement Agent. The agency hereby created shall in no way impair or affect
any of the rights and powers of, or impose any duties or obligations upon the
Disbursement Agent in its capacity as the Administrative Agent or as a Lender.
With respect to its participation in the extensions of credit under the Credit
Agreement, the Disbursement Agent shall have the same rights and powers
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hereunder as any other Lender and may exercise the same as though it were not
performing the duties and functions delegated to it hereunder. The Disbursement
Agent and its Affiliates may accept deposits from, lend money to and generally
engage in any kind of banking, trust, financial advisory or other business with
the Borrower, any of the other Aladdin Parties and/or the London Clubs Parties
or any of their respective Affiliates as if it were not performing the duties
specified herein, and may accept fees and other consideration from the Borrower,
any of the other Aladdin Parties and/or the London Clubs Parties for services in
connection with this Disbursement Agreement and otherwise without having to
account for the same to the Lenders. Each party hereto acknowledges that, as of
the Closing Date, Scotiabank is, in addition to acting as the Disbursement Agent
hereunder, also acting as the Administrative Agent and is a Lender.
c. Particular Duties and Liabilities of the Disbursement Agent.
i. Reliance Generally. The Disbursement Agent may, from time to
time, in the event that any matter arises as to which specific instructions are
not provided herein, request directions from the Administrative Agent with
respect to such matters and may refuse to act until so instructed and shall be
fully protected in acting or refusing to act in accordance with such
instructions. The Disbursement Agent may rely and shall be protected in acting
or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval or other
paper or document believed by it on reasonable grounds to be genuine and to have
been signed or presented by the proper party or parties.
ii. Court Orders. The Disbursement Agent is authorized, in its
exclusive discretion, to obey and comply with all writs, orders, judgments or
decrees issued by any court or administrative agency affecting any money,
documents or things held by the Disbursement Agent. The Disbursement Agent
shall not be liable to any of the parties hereto or their successors or assigns
by reason of the Disbursement Agent's compliance with such writs, orders,
judgments or decrees, notwithstanding such
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writ, order, judgment or decree is later reversed, modified, set aside or
vacated.
iii. Requests, etc., of the Borrower. Any request, direction, order
or demand of the Borrower mentioned herein shall be sufficiently evidenced
(unless other evidence in respect thereof be herein specifically prescribed) by
an instrument signed by one of its Authorized Representatives, and any
resolution of the Borrower may be evidenced to the Disbursement Agent by a copy
thereof certified by an Authorized Representative of the manager of the
Borrower.
iv. Reliance on Opinions of Counsel. The Disbursement Agent may
consult with counsel and any opinion of counsel shall be full and complete
authorization and protection in respect of any action taken or omitted by it
hereunder in good faith and in accordance with such opinion of counsel.
v. Action through Agents or Attorneys. The Disbursement Agent may
execute any of the powers hereunder or perform any duties hereunder either
directly or by or through agents or attorneys appointed with due care, but the
Disbursement Agent shall be responsible for any willful misconduct or gross
negligence on the part of any agent so appointed.
vi. Marshaling of Assets. The Disbursement Agent need not marshal in
any particular order any particular part or piece of the Main Project Security
held by the Disbursement Agent in its capacity as Disbursement Agent hereunder,
or any of the funds or assets that the Disbursement Agent may be entitled to
receive or have claim upon.
vii. Disagreements.
(1) In the event of any disagreement between the Administrative
Agent and the Borrower or any other Person or Persons whether or not named
herein, and if adverse claims or demands are made in connection with or for any
of the investments or amounts held pursuant to this Disbursement Agreement, the
Disbursement Agent shall be entitled at its option to refuse to comply with any
such claim or demand so long as such disagreement shall
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continue, and, in so doing, the Disbursement Agent shall not be or become liable
for damages or interest to the Administrative Agent or the Borrower or any other
Person or Persons for the Disbursement Agent's failure or refusal to comply with
such conflicting or adverse claims or demands. The Disbursement Agent shall be
entitled to continue so to refrain and refuse so to act until:
(a) the rights of the adverse claimants have been fully adjudicated
in the court assuming and having jurisdiction of the claimants and the
investments and amounts held pursuant to this Disbursement Agreement; or
(b) all differences shall have been adjusted by agreement, and the
Disbursement Agent shall have been notified thereof in writing by all Persons
deemed by the Disbursement Agent, in its sole discretion, to have an interest
therein.
(2) In addition, the Disbursement Agent, in its sole discretion,
upon giving thirty (30) days' prior written notice to the Administrative Agent,
may file a suit in interpleader for the purpose of having the respective rights
of all claimants adjudicated, and may deposit with the court all of the
investments and amounts held pursuant to this Disbursement Agreement. The
Borrower agrees to pay all costs and reasonable counsel fees incurred by the
Disbursement Agent in such action, said costs and fees to be included in the
judgment in any such action.
d. Segregation of Funds and Property Interest. Except as otherwise
expressly provided in the Loan Documents, monies and other property received by
the Disbursement Agent shall, until used or applied as herein provided, be held
for the purposes for which they were received, and shall be segregated from
other funds except to the extent required herein or by law. The Disbursement
Agent shall note in its records that all funds and other assets in (x) the
Borrower's Funds Account, the Bank Proceeds Account, the Loss Proceeds Account,
the Guaranty Deposit Account, the Interest Payment Account, the Term B
Sub-Account, the Term C Sub-Account, the Collection Account, the Disbursement
Account and the Servicing Agent's Account has been pledged to the Secured
Parties and that the Disbursement Agent is holding such
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items as agent for the Secured Parties and (y) the Construction Note
Disbursement Account has been pledged to the Discount Note Indenture Trustee and
that the Disbursement Agent is holding such items as agent for the Discount Note
Indenture Trustee. All such funds and assets shall not be within the bankruptcy
"estate" (as such term is used in 11 U.S.C. Section 541) of the Disbursement
Agent. The Disbursement Agent shall not be under any liability for interest on
any monies received by it hereunder, except as otherwise specified in this
Disbursement Agreement. Except for the compensation and reimbursements set
forth in Section 4.5 and as otherwise set forth in Section 7.4 and Section 7.15,
the Disbursement Agent qua the Disbursement Agent hereby expressly waives any
right of set-off or similar right it may have against or in relation to the
Accounts, and any monies, Permitted Investments or other amounts on deposit
therein.
e. Compensation and Reimbursement of the Disbursement Agent. The
Borrower covenants and agrees to pay or reimburse the Disbursement Agent upon
its request for all reasonable expenses, disbursements and advances incurred or
made by the Disbursement Agent in accordance with any of the provisions of this
Disbursement Agreement or the other Loan Documents or the documents constituting
or executed in connection with the Main Project Security (including the
reasonable compensation and the reasonable expenses and disbursements of its
counsel and of all persons not regularly in its employ). The obligations of the
Borrower under this Section 4.5 to compensate the Disbursement Agent and to pay
or reimburse the Disbursement Agent for reasonable expenses, disbursements and
advances shall constitute additional indebtedness (and shall be deemed permitted
indebtedness under the Loan Documents) hereunder and shall survive the
satisfaction and discharge of this Disbursement Agreement.
f. Qualification of the Disbursement Agent. The Disbursement Agent
hereunder shall at all times be a corporation which (a) is authorized to perform
its duties as Disbursement Agent hereunder, (b) is subject to supervision or
examination by one or more applicable Governmental Instrumentalities, (c) shall
have a combined capital and surplus of at least $500,000,000, (d) shall have a
long-term credit rating of not less than A- or A3,
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respectively, by S&P or Moody's; and provided, that any such Person with a
long-term credit rating of A- or A3 shall not cease to be eligible to act as
Disbursement Agent upon a downward change in either such rating of no more than
one category or grade of such minimum rating, as the case may be, and (e) with
respect to any replacement of the Person acting as Disbursement Agent on the
Closing Date, shall be acceptable to each of the Administrative Agent and, until
all amounts in the Construction Note Disbursement Account have been fully
advanced, the Discount Note Indenture Trustee. In case at any time the
Disbursement Agent shall cease to be eligible in accordance with the provisions
of this Section 4.6, the Disbursement Agent shall resign immediately in the
manner and with the effect specified in Section 4.7.
g. Resignation and Removal of the Disbursement Agent. The Administrative
Agent and, prior to the advance of all amounts in the Construction Note
Disbursement Account, the Discount Note Indenture Trustee, acting jointly, shall
have the right should they reasonably determine that the Disbursement Agent has
breached or failed to perform its obligations hereunder or has engaged in wilful
misconduct or gross negligence, upon the expiration of 30 days following
delivery of written notice of substitution to the Disbursement Agent and the
Borrower, to cause the Disbursement Agent to be relieved of its duties hereunder
and to select a substitute disbursement agent to serve hereunder. The
Disbursement Agent may resign at any time upon 30 days' written notice to all
parties hereto. Such resignation shall take effect upon receipt by the
Disbursement Agent of an instrument of acceptance executed by a successor
disbursement agent meeting the qualifications set forth in Section 4.6 and
consented to by the other parties hereto. Upon selection of such substitute
disbursement agent, the Administrative Agent, the Discount Note Indenture
Trustee, if applicable, the Borrower and the substitute disbursement agent shall
enter into an agreement substantially identical to this Disbursement Agreement
and, thereafter, the Disbursement Agent shall be relieved of its duties and
obligations to perform hereunder, except that the Disbursement Agent shall
transfer to the substitute disbursement agent upon request therefor originals of
all books, records, and other documents in the
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Disbursement Agent's possession relating to this Disbursement Agreement.
h. Merger or Consolidation of the Disbursement Agent. Any corporation
into which the Disbursement Agent may be merged or converted or with which it
may be consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Disbursement Agent shall be a party, or any
corporation succeeding to the corporate trust business of the Disbursement
Agent, shall, if eligible hereunder, be the successor of the Disbursement Agent
hereunder, provided, that such corporation shall be eligible under the
provisions of Section 4.6 without the execution or filing of any paper with any
party hereto or any further act on the part of any of the parties hereto except
where an instrument of transfer or assignment is required by law to effect such
succession, anything herein to the contrary notwithstanding.
i. Statements; Information.
(1) The Disbursement Agent shall provide to the Administrative
Agent, the Borrower and, until all amounts in the Construction Note Disbursement
Account have been fully advanced, the Discount Note Indenture Trustee, a monthly
statement of all deposits to, and disbursements from, each Account and interest
and earnings credited to each Account established and maintained hereunder by
the Disbursement Agent.
(2) The Disbursement Agent shall, at the expense of the Borrower
(i) as promptly as is reasonably practicable after receipt of any reasonable
written request by the Borrower or the Administrative Agent, but not more
frequently than monthly, provide the Borrower or the Administrative Agent, as
the case may be, with such information as the Borrower or the Administrative
Agent may reasonably request regarding all categories, amounts, maturities and
issuers of investments made by the Disbursement Agent pursuant to this
Disbursement Agreement and regarding amounts available in the Accounts, and (ii)
upon the reasonable written request of the Borrower, arrange with the Borrower
for a mutually convenient time for an Authorized Representative of the Reviewing
Accountant to visit the offices of the Disbursement Agent to examine and take
copies of records relating to and
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instruments evidencing the investments made by the Disbursement Agent pursuant
to this Disbursement Agreement.
j. Limitation of Liability. The Disbursement Agent's responsibility and
liability under this Disbursement Agreement shall be limited as follows: (w)
the Disbursement Agent does not represent, warrant or guarantee to the
Administrative Agent, the Lenders, the Discount Note Indenture Trustee, the
Discount Noteholders or any other Person the performance by the Borrower, the
Design/Builder, the Architect of Record or any other Person of their respective
obligations under the Operative Documents and shall have no duty to inquire
whether a Default or an Event of Default has occurred and is continuing; (x) the
Disbursement Agent shall have no responsibility to the Borrower, Holdings, the
Administrative Agent, the Lenders, the Discount Note Indenture Trustee or the
Discount Noteholders as a consequence of performance by the Disbursement Agent
hereunder except for any gross negligence or willful misconduct of the
Disbursement Agent; (y) the Borrower shall remain solely responsible for all
aspects of its business and conduct in connection with the Main Project,
including, but not limited to, the quality and suitability of the Plans and
Specifications, the supervision of the construction, the qualifications,
financial condition and performance of all architects, engineers, Contractors,
Subcontractors, suppliers, consultants and property managers, the accuracy of
all Advance Requests and the proper application of all Advances; and (z) the
Disbursement Agent is not obligated to supervise, inspect or inform the Borrower
of any aspect of the construction of the Main Project or any other matter
referred to above. Each of the Administrative Agent and the Lenders has made
its own independent investigation of the financial condition and affairs of the
Borrower, the other Aladdin Parties and the London Clubs Parties in connection
with the making of the extensions of credit contemplated by the Loan Documents
and has made and shall continue to make its own appraisal of the
creditworthiness of the Borrower, the other Aladdin Parties and the London Clubs
Parties. Except as specifically set forth herein, the Disbursement Agent shall
not have any duty or responsibility, either initially or on a continuing basis,
to make any such investigation or any such appraisal on behalf of the
Administrative Agent or the Lenders or to provide the Administrative Agent or
the Lenders with any credit or other information with respect
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thereto. The Disbursement Agent shall not have, by reason of this Disbursement
Agreement, a fiduciary relationship in respect of any Person; and nothing in
this Disbursement Agreement, expressed or implied, is intended to or shall be so
construed as to impose upon the Disbursement Agent any obligations in respect of
this Disbursement Agreement except as expressly set forth herein. The
Disbursement Agent shall have no duties or obligations hereunder except as
expressly set forth herein, shall be responsible only for the performance of
such duties and obligations and shall not be required to take any action
otherwise than in accordance with the terms hereof. The provisions of this
Article 4 are solely for the benefit of the Disbursement Agent, the
Administrative Agent, the Lenders and the Discount Note Indenture Trustee (but
only so long as amounts are on deposit in the Construction Note Disbursement
Account), and neither the Borrower, the other Aladdin Parties, the London Clubs
Parties nor any other Person shall have any rights as a third party beneficiary
of any of the provisions thereof. In performing its functions and duties under
this Disbursement Agreement, the Disbursement Agent does not assume and shall
not be deemed to have assumed any obligation towards or relationship of agency
or trust with or for the Borrower, the other Aladdin Parties, the London Clubs
Parties or any other Person. Neither the Disbursement Agent nor any of its
officers, directors, employees or agents shall be in any manner liable or
responsible for any loss or damage arising by reason of any act or omission to
act by it or them hereunder or in connection with any of the transactions
contemplated hereby, including, but not limited to, any loss that may occur by
reason of forgery, false representations, the exercise of its discretion, or any
other reason, except as a result of their gross negligence or willful
misconduct.
ARTICLE 5. - SECURITY INTEREST; PERMITTED INVESTMENTS; RELEASE
--------------------------------------------------------------
a. Security Interest in Accounts; Safekeeping of Collateral.
i. Pursuant to the Borrower Collateral Account Agreement, the
Scotiabank Collateral Account Agreement, and the Servicing and Collateral
Account Agreement
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the Borrower has irrevocably granted a first priority security interest in, and
pledged, assigned and set over to the Disbursement Agent all of its right, title
and interest in and to, the Accounts (other than the Construction Note
Disbursement Account), all funds, cash, Permitted Investments and other items
from time to time acquired by the Disbursement Agent with funds in the Accounts
(other than the Construction Note Disbursement Account), as well as any
earnings, proceeds or income therefrom and any claims, present or future, of the
Borrower against any Person liable upon or for payment thereof (collectively,
the "Accounts Collateral"), as security for the Obligations.
ii. The Borrower shall have no right to withdraw, or to cause the
withdrawal of, funds held in the Accounts or to direct the investment of such
funds or the liquidation of any such investments, in each case other than as
expressly provided herein and in the Borrower Collateral Account Agreement, the
Scotiabank Collateral Account Agreement and the Servicing and Collateral Account
Agreement. The Borrower shall not make, attempt to make, or consent to the
making of any withdrawal or transfer from any of the Accounts, except in strict
compliance with this Disbursement Agreement, the Credit Agreement, the Borrower
Collateral Account Agreement, the Scotiabank Collateral Account Agreement and
the Servicing and Collateral Account Agreement. Amounts deposited in the
Accounts shall be applied exclusively as provided in this Disbursement
Agreement, the other Loan Documents, the Borrower Collateral Account Agreement,
the Servicing and Collateral Account Agreement, the Scotiabank Collateral
Account Agreement and the Holdings Collateral Account Agreement, as applicable.
No amount held in any Account maintained hereunder shall be disbursed except in
accordance with the provisions hereof and the Borrower Collateral Account
Agreement, the Servicing and Collateral Account Agreement, the Scotiabank
Collateral Account Agreement and the Holdings Collateral Account Agreement, as
applicable.
iii. The Disbursement Agent is hereby irrevocably authorized by the
Borrower to apply, or cause to be applied, amounts in any Account (other than
the Construction Note Disbursement Account) hereunder upon the occurrence and
during the continuance of an Event of Default to the payment of interest,
principal, fees, costs,
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charges or other amounts due or payable to the Secured Parties as may be elected
in accordance with the Credit Agreement.
iv. To the extent it is within its power, the Disbursement Agent, the
Servicing Agent and the Securities Intermediary, as applicable, at all times
shall cause to be maintained all of the Accounts Collateral and the Construction
Note Disbursement Account free and clear of all Liens, security interests,
safekeeping or other charges, demands and claims of any nature whatsoever now or
hereafter existing, in favor of anyone other than the Disbursement Agent, as
agent for the Administrative, the Lenders and the Discount Note Indenture
Trustee.
v. The Disbursement Agent shall take any other steps from time to
time requested by the Administrative Agent or the Discount Note Indenture
Trustee to confirm and maintain the priority of the Disbursement Agent's
security interests in the Accounts Collateral and the Construction Notes
Disbursement Account.
vi. Notwithstanding any other provision hereof, the parties hereto
acknowledge and agree that all funds or other property in the Construction Note
Disbursement Account (including any Permitted Investments held therein) shall be
managed and transferred in accordance with Section 2.3(g) and the Holdings
Collateral Account Agreement and that only the Discount Note Indenture Trustee
shall have the right to direct the Disbursement Agent with respect thereto.
After the occurrence of an Event of Default (used herein for this purpose only
as such term is defined in the Discount Note Indenture) all funds or other
property in the Construction Note Disbursement Account shall be applied as
specified in Section 15 of the Holdings Collateral Account Agreement.
vii. Notwithstanding any other provision hereof, the parties hereto
acknowledge and agree that all funds or other property in the Accounts (other
than the Construction Note Disbursement Account), including any Permitted
Investments held therein shall be managed and transferred in accordance with the
relevant provisions of Section 2.3 and, as applicable, the Borrower Collateral
Account Agreement, the Scotiabank Collateral Account Agreement or the Servicing
and Collateral Account Agreement and that only the Administrative Agent shall
have
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the right to direct the Disbursement Agent with respect thereto. After the
occurrence of an Event of Default (x) all funds or other property in the
Accounts (other than the Construction Note Disbursement Account) shall be
applied as specified in Section 15 of the Borrower Collateral Account Agreement,
the Scotiabank Collateral Account Agreement or the Servicing and Collateral
Account Agreement, as applicable, (y) all funds or other property in the
Construction Note Disbursement Account shall be applied as specified in Section
15 of the Holdings Collateral Account Agreement and (z) the Disbursement Agent
shall not make any Advance which is funded from proceeds of the Construction
Note Disbursement Account unless otherwise directed in writing by the Discount
Noteholder Trustee.
b. Attorney-in-Fact. The Borrower hereby irrevocably appoints the
Disbursement Agent as its attorney-in-fact effective as of the date hereof but
only during the continuance of an Event of Default with full power of
substitution to do any act which the Borrower is obligated hereby to do, to
exercise such rights as the Borrower might exercise with respect to the Accounts
Collateral and to execute and file in the Borrower's name any financing
statements and amendments thereto required or advisable to protect the
Disbursement Agent's rights and security interests. Such appointment and power
of attorney shall be irrevocable and coupled with an interest.
c. Permitted Investments. Amounts held in the Cash Management Account
may only be invested in Overnight Funds and in money market investments of U.S.
Bank National Association and the Servicing Agent's Disbursement Account may
only be invested in Overnight Funds. Amounts held in the Borrower's Funds
Account, the Bank Proceeds Account, the Loss Proceeds Account, the Guaranty
Deposit Account, the Interest Payment Account, the Term B Sub-Account, the Term
C Sub-Account and the Construction Note Disbursement Account may be invested by
the Securities Intermediary in Permitted Investments at the expense and risk of
the Borrower (x) as directed in writing by the Borrower so long as the
Administrative Agent has not notified the Securities Intermediary that an Event
of Default has occurred and is continuing and (y) after the Administrative Agent
has notified the Securities Intermediary that an Event of Default has occurred
and is continuing, as directed by (1) with respect to the
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Borrower's Funds Account, the Bank Proceeds Account, the Loss Proceeds Account,
the Guaranty Deposit Account, the Term B Sub-Account, the Term C Sub-Account and
the Interest Payment Account, the Disbursement Agent upon instructions from the
Administrative Agent, and (2) with respect to the Construction Note Disbursement
Account, the Disbursement Agent upon instructions from the Discount Note
Indenture Trustee. Notwithstanding the foregoing, in the event that (x) the
Borrower fails to so direct the Securities Intermediary or (z) an Event of
Default exists and the Disbursement Agent fails to direct the Securities
Intermediary, all such amounts shall be invested in overnight deposit accounts,
provided, however, that the Securities Intermediary's obligation to invest such
amounts is conditioned upon receipt by the Securities Intermediary of a valid
Form W9 of the Internal Revenue Service (or other applicable documentation)
which has been fully executed by the Borrower. The right to direct the manner
of investment includes, but is not limited to, the right (i) to sell any
Permitted Investment or hold it until maturity, and (ii) upon any sale at
maturity of any Permitted Investment, to direct the Securities Intermediary to
reinvest the proceeds thereof, plus any interest received thereon, in Permitted
Investments or hold such proceeds and interest for application pursuant to this
Disbursement Agreement. Notwithstanding the foregoing, the Securities
Intermediary is hereby authorized to reduce to cash any Permitted Investment
(without regard to maturity) in order to make any application required by
Section 2.4.4.
NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, INCLUDING, WITHOUT
LIMITATION, THE DEFINITION OF THE TERM "PERMITTED INVESTMENTS," IT IS UNDERSTOOD
AND AGREED BY THE PARTIES HERETO THAT SO LONG AS THE BANK OF NOVA SCOTIA SHALL
BE THE SECURITIES INTERMEDIARY, THE ONLY "PERMITTED INVESTMENTS" THAT MAY BE
MADE ARE OVERNIGHT DEPOSITS AND TIME DEPOSITS WITH SCOTIABANK AND COMMERCIAL
PAPER ISSUED BY SCOTIABANK PROVIDED SUCH INVESTMENTS ARE ON COMMERCIALLY
COMPETITIVE TERMS WHICH SHALL BE DEEMED TO BE THE CASE UNLESS OTHERWISE ADVISED
BY THE BORROWER IN WRITING. THIS RESTRICTION SHALL TERMINATE UPON THE
APPOINTMENT OF A SUCCESSOR SECURITIES INTERMEDIARY PURSUANT TO THE PROVISIONS OF
THIS AGREEMENT, THE BORROWER
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COLLATERAL ACCOUNT AGREEMENT, THE SCOTIABANK COLLATERAL ACCOUNT AGREEMENT AND
THE HOLDINGS COLLATERAL ACCOUNT AGREEMENT.
ARTICLE 6. - EVENTS OF DEFAULT
------------------------------
a. Events of Default.
The occurrence of an "Event of Default" under and as defined in the
Credit Agreement shall constitute an Event of Default under this Agreement.
b. Remedies. Upon the occurrence and during the continuation of an Event
of Default, the Administrative Agent, the Lenders and the Disbursement Agent
may, without further notice of default, presentment or demand for payment,
protest or notice of non-payment or dishonor, or other notices or demands of any
kind, all such notices and demands being waived (to the extent permitted by
applicable law), exercise any or all rights and remedies under the Loan
Documents and at law or in equity (in any combination or order that the Lenders
may elect) including, without limitation, at the direction of the Administrative
Agent, the Disbursement Agent may, without an Advance Request having been made
therefor, (x) make any or all Advances directly to the Design/Builder, any
Contractor or any other Person in payment of Main Project Costs, (y) apply any
or all Advances to satisfy any conditions set forth in the Disbursement
Agreement and/or the Loan Documents which have not been satisfied and/or (z)
expend all or any portion of the amounts in the accounts or, if applicable, the
proceeds of the Loans in connection with the Lenders' rights under the
Completion Guaranty to complete or cause the completion of the Main Project
and/or pay or discharge any Liens on the Site which are the responsibility of
the Borrower to discharge or any other amounts which constitute Guaranteed
Obligations under the Completion Guaranty or liabilities for which the Lenders
are indemnified under the Environmental Indemnity. In furtherance thereof, the
Borrower hereby irrevocably authorizes the Disbursement Agent and the
Administrative Agent to make such payments and applications and, by delivering
the Completion Guaranty, the Completion Guarantors have irrevocably authorized
the Disbursement Agent and the Administrative Agent to make such applications
and payments in accordance with the
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Completion Guaranty and no further authorization from the Borrower and/or any of
the Completion Guarantors shall be necessary to permit such Advances, and all
such Advances shall be deemed to have been made pursuant to this Disbursement
Agreement and to have been received by or to have been made for the account of
the Borrower, and shall be secured by the Deed of Trust as if made directly to
the Borrower.
ARTICLE 7. - MISCELLANEOUS
--------------------------
a. Addresses.
Any communications between the parties hereto or notices provided
herein to be given shall be given to the following addresses:
If to the Borrower prior to the
Conversion Date: Aladdin Gaming, LLC
831 Pilot Road
Las Vegas, NV 89119
Attn: Mr. Jack Sommer
Telephone No.: (702) 736-7114
Facsimile No.: (702) 736-7107
If to the Borrower after the
Conversion Date: Aladdin Gaming, LLC
Project Development - Bunker Building
3667 Las Vegas Boulevard South
Las Vegas, NV 89109
Attn: Mr. Jack Sommer
Telephone No.: (702) 870-1234
Facsimile No.: (702) 870-8733
If to the Administrative Agent: The Bank of Nova Scotia
580 California Street, 21st Floor
San Francisco, CA 94104
Attn: Alan W. Pendergast
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Telephone No.: (415) 986-1100
Facsimile No.: (415) 397-0791
If to the Discount Notes
Indenture Trustee: State Street Bank
2 International Place
Boston, MA 02110
Attn: Paul Allen
Telephone No.: (617) 664-5526
Facsimile No.: (617) 664-5371
If to the Disbursement Agent: The Bank of Nova Scotia
580 California Street, 21st Floor
San Francisco, CA 94104
Attn: Alan W. Pendergast
Telephone No.: (415) 986-1100
Facsimile No.: (415) 397-0791
with a copy to: The Bank of Nova Scotia
Loan Administration
600 Peachtree Street, NE
Atlanta, GA 30308
Attn: Marianne Velker
Telephone No.: (404) 877-1525
Facsimile No.: (404) 888-8998
If to the Construction Consultant: Rider Hunt (NV) L.L.C
2330 Paseo Del Prado
Suite C301
Las Vegas, NV 39102
Telephone No.: (702) 227-8818
Facsimile No.: (702) 227-8858
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If to the Securities Intermediary: The Bank of Nova Scotia
580 California Street, 21st Floor
San Francisco, CA 94104
Attn: Alan W. Pendergast
Telephone No.: (415) 986-1100
Facsimile No.: (415) 397-0791
If to the Servicing Agent: U.S. Bank National Association
2300 West Sahara Avenue
Suite 120/Box 20
Las Vegas, NV 89102
Attn: Terry Gentry
Telephone No.: (702) 386-3903
Facsimile No.: (702) 386-3916
with a copy to: U.S. Bank National Association
107 South Main Street
Suite 303
Salt Lake City, Utah 84111
Attn: Kim Galbraith
Telephone No.: (801) 534-6083
Facsimile No.: (801) 534-6208
All notices and other communications provided to any party hereto under this
Disbursement Agreement shall be in writing and addressed, delivered or
transmitted to such party at its address or facsimile number set forth above or
at such other address or facsimile number as may be designated by such party in
a notice to the other parties. All such notices and communications shall be
deemed to have been properly given (x) if hand delivered, with receipt
acknowledged by the recipient; (y) if mailed, upon the fifth Business Day after
the date on which it is deposited in registered or certified mail, postage
prepaid, return receipt requested, or (z) if sent by Federal Express or other
nationally-recognized express courier service with instructions to deliver on
the following Business Day, on the next Business Day after delivery to such
express courier service. Notices and other communications may be given by
facsimile but shall be deemed to be received upon confirmation of receipt
thereof by the intended recipient thereof with the original of such notice or
communication to be given in the
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manner provided in the second sentence of this Section. The Administrative
Agent agrees to provide the Discount Note Indenture Trustee with a copy of each
written notice of Default or Event of Default which is delivered to the Borrower
pursuant to the Credit Agreement.
b. Further Assurances. The Borrower shall deliver to the Administrative
Agent and the Disbursement Agent each of the instruments, agreements,
certificates, opinions and documents as any such Person may reasonably request
to perfect and maintain the Liens granted under the Loan Documents. The
Borrower shall fully cooperate with the Administrative Agent and the
Disbursement Agent and perform all additional acts reasonably requested by any
such Person to effect the purposes of the Loan Documents.
c. Delay and Waiver. No delay or omission to exercise any right, power
or remedy accruing upon the occurrence of any Default or Event of Default or any
other breach or default of the Borrower under this Disbursement Agreement shall
impair any such right, power or remedy of the Administrative Agent, the Lenders,
the Disbursement Agent or any other Secured Party nor shall it be construed to
be a waiver of any such breach or default, or an acquiescence therein, or in any
similar breach or default thereafter occurring, nor shall any waiver of any
single Default, Event of Default or other breach or default be deemed a waiver
of any other Default, Event of Default or other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any of the Administrative Agent, the Lenders, the
Disbursement Agent or any other Secured Party, of any Default, Event of Default
or other breach or default under this Disbursement Agreement or any other Loan
Document, or any waiver on the part of the Administrative Agent, the Lenders,
the Disbursement Agent or any other Secured Party of any provision or condition
of this Disbursement Agreement or any other Operative Document must be in
writing and shall be closing only to the extent in such writing specifically set
forth. All remedies, either under this Disbursement Agreement or any other Loan
Document or by law or otherwise afforded to the Administrative Agent, the
Lenders, the Disbursement Agent or any other Secured Party, shall be cumulative
and not alternative.
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d. Additional Security; Right to Set-Off. Any deposits or other sums at
any time credited or due from any Secured Party and any securities or other
property of the Borrower in the possession of any Secured Party may at all times
be treated as collateral security for the payment of the Obligations, and the
Borrower hereby pledges to the Disbursement Agent for the benefit of the Secured
Parties and grants the Disbursement Agent a security interest in and to all such
deposits, sums, securities or other property on deposit or in the possession of
such Secured Party, as the case may be. Regardless of the adequacy of any other
collateral, any Secured Party may execute or realize on the Secured Parties'
security interest in any such deposits or other sums credited by or due from any
such Person to the Borrower and may apply any such deposits or other sums to or
set them off against the Borrower's obligations to the Secured Parties under
this Disbursement Agreement and the other Loan Documents at any time after the
occurrence and during the continuance of any Event of Default.
e. Entire Agreement. This Disbursement Agreement and any agreement,
document or instrument attached hereto or referred to herein integrate all the
terms and conditions mentioned herein or incidental hereto and supersede all
oral negotiations and prior writings in respect to the subject matter hereof,
all of which negotiations and writings are deemed void and of no force and
effect.
f. Governing Law. This Disbursement Agreement shall be governed by the
laws of the State of New York of the United States of America and shall for all
purposes be governed by and construed in accordance with the laws of such state
without regard to the conflict of law rules thereof, provided, however, that to
the extent any terms of this Disbursement Agreement are incorporated in and made
part of any other Loan Document, any such term so incorporated shall for all
purposes be governed by and construed in accordance with the law governing the
Loan Document into which such term is so incorporated.
g. Severability. In case any one or more of the provisions contained in
this Disbursement Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the
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remaining provisions shall not in any way be affected or impaired thereby, and
the parties hereto shall enter into good-faith negotiations to replace the
invalid, illegal or unenforceable provision.
h. Headings. Paragraph headings have been inserted in this Disbursement
Agreement as a matter of convenience for reference only and it is agreed that
such paragraph headings are not a part of this Disbursement Agreement and shall
not be used in the interpretation of any provision of this Disbursement
Agreement.
i. Limitation on Liability. No claim shall be made by the Borrower or
Holdings against the Administrative Agent, the Lenders, the Disbursement Agent,
the Servicing Agent, the Securities Intermediary or any other Secured Party or
any of their respective Affiliates, directors, employees, attorneys or agents
for any special, indirect, consequential or punitive damages (whether or not the
claim therefor is based on contract, tort or duty imposed by law), in connection
with, arising out of or in any way related to the transactions contemplated by
this Disbursement Agreement or the other Operative Documents or any act or
omission or event occurring in connection therewith other than for gross
negligence or wilful misconduct on the part of such Person; and each of the
Borrower and Holdings hereby waives, releases and agrees not to sue upon any
such claim for any such damages, whether or not accrued and whether or not known
or suspected to exist in its favor.
j. Waiver of Jury Trial. EACH OF THE PARTIES TO THIS DISBURSEMENT
AGREEMENT HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS DISBURSEMENT AGREEMENT OR ANY
OTHER OPERATIVE DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF PARTIES HERETO. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES HERETO TO ENTER INTO THIS
DISBURSEMENT AGREEMENT.
k. Consent to Jurisdiction. Any legal action or proceeding by or against
any of the parties to this Disbursement Agreement or with respect to or arising
out of this Disbursement Agreement shall be brought in or
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removed to the courts of the State of New York, in and for the County of New
York, or of the United States of America for the Southern District of New York.
By execution and delivery of this Disbursement Agreement, the Borrower accepts,
for itself and in respect of its property, generally and unconditionally, the
jurisdiction of the aforesaid courts for legal proceedings arising out of or in
connection with this Disbursement Agreement and irrevocably consents to the
appointment of the CT Corporation System as its agent to receive service of
process in New York, New York. Nothing herein shall affect the right to serve
process in any other manner permitted by law or any right to bring legal action
or proceedings in any other competent jurisdiction, including judicial or
non-judicial foreclosure of real property interests which are part of the Main
Project Security. The Borrower further agrees that the aforesaid courts of the
State of New York and of the United States of America for the Southern District
of New York shall have exclusive jurisdiction with respect to any claim or
counterclaim of the Borrower based upon the assertion that the rate of interest,
if any, charged by or under this Disbursement Agreement, or under the other Loan
Documents, is usurious. The Borrower hereby waives any right to stay or dismiss
any action or proceeding under or in connection with any or all of the Main
Project, this Disbursement Agreement or any other Operative Document brought
before the foregoing courts on the basis of forum nonconveniens.
l. Successors and Assigns. The provisions of this Disbursement Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns. Notwithstanding the foregoing, the Borrower
shall not assign or otherwise transfer any of its rights under this Disbursement
Agreement.
m. Reinstatement. This Disbursement Agreement shall continue to be
effective or be reinstated, as the case may be, if at any time payment and
performance of the Borrower's obligations hereunder or under the other Loan
Documents, or any part thereof, is, pursuant to applicable law, rescinded or
reduced in amount, or must otherwise be restored or returned by the Secured
Parties. In the event that any payment or any part thereof is so rescinded,
reduced, restored or returned, such obligations shall be reinstated and deemed
reduced only by such
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amount paid and not so rescinded, reduced, restored or returned.
n. No Partnership; etc. The Secured Parties and the Borrower intend that
the relationship between them shall be solely that of creditor and debtor.
Nothing contained in this Disbursement Agreement or in any of the other Loan
Documents shall be deemed or construed to create a partnership,
tenancy-in-common, joint tenancy, joint venture or co-ownership by or between
the Secured Parties and the Borrower or any other Person. The Secured Parties
shall not be in any way responsible or liable for the debts, losses, obligations
or duties of the Borrower or any other Person with respect to the Main Project
or otherwise. All obligations to pay real property or other taxes, assessments,
insurance premiums, and all other fees and charges arising from the ownership,
operation or occupancy of the Main Project and to perform all obligations under
the agreements and contracts relating to the Main Project shall be the sole
responsibility of the Borrower.
o. Costs and Expenses.
i. The Borrower shall (subject to the limitations set forth herein
and, with respect to the Administrative Agent, in the Loan Documents) pay,
without duplication, the reasonable legal, engineering and other professional
and consulting fees and costs of consultants and advisors to the Administrative
Agent, the Disbursement Agent and the reasonable travel expenses and other
out-of-pocket costs incurred by each of them in connection with the preparation,
negotiation, execution and delivery, and, where appropriate, registration and
recording of the Operative Documents (and all matters incidental thereto), the
syndication of the Bank Credit Facility, the administration of the transactions
contemplated by the Operative Documents (including, without limitation, the
administration of this Disbursement Agreement, the other Operative Documents and
the Loan Documents) and the preservation or enforcement of any of their
respective rights or in connection with any amendments, waivers or consents
required under the Loan Documents or the Operative Documents. The
Administrative Agent will reasonably consult with the Borrower on a regular
basis with respect to on-going costs of such Persons' consultants and advisors.
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ii. The Borrower shall indemnify, defend and hold harmless the
Discount Note Indenture Trustee, the Discount Noteholders, the Independent
Consultants, the Disbursement Agent, the Administrative Agent, the Lenders, the
Servicing Agent, the Securities Intermediary and their respective shareholders,
partners, officers, directors, employees, representatives, attorneys and agents
(collectively, the "Indemnitees") from and against and reimburse the Indemnitees
for any and all present and future claims, expenses, obligations, liabilities,
losses, damages, injuries (to person, property, or natural resources),
penalties, stamp or other similar taxes, actions, suits, judgments, reasonable
costs and expenses (including reasonable attorney's fees) of whatever kind or
nature, whether or not well founded, meritorious or unmeritorious, demanded,
asserted or claimed against any such Indemnitee including any liability
resulting from any delay or omission to pay any such tax (collectively,
"Claims") by reason of their participation in the transactions contemplated by
the Operative Documents, including without limitation any and all Claims arising
in connection with the release or presence of any Hazardous Substances at the
Main Project, whether foreseeable or unforeseeable, including all costs of
removal and disposal of such Hazardous Substances, all reasonable costs required
to be incurred in (a) determining whether the Main Project is in compliance and
(b) causing the Main Project to be in compliance with all applicable Legal
Requirements, all reasonable costs associated with claims for damages to persons
or property, and reasonable attorneys' and consultants' fees and court costs.
iii. The indemnity obligation of the Borrower pursuant to this Section
7.15 shall not apply with respect to an Indemnitee to the extent arising as a
result of the gross negligence or willful misconduct of such Indemnitee, but
shall continue to apply to other Indemnitees.
iv. To the extent that the undertaking in the preceding paragraphs of
this Section 7.15 may be unenforceable because it is violative of any law or
public policy, the Borrower will contribute the maximum portion that it is
permitted to pay and satisfy under applicable law to the payment and
satisfaction of such undertakings.
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v. The provisions of this Section 7.15 shall survive foreclosure or
other exercise of rights and remedies under the Loan Documents (or transfer of
the Main Project or a portion thereof in lieu of such foreclosure or other
exercise of remedies, as the case may be) and satisfaction or discharge of the
Borrower's obligations hereunder, and shall be in addition to any other rights
and remedies of any Indemnitee.
vi. Any amounts payable by the Borrower pursuant to this Section 7.15
shall be payable within the later to occur of (i) ten (10) Business Days after
the Borrower receives an invoice for such amounts from any applicable Indemnitee
or (ii) five (5) Business Days prior to the date on which such Indemnitee
reasonably expects to pay such costs on account of which the Borrower's
indemnity hereunder is payable and, if not paid by such applicable date, shall
bear interest at the post maturity rate under Section 3.2.2 of the Credit
Agreement from and after such applicable date until paid in full.
vii. In case any action, suit or proceeding shall be brought
against any Indemnitee, such Indemnitee shall notify the Borrower of the
commencement thereof. The Borrower shall be entitled, at its expense, acting
through counsel reasonably acceptable to such Indemnitee, to participate in
and, to the extent that the Borrower desires, to assume and control the
defense thereof. Upon assumption by the Borrower of the defense of any such
action, suit or proceeding, the Indemnitee shall have the right to
participate in such action, suit or proceeding and to retain its own counsel
but the Borrower shall not be liable for any legal fees and expenses of other
counsel or the fees and disbursements of other providers of professional
services subsequently incurred by such Indemnitee in connection with the
defense thereof unless (x) the Borrower has agreed to pay such fees and
expenses or (y) the Borrower shall have failed to employ counsel reasonably
satisfactory to the Indemnitee in a timely manner. Notwithstanding the
foregoing, the Borrower shall not be entitled to assume and control the
defenses of any such action, suit or proceedings if and to the extent that,
in the reasonable opinion of such Indemnitee and its counsel (which counsel
shall be reasonably acceptable to the Borrower), such action, suit or
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proceeding involves the potential imposition of criminal liability upon
such Indemnitee or a conflict of interest between such Indemnitee and the
Borrower or between such Indemnitee and another Indemnitee (unless such conflict
of interest is waived in writing by the affected Indemnitees), and in such event
(other than with respect to disputes between such Indemnitee and another
Indemnitee) the Borrower shall pay the reasonable expenses of such Indemnitee in
such defense.
viii. The Borrower shall report to such Indemnitee on the status
of such action, suit or proceeding as material developments shall occur and from
time to time as requested by such Indemnitee. The Borrower shall deliver to
such Indemnitee a copy of each document filed or served on any party in such
action, suit or proceeding, and each material document which the Borrower
possesses relating to such action, suit or proceeding.
ix. The Borrower shall not consent to the terms of any compromise or
settlement of any action defended by the Borrower in accordance with the
foregoing without the prior consent of the Indemnitee, unless such compromise or
settlement (x) includes an unconditional release of the Indemnitee from all
liability arising out of such action or claim and (y) does not include a
statement as to, or an admission of, fault, culpability or a failure to act by
or on behalf of the Indemnitee.
x. Any Indemnitee against whom any Claim is made shall be entitled,
after consultation with the Borrower and upon consultation with legal counsel
wherein such Indemnitee is advised that such Claim is reasonably meritorious, to
compromise or settle any such Claim if such Indemnitee determines in its
reasonable discretion that failure to compromise or settle such Claim is
reasonably likely to have a material adverse effect on such Indemnitee, the
Borrower, the Main Project or such Indemnitee's interest in the Main Project.
Any such compromise or settlement shall be binding upon the Borrower for
purposes of this Section 7.15.
xi. Upon payment of any Claim by the Borrower pursuant to this
Section 7.15 or other similar indemnity provisions contained herein to or on
behalf of an Indemnitee, the Borrower, without any further action, shall be
subrogated to any and all claims that such
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Indemnitee may have relating thereto, and such Indemnitee shall at the request
and expense of the Borrower cooperate with the Borrower and give at the request
and expense of the Borrower such further assurances as are necessary or
advisable to enable the Borrower vigorously to pursue such claims.
p. Counterparts. This Disbursement Agreement may be executed in one or
more duplicate counterparts which, when signed by all of the parties listed
below, shall constitute a single binding agreement.
q. Confidentiality. Each of the Lenders and the Administrative Agent
agrees not to disclose to any third party any Confidential Information (as
defined below), except that any of the Lenders or the Administrative Agent may
disclose such information (v) in connection with any litigation between such
Lender or the Administrative Agent and the Aladdin Parties and the London Clubs
Parties or any of them, (w) upon the order, request or demand of any
Governmental Instrumentality or if otherwise required by applicable law, (x) in
connection with the exercise of any right or remedy hereunder or under any Loan
Document after the occurrence of a Default or Event of Default, (y) to those of
its employees, accountants, attorneys, agents and other advisors, directors,
officers, shareholders, partners, members and other principals who are working
on, or are consulted in connection with, the transactions contemplated by the
Loan Documents or (z) in the case of the Administrative Agent or any Lender, to
any actual or potential participant, assignee, lender, agent or servicer that
agrees to be bound by the provisions of this Section 7.17. "Confidential
Information" shall mean any information relating to the business of the
Borrower, the other Aladdin Parties and/or the London Clubs Parties which is
delivered by the Borrower, the other Aladdin Parties and/or the London Clubs
Parties to any Lender, the Securities Intermediary, the Servicing Agent or the
Administrative Agent or relating to the Bank Credit Facility, the Advances, or
the Loan Documents; provided that "Confidential Information" shall not include
information (x) that is or becomes generally available to the public, other than
as a result of the disclosure by any Lender or the Administrative Agent in
breach of this provision, (y) that is or becomes available to any Lender or the
Administrative Agent from
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any source other than the Aladdin Parties and the London Clubs Parties or unless
the Person supplying such information shall have advised the Lender or the
Administrative Agent that such source is subject to a confidentiality agreement
that covers the information in question or (z) that is already in the possession
of any Lender or the Administrative Agent on the date hereof and that is not
otherwise "Confidential Information" as defined herein. In the event that any
Lender or the Administrative Agent is required or demanded by legal process
(e.g., depositions, interrogatories, requests for information or documents,
subpoena, civil investigation demand or similar process) to disclose any of the
Confidential Information, such Lender or the Administrative Agent shall give
prompt written notice to the Borrower of such request or demand so that the
Borrower may, should it elect to do so, within ten (10) Business Days of receipt
of such notice, seek a protective order or other appropriate remedy to challenge
or contest such request (and give such Lender or the Administrative Agent notice
thereof), and, during the pendency of any such action by the Borrower, such
Lender or the Administrative Agent shall not, to the extent permitted by
applicable law, disclose such Confidential Information.
r. Termination. This Disbursement Agreement shall, subject to Section
7.13, terminate and be of no further force or effect upon completion of the
transfer and release of funds contemplated by Section 2.8. The provisions of
Section 7.15 shall survive the termination of this Disbursement Agreement.
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IN WITNESS WHEREOF, the parties have caused this Disbursement Agreement to
be duly executed by their officers thereunto duly authorized as of the day and
year first above written.
BORROWER:
ALADDIN GAMING, LLC,
a Nevada limited-liability company
By:/s/ Richard Goeglein
--------------------------------
Name: Richard Goeglein
---------------------------
Title: President and CEO
------------------------
HOLDINGS:
ALADDIN GAMING HOLDINGS, LLC, a
Nevada limited-liability company
By:/s/ Richard Goeglein
---------------------------------
Name: Richard Geoglein
--------------------------
Title: CEO and President
--------------------------
ADMINISTRATIVE AGENT:
--------------------
THE BANK OF NOVA SCOTIA,
a Canadian chartered bank
By:/s/ Alan Pendergast
---------------------------------
Name: Alan Pendergast
------------------------------
Title: Relationship Manager
-----------------------------
DISCOUNT NOTE INDENTURE TRUSTEE:
-------------------------------
STATE STREET BANK AND TRUST COMPANY
By:/s/ Ruth A. Smith
---------------------------------
Name: Ruth A. Smith
--------------------------
Title: Vice President
--------------------------
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DISBURSEMENT AGENT:
------------------
THE BANK OF NOVA SCOTIA,
a Canadian chartered bank
By:/s/ Alan Pendergast
--------------------------------
Name: Alan Pendergast
--------------------------
Title: Relationship Manager
-----------------------
SECURITIES INTERMEDIARY
-----------------------
THE BANK OF NOVA SCOTIA,
a Canadian chartered bank
By:/s/ Alan Pendergast
--------------------------------
Name: Alan Pendergast
--------------------------
Title: Relationship Manager
-----------------------
SERVICING AGENT
---------------
U. S. BANK NATIONAL ASSOCIATION,
a national banking association
By:/s/ Terry A. Gentry
---------------------------------
Name: Terry A. Gentry
---------------------------
Title: Assistant Vice
---------------------------
President
--------------------------
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
ARTICLE 1- DEFINITIONS; RULES OF INTERPRETATION
<S> <C>
1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.2. Cross-References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
1.3. Conflict with a Facility Agreement. . . . . . . . . . . . . . . . . . . . . . .6
ARTICLE 2 - FUNDING
2.1. Representations Regarding Main Project Status . . . . . . . . . . . . . . . . .6
2.2. Advances; Availability; Amount of Advances. . . . . . . . . . . . . . . . . . .6
2.3. Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.4. Mechanics for Obtaining Advances. . . . . . . . . . . . . . . . . . . . . . . 16
2.5. Allocation of Advances. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.6. Disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.7. Payments of Interest and Other Amounts Under the Loan Documents; Obligatory
Advances for Letters of Credit. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.8. Completion Date Procedures. . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.9. No Approval of Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.10. Security. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 3 - CONDITIONS PRECEDENT TO
THE INITIAL ADVANCE AND SUBSEQUENT ADVANCES
3.1. Conditions Precedent to the Initial Advance . . . . . . . . . . . . . . . . . 25
3.2. Conditions Precedent to Advances from the Accounts. . . . . . . . . . . . . . 34
3.3. No Waiver or Estoppel . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE 4 - THE DISBURSEMENT AGENT
----------------------------------
4.1. Appointment and Acceptance. . . . . . . . . . . . . . . . . . . . . . . . . . 42
4.2. Duties and Liabilities of the Disbursement Agent Generally. . . . . . . . . . 42
4.3. Particular Duties and Liabilities of the Disbursement Agent . . . . . . . . . 44
4.4. Segregation of Funds and Property Interest. . . . . . . . . . . . . . . . . . 45
4.5. Compensation and Reimbursement of the Disbursement Agent. . . . . . . . . . . 46
4.6. Qualification of the Disbursement Agent . . . . . . . . . . . . . . . . . . . 46
</TABLE>
i
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<TABLE>
<CAPTION>
<S> <C>
4.7. Resignation and Removal of the Disbursement Agent . . . . . . . . . . . . . . 46
4.8. Merger or Consolidation of the Disbursement Agent . . . . . . . . . . . . . . 47
4.9. Statements; Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
4.10. Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE 5 - SECURITY INTEREST; PERMITTED INVESTMENTS; RELEASE
5.1. Security Interest in Accounts; Safekeeping of Collateral. . . . . . . . . . . 49
5.2. Attorney-in-Fact. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
5.3. Permitted Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE 6 - EVENTS OF DEFAULT
6.1. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.2. Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE 7- MISCELLANEOUS
------------------------
7.1. Addresses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.2. Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
7.3. Delay and Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
7.4. Additional Security; Right to Set-Off . . . . . . . . . . . . . . . . . . . . 55
7.5. Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.6. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.7. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.8. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.9. Limitation on Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.10. Waiver of Jury Trial. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.11. Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
7.12. Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
7.13. Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
7.14. No Partnership; etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
7.15. Costs and Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
7.16. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
7.17. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
7.18. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
</TABLE>
ii
<PAGE>
EXHIBITS
Exhibit A Description of the Project
Exhibit B-1 Insurance Consultant's Closing Certificate
Exhibit B-2 Borrower's Insurance Broker's Closing Certificate
Exhibit C Construction Consultant's Certificate
Exhibit D Schedule of Permits
Exhibit E Insurance Requirements
Exhibit F Form of Advance Request
Exhibit G Form of Notice of Advance Request
Exhibit H Form of Six Month Certificate
Appendix A Definitions
iii
<PAGE>
L.L.C. INTEREST PLEDGE AND SECURITY AGREEMENT
---------------------------------------------
THIS L.L.C. INTEREST PLEDGE AND SECURITY AGREEMENT (the "L.L.C. Interest
Pledge Agreement"), dated as of February 26, 1998, is executed by ALADDIN GAMING
HOLDINGS, L.L.C., a Nevada limited-liability company ("Shareholder"), in favor
of STATE STREET BANK AND TRUST COMPANY, as trustee ("Trustee") for the holders
of those certain $221,500,000 at maturity 13.5% Senior Discount Notes due 2010
("Noteholders"), pursuant to that certain Indenture dated as of February 26,
1998 (the "Indenture") by and among Trustee, Shareholder, and Aladdin Capital
Corp., a Nevada corporation ("Capital").
RECITALS
--------
Shareholder owns 100% of the Series A Preferred Membership
Interests (the "Series A Preferred Interests") of Aladdin Gaming, L.L.C., a
Nevada limited-liability company ("Aladdin Gaming").
The Noteholders are willing to purchase $221,500,000 at maturity
13.5% Senior Discount Notes due 2010 (the "Notes") for the purposes of, among
other things, providing funds to finance the cost of developing,
constructing, equipping and opening the Aladdin Hotel and Casino in Las
Vegas, Nevada.
Shareholder will derive substantial benefit from the purchase of
the Notes by the Noteholders.
It is a condition precedent to purchasing the Notes that
Shareholder pledge 100% of its interest in the Series A Preferred Interests
to Trustee, for the benefit of the Noteholders, as security for the Notes.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the above recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Shareholder hereby agrees with Trustee as follows:
Definitions and Interpretation. When used in this L.L.C.
Interest Pledge Agreement, the following terms shall have the following
respective meanings:
"Borrowers" shall mean Aladdin Gaming Holdings, L.L.C., a Nevada
limited-liability company and Aladdin Capital Corp., a Nevada
corporation, as joint and several obligors under the Indenture.
<PAGE>
"Collateral" shall have the meaning given to that term in Paragraph 2
hereof.
"Obligations" shall mean and include all obligations, howsoever
arising, owed by Borrowers to the Noteholders of every kind and
description, pursuant to the terms of the Indenture (whether or not
evidenced by any note or instrument and whether or not for the payment
of money), direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter arising pursuant to the terms of
the Notes and the Indenture, including without limitation all
interest, fees, charges, expenses, attorneys' fees and accountants'
fees chargeable to Shareholder or Borrowers and payable by Shareholder
or Borrowers hereunder and thereunder.
"L.L.C. Interest" shall mean the Series A Preferred Interests of
Aladdin Gaming.
"UCC" shall mean the Uniform Commercial Code as the same may, from
time to time, be in effect in the State of Nevada.
Unless otherwise defined herein, all other capitalized terms used herein
and defined in the Indenture shall have the respective meanings given to
those terms in the Indenture, and all terms defined in the UCC shall have the
respective meanings given to those terms in the UCC. To the extent the
meanings given herein are inconsistent with those given in the UCC, the
meanings given herein shall govern. Shareholder has previously received a
copy of the Indenture.
2. Pledge. As security for the Obligations, Shareholder hereby
pledges and assigns to Trustee, for the benefit of the Noteholders and grants
to Trustee, for the benefit of the Noteholders, a security interest in all
right, title and interests of Shareholder in and to the L.L.C. Interest,
whether now owned or hereafter acquired (collectively, the "Shareholder's
L.L.C. Interest"), including without limitation the Shareholder's L.L.C.
Interest described in Exhibit "A" hereto, and all proceeds thereof,
including, without limitation, distributions and other property received and
receivable by Shareholder in connection with the Shareholder's L.L.C.
Interest (the Shareholder's L.L.C. Interest and such proceeds to be referred
to herein collectively as the "Collateral").
3. Representations and Warranties. Shareholder represents and
warrants to Trustee, for the benefit of the Noteholders, that: (a) the
execution, delivery and performance by Shareholder of this L.L.C. Interest
Pledge Agreement are within the power of Shareholder and have been duly
authorized by all necessary actions on the part of Shareholder; (b) this
L.L.C. Interest Pledge Agreement has been duly executed and delivered by
Shareholder and constitutes a legal, valid and binding obligation of
Shareholder, enforceable against it in accordance with its terms, except as
limited by bankruptcy, insolvency or other laws of general application
relating to or affecting the enforcement of creditors' rights generally and
general principles of equity; (c) the execution, delivery and performance of
this L.L.C. Interest Pledge Agreement do not (i) violate
<PAGE>
any requirement of law, regulation or statute, (ii) violate any provision of,
or result in the breach or the acceleration of or entitle any Person to
accelerate (whether after the giving of notice or lapse of time or both) any
obligation under, any indenture, mortgage, lien, lease, agreement, license,
instrument, guaranty, or other document to which Shareholder is a party or by
which Shareholder or its property is bound, or (iii) result in the creation
or imposition of any lien upon any property, asset or revenue of Shareholder
(except such liens as may be created in favor of Trustee, for the benefit of
the Noteholders, pursuant to this L.L.C. Interest Pledge Agreement); (d) no
consent, approval, order or authorization of, or registration, declaration or
filing with, any governmental authority or other Person (including, without
limitation, the shareholders of any Person) is required in connection with
the execution, delivery and performance of this L.L.C. Interest Pledge
Agreement, except such consents, approvals, orders, authorizations,
registrations, declarations and filings that are so required and which have
been obtained and are in full force and effect; (e) Shareholder is the
beneficial owner of the Collateral (or, in the case of after-acquired
Collateral, at the time Shareholder acquires rights in the Collateral, will
be the beneficial) and no other Person has (or, in the case of after-acquired
Collateral, at the time Shareholder acquires rights therein, will have) any
right, title, claim or interest (by way of lien or otherwise) in, against or
to the Collateral, other than "Permitted Liens" (as such term is defined in
the Indenture); (f) all of the Collateral which are preferred membership
interests are and such future Collateral will be validly issued, fully paid
and nonassessable securities of Aladdin Gaming; (g) the Collateral includes
all of the issued and outstanding membership interests of Series A Preferred
Interests of Aladdin Gaming; (h) upon transfer to Trustee of all Collateral
consisting of securities, Trustee (on behalf of the Noteholders) will have a
first priority perfected security interest in such Collateral, and (or in the
case of all other after-acquired Collateral, at the time Shareholder acquires
rights therein, will have) a first priority perfected security interest in
all other Collateral, other than Permitted Liens; (i) all information
heretofore, herein or hereafter supplied in writing to Trustee, taken as a
whole, by or on behalf of Shareholder with respect to the Collateral does not
contain any untrue statements of a material fact and does not omit and will
not omit to state any material fact necessary to make any information so
supplied, in light of the circumstances under which they were supplied, not
misleading; and (j) Shareholder's principal place of business is 3667 Las
Vegas Blvd. South, Las Vegas, Clark County, Nevada.
4. Covenants. Shareholder hereby agrees: (a) to perform all acts
that may be necessary to maintain, preserve, protect and perfect the
Collateral, the lien granted to Trustee hereunder and the first priority of
such lien, subject only to Permitted Liens; (b) to cause its Restricted
Subsidiaries to perform, upon request of the Trustee, all acts that may be
necessary to maintain, preserve, protect and perfect the Collateral, the lien
granted to Trustee hereunder and the first priority of such lien, subject
only to Permitted Liens (c) to promptly deliver to Trustee all originals of
certificates and other documents, instruments and agreements evidencing the
Collateral which are now held or hereafter received by Shareholder, together
with any blank assignment documents executed by Shareholder as Trustee may
request; (d) to procure, execute and deliver from time to time any
endorsements, assignments, financing statements and other documents,
instruments and agreements and take other actions deemed necessary, as
Trustee may request, to perfect, maintain and protect its lien hereunder and
the priority thereof; (e) to appear in and defend any action or proceeding
which may affect its title to or Trustee's interest in the Collateral; (f) to
<PAGE>
keep the Collateral free of all liens except those created hereunder and the
Permitted Liens; (g) not to vote to enable, or take any other action to
permit, Aladdin Gaming to issue any L.L.C. Interest except as expressly
permitted by the Indenture; (h) to pay, and to save Trustee and the
Noteholders harmless from, any and all liabilities with respect to, or
resulting from any delay in paying, any and all stamps, excise, sales or
other similar taxes which may be payable or determined to be payable with
respect to any of the Collateral or in connection with any of the
transactions contemplated by this L.L.C. Interest Pledge Agreement; and (i)
not to, without the written consent of the Trustee pursuant to or otherwise
expressly permitted by the Indenture, sell, dispose of or transfer (directly
or indirectly) or covenant to sell, dispose of or transfer (directly or
indirectly) the Collateral.
5. Dividends and Voting Rights Prior to Default. Until an Event of
Default (as defined in the Indenture) shall have occurred and be continuing
and Trustee shall have given notice to Shareholder of Trustee's intent to
exercise its rights pursuant to Subparagraph 6(b) below, Shareholder shall be
permitted (a) to receive all distributions made in connection with
Shareholder's L.L.C. Interest (other than distributions paid in additional
L.L.C. Interest unless such additional L.L.C. Interest is pledged to Trustee,
for the benefit of the Noteholders, pursuant to this L.L.C. Interest Pledge
Agreement which are expressly permitted by the Indenture and (b) to exercise
all voting and limited-liability company rights with respect to the L.L.C.
Interest; provided, however, that no vote shall be cast or limited-liability
company right exercised or other action taken which, in Trustee's reasonable
judgment, would impair the Collateral or be inconsistent with or result in
any violation of any provision of the Indenture.
6. Future Documents. The Shareholder shall deliver to the Trustee
copies of all documents delivered to the Disbursement Agent pursuant to this
agreement, and shall do or cause to be done all such acts and things as may
be necessary or proper, or as may be required by the provisions herein, to
assure and confirm to the Trustee and the Disbursement Agent that the
security interest in the Collateral is available for the security of the
Indenture and the Notes secured thereby.
7. Recording and Opinions. The Shareholder shall furnish to the
Trustee simultaneously with the execution and delivery of the Indenture an
Opinion of Counsel either (a) stating that in the opinion of such counsel all
action has been taken with respect to the recording, registering and filing
of the Indenture, financing statements or other instruments necessary to make
effective the liens intended to be created by this agreement, and reciting
with respect to the security interests in the Collateral, the details of such
action, or (b) stating that, in the opinion of such counsel, no such action
is necessary to make such liens effective. The Shareholder shall furnish to
the Disbursement Agent and the Trustee on February 1 in each year beginning
with February 1, 1998, an Opinion of Counsel, dated as of such date, either
(a)(i) stating that, in the opinion of such counsel, action has been taken
with respect to the recording, registering, filing, re-recording,
re-registering and refiling of all supplemental indentures, financing
statements, continuation statements or other instruments of further assurance
as is necessary to maintain the liens and reciting with respect to the
security interests in the Collateral, the details of such section or
referring to prior Opinions of Counsel in which such details are given, (ii)
stating that, based on relevant laws as in effect on the date of such Opinion
of Counsel, all financing statements and continuation statements
<PAGE>
have been executed and filed that are necessary as of such date and during
the succeeding twelve (12) months fully to preserve and protect, to the
extent such preservation and protection are possible by filing, the rights of
the Noteholders, the Disbursement Agent and the Trustee under the Indenture
and this agreement with respect to the security interests in the Collateral,
or (b) stating that, in the opinion of such counsel, no such action is
necessary to maintain such liens and assignments.
8. Authorization of Action to be taken by the Trustee. Subject to
Sections 7.01 and 7.02 of the Indenture, the Trustee may, in its sole
discretion and without the consent of the Noteholders, on behalf of the
Noteholders, take and direct the Disbursement Agent to take, all actions it
deems necessary or appropriate in order to (a) enforce any of the terms of
this agreement or (b) collect and receive any and all amounts payable in
respect of the Obligations of the Shareholder under the Indenture. The
Trustee shall have power to institute and maintain such suits and proceedings
as it may deem expedient to prevent any impairment of the Collateral by any
acts that may be unlawful or in violation of this agreement or the Indenture,
and such suits and proceedings as the Trustee may deem expedient to preserve
or protect its interests and the interests of the Noteholders in the
Collateral (including power to institute and maintain suits or proceedings to
restrain the enforcement of or compliance with any legislative or other
governmental enactment, rule or order that may be unconstitutional or
otherwise invalid if the enforcement of, or compliance with, such enactment,
rule or order would impair the security interest granted herein or be
prejudicial to the interest of the Noteholders or the Trustee.
9. Default and Remedies.
(a) Event of Default. The occurrence (whether as a result of acts
or omissions by Borrowers or any other Person) of an Event of Default
under the Indenture, whatever the reason for such Event of Default and
whether it shall be voluntary or involuntary or be effected by operation
of law or pursuant to any judgment, decree or order of any court or any
order, rule or regulation of any administrative or governmental body,
shall constitute an "Event of Default" hereunder.
(b) Dividends and Voting Rights. Upon the occurrence and during
the continuance of any Event of Default hereunder, Trustee may, upon
notice to Shareholder, (i) notify Aladdin Gaming to pay all dividends on
Shareholder's L.L.C. Interest to Trustee, for the benefit of the
Noteholders, receive and collect all such dividends and make application
thereof to the obligations in such order as Trustee may determine, and
(ii) register all of Shareholder's L.L.C. Interest in the name of
Trustee or its nominee, for the benefit of the Noteholders, and Trustee
or its nominee may thereafter exercise (A) all voting, limited-liability
company and other rights pertaining to Shareholder's L.L.C. Interest at
any meeting of shareholders of Aladdin Gaming or otherwise and (B) any
and all rights of conversion, exchange, subscription and any other
rights, privileges or options pertaining to Shareholder's L.L.C.
Interest as if it were the absolute owner thereof (including, without
limitation, after Trustee has commenced to exercise remedies (or such
remedies are deemed commenced) under the Indenture, the right to
exchange at its
<PAGE>
discretion any and all of Shareholder's L.L.C. Interest upon the merger,
consolidation, reorganization, recapitalization or other fundamental
change in the limited-liability company structure of Aladdin Gaming, or
upon the exercise by Shareholder or Trustee of any right, privilege or
option pertaining to Shareholder's L.L.C. Interest, and in connection
therewith, the right to deposit and deliver any and all of Shareholder's
L.L.C. Interest with any committee, depositary, transfer agent,
registrar or other designated agency upon such terms and conditions as
it may determine), all without liability except to account for property
actually received by it, but Trustee shall have no duty to Shareholder
to exercise any such right, privilege or option and shall not be
responsible for any failure to do so or delay in so doing. Promptly
after the waiver or cure of the Event of Default giving rise to
Trustee's election under this Paragraph 6(b), Trustee shall notify
Shareholder, Capital and Aladdin Gaming of such waiver or cure and for
so long as no subsequent continuing Event of Default exists, Shareholder
shall have all rights as a shareholder it had prior to the occurrence of
such Event of Default, the Shareholder's L.L.C. Interest shall again be
registered in the name of Shareholder and Aladdin Gaming shall again
make all payments and distributions with respect to Shareholder's L.L.C.
Interest to Shareholder.
(c) Additional Remedies. Subject to the terms of the Indenture,
upon the occurrence and during the continuance of an Event of Default,
Trustee may exercise, in addition to all other rights and remedies
granted in this L.L.C. Interest Pledge Agreement and in any other
instrument or agreement securing, evidencing or relating to the
Obligations, any and all rights and remedies at law, including, without
limitation, all rights and remedies of a secured party under the UCC.
Without limiting the generality of the foregoing, Trustee may, without
demand of performance or other demand, presentment, protest,
advertisement or notice of any kind to or upon Shareholder, Capital,
Aladdin Gaming or any other Person (except notice of time and place of
sale and any other notice required by law and any notice referred to
below or in the Indenture) forthwith collect, receive, appropriate and
realize upon the Collateral, or any part thereof, and/or may forthwith
sell, assign, give option or options to purchase or otherwise dispose of
and deliver the Collateral or any part thereof (or contract to do any of
the foregoing), in one or more parcels at public or private sale or
sales, in the over-the-counter market, at any exchange, broker's board
or office of Trustee or elsewhere upon such terms and conditions as it
may deem advisable and at such prices as it may deem commercially
reasonable, for cash or on credit or for future delivery without
assumption of any credit risk. Trustee shall have the right upon any
such public sale or sales, and, to the extent permitted by law, upon any
such private sale or sales, to purchase the whole or any part of the
Collateral so sold, free of any right or equity of redemption in
Shareholder, which right or equity is hereby waived and released.
Trustee shall apply any proceeds from time to time held by it and the
net proceeds of any such collection, recovery, receipt, appropriation,
realization or sale, after deducting all reasonable costs and expenses
of every kind incurred in respect thereof or incidental to the care or
safekeeping of any of the Collateral or in any way relating to the
Collateral or the rights of Trustee hereunder, including, without
limitation, reasonable attorneys' fees and disbursements of counsel to
Trustee, to the payment in whole or in part of the Obligations, in such
order as Trustee may elect, and only after such application and
<PAGE>
after the payment by Trustee of any other amount required by any
provision of law, need Trustee account for the surplus, if any, to
Shareholder. To the extent permitted by applicable law, Shareholder
waives all claims, damages and demands it may acquire against Trustee
arising out of the exercise by it of any rights hereunder except as may
arise solely from Trustee's gross negligence or willful misconduct. If
any notice of a proposed sale or other disposition of Collateral shall
be required by law, such notice shall be deemed reasonable and proper if
given at least 5 business days before such sale or other disposition.
10. Authorized Actions. Shareholder acknowledges that the
Obligations hereunder may be supplemented, augmented and otherwise increased
as a result of changes in the underlying obligations of Borrowers pursuant to
the Indenture. In that regard, Shareholder authorizes Trustee, in its
discretion, without notice to Shareholder, irrespective of any change in the
financial condition of Shareholder, Capital, or Aladdin Gaming since the date
hereof, and without affecting or impairing in any way the liability of
Shareholder hereunder, from time to time to (a) create new Obligations, and,
either before or after receipt of notice of revocation, renew, compromise,
extend, accelerate or otherwise change the time for payment or performance
of, or otherwise change the terms of the Obligations or any part thereof,
including increase or decrease of the rate of interest thereon; (b) take and
hold additional security for the payment or performance of the Obligations
and exchange, enforce, waive or release any such additional security; (c)
apply such additional security and direct the order or manner of sale
thereof; (d) purchase such additional security at public or private sale; (e)
upon the occurrence and during the continuance of an Event of Default, make
any payments and do any other acts Trustee shall deem necessary to protect
the Noteholders' security interest in the Collateral, including, without
limitation, pay, purchase, contest or compromise any encumbrance, charge or
lien (other than a Permitted Lien) which in the judgment of Trustee appears
to be prior to or superior to the security interest granted hereunder, and
appear in and defend any action or proceeding purporting to affect its
security interest in and/or the value of the Collateral, and in exercising
any such powers or authority, pay all expenses incurred in connection
therewith, including attorneys' fees, and Shareholder hereby agrees it shall
be bound by any such payment made or act taken by Trustee hereunder and shall
reimburse Trustee for all payments made and expenses incurred, which amounts
shall be secured under this L.L.C. Interest Pledge Agreement; provided,
however, that Trustee shall have no obligation to make any of the foregoing
payments or perform any of the foregoing acts; (f) otherwise exercise any
right or remedy it may have against Shareholder, Capital, or Aladdin Gaming,
or any security, including, without limitation, the right to foreclose upon
any such security by judicial or nonjudicial sale; (g) settle, compromise
with, release or substitute any one or more makers, endorsers or guarantors
of the Obligations; and (h) assign the Obligations or this L.L.C. Interest
Pledge Agreement in whole or in part (subject to the terms and conditions of
the Indenture).
11. Waivers. Shareholder waives (a) any right to require Trustee
or the Noteholders to (i) proceed against Capital or Aladdin Gaming, (ii)
proceed against or exhaust any security received from Capital or Aladdin
Gaming or (iii) pursue any other remedy in Trustee's power whatsoever; (b)
any defense resulting from the absence, impairment or loss of any right of
reimbursement or subrogation or other right or remedy of Shareholder against
Capital or Aladdin
<PAGE>
Gaming, or any security, whether resulting from an election by Trustee to
foreclose upon security by nonjudicial sale, or otherwise; (c) any setoff or
counterclaim of Capital or Aladdin Gaming or any defense which results from
any disability or other defense of Capital or Aladdin Gaming or the cessation
or stay of enforcement from any cause whatsoever of the liability of Capital
or Aladdin Gaming; (d) any right to exoneration of sureties which would
otherwise be applicable; (e) except to the extent prohibited by NRS 40.495,
any right of subrogation or reimbursement and any right of contribution, and
right to enforce any remedy which Trustee now has or may hereafter have
against Capital or Aladdin Gaming, and any benefit of, and any right to
participate in, any security now or hereafter received by Trustee until the
Obligations have been paid in full; (f) all presentments, demands for
performance, notices of non-performance, protests, notice of dishonor, and
notices of acceptance of the L.L.C. Interest Pledge Agreement and of the
existence, creation or incurrence of new or additional Obligations; (g) the
benefit of any statute of limitations (to the extent permitted by law); and
(h) any right to be informed by Trustee of the financial condition of Capital
or Aladdin Gaming or any change therein or any other circumstances bearing
upon the risk of nonpayment or nonperformance of the Obligations.
Shareholder has the ability and assumes the responsibility for keeping
informed of the financial condition of Capital and Aladdin Gaming and of
other circumstances affecting such nonpayment and nonperformance risks.
12. Limitation on Duties Regarding Collateral. Trustee's sole
duty with respect to the custody, safekeeping and physical preservation of
the Collateral in its possession, under Section 104.9207 of the UCC or
otherwise, shall be to deal with it in the same manner as Trustee deals with
similar securities and property for its own account and as would be dealt by
a prudent person in the reasonable administration of its affairs. Neither
Trustee nor any of its directors, officers, employees or agents shall be
liable for failure to demand, collect or realize upon any of the Collateral
or for any delay in doing so or shall be under any obligation to sell or
otherwise dispose of any Collateral upon the request of Shareholder or
otherwise.
13. Nevada Gaming Law. This agreement will be governed by and
subject to the Nevada Gaming Control Act. Without limiting the generality
of the foregoing, the parties agree that:
The pledge of the L.L.C. Interest of Aladdin Gaming provided
for herein, and any restrictions on the transfer and agreements not to
encumber the L.L.C. interest, will be subject to the approval of the Nevada
Gaming Authorities (as defined in the Indenture) and such approval may
require amendment of this agreement to include additional references to
regulatory requirements;
Notwithstanding approval by the Nevada Gaming Authorities
pursuant to paragraph (a), other approvals of the Gaming Authorities
(including the licensing of the Trustee and/or the Noteholders) may, and in
some cases will, be required before certain transactions relating to this
Agreement may occur, including but not limited to the
following:
any re-registration or action similar to re-registration
of the L.L.C. Interest (or any distribution in respect of, in addition
to, in substitution of, or in exchange
<PAGE>
for, the L.L.C. Interest or any part thereof);
any foreclosure, sale, transfer or other disposition
of the L.L.C. Interest or any other enforcement of the security interest
therein; and
(iii) to the extent required by the Nevada Gaming
Authorities, the exercise by the Trustee of any of its remedies under
Section 6 and any of the voting and consensual rights set forth therein,
after and during the continuance of an Event of Default; and
(iv) pursuant to Regulation 8.050 of the Nevada Gaming
Commission, the payment or receipt of any money or other thing of value
constituting any part of the consideration for the transfer or
acquisition of the L.L.C. Interest, except that such consideration may
be placed in escrow pending the necessary approvals.
If required, the Trustee shall retain all evidence of
ownership in the L.L.C. Interest of Aladdin Gaming, or any distribution of
additional securities in respect of, in addition to, in substitution of, or
in exchange for, such L.L.C. Interest of Aladdin Gaming, or any part thereof,
in the State of Nevada at a location designated to the Nevada State Gaming
Control Board (the "Nevada Board") through its agent, or such substitute
agent as it may select in its reasonable discretion that is located in and
authorized to do business in the State of Nevada, pursuant to the terms of an
Escrow Agreement to be entered into by the Trustee and its agent
substantially in the form attached hereto as Exhibit "B", and Trustee shall
make the certificates or instruments evidencing the L.L.C. Interest available
for inspection by agents or employees of the Nevada Board immediately upon
request during normal business hours.
15. Termination. This L.L.C. Interest Pledge Agreement shall
terminate upon the satisfaction of all Obligations, and Trustee shall
promptly thereafter deliver the L.L.C. Interest certificates held by it
hereunder to Shareholder and, at Shareholder's expense, execute and deliver
to Shareholder such documents as Shareholder shall reasonably request to
evidence such termination. Upon any release of the L.L.C. Interest of
Aladdin Gaming from the pledge and security interest hereunder pursuant to
the Release Provision, the Trustee shall promptly deliver to Shareholder all
certificates representing such L.L.C. Interest and, at Shareholder's expense,
execute and deliver to Shareholder such documents as Shareholder shall
reasonably request to evidence such release.
16. Power of Attorney. Shareholder hereby appoints and
constitutes Trustee as Shareholder's attorney-in-fact for purposes of (a)
collecting any Collateral, (b) conveying any item of Collateral to any
purchaser thereof, and (c) making any payments or taking any acts under
Paragraph 6 hereof. Trustee's authority hereunder shall include, without
limitation, upon the occurrence and during the continuance of an Event of
Default, the authority to endorse and negotiate, for Trustee's own account,
any checks or instruments in the name of Trustee, to execute or receipt for
any document, to transfer title to any item of Collateral, and to take any
other actions necessary or incident to the powers granted to Trustee in this
L.L.C. Interest Pledge Agreement.
<PAGE>
This power of attorney is coupled with an interest and is irrevocable by
Shareholder.
17. Miscellaneous.
(a) Notices. Except as otherwise provided herein, all
notices, requests, demands of other communications to or upon the
parties hereto shall be addressed to the parties at the respective
addresses indicated below or at such other address as either party
hereto may designate by written notice to the other party, and shall be
deemed to have been given (i) in the case of notice by letter, three (3)
days after deposited in the mails registered and return receipt
requested, or (ii) in the case of notice given by telecommunication,
when sent and received by the recipient prior to 5:00 p.m. on the
recipient's business day:
Trustee: State Street Bank and Trust Company
Corporate Trust Division
Two International Place
Boston, Massachusetts 02110
Ph: (617) 664-5340
FAX:(617) 664-5371
Shareholder: Aladdin Gaming Holdings, L.L.C.
2810 W. Charleston Blvd., Ste. 58
Las Vegas, Nevada 89102
Attn: Jack Sommer
Ph: (702) 870-1234
FAX:(702) 870-8733
Capital: Aladdin Capital Corp.
2810 W. Charleston Blvd., Ste. 58
Las Vegas, Nevada 89102
Attn: Jack Sommer
Ph: (702) 870-1234
FAX:(702) 870-8733
<PAGE>
Aladdin Gaming: Aladdin Gaming, L.L.C.
2810 W. Charleston Blvd., Ste. 58
Las Vegas, Nevada
Attn: Jack Sommer
Ph: (702) 870-1234
FAX: (702) 870-8733
(b) Nonwaiver. No failure or delay on Trustee's part in
exercising any right hereunder shall operate as a waiver thereof or of any
other right nor shall any single or partial exercise of any such right
preclude any other further exercise thereof or of any other right.
(c) Amendments and Waivers. This L.L.C. Interest Pledge
Agreement may not be amended or modified, nor may any of its terms be
waived, except by written instruments signed by the party or parties
against which enforcement thereof is sought. Each waiver or consent under
any provision hereof shall be effective only in the specific instances for
the purpose for which given.
(d) Assignment. This L.L.C. Interest Pledge Agreement
shall be binding upon inure to the benefit of Trustee, the Noteholders
and Shareholder and their respective successors and assigns; provided,
however, that Shareholder may not assign its rights or delegate its duties
hereunder without the prior written consent of Trustee. Trustee may
assign or otherwise transfer all or any part of its interest under this
L.L.C. Interest Pledge Agreement, upon notice to Shareholder. Trustee may
disclose this L.L.C. Interest Pledge Agreement and any financial or other
information relating to Shareholder to any potential assignee or
participant.
(e) Cumulative Rights, etc. The rights, powers and
remedies of Trustee under this L.L.C. Interest Pledge Agreement shall be
in addition to all rights, powers and remedies given to Trustee by
virtue of the Indenture, any applicable governmental rule or regulation
or any other agreement, all of which rights, powers, and remedies shall
be cumulative and may be exercised successively or concurrently without
impairing Trustee's lien in the Collateral. Shareholder waives any
right to require Trustee to proceed against any Person or to exhaust any
Collateral or to pursue any remedy in Trustee's power.
(f) Governing Law. This L.L.C. Interest Pledge Agreement
shall be governed by and construed in accordance with the laws of the
State of New York, except (i) as the Nevada Gaming Control Act may
apply, (ii) as required by mandatory provisions of Nevada law and (iii) to
the extent that the validity or perfection of the lien and security
interest hereunder, or remedies hereunder, in respect of any particular
Collateral are governed by the laws of the State of Nevada.
<PAGE>
IN WITNESS WHEREOF, Shareholder has caused this L.L.C. Interest
Pledge and Security Agreement to be executed in favor of Trustee as of the
day and year first above written.
SHAREHOLDER:
ALADDIN GAMING HOLDINGS, L.L.C., a Nevada
limited-liability company
By: /s/ Richard Goeglein
-----------------------------
Name: Richard Goeglein
Title: CEO & President
By: /s/ Ronald Dictrow
------------------------------
Name: Ronald B. Dictrow
Title: Executive V.P. & Secretary
<PAGE>
ACKNOWLEDGMENT AND
CONSENT OF CAPITAL AND ALADDIN GAMING
Each of ALADDIN CAPITAL CORP., a Nevada corporation ("Capital") and
Aladdin Gaming, L.L.C., a Nevada limited-liability company ("Aladdin Gaming")
hereby acknowledges receipt of a copy of the above L.L.C. Interest Pledge and
Security Agreement, agrees to be bound by and comply with the terms thereof,
including, without limitation, Paragraph 6 thereof and agrees to perform all
covenants and obligations therein which, by their express or implied terms
are to be performed by Capital and/or Aladdin Gaming.
ALADDIN CAPITAL CORP.,
a Nevada corporation
By: /s/ Richard Goeglein
-------------------------------
Name: Richard Goeglein
Title: CEO & President
ALADDIN GAMING, L.L.C.,
a Nevada limited-liability company
By: /s/ Richard Goeglein
-------------------------------
Name: Richard Goeglein
Title: CEO & President
<PAGE>
EXHIBIT "A"
DESCRIPTION OF SHAREHOLDER'S L.L.C. INTEREST
<TABLE>
<CAPTION>
Percentage of
-------------
Issuer Class of L.L.C. Interest No. of Interests Outstanding
------ -------- --------------- ---------------- -----------
L.L.C. Interest Certificate No. Interests
--------------- --------------- ---------
<S> <C> <C> <C> <C>
Aladdin Gaming Preferred No. 1 100%
Membership
Interests
(Series A)
</TABLE>
<PAGE>
The Holdings Collateral Account Agreement
HOLDINGS COLLATERAL ACCOUNT AGREEMENT
This HOLDINGS COLLATERAL ACCOUNT AGREEMENT (this "Agreement") is
dated February 26, 1998 and entered into by and among ALADDIN GAMING HOLDINGS,
LLC, a Nevada limited liability company (the "Pledgor"), THE BANK OF NOVA
SCOTIA, a Canadian chartered bank, as the initial Disbursement Agent under the
Disbursement Agreement (in such capacity the "Secured Party"), and THE BANK OF
NOVA SCOTIA, as the initial Securities Intermediary (in such capacity the
"Securities Intermediary").
PRELIMINARY STATEMENTS
A. The Project. Aladdin Gaming, LLC (the "Borrower") proposes to develop,
construct and operate the Aladdin Hotel and Casino, a large scale theme hotel,
casino, retail, meeting and entertainment complex, and to refurbish or cause the
refurbishment of the Theater with related heating, ventilation and air
conditioning and power station facilities to be developed at the Site.
B. Credit Agreement. Concurrently herewith, the Borrower, the Agents and
the Lenders have entered into the Credit Agreement pursuant to which the Lenders
have agreed, subject to the terms thereof and hereof, to provide the Bank Credit
Facility to the Borrower in an aggregate amount not to exceed $410,000,000.
C. Discount Note Indenture. Concurrently herewith, Pledgor, Capital and
the Discount Note Indenture Trustee have entered into the Discount Note
Indenture pursuant to which Pledgor and Capital will issue Discount Notes. The
net proceeds of the Discount Notes and warrants to purchase class B common stock
of Aladdin Gaming Enterprises, Inc. will be applied by the Borrower to the
development, construction, equipping and opening of the Main Project in an
aggregate amount of approximately $107,000,000.
D. Disbursement Agreement. Concurrently herewith, the Borrower, the
Pledgor, Administrative Agent (acting on behalf of itself and the Lenders), the
Discount Note Indenture Trustee (acting on behalf of itself and the Discount
Noteholders), The Bank of Nova Scotia as "Disbursement Agent" and U.S. Bank
National Association as "Servicing Agent" have entered into the Disbursement
Agreement for the purpose of setting forth, among other things, (a) the
mechanics for and allocation of the Borrower's requests for Advances under the
Facilities and, inter
<PAGE>
alia, from the Borrower's Funds Account, (b) the conditions precedent to the
initial Advance and conditions precedent to subsequent Advances, (c) the
establishment of the Collateral Account, (d) the management of the Collateral
Account, and (e) the events of default and remedies.
E. Capacity and Obligations of Secured Party. The Secured Party has
entered into this Agreement pursuant to the Disbursement Agreement and is
obligated to exercise its rights and perform its duties hereunder in accordance
with the Disbursement Agreement.
F. Condition. It is a condition precedent to the purchase of the Discount
Notes by Discount Noteholders that Pledgor shall have established the Collateral
Account, granted control to the Disbursement Agent (as Secured Party) of such
account, and undertaken the obligations contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to
induce the Noteholders to purchase the Discount Notes and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Pledgor hereby agrees with Secured Party as follows:
SECTION 1. Certain Definitions.
a. Specific Definitions. The following terms used in this Agreement
shall have the following meanings:
"Broker-Dealer" means a person registered as a broker or dealer
under the Securities Exchange Act of 1934, as amended,
"Business Day" means any day other than a Saturday, Sunday or any
other day which is a legal holiday or a day on which banking institutions are
permitted to be closed in New York or Nevada.
"Code" shall mean the Uniform Commercial Code as in effect in New
York.
"Collateral" means (i) the Collateral Account, (ii) all amounts
credited to or held from time to time in the Collateral Account, (iii) all
Investments and all Financial Assets, security entitlements, securities (whether
certificated or uncertificated), instruments, accounts, general intangibles and
deposits credited to
2
<PAGE>
the Collateral Account representing or evidencing any Investments, (iv) all
interest, dividends, cash, instruments, securities, investment property and
other property from time to time received, receivable or otherwise distributed
in respect of or in exchange for any or all of the Collateral, and (v) to the
extent not covered by clauses (i) through (iv) above, all proceeds of any or all
of the foregoing Collateral.
"Collateral Account" means the Restricted Securities Account and any
other accounts or subaccounts in which Investments may be held or registered.
"Investments" means any Financial Assets credited to the Restricted
Securities Account, and any other property acquired by the Securities
Intermediary as a securities intermediary hereunder in exchange for, with
proceeds from or distributions on, or otherwise in respect of any Investments.
"Overnight Investments" means an interest bearing overnight deposit
account with the Securities Intermediary.
"Permitted Investments" means (a) (i) direct obligations of the
United States of America (including obligations issued or held in book-entry
form on the books of the Department of the Treasury of the United States of
America) or obligations fully guaranteed by the United States of America, (ii)
obligations, debentures, notes or other evidence of indebtedness issued or
guaranteed by any other agency or instrumentality of the United States, (iii)
interest-bearing demand or time deposits (which may be represented by
certificates of deposit) issued by banks having general obligations rated (on
the date of acquisition hereof) at least "A" or the equivalent by any Rating
Agency or, if not so rated, secured at all times, in the manner and to the
extent provided by law, by collateral security in clause (i) or (ii) of this
definition, of a market value of no less than the amount of monies so invested,
(iv) commercial paper rated (on the date of acquisition thereof) at least "A-1"
or "P-1" or the equivalent by any Rating Agency issued by any Person, (v)
repurchase obligations for underlying securities of the types described in
clause (i) or (ii) above, entered into with any commercial bank or any other
financial institution having long-term unsecured debt securities rated (on the
date of acquisition thereof) at least "A" or "A2" or the equivalent by any
Rating Agency in connection with which such underlying securities are held in
trust or by a third-party custodian, (vi) guaranteed investment contracts of any
financial institution which has a long-term debt rated (on the date of
acquisition thereof) at least "A" or "A2" or the equivalent by any Rating
Agency, (vii) obligations (including both taxable and nontaxable municipal
securities) issued or guaranteed by, and any other obligations the interest on
which is
3
<PAGE>
excluded from income for Federal income tax purposes issued by, any state of the
United States of America or the District of Columbia or the Commonwealth of
Puerto Rico or any political subdivision, agency, authority or instrumentality
thereof, which issuer or guarantor has (A) a short-term debt rated (on the date
of acquisition thereof) at least "A-1" or "P-1" or the equivalent by any Rating
Agency and (B) a long-term debt rated (on the date of acquisition thereof) at
least "A" or "A2" or the equivalent by any Rating Agency, (viii) investment
contracts of any financial institution either (A) fully secured by (1) direct
obligations of the United States, (2) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States or
(3) securities or receipts evidencing ownership interest in obligations or
specified portions thereof described in clause (1) or (2), in each case
guaranteed as full faith and credit obligations of the United States of America,
having a market value at least equal to 102% of the amount deposited thereunder,
or (B) with long-term debt rated at least "A" or "A2" or the equivalent by any
Rating Agency and short-term debt rated at least "A-1" or "P-1" or the
equivalent by any Rating Agency, (ix) a contract or investment agreement with a
provider or guarantor (A) which provider or guarantor is rated (on the date of
acquisition thereof) at least "A" or "A2" or the equivalent by any Rating Agency
(provided that if a guarantor is party to the rating, the guaranty must be
unconditional and must be confirmed in writing prior to any assignment by the
provider to another subsidiary of such guarantor), (B) providing that monies
invested shall be payable without condition (other than notice) and without
brokerage fee or other penalty, upon not more than two Business Days' notice for
application when and as required or permitted under the Loan Documents (as
defined in the Credit Agreement), and (C) stating that such contract or
agreement is unconditional, expressly disclaiming any right of setoff and
providing for immediate termination in the event of insolvency of the provider
and termination upon demand of the Disbursement Agent if prior to Completion
after payment or other covenant default by the provider, or (x) any debt
instruments of any Person which instruments are rated (on the date of
acquisition thereof) at least "A," "A2," "A-1" or "P-1" or the equivalent by any
Rating Agency; provided that in each case of clauses (i) through (x), such
investments are denominated in United States dollars and maturing not more than
13 months from the date of acquisition thereof; (b) investments in any money
market fund which is rated (on the date of acquisition thereof) at least "A" or
"A2" or the equivalent by any Rating Agency; (c) investments in mutual funds
sponsored by any securities broker-dealer of recognized national standing having
an investment policy that requires substantially all the invested assets of such
fund to be invested in investments described in any one or more of the foregoing
clauses and having a rating of at least "A" or "A2" or the equivalent by any
Rating Agency or (d) invest-
4
<PAGE>
ments in both taxable and nontaxable (i) periodic auction reset securities
("PARS") which have final maturities between one and 30 years from the date of
issuance and are repriced through a dutch auction or other similar method every
35 days or (ii) auction preferred shares ("APS") which are senior securities of
leveraged closed end municipal bond funds and are repriced pursuant to a variety
of rate reset periods, in each case having rating of at least "A" or "A2" or the
equivalent by any Rating Agency.
"Restricted Securities Account" means the Restricted Securities
Account established and maintained with Securities Intermediary pursuant to
Section 2 known as the Construction Note Disbursement Account.
"Secured Obligations" means all obligations and liabilities of every
nature of Pledgor now or hereafter existing under or arising out of or in
connection with the Discount Note Indenture, the Discount Notes and each other
agreement to which the Discount Note Indenture Trustee is a party or which
grants a security interest for the benefit of the Discount Note Indenture
Trustee or the Discount Noteholders, and all extensions or renewals thereof,
whether for principal, interest (including interest that, but for the filing of
a petition in bankruptcy with respect to Pledgor, would accrue on such
obligations), fees, expenses, indemnities or otherwise, whether voluntary or
involuntary, direct or indirect, absolute or contingent, liquidated or
unliquidated whether or not jointly owned with others, and whether or not from
time to time decreased or extinguished and later increased, created or incurred,
and all or any portion of such obligations or liabilities that are paid, to the
extent all or any part of such payment is avoided or recovered directly or
indirectly from Secured Party or any Discount Noteholder as a preference,
fraudulent transfer or otherwise, and all obligations of every nature of Pledgor
now or hereafter existing under this Agreement.
"Securities Intermediary" means The Bank of Nova Scotia or any
successor thereto.
"Suspension Period" means each period beginning on the occurrence of
a Default or Event of Default and continuing so long as any Default or Event of
Default shall continue.
b. General Provisions. Capitalized terms used but not defined herein
shall have the meaning given to such terms in Exhibit A. Unless
otherwise defined herein or in Exhibit A, terms used in
5
<PAGE>
Articles 8 and 9 of the Code are used herein as therein defined.
Words used herein, regardless of the number or gender specifically
used, shall be deemed and construed to include any other number,
singular or plural, and any other gender, masculine, feminine or
neuter, as the context indicates is appropriate. When a reference is
made in this Agreement to an Appendix, Exhibit, Introduction,
Recital, Section or Schedule, such reference shall be to an
Appendix, an Exhibit, the Introduction, a Recital or a Section of,
or a Schedule to, this Agreement unless otherwise indicated. The
headings contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation."
SECTION 2. Establishment and Operation of the Collateral Account.
a. Establishment of Construction Note Disbursement Account. Pledgor and
Secured Party hereby authorize and direct Securities Intermediary to
establish and maintain at its office at One Liberty Plaza, New York,
New York 10006, a securities account numbered 0228710 in the name of
Secured Party and under the sole dominion and control of Secured
Party, designated as "The Bank of Nova Scotia, as Disbursement Agent
under Disbursement Agreement dated February 26, 1998, Construction
Note Disbursement Account fbo the Discount Note Indenture Trustee".
Securities Intermediary hereby undertakes to treat Secured Party as
the person entitled to exercise the rights and property interest
that comprise any Financial Asset credited to the Bank Proceeds
Account. The Secured Party and the Pledgor agree that this account
shall be the "Construction Note Disbursement Account."
b. Operations of the Collateral Account. The Collateral Account shall
be operated, and all Investments shall be acquired and registered or
held (as applicable), in accordance with the terms of this Agreement
and the directions of Secured Party.
6
<PAGE>
c. Account Statements. Securities Intermediary shall send Secured
Party and Pledgor written account statements with respect to the
Collateral Account not less frequently than monthly. Reports or
confirmation of the execution of orders and statements of account
shall be conclusive if not objected to in writing within 30 days
after delivery pursuant to Section 21.
SECTION 3. Mechanics of Deposits of Funds in Collateral Account.
a. Transfers to Construction Note Disbursement Account. All transfers
of funds to the Construction Note Disbursement Account shall be made
by wire transfer (or, if applicable, intra-bank transfer from
another account of Pledgor with Securities Intermediary) of
immediately available funds, in each case addressed as follows:
Account No.: 0228710
ABA No.: 026-002532
Reference: Aladdin Gaming Holdings-Construction
Note Disbursement Account
Attention: Marianne Velker
b. Financial Assets Election. The Securities Intermediary hereby agrees
that each item of property (whether investment property, financial
asset, security, instrument or cash) credited to the Collateral
Account shall be treated as a "financial asset" within the meaning
of Section 8-102(a)(9) of the Code.
c. Notice of Transfers. In the event of any transfer of funds to or
from the Collateral Account pursuant to any provision of Section 3,
Pledgor, Secured Party or Securities Intermediary, as the case may
be, shall promptly after initiating or sending out written
instructions with respect to such transfer, give notice to the other
such party by facsimile of the date and amount of such transfer.
7
<PAGE>
SECTION 4. Permitted Investments and Transfers of Amounts in the
Collateral Account.
a. Strict Compliance. Cash held by Securities Intermediary in the
Collateral Account shall not be (i) invested or reinvested, (ii)
sold or redeemed, or (iii) transferred from or among the Collateral
Account, except as provided in this Section 4.
b. Pledgor's Right to Direct Investment. Except during any Suspension
Period, Securities Intermediary shall, in accordance with Pledgor's
written Entitlement Orders given to Securities Intermediary from
time to time, sell or redeem Investments, and apply amounts
transferred to or held for the credit of the respective Restricted
Securities Account to make investments for credit to the Restricted
Securities Account, in Securities Intermediary's name and as
custodian under this Agreement, in Permitted Investments. During any
Suspension Period, (i) Pledgor's right to direct such investments
under this Section 4(b) shall be suspended, and Securities
Intermediary shall not accept Entitlement Orders with respect to the
Restricted Securities Account from any person other than Secured
Party; and (ii) any credit balances shall be invested and reinvested
only as provided in Section 4(c).
c. Overnight Investments. To the extent that there are credit balances
expected in any Restricted Securities Account as of the end of day,
or as of 12:00 noon, New York time on any Business Day after
settlement of all pending transactions, unless otherwise instructed
by Secured Party or Pledgor pursuant to Section 4(b), Securities
Intermediary shall apply the expected credit balances to acquire
Overnight Investments. Any Overnight Investments shall be held for
the credit of the Collateral Account from which the proceeds for
acquisition was derived. Pledgor shall have no right to invest funds
in a Restricted Securities Account to the extent that free balances
have been invested in Overnight Investments pursuant to this
Section. Pledgor hereby acknowledges that "Overnight Investments"
may not benefit from any protections afforded to domestic depositors
by state or Federal law and may have a lesser preference in a
liquidation than a domestic deposit.
8
<PAGE>
d. Actions of Securities Intermediary on Purchase of Investments.
Promptly upon the purchase, acquisition or transfer for credit of
any Collateral Account of any Investment, Securities Intermediary
shall take all steps that it customarily takes in the ordinary
course of its business to ensure that such Investment is credited on
its books to the Collateral Account for which the Investment was
acquired. Without limiting the generality of the foregoing,
Securities Intermediary shall promptly (i) send to Pledgor and
Secured Party a written confirmation of the acquisition of such
Investment, and (ii) indicate by book entry in its records that such
Investment has been credited to, and is held for the credit of, the
specified Collateral Account.
e. Control Agreement. Anything contained herein to the contrary
notwithstanding, including the actual or alleged absence of a
Default or Event of Default, if at any time Securities Intermediary
shall receive any order from Secured Party, Securities Intermediary
shall (i) comply with Entitlement Orders originated by Secured Party
with respect to Financial Assets relating to the Collateral Account
and any Security Entitlements therein, (ii) transfer, sell or redeem
any Financial Assets relating to the Collateral, (iii) transfer any
or all of the Collateral to any account or accounts designated by
Secured Party, including any Collateral Account or an account
established in Secured Party's name (whether at Secured Party or
Securities Intermediary or otherwise), (iv) register title to any
Collateral in any name specified by Secured Party, including the
name of Secured Party or any of its nominees or agents, without
reference to any interest of Pledgor, or (v) otherwise deal with the
Collateral as directed by Secured Party, in each case, without
consent of Pledgor or any other person. Securities Intermediary
shall act on any instruction of Secured Party notwithstanding
assertions or proof that (1) Secured Party has no right under
Sections 14 or 15 to originate the instruction or take the
underlying action; (2) such instruction or action constitutes a
breach of this Agreement or any other agreement; or (3) this
Agreement has terminated, unless notified in writing by Secured
Party that this Agreement has terminated and such notice has not
been withdrawn. Nothing contained in this paragraph shall constitute
a waiver by Pledgor of any rights or remedies it may have against
Secured Party under this Agreement or any other agreement.
9
<PAGE>
f. Deposit of Proceeds. Any interest, cash dividends or other cash
distributions received in respect of any Investments and the net
proceeds of any sale or payment of any Investments shall be promptly
credited to, and held for the credit of, the Collateral Account to
which such Investment was credited. Any distribution of property
other than cash in respect of any Investment shall be credited to
and held for the credit of the Collateral Account to which the
related Investment was credited; provided that, unless otherwise
instructed in writing by Secured Party, Securities Intermediary
shall, for credit to the Collateral Account, promptly sell, redeem
or otherwise liquidate any such property that, as of the date of
receipt, is not a Permitted Investment.
SECTION 5. Pledge of Security for Secured Obligations.
Pledgor hereby pledges and assigns to Secured Party and
hereby grants to Secured Party a security interest in,
all of Pledgor's right, title and interest in and to the
Collateral as collateral security for the prompt payment
or performance in full when due, whether at stated
maturity, by required prepayment, declaration,
acceleration, demand or otherwise (including the payment
of amounts that would become due but for the operation
of the automatic stay under Section 362(a) of the United
States Bankruptcy Code, 11 U.S.C. 362(a)), of all
Secured Obligations.
SECTION 6. Acknowledgments of Security Interests in Favor of
Secured Party; Covenant Against Creation of Other
Interests.
a. Acknowledgment of Security Interest. Securities Intermediary
acknowledges the security interest granted by Pledgor in favor of
Secured Party in the Collateral.
b. Acknowledgment of Securities Intermediary's Role. Securities
Intermediary hereby further acknowledges that it holds the
Collateral Account, and all Security Entitlements therein, as
custodian for, for the benefit of, and subject to the control of,
Secured Party. Securities Intermediary shall, by book entry or
otherwise, indicate that the
10
<PAGE>
Collateral Account, and all Security Entitlements registered to or
held therein, are subject to the control of Secured Party as
provided in Section 4(e).
c. Securities Intermediary Has No Notice of Adverse Claims. Securities
Intermediary represents and warrants that (i) it has no notice of
any Adverse Claim against any of the Collateral other than the claim
of Secured Party under this Agreement; and (ii) it is not, in its
capacity as securities intermediary, party to any agreement other
than this Agreement that governs its rights or duties or conflicts
with the rights of Secured Party, including the exclusive right of
Secured Party to control as provided in Section 4(e), with respect
to the Collateral Account.
d. Securities Intermediary Shall Not Acknowledge Other Claims.
Securities Intermediary agrees that, except as expressly provided in
this Agreement or with the written consent of Secured Party, it
shall not agree to or acknowledge (i) any right by any Person other
than Secured Party to originate Entitlement Orders or control with
respect to the Collateral Account; or (ii) any limitation on the
right of Secured Party to originate Entitlement Orders with respect
to or direct the transfer of any Investments or cash credited to the
Collateral Account.
SECTION 7. Securities Intermediary Maintenance of the Collateral
Account.
a. Transactions Shall Comply With Rules. The parties acknowledge that
all transactions in Financial Assets under this Agreement shall be
in accordance with the rules and customs of the exchange, market or
clearing organization, if any, in which the transactions are
executed or settled and in conformity with applicable law and
regulations of governmental authorities and future amendments or
supplements thereto.
b. Fees and Charges of Securities Intermediary. Pledgor shall pay to
Securities Intermediary, in accordance with Securities
Intermediary's usual schedule of charges or any written agreement
between Securities Intermediary and Pledgor, any fees or charges
reasonably
11
<PAGE>
imposed by Securities Intermediary with respect to the
establishment, maintenance and transactions in or affecting the
Collateral Account.
c. Securities Intermediary Shall Not Permit Leverage of Investments.
Securities Intermediary shall not execute any transaction to acquire
a Financial Asset under Section 4(b) unless there are sufficient
funds in a specific Collateral Account or reasonably expected with
respect to pending transactions in such Collateral Account to settle
such transaction for the account of such Collateral Account.
Notwithstanding the foregoing sentence, in the event that Securities
Intermediary executes a transaction without adequate funds to
settle the transaction, Pledgor shall be liable to Securities
Intermediary for any deficiency and shall promptly reimburse
Securities Intermediary for any loss or expense incurred thereby,
including losses sustained by reason of Securities Intermediary's
inability to borrow any securities or other property sold for the
Collateral Account. Pledgor agrees to pay interest charges which may
be imposed by Securities Intermediary in accordance with its usual
custom, with respect to late payments for Financial Assets purchased
for any Collateral Account and prepayments to any Collateral
Account (i.e., the crediting of the proceeds of sale before the
settlement date or receipt by Securities Intermediary of the items
sold in good deliverable form). Pledgor agrees to pay promptly any
amount which may become due in order to satisfy demands for
additional margin or marks to market with respect to any security
purchased or sold on instruction from Pledgor.
d. Risk of Investments and Transactions. It is not the intention of the
parties that Securities Intermediary should bear any investment risk
associated with Permitted Investments or Overnight Investments
acquired for the credit of the Collateral Account in accordance with
Section 4. Any losses or gains realized on such Investments shall be
charged or credited to the Collateral Account, as appropriate. On
committing to a transaction for the credit of the Collateral Account
pursuant to an instruction permitted in accordance with Section 4,
Securities Intermediary may, (i) pending settlement, block (A) the
Investments to be sold or (B) credit balances sufficient to settle
any acquisition and, (ii) at the time of settlement, deliver such
Investments or funds in accordance with the rules, custom or
practice of the particular market.
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e. Use of Intermediaries and Nominees. Securities Intermediary is
authorized, subject to Secured Party's written instructions, to
register any Financial Assets acquired by Securities Intermediary
pursuant to this Agreement in the name of Securities Intermediary or
in the name of its nominee, or to cause such securities to be
registered in the name of a Federal reserve bank, a recognized
securities intermediary or clearing corporation, or a nominee of
any of them. Securities Intermediary may at any time and from time
to time appoint, and may at any time remove, any bank, trust
company, clearing corporation, or Broker-Dealer as its agent to
carry out such of the provisions of this Agreement. The appointment
or use of any intermediary, or the appointment of any such agent,
shall not relieve Securities Intermediary of any responsibility or
liability under this Agreement.
f. Corporate Actions. Except as otherwise set forth herein, the parties
agree that neither Secured Party nor Securities Intermediary shall
have any responsibility for ascertaining or acting upon any calls,
conversions, exchange offers, tenders, interest rate changes or
similar matters relating to any Financial Assets credited to or held
for the credit of the Restricted Securities Account (except based on
written instructions originated by Pledgor or Secured Party), or for
informing Pledgor or Secured Party with respect thereto, whether or
not Securities Intermediary or Secured party has, or is deemed to
have, knowledge of any of the aforesaid. Securities Intermediary is
authorized to withdraw securities sold or otherwise disposed of, and
to credit the appropriate Collateral Account with the proceeds
thereof or make such other disposition thereof as may be directed in
accordance with this Agreement. Securities Intermediary is further
authorized to collect all income and other payments which may become
due on Financial Assets credited to the Collateral Account, to
surrender for payment maturing obligations and those called for
redemption and to exchange certificates in temporary form or like
certificates in definitive form, or, if the par value of any shares
is changed, to effect the exchange for new certificates. It is
understood and agreed by Pledgor and Secured Party that, although
Securities Intermediary will use reasonable efforts to effect the
transactions set forth in the preceding sentence, Securities
Intermediary shall incur no liability for its failure to effect the
same unless its failure is the result of wilful misconduct.
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g. Disclosure of Account Relationships. Pledgor and Secured Party
acknowledge that Securities Intermediary may be required to disclose
to securities issuers the name, address and securities positions
with respect to Financial Assets credited to the Collateral Account,
and hereby consent to such disclosures.
h. Forwarding of Documents. Securities Intermediary shall forward to
Pledgor and Secured Party, or notify Pledgor and Secured Party by
telephone of, all communications received by Securities Intermediary
as owner of any Financial Assets credited to the Collateral Account
and which are intended to be transmitted to the beneficial owner
thereof.
i. Direction of Secured Party Controls in Disputes. Pledgor, Securities
Intermediary and Secured Party hereby agree that in the event any
dispute arises with respect to the payment, ownership or right to
possession of the Collateral Account or any other Collateral
credited to or held therein, Securities Intermediary shall take such
actions and shall refrain from taking such actions with respect
thereto as may be directed by Secured Party.
j. No Setoff, etc. Securities Intermediary shall not exercise on its
own behalf any claim, right of set-off, banker's lien, clearing
lien, counterclaim or similar right against any of the Collateral;
provided that Securities Intermediary may deduct, from any credit
balances, any usual and ordinary transaction and administration fees
payable in connection with the administration and operation of the
Collateral Account. Except for claims for deductions permitted in
the preceding sentence, Securities Intermediary agrees that any
security interest it may have in the Collateral Account or any
security entitlement carried therein shall be subordinate and junior
to the interest of Secured Party.
k. Only Agreement. This Agreement shall govern the actions, rights and
obligations of Securities Intermediary, and shall determine the
governing law, with respect to the Collateral Account and the
Collateral notwithstanding any term or condition in any agreement
other than this Agreement as it may be amended, supplemented or
otherwise modified in writing.
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l. Care of Financial Assets. Securities Intermediary shall maintain
possession or control of all Financial Assets credited to the
Collateral Account by segregating such Financial Assets from its
proprietary assets and keeping them free of any lien, charge or
claim of any third party granted or created by Securities
Intermediary. Securities Intermediary shall take such other steps to
ensure that Financial Assets credited to the Collateral Account are
identified as being held for customers of Securities Intermediary as
may be required under applicable law, including 17 CFR Part 450, or
in accordance with custom and practice in the industry.
m. Further Actions. Securities Intermediary shall take such further
actions as Secured Party shall reasonably request as being necessary
or desirable to maintain or achieve perfection or priority of
Secured Party's security interest with respect to the Collateral and
to permit Secured Party to exercise its rights with respect to the
Collateral.
SECTION 8. Transactions in Collateral Account.
a. Power of Secured Party to Sell or Transfer. Pledgor agrees that
Secured Party may sell or cause the sale or redemption of any
Investment and instruct Securities Intermediary to transfer the
proceeds of such sale or any other credit or balance in the
Collateral Account or any third party or account, in either case (i)
if such sale or redemption is necessary to permit Secured Party to
perform its duties under this Agreement or the Disbursement
Agreement or (ii) as provided in Section 14.
SECTION 9. Representations and Warranties By Securities
Intermediary. Securities Intermediary hereby represents
and warrants to Pledgor and Secured Party as follows:
a. Corporate Power. Securities Intermediary has all necessary corporate
power and authority to enter into and perform this Agreement.
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b. Execution Authorized. The execution, delivery and performance of
this Agreement by Securities Intermediary have been duly authorized
by all necessary corporate action on the part of the Securities
Intermediary.
c. Securities Intermediary. Security Intermediary is a "securities
intermediary" (as that term is defined in Section 8-102(a)(14) of
the Code) and is acting in such capacity with respect to the
Collateral Account. Securities Intermediary is not a "clearing
corporation" (as that term is defined in Section 8-102(a)(5) of the
Code).
SECTION 10. Representations and Warranties of Pledgor. Pledgor
represents and warrants as follows:
a. Ownership of Collateral; Security Interest; Perfection and Priority.
Pledgor is (or at the time of transfer thereof to Securities
Intermediary will be) the legal and beneficial owner of the
Collateral from time to time transferred by Pledgor to Securities
Intermediary, as agent for Secured Party, free and clear of any Lien
except for the security interest created by this Agreement. The
pledge and assignment of the Collateral pursuant to this Agreement
creates a valid security interest in the Collateral securing the
payment of the Secured Obligations. Assuming compliance by
Securities Intermediary with this Agreement, Secured Party will have
a perfected security interest in the Collateral senior in priority
to any other security interest created by Pledgor.
b. Governmental Authorizations. Except as may be required under Nevada
Gaming Laws, no authorization, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory
body is required for either (i) the grant by Pledgor of the security
interest granted hereby, (ii) the execution, delivery or performance
of this Agreement by Pledgor, or (iii) the perfection of or the
exercise by Secured Party or Securities Intermediary of its rights
and remedies hereunder (except as may have been taken by or at the
direction of Pledgor).
c. Other Information. All information heretofore, herein or hereafter
supplied to Secured Party or Securities Intermediary by or
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on behalf of Pledgor with respect to the Collateral, the
establishment of the Collateral Account or otherwise is accurate and
complete in all material respects.
SECTION 11. Further Assurances.
a. Pledgor. Pledgor agrees that from time to time, at the expense of
Pledgor, Pledgor shall promptly execute and deliver all further
instruments and documents, and take all further action, that may be
necessary or reasonably desirable, or that Secured Party may
reasonably request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable
Secured Party or Securities Intermediary to exercise and enforce its
rights and remedies hereunder with respect to any Collateral.
Without limiting the generality of the foregoing, Pledgor shall: (a)
execute and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices, as may be
necessary or reasonably desirable, or as Secured Party may
reasonably request, in order to perfect and preserve the security
interests granted or purported to be granted hereby, and (b) at
Secured Party's request, appear in and defend any action or
proceeding that may affect Pledgor's title to or Secured Party's
security interest in all or any part of the Collateral.
b. Securities Intermediary. Securities Intermediary shall take such
further actions as Secured Party shall reasonably request as being
necessary or desirable to maintain or achieve perfection or priority
of Secured Party's security interest with respect to the Collateral
and to permit Secured Party to exercise its rights with respect to
the Collateral.
c. Document Delivery. The Pledgor shall deliver to the Discount Note
Indenture Trustee copies of all documents delivered to the
Disbursement Agent pursuant to this Agreement, and shall do or cause
to be done all such acts and things as may be necessary or proper,
or as may be required by the provisions herein, to assure and
confirm to the Discount Note Indenture Trustee and the Disbursement
Agent that the security interest in the Collateral is available for
the security of the Discount Note Indenture and the Discount Notes
secured thereby.
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d. Opinions. The Pledgor shall furnish to the Discount Note Indenture
Trustee simultaneously with the execution and delivery of the
Discount Note Indenture an Opinion of Counsel (as such term is
defined in the Discount Note Indenture) either (a) stating that in
the opinion of such counsel all action has been taken with respect
to the recording, registering and filing of the Discount Note
Indenture, financing statements or other instruments necessary to
make effective the Liens intended to be created by this Agreement,
and reciting with respect to the security interests in the
Collateral, the details of such action, or (b) stating that, in the
opinion of such counsel, no such action is necessary to make such
Liens effective. The Pledgor shall furnish to the Disbursement Agent
and the Discount Note Indenture Trustee on February 1 in each year
beginning with February 1, 1999, an Opinion of Counsel dated as of
such date, either (a)(i) stating that in the opinion of such
counsel, action has been taken with respect to the recording,
registering, filing, re-recording, re-registering and refiling of
all supplemental indentures, financing statements, continuation
statements or other instruments of further assurance as is necessary
to maintain the Liens and reciting with respect to the security
interests in the Collateral, the details of such section or
referring to prior Opinions of Counsel in which such details are
given, (ii) stating that, based on relevant laws as in effect on the
date of such Opinion of Counsel, all financing statements and
continuation statements have been executed and filed that are
necessary as of such date and during the succeeding twelve (12)
months fully to preserve and protect, to the extent such
preservation and protection are possible by filing, the rights of
the Discount Noteholders, the Disbursement Agent and the Discount
Note Indenture Trustee under the Discount Note Indenture and this
Agreement with respect to the security interests in the Collateral,
or (b) stating that, in the opinion of such counsel, no such action
is necessary to maintain such liens and assignments.
SECTION 12. Transfers and other Liens. Pledgor agrees that, except
as permitted in Section 4(b) and for the security
interest created by this Agreement, it shall not (a)
sell, assign (by operation of law or otherwise), redeem
or otherwise dispose of any of the Collateral or (b)
create or suffer to
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exist any Lien upon or with respect to any of the
Collateral.
SECTION 13. Secured Party Appointed Attorney-in-Fact; Secured Party
Performance.
a. Secured Party Appointed Attorney-in-Fact. Pledgor hereby irrevocably
appoints Secured Party as Pledgor's attorney-in-fact, with full
authority in the place and stead of Pledgor and in the name of
Pledgor, Secured Party or otherwise, from time to time in Secured
Party's discretion to take any action and to execute any instrument
that Secured Party may deem necessary or advisable to accomplish the
purposes of this Agreement, including (a) to file one or more
financing or continuation statements, or amendments thereto,
relative to all or any part of the Collateral without the signature
of Pledgor and (b) to receive, endorse and collect any instruments
or other Investments made payable to Pledgor representing any
dividend, principal or interest payment or other distribution in
respect of the Collateral or any part thereof and to give full
discharge for the same.
b. Performance by Secured Party. If Pledgor fails to perform any
agreement contained herein, Secured Party may itself perform, or
cause performance of, such agreement, and the expenses of Secured
Party incurred in connection therewith shall be payable by Pledgor
under Section 16.
SECTION 14. Remedies.
a. Transfer or Sequestration of Collateral after Default or Event of
Default. If any Default or Event of Default (as such terms are
defined under the Discount Note Indenture) shall have occurred and
be continuing, Secured Party may instruct Securities Intermediary to
(i) sell or redeem any Investments, (ii) transfer any or all of the
Collateral to any account designated by Secured Party, including
account or accounts established in Secured Party's name (whether at
Secured Party or Securities Intermediary or otherwise), (iii)
register title to any Collateral in any name specified by Secured
Party, including the name of Secured Party or any of its nominees or
agents, without reference to
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any interest of Pledgor, or (iv) otherwise deal with the Collateral
as directed by Secured Party.
b. Rights of Secured Party after Event of Default. If any Event of
Default (as defined under the Discount Note Indenture) shall have
occurred and be continuing, Secured Party may exercise in respect of
the Collateral, in addition to all other rights and remedies
provided for herein or otherwise available to it, all the rights and
remedies of a secured party on default under the Uniform Commercial
Code as in effect in any relevant jurisdiction (the "UCC") (whether
or not the UCC applies to the affected Collateral), and Secured
Party may also in its sole discretion sell the Collateral or any
part thereof in one or more parcels at public or private sale, at
any exchange or broker's board or at any of Secured Party's offices
or elsewhere, for cash, on credit or for future delivery, at such
time or times and at such price or prices and upon such other terms
as Secured Party may deem commercially reasonable, irrespective of
the impact of any such sales on the market price of the Collateral.
Each purchaser at any such sale shall hold the property sold
absolutely free from any claim or right on the part of Pledgor, and
Pledgor hereby waives (to the extent permitted by applicable law)
all rights of redemption, stay or appraisal which it now has or may
at any time in the future have under any rule of law or statute now
existing or hereafter enacted. Secured Party shall not be obligated
to make any sale of Collateral regardless of notice of sale having
been given. Secured Party may adjourn any public or private sale
from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned.
c. Agreement as to Manner of Sale. Pledgor hereby agrees that the
Collateral is of a type customarily sold on recognized markets and,
accordingly, that no notice to any Person is required before any
sale of any of the Collateral pursuant to the terms of this
Agreement; provided that, without prejudice to the foregoing,
Pledgor agrees that, to the extent notice of any such sale shall be
required by law, at least ten days' notice to Pledgor of the time
and place of any public sale or the time after which any private
sale is to be made shall constitute reason able notification.
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d. Deficiency. If the proceeds of any sale or other disposition of the
Collateral are insufficient to pay all the Secured Obligations,
Pledgor shall be liable for the deficiency and the fees of any
attorneys employed by Secured Party to collect such deficiency.
SECTION 15. Application of Proceeds. If any Event of Default (as
defined under the Discount Note Indenture) shall have
occurred and be continuing, all cash included as
Collateral and all proceeds received by Secured Party
in respect of any sale or redemption of, collection
from, or other realization upon all or any part of the
Collateral may, in the discretion of Secured Party, be
held by or for Secured Party as Collateral for, or
then, or at any other time thereafter, applied in full
or in part by Secured Party against, the Secured
Obligations in the following order of priority:
FIRST: To the payment of all costs and expenses of such sale,
collection or other realization, including reasonable compensation to
Secured Party and its agents and counsel, and all other expenses,
liabilities and advances made or reasonably incurred by Secured Party in
connection therewith, and all amounts for which Secured Party is entitled
to indemnification hereunder and all advances made by Secured Party
hereunder for the account of Pledgor, and to the payment of all costs and
expenses paid or incurred by Secured Party in connection with the exercise
of any right or remedy hereunder, all in accordance with Section 16;
SECOND: To the payment of all other Secured Obligations in
accordance with the Discount Note Indenture; and
THIRD: To the payment to or upon the order of Pledgor, or to
whomsoever may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct, of any surplus then remaining from such
proceeds.
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SECTION 16. Limitations on Duties; Exculpation; Indemnity;
Expenses.
a. Securities Intermediary.
i. Limitation on Duties. Securities Intermediary's duties
hereunder are only those specifically provided herein, and
Securities Intermediary shall incur no liability whatsoever
for any actions or omissions hereunder except for any such
liability arising out of or in connection with Securities
Intermediary's gross negligence or wilful misconduct.
Securities Intermediary has no obligation to inquire into, or
to ensure, the sufficiency of this Agreement or the
arrangements described hereunder to satisfy any objectives of
Secured Party or Pledgor. Securities Intermediary shall have
no duty to supervise or to provide investment counseling or
advice to Pledgor or Secured Party with respect to the
purchase, sale, retention or other disposition of any
Financial Assets held hereunder. Except as specifically
otherwise provided in this Agreement, Securities Intermediary
shall not be responsible for enforcing compliance by the other
parties to this Agreement with their respective duties and
obligations to each other under this or any other Agreement.
ii. Consultation with Counsel. Securities Intermediary may consult
with, and obtain advice from, legal counsel as to the
construction of any of the provisions of this Agreement, and
shall incur no liability in acting in good faith in accordance
with the reasonable advice and opinion of such counsel.
iii. Indemnification. Pledgor agrees to indemnify Securities
Intermediary from and against any and all claims, losses,
liabilities and expenses (including reasonable attorneys' fees
and expenses) in any way relating to, growing out of or
resulting from this Agreement or the performance of its
obligations hereunder, except to the extent arising out of or
in connection with Securities Intermediary's gross negligence
or wilful misconduct.
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iv. Reasonable Reliance. Securities Intermediary shall be fully
protected and shall suffer no liability in acting in
accordance with any written instructions reasonably believed
by it to have been given (A) by Secured Party with respect to
any aspect of the operation of the Collateral Account
(including any such instructions relating to any investment or
transfer of any amounts held therein or (B) by Pledgor, to the
extent provided in Section 4(b), with respect to the
Collateral Account.
b. Secured Party.
i. Exculpation. The powers conferred on Secured party hereunder
are solely to protect its interest in the Collateral and shall
not impose any duty upon it to exercise any such powers.
Except for the exercise of reasonable care in the custody of
any Collateral in its possession and the accounting for moneys
actually received by it hereunder, Secured Party shall have no
duty as to any Collateral, it being understood that Secured
Party shall have no responsibility for (a) ascertaining or
taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relating to any
Collateral, whether or not Secured Party has or is deemed to
have knowledge of such matters, (b) taking any necessary steps
(other than steps taken in accordance with the standard of
care set forth above to maintain possession of the Collateral)
to preserve rights against any parties with respect to any
Collateral, (c) taking any necessary steps to collect or
realize upon the Secured Obligations or any guarantee
therefor, or any part thereof, or any of the Collateral, (d)
initiating any action to protect the Collateral against the
possibility of a decline in market value, (e) any loss
resulting from Investments made, held or sold pursuant to
Section 4, except for a loss resulting from Secured Party's
gross negligence or wilful misconduct in complying with
Section 4, or (f) determining (i) the correctness of any
statement or calculation made by Pledgor in any written or
telex (tested or otherwise) instructions or (ii) whether any
transfer to the Collateral Account is proper. Secured Party
shall be deemed to have exercised reasonable
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care in the custody and preservation of Collateral in its
possession if such Collateral is accorded treatment
substantially equal to that which Secured Party accords its
own property of like kind. In addition to the foregoing and
without limiting the generality thereof, Secured Party shall
not be responsible for any actions or omissions of Securities
Intermediary.
ii. Indemnification. Pledgor agrees to indemnify Secured Party,
Discount Note Indenture Trustee and each Noteholder from and
against any and all claims, losses and liabilities in any way
relating to, growing out of or resulting from this Agreement
and the transactions contemplated hereby (including
enforcement of this Agreement), except to the extent such
claims, losses or liabilities result solely from Secured
Party's gross negligence or wilful misconduct as finally
determined by a court of competent jurisdiction.
iii. Reasonable Reliance. Secured Party shall be fully protected
and shall suffer no liability in acting in accordance with any
written instructions reasonably believed by it to have been
given by Pledgor, to the extent provided in Section 4(b), with
respect to any investments of any amounts held for the credit
of the Collateral Account.
iv. Expenses. Pledgor shall pay to Secured Party upon demand the
amount of any and all costs and expenses, including the
reasonable fees and expenses of its counsel and of any experts
and agents, that Secured Party may reasonably incur in
connection with (a) the administration of this Agreement, (b)
the custody, preservation, use or operation of, or the sale
of, collection from, or other realization upon, any of the
Collateral, (c) the exercise or enforcement of any of the
rights of Secured Party hereunder, or (d) the failure by
Pledgor to perform or observe any of the provisions hereof.
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SECTION 17. Resignation and Removal of Securities
Intermediary.
a. Removal. Securities Intermediary may be removed at any time by
written notice given by Secured Party to Securities Intermediary and
Pledgor, but such removal shall not become effective until a
successor Securities Intermediary shall have been appointed by
Secured Party and shall have accepted such appointment in writing.
b. Resignation. Securities Intermediary may resign at any time by
giving not less than thirty days' written notice to Secured Party
and Pledgor, but such removal shall not become effective until a
successor Securities Intermediary shall have been appointed by
Secured Party and shall have accepted such appointment in writing.
If an instrument of acceptance by a successor Securities
Intermediary shall not have been delivered to the resigning
Securities Intermediary within thirty days after the giving of any
such notice of resignation, the resigning Securities Intermediary
may, at the expense of Pledgor, petition any court of competent
jurisdiction for the appointment of a successor Securities
Intermediary.
c. Successor Securities Intermediary. Any successor Securities
Intermediary shall be (i) The Bank of Nova Scotia Trust Company of
New York, (ii) Merrill Lynch Capital Corporation (or an affiliate
thereof) or (iii) a corporation qualified to, and located in, New
York, which (A) is subject to supervision or examination by the
applicable Governmental Instrumentality, (B) has a combined capital
and surplus of at least Five Hundred Million Dollars
(US$500,000,000), (C) has a long-term credit rating of not less than
"A-" or "A3", respectively, by any Rating Agency; and provided, that
any such bank with a long-term credit rating of "A-" or "A3" shall
not cease to be eligible to act as Securities Intermediary upon a
downward change in either such rating of no more than one category
or grade of such minimum rating, as the case may be.
d. Process of Succession. Upon the appointment of a successor
Securities Intermediary and its acceptance of such appointment, the
resigning or removed Securities Intermediary shall transfer all
items of Collateral held by it to such successor (which items of
Collateral
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shall be transferred to appropriate new Collateral Account
established and maintained by such successor). Following such
appointment all references herein to Securities Intermediary shall
be deemed a reference to such successor; provided that the
provisions of Section 16(a) hereof shall continue to inure to the
benefit of the resigning or removed Securities Intermediary with
respect to any actions taken or omitted to be taken by it under this
Agreement while it was Securities Intermediary hereunder.
SECTION 18. Continuing Security Interest; Termination of Obligations
of Securities Intermediary. This Agreement shall create
a continuing security interest in the Collateral and
shall (a) remain in full force and effect until the
indefeasible payment in full of the Secured
Obligations, (b) be binding upon Pledgor, its successors
and assigns, and (c) inure, together with the rights
and remedies of Secured Party hereunder, to the benefit
of Secured Party, Discount Note Indenture Trustee and
Noteholders and their respective successors,
transferees and assigns. Upon the indefeasible payment
in full of all Secured Obligations, the security
interest granted hereby shall terminate and all rights
to the Collateral shall revert to Pledgor. Upon any such
termination Secured Party shall, at Pledgor's expense,
execute and deliver to Pledgor such documents as
Pledgor shall reasonably request to evidence such
termination and Pledgor shall be entitled to the return,
upon its request and at its expense, against receipt and
without recourse to Secured Party, of such of the
Collateral as shall not have been sold or otherwise
applied pursuant to the terms hereof. Securities
Intermediary shall not be released from its obligations
hereunder, and shall continue to maintain any
Collateral in accordance with this Agreement, until
notified in writing by Secured Party that this Agreement
has terminated and so long as Se-
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cured Party has not withdrawn such notification.
SECTION 19. Secured Party as Disbursement Agent.
a. Agency. Secured Party has been appointed to act as Secured Party
hereunder pursuant to the Disbursement Agreement. Secured Party
shall be obligated, and shall have the right hereunder, to make
demands, to give notices, to exercise or refrain from exercising any
rights, and to take or refrain from taking any action (including,
without limitation, the release or substitution of Collateral),
solely in accordance with this Agreement and the Disbursement
Agreement.
b. Identity of Agent. Secured Party shall at all times be the same
Person that is Disbursement Agent under the Disbursement Agreement.
Written notice of resignation by Disbursement Agent pursuant to
Section 4.7 of the Disbursement Agreement shall also constitute
notice of resignation as Secured Party under this Agreement; removal
of Disbursement Agent pursuant to Section 4.7 of the Disbursement
Agreement shall also constitute removal as Secured Party under this
Agreement; and substitution of a successor Disbursement Agent
pursuant to Section 4.7 of the Disbursement Agreement shall also
constitute substitution of a successor Secured Party under this
Agreement. Upon the acceptance of any appointment as Disbursement
Agent under Section 4.7 of the Disbursement Agreement by a successor
Disbursement Agent, that successor Disbursement Agent shall
thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring or removed Secured Party under
this Agreement, and the retiring or removed Secured Party under this
Agreement shall promptly (i) transfer to such successor Secured
Party all items of Collateral held by Secured Party (which as
appropriate shall be credited to, and held for the credit of, any
new restricted Collateral Account established and maintained by such
successor Secured Party), together with all records and other
documents necessary or appropriate in connection with the
performance of the duties of the successor Secured Party under this
Agreement, and (ii) execute and deliver to such successor Secured
Party such amendments to financing statements, and take such other
actions, as may be necessary or appropriate in connection with the
assignment to such successor
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Secured Party of the security interests created hereunder, whereupon
such retiring or removed Secured Party shall be discharged from its
duties and obligations under this Agreement. After any retiring or
removed Disbursement Agent's resignation or removal hereunder as
Secured Party, the provisions of this Agreement shall inure to its
benefit as to any actions taken or omitted to be taken by it under
this Agreement while it was Secured Party hereunder.
SECTION 20. Amendments; etc. No amendment or waiver of any provision
of this Agreement, or consent to any departure by any
party herefrom, shall in any event be effective unless
the same shall be in writing and signed by the other
parties, and then such waiver or consent shall be
effective only in the specific instance and for the
specific purpose for which it was given.
SECTION 21. Notices. Any communications between the parties hereto
or notices provided herein to be given may be given to
the address of the party as set forth under such party's
name on the signature page hereof. All notices or other
communications required or permitted to be given
hereunder shall be in writing and shall be considered as
properly given (a) if delivered in person, (b) if sent
by reputable overnight delivery service, (c) in the
event overnight delivery services are not readily
available, if mailed by first class mail, postage
prepaid, registered or certified with return receipt
requested or (d) if sent by prepaid telex, or by
telecopy with correct answer back received. Notice so
given shall be effective upon receipt by the addressee,
except that communication or notice so transmitted by
telecopy or other direct written electronic means shall
be deemed to have been validly and effectively given on
the day (if a Business Day and, if not, on the next
following Business Day) on which it is validly transmit-
28
<PAGE>
ted if transmitted before 4 p.m., recipient's time, and
if transmitted after that time, on the next following
Business Day, provided, however, that if any notice is
tendered to an addressee and the delivery thereof is
refused by such addressee, such notice shall be
effective upon such tender. Any party shall have the
right to change its address for notice hereunder to any
other location by giving of no less than twenty (20)
days' notice to the other parties in the manner set
forth hereinabove.
SECTION 22. Failure or Indulgence Not Waiver; Remedies
Cumulative. No failure or delay on the part of Secured
Party in the exercise of any power, right or privilege
hereunder shall impair such power, right or privilege or
be construed to be a waiver of any default or
acquiescence therein, nor shall any single or partial
exercise of any such power, right or privilege preclude
any other or further exercise thereof or for any other
power, right or privilege. All rights and remedies
existing under this Agreement are cumulative to, and
not exclusive of, any rights or remedies otherwise
available.
SECTION 23. Severability. In case any provision in or obligation
under this Agreement shall be invalid, illegal or
unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions
or obligations, or of such provision or obligation in
any other jurisdiction, shall not in any way be
affected or impaired thereby.
SECTION 24. Headings. Section and subsection headings in this
Agreement are included herein for convenience of
reference only and shall not constitute
29
<PAGE>
a part of this Agreement for any other purpose or be
given any substantive effect.
SECTION 25. Governing Law. BOTH THIS AGREEMENT AND THE
RESTRICTED SECURITIES ACCOUNT SHALL BE GOVERNED BY, AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES. REGARDLESS OF ANY
PROVISION IN ANY OTHER AGREEMENT, FOR PURPOSES OF THE
UCC, NEW YORK SHALL BE DEEMED TO BE THE SECURITIES
INTERMEDIARY'S JURISDICTION AND THE RESTRICTED
SECURITIES ACCOUNT (AS WELL AS THE SECURITIES
ENTITLEMENTS RELATED THERETO) SHALL BE GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK.
SECTION 26. Consent to Jurisdiction and Service of Process. ALL
JUDICIAL PROCEEDINGS BROUGHT AGAINST PLEDGOR ARISING OUT
OF OR RELATING TO THIS AGREEMENT MAY BE BROUGHT IN ANY
STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE
STATE OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS
AGREEMENT PLEDGOR ACCEPTS FOR ITSELF AND IN CONNECTION
WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND
WAIVES ANY DEFENSE OF FORUM NON CONVENIENS
30
<PAGE>
AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT.
Pledgor hereby agrees that service of all process in any
such proceeding in any such court may be made by
registered or certified mail, return receipt requested,
to Pledgor at its address provided in Section 21, such
service being hereby acknowledged by Pledgor to be
sufficient for personal jurisdiction in any action
against Pledgor in any such court and to be otherwise
effective and binding service in every respect. Nothing
herein shall affect the right to serve process in any
other manner permitted by law or shall limit the right
of Secured Party to bring proceedings against Pledgor
in the courts of any other jurisdiction.
SECTION 27. Waiver of Jury Trial. PLEDGOR, SECURITIES
INTERMEDIARY AND SECURED PARTY HEREBY AGREE TO WAIVE
THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT. The scope of this waiver is intended to be
all-encompassing of any and all disputes that may be
filed in any court and that relate to the subject
matter of this transaction, including contract claims,
tort claims, breach of duty claims, and all other common
law and statutory claims. Pledgor and Secured Party each
acknowledge that this waiver is a material inducement
for Pledgor and Secured Party to enter into a business
relationship, that Pledgor and Secured Party have
already relied on this waiver in entering into this
Agreement and that each will continue to rely on this
waiver in their related
31
<PAGE>
future dealings. Pledgor and Secured Party further
warrant and represent that each has reviewed this
waiver with its legal counsel, and that each knowingly
and voluntarily waives its jury trial rights following
consultation with legal counsel. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT. In the event of
litigation, this Agreement may be filed as a written
consent to a trial by the court.
SECTION 28. Counterparts. This Agreement may be executed in one or
more counterparts and by different parties hereto in
separate counterparts, each of which when so executed
and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the
same instrument; signature pages may be detached from
multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically
attached to the same document.
SECTION 29. Temporary Override. NOTWITHSTANDING ANYTHING HEREIN TO
THE CONTRARY, INCLUDING, WITHOUT LIMITATION, THE DEFINITION OF THE TERM
"PERMITTED INVESTMENTS" IN SECTION 1 HEREOF, IT IS UNDERSTOOD AND AGREED BY THE
PARTIES HERETO THAT SO LONG AS THE BANK OF NOVA SCOTIA SHALL BE THE SECURITIES
INTERMEDIARY HEREUNDER, THE ONLY "PERMITTED INVESTMENTS" THAT MAY BE MADE UNDER
THIS AGREEMENT ARE OVERNIGHT DEPOSITS AND TIME DEPOSITS WITH SCOTIABANK AND
COMMERCIAL PAPER ISSUED BY SCOTIABANK. THIS SECTION OF THE AGREEMENT SHALL
TERMINATE UPON THE APPOINTMENT OF A SUCCESSOR SECURITIES
32
<PAGE>
INTERMEDIARY PURSUANT TO THE PROVISIONS OF SECTION 17 HEREOF.
[Remainder of page intentionally left blank]
33
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first set forth above.
PLEDGOR:
ALADDIN GAMING HOLDINGS, LLC,
a Nevada limited liability company
By:
By: /s/ Richard Goeglein
------------------------------
Name: Richard Goeglein
Title: CEO & President
Notice Address:
Aladdin Gaming, LLC
3667 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Telecopier No.: (702) 736-7107
Attention: Chief Executive Officer
With a copy to:
Skadden, Arps, Slate, Meagher & Flom
LLP & Affiliates
919 Third Avenue
New York, New York 10022
Telecopier No. (212) 735-3000
Attention: Wallace L. Schwartz, Esq.
S-1
<PAGE>
SECURITIES INTERMEDIARY:
THE BANK OF NOVA SCOTIA, a Canadian
chartered bank, as Securities Intermediary
By: /s/ Alan Pendergast
-------------------------------
Alan Pendergast
Title: Relationship Manager
Notice Address: The Bank of Nova Scotia
580 California Street
San Francisco, CA 94104
Attention: Alan Pendergast
Relationship Manager
Facsimile Number: (415) 397-0791
with a copy to: The Bank of Nova Scotia
600 Peachtree Street, N.E.
Atlanta, GA 30308
Attention: Marianne Velker
Facsimile Number: (404) 888-8998
S-2
<PAGE>
SECURED PARTY:
THE BANK OF NOVA SCOTIA, a Canadian chartered
bank, as Disbursement Agent under the
Disbursement Agreement
By: /s/ Alan Pendergast
-------------------------------
Alan Pendergast
Title: Relationship Manager
Notice Address: The Bank of Nova Scotia
580 California Street
San Francisco, CA 94104
Attention: Alan Pendergast
Relationship Manager
Facsimile Number: (415) 397-0791
with a copy to: The Bank of Nova Scotia
600 Peachtree Street, N.E.
Atlanta, GA 30308
Attention: Marianne Velker
Facsimile Number: (404) 888-8998
S-3
<PAGE>
EXHIBIT A
To Holdings Collateral Account Agreement
DEFINITIONS
Exhibit A-1
<PAGE>
[EXECUTION COPY]
U.S. $410,000,000
CREDIT AGREEMENT,
dated as of February 26, 1998,
among
ALADDIN GAMING, LLC,
as the Borrower,
VARIOUS FINANCIAL INSTITUTIONS,
as the Lenders,
THE BANK OF NOVA SCOTIA,
as the Administrative Agent for the Lenders,
MERRILL LYNCH CAPITAL CORPORATION,
as the Syndication Agent for the Lenders,
and
CIBC OPPENHEIMER CORP.
as the Documentation Agent for the Lenders.
Arranged By:
The Bank of Nova Scotia
Merrill Lynch Capital Corporation
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of February 26, 1998, among ALADDIN
GAMING, LLC, a Nevada limited-liability company (the "Borrower"), the
various financial institutions as are or may become parties hereto
(collectively, the "Lenders"), THE BANK OF NOVA SCOTIA ("Scotiabank"), as
administrative agent (in such capacity, the "Administrative Agent") for the
Lenders, MERRILL LYNCH CAPITAL CORPORATION ("Merrill Lynch"), as
syndication agent (in such capacity, the "Syndication Agent") for the
Lenders, and CIBC OPPENHEIMER CORP. ("CIBC"), as documentation agent (in
such capacity, the "Documentation Agent") for the Lenders.
W I T N E S S E T H:
WHEREAS, 100% of the Borrower Common Membership Interests (such term
and other capitalized terms being used herein with the meanings provided in
Section 1.1) are owned by Holdings, which, in turn, (x) to the extent of
72% of its common Membership Interests is owned indirectly through Sommer
Enterprises, Enterprises and AHL by the Trust, (y) to the extent of 25% of
its common Membership Interests is owned indirectly through LCNI and London
Clubs Holdings by London Clubs and (z) to the extent of 3% of its common
Membership Interests is owned by GAI, LLC; and
WHEREAS, 100% of the Borrower Series A Preferred Membership Interests
are owned by Holdings; and
WHEREAS, the Borrower owns all of the outstanding common Membership
Interests of AMH, which is anticipated to own 49% of the common Membership
Interests of Aladdin Music, the remaining 51% of the Aladdin Music common
Membership Interests are anticipated to be owned directly by Planet
Hollywood (Boston) Inc., which is a direct, wholly-owned Subsidiary of
Planet Hollywood; and
WHEREAS, Borrower owns a site (the "Site") totaling approximately
35.16 acres at Las Vegas Boulevard and Harmon Avenue in Clark County,
Nevada on which it intends to demolish the existing Aladdin hotel and
casino (but leaving the existing Theater for the Performing Arts intact)
and to develop and construct a new resort, casino and entertainment complex
(the "Complex"), including:
(a) a luxury themed hotel and casino (the "Hotel/Casino") to be
known as the "Aladdin Hotel and Casino" consisting of a hotel of
approximately 2,600 rooms (the "Hotel"), an approximately 116,000
square foot casino (the "Casino"), a 1,400 seat production showroom
and seven restaurants, all of which will be developed, constructed,
owned and operated by the Borrower on the Main Project Parcel as more
particularly
<PAGE>
described in Exhibit N-3 hereto (the Hotel/Casino collectively with
the Theater and the Energy Project Component, the "Main Project");
(b) a themed entertainment shopping mall with approximately
462,000 square feet of retail space (the "Desert Passage") and an
approximately 4,800 space car parking facility (the "Carpark", and
collectively with the Desert Passage, the "Mall Project"), both to be
developed, constructed, owned and operated by Aladdin Bazaar on the
Mall Project Parcel as more particularly described in Exhibit N-4
hereto;
(c) a second hotel and casino complex with a music and
entertainment theme (the "Music Project") to be developed, constructed
and operated by Aladdin Music on the Music Project Parcel as more
particularly described in Exhibit N-5 hereto;
(d) a 7,000 seat theater (the "Theater") currently known as "The
Aladdin Theater for the Performing Arts" to be leased by the Borrower
to, and to be renovated and operated by, Aladdin Music in accordance
with the Theater Lease; and
(e) a facility (the "Energy Project") to provide electricity,
chilled water and hot water to the Complex which will be constructed,
owned and operated by the Energy Project Provider; and
WHEREAS, the Borrower expects to fund the costs to construct the
Hotel/Casino Component and pay for the Equipment Component and the
Borrower's expenses, if any, with respect to the Energy Project Component,
which are expected pursuant to the Main Project Budget to cost $724,000,000
in the aggregate, by
(a) obtaining from Holdings in consideration for common
membership interests of the Borrower (x) the Site which has a net
equity value (the "Land Equity") of $67,000,000, based on an appraised
value of $135,000,000 (after giving effect to the release of the
portion of the Site required for the Mall Project and the Music
Project) and the discharge of all Indebtedness secured thereby of
$68,000,000, (y) the benefit of pre-development Main Project Costs of
at least $7,000,000 and (z) a portion of the London Clubs Contribution
in the amount of $42,000,000;
(b) obtaining from Holdings in consideration for Series A
Preferred Membership Interest of the Borrower, the amount of
$115,047,100, representing the proceeds received by Holdings, Capital
and Enterprises from the issuance of the Discount Notes and Warrants
in an aggregate amount of $107,047,100 pursuant to the Discount Note
Purchase Agreement and a portion of the London Clubs Contribution in
the amount of $8,000,000; and
2
<PAGE>
(c) obtaining from GECC pursuant to the Approved Equipment
Funding Commitment a $60,000,000 capitalized lease and $20,000,000 in
purchase money loans covering the Gaming Equipment and the Specified
Equipment; and
(d) obtaining Commitments from the Lenders in an aggregate
amount of $410,000,000, all as further described in the following
recital; and
WHEREAS, the Borrower desires to obtain
(a) Term A Loan Commitments from the Term A Lenders pursuant to
which the Borrower may, from time to time on and after the Effective
Date and prior to the Term A Loan Commitment Termination Date, obtain
(i) from the Issuer, Letters of Credit in a maximum
aggregate Stated Amount at any time outstanding not to exceed
$20,000,000, and
(ii) from the Term A Lenders, Borrowings of the Term A
Loans,
all subject, however, to the limitation that the sum at any time of
(x) the aggregate original principal amount of all Term A Loans plus
(y) the aggregate Stated Amount of outstanding Letters of Credit shall
not exceed $136,000,000;
(b) Term B Loan Commitments from the Term B Lenders pursuant to
which a single Borrowing of Term B Loans in a maximum original
principal amount of $114,000,000 shall be made by the Borrower on the
Closing Date; and
(c) Term C Loan Commitments from the Term C Lenders pursuant to
a single Borrowing of Term C Loans in a maximum original principal
amount of $160,000,000 shall be made by the Borrower on the Closing
Date; and
WHEREAS, the Lenders and the Issuer are willing, on the terms and
subject to the conditions hereinafter set forth (including Article V), to
enter into such Commitments and make such Loans to the Borrower and issue
(or participate in) such Letters of Credit for the account of the Borrower;
and
WHEREAS, the proceeds of
(a) the Loans will be applied (x) towards the Main Project Costs
in respect of which such Loans were advanced by the Lenders, (y) prior
to the Conversion Date, for payments of interest in respect of the
Loans made hereunder and (z) in the case of Term A Loans, in addition
to the foregoing purposes, towards the payment of reimbursement
obligations arising from drawn Letters of Credit; and
3
<PAGE>
(b) Letters of Credit will be issued for the account of the
Borrower if required as a deposit by suppliers and/or contractors
providing materials to the Main Project;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1. Defined Terms. The following terms (whether or not
italicized) when used in this Agreement, including its preamble and
recitals, shall, except where the context otherwise requires, have the
following meanings (such meanings to be equally applicable to the singular
and plural forms thereof):
"ABH" means Aladdin Bazaar Holdings, LLC, a Nevada limited-liability
company.
"Account" is defined in the Disbursement Agreement.
"Additional Contract Certificate" means an Additional Contract
Certificate substantially in the form of Exhibit Y hereto.
"Administrative Agent" is defined in the preamble and includes each
other Person as shall have subsequently been appointed as the successor
Administrative Agent pursuant to Section 9.4.
"Advance" is defined in the Disbursement Agreement.
"Affected Lender" is defined in clause(a) of Section 4.11.
"Affiliate" means, relative to any Person, any other Person which,
directly or indirectly, controls, is controlled by or is under common
control with such Person (excluding, however, any trustee under, or any
committee with responsibility for administering, any Plan). With respect
to any Lender, Approved Fund, or Issuer, a Person shall be deemed to be
"controlled by" another Person if such other Person possesses, directly or
indirectly, power to vote 51% or more of the securities (on a fully diluted
basis) having ordinary voting power for the election of directors, managing
general partners or managers, as the case may be. With respect to all
other Persons, a Person shall be deemed to be "controlled by" another
Person if such other Person possesses, directly or indirectly, power
(a) to vote 10% or more of the securities (on a fully diluted
basis) having ordinary voting power for the election of directors,
managing general partners or managers, as the case may be; or
4
<PAGE>
(b) to direct or cause the direction of the management and
policies of such Person whether by contract or otherwise.
"Affiliate Transaction" is defined in Section 7.2.13.
"Agent" means the Administrative Agent, the Syndication Agent and/or
the Documentation Agent, as the context may require.
"Agreement" means, on any date, this Credit Agreement as originally in
effect on the Effective Date and as thereafter from time to time amended,
supplemented, amended and restated, or otherwise modified.
"AHL" means Aladdin Holdings, LLC, a Delaware limited liability
company.
"AHL Pledge Agreement" means, on any date, the Pledge Agreement
executed and delivered by an Authorized Representative of AHL pursuant to
clause (d) of Section 5.1.3, as originally in effect on the Closing Date,
in substantially the form of Exhibit E-2 hereto and as thereafter from time
to time amended, supplemented, amended and restated or otherwise modified.
"Aladdin Bazaar" means Aladdin Bazaar, LLC, a Delaware limited
liability company.
"Aladdin Music" means Aladdin Music, LLC, a Nevada limited-liability
company.
"Aladdin Parties" means, collectively, the Borrower, Holdings,
Capital, Enterprises, Sommer Enterprises, AHL, Aladdin Music, AMH, ABH and
the Trust.
"Alternate Base Rate" means, on any date and relative to all Base Rate
Loans, a fluctuating rate of interest per annum (rounded upward, if
necessary, to the next highest 1/16 of 1%) equal to the higher of
(a) the Base Rate in effect on such day; and
(b) the Federal Funds Rate in effect on such day plus 1/2 of 1%.
Changes in the rate of interest on that portion of any Loans maintained as
Base Rate Loans will take effect simultaneously with each change in the
Alternate Base Rate. The Administrative Agent will give notice promptly to
the Borrower and the Lenders of changes in the Alternate Base Rate.
"AMH" means Aladdin Music Holdings, LLC, a Nevada limited-liability
company.
5
<PAGE>
"AMH Pledge Agreement" means, on any date, the Pledge Agreement
executed and delivered by an Authorized Representative of AMH pursuant to
clause (g) of Section 5.1.3, as originally in effect on the Closing Date,
in substantially the form of Exhibit E-3 hereto and as thereafter from time
to time amended, supplemented, amended and restated or otherwise modified.
"Anticipated Earnings" is defined in the Disbursement Agreement.
"Applicable Base Rate Margin" means, (w) relative to any Term B Loan
and Term C Loan, the proceeds of which on any date are being held in the
Bank Proceeds Account, 1.00% per annum, (x) relative to any Term B Loan,
the proceeds of which on any date have been advanced to the Borrower from
the Bank Proceeds Account, 2.50% per annum, (y) relative to any Term C
Loan, the proceeds of which on any date have been advanced to the Borrower
from the Bank Proceeds Account, 3.00% per annum and (z) relative to any
Term A Loan, (1) on any date prior to the date which is six months after
the Conversion Date, 2.00% per annum and (2) on any date from and after the
date which is six months after the Conversion Date, the per annum
percentage set forth below opposite the Total Debt to EBITDA Ratio set
forth in the Current Compliance Certificate:
<TABLE>
<CAPTION>
Total Debt to EBITDA Ratio Applicable Base Rate Margin
- -------------------------- ---------------------------
<S> <C>
greater than or equal to 4.0:1 1.75%
greater than or equal to 3.5:1 and < 4.0:1 1.50%
greater than or equal to 3.0:1 and < 3.5:1 1.00%
greater than or equal to 2.5:1 and < 3.0:1 0.75%
< 2.5:1 0.50%
</TABLE>
"Applicable LIBO Rate Margin" means, (w) relative to any Term B Loan
and Term C Loan, the proceeds of which on any date are being held in the
Bank Proceeds Account, 2.00% per annum, (x) relative to any Term B Loan,
the proceeds of which on any date have been advanced to the Borrower from
the Bank Proceeds Account, 3.50% per annum, (y) relative to any Term C
Loan, the proceeds of which on any date have been advanced to the Borrower
from the Bank Proceeds Account, 4.00% per annum and (z) relative to any
Term A Loan, (1) on any date prior to the date which is six months after
the Conversion Date, 3.00% per annum and (2) on any date from and after the
date which is six months after the Conversion Date, the per annum
percentage set forth below opposite the Total Debt to EBITDA Ratio set
forth in the Current Compliance Certificate:
6
<PAGE>
<TABLE>
<CAPTION>
Total Debt to EBITDA Ratio Applicable LIBO Rate Margin
- -------------------------- ---------------------------
<S> <C>
greater than or equal to 4.0:1 2.75%
greater than or equal to 3.5:1 and < 4.0:1 2.50%
greater than or equal to 3.0:1 and < 3.5:1 2.00%
greater than or equal to 2.5:1 and < 3.0:1 1.75%
< 2.5:1 1.50%
</TABLE>
"Applicable Percentage" means the percentage of Direct Costs actually
paid or payable by the Borrower to the Design/Builder pursuant to the
Design/Build Contract or, if applicable, to a Contractor or Subcontractor
pursuant to a Contract after taking into account the Retainage Amount.
"Approved Equipment Funding Commitment" means, collectively, (x) the
GECC Commitment and (y) any replacement of the GECC Commitment from an
institutional or other lender approved by the Administrative Agent in its
reasonable discretion if (1) such commitment is in form and substance
reasonably satisfactory to the Administrative Agent and does not include
any material conditions to funding that are not included in the GECC
Commitment and (2) the lender providing such commitment executes an
intercreditor agreement substantially similar to the GECC Intercreditor
Agreement.
"Approved Fund" means, relative to any Lender that is a fund that
invests in bank loans, any other fund that invests in bank loans and is
advised or managed by the same investment advisor as such Lender or by an
Affiliate of such investment advisor.
"Appurtenant Rights" means (x) all agreements, easements, rights of
way or use, rights of ingress or egress, privileges, appurtenances,
tenements, hereditaments and other rights and benefits at any time
belonging or pertaining to the Site or the Improvements, including the use
of any streets, ways, alleys, vaults or strips of land adjoining, abutting,
adjacent or contiguous to the Site and (y) all permits, licenses and
rights, whether or not of record, appurtenant to the Site.
"Architect of Record" means ADP/FD of Nevada, Inc.
"Architect's Agreement" means, collectively, the agreements pursuant
to which architects, engineers and other design professionals have agreed
with the Borrower to provide services in connection with the Main Project.
"Architect's Closing Certificate" means a closing certificate in the
form of Exhibit Q-3 hereto.
7
<PAGE>
"Arranger" means Scotiabank or Merrill Lynch.
"Arrangers' Fee Letter" means the confidential letter agreement, dated
December 4, 1997, among the Borrower, the Sponsors and the Arrangers.
"Assignee Lender" is defined in Section 10.11.1.
"Assignment of Contracts" means an assignment of any and all
contracts, agreements, proposals, Permits (to the extent such Permits are
assignable), approvals (to the extent such approvals are assignable), Plans
and Specifications pertaining to the Hotel/Casino Component, whether now
existing or subsequently entered into by the Borrower, including the
Approved Equipment Funding Commitments and the rights of the Borrower
thereunder, management contracts, the Contracts, development rights,
consents (to the extent assignable), architectural, engineering and leasing
documents and such other documents as may be designated by the
Administrative Agent. Such Assignment of Contracts shall include
appropriate continuation agreements by the Contractors and/or
Subcontractors thereunder.
"Assignment of Consulting Agreement" means, on any date, the
Assignment of Consulting Agreement, as originally in effect on the Closing
Date, between the Borrower, AHL and the Administrative Agent and as
thereafter from time to time amended, supplemented, amended and restated or
otherwise modified in accordance with the terms hereof.
"Assignment of Design/Build Contract" means, on any date, the
Assignment of Design/Build Contract, as originally in effect on the Closing
Date, between the Borrower and the Administrative Agent and as thereafter
from time to time amended, supplemented, amended and restated or otherwise
modified in accordance with the terms hereof.
"Assignment of Project Management Agreement" means, on any date, the
Assignment of Project Management Agreement, as originally in effect on the
Closing Date, between AHL and the Administrative Agent and as thereafter
from time to time amended, supplemented, amended and restated or otherwise
modified in accordance with the terms hereof.
"Assignment of Salle Privee Agreement" means, on any date, the
Assignment of Salle Privee Agreement, as originally in effect on the
Closing Date, between the Borrower and the Administrative Agent and as
thereafter from time to time amended, supplemented, amended and restated or
otherwise modified in accordance with the terms hereof.
"Authorized Representative" means, relative to any Person, those of
its officers or managing members (in the case of a limited liability
company) whose signatures and incumbency shall have been certified to the
Administrative Agent and the Lenders in a certificate of such Person
delivered to the Administrative Agent.
8
<PAGE>
"Available Funds" means, from time to time, the sum of (u) the
aggregate of the unutilized Commitments (excluding, however, the
Commitments of all Defaulting Lenders) under the Bank Credit Facility, plus
(v) the aggregate of the amounts on deposit in the Borrower's Funds
Account, the Construction Note Disbursement Account and all Anticipated
Earnings thereon, plus (w) the aggregate of the amounts on deposit in the
Guaranty Deposit Account, the Cash Management Account, the Bank Proceeds
Account, the Loss Proceeds Account and the Interest Payment Account, plus
(x) so long as (1) no default under the Site Work Agreement and the Mall
Project Loan and no Default hereunder have occurred and are continuing at
the relevant time of computation, (2) advances of the Mall Project Loan
have commenced on or before June 30, 1998 and have continued in accordance
with the approved draw schedule for the Mall Project Loan, (3) advances of
the Mall Project Loan to reimburse the Borrower in accordance with the Site
Work Agreement are made within 45 days after the Construction Consultant
and the Owner Representative have approved the work to be completed by the
Borrower pursuant to the Site Work Agreement, the aggregate amounts payable
to the Borrower by Aladdin Bazaar pursuant to Section 4.5 of the Site Work
Agreement, plus (y) the lesser of (1) the aggregate of the amounts
available to be drawn under all Approved Equipment Funding Commitments and
(2) the aggregate amount of Remaining Costs on the date of calculation for
the Equipment Component (as in effect from time to time), plus (z) the
aggregate amount of Main Project Costs which the Design/Builder and/or
Fluor have agreed or confirmed in writing, to the reasonable satisfaction
of the Disbursement Agent, that they are responsible for paying (on a
timely basis relative to the Main Project's cash needs) from their own
funds but which they have not yet paid.
"Bank Credit Facility" means the Term A Loan Commitment, the Term B
Loan Commitment and the Term C Loan Commitment.
"Bank Proceeds Account" means the account established by the Borrower
with the Disbursement Agent pursuant to the Borrower Collateral Account
Agreement into which the proceeds of the Loans shall be deposited by the
Administrative Agent from time to time.
"Base Rate" means, at any time, the rate of interest then most
recently established by the Administrative Agent in New York, New York as
its base rate for U.S. dollars loaned in the United States. The Base Rate
is not necessarily intended to be the lowest rate of interest determined by
the Administrative Agent in connection with extensions of credit.
"Base Rate Loan" means a Loan bearing interest at a fluctuating rate
determined by reference to the Alternate Base Rate.
"Board of Managers" means (x) for so long as the Borrower is a
limited-liability company, the Board of Managers appointed pursuant to the
Organizational Documents of the Borrower or (y) otherwise, the Board of
Directors of the Borrower.
"Borrower" is defined in the preamble.
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"Borrower Collateral Account Agreement" means, on any date, the
Borrower Collateral Account Agreement, as originally in effect on the
Closing Date, among the Borrower, the Disbursement Agent and the Securities
Intermediary and as thereafter from time to time amended, supplemented,
amended and restated or otherwise modified in accordance with the terms
hereof.
"Borrower Common Membership Interest" means a Common Share as defined
in the Organizational Documents of the Borrower.
"Borrower Pledge Agreement" means, on any date, the Pledge Agreement
executed and delivered by an Authorized Representative of the Borrower
pursuant to clause (f) of Section 5.1.3, as originally in effect on the
Closing Date, in substantially the form of Exhibit E-1 hereto and as
thereafter from time to time amended, supplemented, amended and restated or
otherwise modified.
"Borrower Series A Preferred Membership Interests" means the Series A
Preferred Shares as defined in the Organizational Documents of the
Borrower.
"Borrower's Closing Certificate" means a closing certificate in the
form of Exhibit Q-1 hereto.
"Borrower's Completion Certificate" means a certificate in the form of
Exhibit S-1 hereto.
"Borrower's Final Completion Certificate" means a certificate in the
form of Exhibit U-1 hereto.
"Borrower's Funds Account" is defined in the Borrower Collateral
Account Agreement.
"Borrowing" means the Loans of the same type and, in the case of LIBO
Rate Loans, having the same Interest Period made by all Lenders required to
make such Loans on the same Business Day and pursuant to the same Borrowing
Request in accordance with Section 2.1.
"Borrowing Request" means a Loan request and certificate duly executed
by an Authorized Representative of the Borrower substantially in the form
of Exhibit L-1 hereto.
"Building Department" means the Clark County Building Department.
"Business Day" means
(a) any day which is neither a Saturday or Sunday nor a legal
holiday on which banks are authorized or required to be closed in Las
Vegas, Nevada or New York, New York; and
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(b) relative to the making, continuing, prepaying or repaying of
any LIBO Rate Loans, any day described in clause (a) on which dealings
in Dollars are carried on in the London interbank eurodollar market.
"Capital" means Aladdin Capital Corp., a Nevada corporation.
"Capital Expenditures" means, for any period, the aggregate amount of
all expenditures (other than any residual purchase payments under the FF&E
Leases) of the Borrower and the other Aladdin Parties for fixed or capital
assets made during such period which, in accordance with GAAP, would be
classified as capital expenditures.
"Capital Stock" means, relative to any Person, any and all shares,
interests (including Membership Interests), participations or other
equivalents (however designated, whether voting or non-voting) of such
Person's capital, whether now outstanding or issued after the Effective
Date.
"Capitalized Lease Liability" means, relative to any Person, any
monetary obligation of such Person under any leasing or similar arrangement
which, in accordance with GAAP, would be classified as a capitalized lease,
and, for purposes of this Agreement and each other Loan Document, the
amount of such obligation shall be the capitalized amount thereof,
determined in accordance with GAAP, and the stated maturity thereof shall
be the date of the last payment of rent or any other amount due under such
lease prior to the first date upon which such lease may be terminated by
the lessee without payment of a premium or a penalty.
"Carpark" is defined in clause (b) of the fourth recital.
"Cash Contributions to Capital" means optional contributions (other
than Cash Equity Contributions as defined in the Keep-Well Agreement),
including to cure a Default that would otherwise exist under the Loan
Documents, made by the Sponsors in cash to the Borrower, which
contributions were (x) not made as a loan, (y) made in exchange for
Borrower Series A Preferred Membership Interests and (z) made on terms and
conditions satisfactory to the Administrative Agent as determined on good
faith in its sole discretion.
"Cash Equivalent Investment" means, at any time, (u) United States
Dollars, (v) securities issued or directly and fully guaranteed or insured
by the United States Government or any agency or instrumentality thereof
(provided that the full faith and credit of the United States is pledged in
support thereof) having maturities of not more than six months from the
date of acquisition, (w) certificates of deposit and eurodollar time
deposits with maturities of six months or less from the date of
acquisition, bankers' acceptances with maturities not exceeding six months
and overnight bank deposits, in each case with any domestic commercial bank
having capital and surplus in excess of $500 million and a Thompson Bank
Watch Rating of "B" or better, (x) repurchase obligations with a term of
not more than seven days for underlying securities of the types described
in item (v) and (w) entered into with any financial institution
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meeting the qualifications specified in item (w), (y) commercial paper
having the highest rating obtainable from Moody's Investors Service, Inc.
or Standard & Poor's Corporation and in each case maturing within six
months after the date of acquisition and (z) money market funds at least
95% of the assets of which constitute Cash Equivalents of the kinds
described in items (w)-(y) of this definition.
"Cash Management Account" is defined in the Disbursement Agreement.
"Casino" is defined in clause (a) of the fourth recital.
"CERCLA" is defined in clause (a) of the definition of "Environmental
Law".
"CERCLIS" means the Comprehensive Environmental Response Compensation
Liability Information System List.
"Change in Control" means at any time,
(a) the failure of the Trust or the beneficiaries or
remaindermen of the Trust to (i) directly own, free and clear of all
Liens (other than Liens in favor of the Administrative Agent for the
benefit of the Secured Parties), all of (A) the Membership Interests
of AHL not otherwise owned by GW Vegas, LLC on the Effective Date or
(B) following the dissolution of the Trust and AHL, the Membership
Interests of Sommer Enterprises not otherwise owned by Ronald B.
Dictrow on the Effective Date or (ii) otherwise have the ability to
elect the managers of (A) AHL or (B) following the dissolution of the
Trust and AHL, Sommer Enterprises;
(b) the failure of AHL or following the dissolution of the Trust
and AHL, the beneficiaries or remaindermen of the Trust to directly
own, free and clear of all Liens (other than Liens in favor of the
Administrative Agent for the benefit of the Secured Parties), 98.66%
of the Membership Interests of Sommer Enterprises or otherwise have
the ability to elect the managers of Sommer Enterprises;
(c) the failure of Sommer Enterprises to directly own, free and
clear of all Liens (other than Liens in favor of the Administrative
Agent for the benefit of the Secured Parties), 47.00% of the
Membership Interests of Holdings (except that (v) on the Opening Date,
the percentage interest of Sommer Enterprises in the Holdings Common
Membership Interests may be increased by 0.5% provided that the
percentage interest of LCNI therein is decreased by a corresponding
amount (w) in the event of a default by London Clubs in payment of its
share of amounts due under the Keep-Well Agreement, the percentage
interest of Sommer Enterprises in the Holdings Common Membership
Interests may be increased by 1, 1.5 or 2 times (depending on whether
London Clubs is in default for 30 Business Days, 45 Business Days or
60 Business Days from the date of such default, respectively)
multiplied by a dilution fraction (the "Dilution Fraction"), the
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numerator of which is the delinquent contribution and the denominator
of which is $200,000,000 provided that the percentage interest of LCNI
therein is decreased by a corresponding amount, (x) in the event of a
default by AHL in its share of amounts due under the Keep-Well
Agreement, the percentage interest of LCNI in the Holdings Common
Membership Interests may be increased by 1, 1.5 or 2 times (depending
on whether AHL is in default for 30 Business Days, 45 Business Days or
60 Business Days from the date of such default, respectively)
multiplied by the Dilution Fraction provided that the percentage
interest of Sommer Enterprises therein is decreased by a corresponding
amount), (y) in the event of any vesting of any unvested Membership
Interests in Holdings pursuant to an Employment Agreement, Sommer
Enterprises may be diluted thereby and (z) upon the exercise of the
Warrants, the dilutive effect of such exercise directly and indirectly
on the Membership Interests in Holdings) or otherwise for Sommer
Enterprises and LCNI to have the ability to elect the board of
managers of Holdings or for either of them to have the ability
individually or collectively to elect the board of managers of
Holdings;
(d) except for Capital Stock of Enterprises issued in connection
with the exercise of Warrants, the failure of Sommer Enterprises to
directly own, free and clear of all Liens (other than Liens in favor
of the Administrative Agent for the benefit of the Secured Parties),
all of the Capital Stock of Enterprises or otherwise have the ability
to elect the members of the Board of Directors of Enterprises;
(e) the failure of Enterprises to directly own, free and clear
of all Liens (other than Liens in favor of the Administrative Agent
for the benefit of the Secured Parties), at least 25% of the
Membership Interests of Holdings (except for any adjustments upon the
exercise of any Warrants) or individually or collectively with Sommer
Enterprises and LCNI to have the ability to elect the managing member
of Holdings;
(f) the failure of Holdings to directly own, free and clear of
all Liens (other than Liens in favor of the Administrative Agent for
the benefit of the Secured Parties), all of the Borrower Common
Membership Interests or otherwise to have the ability to elect the
managing member of the Borrower;
(g) the failure of Holdings to directly own, free and clear of
all Liens (other than Liens in favor of the Discount Note Indenture
Trustee for the benefit of the Discount Noteholders), the Borrower
Series A Preferred Membership Interests unless the failure to own the
Borrower Series A Preferred Membership Interests results from the
exercise by the Discount Note Indenture Trustee of the Lien in favor
of the Discount Note Indenture Trustee for the benefit of the Discount
Noteholders;
(h) the failure of Holdings to directly own, free and clear of
all Liens (other than Liens in favor of the Administrative Agent for
the benefit of the Secured Parties), all of
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the Capital Stock of Capital or otherwise have the ability to elect
all of the members of the Board of Directors of Capital;
(i) the failure of the Borrower to directly own, free and clear
of all Liens (other than Liens in favor of the Administrative Agent
for the benefit of the Secured Parties), all of the Membership
Interests of AMH or otherwise to have the ability to elect the
managing member of AMH;
(j) the failure of AMH to directly own, free and clear of all
Liens (other than Liens in favor of the Administrative Agent for the
benefit of the Secured Parties), at least 49% of the Membership
Interests of Aladdin Music or otherwise to have the ability to elect
the managing member of Aladdin Music;
(k) the failure of LCNI to directly own, free and clear of all
Liens (other than Liens in favor of the Administrative Agent for the
benefit of the Secured Parties), at least 25.0% of the Holdings Common
Membership Interests (except that (v) on the Opening Date, the
percentage interest of LCNI in the Holdings Common Membership
Interests may be decreased by 0.5% provided that the percentage
interest of Sommer Enterprises therein is increased by a corresponding
amount (w) in the event of a default by Sommer Enterprises in payment
of its share of amounts due under the Keep-Well Agreement, the
percentage interest of LCNI in the Holdings Common Membership
Interests may be increased by 1, 1.5 or 2 times (depending on whether
Sommer Enterprises is in default for 30 Business Days, 45 Business
Days or 60 Business Days from the date of such default, respectively)
multiplied by the Dilution Fraction, provided that the percentage
interest of Sommer Enterprises therein is decreased by a corresponding
amount, (x) in the event of a default by LCNI in payment of its share
of amounts due under the Keep-Well Agreement, the percentage interest
of Sommer Enterprises in the Holdings Common Membership Interests may
be increased by 1, 1.5 or 2 times (depending on whether LCNI is in
default for 30 Business Days, 45 Business Days or 60 Business Days
from the date of such default, respectively) multiplied by the
Dilution Fraction provided that the percentage interest of LCNI is
decreased by a corresponding amount) and (y) in the event of any
vesting of unvested membership interests in Holdings pursuant to an
Employment Agreement, LCNI may be diluted thereby and (z) upon the
exercise of the Warrants, the dilutive effect of such exercise
directly and indirectly on the Membership Interest of Holdings) or
otherwise for LCNI and Sommer Enterprises to have the ability to elect
the board of managers of Holdings;
(l) until such time as London Clubs has paid and performed, in all
material respects, its obligations under the Completion Guaranty and the
Keep-Well Agreement (or the Completion Guaranty and the Keep-Well Agreement
have expired or terminated), the failure of London Clubs to directly own all
of the Capital Stock of London Clubs Holdings or otherwise have the ability
to elect all members of the Board of Directors of London Clubs Holdings;
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(m) the failure of London Clubs to own directly or indirectly
all of the Capital Stock of LCNI or otherwise have the ability to
elect all members of the Board of Directors of LCNI; or
(n) any "Change of Control" under (and as defined in) the
Discount Note Indenture.
"Change Order" means, at any time, an adjustment made to the
Guaranteed Maximum Price or the Design/Build Contract Time with respect to
changes in the Work which increase or decrease the time of performance or
the actual cost to the Design/Builder of the Work.
"CIBC" is defined in the preamble.
"Claim" is defined in the Disbursement Agreement.
"Clark County Code" is defined in clause (b) of Section 7.1.19.
"Closing" is defined in Section 5.1.
"Closing Date" means the Business Day, if any, prior to the Term B and
Term C Loan Commitment Termination Date, on which the conditions in Article
V are satisfied.
"Code" means the Internal Revenue Code of 1986, and the regulations
thereunder, in each case as amended, reformed or otherwise modified from
time to time.
"Commitment" means, as the context may require, a Term A Loan
Commitment, a Term B Loan Commitment, a Term C Loan Commitment or a Letter
of Credit Commitment made by a Lender hereunder.
"Commitment Amount" means, as the context may require, the Term A Loan
Commitment Amount, the Term B Loan Commitment Amount, the Term C Loan
Commitment Amount or the Letter of Credit Commitment Amount.
"Commitment Letter" means the Commitment Letter, dated December 4,
1997, between the Arrangers, the Borrower and the Sponsors as thereafter
from time to time amended.
"Commitment Termination Date" means, as the context may require, the
Term A Loan Commitment Termination Date or the Term B Loan and Term C Loan
Commitment Termination Date.
"Commitment Termination Event" means
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(a) the occurrence of any Event of Default described in
clauses (a) through (e) of Section 8.1.10; or
(b) the occurrence and continuance of any other Event of Default
and either (x) the declaration of all or any portion of the Loans to
be immediately due and payable pursuant to Section 8.3 or (y) the
giving of notice by the Administrative Agent, acting at the direction
of the Required Lenders, to the Borrower that the Commitments have
been terminated.
"Common Parking Area Use Agreement" means, the Common Parking Area Use
Agreement to be entered into between the Borrower and Aladdin Bazaar in
form and substance satisfactory to the Administrative Agent determined in
good faith in its sole discretion, and as thereafter from time to time
amended, supplemented, amended and restated or otherwise modified in
accordance with the terms hereof.
"Completion" means that each of the following has occurred:
(a) the construction of the Hotel/Casino and any Tenant
Improvements have been completed substantially in accordance with this
Agreement, the Plans and Specifications, the provisions of the
Reciprocal Easement Agreement applicable to the Hotel/Casino and all
of the other Operative Documents to the extent that the development,
construction, use or operation of the Hotel/Casino are affected
thereby, except for the Main Project Punchlist Items applicable to the
Hotel/Casino, and in substantial compliance with all Legal
Requirements pertaining to the construction of the Hotel/Casino so as
to allow the Hotel/Casino to be utilized for its intended purpose;
(b) reasonable and safe means of access and facilities necessary
for the use and occupancy of the Hotel/Casino have been installed and
are operational including corridors, elevators, stairways, heating,
ventilation, air conditioning, sanitary, water and electrical
facilities and all security systems and life safety systems required
by the Plans and Specifications, the Reciprocal Easement Agreement,
the other Operative Documents and all Legal Requirements and that the
Borrower has made arrangements (from the Energy Project or an
alternative source) to obtain reliable electrical and other utility
services at appropriate levels required to start up, operate and
maintain the Hotel/Casino in a safe, efficient and reliable manner;
and
(c) there are no outstanding claims or Liens by any Contractor
or Subcontractor or any other Person against any portion of the
Hotel/Casino Component except for Permitted Liens and Permitted
Encumbrances.
"Completion Certificate" means, collectively, the Borrower's
Completion Certificate and the Construction Consultant's Completion
Certificate in the form of Exhibits S-1 and S-2 hereto, respectively.
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"Completion Date" means the date on which Completion occurs but in no
event shall the Completion Date extend beyond the Outside Completion
Deadline, time being of the essence as to the Borrower.
"Completion Guarantor" means, jointly and severally, each of London
Clubs, ABH and the Trust.
"Completion Guaranty" means, on any date, the Guaranty of Performance
and Completion, as originally in effect on the Closing Date, by the
Completion Guarantors in favor of the Lenders substantially in the form of
Exhibit C hereto and as thereafter from time to time amended, supplemented,
amended and restated or otherwise modified.
"Complex" is defined in the fourth recital and is more fully described
in Exhibit N-2 hereto.
"Compliance Certificate" means a certificate duly completed and
executed by an Authorized Representative of the Borrower substantially in
the form of Exhibit R hereto, as amended, supplemented, amended and
restated or otherwise modified from time to time, together with such
changes thereto as the Administrative Agent may from time to time
reasonably request for the purpose of monitoring the Borrower's compliance
with the financial covenants contained herein.
"Consent" means a consent, substantially in the form of Exhibit I
hereto, to the collateral assignment by the Borrower of the Main Project
Documents.
"Construction Benchmark Schedule" means the schedule for construction
and completion of each Construction Component, the Main Project as a whole
and the other work that the Borrower is required to perform pursuant to the
Operative Documents substantially the form of Exhibit X-1 (as amended from
time to time in accordance with the terms hereof) which (w) shall
demonstrate that Substantial Completion will occur on or before the Outside
Completion Deadline, (x) includes a statement from the Owner Representative
and the Design/Builder that the Construction Benchmark Schedule is
realistic and can be adhered to (subject to Force Majeure Events) in
completing the Main Project in accordance with the Plans and
Specifications, (y) shows on a monthly basis the anticipated progress of
the Work and other activities pertaining to the construction of the
Hotel/Casino Component, the Energy Project Component and Theater
renovations, and (z) the Construction Consultant has reviewed and certified
in the Construction Consultant's Closing Certificate that the statement
from the Owner Representative in item (x) is reasonable and that it is
appropriate for the Administrative Agent to rely thereon and on the other
schedules and benchmarks set forth in the Construction Benchmark Schedule.
"Construction Component" means the Hotel/Casino Component, the Energy
Project Component or the Equipment Component.
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"Construction Consultant" means Rider Hunt (NV), L.L.C. or any other
Person designated from time to time by the Administrative Agent to serve as
the Construction Consultant under this Agreement and the Disbursement
Agreement.
"Construction Consultant Engagement Agreement" means the Engagement
Letter, dated as of January 28, 1998, by and among the Construction
Consultant, the Borrower, the Administrative Agent, the Disbursement Agent
and the Discount Note Indenture Trustee.
"Construction Consultant's Certificate" is defined in the Disbursement
Agreement.
"Construction Consultant's Closing Certificate" means a closing
certificate in the form of Exhibit Q-2 hereto.
"Construction Consultant's Completion Certificate" means a certificate
in the form of Exhibit S-2 hereto.
"Construction Consultant's Final Completion Certificate" means a
certificate in the form of Exhibit U-2 hereto.
"Construction Consultant's Report" means a report of the Construction
Consultant delivered to the Disbursement Agent and the Administrative Agent
pursuant to Section 3.1.10 of the Disbursement Agreement which shall
include an analysis of the Plans and Specifications, the Main Project
Budget, the Construction Benchmark Schedule, the Contracts, to the extent
available, the construction and renovation of the Theater the construction
of the Energy Project to be performed by the Energy Provider under the
Energy Project Ground Lease and the Energy Project Development Agreement,
and all other reports submitted to the Administrative Agent and stating,
among other things, that (x) the Construction Consultant has reviewed the
Main Project Documents, the Plans and Specifications, and other material
information deemed necessary by the Construction Consultant for the purpose
of evaluating whether the Main Project can be constructed and completed in
the manner contemplated by the Operative Documents and (y) based on its
review of such information, the Construction Consultant is of the opinion
that the Main Project can be constructed in the manner contemplated by the
Operative Documents and, in particular, that the Main Project can be
constructed and completed in accordance with the Main Project Documents and
the Plans and Specifications within the parameters set by the Construction
Benchmark Schedule and the Main Project Budget. Such report shall contain
an analysis reasonably satisfactory to the Administrative Agent
demonstrating the adequacy of the Main Project Budget to complete the Main
Project (and any improvements to be completed by the Borrower pursuant to
the Reciprocal Easement Agreement) in accordance with the Construction
Benchmark Schedule, confirmation that the Construction Benchmark Schedule
is realistic, and verifying that the information delivered by the Borrower
relating to the Complex and any improvements to be completed by the
Borrower pursuant to the Reciprocal Easement Agreement are accurate.
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"Construction Expenses" means all Main Project Costs, excluding,
however, Pre-Opening Expenses, Debt Service due and payable after the
Conversion Date and Issuance Fees and Expenses.
"Construction Note Disbursement Account" is defined in the Holdings
Collateral Account Agreement.
"Contingent Liability" means, relative to any Person, any agreement,
undertaking or arrangement by which such Person guarantees, endorses or
otherwise becomes or is contingently liable upon (by direct or indirect
agreement, contingent or otherwise, to provide funds for payment, to supply
funds to, or otherwise to invest in, a debtor, or otherwise to assure a
creditor against loss) the Indebtedness of any other Person (other than by
endorsements of instruments in the course of collection), or guarantees the
payment of dividends or other distributions upon the shares of any other
Person. The amount of any Person's obligation under any Contingent
Liability shall (subject to any limitation set forth therein) be deemed to
be the outstanding principal amount of the debt, obligation or other
liability guaranteed thereby.
"Continuation/Conversion Notice" means a notice of continuation or
conversion and certificate duly executed by an Authorized Representative of
the Borrower substantially in the form of Exhibit M hereto.
"Contract" means any contract entered into from time to time by the
Borrower with any Contractor for performance of services or sale of goods
or services in connection with the design, engineering, installation,
construction, operation or maintenance of the Main Project, including all
warranties and guarantees.
"Contract Amendment Certificate" means a Contract Amendment
Certificate substantially in the form of Exhibit Z hereto.
"Contractor" means any architect, consultant, designer, contractor,
subcontractor, supplier, laborer or any other Person engaged by the
Borrower in connection with the design, engineering, installation and
construction of the Main Project (excluding, however, the Design/Builder).
"Controlled Group" means all members of a controlled group of
corporations and all members of a controlled group of trades or businesses
(whether or not incorporated) under common control which, together with the
Borrower, are treated as a single employer under Section 414(b) or 414(c)
of the Code or Section 4001 of ERISA.
"Conversion Date" means the date on which either of the following
first occurs:
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(a) the relevant Governmental Instrumentality issues a Main
Project Certificate of Occupancy (which must include appropriate
parking facilities) and operating permit for the Energy Project; or
(b) the Administrative Agent and the Construction Consultant
determine that Completion of the Main Project has occurred.
"Credit Extension" means, as the context may require,
(a) the making of a Loan by a Lender; or
(b) the issuance of any Letter of Credit, or the extension of
any Stated Expiry Date of any existing Letter of Credit, by an Issuer.
"Credit Extension Request" means, as the context may require, any
Borrowing Request or Letter of Credit Issuance Request.
"Current Compliance Certificate" means the Compliance Certificate most
recently delivered by the Borrower to the Administrative Agent pursuant to
clause (d) of Section 7.1.1. Changes in the Applicable Base Rate Margin or
Applicable LIBO Rate Margin resulting, after the Conversion Date, from a
change in the Total Debt to EBITDA Ratio shall become effective upon
delivery by the Borrower to the Administrative Agent of a new Compliance
Certificate pursuant to clause (d) of Section 7.1.1. If the Borrower shall
fail to deliver a Compliance Certificate within the number of days after
the end of any Fiscal Quarter as required pursuant to clause (d) of
Section 7.1.1 (without giving effect to any grace period), the Applicable
Base Rate Margin or Applicable LIBO Rate Margin, as the case may be, from
and including the first day after the date on which such Compliance
Certificate was required to be delivered to but not including the date the
Borrower delivers to the Administrative Agent a Compliance Certificate
shall conclusively equal the highest Applicable Base Rate Margin or
Applicable LIBO Rate Margin, as the case may be, set forth in the
definition of such term.
"Debt Service" means all principal repayments or interest and other
amounts payable or accrued from time to time under any Loan Document or the
Approved Equipment Funding Commitments.
"Deed of Trust" means, on any date, the Deed of Trust, Assignment of
Rents and Leases, Security Agreement and Fixture Filing in the form of
Exhibit B hereto, as originally in effect on the date on which it is
recorded, made by the Borrower, as trustor, to the trustee named therein,
for the benefit of the Administrative Agent and the Lenders, as
beneficiaries covering the Site and as thereafter from time to time
amended, supplemented, amended and restated or otherwise modified.
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"Default" means any Event of Default or any condition, occurrence or
event which, after notice or lapse of time or both, would constitute an
Event of Default.
"Defaulting Lender" means any Lender with respect to which a Lender
Default is in effect.
"Desert Passage" is defined in clause (b) of the fourth recital.
"Design/Build Contract" means, on any date, the Design/Build Contract,
as originally in effect on the Closing Date, between the Borrower and the
Design/Builder and as thereafter from time to time amended, supplemented,
amended and restated or otherwise modified in accordance with the terms
hereof.
"Design/Build Contract Time" is defined in Section 14.1 of the
Design/Build Contract.
"Design/Builder" means Fluor Daniel, Inc., a California corporation.
"Design/Builder Consent and Acknowledgment" means the Consent and
Acknowledgment by the Design/Builder in favor of the Lenders and the
Administrative Agent dated as of the Closing Date.
"Design/Build Final Completion" means "Final Completion" as defined in
Section 31.9 of the General Conditions annexed to the Design/Build Contract
as Attachment D.
"Development Agreement" means, on any date, the Aladdin Hotel & Casino
Agreement, dated March 18, 1997, among Holdings, Aladdin Management
Corporation and the County of Clark, as assigned by Holdings and Aladdin
Management Corporation to the Borrower, and as thereafter from time to time
amended, supplemented, amended and restated or otherwise modified in
accordance with the terms hereof.
"Direct Costs" means all Main Project Costs expended or incurred by
the Borrower for labor, services, materials, tools, utilities, equipment,
fixtures and furnishings in connection with the construction of the Main
Project all as set forth on the Main Project Budget.
"Disbursement Agent" means Scotiabank, in its capacity as the
disbursement agent under the Disbursement Agreement, and its successors in
such capacity.
"Disbursement Agreement" means, on any date, the Disbursement
Agreement, as originally in effect on the Closing Date, among the Borrower,
Holdings, the Administrative Agent, the Discount Note Indenture Trustee,
the Disbursement Agent, the Servicing Agent and the Securities Intermediary
and as thereafter from time to time amended, supplemented, amended and
restated or otherwise modified.
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"Disclosure Schedule" means the Disclosure Schedule attached hereto as
Schedule I hereto, as it may be amended, supplemented, amended and restated
or otherwise modified from time to time by the Borrower with the written
consent of the Administrative Agent and the Required Lenders.
"Discount Note" means the 131/2% Series A and B Senior Discount Notes
due 2010 of Holdings and Capital issued on the Closing Date for gross
proceeds of $115,000,000.
"Discount Note Indenture" means, on any date, the Indenture relating
to the Discount Notes, as originally in effect on the Effective Date, among
Holdings, Capital and the Discount Note Indenture Trustee and as thereafter
from time to time amended, supplemented, amended and restated or otherwise
modified in accordance with the terms hereof.
"Discount Note Indenture Trustee" means State Street Bank and Trust
Company, in its capacity as the indenture trustee for the Discount
Noteholders under the Discount Note Indenture.
"Discount Note Offering Circular" means the offering memorandum, dated
February 14, 1998, with respect to the units, consisting of the Discount
Notes offered by Holdings and Capital and the Warrants offered by
Enterprises.
"Discount Note Purchase Agreement" means the Purchase Agreement with
respect to the Discount Notes and Warrants, dated as of February 18, 1998,
among Holdings, Capital, Enterprises, AHL, the Trust and Merrill Lynch and
First Boston (as representatives of the several initial purchasers).
"Discount Noteholder" means the duly registered holder of a Discount
Note.
"Documentation Agent" is defined in the preamble.
"Dollar" and the symbol "$" mean lawful money of the United States.
"Downgraded Lender" is defined in clause(b) of Section 4.11.
"EBITDA" means, for the Borrower only, for any applicable period, the
sum (without duplication) of
(a) Net Income for such period,
plus
(b) the amount deducted by the Borrower, in determining Net
Income for such period, representing
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<PAGE>
(i) Interest Expense of the Borrower;
plus
(ii) the amount deducted, in determining Net Income, of all
federal, state and local income taxes (whether paid in cash or
deferred) of the Borrower or, if the Borrower is treated as a
pass-through entity or is not treated as a separate entity for
United States federal income tax purposes, the amount of
Restricted Payments made by the Borrower in accordance with
clause (c) of Section 7.2.6, subject to the terms thereof;
plus
(iii) depreciation of assets of the Borrower;
plus
(iv) amortization;
plus
(v) the amount of Cash Equity Contributions (as defined in
the Keep-Well Agreement);
plus
(vi) the amount of Cash Contributions to Capital;
provided, however, that in computing EBITDA for purposes of determining the
"Total Debt to EBITDA Ratio" in clause (h)(i)(B) of Section 7.2.6 or the
amount of "Excess Cash Flow", the "Applicable Base Rate Margin" or the
"Applicable LIBO Rate Margin", subclauses (b)(v) and (b)(vi) shall be
excluded from such computation; provided further, however, that in
computing EBITDA for any period commencing on the Conversion Date and
ending as of the close of any Fiscal Quarter on or prior to the first
anniversary of the Conversion Date, EBITDA for such period shall equal the
product of (x) the sum of the amounts determined pursuant to clauses (a)
and (b) for such period multiplied by (y) a fraction, the numerator of
which is equal to 365 and the denominator of which is equal to the number
of days that have elapsed in such period.
"Effective Date" means the date this Agreement becomes effective
pursuant to Section 10.8.
"Employment Agreement" means, collectively, (u) the Amended Employment
and Consulting Agreement among Holdings, the Borrower and Richard J.
Goeglein effective January
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1, 1997, (v) the Amended Employment Agreement among Holdings, the Borrower
and James H. McKennon effective April 15, 1997, (w) the Amended Employment
Agreement among Holdings, the Borrower and Cornelius T. Klerk effective
July 1, 1997, (x) the Amended Employment Agreement among Holdings, the
Borrower and Lee A. Galati effective July 1, 1997, (y) the Amended
Employment Agreement among Holdings, the Borrower and Jose A. Rueda
effective July 1, 1997 and (z) the Amended Consulting Agreement between
GAI, LLC, Holdings and the Borrower effective January 1, 1997.
"Energy Project" is defined in clause (e) of the fourth recital.
"Energy Project Commitment" means the commitment (as set forth in the
letter agreement, dated October 21, 1997, between the Energy Project
Provider and AHL) of the Energy Project Provider to enter into the Energy
Project Ground Lease, the Energy Project Development Agreement and the
Energy Project Service Agreement.
"Energy Project Completion" means that
(a) the construction of the Energy Project has been completed
substantially in accordance with the Energy Project Ground Lease and
the provisions of the Reciprocal Easement Agreement applicable to the
Energy Project except for any punchlist items applicable to the Energy
Project and in substantial compliance with all Legal Requirements
pertaining to the construction of the Energy Project so as to allow
the Energy Project to be utilized for its intended purposes;
(b) reasonable and safe means of access and facilities necessary
for the use and operation of the Energy Project have been installed
and are operational;
(c) the Borrower has certified to the Administrative Agent that
(1) arrangements have been made to obtain reliable electric and other
utility services at the appropriate levels required for the operation
of the Hotel/Casino and, to the extent applicable, other parts of the
Complex that are subject to the Energy Service Agreement, (2) all
other conditions precedent in the Energy Project Ground Lease relating
to construction, installation, start-up and test activities have been
satisfied in all material respects, and (3) there are no outstanding
claims or Liens by any contractor or subcontractor or any other Person
against any portion of the Energy Project Component except for
Permitted Liens and Permitted Encumbrances.
"Energy Project Component" means the portion of the Complex described
in Exhibit N-9 hereto.
"Energy Project Development Agreement" means, on any date, the
Development Agreement, as originally in effect on the Closing Date, between
the Borrower and the Energy
24
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Project Provider and as thereafter from time to time amended, supplemented,
amended and restated or otherwise modified in accordance with the terms
hereof.
"Energy Project Easements" means the easements appurtenant, easements
in gross, license agreements and other right running for the benefit of the
Energy Project Provider and/or appurtenant to the Energy Project Ground
Lease, including those certain easements and licenses described in each
Title Policy.
"Energy Project Ground Lease" means, on any date, the Ground Lease, as
originally in effect on the Effective Date, between the Borrower and the
Energy Project Provider and as thereafter from time to time amended,
supplemented, amended and restated or otherwise modified in accordance with
the terms hereof.
"Energy Project Guarantor" means Unicom Corporation, an Illinois
corporation.
"Energy Project Guaranty" means the Guaranty, dated as of December 3,
1997, executed by the Energy Project Guarantor to and for the benefit of
the Borrower and as thereafter from time to time amended, supplemented,
amended and restated or otherwise modified in accordance with the terms
hereof.
"Energy Project Provider" means Northwind Aladdin, LLC, a Nevada
limited-liability company.
"Energy Project Service Agreement" means, on any date, the Energy
Services Agreement, as originally in effect on the Effective Date, between
the Borrower and the Energy Project Provider and as thereafter from time to
time amended, supplemented, amended and restated or otherwise modified in
accordance with the terms hereof.
"Enterprises" means Aladdin Gaming Enterprises, Inc., a Nevada
corporation.
"Enterprises Pledge Agreement" means, on any date, the Pledge
Agreement executed and delivered by an Authorized Representative of
Enterprises pursuant to clause (e) of Section 5.1.3, as originally in
effect on the Closing Date, in substantially the form of Exhibit E-4 hereto
and as thereafter from time to time amended, supplemented, amended and
restated or otherwise modified.
"Environmental Claim" means any and all obligations, liabilities,
losses, administrative, regulatory or judicial actions, suits, demands,
decrees, claims, liens, judgments, warning notices, notices of noncompliance
or violation, investigations, proceedings, removal or remedial actions or
orders, or damages (foreseeable and unforeseeable, including consequential
and punitive damages), penalties, fees, out-of-pocket costs, expenses,
disbursements, attorneys' or consultants' fees, relating in any way to any
Environmental Law or any Permit issued under any such Environmental Law
including (x) any and all Claims by Governmental Instrumentalities for
25
<PAGE>
enforcement, cleanup, removal, response, remedial or other actions or
damages pursuant to any applicable Environmental Law and (y) any and all
Claims by any third party seeking damages, contribution, indemnification,
cost recovery, compensation or injunctive relief resulting from Hazardous
Substances or arising from alleged injury or threat of injury to health,
safety or the environment.
"Environmental Consultant" means ERM-Northeast, Inc., or any other
Person designated from time to time by the Administrative Agent in its sole
discretion to serve as the Environmental Consultant.
"Environmental Indemnity" means, on any date, the Environmental
Indemnity Agreement, as originally in effect on the Effective Date, from
the Borrower, the Trust and London Clubs for the benefit of the
Administrative Agent on behalf of the Lenders in the form of Exhibit K
hereto and as thereafter from time to time amended, supplemented, amended
and restated or otherwise modified.
"Environmental Law" means any of:
(a) the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended (42 U.S.C. Section 9601, et seq.)
("CERCLA");
(b) the Federal Water Pollution Control Act (33 U.S.C. Section
1251, et seq.) ("Clean Water Act" or "CWA");
(c) the Resource Conservation and Recovery Act (42 U.S.C.
Section 6901, et seq.) ("RCRA");
(d) the Atomic Energy Act of 1954 (42 U.S.C. Section 2011, et
seq.);
(e) the Clean Air Act (42 U.S.C. Section 7401, et seq.);
(f) the Emergency Planning and Community Right to Know Act (42
U.S.C. Section 11001, et seq.);
(g) the Federal Insecticide, Fungicide, and Rodenticide Act (7
U.S.C. Section 136, et seq.) ("FIFRA");
(h) the Oil Pollution Act of 1990 (P.L. 101-380, 104 Stat. 486);
(i) the Safe Drinking Water Act (42 U.S.C. Sections 300f, et
seq.) ("SDWA");
(j) the Surface Mining Control and Reclamation Act of 1974 (30
U.S.C. Sections 1201, et seq.);
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<PAGE>
(k) the Toxic Substances Control Act (15 U.S.C. Section 2601, et
seq.) ("TSCA");
(l) the Hazardous Materials Transportation Act (49 U.S.C.
Section 1801, et seq.) ("HMTA");
(m) the Uranium Mill Tailings Radiation Control Act of 1978 (42
U.S.C. Section 7901, et seq.) ("UMTRCA");
(n) the Occupational Safety and Health Act (29 U.S.C. Section
651, et seq.) ("OSHA");
(o) the Nevada Hazardous Materials law (NRS Chapter 459);
(p) the Nevada Solid Waste/Disposal of Garbage or Sewage law
(NRS 444.440 to 444.650, inclusive);
(q) the Nevada Water Controls/Pollution law (NRS Chapter 445A);
(r) the Nevada Air Pollution law (NRS Chapter 445B);
(s) the Nevada Cleanup of Discharged Petroleum law (NRS 590.700
to 590.920, inclusive);
(t) the Nevada Control of Asbestos law (NRS 618.750 to 618.850);
(u) the Nevada Appropriation of Public Waters law (NRS 533.324
to 533.4385, inclusive);
(v) the Nevada Artificial Water Body Development Permit law (NRS
502.390);
(w) the Nevada Protection of Endangered Species, Endangered
Wildlife Permit (NRS 503.585) and Endangered Flora Permit law (NRS
527.270); and
(x) all other Federal, state and local Legal Requirements which
govern Hazardous Substances, and the regulations adopted and
publications promulgated pursuant to all such foregoing laws;
in each case as amended by an amendment thereto or succeeded by a successor
law, statute or regulation thereto.
"Environmental Matter" means any:
27
<PAGE>
(a) release, emission, entry or introduction into the air
including the air within buildings and other natural or man-made
structures above ground;
(b) discharge, release or entry into water including into any
river, watercourse, lake or pond (whether natural or artificial or
above ground or which joins or flows into any such water outlet above
ground) or reservoir, or the surface of the riverbed or of other land
supporting such waters, ground waters, sewer or the sea;
(c) deposit, disposal, keeping, treatment, importation,
exportation, production, transportation, handling, processing,
carrying, manufacture, collection, sorting or presence of any
Hazardous Substance (including, in the case of waste, any substance
which constitutes a scrap material or an effluent or other unwanted
surplus substance arising from the application of any process or
activity (including making it reusable or reclaiming substances from
it) and any substance or article which is required to be disposed of
as being broken, worn out, contaminated or otherwise spoiled);
(d) nuisance, noise, defective premises, health and safety at
work, industrial illness, industrial injury due to environmental
factors, environmental health problems (including asbestosis or any
other illness or injury caused by exposure to asbestos) or genetically
modified organisms;
(e) conservation, preservation or protection of the natural or
man-made environment or any living organisms supported by the natural
or man-made environment; or
(f) other matter howsoever directly affecting the environment or
any aspect of it.
"Equipment Component" means the equipment, fixtures and other items
described in Exhibit N-10 hereto.
"Equity Interest" means, relative to any Person, Capital Stock and all
warrants, options or other rights to acquire Capital Stock (excluding,
however, any debt security that is convertible into, or exchangeable for,
Capital Stock) of such Person.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute thereto of similar import, together with
the regulations thereunder, in each case as in effect from time to time.
References to sections of ERISA also refer to any successor sections
thereto.
"ERISA Plan" means any employee benefit plan (x) maintained by the
Borrower or any member of the Controlled Group, or to which the Borrower or
any member of the Controlled Group contributes or is obligated to
contribute, for its employees and (y) covered by Title IV of ERISA or to
which Section 412 of the Code applies.
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<PAGE>
"Event of Default" is defined in Section 8.1.
"Event of Loss" means, relative to any property or asset (tangible or
intangible, real or personal), (x) any loss, destruction or damage of such
property or asset, (y) any actual condemnation, seizure or taking by
exercise of the power of eminent domain or otherwise of all or a part of
such property or asset, or confiscation of all or a part of such property
or asset or the requisition of the use of all or a part of such property or
asset or (z) any settlement in lieu of item (y).
"Excess Cash Flow" means, for any Fiscal Quarter, the excess (if any),
of
(a) EBITDA for such Fiscal Quarter
over
(b) the sum (during such Fiscal Quarter) of
(i) Interest Expense of the Borrower actually paid in cash
by the Borrower;
plus
(ii) scheduled payments, to the extent actually made, of
the principal amount of the Loans pursuant to Section 3.1.1 and
scheduled payments, to the extent actually made, with respect to
the FF&E Financing;
plus
(iii) the amount of all federal, state and local income
taxes (whether paid in cash or deferred) of the Borrower paid in
cash by the Borrower or, if the Borrower is treated as a pass-through
entity or is not treated as a separate entity for United States
federal income tax purposes, the amount of Restricted Payments made in
cash by the Borrower in accordance with clause (c) of Section 7.2.6,
subject to the terms thereof;
plus
(iv) the amount of all Restricted Payments on the Borrower
Series A Preferred Membership Interests made in accordance with
clause (d) of Section 7.2.6;
plus
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(v) Capital Expenditures actually made or reserved by the
Borrower.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Indebtedness" means Indebtedness of the Borrower in
existence on the Effective Date (after giving effect to payment of
Indebtedness that is being discharged and retired on the Closing Date,
including all Indebtedness to be Paid) and identified in item (b) of
Section 7.2.2 ("Existing Indebtedness") of the Disclosure Schedule.
"Federal Funds Rate" means, for any period, a fluctuating interest
rate per annum equal for each day during such period to
(a) the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by
federal funds brokers, as published for such day (or, if such day is
not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York; or
(b) if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such
transactions received by the Administrative Agent from three federal
funds brokers of recognized standing selected by it.
"Fee Letter" means, the Arrangers' Fee Letter or the Scotiabank Fee
Letter.
"FF&E" means all furnishings, fixtures and equipment other than the
Specified Equipment and the Gaming Equipment.
"FF&E Financing" means the incurrence of Indebtedness, the proceeds of
which are utilized solely to finance or refinance the acquisitions of (or
the incurrence of Capitalized Lease Liabilities by the Borrower with
respect to) the Gaming Equipment and the Specified Equipment.
"FF&E Lease" means one or more leases entered into by the Borrower
giving rise to synthetic lease liabilities to one or more lessors (the
"FF&E Lessors") covering a portion of the FF&E, the Specified Equipment
and/or the Gaming Equipment.
"FF&E Lease Document" means the FF&E Lease and any other document
executed and delivered by the Borrower and the FF&E Lessors in connection
therewith, as the same may be amended, supplemented, amended and restated,
replaced or otherwise modified from time to time in accordance with the
terms hereof.
"FF&E Lessor" is defined in the definition of "FF&E Lease".
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<PAGE>
"FF&E Reserve" is defined in Section 7.1.3.
"Final Completion" means that (r) Design/Build Final Completion shall
have occurred, (s) Energy Project Completion shall have occurred, (t)
Theater Renovation Completion shall have occurred, (u) all other
construction work with respect to the Main Project shall have been
substantially completed in accordance with the Main Project Document
applicable thereto so as to allow such improvements to be utilized for
their intended purposes and in substantial compliance with all Legal
Requirements applicable thereto, (v) each of the Hotel Casino, the Energy
Project and the Theater shall have received a permanent Main Project
Certificate of Occupancy from the Building Department and the Energy
Project shall have received all Permits required by the Governmental
Instrumentality having or asserting jurisdiction over the operation of the
Energy Project (and a copy of each such certificate shall have been
delivered to the Administrative Agent), (w) a Notice of Completion shall
have been posted with respect to Hotel/Casino, the Energy Project and the
Theater, as required, and recorded in the Office of the County, (x) the
Borrower shall have delivered to the Administrative Agent its Final
Completion Certificate certifying to the extent set forth therein that all
Main Project Punchlist Items have been completed, (y) the Construction
Consultant shall have delivered to the Administrative Agent its Final
Completion Certificate in which it verifies the statements in items (r),
(s), (t), (u), (v), and (w) and certifies that it is appropriate for the
Administrative Agent to rely on the Final Completion Certificate of the
Borrower delivered to the Administrative Agent pursuant to item (x) and (z)
the Mall Project Parcel and the Music Project Parcel shall be separate
legal parcels in accordance with Section 7.1.19.
"Final Completion Certificate" means a Borrower's Final Completion
Certificate or a Construction Consultant's Final Completion Certificate in
the form of Exhibit U-1 or Exhibit U-2 hereto.
"Final Completion Date" means the date on which Final Completion
occurs.
"Final Plans and Specifications" means, relative to any particular
portion of the Work or other improvement, Plans and Specifications for such
portion which (x) have received final approval from all Governmental
Instrumentalities required to approve such Plans and Specifications prior
to completion of the Work or improvements and (y) contain sufficient
specificity to permit the completion of such portion of the Work or other
improvements.
"Fiscal Quarter" or "FQ" means a calendar quarter ending on the last
day of March, June, September or December; references to a FQ with a
following number (e.g., FQ1) refer to the number of Fiscal Quarters then to
have elapsed in whole or in part since the Conversion Date.
"Fiscal Year" means any period of twelve consecutive calendar months
ending on December 31; references to a Fiscal Year with a number
corresponding to any calendar year
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(e.g., the "1998 Fiscal Year") refer to the Fiscal Year ending on
December 31 of such calendar year.
"Fleet Commitment" means, on any date, the Commitment Letter, as
originally in effect on the Effective Date, between Fleet National Bank and
Aladdin Bazaar and as thereafter from time to time amended, supplemented,
amended and restated or otherwise modified in accordance with the terms
thereof.
"Fluor" means Fluor Corporation, a California corporation.
"Fluor Guaranty" means, on any date, the Fluor Guaranty, as originally
in effect on the Effective Date, by Fluor in favor of the Borrower and as
thereafter from time to time amended, supplemented, amended and restated or
otherwise modified in accordance with the terms hereof.
"Force Majeure Event" means any event which is defined as "Force
Majeure" in the Design/Build Contract and/or that causes a delay in the
construction of the Main Project and is outside the Borrower's control but
only to the extent
(a) such event does not arise out of (w) the negligence, willful
misconduct or inefficiencies of the Borrower, (x) late performance by
the Design/Builder or the Architect of Record, (y) any cause or
circumstance resulting in delays, stoppage or any other interference
with the construction of the Main Project caused by the insolvency,
bankruptcy or any lack of funds by the Borrower, any other Project
Party, the Energy Provider, the Energy Project Guarantor and/or the
Architect of Record or (z) delays, stoppage or other interference with
the construction of the Main Project caused by the insolvency,
bankruptcy or any lack of funds by Aladdin Bazaar, Aladdin Music
and/or the construction contractors and project architects with
respect to the Mall Project, the Music Project and/or the Energy
Project; and
(b) such event consists of an act of God (such as tornado,
flood, hurricane, etc.), fires and other casualties; strikes, lockouts
or other labor disturbances (except to the extent taking place at the
Site only); riots, insurrections or civil commotions; embargos,
shortages or unavailability of materials, supplies, labor, equipment
and systems that first arise after the Effective Date, but only to the
extent caused by another act, event or condition covered by this
clause (b); sabotage; vandalism; the requirements of law, statutes,
regulations and other Legal Requirements enacted after the Effective
Date (unless the Borrower should, in the exercise of due diligence and
prudent judgment, have anticipated such enactment); orders or
judgments; or any similar types of events;
provided, however, that (x) the Borrower has sought to mitigate the impact
of the delay, (y) any delay resulting from the foregoing shall not exceed
365 days and (z) the period during which a Force Majeure Event exists shall
commence on the date that the Borrower has given the Administrative Agent
written notice describing in reasonable detail the event which constitutes
a
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Force Majeure Event and the Administrative Agent has confirmed the
existence of such Force Majeure Event on the date of such notice and shall
end on the date that such Force Majeure Event no longer exists, whether or
not notice is given to the Administrative Agent, as determined by the
Construction Consultant.
"F.R.S. Board" means the Board of Governors of the Federal Reserve
System or any successor thereto.
"GAAP" is defined in Section 1.4.
"GAI, LLC" means GAI, LLC, a Nevada limited-liability company.
"Gaming Equipment" means the gaming equipment and gaming devices which
are regulated gaming devices under any Nevada Gaming Law (such as slot
machines, cashless wagering systems and associated equipment) together with
all improvements and/or additions thereto financed by the $20,000,000 term
loan facility under the GECC Commitment.
"Gaming License" means any and all duly issued and valid licenses,
approvals, registrations, findings of suitability and authorizations
relating to gaming at the Hotel/Casino under the Nevada Gaming Laws or
required by the Nevada Gaming Authorities or necessary for the operation of
gaming at the Hotel/Casino.
"GECC" means General Electric Capital Corporation.
"GECC Commitment" means the commitment of GECC to enter into a
$60,000,000 synthetic lease facility and a $20,000,000 term loan facility
pursuant to that certain commitment letter, dated as of January 23, 1998,
between the Borrower and GECC.
"GECC Intercreditor Agreement" means the Intercreditor Agreement to be
entered into between GECC and the Administrative Agent, initially in the
form approved by the Administrative Agent determined in good faith in its
sole discretion, and as from time to time thereafter amended, supplemented,
amended and restated or otherwise modified.
"Governmental Instrumentality" means any national, state or local
government (whether domestic or foreign), any political subdivision thereof
or any other governmental, quasi governmental, judicial, public or
statutory instrumentality, authority, body, agency, bureau or entity
(including the Nevada Gaming Authorities, any zoning authority, the Federal
Deposit Insurance Corporation, the Comptroller of the Currency or the
F.R.S. Board, any central bank or any comparable authority) or any
arbitrator with authority to bind a party at law.
"Ground Lease" means, collectively, the Mall Project Ground Lease, the
Music Project Ground Lease and the Energy Project Ground Lease.
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<PAGE>
"Guaranteed Maximum Price" means the total costs payable by the
Borrower to the Design/Builder for the Work, which costs shall not exceed
$267,000,000, except as adjusted in accordance with this Agreement and the
Design/Build Contract.
"Guaranty Deposit Account" is defined in the Borrower Collateral
Account Agreement.
"Hazardous Substances" means (statutory acronyms and abbreviations
having the meaning given them in the definition of "Environmental Laws")
substances defined as "hazardous substances," "pollutants" or
"contaminants" in Section 101 of the CERCLA; those substances defined as
"hazardous waste," "hazardous materials" or "regulated substances" by the
RCRA; those substances designated as a "hazardous substance" pursuant to
Section 311 of the CWA; those substances defined as "hazardous materials"
in Section 103 of the HMTA; those substances regulated as a hazardous
chemical substance or mixture or as an imminently hazardous chemical
substance or mixture pursuant to Sections 6 or 7 of the TSCA; those
substances defined as "contaminants" by Section 1401 of the SDWA, if
present in excess of permissible levels; those substances regulated by the
Oil Pollution Act; those substances defined as a pesticide pursuant to
Section 2(u) of the FIFRA; those substances defined as a source, special
nuclear or by-product material by Section 11 of the AEA; those substances
defined as "residual radioactive material" by Section 101 of the UMTRCA;
those substances defined as "toxic materials" or "harmful physical agents"
pursuant to Section 6 of the OSHA); those substances defined as hazardous
wastes in 40 C.F.R. Part 261.3; those substances defined as hazardous waste
constituents in 40 C.F.R. Part 260.10, specifically including Appendices
VII and VIII of Subpart D of 40 C.F.R. Part 261; those substances
designated as hazardous substances in 40 C.F.R. Parts 116.4 and 302.4;
those substances defined as hazardous substances or hazardous materials in
49 C.F.R. Part 171.8; those substances regulated as hazardous materials,
hazardous substances or toxic substances in 40 C.F.R. Part 1910; those
substances defined as hazardous materials, hazardous substances or toxic
substances in any other Environmental Laws; and those substances defined as
hazardous materials, hazardous substances or toxic substances in the
regulations adopted and publications promulgated pursuant to said laws,
whether or not such regulations or publications are specifically referenced
herein.
"Hedging Liability" means, relative to any Person, any liability of
such Person under any currency exchange agreement, interest rate swap
agreement, interest rate cap agreement or interest rate collar agreement,
or any other agreement designed to protect such Person against fluctuations
in interest rates or currency exchange rates including the Rate Protection
Agreement.
"herein", "hereof", "hereto", "hereunder" and similar terms contained
in this Agreement or any other Loan Document refer to this Agreement or
such other Loan Document, as the case may be, as a whole and not to any
particular Section, paragraph or provision of this Agreement or such other
Loan Document.
"Holdings" means Aladdin Gaming Holdings, LLC, a Nevada limited-
liability company.
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"Holdings Collateral Account Agreement" means, on any date, the
Holdings Collateral Account Agreement, as originally in effect on the
Closing Date, between Holdings, the Securities Intermediary and the
Disbursement Agent, for the benefit of the Discount Note Indenture Trustee,
and as thereafter from time to time amended, supplemented, amended and
restated or otherwise modified in accordance with the terms hereof.
"Holdings Common Membership Interest" means a Common Share as defined
in the Organizational Documents of Holdings.
"Holdings Pledge Agreement" means, on any date, the Pledge Agreement
executed and delivered by an Authorized Representative of Holdings pursuant
to clause (a) of Section 5.1.3, as originally in effect on the Closing
Date, in substantially the form of Exhibit E-5 hereto and as thereafter
from time to time amended, supplemented, amended and restated or otherwise
modified.
"Holdings Series A Preferred Membership Interests" means the Series A
Preferred Shares as defined in the Organizational Documents of Holdings and
issued to LCNI or Sommer Enterprises pursuant thereto in consideration for
any payments to the Borrower required by London Clubs, the Trust or AHL
pursuant to the Keep-Well Agreement, the Completion Guaranty or the
Noteholder Completion Guaranty, as the case may be, when such payments are
Cash Equity Contributions (as defined in the Keep-Well Agreement).
"Holdings Series B Preferred Membership Interests" means the Series B
Preferred Shares as defined in the Organizational Documents of Holdings and
issued to LCNI or Sommer Enterprises pursuant thereto in consideration for
any payments to the Borrower required by London Clubs, the Trust or AHL
pursuant to the Keep-Well Agreement when such payments are Cash Equity
Contributions (as defined in the Keep-Well Agreement).
"Hotel" is defined in clause (a) of the fourth recital.
"Hotel/Casino" is defined in clause (a) of the fourth recital.
"Hotel/Casino Component" means the portion of the Complex described in
Exhibit N-8.
"Hotel/Casino Component Funding Source" means the Land Equity, the
London Clubs Contribution, the proceeds of the Borrower Series A Preferred
Membership Interests, the Loans, the Approved Equipment Funding
Commitments, the amounts payable to the Borrower by Aladdin Bazaar pursuant
to Section 4.5 of the Site Work Agreement, together with any amounts
payable under the Completion Guaranty from time to time.
"Impermissible Qualification" means, relative to the opinion or
certification of any independent public accountant as to any financial
statement of the Borrower, any other Aladdin
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Party, LCNI, London Clubs Holdings or London Clubs, any qualification or
exception to such opinion or certification
(a) which is of a "going concern" or similar nature;
(b) which relates to the limited scope of examination of matters
relevant to such financial statement; or
(c) which relates to the treatment or classification of any item
in such financial statement and which, as a condition to its removal,
would require an adjustment to such item the effect of which would be
to cause the Borrower to be in default of any of its obligations under
Section 7.2.4.
"Imposition" means any real estate tax, payment in lieu of taxes or
other assessment levied, assessed or imposed against the portion of the
Site owned by the Borrower, and any water rates, sewer rentals or other
governmental, municipal or public dues, charges or impositions, of every
nature and to whomever assessed, that may now or hereafter be levied or
assessed upon the portion of the Site owned by the Borrower, or upon the
rents, issues, income, proceeds or profits thereof, whether the Imposition
is levied directly or indirectly against such portion of the Site owned by
the Borrower or as excise taxes or income taxes.
"Improvement" means any building, structure or other improvements to
be located or constructed on the Main Project Parcel.
"In Balance" will be deemed to exist when (x) the Unallocated
Contingency Balance equals or exceeds the Required Minimum Contingency, (y)
after giving effect to the requested Credit Extension, the Available Funds
allocated to each Line Item Category equals or exceeds for such Line Item
Category the aggregate of (1) the costs required to complete such Line Item
Category, (2) the Retainage Amount to be paid to Persons who have supplied
labor or materials in connection with such Line Item Category and (3) the
amount required to pay interest and all other amounts due under this
Agreement and the Approval Equipment Funding Commitments at the maximum
rate of interest set forth in the Main Project Budget through the
Conversion Date and (z) the Guaranteed Maximum Price remains in effect.
"including" and "include" means including, without limiting the
generality of any description preceding such term, and, for purposes of
this Agreement and each other Loan Document, the parties hereto agree that
the rule of ejusdem generis shall not be applicable to limit a general
statement, which is followed by or referable to an enumeration of specific
matters, to matters similar to the matters specifically mentioned.
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"Indebtedness" means, relative to any Person, without duplication:
(a) all obligations of such Person for borrowed money and all
obligations of such Person evidenced by bonds, debentures, notes or
other similar instruments;
(b) all obligations, contingent or otherwise, relative to the
face amount of all letters of credit (or reimbursement agreements in
respect thereof), whether or not drawn, and banker's acceptances
issued for the account of such Person;
(c) all obligations of such Person as lessee under leases which
have been or should be, in accordance with GAAP, recorded as
Capitalized Lease Liabilities;
(d) all other items which, in accordance with GAAP, would be
included as liabilities on the liability side of the balance sheet of
such Person as of the date at which Indebtedness is to be determined;
(e) net liabilities of such Person under all Hedging
Liabilities;
(f) whether or not so included as liabilities in accordance with
GAAP, all obligations of such Person to pay the deferred purchase
price of property or services, and indebtedness (excluding, however,
prepaid interest thereon) secured by a Lien on property owned or being
purchased by such Person (including indebtedness arising under
conditional sales or other title retention agreements), whether or not
such indebtedness shall have been assumed by such Person or is limited
in recourse; and
(g) all Contingent Liabilities of such Person in respect of any
of the foregoing.
For all purposes of this Agreement, (x) the Indebtedness of any Person
shall include the proportion of Indebtedness of any partnership in which
such Person is a general partner or joint venturer with liability for the
entire indebtedness of the joint venture and (y) the amount of any
Indebtedness outstanding as of any date shall be (1) the accredited value
thereof, in the case of Indebtedness issued with original issue discount
and (2) the principal amount thereof, together with any interest thereon
that is more than 30 days past due, in the case of any other Indebtedness.
"Indebtedness to be Paid" means the Indebtedness identified in Item
5.1.10 on the Disclosure Schedule.
"Indemnified Liability" is defined in Section 10.4.
"Indemnified Party" is defined in Section 10.4.
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"Independent Consultant" means the Construction Consultant, the
Insurance Consultant, the Environmental Consultant or their successors
engaged pursuant to this Agreement.
"Indirect Cost" means any Main Project Cost which is not a Direct
Cost, including appraisal fees, the Term A Loan Commitment Fee, the Term B
and Term C Loan Commitment Fee, the fees set forth in the Fee Letters,
interest on the Loans prior to the Conversion Date, brokers' commissions,
fees of the Independent Consultants, insurance during construction, surety
bond premiums, cost of surveys, Impositions during construction, title
examination and title insurance premiums, recording expenses in connection
with the Deed of Trust and other Security Documents and fees and
disbursements of the attorneys for the Administrative Agent.
"Instrument" means any contract, agreement, indenture, mortgage, deed
of trust, document or writing (whether by formal agreement, letter or
otherwise) under which any obligation is evidenced, assumed or undertaken,
or any Lien (or right or interest therein) is granted or perfected.
"Insurance Consultant" means Sedgwick of Tennessee, Inc. or its
successor appointed pursuant to Section 9.8.
"Insurance Requirement" means any provisions of any insurance policy
covering or applicable to the Borrower, the Main Project or any portion
thereof, all requirements of the issuer of any such policy and all orders,
rules, regulations and other requirements of the National Board of Fire
Underwriters (or any body exercising similar functions) applicable to or
affecting the Main Project or any portion thereof, any use or condition
thereof or the Borrower.
"Interest Coverage Ratio" means, at the close of any Fiscal Quarter,
the ratio computed for the period consisting of such Fiscal Quarter (or
such shorter portion of any Fiscal Quarter after the occurrence therein of
the Conversion Date) and each of the three immediately prior Fiscal
Quarters (or such lesser number of Fiscal Quarters to have closed since the
Conversion Date) of:
(a) EBITDA for such period
to
(b) Interest Expense of the Borrower for such period;
provided, however, that in computing the Interest Coverage Ratio for any
such period ending on or prior to the first anniversary of the Conversion
Date, the amount determined pursuant to clause (b) shall equal the product
of (x) the Interest Expense for such period multiplied by (y) a fraction,
the numerator of which is equal to 365 and the denominator of which is
equal to the number of days that have elapsed in such period.
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<PAGE>
"Interest Expense" means, for any period, the aggregate cash interest
expense (net of cash interest income) of the Borrower (including, to the
extent the Borrower has any Contingent Liability in respect of such
interest expense, the interest expense of other Persons) for such period,
as determined in accordance with GAAP, including the portion of any
payments made in respect of Capitalized Lease Liabilities allocable to
interest expense, but excluding, however, deferred financing costs and
other non-cash interest expense.
"Interest Payment Account" means the account established by the
Borrower with the Disbursement Agent pursuant to the Borrower Collateral
Account Agreement into which the proceeds of the Loans shall be deposited
by the Administrative Agent from time to time.
"Interest Period" means, relative to any LIBO Rate Loan, the period
beginning on (and including) the date on which such LIBO Rate Loan is made
or continued as, or converted into, a LIBO Rate Loan pursuant to
Section 2.3 or Section 2.4 and shall end on (but exclude) the day which
numerically corresponds to such date one, two, three, six or, if then
generally available from all Lenders, twelve months thereafter (or, if such
month has no numerically corresponding day, on the last Business Day of
such month), as the Borrower may select in its relevant notice pursuant to
Section 2.3 or Section 2.4; provided, however, that
(a) the Borrower shall not be permitted to select Interest
Periods to be in effect at any one time which have expiration dates,
(i) in the case of Term A Loans made or maintained as LIBO
Rate Loans, occurring on more than eight different dates,
(ii)in the case of Term B Loans made or maintained as LIBO
Rate Loans, occurring on more than four different dates, and
(iii) in the case of Term C Loans made or maintained as LIBO
Rate Loans, occurring on more than four different dates;
(b) if such Interest Period would otherwise end on a day which
is not a Business Day, such Interest Period shall end on the next
following Business Day (unless such next following Business Day is the
first Business Day of a calendar month, in which case such Interest
Period shall end on the Business Day next preceding such numerically
corresponding day); and
(c) no Interest Period for any Loan may end later than the
Stated Maturity Date for such Loan.
"Investment" means, relative to any Person,
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(a) any loan or advance made by such Person to any other Person
(including Affiliates) (excluding, however, commission, travel, petty
cash and similar advances to officers and employees made in the
ordinary course of business);
(b) any Contingent Liability of such Person incurred in
connection with loans or advances described in clause (a);
(c) any ownership or similar interest held by such Person in any
other Person; and
(d) any other item that is or would be classified as an
investment on a balance sheet of such Person prepared in accordance
with GAAP.
The amount of any Investment shall be the original principal or capital
amount thereof less all returns of principal or equity thereon and shall,
if made by the transfer or exchange of property other than cash, be deemed
to have been made in an original principal or capital amount equal to the
fair market value of such property at the time of such Investment. If
Holdings or any Subsidiary of Holdings sells, assigns, transfers or
otherwise disposes of any Equity Interests of any direct or indirect
Subsidiary of Holdings such that, after giving effect thereto, such Person
is no longer a Subsidiary of Holdings, Holdings or such Subsidiary shall be
deemed to have made an Investment on the date of such sale, assignment,
transfer or other disposition equal to the fair market value of the Equity
Interests of such Subsidiary not sold, assigned, transferred or otherwise
disposed of in an amount determined as provided in clause (d) of Section
7.2.6.
"Issuance Fee or Expense" means any fee or expense incurred by the
Borrower in connection with the raising of debt or equity to finance the
Main Project which is paid on or before the Closing Date as more fully set
forth on Schedule IX hereto.
"Issuer" means Scotiabank in its capacity as issuer of the Letters of
Credit. At the request of Scotiabank, another Lender or an Affiliate of
Scotiabank may issue one or more Letters of Credit hereunder.
"Keep-Well Agreement" means, on any date, the Keep-Well Agreement, as
originally in effect on the Closing Date, by the Sponsors and ABH in favor
of the Lenders substantially in the form of Exhibit D hereto and as
thereafter from time to time amended, supplemented, amended and restated or
otherwise modified.
"Knowledge" of any Obligor means, at any time and relative to any
matter, knowledge which the Authorized Representatives of such Obligor
would have after inquiring of the current employees of such Obligor and its
Subsidiaries who would reasonably be expected to have knowledge regarding
such matter, whether or not such Authorized Representatives actually made
inquiry of such employees.
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"Land Equity" is defined in clause (a) of the fifth recital.
"LCNI" means London Clubs Nevada Inc., a Nevada corporation.
"LCNI Pledge Agreement" means, on any date, the Pledge Agreement
executed and delivered by an Authorized Representative of LCNI pursuant to
clause (b) of Section 5.1.3, as originally in effect on the Closing Date,
in substantially the form of Exhibit E-6 hereto and as thereafter from time
to time amended, supplemented, amended and restated or otherwise modified.
"Legal Requirement" means, relative to any Person or property, all
laws (including Nevada Gaming Laws, if applicable), statutes, codes,
regulations, rules, acts, ordinances, permits, licenses, authorizations,
directions and requirements of all Governmental Instrumentalities,
departments, commissions, boards, courts, authorities, agencies, officials
and officers, and any deed restrictions or other requirements of record,
applicable to such Person or such property, or any portion thereof or
interest therein or any use or condition of such property or any portion
thereof or interest therein (including those relating to zoning, planning,
subdivision, building, safety, health, use, environmental quality and other
similar matters).
"Lender Assignment Agreement" means a lender assignment agreement
substantially in the form of Exhibit H hereto.
"Lender" is defined in the preamble and, in addition, shall include
any commercial bank or other financial institution that becomes a Lender
pursuant to Section 10.11.1.
"Lender Default" means (x) the refusal (which has not been retracted)
of a Lender to make available its portion of any Borrowing or to fund its
portion of any unreimbursed payment under Section 2.6.1 or (y) a Lender
having notified the Administrative Agent or the Borrower that it does not
intend to comply with its obligations under Section 2.3 or under Section
2.6.1, in either case, as a result of the appointment of a receiver or
conservator with respect to such Lender at the direction or request of any
regulatory agency or authority.
"Lender's Environmental Liability" means any and all losses,
liabilities, obligations, penalties, claims, litigation, demands, defenses,
costs, judgments, suits, proceedings, damages (including consequential
damages), disbursements or expenses of any kind or nature whatsoever
(including reasonable attorneys' fees at trial and appellate levels and
consultants' and experts' fees and disbursements and expenses incurred in
investigating, defending against or prosecuting any litigation, claim or
proceeding) which may at any time be imposed upon, incurred by or asserted
or awarded against any Lender or any of such Lender's parent and subsidiary
corporations, and their Affiliates, shareholders, directors, officers,
employees, and agents in connection with or arising from:
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(a) any Hazardous Substances on, in, under or affecting all or
any portion of any property of the Borrower, any of the Borrower's
Subsidiaries or Aladdin Bazaar, the groundwater thereunder, or any
surrounding areas thereof to the extent caused by Releases from the
Borrower, any of the Borrower's Subsidiaries, any other Aladdin Party
or Aladdin Bazaar or any of their respective properties;
(b) any misrepresentation, inaccuracy or breach of any warranty,
contained or referred to in Section 6.12;
(c) any violation or claim of violation by the Borrower, any of
the Borrower's Subsidiaries, any other Aladdin Party or Aladdin Bazaar
of any Environmental Laws; or
(d) the imposition of any Lien for damages caused by or the
recovery of any costs for the cleanup, release or threatened release
of Hazardous Substances by the Borrower, any of the Borrower's
Subsidiaries, any other Aladdin Party or Aladdin Bazaar, or in
connection with any property owned or formerly owned by the Borrower,
any of the Borrower's Subsidiaries, any other Aladdin Party or Aladdin
Bazaar, as the case may be.
"Lender's Tax" is defined in Section 4.6.
"Letter of Credit" is defined in Section 2.1.2.
"Letter of Credit Commitment" means, (x) relative to an Issuer, such
Issuer's obligation to issue Letters of Credit pursuant to Section 2.1.2
and (y) relative to each Lender (other than the Issuer) that has a Term A
Loan Commitment, the obligation of such Lender to participate in Letters of
Credit pursuant to Section 2.6.1.
"Letter of Credit Commitment Amount" means, on any date, a maximum
amount of $20,000,000, as such amount may be permanently reduced from time
to time pursuant to Section 2.2.
"Letter of Credit Disbursement" is defined in Section 2.6.2.
"Letter of Credit Disbursement Date" is defined in Section 2.6.2.
"Letter of Credit Issuance Request" means a Letter of Credit request
and certificate duly executed by an Authorized Representative of the
Borrower substantially in the form of Exhibit L-2 hereto.
"Letter of Credit Outstandings" means, on any date, an amount equal to
the sum of
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(a) the then aggregate amount which is undrawn and available
under all issued and outstanding Letters of Credit,
plus
(b) the then aggregate amount of all unpaid and outstanding
Letter of Credit Reimbursement Obligations.
"Letter of Credit Reimbursement Obligation" is defined in
Section 2.6.3.
"Letter of Credit Stated Expiry Date" is defined in Section 2.6.
"LIBO Rate" means, relative to any Interest Period for LIBO Rate
Loans, the rate of interest equal to the average (rounded upwards, if
necessary, to the nearest 1/16 of 1%) of the rate per annum at which Dollar
deposits in immediately available funds are offered to the Administrative
Agent in the London, England interbank market as at or about 11:00 a.m.
London, England time two Business Days prior to the beginning of such
Interest Period for delivery on the first day of such Interest Period, and
in an amount approximately equal to the amount of the LIBO Rate Loans and
for a period approximately equal to such Interest Period.
"LIBO Rate Loan" means a Loan bearing interest, at all times during an
Interest Period applicable to such Loan, at a fixed rate of interest
determined by reference to the LIBO Rate (Reserve Adjusted).
"LIBO Rate (Reserve Adjusted)" means, relative to any Loan to be made,
continued or maintained as, or converted into, a LIBO Rate Loan for any
Interest Period, a rate per annum (rounded upwards, if necessary, to the
nearest 1/16 of 1%) determined pursuant to the following formula:
LIBO Rate
(Reserve Adjusted) = LIBO Rate
-----------------------------------
1.00 - LIBOR Reserve Percentage
The LIBO Rate (Reserve Adjusted) for any Interest Period for LIBO Rate
Loans will be determined by the Administrative Agent on the basis of the
LIBOR Reserve Percentage in effect, and the applicable rates furnished to
and received by the Administrative Agent from the Lenders, two Business
Days before the first day of such Interest Period.
"LIBOR Reserve Percentage" means, relative to any Interest Period for
LIBO Rate Loans, the reserve percentage (expressed as a decimal) equal to
the maximum aggregate reserve requirements (including all basic, emergency,
supplemental, marginal and other reserves and taking into account any
transitional adjustments or other scheduled changes in reserve
requirements) specified under regulations issued from time to time by the
F.R.S. Board and then
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applicable to assets or liabilities consisting of or including
"Eurocurrency Liabilities", as currently defined in Regulation D of the
F.R.S. Board, having a term approximately equal or comparable to such
Interest Period.
"Lien" means, relative to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under
applicable law (including any conditional sale or other title retention
agreement, any lease in the nature thereof, any option or other agreement
to sell or give a security interest therein).
"Line Item" means each of the individual line items set forth in the
Main Project Budget.
"Line Item Category" means each of the following line item categories
of the Main Project Budget:
(a) Construction Costs;
(b) Indirect Costs;
(c) Indirect Fees;
(d) General FF&E;
(e) Gaming Equipment;
(f) Owner FF&E;
(g) Theming;
(h) Project Contingency;
(i) Mall Project Reimbursement;
(j) Capitalized Interest;
(k) Fees/Other Expenses;
(l) Retirement of Existing Debt;
(m) Retirement of Partnership Debt;
(n) Pre-Opening Expenses;
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(o) Working Capital;
(p) Investment in Aladdin Music; and
(i) Land/Infrastructure Contract.
"Loan" means a Term A Loan, a Term B Loan or a Term C Loan of any
type.
"Loan Document" means, collectively, this Agreement, the Notes, the
Letters of Credit, each Pledge Agreement, each Rate Protection Agreement,
each Borrowing Request, each Letter of Credit Issuance Request, the
Security Agreement, the Keep-Well Agreement, the Completion Guaranty, the
GECC Intercreditor Agreement, the Trademark Security Agreement, the Deed of
Trust, the Disbursement Agreement, the Mall Project Completion Assignment,
the Fee Letters, the Environmental Indemnity, the Assignment of Contracts,
the Assignment of Consulting Agreement, the Assignment of Design/Build
Contract, the Assignment of Salle Privee Agreement, the Assignment of
Project Management Agreement, the Borrower Collateral Account Agreement,
the Holding Collateral Account Agreement, the Servicing and Collateral
Account Agreement, the Design/Builder Consent and Acknowledgment and any
other agreement, certificate, document or Instrument delivered in
connection with this Agreement and such other agreements, whether or not
specifically mentioned herein or therein.
"London Clubs" means London Clubs International, plc, a company
registered in England and Wales.
"London Clubs Contribution" means the $50,000,000 cash contribution by
London Clubs indirectly through London Clubs Holding and LCNI in
consideration for Common Membership Interests in Holdings.
"London Clubs Holdings" means London Clubs Holdings, Ltd., a company
registered in England and Wales.
"London Clubs Parties" means, collectively, London Clubs and LCNI.
"London Clubs Purchase Agreement" means the Amended and Restated
Purchase Agreement, dated the Effective Date, among London Clubs, LCNI,
AHL, Sommer Enterprises, the Trust, Holdings and the Borrower as originally
in effect on the Effective Date and as thereafter from time to time
amended, supplemented, amended and restated or otherwise modified in
accordance with the terms hereof.
"Loss Proceeds" is defined in Section 7.1.20.
"Loss Proceeds Account" is defined in the Borrower Collateral Account
Agreement.
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"Main Project" is defined in clause (a) of the fourth recital.
"Main Project Budget" means a budget in substantially the form of
Exhibit X-2 (as amended from time to time in accordance with Section
7.2.18) which shall include (w) a breakdown of all Direct Costs and
Indirect Costs by Line Item Categories as set forth on the Trade Detail
Report, together with a schedule of costs by trades and Main Project Costs
(including Main Project Costs incurred prior to, as well as after, the
Effective Date, the Pre-Opening Expenses, the Issuance Fees or Expenses,
Debt Service and initial working capital required to operate the Main
Project on and after the Opening Date) which (1) are to be paid from the
Hotel/Casino Component Funding Sources and (2) are to be constructed and
paid for by the Borrower pursuant to the Site Work Agreement for
improvements to the Mall Project, (x) a schedule setting forth the FF&E
which is to be purchased from the proceeds of the Loans (which FF&E shall
not include any Gaming Equipment and/or Specified Equipment), (y) a
drawdown schedule for Advances necessary to achieve Final Completion and
such other information relative to such Main Project Costs and the funding
thereof as the Administrative Agent may reasonably require and (z) a
balanced statement of sources and uses of proceeds (and any other funds
necessary to complete the Main Project), broken down by Construction
Component and Line Item. The Main Project Costs shall not exceed
$724,000,000.
"Main Project Budget/Schedule Amendment Certificate" means a Main
Project Budget/Schedule Amendment Certificate substantially in the form of
Exhibit X-3 hereto.
"Main Project Certificate of Occupancy" means a permanent or temporary
certificate of occupancy, in either case, for the portion of the Main
Project specified in such certificate of occupancy issued by the Building
Department pursuant to applicable Legal Requirements which permanent or
temporary certificate of occupancy shall permit such portion of the Main
Project to be used for its intended purposes, shall be in full force and
effect and, in the case of a temporary certificate of occupancy, if such
temporary certificate of occupancy shall provide for an expiration date,
any Main Project Punchlist Items which must be completed in order for such
temporary certificate of occupancy to be renewed or extended shall be
completed no later than 15 days prior to the applicable expiration date.
"Main Project Costs" means all costs incurred or to be incurred in
accordance with the Main Project Budget in connection with the development,
design, engineering, procurement, installation, construction, Final
Completion and opening of the Main Project, including:
(a) all costs incurred under the Design/Build Contract and the
Contracts;
(b) interest accruing under this Agreement, the other Loan
Documents and the Approved Equipment Funding Commitments prior to the
Conversion Date;
(c) reasonable financing and closing costs related to the Main
Project until the Conversion Date, including insurance costs
(including, with respect to directors and
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officers insurance, costs relating to such insurance extending beyond
the Conversion Date), guarantee fees, legal fees and costs and
expenses, financial advisory fees and expenses, technical fees and
expenses (including fees and expenses of the Construction Consultant,
the Environmental Consultant and the Insurance Consultant), commitment
fees, management fees, agency fees (including fees and expenses of the
Disbursement Agent and the Administrative Agent), interest, taxes
(including value-added tax and Restricted Payments made in accordance
with clause (c) of Section 7.2.6) and other out-of-pocket expenses
payable by the Borrower under all documents related to the financing
and construction of the Main Project until the Conversion Date;
(d) the costs of acquiring Permits for the Main Project prior to
the Final Completion Date (including Permits required for the
operation of the Main Project subsequent to the Final Completion
Date);
(e) costs incurred in settling insurance claims in connection
with Events of Loss and collecting Loss Proceeds;
(f) amounts due under the Energy Project Service Agreement prior
to the Conversion Date; and
(g) without duplication, working capital costs.
"Main Project Document" means, collectively, the Design/Build
Contract, the Fluor Guaranty, the Contracts, the Energy Project Service
Agreement, the Energy Project Ground Lease, the Mall Project Ground Lease,
the Music Project Ground Lease, the Theater Lease (if entered into), the
Reciprocal Easement Agreement, the Common Parking Area Use Agreement, the
Site Work Agreement, the Project Management Agreement, the Development
Agreement or any other document or agreement entered into on, prior to or
after the Effective Date, relating to the development, construction,
maintenance or operation of the Main Project (other than the Loan Documents
and the Discount Note Trust Indenture), as the same may be amended from
time to time in accordance with the terms and conditions hereof and
thereof.
"Main Project Easement" means any easement appurtenant, easement in
gross, license agreement or other right running for the benefit of the
Borrower or appurtenant to the Main Project Parcel, including those
easements and licenses described in the Reciprocal Easement Agreement and
each Title Policy.
"Main Project Intended Use" means each intended use of the Main
Project, as more particularly set forth on Exhibit O hereto.
"Main Project Parcel" means the portion of the Site described on
Exhibit N-3 hereto together with the Main Project Easements.
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"Main Project Punchlist Completion Certificate" means the Main Project
Punchlist Completion Certificate substantially in the form of Exhibit V.
"Main Project Punchlist Item" means any minor or insubstantial detail
of construction or mechanical adjustment, the non-completion of which, when
all such items are taken together, will not interfere in any material
respect with the use or occupancy of any portion of the Main Project for
its intended purposes or the ability of the owner of the Main Project or
the Energy Project Provider, as applicable, to perform work that is
necessary or desirable to prepare such portion of the Main Project for such
use or occupancy; provided, however, that, in all events, "Main Project
Punchlist Items" shall include the items set forth in the punchlist to be
delivered by the Borrower in connection with Substantial Completion (as
defined in the Design/Build Contract) and all items that are listed on the
"punchlists" furnished by the Building Department, the Nevada Department of
Transportation or the Clark County Department of Public Works in connection
with, or after, the issuance of a temporary Main Project Certificate of
Occupancy for the portion of the Main Project covered thereby as those that
must be completed in order for the Building Department to issue a permanent
Main Project Certificate of Occupancy.
"Main Project Security" means all real and personal property which is
subject or is intended to become subject to the security interests or liens
granted by any of the Operative Documents.
"Major Contractor" means a Contractor who is party to a Material Main
Project Document.
"Mall Project" is defined in clause (b) of the fourth recital.
"Mall Project Completion Assignment" means, on any date, the Mall
Project Completion Assignment, as originally in effect on the Closing Date,
from Holdings in favor of the Lenders substantially in the form of Exhibit
G hereto and as thereafter from time to time amended, supplemented, amended
and restated or otherwise modified.
"Mall Project Easement" means any easement appurtenant, easement in
gross, license agreement or other right running for the benefit of Aladdin
Bazaar or appurtenant to the Mall Project Parcel, including those certain
easements and licenses described in the Reciprocal Easement Agreement and
each Title Policy.
"Mall Project Ground Lease" means, on any date, the Lease, as
originally in effect on the Effective Date, between the Borrower and
Aladdin Bazaar and as thereafter from time to time amended, supplemented,
amended and restated or otherwise modified in accordance with the terms
hereof.
"Mall Project Parcel" means the portion of the Site described on
Exhibit N-4 hereto, together with the Mall Project Easements.
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"Mall Project Parcel Creation Date" means the date on which the Mall
Project Parcel is created in accordance with clause (b) of Section 7.1.19.
"Mandatory Prepayment" is defined in clause (c) of Section 3.1.1.
"Material Adverse Effect" means (x) a material adverse effect on the
financial condition, business, property, prospects of the Borrower or on
its ability to perform in all material respects its obligations under any
Operative Document to which it is a party, (y) a material adverse effect on
the financial condition, business, property, prospects and ability of any
other Project Party to perform in all material respects its obligations
under any Operative Document to which it is a party or (z) a material
impairment of the validity or enforceability of, or a material impairment
of the rights, remedies or benefits available to the Administrative Agent,
the Issuer or the Lenders under this Agreement or any other Operative
Document; provided, however, that whenever the term "Material Adverse
Effect" is used in a representation or warranty made by the Borrower, such
representation or warranty as it relates to clause (y) above shall be
deemed to have been made to the Borrower's Knowledge.
"Material Main Project Document" means the Mall Project Ground Lease,
the Music Project Ground Lease, the Reciprocal Easement Agreement, the Site
Work Agreement, the Common Parking Area Use Agreement, the Energy Project
Ground Lease, the Energy Project Service Agreement, the Theater Lease, the
Design/Build Contract, the Fluor Guaranty, the Project Management
Agreement, the Development Agreement and any other certificate, document or
Instrument delivered in connection with or by the Borrower and any other
Person pursuant to any Material Main Project Document, and such other
agreements, whether or not specifically mentioned herein or therein and,
without duplication, any Main Project Document with a total contract amount
in excess of $2,500,000.
"Membership Interest" means, relative to any Person which is a limited
liability company, a membership interest or a limited liability company
interest, as the case may be, of such Person.
"Merrill Lynch" is defined in the preamble.
"Minimum Fixed Charge Coverage Ratio" means, as of the close of any
Fiscal Quarter, commencing with the close of the Fiscal Quarter in which
the Conversion Date occurs, the ratio computed for the period consisting
of such Fiscal Quarter (or such shorter period of any Fiscal Quarter after
the occurrence therein of the Conversion Date and each of the three
immediately prior Fiscal Quarters (or such lesser number of Fiscal Quarters
to have closed since the Conversion Date) of:
(a) EBITDA (for all such Fiscal Quarters or such shorter period,
as the case may be and determined for any period ending on or prior to
the first anniversary of the Conversion Date, consistently with the
proviso to the definition of "EBITDA");
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to
(b) the sum (for all such Fiscal Quarters or such shorter
period, as the case may be) of
(i) Interest Expense;
plus
(ii) scheduled principal repayments of the Loans pursuant
to clauses (b) and (c) of Section 3.1.1 after giving effect to
any reductions in such scheduled principal repayments
attributable to any optional or mandatory prepayments of the
Loans and scheduled payments made with respect to the FF&E
Financing;
plus
(iii) the amount of all federal, state and local income
taxes (whether paid in cash or deferred) of the Borrower paid by
the Borrower or, if the Borrower is treated as a pass-through
entity or is not treated as a separate entity for United States
federal income tax purposes, the amount of Restricted Payments
made by the Borrower in accordance with clause (c) of
Section 7.2.6, subject to the terms thereof, in each case, in
cash during such Fiscal Quarters;
plus
(iv) Restricted Payments of the types described in
clause (d) of Section 7.2.6 made in cash during such Fiscal
Quarters;
plus
(v) Capital Expenditures of the Borrower actually made or
reserved during all such Fiscal Quarters pursuant to
Section 7.2.7;
provided, however, that in computing the Minimum Fixed Charge Coverage
Ratio for any such period ending on or prior to the first anniversary of
the Conversion Date, the amount determined pursuant to clause (b) shall
equal the product of (x) the sum of the amounts determined pursuant to
clause (b) for such period multiplied by (y) a fraction, the numerator of
which is equal to 365 and the denominator of which is equal to the number
of days that have elapsed in such period.
"Moody's" means Moody's Investors Service, Inc., a Delaware
corporation, or any successor thereto.
"Music Investment Prepayment" is defined in clause (d) of Section
3.1.1.
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"Music Project" is defined in clause (c) of the fourth recital.
"Music Project Easement" means any easement appurtenant, easement in
gross, license agreement or other right running for the benefit of Aladdin
Music or appurtenant to the Music Project Parcel, including those certain
easements and licenses described in the Reciprocal Easement Agreement and
each Title Policy.
"Music Project Ground Lease" means, on any date, the Lease, as
originally in effect on the Effective Date, between the Borrower and
Aladdin Music and as thereafter from time to time amended, supplemented,
amended and restated or otherwise modified in accordance with the terms
hereof.
"Music Project Parcel" means the portion of the Site described on
Exhibit N-5 hereto, together with the Music Project Easements.
"Music Project Parcel Creation Date" means the date on which the Music
Project Parcel is created in accordance with clause (c) of Section 7.1.19.
"Net Distribution Amount" means, for any period, the amount of fees
paid to AMH under any keep-well agreement relating to the Music Project and
then paid as distributions in cash to the Borrower by AMH to the extent
permitted thereunder.
"Net Income" means, for any period, the aggregate of all amounts
(including extraordinary losses) which, in accordance with GAAP, would be
included in determining net income on the financial statements of the
Borrower for such period (excluding, however, (x) all amounts in respect of
any extraordinary gains and any non-cash income and (y) net income of any
Subsidiary, other than any Net Distribution Amount paid in cash to the
Borrower during such period).
"Net Worth" means the net worth of the Borrower determined in
accordance with GAAP.
"Nevada Gaming Authority" means the Nevada Gaming Commission, the
Nevada State Gaming Control Board or the Clark County Liquor and Gaming
Licensing Board.
"Nevada Gaming Law" means the Nevada Gaming Control Act, as codified
in Chapter 463 of the NRS, as amended from time to time, and the
regulations of the Nevada Gaming Commission promulgated thereunder, as
amended from time to time, and Clark County Code Sections 8.04.010 to
8.04.310 and 8.20.010 to 8.20.580, as amended from time to time.
"Non-Defaulting Lender" means and includes each Lender other than a
"Defaulting Lender".
"Non-U.S. Lender" is defined in Section 4.6.
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"Note" means a Term A Note, a Term B Note, a Term C Note or a
Registered Note.
"Note Construction Disbursement Account" is defined in the Holdings
Collateral Account Agreement.
"Noteholder Completion Guaranty" means, on any date, the Noteholder
Completion Guaranty, as originally in effect on the Effective Date, by the
Completion Guarantors in favor of the Discount Note Indenture Trustee (for
the benefit of the Discount Noteholders) as thereafter from time to time
amended, supplemented, amended and restated or otherwise modified in
accordance with the terms hereof.
"NRS" means Nevada Revised Statutes.
"Obligations" means (x) all loans, advances, debts, liabilities and
obligations, howsoever arising, owed by the Borrower under this Agreement
to any Lender of every kind and description (whether or not evidenced by
any note or instrument and whether or not for the payment of money), direct
or indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, pursuant to the terms of the Disbursement Agreement, any
of the Loan Documents or any of the other Operative Documents, including
all interest, fees, charges, expenses, attorneys' fees, consultants' fees
and accountants' fees chargeable to the Borrower in connection with such
Person's dealings with the Borrower and payable by the Borrower hereunder
or thereunder; (y) any and all sums advanced by the Lenders in order to
preserve the Main Project Security or preserve any Secured Parties'
security interest in the Main Project Security, including all protective
advances; and (z) in the event of any proceeding for the collection or
enforcement of, or any "working out" of, the Obligations after an Event of
Default shall have occurred and be continuing, the reasonable expenses of
retaking, holding, preparing for sale or lease, selling or otherwise
disposing of or realizing on the Main Project Security, or of any exercise
by any Secured Party of its rights under the Operative Documents, together
with reasonable attorneys' fees and court costs.
"Obligor" means, as the context may require, the Borrower, each other
Aladdin Party, LCNI, London Clubs Holdings, London Clubs, each Sponsor,
each Completion Guarantor and each other Person (other than the Agents, the
Issuer or any Lender) to the extent such Person is obligated under this
Agreement or any other Operative Document.
"Ongoing Investment" is any Investment listed in Item 7.2.5(a) on the
Disclosure Schedule.
"On Schedule Certificate" means a certificate in the form of Exhibit
AA hereto.
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"Opening Condition" means, collectively, the following:
(a) Substantial Completion shall have occurred;
(b) the Hotel/Casino shall have received a Main Project
Certificate of Occupancy from the Building Department (and a copy of
such certificate shall have been delivered to the Administrative
Agent);
(c) each remaining Main Project Punchlist Item with respect to
the Hotel/Casino and the completion thereof shall be such that it will
not interfere with or disrupt the operation of the Main Project for
its intended purposes or detract from the aesthetic appearance of the
Main Project other than to a de minimis extent, as reasonably
determined by the Owner Representative and confirmed by the
Construction Consultant;
(d) the failure to complete each remaining Main Project
Punchlist Item would not interfere with or disrupt the operation of
the Main Project for its intended purposes or detract from the
aesthetic appearance of the Main Project other than to a de minimis
extent, as reasonably determined by the Owner Representative and
confirmed by the Construction Consultant; and
(e) the Borrower shall have available a fully trained staff to
operate the Hotel/Casino in accordance with first-class industry
standards for a hotel/casino operation of similar size and location.
"Opening Date" means the date on which all of the Opening Conditions
are satisfied.
"Operating" means the first time that (t) all Gaming Licenses have
been granted and are not then revoked or suspended, (u) all Liens (other
than Permitted Liens) related to the development, construction, and
equipping of the Main Project have been paid or, if payment is not yet due
or if such payment is contested in good faith by Borrower, either (1)
sufficient funds remain in the Construction Note Disbursement Account to
discharge such Liens or (2) such Liens have been bonded, (v) the
Construction Consultant, the Design/Builder and the Architect of Record
shall have delivered one or more certificates to the Administrative Agent
each certifying that the Main Project is Complete in all material respects
in accordance with the Plans and Specifications and all applicable Legal
Requirements, (w) the Main Project is in a condition (including
installation of FF&E) to receive invitees in the ordinary course of
business, (x) gaming and other operations in accordance with applicable
Legal Requirements are open to the general public and are being conducted
at the Hotel/Casino, (y) a Main Project Certificate of Occupancy has been
issued for the Main Project by the Building Department and (z) a notice of
completion of the Main Project has been duly recorded.
"Operating Costs" means all actual cash costs incurred by the Borrower
and related to the operation of the Main Project or any portion thereof in
the ordinary course of business,
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including costs incurred for labor, consumables, utility services and all
other operation-related costs; provided, however, that (x) Operating Costs
shall not include non-cash charges (including depreciation and
amortization) and (y) Debt Service shall constitute Operating Costs from
and after the Conversion Date but not prior to such date.
"Operative Document" means any Loan Document or Main Project Document.
"Organizational Document" means, relative to any Obligor, as
applicable, its certificate or articles of incorporation, by-laws,
certificate of partnership, partnership agreement, certificate of
formation, articles of organization, operating agreement, limited liability
company or operating agreement and all shareholder agreements, voting
trusts and similar arrangements applicable to any of such Obligor's
partnership interests, limited liability company interests or authorized
shares of capital stock.
"Outside Completion Deadline" means the date which is 28 months
following the Effective Date, time being of the essence; provided, however,
if a Force Majeure Event occurs, then the Borrower shall be permitted to
extend the Completion Date for up to one year subject to the satisfaction
by the Borrower of the conditions to such extension as set forth in the
definition of "Force Majeure Event".
"Owner Representative" means Tishman Construction Corporation of
Nevada.
"Participant" is defined in Section 10.11.2.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Pension Plan" means a "pension plan", as such term is defined in
Section 3(2) of ERISA, which is subject to Title IV of ERISA (excluding,
however, a multiemployer plan as defined in Section 4001(a)(3) of ERISA),
and to which the Borrower or any corporation, trade or business that is,
along with the Borrower, a member of a Controlled Group, may have
liability, including any liability by reason of having been a substantial
employer within the meaning of Section 4063 of ERISA at any time during the
preceding five years, or by reason of being deemed to be a contributing
sponsor under Section 4069 of ERISA.
"Percentage" means, relative to any Lender, the applicable percentage
relating to Term A Loans, Term B Loans or Term C Loans, as the case may be,
as set forth opposite its signature hereto under the applicable column
heading or as set forth in a Lender Assignment Agreement under the
applicable column heading, as such percentage may be adjusted from time to
time pursuant to Lender Assignment Agreement(s) executed by such Lender and
its Assignee Lender(s) and delivered pursuant to Section 10.11.1. A Lender
shall not have any Commitment to make Term A Loans, Term B Loans or Term C
Loans, as the case may be, if its percentage under the applicable column
heading is zero percent (0%).
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"Permit" means any material building, construction, land use,
environmental or other permit, license, franchise, approval, consent and
authorization (including central bank and planning board approvals from
applicable Governmental Instrumentalities and approvals required under the
Nevada Gaming Law) required for or in connection with the construction,
ownership, use, occupation and operation of the Main Project and the
transactions provided for in this Agreement and the other Operative
Documents.
"Permitted Encumbrance" means any encumbrance against all or a portion
of the Site as set forth in Exhibit BB hereto.
"Permitted Exception" means any exception to title to all or a portion
of the Site as set forth in Exhibit CC hereto.
"Permitted Lien" means any of the following types of Liens (excluding,
however, any such Lien imposed pursuant to Section 401(a)(29) or 412(n) of
the Internal Revenue Code or by ERISA, any such Lien relating to or imposed
in connection with any Environmental Claim and any such Lien expressly
prohibited by any applicable terms of any of the Operative Documents or the
Discount Note Indenture):
(a) Liens in favor of the Borrower;
(b) Liens to secure the performance of statutory obligations,
surety or appeal bonds, performance bonds or other obligations of a
like nature incurred in the ordinary course of business or in the
construction of the Main Project; provided, however, that the Borrower
has obtained a title insurance endorsement insuring against losses
arising therewith or, if such Lien arises after completion of the Main
Project, the Borrower has bonded such Lien within a reasonable time
after becoming aware of the existence of such Lien;
(c) Liens securing the Obligations under the Operative
Documents;
(d) Liens existing on the Effective Date and set forth in Item
7.2.3 of the Disclosure Schedule;
(e) (x) Liens for Impositions or (y) statutory Liens of
landlords, and carriers', warehousemen's, mechanics', suppliers',
materialmen's, repairmen's or other similar Liens arising in the
ordinary course of business or in the construction of the Main
Project, in the case of each of items (x) and (y), with respect to
amounts that either (1) are not yet delinquent or (2) are being
diligently contested in good faith by appropriate proceedings,
provided, however, that, in each case, any reserve or other
appropriate provision as shall be required in conformity with GAAP
shall have been made therefor;
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(f) easements, rights-of-way, avigational servitude,
restrictions, minor defects or irregularities in title and other
similar charges or encumbrances which do not interfere in any material
respect with the ordinary conduct of business of the Borrower;
(g) Liens created by the Reciprocal Easement Agreement;
(h) Liens created by the Disbursement Agreement;
(i) licenses of patents, trademarks and other intellectual
property rights granted by the Borrower in the ordinary course of
business;
(j) any judgment attachment or judgment Lien not constituting an
Event of Default;
(k) subject to the terms of the GECC Intercreditor Agreement,
Liens to secure all obligations under the FF&E Financing; provided,
however, that (x) the principal amount of such Indebtedness does not
exceed the cost (including sales and excise taxes, installation and
delivery charges and other direct costs of, and other direct expenses
paid or charged in connection with, such purchase) of the FF&E
purchased or leased with the proceeds thereof and (y) the aggregate
principal amount of such Indebtedness including any Permitted
Refinancing Indebtedness incurred to refinance or replace any
Indebtedness secured by such Lien does not exceed $80,000,000
(including obligations characterized as operating leases or other off-
balance sheet financing arrangements) outstanding at any time;
(l) Liens securing obligations arising under the Contribution
Agreement and between the parties thereto so long as such Liens cannot
be enforced by the holder thereof until all Obligations have been paid
in cash in full, all Letters of Credit have been terminated or expired
and all Commitments have terminated provided, however, that to the
extent any distributions on any relevant Capital Stock or Membership
Interests, as the case may be, are permitted to be made to the
shareholders or members, as the case may be, in respect thereof under
the Loan Documents, such holder shall be permitted to enforce such
Liens (including by causing the redirection of any such distribution
to such holder);
(m) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment
insurance and other types of social security, or to secure the
performance of tenders, statutory obligations, surety and appeal
bonds, bids, leases, government contracts, trade contracts,
performance and return-of-money bonds and other similar obligations
(excluding, however, obligations for the payment of borrowed money),
incurred in the ordinary course of business so long as no foreclosure,
sale or similar proceedings have been commenced with respect to any
portion of the Main Project Security on account thereof, (x) for
amounts not yet overdue
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or (y) for amounts that are overdue and that (in the case of any such
amounts overdue for a period in excess of 5 days) are being contested
in good faith by appropriate proceedings, so long as (1) such reserves
or other appropriate provisions, if any, as shall be required by
generally accepted accounting principles shall have been made for any
such contested amounts, and (2) in the case of a Lien with respect to
any portion of the Main Project Security, such contest proceedings
conclusively operate to stay the sale of any portion of the Main
Project Security on account of such Lien;
(n) Liens for taxes, assessments or governmental charges or
claims the payment of which is not, at the time due and payable or
which is being contested in good faith by appropriate governmental
proceedings promptly instituted and diligently contested, so long as
(x) such reserve or other appropriate provision, if any, as shall be
required in conformity with generally accepted accounting principles
shall have been made therefor through an allocation in the Trade
Detail Report and (y) in case of any charge or claim which has or may
become a Lien against any of the Main Project Security, such contest
proceedings conclusively operate to stay the sale of any portion of
the Main Project Security to satisfy such charge or claim;
(o) Liens created by the Common Parking Area Use Agreement; and
(p) Liens created pursuant to Permitted Refinancing Indebtedness
which is incurred to refinance Indebtedness which has been secured by
a Lien and is permitted under Section 7.2.2 and which has been
incurred in accordance with such Section; provided, however, that such
Liens do not extend to cover any property or assets of the Borrower
not already securing the Indebtedness so refinanced.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Borrower issued in exchange for, or the net proceeds of which are used to
extend, refinance, renew, replace, defease or refund other Indebtedness of
the Borrower; provided, however, that (u) the principal amount of such
Permitted Refinancing Indebtedness does not exceed the principal amount
plus accrued interest on the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of reasonable expenses
incurred in connection therewith), (v) such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date
of, and has a Weighted Average Life to Maturity equal to or greater than
the Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded, (w) such Indebtedness
is incurred by the Borrower as the Obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded, (x) the
security, if any, for the Permitted Refinancing Indebtedness shall be the
same as that for the Indebtedness being refinanced (except to the extent
that less security is granted to holders of such refinancing Indebtedness),
(y) the holders of the Permitted Refinancing Indebtedness are not afforded
covenants, defaults, rights or remedies more burdensome to the obligor or
obligors than those contained in the Indebtedness being refinanced and
(z) the Permitted Refinancing Indebtedness is subordinated to the same
degree, if any, as the Indebtedness being refinanced.
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"Person" means any natural person, corporation, limited liability
company, partnership, joint venture, joint stock company, firm,
association, trust or unincorporated organization, government, governmental
agency, Governmental Instrumentality, court or any other legal entity,
whether acting in an individual, fiduciary or other capacity.
"Phase I Report" is defined in the Disbursement Agreement.
"Plan" means any Pension Plan or Welfare Plan.
"Planet Hollywood" means Planet Hollywood International, Inc.
"Plans and Specifications" means all plans, specifications, design
documents, schematic drawings and related items for the design,
architecture and construction of the Main Project that are listed on
Schedule VII hereto, as the same may be (x) finalized in a manner that
reflects a natural evolution of their status on the date hereof and in a
manner consistent with the standards set forth in Section 7.2.17 and (y)
amended in accordance with Section 7.2.17.
"Pledge Agreement" means, as the context may require, the Holdings
Pledge Agreement, the LCNI Pledge Agreement, the Sommer Enterprises Pledge
Agreement, the AHL Pledge Agreement, the Enterprises Pledge Agreement, the
Borrower Pledge Agreement or the AMH Pledge Agreement.
"Pledged Entity" means, at any time, each Person in respect of which
the Lenders have been granted, at such time, a security interest in and to,
or a pledge of, any of the issued and outstanding interests or shares of
Capital Stock of such Person.
"Preferred Stock" means any Equity Interest with preferential right of
payment of dividends or distributions, as applicable, or upon liquidation,
dissolution or winding up.
"Pre-Opening Expense" means any expense of the type listed in Schedule
VIII hereto.
"Pre-Opening Revenues" means all operating revenues received by the
Borrower with respect to the Main Project prior to the Opening Date.
"Process Agent" is defined in Section 10.14.
"Project Management Agreement" means, on any date, the Project
Management Agreement, as originally in effect on the Effective Date,
between AHL and the Owner Representative and as thereafter from time to
time amended, supplemented, amended and restated or otherwise modified in
accordance with the terms hereof.
"Project Party" means the Borrower, AHL, Sommer Enterprises, Capital,
Holdings, London Clubs, LCNI, the Design/Builder or Fluor.
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"Quarterly Payment Date" means the last Business Day of each March,
June, September and December.
"Rate Protection Agreement" means any interest rate swap, cap, collar
or similar agreement entered into by the Borrower in respect of the Loans
pursuant to the terms of this Agreement under which the counterparty to
such agreement is (or, at the time such Rate Protection Agreement was
entered into, was) a Lender or an Affiliate of a Lender reasonably
acceptable to the Administrative Agent.
"Real Property" means, relative to any Person, such Person's present
and future right, title and interest (including any leasehold estate) in
(a) any plots, pieces or parcels of land;
(b) any improvements, buildings, structures and fixtures now or
hereafter located or erected thereon or attached thereto of every
nature whatsoever;
(c) any other interests in property constituting appurtenances
to the Site, or which hereafter shall in any way belong, relate or be
appurtenant thereto; and
(d) all other rights and privileges thereunto belonging or
appertaining and all extensions, additions, improvements, betterments,
renewals, substitutions and replacements to or of any of the rights
and interests described in clause (c).
"Realized Savings" means:
(a) the portion of any decrease to the Guaranteed Maximum Price
retained or to be retained by the Borrower in accordance with the
provisions of Attachment H to the Design/Build Contract in the "Cost of the
Work" (as defined in Section 3 of Attachment G to the Design/Build
Contract) contemplated by a Line Item but only to the extent that the
Guaranteed Maximum Price has been reduced as a result of such decrease in
the anticipated "Cost of the Work" as approved in writing by the
Design/Builder and such reduction is confirmed by the Construction
Consultant;
(b) with respect to the Construction Period Interest Line Item, a
decrease in the anticipated cost of construction period interest resulting
from (x) a decrease in the interest rates payable by the Borrower prior to
the date which is six months after the Conversion Date as determined by the
Administrative Agent with the reasonable concurrence of the Borrower taking
into account the current and future anticipated interest rates and the
anticipated times and amounts of draws under the Bank Credit Facility for
the payment of Main Project Costs or (y) the anticipated Conversion Date
being earlier than the date set therefor in the Construction Benchmark
Schedule as determined by the Owner Representative with the reasonable
concurrence of the Construction Consultant; and
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(c) with respect to any other Line Item, the amount by which the
total cost allocated to such Line Item exceeds the total cost incurred by
the Borrower to complete all aspects of the Work contemplated by such Line
Item which amount shall not be established until the Borrower has actually
completed 90% of all such Work;
in each case, which is documented by the Borrower in a Realized Savings
Certificate substantially in the form of Exhibit W hereto, duly executed
and completed with all exhibits and attachments thereto.
"Reciprocal Easement Agreement" means, on any date, the Construction,
Operation and Reciprocal Easement Agreement, as originally in effect on the
Effective Date, by and among the Borrower, Aladdin Bazaar and AMH and as
thereafter from time to time amended, supplemented, amended and restated or
otherwise modified in accordance with the terms hereof.
"Register" is defined in clause (b) of Section 2.8.
"Registered Note" is defined in Section 2.8, in the form of Exhibit A-4
hereto (as such promissory note may be amended, endorsed or otherwise modified
from time to time).
"Release" means a "release", as such term is defined in CERCLA.
"Remaining Costs" means, without duplication, the sum of (w) the costs
required to achieve Final Completion plus (x) the Retainage Amounts to be
paid to Persons who have supplied labor or materials in connection with
such line item, plus (y) the amount required to pay fees and interest at
the maximum rate of interest set forth in the Loan Documents (after giving
effect to the Rate Protection Agreement) through the date which is six
months after the Conversion Date plus (z) the Required Minimum Contingency.
"Required Completion Amount" is defined in the Disbursement Agreement.
"Required Lenders" means, at any time,
(a) Non-Defaulting Lenders holding at least 66 2/3% of the sum
of the aggregate outstanding principal amount of the Loans then held
by such Lenders plus the participation interests of such Lenders in
the Letter of Credit Outstandings, or
(b) if no Loans or Letter of Credit are then outstanding,
Lenders having at least 66 2/3% of the Commitments;
provided, however, that (x) amendments affecting only one class of Lenders
(with a class for each of the Term A Lenders, the Term B Lenders and the
Term C Lenders) will require the approval of the Non-Defaulting Lenders
holding 66 2/3% or more of the principal amount of the Loans, Letters of
Credit or, if applicable, Commitments for such class and (y) the consent of
all
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of the Non-Defaulting Lenders in the same class and of all Non-Defaulting
Lenders in all classes shall be required with respect to the matters set
forth in Section 10.1.
"Required Minimum Contingency" means (w) during the first month after
the Effective Date, no less than $24,000,000, (x) during the second month
after the Effective Date, no less than $23,000,000, (y) during the third
month after the Effective Date, no less than $22,000,000 and (z) thereafter
the product of (1) $25,000,000 reduced by (2) the $25,000,000 multiplied by
the percentage completed in respect of such Line Item Category on the date
that the Advance is made.
"Required Scope Change Approval" means, relative to each proposed
Scope Change, the consent of the Administrative Agent.
"Restricted Payment" is defined in clause (b) of Section 7.2.6.
"Retainage Amount" means, at any given time, amounts which have
accrued and are owing under the terms of the Design/Build Contract, a
Contract or a Subcontract, as the case may be, for work or services already
provided but which at such time (and in accordance with the terms of the
Design/Build Contract, the Contract or Subcontract, as the case may be) are
being withheld from payment to the Design/Builder, a Contractor or a
Subcontractor, as the case may be, until certain subsequent events (e.g.,
completion benchmarks) have been achieved under the Design/Build Contract
or relevant Contract or Subcontract.
"Reviewing Accountant" means Arthur Andersen LLP or any nationally
recognized firm of independent public accountants subsequently selected by
the Borrower with the consent of the Administrative Agent from time to time
(which shall not be unreasonably withheld or delayed), as auditors of the
Borrower.
"S&P" means Standard & Poor's Ratings Group, Inc., a New York
corporation, or any successor thereto.
"Salle Privee Agreement" means, on any date, the Salle Privee
Agreement, as originally in effect on the Effective Date, between the
Borrower, LCNI and London Clubs and as thereafter from time to time
amended, supplemented, amended and restated or otherwise modified in
accordance with the terms hereof.
"Scheduled Amortization" is defined in clause (b) of Section 3.1.1.
"Scope Change" means any change in the "Services" or "Work".
"Scotiabank" is defined in the preamble.
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"Scotiabank Fee Letter" means the confidential letter agreement, dated
December 4, 1997, among the Borrower, the Sponsors and Scotiabank.
"SEC" means the Securities and Exchange Commission.
"Secured Party" means the Lenders, the Issuer, the Agents, each
counterparty to a Rate Protection Agreement that is (or at the time such
Rate Protection Agreement was entered into, was) a Lender or an Affiliate
thereof reasonably acceptable to the Administrative Agent and, in each
case, each of their respective successors, transferees and assigns.
"Securities Intermediary" is defined in the Disbursement Agreement.
"Security Agreement" means, on any date, the Security Agreement
executed and delivered by an Authorized Representative of the Borrower
pursuant to Section 5.1.5, as originally in effect on the Closing Date, in
substantially the form of Exhibit F hereto and as thereafter from time to
time amended, supplemented, amended and restated or otherwise modified.
"Services" is defined in Section 1.7 of the Design/Build Contract.
"Servicing Agent" means U.S. Bank National Association, in its
capacity as the servicing agent under the Disbursement Agreement, and its
successors and assigns in such capacity.
"Servicing and Collateral Account Agreement" means, on any date, the
Servicing and Collateral Account Agreement, as originally in effect on the
Closing Date, among the Disbursement Agent, the Borrower and the Servicing
Agent and as thereafter from time to time amended, supplemented, amended
and restated or otherwise modified in accordance with the terms hereof.
"Shoulder Space" means the property and space described in Exhibit N-6
hereto.
"Site" is defined in the fourth recital and is more fully described in
Exhibit N-1 hereto.
"Site Easement" means any easement appurtenant, easement in gross,
license agreement and other right running for the benefit of the Borrower,
the Main Project, the Mall Project and the owner of the Mall Project, the
Music Project and the owner of the Music Project, the Energy Project and
the lessee of the Energy Project or appurtenant to the Site, including
those certain easements and licenses described in the Title Policy.
"Site Work Agreement" means, on any date, the Site Work Development
and Construction Agreement, as originally in effect on the Effective Date,
among the Borrower, AHL and Aladdin Bazaar and as thereafter from time to
time amended, supplemented, amended and restated or otherwise modified in
accordance with the terms hereof.
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"Solvency Certificate" means a solvency certificate to be executed and
delivered by the chief financial or accounting Authorized Representative of
the Borrower substantially in the form of Exhibit P hereto.
"Solvent" means, relative to any Person and its Subsidiaries on a
particular date, that on such date (w) the fair value of the property of
such Person and its Subsidiaries on a consolidated basis is greater than
the total amount of liabilities, including contingent liabilities, of such
Person and its Subsidiaries on a consolidated basis, (x) the present fair
salable value of the assets of such Person and its Subsidiaries on a
consolidated basis is not less than the amount that will be required to pay
the probable liability of such Person and its Subsidiaries on a
consolidated basis on its debts as they become absolute and matured,
(y) such Person does not intend to, and does not believe that it or its
Subsidiaries will, incur debts or liabilities beyond the ability of such
Person and its Subsidiaries to pay as such debts and liabilities mature and
(z) such Person and its Subsidiaries on a consolidated basis are not
engaged in a business or transaction, and such Person and its Subsidiaries
on a consolidated basis are not about to engage in business or a
transaction, for which the property of such Person and its Subsidiaries on
a consolidated basis would constitute an unreasonably small capital.
"Sommer Enterprises" means Sommer Enterprises, LLC, a Nevada limited-
liability company.
"Sommer Enterprises Pledge Agreement" means, on any date, the Pledge
Agreement executed and delivered by an Authorized Representative of Sommer
Enterprises pursuant to clause (c) of Section 5.1.3, as originally in
effect on the Closing Date, in substantially the form of Exhibit E-7 hereto
and as thereafter from time to time amended, supplemented, amended and
restated or otherwise modified.
"Specified Equipment" means the portion of the new FF&E together with
all improvements and/or additions thereto covered by an FF&E Lease and
financed by a portion of the FF&E Financing.
"Sponsor" means AHL or London Clubs.
"Stated Amount" of each Letter of Credit means the total amount
available to be drawn under such Letter of Credit upon the issuance
thereof.
"Stated Maturity Date" means
(a) with respect to all Term A Loans, the date which is the
seventh anniversary of the Closing Date;
(b) with respect to all Term B Loans, the date which is
8.5 years after the Closing Date; and
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(c) with respect to all Term C Loans, the tenth anniversary of
the Closing Date.
"Subcontract" means a contract between the Design/Builder and a
Subcontractor which has been entered into in accordance with the
Design/Build Contract.
"Subcontractor" is defined in the Design/Build Contract.
"Subsidiary" means, relative to any Person, any corporation,
partnership or other business entity of which more than 50% of the
outstanding capital stock (or other ownership interest) having ordinary
voting power to elect the board of directors, managers or other voting
members of the governing body of such Person (irrespective of whether at
the time Capital Stock (or other ownership interest) of any other class or
classes of such Person shall or might have voting power upon the occurrence
of any contingency) is at the time directly or indirectly owned by such
Person, by such Person and one or more other Subsidiaries of such Person,
or by one or more other Subsidiaries of such Person. Except as otherwise
indicated herein, references to Subsidiaries refer to Subsidiaries of the
Borrower.
"Substantial Completion" means that (x) the conditions set forth in
the definition of "Completion" have occurred, (y) "Substantial Completion"
(as such is defined in Section 31.8 of the General Conditions annexed to
the Design/Build Contract as Attachment D) has occurred and (z) a Main
Project Certificate of Occupancy has been issued and is outstanding for the
Hotel/Casino.
"Survey" means, collectively, the surveys required by Section 3.1.24
of the Disbursement Agreement.
"Syndication Agent" is defined in the preamble.
"Tax" means any federal, state, local, foreign or other tax, levy,
impost, fee, assessment or other government charge, including income,
estimated income, business, occupation, franchise, property, payroll,
personal property, sales, transfer, use, employment, commercial rent,
occupancy, franchise or withholding taxes, and any premium, including
interest, penalties and additions in connection therewith.
"Tax Amount" means, relative to any period, without duplication, the
increase in the cumulative United States federal, state and local income
tax liability of the holders of Equity Interests in the Borrower (or if the
holder is a pass-though entity for United States income tax purposes, the
direct or indirect holders of its equity interests subject to United
States, state and local income tax) in respect of such interests for such
period, plus any additional amounts payable to such holders for taxes
arising from ownership of such Equity Interests.
"Tax Certificate" means a Tax Certificate substantially in the form of
Exhibit EE hereto.
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"Tenant Improvement" means (x) the portion of the construction to be
performed by or on behalf of the Borrower in the interior of the Main
Project pursuant to a lease to adapt the same for the initial use and
occupancy by the tenant under such lease or (y) if a tenant under a Lease
undertakes to complete the work to the portion of the Main Project covered
by such Lease, any allowances or payments advanced to such Person by the
Borrower.
"Term A Lender" means any Lender which has made a Term A Loan
Commitment or holds a Term A Loan.
"Term A Loan" is defined in Section 2.1.1.
"Term A Loan Commitment" means the aggregate principal amount of
Term A Loans which the Term A Lenders are obligated to make pursuant to
Section 2.1.1. The Term A Loan Commitment shall not exceed $136,000,000.
"Term A Loan Commitment Amount" means, on any date, relative to any
Term A Lender, the portion of the Term A Loan Commitment of such Term A
Lender reduced by the principal amount of any Term A Loans made by such
Term A Lender as of such date. The portion of the Term A Loan Commitment
of each Term A Lender is set forth below such Term A Lender's signature
hereto or in a Lender Assignment Agreement.
"Term A Loan Commitment Fee" is defined in Section 3.3.1.
"Term A Loan Commitment Termination Date" means the earlier of
(a) the Term B and Term C Loan Commitment Termination Date (if
the Term B Loans and Term C Loans have not been made on or prior to
such date);
(b) the Conversion Date; and
(c) the date on which any Commitment Termination Event occurs.
Upon the occurrence of any event described in clause (a) or (b), the Term A
Loan Commitments shall terminate automatically and without any further
action.
"Term A Note" means, on any date, a promissory note of the Borrower
payable to any Term A Lender, in the form of Exhibit A-1 hereto (as such
promissory note may thereafter from time to time be amended, supplemented,
amended and restated, endorsed or otherwise modified), evidencing the
aggregate Indebtedness of the Borrower to such Term A Lender resulting from
outstanding Term A Loans, and also means all other promissory notes
accepted from time to time in substitution or replacement therefor or
renewal thereof.
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"Term B and Term C Loan Commitment Fee" is defined in Section 3.3.1.
"Term B and Term C Loan Commitment Termination Date" means the earlier
of
(a) February 27, 1998; and
(b) the date on which any Commitment Termination Event occurs.
Upon the occurrence of any event described in clause (a) or (b), the Term B
Loan Commitments and the Term C Loan Commitments shall terminate
automatically and without any further action.
"Term B Lender" means any Lender which has made a Term B Loan
Commitment or holds a Term B Loan.
"Term B Loan" is defined in clause (a) of Section 2.1.3.
"Term B Loan Commitment" means the aggregate principal amount of
Term B Loans which the Term B Lenders are obligated to make pursuant to
clause (b) of Section 2.1.3. The Term B Loan Commitment shall not exceed
$114,000,000.
"Term B Loan Commitment Amount" means, on any date, relative to any
Term B Lender, the portion of the Term B Loan Commitment of such Term B
Lender reduced by the principal amount of any Term B Loans made by such
Term B Lender as of such date. The portion of the Term B Loan Commitment
of each Term B Lender is set forth below such Term B Lender's signature
hereto or in a Lender Assignment Agreement.
"Term B Note" means, on any date, a promissory note of the Borrower
payable to any Term B Lender, in the form of Exhibit A-2 hereto (as such
promissory note may thereafter from time to time be amended, supplemented,
amended and restated, endorsed or otherwise modified), evidencing the
aggregate Indebtedness of the Borrower to such Term B Lender resulting from
outstanding Term B Loans, and also means all other promissory notes
accepted from time to time in substitution or replacement therefor or
renewal thereof.
"Term C Lender" means any Lender which has made a Term C Loan
Commitment or holds a Term C Loan.
"Term C Loan" is defined in clause (b) of Section 2.1.3.
"Term C Loan Commitment"means the aggregate principal amount of Term C
Loans which the Term C Lenders are obligated to make pursuant to clause (c)
of Section 2.1.3. The Term C Loan Commitment shall not exceed
$160,000,000.
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"Term C Loan Commitment Amount" means, on any date, relative to any
Term C Lender, the portion of the Term C Loan Commitment of such Term C
Lender reduced by the principal amount of any Term C Loans made by such
Term C Lender as of such date. The portion of the Term C Loan Commitment
of each Term C Lender is set forth below such Term C Lender's signature
hereto or in a Lender Assignment Agreement.
"Term C Note" means, on any date, a promissory note of the Borrower
payable to any Term C Lender, in the form of Exhibit A-3 hereto (as such
promissory note may thereafter from time to time be amended, supplemented,
amended and restated, endorsed or otherwise modified), evidencing the
aggregate Indebtedness of the Borrower to such Term C Lender resulting from
outstanding Term C Loans, and also means all other promissory notes
accepted from time to time in substitution or replacement therefor or
renewal thereof.
"Theater" is defined in clause (d) of the fourth recital.
"Theater Lease" means, on any date, the Lease, to be entered into
between the Borrower and Aladdin Music covering the Theater Space as the
same may be amended, supplemented, amended and restated, replaced or
otherwise modified from time to time in accordance with the terms hereof.
"Theater Renovation Completion" means that each of the following has
occurred:
(a) the renovation of the Theater has been completed
substantially in accordance with this Agreement, the Plans and
Specifications, the provisions of the Reciprocal Easement Agreement
applicable to the Theater and all of the other Operative Documents to
the extent that the development, renovation, use or operation of the
Theater are affected thereby, except for the Main Project Punchlist
Items applicable to the Theater and in substantial compliance with all
Legal Requirements pertaining to the renovation of the Theater so as
to allow the Theater to be utilized for its intended purpose;
(b) reasonable and safe means of access and facilities necessary
for the use and occupancy of the Theater have been installed and are
operational including corridors, elevators, stairways, heating,
ventilation, air conditioning, sanitary, water and electrical
facilities and all security systems and life safety systems required
by the Plans and Specifications, the Reciprocal Easement Agreement,
the other Operative Documents and all Legal Requirements; and
(c) there are no outstanding claims or Liens by any Contractor
or Subcontractor or any other Person against any portion of the
Hotel/Casino Component except for Permitted Liens and Permitted
Encumbrances.
"Theater Space" means the property and the space described in Exhibit
N-7 hereto.
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"Title Insurer" means, collectively, Stewart Title Guaranty Company
and Lawyers Title Insurance Corporation.
"Title Policy" means each lenders A.L.T.A. policy of title insurance
issued by the Title Insurer as of the Effective Date, as provided in
Section 3.1.25 of the Disbursement Agreement, including all amendments
thereto, endorsements thereof and substitutions or replacements therefor.
"Total Debt" means, on any date, the outstanding principal amount of
all Indebtedness of the Borrower of the type described in clauses (a), (b)
and (c) of such definition and (without duplication) any Contingent
Liability in respect of any of the foregoing of any other Person.
"Total Debt to EBITDA Ratio" means, as of the close of any Fiscal
Quarter, commencing with the close of the Fiscal Quarter in which the
Conversion Date occurs, the ratio of
(a) Total Debt outstanding on the last day of such Fiscal
Quarter
to
(b) EBITDA computed for the period consisting of such Fiscal
Quarter (or such shorter portion of any Fiscal Quarter after the
occurrence therein of the Conversion Date) and each of the three
immediately preceding Fiscal Quarters (or such lesser number of Fiscal
Quarters to have closed since the Conversion Date) and determined for
any period ending on or prior to the first anniversary of the
Conversion Date, consistently with the proviso to the definition of
the term "EBITDA".
"Trade Detail Report" means a Trade Detail Report in the form of
Exhibit DD hereto.
"Trademark Security Agreement" means, on any date, the Trademark
Security Agreement executed and delivered by an Authorized Representative
of the Borrower pursuant to Section 5.1.6, as originally in effect on the
Closing Date, in substantially the form of Exhibit B to the Security
Agreement and as thereafter from time to time amended, supplemented,
amended and restated or otherwise modified.
"Transaction" means the transactions contemplated by the Discount Note
Indenture and the Operative Documents.
"Trust" means the Trust under Article Sixth u/w/o Sigmund Sommer.
"Trust Estate" is defined in the Deed of Trust.
"type" means, relative to any Loan, the portion thereof, if any, being
maintained as a Base Rate Loan or a LIBO Rate Loan.
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"UCC" means the Uniform Commercial Code of the jurisdiction the law of
which governs the document with respect to the term used.
"Unallocated Contingency Balance" means (w) during the first month
after the Effective Date, the greater of (1) $24,000,000 or (2) the
Unallocated Contingency Calculation, (x) during the second month after the
Effective Date, the greater of $23,000,000 or (2) the Unallocated
Contingency Calculation, (y) during the third month after the Effective
Date, the greater of $22,000,000 or (2) the Unallocated Contingency
Calculation, and (z) thereafter, from time to time, the Unallocated
Contingency Calculation.
"Unallocated Contingency Calculation" means an amount equal to (x)
$25,000,000 minus (y) the product of (1) $25,000,000 multiplied by (2) the
percentage of construction completed on the date that the Advance is to be
made, as determined by the Construction Consultant.
"United States" or "U.S." means the United States of America, its
fifty states and the District of Columbia.
"Unsuitable Lender" is defined in clause (c) of Section 4.11.
"Voting Stock" means, with respect to any Person, Capital Stock of any
class or kind ordinarily having the power to vote for the election of
directors, managers or other voting members of the governing body of such
Person.
"Warrant" means the warrants issued by Enterprises on February 18,
1998 which, if exercised, will in the aggregate for all such warrants
entitle the holders thereof to acquire an aggregate of not more than
2,215,000 shares of the Capital Stock of Enterprises representing an
indirect interest in not more than 10% of the Holdings Common Membership
Interests, plus, warrants for up to 1,107,500 shares of the Capital Stock
of Enterprises which may be issued in connection with the Mall Project
credit enhancement on terms substantially the same as the Warrants issued
by Enterprises on February 18, 1998.
"Weighted Average Life to Maturity" means, relative to any
Indebtedness at any date, the number of years (calculated to the nearest
one-twelfth) obtained as the quotient of (x) the sum of the product of
(1) the amount of each then remaining installment, sinking fund, serial
maturity or other required payments of principal, including payment at
final maturity, in respect thereof, multiplied by (2) the number of years
(calculated to the nearest one-twelfth) that will elapse between such date
and the making of such payment divided by (y) the then outstanding
principal amount or liquidation preference, as applicable, of such
Indebtedness.
"Welfare Plan" means a "welfare plan", as such term is defined in
Section 3(1) of ERISA.
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"wholly-owned" means, with respect to any direct or indirect
Subsidiary, any Subsidiary all of the outstanding common stock (or similar
equity interest) of which (other than any director's qualifying shares or
investments by foreign nationals mandated by applicable laws) is owned
directly or indirectly by the Borrower.
"Work" is defined in Section 1.7 of the Design/Build Contract.
SECTION 1.2. Use of Defined Terms. Unless otherwise defined or the
context otherwise requires, terms for which meanings are provided in this
Agreement shall have such meanings when used in each other Loan Document,
the Disclosure Schedule, or any Borrowing Request, Letter of Credit
Issuance Request, Continuation/Conversion Notice, Compliance Certificate,
notice or other communications delivered from time to time in connection
with this Agreement or any other Loan Document.
SECTION 1.3. Cross-References. Unless otherwise specified,
references in this Agreement and in each other Loan Document to any Article
or Section are references to such Article or Section of this Agreement or
such other Loan Document, as the case may be, and, unless otherwise
specified, references in any Article, Section or definition to any item or
clause are references to such item or clause of such Article, Section or
definition.
SECTION 1.4. Accounting and Financial Determinations. Unless
otherwise specified, all accounting terms used herein or in any other Loan
Document shall be interpreted, and all accounting determinations and
computations hereunder or thereunder (including under Section 7.2.4) shall
be made, in accordance with, those generally accepted accounting principles
("GAAP") applied in the United States or, if applicable, the United Kingdom
in the preparation of the financial statements referred to in
Section 5.1.4. Unless otherwise expressly provided, all financial
covenants and defined financial terms for the Person covered thereby shall
be computed on a consolidated basis for such Person and its Subsidiaries,
in each case, without duplication.
ARTICLE II
COMMITMENTS, BORROWING AND ISSUANCE
PROCEDURES, NOTES AND LETTERS OF CREDIT
SECTION 2.1. Commitments. On the terms and subject to the conditions
of this Agreement (including Sections 2.1.4 and 2.1.5 and Article V),
(a) each Lender severally agrees to make Loans pursuant to its
Commitments, in each case as described in this Section 2.1; and
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(b) the Issuer agrees that it will issue Letters of Credit
pursuant to Section 2.1.2, and each other Lender that has a Term A
Loan Commitment severally agrees that it will purchase participation
interests in such Letters of Credit pursuant to Section 2.6.1.
No Lender shall have any liability for the failure of another Lender to
make its Commitment Amount available or to advance such Lender's Percentage
of any Loans to be made to the Borrower.
SECTION 2.1.1. Term A Loan Commitment. From time to time on any
Business Day occurring from and after the date on which the proceeds of all
Term B Loans and Term C Loans have been disbursed from the Bank Proceeds
Account but prior to the Term A Loan Commitment Termination Date, each
Lender that has a Term A Loan Commitment will make a loan (relative to such
Lender, its "Term A Loan") to the Borrower equal to such Lender's
Percentage of the aggregate amount of each Borrowing of the Term A Loans
requested by the Borrower to be made on such day; provided, however, that
each Lender may make Term A Loans prior to the date on which the proceeds
of the Term B Loans and Term C Loans have been disbursed from the Bank
Proceeds Account so long as the proceeds of such Loans are used to
reimburse the Issuer for, or fund the drawings of, Letters of Credit. The
Commitment of each such Lender described in this Section 2.1.1 is herein
referred to as its "Term A Loan Commitment". On the terms and subject to
the conditions hereof, the Borrower may from time to time borrow and prepay
the Term A Loans but no amount paid or prepaid with respect to the Term A
Loans may be reborrowed.
SECTION 2.1.2. Letter of Credit Commitment. From time to time on any
Business Day occurring from and after the date on which the Term B Loans
and the Term C Loans have been funded into the Bank Proceeds Account but
prior to the second Business Day immediately preceding the Conversion Date,
the Issuer will
(a) issue one or more standby letters of credit (relative to such
Issuer, its "Letter of Credit") for the account of the Borrower in the
Stated Amount requested by the Borrower on such day; or
(b) extend the Letter of Credit Stated Expiry Date of an existing
Letter of Credit previously issued in accordance with clause (a) of
this Section 2.1.2 to a date not later than the earlier of (x) the
Business Day immediately preceding the Conversion Date and (y) one
year from the date of such extension.
SECTION 2.1.3. Term B Loan and Term C Loan Commitments. In a single
Borrowing on the Closing Date, each Lender that has a Term B Loan
Commitment or a Term C Loan Commitment, as applicable,
(a) will make a loan (relative to such Lender, its "Term B Loan")
equal to such Lender's Percentage of the aggregate amount of the
Borrowing of Term B Loans to be
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made to the Borrower on such day (with the commitment of each such
Lender described in this clause (a) herein referred to as its "Term B
Loan Commitment"); and
(b) will make a loan (relative to such Lender, its "Term C Loan")
equal to such Lender's Percentage of the aggregate amount of the
Borrowing of Term C Loans to be made to the Borrower on such day (with
the commitment of each such Lender described in this clause (b) herein
referred to as its "Term C Loan Commitment"),
in each case directly into the Bank Proceeds Account on behalf of the
Borrower. On the terms and subject to the conditions hereof, the Borrower
may prepay the Term B Loans or the Term C Loans but no amount paid or
prepaid with respect to Term B Loans or Term C Loans may be reborrowed.
SECTION 2.1.4. Lenders Not Permitted or Required to Make Loans. No
Lender shall be permitted or required to make any Loan if, after giving
effect thereto, the aggregate outstanding principal amount of
(a) all Term A Loans
(i) of all Lenders with a Term A Loan Commitment, together
with the aggregate amount of all Letter of Credit Outstandings,
would exceed the then existing aggregate amount of the Term A
Loan Commitment Amounts, or
(ii) of such Lender with a Term A Loan Commitment, together
with such Lender's Percentage of the aggregate amount of all
Letter of Credit Outstandings, would exceed such Lender's then
existing Term A Loan Commitment Amount of such Lender; or
(b) all Term B Loans or all Term C Loans (as the case may be)
(i) of all Lenders made on the Closing Date would exceed the
aggregate amount of the Term B Loan Commitment Amounts (in the
case of Term B Loans) or the aggregate amount of the Term C Loan
Commitment Amounts (in the case of Term C Loans), or
(ii) of such Lender with a Term B Loan Commitment or with a
Term C Loan Commitment, as applicable, made on the Closing Date
would exceed such Lender's then existing Term B Loan Commitment
Amount (in the case of Term B Loans) or then existing Term C Loan
Commitment Amount (in the case of Term C Loans).
SECTION 2.1.5. Issuer Not Permitted or Required to Issue Letters of
Credit. No Issuer shall be permitted or required to issue any Letter of
Credit if, after giving effect thereto, (x) the
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aggregate amount of all Letter of Credit Outstandings would exceed the
Letter of Credit Commitment Amount or (y) the sum of the aggregate amount
of all Letter of Credit Outstandings plus the aggregate principal amount of
all Term A Loans then outstanding would exceed the aggregate amount of the
Term A Loan Commitment Amounts.
SECTION 2.2. Reduction of the Term A Loan Commitment Amount. The
Borrower may, from time to time on any Business Day occurring after the
Effective Date, voluntarily reduce the aggregate amount of the Term A Loan
Commitment Amounts on the Business Day so specified by the Borrower;
provided, however, that all such reductions shall require at least one
Business Day's prior notice to the Administrative Agent and be permanent,
and any partial reduction of the aggregate amount Term A Loan Commitment
Amounts shall be in a minimum amount of $1,000,000 and in an integral
multiple of $500,000. The aggregate amount of all Term A Loan Commitments
shall be reduced by the Administrative Agent, prior to the Term A Loan
Commitment Termination Date, by an amount equal to any reduction in the
Main Project Budget as approved by the Administrative Agent, the Borrower
and the Construction Consultant. In addition to the foregoing, in the
event that the Borrower does not enter into the Theater Lease with Aladdin
Music, there shall be no investment by the Borrower in Aladdin Music, the
amount set forth in the Main Project Budget as "Investment in Aladdin
Music, LLC" shall be applied by the Borrower to pay for the costs of
renovation of the Theater (based upon a renovation budget approved by the
Administrative Agent as determined in good faith in its sole discretion),
and the unadvanced portion of the aggregate amount of the Term A Loan
Commitment Amounts shall be reduced dollar-for-dollar by the amount
remaining in such line item. Upon any reduction of the aggregate amount of
the Term A Loan Commitment Amounts under this Section, the Term A Loan
Commitment Amount of each Term A Lender shall be reduced by an amount equal
to such Lender's Percentage of such reduction.
SECTION 2.3. Borrowing Procedure. Loans shall be made by the Lenders
in accordance with this Section 2.3.
SECTION 2.3.1. Borrowing Procedure. On the terms and subject to the
conditions of this Agreement, by delivering a Borrowing Request to the
Administrative Agent on or before 10:00 a.m., New York City time, on a
Business Day, the Borrower may from time to time irrevocably request, on
not less than one Business Day's notice in the case of Base Rate Loans, or
three Business Days' notice in the case of LIBO Rate Loans, and in either
case not more than five Business Days' notice, that a Borrowing be made.
On the terms and subject to the conditions of this Agreement, each
Borrowing shall be comprised of the type of Loans, and shall be made on the
Business Day, specified in such Borrowing Request. On or before 11:00 a.m.
(New York City time) on such Business Day each Lender that has a Commitment
to make the Loans being requested shall deposit with the Administrative
Agent same day funds in an amount equal to such Lender's Percentage of the
requested Borrowing. Such deposit will be made to an account which the
Administrative Agent shall specify from time to time by notice to the
Lenders. To the extent funds are received from the Lenders, the
Administrative Agent shall make such funds available to the Disbursement
Agent by wire transfer to the Bank Proceeds
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Account or, if applicable, the Collection Account for distribution to the
Borrower in accordance with the Disbursement Agreement.
SECTION 2.3.2. Term A Loans. On the terms and subject to the
conditions of this Agreement and the Disbursement Agreement prior to the
Term A Loan Commitment Termination Date, the Borrower may from time to time
irrevocably request that Term A Loans be made by the Lenders. Any such
request for Term A Loans shall be made in accordance with Section 2.3.1 and
Section 2.4 of the Disbursement Agreement; provided, however, that any of
the Term A Loans which are advanced by the Lenders to reimburse the Issuer
for or fund draws under a Letter of Credit shall be made in accordance with
Sections 2.6.1 and 2.6.2.
SECTION 2.3.3. Term B Loans and Term C Loans. On the terms and
conditions of this Agreement prior to the Term B and Term C Loan Commitment
Termination Date, the Borrower may irrevocably request that the Term B
Loans and the Term C Loans be made by the Lenders on the Closing Date. Any
such request for the Term B Loans and the Term C Loans shall be made in
accordance with Section 2.3.1 and Section 2.4 of the Disbursement
Agreement. The Term B Loans and the Term C Loans shall be made
simultaneously and neither any Term B Loan nor any Term C Loan shall be
made without all other such Loans being then made. The proceeds of the
Term B Loans and the Term C Loans shall be made available by the Lenders,
by wire transfer to the Bank Proceeds Account, for distribution pro rata by
the Disbursement Agent in accordance with the Disbursement Agreement.
SECTION 2.3.4. Additional Term B Loans and/or Term C Loans. (a) On
the terms and subject to the conditions of this Agreement and the
Disbursement Agreement prior to the date on which all of the Term B Loans
and Term C Loans have been advanced from the Bank Proceeds Account, the
Borrower may request in accordance with Section 2.3.1 and Section 2.4 of
the Disbursement Agreement an additional borrowing of a loan to be deemed
to have been made as a Term B Loan and/or a Term C Loan in an aggregate
amount not exceeding $5,000,000 by (i) any of the Lenders, in each case,
which agrees to make such loan or (ii) any commercial bank, fund or other
financial institution reasonably acceptable to the Administrative Agent and
the Borrower, in each case, which agrees to make such loan in a single
borrowing on a Business Day prior to such date. The proceeds of such loan
shall be made available by such institution by wire transfer to the Bank
Proceeds Account, for distribution by the Disbursement Agent in accordance
with the Disbursement Agreement.
(b) Following the making of such loan, (i) such borrowing shall be
deemed to be a Borrowing; (ii) such loan shall be deemed to have been made
as a Term B Loan and/or a Term C Loan, as the case may be; (iii) the final
amortization payment amount set forth under the headings on "Scheduled
Repayment of Term B Loan" and "Scheduled Repayment of Term C Loan" in
Schedule II hereto shall be increased by the amount of such made as a Term
B Loan and Term C Loan, respectively; (iv)such institution shall be deemed
to be a Term B Loan Lender and/or a Term C Loan Lender; (v) the Percentage
of Term B Loans of each Term B Lender (including such institution) shall be
adjusted to equal a fraction, the numerator of which
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equals the amount of Term B Loans held by such Term B Lender (including, in
the case of such institution, such loan) and the denominator of which
equals the aggregate outstanding amount of all Term B Loans (including such
loan); and (vi) the Percentage of Term C Loans of each Term C Lender
(including such institution) shall be adjusted to equal a fraction, the
numerator of which equals the amount of Term C Loans held by such Term C
Lender (including, in the case of such institution, such loan) and the
denominator of which equals the aggregate outstanding amount of all Term C
Loans (including such loan).
(c) Notwithstanding the date on which such loan was made by such
institution or any provisions of the UCC, any applicable law or decision,
each Lender agrees that all Liens and security interests created under any
Loan Document in favor of the Lenders shall inure to the benefit of such
institution as if such institution had made such loan on the Closing Date
and such Liens and security interests shall be treated by such Lenders, on
the one hand, and such institution, on the other hand, as having equal
priority.
SECTION 2.4. Continuation and Conversion Elections. By delivering a
Continuation/Conversion Notice to the Administrative Agent on or before
10:00 a.m., New York City time, on a Business Day, the Borrower may from
time to time irrevocably elect, on not less than one Business Day's notice
in the case of Base Rate Loans, or three Business Days' notice in the case
of LIBO Rate Loans, and in either case not more than five Business Days'
notice, that all, or any portion in an aggregate minimum amount of
$4,000,000 and an integral multiple of $1,000,000, in the case of LIBO Rate
Loans, or an aggregate minimum amount of $4,000,000 and an integral
multiple of $1,000,000, in the case of Base Rate Loans, be, in the case of
Base Rate Loans, converted into LIBO Rate Loans or be, in the case of LIBO
Rate Loans, converted into Base Rate Loans or continued as LIBO Rate Loans
(in the absence of delivery of a Continuation/Conversion Notice with
respect to any LIBO Rate Loan at least three Business Days (but not more
than five Business Days) before the last day of the then current Interest
Period with respect thereto, such LIBO Rate Loan shall, on such last day,
automatically convert to a Base Rate Loan); provided, however, that
(x) each such conversion or continuation shall be pro rated among the
applicable outstanding Loans of all Lenders that have made such Loans and
(y) no portion of the outstanding principal amount of any Loans may be
continued as, or be converted into, LIBO Rate Loans when any Default has
occurred and is continuing.
SECTION 2.5. Funding. Each Lender may, if it so elects, fulfill its
obligation to make, continue or convert LIBO Rate Loans hereunder by
causing one of its foreign branches or Affiliates (or an international
banking facility created by such Lender) to make or maintain such LIBO Rate
Loan; provided, however, that such LIBO Rate Loan shall nonetheless be
deemed to have been made and to be held by such Lender, and the obligation
of the Borrower to repay such LIBO Rate Loan shall nevertheless be to such
Lender for the account of such foreign branch, Affiliate or international
banking facility. In addition, the Borrower hereby consents and agrees
that, for purposes of any determination to be made for purposes of
Section 4.1, 4.2, 4.3 or 4.4, it shall be conclusively assumed that each
Lender elected to fund all LIBO Rate Loans by purchasing Dollar deposits in
its relevant interbank eurodollar market.
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SECTION 2.6. Letter of Credit Issuance Procedures. By delivering to
the Administrative Agent a Letter of Credit Issuance Request on or before
10:00 a.m., New York City time, on a Business Day, the Borrower may from
time to time irrevocably request, on not less than three nor more than ten
Business Days' notice in the case of an initial issuance of a Letter of
Credit for the account of the Borrower and not less than three Business
Days' prior notice in the case of a request for the extension of the Letter
of Credit Stated Expiry Date of a Letter of Credit, that the Issuer issue,
or extend the Letter of Credit Stated Expiry Date of, as the case may be,
an irrevocable Letter of Credit in such form as may be requested by the
Borrower and approved by the Issuer, solely for the purposes described in
Section 7.1.9(c). Each Letter of Credit shall by its terms be stated to
expire on a date (its "Letter of Credit Stated Expiry Date") no later than
the earlier to occur of (x) the Business Day immediately preceding the
Conversion Date or (y) one year from the date of its issuance. The Issuer
will make available to the beneficiary thereof the original of each Letter
of Credit which it issues hereunder. The issuance of a Letter of Credit
under this Section 2.6 shall be deemed to be a Borrowing under the Term A
Loan Commitment in the face amount of such Letter of Credit.
SECTION 2.6.1. Other Lenders' Participation. Upon the issuance of
each Letter of Credit pursuant hereto, and without further action, each
Term A Lender (other than the Issuer) shall be deemed to have irrevocably
purchased, to the extent of its Letter of Credit Commitment, a
participation interest in such Letter of Credit (including any Letter of
Credit Reimbursement Obligation with respect thereto), and each Term A
Lender shall, to the extent of its then existing Term A Loan Commitment
Amount, be responsible for funding promptly (and in any event within one
Business Day) to the Issuer the amount of any Letter of Credit
Reimbursement Obligation which has not otherwise been reimbursed by the
Borrower in accordance with Section 2.6.3. In addition, each Term A Lender
shall, to the extent of its Term A Loan Commitment, be entitled to receive
a ratable portion of the Letter of Credit fees payable pursuant to
Section 3.3.3 with respect to each Letter of Credit (other than the
issuance fees payable to the Issuer of such Letter of Credit pursuant to
the last sentence of Section 3.3.3) and of interest payable pursuant to
Section 3.2 with respect to any Letter of Credit Reimbursement Obligation.
To the extent that a Term A Lender has reimbursed any Issuer for a Letter
of Credit Disbursement as required by this Section, such Term A Lender
shall be entitled to receive its ratable portion of any amounts
subsequently received (from the Borrower or otherwise) in respect of such
Letter of Credit Disbursement. The obligations of each Term A Lender under
this Section 2.6.1 are obligatory on the part of each Term A Lender, such
obligations of each Term A Lender shall be performed whether or not a
Default or Event of Default exists hereunder and whether or not the
conditions set forth in Section 3.2 of the Disbursement Agreement and
Article V of this Agreement have been satisfied, shall be absolute,
unconditional, and irrevocable, and shall be performed by each Term A
Lender strictly in accordance with the terms and provisions of this
Agreement, under any and all circumstances and irrespective of any set-off,
counterclaim, or defense to payment which the Term A Lenders, individually
or collectively, may have or have had against the Issuer, the other
Lenders, the Administrative Agent or the Disbursement Agent, shall not be
subject to the requirement that the Borrower reimburse the Issuer for any
sight drafts presented under any Letter of Credit and shall be
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independent of all of the obligations of the Borrower, the Lenders, the
Administrative Agent and/or the Disbursement Agent. Notwithstanding
anything to the contrary in this Section 2.6.1, so long as any Letter of
Credit is outstanding, each of the Term A Lenders shall have the absolute
obligation to make a Term A Loan to the Issuer on behalf of Borrower in
accordance with Section 2.6.2.
SECTION 2.6.2. Letter of Credit Disbursements. The Issuer will
notify the Borrower and the Administrative Agent promptly of the
presentment for payment of any Letter of Credit, together with notice of
the date (the "Letter of Credit Disbursement Date") such payment shall be
made (each such payment, a "Letter of Credit Disbursement"). Immediately
thereafter, the Administrative Agent shall give telephonic and facsimile
notice to the Term A Lenders of the presentation of such sight draft, the
amount of such sight draft, the date on which payment thereon has been or
will be made, and the Percentage of each Term A Lender in the amount of
such sight draft together with a copy of the sight draft and accompanying
documents. A copy of such sight draft, together with such accompanying
documents, shall, for purposes of this Agreement, be deemed to be a
Borrowing Request for a Term A Loan to each of the Term A Lenders (which,
on the date of such Borrowing, shall bear interest at the Base Rate).
Subject to the terms and provisions of such Letter of Credit, the Issuer
shall make such Letter of Credit Disbursement to the beneficiary (or its
designee) of such Letter of Credit. Prior to 11:00 a.m., New York City
time, on the first Business Day following the date on which notice was
given by the Administrative Agent to the Term A Lenders, the Term A Lenders
shall advance as an obligatory advance hereunder a Term A Loan to the
Administrative Agent (whether or not the Borrower has satisfied the
conditions set forth in Section 3.2 of the Disbursement Agreement or
Article V of this Agreement), for the account of the Issuer, in an amount
equal to such Term A Lender's Percentage of the amount which the Issuer has
disbursed under such Letter of Credit, together with interest thereon at a
rate per annum equal to the rate per annum then in effect for Base Rate
Loans (with the then Applicable Base Rate Margin accruing on such amount)
pursuant to Section 3.2 for the period from the Letter of Credit
Disbursement Date through the date of such reimbursement. The Term A Loans
made pursuant to this Section 2.6.2 shall be applied to the payment of such
sight draft (and at the election of the Issuer be advanced directly to the
beneficiary) and shall not be used for any other purpose. Without limiting
in any way the foregoing and notwithstanding anything to the contrary
contained herein or in any separate application for any Letter of Credit,
the Borrower hereby acknowledges and agrees that it shall be obligated to
reimburse the Issuer upon each Letter of Credit Disbursement by means of a
Borrowing of Term A Loans made pursuant to this Section 2.6.2.
SECTION 2.6.3. Reimbursement. The obligation (a "Letter of Credit
Reimbursement Obligation") of the Borrower under Section 2.6.2 to reimburse
the Issuer with respect to each Letter of Credit Disbursement (including
interest thereon), and, upon the failure of the Borrower to reimburse the
Issuer, each Term A Lender's obligation under Section 2.6.1 to reimburse
the Issuer, shall be absolute, unconditional and irrevocable under any and
all circumstances and irrespective of any setoff, counterclaim or defense
to payment which the Borrower or such Term A Lender, as the case may be,
may have or have had against the Issuer or any other Term A
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Lender, including any defense based upon the failure of any Letter of
Credit Disbursement to conform to the terms of the applicable Letter of
Credit (if, in the Issuer's good faith opinion, such Letter of Credit
Disbursement is determined to be appropriate) or any non-application or
misapplication by the beneficiary of the proceeds of such Letter of Credit;
provided, however, that after paying in full its Letter of Credit
Reimbursement Obligation hereunder, nothing herein shall adversely affect
the right of the Borrower or such other Term A Lender, as the case may be,
to commence any proceeding against the Issuer for any wrongful Letter of
Credit Disbursement made by the Issuer under a Letter of Credit as a result
of acts or omissions constituting gross negligence or wilful misconduct on
the part of the Issuer.
SECTION 2.6.4. Deemed Letter of Credit Disbursements. Upon the
occurrence and during the continuance of any Default of the type described
in Section 8.1.10 or, with notice from the Administrative Agent, upon the
occurrence and during the continuance of any other Event of Default,
(a) an amount equal to that portion of all Letter of Credit
Outstandings attributable to the then aggregate amount which is
undrawn and available under all Letters of Credit issued and
outstanding hereunder shall, without demand upon or notice to the
Borrower, be deemed to have been paid or disbursed by the Issuer under
such Letters of Credit (notwithstanding that such amount may not in
fact have been so paid or disbursed); and
(b) upon notification by the Administrative Agent to the Borrower
of its obligations under this Section, the Borrower shall be
immediately obligated to reimburse the Issuer for the amount deemed to
have been so paid or disbursed by such Issuer, in which case the last
four sentences of Section 2.6.2 shall apply.
Any amounts so payable by the Borrower pursuant to this Section 2.6.4 shall
be deposited in cash with the Administrative Agent and held as collateral
security for the Obligations in connection with the Letters of Credit
issued by the Issuer, and the Administrative Agent shall make disbursements
thereof from time to time to reimburse the Issuer for payments made by the
Issuer with respect to Letters of Credit. At such time when the Default or
Events of Default giving rise to the deemed disbursements hereunder shall
have been cured or waived, the Administrative Agent shall return to the
Borrower all amounts then on deposit with the Administrative Agent pursuant
to this Section which have not been applied to the partial satisfaction of
such Obligations.
SECTION 2.6.5. Nature of Letter of Credit Reimbursement Obligations.
The Borrower and, to the extent set forth in Section 2.6.1, each Term A
Lender shall assume all risks of the acts, omissions or misuse of any
Letter of Credit by the beneficiary thereof. The Issuer (except to the
extent of its own gross negligence or wilful misconduct) shall not be
responsible for:
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(a) the form, validity, sufficiency, accuracy, genuineness or
legal effect of any Letter of Credit or any document submitted by any
party in connection with the application for and issuance of a Letter
of Credit, even if it should in fact prove to be in any or all
respects invalid, insufficient, inaccurate, fraudulent or forged;
(b) the form, validity, sufficiency, accuracy, genuineness or
legal effect of any instrument transferring or assigning or purporting
to transfer or assign a Letter of Credit or the rights or benefits
thereunder or the proceeds thereof in whole or in part, which may
prove to be invalid or ineffective for any reason;
(c) failure of the beneficiary to comply fully with conditions
required in order to demand payment under a Letter of Credit;
(d) errors, omissions, interruptions or delays in transmission or
delivery of any messages, by mail, facsimile or otherwise; or
(e) any loss or delay in the transmission or otherwise of any
document or draft required in order to make a Letter of Credit
Disbursement under a Letter of Credit.
None of the foregoing shall affect, impair or prevent the vesting of any of
the rights or powers granted to the Issuer or any Term A Lender hereunder.
In furtherance and not in limitation or derogation of any of the foregoing,
any action taken or omitted to be taken by an Issuer in good faith (and not
constituting gross negligence or willful misconduct) shall be binding upon
the Borrower and each such Term A Lender, and shall not put such Issuer
under any resulting liability to the Borrower or any such Term A Lender, as
the case may be.
SECTION 2.7. Notes. Each Lender's Loans under a Commitment shall be
evidenced by a Note payable to the order of such Lender in a maximum
principal amount equal to such Lender's original applicable Commitment
Amount. The Borrower hereby irrevocably authorizes each Lender to make (or
cause to be made) appropriate notations on the grid attached to such
Lender's Note (or on any continuation of such grid), which notations, if
made, shall evidence, inter alia, the date of, the outstanding principal
of, and the interest rate and Interest Period applicable to the Loans
evidenced thereby. Such notations shall be conclusive and binding on the
Borrower absent manifest error; provided, however, that the failure of any
Lender to make any such notations shall not limit or otherwise affect any
Obligations of the Borrower or any other Obligor.
SECTION 2.8. Registered Notes. (a) Any Lender may request the
Borrower (through the Administrative Agent), and the Borrower agrees (i) to
exchange for any Notes held by such Lender, or (ii) to issue to such Lender
on the date it becomes a Lender, promissory notes(s) registered as provided
in clause (b) of this Section 2.8 (each, a "Registered Note"), to be in
substantially the form agreed to by the Borrower and such Lender.
Registered Notes may not be exchanged for Notes that are not Registered
Notes.
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(b) The Borrower shall maintain, or cause to be maintained, a
register (the "Register") (which, at the request of the Borrower,
shall be kept by the Administrative Agent of behalf of the Borrower at
no extra charge to the Borrower at the address to which notices to the
Administrative Agent are to be sent under this Agreement) on which it
enters the name of the registered owner of the Lender Obligations(s)
evidenced by a Registered Note.
(c)The Register shall be available for inspection by the Borrower
and any Lender at any reasonable time upon reasonable (but in any
event not less than 10 business Days) prior written notice.
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
SECTION 3.1. Repayments and Prepayments; Application.
SECTION 3.1.1. Repayments and Prepayments. The Borrower shall repay
in full the unpaid principal amount of each Loan upon the applicable Stated
Maturity Date therefor. Prior thereto, payments and prepayments of Loans
shall or may be made as set forth below.
(a)(i) From time to time on any Business Day, the Borrower may
make a voluntary prepayment, in whole, of the outstanding
principal amount of any Term A Loan, provided, however, that
(A) All such voluntary prepayments shall require at
least one but no more than five Business Days' prior written
notice to the Administrative Agent; and
(B) All such voluntary partial prepayments shall be, in
the case of LIBO Rate Loans, in an aggregate minimum amount
of $4,000,000 and an integral multiple of $1,000,000 and, in
the case of Base Rate Loans, in an aggregate minimum amount
of $4,000,000 and an integral multiple of $1,000,000.
(ii) From time to time on any Business Day after the second
anniversary of the Effective Date, the Borrower may make a
voluntary prepayment, in whole or in part, of the outstanding
principal amount of any Term B Loan or Term C Loan; provided,
however, that
(A) any such prepayment of such Loans shall be made pro
rata among such Loans of the same type and, if applicable,
having the same Interest Period of all Lenders that have
made such Loans (with the
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amounts so allocated being applied to the remaining
amortization payments for such Loans in such amounts as the
Borrower shall determine);
(B) all such voluntary prepayments shall require at
least one but no more than five Business Days' prior written
notice to the Administrative Agent;
(C) all such voluntary partial prepayments shall be, in
the case of LIBO Rate Loans, in an aggregate minimum amount
of $4,000,000 and an integral multiple of $1,000,000 and, in
the case of Base Rate Loans, in an aggregate minimum amount
of $4,000,000 and an integral multiple of $1,000,000; and
(D) shall be accompanied by a premium equal to the
product of (1) the percentage set forth opposite the 12-month
period ending on the anniversary of the Effective Date in which
such prepayment is made multiplied by (2) the amount then
prepaid:
<TABLE>
<CAPTION>
<S> <C>
Third Anniversary: 3.00%
Fourth Anniversary: 2.00%
Fifth Anniversary: 1.00%
Each Anniversary Thereafter: 0%
</TABLE>
(b) From and after the Conversion Date, the principal amount of
the Term A Loans, the Term B Loans and the Term C Loans shall be
amortized (the "Scheduled Amortization") on the dates and in the
amounts set forth on Schedule II.
(c) From and after the Conversion Date, the Borrower shall make
mandatory prepayments of principal (the "Mandatory Prepayments") of
all Loans in addition to the Scheduled Amortization on the dates and
in the amounts set forth in Schedule III; provided, however, on any
date on which a Mandatory Prepayment is to be made, any Term B Lender
or a Term C Lender may elect not to receive its portion of such
Mandatory Prepayment in which case 50% of the portion of the Mandatory
Prepayment which was to have been made to such Lender shall be paid
pro rata to (x) the Term B Lenders and the Term C Lenders and which
have elected to receive their portions of such Mandatory Prepayment
and (y) the Term A Lenders which have made a Term A Loan (up to the
outstanding amount of the Term A Loans), and upon the payment of such
50% portion of such Mandatory Prepayment, the Borrower shall be deemed
to have satisfied its obligations to make such Mandatory Prepayment.
Except as set forth in the proviso of the immediately preceding
sentence, Mandatory Prepayments will be applied pro rata in inverse
order among the Term A Loan, the Term B Loan and the Term C Loan.
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(d) If the entire "Investment in Aladdin Music, LLC" has been
advanced from the Commitments, the Borrower shall make a mandatory
prepayment of principal (the "Music Investment Prepayment") of all
Term A Loans within 5 days after request by the Administrative Agent
to the Borrower by an amount equal to the excess of the amount set
forth in the Main Project Budget as "Investment in Aladdin Music, LLC"
over the costs of renovation of the Theater; and upon the payment of
such Music Investment Prepayment, the Borrower shall be deemed to have
satisfied its obligations to make such Music Investment Prepayment.
(e) In addition to the Scheduled Amortization, the Mandatory
Prepayments and the Music Investment Prepayments, the entire
outstanding principal balance of all Loans shall become immediately
due and payable (and any outstanding Letters of Credit shall be cash
collateralized as contemplated by Section 2.6.4), and the obligation
of any Term A Lender to make a Term A Loan (except as otherwise
required under Section 2.6.2) or the Issuer to issue any Letters of
Credit shall automatically terminate (a) upon a sale, transfer or
conveyance of or borrowing against (whether or not secured by) the
Hotel/Casino not otherwise permitted under the Loan Documents, (b) a
Change in Control, or (c) if no disbursement of any proceeds of the
Term B Loan or the Term C Loan is made from the Bank Proceeds Account
within 12 months after the Closing Date (subject, however, to Force
Majeure Events). Any repayment of the aggregate principal amount of
the Term B Loan and the Term C Loan which is due with respect to a
Change in Control shall be accompanied by a premium equal to the
product of (x) the aggregate principal amount of the Term B Loans and
the Term C Loans then outstanding multiplied by (y) 1%.
SECTION 3.1.2. Application. Amounts paid or prepaid pursuant to
Section 3.1.1 shall be applied as set forth in this Section.
(a) So long as no Event of Default has occurred and is
continuing, the Lenders shall apply all amounts received in accordance
with the provisions of this Agreement first, to all Obligations (other
than principal and interest on the Loans), second, to accrued and
unpaid interest on the Loans, third, to the outstanding principal
amount of the Loans being maintained as Base Rate Loans, and fourth,
to the outstanding principal amount of the Loans being maintained as
LIBO Rate Loans; provided, however, that Music Investment Prepayments,
Mandatory Prepayments and Scheduled Amortization of LIBO Rate Loans,
if not made on the last day of the Interest Period with respect
thereto, shall be prepaid subject to the provisions of Section 4.4.
(b) After an Event of Default has occurred and so long as such
Event of Default is continuing, all amounts received by the Lenders
shall be applied first, to the costs and expenses of protecting and
preserving the security interests of the Lenders under the Loan
Documents, second, to the costs and expenses of protecting and
preserving the Main Project, third, to the costs and expenses of
enforcing the rights of the Lenders
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under this Agreement and the other Operative Documents, fourth, to
all other Obligations due under this Agreement and the other Operative
Documents (other than principal and interest on the Loans), fifth, to
the Lenders for accrued and unpaid interest on the Loans and to the
Lenders for all amounts due to them or their Affiliates under any Rate
Protection Agreements, sixth, to the aggregate outstanding principal
balance of the Term A Loans, then to the aggregate outstanding
principal balance of the Term B Loans and then to the aggregate
outstanding principal balance of the Term C Loans and, after all
amounts evidenced and secured by the Loan Documents have been
indefeasibly paid in full and the Borrowers have performed their
obligations under the Loan Documents, the balance, if any, shall be
delivered to the Borrower.
(c) Each payment and prepayment of the principal amount of the
Loans shall be applied to the outstanding principal amount of Loans of
such Borrower in inverse order of maturity.
SECTION 3.2. Interest Provisions. Interest on the outstanding
principal amount of Loans and the Letter of Credit Reimbursement
Obligations shall accrue and be payable in accordance with this
Section 3.2.
SECTION 3.2.1. Rates. Subject to Section 2.3.2, pursuant to an
appropriately delivered Borrowing Request or Continuation/Conversion
Notice, the Borrower may elect that Loans comprising a Borrowing accrue
interest at a rate per annum:
(a) on that portion maintained from time to time as a Base Rate
Loan, equal to the sum of the Alternate Base Rate from time to time in
effect plus the Applicable Base Rate Margin; and
(b) on that portion maintained as a LIBO Rate Loan, during each
Interest Period applicable thereto, equal to the sum of the LIBO Rate
(Reserve Adjusted) for such Interest Period plus the Applicable LIBO
Rate Margin.
All LIBO Rate Loans shall bear interest from and including the first day of
the applicable Interest Period to (but not including) the last day of such
Interest Period at the interest rate determined as applicable to such LIBO
Rate Loan.
SECTION 3.2.2. Post-Maturity Rates. After the date any principal
amount of any Loan or Letter of Credit Reimbursement Obligation is due and
payable (whether on the Stated Maturity Date, upon acceleration or
otherwise), or after any other monetary Obligation of the Borrower shall
have become due and payable, the Borrower shall pay, but only to the extent
permitted by law, interest (after as well as before judgment) on such
amounts at a rate per annum equal to (a) in the case of any overdue amounts
in respect of Loans or other obligations (or the related Commitments)
relative thereto, the rate that would otherwise be applicable to such Loans
made as Base Rate Loans pursuant to Section 3.2.1 plus 2% and (b) in the
case of
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other overdue monetary Obligations, the rate that would otherwise be
applicable to Term A Loans made as Base Rate Loans pursuant to Section
3.2.1 plus 2%.
SECTION 3.2.3. Payment Dates. Interest accrued on each Loan shall be
payable, without duplication:
(a) on the Stated Maturity Date therefor;
(b) on the date of any payment or prepayment, in whole or in
part, of principal outstanding on such Loan on the principal amount so
paid or prepaid;
(c) with respect to Base Rate Loans, on each Quarterly Payment
Date occurring after the Effective Date;
(d) with respect to LIBO Rate Loans, on the last day of each
applicable Interest Period (and, if such Interest Period shall exceed
three months, on each Quarterly Payment Date during such Interest
Period);
(e) with respect to any Base Rate Loans converted into LIBO Rate
Loans on a day when interest would not otherwise have been payable
pursuant to clause (c), on the date of such conversion; and
(f) on that portion of any Loan the Stated Maturity Date of which
is accelerated pursuant to Section 8.2 or Section 8.3, immediately
upon such acceleration.
Interest accrued on Loans or other monetary Obligations arising under this
Agreement or any other Loan Document after the date such amount is due and
payable (whether on the Stated Maturity Date, upon acceleration or
otherwise) shall be payable upon demand.
SECTION 3.3. Fees. The Borrower agrees to pay the fees set forth in
this Section 3.3. All such fees shall be non-refundable.
SECTION 3.3.1. Commitment Fee. From and after the Effective Date and
until the Conversion Date, a non-refundable fee (the "Term A Loan
Commitment Fee") in the amount of one-half percent per annum of the
aggregate amount of the then existing Term A Loan Commitment Amounts shall
accrue on the daily average of the aggregate amount of the then existing
Term A Loan Amount. The Term A Loan Commitment Fee shall be payable in
arrears to the Term A Lenders on each Quarterly Payment Date in proportion
to such Term A Lenders' respective then existing Term A Loan Commitment
Amount.
SECTION 3.3.2. Agency Fee. The Borrower agrees to pay to the
Administrative Agent, for its own account, the fees in the amounts and on
the dates set forth in the Fee Letters.
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SECTION 3.3.3. Letter of Credit Fee. From and after the date that a
Letter of Credit is issued until such time as such Letter of Credit is
fully drawn or, if applicable, returned to the Issuer, the Borrower agrees
to pay to the Administrative Agent, for the account of the Term A Lenders,
a Letter of Credit fee in an amount equal to the then Applicable Margin for
Term A Loans maintained as LIBO Rate Loans (whether or not advanced by the
Lenders), multiplied by the Stated Amount of such Letter of Credit, such
fees being payable on each Quarterly Payment Date in arrears to the Term A
Lenders in proportion to such Term A Lenders' respective Percentage of the
Stated Amount of such Letter of Credit. The Borrower further agrees to pay
in advance on each Quarterly Payment Date to the Issuer the issuance fee as
specified in the Scotiabank Fee Letter.
SECTION 3.3.4. Other Fees. The Borrower agrees to pay the
Administrative Agent, for the account of the Person entitled thereto,
without duplication, all other fees described in the Fee Letters when and
as due and payable in accordance with the terms of the Fee Letters.
ARTICLE IV
CERTAIN LIBO RATE AND OTHER PROVISIONS
SECTION 4.1. LIBO Rate Lending Unlawful. If any Lender shall
determine (which determination shall, upon notice thereof to the
Administrative Agent, the Borrower and the other Lenders, be conclusive and
binding on the Borrower) that the introduction of or any change in or in
the interpretation of any law makes it unlawful, or any central bank or
other governmental authority asserts that it is unlawful, for such Lender
to make, continue or maintain any Loan as, or to convert any Loan into, a
LIBO Rate Loan, the obligations of such Lender to make, continue, maintain
or convert any such LIBO Rate Loan shall, upon such determination,
forthwith be suspended until such Lender shall notify the Administrative
Agent that the circumstances causing such suspension no longer exist, and
all outstanding LIBO Rate Loans shall automatically convert into Base Rate
Loans at the end of the then current Interest Periods with respect thereto,
or sooner, if required by such law or assertion.
SECTION 4.2. Deposits Unavailable. If the Administrative Agent shall
have determined that
(a) Dollar deposits in the relevant amount and for the relevant
Interest Period are not available to the Administrative Agent in its
relevant market; or
(b) by reason of circumstances affecting the Administrative
Agent's relevant market, adequate means do not exist for ascertaining
the interest rate applicable hereunder to LIBO Rate Loans,
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then, upon notice from the Administrative Agent to the Borrower and the
Lenders, the obligations of all Lenders under Section 2.3 and Section 2.4
to make or continue any Loans as, or to convert any Loans into, LIBO Rate
Loans shall forthwith be suspended until the Administrative Agent shall
notify the Borrower and the Lenders that the circumstances causing such
suspension no longer exist.
SECTION 4.3. Increased LIBO Rate Loan Costs, etc. The Borrower
agrees to reimburse each Lender for any increase in the cost to such Lender
of, or any reduction in the amount of any sum receivable by such Lender in
respect of, making, continuing or maintaining (or of its obligation to
make, continue or maintain) any Loans as, or of converting (or of its
obligation to convert) any Loans into, LIBO Rate Loans that arises in
connection with any change in, or the introduction, adoption,
effectiveness, interpretation, reinterpretation or phase-in after the date
hereof of, any law or regulation, directive, guideline, decision or request
(whether or not having the force of law) of any court, central bank,
regulator or other governmental authority, except for such changes with
respect to increased capital costs and taxes which are governed by
Sections 4.5 and 4.6, respectively. Such Lender shall promptly notify the
Administrative Agent and the Borrower in writing of the occurrence of any
such event, such notice to state, in reasonable detail, the reasons
therefor and the additional amount required fully to compensate such Lender
for such increased cost or reduced amount. Such additional amounts shall
be payable by the Borrower directly to such Lender within five days of its
receipt of such notice, and such notice shall, in the absence of manifest
error, be conclusive and binding on the Borrower.
Without limiting the foregoing, in the event that, as a result of any
such change, introduction, adoption or the like described above, the LIBOR
Reserve Percentage decreases for any Lender's LIBO Rate Loans, such Lender
shall give prompt notice thereof in writing to the Administrative Agent and
the Borrower. The LIBO Rate (Reserve Adjusted) attributable to such
Lender's LIBO Rate Loans shall be adjusted to give the Borrower the benefit
of such decrease (for so long as such decrease shall remain in effect).
SECTION 4.4. Funding Losses. In the event any Lender shall incur any
loss or expense (including any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such
Lender to make, continue or maintain any portion of the principal amount of
any Loan as, or to convert any portion of the principal amount of any Loan
into, a LIBO Rate Loan) as a result of
(a) any conversion or repayment or prepayment of the principal
amount of any LIBO Rate Loans on a date other than the scheduled last
day of the Interest Period applicable thereto, whether pursuant to
Section 3.1 or otherwise;
(b) any Loans not being made as LIBO Rate Loans in accordance
with the Borrowing Request therefor; or
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(c) any Loans not being continued as, or converted into, LIBO
Rate Loans in accordance with the Continuation/Conversion Notice
therefor,
then, upon the written notice of such Lender to the Borrower (with a copy
to the Administrative Agent), the Borrower shall, within five days of its
receipt thereof, pay directly to such Lender such amount as will (in the
reasonable determination of such Lender) reimburse such Lender for such
loss or expense. Such written notice (which shall include calculations in
reasonable detail) shall, in the absence of manifest error, be conclusive
and binding on the Borrower.
SECTION 4.5. Increased Capital Costs. If any change in, or the
introduction, adoption, effectiveness, interpretation, reinterpretation or
phase-in of, any law or regulation, directive, guideline, decision or
request (whether or not having the force of law) of any court, central
bank, regulator or other governmental authority affects or would affect the
amount of capital required or expected to be maintained by any Lender or
any Person controlling such Lender, and such Lender determines (in good
faith but in its sole and absolute discretion) that the rate of return on
its or such controlling Person's capital as a consequence of the
Commitments or the Loans made, or the Letters of Credit participated in, by
such Lender is reduced to a level below that which such Lender or such
controlling Person could have achieved but for the occurrence of any such
circumstance, then, in any such case upon notice from time to time by such
Lender to the Borrower, the Borrower shall immediately pay directly to such
Lender additional amounts sufficient to compensate such Lender or such
controlling Person for such reduction in rate of return. A statement of
such Lender as to any such additional amount or amounts (including
calculations thereof in reasonable detail) shall, in the absence of
manifest error, be conclusive and binding on the Borrower. In determining
such amount, such Lender may use any method of averaging and attribution
that it (determines in good faith in its sole and absolute discretion)
shall deem applicable.
SECTION 4.6. Lender's Tax. All payments by the Borrower of principal
of, and interest on, the Credit Extensions and all other amounts payable
hereunder (including fees) shall be made free and clear of and without
deduction for any present or future income, excise, stamp or franchise
taxes and other taxes, fees, duties, withholdings or other charges of any
nature whatsoever imposed by any taxing authority, but excluding franchise
taxes and taxes imposed on or measured by any Lender's net income or
receipts (each such non-excluded item being called a "Lender's Tax"). In
the event that any withholding or deduction from any payment to be made by
the Borrower hereunder is required in respect of any Lender's Tax pursuant
to any applicable law, rule or regulation, then the Borrower will
(a) pay directly to the relevant authority the full amount
required to be so withheld or deducted;
(b) promptly forward to the Administrative Agent an official
receipt or other documentation satisfactory to the Administrative
Agent evidencing such payment to such authority; and
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(c) pay to the Administrative Agent for the account of the
Lenders such additional amount or amounts as is necessary to ensure
that the net amount actually received by each Lender will equal the
full amount such Lender would have received had no such withholding or
deduction been required.
Moreover, if any Lender's Tax is directly asserted against the
Administrative Agent or any Lender with respect to any payment received by
the Administrative Agent or such Lender hereunder, the Administrative Agent
or such Lender may pay such Lender's Tax and the Borrower will promptly pay
such additional amounts (including any penalties, interest or expenses) as
is necessary in order that the net amount received by such Person after the
payment of such Lender's Tax (including any Lender's Tax on such additional
amount) shall equal the amount such Person would have received had not such
Lender's Tax been asserted.
If the Borrower fails to pay any Lender's Tax when due to the
appropriate taxing authority or fails to remit to the Administrative Agent,
for the account of the respective Lenders, the required receipts or other
required documentary evidence, the Borrower shall indemnify the Lenders for
any incremental Lender's Tax, interest or penalties that may become payable
by any Lender as a result of any such failure. For purposes of this
Section 4.6, a distribution hereunder by the Administrative Agent or any
Lender to or for the account of any Lender shall be deemed a payment by the
Borrower.
Upon the request of the Borrower or the Administrative Agent, each
Lender that is organized under the laws of a jurisdiction other than the
United States or a State thereof (for purposes of this Section 4.6, a "Non-U.S.
Lender") shall, prior to the date on which any Loan is made or Letter of
Credit is issued hereunder (or in the case of a Lender that becomes a party
to this Agreement pursuant to Section 4.11 or any Assignee Lender, before it
becomes a party hereto) (a) execute and deliver to the Borrower and the
Administrative Agent one or more (as the Borrower or the Administrative Agent
may reasonably request) United States Internal Revenue Service Forms 4224 or
Forms 1001 or such other forms or documents (or successor forms or
documents), appropriately completed, certifying in each case that such Lender
or Assignee Lender is entitled to receive payments under this Agreement
without deduction or withholding of any United States federal income taxes,
and an applicable Internal Revenue Service Form W-8 or Form W-9 or successor
applicable form (if required by law), as the case may be, to establish an
exemption from United States backup withholding tax or (b) if such Non-U.S.
Lender is not a "bank" or other person described in Section 881 (c) (3) of
the Code and cannot deliver either Form 4224 or Form 1001 pursuant to clause
(a) above, execute and deliver to the Borrower and the Administrative Agent
one or more (as the Borrower or Administrative Agent may reasonably request)
copies of the Tax Certificate, Form W-8 (or any successor form) and any other
certificate or statement of exemption required under the Code or Treasury
Regulations issued thereunder, appropriately completed, certifying that such
Lender or Assignee Lender is entitled to receive payments under this
Agreement without deduction or withholding of United States federal income
tax and establishing an exemption from United States backup withholding tax.
All Lenders other than Non-U.S. Lenders shall, prior to the date
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on which any Loan is made or Letter of Credit is issued hereunder (or in the
case of a Lender that becomes a party to this Agreement pursuant to Section
4.11 or is an Assignee Lender, before such Lender becomes a party hereto),
execute and deliver to the Borrower and the Administrative Agent one or more
copies (as the Borrower or Administrative Agent may reasonably request) of
United States Internal Revenue Form W-9 or successor applicable form (if
required by law), as the case may be, to establish exemption from United
States backup withholding tax.
Each Lender which undertakes to deliver to the Borrower a Tax
Certificate, a Form 4224, Form 1001, Form W-8 or Form W-9 pursuant to the
preceding paragraph shall further undertake to deliver to the Borrower two
further copies of said Tax Certificate, Form 4224, Form 1001, Form W-8 or
Form W-9 (if required by law), or successor applicable forms, or other
manner of certification, as the case may be, on or before the date that
such form expires or becomes obsolete or after the occurrence of an event
requiring a change in the most recent form delivered by it to the Borrower
and the Administrative Agent, and such extensions or renewals thereof as
may be reasonably requested by the Borrower or Administrative Agent,
certifying in the case of a Tax Certificate, Form 4224 or Form 1001 that
such Lender is entitled to receive payments under this Agreement without
deduction or withholding of any United States federal income taxes, unless
in any case an event (including any change in treaty, law or regulation)
has occurred prior to the date on which such delivery would otherwise be
required which renders all forms inapplicable or which would prevent such
Lender from duly completing and delivering any such form with respect to it
and such Lender advises the Borrower and the Administrative Agent that it
is not capable of receiving payments without any deduction or withholding
of United States federal income tax, and in the case of a Form W-8 or Form
W-9, establishing an exemption from backup withholding. In the event that
any Sponsor, Indemnitor or Guarantor is required to make a payment pursuant
to a Completion Guaranty, Keep-Well Agreement, Environmental Indemnity or
other agreement entered into pursuant hereto, such Persons shall have the
same rights as the Borrower or Administrative Agent (as described above) to
obtain from the Lenders the appropriate Internal Revenue Service Forms
certifying that the Lenders are entitled to receive such payments from such
Persons without deduction or withholding for United States federal income
taxes and without backup withholding tax.
SECTION 4.7. Payments, Computations, etc. Unless otherwise expressly
provided, all payments by the Borrower pursuant to this Agreement, the
Notes, each Letter of Credit or any other Loan Document shall be made by
the Borrower to the Administrative Agent for the pro rata account of the
Lenders entitled to receive such payment. All such payments required to be
made to the Administrative Agent shall be made, without setoff, deduction
or counterclaim, not later than 11:00 a.m., New York City time, on the date
due, in same day or immediately available funds, to such account as the
Administrative Agent shall specify from time to time by notice to the
Borrower. Funds received after that time shall be deemed to have been
received by the Administrative Agent on the next succeeding Business Day.
The Administrative Agent shall promptly remit in same day funds to each
Lender its share, if any, of such payments received by the Administrative
Agent for the account of such Lender. All interest (including interest on
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LIBO Rate Loans) and fees shall be computed on the basis of the actual
number of days (including the first day but excluding the last day)
occurring during the period for which such interest or fee is payable over
a year comprised of 360 days (or, in the case of interest on a Base Rate
Loan (calculated at other than the Federal Funds Rate), 365 days or, if
appropriate, 366 days). Whenever any payment to be made shall otherwise be
due on a day which is not a Business Day, such payment shall (except as
otherwise required by clause (c) of the definition of the term "Interest
Period") be made on the next succeeding Business Day and such extension of
time shall be included in computing interest and fees, if any, in
connection with such payment.
SECTION 4.8. Sharing of Payments. If any Lender shall obtain any
payment or other recovery (whether voluntary, involuntary, by application
of setoff or otherwise) on account of any Loan or Letter of Credit
Reimbursement Obligation (other than pursuant to the terms of Section 4.3,
4.4, 4.5 or 4.6) in excess of its pro rata share of payments then or
therewith obtained by all Lenders, such Lender shall purchase from the
other Lenders such participations in Credit Extensions made by them as
shall be necessary to cause such purchasing Lender to share the excess
payment or other recovery ratably with each of them; provided, however,
that if all or any portion of the excess payment or other recovery is
thereafter recovered from such purchasing Lender, the purchase shall be
rescinded and each Lender which has sold a participation to the purchasing
Lender shall repay to the purchasing Lender the purchase price to the
ratable extent of such recovery together with an amount equal to such
selling Lender's ratable share (according to the proportion of
(a) the amount of such selling Lender's required repayment to the
purchasing Lender
to
(b) total amount so recovered from the purchasing Lender)
of any interest or other amount paid or payable by the purchasing Lender in
respect of the total amount so recovered. The Borrower agrees that any
Lender so purchasing a participation from another Lender pursuant to this
Section may, to the fullest extent permitted by law, exercise all its
rights of payment (including pursuant to Section 4.9) with respect to such
participation as fully as if such Lender were the direct creditor of the
Borrower in the amount of such participation. If, under any applicable
bankruptcy, insolvency or other similar law, any Lender receives a secured
claim in lieu of a setoff to which this Section applies, such Lender shall,
to the extent practicable, exercise its rights in respect of such secured
claim in a manner consistent with the rights of the Lenders entitled under
this Section to share in the benefits of any recovery on such secured
claim.
SECTION 4.9. Setoff. Each Lender shall, upon the occurrence and
during the continuance of any Default described in clauses (a) through (e)
of Section 8.1.10 or, with the consent of the Required Lenders, upon the
occurrence and during the continuance of any other
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Event of Default, have the right to appropriate and apply to the payment of
the Obligations owing to it (whether or not then due), and (as security for
such Obligations) the Borrower hereby grants upon the execution of this
Agreement to each Lender a continuing security interest in, any and all
balances, credits, deposits, accounts or moneys of the Borrower then or
thereafter maintained with such Lender; provided, however, that any such
appropriation and application shall be subject to the provisions of
Section 4.8. Each Lender agrees promptly to notify the Borrower and the
Administrative Agent after any such setoff and application made by such
Lender; provided, however, that the failure to give such notice shall not
affect the validity of such setoff and application. The rights of each
Lender under this Section are in addition to other rights and remedies
(including other rights of setoff under applicable law or otherwise) which
such Lender may have.
SECTION 4.10. Mitigation. Each Lender agrees that if it makes any
demand for payment under Sections 4.3, 4.4, 4.5, or 4.6, or if any adoption
or change of the type described in Section 4.1 shall occur with respect to
it, it will use reasonable efforts (consistent with its internal policy and
legal and regulatory restrictions and so long as such efforts would not be
disadvantageous to it, as determined in its sole discretion) to designate a
different lending office if the making of such a designation would reduce
or obviate the need for the Borrower to make payments under Sections 4.3,
4.4, 4.5, or 4.6, or would eliminate or reduce the effect of any adoption
or change described in Section 4.1.
SECTION 4.11. Replacement of Lenders. Each Lender hereby severally
agrees as set forth in this Section. If
(a) (i) any Lender (an "Affected Lender") makes demand upon the
Borrower for (or if the Borrower is otherwise required to pay) amounts
pursuant to Section 4.3, 4.4, 4.5 or 4.6 and the payment of such
additional amounts are, and are likely to continue to be, more onerous
in the reasonable judgment of the Borrower than with respect to the
other Lenders or (ii) a Lender becomes a Defaulting Lender, the
Borrower may, within 30 days of receipt by the Borrower of such demand
or notice (or the occurrence of such other event causing the Borrower
to be required to pay such compensation) or from the date that such
Lender becomes a Defaulting Lender, as the case may be, give notice in
writing to the Administrative Agent and such Affected Lender or such
Defaulting Lender, as the case may be, of its intention to replace
such Affected Lender or such Defaulting Lender, as the case may be,
with a financial institution designated in such notice. The
Administrative Agent and the Syndication Agent agree to use
commercially reasonable efforts to assist the Borrower in replacing
such Defaulting Lender. If the Administrative Agent shall, in the
exercise of its reasonable discretion and within 30 days of its
receipt of such notice, notify the Borrower and such Affected Lender
or such Defaulting Lender, as the case may be, in writing that the
designated financial institution is satisfactory to the Administrative
Agent (such consent not being required where such financial
institution is already a Lender or an Approved Fund), then such
Affected Lender or such Defaulting Lender, as the case may be, shall,
subject to the
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payment of any amounts due pursuant to Section 4.4 by the Borrower,
assign, in accordance with Section 10.11.1, all of its Commitments,
Loans, Notes and other rights and obligations under this Agreement and
all other Loan Documents (including Reimbursement Obligations, if
applicable) to such designated financial institution; provided,
however, that (i) such assignment shall be without recourse,
representation or warranty (except as to (x) such Affected Lender's or
such Defaulting Lender's, as the case may be, then existing Commitment
Amount(s) and the outstanding principal amount of Loans held by such
Affected Lender or such Defaulting Lender, as the case may be, and (y)
the absence of Liens arising by, through and under the Affected Lender
or such Defaulting Lender, as the case may be ) and shall be on terms
and conditions reasonably satisfactory to such Affected Lender and
such designated financial institution, (ii) the purchase price paid by
such designated financial institution shall be in the amount of such
Affected Lender's or such Defaulting Lender's, as the case may be,
Loans and its Percentage of outstanding Reimbursement Obligations,
together with all accrued and unpaid interest and fees in respect
thereof, plus all other amounts (including the amounts demanded and
unreimbursed under Sections 4.3, 4.5 and 4.6), owing to such Affected
Lender or such Defaulting Lender, as the case may be, hereunder and
(iii) the Borrower shall pay to such Affected Lender or such
Defaulting Lender, as the case may be, and the Administrative Agent
all reasonable out-of-pocket expenses incurred by such Affected Lender
or such Defaulting Lender, as the case may be, and the Administrative
Agent in connection with such assignment and assumption (including the
processing fees described in Section 10.11.1).
(b) If S&P, Moody's or Thompson's BankWatch (or InsuranceWatch
Ratings Service, in the case of Lenders that are insurance companies
(or Best's Insurance Reports, if such insurance company is not rated
by Insurance Watch Ratings Service) (or Duff & Phelps, Inc. or Fitch
Investor Services, Inc., if such Lender is neither an insurance
company nor rated by S&P, Moody's or Thompson's BankWatch)) shall,
after the date that any Person becomes a Lender and prior to the date
that all of the Commitments of such Lender have been fully funded,
downgrade the long-term certificate of deposit rating or long-term
senior unsecured debt rating of such Lender (a "Downgraded Lender"),
and the resulting ratings shall be below BBB-, Baa3 or C (or BB, in
the case of Lender that is an insurance company (or B, in the case of
an insurance company rated by Best's Insurance Reports (or BBB- or
BBB-, in the case of a Lender which is neither rated by S&P, Moody's
or Thompson's BankWatch nor an insurance company))), respectively, or
the equivalent, the Borrower (or the Issuer) may, within 30 days of
receipt by the Borrower (or the Issuer) of notice of such downgrade
and while such downgrade is in effect, give notice in writing to the
Administrative Agent and such Downgraded Lender (and the Borrower) of
its intention to replace such Downgraded Lender (or have such
Downgraded Lender replaced) with a financial institution designated in
such notice (or another notice given by the Borrower at the request of
the Issuer). If the Administrative Agent and the Issuer shall, in the
exercise of their reasonable discretion and within 30 days of their
receipt of such notice, notify the
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Borrower and such Downgraded Lender in writing that the designated
financial institution is satisfactory to the Administrative Agent and
the Issuer (such consent not being required where such financial
institution is already a Lender or an Approved Fund), then such
Downgraded Lender shall, subject to the payment of any amounts due
pursuant to Section 4.4 by the Borrower, assign, in accordance with
Section 10.11.1, all of its Commitments, Loans, Notes and other rights
and obligations under this Agreement and all other Loan Documents
(including Reimbursement Obligations, if applicable) to such
designated financial institution; provided, however, that (i) such
assignment shall be without recourse, representation or warranty
(except as to (x) such Downgraded Lender's then existing Commitment
Amount(s) and the principal amount of Loans held by such Downgraded
Lender and (y) the absence of Liens arising by, through and under the
Downgraded Lender) and shall be on terms and conditions
reasonably satisfactory to such Downgraded Lender and such designated
financial institution, (ii) the purchase price paid by such designated
financial institution shall be in the amount of such Downgraded
Lender's Loans and its Percentage of outstanding Reimbursement
Obligations, together with all accrued and unpaid interest and fees in
respect thereof, plus all other amounts (including the amounts
demanded and unreimbursed under Sections 4.3, 4.5 and 4.6), owing to
such Downgraded Lender hereunder and (iii) the Borrower shall pay to
the Downgraded Lender and the Administrative Agent all reasonable
out-of-pocket expenses incurred by the Downgraded Lender and the
Administrative Agent in connection with such assignment and assumption
(including the processing fees described in Section 10.11.1).
(c) If any Nevada Gaming Authority or any other gaming authority
with jurisdiction over the gaming business of the Borrower, as the
case may be, shall determine that any Lender (an "Unsuitable Lender")
does not meet the suitability standards prescribed under any
applicable Nevada Gaming Law or the suitability standards of such
gaming authority, as the case may be, the Borrower may give notice in
writing to the Administrative Agent and such Unsuitable Lender of its
intention to replace such Unsuitable Lender with a financial
institution designated in such notice. If the Administrative Agent
shall, in the exercise of its reasonable discretion and promptly
following its receipt of such notice, notify the Borrower and such
Unsuitable Lender in writing that the designated financial institution
is satisfactory to the Administrative Agent (such consent not being
required where such financial institution is already a Lender or an
Approved Fund), then such Unsuitable Lender shall, subject to the
payment of any amounts due pursuant to Section 4.4 by the Borrower,
assign, in accordance with Section 10.11.1, all of its Commitments,
Loans, Notes and other rights and obligations under this Agreement and
all other Loan Documents (including Reimbursement Obligations, if
applicable) to such designated financial institution; provided,
however, that (i) such assignment shall be without recourse,
representation or warranty (except as to (x) such Unsuitable Lender's
then existing Commitment Amount(s) and the principal amount of Loans
held by such Unsuitable Lender and (y) the absence of Liens arising
by, through and under the Unsuitable Lender) and shall be on terms and
conditions
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reasonably satisfactory to such Unsuitable Lender and such designated
financial institution, (ii) the purchase price paid by such designated
financial institution shall be in the amount of such Unsuitable Lender's
Loans and its Percentage of outstanding Reimbursement Obligations,
together with all accrued and unpaid interest and fees in respect
thereof, plus all other amounts (including the amounts demanded and
unreimbursed under Sections 4.3, 4.5 and 4.6), owing to such Unsuitable
Lender hereunder and (iii) the Borrower shall pay to the Unsuitable
Lender and the Administrative Agent all reasonable out-of-pocket
expenses incurred by the Unsuitable Lender and the Administrative Agent
in connection with such assignment and assumption (including the
processing fees described in Section 10.11.1); provided further,
however, that if the Borrower fails to find a substitute financial
institution within any time specified by the appropriate gaming
authority for the withdrawal of such Unsuitable Lender (the "Withdrawal
Period"), the Borrower shall prepay in full the outstanding principal
amount of the Loans made by such Unsuitable Lender (without giving
effect to Section 4.8) and shall be deemed to have requested a reduction
in each of the aggregate amounts of the Commitment Amounts relating to
all Commitments held by such Lender, in each case, in an amount equal to
such Unsuitable Lender's then existing Commitment Amounts.
(d) Upon the effective date of an assignment described in
clause (a), (b) or (c), the Borrower shall issue a replacement Note or
Notes, as the case may be, to such replaced Lender and such
institution shall become a "Lender" for all purposes under this
Agreement and the other Loan Documents. Upon any such termination or
assignment, such replaced Lender shall cease to be a party hereto but
shall continue to be entitled to the benefits of any provisions of
this Agreement which by their terms survive the termination of this
Agreement.
ARTICLE V
CONDITIONS TO CREDIT EXTENSIONS
SECTION 5.1. Initial Credit Extension. The obligations of the
Lenders to fund the Term B Loans and the Term C Loans into the Bank
Proceeds Account (the "Closing") shall be subject to the prior or
concurrent satisfaction of each of the conditions precedent set forth in
this Section 5.1.
SECTION 5.1.1. Satisfaction of Conditions Precedent to the Closing
Date. The Borrower and Holdings shall satisfy in all material respects the
conditions precedent to the Closing as set forth in Section 3.1 of the
Disbursement Agreement.
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SECTION 5.1.2. Delivery of Notes. The Administrative Agent shall
have received, for the account of each Lender, such Lender's Notes duly
executed and delivered by an Authorized Representative of the Borrower.
SECTION 5.1.3. Pledge Agreements. The Administrative Agent shall
have received, with counterparts for each Lender,
(a) the Holdings Pledge Agreement, dated as of the Closing Date,
duly executed and delivered by an Authorized Representative of
Holdings, together with certificates evidencing all of issued and
outstanding (x) Borrower Common Membership Interests and (y) Capital
Stock of Capital, which certificates shall be accompanied by undated
powers of transfer relating thereto duly executed in blank;
(b) the LCNI Pledge Agreement from LCNI , dated as of the Closing
Date, duly executed and delivered by an Authorized Representative of
LCNI, together with certificates evidencing all of the Holdings Common
Membership Interests of LCNI, which certificates shall be accompanied
by undated powers of transfer relating thereto duly executed in blank;
(c) the Sommer Enterprises Pledge Agreement, dated as of the
Closing Date, duly executed and delivered by an Authorized
Representative of Sommer Enterprises, together with (x) certificates
evidencing all of the Holdings Common Membership Interests of Sommer
Enterprises and (y) certificates evidencing all of the issued and
outstanding shares of Capital Stock of Enterprises, subject to the
rights of the holders of the Warrants both while such holders hold
Warrants and on the exercise of such Warrants into shares of Capital
Stock of Enterprise, which certificates shall be accompanied by
undated powers of transfer relating thereto duly executed in blank;
(d) the AHL Pledge Agreement, dated as of the Closing Date, duly
executed and delivered by an Authorized Representative of AHL,
together with certificates evidencing all of the Membership Interests
of AHL in Sommer Enterprises, which certificates shall be accompanied
by undated powers of transfer relating thereto duly executed in blank;
(e) the Enterprises Pledge Agreement, dated as of the Closing
Date, duly executed and delivered by an Authorized Representative of
Enterprises, together with certificates evidencing all of the Holdings
Common Membership Interests of Enterprises, which certificates shall
be accompanied by undated powers of transfer relating thereto duly
executed in blank;
(f) the Borrower Pledge Agreement, dated as of the Closing Date,
duly executed and delivered by an Authorized Representative of the
Borrower, together with certificates evidencing all of the Membership
Interests of the Borrower in AMH, which certificates
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shall be accompanied by undated powers of transfer relating thereto
duly executed in blank; and
(g) the AMH Pledge Agreement, dated as of the Closing Date, duly
executed and delivered by an Authorized Representative of AMH,
together with certificates evidencing all of the Membership Interests
of AMH in Aladdin Music, which certificates shall be accompanied by
undated powers or transfer relating thereto duly executed in blank.
SECTION 5.1.4. Financial Information, etc. The Administrative Agent
shall have received prior to the Effective Date, with counterparts for each
Lender, audited financial statements of each of the Borrower, the other
Aladdin Parties, (other than the Trust and Aladdin Music), LCNI and London
Clubs, in each case as at December 31, 1997, except in the case of the LCNI
and London Clubs which audited financial statements shall have been
prepared as at March 30, 1997.
SECTION 5.1.5. Security Agreement. The Administrative Agent shall
have received, with counterparts for each Lender, executed counterparts of
the Security Agreement, dated as of the Closing Date, duly executed by the
Borrower, together with
(a) executed copies of Uniform Commercial Code financing
statements (Form UCC-1), naming the Borrower as a debtor and the
Administrative Agent as the secured party, or other similar
instruments or documents, to be filed under the Uniform Commercial
Code of all jurisdictions as may be necessary or, in the reasonable
opinion of the Administrative Agent, desirable to perfect the security
interests of the Administrative Agent pursuant to the Security
Agreement and the other Operative Documents;
(b) executed copies of proper Uniform Commercial Code termination
statements, if any, necessary to release all Liens and other rights of
any Person
(i) in any collateral described in the Security Agreement
previously subject to a Lien or other right granted to any
Person, and
(ii) securing any of the Indebtedness to be Paid,
together with such other Uniform Commercial Code termination
statements as the Administrative Agent may reasonably request from
such Obligors; and
(c) certified copies of search reports certified by the offices
from which they were requested or another Person acceptable to the
Administrative Agent, dated a date reasonably near to the Effective
Date, listing all effective financing statements which name the
Borrower (under its present name and any previous names) and such
other Persons designated by the Administrative Agent as the debtor and
which are filed in the
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jurisdictions in which filings were made pursuant to clause (a) above,
together with copies of such financing statements (none of which
(other than those described in clause (a), if such search report, as
the case may be, is current enough to list such financing statements
described in clause (a)) shall cover any collateral described in the
Security Agreement).
SECTION 5.1.6. Trademark Security Agreement. The Administrative
Agent shall have received the Trademark Security Agreement, as applicable,
each dated as of the Closing Date and duly executed and delivered by the
Borrower or appropriate Owner of the related intellectual property
registration.
SECTION 5.1.7. Deed of Trust. The Administrative Agent shall have
received the Deed of Trust, dated as of the Closing Date, duly executed by
the Borrower, together with
(a) evidence of the completion (or satisfactory arrangements for
the completion) of all recordings and filings of the Deed of Trust as
may be necessary or, in the reasonable opinion of the Administrative
Agent, desirable effectively to create a valid, perfected first
priority Lien against the properties and the leasehold interests
described therein purported to be covered thereby;
(b) the Title Policy described in Section 3.1.25 of the
Disbursement Agreement together with all endorsements described
therein; and
(c) such other approvals, opinions, or documents as the
Administrative Agent may reasonably request including consents and
estoppel agreements and a current survey of the Site in form and
substance reasonably satisfactory to the Administrative Agent and the
Title Insurer.
SECTION 5.1.8. Solvency, etc. The Administrative Agent shall have
received, with counterparts for each Lender, a duly executed Solvency
Certificate, dated as of the Effective Date.
SECTION 5.1.9. Initial Rate Protection Agreement. The Administrative
Agent shall have received the initial Rate Protection Agreement, dated as
of the Closing Date, executed and delivered by an Authorized Representative
of the Borrower, which shall be in a notional amount of the Commitments at
a maximum rate approved by the Administrative Agent in its sole discretion.
SECTION 5.1.10. Payment of Outstanding Indebtedness, etc. All
Indebtedness to be Paid on or before the Closing Date, together with all
interest, all prepayment premiums and other amounts due and payable with
respect thereto, shall have been paid in full from the London Clubs
Contribution and/or the proceeds of the Discount Notes and the commitments
in respect of such Indebtedness shall have been terminated, and all Liens
securing payment of any
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such Indebtedness shall have been discharged and released and the
Administrative Agent shall have received copies of all termination
statements or other instruments as may be suitable or appropriate in
connection therewith.
SECTION 5.1.11. Closing Fees, Expenses, etc. The Administrative
Agent shall have received for its own account, or for the account of each
Lender, as the case may be, all fees, costs and expenses due and payable
pursuant to Sections 3.3 and 10.3, if then invoiced.
SECTION 5.1.12. Opinions of Counsel. The Administrative Agent shall
have received the opinions substantially in the forms of the ones attached
as Schedule IV hereto, dated the Closing Date and addressed to the
Administrative Agent, the Lenders and, if applicable, the Disbursement
Agent, which shall be in form and substance satisfactory to the
Administrative Agent.
SECTION 5.1.13. Satisfactory Form and Substance. All documents
executed or submitted pursuant hereto by or on behalf of the Borrower, any
of the other Aladdin Parties, and any of the other Project Parties shall be
reasonably satisfactory in form and substance to the Administrative Agent
and its counsel and the Administrative Agent and its counsel shall have
received all information, approvals, opinions, documents or instruments as
the Administrative Agent or its counsel may reasonably request.
SECTION 5.1.14. Other Loan Documents. The Administrative Agent shall
have received, with counterparts for each Lender, each of the following
documents duly executed by the parties thereto, each of which shall be in
full force and effect, and all actions necessary or desirable, including
all filings, in the reasonable opinion of the Administrative Agent to
perfect the same as a valid first security interest encumbering the Main
Project Security shall have been taken or made:
(a) the Keep-Well Agreement;
(b) the Completion Guaranty;
(c) the Disbursement Agreement;
(d) the Mall Project Completion Assignment;
(e) the Fee Letters;
(f) the Environmental Indemnity;
(g) the Assignments of Contracts;
(h) the Borrower Collateral Account Agreement;
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(i) the Holdings Collateral Account Agreement; and
(j) the Servicing and Collateral Account Agreement.
SECTION 5.1.15. Main Project Documents. The Administrative Agent
shall have received, with counterparts for each Lender, the Main Project
Documents (other than the Theater Lease) duly executed by the parties
thereto, each of which shall be in full force and effect.
SECTION 5.1.16. Other Documents. The Administrative Agent shall have
received such other documents and evidence as it may reasonably request in
connection with the transactions contemplated hereby.
SECTION 5.2. All Credit Extensions. The obligation of each Lender
and each Issuer to make any Credit Extension (including the initial Credit
Extension) shall be subject to Sections 2.1.4 and 2.1.5 and the
satisfaction of each of the conditions precedent set forth in this
Section 5.2.
SECTION 5.2.1. Conditions for Advances under the Disbursement
Agreement and the Making of Term A Loans. Not in limitation but in
furtherance of the other conditions in this Article V, the following
conditions shall be satisfied prior to the making of any Advance under the
Disbursement Agreement or any Term A Loan, as the case may be,
(a) all conditions to the making of any Advance as set forth in
Section 3.2 of the Disbursement Agreement shall be satisfied by the
Borrower or otherwise waived in writing by the Administrative Agent in
good faith in its sole discretion;
(b) the proceeds of the Term B Loan and Term C Loan shall be
fully disbursed from the Term B Sub-Account and the Term C Sub-Account,
respectively, prior to the making of the Term A Loan (other than advances
of the Term A Loan which are made to reimburse the Issuer for, or fund
draws under, a Letter of Credit); and
(c) the amount to be advanced to the Borrower hereunder and under
the Disbursement Agreement for Direct Costs, Indirect Costs,
unincorporated materials, investments in Aladdin Music and advances
for interest on the Loans shall be limited as set forth in Article 2
of the Disbursement Agreement.
SECTION 5.2.2. Conditions for the Making of an Additional Term B Loan
and/or Term C Loan. Not in limitation but in furtherance of the other
conditions in this Article V, the following conditions shall be satisfied
prior to the making of the Loan(s) referred to in Section 2.3.4:
(a) the Administrative Agent shall have received from the
Borrower a certificate, dated the date such Loan(s) is to be made, of
the Secretary of the Borrower as to limited
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liability company action then in full force and effect authorizing the
Borrowing of such Loan(s) and the execution, delivery and performance
of the Note(s) referred to in clause (b) below;
(b) the Administrative Agent shall have received, for the account
of the Lender making such Loan(s), such Lender's Note(s) duly executed
and delivered by an Authorized Representative of the Borrower;
(c) if such Lender was not already a Lender prior to the making
of such Loan, the Administrative Agent shall have received from such
Lender a joinder to this Agreement, which joinder shall be in form and
substance reasonably satisfactory to the Administrative Agent;
(d) the Administrative Agent shall have received, for the account
of the Lender making such Loan(s), such Lender's Note(s) duly executed
and delivered by an Authorized Representative of the Borrower;
(e) the Administrative Agent shall have received an affirmation
and acknowledgment (in form and substance satisfactory to the
Administrative Agent in its sole discretion) from an Authorized
Representative of each Obligor;
(f) the Administrative Agent shall have received opinions, dated
the date such Loan is to be made and addressed to the Agents and the
Lenders, from the Borrower's New York counsel and Nevada counsel in
form and substance (including opinions as to the non-impairment of any
Liens or security interests created under, or any guarantees made
under, any Loan Document in favor of the Administrative Agent for the
benefit of the Lenders) reasonably satisfactory to the Administrative
Agent; and
(g) such other amendments, approvals, opinions, or documents as
the Administrative Agent may reasonably request.
SECTION 5.2.3. Compliance with Warranties, No Default, etc. Both
before and after giving effect to any Credit Extension the following
statements shall be true and correct:
(a) the accuracy of the representations and warranties contained
in Article VI (excluding, however, those contained in Section 6.7) and
each other Operative Document as if made on the date of the Credit
Extension or Advance, as the case may be, (except those that relate to
a different date) unless the failure of the foregoing to be the case
would not have a Material Adverse Effect;
(b) except as disclosed by the Borrower to the Agents and the
Lenders pursuant to Section 6.7 there exists
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(i) no material litigation which could reasonably be
expected to have a Material Adverse Effect or which purports to
affect the legality, validity or enforceability of this
Agreement, the Notes or any other Operative Document; and
(ii) no material development shall have occurred in any
litigation disclosed pursuant to Section 6.7 which could
reasonably be expected to have a Material Adverse Effect;
(c) the absence of any material adverse change in (i) the
financial condition, business, property or prospects of the Borrower
or on its ability to perform in all material respects its obligations
under any Operative Document to which it is a party or (ii) the
financial condition, business, property or prospects of any other
Project Party affecting its ability to perform in all material
respects its obligations under any Operative Document to which it is a
party or (iii) a material impairment of the validity of enforceability
of, or a material impairment of the rights, remedies or benefits
available to the Administrative Agent, the Issuer or the Lenders under
this Agreement or any other Operative Document;
(d) the absence of any default or an event of default with
respect to the Operative Documents which would be reasonably likely to
cause a Material Adverse Effect.
SECTION 5.2.4. Credit Extension Request, etc. Subject to Section
2.3.2 with respect to Term A Loans and Section 2.3.3 with respect to Term B
Loans and Term C Loans, the Administrative Agent shall have received a
Borrowing Request for the Loan being requested or a Letter of Credit
Issuance Request if a Letter of Credit is being requested or extended.
Each of the delivery of a Borrowing Request or Letter of Credit Issuance
Request and the acceptance by the Borrower of the proceeds of such Credit
Extension shall constitute a representation and warranty by the Borrower
that on the date of such Credit Extension (both immediately before and
after giving effect to such Credit Extension and the application of the
proceeds thereof) the statements made in Section 5.2.3 are true and correct
in all material respects.
SECTION 5.2.5. Satisfactory Legal Form. All documents executed or
submitted pursuant hereto by or on behalf of the Borrower, any of the other
Aladdin Parties, LCNI, London Clubs Holdings, London Clubs and any of the
other Project Parties shall satisfy the applicable provisions of
Section 7.2.12.
SECTION 5.2.6. Other Documents. The Administrative Agent shall have
received, with counterparts for each Lender, any Operative Documents (other
than the Theater Lease) entered into or obtained after the Closing Date
(including the GECC Intercreditor Agreement), each of which shall be duly
executed by the parties thereto and in full force and effect.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders, the Issuer and the Agents to enter
into this Agreement and to make Credit Extensions hereunder, the Borrower
represents and warrants unto the Agents, the Issuer and each Lender as set
forth in this Article VI.
SECTION 6.1. Organization, etc. Each of the Borrower, each of the
other Aladdin Parties and LCNI, are validly organized and existing and in
good standing under the laws of the state or jurisdiction of its
organization, is duly qualified to do business and is in good standing in
each jurisdiction where the nature of its business requires such
qualification and where failure to do so would have a Material Adverse
Effect; and has full power and authority and holds all requisite
governmental licenses, permits and other approvals to enter into and
perform its Obligations under this Agreement and each of the other
Operative Documents to which it is a party and to own, hold and, if
applicable, lease its property and to conduct its business substantially as
currently conducted by it the absence of which would have a Material
Adverse Effect; provided, however, that the failure of the Borrower to be
in good standing in the State of Nevada shall be deemed to have a Material
Adverse Effect on it.
SECTION 6.2. Due Authorization, Non-Contravention, etc. The
execution, delivery and performance by each of the Borrower, each of the
other Aladdin Parties and LCNI of this Agreement and each of the other
Operative Documents to which it is a Party, and participation by the
Borrower, each of the other Aladdin Parties and LCNI in the consummation of
all aspects of the Transaction, and the execution, delivery and performance
by the Borrower, each of the other Aladdin Parties and LCNI of the other
agreements executed and delivered in connection with the Transaction are in
each case within each such Person's powers, have been duly authorized by
all necessary action, and do not
(a) contravene any such Person's Organizational Documents;
(b) contravene any contractual restriction binding on or
affecting any such Person which contravention would have a Material
Adverse Effect;
(c) contravene (i) any court decree or order binding on or
affecting any such Person or (ii) any Legal Requirement binding on or
affecting any such Person; or
(d) result in, or require the creation or imposition of, any Lien
on any of such Person's properties (except as expressly permitted by
this Agreement).
SECTION 6.3. Government Approval, Regulation, etc. No authorization
or approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body or other Person (other than those
that have been, or on the Closing Date will be, duly obtained or
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made and which are, or on the Closing Date will be, in full force and
effect and except for filings and registrations of any UCC financing
statements, the Deed of Trust or intellectual property filings (all of
which have been duly executed and delivered to the Administrative Agent on
the Closing Date by the Borrower or other relevant Project Party, as the
case may be, party thereto) necessary to record the Lenders' security
interest in certain personal, real or intellectual property included in the
Collateral) is required for the due execution, delivery or performance by
the Borrower, the other Aladdin Parties and LCNI of this Agreement and any
other Operative Document to which it is a party, in each case by the
parties thereto or the consummation of the Transaction.
SECTION 6.4. Validity, etc. This Agreement and each other Loan
Document executed by the Borrower will, on the due execution and delivery
thereof, constitute, the legal, valid and binding obligations of the
Borrower, enforceable against the Borrower in accordance with their
respective terms; and each other Operative Document executed by the
Borrower, the other Aladdin Parties and LCNI will, on the due execution and
delivery thereof by such Person, constitute the legal, valid and binding
obligation of such Person enforceable against such Person in accordance
with its terms (except, in any case above, as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization or similar
laws affecting creditors' rights generally and by principles of equity).
SECTION 6.5. Financial Information. The financial statements of the
Borrower, the other Aladdin Parties and LCNI furnished to the
Administrative Agent pursuant to Section 5.1.4 have been prepared in
accordance with GAAP consistently applied, and present fairly the financial
condition of the Persons covered thereby as at the dates thereof and the
results of their operations for the periods then ended. All balance
sheets, all statements of operations, equity amounts, cash flow and all
other financial information of each of the Borrower, the other Aladdin
Parties and LCNI furnished pursuant to Section 7.1.1 have been and will for
periods following the Effective Date be prepared in accordance with GAAP
consistently applied, and do or will present fairly the financial condition
of the Persons covered thereby as at the dates thereof and the results of
their operations for the periods then ended, except that quarterly
financial statements need not include footnote disclosure and may be
subject to ordinary year-end adjustment. The Borrower represents that (a)
all factual information that has been or will be made available to the
Agents by or on behalf of the Borrower, the other Aladdin Parties and LCNI
is or will be, when furnished, complete and correct in all material
respects and does not or will not, when furnished, contain any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements contained therein not materially misleading in
light of the circumstances under which such statements are made and (b) the
projections that have been or will be made available to the Agents by or on
behalf of the Borrower, the other Aladdin Parties and LCNI have been or
will be prepared in good faith based upon reasonable assumptions.
SECTION 6.6. No Material Adverse Change. No material adverse change
in (a) the financial condition, business, property, prospects or ability of
the Borrower to perform in all
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material respects its obligations under any Operative Document to which it
is a party or (b) the financial condition, business, property, prospects
and ability of any other Aladdin Party, LCNI or, to the best Knowledge of
the Borrower, the Design/Builder or Fluor to perform in all material
respects its obligations under any Operative Document to which it is a
party has occurred since the date of the financial statements of such
Person delivered pursuant to Section 5.1.4.
SECTION 6.7. Litigation, Labor Controversies, etc. There is no
pending material litigation, action, proceeding, or labor controversy which
could reasonably be expected to have a Material Adverse Effect or which
purports to affect the legality, validity or enforceability of this
Agreement, the Notes or any other Operative Document, except as disclosed
in Item 6.7 of the Disclosure Schedule.
SECTION 6.8. Subsidiaries. The Subsidiaries of the Borrower, the
other Aladdin Parties (other than the Trust) and LCNI are identified in
Item 6.8 of the Disclosure Schedule.
SECTION 6.9. Ownership of Properties. Other than the Borrower,
Aladdin Music and the Trust, the Aladdin Parties and LCNI do not own or
lease any real property other than the Mall Project Ground Lease and Music
Project Ground Lease. The Borrower and AMH (x) in the case of owned real
property, have good and marketable fee title to, and (y) in the case of
leased real property, hold valid and enforceable leasehold interests in,
all of such owned or lease real property, as the case may be, free and
clear in each case of all Liens or claims, except for Liens permitted
pursuant to Section 7.2.3 and where the failure to own or hold such title,
as the case may be, will not have a Material Adverse Effect. Except as
permitted pursuant to Section 6.13 or Section 7.2.3, the Borrower, the
other Aladdin Parties and LCNI (x) in the case of owned personal property,
have good and valid title to, and (y) in the case of leased personal
property, hold valid and enforceable leasehold interests in, all of such
material personal properties and assets, tangible and intangible, of any
nature whatsoever, free and clear in each case of all Liens or claims,
except for Liens permitted pursuant to Section 7.2.3, or where the failure
to own or hold such title will not have a Material Adverse Effect.
SECTION 6.10. Taxes. (a) Each of the Aladdin Parties and LCNI has
filed, or caused to be filed, all material tax and informational returns
that are required to have been filed by it in any jurisdiction, and has
paid all material Taxes shown to be due and payable on such returns and all
other taxes and assessments payable by it, to the extent the same have
become due and payable (other than those Taxes (i) that it is contesting in
good faith and by appropriate proceedings, with adequate, segregated
reserves established for such Taxes or (ii) with respect to which failure
to pay the same could not reasonably be expected to have a Material Adverse
Effect or to impair the respective interests of the Lenders in the Main
Project Security) and, to the extent such Taxes are not due, has
established reserves therefor by allocating, in the Trade Detail Report,
amounts that are adequate for the payment thereof and are required by GAAP.
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(b) None of the Aladdin Parties or LCNI has incurred any material Tax
liability in connection with the Main Project or the other transactions
contemplated by the Operative Documents which has not been disclosed in
writing to, and approved by, the Administrative Agent, except as set forth
in Item 6.10(b) of the Disclosure Schedule.
(c) All interest that accrues on funds on deposit in the Accounts
(other than the Construction Note Disbursement Account) is for the account
of the Borrower and, accordingly, no withholding or deduction of any
payments (including payments of principal, interest or premium, if any) to
any Agent or Lender is required in respect thereof.
SECTION 6.11. Pension and Welfare Plans. During the twelve
consecutive month period prior to the Effective Date and prior to the date
of any Credit Extension hereunder, no steps have been taken to terminate
any Pension Plan, and no contribution failure has occurred with respect to
any Pension Plan sufficient to give rise to a Lien under section 302(f) of
ERISA. No condition exists or event or transaction has occurred with
respect to any Pension Plan which might result in the incurrence by the
Borrower or any member of the Controlled Group of any material liability,
fine or penalty. Except as disclosed in Item 6.11 in the Disclosure
Schedule neither the Borrower nor any member of the Controlled Group has
any Contingent Liability with respect to any post-retirement benefit under
a Welfare Plan, other than liability for continuation coverage described in
Part 6 of Title I of ERISA.
SECTION 6.12. Environmental Warranties. Except as set forth in Item
6.12 in the Disclosure Schedule:
(a) all facilities and property (including underlying
groundwater) owned or leased by the Borrower, Aladdin Bazaar and
Aladdin Music have been, and continue to be, owned or leased by such
Person in material compliance with all Environmental Laws;
(b) there have been no past, and there are no pending or
threatened
(i) claims, complaints, notices or requests for information
received by the Borrower, Aladdin Bazaar or Aladdin Music with
respect to any alleged violation of any Environmental Law, or
(ii) complaints, notices or inquiries to the Borrower,
Aladdin Bazaar or Aladdin Music regarding potential liability
under any Environmental Law;
(c) there have been no Releases of Hazardous Substances at, on or
under any property now or previously owned or leased by the Borrower,
Aladdin Bazaar or Aladdin Music that, singly or in the aggregate,
have, or may reasonably be expected to have, a Material Adverse
Effect;
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(d) the Borrower, Aladdin Bazaar and Aladdin Music have been
issued and are in material compliance with all permits, certificates,
approvals, licenses and other authorizations relating to environmental
matters and necessary or desirable for their businesses;
(e) to the Knowledge of the Borrower, no property now or
previously owned or leased by the Borrower, Aladdin Bazaar or AMH, is
listed or proposed for listing (with respect to owned property only)
on the National Priorities List pursuant to CERCLA, on the CERCLIS or
on any similar state list of sites requiring investigation or clean-up;
(f) there are no underground storage tanks, active or abandoned,
including petroleum storage tanks, on or under any property now or
previously owned or leased by the Borrower, Aladdin Bazaar or Aladdin
Music that, singly or in the aggregate, have, or may reasonably be
expected to have, a Material Adverse Effect;
(g) neither the Borrower, Aladdin Bazaar nor Aladdin Music has
directly transported or directly arranged for the transportation of
any Hazardous Substances to any location which is listed or proposed
for listing on the National Priorities List pursuant to CERCLA, on the
CERCLIS or on any similar state list or which is the subject of
federal, state or local enforcement actions or other investigations
which may lead to material claims against the Borrower, Aladdin Bazaar
or Aladdin Music for any remedial work, damage to natural resources or
personal injury, including claims under CERCLA;
(h) there are no polychlorinated biphenyls or friable asbestos
present at any property now or previously owned or leased by the
Borrower, Aladdin Bazaar or Aladdin Music that, singly or in the
aggregate, have, or may reasonably be expected to have, a Material
Adverse Effect; and
(i) no conditions exist at, on or under any property now or
previously owned or leased by the Borrower, Aladdin Bazaar or Aladdin
Music which, with the passage of time, or the giving of notice or
both, would give rise to liability under any Environmental Law.
SECTION 6.13. Intellectual Property. The Borrower owns or licenses
(as the case may be) or will own or hold licenses for all such patents,
patent rights, trademarks, trademark rights, trade names, trade name
rights, service marks, service mark rights and copyrights as the Borrower
considers necessary for the conduct of the businesses of the Borrower
without, to the Knowledge of Borrower, any infringement upon rights of
other Persons, in each case except as could not reasonably be expected to
individually or in the aggregate result in a Material Adverse Effect and
there is no individual patent, patent right, trademark, trademark right,
trade name, trade name right, service mark, service mark right or copyright
the loss of which would result in a Material Adverse Effect, any of the
other Aladdin Parties or LCNI, except as may be disclosed in Item 6.13 in
the Disclosure Schedule.
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SECTION 6.14. Regulations G, U and X. Neither the Borrower, any of
the other Aladdin Parties nor LCNI is engaged in the business of extending
credit for the purpose of purchasing or carrying margin stock, and no
proceeds of any Credit Extensions will be used to purchase or carry margin
stock or otherwise for a purpose which violates, or would be inconsistent
with, F.R.S. Board Regulation G, U or X. Terms for which meanings are
provided in F.R.S. Board Regulation G, U or X or any regulations
substituted therefor, as from time to time in effect, are used in this
Section with such meanings.
SECTION 6.15. Accuracy of Information. None of the factual
information, taken as a whole (including the factual information set forth
in the Discount Note Offering Circular), heretofore or contemporaneously
furnished by or on behalf of the Borrower, any of the other Aladdin
Parties, LCNI or London Clubs in writing to any Agent, the Issuer or any
Lender for purposes of or in connection with this Agreement or any
transaction contemplated hereby or with respect to the Transaction (true
and complete copies of which were furnished to each Agent, the Issuer and
each Lender in connection with its execution and delivery hereof), contains
any untrue statement of a material fact, and none of the other factual
information, taken as a whole, hereafter furnished in connection with this
Agreement or any other Operative Document by the Borrower, any of the other
Aladdin Parties, LCNI, London Clubs Holdings or London Clubs to any of the
Agents, the Issuer or any Lender will contain any untrue statement of a
material fact on the date as of which such information, taken as a whole,
is dated or certified and, as of the Effective Date, the information
delivered prior thereto (unless such information specifically relates to a
prior date) does not, and the factual information, taken as a whole,
hereafter furnished shall not on the date as of which such information is
dated or certified, omit to state any material fact necessary to make such
information, taken as a whole, not misleading.
SECTION 6.16. Permits. There are no Permits that are required or
will become required for the ownership, construction, financing or
operation of the Main Project, other than the Permits described in Exhibit
D to the Disbursement Agreement. Each Permit described in Exhibit D to the
Disbursement Agreement as required to be obtained by the date that this
representation is deemed to be made is in full force and effect and is not
at such time subject to any appeals or further proceedings or to any
unsatisfied condition (that is required to be satisfied by the date that
this representation is deemed to be made) that may allow modification or
revocation. Each Permit described in Exhibit D to the Disbursement
Agreement as not required to have been obtained by the date that this
representation is deemed to be made is of a type that is routinely granted
on application except approval by the applicable Governmental
Instrumentalities for the creation of the Mall Project Parcel and the Music
Project Parcel as separate legal parcels under Nevada subdivision law and
except for approvals, licences, authorizations and findings of suitability
required under Nevada Gaming Laws for the operation of the Main Project as
a Casino. The Borrower has no reason to believe that any Permit so
indicated will not be obtained before it becomes necessary for the
ownership, construction, financing or operation of the Main Project or that
obtaining such Permit will result in undue expense or delay. The Borrower
is not in violation of any condition in any Permit the effect of which
could reasonably be expected to have a Material Adverse Effect.
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SECTION 6.17. Security Interests.
(a) The security interests granted to the Secured Parties pursuant to
the Loan Documents (i) constitute, as to personal property included in the
Main Project Security, subject to the Nevada Gaming Laws, the filings,
registrations and recordations set forth on Schedule V hereto and, with
respect to subsequently acquired personal property included in the Main
Project Security, will constitute, a perfected security interest under the
UCC and/or other applicable law, except for any subsequently issued
certificate or instrument that constitutes collateral thereunder which will
be perfected upon the delivery of such certificate or instrument to the
Administrative Agent, and (ii) have been, and, with respect to such
subsequently acquired property, will be perfected under the UCC and/or
other applicable law as aforesaid, (A) the first priority contemplated
thereby and (B) as between the Secured Parties and any third Persons,
superior priority and rights over the rights of any such third Persons now
existing or hereafter arising whether by way of mortgage, deed of trust,
lien, security interests, encumbrance, assignment or otherwise, subject to
the rights and priorities of Permitted Liens and Permitted Encumbrances.
All such action as is necessary has been taken to establish and perfect the
Secured Parties' rights in and to the Main Project Security, including any
recording, filing, registration, giving of notice or other similar action,
subject to the filings, registrations and recordations set forth on
Schedule V hereto. As of the Effective Date, no filing, registration,
recordation, re-filing or re-recording other than those listed on Schedule
V hereto is necessary to perfect and maintain the perfection of the
interest, title or Liens of the Loan Documents, and on the Effective Date
all such filings or recordings will have been made except for any filings
or recordings for Liens as to which the Title Insurers have issued or
committed to issue Title Policies acceptable to the Administrative Agent.
The Borrower has properly delivered or caused to be delivered to the
Administrative Agent all Main Project Security that requires perfection of
the Lien and security interest described above by possession.
(b) No authorization, approval or other action by, and no notice to or
filing with, any Governmental Instrumentality (except for those by or with
the Nevada Gaming Authorities when any of the Borrower, the Aladdin Parties
and LCNI obtain a gaming license) is required for either (i) the pledge or
grant by the Borrower, the other Aladdin Parties and LCNI of the Liens
purported to be created in favor of the Secured Parties pursuant to any of
the Loan Documents or (ii) the exercise by the Administrative Agent and the
other Secured Parties of any rights or remedies in respect of any Main
Project Security (whether specifically granted or created pursuant to any
of the Loan Documents or created or provided for by applicable law), except
for filings or recordings contemplated by Section 6.17(a) above or as set
forth on Schedule V hereto.
(c) Except such as may have been filed in favor of the Secured Parties
as contemplated by Section 6.17(a) above or as set forth on Schedule V
hereto, no effective UCC financing statement, fixture filing or other
instrument similar in effect covering all or any part of the Main Project
Security is on file in any filing or recording office.
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(d) All information supplied to the Administrative Agent and the
Lenders by or on behalf of the Borrower, the other Aladdin Parties and LCNI
with respect to any of the Main Project Security (in each case taken as a
whole with respect to any particular Main Project Security) is accurate and
complete in all material respects.
SECTION 6.18. Existing Defaults. There is no Default or Event of
Default which has occurred and is continuing under any of the Operative
Documents.
SECTION 6.19. Design/Build Contract; Construction Contracts. Each of
the Design/Build Contract and the other Contracts which have been executed
by or on behalf of the Borrower (w) is in full force and effect and there
are no material defaults thereunder on the part of the Borrower or, to the
best knowledge of the Borrower, of the other party thereto which have not
been previously disclosed in writing to the Administrative Agent (nor has
any event, act or condition occurred which, with notice or expiration of
any applicable grace period, or both, would constitute an event of default
thereunder by the Borrower or, to the best of the Knowledge of the
Borrower, the other party thereto, as the case may be and which has not
been previously disclosed in writing to the Administrative Agent), (x) has
not been terminated, modified, amended or assigned except as permitted
hereunder, (y) has not expired by its terms and (z) has been delivered to
the Administrative Agent prior to the Effective Date.
SECTION 6.20. Contingent Liabilities. None of the Aladdin Parties
(other than the Trust) nor LCNI has any material Contingent Liabilities in
respect of Indebtedness (excluding, however, Indebtedness of the nature
referred to in clause (d) of the definition thereof) or obligations except
those authorized under or contemplated by the Operative Documents and not
prohibited by this Agreement or the Discount Note Indenture.
SECTION 6.21. Business, Debt, Contracts, etc. None of the Aladdin
Parties (other than the Trust) nor LCNI has conducted any business other
than the business contemplated by the Operative Documents. None of the
Aladdin Parties (other than the Trust) nor LCNI has any outstanding
Indebtedness other than Indebtedness incurred under the Loan Documents or
permitted under the Loan Documents or liabilities other than those incurred
under the Operative Documents or permitted under the Loan Documents and the
Discount Note Indenture, and is not a party to or bound by any Contract
other than as contemplated by the Operative Documents to which such Person
is a party or permitted under the Loan Documents and the Discount Note
Indenture.
SECTION 6.22. Representations and Warranties. As of the Effective
Date (in each case except to the extent related to a different date), all
representations and warranties of the Aladdin Parties and LCNI and, to the
best of the Borrower's Knowledge, the Design/Builder, Fluor, the Architect
of Record, and each other Major Contractor and each other Person (other
than the Borrower) to a Material Main Project Document contained in the
Operative Documents are true and correct in all material respects (unless
the failure of such representation or warranty could not reasonably be
expected to have a Material Adverse Effect) and the Borrower hereby
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confirms each such representation and warranty made by it with the same
effect as if set forth in full herein.
SECTION 6.23. Utilities. All utility services necessary for the
construction and the operation of the Main Project for its intended
purposes are or will be available at the Site as and when required on
commercially reasonable terms.
SECTION 6.24. In Balance Requirement. As of the date of each
Borrowing and Advance the Main Project Budget shall be In Balance.
SECTION 6.25. Sufficiency of Interests and Main Project Documents.
SECTION 6.25.1. Ownership, Title, etc. Except for the Permitted
Liens, Permitted Encumbrances and Permitted Exceptions and as set forth on
the Exhibits to the Trademark Security Agreement, the Borrower owns the
Site in fee simple, free and clear of all Liens and encumbrances and has
good legal and beneficial title to the property, assets and revenues on
which it purports to grant Liens pursuant to the Loan Documents. The
Borrower, AMH, Bazaar, and the Energy Provider own the Site Easements, as
their interests may appear. After giving effect to the Mall Project Ground
Lease, Aladdin Bazaar has and, until the Mall Project Parcel Creation Date,
will have, good leasehold title to the Mall Project Parcel and the Mall
Project Easements. From and after the Mall Project Parcel Creation Date,
Aladdin Bazaar will own the Mall Project Parcel and the Mall Project
Easements in fee simple. After giving effect to the Music Project Ground
Lease, Aladdin Music has and, until the Music Project Parcel Creation Date,
will have, good leasehold title to the Music Project Parcel and the Music
Project Easements. From and after the Music Project Parcel Creation Date,
Aladdin will own the Music Project Parcel and the Music Project Easements
in fee simple. Other than those services to be performed and materials to
be supplied that can be reasonably expected to be commercially available
when and as required, the Borrower owns all of the property interests and
has entered into all documents and agreements necessary to develop,
construct, complete, own and operate the Main Project on the Main Project
Parcel and in accordance with all Legal Requirements and the Construction
Benchmark Schedule and as contemplated in the Operative Documents.
SECTION 6.25.2. Main Project Documents. The Administrative Agent has
received a true, complete and correct copy of each of the Main Project
Documents in effect or required to be in effect as of the date this
representation is made or deemed made (including all exhibits, schedules,
side letters and disclosure letters referred to therein or delivered
pursuant thereto, if any). A list of all Main Project Documents entered
into as of the Effective Date is attached hereto as Schedule VI hereto.
SECTION 6.25.3. Satisfaction to Main Project Document Conditions.
All conditions precedent to the obligations of the respective parties
(other than the Borrower) under the Main Project Documents have been
satisfied, except for such conditions precedent (a) the failure of which to
be satisfied could not reasonably be expected to have a Material Adverse
Effect or
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(b) which by their terms cannot be met until a later stage in the
construction or operation of the Main Project, and the Borrower has no
reason to believe that any such condition precedent (the failure of which
to be satisfied could reasonably be expected to have a Material Adverse
Effect) cannot be satisfied on or prior to the appropriate stage in the
construction or operation of the Main Project.
SECTION 6.26. Main Project Budget; Trade Detail Report.
SECTION 6.26.1. Main Project Budget. The Main Project Budget (a) is
consistent with the provisions of the Operative Documents in all material
respects, (b) has been and will be prepared in good faith and with due
care, (c) sets forth, for each Line Item, the total Main Project Costs
which are anticipated to be incurred through Final Completion, and (d)
fairly represents the Borrower's expectation as to the matters covered
thereby. The Main Project Budget (including the detailed schedules
thereto) allocates the Main Project Costs to be incurred with respect to
construction and completion of each of the Hotel/Casino Component, the
Energy Project Component and the Equipment Component.
SECTION 6.26.2. Trade Detail Report. The Trade Detail Report (as in
effect from time to time):
(a) sets forth the amount allocated to each Line Item pursuant
to the Main Project Budget then in effect;
(b) sets forth, for each Line Item other than the Line Items in
the Line Item Category entitled "Project Contingency", an amount no
less than the total anticipated costs to be incurred by the Borrower
from the commencement through the completion of the work contemplated
by such Line Item, as determined by the Borrower and the Owner
Representative with the reasonable concurrence of the Construction
Consultant in the Construction Consultant's Certificate dated the date
on which this representation is made or deemed made;
(c) sets forth, for each Line Item Category, an aggregate amount
no less than the aggregate amount set forth for such Line Item
Category in the Main Project Budget then in effect less Realized
Savings obtained with respect to such Line Item Category (and not
reflected in the Main Project Budget); and
(d) to the Knowledge of the Borrower is true and correct in all
material respects.
SECTION 6.27. Fees and Enforcement. Other than amounts that have
been paid in full or will have been paid in full by the Effective Date or
the date when due for same, no fees or Taxes, including stamp, transaction,
registration or similar taxes, are required to be paid for the legality,
validity or enforceability of the Operative Documents.
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SECTION 6.28. ERISA Compliance. Either (a) there are no ERISA Plans
for the Borrower or any member of the Controlled Group or (b) the Borrower
and each member of the Controlled Group have fulfilled their obligations
(if any) under the minimum funding standards of ERISA and the Code for each
ERISA Plan in compliance in all material respects with the currently
applicable provisions of ERISA and the Code and have not incurred any
liability to the PBGC or an ERISA Plan under Title IV of ERISA (other than
liability for premiums due in the ordinary course). Neither the execution
of this Agreement or the other Operative Documents nor the consummation of
the Transactions will involve a "prohibited transaction" within the meaning
of Section 406 of ERISA or Section 4975 of the Code which is not exempt
under Section 408 of ERISA or under Section 4975(d) of the Code.
SECTION 6.29. Labor Disputes; Acts of God; Casualty and Condemnation.
Neither the business nor the properties of the Borrower or, to the
Knowledge of the Borrower, any other party to a Material Main Project
Document is affected by any fire, explosion, accident, strike, lockout or
other labor dispute (except as set forth in Item 6.29 in the Disclosure
Schedule as in effect on the Effective Date), drought, storm, hail,
earthquake, embargo, act of God or of the public enemy, or other casualty
or Force Majeure Event, that could reasonably be expected to have a
Material Adverse Effect. As of the date hereof, there is no casualty or
condemnation proceeding pending or, to the best knowledge of the Borrower,
threatened, affecting all or a portion of the Site.
SECTION 6.30. Liens. Except for Permitted Liens and Permitted
Encumbrances, the Borrower has not secured or agreed to secure any
Indebtedness by any Lien upon any of its present or future revenues or
assets or upon the Borrower Common Membership Interests. The Borrower does
not have outstanding any Lien or obligation to create Liens on or with
respect to any of its properties or revenues (other than the security
interest granted by Holdings to the Discount Note Indenture Trustee
pursuant to the Holdings Collateral Account Agreement), other than
Permitted Liens and Permitted Encumbrances and as provided in the Loan
Documents. Holdings has not secured or agreed to secure any Indebtedness
by any Lien upon any of its present or future revenues or assets or
Holdings Series A Preferred Membership Interests other than the security
interest granted by Holdings to the Discount Note Indenture Trustee
pursuant to the Holdings Collateral Amount Agreement and the Holdings
Pledge Agreement. None of the Borrower, Holdings, Capital, Enterprises,
Sommer Enterprises, AHL, AMH, ABH or LCNI has outstanding any Lien or
obligation to create Liens on or with respect to any of its properties or
revenues, other than as provided in the Loan Documents and the Discount
Note Indenture.
SECTION 6.31. Construction Benchmark Schedule; Guaranteed Maximum
Price.
SECTION 6.31.1. Construction Benchmark Schedule. The Construction
Benchmark Schedule accurately specifies in summary form the Work and the
other improvements that the Borrower and the Design/Builder propose to
complete in each calendar month from the Effective Date through the Final
Completion of the Main Project, all of which can be expected to be
achieved.
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SECTION 6.31.2. Guaranteed Maximum Price. The Design/Build Contract
has been amended to provide that the Guaranteed Maximum Price will remain
in effect if the Borrower provides the Design/Builder with the Notice to
Proceed (as defined in the Design/Build Contract) on or before February 27,
1998 and that the Design/Builder shall have no right to terminate the
Design/Build Contract if the Notice to Proceed is delivered on or before
March 1, 1998.
SECTION 6.32. Proper Subdivision. The Site has been properly
subdivided or entitled to exception therefrom, and for all purposes the
Site may be mortgaged, conveyed and otherwise dealt with as separate legal
lot or parcel. The parties acknowledge, however, that this Agreement
contemplates the creation of a separate legal parcel for each of the Mall
Project Parcel (including sub-parcels relating to the common parking area
and the retail facility), the Music Project Parcel, the Energy Project
Parcel and the Optional Improvement Site.
SECTION 6.33. Offices; Location of Collateral.
(a) The chief executive office or chief place of business (as such
term is used in Article 9 of the Uniform Commercial Code as in effect in
the State of New York from time to time) of the Borrower is located in
Clark County, Nevada. The Borrower's federal employer identification
number is 86-0856993.
(b) All of the Main Project Security (other than the Accounts and
general intangibles) is, or when installed pursuant to the Main Project
Documents will be, located on the Site.
(c) The Borrower's books of accounts and records are located at the
chief executive office or the chief place of business.
SECTION 6.34. Government Regulation. None of the Aladdin Parties nor
LCNI is subject to regulation under the Public Utility Holding Company Act
of 1935, the Federal Power Act or the Interstate Commerce Act or
registration under the Investment Company Act of 1940 or under any other
federal or state statute or regulation which may limit its ability to incur
Indebtedness, other than the Nevada Gaming Laws (from and after the date
that such Person holds any Gaming License), or which may otherwise render
all or any portion of the Obligations unenforceable. Incurrence of the
Obligations under the Operative Documents complies with all applicable
provisions of the Nevada Gaming Laws.
SECTION 6.35. No Brokers. The Borrower represents that no broker or
finder was responsible for or involved with the parties in connection with
the transactions contemplated by this Agreement and the other Loan
Documents and that there is no obligation for the payment of any brokerage
commission, compensation or fee of any kind with respect to this Agreement
or any other Loan Document except those included as an Issuance Fee or
Expense.
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ARTICLE VII
COVENANTS
SECTION 7.1. Affirmative Covenants. The Borrower agrees with the
Agents, the Issuer and each Lender that, until all Commitments have
terminated and all Obligations have been indefeasibly paid and performed in
full, the Borrower will perform or cause to be performed the obligations
set forth in this Section 7.1.
SECTION 7.1.1. Financial Information, Reports, Notices, etc. The
Borrower will furnish, or will cause to be furnished, to each Lender, the
Issuer, the Administrative Agent and, as applicable, the Construction
Consultant copies of the following financial statements, reports, notices
and information:
(a) as soon as available and in any event within 30 days after
the end of each month other than the last month of any Fiscal Quarter,
a balance sheet of the Borrower and a consolidated and consolidating
balance sheet of the Borrower and Subsidiaries, in each case as of the
end of such month, and consolidated and consolidating statements of
earnings and cash flow of the Borrower and Subsidiaries and statements
of earnings and cash flow of the Borrower for such month and for the
period commencing at the end of the previous Fiscal Year and ending
with the end of such month, certified as complete and correct by the
chief financial or accounting Authorized Representative of the
Borrower;
(b) as soon as available and in any event within 45 days after
the end of each of the first three Fiscal Quarters of each Fiscal
Year, a balance sheet of the Borrower, the other Aladdin Parties
(other than the Trust) and LCNI and a consolidated and consolidating
balance sheet of each of the Borrower and Subsidiaries and the other
Aladdin Parties (other than the Trust) and each of their respective
Subsidiaries, in each case as of the end of such Fiscal Quarter, and
consolidated and consolidating statements of earnings and cash flow of
each of the Borrower and Subsidiaries and the other Aladdin Parties
(other than the Trust) and each of their respective Subsidiaries and
statements of earnings and cash flow of the Borrower, the other
Aladdin Parties (other than the Trust) and LCNI, in each case for such
Fiscal Quarter and for the period commencing at the end of the
previous Fiscal Year and ending with the end of such Fiscal Quarter,
certified as complete and correct by the chief financial or accounting
Authorized Representative of the Person for which such information is
being delivered;
(c) as soon as available and in any event within 90 days after
the end of each Fiscal Year, a copy of the annual audited financial
statements for such Fiscal Year for such Person and for the Borrower
and Subsidiaries and the other Aladdin Parties (other than the Trust)
and each of their respective Subsidiaries, including therein a
consolidated and consolidating balance sheet of each of the Borrower
and Subsidiaries and the other
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Aladdin Parties (other than the Trust) and each of their respective
Subsidiaries as of the end of such Fiscal Year and consolidated and
consolidating statements of earnings and cash flow of each of the
Borrower and Subsidiaries and the other Aladdin Parties (other than
the Trust) and each of their respective Subsidiaries for such Fiscal
Year, in each case as audited (without any Impermissible
Qualification) by nationally recognized independent public accountants
acceptable to the Administrative Agent;
(d) as soon as available and in any event within 45 days after
the end of each of the first three Fiscal Quarters of each Fiscal Year
and within 90 days after the end of the Fiscal Year, a Compliance
Certificate, executed by the chief financial or accounting Authorized
Representative of the Borrower, showing (in reasonable detail and with
appropriate calculations and computations in all respects reasonably
satisfactory to the Administrative Agent) compliance (currently and on
a pro forma basis after giving effect the payments to be made in
respect of all federal, state and local income taxes of the Borrower
or, if the Borrower is treated as a pass-through entity or is not
treated as a separate entity for United States federal income tax
purposes, the payments to be made pursuant to clause (c) of Section
7.2.6) with the financial covenants set forth in Section 7.2.4.
(e) as soon as possible and in any event within 90 days after the
end of the fiscal year of the Trust, a letter from the Trust's tax
accountants stating that the net worth of the Trust based upon the
fair market value of its assets less liabilities is not less than
$100,000,000, together with all other financial information required
to be submitted by the Trust from time to time to the Person financing
the Mall Project;
(f) as soon as possible and in any event within three days after
the Borrower, any of the other Aladdin Parties, LCNI, London Clubs
Holdings or London Clubs obtains Knowledge of the occurrence of a
Default, a statement of the chief executive, financial or accounting
Authorized Representative of such Person setting forth details of such
Default and the action which such Person has taken and proposes to
take with respect thereto;
(g) as soon as possible and in any event within five Business
Days after the Borrower, any of the other Aladdin Parties, LCNI,
London Clubs Holdings or London Clubs obtains Knowledge of (x) the
occurrence of any material adverse development with respect to any
litigation, action, proceeding or labor controversy of the type and
materiality described in Item 6.7 of the Disclosure Schedule, or
(y) the commencement of any litigation, action, proceeding or labor
controversy of the type and materiality described in Item 6.7 of the
Disclosure Schedule, notice thereof and, to the extent the
Administrative Agent reasonably requests, copies of all documentation
relating thereto;
(h) promptly after the sending or filing thereof, (x) copies of
all reports and registration statements which the Borrower, any of the
other Aladdin Parties or LCNI files with the SEC or any national or
foreign securities exchange and (y) copies of all
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reports required to be filed by the Borrower with any Governmental
Instrumentality, including any reports with respect to Environmental
Matters and the Permits;
(i) immediately upon becoming aware of (w) the institution of any
steps by the Borrower or any other Person to terminate any Pension
Plan, (x) the failure to make a required contribution to any Pension
Plan if such failure is sufficient to give rise to a Lien under
Section 302(f) of ERISA, (y) the taking of any action with respect to
a Pension Plan which could result in the requirement that the Borrower
furnish a bond or other security to the PBGC or such Pension Plan or
(z) the occurrence of any event with respect to any Pension Plan which
could result in the incurrence by the Borrower, any of the other
Aladdin Parties or LCNI of any material liability, fine or penalty,
notice thereof and copies of all documentation relating thereto;
(j) promptly upon receipt thereof, copies of all detailed
management letters submitted to the Borrower by the independent public
accountants referred to in clause (b) in connection with each audit
made by such accountants of the books of the Borrower, any of the
other Aladdin Parties or LCNI;
(k) promptly when available and in any event no later than 45
days prior to the last day of each Fiscal Year (commencing after the
Effective Date), a budget for the next Fiscal Year, which budget shall
be prepared on a Fiscal Quarter basis and shall contain a projected,
consolidated balance sheet and statement of earnings and cash flow of
the Borrower and Subsidiaries for such Fiscal Year, prepared in
reasonable detail by the chief accounting or financial Authorized
Representative of the Borrower (the Administrative Agent shall have
the right to request clarifications on such budget within 20 days
after delivery thereof);
(l) promptly and in any event within five Business Days after the
receipt thereof, any material notice received by any of the Borrower,
any Aladdin Party or LCNI from any Nevada Gaming Authority, including
all NGC-1 Reports and all exception reports, which notice relates to
the construction, operation or maintenance of the Main Project, any
Permit related thereto or any Equity Interest or any Membership
Interest in any such Person;
(m) as soon available and in any event within 30 days after the
end of each month following the Opening Date, a report detailing the
occupancy rate of the Hotel, the average room rate thereof, the win
rate at the Casino and such other information prepared by the Borrower
relating to the operation and condition of the Hotel/Casino;
(n) prior to Final Completion, within 30 days after the end of
each month, a monthly status report describing in reasonable detail
the progress of the construction of each Construction Component and
the Main Project as a whole since the immediately preceding report
hereunder, including the cost incurred to the end of such month, an
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estimate of the time and cost required to complete each Construction
Component and the Main Project as a whole, the progress of
construction and how it relates to the Construction Benchmark Schedule
and such other information and reports as the Administrative Agent or
Construction Consultant may reasonably request; and
(o) prior to Final Completion promptly after receipt thereof by
the Borrower, all progress reports provided by the Design/Builder
pursuant to the Design/Build Contract and the attachments thereto, if
any, and such additional information relative thereto as the
Administrative Agent or Construction Consultant may reasonably
request;
(p) as soon as possible and in any event within three days after
the Borrower obtains Knowledge thereof, notice of any event,
occurrence or circumstance which reasonably could be expected to cause
the Main Project Budget not to be In Balance or render the Borrower,
one or more of the Completion Guarantors, the Design/Builder, Fluor,
the Energy Project Provider, or the Energy Project Guarantor incapable
of, or preventing such Person from (x) achieving the Completion Date
on or before the Outside Completion Deadline or (y) meeting any
material obligation of such Person under the Operative Documents, the
Design/Build Contract or the other Material Main Project Documents as
and when required thereunder;
(q) as soon as possible and in any event within three days after
the Borrower obtains Knowledge thereof, notice of any termination or
event of default or notice thereof or any requests for indemnification
of any other party or any other notice relating to material rights or
obligations with respect to the Reciprocal Easement Agreement, Site
Work Agreement or Common Parking Area Use Agreement pursuant to the
terms thereof under any Material Main Project Document;
(r) any change in the Authorized Representatives of the Borrower,
the other Aladdin Parties, LCNI, London Clubs Holdings or London Clubs
and such notice shall include a certified specimen signature of any
new Authorized Representative so appointed and, if requested by the
Administrative Agent, satisfactory evidence of the authority of such
new Authorized Representative;
(s) prior to Final Completion, any proposed material change in
the nature or scope of the Main Project or the business or operations
of any of the Aladdin Parties (other than the Trust) or LCNI;
(t) prior to Final Completion, any notice of any schedule delay
delivered under the Design/Build Contract and all remedial plans and
updates thereof;
(u) the occurrence or existence of any Environmental Matter
requiring notice to a Governmental Instrumentality or with respect to
which notice is received from a Governmental Instrumentality;
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(v) any Event of Loss or any other event or development which
could reasonably be expected to have a Material Adverse Effect;
(w) prior to Final Completion, promptly, but in no event later
than ten days after the receipt thereof by the Borrower, copies of (x)
all Main Project Documents and Permits obtained or entered into by the
Borrower after the Effective Date, (y) any amendment, supplement or
other modification to any Permit received by the Borrower after the
Effective Date, and (z) all notices relating to the Main Project
received by or delivered to the Borrower from any Governmental
Instrumentality or any of the other Project Parties; and
(x) such other information respecting the condition or
operations, financial or otherwise, of the Borrower, the other Aladdin
Parties and/or LCNI as required by the other Loan Documents applicable
to it other than with respect to the Trust (including information and
reports from the chief accounting or financial Authorized
Representative of the Borrower, in such detail as the Administrative
Agent or any Lender or the Issuer through the Administrative Agent may
reasonably request, with respect to the terms of and information
provided pursuant to any Compliance Certificate) and as any Lender or
the Issuer through the Administrative Agent may from time to time
reasonably request.
SECTION 7.1.2. Compliance with Laws, etc. The Borrower and
Subsidiaries will comply in all material respects with all applicable Legal
Requirements, including:
(a) the maintenance and preservation of the corporate or other
organizational existence of such Person; and
(b) the payment, before the same become delinquent, of all
material Taxes, assessments and governmental charges imposed upon it
or upon its property, except to the extent being diligently contested
in good faith by appropriate proceedings and for which adequate
reserves, if any, in accordance with GAAP shall have been set aside on
its books.
SECTION 7.1.3. Maintenance of Properties; Operation; Reserves. The
Borrower and Subsidiaries will maintain, preserve, protect and keep the
portion of the Site owned or leased by such Person in good repair, working
order and condition (ordinary wear and tear excepted), and make necessary
and proper repairs, renewals and replacements so that its business carried
on in connection therewith may be properly conducted at all times. The
Borrower will operate the Main Project as a luxury themed casino hotel
(with a separate level of the Casino catering to premium players) in
accordance with the standards which shall be at least equivalent to the
standards of the Mirage on the Effective Date. The Theater shall be used
to present events which are consistent with the first class nature of
Complex. The Borrower shall maintain adequate working capital reserves and
other reserves as set forth in the annual budget to be delivered by the
Borrower in accordance with clause (k) of Section 7.1.1. From and after
the
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Opening Date, the Borrower shall for each year following the Opening Date
establish a reserve for replacements ("FF&E Reserve") which shall be funded
on a monthly basis at the percentage of gross revenues set forth below and
to the level of maximum funding set forth below, in each case, opposite
such year. After the FF&E Reserve has been funded to the level of maximum
funding set forth below opposite such year, the Borrower shall have no
further obligation to fund the FF&E Reserve until such time as amounts are
withdrawn from the FF&E Reserve in which case monthly contributions at the
percentage of gross revenues set forth opposite such year below shall
resume:
<TABLE>
<CAPTION>
Percentage of Maximum
Year Gross Revenues Funding
---- -------------- -------
<S> <C> <C>
1 1.75% $12,000,000
2 1.25% $12,000,000
3 1.3% $12,000,000
4 1.35% $12,000,000
5 2.5% $18,000,000
6 2.5% $18,000,000
7 3.0% $18,000,000
8 3.0% $18,000,000
9 3.0% $18,000,000
10 3.0% $18,000,000
</TABLE>
SECTION 7.1.4. Insurance. The Borrower shall maintain the insurance
set forth on Exhibit E to the Disbursement Agreement and shall comply in
all material respects with the requirements of such insurance policies.
SECTION 7.1.5. Books and Records. The Borrower and Subsidiaries shall
maintain adequate books, accounts and records with respect to the Main
Project in compliance in all material respects with the regulations of any
Governmental Instrumentality having jurisdiction thereof and, with respect
to financial statements, in accordance with GAAP. Subject to reasonable
safety requirements and the rights of other Persons, and (from and after
the date that the Borrower holds a Gaming License) subject to Nevada Gaming
Laws, the Borrower shall, at its cost and expense, permit employees or
agents of the Administrative Agent and the Construction Consultant at any
reasonable times and upon reasonable prior notice to inspect the Main
Project, to examine or audit all of the Borrower's books, accounts and
records pertaining or related to the Main Project, to make copies and
memoranda thereof and, with respect to any Environmental Matters, to
perform any tests or studies and prepare any reports reasonably required by
the Administrative Agent. For all expenditures with respect to which Loans
are made, the Borrower shall retain, until at least five years after the
Administrative Agent has received the report specified in clause (a) of
Section 7.1.1 for the calendar month in which the
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last Advance was made by the Lenders, all records (contracts, orders,
invoices, bills, receipts and other documents) evidencing such
expenditures.
SECTION 7.1.6. Environmental. The Borrower and Subsidiaries will:
(a) construct, use and operate all of its facilities and
properties in material compliance with all Environmental Laws, keep
all necessary permits, approvals, certificates, licenses and other
authorizations relating to environmental matters in effect and remain
in material compliance therewith, and handle all Hazardous Substances
in material compliance with all applicable Environmental Laws;
(b) promptly notify the Administrative Agent and provide copies
upon receipt of all material written claims, complaints, notices or
inquiries relating to potential liability under or non-compliance
with, Environmental Laws, and shall promptly resolve any material non-
compliance with Environmental Laws and keep its property free of any
Lien imposed by any Environmental Law; and
(c) provide such information and certifications which the
Administrative Agent may reasonably request from time to time to
evidence compliance with this Section, including certificates
confirming (x) removal of asbestos in the existing building on or
before June 30, 1998, (y) removal of asbestos from the Theater within
30 days after such removal has been completed and (z) removal of all
underground storage tanks within 30 days after such removal has been
completed.
SECTION 7.1.7. Additional Collateral. The Borrower shall cause the
Administrative Agent to have at all times a first priority perfected
security interest (subject only to Permitted Liens and Permitted
Encumbrances) in all of the property (real and personal) owned from time to
time by the Borrower, the other Aladdin Parties (other than the Trust) and
LCNI to the extent the same constitutes or would constitute "Collateral"
under the Loan Documents. Without limiting the generality of the
foregoing, the Borrower shall, and shall cause each of the other Aladdin
Parties (other than the Trust) and LCNI to, execute, deliver and/or file
(as applicable) or cause to be executed, delivered and/or filed (as
applicable), the pledge agreement(s), the security agreement(s), Uniform
Commercial Code (Form UCC-1) financing statements, Uniform Commercial Code
termination statements, and other documentation necessary to grant and
perfect such security interest, in each case in form and substance
satisfactory to the Administrative Agent.
SECTION 7.1.8. Use of Proceeds. The Borrower shall apply the
proceeds of the Credit Extensions:
(a) to pay in part the Main Project Costs which are identified in
the Main Project Budget to be paid from the Loans;
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(b) to pay the costs, expenses and fees required to be paid by
the Borrower under this Agreement, the other Loan Documents and, to
the extent set forth in the Main Project Budget, the other Operative
Documents; and
(c) in the case of Letters of Credit, for issuing Letters of
Credit for the account of the Borrower to be delivered to suppliers or
contractors providing materials to the Main Project which constitute
Main Project Costs set forth in the Main Project Budget to be paid
from the Loans; provided, however, that no Letter of Credit shall be
issued for the Gaming Equipment or the Specified Equipment which is to
be leased under an FF&E Lease and/or financed by the credit facilities
contemplated by the Approved Equipment Funding Commitments.
SECTION 7.1.9. Deposits into the Accounts. The Borrower shall
deposit or cause to be deposited (v) all amounts required pursuant to
Section 7.1.14 into the Guaranty Deposit Account, (w) all amounts paid
pursuant to the Completion Guaranty into the Guaranty Deposit Account, (x)
all Loss Proceeds into the Loss Proceeds Account, (y) all Pre-Opening
Revenues, the Net Distribution Amount, all amounts received from Aladdin
Bazaar for reimbursement of costs of work on the Shoulder Space pursuant to
the Site Work Agreement, all damages, liquidated or otherwise, and all
other amounts paid to the Borrower prior to the Conversion Date pursuant to
the Design/Build Contract, the Fluor Guaranty, the Contracts and the other
Main Project Documents into the Borrower's Funds Account and (z) all other
funds received by the Borrower prior to the Conversion Date (other than
those permitted or required to be deposited elsewhere) into the Borrower's
Funds Accounts. The Borrower shall not, at any time prior to the
Completion Date, open or establish any bank, deposit or any other accounts
at any financial institution other than the Accounts provided for herein.
SECTION 7.1.10. Main Project Costs. The Borrower shall apply all
proceeds described in Section 7.1.9 and all other amounts in the Accounts
from time to time only to pay Main Project Costs in accordance with the
terms of this Agreement and, if applicable, the Disbursement Agreement,
including:
(a) the application of the proceeds of Hotel/Casino Component
Funding Sources only to pay Main Project Costs permitted pursuant to
the allocation procedures of Section 2.5 of the Disbursement
Agreement;
(b) the application of the proceeds of Approved Equipment Funding
Commitments only to the payment of the Gaming Equipment, the Specified
Equipment and other Main Project Costs allocated to the Equipment
Component;
(c) the application of amounts in the Accounts only to pay Main
Project Costs allocated to the Hotel/Casino Component, as set forth in
the Main Project Budget; and
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(d) the incurrence and payment of Pre-Opening Expenses only to
satisfy the Opening Conditions.
SECTION 7.1.11. Repayment of Indebtedness. The Borrower shall repay,
in accordance with its terms, all Indebtedness, including all sums due
under this Agreement and the other Operative Documents subject, however, in
the case of any such Indebtedness (excluding, however any Obligation) the
repayment of which is limited by any term of any Operative Document, to
such limitation.
SECTION 7.1.12. Diligent Construction of the Main Project. With
respect to the construction and Final Completion of each of the
Hotel/Casino, the Energy Project, and, if applicable, the renovations to
the Theater, the Borrower shall:
(a) take or cause to be taken all action, make or cause to be
made all Contracts and, if required, Subcontracts and do or cause to
be done all things necessary to construct of the Hotel/Casino and, if
applicable, the renovations to the Theater diligently to Final
Completion in accordance with the Design/Build Contract, the Plans and
Specifications and the other Operative Documents;
(b) take or cause to be taken all action and do or cause to be
done all things necessary to enforce the obligation of the Energy
Project Provider and, if applicable, the Energy Project Guarantor to
construct or cause the construction of the Energy Project diligently
to Final Completion in accordance with the Energy Project Ground
Lease, the Energy Service Agreement and the other Operative Documents
applicable to the Energy Project, subject to clause (c) of Section
8.1.13; and
(c) promptly after completing the Main Project Punchlist Items
applicable to the Hotel/Casino and the Theater, as the case may be,
request the Construction Consultant to issue the Main Project
Punchlist Completion Certificate applicable to the Hotel/Casino and
the Theater, as the case may be.
SECTION 7.1.13. Compliance with Legal Requirements. The Borrower
promptly and diligently shall (x) own, construct, maintain and operate the
Main Project in compliance in all material respects with all applicable
Legal Requirements, including the Permits, the Environmental Laws and (from
and after the date that the Borrower holds a Gaming License) Nevada Gaming
Laws and (y) procure, maintain and comply, or cause to be procured,
maintained and complied with, in all material respects, all Permits
required for any ownership, construction, financing, maintenance or
operation of the Main Project or any part thereof at or before the time
each such Permit becomes necessary for the ownership, construction,
financing, maintenance or operation of the Main Project, as the case may
be, as contemplated by the Operative Documents, except that the Borrower
may, at its expense, contest by appropriate proceedings conducted in good
faith the validity or application of any such Legal Requirements, provided,
however, that (1) none of the Agents, any of the Lenders, any of the
Aladdin Parties or
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LCNI would be subject to any criminal liability for failure to comply
therewith and (2) all proceedings to enforce such Legal Requirements
against the Agents, any of the Aladdin Parties or LCNI shall have been duly
and effectively stayed during the entire pendency of such contest, except
where failure to procure such stay could not reasonably be expected to
result in a Material Adverse Effect.
SECTION 7.1.14. In Balance; Borrower Equity. If at any time the
Project Budget is not In Balance, the Borrower shall deposit or cause to be
deposited into the Guaranty Deposit Account, in cash, funds in the amount
required to bring the Project Budget In Balance. Each such deposit shall
be made on the earlier of (x) 10 days after demand therefor by the
Administrative Agent or (y) the Business Day immediately preceding the date
on which an Advance is to be made by the Lenders pursuant to the Loan
Documents or, if applicable, by the Disbursement Agent pursuant to the
Disbursement Agreement, as the case may be.
SECTION 7.1.15. Security Interest in Newly Acquired Property. If the
Borrower shall at any time acquire any interest in property not covered by
the Loan Documents (excluding, however, property in which, pursuant to the
Loan Documents, the Borrower is not required to grant a security interest
in favor of any Secured Party) or enter into a Main Project Document, then
promptly upon such acquisition or execution the Borrower shall execute,
deliver and record a supplement to the Loan Documents, reasonably
satisfactory in form and substance to the Administrative Agent, subjecting
such interests to the Lien and security interests created by the applicable
Loan Documents (with the priority contemplated thereby in favor of each
Secured Party) and (if the Main Project Document is a Material Main Project
Document) deliver to the Administrative Agent, on behalf of the Secured
Parties, Consents (with such changes thereto as are reasonably acceptable
to the Administrative Agent) with respect to the collateral assignment of
any such Main Project Document.
SECTION 7.1.16. Plans and Specifications. The Borrower shall provide
to the Construction Consultant a copy of, and maintain at the Site, a
complete set of Plans and Specifications as in effect from time to time.
The Borrower shall provide or make available to the Construction Consultant
a copy of all shop drawings, schedules, reports, diagrams, layouts, setting
plans, cuts, explanations, catalogue references, samples and other data
prepared by the Design/Builder, the Architect of Record or any
Subcontractor in connection with the development of the Plans and
Specifications during the time that the Borrower and the Owner
Representative have to review and approve such items in order for the
Construction Consultant to confirm the conformity thereof to the
applicable provisions of this Agreement and the other Operative Documents;
provided, however, in no event shall any such review by the Construction
Consultant require the Borrower or the Owner Representative to delay the
approval process thereof as set forth in Section 4.2 of the General
Conditions annexed to the Design/Build Contract as Attachment D. Following
the review and approval of such submissions as aforesaid, no material
modifications to the Plans and Specifications may be made without the prior
written consent of the Administrative Agent, which consent shall not be
unreasonably withheld or delayed if, after giving effect thereto, such
modifications will not (w) cause a breach under the
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Discount Note Indenture, (x) extend the Completion Date beyond the Outside
Completion Deadline, (y) require any adjustment to the Guaranteed Maximum
Price or the Design/Build Contract Time and (z) the Completion Guarantors
have consented in writing to such modifications. The Borrower shall
provide Final Plans and Specifications for the Hotel/Casino no later than
six months prior to the estimated Completion Date and "as built" Plans and
Specifications for the Hotel/Casino no later than three months after the
Completion Date.
SECTION 7.1.17. Construction Consultant. The Borrower shall:
(a) cooperate and cause the Design/Builder and the Architect of
Record to cooperate with the Construction Consultant in the
performance of the Construction Consultant's duties hereunder and
under the Construction Consultant Engagement Agreement. Without
limiting the generality of the foregoing, the Borrower shall and shall
instruct the Design/Builder and the Architect of Record to: (w)
communicate with and promptly provide or make available to the
Construction Consultant all invoices, documents, shop drawings,
schedules, reports, diagrams, layouts, setting plans, cuts,
explanations, catalogue references, samples and other data and
information reasonably requested by the Construction Consultant with
respect to the construction of the Main Project and, if applicable,
the renovation of the Theater (x) provide the Construction Consultant
with access to the Site and, subject, however, to required safety
precautions, the construction areas (the Owner Representative shall
accompany the Construction Consultant on any such visits), (y) provide
the Construction Consultant with reasonable working space and access
to telephone, copying and telecopying equipment (at no cost to the
Lenders, the Construction Consultant, the Administrative Agent or the
Disbursement Agent) and (z) otherwise facilitate the Construction
Consultant's review of the construction of the Main Project and
preparation of the certificates required hereby and by the
Disbursement Agreement.
(b) pay or cause to be paid to the Construction Consultant (or
the Administrative Agent for the account of the relevant Lenders for
reimbursement of payments advanced to the Construction Consultant) out
of the Loans made hereunder (to the extent not otherwise paid from the
Accounts or any other sources) all amounts required hereunder and
under the Construction Consultant Engagement Agreement (and, in the
case of any such reimbursement, to the extent so advanced by the
Administrative Agent).
(c) in addition to any other consultation required hereunder,
following the end of each Fiscal Quarter, upon the reasonable request
of the Administrative Agent, consult with any Person (other than
Contractors or Subcontractors) regarding any adverse event or
condition identified in any report prepared by the Construction
Consultant or the Owner Representative, as the case may be.
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SECTION 7.1.18. Proper Legal Forms. The Borrower shall take all
action within its control required or advisable to ensure that each of the
Operative Documents is in proper legal form.
SECTION 7.1.19. Preserving the Main Project Security. The Borrower
shall:
(a) Subject to clauses (b) and (c), undertake all actions which
are necessary or appropriate in the reasonable judgment of the
Administrative Agent and (from and after the date that the Borrower
holds a Gaming License) as required by the Nevada Gaming Laws to (x)
maintain the Secured Parties' respective security interests under the
Loan Documents in the Main Project Security in full force and effect
at all times (including the priority thereof) and (y) preserve and
protect the Main Project Security and protect and enforce the
Borrower's rights and title and the respective rights of the Secured
Parties to the Main Project Security, including the making or delivery
of all filings and recordations, the payments of fees and other
charges, the issuance of supplemental documentation, the discharge of
all claims or other Liens (other than the Permitted Liens and the
Permitted Encumbrances) adversely affecting the respective rights of
the Secured Parties to and under the Main Project Security (except to
the extent same is being contested in good faith by appropriate
governmental proceedings promptly instituted and diligently contested,
so long as (1) such reserve or other appropriate provision, if any, as
shall be required in conformity with generally accepted accounting
principles shall have been made therefor and (2) in case of any charge
or claim which has or may become a Lien against any of the Main
Project Security, such contested proceedings conclusively operate to
stay the sale of any portion of the Main Project Security to satisfy
such charge or claim which has of may become a Lien against any of the
Main Project Security, such contested proceedings conclusively operate
to stay the sale of any portion of the Main Project Security to
satisfy such charge or claim) and the publication or other delivery of
notice to third parties.
(b) Take all actions and do all things as may be reasonably
necessary under NRS Chapter 278 and the applicable provisions of the
Clark County Code, Clark County, Nevada (the "Clark County Code"), to
cause the Mall Project Parcel to become a separate legal parcel as
promptly as practicable. The Borrower shall, upon creation of the
Mall Project Parcel as a separate legal parcel, deliver a notice to
such effect to the Administrative Agent. Promptly thereafter, at the
Borrower's sole cost and expense, in substantially concurrent
transactions:
(i)the Borrower, in accordance with the Mall Project Ground
Lease, shall transfer all of its right, title and interest in and
to the Mall Project Parcel to Aladdin Bazaar by executing,
delivering and recording at the Clark County, Nevada, Recorder's
Office a Grant, Bargain and Sale Deed substantially in the form
of Exhibit J hereto;
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(ii) the Borrower and Aladdin Bazaar shall terminate the
Mall Project Ground Lease;
(iii) the Mall Project Parcel shall be released from the
Deed of Trust and reconveyed by the Lenders to Aladdin Bazaar,
which release shall be recorded at the Clark County, Nevada,
Recorder's Office; and
(iv) substantially concurrently with the foregoing, and as a
condition precedent thereto, the Borrower shall deliver to the
Administrative Agent: (A) a legal opinion from counsel reasonably
acceptable to the Administrative Agent to the effect that (after
giving effect to the amendments and re-recordations contemplated
by this clause (b)) (1) the Mall Project Parcel has been legally
created as a separate legal parcel under NRS Chapter 278 and the
applicable provisions of the Clark County Code, and (2) the Deed
of Trust remains enforceable in accordance with its terms and
continues to be effective to create the security interests
described therein, together with such other legal opinions as the
Administrative Agent may reasonably request, each in form and
substance reasonably satisfactory to the Administrative Agent,
(B) endorsements, or commitments by the Title Insurer to issue
endorsements, to the Title Policies, in each case in form and
substance satisfactory to the Administrative Agent, insuring the
continuing perfection and priority of the respective Liens on the
Main Project Security and (C) any amendments to the Reciprocal
Easement Agreement, the Site Work Agreement and the Common
Parking Area Use Agreement necessary to allow continued
performance by the parties thereto of their obligations
thereunder.
(c) Take all actions and do all things as may be reasonably
necessary under NRS Chapter 278 and the applicable provisions of the
Clark County Code, to cause the Music Project Parcel to become a
separate legal parcel as promptly as practicable. The Borrower shall,
upon creation of the Music Project Parcel as a separate legal parcel,
deliver a notice to such effect to the Administrative Agent. Promptly
thereafter, at the Borrower's sole cost and expense, in substantially
concurrent transactions:
(i) The Borrower, in accordance with the Music Project
Ground Lease, shall transfer all of its right, title and interest
in and to the Music Project Parcel to Aladdin Music by executing,
delivering and recording at the Clark County, Nevada, Recorder's
Office a Grant, Bargain and Sale Deed substantially in the form
of Exhibit J hereto;
(ii) the Borrower and Aladdin Music shall terminate the
Music Project Ground Lease;
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(iii) the Music Project Parcel shall be released from the
Deed of Trust and reconveyed by the Lenders to Aladdin Music,
which release shall be recorded at the Clark County, Nevada,
Recorder's Office; and
(iv) substantially concurrently with the foregoing, and as a
condition precedent thereto, the Borrower shall deliver to the
Administrative Agent: (A) a legal opinion from counsel reasonably
acceptable to the Administrative Agent to the effect that (after
giving effect to the amendments and re-recordations contemplated
by this clause (c)) (1) the Music Project Parcel has been legally
created as a separate legal parcel under NRS Chapter 278 and the
applicable provisions of the Clark County Code, and (2) the Deed
of Trust remains enforceable in accordance with its terms and
continues to be effective to create the security interests
described therein, together with such other legal opinions as the
Administrative Agent may reasonably request, each in form and
substance reasonably satisfactory to the Administrative Agent,
(B) endorsements, or commitments by the Title Insurer to issue
endorsements, to the Title Policies, in each case, in form and
substance satisfactory to the Administrative Agent, insuring the
continuing perfection and priority of the respective Liens on the
Main Project Security and (C) any amendments to the Reciprocal
Easement Agreement, the Site Work Agreement and the Common
Parking Area Use Agreement necessary to allow continued
performance by the parties thereto of their obligations
thereunder.
SECTION 7.1.20. Application of Insurance and Condemnation Proceeds.
(a) As a material inducement to the Lenders to enter into this
Agreement, if any Event of Loss shall occur with respect to the
Complex or any part thereof, the Borrower shall (x) promptly upon
discovery or receipt of notice thereof provide written notice thereof
to the Administrative Agent, (y) diligently pursue all its rights to
compensation against all relevant insurers, reinsurers and/or
Governmental Instrumentalities, as applicable, in respect of such
event and (z) not, without consent of the Administrative Agent (which
consent shall not be unreasonably withheld or delayed), compromise or
settle any claim involving an amount in excess of $100,000 per claim.
(b) All awards, amounts, damages, compensation, payments,
settlements and proceeds (including instruments) in respect of any
Event of Loss including the proceeds of any insurance policy required
to be maintained by the Borrower hereunder and awards or settlements
from any condemnation (collectively, "Loss Proceeds") shall be applied
as provided in this Section, subject, however, to the applicable
provisions of the Reciprocal Easement Agreement. All Loss Proceeds
shall be paid by the insurers, reinsurers, Governmental
Instrumentalities or other payors directly to the Administrative Agent
for deposit in the Loss Proceeds Account. If any Loss Proceeds are
paid directly to the Borrower, any other Aladdin Party, LCNI, London
Clubs Holdings or London Clubs or
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any Affiliate of any of the foregoing by any insurer, reinsurer,
Governmental Instrumentality or such other payor, (x) such Loss
Proceeds shall be received in trust for the Administrative Agent, (y)
such Loss Proceeds shall be segregated from other funds of such Person
and (z) such Person shall pay (or, if applicable, Borrower shall cause
the Aladdin Parties or, if applicable, LCNI, London Clubs Holdings or
London Clubs to pay) such Loss Proceeds over to the Administrative
Agent in the same form as received (with any necessary endorsement)
for deposit in the Loss Proceeds Account. In the event that for a
period of 60 days after any Loss Proceeds are deposited in the Loss
Proceeds Account, the Borrower is not permitted pursuant to the terms
of the Disbursement Agreement to obtain Advances of such Loss
Proceeds, then the Borrower shall use such proceeds to prepay the
Loans in accordance with this Agreement, subject, however, to the
applicable provisions of the Reciprocal Easement Agreement.
SECTION 7.1.21. Shoulder Space Encroachments.
(a) The Borrower shall construct or cause to be constructed the
Hotel/Casino and the Energy Project within the Main Project Parcel;
provided, however, that (x) portions of the Hotel/Casino and other
improvements constituting the Main Project may encroach onto the Mall
Project Parcel or the Music Project Parcel, (y) portions of the Mall
Project may encroach onto the Main Project Parcel or the Music Project
Parcel and (z) portions of the Music Project may encroach onto the
Mall Project Parcel or the Main Project Parcel, so long as: (1) none
of such encroachments extends beyond the limitations set forth in the
Reciprocal Easement Agreement and the Final Plans and Specifications
and (2) the Borrower complies in all material respects with the
provisions set forth in Section 7.2.17 in implementing any Scope
Change that causes such encroachment.
(b) Promptly after the creation of the Mall Project Parcel and
the Music Project Parcel in accordance with this Agreement and the
other Operative Documents, the Borrower shall implement such lot line
adjustments as may be necessary to ensure that (x) all improvements
which are to be constructed on the Mall Project are located on the
Mall Project Parcel or on a parcel as to which Aladdin Bazaar has a
permanent easement, (y) all improvements which are to be constructed
on the Main Project are located on the Main Project Parcel or on a
parcel as to which the Borrower has a permanent easement and (z) all
improvements which are to be constructed on the Music Project are
located on the Music Project Parcel or on a parcel as to which Aladdin
Music has a permanent easement.
SECTION 7.1.22. GECC Intercreditor Agreement. On or before the
earlier of June 30, 1998 or the applicable date set forth in the GECC
Commitment, the Borrower shall provide the Administrative Agent with the
final form of documents to be used with respect to the FF&E Financing
including the GECC Intercreditor Agreement. Such documents shall be in
form and substance satisfactory to the Administrative Agent as determined
in good faith in its sole discretion. The GECC Intercreditor Agreement
shall provide, in relevant part, that the
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Administrative Agent shall receive all notices given or received by GECC
with respect to the FF&E Financing, that the Administrative Agent, on
behalf of the Lenders, shall have the right but not the obligation to cure
defaults of the Borrower under the FF&E Financing and such other rights,
remedies and options as are customary for senior secured lenders to receive
in transactions of this type.
SECTION 7.1.23. Compliance with Material Main Project Documents and
the Approved Equipment Funding Commitment. The Borrower shall comply duly
and promptly, in all material respects, with its obligations, and enforce
all of its respective rights, under all Material Main Project Documents,
except where the failure to comply or enforce such rights, as the case may
be, could not reasonably be expected to have a Material Adverse Effect.
The Borrower shall comply duly and promptly, in all material respects, with
its obligations, and enforce all of its respective rights, under the
Approved Equipment Funding Commitment.
SECTION 7.2. Negative Covenants. The Borrower agrees with the
Agents, the Issuer and each Lender that, until all Commitments have
terminated and all Obligations have been indefeasibly paid and performed in
full, the Borrower will perform the obligations set forth in this
Section 7.2.
SECTION 7.2.1. Business Activities. The Borrower and Subsidiaries
will not engage in any business activity, except those described in the
recitals and such activities as are reasonably incidental or substantially
similar thereto.
SECTION 7.2.2. Indebtedness. The Borrower and Subsidiaries will not
directly or indirectly, create, incur, assume or suffer to exist or
otherwise become or be liable in respect of any Indebtedness or issue any
shares of Preferred Stock, other than, without duplication, the following:
(a) Indebtedness in respect of the Credit Extensions and other
Obligations;
(b) Existing Indebtedness;
(c) Indebtedness of the Borrower comprised of Hedging
Liabilities; provided, however, that the notional principal amount of
any such Hedging Liabilities does not exceed the principal amount of
Indebtedness to which such Hedging Liabilities relate;
(d) Indebtedness of the Borrower incurred under the FF&E
Financing; provided, however, that (x) the principal amount of such
Indebtedness does not exceed the cost (including sales and excise
taxes, installation and delivery charges and other direct costs of,
and other direct and transaction expenses paid or charged in
connection with, such purchase including reasonable transaction costs)
of the FF&E purchased or leased with the proceeds thereof and (y) the
aggregate principal amount of such Indebtedness, including any
Permitted Refinancing Indebtedness incurred to refinance or replace
any
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Indebtedness incurred pursuant to this clause (d), does not exceed
$80,000,000 (including obligations characterized as operating leases
or other off-balance sheet financing arrangements) outstanding at any
time;
(e) Indebtedness (to the extent that the incurrence thereof does
not result in incurrence by the Borrower of any obligation for the
payment of borrowed money of others) solely in respect of performance
bonds; provided, that such Indebtedness was incurred in the ordinary
course of business of the Borrower and in an aggregate principal
amount outstanding under this clause (e) at any one time of not more
than $10,000,000;
(f)Indebtedness of the Borrower comprised of (x) at any time
prior to the Outside Completion Deadline, additional Indebtedness
under clause (d) of this Section in an aggregate amount not to exceed
$40,000,000, plus (y) after a Default of the "In Balance" requirements
in Section 7.1.14 and at any time prior to the Outside Completion
Deadline, additional Indebtedness under clause (d) in an aggregate
amount not to exceed $50,000,000 (provided that Indebtedness incurred
pursuant to this clause (f)(y) is matched, dollar for dollar, by
additional equity investments; provided, however, that the foregoing
amounts shall be reduced by any amounts which the Lenders have agreed
by amendment to this Agreement to lend pursuant to clause (a);
(g) the Borrower may incur Permitted Refinancing Indebtedness in
exchange for, or the net proceeds of which are used to refinance,
renew, replace, substitute or refund, Indebtedness that was permitted
to be incurred under clauses (b), (d) and (h) of this covenant;
(h) after the Hotel/Casino is Operating, Indebtedness of the
Borrower under any Working Capital Facility in an aggregate amount at
any time outstanding not to exceed $20,000,000; and
(i) Indebtedness of Aladdin Music in respect of the construction
of the Music Project, the terms of which and the Instruments which
evidence and secure such Indebtedness shall be satisfactory to the
Administrative Agent as determined in good faith in its sole
discretion.
Accrual of interest, the accretion of the accreted value or principal and
the payment of interest in the form of additional Indebtedness and the
issuance of the Borrower Series A Preferred Membership Interests, will not
be deemed to be an incurrence of Indebtedness for purposes of this
covenant.
SECTION 7.2.3. Liens. The Borrower and Subsidiaries will not create,
incur, assume or suffer to exist any Lien upon any of its property,
revenues or assets, whether now owned or hereafter acquired, or any
proceeds, income or profits therefrom, or assign or convey any right to
receive income therefrom, excluding, however, Liens securing (x) the
Obligations,
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(y) Permitted Refinancing Indebtedness which is incurred to refinance
Indebtedness which has been secured by a Lien and is permitted under
Section 7.2.2 and which has been incurred in accordance with such Section;
provided, however, that such Liens do not extend to cover any property or
assets of the Borrower not already securing the Indebtedness so refinanced
and (z) Permitted Liens, Permitted Encumbrances and Permitted Exceptions.
SECTION 7.2.4. Financial Condition and Operations. The Borrower will
not, as of the close of any Fiscal Quarter, commencing with the close of
the Fiscal Quarter in which the Conversion Date occurs, permit:
(a) Total Debt to EBITDA Ratio. The Total Debt to EBITDA Ratio
at the close of any such Fiscal Quarter set forth below to exceed the
ratio set forth opposite such Fiscal Quarter:
<TABLE>
<CAPTION>
Such FQ Closing Total Debt to EBITDA
after Conversion Date Ratio
--------------------- --------------------
<S> <C>
FQ 1 4.1:1
FQ 2 4.0:1
FQ 3 4.0:1
FQ 4 3.75:1
FQ 5 3.75:1
FQ 6 3.60:1
FQ 7 3.60:1
FQ 8 3.25:1
FQ 9 3.25:1
FQ 10 2.85:1
FQ 11 2.85:1
FQ 12 2.55:1
FQ 13 2.55:1
FQ 14 2.40:1
FQ 15 2.40:1
FQ 16 2.25:1
FQ 17 2.25:1
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Such FQ Closing Total Debt to EBITDA
after Conversion Date Ratio
--------------------- --------------------
<S> <C>
FQ 18 2.15:1
FQ 19 2.15:1
FQ 20 and thereafter 2.00:1
</TABLE>
(b) Interest Coverage Ratio. The Interest Coverage Ratio as of
the close of any such Fiscal Quarter to be less than 2.0:1.0.
(c) Net Worth. Net Worth as of the close of any such Fiscal
Quarter to be less than the sum of $100,000,000 plus 85% of positive
Net Income (after giving effect to the amount of Restricted Payments
made by the Borrower in cash in accordance with clauses (a) and (c) of
Section 7.2.6, subject to the terms thereof for the period, treated as
one accounting period) from the Closing Date through the close of such
Fiscal Quarter.
(d) EBITDA. EBITDA at the close of any such Fiscal Quarter
(determined for such Fiscal Quarter and the three immediately
preceding such Fiscal Quarters or such lesser number of Fiscal
Quarters to have elapsed since the Conversion Date) during any period
set forth below to be less than the amount set forth below opposite
such period:
<TABLE>
<CAPTION>
Period of FQs after
Conversion Date Amount
------------------- ------------
<S> <C>
FQ1 through FQ4 $105,000,000
FQ5 through FQ8 $110,000,000
FQ9 through FQ12 $120,000,000
FQ13 through FQ16 $125,000,000
FQ17 through FQ20 $130,000,000
FQ21 and each
Fiscal Quarter
thereafter $140,000,000
</TABLE>
(e) Minimum Fixed Charge Coverage. The Minimum Fixed Charge
Coverage Ratio as of the close of any such Fiscal Quarter to be less
than 1.10:1.0.
SECTION 7.2.5. Investments. The Borrower and Subsidiaries will not
make, incur, assume or suffer to exist any Investment in any other Person,
except:
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(a) Ongoing Investments;
(b) Cash Equivalent Investments;
(c) without duplication, Investments to the extent permitted as
Indebtedness pursuant to Section 7.2.2;
(d) without duplication, Investments permitted as Capital
Expenditures pursuant to Section 7.2.7;
(e) Investments by way of contributions to capital or purchases
of interests (directly or indirectly) (i) by the Borrower in AMH and
Aladdin Music or by such Subsidiary in any of its Subsidiaries,
subject to the limitations and the satisfaction of the conditions set
forth in Section 2.2.7 of the Disbursement Agreement;
(f) Investments constituting (x) accounts receivable arising,
(y) trade debt granted or (z) deposits made in connection with the
purchase price of goods or services, in each case in the ordinary
course of business;
(g) the grant by the Borrower to Bazaar of the Mall Project
Ground Lease and, upon the subdivision of the Site, the transfer by
the Borrower to Aladdin Bazaar of the fee interest in the Mall Project
Parcel and the Mall Project Easements, subject to, however subsection
(b) of Section 7.1.22;
(h) the grant of the Energy Project Ground Lease;
(i) (x) the grant by the Borrower to AMH of the Music Project
Ground Lease by the Borrower to Aladdin Music, (y) upon the
subdivision of the Site, the transfer by the Borrower to Aladdin Music
of the fee interest in the Music Project Parcel and the Music Project
Easements, subject to, however subsection (c) of Section 7.1.19 and
(z) upon consummation of the Music Project financing, an Investment
not to exceed $21,250,000 in consideration for preferred Membership
Interests in Aladdin Music pursuant to the Organizational Documents of
Aladdin Music;
provided, however, that
(j) any Investment which when made complied with the requirements
of clauses (w), (x) or (y) of the definition of the term "Cash
Equivalent Investment" may continue to be held notwithstanding that
such Investment if made thereafter would not comply with such
requirements; and
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(k) no Investment otherwise permitted by clauses (c), (d), (e),
(f) or (i)(z) shall be permitted to be made if any Default has
occurred and is continuing or would result therefrom.
SECTION 7.2.6. Restricted Payments, etc. On and at all times after
the date hereof:
(a) the Borrower will not declare, pay or make any dividend or
distribution (in cash, property or obligations) on any Membership
Interests (now or hereafter outstanding) of the Borrower or on any
warrants, options or other rights with respect to any shares of any
Membership Interests (now or hereafter outstanding) of the Borrower
(other than dividends or distributions payable in its Membership
Interests or warrants to purchase its Membership Interests or splitups
or reclassifications of its Membership Interests into additional or
other shares of its Membership Interests ) or apply, or permit any of
its Subsidiaries to apply, any of its funds, property or assets to the
purchase, redemption, sinking fund or other retirement of, or agree or
permit any of its Subsidiaries to purchase or redeem, any shares of
any Membership Interests (now or hereafter outstanding) of the
Borrower, or warrants, options or other rights with respect to any
shares of any Membership Interests (now or hereafter outstanding) of
the Borrower;
(b) the Borrower will not, and will not permit any of its
Subsidiaries to
(i) make any payment or prepayment of principal of, or make
any payment of interest on, (x) any subordinated debt on any day
other than the stated, scheduled date for such payment or
prepayment set forth in the documents and instruments
memorializing such subordinated debt, or which would violate the
subordination provisions of such subordinated debt or (y) any
Discount Note; or
(ii) redeem, purchase or defease, any subordinated debt or
any Discount Note or make any payment for purposes of funding any
of the foregoing;
(the foregoing prohibited acts referred to in clauses (a) and (b) being
herein collectively referred to as "Restricted Payments"); provided,
however, that
(c) notwithstanding the provisions of clause (a) above, for so
long as the Borrower is treated as a pass-through entity, or the
Borrower is not treated as a separate entity, for United States
federal income tax purposes (as evidenced by an opinion of counsel
subject to usual qualifications and in reliance on customary
representations, at least annually), the Borrower shall be permitted
to make Restricted Payments to equity holders of the Borrower, in an
amount not to exceed the Tax Amount for such period; provided,
however, that (x) prior to any distributions of Tax Amounts, the
Borrower shall deliver an officers' certificate to the Administrative
Agent to the effect that the Borrower is a limited-liability company
taxable as a partnership or other substantially similarly
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treated pass-through entity, or the Borrower is not treated as a
separate entity, for United States federal income tax purposes and,
after giving effect to any such distribution of such Tax Amount, the
Borrower will continue to be in compliance with the covenants in
Sections 7.2.4 and (y) at the time of such distributions, the most
recent audited financial statements of the Borrower required to have
been furnished pursuant to clause (c) of Section 7.1.1 reflect that
the Borrower is treated as a limited-liability company taxable as a
partnership or other substantially similarly treated pass-through
entity or the Borrower, is not treated as a separate entity for United
States federal income tax purposes for the period covered by such
financial statements;
(d) notwithstanding the provisions of clause (a) above, from and
after March 1, 2003, the Borrower shall be permitted to make
Restricted Payments on the Borrower Series A Preferred Membership
Interests to Holdings from time to time in an amount sufficient to
enable Holdings to make payments of interest on the Discount Notes
which are then due and payable, such amount not to exceed the amount
payable thereunder in accordance with the terms thereof in effect on
the Effective Date;
(e) notwithstanding the provisions of clause (a) above, the
Borrower shall be permitted to make Restricted Payments in respect of
the Management Fee pursuant to the Salle Privee Management Agreement
as in effect on the Effective Date to Holdings, which shall in turn
utilize all of any such Restricted Payment to make a distribution or
dividend to LCNI, which shall in turn utilize all of any such
Restricted Payment to make a distribution and/or dividend to London
Clubs Holdings, which shall in turn utilize all of any such
distribution or dividend to make a distribution and/or dividend to
London Clubs;
(f) notwithstanding the provisions of clause (a), the Borrower
shall be permitted to make Restricted Payments on the Effective Date
in respect of a fee equal to 1% of the amount of Indebtedness
supported and enhanced by the Keep-Well Agreement on the Effective
Date (such amount of Indebtedness being $265,000,000) and payment of
an annual fee equal to 1.5% of the annual average Indebtedness
outstanding under the Bank Credit Facility which is supported and
enhanced by the Keep-Well Agreement, in each case as set forth in the
London Clubs Purchase Agreement as in effect on the Effective Date, to
Holdings, which shall in turn utilize all of any such Restricted
Payment to make a distribution and/or dividend to LCNI, which shall in
turn utilize all of any such Restricted Payment to make a distribution
and/or dividend to London Clubs Holdings, which shall in turn utilize
all of any such distribution or dividend to make a distribution or
dividend to London Clubs;
(g) notwithstanding the provisions of clause (a), the Borrower
shall be permitted to make Restricted Payments with respect to the
Employment Agreements in an aggregate amount not exceeding $2,000,000
in any Fiscal Year; and
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(h) notwithstanding the provisions of clause (a) above, the
Borrower shall be permitted to make Restricted Payments as dividends
or distributions to its stockholders in any Fiscal Quarter following
the Conversion Date, so long as
(i) the Borrower shall have delivered to the Administrative
Agent
(A) financial statements prepared on a pro forma basis
to give effect to such Restricted Payment for the Fiscal
Quarter (the "Base Fiscal Quarter") then last ended for
which financial statements and the Compliance Certificate
relating thereto have been delivered to the Administrative
Agent pursuant to Section 7.1.1, and
(B) a certificate of the Borrower executed by its
chief financial or accounting Authorized Representative
demonstrating that the financial results reflected in such
financial statements would result in a Total Debt to EBITDA
Ratio at the Close of any such Base Fiscal Quarter occurring
during any period set forth below to be less than the ratio
set forth opposite such period:
<TABLE>
<CAPTION>
Period of Fqs Total Debt to
After Conversion Date EBITDA Ratio
--------------------- -------------
<S> <C>
FQ1 through FQ4 3.50:1
FQ5 through FQ8 3.25:1
FQ9 and thereafter 3.00:1; and
</TABLE>
(ii) the aggregate amount of such Restricted Payment to be
made by the Borrower pursuant to this clause (h), when added to
the aggregate amount of all such Restricted Payments during the
Fiscal Quarter in which such Restricted Payment would be made,
does not exceed the lesser of (A) the sum of (1) 50% of Net
Income for the Base Fiscal Quarter plus (2) the amount of Cash
Contributions to Capital and (B) an amount equal to the excess of
(1) Excess Cash Flow for the Base Fiscal Quarter over (2) the
amount of Mandatory Prepayments required to have been made
pursuant to clause (c) of Section 3.1.1 (without giving effect to
the proviso to such Section) for the Base Fiscal Quarter;
(i) no Restricted Payments otherwise permitted by clause (c),
(d), (e), (f), (g) or (h) shall be made if a Default shall have
occurred and be continuing or if a Default will result after giving
effect thereto.
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SECTION 7.2.7. Capital Expenditures, etc. From and after the
Conversion Date, the Borrower will not make or commit to make Capital
Expenditures, except Capital Expenditures set forth in a budget delivered
by the Borrower in accordance with clause (k) of Section 7.1.1; provided,
however, in no event shall the Borrower make or commit to make any Capital
Expenditures during any Fiscal Year occurring (a) during the period from
the Effective Date through the fourth anniversary thereof in excess of
$12,000,000 or (b) after such anniversary in excess of $18,000,000, in each
case whether or not funded from the FF&E Reserve.
SECTION 7.2.8. Rental Obligations. The Borrower will not, and will
not permit any Subsidiary to, enter into at any time any arrangement (other
than the arrangement described in clause (c) of the fifth recital) which
involves the leasing by the Borrower from any lessor of any real or
personal property (or any interest therein), which does not create a
Capitalized Lease Liability and except arrangements which, together with
all other such arrangements which shall then be in effect, will not require
the payment of an aggregate amount in any Fiscal Year of rentals by the
Borrower and Subsidiary in excess of, in the case of any such arrangements
entered into prior to the 90th day following the Final Completion Date,
$1,000,000 per annum and, in the case of any such arrangement entered into
on or subsequent to such date, $5,000,000 per annum.
SECTION 7.2.9. Take or Pay Contracts. Except for the Energy Project
Service Agreement, the Borrower and Subsidiaries will not enter into or be
a party to any arrangement for the purchase of materials, supplies, other
property or services if such arrangement by its express terms requires that
payment be made by the Borrower or such other Person regardless of whether
such materials, supplies, other property or services are in fact or can be
required to be delivered or furnished to it.
SECTION 7.2.10. Consolidation, Merger, etc. The Borrower and
Subsidiaries will not liquidate or dissolve, consolidate with, or merge
into or with, any other Person, or purchase or otherwise acquire all or
substantially all of the assets of any Person (or of any division thereof).
SECTION 7.2.11. Permitted Dispositions. The Borrower and
Subsidiaries will not sell, transfer, lease, contribute or otherwise convey
(including by way of merger), or grant options, warrants or other rights
with respect to, any of the assets of such Person (including accounts
receivable or capital stock of Subsidiaries) to any Person unless such
disposition is in the ordinary course of its business or otherwise
permitted by this Agreement; provided, however, that the Administrative
Agent will not unreasonably withhold its consent to transfers of minority
interests in the Borrower to members of the management team of the Borrower
so long as such interests are pledged to the Lenders as security for the
Loans.
SECTION 7.2.12. Modification of Certain Agreements. The Borrower
will not, and will not permit any of its Subsidiaries to, directly or
indirectly, enter into, amend (by Change Order or otherwise), modify (by
Change Order or otherwise), terminate, supplement or waive a right under or
permit or consent to the amendment, modification, termination, supplement
or waiver
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<PAGE>
of any of the provisions of, or grant any consent under (v) any Security
Agreement without the consent of the Administrative Agent (provided,
however, that the Administrative Agent shall consent to any such
amendment, termination or supplement which the Borrower is permitted to
enter into pursuant to this Agreement), (w) any Permit, the effect of which
could reasonably be expected to have a Material Adverse Effect, (x) the
Energy Project Service Agreement, the Energy Project Ground Lease, the Mall
Project Ground Lease (other than as set forth in clause (b) of Section
7.1.19), the Music Project Ground Lease (other than as set forth in
clause (c) of Section 7.1.19), the Organizational Documents of the Borrower
and Subsidiaries, the Fluor Guaranty, or the approved Equipment Funding
Commitments (except for the purpose of replacing them with a commitment
described in clause (b) of the definition of "Approved Equipment Funding
Commitments") without obtaining the Administrative Agent's prior written
consent in its sole discretion, (y) the Design/Build Contract or any other
Subcontract entered into with a Subcontractor constituting a Material Main
Project Document except in accordance with the procedures set forth in
Section 7.2.18 and Section 8.1.13, as applicable, below or (z) any other
Material Main Project Document, the effect of which, with respect to such
other Material Main Project Document, could reasonably be expected to have
a Material Adverse Effect with respect to the Borrower or the Complex.
Notwithstanding any of the foregoing, the Borrower may:
(a) enter into Contracts and Subcontracts constituting Material
Main Project Documents consistent with the Plans and Specifications,
the Construction Benchmark Schedule, the Main Project Budget, and the
Design/Build Contract as each is in effect from time to time so long
as such Contract or Subcontract does not increase the Guaranteed
Maximum Price or require an adjustment of the Design/Build Contract
Time. Each such Contract or Subcontract, as the case may be, shall be
in writing and shall become effective when and only when: (i) the
Borrower and such other party thereto have executed and delivered such
Contract or Subcontract (with the effectiveness thereof subject only
to satisfaction of the conditions in clauses (ii), (iii), (iv), (v)
and (vi) below); (ii) the Borrower has submitted to the Administrative
Agent an Additional Contract Certificate together with all exhibits,
attachments and certificates required thereby (including the
Construction Consultant's Certificate), each duly completed and
executed; (iii) if entering into such Contract or Subcontract will
require a Change Order affecting the Main Project Budget, the Borrower
has complied with the requirements of Section 7.2.18; (iv) if entering
into such Contract or Subcontract will require a Change Order
resulting in a Scope Change, the Borrower has complied with the
provisions of Section 7.2.17; (v) if entering into such Contract will
cause the Main Project Budget not to be In Balance, the Borrower has
complied with the requirements of Section 7.1.14; and (vi) the
Administrative Agent has acknowledged receipt of the materials
referenced in clause (ii) above, as contemplated in the Additional
Contract Certificate (which the Administrative Agent agrees to do
promptly upon receipt of said material); and
(b) from time to time, deliver a Change Order or amend any
Contract or Subcontract to effect a Scope Change and may issue a
Pending Item Claim (as referred to
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in Section 18.11 of the Design/Build Contract). Any such Change Order
or amendment shall be in writing and shall identify with particularity
all changes being made. Each such amendment shall be effective when
and only when: (i) the Borrower and the Design/Builder, the Architect
of Record or such other party to the Design/Build Contract, the
Contract or Subcontract, as the case may be, have executed and
delivered the Change Order or amendment, as the case may be (with the
effectiveness thereof subject only to satisfaction of the conditions
in clauses (ii), (iii), (iv), (v) and (vi) below); (ii) the Borrower
has submitted to the Administrative Agent a Contract Amendment
Certificate together with all exhibits, attachments and certificates
required thereby, each duly completed and executed; (iii) if such
Change Order or amendment will result in an adjustment to the Main
Project Budget, the Borrower has complied with the requirements of
Section 7.2.18; (iv) if such Change Order or amendment will have the
effect of a Scope Change, the Borrower has complied with the
provisions of Section 7.2.17; (v) if such amendment will cause the
Project Budget not to be In Balance, the Borrower has complied with
the requirements of Section 7.1.14 and (vi) the Administrative Agent
has acknowledged its receipt of the materials referenced in clause
(ii) above (which the Administrative Agent agrees to do promptly upon
receipt of said materials).
SECTION 7.2.13. Transactions with Affiliates. The Borrower will not
sell, lease, transfer or otherwise dispose of any of its properties or
assets to, or purchase any property or assets from, or enter into or make
or amend any transaction, contract, agreement, understanding, loan, advance
or guarantee with, or for the benefit of, any Affiliate (each of the
foregoing, an "Affiliate Transaction"), unless (i) such Affiliate
Transaction is on terms that are no less favorable to the Borrower than
those that would have been obtained in a comparable transaction by the
Borrower with an unrelated Person and (ii) the Borrower delivers to the
Administrative Agent (a) with respect to any Affiliate Transaction or
series of related Affiliate Transactions involving aggregate consideration
in excess of $1,000,000, a certificate from an Authorized Representative of
the Borrower certifying that such Affiliate Transaction complies with
clause (i) above, (b) with respect to any Affiliate Transaction or series
of Affiliate Transactions involving aggregate consideration in excess of
$5,000,000, a resolution of the Management Committee set forth in a
certificate from an Authorized Representative of the Borrower certifying
that such Affiliate Transaction complies with clause (i) above and that
such Affiliate Transaction has been approved unanimously by the Management
Committee and (c) with respect to any Affiliate Transactions involving
aggregate consideration in excess of $10,000,000, an opinion as to the
fairness to the Administrative Agent of such Affiliate Transaction from a
financial point of view issued by an accounting, appraisal or investment
banking firm of national standing. The foregoing provisions will not apply
to any payments, transfers or dispositions pursuant to the following:
(i) any employment, indemnification, noncompetition or confidentiality
agreement entered into by the Borrower in the ordinary course of business
on terms customary in the hotel/casino business including the Employment
Agreement; (ii) Restricted Payments permitted by the provisions of Sections
7.2.6; (iii) the Noteholder Completion Guaranty; (iv) the Keep-Well
Agreement; (v) the Salle Privee Management Agreement; (vi) the Reciprocal
Easement Agreement as in effect on the Effective Date; (vii) the
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Common Parking Area Use Agreement; (viii) any amendments, modifications,
restatements, renewals, supplements and replacements to the Reciprocal
Easement Agreement or the Common Parking Area Use Agreement approved by the
Administrative Agent in its sole discretion; (ix) the Theater Lease after
the Administrative Agent has approved the form and content thereof; (x) the
payment by Aladdin Bazaar to the Borrower of up to $14,200,000 pursuant to
Section 4.5(a) of the Site Work Agreement, (xi) loans or advances to
employees of the Borrower to fund the exercise price of options granted
under employment agreements or stock option plans or agreements of the
Borrower, in each case, as in effect on the Effective Date, not to exceed
$500,000 outstanding at any one time; (xii) the Investments described in
clauses (g), (h) and (i) of Section 7.2.5 and (xiii) the payment of
reasonable fees to members of the Board of Managers or the Board of
Directors, as the case may be, of the Borrower who are not employees of the
Borrower.
SECTION 7.2.14. Negative Pledges, Restrictive Agreements, etc. The
Borrower will not enter into any agreement (excluding, however, (i) this
Agreement and any other Loan Document, or (ii) in the case of clause (a)
below, any agreement governing any Indebtedness permitted by clause (d) of
Section 7.2.2 as to the assets financed with the proceeds of such
Indebtedness) governing any Indebtedness prohibiting
(a) the creation or assumption of any Lien upon its properties,
revenues or assets, whether now owned or hereafter acquired, to the
extent that any such negative pledge would prohibit the creation or
first priority perfection of any Liens of the type described in
clause (x) of Section 7.2.3;
(b) the ability of the Borrower or Subsidiaries to amend or
otherwise modify any Operative Document; or
(c) the ability of any Subsidiary to make any payments, directly
or indirectly, to the Borrower by way of dividends, advances,
repayments of loans or advances, reimbursements of management and
other intercompany charges, expenses and accruals or other returns on
investments, or any other agreement or arrangement which restricts the
ability of any such Subsidiary to make any payment, directly or
indirectly, to the Borrower.
SECTION 7.2.15. Sale and Leaseback. The Borrower will not, and will
not permit any of its Subsidiaries to, enter into any agreement or
arrangement with any other Person providing for the leasing by the Borrower
or any of its Subsidiaries of real or personal property which has been or
is to be sold or transferred by the Borrower or any of its Subsidiaries to
such other Person or to any other Person to whom funds have been or are to
be advanced by such Person on the security of such property or rental
obligations of the Borrower or any of its Subsidiaries.
SECTION 7.2.16. Stock of Subsidiaries. The Borrower will not permit
any Subsidiary to issue any Capital Stock (whether for value or otherwise)
to any Person other than (x) to the
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Borrower or another wholly-owned Subsidiary or (y) up to 50% of the common
Membership Interests of AMH to Planet Hollywood.
SECTION 7.2.17. Scope Changes.
(a) Without obtaining the Required Scope Change Approval, the Borrower
shall not direct, consent to or enter into any Scope Change if such Scope
Change:
(i) will cause an increase in the Guaranteed Maximum Price or
the Main Project Budget not to be In Balance, unless the Borrower
complies with the requirements of Section 7.1.14 or amends the Main
Project Budget as provided in clause (a) of Section 7.2.18 so that,
after giving effect to the proposed Scope Change, the Main Project
Budget will be In Balance;
(ii) in the reasonable judgment of the Administrative Agent, is
reasonably likely to materially and adversely change or affect the
Main Project, the Energy Project, the Mall Project or the Music
Project;
(iii) in the reasonable judgment of the Construction Consultant
(based on its experience, familiarity and review of the Main Project
and representations provided by the Borrower, the Design/Builder, the
Contractors and Subcontractors), could reasonably require an
adjustment to the Design/Build Contract Time, delay the Completion
Date beyond the Outside Completion Deadline, or could reasonably
require the Design/Builder or the Subcontractors to accelerate
performance (except in accordance with the Scope Change) of the Work
pursuant to Section 16.0 of the General Conditions annexed to the
Design/Build Contract as Attachment D;
(iv) in the reasonable judgment of the Construction Consultant,
could reasonably permit or result in any materially adverse
modification or materially impair the enforceability of any warranty
under or any material reduction in the quality standards set forth in
the Design/Build Contract, any Contract or any Subcontract;
(v) is not permitted by a Main Project Document;
(vi) could reasonably present a significant risk of the
revocation or material adverse modification of any Permit;
(vii) could reasonably cause the Main Project, the Mall Project,
the Energy Project or the Music Project not to comply with Legal
Requirements (provided, however, that the Construction Consultant
shall be entitled to determine that no violation of any Legal
Requirement will occur on the basis of a certification by the Borrower
to such effect unless the Construction Consultant is aware of any
inaccuracies in such certification); or
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(viii) could reasonably result in a material adverse
modification, cancellation or termination of any insurance policy
required to be maintained by the Borrower pursuant to Section 7.1.4.
Prior to implementing any Scope Change, the Borrower shall submit an
Additional Contract Certificate or Contract Amendment Certificate and
otherwise comply with the provisions of clauses (a) or (b) of Section
7.2.12, as applicable.
(b) The Borrower shall not permit the Owner Representative to approve
Design/Build Final Completion until the Construction Consultant has
accompanied the Owner Representative on the final inspection of the Work
and confirmed the acceptance thereof, which confirmation shall not be
unreasonably withheld or delayed.
(c) The Borrower may not approve any Change Order setting forth the
amount of Realized Savings as contemplated by the Design/Build Contract
until such Realized Savings have been confirmed by the Construction
Consultant, which confirmation shall not be unreasonably withheld or
delayed.
SECTION 7.2.18. Amendment of Main Project Budget, Construction
Benchmark Schedule; Design/Build Contract Time and Guaranteed Maximum
Price. The Borrower shall not directly or indirectly amend (by Change
Order or otherwise), modify (by Change Order or otherwise), allocate,
reallocate or supplement or permit or consent to the amendment (by Change
Order or otherwise), modification (by Change Order or otherwise),
allocation, reallocation or supplementation of any of the Line Items, Line
Item Categories or other sections of the Main Project Budget, the
Construction Benchmark Schedule, or the Design/Build Contract Time or
adjust the Guaranteed Maximum Price except as follows:
(a) Concurrently with the implementation of any Scope Change,
the Borrower shall submit a Main Project Budget/Schedule Amendment
Certificate and amend the Main Project Budget in accordance with the
provisions of clause (c) of Section 7.2.18 to the extent necessary so
that the amount set forth therein for each Line Item Category and Line
Item therein shall reflect all Scope Changes that have been made
thereto.
(b) The Borrower may from time to time amend the Main Project
Budget in accordance with the provisions of clause (c) of this Section
7.2.18 in order to increase, decrease or otherwise reallocate amounts
allocated to specific Line Item Categories or Line Items. Any such
amendments shall be effective after the Owner Representative and the
Construction Consultant have reviewed and approved the proposed
amendment.
(c) The Borrower shall request an amendment to the Main Project
Budget by delivering to the Disbursement Agent and the Construction
Consultant a Main Project Budget/Schedule Amendment Certificate
together with all exhibits, attachments and certificates required
thereby, each duly completed and executed. Each such Main Project
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Budget/Schedule Amendment Certificate shall describe with
particularity the increases, decreases, contingency allocations, and
other proposed amendments to the Line Item Categories and the Line
Items within each Line Item Category which will be adjusted by such
amendment. Increases to any Line Item Category or Line Item within
such Line Item Category will only be permitted to the extent of (w) a
trade transfer to such Line Item Category or Line Item within such
Line Item Category from a different Line Item Category or Line Item
within such Line Item Category so long as (1) such trade transfer is
for a Main Project Cost which is included in the Line Item Category
and a Line Item within such Line Item Category to which such trade
transfer is being made, (2) after giving effect to such trade
transfer, such Main Project Cost is no longer included in the Line
Item Category or in any Line Item within such Line Item Category from
which such trade transfer was made and (3) after giving effect to any
such trade transfer, the Available Funds allocated to each such Line
Item Category and Line Item equals or exceeds for such Line Item
Category and Line Item the aggregate of (X) the costs required to
complete such Line Item Category and Line Item, as the case may be,
(Y) the Retainage Amount to be paid to Persons who have supplied labor
or materials in connection with such Line Item Category and Line Item
and (Z) with respect to the Line Item Category entitled "Cap.
Interest", the amount required to pay interest and all other amounts
due under this Agreement and the Approved Equipment Funding Commitment
at the maximum rate of interest set forth in the Main Project Budget
through the Conversion Date, (x) allocation of Realized Savings
obtained in a different Line Item Category, (y) allocation of
previously "unallocated contingency" (which allocations shall be
subject to clause (f) of this Section 7.2.18 and, after giving effect
to such allocation, the Unallocated Contingency Balance will equal or
exceed the Required Minimum Contingency), or (z) allocation of an
increase in Available Funds, including additional funds deposited in
to the Accounts. Decreases to any Line Item Category will only be
permitted upon (x) obtaining Realized Savings in such Line Item
Category and (y) a trade transfer from such Line Item Category to a
different Line Item Category so long as (1) such trade transfer is for
a Main Project Cost which is included in the Line Item Category and a
Line Item within such Line Item Category to which such trade transfer
is being made, (2) after giving effect to such trade transfer, such
Project Cost is no longer included in the Line Item Category or in any
Line Item within such Line Item Category from which such trade
transfer was made and (3) after giving effect to any such trade
transfer, the Available Funds allocated to such Line Item Category and
Line Item equals or exceeds for such Line Item Category and Line Item
the aggregate of (X) the costs required to complete such Line Item
Category or Line Item, as the case may be, (Y) the Retainage Amount
to be paid to Persons who have supplied labor or materials in
connection with such Line Item Category and Line Item and (Z) with
respect to the Line Item Category entitled "Cap. Interest", the amount
required to pay interest and all other amounts due under this
Agreement and the Approved Equipment Funding Commitment at the maximum
rate of interest set forth in the Main Project Budget through the
Conversion Date.
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(d) The Borrower may, from time to time, amend the Construction
Benchmark Schedule to extend the Completion Date, but not beyond the
Outside Completion Deadline, by delivering to the Administrative Agent
a Main Project Budget/Schedule Amendment Certificate (x) containing a
revised Construction Benchmark Schedule reflecting the new Completion
Date and (y) complying with the applicable provisions of this Section
7.2.18 with respect to the changes in the Main Project Budget that
will result from the extension of the Completion Date. If a Force
Majeure Event occurs, then the Borrower shall be permitted to extend
the Completion Date for up to one year to the extent that (w) the
Borrower certifies the occurrence and continuation of such Force
Majeure Event in writing, (x) the Construction Consultant confirms
that such extension is reasonably necessary to overcome any delays
caused by the Force Majeure Event, (y) the Borrower has satisfied the
conditions to such extension as set forth in the definition of "Force
Majeure Event", and (z) such extension is permitted by the
Design/Build Contract.
(e) Upon satisfaction of the conditions set forth in this
Section 7.2.18, such Change Order or amendment shall become effective
hereunder.
(f) Allocations of the Line Items in the Line Item Category
entitled "Project Contingency" (x) for each of the first three months
after the Effective Date shall not exceed $1,000,000 in the aggregate
for each such month and (y) thereafter shall not exceed 10% for any
one Line Item Category provided that after giving effect to such
allocation, the Unallocated Contingency Balance will equal or exceed
the Required Minimum Contingency.
SECTION 7.2.19. Hazardous Substances. The Borrower and Subsidiaries
shall not release, emit or discharge into the environment any Hazardous
Substances in material violation of any Environmental Law, Legal
Requirement or Permit.
SECTION 7.2.20. No Other Powers of Attorney. The Borrower and
Subsidiaries shall not execute or deliver any agreement creating any Lien
(other than Permitted Liens), powers of attorney (other than powers of
attorney for signatories of documents permitted or contemplated by the
Operative Documents), or similar documents, instruments or agreements,
except to the extent such documents, instruments or agreements comprise
part of the Loan Documents.
SECTION 7.2.21. Opening. The Borrower shall not begin Operating the
Hotel/Casino unless each of the Opening Conditions has been satisfied and
the Borrower has delivered to the Administrative Agent a certificate in the
form of Exhibit T-1 hereto and the Construction Consultant has delivered to
the Administrative Agent a certificate in the form of Exhibit T-2 hereto.
SECTION 7.2.22. Actions Affecting Energy Provider. The Borrower
shall not take any action, give consent to, approve or fail to object to
the action of any other Person which results
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in the Energy Provider being subject to more extensive or restrictive
regulation under federal or Nevada state law.
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.1. Listing of Events of Default. Each of the following
events or occurrences described in this Section 8.1 shall constitute an
"Event of Default".
SECTION 8.1.1. Non-Payment of Obligations. The Borrower shall
default in the payment or prepayment when due of
(a) any Letter of Credit Reimbursement Obligation or any deposit
of cash for collateral purposes pursuant to Section 2.6.2 or
Section 2.6.4, as the case may be;
(b) any principal of or interest on any Loan, and, with respect
to any Default in the payment of interest, such Default shall continue
unremedied for a period of two Business Days; or
(c) any fee described in Article III or of any other Obligation
and such Default shall continue unremedied for a period of five days.
SECTION 8.1.2. Breach of Warranty. Any representation or warranty of
the Borrower and Subsidiaries made or deemed to be made hereunder or in any
other Operative Document executed by it or any other writing or certificate
furnished by or on behalf of any such Person to any Agent, the Issuer or
any Lender for the purposes of or in connection with this Agreement or any
such other Loan Document (including any certificates delivered pursuant to
Article V hereof or Article 3 of the Disbursement Agreement) is or shall
be incorrect when made or deemed to have been made in any material respect.
SECTION 8.1.3. Non-Performance of Certain Covenants and Obligations.
The Borrower and Subsidiaries shall default in the due performance and
observance of any of their respective obligations under Section 7.1.9,
Section 7.1.10 or Section 7.2.
SECTION 8.1.4. Non-Performance of Other Covenants and Obligations.
The Borrower, any of the other Aladdin Parties, LCNI, London Clubs Holdings
or London Clubs shall default in the due performance and observance of any
Operative Document executed by it, and such default shall continue
unremedied for a period of 30 days (or such other period of time during
which performance is required under the applicable Operative Document)
after notice thereof shall have been given to such Person by the
Administrative Agent.
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SECTION 8.1.5. Default on Other Indebtedness. A default shall occur
in the payment when due (subject to any applicable grace period or, whether
by acceleration or otherwise, of any Indebtedness of the Borrower or any of
its Subsidiaries (other than Aladdin Music and AMH) (other than
Indebtedness described in Section 8.1.1 or unsecured Indebtedness of the
Borrower or any such Subsidiary incurred in the ordinary course of business
(including open accounts extended by suppliers on normal trade terms in
connection with purchases of goods and services, but excluding, however,
(x) Indebtedness incurred through the borrowing of money and (y) Contingent
Liabilities in respect of Indebtedness other than Indebtedness of the
nature referred to in clause (d) thereof)) having a principal amount,
individually or in the aggregate, in excess of $2,000,000, or a Default
shall occur in the performance or observance of any obligation or condition
with respect to such Indebtedness (subject to any applicable grace period)
if the effect of such Default is to accelerate the maturity of any such
Indebtedness or such Default shall continue unremedied for any applicable
period of time sufficient to permit the holder or holders of such
Indebtedness, or any trustee or agent for such holders, to cause or declare
such Indebtedness to become due and payable or to require such Indebtedness
to be prepaid, redeemed, purchased or defeased, or to cause an offer to
purchase or redeem such Indebtedness to be required to be made, prior to
its expressed maturity.
SECTION 8.1.6. Outside Completion Deadline. The Borrower shall fail
to achieve the Completion Date on or before the Outside Completion
Deadline.
SECTION 8.1.7. Judgments. Any judgment or order for the payment of
money in excess of $1,000,000 individually or in the aggregate (excluding,
however, any amounts fully covered by insurance (less any applicable
deductible) or indemnification and as to which the insurer or the
indemnifying party, as the case may be, has acknowledged its responsibility
to cover such judgment or order) shall be rendered against the Borrower or
Subsidiaries, (y) or Aladdin Bazaar or ABH prior to completion of the Mall
Project or (z) Aladdin Music or AMH prior to the completion of the Music
Project and such judgment shall not have been vacated or discharged or
stayed or bonded pending appeal within 45 days after the entry thereof.
SECTION 8.1.8. Pension Plans. Any of the following events shall
occur with respect to any Pension Plan
(a) the institution of any steps by the Borrower, any member of
its Controlled Group or any other Person to terminate a Pension Plan
if, as a result of such termination, the Borrower or any such member
could be required to make a contribution to such Pension Plan, or
could reasonably expect to incur a liability or obligation to such
Pension Plan, in excess of $1,000,000; or
(b) a contribution failure occurs with respect to any Pension
Plan sufficient to give rise to a Lien under section 302(f) of ERISA
and such failure continues for 30 days or more.
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SECTION 8.1.9. Change in Control. Any Change in Control shall occur.
SECTION 8.1.10. Bankruptcy, Insolvency, etc. The Borrower, any of
the other Aladdin Parties (other than the Trust), LCNI or, prior to the
time that London Clubs has indefeasibly paid and performed its obligations
under the Completion Guaranty and the Keep-Well Agreement or such
Instruments have terminated or otherwise expired by their terms, London
Clubs shall
(a) become insolvent or generally fail to pay, or admit in
writing its inability or unwillingness generally to pay, debts as they
become due;
(b) apply for, consent to, or acquiesce in the appointment of a
trustee, receiver, sequestrator or other custodian for any substantial
part of the property of any thereof, or make a general assignment for
the benefit of creditors;
(c) in the absence of such application, consent or acquiescence,
permit or suffer to exist the appointment of a trustee, receiver,
sequestrator or other custodian for a substantial part of the property
of any thereof, and such trustee, receiver, sequestrator or other
custodian shall not be discharged within 60 days; provided, however,
that the Borrower and Subsidiaries each hereby expressly authorizes
the Administrative Agent and each Lender to appear in any court
conducting any relevant proceeding during such 60-day period to
preserve, protect and defend their rights under this Agreement and the
other Loan Documents;
(d) permit or suffer to exist the commencement of any bankruptcy,
reorganization, debt arrangement or other case or proceeding under any
bankruptcy or insolvency law, or any dissolution, winding up or
liquidation proceeding, in respect thereof, and, if any such case or
proceeding is not commenced by the Person which is the subject of such
case or proceeding, such case or proceeding shall be consented to or
acquiesced in by such Person or shall result in the entry of an order
for relief or shall remain for 60 days undismissed; provided, however,
that the Borrower and Subsidiaries each hereby expressly authorizes
the Administrative Agent and each Lender to appear in any court
conducting any such case or proceeding during such 60-day period to
preserve, protect and defend their rights under the Loan Documents and
the other Operative Documents; or
(e) take any action authorizing, or in furtherance of, any of the
foregoing.
SECTION 8.1.11. Impairment of Security, etc. Any Loan Document, or
any Lien granted thereunder, shall (except in accordance with its terms),
in whole or in part, terminate, cease to be effective or cease to be the
legally valid, binding and enforceable obligation of any Obligor party
thereto; the Borrower, any other Obligor or any other Person shall,
directly or indirectly, contest in any manner such effectiveness, validity,
binding nature or enforceability; or,
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except as permitted under any Loan Document, any Lien securing any
Obligation shall, in whole or in part, cease to be a perfected first
priority Lien.
SECTION 8.1.12. Advance Requests. The failure, for 30 consecutive
days, of the Borrower to submit an Advance Request or if an Advance Request
is submitted, the failure for 30 consecutive days, of the Borrower to
satisfy, in all material respects, the conditions to the approval of such
Advance Request by the Disbursement Agent.
SECTION 8.1.13. Breach of Main Project Documents. The Borrower, any
other Aladdin Party or any other Person thereto shall breach or default
under any term, condition, provision, covenant, representation or warranty
contained in any Material Main Project Document or any other agreement
(other than the Loan Documents and the Discount Note Trust Indenture) to
which such Person is a party if the effect of such breach or default could
reasonably be expected to have a Material Adverse Effect and such breach or
default shall continue unremedied for 30 days after notice from the
Administrative Agent to the Borrower; provided, however, that in the case
of any Main Project Document,
(a) if the breach or default is reasonably susceptible to cure
within 90 days but cannot be cured within such 30 day period despite
the Borrower's or such other Person's, as the case may be, good faith
and diligent efforts to do so, the cure period shall be extended as is
reasonably necessary beyond such 30 day period (but in no event longer
than 90 days) if remedial action reasonably likely to result in cure
is promptly instituted within such 30 day period and is thereafter
diligently pursued until the breach or default is corrected; and
(b) if the breach is by a Person other than the Borrower or any
of the other Aladdin Parties, then no Event of Default shall be deemed
to have occurred as a result of such breach if the Borrower provides
written notice to the Administrative Agent immediately upon (but in no
event more than 2 Business Days after) such Person becoming aware of
such breach that such Main Project Document shall be replaced (or that
replacement is not necessary) and (x) a replacement obligor or
obligors reasonably acceptable to the Borrower (after consultation
with the Construction Consultant) for the affected Person (if in the
reasonable judgment of the Borrower (after consultation with the
Construction Consultant) a replacement is necessary), (y ) the
Borrower enters into a replacement Main Project Document in accordance
with Section 7.2.12 on terms no less beneficial to the Borrower and
the Lenders in any material respect than the Main Project Document so
terminated (if in the reasonable judgment of the Borrower (after
consultation with the Construction Consultant) a replacement is
necessary) and (z) such termination, after considering any replacement
obligor and replacement Main Project Document and the time required to
implement such replacement, has not had and would not reasonably be
expected to have a Material Adverse Effect.
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(c) if the breach is by the Energy Project Provider under the
Energy Project Ground Lease and, if applicable, the Energy Service
Agreement and the Energy Project Guarantor is not performing its
obligations under the Energy Project Guaranty, no Event of Default
shall be deemed to have occurred as a result of such breach if (w) the
Borrower provides written notice to the Administrative Agent
immediately upon (but in no event more than 2 Business Days after) the
Borrower becoming aware of such breach that the Borrower will commence
and diligently and continuously prosecute to completion the
enforcement of the obligations of the Energy Project Provider under
the Energy Project Ground Lease and, if applicable, the Energy Service
Agreement and the Energy Project Guarantor under the Energy Project
Guaranty, (x ) the Borrower has made arrangements to obtain reliable
electrical and other utility services at appropriate levels required
to start-up, operate and maintain the Hotel/Casino in a safe,
efficient and reliable manner, (y) if the Energy Project Ground Lease
or the Energy Service Agreement is terminated as a result of such
breach the Borrower replaces the Energy Project Ground Lease and
Energy Service Agreement so terminated in accordance with Section
7.2.12 on terms no less beneficial to the Borrower and the Lenders in
any material respect than the Energy Project Ground Lease or Energy
Service Agreement so terminated and (z) any such termination, after
considering any replacement obligor and replacement to the Energy
Project Ground Lease or Energy Service Agreement, as the case be, and
the time required to implement such replacement, has not had and would
not reasonably be expected to have a Material Adverse Effect.
SECTION 8.1.14. Termination or Invalidity of Main Project Documents;
Abandonment of Main Project.
(a) The Design/Build Contract shall have terminated, become invalid
or illegal or otherwise ceased to be in full force and effect or if any of
the other Material Main Project Documents shall have terminated (except
with respect to the Energy Project as provided in clause (c) of Section
8.1.13), become invalid or illegal, or otherwise ceased to be in full force
and effect if the effect thereof could reasonably be expected to have a
Material Adverse Effect with respect to the Borrower or the Main Project;
provided, however, that, with respect to any Material Main Project Document
other than the Design/Build Contract and the Fluor Guaranty, no Event of
Default shall be deemed to have occurred as a result of such termination if
the Borrower provides written notice to the Administrative Agent,
immediately upon (but in no event more than two Business Days after) the
Borrower becoming aware of such Main Project Document ceasing to be in full
force or effect that the Borrower intends to replace such Main Project
Document (or that replacement is not necessary) and (x) the Borrower
obtains a replacement obligor or obligors reasonably acceptable to the
Borrower (after consultation with the Construction Consultant) for the
affected party (if in the reasonable judgment of the Borrower (after
consultation with the Construction Consultant) a replacement is necessary),
(y) the Borrower enters into a replacement Main Project Document in
accordance with Section 7.2.12, on terms no less beneficial to the Borrower
and the Lenders in any material respect than the Main Project Document so
terminated, within 60 days of such termination (if in the
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reasonable judgment of the Borrower (after consultation with the
Construction Consultant) a replacement is necessary) and (z) such
termination, after considering any replacement obligor and replacement Main
Project Document and the time required to implement such replacement, has
not had and would not reasonably be expected to have a Material Adverse
Effect;
(b) The Borrower shall cease to own the Site (excluding, however, the
Mall Project Parcel and the Music Project Parcel to the extent permitted by
clause (b) of Section 7.1.19 and clause (c) of Section 7.1.19) and all
parcels and subdivisions comprising the Site, the Improvements or the Site
Easements for the purpose of owning, constructing, maintaining and
operating the Main Project in the manner contemplated by the Operative
Documents; or
(c) The Borrower shall abandon the Main Project or otherwise cease
construction of the Main Project or, after Final Completion, cease to
pursue the operations of the Main Project in accordance with standard
industry practice or shall sell or otherwise dispose of its interest in the
Main Project.
SECTION 8.1.15. Government Authorizations. Any Permit necessary for
the ownership, construction, maintenance, financing or operation of the
Main Project shall be modified, refused, rejected, suspended, revoked or
canceled, or allowed to lapse (including casino, gaming or gambling
business) or a notice of a material violation is issued under any Permit,
by the issuing agency or other Governmental Instrumentality having
jurisdiction, or any proceeding is commenced by any Governmental
Instrumentality for the purpose of modifying, suspending, revoking or
canceling any Permit and such modification, refusal, rejection, revocation
or loss of such Permit or such notice of a material violation or proceeding
is reasonably likely to have a Material Adverse Effect.
SECTION 8.2. Action if Bankruptcy. If any Event of Default described
in clauses (a) through (e) of Section 8.1.10 shall occur, the Commitments
(if not theretofore terminated) shall automatically terminate and the
outstanding principal amount of all outstanding Loans and all other
Obligations (including Letter of Credit Reimbursement Obligations) shall
automatically be and become immediately due and payable without notice or
demand and the Borrower shall automatically and immediately be obligated to
deposit with the Administrative Agent cash collateral in an amount equal to
all Letter of Credit Outstandings in accordance with Section 2.6.4.
SECTION 8.3. Action if Other Event of Default. If any Event of
Default (other than any Event of Default described in clauses (a) through
(e) of Section 8.1.10) shall occur for any reason, whether voluntary or
involuntary, and be continuing, the Administrative Agent, upon the
direction of the Required Lenders, shall by notice to the Borrower declare
all or any portion of the outstanding principal amount of the Loans and
other Obligations (including Letter of Credit Reimbursement Obligations) to
be due and payable or the Commitments (if not theretofore terminated) to be
terminated, whereupon the full unpaid amount of such Loans and other
Obligations which shall be so declared due and payable shall be and become
immediately due
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and payable, without further notice, demand or presentment, or, as the case
may be, the Commitments shall terminate and the Borrower shall
automatically and immediately be obligated to deposit with the
Administrative Agent cash collateral in an amount equal to all Letter of
Credit Outstandings in accordance with Section 2.6.4. In addition to the
foregoing, the Administrative Agent upon direction of the Required Lenders
may, without further notice of default, presentment or demand for payment,
protest or notice of non-payment or dishonor, or other notices or demands
of any kind, all such notices and demands being waived (to the extent
permitted by applicable law), exercise any or all rights and remedies at
law or in equity (in any combination or order that the Lenders may elect,
subject to the foregoing), including, without prejudice to the Lenders'
other rights and remedies, the following:
(a) refuse, and the Lenders shall not be obligated, to consent to
or direct that any payments be made from any Account or other funds
held by the Disbursement Agent by or on behalf of the Borrower and may
suspend or terminate the Lenders' obligation to make additional
Advances (other than obligatory Advances hereunder pursuant to Section
2.6.1 and Section 2.6.4), to process requests by the Borrower and to
perform any other obligations of the Lenders which are expressly
subject to there not being a Default under this Agreement shall be
terminated; the remedy set forth in this Section 8.3(a) shall be
exercised automatically upon an Event of Default with respect to the
Borrower described in Section 8.1.10;
(b) make or do the same in such manner and to such extent as the
Lenders may deem necessary to protect the security hereof, the Lenders
being authorized to enter upon and take possession of the portion of
the Site owned by the Borrower for such purposes, and any sums
expended for such purposes shall become part of the Indebtedness
evidenced and secured by the Deed of Trust;
(c) commence, appear in and/or defend any action or proceedings
purporting to affect the security hereof, and/or any additional or
other security therefor, the interests, rights, powers or duties of
the Lenders hereunder, whether brought by or against the Borrower or
the Lenders;
(d) pay, purchase, contest or compromise any claim, debt, lien,
charge or encumbrance that in the judgment of the Lenders may impair
or reasonably appear to impair the security of the Deed of Trust or
the other Loan Documents, the interests of the Lenders or the rights,
powers and/or duties of the Lenders hereunder and any sums expended
for such purposes shall become part of the Indebtedness evidenced and
secured by the Loan Documents;
(e) the Lenders (and their nominee and/or designee) are
authorized either by themselves or by their agents or by a receiver
appointed by a court of competent jurisdiction, to enter into and upon
and take and hold possession of any portion or all of the Main
Project, both real and personal, and exclude the Borrower and all
other Persons
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therefrom and thereupon the Lenders (or their nominee or designee)
may, (u) use, operate, manage, control, insure, maintain, repair,
restore and otherwise deal with all and every part of the Main Project
and conduct business thereat, (v) take possession of all materials,
supplies, tools, equipment and construction facilities and appliances
located on the portion of the Site owned by the Borrower and perform
any and all work and labor necessary to complete the construction of
the Main Project in accordance with the Plans and Specifications, the
Reciprocal Easement Agreement, the other Operative Documents and any
agreements relating to the Main Project existing at the time the
Lenders (or their nominee and/or designee) enter into possession of
the Main Project and perform any and all work and labor necessary to
complete the Main Project or to operate and maintain the Main Project,
and all sums expended in so doing, together with interest on such
total amount at the rate set forth in Section 3.2.2, shall be repaid
by the Borrower to the Lender upon demand and shall be secured by the
Loan Documents, (w) employ watchmen to protect the Main Project,
(x) make alterations, additions, renewals, replacements and
improvements to the Main Project and, if required by the Reciprocal
Easement Agreement, the Operative Documents or any agreements relating
to the portion of the Site owned by the Borrower, (y) exercise all
rights and powers of the Borrower with respect to the portion of the
Site owned by it and pursuant to or under the Reciprocal Easement
Agreement, the Operative Documents or any agreements relating to the
portion of the Site owned by the Borrower, whether in the name of the
Borrower or otherwise, including the right to make, cancel, enforce or
modify the Reciprocal Easement Agreement, the Operative Documents or
any agreements relating to the portion of the Site owned by the
Borrower, obtain and evict tenants and other Persons, and demand, sue
for, collect and receive all earnings, revenues, rents, issues,
profits and other income from the Main Project, and every part
thereof, the Reciprocal Easement Agreement, the Operative Documents or
any agreements relating to the portion of the Site owned by the
Borrower and (z) apply the receipts therefrom to the payment of the
Indebtedness evidenced and secured by the Loan Documents in accordance
with this Agreement, after deducting therefrom all expenses (including
reasonable attorneys' fees and costs and expenses) incurred in
connection with the aforesaid operations and all amounts to pay the
Impositions, assessments, insurance and other charges in connection
with the Main Project as well as just and reasonable compensation for
the services of the Administrative Agent, the Lenders and their
counsel, agents and employees;
(f) exercise all rights and remedies under the Deed of Trust and
the other Loan Documents;
(g) institute an action, suit or proceeding in equity for the
specific performance by the Borrower of any covenant, condition, or
agreement contained herein or in any of the other Loan Documents;
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(h) recover judgment on the Completion Guaranty or the Keep-Well
Agreement either before, during or after any proceedings for the
enforcement of the Lenders' rights and remedies hereunder or under the
other Loan Documents;
(i) apply, ex parte and without notice to any Person, for the
appointment of a custodian, receiver, liquidator or conservator of the
portion of the Site owned by the Borrower, without regard for the
adequacy of the security for the Indebtedness evidenced and secured by
the Loan Documents;
(j) set off and apply all monies on deposit in any Account or any
amounts paid under the Completion Guaranty or any other monies of the
Borrower on deposit with the Disbursement Agent to the satisfaction of
the Obligations under all of the Loan Documents; and
(k) exercise any and all rights and remedies available to it
under applicable law or any of the Operative Documents.
Except as otherwise set forth herein, all sums expended by the Lenders for
any of the purposes described above shall be deemed to have been advanced
to the Borrower under and pursuant to the provisions of this Agreement,
shall bear interest at the rate of interest set forth in Section 3.2.2 and
shall be secured by the Deed of Trust. The Administrative Agent or the
Lenders (or their nominee or designee) may at any time discontinue any
action or remedy commenced by it or them, as the case may be, or change any
course of action undertaken by it or them, and in such event, the
Administrative Agent and the Lenders (or their nominee or designee) shall
not be bound by any requirements or limitations of time contained in the
Deed of Trust or the other Loan Documents. For the foregoing purposes, the
Borrower to the fullest extent permitted by law, hereby constitute and
appoint the Administrative Agent (or its nominee or designee) as the true
and lawful agent and attorney-in-fact of the Borrower with full power of
substitution and hereby empowers the Administrative Agent (and its nominee
or designee) to take such action and require such performance as its or
they deem necessary or desirable. This agency and power of attorney shall
be deemed to be coupled with an interest and shall be irrevocable.
ARTICLE IX
THE ADMINISTRATIVE AGENT
SECTION 9.1. Actions. Each Lender hereby appoints Scotiabank as its
Administrative Agent under and for purposes of this Agreement, the Notes
and each other Loan Document. Each Lender authorizes the Administrative
Agent to act on behalf of such Lender under this Agreement, the Notes and
each other Loan Document and, in the absence of other written instructions
from the Required Lenders received from time to time by the Administrative
Agent (with respect to which the Administrative Agent agrees that it will
comply, except as otherwise provided in this Section or as otherwise
advised by counsel in order to avoid contravention of
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applicable law), to exercise such powers hereunder and thereunder as are
specifically delegated to or required of the Administrative Agent by the
terms hereof and thereof, together with such powers as may be reasonably
incidental thereto. Each Lender hereby indemnifies (which indemnity shall
survive any termination of this Agreement) the Administrative Agent, pro
rata according to such Lender's Percentage, from and against any and all
liabilities, obligations, losses, damages, claims, costs or expenses of any
kind or nature whatsoever which may at any time be imposed on, incurred by,
or asserted against, the Administrative Agent in any way relating to or
arising out of this Agreement, the Notes and any other Loan Document,
including reasonable attorneys' fees, consultants' fees and as to which the
Administrative Agent is not reimbursed by the Borrower; provided, however,
that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, claims, costs or expenses which
are determined by a court of competent jurisdiction in a final proceeding
to have resulted solely from the Administrative Agent's gross negligence or
wilful misconduct. The Administrative Agent shall not be required to take
any action hereunder, under the Notes or under any other Operative
Document, or to prosecute or defend any suit in respect of this Agreement,
the Notes or any other Operative Document, unless it is indemnified
hereunder to its satisfaction. If any indemnity in favor of the
Administrative Agent shall be or become, in the Administrative Agent's
determination, inadequate, the Administrative Agent may call for additional
indemnification from the Lenders and cease to do the acts indemnified
against hereunder until such additional indemnity is given.
SECTION 9.2. Funding Reliance, etc. Unless the Administrative Agent
shall have been notified by telephone, confirmed in writing, by any Lender
by 5:00 p.m., New York City time, on the Business Day prior to a Borrowing
that such Lender will not make available the amount which would constitute
its Percentage of such Borrowing on the date specified therefor, the
Administrative Agent may assume that such Lender has made such amount
available to the Administrative Agent and, in reliance upon such
assumption, make available to the Borrower a corresponding amount. If and
to the extent that such Lender shall not have made such amount available to
the Administrative Agent, such Lender and the Borrower severally agree to
repay the Administrative Agent forthwith on demand such corresponding
amount, together with interest thereon, for each day from the date the
Administrative Agent made such amount available to the Borrower to the date
such amount is repaid to the Administrative Agent, at the interest rate
applicable at the time to Loans comprising such Borrowing in the case of
the Borrower and at the Federal Funds Rate (in the case of a Lender) (for
the first two Business Days after which such amount has not been repaid)
and thereafter at the interest rate applicable to Loans comprising such
Borrowing. Nothing in this Section shall affect or impair the rights or
remedies of the Borrower against such Lender so long as such amount and
interest, if any, has been repaid to the Administrative Agent.
SECTION 9.3. Exculpation. Neither the Administrative Agent nor any
of its directors, officers, employees or agents shall be liable to any
Lender for any action taken or omitted to be taken by it under this
Agreement or any other Loan Document, or in connection herewith or
therewith, except for its own wilful misconduct or gross negligence, nor
responsible for any
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recitals or warranties herein or therein, nor for the effectiveness,
enforceability, validity or due execution of this Agreement or any other
Loan Document, nor for the creation, perfection or priority of any Liens
purported to be created by any of the Loan Documents, or the validity,
genuineness, enforceability, existence, value or sufficiency of any
collateral security, nor to make any inquiry respecting the performance by
the Borrower of its obligations hereunder or under any other Loan Document.
Any such inquiry which may be made by the Administrative Agent shall not
obligate it to make any further inquiry or to take any action. The
Administrative Agent shall be entitled to rely upon advice of counsel
concerning legal matters and upon any notice, consent, certificate,
statement or writing which the Administrative Agent believes to be genuine
and to have been presented by a proper Person.
SECTION 9.4. Successor. The Administrative Agent may resign as such
at any time upon at least 30 days' prior notice to the Borrower and all
Lenders. If the Administrative Agent at any time shall resign, the
Required Lenders may appoint another Lender as a successor Administrative
Agent which shall thereupon become the Administrative Agent hereunder. If
no successor Administrative Agent shall have been so appointed by the
Required Lenders, and shall have accepted such appointment, within 30 days
after the retiring Administrative Agent's giving notice of resignation,
then the retiring Administrative Agent may, on behalf of the Lenders,
appoint a successor Administrative Agent, which shall be one of the Lenders
or a commercial banking institution organized under the laws of the U.S.
(or any State thereof) or a U.S. branch or agency of a commercial banking
institution and having (x) a combined capital and surplus of at least
$250,000,000 and (y) a credit rating of AA or better by Moody's or a
comparable rating by S&P; provided, however, that if, after expending all
reasonable commercial efforts, such retiring Administrative Agent is unable
to find a commercial banking institution which is willing to accept such
appointment and which meets the qualifications set forth in item (y), such
retiring Administrative Agent shall be permitted to appoint as its
successor from all available commercial banking institutions willing to
accept such appointment such institution having the highest credit rating
of all such available and willing institutions. Upon the acceptance of any
appointment as Administrative Agent hereunder by a successor Administrative
Agent, such successor Administrative Agent shall be entitled to receive
from the retiring Administrative Agent such documents of transfer and
assignment as such successor Administrative Agent may reasonably request,
and shall thereupon succeed to and become vested with all rights, powers,
privileges and duties of the retiring Administrative Agent, and the
retiring Administrative Agent shall be discharged from its duties and
obligations under this Agreement. After any retiring Administrative
Agent's resignation hereunder as the Administrative Agent, the provisions
of
(a) this Article IX shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was the Administrative
Agent under this Agreement; and
(b) Section 10.3 and Section 10.4 shall continue to inure to its
benefit.
SECTION 9.5. Loans by Scotiabank. Scotiabank shall have the same
rights and powers with respect to (x) the Credit Extensions made by it or
any of its Affiliates, and (y) the Notes
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held by it or any of its Affiliates as any other Lender and may exercise
the same as if it were not the Administrative Agent. Scotiabank and its
Affiliates may accept deposits from, lend money to, and generally engage in
any kind of business with the Borrower, the other Aladdin Parties, LCNI,
London Clubs Holdings or London Clubs or any of the other Project Parties
or any Subsidiary or Affiliate thereof as if Scotiabank were not the
Administrative Agent hereunder.
SECTION 9.6. Credit Decisions. Each Lender acknowledges that it has,
independently of the Administrative Agent and each other Lender, and based
on such Lender's review of the financial information of the Borrower, the
other Aladdin Parties, LCNI, London Clubs Holdings or London Clubs, this
Agreement, the other Loan Documents (the terms and provisions of which
being satisfactory to such Lender) and such other documents, information
and investigations as such Lender has deemed appropriate, made its own
credit decision to extend its Commitments. Each Lender also acknowledges
that it will, independently of the Administrative Agent and each other
Lender, and based on such other documents, information and investigations
as it shall deem appropriate at any time, continue to make its own credit
decisions as to exercising or not exercising from time to time any rights
and privileges available to it under this Agreement or any other Loan
Document.
SECTION 9.7. Copies, etc. The Administrative Agent shall give prompt
notice to each Lender of each notice or request required or permitted to be
given to the Administrative Agent by the Borrower pursuant to the terms of
this Agreement (unless concurrently delivered to the Lenders by the
Borrower). The Administrative Agent will distribute to each Lender each
document or instrument received for its account and copies of all other
communications received by the Administrative Agent from the Borrower for
distribution to the Lenders by the Administrative Agent in accordance with
the terms of this Agreement or any other Loan Document.
SECTION 9.8. Consultants and Reports. (a) The Administrative Agent,
in its sole discretion, may remove from time to time the Independent
Consultants and appoint replacements as the Administrative Agent may choose
after consultation with the Borrower. As soon as practicable, notice of
any replacement Independent Consultant shall be given by the Administrative
Agent to the Borrower and the Independent Consultant being replaced. All
reasonable fees and expenses of the Independent Consultants (whether the
original ones or replacements) shall be paid by the Borrower.
(b) Each of the Independent Consultants shall be contractually
obligated to the Administrative Agent to carry out the activities required
of it in the Loan Documents, the Disbursement Agreement and in the
Construction Consultant Engagement Agreement and as otherwise requested by
the Administrative Agent. The Borrower acknowledges that, except as
provided in the Construction Consultant's Engagement Agreement with respect
to the Construction Consultant, it will not have any cause of action or
claim against any Independent Consultant resulting from any decision made
or not made, any action taken or not taken or any
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advice given by such Independent Consultant in the due performance in good
faith of its duties except for the gross negligence and willful misconduct
of the Independent Consultant.
SECTION 9.9. GECC Intercreditor Agreement. Each Lender hereby
authorizes the Administrative Agent, on behalf of and for the benefit of
such Lender, to enter into the GECC Intercreditor Agreement, and such
Lender agrees to be bound by the terms of the Intercreditor Agreement;
provided that the Administrative Agent shall not enter into or consent to
any amendment, modification, termination or waiver of any provision
contained in the Intercreditor Agreement without the prior consent of the
Required Lenders (or, if such amendment, modification, termination or
waiver would result in a change that under Section 10.1 would require the
consent of all Lenders, then the prior consent of all Lenders).
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1. Waivers, Amendments, etc. The provisions of this
Agreement and of each other Loan Document may from time to time be amended,
modified or waived, if such amendment, modification or waiver is in writing
and consented to by the Borrower and the Required Lenders; provided,
however, that no such amendment, modification or waiver shall:
(a) extend any Commitment Termination Date or modify this
Section without the consent of all Lenders;
(b)increase the aggregate amount of any Lender's then existing
Commitment Amounts, increase the aggregate amount of any Loans
required to be made by a Lender pursuant to its Commitments or reduce
any fees described in Article III payable to any Lender without the
consent of such Lender;
(c) extend the Stated Maturity Date for any Lender's Loan, or
reduce the principal amount of or rate of interest on any Lender's
Loan, without the consent of such Lender; provided, however, that any
vote to rescind any acceleration made pursuant to Section 8.2 or 8.3
of amounts owing with respect to the Loans and other Obligations shall
only require the vote of the Required Lenders;
(d) change the definition of "Required Lenders" or any
requirement hereunder that any particular action be taken by all
Lenders without the consent of all Lenders;
(e) increase the Stated Amount of any Letter of Credit unless
consented to by each Issuer;
(f) release the Sponsors under the Keep-Well Agreement, the
Completion Guarantors under the Completion Guaranty, or discharge the
Lien of the Deed of Trust
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(except in accordance with clause (b) or (c) of Section 7.1.19) or
release all or substantially all of the other security interests
granted pursuant to the Loan Documents, in each case without the
consent of all Lenders as expressly provided herein or therein; or
(g) affect adversely the interests, rights or obligations of the
Administrative Agent qua the Administrative Agent, or any Issuer,
unless consented to by the Administrative Agent or such Issuer, as the
case may be.
provided, further, however, that, at any time when no Default shall have
occurred and be continuing, Non-Defaulting Lenders holding more than 50% of
the sum of the aggregate outstanding principal amount of the Loans then
held by such Lenders plus the participation interests of such Lenders in
Letter of Credit Outstandings may authorize the release by the
Administrative Agent of the Music Project Parcel and the common Membership
Interests of Aladdin Music upon the closing of the financing for the Music
Project. No failure or delay on the part of the Administrative Agent, the
Issuer or any Lender in exercising any power or right under this Agreement
or any other Loan Document shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power or right preclude any other or
further exercise thereof or the exercise of any other power or right. No
notice to or demand on the Borrower in any case shall entitle it to any
notice or demand in similar or other circumstances. No waiver or approval
by the Administrative Agent, any Issuer or any Lender under this Agreement
or any other Loan Document shall, except as may be otherwise stated in such
waiver or approval, be applicable to subsequent transactions. No waiver or
approval hereunder shall require any similar or dissimilar waiver or
approval thereafter to be granted hereunder.
SECTION 10.2. Notices. All notices and other communications provided
to any party hereto under this Agreement or any other Loan Document shall
be in writing and addressed, delivered or transmitted to such party at its
address or facsimile number set forth below its signature hereto or set
forth in the Lender Assignment Agreement or at such other address or
facsimile number as may be designated by such party in a notice to the
other parties. All such notices and communications shall be deemed to have
been properly given if (x) hand delivered with receipt acknowledged by the
recipient; (y) if mailed, upon the fifth Business Day after the date on
which it is deposited in registered or certified mail, postage prepaid,
return receipt requested or (z) if by Federal Express or other nationally-
recognized express courier service with instructions to deliver on the
following Business Day, on the next Business Day after delivery to such
express courier service. Notices and other communications may also be
properly given by facsimile but shall be deemed to be received upon
automatic facsimile confirmation of receipt thereof by the intended
recipient machine therefor with the original of such notice or
communication to be given in the manner provided in the second sentence of
this Section; provided, however, that the failure to deliver a copy in
accordance with the second sentence of this Section shall not invalidate
the effectiveness of such facsimile notice.
SECTION 10.3. Payment of Costs and Expenses. The Borrower agrees to
pay on demand all expenses of the Administrative Agent (including the
reasonable fees and out-of-
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pocket expenses of counsel to the Administrative Agent and of local
counsel, if any, who may be retained by counsel to the Administrative
Agent) in connection with
(a) the negotiation, preparation, execution and delivery of this
Agreement and of each other Loan Document, including schedules and
exhibits, and any amendments, waivers, consents, supplements or other
modifications to this Agreement or any other Loan Document as may from
time to time hereafter be required, whether or not the transactions
contemplated hereby are consummated;
(b) the filing, recording, refiling or rerecording of any Loan
Document or any Uniform Commercial Code financing statements relating
thereto and all amendments, supplements, amendments and restatements
and other modifications to any thereof and any and all other documents
or instruments of further assurance required to be filed or recorded
or refiled or rerecorded by the terms hereof or the terms of any Loan
Document;
(c) the preparation and review of the form of any document or
instrument relevant to this Agreement or any other Loan Document; and
(d) the preparation of any information or response required with
respect to any investigative request or inquiry, approval, findings of
suitability or any other response or communication involving a
Governmental Instrumentality arising out of this Agreement, any other
Operative Documents or any Obligation evidenced and secured by the
Loan Documents or the participation in any public or investigatory
hearing or meeting.
The Borrower further agrees to pay, and to save the Administrative Agent, the
Issuer and the Lenders harmless from all liability for, any stamp or other
taxes which may be payable in connection with the execution or delivery of
this Agreement, the Credit Extensions hereunder, or the issuance of the
Notes, the Letters of Credit or any other Loan Documents. The Borrower also
agrees to reimburse the Administrative Agent and, following a Default of the
nature set forth in Section 8.1.10 or an Event of Default, the Issuer and
each Lender upon demand for all reasonable out-of-pocket expenses (including
reasonable attorneys' fees and legal expenses of counsel and fees and
expenses of consultants to the Administrative Agent, the Issuer and the
Lenders, and, based upon the written advice of legal counsel, a copy of which
shall be provided to the Borrower, that in such counsel's judgment having a
common counsel for the Administrative Agent, the Issuer and the Lenders would
present such counsel with a conflict of interest, of one other counsel
selected by the Required Lenders (other than the Administrative Agent))
incurred by the Administrative Agent, the Issuer or such Lenders in
connection with (x) the negotiation of any restructuring or "work-out" with
the Borrower, whether or not consummated, of any Obligations and (y) the
enforcement of any Obligations.
SECTION 10.4. Indemnification. In consideration of the execution and
delivery of this Agreement by each Lender and the extension of the
Commitments, the Borrower hereby
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indemnifies, exonerates and holds the Administrative Agent, the Issuer and
each Lender and each of their respective officers, directors, employees and
agents (collectively, the "Indemnified Parties") free and harmless from and
against any and all actions, causes of action, suits, losses, costs,
liabilities and damages, and expenses incurred in connection therewith
(irrespective of whether any such Indemnified Party is a party to the
action for which indemnification hereunder is sought), including reasonable
attorneys' fees and disbursements, whether incurred in connection with
actions between or among the parties hereto or the parties hereto and third
parties (collectively, the "Indemnified Liabilities"), incurred by the
Indemnified Parties or any of them as a result of, or arising out of, or
relating to
(a) any transaction financed or to be financed in whole or in
part, directly or indirectly, with the proceeds of any Credit
Extension, including all Indemnified Liabilities arising in connection
with the Transaction;
(b) the entering into and performance of this Agreement and any
other Loan Document by any of the Indemnified Parties (including any
action brought by or on behalf of the Borrower as the result of any
determination by the Required Lenders pursuant to Article V not to
fund any Credit Extension); provided, however, that any such action is
resolved in favor of such Indemnified Party;
(c) any investigation, litigation or proceeding related to any
acquisition or proposed acquisition by the Borrower or any Subsidiary
of all or any portion of the stock or assets of any Person, whether or
not the Administrative Agent, the Issuer or any Lender is party
thereto;
(d) any investigation, litigation or proceeding related to any
environmental cleanup, audit, compliance or other matter relating to
the protection of the environment or the Release by the Borrower or
any other Aladdin Party which owns or leases a portion of the Site of
any Hazardous Substances;
(e) the presence on or under, or the escape, seepage, leakage,
spillage, discharge, emission, discharging or releases from, any real
property owned or operated by the Borrower or any other Aladdin Party
which owns or leases a portion of the Site of any Hazardous Substances
(including any losses, liabilities, damages, injuries, costs, expenses
or claims asserted or arising under any Environmental Law), regardless
of whether caused by, or within the control of, the Borrower or any
other Aladdin Party which owns or leases a portion of the Site;
(f) each Lender's Environmental Liability (the indemnification
herein for any Environmental Claim shall survive repayment of the
Notes and any transfer of the property of the Borrower by foreclosure
or by a deed in lieu of foreclosure, regardless of whether caused by,
or within the control of, the Borrower); or
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(g) the liability of any of the Indemnified Parties with respect
to the Reciprocal Easement Agreement, the Site Work Agreement and the
Common Parking Area Use Agreement;
except for, in each case, (x) any such Indemnified Liabilities arising for
the account of a particular Indemnified Party by reason of the relevant
Indemnified Party's gross negligence or wilful misconduct and (ii) any such
Indemnified Liabilities arising from actions, occurrences, or events that
take place after conveyance of the portion of the Site by foreclosure or
deed in lieu of foreclosure. The Borrower and its successors and assigns
hereby waive, release and agree not to make any claim or bring any cost
recovery action against the Administrative Agent, the Issuer or any Lender
under CERCLA or any state equivalent, or any similar law now existing or
hereafter enacted. It is expressly understood and agreed that to the
extent that any of the Indemnified Parties is strictly liable under any
Environmental Laws, the Borrower's obligation to such Person under this
indemnity shall likewise be without regard to fault on the part of the
Borrower with respect to the violation or condition which results in
liability of such Person. If and to the extent that the foregoing
undertaking may be unenforceable for any reason, the Borrower hereby agrees
to make the maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities which is permissible under applicable law.
SECTION 10.5. Survival. The obligations of the Borrower under
Sections 4.3, 4.4, 4.5, 4.6, 10.3 and 10.4, and the obligations of the
Lenders under Section 9.1, shall in each case survive any assignment from
one Lender to another (in the case of Sections 10.3 and 10.4) and any
termination of this Agreement, the payment in full of all the Obligations
and the termination of all the Commitments. The representations and
warranties made by the Borrower and each other Obligor in this Agreement
and in each other Loan Document shall survive the execution and delivery of
this Agreement and each such other Loan Document.
SECTION 10.6. Severability. Any provision of this Agreement or any
other Loan Document which is prohibited or unenforceable in any
jurisdiction shall, as to such provision and such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement or such Loan
Document or affecting the validity or enforceability of such provision in
any other jurisdiction.
SECTION 10.7. Headings. The various headings of this Agreement and
of each other Loan Document are inserted for convenience only and shall not
affect the meaning or interpretation of this Agreement or such other Loan
Document or any provisions hereof or thereof.
SECTION 10.8. Execution in Counterparts, Effectiveness, etc. This
Agreement may be executed by the parties hereto in several counterparts,
each of which shall be an original and all of which shall constitute
together but one and the same agreement. This Agreement shall become
effective when counterparts hereof executed on behalf of the Borrower, the
Administrative Agent and each Lender (or notice thereof satisfactory to the
Administrative
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Agent) shall have been received by the Administrative Agent and notice
thereof shall have been given by the Administrative Agent to the Borrower
and each Lender.
SECTION 10.9. Governing Law; Entire Agreement. THIS AGREEMENT, THE
NOTES AND EACH OTHER LOAN DOCUMENT (INCLUDING PROVISIONS WITH RESPECT TO
INTEREST, LOAN CHARGES AND COMMITMENT FEES) SHALL EACH BE DEEMED TO BE A
CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), EXCEPT TO THE EXTENT
THAT THE VALIDITY OR PERFECTION OF A SECURITY INTEREST OR DEED OF TRUST
HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL
ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW
YORK. This Agreement, the Notes, the other Loan Documents and the Fee
Letters constitute the entire understanding among the parties hereto with
respect to the subject matter hereof and thereof and supersede any and all
prior agreements, written or oral, with respect thereto including the
Commitment Letter.
SECTION 10.10. Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that:
(a) the Borrower may not assign or transfer its rights or
obligations hereunder without the prior written consent of the
Administrative Agent and all Lenders, which consent shall be
determined in good faith in their sole discretion; and
(b) the rights of sale, assignment and transfer of the Lenders
are subject to Section 10.11.
SECTION 10.11. Sale and Transfer of Loans and Notes; Participations
in Loans and Notes. Each Lender may assign, or sell participations in, its
Loans, Letters of Credit and Commitments to one or more other Persons in
accordance with this Section 10.11.
SECTION 10.11.1. Assignments. Upon prior notice to the Borrower and
the Administrative Agent, any Lender,
(a) with the consent of the Borrower, the Issuer and the
Administrative Agent (which consents shall not be unreasonably delayed
or withheld; provided, however, that in the event of a proposed
assignment of any Commitment to an assignee, the obligations of which
do not satisfy the credit ratings set forth in Section 9.4, any of the
Administrative Agent, the Issuer or the Borrower may withhold such
consent in its sole discretion), may at any time assign and delegate
to one or more commercial banks, funds or other financial
institutions, and
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(b) with notice to the Borrower and the Administrative Agent, but
without the consent of the Borrower or the Administrative Agent, may
assign and delegate to any of its Affiliates, any other Lender, any
Approved Fund or any other institution set forth in Schedule X hereto
so long as such assignment and delegation to such institution is made
within ten Business Days of the Closing Date,
(each Person described in either of the foregoing clauses as being the
Person to whom such assignment and delegation is to be made, being
hereinafter referred to as an "Assignee Lender"), all or any fraction of
such Lender's total Loans, Letter of Credit Outstandings and Commitments in
a minimum aggregate amount of $5,000,000 (or, if less, the entire remaining
amount of such Lender's Loans, Letter of Credit Outstandings and
Commitments). The Borrower and each other Obligor and the Administrative
Agent shall be entitled to continue to deal solely and directly with such
Lender in connection with the interests so assigned and delegated to an
Assignee Lender until
(c) notice of such assignment and delegation, together with
(i) payment instructions, (ii) the Internal Revenue Service Forms or
other statements contemplated or required to be delivered pursuant to
Section 4.6 and (iii) addresses and related information with respect
to such Assignee Lender, shall have been delivered to the Borrower and
the Administrative Agent by such Lender and such Assignee Lender;
(d) such Assignee Lender shall have executed and delivered to the
Borrower and the Administrative Agent a Lender Assignment Agreement,
accepted by the Administrative Agent; and
(e) the processing fees described below shall have been paid.
From and after the date that the Administrative Agent accepts such Lender
Assignment Agreement (and records the information therein in the Register,
if applicable), (x) the Assignee Lender thereunder shall be deemed
automatically to have become a party hereto and to the extent that rights
and obligations hereunder have been assigned and delegated to such Assignee
Lender in connection with such Lender Assignment Agreement, shall have the
rights and obligations of a Lender hereunder and under the other Loan
Documents, and (y) the assignor Lender, to the extent that rights and
obligations hereunder have been assigned and delegated by it in connection
with such Lender Assignment Agreement, shall be released from its
obligations hereunder and under the other Loan Documents. Within five
Business Days after its receipt of notice that the Administrative Agent has
received and accepted an executed Lender Assignment Agreement, subject,
however, to clause (d), the Borrower shall execute and deliver to the
Administrative Agent (for delivery to the relevant Assignee Lender) a new
Note evidencing such Assignee Lender's assigned Loans and Commitments and,
if the assignor Lender has retained Loans and Commitments hereunder, a
replacement Note in the principal amount of the Loans and Commitments
retained by the assignor Lender hereunder (such Note to be in exchange for,
but not in payment of, the Note then held by such assignor Lender). Each
such Note shall be
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dated the date of the predecessor Note. The assignor Lender shall mark
each predecessor Note "exchanged" and deliver each of them to the Borrower.
Accrued interest on that part of each predecessor Note evidenced by a new
Note, and accrued fees, shall be paid as provided in the Lender Assignment
Agreement. Accrued interest on that part of each predecessor Note
evidenced by a replacement Note shall be paid to the assignor Lender.
Accrued interest and accrued fees shall be paid at the same time or times
provided in the predecessor Note and in this Agreement. Such assignor
Lender or such Assignee Lender must also pay a processing fee in the amount
of $3,500 to the Administrative Agent upon delivery of any Lender
Assignment Agreement. Any attempted assignment and delegation not made in
accordance with this Section 10.11.1 shall be null and void.
Notwithstanding anything to the contrary set forth above, any Lender may
(without requesting the consent of the Borrower or the Administrative
Agent) pledge its Loans to a Federal Reserve Bank in support of borrowings
made by such Lender from such Federal Reserve Bank, and any Lender that is
an investment fund that invests in bank loans may, without the consent of
the Administrative Agent or Borrower, pledge all or any portion of its
interest and rights (but may not delegate any of its duties or obligations
hereunder or under any other Loan Document, including its Commitment(s), if
any) to any trustee or any other representative of holders of obligations
owed or securities issued by such investment fund as security for such
obligations or securities.
SECTION 10.11.2. Participations. Upon prior written notice to the
Borrower and the Administrative Agent, any Lender may at any time sell to
one or more commercial banks or other Persons (other than an Obligor or an
Affiliate of an Obligor) (each of such commercial banks and other Persons
being herein called a "Participant") participating interests in any of the
Loans, Commitments, or other interests of such Lender hereunder; provided,
however, that
(a) no participation contemplated in this Section shall relieve
such Lender from its Commitments or its other obligations hereunder or
under any other Loan Document;
(b) such Lender shall remain solely responsible for the
performance of its Commitments and such other obligations;
(c) the Borrower and each other Obligor and the Administrative
Agent shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this
Agreement and each of the other Loan Documents;
(d) no Participant, unless such Participant is an Affiliate of
such Lender or an Approved Fund or is itself a Lender, shall be
entitled to require such Lender to take or refrain from taking any
action hereunder or under any other Loan Document, except that such
Lender may agree with any Participant that such Lender will not,
without such Participant's consent, take any actions of the type
described in clause (a), (b), (f) or, to the extent requiring the
consent of such Lender, clause (c) of Section 10.1; and
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(e) the Borrower shall not be required to pay any amount under
this Agreement that is greater than the amount which it would have
been required to pay had no participating interest been sold.
The Borrower acknowledges and agrees that each Participant, for purposes of
Sections 4.3, 4.4, 4.5, 4.6, 4.8 or 4.9 shall be considered a Lender. Each
Participant shall only be indemnified for increased costs pursuant to
Section 4.3, 4.4, 4.5 or 4.6 if and to the extent that the Lender which
sold such participating interest to such Participant concurrently is
entitled to make, and does make, a claim on the Borrower for such increased
costs. Any Lender that sells a participating interest in any Loan,
Commitment or other interest to a Participant under this Section 10.11.2
shall indemnify and hold harmless the Borrower and the Administrative Agent
from and against any taxes, penalties, interest or other costs or losses
(including reasonable attorneys' fees and expenses) incurred or payable by
the Borrower or the Administrative Agent as a result of the failure of the
Borrower or the Administrative Agent to comply with its obligations to
deduct or withhold any Taxes from any payments made pursuant to this
Agreement to such Lender or the Administrative Agent, as the case may be,
which Taxes would not have been incurred or payable if such Participant had
been a Lender organized under the laws of a jurisdiction other than the
United States that was entitled to deliver to the Borrower, the
Administrative Agent or such Lender, and did in fact so deliver, a duly
completed and valid Form W-8 or W-9 or Form 1001 or 4224 (or applicable
successor form) entitling such Participant to receive payments under this
Agreement without deduction or withholding of any United States federal
taxes.
SECTION 10.11.3. Assignment of Registered Notes. A Registered Note
and the Obligation(s) evidenced thereby may be assigned or otherwise
transferred in whole or in part pursuant to the terms of Section 10.11.1
and only by registration of such assignment or transfer of such Registered
Note and the Obligation(s) evidenced thereby on the Register (and each
Registered Note shall expressly so provide). Any assignment or transfer of
all or part of such Obligation(s) and the Registered Note(s) evidencing the
same shall be registered on the Register only upon surrender for
registration of assignment or transfer of the Registered Note(s) evidencing
such Obligation(s), duly endorsed by (or accompanied by a written
instrument of assignment or transfer duly executed by) the Registered
Noteholder thereof, and thereupon one or more new Registered Note(s) in the
same aggregate principal amount shall be issued to the designated Assignee
Lender, and the old Registered Note shall be returned by the Administrative
Agent to the Borrower marked "Replaced". Prior to the due presentment for
registration of assignment or transfer of any Registered Note, the Borrower
and the Administrative Agent shall treat the Person in whose name such
Obligation(s) and the Registered Note(s) evidencing the same is registered
as the owner thereof for the purpose of receiving all payments thereon and
for all other purposes, notwithstanding any notice to the contrary.
SECTION 10.12. Other Transactions. Nothing contained herein shall
preclude the Agents, the Issuer or any other Lender from engaging in any
transaction, in addition to those contemplated by this Agreement or any
other Loan Document, with the Borrower or any of its
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Affiliates in which the Borrower or such Affiliate is not restricted hereby
from engaging with any other Person.
SECTION 10.13. Execution by Authorized Representative. Any signature
by any Authorized Representative on this Agreement, any Loan Document and
any other instrument and certificate executed or to be executed pursuant to
or in connection with this Agreement or such other Loan Documents is
provided only in such Authorized Representative's capacity as an officer or
member of the Person in question, and not in any way in such Authorized
Representative's personal capacity.
SECTION 10.14. Forum Selection and Consent to Jurisdiction. ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH,
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE
OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE
ADMINISTRATIVE AGENT, THE LENDERS, THE ISSUER OR THE BORROWER IN CONNECTION
HEREWITH OR THEREWITH SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE
COURTS OF THE STATE OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING
ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE
ADMINISTRATIVE AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH
COLLATERAL OR OTHER PROPERTY MAY BE FOUND. THE BORROWER HEREBY EXPRESSLY
AND IRREVOCABLY SUBMITS TO THE PERSONAL JURISDICTION OF THE COURTS OF THE
STATE OF NEW YORK AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH
ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY
IN CONNECTION WITH SUCH LITIGATION, SUBJECT TO THE BORROWER'S RIGHT TO
CONTEST SUCH JUDGMENT BY MOTION OR APPEAL ON ANY GROUNDS NOT EXPRESSLY
WAIVED IN THIS SECTION 10.14. THE BORROWER HEREBY IRREVOCABLY APPOINTS
CT CORPORATION SYSTEM (THE "PROCESS AGENT"), WITH AN OFFICE ON THE DATE
HEREOF AT 1633 BROADWAY, NEW YORK, NEW YORK 10019, UNITED STATES, AS ITS
AGENT TO RECEIVE, ON THE BORROWER'S BEHALF AND ON BEHALF OF THE BORROWER'S
PROPERTY, SERVICE OF COPIES OF THE SUMMONS AND COMPLAINT AND ANY OTHER
PROCESS WHICH MAY BE SERVED IN ANY SUCH ACTION OR PROCEEDING. SUCH SERVICE
MAY BE MADE BY MAILING OR DELIVERING A COPY OF SUCH PROCESS TO THE BORROWER
IN CARE OF THE PROCESS AGENT AT THE PROCESS AGENT'S ABOVE ADDRESS, AND THE
BORROWER HEREBY IRREVOCABLY AUTHORIZES AND DIRECTS THE PROCESS AGENT TO
ACCEPT SUCH SERVICE ON ITS BEHALF. AS AN ALTERNATIVE METHOD OF SERVICE,
THE BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF
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PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN
OR WITHOUT THE STATE OF NEW YORK AT THE ADDRESS FOR NOTICES SPECIFIED IN
SECTION 10.2. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR
HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN
ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT THE BORROWER HAS
OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR
FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR
TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO
ITSELF OR ITS PROPERTY, THE BORROWER HEREBY IRREVOCABLY WAIVES TO THE
FULLEST EXTENT PERMITTED BY LAW SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS
UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
SECTION 10.15. Waiver of Jury Trial. THE ADMINISTRATIVE AGENT, THE
LENDERS, THE ISSUER AND THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE TO THE FULLEST EXTENT PERMITTED BY LAW ANY RIGHTS THEY
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE ADMINISTRATIVE AGENT, THE
LENDERS, THE ISSUER OR THE BORROWER IN CONNECTION HEREWITH OR THEREWITH.
THE BORROWER ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND
SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF
EACH OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS
A MATERIAL INDUCEMENT FOR THE ADMINISTRATIVE AGENT, THE LENDERS AND EACH
ISSUER ENTERING INTO THIS AGREEMENT AND EACH SUCH OTHER LOAN DOCUMENT.
SECTION 10.16. Maximum Rate of Interest. Nothing contained in this
Agreement or in any other Loan Documents shall be construed to permit the
Lenders to charge or receive at any time interest, fees or other charges in
excess of the amounts which the Lenders are legally entitled to charge and
receive under any law to which such interest, fees or charges are subject.
In no contingency or event whatsoever shall the compensation payable to the
Lenders by any Person, howsoever characterized or computed, hereunder or
under any of the other Loan Documents, exceed the highest rate permissible
under any law to which such compensation is subject. There is no intention
that the Lenders shall contract for, charge or receive compensation in
excess of the highest lawful rate, and, in the event it should be
determined that the Lenders
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have contracted for any rate of interest in excess of the highest lawful
rate, then ipso facto such rate shall be reduced to the highest lawful rate
so that no amounts shall be charged or received which are in excess
thereof, and, in the event it should be determined that any excess over
such highest lawful rate has been charged or received, the Lenders shall
promptly refund such excess to the Person entitled thereto; provided,
however, that, if lawful, any such excess shall be paid by the Borrower to
the Lenders as additional interest (accruing at a rate equal to the maximum
legal rate minus the rate provided for hereunder) during any subsequent
period when regular interest is accruing hereunder at less than the maximum
legal rate.
SECTION 10.17. Time of Essence. Time is of the essence as to all
times and dates set forth in or applicable to this Agreement with respect
to all payments to be made by or on behalf of the Borrower hereunder;
provided, however, that whenever any payment to be made under the Loan
Documents shall be stated to be due on a day other than a Business Day,
such payment may be made on the next succeeding Business Day and such
extension of time shall in such case be included in the computation of
interest payable hereunder.
SECTION 10.18. Consent or Approval of the Administrative Agent and
the Lenders.
(a) Any request by the Borrower for consent or approval by the
Administrative Agent and/or the Lenders under this Agreement or any of the
other Operative Documents shall be given in writing in accordance with
Section 10.2. Except where a specific time period for response is provided
in this Agreement, the Administrative Agent and the Lenders, as applicable,
shall have 30 days to grant or deny any such request. If the
Administrative Agent or the Lenders, as applicable, fail to respond to any
such request in writing within such 30 day period, the Borrower's request
shall be deemed disapproved.
(b) No Claims may be made by the Borrower or any other Person against
the Agents, the Lenders, any Affiliate of the foregoing, or the officers,
directors, employees, attorneys, consultants or agents of any of them for
consequential or punitive damages in respect of any Claim for breach or
contract or any other theory of liability arising out of or related to the
transactions contemplated by this Agreement or by the other Operative
Documents, or an act, omission, or event occurring in connection therewith;
and the Borrower, the other Aladdin Parties, LCNI, the London Clubs
Holdings and London Clubs each for itself and for all Persons claiming by,
through and under each of them, waives, releases, and agrees not to sue
upon any Claim for any such damages, whether or not accrued and whether or
not known or suspected to exist in its favor.
SECTION 10.19. No Third Party Beneficiary. All conditions of the
obligations of the Lenders to make Loans hereunder and Advances under the
Disbursement Agreement are imposed solely and exclusively for the benefit
of the Lenders, and neither the Design/Builder nor the Main Project
Architect or any other Contractor, Subcontractor or any other Person (x)
shall have standing to require satisfaction of such conditions or be
entitled to assume that the Lenders will refuse to make Loans in the
absence of strict compliance with any or all of such conditions
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or (y) shall, under any circumstances, be deemed to be a beneficiary under
this Agreement or the Disbursement Agreement or of such conditions, any or
all of which may be waived in whole or in part by the Administrative Agent
or the Lenders at any time if they, in their sole discretion, deem it
advisable to do so. The waiver by the Lenders at any time of any of such
conditions shall be deemed to be made pursuant to, and not in modification
of, this Agreement.
SECTION 10.20. Cumulative Remedies. No right or remedy conferred
upon the Administrative Agent or the Lenders in this Agreement is intended
to be exclusive of any other right or remedy contained in the other Loan
Documents or at law and equity and every such right and remedy shall be
cumulative and shall be in addition to every other right or remedy
contained in the other Loan Documents and as now or hereafter available to
the Lenders at law or in equity, by statute or otherwise.
SECTION 10.21. Estoppel Certificates. The Borrower shall execute and
deliver, or cause to be executed and delivered, to the Administrative
Agents all instruments and certificates as the Administrative Agent may
reasonably request (including estoppel certificates certifying that the
Loans and each of the Loan Documents are in full force and effect and that
there are no defenses or offsets, claims or counterclaims with respect
thereto or if there are, stating the nature of such defenses, offsets,
claims or counterclaims) to effect, confirm or assure the rights, remedies
and Liens intended to be granted to the Lenders under the Loan Documents.
SECTION 10.22. Claims of Discount Noteholders. Subject to the
provisions of Article 12 of the Discount Note Indenture, the Discount Note
Indenture Trustee and the Discount Noteholders will be entitled in any
insolvency proceeding in which Holdings and the Borrower were substantively
consolidated (other than any consolidated proceeding resulting following
assertion of substantive consolidation by the Trustee or any Discount
Noteholder in violation of the provisions of Article 12 of the Discount
Note Indenture) to exercise all rights available to the Discount
Noteholders, as creditors or otherwise, and none of the Lenders, the Issuer
or the Administrative Agent shall (x) contest the involvement in such
proceeding of the Discount Note Indenture Trustee or any Discount
Noteholder or (y) seek an equitable subordination of the Discount
Noteholders' claims. Notwithstanding anything to the contrary in Section
10.1, this Section shall not be amended without the consent of the Discount
Note, Indenture Trustee or the holders of a majority of the Accreted Value
of the Discount Notes.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of
the day and year first above written.
ALADDIN GAMING, LLC
By: /s/ Richard Goeglein
----------------------
Title: President, CEO
Address: 831 Pilot Road
Las Vegas, NV 89119*
Facsimile No.: (702) 736-7107
Attention: Ronald Dictrow
with a copy to: Skadden, Arps, Slate, Meagher
& Flom LLP
Address: 919 Third Avenue
New York, NY 10022
Facsimile No.: (212) 735-2000
Attention: Wallace L. Schwartz
*after Conversion Date:
3667 Las Vegas Blvd. So.
Las Vegas, NV 89109
Facsimile No: (702) 736-7107
Attention: Ronald Dictrow
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THE BANK OF NOVA SCOTIA, as
Administrative Agent
By: /s/ Alan Pendergast
-------------------------
Name: Alan Pendergast
Title: Relationship Manager
MERRILL LYNCH CAPITAL
CORPORATION, as Syndication Agent
By: /s/ Christopher Birosak
--------------------------
Name: Christopher Birosak
Title: Vice President
CIBC OPPENHEIMER CORP., as
Documentation Agent
By: /s/ Mark W.B. Harms
---------------------------
Name: Mark W.B. Harms
Title: Managing Director
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<TABLE>
<CAPTION>
<S> <C>
Term A Loan Commitment: THE BANK OF NOVA SCOTIA
18.382352941698%
By: /s/ Alan Pendergast
-------------------------
Term B Loan Commitment: Name: Alan W. Pendergast
Title: Relationship Manager
54.142300192983%
Term C Loan Commitment: Address for Notices:
580 California Street
31.611111112500% 21st Floor
San Francisco, CA 94104
Facsimile No.: (415) 397-0791
Attention: Alan W. Pendergast
With a copy of:
The Bank of Nova Scotia
Loan Administration Department
Suite 2700
600 Peachtree Street N.E.
Atlanta, Georgia 30308
Facsimile No.: (404) 888-8998
Attention: Marianne Velker
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
Term A Loan Commitment: MERRILL LYNCH CAPITAL CORPORATION
18.382352941176%
By: /s/ Christopher Birosak
--------------------------
Term B Loan Commitment: Name: Christopher Birosak
Title: Vice President
11.403508771930%
Term C Loan Commitment: Address for Notices:
World Financial Center
12.625000000000% Two Vesey Street
New York, New York 10281
Facsimile No.: (212) 449-8230
Attention: Christopher Birosak
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
Term A Loan Commitment: CIBC INC.
18.382352941176%
Term B Loan Commitment: By: /s/ Dean J. Decker
--------------------------
Name: Dean J. Decker
8.771929824561% Title: Executive Director
CIBC Oppenheimer Corp., AS AGENT
Term C Loan Commitment: Address for Notices:
350 S. Grand Avenue, Suite 2600
0% Los Angeles, CA 90071
Facsimile No.: (213) 346-0157
Attention: Dean J. Decker
</TABLE>
174
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Term A Loan Commitment: THE INTERNATIONAL COMMERCIAL
BANK OF CHINA, NEW YORK
14.70588235242% AGENCY
Term B Loan Commitment: By: /s/ Robin C. C. Lin
--------------------------------
Name: Robin C. C. Lin
0% Title: Vice President &
Deputy General Manager
Term C Loan Commitment: Address for Notices:
65 Liberty Street, 2nd Floor
0% New York, New York 10005
Facsimile No.: (212) 766-5006
Attention: Mr. M.S. Wu
</TABLE>
175
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Term A Loan Commitment: FIRST COMMERCIAL BANK
(incorporated in Taiwan, R.O.C.)
11.029411764706% LOS ANGELES BRANCH
Term B Loan Commitment: By: /s/ June Shiong Lu
-------------------------------
Name: June Shiong Lu
0% Title: SVP & General Manager
Term C Loan Commitment: Address for Notices:
515 S. Flower Street, Suite 1050
0% Los Angeles, CA 90071
Facsimile No.: (212) 362-0219
Attention: Jonathan Kuo
</TABLE>
176
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Term A Loan Commitment: U.S. BANK NATIONAL ASSOCIATION
11.029411764706%
Term B Loan Commitment: By: /s/ Terry A. Gentry
----------------------------------
Name: Terry A. Gentry
0% Title: Assistant Vice President
Term C Loan Commitment: Address for Notices:
U.S. Bank
0% 2300 West Sahara, Suite 120
Las Vegas, NV 89102
Facsimile No.: (703) 386-3903
Attention: Terry A. Gentry
</TABLE>
177
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Term A Loan Commitment: ERSTE BANK DER
OESTERREICHISCHEN
8.088235294118% SPARKASSEN AG
Term B Loan Commitment: By: /s/ John Runnion
------------------------------
Name: John Runnion
0% Title: First Vice President
Term C Loan Commitment: By: /s/ David Manheim
------------------------------
Name: David Manheim
0% Title: Assistant Vice President
Address for Notices:
280 Park Avenue
West Bldg., 32nd Floor
New York, NY 10017
Facsimile No.: (212) 984-5627
Attention: David Manheim
</TABLE>
178
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Term A Loan Commitment: ING HIGH INCOME PRINCIPAL
PRESERVATION FUND
0% HOLDINGS, LDC
By: ING Capital Advisors, Inc.
as Investment Advisor
Term B Loan Commitment: By: /s/ Michael D. Hatley
--------------------------------------------
Name: Michael D. Hatley
4.736842105263% Title: Vice President & Portfolio Manager
Term C Loan Commitment: Address for Notices:
ING High Income Principal
6.000000000000% Preservation Fund Holdings, LDC
333 South Grand Avenue, Suite 4250
Los Angeles, CA 90071
Facsimile No.: (212) 346-3995
Attention: Michael Hatley
179
<PAGE>
Term A Loan Commitment: THE ING CAPITAL SENIOR SECURED
HIGH INCOME FUND, LP.
0% By: ING Capital Advisors, Inc.
as Investment Advisor
Term B Loan Commitment: By: /s/ Michael D. Hatley
--------------------------------------------
Name: Michael D. Hatley
3.157894736842% Title: Vice President & Portfolio Manager
Term C Loan Commitment: Address for Notices:
The ING Capital Senior Secured
4.000000000000% High Income Fund, LP.
333 South Grand Avenue, Suite 4250
Los Angeles, CA 90071
Facsimile No.: (212) 346-3995
Attention: Michael Hatley
</TABLE>
180
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Term A Loan Commitment: PPM AMERICA, INC., as Attorney-in-Fact
on behalf of Jackson National Life
0% Insurance Company
Term B Loan Commitment: By: /s/ Michael DiRe
---------------------------
Name: Michael DiRe
17.543859649123% Title: Managing Director
Term C Loan Commitment: Address for Notices:
225 West Wacker Drive, Suite 1200
18.750000000000% Chicago, IL 60606-1228
Facsimile No.: (312) 634-0054
Attention: Private Placement -
Michael DiRe or Mike King
181
<PAGE>
Term A Loan Commitment: VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST
0%
Term B Loan Commitment: By: /s/ Jeffrey W. Maillet
----------------------------------------
Name: Jeffrey W. Maillet
0% Title: Senior Vice President Director
Term C Loan Commitment: Address for Notices:
Van Kampen American Capital
25.625000000000% One Parkview Plaza
Oakbrook, IL 60181
Facsimile No.: (630) 684-6740/6741
Attention:
State Street Bank & Trust
Corporate Trust Department
P.O. Box 778
Boston, MA 02102
Facsimile: (617) 664-5366/5367
Attention: Sean Emerson
</TABLE>
182
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Term A Loan Commitment: FLOATING RATE PORTFOLIO
By: Chancellor LGT Senior Secured
0% Management Inc., as Attorney-
in-Fact
Term B Loan Commitment: By: /s/ Anthony R. Clemente
----------------------------------------
Name: Anthony R. Clemente
0.243664719298% Title: Authorized Signatory
Term C Loan Commitment: Address for Notices:
Chancellor LGT Asset Management, Inc.
1.388888887500% 50 California Street, 27th Floor
San Francisco, CA 94111-4624
Facsimile No.: (415) 445-7525
Attention: Linda DiNapoli
Chancellor LGT Senior Secured
Management, Inc.
1166 Avenue of the Americas, 27th Floor
New York, NY 10036
Facsimile: (212) 278-9647
Attention: Peter Wollman
</TABLE>
183
<PAGE>
SCHEDULE I
DISCLOSURE SCHEDULE TO CREDIT AGREEMENT
ITEM 5.1.9 Indebtedness to be Paid.
CREDITOR OUTSTANDING PRINCIPAL AMOUNT
ITEM 6.7 Litigation.
ITEM 6.8 Subsidiaries.
ITEM 6.11 Employee Benefit Plans.
ITEM 6.12 Environmental Matters.
ITEM 6.13 Intellectual Property.
ITEM 6.29 Labor Disputes.
ITEM 7.2.2(b) Existing Indebtedness
CREDITOR OUTSTANDING PRINCIPAL AMOUNT
ITEM 7.2.3(c) Ongoing Liens.
ITEM 7.2.5(a) Ongoing Investments.
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
1.1. Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.2. Use of Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . .68
1.3. Cross-References . . . . . . . . . . . . . . . . . . . . . . . . . . . .68
1.4. Accounting and Financial Determinations. . . . . . . . . . . . . . . . .68
ARTICLE II
COMMITMENTS, BORROWING AND ISSUANCE
PROCEDURES, NOTES AND LETTERS OF CREDIT
2.1. Commitments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .69
2.1.1. Term A Loan Commitment . . . . . . . . . . . . . . . . . . . . . . . .69
2.1.2. Letter of Credit Commitment. . . . . . . . . . . . . . . . . . . . . .69
2.1.3. Term B Loan and Term C Loan Commitments. . . . . . . . . . . . . . . .70
2.1.4. Lenders Not Permitted or Required to Make Loans. . . . . . . . . . . .70
2.1.5. Issuer Not Permitted or Required to Issue Letters of Credit. . . . . .71
2.2. Reduction of the Term A Loan Commitment Amount . . . . . . . . . . . . .71
2.3. Borrowing Procedure. . . . . . . . . . . . . . . . . . . . . . . . . . .71
2.3.1. Borrowing Procedure. . . . . . . . . . . . . . . . . . . . . . . . . .71
2.3.2. Term A Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . .72
2.3.3. Term B Loans and Term C Loans. . . . . . . . . . . . . . . . . . . . .72
2.3.4. Additional Term B Loans and/or Term C Loans. . . . . . . . . . . . . .72
2.4. Continuation and Conversion Elections. . . . . . . . . . . . . . . . . .73
2.5. Funding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .73
2.6. Letter of Credit Issuance Procedures . . . . . . . . . . . . . . . . . .74
2.6.1. Other Lenders' Participation . . . . . . . . . . . . . . . . . . . . .74
2.6.2. Letter of Credit Disbursements . . . . . . . . . . . . . . . . . . . .75
2.6.3. Reimbursement. . . . . . . . . . . . . . . . . . . . . . . . . . . . .75
2.6.4. Deemed Letter of Credit Disbursements. . . . . . . . . . . . . . . . .76
2.6.5. Nature of Letter of Credit Reimbursement Obligations . . . . . . . . .76
2.7. Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .77
2.8. Registered Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . .77
</TABLE>
i
<PAGE>
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
3.1. Repayments and Prepayments; Application. . . . . . . . . . . . . . . . .78
3.1.1. Repayments and Prepayments . . . . . . . . . . . . . . . . . . . . . .78
3.1.2. Application. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .80
3.2. Interest Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . .81
3.2.1. Rates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .81
3.2.2. Post-Maturity Rates. . . . . . . . . . . . . . . . . . . . . . . . . .81
3.2.3. Payment Dates. . . . . . . . . . . . . . . . . . . . . . . . . . . . .82
3.3. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .82
3.3.1. Commitment Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . .82
3.3.2. Agency Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .82
3.3.3. Letter of Credit Fee . . . . . . . . . . . . . . . . . . . . . . . . .83
3.3.4. Other Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .83
ARTICLE IV
CERTAIN LIBO RATE AND OTHER PROVISIONS
4.1. LIBO Rate Lending Unlawful . . . . . . . . . . . . . . . . . . . . . . .83
4.2. Deposits Unavailable . . . . . . . . . . . . . . . . . . . . . . . . . .83
4.3. Increased LIBO Rate Loan Costs, etc. . . . . . . . . . . . . . . . . . .84
4.4. Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .84
4.5. Increased Capital Costs. . . . . . . . . . . . . . . . . . . . . . . . .85
4.6. Lender's Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .85
4.7. Payments, Computations, etc. . . . . . . . . . . . . . . . . . . . . . .87
4.8. Sharing of Payments. . . . . . . . . . . . . . . . . . . . . . . . . . .88
4.9. Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .88
4.10. Mitigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .89
4.11. Replacement of Lenders. . . . . . . . . . . . . . . . . . . . . . . . .89
</TABLE>
ii
<PAGE>
ARTICLE V
CONDITIONS TO CREDIT EXTENSIONS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
5.1. Initial Credit Extension . . . . . . . . . . . . . . . . . . . . . . . .92
5.1.1. Satisfaction of Conditions Precedent to the Closing Date . . . . . . .92
5.1.2. Delivery of Notes. . . . . . . . . . . . . . . . . . . . . . . . . . .92
5.1.3. Pledge Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . .92
5.1.4. Financial Information, etc.. . . . . . . . . . . . . . . . . . . . . .93
5.1.5. Security Agreement . . . . . . . . . . . . . . . . . . . . . . . . . .94
5.1.6. Trademark Security Agreement . . . . . . . . . . . . . . . . . . . . .94
5.1.7. Deed of Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . .94
5.1.8. Solvency, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . .95
5.1.9. Initial Rate Protection Agreement. . . . . . . . . . . . . . . . . . .95
5.1.10. Payment of Outstanding Indebtedness, etc. . . . . . . . . . . . . . .95
5.1.11. Closing Fees, Expenses, etc.. . . . . . . . . . . . . . . . . . . . .95
5.1.12. Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . . . . .95
5.1.13. Satisfactory Form and Substance . . . . . . . . . . . . . . . . . . .95
5.1.14. Other Loan Documents. . . . . . . . . . . . . . . . . . . . . . . . .96
5.1.15. Main Project Documents. . . . . . . . . . . . . . . . . . . . . . . .96
5.1.16. Other Documents . . . . . . . . . . . . . . . . . . . . . . . . . . .96
5.2. All Credit Extensions. . . . . . . . . . . . . . . . . . . . . . . . . .96
5.2.1. Conditions for Advances under the Disbursement Agreement and the
Making of Term A Loans. . . . . . . . . . . . . . . . . . . . . . .97
5.2.2. Conditions for the Making of an Additional Term B Loan and/or Term
C Loan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .97
5.2.3. Compliance with Warranties, No Default, etc. . . . . . . . . . . . . .98
5.2.4. Credit Extension Request, etc. . . . . . . . . . . . . . . . . . . . .99
5.2.5. Satisfactory Legal Form. . . . . . . . . . . . . . . . . . . . . . . .99
5.2.6. Other Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . .99
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.1. Organization, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . .99
6.2. Due Authorization, Non-Contravention, etc. . . . . . . . . . . . . . . 100
6.3. Government Approval, Regulation, etc.. . . . . . . . . . . . . . . . . 100
6.4. Validity, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
6.5. Financial Information. . . . . . . . . . . . . . . . . . . . . . . . . 101
6.6. No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . 101
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
6.7. Litigation, Labor Controversies, etc.. . . . . . . . . . . . . . . . . 101
6.8. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
6.9. Ownership of Properties. . . . . . . . . . . . . . . . . . . . . . . . 101
6.10. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
6.11. Pension and Welfare Plans . . . . . . . . . . . . . . . . . . . . . . 102
6.12. Environmental Warranties. . . . . . . . . . . . . . . . . . . . . . . 103
6.13. Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . 104
6.14. Regulations G, U and X. . . . . . . . . . . . . . . . . . . . . . . . 104
6.15. Accuracy of Information . . . . . . . . . . . . . . . . . . . . . . . 104
6.16. Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
6.17. Security Interests. . . . . . . . . . . . . . . . . . . . . . . . . . 105
6.18. Existing Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . 106
6.19. Design/Build Contract; Construction Contracts . . . . . . . . . . . . 106
6.20. Contingent Liabilities. . . . . . . . . . . . . . . . . . . . . . . . 106
6.21. Business, Debt, Contracts, etc. . . . . . . . . . . . . . . . . . . . 107
6.22. Representations and Warranties. . . . . . . . . . . . . . . . . . . . 107
6.23. Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
6.24. In Balance Requirement. . . . . . . . . . . . . . . . . . . . . . . . 107
6.25. Sufficiency of Interests and Main Project Documents . . . . . . . . . 107
6.25.1. Ownership, Title, etc.. . . . . . . . . . . . . . . . . . . . . . . 107
6.25.2. Main Project Documents. . . . . . . . . . . . . . . . . . . . . . . 108
6.25.3. Satisfaction to Main Project Document Conditions. . . . . . . . . . 108
6.26. Main Project Budget; Trade Detail Report. . . . . . . . . . . . . . . 108
6.26.1. Main Project Budget . . . . . . . . . . . . . . . . . . . . . . . . 108
6.26.2. Trade Detail Report . . . . . . . . . . . . . . . . . . . . . . . . 108
6.27. Fees and Enforcement. . . . . . . . . . . . . . . . . . . . . . . . . 109
6.28. ERISA Compliance. . . . . . . . . . . . . . . . . . . . . . . . . . . 109
6.29. Labor Disputes; Acts of God; Casualty and Condemnation. . . . . . . . 109
6.30. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
6.31. Construction Benchmark Schedule; Guaranteed Maximum Price . . . . . . 110
6.31.1. Construction Benchmark Schedule . . . . . . . . . . . . . . . . . . 110
6.31.2. Guaranteed Maximum Price. . . . . . . . . . . . . . . . . . . . . . 110
6.32. Proper Subdivision. . . . . . . . . . . . . . . . . . . . . . . . . . 110
6.33. Offices; Location of Collateral . . . . . . . . . . . . . . . . . . . 110
6.34. Government Regulation . . . . . . . . . . . . . . . . . . . . . . . . 111
6.35. No Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
</TABLE>
iv
<PAGE>
ARTICLE VII
COVENANTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
7.1. Affirmative Covenants. . . . . . . . . . . . . . . . . . . . . . . . . 111
7.1.1. Financial Information, Reports, Notices, etc.. . . . . . . . . . . . 111
7.1.2. Compliance with Laws, etc. . . . . . . . . . . . . . . . . . . . . . 115
7.1.3. Maintenance of Properties; Operation; Reserves . . . . . . . . . . . 116
7.1.4. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
7.1.5. Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . . 117
7.1.6. Environmental. . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
7.1.7. Additional Collateral. . . . . . . . . . . . . . . . . . . . . . . . 117
7.1.8. Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . 118
7.1.9. Deposits into the Accounts . . . . . . . . . . . . . . . . . . . . . 118
7.1.10. Main Project Costs. . . . . . . . . . . . . . . . . . . . . . . . . 118
7.1.11. Repayment of Indebtedness . . . . . . . . . . . . . . . . . . . . . 119
7.1.12. Diligent Construction of the Main Project . . . . . . . . . . . . . 119
7.1.13. Compliance with Legal Requirements. . . . . . . . . . . . . . . . . 119
7.1.14. In Balance; Borrower Equity . . . . . . . . . . . . . . . . . . . . 120
7.1.15. Security Interest in Newly Acquired Property. . . . . . . . . . . . 120
7.1.16. Plans and Specifications. . . . . . . . . . . . . . . . . . . . . . 120
7.1.17. Construction Consultant . . . . . . . . . . . . . . . . . . . . . . 121
7.1.18. Proper Legal Forms. . . . . . . . . . . . . . . . . . . . . . . . . 122
7.1.19. Preserving the Main Project Security. . . . . . . . . . . . . . . . 122
7.1.20. Application of Insurance and Condemnation Proceeds. . . . . . . . . 124
7.1.21. Shoulder Space Encroachments. . . . . . . . . . . . . . . . . . . . 125
7.1.22. GECC Intercreditor Agreement. . . . . . . . . . . . . . . . . . . . 125
7.1.23. Compliance with Material Main Project Documents and the Approved
Equipment Funding Commitment . . . . . . . . . . . . . . . . . . 126
7.2. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . 126
7.2.1. Business Activities. . . . . . . . . . . . . . . . . . . . . . . . . 126
7.2.2. Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
7.2.3. Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
7.2.4. Financial Condition and Operations . . . . . . . . . . . . . . . . . 128
7.2.5. Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
7.2.6. Restricted Payments, etc.. . . . . . . . . . . . . . . . . . . . . . 131
7.2.7. Capital Expenditures, etc. . . . . . . . . . . . . . . . . . . . . . 133
7.2.8. Rental Obligations . . . . . . . . . . . . . . . . . . . . . . . . . 134
7.2.9. Take or Pay Contracts. . . . . . . . . . . . . . . . . . . . . . . . 134
7.2.10. Consolidation, Merger, etc. . . . . . . . . . . . . . . . . . . . . 134
7.2.11. Permitted Dispositions. . . . . . . . . . . . . . . . . . . . . . . 134
</TABLE>
v
<PAGE>
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
7.2.12. Modification of Certain Agreements. . . . . . . . . . . . . . . . . 134
7.2.13. Transactions with Affiliates. . . . . . . . . . . . . . . . . . . . 136
7.2.14. Negative Pledges, Restrictive Agreements, etc.. . . . . . . . . . . 137
7.2.15. Sale and Leaseback. . . . . . . . . . . . . . . . . . . . . . . . . 137
7.2.16. Stock of Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . 137
7.2.17. Scope Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
7.2.18. Amendment of Main Project Budget, Construction Benchmark Schedule;
Design/Build Contract Time and Guaranteed Maximum Price. . . . . 139
7.2.19. Hazardous Substances. . . . . . . . . . . . . . . . . . . . . . . . 141
7.2.20. No Other Powers of Attorney . . . . . . . . . . . . . . . . . . . . 141
7.2.21. Opening . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
7.2.22. Actions Affecting Energy Provider . . . . . . . . . . . . . . . . . 141
ARTICLE VIII
EVENTS OF DEFAULT
8.1. Listing of Events of Default . . . . . . . . . . . . . . . . . . . . . 141
8.1.1. Non-Payment of Obligations . . . . . . . . . . . . . . . . . . . . . 142
8.1.2. Breach of Warranty . . . . . . . . . . . . . . . . . . . . . . . . . 142
8.1.3. Non-Performance of Certain Covenants and Obligations . . . . . . . . 142
8.1.4. Non-Performance of Other Covenants and Obligations . . . . . . . . . 142
8.1.5. Default on Other Indebtedness. . . . . . . . . . . . . . . . . . . . 142
8.1.6. Outside Completion Deadline. . . . . . . . . . . . . . . . . . . . . 143
8.1.7. Judgments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143
8.1.8. Pension Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . 143
8.1.9. Change in Control. . . . . . . . . . . . . . . . . . . . . . . . . . 143
8.1.10. Bankruptcy, Insolvency, etc.. . . . . . . . . . . . . . . . . . . . 143
8.1.11. Impairment of Security, etc.. . . . . . . . . . . . . . . . . . . . 144
8.1.12. Advance Requests. . . . . . . . . . . . . . . . . . . . . . . . . . 144
8.1.13. Breach of Main Project Documents. . . . . . . . . . . . . . . . . . 144
8.1.14. Termination or Invalidity of Main Project Documents; Abandonment
of Main Project. . . . . . . . . . . . . . . . . . . . . . . . . 146
8.1.15. Government Authorizations . . . . . . . . . . . . . . . . . . . . . 146
8.2. Action if Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . 147
8.3. Action if Other Event of Default . . . . . . . . . . . . . . . . . . . 147
</TABLE>
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<PAGE>
ARTICLE IX
THE ADMINISTRATIVE AGENT
<TABLE>
<CAPTION>
Section Page
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<S> <C> <C>
9.1. Actions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150
9.2. Funding Reliance, etc. . . . . . . . . . . . . . . . . . . . . . . . . 150
9.3. Exculpation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151
9.4. Successor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151
9.5. Loans by Scotiabank. . . . . . . . . . . . . . . . . . . . . . . . . . 152
9.6. Credit Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . 152
9.7. Copies, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152
9.8. Consultants and Reports. . . . . . . . . . . . . . . . . . . . . . . . 153
9.9. GECC Intercreditor Agreement . . . . . . . . . . . . . . . . . . . . . 153
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1. Waivers, Amendments, etc. . . . . . . . . . . . . . . . . . . . . . . 153
10.2. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154
10.3. Payment of Costs and Expenses . . . . . . . . . . . . . . . . . . . . 155
10.4. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . 156
10.5. Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157
10.6. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157
10.7. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158
10.8. Execution in Counterparts, Effectiveness, etc.. . . . . . . . . . . . 158
10.9. Governing Law; Entire Agreement . . . . . . . . . . . . . . . . . . . 158
10.10. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . 158
10.11. Sale and Transfer of Loans and Notes; Participations in Loans and
Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158
10.11.1. Assignments. . . . . . . . . . . . . . . . . . . . . . . . . . . . 159
10.11.2. Participations . . . . . . . . . . . . . . . . . . . . . . . . . . 160
10.11.3. Assignment of Registered Notes . . . . . . . . . . . . . . . . . . 161
10.12. Other Transactions . . . . . . . . . . . . . . . . . . . . . . . . . 162
10.13. Execution by Authorized Representative . . . . . . . . . . . . . . . 162
10.14. Forum Selection and Consent to Jurisdiction. . . . . . . . . . . . . 162
10.15. Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . 163
10.16. Maximum Rate of Interest . . . . . . . . . . . . . . . . . . . . . . 163
10.17. Time of Essence. . . . . . . . . . . . . . . . . . . . . . . . . . . 164
10.18. Consent or Approval of the Administrative Agent and the Lenders. . . 164
10.19. No Third Party Beneficiary . . . . . . . . . . . . . . . . . . . . . 164
</TABLE>
vii
<PAGE>
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
10.20. Cumulative Remedies. . . . . . . . . . . . . . . . . . . . . . . . . 165
10.21. Estoppel Certificates. . . . . . . . . . . . . . . . . . . . . . . . 165
10.22. Claims of Discount Noteholders . . . . . . . . . . . . . . . . . . . 165
</TABLE>
viii
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
SCHEDULE I - Disclosure Schedule
SCHEDULE II - Scheduled Amortization
SCHEDULE III - Mandatory Prepayments
SCHEDULE IV - Forms of Opinions
SCHEDULE V - Schedule of Security Filings
SCHEDULE VI - Schedule of Main Project Documents
SCHEDULE VII - Schedule of Plans and Specifications
SCHEDULE VIII - Schedule of Pre-Opening Expenses
SCHEDULE IX - Schedule of Issuance Fees and Expenses
SCHEDULE X - Pre-Approved Assignees
EXHIBIT A-1 - Form of Term A Note
EXHIBIT A-2 - Form of Term B Note
EXHIBIT A-3 - Form of Term C Note
EXHIBIT A-4 - Form of Registered Note
EXHIBIT B - Form of Deed of Trust
EXHIBIT C - Form of Completion Guaranty
EXHIBIT D - Form of Keep-Well Agreement
EXHIBIT E-1 - Form of Borrower Pledge Agreement
EXHIBIT E-2 - Form of AHL Pledge Agreement
EXHIBIT E-3 - Form of AMH Pledge Agreement
EXHIBIT E-4 - Form of Enterprises Pledge Agreement
EXHIBIT E-5 - Form of Holdings Pledge Agreement
EXHIBIT E-6 - Form of LCNI Pledge Agreement
EXHIBIT E-7 - Form of Sommer Enterprises Pledge Agreement
EXHIBIT F - Form of Security Agreement
EXHIBIT G - Form of Mall Project Completion Assignment
EXHIBIT H - Form of Lender Assignment Agreement
EXHIBIT I - Form of Consent to Agreement
EXHIBIT J - Form of Grant, Bargain and Sale Deed
EXHIBIT K - Form of Environmental Indemnity
EXHIBIT L-1 - Form of Borrowing Request
EXHIBIT L-2 - Form of Letter of Credit Issuance Request
EXHIBIT M - Form of Continuation/Conversion Notice
EXHIBIT N-1 - Description of the Site
EXHIBIT N-2 - Description of the Complex
EXHIBIT N-3 - Description of the Main Project Parcel
EXHIBIT N-4 - Description of the Mall Project Parcel
EXHIBIT N-5 - Description of the Music Project Parcel
EXHIBIT N-6 - Description of the Shoulder Space
EXHIBIT N-7 - Description of the Theater Space
EXHIBIT N-8 - Description of the Hotel/Casino Component
EXHIBIT N-9 - Description of the Energy Project Component
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
EXHIBIT N-10 - Description of the Equipment Component
EXHIBIT O - Description of the Main Project Intended Use
EXHIBIT P - Form of Solvency Certificate
EXHIBIT Q-1 - Form of Borrower's Closing Certificate
EXHIBIT Q-2 - Form of Construction Consultant's Closing Certificate
EXHIBIT Q-3 - Form of Architect's Closing Certificate
EXHIBIT R - Form of Compliance Certificate
EXHIBIT S-1 - Form of Borrower's Completion Certificate
EXHIBIT S-2 - Form of Construction Consultant's Completion Certificate
EXHIBIT T-1 - Form of Borrower's Opening Date Certificate
EXHIBIT T-2 - Form of Construction Consultant's Opening Date Certificate
EXHIBIT U-1 - Form of Borrower's Final Completion Certificate
EXHIBIT U-2 - Form of Construction Consultant's Final Completion
Certificate
EXHIBIT V - Form of Main Project Punchlist Completion Certificate
EXHIBIT W - Form of Realized Savings Certificate
EXHIBIT X-1 - Form of Construction Benchmark Schedule
EXHIBIT X-2 - Form of Main Project Budget
EXHIBIT X-3 - Form of Main Project Budget/Schedule Amendment Certificate
EXHIBIT Y - Form of Additional Contract Certificate
EXHIBIT Z - Form of Contract Amendment Certificate
EXHIBIT AA - Form of On-Schedule Certificate
EXHIBIT BB - Permitted Encumbrances
EXHIBIT CC - Permitted Exceptions
EXHIBIT DD - Trade Detail Report
EXHIBIT EE - Tax Certificate
</TABLE>
x
<PAGE>
Bank Completion Guaranty
GUARANTY OF PERFORMANCE AND COMPLETION
THIS GUARANTY OF PERFORMANCE AND COMPLETION (this "Completion Guaranty"),
dated as of February 26, 1998 is made by LONDON CLUBS INTERNATIONAL PLC, a
company registered in England and Wales under company number 2862479 ("LCI"),
THE TRUST UNDER ARTICLE SIXTH UNDER THE WILL OF SIGMUND SOMMER (the "Trust") and
ALADDIN BAZAAR HOLDINGS, LLC, a Nevada limited liability company ("ABH"; ABH,
the Trust and LCI are individually called a "Guarantor" and collectively called
the "Guarantors"), in favor of each of the Administrative Agent and the Lenders
and their respective successors, transferees and assigns.
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of even date herewith
(together with all amendments and other modifications, if any, from time to time
thereafter made thereto, the "Credit Agreement"), among Aladdin Gaming, LLC, a
Nevada limited liability company (the "Borrower"), the various lending
institutions (individually a "Lender" and collectively the "Lenders") as are, or
may from time to time become, parties thereto and The Bank of Nova Scotia as
administrative agent (together with any successor(s) thereto in such capacity,
the "Administrative Agent") for the Lenders, Merrill Lynch Capital Corporation
as the syndication agent (together with any successor thereto in such capacity,
the "Syndication Agent") and CIBC Oppenheimer Corp. as the documentation agent
(together with any successor thereto in such capacity, the "Documentation
Agent"), the Lenders have extended Commitments to make Loans to the Borrower and
to issue Letters of Credit for the account of the Borrower; and
WHEREAS, as a condition precedent to the effectiveness of the Credit
Agreement, the Guarantors are required to execute and deliver this Completion
Guaranty and certain subsidiaries of LCI (the "Subsidiary Guarantors") have
agreed to fully and unconditionally guarantee the payment of LCI's obligations
under this Completion Guaranty pursuant to a guaranty agreement of even date
herewith (the "Subsidiary Guaranty"); and
WHEREAS, the Guarantors have duly authorized the execution, delivery and
performance of this Completion Guaranty and the Subsidiary Guarantors have duly
authorized the execution, delivery and performance of the Subsidiary Guaranty;
and
WHEREAS, it is in the best interests of the Guarantors to execute this
Completion Guaranty and the Subsidiary Guarantors to execute the Subsidiary
Guaranty inasmuch as the Guarantors and the Subsidiary Guarantors will derive
substantial direct and indirect benefits from
<PAGE>
the Loans made to the Borrower by the Lenders pursuant to the Credit Agreement
and the Letters of Credit issued for the account of the Borrower under the
Credit Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, and in order to induce the Lenders to make Loans to the
Borrower and to issue Letters of Credit for the account of the Borrower pursuant
to the Credit Agreement, the Guarantors agree, for the benefit of the
Administrative Agent, the Syndication Agent and each Lender, as follows:
1. Definitions. Terms defined in the Credit Agreement and not otherwise
defined in this Completion Guaranty shall have the meanings ascribed to
them in the Credit Agreement. For the purposes of Section 12(g) and
Section 13 hereof, the terms set forth on Schedule 1 hereto shall have the
meanings ascribed thereto on such Schedule. As used in this Completion
Guaranty, the following terms shall have the meanings respectively set
forth after each:
"Accelerated Payment Amount" shall have the meaning ascribed to such term
in the Keep-Well Agreement.
"Advance" shall have the meaning ascribed to such term in the Disbursement
Agreement.
"Bankruptcy Code" shall mean Title 11 of the United States Code as amended
from time to time.
"Cash Equity Contributions" shall mean cash contributions by the
Guarantors to the Borrower in exchange for preferred interests of
Holdings.
"Consolidated Intangibles": at a particular date, all assets of a
Guarantor and its consolidated Subsidiaries, determined on a consolidated
basis, that would, in conformity with GAAP, be classified as intangible
assets, including, without limitation, unamortized debt discount and
expense, unamortized organization and reorganization expense, costs in
excess of the fair market value of acquired companies, patents, trade or
service marks, franchises, trade names, goodwill and, from and after June
30, 1997, the amount of all write-ups in the book value of assets
resulting from any revaluation thereof.
"Consolidated Tangible Assets": at a particular date, the amount equal to
(a) the amount which would be included as assets on the consolidated
balance sheet of a Guarantor and its consolidated Subsidiaries as at such
date in accordance with GAAP minus (b) Consolidated Intangibles.
"Dormant Subsidiary" means any Subsidiary of a Guarantor which has no
operating assets or property and conducts no business.
2
<PAGE>
"Enforcement Costs" means all reasonable out-of-pocket costs and expenses
of the Lenders in connection with the enforcement of the rights and
remedies of the Lenders under this Completion Guaranty and any amendment,
waiver or consent relating hereto including, without limitation,
reasonable attorneys' fees and costs and expenses, court costs and filing
fees in addition to all other amounts due hereunder whether or not such
Enforcement Costs are incurred in one or more proceedings.
"Existing Senior Debt" shall mean all principal, premium (if any),
interest and other amounts owing from time to time under (i) the Note
Agreements and (ii) the Facilities Agreement, in either case as amended,
supplemented or refinanced, from time to time, provided that the aggregate
principal amount of the Note Agreements and the Facilities Agreement shall
not be greater than the sum of (A) the maximum aggregate principal amount
which could be outstanding under the Facilities Agreement and the Note
Agreements in accordance with their terms as at the date hereof plus (B)
25% of Consolidated Net Assets of LCI; provided further, that the
aggregate principal amount of the Existing Senior Debt in excess of the
maximum aggregate principal amount which could be outstanding under the
Facilities Agreement and the Note Agreements in accordance with their
terms as at the date hereof shall be excluded from the parenthetical
phrase of Section 14(b) hereof.
"Facilities Agreement" shall mean that certain (pounds)65,000,000
Facilities Agreement (originally dated 24th May 1994 as amended and
restated) among, inter alia, LCI, various banks and National Westminster
PLC (the predecessor-in-interest to The Bank of Nova Scotia) as arranger
and agent, as in effect on the date hereof and as the same may be modified
by amendments that would not, in the aggregate, have the effect of making
LCI's obligations thereunder materially more onerous (it being understood
and agreed that any amendment, supplement or modification (i) that
increases the amount of the obligations of LCI thereunder, (ii) that would
permit the lenders thereunder to declare a default if LCI made any Cash
Equity Contribution required of the Guarantors hereunder or (iii) that
would permit the lenders thereunder to declare a default if LCI made net
payments (net of all reimbursements from the other Guarantors) of not more
than 25% of any Accelerated Payment Amount required of the Sponsors under
the Keep-Well Agreement, shall be deemed material).
"GAAP" shall mean the generally accepted accounting principles as in
effect from time to time in the United Kingdom with respect to LCI and in
the United States with respect to the other Guarantors, as the case may
be.
"Guaranteed Obligations" means the obligations of the Guarantors under
Section 2 of this Completion Guaranty.
"Insolvency Proceeding" shall mean any case or proceeding, voluntary or
involuntary, under the Bankruptcy Code, or any similar existing or future
law of any jurisdiction,
3
<PAGE>
foreign, state or federal, relating to bankruptcy, insolvency,
reorganization or relief of debtors.
"Leases" means, collectively, all agreements relating to the use,
occupancy and possession of space with respect to the Main Project entered
into by the Borrower and a tenant.
"LSE" means the London Stock Exchange Limited.
"Material" means material in relation to the business, operations,
affairs, financial condition, assets, properties, or prospects of a
Guarantor and its Subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on (a) the
business, operations, affairs, financial conditions, assets or properties
of a Guarantor and its Subsidiaries taken as a whole, or (b) the ability
of a Guarantor to perform its Guaranteed Obligations or (c) the validity
or enforceability of this Completion Guaranty.
"Material Subsidiary" shall mean each of the Subsidiaries of LCI that are
party to that certain Subsidiary Guaranty dated as of June 30, 1997
guaranteeing the obligations of LCI under the Note Agreements. Each
Material Subsidiary of LCI as of the date hereof is listed on Schedule 2
hereof.
"Note Agreements" shall mean the several identical Note Purchase
Agreements dated as of June 30, 1997 among LCI and the purchasers named
therein relating to LCI's $50,000,000 aggregate principal amount of 7.74%
Guaranteed Senior Notes due 2004 and as the same may be modified by
amendments that would not, in the aggregate, have the effect of making
LCI's obligations thereunder materially more onerous (it being understood
and agreed that any amendment, supplement or modification (i) that
increases the amount of the obligations of LCI thereunder, (ii) that would
permit the lenders thereunder to declare a default if LCI made any Cash
Equity Contribution required of the Guarantors hereunder or (iii) that
would permit the lenders thereunder to declare a default if LCI made net
payments (net of all reimbursements from the other Guarantors) of not more
than 25% of any Accelerated Payment Amount required of the Sponsors under
the Keep-Well Agreement, shall be deemed material).
"Wholly-Owned Subsidiary" shall mean, at any time, any Subsidiary one
hundred percent (100%) of all of the equity interests (except directors'
qualifying shares) and voting interests of which are owned by any one or
more of the Guarantors and such Guarantor's Wholly-Owned Subsidiaries at
such time.
4
<PAGE>
2. Guaranty of Completion and Performance. The Guarantors, jointly and
severally, absolutely, unconditionally and irrevocably, on the terms and
subject to the conditions set forth herein, guarantee to the Lenders:
(i) that the Borrower shall (A) prosecute the Work and the construction of
the Main Project to Final Completion with due diligence and continuity, in
an expeditious and first-class workmanlike manner, (B) cause the Work and
the construction of the Main Project to be performed and the Main Project
to be constructed, equipped and completed in compliance with the Plans and
Specifications in all material respects and in compliance in all material
respects with the provisions of the Loan Documents, the other Operative
Agreements, all Environmental Laws and all Legal Requirements, and (C)
correct or cause to be corrected as soon as possible any material defect
in the Main Project and the Work (including, without limitation, any
material defect in workmanship or quality of construction or materials) or
any material departure or variation from the Final Plans and
Specifications not made pursuant to Change Orders approved in writing by
the Administrative Agent, the Construction Consultant, the Architect of
Record and any of the Governmental Instrumentalities whose approval is
required; and
(ii) that the Borrower shall punctually pay and discharge (A) any and all
costs, expenses and liabilities incurred by the Borrower for or in
connection with the Final Completion of the Work and the Main Project, (B)
all claims and demands for labor, materials and services incurred by the
Borrower for or in connection with the Final Completion of the Work and
the Main Project which are or may become due and payable, or, if unpaid,
are or may become Liens on the Site or any portion thereof owned by the
Borrower, (C) all payments to be made for work to be performed by the
Borrower under Leases or under the Operative Documents for Tenant
Improvements, (D) Impositions and premiums for the insurance required by
the Loan Documents prior to the Conversion Date, (E) all interest accruing
on the Bank Credit Facility during construction and prior to the Final
Completion of the Work and the Main Project, and (F) the obligations of
the Borrower to keep the Bank Credit Facility In Balance; and
(iii) that the Borrower shall complete the Work and construction of the
Main Project Lien free and that the Main Project shall be and remain free
and clear of all Liens arising from the furnishing of materials, labor or
services for or in connection with the Work and the Main Project; and
(iv) that the Borrower shall provide the expertise necessary to supervise
construction of the Main Project and the Final Completion of the Work at
no cost to the Lenders or the Administrative Agent; and
(v) that in the event the Guarantors hereunder shall fail or refuse to pay
or perform the Guaranteed Obligations under this Completion Guaranty, the
Lenders may pay or perform or cause the payment and performance of the
Guaranteed Obligations of the
5
<PAGE>
Guarantors hereunder in which case the Guarantors, upon demand by the
Lenders, shall pay any and all costs, expenses and liabilities for such
costs and expenses in connection with the Final Completion of the Main
Project, or cause any Lien in connection with the Final Completion thereof
or any claim or demand for the payment of the cost of the Final Completion
of the Main Project to be bonded, discharged, released or paid, shall
reimburse the Lenders for all sums paid and all costs, expenses or
liabilities incurred by the Lenders in connection therewith; and
(vi) that the Guarantors shall pay the Enforcement Costs.
3. Payment Provisions. All payments required to be made by the Guarantors
pursuant to Section 2 shall be made subject to the following terms:
(a) The Guarantors shall make cash payments in the amounts required
under Section 2 into an interest-bearing deposit account designated
and controlled exclusively by the Disbursement Agent (the
"Guaranty Deposit Account") in accordance with the Borrower
Collateral Account Agreement in which the Disbursement Agent is
hereby granted a security interest for the benefit of the Lenders.
The Guaranty Deposit Account is intended to be a "deposit account"
for the purposes of Nevada Revised Statutes ("NRS") 40.430.4(g) and
Section 9301(g) of the California Uniform Commercial Code. Such
funds shall be held in the Guaranty Deposit Account as additional
collateral for the Obligations under the Credit Agreement and the
other Loan Documents; provided that, if requested by the Guarantors,
such funds shall be applied to payment of the Guaranteed
Obligations.
(b) The cash payments into the Guaranty Deposit Account and the funds
therein are for the purpose of paying the Guaranteed Obligations
under this Completion Guaranty and shall be free and clear of any
third party claims thereto, including any claims by the Borrower as
a third party beneficiary under this Completion Guaranty. The
Guarantors and the Administrative Agent on behalf of the Lenders
specifically agree that the Borrower is not an intended third party
beneficiary to this Completion Guaranty and that the Borrower nor
any other Person which is not party to this Completion Guaranty
(other than successors and assigns of the Lenders, the
Administrative Agent, the Documentation Agent and the Syndication
Agent) has no rights under this Completion Guaranty.
4. Continuation of Guaranty. In the event that the Obligations of the
Borrower under the Credit Agreement shall be accelerated pursuant to the
provisions of Section 8.1 thereof, this Guaranty shall continue to be in
full force and effect. Subject to the provisions of Section 10 hereof,
upon the indefeasible payment and performance of the Guaranteed
Obligations by the Guarantors, this Completion Guaranty shall terminate.
All amounts received by the Administrative Agent hereunder shall be
applied by it to the payment of the Guaranteed Obligations and in
accordance with the Loan Documents.
6
<PAGE>
5. Proof of Damages. If the Guarantors shall at any time or from time to time
fail to perform or comply with any of the Guaranteed Obligations contained
herein and if for any reason the Lenders have failed to receive when due
and payable the payment of interest or any other amount payable by the
Guarantors under this Completion Guaranty, then in each such case (i) it
shall be assumed conclusively without necessity of proof that such failure
by the Guarantors was the sole and direct cause of the Lenders failing to
receive such payment when due ( to the extent of the failure of the
Guarantors to perform the Guaranteed Obligations contained herein)
irrespective of any other contributing or intervening cause whatsoever,
and (ii) the Guarantors further irrevocably waive to the fullest extent
permitted by law any right or defense the Guarantors may have to cause the
Lenders to prove the cause or amount of such damages or to mitigate the
same.
6. Rights of the Administrative Agent. Each Guarantor authorizes the
Administrative Agent, on behalf of the Lenders, to perform any or all of
the following acts at any time in their sole discretion, all without
notice to the Guarantors and without affecting the payment and performance
of the Guaranteed Obligations by the Guarantors:
(a) The Administrative Agent and the Lenders may alter any terms of the Loan
Documents to which the Guarantors are not a party, including renewing,
compromising, extending, enforcing or accelerating, or otherwise changing
the time for payment of, or increasing or decreasing the rate of interest
on, the Loans or any part of them or increasing or decreasing the amount
of the Loans or any other fees payable under the Loan Documents.
(b) The Administrative Agent and the Lenders may take and hold security for
the Loans, the Letters of Credit and the Borrower's other obligations
under the Credit Agreement, the Sponsors' obligations under the Keep-Well
Agreement and the Guaranteed Obligations under this Completion Guaranty,
accept additional or substituted security for any of the foregoing, and
subordinate, exchange, enforce, waive, release, compromise, fail to
perfect and sell or otherwise dispose of any such security.
(c) The Administrative Agent and the Lenders may direct the order and manner
of any sale of all or any part of any security now or later to be held for
the Loans, the Letters of Credit, this Completion Guaranty or any of the
other Loan Documents, and may also bid at any such sale.
(d) The Administrative Agent and the Lenders may apply any payments or
recoveries from the Borrower, any Guarantor, any Sponsor or any other
source, and any proceeds of any security, to the Borrower's obligations
under the Loan Documents and/or the Guaranteed Obligations under this
Completion Guaranty in such manner, order and priority as they may elect,
whether or not those
7
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Guaranteed Obligations are supported by this Completion Guaranty or
secured at the time of the application.
(e) The Administrative Agent and the Lenders may release the Borrower of its
liability for the Obligations under the Credit Agreement or any portion
thereof.
(f) The Administrative Agent and the Lenders may substitute, add or release
any one or more Guarantors or endorsers.
(g) In addition to the Obligations under the Credit Agreement, the
Administrative Agent and the Lenders may extend other credit to the
Borrower, its Affiliates and any of the Guarantors and any of the Sponsors
or their respective Affiliates and may take and hold security for the
credit so extended, all without affecting the Guarantors' liability under
this Completion Guaranty.
(h) The Administrative Agent and the Lenders may change the terms or
conditions of disbursement of the Loans or the issuance of the Letters of
Credit.
(i) The Administrative Agent and the Lenders may advance additional funds to
the Borrower for any purpose.
7. Completion Guaranty to be Absolute. The Guarantors expressly agree that
for as long as the Credit Agreement remains in effect or any of the
Obligations under the Credit Agreement remain outstanding, the Guarantors
shall not be released from the Guaranteed Obligations hereunder by or
because of:
(a) Any act or event which might otherwise discharge, reduce, limit or modify
the Guaranteed Obligations;
(b) Any waiver, extension, modification, forbearance, delay or other act or
omission of the Administrative Agent or the Lenders, or any failure to
proceed promptly or otherwise as against the Borrower, any Sponsor, any
Guarantor or any security;
(c) Any action, omission or circumstance which might increase the likelihood
that the Guarantors may be called upon to perform under this Completion
Guaranty or which might affect the rights or remedies of the Guarantors as
against the Borrower or any Guarantor; or
(d) Any dealings occurring at any time between the Borrower, the Guarantors,
the Administrative Agent, the Syndication Agent, the Documentation Agent
or any Lender, whether relating to the Loans, the Letters of Credit or
otherwise.
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The Guarantors hereby expressly waive and surrender any defense to their
liability under this Completion Guaranty based upon any of the foregoing
acts, omissions, agreements, waivers or matters. It is the purpose and
intent of this Completion Guaranty that the Guaranteed Obligations shall
be absolute and unconditional under any and all circumstances.
8. Guarantors' Waivers. The Guarantors waive:
(a) All statutes of limitations as a defense to any action or proceeding
brought against the Guarantors by the Administrative Agent or any Lender,
to the fullest extent permitted by law;
(b) Any right they may have to require the Administrative Agent or the Lenders
to proceed against the Borrower or any of the Sponsors, proceed against or
exhaust any security held from the Borrower or any of the Sponsors, or
pursue any other remedy in their power to pursue;
(c) Any defense based on any claim that the Guaranteed Obligations exceed or
are more burdensome than those of the Borrower;
(d) Any defense based on: (i) any legal disability of the Borrower, (ii) any
release, discharge, modification, impairment or limitation of the
liability of the Borrower and/or the Guarantors under the Loan Documents
from any cause, whether consented to by the Administrative Agent or any
Lender or arising by operation of law or from any Insolvency Proceeding,
(iii) any rejection or disaffirmance of the Loans or any security held for
the Loans, in any Insolvency Proceeding and (iv) the Guarantors' rights
under NRS 104.3605, the Guarantors specifically agreeing that this clause
(iv) shall constitute a waiver of discharge under NRS 104.3605;
(e) Any defense based on any action taken or omitted (other than gross
negligence or willful misconduct) by the Administrative Agent or any
Lender in any Insolvency Proceeding involving the Borrower or any of the
Sponsors, including any election to have a claim allowed as being secured,
partially secured or unsecured, any extension of credit by the
Administrative Agent or any Lender to the Borrower in any Insolvency
Proceeding, and the taking and holding by the Administrative Agent or any
Lender of any security for any such extension of credit;
(f) All presentments, demands for performance, notices of nonperformance,
protests, notices of protest, notices of dishonor, notices of acceptance
of this Completion Guaranty and of the existence, creation, or incurring
of new or additional indebtedness, and demands and notices of every kind;
9
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(g) Any defense based on or arising out of any defense that the Borrower may
have to the payment or performance of the Obligations under the Credit
Agreement or any portion of such Obligations; and
(h) Any defense or benefit based on NRS 40.430 and judicial decisions relating
thereto and NRS 40.451 et seq. and judicial decisions relating thereto,
the Guarantors agreeing that the waiver in this paragraph (h) is intended
to take advantage of the two (2) waivers permitted by NRS 40.495 (1) and
(2) to the maximum extent permitted.
9. Waivers of Subrogation and Other Rights.
(a) Upon the occurrence of any Event of Default, the Administrative Agent in
its sole discretion, without prior notice to or consent of the Guarantors,
may elect to: (i) foreclose either judicially or nonjudicially against any
real or personal property security for the Obligations under the Loan
Documents, (ii) accept a transfer of any such security in lieu of
foreclosure, (iii) compromise or adjust the Loans or any part thereof or
any of the Letters of Credit or make any other accommodation with the
Borrower or any Guarantor, or (iv) exercise any other remedy against the
Borrower, any Guarantor or any security. No such action by the
Administrative Agent or any Lender shall release or limit the liability of
the Guarantors, who shall remain liable under this Completion Guaranty
after the action, even if the effect of the action is to deprive the
Guarantors of any subrogation rights, rights of indemnity, or other rights
to collect reimbursement from the Borrower for any sums paid to the
Administrative Agent or the Lenders, whether contractual or arising by
operation of law or otherwise. The Guarantors expressly waive any defenses
or benefits that may be derived from NRS Section 40.451, et seq. and
judicial decisions relating thereto, or comparable provisions of Nevada
law which are comparable to California Civil Procedure ss.ss. 580a, 580b,
580d, or 726 or comparable provisions of the laws of any other
jurisdiction, and all other suretyship defenses they otherwise might or
would have under Nevada law or other applicable law. The Guarantors
expressly agree that under no circumstances shall they be deemed to have
any right, title, interest or claim in or to any real or personal property
to be held by the Administrative Agent or any Lender or any third party
after any foreclosure or transfer in lieu of foreclosure of any security
for the Obligations under the Credit Agreement.
(b) Regardless of whether the Guarantors may have made any payments to the
Administrative Agent or any Lender, the Guarantors hereby waive: (i) all
rights of subrogation, all rights of indemnity, and any other rights to
collect reimbursement from the Borrower for any sums paid to the
Administrative Agent or any Lender, whether contractual or arising by
operation of law (including the Bankruptcy Code) or otherwise, (ii) all
rights to enforce any remedy that the Administrative
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<PAGE>
Agent or any Lender may have against the Borrower or any other
Person, and (iii) all rights to participate in any security now or
later to be held by the Administrative Agent or any Lender for the
Obligations under the Credit Agreement. The waivers given in this
Section 9(b) shall be effective until the Loans and all other
Obligations under the Credit Agreement have been indefeasibly paid
and performed in full and all Commitments have been terminated.
(c) The Guarantors understand and acknowledge that if the Administrative
Agent or any Lender forecloses judicially or nonjudicially against
any real property security for the Obligations under the Loan
Documents, that foreclosure could impair or destroy any ability that
the Guarantors may have to seek reimbursement, contribution or
indemnification from the Borrower or others based on any right the
Guarantors may have of subrogation, reimbursement, contribution or
indemnification for any amounts paid by the Guarantors under this
Completion Guaranty. The Guarantors further understand and
acknowledge that in the absence of this Section 9, such potential
impairment or destruction of the Guarantors' rights, if any, may
entitle the Guarantors to assert a defense to this Completion
Guaranty. By executing this Completion Guaranty, the Guarantors
freely, irrevocably and unconditionally: (i) waive and relinquish
that defense and agree that the Guarantors will be fully liable
under this Completion Guaranty even though the Administrative Agent
of the Lenders may foreclose judicially or nonjudicially against any
real property security for the Obligations under the Loan Documents;
(ii) agree that the Guarantors will not assert that defense in any
action or proceeding which the Administrative Agent or the Lenders
may commence to enforce this Completion Guaranty; and (iii)
acknowledge and agree that the Administrative Agent and the Lenders
are relying on this waiver in making the Loans and issuing the
Letters of Credit, and that this waiver is a material part of the
consideration which they are receiving for making the Loans and
issuing the Letters of Credit.
10. Revival and Reinstatement. If the Lenders are required to pay, return or
restore to any of the Guarantors any amounts previously paid with respect
to the Guaranteed Obligations because of any Insolvency Proceeding of any
of the Guarantors, any stop notice or any other reason, to the extent that
the source of such payment was a Cash Equity Contribution from the
Guarantors or the payment of the Accelerated Payment Amount by the
Guarantors pursuant to this Completion Guaranty, the Guaranteed
Obligations shall be reinstated and revived and the rights of the
Administrative Agent and the Lenders shall continue with regard to such
amounts, as though they had never been paid.
11. Representations and Warranties. Each Guarantor hereby represents and
warrants unto the Administrative Agent and each Lender as follows:
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(a) The most recent audited consolidated balance sheet of LCI and ABH
and their respective consolidated Subsidiaries (in the case of ABH,
as of December 31, 1996 and in the case of LCI, as of March 30,
1997) and the related consolidated statements of earnings and
stockholders' equity (or profit and loss in the case of LCI) and of
cash flows for the fiscal year ended on such date, reported on by
such Guarantor's independent public accountants, copies of which
have heretofore been furnished to each Lender, are complete and
correct and present fairly (or give a true and fair view of in the
case of LCI) the consolidated financial condition of such Guarantor
and its consolidated Subsidiaries as at such date, and the results
of their operations (or consolidated profit and loss in the case of
LCI) and their consolidated cash flows for the fiscal year then
ended. The unaudited consolidated balance sheet of such Guarantor
and its consolidated Subsidiaries as at September 30, 1997 and the
related unaudited consolidated statements of earnings and of cash
flows for the nine-month period (or, in the case of LCI, six month
period) ended on such date, certified by an Authorized
Representative of such Guarantor, are complete and correct and
present fairly (or give a true and fair view of in the case of LCI)
the consolidated financial condition of such Guarantor and its
consolidated Subsidiaries as at such date, and the consolidated
results of their operations and their consolidated cash flows for
the nine-month period (or, in the case of LCI, six-month period)
then ended (subject to normal year-end audit adjustments). All such
financial statements, including the related schedules and notes
thereto, have been prepared in accordance with GAAP applied
consistently throughout the periods involved (except as approved by
such accountants or Authorized Representative, as the case may be,
and as disclosed therein).
(b) Since December 31, 1996, in the case of ABH and since March 30, 1997
in the case of the Trust, there has been no development or event
which has had or could reasonably be expected to have a Material
Adverse Effect.
(c) Each of such Guarantor and its Subsidiaries (a) is duly organized,
and, to the extent applicable, validly existing and in good standing
under the laws of the jurisdiction of its organization, (b) has the
corporate or other power and authority, and the legal right, to own
and operate its property, to lease the property it operates as
lessee and to conduct the business in which it is currently engaged,
(c) to the extent applicable, is duly qualified as a foreign
corporation or company or trust and in good standing under the laws
of each jurisdiction where its ownership, lease or operation of
property or the conduct of its business requires such qualification
and (d) is in compliance with all material Requirements of Law
except where failure to comply with any of the foregoing could not
individually or in the aggregate reasonably be expected to have a
Material Adverse Effect.
(d) Each of such Guarantors has the corporate or other power and
authority, and the legal right, to make, deliver and perform this
Completion Guaranty and to provide
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<PAGE>
the undertakings hereunder and has taken all necessary corporate or
other action to authorize the execution, delivery and performance of
this Completion Guaranty. No consent or authorization of, filing
with or other act by or in respect of, any Governmental
Instrumentality or any other Person is required to be obtained or
made, as the case may be, by such Guarantor in connection with this
Completion Guaranty or with the execution, delivery, performance,
validity or enforceability of this Completion Guaranty by or against
such Guarantor, except as has been obtained and remains in full
force and effect on the date hereof. This Completion Guaranty has
been duly executed and delivered on behalf of such Guarantor. This
Completion Guaranty constitutes a legal, valid and binding
obligation of such Guarantor enforceable against it in accordance
with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles (whether enforcement
is sought by proceedings in equity or at law).
(e) Each Subsidiary Guarantor has the corporate power and authority, and
the legal right, to make, deliver and perform the Subsidiary
Guaranty and to provide the undertakings thereunder and has taken
all necessary corporate action to authorize the execution, delivery
and performance of the Subsidiary Guaranty. No consent or
authorization of, filing with or other act by or in respect of, any
Governmental Instrumentality or any other Person is required to be
obtained or made, as the case may be, by such Subsidiary Guarantor
in connection with the Subsidiary Guaranty or with the execution,
delivery, performance, validity or enforceability of the Subsidiary
Guaranty by or against such Subsidiary Guarantor, except as has been
obtained and remains in full force and effect on the date hereof.
The Subsidiary Guaranty has been duly executed and delivered on
behalf of each Subsidiary Guarantor. The Subsidiary Guaranty
constitutes a legal, valid and binding obligation of each Subsidiary
Guarantor enforceable against it in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general equitable
principles (whether enforcement is sought by proceedings in equity
or at law).
(f) The execution, delivery and performance of this Completion Guaranty
by the Guarantors and the execution, delivery and performance by the
Subsidiary Guarantors of the Subsidiary Guaranty will not (i)
violate any Legal Requirement or contractual obligation of such
Guarantor or Subsidiary Guarantor, (ii) result in, or require, the
creation or imposition of any Lien on any of its properties or
revenues pursuant to any such Legal Requirement or contractual
obligation or (iii) conflict with or result in a breach of any of
the terms, conditions or provisions of any order, judgment, decree
or ruling of any court, arbitrator or Governmental Instrumentality
applicable to such Guarantor or Subsidiary Guarantor.
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<PAGE>
(g) Schedule 3 contains (except as noted therein) complete and correct
lists of each of LCI's and ABH's Subsidiaries (other than Dormant
Subsidiaries), showing, as to each Subsidiary, the correct name
thereof, the jurisdiction of its organization, and the percentage of
shares of each class of its capital stock or similar equity
interests outstanding owned by such Guarantor and each other
Subsidiary of such Guarantor. All of the outstanding shares of
capital stock or similar equity interests of each Subsidiary shown
in Schedule 3 as being owned by such Guarantor and its Subsidiaries
have been validly issued, are fully paid and nonassessable and are
owned by such Guarantor or another Subsidiary free and clear of any
Lien (except as otherwise disclosed in Schedule 3). Each Subsidiary
identified in Schedule 3 is a corporation or other legal entity duly
organized, validly existing and in good standing under the laws of
its jurisdiction of organization, and is duly qualified as a foreign
corporation or other legal entity and is in good standing in each
jurisdiction in which such qualification is required by law, other
than those jurisdictions as to which the failure to be so qualified
or in good standing could not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the
business, assets, debt service capacity, property or financial
condition, operations or prospects of such Subsidiary. Each such
Subsidiary has the corporate or other power and authority to own or
hold under lease the properties it purports to own or hold under
lease and to transact the business it transacts and proposes to
transact. No Subsidiary identified in Schedule 3 is a party to, or
otherwise subject to any legal restriction or any agreement (other
than this Completion Guaranty, the agreements listed on Schedule 3
and customary limitations imposed by corporate law statutes)
restricting the ability of such Subsidiary to pay dividends out of
profits or make any other similar distributions of profits to its
Guarantor parent or any of such Guarantor's Subsidiaries that owns
outstanding shares of capital stock or similar equity interests of
such Subsidiary.
(h) Except as disclosed in Schedule 4 there are no actions, suits or
proceedings pending or, to the knowledge of any Guarantor,
threatened against or affecting such Guarantor or any Subsidiary or
any property of such Guarantor or any Subsidiary in any court or
before any arbitrator of any kind or before or by any Governmental
Instrumentality that, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect. Neither
any Guarantor nor any Subsidiary is in default under any term of any
agreement or instrument to which it is a party or by which it is
bound, or any order, judgment, decree or ruling of any court,
arbitrator or Governmental Instrumentality or is in violation of any
applicable law, ordinance, rule or regulation (including without
limitation Environmental Laws) of any Governmental Instrumentality,
which default or violation, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
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(i) Except as disclosed in Schedule 3-A, each Guarantor and its
Subsidiaries have filed all material tax returns that are required
to have been filed in any jurisdiction, and have paid all taxes
shown to be due and payable on such returns and all other taxes and
assessments levied upon them or their properties, assets, income or
franchises, to the extent such taxes and assessments have become due
and payable and before they have become delinquent, except for any
taxes and assessments (i) the non-payment of which could not
reasonably be expected to have a Material Adverse Effect or (ii) the
amount, applicability or validity of which is currently being
contested in good faith by appropriate proceedings and with respect
to which such Guarantor or a Subsidiary, as the case may be, has
established adequate reserves in accordance with GAAP. Each
Guarantor knows of no basis for any other tax or assessment that
could reasonably be expected to have a Material Adverse Effect. The
charges, accruals and reserves on the books of each Guarantor and
its Subsidiaries in respect of governmental or other taxes for all
fiscal periods are adequate.
(j) Each Guarantor and its Subsidiaries have adequate and appropriate
insurance with respect to their respective properties and businesses
against such casualties and contingencies, of such types, on such
terms and in such amounts (including deductibles, co-insurance and
self-insurance) to the extent this is customary in the case of
entities of established reputations engaged in the same or a similar
business and similarly situated, except where the failure to so
maintain insurance, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
(k) Each of LCI, ABH and its Subsidiaries have good and sufficient title
to their respective properties that individually or in the aggregate
are Material, including all such properties reflected in the most
recent audited balance sheet referred to in clause (a) hereof or
purported to have been acquired by such Guarantor or any Subsidiary
after said date (except as sold or otherwise disposed of in the
ordinary course of business), in each case free and clear of Liens
prohibited by this Completion Guaranty. All leases that individually
or in the aggregate are Material are valid and subsisting and are in
full force and effect in all material respects.
(l) Except as disclosed in Schedule 5,
(i) each Guarantor and its Subsidiaries own or possess all
licenses, permits, franchises, authorizations, patents,
copyrights, service marks, trademarks and trade names, or
rights thereto, that individually or in the aggregate are
Material, without known conflict with the rights of others;
(ii) to the best knowledge of each Guarantor, no product or such
Guarantor infringes in any material respect on any license,
permit, franchise,
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authorization, patent, copyright, service mark, trademark, trade
name or other right owned by any other Person; and
(iii) to the best knowledge of each Guarantor, there is no Material
violation by any Person of any right of such Guarantor or any
of its Subsidiaries with respect to any patent, copyright,
service mark, trademark, trade name or other right owned or
used by such Guarantor or any of its Subsidiaries.
(m) Except as described therein, Schedule 6 sets forth a complete and
correct list of all outstanding Indebtedness of each of LCI and ABH
and its Subsidiaries as of September 30, 1997, since which date
there has been no Material changes in the amounts, interest rates,
sinking funds, installment payments or maturities of the
Indebtedness of such Guarantor or its Subsidiaries. Neither any such
Guarantor nor any Subsidiary is in default and no waiver of default
is currently in effect, in the payment of any principal or interest
on any Indebtedness of such Guarantor or such Subsidiary and no
event or condition exists with respect to any Indebtedness of any
such Guarantor or any Subsidiary in an aggregate principal amount in
excess of $1,500,000 that would permit (or that with notice or the
lapse of time, or both, would permit) one or more Persons to cause
such Indebtedness to become due and payable before its stated
maturity or before its regularly scheduled dates of payment. Except
as disclosed in Schedule 6, neither any such Guarantor nor any
Subsidiary has agreed or consented to cause or permit in the future
(upon the happening of a contingency or otherwise) any of its
property, whether now owned or hereafter acquired, to be subject to
a Lien not permitted by Section 14(a).
(n) Neither any Guarantor nor any Subsidiary is subject to regulation
under the Investment Company Act of 1940, as amended, the Public
Utility Holding Company Act of 1935, as amended, or the Federal
Power Act, as amended.
(o) Neither any Guarantor nor any Subsidiary has knowledge of any claim
or has received any notice of any claim, and no proceeding has been
instituted raising any claim against such Guarantor or any of its
Subsidiaries or any of their respective real properties now or
formerly owned, leased or operated by any of them or other assets,
alleging any damage to the environment or violation of any
Environmental Laws, except, in each case, such as could not
reasonably be expected to result in a Material Adverse Effect.
(p) Each Guarantor's ownership interest in the Borrower as of the date
hereof is set forth on Schedule 7.
(q) LCI has delivered to the Administrative Agent true, correct and
complete copies of all material documents, instruments, opinions and
certificates with respect to the Existing Senior Debt.
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12. Affirmative Covenants. Until all of the Guaranteed Obligations have been
indefeasibly paid and performed, each Guarantor agrees as follows:
(a) LCI shall furnish to the Administrative Agent the documentation
required to be delivered pursuant to Section 12.1(i) and (ii)(a),
(b), (c), (d) and (e) of the LCI Facilities Agreement, or the
comparable provisions of any facilities agreement executed in
substitution of, or as a replacement of, the LCI Facilities
Agreement.
(b) (i) ABH shall furnish to the Administrative Agent:
(A) as soon as available, but in any event within 120 days after
the end of each fiscal year of such Guarantor, a copy of the
consolidated and consolidating balance sheet of such Guarantor
and its consolidated Subsidiaries as at the end of such year
and the related consolidated and consolidating statements of
earnings and stockholders' equity and of cash flows for such
year, setting forth in each case in comparative form the
figures for the previous year, reported on without a "going
concern" or like qualification or exception, or qualification
arising out of the scope of the audit, by an independent
certified public accountants of nationally recognized
standing; and
(B) as soon as available, but in any event not later than 60 days
after the end of each of the first three quarterly periods of
each fiscal year of such Guarantor, (A) the unaudited
consolidated and consolidating balance sheet of such Guarantor
and its consolidated Subsidiaries as at the end of such
quarter and in comparative form the figures for the end of the
previous fiscal year, (B) the unaudited consolidated and
consolidating statement of earnings of such Guarantor and its
consolidated Subsidiaries for such quarter and the portion of
the fiscal year through the end of such quarter, and in
comparative form the figures for the previous year and (C) the
consolidated and consolidating statement of cash flows of such
Guarantor and its consolidated Subsidiaries for the portion of
the fiscal year through the end of such quarter, and in
comparative form the figures for the previous year, certified
by an Authorized Representative of such Guarantor as being
fairly stated in all material respects when considered in
relation to the consolidated and consolidating financial
statements of such Guarantor and its consolidated Subsidiaries
(subject to normal year-end audit adjustments);
all such financial statements to be complete and correct in all
material respects and to be prepared in reasonable detail and in
accordance with GAAP applied consistently throughout the periods
reflected therein and with prior periods
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(except as approved by such accountants or officer, as the case may
be, and disclosed therein).
(ii) The Trust shall furnish the Administrative Agent with all
financial information, certificates, reports, and disclosures
that the Trust is providing to any other creditor in
connection with the Main Project, the Mall Project, and/or the
Music Project at such time as such information is made
available to such creditor.
(c) LCI shall furnish to the Administrative Agent, concurrently with the
delivery of the financial statements described in clause (a) above,
a certificate of an Authorized Representative of LCI showing in
reasonable detail the calculations demonstrating compliance with
Section 12(g) of this Completion Guaranty for the fiscal period
ending on such date. Each Guarantor shall furnish to the
Administrative Agent within thirty days after the same are sent,
copies of all financial statements and reports which such Guarantor
sends to its stockholders, and within thirty days after the same are
filed, copies of all financial statements and reports which such
Guarantor may make to, or file with, the LSE, the Securities and
Exchange Commission or any successor or analogous Governmental
Instrumentality. Each Guarantor shall furnish to the Administrative
Agent with reasonable promptness, such additional financial and
other information as the Administrative Agent, on behalf of any
Lender, may from time to time reasonably request.
(d) ABH and LCI shall keep true and correct books of records and account
in conformity with GAAP and all Requirements of Law; and permit the
Administrative Agent:
(i) No Event of Default -- if no Event of Default then exists,
at the expense of such Administrative Agent and upon reasonable
prior notice to such Guarantor, to visit the principal executive
office of such Guarantor and to discuss the affairs, finances and
accounts of such Guarantor and its Subsidiaries with such
Guarantor's officers, all at such reasonable times and as often as
may be reasonably requested in writing; and
(ii) Event of Default -- if an Event of Default then exists,
at the expense of such Guarantor to visit and inspect any of the
offices of properties of such Guarantor or any Subsidiary, to
examine their respective books and records and to make copies and
extracts therefrom, and to discuss their respective affairs,
finances and accounts with their respective officers and independent
public accountants, all at such reasonable times and as often as may
be requested.
A Guarantor shall not be under any obligation under this Completion
Guaranty to provide information pursuant to the last sentence of
Section 12(c) or pursuant to
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this Section 12(d) if (i) disclosure of such information, on the
written advice of such Guarantor's counsel provided to such
Guarantor, would be prohibited by law or by decree of any
Governmental Instrumentality or arbitral body or by the terms of any
obligation of confidentiality contained in any agreement binding
upon such Guarantor and not entered into in contemplation of this
Section 12(d) or (ii) such information relates to the identity or
personal details of any of the customers or clients of LCI or any of
its Subsidiaries.
In addition, LCI shall not be under any obligation under this
Completion Guaranty to provide information pursuant to the last
sentence of Section 12(c) or pursuant to Section 12(d) if LCI has
been advised in writing by an investment or merchant bank in London,
that the requested disclosure to the Administrative Agent or any
Lender would require LCI to make public disclosure of such
information to comply with its continuing obligations under the
rules of the LSE or would otherwise be prohibited by such rules. If
the Administrative Agent shall contest such written advice from the
investment or merchant bank by itself providing advice in writing to
the contrary from an investment or merchant bank in London, then LCI
will obtain advice in writing from a senior official of the LSE as
to whether the requested disclosure would require LCI to make public
disclosure of such information to comply with any of such
obligations or would otherwise be prohibited as aforesaid. Before
seeking such advice from the LSE (either directly or through its
listing sponsor), LCI will consult with the Administrative Agent and
submit to the LSE such factual submissions and other representations
that the Administrative Agent may provide to LCI for such purpose.
The written advice of such senior official shall be conclusive as to
the disclosure in question.
(e) Each of LCI and ABH shall promptly give notice to the Administrative
Agent (which shall promptly transmit such notice to each Lender) of:
(i) any breach by such Guarantor of any of the Guaranteed
Obligations hereunder or with respect to Existing Senior Debt;
(ii) any (a) default or event of default under any contractual
obligation of such Guarantor or any of its Subsidiaries or (b)
litigation, investigation or proceeding which may exist at any
time between such Guarantor or any of its Subsidiaries and any
Governmental Instrumentality, which in either case, if not
cured or if adversely determined, as the case may be, could
reasonably be expected to have a Material Adverse Effect;
(iii) any material litigation or proceeding affecting such Guarantor
or any of its Subsidiaries; and
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(iv) any development or other event which could reasonably be
expected to have a Material Adverse Effect.
Each notice pursuant to this clause (e) shall be accompanied by a
statement of a Authorized Representative of such Guarantor setting
forth details of the occurrence referred to therein and stating what
action such Guarantor or any of its Subsidiaries propose to take
with respect thereto.
(f) Each of ABH and LCI shall, in the aggregate, continue to own,
directly or through one or more wholly-owned Subsidiaries, free of
any Lien other than Liens in favor of the Administrative Agent and
the Lenders, the same aggregate percentage of the capital stock of
the Borrower as set forth on Schedule 7 hereof, subject to
adjustment as provided in clause (k) in the definition of "Change in
Control" in the Credit Agreement.
(g) LCI covenants and agrees that
(i) the ratio of Group Operating Profit to Net Interest Payable in
respect of each 12 month period ending on the last day of each
financial year and financial half year of the Group shall not
be less than 2.5:1;
(ii) the ratio of Consolidated Net Borrowings to Consolidated Net
Worth shall not at any time exceed 1.5:1; and
(iii) Consolidated Net Worth shall at all times be greater than
(pounds)95,000,000,
and that the finance director of LCI for the time being shall
certify compliance or, as the case may be, non-compliance by LCI and
the Group with each of the provisions referred to in paragraphs (i),
(ii) and (iii) above at the same time as LCI shall furnish to the
Administrative Agent the financial statements referred to in Section
12(a) provided that following receipt of any such certificate the
Administrative Agent may in its absolute discretion require LCI to
instruct its auditors for the time being to certify compliance or,
as the case may be, non-compliance by LCI and the Group with each of
the provisions referred to in paragraphs (i), (ii) and (iii) above
and further that in the event of any changes in any of the
accounting principles and bases upon which any of such financial
statements are prepared, the financial covenants set out in this
sub-clause shall be adjusted or otherwise amended so as to ensure
that or, as nearly as possible that, following such changes the
obligations, limitations and restrictions contained in such
covenants shall, mutatis mutandis, have the same effect as if such
changes had not been made and that the Administrative Agent shall be
provided with all appropriate information and details that it may
request in connection with such adjustments or amendments.
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(h) Each of ABH and LCI will cause each of its Subsidiaries to comply
with all laws, ordinances or governmental rules or regulations to
which each of them is subject, including, without limitation,
Environmental Laws, and will obtain and maintain in effect all
licenses, certificates, permits, franchises and other governmental
authorizations necessary to the ownership of their respective
properties or to the conduct of their respective businesses, in each
case to the extent necessary to ensure that non-compliance with such
laws, ordinances or governmental rules or regulations or failures to
obtain or maintain in effect such licenses, certificates, permits,
franchises and other governmental authorizations could not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
(i) Each Guarantor will and will cause each of its Subsidiaries to
maintain, with institutions it reasonably believes to be financially
sound insurers, insurance with respect to their respective
properties and businesses against such casualties and contingencies,
of such types, on such terms and in such amounts (including
deductibles, co-insurance and self-insurance if adequate reserves
are maintained with respect thereto) as is customary in the case of
entities of established reputations engaged in the same or similar
business and similarly situated.
(j) Each Guarantor will and will cause each of its Subsidiaries to
maintain and keep, or cause to be maintained and kept, their
respective properties in reasonably good repair, working order and
condition (other than ordinary wear and tear), so that the business
carried on in connection therewith may be properly conducted at all
times, provided that this Section shall not prevent a Guarantor from
discontinuing the operation and maintenance of or the liquidation of
any Dormant Subsidiary and shall not prevent a Guarantor or any
Subsidiary from discontinuing the operation and the maintenance of
any of its properties if such discontinuance is desirable in the
conduct of its business and such Guarantor has concluded that such
discontinuance could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
(k) Each Guarantor will and will cause each of its Subsidiaries to file
all material tax returns required to be filed in any jurisdiction
and to pay and discharge all taxes, assessments, governmental
charges, or levies shown to be due and payable on such returns and
all other taxes imposed on them or any of their properties, assets,
income or franchises, to the extent such taxes and assessments have
become due and payable and before they have become delinquent and
all claims for which sums have become due and payable that have or
might become a Lien on properties or assets of such Guarantor or any
Subsidiary, provided that neither a Guarantor nor any Subsidiary
need to pay any such tax or assessment or claims if (i) the amount,
applicability or validity thereof is contested by such Guarantor or
such Subsidiary on a timely basis in good faith in appropriate
proceedings and such Guarantor or a Subsidiary has established
adequate reserves therefor in
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accordance with GAAP on the books of such Guarantor or such
Subsidiary or (ii) the nonpayment of all such taxes and assessments
in the aggregate could not reasonably be expected to have a Material
Adverse Effect.
(l) Each Guarantor will at all times preserve and keep in full force and
effect its corporate or other existence. Except as allowed under the
Note Agreements, each of ABH and LCI will at all times preserve and
keep in full force and effect the corporate or other existence of
each of its Subsidiaries (other than Dormant Subsidiaries or unless
merged into such Guarantor or a Subsidiary) and all licenses,
consents, certificates and authorizations of such Guarantor and its
Subsidiaries unless, in the good faith judgment of such Guarantor,
the termination of or failure to preserve and keep in full force and
effect such corporate or other existence, licenses, consents,
certificates and authorizations could not, individually or in the
aggregate, have a Material Adverse Effect.
(m) Each Guarantor will, and will cause each of its Subsidiaries to,
keep proper books of record and account in accordance with GAAP as
applied in the jurisdiction of its incorporation as such Guarantor
may deem appropriate from time to time.
(n) Neither ABH or LCI nor any Subsidiary will engage in any business
if, as a result, the general nature of the business, taken on a
consolidated basis, which would then be engaged in by such Guarantor
and its Subsidiaries would be materially changed from the general
nature of the business engaged in by such Guarantor and its
Subsidiaries as of the date hereof.
(o) Promptly upon the determination that any Subsidiary of LCI has
become a Material Subsidiary, LCI shall cause such Subsidiary to
execute and deliver a joinder agreement for the Subsidiary Guaranty
pursuant to which such Subsidiary shall become a party thereto and
Subsidiary Guarantor thereunder.
(p) The Trust covenants and agrees that the Trust will maintain a
minimum fair market value of assets less liabilities of
$100,000,000.
13. Consequences of Specified Events. If at any time prior to the indefeasible
payment and performance of the Guaranteed Obligations (each of the
following, a "Specified Event"),
(a) LCI shall at any time fail to comply with the covenants set forth in
Sections 12(f), 12(g), 12(o) or 14 hereof and to the extent such
non-compliance is capable of being cured, such non-compliance shall
not have been cured within twenty-five (25) days; or
(b) any borrowed money for a sum in excess of (pounds)2,500,000 or the
equivalent thereof in any other currency of LCI or any Material
Subsidiary shall by reason of breach
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<PAGE>
or default become due and payable prior to its stated maturity or
due date therefor or if any such borrowed money is not paid at the
maturity thereof or due date therefor (or within any originally
stated applicable grace period therefor) or, if payable on demand,
is not paid on demand; or
(c) LCI or any Material Subsidiary becomes insolvent or applies for or
consents to or suffers the appointment of a liquidator, receiver,
administrative receiver, administrator, guardian, encumbrancer,
trustee in bankruptcy or similar official of the whole or any
substantial part of its respective assets, business, property,
revenues or undertaking (other than in any of such cases (except for
the appointment of any administrator) for the purposes of a solvent
reconstruction or amalgamation the terms of which have previously
been approved by the Required Lenders) LCI or any Material
Subsidiary takes any proceedings under any law for adjustment,
deferment or rescheduling of its Indebtedness or any part thereof or
makes or enters or any proposal is made to make or enter into a
general assignment or arrangement (including, without limitation,
any voluntary arrangement under part I of the Insolvency Act 1986)
or composition with or for the benefit of its creditors or a
moratorium shall be declared on any of its Indebtedness or any part
thereof or any creditor of LCI or any Material Subsidiary exercises
a contractual right to take over the financial management of LCI or
any Material Subsidiary or LCI or any Material Subsidiary is deemed
or shall become unable to pay its debts as defined in Section 123
Insolvency Act 1986 or LCI or any Material Subsidiary fails
generally to pay its debts as and when they fall due or if the
equivalent of any of the foregoing shall occur in relation to LCI or
any Material Subsidiary under the laws of any jurisdiction to which
it or any of its rights, property or assets are subject; or
(d) a petition is presented (but only if such petition remains
undischarged 90 days after presentation thereof) or a meeting is
convened or an order is made or resolution is passed for or other
action or proceedings or steps are taken with a view to the
appointment of an administrator, winding-up, liquidation or
dissolution of LCI or any Material Subsidiary or if the equivalent
of any of the foregoing shall occur in relation to LCI or any
Material Subsidiary under the laws of any jurisdiction to which it
or any of its rights, property or assets are subject (other than in
any of such cases (except for the appointment of any administrator)
for the purposes of the winding up of a dormant member of the Group
or a solvent reconstruction or amalgamation, in each case the terms
of which have previously been approved by the Required Lenders), or
LCI or any Material Subsidiary stops or threatens to stop payments
generally or ceases or threatens to cease to carry on its business
or a substantial part thereof or LCI or any Material Subsidiary
merges, consolidates or amalgamates with or into any other company,
corporation or entity in a transaction not otherwise permitted under
the Facilities Agreement; or
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(e) a distress, execution or other legal process is levied against any
of the assets of LCI or any Material Subsidiary and is not
discharged or paid out within 90 days, except where such distress,
execution or other legal process is in the reasonable opinion of the
Required Lenders being contested in good faith by LCI or the
relevant Material Subsidiary or any analogous proceedings shall be
commenced against LCI or any Material Subsidiary or its assets under
the laws of any other jurisdiction; or
(f) an encumbrancer takes possession or a receiver or an administrative
receiver is appointed of the whole or any substantial part of the
assets or undertaking of LCI or any Material Subsidiary or any
analogous action shall be taken against LCI or any Material
Subsidiary or its assets or undertaking under the laws of any
jurisdiction;
then, not later than five (5) days after such Specified Event, at the
option of the Required Lenders, the provisions of Section 17 shall apply.
14. Negative Covenants. At all times prior to indefeasible payment and
performance of the Guaranteed Obligations by the Guarantors hereunder,
(a) Each of ABH and LCI will not, and will not permit any of its
Subsidiaries to, directly or indirectly create, incur, assume or
permit to exist (upon the happening of a contingency or otherwise)
any Lien on or with respect to any property or asset except:
(i) Liens securing Existing Senior Debt;
(ii) any Lien arising by operation of law which secures amounts not
more than 45 days overdue or, if so overdue, are being
contested on a timely basis in good faith and in appropriate
proceedings;
(iii) any Lien imposed on a Guarantor or any of its Subsidiaries in
relation to its purchase of goods, products or supplies in the
ordinary course of business;
(iv) any rights of set-off in the normal course of trading or of
any bank or financial institution or combination of accounts
arising in favor of such bank or financial institution as a
result of the day-to-day operation of banking arrangements,
including without limitation, rights of set-off granted to
such bank or financial institution in respect of the issuance
of letters of credit, or as a result of any currency or
interest rate hedging operations carried out in the ordinary
course of business, in each case, provided that there is no
agreement to confer a security interest;
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(v) statutory Liens of landlords, Liens over goods or documents of
title arising in the ordinary course of documentary credit
transactions and Liens of carriers, warehousemen, mechanics,
materialmen and other similar Liens, in each case, incurred in
the ordinary course of business;
(vi) Liens for taxes, assessments or other governmental charges
which are not yet due and payable or the payment of which is
not at the time required by Note Agreements;
(vii) Liens incurred or deposits made in the ordinary course of
business (A) in connection with workers' compensation,
unemployment insurance and other types of social security or
retirement benefits, or (B) to secure (or to obtain letters of
credit that secure) the performance of tenders, statutory
obligations, surety bonds, appeal bonds, bids, leases (other
than capital leases), performance bonds, purchase,
construction or sales contracts and other similar obligations,
in each case not incurred or made in connection with the
borrowing of money, the obtaining of advances or credit or the
payment of the deferred purchase price of property;
(viii)leases or subleases granted to others, easements,
rights-of-way, restrictions and other similar charges or
encumbrances, in each case incidental to, and not interfering
with, the ordinary conduct of business of a Guarantor and its
Subsidiaries, provided that such Liens do not, in the
aggregate, materially detract from the value of such property;
(ix) any Lien renewing, extending or refunding any Lien permitted
by clause (i), provided that (A) the principal amount of
Indebtedness secured by such Lien immediately prior to such
extension, renewal or refunding is not increased or the
maturity thereof reduced, (B) such Lien is not extended to any
other property and (C) immediately after such extension,
renewal or refunding no Specified Event would exist;
(x) any Lien securing the obligations of LCI under the Credit
Facility and the obligations of any Subsidiary Guarantor under
any Subsidiary Guarantee;
(xi) any Lien not otherwise permitted by clauses (i) through (x)
above, provided that on the date any Indebtedness secured by
any such Lien, is created, incurred, assumed or guaranteed by
such Guarantor or any Subsidiary, and immediately after giving
effect thereto and to the concurrent retirement of any other
Indebtedness, the sum of (A) the aggregate principal amount of
all Indebtedness secured by Liens pursuant to this clause (xi)
plus (B) all unsecured Indebtedness of such Guarantor and its
Subsidiaries (excluding any unsecured Existing Senior Debt)
that is
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senior in any respect in right of payment to the obligations
of such Guarantor hereunder, does not exceed 25% of the
Consolidated Tangible Assets of such Guarantor as of such
date; and
(xii) any Lien set forth on Schedule 3, in the case of ABH.
(b) Each of ABH and LCI will not, and will not permit any of its
Subsidiaries to, directly or indirectly create, incur, assume or
suffer to exist any secured or unsecured Indebtedness (excluding (A)
any Indebtedness secured by Liens pursuant to clauses (i) through
(x) of Section 14(a) hereof and (B) any unsecured Existing Senior
Debt but including an Indebtedness secured by Liens pursuant to
clause (xi) of Section 14(a) hereof) if the aggregate amount of all
such Indebtedness described in this clause (b) would exceed 25% of
the Consolidated Tangible Assets of such Guarantor as of such date.
(c) In the case of ABH only, declare, pay or make any dividend or
distribution (in cash, property or obligations) on any shares of any
class of interests (now or hereafter outstanding) of such Sponsor or
on any warrants, options or other rights with respect to any class
of interests (now or hereafter outstanding) of such Sponsor (other
than dividends or distributions payable in its common interests or
warrants to purchase its common interests or splitups or
reclassifications of its interests into additional or other
interests) or apply, or permit any of its Subsidiaries to apply, any
of its funds, property or assets to the purchase, redemption,
sinking fund or other retirement of, or agree or permit any of its
Subsidiaries to purchase or redeem, any shares of any class of
interests (now or hereafter outstanding) of such Sponsor, or
warrants, options or other rights with respect to any shares of any
class of interests (now or hereafter outstanding) of such Sponsor.
15. Payments Free and Clear of Taxes, etc. Each Guarantor hereby agrees that:
(a) All payments by such Guarantor hereunder to the Borrower or to a
Lender shall be made free and clear of and without deduction for any
present or future income, excise, stamp or franchise taxes and other
taxes, fees, duties, withholdings or other charges of any nature
whatsoever imposed by any taxing authority, but excluding franchise
taxes and taxes imposed on or measured by any Lender's net income or
receipts (such non-excluded items being called "Taxes"). In the
event that any withholding or deduction from any payment to be made
by a Guarantor hereunder is required in respect of any Taxes
pursuant to any applicable law, rule or regulation, then such
Guarantor will
(i) pay directly to the relevant authority the full amount required to
be so withheld or deducted;
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(ii) promptly forward to the Borrower or such Lender an official
receipt or other documentation satisfactory to the Borrower or
such Lender evidencing such payment to such authority; and
(iii) pay to the Borrower or such Lender such additional amount or
amounts ("Additional Amounts") as is necessary to ensure that
the net amount actually received by the Borrower or such
Lender will equal the full amount the Borrower or such Lender
would have received had no such withholding or deduction been
required.
Moreover, if any Taxes are directly asserted against the Borrower or
any such Lender with respect to any payment received by the Borrower
or such Lender hereunder, the Borrower or such Lender may pay such
Taxes and the Guarantor will promptly pay such Additional Amounts
(including any penalties, interest or expenses ) as is necessary in
order that the net amount received by the Borrower or such Lender
after the payment of such Taxes (including any Taxes on such
Additional Amounts) shall equal the amount the Borrower or such
Lender would have received had not such Taxes been asserted.
Upon the request of any Guarantor, each Lender that is organized
under the laws of a jurisdiction other than the United States or a
State thereof (for purposes of this paragraph (k), a "Non-U.S.
Lender") shall, prior to the date on which any payment is made
hereunder (or in the case of a Lender that becomes a party to the
Credit Agreement pursuant to Section 4.11 of the Credit Agreement or
any Assignee Lender, before it becomes a party hereto) (i) execute
and deliver to each Guarantor and the Administrative Agent one or
more (as the Guarantors or the Administrative Agent may reasonably
request) United States Internal Revenue Service Forms 4224 or Forms
1001 or such other forms or documents (or successor forms or
documents), appropriately completed, certifying in each case that
such Lender or Assignee Lender is entitled to receive payments under
this Completion Guaranty without deduction or withholding of any
United States federal income taxes, and an applicable Internal
Revenue Service Form W-8 or Form W-9 or successor applicable form
(if required by law), as the case may be, to establish an exemption
from United States backup withholding tax or (ii) if such Non-U.S.
Lender is not a "bank" or other person described in Section 881 (c)
(3) of the Code and cannot deliver either Form 4224 or Form 1001
pursuant to clause (a) above, execute and deliver to each Guarantor
and the Administrative Agent one or more (as the Guarantors or the
Administrative Agent may reasonably request) copies of the Tax
Certificate, Form W-8 (or any successor form) and any other
certificate or statement of exemption required under the Code or
Treasury Regulations issued thereunder, appropriately completed,
certifying that such Lender or Assignee Lender is entitled to
receive payments under this Completion Guaranty without deduction or
withholding of United States federal
27
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income tax and establishing an exemption from United States backup
withholding tax. All Lenders other than Non-U.S. Lenders shall,
prior to the date on which any payment is made hereunder (or in the
case of a Lender that becomes a party to the Credit Agreement
pursuant to Section 4.11 of the Credit Agreement or is an Assignee
Lender, before such Lender becomes a party hereto) execute and
deliver to the Borrower and the Administrative Agent one or more
copies (as the Borrower or Administrative Agent may reasonably
request) of United States Internal Revenue Form W-9 or successor
applicable form (if required by law), as the case may be, to
establish exemption from United States backup withholding tax.
Each Lender which undertakes to deliver to the Guarantors or the
Administrative Agent a Tax Certificate, a Form 4224, Form 1001, Form
W-8 or Form W-9 pursuant to the preceding paragraph shall further
undertake to deliver to the Guarantors and the Administrative Agent
two further copies of said Tax Certificate, Form 4224, Form 1001,
Form W-8 or Form W-9 (if required by law), or successor applicable
forms, or other manner of certification, as the case may be, on or
before the date that such form expires or becomes obsolete or after
the occurrence of an event requiring a change in the most recent
form delivered by it to the Guarantors and the Administrative Agent,
and such extensions or renewals thereof as may be reasonably
requested by the Guarantors or Administrative Agent, certifying in
the case of a Tax Certificate, Form 4224 or Form 1001 that such
Lender is entitled to receive payments under this Completion
Guaranty without deduction or withholding of any United States
federal income taxes, unless in any case an event (including any
change in treaty, law or regulation) has occurred prior to the date
on which such delivery would otherwise be required which renders all
forms inapplicable or which would prevent such Lender from duly
completing and delivering any such form with respect to it and such
Lender advises the Guarantors and the Administrative Agent that it
is not capable of receiving payments without any deduction or
withholding of United States federal income tax, and in the case of
a Form W-8 or Form W-9, establishing an exemption from backup
withholding.
(b) If the Guarantor fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Borrower or any Lender the
required receipts or other required documentary evidence, the
Guarantor shall indemnify the Borrower or such Lender for any
incremental Taxes, interest or penalties that may become payable by
the Borrower or such Lender as a result of any such failure.
(c) In the event that an Additional Amount is paid by a Guarantor for
the account of any Lender and such Lender is entitled to a refund of
the Tax (a "Tax Refund") to which such payment is attributable, then
such Lender shall take all reasonable steps which are necessary to
obtain such Tax Refund, including filings such
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<PAGE>
forms, certificates, documents, applications or returns as may be
required to obtain such Tax Refund. If such Lender subsequently
receives such a Tax Refund, and such Lender is readily able to
identify the Tax Refund as being attributable to the Tax with
respect to which the Additional Amount was made, then such Lender
shall reimburse such Guarantor such amount as such Lender shall
determine acting in good faith to be the proportion of the Tax
Refund, together with any interest received thereon, attributable to
such Additional Amount as will leave such Lender after the
reimbursement (including such interest) in no better or worse
position than it would have been if the Additional Amount had not
been required.
(d) Without prejudice to the survival of any other agreement of the
Guarantors hereunder, the agreements and obligations of the
Guarantors contained in this Section 15 shall survive the payment in
full of the principal of and interest on the Loans.
16. Judgment. Each Guarantor hereby agrees that:
(a) If, for the purposes of obtaining judgment in any court, it is
necessary to convert a sum due hereunder in United States Dollars
into another currency, such Guarantor agrees, to the fullest extent
permitted by law, that the rate of exchange used shall be that at
which in accordance with normal banking procedures the
Administrative Agent could purchase United States Dollars with such
other currency on the Business Day preceding that on which final
judgment is given.
(b) The obligation of each Guarantor in respect of any sum due from it
to any Lender hereunder shall, notwithstanding any judgment in a
currency other than United States Dollars, be discharged only to the
extent that on the Business Day following receipt by such Lender of
any sum adjudged to be so due in such other currency such Lender
may, in accordance with normal banking procedures, purchase United
States Dollars with such other currency; in the event that the
United States Dollars so purchased are less that the sum originally
due to such Lender in United States Dollars, the Guarantor, as a
separate obligation and notwithstanding any such judgment, shall
indemnify and hold harmless such Lender and such holder against such
loss, and if the United States Dollars so purchased exceed the sum
originally due to such Lender in United States Dollars, such Lender
shall remit to such Guarantor such excess.
17. Breaches by Any Guarantor. If, at any time prior to the indefeasible
payment and performance of the Guaranteed Obligations by the Guarantors
hereunder, any of the Guarantors breaches the Guaranteed Obligations
(after the expiration of applicable grace, notice and/or cure periods),
then, at the option of the Required Lenders, an Event of Default shall
exist under this Completion Guaranty and the other Loan Documents and
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<PAGE>
the Lenders, without any further notice to any of the Guarantors or any
other Person, shall be entitled to exercise all rights and remedies
available hereunder, under the other Loan Documents and at law and equity;
provided, however, the Lenders may, at their option, commence collection
proceedings against one or more of the Guarantors without declaring an
Event of Default under the other Loan Documents.
18. Miscellaneous Provisions.
(a) This Completion Guaranty is a Loan Document executed pursuant to the
Credit Agreement and shall (unless otherwise expressly indicated
herein) be construed, administered and applied in accordance with
the terms and provisions thereof.
(b) This Completion Guaranty shall be binding upon the Guarantors and
their permitted successors, transferees and assigns and shall inure
to the benefit of and be enforceable by the Administrative Agent and
each Lender and their respective successors, transferees and
assigns; provided, however, that the Guarantors may not assign any
of their Guaranteed Obligations hereunder without the prior written
consent of the Required Lenders.
(c) No amendment to or waiver of any provision of this Completion
Guaranty, nor consent to any departure by any Guarantor herefrom,
shall in any event be effective unless the same shall be in writing
and signed by the Administrative Agent, and then such waiver or
consent shall be effective only in the specific instance and for the
specific purpose for which given.
(d) All notices and other communications provided to any party hereto
under this Completion Guaranty shall be in writing and addressed,
delivered or transmitted to such party at its address or facsimile
number set forth below or at such other address or facsimile number
as may be designated by such party in a notice to the other parties.
All such notices and communications shall be deemed to have been
properly given if (x) hand delivered with receipt acknowledged by
the recipient; (y) if mailed, upon the fifth Business Day after the
date on which it is deposited in registered or certified mail,
postage prepaid, return receipt requested or (z) if by Federal
Express or other nationally-recognized express courier service with
instructions to deliver on the following Business Day, on the next
Business Day after delivery to such express courier service. Notices
and other communications may also be properly given by facsimile but
shall be deemed to be received upon automatic facsimile confirmation
of receipt thereof by the intended recipient machine therefor with
the original of such notice or communication to be given in the
manner provided in the second sentence of this Section; provided,
however, that the failure to deliver a copy in accordance with the
second sentence of this paragraph (d) shall not invalidate the
effectiveness of such facsimile notice. The address information for
the parties is set forth below:
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If to the Administrative
Agent: The Bank of Nova Scotia
580 California Street, 21st Floor
San Francisco, CA 94104
Attn: Alan W. Pendergast
Telephone No(415) 986-1100
Facsimile No(415) 397-0791
If to the Trust: c/o Aladdin Holdings
280 Park Avenue
38th Floor
New York, New York 10017
Attn: Ronald Dictrow
Telephone No(212) 661-0700
Facsimile No(212) 661-0844
If to ABH: Aladdin Bazaar Holdings, LLC
831 Pilot Road
Las Vegas, Nevada 89119
Attn: Jack Sommer
Telephone No(702) 736-7114
Facsimile No(702) 736-7107
If to LCI: London Clubs International, plc
10 Brick Street
London W1Y 8HO, England
Attn: Linda M. Lillis
Telephone No011-44-171-518-0000
Facsimile No011-44-171-493-6981
with a copy to: Ohrenstein & Brown, LLP
230 Park Avenue
New York, New York 10169
Attn: Peter J. Kiernan, Esq.
Telephone No(212)- 682-4500
Facsimile No(212)- 557-0910
and: Lionel, Sawyer & Collins
300 South 4th Street
Suite 1700
Las Vegas, Nevada 89101
Attn: Greg Giordano, Esq.
Telephone No(702)-383-8888
Facsimile No(702)-383-8845
31
<PAGE>
(e) No failure on the part of the Administrative Agent or any Lender to
exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial
exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right. The remedies
herein provided are cumulative and not exclusive of any remedies
provided by law.
(f) Section captions used in this Completion Guaranty are for
convenience of reference only, and shall not affect the construction
of this Completion Guaranty.
(g) Wherever possible each provision of this Completion Guaranty shall
be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Completion Guaranty
shall be prohibited by or invalid under such law, such provision
shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or
the remaining provisions of this Completion Guaranty.
(h) THIS COMPLETION GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK. THIS
COMPLETION GUARANTY AND THE OTHER LOAN DOCUMENTS CONSTITUTE THE
ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE
SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR COMPLETION GUARANTIES,
WRITTEN OR ORAL, WITH RESPECT HERETO.
(i) ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS COMPLETION GUARANTY, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS
OF THE ADMINISTRATIVE AGENT, THE LENDERS OR THE GUARANTORS SHALL BE
BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW
YORK IN THE CITY OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED, HOWEVER, THAT ANY
SUIT SEEKING ENFORCEMENT AGAINST ANY PROPERTY MAY BE BROUGHT, AT THE
ADMINISTRATIVE AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION
WHERE SUCH PROPERTY MAY BE FOUND. THE GUARANTORS HEREBY EXPRESSLY
AND IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE COURTS OF THE
STATE OF NEW YORK IN THE CITY OF NEW YORK AND OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE
OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND
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<PAGE>
IRREVOCABLY AGREE TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN
CONNECTION WITH SUCH LITIGATION. THE GUARANTORS HEREBY IRREVOCABLY
APPOINT CT CORPORATION SYSTEM (THE "PROCESS AGENT"), WITH AN OFFICE
ON THE DATE HEREOF AT 1633 BROADWAY, NEW YORK, NEW YORK 10019,
UNITED STATES, AS THEIR AGENT TO RECEIVE, ON THE GUARANTORS' BEHALF
AND ON BEHALF OF THE GUARANTORS' PROPERTY, SERVICE OF COPIES OF THE
SUMMONS AND COMPLAINT AND ANY OTHER PROCESS WHICH MAY BE SERVED IN
ANY SUCH ACTION OR PROCEEDING. SUCH SERVICE MAY BE MADE BY MAILING
OR DELIVERING A COPY OF SUCH PROCESS TO THE GUARANTORS IN CARE OF
THE PROCESS AGENT AT THE PROCESS AGENT'S ABOVE ADDRESS, AND THE
GUARANTORS HEREBY IRREVOCABLY AUTHORIZE AND DIRECT THE PROCESS AGENT
TO ACCEPT SUCH SERVICE ON THEIR BEHALF. AS AN ALTERNATIVE METHOD OF
SERVICE, THE GUARANTORS FURTHER IRREVOCABLY CONSENT TO THE SERVICE
OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL
SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. THE GUARANTORS
HEREBY EXPRESSLY AND IRREVOCABLY WAIVE, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH THEY MAY HAVE OR HEREAFTER MAY
HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY
SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION
HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT THE
GUARANTORS HAVE OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM
JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH
SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID
OF EXECUTION OR OTHERWISE) WITH RESPECT TO THEMSELVES OR THEIR
PROPERTY, THE GUARANTORS HEREBY IRREVOCABLY WAIVE SUCH IMMUNITY IN
RESPECT OF THE GUARANTEED OBLIGATIONS UNDER THIS COMPLETION GUARANTY
AND THE OTHER LOAN DOCUMENTS.
(j) THE GUARANTORS HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION
WITH, THIS COMPLETION GUARANTY, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE
ADMINISTRATIVE AGENT OR THE
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<PAGE>
LENDERS OR THE GUARANTORS. THE GUARANTORS ACKNOWLEDGE AND AGREE THAT
THEY HAVE RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS
PROVISION AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE
LENDERS ENTERING INTO THE CREDIT AGREEMENT.
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<PAGE>
IN WITNESS WHEREOF, the Guarantors have caused this Completion Guaranty to
be duly executed and delivered by their officers thereunto duly authorized as of
the date first above written.
ALADDIN BAZAAR HOLDINGS, LLC
By: /s/ Ron Dictrow
------------------------------
Ron Dictrow
Title: Secretary, Treasurer
Address: 280 Park Avenue
New York, N.Y.10017
Attention: Ronald Dictrow
Telecopy: 212-661-0844
THE TRUST UNDER ARTICLE SIXTH UNDER
THE WILL OF SIGMUND SOMMER
By: /s/ Viola Sommer
------------------------------
Viola Sommer
Title: Trustee
Address: 280 Park Avenue
New York, N.Y. 10017
Attention: Ronald Dictrow
Telecopy: 212-661-0844
By: /s/ Eugene Landsberg
------------------------------
Eugene Landsberg
Title: Trustee
Address: 280 Park Avenue
New York, N.Y. 10017
Attention: Ronald Dictrow
Telecopy: 212-661-0844
LONDON CLUBS INTERNATIONAL PLC
By: /s/ G. Barry Hardy
------------------------------
G. Barry Hardy
Title: Finance Director
Address: 10 Brick Street
London W1Y 8HQ
England
Attention: G. Barry Hardy
Telecopy: 011-44-171-518-0174
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SCHEDULE 1
Additional Defined Terms
"Cash and Cash Equivalents" means:
(a) cash in hand or at a bank and beneficially owned by LCI or a
Subsidiary of LCI;
(b) Sterling or Dollar denominated commercial paper maturing not
more than nine months from the date of issue and rated A-1 or better by
Standard & Poor's Corporation or P-1 or better by Moody's Investors
Service, Inc.;
(c) any deposit with, or acceptance maturing not more than one year
after issue, accepted by, an authorized institution or an exempted
institution within the meaning of the Banking Act 1987 which has a
combined capital and surplus and undistributable profits of not less than
(pounds)100,000,000 or by any bank, either of which shall have a long-term
debt rating of A- or better by Standard & Poor's Corporation or A3 or
better by Moody's Investors Service, Inc.;
(d) Sterling or Dollar denominated debt securities having not more
than one year until final maturity and listed on a recognized stock
exchange or in respect of which there is an active trading market in
London and rated at least Aa by Moody's Investors Service, Inc. or at
least AA by Standard and Poor's Corporation;
(e) direct obligations of the United States of America or any agency
or instrumentality of the United States of America, the payment or
guarantee of which constitutes a full faith and credit obligation of the
United States of America, in each case maturing twelve months or less from
the date of acquisition thereof;
(f) gilt-edge securities issued directly, or unconditionally
guaranteed, by the United Kingdom Treasury, in each case maturing twelve
months or less from the date of acquisition thereof, legally and
beneficially owned, free of Liens and freely accessible by LCI or any
Subsidiary; or
(g) short-term liquid debt securities which for the time being are
rated at least AAA by Standard & Poor's Corporation or an equivalent
rating by any other reputable, rating agency.
"Consolidated Net Borrowings" means the aggregate outstanding
principal amount of Indebtedness of the Group less Cash and Cash Equivalents.
<PAGE>
"Consolidated Net Worth" means, the aggregate of the amounts paid-up
or credited as paid-up on LCI's issued share capital and the amount of the
consolidated capital and revenue reserves of the Group (including, without
limitation, any share premium account, merger reserve, capital redemption
reserve, revaluation reserve and retained earnings) and any credit balance on
LCI's consolidated profit and loss account all as shown by the latest
consolidated financial statements of LCI delivered or to be delivered pursuant
to this Completion Guaranty from time to time but after:
(i) deducting any debit balance on such consolidated profit and
loss account;
(ii) deducting the net book value of all assets, after deducting
any reserves applicable thereto, which would be treated as
intangible under GAAP (excluding amounts attributable to
acquisition goodwill, trademarks, trade names, service marks,
brand names, copyrights, patents and similar property);
(iii) deducting any amounts distributed or proposed to be
distributed (other than to LCI or any other member of the
Group) out of the profits accrued prior to the date of such
financial statements to the extent that such distribution is
not provided for therein;
(iv) deducting all amounts attributable to minority interests, if
any, in Subsidiaries of LCI;
(v) excluding any sums set aside or otherwise reserved or provided
for taxation;
(vi) adding back any diminution due to the writing off or
amortization of acquisition goodwill or the debiting of
acquisition goodwill to any reserve; and
(vii) making such adjustments to reflect any variations which shall
have occurred since the date of such financial statements:
(a) in the amounts paid up or credited as paid up on the
issued share capital of LCI and the consolidated capital
and revenue reserves of the Group;
(b) to reflect any changes in generally accepted accounting
principles and bases and the application of standards
and practices since then as may be appropriate in the
opinion of the auditors for the time being of LCI; and
(c) in the interest of LCI in any other member of the Group.
2
<PAGE>
"Group" means LCI and its subsidiaries.
"Guaranty" means, with respect to any Person, any obligation (except
the endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
indebtedness, dividend or other obligation of any other Person in any manner,
whether directly or indirectly, including (without limitation) obligations
incurred through an agreement, contingent or otherwise, by such Person:
(a) to purchase such indebtedness or obligation or any property
constituting security therefor;
(b) to advance or supply funds (i) for the purchase or payment of
such indebtedness or obligation, or (ii) to maintain any working capital
or other balance sheet condition or any income statement condition of any
other Person or otherwise to advance or make available funds for the
purchase or payment of such indebtedness or obligation,
(c) to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such indebtedness or
obligation of the ability of any other Person to make payment of the
indebtedness or obligation; or
(d) otherwise to assure the owner of such indebtedness or obligation
against loss in respect thereof;
provided that, the obligations of LCI under the Keep-Well Agreement to pay the
Accelerated Payment Amount shall be treated at any time as a Guaranty of
Indebtedness of the Borrower in an amount equal to 25% of the Accelerated
Payment Amount at such time. In any computation of the indebtedness or other
liabilities of the obligor under any Guaranty, the indebtedness or other
obligations that are the subject of such Guaranty shall be assumed to be direct
obligations of such obligor.
"Group Operating Profit" means, in respect of any period of the
Group, (a) the consolidated profit of the Group for such period before crediting
or deducting amounts attributable to extraordinary and exceptional items, all as
determined in accordance with GAAP, plus (to the extent deducted in determining
such consolidated profits), (b) all provisions for Taxes and (c) Net Interest
Payable; in each case as determined from the relevant consolidated financial
statements of LCI delivered or to be delivered pursuant to this Completion
Guaranty for such period.
"Indebtedness" with respect to any Person means, at any time,
without duplication,
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<PAGE>
(a) its liabilities for borrowed money (excluding accounts payable
in the ordinary course of business) and its redemption obligations upon
and following the date of redemption in respect of mandatorily redeemable
Preferred Stock;
(b) its liabilities pursuant to any note purchase facility or the
issue of bonds, notes, debentures, commercial paper, loan stock or similar
instruments;
(c) all actual (as opposed to contingent) reimbursement obligations
(other than accounts payable in the ordinary course of business) in
respect of any acceptance or documentary credit facilities;
(d) its liabilities for the deferred purchase price of property,
assets or services acquired by such Person (excluding accounts payable
arising in the ordinary course of business but including all liabilities
created or arising under any conditional sale or other title retention
agreement with respect to any such property, assets or services);
(e) all liabilities appearing on its balance sheet in accordance
with GAAP in respect of Capital Leases;
(f) its liabilities in respect of the principal amount of any
receivables sold or discounted to a third party to the extent of recourse
to such Person or any of its Subsidiaries;
(g) Swaps of such Person; and
(h) any Guaranty of such Person with respect to liabilities of a
type described in any of clauses (a) through (h) hereof.
Indebtedness of any Person shall include all obligations of such Person of the
character described in clauses (a) through (h) to the extent such Person remains
legally liable in respect thereof notwithstanding that any such obligation is
deemed to be extinguished under GAAP.
"Subsidiary" means, as to any particular parent corporation, any
corporation of which more than 50% (by number of votes) of the Voting Shares
shall be owned, directly or indirectly, by such parent corporation; provided,
however, that notwithstanding the foregoing, the term subsidiary shall, in any
event, include any company or legal entity which is a "subsidiary" as defined in
Section 736 of the Companies Act 1985, as amended by Section 144 of the
Companies Act 1989, or as detailed in analogous legislation.
"Swaps" means, with respect to any Person, payment obligations with
respect to interest rate swaps, currency swaps and similar obligations
obligating such Person to make payments, whether periodically or upon the
happening of a contingency. For the purposes of this Completion Guaranty, the
amount of the obligation under any Swap shall be the amount determined in
respect thereof as of the end of the then most recently ended fiscal quarter of
such
4
<PAGE>
Person, based on the assumption that such Swap had terminated at the end of such
fiscal quarter, and in making such determination, if any agreement relating to
such Swap provides for the netting of amounts payable by and to such Person
thereunder or if any such agreement provides for the simultaneous payment of
amounts by and to such Person, then in each such case, the amount of such
obligation shall be the net amount so determined.
"Taxes" means all present or future taxes, levies, imposts, duties,
fees, assessments, deductions, withholdings or other governmental charges of any
nature whatsoever and any liabilities with respect thereto, including any
surcharge, penalties, additions to tax, fines or interest thereon, now or
hereafter imposed, levied, collected withheld or assessed by any jurisdiction or
by any political subdivision or taxing authority thereof or therein.
5
<PAGE>
SCHEDULE 2
MATERIAL SUBSIDIARIES
LONDON CLUBS HOLDINGS LIMITED
LES AMBASSADEURS CLUB LIMITED
RENDEZVOUS CLUB (LONDON) LIMITED
PALM BEACH CLUB LIMITED
SIX HAMILTON PLACE LIMITED
BURLINGTON STREET SERVICES LIMITED
ZEALCASTLE LIMITED
CORBY LEISURE RETAIL DEVELOPMENTS LIMITED
UNITLAW TRADING LIMITED
LONDON PARK TOWER CLUB LIMITED
PUBLICACE LIMITED
LOMASBOND PROPERTIES LIMITED
LONDON CLUBS (OVERSEAS) LIMITED
DECBURY LIMITED
GOLDEN NUGGET CLUB LIMITED
LONDON CLUBS MANAGEMENT LIMITED
THE SPORTSMAN CLUB LIMITED
RITZ CLUB (LONDON) LIMITED
<PAGE>
SCHEDULE 3-A
TAX LIABILITIES
With respect to the Trust, none other than potential tax liability that may
result from liabilities to which the Site is subject exceeding the tax basis of
the Site.
<PAGE>
SCHEDULE 3
SUBSIDIARIES
(other than Dormant Subsidiaries)
ABH's Subsidiaries
Name: Aladdin Bazaar, LLC
State of Organization: Delaware
ABH Ownership: 50% member
In connection with the development of the Mall Project by Aladdin Bazaar, LLC
("Aladdin Bazaar"), if a guaranty, letter of credit or other form of credit
enhancement is required to be obtained by the Trust or ABH in order to insure
Aladdin Bazaar or any of its members that the Hotel/Casino will be completed and
opened successfully, ABH will be permitted to convey up to 50% of its interest
in Aladdin Bazaar to CS First Boston or any other institutional investor and
pledge any of its remaining interest in Aladdin Bazaar to CS First Boston or to
such other institutional investor providing financing for the development of the
Mall Project. Furthermore, the Trust shall be entitled to pledge its membership
interest in ABH to either or both of CS First Boston or such other institutional
investor in connection with the financing of the Mall Project.
London Clubs' Subsidiaries
See attachment.
<PAGE>
SCHEDULE 4
LITIGATION
Aronow, et al. v. Sommer, et al., Index No. 112618/95 (New York Sup. Ct.)
Kanbar, et al. v. Aronow, et al., Index No. 600301/97 (New York Sup. Ct.)
Sommer, et al. v. PMEC Associates and Co., et al., No. 88 Civ. 2537 (S.D.N.Y.)
<PAGE>
SCHEDULE 5
LICENSES, PERMITS, ETC.
ABH
See attachment.
<PAGE>
SCHEDULE 6
EXISTING INDEBTEDNESS
Trust
None.
ABH and/or its Subsidiaries
$30,000,000 contingent liability (see Schedule 3)
London Clubs and/or its Subsidiaries
See attachment.
<PAGE>
SCHEDULE 7
OWNERSHIP OF BORROWER
Aladdin Bazaar Holdings, LLC
Aladdin Bazaar Holdings, LLC has no ownership interest in Borrower.
The Trust
The Trust owns an indirect interest in Borrower through its ownership interests
in the following entities:
o The Trust owns a 95% membership interest in Aladdin Holdings, LLC (AHL).
o AHL owns a 98.7% membership interest in Sommer Enterprises, LLC
(Sommer Enterprises).
o Sommer Enterprises owns a 47% membership interest in Aladdin
Gaming Holdings, LLC (Holdings) and a 100% membership interest
in Aladdin Gaming Enterprises, Inc. (Enterprises). Enterprises
owns a 25% membership interest in Holdings.
o Holdings owns 100% of the common membership interest and
100% of the Series A Preferred membership interest in
the Borrower.
LCI
See chart attached hereto.
<PAGE>
Exhibit C
To Credit Agreement
GUARANTY OF PERFORMANCE AND COMPLETION
THIS GUARANTY OF PERFORMANCE AND COMPLETION (this "Completion Guaranty"),
dated as of February 26, 1998 is made by LONDON CLUBS INTERNATIONAL PLC, a
company registered in England and Wales under company number 2862479 ("LCI"),
THE TRUST UNDER ARTICLE SIXTH UNDER THE WILL OF SIGMUND SOMMER (the "Trust") and
ALADDIN BAZAAR HOLDINGS, LLC, a Nevada limited liability company ("ABH"; ABH,
the Trust and LCI are individually called a "Guarantor" and collectively called
the "Guarantors"), in favor of each of the Administrative Agent and the Lenders
and their respective successors, transferees and assigns.
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of even date herewith
(together with all amendments and other modifications, if any, from time to time
thereafter made thereto, the "Credit Agreement"), among Aladdin Gaming, LLC, a
Nevada limited liability company (the "Borrower"), the various lending
institutions (individually a "Lender" and collectively the "Lenders") as are, or
may from time to time become, parties thereto and The Bank of Nova Scotia as
administrative agent (together with any successor(s) thereto in such capacity,
the "Administrative Agent") for the Lenders, Merrill Lynch Capital Corporation
as the syndication agent (together with any successor thereto in such capacity,
the "Syndication Agent") and CIBC Oppenheimer Corp. as the documentation agent
(together with any successor thereto in such capacity, the "Documentation
Agent"), the Lenders have extended Commitments to make Loans to the Borrower and
to issue Letters of Credit for the account of the Borrower; and
WHEREAS, as a condition precedent to the effectiveness of the Credit
Agreement, the Guarantors are required to execute and deliver this Completion
Guaranty and certain subsidiaries of LCI (the "Subsidiary Guarantors") have
agreed to fully and unconditionally guarantee the payment of LCI's obligations
under this Completion Guaranty pursuant to a guaranty agreement of even date
herewith (the "Subsidiary Guaranty"); and
WHEREAS, the Guarantors have duly authorized the execution, delivery and
performance of this Completion Guaranty and the Subsidiary Guarantors have duly
authorized the execution, delivery and performance of the Subsidiary Guaranty;
and
WHEREAS, it is in the best interests of the Guarantors to execute this
Completion Guaranty and the Subsidiary Guarantors to execute the Subsidiary
Guaranty inasmuch as the Guarantors and the Subsidiary Guarantors will derive
substantial direct and indirect benefits
<PAGE>
from the Loans made to the Borrower by the Lenders pursuant to the Credit
Agreement and the Letters of Credit issued for the account of the Borrower under
the Credit Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt of which is
hereby acknowledged, and in order to induce the Lenders to make Loans to the
Borrower and to issue Letters of Credit for the account of the Borrower pursuant
to the Credit Agreement, the Guarantors agree, for the benefit of the
Administrative Agent, the Syndication Agent and each Lender, as follows:
1. Definitions. Terms defined in the Credit Agreement and not otherwise
defined in this Completion Guaranty shall have the meanings ascribed to
them in the Credit Agreement. For the purposes of Section 12(g) and Section
13 hereof, the terms set forth on Schedule 1 hereto shall have the meanings
ascribed thereto on such Schedule. As used in this Completion Guaranty,
the following terms shall have the meanings respectively set forth after
each:
"Accelerated Payment Amount" shall have the meaning ascribed to such term
in the Keep-Well Agreement.
"Advance" shall have the meaning ascribed to such term in the Disbursement
Agreement.
"Bankruptcy Code" shall mean Title 11 of the United States Code as amended
from time to time.
"Cash Equity Contributions" shall mean cash contributions by the Guarantors
to the Borrower in exchange for preferred interests of Holdings.
"Consolidated Intangibles": at a particular date, all assets of a
Guarantor and its consolidated Subsidiaries, determined on a consolidated
basis, that would, in conformity with GAAP, be classified as intangible
assets, including, without limitation, unamortized debt discount and
expense, unamortized organization and reorganization expense, costs in
excess of the fair market value of acquired companies, patents, trade or
service marks, franchises, trade names, goodwill and, from and after June
30, 1997, the amount of all write-ups in the book value of assets resulting
from any revaluation thereof.
"Consolidated Tangible Assets": at a particular date, the amount equal to
(a) the amount which would be included as assets on the consolidated
balance sheet of a Guarantor and its consolidated Subsidiaries as at such
date in accordance with GAAP minus (b) Consolidated Intangibles.
"Dormant Subsidiary" means any Subsidiary of a Guarantor which has no
operating assets or property and conducts no business.
2
<PAGE>
"Enforcement Costs" means all reasonable out-of-pocket costs and expenses
of the Lenders in connection with the enforcement of the rights and
remedies of the Lenders under this Completion Guaranty and any amendment,
waiver or consent relating hereto including, without limitation, reasonable
attorneys' fees and costs and expenses, court costs and filing fees in
addition to all other amounts due hereunder whether or not such Enforcement
Costs are incurred in one or more proceedings.
"Existing Senior Debt" shall mean all principal, premium (if any), interest
and other amounts owing from time to time under (i) the Note Agreements and
(ii) the Facilities Agreement, in either case as amended, supplemented or
refinanced, from time to time, provided that the aggregate principal amount
of the Note Agreements and the Facilities Agreement shall not be greater
than the sum of (A) the maximum aggregate principal amount which could be
outstanding under the Facilities Agreement and the Note Agreements in
accordance with their terms as at the date hereof plus (B) 25% of
Consolidated Net Assets of LCI; provided further, that the aggregate
principal amount of the Existing Senior Debt in excess of the maximum
aggregate principal amount which could be outstanding under the Facilities
Agreement and the Note Agreements in accordance with their terms as at the
date hereof shall be excluded from the parenthetical phrase of Section
14(b) hereof.
"Facilities Agreement" shall mean that certain L65,000,000 Facilities
Agreement (originally dated 24th May 1994 as amended and restated) among,
inter alia, LCI, various banks and National Westminster PLC (the
predecessor-in-interest to The Bank of Nova Scotia) as arranger and agent,
as in effect on the date hereof and as the same may be modified by
amendments that would not, in the aggregate, have the effect of making
LCI's obligations thereunder materially more onerous (it being understood
and agreed that any amendment, supplement or modification (i) that
increases the amount of the obligations of LCI thereunder, (ii) that would
permit the lenders thereunder to declare a default if LCI made any Cash
Equity Contribution required of the Guarantors hereunder or (iii) that
would permit the lenders thereunder to declare a default if LCI made net
payments (net of all reimbursements from the other Guarantors) of not more
than 25% of any Accelerated Payment Amount required of the Sponsors under
the Keep-Well Agreement, shall be deemed material).
"GAAP" shall mean the generally accepted accounting principles as in effect
from time to time in the United Kingdom with respect to LCI and in the
United States with respect to the other Guarantors, as the case may be.
"Guaranteed Obligations" means the obligations of the Guarantors under
Section 2 of this Completion Guaranty.
"Insolvency Proceeding" shall mean any case or proceeding, voluntary or
involuntary, under the Bankruptcy Code, or any similar existing or future
law of any jurisdiction,
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<PAGE>
foreign, state or federal, relating to bankruptcy, insolvency,
reorganization or relief of debtors.
"Leases" means, collectively, all agreements relating to the use, occupancy
and possession of space with respect to the Main Project entered into by
the Borrower and a tenant.
"LSE" means the London Stock Exchange Limited.
"Material" means material in relation to the business, operations, affairs,
financial condition, assets, properties, or prospects of a Guarantor and
its Subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on (a) the
business, operations, affairs, financial conditions, assets or properties
of a Guarantor and its Subsidiaries taken as a whole, or (b) the ability of
a Guarantor to perform its Guaranteed Obligations or (c) the validity or
enforceability of this Completion Guaranty.
"Material Subsidiary" shall mean each of the Subsidiaries of LCI that are
party to that certain Subsidiary Guaranty dated as of June 30, 1997
guaranteeing the obligations of LCI under the Note Agreements. Each
Material Subsidiary of LCI as of the date hereof is listed on Schedule 2
hereof.
"Note Agreements" shall mean the several identical Note Purchase Agreements
dated as of June 30, 1997 among LCI and the purchasers named therein
relating to LCI's $50,000,000 aggregate principal amount of 7.74%
Guaranteed Senior Notes due 2004 and as the same may be modified by
amendments that would not, in the aggregate, have the effect of making
LCI's obligations thereunder materially more onerous (it being understood
and agreed that any amendment, supplement or modification (i) that
increases the amount of the obligations of LCI thereunder, (ii) that would
permit the lenders thereunder to declare a default if LCI made any Cash
Equity Contribution required of the Guarantors hereunder or (iii) that
would permit the lenders thereunder to declare a default if LCI made net
payments (net of all reimbursements from the other Guarantors) of not more
than 25% of any Accelerated Payment Amount required of the Sponsors under
the Keep-Well Agreement, shall be deemed material).
"Wholly-Owned Subsidiary" shall mean, at any time, any Subsidiary one
hundred percent (100%) of all of the equity interests (except directors'
qualifying shares) and voting interests of which are owned by any one or
more of the Guarantors and such Guarantor's Wholly-Owned Subsidiaries at
such time.
4
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2. Guaranty of Completion and Performance. The Guarantors, jointly and
severally, absolutely, unconditionally and irrevocably, on the terms and
subject to the conditions set forth herein, guarantee to the Lenders:
(i) that the Borrower shall (A) prosecute the Work and the construction of
the Main Project to Final Completion with due diligence and continuity, in
an expeditious and first-class workmanlike manner, (B) cause the Work and
the construction of the Main Project to be performed and the Main Project
to be constructed, equipped and completed in compliance with the Plans and
Specifications in all material respects and in compliance in all material
respects with the provisions of the Loan Documents, the other Operative
Agreements, all Environmental Laws and all Legal Requirements, and (C)
correct or cause to be corrected as soon as possible any material defect in
the Main Project and the Work (including, without limitation, any material
defect in workmanship or quality of construction or materials) or any
material departure or variation from the Final Plans and Specifications not
made pursuant to Change Orders approved in writing by the Administrative
Agent, the Construction Consultant, the Architect of Record and any of the
Governmental Instrumentalities whose approval is required; and
(ii) that the Borrower shall punctually pay and discharge (A) any and all
costs, expenses and liabilities incurred by the Borrower for or in
connection with the Final Completion of the Work and the Main Project, (B)
all claims and demands for labor, materials and services incurred by the
Borrower for or in connection with the Final Completion of the Work and the
Main Project which are or may become due and payable, or, if unpaid, are or
may become Liens on the Site or any portion thereof owned by the Borrower,
(C) all payments to be made for work to be performed by the Borrower under
Leases or under the Operative Documents for Tenant Improvements, (D)
Impositions and premiums for the insurance required by the Loan Documents
prior to the Conversion Date, (E) all interest accruing on the Bank Credit
Facility during construction and prior to the Final Completion of the Work
and the Main Project, and (F) the obligations of the Borrower to keep the
Bank Credit Facility In Balance; and
(iii) that the Borrower shall complete the Work and construction of the
Main Project Lien free and that the Main Project shall be and remain free
and clear of all Liens arising from the furnishing of materials, labor or
services for or in connection with the Work and the Main Project; and
(iv) that the Borrower shall provide the expertise necessary to supervise
construction of the Main Project and the Final Completion of the Work at no
cost to the Lenders or the Administrative Agent; and
(v) that in the event the Guarantors hereunder shall fail or refuse to pay
or perform the Guaranteed Obligations under this Completion Guaranty, the
Lenders may pay or perform or cause the payment and performance of the
Guaranteed Obligations of the
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Guarantors hereunder in which case the Guarantors, upon demand by the
Lenders, shall pay any and all costs, expenses and liabilities for such
costs and expenses in connection with the Final Completion of the Main
Project, or cause any Lien in connection with the Final Completion thereof
or any claim or demand for the payment of the cost of the Final Completion
of the Main Project to be bonded, discharged, released or paid, shall
reimburse the Lenders for all sums paid and all costs, expenses or
liabilities incurred by the Lenders in connection therewith; and
(vi) that the Guarantors shall pay the Enforcement Costs.
3. Payment Provisions. All payments required to be made by the Guarantors
pursuant to Section 2 shall be made subject to the following terms:
(a) The Guarantors shall make cash payments in the amounts required under
Section 2 into an interest-bearing deposit account designated and
controlled exclusively by the Disbursement Agent (the "Guaranty
Deposit Account") in accordance with the Borrower Collateral Account
Agreement in which the Disbursement Agent is hereby granted a security
interest for the benefit of the Lenders. The Guaranty Deposit Account
is intended to be a "deposit account" for the purposes of Nevada
Revised Statutes ("NRS") 40.430.4(g) and Section 9301(g) of the
California Uniform Commercial Code. Such funds shall be held in the
Guaranty Deposit Account as additional collateral for the Obligations
under the Credit Agreement and the other Loan Documents; provided
that, if requested by the Guarantors, such funds shall be applied to
payment of the Guaranteed Obligations.
(b) The cash payments into the Guaranty Deposit Account and the funds
therein are for the purpose of paying the Guaranteed Obligations under
this Completion Guaranty and shall be free and clear of any third
party claims thereto, including any claims by the Borrower as a third
party beneficiary under this Completion Guaranty. The Guarantors and
the Administrative Agent on behalf of the Lenders specifically agree
that the Borrower is not an intended third party beneficiary to this
Completion Guaranty and that the Borrower nor any other Person which
is not party to this Completion Guaranty (other than successors and
assigns of the Lenders, the Administrative Agent, the Documentation
Agent and the Syndication Agent) has no rights under this Completion
Guaranty.
4. Continuation of Guaranty. In the event that the Obligations of the
Borrower under the Credit Agreement shall be accelerated pursuant to the
provisions of Section 8.1 thereof, this Guaranty shall continue to be in
full force and effect. Subject to the provisions of Section 10 hereof,
upon the indefeasible payment and performance of the Guaranteed Obligations
by the Guarantors, this Completion Guaranty shall terminate. All amounts
received by the Administrative Agent hereunder shall be applied by it to
the payment of the Guaranteed Obligations and in accordance with the Loan
Documents.
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5. Proof of Damages. If the Guarantors shall at any time or from time to time
fail to perform or comply with any of the Guaranteed Obligations contained
herein and if for any reason the Lenders have failed to receive when due
and payable the payment of interest or any other amount payable by the
Guarantors under this Completion Guaranty, then in each such case (i) it
shall be assumed conclusively without necessity of proof that such failure
by the Guarantors was the sole and direct cause of the Lenders failing to
receive such payment when due ( to the extent of the failure of the
Guarantors to perform the Guaranteed Obligations contained herein)
irrespective of any other contributing or intervening cause whatsoever, and
(ii) the Guarantors further irrevocably waive to the fullest extent
permitted by law any right or defense the Guarantors may have to cause the
Lenders to prove the cause or amount of such damages or to mitigate the
same.
6. Rights of the Administrative Agent. Each Guarantor authorizes the
Administrative Agent, on behalf of the Lenders, to perform any or all of
the following acts at any time in their sole discretion, all without notice
to the Guarantors and without affecting the payment and performance of the
Guaranteed Obligations by the Guarantors:
(a) The Administrative Agent and the Lenders may alter any terms of the
Loan Documents to which the Guarantors are not a party, including
renewing, compromising, extending, enforcing or accelerating, or
otherwise changing the time for payment of, or increasing or
decreasing the rate of interest on, the Loans or any part of them or
increasing or decreasing the amount of the Loans or any other fees
payable under the Loan Documents.
(b) The Administrative Agent and the Lenders may take and hold security
for the Loans, the Letters of Credit and the Borrower's other
obligations under the Credit Agreement, the Sponsors' obligations
under the Keep-Well Agreement and the Guaranteed Obligations under
this Completion Guaranty, accept additional or substituted security
for any of the foregoing, and subordinate, exchange, enforce, waive,
release, compromise, fail to perfect and sell or otherwise dispose of
any such security.
(c) The Administrative Agent and the Lenders may direct the order and
manner of any sale of all or any part of any security now or later to
be held for the Loans, the Letters of Credit, this Completion Guaranty
or any of the other Loan Documents, and may also bid at any such sale.
(d) The Administrative Agent and the Lenders may apply any payments or
recoveries from the Borrower, any Guarantor, any Sponsor or any other
source, and any proceeds of any security, to the Borrower's
obligations under the Loan Documents and/or the Guaranteed Obligations
under this Completion Guaranty in such manner, order and priority as
they may elect, whether or not those
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Guaranteed Obligations are supported by this Completion Guaranty or
secured at the time of the application.
(e) The Administrative Agent and the Lenders may release the Borrower of
its liability for the Obligations under the Credit Agreement or any
portion thereof.
(f) The Administrative Agent and the Lenders may substitute, add or
release any one or more Guarantors or endorsers.
(g) In addition to the Obligations under the Credit Agreement, the
Administrative Agent and the Lenders may extend other credit to the
Borrower, its Affiliates and any of the Guarantors and any of the
Sponsors or their respective Affiliates and may take and hold security
for the credit so extended, all without affecting the Guarantors'
liability under this Completion Guaranty.
(h) The Administrative Agent and the Lenders may change the terms or
conditions of disbursement of the Loans or the issuance of the Letters
of Credit.
(i) The Administrative Agent and the Lenders may advance additional funds
to the Borrower for any purpose.
7. Completion Guaranty to be Absolute. The Guarantors expressly agree that
for as long as the Credit Agreement remains in effect or any of the
Obligations under the Credit Agreement remain outstanding, the Guarantors
shall not be released from the Guaranteed Obligations hereunder by or
because of:
(a) Any act or event which might otherwise discharge, reduce, limit or
modify the Guaranteed Obligations;
(b) Any waiver, extension, modification, forbearance, delay or other act
or omission of the Administrative Agent or the Lenders, or any failure
to proceed promptly or otherwise as against the Borrower, any Sponsor,
any Guarantor or any security;
(c) Any action, omission or circumstance which might increase the
likelihood that the Guarantors may be called upon to perform under
this Completion Guaranty or which might affect the rights or remedies
of the Guarantors as against the Borrower or any Guarantor; or
(d) Any dealings occurring at any time between the Borrower, the
Guarantors, the Administrative Agent, the Syndication Agent, the
Documentation Agent or any Lender, whether relating to the Loans, the
Letters of Credit or otherwise.
8
<PAGE>
The Guarantors hereby expressly waive and surrender any defense to their
liability under this Completion Guaranty based upon any of the foregoing
acts, omissions, agreements, waivers or matters. It is the purpose and
intent of this Completion Guaranty that the Guaranteed Obligations shall be
absolute and unconditional under any and all circumstances.
8. Guarantors' Waivers. The Guarantors waive:
(a) All statutes of limitations as a defense to any action or proceeding
brought against the Guarantors by the Administrative Agent or any
Lender, to the fullest extent permitted by law;
(b) Any right they may have to require the Administrative Agent or the
Lenders to proceed against the Borrower or any of the Sponsors,
proceed against or exhaust any security held from the Borrower or any
of the Sponsors, or pursue any other remedy in their power to pursue;
(c) Any defense based on any claim that the Guaranteed Obligations exceed
or are more burdensome than those of the Borrower;
(d) Any defense based on: (i) any legal disability of the Borrower, (ii)
any release, discharge, modification, impairment or limitation of the
liability of the Borrower and/or the Guarantors under the Loan
Documents from any cause, whether consented to by the Administrative
Agent or any Lender or arising by operation of law or from any
Insolvency Proceeding, (iii) any rejection or disaffirmance of the
Loans or any security held for the Loans, in any Insolvency Proceeding
and (iv) the Guarantors' rights under NRS 104.3605, the Guarantors
specifically agreeing that this clause (iv) shall constitute a waiver
of discharge under NRS 104.3605;
(e) Any defense based on any action taken or omitted (other than gross
negligence or willful misconduct) by the Administrative Agent or any
Lender in any Insolvency Proceeding involving the Borrower or any of
the Sponsors, including any election to have a claim allowed as being
secured, partially secured or unsecured, any extension of credit by
the Administrative Agent or any Lender to the Borrower in any
Insolvency Proceeding, and the taking and holding by the
Administrative Agent or any Lender of any security for any such
extension of credit;
(f) All presentments, demands for performance, notices of nonperformance,
protests, notices of protest, notices of dishonor, notices of
acceptance of this Completion Guaranty and of the existence, creation,
or incurring of new or additional indebtedness, and demands and
notices of every kind;
9
<PAGE>
(g) Any defense based on or arising out of any defense that the Borrower
may have to the payment or performance of the Obligations under the
Credit Agreement or any portion of such Obligations; and
(h) Any defense or benefit based on NRS 40.430 and judicial decisions
relating thereto and NRS 40.451 et seq. and judicial decisions
relating thereto, the Guarantors agreeing that the waiver in this
paragraph (h) is intended to take advantage of the two (2) waivers
permitted by NRS 40.495 (1) and (2) to the maximum extent permitted.
9. Waivers of Subrogation and Other Rights.
(a) Upon the occurrence of any Event of Default, the Administrative Agent
in its sole discretion, without prior notice to or consent of the
Guarantors, may elect to: (i) foreclose either judicially or
nonjudicially against any real or personal property security for the
Obligations under the Loan Documents, (ii) accept a transfer of any
such security in lieu of foreclosure, (iii) compromise or adjust the
Loans or any part thereof or any of the Letters of Credit or make any
other accommodation with the Borrower or any Guarantor, or (iv)
exercise any other remedy against the Borrower, any Guarantor or any
security. No such action by the Administrative Agent or any Lender
shall release or limit the liability of the Guarantors, who shall
remain liable under this Completion Guaranty after the action, even if
the effect of the action is to deprive the Guarantors of any
subrogation rights, rights of indemnity, or other rights to collect
reimbursement from the Borrower for any sums paid to the
Administrative Agent or the Lenders, whether contractual or arising by
operation of law or otherwise. The Guarantors expressly waive any
defenses or benefits that may be derived from NRS Section 40.451, et
seq. and judicial decisions relating thereto, or comparable provisions
of Nevada law which are comparable to California Civil Procedure
Sections 580a, 580b, 580d, or 726 or comparable provisions of the
laws of any other jurisdiction, and all other suretyship defenses they
otherwise might or would have under Nevada law or other applicable
law. The Guarantors expressly agree that under no circumstances shall
they be deemed to have any right, title, interest or claim in or to
any real or personal property to be held by the Administrative Agent
or any Lender or any third party after any foreclosure or transfer in
lieu of foreclosure of any security for the Obligations under the
Credit Agreement.
(b) Regardless of whether the Guarantors may have made any payments to the
Administrative Agent or any Lender, the Guarantors hereby waive: (i)
all rights of subrogation, all rights of indemnity, and any other
rights to collect reimbursement from the Borrower for any sums paid to
the Administrative Agent or any Lender, whether contractual or arising
by operation of law (including the Bankruptcy Code) or otherwise, (ii)
all rights to enforce any remedy that the
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<PAGE>
Administrative Agent or any Lender may have against the Borrower or
any other Person, and (iii) all rights to participate in any security
now or later to be held by the Administrative Agent or any Lender for
the Obligations under the Credit Agreement. The waivers given in this
Section 9(b) shall be effective until the Loans and all other
Obligations under the Credit Agreement have been indefeasibly paid and
performed in full and all Commitments have been terminated.
(c) The Guarantors understand and acknowledge that if the Administrative
Agent or any Lender forecloses judicially or nonjudicially against any
real property security for the Obligations under the Loan Documents,
that foreclosure could impair or destroy any ability that the
Guarantors may have to seek reimbursement, contribution or
indemnification from the Borrower or others based on any right the
Guarantors may have of subrogation, reimbursement, contribution or
indemnification for any amounts paid by the Guarantors under this
Completion Guaranty. The Guarantors further understand and
acknowledge that in the absence of this Section 9, such potential
impairment or destruction of the Guarantors' rights, if any, may
entitle the Guarantors to assert a defense to this Completion
Guaranty. By executing this Completion Guaranty, the Guarantors
freely, irrevocably and unconditionally: (i) waive and relinquish that
defense and agree that the Guarantors will be fully liable under this
Completion Guaranty even though the Administrative Agent of the
Lenders may foreclose judicially or nonjudicially against any real
property security for the Obligations under the Loan Documents; (ii)
agree that the Guarantors will not assert that defense in any action
or proceeding which the Administrative Agent or the Lenders may
commence to enforce this Completion Guaranty; and (iii) acknowledge
and agree that the Administrative Agent and the Lenders are relying on
this waiver in making the Loans and issuing the Letters of Credit, and
that this waiver is a material part of the consideration which they
are receiving for making the Loans and issuing the Letters of Credit.
10. Revival and Reinstatement. If the Lenders are required to pay, return or
restore to any of the Guarantors any amounts previously paid with respect
to the Guaranteed Obligations because of any Insolvency Proceeding of any
of the Guarantors, any stop notice or any other reason, to the extent that
the source of such payment was a Cash Equity Contribution from the
Guarantors or the payment of the Accelerated Payment Amount by the
Guarantors pursuant to this Completion Guaranty, the Guaranteed
Obligations shall be reinstated and revived and the rights of the
Administrative Agent and the Lenders shall continue with regard to such
amounts, as though they had never been paid.
11. Representations and Warranties. Each Guarantor hereby represents and
warrants unto the Administrative Agent and each Lender as follows:
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(a) The most recent audited consolidated balance sheet of LCI and ABH and
their respective consolidated Subsidiaries (in the case of ABH, as of
December 31, 1996 and in the case of LCI, as of March 30, 1997) and
the related consolidated statements of earnings and stockholders'
equity (or profit and loss in the case of LCI) and of cash flows for
the fiscal year ended on such date, reported on by such Guarantor's
independent public accountants, copies of which have heretofore been
furnished to each Lender, are complete and correct and present fairly
(or give a true and fair view of in the case of LCI) the consolidated
financial condition of such Guarantor and its consolidated
Subsidiaries as at such date, and the results of their operations (or
consolidated profit and loss in the case of LCI) and their
consolidated cash flows for the fiscal year then ended. The unaudited
consolidated balance sheet of such Guarantor and its consolidated
Subsidiaries as at September 30, 1997 and the related unaudited
consolidated statements of earnings and of cash flows for the
nine-month period (or, in the case of LCI, six month period) ended on
such date, certified by an Authorized Representative of such
Guarantor, are complete and correct and present fairly (or give a true
and fair view of in the case of LCI) the consolidated financial
condition of such Guarantor and its consolidated Subsidiaries as at
such date, and the consolidated results of their operations and their
consolidated cash flows for the nine-month period (or, in the case of
LCI, six-month period) then ended (subject to normal year-end audit
adjustments). All such financial statements, including the related
schedules and notes thereto, have been prepared in accordance with
GAAP applied consistently throughout the periods involved (except as
approved by such accountants or Authorized Representative, as the case
may be, and as disclosed therein).
(b) Since December 31, 1996, in the case of ABH and since March 30, 1997
in the case of the Trust, there has been no development or event which
has had or could reasonably be expected to have a Material Adverse
Effect.
(c) Each of such Guarantor and its Subsidiaries (a) is duly organized,
and, to the extent applicable, validly existing and in good standing
under the laws of the jurisdiction of its organization, (b) has the
corporate or other power and authority, and the legal right, to own
and operate its property, to lease the property it operates as lessee
and to conduct the business in which it is currently engaged, (c) to
the extent applicable, is duly qualified as a foreign corporation or
company or trust and in good standing under the laws of each
jurisdiction where its ownership, lease or operation of property or
the conduct of its business requires such qualification and (d) is in
compliance with all material Requirements of Law except where failure
to comply with any of the foregoing could not individually or in the
aggregate reasonably be expected to have a Material Adverse Effect.
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<PAGE>
(d) Each of such Guarantors has the corporate or other power and
authority, and the legal right, to make, deliver and perform this
Completion Guaranty and to provide the undertakings hereunder and has
taken all necessary corporate or other action to authorize the
execution, delivery and performance of this Completion Guaranty. No
consent or authorization of, filing with or other act by or in respect
of, any Governmental Instrumentality or any other Person is required
to be obtained or made, as the case may be, by such Guarantor in
connection with this Completion Guaranty or with the execution,
delivery, performance, validity or enforceability of this Completion
Guaranty by or against such Guarantor, except as has been obtained and
remains in full force and effect on the date hereof. This Completion
Guaranty has been duly executed and delivered on behalf of such
Guarantor. This Completion Guaranty constitutes a legal, valid and
binding obligation of such Guarantor enforceable against it in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally
and by general equitable principles (whether enforcement is sought by
proceedings in equity or at law).
(e) Each Subsidiary Guarantor has the corporate power and authority, and
the legal right, to make, deliver and perform the Subsidiary Guaranty
and to provide the undertakings thereunder and has taken all necessary
corporate action to authorize the execution, delivery and performance
of the Subsidiary Guaranty. No consent or authorization of, filing
with or other act by or in respect of, any Governmental
Instrumentality or any other Person is required to be obtained or
made, as the case may be, by such Subsidiary Guarantor in connection
with the Subsidiary Guaranty or with the execution, delivery,
performance, validity or enforceability of the Subsidiary Guaranty by
or against such Subsidiary Guarantor, except as has been obtained and
remains in full force and effect on the date hereof. The Subsidiary
Guaranty has been duly executed and delivered on behalf of each
Subsidiary Guarantor. The Subsidiary Guaranty constitutes a legal,
valid and binding obligation of each Subsidiary Guarantor enforceable
against it in accordance with its terms, except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors'
rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
(f) The execution, delivery and performance of this Completion Guaranty by
the Guarantors and the execution, delivery and performance by the
Subsidiary Guarantors of the Subsidiary Guaranty will not (i) violate
any Legal Requirement or contractual obligation of such Guarantor or
Subsidiary Guarantor, (ii) result in, or require, the creation or
imposition of any Lien on any of its properties or revenues pursuant
to any such Legal Requirement or contractual obligation or
(iii) conflict with or result in a breach of any of the terms,
conditions or
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<PAGE>
provisions of any order, judgment, decree or ruling of any court,
arbitrator or Governmental Instrumentality applicable to such
Guarantor or Subsidiary Guarantor.
(g) Schedule 3 contains (except as noted therein) complete and correct
lists of each of LCI's and ABH's Subsidiaries (other than Dormant
Subsidiaries), showing, as to each Subsidiary, the correct name
thereof, the jurisdiction of its organization, and the percentage of
shares of each class of its capital stock or similar equity interests
outstanding owned by such Guarantor and each other Subsidiary of such
Guarantor. All of the outstanding shares of capital stock or similar
equity interests of each Subsidiary shown in Schedule 3 as being owned
by such Guarantor and its Subsidiaries have been validly issued, are
fully paid and nonassessable and are owned by such Guarantor or
another Subsidiary free and clear of any Lien (except as otherwise
disclosed in Schedule 3). Each Subsidiary identified in Schedule 3 is
a corporation or other legal entity duly organized, validly existing
and in good standing under the laws of its jurisdiction of
organization, and is duly qualified as a foreign corporation or other
legal entity and is in good standing in each jurisdiction in which
such qualification is required by law, other than those jurisdictions
as to which the failure to be so qualified or in good standing could
not, individually or in the aggregate, reasonably be expected to have
a material adverse effect on the business, assets, debt service
capacity, property or financial condition, operations or prospects of
such Subsidiary. Each such Subsidiary has the corporate or other
power and authority to own or hold under lease the properties it
purports to own or hold under lease and to transact the business it
transacts and proposes to transact. No Subsidiary identified in
Schedule 3 is a party to, or otherwise subject to any legal
restriction or any agreement (other than this Completion Guaranty, the
agreements listed on Schedule 3 and customary limitations imposed by
corporate law statutes) restricting the ability of such Subsidiary to
pay dividends out of profits or make any other similar distributions
of profits to its Guarantor parent or any of such Guarantor's
Subsidiaries that owns outstanding shares of capital stock or similar
equity interests of such Subsidiary.
(h) Except as disclosed in Schedule 4 there are no actions, suits or
proceedings pending or, to the knowledge of any Guarantor, threatened
against or affecting such Guarantor or any Subsidiary or any property
of such Guarantor or any Subsidiary in any court or before any
arbitrator of any kind or before or by any Governmental
Instrumentality that, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect. Neither any
Guarantor nor any Subsidiary is in default under any term of any
agreement or instrument to which it is a party or by which it is
bound, or any order, judgment, decree or ruling of any court,
arbitrator or Governmental Instrumentality or is in violation of any
applicable law, ordinance, rule or regulation (including without
limitation
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<PAGE>
Environmental Laws) of any Governmental Instrumentality, which default
or violation, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.
(i) Except as disclosed in Schedule 3-A, each Guarantor and its
Subsidiaries have filed all material tax returns that are required to
have been filed in any jurisdiction, and have paid all taxes shown to
be due and payable on such returns and all other taxes and assessments
levied upon them or their properties, assets, income or franchises, to
the extent such taxes and assessments have become due and payable and
before they have become delinquent, except for any taxes and
assessments (i) the non-payment of which could not reasonably be
expected to have a Material Adverse Effect or (ii) the amount,
applicability or validity of which is currently being contested in
good faith by appropriate proceedings and with respect to which such
Guarantor or a Subsidiary, as the case may be, has established
adequate reserves in accordance with GAAP. Each Guarantor knows of no
basis for any other tax or assessment that could reasonably be
expected to have a Material Adverse Effect. The charges, accruals and
reserves on the books of each Guarantor and its Subsidiaries in
respect of governmental or other taxes for all fiscal periods are
adequate.
(j) Each Guarantor and its Subsidiaries have adequate and appropriate
insurance with respect to their respective properties and businesses
against such casualties and contingencies, of such types, on such
terms and in such amounts (including deductibles, co-insurance and
self-insurance) to the extent this is customary in the case of
entities of established reputations engaged in the same or a similar
business and similarly situated, except where the failure to so
maintain insurance, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
(k) Each of LCI, ABH and its Subsidiaries have good and sufficient title
to their respective properties that individually or in the aggregate
are Material, including all such properties reflected in the most
recent audited balance sheet referred to in clause (a) hereof or
purported to have been acquired by such Guarantor or any Subsidiary
after said date (except as sold or otherwise disposed of in the
ordinary course of business), in each case free and clear of Liens
prohibited by this Completion Guaranty. All leases that individually
or in the aggregate are Material are valid and subsisting and are in
full force and effect in all material respects.
(l) Except as disclosed in Schedule 5,
(i) each Guarantor and its Subsidiaries own or possess all licenses,
permits, franchises, authorizations, patents, copyrights, service
marks, trademarks
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<PAGE>
and trade names, or rights thereto, that individually or in the
aggregate are Material, without known conflict with the rights of
others;
(ii) to the best knowledge of each Guarantor, no product or such
Guarantor infringes in any material respect on any license,
permit, franchise, authorization, patent, copyright, service
mark, trademark, trade name or other right owned by any other
Person; and
(iii) to the best knowledge of each Guarantor, there is no
Material violation by any Person of any right of such
Guarantor or any of its Subsidiaries with respect to any
patent, copyright, service mark, trademark, trade name or
other right owned or used by such Guarantor or any of its
Subsidiaries.
(m) Except as described therein, Schedule 6 sets forth a complete and
correct list of all outstanding Indebtedness of each of LCI and ABH
and its Subsidiaries as of September 30, 1997, since which date there
has been no Material changes in the amounts, interest rates, sinking
funds, installment payments or maturities of the Indebtedness of such
Guarantor or its Subsidiaries. Neither any such Guarantor nor any
Subsidiary is in default and no waiver of default is currently in
effect, in the payment of any principal or interest on any
Indebtedness of such Guarantor or such Subsidiary and no event or
condition exists with respect to any Indebtedness of any such
Guarantor or any Subsidiary in an aggregate principal amount in excess
of $1,500,000 that would permit (or that with notice or the lapse of
time, or both, would permit) one or more Persons to cause such
Indebtedness to become due and payable before its stated maturity or
before its regularly scheduled dates of payment. Except as disclosed
in Schedule 6, neither any such Guarantor nor any Subsidiary has
agreed or consented to cause or permit in the future (upon the
happening of a contingency or otherwise) any of its property, whether
now owned or hereafter acquired, to be subject to a Lien not permitted
by Section 14(a).
(n) Neither any Guarantor nor any Subsidiary is subject to regulation
under the Investment Company Act of 1940, as amended, the Public
Utility Holding Company Act of 1935, as amended, or the Federal Power
Act, as amended.
(o) Neither any Guarantor nor any Subsidiary has knowledge of any claim or
has received any notice of any claim, and no proceeding has been
instituted raising any claim against such Guarantor or any of its
Subsidiaries or any of their respective real properties now or
formerly owned, leased or operated by any of them or other assets,
alleging any damage to the environment or violation of any
Environmental Laws, except, in each case, such as could not reasonably
be expected to result in a Material Adverse Effect.
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(p) Each Guarantor's ownership interest in the Borrower as of the date
hereof is set forth on Schedule 7.
(q) LCI has delivered to the Administrative Agent true, correct and
complete copies of all material documents, instruments, opinions and
certificates with respect to the Existing Senior Debt.
12. Affirmative Covenants. Until all of the Guaranteed Obligations have been
indefeasibly paid and performed, each Guarantor agrees as follows:
(a) LCI shall furnish to the Administrative Agent the documentation
required to be delivered pursuant to Section 12.1(i) and (ii)(a), (b),
(c), (d) and (e) of the LCI Facilities Agreement, or the comparable
provisions of any facilities agreement executed in substitution of, or
as a replacement of, the LCI Facilities Agreement.
(b) (i) ABH shall furnish to the Administrative Agent:
(A) as soon as available, but in any event within 120 days after the
end of each fiscal year of such Guarantor, a copy of the
consolidated and consolidating balance sheet of such Guarantor
and its consolidated Subsidiaries as at the end of such year and
the related consolidated and consolidating statements of earnings
and stockholders' equity and of cash flows for such year, setting
forth in each case in comparative form the figures for the
previous year, reported on without a "going concern" or like
qualification or exception, or qualification arising out of the
scope of the audit, by an independent certified public
accountants of nationally recognized standing; and
(B) as soon as available, but in any event not later than 60 days
after the end of each of the first three quarterly periods of
each fiscal year of such Guarantor, (A) the unaudited
consolidated and consolidating balance sheet of such Guarantor
and its consolidated Subsidiaries as at the end of such quarter
and in comparative form the figures for the end of the previous
fiscal year, (B) the unaudited consolidated and consolidating
statement of earnings of such Guarantor and its consolidated
Subsidiaries for such quarter and the portion of the fiscal year
through the end of such quarter, and in comparative form the
figures for the previous year and (C) the consolidated and
consolidating statement of cash flows of such Guarantor and its
consolidated Subsidiaries for the portion of the fiscal year
through the end of such quarter, and in comparative form the
figures for the previous year, certified by an Authorized
Representative of such Guarantor as being fairly stated in all
material respects when considered in relation to the consolidated
and consolidating financial statements of such
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Guarantor and its consolidated Subsidiaries (subject to normal
year-end audit adjustments);
all such financial statements to be complete and correct in all
material respects and to be prepared in reasonable detail and in
accordance with GAAP applied consistently throughout the periods
reflected therein and with prior periods (except as approved by such
accountants or officer, as the case may be, and disclosed therein).
(ii) The Trust shall furnish the Administrative Agent with all
financial information, certificates, reports, and disclosures that the
Trust is providing to any other creditor in connection with the Main
Project, the Mall Project, and/or the Music Project at such time as
such information is made available to such creditor.
(c) LCI shall furnish to the Administrative Agent, concurrently with the
delivery of the financial statements described in clause (a) above, a
certificate of an Authorized Representative of LCI showing in
reasonable detail the calculations demonstrating compliance with
Section 12(g) of this Completion Guaranty for the fiscal period ending
on such date. Each Guarantor shall furnish to the Administrative
Agent within thirty days after the same are sent, copies of all
financial statements and reports which such Guarantor sends to its
stockholders, and within thirty days after the same are filed, copies
of all financial statements and reports which such Guarantor may make
to, or file with, the LSE, the Securities and Exchange Commission or
any successor or analogous Governmental Instrumentality. Each
Guarantor shall furnish to the Administrative Agent with reasonable
promptness, such additional financial and other information as the
Administrative Agent, on behalf of any Lender, may from time to time
reasonably request.
(d) ABH and LCI shall keep true and correct books of records and account
in conformity with GAAP and all Requirements of Law; and permit the
Administrative Agent:
(i) No Event of Default -- if no Event of Default then exists,
at the expense of such Administrative Agent and upon reasonable prior
notice to such Guarantor, to visit the principal executive office of
such Guarantor and to discuss the affairs, finances and accounts of
such Guarantor and its Subsidiaries with such Guarantor's officers,
all at such reasonable times and as often as may be reasonably
requested in writing; and
(ii) Event of Default -- if an Event of Default then exists, at
the expense of such Guarantor to visit and inspect any of the offices
of properties of
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such Guarantor or any Subsidiary, to examine their respective books
and records and to make copies and extracts therefrom, and to discuss
their respective affairs, finances and accounts with their respective
officers and independent public accountants, all at such reasonable
times and as often as may be requested.
A Guarantor shall not be under any obligation under this Completion
Guaranty to provide information pursuant to the last sentence of
Section 12(c) or pursuant to this Section 12(d) if (i) disclosure of
such information, on the written advice of such Guarantor's counsel
provided to such Guarantor, would be prohibited by law or by decree of
any Governmental Instrumentality or arbitral body or by the terms of
any obligation of confidentiality contained in any agreement binding
upon such Guarantor and not entered into in contemplation of this
Section 12(d) or (ii) such information relates to the identity or
personal details of any of the customers or clients of LCI or any of
its Subsidiaries.
In addition, LCI shall not be under any obligation under this
Completion Guaranty to provide information pursuant to the last
sentence of Section 12(c) or pursuant to Section 12(d) if LCI has been
advised in writing by an investment or merchant bank in London, that
the requested disclosure to the Administrative Agent or any Lender
would require LCI to make public disclosure of such information to
comply with its continuing obligations under the rules of the LSE or
would otherwise be prohibited by such rules. If the Administrative
Agent shall contest such written advice from the investment or
merchant bank by itself providing advice in writing to the contrary
from an investment or merchant bank in London, then LCI will obtain
advice in writing from a senior official of the LSE as to whether the
requested disclosure would require LCI to make public disclosure of
such information to comply with any of such obligations or would
otherwise be prohibited as aforesaid. Before seeking such advice from
the LSE (either directly or through its listing sponsor), LCI will
consult with the Administrative Agent and submit to the LSE such
factual submissions and other representations that the Administrative
Agent may provide to LCI for such purpose. The written advice of such
senior official shall be conclusive as to the disclosure in question.
(e) Each of LCI and ABH shall promptly give notice to the Administrative
Agent (which shall promptly transmit such notice to each Lender) of:
(i) any breach by such Guarantor of any of the Guaranteed Obligations
hereunder or with respect to Existing Senior Debt;
(ii) any (a) default or event of default under any contractual
obligation of such Guarantor or any of
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its Subsidiaries or (b) litigation, investigation or proceeding
which may exist at any time between such Guarantor or any of its
Subsidiaries and any Governmental Instrumentality, which in
either case, if not cured or if adversely determined, as the case
may be, could reasonably be expected to have a Material Adverse
Effect;
(iii) any material litigation or proceeding affecting such Guarantor or
any of its Subsidiaries; and
(iv) any development or other event which could reasonably be expected
to have a Material Adverse Effect.
Each notice pursuant to this clause (e) shall be accompanied by a
statement of a Authorized Representative of such Guarantor setting
forth details of the occurrence referred to therein and stating what
action such Guarantor or any of its Subsidiaries propose to take with
respect thereto.
(f) Each of ABH and LCI shall, in the aggregate, continue to own, directly
or through one or more wholly-owned Subsidiaries, free of any Lien
other than Liens in favor of the Administrative Agent and the Lenders,
the same aggregate percentage of the capital stock of the Borrower as
set forth on Schedule 7 hereof, subject to adjustment as provided in
clause (k) in the definition of "Change in Control" in the Credit
Agreement.
(g) LCI covenants and agrees that
(i) the ratio of Group Operating Profit to Net Interest Payable in
respect of each 12 month period ending on the last day of each
financial year and financial half year of the Group shall not be
less than 2.5:1;
(ii) the ratio of Consolidated Net Borrowings to Consolidated Net
Worth shall not at any time exceed 1.5:1; and
(iii) Consolidated Net Worth shall at all times be greater than
L95,000,000,
and that the finance director of LCI for the time being shall certify
compliance or, as the case may be, non-compliance by LCI and the Group
with each of the provisions referred to in paragraphs (i), (ii) and
(iii) above at the same time as LCI shall furnish to the
Administrative Agent the financial statements referred to in
Section 12(a) provided that following receipt of any such certificate
the Administrative Agent may in its absolute discretion require LCI to
instruct its auditors for the time being to certify compliance or, as
the case may be, non-compliance by LCI and the Group with each of the
provisions referred to in paragraphs (i), (ii) and (iii) above and
further that in the event of any changes in any of the accounting
principles and bases upon which any of such financial
20
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statements are prepared, the financial covenants set out in this
sub-clause shall be adjusted or otherwise amended so as to ensure that
or, as nearly as possible that, following such changes the
obligations, limitations and restrictions contained in such covenants
shall, mutatis mutandis, have the same effect as if such changes had
not been made and that the Administrative Agent shall be provided with
all appropriate information and details that it may request in
connection with such adjustments or amendments.
(h) Each of ABH and LCI will cause each of its Subsidiaries to comply with
all laws, ordinances or governmental rules or regulations to which
each of them is subject, including, without limitation, Environmental
Laws, and will obtain and maintain in effect all licenses,
certificates, permits, franchises and other governmental
authorizations necessary to the ownership of their respective
properties or to the conduct of their respective businesses, in each
case to the extent necessary to ensure that non-compliance with such
laws, ordinances or governmental rules or regulations or failures to
obtain or maintain in effect such licenses, certificates, permits,
franchises and other governmental authorizations could not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
(i) Each Guarantor will and will cause each of its Subsidiaries to
maintain, with institutions it reasonably believes to be financially
sound insurers, insurance with respect to their respective properties
and businesses against such casualties and contingencies, of such
types, on such terms and in such amounts (including deductibles,
co-insurance and self-insurance if adequate reserves are maintained
with respect thereto) as is customary in the case of entities of
established reputations engaged in the same or similar business and
similarly situated.
(j) Each Guarantor will and will cause each of its Subsidiaries to
maintain and keep, or cause to be maintained and kept, their
respective properties in reasonably good repair, working order and
condition (other than ordinary wear and tear), so that the business
carried on in connection therewith may be properly conducted at all
times, provided that this Section shall not prevent a Guarantor from
discontinuing the operation and maintenance of or the liquidation of
any Dormant Subsidiary and shall not prevent a Guarantor or any
Subsidiary from discontinuing the operation and the maintenance of any
of its properties if such discontinuance is desirable in the conduct
of its business and such Guarantor has concluded that such
discontinuance could not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect.
(k) Each Guarantor will and will cause each of its Subsidiaries to file
all material tax returns required to be filed in any jurisdiction and
to pay and discharge all taxes, assessments, governmental charges, or
levies shown to be due and payable on such returns and all other taxes
imposed on them or any of their properties, assets,
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income or franchises, to the extent such taxes and assessments have
become due and payable and before they have become delinquent and all
claims for which sums have become due and payable that have or might
become a Lien on properties or assets of such Guarantor or any
Subsidiary, provided that neither a Guarantor nor any Subsidiary need
to pay any such tax or assessment or claims if (i) the amount,
applicability or validity thereof is contested by such Guarantor or
such Subsidiary on a timely basis in good faith in appropriate
proceedings and such Guarantor or a Subsidiary has established
adequate reserves therefor in accordance with GAAP on the books of
such Guarantor or such Subsidiary or (ii) the nonpayment of all such
taxes and assessments in the aggregate could not reasonably be
expected to have a Material Adverse Effect.
(l) Each Guarantor will at all times preserve and keep in full force and
effect its corporate or other existence. Except as allowed under the
Note Agreements, each of ABH and LCI will at all times preserve and
keep in full force and effect the corporate or other existence of each
of its Subsidiaries (other than Dormant Subsidiaries or unless merged
into such Guarantor or a Subsidiary) and all licenses, consents,
certificates and authorizations of such Guarantor and its Subsidiaries
unless, in the good faith judgment of such Guarantor, the termination
of or failure to preserve and keep in full force and effect such
corporate or other existence, licenses, consents, certificates and
authorizations could not, individually or in the aggregate, have a
Material Adverse Effect.
(m) Each Guarantor will, and will cause each of its Subsidiaries to, keep
proper books of record and account in accordance with GAAP as applied
in the jurisdiction of its incorporation as such Guarantor may deem
appropriate from time to time.
(n) Neither ABH or LCI nor any Subsidiary will engage in any business if,
as a result, the general nature of the business, taken on a
consolidated basis, which would then be engaged in by such Guarantor
and its Subsidiaries would be materially changed from the general
nature of the business engaged in by such Guarantor and its
Subsidiaries as of the date hereof.
(o) Promptly upon the determination that any Subsidiary of LCI has become
a Material Subsidiary, LCI shall cause such Subsidiary to execute and
deliver a joinder agreement for the Subsidiary Guaranty pursuant to
which such Subsidiary shall become a party thereto and Subsidiary
Guarantor thereunder.
(p) The Trust covenants and agrees that the Trust will maintain a minimum
fair market value of assets less liabilities of $100,000,000.
13. Consequences of Specified Events. If at any time prior to the indefeasible
payment and performance of the Guaranteed Obligations (each of the
following, a "Specified Event"),
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(a) LCI shall at any time fail to comply with the covenants set forth in
Sections 12(f), 12(g), 12(o) or 14 hereof and to the extent such
non-compliance is capable of being cured, such non-compliance shall
not have been cured within twenty-five (25) days; or
(b) any borrowed money for a sum in excess of L2,500,000 or the
equivalent thereof in any other currency of LCI or any Material
Subsidiary shall by reason of breach or default become due and payable
prior to its stated maturity or due date therefor or if any such
borrowed money is not paid at the maturity thereof or due date
therefor (or within any originally stated applicable grace period
therefor) or, if payable on demand, is not paid on demand; or
(c) LCI or any Material Subsidiary becomes insolvent or applies for or
consents to or suffers the appointment of a liquidator, receiver,
administrative receiver, administrator, guardian, encumbrancer,
trustee in bankruptcy or similar official of the whole or any
substantial part of its respective assets, business, property,
revenues or undertaking (other than in any of such cases (except for
the appointment of any administrator) for the purposes of a solvent
reconstruction or amalgamation the terms of which have previously been
approved by the Required Lenders) LCI or any Material Subsidiary takes
any proceedings under any law for adjustment, deferment or
rescheduling of its Indebtedness or any part thereof or makes or
enters or any proposal is made to make or enter into a general
assignment or arrangement (including, without limitation, any
voluntary arrangement under part I of the Insolvency Act 1986) or
composition with or for the benefit of its creditors or a moratorium
shall be declared on any of its Indebtedness or any part thereof or
any creditor of LCI or any Material Subsidiary exercises a contractual
right to take over the financial management of LCI or any Material
Subsidiary or LCI or any Material Subsidiary is deemed or shall become
unable to pay its debts as defined in Section 123 Insolvency Act 1986
or LCI or any Material Subsidiary fails generally to pay its debts as
and when they fall due or if the equivalent of any of the foregoing
shall occur in relation to LCI or any Material Subsidiary under the
laws of any jurisdiction to which it or any of its rights, property or
assets are subject; or
(d) a petition is presented (but only if such petition remains
undischarged 90 days after presentation thereof) or a meeting is
convened or an order is made or resolution is passed for or other
action or proceedings or steps are taken with a view to the
appointment of an administrator, winding-up, liquidation or
dissolution of LCI or any Material Subsidiary or if the equivalent of
any of the foregoing shall occur in relation to LCI or any Material
Subsidiary under the laws of any jurisdiction to which it or any of
its rights, property or assets are subject (other than in any of such
cases (except for the appointment of any administrator) for the
purposes of the winding up of a dormant member of the Group or a
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solvent reconstruction or amalgamation, in each case the terms of
which have previously been approved by the Required Lenders), or LCI
or any Material Subsidiary stops or threatens to stop payments
generally or ceases or threatens to cease to carry on its business or
a substantial part thereof or LCI or any Material Subsidiary merges,
consolidates or amalgamates with or into any other company,
corporation or entity in a transaction not otherwise permitted under
the Facilities Agreement; or
(e) a distress, execution or other legal process is levied against any of
the assets of LCI or any Material Subsidiary and is not discharged or
paid out within 90 days, except where such distress, execution or
other legal process is in the reasonable opinion of the Required
Lenders being contested in good faith by LCI or the relevant Material
Subsidiary or any analogous proceedings shall be commenced against LCI
or any Material Subsidiary or its assets under the laws of any other
jurisdiction; or
(f) an encumbrancer takes possession or a receiver or an administrative
receiver is appointed of the whole or any substantial part of the
assets or undertaking of LCI or any Material Subsidiary or any
analogous action shall be taken against LCI or any Material Subsidiary
or its assets or undertaking under the laws of any jurisdiction;
then, not later than five (5) days after such Specified Event, at the
option of the Required Lenders, the provisions of Section 17 shall apply.
14. Negative Covenants. At all times prior to indefeasible payment and
performance of the Guaranteed Obligations by the Guarantors hereunder,
(a) Each of ABH and LCI will not, and will not permit any of its
Subsidiaries to, directly or indirectly create, incur, assume or
permit to exist (upon the happening of a contingency or otherwise) any
Lien on or with respect to any property or asset except:
(i) Liens securing Existing Senior Debt;
(ii) any Lien arising by operation of law which secures amounts not
more than 45 days overdue or, if so overdue, are being contested
on a timely basis in good faith and in appropriate proceedings;
(iii) any Lien imposed on a Guarantor or any of its Subsidiaries in
relation to its purchase of goods, products or supplies in the
ordinary course of business;
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(iv) any rights of set-off in the normal course of trading or of
any bank or financial institution or combination of accounts
arising in favor of such bank or financial institution as a
result of the day-to-day operation of banking arrangements,
including without limitation, rights of set-off granted to
such bank or financial institution in respect of the issuance
of letters of credit, or as a result of any currency or
interest rate hedging operations carried out in the ordinary
course of business, in each case, provided that there is no
agreement to confer a security interest;
(v) statutory Liens of landlords, Liens over goods or documents of
title arising in the ordinary course of documentary credit
transactions and Liens of carriers, warehousemen, mechanics,
materialmen and other similar Liens, in each case, incurred in
the ordinary course of business;
(vi) Liens for taxes, assessments or other governmental charges
which are not yet due and payable or the payment of which is
not at the time required by Note Agreements;
(vii) Liens incurred or deposits made in the ordinary course of
business (A) in connection with workers' compensation,
unemployment insurance and other types of social security or
retirement benefits, or (B) to secure (or to obtain letters
of credit that secure) the performance of tenders, statutory
obligations, surety bonds, appeal bonds, bids, leases (other
than capital leases), performance bonds, purchase,
construction or sales contracts and other similar
obligations, in each case not incurred or made in connection
with the borrowing of money, the obtaining of advances or
credit or the payment of the deferred purchase price of
property;
(viii) leases or subleases granted to others, easements,
rights-of-way, restrictions and other similar charges or
encumbrances, in each case incidental to, and not
interfering with, the ordinary conduct of business of a
Guarantor and its Subsidiaries, provided that such Liens do
not, in the aggregate, materially detract from the value of
such property;
(ix) any Lien renewing, extending or refunding any Lien permitted
by clause (i), provided that (A) the principal amount of
Indebtedness secured by such Lien immediately prior to such
extension, renewal or refunding is not increased or the
maturity thereof reduced, (B) such Lien is not extended to any
other property and (C) immediately after such extension,
renewal or refunding no Specified Event would exist;
(x) any Lien securing the obligations of LCI under the Credit
Facility and the obligations of any Subsidiary Guarantor under
any Subsidiary Guarantee;
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(xi) any Lien not otherwise permitted by clauses (i) through (x)
above, provided that on the date any Indebtedness secured by
any such Lien, is created, incurred, assumed or guaranteed by
such Guarantor or any Subsidiary, and immediately after giving
effect thereto and to the concurrent retirement of any other
Indebtedness, the sum of (A) the aggregate principal amount of
all Indebtedness secured by Liens pursuant to this clause (xi)
plus (B) all unsecured Indebtedness of such Guarantor and its
Subsidiaries (excluding any unsecured Existing Senior Debt)
that is senior in any respect in right of payment to the
obligations of such Guarantor hereunder, does not exceed 25%
of the Consolidated Tangible Assets of such Guarantor as of
such date; and
(xii) any Lien set forth on Schedule 3, in the case of ABH.
(b) Each of ABH and LCI will not, and will not permit any of its
Subsidiaries to, directly or indirectly create, incur, assume or
suffer to exist any secured or unsecured Indebtedness (excluding (A)
any Indebtedness secured by Liens pursuant to clauses (i) through (x)
of Section 14(a) hereof and (B) any unsecured Existing Senior Debt
but including an Indebtedness secured by Liens pursuant to clause
(xi) of Section 14(a) hereof) if the aggregate amount of all such
Indebtedness described in this clause (b) would exceed 25% of the
Consolidated Tangible Assets of such Guarantor as of such date.
(c) In the case of ABH only, declare, pay or make any dividend or
distribution (in cash, property or obligations) on any shares of any
class of interests (now or hereafter outstanding) of such Sponsor or
on any warrants, options or other rights with respect to any class of
interests (now or hereafter outstanding) of such Sponsor (other than
dividends or distributions payable in its common interests or warrants
to purchase its common interests or splitups or reclassifications of
its interests into additional or other interests) or apply, or permit
any of its Subsidiaries to apply, any of its funds, property or assets
to the purchase, redemption, sinking fund or other retirement of, or
agree or permit any of its Subsidiaries to purchase or redeem, any
shares of any class of interests (now or hereafter outstanding) of
such Sponsor, or warrants, options or other rights with respect to any
shares of any class of interests (now or hereafter outstanding) of
such Sponsor.
15. Payments Free and Clear of Taxes, etc. Each Guarantor hereby agrees that:
(a) All payments by such Guarantor hereunder to the Borrower or to a
Lender shall be made free and clear of and without deduction for any
present or future income, excise, stamp or franchise taxes and other
taxes, fees, duties, withholdings or other charges of any nature
whatsoever imposed by any taxing authority, but
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excluding franchise taxes and taxes imposed on or measured by any
Lender's net income or receipts (such non-excluded items being called
"Taxes"). In the event that any withholding or deduction from any
payment to be made by a Guarantor hereunder is required in respect of
any Taxes pursuant to any applicable law, rule or regulation, then
such Guarantor will
(i) pay directly to the relevant authority the full amount required
to be so withheld or deducted;
(ii) promptly forward to the Borrower or such Lender an official
receipt or other documentation satisfactory to the Borrower or
such Lender evidencing such payment to such authority; and
(iii) pay to the Borrower or such Lender such additional amount or
amounts ("Additional Amounts") as is necessary to ensure
that the net amount actually received by the Borrower or
such Lender will equal the full amount the Borrower or such
Lender would have received had no such withholding or
deduction been required.
Moreover, if any Taxes are directly asserted against the Borrower or
any such Lender with respect to any payment received by the Borrower
or such Lender hereunder, the Borrower or such Lender may pay such
Taxes and the Guarantor will promptly pay such Additional Amounts
(including any penalties, interest or expenses ) as is necessary in
order that the net amount received by the Borrower or such Lender
after the payment of such Taxes (including any Taxes on such
Additional Amounts) shall equal the amount the Borrower or such Lender
would have received had not such Taxes been asserted.
Upon the request of any Guarantor, each Lender that is organized under
the laws of a jurisdiction other than the United States or a State
thereof (for purposes of this paragraph (k), a "Non-U.S. Lender")
shall, prior to the date on which any payment is made hereunder (or in
the case of a Lender that becomes a party to the Credit Agreement
pursuant to Section 4.11 of the Credit Agreement or any Assignee
Lender, before it becomes a party hereto) (i) execute and deliver to
each Guarantor and the Administrative Agent one or more (as the
Guarantors or the Administrative Agent may reasonably request) United
States Internal Revenue Service Forms 4224 or Forms 1001 or such other
forms or documents (or successor forms or documents), appropriately
completed, certifying in each case that such Lender or Assignee Lender
is entitled to receive payments under this Completion Guaranty without
deduction or withholding of any United States federal income taxes,
and an applicable Internal Revenue Service Form W-8 or Form W-9 or
successor applicable form (if required by law), as the case may be, to
establish an exemption from United States backup withholding tax or
(ii) if
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such Non-U.S. Lender is not a "bank" or other person described in
Section 881 (c) (3) of the Code and cannot deliver either Form 4224 or
Form 1001 pursuant to clause (a) above, execute and deliver to each
Guarantor and the Administrative Agent one or more (as the Guarantors
or the Administrative Agent may reasonably request) copies of the Tax
Certificate, Form W-8 (or any successor form) and any other
certificate or statement of exemption required under the Code or
Treasury Regulations issued thereunder, appropriately completed,
certifying that such Lender or Assignee Lender is entitled to receive
payments under this Completion Guaranty without deduction or
withholding of United States federal income tax and establishing an
exemption from United States backup withholding tax. All Lenders other
than Non-U.S. Lenders shall, prior to the date on which any payment is
made hereunder (or in the case of a Lender that becomes a party to the
Credit Agreement pursuant to Section 4.11 of the Credit Agreement or
is an Assignee Lender, before such Lender becomes a party hereto)
execute and deliver to the Borrower and the Administrative Agent one
or more copies (as the Borrower or Administrative Agent may reasonably
request) of United States Internal Revenue Form W-9 or successor
applicable form (if required by law), as the case may be, to establish
exemption from United States backup withholding tax.
Each Lender which undertakes to deliver to the Guarantors or the
Administrative Agent a Tax Certificate, a Form 4224, Form 1001, Form
W-8 or Form W-9 pursuant to the preceding paragraph shall further
undertake to deliver to the Guarantors and the Administrative Agent
two further copies of said Tax Certificate, Form 4224, Form 1001, Form
W-8 or Form W-9 (if required by law), or successor applicable forms,
or other manner of certification, as the case may be, on or before the
date that such form expires or becomes obsolete or after the
occurrence of an event requiring a change in the most recent form
delivered by it to the Guarantors and the Administrative Agent, and
such extensions or renewals thereof as may be reasonably requested by
the Guarantors or Administrative Agent, certifying in the case of a
Tax Certificate, Form 4224 or Form 1001 that such Lender is entitled
to receive payments under this Completion Guaranty without deduction
or withholding of any United States federal income taxes, unless in
any case an event (including any change in treaty, law or regulation)
has occurred prior to the date on which such delivery would otherwise
be required which renders all forms inapplicable or which would
prevent such Lender from duly completing and delivering any such form
with respect to it and such Lender advises the Guarantors and the
Administrative Agent that it is not capable of receiving payments
without any deduction or withholding of United States federal income
tax, and in the case of a Form W-8 or Form W-9, establishing an
exemption from backup withholding.
28
<PAGE>
(b) If the Guarantor fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Borrower or any Lender the
required receipts or other required documentary evidence, the
Guarantor shall indemnify the Borrower or such Lender for any
incremental Taxes, interest or penalties that may become payable by
the Borrower or such Lender as a result of any such failure.
(c) In the event that an Additional Amount is paid by a Guarantor for the
account of any Lender and such Lender is entitled to a refund of the
Tax (a "Tax Refund") to which such payment is attributable, then such
Lender shall take all reasonable steps which are necessary to obtain
such Tax Refund, including filings such forms, certificates,
documents, applications or returns as may be required to obtain such
Tax Refund. If such Lender subsequently receives such a Tax Refund,
and such Lender is readily able to identify the Tax Refund as being
attributable to the Tax with respect to which the Additional Amount
was made, then such Lender shall reimburse such Guarantor such amount
as such Lender shall determine acting in good faith to be the
proportion of the Tax Refund, together with any interest received
thereon, attributable to such Additional Amount as will leave such
Lender after the reimbursement (including such interest) in no better
or worse position than it would have been if the Additional Amount had
not been required.
(d) Without prejudice to the survival of any other agreement of the
Guarantors hereunder, the agreements and obligations of the Guarantors
contained in this Section 15 shall survive the payment in full of the
principal of and interest on the Loans.
16. Judgment. Each Guarantor hereby agrees that:
(a) If, for the purposes of obtaining judgment in any court, it is
necessary to convert a sum due hereunder in United States Dollars into
another currency, such Guarantor agrees, to the fullest extent
permitted by law, that the rate of exchange used shall be that at
which in accordance with normal banking procedures the Administrative
Agent could purchase United States Dollars with such other currency on
the Business Day preceding that on which final judgment is given.
(b) The obligation of each Guarantor in respect of any sum due from it to
any Lender hereunder shall, notwithstanding any judgment in a currency
other than United States Dollars, be discharged only to the extent
that on the Business Day following receipt by such Lender of any sum
adjudged to be so due in such other currency such Lender may, in
accordance with normal banking procedures, purchase United States
Dollars with such other currency; in the event that the United States
Dollars so purchased are less that the sum originally due to such
Lender in United States Dollars, the Guarantor, as a separate
obligation and
29
<PAGE>
notwithstanding any such judgment, shall indemnify and hold harmless
such Lender and such holder against such loss, and if the United
States Dollars so purchased exceed the sum originally due to such
Lender in United States Dollars, such Lender shall remit to such
Guarantor such excess.
17. Breaches by Any Guarantor. If, at any time prior to the indefeasible
payment and performance of the Guaranteed Obligations by the Guarantors
hereunder, any of the Guarantors breaches the Guaranteed Obligations (after
the expiration of applicable grace, notice and/or cure periods), then, at
the option of the Required Lenders, an Event of Default shall exist under
this Completion Guaranty and the other Loan Documents and the Lenders,
without any further notice to any of the Guarantors or any other Person,
shall be entitled to exercise all rights and remedies available hereunder,
under the other Loan Documents and at law and equity; provided, however,
the Lenders may, at their option, commence collection proceedings against
one or more of the Guarantors without declaring an Event of Default under
the other Loan Documents.
18. Miscellaneous Provisions.
(a) This Completion Guaranty is a Loan Document executed pursuant to the
Credit Agreement and shall (unless otherwise expressly indicated
herein) be construed, administered and applied in accordance with the
terms and provisions thereof.
(b) This Completion Guaranty shall be binding upon the Guarantors and
their permitted successors, transferees and assigns and shall inure to
the benefit of and be enforceable by the Administrative Agent and each
Lender and their respective successors, transferees and assigns;
provided, however, that the Guarantors may not assign any of their
Guaranteed Obligations hereunder without the prior written consent of
the Required Lenders.
(c) No amendment to or waiver of any provision of this Completion
Guaranty, nor consent to any departure by any Guarantor herefrom,
shall in any event be effective unless the same shall be in writing
and signed by the Administrative Agent, and then such waiver or
consent shall be effective only in the specific instance and for the
specific purpose for which given.
(d) All notices and other communications provided to any party hereto
under this Completion Guaranty shall be in writing and addressed,
delivered or transmitted to such party at its address or facsimile
number set forth below or at such other address or facsimile number as
may be designated by such party in a notice to the other parties. All
such notices and communications shall be deemed to have been properly
given if (x) hand delivered with receipt acknowledged by the
recipient; (y) if mailed, upon the fifth Business Day after the date
on which it is deposited in registered or certified mail, postage
prepaid, return receipt requested or (z) if
30
<PAGE>
by Federal Express or other nationally-recognized express courier
service with instructions to deliver on the following Business Day, on
the next Business Day after delivery to such express courier service.
Notices and other communications may also be properly given by
facsimile but shall be deemed to be received upon automatic facsimile
confirmation of receipt thereof by the intended recipient machine
therefor with the original of such notice or communication to be given
in the manner provided in the second sentence of this Section;
provided, however, that the failure to deliver a copy in accordance
with the second sentence of this paragraph (d) shall not invalidate
the effectiveness of such facsimile notice. The address information
for the parties is set forth below:
<TABLE>
<S> <C>
If to the Administrative Agent: The Bank of Nova Scotia
580 California Street, 21st Floor
San Francisco, CA 94104
Attn: Alan W. Pendergast
Telephone No.: (415) 986-1100
Facsimile No.: (415) 397-0791
If to the Trust: c/o Aladdin Holdings
280 Park Avenue
38th Floor
New York, New York 10017
Attn: Ronald Dictrow
Telephone No.: (212) 661-0700
Facsimile No.: (212) 661-0844
If to ABH: Aladdin Bazaar Holdings, LLC
831 Pilot Road
Las Vegas, Nevada 89119
Attn: Jack Sommer
Telephone No.: (702) 736-7114
Facsimile No.: (702) 736-7107
If to LCI: London Clubs International, plc
10 Brick Street
London W1Y 8HO, England
Attn: Linda M. Lillis
Telephone No.: 011-44-171-518-0000
Facsimile No.: 011-44-171-493-6981
31
<PAGE>
with a copy to: Ohrenstein & Brown, LLP
230 Park Avenue
New York, New York 10169
Attn: Peter J. Kiernan, Esq.
Telephone No.: (212)- 682-4500
Facsimile No.: (212)- 557-0910
and: Lionel, Sawyer & Collins
300 South 4th Street
Suite 1700
Las Vegas, Nevada 89101
Attn: Greg Giordano, Esq.
Telephone No.: (702)-383-8888
Facsimile No.: (702)-383-8845
</TABLE>
(e) No failure on the part of the Administrative Agent or any Lender to
exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise
of any right hereunder preclude any other or further exercise thereof
or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
(f) Section captions used in this Completion Guaranty are for convenience
of reference only, and shall not affect the construction of this
Completion Guaranty.
(g) Wherever possible each provision of this Completion Guaranty shall be
interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Completion Guaranty shall
be prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining
provisions of this Completion Guaranty.
(h) THIS COMPLETION GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK. THIS
COMPLETION GUARANTY AND THE OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE
UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT
MATTER HEREOF AND SUPERSEDE ANY PRIOR COMPLETION GUARANTIES, WRITTEN
OR ORAL, WITH RESPECT HERETO.
(i) ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS COMPLETION GUARANTY, OR
32
<PAGE>
ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL
OR WRITTEN) OR ACTIONS OF THE ADMINISTRATIVE AGENT, THE LENDERS OR THE
GUARANTORS SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS
OF THE STATE OF NEW YORK IN THE CITY OF NEW YORK OR IN THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED,
HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY PROPERTY MAY BE
BROUGHT, AT THE ADMINISTRATIVE AGENT'S OPTION, IN THE COURTS OF ANY
JURISDICTION WHERE SUCH PROPERTY MAY BE FOUND. THE GUARANTORS HEREBY
EXPRESSLY AND IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE COURTS OF
THE STATE OF NEW YORK IN THE CITY OF NEW YORK AND OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE
OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREE TO BE
BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH
LITIGATION. THE GUARANTORS HEREBY IRREVOCABLY APPOINT CT CORPORATION
SYSTEM (THE "PROCESS AGENT"), WITH AN OFFICE ON THE DATE HEREOF AT
1633 BROADWAY, NEW YORK, NEW YORK 10019, UNITED STATES, AS THEIR AGENT
TO RECEIVE, ON THE GUARANTORS' BEHALF AND ON BEHALF OF THE GUARANTORS'
PROPERTY, SERVICE OF COPIES OF THE SUMMONS AND COMPLAINT AND ANY OTHER
PROCESS WHICH MAY BE SERVED IN ANY SUCH ACTION OR PROCEEDING. SUCH
SERVICE MAY BE MADE BY MAILING OR DELIVERING A COPY OF SUCH PROCESS TO
THE GUARANTORS IN CARE OF THE PROCESS AGENT AT THE PROCESS AGENT'S
ABOVE ADDRESS, AND THE GUARANTORS HEREBY IRREVOCABLY AUTHORIZE AND
DIRECT THE PROCESS AGENT TO ACCEPT SUCH SERVICE ON THEIR BEHALF. AS
AN ALTERNATIVE METHOD OF SERVICE, THE GUARANTORS FURTHER IRREVOCABLY
CONSENT TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID,
OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. THE
GUARANTORS HEREBY EXPRESSLY AND IRREVOCABLY WAIVE, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH THEY MAY HAVE OR
HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION
BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY
SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE
EXTENT THAT THE GUARANTORS HAVE OR HEREAFTER MAY ACQUIRE ANY
33
<PAGE>
IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS
(WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO
THEMSELVES OR THEIR PROPERTY, THE GUARANTORS HEREBY IRREVOCABLY WAIVE
SUCH IMMUNITY IN RESPECT OF THE GUARANTEED OBLIGATIONS UNDER THIS
COMPLETION GUARANTY AND THE OTHER LOAN DOCUMENTS.
(j) THE GUARANTORS HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION
WITH, THIS COMPLETION GUARANTY, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE
ADMINISTRATIVE AGENT OR THE LENDERS OR THE GUARANTORS. THE GUARANTORS
ACKNOWLEDGE AND AGREE THAT THEY HAVE RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE LENDERS ENTERING INTO THE CREDIT AGREEMENT.
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<PAGE>
IN WITNESS WHEREOF, the Guarantors have caused this Completion Guaranty to
be duly executed and delivered by their officers thereunto duly authorized as of
the date first above written.
ALADDIN BAZAAR HOLDINGS, LLC
By:
--------------------------
Title:
Address:
-----------------------
--------------------------------
Attention:
----------------------
Telecopy:
----------------------
THE TRUST UNDER ARTICLE SIXTH UNDER
THE WILL OF SIGMUND SOMMER
By:
---------------------------
Title: Trustee
Address:
----------------------
--------------------------------
Attention:
----------------------
Telecopy:
----------------------
By:
---------------------------
Title: Trustee
Address:
----------------------
--------------------------------
Attention:
-----------------------
Telecopy:
-----------------------
LONDON CLUBS INTERNATIONAL PLC
By:
-----------------------------
Title:
Address: 10 Brick Street
London W1Y 8HQ
England
Attention:
-------------------------
35
<PAGE>
Telecopy:
-------------------------
36
<PAGE>
SCHEDULE 1
Additional Defined Terms
"Cash and Cash Equivalents" means:
(a) cash in hand or at a bank and beneficially owned by LCI or a
Subsidiary of LCI;
(b) Sterling or Dollar denominated commercial paper maturing not more
than nine months from the date of issue and rated A-1 or better by Standard
& Poor's Corporation or P-1 or better by Moody's Investors Service, Inc.;
(c) any deposit with, or acceptance maturing not more than one year
after issue, accepted by, an authorized institution or an exempted
institution within the meaning of the Banking Act 1987 which has a combined
capital and surplus and undistributable profits of not less than
L100,000,000 or by any bank, either of which shall have a long-term debt
rating of A- or better by Standard & Poor's Corporation or A3 or better by
Moody's Investors Service, Inc.;
(d) Sterling or Dollar denominated debt securities having not more
than one year until final maturity and listed on a recognized stock
exchange or in respect of which there is an active trading market in London
and rated at least Aa by Moody's Investors Service, Inc. or at least AA by
Standard and Poor's Corporation;
(e) direct obligations of the United States of America or any agency
or instrumentality of the United States of America, the payment or
guarantee of which constitutes a full faith and credit obligation of the
United States of America, in each case maturing twelve months or less from
the date of acquisition thereof;
(f) gilt-edge securities issued directly, or unconditionally
guaranteed, by the United Kingdom Treasury, in each case maturing twelve
months or less from the date of acquisition thereof, legally and
beneficially owned, free of Liens and freely accessible by LCI or any
Subsidiary; or
(g) short-tem liquid debt securities which for the time being are
rated at least AAA by Standard & Poor's Corporation or an equivalent rating
by any other reputable, rating agency.
"Consolidated Net Borrowings" means the aggregate outstanding
principal amount of Indebtedness of the Group less Cash and Cash Equivalents.
<PAGE>
"Consolidated Net Worth" means, the aggregate of the amounts paid-up
or credited as paid-up on LCI's issued share capital and the amount of the
consolidated capital and revenue reserves of the Group (including, without
limitation, any share premium account, merger reserve, capital redemption
reserve, revaluation reserve and retained earnings) and any credit balance on
LCI's consolidated profit and loss account all as shown by the latest
consolidated financial statements of LCI delivered or to be delivered pursuant
to this Completion Guaranty from time to time but after:
(i) deducting any debit balance on such consolidated profit and loss
account;
(ii) deducting the net book value of all assets, after deducting any
reserves applicable thereto, which would be treated as intangible
under GAAP (excluding amounts attributable to acquisition
goodwill, trademarks, trade names, service marks, brand names,
copyrights, patents and similar property);
(iii) deducting any amounts distributed or proposed to be distributed
(other than to LCI or any other member of the Group) out of the
profits accrued prior to the date of such financial statements to
the extent that such distribution is not provided for therein;
(iv) deducting all amounts attributable to minority interests, if any,
in Subsidiaries of LCI;
(v) excluding any sums set aside or otherwise reserved or provided
for taxation;
(vi) adding back any diminution due to the writing off or amortization
of acquisition goodwill or the debiting of acquisition goodwill
to any reserve; and
(vii) making such adjustments to reflect any variations which shall
have occurred since the date of such financial statements:
(a) in the amounts paid up or credited as paid up on the issued
share capital of LCI and the consolidated capital and
revenue reserves of the Group;
(b) to reflect any changes in generally accepted accounting
principles and bases and the application of standards and
practices since then as may be appropriate in the opinion of
the auditors for the time being of LCI; and
2
<PAGE>
(c) in the interest of LCI in any other member of the Group.
"Group" means LCI and its subsidiaries.
"Guaranty" means, with respect to any Person, any obligation (except
the endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
indebtedness, dividend or other obligation of any other Person in any manner,
whether directly or indirectly, including (without limitation) obligations
incurred through an agreement, contingent or otherwise, by such Person:
(a) to purchase such indebtedness or obligation or any property
constituting security therefor;
(b) to advance or supply funds (i) for the purchase or payment of
such indebtedness or obligation, or (ii) to maintain any working capital or
other balance sheet condition or any income statement condition of any
other Person or otherwise to advance or make available funds for the
purchase or payment of such indebtedness or obligation,
(c) to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such indebtedness or
obligation of the ability of any other Person to make payment of the
indebtedness or obligation; or
(d) otherwise to assure the owner of such indebtedness or obligation
against loss in respect thereof;
provided that, the obligations of LCI under the Keep-Well Agreement to pay the
Accelerated Payment Amount shall be treated at any time as a Guaranty of
Indebtedness of the Borrower in an amount equal to 25% of the Accelerated
Payment Amount at such time. In any computation of the indebtedness or other
liabilities of the obligor under any Guaranty, the indebtedness or other
obligations that are the subject of such Guaranty shall be assumed to be direct
obligations of such obligor.
"Group Operating Profit" means, in respect of any period of the Group,
(a) the consolidated profit of the Group for such period before crediting or
deducting amounts attributable to extraordinary and exceptional items, all as
determined in accordance with GAAP, plus (to the extent deducted in determining
such consolidated profits), (b) all provisions for Taxes and (c) Net Interest
Payable; in each case as determined from the relevant consolidated financial
statements of LCI delivered or to be delivered pursuant to this Completion
Guaranty for such period.
"Indebtedness" with respect to any Person means, at any time, without
duplication,
3
<PAGE>
(a) its liabilities for borrowed money (excluding accounts payable in
the ordinary course of business) and its redemption obligations upon and
following the date of redemption in respect of mandatorily redeemable
Preferred Stock;
(b) its liabilities pursuant to any note purchase facility or the
issue of bonds, notes, debentures, commercial paper, loan stock or similar
instruments;
(c) all actual (as opposed to contingent) reimbursement obligations
(other than accounts payable in the ordinary course of business) in respect
of any acceptance or documentary credit facilities;
(d) its liabilities for the deferred purchase price of property,
assets or services acquired by such Person (excluding accounts payable
arising in the ordinary course of business but including all liabilities
created or arising under any conditional sale or other title retention
agreement with respect to any such property, assets or services);
(e) all liabilities appearing on its balance sheet in accordance with
GAAP in respect of Capital Leases;
(f) its liabilities in respect of the principal amount of any
receivables sold or discounted to a third party to the extent of recourse
to such Person or any of its Subsidiaries;
(g) Swaps of such Person; and
(h) any Guaranty of such Person with respect to liabilities of a type
described in any of clauses (a) through (h) hereof.
Indebtedness of any Person shall include all obligations of such Person of the
character described in clauses (a) through (h) to the extent such Person remains
legally liable in respect thereof notwithstanding that any such obligation is
deemed to be extinguished under GAAP.
"Subsidiary" means, as to any particular parent corporation, any
corporation of which more than 50% (by number of votes) of the Voting Shares
shall be owned, directly or indirectly, by such parent corporation; provided,
however, that notwithstanding the foregoing, the term subsidiary shall, in any
event, include any company or legal entity which is a "subsidiary" as defined in
Section 736 of the Companies Act 1985, as amended by Section 144 of the
Companies Act 1989, or as detailed in analogous legislation.
"Swaps" means, with respect to any Person, payment obligations with
respect to interest rate swaps, currency swaps and similar obligations
obligating such Person to make payments, whether periodically or upon the
happening of a contingency. For the purposes of this Completion Guaranty, the
amount of the obligation under any Swap shall be the amount
4
<PAGE>
determined in respect thereof as of the end of the then most recently ended
fiscal quarter of such Person, based on the assumption that such Swap had
terminated at the end of such fiscal quarter, and in making such determination,
if any agreement relating to such Swap provides for the netting of amounts
payable by and to such Person thereunder or if any such agreement provides for
the simultaneous payment of amounts by and to such Person, then in each such
case, the amount of such obligation shall be the net amount so determined.
"Taxes" means all present or future taxes, levies, imposts, duties,
fees, assessments, deductions, withholdings or other governmental charges of any
nature whatsoever and any liabilities with respect thereto, including any
surcharge, penalties, additions to tax, fines or interest thereon, now or
hereafter imposed, levied, collected withheld or assessed by any jurisdiction or
by any political subdivision or taxing authority thereof or therein.
5
<PAGE>
SCHEDULE 2
MATERIAL SUBSIDIARIES
LONDON CLUBS HOLDINGS LIMITED
LES AMBASSADEURS CLUB LIMITED
RENDEZVOUS CLUB (LONDON) LIMITED
PALM BEACH CLUB LIMITED
SIX HAMILTON PLACE LIMITED
BURLINGTON STREET SERVICES LIMITED
ZEALCASTLE LIMITED
CORBY LEISURE RETAIL DEVELOPMENTS LIMITED
UNITLAW TRADING LIMITED
LONDON PARK TOWER CLUB LIMITED
PUBLICACE LIMITED
LOMASBOND PROPERTIES LIMITED
LONDON CLUBS (OVERSEAS) LIMITED
DECBURY LIMITED
GOLDEN NUGGET CLUB LIMITED
LONDON CLUBS MANAGEMENT LIMITED
THE SPORTSMAN CLUB LIMITED
RITZ CLUB (LONDON) LIMITED
<PAGE>
SCHEDULE 3-A
TAX LIABILITIES
With respect to the Trust, none other than potential tax liability that may
result from liabilities to which the Site is subject exceeding the tax basis of
the Site.
<PAGE>
SCHEDULE 3
SUBSIDIARIES
(other than Dormant Subsidiaries)
ABH's Subsidiaries
Name: Aladdin Bazaar, LLC
State of Organization: Delaware
ABH Ownership: 50% member
In connection with the development of the Mall Project by Aladdin Bazaar, LLC
("Aladdin Bazaar"), if a guaranty, letter of credit or other form of credit
enhancement is required to be obtained by the Trust or ABH in order to insure
Aladdin Bazaar or any of its members that the Hotel/Casino will be completed and
opened successfully, ABH will be permitted to convey up to 50% of its interest
in Aladdin Bazaar to CS First Boston or any other institutional investor and
pledge any of its remaining interest in Aladdin Bazaar to CS First Boston or to
such other institutional investor providing financing for the development of the
Mall Project. Furthermore, the Trust shall be entitled to pledge its membership
interest in ABH to either or both of CS First Boston or such other institutional
investor in connection with the financing of the Mall Project.
London Clubs' Subsidiaries
See attachment.
<PAGE>
SCHEDULE 4
LITIGATION
Aronow, et al. v. Sommer, et al., Index No. 112618/95 (New York Sup. Ct.)
Kanbar, et al. v. Aronow, et al., Index No. 600301/97 (New York Sup. Ct.)
Sommer, et al. v. PMEC Associates and Co., et al., No. 88 Civ. 2537 (S.D.N.Y.)
<PAGE>
SCHEDULE 5
LICENSES, PERMITS, ETC.
ABH
See attachment.
<PAGE>
SCHEDULE 6
EXISTING INDEBTEDNESS
Trust
None.
ABH and/or its Subsidiaries
$30,000,000 contingent liability (see Schedule 3)
London Clubs and/or its Subsidiaries
See attachment.
<PAGE>
SCHEDULE 7
OWNERSHIP OF BORROWER
Aladdin Bazaar Holdings, LLC
Aladdin Bazaar Holdings, LLC has no ownership interest in Borrower.
The Trust
The Trust owns an indirect interest in Borrower through its ownership interests
in the following entities:
- - The Trust owns a 95% membership interest in Aladdin Holdings, LLC (AHL).
- AHL owns a 98.7% membership interest in Sommer Enterprises, LLC
(Sommer Enterprises).
- Sommer Enterprises owns a 47% membership interest in Aladdin
Gaming Holdings, LLC (Holdings) and a 100% membership interest in
Aladdin Gaming Enterprises, Inc. (Enterprises). Enterprises owns
a 25% membership interest in Holdings.
- Holdings owns 100% of the common membership interest and
100% of the Series A Preferred membership interest in the
Borrower.
LCI
See chart attached hereto.
<PAGE>
Keep-Well Agreement
KEEP-WELL AGREEMENT
THIS KEEP-WELL AGREEMENT (this "Agreement"), dated as of February 26, 1998
is made by LONDON CLUBS INTERNATIONAL PLC, a company registered in England and
Wales under company number 2862479 ("LCI"), ALADDIN BAZAAR HOLDINGS, LLC, a
Nevada limited liability company ("ABH") and ALADDIN HOLDINGS, LLC, a Delaware
limited liability company ("AHL"; AHL, ABH and LCI are individually called a
"Sponsor" and collectively called the "Sponsors"), in favor of each of the
Administrative Agent and the Lenders and their respective successors,
transferees and assigns.
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of even date herewith
(together with all amendments and other modifications, if any, from time to time
thereafter made thereto, the "Credit Agreement"), among Aladdin Gaming, LLC, a
Nevada limited liability company (the "Borrower"), the various lending
institutions (individually a "Lender" and collectively the "Lenders") as are, or
may from time to time become, parties thereto and The Bank of Nova Scotia as
administrative agent (together with any successor(s) thereto in such capacity,
the "Administrative Agent") for the Lenders, Merrill Lynch Capital Corporation
as the syndication agent (together with any successor thereto in such capacity,
the "Syndication Agent") and CIBC Oppenheimer Corp. as the documentation agent
(together with any successor thereto in such capacity, the "Documentation
Agent") the Lenders have extended Commitments to make Loans to the Borrower and
to issue Letters of Credit for the account of the Borrower; and
WHEREAS, as a condition precedent to the effectiveness of the Credit
Agreement, the Sponsors are required to execute and deliver this Agreement and
certain subsidiaries of LCI (the "Subsidiary Guarantors") have agreed to fully
and unconditionally guarantee the payment of LCI's obligations under this
Agreement pursuant to a guaranty agreement of even date herewith (the
"Subsidiary Guaranty"); and
<PAGE>
WHEREAS, the Sponsors have duly authorized the execution, delivery and
performance of this Agreement and the Subsidiary Guarantors have duly authorized
the execution, delivery and performance of the Subsidiary Guaranty; and
WHEREAS, it is in the best interests of the Sponsors to execute this
Agreement and the Subsidiary Guarantors to execute the Subsidiary Guaranty
inasmuch as the Sponsors and the Subsidiary Guarantors will derive substantial
direct and indirect benefits from the Loans made to the Borrower by the Lenders
pursuant to the Credit Agreement and the Letters of Credit issued for the
account of the Borrower under the Credit Agreement;
NOW THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, and in order to induce the Lenders to make Loans to the
Borrower and to issue Letters of Credit for the account of the Borrower pursuant
to the Credit Agreement, the Sponsors agree, for the benefit of the
Administrative Agent, the Syndication Agent and each Lender, as follows:
1. Definitions. Terms defined in the Credit Agreement and not otherwise
defined in this Agreement shall have the meanings ascribed to them in the
Credit Agreement. For the purposes of Section 12(g) and Section 13 hereof,
the terms set forth on Schedule 2 hereto shall have the meanings ascribed
thereto on such Schedule. As used in this Agreement, the following terms
shall have the meanings respectively set forth after each:
"Accelerated Payment Amount" shall mean, as of any date, an amount equal
to the sum of (a) the product of (i) $7,500,000 times (ii) the number of
scheduled quarterly amortization payments remaining under the Credit
Agreement (which have not been paid by or on behalf of the Borrower) plus
(b) any accrued and unpaid amounts owed by the Sponsors under the
provisions of Sections 2 and 3 hereof; provided that at no time shall the
Accelerated Payment Amount exceed the lesser of (x) the outstanding
Obligations at such time of the Borrower under the Credit Agreement and
(y) $150,000,000 plus amounts owed under clause (b) above minus the
product of (A) $7,500,000 times (B) the number of complete calendar
quarters that have elapsed since the Keep-Well Reduction Date.
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"Bankruptcy Code" shall mean Title 11 of the United States Code as amended
from time to time.
"Cash Equity Contributions" shall mean cash contributions by the Sponsors
to the Borrower in exchange for preferred interests of Holdings.
"Consolidated Intangibles": at a particular date, all assets of a Sponsor
and its consolidated Subsidiaries, determined on a consolidated basis,
that would, in conformity with GAAP, be classified as intangible assets,
including, without limitation, unamortized debt discount and expense,
unamortized organization and reorganization expense, costs in excess of
the fair market value of acquired companies, patents, trade or service
marks, franchises, trade names, goodwill and, from and after June 30,
1997, the amount of all write-ups in the book value of assets resulting
from any revaluation thereof.
"Consolidated Tangible Assets": at a particular date, the amount equal to
(a) the amount which would be included as assets on the consolidated
balance sheet of a Sponsor and its consolidated Subsidiaries as at such
date in accordance with GAAP minus (b) Consolidated Intangibles.
"Dormant Subsidiary" means any Subsidiary of a Sponsor which has no
operating assets or property and conducts no business.
"Environmental Laws" means any and all statutes, laws, regulations,
ordinances, rules, judgments, orders, decrees, permits, concessions,
grants, franchises, licenses, agreements or governmental restrictions
relating to pollution and the protection of the environment or the release
of any materials into the environment, including but not limited to those
related to hazardous substances or wastes, air emissions and discharges to
waste or public systems.
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"Existing Senior Debt" shall mean all principal, premium (if any),
interest and other amounts owing from time to time under (i) the Note
Agreements and (ii) the Facilities Agreement, in either case as amended,
supplemented or refinanced, from time to time, provided that the aggregate
principal amount of the Note Agreements and the Facilities Agreement shall
not be greater than the sum of (A) the maximum aggregate principal amount
which could be outstanding under the Facilities Agreement and the Note
Agreements in accordance with their terms as at the date hereof plus (B)
25% of Consolidated Net Assets of LCI; provided further, that the
aggregate principal amount of the Existing Senior Debt in excess of the
maximum aggregate principal amount which could be outstanding under the
Facilities Agreement and the Note Agreements in accordance with their
terms as at the date hereof shall be excluded from the parenthetical
phrase of Section 14(b) hereof.
"Facilities Agreement" shall mean that certain (pound)65,000,000
Facilities Agreement (originally dated 24th May 1994 as amended and
restated) among, inter alia, LCI, various banks and National Westminster
PLC (the predecessor-in-interest to The Bank of Nova Scotia) as arranger
and agent, as in effect on the date hereof and as the same may be modified
by amendments that would not, in the aggregate, have the effect of making
LCI's obligations thereunder materially more onerous (it being understood
and agreed that any amendment, supplement or modification (i) that
increases the amount of the obligations of LCI thereunder, (ii) that would
permit the lenders thereunder to declare a default if LCI made any Cash
Equity Contribution required of the Sponsors hereunder or (iii) that would
permit the lenders thereunder to declare a default if LCI made net
payments (net of all reimbursements from the other Sponsors) of not more
than 25% of any Accelerated Payment Amount required of the Sponsors
hereunder, shall be deemed material).
"GAAP" shall mean the generally accepted accounting principles as in
effect from time to time in the United Kingdom with respect to LCI and in
the United States with respect to the other Sponsors, as the case may be.
"Insolvency Proceeding" shall mean any case or proceeding, voluntary or
involuntary, under the Bankruptcy Code, or any similar existing or future
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law of any jurisdiction, foreign, state or federal, relating to
bankruptcy, insolvency, reorganization or relief of debtors.
"Keep-Well Reduction Date" shall mean the date which is six calendar
quarters after the Conversion Date.
"Keep-Well Termination Date" shall mean the earliest of (i) the day on
which full and indefeasible payment of the Obligations of the Borrower
under the Credit Agreement has been made to reduce the Commitments of the
Lenders thereunder to $145,000,000 or less, (ii) the last day of the
period of six consecutive fiscal quarters from and after the Conversion
Date during which the Borrower shall have satisfied each of the financial
covenants set forth in the Credit Agreement (without giving effect to any
payments to or investments by the Sponsors in or for the benefit of the
Borrower), (iii) the date on which both of the following shall have been
satisfied: (a) construction of the Aladdin Hotel and Casino and renovation
of the Theatre has been completed in accordance with all terms of the
Credit Agreement and (b) the Commitments and the aggregate outstanding
principal amount of the Obligations under the Credit Agreement shall have
been reduced to an amount not in excess of the amount specified for such
date on Schedule 1 hereto, (iv) the date on which the Sponsors shall have
made full payment of the Accelerated Payment Amount described under
Section 4 below or (v) in the case of LCI only, the date on which it shall
have made full payment of the Accelerated Payment Amount described under
Section 13 below.
"LSE" means the London Stock Exchange Limited.
"Material" means material in relation to the business, operations,
affairs, financial condition, assets, properties, or prospects of a
Sponsor and its Subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on (a) the
business, operations, affairs, financial conditions, assets or properties
of a Sponsor and its Subsidiaries taken as a whole, or (b) the ability of
a Sponsor to perform its obligations under this Agreement or (c) the
validity or enforceability of this Agreement.
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"Material Subsidiary" shall mean each of the Subsidiaries of LCI that are
party to that certain Subsidiary Guaranty dated as of June 30, 1997
guaranteeing the obligations of LCI under the Note Agreements. Each
Material Subsidiary of LCI as of the date hereof is listed on Schedule 3
hereof.
"Minimum Fixed Charge Coverage Ratio" shall have the meaning ascribed
thereto in the Credit Agreement.
"Note Agreements" shall mean the several identical Note Purchase
Agreements dated as of June 30, 1997 among LCI and the purchasers named
therein relating to LCI's $50,000,000 aggregate principal amount of 7.74%
Guaranteed Senior Notes due 2004 and as the same may be modified by
amendments that would not, in the aggregate, have the effect of making
LCI's obligations thereunder materially more onerous (it being understood
and agreed that any amendment, supplement or modification (i) that
increases the amount of the obligations of LCI thereunder, (ii) that would
permit the lenders thereunder to declare a default if LCI made any Cash
Equity Contribution required of the Sponsors hereunder or (iii) that would
permit the lenders thereunder to declare a default if LCI made net
payments (net of all reimbursements from the other Sponsors) of not more
than 25% of any Accelerated Payment Amount required of the Sponsors
hereunder, shall be deemed material).
"Wholly-Owned Subsidiary"shall mean, at any time, any Subsidiary one
hundred percent (100%) of all of the equity interests (except directors'
qualifying shares) and voting interests of which are owned by any one or
more of the Sponsors and such Sponsor's Wholly-Owned Subsidiaries at such
time.
2. Keep-Well Agreement. From and after the Conversion Date through, but
terminating on, the Keep-Well Termination Date, whether before or after
the commencement of any Insolvency Proceeding, if the Borrower fails to
comply with the Minimum Fixed Charge Coverage Ratio specified therefor in
Section 7.2.4(e) of the Credit Agreement as of the end of any fiscal
quarter, the Sponsors shall make or cause to be made Cash Equity
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Contributions to the Borrower in an amount which, when added to the
Borrower's EBITDA for the four quarter period ending on the last day of
such fiscal quarter, will result in the Borrower being in compliance with
the Minimum Fixed Charge Coverage Ratio. The Sponsors shall make the Cash
Equity Contributions required hereby not later than ten (10) Business Days
following the earlier of the date on which the Borrower delivers the
quarterly financial statements of the Borrower and its Subsidiaries to the
Administrative Agent pursuant to Section 7.1.1 of the Credit Agreement or
the date such statements are required to be delivered pursuant to said
Section.
Notwithstanding the foregoing provisions of this Section 2, in no event
shall the aggregate Cash Equity Contributions required to be made by the
Sponsors under this Section 2 in any fiscal year of the Borrower exceed
$30,000,000. The $30,000,000 annual limitation on Cash Equity Contributions
shall not apply to, or in any way limit, any obligation of the Sponsors to pay
the Accelerated Payment Amount.
Cash Equity Contributions made under the Completion Guaranty will not
count for purposes of this Agreement, and vice versa.
The obligations of the Sponsors under this Section 2 and under Sections 3
and 4 below are joint and several.
3. Payment Provisions. All payments required to be made by the Sponsors
pursuant to Section 2 shall be made subject to the following terms:
(a) The Sponsors shall make cash payments in the amounts calculated
under Section 2 into an interest-bearing deposit account designated
and controlled exclusively by the Administrative Agent (the "Deposit
Account") in which the Administrative Agent is hereby granted a
security interest for the benefit of the Lenders. The Deposit
Account is intended to be a "deposit account" for the purposes of
Nevada Revised Statutes ("NRS") 40.430.4(g) and Section 9301(g) of
the California Uniform Commercial Code. Such funds shall be held in
the Deposit Account as additional collateral for the Obligations
under the
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Credit Agreement and the other Loan Documents; provided that, if
requested by the Borrower, such funds (i) shall be applied to
payment of the Obligations and/or (ii) shall be applied, with the
approval of the Required Lenders (which shall not be unreasonably
withheld), to the payment of such other obligations of the Borrower
incurred in the ordinary course for the acquisition of goods or
services which have enhanced or maintained the value of the
collateral covered by the Loan Documents.
(b) The cash payments into the Deposit Account and the funds therein
shall be free and clear of any third party claims thereto, including
any claims by the Borrower as a third party beneficiary under this
Agreement. The Sponsors and the Administrative Agent on behalf of
the Lenders specifically agree that the Borrower is not an intended
third party beneficiary to this Agreement and that the Borrower nor
any other Person which is not party to this Agreement (other than
successors and assigns of the Lenders, the Administrative Agent, the
Documentation Agent and the Syndication Agent) has no rights under
this Agreement.
(c) If, notwithstanding Section 3(a) or 3(b) above, the Borrower asserts
(in an Insolvency Proceeding or otherwise) that it holds the right
under this Agreement to have Cash Equity Contributions made to it
directly or that funds in the Deposit Account deposited pursuant to
Section 3(a) are not collateral solely for the Obligations under the
Credit Agreement, then this Agreement shall automatically become a
continuing unconditional guaranty by the Sponsors of the full and
timely payment when due of the Obligations under the Credit
Agreement to the extent and in the amount of the (i) Cash Equity
Contributions that the Borrower asserts should have been or should
be paid to it directly or (ii) funds in the Deposit Account to the
extent that the Borrower asserts that such funds are not collateral
solely for the Obligations under the Credit Agreement, as the case
may be.
4. Payment Provisions in the Event of Acceleration. In the event that the
Obligations of the Borrower under the Credit Agreement shall be
accelerated
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pursuant to the provisions of Section 8.2 or 8.3 thereof, the Sponsors
guarantee and agree to pay the Accelerated Payment Amount to the
Administrative Agent for the benefit of the Lenders not later than forty
(40) days following the date of such acceleration. Subject to the
provisions of Section 10 hereof, upon the receipt by the Administrative
Agent of full and indefeasible payment of the Accelerated Payment Amount,
the obligations of the Sponsors under this Agreement shall terminate. The
Accelerated Payment Amount shall be applied by the Administrative Agent to
the payment of the Borrower's Obligations under the Credit Agreement.
5. Proof of Damages. If the Sponsors shall at any time or from time to time
fail to perform or comply with any of their obligations contained herein
and if for any reason the Lenders have failed to receive when due and
payable (whether at stated maturity, by acceleration, or otherwise) the
payment of all or any part of principal or interest or any other amount
payable by the Borrower under the Credit Agreement, then in each such case
(i) it shall be assumed conclusively without necessity of proof that such
failure by the Sponsors was the sole and direct cause of the Lenders
failing to receive such payment when due ( to the extent of the failure of
the Sponsors to perform their obligations contained herein) irrespective
of any other contributing or intervening cause whatsoever, and (ii) the
Sponsors further irrevocably waive to the fullest extent permitted by law
any right or defense the Sponsors may have to cause the Lenders to prove
the cause or amount of such damages or to mitigate the same.
6. Rights of the Administrative Agent. Each Sponsor authorizes the
Administrative Agent on behalf of the Lenders to perform any or all of the
following acts at any time in their sole discretion, all without notice to
the Sponsors and without affecting the Sponsors' obligations under this
Agreement:
(a) The Administrative Agent and the Lenders may alter any terms of the
Loan Documents to which the Sponsors are not a party, including
renewing, compromising, extending, enforcing or accelerating, or
otherwise changing the time for payment of, or increasing or
decreasing the rate of interest on, the Loans or any part of them or
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<PAGE>
increasing or decreasing the amount of the Loans or any other fees
payable under the Loan Documents.
(b) The Administrative Agent and the Lenders may take and hold security
for the Loans, the Letters of Credit and the Borrower's other
obligations under the Credit Agreement, the Guarantors' obligations
under the Completion Guaranty and this Agreement, accept additional
or substituted security for either, and subordinate, exchange,
enforce, waive, release, compromise, fail to perfect and sell or
otherwise dispose of any such security.
(c) The Administrative Agent and the Lenders may direct the order and
manner of any sale of all or any part of any security now or later
to be held for the Loans, the Letters of Credit, this Agreement or
any of the other Loan Documents, and may also bid at any such sale.
(d) The Administrative Agent and the Lenders may apply any payments or
recoveries from the Borrower, any Sponsor, any Guarantor or any
other source, and any proceeds of any security, to the Borrower's
obligations under the Loan Documents and/or the Guarantors'
obligations under the Completion Guaranty in such manner, order and
priority as they may elect, whether or not those obligations are
supported by this Agreement or secured at the time of the
application.
(e) The Administrative Agent and the Lenders may release the Borrower of
its liability for the Obligations under the Credit Agreement or any
portion thereof.
(f) The Administrative Agent and the Lenders may substitute, add or
release any one or more Guarantors or endorsers.
(g) In addition to the Obligations under the Credit Agreement, the
Administrative Agent and the Lenders may extend other credit to the
Borrower, its Affiliates and any of the Sponsors or their respective
Affiliates and may take and hold security for the credit so
extended, all without affecting the Sponsors' liability under this
Agreement.
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(h) The Administrative Agent and the Lenders may change the terms or
conditions of disbursement of the Loans or the issuance of the
Letters of Credit.
(i) The Administrative Agent and the Lenders may advance additional
funds to the Borrower for any purpose.
7. Agreement to be Absolute. The Sponsors expressly agree that for as long as
the Credit Agreement remains in effect or any of the Obligations under the
Credit Agreement remain outstanding, the Sponsors shall not be released
from their obligations hereunder by or because of:
(a) Any act or event which might otherwise discharge, reduce, limit or
modify the Sponsors' obligations under this Agreement;
(b) Any waiver, extension, modification, forbearance, delay or other act
or omission of the Administrative Agent or the Lenders, or any
failure to proceed promptly or otherwise as against the Borrower,
any Sponsor, any Guarantor or any security;
(c) Any action, omission or circumstance which might increase the
likelihood that the Sponsors may be called upon to perform under
this Agreement or which might affect the rights or remedies of the
Sponsors as against the Borrower or any Guarantor; or
(d) Any dealings occurring at any time between the Borrower, the
Guarantors, the Administrative Agent, the Syndication Agent, the
Documentation Agent or any Lender, whether relating to the Loans,
the Letters of Credit or otherwise.
The Sponsors hereby expressly waive and surrender any defense to their
liability under this Agreement based upon any of the foregoing acts,
omissions, agreements, waivers or matters. It is the purpose and intent of
this Agreement that the obligations of the Sponsors under it shall be
absolute and unconditional under any and all circumstances.
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8. Sponsors' Waivers. The Sponsors waive:
(a) All statutes of limitations as a defense to any action or proceeding
brought against the Sponsors by the Administrative Agent or any
Lender, to the fullest extent permitted by law;
(b) Any right they may have to require the Administrative Agent or the
Lenders to proceed against the Borrower or any of the Guarantors,
proceed against or exhaust any security held from the Borrower or
any of the Guarantors, or pursue any other remedy in their power to
pursue;
(c) Any defense based on any claim that the Sponsors' obligations exceed
or are more burdensome than those of the Borrower;
(d) Any defense based on: (i) any legal disability of the Borrower, (ii)
any release, discharge, modification, impairment or limitation of
the liability of the Borrower and/or the Guarantors under the Loan
Documents from any cause, whether consented to by the Administrative
Agent or any Lender or arising by operation of law or from any
Insolvency Proceeding, (iii) any rejection or disaffirmance of the
Loans or any security held for the Loans, in any Insolvency
Proceeding and (iv) the Sponsors' rights under NRS 104.3605, the
Sponsors specifically agreeing that this clause (iv) shall
constitute a waiver of discharge under NRS 104.3605;
(e) Any defense based on any action taken or omitted (other than gross
negligence or willful misconduct) by the Administrative Agent or any
Lender in any Insolvency Proceeding involving the Borrower or any of
the Guarantors, including any election to have a claim allowed as
being secured, partially secured or unsecured, any extension of
credit by the Administrative Agent or any Lender to the Borrower in
any Insolvency Proceeding, and the taking and holding by the
Administrative Agent or any Lender of any security for any such
extension of credit;
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(f) All presentments, demands for performance, notices of
nonperformance, protests, notices of protest, notices of dishonor,
notices of acceptance of this Agreement and of the existence,
creation, or incurring of new or additional indebtedness, and
demands and notices of every kind;
(g) Any defense based on or arising out of any defense that the Borrower
may have to the payment or performance of the Obligations under the
Credit Agreement or any portion of such Obligations; and
(h) Any defense or benefit based on NRS 40.430 and judicial decisions
relating thereto and NRS 40.451 et seq. and judicial decisions
relating thereto, the Sponsors agreeing that the waiver in this
paragraph (h) is intended to take advantage of the two (2) waivers
permitted by NRS 40.495 (1) and (2) to the maximum extent permitted.
9. Waivers of Subrogation and Other Rights.
(a) Upon the occurrence of any Event of Default, the Administrative
Agent in its sole discretion, without prior notice to or consent of
the Sponsors, may elect to: (i) foreclose either judicially or
nonjudicially against any real or personal property security for the
Obligations under the Loan Documents, (ii) accept a transfer of any
such security in lieu of foreclosure, (iii) compromise or adjust the
Loans or any part thereof or any of the Letters of Credit or make
any other accommodation with the Borrower or any Guarantor, or (iv)
exercise any other remedy against the Borrower, any Guarantor or any
security. No such action by the Administrative Agent or any Lender
shall release or limit the liability of the Sponsors, who shall
remain liable under this Agreement after the action, even if the
effect of the action is to deprive the Sponsors of any subrogation
rights, rights of indemnity, or other rights to collect
reimbursement from the Borrower for any sums paid to the
Administrative Agent or the Lenders, whether contractual or arising
by operation of law or otherwise. The Sponsors expressly waive any
defenses or benefits that may be derived from NRS Section 40.451, et
seq. and judicial decisions relating thereto, or comparable
provisions
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of Nevada law which are comparable to California Civil Procedure
ss.ss. 580a, 580b, 580d, or 726 or comparable provisions of the laws
of any other jurisdiction, and all other suretyship defenses they
otherwise might or would have under Nevada law or other applicable
law. The Sponsors expressly agree that under no circumstances shall
they be deemed to have any right, title, interest or claim in or to
any real or personal property to be held by the Administrative Agent
or any Lender or any third party after any foreclosure or transfer
in lieu of foreclosure of any security for the Obligations under the
Credit Agreement.
(b) Regardless of whether the Sponsors may have made any payments to the
Administrative Agent or any Lender, the Sponsors hereby waive: (i)
all rights of subrogation, all rights of indemnity, and any other
rights to collect reimbursement from the Borrower for any sums paid
to the Administrative Agent or any Lender, whether contractual or
arising by operation of law (including the Bankruptcy Code) or
otherwise, (ii) all rights to enforce any remedy that the
Administrative Agent or any Lender may have against the Borrower or
any other Person, and (iii) all rights to participate in any
security now or later to be held by the Administrative Agent or any
Lender for the Obligations under the Credit Agreement. The waivers
given in this Section 9(b) shall be effective until the Loans and
all other Obligations under the Credit Agreement have been
indefeasibly paid and performed in full and all Commitments have
been terminated.
(c) The Sponsors understand and acknowledge that if the Administrative
Agent or any Lender forecloses judicially or nonjudicially against
any real property security for the Obligations under the Loan
Documents, that foreclosure could impair or destroy any ability that
the Sponsors may have to seek reimbursement, contribution or
indemnification from the Borrower or others based on any right the
Sponsors may have of subrogation, reimbursement, contribution or
indemnification for any amounts paid by the Sponsors under this
Agreement. The Sponsors further understand and acknowledge that in
the absence of this Section 9, such potential impairment or
destruction of the
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Sponsors' rights, if any, may entitle the Sponsors to assert a
defense to this Agreement. By executing this Agreement, the Sponsors
freely, irrevocably and unconditionally: (i) waive and relinquish
that defense and agree that the Sponsors will be fully liable under
this Agreement even though the Administrative Agent of the Lenders
may foreclose judicially or nonjudicially against any real property
security for the Obligations under the Loan Documents; (ii) agree
that the Sponsors will not assert that defense in any action or
proceeding which the Administrative Agent or the Lenders may
commence to enforce this Agreement; and (iii) acknowledge and agree
that the Administrative Agent and the Lenders are relying on this
waiver in making the Loans and issuing the Letters of Credit, and
that this waiver is a material part of the consideration which they
are receiving for making the Loans and issuing the Letters of
Credit.
10. Revival and Reinstatement. If the Lenders are required to pay, return or
restore to the Borrower or any other person any amounts previously paid on
the Loans or the Letters of Credit because of any Insolvency Proceeding of
the Borrower, any stop notice or any other reason, to the extent that the
source of such payment was a Cash Equity Contribution from the Sponsors or
the payment of the Accelerated Payment Amount by the Sponsors pursuant to
this Agreement, the obligations of the Sponsors shall be reinstated and
revived and the rights of the Administrative Agent and the Lenders shall
continue with regard to such amounts, as though they had never been paid.
11. Representations and Warranties. Each Sponsor hereby represents and
warrants unto the Administrative Agent and each Lender as follows:
(a) The most recent audited consolidated balance sheet of such Sponsor
and its consolidated Subsidiaries (in the case of AHL, as of
December 31, 1996, in the case of LCI, as of March 30, 1997 and in
the case of ABH, as of December 31, 1997 and the related
consolidated statements of earnings and stockholders' equity (or
profit and loss in the case of LCI) and of cash flows for the fiscal
year ended on such date, reported on by such Sponsor's independent
public
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accountants, copies of which have heretofore been furnished to each
Lender, are complete and correct and present fairly (or give a true
and fair view of in the case of LCI) the consolidated financial
condition of such Sponsor and its consolidated Subsidiaries as at
such date, and the results of their operations (or consolidated
profit and loss in the case of LCI) and their consolidated cash
flows for the fiscal year then ended. The unaudited consolidated
balance sheet of such Sponsor and its consolidated Subsidiaries as
at September 30, 1997 and the related unaudited consolidated
statements of earnings and of cash flows for the nine-month period
(or, in the case of LCI, six month period) ended on such date,
certified by an Authorized Representative of such Sponsor, are
complete and correct and present fairly (or give a true and fair
view of in the case of LCI) the consolidated financial condition of
such Sponsor and its consolidated Subsidiaries as at such date, and
the consolidated results of their operations and their consolidated
cash flows for the nine-month period (or, in the case of LCI,
six-month period) then ended (subject to normal year-end audit
adjustments). All such financial statements, including the related
schedules and notes thereto, have been prepared in accordance with
GAAP applied consistently throughout the periods involved (except as
approved by such accountants or Authorized Representative, as the
case may be, and as disclosed therein).
(b) Since December 31, 1996, in the case of AHL, since March 30, 1997,
in the case of LCI, and since December 31, 1997, in the case of ABH,
there has been no development or event which has had or could
reasonably be expected to have a Material Adverse Effect.
(c) Each of such Sponsor and its Subsidiaries (a) is duly organized,
and, to the extent applicable, validly existing and in good standing
under the laws of the jurisdiction of its organization, (b) has the
corporate power and authority, and the legal right, to own and
operate its property, to lease the property it operates as lessee
and to conduct the business in which it is currently engaged, (c) to
the extent applicable, is duly qualified as a foreign corporation or
company and in good standing under the laws of each jurisdiction
where its ownership, lease
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or operation of property or the conduct of its business requires
such qualification and (d) is in compliance with all material
Requirements of Law except where failure to comply with any of the
foregoing could not individually or in the aggregate reasonably be
expected to have a Material Adverse Effect.
(d) Each of such Sponsors has the corporate power and authority, and the
legal right, to make, deliver and perform this Agreement and to
provide the undertakings hereunder and has taken all necessary
corporate action to authorize the execution, delivery and
performance of this Agreement. No consent or authorization of,
filing with or other act by or in respect of, any Governmental
Instrumentality or any other Person is required to be obtained or
made, as the case may be, by such Sponsor in connection with this
Agreement or with the execution, delivery, performance, validity or
enforceability of this Agreement by or against such Sponsor, except
as has been obtained and remains in full force and effect on the
date hereof. This Agreement has been duly executed and delivered on
behalf of such Sponsor. This Agreement constitutes a legal, valid
and binding obligation of such Sponsor enforceable against it in
accordance with its terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles (whether enforcement
is sought by proceedings in equity or at law).
(e) Each Subsidiary Guarantor has the corporate power and authority, and
the legal right, to make, deliver and perform the Subsidiary
Guaranty and to provide the undertakings thereunder and has taken
all necessary corporate action to authorize the execution, delivery
and performance of the Subsidiary Guaranty. No consent or
authorization of, filing with or other act by or in respect of, any
Governmental Instrumentality or any other Person is required to be
obtained or made, as the case may be, by such Subsidiary Guarantor
in connection with the Subsidiary Guaranty or with the execution,
delivery, performance, validity or enforceability of the Subsidiary
Guaranty by or against such Subsidiary Guarantor, except as has been
obtained and remains
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in full force and effect on the date hereof. The Subsidiary Guaranty
has been duly executed and delivered on behalf of each Subsidiary
Guarantor. The Subsidiary Guaranty constitutes a legal, valid and
binding obligation of each Subsidiary Guarantor enforceable against
it in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors'
rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
(f) The execution, delivery and performance of this Agreement by the
Sponsors and the execution, delivery and performance by the
Subsidiary Guarantors of the Subsidiary Guaranty will not (i)
violate any Legal Requirement or contractual obligations of such
Sponsor or Subsidiary Guarantor, (ii) result in, or require, the
creation or imposition of any Lien on any of its properties or
revenues pursuant to any such Legal Requirement or contractual
obligations or (iii) conflict with or result in a breach of any of
the terms, conditions or provisions of any order, judgment, decree
or ruling of any court, arbitrator or Governmental Instrumentality
applicable to such Sponsor or Subsidiary Guarantor.
(g) Schedule 4 contains (except as noted therein) complete and correct
lists of each Sponsor's Subsidiaries (other than Dormant
Subsidiaries), showing, as to each Subsidiary, the correct name
thereof, the jurisdiction of its organization, and the percentage of
shares of each class of its capital stock or similar equity
interests outstanding owned by each Sponsor and each other
Subsidiary of such Sponsor. All of the outstanding shares of capital
stock or similar equity interests of each Subsidiary shown in
Schedule 4 as being owned by a Sponsor and its Subsidiaries have
been validly issued, are fully paid and nonassessable and are owned
by such Sponsor or another Subsidiary free and clear of any Lien
(except as otherwise disclosed in Schedule 4). Each Subsidiary
identified in Schedule 4 is a corporation or other legal entity duly
organized, validly existing and in good standing under the laws of
its jurisdiction of organization, and is duly qualified
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as a foreign corporation or other legal entity and is in good
standing in each jurisdiction in which such qualification is
required by law, other than those jurisdictions as to which the
failure to be so qualified or in good standing could not,
individually or in the aggregate, reasonably be expected to have a
material adverse effect on the business, assets, debt service
capacity, property or financial condition, operations or prospects
of such Subsidiary. Each such Subsidiary has the corporate or other
power and authority to own or hold under lease the properties it
purports to own or hold under lease and to transact the business it
transacts and proposes to transact. No Subsidiary identified in
Schedule 4 is a party to, or otherwise subject to any legal
restriction or any agreement (other than this Agreement, the
agreements listed on Schedule 4 and customary limitations imposed by
corporate law statutes) restricting the ability of such Subsidiary
to pay dividends out of profits or make any other similar
distributions of profits to its Sponsor parent or any of such
Sponsor's Subsidiaries that owns outstanding shares of capital stock
or similar equity interests of such Subsidiary.
(h) Except as disclosed in Schedule 5 there are no actions, suits or
proceedings pending or, to the knowledge of any Sponsor, threatened
against or affecting such Sponsor or any Subsidiary or any property
of such Sponsor or any Subsidiary in any court or before any
arbitrator of any kind or before or by any Governmental
Instrumentality that, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect. Neither
any Sponsor nor any Subsidiary is in default under any term of any
agreement or instrument to which it is a party or by which it is
bound, or any order, judgment, decree or ruling of any court,
arbitrator or Governmental Instrumentality or is in violation of any
applicable law, ordinance, rule or regulation (including without
limitation Environmental Laws) of any Governmental Instrumentality,
which default or violation, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
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(i) Except as disclosed in Schedule 5-A, each Sponsor and its
Subsidiaries have filed all material tax returns that are required
to have been filed in any jurisdiction, and have paid all taxes
shown to be due and payable on such returns and all other taxes and
assessments levied upon them or their properties, assets, income or
franchises, to the extent such taxes and assessments have become due
and payable and before they have become delinquent, except for any
taxes and assessments (i) the non-payment of which could not
reasonably be expected to have a Material Adverse Effect or (ii) the
amount, applicability or validity of which is currently being
contested in good faith by appropriate proceedings and with respect
to which such Sponsor or a Subsidiary, as the case may be, has
established adequate reserves in accordance with GAAP. Each Sponsor
knows of no basis for any other tax or assessment that could
reasonably be expected to have a Material Adverse Effect. The
charges, accruals and reserves on the books of each Sponsor and its
Subsidiaries in respect of governmental or other taxes for all
fiscal periods are adequate.
(j) Each Sponsor and its Subsidiaries have adequate and appropriate
insurance with respect to their respective properties and businesses
against such casualties and contingencies, of such types, on such
terms and in such amounts (including deductibles, co-insurance and
self- insurance) to the extent this is customary in the case of
entities of established reputations engaged in the same or a similar
business and similarly situated, except where the failure to so
maintain insurance, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
(k) Each Sponsor and its Subsidiaries have good and sufficient title to
their respective properties that individually or in the aggregate
are Material, including all such properties reflected in the most
recent audited balance sheet referred to in clause (a) hereof or
purported to have been acquired by such Sponsor or any Subsidiary
after said date (except as sold or otherwise disposed of in the
ordinary course of business), in each case free and clear of Liens
prohibited by this Agreement. All leases that individually or in the
aggregate are
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Material are valid and subsisting and are in full force and effect
in all material respects.
(l) Except as disclosed in Schedule 6,
(i) each Sponsor and its Subsidiaries own or possess all licenses,
permits, franchises, authorizations, patents, copyrights,
service marks, trademarks and trade names, or rights thereto,
that individually or in the aggregate are Material, without
known conflict with the rights of others;
(ii) to the best knowledge of each Sponsor, no product or such
Sponsor infringes in any material respect on any license,
permit, franchise, authorization, patent, copyright, service
mark, trademark, trade name or other right owned by any other
Person; and
(iii) to the best knowledge of each Sponsor, there is no Material
violation by any Person of any right of such Sponsor or any of
its Subsidiaries with respect to any patent, copyright,
service mark, trademark, trade name or other right owned or
used by such Sponsor or any of its Subsidiaries.
(m) Except as described therein, Schedule 7 sets forth a complete and
correct list of all outstanding Indebtedness of each Sponsor and its
Subsidiaries as of September 30, 1997, since which date there has
been no Material changes in the amounts, interest rates, sinking
funds, installment payments or maturities of the Indebtedness of
such Sponsor or its Subsidiaries. Neither any Sponsor nor any
Subsidiary is in default and no waiver of default is currently in
effect, in the payment of any principal or interest on any
Indebtedness of such Sponsor or such Subsidiary and no event or
condition exists with respect to any Indebtedness of any Sponsor or
any Subsidiary in an aggregate principal amount in excess of
$1,500,000 that would permit (or that with notice or the lapse of
time, or both, would permit) one or more Persons to cause such
Indebtedness to become due and payable
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before its stated maturity or before its regularly scheduled dates
of payment. Except as disclosed in Schedule 7, neither any Sponsor
nor any Subsidiary has agreed or consented to cause or permit in the
future (upon the happening of a contingency or otherwise) any of its
property, whether now owned or hereafter acquired, to be subject to
a Lien not permitted by Section 14(a).
(n) Neither any Sponsor nor any Subsidiary is subject to regulation
under the Investment Company Act of 1940, as amended, the Public
Utility Holding Company Act of 1935, as amended, or the Federal
Power Act, as amended.
(o) Neither any Sponsor nor any Subsidiary has knowledge of any claim or
has received any notice of any claim, and no proceeding has been
instituted raising any claim against such Sponsor or any of its
Subsidiaries or any of their respective real properties now or
formerly owned, leased or operated by any of them or other assets,
alleging any damage to the environment or violation of any
Environmental Laws, except, in each case, such as could not
reasonably be expected to result in a Material Adverse Effect.
(p) Each Sponsor's ownership interest in the Borrower as of the date
hereof is set forth on Schedule 8.
(q) LCI has delivered to the Administrative Agent true, correct and
complete copies of all material documents, instruments, opinions and
certificates with respect to the Existing Senior Debt.
12. Affirmative Covenants. Until the Keep-Well Termination Date, each Sponsor
agrees as follows:
(a) LCI shall furnish to the Administrative Agent the documentation
required to be delivered pursuant to Section 12.1(i) and (ii)(a),
(b), (c), (d) and (e) of the LCI Facilities Agreement, or the
comparable provisions of any facilities agreement executed in
substitution of, or as a replacement of, the LCI Facilities
Agreement.
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<PAGE>
(b) AHL and ABH shall furnish to the Administrative Agent:
(i) as soon as available, but in any event within 120 days after
the end of each fiscal year of such Sponsor, a copy of the
consolidated and consolidating balance sheet of such Sponsor
and its consolidated Subsidiaries as at the end of such year
and the related consolidated and consolidating statements of
earnings and stockholders' equity and of cash flows for such
year, setting forth in each case in comparative form the
figures for the previous year, reported on without a "going
concern" or like qualification or exception, or qualification
arising out of the scope of the audit, by an independent
certified public accountants of nationally recognized
standing; and
(ii) as soon as available, but in any event not later than 60 days
after the end of each of the first three quarterly periods of
each fiscal year of such Sponsor, (A) the unaudited
consolidated and consolidating balance sheet of such Sponsor
and its consolidated Subsidiaries as at the end of such
quarter and in comparative form the figures for the end of the
previous fiscal year, (B) the unaudited consolidated and
consolidating statement of earnings of such Sponsor and its
consolidated Subsidiaries for such quarter and the portion of
the fiscal year through the end of such quarter, and in
comparative form the figures for the previous year and (C) the
consolidated and consolidating statement of cash flows of such
Sponsor and its consolidated Subsidiaries for the portion of
the fiscal year through the end of such quarter, and in
comparative form the figures for the previous year, certified
by an Authorized Representative of such Sponsor as being
fairly stated in all material respects when considered in
relation to the consolidated and consolidating financial
statements of such Sponsor and its consolidated Subsidiaries
(subject to normal year-end audit adjustments);
23
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all such financial statements to be complete and correct in
all material respects and to be prepared in reasonable detail
and in accordance with GAAP applied consistently throughout
the periods reflected therein and with prior periods (except
as approved by such accountants or officer, as the case may
be, and disclosed therein).
(c) LCI shall furnish to the Administrative Agent, concurrently with the
delivery of the financial statements described in clause (a) above,
a certificate of a Authorized Representative of LCI showing in
reasonable detail the calculations demonstrating compliance with
Section 12(g) of this Agreement for the fiscal period ending on such
date. Each Sponsor shall furnish to the Administrative Agent within
thirty days after the same are sent, copies of all financial
statements and reports which such Sponsor sends to its stockholders,
and within thirty days after the same are filed, copies of all
financial statements and reports which such Sponsor may make to, or
file with, the LSE, the Securities and Exchange Commission or any
successor or analogous Governmental Instrumentality. Each Sponsor
shall furnish to the Administrative Agent with reasonable
promptness, such additional financial and other information as the
Administrative Agent, on behalf of any Lender, may from time to time
reasonably request.
(d) Each Sponsor shall keep true and correct books of records and
account in conformity with GAAP and all Requirements of Law; and
permit the Administrative Agent:
(i) No Event of Default -- if no Event of Default then exists,
at the expense of such Administrative Agent and upon reasonable
prior notice to such Sponsor, to visit the principal executive
office of such Sponsor and to discuss the affairs, finances and
accounts of such Sponsor and its Subsidiaries with such Sponsor's
officers, all at such reasonable times and as often as may be
reasonably requested in writing; and
24
<PAGE>
(ii) Event of Default -- if an Event of Default then exists,
at the expense of such Sponsor to visit and inspect any of the
offices of properties of such Sponsor or any Subsidiary, to examine
their respective books and records and to make copies and extracts
therefrom, and to discuss their respective affairs, finances and
accounts with their respective officers and independent public
accountants, all at such reasonable times and as often as may be
requested.
A Sponsor shall not be under any obligation under this Agreement to
provide information pursuant to the last sentence of Section 12(c)
or pursuant to this Section 12(d) if (i) disclosure of such
information, on the written advice of such Sponsor's counsel
provided to such Sponsor, would be prohibited by law or by decree of
any Governmental Instrumentality or arbitral body or by the terms of
any obligation of confidentiality contained in any agreement binding
upon such Sponsor and not entered into in contemplation of this
Section 12(d) or (ii) such information relates to the identity or
personal details of any of the customers or clients of LCI or any of
its Subsidiaries.
In addition, LCI shall not be under any obligation under this
Agreement to provide information pursuant to the last sentence of
Section 12(c) or pursuant to Section 12(d) if LCI has been advised
in writing by an investment or merchant bank in London, that the
requested disclosure to the Administrative Agent or any Lender would
require LCI to make public disclosure of such information to comply
with its continuing obligations under the rules of the LSE or would
otherwise be prohibited by such rules. If the Administrative Agent
shall contest such written advice from the investment or merchant
bank by itself providing advice in writing to the contrary from an
investment or merchant bank in London, then LCI will obtain advice
in writing from a senior official of the LSE as to whether the
requested disclosure would require LCI to make public disclosure of
such information to comply with any of such obligations or would
otherwise be prohibited as aforesaid. Before seeking such advice
from the LSE (either directly or through its listing sponsor), LCI
will
25
<PAGE>
consult with the Administrative Agent and submit to the LSE such
factual submissions and other representations that the
Administrative Agent may provide to LCI for such purpose. The
written advice of such senior official shall be conclusive as to the
disclosure in question.
(e) Each Sponsor shall promptly give notice to the Administrative Agent
(which shall promptly transmit such notice to each Lender) of:
(i) any breach by such Sponsor of any of its obligations hereunder
or with respect to Existing Senior Debt;
(ii) any (a) default or event of default under any contractual
obligation of such Sponsor or any of its Subsidiaries or (b)
litigation, investigation or proceeding which may exist at any
time between such Sponsor or any of its Subsidiaries and any
Governmental Instrumentality, which in either case, if not
cured or if adversely determined, as the case may be, could
reasonably be expected to have a Material Adverse Effect;
(iii) any material litigation or proceeding affecting such Sponsor
or any of its Subsidiaries; and
(iv) any development or other event which could reasonably be
expected to have a Material Adverse Effect.
Each notice pursuant to this clause (e) shall be accompanied by a
statement of a Authorized Representative of such Sponsor setting
forth details of the occurrence referred to therein and stating what
action such Sponsor or any of its Subsidiaries propose to take with
respect thereto.
(f) LCI shall, in the aggregate, continue to own, directly or through
one or more wholly-owned Subsidiaries, free of any Lien other than
Liens in favor of the Administrative Agent and the Lenders, the same
aggregate percentage of the capital stock of the Borrower as set
forth on Schedule 8 hereof, subject to adjustment as provided in
clause (k)
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<PAGE>
of the definition of the term "Change in Control" in the Credit
Agreement.
(g) LCI covenants and agrees that
(i) the ratio of Group Operating Profit to Net Interest Payable in
respect of each 12 month period ending on the last day of each
financial year and financial half year of the Group shall not
be less than 2.5:1;
(ii) the ratio of Consolidated Net Borrowings to Consolidated Net
Worth shall not at any time exceed 1.5:1; and
(iii) Consolidated Net Worth shall at all times be greater than
(pound)95,000,000,
and that the finance director of LCI for the time being shall
certify compliance or, as the case may be, non-compliance by LCI and
the Group with each of the provisions referred to in paragraphs (i),
(ii) and (iii) above at the same time as LCI shall furnish to the
Administrative Agent the financial statements referred to in Section
12(a) provided that following receipt of any such certificate the
Administrative Agent may in its absolute discretion require LCI to
instruct its auditors for the time being to certify compliance or,
as the case may be, non-compliance by LCI and the Group with each of
the provisions referred to in paragraphs (i), (ii) and (iii) above
and further that in the event of any changes in any of the
accounting principles and bases upon which any of such financial
statements are prepared, the financial covenants set out in this
sub-clause shall be adjusted or otherwise amended so as to ensure
that or, as nearly as possible that, following such changes the
obligations, limitations and restrictions contained in such
covenants shall, mutatis mutandis, have the same effect as if such
changes had not been made and that the Administrative Agent shall be
provided with all appropriate information and details that it may
request in connection with such adjustments or amendments.
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<PAGE>
(h) Each Sponsor will cause each of its Subsidiaries to comply with all
laws, ordinances or governmental rules or regulations to which each
of them is subject, including, without limitation, Environmental
Laws, and will obtain and maintain in effect all licenses,
certificates, permits, franchises and other governmental
authorizations necessary to the ownership of their respective
properties or to the conduct of their respective businesses, in each
case to the extent necessary to ensure that non-compliance with such
laws, ordinances or governmental rules or regulations or failures to
obtain or maintain in effect such licenses, certificates, permits,
franchises and other governmental authorizations could not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
(i) Each Sponsor will and will cause each of its Subsidiaries to
maintain, with institutions it reasonably believes to be financially
sound insurers, insurance with respect to their respective
properties and businesses against such casualties and contingencies,
of such types, on such terms and in such amounts (including
deductibles, co-insurance and self-insurance if adequate reserves
are maintained with respect thereto) as is customary in the case of
entities of established reputations engaged in the same or similar
business and similarly situated.
(j) Each Sponsor will and will cause each of its Subsidiaries to
maintain and keep, or cause to be maintained and kept, their
respective properties in reasonably good repair, working order and
condition (other than ordinary wear and tear), so that the business
carried on in connection therewith may be properly conducted at all
times, provided that this Section shall not prevent a Sponsor from
discontinuing the operation and maintenance of or the liquidation of
any Dormant Subsidiary and shall not prevent a Sponsor or any
Subsidiary from discontinuing the operation and the maintenance of
any of its properties if such discontinuance is desirable in the
conduct of its business and such Sponsor has concluded that such
discontinuance could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
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<PAGE>
(k) Each Sponsor will and will cause each of its Subsidiaries to file
all material tax returns required to be filed in any jurisdiction
and to pay and discharge all taxes, assessments, governmental
charges, or levies shown to be due and payable on such returns and
all other taxes imposed on them or any of their properties, assets,
income or franchises, to the extent such taxes and assessments have
become due and payable and before they have become delinquent and
all claims for which sums have become due and payable that have or
might become a Lien on properties or assets of such Sponsor or any
Subsidiary, provided that neither a Sponsor nor any Subsidiary need
to pay any such tax or assessment or claims if (i) the amount,
applicability or validity thereof is contested by such Sponsor or
such Subsidiary on a timely basis in good faith in appropriate
proceedings and such Sponsor or a Subsidiary has established
adequate reserves therefor in accordance with GAAP on the books of
such Sponsor or such Subsidiary or (ii) the nonpayment of all such
taxes and assessments in the aggregate could not reasonably be
expected to have a Material Adverse Effect.
(l) Each Sponsor will at all times preserve and keep in full force and
effect its corporate or other existence. Except as allowed under the
Note Agreements, each Sponsor will at all times preserve and keep in
full force and effect the corporate or other existence of each of
its Subsidiaries (other than Dormant Subsidiaries or unless merged
into such Sponsor or a Subsidiary) and all licenses, consents,
certificates and authorizations of such Sponsor and its Subsidiaries
unless, in the good faith judgment of such Sponsor, the termination
of or failure to preserve and keep in full force and effect such
corporate or other existence, licenses, consents, certificates and
authorizations could not, individually or in the aggregate, have a
Material Adverse Effect.
(m) Each Sponsor will, and will cause each of its Subsidiaries to, keep
proper books of record and account in accordance with GAAP as
applied in the jurisdiction of its incorporation as such Sponsor may
deem appropriate from time to time.
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<PAGE>
(n) Neither any Sponsor nor any Subsidiary will engage in any business
if, as a result, the general nature of the business, taken on a
consolidated basis, which would then be engaged in by such Sponsor
and its Subsidiaries would be materially changed from the general
nature of the business engaged in by such Sponsor and its
Subsidiaries as of the date hereof.
(o) Promptly upon the determination that any Subsidiary of LCI has
become a Material Subsidiary, LCI shall cause such Subsidiary to
execute and deliver a joinder agreement for the Subsidiary Guaranty
pursuant to which such Subsidiary shall become a party thereto and
Subsidiary Guarantor thereunder.
13. Consequences of Specified Events. If at any time prior to the Keep-Well
Termination Date (each of the following, a "Specified Event"),
(a) LCI shall at any time fail to comply with the covenants set forth in
Sections 12(f), 12(g), 12(o) or 14 hereof and to the extent such
non-compliance is capable of being cured, such non-compliance shall
not have been cured within twenty-five (25) days; or
(b) any borrowed money for a sum in excess of (pound)2,500,000 or the
equivalent thereof in any other currency of LCI or any Material
Subsidiary shall by reason of breach or default become due and
payable prior to its stated maturity or due date therefor or if any
such borrowed money is not paid at the maturity thereof or due date
therefor (or within any originally stated applicable grace period
therefor) or, if payable on demand, is not paid on demand; or
(c) LCI or any Material Subsidiary becomes insolvent or applies for or
consents to or suffers the appointment of a liquidator, receiver,
administrative receiver, administrator, guardian, encumbrancer,
trustee in bankruptcy or similar official of the whole or any
substantial part of its respective assets, business, property,
revenues or undertaking (other than in any of such cases (except for
the appointment of any administrator) for the purposes of a solvent
reconstruction or
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amalgamation the terms of which have previously been approved by the
Required Lenders) LCI or any Material Subsidiary takes any
proceedings under any law for adjustment, deferment or rescheduling
of its Indebtedness or any part thereof or makes or enters or any
proposal is made to make or enter into a general assignment or
arrangement (including, without limitation, any voluntary
arrangement under part I of the Insolvency Act 1986) or composition
with or for the benefit of its creditors or a moratorium shall be
declared on any of its Indebtedness or any part thereof or any
creditor of LCI or any Material Subsidiary exercises a contractual
right to take over the financial management of LCI or any Material
Subsidiary or LCI or any Material Subsidiary is deemed or shall
become unable to pay its debts as defined in Section 123 Insolvency
Act 1986 or LCI or any Material Subsidiary fails generally to pay
its debts as and when they fall due or if the equivalent of any of
the foregoing shall occur in relation to LCI or any Material
Subsidiary under the laws of any jurisdiction to which it or any of
its rights, property or assets are subject; or
(d) a petition is presented (but only if such petition remains
undischarged 90 days after presentation thereof) or a meeting is
convened or an order is made or resolution is passed for or other
action or proceedings or steps are taken with a view to the
appointment of an administrator, winding-up, liquidation or
dissolution of LCI or any Material Subsidiary or if the equivalent
of any of the foregoing shall occur in relation to LCI or any
Material Subsidiary under the laws of any jurisdiction to which it
or any of its rights, property or assets are subject (other than in
any of such cases (except for the appointment of any administrator)
for the purposes of the winding up of a dormant member of the Group
or a solvent reconstruction or amalgamation, in each case the terms
of which have previously been approved by the Required Lenders), or
LCI or any Material Subsidiary stops or threatens to stop payments
generally or ceases or threatens to cease to carry on its business
or a substantial part thereof or LCI or any Material Subsidiary
merges, consolidates or amalgamates with or into
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any other company, corporation or entity in a transaction not
otherwise permitted under the Facilities Agreement; or
(e) a distress, execution or other legal process is levied against any
of the assets of LCI or any Material Subsidiary and is not
discharged or paid out within 90 days, except where such distress,
execution or other legal process is in the reasonable opinion of the
Required Lenders being contested in good faith by LCI or the
relevant Material Subsidiary or any analogous proceedings shall be
commenced against LCI or any Material Subsidiary or its assets under
the laws of any other jurisdiction; or
(f) an encumbrancer takes possession or a receiver or an administrative
receiver is appointed of the whole or any substantial part of the
assets or undertaking of LCI or any Material Subsidiary or any
analogous action shall be taken against LCI or any Material
Subsidiary or its assets or undertaking under the laws of any
jurisdiction;
then, not later than five (5) days after such Specified Event, LCI shall
pay the Accelerated Payment Amount to the Administrative Agent for the
benefit of the Lenders. The Accelerated Payment Amount shall be applied by
the Administrative Agent to the payment of the Borrower's Obligations
under the Credit Agreement.
14. Negative Covenants. At all times prior to the Keep-Well Termination Date,
(a) Each Sponsor will not, and will not permit any of its Subsidiaries
to, directly or indirectly create, incur, assume or permit to exist
(upon the happening of a contingency or otherwise) any Lien on or
with respect to any property or asset except:
(i) Liens securing Existing Senior Debt;
(ii) any Lien arising by operation of law which secures amounts not
more than 45 days overdue or, if so overdue, are being
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contested on a timely basis in good faith and in appropriate
proceedings;
(iii) any Lien imposed on a Sponsor or any of its Subsidiaries in
relation to its purchase of goods, products or supplies in the
ordinary course of business;
(iv) any rights of set-off in the normal course of trading or of
any bank or financial institution or combination of accounts
arising in favor of such bank or financial institution as a
result of the day-to-day operation of banking arrangements,
including without limitation, rights of set-off granted to
such bank or financial institution in respect of the issuance
of letters of credit, or as a result of any currency or
interest rate hedging operations carried out in the ordinary
course of business, in each case, provided that there is no
agreement to confer a security interest;
(v) statutory Liens of landlords, Liens over goods or documents of
title arising in the ordinary course of documentary credit
transactions and Liens of carriers, warehousemen, mechanics,
materialmen and other similar Liens, in each case, incurred in
the ordinary course of business;
(vi) Liens for taxes, assessments or other governmental charges
which are not yet due and payable or the payment of which is
not at the time required by Note Agreements;
(vii) Liens incurred or deposits made in the ordinary course of
business (A) in connection with workers' compensation,
unemployment insurance and other types of social security or
retirement benefits, or (B) to secure (or to obtain letters of
credit that secure) the performance of tenders, statutory
obligations, surety bonds, appeal bonds, bids, leases (other
than capital leases), performance bonds, purchase,
construction or sales contracts and other similar obligations,
in each case not incurred or made in connection with the
borrowing of money, the obtaining of advances or credit or the
payment of the deferred purchase price of property;
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<PAGE>
(viii) leases or subleases granted to others, easements,
rights-of-way, restrictions and other similar charges or
encumbrances, in each case incidental to, and not interfering
with, the ordinary conduct of business of a Sponsor and its
Subsidiaries, provided that such Liens do not, in the
aggregate, materially detract from the value of such property;
(ix) any Lien renewing, extending or refunding any Lien permitted
by clause (i), provided that (A) the principal amount of
Indebtedness secured by such Lien immediately prior to such
extension, renewal or refunding is not increased or the
maturity thereof reduced, (B) such Lien is not extended to any
other property and (C) immediately after such extension,
renewal or refunding no Specified Event would exist;
(x) any Lien securing the obligations of LCI under this Agreement,
the Credit Facility and the obligations of any Subsidiary
Guarantor under any Subsidiary Guarantee;
(xi) any Lien not otherwise permitted by clauses (i) through (x)
above, provided that on the date any Indebtedness secured by
any such Lien, is created, incurred, assumed or guaranteed by
such Sponsor or any Subsidiary, and immediately after giving
effect thereto and to the concurrent retirement of any other
Indebtedness, the sum of (A) the aggregate principal amount of
all Indebtedness secured by Liens pursuant to this clause (xi)
plus (B) all unsecured Indebtedness of such Sponsor and its
Subsidiaries (excluding any unsecured Existing Senior Debt)
that is senior in any respect in right of payment to the
obligations of such Sponsor hereunder, does not exceed 25% of
the Consolidated Tangible Assets of such Sponsor as of such
date; and
(xii) any Lien set forth on Schedule 3, in the case of ABH.
(b) Each Sponsor will not, and will not permit any of its Subsidiaries
to, directly or indirectly create, incur, assume or suffer to exist
any secured or unsecured Indebtedness that is senior in any respect
in right
34
<PAGE>
of payment to the obligations of such Sponsor hereunder (excluding
(A) any Indebtedness secured by Liens pursuant to clauses (i)
through (x) of Section 14(a) hereof and (B) any unsecured Existing
Senior Debt but including any Indebtedness secured by Liens pursuant
to clause (xi) of Section 14(a) hereof) if the aggregate amount of
all such senior Indebtedness described in this clause (b) would
exceed 25% of the Consolidated Tangible Assets of such Sponsor as of
such date.
(c) In the case of ABH and AHL only, declare, pay or make any dividend
or distribution (in cash, property or obligations) on any shares of
any class of interests (now or hereafter outstanding) of such
Sponsor or on any warrants, options or other rights with respect to
any interests in any class of interests (now or hereafter
outstanding) of such Sponsor (other than dividends or distributions
payable in its common interests or warrants to purchase its common
interests or splitups or reclassifications of its interests into
additional or other interests) or apply, or permit any of its
Subsidiaries to apply, any of its funds, property or assets to the
purchase, redemption, sinking fund or other retirement of, or agree
or permit any of its Subsidiaries to purchase or redeem, any shares
of any class of interests (now or hereafter outstanding) of such
Sponsor, or warrants, options or other rights with respect to any
shares of any class of interests (now or hereafter outstanding) of
such Sponsor.
15. Payments Free and Clear of Taxes, etc. Each Sponsor hereby agrees that:
(a) All payments by such Sponsor hereunder to the Borrower or to a
Lender shall be made free and clear of and without deduction for any
present or future income, excise, stamp or franchise taxes and other
taxes, fees, duties, withholdings or other charges of any nature
whatsoever imposed by any taxing authority, but excluding franchise
taxes and taxes imposed on or measured by any Lender's net income or
receipts (such non-excluded items being called "Taxes"). In the
event that any withholding or deduction from any payment to be made
by a Sponsor hereunder is required in respect of any Taxes pursuant
to any applicable law, rule or regulation, then such Sponsor will
35
<PAGE>
(i) pay directly to the relevant authority the full amount
required to be so withheld or deducted;
(ii) promptly forward to the Borrower or such Lender an official
receipt or other documentation satisfactory to the Borrower or
such Lender evidencing such payment to such authority; and
(iii) pay to the Borrower or such Lender such additional amount or
amounts ("Additional Amounts") as is necessary to ensure that
the net amount actually received by the Borrower or such
Lender will equal the full amount the Borrower or such Lender
would have received had no such withholding or deduction been
required.
Moreover, if any Taxes are directly asserted against the Borrower or
any such Lender with respect to any payment received by the Borrower
or such Lender hereunder, the Borrower or such Lender may pay such
Taxes and the Sponsor will promptly pay such Additional Amounts
(including any penalties, interest or expenses ) as is necessary in
order that the net amount received by the Borrower or such Lender
after the payment of such Taxes (including any Taxes on such
Additional Amounts) shall equal the amount the Borrower or such
Lender would have received had not such Taxes been asserted.
Upon the request of any Sponsor, each Lender that is organized under
the laws of a jurisdiction other than the United States or a State
thereof (for purposes of this paragraph (k), a "Non-U.S. Lender")
shall, prior to the date on which any payment is made hereunder (or
in the case of a Lender that becomes a party to the Credit Agreement
pursuant to Section 4.11 of the Credit Agreement or any Assignee
Lender, before it becomes a party hereto) (i) execute and deliver to
each Sponsor and the Administrative Agent one or more (as the
Sponsors or the Administrative Agent may reasonably request) United
States Internal Revenue Service Forms 4224 or Forms 1001 or such
other forms or documents (or successor forms or documents),
appropriately completed, certifying in each case that such Lender or
Assignee Lender is entitled to receive payments under this Agreement
without deduction or withholding of any United States federal income
taxes,
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<PAGE>
and an applicable Internal Revenue Service Form W-8 or Form W-9 or
successor applicable form (if required by law), as the case may be,
to establish an exemption from United States backup withholding tax
or (ii) if such Non-U.S. Lender is not a "bank" or other person
described in Section 881 (c) (3) of the Code and cannot deliver
either Form 4224 or Form 1001 pursuant to clause (a) above, execute
and deliver to each Sponsor and the Administrative Agent one or more
(as the Sponsors or the Administrative Agent may reasonably request)
copies of the Tax Certificate, Form W-8 (or any successor form) and
any other certificate or statement of exemption required under the
Code or Treasury Regulations issued thereunder, appropriately
completed, certifying that such Lender or Assignee Lender is
entitled to receive payments under this Agreement without deduction
or withholding of United States federal income tax and establishing
an exemption from United States backup withholding tax. All Lenders
other than Non-U.S. Lenders shall, prior to the date on which any
payment is made hereunder (or in the case of a Lender that becomes a
party to the Credit Agreement pursuant to Section 4.11 of the Credit
Agreement or is an Assignee Lender, before such Lender becomes a
party hereto) execute and deliver to the Borrower and the
Administrative Agent one or more copies (as the Borrower or
Administrative Agent may reasonably request) of United States
Internal Revenue Form W-9 or successor applicable form (if required
by law), as the case may be, to establish exemption from United
States backup withholding tax.
Each Lender which undertakes to deliver to the Sponsors or the
Administrative Agent a Tax Certificate, a Form 4224, Form 1001, Form
W-8 or Form W-9 pursuant to the preceding paragraph shall further
undertake to deliver to the Sponsors and the Administrative Agent
two further copies of said Tax Certificate, Form 4224, Form 1001,
Form W-8 or Form W-9 (if required by law), or successor applicable
forms, or other manner of certification, as the case may be, on or
before the date that such form expires or becomes obsolete or after
the occurrence of an event requiring a change in the most recent
form delivered by it to the Sponsors and the Administrative Agent,
and such extensions or renewals thereof as may be reasonably
requested by the Sponsors or Administrative Agent, certifying in the
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<PAGE>
case of a Tax Certificate, Form 4224 or Form 1001 that such Lender
is entitled to receive payments under this Agreement without
deduction or withholding of any United States federal income taxes,
unless in any case an event (including any change in treaty, law or
regulation) has occurred prior to the date on which such delivery
would otherwise be required which renders all forms inapplicable or
which would prevent such Lender from duly completing and delivering
any such form with respect to it and such Lender advises the
Sponsors and the Administrative Agent that it is not capable of
receiving payments without any deduction or withholding of United
States federal income tax, and in the case of a Form W-8 or Form
W-9, establishing an exemption from backup withholding.
(b) If the Sponsor fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Borrower or any Lender the
required receipts or other required documentary evidence, the
Sponsor shall indemnify the Borrower or such Lender for any
incremental Taxes, interest or penalties that may become payable by
the Borrower or such Lender as a result of any such failure.
(c) In the event that an Additional Amount is paid by a Sponsor for the
account of any Lender and such Lender is entitled to a refund of the
Tax (a "Tax Refund") to which such payment is attributable, then
such Lender shall take all reasonable steps which are necessary to
obtain such Tax Refund, including filings such forms, certificates,
documents, applications or returns as may be required to obtain such
Tax Refund. If such Lender subsequently receives such a Tax Refund,
and such Lender is readily able to identify the Tax Refund as being
attributable to the Tax with respect to which the Additional Amount
was made, then such Lender shall reimburse such Sponsor such amount
as such Lender shall determine acting in good faith to be the
proportion of the Tax Refund, together with any interest received
thereon, attributable to such Additional Amount as will leave such
Lender after the reimbursement (including such interest) in no
better or worse position than it would have been if the Additional
Amount had not been required.
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<PAGE>
(d) Without prejudice to the survival of any other agreement of the
Sponsors hereunder, the agreements and obligations of the Sponsors
contained in this Section 15 shall survive the payment in full of
the principal of and interest on the Loans.
16. Judgment. Each Sponsor hereby agrees that:
(a) If, for the purposes of obtaining judgment in any court, it is
necessary to convert a sum due hereunder in United States Dollars
into another currency, such Sponsor agrees, to the fullest extent
permitted by law, that the rate of exchange used shall be that at
which in accordance with normal banking procedures the
Administrative Agent could purchase United States Dollars with such
other currency on the Business Day preceding that on which final
judgment is given.
(b) The obligation of each Sponsor in respect of any sum due from it to
any Lender hereunder shall, notwithstanding any judgment in a
currency other than United States Dollars, be discharged only to the
extent that on the Business Day following receipt by such Lender of
any sum adjudged to be so due in such other currency such Lender
may, in accordance with normal banking procedures, purchase United
States Dollars with such other currency; in the event that the
United States Dollars so purchased are less that the sum originally
due to such Lender in United States Dollars, the Sponsor, as a
separate obligation and notwithstanding any such judgment, shall
indemnify and hold harmless such Lender and such holder against such
loss, and if the United States Dollars so purchased exceed the sum
originally due to such Lender in United States Dollars, such Lender
shall remit to such Sponsor such excess.
17. Agreement to Subordinate. Notwithstanding anything to the contrary in this
Agreement, the Administrative Agent and each Lender, for itself and for
its successors assigns, agrees that it shall become party to an
Intercreditor Deed with terms substantially as described in the form of
Schedule 9 hereto. The payment of all sums payable by LCI hereunder shall
be subordinated in right of payment to the extent and in the manner
provided in such Intercreditor Deed.
39
<PAGE>
18. Miscellaneous Provisions.
(a) This Agreement is a Loan Document executed pursuant to the Credit
Agreement and shall (unless otherwise expressly indicated herein) be
construed, administered and applied in accordance with the terms and
provisions thereof.
(b) This Agreement shall be binding upon the Sponsors and their
permitted successors, transferees and assigns and shall inure to the
benefit of and be enforceable by the Administrative Agent and each
Lender and their respective successors, transferees and assigns;
provided, however, that the Sponsors may not assign any of their
obligations hereunder without the prior written consent of the
Required Lenders.
(c) No amendment to or waiver of any provision of this Agreement, nor
consent to any departure by any Sponsor herefrom, shall in any event
be effective unless the same shall be in writing and signed by the
Administrative Agent, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose
for which given.
(d) All notices and other communications provided to any party hereto
under this Agreement shall be in writing and addressed, delivered or
transmitted to such party at its address or facsimile number set
forth below or at such other address or facsimile number as may be
designated by such party in a notice to the other parties. All such
notices and communications shall be deemed to have been properly
given if (x) hand delivered with receipt acknowledged by the
recipient; (y) if mailed, upon the fifth Business Day after the date
on which it is deposited in registered or certified mail, postage
prepaid, return receipt requested or (z) if by Federal Express or
other nationally-recognized express courier service with
instructions to deliver on the following Business Day, on the next
Business Day after delivery to such express courier service. Notices
and other communications may also be properly given by facsimile but
shall be deemed to be received upon automatic facsimile confirmation
of receipt thereof by the intended recipient machine therefor with
the
40
<PAGE>
original of such notice or communication to be given in the manner
provided in the second sentence of this Section; provided, however,
that the failure to deliver a copy in accordance with the second
sentence of this paragraph (d) shall not invalidate the
effectiveness of such facsimile notice. The address information for
the parties is set forth below:
If to the Administrative Agent: The Bank of Nova Scotia
580 California Street, 21st Floor
San Francisco, CA 94104
Attn: Alan W. Pendergast
Telephone No.: (415) 986-1100
Facsimile No.: (415) 397-0791
If to ABH: Aladdin Bazaar Holdings, LLC
831 Pilot Road
Las Vegas, Nevada 89119
Attn: Jack Sommer
Telephone No.: (702) 736-7114
Facsimile No.: (702) 736-7107
If to AHL: Aladdin Holdings, LLC
831 Pilot Road
Las Vegas, Nevada 89119
Attn: Jack Sommer
Telephone No.: (702) 736-7114
Facsimile No.: (702) 736-7107
If to LCI: London Clubs International, plc
10 Brick Street
London W1Y 8HO, England
Attn: Linda M. Lillis
Telephone No.: 011-44-171-518-0000
Facsimile No.: 011-44-171-493-6981
41
<PAGE>
with a copy to: Ohrenstein & Brown, LLP
230 Park Avenue
New York, New York 10169
Attn: Peter J. Kiernan, Esq.
Telephone No.: (212)- 682-4500
Facsimile No.: (212)- 557-0910
and: Lionel, Sawyer & Collins
300 South 4th Street
Suite 1700
Las Vegas, Nevada 89101
Attn: Greg Giordano, Esq.
Telephone No.: (702)-383-8888
Facsimile No.: (702)-383-8845
(e) No failure on the part of the Administrative Agent or any Lender to
exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial
exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right. The remedies
herein provided are cumulative and not exclusive of any remedies
provided by law.
(f) Section captions used in this Agreement are for convenience of
reference only, and shall not affect the construction of this
Agreement.
(g) Wherever possible each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining
provisions of this Agreement.
(h) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS OF THE STATE OF NEW YORK. THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE
PARTIES
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<PAGE>
HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY
PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT HERETO.
(i) ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE
ADMINISTRATIVE AGENT, THE LENDERS OR THE SPONSORS SHALL BE BROUGHT
AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK IN
THE CITY OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK; PROVIDED, HOWEVER, THAT ANY SUIT
SEEKING ENFORCEMENT AGAINST ANY PROPERTY MAY BE BROUGHT, AT THE
ADMINISTRATIVE AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION
WHERE SUCH PROPERTY MAY BE FOUND. THE SPONSORS HEREBY EXPRESSLY AND
IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF
NEW YORK IN THE CITY OF NEW YORK AND OF THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY
SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREE TO BE BOUND
BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION.
THE SPONSORS HEREBY IRREVOCABLY APPOINT CT CORPORATION SYSTEM (THE
"PROCESS AGENT"), WITH AN OFFICE ON THE DATE HEREOF AT 1633
BROADWAY, NEW YORK, NEW YORK 10019, UNITED STATES, AS THEIR AGENT TO
RECEIVE, ON THE SPONSORS' BEHALF AND ON BEHALF OF THE SPONSORS'
PROPERTY, SERVICE OF COPIES OF THE SUMMONS AND COMPLAINT AND ANY
OTHER PROCESS WHICH MAY BE SERVED IN ANY SUCH ACTION OR PROCEEDING.
SUCH SERVICE MAY BE MADE BY MAILING OR DELIVERING A COPY OF SUCH
PROCESS TO THE SPONSORS IN CARE OF THE PROCESS AGENT AT
43
<PAGE>
THE PROCESS AGENT'S ABOVE ADDRESS, AND THE SPONSORS HEREBY
IRREVOCABLY AUTHORIZE AND DIRECT THE PROCESS AGENT TO ACCEPT SUCH
SERVICE ON THEIR BEHALF. AS AN ALTERNATIVE METHOD OF SERVICE, THE
SPONSORS FURTHER IRREVOCABLY CONSENT TO THE SERVICE OF PROCESS BY
REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR
WITHOUT THE STATE OF NEW YORK. THE SPONSORS HEREBY EXPRESSLY AND
IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH THEY MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF
VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO
ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. TO THE EXTENT THAT THE SPONSORS HAVE OR
HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR
FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE,
ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR
OTHERWISE) WITH RESPECT TO THEMSELVES OR THEIR PROPERTY, THE
SPONSORS HEREBY IRREVOCABLY WAIVE SUCH IMMUNITY IN RESPECT OF THEIR
OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
(j) THE SPONSORS HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION
WITH, THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE
ADMINISTRATIVE AGENT OR THE LENDERS OR THE SPONSORS. THE SPONSORS
ACKNOWLEDGE AND AGREE THAT THEY HAVE RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR
44
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THIS PROVISION AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR
THE LENDERS ENTERING INTO THE CREDIT AGREEMENT.
45
<PAGE>
IN WITNESS WHEREOF, the Sponsors have caused this Agreement to be duly
executed and delivered by their officers thereunto duly authorized as of the
date first above written.
ALADDIN HOLDINGS, LLC
By: /s/ Ronald Dictrow
-------------------------------
Ronald Dictrow
Title: Secretary, Treasurer
Address: 280 Park Avenue
New York, N.Y. 10017
Attention: Ronald Dictrow
Telecopy: 212-661-0844
ALADDIN BAZAAR HOLDINGS, LLC
By: /s/ Ronald Dictrow
-------------------------------
Ronald Dictrow
Title: Secretary, Treasurer
Address: 280 Park Avenue
New York, N.Y. 10017
Attention: Ronald Dictrow
Telecopy: 212-661-0844
LONDON CLUBS INTERNATIONAL PLC
By: /s/ G. Barry Hardy
-------------------------------
G. Barry Hardy
Title: Finance Director
Address: 30 Burlington Street
London W1X 2LN
England
Attention: G. Barry Hardy
Telecopy: 011-44-171-518-0174
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SCHEDULE 1
- --------------------------------------------------------------------------------
DATE AGGREGATE PRINCIPAL
OUTSTANDING
($ Millions)
- --------------------------------------------------------------------------------
Conversion Date $285.0
- --------------------------------------------------------------------------------
End of First Quarter following Conversion Date $277.5
- --------------------------------------------------------------------------------
End of Second Quarter thereafter $270.0
- --------------------------------------------------------------------------------
End of Third Quarter thereafter $262.5
- --------------------------------------------------------------------------------
End of Fourth Quarter thereafter $255.0
- --------------------------------------------------------------------------------
End of Fifth Quarter thereafter $247.5
- --------------------------------------------------------------------------------
End of Sixth Quarter thereafter $240.0
- --------------------------------------------------------------------------------
End of Seventh Quarter thereafter $232.5
- --------------------------------------------------------------------------------
End of Eighth Quarter thereafter $225.0
- --------------------------------------------------------------------------------
End of Ninth Quarter thereafter $217.5
- --------------------------------------------------------------------------------
End of Tenth Quarter thereafter $210.0
- --------------------------------------------------------------------------------
End of Eleventh Quarter thereafter $202.5
- --------------------------------------------------------------------------------
End of Twelfth Quarter thereafter $195.0
- --------------------------------------------------------------------------------
End of Thirteenth Quarter thereafter $187.5
- --------------------------------------------------------------------------------
End of Fourteenth Quarter thereafter $180.0
- --------------------------------------------------------------------------------
End of Fifteenth Quarter thereafter $172.5
- --------------------------------------------------------------------------------
End of Sixteenth Quarter thereafter $165.0
- --------------------------------------------------------------------------------
End of Seventeenth Quarter thereafter $157.5
- --------------------------------------------------------------------------------
End of Eighteenth Quarter thereafter $150.0
- --------------------------------------------------------------------------------
End of Nineteenth Quarter thereafter $150.0
- --------------------------------------------------------------------------------
End of Twentieth Quarter thereafter $145.0
- --------------------------------------------------------------------------------
47
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SCHEDULE 2
Additional Defined Terms
"Cash and Cash Equivalents" means:
(a) cash in hand or at a bank and beneficially owned by LCI or a
Subsidiary of LCI;
(b) Sterling or Dollar denominated commercial paper maturing not
more than nine months from the date of issue and rated A-1 or better by
Standard & Poor's Corporation or P-1 or better by Moody's Investors
Service, Inc.;
(c) any deposit with, or acceptance maturing not more than one year
after issue, accepted by, an authorized institution or an exempted
institution within the meaning of the Banking Act 1987 which has a
combined capital and surplus and undistributable profits of not less than
(pound)100,000,000 or by any bank, either of which shall have a long-term
debt rating of A- or better by Standard & Poor's Corporation or A3 or
better by Moody's Investors Service, Inc.;
(d) Sterling or Dollar denominated debt securities having not more
than one year until final maturity and listed on a recognized stock
exchange or in respect of which there is an active trading market in
London and rated at least Aa by Moody's Investors Service, Inc. or at
least AA by Standard and Poor's Corporation;
(e) direct obligations of the United States of America or any agency
or instrumentality of United States of America, the payment or guarantee
of which constitutes a full faith and credit obligation of the United
States of America, in each case maturing twelve months or less from the
date of acquisition thereof;
(f) gilt-edge securities issued directly, or unconditionally
guaranteed, by the United Kingdom Treasury, in each case maturing twelve
months or less from the date of acquisition thereof, legally and
beneficially owned, free of Liens and freely accessible by LCI or any
Subsidiary; or
<PAGE>
(g) short-tem liquid debt securities which for the time being are
rated at least AAA by Standard & Poor's Corporation or an equivalent
rating by any other reputable, rating agency.
"Consolidated Net Borrowings" means the aggregate outstanding
principal amount of Indebtedness of the Group less Cash and Cash Equivalents.
"Consolidated Net Worth" means, the aggregate of the amounts paid-up
or credited as paid-up on LCI's issued share capital and the amount of the
consolidated capital and revenue reserves of the Group (including, without
limitation, any share premium account, merger reserve, capital redemption
reserve, revaluation reserve and retained earnings) and any credit balance on
LCI's consolidated profit and loss account all as shown by the latest
consolidated financial statements of LCI delivered or to be delivered pursuant
to the Keep-Well Agreement from time to time but after:
(i) deducting any debit balance on such consolidated profit and
loss account;
(ii) deducting the net book value of all assets, after deducting
any reserves applicable thereto, which would be treated as
intangible under GAAP (excluding amounts attributable to
acquisition goodwill, trademarks, trade names, service marks,
brand names, copyrights, patents and similar property);
(iii) deducting any amounts distributed or proposed to be
distributed (other than to LCI or any other member of the
Group) out of the profits accrued prior to the date of such
financial statements to the extent that such distribution is
not provided for therein;
(iv) deducting all amounts attributable to minority interests, if
any, in Subsidiaries of LCI;
(v) excluding any sums set aside or otherwise reserved or provided
for taxation;
2
<PAGE>
(vi) adding back any diminution due to the writing off or
amortization of acquisition goodwill or the debiting of
acquisition goodwill to any reserve; and
(vii) making such adjustments to reflect any variations which shall
have occurred since the date of such financial statements:
(a) in the amounts paid up or credited as paid up on the
issued share capital of LCI and the consolidated capital
and revenue reserves of the Group;
(b) to reflect any changes in generally accepted accounting
principles and bases and the application of standards
and practices since then as may be appropriate in the
opinion of the auditors for the time being of LCI; and
(c) in the interest of LCI in any other member of the Group.
"Group" means LCI and its subsidiaries.
"Guaranty" means, with respect to any Person, any obligation (except
the endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
indebtedness, dividend or other obligation of any other Person in any manner,
whether directly or indirectly, including (without limitation) obligations
incurred through an agreement, contingent or otherwise, by such Person:
(a) to purchase such indebtedness or obligation or any property
constituting security therefor;
(b) to advance or supply funds (i) for the purchase or payment of
such indebtedness or obligation, or (ii) to maintain any working capital
or other balance sheet condition or any income statement condition of any
other Person or otherwise to advance or make available funds for the
purchase or payment of such indebtedness or obligation,
(c) to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such indebtedness or
3
<PAGE>
obligation of the ability of any other Person to make payment of the
indebtedness or obligation; or
(d) otherwise to assure the owner of such indebtedness or obligation
against loss in respect thereof.
provided that, the obligations of LCI under the Keep-Well Agreement to pay the
Accelerated Payment Amount shall be treated at any time as a Guaranty of
Indebtedness of the Borrower in an amount equal to 25% of the Accelerated
Payment Amount at such time. In any computation of the indebtedness or other
liabilities of the obligor under any Guaranty, the indebtedness or other
obligations that are the subject of such Guaranty shall be assumed to be direct
obligations of such obligor.
"Group Operating Profit" means, in respect of any period of the
Group, (a) the consolidated profit of the Group for such period before crediting
or deducting amounts attributable to extraordinary and exceptional items, all as
determined in accordance with GAAP, plus (to the extent deducted in determining
such consolidated profits), (b) all provisions for Taxes and (c) Net Interest
Payable; in each case as determined from the relevant consolidated financial
statements of LCI deliver or to be delivered pursuant to the Keep-Well Agreement
for such period.
"Indebtedness" with respect to any Person means, at any time,
without duplication,
(a) its liabilities for borrowed money (excluding accounts payable
in the ordinary course of business) and its redemption obligations upon
and following the date of redemption in respect of mandatorily redeemable
Preferred Stock;
(b) its liabilities pursuant to any note purchase facility or the
issue of bonds, notes, debentures, commercial paper, loan stock or similar
instruments;
4
<PAGE>
(c) all actual (as opposed to contingent) reimbursement obligations
(other than accounts payable in the ordinary course of business) in
respect of any acceptance or documentary credit facilities;
(d) its liabilities for the deferred purchase price of property,
assets or services acquired by such Person (excluding accounts payable
arising in the ordinary course of business but including all liabilities
created or arising under any conditional sale or other title retention
agreement with respect to any such property, assets or services);
(e) all liabilities appearing on its balance sheet in accordance
with GAAP in respect of Capital Leases;
(f) its liabilities in respect of the principal amount of any
receivables sold or discounted to a third party to the extent of recourse
to such Person or any of its Subsidiaries;
(g) Swaps of such Person; and
(h) any Guaranty of such Person with respect to liabilities of a
type described in any of clauses (a) through (h) hereof.
Indebtedness of any Person shall include all obligations of such Person of the
character described in clauses (a) through (h) to the extent such Person remains
legally liable in respect thereof notwithstanding that any such obligation is
deemed to be extinguished under GAAP.
"Net Interest Payable" means in respect of any period of the Group,
the aggregate amount of the interest, commission, fees and other finance charges
of whatsoever nature (including, without limitation, arrangement fees,
commitment or non-utilization fees, agency fees, monitoring fees and any
interest in respect of Capital Leases) incurred by each member of the Group less
all interest payments received by each member of the Group including interest
received in respect of Cash and Cash Equivalents of the Group and similar income
received during such period. In each case as determined from the relevant
consolidated financial statements of LCI delivered or to be delivered pursuant
to this Agreement for such period.
5
<PAGE>
"Subsidiary" means, as to any particular parent corporation, any
corporation of which more than 50% (by number of votes) of the Voting Shares
shall be owned, directly or indirectly, by such parent corporation; provided,
however, that notwithstanding the foregoing, the term subsidiary shall, in any
event, include any company or legal entity which is a "subsidiary" as defined in
Section 736 of the Companies Act 1985, as amended by Section 144 of the
Companies Act 1989, or as detailed in analogous legislation.
"Swaps" means, with respect to any Person, payment obligations with
respect to interest rate swaps, currency swaps and similar obligations
obligating such Person to make payments, whether periodically or upon the
happening of a contingency. For the purposes of the Keep-Well Agreement, the
amount of the obligation under any Swap shall be the amount determined in
respect thereof as of the end of the then most recently ended fiscal quarter of
such Person, based on the assumption that such Swap had terminated at the end of
such fiscal quarter, and in making such determination, if any agreement relating
to such Swap provides for the netting of amounts payable by and to such Person
thereunder or if any such agreement provides for the simultaneous payment of
amounts by and to such Person, then in each such case, the amount of such
obligation shall be the net amount so determined.
"Taxes" means all present or future taxes, levies, imposts, duties,
fees, assessments, deductions, withholdings or other governmental charges of any
nature whatsoever and any liabilities with respect thereto, including any
surcharge, penalties, additions to tax, fines or interest thereon, now or
hereafter imposed, levied, collected withheld or assessed by any jurisdiction or
by any political subdivision or taxing authority thereof or therein.
6
<PAGE>
SCHEDULE 3
MATERIAL SUBSIDIARIES
LONDON CLUBS HOLDINGS LIMITED
LONDON AMBASSADEURS CLUB LIMITED
RENDEZVOUS CLUB (LONDON) LIMITED
PALM BEACH CLUB LIMITED
SIX HAMILTON PLACE LIMITED
BURLINGTON STREET SERVICES LIMITED
ZEALCASTLE LIMITED
CORBY LEISURE RETAIL DEVELOPMENTS LIMITED
UNITLAW TRADING LIMITED
LONDON PARK TOWER CLUB LIMITED
PUBLICACE LIMITED
LOMASBOND PROPERTIES LIMITED
LONDON CLUBS (OVERSEAS) LIMITED
DECBURY LIMITED
GOLDEN NUGGET CLUB LIMITED
LONDON CLUBS MANAGEMENT LIMITED
THE SPORTSMAN CLUB LIMITED
RITZ CLUB (LONDON) LIMITED
<PAGE>
SCHEDULE 4
SUBSIDIARIES
(other than Dormant Subsidiaries)
ABH's Subsidiaries
Name: Aladdin Bazaar, LLC
State or Organization: Delaware
ABH Ownership: 50% member
In connection with the development of the Mall Project by Aladdin Bazaar, LLC
("Aladdin Bazaar"), if a guaranty, letter of credit or other form of credit
enhancement is required to be obtained by the Trust or ABH in order to insure
Aladdin Bazaar or any of its members that the Hotel/Casino will be completed and
opened successfully, ABH will be permitted to convey up to 50% of its interest
in Aladdin Bazaar to CS First Boston or any other institutional investor and
pledge any of its remaining interest in Aladdin Bazaar to such credit enhancer
or to any financial institution providing financing for the development of the
Mall Project. Furthermore, the Trust shall be entitled to pledge its membership
interest in ABH to either or both of a credit enhancer or financing source in
connection with the Mall Project.
Aladdin Holdings, LLC (AHL)
Name: Sommer Enterprises, LLC (SE)
State of Organization: Nevada
Ownership: SE owns a 98.7% membership interest in AHL
Name: Aladdin Gaming Enterprises, Inc. (AGE)
State of Organization: Nevada
Ownership: SE owns 100% of the issued and outstanding Class A Voting
Common Stock of AGE
SE owns 100% of the issued and outstanding Class B Non-Voting
Common Stock of AGE
<PAGE>
Name: Aladdin Gaming Holdings, LLC (ABH)
State or Organization: Nevada
Ownership: AGE owns a 25% common interest in ABH
SE owns a 47% common interest in ABH
Name: Aladdin Capital Corp. (Capital)
State or Organization: Nevada
Ownership: ABH owns 100% of the issued and outstanding common stock of
Capital
Name: Aladdin Gaming, LLC (Gaming)
State or Organization: Nevada
Ownership: ABH owns 100% of the issued and outstanding Common Shares of
Gaming
ABH owns 100% of the issued and outstanding Series A Preferred
Shares of Gaming
Name: Aladdin Music Holdings, LLC (ABH)
State or Organization: Nevada
Ownership: Aladdin owns a 100% common interest in ABH
Name: Aladdin Music, LLC
State or Organization: Nevada
Ownership: ABH owns a 100% common interest in ABH
London Clubs' Subsidiaries
See attachment.
<PAGE>
SCHEDULE 5
LITIGATION
Aronow, et al. v. Sommer, et al., Index No. 112618/95 (New York Sup. Ct.)
Kanbar, et al. v. Aronow, et al., Index No. 600301/97 (New York Sup. Ct.)
Sommer, et al. v. PMEC Associates and Co., et al., No. 88 Civ. 2537
(S.D.N.Y.)
<PAGE>
SCHEDULE 5A
TAX LIABILITIES
None.
<PAGE>
SCHEDULE 6
LICENSES, PERMITS, ETC.
ABH and AHL
See attachment.
<PAGE>
SCHEDULE 7
EXISTING INDEBTEDNESS
Outstanding Indebtedness of ABH and/or its Subsidiaries
$30,000,000 contingent liability (see Schedule 4)
Outstanding Indebtedness of AHL and/or its Subsidiaries
$65,000,000.00 loan to AHL from Credit Suisse First Boston and Sun America to be
paid off in full at closing.
LCI and/or its Subsidiaries
See attachment.
<PAGE>
SCHEDULE 8
OWNERSHIP OF BORROWER
See chart attached hereto.
<PAGE>
SCHEDULE 9
Terms of Intercreditor Deed
The Intercreditor Deed shall provide as follows:
1. The banks under the Facilities Agreement (or the Agent Bank on
their behalf), the holders of the Notes issued under any Note
Agreements, the Lenders, the Administrative Agent, the
Subsidiary Guarantors and LCI shall be party to the Deed. Any
transferees or assignees of such parties shall be required to
execute and deliver a deed of accession.
2. In any fiscal year of the Borrower, the Lenders will have an
unsubordinated right to receive a maximum of net payments (net
of all reimbursements from the other Sponsors) of $37.5
million from LCI.
3. In any insolvency, liquidation or winding-up proceeding of LCI
or any Subsidiary Guarantor, the banks under the Facilities
Agreement and the holders of the Notes issued under the Note
Agreements (the "Senior Creditors") shall be entitled to
receive payment in full of all amounts due to them from LCI or
any such Subsidiary Guarantor, as the case may be, under the
terms of the Facilities Agreement, the Note Agreements or any
guarantee thereof by such Subsidiary Guarantor prior to the
Lenders or the Administrative Agent receiving any payment.
4. If the Lenders receive any payment to which they are not
entitled, they will hold such payments in trust for the
benefit of the Senior Creditors.
5. The Deed shall be governed by English law.
<PAGE>
Amendment No. 1 to Design/Build Contract
ALADDIN HOLDINGS, LLC
2810 West Charleston Blvd., Ste. F-58
Las Vegas, Nevada 89102
(702) 870-1234
AMENDMENT NO. 1
This Amendment No. 1 is entered into this 21st day of January, 1998 by and
between Aladdin Holdings, LLC and Fluor Daniel, Inc.
WHEREAS, on December 4, 1997, the parties executed a Contract for the
design and construction of the Aladdin Hotel & Casino, related retail and
underground parking (the "Project");
WHEREAS, the parties now desire to amend said Contract in certain
particulars;
NOW, THEREFORE, for good and valuable consideration the receipt of which
is acknowledged, the parties agree as follows to:
Amend article 4.1 of the Contact in the following respects:
1) 4.1 Guaranteed Maximum Price. Design/Builder shall be paid on a
Guaranteed Maximum Price ("GMP") basis as described in Attachment G.
Subject to additions and deductions which may be made in accordance
with the Contract Documents, Design/Builder agrees that the total
costs payable by Owner for the Work described in Attachments A and E
shall not exceed a Guaranteed Maximum Price of Two Hundred
Sixty-Seven Million Dollars ($267,000,000.00), as set forth in
Attachment G. Design/Builder agrees to honor the GMP provided that
the Notice to Proceed is received on or before February 15, 1998. In
the event that the Notice to Proceed is not received on or before
February 15, 1998, Design/Builder reserves the right to revise the
GMP. In the event that the Notice to Proceed is not received on or
before March 1, 1998, Design/Builder may terminate this Contract
without any further obligation.
Except as specifically set forth above, all other terms and conditions of
the Contract remain unchanged.
FLUOR DANIEL, INC. ALADDIN HOLDINGS, LLC, a Delaware
Limited Liability Company
By: /s/ Bob McNamara By: ALADDIN MANAGEMENT CORP.,
--------------------------- a Nevada Corporation, its Manager
Title: Vice President
--------------------------
Date: January 21, 1998 By: /s/ Ronald Dictrow
--------------------------- ---------------------
Ronald Dictrow
Chief Financial Officer and Treasurer
<PAGE>
January 28, 1998 MARSHALL
Aladdin Gaming, LLC
280 Park Avenue
New York, NY 10017
Attention: Mr. Ronald Dictrow
Reference: Aladdin Hotel & Casino
Mixed Use Development Project
Fluor Daniel Job No. 64207400
Subject: Amendment 2 of the Contract and Amendment 5 of the Letter of
Agreement
Gentlemen,
This will confirm our agreement to amend the Contract and Letter of Agreement to
extend the February 15, 1998 date to February 27, 1998. All other terms and
condition will remain the same.
If you have any questions concerning this matter, please contact me anytime.
Very truly yours,
/s/ Larry Kossinger
Larry Kossinger
Senior Project Director
Attachments:
1. Amendment #2
2. Amendment #5
cc:
Mr. Robert Accordi, Tishman, NY, NY
Mr. Curtis Culver, FD, Sugarland, TX
Mr. Bob Fratti, ADP-FD of NV
Mr. Peter Goetz, Goetz, Fitzpatrick, Cartione, Eiseman, Finegan & Rubin, LLP,
NY, NY
Mr. Bob McNamara, ADPM, Rumford, RI
File
<PAGE>
ATTACHMENT N(3)
PARENT COMPANY GUARANTEE
This Agreement (hereinafter called the "Guarantee") made this 4th day of
December 1997 between FLUOR CORPORATION (hereinafter called "GUARANTOR") of the
first part and ALADDIN GAMING LLC (hereinafter called "OWNER"), of the second
part,
W I T N E S S E T H:
In consideration of Owner entering into an Agreement for Design/Build
Services dated December 4, 1997 for the Aladdin Hotel & Casino (hereinafter
called the "AGREEMENT") with GUARANTOR's subsidiary Fluor Daniel, Inc.
(hereinafter called "CONTRACTOR"), the GUARANTOR hereby covenants and agrees as
follows:
1. GUARANTOR guarantees the performance by CONTRACTOR of all CONTRACTOR's
obligations under the AGREEMENT. This Guarantee shall take effect as an
absolute, irrevocable and continuing guarantee.
2. If CONTRACTOR fails to perform any of its obligations under the AGREEMENT,
or commits any breach thereof, GUARANTOR shall immediately: (i) take such
steps as may be necessary to have CONTRACTOR perform all CONTRACTOR's
obligations under the AGREEMENT, or remedy any breach thereof; or (ii)
take such steps as may be necessary itself, or through a third party other
than CONTRACTOR, to perform all of CONTRACTOR's obligations under the
AGREEMENT, or to remedy any breach thereof.
3. If GUARANTOR fails at any time to perform any obligations under this
Guarantee after written demand having been made by OWNER, OWNER may,
wtihout the need to give further notice thereof to GUARANTOR, perform
itself, or have any third party perform, any such obligations and
GUARANTOR shall indemnify OWNER from and against any and all losses,
damages, costs and expenses which may be incurred by OWNER by reason of or
in connection with any such failure, including without limitation any and
all costs incurred by OWNER in so performing or so having performed, such
obligations.
4. GUARANTOR, shall not in any way be released from any of its obligtions
arising under this Guarantee by: (i) termination of the AGREEMENT; (ii)
alterations to the terms of the AGREEMENT; or (iii) forbearance or
forgiveness in respect of any matter or thing concerning the CONTRACTOR on
the part of OWNER or CONTRACTOR.
5. The rights and remedies of OWNER arising under this Guarantee shall
operate independently of any rights and remedies OWNER may have arising
under any other agreement (including without limitation the AGREEMENT) and
OWNER shall not be required to proceed first or at all against CONTRACTOR
or any other person before enforcing the terms of the Guarantee.
6. The liability of GUARANTOR under this Guarantee shall not be greater than
those of CONTRACTOR under the AGREEMENT.
7. This Guarantee shall in all respects be construed and interpreted and
shall operate in accordance with the laws of the state governing the
AGREEMENT.
IT WITNESS WHEREOF, the Parties to this Guarantee have caused this
Guarantee to be executed by their duly authorized representatives the day and
year first above written.
FLUOR CORPORATION
By: /s/ L. N. Fisher
----------------
Name: L. N. Fisher
Title: Senior Vice President - Law
and Secretary
<PAGE>
Site Work, Development and Construction Agreement
SITE WORK DEVELOPMENT
AND CONSTRUCTION AGREEMENT
by and among
ALADDIN GAMING, LLC,
a Nevada limited liability company
"Aladdin Gaming"
and
ALADDIN HOLDINGS, LLC,
a Delaware limited liability company
"Holdings"
and
ALADDIN BAZAAR, LLC,
a Delaware limited liability company
"Bazaar Company"
<PAGE>
TABLE OF CONTENTS
Page
RECITALS.....................................................................1
ARTICLE I DEFINITIONS......................................................2
ARTICLE II DEMOLITION WORK AND SITE WORK....................................9
2.1 Performance of Demolition Work...................................9
2.2 Site Work Approvals..............................................9
ARTICLE III CONSTRUCTION OF IMPROVEMENTS....................................10
3.1 Bazaar Plans and Improvements...................................10
3.2 Aladdin Plans and Improvements..................................10
3.3 Conditions Precedent............................................11
3.4 Approval of Construction Schedule...............................11
ARTICLE IV CONSTRUCTION OBLIGATIONS
AND COVENANTS...................................................11
4.1 Construction Standards..........................................11
4.2 Insurance.......................................................13
4.3 Indemnification.................................................13
4.4 Waiver of Subrogation...........................................13
4.5 Reimbursement Obligations.......................................14
4.6 Remedies and Self-Help Cure.....................................14
ARTICLES V and VI [INTENTIONALLY DELETED].................................15
ARTICLE VII EXERCISE OF APPROVAL RIGHTS....................................15
ARTICLE VIII DISPUTE RESOLUTION PROCEDURES.................................15
8.1 Arbitration.....................................................15
8.3 Fees and Costs..................................................16
ARTICLE IX FORCE MAJEURE.............................................17
9.1 Force Majeure...................................................17
9.2 Notice..........................................................17
ARTICLE X MISCELLANEOUS PROVISIONS........................................17
10.1 Attorneys' Fees.................................................17
10.2 Notice..........................................................17
i
<PAGE>
Page
10.3 Mortgagee Notice Provisions.....................................19
10.4 Amendment.......................................................20
10.5 No Third Party Beneficiaries....................................20
10.6 Counterparts....................................................20
10.7 Governing Law...................................................20
10.8 Waivers.........................................................21
10.9 Assignment......................................................21
10.10 Successors and Assigns..........................................21
10.11 Further Assurances..............................................21
10.12 Title and Headings..............................................21
10.13 Pronouns........................................................21
10.14 Severability....................................................21
10.15 Drafting Ambiguities............................................22
10.16 Entire Agreement................................................22
10.17 Conflicts with REA..............................................22
10.19 Recording Memorandum and Termination of Agreement...............22
ii
<PAGE>
SITE WORK DEVELOPMENT
AND CONSTRUCTION AGREEMENT
THIS SITE WORK DEVELOPMENT AND CONSTRUCTION AGREEMENT ("Agreement") is
entered into as of this 26th day of February, 1998, by and among Aladdin Gaming,
LLC, a Nevada limited liability company ("Aladdin Gaming"), Aladdin Holdings,
LLC, a Delaware limited liability company ("Holdings") and Aladdin Bazaar, LLC,
a Delaware limited liability company ("Bazaar Company"), with reference to the
following recitals:
R E C I T A L S
A. Aladdin Gaming is the owner of that certain real property generally
located at 3667 Las Vegas Boulevard South in Clark County, Nevada, which is more
particularly described on Exhibit "A-1" attached hereto (the "Site").
B. Pursuant to a lease agreement (the "Bazaar Lease"), Aladdin Gaming will
lease to Bazaar Company that portion of the Site more particularly described on
Exhibit "A-2" attached hereto (the "Bazaar Site") on which Bazaar Company shall
construct an enclosed themed entertainment shopping center consisting of
approximately 726,000 square feet of gross building area, including
approximately 462,000 retail gross leasable area at particular elevations of the
Aladdin Improvements (the "Retail Facility"), as well as a multi-level parking
structure for approximately 4,800 motor vehicles, and additional surface-level
parking facilities beneath and adjacent to the Retail Facility for approximately
364 motor vehicles (collectively, the "Common Parking Area"), all as shown on
the Plans which are described on Exhibit "B" attached hereto. The Retail
Facility and the Common Parking Area are hereinafter referred to collectively as
the "Bazaar Improvements".
C. On that portion of the Site that does not include the Bazaar Site, the
Music Site or the Energy Site (the "Aladdin Site") (more particularly described
on Exhibit "A-3" attached hereto), the Aladdin Parties shall demolish or cause
to be demolished portions of, and shall renovate, expand and construct or cause
to be renovated, expanded and constructed, the hotel-casino commonly known as
the "Aladdin Hotel and Casino" containing approximately 2,600 rooms and an
approximately 100,000 square foot casino, together with related and physically
attached facilities (the "Aladdin Hotel and Casino"), and including parking
facilities beneath the Aladdin Hotel and Casino for approximately 500 motor
vehicles (collectively, the "Aladdin Parking Area"), all as shown on the Plans.
The Aladdin Hotel and Casino and the Aladdin Parking Area are hereinafter
referred to collectively as the "Aladdin Improvements".
D. Aladdin Gaming has leased to Energy Company a portion of the Site (the
"Energy Site") (more particularly described on Exhibit "A-5" hereto") pursuant
to a lease agreement dated as of December 3, 1997, pursuant to which Energy
Company is obligated to construct and operate a central energy plant (the
"Central Energy Plant") for the cogeneration of electricity, chilled and hot
water to the Site and the distribution of electricity, chilled water and hot
water to the Site. Pursuant to a lease agreement (the "Music Lease"), Aladdin
Gaming has leased to Aladdin Music
<PAGE>
approximately 4.75 acres located on the corner of Audrie Street and Harmon
Avenue (the "Music Site") (as more particularly described on Exhibit "A-4"
hereto), to permit the construction and operation of a second hotel and casino
facility consisting of certain related and physically attached facilities,
including a hotel containing approximately 1,000 rooms and an approximately
50,000 square foot casino (the "Music Hotel").
E. The Site currently has certain improvements, including portions of the
Aladdin Hotel and Casino, from which asbestos must be removed or abated or which
will be demolished, razed and removed (collectively, the "Demolition Work") by
the Aladdin Parties pursuant to the terms of this Agreement and as shown on
Exhibit "C" hereto. Thereafter, pursuant to the terms hereof, the Site will be
prepared by the Aladdin Parties with certain Infrastructure Improvements and
related work all as specified in the Site Work Plans (collectively, the "Site
Work") so as to then permit the development and construction of the Bazaar
Improvements by Bazaar Company and the Aladdin Improvements by the Aladdin
Parties. The Bazaar Improvements, the Aladdin Improvements, the Central Energy
Plant and the Music Hotel are sometimes hereinafter collectively referred to as
the "Redeveloped Aladdin".
F. Holdings has entered into an agreement with the County of Clark, State
of Nevada (the "County") dated March 18, 1997 (the "DPW Agreement") which
permits Aladdin Gaming and/or its assignees to perform the Demolition Work and a
portion of the Site Work prior to the issuance of any building permits.
G. The development, construction and operation of the Redeveloped Aladdin
shall be conducted in accordance with and subject to the provisions and
requirements of that certain Construction, Operation and Reciprocal Easement
Agreement to be entered into concurrently herewith by and among Aladdin Gaming,
Aladdin Music, and Bazaar Company, among others (the "REA").
H. The parties to this Agreement desire to set forth their respective
rights, duties and obligations with respect to the Demolition Work and the Site
Work and their subsequent development and construction obligations with respect
to the Redeveloped Aladdin.
NOW, THEREFORE, incorporating and with reference to the foregoing recitals
and in consideration of the mutual promises, representations and covenants set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the following
particular meanings:
Affiliate. "Affiliate" means a Person that Controls, is directly or
indirectly Controlled by, or is under common ownership or Control with, another
Person. Notwithstanding the foregoing or any other provision of this Agreement
to the contrary, Bazaar Company shall not be considered to
2
<PAGE>
be an Affiliate of Aladdin Gaming, Holdings or any Affiliates thereof, and
Aladdin Gaming and Holdings shall not be considered to be Affiliates of Bazaar
Company or any Affiliates thereof, notwithstanding the fact that an Affiliate of
Aladdin Gaming and Holdings holds a fifty percent (50%) membership interest in
Bazaar Company.
Agreement. "Agreement" means this Site Work Development and Construction
Agreement, as amended from time to time.
Aladdin Gaming. "Aladdin Gaming" is defined in the introductory paragraph
of this Agreement.
Aladdin Hotel and Casino. "Aladdin Hotel and Casino" is defined in Recital
C of this Agreement.
Aladdin Improvements. "Aladdin Improvements" is defined in Recital C of
this Agreement and includes the Buildings, Separate Utility Lines, Common
Utility Lines and truck loading docks and access areas, turn-around and
loading/delivery areas, storage racks, delivery elevators and related
facilities, constructed and installed on the Aladdin Site, including any present
or future construction or alteration thereof from time to time.
Aladdin Music. "Aladdin Music" means Aladdin Music, LLC, a Nevada limited
liability company.
Aladdin Parking Area. "Aladdin Parking Area" is defined in Recital C of
this Agreement and shall mean that portion of the Aladdin Improvements for the
shared use of the Redeveloped Aladdin and all of its Permittees in connection
with the parking, passage and loading of motor vehicles, together with related
improvements which are at any time constructed in connection therewith,
including driveways, pedestrian sidewalks, walkways and stairways, escalators,
elevators, light standards, directional signs, curbs and landscaping within and
adjacent to areas used for such shared parking, passage and loading, underneath
the Aladdin Hotel and Casino for the use of the Aladdin Parties and their
respective Permittees, in each case and to the extent indicated on Exhibit "B".
Aladdin Parties. "Aladdin Parties" shall mean, collectively, Aladdin
Gaming and Holdings, each of which shall be jointly and severally liable for the
obligations and responsibilities of the other hereunder.
Aladdin Plans. "Aladdin Plans" is defined in Section 3.2(a) of this
Agreement.
Aladdin Site. "Aladdin Site" is defined in Recital C of this Agreement.
Bazaar Company. "Bazaar Company" is defined in the introductory paragraph
of this Agreement.
Bazaar Improvements. "Bazaar Improvements" is defined in Recital B of this
Agreement and includes the Buildings, Separate Utility Lines, Common Utility
Lines and truck loading docks
3
<PAGE>
and access areas, turn-around and loading/delivery areas, storage racks,
delivery elevators and related facilities, constructed and installed on the
Bazaar Site, including any present or future construction or alteration thereof
from time to time.
Bazaar Lease. "Bazaar Lease" is defined in Recital B of this Agreement,
and includes any amendments thereof from time to time.
Bazaar Plans. "Bazaar Plans" is defined in Section 3.1(a) of this
Agreement.
Bazaar Site. "Bazaar Site" is defined in Recital B of this Agreement.
Building. "Building" shall mean all portions of the buildings and
structures, as altered or restored, that exist or are constructed from time to
time on a party's Tract, including the Shell and Facade.
Central Energy Plant. "Central Energy Plant" is defined in Recital D of
this Agreement and shall mean that facility by and through which the Energy
Company will generate and distribute electricity, hot water and chilled water
sufficient to service the power, heating, ventilating and air conditioning
requirements of the Redeveloped Aladdin pursuant to the Energy Company
Agreement.
CIP. "CIP" shall mean the "Controlled Insurance Program" as defined and
set forth in the Design/Build Contract.
Claim. "Claim" is defined in Section 4.3(a) of this Agreement.
Common Parking Area. "Common Parking Area" is defined in Recital B of this
Agreement and shall mean that portion of the Bazaar Improvements for the shared
use of the Redeveloped Aladdin and all of its Permittees in connection with the
parking, passage and loading of motor vehicles, together with related
improvements which are at any time constructed in connection therewith including
driveways, pedestrian sidewalks, walkways and stairways, escalators, elevators,
light standards, directional signs, curbs and landscaping within and adjacent to
areas used for such shared parking, passage and loading, in each case to the
extent indicated on Exhibit "B".
Common Utility Lines. "Common Utility Lines" shall mean all utility lines,
connections and facilities or portions thereof that extend to a particular point
of delivery to a particular Tract designated on the Plans attached hereto as
Exhibit "B", installed for the common use and benefit of all Buildings and
Tracts comprising the Redeveloped Aladdin for the transmission of domestic
water, fire protection water, storm drainage, and sanitary sewage, which the
Aladdin Parties shall install pursuant to this Agreement and which shall be
maintained, repaired and restored as set forth in the REA.
Concerned Party, Concerned Parties. "Concerned Party" and "Concerned
Parties" are defined in Section 8.1(a) of this Agreement.
Construction Schedule. "Construction Schedule" shall mean that time
schedule in reasonable
4
<PAGE>
detail attached hereto as Schedule 1 (as amended from time to time pursuant
hereto) indicating certain key, threshold dates for the construction and
completion of the Demolition Work, Site Work, the Bazaar Improvements, the
Aladdin Improvements, the Music Hotel, and the Central Energy Plant, including
the First Scheduled Opening Date and the Second Scheduled Opening Date, and
5
<PAGE>
changes to which and further refinements of which the parties must agree in
accordance with Section 3.4 of this Agreement.
Control. "Control" shall mean ownership of a Person or party in excess of
50% and/or the power, exercisable jointly or severally, to manage and direct a
Person through the direct or indirect ownership of partnership interest, stock,
trust powers, or other beneficial interests and/or management or voting rights.
County. "County" is defined in Recital F of this Agreement.
Cure. At such time as a Person is in Default and has received a demand for
correction of such Default, such Person and its Mortgagee shall be permitted
thirty (30) days or such other amount of time specified herein within which to
render remedial performance sufficient to correct said Default, which correction
shall be a "Cure." Whenever a Default is not capable of Cure within the
specified period, a Defaulting Party (or its Mortgagee) shall be deemed to have
Cured the Default if it shall have commenced Cure within the specified time
period and shall have prosecuted and pursued the Cure continuously and
diligently thereafter to completion.
Default, Defaulting Party. "Default" shall mean a party's breach or
violation of any of covenants, terms or obligations set forth in this Agreement.
"Defaulting Party" shall mean the party in Default.
Demolition Work. "Demolition Work" is defined in Recital E of this
Agreement.
Design/Build Contract. "Design/Build Contract" shall mean that certain
Contract between Aladdin Gaming and Fluor Daniel, Inc. for Design/Build Services
dated as of December 4, 1997.
Dispute. "Dispute" is defined in Section 8.1(a) of this Agreement.
Dispute Resolution Procedures. "Dispute Resolution Procedures" means those
procedures for resolving disputes among the parties set forth in Article VIII of
this Agreement.
DPW Agreement. "DPW Agreement" is defined in Recital F of this Agreement.
Energy Company. "Energy Company" means Northwind Las Vegas, LLC, a Nevada
limited liability company.
Energy Company Agreement. "Energy Company Agreement" shall have the
meaning ascribed to it in the REA.
Energy Company Utility Lines. "Energy Company Utility Lines" shall mean
all utility lines, connections and facilities or portions thereof that extend to
a particular point of delivery to a particular Tract designated on the Plans
attached hereto as Exhibit "B", installed for the common use and benefit of all
Buildings and Tracts comprising the Redeveloped Aladdin for the transmission of
chilled water, hot water and electricity, which shall be installed and
maintained by the Energy
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Company pursuant to the Energy Company Agreement.
Energy Site. "Energy Site" is defined in Recital D of this Agreement.
Excuse. "Excuse" means (a) the occurrence of an event of force majeure
pursuant to Article IX that interferes with a party's ability to perform its
obligations under this Agreement, or (b) the Default of the other party with
respect to its construction or restoration covenants set forth herein and in the
REA, to the extent that such Default interferes with a non-Defaulting Party's
ability to perform its obligations under this Agreement, which force majeure
event or which Default shall result in the temporary relief of the
interfered-with or non-Defaulting Party (as applicable) from its duty to
construct or restore, as applicable, for so long as such force majeure event
continues or such Defaulting Party has not Cured its Default.
Facade. "Facade" shall mean the facia or front portions of the Buildings
constituting the Aladdin Hotel and Casino that face Las Vegas Boulevard, as more
specifically described in the Plans attached hereto as Exhibit "B".
First Scheduled Opening Date. "First Scheduled Opening Date" shall mean
the date by which the Aladdin Improvements and the Bazaar Improvements are
scheduled to be first opened for business to the public, which shall mean that
(a) all certificates of occupancy for the Aladdin Hotel and Casino, the Common
Parking Area, the Aladdin Parking Area, the Retail Facility and the Central
Energy Plant shall have been issued by the County, (b) with respect to the
Aladdin Hotel and Casino, all design and construction work in the casino has
been substantially completed, the casino is fully operational, substantially all
Salle Privee Facilities are open, and substantially all of the public areas
(other than convention and meeting rooms) of the Aladdin Hotel and Casino are
open; (c) the Common Parking Area and the Aladdin Parking Area are fully
operational; (d) with respect to the Retail Facility, all of Bazaar Company's
design and construction work in the Retail Facility, including substantially all
of the public areas, has been substantially completed and the same is open; and
(e) the Central Energy Plant is fully operational or utilities are available for
use by the parties from an alternative source. The First Scheduled Opening Date
shall be set forth in the Construction Schedule. Notwithstanding this fact,
thirteen (13) months prior to the date set forth in the Construction Schedule,
the parties hereto, in their reasonable discretion, shall confirm and establish
the First Scheduled Opening Date and thereafter, subject only to an Excuse, the
First Scheduled Opening Date shall not be changed unless all parties, each in
its sole and absolute discretion, agrees to such change.
Indemnitor. "Indemnitor" is defined in Section 4.3(a) of this Agreement.
Infrastructure Improvements. "Infrastructure Improvements" means those
off-site and on-site infrastructure improvements as more specifically described
on the Site Work Plans attached as Exhibit "D" installed, made, constructed,
restored or relocated by the Aladdin Parties in order to prepare the Site for
the development and construction of the Redeveloped Aladdin, and for ongoing
operation as required by the DPW Agreement, the Traffic Study and the County,
including, without limitation, grading, pad preparation, streets (including,
without limitation, the realignment of Harmon Avenue, if and to the extent the
County requires the completion of such realignment),
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roadways, driveways, walkways, sidewalks, curbs, bridges, turning lanes, traffic
control devices, traffic signals, traffic mitigation measures, water drainage
and flood control mitigation measures, street lights, driveway and walkway
lights, Building lights (including lighting and ceilings that are underneath the
Retail Facility), signage, landscaping, pedestrian bridges, tunnels and
overpasses and preparation for the installation of utilities.
LLC Agreement. "LLC Agreement" shall mean that certain Limited Liability
Company Agreement of Bazaar Company dated September 3, 1997, by and between TH
Bazaar Centers, Inc., a Delaware corporation, and Aladdin Bazaar Holdings, LLC,
a Nevada limited liability company, as amended on October 16, 1997, and from
time to time.
Mortgage; Mortgagor; Mortgagee. "Mortgage" shall mean an indenture of
mortgage, deed of trust encumbering all or a portion of the interest of a party
("Mortgagor") in its Tract. "Mortgagee" shall mean either the trustee and
beneficiary/mortgagee, individually or collectively as appropriate, under a
Mortgage.
Music Hotel. "Music Hotel" is defined in Recital D of this Agreement.
Music Lease. "Music Lease" is defined in Recital D of this Agreement.
Music Site. "Music Site" is defined in Recital D of this Agreement.
NRS. "NRS" means the Nevada Revised Statutes, as currently in effect and
as amended from time to time.
Permits. "Permits" means those approvals, licenses, permits, variances,
entitlements and certificates of occupancy relating to or required for the
Demolition Work, the Site Work and the construction of the Aladdin Improvements
and the Bazaar Improvements, as the case may be, including but not limited to
those set forth on Schedule 2 hereto, which shall be obtained by the Aladdin
Parties or Bazaar Company (with respect to the Bazaar Improvements), as
appropriate, at such parties' sole cost and expense.
Permittee. "Permittee" shall mean any Person from time to time entitled by
the parties hereto to use, occupy or visit the Redeveloped Aladdin under any
lease, sublease, deed or other instrument or arrangement, and its respective
officers, directors, employees, representatives, agents, partners, members,
managers, agents, architects, engineers, contractors, customers, visitors,
invitees, tenants, subtenants, licenses and concessionaires, including, without
limitation, the Project Architect/Engineer and the Project Contractor and their
authorized agents and employees.
Person. "Person" shall mean an individual, fiduciary, trust, partnership,
limited-liability company, firm, association and corporation, or any other form
of business or governmental entity.
Plans. "Plans" shall mean collectively, the Aladdin Plans and the Bazaar
Plans described on Exhibit "B" attached hereto, which shall be those certain
drawings and plans to include schematics, preliminary and working drawings,
designs, specifications, criteria and progress reports, as amended
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and revised from time to time (including during construction), with respect to
the design, development and construction of the Aladdin Improvements and the
Bazaar Improvements, which changes must be approved by the parties in accordance
with Sections 3.1 and 3.2 of this Agreement and by the County in connection with
the issuance of building permits and certificates of occupancy. The parties
understand that the Plans shall be in final "as-built" form only at or after the
completion of all work thereunder. The Plans shall include and reflect, without
limitation, all plans and specifications for Buildings, Utility Lines, exterior
and accent lighting, vehicle and pedestrian access, setback requirements, and
the like.
Pro Forma Budget. "Pro Forma Budget" shall mean that certain pro forma
budget attached hereto as Schedule 3 prepared by the Aladdin Parties identifying
the costs to be incurred by the Aladdin Parties for the Site Work.
Project Architect/Engineer. "Project Architect/Engineer" shall have the
meaning ascribed to it in the REA.
Project Contractor. "Project Contractor" shall have the meaning ascribed
to it in the REA.
REA. "REA" is defined in Recital G of this Agreement.
Redeveloped Aladdin. "Redeveloped Aladdin" is defined in Recital E of this
Agreement.
Reimbursement Obligation. "Reimbursement Obligation" is defined in Section
4.5(a) of this Agreement.
Retail Facility. "Retail Facility" is defined in Recital B of this
Agreement.
Salle Privee Facilities. "Salle Privee Facilities" shall mean that
separate 15,000 square foot luxurious gaming section of the Aladdin Hotel and
Casino operated by London Clubs which is intended to cater to wealthy clientele.
Second Scheduled Opening Date. "Second Scheduled Opening Date" shall mean
that date by which the Music Hotel is scheduled to be first opened for business
to the public, which shall mean that (a) all certificates of occupancy for the
Music Hotel shall have been issued by the County, and (b) all design and
construction work in the casino area of the Music Hotel has been completed, the
casino is fully operational and guest rooms are ready to be occupied by guests.
The Second Scheduled Opening Date shall in no event be later than the later of
(i) six (6) months after the First Scheduled Opening Date and (ii) November 1,
2000.
Separate Utility Lines. "Separate Utility Lines" shall mean all utility
lines, connections and facilities or portions thereof that extend to a
particular point of delivery to a particular Tract designated on the Plans
attached hereto as Exhibit "B", installed for the sole and exclusive use and
benefit of any Buildings, Tracts or portions thereof comprising the Redeveloped
Aladdin for the transmission of electrical power, natural gas, chilled water,
hot water, domestic water, fire protection water, storm drainage, sanitary
sewage, telephone service, cable television service, and other
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telecommunication services, which the party requiring and benefitting from the
use of such Separate Utility Lines shall install, and which shall be maintained,
repaired and restored as set forth in the REA.
Shell. "Shell" shall mean the Buildings without interior finish that will
constitute the Retail Facility and the Aladdin Hotel and Casino, built by the
Project Contractor, as more specifically described on Exhibit "B".
Site. "Site" is defined in Recital A of this Agreement.
Site Work. "Site Work" is defined in Recital E of this Agreement and is
shown on the Site Work Plans, and includes all Infrastructure Improvements, as
well as the installation and construction of all above- and below-ground
footings, girders, columns, braces, load-bearing walls, foundations and standard
structural support elements necessary for the construction, support, structural
integrity, enclosure and operation of Buildings and other improvements
constituting the Redeveloped Aladdin except for the Music Hotel and the Central
Energy Plant, and any replacement, substitution or modification thereof, all of
which shall be designed, installed and constructed by the Aladdin Parties, at
their sole cost and expense.
Site Work Plans. "Site Work Plans" shall mean those certain drawings and
plans to include schematics, preliminary and working drawings, designs,
specifications, criteria and progress reports, as amended and revised from time
to time (including during the Site Work in accordance with Section 2.2 hereof),
with respect to the Site Work, described on Exhibit "D" hereto, and shall
include and reflect, without limitation, easements for the installation, use,
maintenance, repair, replacement, relocation, restoration and/or removal of all
Site Work.
Tract. "Tract" shall mean the Buildings, land and/or air space comprising
the Bazaar Site, the Music Site, the Energy Site or the Aladdin Site, as
applicable, together with all other improvements of a party now or hereafter
located thereon.
Traffic Study. "Traffic Study" means the traffic impact mitigation plan
approved by the Board of County Commissioners of the County with respect to the
Redeveloped Aladdin.
Utility Lines. "Utility Lines" shall mean all Common Utility Lines,
Separate Utility Lines and Utility Company Utility Lines.
ARTICLE II
DEMOLITION WORK AND SITE WORK
2.1 Performance of Demolition Work. Following the issuance of all Permits,
including those identified on Schedule 2, as are required to perform the
Demolition Work, the Aladdin Parties, at their sole cost and expense, shall
commence the Demolition Work and shall complete same in accordance with the
Construction Schedule.
2.2 Site Work Approvals.
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(a) The most current Site Work Plans are identified on Exhibit "D".
The Aladdin Parties, at their sole cost and expense, shall prepare or cause to
be prepared and shall provide Bazaar Company with copies of all revised Site
Work Plans as soon as prepared by the Project Architect/Engineer and in no event
on less than a monthly basis after the date of this Agreement until the
completion of the Site Work. The Site Work Plans and all revised Site Work Plans
(which shall clearly identify all changes from the previously approved Site Work
Plans) shall be subject to the process and time period for approval each month
that is set forth in Section 3.1 of the REA.
(b) If Bazaar Company objects to the Site Work Plans and the parties
are unable to resolve their differences in accordance with the procedures and
within the time period contained in Section 3.1 of the REA, any party may
thereafter initiate the Dispute Resolution Procedures. The Aladdin Parties shall
not undertake any Site Work unless same is set forth on Site Work Plans which
have been approved or deemed approved by Bazaar Company pursuant to this Section
2.2
(c) The Aladdin Parties, at their sole cost and expense (subject
only to the Reimbursement Obligation), shall proceed with and diligently
prosecute to completion the Site Work in conformance with the approved Site Work
Plans and in accordance with the Construction Schedule.
ARTICLE III
CONSTRUCTION OF IMPROVEMENTS
3.1 Bazaar Plans and Improvements.
(a) In accordance with the Construction Schedule, Bazaar Company, at
its sole cost and expense, shall prepare or cause to be prepared, and shall
provide to the Aladdin Parties for review as soon as prepared by the Project
Architect/Engineer and in no event on less than a monthly basis until the
completion of construction of the Bazaar Improvements, the Plans to be used to
construct the Bazaar Improvements (the "Bazaar Plans"). The Bazaar Plans shall
be attached to this Agreement as Exhibit "B-1". The process for approval of the
Bazaar Plans shall be that set forth in the LLC Agreement and in the REA.
(b) Subject to the conditions precedent set forth in Section 3.3
hereof and in accordance with the Construction Schedule, Bazaar Company, at its
sole cost and expense, shall proceed with the construction of the Bazaar
Improvements and shall diligently prosecute to completion same in conformance
with the Bazaar Plans and the Construction Schedule.
3.2 Aladdin Plans and Improvements.
(a) In accordance with the Construction Schedule, the Aladdin
Parties, at their sole cost and expense, shall prepare or cause to be prepared
and shall provide Bazaar Company with copies of all Plans used to construct the
Aladdin Improvements (the "Aladdin Plans") as soon as prepared by the Project
Architect/Engineer and in no event on less than a monthly basis until the
completion of construction of the Aladdin Improvements. The Aladdin Plans shall
be attached to this Agreement as Exhibit "B-2". The process and time period for
approval of the Aladdin Plans
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shall be that set forth in Section 3.1 of the REA.
(b) If Bazaar Company objects to the Aladdin Plans and the parties
are unable to resolve their differences in accordance with the procedures and
within the time period contained in Section 3.1 of the REA, any party may
thereafter initiate the Dispute Resolution Procedures.
(c) Subject to the conditions precedent set forth in Section 3.3
hereof and in accordance with the Construction Schedule, the Aladdin Parties, at
their sole cost and expense, shall proceed with the construction of the Aladdin
Improvements and shall diligently prosecute to completion same in conformance
with the Aladdin Plans and the Construction Schedule.
3.3 Conditions Precedent.
(a) Bazaar Company's obligations to begin construction of the
improvements for which it is responsible pursuant to Sections 3.1 and 3.2 above
shall be subject to satisfaction of the following conditions:
(i) The Demolition Work and the Site Work (or that portion
thereof which is necessary to construct the Bazaar Improvements) shall have been
completed in the manner described herein; and
(ii) The closing of the construction financing for the Bazaar
Improvements.
(b) The Aladdin Parties' obligations to begin construction of the
improvements for which they are responsible pursuant to Sections 3.1 and 3.2
above shall be subject to the closing of the construction financing for the
Aladdin Improvements.
3.4 Approval of Construction Schedule. The Aladdin Parties and Bazaar
Company have mutually agreed upon the Construction Schedule attached hereto,
although they anticipate that the Construction Schedule will be periodically
revised and updated. Except as otherwise provided herein (in particular, with
respect to the determination of the First Scheduled Opening Date), any material
changes to the Construction Schedule must be approved by both the Aladdin
Parties and Bazaar Company, in their reasonable discretion. If the parties
cannot mutually agree to any such material change to the Construction Schedule
proposed by a party then the parties shall adhere to the then existing
Construction Schedule (subject to the force majeure provisions of Article IX).
ARTICLE IV
CONSTRUCTION OBLIGATIONS
AND COVENANTS
4.1 Construction Standards. In addition to the other obligations of the
parties hereunder, the parties hereby covenant and agree that:
(a) The standard of quality of development for the Aladdin Hotel and
Casino (as
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of the First Scheduled Opening Date) shall be equal to or better than the
general quality (as of the date of this Agreement) of the Mirage Hotel and
Casino (the "Mirage"), as to the Aladdin Hotel and Casino, including but not
limited to interior finish, theming and attraction package, and standard hotel
rooms, with a higher percentage of suites and king parlors. Such standards are
intended to attract as a primary target the upper middle market segment, with an
ambiance equal to or better than Bally's Casino and Hotel and the Mirage. Upon
the First Scheduled Opening Date, the Aladdin Hotel and Casino is intended to be
one of the top five hotel/casinos on the Las Vegas Strip, taking into
consideration for such purposes the hotels existing and/or announced as of the
date hereof in terms of market segment, average daily room rate and overall
ambiance and market perception. Bazaar Company acknowledges that such standards
are not intended to be a guaranty of the economic performance of the Aladdin
Hotel and Casino and no party shall have any liability under this Agreement with
respect to such economic performance. The standard of quality of development for
the Retail Facility (as of the First Scheduled Opening Date) shall be equal to
or better than the general quality of the Forum Shops (as of the date of this
Agreement).
(b) All work shall be performed in a good and workmanlike manner,
and in accordance with good construction practice in the manner customary for
such improvements, and (i) in substantial compliance with the Site Work Plans
and the Aladdin Plans and Bazaar Plans, as applicable, approved pursuant hereto,
unless otherwise approved in writing by Bazaar Company with respect to the
Aladdin Plans or by the Aladdin Parties with respect to the Bazaar Plans, (ii)
in strict compliance with all applicable laws, ordinances, orders, rules,
regulations, requirements of all federal, state and municipal governments and
the appropriate departments, commissions, boards and officers thereof and all
Permits, and (iii) in strict compliance with all covenants, conditions and
restrictions affecting the Site, including the covenants of any Mortgage on any
Tract or the Site and of the REA, or the requirements of any Mortgagee or
insurer.
(c) Subject to the force majeure provisions set forth in Article IX
below, the parties shall prosecute and pursue the work for which they are
responsible hereunder with reasonable dispatch and diligence and without
unreasonable delay and in strict compliance with the Construction Schedule,
using commercially reasonable efforts to, (i) in the case of the Aladdin
Parties, (A) complete construction of the Aladdin Hotel and Casino and the
Aladdin Parking Area by the First Scheduled Opening Date, (B) enter into an
agreement to cause the completion of the construction of the Music Hotel by the
Second Scheduled Opening Date, and (C) if the Central Energy Plant is not
operational by the First Scheduled Opening Date, cause utilities to be provided
to the Site from alternative energy sources, and, (ii) in the case of Bazaar
Company, complete construction of the Retail Facility and the Common Parking
Area by the First Scheduled Opening Date.
(d) The Project Architect/Engineer and Project Contractor shall be
engaged under separate written contracts with the Aladdin Parties and Bazaar
Company, each reasonably satisfactory to the other. Regardless of whether the
Project Architect/Engineer or Project Contractor is working on any improvements
in a particular Tract, with respect to its own construction obligations, such
party shall use all reasonable efforts to cooperate with the Project
Architect/Engineer and the Project Contractor to coordinate the construction
plans and activities on that Tract with the construction plans and activities of
the other parties in order to achieve the
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objectives set forth herein.
(e) Subject to Article III hereof, in order to achieve the
objectives set forth in Section 4.1(a) above and to present to the public a
coherent, consistent and polished finished product, each party hereto shall use
all reasonable efforts to cooperate and coordinate with the other parties hereto
with respect to the design and construction of all interior and exterior
theming, finishes and attractions.
(f) Each of the Aladdin Parties and Bazaar Company shall cooperate
with one another in their respective efforts to apply for and obtain the Permits
required for their respective obligations hereunder, at no expense or liability
to the other.
(g) Each of the Aladdin Parties and Bazaar Company agrees that it
shall not (and that it shall cause its Permittees to not) (i) unreasonably
interrupt or interfere with the work conducted by any other party at the Site;
(ii) cause any material increase in the cost of construction on another party's
Tract, or (iii), interfere unreasonably with the use, occupancy or enjoyment of
another party's Tract, or any part thereof.
(h) Each of the Aladdin Parties and Bazaar Company, as applicable,
shall provide written notice to the other at least ten (10) business days in
advance of the commencement of the Demolition Work, the Site Work and the
construction of the Aladdin Improvements and the Bazaar Improvements, as
applicable, or any other construction, alteration or repair contemplated by NRS
ss.108.234, so as to afford the Aladdin Parties and Bazaar Company an
opportunity to file appropriate notices of non-responsibility.
(i) If either the Aladdin Parties or Bazaar Company is required by
its Mortgagee to obtain, or otherwise elects to require its Project Contractor
to obtain, payment and/or completion bonds in connection with the improvements
constructed by such party, then such party shall request that Bazaar Company or
the Aladdin Parties, as applicable, be named as an obligee under such bonds,
except that the rights of the other party hereto shall be subordinate to the
Mortgagee's rights and the rights of the party obtaining such bond.
4.2 Insurance. Throughout the term of this Agreement, each party shall
maintain such insurance as is required by the REA and their respective
Mortgagees.
4.3 Indemnification. Each of the Aladdin Parties and Bazaar Company
("Indemnitor") shall at all times indemnify, hold harmless, protect and defend,
the other parties hereto, including their Affiliates and their respective
officers, directors, partners, members, managers, stockholders, landlords,
agents, representatives, consultants, servants and employees, and their Tracts,
as applicable (individually and collectively, "Indemnitee"), from and against
all losses, claims, actions, liens, proceedings, liabilities, damages, costs
and/or expenses, including the Indemnitee's reasonable attorneys' fees but
excluding consequential damages (collectively, a "Claim") resulting from such
Indemnitor's operation, use or ownership of its Tract or arising from any event
occurring on its Tract arising under this Agreement, to the extent not resulting
from the gross negligence or willful misconduct of that Indemnitee.
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4.4 Waiver of Subrogation. Each Indemnitor covenants that it will, if
generally available in the insurance industry, obtain for the benefit of the
Indemnitee a waiver of any right of subrogation which the insurer of Indemnitor
may acquire against Indemnitee by virtue of the payment of any loss covered by
insurance. In the event any Indemnitor is by law, statute or governmental
regulation unable to obtain a waiver of the right of subrogation for the benefit
of Indemnitee, then, during any period of time when such waiver is unobtainable,
Indemnitor shall not have been deemed to have released any subrogated claim of
its insurance carrier against Indemnitee, and during the same period of time
Indemnitee shall be deemed not to have released Indemnitor from
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any claims it or its insurance carrier may assert which otherwise would have
been released pursuant to this Section.
4.5 Reimbursement Obligations.
(a) Bazaar Company shall reimburse the Aladdin Parties for the costs
associated with (i) the construction of the structural shoulder area of the
Shell shared by the Retail Facility and the Aladdin Hotel and Casino in the
amount of Twelve Million Seven Hundred Fifty Thousand Dollars ($12,750,000),
(ii) the construction of the Facade in the amount of Eight Hundred Fifty
Thousand Dollars ($850,000), and (iii) Bazaar Company's pro rata share of the
financing costs incurred by the Aladdin Parties, as reasonably determined by
Bazaar Company and the Aladdin Parties, in connection with the costs set forth
in clauses (i) and (ii) above (the "Reimbursement Obligation"). Assuming all of
the work described in clauses (i) and (ii) has been completed in accordance with
the requirements of the Design/Build Contract, Bazaar Company shall pay the
Reimbursement Obligation immediately upon its first draw under its construction
financing. If such work has not been completed at the time of Bazaar Company's
first draw and Bazaar Company's construction lender permits such partial
reimbursements to be funded under its construction draws, the Reimbursement
Obligation shall be paid in proportion to the work completed, as reasonably
determined by Bazaar Company's construction lender. If Bazaar Company's
construction lender does not permit partial reimbursement to be funded, the
reimbursement obligation shall be paid in a lump sum upon completion of the
applicable work.
(b) Notwithstanding that certain Letter of Intent signed by the
parties as of February 26, 1997, Bazaar Company and the Aladdin Parties shall
have no reimbursement obligations one to the other with respect to the
construction of the Aladdin Improvements and the Bazaar Improvements except as
set forth in this Agreement, the REA and the Common Parking Area Use Agreement.
Notwithstanding anything to the contrary contained in this Agreement, in no
event shall Bazaar Company be obligated to spend more than Thirty Six Million
Dollars ($36,000,000) attributable to the design and construction of the Common
Parking Area, and any excess costs shall be paid by the Aladdin Parties.
4.6 Remedies and Self-Help Cure.
(a) If any party fails to perform any of its duties or obligations
under Article III with respect to the construction of the Common Parking Area
and such failure involves missing a milestone on a critical path of the
Construction Schedule, or if any party fails to perform any of its duties or
obligations under this Article IV with respect to the maintenance and operation
of Common Areas (as that term is defined in the REA), or if the Aladdin Parties
fail to complete the construction of the structural shoulder area of the Shell
shared by the Retail Facility and the Aladdin Hotel and Casino, any other party
shall have those self-help cure rights set forth in Section 3.11 of the REA.
(b) If there is a Default by Bazaar Company hereunder with respect
to its Reimbursement Obligation, the other party shall have those rights set
forth on Exhibit "E" hereto.
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ARTICLES V and VI
[INTENTIONALLY DELETED]
ARTICLE VII
EXERCISE OF APPROVAL RIGHTS
7.1 Wherever in this Agreement, the approval or consent of any party is
required, and unless a different time limit is provided herein (in which event
such different time limit shall control), such approval or disapproval shall be
given within twenty (20) days following the receipt of the item to be so
approved or disapproved or the same shall be conclusively deemed to have been
approved by such party, subject to the provisions of this Article. Such
approval, or disapproval, shall be given in writing, and such approval shall not
be unreasonably withheld, unless the provisions of this Agreement with respect
to the particular consent or approval shall expressly provide that the same may
be given or refused in the sole and absolute judgment or discretion of such
party. Any disapproval shall specify with particularity the reasons therefor;
provided, however, that wherever in this Agreement any party is given the right
to approve or disapprove in its sole and absolute judgment or discretion, such
party may disapprove without specifying a reason therefor and its disapproval
shall not be subject to contest in any judicial, administrative, arbitration or
other proceeding.
7.2 A party requesting approval shall send such request in a writing
setting forth the applicable time period, pursuant to Section 7.1 hereof, within
which such party must act or otherwise respond. If the time specified in the
notice is incorrectly set forth or omitted, the time limit shall be thirty (30)
days unless a longer time period is specified in this Agreement, in which case
the longer time period shall control. Failure to specify such time period shall
not invalidate such notice but shall instead require the action of such party
within said thirty (30) day period or such longer period.
7.3 Any request for the consent or approval of any party shall refer to
the proper section numbers of this Agreement to which the request relates,
properly state the time period permitted hereunder for approval, and state that
the document, or the facts contained therein, shall be deemed approved or
consented to by the recipient unless the recipient objects thereto within the
required time period specified in such notice. Notwithstanding anything to the
contrary contained in this Agreement, no recipient's approval of or consent to
the subject matter of a notice shall be deemed to have been given by its failure
to object thereto if such notice (or the accompanying cover letter) did not
properly refer to the applicable section of this Agreement and properly state
the time period permitted hereunder for approval.
ARTICLE VIII
DISPUTE RESOLUTION PROCEDURES
8.1 Arbitration.
(a) The parties hereunder agree that if they are unable in good
faith to resolve any dispute or disagreement arising under or pursuant to this
Agreement, including any dispute or disagreement about the interpretation or
application of any provision hereof (collectively, a
17
<PAGE>
"Dispute"), but not including any Default or claim of Default thereunder (which
shall be resolved before a court of law), any party to the Dispute (a "Concerned
Party" and together with the other parties to the Dispute, the "Concerned
Parties") shall demand binding arbitration before the American Arbitration
Association ("AAA") in Las Vegas, Nevada, by so notifying all other Concerned
Parties and the AAA.
(b) In a Dispute between Bazaar Company, on the one hand, and the
Aladdin Parties, on the other hand, the Aladdin Parties and all Affiliates
thereof shall collectively be considered a single Concerned Party. A Permitted
Transferee shall not be considered a single Concerned Party with the Aladdin
Parties.
(c) Within three (3) days of a demand for arbitration of a Dispute
hereunder, in accordance with the rules and guidelines of the AAA, the Aladdin
Parties and Bazaar Company shall mutually agree upon one arbitrator (and two
alternate arbitrators) to hear the Dispute and the demanding party shall
immediately notify such arbitrator of his or her appointment. If an arbitrator
is unavailable to hear the Dispute, the demanding party shall notify the
alternate(s). If the parties cannot mutually agree upon an arbitrator, the
demanding party shall promptly apply to the Eighth Judicial District Court of
Nevada for the appointment of an arbitrator in accordance with the provisions of
NRS Chapter 38 The arbitration shall take place at the offices of the AAA or at
such other location to which the Concerned Parties agree in Las Vegas, Nevada.
To the extent possible, the appointed arbitrator shall commence the arbitration
hearing on the Dispute within three (3) days of his or her appointment and the
hearing shall be conducted on consecutive days, including Saturdays and Sundays
(but excluding holidays), until the completion of the hearing. In connection
with any arbitration proceedings commenced hereunder, no Concerned Party shall
have the right to join any third parties not a party to this Agreement other
than the Project Architect/Engineer and the Project Contractor, except by
written consent containing a specific reference to this Agreement signed by all
Concerned Parties and the other Person sought to be joined. The decision of the
arbitrator shall be final and binding on, as well as nonappealable by, the
Concerned Parties. The arbitrator shall determine the award as promptly as
possible after the arbitration hearing has been completed, and if at all
possible not later than three (3) days after the completion of the hearing. The
award of the arbitrator shall be written and signed by the arbitrator and shall
be served on each Concerned Party in the manner provided in Article 10.2.
(d) The award of the arbitrator may be entered as a judgment in a
court of competent jurisdiction. To the extent permitted by law, compliance with
this Article VIII by a Concerned Party is a condition precedent to the
commencement by any Concerned Party of a judicial proceeding arising out of a
Dispute.
(e) If any of the provisions relating to arbitration are not adhered
to or complied with, any party may petition the Eighth Judicial District Court
of the State of Nevada for appropriate relief in accordance with the provisions
of NRS Chapter 38.
8.3 Fees and Costs. The prevailing party in a Dispute shall be entitled to
recover from the non-prevailing party its reasonable fees and costs, including
attorneys' fees and other reasonable expenses, as fixed by the arbitrator, in
his or her discretion.
18
<PAGE>
19
<PAGE>
ARTICLE IX
FORCE MAJEURE
9.1 Force Majeure. Except as otherwise expressly provided herein to the
contrary, each party shall be Excused from its duty to perform any covenant or
obligation hereunder, except an obligation to pay any sums of money not
expressly conditioned on any party's performance of a covenant or obligation
that has itself been Excused by this Section, in the event but only so long as
the performance of any such covenant or obligation is prevented, delayed,
retarded or hindered by any of the following: an act of God, fire, earthquake,
flood, explosion, action of the elements, war, invasion, insurrection, riot, mob
violence, sabotage, inability to procure or general shortage of labor,
equipment, facilities, materials or supplies in the open market, failure of
transportation, strikes, lockouts, action of labor unions, condemnation,
requisition, laws, orders of governmental or civil or military or naval
authorities, or any other cause, whether similar or dissimilar to the foregoing,
not within the respective control of such party (other than the lack or
inability to procure funds to fulfill its covenants and obligations provided in
this Agreement), including the timely performance of any party (other than such
party) of its respective obligations under the DPW Agreement and the REA.
9.2 Notice. In the event any party claims an Excuse from its duty to
perform any covenant or obligation set forth in this Agreement due to any of the
events of force majeure set forth in Section 9.1, such party shall notify the
other party of the occurrence of such event of force majeure within ten (10)
days following the occurrence thereof. The provisions of Section 9.1 shall not
be effective to Excuse any party failing to give such notice from the
performance of such covenant or obligation until such notice is given to the
other party.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Attorneys' Fees. If any party shall institute any legal action or
proceeding in connection with any Default or claim of Default under this
Agreement, the prevailing party shall be entitled to recover from the
non-prevailing party its reasonable fees and costs, including attorneys' fees
and other reasonable expenses, as fixed by the court in its discretion.
10.2 Notice.
(a) Any and all notices, demands, requests, consents, approvals,
designations, or other communications (collectively, for purposes of this
Section 10.2 only, "Notice") required or desired to be given, made, received and
communicated hereunder by any party shall be in writing and delivered by
personal delivery, by deposit in the United States mail, certified or
registered, postage prepaid, return receipt requested, by overnight express
delivery service or by facsimile transmission, to the following addresses and
fax numbers:
20
<PAGE>
To the Aladdin Parties: Aladdin Gaming, LLC
2810 West Charleston Boulevard, Ste. 58
Las Vegas, Nevada 89102
Attn: Jack Sommer
Telephone No.: (702) 870-1234
Facsimile No.: (702) 870-8733
with a copy to: Ronald Dictrow
c/o Sommer Properties
280 Park Avenue
New York, NY 10017
Telephone No.: (212) 661-0700
Facsimile No.: (212) 661-0844
and a copy to: Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022-3897
Attention: Wallace L. Schwartz, Esq.
Telephone No.: (212) 735-3000
Facsimile No.: (212) 735-2000
and a copy to: Schreck Morris
300 S. Fourth Street, Suite 1200
Las Vegas, Nevada 89101
Attention: Ellen Schulhofer, Esq.
Telephone No.: (702) 382-2101
Facsimile No.: (702) 382-8135
To Aladdin Bazaar: Aladdin Bazaar Holdings, LLC
c/o TH Bazaar Centers, Inc.
4350 La Jolla Village Drive, Suite 400
San Diego, California 92122-1233
Attention: Wayne Finley and Wendy Godoy
Telephone No.: (619) 546-3535
Facsimile No.: (619) 546-3307
with a copy to: John Bedard
TH Bazaar Centers, Inc.
4350 La Jolla Village Drive, Suite 400
San Diego, California 92122-1233
Telephone No.: (619) 546-3304
Facsimile No.: (619) 546-3413
21
<PAGE>
and
Allen, Matkins, et al.
501 W. Broadway, Suite 900
San Diego, California 92101
Attn: David A.B. Burton, Esq. and
Michael Pruter, Esq.
Telephone No.: (619) 233-1155
Facsimile No.: (619) 233-1158
Each party may designate at any time a different or additional address for its
receipt of Notice by giving at least ten (10) days' Notice of such change of
address to all other parties.
(b) Any Notice shall be deemed to have been given, made, received
and communicated, as the case may be, on the date personal delivery was effected
if personally served, three (3) business days after the deposit thereof in the
United States mail, one (1) business day after the deposit thereof with the
overnight delivery service, and on the date of transmission if by facsimile and
received by the primary intended recipient (as opposed to those copied) prior to
5:00 p.m. on the recipient's business day (provided a hard copy of the same is
sent in another manner permitted herein within twenty-four (24) hours of
transmission); provided, however, if delivery is not completed due to the
absence of the recipient or his/her refusal to accept delivery, delivery to the
Person identified above for receipt of copies shall be deemed to be delivery to
the primary addressee. If any such Notice requires any action or response by the
recipient or involves any consent or approval solicited from the recipient, such
fact shall be clearly stated in the Notice. Any responsive consent, approval or
designation shall be sent as provided above and shall be deemed to have been
given, made, received and communicated, as the case may be, on the date of
personal delivery, the date on which the facsimile was transmitted, one (1)
business day after the deposit thereof with the overnight delivery service, or
three (3) business days after the same was deposited in the United States mail
in conformity with this Section.
(c) In the event a party shall give Notice to any other party of a
Default, such Party shall concurrently send each of the other parties and their
Mortgagees (in accordance with Article 15 of the REA) a copy of such Notice.
10.3 Mortgagee Notice Provisions. Any Mortgagee under a Mortgage affecting
the Tract of a party shall be entitled to receive notice of any Default by the
party as to such Tract in the same manner provided in Section 10.2, provided
that such Mortgagee shall have delivered a notice to each party, substantially
in the following form:
The undersigned, whose address is _______________ does hereby
certify that it is the "Mortgagee" (as such term is defined in the
Site Work Development and Construction Agreement ("Site Work
Agreement")) of the Tract of land described on Exhibit "A" attached
hereto and made a part hereof and being the Tract of [party] in
Clark County, Nevada. In the event that any notice shall be given of
the Default of the party as to whose Tract the Mortgage held by the
undersigned applies, a copy thereof shall be delivered to the
22
<PAGE>
undersigned who shall have all rights of a Mortgagee to Cure such
Default as specified in the Site Work Agreement. Failure to deliver
a copy of such notice to the undersigned shall in no way affect the
validity of the notice of Default as it respects such party, but
shall make the same invalid as it respects the Mortgage of the
undersigned and such Mortgagee's cure rights shall remain
undisturbed.
In the event that any notice shall be given of the Default of a party and such
defaulting party has failed to Cure or commence to Cure such Default as provided
in this Agreement, then and in that event any such Mortgagee under a Mortgage
affecting the Tract of the Defaulting Party shall be entitled to receive an
additional notice, given in the manner provided in Section 10.2, that the
Defaulting Party has failed to Cure or commence to Cure such Default. Each
Mortgagee shall have thirty (30) days after receipt of said additional notice to
Cure or, if such Default cannot be Cured within thirty (30) days, to commence to
Cure any such Default and to prosecute said Cure continuously and diligently
until completed; provided, however, that no dispute of any nature between
Mortgagees shall serve to toll or extend said Cure period nor impose liability
of any nature on any Party to resolve such dispute in connection with accepting
Cure from any particular Mortgagee.
10.4 Amendment. This Agreement may not be modified, changed or
supplemented, nor may any obligations hereunder be waived, except by a written
instrument that references this Agreement and is signed by the parties. The
parties shall make those modifications and changes to this Agreement requested
by any Mortgagees that do not materially increase their respective obligations
hereunder or adversely affect or diminish their respective rights at no cost to
the non-requesting party.
10.5 No Third Party Beneficiaries. Except as set forth in Section 10.3,
this Agreement is for the exclusive benefit of the parties hereto and not for
the benefit of any third Person, nor shall this Agreement be deemed to have
conferred any rights, express or implied, upon any third Person.
10.6 Counterparts. This Agreement may be executed by the parties in any
number of counterparts, each of which shall be deemed an original, and all of
which, taken together, shall constitute but one and the same instrument.
10.7 Governing Law. This Agreement shall be governed by, interpreted
under, and construed in accordance with the laws of the State of Nevada
applicable to agreements made and to be performed wholly within the State of
Nevada. The parties intend and agree that the proper forum for the litigation of
all actions and proceedings arising out of a Default or claim of Default under
this Agreement, is any circuit court of the State of Nevada or the Eighth
Judicial District Court of the State of Nevada in Clark County, Nevada. Each of
the parties agrees that it will not commence any action or proceeding arising
out of or relating to this Agreement in any court other than as specified in the
preceding sentence and it shall not challenge on grounds of forum non conveniens
or any other grounds any action or proceeding so commenced, and hereby
stipulates and irrevocably agrees that said courts have in personam jurisdiction
over each of them for such litigation of any such controversy.
23
<PAGE>
24
<PAGE>
10.8 Waivers. A party's waiver of another party's default or of a
provision of this Agreement must be made in writing, and no such waiver shall be
implied from a party's failure to take or exercise, or delay in taking or
exercising, any action or right in respect thereof (unless the time specified
herein for taking such action or exercising such right has expired). No express
waiver of any default shall affect any default, or cover any period of time,
other than the precise default and period of time specified in such express
waiver. No waiver of any default in the performance of any term, covenant,
restriction or condition of this Agreement shall be deemed or shall constitute a
waiver of any subsequent default or of any other term, covenant, restriction or
condition, nor shall any waiver constitute a continuing waiver. A party's giving
of its consent or approval to any act or request of another party or the single
or partial exercise of any right shall not be deemed to waive or render
unnecessary the consenting party's consent to or approval of or the exercise of
any subsequent acts, requests or rights, whether or not similar.
10.9 Assignment. This Agreement may not be assigned by any party hereto
except that Aladdin Gaming may assign its rights and obligations under this
Agreement to Holdings, and vice versa, and any Mortgagee that succeeds to the
interest of a party hereunder may assign this Agreement subject to the terms of
the REA. If Mortgagee acquires title to the Aladdin Site, Mortgagee shall not be
liable for any obligations or damages incurred prior to such acquisition of
title but from and after such date shall assume Aladdin Gaming's obligations
hereunder. The parties agree in such event to meet and mutually agree upon
equitable adjustments to the Construction Schedule and timing for interim and
final completion deadlines consistent with commercially reasonable and
technically feasible realities of the then existing circumstances. The Aladdin
Parties and Bazaar Company may collaterally assign its rights hereunder to
lenders in connection with construction financing. Any assignment shall
expressly be made subject to the provisions of this Agreement and no party shall
be released from liability hereunder in the event of an assignment without the
prior written agreement of the other parties, which agreement shall not be
unreasonably withheld.
10.10 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties and to their respective successors and
assigns.
10.11 Further Assurances. The parties agree to do such further acts and
things and to execute and deliver such additional agreements and instruments as
the other may reasonably require to consummate, evidence or confirm any
agreement contain herein in the manner contemplated hereby.
10.12 Title and Headings. Titles and headings of sections of this
Agreement are for convenience of reference only and shall not affect the
construction of any provisions of this Agreement.
10.13 Pronouns. All pronouns and any variations thereof shall be deemed to
refer to the masculine, feminine or neuter, singular or plural, as the identity
of the parties require.
10.14 Severability. The determination that any covenant, representation,
warranty, condition or provision of this Agreement is invalid shall not affect
the enforceability of the
25
<PAGE>
remaining covenants, representations, warranties, conditions or provisions
hereof and, in the event of any such determination, this Agreement shall be
construed as if such invalid covenant, representation, warranty, condition or
provision were not included herein.
10.15 Drafting Ambiguities. The parties and their respective counsel have
reviewed and revised this Agreement. The rule of construction to the effect that
any ambiguities are to be resolved against the drafting party shall not be
employed in the interpretation of this Agreement or any amendments or exhibits
hereto.
10.16 Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
prior understandings and writings and respect thereto.
10.17 Conflicts with REA. Notwithstanding anything to the contrary in
Section 10.8 above, to the extent this Agreement fails to address or conflicts
with an issue or matter addressed in the REA, the provisions of the REA shall
control.
10.18 Term. This Agreement shall terminate on July 31, 1998, if Bazaar
Company shall have failed to obtain its construction financing by that date, or
on such date as all covenants and obligations of the parties hereunder have been
performed, unless sooner terminated by the written consent of all parties
hereto.
10.19 Recording Memorandum and Termination of Agreement. Upon the
execution of this Agreement, the parties hereto shall agree to the form of, and,
prior to the recordation of any Mortgage and after the recordation of a
Memorandum of Bazaar Lease, shall record or cause to be recorded in the office
of the recorder of the County, a Memorandum of Site Work Development and
Construction Agreement, substantially in the form attached hereto as Exhibit
"F". Upon the termination of this Agreement, either party, at the other party's
request, will execute a recordable statement of termination of this Agreement
which states the applicable termination date.
IN WITNESS WHEREOF, the parties have executed this Agreement the date and
year first above written.
26
<PAGE>
"ALADDIN GAMING"
ALADDIN GAMING, LLC, a Nevada limited liability company
By: /s/ Ron Dictrow
---------------
Ron Dictrow, Executive Vice President and
Secretary
"HOLDINGS"
ALADDIN HOLDINGS, LLC, a Delaware
limited liability company
By: Aladdin Management Corporation,
its Manager
By: /s/ Jack Sommer
---------------
Jack Sommer, Vice President and Secretary
"BAZAAR COMPANY"
ALADDIN BAZAAR, LLC, a Delaware limited liability
company
By: ALADDIN BAZAAR HOLDINGS, LLC, a
Nevada limited liability company, its
Member
By: Aladdin Management Corporation, its
Manager
By: /s/ Jack Sommer
---------------
Jack Sommer, Vice President and
Secretary
By: TH BAZAAR CENTERS INC., a Delaware
corporation
By: /s/ Wayne Finley
----------------
Wayne J. Finley, Senior Vice President
By: /s/ Wendy Godoy
---------------
Wendy M. Godoy, Senior Vice President
27
<PAGE>
EXHIBIT A-1
THE SITE
<PAGE>
EXHIBIT A-2
THE BAZAAR SITE
<PAGE>
EXHIBIT A-3
THE ALADDIN SITE
<PAGE>
EXHIBIT A-4
THE MUSIC SITE
<PAGE>
EXHIBIT A-5
THE ENERGY SITE
<PAGE>
EXHIBIT B
THE PLANS
<PAGE>
EXHIBIT B-1
THE BAZAAR PLANS
<PAGE>
EXHIBIT B-2
THE ALADDIN PLANS
<PAGE>
EXHIBIT C
DEMOLITION WORK
<PAGE>
EXHIBIT D
THE SITE WORK PLANS
<PAGE>
EXHIBIT E
REMEDIES
A Default by Bazaar Company with respect to its Reimbursement
Obligation shall ipso facto result in the creation of a lien against
the Bazaar Site consistent with provisions of Section 4.3 to the
REA, and shall be treated as an allocable share of real estate
taxes.
<PAGE>
EXHIBIT F
MEMORANDUM OF SITE WORK DEVELOPMENT
AND CONSTRUCTION AGREEMENT
MEMORANDUM OF
SITE WORK DEVELOPMENT AND CONSTRUCTION AGREEMENT
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
Aladdin Gaming, LLC
c/o Schreck Morris
1200 Bank of America Plaza
300 South Fourth Street
Las Vegas, Nevada 89101
Attn: Ellen Schulhofer, Esq.
- --------------------------------------------------------------------------------
MEMORANDUM OF SITE WORK DEVELOPMENT
AND CONSTRUCTION AGREEMENT
THIS MEMORANDUM OF SITE WORK DEVELOPMENT AND CONSTRUCTION AGREEMENT
("Memorandum") is made as of this 26th day of February, 1998, by and between
Aladdin Gaming, LLC, a Nevada limited liability company ("Aladdin Gaming"),
Aladdin Holdings, LLC, a Delaware limited liability company ("Aladdin Holdings")
and Aladdin Bazaar, LLC, a Delaware limited liability company ("Bazaar
Company").
1. Aladdin Gaming, Aladdin Holdings and Bazaar Company have entered into
that certain Site Work Development and Construction Agreement dated of even date
herewith ("Site Work Agreement"), pursuant to which they have set forth their
respective rights, duties and obligations with respect to certain demolition and
site work and the construction of improvements on certain real property located
in the County of Clark, State of Nevada and more particularly described on
Exhibit "A" hereto.
2. The purpose of this Memorandum is to give notice of the existence of
the Site Work Agreement. To the extent that any provision of this Memorandum
conflicts with any provision of the Site Work Agreement, the Site Work Agreement
shall control.
3. This Memorandum may be executed in counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
<PAGE>
ALADDIN GAMING, LLC ALADDIN BAZAAR, LLC
By: TH Bazaar Centers, Inc., a Delaware
corporation
By:
--------------------------
Name: By:
------------------------ ----------------------------------
Title: Wayne J. Finley, Senior Vice President
-----------------------
By:
-----------------------------------
By: Wendy M. Godoy, Senior Vice President
--------------------------
Name:
------------------------
Title: By: Aladdin Bazaar Holdings, LLC., a Nevada
----------------------- limited liability company
ALADDIN HOLDINGS, LLC By: Aladdin Management Corporation, a Nevada
corporation, its manager
By: Aladdin Management Corporation,
its manager
By:
------------------------------
Ronald B. Dictrow, Treasurer
By:
------------------------------
Ronald B. Dictrow, Treasurer
By:
-----------------------------
Jack Sommer, Vice President
By:
-----------------------------
Jack Sommer, Vice President
<PAGE>
STATE OF NEVADA )
) ss.
COUNTY OF CLARK )
This instrument was acknowledged before me on February ___, 1998, by
_________ as ____________ of Aladdin Gaming, LLC.
---------------------------------------------
Signature of Notarial Officer
STATE OF NEVADA )
) ss.
COUNTY OF CLARK )
This instrument was acknowledged before me on February ___, 1998, by Wayne
J. Finley as Senior Vice President of TH Bazaar Centers, Inc., Manager of
Aladdin Bazaar, LLC.
---------------------------------------------
Signature of Notarial Officer
STATE OF NEVADA )
) ss.
COUNTY OF CLARK )
This instrument was acknowledged before me on February ___, 1998, by Wendy
M. Godoy as Senior Vice President of TH Bazaar Centers, Inc., Manager of Aladdin
Bazaar, LLC.
---------------------------------------------
Signature of Notarial Officer
STATE OF NEVADA )
) ss.
COUNTY OF CLARK )
This instrument was acknowledged before me on February ___, 1998, by
Ronald B. Dictrow as Treasurer of Aladdin Management Corporation, Manager of
Aladdin Bazaar Holdings, LLC (in turn, Manager of Aladdin Bazaar, LLC) and as
Manager of Aladdin Holdings, LLC.
---------------------------------------------
Signature of Notarial Officer
<PAGE>
STATE OF NEVADA )
) ss.
COUNTY OF CLARK )
This instrument was acknowledged before me on February ___, 1998, by Jack
Sommer as Vice President of Aladdin Management Corporation, Manager of Aladdin
Bazaar Holdings, LLC (in turn, Manager of Aladdin Bazaar, LLC) and Manager of
Aladdin Holdings, LLC.
---------------------------------------------
Signature of Notarial Officer
STATE OF NEVADA )
) ss.
COUNTY OF CLARK )
This instrument was acknowledged before me on February ___, 1998, by
_________ as _________ of Aladdin Holdings, LLC.
---------------------------------------------
Signature of Notarial Officer
<PAGE>
SCHEDULE 1
CONSTRUCTION SCHEDULE
<PAGE>
SCHEDULE 2
PERMITS
I. Approvals Required During Development and Construction
A. Environmental Approvals
1. Regulation of Hazardous Materials
a. Storm water discharge permit. Nevada Administrative Code
("NAC") 445A.232; Clark County Code ("CCC") 24.40.020.
To be obtained.
b. Sewer connection permit. CCC 24.05.090 To be obtained.
c. Storage tank permit. Nevada Revised Statutes ("NRS")
459.836; NAC 590.730(1) To be obtained.
d. Permit to construct elevator, dumbwaiter, escalator and
related equipment. NAC 618.454. Provided by Contractor.
2. Air Pollution Control
a. "Authority to construct" Certificate for air emissions
source. NAC 445.704(1)(a). Provided by State. May be
required for generators.
b. Operating Permit for air emissions source. NRS
445B.300(1)(a). Provided by State. May be required for
generators.
c. Land cleaning or leveling permit for the disturbance of
dust or vegetation. CCC 9.12.030. To be obtained.
3. Aviation
a. Approval of the Federal Aviation Administration ("FAA").
CCC 29.50.030. Obtained.
b. Approval of the Clark County Department of Aviation. CCC
29.50.030. To be obtained.
c. Execution of aviation easement. CCC 29.50.030 To be
obtained.
B. Zoning Approvals.
1. Conditional use permit. CCC 29.30.015, 29.30.080 & 29.66.020.
Obtained (UC-0334-96 & UC-2030-96).
2. Flood control approval. Clark County Regional Flood Control
District Regulations ("CCRFCD Regs") ss. 12.035(B).
Preliminary approval obtained. Final approval to be obtained.
3. Pre-development Agreement. Entered into with Clark County and
approved by the Board of County Commissioners on March 18,
1997.
<PAGE>
C. Building Approvals.
1. Traffic study approval. Obtained.
2. Building electrical, plumbing, mechanical, combination,
swimming pool, spa, and other permits. CCC Title 22 &
29.56.010. To be obtained.
3. Energy source connection approval. CCC 22.02.970. To be
obtained.
4. Demolition, Grading and Foundation Permits. To be obtained
(authorized by Pre-development Agreement)
D. Subdivision Map Requirements.
1. Technical studies
a. Traffic Impact Mitigation Plan. Approved. (Subject to
options.)
b. Drainage Impact Evaluation Study and Mitigation Plan.
Preliminary plan approved. Final approval to be
obtained.
II. Other Permits required prior to opening:
A. Certificate(s) of occupancy. CCC 22.02.980 & 29.54.010 To be
submitted.
B. Occupational Safety and Health Regulations
1. Operating permit (boiler/pressure vessel). NAC 618.172.
Provided after installation.
2. Operating permit for elevators, dumbwaiters, escalators and
related equipment. NAC 618.457 & 618.466. Provided after
installation.
<PAGE>
SCHEDULE 3
PRO FORMA BUDGET
<PAGE>
Design/Build Contract
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
919 Third Avenue
New York, New York 10022
Attention: Wallace L. Schwartz, Esq.
================================================================================
(Space Above For Recorder's Use)
ALADDIN GAMING/BAZAAR/MUSIC
CONSTRUCTION, OPERATION AND RECIPROCAL
EASEMENT AGREEMENT
by and among
ALADDIN GAMING, LLC,
a Nevada limited-liability company
"Aladdin Gaming"
and
ALADDIN BAZAAR, LLC,
a Delaware limited liability company
"Bazaar Company"
and
ALADDIN MUSIC HOLDINGS, LLC
a Nevada limited-liability company
"Aladdin Music"
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS.......................................................4
ARTICLE 2 EASEMENTS........................................................22
2.1 Definitions and Conditions.......................................22
2.2 Easement: Automobile Parking, Vehicular and Pedestrian Access;
Emergency Egress.................................................26
2.3 Easement: Utilities..............................................27
2.4 Easement: Construction...........................................30
2.5 Easement: Maintenance of Common Structural Supports..............32
2.6 Easement: Exterior and Accent Lights.............................33
2.7 Easement: Truck Loading Areas....................................33
2.8 Easement: Encroachments..........................................34
2.9 Easement: Roof...................................................35
2.10 Easement: Setbacks...............................................35
2.11 Easement: General Integration, Maintenance and Development.......35
2.12 No Dedication of Easements.......................................36
2.13 Abandonment of Easements.........................................36
2.14 Granting of Easements to Utility Companies.......................36
2.15 Easement: Monorail...............................................37
2.16 Easement: Signs..................................................38
ARTICLE 3 CONSTRUCTION OF REDEVELOPED ALADDIN..............................39
3.1 General Covenants and Background.................................39
3.2 Workmanship......................................................40
3.3 Coordination.....................................................41
3.4 Interference During Construction.................................41
3.5 Optional Improvements and Music Hotel............................41
3.6 Mechanic's Liens.................................................43
3.7 Construction Bonds...............................................43
3.8 Temporary Termination of Fire Service............................43
3.9 Indemnity........................................................44
3.10 Submittal of As-Built Plans and Record Drawings..................44
3.11 Self-Help Cure of Construction Defaults..........................45
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ARTICLE 4 ALLOCABLE SHARES OF COMMON COSTS.................................45
4.1 Payments.........................................................45
4.2 Resolution of Disputes...........................................47
4.3 Creation of Lien and Personal Obligation for Payment of Allocable
Shares...........................................................47
4.4 Adjustments to Allocable Share of Common Costs...................47
ARTICLE 5 CENTRAL ENERGY PLANT.............................................48
5.1 Construction of Central Energy Plant.............................48
5.2 Purchase of Electricity, Chilled Water and Hot Water.............48
5.3 Sale of Excess Electricity, Chilled Water and Hot Water..........48
ARTICLE 6 FLOOR AREA, USE, AND OPERATION...................................49
6.1 Floor Area; First and Second Scheduled Opening Dates.............49
6.2 Uses.............................................................49
6.3 Limitation on Detrimental Characteristics........................50
6.4 Operation........................................................50
6.5 Gaming Activities................................................53
6.6 Commercial Subdivision; Taxes and Assessments....................54
6.7 Adjacent Land....................................................55
ARTICLE 7 COVENANTS AGAINST WASTE..........................................56
7.1 Waste............................................................56
7.2 Hazardous Substances.............................................56
ARTICLE 8 INDEMNIFICATION AND INSURANCE....................................56
8.1 Indemnity........................................................56
8.2 General Liability Insurance......................................56
8.3 Property Insurance...............................................57
8.4 Blanket Insurance................................................57
8.5 Controlled Insurance Program.....................................57
8.6 Mutual Release; Waiver of Subrogation............................57
8.7 Named Insureds...................................................58
ARTICLE 9 REPAIR, MAINTENANCE, ALTERATIONS AND RES-
TORATION.........................................................58
9.1 Maintenance - Buildings..........................................58
9.2 Maintenance - Common Parking Area................................59
9.3 Alterations - Buildings and Common Area..........................59
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9.4 Restoration of Buildings and/or Common Area......................61
9.5 Restoration of Improvements Not Covered by Section 9.4...........61
9.6 Standards of Construction........................................62
9.7 Licenses for Repairs, Maintenance, Alterations and Restoration...63
9.8 Clearing of Building Site........................................64
9.9 Self-Help Cure of Maintenance and Restoration Defaults...........64
9.10 Lien.............................................................65
9.11 Article 9 Approvals..............................................65
ARTICLE 10 FORCE MAJEURE....................................................65
10.1 Force Majeure....................................................65
10.2 Notice...........................................................65
ARTICLE 11 DISCHARGE AND RELEASE............................................66
11.1 Discharge on Transfer............................................66
11.2 Discharge on Involuntary Transfer................................66
11.3 Exceptions to Discharge..........................................67
11.4 Discharge of Mortgagee...........................................67
11.5 Aladdin Gaming Released From Operating Covenants.................67
11.6 Bazaar Company Released from Operating Covenants.................67
11.7 Aladdin Music Released from Operating Covenants..................67
11.8 Excuse and Release From Restoration Covenants....................68
11.9 No Waiver........................................................68
ARTICLE 12 ARBITRATION......................................................69
12.1 Disputes Covered.................................................69
12.2 Arbitration Procedures...........................................69
ARTICLE 13 ATTORNEYS' FEES..................................................71
13.1 Prevailing Party.................................................71
ARTICLE 14 NOTICES..........................................................72
14.1 Notices to Parties...............................................72
ARTICLE 15 MORTGAGEE PROVISIONS.............................................77
15.1 Mortgagee Notice.................................................77
ARTICLE 16 AMENDMENT........................................................78
16.1 Method and Effect of Amendment...................................78
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16.2 No Third Party Beneficiary......................................79
ARTICLE 17 TERMINATION OF REA..............................................79
ARTICLE 18 EXERCISE OF APPROVAL RIGHTS.....................................79
ARTICLE 19 EFFECTIVE DATE OF REA...........................................80
ARTICLE 20 MISCELLANEOUS...................................................81
20.1 Breach Shall Not Defeat Mortgage................................81
20.2 Breach Shall Not Permit Termination.............................81
20.3 Captions........................................................81
20.4 Interpretation..................................................81
20.5 Governing Laws and Forum........................................81
20.6 Injunctive Relief...............................................82
20.7 No Partnership..................................................82
20.8 Not a Public Dedication.........................................82
20.9 Payment on Default..............................................82
20.10 Severability....................................................83
20.11 Successors......................................................83
20.12 Time of Essence.................................................83
20.13 Waiver of Default...............................................83
20.14 Rights Cumulative...............................................84
20.15 Counterparts....................................................84
20.16 Estoppel Certificates...........................................84
20.17 Limitation on Liability.........................................85
20.18 Index...........................................................86
20.19 Compliance With Laws............................................86
20.20 Conflicts.......................................................87
EXHIBIT "A-1" - LEGAL DESCRIPTION SITE........................................93
EXHIBIT "A-2" - LEGAL DESCRIPTION GAMING SITE.................................94
EXHIBIT "A-3" - LEGAL DESCRIPTION BAZAAR SITE.................................95
EXHIBIT "A-4" - LEGAL DESCRIPTION ALADDIN MUSIC SITE..........................96
EXHIBIT "A-5" - LEGAL DESCRIPTION UTILITY SITE................................97
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EXHIBIT "A-6" - LEGAL DESCRIPTION OPTIONAL IMPROVEMENTS
SITE........................................................98
EXHIBIT "B" - SITE PLANS
EXHIBIT "C" - PLANS AND SPECIFICATIONS
SCHEDULE "I" - ALLOCABLE SHARE OF COMMON COSTS
SCHEDULE "II" - ALLOCABLE SHARE OF REAL ESTATE TAXES
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CONSTRUCTION, OPERATION AND
RECIPROCAL EASEMENT AGREEMENT
(Aladdin Gaming/Bazaar/Music)
THIS CONSTRUCTION, OPERATION AND RECIPROCAL EASEMENT AGREEMENT (this
"REA") is made and entered into as of February 26, 1998, by and between ALADDIN
GAMING, LLC, a Nevada limited-liability company ("Aladdin Gaming"), ALADDIN
BAZAAR, LLC, a Delaware limited liability company ("Bazaar Company"), and
ALADDIN MUSIC HOLDINGS, LLC, a Nevada limited-liability company ("Aladdin
Music").
R E C I T A L S :
A. Aladdin Gaming is the owner of that certain real property located
at 3667 Las Vegas Boulevard South in Clark County, Nevada (the "County") which
is more particularly described on Exhibit "A-1" attached hereto (the "Site").
The Site is currently improved with certain improvements commonly known as the
"Aladdin Hotel and Casino" which are being, or will be, demolished and
redeveloped, pursuant to the terms of that certain Site Work Development and
Construction Agreement dated as of the date hereof, among Aladdin Holdings, LLC,
Aladdin Gaming and Bazaar Company (the "Site Work Agreement"). A memorandum of
the Site Work Agreement shall be recorded in the Official Records of the County
immediately following the recordation of this REA. In addition to the demolition
contemplated by the Site Work Agreement, certain portions of the Site will be
prepared pursuant to the terms of the Site Work Agreement with various on-site
and off-site infrastructure improvements to permit the development of the
Redeveloped Aladdin (as hereinafter defined) described in this REA.
B. That portion of the Site not including the Bazaar Site, the
Aladdin Music Site, the Energy Site and the Optional Improvements Site (as such
terms are hereinafter defined) is more particularly described on Exhibit "A-2"
attached hereto (the "Gaming Site"). Aladdin Gaming shall construct and/or
renovate on the Gaming Site the Aladdin Improvements (as hereinafter defined)
consisting of certain related and physically attached facilities, including a
hotel containing approximately 2600 rooms, an approximately 116,000 square foot
casino, a Theater for Performing Arts (as hereinafter defined), an area (the
"Aladdin Parking Area") which shall consist of space for approximately 500 motor
vehicles, and truck docking and loading facilities which shall be located
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beneath the hotel and casino, all as more particularly set forth on the Site
Plans and the Plans and Specifications (as such terms are hereinafter defined).
C. Aladdin Gaming has leased to Bazaar Company a portion of the Site
to permit the construction and operation by Bazaar Company of the Bazaar
Improvements (as hereinafter defined) pursuant to the terms of that certain
lease between Aladdin Gaming and Bazaar Company (the "Bazaar Lease"). A
memorandum of the Bazaar Lease shall be recorded in the Official Records of the
County immediately prior to the recordation of this REA. That portion of the
Site subject to the Bazaar Lease and upon which the Bazaar Improvements will be
developed is more particularly described on Exhibit "A-3" attached hereto (the
"Bazaar Site").
D. Aladdin Gaming has leased to Aladdin Music a portion of the Site
pursuant to the terms of that certain lease between Aladdin Gaming and Aladdin
Music (the "Music Lease") to permit the construction and operation by Aladdin
Music of a second hotel and casino facility consisting of certain related and
physically attached facilities, including a hotel containing approximately 1000
rooms and an approximately 50,000 square foot casino located on the corner of
Audrie Street and Harmon Avenue as more particularly described herein below (the
"Music Hotel"). A memorandum of the Music Lease shall be recorded in the
Official Records of the County immediately prior to the recordation of this REA.
That portion of the Site subject to the Music Lease and upon which the Music
Hotel will be developed is more particularly described on Exhibit "A-4" attached
hereto (the "Aladdin Music Site").
E. Aladdin Gaming has leased to Energy Provider (as hereinafter
defined) a portion of the Site pursuant to the terms of that certain lease dated
as of December 3, 1997, between Aladdin Gaming and Energy Provider (the "Energy
Lease"). Pursuant to the Energy Provider Agreement (as hereinafter defined),
Energy Provider is obligated to construct and operate a central energy plant
(the "Central Energy Plant") for the cogeneration of electricity, the production
of chilled water and hot water, and the distribution of electricity, chilled
water and hot water to the Site. A memorandum of the Energy Lease shall be
recorded in the Official Records of the County immediately prior to the
recordation of this REA. That portion of the Site subject to the Energy Lease
and upon which the Central Energy Plant will be developed is more particularly
described on Exhibit "A-5" attached hereto (the "Energy Site").
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F. Conditioned upon the due performance of the demolition and
infrastructure development described in the Site Work Agreement, Aladdin Gaming
and Bazaar Company are each obligated to construct certain improvements on the
Gaming Site and the Bazaar Site, respectively, pursuant to the terms of the Site
Work Agreement and this REA, as more particularly described on the Site Plans
and the Plans and Specifications (the "Initial Planned Floor Area"). The
improvements required to be constructed by Bazaar Company on the Bazaar Site
pursuant to the terms of this REA shall be owned by Bazaar Company and are
hereinafter collectively referred to as the "Bazaar Improvements". The
improvements required or permitted to be constructed and/or renovated by Aladdin
Gaming pursuant to the terms of this REA shall be owned by Aladdin Gaming and
are hereinafter referred to as the "Aladdin Improvements". The Bazaar
Improvements, the Music Hotel, the Central Energy Plant and the Aladdin
Improvements are sometimes hereinafter collectively referred to as the
"Redeveloped Aladdin". As more particularly described in this REA, while all of
the Bazaar Improvements are required to be constructed by Bazaar Company, only a
portion of the Aladdin Improvements are required to be constructed by Aladdin
Gaming. Construction of any Aladdin Improvements which are not required to be
constructed by Aladdin Gaming pursuant to this REA (the "Optional Improvements")
may be developed by the Aladdin Parties (as hereinafter defined), subject to the
terms and conditions of this REA.
G. The Bazaar Improvements consist of the "Retail Facility" and the
"Common Parking Area." The Retail Facility consists of approximately 726,000
square feet of Floor Area (including approximately 462,000 square feet of gross
leasable retail area) in the nature of an enclosed themed entertainment shopping
mall located at particular elevations of the Aladdin Improvements with various
vertical penetrations above and below such elevations, all as more particularly
described on the Site Plans and the Plans and Specifications. The Common Parking
Area consists of a multi-level parking structure for approximately 4,800 motor
vehicles adjacent to the Bazaar Improvements and surface-level parking
facilities for approximately 364 motor vehicles beneath and adjacent to the
Retail Facility, as more particularly described on the Site Plans and the Plans
and Specifications. The Common Parking Area does not include the Aladdin Parking
Area.
H. The Parties to this REA desire that the Redeveloped Aladdin be
improved and operated as a mixed-use project which is physically and function
ally integrated through, among other things, reciprocal easements for parking
and
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access, construction easements for development and renovation of the Redeveloped
Aladdin, and the adoption and observance of uniform standards of development,
operation and maintenance as set forth in this REA.
NOW, THEREFORE, in consideration of the foregoing, the covenants
contained herein, and for other and good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Parties hereto hereby
agree as follows:
ARTICLE 1
DEFINITIONS
As used in this REA, references to "Recitals," "Articles,"
"Sections" and "Exhibits" are references to corresponding portions of this REA.
Listed below are definitions for certain terms that are used in this REA with
particular meanings. Unless otherwise defined herein, capitalized terms used in
this REA shall have the meanings set forth in this Article 1. Unless otherwise
noted, a defined term shall include, where appropriate to the context, the noun
(singular and plural), verb and adjective forms of the terms.
Accounting Period. "Accounting Period" shall mean any period
beginning on January 1 and ending on the next following December 31, except that
the first Accounting Period shall commence on the date hereof and shall end on
the following December 31, and the last Accounting Period shall end on the
Termination Date.
Adjacent Land. "Adjacent Land" is defined in Section 6.7.
Affiliate. "Affiliate" shall mean a Person that Controls, is
directly or indirectly Controlled by, or is under common ownership or Control
with, another Person. Notwithstanding the foregoing or any other provision of
this REA to the contrary, in no event shall any Party be considered to be an
Affiliate of any other Party or Affiliates thereof, notwithstanding the fact
that Affiliates of certain Parties hold a fifty percent (50%) membership
interest in other Parties.
Aladdin Gaming. "Aladdin Gaming" shall initially mean Aladdin
Gaming, LLC, a Nevada limited-liability company, and upon a Transfer or
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Involuntary Transfer of such Person's interest in the Site, "Aladdin Gaming"
shall mean such Person's Transferee.
Aladdin Hotel and Casino. "Aladdin Hotel and Casino" is defined in
Recital A.
Aladdin Improvements. "Aladdin Improvements" is defined in Recital F
and includes the Buildings and Common Area improvements on the Gaming Site, as
more particularly set forth on the Site Plans and the Plans and Specifications,
including any present or future Construction or alteration of the Optional
Improvements, in accordance with the terms of this REA and the Site Work
Agreement, as the same may exist from time-to-time. Aladdin Improvements shall
not include any of the Aladdin Improvements that have been from time-to-time
razed or removed in accordance with the terms of this REA.
Aladdin Music. "Aladdin Music" shall initially mean Aladdin Music
Holdings, LLC, a Nevada limited-liability company, and upon a Transfer or
Involuntary Transfer of such Person's interest in the Site, "Aladdin Music"
shall mean such Person's Transferee.
Aladdin Music Site. "Aladdin Music Site" is defined in Recital D.
Aladdin Parking Area. "Aladdin Parking Area" is described in Recital
B and includes portions of the Gaming Site, as more particularly set forth on
the Site Plans and the Plans and Specifications.
Aladdin Parties. "Aladdin Parties" shall mean Aladdin Gaming and/or
its Permitted Transferees.
Allocable Share of Common Costs. "Allocable Share of Common Costs"
shall mean that portion of each category of the Common Costs allocable to each
Tract on a monthly basis for each Accounting Period, subject to adjustment on an
annual basis as provided in this REA. The Common Costs allocable to each Tract
shall also be subject to adjustment pursuant to the terms of Section 4.4 hereof
at such time as any Optional Improvements shall be developed by an Aladdin
Party, or a successor thereof. The Party responsible for maintaining and
operating the Common Area affected by an adjustment shall notify each Party of
such adjustment in accordance with Article 4 hereof. The initial Allocable Share
of Common Costs for each Tract shall be equal to the percentages and paid by the
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Parties set forth on Schedule "I" hereto for each such Tract, which amounts
shall be payable to Bazaar Company or Aladdin Gaming, as the case may be, as set
forth in this REA.
Allocable Share of Real Estate Taxes. "Allocable Share of Real
Estate Taxes" is defined in Section 6.6.
Annual Statement. "Annual Statement" is defined in Section 4.1(b).
Arbitrator. "Arbitrator" is defined in Section 12.2(a).
Attorneys' Fees. "Attorneys' Fees" is defined in Article 13.
Bazaar Company. "Bazaar Company" shall initially mean Aladdin
Bazaar, LLC, a Delaware limited liability company, and upon a Transfer or
Involuntary Transfer of such Person's interest in the Site, "Bazaar Company"
shall mean such Person's Transferee.
Bazaar Improvements. "Bazaar Improvements" is defined in Recital F
and includes the Buildings and Common Area improvements on the Bazaar Site, as
more particularly set forth on the Site Plans and the Plans and Specifications,
including any present or future Construction or alteration thereof in accordance
with the terms of this REA, as the same may exist from time to time. Bazaar
Improvements shall not include any of the Bazaar Improvements that have been
from time to time razed or removed in accordance with the terms of the Bazaar
Lease and this REA.
Bazaar Lease. "Bazaar Lease" is defined in Recital C.
Bazaar LLC Agreement. "Bazaar LLC Agreement" shall mean that Limited
Liability Company Agreement of Aladdin Bazaar, LLC dated as of September 3,
1997, as amended on October 16, 1997 and as thereafter amended from time to
time.
Bazaar Perimeter Areas. "Bazaar Perimeter Areas" means the
sidewalks, landscaping, irrigation, lighting and similar areas to be maintained
by Bazaar Company, as more particularly set forth on the Site Plans and the
Plans and Specifications.
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Bazaar Site. "Bazaar Site" is defined in Recital C.
Budget. "Budget" is defined in Section 4.1(a).
Building. "Building" shall mean all portions of the buildings and
improvements (including alterations or restorations) that exist or are
constructed from time to time on a Party's Tract.
Casino Perimeter Areas. "Casino Perimeter Areas" means the
sidewalks, landscaping, irrigation, lighting and similar areas to be maintained
by Aladdin Gaming, as more particularly set forth on the Site Plans and the
Plans and Specifications.
Central Energy Plant. "Central Energy Plant" is defined in Recital
E.
Cessation Right. "Cessation Right" is defined in Section 6.4(h).
Claim. "Claim" is defined in the definition of "Indemnify".
Commercial Subdivision. "Commercial Subdivision" is defined in
Section 6.6.
Common Area. "Common Area" shall mean the Common Parking Area,
Common Area Utility Lines, the Bazaar Perimeter Areas, the Casino Perimeter
Areas and the Fire Command Center, all as more particularly set forth on the
Site Plans and the Plans and Specifications, subject to any restrictions set
forth in this REA. The Common Area, except the Common Parking Area, shall be
maintained, repaired, operated and restored by the Parties set forth on Schedule
"I" hereto. The Common Parking Area shall be maintained, repaired, operated and
restored by Bazaar Company pursuant to the Parking Use Agreement.
Common Area Utility Line. "Common Area Utility Line" is defined in
Section 2.1(e).
Common Area Work. "Common Area Work" is defined in Section 4.1.
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Common Costs. "Common Costs" shall mean those expenses and costs
which arise in connection with the proper maintenance, repair and operation of
the Common Area (including administrative fees to the extent representative of
actual costs and expenses, but not profits, except as expressly provided in the
Parking Use Agreement) and which are to be shared between certain of the Parties
in accordance with their respective Allocable Share of Common Costs. Each Party
shall be responsible for, and Common Costs shall not include, the cost of
building, installing, maintaining and operating Buildings, except to the extent
the Parties hereto otherwise agree to include such costs as Common Costs. In no
event shall Common Costs include any of the following: (i) the cost of any
demolition or construction Work contemplated by the Site Work Agreement,
including but not limited to the cost of constructing the Initial Planned Floor
Area and the Optional Improvements; (ii) any costs specifically allocated to or
required to be paid by a Party pursuant to the Site Work Agreement, the Bazaar
Lease, the Music Lease, the Energy Lease, the Parking Use Agreement, this REA,
any environmental indemnity, or any other agreement between two or more Parties
hereto which specifically requires any such Party to bear a cost or expense
which might other wise be considered a Common Cost; (iii) promotional costs and
activities; (iv) Construction, operation, maintenance, repair, replacement and
restoration of the Central Energy Plant; (v) costs imposed by the County or
other governmental authorities claiming jurisdiction over the Site which relate
to the use to which any individual Tract is put; (vi) depreciation and financing
costs attributable to any of the improvements comprising the Redeveloped
Aladdin; (vii) the continuing cost of complying with any requirements imposed by
the County or any other governmental authority in connection with the
realignment of Harmon Avenue and pedestrian bridges, which cost shall remain the
responsibility of Aladdin Gaming; (viii) the cost of special services, goods or
materials provided to or specific costs incurred for the account of specific
Parties, Occupants or Permittees rather than for the benefit of the Site as a
whole; (ix) amounts paid in respect of Common Costs to an Affiliate of an
Operator Party to the extent such amounts are in excess of amounts that would be
paid on a commercially reasonable basis to qualified third parties in respect of
such costs; (x) real estate and personal property taxes with respect to each
Tract and each Party (except for personal property taxes attributable to
personal property to the extent used in connection with the Common Area) (it
being understood, however, that the Parties shall be responsible for their
respective Allocable Share of Real Estate Taxes as provided herein); and (xi)
the cost of Construction of the Monorail (it being understood, however, that
such cost shall nonetheless be subject to equitable allocation among the Parties
as set forth in Section 2.15 hereof).
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Common Parking Area. "Common Parking Area" is referenced in Recital
G and shall mean that portion of the Bazaar Improvements located on the Bazaar
Site and designated on the Site Plans and the Plans and Specifications for the
shared use of the Redeveloped Aladdin in connection with the parking, passage,
and loading of motor vehicles and trucks, together with related improvements
which at any time are constructed in connection therewith, including but not
limited to roadways, pedestrian sidewalks, stairways, elevators, bridges,
landscaping light standards, directional signs, driveways and curbs, in each
case to the extent indicated on the Site Plans and the Plans and Specifications.
Construction. "Construction" is defined in Section 3.1.
Contracting Party. "Contracting Party" is defined in Section 3.6.
Control. "Control" shall mean ownership of a Person or Party in
excess of 50% and/or the power, exercisable jointly or severally, to manage and
direct a Person through the direct or indirect ownership of partnership
interest, stock, trust powers, or other beneficial interests and/or management
or voting rights. A "change of control" shall mean that Control passes from one
Person and its Affiliates to another in a single transaction or a series of
related transactions.
Controlled Insurance Program. "Controlled Insurance Program" is
defined and set forth in that certain Contract between Aladdin Gaming and Fluor
Daniel, Inc. for Design/Build Services dated as of December 4, 1997.
County. "County" is defined in Recital A.
Cure. At such time as a Party is in Default and has received a
demand for the correction of such Default, such Party and its Mortgagee shall be
permitted thirty (30) days or such other amount of time specified herein within
which to render remedial performance sufficient to correct said Default, which
correction of said Default shall be referred to herein as "Cure." At its
election, the Party serving a notice of Default may also serve a demand for the
correction of such Default either concurrently with or subsequent to service of
the notice of Default, which demand shall specify the nature of the Default and
the precise duty or obligation under this REA alleged to have been breached.
Except as provided elsewhere in this REA to the contrary, whenever a Default is
not capable of Cure within the specified period, a Defaulting Party (or its
Mortgagee) shall be deemed
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to have Cured the Default if it shall have commenced Cure within the specified
time period and shall have prosecuted the Cure continuously and diligently
thereafter to completion.
Default. "Default" shall mean a Party's breach of any of its
covenants or obligations set forth in this REA. A notice of Default may be
accompanied or followed by service of a demand for the correction of such
Default. A party in Default is sometimes referred to herein as a "Defaulting
Party."
Demolition Work. "Demolition Work" shall mean portions of the Site
which may be demolished, razed and removed and which is more particularly
described in Article II of the Site Work Agreement.
Demand. "Demand" is defined in Section 12.2(a) hereof.
Demanding Party. "Demanding Party" is defined in Section 12.2(a)
hereof.
Discharge. "Discharge" shall mean the full relief and exoneration
from any personal liability or responsibility of a Transferor, Mortgagor or
Mortgagee for performance of, granting of or compliance with all easements,
covenants, duties and obligations accruing and arising under this REA in
connection with a Party's possession of its Tract, which shall occur from and
after the effective date of the following: (a) with respect to a Transferor, a
Transfer, as more fully described in Section 11.1; (b) with respect to a
Mortgagor, an Involuntary Transfer, as more fully described in Section 11.2; and
(c) with respect to a Mortgagee, a Transfer by such Mortgagee after acquiring
title to a Tract (or portion thereof) in an Involuntary Transfer, as more fully
described in Section 11.4.
DPW Agreement. "DPW Agreement" shall mean that certain Aladdin Hotel
& Casino Agreement between Aladdin Holdings, LLC and the County, dated March 18,
1997.
Energy Provider. "Energy Provider" shall mean Northwind Aladdin,
LLC, a Nevada limited-liability company, and upon a Transfer or Involuntary
Transfer of such Person's interest in the Site, "Energy Provider" shall mean
such Person's Transferee.
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Energy Provider Agreement. "Energy Provider Agreement" is defined in
Section 2.1(f).
Energy Provider Utility Line. "Energy Provider Utility Line" is
defined in Section 2.1.
Energy Site. "Energy Site" is defined in Recital E.
Estimated Cost Statement. "Estimated Cost Statement" is defined in
Section 4.1.
Event of Default. "Event of Default" shall mean a Default beyond
applicable notice and period for Cure.
Excuse. "Excuse" shall mean the occurrence of an event of either (a)
force majeure pursuant to Article 10 that interferes with a Party's ability to
perform its obligations under this REA, or (b) the Default of another Party with
respect to its restoration covenants given in Article 9 to the extent that such
Default interferes with a non-Defaulting Party's ability to perform its
obligations under this REA and which Default shall, pursuant to Section 11.8(a),
result in the temporary relief of the non-Defaulting Party from its duty to
restore under Article 9, for so long as such force majeure event continues or
such Defaulting Party has not Cured its Default.
Final Completion Deadline. "Final Completion Deadline" is defined in
the Energy Provider Agreement.
Fire Command Center. "Fire Command Center" shall mean that certain
fire command center for the Site and all facilities in connection therewith, as
more particularly set forth on the Site Plans and the Plans and Specifications,
to be maintained by Aladdin Gaming or Bazaar Company, as such Parties shall
mutually determine.
First Scheduled Opening Date. "First Scheduled Opening Date" shall
mean that date by which the Redeveloped Aladdin, except for the Music Hotel, is
scheduled to be first opened for business to the public, as more particularly
set forth in the Site Work Agreement.
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Floor Area. "Floor Area" shall mean the aggregate, as established
from time to time by the Project Architect/Engineer, of the actual number of
square feet of floor space on all floors in any Building, whether or not roofed
or occupied or leased, excluding non-leasable areas such as equipment rooms,
subterranean areas, balconies and mezzanines, management offices, and the like,
but only to the extent the same are not actually leased or leasable, measured
from the exterior faces or exterior lines of the exterior walls (including
basement walls) and from the center line (as opposed to exterior face) of the
party and interior common walls. Estimates of the initial Floor Areas,
including, with respect to the Gaming Site and the Bazaar Site, the Initial
Planned Floor Area, are set forth on the Site Plans and the Plans and
Specifications, which estimates shall be adjusted from time to time as the
Redeveloped Aladdin is constructed and improved.
Gaming Authority; Gaming Activity; Gaming Facility; Gaming Laws.
"Gaming Authority" shall mean the Nevada Gaming Commission, the Nevada State
Gaming Control Board, the Clark County Liquor and Gaming License Board, any
agency or authority operating under the Nevada Gaming Control Act, and any other
agency or authority of the State of Nevada regulating Gaming Activities. "Gaming
Laws" shall mean any statute, regulation, rule, mandate, opinion or similar
authority promulgated by a Gaming Authority. "Gaming Activity" shall mean any
use, operation, business or other activity which requires a license, approval,
authorization, registration or a finding of suitability from any Gaming
Authority. "Gaming Facility" shall mean a facility or facilities devoted
substantially to lodging, entertainment and the operation of Gaming Activities
open to the public at large, which facility and Gaming Activities are similar in
type to the majority of the hotel casinos located on the Las Vegas Strip. A
Gaming Facility may be associated with or included within or be a part of
another business operated in conjunction with the Gaming Facility including but
not limited to a hotel, hotel resort complex, amusement or theme ride parks,
retail center, and/or entertainment venues.
Gaming Equipment. "Gaming Equipment" is defined in Section 6.5(c).
Gaming Site. "Gaming Site" is defined in Recital B.
Grantee. "Grantee" is defined in Section 2.1(b).
Grantor. "Grantor" is defined in Section 2.1(a).
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Hazardous Substances. "Hazardous Substances" means and includes the
following, including mixtures thereof: any hazardous substance, pollutant,
contaminant, waste, by-product or constituent regulated under NRS Ch. 459, NRS
ss.ss. 618.750-618.850, NRS ss. 477.045, as amended, or any other federal, state
or local laws and regulations as amended or hereafter enacted regulating
hazardous or toxic substances or wastes, petroleum pollutant or waste or similar
substances, including, but not limited to, as defined in the Comprehensive
Environmental Response, Liability and Compensation Act, 42 U.S.C. 9601 et seq.,
as amended, the Federal Water Pollution Control Act, 33 U.S.C. Sections 1251, et
seq., Hazardous Materials Transportation Act, 49 U.S.C. Sections 1801, et seq.,
Resource Conservation and Recovery Act, 42 U.S.C. Sections 6901, et seq., Safe
Drinking Water Act, 42 U.S.C. Sections 3000(f), et seq., Clean Air Act, 42
U.S.C. Sections 7401, et seq., and United States Department of Transportation
Hazardous Materials Table, 49 C.F.R. 172.101, Chapters 444, 445A, 445B, 590 or
618 of NRS; pesticides regulated under the Federal Insecticides, Fungicide, and
Rodenticide Act, 7 U.S.C. Section 136 et seq.; asbestos and asbestos-containing
materials, PCBs and other substances regulated under the Toxic Substances
Control Act, 15 U.S.C. Section 2601 et seq.; source material, special nuclear
material, by-product material and any other radioactive materials or radioactive
wastes, however produced, regulated under the Atomic Energy Act or the Nuclear
Waste Police Act; chemicals subject to the OSHA Hazard Communication Standard,
29 C.F.R. 1910.1200 et seq.; and industrial process and pollution control wastes
whether or not hazardous within the meaning of the Resource Conservation and
Recovery Act, 42 U.S.C. 6901 et seq. References to statutory authority in this
definition shall be deemed to refer to such authority as such may be amended
from time to time.
In. "In" is defined in Section 2.1(c).
Indemnify. "Indemnify" shall mean the obligation of a Party
("Indemnitor") to indemnify, hold harmless, protect and defend, with counsel
reasonably acceptable to the Person receiving such indemnity ("Indemnity"),
including such Person's Affiliates and their respective officers, directors,
partners, members, landlords, agents, servants and employees (individually and
collectively, "Indemnitee") from and against all losses, claims, actions, liens,
proceedings, liabilities, damages (excluding consequential and punitive
damages), costs and/or expenses (including the Indemnitee's reasonable
Attorneys' Fees) (collectively, a "Claim") resulting from the death of or injury
to any Person or the physical or economic damage to or loss of any property
arising out of the Indemnitor's duties
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or conduct specified in this REA. Such term shall also include the requirement
that the Indemnitee give the Indemnitor notice of any suit or proceeding
entitling the Indemnitee to indemnification pursuant to this REA. Failure to
give such notice shall not, however, in any manner negate or invalidate the
obligation to provide such indemnity, except to the extent the Indemnitor is
actually prejudiced thereby. No Party shall be obligated to Indemnify another
Party to the extent the Claim underlying the Indemnitee's request for Indemnity
(a) results from the negligence or intentional wrongdoing of the Indemnitee
without the negligence of the Indemnitor, or (b) results from such willful,
intentional or wanton acts or omissions of the Indemnitee as shall constitute an
"occurrence" excluded from coverage under standard comprehensive public
liability and property damage insurance policies as they may exist from time to
time.
Index. "Index" is defined in Section 20.18.
Infrastructure Improvements. "Infrastructure Improvements" means
those off-site and on-site infrastructure improvements depicted on the Site
Plans and the Plans and Specifications and installed, made, constructed,
restored or relocated by the Aladdin Parties in order to prepare the Site for
the development and construction of the Redeveloped Aladdin, and for ongoing
operation as required by the DPW Agreement and the County, including, without
limitation, grading, pad preparation, streets, roadways, driveways, walkways,
sidewalks, curbs, bridges, turning lanes, traffic control devices, traffic
signals, traffic mitigation measures, water drainage and flood control
mitigation measures, street lights, driveway and walkway lights, Building lights
(including lighting and ceilings that are underneath the Retail Facility),
signage, landscaping, pedestrian bridges, tunnels and overpasses (whenever
constructed) and preparation for the installation of utilities.
Initial Planned Floor Area. "Initial Planned Floor Area" is referred
to in Recital F and shall mean the Floor Area that Aladdin Gaming is required to
construct on the Gaming Site and Bazaar Company is required to construct on the
Bazaar Site, respectively, pursuant to the Site Work Agreement and this REA. The
Initial Planned Floor Area for the Bazaar Improvements and the required portion
of the Aladdin Improvements is more particularly set forth on the Site Plans and
the Plans and Specifications for the Bazaar Improvements and the Aladdin
Improvements, respectively.
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Involuntary Transfer. "Involuntary Transfer" shall mean the
conveyance or reversion of fee or leasehold title to a Tract (or portion
thereof) from a Mortgagor ("Involuntary Transferor") to a Mortgagee
("Involuntary Transferee") resulting from the judicial or nonjudicial
foreclosure of the Mortgage or the grant of a deed in lieu of such foreclosure;
provided, however, in the event of such an Involuntary Transfer, the Involuntary
Transferor shall be conclusively deemed to have assigned all of its rights,
powers, title and interest in its Tract and this REA to the Involuntary
Transferee, who shall be conclusively deemed to have assumed all of the
Involuntary Transferor's covenants and obligations thereunder accruing from and
after such Involuntary Transfer.
Licensee. "Licensee" is defined in Section 9.7.
Liened Party. The term "Liened Party" is defined in Section 3.6.
Monorail. "Monorail" is defined in Section 2.15.
Mortgage; Mortgagor; Mortgagee. "Mortgage" shall mean an indenture
of mortgage or a deed of trust encumbering all or a portion of the interest of a
Party ("Mortgagor") in its Tract. "Mortgagee" shall mean either the trustee and
beneficiary/mortgagee, individually or collectively as appropriate, under a
Mortgage.
Music Hotel. "Music Hotel" is defined in Recital D.
Music Lease. "Music Lease" is defined in Recital D.
Name. "Name" shall exclusively mean, with respect to Aladdin Gaming,
"Aladdin Hotel and Casino" or such other name as Aladdin Gaming may designate in
lieu thereof in the future, as to which Bazaar Company and Aladdin Music shall
have the right to reasonably approve, which approval shall not be unreasonably
withheld; with respect to Bazaar Company, "Desert Passage at Aladdin" or such
other name as Bazaar Company may designate in lieu thereof in the future, as to
which Aladdin Gaming and Aladdin Music shall have the right to reasonably
approve, which approval shall not be unreasonably withheld; and, with respect to
Aladdin Music, "Sound Asylum Hotel" or such other name as Aladdin Music may
designate in lieu thereof in the future, as to which Aladdin Gaming and Bazaar
Company shall have the right to reasonably approve, which approval shall not be
unreasonably withheld.
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Non-Demanding Party. "Non-Demanding Party" is defined in Section
12.2(a) hereof.
NRS. "NRS" shall mean Nevada Revised Statutes.
Occupant. "Occupant" shall mean the Parties hereto and any Person
from time to time entitled to use and occupy Floor Area under any lease,
sublease, deed or other instrument or arrangement.
Operator Party. "Operator Party" is defined in Section 4.1.
Optional Improvements. "Optional Improvements" is referred to in
Recital F and shall mean the office tower and/or time share facilities that are
permitted to be developed by the Aladdin Parties pursuant to this REA on that
portion of the Site more particularly described on Exhibit "A-6" attached hereto
(the "Optional Improvements Site"), in all instances to the extent permitted by
applicable law.
Optional Improvements Site. "Optional Improvements Site" is defined
in the definition of Optional Improvements.
Parking Use Agreement. "Parking Use Agreement" shall mean that
certain Common Parking Area Use Agreement dated as of the date hereof by and
between Bazaar Company and Aladdin Gaming. A memorandum of the Parking Use
Agreement shall be recorded in the Official Records of the County immediately
following the recordation of this REA.
Party. "Party" shall mean each of the following: Aladdin Gaming,
Bazaar Company, Aladdin Music, Energy Provider, the owner or lessee of any
portion of the Site conveyed by or leased from Aladdin Gaming for the purposes
of developing the Optional Improvements and, upon a Transfer or Involuntary
Transfer, any of their respective Transferees or Involuntary Transferees (as the
case may be), subject to the provisions of this Section with respect to
Transfers or Involuntary Transfers of partial interests in a Tract. Following a
Transfer or Involuntary Transfer, the Transferor or Involuntary Transferor shall
no longer be a Party; provided, however, that the easements, conditions,
covenants, obligations and restrictions of this REA shall be binding and
enforceable by any Party against any Transferor with respect to those time
periods during which such Transferor was a Party. A Mortgagee shall not be
deemed to be the Party with respect to a
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Tract so long as the Mortgagor, as the applicable Party, retains the entire
possessory interest in such Tract except that if a Mortgagor conveys a Tract to
a Mortgagee upon the occurrence of a judicial or nonjudicial foreclosure or the
grant of a deed in lieu of foreclosure, then the Mortgagee shall become a Party,
although such Mortgagee shall not be liable for the acts or omissions of the
Transferor. Notwithstanding the foregoing, any such Mortgagee shall not be
deemed a Party unless and until said Mortgagee takes title to the Transferor's
interest in the subject Tract or is deemed to be a Mortgagee in possession
pursuant to applicable law.
A Transferee or Involuntary Transferee of any of the following
partial interests shall not be treated as a separate Party hereunder (but shall
nonetheless be subject to the terms of this REA), unless such Person is
designated in writing as the sole Party with respect to such Tract by all such
Persons owning a partial interest in such Tract:
(a) Any partial, subdivided interest in a Party's Tract
whether by parcelization, condominiumization or otherwise, except in
connection with the Commercial Subdivision;
(b) Any partial, undivided interest in all of a Party's Tract
or Tracts, such as an interest held in joint tenancy, tenancy-in-common
or as a life estate;
(c) Any partial, undivided interest, legal or equitable, in
the assets of any Party that is a Person other than an individual, which
interest is not an interest in the Party's Tract, such as a beneficial
interest in a Party which is a trust but not including the shareholders
and/or bond holders of a Party that is a corporation; and
(d) Any lease, sublease, easement or license (excluding the
Bazaar Lease, the Music Lease and the Energy Lease) affecting all or a
portion of a Tract.
Only one Person for each Tract may be designated as a Party. In the event that
the Persons owning such partial interests fail to designate a Person as the
Party, the acts of the Person who was the Party prior to the Transfer or
Involuntary Transfer (whether or not such Party retains any interest in the
Tract or Tracts in question) shall be binding on all Persons having an interest
or right in said Tract or Tracts, until such time as written notice of such
designation is given and recorded in the
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office of the County Recorder of the County and a copy thereof is served on the
Parties in accordance with Article 14.
Perimeter Access Areas. "Perimeter Access Areas" means those areas
on a Party's Tract adjacent to a Party's Building between exterior Building
faces and the exterior boundary lines of the Site, including sidewalks, stairs,
escalators, elevators, people movers, monorails and all other surface
improvements relating to ingress and egress within said areas.
Permittee. "Permittee" shall mean any Party or Occupant and its
respective officers, directors, employees, partners, members, agents,
contractors, customers, visitors, invitees, subtenants, licensees and
concessionaires.
Person. "Person" shall mean an individual, fiduciary, partnership,
limited liability company, firm, association and corporation, or any other form
of business or government entity.
Plans and Specifications. "Plans and Specifications" shall mean all
drawings, plans and specifications prepared by or for a Party which describe and
show the labor, materials, equipment, fixtures and furnishings necessary for the
construction of the improvements on a Party's Tract and which are or will be
identified on Exhibit "C" attached hereto and made a part hereof, as the same
may be modified from time to time pursuant to this REA.
Prevailing Party. "Prevailing Party" is defined in Article 13.
Project Architect/Engineer. "Project Architect/Engineer" shall mean
ADP/FD of Nevada, Inc. with respect to architectural and engineering matters
relating to the Demolition Work, the Site Work, the Aladdin Improvements and the
shell of the Bazaar Improvements, who shall be retained by Aladdin Gaming, or
such other architect(s) or engineer(s) duly licensed to practice in the State of
Nevada as may from time to time be selected by Aladdin Gaming and, with respect
to the shell of the Bazaar Improvements, approved by Bazaar Company (which
approval shall not be unreasonably withheld and shall be deemed granted if not
denied within fifteen (15) days of a request therefor). "Project
Architect/Engineer" shall mean RTKL Associates, Inc. with respect to
architectural and engineering matters relating to the construction of the
interior of the shell of the Bazaar Improvements, who shall be retained by
Bazaar Company, or such other architect(s) or engineer(s) duly licensed to
practice in the State of Nevada as
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may from time to time be selected by Bazaar Company. "Project
Architect/Engineer" shall mean ADP/FD of Nevada, Inc. with respect to
architectural and engineering matters relating to the construction of the Common
Parking Area, who shall be retained by Bazaar Company, or such other
architect(s) or engineer(s) duly licensed to practice in the State of Nevada as
may from time to time be selected by Bazaar Company and approved by Aladdin
Gaming (which approval shall not be unreasonably withheld and shall be deemed
granted if not denied within fifteen (15) days of a request therefor). "Project
Architect/Engineer" shall mean, with respect to architectural and engineering
matters relating to the construction of the Music Hotel, ADP/FD of Nevada, Inc.,
who shall be retained by Aladdin Music, or such other architect(s) or
engineer(s) duly licensed to practice in the State of Nevada as may from time to
time be selected by Aladdin Music and approved by Aladdin Gaming (which approval
shall not be unreasonably withheld and shall be deemed granted if not denied
within fifteen (15) days of a request therefor). "Project Architect/Engineer"
shall mean, with respect to architectural and engineering matters relating to
the Construction of the Central Energy Plant, such architect(s) or engineer(s)
duly licensed to practice in the State of Nevada selected by Energy Provider in
accordance with the Energy Provider Agreement.
Project Contractor. "Project Contractor" shall mean Fluor Daniel,
Inc., the contractor to be retained by Aladdin Gaming with respect to the
Construction of the Initial Planned Floor Area of the Aladdin Improvements and a
portion of the shell of the Bazaar Improvements, and by Bazaar Company for the
balance of the Retail Facility and the Common Parking Area, or such other
contractor(s) duly licensed to practice in the State of Nevada as may from time
to time be designated by Bazaar Company with respect to the Bazaar Improvements
(provided that such other contractor is reasonably approved by Aladdin Gaming
within fifteen (15) days after request therefor and Aladdin Gaming's failure to
respond shall be deemed approval) and/or by Aladdin Gaming with respect to the
Aladdin Improvements (provided that such other contractor is reasonably approved
by Bazaar Company within fifteen (15) days after request therefor and Bazaar
Company's failure to respond shall be deemed approval). "Project Contractor"
shall mean, with respect to the Construction of the Music Hotel, such
contractor(s) duly licensed to practice in the State of Nevada as may from time
to time be designated by Aladdin Music (provided that such contractor is
reasonably approved by Aladdin Gaming within fifteen (15) days after request
therefor and Aladdin Gaming's failure to respond shall be deemed approval).
"Project Contractor" shall mean, with respect to the Construction of the Central
Energy Plant, such contractor(s) duly licensed to practice in the State of
Nevada as may from time to
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time be designated by Energy Provider in accordance with the Energy Provider
Agreement.
Quality of Development and Planning for the Aladdin Improvements.
"Quality of Development and Planning for the Aladdin Improvements" shall mean
that the standard of quality of development for the Aladdin Improvements (as of
the First Scheduled Opening Date) shall be equal to or better than the general
quality (as of the date of this REA) of the Mirage, including but not limited to
interior finish, theming and attraction package, and standard hotel room, with a
higher percentage of suites and king parlors. Such standards are intended to
attract as a primary target the upper middle market segment, with an ambiance
equal to or better than Bally's and Mirage. Upon the First Scheduled Opening
Date, the Aladdin Hotel and Casino is intended to be one of the top five hotels
on the Las Vegas strip, taking into consideration for such purposes the hotels
existing and/or announced as of the date hereof in terms of market segment,
average daily room rate and overall ambiance and market perception. Bazaar
Company acknowledges that such standards are not intended to be a guaranty of
the economic performance of the Aladdin Improvements or the Redeveloped Aladdin
and no Party shall have any liability with respect to such economic performance.
Bazaar Company shall have reasonable approval of the Quality of Development and
Planning for the Aladdin Improvements, and in its exercise of such approval
shall take into account, among other things, the quality of vehicular traffic
and pedestrian circulation, ingress and egress, and the contractors, plans,
drawings and construction schedule relating to the foregoing. Bazaar Company's
approval of the Plans and Specifications shall be deemed approval of the Quality
of Development and Planning for the Aladdin Improvements with respect to the
Construction covered by such Plans and Specifications.
Redeveloped Aladdin. "Redeveloped Aladdin" is defined in Recital F.
Release. "Release" shall mean that a specified easement, covenant
and/or restriction under this REA, as both a Party's personal obligation and one
running with the Party's Tract, shall have been terminated with respect to
obligations accruing from and after those events described, and in the manner
set forth, in Article 11.
Released Party. "Released Party" is defined in Section 11.7(b).
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Retail Facility. "Retail Facility" is defined in Recital G.
Second Scheduled Opening Date. "Second Scheduled Opening Date" shall
mean that date by which the Music Hotel is scheduled to be first opened for
business to the public, which shall mean that (a) all certificates of occupancy
for the Music Hotel shall have been issued by the County, and (b) all design and
construction work in the casino area of the Music Hotel has been completed and
the casino is fully operational and guest rooms are ready to be occupied by
guests. The Second Scheduled Opening Date shall in no event be later than the
later of (i) six (6) months after the First Scheduled Opening Date and (ii)
November 1, 2000.
Separate Utility Line. "Separate Utility Line" is defined in Section
2.1(d).
Site. "Site" is defined in Recital A.
Site Plans. "Site Plans" shall mean those certain drawings, plans,
specifications and criteria with respect to the development of the Redeveloped
Aladdin on the Site which are identified on Exhibit "B" attached hereto and made
a part hereof, as the same may be modified from time to time in accordance with
this REA.
Site Work. "Site Work" shall mean all Infrastructure Improvements,
as well as the installation and construction of all above-and below-ground
footings, girders, columns, braces, load-bearing walls, foundations and standard
structural support elements necessary for the construction, support, structural
integrity, enclosure and operation of Buildings and other improvements
constituting the Redeveloped Aladdin except for the Music Hotel and the Central
Energy Plant, and any replacement, substitution or modification thereof, all of
which shall be designed, installed and constructed by an Aladdin Party or
Parties, at its or their sole cost and expense, subject only to the Site Work
Contribution defined and set forth in Section 4.5 of the Site Work Agreement.
Site Work Agreement. "Site Work Agreement" is defined in Recital A.
Suit. "Suit" is defined in Article 13.
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Termination Date. "Termination Date" shall mean the date on which
this REA shall terminate, pursuant to the terms and provisions of Article 17.
Theater for Performing Arts. "Theater for Performing Arts" shall
mean that portion of the Aladdin Improvements designated as such on the Site
Plans and the Plans and Specifications, which shall be leased to Aladdin Music
pursuant to the terms of the Theater Lease.
Theater Lease. "Theater Lease" shall mean that certain lease of the
Theater for Performing Arts to be entered into between Aladdin Gaming, as
lessor, and Aladdin Music, as lessee.
Tract. "Tract" shall initially mean the land and/or air space
comprising the Bazaar Site, the Gaming Site, the Aladdin Music Site, the Energy
Site or the Optional Improvements Site, as applicable, together with the
Buildings, Common Area and all other improvements of a Party now or hereafter
located thereon. If at any time hereafter there is a Transfer of a Tract, then
the Tract so transferred shall be deemed a separate Tract and the Person
acquiring or leasing such Tract shall be deemed a Party hereunder, subject to
the terms set forth herein; provided, however, that no parcelization or
subdivision of a Tract (other than the Commercial Subdivision), or lease or
license of space within the Redeveloped Aladdin by a Party shall alone be deemed
to create a new Tract.
Transfer; Transferor; Transferee. "Transfer" shall mean any
voluntary transaction in which a Person ("Transferor") shall sell, lease,
transfer or assign, other than for security purposes, all or substantially all
of its interest in its Tract together with all of its rights under this REA to a
Person or Persons ("Transferee") who shall expressly assume, by a duly executed
and acknowledged written instrument in recordable form served on all Parties in
accordance with Article 14, all of such Transferor's covenants, duties and
obligations under this REA. Neither the execution of space leases with Occupants
demising space in the Retail Facility, nor execution of the Parking Use
Agreement shall be deemed a Transfer by Bazaar Company.
Utility Lease. "Utility Lease" is defined in Recital E.
Utility Lines. "Utility Lines" is defined in Section 2.3(a).
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Work. "Work" is defined in Section 9.6.
ARTICLE 2
EASEMENTS
2.1 Definitions and Conditions. In this Article 2, each holder of an
interest in a Tract grants to the holder(s) of an interest in every other Tract
certain easements, subject to the terms and conditions contained herein. As used
in this Article 2, the following definitions, terms and conditions shall apply:
(a) "Grantor" shall mean the Party granting an easement in
this REA. An easement granted herein shall bind the Grantor and its successors
and assigns, together with all Persons joining in, consenting to or
subordinating to this REA, but only with respect to their respective interests
in the Grantor's Tract, or portion thereof, each of which interest or portion
shall be a servient tenement burdened with the easement, provided that where
only a portion of the Tract or interest is bound and burdened by the easement,
only that portion shall be deemed to be the servient tenement.
(b) "Grantee" shall mean the Party (and its successors and
assigns) as to the Tract, or portion thereof, that is the dominant tenement
benefitted by the easement. An easement granted in this Article 2 shall benefit
only the dominant tenement (provided that where only a portion of the Tract is
so benefitted, only that portion shall be deemed to be the dominant tenement)
and Grantee with respect to its interest therein, except Grantee may permit its
Permitees from time to time to use such easement; however, such permission shall
in no way authorize use of the easement in excess of that set forth in this REA.
(c) The word "in" with respect to an easement granted "in" a
particular Tract shall mean, as the context may require, "in," "to," "on,"
"over," "through," "across," "upon" and/or "under."
(d) "Separate Utility Line" shall mean a utility line,
connection or facility that does not constitute a Common Area Utility Line or a
Energy Provider Utility Line, or the portions thereof which extend into a
particular Tract from a particular point of delivery, installed for the sole and
exclusive use
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and benefit of any Buildings or Tracts comprising the Redeveloped Aladdin for
the transmission of electrical power, heating, ventilation and air conditioning,
natural gas, steam, chilled water, hot water, domestic water, fire protection
water, storm drain, sanitary sewer, telephone service, cable television service,
and other telecommunication services, which lines, connections or facilities
shall be installed and maintained by the Party benefitting therefrom at such
Party's sole cost and expense.
(e) "Common Area Utility Line" shall mean a utility line,
connection or facility, or the portions thereof that extend to a particular
point of delivery to a particular Tract, installed for the common use and
benefit of all Buildings and Tracts comprising the Redeveloped Aladdin for the
transmission of domestic water, fire protection water, storm drainage and
sanitary sewage, which lines, connections or facilities Aladdin Gaming shall be
responsible for installing pursuant to the Site Work Agreement. The Common Area
Utility Lines will constitute Common Areas and will initially be as set forth on
the Site Plans and the Plans and Specifications.
(f) "Energy Provider Utility Line" shall mean a utility line,
connection or facility, or the portions thereof that extend to a particular
point of delivery to a particular Tract, installed for the common use and
benefit of all Buildings and Tracts comprising the Redeveloped Aladdin for the
transmission of chilled water, hot water and/or electricity, which lines,
connections or facilities shall be installed and maintained by Energy Provider
pursuant to (i) the Energy Lease, (ii) that certain Development Agreement
between Aladdin Gaming and Energy Provider dated as of December 3, 1997, (iii)
that certain Guaranty dated as of December 3, 1997 by Unicom Corporation to and
for the benefit of Aladdin Gaming, (iv) those certain Energy Service Agreements
to be entered into between Energy Provider and the other Parties and (v) that
certain Coordination Agreement to be entered into among Aladdin Gaming, Bazaar
Company and Aladdin Music ((i) through (v) collectively, the "Energy Provider
Agreement").
(g) All easements granted in this REA are appurtenant and not
in gross. Unless provided otherwise herein, all easements are nonexclusive,
irrevocable and shall terminate on the Termination Date. Notwithstanding
anything to the contrary contained herein, no easement shall be deemed to be
granted and/or no easement shall be permitted to be used, if or while the grant
or use of such easement, as applicable, would violate any law, statute or
regulation of the County or any other governmental authority claiming
jurisdiction over the Site.
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(h) All easements granted hereunder shall exist by virtue of
this REA, without the necessity of confirmation by any other document. Likewise,
upon the termination of any easement (in whole or in part) by expiration or
Release, the same shall be deemed to have been terminated without the necessity
of confirmation by any other document. However, at the request of any other
Party, each Party shall execute and acknowledge a document memorializing the
continued existence (including the location and any conditions thereon) or the
termination (in whole or in part) of any easement, provided each Party approves
the form and substance of such document pursuant to Article 18. Moreover, the
Parties hereby agree to cooperate with each other to terminate or modify
easements affecting the Site as of the date hereof to the extent necessary to
effect the intentions of the Parties under this REA, which cooperation shall
include, but not be limited to, the execution and recordation of documents that
implement such terminations and/or modifications.
(i) No grant of easement pursuant to this Article 2 shall
impose any greater obligation on any Party to construct or maintain its
Buildings other than as expressly provided in this REA.
(j) In its sole and absolute discretion, Grantee shall elect
whether to exercise its right to use any easement granted to it. Except for
easements granted pursuant to Sections 2.2, 2.7, 2.8, 2.11 and 2.14, prior to
Grantee's entry onto Grantor's Tract in exercise of its easement rights, Grantee
shall first obtain Grantor's consent to Grantee's proposed location, methods and
schedule for such exercise, which consent shall not be unreasonably withheld or
delayed, except as otherwise provided herein. Should Grantee elect to exercise
any such easement right, Grantee covenants to use the easement with due care so
as not to damage, injure or disturb any Person, any Party's Tract or any Party's
operation of its business and Buildings. Further, Grantee covenants to
construct, maintain, repair, operate, and restore and/or remove, at Grantee's
sole cost and expense (except as provided in Section 2.3 with respect to the
cost of Grantor relocating a utility easement), any facilities and improvements
Grantee shall have installed in Grantor's Tract in connection with such use;
provided, however, Grantee may elect at any time to discontinue its use of such
easement, in which event Grantee (i) shall remove or, at Grantor's request,
abandon all facilities and improvements previously installed in connection with
such use, (ii) shall repair any damage to Grantor's Tract in connection
therewith as required by Section 2.1(k) below and (iii) thereafter shall be
Discharged from all further duties whatsoever with respect thereto.
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(k) Grantee shall Indemnify Grantor and shall repair at
Grantee's sole cost and expense the servient tenement in connection with
Grantee's exercise of any of its easement rights. Without limiting the
foregoing, Grantee shall repair, to such condition as existed prior to Grantee's
exercise of such rights, all portions of the surface area or Buildings of the
servient tenement that Grantee or its agents may have excavated, damaged or
otherwise disturbed in exercising its easement rights.
(l) Each Party covenants and agrees that its exercise of the
easements granted herein shall not unreasonably interrupt or unreasonably
interfere with the Construction and/or business operations conducted by any
other Party at the Redeveloped Aladdin and that its exercise of the easements
granted herein shall be in a manner so as to avoid (i) causing any increase in
the cost of Construction on any other Party's Tract or any part thereof, (ii)
interfering unreasonably with any Construction Work being performed on any other
Party's Tract, or any part thereof, or (iii) interfering unreasonably with the
use, occupancy or enjoyment of any other Party's Tract, or any part thereof, by
any other Permittee. Any use of such easements by Grantee, and Grantor's
obligations in connection therewith, are subject to the provisions of Article 3
hereof.
(m) Each Party covenants and agrees that its exercise of the
right to relocate easements granted herein shall not unreasonably interrupt or
unreasonably interfere with the Construction and/or business operations
conducted by the Grantor of such easement on its Tract.
(n) Each Party reserves the right to close off such portions
of its Tract for such reasonable periods of time as may be legally necessary,
in the reasonable opinion of its attorney, to prevent the acquisition of
prescriptive rights by any Person or a dedication for a public purpose;
provided, however, that prior to closing off any such portion of its Tract, as
herein provided, such Party shall notify the other Parties of its intention so
to do and shall coordinate such closing with the other Parties so that there
shall be no unreasonable interference with the operation of the Redeveloped
Aladdin.
2.2 Easement: Automobile Parking, Vehicular and Pedestrian Access;
Emergency Egress.
(a) Each Party hereto as to its ownership or leasehold
interest in its Tract, as applicable, as Grantor, hereby grants to each other
Party
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hereto as to its respective ownership or leasehold interest in its Tract, as
applicable, as Grantee, for use by Grantee and Grantee's Permittees, a
non-exclusive easement in such respective portions of the Common Area and
Perimeter Access Areas of Grantor's Tract as have been identified on the Site
Plans and the Plans and Specifications, or may be set aside, maintained and
authorized under this REA for pedestrian and vehicular ingress and egress to and
from Grantee's Tract.
(b) Bazaar Company, as to its ownership or leasehold interest
in its Tract, as applicable, as Grantor, hereby grants to each other Party
hereto as to its respective ownership or leasehold interest in its Tract, as
applicable, as Grantee, for use by Grantee and Grantee's Permittees, a
non-exclusive easement in such respective portions of the Common Parking Area of
Grantor's Tract as have been identified on the Site Plans and the Plans and
Specifications, or may be set aside, maintained and authorized under this REA
for passage and parking of vehicles. Bazaar Company, as Grantor, shall at all
times provide Grantee access to the Common Parking Area. Each Grantee's use of
the vehicular parking easement granted in this Section 2.2, and the
Construction, maintenance, operation and/or restoration of the Common Parking
Area by, and the other rights and obligations in connection therewith of, Bazaar
Company are subject to the provisions of the Parking Use Agreement.
(c) Each Party hereto shall have the non-exclusive easement to
use the exit stairways and walkways shown on the Site Plans and the Plans and
Specifications for emergency egress purposes only, provided that in the event of
construction, repair, demolition, casualty or similar circumstances one or more
alternate means of egress may be provided.
(d) Each Grantor hereby reserves the right to eject or cause
to be ejected from its Tract any Person who is not authorized, empowered or
privileged to use such Tract under this REA.
(e) Bazaar Company, as Grantor, hereby grants to Aladdin
Gaming as to its ownership interest in its Tract, as Grantee, for use by Grantee
and its employees, a non-exclusive easement in such respective portions of
Grantor's Tract as has been designated on the Site Plans and the Plans and
Specifications (and as otherwise may be, set aside, maintained and authorized
under this REA) for the pedestrian access and passage by Grantee and its
employees from the Common Parking Area through the service corridor of the
Retail Facility and to the Gaming Site.
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2.3 Easement: Utilities.
(a) Each Party hereto as to its ownership or leasehold
interest in its Tract, as applicable, as Grantor, hereby grants to each of the
other Parties hereto as to its ownership or leasehold interest in its Tract, as
applicable, as Grantee, an easement in the Common Area of Grantor's Tract and in
Buildings to the extent reflected on the Plans and Specifications for the
Initial Planned Floor Area or as may be reasonably required, for the
installation, operation, flow, passage, use, maintenance, repair, replacement,
relocation, restoration and/or removal of Separate Utility Lines, Energy
Provider Utility Lines and Common Area Utility Lines (collectively, "Utility
Lines"). All Utility Lines, whether or not installed and/or relocated pursuant
to the easements granted herein, shall be placed underground or within a
structure reasonably approved by Grantor. The location (or relocation) of all
easements granted by the Parties in this Section 2.3 shall be subject to the
prior approval of the Grantor, which approval shall not be unreasonably
withheld; provided, however, any Utility Lines shown on the Plans and
Specifications which have been approved by Bazaar Company or Aladdin Gaming, as
applicable, pursuant to the provisions of the Bazaar Lease or the Site Work
Agreement, or approved by Aladdin Gaming pursuant to the Energy Provider
Agreement, shall not require separate approval by the Grantor pursuant to the
provisions of this REA.
(b) The Grantee of any of the Separate Utility Line easements
shall be responsible as between the Grantor and Grantee thereof for the
installation, maintenance, repair, restoration, relocation and/or removal of all
such Separate Utility Lines installed pursuant to such grant. Grantee shall give
Grantor at least fifteen (15) days written notice prior to Grantee's
installation, maintenance, repair, restoration, relocation and/or removal of any
such Separate Utility Line; provided, however, in the case of an emergency,
Grantee may perform or cause to be performed any such Work (i) immediately after
giving Grantor such advance written notice as is practicable under the
circumstances, or (ii) immediately and without advance notice if the reasonably
expected delay to be incurred by giving advance notice would unreasonably
jeopardize persons or property; provided, further, however, that in the event of
emergency Work permitted to be conducted without advance notice pursuant to
clause (ii) above, Grantee shall give Grantor notice thereof as soon as
practicable thereafter. Grantee shall perform all such Work without cost or
expense to Grantor and in such a manner as to cause minimal disturbance to
Grantor's and other Person's use of the Redeveloped Aladdin as may be
practicable under the circumstances.
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(c) All Energy Provider Utility Lines shall be installed,
maintained, repaired, restored, relocated and/or removed by Energy Provider.
Energy Provider shall give the other Parties at least fifteen (15) days written
notice prior to Energy Provider's installation, maintenance, repair,
restoration, relocation and/or removal of any such Energy Provider Utility
Lines; provided, however, that in the case of an emergency, Energy Provider may
perform or cause to be performed any such Work (i) immediately after giving the
other Parties such advance written notice as is practicable under the
circumstances, or (ii) immediately and without advance notice if the reasonably
expected delay to be incurred by giving advance notice would unreasonably
jeopardize persons or property; provided, further, however, that in the event
of emergency Work permitted to be conducted without advance notice pursuant to
clause (ii) above, Energy Provider shall give the Parties notice thereof as soon
as practicable thereafter. Energy Provider shall use its reasonable efforts to
perform all such Work in such a manner as to cause minimal disturbance to the
use, operation, development and construction of the Redeveloped Aladdin as may
be practicable under the circumstances. The cost of such Work shall be payable
to Energy Provider by the other Parties pursuant to the Energy Provider
Agreement.
(d) All Common Area Utility Lines shall be initially
Constructed and installed by Aladdin Gaming pursuant to the Site Work Agreement.
Thereafter, all Common Area Utility Lines shall be maintained, repaired,
restored, relocated and/or removed by the Operator Party. The Operator Party
shall give the other Parties at least fifteen (15) days written notice prior to
the Operator Party's relocation, removal or, if such may result in the temporary
cessation of service, maintenance of any such Common Area Utility Lines;
provided, however, that in the case of an emergency, the Operator Party may
perform or cause to be performed any such Work (i) immediately after giving the
other Parties such advance written notice as is practicable under the
circumstances, or (ii) immediately and without advance notice if the reasonably
expected delay to be incurred by giving advance notice would unreasonably
jeopardize persons or property; provided, further, however, that in the event of
emergency Work permitted to be conducted without advance notice pursuant to
clause (ii) above, the Operator Party shall give the Parties notice thereof as
soon as practicable thereafter. The Operator Party shall use its reasonable
efforts to perform all such Work in such a manner as to cause minimal
disturbance to the use, operation, development and construction of the
Redeveloped Aladdin as may be practicable under the circumstances. The cost of
such Work shall be payable to the Operator Party by the other Parties pursuant
to the Allocable Share of Common Costs.
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(e) The Grantor of any utility easement granted under this
Section 2.3 shall have the right to relocate the same on its Tract at any time;
provided that Grantor shall give Grantee thirty (30) days prior written notice
thereof; and provided further, that such relocation (i) shall not interfere with
or diminish the utility services to Grantee, (ii) shall not reduce or
unreasonably impair the usefulness or function of such easements, (iii) shall
not be relocated other than underground or within a structure reasonably
approved by Grantee; and (iv) shall be performed at Grantor's sole cost and
expense and without cost or expense to Grantee, including any increased cost of
maintenance caused by such relocation. Notwithstanding clauses (i) and (ii)
above, temporary interferences with and diminution in such services shall be
permitted if they occur upon prior written notice and during Grantee's non-peak
business hours and Grantor promptly reimburses Grantee for all of Grantee's
direct cost, expense and loss (excluding, in the absence of Grantor's
negligence, any consequential damages) resulting from such interferences and/or
diminution in such services. Notwithstanding anything to the contrary set forth
in this Section 2.3(e), any relocation of any utility easement permitted to be
effected by a Grantor shall be subject to the reasonable approval of any
non-Grantee Party (except Energy Provider) if said relocation would have a
material and detrimental effect on such non-Grantee Party's owner ship,
construction, leasing, financing, operation or restoration of its Tract.
(f) The Grantee of any utility easement granted under this
Section 2.3 shall have the right to relocate the same on Grantor's Tract at any
time, subject to the reasonable approval of Grantor; provided that Grantee shall
give Grantor thirty (30) days prior written notice thereof; and provided
further, that such relocation (i) shall not interfere with or diminish the
utility services to Grantor, (ii) shall not reduce or unreasonably impair the
usefulness or function of Grantor easements or the business conducted by Grantor
on Grantor's Tract, (iii) shall not be relocated other than underground or
within a structure reasonably approved by Grantor; and (iv) shall be performed
at Grantee's sole cost and expense and without cost or expense to Grantor,
including any increased cost of maintenance caused by such relocation.
Notwithstanding clauses (i) and (ii) above, temporary interferences with and
diminution in utility services shall be permitted if they occur upon prior
written notice and during Grantor's non-peak business hours and Grantee promptly
reimburses Grantor for all of Grantor's direct cost, expense and loss
(excluding, in the absence of Grantee's negligence, any consequential damages)
resulting from such interferences and/or diminution in such services.
Notwithstanding anything to the contrary set forth in this Section 2.3(f), any
relocation of any utility easement permitted to be effected by a Grantee shall
be
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subject to the approval of any non-Grantee Party (except Energy Provider), in
such non-Grantee's sole and absolute discretion, if said relocation would have a
material and detrimental effect on such non-Grantee Party's ownership,
construction, leasing, financing, operation or restoration of its Tract.
2.4 Easement: Construction. Each Party hereto as to its ownership or
leasehold interest in its Tract, as applicable, as Grantor, hereby grants to
each of the other Parties hereto as to its ownership or leasehold interest in
its Tract, as applicable, as Grantee, an easement in Grantor's Tract (to the
extent reasonably necessary for the Grantee's enjoyment or preservation of
Grantee's improvements located on Grantor's Tract and in Grantor's Buildings),
for the (i) installation, Construction and/or restoration of improvements to the
Grantee's Tract and Buildings performed pursuant to this REA (including, without
limitation, for staging areas, worker parking, hoist and crane locations,
underpinnings and temporary safety closures); (ii) ingress, egress and access to
said areas to perform said Work; and (iii) use and maintenance of the following:
(a) separate or common footings, girders, columns, braces,
foundations and other standard support elements to a maximum lateral distance as
set forth in the Site Plans and the Plans and Specifications for the purpose of
supporting Building improvements of Grantee and party walls shared by Grantor
and Grantee as may be necessary for the structural integrity and enclosure of
adjacent or subjacent Buildings and any replacement, substitution or
modification thereof as permitted by this REA; provided that, at the request of
any Party, the applicable Parties shall prepare and record an agreement
specifying the exact locations of such above-ground and underground footings,
girders, columns, braces, foundations and other standard support elements, and
provided further that the manner of attachment shall be designed in accordance
with good Construction practice in the manner customary for such improvements
and so as not to impose any load on Grantor's Building in excess of the loads
contemplated in the Plans and Specifications for the Initial Planned Floor Area
approved pursuant to the provisions hereof, unless otherwise approved in writing
by Grantor and Grantee;
(b) canopies, roof and building overhangs, roof flashings,
wing walls, awnings, signs, lights and lighting devices and other similar
appurtenances, provided that all of the foregoing are attached to the Buildings
of Grantee to a maximum lateral distance as set forth in the Site Plans and the
Plans and Specifications or as otherwise consented to by Grantor, which consent
shall not be unreasonably withheld; and
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(c) electrical or similar vaults and HVAC supply or exhaust
shafts above and below the surface of such Tract, to a maximum lateral distance
as set forth in the Site Plans and the Plans and Specifications; provided,
however, the precise locations of the items described in subparagraphs (a), (b)
and (c) above must be shown in the Plans and Specifications for the Initial
Planned Floor Area and approved pursuant to the provisions hereof or must
otherwise be approved by Grantor. Upon completion of the Construction elements
referred to in subparagraphs (a), (b) and (c) above and upon request of any
Party, the Parties shall execute an agreement, in recordable form, appropriately
identifying the nature and location of each such Construction element and the
location of the easements granted in this Section 2.4, none of which shall
thereafter be changed without the prior written approval of Grantor, which
approval shall be at Grantor's sole and absolute discretion.
The Parties hereto acknowledge that it is contemplated that the
Music Hotel and the Optional Improvements, if any, will not be developed and
open to the public until after the First Scheduled Opening Date. In connection
therewith, each Party covenants and agrees that its exercise of the easements
granted under this Section 2.4 shall not unreasonably interrupt or unreasonably
interfere with the Construction and/or business operations conducted by any
other Party at the Redeveloped Aladdin, it being understood that there is likely
to be more interruption and interference during the Construction of the Music
Hotel and Optional Improvements than might otherwise occur during normal
business operations.
2.5 Easement: Maintenance of Common Structural Supports. The Grantor
of any easement in Section 2.4 covenants to Grantee that, if all or any part of
Grantor's Building is removed or destroyed and Grantor does not restore the
same, and if Grantor and Grantee shall have shared any foundations, footings,
girders, columns, braces, party walls or load-bearing walls, then Grantor shall
leave in place such structural support elements, or portions thereof not so
removed or destroyed, to the extent necessary, for adjacent, lateral, and
subjacent support and only for so long as that portion of Grantee's Building
sharing such structural support elements, as originally constructed or as
replaced under this REA, exists or is being restored. In the event Grantee shall
desire that Grantor reconstruct or restore such structural support elements, the
following provisions shall apply to Grantee's exercise of its easement under
this Section 2.5. Following any such removal or destruction, to obtain Grantor's
reasonable approval of common footings and foundations and other structural
support elements which Grantee
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desires that Grantor construct or restore, Grantee shall furnish Grantor with
all required live and dead load requirements, all column, anchor and beam
conditions and locations, and all other information Grantor shall reasonably
require with respect thereto. Upon Grantor's reasonable approval (which approval
shall be deemed granted if not denied within fifteen (15) days after Grantor's
receipt of the information set forth in the preceding sentence), Grantor shall
perform all Construction, maintenance, repair or replacement of such footings
and foundations and other structural support elements and Indemnify Grantee from
all costs associated therewith; provided, however, that if Grantor does not
perform all such Construction, maintenance, repair or replacement in a timely
and diligent manner, then Grantee may perform the same at Grantor's sole and
reasonable cost and expense if Grantee follows the self-help cure procedures set
forth in Section 9.9 hereof. Grantor shall be under no obligation to perform any
Construction, maintenance, repair or replacement of such footings and
foundations and other structural support elements, if such damage has occurred
after the termination of Grantor's restoration obligations set forth in Section
9.4 hereof; provided, however, that in such event Grantee shall have the right,
at Grantee's cost and expense, to maintain, repair or replace such footings and
foundations and other structural support elements on Grantor's Tract upon
Grantor's reasonable approval (which approval shall be deemed granted if not
denied within fifteen (15) days after Grantee's request therefor).
Notwithstanding the foregoing, in the event of damage affecting more than one
Party's Tract, and the affected Parties have each elected to restore their
respective Tracts, the provisions of Section 9.4 hereof shall control such
Parties' actions in connection with such restoration.
2.6 Easement: Exterior and Accent Lights. Each Party hereto as to
its ownership or leasehold interest in its Tract, as applicable, as Grantor,
hereby grants to each other Party hereto as to its ownership or leasehold
interest in its Tract, as applicable, as Grantee, an easement in such location
as Grantor shall reasonably approve for the (a) installation, maintenance,
repair, replacement and/or removal, at Grantee's sole cost and expense
(including the cost of electricity), of exterior and accent lights, on such
light standards and locations and at such levels of illumination as set forth on
the Site Plans and the Plans and Specifications, to highlight the exterior of
Grantee's Building, installed pursuant to this REA; and (b) ingress, egress and
access to said area to perform said Work. All such exterior and accent lighting
must be located and detailed as set forth on the Site Plans and the Plans and
Specifications for the Initial Planned Floor Area, and any exterior or accent
lights thereafter proposed to be installed by a Grantee shall be subject to
Grantor's approval, at Grantor's sole and absolute discretion, as to
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location, type and character, and must be harmonious with existing exterior and
accent lighting treatments. During Construction on Grantor's Tract in the
vicinity of the easement, any Grantee of this easement shall, upon thirty (30)
days prior written notice from Grantor, promptly remove all lights so installed
by the Grantee from the area under Construction; provided, however, upon
completion of such Construction, each Grantee shall have the right to reinstall
said lights at Grantee's cost and subject to compliance with the above
provisions.
2.7 Easement: Truck Loading Areas. Each Party, as to its ownership
or leasehold interest in its Tract, as applicable, as Grantor, hereby grants to
each other Party, as to its ownership or leasehold interest in its Tract, as
applicable, as Grantee, an easement in that portion of the Grantor's Tract that
borders those areas which have been designated on the Site Plans and the Plans
and Specifications and/or Constructed, maintained, repaired or restored for
purposes of truck dock parking, turn-around and loading/delivery areas, storage
rack areas, and truck access areas serving Grantee's Tract, if and to the extent
that Grantor's Tract borders such areas. All such truck loading areas shall be
Constructed in accordance with the requirements of this REA, the Site Work
Agreement and the Parking Use Agreement. Each Grantee's use of the easements
granted in this Section 2.7, and Grantor's rights and obligations in connection
therewith, are subject to the provisions hereof, the Parking Use Agreement and
each Party's exclusive truck loading facilities designated as such on the Site
Plans and the Plans and Specifications. The Parties hereby acknowledge that the
easements granted in this Section 2.7 are granted for the sole purpose of
permitting each Party the full use and enjoyment of said exclusive truck loading
facilities, which facilities shall be maintained by the Party entitled to the
exclusive use thereof.
2.8 Easement: Encroachments. Each Party hereto as to its ownership
or leasehold interest in its Tract, as applicable, as Grantor, hereby grants to
each other Party hereto as to its ownership or leasehold interest in its Tract,
as applicable, as Grantee, an easement for encroachments and maintenance thereof
if and to the extent that:
(a) there are minor variations from the Plans and
Specifications in the Construction of any of the Buildings occurring due
to Construction accuracy, methods and/or techniques;
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(b) there is minor settlement or shifting of any Buildings
over time so that any part of a Building encroaches upon a part of an
adjacent Tract; and
(c) there are canopies, roof and building overhangs, door
swings, signs, light standards, or other similar encroachments as
contemplated by the Plans and Specifications for the Initial Planned Floor
Area, or as may otherwise be approved by Grantor, together with their
replacements as such replacements may be reasonably modified.
Such easement for the maintenance of encroachments shall exist, as to a
particular encroachment, only so long as the encroaching portion of the Building
shall remain standing and in existence. Notwithstanding the foregoing, in no
event shall an easement for any encroachment be created or maintained in favor
of one Tract if such encroachment materially and adversely interferes with the
use, operation and enjoyment of another Tract by its Occupants or Permitees.
Nothing contained herein shall in any manner be construed as diminishing, or be
deemed to constitute a waiver of, any rights of a Grantor resulting from a
Grantee's failure to construct its Buildings within its respective Tract in
strict accordance with the Plans and Specifications therefor, and this
encroachment easement shall not relieve or excuse a Grantee from exercising all
due diligence to Construct its Buildings within the boundaries of such Grantee's
Tract.
2.9 Easement: Roof. Each Party as to its ownership or leasehold
interest in its Tract, as applicable, as Grantor, hereby grants to each other
Party (except Energy Provider) as to its ownership or leasehold interest in its
Tract, as applicable, as Grantee, an easement for the usage of any of Grantor's
roof space for the Construction, maintenance, repair, replacement and/or
removal, at Grantee's sole cost and expense, of such telecommunication and
ventilation equipment as may be reasonably necessary or required for the benefit
of Grantee's Tract (but excluding telecommunications or other equipment
installed by third parties pursuant to a lease or license executed by Grantee),
subject to the reason able approval of Grantor (it being understood that, with
respect to visible items installed pursuant to this Section 2.9, said items must
be properly and attractively screened).
2.10 Easement: Setbacks. Each Party hereto as to its ownership or
leasehold interest in its Tract, as applicable, as Grantor, hereby grants to
each of the other Parties hereto as to its ownership or leasehold interest in
its Tract, as
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applicable, as Grantee, an easement to the extent required by and for the
purpose of complying with any setback requirement imposed by applicable law or
private covenants, conditions and restrictions affecting the Site as of the
issuance of building permits for the Initial Planned Floor Area and the Music
Hotel. To the extent reflected on the Plans and Specifications for the Initial
Planned Floor Area, Grantor further agrees not to construct, place or otherwise
permit to be maintained any Building within such setback area in a manner which
would violate any such setback restrictions. Nothing contained herein shall
require a Grantor to relocate any Building constructed on its Tract in
compliance with such initial setback restrictions to allow for a setback
easement described herein due to changes in any applicable law or the decision
to develop the Optional Improvements.
2.11 Easement: General Integration, Maintenance and Development.
Each Party hereto as to its ownership or leasehold interest in its Tract, as
applicable, as Grantor, hereby grants to each of the other Parties hereto as to
its ownership or leasehold interest in its Tract, as applicable, as Grantee,
easements at any level above or below the ground to the extent to which such
easements may be required to comply with any provision of applicable law with
respect to ingress or egress in the event of fire or other emergency,
maintenance of Grantee's Buildings, or as otherwise may be reasonably necessary
to carry out the Construction, repair, operation, and restoration of Grantee's
Buildings; provided, however, that the location of any such additional easements
shall be governed by the provisions of Section 2.1(m) hereof pertaining to the
location or relocation of easements; and provided, further, that with respect to
any such additional easements, Grantee shall not, pursuant to Section 2.1(l)
hereof, unreasonably interrupt or unreasonably interfere with the Construction
and/or business operations conducted by Grantor on its Tract. Notwithstanding
the foregoing, no Party shall be required to grant an easement hereunder if it
is in any way adverse to that Party and the Party requesting the easement can
comply with applicable laws or accomplish its purpose in another reasonable
manner.
2.12 No Dedication of Easements. Nothing contained in this Article
2, including the grant of any or all easements hereunder, shall be deemed to
constitute a dedication of any Tract or any portion or portions thereof to the
County or any other governmental body, agency or entity or to the general
public, or be construed to create any rights in or for the benefit of any Person
not a Party, it being intended that this REA shall be strictly limited to and
for the purposes herein expressed.
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2.13 Abandonment of Easements. Subject to the requirements of
Section 2.1(j), the easements granted in Article 2 and any improvements
constructed in the exercise thereof, may be (a) abandoned by the Grantee at any
time by Grantee's notice given to Grantor (together with the written joinder in
such abandonment by the fee owner and any ground lessee of Grantee's Tract); or
(b) terminated by Grantor after the Termination Date of this REA, if not
terminated by their own terms, because the use thereof, including the use of
facilities therein, shall have ceased for a period of two (2) years and prior to
the resumption of use (i) Grantor shall have notified the then record owner of
the fee or leasehold estate constituting the dominant tenement that such
easement has been abandoned, (ii) Grantor shall have caused to be recorded in
the Recorder's Office in the County an affidavit that such abandonment has taken
place and that such notice has been properly given, and (iii) within ninety (90)
days after such notice, any such record owner shall have failed to record in
such Recorder's Office an affidavit that the Grantee has in fact used such
easement within such two (2) year period. Any Person at any time acquiring an
interest in any Tract after the first such affidavit described above has been
placed of record (provided such affidavit and recording shall have been made
after the Termination Date as provided in subsection (b) above) shall be
entitled to rely on such failure to record an affidavit of use within such
ninety (90) day period as conclusive evidence that such easement has been
abandoned and terminated.
2.14 Granting of Easements to Utility Companies.
(a) Aladdin Gaming is hereby authorized by the other Parties
hereto to convey any utility easements in the Gaming Site, the Optional
Improvements Site and the Energy Site to Energy Provider, public utility
companies or to any municipal or other similar governmental agency requesting
the execution and delivery of a written easement agreement prior to the First
Scheduled Opening Date and subject and pursuant to the terms of the Site Work
Agreement, so long as Aladdin Gaming, in the exercise of its reasonable business
judgment, determines that the granting of such easements would not have a
material adverse effect on the Parties.
(b) Bazaar Company is hereby authorized by the other Parties
hereto to convey any utility easements in the Bazaar Site to public utility
companies or to any municipal or other similar governmental agency requesting
the execution and delivery of a written easement agreement prior to the First
Scheduled Opening Date and subject and pursuant to the terms of the Site Work
Agree-
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ment, so long as Bazaar Company, in the exercise of its reasonable business
judgment, determines that the granting of such easements would not have a
material adverse effect on the Parties.
(c) Aladdin Music is hereby authorized by the other Parties
hereto to convey any utility easements in the Aladdin Music Site to public
utility companies or to any municipal or other similar governmental agency
requesting the execution and delivery of a written easement agreement prior to
the Second Scheduled Opening Date, so long as Aladdin Music, in the exercise of
its reasonable business judgment, determines that the granting of such easements
would not have a material adverse effect on the Parties.
2.15 Easement: Monorail. Aladdin Gaming shall have the right but not
the obligation, at any time to Construct, operate, alter, maintain and/or remove
a monorail and monorail stop to carry pedestrians and Permittees to and from the
Redeveloped Aladdin (the "Monorail") as such Monorail may be permitted by the
authorities of the County. In the event that Aladdin Gaming Constructs the
Monorail, Aladdin Gaming shall use commercially reasonable efforts (at no
significant cost to Aladdin Gaming) to provide a Monorail stop that provides
access into the Music Hotel. Subject to the other provisions of this Article 2,
each Party as to its ownership or leasehold interest in its Tract, as
applicable, as Grantor, hereby grants to Aladdin Gaming as to its ownership or
leasehold interest in its Tract, as applicable, as Grantee, an easement in
Grantor's Tract, for the Construction, operation, maintenance and removal of
such Monorail which may have supports located on a portion of the Gaming Site,
the Bazaar Site and/or the Music Site. The Monorail shall be deemed to be a part
of the Common Area and the costs of the Construction, operation and maintenance
thereof shall be subject to an equitable allocation among the Parties as
mutually approved by the Parties.
2.16 Easement: Signs.
(a) Each Party as to its ownership or leasehold interest in
its Tract, as applicable, as Grantor, hereby grants to each other Party (except
Energy Provider) as to its ownership or leasehold interest in its Tract, as
applicable, as Grantee, an easement for signs and posters advertising the
Aladdin Hotel and Casino, the Retail Facility, the Music Hotel or events in any
of the foregoing at such locations as are then used for such posters or
advertising and at the locations designated for same on the Site Plans and the
Plans and Specifications, subject to the reasonable approval of Grantor.
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(b) Aladdin Gaming, Bazaar Company and Aladdin Music shall be
entitled to have their respective Names on signs designating the Aladdin Hotel
and Casino, the Retail Facility and the Music Hotel, respectively, over certain
doors, gates and at certain other locations on each other Party's Tract, subject
to the approval of the Plans and Specifications for such signage, as set forth
in Section 3.1 hereof. The location and approximate size of all signs referred
to in this clause are designated on the Site Plans and the Plans and
Specifications.
(c) Aladdin Gaming, Bazaar Company and Aladdin Music shall be
entitled to have their respective Names on signs designating the Aladdin Hotel
and Casino, the Retail Facility and the Music Hotel, respectively, at certain
locations in the Common Areas, subject to the approval of the Plans and
Specifications for such signage, as set forth in Section 3.1 hereof. The
location and approximate size of all signs referred to in this clause are
designated on the Site Plans and the Plans and Specifications.
(d) Each Party which erects signs and posters pursuant to this
Section 2.16 shall maintain such signs and posters in good condition and repair
and the erection, maintenance and repair thereof shall be performed at such
Party's sole cost and expense.
ARTICLE 3
CONSTRUCTION OF REDEVELOPED ALADDIN
3.1 General Covenants and Background. The Parties agree that the
Construction of the Aladdin Improvements, the Bazaar Improvements, the Music
Hotel, the Central Energy Plant and any Optional Improvements shall be
accomplished in accordance with the requirements of the Site Work Agreement and
this REA, as applicable. As used in this REA, "Construction" means initially
installing or constructing upon, performing maintenance upon, making repairs to,
constructing alterations, additions and improvements, and/or razing, replacing
and restoring the whole or any part of the Buildings in accordance with the
provisions of this REA. All references to the Plans and Specifications refer to
those plans and specifications which have been attached hereto as Exhibit C, as
the same may be modified from time to time, pursuant to the procedures
hereinafter described. Any changes to the Plans and Specifications requested by
a Party which involve physical changes to another Party's Tract (except Energy
Provider's), other than
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de minimis changes which have no adverse effect, must be consented to by such
other Party(ies), in their sole discretion. For the purposes of this Section
3.1, "adverse effect" means a materially detrimental effect on the ownership,
construction, leasing, financing, operation or restoration of a Party's Tract
or improvements thereon. Any changes to the Plans and Specifications requested
by a Party which have a direct adverse effect on (a) another Party's Tract
(except Energy Provider's), (b) the Site Work, (c) the Common Areas, or (d) the
Quality of Development and Planning for the Redeveloped Aladdin, shall be
subject to the reasonable approval of the non-requesting Party(ies) (except
Energy Provider), which approval shall be deemed granted if not denied within
ten (10) business days following a request therefor. Any changes to the Plans
and Specifications requested by a Party which do not have a direct adverse
effect on those items enumerated in clauses (a) through (d) above, but which are
material and substantial in nature, are subject to the reasonable approval of
the non-requesting Party(ies) (except Energy Providers), which approval shall be
deemed granted if not denied within ten (10) business days following a request
therefor. Any changes to the Plans and Specifications requested by a Party which
involve physical changes to any Tract other than to the Gaming Site, other than
de minimis changes which have no adverse effect, shall be subject to the
reasonable approval of Aladdin Gaming, which approval shall be deemed granted if
not denied within ten (10) business days following a request therefor. The
approval rights of Aladdin Gaming set forth in this paragraph shall be effective
at such time as Aladdin Bazaar Holdings, LLC is not an Affiliate (disregarding
for the purposes of this Section 3.1 the second sentence of the definition of
the term "Affiliate") of Aladdin Gaming.
Within ten (10) business days after the submission of such Plans and
Specifications, the Party affected by such Construction, if and to the extent
any approval is applicable as set forth herein, shall notify the constructing
Party whether the same are approved or disapproved in accordance with Article
18, specifying the reason therefor if disapproved. If such Party shall
disapprove the modified Plans and Specifications, such Parties shall attempt to
resolve any disagreements by consulting with each other and their respective
architects, engineers or consultants as soon as reasonably possible, and if such
Parties are unable to resolve any such disagreements, any Party to the
disagreement may elect to resolve the disagreement by arbitration pursuant to
the expedited arbitration procedure set forth in the Site Work Agreement if such
Work is to be performed prior to the Second Scheduled Opening Date and otherwise
pursuant to the procedure set forth in Article 12 hereof.
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The failure of any Party to exercise its approval rights within the
time periods set forth in this Section 3.1 shall be deemed approval with respect
to the Plans and Specifications theretofore submitted.
3.2 Workmanship. Each Party agrees that all Construction to be
performed hereunder by such Party during the term of this REA shall be done in a
good and workmanlike manner and in accordance with good construction practice,
with new, first-class materials and in compliance with all applicable laws,
rules, ordinances, regulations, orders, requirements of all federal, state and
municipal governments and all licenses, approvals, permits, variances,
entitlements and certificates of occupancy and in substantial compliance with
the Plans and Specifications for the same which have been approved by the other
Party to the extent required by Section 3.1 above. Subject to the Site Work
Agreement, each Party shall pay all costs, expenses, liabilities and liens
arising out of or in any way connected with its Construction, including without
limitation all costs to repair any Buildings or property of the other Party
damaged as a result of such Construction. Upon demand, each Party shall deliver
to the other Party copies of those items submitted to such Party's Mortgagee
evidencing (i) completion of such Party's Work hereunder in compliance with the
approved Plans and Specifications for such Party's Buildings, if applicable, and
all applicable laws, ordinances, regulations and rules, and (ii) payment of all
costs, expenses, liabilities and liens arising out of or in any way connected
with such Construction and (iii) discharge of all liens of record, or contested
and bonded, in which event any judgment or other process issued in such contest
shall be paid and discharged before execution thereof. Nothing contained herein
shall be deemed to prohibit a lien created by a Mortgage on a Tract.
3.3 Coordination. Each Party shall use all reasonable efforts to
cause its Project Architect/Engineer and Project Contractor to cooperate and
coordinate such Party's Construction with the Project Architect/Engineers and
Project Contractors and Construction of the other Parties to the extent
reasonably practicable in order to achieve the objectives set forth in Sections
3.1 and 3.2.
3.4 Interference During Construction. Each Party agrees to perform
its respective Work (and to cause such Party's Permittees to perform such Work)
in a manner so as to avoid (a) causing any increase in the cost of Construction
on any other Party's Tract or any part thereof, (b) interfering unreasonably
with any Work being performed on any other Party's Tract, or any part thereof,
or (c) interfering unreasonably with the use, occupancy or enjoyment of any
other
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Party's Tract, or any part thereof, by any other Permittee. In furtherance of
the obligation set forth in clause (c) of the preceding sentence, the
constructing Party and/its Permittees shall exercise commercially reasonable
efforts to (i) minimize the amount of dust caused by its Construction
activities, (ii) utilize secondary access routes for all deliveries of
Construction equipment and supplies to minimize disruption to the other Parties'
business operations and (iii) to the extent deliveries of Construction equipment
and supplies are not able to be made on secondary access routes, to the extent
feasible, schedule such deliveries at non-peak business hours and days to
minimize disruption to the other Parties' business operations.
3.5 Optional Improvements and Music Hotel. (A) If and when Aladdin
Gaming elects to Construct any of the Optional Improvements, and before Aladdin
Music begins to Construct the Music Hotel, the Constructing Party shall so
notify the other Parties (except Energy Provider), which notification shall be
accompanied by such program requirements and conceptual plans and drawings as
the Constructing Party may have prepared at such time. (B) If and to the extent
that the Construction or Optional Improvements would require physical changes to
the Bazaar Site or the Gaming Site, other than de minimis changes which have no
adverse effect (as such term is used in Section 3.1 hereof), such changes must
be approved by the Party (or Parties, other than Energy Provider) whose Tract is
so affected, in such Party's sole discretion. (C) If and to the extent that the
Construction or the Optional Improvements have a direct adverse effect on (a)
the Bazaar Site or the Gaming Site, (b) the Work at the Bazaar Site or the
Gaming Site, (c) the Common Area, or (d) the Quality of Development and Planning
for the Aladdin Improvements, such Construction shall be subject to the
reasonable approval of the affected Party or Parties (other than Energy
Provider), which approval shall be deemed granted if not denied within twenty
(20) days following a request therefor. (D) If and to the extent that the
Construction Optional Improvements would not have a direct adverse effect on
those items enumerated in clauses (a) through (d) above, but are material and
substantial in nature, the Construction shall be subject to the reasonable
approval of the other Parties (except Energy Provider), which approval shall be
deemed granted if not denied within fifteen (15) days of a request therefor. (E)
At least thirty (30) days prior to the commencement of any material Construction
of the Music Hotel or any Optional Improvements or restoration thereof by any
Party, and in addition to compliance with other relevant provisions of this REA,
such Party shall cause its Project Architect/Engineer to submit to the other
Parties the following to the extent necessary or applicable: (a) a plot plan of
the Site affected by the Music Hotel or Optional Improvements showing (i) the
Buildings, (ii) the Common Area, (iii) utility connections, (iv) contractors'
staging
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areas, (v) material and equipment storage areas, (vi) Construction shacks and
other temporary improvements, (vii) access routes which the constructing Party
agrees to require its Construction personnel to use during the course of such
Construction or reconstruction, and (viii) workmen's parking area; (b) a time
schedule in reason able detail indicating the approximate date or dates upon
which the constructing Party shall commence, continue and cease using the
affected portions of the Site for the Construction of the Music Hotel or any
Optional Improvements; and (c) any material changes to the zoning or use permits
affecting the Site. Within fifteen (15) or twenty (20) days, as applicable,
after the submission of such plans and specifications for the Music Hotel or
Optional Improvements, the Party affected by such Construction (other than
Energy Provider), shall, to the extent such approval is applicable as set forth
herein, notify the constructing Party whether the same are approved or
disapproved in accordance with Article 18, specifying the reason therefor if
disapproved. If such Party shall disapprove the plans and specifications for the
Music Hotel or the Optional Improvements, such Parties shall attempt to resolve
any disagreements by consulting with each other and their respective architects,
engineers or consultants as soon as reasonably possible, and if such Parties are
unable to resolve any such disagreements, any Party to the disagreement may
elect to resolve the disagreement by arbitration pursuant to the expedited
arbitration procedure set forth in the Site Work Agreement if such Work is to be
performed prior to the Second Scheduled Opening Date or pursuant to the
procedure set forth in Article 12 hereof. The failure of any Party to exercise
its approval rights within the time periods set forth in this Section 3.5 shall
be deemed its approval.
3.6 Mechanic's Liens. In the event any mechanic's lien is filed
against the Tract of any Party (referred to in this Section 3.6 as the "Liened
Party"), the Party who ordered or contracted for the Work or materials on
account of which the lien was filed (referred to in this Section 3.6 as the
"Contracting Party") hereby covenants for the benefit of the Liened Party either
to pay the same and have it promptly discharged of record or to take such action
as may be required reasonably and legally to object to such lien or to have such
lien removed from such Tract but in all events to have such lien discharged
prior to its foreclosure. Upon request of the Liened Party, the Contracting
Party covenants to bond against and to Indemnify the Liened Party, its
Mortgagee, and the title insurer of the Liened Party's Tract from such lien or
furnish such security as may be required by law, or by any Mortgagee of the
Liened Party, to remove, release and discharge such lien of record. For all
purposes applicable to provisions of the statutory law of the State of Nevada,
the Music Hotel, Common Parking Area, the
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Retail Facility, the Central Energy Plant and the Aladdin Improvements shall
each be deemed separate and distinct works of improvement, notwithstanding the
integration of the Buildings constituting the Redeveloped Aladdin.
3.7 Construction Bonds. If any Party is required by its Mortgagee
to obtain, or otherwise elects to require its Project Contractor to obtain,
payment and/or completion bonds in connection with the Construction of the
Initial Planned Floor Area, the Central Energy Plant, the Music Hotel or any
subsequent Optional Improvements, then such Party shall request that the other
Parties (except Energy Provider) and their respective Mortgagees (except Energy
Provider's Mortgagee) be named as additional obligees under such bonds, except
that the rights of said additional obligees shall be subordinate to the
Mortgagee's rights and the rights of the Party obtaining such bond; provided,
however, that naming such other Parties as obligees under such payment and/or
completion bonds shall be at reasonable cost to the Party obtaining such bond
and is permitted by said Party's Mortgagee.
3.8 Temporary Termination of Fire Service. In the event a Party is
to perform any Construction or repair Work, including but not limited to the
installation, modification or relocation of utility facilities pursuant to
Article 2, which shall require as an incident thereto the loss of operation of
fire service in any Party's Building, the constructing Party, as a condition
precedent to the commencement and continuation of such Construction, shall:
(a) notify the other Parties that fire service will be
temporarily terminated at least forty-eight (48) hours prior thereto, which
notice shall specify the Party is performing such Construction and the date or
dates and hours such service shall be lost;
(b) obtain the prior written consent of the Parties in whose
Building(s) such service shall be lost, which consent shall not be unreasonably
withheld;
(c) perform all such Construction during non-peak business
hours of (or such other hours as may be designated by) the Parties so affected;
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(d) cause a fire watch to be posted and provide substitute
fire protection measures acceptable to the other Parties, at the constructing
Party's cost, during all periods when such fire service is not in operation; and
(e) comply with all requirements of County laws, codes and
regulations.
3.9 Indemnity. As to Work or materials ordered or contracted for by
or on behalf of each Party or its agents, such Party covenants to Indemnify the
other Parties and the Tracts of the other Parties from (i) claims of lien of
laborers, materialmen and others arising from such Work performed or supplies
furnished pursuant to such order or contract and (ii) all Claims arising from or
as a result of the death of, or any accident, bodily injury, loss or damage
whatsoever caused to any natural Person, or to the property of any Person, as
shall occur by reason of the performance of any Work to be constructed or caused
to be constructed by such Party.
3.10 Submittal of As-Built Plans and Record Drawings. Within ninety
(90) days after each of the First Scheduled Opening Date, the Second Scheduled
Opening Date and the completion of any Optional Improvements, as applicable,
each Party shall cause its Project Architect/Engineer to prepare as-built plans
and record drawings with respect to the Building constructed on its Tract and,
after receipt thereof, shall deliver copies of same to the other Parties for
their records.
3.11 Self-Help Cure of Construction Defaults. If Bazaar Company
fails to perform any of its Construction duties or obligations under this
Article 3 in connection with the Construction of the Common Parking Area within
sixty (60) days after the applicable milestone dates for performance as
indicated on the construction schedule for the Common Parking Area, any other
Party may at any time give a written notice to Bazaar Company, setting forth the
specific nonperformance. If such nonperformance is not corrected within thirty
(30) days after receipt of such notice, or if such nonperformance is such that
it cannot be corrected within such time, then if Bazaar Company fails to
commence the performance of such duties within such period and diligently
prosecute the same to completion thereafter, then, in either such event, the
Party giving such notice shall have the right, upon prior written notice, to
perform same, including the right and temporary license to enter upon Bazaar
Company's Tract to perform same, and Bazaar Company shall pay, on demand, the
performing Party's reasonable costs
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thereof, with interest computed in accordance with Section 20.9(a) hereof,
provided, however, these provisions shall be without prejudice to Bazaar
Company's right to contest the right of the other Party's performance. All Work
performed by such Party shall be performed in compliance with the Gaming Laws
and this Article 3.
ARTICLE 4
ALLOCABLE SHARES OF COMMON COSTS
4.1 Payments.
(a) Except as may be otherwise noted in this REA, the
maintenance, operation, repair and other Work required to be performed on the
Common Area (the "Common Area Work") shall be performed by the Parties
(individually, an "Operator Party" and collectively, the "Operator Parties") set
forth on Schedule "I" hereto. Each Operator Party shall submit to all other
Parties (except Energy Provider), at least thirty (30) days prior to the
commencement of every Accounting Period, the reasonably estimated annual costs
to be incurred by such Operating Party in the performance of its Common Area
Work during the next Accounting Period (the "Budget") and each Party's Allocable
Share of Common Costs with respect thereto (the "Estimated Cost Statement").
Notwithstanding the preceding sentence, each Operator Party shall submit the
applicable Budget and Estimated Cost Statement with respect to the first
Accounting Period as soon as reasonably possible following the recordation of
this REA. Bazaar Company and/or Aladdin Gaming may object to the Budget within
fifteen (15) days of its receipt thereof, in which event the objecting Party and
Operator Party shall negotiate in good faith in an attempt to reach an
agreement. Any Party (except Energy Provider) may object to the Estimated Cost
Statement within fifteen (15) days of its receipt thereof, in which event the
objecting Party and the relevant Operator Party shall negotiate in good faith to
reach an agreement. If an agreement concerning the Budget and/or the Estimated
Cost Statement is not reached within ten (10) days of an objection, then the
objection shall be subject to the arbitration procedures set forth in Article 12
hereof; provided, however, that during such arbitration each Party shall pay its
Allocable Share of Common Costs, as hereinafter provided, based upon the lesser
of (x) the actual cost of the subject Common Area Work for the previous
Accounting Period, plus ten percent (10%), or (y) the Estimated Cost Statement.
The failure of an Operator Party to timely
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submit an Estimated Cost Statement shall not preclude the right of such Party to
collect each Party's Allocable Share of Common Costs.
(b) Each Party shall pay its Allocable Share of Common Costs
to the Operator Party on the first day of each month pursuant to the Estimated
Cost Statement. Within ninety (90) days following the end of each Accounting
Period, each Operator Party shall provide each other Party with a full, complete
and itemized separate statement (the "Annual Statement"), together with
reasonable supporting documentation, showing the actual Common Costs incurred by
such Operator Party in the performance of its Common Area Work during such
Accounting Period. The Annual Statement, and any Operator Party's books and
records in connection therewith, may upon reasonable notice be audited by an
independent accounting firm or real estate consultant retained by any Party at
its sole cost and discretion. If any Party has paid more than its Allocable
Share of Common Costs during any such Accounting Period with respect to such
Common Area Work, such Party shall receive a credit toward its next payment(s)
of its Allocable Share of Common Costs with respect to which such overpayment
occurred. If any Party has paid less than its Allocable Share of Common Costs
for such Accounting Period, then such Party shall pay the deficiency in its
Allocable Share of Common Costs to the Operator Party entitled to same within
thirty (30) days after receipt of the Annual Statement. At any time, any
Operator Party, with the reasonable approval of the other Parties, may adjust
the monthly estimated payments contained in the Estimated Cost Statement to more
closely reflect actual expenses being incurred as Common Costs in order to
reduce the magnitude of any year-end reconciliation. Any payment which is not
timely made by a Party under this Section 4.1 shall bear interest from the date
that is three (3) business days subsequent to such Party's receipt of a
delinquency notice from an Operator Party until such payment is received by the
Operator Party at the rate specified in Section 20.9 hereof. Any delinquent
payment made by a Party and bearing interest pursuant to the preceding sentence
shall include a late charge in the amount of five percent (5%) of the delinquent
amount due.
4.2 Resolution of Disputes. If a Party disagrees with an Operator
Party's year-end reconciliation of the Allocable Share of Common Costs, such
Party shall be entitled to object by written notice to such Operator Party
within thirty (30) days of receipt of the Annual Statement. If the Parties
cannot reach an agreement within thirty (30) days of such notice, the dispute
shall be resolved by arbitration pursuant to the provisions of Article 12
hereof.
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4.3 Creation of Lien and Personal Obligation for Payment of
Allocable Shares. Each Party hereby covenants for the benefit of every other
Party hereto, regardless of whether such covenant is expressed in any deed to a
Tract, that the delinquent amount of its Allocable Share of Common Costs and/or
its Allocable Share of Real Estate Taxes, together with any late charges,
Attorneys' Fees and interest due on any delinquent payment thereof, shall be a
charge upon such Party's Tract and shall be a continuing lien upon such Tract,
effective upon recordation of a notice of delinquency as provided herein. The
total amount so due shall be the personal obligation of the Party owing such
amount, and shall not pass to Transferees of such Party, but shall remain a
personal obligation of such previous Party and shall remain as a lien and charge
against the Tract of such previous delinquent Party. Notwithstanding the
foregoing, no Mortgagee shall be liable for the payment of liens for Allocable
Shares of Common Costs except those accruing after the Mortgagee obtains title
to the Tract encumbered by its Mortgage pursuant to an Involuntary Transfer and
liens of record prior to the recordation of the lien of such Mortgagee. Any such
Involuntary Transferee shall take title to the Tract subject to the Mortgage
free and clear of any claims and liens for unpaid Allocable Shares of Common
Costs. Any such Involuntary Transferee who so acquires title to the Tract shall
be liable for payment of Allocable Shares of Common Costs accruing after the
date of such Involuntary Transfer. Following any such Involuntary Transfer, the
Party owing such delinquent amount shall remain personally liable for the
payment thereof.
4.4 Adjustments to Allocable Share of Common Costs. The Common Costs
allocable to each Tract shall be subject to equitable adjustment at such time as
the Optional Improvements shall be developed by an Aladdin Party or a successor
thereof. Upon such an adjustment to the Common Costs, the Operator Parties shall
notify the other Parties of the new Allocable Share of Common Costs which shall
be payable by each Party commencing on the first day of the succeeding month,
provided such notification is delivered to each Party by the tenth day of the
then current month. If a Party disagrees with the adjustment to the Allocable
Share of Common Costs, such Party shall be entitled to object by written notice
to the Operator Parties within thirty (30) days of receipt of such adjustment.
If the Parties cannot reach an agreement within thirty (30) days of such notice,
the dispute shall be resolved by arbitration pursuant to the provisions of
Article 12 hereof.
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ARTICLE 5
CENTRAL ENERGY PLANT
5.1 Construction of Central Energy Plant. The Central Energy Plant
will be designed and Constructed to perform in accordance with the
specifications described in the Energy Provider Agreement and subject to the
provisions of this REA. All Construction of the Central Energy Plant, including
the maintenance, operation and restoration thereof, shall be performed without
contribution from any Party, except to the extent specifically provided in the
Energy Provider Agreement. Upon the expiration or termination of the Energy
Provider Agreement, Aladdin Gaming shall make the Energy Site available for the
Construction, renovation and operation of such facilities as may be necessary to
provide sufficient electricity, chilled water and hot water to each of the
Tracts. The Parties agree to cooperate in all reasonable respects to cause such
facilities to be provided for the Site, and the plans and specifications for any
such facilities and the operating agreements relating thereto shall be subject
to the reasonable approval of the Parties (other than Energy Provider), which
approval shall be deemed granted if not denied within fifteen (15) days
following the request therefor.
5.2 Purchase of Electricity, Chilled Water and Hot Water. Provided
that the Central Energy Plant provides electricity, chilled water and hot water
in accordance with the specifications and requirements described in the Energy
Provider Agreement, each Party which is the owner of a Building located on the
Site shall purchase electricity, chilled water and hot water in amounts
sufficient to service such Building(s) from Energy Provider pursuant to the
Energy Provider Agreement.
5.3 Sale of Excess Electricity, Chilled Water and Hot Water. The
sale to third parties of excess electricity, chilled water and/or hot water by
Energy Provider shall be permitted only upon the terms and conditions set forth
in the Energy Provider Agreement.
ARTICLE 6
FLOOR AREA, USE, AND OPERATION
6.1 Floor Area; First and Second Scheduled Opening Dates. Subject to
force majeure as described in Article 10 and the satisfaction of the
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applicable conditions precedent contained in the Site Work Agreement, on or
before the First Scheduled Opening Date, Aladdin Gaming covenants that it shall
have completed Construction (as evidenced by issuance of certificates of
occupancy by the County) of that portion of the Initial Planned Floor Area of
the Aladdin Improvements that Aladdin Gaming is required to construct pursuant
to this REA. Subject to force majeure as described in Article 10 and the
satisfaction of the applicable conditions precedent contained in the Site Work
Agreement, on or before the First Scheduled Opening Date, Bazaar Company
covenants that it shall have completed Construction (as evidenced by issuance of
certificates of occupancy by the County) of the Common Parking Area and the
Retail Facility required to be constructed by Bazaar Company pursuant to this
REA. Subject to force majeure as described in Article 10, on or before the
Second Scheduled Opening Date, Aladdin Music covenants that it shall have
completed Construction (as evidenced by issuance of certificates of occupancy by
the County) of the Music Hotel required to be constructed by Aladdin Music
pursuant to this REA. On or before the Final Completion Deadline, Energy
Provider shall complete Construction of the Central Energy Plant required to be
constructed by Energy Provider pursuant to the Energy Provider Agreement.
6.2 Uses.
(a) Each portion of the Initial Planned Floor Area and the
Music Hotel shall be operated in a manner consistent with the standards of a
first-class facility, which standards shall be at least equivalent to the
standards of the Mirage (as of the date of this REA), as to the Aladdin Hotel
and Casino, the standards of Bally's (as of the date of this REA) as to the
Music Hotel, and the standards of the Forum Shops (as of the date of this REA),
as to the Retail Facility. The Parties agree that the Theater for Performing
Arts shall be used to present events which are consistent with the first-class
nature of the Redeveloped Aladdin.
(b) Bazaar Company agrees that the Retail Facility shall be
used only for retail merchandising, restaurants, services and entertainment as
are commonly found in first-class retail enclosed shopping centers and related
incidental uses, including but not limited to a management/leasing office not
exceeding eighteen thousand (18,000) square feet of Floor Area.
(c) Aladdin Gaming and Aladdin Music shall have the right to
lease or use portions of the Aladdin Improvements and the Music Hotel,
respectively, for retail purposes (whether or not such retail purposes would be
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competitive with Occupants of the Retail Facility), including, but not limited
to, restaurants, souvenir shops, spa facilities, and the like which are commonly
found in first-class casinos and/or first-class hotels.
(d) The Parties shall install, maintain, repair and replace
the landscaping on their respective Tracts (to the extent that said landscaping
is not part of the Common Area to be maintained by an Operator Party) as
required to keep the same in a first-class condition.
(e) The Parties shall use commercially reasonable efforts to
employ or cause to be employed sufficient security and traffic control personnel
to ensure the safety of all Permittees using the Tracts operated by such
Parties.
6.3 Limitation on Detrimental Characteristics. Notwithstanding any
other provision of this REA, no use or operation shall be made, conducted or
permitted on any part of the Site which is clearly objectionable to the
development or operation of the Retail Facility, the Music Hotel or the Aladdin
Improvements or which is inconsistent with the operation of a first-class
shopping center, hotel and casino, as described in Section 6.2(a) above.
6.4 Operation.
(a) Subject to Section 9.4 hereof, provided that Aladdin
Gaming is using commercially reasonable efforts to operate the Aladdin
Improvements, substantially similar in size to the gaming facility and hotel set
forth on the Plans and Specifications, in a first-class manner in accordance
with the provisions of Section 6.4(b) hereof, then Bazaar Company, subject to
requirements of applicable laws and regulations, shall use commercially
reasonable efforts to cause the Bazaar Improvements, substantially similar in
size to the Bazaar Improvements set forth on the Plans and Specifications. (i)
With respect to the Retail Facility and the retail tenants of the Bazaar
Improvements (A) for the three year period beginning on the First Scheduled
Opening Date, to be kept open to the general public at all times when any tenant
of the Retail Facility is open for business but in any event at such times as
the general business hours of the Forum Shops, and (B) subsequent to said three
year period, to be kept open to the general public at all times that are
industry standard for first-class mixed use casino-related shopping centers
located on Las Vegas Boulevard, and (ii) to be operated and leased as a
first-class themed entertainment center, in accordance with this REA. The common
areas within the Retail Facility (as distinguished from the Common Area)
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shall remain open 24 hours a day, seven days a week, each and every day of the
year, and shall be operated in a first-class manner consistent with the
provisions of Section 6.4(f) hereof.
(b) Subject to Section 9.4 hereof, provided that (i) the
Common Parking Area, substantially similar in size to the Common Parking Area
set forth on the Plans and Specifications, is open to the general public and
being operated in accordance with the Parking Use Agreement, and (ii) Bazaar
Company is using commercially reasonable efforts to keep the Retail Facility,
substantially similar in size as that set forth on the Plans and Specifications,
open to the public and operated and leased as a first-class themed entertainment
center in accordance with the provisions of Section 6.4(a) hereof, then Aladdin
Gaming shall use commercially reasonable efforts to cause the Aladdin
Improvements, substantially similar in size to the Aladdin Improvements set
forth on the Plans and Specifications, (x) subject to requirements of applicable
laws and regulations, and subject to practices which are industry standard for
first class mixed use shopping-center related hotels and casinos located on Las
Vegas Boulevard, to be kept open to the general public 24 hours a day, seven
days a week, each and every day of the year, and (y) to be operated as a
first-class hotel and casino, in accordance with this REA.
(c) Subject to Section 9.4 hereof, provided that (i) the
Common Parking Area, substantially similar in size to the Common Parking Area
set forth on the Plans and Specifications, is open to the general public and
being operated in accordance with the Parking Use Agreement, and (ii) Bazaar
Company is operating the Retail Facility, substantially similar in size as that
set forth on the Plans and Specifications, open to the public and operated and
leased as a first-class themed entertainment center in accordance with the
provisions of Section 6.4(a) hereof, then, as of the Second Scheduled Opening
Date, Aladdin Music shall use commercially reasonable efforts to cause the Music
Hotel, substantially similar in size to the Music Hotel set forth on the Plans
and Specifications, (x) subject to requirements of applicable laws and
regulations, and subject to practices which are industry standard for first
class mixed use shopping-center related hotels and casinos located on Las Vegas
Boulevard, to be kept open to the general public 24 hours a day, seven days a
week, each and every day of the year, and (y) to be operated as a first-class
hotel and casino, in accordance with this REA.
(d) Energy Provider shall operate the Central Energy Plant
pursuant to the Energy Provider Agreement.
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(e) In addition, regardless of whether the Parties are
operating their respective Buildings in accordance with the foregoing minimum
requirements, all Parties hereto covenant and agree for the benefit of all
Parties hereto to maintain all necessary Perimeter Access Areas to permit
Occupants and Permitees access to and enjoyment of the Buildings of any other
Party hereto which may be open for business to the general public.
(f) Subject to the provisions of this Section 6.4, all Common
Areas of the Redeveloped Aladdin and the common areas within the Retail Facility
shall be operated in a first-class manner comparable to the standards of the
Forum Shops and be "fully opened" to the public for ingress and egress at all
times 24 hours a day, seven days a week, each and every day of the year, except
that (i) such areas need not be open at any time that none of the Aladdin Hotel
and Casino, the Retail Facility and the Music Hotel is open for business, (ii)
such areas need not be open prior to the First Scheduled Opening Date, and (iii)
portions of such areas may be closed from time to time as required for repair
and maintenance provided that at all times there is reasonable ingress and
egress to each Tract of the Redeveloped Aladdin. "Fully opened" means, without
limitation, that there shall be reasonably adequate security, adequate air
conditioning, lighting and other utilities, consistent with first-class
standards; and in general that at all hours such areas shall be maintained, but
not necessarily staffed, in the same manner as when all stores are open for
business.
(g) The Parties agree that each Party (except Energy Provider)
shall have the right to sponsor and stage special events on their Tracts at the
locations designated for same on the Site Plans and the Plans and
Specifications. In the event that a Party schedules a special event in the
Theater for Performing Arts or on any public areas on level 115 (as defined in
the Plans and Specifications), such Party shall inform the other Parties (other
than Energy Provider) at least thirty (30) days prior thereto and provide each
of them with information with respect to the type of entertainment, proposed
time and location of staging, planned security arrangements and expected turnout
for the event. All such events shall be consistent with the first-class nature
of the Redeveloped Aladdin. Any disputes relating to such events shall be
resolved by arbitration pursuant to Article 12 hereof. The costs attributable to
any such special event, including security, refuse disposal and janitorial
staff, shall be at the sole cost and expense of the Party or Parties sponsoring
such event. Nothing in this Section 6.4(g) shall be construed as granting
approval rights to any Party.
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(h) Forty-five (45) days prior to any Party's exercise of its
right, if any, to cease compliance with the operational covenants set forth in
subsections 6.4(a) through 6.4(c) above, as applicable, based upon the Default
of another Party ("Cessation Right"), such non-Defaulting Party shall serve
notice of such intention upon each of the other Parties (including, but not
limited to, the Defaulting Party), which notice shall specify in reasonable
detail the circumstances of the subject Default. If the Defaulting Party fails
to Cure the Default specified in said notice, if any, or, if said Default cannot
reasonably be Cured within the aforesaid forty-five day period, the Defaulting
Party fails to diligently pursue said Cure within such period and until the
subject Default is Cured, then the non-Defaulting Party may exercise its
Cessation Right. The notice and Cure period required in this subsection 6.4(h)
is a condition precedent to any Party's exercise of its Cessation Right. Subject
to Sections 11.5 and 11.6 hereof, any Party's Cessation Right shall be
terminated upon the Cure of the Default underlying same.
6.5 Gaming Activities.
(a) Aladdin Gaming represents that neither Aladdin Gaming nor
any member thereof nor any Affiliate of Aladdin Gaming nor any member thereof is
unwilling or unable to file all necessary applications with the Gaming
Authorities to obtain whatever gaming licenses that may be required of such
Persons in connection with the Gaming Activities to be conducted in the Gaming
Facilities in the Aladdin Improvements. To Aladdin Gaming's actual knowledge, no
such Person has ever engaged in any conduct or practices which would cause such
Person to be denied any gaming license that may be required by such Person.
Without limiting the foregoing, no such Person has ever (a) been convicted of
any felony, (b) had a civil or criminal record expunged or sealed by a court
order, (c) received a pardon for any criminal offense, (d) held a privileged or
professional license in any state and had any disciplinary action taken against
him or her with respect to any such license, or (e) been refused a gaming
license or been subject to a related fining of unsuitability or been refused a
license for selling alcoholic beverages or been subject to a related finding of
unsuitability or been a participant in any group which has been denied any such
license or subject to such finding. Aladdin Gaming covenants to take all
commercially reasonable actions in order that Aladdin Gaming shall be issued all
necessary gaming licenses in order to conduct Gaming Activities in the Gaming
Facilities in the Music Hotel as soon as reasonably possible following the
recordation of this REA.
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(b) Aladdin Music represents that neither Aladdin Music nor
any member thereof nor any Affiliate of Aladdin Music nor any member thereof is
unwilling or unable to file all necessary applications with the Gaming
Authorities to obtain whatever gaming licenses that may be required of such
Persons in connection with the Gaming Activities to be conducted in the Gaming
Facilities in the Music Hotel. To Aladdin Music's actual knowledge, no such
Person has ever engaged in any conduct or practices which would cause such
Person to be denied any gaming license that may be required by such Person.
Without limiting the foregoing, no such Person has ever (a) been convicted of
any felony, (b) had a civil or criminal record expunged or sealed by a court
order, (c) received a pardon for any criminal offense, (d) held a privileged or
professional license in any state and had any disciplinary action taken against
him or her with respect to any such license, or (e) been refused a gaming
license or been subject to a related fining of unsuitability or been refused a
license for selling alcoholic beverages or been subject to a related finding of
unsuitability or been a participant in any group which has been denied any such
license or subject to such finding. Aladdin Music covenants to take all
commercially reasonable actions in order that Aladdin Music shall be issued all
necessary gaming licenses in order to conduct Gaming Activities in the Gaming
Facilities in the Music Hotel as soon as reason ably possible following the
recordation of this REA.
(c) No Gaming Activities or gaming devices, cashless wagering
systems or associated equipment (as such terms are defined in NRS Chapter 463)
("Gaming Equipment") shall be permitted in or on the Bazaar Site, except to the
extent that Bazaar Company agrees to permit Aladdin Gaming to engage in Gaming
Activities or to open a Gaming Facility therein in its sole discretion.
6.6 Commercial Subdivision; Taxes and Assessments. The Parties agree
to cooperate with each other to commercially subdivide the Site into separate
legal tracts for the Gaming Site, the Optional Improvements Site, the Bazaar
Site (with separate legal lots for each of the Retail Facility and the Common
Parking Area), the Aladdin Music Site and the Energy Site (the "Commercial
Subdivision"). Aladdin Gaming agrees to use commercially reasonable efforts to
pursue the Commercial Subdivision at its own cost and expense and to commence
such process as soon as reasonably practicable after the date hereof, but in any
event so as to complete the Commercial Subdivision prior to the First Scheduled
Opening Date. Until such time as the Commercial Subdivision shall be effected,
the Parties agree to pay to Aladdin Gaming, within thirty (30) days of a request
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therefor (but in no event more frequently than quarterly), their respective
allocable share of the real estate taxes and assessments levied against the Site
(the "Allocable Share of Real Estate Taxes"), as such shares are set forth on
Schedule "II" hereto. The Allocable Share of Real Estate Taxes shall be
appropriately prorated with respect to the real estate tax year in which the
recordation of this REA and the Commercial Subdivision occurs. After such time
as the Commercial Subdivision is effected, each Party agrees that it will pay
before delinquency, all real estate taxes and assessments, both general and
special, which are levied or assessed against its Tract. Nothing herein
contained shall be deemed to limit the right of a Party to contest the validity
of any such taxes or assessments against its Tract by appropriate proceedings;
provided, that such contest is made in good faith at such Party's own cost, and
as long as neither title to the subject Tract, nor the rights, privileges and
easements granted herein with respect thereto would be forfeited or released as
a result of the continuing non-payment of such taxes. If a Party fails to comply
with this Section 6.6, any of the other Parties, upon giving the Defaulting
Party thirty (30) days' prior notice, may cure such failure and shall be
entitled to reimbursement from the Defaulting Party in accordance with the terms
of Section 20.9.
6.7 Adjacent Land. The Parties agree that the parcel of land located
on the northeast corner of the intersection of Las Vegas Boulevard South and
Harmon Avenue (the "Adjacent Land") shall not be purchased by any Party or any
Affiliate thereof without first notifying all other Parties (except Energy
Provider). If any Party or Affiliate thereof purchases the Adjacent Land, the
Parties agree that as of such purchase (a) the Adjacent Land and the then owner
thereof shall become subject to all of the terms and conditions of this REA (b)
the Construction of any improvements thereon shall be subject terms and
conditions of Section 3.5 hereof (it being understood that all Parties (except
Energy Provider) shall have approval rights in connection with such Construction
to the same extent that Bazaar Company has approval rights over the Construction
of the Optional Improvements) and (c) the Allocable Share of Common Costs will
be equitably adjusted among the parties. If any Party performs Construction on
the Adjacent Land, such Party hereby covenants that (x) such Construction shall
be consistent with the architectural character of the Aladdin Hotel and Casino
and the Retail Facility and (y) it shall use commercially reasonable efforts (at
no significant cost to such Party) to minimize interference with the visibility
of the Music Hotel from Las Vegas Boulevard resulting therefrom.
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ARTICLE 7
COVENANTS AGAINST WASTE
7.1 Waste. Each Party covenants to the other Parties that it shall
not commit or suffer any waste or damage to, or impairment of the value of, any
Party's Tract in the use of the easements created herein or otherwise.
7.2 Hazardous Substances. Each Party covenants to the other Parties
that it shall not keep, use or store, or allow to be kept, used or stored, or
discharge in any amount, any Hazardous Substances or any other hazardous or
toxic substances on or in the Site, without the express prior written consent of
the other Parties and all insurance companies which have issued any insurance on
the Site or any portion thereof, provided, however, a Party may use Hazardous
Substances (in quantities necessary for the activities conducted) in the
business of operating each Party's Tract to the extent such use is in compliance
with applicable laws and prudent Hazardous Substance handling procedures and
such Hazardous Substances to the extent not fully used are properly and lawfully
disposed of, without materially violating applicable laws, endangering human
health and safety or impairing any portion of the Site. Each Party Indemnifies
the others with respect to any Claims arising out of the breach of the foregoing
sentence and from any damages resulting from a Party's use of Hazardous
Substances which impairs such other Party's use of their Tract.
ARTICLE 8
INDEMNIFICATION AND INSURANCE
8.1 Indemnity. Each Party, as Indemnitor, covenants to Indemnify
the other Parties, as Indemnitees, with regard to any and all Claims arising
from such Indemnitor's operation, use or ownership of its Tract or arising from
any event occurring on its Tract or any Default under this REA; provided, how
ever, Indemnity under this Section 8.1 shall not be required if and to the
extent the Claim underlying an Indemnitee's request for indemnity is of a type
covered by "All-Risk" property damage insurance or by the insurance required to
be carried under this Article 8 and the insurance carrier accepts tender of such
Claim.
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8.2 General Liability Insurance. Throughout the term of this REA,
each Party shall maintain through the Controlled Insurance Program, or otherwise
shall cause to be maintained, in full force and effect, with a financially
responsible insurance company or companies, commercial general liability
(including public liability and property damage) insurance covering occurrences,
accidents and incidents on the Tract in which such Party has an interest, that
(a) occur during the term of this REA (regardless of when the claim is filed),
and (b) result in bodily injury, personal injury or death to any Person and/or
damage or destruction of property. Said insurance shall have a combined single
limit of liability per occurrence of not less than One Million Dollars
($1,000,000) on a primary basis and not less than One Hundred Million Dollars
($100,000,000) on an excess/umbrella basis, or such greater amounts as are
typical for similar casino-hotel projects in Las Vegas and as such Parties may
consider from time to time (but not more than once every three (3) years) and
agree upon. By endorsements, such insurance policy shall provide coverage for
liability arising from the premises, its operations, personal injury, completed
operations, broad-form property damage liability, and broad-form contractual
liability extending to the Indemnity given in Section 8.1. Each Party shall also
maintain, or cause to be maintained, motor vehicle insurance with not less than
Five Million Dollars ($5,000,000) combined single limit of liability per
occurrence, which limit such Parties shall review periodically in the same
manner as they shall review the general liability insurance coverage. In
addition to the minimum requirements set forth in this Section 8.2, Energy
Provider shall maintain the insurance coverages required pursuant to the Energy
Provider Agreement.
8.3 Property Insurance. Each Party shall maintain property damage
insurance on its improvements with coverage amounts not less than the full
replacement value thereof and as may be required by such Party's Mortgagee.
8.4 Blanket Insurance. The Parties agree that the insurance
described in this Article 8 may be provided in whole or in part through a policy
or policies covering other liabilities and locations of the Parties or their
respective Affiliates.
8.5 Controlled Insurance Program. The Parties acknowledge that
participation in the Controlled Insurance Program will not satisfy all of the
insurance obligations of the Parties hereunder.
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8.6 Mutual Release; Waiver of Subrogation. Each Party covenants that
it will, if generally available in the insurance industry, obtain for the
benefit of each such released Party a waiver of any right of subrogation which
the insurer of such Party may acquire against any such Party by virtue of the
payment of any such loss covered by such insurance. In the event any Party is by
law, statute or governmental regulation unable to obtain a waiver of the right
of subrogation for the benefit of another Party, then, during any period of time
when such waiver is unobtainable, said Party shall not have been deemed to have
released any subrogated claim of its insurance carrier against such other Party,
and during the same period of time such other Party shall be deemed not to have
released the Party who has been unable to obtain such waiver from any claims it
or its insurance carrier may assert which otherwise would have been released
pursuant to this Section.
8.7 Named Insureds. Each Party shall name the other Parties (a) as
additional named insureds on general liability insurance policies held by such
Party or such Party's contractors and (b) as an indemnitee under any indemnity
clause in such Party's contractors' general liability insurance policies, if, in
either event, such is obtainable without material additional cost to said Party.
Each Party shall, upon the written request of another Party, provide such
requesting Party with a copy of the insurance certificates evidencing the
insurance required to be maintained by such Party under this REA.
ARTICLE 9
REPAIR, MAINTENANCE, ALTERATIONS AND RESTORATION
9.1 Maintenance - Buildings. Each Party shall keep and maintain, or
cause to be kept and maintained, in good order, first-class (as defined in
Section 6.2(a) hereof, to the extent applicable) condition and repair,
reasonable wear and tear excepted, and in accordance with all applicable laws,
rules, ordinances, orders and regulations, all completed portions of such
Party's Tract. Without limiting the generality of the foregoing each Party
shall, with respect to such Party's Tract except with respect to the Common Area
in which case the Operator Party shall:
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(a) regularly clean the floor surfaces with appropriate
finishing compounds and shall maintain them so that such surfaces remain
smooth and evenly covered with surfacing material;
(b) remove all papers, debris, filth and refuse and wash or
thoroughly sweep or vacuum surface areas;
(c) clean, repair and maintain all lighting fixtures and
relamp and reballast them as needed;
(d) subject to Sections 2.6 and 2.16 hereof, maintain or cause
to be maintained all signs, in a clean, orderly and first-class condition,
including relamping and repairing as may be required;
(e) maintain and keep in a sanitary condition public restrooms
and other common use facilities;
(f) clean, repair and maintain all mechanical systems,
vertical transportation equipment, sprinkler and fire control systems, and
mechanically actuated and manually operated doors;
(g) furnish necessary pest (including rodent) abatement
controls;
(h) subject to Section 2.1(n), keep the Perimeter Access Areas
and all other pedestrian and vehicular access areas within the Redeveloped
Aladdin open to passage to the general public; and
(i) maintain and replace landscaping as necessary to maintain
first-class condition.
9.2 Maintenance - Common Parking Area. Bazaar Company agrees that it
shall maintain the Common Parking Area in accordance with the provisions of the
Parking Use Agreement.
9.3 Alterations - Buildings and Common Area.
(a) Right to Alter. Following the date on which the
Construction of the Initial Planned Floor Area is completed with respect to the
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Gaming Site and Bazaar Site, and following the Second Scheduled Opening Date
with respect to the Aladdin Music Site, changes and alterations to each Party's
Tract shall be made subject to the following conditions: (i) any alterations
requested by a Party which involve physical changes to another Party's Tract
(other than Energy Provider's Tract), other than de minimis changes which have
no adverse effect (as defined in Section 3.1 hereof), must be approved by any
Party whose Tract is so affected, in such Party's sole discretion; (ii) any
alterations requested by a Party which have a direct adverse effect on (a)
another Party's Tract, (b) the Common Areas, or (c) the Quality of Development
and Planning for the Redeveloped Aladdin, shall be subject to the reasonable
approval of, with respect to clauses (a) and (b), the affected Party (except
Energy Provider), and with respect to clause (c), Aladdin Gaming and Bazaar
Company. Any alterations requested by a Party which do not have a direct adverse
effect on those items enumerated in clauses (a) through (c) above, but which are
material and substantial in nature, are subject to the reasonable approval of
any affected Party (except Energy Provider). If any affected Party (except
Energy Provider) shall disapprove any requested contemplated alterations, the
requesting and affected Parties shall attempt to resolve any disagreements by
consulting each other and their respective architects, engineers or consultants
as soon as reasonably possible, and if such Parties are unable to resolve any
such disagreements, any Party to the disagreement may elect to resolve the
disagreement by arbitration pursuant to Article 12. For the purposes of this
Section 9.3(a), the term "adverse effect" shall have the meaning for such term
set forth in Section 3.1 hereof.
(b) Right to Raze. Except as permitted by the Site Work
Agreement, no Party shall be permitted to demolish or raze any Buildings located
on its Tract in violation of the provisions of Article 6, including but not
limited to Section 6.4 thereof, except as may be necessary prior to rebuilding
the same following destruction or damage due to a casualty or condemnation
pursuant to the provisions of Section 9.4 hereof. If any Party elects to
demolish or raze any portion of its Buildings or Common Area located on its
Tract which is not required to be operated in accordance with Article 6, such
demolition shall be undertaken in a manner designed to minimize any disruption
or inconvenience to the other Parties in the operation of their business, and
thereafter that portion of the Site so leveled shall be maintained in a safe,
sightly and dust-free condition appropriately landscaped to be consistent with
the standards required in Section 3.1, until such Party which has demolished
same shall elect to rebuild on such portion of the Site. In no event shall such
demolition be undertaken in a way which would render unusable
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any structural support easements or any of the other easements granted in
Article 2, except as may be permitted in strict accordance with the provisions
of Article 2.
(c) Right to Re-open Access. In the event that access to
and/or through the Tract of any Party is temporarily closed or impaired, the
Party responsible for creating the impaired access shall open such access or
provide alternate access to and/or through such Tract. If any Party fails to
provide adequate access, any other Party may at any time give a written notice
to the Party thus failing, setting forth the impaired access. If such access is
not re-opened within three (3) days after receipt of such notice, or if such
access cannot be reopened within such time, then if such Party fails to re-open
the access within such period and diligently prosecute the same to completion
thereafter, then, in either such event, the Party giving such notice shall have
the right, upon prior written notice, to re-open the access, including the right
and temporary license to enter upon the other Party's Tract to perform same, and
such Party which has failed to perform shall pay the performing Party's
reasonable costs thereof, provided, however, these provisions shall be without
prejudice to such non-performing Party to contest the right of the other Party
to re-open such access or expend such monies.
9.4 Restoration of Buildings and/or Common Area. In the event of any
casualty (which term shall include acts of God, fire, earthquake, flood,
explosion or similar occurrences) or condemnation that results in damage or
destruction to, or the taking of, less than substantially all of any Party's
Tract, whether insured or uninsured, which damage, destruction or taking occurs
during a time when such Party is required by this REA to be in operation, then
such Party shall restore, repair and/or rebuild such Tract with all due
diligence and in accordance with the Plans and Specifications therefor. All
restoration, repair and/or rebuilding shall be performed in accordance with the
applicable requirements of Article 3. If any Party desires to alter the
improvements to be so repaired or restored, such Party shall comply with the
provisions of Section 9.3(a) hereof. All costs and expenses of restoration,
repair and/or rebuilding of the Buildings, Common Area and/or other improvements
on a Party's Tract in excess of available insurance or condemnation proceeds
shall be paid by said Party; provided, however, that with respect to the Common
Parking Area, any such excess costs and expenses shall be allocated to all
Parties in accordance with each Tract's proportionate share of parking spaces
required in accordance with County laws, codes and regulations. Notwithstanding
the foregoing, the Parties (other than Energy Provider) shall not have the
obligation to restore their Tract if such
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damage or destruction occurs more than twenty-five (25) years after the Second
Scheduled Opening Date; provided, however, that if such damage or destruction
affects the Common Parking Area and occurs at any time during the term of this
REA, then the Common Parking Area shall be restored. In addition to the minimum
requirements set forth in this Section 9.4, Energy Provider shall adhere to the
restoration obligations required pursuant to the Energy Provider Agreement.
9.5 Restoration of Improvements Not Covered by Section 9.4. Aladdin
Gaming shall have no obligation to repair or restore any damage or destruction
to any improvements constituting Optional Improvements; however, the provisions
of Section 9.8 shall apply in the event a Party elects not to repair or restore
any such damaged or destroyed improvements.
9.6 Standards of Construction. A Party performing any restoration,
repair, rebuilding, maintenance, alterations, additions or improvements
(collectively called "Work") shall, to the extent applicable, strictly comply
with the standards of construction set forth in Article 3 hereof and the
following requirements:
(a) Such Work shall include leveling, paving, constructing
proper exterior walls for what previously constituted common party walls, and
creating reasonably useful entrances and exits that afford proper ingress to and
egress between and among the Retail Facility, the Common Parking Area, the
Aladdin Improvements and the Music Hotel.
(b) No Work shall be commenced unless the Party desiring to
perform the same has in each instance complied with the appropriate provisions
of this REA.
(c) If the Work is to a structure which is adjacent to a
Party's Building, then during the performance of the Work the structure being
restored, repaired and/or rebuilt shall be secured and temporarily enclosed in
order to prevent conditioned air from escaping, and upon completion shall be
physically integrated with such Party's Building.
(d) If the Work could reasonably be deemed to constitute a
hazardous condition for Permitees or detract from the attractiveness of any
Party's Buildings, then during the performance of the Work, an adequate and
attractive
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construction barricade or other protective device shall be placed around the
structure being restored, repaired and/or rebuilt.
(e) All Work shall be performed in a good and workmanlike
manner in accordance with good construction practice, strictly conforming to and
complying with:
(i) The Plans and Specifications therefor approved to
the extent provided in Section 9.4;
(ii) All applicable requirements of laws, codes,
regulations, rules and underwriters, subject to the right of any Party to
contest the validity or application thereof at its sole cost and expense;
(iii) As applicable, the requirements of any Mortgagee
and the Plans and Specifications; and
(iv) As applicable, the provisions of Section 11.7.
(f) Except as herein provided to the contrary, all Work shall
be completed at the sole cost and expense of the Party performing the same, and
with due diligence.
9.7 Licenses for Repairs, Maintenance, Alterations and Restoration.
Each Party (hereinafter, the "Licensee") is hereby granted a temporary license
to use portions of the Common Area for the purposes of performing maintenance
upon, making repairs to, constructing alterations, additions and improvements,
and/or razing, replacing and restoring the whole or any part of the Common Area
and/or Buildings, as are permitted pursuant to this REA. Within a reasonable
time prior to commencement of Work pursuant to said license, the Licensee shall
submit to the other Parties (except Energy Provider) for their approval the
following: a plot plan of the Site affected by the Work and a time schedule
therefor, all in accordance with the provisions of Section 3.5 and the approvals
provided for therein. At all times during any Licensee's use of a portion of the
Common Area, as aforesaid, such Licensee shall comply with the applicable
requirements of this REA, and, upon cessation of such use, shall promptly
restore the portions of the Common Area so used to the same condition in which
they existed prior to the time of commencement of such use, including the
clearing of such area of all dirt, debris, equipment and Construction materials.
The Licensee
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shall also restore, at its sole cost and expense, any portions of the Site which
may have been damaged as a result of such Construction promptly upon the
occurrence of such damage and shall at all times during the period of any such
Construction keep all portions of the Site, except the portions upon which said
Construction is being performed and the portions of the Common Area being
utilized by such Party pursuant to this Section, free from and unobstructed by
any dirt, debris, equipment or Construction materials related to such
Construction. Each Licensee covenants to Indemnify each other Party with regard
to such Licensee's exercise of the license provided by this Section.
9.8 Clearing of Building Site. Whenever a Party is not obligated
hereunder to restore, repair and/or rebuild any Building that has been damaged,
destroyed or taken by any casualty or condemnation and elects not to do so, then
and in such event such Party shall raze such Building or such part thereof as
has been so damaged or destroyed in accordance with the requirements of Section
9.3(b).
9.9 Self-Help Cure of Maintenance and Restoration Defaults. If any
Party fails to perform any of its duties or obligations under this Article 9,
including but not limited to the obligations of certain Parties to maintain
certain portions of the Common Area, any other Party may at any time give a
written notice to the Defaulting Party thus failing, setting forth the specific
nonperformance. If such nonperformance is not corrected within thirty (30) days
after receipt of such notice, or if such nonperformance is such that it cannot
be corrected within such time, then if such Defaulting Party fails to commence
the performance of such duties within such period and diligently prosecute the
same to completion thereafter, then, in either such event, the Party giving such
notice shall have the right, upon prior written notice, to perform same,
including the right and temporary license to enter upon the Defaulting Party's
Tract to perform same, and the Defaulting Party shall pay, on demand, the
performing Party's reasonable costs thereof (subject to the allocation provision
of Section 9.4 hereof), with interest computed in accordance with Section
20.9(a) hereof, provided, however, these provisions shall be without prejudice
to the Defaulting Party's right to contest the right of the other Party to make
such repairs or expend such monies. All Work performed by such Party shall be
performed in compliance with the Gaming Laws and Article 3 hereof and,
notwithstanding anything herein to the contrary, shall be performed by such
Party to the extent necessary to properly operate such Party's Tract and shall
not be performed by such Party in order to effect a rebuilding or restoration of
the Building on the Defaulting Party's Tract, except a rebuilding,
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repair or restoration of the Common Parking Area following damage or partial
condemnation, which shall be permitted hereunder in the event that the Party
responsible for the maintenance and operation of the Common Parking Area (a)
fails to diligently pursue such rebuilding, repair or restoration within the
ninety (90) day period following a casualty to the Common Parking Area or (b)
fails for a period of sixty (60) days to meet milestones on the critical path of
any construction schedule in connection with such rebuilding, repair or
restoration. Notwithstanding anything hereinabove contained to the contrary, in
the event that any Party in good faith deems that there is an emergency
situation which threatens immediate injury to Persons or immediate damage to
property, or material interference with access to or parking for a Party's
Tract, such Party may, without the notice required above, but with such notice
as is reasonable under the circumstances, cure any such Default.
9.10 Lien. Any amount due under this Article 9 from the Defaulting
Party to the other Party shall be a lien against the Tract of the Defaulting
Party, effective upon and enforceable in accordance with Section 4.3 hereof.
9.11 Article 9 Approvals. Except as otherwise provided herein, any
approval required pursuant to this Article 9 shall be deemed granted if not
denied within thirty (30) days after the approving Party's receipt of the
requisite information and a request therefor and shall be subject to the terms
and conditions of Article 18 hereof.
ARTICLE 10
FORCE MAJEURE
10.1 Force Majeure. Except as otherwise expressly provided in this
REA to the contrary, each Party shall be Excused from its duty to perform any
covenant or obligation of this REA, except an obligation to pay any sums of
money not expressly conditioned on any Party's performance of a covenant or
obligation that has itself been Excused by this Section, in the event but only
so long as the performance of any such covenant or obligation is prevented,
delayed, retarded or hindered by any of the following: act of God, fire,
earthquake, floods, explosion, action of the elements, war, invasion,
insurrection, riot, mob violence, sabotage, inability to procure or general
shortage of labor, equipment, facilities, materials or supplies in the open
market, failure of transportation, strikes, lockouts, action of
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labor unions, condemnation, requisition, laws, orders of governmental or civil
or military or naval authorities, or any other cause, whether similar or
dissimilar to the foregoing, not within the respective control of such Party
(other than the lack of or inability to procure funds to fulfill its covenants
and obligations provided in this REA), including the timely performance by any
Party (other than such Party) of its respective obligations under the Site Work
Agreement. Notwithstanding any specific references in certain provisions of this
REA to this Section, the absence of such specific reference in any other
provision shall not be deemed to diminish the general applicability of this
Section.
10.2 Notice. In the event any Party claims Excuse from its duty to
perform any covenant or obligation set forth in this REA due to any of the
events of force majeure set forth in Section 10.1, such Party shall notify the
other Parties of the occurrence of such event of force majeure within ten (10)
days following the occurrence thereof. The provisions of Section 10.1 shall not
be effective to Excuse any Party failing to give such notice from the
performance of such covenant or obligation until such notice is given to the
other Parties; provided, however, in no event shall the giving of such notice
at any time following such ten (10) day period extend the period during which
such Party is otherwise Excused beyond any maximum Excuse periods set forth in
this REA.
ARTICLE 11
DISCHARGE AND RELEASE
11.1 Discharge on Transfer. Except as provided in Section 11.3, a
Transferor shall be Discharged from and after the effective date of the Transfer
from all of its unaccrued obligations hereunder, provided that all of the
following conditions precedent are satisfied:
(a) Transferor shall have paid all amounts due and payable to
the other Parties, and shall have performed all of its obligations accrued, as
of said effective date;
(b) Transferor shall have given the other Parties notice of
the Transfer; and
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(c) Transferor shall have delivered to each other Party a
written instrument in recordable form, duly executed and acknowledged by
Transferee, whereby Transferee shall have expressly assumed all of the
covenants, duties and obligations of Transferor under this REA from and after
said effective date.
11.2 Discharge on Involuntary Transfer; Condemnation. Subject to the
provisions of Section 11.3, an Involuntary Transferor shall be Discharged from
and after the effective date of the Involuntary Transfer from all of its
unaccrued obligations hereunder, on condition that such Involuntary Transferor
shall have paid all amounts due and payable to the other Parties by such
Involuntary Transferor, and shall have performed all of its obligations accrued,
as of said effective date. In the event of a condemnation of at least
substantially all of a Party's Tract, such Party shall be Discharged from and
after the effective date of the taking of title to or possession of such Tract,
whichever first occurs, from all of its unaccrued obligations hereunder, on
condition that such Party shall have paid all amounts due and payable to the
other Parties by such Party, and shall have performed all of its obligations
accrued, as of said effective date.
11.3 Exceptions to Discharge. Neither a Transfer nor an Involuntary
Transfer shall Discharge a Party from its initial Construction obligations under
Section 3.1. Further, neither a Transfer nor an Involuntary Transfer shall
Discharge a Transferor or Involuntary Transferor from (i) amounts due and unpaid
from such Transferor or Involuntary Transferor or (ii) accrued obligations of
such Transferor or Involuntary Transferor, in either event, as of the date of
such Transfer or Involuntary Transfer, and such Transferor or Involuntary
Transferor shall not be Released from such obligations by such Transfer or
Involuntary Transfer.
11.4 Discharge of Mortgagee. A Mortgagee that acquires title to a
Tract (or portion thereof) in an Involuntary Transfer shall subsequently be
Discharged from and after the effective date of such Mortgagee's Transfer of its
interest in said Tract provided it has performed all of its obligations that
accrued during its period of ownership, and complies with Sections 11.1 (b) and
(c).
11.5 Aladdin Gaming Released From Operating Covenants. Provided that
Aladdin Gaming is not then in Default under this REA, the Bazaar Lease, the Site
Work Agreement or the Parking Use Agreement, Aladdin Gaming shall be Released
from its operating covenants under Article 6 and its Tract shall
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be Released from such operating covenants if Bazaar Company shall have failed to
Cure a material Default in the performance of any of its duties under Article 6
within one hundred twenty (120) days after notice to Cure from Aladdin Gaming,
which failure shall constitute an Event of Default.
11.6 Bazaar Company Released from Operating Covenants. Provided that
Bazaar Company is not then in Default under this REA, the Bazaar Lease, the Site
Work Agreement, or the Parking Use Agreement, Bazaar Company shall be Released
from its operating covenants under Article 6 and its Tract shall be Released
from such operating covenants if Aladdin Gaming shall have failed to Cure a
material Default in the performance of any of its duties under Article 6 within
one hundred twenty (120) days after notice to Cure from Bazaar Company, which
failure shall constitute an Event of Default.
11.7 Aladdin Music Released from Operating Covenants. Provided that
Aladdin Music is not then in Default under this REA or the Music Lease, Aladdin
Music shall be Released from its operating covenants under Article 6 and its
Tract shall be Released from its operating covenants if Bazaar Company shall
have failed to Cure a material Default in the performance of any of its duties
under Article 6, within one hundred twenty (120) days after notice to Cure from
Aladdin Music, which failure shall constitute an Event of Default.
11.8 Excuse and Release From Restoration Covenants.
(a) Excuse. Each Party shall be Excused from its restoration
covenants under Article 9 for so long as any other Party is Excused from and is
not performing, or is in Default of, its restoration and/or operation covenants,
in each case to the extent that and for so long as such nonperformance of such
other Party interferes with the subject Party's ability to perform its
obligations hereunder.
(b) Release. A Party (the "Released Party") shall be Released
from its restoration covenants under Article 9 in each of the following
circumstances:
(i) The Released Party shall be Released from said
covenants if the Released Party has also been Released from its operating
covenants under Section 6.4 hereof pursuant to Sections 11.5, 11.6, or 11.7
hereof.
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(ii) The Released Party shall be Released from said
covenants if the other Parties have not Cured their respective Defaults under
said covenants after sixty (60) days notice from the Released Party.
11.9 No Waiver. A Party's Excuse, Discharge or Release, or a Party's
continued performance or operation after its Excuse, Discharge or Release or its
service of a notice of Default or a notice to Cure shall not diminish such
Excuse, Discharge or Release nor any rights of such Party under this REA,
including any claim for damages, or constitute such Party's waiver of the
effectiveness of the notice it shall have served.
ARTICLE 12
ARBITRATION
12.1 Disputes Covered. Except where a Party may grant or withhold
its consent or approval under the express provisions of this REA in its sole and
absolute discretion, any dispute between the Parties involving any approvals
hereunder, including those arising from lack of approval or disagreements over
interpretation or application of such provisions, and any other disputes
involving provisions of this REA shall be resolved by binding arbitration
conducted in the manner described in this Article 12; provided, however, that
any Party may seek prohibitory injunctive relief without first submitting the
controversy to arbitration. Prior to the Second Scheduled Opening Date, the
arbitration procedures set forth in Article VIII of the Site Work Agreement
shall control, notwithstanding the fact that all the Parties are not parties to
the Site Work Agreement.
12.2 Arbitration Procedures.
(a) A Party seeking arbitration ("Demanding Party") shall
deliver a written notice of demand to resolve dispute (the "Demand") to
the other Party to such dispute ("Non-Demanding Party"), with a copy of
the Demand delivered to all other Parties (except Energy Provider). The
Demand shall include a brief statement of the Demanding Party's claim or
controversy, the amount thereof, and the name of the proposed Arbitrator
to decide the dispute ("Arbitrator"). Within ten (10) days after receipt
of the demand, the Non-Demanding Party against whom a demand is made
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shall deliver a written response to the Demanding Party. Such response
shall include a short and plain statement of the Non-Demanding Party's
defense to the claim and shall also state whether such Party agrees to the
Arbitrator chosen by the Demanding Party. If the Non-Demanding Party fails
to agree to the Arbitrator chosen by the Demanding Party, then such
Non-Demanding Party shall state in its response the name of the proposed
Arbitrator chosen by such non-Demanding Party as the proposed Arbitrator.
If the Non-Demanding Party fails to deliver its written response to the
Demanding Party within ten (10) days after receipt of the demand, or if
the Non-Demanding Party fails to select in its written response a proposed
Arbitrator, then the Arbitrator selected by the Demanding Party shall
serve as the Arbitrator. An Arbitrator shall not be employed by any Party
or its Affiliate, directly, indirectly or as an agent, except in
connection with the arbitration proceeding. Any person appointed as an
Arbitrator shall be knowledgeable and experienced in the matters sought to
be arbitrated.
(b) The locale of the arbitration shall be in Las Vegas,
Nevada at the offices of the American Arbitration Association or at such
other location in Las Vegas, Nevada agreed to by the parties, or if the
Parties cannot agree, at the Aladdin Hotel and Casino.
(c) If the Non-Demanding Party selects a proposed Arbitrator
different than the Arbitrator selected by the Demanding Party, and such
selection is indicated by the Non-Demanding Party in its written response
to the Demanding Party made within ten (10) days after receipt of the
demand, then the Parties shall, for ten (10) days after the Demanding
Party's receipt of the Non-Demanding Party's written response to the
demand, attempt to agree upon an Arbitrator. If the Parties cannot agree
upon an Arbitrator within said ten (10) day period, then, on the
application of the Demanding Party, a single neutral Arbitrator shall be
appointed by the Eighth Judicial District Court of the State of Nevada in
accordance with the provisions of NRS Section 38.055.
(d) The Arbitrator's powers shall be limited as follows: the
Arbitrator shall follow the substantive laws of the State of Nevada, and
the Rules of Evidence of Nevada, and his/her decision shall be subject to
review thereon in accordance with the provisions of NRS Chapter 38 (the
Nevada Uniform Arbitration Act).
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(e) The costs of the resolution (including all reporter costs)
shall be split among the Parties participating in the arbitration,
provided, however, that such costs, along with all other costs and
expenses, including attorney's fees, shall be subject to award, in full or
in part, by the Arbitrator, in his/her discretion, to the prevailing
party. Unless the Arbitrator so awards attorneys' fees, each Party shall
be responsible for its own attorneys' fees.
(f) To the extent possible, the arbitration hearings shall be
conducted on consecutive days, excluding Saturdays, Sundays and holidays,
until the completion of the hearings.
(g) In connection with any arbitration proceedings commenced
hereunder, any Party shall have the right to join any third parties in
such proceedings in order to resolve any other disputes, the facts of
which are related to the matters submitted for arbitration hereunder.
(h) The Arbitrator shall render her/his decision(s) concerning
the substantive issue(s) in dispute in writing. The written decision shall
be sent to the Parties no later than thirty (30) days following the last
hearing date.
(i) All hearings shall be concluded within ninety (90) days
from the day the Arbitrator is selected or appointed, unless the
Arbitrator determines that this deadline is impractical.
(j) If any of the provisions relating to arbitration are not
adhered to or complied with, any Party may petition the Eighth Judicial
District Court of the State of Nevada, for appropriate relief in
accordance with the provisions of NRS Chapter 38.
(k) Upon application of a Party to the Eighth Judicial
District Court of the State of Nevada within one year of any award, the
award of the Arbitrator may be confirmed and entered as a judgment in a
court of competent jurisdiction. All arbitration conducted under this
Article 12 shall be in accordance with NRS Chapter 38 and the rules of the
American Arbitration Association situated in Las Vegas, Nevada to the
extent such rules do not conflict with the procedures herein set forth. To
the extent permitted by law, compliance with this Article 12 is a
condition
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precedent to the commencement by any Party of a judicial proceeding
arising out of any arbitratable dispute relating directly or indirectly to
this REA.
ARTICLE 13
ATTORNEYS' FEES
13.1 Prevailing Party. If any Party shall institute any action or
proceeding ("Suit"), excluding arbitration, against any other Party relating to
a breach or alleged violation of any covenant, term or obligation of this REA,
any Default, or enforcement of the provisions hereof, the Prevailing Party (as
hereinafter defined) shall be entitled to recover from the nonprevailing Party,
as part of the Prevailing Party's costs of Suit or its damages, said Prevailing
Party's reasonable Attorneys' Fees as fixed by the court. The "Prevailing Party"
shall be the Party which by law is entitled to recover its costs of Suit,
whether or not the Suit proceeds to final judgment. A Party not entitled to
recover its costs shall not recover Attorneys' Fees; provided, however, where a
Party shall have instituted and then dismissed Suit as against another Party,
without the concurrence of such other Party, such other Party shall be the
Prevailing Party. No sum for Attorneys' Fees shall be included in calculating
the amount of a judgment to determine whether a Party is the Prevailing Party
entitled to recover its costs and Attorneys' Fees. The term "Attorneys' Fees"
shall include fees of outside counsel and costs allocable to in-house counsel
(including, in each instance, fees and charges attributable to services
performed by legal assistants or other non-attorney personnel performing
services under the supervision of an attorney). The provisions of this Article
shall not apply to any action or cause of action for declaratory relief.
ARTICLE 14
NOTICES
14.1 Notices to Parties. Any notice, demand, request, consent,
approval, designation, or other communication that any Party is required or
desires to give, make or communicate to any other Party shall be given, made or
communicated in writing either by personal delivery, by facsimile or telex
transmission,
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by reliable overnight courier, or by United States registered or certified mail,
return receipt requested with postage fully prepaid, to the following addresses:
To Aladdin Gaming: Aladdin Gaming, LLC
c/o Sigmund Sommer Properties
2810 West Charleston Boulevard
Suite 58
Las Vegas, Nevada 89102
Attention: Mr. Jack Sommer
Telephone No.: (702) 870-1234
Facsimile No.: (702) 870-8733
with a copy to: Mr. Ronald Dictrow
Sigmund Sommer Properties
280 Park Avenue
New York, New York 10017
Telephone No.: (212) 661-0700
Facsimile No.: (212) 661-0844
and a copy to: Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022-3897
Attention: Wallace L. Schwartz, Esq.
Telephone No.: (212) 735-3000
Facsimile No.: (212) 735-2000
and a copy to: Schreck Morris
300 S. Fourth Street
Suite 1200
Las Vegas, Nevada 89101
Attention: Ellen Schulhofer, Esq.
Telephone No.: (702) 382-2101
Facsimile No.: (702) 382-8135
To Bazaar Company: Aladdin Bazaar, LLC
c/o TH Bazaar Centers, Inc.
4350 La Jolla Village Drive
Suite 400
San Diego, California 92122-1233
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Attention: Mr. Wayne Finley and
Ms. Wendy Godoy
Telephone No.: (619) 546-3535
Facsimile No.: (619) 546-3413
with a copy to: Aladdin Bazaar Holdings, LLC
c/o Aladdin Management Corporation, Manager
2810 West Charleston Boulevard
Suite 58
Las Vegas, Nevada 89102
Attention: Mr. Jack Sommer
Telephone No.: (702) 870-1234
Facsimile No.: (702) 870-8733
and a copy to: TH Bazaar Centers Inc.
4350 La Jolla Village Drive
Suite 400
San Diego, California 92122-1233
Attention: General Counsel
Telephone No.: (619) 546-3535
Facsimile No.: (619) 546-3413
and a copy to: Allen, Matkins, Leck, Gamble & Mallory LLP
501 West Broadway, Suite 900
San Diego, CA 92101
Attention: Michael C. Pruter, Esq.
David A. B. Burton, Esq.
Telephone No.: (619) 235-1517
Facsimile No.: (619) 233-1158
and a copy to: Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022-3897
Attention: Wallace L. Schwartz, Esq.
Telephone No.: (212) 735-3000
Facsimile No.: (212) 735-2000
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and a copy to: Schreck Morris
300 S. Fourth Street
Suite 1200
Las Vegas, Nevada 89101
Attention: Ellen Schulhofer, Esq.
Telephone No.: (702) 382-2101
Facsimile No.: (702) 382-8135
To Aladdin Music: Aladdin Music Holdings, LLC
c/o Sigmund Sommer Properties
2810 West Charleston Boulevard
Suite 58
Las Vegas, Nevada 89102
Attention: Mr. Jack Sommer
Telephone No.: (702) 870-1234
Facsimile No.: (702) 870-8733
with a copy to: Mr. Ronald Dictrow
Sigmund Sommer Properties
280 Park Avenue
New York, New York 10017
Telephone No.: (212) 661-0700
Facsimile No.: (212) 661-0844
and a copy to: Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022-3897
Attention: Wallace L. Schwartz, Esq.
Telephone No.: (212) 735-3000
Facsimile No.: (212) 735-2000
and a copy to: Schreck Morris
300 S. Fourth Street
Suite 1200
Las Vegas, Nevada 89101
Attention: Ellen Schulhofer, Esq.
Telephone No.: (702) 382-2101
Facsimile No.: (702) 382-8135
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To Energy Provider: Northwind Aladdin, LLC
c/o Unicom Thermal Technologic, Inc.
30 West Monroe Street, Suite 500
Chicago, Illinois 60603
Attention: President
Telephone No.: (312) 634-3200
Facsimile No.: (312) 346-3201
and a copy to: Schwartz, Cooper, Greenberger & Kraus
180 North LaSalle Street, Suite 2700
Chicago, Illinois 60601
Attention: Andrew H. Connor, Esq.
Telephone No.: (312) 346-1300
Facsimile No.: (312) 782-8416
Each Party may designate at any time a different or additional address for its
receipt of notices by giving at least ten (10) days' written notice of such
change of address to all other Parties.
Any notice, demand, request or other communication (except any
consent, approval or designation), including any copy, shall be deemed to have
been given, made, received and communicated, as the case may be, on the date
personal delivery was effected if personally served, on the date of
acknowledgment of receipt if by facsimile or telex (provided a hard copy of the
same is sent in another manner permitted herein within twenty-four (24) hours of
transmission), on the date shown as the delivery date on the overnight courier's
cartage copy if by overnight courier, or on the date of delivery as shown on the
return receipt if delivered by mail; provided, however, if delivery is not
completed due to the absence of the recipient or his/her refusal to accept
delivery, delivery to the Person identified above for receipt of copies shall be
deemed to be delivery to the primary addressee. If any such notice requires any
action or response by the recipient or involves any consent or approval
solicited from the recipient, such fact shall be clearly stated in the notice in
the manner provided in Article 18. Any responsive consent, approval or
designation shall be sent as provided above and shall be deemed to have been
given, made, received and communicated, as the case may be, on the date of
personal delivery, the date on which the facsimile or telex was transmitted, the
date deposited with the overnight courier, or the date the same was deposited in
the United States mail in conformity with this Section.
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In the event a Party shall give notice to any other Party of a
Default, such Party shall concurrently send each of the other Parties and their
Mortgagees (in accordance with Article 15) a copy of such notice; provided,
however, failing to give a copy of such notice to the other Parties (and/or
their Mortgagees) shall not affect the validity of such notice of Default nor
shall giving or failing to give such notice create any liability on the part of
the Party so declaring a Default.
ARTICLE 15
MORTGAGEE PROVISIONS
15.1 Mortgagee Notice. Any Mortgagee under a Mortgage affecting the
Tract of a Party shall be entitled to receive notice of any Default by the Party
as to such Tract, provided that such Mortgagee shall have delivered a copy of a
notice substantially in the form hereinafter contained to each Party. The form
of such notice shall be as follows:
The undersigned, whose address is __________________________________
_____________________________________ does hereby certify that it is
the "Mortgagee" (as such term is defined in the REA) of the Tract of
land described on Exhibit "A" attached hereto and made a part
hereof and being the Tract of Party ("Party") in Clark County,
Nevada. In the event that any notice shall be given of the Default
of the Party as to whose Tract the Mortgage held by the undersigned
applies, a copy thereof shall be delivered to the undersigned who
shall have all rights of a Mortgagee to Cure such Default as
specified in the REA. Failure to deliver a copy of such notice to
the undersigned shall in no way affect the validity of the notice of
Default as it respects such Party, but shall make the same invalid
as it respects the Mortgagee of the undersigned, and such
Mortgagee's Cure rights shall remain undisturbed.
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Any such notice to a Mortgagee shall be given in the same manner as provided in
Article 14. In the event that any notice shall be given of the Default of a
Party and such defaulting Party has failed to Cure or commence to Cure such
Default as provided in this REA, then and in that event any such Mortgagee under
a Mortgage affecting the Tract of the Defaulting Party shall be entitled to
receive an additional notice, given in the manner provided in Article 14, that
the Defaulting Party has failed to Cure or commence to Cure such Default. Each
Mortgagee shall have thirty (30) days after receipt of said additional notice to
Cure or, if such Default cannot be Cured within thirty (30) days, to commence to
Cure any such Default and to prosecute said Cure continuously and diligently
until completed (it being understood that such period beyond said thirty (30)
days shall apply to events including, but not limited to, non-monetary Defaults
temporarily incapable of a Cure by a Mortgagee due to (a) an automatic stay or
(b) the requirement of possession); provided however, that any Default personal
to a Party shall not prejudice the rights of any Mortgagee; provided further,
however, no dispute of any nature between Mortgagees shall serve to toll or
extend said Cure period nor impose liability of any nature on any Party to
resolve such dispute in connection with accepting Cure from any particular
Mortgagee.
ARTICLE 16
AMENDMENT
16.1 Method and Effect of Amendment. The Parties agree that the
provisions of this REA may be modified or amended, in whole or in part, only by
an instrument in writing, executed and acknowledged by Bazaar Company, Aladdin
Gaming and Aladdin Music, and duly recorded in the Office of the Recorder in and
for the County. Any amendment or modification hereof, including any extension
and renewal hereof, whenever made, shall be superior to any and all liens, to
the same extent as if such amendment or modification had been executed
concurrently with this REA; provided that, in the event a Party (other than
Energy Provider) has a Mortgage which requires the Mortgagee's consent to any
amendment of this REA, and such Mortgagee has given notice of the existence of
such Mortgage to the other Parties to this REA in accordance with Article 15,
the Mortgagee's written consent to any proposed amendment, which consent shall
not be unreasonably withheld or delayed, must be obtained in order for such
amendment to be enforceable against and binding on such Mortgagee. Nothing
contained herein shall constitute a Party's agreement that this REA cannot be
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effectively amended as between the Parties without the approval of a Party's
Mortgagee. If a Party's Mortgagee (other than Energy Provider's Mortgagee)
reasonably requests a modification or amendment to this REA which does not
materially increase the obligations or decrease the rights of the Parties
hereunder, the Parties agree to amend or modify this REA accordingly.
16.2 No Third Party Beneficiary. Except for the provisions of
Article 15 which are for the benefit of a Mortgagee, the provisions of this REA
are for the exclusive benefit of the Parties hereto and not for the benefit of
any third Person, nor shall this REA be deemed to have conferred any rights,
express or implied, upon any third Person. It is expressly understood and agreed
that the Parties specifically intend that no other Person (other than a
Mortgagee in accordance with Article 15) shall have any right to enforce any of
the provisions of this REA.
ARTICLE 17
TERMINATION OF REA
Except as to the easements, covenants and/or provisions of this REA
which by their terms shall or may survive such date, and except as to the
Parties' restoration obligations set forth in Section 9.4 hereof, which
obligations (except Energy Provider's and except with respect to the Common
Parking Area) shall terminate twenty-five (25) years after the Second Scheduled
Opening Date, this REA shall terminate on December 31, 2097, unless sooner
terminated by the written consent of all Parties (other than Energy Provider).
ARTICLE 18
EXERCISE OF APPROVAL RIGHTS
18.1 Wherever in this REA the approval or consent of any Party is
required, and unless a different time limit is provided in this REA (in which
event such different time limit shall control), such approval or disapproval
shall be given within twenty (20) days following the receipt of the item to be
so approved or disapproved or the same shall be conclusively deemed to have been
approved by such Party, subject to the provisions of this Article. Such
approval, or disap-
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proval, shall be given in writing, and such approval shall not be unreasonably
withheld, unless the provisions of this REA with respect to a particular consent
or approval shall expressly provide that the same may be given or refused in the
sole and absolute judgment or discretion of such Party. Any disapproval shall
specify with particularity the reasons therefor; provided, however, that
wherever in this REA any Party is given the right to approve or disapprove in
its sole and absolute judgment or discretion, such Party may disapprove without
specifying a reason therefor and its disapproval shall not be subject to contest
in any judicial, administrative, arbitration or other proceeding.
18.2 A Party requesting approval shall send such request in a
writing setting forth the applicable time period, pursuant to Section 18.1
hereof, within which such Party must act or otherwise respond. If the time
specified in the notice is incorrectly set forth or omitted, the time limit
shall be thirty (30) days unless a longer time period is specified in this REA,
in which case the longer time period shall control. Failure to specify such time
period shall not invalidate such notice but shall instead require the action of
such Party within said thirty (30) day period or such longer period.
18.3 Any request for the consent or approval of any Party shall
refer to the proper section numbers of the REA to which the request relates,
properly state the time period permitted hereunder for approval, and state that
the document, or the facts contained therein, shall be deemed approved or
consented to by the recipient unless the recipient objects thereto within the
required time period specified in such notice. Notwithstanding anything to the
contrary contained in this REA, no recipient's approval of or consent to the
subject matter of a notice shall be deemed to have been given by its failure to
object thereto if such notice (or the accompanying cover letter) did not
properly refer to the applicable section of this REA and properly state the time
period permitted hereunder for approval.
ARTICLE 19
EFFECTIVE DATE OF REA
This REA shall not be effective until it has been executed,
acknowledged and delivered by all signatories hereto. The Parties agree that
this REA is to be recorded in the Office of the Recorder of the County. The duly
executed
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REA shall be effective against all Persons having actual or constructive notice
thereof whether or not it has been recorded.
ARTICLE 20
MISCELLANEOUS
20.1 Breach Shall Not Defeat Mortgage. A breach of any of the
easements, conditions, covenants, or restrictions of this REA shall not defeat
or render invalid the lien of any Mortgage made in good faith and for value, but
all such easements, conditions, covenants and restrictions shall be binding upon
and effective against any Person who acquires title to said property or any
portion thereof by Involuntary Transfer.
20.2 Breach Shall Not Permit Termination. No breach of this REA
shall entitle any Party to cancel, rescind or otherwise terminate this REA, but
such limitation shall not affect, in any manner, any other right or remedies
which the Parties may have by reason of any breach of this REA.
20.3 Captions. The table of contents and the captions of the
Sections and Articles of this REA are for convenience only and shall not be
considered or referred to in resolving questions of interpretation and/or
construction.
20.4 Interpretation. Any uncertainty or ambiguity regarding the
provisions of this REA shall not be interpreted against any Party as the
draftsman of the document, but shall be resolved by application of all other
principles of law regarding interpretation of contracts.
20.5 Governing Laws and Forum. This REA shall be governed by,
interpreted under, and construed in accordance with the laws of the State of
Nevada. The Parties intend and agree that the proper forum for the litigation of
any and all disputes or controversies arising out of or related to this REA, to
the extent that arbitration is not permitted for the resolution of such dispute
or arbitration as described herein, is any circuit court of the State of Nevada
or the Eighth Judicial District Court of the State of Nevada. Each of the
Parties agrees that it will not commence any action or proceeding arising out of
or relating to this REA in any court other than as specified in the preceding
sentence and that it shall not
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challenge on grounds of forum non conveniens or any other grounds any action or
proceeding so commenced, and hereby stipulates and irrevocably agrees that said
courts have in personam jurisdiction over each of them for such litigation of
any dispute or controversy arising out of or in any way related to this REA.
20.6 Injunctive Relief. In the event of any violation or threatened
violation by any Person of any of the terms, restrictions, covenants and
conditions of this REA, any of the Parties shall have the right to seek an
injunction of such violation or threatened violation in a court of competent
jurisdiction.
20.7 No Partnership. Neither this REA nor any acts of the Parties
(other than acts undertaken pursuant to written agreements expressly setting
forth such intention) shall be deemed or construed by the Parties to constitute
an agreement to share profits and losses or to create the relationships of
principal-agent, partnership, joint venture, or any association whatsoever
between any of the Parties.
20.8 Not a Public Dedication. Nothing in this REA shall be deemed to
be a gift to the general public, or a dedication for any public purpose
whatsoever, of any portion of the Site, it being the intention of the Parties
that this REA shall be strictly limited to and for the purposes herein
expressed.
20.9 Payment on Default.
(a) If any Party (i) is compelled or elects to pay any sum of
money or do any acts which require the payment of money by reason of any
other Party's Default or (ii) does not pay any other sum when due to any
other Party pursuant to the terms and provisions of this REA, then the
Defaulting Party shall, provided that said Party shall have been served a
written delinquency notice from the paying Party, upon demand, promptly
reimburse the paying Party all such sums together with interest thereon at
the lesser of (x) the rate of fifteen percent (15%) per annum, and (y) the
maximum rate permitted by law, compounded annually, from the date that is
three (3) business days subsequent to such Defaulting Party's receipt of
the delinquency notice from the paying Party until the date of such
reimbursement by the Defaulting Party.
(b) If the Defaulting Party shall not have made the requested
repayment within ten (10) days after demand therefor, the paying
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Party (or Person to whom the amount is due) shall have the right to deduct
the amount thereof, together with interest as aforesaid, without liability
or forfeiture, from any sums then due or thereafter becoming due from the
paying Party to the Defaulting Party, subject, however, to Sections 4.2
and 9.9 and Article 12 hereof, if the payment amount is in dispute.
(c) A Party's deduction from any sums due or payable by it
pursuant to the provisions of this Section 20.9 shall not constitute a
Default in the payment thereof unless such Party fails to pay the amount
of such deduction (with interest thereon at the rate provided above from
the respective date of deduction) to the Defaulting Party to whom the sum
is owing within thirty (30) days after final adjudication or decision that
such amount is owing. The option given in this Section 20.9 is for the
sole protection of the paying Party (or Person to whom such sum is due)
but shall not Release the Defaulting Party from its obligation to perform
the terms, provisions, covenants and conditions of this REA which are
required to be performed by such Party, nor deprive the paying Party (or
Party to whom such sum is due) of any legal or equitable rights which it
may have by reason of such Default.
20.10 Severability. If any term, covenant, restriction or condition
contained in this REA shall, to any extent, be invalid or unenforceable, the
remainder of this REA (or the application of such term, covenant, restriction or
condition to Persons or circumstances other than those with respect to which it
is invalid or unenforceable), shall not be affected thereby and each term,
covenant, restriction and condition of this REA shall be valid and enforceable
to the fullest extent permitted by law, except those terms, covenants,
restrictions or conditions which are expressly subject to or conditioned upon
such invalid or unenforceable provisions.
20.11 Successors. The provisions of this REA shall, except as
otherwise provided herein, run with the land, both as respects benefits and
burdens created herein.
20.12 Time of Essence. Time is of the essence with respect to the
performance of each of the terms, covenants, restrictions and conditions
contained in this REA.
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20.13 Waiver of Default. A Party's waiver of another Party's Default
must be made in writing, and no such waiver shall be implied from a Party's
failure to take any action in respect of such Default if such Default continues
or is repeated. No express waiver of any Default shall affect any Default, or
cover any period of time, other than the precise Default and period of time
specified in such express waiver. One or more waivers of any Default in the
performance of any term, covenant, restriction or condition of this REA shall
not be deemed to waive any subsequent Default. A Party's giving of its consent
or approval to any act or request of another Party shall not be deemed to waive
or render unnecessary the consenting/approving Party's consent to or approval of
any subsequent similar acts or requests.
20.14 Rights Cumulative. Except as limited by Article 12, the rights
and remedies of any Party under this REA shall be cumulative and not exclusive
of any other rights or remedies of such Party at law or in equity. A Party's
exercise of any given right or remedy shall not impair such Party's standing to
exercise any other right or remedy.
20.15 Counterparts. This REA may be executed in multiple
counterparts, each of which shall be deemed an original, and all such
counterparts taken together shall constitute one and the same instrument.
Further, this REA may be executed in triplicate originals.
20.16 Estoppel Certificates. Each Party hereby severally covenants
that upon at least twenty (20) days' prior notice from another Party, it will
issue to any prospective or existing Mortgagee or to any prospective Transferee,
an estoppel certificate stating: (a) whether the Party to whom the request has
been directed knows of any default under this REA, and if there are known
defaults, specifying the nature thereof, (b) whether to its knowledge this REA
has been assigned, modified or amended in any way (and if it has, then stating
the nature thereof; (c) that to the Party's knowledge this REA as of that date
is in full force and effect; and (d) as to such other reasonably requested
factual matters known to the Party concerning this REA. Such certificate shall
act as a waiver of any claim by the Party furnishing such certificate to the
extent such claim is based upon facts which are contrary to those asserted in
the certificate but only to the extent the claim is asserted against a bona fide
encumbrancer or purchaser for value without knowledge of facts contrary to those
contained in the certificate and who has acted in reasonable reliance upon the
certificate. Such certificate shall in no event subject the Party furnishing it
to any liability whatsoever (except for fraud),
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notwithstanding the negligent or inadvertent failure of such Party to disclose
correct or relevant information.
20.17 Limitation on Liability. Notwithstanding anything contained in
this REA, if at any time a Party (such Party being referred to in this Section
20.17 as the "breaching Party") shall fail to perform or pay any covenant or
obligation on its part to be performed or paid hereunder or under any such other
agreement, or shall breach any warranty made hereunder, and as a consequence
thereof any other Party, or their successors and assigns, shall recover a money
judgment against the breaching Party, such judgment shall (subject to the rights
of any Mortgagee whose lien predates the attachment of such judgment) be
enforced against and satisfied out of only (i) the proceeds of sale produced
upon execution of such judgment and levy thereon against the breaching Party's
interest in its Tract and improvements thereon, (ii) the rents, issues, profits
or other income receivable from the such Tract and improvements thereon, (iii)
the consideration received by the breaching Party from the sale of all or any
part of its interest in its Tract and improvements thereon made after such
failure of performance or breach of warranty (which consideration shall be
deemed to include any assets at any time held by the breaching Party to the
extent that the value of same does not exceed the proceeds of such sale), (iv)
any insurance proceeds or condemnation award payable as the result of any
casualty to or condemnation of the breaching Party's Tract and/or improvements
thereon, and (v) any sums due or to become due from the other Party to the
breaching Party regardless of when the obligation arises, by way of set-off, and
the other Party and any other owner or holder of any claim or action against the
breaching Party shall look solely to the breaching party's Tract and
improvements thereon and to said property specified in clauses (i), (ii), (iii),
(iv) and (v) above for the payment and satisfaction of any such claim or action
and any judgment thereon. Except as set forth in the preceding sentence, the
breaching Party shall not have any personal liability for the performance or
payment of any such covenant, warranty or obligation hereunder or under any such
other agreement or upon any judgment thereon. Furthermore, none of the members
individually in the limited liability companies referred to herein as "Aladdin
Gaming", "Bazaar Company", "Aladdin Music" and "Energy Provider" shall have any
liability whatsoever for the performance or payment of any covenant, warranty or
obligation of such Party hereunder or upon any judgment thereon. No Party shall
seek specific performance of any affirmative covenant or affirmative obligation
by or against the breaching Party or any partner in the breaching Party, except
to the extent that the same can be achieved with the property and proceeds
specified in clauses (i), (ii), (iii), (iv) and (v) above. The provisions of
this Section 20.17 are
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not intended to relieve the breaching Party from the performance of any of its
obligations hereunder, but rather to limit the breaching Party's liability as
aforesaid, and to relieve and release any partner or member of the breaching
Party from any such liability as aforesaid; nor shall any of the provisions of
this Section 20.17 be deemed to limit or otherwise affect any Party's right to
obtain injunctive relief necessary to enforce other rights specifically granted
to such Party in this REA. To the extent that (with or without recourse to the
limited remedies provided in this Section 20.17) a Party is, by virtue of the
foregoing limitations, unable to recover the full amount of any money judgment
against the Defaulting Party, the non-Defaulting Party may, for so long as such
amount (and interest thereon in accordance with Section 20.9) shall remain
unpaid, offset amounts owed by the Defaulting Party against amounts owed to the
non-Defaulting Party hereunder and/or pursuant to the Site Work Agreement and/or
the Parking Use Agreement and/or that certain subordinated debenture between
Aladdin Gaming and Bazaar Company.
20.18 Index. Wherever in this REA reference is made to a constant
dollar denomination, calculation of constant dollar equivalency shall be
adjusted every fifth Accounting Period based on the Implicit Price Deflator of
the Gross National Product of the United States (Personal Consumption
Expenditures By Major Type of Product Table), issued and published by the United
States Department of Commerce (1972=100) (the "Index"), or any successor index
thereto, appropriately adjusted. In the event that the Index is converted to a
different standard reference base or otherwise revised, the determination of the
adjustment to be made with reference to the Index shall be made with the use of
such conversion factor, formula or table for converting the Index as may be
published by the Department of Commerce or, if said Department shall not publish
the same, then with the use of such conversion factor, formula or table as may
be published by Prentice Hall, Inc., or other nationally recognized publisher of
similar statistical information as may be agreed upon by the Parties. If at any
time such index as herein recited shall not exist, the Parties shall substitute
an index or procedure that reasonably reflects and monitors consumer prices, and
the same shall be considered the "Index" hereunder and in the event the Parties
are unable to agree upon a substitute index or procedure, the matter shall be
resolved pursuant to Article 12. Notwithstanding anything to the contrary set
forth herein, the adjustments provided in this Section 20.18 shall be effective
only upon notice given by any Party (except Energy Provider) to all other
Parties not more than 120 days nor less than 30 days before the beginning of
every fifth Accounting Period, which notice shall make specific reference to
this Section 20.18.
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20.19 Compliance With Laws. Each Party shall comply with all
applicable laws, ordinances, rules, orders and regulations of all governmental
agencies and entities respecting the use, occupancy and/or enjoyment of its
Tract and improvements thereon including, but not limited to, obtaining and
maintaining all necessary licenses, approvals and permits from all federal,
state and local authorities required for the operation of such Tract and
improvements.
20.20 Conflicts. In the case of each and every conflict or
inconsistency between the provisions of the Bazaar Lease, the Music Lease, the
Parking Use Agreement, the Site Work Agreement or the Energy Provider Agreement
and this REA, the Parties agree that the provisions of this REA shall prevail
and control. All Mortgages shall be subject and subordinate to the terms,
covenants and provisions of this REA and any amendment hereto to which the
subject Mortgagee has consented to pursuant to Section 16.1 hereof.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, this REA has been executed by the Parties as of
the day and year first written above.
"Aladdin Gaming" ALADDIN GAMING, LLC
a Nevada limited-liability company
By: /s/ Ronald Dictrow
-----------------------------
Name: Ronald Dictrow
Title: Secretary
"Bazaar Company" ALADDIN BAZAAR, LLC
a Delaware limited liability company
By: Aladdin Bazaar Holdings, LLC, a Nevada
limited-liability company, its member
By: Aladdin Management Corporation
Its: Manager
By: /s/ Ronald Dictrow
-----------------------------
Name: Ronald Dictrow
Title: Treasurer
By: TH Bazaar Centers Inc., a Delaware
corporation, its member
By: /s/ Wayne J. Finley
-----------------------------
Name: Wayne J. Finley
Title: Senior Vice President
By: /s/ Wendy M. Godoy
-----------------------------
Name: Wendy M. Godoy
Title: Senior Vice President
<PAGE>
"Aladdin Music" ALADDIN MUSIC HOLDINGS, LLC,
a Nevada limited-liability company
By: Aladdin Music Holdings, LLC
Its: Member
By: /s/ Ronald Dictrow
-----------------------------
Name: Ronald Dictrow
Title: Treasurer
<PAGE>
STATE OF New York)
) ss.
COUNTY OF New York)
On February 27, 1998, before me, Dawn M. Schoenig, a Notary Public in and for
said state, personally appeared Ronald Dictrow, personally known to me (or
proved to me on the basis of satisfactory evidence) to be the persons whose
names are subscribed to the within instrument and acknowledged to me that they
executed the same in their authorized capacities, and that by their signatures
on the instrument, the persons, or the entity upon behalf of which the persons
acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Dawn M. Schoenig
----------------------------
Notary Public in and for said State
STATE OF New York)
) ss.
COUNTY OF New York)
On February 27, 1998, before me, Dawn M. Schoenig, a Notary Public in and for
said state, personally appeared Wayne Finley and Wendy Godoy, personally known
to me (or proved to me on the basis of satisfactory evidence) to be the persons
whose names are subscribed to the within instrument and acknowledged to me that
they executed the same in their authorized capacities, and that by their
signatures on the instrument, the persons, or the entity upon behalf of which
the persons acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Dawn M. Schoenig
----------------------------
Notary Public in and for said State
<PAGE>
STATE OF New York)
) ss.
COUNTY OF New York)
On February 27, 1998, before me, Dawn M. Schoenig, a Notary Public in and for
said state, personally appeared Ronald Dictrow, personally known to me (or
proved to me on the basis of satisfactory evidence) to be the persons whose
names are subscribed to the within instrument and acknowledged to me that they
executed the same in their authorized capacities, and that by their signatures
on the instrument, the persons, or the entity upon behalf of which the persons
acted, executed the instrument. WITNESS my hand and official seal.
/s/ Dawn M. Schoenig
----------------------------
Notary Public in and for said State
STATE OF New York)
) ss.
COUNTY OF New York)
On February 27, 1998, before me, Dawn M. Schoenig, a Notary Public in and for
said state, personally appeared Ronald Dictrow, personally known to me (or
proved to me on the basis of satisfactory evidence) to be the persons whose
names are subscribed to the within instrument and acknowledged to me that they
executed the same in their authorized capacities, and that by their signatures
on the instrument, the persons, or the entity upon behalf of which the persons
acted, executed the instrument. WITNESS my hand and official seal.
/s/ Dawn M. Schoenig
----------------------------
Notary Public in and for said State
<PAGE>
EXHIBIT "A-1"
LEGAL DESCRIPTION
SITE
(Please see attached)
<PAGE>
EXHIBIT "A-2"
LEGAL DESCRIPTION
GAMING SITE
(Please see attached)
<PAGE>
EXHIBIT "A-3"
LEGAL DESCRIPTION
BAZAAR SITE
(Please see attached)
<PAGE>
EXHIBIT "A-4"
LEGAL DESCRIPTION
ALADDIN MUSIC SITE
(Please see attached)
<PAGE>
EXHIBIT "A-5"
LEGAL DESCRIPTION
UTILITY SITE
(Please see attached)
<PAGE>
EXHIBIT "A-6"
LEGAL DESCRIPTION
OPTIONAL IMPROVEMENTS SITE
(Please see attached)
<PAGE>
EXHIBIT "B"
SITE PLANS
(Please see attached)
<PAGE>
EXHIBIT "C"
PLANS AND SPECIFICATIONS
(Please see attached)
<PAGE>
SCHEDULE "I"
ALLOCABLE SHARE OF COMMON COSTS
Common Area Operator Party Allocable Share
----------- -------------- ---------------
I. Common Area Bazaar Company Bazaar Company: 25%
Utility Lines Aladdin Gaming: 75%(1)
II. Casino Perimeter Aladdin Gaming Bazaar Company: 25%
Area Aladdin Gaming: 75%(1)
II. Bazaar Perimeter Bazaar Company Bazaar Company: 25%
Area Aladdin Gaming: 75%(1)
IV. Fire Command Bazaar Company: 25%
Center [To be determined] Aladdin Gaming: 75%(1)
- ----------
(1) Aladdin Gaming shall have the right, but not the obligation, to assign
one-third (1/3) of its Allocable Share obligation to Aladdin Music (which
obligation Aladdin Music hereby agrees to assume), but shall not be
relieved of liability therefor.
<PAGE>
SCHEDULE "II"
ALLOCABLE SHARE OF REAL ESTATE TAXES
Responsible Party Allocable Share(1)
----------------- ------------------
Aladdin Gaming 49%
Bazaar Company 35% 24% - Retail Facility
11% - Garage Parking
Music Lease 14%
Energy Provider 2%
- ----------
(1) Notwithstanding the Allocable Shares of Real Estate Taxes set forth
herein, it is understood and agreed that all Parties shall be directly and
personally responsible for the payment of all taxes and assessments
attributable to the improvements Constructed on and changes of ownership
regarding their respective Tracts after the date hereof.
<PAGE>
COMMON PARKING AREA USE AGREEMENT
---------------------------------
THIS COMMON PARKING AREA USE AGREEMENT ("Agreement") is entered into as of
the 26th day of February, 1998 (the "Effective Date"), by and between Aladdin
Gaming, LLC, a Nevada limited liability company ("Aladdin Gaming"), and Aladdin
Bazaar, LLC, a Delaware limited liability company ("Bazaar Company").
R E C I T A L S
---------------
A. Aladdin Gaming owns certain real property located at 3667 Las Vegas
Boulevard South in Clark County, Nevada which are more particularly described on
Exhibit "A-1" to the REA (the "Site").
B. Aladdin Gaming and Bazaar Company have entered into that certain Lease
dated of even date herewith (the "Bazaar Lease"), pursuant to which Bazaar
Company leased from Aladdin Gaming that portion of the Site more particularly
described on Exhibit "A-3" to the REA (the "Bazaar Site"). Bazaar Company shall
construct certain improvements on the Bazaar Site (the "Bazaar Improvements")
consisting of an enclosed themed entertainment shopping center containing
approximately 462,000 square feet of gross leasable retail area (the "Retail
Facility"), and a multi-level parking structure adjacent to the Aladdin
Improvements for approximately 4,800 motor vehicles adjacent to the Aladdin
Improvements, and surface-level parking facilities for approximately 364 motor
vehicles beneath and adjacent to the Retail Facility, all as more particularly
described on the Site Plans (as defined in the REA) attached to the REA as
Exhibit "B" (the "Common Parking Area").
C. Aladdin Gaming shall construct or cause to be constructed certain
improvements on that portion of the Site that is more particularly described on
Exhibit "A-2" to the REA (the "Aladdin Site") consisting of a renovated and
expanded hotel-casino containing approximately 2,600 rooms and an approximately
115,000 square foot casino (the "Aladdin Hotel & Casino"), a Theater for
Performing Arts (as that term is defined in the REA) and parking facilities
beneath the Aladdin Hotel and Casino for approximately 500 motor vehicles (the
"Aladdin Parking Area" and, together with the Aladdin Hotel & Casino and Theater
for Performing Arts, the "Aladdin Improvements").
D. Aladdin Gaming and Aladdin Music Holdings, LLC ("Aladdin Music
Holdings") have entered into that certain Lease dated of even date herewith (the
"Music Lease"), pursuant to which Aladdin Music Holdings leased from Aladdin
Gaming an approximately 4.7 acre portion of the Site (the "Music Site") located
at the corner of Audrie Street and Harmon Avenue to permit the construction and
operation by Aladdin Music, LLC ("Aladdin Music") of an approximately 1,000
room, themed hotel with an approximately 50,000 square foot casino (the "Music
Hotel"). Aladdin Music Holdings shall assign all its right, title and interest
in the Music Lease to Aladdin Music.
E. Aladdin Gaming and its Permittees must have the non-exclusive right to
use the Common Parking Area and Bazaar Company agrees to grant to Aladdin Gaming
and its Permittees such non-exclusive right to use the Common Parking Area,
pursuant to the covenants, terms and
1
<PAGE>
conditions hereinafter set forth.
NOW, THEREFORE, incorporating the foregoing recitals and in consideration
of the mutual promises, representations and covenants set forth herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1
---------
DEFINITIONS
-----------
Accounting Period. "Accounting Period" means any period beginning on
January 1st and ending on the next following December 31st, except that the
first Accounting Period shall commence on the Effective Date and shall end on
the following December 31st.
Adjustment Date. "Adjustment Date" has the meaning ascribed to it in
Section 3.1(b) of this Agreement.
Affiliate. "Affiliate" means a Person that Controls, is directly or
indirectly Controlled by, or is under common ownership or Control with, another
Person. Notwithstanding the foregoing or any other provision of this Agreement
to the contrary, Bazaar Company shall not be considered to be an Affiliate of
Aladdin Gaming or any Affiliates thereof, and Aladdin Gaming shall not be
considered to be an Affiliate of Bazaar Company or any Affiliates thereof,
notwithstanding the fact that an Affiliate of Aladdin Gaming holds a fifty
percent (50%) membership interest in Bazaar Company.
Agreement. "Agreement" means this Common Parking Area Use Agreement, as
amended from time to time.
Aladdin Improvements. "Aladdin Improvements" has the meaning ascribed to
it in Recital C of this Agreement.
Aladdin Music. "Aladdin Music" means Aladdin Music, LLC, a Nevada limited
liability company, its successors and assigns.
Aladdin Music Holdings. "Aladdin Music Holdings" means Aladdin Music
Holdings, LLC, a Nevada limited liability company, its successors and assigns.
Aladdin Site. "Aladdin Site" shall have the meaning ascribed to it in
Recital C of this Agreement.
Allocable Share of Parking Operating Costs. "Allocable Share of Parking
Operating Costs" means that percentage of the Parking Operating Costs allocable
to each of Aladdin Gaming for the Aladdin Site and the Music Site and Bazaar
Company for the Bazaar Site on a monthly basis in and for each Accounting
Period, which share shall be determined by multiplying the amount set forth in
the Estimated Cost Statement by the percentage set forth below, which percentage
shall be subject to equitable adjustment as reasonably determined by the parties
hereto at such time as any Optional Improvements (as that term is defined in the
REA) shall be developed by Aladdin Gaming and its Permitted Transferees under
the REA, or a successor thereof. The initial Allocable Share of Parking
2
<PAGE>
Operating Costs shall be equal to the percentages and paid by the parties set
forth below, payable to Aladdin Gaming or Bazaar Company, as the case may be, as
set forth herein:
(a) Seventy-five percent (75%) for Aladdin Gaming; and
(b) Twenty-five percent (25%) for Bazaar Company.
Amended LLC Agreement. "Amended LLC Agreement" shall mean that certain
Limited Liability Company Agreement of Bazaar Company dated as of September 3,
1997, as amended by that certain First Amendment to the Limited Liability
Company Agreement dated as of October 16, 1997, as amended.
Arbitration. "Arbitration" means those procedures for resolving Disputes
among the parties set forth in Section 10.1 of this Agreement.
Arbitrator. "Arbitrator" shall have the meaning ascribed to it in Section
10.1(a) of this Agreement.
Base Fee. "Base Fee" shall have the meaning ascribed to it in Section 3.1
of this Agreement.
Base Month. "Base Month" has the meaning ascribed to it in Section 3.1(b)
of this Agreement.
Bazaar Company. "Bazaar Company" means Aladdin Bazaar, LLC, a Delaware
limited liability company, its successors and assigns.
Bazaar Improvements. "Bazaar Improvements" has the meaning ascribed to it
in Recital B of this Agreement.
Bazaar Lease. "Bazaar Lease" has the meaning ascribed to it in Recital B
of this Agreement, as amended from time to time.
Bazaar Site. "Bazaar Site" has the meaning ascribed to it in Recital B of
this Agreement.
Budget. "Budget" has the meaning ascribed to it in Section 3.2(a) of this
Agreement.
CIP. "CIP" shall mean the "Controlled Insurance Program" as defined and
set forth in that certain Contract between Aladdin Gaming and Fluor Daniel, Inc.
for Design/Build Services dated as of December 4, 1997.
Common Parking Area. "Common Parking Area" has the meaning ascribed to it
in Recital B of this Agreement and shall mean that portion of the Bazaar
Improvements as designated on the Site Plans attached to the REA as Exhibit "B"
for the shared use of all parties and the Redeveloped Aladdin and all of their
Permittees in connection with the parking, passage and loading of motor
vehicles, together with related improvements which are at any time constructed
in connection therewith including driveways, pedestrian sidewalks, walkways and
stairways, escalators, elevators,
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light standards, directional signs, curbs and landscaping within and adjacent to
areas used for such shared parking, passage and loading.
Comparison Month. "Comparison Month" has the meaning ascribed to it in
Section 3.1(b) of this Agreement.
Control. "Control" shall mean the power, exercisable jointly or severally,
to manage and direct a Person through the direct or indirect ownership of
partnership interest, stock, trust powers, or other beneficial interests and/or
management or voting rights.
CPI. "CPI" means the Consumer Price Index for Urban Wage Earners and
Clerical Workers, or any successor index thereto, published by the United States
Department of Labor, Bureau of Labor Statistics, for the year in question. In
the event that the CPI is converted to a different standard reference base or
otherwise revised, the determinations to be made based on the CPI pursuant to
Section 3.1 of this Agreement shall be made with the use of such conversion
factor, formula or table for converting the CPI as may be published by the U.S.
Department of Labor or, if not so published, then with the use of such
conversion factor, formula or table as may be published by any nationally
recognized publisher of similar statistical information, or if a conversion
factor, formula or table is unavailable from any such source, the parties shall
select, in good faith, another method to adjust the CPI, or any successor
thereto, to the figure that would have been arrived at had the manner of
computing the CPI in effect on the date of this Agreement not been altered.
Demand. "Demand" shall have the meaning ascribed to it in Section 10.1(a)
of this Agreement.
Demanding Party, Non-Demanding Party. "Demanding Party" and "Non-Demanding
Party" shall have the meanings ascribed to them in Section 10.1(a) of this
Agreement.
Dispute. "Dispute" shall have the meaning ascribed to it in Section
10.1(a) of this Agreement.
Effective Date. "Effective Date" means the date this Agreement is executed
by Aladdin Gaming and Bazaar Company as set forth in the introductory paragraph
of this Agreement.
Employee Parking Areas. "Employee Parking Areas" shall have the meaning
ascribed to it in Section 6.2(b) of this Agreement.
Estimated Cost Statement. "Estimated Cost Statement" shall have the
meaning ascribed to it in Section 3.2(a) of this Agreement.
Event of Default, Default. "Event of Default" or "Default" shall have the
meanings ascribed to them in Article 9 of this Agreement.
Aladdin Gaming. "Aladdin Gaming" means Aladdin Gaming, LLC, a Nevada
limited liability company, its successors and assigns.
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Hazardous Substances. "Hazardous Substances" means and includes the
following, including mixtures thereof; any hazardous substance, pollutant,
contaminant, waste, byproduct or constituent regulated under NRS Chapter 459,
NRS Sections 618.750-618.850, NRS Section 477.045, as amended, or any other
federal, state or local laws and regulations as amended or hereafter enacted
regulating hazardous or toxic substances or wastes, petroleum pollutant or waste
or similar substances, including, but not limited to, as defined in the
Comprehensive Environmental Response, Liability and Compensation Act, 42 U.S.C.
Section 9601 et seq., as amended, the Federal Water Pollution Control Act, 33
U.S.C. Sections 1251, et seq. Hazardous Materials Transportation Act, 49 U.S.C.
Sections 1801, et seq., Resource Conservation and Recovery Act, 42 U.S.C.
Sections 6901, et seq., Safe Drinking Water Act, 42 U.S.C. Sections 3000(f), et
seq., Clean Air Act, 42 U.S.C. Sections 7401, et seq., United States Department
of Transportation Hazardous Materials Table, 49 C.F.R. 172.101, Chapters 444,
445A, 445B, 590 or 618 of NRS, pesticides regulated under the Federal
Insecticides, Fungicide and Rodenticide Act, 7 U.S.C. Section 136 et seq.,
asbestos and asbestos-containing materials, PCBs and other substances regulated
under the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq., source
material, special nuclear material, by-product material and any other
radioactive materials or radioactive wastes, however produced, regulated under
the Atomic Energy Act or the Nuclear Waste Police Act; chemicals subject to the
OSHA Hazard Communication Standard, 29 C.F.R. 1910.1200 et seq.; and industrial
process and pollution control wastes whether or not hazardous within the meaning
of the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq.,
all as may be amended.
Involuntary Transfer; Involuntary Transferor; Involuntary Transferee.
"Involuntary Transfer" shall mean the conveyance or reversion of fee or
leasehold title to a Tract (or portion thereof) from a Mortgagor ("Involuntary
Transferor") to a Mortgagee ("Involuntary Transferee") resulting from the
judicial or nonjudicial foreclosure of the Mortgage, the grant of a deed in lieu
of such foreclosure, or the expiration, termination or surrender of a leaseback
in a sale and leaseback transaction; provided, however, in the event of such an
Involuntary Transfer, the Involuntary Transferor shall be conclusively deemed to
have assigned all of its rights, powers, title and interest in its Tract (or the
relevant portion thereof) and this Agreement to the Involuntary Transferee, who
shall be conclusively deemed to have assumed all of the Involuntary Transferor's
covenants and obligations thereunder accruing from and after such Involuntary
Transfer.
Mortgage; Mortgagor; Mortgagee. "Mortgage" shall mean an indenture of
mortgage, deed of trust, or a sale and leaseback of all or a portion of the
interest of a party ("Mortgagor") in its Tract. "Mortgagee" shall mean either
the trustee and beneficiary/mortgagee, individually or collectively as
appropriate, under a Mortgage or Aladdin Gaming or lessor following a sale and
leaseback, provided that such Persons are not in possession of the Tract of the
applicable party. Mortgagee shall not be deemed to be in possession until
Mortgagee takes title to any Tract.
Music Hotel. "Music Hotel" has the meaning ascribed to it in Recital D of
this Agreement.
Music Lease. "Music Lease" has the meaning ascribed to it in Recital D of
this Agreement.
Music Site. "Music Site" has the meaning ascribed to it in Recital D of
this Agreement.
NRS. "NRS" means the Nevada Revised Statutes as in effect from time to
time.
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Offset Rights. "Offset Rights" shall have the meaning ascribed to it in
Section 3.5.
Opening Date. "Opening Date" shall have the meaning ascribed to the term
"First Scheduled Opening Date" in the Site Work Agreement.
Parking Operating Costs. "Parking Operating Costs" shall mean all costs
and expenses of every kind and nature incurred by Bazaar Company in connection
with its operation, management, maintenance, repair, replacement or restoration
of the Common Parking Area, which costs and expenses are not allocated among the
parties as Common Costs (as that term is defined in the REA) and are not
associated with the Retail Facility, including, without limitation, the
following:
(a) all payments made to an operator of any portion of the Common
Parking Area, including administrative fees paid to and actual costs incurred by
Bazaar Company as operator (and Bazaar Company shall be entitled to a ten
percent (10%) override to cover Bazaar Company's general and administrative
costs);
(b) any use taxes or other fees or charges relating to parking
operations imposed by Clark County or any other governmental authority claiming
jurisdiction over the Site;
(c) the cost of licenses, certificates, permits and inspections, and
the cost of contesting the validity or applicability of any governmental
enactments which may affect Parking Operating Costs;
(d) all real estate taxes and general and special assessments
allocable to the Common Parking Area, in accordance with Section 6.6 of the REA;
(e) the cost of insurance premiums with respect to insurance policies
required to be carried by Bazaar Company by its Mortgagee, the REA, or this
Agreement, including business interruption insurance, in an amount equal to the
difference between the aggregate insurance premiums paid by Bazaar Company for
the Bazaar Site and the aggregate insurance premiums which would have been
payable by Bazaar Company if it had only carried required insurance with respect
to the Retail Facility; and
(f) the cost of supplying all utilities, and operating, maintaining,
repairing, renovating and managing all systems and equipment;
(g) wages, salaries and other compensation and benefits of all
persons engaged exclusively (appropriate pro rata portion thereof) in the
operation, management, maintenance or security of the Common Parking Area, and
employer's social security taxes, unemployment taxes or insurance, and any other
taxes which may be levied on such wages, salaries, compensation and benefits;
(h) payments under the Bazaar Lease (excluding rent) or under any
easement, license, operating agreement, declaration, restrictive covenant or
instrument pertaining to the sharing of costs by the Common Parking Area;
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(i) the cost of janitorial service, alarm and security service, trash
removal, maintenance of public areas, maintenance and replacement of curbs,
walkways and roofs;
(j) the cost of landscaping, relamping, supplies, tools, equipment
and materials, and all fees, charges and other costs incurred in connection with
the management, operation, repair and maintenance of the Common Parking Area
pursuant to Section 6.1 of this Agreement; and
(k) the cost of any capital improvements or other costs (i) which are
intended as a labor-saving device or to effect other economies in the operation
or maintenance of the Common Parking Area, (ii) made to the Common Parking Area
after the Opening Date that are required under any governmental law or
regulation enacted after the Effective Date unless such capital improvement or
other cost should have been incurred in connection with the initial construction
of the Common Parking Area in order to comply with then existing governmental
laws and regulations; or (iii) which are reasonably determined by Bazaar Company
to be in the best interests of the Common Parking Area.
If and to the extent any services or transactions referred to in subsections (a)
through (k) of this definition are performed by Affiliates of Bazaar Company,
they shall be at competitive market rates. Except as otherwise specifically
provided above, "Parking Operating Costs" shall not include costs of interest on
debt or amortization on any Mortgages and rent payable under the Bazaar Lease.
Any and all revenues generated by the Common Parking Area shall be offset
against the Parking Operating Costs for the corresponding Accounting Period in
order that Parking Operating Costs shall represent the net cost of operating the
Common Parking Area after application of such revenues.
Parking Regulations. "Parking Regulations" shall have the meaning ascribed
to it in Section 6.2(a) of this Agreement.
Permitted Transferee. "Permitted Transferee" means a Person to whom
Aladdin Gaming or Bazaar Company sells, leases, transfers or assigns its
interest in all of its Tract, together with all or the relevant portion of its
rights and obligations under this Agreement, the REA, the Bazaar Lease and any
and all other agreements affecting or concerning the Site or any portion
thereof, as applicable. Such Person to whom a transfer is made and who becomes
a Permitted Transferee hereunder must expressly assume the transferring party's
rights and obligations under this and all relevant agreements by a writing duly
acknowledged and in recordable form if necessary.
Permittees. "Permittees" shall mean the parties hereto, Aladdin Music, and
all other Persons from time to time entitled to use, occupy or visit the
Redeveloped Aladdin pursuant to any lease, sublease, deed or other instrument,
agreement or arrangement, and their respective officers, directors, employees,
representatives, agents, partners, members, managers, architects, engineers,
contractors, customers, visitors, invitees, tenants, subtenants, licensees,
suppliers, vendors and concessionaires.
Person. "Person" shall mean an individual, fiduciary, trust, partnership,
limited liability company, firm, association and corporation, or any other form
of business or governmental entity.
REA. "REA" means that certain Construction, Operation and Reciprocal
Easement Agreement dated concurrently herewith, by and among Aladdin Gaming,
Bazaar Company and
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Aladdin Music.
Redeveloped Aladdin. "Redeveloped Aladdin" means the Bazaar Improvements,
the Aladdin Improvements, the Music Hotel and the Energy Plant.
Retail Facility. "Retail Facility" has the meaning ascribed to it in
Recital B of this Agreement.
Site. "Site" has the meaning ascribed to it in Recital A of this Agreement.
Site Work Agreement. "Site Work Agreement" means that certain Site Work
Development and Construction Agreement dated concurrently herewith, entered into
by Aladdin Gaming, Aladdin Holdings, LLC, a Delaware limited liability company,
and Bazaar Company.
Subordinated Debt. "Subordinated Debt" shall have the meaning ascribed to
it in Section 3.5 of this Agreement.
Tract. "Tract" shall initially mean all buildings, land and/or air space
comprising the Bazaar Site or the Aladdin Site, as applicable, together with all
other improvements of Aladdin Gaming, or Bazaar Company, as the case may be, now
or hereafter located thereon. If at any time hereafter less than all of the
Bazaar Site or the Aladdin Site is Transferred in accordance with the
requirements of the REA, then that portion of the Tract so Transferred shall
hereinafter be deemed a separate Tract and the Person acquiring or leasing such
new Tract shall be deemed a Permittee hereunder; provided, however, that no
lease or license of space within the Redeveloped Aladdin by either Aladdin
Gaming or Bazaar Company shall be deemed to create a new Tract.
Use Fee. "Use Fee" means, collectively, the Base Fee and Aladdin Gaming's
Allocable Share of Parking Operating Costs which shall be payable to Bazaar
Company at the address for Bazaar Company set forth in Section 10.4 below.
ARTICLE 2
USE OF COMMON PARKING AREA
2.1 Use by Permittees. From and after the Opening Date, all Permittees of
the Redeveloped Aladdin shall have the right to use the Common Parking Area,
subject only to the terms and conditions contained herein.
2.2 Limitations on Use. Notwithstanding any other provision contained in
this Agreement, no Permittee may use the Common Parking Area for any unlawful
purpose and, unless Aladdin Gaming and Bazaar Company otherwise mutually agree,
the Common Parking Area shall be used only for the parking, passage, loading and
unloading of motor vehicles and pedestrian traffic. The use of the Common
Parking Area shall be subject to the Parking Regulations and, more generally,
the provisions of Article 6 hereof. In addition, neither Aladdin Gaming nor any
Permittees shall perform any act or carry on any practice that may damage the
Common Parking Area, normal wear and tear excepted, or cause any offensive odors
or loud noise (aside from odors and noises customarily found in a parking
garage) or constitute a nuisance or a menace. Neither Aladdin Gaming nor Bazaar
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Company shall, without the prior express written consent of the other party
keep, use or store, or allow to be kept, used or stored, upon or about the
Common Parking Area any Hazardous Substances that may endanger any portion
thereof or Permittee thereon; provided, however, a party may use Hazardous
Substances (in quantities necessary for the activities conducted) in the
business of operating the Common Parking Area to the extent such use is in
strict compliance with applicable laws and prudent Hazardous Substance handling
procedures and such Hazardous Substances, to the extent not fully used, are
properly and lawfully disposed of, without violating applicable laws,
endangering human health and safety or impairing any portion of the Site. Each
party indemnifies the other with respect to any claims arising out of the breach
of the foregoing sentence and from any damages resulting from a party's use of
Hazardous Substances which impairs such other party's use of the Common Parking
Area of their Tract.
ARTICLE 3
USE FEE AND ALLOCABLE COSTS
3.1 Base Fee.
(a) Commencing on the Opening Date and for the balance of the
affected Accounting Period, Aladdin Gaming shall pay to Bazaar Company, in such
legal tender of the United States of America as at the time of payment shall be
acceptable for the payment of public and private debts, a fee in the amount of
Three Million Two Hundred Thousand Dollars ($3,200,000) per annum (the "Base
Fee"), payable in twelve (12) equal monthly installments during each year, in
advance, on the first day of the calendar month for which such monthly payment
is being made. Should the Opening Date occur on a day other than the first day
of the calendar month, then the Base Fee for such first fractional month shall
be paid on the Opening Date and shall be computed on a daily basis for the
period from the Opening Date to the end of such calendar month and at an amount
equal to 1/360th of the Base Fee for each such day, and, thereafter, shall be
computed and paid as aforesaid.
(b) Commencing on the first day of the calendar month following the
end of the fifth Accounting Period (the "Adjustment Date") and on the first day
of the calendar month following the end of each successive fifth Accounting
Period thereafter, the Base Fee shall be adjusted in accordance with percentage
increases, if any, in the CPI over the preceding five (5) years, which increase
shall be capped at five percent (5%) per annum. The initial Base Fee shall be
increased by a percentage equal to the percentage increase, if any, in the CPI
published for the calendar month which is three (3) months prior to the month in
which the Adjustment Date occurs (the "Comparison Month") as compared to the CPI
published for the same calendar month immediately preceding the Opening Date
(the "Base Month"). Notwithstanding anything to the contrary herein, if the
CPI for any applicable Comparison Month shall be less than the CPI for the Base
Month, the Base Fee shall remain at the same amount payable immediately prior to
the applicable Adjustment Date. Commencing on the first day of the calendar
month following the end of the sixty-ninth Accounting Period of the term of this
Agreement, and on the first day of the calendar month following the end of each
successive tenth Accounting Period thereafter through the end of the term, the
Base Fee shall be adjusted to market rate.
3.2 Allocable Costs.
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(a) Bazaar Company shall submit to Aladdin Gaming, promptly following
the Effective Date, and in each Accounting Period thereafter, at least ninety
(90) days prior to the first day of the calendar month following the first
anniversary of the Effective Date, and in each successive Accounting Period
thereafter, a reasonable estimate of the total Parking Operating Costs to be
incurred by Bazaar Company during the next Accounting Period (the "Budget"), and
each party's Allocable Share of Parking Operating Costs with respect thereto
(the "Estimated Cost Statement"). Aladdin Gaming may object to the Budget
and/or the Estimated Cost Statement within thirty (30) days of its receipt
thereof, in which event the parties shall negotiate in good faith in an attempt
to reach an agreement. If an agreement concerning the Budget and/or Estimated
Cost Statement is not reached within twenty (20) days of an objection, then the
objection shall be subject to the procedures for Arbitration set forth in
Article 10.1 hereof; provided, however, that during such arbitration, Aladdin
Gaming shall pay to Bazaar Company Aladdin Gaming's Allocable Share of Parking
Operating Costs, as hereinafter provided, based upon the lesser of (x) the
actual cost of the subject Parking Operating Costs for the previous Accounting
Period, plus ten percent (10%), or (y) the Estimated Cost Statement. The
failure of Bazaar Company to timely submit a Budget or the Estimated Cost
Statement shall not preclude Bazaar Company from enforcing its right to collect
Aladdin Gaming's Allocable Share of Parking Operating Costs.
(b) Aladdin Gaming shall pay its Allocable Share of Parking Operating
Costs in twelve (12) equal monthly installments, in advance, on the first day of
each calendar month commencing on the Effective Date (and on and after the
Opening Date, together with its next installment of the Base Fee due), pursuant
to the Estimated Cost Statement. At any time, Bazaar Company, with the
reasonable approval of Aladdin Gaming, may elect to adjust monthly estimated
payments contained in the Estimated Cost Statement to more closely reflect
actual Parking Operating Costs being incurred in order to reduce the magnitude
of any year-end reconciliation. Should the Effective Date occur on a day other
than the first day of the calendar month, then for such first fractional month
the Allocable Share of Parking Operating Costs shall be paid on the Effective
Date and shall be computed on a daily basis for the period from the Effective
Date to the end of such calendar month and at an amount equal to 1/360th of the
Allocable Share of Parking Operating Costs for each such day, and, thereafter,
shall be computed and paid as aforesaid.
(c) Within ninety (90) days following the end of each Accounting
Period, Bazaar Company shall provide Aladdin Gaming with a full, complete and
itemized separate statement, with reasonable supporting documentation as may be
requested, showing the actual Parking Operating Costs incurred during such
Accounting Period. Aladdin Gaming shall also have the right, upon reasonable
notice and at its sole cost and expense, to audit Bazaar Company's records with
respect to the immediately preceding Accounting Period and its allocation of
Parking Operating Costs. If any party has paid more than its Allocable Share of
Parking Operating Costs during any such Accounting Period, such party shall
receive a credit towards its next payment of its Allocable Share of Parking
Operating Costs. If any party has paid less than its Allocable Share of Parking
Operating Costs for such Accounting Period, such party shall pay the deficiency
within thirty (30) days after receipt of such year-end statement.
3.3 Resolution of Disputes. If Aladdin Gaming disagrees with Bazaar
Company's year-end reconciliation of the Allocable Share of Parking Operating
Costs, Aladdin Gaming shall be entitled to object by written notice to Bazaar
Company within thirty (30) days of receipt of such year-
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end statement. If the parties cannot reach an agreement within thirty (30) days
following such notice, the Dispute shall be resolved by Arbitration pursuant to
the provisions of Section 10.1 hereof.
3.4 Creation of Lien and Personal Obligation for Payment of Allocable
Share. Aladdin Gaming and Bazaar Company covenant for the benefit of the other,
regardless of whether such covenant is expressed in any deed to a Tract, that
the delinquent amount of its Allocable Share of Parking Operating Costs and the
delinquent amount of any other payments owing by a party hereunder, together
with any late charges, attorneys' fees or interest due on any delinquent amount,
shall be a charge and a continuing lien upon its Tract, effective upon
recordation of a notice of delinquency as provided herein. The total amount so
due shall be the personal obligation of the party owing such amount and shall
remain the personal obligation of such previous party, and shall pass to
Transferees of such previous party as a lien and charge against its Tract.
Notwithstanding the foregoing, no Mortgagee shall be liable for the payment of
liens for an Allocable Share of Parking Operating Costs or any other payments to
be made by a party hereunder except those accruing after the Mortgagee obtains
title to the Tract encumbered by its Mortgage pursuant to an Involuntary
Transfer but shall take subject to any lien encumbering the property at the time
such Mortgage is recorded. Any Involuntary Transferee shall take title to the
Tract subject to the Mortgage free and clear of any claims and liens for unpaid
Allocable Shares of Parking Operating Costs or other unpaid charges. Any such
Involuntary Transferee who so acquires title to the Tract shall be liable for
payment of Allocable Shares of Parking Operating Costs accruing after the date
of such Involuntary Transfer. Following any such Involuntary Transfer, the
party owing the delinquent amount shall remain personally liable for the payment
thereof.
3.5 Offset Rights. The parties hereto are relying on full performance
under both this Agreement and the Bazaar Lease. The failure of Aladdin Gaming
to pay the Use Fee shall be offset against any amount due from Bazaar Company
under the Bazaar Lease and against the payments due under that subordinated
debenture (the "Subordinated Debt") issued by Bazaar Company to Aladdin Gaming,
LLC upon the terms and conditions set forth in the Amended LLC Agreement (the
"Offset Rights").
3.6 Sublicense to Aladdin Music. Aladdin Gaming shall have the right to
enter into a parking sublicense agreement with Aladdin Music for the purpose of
passing through to such entity one-third of the parking fees and costs incurred
by Aladdin Gaming hereunder (which parking fees and costs Aladdin Music hereby
agrees to assume) relating to Aladdin Gaming's use and its Permittees' use of
the Common Parking Area, including the right to use any portion of the
non-exclusive Common Parking Area; however, Aladdin Gaming's payments to Bazaar
Company hereunder are not contingent upon Aladdin Gaming's receipt of any sums
under any such agreement. Bazaar Company and Aladdin Gaming hereby agree that if
and when Aladdin Music is not indirectly wholly-owned by Aladdin Gaming then
this Agreement shall be amended and restated as a tri-party agreement with
Aladdin Music as the third party with its own obligations and benefits on the
same terms as otherwise exist in this Agreement, except that it bears sole
responsibility for its 25% Allocable Share of Parking Operating Costs with a
corresponding reduction in Aladdin Gaming's Allocable Share of Parking Operating
Costs to 50%. Each party shall cause its Mortgagee to subordinate to such
restated and amended tri-party agreement.
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ARTICLE 4
TERM
This Agreement shall commence on the Effective Date and shall thereafter
run until December 31, 2097. If Bazaar Company holds over at the Bazaar Site
with Aladdin Gaming's consent following the expiration or any earlier
termination of the Bazaar Lease, this Agreement shall remain in full force and
effect until such time as Bazaar Company shall cease to remain in possession and
control of the Bazaar Site.
ARTICLE 5
INSURANCE
After the Effective Date or after the Opening Date, as applicable, and
throughout the term of this Agreement each party shall maintain through CIP, or
otherwise shall cause to be maintained, in full force and effect with a
financially responsible insurance company or companies, such insurance coverage
as is required in Article 8 of the REA, and to the extent not covered thereby,
garage liability and garage keepers liability policies of not less than Two
Million Dollars ($2,000,000) each subject to deductibles of no greater than Five
Thousand Dollars ($5,000) for each vehicle and Twenty Five Thousand Dollars
($25,000) for each loss covering bodily and personal injury and property damage
for operation of the garage, and comprehensive and collision coverage for
physical damage to vehicles in Bazaar Company's or its Permittees' care, custody
and control. Bazaar Company shall submit any proposed substitution or
modification of such insurance coverage to Aladdin Gaming for Aladdin Gaming's
approval at least forty-five (45) days in advance, which consent shall not be
unreasonably withheld or delayed.
ARTICLE 6
OPERATION; MAINTENANCE
6.1 Operation and Maintenance. Bazaar Company shall be solely responsible
for the operation and maintenance of the Common Parking Area. Subject to
Article 7 and Section 10.2 of this Agreement, Bazaar Company shall operate and
maintain or cause to be operated and maintained the Common Parking Area in good
order, condition and repair, and in first-class condition. Without limiting the
generality of the foregoing, with respect to the Common Parking Area, Bazaar
Company shall observe and comply with those operation, repair, maintenance,
alteration and restoration obligations and standards set forth in Articles 6 and
9 of the REA.
6.2 Parking Regulations.
(a) The use and operation of the Common Parking Area shall be subject
to such reasonable rules, regulations and restrictions as are imposed and
promulgated by Bazaar Company from time to time (the "Parking Regulations").
Copies of the proposed Parking Regulations and, after their implementation, any
proposed amendments to the Parking Regulations, shall be provided to Aladdin
Gaming at least thirty (30) days prior to their adoption by Bazaar Company.
Within ten (10) days of its receipt of the proposed Parking Regulations (or
amendments thereof), Aladdin Gaming
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shall notify Bazaar Company in writing of any reasonable objections. If Aladdin
Gaming so objects, the parties shall meet and confer in good faith with one
another and their authorized representatives and consultants in an attempt to
resolve their differences during the ten (10) day period following such
notification. If the parties are unable to resolve their differences during
such time period, any party making the demand shall submit to Arbitration
pursuant to the provisions of Section 10.1 hereof. Notwithstanding the
generality of the foregoing, unless Aladdin Gaming and Bazaar Company, in their
sole and absolute discretion, mutually agree, no fee of any type shall be
charged to or collected from any Permittees, including commercial Permittees,
for parking or the right to park vehicles in, or for the use of, or for the
passage through, the Common Parking Area, except for any charges that may be
associated with any valet parking service operated in the Common Parking Area,
which valet parking service fees, if any, shall be reasonably approved by both
parties.
(b) Bazaar Company and Aladdin Gaming shall designate certain areas
within the Common Parking Area or on other land outside the Site within a
reasonable distance from the Site for use as automobile parking space for
certain Permittees of the Site including, without limitation, officers,
directors, managers, and employees of Bazaar Company, Aladdin Gaming, Aladdin
Music and their respective tenants and subtenants (the "Employee Parking
Areas").
(c) So long as such Permittees do not violate the Parking
Regulations, Permittees of the Redeveloped Aladdin shall not be prohibited or
prevented from parking in any portion of the Common Parking Area other than (i)
the Employee Parking Areas, which are for the exclusive use of certain
designated Permittees, and (ii) spaces reserved for valet parking services.
6.3 Use of Entire Structure. Subject to Section 6.4, if at any time
Bazaar Company should determine that it is not necessary to operate or keep open
for use by the public any portion of the Common Parking Area, with the approval
of Aladdin Gaming, it may close that portion of the Common Parking Area for the
time period it deems reasonable.
6.4 Compliance with Applicable Law. Although Bazaar Company shall not be
liable specifically to Aladdin Gaming with respect to whether sufficient parking
and/or loading docks and areas are available within the Common Parking Area to
serve each party's businesses and Buildings, Bazaar Company shall be responsible
for operating and maintaining the Common Parking Area, in strict compliance with
all applicable laws, ordinances, orders, rules, regulations, requirements and
permits of all federal, state and municipal governments and the appropriate
departments, commissions, boards and officers thereof, and for operating and
maintaining the Common Parking Area in strict compliance with all covenants,
conditions and restrictions affecting the Site, including the covenants and
requirements of any Mortgage encumbering the Common Parking Area or insurer of
the Common Parking Area.
6.5 Self-Help Cure of Operation and Maintenance Defaults. If any party
fails to perform any of its duties or obligations under this Article 6 with
respect to the operation and maintenance of Common Parking Area, any other
party may at any time give written notice to the party thus failing, setting
forth the specific nonperformance. If such nonperformance is not corrected
within thirty (30) days after receipt of such notice, or if such nonperformance
is such that it cannot be corrected within such time, then if such party fails
to commence the performance of such duties within such period and diligently
prosecute the same to completion thereafter, then, in either such event, the
party giving such notice shall have the right, upon prior written notice, to
perform same, including the right and
13
<PAGE>
temporary license to enter upon the other party's Tract to perform same, and
such party which has failed to perform shall pay the performing party's
reasonable costs thereof, provided, however, that these provisions shall be
without prejudice to such non-performing party to contest the right of the other
party to make such repairs or expend such monies. All work performed by such
party shall be performed in compliance with this Article and shall be performed
by such party to the extent necessary to properly operate such party's Tract.
Notwithstanding anything hereinabove contained to the contrary, in the event of
any emergency situation which threatens immediate injury to persons or immediate
danger to property, or material interference with access to a party's Tract, or
in the event of any closure of the Common Parking Area in violation of this
Agreement or the REA, such party may without the notice required above, but with
such notice as is reasonable under the circumstances, cure any such default.
ARTICLE 7
CONDEMNATION,
DAMAGE OR DESTRUCTION
7.1 Condemnation.
(a) The rights and obligations of the parties hereunder in the event
of a permanent taking of fee title to all or substantially all of the Common
Parking Area for any public or quasi-public use under any statute, or by right
of eminent domain, whether by a condemnation proceeding or otherwise, or any
permanent transfer of all or substantially all of the Common Parking Area in
avoidance of an exercise of the power of eminent domain, shall be governed by
and as set forth in the REA. No party other than Bazaar Company shall have any
interest in any condemnation award under this Agreement; provided, however, that
nothing herein shall limit any rights that the Aladdin Gaming may have in any
condemnation award under any other agreement or lease.
(b) The rights and obligations of the parties hereunder in the event
of any taking or any transfer in avoidance of eminent domain of less than
substantially all of the Common Parking Area, or if such taking or transfer is
less than of a permanent nature, shall be governed by and as set forth in the
REA; provided, however, that assuming that the remaining portion of the Common
Parking Area (after reconstruction, if necessary) is reasonably suitable for
continued use as a parking facility and lawfully remains open for operation,
this Agreement shall remain in force and effect as to that remaining portion,
the Base Fee shall continue to be payable by Aladdin Gaming but shall be reduced
in proportion to the number of usable parking spaces before and after the taking
or transfer, and the Allocable Share of Parking Operating Costs allocable to
Aladdin Gaming shall not reflect any amounts expended by Bazaar Company to
rebuild or repair the remaining portions of the Common Parking Area.
7.2 Damage or Destruction.
(a) The rights and obligations of the parties in the event of any
casualty to the Common Parking Area resulting in damage to or destruction of the
Common Parking Area, shall be governed by and as set forth in the REA; provided,
however, that, assuming that any portion of the Common Parking Area lawfully
remains open for operation, this Agreement shall remain in full force and
effect, and the Base Fee shall continue to be payable by Aladdin Gaming but
shall be proportionately reduced to reflect the amount of insurance proceeds
received by Bazaar Company, and
14
<PAGE>
the Allocable Share of Parking Operating Costs allocable to Aladdin Gaming shall
not reflect any amounts expended by Bazaar Company to rebuild or repair those
portions of the Common Parking Area that were damaged or destroyed.
(b) Any excess insurance proceeds after a taking or transfer shall be
paid to Aladdin Gaming and Bazaar Company in the same ratio as the required
number of parking spaces in accordance with the County's laws, codes and
regulations bears to the total number of parking spaces in the Common Parking
Area.
7.3 Payment of Excess Costs to Repair. Any costs to repair or rebuild the
Common Parking Area which are in excess of the condemnation award or insurance
proceeds (as applicable) received by Bazaar Company shall be paid by Aladdin
Gaming and Bazaar Company in the same ratio as the required number of parking
spaces in accordance with the County's laws, codes and regulations bears to the
total number of parking spaces in the Common Parking Area.
ARTICLE 8
ASSIGNMENT
Except as set forth in Section 3.6 hereof, the parties shall have no right
at any time during the term of this Agreement to assign, sell or otherwise
transfer any of their respective rights hereunder, unless such assignment is
made in conjunction with the sale of the relevant party's entire Tract (and, in
the case of Aladdin Gaming, the concurrent sale of its interest in the Bazaar
Lease or Subordinated Debt, as applicable), in which case (a) such assignment
shall expressly be made subject to the provisions of this Agreement and the
transferee shall sign all documents necessary to acknowledge its assumption of
the obligations hereunder, and (b) no party shall be released from liabilities,
whether known or unknown, that accrued before such assignment, however, the
transferring party shall be released from all liabilities accruing after such
assignment, except that this Agreement may be collaterally assigned by either
party in connection with the financing of its improvements and, in the case of
Aladdin Gaming, in the event of the sale of the Subordinated Debt.
ARTICLE 9
DEFAULT
9.1 Event of Default. An "Event of Default" or "Default" shall be deemed
to have occurred upon the happening of one or more of the following events:
(a) if any party shall fail to make payment of the Use Fee or
any portion thereof or any other sum owing hereunder when and as the same shall
have become due and payable, and such Default shall have continued for a period
of thirty (30) days after delivery of a notice of delinquency thereof from the
non-defaulting party to the defaulting party (except that if a Dispute regarding
the payment of such Use Fee or other sum has been submitted to Arbitration, the
defaulting party shall have thirty (30) days after the decision of the
Arbitrator to make any required payment);
(b) if any party shall breach or violate any covenants, terms or
obligations set forth in this Agreement and such Default shall have continued
for a period of ninety (90) days after notice thereof from the non-defaulting
party, to the defaulting party, (or if the default is not capable of being
15
<PAGE>
cured within such period, the defaulting party fails within such period to
commence to cure such default and to continuously and diligently prosecute and
pursue such cure thereafter to completion); or
(c) subject to Section 10.2 hereof, if, during the term of this
Agreement, Bazaar Company shall abandon or close down the Common Parking Area,
without the consent of Aladdin Gaming, for a period of three (3) consecutive
days.
9.2 Rights and Remedies. If any Event of Default occurs, the
non-defaulting party shall have the following remedies, in addition to any
rights (including the Offset Rights) that it may possess at law or in equity:
(a) The right to bring suit against the defaulting party for the
amount of damage sustained by the non-defaulting party by reason of such Event
of Default, except that no party shall be liable for consequential or punitive
damages; and
(b) The right to seek such injunctive or other equitable relief as
may be necessary to enforce the terms and conditions hereof, it being understood
and agreed that damages may not be an adequate remedy for the breach hereof.
Except as may be limited by the REA, the rights and remedies of any party
hereunder shall be cumulative and not exclusive of any other rights or remedies
of such party at law or in equity.
9.3 Interest on Default; Late Charge. Any installment of a Use Fee or any
other sum due from either party to the other hereunder which is not timely made
shall bear interest from the date that is ten (10) days subsequent to the
defaulting party's receipt of a notice of delinquency from the non-defaulting
party until such payment is received at the rate of fifteen percent (15%) per
annum. Any delinquent payment made by a party and bearing interest pursuant to
the preceding sentence shall include a late charge in the amount of five percent
(5%) of the delinquent amount due. The late charge shall be deemed to
constitute a part of such party's Allocable Share of Parking Operating Costs and
the right to require it shall be in addition to all of such non-delinquent
party's other rights and remedies hereunder, at law or in equity, and shall not
be construed as liquidated damages or as limiting such party's remedies in any
manner.
ARTICLE 10
MISCELLANEOUS PROVISIONS
10.1 Arbitration.
(a) The parties hereunder agree that if they are unable in good faith
to resolve any dispute or disagreement arising under or pursuant to this
Agreement, including any dispute or disagreement about the interpretation or
application of any provision thereof and any dispute arising pursuant to
Sections 3.2(a), 3.3, or 6.2(a) hereof (collectively, a "Dispute"), but not
including any Event of Default or claim of Default thereunder (which shall be
resolved before a court of law), the party seeking arbitration of the Dispute (a
"Demanding Party") shall deliver written notice of demand to resolve Dispute
(the "Demand") to the other party (the "Non-Demanding Party"), which Demand
shall include a brief statement of the Demanding Party's claim or controversy,
the amount thereof and
16
<PAGE>
the name of the proposed arbitrator to decide the Dispute (the "Arbitrator").
(b) Within ten (10) days after receipt of the Demand, the
Non-Demanding Party against whom a Demand is made shall deliver a written
response to the Demanding Party. Such response shall include a short and plain
statement of the Non-Demanding Party's defense to the claim and shall also state
whether such Party agrees to the Arbitrator chosen by the Demanding Party. If
the Non-Demanding Party fails to agree to the Arbitrator chosen by the Demanding
Party, then such Non-Demanding Party shall state in its response the name of the
proposed Arbitrator chosen by such non-Demanding Party as the proposed
Arbitrator. If the Non-Demanding Party fails to deliver its written response to
the Demanding Party within ten (10) days after receipt of the Demand, or if the
Non-Demanding Party fails to select in its written response a proposed
Arbitrator, then the Arbitrator selected by the Demanding Party shall serve as
the Arbitrator. An Arbitrator shall not be employed by any party or its
Affiliate, directly, indirectly or as an agent, except in connection with the
arbitration proceeding. Any person appointed as an Arbitrator shall be
knowledgeable and experienced in the matters sought to be arbitrated.
(c) The locale of the Arbitration shall be the offices of the
American Arbitration Association in Las Vegas, Nevada or at such other location
in Las Vegas, Nevada to which the Demanding Party and the Non-Demanding Party
agree.
(d) If the Non-Demanding Party selects a proposed Arbitrator
different than the Arbitrator selected by the Demanding Party, and such
selection is indicated by the Non-Demanding Party in its written response to the
Demanding Party made within ten (10) days after receipt of the Demand, then the
parties shall, for ten (10) days after the Demanding Party's receipt of the
Non-Demanding Party's written response to the Demand, attempt to agree upon an
Arbitrator. If the parties cannot agree upon an Arbitrator within said ten (10)
day period, then a single neutral Arbitrator shall be appointed by the Eighth
Judicial District Court of the State of Nevada in accordance with NRS Section
38.055 on the application of the Demanding Party.
(e) The Arbitrator's powers shall be limited as follows: the
Arbitrator shall follow the substantive laws of the State of Nevada and the
Rules of Evidence of Nevada, and his/her decision shall be subject to review
thereon in accordance with the provisions of NRS Chapter 38.
(f) The costs of the resolution (including all reporter costs) shall
be split among the parties participating in the Arbitration provided, however,
that such costs, along with all other costs and expenses, including attorneys'
fees, shall be subject to award, in full or in part, by the Arbitrator, in
his/her discretion, to the prevailing party. Unless the Arbitrator so award
attorneys' fees, each party shall be responsible for its own attorneys' fees.
(g) To the extent possible, the Arbitration hearings shall be
conducted on consecutive days, excluding Saturdays, Sundays and holidays, until
the completion of the hearings.
(h) In connection with any Arbitration proceedings commenced
hereunder, any party shall have the right to join any third parties in such
proceedings in order to resolve any other disputes, the facts of which are
related to the matters submitted for arbitration hereunder.
(i) The Arbitrator shall render his/her decisions concerning the
substantive issues
17
<PAGE>
in dispute in writing. The written decision shall be sent to the parties no
later than thirty (30) days following the last hearing date.
(j) All hearings shall be concluded within ninety (90) days from the
day the Arbitrator is selected or appointed, unless the Arbitrator determines
that this deadline is impractical.
(k) If any of the provisions relating to Arbitration are not adhered
to or complied with, any party may petition the Eighth Judicial District Court
of the State of Nevada for appropriate relief in accordance with NRS Chapter 38.
(l) Upon application of a party to the Eighth Judicial District Court
of the State of Nevada within one (1) year, the award of Arbitrator may be
confirmed and entered as a judgment in a court of competent jurisdiction. All
Arbitration conducted under this Article 10 shall be in accordance with NRS
Chapter 38 (the Nevada Uniform Arbitration Act) and the rules of the American
Arbitration Association to the extent such rules do not conflict with the
procedures herein set forth. To the extent permitted by law, compliance with
this Article 10 is a condition precedent to the commencement by any party of a
judicial proceeding arising out of any dispute relating directly or indirectly
to this Agreement.
10.2 Force Majeure; Discharge and Release. The force majeure provisions
set forth in Article 10 of the REA and the Discharge and Release provisions set
forth in Article 11 of the REA are hereby incorporated into this Agreement in
their entirety by this reference.
10.3 Attorneys' Fees. If any party shall institute any legal action or
proceeding in connection with any Default or claim of Default under this
Agreement, the prevailing party shall be entitled to recover from the
non-prevailing party its reasonable fees and costs, including attorneys' fees
and other reasonable expenses, as fixed by the court in its discretion.
10.4 Notices.
(a) Any and all notices, demands, requests, consents, approvals,
designations, or other communications (collectively for purposes of this Section
10.4, "Notice") required or desired to be given, made, received and communicated
hereunder by any other party shall be in writing by personal delivery, by
deposit in the United States mail, certified or registered, postage prepaid,
return receipt requested, by overnight express delivery service or by facsimile
transmission, to the following addresses and fax numbers:
18
<PAGE>
Aladdin Gaming: Aladdin Gaming, LLC
2810 W. Charleston Blvd., Suite 58
Las Vegas, Nevada 89102
Attn.: Jack Sommer
Telephone: 702-870-1234
Facsimile: 702-870-8733
with a copy to:
Ronald Dictrow
c/o Sommer Properties
280 Park Avenue
New York, New York 10017
Telephone: 212-661-0700
Facsimile: 212-661-0844
and
Schreck Morris
300 South Fourth Street, Suite 1200
Las Vegas, Nevada 89101
Attn.: Ellen L. Schulhofer, Esq.
Telephone: 702-382-2101
Facsimile: 702-382-8135
and
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attn.: Wallace L. Schwartz, Esq.
Telephone: 212-735-3000
Facsimile: 212-735-2000
Bazaar Company: Bazaar Company, LLC
c/o TH Bazaar Centers, Inc.
4350 La Jolla Village Drive, Suite 400
San Diego, California 92122-1233
Attention: Wayne Finley and Wendy Godoy
Telephone No.: (619) 546-3535
Facsimile No.: (619) 546-3307
with a copy to: John Bedard
TH Bazaar Centers, Inc.
4350 La Jolla Village Drive, Suite 400
San Diego, California 92122-1233
Telephone No.: (619) 546-3304
Facsimile No.: (619) 546-3413
and
19
<PAGE>
Allen, Matkins, Leck, Gamble & Mallory LLP
501 W. Broadway, Suite 900
San Diego, California 92101
Attn: Michael C. Pruter, Esq.
Telephone: 619-235-1517
Facsimile: 619-233-1158
Aladdin Music Holdings: Aladdin Music Holdings, LLC
c/o Sigmund Sommer Properties
2810 West Charleston Boulevard, Suite 58
Las Vegas, Nevada 89102
Attn: Jack Sommer
Telephone: 702-870-1234
Facsimile: 702-870-8733
with a copy to:
Ronald Dictrow
c/o Sommer Properties
280 Park Avenue
New York, New York 10017
Telephone: 212-661-0700
Facsimile: 212-661-0844
and
Schreck Morris
300 South Fourth Street, Suite 1200
Las Vegas, Nevada 89101
Attn.: Ellen L. Schulhofer, Esq.
Telephone: 702-382-2101
Facsimile: 702-382-8135
and
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attn.: Wallace L. Schwartz, Esq.
Telephone: 212-735-3000
Facsimile: 212-735-2000
Each party may designate at any time a different or additional address for its
receipt of Notice by giving at least ten (10) days' notice of such change of
address to all other parties.
(b) Any Notice shall be deemed to have been given, made,
received and communicated, as the case may be, on the date personal delivery was
effected if personally served, three (3) business days after the deposit thereof
in the United States mail, one (1) business day after the deposit thereof with
the overnight delivery service, and on the date of transmission if by facsimile
[and received by the recipient prior to 5:00 p.m. on the recipient's business
day][(provided a hard copy of the same is sent in another manner permitted
herein within twenty-four (24) hours of transmission)]; provided, however, if
delivery is not completed due to the absence of the recipient or
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<PAGE>
his/her refusal to accept delivery, delivery to the Person identified above for
receipt of copies shall be deemed to be delivery to the primary addressee. If
any such Notice requires any action or response by the recipient or involves any
consent or approval solicited from the recipient, such fact shall be clearly
stated in the Notice.
(c) In the event a party shall give Notice to any other party of a
Default, such Party shall concurrently send each of the other parties and
(provided the Mortgagees shall have given to the party giving such Notice a
notice substantially in the form prescribed in Article 15 of the REA) their
Mortgagees a copy of such Notice, and such Mortgagees shall have the same rights
to Cure Defaults under this Agreement by the owner of the Tract encumbered by
their Mortgages as they have to Cure Defaults under the REA.
10.5 Partial Invalidity. If any provision of this Agreement or the
application thereof to any Person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Agreement, or the application of
such provision to Persons or circumstances other than those to which it is held
invalid or unenforceable, shall not be affected thereby, and each provision of
this Agreement shall be valid and be enforced to the fullest extent permitted by
law.
10.6 Governing Law. This Agreement shall be governed by, interpreted
under, and construed in accordance with the laws of the State of Nevada. The
parties intend and agree that the proper form for the litigation of any and all
disputes or controversies arising out of or related to this Agreement, to the
extent that such dispute is not submitted to Arbitration, is any circuit court
of the State of Nevada or the Eighth Judicial District Court of the State of
Nevada in Las Vegas, Nevada. Each of the parties agrees that it will not
commence any action or proceeding arising out of or relating to this Agreement
in any court other than as specified in the preceding sentence on grounds of
forum non conveniens or any other grounds, and hereby stipulates and irrevocably
agrees that said courts have in personam jurisdiction over each of them for such
litigation of any dispute or controversy arising out of or in any way related to
this Agreement.
10.7 Captions. The captions and headings in this Agreement are for
convenience only, are not a part of this Agreement, and do not in any way limit
or amplify the provisions hereof.
10.8 Amendments. The parties agree that the provisions of this Agreement
may be modified or amended, in whole or in part, only by an instrument in
writing, executed and acknowledged by Bazaar Company and Aladdin Gaming. The
parties shall make those modifications and amendments to this Agreement
requested by any of their respective Mortgagees that do not materially increase
their respective obligations hereunder or adversely affect or diminish their
respective rights, so long as such modifications and amendments shall be at no
cost to the non-requesting party.
10.9 Relationship of Parties. The relationship of the parties is that of
licensor and licensee and nothing herein shall be deemed to be a contract for
employment or to constitute an agreement to share profits and losses or to
create a relationship of joint venture, partnership, agent-principal, or any
other type of association between the parties or any officer, director, manager,
member or employee of the parties.
10.10 Time of Essence. Time is of the essence with respect to the
performance of each of the terms, covenants, restrictions and conditions
contained in this Agreement.
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10.11 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which, taken
together, shall constitute one and the same instrument.
10.12 Binding Obligations. This Agreement shall be binding upon and
inure to the benefit of the successors and permitted assigns of the parties
hereto.
10.13 Waiver. A party's waiver of another party's default or of a
provision of this Agreement must be made in writing, and no such waiver shall be
implied from a party's failure to take or exercise, or delay in taking or
exercising, any action or right in respect thereof (unless the time specified
herein for taking such action or exercising such right has expired). No express
waiver of any default shall affect any default, or cover any period of time,
other than the precise default and period of time specified in such express
waiver. No waiver of any default in the performance of any term, covenant,
restriction or condition of this Agreement shall be deemed or shall constitute a
waiver of any subsequent default or of any other term, covenant, restriction or
condition, nor shall any waiver constitute a continuing waiver. A party's giving
of its consent or approval to any act or request of another party or the single
or partial exercise of any right shall not be deemed to waive or render
unnecessary the consenting party's consent to or approval of or the exercise of
any subsequent acts, requests or rights, whether or not similar.
10.14 Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior understandings and writings and respect thereto.
10.15 Conflicts with REA. Notwithstanding anything to the contrary in
Section 10.14 above, to the extent this Agreement fails to address an issue or
matter addressed in the REA, the provisions of the REA shall control.
10.16 Memorandum of Agreement. After the REA has been recorded in the
office of the Recorder of Clark County, Nevada, and prior to the recordation of
any Mortgage, the parties hereto agree that they shall prepare, execute and
cause to be recorded with the Clark County Recorder a Memorandum of Common
Parking Area Use Agreement in the form attached hereto as Exhibit "A". Upon
termination of this Agreement, either party, at the other party's request, will
execute and record a statement of termination of this Agreement which states the
applicable termination date.
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IN WITNESS WHEREOF, the parties hereto have set forth their hands on the
day and year first above mentioned.
"Aladdin Gaming" "Bazaar Company"
ALADDIN GAMING, LLC, a ALADDIN BAZAAR, LLC, a
Nevada limited liability company Delaware limited liability company
By: Aladdin Bazaar Holdings, LLC, a Nevada
limited liability company, its Member
By: /s/ Ronald Dictrow By: Aladdin Management Corporation,
-----------------------
Ronald B. Dictrow, Executive Vice its Manager
President and Secretary
By: /s/ Jack Sommer
---------------------------
Jack Sommer, Vice President and
Secretary
By: TH Bazaar Centers Inc., a Delaware
corporation, its Member
By: /s/ Wayne Finley
-------------------
Wayne J. Finley, Senior Vice President
By: /s/ Wendy Godoy
------------------
Wendy M. Godoy, Senior Vice President
23
<PAGE>
EXHIBIT "A"
MEMORANDUM OF
COMMON PARKING AREA USE AGREEMENT
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
Aladdin Gaming, LLC
c/o Schreck Morris
1200 Bank of America Plaza
300 South Fourth Street
Las Vegas, Nevada 89101
Attn: Ellen Schulhofer, Esq.
________________________________________________________________________
MEMORANDUM OF COMMON PARKING AREA USE AGREEMENT
THIS MEMORANDUM OF COMMON PARKING AREA USE AGREEMENT ("Memorandum") is made
as of this __ day of February, 1998, by and between Aladdin Gaming, LLC, a
Nevada limited liability company ("Aladdin Gaming") and Aladdin Bazaar, LLC, a
Delaware limited liability company ("Bazaar Company").
1. Aladdin Gaming and Bazaar Company have entered into that certain
Common Parking Area Use Agreement dated of even date herewith ("Parking
Agreement"), pursuant to which Bazaar Company has agreed to grant Aladdin Gaming
and its permittees a non-exclusive right to use that certain multi-level parking
structure for approximately 4,800 motor vehicles and surface-level parking
facilities for approximately 364 motor vehicles located on that certain real
property located in the County of Clark, State of Nevada, and more particularly
described on Exhibit "A" attached hereto, until December 31, 2097, unless sooner
terminated by the written consent of the parties, and commencing on the date
hereof, for the fees and subject to the terms and covenants set forth in the
Parking Agreement.
2. The purpose of this Memorandum is to give notice of the existence of
the Parking Agreement. To the extent that any provision of this Memorandum
conflicts with any provision of the Parking Agreement, the Parking Agreement
shall control.
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3. This Memorandum may be executed in counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.
ALADDIN GAMING, LLC ALADDIN BAZAAR, LLC
By: TH Bazaar Centers, Inc., a Delaware
corporation
By:
-------------------------
Name: By:
------------------------ -----------------------------------
Title: Wayne J. Finley, Senior Vice President
-----------------------
By:
------------------------------------
By: Wendy M. Godoy, Senior Vice
--------------------------
President
Name:
------------------------
Title: By: Aladdin Bazaar Holdings, LLC., a Nevada
-------------------------
limited liability company
By: Aladdin Management Corporation, a
Nevada corporation, its manager
By:
-----------------------------
Ronald B. Dictrow, Treasurer
By:
-----------------------------
Jack Sommer, Vice President
STATE OF NEW YORK )
) ss.
BOROUGH OF MANHATTAN )
This instrument was acknowledged before me on February ___, 1998, by
__________________ as _____________________ of Aladdin Gaming, LLC.
-----------------------------------
Signature of Notarial Officer
2
<PAGE>
STATE OF NEW YORK )
) ss.
BOROUGH OF MANHATTAN )
This instrument was acknowledged before me on February ___, 1998, by
__________________ as _____________________ of Aladdin Gaming, LLC.
--------------------------------------
Signature of Notarial Officer
STATE OF NEW YORK )
) ss.
BOROUGH OF MANHATTAN )
This instrument was acknowledged before me on February ___, 1998, by Wayne
J. Finley as Senior Vice President of TH Bazaar Centers, Inc., Manager of
Aladdin Bazaar, LLC.
--------------------------------------
Signature of Notarial Officer
STATE OF NEW YORK )
) ss.
BOROUGH OF MANHATTAN )
This instrument was acknowledged before me on February ___, 1998, by Wendy
Godoy as Senior Vice President of TH Bazaar Centers, Inc., Manager of Aladdin
Bazaar, LLC.
--------------------------------------
Signature of Notarial Officer
3
<PAGE>
STATE OF NEW YORK )
) ss.
BOROUGH OF MANHATTAN )
This instrument was acknowledged before me on February ___, 1998, by Ronald
B. Dictrow as Treasurer of Aladdin Management Corporation, which is Manager of
Aladdin Bazaar Holdings, LLC, Manager of Aladdin Bazaar, LLC and is Manager of
Aladdin Holdings, LLC.
--------------------------------------
Signature of Notarial Officer
STATE OF NEW YORK )
) ss.
BOROUGH OF MANHATTAN )
This instrument was acknowledged before me on February ___, 1998, by Jack
Sommer as Vice President of Aladdin Management Corporation, which is Manager of
Aladdin Bazaar Holdings, LLC, Manager of Aladdin Bazaar, LLC.
--------------------------------------
Signature of Notarial Officer
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COMMON PARKING AREA
USE AGREEMENT
by and between
ALADDIN GAMING, LLC,
a Nevada limited liability company
"Aladdin Gaming"
and
ALADDIN BAZAAR, LLC,
a Delaware limited liability company
"Bazaar Company"
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
ARTICLE 1 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
ARTICLE 2 USE OF COMMON PARKING AREA . . . . . . . . . . . . . . . . . . . . . . . .8
2.1 Use by Permittees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
2.2 Limitations on Use. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
ARTICLE 3 USE FEE AND ALLOCABLE COSTS. . . . . . . . . . . . . . . . . . . . . . . .8
3.1 Base Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
3.2 Allocable Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
3.3 Resolution of Disputes. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.4 Creation of Lien and Personal Obligation for Payment of Allocable Share . . . 10
3.5 Offset Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.6 Sublicense to Aladdin Music . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE 4 TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 5 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 6 OPERATION; MAINTENANCE . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.1 Operation and Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.2 Parking Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.3 Use of Entire Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.4 Compliance with Applicable Law. . . . . . . . . . . . . . . . . . . . . . . . 12
6.5 Self-Help Cure of Operation, and Maintenance Defaults . . . . . . . . . . . . 13
ARTICLE 7 CONDEMNATION, DAMAGE OR DESTRUCTION. . . . . . . . . . . . . . . . . . . 13
7.1 Condemnation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.2 Damage or Destruction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.3 Payment of Excess Costs to Repair . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 8 ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 9 DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
9.1 Event of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
9.2 Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
9.3 Interest on Default; Late Charge. . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
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<TABLE>
<CAPTION>
Page
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ARTICLE 10 MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . . . . . 16
10.1 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
10.2 Force Majeure; Discharge and Release. . . . . . . . . . . . . . . . . . . . . 17
10.3 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
10.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
10.5 Partial Invalidity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
10.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
10.7 Captions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
10.8 Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
10.9 Relationship of Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
10.10 Time of Essence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
10.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
10.12 Binding Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
10.13 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
10.14 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
10.15 Conflicts with REA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
10.16 Memorandum of Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
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LEASE
THIS LEASE is made as of February 26, 1998, by and between Aladdin
Gaming, LLC, a Nevada limited-liability company ("Lessor"), and Aladdin
Bazaar, LLC, a Delaware limited liability company ("Lessee").
R E C I T A L S :
A. Lessor is the owner in fee simple of certain real property
located at 3667 Las Vegas Boulevard South, Clark County, Nevada (the
"Master Site"), upon which Lessor intends to participate with others in the
renovation and expansion of an existing hotel and casino facility,
including, without limitation, the construction by Lessee of a themed
entertainment shopping center (the "Retail Facility") and new parking
facilities for approximately 4,800 automobiles in a car parking facility
and approximately three hundred sixty-four (364) automobiles in additional
surface parking (the "Common Parking Area"). The Master Site is more
particularly described on Exhibit "A" hereto, which is incorporated herein
by reference.
B. Lessee desires to lease from Lessor and Lessor desire to lease to
Lessee that certain portion of the Master Site upon which the Retail
Facility and the Common Parking Area will be constructed, together with all
rights, privileges, easements, Improvements (as defined below), buildings,
reversions and appurtenances thereto, a more particular description of
which is set forth on Exhibit "B" hereof, which is incorporated herein by
reference (the "Demised Premises").
C. Lessor, Lessee and Aladdin Holdings, LLC, a Delaware limited
liability company ("Holdings") have entered into that certain Site Work
Development and Construction Agreement dated concurrently herewith ("Site
Work Agreement"). Pursuant to the Site Work Agreement, certain existing
improvements on the Master Site shall be demolished by Lessor and Holdings.
D. Lessor shall be constructing and maintaining a hotel/casino
complex on the remaining portion of the Master Site as well as a parking
area thereunder (the "Hotel/Casino Facilities"), which shall be used in
connection with the Retail Facility and Common Parking Area.
IN CONSIDERATION of the recitals and the mutual promises herein, the
parties hereby agree as follows:
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ARTICLE I
DEMISED PREMISES -- TERM OF LEASE
Section 1.1. Lessor does hereby lease, rent, let and demise unto
Lessee, and Lessee does hereby lease, take and hire, pursuant to this
Lease, the Demised Premises, to have and hold the same unto Lessee, its
successors and assigns, for the Term (as defined in Section 1.3 hereof),
subject only to the terms and conditions herein provided and to the
encumbrances and exceptions to title of record as of the date hereof
(collectively, the "Permitted Exceptions"). All buildings, structures and
improvements now or at any time hereafter erected, constructed or situated
upon the Demised Premises or any part thereof prior to or during the
continuance of the term of this Lease (including all utilities systems,
loading areas, access ways, fixtures, plants, apparatus, appliances,
furnaces, boilers, machinery, engines, motors, compressors, dynamos,
elevators, fittings, piping, connections, conduits, ducts, equipment,
partitions, furnishings and personal property of every kind and description
now or hereafter affixed or attached or adjacent or subjacent to any such
building, structure or improvement now or hereafter used or procured for
use in connection with the heating, cooling, lighting, plumbing,
ventilating, air conditioning, refrigeration, cleaning or general operation
of any such building, structure or improvement, together with any and all
renewals and replacements of, additions to and substitutes for any such
building, structure or improvement or any of the above referred to property
made by Lessee) may be hereinafter sometimes collectively called the
"Improvements." Lessee acknowledges that certain existing Improvements on
the Master Site will be demolished by Lessor pursuant to the Site Work
Agreement and agrees to cooperate with Lessor at no cost or liability to
Lessee except as set forth in the Site Work Agreement.
Section 1.2. It is understood and agreed by the parties that,
following the execution hereof, Lessor shall cause the Demised Premises to
be subdivided into a separate parcel or parcels from the balance of the
Master Site, in accordance with Nevada Revised Statutes ("NRS") 278.320
through NRS 278.469, inclusive (the "Commercial Subdivision"). Lessee
agrees to cooperate with Lessor to obtain the Commercial Subdivision and to
fund its pro rata share of the cost thereof based upon the ratio that the
Demised Premises bears to the Master Site. Lessor agrees to diligently
pursue the Commercial Subdivision and to commence such process as soon as
reasonably practicable after the date hereof, but in any event so as to
complete the Commercial Subdivision prior to the "First Scheduled Opening
Date" (as such term is defined in the Site Work Agreement). As soon as
practicable after obtaining the Commercial Subdivision, and conditioned
upon the cure of any outstanding monetary defaults of Lessee, Lessor shall
convey to Lessee, at no cost or expense to Lessee, a fee interest in the
Demised Premises free and clear of any liens created by Lessor and subject
only to liens created by Lessee, the Permitted Exceptions and any
encumbrances and exceptions created in accordance with the provisions
hereof (the "Fee Transfer"). Lessor's obligations with respect to the Fee
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Transfer shall relate back to the date hereof and the recordation of the
Memorandum of Lease attached as Exhibit "C". Any mechanics' liens or other
clouds on title arising after the date of recordation of the Memorandum of
Lease shall be subordinate to the Fee Transfer.
Section 1.3. This Lease shall commence as of the date hereof and
shall terminate on the earlier to occur of (i) December 31, 2097 (ii) the
date upon which possession of the whole of the Demised Premises and the
Improvements is taken by any governmental or quasi-governmental public
authority for any public or quasi-public use under any statute or by right
of eminent domain, as set forth in Article X, and (iii) the Fee Transfer
(such period of time shall be referred to herein as the "Term"), unless
this Lease shall be otherwise sooner terminated as provided herein. In the
event that the Term of this Lease terminates pursuant to Subsections (ii),
or (iii), above, the parties shall execute, acknowledge and deliver a
ratification of that certain Construction, Operation and Reciprocal
Easement Agreement (the "REA") dated as of the date hereof and encumbering
the Master Site, substantially in the form attached hereto as Exhibit "D"
(the "Ratification of REA"), and such Ratification of REA shall be deemed
effective as of the original effective date of the REA. Lessee hereby
grants Lessor a limited power of attorney coupled with an interest for the
purpose of executing, acknowledging and delivering the Ratification of REA
upon the termination of the Term of this Lease pursuant to Subsections (ii)
or (iii) above. Neither party shall have the right to terminate this Lease
prior to the expiration of the Term under any circumstances, including,
without limitation, the occurrence of an Event of Default (as defined
below).
ARTICLE II
RENT
Section 2.1. Lessee shall pay to Lessor from and after the grand
opening of the Retail Facility to the public ("Rent Commencement Date"), in
such legal tender of the United States of America as at the time of payment
shall be acceptable for the payment of public and private debts, at the
address for Lessor set forth below or at such other place as Lessor may
from time to time designate in writing, an annual rent in the amount of Ten
and No/100 Dollars ($10.00) ("Property Rent"), payable in advance in annual
installments commencing on the Rent Commencement Date and continuing on the
same day of each year thereafter, with payments for periods of less than
one year being prorated for the number of days of that year which are part
of the term(s) of this Lease.
Section 2.2. Lessee shall pay the Property Rent without notice or
demand.
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ARTICLE III
PAYMENT OF TAXES, ASSESSMENTS, ETC.
Section 3.1. During all times prior to the Commercial Subdivision,
Lessee shall pay or cause to be paid, as additional rent, its Allocable
Share of Real Estate Taxes, as such term is defined in, and pursuant to the
terms of Section 6.6 of the REA (the "Impositions").
Section 3.2. Deliberately Omitted.
Section 3.3. The parties intend this Lease to be a "net" Lease,
subject to the terms and conditions of the REA. All expenses in connection
with the operation of the Demised Premises and Improvements during the Term
hereof shall be paid prior to the due date by Lessee, except where this
Lease or the REA expressly provides otherwise.
Section 3.4. Each party, upon the written request of the other party,
shall furnish to the requesting party and, upon the further and separate
written request of the other party, to any mortgagee to whom the requesting
party is the mortgagor, within thirty (30) days after the date when any
Imposition would become delinquent, official receipts of the appropriate
taxing authority, or other proof satisfactory to the requesting party or
such mortgagee, evidencing the payment thereof or a decision to proceed
diligently under Section 3.5.
Section 3.5. Prior to the Fee Transfer, Lessee shall have the right,
after prior written notice to Lessor, to contest the amount or validity, in
whole or in part, of any Imposition by appropriate proceedings diligently
conducted in good faith; provided, however, that Lessee must in any event
pay any such Imposition prior to any action being taken that may adversely
affect the ownership of or any leasehold or mortgagee's interest in the
Demised Premises, in any of the Improvements, or in any portion thereof
for nonpayment. Prior to commencing the contest of an Imposition, Lessee
shall notify Lessor of the nature of the contest and of the amount in
issue, and Lessor and Lessee shall use commercially reasonable efforts to
reconcile their respective positions in relation to the taxing authority.
Subject to the terms or conditions of any mortgage on the Demised Premises,
either Lessor or Lessee may, if it shall so desire, but at its sole
expense, endeavor at any time or times to obtain a lowering of the assessed
valuation upon the Demised Premises and the Improvements, or any part
thereof, for the purpose of reducing taxes thereon, and in such event, the
other party will cooperate in effecting such reduction, provided the other
party shall not be obligated to expend any money or provide any moneys in
so cooperating.
Section 3.6. Neither party shall be required to join in any
proceedings referred to in Section 3.5 of this Lease that are initiated by
the other party unless the provisions of any law, rule or regulation at the
time in effect shall require that such proceeding be brought by and or in
the name of such other party or any owner of the Demised Premises, in which
event the other party shall join in such proceedings or permit the same to
be brought in its name, but shall not, however, be subjected to any
liability for the payment of any costs or expenses in connection
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with any such proceedings not initiated by that party and the party
initiating the said proceedings will indemnify and save harmless the other
party from any such costs and expenses, reimbursing the other party
therefor upon demand. Each party shall be entitled to any refund of any
Imposition and penalties or interest from any governmental authority to the
extent such refund represents moneys paid to such governmental authority,
directly or indirectly, by that party.
Section 3.7. An official certificate or statement issued or given by
any federal, state, county or municipal authority, or any department,
bureau, board or officer thereof or of any public utility, showing the
existence of any Imposition, together with interest and penalties thereon,
the payment of which is the obligation of Lessee as herein provided, shall
be prima facie evidence for all purposes of this Lease of the existence,
amount and validity of such Imposition.
ARTICLE IV
SURRENDER OF PREMISES
Section 4.1. Subject to the provisions of Articles I and XI hereof
and the provisions of the REA, on the last day of the Term hereof, or upon
any earlier termination of this Lease (except if the Term ends as a result
of the Fee Transfer), Lessee shall surrender and deliver possession of the
Demised Premises and the Improvements to Lessor in reasonably good
condition considering their age and use, ordinary wear and tear and the
effect of casualty and condemnation excepted, without delay and free and
clear of all liens and encumbrances other than (a) the Permitted
Exceptions, and (b) those created in accordance with the provisions hereof
or the REA. At the end of the Term (except if the Term ends as a result of
the Fee Transfer), the title to and ownership of the Improvements shall
automatically vest in Lessor without the execution of any further
instrument, but Lessee shall execute a quitclaim deed and any other
appropriate conveyancing documents to Lessor if Lessor so requests.
Section 4.2. Notwithstanding any other provisions of this Lease,
where furnished by or at the expense of Lessee or any subtenant, Lessee may
(or if required by Lessor, shall) remove furniture, trade fixtures and
business equipment, furnishings and personal property of every kind,
regardless of whether or not originally classified as Improvements, at or
prior to the termination of this Lease; provided, however, that the removal
thereof will not impair the structural integrity of the Improvements. Any
damage to the Improvements resulting from such removal shall be repaired by
Lessee to the reasonable satisfaction of Lessor, taking into account normal
wear and tear.
Section 4.3. Any personal property of Lessee which shall remain in
the Improvements for more than thirty (30) days after the termination of
this Lease and the removal of Lessee, and any personal property of any
subtenant which shall remain in the Improvements for more than thirty (30)
days after the termination of this Lease and the removal of any such
subtenant from the Improvements, may, at the option of Lessor, be deemed to
have been abandoned by Lessee or such subtenant and may be retained by
Lessor as its property or may be disposed of, without accountability, in
such a manner as Lessor may see fit.
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Section 4.4. The provisions of this Article IV shall survive any
termination of this Lease.
ARTICLE V
INSURANCE
Section 5.1. The parties agree that they shall, throughout the Term
of this Lease, maintain, or cause to be maintained, in full force and
effect, such policy or policies of insurance as shall be required under
Article 8 of the REA.
ARTICLE VI
REPAIRS, MAINTENANCE AND RESTORATION
Section 6.1. Deliberately Omitted.
ARTICLE VII
CONSTRUCTION, CHANGES AND ALTERATIONS
Section 7.1. Deliberately Omitted.
Section 7.2. All construction performed on the Demised Premises or
the Hotel/Casino Facilities shall be done in accordance with Articles 3 and
9 of the REA.
ARTICLE VIII
USE OF PROPERTY
Section 8.1. Use of the Demised Premises shall be governed by the REA
and, as applicable, the Site Work Agreement.
ARTICLE IX
ENTRY ON PROPERTY BY LESSOR AND LESSEE
Section 9.1. Lessee shall permit Lessor and Lessor's authorized
representatives to enter the Demised Premises and Improvements at all
reasonable times during usual business hours after reasonable notice to
Lessee for the purpose of inspecting the same and observing the manner in
which Lessee protects, maintains and repairs the Demised Premises and
complying with the Site Work Agreement.
Section 9.2. Lessor shall have the right to enter the Demised
Premises and Improvements at all reasonable times during usual business
hours after reasonable notice to Lessee and upon Lessee's consent (which
Lessee shall not unreasonably withhold) for the
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purpose of showing the same to prospective purchasers and prospective
tenants of the Master Site, exclusive of the Demised Premises and
Improvements, provided any such entry is in compliance with Lessee's
reasonable security requirements and applicable gaming laws. Lessee shall
have the right to enter the Master Site and Hotel/Casino Facilities at all
reasonable times during usual business hours after notice to Lessor and
upon Lessor's consent (which Lessor shall not unreasonably withhold) for
the purpose of showing the same to prospective assignees of Lessee's
interest in or prospective subtenants of the Demised Premises, provided any
such entry is in compliance with Lessor's reasonable security requirements
and applicable gaming laws.
Section 9.3. Nothing contained herein is intended to alter Lessor's
or Lessee's rights under the REA regarding access.
ARTICLE X
CONDEMNATION
Section 10.1. In the event that the whole of the Demised Premises
shall be taken by any governmental or public authority for any public or
quasi-public use under any statute or by right of eminent domain, whether
by a condemnation proceeding or otherwise, then this Lease shall terminate
on the earlier of the date that title to or possession of the Demised
Premises and Improvements is taken and Property Rent and other charges
provided herein to be paid by Lessee or already paid by Lessee shall be
apportioned and paid by Lessee or refunded by Lessor to Lessee, as
appropriate, to such date. In the event that a portion of the Demised
Premises is condemned, then this Lease shall remain in full force and
effect as to the portion of the Demised Premises remaining after such
taking; provided, however, that if such partial taking occurs prior to the
Fee Transfer, Lessee's Allocable Share of Real Estate Taxes shall be
recalculated and Lessor shall refund any amounts Lessee overpaid for the
applicable tax year. Lessee shall have the right to all awards and
payments provided as compensation for any such taking, and Lessor hereby
agrees to assign and transfer to Lessee any such awards and payments
received by it, except those expressly allocated to the Lessor's interest
in the Demised Premises. Lessor and Lessee shall cooperate and shall
jointly adjust and settle all claims relating to the award.
ARTICLE XI
FEE MORTGAGES AND LEASEHOLD MORTGAGES
Section 11.1. As used herein, "Mortgage" shall mean an indenture of
mortgage, deed of trust, or a Sale and Leaseback of all or a portion of the
interest of a party ("Mortgagor") in any portion of the Master Site owned
or leased by it ("Mortgaged Premises"). "Mortgagee" shall mean either the
trustee and beneficiary/mortgagee, individually or collectively as
appropriate, under a Mortgage or the fee owner or lessor following a Sale
and Leaseback, provided that such persons are not in possession of the
Mortgaged Premises of the applicable party. A "Sale and Leaseback" shall
mean a transaction in which (a) a party who is the fee owner of its
Mortgaged Premises conveys a fee or a leasehold estate in all or a portion
of its
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Mortgaged Premises for financing purposes and, immediately thereafter, such
party, its affiliate or any guarantor of such party's covenants, agreements
and obligations set forth in this Lease or in the REA, leases or subleases
such Mortgaged Premises or portion thereof so conveyed, or (b) a party
holding a leasehold estate in its Mortgaged Premises assigns said estate
(or a portion thereof) or subleases such Mortgaged Premises (or a portion
thereof) for financing purposes and, immediately thereafter, such party,
its affiliate or any guarantor of such party's covenants, agreements and
obligations set forth in this Lease or in the REA subleases such Mortgaged
Premises or portion thereof so assigned or subleased.
Section 11.2. Any present or future Mortgage or other lien or
encumbrance affecting or encumbering Lessor's fee title to the real
property constituting the Demised Premises (the "Fee") (any such Mortgage
or other lien or encumbrance shall be referred to herein as a "Fee
Mortgage") shall be subject and subordinate to this Lease. Lessor and
Lessee acknowledge and agree that concurrently herewith, Lessor is
encumbering the Fee with a Fee Mortgage in favor of Bank of Nova Scotia as
Administrative Agent on behalf of certain lenders.
Section 11.3.
(a) Lessee shall have the right, at any time and from time to
time, to encumber, by mortgage, deed of trust or other property instrument,
the leasehold interest herein demised on such terms, conditions, and
maturity as Lessee shall determine, and to enter into any and all
extensions, modifications, amendments, replacements, and refinancing
thereof as Lessee may desire (all of the foregoing being referred to herein
collectively as "Leasehold Mortgages" and singularly as a "Leasehold
Mortgage").
(b) Lessor shall simultaneously deliver to the holder of each
Leasehold Mortgage ("Leasehold Mortgagee") and/or each trustee ("Trustee")
of any trust indenture or deed of trust relating to the Leasehold Mortgage
identified by written notice from Lessee to Lessor, a duplicate copy of any
and all notices of default or other notices which Lessor may deliver to
Lessee pursuant to the terms of this Lease, and any such notice shall not
be effective as against any such Leasehold Mortgagee or Trustee until the
duplicate copy is so delivered. A different address may be designated by
any such Leasehold Mortgagee and Trustee by notice delivered to Lessor from
time to time. Any such Leasehold Mortgagee or Trustee may, at its option
and at any time, pay any of the Rents or other sums of money herein
stipulated to be paid by Lessee or do any other act or thing required of
Lessee by the terms of this Lease in accordance with the provisions of
Sections 11.3(f) and (g) hereof; and all payments so made, and all things
so done or performed by any such Leasehold Mortgagee or Trustee shall be as
effective to cure Lessee's default as the same would have been if done and
performed by Lessee instead of by any such Leasehold Mortgagee or Trustee.
The loan documents related to any such Leasehold Mortgage (the "Loan
Documents") may, if Lessee so desires, be so conditioned as to provide
that, as between the Leasehold Mortgagee (or Trustee) and Lessee, the
Leasehold Mortgagee (or Trustee), on making good and performing any such
default or defaults on the part of Lessee, shall be thereby subrogated to
any and all of the rights of the person or persons to whom any payment
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is made by the Leasehold Mortgagee (or Trustee), and all of the rights of
Lessee hereunder. The Leasehold Mortgagee (or Trustee) shall not be or
become liable to Lessor as an assignee of this Lease until such time, if
any, as the Leasehold Mortgagee (or Trustee) shall by foreclosure or other
appropriate proceedings in the nature thereof, or as the result of any
other action of remedy provided for in the Loan Documents (or Leasehold
Mortgage), or by proper conveyance from Lessee, either acquire the rights
and interests of Lessee under the terms of this Lease or actually take
possession of the Demised Premises, and such liability of Leasehold
Mortgagee (or Trustee) shall terminate upon the Leasehold Mortgagee (or
Trustee) assigning such rights and interests to another party or
relinquishing such possession, as the case may be, provided that such
termination of liability as to the Leasehold Mortgagee (or Trustee) shall
not extinguish any default hereunder or any such liability as to any other
person or persons.
(c) Should any Leasehold Mortgagee or Trustee acquire Lessee's
interest in this Lease and the Demised Premises by foreclosure or other
appropriate proceedings in the nature thereof, or as a result of any other
action or remedy provided for by any Leasehold Mortgage, or by a proper
conveyance from Lessee, such Leasehold Mortgagee or Trustee shall take
Lessee's interest in the Demised Premises subject to all the provisions of
this Lease; and shall, so long as and only so long as it shall be the owner
of the leasehold interest, assume personally the obligations of Lessee
under this Lease.
(d) Should any Leasehold Mortgagee or Trustee or a purchaser at
a foreclosure sale acquire Lessee's interest in this Lease and in the
Demised Premises by foreclosure or other appropriate proceedings in the
nature thereof, or as a result of any other action or remedy provided for
by any Leasehold Mortgage, or by proper conveyance from Lessee, such
Leasehold Mortgagee, Trustee or purchaser may, subject to the provisions of
Article XII, assign this Lease by sale or otherwise, and any assignee of
such Leasehold Mortgagee, Trustee or purchaser may likewise assign this
Lease. subject to the provisions of Article XII below. Any assignee of
such Leasehold Mortgagee or Trustee, or any purchaser of the leasehold
interest from such Leasehold Mortgagee or Trustee, or any person taking
through any other means from such Leasehold Mortgagee or Trustee and/or
their respective successors in interest shall take such leasehold interest
subject to all the agreements, conditions, covenants and terms of this
Lease on the part of Lessee to be kept, observed and performed, and shall
as a condition of such assignment, purchase or other taking, assume and
agree by writing in form approved by and delivered to Lessor to perform all
such agreements, conditions, covenants and terms, whereupon the assignor
thereof shall be relieved thereafter of any liability hereunder; provided,
however, that any such Leasehold Mortgagee or Trustee or assignee thereof
that so acquires Lessee's interest hereunder shall not be liable for any
default of Lessee hereunder except a default in connection with Lessee's
failure to pay Impositions, but the foregoing is not intended to relieve
such Leasehold Mortgagee or Trustee or assignee thereof of obligations
under the REA, the Site Work Agreement or the Parking Agreement.
(e) No such foreclosure, assignment, sale or hypothecation of
the Demised Premises shall relieve, release, or in any manner affect the
liability of Lessee under this Lease.
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(f) Notwithstanding anything to the contrary contained herein, any
Leasehold Mortgagee or Trustee shall have until thirty (30) days after the
later of (i) notice from Lessor or the holder of the Fee Mortgage or (ii) the
expiration of the cure period given to Lessee under this Lease to cure any
default under this Lease, provided that if such default is a non-monetary
default and is not capable of cure within such thirty (30) day period, then
such period as is reasonably necessary to cure such default, so long as such
Leasehold Mortgagee or Trustee shall diligently proceed to do so. If the
non-monetary default is such that possession of the Demised Premises is
necessary to cure the same, then the period of time within which the
Leasehold Mortgagee or Trustee may cure shall be extended by the period of
time necessary for the Leasehold Mortgagee or Trustee to acquire Lessee's
interest in this Lease and the Demised Premises by foreclosure or other
appropriate proceedings (which extension shall include any period of time
during which the Leasehold Mortgagee or Trustee is prohibited or delayed from
commencing or prosecuting such proceedings by reason of the bankruptcy or
insolvency of Lessee), provided that the Leasehold Mortgagee or Trustee
promptly commences and diligently prosecutes such proceedings.
(g) Deliberately Omitted
(h) Lessor shall not agree to any mutual termination or accept
any surrender of this Lease, nor shall Lessor consent to any material
amendment or modification of this Lease, without the prior written consent
of each Leasehold Mortgagee or Trustee.
(i) Lessor agrees to execute such amendments or modifications of
this Lease as may be reasonably required by a Leasehold Mortgagee or
Trustee, at Lessee's request, provided that any such amendments and
modifications do not in any material respect diminish any right or increase
any obligation of, or adversely affect, Lessor and are in form reasonably
satisfactory to Lessor and the holder of the Fee Mortgage.
Section 11.4.
(a) Upon termination of this Lease by reason of rejection of
this Lease in a bankruptcy of Lessor or for any other reason (other than as
a result of the Fee Transfer), Lessor shall give notice thereof to the
first priority Leasehold Mortgagee or Trustee, and such Leasehold Mortgagee
or Trustee shall have the option, upon notice to Lessor deposited in the
mails not later than ninety (90) days after notice from Lessor of such
termination, to elect to receive, in its own name or in the name of its
nominee or designee, from Lessor a new lease of the Demised Premises for
the unexpired balance of the Term hereof, or any renewal or extension
hereof, on the same terms and conditions as are in this Lease set forth,
which new lease shall be effective as of the date of termination of this
Lease and Lessor agrees promptly to execute such lease, provided:
(i) such Leasehold Mortgagee or Trustee shall
simultaneously with the giving of such notice cure any monetary default of
Lessee; and
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(ii) such Leasehold Mortgagee or Trustee immediately
commences to remedy, and thereafter diligently pursues the remedy of, any
non-monetary default of Lessee, excluding those which by their very nature
are incapable of cure by any other person.
(b) The Leasehold Mortgagee or Trustee, or the nominee or
designee of either, shall thereafter observe and perform all covenants and
conditions in such new lease contained on the part of Lessee to be observed
and performed. Any such new lease shall have priority equal to this Lease.
If such Leasehold Mortgagee or Trustee (or nominee or designee) shall
become lessee under such new lease and shall subsequently assign such new
lease in accordance with Article XII herein, then such Leasehold Mortgagee
or Trustee (or nominee or designee) shall thereupon be relieved of
liability under such new lease, provided that the assignee expressly
assumes all liabilities and obligations of lessee under such new lease
thereafter accruing, and Lessee furnishes Lessor a copy of such assignment
and assumption. The termination of this Lease prior to the date on which
this Lease expires shall not terminate the right of such Leasehold
Mortgagee or Trustee (or nominee or designee) to a new lease under this
Article XI.
ARTICLE XII
ASSIGNMENT, TRANSFERS AND SUBLETTING
Section 12.1. The parties shall have the right at any time and from
time to time during the Term hereof to assign, sell or otherwise transfer
their respective interests, in whole or in part, in this Lease and the
estate created by this Lease in accordance with the requirements of the
REA; provided, however, that (a) each such assignment, sale or transfer
shall expressly be made subject to the provisions of this Lease, and (b)
any such assignment, sale or transfer shall be subject to the Discharge and
Release provisions of Article XIII hereof.
Section 12.2. Lessee shall have the right at any time and from time
to time during the Term hereof to sublet all or any part or parts of the
Demised Premises and to assign, encumber, extend, or renew any sublease,
provided that:
(a) each such sublease shall expressly be made subject to the
provisions of this Lease;
(b) each such sublease shall expire, by its express terms, no
later than the end of the Term of this Lease;
(c) Lessee remains primarily obligated to perform Lessee's
obligations hereunder; and
(d) Lessee shall use reasonable efforts to ensure that each
sublease entered into after the Term of this Lease commences shall contain
a provision requiring the sublessee, so long as the terms of such sublease
are recognized and honored, to attorn to Lessor if Lessee defaults under
this Lease, and if the subtenant is notified of Lessee's default and
instructed to
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make subtenant's rental payments to Lessor.
Section 12.3. Lessor agrees, upon written request by Lessee and
subject to the prior agreement of sublessees to attorn and make payments to
Lessor as provided in Section 12.2 hereof, and that Lessor shall execute a
non-disturbance and attornment agreement upon commercially reasonable terms
and in a form and substance acceptable to Lessor and the holder of the Fee
Mortgage, which shall not require Lessor or the holder of the Fee Mortgage
to assume any obligation to construct the Bazaar Improvements.
ARTICLE XIII
DISCHARGE AND RELEASE
Section 13.1. The discharge and release provisions set forth in
Article 11 of the REA, along with the definitions set forth in Article 1 of
the REA, shall also apply to this Lease.
ARTICLE XIV
DEFAULT PROVISIONS
Section 14.1. If any one or more of the following events happens, an
Event of Default shall be deemed to have occurred:
(a) if default shall be made in the payment of any Property Rent
payable under this Lease or any part thereof, when and as the same shall
become due and payable, and such default shall continue for a period of
ninety (90) days after written notice thereof from Lessor to Lessee; or
(b) if default shall be made in the payment of any other amounts
payable under this Lease or any part thereof, when and as the same shall
become due and payable, and such default shall continue for a period of
forty-five (45) days after written notice thereof from Lessor to Lessee; or
(c) notwithstanding the foregoing, if any mechanics' lien
encumbers the Demised Premises (other than as may be created by Lessor or
its agents) for more than thirty (30) days following actual notice to
Lessee, and Lessee shall have failed to bond around same in accordance with
applicable law, or have deposited an equivalent amount with the holder of
the Fee Mortgage. Any amount so deposited shall be released to the party
entitled to same upon the resolution of the claim underlying the mechanics
lien.
Section 14.2. If any Event of Default occurs arising from the
nonpayment of any Property Rents or any other amounts payable under this
Lease, Lessor shall have the right to sue for each installment of such
Property Rent or such other amounts as the same becomes due.
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Section 14.3. If any Event of Default occurs other than one arising
from the nonpayment of rents ("Nonmonetary Default"), this Lease shall
remain in full force and effect and, if no resolution regarding the Event
of Default can be obtained by agreement of the parties, Lessor shall be
required to obtain its remedies by arbitration in accordance with the REA;
provided, however, that following an arbitration decision requiring Lessee
to cure a Nonmonetary Default, Lessee shall have an additional thirty (30)
days after the issuance of the said decision to cure any such default and,
if the default cannot be cured within such thirty (30) day period, Lessee
shall diligently pursue such cure.
Section 14.4. No failure by Lessor or Lessee to insist upon the
strict performance of any provision of this Lease or to exercise any right
or remedy consequent upon a breach hereof and no acceptance of full or
partial rent during the continuance of any such breach (and/or the
application thereof toward cure of the earliest occurring default) shall
constitute a waiver of any such breach or of such provision. No provision
hereof to be complied with by Lessee or Lessor, and no breach thereof shall
be waived, terminated, altered or modified, except by a written instrument
executed by Lessor and Lessee. No waiver of any breach shall affect or
alter this Lease, but each and every provision of this Lease shall continue
in full force and effect with respect to any other then existing or
subsequent breach thereof.
Section 14.5. The remedies provided herein may be exercised by the
parties entitled thereto singly, in combination, and cumulatively.
Section 14.6. Amounts payable under this Lease which become
delinquent shall bear interest, from the delinquency date until paid in
full, at the rate set forth in Section 20.9 of the REA. When the party who
owes the delinquent amount pays it, the party shall also pay the interest
accrued thereon. No amount shall be considered delinquent hereunder until
after the expiration of any applicable notice period or grace period.
Section 14.7. If default shall be made by Lessor in the performance
of any obligations of Lessor under this Lease and such default shall
continue for a period of thirty (30) days, and Lessor fails within such
period to commence to cure such default and continuously and diligently
thereafter to proceed with the curing of such default by the earliest date
by which it may through continuous, diligent effort be cured (it being
intended that in connection with a default not susceptible of being cured
with due diligence within thirty (30) days, the time of Lessor within which
to cure the same shall be extended for such period as may be necessary to
complete the same with all due diligence), then Lessee shall have all
rights and remedies available at law or in equity and not otherwise
inconsistent with the terms of this Lease or the REA. The holder of the
Fee Mortgage shall be entitled to receive notice and exercise the same or
reciprocal rights as a Leasehold Mortgagee has under Section 11.3 in
connection with a default by Lessee hereunder.
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ARTICLE XV
INVALIDITY OF PARTICULAR PROVISIONS
Section 15.1. If any provision of this Lease or the application
thereof to any person or circumstance shall, to any extent, be invalid or
unenforceable, the remainder of this Lease, or the application of such
provision to persons or circumstances other than those to which it is held
invalid or unenforceable, shall not be affected thereby, and each provision
of this Lease shall be valid and be enforced to the fullest extent
permitted by law.
ARTICLE XVI
NOTICES AND CERTIFICATES
Section 16.1. Unless otherwise provided herein, any notice,
communication, request, reply or advice (herein severally and collectively
for convenience, called "notice" in this Lease) provided or permitted to be
given, made or accepted by either party to the other, must be in writing
and may, unless otherwise expressly provided in this Lease, be given or be
served by telecopier transmittal with the original thereof deposited in the
United States mail, postpaid and certified and addressed to the party to be
notified, with return receipt requested, or by delivering the same to such
party in person or by courier. Notice transmitted via telecopier with an
original deposited in the manner hereinabove described shall be effective,
unless otherwise stated in this Lease, from and after the transmission of
said telecopied notice. Notice given in any other manner shall be
effective only if and when received by the party to be notified. For
purposes of notice, the addresses of the parties shall, until changed as
herein provided, be as follows:
LESSOR: Aladdin Gaming, LLC
c/o Sigmund Sommer Properties
2810 W. Charleston Blvd., Suite 58
Las Vegas, Nevada 89102
Attn.: Jack Sommer
Telephone: 702-870-1234
Telecopier: 702-870-8733
with copies similarly delivered to:
Aladdin Gaming, LLC
c/o Sigmund Sommer Properties
280 Park Avenue
New York, New York 10017
Attn.: Ronald Dictrow
Telephone: 212-661-0700
Telecopier: 212-661-0844
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and: Schreck Morris
300 S. Fourth Street, Suite 1200
Las Vegas, Nevada 89101
Attn.: Ellen L. Schulhofer, Esq.
Telephone: 702-382-2101
Telecopier: 702-382-8135
and: Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attn.: Wallace L. Schwartz, Esq.
Telephone: 212-735-3000
Telecopier: 212-735-2000
LESSEE: Aladdin Bazaar, LLC
c/o TH Bazaar Centers, Inc.
4350 La Jolla Village Drive, Suite 400
San Diego, California 92122-1233
Attn.: Mr. Wayne Finley and
Ms. Wendy Godoy
Telephone: 619-546-1001
Facsimile: 619-546-3309
with copies similarly delivered to:
Aladdin Bazaar, LLC
c/o TH Bazaar Centers Inc.
4350 La Jolla Village Drive, Suite 400
San Diego, California 92122-1233
Attn.: General Counsel
Telephone: 619-546-1001
Facsimile: 619-546-3342
and: Allen, Matkins, Leck, Gamble & Mallory LLP
501 West Broadway, Suite 900
San Diego, California 92101
Attn.: Michael C. Pruter, Esq.
Telephone: 619-233-1155
Telecopier: 619-233-1158
Section 16.2. Notices, demands, requests and consents which shall be
served by registered or certified mail upon Lessor or Lessee in the manner
aforesaid shall be deemed sufficiently served or given for all purposes
hereunder (a) five (5) days after such notice, demand, request or consent
shall be mailed by United States registered or certified mail as
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aforesaid in any Post Office or Branch Post Office regularly maintained by the
United States Government, or (b) upon receipt, if earlier.
ARTICLE XVII
GOVERNING LAW AND CHOICE OF FORUM
Section 17.1. This Lease shall be governed by, interpreted
under, and construed in accordance with the laws of the State of Nevada. The
Parties intend and agree that the proper forum for the litigation of any and
all disputes or controversies arising out of or related to this Lease, to the
extent that arbitration is not specified for the resolution of such dispute
as described herein, is the Eighth Judicial District Court of the State of
Nevada. Each of the parties agrees that it will not commence any action or
proceeding arising out of or relating to this Lease in any court other than
as specified in the preceding sentence on grounds of forum non conveniens or
any other grounds, and hereby stipulates and irrevocably agrees that said
courts have in personam jurisdiction over each of them for such litigation of
any dispute or controversy arising out of or in any way related to this Lease.
ARTICLE XVIII
QUIET ENJOYMENT; CONVEYANCE BY LESSOR
Section 18.1. Lessor covenants that, provided that no Event of
Default has occurred and is continuing, Lessee shall quietly have and enjoy
the Demised Premises and Improvements and all portions thereof throughout
the entire Term hereof but it is understood and agreed that this covenant
and any and all other covenants of Lessor contained in this Lease shall be
binding upon Lessor and its successors and assigns only with respect to
breaches occurring during its and their respective ownership of the
Lessor's interest hereunder.
Section 18.2. Lessor understands and agrees that Lessee shall have
control over the Demised Premises subject and pursuant to the REA, the Site
Work Agreement, and the Common Parking Area Use Agreement of even date
herewith (the "Parking Agreement").
Section 18.3. At no time during the Term of this Lease shall
Lessor, without Lessee's consent (which Lessee shall not unreasonably
withhold), grant any easement, servitude or license or enter any restrictive
covenant or accept any condition or otherwise make any grant or agreement
which will affect title to the real property constituting the Demised
Premises or Lessor's estate therein or Lessor's reversion hereunder except as
expressly permitted in the REA.
ARTICLE XIX
ESTOPPEL CERTIFICATES
Section 19.1. Each party shall at any time, and from time to
time, within ten (10) business days of written notice from the other party,
execute, acknowledge and deliver to such
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other party and any other party identified by such other party a statement
in writing: (a) clarifying that this Lease is unmodified and in full force
and effect (or, if modified, stating the nature of such modification and
certifying that this Lease as so modified, is in full force and effect) and
the dates to which the rental and other charges are paid in advance or
delinquent, if any, (b) certifying the commencement and termination dates
of the Lease, (c) certifying that there has been no assignment or other
transfer by the certifying party of this Lease, or any interest therein
subject to Articles XI through XII hereof, (d) acknowledging that there are
not, to the certifying party's knowledge, any uncured defaults on the part
of the other party hereunder and that the certifying party has no right of
offset, counterclaim or deduction against rent, or specifying such default
if any are claimed together with the amount of any offset, counterclaim or
deduction alleged by the certifying party, and (e) setting forth any other
matters reasonably required by the requesting party. Any such statements
may be relied upon by any existing owner or prospective purchaser or any
present or prospective lender upon the security of the Demised Premises.
The failure of either party to deliver such statement within such time
shall be conclusive and binding upon that party (i) that this Lease is in
full force and effect, without modification except as may be represented by
the requesting party, and that the status of rent payments is as certified
by the requesting party, (ii) that there are no uncured defaults in the
requesting party's performance and that the party being requested to issue
a certificate has no right of offset, counterclaim or deduction against
rental, and (iii) that no more than one month's rent has been paid in
advance. In addition to the foregoing, Lessor hereby covenants and agrees,
upon the satisfaction by Lessee of the Construction Financing Requirement
and the written request of Lessee, to execute, acknowledge and deliver to
Lessee, or to such other party as Lessee may reasonably direct, a statement
in writing certifying that the Construction Financing Requirement has been
satisfied. Lessor hereby grants to Lessee an irrevocable power of attorney
coupled with a interest for the purpose of executing, acknowledging and
delivering such a statement in connection with the satisfaction of the
Construction Financing Requirement.
ARTICLE XX
INDEMNITY AND LIABILITY
Section 20.1. The parties hereto shall be subject to the same
indemnity obligations as are set forth in Section 8.1 of the REA, using the
same definitions as are set forth in Article 1 of the REA.
ARTICLE XXI
FORCE MAJEURE
Section 21.1. The rights and obligations of the parties hereto
shall be subject to the same force majeure provisions as contained in the REA.
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ARTICLE XXII
ARBITRATION
Section 22.1. Any dispute between the parties involving this Lease,
including those arising from disagreements over interpretation or
application of the provisions hereof, and any other disputes involving
provisions of this Lease shall be resolved by binding arbitration conducted
in the manner set forth in Article 12 of the REA; provided, however, that
any Party may seek prohibitory injunctive relief without first submitting
the controversy to arbitration.
ARTICLE XXIII
MISCELLANEOUS PROVISIONS
Section 23.1. For the purpose of this Lease, unless the context
otherwise requires:
(a) The term "person" shall mean an individual, corporation,
limited liability company, joint venture, general or limited partnership,
unincorporated organization, tenancy-in-common or government, or any agency
or political subdivision thereof, and the term "successors" shall include
the executors and administrators of any individual.
(b) Words of any gender used in this Lease shall include any
other gender.
Section 23.2. Each party shall be separately responsible for any
attorneys' fees it may incur in connection with the negotiation and
preparation of this Lease and other instruments or documents mentioned
herein. If there is any legal action or proceeding between Lessor and Lessee
to enforce any provision of this Lease or to protect or establish any right
or remedy of either party hereunder, the prevailing party shall be entitled
to all costs and expenses, including reasonable attorneys' fees incurred in
connection with such action and in any appeal in connection therewith.
Section 23.3. The captions and headings in this Lease are for
convenience only, are not a part of this Lease, and do not in any way limit
or amplify the provisions hereof.
Section 23.4. The parties shall cause a Memorandum of this Lease
in the form attached hereto as Exhibit "C" to be executed and recorded with
the office of the recorder of Clark County, Nevada immediately prior to the
recording of the REA. Upon the termination of this Lease, either party, at
the other party's request, will execute a recordable statement of termination
of the Lease which states the applicable termination date.
Section 23.5. The relationship of Lessor and Lessee is that of
landlord and tenant. Nothing herein shall be deemed to be a contract for
employment or to create (a) a joint venture, (b) a partnership, (c) an
agent/principal relationship, (d) an employer-employee relationship, or (e)
any other type of relationship between Lessor and Lessee, or between Lessor
and any officer,
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director or employee of Lessee. Nothing in this Lease shall be deemed to
interfere with Lessor's or Lessee's right to hire, terminate or discipline
their respective employees.
Section 23.6. It is mutually agreed by and between Lessor and
Lessee that the respective parties hereto shall and they hereby do waive
trial by jury in any action, proceeding or counterclaim brought by either of
the parties hereto against the other on any matters whatsoever arising out of
or in any way connected with this Lease, the relationship of Lessor and
Lessee, Lessee's use or occupancy of the Demised Premises, and/or any claim
of injury or damage.
Section 23.7. Time is of the essence of this Lease and of all of
the terms, covenants, and conditions hereof.
Section 23.8. This Lease may be executed in two or more
counterparts and all of such counterparts, taken together, shall be deemed
part of one instrument.
ARTICLE XXIV
NO MERGER OF TITLES
Section 24.1. Except as provided in Article I hereof, so long as
any mortgage on this Lease and the leasehold created hereby has not been
fully paid and satisfied and discharged of record, there shall be no merger
of this leasehold estate with any other interest or title Lessee hereunder
may acquire in the Demised Premises or any part thereof.
ARTICLE XXV
COVENANT TO BIND AND BENEFIT RESPECTIVE PARTIES
Section 25.1. The covenants of the parties herein contained shall,
subject to the provisions of this Lease, bind and inure to the benefit of
the successors and assigns of the respective parties hereto, except as
otherwise provided herein.
ARTICLE XXVI
ENTIRE AGREEMENT OF PARTIES
Section 26.1. This Lease constitutes the entire agreement
between the parties pertaining to the subject matter contained in it and
supersedes all prior agreements, representations and understandings of the
parties. Concurrently herewith, the parties are entering into, inter alia,
the REA, the Site Work Agreement and the Parking Agreement. No addition to or
modification or termination of this Lease shall be binding unless executed in
writing by each of the parties. Except as may be otherwise provided in this
Lease, no waiver of any of the provisions of this Agreement shall be deemed,
or shall constitute, a waiver of any other provision, whether or not similar,
nor shall any waiver constitute a continuing waiver and no waiver shall be
binding unless evidenced by an instrument in writing executed by the party
marking the waiver.
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IN WITNESS WHEREOF, the parties hereto have set forth their
hands on the day and year first above mentioned.
"LESSOR" ALADDIN GAMING, LLC,
a Nevada limited-liability company
By: /s/ Jack Sommer
Name: Jack Sommer
Its: Manager
"LESSEE" ALADDIN BAZAAR, LLC,
a Delaware limited liability company
By: TH BAZAAR CENTERS, INC.
a Delaware corporation,
Its Member
By: /s/ Wayne J. Finley
Wayne J. Finley,
Senior Vice President
By: /s/ Wendy M. Godoy
Wendy M. Godoy,
Senior Vice President
By: ALADDIN BAZAAR HOLDINGS, LLC,
a Nevada limited-liability company,
Its Member
By: ALADDIN MANAGEMENT CORPORATION,
a Nevada corporation,
Its Manager
By: /s/ Jack Sommer
Name: Jack Sommer
Its: Vice President
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STATE OF )
) ss.
COUNTY OF )
This instrument was acknowledged before me on the _____ day of
____________, 199_, by Richard Goeglein, as President of Aladdin Gaming
Corp., Manager of Aladdin Gaming, LLC.
WITNESS my hand and official seal.
-----------------------------------
Notary Public in and for said State
STATE OF )
) ss.
COUNTY OF )
This instrument was acknowledged before me on the _____ day of
____________, 199_, by Ronald B. Dictrow, as Treasurer of Aladdin Gaming
Corp., Manager of Aladdin Gaming, LLC.
WITNESS my hand and official seal.
-----------------------------------
Notary Public in and for said State
STATE OF New York )
) ss.
COUNTY OF New York )
This instrument was acknowledged before me on the 27 day of February,
1998, by Jack Sommer, as Secretary of Aladdin Gaming Corp., Manager of
Aladdin Gaming, LLC.
WITNESS my hand and official seal.
Notary Public /s/ Dawn M. Schoenig
(My Commission expires August 3, 1999)
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STATE OF New York )
) ss.
COUNTY OF New York )
This instrument was acknowledged before me on the 27 day of February,
1998, by Wayne J. Finley, as Senior Vice President of TH Bazaar Centers
Inc., Member of Aladdin Bazaar, LLC.
Notary Public /s/ Dawn M. Schoenig
(My Commission expires August 3, 1999)
STATE OF New York )
) ss.
COUNTY OF New York )
This instrument was acknowledged before me on the 27 day of February,
1998, by Wendy M. Godoy, as Senior Vice President of TH Bazaar Centers
Inc., Member of Aladdin Bazaar, LLC.
Notary Public /s/ Dawn Schoenig
(My Commission expires August 3, 1999)
STATE OF )
) ss.
COUNTY OF )
This instrument was acknowledged before me on the _____ day of ______________
, 1998, by Ronald B. Dictrow, as Treasurer of Aladdin Bazaar Holdings,
LLC, Member of Aladdin Bazaar, LLC.
Notary Public
(My Commission expires __________________________ )
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STATE OF New York )
) ss.
COUNTY OF New York )
This instrument was acknowledged before me on the 27 day of February,
1998, by Jack Sommer, as Vice President of Aladdin Management
Corporation, manager of Aladdin Bazaar Holdings, LLC, Member of Aladdin
Bazaar, LLC.
Notary Public /s/ Dawn M. Schoenig
(My Commission expires August 3, 1999)
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EXHIBIT "A"
LEGAL DESCRIPTION OF THE MASTER SITE
1
<PAGE>
EXHIBIT "B"
LEGAL DESCRIPTION OF THE DEMISED PREMISES
1
<PAGE>
EXHIBIT "C"
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
Aladdin Bazaar, LLC
c/o Allen, Matkins, Leck, Gamble & Mallory LLP
501 West Broadway, Suite 900
San Diego, California 92101
Attn.: Michael C. Pruter, Esq.
- --------------------------------------------------------------------------
(Space Above For Recorder's Use)
MEMORANDUM OF LEASE
THIS MEMORANDUM OF LEASE ("Memorandum'), is made as of this
26th day of February, 1998 by and between ALADDIN GAMING, LLC, a Nevada
limited-liability company ("Landlord"), and ALADDIN BAZAAR, LLC, a
Delaware limited liability company ("Tenant").
1. Landlord and Tenant have entered into that certain Lease
dated of even date herewith ("Lease"), pursuant to which Landlord has
ground leased to Tenant and Tenant has ground leased from Landlord that
certain real property located in the County of Clark, State of Nevada,
and more particularly described on Exhibit "A" attached hereto (the
"Premises"), for a term commencing on February 26, 1998 and expiring
December 31, 2097, for the rental and subject to the terms and covenants
set forth in the Lease.
2. The purpose of this Memorandum is to give notice of the
existence of the Lease. The Lease provides for the right of a mortgagee
to have a new lease in the same priority as the Lease. To the extent
that any provision of this Memorandum conflicts with any provision of
the Lease, the Lease shall control.
3. This Memorandum may be executed in counterparts, each of
which shall be deemed an original, but all of which, together shall
constitute one and the same instrument.
[Signatures on next page ]
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IN WITNESS WHEREOF, the undersigned have caused their duly authorized
signatories execute this Memorandum of Lease.
"LESSOR" ALADDIN GAMING, LLC,
a Nevada limited-liability company
By: _____________________________
Name: ______________________
Its: ______________________
By: _____________________________
Name: ______________________
Its: ______________________
"LESSEE" ALADDIN BAZAAR, LLC,
a Delaware limited liability company
By: TH BAZAAR CENTERS, INC.,
a Delaware corporation,
Its Member
By: _____________________________
Wayne J. Finley,
Senior Vice President
By: _____________________________
Wendy M. Godoy,
Senior Vice President
By: ALADDIN BAZAAR HOLDINGS, LLC,
a Nevada limited-liability company,
Its Member
By: ALADDIN MANAGEMENT CORPORATION,
a Nevada corporation,
Its Manager
By: _____________________________
Name: _______________________
Its: _______________________
By: _____________________________
Name: _______________________
Its: _______________________
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<PAGE>
STATE OF ___________________)
) ss.
COUNTY OF __________________)
This instrument was acknowledged before me on the _____ day of
____________, 199_, by Richard Goeglein, as President of Aladdin Gaming
Corp., Manager of Aladdin Gaming, LLC.
WITNESS my hand and official seal.
-----------------------------------
Notary Public in and for said State
STATE OF ___________________)
) ss.
COUNTY OF __________________)
This instrument was acknowledged before me on the _____ day of
____________, 199_, by Ronald B. Dictrow, as Treasurer of Aladdin Gaming
Corp., Manager of Aladdin Gaming, LLC.
WITNESS my hand and official seal.
-----------------------------------
Notary Public in and for said State
STATE OF ___________________)
) ss.
COUNTY OF __________________)
This instrument was acknowledged before me on the _____ day of
____________, 199_, by Jack Sommer, as Secretary of Aladdin Gaming
Corp., Manager of Aladdin Gaming, LLC.
WITNESS my hand and official seal.
-----------------------------------
Notary Public in and for said State
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<PAGE>
STATE OF ___________________)
) ss.
COUNTY OF __________________)
This instrument was acknowledged before me on the _____ day of
____________, 199_, by Wayne J. Finley, as Senior Vice President of TH
Bazaar, LLC, Member of Aladdin Bazaar, LLC.
WITNESS my hand and official seal.
-----------------------------------
Notary Public in and for said State
STATE OF ___________________)
) ss.
COUNTY OF __________________)
This instrument was acknowledged before me on the _____ day of
____________, 199_, by Wendy M. Godoy, as Senior Vice President of TH
Bazaar, LLC, Member of Aladdin Bazaar, LLC.
WITNESS my hand and official seal.
-----------------------------------
Notary Public in and for said State
STATE OF ___________________)
) ss.
COUNTY OF __________________)
This instrument was acknowledged before me on the _____ day of
____________, 199_, by Ronald B. Dictrow, as Treasurer of Aladdin Bazaar
Holdings, LLC, Member of Aladdin Bazaar, LLC.
WITNESS my hand and official seal.
-----------------------------------
Notary Public in and for said State
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<PAGE>
STATE OF ___________________)
) ss.
COUNTY OF __________________)
This instrument was acknowledged before me on the _____ day of
____________, 199_, by Jack Sommer, as Vice President of Aladdin Bazaar
Holdings, LLC, Member of Aladdin Bazaar, LLC.
WITNESS my hand and official seal.
-----------------------------------
Notary Public in and for said State
5
<PAGE>
EXHIBIT "D"
RATIFICATION OF REA
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<PAGE>
LEASE
by and between
Aladdin Gaming, LLC,
a Nevada limited-liability company
("Lessor")
and
Aladdin Bazaar, LLC,
a Delaware limited liability company
("Lessee")
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<PAGE>
Recording Requested by and Recorded
Counterparts Should be Returned to:
MAYER, BROWN & PLATT
1675 Broadway
New York, New York 10019-5820
Attn: Douglas L. Wisner, Esq.
DEED OF TRUST, ASSIGNMENT OF RENTS AND LEASES,
FIXTURE FILING AND SECURITY AGREEMENT
made by
ALADDIN GAMING, LLC,
a Nevada limited-liability company,
as Trustor,
to
STEWART TITLE OF NEVADA,
a Nevada corporation,
as Trustee,
for the benefit of
THE BANK OF NOVA SCOTIA,
in its capacity as Administrative Agent,
as Beneficiary
******************************************************************************
THIS INSTRUMENT IS TO BE FILED AND INDEXED IN THE REAL ESTATE RECORDS
AND IS ALSO TO BE INDEXED IN THE INDEX OF FINANCING STATEMENTS OF CLARK
COUNTY, NEVADA UNDER THE NAME OF ALADDIN GAMING, LLC AS "DEBTOR" AND THE BANK
OF NOVA SCOTIA, AS ADMINISTRATIVE AGENT, AS SECURED PARTY.
THIS INSTRUMENT IS A "CONSTRUCTION MORTGAGE" AS THAT TERM IS DEFINED
IN SECTION 104.9313(1)(C) OF THE NEVADA
<PAGE>
REVISED STATUTES AND SECURES AN OBLIGATION INCURRED FOR THE CONSTRUCTION OF AN
IMPROVEMENT UPON LAND.
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<PAGE>
DEED OF TRUST, ASSIGNMENT OF RENTS AND LEASES,
FIXTURE FILING AND SECURITY AGREEMENT
THIS DEED OF TRUST, ASSIGNMENT OF RENTS AND LEASES, FIXTURE FILING AND
SECURITY AGREEMENT (hereinafter called "Deed of Trust") is made and effective
as of February 26, 1998, by ALADDIN GAMING, LLC, a Nevada limited-liability
company (Aladdin Gaming, LLC, together with all successors and assigns of the
Trust Estate (as hereinafter defined), "Trustor") whose address is 2810 West
Charleston Boulevard, Suite F58, Las Vegas, Nevada 89102, Attention: Jack
Sommer, to STEWART TITLE OF NEVADA, a Nevada corporation, whose address is
3800 Howard Hughes Parkway, Suite 500, Las Vegas, Nevada 89109, Attention:
Linda J. Jones, as Trustee ("Trustee"), for the benefit of THE BANK OF NOVA
SCOTIA, a Canadian chartered bank ("Beneficiary"), whose address is: 580
California Street, 21st Floor, San Francisco, California 94104, Attention: Mr.
Alan Pendergast, in its capacity as Administrative Agent under that certain
Credit Agreement dated as of February 26, 1998, among Trustor, Beneficiary,
Merrill Lynch Capital Corporation, as syndication agent, and the lenders (the
"Lenders") listed therein from time to time (as the same may be amended or
modified from time to time, the "Credit Agreement").
INTEREST ON OBLIGATIONS SECURED HEREBY ACCRUES AT THE RATE WHICH MAY FLUCTUATE
FROM TIME TO TIME.
DEFINITIONS - As used in this Deed of Trust, the following terms have
the meanings hereinafter set forth:
"Accounts Receivable" shall have the meaning set forth in
Section 9-106 (NRS 104-9106) of the UCC for the term "account," and shall
include, without limitation, all rents, room revenues, income, receipts,
issues, profits, revenues and maintenance fees, all rights to payment for
hotel room occupancy by hotel guests, food and beverage revenues, advance
registration fees, tour or junket proceeds and deposits, deposits for
conventions and/or party reservations, security deposits and prepaid amounts,
license and concession fees, income, proceeds and other benefits to which
Trustor may now or hereafter be entitled from the Site, the Improvements, or
any business or other activity conducted by Trustor at the Site or the
Improvements.
"Bankruptcy" means, with respect to any Person that: (i) a court
having jurisdiction in the Trust Estate shall have entered a decree or order
for relief in
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respect of such Person in an involuntary case under the Bankruptcy Code or
under any other applicable bankruptcy, insolvency or similar law now or
hereafter in effect, which decree or order has not been stayed; or any other
similar relief shall have been granted under any applicable federal or state
law; or (ii) an involuntary case shall be commenced against such Person, under
the Bankruptcy Code or under any other applicable bankruptcy, insolvency or
similarly law now or hereafter in effect; or a decree or order of a court
having jurisdiction in the Trust Estate for the appointment of a receiver,
liquidator, sequestrator, trustee, custodian or other officer having similar
powers over such Person, or over all or a substantial part of its property,
shall have been entered; or there shall have occurred the involuntary
appointment of an interim receiver, trustee or other custodian of such Person,
for all or a substantial part of its property; or a warrant of attachment,
execution or similar process shall have been issued against any substantial
part of the property of such Person, and any such event described in this
clause (ii) shall continue for sixty (60) days unless dismissed, bonded or
discharged; or (iii) such Person shall have an order for relief entered with
respect to it or shall commence a voluntary case under the Bankruptcy Code or
under any other applicable bankruptcy, insolvency or similar law now or
hereafter in effect, or shall consent to the entry of an order for relief in
an involuntary case, or to the conversion of an involuntary case to a
voluntary case, under any such law, or shall consent to the appointment of or
taking possession by a receiver, trustee or other custodian for all or a
substantial part of its property; or such Person shall make any assignment for
the benefit of creditors or shall fail generally, or shall admit in writing
its inability, to pay its debts as such debts become due and payable and a
period of thirty (30) days shall have elapsed; or (iv) such Person shall be
unable, or shall fail generally, or shall admit in writing its inability, to
pay its debts as such debts become due and a period of thirty (30) days shall
have elapsed; or the Board of Directors of such Person (or any committee
thereof) or the managing member of such Person shall, adopt any resolution or
otherwise authorize any action to approve any of the actions referred to in
clause (iii) above or this clause (iv).
"Deed of Trust" means this Deed of Trust, Assignment of Rents and
Leases and Security Agreement as it may be amended, increased or modified from
time to time
"Default Rate" means the interest rate set forth in Section 3.2.2 of
the Credit Agreement that shall be due upon an Event of Default pursuant to
Section 8.3 of the Credit Agreement.
"Event of Default" has the meaning set forth in Section 3.1 hereof.
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<PAGE>
"FF&E" means all furniture, fixtures, equipment, apparatus,
appurtenances, inventory and personal property now or in the future contained
in, used in connection with, attached to, or otherwise useful or convenient to
the use, operation, or occupancy of, or placed on, but unattached to, any part
of the Site or Improvements whether or not the same constitutes real property
or fixtures in the State of Nevada, and including all removable window and
floor coverings, all furniture and furnishings, heating, lighting, plumbing,
laundry, ventilating, air conditioning, refrigerating, incinerating, cleaning,
and or lifting equipment, all elevators, escalators, and elevator and
escalator plants, vacuum cleaning systems, public address and communications
systems, switchboards, security and surveillance equipment and devices, power
equipment, transformers, sprinkler systems and other fire prevention and
extinguishing apparatus and materials, engines, motors, compressors,
machinery, pipes, appliances, equipment, fittings, conduits, fixtures, and
building materials, all exercise equipment, all financial equipment, computer
equipment, calculators, adding machines, video game machines, and any other
electronic equipment of every nature used or located on any part of the Site
or Improvements, together with all venetian blinds, shades, awnings, screens,
draperies, drapery and curtain rods, carpeting, brackets, bulbs, cleaning
apparatus, mirrors, lamps, ornaments, cooling apparatus and equipment, cooking
facilities, stoves, ranges and ovens, microwave units, bakery equipment,
garbage disposals, dishwashers, dishes, china, flatware, utensils, glassware
and barware, all stock pots, and all other pots and pans and other kitchen
and/or food, beverage and liquor handling, preparation, serving and storage
equipment, tables, desks, chairs, chests, cabinets, mantels, plants,
shrubbery, ground maintenance equipment, and any and all such property which
is at any time installed in, affixed to or placed upon the Site or
Improvements.
"Improvements" means (1) all the buildings, structures, facilities and
improvements of every nature whatsoever now or hereafter situated on the Site
or any real property encumbered hereby, and (2) all FF&E, of every nature
whatsoever now or hereafter owned or leased by Trustor or in which Trustor has
any rights or interest and located in or on, or attached to, or used or
intended to be used or which are now or may hereafter be appropriated for use
on or in connection with the operation of the Site or any real or personal
property encumbered hereby or any other Improvements, or in connection with
any construction being conducted or which may be conducted thereon, and all
extensions, additions, accessions, improvements, betterments, renewals,
substitutions, and replacements to any of the foregoing, and all of the right,
title and interest of Trustor in and to any such property, which, to the
fullest extent permitted by law, shall be conclusively deemed fixtures and
improvements and a part of the real property hereby encumbered.
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<PAGE>
"Intangible Collateral" means (a) the rights to use all names and all
derivations thereof now or hereafter used by Trustor in connection with the
Site or Improvements, including, without limitation, the name "Aladdin,"
including any variations thereon, together with the goodwill associated
therewith, and all names, logos, and designs used by Trustor, or in connection
with the Site or in which Trustor has rights, with the exclusive right to use
such names, logos and designs wherever they are now or hereafter used in
connection with the Site or Improvements, and any and all other trade names,
trademarks or service marks, whether or not registered, now or hereafter used
in the operation of the Site or Improvements, including, without limitation,
any interest as a lessee, licensee or franchisee, and, in each case, together
with the goodwill associated therewith; (b) subject to the absolute assignment
contained herein, the Rents; (c) any and all books, records, customer lists,
concession agreements, supply or service contracts, licenses, permits,
governmental approvals (to the extent such licenses, permits and approvals may
be pledged under applicable law), signs, goodwill, casino and hotel credit and
charge records, supplier lists, checking accounts, safe deposit boxes
(excluding the contents of such deposit boxes owned by persons other than
Trustor and its subsidiaries), cash, instruments, chattel papers, including
inter-company notes and pledges, documents, unearned premiums, deposits,
refunds, including but not limited to income tax refunds, prepaid expenses,
rebates, tax and insurance escrow and impound accounts, if any, actions and
rights in action, and all other claims, including without limitation
condemnation awards and insurance proceeds, and all other contract rights and
general intangibles resulting from or used in connection with the operation
and occupancy of the Trust Estate and the Improvements and in which Trustor
now or hereafter has rights; and (d) general intangibles, vacation license
resort agreements or other time share license or right to use agreements,
including without limitation all rents, issues, profits, income and
maintenance fees resulting therefrom, whether any of the foregoing is now
owned or hereafter acquired.
"Personal Property" has the meaning set forth in Section 1.13 hereto.
"Proceeds" has the meaning assigned to it under the UCC and, in any
event, shall include but not be limited to (i) any and all proceeds of any
insurance (including without limitation property casualty and title
insurance), indemnity, warranty or guaranty payable from time to time with
respect to any of the Trust Estate; (ii) any and all proceeds in the form of
accounts, security deposits, tax escrows (if any), down payments (to the
extent the same may be pledged under applicable law), collections, contract
rights, documents, instruments, chattel paper, liens and security instruments,
guarantees or general intangibles relating in whole or in part to the Site
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<PAGE>
or the Improvements and all rights and remedies of whatever kind or nature
Trustor may hold or acquire for the purpose of securing or enforcing any
obligation due Trustor thereunder; (iii) any and all payments in any form
whatsoever made or due and payable from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or any
part of the Trust Estate by any Governmental Instrumentality; (iv) subject to
the absolute assignment contained herein, the Rents or other benefits arising
out of, in connection with or pursuant to any Space Lease of the Trust Estate;
and (v) any and all other amounts from time to time paid or payable in
connection with any of the Trust Estate; provided, however, that the Trustor
is not authorized to dispose of any of the Trust Estate unless such
disposition is a Permitted Disposition.
"Rents" means all rents, issues, profits, revenue, royalties, income,
proceeds, earnings and other benefits, including, without limitation, prepaid
rents, security deposits, and impound accounts derived from the Ground
Leases, any Space Lease, sublease, license, franchise, occupancy or other
agreement now existing or hereafter created affecting all or any portion of
the Site or the Improvements or the use or occupancy thereof.
"Space Leases" means any and all leases, subleases, lettings,
licenses, concessions, operating agreements, management agreements,
arrangements and all other agreements affecting the Trust Estate, that Trustor
has entered into, taken by assignment, taken subject to, or assumed, or has
otherwise become bound by, now or in the future, that give any person (a) the
right to conduct its business on, or otherwise use, operate or occupy, all or
any portion of the Site or Improvements or (b) the right to enter upon or use
any of the Trust Estate to extract or remove natural resources of any kind,
together with all amendments, extensions, and renewals of the foregoing
entered into in compliance with this Deed of Trust, together with all rental,
occupancy, service, maintenance or any other similar agreements pertaining to
use or occupation of, or the rendering of services at the Site, the
Improvements or any part thereof; provided, however, the Ground Leases shall
not be deemed to be included within the definition of "Space Leases."
"Space Lessee(s)" means any and all tenants, licensees, or other
grantees of the Space Leases and any and all guarantors, sureties, endorsers
or others having primary or secondary liability with respect to such Space
Leases.
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<PAGE>
"Site" means the real property situated in the County of Clark, State
of Nevada, more specifically described in Exhibit A attached hereto and
incorporated herein by reference, including any after acquired title thereto.
"Tangible Collateral" means all personal property, goods, equipment,
supplies, building and other materials of every nature whatsoever and all
other tangible personal property constituting a part or portion of the Site or
the Improvements and/or used in the operation of the hotel, casino,
restaurants, stores, parking facilities, and all other commercial operations
on the Site or Improvements, including but not limited to communication
systems, visual and electronic surveillance systems and transportation systems
and not constituting a part of the real property subject to the real property
lien of this Deed of Trust and including all property and materials stored
therein in which Trustor has an interest and all tools, utensils, food and
beverage, liquor, uniforms, linens, housekeeping and maintenance supplies,
vehicles, fuel, advertising and promotional material, blueprints, surveys,
plans and other documents relating to the Site or Improvements, and all
construction materials and all furnishings, fixtures and equipment, including,
but not limited to, all FF&E and all equipment and devices which are or are to
be installed and used in connection with the operation of the Site or the
Improvements, those items of furniture, fixtures and equipment which are to be
purchased or leased by Trustor, machinery and any other item of personal
property in which Trustor now or hereafter own or acquire an interest or
right, and which are used or useful in the construction, operation, use and
occupancy of the Site or the Improvements and all present and future right and
interest of Trustor in and to any casino operator's agreement, license
agreement or sublease agreement used in connection with the Site or the
Improvements.
"Trust Estate" means all of the property described in Granting Clauses
(A) through (P) below, inclusive, and each item of property therein described.
"UCC" means the Uniform Commercial Code in effect in the State of
Nevada from time to time, NRS chapters 104 and 104A.
In addition. any capitalized terms used in this Deed of Trust which are not
otherwise defined herein shall have the meaning ascribed to such terms in the
Credit Agreement and, if not defined therein, the meaning ascribed to such
terms in the Disbursement Agreement
W I T N E S S E T H:
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IN CONSIDERATION OF TEN DOLLARS AND OTHER GOOD AND VALUABLE
CONSIDERATION; THE RECEIPT AND SUFFICIENCY OF WHICH ARE HEREBY ACKNOWLEDGED,
AND FOR THE PURPOSE OF SECURING in favor of Beneficiary (1) the due and
punctual payment of the indebtedness evidenced by the Notes in the principal
amount of Four Hundred Ten Million Dollars ($410,000,000); (2) the performance
of each covenant and agreement of Trustor contained in the Credit Agreement,
herein or in the other Loan Documents and the Disbursement Agreement; (3) the
payment of such additional loans or advances as hereafter may be made to
Trustor (individually or jointly and severally with any other Person) or its
successors or assigns, when evidenced by a promissory note or notes reciting
that they are secured by this Deed of Trust; provided, however, that any and
all future advances by Beneficiary or Lenders to Trustor made for the
improvement, protection or preservation of the Trust Estate, together with
interest at the interest rate provided in the Credit Agreement, shall be
automatically secured hereby unless such a note or instrument evidencing such
advances specifically recites that it is not intended to be secured hereby and
(4) the payment of all sums expended or advanced by Beneficiary or Lenders
under or pursuant to the terms hereof or to protect the security hereof
(including Protective Advances (as such term is defined in Section 4.2
hereof)), together with interest thereon as herein provided, Trustor, in
consideration of the premises, and for the purposes aforesaid, does hereby
ASSIGN, GRANT, BARGAIN, SELL, CONVEY, PLEDGE, RELEASE, HYPOTHECATE, WARRANT,
AND TRANSFER WITH POWER OF SALE UNTO TRUSTEE IN TRUST FOR THE BENEFIT OF
BENEFICIARY AND THE LENDERS each of the following:
(A) Trustor's interest in the Site;
(B) TOGETHER WITH all the estate, right, title and interest of
Trustor of, in and to the Improvements;
(C) TOGETHER WITH all Appurtenant Rights which now or hereinafter
shall in any way belong, relate or be appurtenant thereto, whether now owned
or hereafter acquired by Trustor;
(D) TOGETHER WITH all the estate, right, title and interest of
Trustor of, in and to the Tangible Collateral to the extent permitted by, or
not prohibited by, the Nevada Gaming Laws and other applicable law;
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(E) TOGETHER WITH the Intangible Collateral to the extent
permitted by, or not prohibited by, Nevada Gaming Laws and other applicable
law;
(F) TOGETHER WITH (i) all the estate, right, title and interest of
Trustor of, in and to all judgments and decrees, Loss Proceeds (including
awards of damages and settlements hereafter made resulting from condemnation
proceedings or the taking of any of the property described in Granting Clauses
(A), (B), (C), (D) and (E) hereof or any part thereof under the power of
eminent domain, or for any damage (whether caused by such taking or otherwise)
to the property described in Granting Clauses (A), (B), (C), (D) and (E)
hereof or any part thereof, or to any Appurtenant Rights thereto), and
Beneficiary is hereby authorized to collect and receive said Loss Proceeds and
to give proper receipts and acquittance therefor, and (subject to the terms
hereof) to apply the same toward the payment of the indebtedness and other
sums secured hereby, notwithstanding the fact that the amount owing thereon
may not then be due and payable; (ii) all proceeds of any sales or other
dispositions of the property or rights described in Granting Clauses (A), (B),
(C), (D) and (E) hereof or any part thereof whether voluntary or involuntary,
provided, however, that the foregoing shall not be deemed to permit such
sales, transfers, or other dispositions except as specifically permitted
herein; and (iii) whether arising from any voluntary or involuntary
disposition of the property described in Granting Clauses (A), (B), (C), (D)
and (E), all Proceeds, products, replacements, additions, substitutions,
renewals and accessions, remainders, reversions and after-acquired interest
in, of and to such property;
(G) TOGETHER WITH, the absolute assignment of the Ground Leases
and any Space Leases or any part thereof that Trustor has entered into, taken
by assignment, taken subject to, or assumed, or has otherwise become bound by,
now or in the future, together with all of the following (including all "Cash
Collateral" within the meaning of the Bankruptcy Code) arising from the Ground
Leases and any Space Leases: (a) Rents (subject, however, to the aforesaid
absolute assignment to Trustee for the benefit of Beneficiary and the
conditional permission hereinbelow given to Trustor to collect the Rents), (b)
all guarantees, letters of credit, security deposits, collateral, cash
deposits, and other credit enhancement documents, arrangements and other
measures with respect to the Ground Leases and any Space Leases, (c) all of
Trustor's right, title, and interest under the Ground Leases and any Space
Leases, including the following: (i) the right to receive and collect the
Rents from the lessee, sublessee or licensee, or their successor(s), under the
Ground Leases and any Space Lease(s) and (ii) the right to enforce against any
tenants thereunder and otherwise any and all remedies under the Ground Leases
and any Space Leases,
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including Trustor's right to evict from possession any tenant thereunder or to
retain, apply, use, draw upon, pursue, enforce or realize upon any guaranty of
the Ground Leases and any Space Lease; to terminate, modify, or amend the
Ground Leases and any Space Leases; to obtain possession of, use, or occupy,
any of the real or personal property subject to the Ground Leases and any
Space Leases; and to enforce or exercise, whether at law or in equity or by
any other means, all provisions of the Ground Leases and any Space Leases and
all obligations of the tenants thereunder based upon (A) any breach by such
tenant under the applicable Ground Lease or Space Lease (including any claim
that Trustor may have by reason of a termination, rejection, or disaffirmance
of such Ground Lease or Space Lease pursuant to the Bankruptcy Code) and (B)
the use and occupancy of the premises demised, whether or not pursuant to the
applicable Ground Lease or Space Lease (including any claim for use and
occupancy arising under landlord-tenant law of the State of Nevada or the
Bankruptcy Code). Permission is hereby given to Trustor, so long as no Event
of Default has occurred and is continuing hereunder, to enforce and collect
and use the Rents, as they become due and payable, but not more than one (1)
month in advance thereof. Upon the occurrence of an Event of Default, the
permission hereby given to Trustor to collect the Rents shall automatically
terminate, but such permission shall be reinstated upon a cure of such Event
of Default. Beneficiary shall have the right, at any time and from time to
time, to notify the ground lessees and any Space Lessee of the rights of
Beneficiary as provided by this Section;
Notwithstanding anything to the contrary contained herein, the
foregoing provisions of this Paragraph (G) shall not constitute an assignment
for purposes of security but shall to the extent permitted by, or not
prohibited by, the Nevada Gaming Laws and other applicable law constitute an
absolute and present assignment of the Rents to Beneficiary, subject, however,
to the conditional license given to Trustor to collect and use the Rents as
hereinabove provided; and the existence or exercise of such right of Trustor
shall not operate to subordinate this assignment to any subsequent assignment,
in whole or in part, by Trustor;
(H) TOGETHER WITH all of Trustor's right, title and interest in
and to any and all reimbursements and rights to payments, credits, offsets and
refunds under the Main Project Documents (other than the Ground Leases)
including, without limitation, the Reciprocal Easement Agreement, the Common
Parking Use Agreement, the Site Work Agreement, the Energy Service Agreement
(including any right to purchase the Utility Plant), and any side letters or
related agreements between Trustor and any other party thereto;
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<PAGE>
(I) TOGETHER WITH all of Trustor's right, title and interest in
and to any and all Plans and Specifications and all maps, plans,
specifications, surveys, studies, tests, reports, data and drawings relating
to the development of the Site or the Improvements and the construction of the
Improvements, including, without limitation, all marketing plans, feasibility
studies, soils tests, design contracts and all contracts and agreements of
Trustor relating thereto including, without limitation, architectural,
structural, mechanical and engineering plans and specifications, studies, data
and drawings prepared for or relating to the development of the Site or the
Improvements or the construction, renovation or restoration of any of the
Improvements or the extraction of minerals, sand, gravel or other valuable
substances from the Site and purchase contracts or any agreement granting
Trustor a right to acquire any land situated within Clark County, Nevada;
(J) TOGETHER WITH, to the extent permitted by applicable law, all
of Trustor's right, title, and interest in and to any and all licenses,
permits, variances, special permits, franchises, certificates, rulings,
certifications, validations, exemptions, filings, registrations,
authorizations, consents, approvals, waivers, orders, rights and agreements
(including, without limitation, options, option rights, contract rights now or
hereafter obtained by Trustor from any Governmental Instrumentality having or
claiming jurisdiction over the Site, the FF&E, the Improvements, or any other
element of the Trust Estate or providing access thereto, or the operation of
any business on, at, or from the Site including, without limitation, any
liquor or Gaming Licenses, (except for any registrations, licenses, findings
of suitability or approvals issued by the Nevada Gaming Authorities or any
other liquor or gaming licenses which are non-assignable); provided, that upon
an Event of Default hereunder or under the Credit Agreement, if Beneficiary is
not qualified under the Nevada Gaming Laws to hold such Gaming Licenses, then
Beneficiary may designate an appropriately qualified third party to which an
assignment of such Gaming Licenses can be made in compliance with the Nevada
Gaming Laws;
(K) TOGETHER WITH all water stock, water permits and other water
rights relating to the Site;
(L) TOGETHER WITH all oil and gas and other mineral rights, if
any, in or pertaining to the Site and all royalty, leasehold and other rights
of Trustor pertaining thereto;
(M) TOGETHER WITH any and all monies and other property, real or
personal, which may from time to time be subjected to the lien hereof by
Trustor or
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by anyone on its behalf or with its consent, or which may come into the
possession or be subject to the control of Trustee or Beneficiary pursuant to
this Deed of Trust, the Credit Agreement or any other Loan Document granting a
security interest to the Beneficiary, including, without limitation, any
Protective Advances (as defined in Section 4.2 hereof) under this Deed of
Trust; and all of Trustor's right, title, and interest in and to all
extensions, improvements, betterments, renewals, substitutes for and
replacements of, and all additions, accessions, and appurtenances to, any of
the foregoing that Trustor may subsequently acquire or obtain by any means, or
construct, assemble, or otherwise place on any of the Trust Estate, and all
conversions of any of the foregoing; it being the intention of Trustor that
all property hereafter acquired by Trustor and required by this Deed of Trust,
the Credit Agreement or other Loan Document granting security interest to the
Beneficiary to be subject to the lien of this Deed of Trust or intended so to
be shall forthwith upon the acquisition thereof by Trustor be subject to the
lien of this Deed of Trust as if such property were now owned by Trustor and
were specifically described in this Deed of Trust and granted hereby or
pursuant hereto, and Trustee and Beneficiary are hereby authorized to receive
any and all such property as and for additional security for the obligations
secured or intended to be secured hereby. Trustor agrees to take any action
as may reasonably be necessary to evidence and perfect such liens or security
interests, including, without limitation, the execution of any documents
necessary to evidence and perfect such liens or security interests;
(N) TOGETHER WITH, to the extent permitted by applicable laws, any
and all Accounts Receivable and all royalties, earnings, income, proceeds,
products, rents, revenues, reversions, remainders, issues, profits, avails,
production payments, and other benefits directly or indirectly derived or
otherwise arising from any of the foregoing, all of which are hereby assigned
to Beneficiary, who, except as otherwise expressly provided in this Deed of
Trust (including, the provisions of Section 1.13 hereof), is authorized to
collect and receive the same, to give receipts and acquittances therefor and
to apply the same to the Obligations secured hereunder, whether or not then
due and payable;
(O) TOGETHER WITH Proceeds of the foregoing property described in
Granting, Clauses (A) through (N);
(P) TOGETHER WITH Trustor's rights further to assign, sell, lease,
encumber or otherwise transfer or dispose of the property described in
Granting Clauses (A) through (O) inclusive, above, for debt or otherwise; and
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Trustor, for itself and its successors and assigns, covenants and
agrees to and with Trustee that, at the time or times of the execution of and
delivery of these presents or any instrument of further assurance with respect
thereto, Trustor has good right, full power and lawful authority to assign,
grant, bargain, sell, convey, pledge, release, hypothecate, warrant, and
transfer its interests in the Trust Estate in the manner and form as
aforesaid, and that the Trust Estate is free and clear of all liens and
encumbrances whatsoever, except the Permitted Liens, and Trustor shall warrant
and forever defend the above-bargained property in the quiet and peaceable
possession of Trustee and its successors and assigns against all and every
person or persons lawfully or otherwise claiming or to claim the whole or any
part thereof, except for Permitted Liens and Permitted Encumbrances. Trustor
agrees that any greater title to the Trust Estate hereafter acquired by
Trustor during the term hereof shall be automatically subject hereto.
ARTICLE 1.
COVENANTS OF TRUSTOR
The Beneficiary and Lenders have been induced to enter into the Credit
Agreement and the Disbursement Agreement and to make the Loans to Borrower on
the basis of the following material covenants, all agreed to by Trustor:
a. Performance of Loan Documents. Trustor shall perform, observe
and comply with each and every provision hereof, and with each
and every provision contained in the Loan Documents and shall
promptly pay to the Administrative Agent, when payment shall
become due, the principal with interest thereon and all other
sums required to be paid by Trustor under this Deed of Trust
and the other Loan Documents.
b. General Representations, Covenants and Warranties. Trustor
represents, covenants and warrants that: (a) all of Trustor's
representations and warranties contained in the Credit
Agreement are true, correct and complete; (b) Trustor has good
and marketable title to an indefeasible fee estate in the
Site, free and clear of all encumbrances except the Permitted
Liens and the Permitted Encumbrances, and that it has the
right to hold, occupy and enjoy its interest in the Trust
Estate,
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and has good right, full power and lawful authority to subject
the Trust Estate to the Lien of this Deed of Trust and to
pledge the same as provided herein and Beneficiary may at all
times peaceably and quietly enter upon, hold, occupy and enjoy
the entire Trust Estate in accordance with the terms hereof;
(c) all costs arising from construction of any Improvements,
the performance of any labor and the purchase of all Tangible
Collateral and Improvements have been or shall be paid when
due (subject to the provisions of the Disbursement Agreement,
the Credit Agreement and this Deed of Trust); (d) the Site has
frontage on, and direct access for ingress and egress to
dedicated street(s); (e) Trustor shall at all times conduct
and operate the Trust Estate in a manner so as not to lose, or
permit its affiliate to lose the right to conduct gaming
activities at the Main Project; and (f) Trustor acknowledges
and agrees that it presently uses, and has in the past used,
certain trade or fictitious names in connection with the
operation of the business at the Trust Estate, including the
names "Aladdin," (all of the foregoing, collectively, the
"Enumerated Names"). For all purposes under this Deed of
Trust it shall be deemed that the term "Trustor" includes, in
addition to "Aladdin Gaming, LLC," all trade or fictitious
names (including without limitation, all filings with Clark
County, Nevada for fictitious names as d/b/a's) that Aladdin
(or any successor or assign thereof) now or hereafter uses, or
has in the past used, including, without limitation, the
Enumerated Names, with the same force and effect as if this
Deed of Trust had been executed in all such names (in addition
to "Aladdin Gaming, LLC").
c. Compliance With Legal Requirements. Trustor shall cause all
portions of the Trust Estate and its use and occupancy to
fully comply in all material respects with Legal Requirements
at all times, whether or not such compliance requires work or
remedial measures that are ordinary or extraordinary, foreseen
or unforeseen, structural or nonstructural, or that interfere
with the use or enjoyment of the Trust Estate.
d. Taxes. Except as otherwise permitted by the Credit Agreement
generally and within the definition of "Permitted Liens,"
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(a) Trustor shall pay all Impositions as they become due and
payable and shall deliver to Beneficiary promptly upon
Beneficiary's request, evidence satisfactory to Beneficiary
that the Impositions have been paid or are not delinquent; (b)
Trustor shall not suffer to exist, permit or initiate the
joint assessment of the real and personal property, or any
other procedure whereby the lien of the real property taxes
and the lien of the personal property taxes shall be assessed,
levied or charged to the Site as a single lien, except as may
be required by law; and (c) in the event of the passage of any
law deducting from the value of real property for the purposes
of taxation any lien thereon, or changing in any way the
taxation of deeds of trust or obligations secured thereby for
state or local purposes, or the manner of collecting such
taxes and imposing a tax, either directly or indirectly, on
this Deed of Trust or the Notes, Trustor shall pay all such
Impositions and all payments required with respect to such
Impositions.
e. Insurance.
i. Hazard Insurance Requirements and Proceeds.
(1) Hazard Insurance. Trustor shall at its sole
expense obtain for, deliver to, assign and
maintain for the benefit of Beneficiary,
during the term of this Deed of Trust,
insurance policies insuring the Trust Estate
and liability insurance policies, all in
accordance with the requirements of
Section 7.1.4 of the Credit Agreement,
Section 3.1.6 and Exhibit E of the
Disbursement Agreement. Trustor shall
promptly pay when due any premiums on such
insurance policies and on
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any renewals thereof and all payments required
with respect to the procurement of such
insurance. In the event of the foreclosure of
this Deed of Trust or any other transfer of
title to the Trust Estate in extinguishment of
the Indebtedness and other sums secured
hereby, all right, title and interest of
Beneficiary in and to all insurance policies
and renewals thereof then in force shall pass
to the purchaser or grantee.
(2) Handling of Proceeds. All Proceeds from any
insurance policies shall be applied in
accordance with the provisions of
Section 7.1.20 of the Credit Agreement.
ii. Notices Regarding Insurance Policies. Trustor
covenants to promptly send to Beneficiary all notices
relating to any violation of such policies or
otherwise affecting Trustor's insurance coverage or
ability to obtain and maintain such insurance
coverage.
f. Condemnation. Beneficiary is hereby authorized, at its
option, to commence, appear in and prosecute in its own or
Trustor's name any action or proceeding relating to any
condemnation and, to settle or compromise any claim in
connection therewith, and Trustor hereby appoints Beneficiary
as its attorney-in-fact to take any action in Trustor's name
pursuant to Beneficiary's rights hereunder. Immediately upon
obtaining knowledge of the institution of any proceedings for
the condemnation of the Trust Estate, or any portion thereof,
Trustor shall notify the Trustee and Beneficiary of the pen-
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dency of such proceedings. Trustor from time to time shall
execute and deliver to Beneficiary all instruments requested
by it to permit such participation; provided, however, that
such instruments shall be deemed as supplemental to the
foregoing grant of permission to Trustee and Beneficiary, and
unless otherwise required, the foregoing permission shall,
without more, be deemed sufficient to permit Trustee and/or
Beneficiary to participate in such proceedings on behalf of
Trustor. All such compensation awards, damages, claims,
rights of action and Proceeds, and any other payments or
relief, and the right thereto, whether paid to Beneficiary or
Trustor, are included in the Trust Estate. Beneficiary, after
deducting therefrom all its expenses, including reasonable
attorneys fees, shall apply all Loss Proceeds in accordance
with the provisions of Section 7.1.20 of the Credit Agreement.
Trustor hereby waives any rights it may have under NRS 37.115,
as amended or recodified from time to time.
g. Care of Trust Estate. Trustor shall not permit, commit or
suffer to exist any waste, impairment or deterioration of the
Trust Estate or of any part thereof that in any manner
materially impairs Beneficiary's security hereunder and shall
not take any action which will materially increase the risk of
fire or other hazard to the Trust Estate or to any part
thereof. Except as permitted under the Credit Agreement or as
contemplated by the Plans and Specifications, no material part
of the Improvements or Tangible Collateral that are part of
the Trust Estate shall be removed, demolished or materially
altered, without the prior written consent of Beneficiary,
which consent shall not be unreasonably withheld or delayed.
Trustor shall have the right, without such consent, to remove
and dispose of free from the lien of this Deed of Trust any
part of the Improvements or Tangible Collateral (that is part
of the Trust Estate) as from time to time may become worn out
or obsolete, or otherwise not useful in connection with the
operation of the Trust Estate, provided that either (i) such
removal or disposition does not materially affect the value of
the Trust Estate or (ii) prior to or promptly following such
removal, any such property shall be replaced with other
property of substan-
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tially equal utility and of a value at least substantially
equal to that of the replaced property when first acquired and
free from any security interest of any other person (subject
only to Permitted Liens), and by such removal and replacement
Trustor shall be deemed to have subjected such replacement
property to the lien of this Deed of Trust.
h. Leases.
i. Trustor represents and warrants that:
(1) Trustor has delivered to Beneficiary true,
correct and complete copies of the Ground
Leases, and all Space Leases, including all
amendments and modifications, written or oral
existing as of the Closing Date;
(2) Trustor has not executed or entered into any
modifications or amendments of the Ground
Leases, or the Space Leases, either orally or
in writing, other than written amendments that
have been disclosed to Beneficiary in writing;
(3) to Trustor's knowledge, no default now exists
under the Ground Leases or any Space Lease;
(4) to Trustor's knowledge, no event has occurred
that, with the giving of notice or the passage
of time or both, would constitute such a
default or would entitle Trustor or any other
party under
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the Ground Leases or any Space Lease to cancel
the same or otherwise avoid its obligations;
(5) Trustor has not accepted prepayments of
installments of Rent under the Ground Leases
or any Space Leases, except for installment
payments not in excess of one month's Rent and
security deposits;
(6) except for the assignment effected hereby and
as set forth in the Credit Agreement, Trustor
has not executed any assignment or pledge of
any of the Ground Leases, any of the Space
Leases, the Rents, or of Trustor's right,
title and interest in the same; and
(7) this Deed of Trust does not constitute a
violation or default under any of the Ground
Leases or the Space Lease, and is and shall at
all times constitute a valid lien on Trustor's
interests in the Ground Leases or the Space
Leases.
ii. Trustor shall not enter into any Space Lease nor shall
any Space Lease be modified, amended, or supplemented
without Beneficiary's prior written consent, which
consent shall not be unreasonably withheld or delayed.
iii. Trustor shall not amend, modify or supplement any
Ground Lease without Beneficiary's prior
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written consent, which consent shall not be
unreasonably withheld or delayed.
iv. After an Event of Default, Trustor shall deliver to
Beneficiary the executed originals of all Space
Leases.
i. Further Encumbrance. Trustor acknowledges and confirms its
agreement to be bound by the covenants and restrictions
contained in the Credit Agreement applicable to the Trust
Estate. Trustor covenants and agrees to comply with all of
the terms and conditions set forth in any FF&E Financing. If
Trustor shall default in its obligations under any FF&E
Financing, then the Beneficiary shall have the right, but not
the obligation, to cure such default on Trustor's behalf and
any and all sums so expended by the Beneficiary shall be
secured by this Deed of Trust and shall be repaid by Trustor
upon demand, together with interest thereon at the Default
Rate from the date of advance.
j. Actions with Respect to Permitted Liens.
i. If any action or proceeding shall be brought to
foreclose any Permitted Lien (regardless of whether
the same is a judicial proceeding or pursuant to a
power of sale contained therein), (i) no tenant of any
portion of the Trust Estate shall be named by Trustor
as a party defendant nor shall any action be taken
with respect to the Trust Estate which would terminate
any occupancy or tenancy of the Trust Estate, or any
portion thereof, without the consent of Beneficiary;
and (ii) any Rents, if collected through a receiver or
by the holder of the Permitted Lien, shall be applied
first to the obligations secured by this Deed of
Trust, including principal and interest due and owing
on or to become due and owing on the Notes, and then
to the payment of maintenance expenses, operating
charges,
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taxes, assessments, and disbursements incurred in
connection with the ownership, operation, and
maintenance of the Trust Estate.
ii. Trustor agrees that in the event the ownership of the
Trust Estate or any part thereof becomes vested in a
person other than Trustor, Beneficiary may, without
notice to Trustor, deal in any way with such successor
or successors in interest with reference to this Deed
of Trust, the Notes and other Obligations hereby
secured without in any way vitiating or discharging
Trustor's or any guarantor's, surety's or endorser's
liability hereunder or upon the obligations hereby
secured. No sale of the Trust Estate and no
forbearance to any person with respect to this Deed of
Trust and no extension to any person of the time for
payment of the Notes, and other sums hereby secured
given by Beneficiary shall operate to release,
discharge, modify, change or affect the original
liability of Trustor, or such guarantor, surety or
endorser either in whole or in part.
k. Partial Releases of Trust Estate. Trustor may from time to
time make a Permitted Disposition including, but not limited
to, (i) transferring a portion of the Trust Estate (including
any temporary taking) to any person legally empowered to
exercise the power of eminent domain, (ii) granting utility
easements reasonably necessary or desirable for the
construction and/or operation of the Site and the
Improvements, which grant or transfer is for the benefit of
the Trust Estate, or (iii) transferring a portion of the Trust
Estate as contemplated pursuant to Section 7.1.19 of the
Credit Agreement (including the release of the Mall Project
Parcel, and the Music Project Parcel). In each such case,
Beneficiary shall execute and deliver any instruments
necessary or appropriate to effectuate or confirm any such
transfer or grant, free from the lien of this Deed of Trust,
provided, however, that Beneficiary shall
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execute a lien release or subordination agreement, as
appropriate, for matters described in clauses (i) and (iii)
above only if:
i. Such transfer, grant or release is permitted by the
Credit Agreement and all conditions precedent
contained in the Credit Agreement for such transfer,
grant or release, if any, shall have been satisfied;
ii. Beneficiary and Trustee shall have received a
counterpart of the instrument pursuant to which such
transfer, grant or release is to be made, and each
instrument which Beneficiary or Trustee is requested
to execute in order to effectuate or confirm such
transfer, grant or release;
iii. In the case of a transfer to a Person legally
empowered to exercise the power of eminent domain,
which transfer involves property whose value is
greater than $5,000,000, Beneficiary and Trustee shall
have received an opinion of counsel, who may be
counsel to Trustor, to the effect that the assignee or
grantee of the portion of the Trust Estate being
transferred is legally empowered to take such portion
under the power of eminent domain; and
iv. Beneficiary and Trustee shall have received such other
instruments, certificates (including evidence of
authority), endorsements (including title endorsements
and date downs) and opinions as Beneficiary or Trustee
may reasonably request, including, but not limited to,
opinions that the proposed release is permitted by
this Section 1.11.
Any consideration received for a transfer to any person empowered to exercise
the right of eminent domain shall be subject to Section 1.6 hereof.
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l. Further Assurances.
i. At its sole cost and without expense to Trustee or
Beneficiary, and subject in all events to compliance
with the Nevada Gaming Laws and other applicable Legal
Requirements, Trustor shall do, execute, acknowledge
and deliver any and all such further acts, deeds,
conveyances, notices, requests for notices, financing
statements, continuation statements, certificates,
assignments, notices of assignments, agreements,
instruments and further assurances, and shall mark any
chattel paper, deliver any chattel paper or
instruments to Beneficiary and take any other actions
that are necessary, prudent, or reasonably requested
by Beneficiary or Trustee to perfect or continue the
perfection and first priority of Beneficiary's
security interest in the Trust Estate, to protect the
Trust Estate against the rights, claims, or interests
of third persons other than holders of Permitted Liens
or to effect the purposes of this Deed of Trust,
including the security agreement and the absolute
assignment of Rents contained herein, or for the
filing, registering or recording thereof.
ii. Trustor shall forthwith upon the execution and
delivery of this Deed of Trust, and thereafter from
time to time, cause this Deed of Trust and each
instrument of further assurance to be filed, indexed,
registered, recorded, given or delivered in such
manner and in such places as may be required by any
present or future law in order to publish notice of
and fully to protect the lien hereof upon, and the
title of Trustee and/or Beneficiary to, the Trust
Estate.
m. Security Agreement and Financing Statements. Trustor (as
debtor) hereby grants to Beneficiary (as creditor and secured
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party) a present and future security interest in all Account
Receivables, Tangible Collateral (other than Tangible
Collateral which secures an FF&E Financing), Intangible
Collateral, FF&E (other than FF&E which secures an FF&E
Financing), Improvements (in the case of Improvements
described in clause (2) of the definition thereof, other than
Improvements which secure an FF&E Financing), all other
personal property now or hereafter owned or leased by Trustor
or in which Trustor has or will have any interest, to the
extent that such property constitutes a part of the Trust
Estate (whether or not such items are stored on the premises
or elsewhere), Proceeds of the foregoing comprising a portion
of the Trust Estate and all proceeds of insurance policies and
consideration awards arising therefrom and all proceeds,
products, substitutions, and accessions therefor and thereto,
subject to Beneficiary's rights to treat such property as real
property as herein provided (collectively, the "Personal
Property"). Trustor shall execute any and all documents and
writings, including without limitation financing statements
pursuant to the UCC, as may be necessary or prudent to
preserve and maintain the priority of the security interest
granted hereby on property which may be deemed subject to the
foregoing security agreement or as Beneficiary may reasonably
request, and shall pay to Beneficiary on demand any reasonable
expenses incurred by Beneficiary in connection with the
preparation, execution and filing of any such documents.
Trustor hereby authorizes and empowers Beneficiary to execute
and file, on Trustor's behalf, all financing statements and
refiling and continuations thereof as advisable to create,
preserve and protect said security interest (which empowerment
shall be irrevocably as it is coupled with an interest). This
Deed of Trust constitutes both a real property deed of trust
and a "security agreement," within the meaning of the UCC, and
the Trust Estate includes both real and personal property and
all other rights and interests, whether tangible or intangible
in nature, of Trustor in the Trust Estate. Trustor by
executing and delivering this Deed of Trust has granted to
Beneficiary, as security of the Obligations, a security
interest in the Trust Estate.
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i. Fixture Filing. Without in any way limiting the
generality of the immediately preceding, paragraph or
of the definition of the Trust Estate, this Deed of
Trust constitutes and shall be effective as Financing
Statement filed as a fixture filing from the date of
recording under Sections 9-313 and 9-402 of the UCC
(NRS 104.9313 and NRS 104.9402). For such purposes,
(i) the "debtor" is Trustor and its address is the
address given for it in the initial paragraph of this
Deed of Trust; (ii) the "secured party" is
Beneficiary, and its address for the purpose of
obtaining information is the address given for it in
the initial paragraph of this Deed of Trust; (iii) the
real estate to which the fixtures are or are to become
attached is Trustor's interest in the Site and is
legally described in Exhibit A attached hereto; and
(iv) the record owner of such real estate is Trustor.
ii. Remedies. This Deed of Trust shall be deemed a
security agreement as defined in the UCC and the
remedies for any violation of the covenants, terms and
conditions of the agreements herein contained shall
include any or all of (i) those prescribed herein, and
(ii) those available under applicable law, and (iii)
those available under the UCC, all at Beneficiary's
sole election. In addition, a photographic or other
reproduction of this Deed of Trust shall be sufficient
as a financing statement for filing wherever filing
may be necessary to perfect or continue the security
interest granted herein.
iii. Derogation of Real Property. It is the intention of
the parties that the filing of a financing statement
in the records normally having to do with personal
property shall never be construed as in anyway
derogating from or impairing the
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express declaration and intention of the parties
hereto as hereinabove stated that everything used in
connection with the production of income from the
Trust Estate and/or adapted for use therein and/or
which is described or reflected in this Deed of Trust
is, and at all times and for all purposes and in all
proceedings both legal or equitable shall be regarded,
as part of the real property encumbered by this Deed
of Trust irrespective of whether (i) any such item is
physically attached to the Improvements, (ii) serial
numbers are used for the better identification of
certain equipment items capable of being thus
identified in a recital contained herein or in any
list filed with Beneficiary, or (iii) any such item is
referred to or reflected in any such financing
statement so filed at any time. It is the intention
of the parties that the mention in any such financing
statement of (1) rights in or to the proceeds of any
fire and/or hazard insurance policy, or (2) any award
in eminent domain proceedings for a taking or for loss
of value, or (3) Trustor's interest as lessors in any
present or future Space Lease or rights to Rents,
shall never be construed as in any way altering any of
the rights of Beneficiary as determined by this Deed
of Trust or impugning the priority of Beneficiary's
real property lien granted hereby or by any other
recorded document, but such mention in the financing
statement is declared to be for the protection of
Beneficiary in the event any court or judge shall at
any time hold with respect to the matters set forth in
the foregoing clauses (1), (2) and (3) that notice of
Beneficiary's priority of interest to be effective
against a particular class of persons, including but
not limited to, the federal government and any
subdivisions or
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entity of the federal government, must be filed in the
UCC records.
iv. Priority; Permitted Financing of Tangible Collateral.
All Personal Property of any nature whatsoever which
is subject to the provisions of this security
agreement shall be purchased or obtained by Trustor in
its name and free and clear of any lien or
encumbrance, except for Permitted Liens and the lien
hereof, for use only in connection with the business
and operation of the Site and the Improvements, and
shall be and at all times remain free and clear of any
lease or similar arrangement, chattel financing,
installment sale agreement, security agreement and any
encumbrance of like kind, so that Beneficiary's
security interest shall attach to and vest in Trustor
for the benefit of Beneficiary, with the priority
herein specified, immediately upon the installation or
use of the Personal Property at the Site and Trustor
warrants and represents that Beneficiary's security
interest in the Personal Property is a validly
attached and binding security interest, properly
perfected and prior to all other security interests
therein except as otherwise permitted in this Deed of
Trust. The foregoing shall not be construed as
limiting Trustor's rights to transfer Personal
Property pursuant to Permitted Dispositions or to
obtain releases of Personal Property from the Lien of
this Deed of Trust pursuant to Section 1.11 hereof.
v. Presentation of Contractual Rights of Collateral.
Trustor shall, prior to delinquency, default, or
forfeiture, perform all obligations and satisfy all
material conditions required on its part to be
satisfied to preserve its rights and privileges under
any contract, lease, license,
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permit, or other authorization (i) under which it
holds any Tangible Collateral or (ii) which
constitutes part of the Intangible Collateral, except
where Trustor is contesting such obligations in good
faith.
vi. Removal of Collateral. Except as permitted in the
Credit Agreement (while in effect) for damaged or
obsolete Tangible Collateral which is either no longer
usable or which is removed temporarily for repair or
improvement or removed for replacement on the Trust
Estate with Tangible Collateral of similar function or
as otherwise permitted herein, none of the Tangible
Collateral shall be removed from the Trust Estate
without Beneficiary's prior written consent.
vii. Change of Name. Trustor shall not change its
corporate or business name, or do business within the
State of Nevada under any name other than such name,
or any trade name(s) other than those as to which
Trustor gives prior written notice to Beneficiary of
its intent to use such trade names, or any other
business names (if any) specified in the financing
statements delivered to Beneficiary for filing in
connection with the execution hereof, without
providing Beneficiary with the additional financing
statement(s) and any other similar documents deemed
reasonably necessary by Beneficiary to assure that its
security interest remains perfected and of
undiminished priority in all such Personal Property
notwithstanding such name change.
n. Assignment of Rents and Leases. Effective upon the
recordation of this Deed of Trust, the assignment of Rents and
Leases set out above in Granting Clause (G) shall constitute
an
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absolute and present assignment to Beneficiary, subject to the
license herein given to Trustor to collect the Rents
(including the Account Receivables, to the extent they are
deemed to be Rents), and shall be fully operative without any
further action on the part of any party, and Trustor hereby
irrevocably, absolutely, presently and unconditionally assigns
to Beneficiary all Rents and Leases. This is an absolute
assignment and not an assignment for security only.
Beneficiary shall be entitled upon the occurrence of an Event
of Default hereunder to all Rents and to enter into the Site
and the Improvements to collect all such Rents, provided,
however, that Beneficiary shall not be obligated to take
possession of the Trust Estate, or any portion thereof. The
absolute assignment contained in Granting Clause (G) shall not
be deemed to impose upon Beneficiary any of the obligations or
duties of Trustor provided in any Ground Lease or Space Lease
(including, without limitation, any liability under the
covenant of quiet enjoyment contained in any lease in the
event that any lessee shall have been joined as a party
defendant in any action to foreclose this Deed of Trust and
shall have been barred and foreclosed thereby of all right,
title and interest and equity of redemption in the Trust
Estate or any part thereof).
o. Expenses.
i. Trustor shall pay when due and payable all costs,
including without limitation, those reasonable
appraisal fees, recording fees, taxes, abstract fees,
title policy fees, escrow fees, attorneys' and
paralegal fees, travel expenses, fees for inspecting
architect(s) and engineer(s) and all other reasonable
costs and expenses of every character which may
hereafter be incurred by Beneficiary or any assignee
of Beneficiary in connection with the preparation and
execution of the amendments to the Credit Agreement
and the Loan Documents, amendments thereto or
instruments, agreements or documents of further
assurance, the funding of
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the indebtedness secured hereby, and the enforcement
of any Loan Document; and
ii. Trustor shall, upon demand by Beneficiary, reimburse
Beneficiary or any assignee of Beneficiary for all
such reasonable expenses which have been incurred or
which shall be incurred by it; and
iii. Trustor shall indemnify Beneficiary with respect to
any transaction or matter in any way connected with
any portion of the Trust Estate, this Deed of Trust,
including any occurrence at, in, on, upon or about the
Trust Estate (including any personal injury, loss of
life, or property damage), or Trustor's use,
occupancy, or operation of the Trust Estate, or the
filing or enforcement of any mechanic's lien, or
otherwise caused in whole or in part by any act,
omission or negligence occurring on or at the Trust
Estate, including failure to comply with any Legal
Requirement or with any requirement of this Deed of
Trust that applies to Trustor, except to the extent
resulting from the gross negligence, fraud or willful
misconduct of Trustee or Beneficiary. If Beneficiary
is a party to any litigation as to which either
Trustor is required to indemnify Beneficiary (or is
made a defendant in any action of any kind against
Trustor or relating directly or indirectly to any
portion of the Trust Estate) then, at Beneficiary's
option, Trustor shall undertake Beneficiary's defense,
using counsel reasonably satisfactory to Beneficiary
(and any settlement shall be subject to Beneficiary's
consent, which consent shall not be unreasonably
withheld) and in any case shall indemnify Beneficiary
against such litigation. Trustor shall pay all
reasonable costs and expenses, including reasonable
legal costs, that
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Beneficiary pays or incurs in connection with any such
litigation. Any amount payable under any indemnity in
this Deed of Trust shall be a demand obligation, shall
be added to, and become a part of, the secured
obligations under this Deed of Trust, shall be secured
by this Deed of Trust, and shall bear interest at the
interest rate specified in the Credit Agreement. Such
indemnity shall survive any release of this Deed of
Trust and any foreclosure.
p. Beneficiary's Cure of Trustor's Default. If Trustor defaults
hereunder in the payment of any tax, assessment, lien,
encumbrance or other Imposition, in its obligation to furnish
insurance hereunder, or in the performance or observance of
any other covenant, condition or term of this Deed of Trust or
any other Loan Document or any FF&E Financing, Beneficiary
may, but is not obligated to, to preserve its interest in the
Trust Estate, perform or observe the same, but only upon not
less than five (5) Business Days notice to Trustor and all
payments made (whether such payments are regular or
accelerated payments) and reasonable costs and expenses
incurred or paid by Beneficiary in connection therewith shall
become due and payable immediately. The amounts so incurred
or paid by Beneficiary, together with interest thereon at the
Default Rate from the date incurred until paid by Trustor,
shall be added to the indebtedness and secured by the lien of
this Deed of Trust. Beneficiary is hereby empowered to enter
and to authorize others to enter upon the Site or any part
thereof for the purpose of performing or observing any such
defaulted covenant, condition or term, without thereby
becoming liable to Trustor or any person in possession holding
under Trustor. No exercise of any rights under this
Section 1.16 by Beneficiary shall cure or waive any Event of
Default or notice of default hereunder or invalidate any act
done pursuant hereto or to any such notice, but shall be
cumulative of all other rights and remedies.
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q. Defense of Actions. Trustor shall appear in and defend any
action or proceeding affecting or purporting to affect the
security hereof or the rights or powers of Beneficiary or
Trustee, and shall pay all costs and expenses, including cost
of title search and insurance or other evidence of title,
preparation of survey, and reasonable attorneys' fees in any
such action or proceeding in which Beneficiary or Trustee may
appear or may be joined as a party and in any suit brought by
Beneficiary based upon or in connection with this Deed of
Trust or any Loan Document. Nothing contained in this Section
shall, however, limit the right of Beneficiary to appear in
such action or proceeding with counsel of its own choice,
either on its own behalf or on behalf of Trustor.
ARTICLE 2.
CORPORATE LOAN PROVISIONS
a. Interaction with Credit Agreement.
i. Incorporation by Reference. All terms, covenants,
conditions, provisions and requirements of the Credit
Agreement are incorporated by reference in this Deed
of Trust.
ii. Conflicts. In the event of any conflict or
inconsistency between the provisions of this Deed of
Trust and those of the Credit Agreement, the
provisions of the Credit Agreement shall govern.
b. Other Collateral. This Deed of Trust is one of a number of
security agreements to secure the debt delivered by or on
behalf of Trustor pursuant to the Credit Agreement and the
other Loan Documents and securing the Obligations secured
hereunder. All potential junior Lien claimants are placed on
notice that, under the Credit Agreement and each other Loan
Document granting a security interest to the Beneficiary or
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otherwise (such as by separate future unrecorded agreement
between Trustor and Beneficiary), other collateral for the
Obligations secured hereunder (i.e., collateral other than the
Trust Estate) may, under certain circumstances, be released
without a corresponding reduction in the total principal
amount secured by this Deed of Trust. Such a release would
decrease the amount of collateral securing the same
indebtedness, thereby increasing the burden on the remaining
Trust Estate created and continued by this Deed of Trust.
No such release shall impair the priority of the lien of this
Deed of Trust. By accepting its interest in the Trust Estate,
each and every junior Lien claimant shall be deemed to have
acknowledged the possibility of, and consented to, any such
release. Nothing in this paragraph shall impose any
obligation upon Beneficiary.
ARTICLE 3.
DEFAULTS
a. Event of Default. The term "Event of Default," wherever used
in this Deed of Trust, shall mean any one or more of the
events of default listed in Section 8 of the Credit Agreement
(whether any such event shall be voluntary or involuntary or
come about or be effected by operation of law or pursuant to
or in compliance with any judgment, decree or order of any
court or any order, rule or regulation of any administrative
or governmental body).
ARTICLE 4.
REMEDIES
a. Acceleration of Maturity. If an Event of Default occurs,
Beneficiary may (except that such acceleration shall be
automatic if any Event of Default under clauses (a) through
(e) of Section 8.1.10 of the Credit Agreement shall occur),
declare
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the Notes and all indebtedness or sums secured hereby, to be
due and payable immediately, and upon such declaration such
principal and interest and other sums shall immediately become
due and payable without demand, presentment, notice or other
requirements of any kind (all of which Trustor waives)
notwithstanding anything in this Deed of Trust or any Loan
Document or applicable law to the contrary.
b. Protective Advances. If Trustor fails to make any payment or
perform any other obligation under the Notes or any other Loan
Documents, then without thereby limiting Beneficiary's other
rights or remedies, waiving or releasing any of Trustor's
obligations, or imposing any obligation on Beneficiary,
Beneficiary may either advance any amount owing or perform any
or all actions that Beneficiary considers necessary or
appropriate to cure such default. All such advances shall
constitute "Protective Advances." Protective Advances shall
bear interest at the Default Rate from the date so advanced
until paid in full. No sums advanced or performance rendered
by Beneficiary shall cure, or be deemed a waiver of any Event
of Default.
c. Institution of Equity Proceedings. If an Event of Default
occurs, Beneficiary may institute an action, suit or
proceeding in equity for specific performance of this Deed of
Trust, the Credit Agreement or any other Loan Document which
grants a security interest for the benefit of the Beneficiary,
all of which shall be specifically enforceable by injunction
or other equitable remedy. Trustor waives any defense based
on laches or any applicable statute of limitations.
d. Beneficiary's Power of Enforcement.
i. If an Event of Default occurs, Beneficiary shall be
entitled, at its option and in its sole and absolute
discretion, to prepare and record on its own behalf,
or to deliver to Trustee for recording, if
appropriate, written declaration of default and demand
for sale and written Notice of
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Breach and Election to Sell (NRS 107.080(3) (or other
statutory notice) to cause the Trust Estate to be sold
to satisfy the obligations hereof, and in the case of
delivery to Trustee, Trustee shall cause said notice
to be filed for record.
ii. After the lapse of such time as may then be required
by law following the recordation of said Notice of
Breach and Election to Sell, and notice of sale having
been given as then required by law, including
compliance with all applicable Nevada Gaming Laws,
Trustee without demand on Trustor, shall sell the
Trust Estate or any portion thereof at the time and
place fixed by it in said notice, either as a whole or
in separate parcels, and in such order as it may
determine, at public auction to the highest bidder, of
cash in lawful money of the United States payable at
the time of sale. Trustee may, for any cause it deems
expedient, postpone the sale of all or any portion of
said property until it shall be completed and, in
every case, notice of postponement shall be given by
public announcement thereof at the time and place last
appointed for the sale and from time to time
thereafter Trustee may postpone such sale by public
announcement at the time fixed by the preceding
postponement. Trustee shall execute and deliver to
the purchaser its Deed, Bill of Sale, or other
instrument conveying said property so sold, but
without any covenant or warranty, express or implied.
The recitals in such instrument of conveyance of any
matters or facts shall be conclusive proof of the
truthfulness thereof. Any person, including
Beneficiary, may bid at the sale.
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iii. After deducting all costs, fees and expenses of
Trustee and of this Deed of Trust, including, without
limitation, costs of evidence of title and reasonable
attorneys' fees of Trustee or Beneficiary in
connection with a sale, Trustee shall apply the
proceeds of such sale to payment of all sums expended
under the terms hereof not then repaid, with accrued
interest at the Default Rate to the payment of all
other sums then secured hereby and the remainder, if
any, to the person or persons legally entitled thereto
as provided in NRS 40.462.
iv. Subject to compliance with applicable Nevada Gaming
Laws, if any Event of Default occurs, Beneficiary may,
either with or without entry or taking possession of
the Trust Estate, and without regard to whether or not
the indebtedness and other sums secured hereby shall
be due and without prejudice to the right of
Beneficiary thereafter to bring an action or
proceeding to foreclose or any other action for any
default existing at the time such earlier action was
commenced, proceed by any appropriate action or
proceeding: (1) to enforce payment of the Notes, to
the extent permitted by law, or the performance of any
term hereof or any other right; (2) to foreclose this
Deed of Trust in any manner provided by law for the
foreclosure of mortgages or deeds of trust on real
property and to sell, as an entirety or in separate
lots or parcels, the Trust Estate or any portion
thereof pursuant to the laws of the State of Nevada or
under the judgment or decree of a court or courts of
competent jurisdiction, and Beneficiary shall be
entitled to recover in any such proceeding all costs
and expenses incident thereto, including reasonable
attorneys' fees in such amount as shall be awarded by
the court;
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(3) to exercise any or all of the rights and remedies
available to it under the Credit Agreement; and (4) to
pursue any other remedy available to it. Beneficiary
shall take action either by such proceedings or by the
exercise of its powers with respect to entry or taking
possession, or both, as Beneficiary may determine.
v. The remedies described in this Section 4.4 may be
exercised with respect to all or any portion of the
Personal Property, either simultaneously with the sale
of any real property encumbered hereby or independent
thereof. Beneficiary shall at any time be permitted
to proceed with respect to all or any portion of the
Personal Property in any manner permitted by the UCC.
Trustor agrees that Beneficiary's inclusion of all or
any portion of the Personal Property (and all personal
property that is subject to a security interest in
favor, or for the benefit, of Beneficiary) in a sale
or other remedy exercised with respect to the real
property encumbered hereby, as permitted by the UCC,
is a commercially reasonable disposition of such
property.
e. Beneficiary's Right to Enter and Take Possession, Operate and
Apply Income.
i. Subject to compliance with applicable Nevada Gaming
Laws, if an Event of Default occurs, (i) Trustor, upon
demand of Beneficiary, shall forthwith surrender to
Beneficiary the actual possession and, if and to the
extent permitted by law, Beneficiary itself, or by
such officers or agents as it may appoint, may enter
and take possession of all the Trust Estate including
the Personal Property, without liability for trespass,
damages or otherwise, and may exclude Trustor and its
agents and employees wholly therefrom
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and may have joint access with Trustor to the books,
papers and accounts of Trustor; and (ii) Trustor shall
pay monthly in advance to Beneficiary on Beneficiary's
entry into possession, or to any receiver appointed to
collect the Rents, all Rents then due and payable.
ii. If Trustor shall for any reason fail to surrender or
deliver the Trust Estate, the Personal Property or any
part thereof after Beneficiary's demand, Beneficiary
may obtain a judgment or decree conferring on
Beneficiary or Trustee the right to immediate
possession or requiring Trustor to deliver immediate
possession of all or part of such property to
Beneficiary or Trustee and Trustor hereby specifically
consents to the entry of such judgment or decree.
Trustor shall pay to Beneficiary or Trustee, upon
demand, all reasonable costs and expenses of obtaining
such judgment or decree and reasonable compensation to
Beneficiary or Trustee, their attorneys 'and agents,
and all such costs, expenses and compensation shall,
until paid, be secured by the lien of this Deed of
Trust.
iii. Subject to compliance with applicable Nevada Gaming
Laws, upon every such entering upon or taking of
possession, Beneficiary or Trustee may hold, store,
use, operate, manage and control the Trust Estate and
conduct the business thereof, and, from time to time
in its sole and absolute discretion and without being
under any duty to so act:
(1) make all necessary and proper maintenance,
repairs, renewals, replacements, additions,
betterments and improvements
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thereto and thereon and purchase or otherwise
acquire additional fixtures, personalty and
other property;
(2) insure or keep the Trust Estate insured;
(3) manage and operate the Trust Estate and
exercise all the rights and powers of Trustor
in their name or otherwise with respect to the
same;
(4) enter into agreements with others to
exercise the powers herein granted Beneficiary
or Trustee, all as Beneficiary or Trustee from
time to time may determine; and, subject to
the absolute assignment of the Rents and
Leases to Beneficiary, Beneficiary or Trustee
may collect and receive all the Rents,
including those past due as well as those
accruing thereafter; and shall apply the
monies so received by Beneficiary or Trustee
in such priority as Beneficiary may determine
to (1) the payment of interest and principal
due and payable on the Notes, (2) the deposits
for taxes and assessments and insurance
premiums due, (3) the cost of insurance,
taxes, assessments and other proper charges
upon the Trust Estate or any part thereof; (4)
the compensation, expenses and
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disbursements of the agents, attorneys and
other representatives of Beneficiary or
Trustee; and (5) any other charges or costs
required to be paid by Trustor under the terms
hereof; and
(5) rent or sublet the Trust Estate or any
portion thereof for any purpose permitted by
this Deed of Trust.
Beneficiary, or Trustee shall surrender possession of the Trust Estate
and the Personal Property to Trustor only when all accrued and unpaid such
interest and principal, tax and insurance deposits, and all amounts under any
of the terms of the Credit Agreement, this Deed of Trust or any other Loan
Document, shall have been paid in full. The same right of taking possession,
however, shall exist if any subsequent Event of Default shall occur and be
continuing.
f. Leases. Beneficiary is authorized to foreclose this Deed of
Trust subject to the rights of any tenants of the Trust
Estate, and the failure to make any such tenants parties
defendant to any such foreclosure proceedings and to foreclose
their rights shall not be, nor be asserted by Trustor to be, a
defense to any proceedings instituted by Beneficiary to
collect the sums secured hereby or to collect any deficiency
remaining unpaid after the foreclosure sale of the Trust
Estate, or any portion thereof. Unless otherwise agreed by
Beneficiary, in writing, all Space Leases executed subsequent
to the date hereof, or any part thereof, shall be subordinate
and inferior to the lien of this Deed of Trust; provided,
however that (i) Beneficiary may require that a
non-disturbance and attornment agreement in connection with
certain Space Leases; and (ii) from time to time Beneficiary
may execute and record among the land records of the
jurisdiction where this Deed of Trust is recorded,
subordination statements with respect to such of said Space
Leases as Beneficiary may designate in its sole discretion,
whereby the Space Leases so designated by Beneficiary
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shall be made superior to the lien of this Deed of Trust for
the term set forth in such subordination statement. From and
after the recordation of such subordination statements, and
for the respective periods as may be set forth therein, the
Space Leases therein referred to shall be superior to the lien
of this Deed of Trust and shall not be affected by any
foreclosure hereof. All such Space Leases shall contain a
provision to the effect that the Trustor and Space Lessee
recognize the right of Beneficiary to elect and to effect such
subordination of this Deed of Trust and consents thereto.
g. Purchase by Beneficiary. Upon any foreclosure sale (whether
judicial or nonjudicial), Beneficiary may bid for and purchase
the property subject to such sale and, upon compliance with
the terms of sale, may hold, retain and possess and dispose of
such property in its own absolute right without further
accountability.
h. Waiver of Appraisement, Valuation, Stay, Extension and
Redemption Laws. Trustor agrees to the full extent permitted
by law that if an Event of Default occurs, neither Trustor nor
anyone claiming through or under it shall or will set up,
claim or seek to take advantage of any appraisement,
valuation, stay, extension or redemption laws now or hereafter
in force, in order to prevent or hinder the enforcement or
foreclosure of this Deed of Trust or the absolute sale of the
Trust Estate or any portion thereof or the final and absolute
putting into possession thereof, immediately after such sale,
of the purchasers thereof, and Trustor for itself and all who
may at any time claim through or under it, hereby waives, to
the full extent that it may lawfully so do, the benefit of all
such laws, and any and all right to have the assets comprising
the Trust Estate marshaled upon any foreclosure of the lien
hereof and agrees that Trustee or any court having
jurisdiction to foreclose such lien may sell the Trust Estate
in part or as an entirety.
i. Receiver. If an Event of Default occurs, Beneficiary, to the
extent permitted by law and subject to compliance with all
applicable Nevada Gaming Laws, and without regard to the
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value, adequacy or occupancy of the security for the
indebtedness and other sums secured hereby, shall be entitled
as a matter of right if it so elects to the appointment of a
receiver to enter upon and take possession of the Trust Estate
and to collect all Rents and apply the same as the court may
direct, and such receiver may be appointed by any court of
competent jurisdiction upon application by Beneficiary.
Beneficiary may have a receiver appointed without notice to
Trustor or any third party, and Beneficiary may waive any
requirement that the receiver post a bond. Beneficiary shall
have the power to designate and select the Person who shall
serve as the receiver and to negotiate all terms and
conditions under which such receiver shall serve. Any
receiver appointed on Beneficiary's behalf may be an Affiliate
of Beneficiary. The expenses, including receiver's fees,
attorneys' fees, costs and agent's compensation, incurred
pursuant to the powers herein contained shall be secured by
this Deed of Trust. The right to enter and take possession of
and to manage and operate the Trust Estate and to collect all
Rents, whether by a receiver or otherwise, shall be cumulative
to any other right or remedy available to Beneficiary under
this Deed of Trust, the Credit Agreement or otherwise
available to Beneficiary and may be exercised concurrently
therewith or independently thereof. Beneficiary shall be
liable to account only for such Rents (including, without
limitation, security deposits) actually received by
Beneficiary, whether received pursuant to this Section or any
other provision hereof. Notwithstanding the appointment of
any receiver or other custodian, Beneficiary shall be entitled
as pledgee to the possession and control of any cash,
deposits, or instruments at the time held by, or payable or
deliverable under the terms of this Deed of Trust to,
Beneficiary.
j. Suits to Protect the Trust Estate. Beneficiary shall have the
power and authority to institute and maintain any suits and
proceedings as Beneficiary, in its sole and absolute
discretion, may deem advisable (a) to prevent any impairment
of the Trust Estate by any acts which may be unlawful or in
violation of this Deed of Trust, (b) to preserve or protect
its interest in
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the Trust Estate, or (c) to restrain the enforcement of or
compliance with any legislation or other Legal Requirement
that may be unconstitutional or otherwise invalid, if the
enforcement of or compliance with such enactment, rule or
order might impair the security hereunder or be prejudicial to
Beneficiary's interest.
k. Proofs of Claim. In the case of any receivership, Insolvency,
Bankruptcy, reorganization, arrangement, adjustment,
composition or other judicial proceedings affecting Trustor,
or, to the extent the same would result in an Event of Default
hereunder, any Subsidiary, or any guarantor, co-maker or
endorser of any of Trustor's obligations, its creditors or its
property, Beneficiary, to the extent permitted by law, shall
be entitled to file such proofs of claim or other documents as
it may deem to be necessary or advisable in order to have its
claims allowed in such proceedings for the entire amount due
and payable by Trustor under the Notes, any other Loan
Document, at the date of the institution of such proceedings,
and for any additional amounts which may become due and
payable by Trustor after such date.
l. Trustor to Pay the Notes on Any Default in Payment:
Application of Monies by Beneficiary.
i. In case of a foreclosure sale of all or any part of
the Trust Estate and of the application of the
proceeds of sale to the payment of the sums secured
hereby, Beneficiary shall be entitled to enforce
payment from Trustor of any additional amounts then
remaining due and unpaid and to recover judgment
against Trustor for any portion thereof remaining
unpaid, with interest at the Default Rate in
accordance with Section 4.19 hereof.
ii. Trustor hereby agrees to the extent permitted by law,
that no recovery of any such judgment by Beneficiary
or other action by Beneficiary and no attachment or
levy of any execution upon any of the Trust Estate or
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any other property shall in any way affect the Lien
and security interest of this Deed of Trust upon the
Trust Estate or any part thereof or any Lien, rights,
powers or remedies of Beneficiary hereunder, but such
Lien, rights, powers and remedies shall continue
unimpaired as before.
iii. Any monies collected or received by Beneficiary under
this Section 4.12 shall be first applied to the
payment of reasonable compensation, expenses and
disbursements of the agents, attorneys and other
representatives of Beneficiary, and the balance
remaining shall be applied to the payment of amounts
due and unpaid under the Notes.
iv. The provisions of this Section shall not be deemed to
limit or otherwise modify the provisions of any
guaranty of the indebtedness evidenced by the Notes.
m. Delay or Omission; No Waiver. No delay or omission of
Beneficiary to exercise any right, power or remedy upon any
Event of Default shall exhaust or impair any such right, power
or remedy or shall be construed to waive any such Event of
Default or to constitute acquiescence therein. Every right,
power and remedy given to Beneficiary whether contained herein
or in the Credit Agreement or otherwise available to
Beneficiary may be exercised from time to time and as often as
may be deemed expedient by Beneficiary.
n. No Waiver of One Default to Affect Another. No waiver of any
Event of Default hereunder shall extend to or affect any
subsequent or any other Event of Default then existing, or
impair any rights, powers or remedies consequent thereon. If
Beneficiary (a) grants forbearance or an extension of time for
the payment of any sums secured hereby; (b) takes other or
additional security for the payment thereof; (c) waives or
does not exercise any right granted in the Notes, the Credit
Agreement, this Deed of Trust, or any other Loan Document; (d)
releases any part of the Trust Estate from the lien or
security
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interest of this Deed of Trust or any other instrument
securing the Notes; (e) consents to the filing of any map,
plat or replat of the Site (to the extent such consent is
required); (f) consents to the granting of any easement on the
Site (to the extent such consent is required); or (g) makes or
consents to any agreement changing the terms of this Deed of
Trust, the Credit Agreement or any other Loan Document for the
benefit of Beneficiary subordinating the lien or any charge
hereof, no such act or omission shall release, discharge,
modify, change or affect the original liability under the
Notes, this Deed of Trust, the Credit Agreement or any other
Loan Document for the benefit of Beneficiary or otherwise of
Trustor, or any subsequent purchaser of the Trust Estate or
any part thereof or any maker, co-signer, surety or guarantor.
No such act or omission shall preclude Beneficiary from
exercising any right, power or privilege herein granted or
intended to be ranted in case of any Event of Default then
existing or of any subsequent Event of Default, nor, except as
otherwise expressly provided in an instrument or instruments
executed by Beneficiary, shall the lien or security interest
of this Deed of Trust be altered thereby, except to the extent
expressly provided in any releases, maps, easements or
subordinations described in clause (d), (e), (f) or (g) above
of this Section 4.14. In the event of the sale or transfer by
operation of law or otherwise of all or any part of the Trust
Estate, Beneficiary, without notice to any person, firm or
corporation, is hereby authorized and empowered to deal with
any such vendee or transferee with reference to the Trust
Estate or the indebtedness secured hereby, or with reference
to any of the terms or conditions hereof, as fully and to the
same extent as it might deal with the original parties hereto
and without in any way releasing or discharging any of the
liabilities or undertakings hereunder, or waiving its right to
declare such sale or transfer an Event of Default as provided
herein. Notwithstanding anything to the contrary contained in
this Deed of Trust, the Credit Agreement or any other Loan
Documents, (i) in the case of any nonmonetary Event of
Default, Beneficiary may continue to accept payments due
hereunder without thereby waiving the existence of such or any
other Event of Default and (ii) in the
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case of any monetary Event of Default, Beneficiary may accept
partial payments of any sums due hereunder without thereby
waiving the existence of such Event of Default if the partial
payment is not sufficient to completely cure such Event of
Default.
o. Discontinuance of Proceedings; Position of Parties Restored.
If Beneficiary shall have proceeded to enforce any right or
remedy under this Deed of Trust by foreclosure, entry of
judgement or otherwise and such proceedings shall have been
discontinued or abandoned for any reason, or such proceedings
shall have resulted in a final determination adverse to
Beneficiary, then and in every such case Trustor and
Beneficiary shall be restored to their former positions and
rights hereunder, and all rights, powers and remedies of
Beneficiary shall continue as if no such proceedings had
occurred or had been taken.
p. Remedies Cumulative. No right, power or remedy, including
without limitation remedies with respect to any security for
the Notes, conferred upon or reserved to Beneficiary by this
Deed of Trust, the Credit Agreement or any other Loan Document
is exclusive of any other right, power or remedy, but each and
every such right, power and remedy shall be cumulative and
concurrent and shall be in addition to any other right, power
and remedy given hereunder or under the Credit Agreement or
any other Loan Document, now or hereafter existing at law, in
equity or by statute, and Beneficiary shall be entitled to
resort to such rights, powers, remedies or security as
Beneficiary shall in its sole and absolute discretion deem
advisable.
q. Interest After Event of Default. If an Event of Default shall
have occurred and is continuing, all sums outstanding and
unpaid under the Notes and this Deed of Trust shall, at
Beneficiary's option, bear interest at the Default Rate until
such Event of Default has been cured. Trustor's obligation to
pay such interest shall be secured by this Deed of Trust.
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r. Foreclosure; Expenses of Litigation. If Trustee forecloses,
reasonable attorneys' fees for services in the supervision of
said foreclosure proceeding shall be allowed to the Trustee
and Beneficiary as part of the foreclosure costs. In the
event of foreclosure of the lien hereof, there shall be
allowed and included as additional indebtedness all reasonable
expenditures and expenses which may be paid or incurred by or
on behalf of Beneficiary for attorneys' fees, appraiser's
fees, outlays for documentary and expert evidence,
stenographers' charges, publication costs, and costs (which
may be estimated as to items to be expended after foreclosure
sale or entry of the decree) of procuring all such abstracts
of title, title searches and examinations, title insurance
policies and guarantees, and similar data and assurances with
respect to title as Beneficiary may deem reasonably advisable
either to prosecute such suit or to evidence to a bidder at
any sale which may be had pursuant to such decree the true
condition of the title to or the value of the Trust Estate or
any portion thereof. All expenditures and expenses of the
nature in this section mentioned, and such expenses and fees
as may be incurred in the protection of the Trust Estate and
the maintenance of the lien and security interest of this Deed
of Trust, including the fees of any attorney employed by
Beneficiary in any litigation or proceeding affecting this
Deed of Trust or any Loan Document, the Trust Estate or any
portion thereof, including, without limitation, civil,
probate, appellate and bankruptcy proceedings, or in
preparation for the commencement or defense of any proceeding
or threatened suit or proceeding, shall be immediately due and
payable by Trustor, with interest thereon at the Default Rate,
and shall be secured by this Deed of Trust. Trustee waives
its right to any statutory fee in connection with any judicial
or nonjudicial foreclosure of the lien hereof and agrees to
accept a reasonable fee for such services.
s. Deficiency Judgments. If after foreclosure of this Deed of
Trust or Trustee's sale hereunder, there shall remain any
deficiency with respect to any amounts payable under the Notes
or hereunder or any amounts secured hereby, and Beneficiary
shall institute any proceedings to recover such defi-
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ciency or deficiencies, all such amounts shall continue to
bear interest at the Default Rate. Trustor waives any defense
to Beneficiary's recovery against Trustor of any deficiency
after any foreclosure sale of the Trust Estate. Trustor
expressly waives any defense or benefits that may be derived
from any statute granting Trustor any defense to any such
recovery by Beneficiary. In addition, Beneficiary and Trustee
shall be entitled to recovery of all of their reasonable costs
and expenditures (including without limitation any court
imposed costs) in connection with such proceedings, including
their reasonable attorneys' fees, appraisal fees and the other
costs, fees and expenditures referred to in Section 4.18
above. This provision shall survive any foreclosure or sale
of the Trust Estate, any portion thereof and/or the
extinguishment of the lien hereof.
t. Waiver of Jury Trial. The waiver of jury trial contained in
the Credit Agreement is hereby incorporated herein by this
reference.
u. Exculpation of Beneficiary. The acceptance by Beneficiary of
the assignment contained herein with all of the rights,
powers, privileges and authority created hereby shall not,
prior to entry upon and taking possession of the Trust Estate
by Beneficiary, be deemed or construed to make Beneficiary a
"mortgagee in possession"; nor thereafter or at any time or in
any event obligate Beneficiary to appear in or defend any
action or proceeding relating to the Space Leases, the Rents
or the Trust Estate, or to take any action hereunder or to
expend any money or incur any expenses or perform or discharge
any obligation, duty or liability under any Ground Lease or
any Space Lease or to assume any obligation or responsibility
for any security deposits or other deposits except to the
extent such deposits are actually received by Beneficiary, nor
shall Beneficiary, prior to such entry and taking, be liable
in any way for any injury or damage to person or property
sustained by any Person in or about the Trust Estate.
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ARTICLE 5.
RIGHTS AND RESPONSIBILITIES OF TRUSTEE;
OTHER PROVISIONS RELATING TO TRUSTEE
Notwithstanding anything to the contrary in this Deed of Trust,
Trustor and Beneficiary agree as follows.
a. Exercise of Remedies by Trustee. To the extent that this Deed
of Trust or applicable law authorizes or empowers, or does not
require approval for, Beneficiary to exercise any remedies set
forth in Article 4 hereof or otherwise, or perform any acts in
connection therewith, Trustee (but not to the exclusion of
Beneficiary unless so required under the law of the State of
Nevada) shall have the power to exercise any or all such
remedies, and to perform any acts provided for in this Deed of
Trust in connection therewith, all for the benefit of
Beneficiary and on Beneficiary's behalf in accordance with
applicable law of the State of Nevada. In connection
therewith, Trustee: (a) shall not exercise, or waive the
exercise of, any Beneficiary's remedies (other than any rights
of Trustee to any indemnity or reimbursement), except at
Beneficiary's request, and (b) shall exercise, or waive the
exercise of, any or all of Beneficiary's remedies at
Beneficiary's request, and in accordance with Beneficiary's
directions as to the manner of such exercise or waiver.
Trustee may, however, decline to follow Beneficiary's request
or direction if Trustee shall be advised by counsel that the
action or proceeding, or manner thereof, so directed may not
lawfully be taken or waived.
b. Rights and Privileges of Trustee. To the extent that this
Deed of Trust requires Trustor to indemnify Beneficiary or
reimburse Beneficiary for any expenditures Beneficiary may
incur, Trustee shall be entitled to the same indemnity and the
same rights to reimbursement of expenses as Beneficiary,
subject to such limitations and conditions as would apply in
the case of Beneficiary. To the extent that this Deed of
Trust negates or limits Beneficiary's liability as to any
matter, Trustee shall be entitled to the same negation or
limitation of
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liability. To the extent that Trustor, pursuant to this Deed
of Trust, appoints Beneficiary as Trustor's attorney in fact
for any purpose, Beneficiary or (when so instructed by
Beneficiary) Trustee shall be entitled to act on Trustor's
behalf without joinder or confirmation by the other.
c. Resignation or Replacement of Trustee. Trustee may resign by
an instrument in writing addressed to Beneficiary, and Trustee
may be removed at any time with or without cause (i.e., in
Beneficiary's sole and absolute discretion) by an instrument
in writing executed by Beneficiary. In case of the death,
resignation, removal or disqualification of Trustee or if for
any reason Beneficiary shall deem it desirable to appoint a
substitute, successor or replacement Trustee to act instead of
Trustee originally named (or in place of any substitute,
successor or replacement Trustee), then Beneficiary shall have
the right and is hereby authorized and empowered to appoint a
successor, substitute or replacement Trustee, without any
formality other than appointment and designation in writing
executed by Beneficiary, which instrument shall be recorded if
required by the law of the State of Nevada. The laws of the
State of Nevada shall govern the qualifications of any
Trustee. The authority conferred upon Trustee by this Deed of
Trust shall automatically extend to any and all other
successor, substitute and replacement Trustee(s) successively
until the obligations secured hereunder have been paid in full
or the Trust Estate has been sold hereunder or released in
accordance with the provisions of the Credit Agreement and
each other Loan Document to which the Beneficiary is a party
or which grants a security for the benefit of the Beneficiary.
Beneficiary's written appointment and designation of any
Trustee shall be full evidence of Beneficiary's right and
authority to make the same and of all facts therein recited.
No confirmation, authorization, approval or other action by
Trustor shall be required in connection with any resignation
or other replacement of Trustee.
d. Authority of Beneficiary. If Beneficiary is a banking
corporation, state banking corporation or a national banking
associa-
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tion and the instrument of appointment of any successor or
replacement Trustee is executed on Beneficiary's behalf by an
officer of such corporation, state banking corporation or
national banking association, then such appointment shall be
conclusively presumed to be executed with authority and shall
be valid and sufficient without proof of any action by the
board of directors or any superior officer of Beneficiary.
e. Effect of Appointment of Successor Trustee. Upon the
appointment and designation of any successor, substitute or
replacement Trustee, and subject to compliance with applicable
laws, Trustee's entire estate and title in the Trust Estate
shall vest in the designated successor, substitute or
replacement Trustee. Such successor, substitute or
replacement Trustee shall thereupon succeed to and shall hold,
possess and execute all the rights, powers, privileges,
immunities and duties herein conferred upon Trustee. All
references herein to Trustee shall be deemed to refer to
Trustee (including any successor or substitute appointed and
designated as herein provided) from time to time acting
hereunder.
f. Confirmation of Transfer and Succession. Upon the written
request of Beneficiary or of any successor, substitute or
replacement Trustee, any former Trustee ceasing to act shall
execute and deliver an instrument transferring to such
successor, substitute or replacement Trustee all of the right,
title, estate and interest in the Trust Estate of Trustee so
ceasing to act, together with all the rights, powers,
privileges, immunities and duties herein conferred upon
Trustee, and shall duly assign, transfer and deliver all
properties and moneys held by said Trustee hereunder to said
successor, substitute or replacement Trustee.
g. Exculpation. Trustee shall not be liable for any error of
judgment or act done by Trustee in good faith, or otherwise be
responsible or accountable under any circumstances whatsoever,
except for Trustee's negligence, misconduct or knowing
violation of law. Trustee shall have the right to rely on any
instrument, document or signature authorizing or supporting
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any action taken or proposed to be taken by it hereunder,
believed by it in good faith to be genuine. All moneys
received by Trustee shall, until used or applied as herein
provided, be held in trust for the purposes for which they
were received, but need not be segregated in any manner from
any other moneys (except to the extent required by law).
Trustee shall be under no liability for interest on any moneys
received by it hereunder.
h. Endorsement and Execution of Documents. Upon Beneficiary's
written request, Trustee shall, without liability or notice to
Trustor, execute, consent to, or join in any instrument or
agreement in connection with or necessary to effectuate the
purposes of the Credit Agreement and each other Loan Document
to which the Beneficiary is a party or which grants a security
interest for the benefit of the Beneficiary. Trustor hereby
irrevocably designates Trustee as its attorney in fact to
execute, acknowledge and deliver, on Trustor's behalf and in
Trustor's name, all instruments or agreements necessary to
implement any provision(s) of this Deed of Trust or to further
perfect the lien created by this Deed of Trust on the Trust
Estate. This power of attorney shall be deemed to be coupled
with an interest and shall survive any disability of Trustor.
i. Multiple Trustees. If Beneficiary appoints multiple trustees,
then any Trustee, individually, may exercise all powers
granted to Trustee under this instrument, without the need for
action by any other Trustee(s).
j. Terms of Trustee's Acceptance. Trustee accepts the trust
created by this Deed of Trust upon the following terms and
conditions:
i. Delegation. Trustee may exercise any of its powers
through appointment of attorneys) in fact or agents.
ii. Counsel. Trustee may select and employ legal counsel
(including any law firm representing
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Beneficiary). Trustor shall reimburse all reasonable
legal fees and expenses that Trustee may thereby
incur.
iii. Security. Trustee shall be under no obligation to
take any action upon any Event of Default unless
furnished security or indemnity, in form satisfactory
to Trustee, against costs, expenses, and liabilities
that Trustee may incur.
iv. Costs and Expenses. Trustor shall reimburse Trustee,
as part of the Obligations secured hereunder, for all
reasonable disbursements and expenses incurred by
reason of and as provided for in this Deed of Trust,
including any of the foregoing incurred in Trustee's
administering and executing the trust created by this
Deed of Trust and performing Trustee's duties and
exercising Trustee's powers under this Deed of Trust.
v. Release. Upon satisfaction of the conditions for
reconveyance contained in Section 6.10 hereof,
Beneficiary shall request that Trustee release this
Deed of Trust and Trustee shall release this Deed of
Trust and reconvey to the Trust Estate in accordance
with Section 6. 10 hereof, provided, however, that
Trustor shall pay all costs of recordation, if any,
and all of Trustee's and Beneficiary's costs and
expenses in connection with such release, including,
but not limited to, reasonable attorneys' fees.
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ARTICLE 6.
MISCELLANEOUS PROVISIONS
a. Heirs, Successors and Assigns Included in Parties. Whenever
one of the parties hereto is named or referred to herein, the
heirs, successors and assigns of such party shall be included,
and subject to the limitations set forth in the Credit
Agreement, all covenants and agreements contained in this Deed
of Trust, by or on behalf of Trustor or Beneficiary shall bind
and inure to the benefit of its heirs, successors and assigns,
whether so expressed or not.
b. Addresses for Notices, Etc. All notices and other
communications provided to any party hereto under this Deed of
Trust or any other Loan Document shall be in writing and
addressed, delivered or transmitted to such party at the
address or facsimile number set forth below or at such other
address or facsimile number as may be designated by such party
in a notice to the other parties. All such notices and
communications shall be deemed to have been properly given if
(x) hand delivered with receipt acknowledged by the recipient;
(y) if mailed, upon the fifth (5th) Business Day after the
date on which it is deposited in registered or certified mail,
postage prepaid, return receipt requested or (z) if by Federal
Express or other nationally-recognized express courier service
with instructions to deliver on the following Business Day, on
the next Business Day after delivery to such express courier
service. Notices and other communications may be given by
facsimile but shall be deemed to be received upon automatic
facsimile confirmation of receipt thereof by the intended
recipient machine therefor with the original of such notice or
communication to be given in the manner provided in the second
sentence of this Section; provided, however, that the failure
to deliver a copy in accordance with the second sentence of
this Section shall not invalidate the effectiveness of such
facsimile notice.
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Beneficiary: The Bank of Nova Scotia
580 California Street
21st Floor
San Francisco, California 94104
Attention: Mr. Alan Pendergast
Telephone: (415) 616-4155
Telefax: (415) 397-0791
With a copy to: The Bank of Nova Scotia
Loan Administration
600 Peachtree Street, N.E.
Suite 2700
Atlanta, Georgia 30308
Attention: Marianne Velker
Telephone: (404) 877-1500
Telefax: (404) 888-8988
Trustor: Aladdin Gaming, LLC
2810 West Charleston Boulevard
Suite F58
Las Vegas, Nevada 89102
Attention: Jack Sommer
Telephone: (702) 870-1234
Telefax: (702) 870-8733
Trustee: Stewart Title of Nevada
3800 Howard Hughes Parkway
Suite 500
Las Vegas, Nevada 89109
Attention: Linda J. Jones
Telephone: (702) 791-7000
Telefax: (702) 733-6401
Any Person may change the address to which any such notice, report, demand or
other instrument is to be delivered or mailed to that person, by furnishing
written notice of such change to the other parties, but no such notice of
change shall be effective unless and until received by such other parties.
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c. Headings. The headings of the articles, sections, paragraphs
and subdivisions of this Deed of Trust are for convenience of
reference only, are not to be considered a part hereof, and
shall not limit or expand or otherwise affect any of the terms
hereof.
d. Invalid Provisions to Affect No Others. In the event that any
of the covenants, agreements, terms or provisions contained
herein or in the Notes, the Credit Agreement or any other Loan
Document shall be invalid, illegal or unenforceable in any
respect, the validity of the lien hereof and the remaining
covenants, agreements, terms or provisions contained herein or
in the Notes, the Credit Agreement or any other Loan Document
shall be in no way affected, prejudiced or disturbed thereby.
To the extent permitted by law, Trustor waives any provision
of law which renders any provision hereof prohibited or
unenforceable in any respect.
e. Changes and Priority Over Intervening Liens. Neither this
Deed of Trust nor any term hereof may be changed, waived,
discharged or terminated orally, or by any action or inaction,
but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or
termination is sought. Any agreement hereafter made by
Trustor and Beneficiary relating to this Deed of Trust shall
be superior to the rights of the holder of any intervening
lien or encumbrance.
f. Estoppel Certificates. Within ten (10) Business Days after
Beneficiary's written request, Trustor shall from time to time
execute a certificate, in recordable form (an "Estoppel
Certificate"), stating, except to the extent it would be
inaccurate to so state: (a) the current amount of the
Obligations secured hereunder and all elements thereof,
including principal, interest, and all other elements; (b)
that Trustor has no defense, offset, claim, counterclaim,
right of recoupment, deduction, or reduction against any of
the Obligations secured hereunder; (c) that none of the Loan
Documents to which the Beneficiary is a party or which grants
a security interest for the benefit of the Beneficiary have
been amended, whether orally or in writing;
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(d) that Trustor has no claims against Beneficiary of any
kind; (e) that any Power of Attorney granted to Beneficiary is
in full force and effect; and (f) such other matters relating
to this Deed of Trust, and each other Loan Document to which
the Beneficiary is a party or which grants a security interest
for the benefit of the Beneficiary and the relationship of
Trustor and Beneficiary as Beneficiary shall request. In
addition, the Estoppel Certificate shall set forth the reasons
why it would be inaccurate to make any of the foregoing
assurances ("a" through "f").
g. Waiver of Setoff and Counterclaim. All amounts due under this
Deed of Trust, the Notes, the Credit Agreement and each other
Loan Document to which the Beneficiary is a party or which
grants a security interest for the benefit of the Beneficiary
shall be payable without setoff, counterclaim or any deduction
whatsoever. Trustor hereby waives the right to assert a
counterclaim (other than a compulsory counterclaim) in any
action or proceeding brought against it by Beneficiary and/or
any Lender under the Credit Agreement, or arising out of or in
any way connected with this Deed of Trust, the other Loan
Documents to which the Beneficiary is a party or which grants
a security interest for the benefit of the Beneficiary or the
Obligations.
h. Governing Law. The Credit Agreement and the Notes provide
that they are governed by, and construed and enforced in
accordance with, the laws of the State of New York. This Deed
of Trust shall also be construed under and governed by the
laws of the State of New York; provided, however, that (i) the
terms and provisions of this Deed of Trust pertaining to the
priority, perfection, enforcement or realization by
Beneficiary of its respective rights and remedies under this
Deed of Trust with respect to the Trust Estate shall be
governed and construed and enforced in accordance-with the
internal laws of the State of Nevada (the "State") without
giving effect to the conflicts-of-law rules and principles of
the State; (ii) Trustor agrees that to the extent deficiency
judgments are available under the laws of the State after a
foreclosure (judicial or
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nonjudicial) of the Trust Estate, or any portion thereof, or
any other realization thereon by Beneficiary or any Lender
under the Credit Agreement, Beneficiary or such Lender, as the
case may be, shall have the right to seek such a deficiency
judgment against Trustor in the State; and (iii) Trustor
agrees that if Beneficiary or any Lender under the Credit
Agreement obtains a deficiency judgment in another state
against Trustor, then Beneficiary or such Lender, as the case
may be, shall have the right to enforce such judgment in the
State to the extent permitted under the laws of the State, as
well as in other states. Nothing contained in this Section
shall be deemed to expand the limitations set forth in
Section 10.9 of the Credit Agreement.
i. Required Notices. Trustor shall notify Beneficiary promptly
of the occurrence of any of the following and shall
immediately provide Beneficiary a copy of the notice or
documents referred to: (i) receipt of notice from any
Governmental Instrumentality relating to all or any material
part of the Trust Estate if such notice relates to a default
or act, omission or circumstance which would result in a
default after notice or passage of time or both; or (ii)
receipt of any notice from any tenant leasing all or any
material portion of the Trust Estate if such notice relates to
a default or act, omission or circumstance which would result
in a default after notice or passage of time or both.
j. Reconveyance. Upon written request of Trustor after the
Obligations secured hereby have been satisfied in full,
Beneficiary shall cause Trustee to reconvey, without warranty,
the property then held hereunder. The recitals in such
reconveyance of any matters or facts shall be conclusive proof
of the truthfulness thereof. The grantee in such reconveyance
may be described as "the person or persons legally entitled
thereto."
k. Attorneys' Fees. Without limiting any other provision
contained herein, Trustor agrees to pay all costs of
Beneficiary or Trustee incurred in connection with the
enforcement of this
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Deed of Trust, the Credit Agreement or any other Loan
Document, including without limitation all reasonable
attorneys' fees whether or not suit is commenced, and
including, without limitation, fees incurred in connection
with any probate, appellate, bankruptcy, deficiency or any
other litigation proceedings, all of which sums shall be
secured hereby.
l. Late Charges. By accepting payment of any sum secured hereby
after its due date, Beneficiary does not waive its right to
collect any late charge thereon or interest thereon at the
interest rate on the Notes, if so provided, not then paid or
its right either to require prompt payment when due of all
other sums so secured or to declare default for failure to pay
any amounts not so paid.
m. Cost of Accounting. Trustor shall pay to Beneficiary, for and
on account of the preparation and rendition of any accounting,
which Trustor may be entitled to require under any law or
statute now or hereafter providing therefor, the reasonable
costs thereof.
n. Right of Entry. Beneficiary may at any reasonable time or
times and on reasonable prior written notice to Trustor make
or cause to be made entry upon and inspections of the Trust
Estate or any part thereof in person or by agent.
o. Corrections. Trustor shall, upon request of Beneficiary or
Trustee, promptly correct any defect, error or omission which
may be discovered in the contents of this Deed of Trust
(including, but not limited to, in the exhibits and schedules
attached hereto) or in the execution or acknowledgement
hereof, and shall execute, acknowledge and deliver such
further instruments and do such further acts as may be
necessary or as may be reasonably requested by Trustee to
carry out more effectively the purposes of this Deed of Trust,
to subject to the lien and security interest hereby created
any of Trustor's properties, rights or interest covered or
intended to be covered hereby, and to perfect and maintain
such lien and security interest.
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p. Statute of Limitations. To the fullest extent allowed by the
law, the right to plead, use or assert any statute of
limitations as a plea or defense or bar of any kind, or for
any purpose, to any debt, demand or obligation secured or to
be secured hereby, or to any complaint or other pleading or
proceeding filed, instituted or maintained for the purpose of
enforcing this Deed of Trust or any rights hereunder, is
hereby waived by Trustor.
q. Subrogation. Should the proceeds of any loan or advance made
by Beneficiary to Trustor, repayment of which is hereby
secured, or any part thereof, or any amount paid out or
advanced by Beneficiary, be used directly or indirectly to pay
off, discharge, or satisfy, in whole or in part, any prior or
superior lien or encumbrance upon the Trust Estate, or any
part thereof, then, as additional security hereunder, Trustee,
on behalf of Beneficiary, shall be subrogated to any and all
rights, superior titles, liens, and equities owned or claimed
by any owner or holder of said outstanding liens, charges, and
indebtedness, however remote, regardless of whether said
liens, charges, and indebtedness are acquired by assignment or
have been released of record by the holder thereof upon
payment.
r. Joint and Several Liability. All obligations of Trustor
hereunder, if more than one, are joint and several. Recourse
for deficiency after sale hereunder may be had against the
property of Trustor, without, however, creating a present or
other lien or charge thereon.
s. Homestead. Trustor hereby waives and renounces all homestead
and exemption rights provided by the constitution and the laws
of the United States and of any state, in and to the Trust
Estate as against the collection of the Obligations, or any
part hereof.
t. Context. In this Deed of Trust, whenever the context so
requires, the neuter includes the masculine and feminine, and
the singular including the plural, and vice versa.
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u. Time. Time is of the essence of each and every term, covenant
and condition hereof. Unless otherwise specified herein, any
reference to "days" in this Deed of Trust shall be deemed to
mean "calendar days."
v. Interpretation. As used in this Deed of Trust unless the
context clearly requires otherwise: The terms "herein" or
"hereunder" and similar terms without reference to a
particular section shall refer to the entire Deed of Trust and
not just to the section in which such terms appear; the term
"lien" shall also mean a security interest, and the term
"security interest" shall also mean a lien.
w. Effect of NRS Section 107.030. To the extent not inconsistent
herewith, the provisions of NRS Section 107.030 are included
herein by reference.
x. Amendments. This Deed of Trust cannot be waived, changed,
discharged or terminated orally, but only by an instrument in
writing signed by the party against whom enforcement of any
waiver, change, discharge or termination is sought and only as
permitted by the provisions of the Credit Agreement.
ARTICLE 7.
POWER OF ATTORNEY
a. Grant of Power. Trustor irrevocably appoints Beneficiary and
any successor thereto as its attorney-in-fact (which
appointment Trustor hereby acknowledges is coupled with an
interest), with full power and authority, including the power
of substitution, exercisable only during the continuance of an
Event of Default to act for Trustor in its name, place and
stead as hereinafter provided:
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i. Possession and Completion. To take possession of the
Site and the Improvements, remove all employees,
contractors and agents of Trustor therefrom, complete
or attempt to complete the work of construction, and
market, sell or lease the Site and the Improvements.
ii. Plans. To make such additions, changes and
corrections in the current Plans and Specifications as
may be necessary or desirable, in Beneficiary's
reasonable discretion, or as it deems proper to
complete the Main Project.
iii. Employment of Others. To employ such contractors,
subcontractors, suppliers, architects, inspectors,
consultants, property managers and other agents as
Beneficiary, in its discretion, deems proper for the
completion of the Main Project, for the protection or
clearance of title to the Site or Personal Property,
or for the protection of Beneficiary's interests with
respect thereto.
iv. Security Guards. To employ watchmen to protect the
Site and the Improvements from injury.
v. Compromise Claims. To pay, settle or compromise all
bills and claims then existing or thereafter arising
against Trustor, which Beneficiary, in its discretion,
deems proper for the protection or clearance of title
to the Site or Personal Property, or for the
protection of Beneficiary's interests with respect
thereto.
vi. Legal Proceedings. To prosecute and defend all
actions and proceedings in connection with the Site or
the Improvements.
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vii. Other Acts. To execute, acknowledge and deliver all
other instruments and documents in the name of Trustor
that are necessary or desirable, to exercise Trustor's
rights under all contracts concerning the Site or the
Improvements, including, without limitation, under any
Space Leases, and to do all other acts with respect to
the Site or the Improvements that Trustor might do on
its own behalf, as Beneficiary, in its reasonable
discretion, deems proper.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, Trustor has executed this Deed of Trust,
Assignment of Rents and Leases and Security Agreement to be effective as of
the day and year first above written.
TRUSTOR: ALADDIN GAMING, LLC,
a Nevada limited-liability company,
as Trustor
By: /s/ Ronald Dictrow
------------------------------
Ronald Dictrow,
Secretary
S-1
<PAGE>
ACKNOWLEDGMENT
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 26th day of February in the year 1998 before me, the
undersigned, a Notary Public in and for said State, personally appeared Ronald
Dictrow, personally known to me or proved to me on the basis of satisfactory
evidence to be the individual whose name is subscribed to the within
instrument and acknowledged to me that he/she executed same in his/her
capacity, and that by his/her signature on the instrument, the entity upon
behalf of which the individual acted, executed the instrument.
/s/ Dawn M. Schoenig
- ---------------------
Notary Public
My commission expires: August 3, 1999
Notarial Seal:
<PAGE>
EXHIBIT A
Legal Description of the Site
A-1
<PAGE>
Table of Contents
Section Page
ARTICLE 1
COVENANTS OF TRUSTOR
1.1 Performance of Loan Documents. . . . . . . . . . . . . . . . 10
1.2 General Representations, Covenants and Warranties. . . . . . 10
1.3 Compliance With Legal Requirements.. . . . . . . . . . . . . 10
1.4 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.5 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.5.1 Hazard Insurance Requirements and Proceeds.. . . . 11
1.5.2 Notices Regarding Insurance Policies.. . . . . . . 11
1.6 Condemnation.. . . . . . . . . . . . . . . . . . . . . . . . 11
1.7 Care of Trust Estate.. . . . . . . . . . . . . . . . . . . . 12
1.8 Leases. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.9 Further Encumbrance. . . . . . . . . . . . . . . . . . . . . 13
1.10 Actions with Respect to Permitted Liens. . . . . . . . . . . 13
1.11 Partial Releases of Trust Estate.. . . . . . . . . . . . . . 14
1.12 Further Assurances.. . . . . . . . . . . . . . . . . . . . . 15
1.13 Security Agreement and Financing Statements. . . . . . . . . 15
1.13.1 Fixture Filing. . . . . . . . . . . . . . . . . . 16
1.13.2 Remedies. . . . . . . . . . . . . . . . . . . . . 16
1.13.3 Derogation of Real Property. . . . . . . . . . . . 16
1.13.4 Priority; Permitted Financing of Tangible
Collateral. . . . . . . . . . . . . . . . . . . . 17
1.13.5 Presentation of Contractual Rights of Collateral.. 17
1.13.6 Removal of Collateral. . . . . . . . . . . . . . . 17
1.13.7 Change of Name. . . . . . . . . . . . . . . . . . 18
1.14 Assignment of Rents and Leases. . . . . . . . . . . . . . . 18
1.15 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 18
1.16 Beneficiary's Cure of Trustor's Default. . . . . . . . . . . 19
1.17 Defense of Actions.. . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 2
CORPORATE LOAN PROVISIONS
2.1 Interaction with Credit Agreement. . . . . . . . . . . . . . 20
2.1.1 Incorporation by Reference.. . . . . . . . . . . . 20
2.1.2 Conflicts . . . . . . . . . . . . . . . . . . . . 20
i
<PAGE>
2.2 Other Collateral.. . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 3
DEFAULTS
3.1 Event of Default.. . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 4
REMEDIES
4.1 Acceleration of Maturity.. . . . . . . . . . . . . . . . . . 21
4.2 Protective Advances. . . . . . . . . . . . . . . . . . . . . 21
4.3 Institution of Equity Proceedings. . . . . . . . . . . . . . 21
4.4 Beneficiary's Power of Enforcement.. . . . . . . . . . . . . 21
4.5 Beneficiary's Right to Enter and Take Possession,
Operate and Apply Income. . . . . . . . . . . . . . . . . . 23
4.6 Leases.. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.7 Purchase by Beneficiary. . . . . . . . . . . . . . . . . . . 24
4.8 Waiver of Appraisement, Valuation, Stay, Extension and
Redemption Laws.. . . . . . . . . . . . . . . . . . . . . . 24
4.9 Receiver. . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.10 Suits to Protect the Trust Estate. . . . . . . . . . . . . . 25
4.11 Proofs of Claim. . . . . . . . . . . . . . . . . . . . . . . 25
4.12 Trustor to Pay the Notes on Any Default in Payment:
Application of Monies by Beneficiary. . . . . . . . . . . . 26
4.13 Delay or Omission; No Waiver.. . . . . . . . . . . . . . . . 26
4.14 No Waiver of One Default to Affect Another.. . . . . . . . . 26
4.15 Discontinuance of Proceedings; Position of Parties Restored. 27
4.16 Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . 27
4.17 Interest After Event of Default. . . . . . . . . . . . . . . 28
4.18 Foreclosure; Expenses of Litigation. . . . . . . . . . . . . 28
4.19 Deficiency Judgments.. . . . . . . . . . . . . . . . . . . . 28
4.20 Waiver of Jury Trial.. . . . . . . . . . . . . . . . . . . . 29
4.21 Exculpation of Beneficiary.. . . . . . . . . . . . . . . . . 29
ARTICLE 5
ii
<PAGE>
RIGHTS AND RESPONSIBILITIES OF TRUSTEE;
OTHER PROVISIONS RELATING TO TRUSTEE
5.1 Exercise of Remedies by Trustee. . . . . . . . . . . . . . . 29
5.2 Rights and Privileges of Trustee.. . . . . . . . . . . . . . 29
5.3 Resignation or Replacement of Trustee. . . . . . . . . . . . 30
5.4 Authority of Beneficiary.. . . . . . . . . . . . . . . . . . 30
5.5 Effect of Appointment of Successor Trustee.. . . . . . . . . 30
5.6 Confirmation of Transfer and Succession. . . . . . . . . . . 30
5.7 Exculpation. . . . . . . . . . . . . . . . . . . . . . . . . 31
5.8 Endorsement and Execution of Documents.. . . . . . . . . . . 31
5.9 Multiple Trustees. . . . . . . . . . . . . . . . . . . . . . 31
5.10 Terms of Trustee's Acceptance. . . . . . . . . . . . . . . . 31
5.10.1 Delegation.. . . . . . . . . . . . . . . . . . . . 31
5.10.2 Counsel. . . . . . . . . . . . . . . . . . . . . . 31
5.10.3 Security.. . . . . . . . . . . . . . . . . . . . . 31
5.10.4 Costs and Expenses.. . . . . . . . . . . . . . . . 32
5.10.5 Release. . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE 6
MISCELLANEOUS PROVISIONS
6.1 Heirs, Successors and Assigns Included in Parties. . . . . . 32
6.2 Addresses for Notices, Etc.. . . . . . . . . . . . . . . . . 32
6.3 Headings.. . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.4 Invalid Provisions to Affect No Others. . . . . . . . . . . 33
6.5 Changes and Priority Over Intervening Liens. . . . . . . . . 34
6.6 Estoppel Certificates. . . . . . . . . . . . . . . . . . . . 34
6.7 Waiver of Setoff and Counterclaim. . . . . . . . . . . . . . 34
6.8 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . 34
6.9 Required Notices.. . . . . . . . . . . . . . . . . . . . . . 35
6.10 Reconveyance.. . . . . . . . . . . . . . . . . . . . . . . . 35
6.11 Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . . 35
6.12 Late Charges.. . . . . . . . . . . . . . . . . . . . . . . . 35
6.13 Cost of Accounting.. . . . . . . . . . . . . . . . . . . . . 35
6.14 Right of Entry. . . . . . . . . . . . . . . . . . . . . . . 36
6.15 Corrections. . . . . . . . . . . . . . . . . . . . . . . . . 36
6.16 Statute of Limitations. . . . . . . . . . . . . . . . . . . 36
6.17 Subrogation. . . . . . . . . . . . . . . . . . . . . . . . . 36
6.18 Joint and Several Liability. . . . . . . . . . . . . . . . . 36
iii
<PAGE>
6.19 Homestead. . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.20 Context. . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.21 Time.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.22 Interpretation. . . . . . . . . . . . . . . . . . . . . . . 37
6.23 Effect of NRS Section 107.030. . . . . . . . . . . . . . . . 37
6.24 Amendments.. . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE 7
POWER OF ATTORNEY
7.1 Grant of Power. . . . . . . . . . . . . . . . . . . . . . . 37
7.1.1 Possession and Completion. . . . . . . . . . . . . 37
7.1.2 Plans. . . . . . . . . . . . . . . . . . . . . . . 37
7.1.3 Employment of Others.. . . . . . . . . . . . . . . 37
7.1.4 Security Guards. . . . . . . . . . . . . . . . . . 37
7.1.5 Compromise Claims. . . . . . . . . . . . . . . . . 38
7.1.6 Legal Proceedings. . . . . . . . . . . . . . . . . 38
7.1.7 Other Acts.. . . . . . . . . . . . . . . . . . . . 38
EXHIBIT A LEGAL DESCRIPTION OF THE SITE
iv
<PAGE>
Music Project Memorandum of Understanding
Aladdin Gaming, LLC
Proposed Development
of the
Sound Asylum Hotel and Casino
Las Vegas, Nevada
Memorandum of Understanding and Letter of Intent
As of September 2, 1997
Set forth below is the Memorandum of Understanding and Letter of Intent ("MOU")
between Planet Hollywood International, Inc. ("PH") and Aladdin Gaming, LLC
("Aladdin") relating to the planned Sound Asylum Hotel and Casino to be
constructed at the corner of Audrie Street and Harmon Avenue in Las Vegas,
Nevada. Except as otherwise specified herein, this MOU is a non-binding upon
either party.
Project size; scope and site: 1,000 room hotel with an approximately 50,000
square foot casino on the corner of Audrie
Street and Harmon Avenue in Las Vegas (the
"Hotel"). The site is approximately 4.7 acres.
All parking and central utilities will be
purchased from affiliated entities via a
parking agreement and a utility metering
agreement. The site will also be subject to a
reciprocal easement agreement with Aladdin
Bazaar, LLC (the "Shopping Mall") and Aladdin
Hotel and Casino, LLC (the "Aladdin Hotel"), a
wholly owned subsidiary of Aladdin.
Theme: PH's new music theme currently anticipated to
be named "Sound Asylum".
Corporate organization: Aladdin shall form Aladdin Music, LLC, a
Nevada limited liability company (the "LLC").
Board of Directors, corporate
governance and management: Except as set forth below, the Board of
Directors shall be voted upon by all holders
of greater than 10% of the issued and
outstanding common stock of the LLC. However,
so long as PH has not exercised its right to
purchase common stock of the LLC pursuant to
its Warrant, as hereinafter defined, then PH
shall be entitled to appoint one member to the
Board of Directors in order to protect its
tradenames and trademarks. At such time as PH
exercises its right to
<PAGE>
Memorandum of Understanding and Letter of Intent
As of September 2, 1997
Page 2
- --------------------------------------------------------------------------------
purchase common stock of the LLC and votes its
shares in the election of the Board of
Directors, its right to appoint one such
member of the Board of Directors shall be
terminated. The Board of Directors shall have
a maximum of four members. Certain matters (to
be determined by PH) deemed necessary to
protect PH's trademarks and tradenames shall
require the affirmative vote of a
super-majority of 80% of the Board of
Directors for approval. Such items deemed
necessary to protect PH's trademarks and
tradenames may include, but not be limited to,
all major financial and operational decisions,
approval of the annual budget, adopting a
management compensation and stock option plan
and approving certain items as described and
set forth in the section labeled Reciprocal
Easement Agreement.
Executive management of the Hotel will report
to management of Aladdin of which Richard
Goeglein is the President and Chief Executive
Officer. Management of Aladdin will in turn
report to the Board of Directors of the LLC.
All corporate events outside the ordinary
course of business shall be approved by the
Board of Directors. The Board of Directors
shall have regular meetings, at least
quarterly, at which time management of the
Hotel and Aladdin shall advise the Board of
Directors as to the Hotel's operations and
financial condition as well as submit for
Board approval and consideration any items
that require the advice and consent of the
Board. The LLC agreement shall detail a
schedule of items that require the advice and
consent of the Board of Directors. The
affirmative vote of at least a majority of the
Board of Directors is necessary to approve any
proposal.
Name of the Hotel: At the option of Aladdin, the name of the
Hotel may be either the Sound Asylum (or other
name adopted by PH for its music concept
theme, however, for the purposes of this
memorandum such name, whether Sound Asylum or
other name selected by PH, shall be referred
to as Sound Asylum) or another name mutually
agreed upon by PH and Aladdin. However, in the
event that the name of the Hotel is not Sound
Asylum, then a Sound Asylum restaurant and
showroom shall
<PAGE>
Memorandum of Understanding and Letter of Intent
As of September 2, 1997
Page 3
- --------------------------------------------------------------------------------
be a featured as the Hotel's main attraction.
To the extent that the name of the Hotel is
not the Sound Asylum, then the name of the
Hotel shall be the property of PH for use on
other hotels other than in Clark County.
Contribution of Aladdin Aladdin shall contribute the following to the
Gaming to the LLC: LLC:
(i) Approximately 4.7 acres at the corner of
Audrie Street and Harmon Avenue (the "Land"),
(ii) the TPA Lease (as hereinafter defined),
(iii) the Parking Lease (as hereinafter
defined),
(iv) the Utility Agreement (as hereinafter
defined),
(v) the Reciprocal Easement Agreement (as
hereinafter defined),
(vi) the Management Agreement (as hereinafter
defined),
(vii) the Aladdin Hotel Management Services
Agreement and
(viii) $21.25 million in cash.
Contribution of
PH to the LLC: PH shall contribute the following to the LLC:
(i) $41.25 million,
(ii) all rights and trade name/trademark
agreements necessary for the Hotel to operate
as the Sound Asylum Hotel and maintain a Sound
Asylum restaurant on its premises and
(iii) the Marketing and Consulting Agreement
(as hereinafter defined).
Form of Interest Purchased By As hereinafter defined, Convertible Preferred
Aladdin Gaming: Stock and Common Stock.
Form of Interest Purchased by As herein defined, Subordinated Debt and
Warrants.
<PAGE>
Memorandum of Understanding and Letter of Intent
As of September 2, 1997
Page 4
- --------------------------------------------------------------------------------
PH:
The TPA Lease: The Aladdin Theater for the Performing Arts
(the "TPA") shall be leased from Aladdin to
the LLC for a period of at least 30 years for
nominal annual rent. Such lease shall be a
triple net lease and will contain provisions
relating to the Aladdin's right to leaseback
the TPA for a reasonable number of weekend
nights, holiday nights, weekday nights and
days to promote special events. The leaseback
price shall be the daily "going rate" lease
amount charged to non-related third parties
for similar time periods. In addition, the TPA
Lease shall contain provisions for cooperation
and coordination between the LLC, the Shopping
Mall and the Aladdin Hotel relating to
promotion and security of the TPA. Management
of the Aladdin Hotel and the Hotel shall work
together in a cooperative mode with the common
goal to maximize utilization of the TPA
throughout the year and for all "day-parts".
Pursuant to the TPA Lease, the LLC shall have
the obligation to use its good faith business
efforts to maximize the utilization of the
TPA. In addition, the LLC shall have the
obligation to renovate the TPA for a
"reopening" of the facility on the date that
the Aladdin Hotel opens for business. The
anticipated renovation costs for the TPA are
approximately $8 million of hard construction
and FF&E expenses plus "soft costs" and
construction interest expense. The LLC shall
have the obligation to maintain the TPA in a
"first class" condition during the term of the
TPA Lease. PH shall assist the LLC in
obtaining commitments to perform at TPA from
the various celebrities involved with the
promotion of the Hotel and the Sound Asylum
brand.
The Parking Lease: The Parking Lease shall be between the LLC and
the Shopping Mall and shall provide for access
to an appropriate number of parking spaces for
customers and guests of the Hotel and the TPA.
The number of parking spaces for the Hotel and
the TPA will be calculated in accordance with,
among other things, the Clark County Use
Permit governing the site and all applicable
zoning regulations. The amount of rent to be
paid by the LLC to the Shopping Mall will be
equal to the LLC's and TPA's estimated
allocable share of the use
<PAGE>
Memorandum of Understanding and Letter of Intent
As of September 2, 1997
Page 5
- --------------------------------------------------------------------------------
of the parking facilities multiplied by the
actual annual cost of operating the parking
facilities (including financing the
construction of the parking facilities and
amortization and depreciation). Such allocable
share shall be determined at the time of
executing the lease. The first year parking
rent is currently estimated to be
approximately $1.12 million, however, such
rent allocation for the parking may need to be
adjusted to reflect the TPA parking
allocation. Such additional parking rent is
anticipated to be "revenue neutral" to the
Hotel since it is anticipated to be paid for
from event ticket sales and rental income from
TPA.
The Utility Agreement: Located on the current Aladdin site will be a
co-generation or central utility plant that
will be owned and operated by an independent
third party. Such plant will provide
electricity, hot water and chilled water to
the Hotel, the Aladdin Hotel and the Shopping
Mall. Utilities purchased by the Hotel will be
metered with such rate charged to the Hotel to
be the same as that charged to the Aladdin
Hotel and the Shopping Mall. Such
co-generation facility will be of size and
scope to provide all peak demand electricity,
hot water and chilled water to the Hotel, the
Aladdin Hotel, the Shopping Mall and all other
structures on the current Aladdin site and
will contain appropriate redundancies.
The Reciprocal Easement The LLC will execute a Reciprocal Easement
Agreement: Agreement with the Shopping Mall and Aladdin
relating to (i) vehicular access and
maintenance of roads, (ii) pedestrian access,
maintenance of sidewalks and internal
circulation, (iii) the construction and rental
of abutting space by the Shopping Mall from
the Hotel and by the Hotel from the Shopping
Mall, (iv) security and reciprocal access of
Aladdin Hotel personnel and Hotel personnel
and (v) Strip signage and visibility of the
Hotel from the Strip. Through the Reciprocal
Easement Agreement, among other documents and
agreements, the Hotel, the Shopping Mall, the
Aladdin Hotel and all other structures that
are governed by the Reciprocal Easement
Agreement, will comply with, among other
things, the Clark County Use Permit governing
the site and all applicable zoning
regulations. In addition, the Reciprocal
Easement Agreement
<PAGE>
Memorandum of Understanding and Letter of Intent
As of September 2, 1997
Page 6
- --------------------------------------------------------------------------------
shall contain a specific list of actions and
items that each party to such agreement must,
prior to undertaking any of the actions or
items on such list, obtain the consent of the
other parties to such agreement, with such
consent not to be unreasonably withheld. Such
list shall contain actions and items which may
cause irreparable harm to another party to the
Reciprocal Easement Agreement. The Reciprocal
Easement Agreement shall contain appropriate
provisions to make possible a connection with
the planned Las Vegas Regional Monorail
System. In addition, to the extent that either
the Aladdin, the Shopping Mall or an affiliate
thereof is able to purchase the land adjacent
to the Aladdin and the Mall and on Las Vegas
Boulevard, (i) there shall be nothing
constructed on such site that will block
either access or reasonable visibility of the
Hotel from Las Vegas Boulevard (expansion of
the Mall in a low rise format (up to 3
stories) consistent with the architectural
character of the rest of the Mall does not
constitute blocking visibility) (ii) enhanced
pedestrian access from Las Vegas Boulevard to
the Hotel shall be constructed provided such
access is commercially reasonable, does not
interfere with the operation of either the
Mall or the Aladdin Hotel, is approved by the
Board of Directors, and is constructed at the
LLC's expense.
The Management Agreement: In exchange for providing certain management
services and promotional services, Aladdin
shall be paid fees as set forth below.
The Aladdin Hotel Management Aladdin shall provide certain management
Agreement: services to the Hotel and shall be reimbursed
for its fully allocated cost of providing such
services. Such services shall include, but not
be limited to, accounting and financial
services, MIS, general management,
investor/lender relations, promotional
services and other management services that
may be agreed upon by the LLC in the ordinary
course of business.
The Marketing and Consulting In exchange for providing certain marketing
Agreement: and consulting services, PH shall be paid fees
as set forth below. Such services shall
include arranging for a minimum amount of
promotional spots and events for the Hotel (at
no additional
<PAGE>
Memorandum of Understanding and Letter of Intent
As of September 2, 1997
Page 7
- ------------------------------------------------------------------------------
cost to the Hotel), a minimum number of guest
appearances by celebrities related to the
Hotel, and the coordination of a public
relations strategy and campaign. In addition,
PH will consult with Aladdin on the design,
development and operations of the Sound Asylum
food and beverage, entertainment and
merchandising activities at the Hotel and will
provide basic interior design and
architectural services consistent with the
services provided in connection with PH's
other themed entertainment restaurant
properties. Reasonable out-of-pocket costs
incurred by PH in connection with the
provision of interior design and architectural
services will be passed through to the LLC
without mark-up or overhead charges and all
budgets relating to the interior fit-up or the
Sound Asylum components of the Hotel will be
subject to the approval of the LLC's Board of
Directors.
PH shall be reimbursed for certain of its
costs and expenses relating to the Marketing
and Consulting Agreement. Such costs and
expenses shall include out-of-pocket expenses
as well as allocable overhead charges. PH's
expense reimbursement shall be equal to .5% of
the Hotel's net revenue (gross revenue
adjusted for complementaries) (the "PH Expense
Reimbursement") and shall be reimbursed on a
quarterly basis without supporting
documentation. In addition to the PH Expense
Reimbursement, to the extent the management of
the Hotel or the Board of Directors determines
that it is in the best interests of the Hotel
to incur certain promotional expenses relating
to reimbursing the out-of-pocket expenses
incurred by celebrities that are appearing at
the Hotel and are related to PH or Sound
Asylum (including but not limited to
complementaries at the Hotel or travel
expenses relating to a performance at the
Hotel) such expense reimbursement shall be the
obligation of the Hotel and not PH. Any such
expenses must be pre-approved in writing by
either the President of the Hotel or the
President of Aladdin prior to being incurred.
Also, to the extent that PH employees perform
special services for the Hotel or the LLC not
related to the Marketing and Consulting
Agreement or PH's investment in the LLC, and
such services are out-of the ordinary course
of business, and such employees incur travel
<PAGE>
Memorandum of Understanding and Letter of Intent
As of September 2, 1997
Page 8
- --------------------------------------------------------------------------------
or other out-of-pocket expenses, then the
Hotel shall reimburse such employees for such
expenses in accordance with the Hotel's
established expense reimbursement policy
(which may limit the type of travel, i.e.,
coach, and acceptable forms of documentation
and receipts). Any such expenses must be
pre-approved in writing by either the
President of the Hotel or the President of
Aladdin prior to being incurred.
Aladdin Fees and PH Fees (i) PH and Aladdin shall receive fees equal to
Relating to the Management 2.00% and 1.50%, respectively, of the Hotel's
Agreement and the Marketing net revenue (gross revenue adjusted for
Agreement: complementaries) on a pari passu basis, (ii)
PH shall receive an additional fee equal to 6%
of net revenue that is in excess of the net
revenue which produces EBITDA equal to $35
million (calculated using the Hotel's actual
EBITDA Margin for the period), which fee shall
be waived for any period in which EBITDA from
the Hotel is less than $35 million and (iii)
Aladdin shall receive an additional fee equal
to 6% of net revenue that is in excess of the
net revenue which produces EBITDA equal to $40
million (calculated using the Hotel's actual
EBITDA Margin for the period), which fee shall
be waived for any period in which EBITDA from
the Hotel is less than $40 million. For the
purposes of the fee calculations set forth
herein, EBITDA shall be before deducting the
fees set forth in (ii) and (iii) (the
"Additional Fees") and before any lease
payments relating to furniture, fixtures or
equipment. To the extent that EBITDA from the
Hotel exceeds the thresholds set forth in (ii)
and (iii), above, but there is either
insufficient earning or cash flow to pay any
or all of the Additional Fees, or the
providers of debt financing to the LLC
restrict the LLC's ability to pay the
Additional Fees, then the LLC shall accrue any
unpaid Additional Fees and shall pay them on a
basis that gives priority to the Additional
Fees owed to PH.
The Subordinated Debt:
Amount: $41.25 million.
Coupon: 12% per annum. The coupon must be paid out of
cash flow to the extent such cash flow is
available and the payment of
<PAGE>
Memorandum of Understanding and Letter of Intent
As of September 2, 1997
Page 9
- --------------------------------------------------------------------------------
such coupon does not violate the terms and
conditions of any senior obligations of the
LLC. To the extent the coupon is not paid
currently it shall accrue but not compound.
Term: 30 years.
Periodic principal After 10 years the Subordinated Debt shall
payments: receive annual periodic principal payments, in
arrears, equal to 1% of its original principal
balance.
Mandatory redemption: Upon the occurrence of a merger or sale of
substantially all of the assets of the LLC the
Subordinated Debt shall be redeemed at an
amount equal to the remaining outstanding
principal amount of the Subordinated Debt.
Subordination: The Subordinated Debt shall be junior to all
other debt or operating obligations of the
LLC. The Subordinated Debt shall be unsecured
and shall have no right to declare any event
of default or exercise any remedies during any
period that any senior debt is outstanding.
Accrued and Unpaid All accrued and unpaid interest upon a tender
Interest Upon a Tender or or mandatory redemption of the Subordinated
Mandatory Redemption: Debt shall remain due and owing, until
actually paid, to the holder of the
Subordinated Debt as if the Subordinated Debt
had not been tendered or redeemed.
The Warrants:
Right to purchase common The Warrants shall initially entitle PH to
stock: purchase up to 50% of the LLC's Common Stock.
Strike price: The Strike Price of the Warrants shall equal
$41.25 million for what is initially 50% of
the LLC's Common Stock. The Strike Price of
the Warrants may be paid either in cash or
through the tender of the Subordinated Debt.
To the extent that the Subordinated Debt is
tendered it shall have a value equal to the
then current outstanding face amount of such
debt and any difference between the
outstanding face amount of such debt and the
Strike Price of the Warrants shall be paid in
<PAGE>
Memorandum of Understanding and Letter of Intent
As of September 2, 1997
Page 10
- --------------------------------------------------------------------------------
cash.
Anti-dilution provisions: The Warrants shall contain anti-dilution
provisions that provide for either (i) the
payment of all dividends, other than tax
related dividends to the holder of the Warrant
as if it had fully exercised its right to
purchase the LLC's Common Stock or (ii) a two
for one increase in the amount of the LLC's
Common Stock that may be purchased for the
Strike Price. For example, if the LLC pays a
$10 million dividend to holders of its Common
Stock, the LLC has the option to pay the
holders of the Warrant either (i) $10 million
or (ii) adjust the Warrant Strike Price so
that upon a full exercise of the Warrant, the
holder of the Warrant will be able to purchase
the proportion of Common Stock equal to
((10x2)+41.25)/(41.25+41.25+10). However, as
provided in "Management Stock Options", below,
the Warrants will be diluted by the amount of
any management stock options actually granted.
Transfer restrictions: Except as set forth in the following sentence,
the Warrants shall not be transferrable (i)
without the consent of Aladdin, which consent
shall not be unreasonably withheld, (ii) to
any "Prohibited Person" or (iii) before the
opening of the Hotel. However, the Warrants
shall be transferrable in connection with the
merger of PH, the payment by PH of a
liquidating dividend to its shareholders, the
spin-off or spin-out by PH of its interest in
the LLC to its shareholders or the sale or
liquidation of substantially all of the assets
of PH. The Warrants may not be transferred to
any person except as a unit with the
Subordinated Debt in a simultaneous transfer
to the same person. A "Prohibited Person"
shall be any person that the Nevada Gaming
authorities do not find suitable for obtaining
a gaming license. No transfer is effective
until the Nevada Gaming authorities confirm
that such transferee is suitable for obtaining
a gaming license.
The Convertible Preferred Aladdin shall purchase the Convertible
Stock: Preferred Stock in exchange for its
contribution to the LLC
Face Amount: $41.25 million.
<PAGE>
Memorandum of Understanding and Letter of Intent
As of September 2, 1997
Page 11
- --------------------------------------------------------------------------------
Coupon: 12% per annum. To the extent the coupon is not
paid currently it shall accrue but not
compound.
Optional Conversion: At any time into 50% of the LLC's Common Stock
(subject to any adjustment required by either
the grant of management stock options or the
anti-dilution provisions of the Warrants).
Mandatory Conversion: Upon the exercise of the Warrants, the
Convertible Preferred Stock shall be
mandatorily converted into 50% of the LLC's
Common Stock (subject to any adjustment
required by either the grant of management
stock options or the anti-dilution provisions
of the Warrants).
Accrued and Unpaid All accrued and unpaid dividends upon a
Dividends Upon a conversion of the Convertible Preferred Stock
Conversion to Common into Common Stock of the LLC shall remain due
Stock: and owing, until actually paid, to the holder
of the Convertible Preferred Stock as if the
Convertible Preferred Stock had not been
converted.
Term: Perpetual.
Transfer restrictions: Except as set forth in the following sentence,
the Convertible Preferred Stock shall not be
transferrable without (i) the consent of PH,
which consent shall not be unreasonably
withheld, (ii) to any Prohibited Person, or
(iii) before the opening of the Hotel.
However, the Convertible Preferred Stock shall
be transferable in connection the merger of
Aladdin, the sale or liquidation of
substantially all of the assets of Aladdin,
the payment by Aladdin to its shareholders of
a liquidating dividend, the spin-off or
spin-out by Aladdin to its shareholders of its
interest in Convertible Preferred Stock or the
initial public offering of Aladdin. No
transfer is effective until the Nevada Gaming
authorities confirm that such transferee is
suitable for obtaining a gaming license. In
addition, all costs of gaming licensure for
either Aladdin or PH will be payable at each
parties sole cost and expense.
Management stock options: To the extent that all members of the Board of
Directors determine that it is in the best
interests of the Hotel to offer to key members
of management stock grants, warrants or stock
<PAGE>
Memorandum of Understanding and Letter of Intent
As of September 2, 1997
Page 12
- --------------------------------------------------------------------------------
options as a form of compensation, the amount
of dilution represented by such compensation
shall be shared ratably by the Warrants and
the Convertible Preferred Stock.
The LLC Common Stock: At the time of formation of the LLC, Aladdin
shall purchase all of the issued and
outstanding shares of Common Stock of the LLC
for nominal consideration.
Miscellaneous:
Right of first negotiation If either Aladdin or PH decides that it
on the sale of interest in desires to sell, convey or otherwise liquidate
the LLC: its interest in the LLC, other than in
connection with the merger, sale or
liquidation of substantially all of its
assets, the payment of a liquidating dividend
to shareholders, a spin-off or spin-out to
shareholders or initial public offering of
stock, then the other party shall have a 30
day exclusive period to negotiate for the
purchase of such interest to be sold. At the
end of such 30 day period the non-selling
party shall have no rights, in law or equity,
other than those outlined above in "Transfer
Restrictions", relating to the sale of such
interest.
Opening dates for the The parties shall agree upon an appropriate
Aladdin Hotel and the opening date for the Hotel and Aladdin shall
Hotel: commit to a date by which the Aladdin Hotel
shall be opened. It is currently anticipated
that the opening date for the Hotel shall not
be more than six months before or after the
opening date of the Aladdin Hotel.
Land condominiumization: The land underlying the Hotel shall initially
be owned by Aladdin subject to a lease to the
LLC at a nominal rent. Ownership of the Land
underlying the Hotel together with the LLC's
rights under the Reciprocal Easement Agreement
and other related agreements shall be
converted into an ownership interest under a
condominium regime as soon as possible and
practical following construction of the Hotel.
The costs of such condominiumization shall be
shared by the LLC based upon the Hotel's pro
rata amount of acreage to the overall
condominiumization plan for the entire current
Aladdin site.
<PAGE>
Memorandum of Understanding and Letter of Intent
As of September 2, 1997
Page 13
- --------------------------------------------------------------------------------
Pre-development Upon execution of the LLC agreement, both PH
expenses: and Aladdin shall contribute equally to the
funding of pre-development expenses including,
but not limited to, architectural and
pre-construction expenses. All pre-development
expense shall be subject to a budget that is
reasonably agreed upon between Aladdin and PH.
Such pre-development expenses shall include
expenses incurred after execution of this
agreement but prior to the execution of the
LLC agreement. Such expenses shall not include
legal fees or the fees of financial advisors
in connection with the negotiation or
execution of the LLC agreement but shall
include expenses such as architectural and
design expenses. Upon the completion of the
major portion of the funding of the LLC, e.g.,
debt, all such legal and financial advisory
fees shall be the obligation of the LLC. The
aggregate of pre-development expenses
(excluding legal and financial advisory fees)
incurred after execution of this agreement but
prior to execution of the LLC agreement shall
be limited to $100,000.
Financial advisors: Each of PH and Aladdin agree that Westwood
Capital shall act as the LLC's financial
advisor for the purpose of securing
appropriate financing commitments. Upon the
formation of the LLC, Westwood Capital and the
LLC shall execute an engagement letter that
sets forth the fees payable to Westwood
Capital. Such fees and terms of engagement
shall be materially the same as those under
which Westwood Capital acts as the financial
advisor to Aladdin Gaming. As part of its due
diligence, PH shall have the right to review
and reasonably approve such engagement letter.
Financial guarantees: It is understood that the lenders to the
project may require certain cash flow
maintenance and construction completion
guarantees. The LLC will attempt to mitigate
such construction completion guarantees
through a guaranteed fixed price
"design/build" contract from a construction
company, currently anticipated to be Fluor
Corporation and a guarantee from Aladdin. The
LLC will attempt to limit the amount and term
of any cash flow maintenance guarantees that
may be required from the parties but the
parties acknowledge that certain guarantees
may be necessary from
<PAGE>
Memorandum of Understanding and Letter of Intent
As of September 2, 1997
Page 14
- --------------------------------------------------------------------------------
each of them to achieve appropriate financing
for the project; provided, however, that
Aladdin hereby acknowledges PH's extreme
reluctance to be required to provide such cash
flow maintenance guarantees. In order to
induce PH to consider providing such cash flow
maintenance guarantees, Aladdin Holdings, LLC
will consider indemnifying PH for any or all
exposure it may be required to bear under such
cash flow maintenance guarantee. In addition,
Aladdin acknowledges that after due diligence
PH may require either another affiliate of
Aladdin Holdings, LLC to also provide such
indemnity. With regard to indemnities provided
by Aladdin Holdings, LLC or other parties,
Aladdin Holdings, LLC or such other party will
execute all documents necessary for PH to be
assured of appropriate indemnification.
Exclusive period: Upon the execution of this letter and until
October 15, 1997 (the "Exclusive Period"),
Aladdin agrees not to negotiate with any other
party in connection with the development of
the Land and PH agrees not to negotiate for
the development of any restaurant or hotel
that will be connected with the Sound Asylum
concept in Clark County, Nevada. The parties
will use their best efforts, with time being
of the essence, to complete and execute a
binding agreement setting forth the foregoing
by the conclusion of the Exclusive Period. If
however, both parties agree that the Hotel is
not economically feasible prior to October 15,
1997, then the Exclusive Period shall
terminate on such date. This provision is
binding upon the parties.
Due diligence: During the Exclusive Period, each of Aladdin
and PH agree to grant the other the right to
perform reasonable due diligence for the
purpose of entering into the LLC. Reasonable
due diligence on the part of PH includes
access to all Aladdin personnel and
representatives and books and records of
Aladdin and the personnel and representatives
of the Shopping Mall. Reasonable due diligence
on the part of Aladdin on PH includes access
to all of PH's personnel and representatives,
contracts and other agreements (executed,
being negotiated, planned or under
consideration) and books and records relating
to the Sound Asylum or otherwise
<PAGE>
Memorandum of Understanding and Letter of Intent
As of September 2, 1997
Page 15
- --------------------------------------------------------------------------------
materially impacted upon PH's execution of its
expected obligations under the various
agreements relating to the LLC and the Hotel.
Confidentiality: Except as otherwise compelled by a court of
competent jurisdiction, each of PH and Aladdin
agree to keep this agreement and all matters
relating to this agreement confidential. Each
party may, however, disclose this agreement
and related matters to affiliates and
representatives and agents of themselves (or
in the case of the Aladdin to representatives
of the Shopping Mall, LCI and financing
sources for the Aladdin Hotel) solely for the
purpose of performing due diligence, obtaining
required consents, negotiating the LLC or
determining the economic feasibility of the
Hotel. To the extent either party discloses
this agreement to representatives or agents or
representatives of the Shopping Mall, it shall
inform such representatives and agents as to
the confidential nature of such disclosure. It
is understood that Aladdin, and its parent,
Aladdin Holdings, LLC, are pursuing the
transaction described herein in part to be
able to make reference to PH's participation
in the Hotel so as to facilitate the leasing
of the Shopping Mall. Consequently, every
effort will be made, provided it does not
jeopardize PH's business operations in any
way, and in PH's sole discretion, to permit
Aladdin to publically discuss the proposed
development of the Hotel with PH at the
earliest possible date. This provision is
binding upon the parties.
<PAGE>
Memorandum of Understanding and Letter of Intent
As of September 2, 1997
Page 16
- --------------------------------------------------------------------------------
AGREED AND ACCEPTED AS OF THE DATE HEREOF:
ALADDIN GAMING, LLC
By: /s/ Jack Sommer
---------------------------
Jack Sommer, Chairman
ALADDIN HOLDINGS, LLC
By: /s/ Jack Sommer
---------------------------
Jack Sommer, Vice President
PLANET HOLLYWOOD INTERNATIONAL, INC.
By: /s/ Robert Earl
--------------------------------------
Robert Earl, Chief Executive Officer
<PAGE>
Amendment to Music Project Memo. of Understanding
Planet Hollywood International, Inc.
7380 Sand Lake Road
Suite 650
Orlando, FL 32819
October 15, 1997
Aladdin Gaming LLC
Project Development Office
3667 Las Vegas Boulevard South
Las Vegas, NV 89109
Attention:
Sound Asylum Hotel and Casino
Amendment to Memorandum of Understanding and Letter of Intent
Dear Sirs:
Reference is made to the Memorandum of Understanding and Letter of Intent
dated as of September 2, 1997 (the "Letter of Intent"), between us and you.
Terms used but not defined in this letter agreement have the meanings assigned
thereto in the Letter of Intent.
You and we hereby agree that the last sentence of the first paragraph and
the section under the caption "Exclusive Period" in the Letter of Intent shall
be deleted in their entirety. You and we also agree that the following sections
shall be added at the end of the Letter of Intent immediately prior to the
signature block:
"Binding Agreement; The parties will use their best efforts
Documentation: promptly to complete and execute all
agreements and other documents that may be
reasonably necessary to carry out the
provisions of this MOU. Such agreements will
contain, among other things, such terms,
covenants, representations, warranties and
conditions as are customary for transactions
of this nature. However, it is expressly
agreed that our agreement set forth in this
MOU is not conditioned upon the signing of any
such agreements or other documents, but is
intended to create a legally binding
obligation of each of us, subject only to the
conditions that (i) on or prior to December
31, 1997, the LLC shall have obtained written
proposal(s) from one or more lenders with
respect to at least $120 million of
conventional construction financing at an
interest rate not
<PAGE>
exceeding 10% per annum and containing such
other terms, covenants, representations,
warranties and conditions as are customary for
transactions of this nature (the "Financing")
and (ii) on or prior to March 31, 1998, the
LLC shall have obtained written commitment(s)
from one or more lenders to provide the
Financing.
Purchase Right and If (a) either party, any beneficial owner of
Indemnity in Event of an interest in either party, or any officer or
Licensing Problem: director of either party is denied a gaming
license or is found unsuitable or unqualified
to have a gaming license pursuant to a
determination by the Nevada Gaming Authorities
and (b) such problem is not cured within 30
days after such determination (by transferring
the interest of such party or beneficial
owner, by terminating such officer or
director, or otherwise), the other party may
elect within 120 days (or such shorter period
as may be required by the Nevada Gaming
Authorities) to purchase the entire interest
of such party in the LLC at a price equal to
the fair market value of such interest (as
determined by a qualified independent
appraiser). Each party will indemnify the
other party from and against all losses,
claims, damages and liabilities arising out of
or based upon any determination by the Nevada
Gaming Authorities referred to in clause (a)
above (whether or not final).
Disputes: If any controversy, dispute or claim shall
arise under this MOU, such controversy,
dispute or claim shall be determined by
arbitration conducted in New York City, before
one arbitrator and in accordance with the
then-existing Rules for Commercial Arbitration
of the American Arbitration Association (the
"Rules"), and any judgment or award rendered
by the arbitrator shall be final, binding and
unappealable, and judgment may be entered by
any court having jurisdiction thereof. The
parties hereby agree to the institution of any
available "fast track" or other mechanisms or
procedures that would have the effect of
streamlining or increasing the speed of the
arbitration. The parties hereto intend that
the provisions to arbitrate set forth herein
be valid, enforceable and irrevocable. In his
award the arbitrator shall allocate, in his
discretion, among the parties to the
arbitration at all costs of the arbitration,
including the fees and expenses of the
arbitrator and reasonable attorneys' fees,
costs and expert witness expenses of the
parties. The parties hereto agree to comply
with any award made in any such arbitration
proceedings that has become final in
accordance with the Rules and agree to the
entry of a judgment in any jurisdiction upon
any award rendered in such proceedings
becoming final under the Rules. The arbitrator
shall be entitled, if appropriate, to award
any remedy in such proceedings, including
monetary damages, specific performance,
temporary restraining order, preliminary
2
<PAGE>
injunction, injunction and all other forms of
legal and equitable relief, including punitive
damages."
If the foregoing meets with your approval, please evidence your acceptance
by executing the enclosed copy of this letter agreement. This letter agreement
may be signed in any number of counterparts, each of which shall be an original
and all of which, when taken together, shall constitute one agreement. Delivery
of an executed counterpart of a signature page of this letter by facsimile
transmission shall be effective as delivery of a manually executed counterpart
hereof.
Sincerely,
PLANET HOLLYWOOD INTERNATIONAL,
INC.,
By: /s/ Robert Earl
---------------------------------
Name: Robert Earl
Title: Chief Executive Officer
ACCEPTED AND AGREED:
ALADDIN GAMING, LLC,
By: /s/ Jack Sommer
--------------------------
Name: Jack Sommer
Title: Chairman
ALADDIN HOLDINGS, LLC,
By: /s/ Jack Sommer
--------------------------
Name: Jack Sommer
Title: Vice President
3
<PAGE>
GAI Consulting Agreement
ALADDIN GAMING, LLC
CONSULTING AGREEMENT
This consulting agreement (the "Agreement") is made between and among
Aladdin Gaming, LLC (the "Company"), Aladdin Holdings, LLC ("Aladdin Holdings")
and GAI, LLC ("Consultant"). The Company desires to retain Consultant as an
independent contractor to perform consulting services for the Company and
Consultant is willing to perform such services, on terms set forth more fully
below. In consideration of the mutual promises contained herein, the parties
agree as follows.
1. Commencement Date; Term. Consultant's provision of services to the
Company pursuant to this Agreement shall commence on January 1, 1997 (the
"Effective Date") and shall continue for five years and six months thereafter
subject to the terms and conditions herein set forth (the "Consulting Term").
2. Services to be Rendered. The Company shall engage the Consultant to
render such consulting services as are reasonably requested by the Board of
Directors of the Company (the "Board").
3. Employee Benefits. Consultant acknowledges and agrees and it is the
intent of the parties hereto that Consultant receive no Company-sponsored
benefits from the Company either as a Consultant or employee. Such benefits
include, but are not limited to, paid vacation, sick leave, medical insurance,
and 401(k) participation.
4. Compensation.
(a) Retainer. During the Consulting Term, the Company shall pay to
Consultant, on the first day of each month, a retainer of $12,500 as payment for
remaining on call to provide services and expertise for such month (as in effect
from time to time, the "Base Rate"). Such Base Rate shall not be reduced.
(b) LLC Membership Interest Purchase.
(i) Initial Purchase. On the date of signing of this Agreement
by the parties hereto, Consultant shall purchase a membership interest equal to
three percent of the total membership interest of the Company, for a purchase
price of $1800, which amount equals 100% of the fair market value of
Consultant's membership interest on the date of purchase (the "Membership
Interest"). The Membership Interest shall be 100% vested as of the date of
purchase.
(ii) Anti-Dilution Purchases. Upon the Company's closing of a
financing transaction or transactions involving the sale of membership
interests, equity (or securities convertible into membership interests or
equity) of the Company (a "Financing Transaction"), and if Consultant is still
providing services to the Company upon such closing date or dates, Consultant
shall have the right to purchase that number of such instruments that would
result in Consultant
<PAGE>
being able to purchase, in the aggregate, (including pursuant to Consultant's
initial purchase under the preceding paragraph) three percent of the
fully-diluted membership interest or equity of the Company, as measured on the
date of such closing or closings; provided, however, that such right to purchase
shall only be effective with respect to non-compensatory Financing Transactions
(i.e., Consultant shall not have the right to make anti-dilutive purchases with
respect to ordinary course of business compensatory sales of stock or membership
interests to Company employees). Any such right of Consultant to make an
anti-dilutive purchase of stock hereunder shall be at the most favorable price
and on the most favorable terms and conditions as are provided to any party in
the Financing Transaction. For purposes of this Agreement, "fully diluted equity
of the Company" shall mean the aggregate amount of membership interests (or the
aggregate number of shares of all outstanding common and preferred stock) plus
the aggregate amount of membership interests (or the number of shares of common
and preferred stock) that could be obtained through the exercise or conversion
of rights, options, warrants and convertible securities (other than employee
equity compensation). Notwithstanding the foregoing, Consultant shall not have
the right to make anti-dilutive purchases (i) in any Financing Transaction in
which Consultant's equity ownership interest in the Company is diluted to the
same extent as the equity interest in the Company held by The Trust Under
Article Sixth u/w/o Sigmund Sommer or its affiliates (the "Trust"),or (ii) as a
result of any sales or transfers arising as a result of the death of Mrs. Viola
Sommer or for the purpose of satisfying attendant estate tax liabilities.
(iii) Put Right. In the event that, that (i) the IPO has not
occurred by the end of the Consulting Term, or (ii) during the Consulting Term,
Richard J. Goeglein is terminated from his employment with the Company other
than for "Cause" or voluntarily terminates for "Good Reason" (both as defined in
Section 9 of the employment agreement by and between Richard J. Goeglein and the
Company (the "Employment Agreement")) on or after the date upon which
substantially complete project financing sufficient for substantially full
renovation and construction has been secured for the Aladdin Hotel and Casino
Redevelopment and Expansion project set forth in the presentation to GW Vegas
prepared by Westwood Capital LLC and dated July 1996 (or as subsequently
modified) and as finally approved by the Clark County Commission (the
"Funding"), then Consultant shall have the right (but not the obligation) to
sell any shares purchased hereunder back to the Company on the date that is the
one year anniversary of the date of such termination of employment or end of the
Consulting Term (the "Anniversary Date") (so long as the IPO has not occurred by
such date) at a price equal to the fair market value of such shares on the
Anniversary Date, as determined by an independent appraisal firm mutually agreed
to by and between the Company and Consultant, with the costs of such appraisal
being paid by the Company (the "Put Right"). The Put Right must be exercised in
writing by Consultant by the Anniversary Date or it shall become void and
without further effect. If the Put Right is exercised, the Company must purchase
the shares subject to the Put Right within ninety days following the Anniversary
Date.
(iv) LLC Distributions. While the Company remains an LLC, the
Company will distribute sufficient cash for Consultant to satisfy the tax
obligations arising from Consultant's membership interest.
-2-
<PAGE>
5. Piggyback Registration Rights.
(i) Certain Definitions. As used in this Section 5, the following
terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Registrable Securities" means the Stock.
The terms "register," "registered" and "registration" refer to
a registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses incurred by
the Company in complying with this Section 5, including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for the Company, blue sky fees and expenses,
and the expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of the Company
which shall be paid in any event by the Company).
"Selling Expenses" shall mean all underwriting discounts,
selling commissions and stock transfer taxes applicable to the securities
registered by the Consultant and all fees and disbursements of counsel for the
Consultant.
(ii) Company Registration.
a. Notice of Registration. If at any time the Company shall
determine to register any of its securities, either for its own account or the
account of a security holder, other than (i) a registration relating solely to
employee benefit plans, or (ii) a registration relating solely to a Commission
Rule 145 transaction, the Company will:
b. promptly give to the Consultant written notice thereof; and
c. include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Secu rities specified in a written request or
requests, made within 15 days after receipt of such written notice from the
Company, by the Consultant subject to the provisions of Section 5(iii).
-3-
<PAGE>
(iii) Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Consultant as a part of the written notice given
pursuant to this Section 5. In such event the right of the Consultant to
registration pursuant to this Section 5 shall be conditioned upon the
Consultant's participation in such underwriting and the inclusion of the
Consultant's Registrable Securities in the underwriting to the extent provided
herein. The Consultant shall (together with the Company and the other holders
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the managing underwriter selected
for such underwriting by the Company. Notwithstanding any other provision of
this Section 5, if the managing underwriter determines that marketing factors
require a limitation of the number of shares to be underwritten, the underwriter
may limit the number of the Registrable Securities to be included in such
registration and underwriting. In such event, the Company shall so advise all
holders distributing their securities through such underwriting, and the number
of shares of Registrable Securities that may be included in the registration and
underwriting shall be allocated among all holders thereof, including the
Consultant, in proportion, as nearly as practicable, to the respective amounts
of equity interests in the Company held by all such holders at the time of
filing the registration statement. If the Consultant disapproves of the terms of
any such underwriting, the Consultant may elect to withdraw therefrom by written
notice to the Company and the managing underwriter. Any securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration, but
shall not be transferred in a public distribution prior to ninety (90) days
after the effective date of the registration statement relating thereto.
(iv) Expenses of Registration. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Section 5 shall be borne by the Company. Unless otherwise stated, all Selling
Expenses relating to securities registered by the Consultant shall be borne by
the Consultant.
(v) Registration Procedures. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Section 5,
the Company will keep the Consultant advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense the Company will furnish such number of prospectuses and
other documents incident thereto as the Consultant from time to time may
reasonably request.
(vi) Indemnification.
a. The Company will indemnify the Consultant, each of its
officers and directors and the Consultant's legal counsel and independent
accountants, and each person controlling the Consultant within the meaning of
Section 15 of the Securities Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Section 5, and
each underwriter, if any, and each person who controls any underwriter within
the meaning of Section 15 of the Securities Act, against all expenses, claims,
losses, damages and liabilities (or actions in respect thereof), including any
of the foregoing incurred in settlement of any litigation, commenced
-4-
<PAGE>
or threatened, arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any registration statement,
prospectus, offering circular or other document, or any amendment or supplement
thereto, incident to any such registration, qualification or compliance, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading, or any
violation by the Company of any rule or regulation promulgated under the
Securities Act applicable to the Company and relating to action or inaction
required of the Company in connection with any such registration, qualification
or compliance, and will reimburse the Consultant, each of its officers and
directors and the Consultant's legal counsel and independent accountants, and
each person controlling the Consultant, each such underwriter and each person
who controls any such underwriter, for any legal and any other expenses
reasonably incurred in connection with investigating, preparing or defending any
such claim, loss, damage, liability or action, provided that the Company will
not be liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission or alleged untrue statement or alleged omission, made in reliance upon
and in conformity with written information furnished to the Company by an
instrument duly executed by the Consultant or underwriter and stated to be
specifically for use therein.
b. Each party entitled to indemnification under this Section 5
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought. The
Company shall be entitled to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnified Party,
who shall conduct the defense of such claim or litigation, shall be approved by
the Indemnified Party (whose approval shall not unreasonably be withheld). The
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Section 5, unless
the Indemnifying Party is materially prejudiced by the failure to give notice
promptly. No Indemnifying Party, in the defense of any such claim or litigation,
shall, except with the consent of each Indemnified Party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
(vii) Information by Consultant. The Consultant shall furnish to the
Company such information regarding the Consultant and the distribution proposed
by the Consultant as the Company may request in writing and as shall be required
in connection with any registration, qualification or compliance referred to in
this Section 5.
(viii) Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Securities and Exchange
Commission which may at any time permit the sale of the restricted securities to
the public without registration, after such time as a public market exists for
the Common Stock of the Company, the Company agrees to:
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a. Make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, at all times
after the effective date of the first registration under the Securities Act
filed by the Company for an offering of its securities to the general public;
b. Use its best efforts to then file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Securities Exchange Act of 1934, as amended (at any time
after it has become subject to such reporting requirements); and
c. So long as the Consultant owns any Registrable Securities,
to furnish to the Consultant upon request a written statement by the Company as
to its compliance with the reporting requirements of said Rule 144 (at any time
after 90 days after the effective date of the first registration statement filed
by the Company for an offering of its securities to the general public), and of
the Securities Act and of the Securities Exchange Act of 1934 (at any time after
it has become subject to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company, and such other reports and documents
of the Company as the Consultant may reasonably request in availing itself of
any rule or regulation of the Securities and Exchange Commission allowing the
Consultant to sell any such securities without registration.
(ix) Transfer and Expiration of Registration Rights. The rights to
cause the Company to register securities granted the Consultant under this
Section 5 may not be assigned to a transferee or assignee in connection with the
transfer or assignment of shares of the Restricted Securities. The registration
rights granted to the Consultant under this Section 5 shall expire when the
Consultant is able to sell all its Registrable Securities in any three month
period.
6. Special Right of Company to Terminate Agreement. In the event that the
Company terminates the Employment Agreement pursuant to its "Special Right," as
defined in the Employment Agreement, this Agreement shall become void and
without further effect. The exercise of the Special Right shall not affect
compensation previously earned by Consultant hereunder, including the Stock.
7. Legal Fee Reimbursement. The Company agrees to pay Consultant's legal
fees associated with entering into this Agreement up to $2,500 upon receiving an
invoice for such legal services.
8. Indemnification. The Company shall indemnify Consultant to the same
extent as other senior management and directors of the Company are indemnified.
The foregoing indemnification shall not be inclusive of any other right which
Consultant may have or hereafter acquire under any statute, provision of the
Certificate of Incorporation or Bylaws, agreement, vote of stockholders or
disinterested directors or otherwise. The foregoing indemnification shall not be
deemed to affect any rights to subrogation which may exist in any policy of
directors and officers liability.
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<PAGE>
9. Full Settlement; No Mitigation. The Company's obligation to make
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense, or other claim, right or action which the Company may have against the
Consultant or others. In no event shall the Consultant be obligated to take any
action to mitigate the amounts payable to the Consultant hereunder. The Company
agrees to pay for any legal fees and expenses reasonably incurred by the
Consultant in connection with any breach of this Agreement by the Company.
10. Assignment. This Agreement shall be binding upon and inure to the
benefit of any successor of the Company. Any such successor of the Company shall
be deemed substituted for the Company under the terms of this Agreement for all
purposes. As used herein, "successor" shall include any person, firm,
corporation or other business entity which at any time, whether by purchase,
merger or otherwise, directly or indirectly acquires all or substantially all of
the assets or business of the Company.
11. Notices. All notices, requests, demands and other communications
called for hereunder shall be in writing and shall be deemed given if delivered
personally or three (3) days after being mailed by registered or certified mail,
or sent by Federal Express or a similar private delivery company, return receipt
requested, prepaid and addressed to the parties or their successors in interest
at the following addresses, or at such other addresses as the parties may
designate by written notice in the manner aforesaid:
If to the Company: Aladdin Holdings LLC
Sigmund Sommer Properties
280 Park Avenue, 38th Floor
New York, New York 10017
Attn: Ron Dictrow
If to Consultant: GAI, LLC
2688 So. Rainbow Blvd., Suite D
Las Vegas, NV 89102
Attn: President
12. Guarantee. Aladdin Holdings LLC hereby unconditionally and irrevocably
guarantees to Consultant the performance of all payment obligations of the
Company, its successors and assigns with respect to the Agreement; provided,
however, that (i) such guarantee shall become void and without further effect,
and (ii) Aladdin Holdings LLC shall cease being a party to this Agreement, as of
the date, if any, of the "Funding," as such term is defined in the Employment
Agreement.
13. Severability. In the event that any provision hereof becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision.
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<PAGE>
14. Entire Agreement. This Agreement represent the entire agreement and
understanding between the Company and Consultant concerning Consultant's service
relationship with the Company, and supersedes and replace any and all prior
agreements and understandings concerning Consultant's service relationship with
the Company.
15. No Oral Modification, Cancellation or Discharge. This Agreement may
only be amended, canceled or discharged in writing signed by Consultant and the
Company.
16. Governing Law. This Agreement shall be governed by the laws of the
State of Nevada.
IN WITNESS WHEREOF, the undersigned have executed this Agreement.
ALADDIN GAMING, LLC
By: Jack Sommer /s/ Jack Sommer
--------------------------- ------------------------------
Signature
Date: 7/1/97
-------------------------
GAI, LLC
Date: July, 1997 /s/ Richard J. Goeglein
--------------------------- ------------------------------
Richard J. Goeglein
ALADDIN HOLDINGS, LLC
By: Jack Sommer /s/ Jack Sommer
--------------------------- ------------------------------
Signature
Date: 7/1/97
-------------------------
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<PAGE>
ALADDIN GAMING, LLC
AMENDMENT TO CONSULTING AGREEMENT
This Amendment (the "Amendment") is made this _____ day of January, 1998,
between and among GAI, LLC ("Consultant"), Aladdin Gaming, LLC (the "Company")
and Aladdin Holdings, LLC ("Holdings").
WHEREAS, it was initially agreed that Consultant would be given certain
put rights with respect to certain LLC membership interests purchased by
Consultant pursuant to the Consulting Agreement made between and among the
Company, Holdings and Consultant as of January 1, 1997 (the "Consulting
Agreement") upon the end of the "Employment Term" (as such term is defined in
the Employment Agreement made between and among the Company, Holdings and
Executive as of January 1, 1997 (the "Employment Agreement")) if, upon such
date, the Company (or an affiliate of the Company) has not effected an "IPO" (as
such term is defined in the Consulting Agreement); and
WHEREAS, the Consulting Agreement did not properly reflect such initial
agreement;
NOW, THEREFORE, the Company, Holdings and Consultant agree that the
Consulting Agreement is hereby amended to properly reflect the initial
agreement.
1. Consulting Agreement Amendment. Section 4(c)(iii) of the Consulting
Agreement is hereby amended in its entirety to read as follows:
"(iii) Put Rights.
(A) Certain Terminations During Consulting Term. In
the event that, that during the Consulting Term, Richard J. Goeglein is
terminated from his employment with the Company other than for "Cause" or
voluntarily terminates for "Good Reason" (both as defined in Section 9 of the
employment agreement by and between Richard J. Goeglein and the Company (the
"Employment Agreement")) on or after the date upon which substantially complete
project financing sufficient for substantially full renovation and construction
has been secured for the Aladdin Hotel and Casino Redevelopment and Expansion
project set forth in the presentation to GW Vegas prepared by Westwood Capital
LLC and dated July 1996 (or as subsequently modified) and as finally approved by
the Clark County Commission (the "Funding"), then Consultant shall have the
right (but not the obligation) to sell any shares purchased hereunder back to
the Company on the date that is the one year anniversary of the date of such
termination of employment or end of the Consulting Term (the "Anniversary Date")
(so long as the IPO has not occurred by such date) at a price equal to the fair
market value of such shares on the Anniversary Date, as determined by an
independent appraisal firm mutually agreed to by and between the Company and
Consultant, with the costs of such appraisal being paid by the Company (the "Put
Right"). The Put Right must be exercised in writing by Consultant by the
Anniversary Date or it shall become void and without
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<PAGE>
further effect. If the Put Right is exercised, the Company must purchase the
shares subject to the Put Right within ninety days following the Anniversary
Date.
(B) Lapsing of Consulting Term Prior to IPO. In the
event that the IPO has not occurred by the end of the Consulting Term (the
"Consulting Term Lapse Date"), then Consultant shall have the right (but not the
obligation) to sell any membership interest (or shares exchanged for such
interest) purchased hereunder back to the Company at a price equal to the fair
market value of such membership interest or shares on the Consulting Term Lapse
Date, as determined by an independent appraisal firm mutually agreed to by and
between the Company and Consultant, with the costs of such appraisal being paid
by the Company (the "Consulting Term Lapse Put Right"). The Consulting Term
Lapse Put Right must be exercised in writing by Consultant within thirty (30)
days following the Consulting Term Lapse Date or it shall become void and
without further effect. If the Consulting Term Lapse Put Right is exercised, the
Company must purchase the membership interest or shares subject to the
Consulting Term Lapse Put Right within ninety (90) days following receipt of
Consultant's exercise thereof."
2. Other Consulting Agreement Provisions. To the extent not expressly
amended hereby, the Consulting Agreement remains in full force and effect.
3. Entire Agreement. This Amendment, taken together with the Consulting
Agreement (to the extent not expressly amended hereby), represents the entire
agreement of the parties and shall supersede any and all previous contracts,
arrangements or understandings between the parties with respect to the
Consultant's provision of services (the "Agreement"). The Agreement may be
amended at any time only by mutual written agreement of the parties hereto.
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<PAGE>
IN WITNESS WHEREOF, this Amendment has been entered into as of the date
and year first set forth above.
ALADDIN GAMING, LLC
By: Jack Sommer /s/ Jack Sommer
---------------------- --------------------------------
Signature
Date: 7/1/97
--------------------
GAI, LLC
Date: 7/1/97 /s/ Richard J. Goeglein
---------------------- --------------------------------
Richard J. Goeglein
ALADDIN HOLDINGS, LLC
By: Jack Sommer /s/ Jack Sommer
---------------------- --------------------------------
Signature
Date: 7/1/97
--------------------
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<PAGE>
ALADDIN GAMING, LLC
AMENDMENT TO CONSULTING AGREEMENT
This Amendment (the "Amendment") is made this _____ day of January, 1998,
between and among GAI, LLC ("Consultant"), Aladdin Gaming, LLC (the "Company")
and Aladdin Holdings, LLC ("Holdings").
WHEREAS, it was initially agreed that Consultant would be given certain
put rights with respect to certain LLC membership interests purchased by
Consultant pursuant to the Consulting Agreement made between and among the
Company, Holdings and Consultant as of January 1, 1997 (the "Consulting
Agreement") upon the end of the "Employment Term" (as such term is defined in
the Employment Agreement made between and among the Company, Holdings and
Executive as of January 1, 1997 (the "Employment Agreement")) if, upon such
date, the Company (or an affiliate of the Company) has not effected an "IPO" (as
such term is defined in the Consulting Agreement); and
WHEREAS, the Consulting Agreement did not properly reflect such initial
agreement;
NOW, THEREFORE, the Company, Holdings and Consultant agree that the
Consulting Agreement is hereby amended to properly reflect the initial
agreement.
1. Consulting Agreement Amendment. Section 4(c)(iii) of the Consulting
Agreement is hereby amended in its entirety to read as follows:
"(iii) Put Rights.
(A) Certain Terminations During Consulting Term. In
the event that, that during the Consulting Term, Richard J. Goeglein is
terminated from his employment with the Company other than for "Cause" or
voluntarily terminates for "Good Reason" (both as defined in Section 9 of the
employment agreement by and between Richard J. Goeglein and the Company (the
"Employment Agreement")) on or after the date upon which substantially complete
project financing sufficient for substantially full renovation and construction
has been secured for the Aladdin Hotel and Casino Redevelopment and Expansion
project set forth in the presentation to GW Vegas prepared by Westwood Capital
LLC and dated July 1996 (or as subsequently modified) and as finally approved by
the Clark County Commission (the "Funding"), then Consultant shall have the
right (but not the obligation) to sell any shares purchased hereunder back to
the Company on the date that is the one year anniversary of the date of such
termination of employment or end of the Consulting Term (the "Anniversary Date")
(so long as the IPO has not occurred by such date) at a price equal to the fair
market value of such shares on the Anniversary Date, as determined by an
independent appraisal firm mutually agreed to by and between the Company and
Consultant, with the costs of such appraisal being paid by the Company (the "Put
Right"). The Put Right must be exercised in writing by Consultant by the
Anniversary Date or it shall become void and without
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<PAGE>
further effect. If the Put Right is exercised, the Company must purchase the
shares subject to the Put Right within ninety days following the Anniversary
Date.
(B) Lapsing of Consulting Term Prior to IPO. In the
event that the IPO has not occurred by the end of the Consulting Term (the
"Consulting Term Lapse Date"), then Consultant shall have the right (but not the
obligation) to sell any membership interest (or shares exchanged for such
interest) purchased hereunder back to the Company at a price equal to the fair
market value of such membership interest or shares on the Consulting Term Lapse
Date, as determined by an independent appraisal firm mutually agreed to by and
between the Company and Consultant, with the costs of such appraisal being paid
by the Company (the "Consulting Term Lapse Put Right"). The Consulting Term
Lapse Put Right must be exercised in writing by Consultant within thirty (30)
days following the Consulting Term Lapse Date or it shall become void and
without further effect. If the Consulting Term Lapse Put Right is exercised, the
Company must purchase the membership interest or shares subject to the
Consulting Term Lapse Put Right within ninety (90) days following receipt of
Consultant's exercise thereof."
2. Other Consulting Agreement Provisions. To the extent not expressly
amended hereby, the Consulting Agreement remains in full force and effect.
3. Entire Agreement. This Amendment, taken together with the Consulting
Agreement (to the extent not expressly amended hereby), represents the entire
agreement of the parties and shall supersede any and all previous contracts,
arrangements or understandings between the parties with respect to the
Consultant's provision of services (the "Agreement"). The Agreement may be
amended at any time only by mutual written agreement of the parties hereto.
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<PAGE>
IN WITNESS WHEREOF, this Amendment has been entered into as of the date
and year first set forth above.
ALADDIN GAMING, LLC
By: Jack Sommer /s/ Jack Sommer
------------------------ --------------------------
Signature
Date: 7/1/97
----------------------
GAI, LLC
Date: 7/1/97 /s/ Richard J. Goeglein
------------------------ --------------------------
Richard J. Goeglein
ALADDIN HOLDINGS, LLC
By: Jack Sommer /s/ Jack Sommer
------------------------ --------------------------
Signature
Date: 7/1/97
----------------------
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<PAGE>
Employment and Consulting Agreement
ALADDIN GAMING, LLC
EMPLOYMENT & CONSULTING AGREEMENT
This Agreement is made between and among Aladdin Gaming, LLC (the
"Company"), Aladdin Holdings, LLC ("Aladdin Holdings") and Richard J. Goeglein
("Executive").
1. Term. Executive's employment with the Company pursuant to this
Agreement shall commence on January 1, 1997 (the "Effective Date") and shall
continue for five years and six months thereafter subject to the terms and
conditions herein set forth (the Employment Term"). For a period of five years
following the termination of the Employment Term, Executive shall be retained as
a consultant and as a member of the Board of Directors of the Company (the
"Consulting Term") with an annual retainer of $100,000 (paid no less frequently
than monthly); provided, however, that the Company, in its sole discretion, may
terminate the Consulting Term at any time by notifying Executive thereof and
along with such notification making a lump-sum payment to Executive equal to
$500,000 less the amount of any retainers previously paid to Executive by the
Company during the Consulting Term.
2. Duties and Scope of Employment.
(a) Position; Employment Commencement Date. From the Effective Date
until the first date that the Company operates the newly renovated and expanded
Aladdin Hotel and Casino (the "Operational Date"), the Company shall employ the
Executive as the President of the Company reporting to the Chief Executive
Officer of the Company and the Board of Directors of the Company (the "Board").
On and after the Operational Date, the Company shall employ the Executive as the
sole Chief Executive Officer and President of the Company, reporting only to the
Board. Additionally, Executive shall serve as a member of the Board during the
Employment Term and the Consulting Term. As President and Chief Executive
Officer of the Company, Executive shall have the duties and responsibilities
customarily associated with such positions, including senior management powers
and responsibilities for the Company's business and affairs.
(b) Obligations. Except in connection with his employment as
President of Gaming Associates, Inc., his provision of services to GAI, LLC and
his provision of services as a member of the Gaming Oversight Committee of the
Marriott Corporation, Executive agrees, during the Employment Term, not to
actively engage in any other employment, occupation or consulting activity for
any direct or indirect remuneration without the prior approval of the Board;
provided, however, that Executive may serve in any capacity with any civic,
educational or charitable organization, or as a member of corporate Boards of
Directors or committees thereof, including those upon which Executive currently
serves, all of which are listed on Exhibit A hereto, without the approval of the
Board, so long as such activities do not substantially interfere with
Executive's ability to discharge his duties to the Company hereunder. If the
Board reasonably and in good faith determines that the time Executive is
devoting to such activities materially interferes with or impairs his ability to
properly discharge his duties to the Company and so notifies Executive, then the
Executive will promptly take such action as is necessary to eliminate such
<PAGE>
interference or impairment, including curtailing or ceasing such activities. If
the Board reasonably and in good faith determines that Executive's activities
for other entities or organizations give rise to a conflict of interest with the
business of the Company, then the parties agree to address such conflict issues
on a mutually approved and a reasonable basis to eliminate the conflict;
provided, however, Executive will comply with reasonable Board directives in
this respect. Specifically, if the Board reasonably determines that a company
upon which Executive serves as a member of the board of directors or in another
capacity, is a competing company as such term is defined in Section 23(b) hereof
with the Company, the Board may ask Executive to resign from such membership or
cease services to such a company, and Executive shall promptly comply with such
request.
3. Employee Benefits. Except as specified in the next sentence, during the
Employment Term, Executive shall be eligible to participate in (i) all employee
benefit plans currently and hereafter maintained by the Company for senior
management, including, without limitation, life, group health and disability
insurance, incentive, profit-sharing, savings, deferred compensation and
retirement plans, practices, policies and programs according to their terms, and
(ii) such other employee benefits as are set forth in this Agreement. During the
Employment Term and while Executive, his spouse and dependent child receive
comparable health care benefits at no cost from an entity other than the
Company, the Company shall not be required to provide group health insurance
benefits to Executive, his spouse and dependent child; provided, however, that
should Executive, his spouse or dependent child lose such health care coverage
(or in the event that it is provided on other than a no cost basis), then the
Company shall provide replacement coverage under the Company's group health
plans according to their terms.
4. Compensation.
(a) Base Salary. During the Employment Term, the Company shall pay
the Executive as compensation for his services a base salary at the minimum
annualized rate of $500,000, which shall increase to the minimum annualized rate
of $600,000 as of the Operational Date (as in effect from time to time, the
"Base Salary"). The Base Salary shall be paid periodically in accordance with
normal Company payroll practices and subject to the usual, required withholding.
Executive's salary shall be reviewed annually for possible raises in light of
Executive's performance of his duties, as determined by the Board or its
Compensation Committee. Such Base Salary shall not be reduced after any increase
thereto pursuant to this Section 4(a).
(b) Bonus. As of the Operational Date and during the Employment
Term, Executive shall be eligible to receive an annual bonus with "on target"
performance resulting in a payment equal to 50% of one year's Base Salary and
with a potential payout equal to 75% of one years' Base Salary (the "Annual
Bonus"); provided, however, that if the payment of the Annual Bonus would result
in the loss of a Company corporate income tax deduction by virtue of the
provisions of Internal Revenue Code Section 162(m) (a "162(m) Deduction Loss"),
then the otherwise non-deductible portion of such Annual Bonus shall have its
payment deferred until the
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earlier of (i) the end of any calendar year in which Executive's compensation
for such calendar year would not result in a 162(m) Deduction Loss (but only to
the extent that such deferred payment would not result in a 162(m) Deduction
Loss), or (ii) the date upon which Executive ceases to be a "covered employee"
as defined in Internal Revenue Code Section 162(m)(3). Any such deferred amount
shall earn interest from the Company at the mid-term applicable federal rate
under Internal Revenue Code Section 1274(d) as in effect upon the date of
deferral, compounded monthly from the date of deferral until the date of
payment. The performance milestones for earning the Annual Bonus shall be
established in good faith by the Board or its Compensation Committee in
conjunction with Executive so as to have a probability of attainment comparable
to that of the annual target bonuses of the chief executive officers of
corporations or entities similar to the Company. The Annual Bonus shall be
prorated for the first year and for any subsequent partial fiscal years of
employment hereunder.
(c) LLC Membership Interest Purchase.
(i) Initial Purchase. On the date of signing of this Agreement
by the parties hereto, Executive shall purchase a membership interest equal to
two percent of the total membership interest of the Company, for a purchase
price of $1200, which amount equals 100% of the fair market value of Executive's
membership interest on the date of purchase (the "Restricted Membership
Interest"). Subject to acceleration as set forth elsewhere in this Agreement,
the Restricted Membership Interest shall become 100% vested on the earlier of
(i) July 1, 2002, (ii) the date upon which securities that have been exchanged
for the Restricted Membership Interest become publicly traded on an established
securities market, conditioned upon Executive's continued employment, consulting
or director relationship with the Company as of such vesting date. Any unvested
portion of the Restricted Membership Interest shall be subject to repurchase by
the Company for the purchase price originally paid by Executive if Executive
terminates his employment, consulting or director relationship with the Company.
(ii) Anti-Dilution Purchases. Upon the Company's closing of a
financing transaction or transactions involving the sale of membership
interests, equity (or securities convertible into membership interests or
equity) of the Company (a "Financing Transaction"), and if Executive is employed
by the Company upon such closing date or dates, Executive shall have the right
to purchase that number of such instruments that would result in Executive being
able to purchase, in the aggregate, (including pursuant to his initial purchase
under the preceding paragraph) two percent of the fully-diluted membership
interest or equity of the Company, as measured on the date of such closing or
closings; provided, however, that such right to purchase shall only be effective
with respect to non-compensatory Financing Transactions (i.e., Executive shall
not have the right to make anti-dilutive purchases with respect to ordinary
course of business compensatory sales of stock or membership interests to
Company employees). Any such right of Executive to make an anti-dilutive
purchase of stock hereunder shall be at the most favorable price and on the most
favorable terms and conditions as are provided to any party in the Financing
Transaction. For purposes of this Agreement, "fully diluted equity of the
Company" shall mean
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<PAGE>
the aggregate amount of membership interests (or the aggregate number of shares
of all outstanding common and preferred stock) plus the aggregate amount of
membership interests (or the number of shares of common and preferred stock)
that could be obtained through the exercise or conversion of rights, options,
warrants and convertible securities (other than employee equity compensation).
Notwithstanding the foregoing, Executive shall not have the right to make
anti-dilutive purchases (i) in any Financing Transaction in which his equity
ownership interest in the Company is diluted to the same extent as the equity
interest in the Company held by The Trust Under Article Sixth u/w/o Sigmund
Sommer or its affiliates (the "Trust"),or (ii) as a result of any sales or
transfers arising as a result of the death of Mrs. Viola Sommer or for the
purpose of satisfying attendant estate tax liabilities. If, in the event of a
public offering, underwriters take issue with Executive's rights under this
paragraph, the underwriters, Company and Executive will address such issues on a
mutually approved and reasonable basis, taking into account the interests of all
involved.
(iii) Put Right. In the event that (i) the IPO has not
occurred by the end of the Employment Term, or (ii) during the Employment Term,
Executive is terminated other than for "Cause" or voluntarily terminates for
"Good Reason" (both as defined in Section 9 hereof) on or after the date upon
which substantially complete project financing sufficient for substantially full
renovation and construction has been secured for the Aladdin Hotel and Casino
Redevelopment and Expansion project set forth in the presentation to GW Vegas
prepared by Westwood Capital LLC and dated July 1996 (or as subsequently
modified) and as finally approved by the Clark County Commission (the
"Funding"), then Executive shall have the right (but not the obligation) to sell
any membership interest (or shares exchanged for such interest) purchased
hereunder back to the Company on the date that is the one year anniversary of
the date of such termination of employment or end of the Employment Term (the
"Anniversary Date") (so long as the IPO has not occurred by such date) at a
price equal to the fair market value of such membership interest or shares on
the Anniversary Date, as determined by an independent appraisal firm mutually
agreed to by and between the Company and Executive, with the costs of such
appraisal being paid by the Company (the "Put Right"). The Put Right must be
exercised in writing by Executive by the Anniversary Date or it shall become
void and without further effect. If the Put Right is exercised, the Company must
purchase the membership interest or shares subject to the Put Right within
ninety days following the Anniversary Date.
(iv) LLC Distributions. While the Company remains an LLC, the
Company will distribute sufficient cash for Executive to satisfy the tax
obligations arising from his membership interest.
(d) Stock Option. On the date, if any, upon which the Company (or an
affiliate of the Company) effects an initial public offering for its securities
(the "IPO"), Executive shall be granted a stock option covering such securities
(the "Stock Option"). The number of shares subject to such option shall be equal
to the number derived by dividing the 125% of the Base Salary by the "Price to
Public" share price in such offering. The Stock Option per share exercise
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<PAGE>
price shall be equal to the "Price to Public" share price. The Stock Option,
shall qualify, to the maximum extent permitted by Internal Revenue Code Section
422(d) or its successor provision, as an "incentive stock option." Subject to
accelerated vesting as set forth elsewhere herein, the Stock Option shall vest
as to one third of the shares subject to the Stock Option as of the date of
grant, and as to an additional one third of such shares on each anniversary of
the date of grant, so as to be 100% vested on the second anniversary of the date
of grant, conditioned upon Executive's continued employment, consulting or
director relationship with the Company as of each vesting date. The Company
agrees to register the Stock Option and the stock issuable thereunder on a Form
S-8 (or its successor form) with the Securities and Exchange Commission
following the date of grant. In good faith and giving consideration to
Executive's interests, the Company and Executive will agree upon the
registration date(s).
(e) Retainer. The Company has previously paid Executive a one-time
retainer in the amount of $50,000.
5. Expenses. During the Employment Term, the Company will pay or reimburse
Executive for reasonable travel, entertainment or other expenses incurred by
Executive in the furtherance of or in connection with the performance of
Executive's duties hereunder in accordance with the Company's established
policies.
6. Life Insurance. During the Employment Term, the Company will obtain
term life insurance for Executive in the amount of Executive's annual Base
Salary, payable to the beneficiary designated by Executive.
7. Disability Insurance. During the Employment Term, the Company will
obtain the greatest amount of disability insurance reasonably available to
Executive, provided that the Company shall not be required to provide long-term
disability insurance coverage in excess of 66 and 2/3% of Executive's annual
Base Salary.
8. Special Right of Company to Terminate Agreement. In exchange for a
lump-sum payment to Executive of $650,000, the Company shall have the right to
terminate the Agreement without payment of severance benefits under Section 9
hereof if, as of January 1, 1999, the Funding has not been secured (the "Special
Right"). The Special Right must be exercised in writing by the Company by
February 1, 1999 or it shall become void and without further effect. The
exercise of the Special Right shall not affect compensation previously earned by
Executive hereunder, including all vested Equity Compensation.
9. Severance Benefits. If, prior to the end of the Employment Term,
Executive's employment with the Company terminates involuntarily other than for
death, disability, exercise of the Special Right or "Cause," or if Executive
terminates his employment with the Company voluntarily for "Good Reason" (both
as defined herein), then (i) Executive shall be entitled to a lump-sum payment
equal to the Base Salary that he would have been paid had he remained
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employed by the Company through the end of the Employment Term, with such amount
paid to Executive within thirty (30) days of such termination, (ii) to make
Executive whole for any foregone Annual Bonus, Executive shall be entitled to an
additional lump-sum payment equal to 50% of the Base Salary he would have been
paid had he remained employed by the Company after the Operational Date and
through the end of the Employment Term, with such amount paid to Executive
within thirty (30) days of such termination (or, if Executive's termination is
prior to the Operational Date, the amount shall be paid within thirty (30) days
following the Operational Date), (iii) Executive's Stock Option, Restricted
Membership Interest and any equity compensation granted to Executive by the
Company or exchanged for the Restricted Membership Interest or Stock Option
("Equity Compensation") shall have their vesting accelerated in full so as to
become 100% vested as of the date of termination, (iv) if such termination
occurs prior to the IPO and the IPO occurs within twelve months following such
termination, Executive shall be granted a 100% vested Stock Option on the date
of the IPO, and (v) for the duration of the Employment Term, the Company shall
provide to Executive and his spouse and daughter one hundred percent (100%)
Company-paid health and life insurance coverage at the same level of coverage as
was provided to Executive immediately prior to the date of termination (the
"Company-Paid Coverage").
For this purpose, "Good Reason" is defined as (i) the assignment to
Executive of duties incommensurate with his status as President and Chief
Executive Officer, or any material reduc tion of the Executive's duties,
authority or responsibilities or any reduction, whether material or not, in
Executive's title or reporting responsibilities, relative to the Executive's
duties, authority, responsibilities, title or reporting responsibilities as in
effect immediately prior to such reduction, except if agreed to in writing by
the Executive; (ii) a reduction by the Company in the Base Salary, or Annual
Bonus as in effect immediately prior to such reduction; (iii) the relocation of
the Executive to a facility or a location more than thirty-five (35) miles from
the Executive's then present location, without the Executive's written consent;
or (iv)any material breach of this Agreement by the Company (if such breach is
not cured within 60 days following receipt by the Company of written notice from
the Executive specifying the facts relating to the breach).
For this purpose, "Cause" is defined as Executive's (i) gross negligence
in connection with the performance of his duties hereunder which materially
adversely affects the Company and is not cured within a reasonable period of
time after receipt by Executive of written notice from the Board, (ii) loss of
Executive's key license issued by the Nevada Gaming Commission, (iii) any
material breach of this Agreement by the Executive (if such breach is not cured
within 60 days following receipt by the Company of written notice from the
Company specifying the facts relating to the breach), (iv) misappropriation of
funds or embezzlement by the Executive of the Company, or (v) conviction of
Executive of a felony.
10. Change of Control. In the event of a "Change of Control" of the
Company (as defined herein) occurring while Executive is employed by the
Company, Executive's Equity Compensation shall have its vesting accelerated in
full so as to become 100% vested as of the date
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of the Change of Control; provided, however, that if such potential vesting
acceleration would cause a contemplated Change of Control transaction that was
intended to be accounted for as a "pooling-of-interests" transaction to become
ineligible for such accounting treatment under generally accepted accounting
principles, as determined by the Company's independent public accountants (the
"Accountants") prior to the Change of Control, Executive's Equity Compensation
shall not have its vesting so accelerated. For this purpose, "Change of Control"
of the Company is defined as:
(a) Any "person," as such term is used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended (other than a group
consisting of the members of the Board as of the Effective Date and their
affiliated investment funds and the partners thereof) becomes the "beneficial
owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of
securities of the Company representing 50% or more of the total voting power
represented by the Company's then outstanding voting securities; provided,
however, that a "Change of Control" will not be deemed to occur under this
paragraph with respect to (i) intra-family transfers among the Sommer family, or
(ii) sales or transfers arising as a result of the death of Mrs. Viola Sommer or
for the purpose of satisfying attendant estate tax liabilities; or
(b) The consummation of a merger or consolidation of the Company
with any other corporation other than a merger or consolidation which would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least fifty percent
(50%) of the total voting power represented by the voting securities of the
Company or such surviving entity outstanding immediately after such merger or
consolidation; or
(c) A change in the composition of the Board of Directors of the
Company occurring within a two-year period, as a result of which fewer than a
majority of the directors are Incumbent Directors. "Incumbent Directors" shall
mean directors who either (A) are directors of the Company as of the date
hereof, or (B) are elected, or nominated for election, to the Board of Directors
of the Company with the affirmative votes of at least a majority of the
Incumbent Directors at the time of such election or nomination (but shall not
include an individual whose election or nomination is in connection with an
actual or threatened proxy contest relating to the election of directors to the
Company); or
(d) The approval by the Board of a plan of complete liquidation of
the Company or of an agreement for the sale or disposition by the Company of all
or substantially all of the Company's assets.
11. Golden Parachute Excise Tax Gross-Up. In the event that the benefits
provided for in this Agreement or otherwise payable to the Executive constitute
"parachute payments" within the meaning of Section 280G of the Internal Revenue
Code of 1986, as amended (the "Code") and will be subject to the excise tax
imposed by Section 4999 of the Code, then the Executive shall
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receive (i) a payment from the Company sufficient to pay such excise tax, and
(ii) an additional payment from the Company sufficient to pay the excise tax and
federal and state income taxes arising from the payments made by the Company to
Executive pursuant to this sentence; provided, however, that in the aggregate
such payments shall not exceed $1,000,000. Unless the Company and the Executive
otherwise agree in writing, the determination of Executive's excise tax
liability and the amount required to be paid under this Section 11 shall be made
in writing by the Accountants. For purposes of making the calculations required
by this Section 11, the Accountants may make reasonable assumptions and
approximations concerning applicable taxes and may rely on reasonable, good
faith interpretations concerning the application of Sections 280G and 4999 of
the Code. The Company and the Executive shall furnish to the Accountants such
information and documents as the Accountants may reasonably request in order to
make a determination under this Section. The Company shall bear all costs the
Accountants may reasonably incur in connection with any calculations
contemplated by this Section 11.
12. Automobile. During the Employment Term, the Company shall, in its
discretion, either make available to Executive a 1997 or newer model Lexus LS
400 or pay Executive a monthly auto allowance sufficient to lease such
automobile and reimburse Executive for the maintenance and insurance costs of
such automobile.
13. Death and Disability. If Executive dies or becomes permanently
disabled while employed by the Company, then (i) then Executive shall cease to
be employed hereunder, and (ii) Executive's Equity Compensation shall have its
vesting accelerated in full so as to become 100% vested. Executive shall be
considered permanently disabled if Executive is absent from employment or unable
to render services hereunder on a full-time basis by reason of physical or
mental illness or disability for six (6) months or more in the aggregate in any
twelve (12) month period. Any question as to the existence or extent of
Executive's disability upon which Executive and the Company cannot agree shall
be determined by a qualified independent physician selected by the Board and
approved by Executive, which approval shall not be unreasonably withheld.
14. Relocation Expense Reimbursement. The Company will reimburse Executive
for the following reasonable costs:
(a) Reasonable hotel or housing costs for Executive and his
immediate family for up to two years; provided, however, that
the Company shall not reimburse Executive for any such costs
arising more than fifteen days following the Company's
provision of a loan to Executive as specified in Section 15.
(b) Reasonable transaction costs associated with buying or renting
Executive's new residence (closing costs, inspections, title
insurance, legal expenses, brokerage and related fees, etc.).
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(c) Reasonable transaction costs associated with selling
Executive's old residence (closing costs, inspections, title
insurance, legal expenses, brokerage and related fees, etc.).
(c) Reasonable costs associated with moving household furnishings,
automobiles and personal effects.
(d) Reasonable travel expenses incurred by Executive and family
traveling to and from Las Vegas during the first two years of
this Agreement.
15. Relocation Loan. In connection with the transfer of Executive's
principal place of employment to Las Vegas from California, the Company shall
provide Executive with a five (5) year interest-free mortgage loan in the amount
of up to $500,000 for purposes of Executive's acquisition of a new principal
residence (the "Loan"). The Loan shall not be for more than the purchase price
of the residence. The Loan shall be subject to, and governed by, the terms and
conditions of a loan agreement and mortgage between the Executive and the
Company. The Company shall retain a mortgage security interest in the residence
during the term of the Loan. The Loan is intended to satisfy the Requirements of
Proposed Treasury Regulation Section 1.7872-5T(c)(1) and the Executive and the
Company agree to execute such documents as are necessary to comply therewith.
The term of the Loan shall be shortened to two years in the event Executive is
terminated for Cause.
16. Legal Fee Reimbursement. The Company agrees to pay Executive's legal
fees associated with entering into this Agreement up to $15,000 upon receiving
an invoice for such legal services.
17. Withholding. The Company shall be entitled to withhold, or cause to be
withheld, from payment any amount of withholding taxes required by law with
respect to payments made to Executive in connection with his employment
hereunder.
18. D&O Insurance. During the Employment Term and the Consulting Term, the
Company agrees to maintain director and officer liability insurance in scope and
amounts reasonably satisfactory to Executive, to the extent available.
19. Indemnification. The Company shall indemnify Executive to the same
extent as other senior executives and directors of the Company are indemnified.
The foregoing indemnification shall not be inclusive of any other right which
Executive may have or hereafter acquire under any statute, provision of the
Certificate of Incorporation or Bylaws, agreement, vote of stockholders or
disinterested directors or otherwise. The foregoing indemnification shall not be
deemed to affect any rights to subrogation which may exist in any policy of
directors and officers liability.
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20. Vacation. Executive shall be entitled to paid vacation of four weeks
per year in accordance with the Company's vacation policy, with the timing and
duration of specific vacations mutually and reasonably agreed to by the parties
hereto.
21. Fringe Benefit Gross-Up. Executive will be fully "grossed-up"by the
Company for any imputed income required to be recognized under Sections 6, 7,
12, and 14 hereof so that the economic effect to Executive is the same as if
these benefits were provided to Executive on a non-taxable basis; provided,
however, that the total of such gross-up payments shall not exceed $100,000 in
the aggregate.
22. Full Settlement; No Mitigation. The Company's obligation to make
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense, or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action to mitigate the amounts payable to the
Executive hereunder. The Company agrees to pay for any legal fees and expenses
reasonably incurred by the Executive in connection with any breach of this
Agreement by the Company.
23. Covenant Not to Compete.
(a) Covenant Not to Compete. For a period of one year following
Executive's termination of employment with the Company (i) by the Company for
Cause, or (ii) by Executive for other than Good Reason, Executive will not
render services as an employee, consultant, director, partner, owner to, or
participate as more than a 2% shareholder in, any Competing Company, as such
term is defined immediately below. This covenant shall not apply in the event of
any other termination of Executive's employment with the Company.
(b) Competing Company. "Competing Company" shall mean another
company, corporation, partnership, limited liability corporation or other entity
any portion of who is a business competitor of the Company in Clark County,
Nevada.
24. Assignment. This Agreement shall be binding upon and inure to the
benefit of any successor of the Company. Any such successor of the Company shall
be deemed substituted for the Company under the terms of this Agreement for all
purposes. As used herein, "successor" shall include any person, firm,
corporation or other business entity which at any time, whether by purchase,
merger or otherwise, directly or indirectly acquires all or substantially all of
the assets or business of the Company.
25. Notices. All notices, requests, demands and other communications
called for hereunder shall be in writing and shall be deemed given if delivered
personally or three (3) days after being mailed by registered or certified mail,
or sent by Federal Express or a similar private
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delivery company, return receipt requested, prepaid and addressed to the parties
or their successors in interest at the following addresses, or at such other
addresses as the parties may designate by written notice in the manner
aforesaid:
If to the Company: Aladdin Holdings LLC
Sigmund Sommer Properties
280 Park Avenue, 38th Floor
New York, New York 10017
Attn: Ron Dictrow
If to Executive: Richard J. Goeglein
at the last residential address known by the Company
26. Guarantee. Aladdin Holdings LLC hereby unconditionally and irrevocably
guarantees to Executive the performance of all payment obligations of the
Company, its successors and assigns with respect to the Agreement; provided,
however, that (i) such guarantee shall become void and without further effect,
and (ii) Aladdin Holdings LLC shall cease being a party to this Agreement, as of
the date, if any, of the Funding.
27. Severability. In the event that any provision hereof becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision.
28. Entire Agreement. This Agreement represent the entire agreement and
understanding between the Company and Executive concerning Executive's
employment and director relationship with the Company, and supersedes and
replace any and all prior agreements and understandings concerning Executive's
employment relationship with the Company.
29. No Oral Modification, Cancellation or Discharge. This Agreement may
only be amended, canceled or discharged in writing signed by Executive and the
Company.
30. Governing Law. This Agreement shall be governed by the laws of the
State of Nevada.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement.
ALADDIN GAMING, LLC
By: Jack Sommer /s/ Jack Sommer
------------------------ ------------------------
Signature
Date: 7/1/97
RICHARD J. GOEGLEIN
Date: July, 1997 /s/ Richard J. Goelein
------------------------
ALADDIN HOLDINGS, LLC
By: Jack Sommer /s/ Jack Sommer
------------------------ ------------------------
Signature
Date: 7/1/97
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<PAGE>
EXHIBIT A
BOARD MEMBERSHIPS
Platinum Software Corporation
AST Research, Inc.
Hollywood Park
Diamond Seal
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<PAGE>
ALADDIN GAMING, LLC
AMENDMENT TO
EMPLOYMENT & CONSULTING AGREEMENT
This Amendment (the "Amendment") is made this _____ day of January, 1998,
between and among Richard J. Goeglein ("Executive"), Aladdin Gaming, LLC (the
"Company") and Aladdin Holdings, LLC ("Holdings").
WHEREAS, it was initially agreed that Executive would be given certain put
rights with respect to certain LLC membership interests purchased by Executive
pursuant to the Employment Agreement made between and among the Company,
Holdings and Executive as of January 1, 1997 (the "Employment Agreement") upon
the end of his "Employment Term" (as such term is defined in the Employment
Agreement) if, upon such date, the Company (or an affiliate of the Company) has
not effected an "IPO" (as such term is defined in the Employment Agreement); and
WHEREAS, the Employment Agreement did not properly reflect such initial
agreement;
NOW, THEREFORE, the Company, Holdings and Executive agree that the
Employment Agreement is hereby amended to properly reflect the initial
agreement.
1. Employment Agreement Amendment. Section 4(c)(iii) of the Employment
Agreement is hereby amended in its entirety to read as follows:
"(iii) Put Rights.
(A) Certain Terminations During Employment Term. In
the event that, during the Employment Term, Executive is terminated other than
for "Cause" or voluntarily terminates for "Good Reason" (both as defined in
Section 9 hereof) on or after the date upon which substantially complete project
financing sufficient for substantially full renovation and construction has been
secured for the Aladdin Hotel and Casino Redevelopment and Expansion project set
forth in the presentation to GW Vegas prepared by Westwood Capital LLC and dated
July 1996 (or as subsequently modified) and as finally approved by the Clark
County Commission (the "Funding"), then Executive shall have the right (but not
the obligation) to sell any membership interest (or shares exchanged for such
interest) purchased hereunder back to the Company on the date that is the one
year anniversary of the date of such termination of employment (the "Anniversary
Date") (so long as the IPO has not occurred by such date) at a price equal to
the fair market value of such membership interest or shares on the Anniversary
Date, as determined by an independent appraisal firm mutually agreed to by and
between the Company and Executive, with the costs of such appraisal being paid
by the Company (the
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"Employment Term Put Right"). The Employment Term Put Right must be exercised in
writing by Executive by the Anniversary Date or it shall become void and without
further effect. If the Employment Term Put Right is exercised, the Company must
purchase the membership interest or shares subject to the Employment Term Put
Right within ninety (90) days following the Anniversary Date.
(B) Lapsing of Employment Term Prior to IPO. In the
event that the IPO has not occurred by the end of the Employment Term (the
"Employment Term Lapse Date"), then Executive shall have the right (but not the
obligation) to sell any membership interest (or shares exchanged for such
interest) purchased hereunder back to the Company at a price equal to the fair
market value of such membership interest or shares on the Employment Term Lapse
Date, as determined by an independent appraisal firm mutually agreed to by and
between the Company and Executive, with the costs of such appraisal being paid
by the Company (the "Employment Term Lapse Put Right"). The Employment Term
Lapse Put Right must be exercised in writing by Executive within thirty (30)
days following the Employment Term Lapse Date or it shall become void and
without further effect. If the Employment Term Lapse Put Right is exercised, the
Company must purchase the membership interest or shares subject to the
Employment Term Lapse Put Right within ninety (90) days following receipt of
Executive's exercise thereof."
2. Other Employment Agreement Provisions. To the extent not expressly
amended hereby, the Employment Agreement remains in full force and effect.
3. Entire Agreement. This Amendment, taken together with the Employment
Agreement (to the extent not expressly amended hereby), represents the entire
agreement of the parties and shall supersede any and all previous contracts,
arrangements or understandings between the parties with respect to the
Executive's employment (the "Agreement"). The Agreement may be amended at any
time only by mutual written agreement of the parties hereto.
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IN WITNESS WHEREOF, this Amendment has been entered into as of the date
and year first set forth above.
ALADDIN GAMING, LLC
By: Jack Sommer /s/ Jack Sommer
-------------------------- ---------------------------
Signature
Date: 7/1/97
RICHARD J. GOEGLEIN
Date: July, 1997 /s/ Richard J. Goelein
---------------------------
ALADDIN HOLDINGS, LLC
By: Jack Sommer /s/ Jack Sommer
-------------------------- ---------------------------
Signature
Date: 7/1/97
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<PAGE>
Employment Agreement
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement"), is made and entered into by and
between Aladdin Gaming LLC ("Company"), Aladdin Holdings, LLC, ("Aladdin
Holdings") and James H. McKennon ("Executive").
WHEREAS, the Company considers it important and in its best interest and
the best interest of its owners to foster the employment of key management
personnel and desires to retain the services of Executive on the terms and
subject to the conditions in this Agreement;
WHEREAS, the Executive desires to accept employment by the Company to
render services to the Company on the terms and subject to the conditions in
this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the following mutual
covenants and agreements, the parties agree as follows:
1. Employment. The Company hereby employs Executive as President of the
Aladdin Hotel and Casino and Executive hereby accepts such employment with the
Company for the compensation and on the terms and subject to the conditions in
this Agreement.
2. Term. The term of the Executive's employment under this Agreement
("Term") shall commence on April 15, 1997 ("Commencement Date") and shall
continue for four (4) years, to and including April 14, 2001, unless earlier
terminated as provided in this Agreement. (The date of any termination of this
Agreement as provided herein is the "Termination Date".)
3. Duties and Responsibilities. During the Term, Executive will serve as
President of the Aladdin Hotel and Casino and will have such authority,
responsibilities and duties as are customarily associated with this position. At
all times Executive shall faithfully and to the best of his abilities perform
his duties and responsibilities hereunder to the reasonable satisfaction of the
Board of Directors. In addition, Executive shall devote his full time, efforts
and attention to the business and affairs of the Company, use his best efforts
to further the interest of the Company and at all times conduct himself in a
manner which reflects credit upon the Company.
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4. Compensation.
a. Salary. For his services hereunder, the Company shall pay
Executive a base salary ("Base Salary") of $325,000.00 for each
consecutive 12-month period during the Term beginning with the
Commencement Date. (Each such consecutive 12-month period is an
"Employment Year"). Executive's Base Salary will be prorated for any
partial Employment Year. The Board of Directors will consider increases in
the Base Salary no less frequently than annually, commencing at the end of
the first Employment Year hereunder and will be based upon criteria
determined by the Board of Directors and applicable to other members of
the executive management group. Any such increases, however, shall be in
the sole discretion of the Board of Directors, but there shall be no
reduction in Base Salary during the Term. The Base Salary shall be payable
in equal periodic installments subject to customary deductions for social
security, other taxes and amounts customarily withheld from salaries of
employees of the Company, all in accordance with the Company's usual and
customary payroll practices.
b. Annual Bonus. From and after the Operational Date as defined in
Section 4(f)(1)(i) hereof, Executive is eligible to receive from the
Company an annual cash bonus, provided Executive is employed by the
Company on the date the Board of Directors grants the bonus. The bonus
will be based on relevant criteria or performance standards as determined
by the Board of Directors in a bonus plan which will be competitive with
industry standards.
c. Benefits. During the Term, Executive shall be entitled to receive
from the Company such health, pension, retirement and other employee
benefits as the Company provides to other members of the executive
management group. During the Term, the Company at its expense will provide
Executive with term life insurance in the amount of Executive's annual
Base Salary. During the Term, the Company at its expense will provide
Executive with long-term disability coverage under a group long-term
disability plan the Company provides other members of the executive
management group.
d. Vacation. Executive shall be entitled to two (2) weeks paid
vacation for each Employment Year, prorated for any partial Employment
Year. The Board of Directors in its discretion may increase Executive's
vacation entitlement. The timing and duration of specific vacations will
take into account the business needs of the Company and will be mutually
agreed to by the parties. In the event any such vacation is not used by
Executive in any Employment Year, the Executive has a
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right to accumulate and carry forward such number of unused vacation days
from year to year as may be consistent with the Company's policy therefor
for other members of the executive management group, in effect from time
to time. Upon termination of employment, all unused vacation time shall be
paid to Executive.
e. Reimbursement of Expenses. The Company shall pay all reasonable
expenses incurred by Executive in the performance of his duties and
responsibilities for the Company. Executive shall submit to the Company
statements and documentation reflecting such expenses so incurred, with
such detail, backup and confirmation as the Company may reasonably
require. Subject to any audit the Company deems necessary, the Company
shall promptly reimburse Executive the full amount of any such expenses
incurred by Executive.
f. Right to Purchase LLC Membership Interest. On the Execution Date,
Executive has the right to purchase a membership interest equal to one
(1%) percent of the total membership interests of the Company for a total
purchase price of $600.00, which amount equals 100% of the fair market
value of Executive's membership interest on the date of purchase (the
"Restricted Membership Interest").
(1) During the Term, the Restricted Membership Interest vests as
follows:
(i) 25% of the Restricted Membership Interest on the
date that the Company opens and begins operating the newly
renovated and expanded Aladdin Hotel & Casino (the
"Operational Date") and Executive executes and agrees to be
bound by the Company's Operating Agreement; and
(ii) 25% of the Restricted Membership Interest on each
succeeding annual anniversary of the Operational Date to the
Termination Date;
(2) Upon expiration of the four-year term of this Agreement
(provided Executive was employed by the Company at such
expiration), any unvested Restricted Membership Interest vests
only as follows:
(i) if the Company does not continue to employ Executive
for reason(s) not constituting Cause as defined in Section
5(d)(1-4)
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hereof or if the Executive does not continue his employment at
the request of the Company for reason(s) constituting Good
Reason as defined in Section 5(d)(5), then an additional 25%
of the Restricted Membership Interest vests; or
(ii) if the Executive's employment with the Company
continues, the 25% of the Restricted Membership Interest
continues to vest in accordance with Section 4(f)(1)(ii) above
as though there had been no Termination Date.
(3) If Executive's employment terminates, the Company has the
right to repurchase any unvested portion of the Restricted
Membership Interest for the purchase price originally paid by
Executive.
(4) If, after the Operational Date, the Company remains an LLC,
has profits from operations but does not make Executive
membership distributions sufficient to pay Executive's tax
obligations from such profits, then the Company will
distribute sufficient cash for Executive to satisfy such
obligations, but only to the extent such distributions are not
sufficient to meet such tax obligations.
g. Executive's Put Right. Executive has the right but not the
obligation to sell his vested Restricted Membership Interest (or shares
exchanged by such Interest) back to the Company only in the following
circumstances:
(1) the Company's IPO has not occurred upon expiration of the
original four-year term of this Agreement and Company does not
continue to employ Executive for reason(s) not constituting
Cause as defined in Section 5(d)(1-4) hereof or the Executive
does not continue his employment at the request of the Company
for reason(s) constituting Good Reason as defined in Section
5(d)(5). This Put right must be exercised in writing by
Executive within thirty (30) days of the expiration of the
four-year term hereunder or it shall become void and without
further effect.
(2) The Company's IPO has not occurred upon Executive becoming
100% vested in Restricted Membership Interest. This Put right
must be exercised in writing by Executive within 30 days of
Executive being 100% vested or it shall become void and
without further effect.
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The Put purchase price is the fair market value of such Interest (or
shares) on the Valuation Date. Under this Agreement, the Valuation Date
is: (i) the expiration of the four-year term of this Agreement, in the
event of a Put under Section 4(g)(i), or (ii) the date Executive becomes
100% vested, in the event of a Put under Section 4(g)(2). In either case
of (i) or (ii) in the preceding sentence, the fair market value shall be
determined by an independent appraisal firm mutually agreed to by the
Company and Executive, with the cost of such appraisal being paid by the
Company. If Executive exercises the Put hereunder, the Company must
purchase the Restricted Membership Interest or shares within ninety (90)
days of Executive's exercise of the Put.
h. Company's Call Right. If, prior to the date of the Company's IPO,
the Company terminates Executive for Cause as defined in Section 5(d)
hereof (including Executive quitting without Good Reason under Section
5(d)(5)), then the Company shall have the right but not the obligation to
purchase any vested Restricted Membership Interest (or shares exchanged by
such Interest) within thirty (30) days of the Termination Date at a price
equal to two (2) times the price Executive originally paid the Company for
such Restricted Membership Interest. The Call right must be exercised in
writing by the Company within thirty (30) days of the Termination Date or
it shall become void and without further effect. If the Company exercises
the Call hereunder, Executive must tender such Interest or shares and
otherwise complete the transaction hereunder within thirty (30) days of
the Company's exercise of the Call.
i. Auto Allowance. During the Term, the Company shall pay Executive
an auto allowance of $600.00 per month.
5. Termination. This Agreement shall terminate in accordance with the
following provisions:
a. Expiration of the Term. Unless earlier terminated in accordance
with the provisions hereof, this Agreement shall terminate upon expiration
of the four-year term as provided in Section 2.
b. Death. If the Executive dies during the Term, this Agreement
shall terminate, with the Termination Date being the date of the
Executive's death.
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c. Disability. If the Executive has been absent from service to the
Company as required in this Agreement for a period of ninety (90) days or
more during any one-hundred eighty (180) day period during the Term as a
result of any physical or mental disability, the Company has the right to
terminate this Agreement, the Termination Date being ten (10) days after
notice thereof is given to Executive.
d. Termination by Company for Cause. The Company has the right to
terminate this Agreement for Cause as defined herein, such termination to
be effective immediately upon notice thereof from the Company to
Executive. For purposes of this Agreement, Cause shall mean Executive's
(1) conviction of any felony; (2) embezzlement or misappropriation of
money or property of the Company; (3) denial, rejection, suspension or
revocation of any gaming license or permit; (4) Executive's material
breach of Section 6 hereof which material breach has an adverse impact on
the Company; (5) Executive quits his employment with the Company without
Good Reason. Good Reason is defined as (i) the assignment to Executive of
duties materially inconsistent with his position and title without his
consent, or (ii) a material reduction in Executive's duties, authorities
and responsibilities without his consent, or (iii) a reduction by the
Company in Executive's Base Salary, in effect immediately prior to such
reduction, without his consent, provided Executive gives the Company
written notice specifying such assignment or reduction and the Company has
not cured or abated such assignment or reduction within 20 days
thereafter.
e. Termination by Company Without Cause (Termination by Executive
With Good Reason). Subject to Section 5(f), the Company has the right to
terminate this Agreement without Cause (and the Executive has the right to
terminate this Agreement for Good Reason as defined in Section 5(d)
hereof) by giving the other party written notice thereof and the Company
shall provide Executive with the benefits set forth in Section 8(e). A
termination under this Section 5(e) includes Executive's termination
without Cause following a Change of Control. For purposes of this
Agreement, a Change of Control shall be deemed to occur only if any two of
the three directors who are serving on the Board of Directors of the
Company as representatives of the Sommer Family Trust or related entities
on the date of the execution of this Agreement cease to be directors of
the Company.
f. Special Right of Company to Terminate this Agreement. If, within
twelve (12) months from the Commencement Date, substantially complete
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project financing sufficient for substantially full renovation and
construction for the Aladdin Hotel & Casino Redevelopment and Expansion
Project as set forth in the presentation to GW Vegas prepared by Westwood
Capital LLC and dated July, 1996 (or as subsequently modified) and as
finally approved by the Clark County Commission, has not been secured, the
Company shall have the right but not the obligation to terminate Executive
and this Agreement and Executive shall only be entitled to the benefits in
Section 8(f) hereof.
6. Executive's Covenants: The Executive acknowledges that the Company has
a substantial, legitimate and continuing interest in the protection of its
business relationships with others including without limitation current and
prospective employees, consultants, advisors, customers, vendors, suppliers,
partners or joint venturers, and financing sources, and in the protection of its
Confidential Information, and has invested substantial sums, time and effort and
will continue to invest substantial sums, time and effort to develop, maintain
and protect such relationships and Information. Accordingly, Executive covenants
and agrees as follows:
a. Confidentiality. During the Term and thereafter, Executive shall
keep secret and retain in strictest confidence and shall not, without the
prior written consent of the Company, furnish, make available or disclose
to any third party or use for the benefit of himself or any third party
any Confidential Information. Confidential Information is information
related to or concerning the Company and its businesses which is
confidential, proprietary or not generally known to and cannot be readily
ascertained through proper means by persons or entities (including the
Company's present or future competitors), who can obtain any type of value
from its disclosure or use. Confidential Information includes all secret,
confidential or proprietary information, knowledge or data relating to the
Company, such as, without limitation, finances and financing methods,
sources, proposals or plans; operational methods; marketing or development
proposals, plans or strategies; pricing strategies; business or property
acquisition or development proposals or plans; new personnel acquisition
proposals or plans; customer lists and any descriptions or data concerning
current or prospective customers; provided, however, while employed by the
Company and in furtherance of the business and for the benefit of the
Company, Executive may provide Confidential Information as appropriate to
attorneys, accountants, financial institutions and other persons or
entities engaged in business with the Company.
b. Non-Competition. Executive covenants and agrees that he will not
compete with the Company, its affiliates or subsidiaries at any time
during the
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Term, or for one (1) year from the Termination Date upon a Termination by
the Company for Cause under Section 5(d) (including Executive quitting
without Good Reason under Section 5(d)(5)). Under this paragraph,
Executive agrees that he will not, directly or indirectly, whether as
employee, owner, partner, agent, director, officer, consultant,
independent consultant or stockholder (except as the beneficial owner of
not more than 2% of the outstanding shares of a corporation, any of the
capital stock of which is listed on any national or regional securities
exchange or quoted in the daily listing of over-the-counter market
securities and, in each case, in which the Executive does not undertake
any management or operational or advisory role) or in any other capacity,
for his own account or for the benefit of any other person or entity,
establish, engage, work for or be connected in any manner with any person
or entity which is, at the time, engaged in a business which is in
competition with the business of the Company (or any of its subsidiaries
or affiliates); it being understood that for purposes of this Section
6(b), the business of owning, managing, operating or financing a casino or
similar gaming activities in Clark County, Nevada, shall be deemed to be
business in which the Company is engaged; provided, however, nothing
herein prohibits Executive from working for a competing business outside
Clark County, Nevada, so long as Executive's work outside Clark County,
Nevada, does not involve competition with the business of the Company in
Clark County, Nevada.
c. Employees of the Company. For one (1) year following the
Termination Date, Executive shall not, directly or indirectly, solicit, or
cause others to solicit, for employment by any person or entity other than
the Company, any employee of the Company or encourage any such employee to
leave employment with the Company.
d. Property of the Company. Executive acknowledges and agrees that
all memoranda, notes, lists, records and other documents or papers,
including copies thereof, containing or reflecting Confidential
Information (whether or not such items are kept or stored in computer
memories, microfiche, hard copy or any other manner) made or compiled by
Executive or made available to Executive are and remain the property of
the Company ("Company Property") and shall be delivered to the Company
promptly upon any termination of this Agreement under Section 5 hereof.
Executive shall retain no copies of Company Property following the
Termination Date.
e. Reasonableness and Severability of Covenants. The Executive
acknowledges and agrees that the Executive's Covenants herein are
necessary for
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the protection of the Company's legitimate interests, are reasonable and
valid in duration and geographical scope, and in all other respects. If
any court determines that any of the Executive Covenants, or any part
thereof, is invalid or unenforceable, the remainder of the Restrictive
Covenants shall not thereby be affected and shall be given full effect
without regard to the invalid portions.
f. Blue-Pencilling. If any court determines that any of the
Executive Covenants, or any part thereof, is unenforceable because of the
duration or geographical scope of such provision, such court shall have
the power to reduce the duration or scope of such provision, as the case
may be, and, in its reduced form, such provision shall then be
enforceable.
7. Non-Disparagement. Each of the parties agrees that after the
Termination Date, neither shall, publicly or privately, disparage or make any
statements (written or oral) that could impugn the integrity, acumen (business
or otherwise), ethics or business practices, of the other, except in each case,
to the extent (but solely to the extent) necessary (i) in any judicial or
arbitral action to enforce the provisions of this Agreement or (ii) in
connection with any judicial or administrative proceeding to the extent required
by applicable law.
8. Effect of Termination. The following provisions shall apply in the
event of the termination of this Agreement as provided in Section 5 above, and
neither party shall have any further liability or obligation to the other,
except as provided herein:
a. Expiration of Term. Upon expiration of the four (4) year term
under Section 5(a) hereof, this Agreement shall terminate and be of no
further force and effect, except as provided in Sections 4(f), 4(g), 6(a),
6(c), 6(d), 6(e), 6(f) and 7; provided that Executive shall be entitled to
such salary, bonus and benefits then accrued or vested to the Termination
Date, and any expense reimbursement amounts accrued to the Termination
Date;
b. Death. Upon termination of this Agreement as provided in Section
5(b) hereof, this Agreement shall terminate and be of no further force and
effect except as provided in Sections 4(f) and 4(g)(2); provided further
that the Company shall pay to Executive's estate any salary, bonus and
benefits then accrued or vested to the Termination Date, and any expense
reimbursement amounts accrued to the Termination Date;
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c. Disability. Upon termination of this Agreement as provided in
Section 5(c) hereof, this Agreement shall terminate and be of no further
force and effect, except as provided in Sections 4(f), 4(g)(2), 6(a),
6(c), 6(d), 6(e), 6(f) and 7; provided that Executive shall be entitled to
such salary, bonus and benefits then accrued or vested to the Termination
Date, and any expense reimbursement amounts accrued to the Termination
Date;
d. Termination by Company for Cause. Upon termination of this
Agreement as provided in Section 5(d) hereof, this Agreement shall
terminate and be of no further force and effect, except as provided in
Sections 4(f), 4(h), 6 and 7; provided that Executive shall be entitled to
such salary, bonus and benefits then accrued or vested to the Termination
Date, and any expense reimbursement amounts accrued to the Termination
Date;
e. Termination by the Company Without Cause. Upon termination of
this Agreement as provided in Section 5(e), this Agreement shall terminate
and be of no further force and effect, except as provided in Sections 6
and 7; provided further that Executive shall be entitled to such salary,
bonus and benefits to which Executive would have been entitled for the
remainder of the four-year term or twelve (12) months, whichever is
longer, as if there had been no earlier termination.
f. Termination By Special Right of the Company. Upon termination of
this Agreement as provided in Section 5(f), this Agreement shall terminate
and be of no further force and effect, except as provided in Sections
6(a), 6(c), 6(d), 6(e), 6(f) and 7; provided further that Executive shall
be entitled to such salary, bonus and benefits then accrued or vested to
the Termination Date, any expense reimbursement amounts accrued to the
Termination Date, and additional benefits as follows: Company paid COBRA
premiums for twelve (12) months and Base Salary for twelve (12) months,
payable in lump sum less customary deductions.
9. General Provisions.
a. Assignment. Neither this Agreement nor any right or interest
hereunder shall be assignable by the Executive or the Company without the
prior written consent of the other; provided, that (i) in the event of the
Executive's Death during the Term, the Executive's estate and his heirs,
executors, administrators, legatees and distributees shall have the rights
and obligations set forth herein, as provided herein, and (ii) nothing
contained in this Agreement shall limit or restrict
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the Company's ability (A) to merge or consolidate or effect any similar
transaction with any other entity, irrespective of whether the Company is
the surviving entity (including a split up, spin off or similar type
transaction), provided, that one or more of such surviving entities shall
continue to be bound by the provisions hereof binding upon the Company;
(B) to assign this Agreement in conjunction with a sale of all or
substantially all of the Company's assets; or (C) an assignment of this
Agreement to an affiliate controlled by or under common control with
Company.
b. Binding Agreement. This Agreement shall be binding upon, and
inure to the benefit of, the Executive and the Company and their
respective heirs, executors, administrators, legatees and distributees,
successors and permitted assigns.
c. Guarantee. Aladdin Holdings hereby unconditionally and
irrevocably guarantees to Executive the performance of all payment
obligations of the Company, its successors and assigns with respect to the
Agreement; provided, however, that (i) such guarantee shall become void
and without further effect, and (ii) Aladdin Holdings shall cease being a
party to this Agreement, as of the date, if any, of the Funding, defined
as substantially complete project financing sufficient for substantially
full renovation and construction for the Aladdin Hotel and Casino
Redevelopment and Expansion project as set forth in the presentation to GW
Vegas prepared by Westwood Capital LLC and dated July 1996 (or as
subsequently modified) and as finally approved by the Clark County
Commission.
d. Amendment of Agreement. This Agreement may not be modified or
amended except by an instrument in writing signed by the parties hereto.
e. Severability. If, for any reason, any provision of this Agreement
is determined to be invalid or unenforceable, such invalidity or lack of
enforceability shall not affect any other provision of this Agreement not
so determined to be invalid or unenforceable, and each such other
provision shall, to the full extent consistent with applicable law,
continue in full force and effect, irrespective of such invalid or
unenforceable provision.
f. Effect of Prior Agreements. This Agreement contains the entire
understanding between the parties hereto respecting the Executive's
employment by the Company, and supersedes any prior understandings or
agreements between the parties hereto.
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g. Indemnification. The Company shall indemnify and hold Executive
harmless to the full extent permitted by Chapter 86 of the Nevada Revised
Statutes against costs, expenses, liabilities and losses, including
reasonable attorney's fees and disbursements of counsel, incurred or
suffered by him in connection with his serves as an employee of the
Company during the Term of this Agreement.
h. Notices. For the purpose 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 delivered, if sent by
telecopy or by hand, (ii) one business day after sending, if sent by
reputable overnight courier service, such as Federal Express, or (iii)
three business days after being mailed, if sent by United States certified
or registered mail, return receipt requested, postage prepaid. Notices
shall be sent by one of the methods described above; provided, that any
notice sent by telecopy shall also be sent by any other method permitted
above. Notices shall be sent:
If to the Executive: James McKennon
22 Burning Tree Ct.
Las Vegas, NV 89113
with a copy to:
If to the Company: Aladdin Holdings LLC
280 Park Avenue
New York, NY 10017
Attn: Ron Dictrow
directed to the attention of the Board of Directors with copies to the
Chairman thereof; or to such other address as either party may have
furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon receipt.
i. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of
which together shall constitute one and the same instrument.
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j. Indulgences, Etc. Neither the failure nor any delay on the part
of either party to exercise any right, remedy, power or privilege under
this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege preclude any
other or further exercise of the same or of any other right, remedy, power
or privilege, nor shall any waiver of any right, remedy, power or
privilege with respect to any occurrence be construed as a waiver of such
right, remedy, power or privilege with respect to any other occurrence.
k. Binding Arbitration. Except for an action by the company for
injunctive or other equitable relief, any dispute or controversy arising
under or in connection to this Employment Agreement shall be resolved
through binding arbitration, conducted in Las Vegas, Nevada, in accordance
with the rules of the American Arbitration Association. Judgment may be
entered on the arbitration award in any court of competent jurisdiction.
l. Headings. The headings of sections and paragraphs herein are
included solely for convenience of reference and shall not control the
meaning or interpretation of any of the provisions of this Agreement.
m. Neutral Construction: Each party to this Agreement has had the
opportunity to retain counsel, and to review and participate in the
drafting of this Agreement, and, accordingly, the normal rule of
construction to the effect that any ambiguities are to be resolved against
the drafting parties will not be employed or used in any interpretation or
enforcement of this Agreement.
n. Gaming Law. Anything to the contrary herein notwithstanding, the
parties hereto agree and acknowledge that they are subject to and that
they shall comply in all respects with the gaming laws of the State of
Nevada including the Nevada Gaming Control Act and the rules and
regulations promulgated by the Nevada Gaming Commission and the State
Gaming Control Board. To the extent anything in this Agreement is
inconsistent with any gaming laws or regulations, the gaming laws and
regulations shall control.
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o. Governing Law. This Agreement has been executed and delivered in
the State of Nevada, and its validity, interpretation, performance, and
enforcement shall be governed by the laws of such state, without regard to
principals of conflicts of laws.
EXECUTION DATE ALADDIN GAMING LLC
July 28, 1997 By: /s/ Jack Sommer
-----------------------------
Its: President
ALADDIN HOLDINGS, LLC
By: /s/ Jack Sommer
-----------------------------
Its: President
/s/ James H. McKennon
-----------------------------
James H. McKennon, Executive
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Employment Agreement
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement"), is made and entered into by and
between Aladdin Gaming LLC ("Company"), Aladdin Holdings, LLC, ("Aladdin
Holdings") and Cornelius T. Klerk ("Executive").
WHEREAS, the Company considers it important and in its best interest and
the best interest of its owners to foster the employment of key management
personnel and desires to retain the services of Executive on the terms and
subject to the conditions in this Agreement;
WHEREAS, the Executive desires to accept employment by the Company to
render services to the Company on the terms and subject to the conditions in
this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the following mutual
covenants and agreements, the parties agree as follows:
1. Employment. The Company hereby employs Executive as Senior Vice
President and Chief Financial Officer of the Aladdin Hotel and Casino and
Executive hereby accepts such employment with the Company for the compensation
and on the terms and subject to the conditions in this Agreement.
2. Term.
a. On-Call Period. Beginning July 1, 1997, Company will employ
Executive in a consulting/on call capacity, which will not interfere with
Executive's duties and commitments elsewhere and with others. During this
on call period, the Company will pay Executive as his sole compensation
five-hundred ($500.00) dollars per month and Executive will be reasonably
available to confer with the Company on matters related to Executive's
duties under Section 3 hereof.
b. Full-Time Period. Following the On-Call Period, the full term of
the Executive's employment under this Agreement ("Term") shall commence on
July 14, 1997 ("Commencement Date") and shall continue for four (4) years,
to and including July 13, 2001, unless earlier terminated as provided in
this Agreement. (The date of any termination of this Agreement as provided
herein is the "Termination Date".)
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3. Duties and Responsibilities. During the Term, Executive will serve as
Senior Vice President and Chief Financial Officer of the Aladdin Hotel and
Casino and will have such authority, responsibilities and duties as are
customarily associated with this position. At all times Executive shall
faithfully and to the best of his abilities perform his duties and
responsibilities hereunder to the reasonable satisfaction of the Board of
Directors. In addition, Executive shall devote his full time, efforts and
attention to the business and affairs of the Company, use his best efforts to
further the interest of the Company and at all times conduct himself in a manner
which reflects credit upon the Company.
4. Compensation.
a. Salary. For his services hereunder, the Company shall pay
Executive a base salary ("Base Salary") of $200,000.00 for each
consecutive 12-month period during the Term beginning with the
Commencement Date. (Each such consecutive 12-month period is an
"Employment Year"). Executive's Base Salary will be prorated for any
partial Employment Year. The Board of Directors will consider increases in
the Base Salary no less frequently than annually, commencing at the end of
the first Employment Year hereunder and will be based upon criteria
determined by the Board of Directors and applicable to other members of
the executive management group. Any such increases, however, shall be in
the sole discretion of the Board of Directors, but there shall be no
reduction in Base Salary during the Term. The Base Salary shall be payable
in equal periodic installments subject to customary deductions for social
security, other taxes and amounts customarily withheld from salaries of
employees of the Company, all in accordance with the Company's usual and
customary payroll practices.
b. Annual Bonus. From and after the Operational Date as defined in
Section 4(f)(1)(i) hereof, Executive is eligible to receive from the
Company an annual cash bonus, provided Executive is employed by the
Company on the date the Board of Directors grants the bonus. The bonus
will be based on relevant criteria or performance standards as determined
by the Board of Directors in a bonus plan which will be competitive with
industry standards.
c. Benefits. During the Term, Executive shall be entitled to receive
from the Company such health, pension, retirement and other employee
benefits as the Company provides to other members of the executive
management group. During the Term, the Company at its expense will provide
Executive with term life insurance in the amount of Executive's annual
Base Salary. During the Term, the Company at its expense will provide
Executive with long-term disability coverage
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under a group long-term disability plan the Company provides other members
of the executive management group.
d. Vacation. Executive shall be entitled to two (2) weeks paid
vacation for each Employment Year, prorated for any partial Employment
Year. The Board of Directors in its discretion may increase Executive's
vacation entitlement. The timing and duration of specific vacations will
take into account the business needs of the Company and will be mutually
agreed to by the parties. In the event any such vacation is not used by
Executive in any Employment Year, the Executive has a right to accumulate
and carry forward such number of unused vacation days from year to year as
may be consistent with the Company's policy therefor for other members of
the executive management group, in effect from time to time. Upon
termination of employment, all unused vacation time shall be paid to
Executive.
e. Reimbursement of Expenses. The Company shall pay all reasonable
expenses incurred by Executive in the performance of his duties and
responsibilities for the Company. Executive shall submit to the Company
statements and documentation reflecting such expenses so incurred, with
such detail, backup and confirmation as the Company may reasonably
require. Subject to any audit the Company deems necessary, the Company
shall promptly reimburse Executive the full amount of any such expenses
incurred by Executive.
f. Right to Purchase LLC Membership Interest. On the date the
On-Call Period commences, Executive has the right to purchase a membership
interest equal to seventy-five hundredths (0.75%) percent of the total
membership interests of the Company for a total purchase price of $450.00,
which amount equals 100% of the fair market value of Executive's
membership interest on the date of purchase (the "Restricted Membership
Interest").
(1) During the Term, the Restricted Membership Interest vests as
follows:
(i) 25% of the Restricted Membership Interest on the
date that the Company opens and begins operating the newly
renovated and expanded Aladdin Hotel & Casino (the
"Operational Date") and Executive executes and agrees to be
bound by the Company's Operating Agreement; and
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(ii) 25% of the Restricted Membership Interest on each
succeeding annual anniversary of the Operational Date to the
Termination Date;
(2) Upon expiration of the four-year term of this Agreement
(provided Executive was employed by the Company at such
expiration), any unvested Restricted Membership Interest vests
only as follows:
(i) if the Company does not continue to employ Executive
for reason(s) not constituting Cause as defined in Section
5(d)(1-4) hereof or if the Executive does not continue his
employment at the request of the Company for reason(s)
constituting Good Reason as defined in Section 5(d)(5), then
an additional 25% of the Restricted Membership Interest vests;
or
(ii) if the Executive's employment with the Company
continues, the 25% of the Restricted Membership Interest
continues to vest in accordance with Section 4(f)(1)(ii) above
as though there had been no Termination Date.
(3) If Executive's employment terminates, the Company has the
right to repurchase any unvested portion of the Restricted
Membership Interest for the purchase price originally paid by
Executive.
(4) If, after the Operational Date, the Company remains an LLC,
has profits from operations but does not make Executive
membership distributions sufficient to pay Executive's tax
obligations from such profits, then the Company will
distribute sufficient cash for Executive to satisfy such
obligations, but only to the extent such distributions are not
sufficient to meet such tax obligations.
g. Executive's Put Right. Executive has the right but not the
obligation to sell his vested Restricted Membership Interest (or shares
exchanged by such Interest) back to the Company only in the following
circumstances:
(1) the Company's IPO has not occurred upon expiration of the
original four-year term of this Agreement and Company does not
continue to employ Executive for reason(s) not constituting
Cause as defined in Section 5(d)(1-4) hereof or the Executive
does not continue his employment at the request of the Company
for reason(s) constituting
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Good Reason as defined in Section 5(d)(5). This Put right must
be exercised in writing by Executive within thirty (30) days
of the expiration of the four-year term hereunder or it shall
become void and without further effect.
(2) The Company's IPO has not occurred upon Executive becoming
100% vested in Restricted Membership Interest. This Put right
must be exercised in writing by Executive within 30 days of
Executive being 100% vested or it shall become void and
without further effect.
The Put purchase price is the fair market value of such Interest (or
shares) on the Valuation Date. Under this Agreement, the Valuation Date is
(i) the expiration of the four-year term of this Agreement, in the event
of a Put under Section 4(g)(i), or (ii) the date Executive becomes 100%
vested, in the event of a Put under Section 4(g)(2). In either case of (i)
or (ii) in the preceding sentence, the fair market value shall be
determined by an independent appraisal firm mutually agreed to by the
Company and Executive, with the cost of such appraisal being paid by the
Company. If Executive exercises the Put hereunder, the Company must
purchase the Restricted Membership Interest or shares within ninety (90)
days of Executive's exercise of the Put.
h. Company's Call Right. If, prior to the date of the Company's IPO,
the Company terminates Executive for Cause as defined in Section 5(d)
hereof (including Executive quitting without Good Reason under Section
5(d)(5)), then the Company shall have the right but not the obligation to
purchase any vested Restricted Membership Interest (or shares exchanged by
such Interest) within thirty (30) days of the Termination Date at a price
equal to two (2) times the price Executive originally paid the Company for
such Restricted Membership Interest. The Call right must be exercised in
writing by the Company within thirty (30) days of the Termination Date or
it shall become void and without further effect. If the Company exercises
the Call hereunder, Executive must tender such Interest or shares and
otherwise complete the transaction hereunder within thirty (30) days of
the Company's exercise of the Call.
i. Auto Allowance. During the Term, the Company shall pay Executive
an auto allowance of $500.00 per month.
5. Termination. This Agreement shall terminate in accordance with the
following provisions:
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a. Expiration of the Term. Unless earlier terminated in accordance
with the provisions hereof, this Agreement shall terminate upon expiration
of the four-year term as provided in Section 2.
b. Death. If the Executive dies during the Term, this Agreement
shall terminate, with the Termination Date being the date of the
Executive's death.
c. Disability. If the Executive has been absent from service to the
Company as required in this Agreement for a period of ninety (90) days or
more during any one-hundred eighty (180) day period during the Term as a
result of any physical or mental disability, the Company has the right to
terminate this Agreement, the Termination Date being ten (10) days after
notice thereof is given to Executive.
d. Termination by Company for Cause. The Company has the right to
terminate this Agreement for Cause as defined herein, such termination to
be effective immediately upon notice thereof from the Company to
Executive. For purposes of this Agreement, Cause shall mean Executive's
(1) conviction of any felony; (2) embezzlement or misappropriation of
money or property of the Company; (3) denial, rejection, suspension or
revocation of any gaming license or permit; (4) Executive's material
breach of Section 6 hereof which material breach has an adverse impact on
the Company; (5) Executive quits his employment with the Company without
Good Reason. Good Reason is defined as (i) the assignment to Executive of
duties materially inconsistent with his position and title without his
consent, or (ii) a material reduction in Executive's duties, authorities
and responsibilities without his consent, or (iii) a reduction by the
Company in Executive's Base Salary, in effect immediately prior to such
reduction, without his consent, provided Executive gives the Company
written notice specifying such assignment or reduction and the Company has
not cured or abated such assignment or reduction within 20 days
thereafter.
e. Termination by Company Without Cause (Termination by Executive
With Good Reason). Subject to Section 5(f), the Company has the right to
terminate this Agreement without Cause (and the Executive has the right to
terminate this Agreement for Good Reason as defined in Section 5(d)
hereof) by giving the other party written notice thereof and the Company
shall provide Executive with the benefits set forth in Section 8(e). A
termination under this Section 5(e) includes Executive's termination
without Cause following a Change of Control. For purposes of this
Agreement, a Change of Control shall be deemed to occur only if any two of
the three directors who are serving on the Board of
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Directors of the Company as representatives of the Sommer Family Trust or
related entities on the date of the execution of this Agreement cease to
be directors of the Company.
f. Special Right of Company to Terminate this Agreement. If, within
twelve (12) months from the Commencement Date, substantially complete
project financing sufficient for substantially full renovation and
construction for the Aladdin Hotel & Casino Redevelopment and Expansion
Project as set forth in the presentation to GW Vegas prepared by Westwood
Capital LLC and dated July, 1996 (or as subsequently modified) and as
finally approved by the Clark County Commission, has not been secured, the
Company shall have the right but not the obligation to terminate Executive
and this Agreement and Executive shall only be entitled to the benefits in
Section 8(f) hereof.
6. Executive's Covenants: The Executive acknowledges that the Company has
a substantial, legitimate and continuing interest in the protection of its
business relationships with others including without limitation current and
prospective employees, consultants, advisors, customers, vendors, suppliers,
partners or joint venturers, and financing sources, and in the protection of its
Confidential Information, and has invested substantial sums, time and effort and
will continue to invest substantial sums, time and effort to develop, maintain
and protect such relationships and Information. Accordingly, Executive covenants
and agrees as follows:
a. Confidentiality. During the Term and thereafter, Executive shall
keep secret and retain in strictest confidence and shall not, without the
prior written consent of the Company, furnish, make available or disclose
to any third party or use for the benefit of himself or any third party
any Confidential Information. Confidential Information is information
related to or concerning the Company and its businesses which is
confidential, proprietary or not generally known to and cannot be readily
ascertained through proper means by persons or entities (including the
Company's present or future competitors), who can obtain any type of value
from its disclosure or use. Confidential Information includes all secret,
confidential or proprietary information, knowledge or data relating to the
Company, such as, without limitation, finances and financing methods,
sources, proposals or plans; operational methods; marketing or development
proposals, plans or strategies; pricing strategies; business or property
acquisition or development proposals or plans; new personnel acquisition
proposals or plans; customer lists and any descriptions or data concerning
current or prospective customers; provided, however, while employed by the
Company and in furtherance of the business and for the benefit of the
Company, Executive may provide Confidential Information as
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appropriate to attorneys, accountants, financial institutions and other
persons or entities engaged in business with the Company.
b. Non-Competition. Executive covenants and agrees that he will not
compete with the Company, its affiliates or subsidiaries at any time
during the Term, or for one (1) year from the Termination Date upon a
Termination by the Company for Cause under Section 5(d) (including
Executive quitting without Good Reason under Section 5(d)(5)). Under this
paragraph, Executive agrees that he will not, directly or indirectly,
whether as employee, owner, partner, agent, director, officer, consultant,
independent consultant or stockholder (except as the beneficial owner of
not more than 2% of the outstanding shares of a corporation, any of the
capital stock of which is listed on any national or regional securities
exchange or quoted in the daily listing of over-the-counter market
securities and, in each case, in which the Executive does not undertake
any management or operational or advisory role) or in any other capacity,
for his own account or for the benefit of any other person or entity,
establish, engage, work for or be connected in any manner with any person
or entity which is, at the time, engaged in a business which is in
competition with the business of the Company (or any of its subsidiaries
or affiliates); it being understood that for purposes of this Section
6(b), the business of owning, managing, operating or financing a casino or
similar gaming activities in Clark County, Nevada, shall be deemed to be
business in which the Company is engaged; provided, however, nothing
herein prohibits Executive from working for a competing business outside
Clark County, Nevada, so long as Executive's work does not involve
competition with the business of the Company in Clark County, Nevada.
c. Employees of the Company. For one (1) year following the
Termination Date, Executive shall not, directly or indirectly, solicit, or
cause others to solicit, for employment by any person or entity other than
the Company, any employee of the Company or encourage any such employee to
leave employment with the Company.
d. Property of the Company. Executive acknowledges and agrees that
all memoranda, notes, lists, records and other documents or papers,
including copies thereof, containing or reflecting Confidential
Information (whether or not such items are kept or stored in computer
memories, microfiche, hard copy or any other manner) made or compiled by
Executive or made available to Executive are and remain the property of
the Company ("Company Property") and shall be delivered to the Company
promptly upon any termination of this Agreement under
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Section 5 hereof. Executive shall retain no copies of Company Property
following the Termination Date.
e. Reasonableness and Severability of Covenants. The Executive
acknowledges and agrees that the Executive's Covenants herein are
necessary for the protection of the Company's legitimate interests, are
reasonable and valid in duration and geographical scope, and in all other
respects. If any court determines that any of the Executive Covenants, or
any part thereof, is invalid or unenforceable, the remainder of the
Restrictive Covenants shall not thereby be affected and shall be given
full effect without regard to the invalid portions.
f. Blue-Pencilling. If any court determines that any of the
Executive Covenants, or any part thereof, is unenforceable because of the
duration or geographical scope of such provision, such court shall have
the power to reduce the duration or scope of such provision, as the case
may be, and, in its reduced form, such provision shall then be
enforceable.
7. Non-Disparagement. Each of the parties agrees that after the
Termination Date, neither shall, publicly or privately, disparage or make any
statements (written or oral) that could impugn the integrity, acumen (business
or otherwise), ethics or business practices, of the other, except in each case,
to the extent (but solely to the extent) necessary (i) in any judicial or
arbitral action to enforce the provisions of this Agreement or (ii) in
connection with any judicial or administrative proceeding to the extent required
by applicable law.
8. Effect of Termination. The following provisions shall apply in the
event of the termination of this Agreement as provided in Section 5 above, and
neither party shall have any further liability or obligation to the other,
except as provided herein:
a. Expiration of Term. Upon expiration of the four (4) year term
under Section 5(a) hereof, this Agreement shall terminate and be of no
further force and effect, except as provided in Sections 4(f), 4(g), 6(a),
6(c), 6(d), 6(e), 6(f) and 7; provided that Executive shall be entitled to
such salary, bonus and benefits then accrued or vested to the Termination
Date, and any expense reimbursement amounts accrued to the Termination
Date;
b. Death. Upon termination of this Agreement as provided in Section
5(b) hereof, this Agreement shall terminate and be of no further force and
effect except as provided in Sections 4(f) and 4(g)(2); provided further
that the Company shall pay to Executive's estate any salary, bonus and
benefits then accrued or vested
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to the Termination Date, and any expense reimbursement amounts accrued to
the Termination Date;
c. Disability. Upon termination of this Agreement as provided in
Section 5(c) hereof, this Agreement shall terminate and be of no further
force and effect, except as provided in Sections 4(f), 4(g)(2), 6(a),
6(c), 6(d), 6(e), 6(f) and 7; provided that Executive shall be entitled to
such salary, bonus and benefits then accrued or vested to the Termination
Date, and any expense reimbursement amounts accrued to the Termination
Date;
d. Termination by Company for Cause. Upon termination of this
Agreement as provided in Section 5(d) hereof, this Agreement shall
terminate and be of no further force and effect, except as provided in
Sections 4(f), 4(h), 6 and 7; provided that Executive shall be entitled to
such salary, bonus and benefits then accrued or vested to the Termination
Date, and any expense reimbursement amounts accrued to the Termination
Date;
e. Termination by the Company Without Cause. Upon termination of
this Agreement as provided in Section 5(e), this Agreement shall terminate
and be of no further force and effect, except as provided in Sections 6
and 7; provided further that Executive shall be entitled to such salary,
bonus and benefits to which Executive would have been entitled for the
remainder of the four-year term or twelve (12) months, whichever is
longer, as if there had been no earlier termination.
f. Termination By Special Right of the Company. Upon termination of
this Agreement as provided in Section 5(f), this Agreement shall terminate
and be of no further force and effect, except as provided in Sections
6(a), 6(c), 6(d), 6(e), 6(f) and 7; provided further that Executive shall
be entitled to such salary, bonus and benefits then accrued or vested to
the Termination Date, any expense reimbursement amounts accrued to the
Termination Date, and additional benefits as follows: Company paid COBRA
premiums for twelve (12) months and Base Salary for twelve (12) months,
payable in lump sum less customary deductions.
9. General Provisions.
a. Assignment. Neither this Agreement nor any right or interest
hereunder shall be assignable by the Executive or the Company without the
prior written consent of the other; provided, that (i) in the event of the
Executive's Death during the Term, the Executive's estate and his heirs,
executors, administrators,
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legatees and distributees shall have the rights and obligations set forth
herein, as provided herein, and (ii) nothing contained in this Agreement
shall limit or restrict the Company's ability (A) to merge or consolidate
or effect any similar transaction with any other entity, irrespective of
whether the Company is the surviving entity (including a split up, spin
off or similar type transaction), provided, that one or more of such
surviving entities shall continue to be bound by the provisions hereof
binding upon the Company; (B) to assign this Agreement in conjunction with
a sale of all or substantially all of the Company's assets; or (C) an
assignment of this Agreement to an affiliate controlled by or under common
control with Company.
b. Binding Agreement. This Agreement shall be binding upon, and
inure to the benefit of, the Executive and the Company and their
respective heirs, executors, administrators, legatees and distributees,
successors and permitted assigns.
c. Guarantee. Aladdin Holdings hereby unconditionally and
irrevocably guarantees to Executive the performance of all payment
obligations of the Company, its successors and assigns with respect to the
Agreement; provided, however, that (i) such guarantee shall become void
and without further effect, and (ii) Aladdin Holdings shall cease being a
party to this Agreement, as of the date, if any, of the Funding, defined
as substantially complete project financing sufficient for substantially
full renovation and construction for the Aladdin Hotel and Casino
Redevelopment and Expansion project as set forth in the presentation to GW
Vegas prepared by Westwood Capital LLC and dated July 1996 (or as
subsequently modified) and as finally approved by the Clark County
Commission.
d. Amendment of Agreement. This Agreement may not be modified or
amended except by an instrument in writing signed by the parties hereto.
e. Severability. If, for any reason, any provision of this Agreement
is determined to be invalid or unenforceable, such invalidity or lack of
enforceability shall not affect any other provision of this Agreement not
so determined to be invalid or unenforceable, and each such other
provision shall, to the full extent consistent with applicable law,
continue in full force and effect, irrespective of such invalid or
unenforceable provision.
f. Effect of Prior Agreements. This Agreement contains the entire
understanding between the parties hereto respecting the Executive's
employment by the Company, and supersedes any prior understandings or
agreements between the parties hereto.
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g. Indemnification. The Company shall indemnify and hold Executive
harmless to the full extent permitted by Chapter 78 of the Nevada Revised
Statutes against costs, expenses, liabilities and losses, including
reasonable attorney's fees and disbursements of counsel, incurred or
suffered by him in connection with his serves as an employee of the
Company during the Term of this Agreement.
h. Notices. For the purpose 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 delivered, if sent by
telecopy or by hand, (ii) one business day after sending, if sent by
reputable overnight courier service, such as Federal Express, or (iii)
three business days after being mailed, if sent by United States certified
or registered mail, return receipt requested, postage prepaid. Notices
shall be sent by one of the methods described above; provided, that any
notice sent by telecopy shall also be sent by any other method permitted
above. Notices shall be sent:
If to the Executive: Cornelius T. Klerk
440 Wedgewood Drive
Henderson, NV 89014
with a copy to:
If to the Company: Aladdin Holdings LLC
280 Park Avenue
New York, NY 100170
Attn: Ron Dictrow
directed to the attention of the Board of Directors with copies to the
Chairman thereof; or to such other address as either party may have
furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon receipt.
i. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of
which together shall constitute one and the same instrument.
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j. Indulgences, Etc. Neither the failure nor any delay on the part
of either party to exercise any right, remedy, power or privilege under
this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege preclude any
other or further exercise of the same or of any other right, remedy, power
or privilege, nor shall any waiver of any right, remedy, power or
privilege with respect to any occurrence be construed as a waiver of such
right, remedy, power or privilege with respect to any other occurrence.
k. Binding Arbitration. Except for an action by the company for
injunctive or other equitable relief, any dispute or controversy arising
under or in connection to this Employment Agreement shall be resolved
through binding arbitration, conducted in Las Vegas, Nevada, in accordance
with the rules of the American Arbitration Association. Judgment may be
entered on the arbitration award in any court of competent jurisdiction.
l. Headings. The headings of sections and paragraphs herein are
included solely for convenience of reference and shall not control the
meaning or interpretation of any of the provisions of this Agreement.
m. Neutral Construction: Each party to this Agreement has had the
opportunity to retain counsel, and to review and participate in the
drafting of this Agreement, and, accordingly, the normal rule of
construction to the effect that any ambiguities are to be resolved against
the drafting parties will not be employed or used in any interpretation or
enforcement of this Agreement.
n. Gaming Law. Anything to the contrary herein notwithstanding, the
parties hereto agree and acknowledge that they are subject to and that
they shall comply in all respects with the gaming laws of the State of
Nevada including the Nevada Gaming Control Act and the rules and
regulations promulgated by the Nevada Gaming Commission and the State
Gaming Control Board. To the extent anything in this Agreement is
inconsistent with any gaming laws or regulations, the gaming laws and
regulations shall control.
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o. Governing Law. This Agreement has been executed and delivered in
the State of Nevada, and its validity, interpretation, performance, and
enforcement shall be governed by the laws of such state, without regard to
principals of conflicts of laws.
EXECUTION DATE ALADDIN GAMING LLC
______________________, 1997 By: /s/ Jack Sommer
--------------------------
Its: President
ALADDIN HOLDINGS, LLC
By: /s/ Jack Sommer
--------------------------
Its: President
/s/ Cornelius T. Klerk
------------------------------
Cornelius T. Klerk, Executive
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Employment Agreement
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement"), is made and entered into by and
between Aladdin Gaming LLC ("Company"), Aladdin Holdings, LLC, ("Aladdin
Holdings") and Lee Galati ("Executive").
WHEREAS, the Company considers it important and in its best interest and
the best interest of its owners to foster the employment of key management
personnel and desires to retain the services of Executive on the terms and
subject to the conditions in this Agreement;
WHEREAS, the Executive desires to accept employment by the Company to
render services to the Company on the terms and subject to the conditions in
this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the following mutual
covenants and agreements, the parties agree as follows:
1. Employment. The Company hereby employs Executive as Senior Vice
President - Human Resources of the Aladdin Hotel and Casino and Executive hereby
accepts such employment with the Company for the compensation and on the terms
and subject to the conditions in this Agreement.
2. Term. The term of the Executive's employment under this Agreement
("Term") shall commence on July 1, 1997 ("Commencement Date") and shall continue
for four (4) years, to and including June 30, 2001, unless earlier terminated as
provided in this Agreement. (The date of any termination of this Agreement as
provided herein is the "Termination Date".)
3. Duties and Responsibilities. During the Term, Executive will serve as
Senior Vice President - Human Resources of the Aladdin Hotel and Casino and will
have such authority, responsibilities and duties as are customarily associated
with this position. At all times Executive shall faithfully and to the best of
his abilities perform his duties and responsibilities hereunder to the
reasonable satisfaction of the Board of Directors. In addition, Executive shall
devote his full time, efforts and attention to the business and affairs of the
Company, use his best efforts to further the interest of the Company and at all
times conduct himself in a manner which reflects credit upon the Company.
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4. Compensation.
a. Salary. For his services hereunder, the Company shall pay
Executive a base salary ("Base Salary") of $150,000.00 for each
consecutive 12-month period during the Term beginning with the
Commencement Date. (Each such consecutive 12-month period is an
"Employment Year"). Executive's Base Salary will be prorated for any
partial Employment Year. The Board of Directors will consider increases in
the Base Salary no less frequently than annually, commencing at the end of
the first Employment Year hereunder and will be based upon criteria
determined by the Board of Directors and applicable to other members of
the executive management group. Any such increases, however, shall be in
the sole discretion of the Board of Directors, but there shall be no
reduction in Base Salary during the Term. The Base Salary shall be payable
in equal periodic installments subject to customary deductions for social
security, other taxes and amounts customarily withheld from salaries of
employees of the Company, all in accordance with the Company's usual and
customary payroll practices.
b. Annual Bonus. From and after the Operational Date as defined in
Section 4(f)(1)(i) hereof, Executive is eligible to receive from the
Company an annual cash bonus, provided Executive is employed by the
Company on the date the Board of Directors grants the bonus. The bonus
will be based on relevant criteria or performance standards as determined
by the Board of Directors in a bonus plan which will be competitive with
industry standards.
c. Benefits. During the Term, Executive shall be entitled to receive
from the Company such health, pension, retirement and other employee
benefits as the Company provides to other members of the executive
management group. During the Term, the Company at its expense will provide
Executive with term life insurance in the amount of Executive's annual
Base Salary. During the Term, the Company at its expense will provide
Executive with long-term disability coverage under a group long-term
disability plan the Company provides other members of the executive
management group.
d. Vacation. Executive shall be entitled to two (2) weeks paid
vacation for each Employment Year, prorated for any partial Employment
Year. The Board of Directors in its discretion may increase Executive's
vacation entitlement. The timing and duration of specific vacations will
take into account the business needs of the Company and will be mutually
agreed to by the parties. In the event any such vacation is not used by
Executive in any Employment Year, the Executive has a right to accumulate
and carry forward such number of unused vacation days from year to year as
may be consistent with the Company's policy therefor for other
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members of the executive management group, in effect from time to time.
Upon termination of employment, all unused vacation time shall be paid to
Executive.
e. Reimbursement of Expenses. The Company shall pay all reasonable
expenses incurred by Executive in the performance of his duties and
responsibilities for the Company. Executive shall submit to the Company
statements and documentation reflecting such expenses so incurred, with
such detail, backup and confirmation as the Company may reasonably
require. Subject to any audit the Company deems necessary, the Company
shall promptly reimburse Executive the full amount of any such expenses
incurred by Executive.
f. Right to Purchase LLC Membership Interest. On the Commencement
Date, Executive has the right to purchase a membership interest equal to
twenty-five hundredths (0.25%) percent of the total membership interests
of the Company for a total purchase price of $150.00, which amount equals
100% of the fair market value of Executive's membership interest on the
date of purchase (the "Restricted Membership Interest").
(1) During the Term, the Restricted Membership Interest vests as
follows:
(i) 25% of the Restricted Membership Interest on the
date that the Company opens and begins operating the newly
renovated and expanded Aladdin Hotel & Casino (the
"Operational Date"); and
(ii) 25% of the Restricted Membership Interest on each
succeeding annual anniversary of the Operational Date to the
Termination Date;
(2) Upon expiration of the four-year term of this Agreement
(provided Executive was employed by the Company at such
expiration), any unvested Restricted Membership Interest vests
only as follows:
(i) if the Company does not continue to employ Executive
for reason(s) not constituting Cause as defined in Section
5(d)(1-4) hereof or if the Executive does not continue his
employment at the request of the Company for reason(s)
constituting Good Reason as defined in Section 5(d)(5), then
an additional 25% of the Restricted Membership Interest vests;
or
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(ii) if the Executive's employment with the Company
continues, the 25% of the Restricted Membership Interest
continues to vest in accordance with Section 4(f)(1)(ii) above
as though there had been no Termination Date.
(3) If Executive's employment terminates, the Company has the
right to repurchase any unvested portion of the Restricted
Membership Interest for the purchase price originally paid by
Executive.
(4) If, after the Operational Date, the Company remains an LLC,
has profits from operations but does not make to Executive
membership distributions sufficient to pay Executive's tax
obligations from such profits, then the Company will
distribute sufficient cash for Executive to satisfy such
obligations, but only to the extent such distributions are not
sufficient to meet such tax obligations.
g. Executive's Put Right. Executive has the right but not the
obligation to sell his vested Restricted Membership Interest (or shares
exchanged by such Interest) back to the Company only in the following
circumstances:
(1) The Company's IPO has not occurred upon expiration of the
original four-year term of this Agreement and Company does not
continue to employ Executive for reason(s) not constituting
Cause as defined in Section 5(d)(1-4) hereof or the Executive
does not continue his employment at the request of the Company
for reason(s) constituting Good Reason as defined in Section
5(d)(5). This Put right must be exercised in writing by
Executive within thirty (30) days of the expiration of the
four-year term hereunder or it shall become void and without
further effect.
(2) The Company's IPO has not occurred upon Executive becoming
100% vested in Restricted Membership Interest. This Put right
must be exercised in writing by Executive within 30 days of
Executive being 100% vested or it shall become void and
without further effect.
The Put purchase price is the fair market value of such Interest (or
shares) on the Valuation Date. Under this Agreement, the Valuation Date is
(i) the expiration of the four-year term of this Agreement, in the event
of a Put under Section 4(g)(i), or (ii) the date Executive becomes 100%
vested, in the event of a Put under Section 4(g)(2). In either case of (i)
or (ii) in the preceding sentence, the fair market value shall be
determined by an independent appraisal firm mutually agreed to by the
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Company and Executive, with the cost of such appraisal being paid by the
Company. If Executive exercises the Put hereunder, the Company must
purchase the Restricted Membership Interest or shares within ninety (90)
days of Executive's exercise of the Put.
h. Company's Call Right. If, prior to the date of the Company's IPO,
the Company terminates Executive for Cause as defined in Section 5(d)
hereof (including Executive quitting without Good Reason under Section
5(d)(5)), then the Company shall have the right but not the obligation to
purchase any vested Restricted Membership Interest (or shares exchanged by
such Interest) within thirty (30) days of the Termination Date at a price
equal to two (2) times the price Executive originally paid the Company for
such Restricted Membership Interest. The Call right must be exercised in
writing by the Company within thirty (30) days of the Termination Date or
it shall become void and without further effect. If the Company exercises
the Call hereunder, Executive must tender such Interest or shares and
otherwise complete the transaction hereunder within thirty (30) days of
the Company's exercise of the Call.
i. Auto Allowance. During the Term, the Company shall pay Executive
an auto allowance of $300.00 per month.
5. Termination. This Agreement shall terminate in accordance with the
following provisions:
a. Expiration of the Term. Unless earlier terminated in accordance
with the provisions hereof, this Agreement shall terminate upon expiration
of the four-year term as provided in Section 2.
b. Death. If the Executive dies during the Term, this Agreement
shall terminate, with the Termination Date being the date of the
Executive's death.
c. Disability. If the Executive has been absent from service to the
Company as required in this Agreement for a period of ninety (90) days or
more during any one-hundred eighty (180) day period during the Term as a
result of any physical or mental disability, the Company has the right to
terminate this Agreement, the Termination Date being ten (10) days after
notice thereof is given to Executive.
d. Termination by Company for Cause. The Company has the right to
terminate this Agreement for Cause as defined herein, such termination to
be effective immediately upon notice thereof from the Company to
Executive. For
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purposes of this Agreement, Cause shall mean Executive's (1) conviction of
any felony; (2) embezzlement or misappropriation of money or property of
the Company; (3) denial, rejection, suspension or revocation of any gaming
license or permit; (4) Executive's material breach of Section 6 hereof
which material breach has an adverse impact on the Company; (5) Executive
quits his employment with the Company without Good Reason. Good Reason is
defined as (i) the assignment to Executive of duties materially
inconsistent with his position and title without his consent, or (ii) a
material reduction in Executive's duties, authorities and responsibilities
without his consent, or (iii) a reduction by the Company in Executive's
Base Salary, in effect immediately prior to such reduction, without his
consent, provided Executive gives the Company written notice specifying
such assignment or reduction and the Company has not cured or abated such
assignment or reduction within 20 days thereafter.
e. Termination by Company Without Cause (Termination by Executive
With Good Reason). Subject to Section 5(f), the Company has the right to
terminate this Agreement without Cause (and the Executive has the right to
terminate this Agreement for Good Reason as defined in Section 5(d)
hereof) by giving the other party written notice thereof and the Company
shall provide Executive with the benefits set forth in Section 8(e). A
termination under this Section 5(e) includes Executive's termination
without Cause following a Change of Control. For purposes of this
Agreement, a Change of Control shall be deemed to occur only if any two of
the three directors who are serving on the Board of Directors of the
Company as representatives of the Sommer Family Trust or related entities
on the date of the execution of this Agreement cease to be directors of
the Company.
f. Special Right of Company to Terminate this Agreement. If, within
twelve (12) months from the Commencement Date, substantially complete
project financing sufficient for substantially full renovation and
construction for the Aladdin Hotel & Casino Redevelopment and Expansion
Project as set forth in the presentation to GW Vegas prepared by Westwood
Capital LLC and dated July, 1996 (or as subsequently modified) and as
finally approved by the Clark County Commission, has not been secured, the
Company shall have the right but not the obligation to terminate Executive
and this Agreement and Executive shall only be entitled to the benefits in
Section 8(f) hereof.
6. Executive's Covenants: The Executive acknowledges that the Company has
a substantial, legitimate and continuing interest in the protection of its
business relationships with others including without limitation current and
prospective employees, consultants, advisors, customers, vendors, suppliers,
partners or joint venturers, and
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financing sources, and in the protection of its Confidential Information, and
has invested substantial sums, time and effort and will continue to invest
substantial sums, time and effort to develop, maintain and protect such
relationships and Information. Accordingly, Executive covenants and agrees as
follows:
a. Confidentiality. During the Term and thereafter, Executive shall
keep secret and retain in strictest confidence and shall not, without the
prior written consent of the Company, furnish, make available or disclose
to any third party or use for the benefit of himself or any third party
any Confidential Information. Confidential Information is information
related to or concerning the Company and its businesses which is
confidential, proprietary or not generally known to and cannot be readily
ascertained through proper means by persons or entities (including the
Company's present or future competitors), who can obtain any type of value
from its disclosure or use. Confidential Information includes all secret,
confidential or proprietary information, knowledge or data relating to the
Company, such as, without limitation, finances and financing methods,
sources, proposals or plans; operational methods; marketing or development
proposals, plans or strategies; pricing strategies; business or property
acquisition or development proposals or plans; new personnel acquisition
proposals or plans; customer lists and any descriptions or data concerning
current or prospective customers; provided, however, while employed by the
Company and in furtherance of the business and for the benefit of the
Company, Executive may provide Confidential Information as appropriate to
attorneys, accountants, financial institutions and other persons or
entities engaged in business with the Company.
b. Non-Competition. Executive covenants and agrees that he will not
compete with the Company, its affiliates or subsidiaries at any time
during the Term, or for one (1) year from the Termination Date upon a
Termination by the Company for Cause under Section 5(d) (including
Executive quitting without Good Reason under Section 5(d)(5)). Under this
paragraph, Executive agrees that he will not, directly or indirectly,
whether as employee, owner, partner, agent, director, officer, consultant,
independent consultant or stockholder (except as the beneficial owner of
not more than 2% of the outstanding shares of a corporation, any of the
capital stock of which is listed on any national or regional securities
exchange or quoted in the daily listing of over-the-counter market
securities and, in each case, in which the Executive does not undertake
any management or operational or advisory role) or in any other capacity,
for his own account or for the benefit of any other person or entity,
establish, engage, work for or be connected in any manner with any person
or entity which is, at the time, engaged in a business which is in
competition with the business of the Company (or any of its subsidiaries
or affiliates); it being understood that for purposes of this Section
6(b), the business of
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owning, managing, operating or financing a casino or similar gaming
activities in Clark County, Nevada, shall be deemed to be business in
which the Company is engaged; provided, however, nothing herein prohibits
Executive from working for a competing business outside Clark County,
Nevada, so long as Executive's work outside Clark County, Nevada, does not
involve competition with the business of the Company in Clark County,
Nevada.
c. Employees of the Company. For one (1) year following the
Termination Date, Executive shall not, directly or indirectly, solicit, or
cause others to solicit, for employment by any person or entity other than
the Company, any employee of the Company or encourage any such employee to
leave employment with the Company.
d. Property of the Company. Executive acknowledges and agrees that
all memoranda, notes, lists, records and other documents or papers,
including copies thereof, containing or reflecting Confidential
Information (whether or not such items are kept or stored in computer
memories, microfiche, hard copy or any other manner) made or compiled by
Executive or made available to Executive are and remain the property of
the Company ("Company Property") and shall be delivered to the Company
promptly upon any termination of this Agreement under Section 5 hereof.
Executive shall retain no copies of Company Property following the
Termination Date.
e. Reasonableness and Severability of Covenants. The Executive
acknowledges and agrees that the Executive's Covenants herein are
necessary for the protection of the Company's legitimate interests, are
reasonable and valid in duration and geographical scope, and in all other
respects. If any court determines that any of the Executive Covenants, or
any part thereof, is invalid or unenforceable, the remainder of the
Restrictive Covenants shall not thereby be affected and shall be given
full effect without regard to the invalid portions.
f. Blue-Pencilling. If any court determines that any of the
Executive Covenants, or any part thereof, is unenforceable because of the
duration or geographical scope of such provision, such court shall have
the power to reduce the duration or scope of such provision, as the case
may be, and, in its reduced form, such provision shall then be
enforceable.
7. Non-Disparagement. Each of the parties agrees that after the
Termination Date, neither shall, publicly or privately, disparage or make any
statements (written or oral) that could impugn the integrity, acumen (business
or otherwise), ethics or business practices, of the other, except in each case,
to the extent (but solely to the extent)
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necessary (i) in any judicial or arbitral action to enforce the provisions of
this Agreement or (ii) in connection with any judicial or administrative
proceeding to the extent required by applicable law.
8. Effect of Termination. The following provisions shall apply in the
event of the termination of this Agreement as provided in Section 5 above, and
neither party shall have any further liability or obligation to the other,
except as provided herein:
a. Expiration of Term. Upon expiration of the four (4) year term
under Section 5(a) hereof, this Agreement shall terminate and be of no
further force and effect, except as provided in Sections 4(f), 4(g), 6(a),
6(c), 6(d), 6(e), 6(f) and 7; provided that Executive shall be entitled to
such salary, bonus and benefits then accrued or vested to the Termination
Date, and any expense reimbursement amounts accrued to the Termination
Date;
b. Death. Upon termination of this Agreement as provided in Section
5(b) hereof, this Agreement shall terminate and be of no further force and
effect except as provided in Sections 4(f) and 4(g)(2); provided further
that the Company shall pay to Executive's estate any salary, bonus and
benefits then accrued or vested to the Termination Date, and any expense
reimbursement amounts accrued to the Termination Date;
c. Disability. Upon termination of this Agreement as provided in
Section 5(c) hereof, this Agreement shall terminate and be of no further
force and effect, except as provided in Sections 4(f), 4(g)(2), 6(a),
6(c), 6(d), 6(e), 6(f) and 7; provided that Executive shall be entitled to
such salary, bonus and benefits then accrued or vested to the Termination
Date, and any expense reimbursement amounts accrued to the Termination
Date;
d. Termination by Company for Cause. Upon termination of this
Agreement as provided in Section 5(d) hereof, this Agreement shall
terminate and be of no further force and effect, except as provided in
Sections 4(f), 4(h), 6 and 7; provided that Executive shall be entitled to
such salary, bonus and benefits then accrued or vested to the Termination
Date, and any expense reimbursement amounts accrued to the Termination
Date;
e. Termination by the Company Without Cause. Upon termination of
this Agreement as provided in Section 5(e), this Agreement shall terminate
and be of no further force and effect, except as provided in Sections 6
and 7; provided further that Executive shall be entitled to such salary,
bonus and benefits to which Executive would have been entitled for the
remainder of the four-year term or
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twelve (12) months, whichever is longer, as if there had been no earlier
termination.
f. Termination By Special Right of the Company. Upon termination of
this Agreement as provided in Section 5(f), this Agreement shall terminate
and be of no further force and effect, except as provided in Sections
6(a), 6(c), 6(d), 6(e), 6(f) and 7; provided further that Executive shall
be entitled to such salary, bonus and benefits then accrued or vested to
the Termination Date, any expense reimbursement amounts accrued to the
Termination Date, and additional benefits as follows: Company paid COBRA
premiums for twelve (12) months and Base Salary for twelve (12) months,
payable in lump sum less customary deductions.
9. General Provisions.
a. Assignment. Neither this Agreement nor any right or interest
hereunder shall be assignable by the Executive or the Company without the
prior written consent of the other; provided, that (i) in the event of the
Executive's Death during the Term, the Executive's estate and his heirs,
executors, administrators, legatees and distributees shall have the rights
and obligations set forth herein, as provided herein, and (ii) nothing
contained in this Agreement shall limit or restrict the Company's ability
(A) to merge or consolidate or effect any similar transaction with any
other entity, irrespective of whether the Company is the surviving entity
(including a split up, spin off or similar type transaction), provided,
that one or more of such surviving entities shall continue to be bound by
the provisions hereof binding upon the Company; (B) to assign this
Agreement in conjunction with a sale of all or substantially all of the
Company's assets; or (C) an assignment of this Agreement to an affiliate
controlled by or under common control with Company.
b. Binding Agreement. This Agreement shall be binding upon, and
inure to the benefit of, the Executive and the Company and their
respective heirs, executors, administrators, legatees and distributees,
successors and permitted assigns.
c. Guarantee. Aladdin Holdings hereby unconditionally and
irrevocably guarantees to Executive the performance of all payment
obligations of the Company, its successors and assigns with respect to the
Agreement; provided, however, that (i) such guarantee shall become void
and without further effect, and (ii) Aladdin Holdings shall cease being a
party to this Agreement, as of the date, if any, of the Funding, defined
as substantially complete project financing sufficient for substantially
full renovation and construction for the Aladdin Hotel and Casino
Redevelopment and Expansion project as set forth in the presentation to GW
Vegas
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prepared by Westwood Capital LLC and dated July 1996 (or as subsequently
modified) and as finally approved by the Clark County Commission.
d. Amendment of Agreement. This Agreement may not be modified or
amended except by an instrument in writing signed by the parties hereto.
e. Severability. If, for any reason, any provision of this Agreement
is determined to be invalid or unenforceable, such invalidity or lack of
enforceability shall not affect any other provision of this Agreement not
so determined to be invalid or unenforceable, and each such other
provision shall, to the full extent consistent with applicable law,
continue in full force and effect, irrespective of such invalid or
unenforceable provision.
f. Effect of Prior Agreements. This Agreement contains the entire
understanding between the parties hereto respecting the Executive's
employment by the Company, and supersedes any prior understandings or
agreements between the parties hereto.
g. Indemnification. The Company shall indemnify and hold Executive
harmless to the full extent permitted by Chapter 86 of the Nevada Revised
Statutes against costs, expenses, liabilities and losses, including
reasonable attorney's fees and disbursements of counsel, incurred or
suffered by him in connection with his serves as an employee of the
Company during the Term of this Agreement.
h. Notices. For the purpose 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 delivered, if sent by
telecopy or by hand, (ii) one business day after sending, if sent by
reputable overnight courier service, such as Federal Express, or (iii)
three business days after being mailed, if sent by United States certified
or registered mail, return receipt requested, postage prepaid.
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Notices shall be sent by one of the methods described above; provided,
that any notice sent by telecopy shall also be sent by any other method
permitted above. Notices shall be sent:
If to the Executive:
with a copy to:
If to the Company: Aladdin Holdings LLC
280 Park Avenue
New York, NY 10017
Attn: Ron Dictrow
directed to the attention of the Board of Directors with copies to the
Chairman thereof; or to such other address as either party may have
furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon receipt.
i. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of
which together shall constitute one and the same instrument.
j. Indulgences, Etc. Neither the failure nor any delay on the part
of either party to exercise any right, remedy, power or privilege under
this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege preclude any
other or further exercise of the same or of any other right, remedy, power
or privilege, nor shall any waiver of any right, remedy, power or
privilege with respect to any occurrence be construed as a waiver of such
right, remedy, power or privilege with respect to any other occurrence.
k. Binding Arbitration. Except for an action by the company for
injunctive or other equitable relief, any dispute or controversy arising
under or in connection to this Employment Agreement shall be resolved
through binding arbitration, conducted in Las Vegas, Nevada, in accordance
with the rules of the American Arbitration Association. Judgment may be
entered on the arbitration award in any court of competent jurisdiction.
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l. Headings. The headings of sections and paragraphs herein are
included solely for convenience of reference and shall not control the
meaning or interpretation of any of the provisions of this Agreement.
m. Neutral Construction: Each party to this Agreement has had the
opportunity to retain counsel, and to review and participate in the
drafting of this Agreement, and, accordingly, the normal rule of
construction to the effect that any ambiguities are to be resolved against
the drafting parties will not be employed or used in any interpretation or
enforcement of this Agreement.
n. Governing Law. This Agreement has been executed and delivered in
the State of Nevada, and its validity, interpretation, performance, and
enforcement shall be governed by the laws of such state, without regard to
principals of conflicts of laws.
EXECUTION DATE ALADDIN GAMING LLC
________________, 1997 By: /s/ Jack Sommer
--------------------------
Its: President
ALADDIN HOLDINGS, LLC
By: /s/ Jack Sommer
--------------------------
Its: President
/s/ Lee Galati
------------------------------
Lee Galati, Executive
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Employment Agreement
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement"), is made and entered into by and
between Aladdin Gaming LLC ("Company"), Aladdin Holdings, LLC, ("Aladdin
Holdings") and Jose A. Rueda ("Executive").
WHEREAS, the Company considers it important and in its best interest and
the best interest of its owners to foster the employment of key management
personnel and desires to retain the services of Executive on the terms and
subject to the conditions in this Agreement;
WHEREAS, the Executive desires to accept employment by the Company to
render services to the Company on the terms and subject to the conditions in
this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the following mutual
covenants and agreements, the parties agree as follows:
1. Employment. The Company hereby employs Executive as Senior Vice
President - Electronic Gaming of the Aladdin Hotel and Casino and Executive
hereby accepts such employment with the Company for the compensation and on the
terms and subject to the conditions in this Agreement.
2. Term.
a. On-Call Period. Beginning July 1, 1997, Company will employ
Executive in a consulting/on call capacity, which will not interfere with
Executive's duties and commitments elsewhere and with others. During this
on call period, the Company will pay Executive as his sole compensation
five-hundred ($500.00) dollars per month and Executive will be reasonably
available to confer with the Company on matters related to Executive's
duties under Section 3 hereof.
b. Full-Time Period. Following the On-Call Period, the full term of
the Executive's employment under this Agreement ("Term") shall commence on
September 1, 1997 ("Commencement Date") and shall continue for four (4)
years, to and including August 31, 2001, unless earlier terminated as
provided in this Agreement. (The date of any termination of this Agreement
as provided herein is the "Termination Date".)
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3. Duties and Responsibilities. During the Term, Executive will serve as
Senior Vice President - Electronic Gaming of the Aladdin Hotel and Casino and
will have such authority, responsibilities and duties as are customarily
associated with this position. At all times Executive shall faithfully and to
the best of his abilities perform his duties and responsibilities hereunder to
the reasonable satisfaction of the Board of Directors. In addition, Executive
shall devote his full time, efforts and attention to the business and affairs of
the Company, use his best efforts to further the interest of the Company and at
all times conduct himself in a manner which reflects credit upon the Company.
4. Compensation.
a. Salary. For his services hereunder, the Company shall pay
Executive a base salary ("Base Salary") of $250,000 for each consecutive
12-month period during the Term beginning with the Commencement Date.
(Each such consecutive 12-month period is an "Employment Year").
Executive's Base Salary will be prorated for any partial Employment Year.
The Board of Directors will consider increases in the Base Salary no less
frequently than annually, commencing at the end of the first Employment
Year hereunder and will be based upon criteria determined by the Board of
Directors and applicable to other members of the executive management
group. Any such increases, however, shall be in the sole discretion of the
Board of Directors, but there shall be no reduction in Base Salary during
the Term. The Base Salary shall be payable in equal periodic installments
subject to customary deductions for social security, other taxes and
amounts customarily withheld from salaries of employees of the Company,
all in accordance with the Company's usual and customary payroll
practices.
b. Annual Bonus. From and after the Operational Date as defined in
Section 4(f)(1)(i) hereof, Executive is eligible to receive from the
Company an annual cash bonus, provided Executive is employed by the
Company on the date the Board of Directors grants the bonus. The bonus
will be based on relevant criteria or performance standards as determined
by the Board of Directors in a bonus plan which will be competitive with
industry standards.
c. Benefits. During the Term, Executive shall be entitled to receive
from the Company such health, pension, retirement and other employee
benefits as the Company provides to other members of the executive
management group. During the Term, the Company at its expense will provide
Executive with term life insurance in the amount of Executive's annual
Base Salary. During the Term, the Company at its expense will provide
Executive with long-term disability coverage
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under a group long-term disability plan the Company provides other members
of the executive management group.
d. Vacation. Executive shall be entitled to two (2) weeks paid
vacation for each Employment Year, prorated for any partial Employment
Year. The Board of Directors in its discretion may increase Executive's
vacation entitlement. The timing and duration of specific vacations will
take into account the business needs of the Company and will be mutually
agreed to by the parties. In the event any such vacation is not used by
Executive in any Employment Year, the Executive has a right to accumulate
and carry forward such number of unused vacation days from year to year as
may be consistent with the Company's policy therefor for other members of
the executive management group, in effect from time to time. Upon
termination of employment, all unused vacation time shall be paid to
Executive.
e. Reimbursement of Expenses. The Company shall pay all reasonable
expenses incurred by Executive in the performance of his duties and
responsibilities for the Company. Executive shall submit to the Company
statements and documentation reflecting such expenses so incurred, with
such detail, backup and confirmation as the Company may reasonably
require. Subject to any audit the Company deems necessary, the Company
shall promptly reimburse Executive the full amount of any such expenses
incurred by Executive.
f. Right to Purchase LLC Membership Interest. On the date the
On-Call Period commences, Executive has the right to purchase a membership
interest equal to seventy-five hundredths (0.75%) percent of the total
membership interests of the Company for a total purchase price of $450.00,
which amount equals 100% of the fair market value of Executive's
membership interest on the date of purchase (the "Restricted Membership
Interest").
(1) During the Term, the Restricted Membership Interest vests as
follows:
(i) 25% of the Restricted Membership Interest on the
date that the Company opens and begins operating the newly
renovated and expanded Aladdin Hotel & Casino (the
"Operational Date") and Executive executes and agrees to be
bound by the Company's Operating Agreement; and
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(ii) 25% of the Restricted Membership Interest on each
succeeding annual anniversary of the Operational Date to the
Termination Date;
(2) Upon expiration of the four-year term of this Agreement
(provided Executive was employed by the Company at such
expiration), any unvested Restricted Membership Interest vests
only as follows:
(i) if the Company does not continue to employ Executive
for reason(s) not constituting Cause as defined in Section
5(d)(1-4) hereof or if the Executive does not continue his
employment at the request of the Company for reason(s)
constituting Good Reason as defined in Section 5(d)(5), then
an additional 25% of the Restricted Membership Interest vests;
or
(ii) if the Executive's employment with the Company
continues, the 25% of the Restricted Membership Interest
continues to vest in accordance with Section 4(f)(1)(ii) above
as though there had been no Termination Date.
(3) If Executive's employment terminates, the Company has the
right to repurchase any unvested portion of the Restricted
Membership Interest for the purchase price originally paid by
Executive.
(4) If, after the Operational Date, the Company remains an LLC,
has profits from operations but does not make Executive
membership distributions sufficient to pay Executive's tax
obligations from such profits, then the Company will
distribute sufficient cash for Executive to satisfy such
obligations, but only to the extent such distributions are not
sufficient to meet such tax obligations.
g. Executive's Put Right. Executive has the right but not the
obligation to sell his vested Restricted Membership Interest (or shares
exchanged by such Interest) back to the Company only in the following
circumstances:
(1) the Company's IPO has not occurred upon expiration of the
original four-year term of this Agreement and Company does not
continue to employ Executive for reason(s) not constituting
Cause as defined in Section 5(d)(1-4) hereof or the Executive
does not continue his employment at the request of the Company
for reason(s) constituting
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Good Reason as defined in Section 5(d)(5). This Put right must
be exercised in writing by Executive within thirty (30) days
of the expiration of the four-year term hereunder or it shall
become void and without further effect.
(2) The Company's IPO has not occurred upon Executive becoming
100% vested in Restricted Membership Interest. This Put right
must be exercised in writing by Executive within 30 days of
Executive being 100% vested or it shall become void and
without further effect.
The Put purchase price is the fair market value of such Interest (or
shares) on the Valuation Date. Under this Agreement, the Valuation Date is
(i) the expiration of the four-year term of this Agreement, in the event
of a Put under Section 4(g)(i), or (ii) the date Executive becomes 100%
vested, in the event of a Put under Section 4(g)(2). In either case of (i)
or (ii) in the preceding sentence, the fair market value shall be
determined by an independent appraisal firm mutually agreed to by the
Company and Executive, with the cost of such appraisal being paid by the
Company. If Executive exercises the Put hereunder, the Company must
purchase the Restricted Membership Interest or shares within ninety (90)
days of Executive's exercise of the Put.
h. Company's Call Right. If, prior to the date of the Company's IPO,
the Company terminates Executive for Cause as defined in Section 5(d)
hereof (including Executive quitting without Good Reason under Section
5(d)(5)), then the Company shall have the right but not the obligation to
purchase any vested Restricted Membership Interest (or shares exchanged by
such Interest) within thirty (30) days of the Termination Date at a price
equal to two (2) times the price Executive originally paid the Company for
such Restricted Membership Interest. The Call right must be exercised in
writing by the Company within thirty (30) days of the Termination Date or
it shall become void and without further effect. If the Company exercises
the Call hereunder, Executive must tender such Interest or shares and
otherwise complete the transaction hereunder within thirty (30) days of
the Company's exercise of the Call.
i. Auto Allowance. During the Term, the Company shall pay Executive
an auto allowance of $500.00 per month.
5. Termination. This Agreement shall terminate in accordance with the
following provisions:
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a. Expiration of the Term. Unless earlier terminated in accordance
with the provisions hereof, this Agreement shall terminate upon expiration
of the four-year term as provided in Section 2.
b. Death. If the Executive dies during the Term, this Agreement
shall terminate, with the Termination Date being the date of the
Executive's death.
c. Disability. If the Executive has been absent from service to the
Company as required in this Agreement for a period of ninety (90) days or
more during any one-hundred eighty (180) day period during the Term as a
result of any physical or mental disability, the Company has the right to
terminate this Agreement, the Termination Date being ten (10) days after
notice thereof is given to Executive.
d. Termination by Company for Cause. The Company has the right to
terminate this Agreement for Cause as defined herein, such termination to
be effective immediately upon notice thereof from the Company to
Executive. For purposes of this Agreement, Cause shall mean Executive's
(1) conviction of any felony; (2) embezzlement or misappropriation of
money or property of the Company; (3) denial, rejection, suspension or
revocation of any gaming license or permit; (4) Executive's material
breach of Section 6 hereof which material breach has an adverse impact on
the Company; (5) Executive quits his employment with the Company without
Good Reason. Good Reason is defined as (i) the assignment to Executive of
duties materially inconsistent with his position and title without his
consent, or (ii) a material reduction in Executive's duties, authorities
and responsibilities without his consent, or (iii) a reduction by the
Company in Executive's Base Salary, in effect immediately prior to such
reduction, without his consent, provided Executive gives the Company
written notice specifying such assignment or reduction and the Company has
not cured or abated such assignment or reduction within 20 days
thereafter.
e. Termination by Company Without Cause (Termination by Executive
With Good Reason). Subject to Section 5(f), the Company has the right to
terminate this Agreement without Cause (and the Executive has the right to
terminate this Agreement for Good Reason as defined in Section 5(d)
hereof) by giving the other party written notice thereof and the Company
shall provide Executive with the benefits set forth in Section 8(e). A
termination under this Section 5(e) includes Executive's termination
without Cause following a Change of Control. For purposes of this
Agreement, a Change of Control shall be deemed to occur only if any two of
the three directors who are serving on the Board of
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Directors of the Company as representatives of the Sommer Family Trust or
related entities on the date of the execution of this Agreement cease to
be directors of the Company.
f. Special Right of Company to Terminate this Agreement. If, within
twelve (12) months from the Commencement Date, substantially complete
project financing sufficient for substantially full renovation and
construction for the Aladdin Hotel & Casino Redevelopment and Expansion
Project as set forth in the presentation to GW Vegas prepared by Westwood
Capital LLC and dated July, 1996 (or as subsequently modified) and as
finally approved by the Clark County Commission, has not been secured, the
Company shall have the right but not the obligation to terminate Executive
and this Agreement and Executive shall only be entitled to the benefits in
Section 8(f) hereof.
6. Executive's Covenants: The Executive acknowledges that the Company has
a substantial, legitimate and continuing interest in the protection of its
business relationships with others including without limitation current and
prospective employees, consultants, advisors, customers, vendors, suppliers,
partners or joint venturers, and financing sources, and in the protection of its
Confidential Information, and has invested substantial sums, time and effort and
will continue to invest substantial sums, time and effort to develop, maintain
and protect such relationships and Information. Accordingly, Executive covenants
and agrees as follows:
a. Confidentiality. During the Term and thereafter, Executive shall
keep secret and retain in strictest confidence and shall not, without the
prior written consent of the Company, furnish, make available or disclose
to any third party or use for the benefit of himself or any third party
any Confidential Information. Confidential Information is information
related to or concerning the Company and its businesses which is
confidential, proprietary or not generally known to and cannot be readily
ascertained through proper means by persons or entities (including the
Company's present or future competitors), who can obtain any type of value
from its disclosure or use. Confidential Information includes all secret,
confidential or proprietary information, knowledge or data relating to the
Company, such as, without limitation, finances and financing methods,
sources, proposals or plans; operational methods; marketing or development
proposals, plans or strategies; pricing strategies; business or property
acquisition or development proposals or plans; new personnel acquisition
proposals or plans; customer lists and any descriptions or data concerning
current or prospective customers; provided, however, while employed by the
Company and in furtherance of the business and for the benefit of the
Company, Executive may provide Confidential Information as
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appropriate to attorneys, accountants, financial institutions and other
persons or entities engaged in business with the Company.
b. Non-Competition. Executive covenants and agrees that he will not
compete with the Company, its affiliates or subsidiaries at any time
during the Term, or for one (1) year from the Termination Date upon a
Termination by the Company for Cause under Section 5(d) (including
Executive quitting without Good Reason under Section 5(d)(5)). Under this
paragraph, Executive agrees that he will not, directly or indirectly,
whether as employee, owner, partner, agent, director, officer, consultant,
independent consultant or stockholder (except as the beneficial owner of
not more than 2% of the outstanding shares of a corporation, any of the
capital stock of which is listed on any national or regional securities
exchange or quoted in the daily listing of over-the-counter market
securities and, in each case, in which the Executive does not undertake
any management or operational or advisory role) or in any other capacity,
for his own account or for the benefit of any other person or entity,
establish, engage, work for or be connected in any manner with any person
or entity which is, at the time, engaged in a business which is in
competition with the business of the Company (or any of its subsidiaries
or affiliates); it being understood that for purposes of this Section
6(b), the business of owning, managing, operating or financing a casino or
similar gaming activities in Clark County, Nevada, shall be deemed to be
business in which the Company is engaged; provided, however, nothing
herein prohibits Executive from working for a competing business outside
Clark County, Nevada, so long as Executive's work does not involve
competition with the business of the Company in Clark County, Nevada.
c. Employees of the Company. For one (1) year following the
Termination Date, Executive shall not, directly or indirectly, solicit, or
cause others to solicit, for employment by any person or entity other than
the Company, any employee of the Company or encourage any such employee to
leave employment with the Company.
d. Property of the Company. Executive acknowledges and agrees that
all memoranda, notes, lists, records and other documents or papers,
including copies thereof, containing or reflecting Confidential
Information (whether or not such items are kept or stored in computer
memories, microfiche, hard copy or any other manner) made or compiled by
Executive or made available to Executive are and remain the property of
the Company ("Company Property") and shall be delivered to the Company
promptly upon any termination of this Agreement under
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Section 5 hereof. Executive shall retain no copies of Company Property
following the Termination Date.
e. Reasonableness and Severability of Covenants. The Executive
acknowledges and agrees that the Executive's Covenants herein are
necessary for the protection of the Company's legitimate interests, are
reasonable and valid in duration and geographical scope, and in all other
respects. If any court determines that any of the Executive Covenants, or
any part thereof, is invalid or unenforceable, the remainder of the
Restrictive Covenants shall not thereby be affected and shall be given
full effect without regard to the invalid portions.
f. Blue-Pencilling. If any court determines that any of the
Executive Covenants, or any part thereof, is unenforceable because of the
duration or geographical scope of such provision, such court shall have
the power to reduce the duration or scope of such provision, as the case
may be, and, in its reduced form, such provision shall then be
enforceable.
7. Non-Disparagement. Each of the parties agrees that after the
Termination Date, neither shall, publicly or privately, disparage or make any
statements (written or oral) that could impugn the integrity, acumen (business
or otherwise), ethics or business practices, of the other, except in each case,
to the extent (but solely to the extent) necessary (i) in any judicial or
arbitral action to enforce the provisions of this Agreement or (ii) in
connection with any judicial or administrative proceeding to the extent required
by applicable law.
8. Effect of Termination. The following provisions shall apply in the
event of the termination of this Agreement as provided in Section 5 above, and
neither party shall have any further liability or obligation to the other,
except as provided herein:
a. Expiration of Term. Upon expiration of the four (4) year term
under Section 5(a) hereof, this Agreement shall terminate and be of no
further force and effect, except as provided in Sections 4(f), 4(g), 6(a),
6(c), 6(d), 6(e), 6(f) and 7; provided that Executive shall be entitled to
such salary, bonus and benefits then accrued or vested to the Termination
Date, and any expense reimbursement amounts accrued to the Termination
Date;
b. Death. Upon termination of this Agreement as provided in Section
5(b) hereof, this Agreement shall terminate and be of no further force and
effect except as provided in Sections 4(f) and 4(g)(2); provided further
that the Company shall pay to Executive's estate any salary, bonus and
benefits then accrued or vested
9
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to the Termination Date, and any expense reimbursement amounts accrued to
the Termination Date;
c. Disability. Upon termination of this Agreement as provided in
Section 5(c) hereof, this Agreement shall terminate and be of no further
force and effect, except as provided in Sections 4(f), 4(g)(2), 6(a),
6(c), 6(d), 6(e), 6(f) and 7; provided that Executive shall be entitled to
such salary, bonus and benefits then accrued or vested to the Termination
Date, and any expense reimbursement amounts accrued to the Termination
Date;
d. Termination by Company for Cause. Upon termination of this
Agreement as provided in Section 5(d) hereof, this Agreement shall
terminate and be of no further force and effect, except as provided in
Sections 4(f), 4(h), 6 and 7; provided that Executive shall be entitled to
such salary, bonus and benefits then accrued or vested to the Termination
Date, and any expense reimbursement amounts accrued to the Termination
Date;
e. Termination by the Company Without Cause. Upon termination of
this Agreement as provided in Section 5(e), this Agreement shall terminate
and be of no further force and effect, except as provided in Sections 6
and 7; provided further that Executive shall be entitled to such salary,
bonus and benefits to which Executive would have been entitled for the
remainder of the four-year term or twelve (12) months, whichever is
longer, as if there had been no earlier termination.
f. Termination By Special Right of the Company. Upon termination of
this Agreement as provided in Section 5(f), this Agreement shall terminate
and be of no further force and effect, except as provided in Sections
6(a), 6(c), 6(d), 6(e), 6(f) and 7; provided further that Executive shall
be entitled to such salary, bonus and benefits then accrued or vested to
the Termination Date, any expense reimbursement amounts accrued to the
Termination Date, and additional benefits as follows: Company paid COBRA
premiums for twelve (12) months and Base Salary for twelve (12) months,
payable in lump sum less customary deductions.
9. General Provisions.
a. Assignment. Neither this Agreement nor any right or interest
hereunder shall be assignable by the Executive or the Company without the
prior written consent of the other; provided, that (i) in the event of the
Executive's Death during the Term, the Executive's estate and his heirs,
executors, administrators,
10
<PAGE>
legatees and distributees shall have the rights and obligations set forth
herein, as provided herein, and (ii) nothing contained in this Agreement
shall limit or restrict the Company's ability (A) to merge or consolidate
or effect any similar transaction with any other entity, irrespective of
whether the Company is the surviving entity (including a split up, spin
off or similar type transaction), provided, that one or more of such
surviving entities shall continue to be bound by the provisions hereof
binding upon the Company; (B) to assign this Agreement in conjunction with
a sale of all or substantially all of the Company's assets; or (C) an
assignment of this Agreement to an affiliate controlled by or under common
control with Company.
b. Binding Agreement. This Agreement shall be binding upon, and
inure to the benefit of, the Executive and the Company and their
respective heirs, executors, administrators, legatees and distributees,
successors and permitted assigns.
c. Guarantee. Aladdin Holdings hereby unconditionally and
irrevocably guarantees to Executive the performance of all payment
obligations of the Company, its successors and assigns with respect to the
Agreement; provided, however, that (i) such guarantee shall become void
and without further effect, and (ii) Aladdin Holdings shall cease being a
party to this Agreement, as of the date, if any, of the Funding, defined
as substantially complete project financing sufficient for substantially
full renovation and construction for the Aladdin Hotel and Casino
Redevelopment and Expansion project as set forth in the presentation to GW
Vegas prepared by Westwood Capital LLC and dated July 1996 (or as
subsequently modified) and as finally approved by the Clark County
Commission.
d. Amendment of Agreement. This Agreement may not be modified or
amended except by an instrument in writing signed by the parties hereto.
e. Severability. If, for any reason, any provision of this Agreement
is determined to be invalid or unenforceable, such invalidity or lack of
enforceability shall not affect any other provision of this Agreement not
so determined to be invalid or unenforceable, and each such other
provision shall, to the full extent consistent with applicable law,
continue in full force and effect, irrespective of such invalid or
unenforceable provision.
f. Effect of Prior Agreements. This Agreement contains the entire
understanding between the parties hereto respecting the Executive's
employment by the Company, and supersedes any prior understandings or
agreements between the parties hereto.
11
<PAGE>
g. Indemnification. The Company shall indemnify and hold Executive
harmless to the full extent permitted by Chapter 78 of the Nevada Revised
Statutes against costs, expenses, liabilities and losses, including
reasonable attorney's fees and disbursements of counsel, incurred or
suffered by him in connection with his serves as an employee of the
Company during the Term of this Agreement.
h. Notices. For the purpose 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 delivered, if sent by
telecopy or by hand, (ii) one business day after sending, if sent by
reputable overnight courier service, such as Federal Express, or (iii)
three business days after being mailed, if sent by United States certified
or registered mail, return receipt requested, postage prepaid. Notices
shall be sent by one of the methods described above; provided, that any
notice sent by telecopy shall also be sent by any other method permitted
above. Notices shall be sent:
If to the Executive:
with a copy to:
If to the Company: Aladdin Holdings LLC
280 Park Avenue
New York, NY 10017
Attn: Ron Dictrow
directed to the attention of the Board of Directors with copies to the
Chairman thereof; or to such other address as either party may have
furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon receipt.
i. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of
which together shall constitute one and the same instrument.
12
<PAGE>
j. Indulgences, Etc. Neither the failure nor any delay on the part
of either party to exercise any right, remedy, power or privilege under
this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege preclude any
other or further exercise of the same or of any other right, remedy, power
or privilege, nor shall any waiver of any right, remedy, power or
privilege with respect to any occurrence be construed as a waiver of such
right, remedy, power or privilege with respect to any other occurrence.
k. Binding Arbitration. Except for an action by the company for
injunctive or other equitable relief, any dispute or controversy arising
under or in connection to this Employment Agreement shall be resolved
through binding arbitration, conducted in Las Vegas, Nevada, in accordance
with the rules of the American Arbitration Association. Judgment may be
entered on the arbitration award in any court of competent jurisdiction.
l. Headings. The headings of sections and paragraphs herein are
included solely for convenience of reference and shall not control the
meaning or interpretation of any of the provisions of this Agreement.
m. Neutral Construction: Each party to this Agreement has had the
opportunity to retain counsel, and to review and participate in the
drafting of this Agreement, and, accordingly, the normal rule of
construction to the effect that any ambiguities are to be resolved against
the drafting parties will not be employed or used in any interpretation or
enforcement of this Agreement.
n. Gaming Law. Anything to the contrary herein notwithstanding, the
parties hereto agree and acknowledge that they are subject to and that
they shall comply in all respects with the gaming laws of the State of
Nevada including the Nevada Gaming Control Act and the rules and
regulations promulgated by the Nevada Gaming Commission and the State
Gaming Control Board. To the extent anything in this Agreement is
inconsistent with any gaming laws or regulations, the gaming laws and
regulations shall control.
13
<PAGE>
o. Governing Law. This Agreement has been executed and delivered in
the State of Nevada, and its validity, interpretation, performance, and
enforcement shall be governed by the laws of such state, without regard to
principals of conflicts of laws.
EXECUTION DATE ALADDIN GAMING LLC
July 1, 1997 By: /s/ Jack Sommer
-------------------------
Its: President
ALADDIN HOLDINGS, LLC
By: /s/ Jack Sommer
-------------------------
Its: President
/s/ Jose A. Rueda
-----------------------------
Jose A. Rueda, Executive
14
<PAGE>
Mall Commitment Letter
December 29, 1997
Aladdin Bazaar, LLC
c/o TrizecHahn Centers Inc.
4350 La Jolla Village Drive
Suite 400
San Diego, California 92122
Attention: Mr. Gregory Bowen
Re: Premises located at 3667 Las Vegas Boulevard South,
Las Vegas, Clark County, Nevada and more particularly
described on the site plan attached hereto as Exhibit A (the
"Premises")
Gentlemen:
We (hereinafter and in the General Conditions attached hereto and made a part
hereof, "Fleet"; this letter and the General Conditions, hereinafter and in the
General Conditions, collectively, "this Commitment") agree to lend up to
$194,000,000 to you (hereinafter and in the General Conditions, "Borrower"), in
accordance with the terms set forth in this Commitment. Fleet, in its capacity
as administrative agent under the loan (see the heading "Co-Lending" below) is
sometimes referred to in this Commitment as "Agent". Borrower is a Delaware
limited liability company owned 50% by TH Bazaar Centers Inc., a Delaware
corporation, a wholly-owned subsidiary of TrizecHahn Centers Inc. ("THCI") and
50% by Aladdin Bazaar Holdings, LLC, a Nevada limited liability company, an
affiliate of the Trust under Article Sixth under the Will of Sigmund Sommer (the
"Trust").
Purpose.
The loan shall be advanced for the construction on the Premises of improvements
consisting of an approximately 462,000 square foot (gross leasable area)
specialty retail center to be known as the Desert Passage at Aladdin, an
approximately 4,000-space parking structure and additional surface or
underground parking containing approximately 500 spaces (collectively, the
"Improvements"). The Improvements will be adjacent to the to-be-developed
approximately 2,600 room Aladdin hotel and approximately 100,000 sf casino. The
Improvements shall be completed on or before December 31, 2000, as such date may
be extended for force majeure, but in no event later
<PAGE>
than December 31, 2001. A Preliminary Development Cost Proforma setting forth
costs to be incurred in connection with the development and construction of the
Improvements (including certain fees to be paid to parties related to Borrower)
is attached hereto as Exhibit B.
Loan Amount.
The amount of the loan shall be up to $194,000,000. The loan amount is subject
to change based on a final budget but in any event is not to exceed the lesser
of 75% of total budgeted costs (including value of contributed fee or leasehold
interest) or 65% of the "as-stabilized" value of the Premises and Improvements,
as determined by an independent MAI appraisal. The loan amount is subject to
permanent reduction (at Borrower's option, subject, however, to the loan
remaining in balance) through reductions in the commitment amount or prepayments
of outstanding principal.
Recourse.
The loan shall be non-recourse except for liabilities pursuant to the Guaranty
referred to below, the environmental indemnity referred to in the General
Conditions, and customary carve-outs for wrongful conduct.
Term.
The loan shall mature five years from closing. Borrower shall have two one-year
extension options as described below. At the end of the initial five-year term
any unfunded commitment amount will be automatically canceled.
Extension Options.
The first extension option will be available provided the following conditions
are satisfied: (a) at least 60 and no more than 180 days' written notice to
Agent, (b) no default beyond applicable cure periods, (c) lien-free completion
of the Improvements in conformance with approved plans and specifications, (d)
minimum DSCR (as defined below) of 1.25x, (e) maximum ratio of the outstanding
principal amount of the loan to the "as-stabilized" value of the Premises and
Improvements, based on an updated independent MAI appraisal, acceptable to
Agent, at Borrower's expense (the "LTV"), of 65% and (f) payment of a 10 bp fee
on the outstanding principal amount (payable at the time the option is
exercised).
The second extension option will be available provided the following conditions
are satisfied: (a) at least 60 and no more than 180 days' written notice to
Agent, (b) no default beyond applicable cure periods, (c) the Improvements are
at least 85% leased and occupied, (d) minimum DSCR of 1.40x, (d) maximum LTV of
65% and (e) payment of a 10 bp fee on the outstanding principal amount (payable
at the time the option if exercised).
Borrower shall have the right to prepay principal as necessary to qualify for
either extension.
2
<PAGE>
Interest Rate.
Pricing will be a margin (expressed in basis points) above the Base Rate or
LIBOR, based on the following grid (both pre-leasing and Pro forma DSCR must be
satisfied for pricing reduction):
--------------------------------------------------------------------
Pre-Leasing(1) Pro forma DSCR LIBOR Base Rate Spread
Spread
--------------------------------------------------------------------
< 25% Total GLA n/a 150 10
--------------------------------------------------------------------
>= 25% Total GLA n/a 135 10
--------------------------------------------------------------------
>= 50% Total GLA >= 1.00x 120 5
--------------------------------------------------------------------
>= 75% Total GLA >= 1.40x 100 0
--------------------------------------------------------------------
>= 90% Total GLA >= 1.50x 90 0
--------------------------------------------------------------------
After the Improvements are completed, and tenants are in occupancy and paying
rent (to the extent required under their respective leases), the LIBOR Spread
and the Base Rate Spread will not be adjusted upward once the subject test is
achieved.
For purposes of the chart above, "Pre-leasing" is defined as executed leases.
Executed leases shall be subject to Agent's approval pursuant to the Lease
Guidelines referred to below.
"DSCR" will be defined as Net Operating Income divided by Pro forma Debt
Service. "Net Operating Income," at any time, shall be determined for the prior
four quarters based on: (a) the sum of (i) actual rental income from tenants in
occupancy for a minimum of 12 months, (ii) annualized base rental income from
tenants in occupancy for less than 12 months and (iii) actual reimbursement
income and actual other income less (b) actual operating expenses, all
determined in accordance with GAAP. "Pro forma Debt Service" will be calculated
based on the then commitment amount, 25-year mortgage-style amortization and an
interest rate derived based on the then prevailing 10 year Treasury rate plus a
150 bps spread.
"Pro forma DSCR" will be defined as Pro forma Net Operating Income divided by
Pro forma Debt Service. "Pro forma Net Operating Income" shall be determined
based on (i) annualized total rental income provided by tenants with fully
executed leases and (ii) reasonably acceptable proforma other income less pro
forma operating expenses.
"Base Rate" shall mean the greater of (a) the commercial lending rate announced
by Fleet from time to time at its principal office in Boston as its "prime" or
"base" rate or (b) the federal funds rate plus 1/2 of 1%, to be computed on an
actual/360-day basis, each change in said rates to be effective as of the day of
such change. For purposes hereof, "federal funds rate" shall mean, for any day,
the rate per annum equal to the weighted average of the rates on overnight
federal funds transactions as published by the Federal Reserve Bank of New York
for such day or, for any day that is not a banking day in New York City, for the
immediately preceding banking day.
3
<PAGE>
"LIBOR" shall mean the rate which appears on Dow Jones Markets Page 3750 at
approximately 11 a.m. (London time) two business days prior to the first day of
a given LIBOR interest period selected by Borrower for amounts comparable to the
LIBOR amount in question and having the same term as the applicable LIBOR
interest period, as adjusted for the maximum rate(s) at which reserves
(including any marginal, supplemental or emergency reserves) are actually
required to be maintained by Fleet or its co-lenders, as applicable, with
respect to "Eurocurrency liabilities" under Regulation D of the Board of
Governors of the Federal Reserve System. If such rate does not appear on Dow
Jones Markets page 3750, the rate for that date will be determined on the basis
of the offered rates for deposits in U.S. dollars for a period of time
comparable to such LIBOR interest period for an amount comparable to such LIBOR
amount which are offered by four major banks in the London interbank market at
approximately 11:00 a.m. London time two business days prior to the first day of
the LIBOR interest period. The principal London office of each of the four major
London banks will be requested to provide a quotation of its U.S. dollar deposit
offered rate. If at least two such quotations are provided, the rate for that
date will be the arithmetic mean of the quotations. If fewer than two quotations
are provided as requested, the rate for that date will be determined on the
basis of the rates quoted for loans in U.S. dollars to leading European banks
for a period of time comparable to such LIBOR interest period for an amount
comparable to such LIBOR amount offered by major banks in New York City at
approximately 11:00 a.m. New York time two business days prior to the first day
of such LIBOR interest period. In the event that any such quotation cannot be
obtained as provided above, it will be deemed that LIBOR cannot be determined.
Available LIBOR interest periods shall be 30, 60, 90 or 180 days or, with
Agent's approval, any other period available. There will be no more than six
LIBOR contracts outstanding at any one time. The loan documents shall contain
customary protective provisions relating to LIBOR pricing.
Interest, whether based on the Base Rate or LIBOR, will be computed on an
actual/360 day basis and will be payable monthly in arrears.
Amortization.
The loan will be interest-only during the initial term. During the extension
terms, Borrower will be required to amortize principal based on 25-year (during
the first extension term) and 24-year (during the second extension term)
mortgage-style amortization and an interest rate derived based on the then
prevailing 10 year treasury rate plus 150 bps spread.
Prepayment.
The loan shall be prepayable in whole or part (if in part, in integral multiples
of $100,000) without penalty, provided that Borrower shall pay customary costs,
if any, of breaking LIBOR contracts.
Unused Fee.
4
<PAGE>
Borrower will be required to pay a fee of 10 bps per annum on the unfunded loan
amount (as the same may be reduced as described above under the heading "Loan
Amount"). Such fee shall be computed on an actual/360-day basis and shall be
payable quarterly in arrears from and after the loan closing.
Administration Fee.
Borrower will pay to Agent, for its own account, an administration fee of
$35,000 per annum during the construction period. Upon completion of
construction, the administration fee shall be reduced to $14,000 per annum. The
administration fee shall be payable in quarterly installments, in advance, upon
the closing date and at the commencement of each quarter thereafter.
Collateral.
The loan will be secured by a deed of trust, assignment of leases and rents and
security agreement (the "Mortgage") which shall be a first lien on Borrower's
interest in the Premises (which consist of a 11.4 acre (at ground level) site)
and the Improvements. Borrower's interest in the Premises initially will be a
ground and air rights leasehold estate which will be replaced with a fee
interest in the same land and air rights following subdivision of the same from
the adjacent Aladdin hotel-casino and Sound Asylum hotel-casino projects. If the
Mortgage is recorded before such subdivision and Borrower's acquisition of a fee
interest, then, following such subdivision and acquisition of a fee interest,
Borrower shall enter into an agreement spreading the lien of the Mortgage to
such fee interest (in connection with which any other mortgage or deed of trust
of the fee shall be released). If the Mortgage is recorded after such
subdivision and conveyance of a fee interest, then the Mortgage will encumber
such fee interest rather than the leasehold. The ground lease creating
Borrower's initial interest (the "Ground Lease") shall be subject to no
mortgages, deeds of trust or other encumbrances not approved by Fleet. The
Mortgage shall encumber all of Borrower's rights under (and be subject to) a
Construction, Operation and Reciprocal Easement Agreement (the "REA"), a Site
Work, Development and Construction Agreement (the "Site Work Agreement") and a
Common Parking Area Use Agreement (the "Parking Agreement"), each between
Borrower and the fee owner. The Mortgage shall also encumber (or Borrower shall
assign to Agent in separate instruments) (i) all of Borrower's rights in, to and
under all other underlying project documents, all construction, architectural
and engineering contracts and plans and specifications with respect to the
Improvements (including any contracts for construction of the Aladdin
hotel-casino, only to the extent such contracts provide for the construction of
the so-called mall "shoulders") and other related construction documents and
(ii) other customary collateral.
Project Financial Covenants.
The LTV shall not exceed 65% at any time. In the event this covenant is
violated, Borrower will have the option to pay down the loan or provide
additional collateral, satisfactory to Fleet in its sole discretion, to bring
the LTV into conformance. Agent has the right to re-appraise the property, at
Borrower's expense, no more than annually (provided that such limit shall not
apply following Borrower's default under the loan
5
<PAGE>
documents beyond applicable grace periods).
Beginning on the first anniversary of completion of the Improvements and through
maturity (tested quarterly), unless a DSCR of at least 1.25x is achieved and
maintained, Borrower will be obligated either, at Borrower's option, to deposit
all Excess Cash Flow into an interest bearing cash collateral account maintained
at and pledged to Agent or to apply Excess Cash Flow to outstanding principal
under the loan.
Unless previously applied to payment of the loan at Borrower's election, funds
held in the cash collateral account will be released with interest to Borrower
upon Borrower's achievement of the requisite DSCR for at least two consecutive
quarters. After the release, should Borrower fail to maintain the DSCR
designated above, the cash flow sweep will be reinstated until Borrower attains
the requisite DSCR for at least two consecutive quarters.
"Excess Cash Flow" is defined as Net Operating Income after debt service under
the loan, adjusted for non-recurring items and straight-lining of rents, also
adjusted to a cash basis, less, without duplication, (i) capital expenditures
incurred, reasonably approved by Agent, (ii) reserves for committed capital
expenditures, reasonably approved by Agent, and (iii) operating reserves for
property taxes, insurance, utilities and other normal operating expenses.
Financial Reporting.
Borrower and Guarantors shall supply the following reports:
Quarterly internally-prepared Borrower and Guarantor financial statements.
Annual audited Borrower and Guarantor financial statements.
Quarterly covenant compliance certificates of Borrower and THCI.
Other standard reports as appropriate for this type of transaction.
For purposes of clauses 1, 2 and 4 above, the only "financial statements" or
reports required of the Trust will be an annual statement, prepared by the
Trust's tax accountants and certified by the trustees, of the net worth of the
trust based on the fair market value of its assets less liabilities (a "Fair
Market Value Statement").
In addition, Borrower shall use reasonable efforts to deliver to Lender the
semi-annual financial covenant compliance reports of London Clubs International
plc ("LCI") required under the documents for (i) the Hotel Financing (as defined
below) and (ii) the credit facility to LCI led by National Westminster Bank PLC.
Transfer and Debt Restrictions.
Borrower shall not incur additional indebtedness (other than the subordinated
debt described in the succeeding paragraph), nor voluntarily or involuntarily
sell, transfer, assign, pledge or encumber Borrower's assets without the consent
of Fleet. No transfer of interests in Borrower shall be permitted without
Fleet's consent, except as provided
6
<PAGE>
below. Borrower will certify to Fleet compliance with these covenants prior to
closing and quarterly thereafter. Transfers of ownership interests in Borrower
or its constituent members shall be permitted so long as THCI retains, directly
or indirectly, at least a 50% beneficial ownership interest and managing
position in Borrower.
Subordinated Debt.
Subordinated debt in the amount of approximately $16,700,000 payable to Aladdin
Bazaar Holdings by Borrower shall be permitted, provided the annual interest and
principal payments shall not exceed $2,000,000 and shall be payable only to the
extent of available cash flow after debt service on the loan, and the debt shall
be unsecured and fully subordinated to the loan in every respect under terms
acceptable to Fleet (which shall include elimination of the obligation upon
foreclosure of the Mortgage).
Lease Guidelines.
Agent shall retain the right to approve all leases for space in the Improvements
in excess of 7,500 square feet, and any leases which materially differ from an
Agent-approved standard lease form or from proforma rents and terms set forth in
lease guidelines to be mutually agreed upon.
Co-Lending.
Fleet shall have the right to syndicate the loan to other financial institutions
through direct assignments of interests to co-lenders or through participations,
either prior to the time of closing the loan or thereafter, subject (so long as
there exists no default beyond the applicable grace period), in the case of
assignments, to Borrower's approval as to the identity and number of assignees,
such approval not to be unreasonably withheld. Fleet shall retain an interest in
the loan at least equal to the next greatest interest. Fleet shall act as the
administrative agent for the lenders in connection with the Loan. During
construction and so long as there is no outstanding Borrower event of default,
Fleet may not unilaterally resign as Agent without Borrower's consent, not to be
unreasonably withheld. Borrower agrees to cooperate with Fleet in connection
with the syndication of the loan by, for example, assisting in preparation of
offering materials, allowing site visits and making documents and personnel
available to prospective assignees and participants.
This Commitment shall not be contingent upon Fleet's ability to syndicate the
loan.
Expenses.
Whether or not the loan closes (unless the loan fails to close as a result of
Fleet's gross negligence or breach of its obligations under this Commitment),
and notwithstanding anything to the contrary contained in this Commitment or in
the Fee Letter (as defined below), Borrower shall pay all reasonable third party
costs and expenses incurred by Fleet in connection with the transaction and
Fleet's ongoing due diligence in connection therewith (including, without
limitation, reasonable fees and expenses of Fleet's counsel, appraiser and
environmental, engineering and other consultants) as well as (i) up to $10,000
in syndication expenses of the loan incurred by Fleet and (ii) non-syndication
related outside-service and travel expenses of Fleet personnel (such travel
expenses not to
7
<PAGE>
exceed $10,000 in the aggregate). Borrower will also pay any tax imposed by
reason of the execution of the loan documents. Borrower will not pay for the
fees or costs of assignees or participants.
Consents and Waivers.
Within the customary limitations inherent to syndicated loan transactions, Agent
shall retain maximum administrative authority including the authority to grant
waivers, consents or approvals to Borrower. Except as contemplated by this
Commitment, only major events such as (i) reduction of principal, (ii)
postponement of any date fixed for payment of principal or interest, (ii)
release of any material portion of the mortgaged property, (iv) change in the
interest rate or fees of the loan, (v) release of guarantors or (vi) change in
the definition of the "Required Lenders" will require the consent or approval of
all lenders. In all other circumstances requiring approval of the lenders (as
opposed to Agent's approval), the approval of non-delinquent lenders having
66-2/3% of the commitments or outstanding loans of non-delinquent lenders (the
"Required Lenders") shall be sufficient.
Events of Default.
All customary events of default for similar loan transactions, consistent with
the following (provided the only cross-defaults will be those expressly
identified below) shall constitute events of default under the loan documents:
Insolvency or bankruptcy of Borrower;
Insolvency or bankruptcy of THCI or breach of its guarantor covenants or
judgments against THCI (unless the same are discharged within 60 days of
entry or are being appealed (provided execution thereof is stayed pending
such appeal)) in excess of $25,000,000 (individually or in the aggregate);
Failure to pay debt service within five (5) days after due;
Inaccuracy of any representation or warranty; and
Breach of Borrower covenants, subject to reasonable notice and cure periods.
Conditions Precedent.
Fleet's obligation to make the initial advance of the loan shall be subject to
the satisfaction of each of the following conditions:
Equity Requirement. A minimum of 25% of total project costs shall be
contributed as up-front equity prior to funding of the loan. Equity must
include a minimum of $30,000,000 in the form of cash invested in the
Improvements.
Pre-Leasing Requirement. No pre-leasing is required.
8
<PAGE>
Bonding. Agent shall receive payment and performance bonds for all major
subcontractors (i.e., contracts equal to or greater than $250,000). The
project will be bonded in an aggregate amount acceptable to Fleet (or the
contractor's obligations shall be covered by a guaranty from a guarantor
acceptable to Fleet), and will be constructed pursuant to a GMP contract
or other contract acceptable to Fleet with a contractor acceptable to
Fleet.
Guaranties. Full joint and several lien-free completion and payment
guaranties (collectively, the "Guaranty") shall be provided by THCI,
Aladdin Bazaar Holdings, LLC, a Nevada limited liability company, Aladdin
Holdings, LLC, a Nevada limited liability company, and the Trust (jointly
and severally, "Guarantors"). Subsequent to achieving conditions "b" and
"c" of the conditions for the first extension option, the payment guaranty
will be reduced according to the following grid (both DSCR and LTV must be
satisfied for guaranty reduction):
-----------------------------------------------------------------
Payment Guaranty DSCR LTV
-----------------------------------------------------------------
50% of outstanding principal(1) 1.30x 65%
-----------------------------------------------------------------
25% of outstanding principal(1) 1.40x 65%
-----------------------------------------------------------------
15% of outstanding principal(1) 1.50x 60%
-----------------------------------------------------------------
Debt Service only 1.60x 55%(2)
-----------------------------------------------------------------
Released 1.75x 55%(2)
-----------------------------------------------------------------
Notes:
(1) Plus full liability as to Debt Service (i.e., interest plus required
amortization and all other sums aside from principal).
(2) Based on an updated FIRREA complying appraisal, at Borrower's expense.
The payment guaranty may fluctuate either up or down as to principal
liability, however, once the payment guaranty is reduced to a Debt Service
only guarantee, it may not be increased.
The guaranties from THCI shall contain financial covenants obligating THCI
to maintain:
1. Minimum GAAP Net Worth of $400,000,000.
2. Minimum unrestricted cash and cash equivalents of $10,000,000
determined on a quarterly basis.
3. Maximum Leverage of 65%.
4. Minimum Fixed Charge coverage of 1.25x.
Leverage shall be defined as Total Outstanding Long Term Debt (per the
balance sheet) divided by Capitalization Value. Capitalization Value is
defined as most
9
<PAGE>
recent four quarters' Rental Income (per the income statement) capped at
8.25%, less $.15 psf cap ex on the amount of square feet owned by THCI
(including ownership through affiliates, to the extent of THCI's
fractional interest in the affiliate). Total Outstanding Long Term Debt
shall exclude project construction debt until the relevant project has
been completed and open for 12 months.
Fixed Charge Coverage is defined as most recent four quarters' Rental
Income (per the income statement) divided by most recent four quarters'
Total Debt Service (per THCI's property operating statements) (excluding
any balloon mortgage payments due at maturity).
The guaranty from the Trust will contain a covenant that the Trust will
maintain a minimum fair market value of assets less liabilities of
$100,000,000. Other financial covenants for Aladdin Bazaar Holdings, LLC,
Aladdin Holdings, LLC, and the Trust will be mutually agreed upon by Fleet
and the Guarantors.
Status of Hotel-Casino Project. The proceeds of the cash equity contributions
from LCI and Aladdin Gaming Holdings, LLC ("Holdings") and the Discount
Notes offering from Holdings, and the land contribution by Holdings (or
other equity/financing/contributions for the Aladdin hotel-casino), all of
which shall total approximately $224,000,000, shall have been expended on
or contributed to the Aladdin hotel-casino project; construction financing
in the amount of approximately $410,000,000 for the Aladdin hotel-casino
(the "Hotel Construction Financing") shall have closed and funding from
escrow of the proceeds of the "Term B Loan" and "Term C Loan" thereunder
shall have commenced; and Aladdin Gaming, LLC shall have received and the
lenders of the Hotel Construction Financing shall have approved a
commitment for FF&E financing for the Aladdin hotel-casino of
approximately $80,000,000. The provisions of the documentation for the
Hotel Construction Financing relating to the conditions and procedures for
the disbursement thereof shall be usual and customary for financings of
that type and in form and substance reasonably satisfactory to Fleet. It
shall be a condition precedent to the initial advance of the loan that
Agent shall have received a letter, reasonably satisfactory to it, from
the administrative agent for the lenders of the Hotel Construction
Financing stating that it knows of no default or unsatisfied condition
that would prevent further advances of the Hotel Construction Financing.
Fleet's obligation to make the initial advance of the loan shall also be
conditioned on a guaranteed maximum price construction contract being in
place for the Aladdin hotel-casino project.
Litigation. The absence of material litigation affecting Borrower, THCI or
the Premises or Improvements that is likely to adversely affect Borrower's
or THCI's ability to perform their obligations under the loan.
Project Documents. Fleet's (i) review and approval of the Ground Lease, REA,
Site Work Agreement, Parking Agreement and other underlying project
documents
10
<PAGE>
(including, without limitation, the Lease, Development Agreement,
Guaranty, Energy Service Agreement and Cost-Sharing Agreement, all
pertaining to the furnishing of electricity and chilled water to the
Improvements), (ii) receipt of estoppel certificates from the parties to
such documents, (iii) review and approval of such documents as Fleet may
specify relating to the hotel-casino project and (iv) receipt of such
information concerning the neighboring "Sound Asylum" project as Fleet may
specify.
General Conditions. The satisfaction of the General Conditions.
Commitment Fee. Payment to Fleet of the commitment fee provided for in a
separate letter agreement of even date herewith between Fleet and Borrower
(the "Fee Letter").
Other Issues.
The loan documents will contain other customary terms and conditions for
facilities of this type.
11
<PAGE>
If this Commitment is satisfactory, please indicate your and Guarantors'
acceptance thereof by executing and returning to Fleet a copy of this covering
letter with the General Conditions attached, as well as the Fee Letter, on or
before December 31, 1997 (it being understood that this Commitment shall be
irrevocable until the expiration of such period), together with any sums
required above to be paid upon acceptance hereof. Otherwise this Commitment
will, at Fleet's option, be of no force or effect.
Very truly yours,
FLEET NATIONAL BANK
By /s/ Margaret A. Mulcahy
-------------------------------
Name: Margaret A. Mulcahy
Title: Senior Vice President
Accepted and agreed to this
30th day of December, 1997.
BORROWER:
ALADDIN BAZAAR, LLC, a
Delaware limited liability company
By: TH Bazaar Centers, Inc.,
a Delaware corporation, Member
By /s/ Wendy M. Godoy
--------------------------
Name: Wendy M. Godoy
Title: Senior Vice President, Finance
By /s/ Mary Allman Boyle
--------------------------
Name: Mary Allman Boyle
Title: Assistant Secretary
By: Aladdin Bazaar Holdings, LLC, a
Nevada limited liability company, Member
By: Aladdin Management Corporation,
a Nevada corporation, Manager
By /s/ Ronald Dictrow
----------------------
Name: Ronald Dictrow
Title: Treasurer
12
<PAGE>
GUARANTORS:
TRIZECHAHN CENTERS INC.,
a California corporation
By /s/ Wendy M. Godoy
---------------------------------------
Name: Wendy M. Godoy
Title: Senior Vice President, Finance
By /s/ Mary Allman Boyle
---------------------------------------
Name: Mary Allman Boyle
Title: Vice President
ALADDIN BAZAAR HOLDINGS, LLC,
a Nevada limited liability company
By: Aladdin Management Corporation,
a Nevada corporation, Manager
By: /s/ Ronald Dictrow
-----------------------------------
Name: Ronald Dictrow
Title: Treasurer
ALADDIN HOLDINGS, LLC
By: /s/ Ronald Dictrow
---------------------------------------
Name: Ronald Dictrow
Title: Treasurer
TRUST UNDER ARTICLE SIXTH UNDER
WILL OF SIGMUND SOMMER
By /s/ Viola Sommer By /s/ Jack Sommer
--------------------------------- ---------------------------------
Name: Viola Sommer Name: Jack Sommer
Title: Trustee, and not as an Title: Trustee, and not as an
individual individual
13
<PAGE>
EXHIBIT A
Site Plan
<PAGE>
EXHIBIT B
Preliminary Development Cost Pro Forma
<PAGE>
GENERAL CONDITIONS OF CONSTRUCTION LOAN COMMITMENTS
The loan shall be evidenced by one or more notes (collectively, the
"Note") and secured by the Mortgage which shall be a first lien on the Premises
(or a first lien on a leasehold interest in an unencumbered fee (i.e., any
mortgage or deed of trust of the fee shall be subordinated to the Ground Lease)
if Borrower's interest in the Premises is a leasehold), and shall be advanced
periodically in accordance with the terms of a building loan agreement (the
"BLA") which shall require construction of the Improvements on the Premises and
supervision of construction and approval of advances by an architect or engineer
of Fleet's selection (the "Construction Consultant"). The funding of the loan
shall be conditioned on Fleet's receipt and approval of the following:
An independent M.A.I. appraisal conforming to the requirements of
the Financial Institutions Reform, Recovery, and Enforcement Act of 1989,
and a project cost statement (i.e., budget);
Plans and specifications for the Improvements approved by the
Construction Consultant, and a satisfactory report from the Construction
Consultant;
Certified copies of all then existing construction and
architectural/engineering contracts (all of which shall be approved by the
Construction Consultant), together with the undertakings of the general
contractor (and the contractor(s) for the Aladdin hotel-casino, only to
the extent their work includes the so-called mall "shoulders"), major
subcontractors and Borrower's architect to continue performance on Fleet's
behalf, without additional cost, in the event of a default by Borrower
under the loan;
The Note, Mortgage (and related UCC Financing Statements), BLA and
Guaranty;
A policy or policies of mortgage title insurance in ALTA Loan Policy
10/17/92 form, assignable to a permanent mortgagee, containing such
endorsements as are required, and only such exceptions to coverage as are
approved, by Fleet's counsel, together with such reinsurance agreements,
in ALTA 1994 facultative form, as Fleet's counsel may require;
A current survey certified to Fleet and the title insurer;
A list, certified by the title insurer, of the prior owners, tenants
and other users, during the period from January 1, 1940 to the date of
such certification, of all or any portion of the Premises or the
improvements thereon;
Certified financial statements of Borrower and Guarantors (which, in
the case of the Trust, shall mean a Fair Market Value Statement), together
with, in the case of the financial statements of Borrower and THCI,
evidence that there has occurred no material adverse change (i.e., a
change that is apt to have a material adverse effect on the ability of
Borrower or THCI to perform their respective obligations under the loan)
in the respective financial conditions reflected therein between the
respective dates thereof and the date of the initial funding of the loan;
Evidence of compliance with all laws, ordinances, rules, regulations
and restrictions affecting the Premises, the construction of the
Improvements and the consummation of
<PAGE>
the loan, including, without limitation, evidence that Borrower is current
in the payment of all real property taxes, water and/or sewer charges and
any other taxes or assessments which, if not paid, could give rise to a
lien against the Premises;
Fully prepaid policies of insurance as are set forth on Schedule A
attached hereto and made a part hereof;
An opinion of counsel from the jurisdiction in which the Premises
are located to the effect, inter alia, that the loan documents
contemplated hereby will be valid and enforceable in such jurisdiction in
accordance with their respective terms;
(a)Evidence that the Premises are not located in an area that has
been identified as an area having special flood hazards or, if it is, such
flood hazard insurance as is set forth on Schedule A hereto (in such
connection, the acceptance of this Commitment shall constitute Borrower's
and Guarantors' authorization to Fleet to undertake a flood zone status
determination and their agreement to pay Fleet's reasonable fees and
expenses therefor);
(b)A detailed report and certification by a properly qualified
engineer, which shall include, inter alia, a certification that such
engineer has obtained and examined the list of prior owners, tenants and
other users referred to above, and has made an on-site physical
examination of the Premises, and a visual observation of the surrounding
areas, and has found no evidence of the presence of toxic or hazardous
materials, substances or wastes (collectively, "Hazardous Materials") or
of past or present Hazardous Materials activities; Borrower and Guarantors
shall also deliver to Fleet an executed agreement wherein they shall,
inter alia, agree to indemnify Fleet regarding Hazardous Materials; and
(c)Such other documents, instruments, opinions and assurances as
Fleet may request, including, without limitation, (i) to the extent they
then exist, all management, leasing and other service contracts regarding
the Premises, together with related "will-serve" letters, (ii) a certified
copy of the standard form of lease Borrower intends to use for the leasing
of the Improvements, (iii) leases, to the extent they then exist, together
with estoppel certificates from the tenants thereunder and (iv) as
applicable, Borrower's and Guarantor's organizational documents and
evidence of authority.
The loan documents shall provide, inter alia, that (a) Fleet shall be
entitled to recover late fees of 4% for any payments received by it more than 15
days after than the due date thereof (other than principal due on maturity), (b)
interest on the Note shall accrue, following default beyond applicable grace
periods, at the per annum rate of 2% above the interest rate specified in the
Note, and (c) Fleet shall be entitled to recover all costs, expenses and
disbursements, including, but not limited to, reasonable attorneys' fees and
expenses, incurred by it as a result of any default by Borrower and/or the
enforcement by Fleet of its rights under the loan documents.
The loan documents and all other instruments and documents required hereby
or affecting the Premises, or relating to Borrower's capacity and authority to
make the loan and to execute the loan documents and such other documents,
instruments, opinions and assurances as Fleet may reasonably request and all
procedures in connection herewith or therewith shall be subject to the
2
<PAGE>
reasonable approval, as to form and substance, of Fleet and Fleet's counsel,
Dewey Ballantine LLP, New York, New York, and Fleet's local counsel, if any. All
persons or entities responsible for the preparation and/or execution of any
required documents or instruments, all obligors thereunder and all persons or
entities responsible for the construction of the Improvements, shall be
satisfactory to Fleet.
Except where Borrower or Guarantors are the prevailing parties, Borrower
and Guarantors shall pay all reasonable legal fees or expenses incurred by Fleet
in connection with any action or proceeding brought in respect of this
Commitment. The acceptance of this Commitment shall constitute an undertaking on
the part of Borrower and Guarantors to indemnify Fleet against claims of brokers
(other than any brokers engaged or who claim to be engaged solely by Fleet)
arising in connection with the execution of this Commitment or the consummation
of the loan.
The loan closing shall be held on a date within 120 days from the date of
Borrower's and Guarantors' acceptance of this Commitment at Fleet's Real Estate
Finance office, or such other place specified by Fleet. If the loan closing is
not held within such 120-day period, Fleet's obligations hereunder shall
terminate unless Fleet, at its option, extends the time for such closing in
writing.
Borrower and Guarantors recognize that Fleet may sell and transfer
interests in the loan to one or more participants or assignees, as more
particularly provided in the covering letter, and that all documentation,
financial statements, appraisals and other data, or copies thereof, relevant to
Borrower, Guarantors, the Premises or the loan, may be exhibited to and retained
by any such participant or assignee or prospective participant or assignee.
Financial statements shall be delivered to participants or assignees or
prospective participants or assignees shall be delivered by Fleet on a
confidential basis and on the condition that they be used for no other purpose
than in connection with the loan.
This Commitment and the rights and obligations of the parties hereunder
shall in all respects be governed by, and construed and enforced in accordance
with, the laws of the State of New York (without giving effect to New York's
principles of conflicts of law). Borrower and Guarantors hereby irrevocably
submit to the non-exclusive jurisdiction of any New York State or Federal court
sitting in the city of New York over any suit, action or proceeding arising out
of or relating to this Commitment, and Borrower and Guarantors hereby agree and
consent that, in addition to any methods of service of process provided for
under applicable law, all service of process in any such suit, action or
proceeding in any New York State or Federal court sitting in the city of New
York may be made by certified or registered mail, return receipt requested,
directed to Borrower or Guarantors at the address indicated above to which this
Commitment was sent, and service so made shall be complete five business days
after the same shall have been so mailed.
3
<PAGE>
SCHEDULE A
The following insurance must be provided, maintained and kept in force:
policies of insurance insuring the Premises, Improvements and
chattels against loss or damage by fire and lightning; against loss or
damage by other risks embraced by coverage of the type now known as All
Risk Replacement Cost Insurance with agreed amount endorsement, including
but not limited to riot and civil commotion, vandalism, malicious mischief
and theft; and against such other risks or hazards as Fleet from time to
time reasonably may designate in an amount sufficient to prevent Fleet or
Borrower from becoming a co-insurer under the terms of the applicable
policies, but in any event in an amount not less than 100% of the then
full replacement cost of the Improvements (exclusive of the cost of
excavations, foundations and footings below the lowest basement floor)
without deduction for physical depreciation;
policies of insurance insuring the Premises against the loss of
"rental value" of the buildings which constitute a part of the
Improvements on a "rented or vacant basis" arising out of the perils
insured against pursuant to clause (i) above in an amount equal to not
less than one year's gross "rental value" of the Improvements. "Rental
value" as used herein is defined as the sum of (A) the total anticipated
gross rental income from tenant occupancy of such buildings as furnished
and equipped, (B) the amount of all charges which are the legal obligation
of tenants and which would otherwise be the obligation of Borrower and (C)
the fair rental value of any portion of such buildings which is occupied
by Borrower;
if all or part of the Premises are located in an area identified by
the Secretary of the United States Department of Housing and Urban
Development or by any applicable federal agency as a flood hazard area,
flood insurance in an amount at least equal to the maximum limit of
coverage available under the National Flood Insurance Act of 1968,
provided, however, that Fleet reserves the right to require flood
insurance in excess of said limit if such insurance is commercially
available up to the amount provided in clause (i) above;
throughout the course of construction of the "Improvements" to be
constructed pursuant to the Building Loan Agreement, and during any period
of restoration, a policy or policies of builder's "all risk" insurance,
written on a Standard Builder's Risk Completed Value Form (100%
non-reporting), in an amount not less than the full insurable value of the
Premises against such risks (including, without limitation, fire and
extended coverage, collapse and earthquake coverage to agreed limits) as
Fleet may reasonably request, in form and substance acceptable to Fleet;
(i)a policy or policies of workers' compensation insurance as
required by workers' compensation insurance laws (including employer's
liability insurance, if requested by Fleet) covering all employees of
Borrower;
(ii)comprehensive liability insurance on an "occurrence" basis
against claims for "personal injury" liability, including, without
limitation, bodily injury, death or property damage liability, with a
limit of not less than $15,000,000 in the event of "personal
<PAGE>
injury" to any number of persons or of damage to property arising out of
one "occurrence". Such policies shall name Fleet as additional insured by
an endorsement, and shall contain cross-liability and severability of
interest clauses, all satisfactory to Fleet; and
(iii)such other insurance (including, but not limited to, earthquake
insurance), and in such amounts, as may from time to time be reasonably
required by Fleet against the same or other insurable hazards.
All policies of insurance shall be issued by companies having Best's
ratings of not less than A:VIII and being otherwise acceptable to Fleet, shall
be subject to the reasonable approval of Fleet as to amount, content, form and
expiration date and, except for the liability policies described in clauses
(a)(v) and (vi) above, shall contain a Non-Contributory Standard Mortgagee
Clause and Lender's Loss Payable Endorsement, or their equivalents, in favor of
Fleet. The proceeds of all policies shall be assigned to Fleet and all policies
shall provide that the proceeds thereof shall be payable to Lender. Fleet shall
be furnished with original evidence of insurance with respect to each policy
required hereunder, which policies shall provide that they shall not lapse, nor
be modified or cancelled, without 30 days' written notice to Fleet. In addition,
Borrower shall make available at its principal office, for review and inspection
by Fleet, the original of each policy required hereby at reasonable times. At
least 30 days prior to expiration of any policy, Borrower shall furnish Fleet
appropriate proof of issuance of a policy continuing in force the insurance
covered by the policy so expiring. Borrower shall furnish to Fleet, promptly
upon request, receipts or other satisfactory evidence of the payment of the
premiums on such insurance policies.
A-2
<PAGE>
October 7, 1997
Mr. Jim Riley
The Bank of Nova Scotia, New York Agency
One Liberty Plaza
New York, New York 10005
(212) 225-5098
Re: Proposed Aladdin Hotel and Casino
Las Vegas, Nevada
HVS Ref.: #9710413
Dear Mr. Riley:
Pursuant to your request, we herewith submit our self-contained appraisal report
pertaining to the above-captioned property. We have inspected the site and
analyzed the Las Vegas gaming market. Based on the available data, and our
analysis and experience in the hotel industry, it is our opinion that the
"prospective" market value of the fee simple interest in the proposed Aladdin
Hotel and Casino, as of the date the project is complete and operational,
assumed to be on or about January 1, 2000, will be:
$825,000,000
EIGHT HUNDRED TWENTY-FIVE MILLION DOLLARS
In addition, it is our opinion that the market value of the total +/- 34.31-acre
subject site, as vacant and including the development rights and entitlements,
as of August 7, 1997, is:
$180,000,000
ONE HUNDRED EIGHTY MILLION DOLLARS
In addition, it is our opinion that the market value of the +/- 18.16 acres of
land allocated to the Aladdin Hotel and Casino portion of the development, as
vacant and including the development rights and entitlements, as of August 7,
1997, is:
<PAGE>
$135,000,000
ONE HUNDRED THIRTY-FIVE MILLION DOLLARS
Our report is made in conformance with, and subject to, the requirements of the
Uniform Standards of Appraisal Practice (USPAP), as provided by the Appraisal
Foundation, as well as the requirements of the Financial Institutions Reform,
Recovery, and Enforcement Act (FIRREA). We do hereby certify that we have no
undisclosed interest in the property, and our employment and compensation are
not contingent upon our findings and valuation.
The valuation is expressly made subject to all normal and specific assumptions
and limiting conditions, a copy of which is included in the attached appraisal
report.
Very truly yours,
HVS International
Mark D. Capasso
Senior Associate
Anne R. Lloyd-Jones, CRE
Senior Vice President
/s/ Stephen Rushmore
Stephen Rushmore, CRE, MAI, CHA
President
MDC/ALJ/SXR/nkw
<PAGE>
HVS International, Mineola, New York Quality Assurance
Quality Assurance
The HVS International division of Hotel Consulting, Inc., strives to
achieve the highest standards of quality during all phases of the
appraisal process. It is our goal to provide clients with the finest
appraisal report available. The following staff members acknowledge
their contribution to this report.
Natalie K. Wysong - Editing and Report Production
Editor (SF Office 415-896-0868, Extension 306)
Mark D. Capasso - Fieldwork, Analysis, and Text
Senior Associate (SF Office 415-896-0868, Extension 204)
Anne R. Lloyd-Jones, CRE - Fieldwork, Analysis, and Review
Senior Vice President (NY Office 516-248-8828, Extension 208)
/s/ Stephen Rushmore
Stephen Rushmore, CRE, MAI, CHA - Analysis, and Review President (NY Office
516-248-8828, Extension 204)
We are available to answer any questions and are pleased to have
provided you with the finest quality product available. Wendy
Millward (NY Office 516-248-8828, extension 233) is available to
answer any billing questions. We look forward to serving you again
in the future.
<PAGE>
HVS International, Mineola, New York Summary of Salient Data and Conclusions 1
- --------------------------------------------------------------------------------
1. Summary of Salient Data and Conclusions
Property: Proposed Aladdin Hotel and Casino
Location: 3667 Las Vegas Boulevard, Las Vegas,
Nevada 89109
Dates of Inspection: August 7, 1997
Date of Value (Aladdin Hotel and Casino): January 1, 2000
Date of Value (Total Subject Land): August 7, 1997
Date of Value (Hotel and Casino Land): August 7, 1997
Stabilized Year: 2002
Interest Appraised: Fee simple
Property Description
Land
Total Area: +/- 34.31 acres, or +/- 1,494,544
square feet
Hotel and Casino Portion: +/- 18.16 acres, or +/- 791, 051
square feet
Zoning: H1 - Limited Resort and Apartment
District
Flood Zone: A - Within the 100-year flood plain
Proposed Improvements
Hotel 2,600 rooms
Meeting Space: 71,500 square feet
Scheherazade Show Room: 1,400 seats
Theater for the Performing Arts: 7,000 seats
Casino 110,000 square feet
Table Games: 117
Gaming Devices: 2,900
Sports Book: 5,000 square feet
Keno Lounge: 1,200 square feet
Food and Beverage Facilities
Buffet and Food Plaza: 1,000 seats
24-Hour Coffee Shop: 575 seats
High Energy Restaurant: 225 seats
Italian Restaurant: 200 seats
Themed Restaurant: 150 seats
Steakhouse: 150 seats
Sushi/Chinese Noodle Bar: 50 seats
Casual Dining Coffee Bar: 50 seats
Salle Prive Exclusive Restaurant: 100 seats
<PAGE>
HVS International, Mineola, New York Summary of Salient Data and Conclusions 2
- --------------------------------------------------------------------------------
Summary of Value Parameters
Highest and Best Use (as if vacant): Land-based casino hotel facility
Highest and Best Use (as improved): Land-based casino hotel facility
Effective Date of the Appraisal (Hotel
and Casino): January 1, 2000
Effective Date of the Appraisal
(H&C Site): August 7, 1997
Marketing Period: Up to 6 months
Stabilized Year: January 1, 2002 - December 31, 2002
Valuation Parameters
Discount Rate: 19.1%
Interest Rate: 9.0%
Equity Yield: 31.0%
Terminal Capitalization Rate: 18.0%
Loan-to-Value Ratio: 60%
Estimates of Value (Hotel and Casino)
Income Capitalization Approach: $824,100,000
Sales Comparison Approach: Not applicable
Cost Approach: $760,000,000
Prospective Market Value Conclusion: $825,000,000
Estimate of Value (Land Components)
Total Site: $180,000,000
Hotel and Casino Site: $135,000,000
<PAGE>
HVS International, Mineola, New York Market Area Analysis 1
4. Market Area Analysis
The economic vitality of the market surrounding the
subject property is an important consideration in
forecasting gaming and lodging demand and income
potential. Economic and demographic trends that
reflect the amount of visitation provide a basis from
which to project future demand for gaming and lodging
facilities. The purpose of the market area analysis is
to review available economic and demographic data to
determine whether the local market will undergo
economic growth, stabilize, or decline.
Market Area Overview The subject site is situated in the Las Vegas, Nevada
Metropolitan Statistical Area (MSA). The Las Vegas MSA
includes Clark and Nye Counties and the incorporated
Cities of Las Vegas, North Las Vegas, Henderson,
Boulder City, and Mesquite. The subject site is
situated at the northern tip of the City of Las Vegas.
Las Vegas is an urban area encompassing approximately
84.272 square miles. The city was first founded in
1905 and incorporated on March 16, 1911. By virtue of
its proximity to the Los Angeles metropolitan area and
its destination resort appeal, Las Vegas has become
known as the "Entertainment Capital of the World."
Clark County covers 7,910 square miles and is bounded
by California to the south and west and the Colorado
River and Arizona to the east. Vacant land occupies
approximately 84% of Clark County.
Las Vegas, and southern Nevada in general, are
expanding regional economic centers characterized
primarily by tourism and related service sectors. In
addition to tourism, Las Vegas's economic base
continues to diversify into areas such as
manufacturing, distribution, wholesale trade, and
construction. In 1996, roughly 34 new companies came
to the Las Vegas area, employing almost 3,000 people.
These new employees were estimated to have a
$136-million impact on the local economy. While the
service sector is currently expanding at the most
rapid rate (and contributes the largest share of total
employment), higher value-added jobs continue to be
created in the manufacturing and distribution sectors.
These two areas make up the major employment
classifications of firms relocating to the area.
Nevada's tax structure is favorable for individuals
and corporations and has provided the impetus for
rapid corporate in-migration. While these sectors have
emerged within Las Vegas, the area's driving force is,
and will continue to be, gaming-related tourism.
Between 1992 and 1996, Las Vegas experienced an
expansion in room inventory of approximately 29.5% or
almost 23,000 rooms. According to Las Vegas
Perspective, 1996, published by the Las Vegas Review
Journal, this expansion in rooms inventory is
estimated to have created more than 30,000 new jobs.
The total indirect economic impact was estimated to
affect as many as 60,000
<PAGE>
HVS International, Mineola, New York Market Area Analysis 2
individuals. This "boom" favorably impacted the
commercial construction sub-segment of the local
economy, which continues to fuel economic growth.
Similarly, another round of room construction is
underway, with approximately 10,000 to 15,000 more
rooms expected to enter the market. This wave of
construction is expected to create roughly 15,000 more
new jobs. This type of growth creates a chain reaction
impacting existing businesses, creating the demand for
new business, increasing the number of housing
permits, and ultimately growing the county's tax base.
This results in an expanded and improved
infrastructure. This expansion is anticipated to
benefit the entire Las Vegas community.
Demographic Review Based on fieldwork conducted in the area and our
in-house sources, we have evaluated various economic
and demographic statistics to determine trends in
lodging demand. A primary source of economic and
demographic statistics used in this analysis is the
Complete Economic and Demographic Data Source
published by Woods & Poole Economics, Inc., a
well-regarded forecasting service based in Washington,
DC. Using a data base containing more than 300
variables for each county in the nation, Woods & Poole
employs a sophisticated regional model to forecast
economic and demographic trends. Historical statistics
are based on census data and information published by
the Bureau of Economic Analysis. Projections are
formulated by Woods and Poole.
Population Historical and projected population trends often
reflect the economic climate of a locale, and thus
have an impact on the demand for hotels, office space,
retail outlets, and recreational facilities. The
catalysts for population growth in the Las Vegas area
were the completion of the Hoover Dam and the
legalization of gambling in 1931. The dam project
provided affordable water and power and set the stage
for the evolution of the gaming industry as the
primary local industry. A major government presence
was established with the creation of what is now
Nellis Air Force Base (12 miles northeast of Las
Vegas) and the Nevada Nuclear Test Site (20 miles to
the north).
Historically, population growth in Clark County and
the Las Vegas MSA has exceeded national averages.
Between 1980 and 1990, the population of Clark County
increased at an average annual compounded rate of
4.9%, and the Las Vegas MSA registered a comparable
growth rate of 5.0%. The state maintained a slightly
lower increase of 4.2% annually, but all of these
figures were significantly higher than the national
rate of 0.9% per year during the same period.
According to the Convention and Visitors Authority,
between 4,000 and 6,000 people move into Clark County
each month. Between 1990 and 1996, the county
population rose by 5.3% annually, which was slightly
higher than the 5.2% growth rate in the Las Vegas MSA.
Nevada as a whole maintained an average annual
compounded population increase of 4.3% during this
period. The national gain was
<PAGE>
HVS International, Mineola, New York Market Area Analysis 3
far lower, at approximately 1.0% annually. It is
estimated that approximately 65% of Nevada's
population growth during the past five years has
resulted from migration from other states.
Projections indicate that population growth in the
region will continue to outpace national averages.
Between 1996 and 2000, Clark County is expected to
undergo a population increase of 3.1% per year, which
is similar to the anticipated MSA gain of 3.1%. The
population of the state is projected to increase at an
average annual compounded rate of 2.6% through the end
of the decade, far outpacing the 0.9% annual growth
rate in the nation as a whole.
Retail Sales Trends in retail sales reflect changes in population
and propensity of area residents to spend money on
goods. Like population trends, retail sales tend to
reflect the economic health and vitality of the
market.
Although retail sales in the United States increased
at an average annual compounded rate of only 1.6%
between 1980 and 1990 (following adjustments for
inflation), far higher rates were apparent in Clark
County (at 4.4%), the Las Vegas MSA (at 4.5%), and the
State of Nevada (at 3.4%). Growth in retail sales
surged between 1990 and 1996 for the county, MSA, and
the state recording annual average growth of 6.2%,
6.2%, and 5.2%, respectively, continuing to outpace
annual average growth in the nation (at 1.8%). Several
retail centers and one regional shopping mall opened
between 1993 and 1995, adding approximately 2,000,000
square feet of additional retail space to the area. As
of December 1996, the inventory of gross leasable
retail space in the city was estimated at roundly
22,000,000 square feet, and the overall vacancy rate
was roughly 5.4%.
There are several major developments that should boost
the area's retail sector during the next several
years. These include Phase III of the Forum Shops at
Caesars Palace (450,000 square feet), a
500,000-square-foot shopping mall at the proposed
Venetian Resort on the Strip, and the
450,000-square-foot Desert Passage Shopping Bazaar at
the subject property.
While several new retail centers are in the planning
stages, projections indicate retail sales growth
should moderate through 2000. Specifically, average
annual compounded growth is anticipated at rates of
3.3% in Clark County, 3.3% in the Las Vegas MSA, and
2.8% in the State of Nevada. A more moderate increase
of 1.1% annually is projected for the nation.
Personal Income As with population and retail sales, Clark County and
the Las Vegas MSA have far surpassed the nation in
terms of historical personal income growth. Between
1980 and 1990, the county and the MSA maintained an
average annual compounded growth rate of 6.0% and
6.1%, respectively. Nevada trailed somewhat, but still
<PAGE>
HVS International, Mineola, New York Market Area Analysis 4
maintained a significant growth rate of 5.2% annually
after adjustment for inflation. Personal income in the
United States increased at a substantially lower rate
of 2.6% annually between 1980 and 1990. Similar trends
were apparent during the shorter period of 1990
through 1996, when personal income growth rates
equated to 6.6% in Clark County, 6.5% in the Las Vegas
MSA, 5.6% in Nevada, and 2.1% in the United States.
More moderate gains in personal income are anticipated
in the subject property's area between 1996 and 2000.
The county and Las Vegas MSA are projected to achieve
an average annual compounded increase of 4.4% during
this period, and the State of Nevada 3.8%. On a
nationwide basis, personal income is expected to
increase by 2.1% annually through the end of the
decade.
Employment With the exception of farming and the federal military
government, virtually all employment sectors in Clark
County exhibited significant growth between 1980 and
1996. The strongest gain was in the relatively small
agricultural services sector, which exhibited an
average annual compounded increase of 8.8%. Wholesale
and retail trade employment rose at rates of 6.9% and
5.1%, respectively, yielding an overall 5.4% annual
increase in the trade sector. Substantial gains of
7.7% and 5.9% were apparent in construction and
service employment, and there was moderate growth in
government, manufacturing, TCPU (transportation,
communications, and public utilities), and FIRE
(finance, insurance, and real estate) sectors. Total
employment in Clark County increased at an average
annual compounded rate of 5.5% between 1980 and 1996.
Employment increases were more moderate during the
short-term historical period. The agricultural
services sector maintained the highest average annual
compounded increase (at 6.0%) between 1990 and 1996.
Slightly lower increases were registered in the
manufacturing and services categories (at 5.9% and
5.7%, respectively). In addition, total trade at 5.1%
and construction at 4.8% showed strong annual growth.
There were also robust gains in the TCPU and FIRE
categories. Overall employment growth in the county
averaged 5.2% annually between 1990 and 1996.
Employment growth in the county is expected to
continue, albeit at rates lower than those achieved
historically. Overall, employment growth is expected
to average 2.9% per year throughout Clark County
through 2000.
Unemployment Statistics The following table presents historical average
unemployment rates for Clark County, versus those of
the state of Nevada and the nation, from 1987 to 1996.
<PAGE>
HVS International, Mineola, New York Market Area Analysis 5
Unemployment Statistics
Clark State of United
Year County Nevada States
---------------------------------------------
1987 6.5% 6.3% 6.2%
1988 5.4 5.2 5.5
1989 5.0 5.0 5.3
1990 6.0 4.9 5.5
1991 6.6 5.6 5.7
1992 7.6 6.7 7.4
1993 6.0 7.3 6.8
1994 4.7 6.2 6.0
1995 4.4 5.4 5.6
1996 5.0 5.4 5.4
Source: Nevada Department of Employment Security
-------------------------------------------------
In the above chart, historical unemployment rates for
the Clark County MSA are compared to those of the
state and the nation. For the nation as a whole,
unemployment rates continued to increase through 1992.
A slight decrease was shown in 1993, indicating a
sluggish economy and slow recovery from the early
1990s' recession. A modest increase in unemployment
was recorded through 1993 in the state of Nevada;
however, in 1994 and 1995 unemployment dropped
noticeably in the county and state, mirroring a trend
in the national unemployment level. According to state
officials, the early 1990s' increase in unemployment
was a function of job growth not keeping pace with
rapid population growth. The continued expansion of
the resort industry through the mid 1990s kept
unemployment to a minimum. However, in 1996 county
unemployment surged to 5.0% from 4.4%. This is related
to a lack of resort industry growth in 1996. As
several new resorts are currently in the planning
stages, unemployment is expected to again decrease in
the near future.
Government Clark County operates as an independent political
entity, and is administered by a County Manager who
is, in turn, supervised by a seven-person Board of
Commissioners. The various city administrations in the
area consist of Mayors, five-person City Councils,
City Managers, and support departments.
Education The Clark County School District is undergoing rapid
growth. Enrollment increased from 86,927 students in
1980 to 176,106 in 1996 and an anticipated 233,000 by
2000. The county is currently ranked as the tenth
largest school district in the United States. The area
is served by 194 schools with 11 new facilities
planned to open in 1997.
<PAGE>
HVS International, Mineola, New York Market Area Analysis 6
Higher education is available at Clark County
Community College, a multi-campus institution serving
four counties in southern Nevada. Enrollment is
estimated at 25,000. The University of Nevada at Las
Vegas has a 335-acre campus located on Maryland
Parkway, between Tropicana Avenue and Flamingo Road
approximately two miles east of the proposed subject
property. This school has a faculty of more than 600,
73% of whom hold doctorates. Current enrollment is
roundly 20,000 students participating in more than 137
undergraduate, graduate, and doctoral degree programs.
Water Water is supplied to the Las Vegas metropolitan area
from two primary sources. Underground wells contribute
approximately 25% of the water supply, and the
remainder is provided by the Colorado River. Nevada is
limited to 309,000 acre-feet of water from the
Colorado River. The Las Vegas Valley Water District
redistributes the supply to Clark County and the City
of Las Vegas. North Las Vegas, Henderson, and Boulder
City have their own water distribution systems. Water
rates in the area are relatively low compared to those
in other western cities.
In the early spring of 1991, the Las Vegas Valley
Water District stopped issuing will-serve letters for
water service to land not yet planned for development;
the moratorium lasted six months. Currently,
will-serve letters and conditional commitment
agreements are granted on a first-come, first-serve
basis. If the developer does not build and exercise
the water rights within a specified period, the
agreement expires. It is too soon to evaluate this
plan's impact on construction in the Las Vegas market,
but it may have a negative impact on vacant land
parcels by requiring developers to build within a
specified time period.
Officials of the Las Vegas Valley Water District are
exploring ways to reduce consumption and increase
supply, because additional water resources are
necessary to sustain the area's growth. In 1991, the
Southern Nevada Water Authority was established to
address regional water issues, and it has acquired
rights from Southern California Edison and is
negotiating with Basic Management, Inc., for a portion
of their Colorado River rights. Additional
appropriations are being sought for the Virgin River.
In 1993, 320,000,000 gallons of water were delivered
from Lake Mead to the Las Vegas Valley each day. In
1994, the volume of river water available to Las Vegas
was increased by 80,000,000 gallons per day, and the
delivery system is scheduled for completion by the end
of 1997. The Southern Nevada Water Authority has also
established a committee to study water issues related
to resources, conservation, and facilities. Given the
extensive growth that is underway in the Las Vegas
Valley, water availability is expected to become the
most critical development constraint.
Transportation Ease of transportation has a significant impact on a
hotel and casino's level of visitation. As noted
earlier, Las Vegas is easily accessible from a variety
of
<PAGE>
HVS International, Mineola, New York Market Area Analysis 7
highways and McCarran International Airport. The
following table summarizes the modes of transportation
used by visitors arriving in Las Vegas, as compiled by
the Las Vegas Convention and Visitors Authority.
Modes of Transportation Used by Las Vegas Visitors
<TABLE>
<CAPTION>
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Airlines 38.5% 40.9% 45.2% 43.7% 42.3% 41.7% 42.4% 42.3% 44.1% 44.3% 44.7% 45.7%
Automobiles 49.0% 47.0% 44.7% 45.2% 47.2% 46.8% 46.9% 46.9% 45.1% 46.9% 47.0% 47.0%
Bus 12.4% 12.1% 10.0% 11.0% 10.1% 11.2% 10.4% 10.4% 10.5% 8.5% 8.0% 7.0%
Train 0.1% 0.1% 0.1% 0.1% 0.4% 0.4% 0.4% 0.4% 0.3% 0.3% 0.3% 0.3%
Source: Las Vegas Convention and Visitors Authority
- --------------------------------------------------------------------------------------------------------------
</TABLE>
As shown, the percentage of visitors arriving in Las
Vegas by airplane increased from 38.5% in 1985 to
45.7% in 1996, while the percentage of visitors
relying on automobile transportation declined from
49.0% to 47.0%. Bus travel also decreased from 12.4%
to 7.0%, and the number of visitors arriving by train
rose slightly, from 0.1% in 1985 to 0.3% in 1996.
Tourism and Visitation Tourism plays a crucial role in lodging demand. This
is especially true in Las Vegas due to its status as
the "Gaming Capital of the World." The following chart
offers statistics highlighting the growth in tourism
in Las Vegas.
<PAGE>
HVS International, Mineola, New York Market Area Analysis 8
Tourism Statistics - Las Vegas, Nevada
<TABLE>
<CAPTION>
Visitor Volume McCarran Airport Convention Visitation
---------------------------------- --------------------------------------- --------------------------------
Annual Annual Annual
% Compound % Compound % Total % Compound %
Year Total Visitors Change % Change Total Passengers Change Change Attendance Change Change
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1983 12,348,270 --- --- 10,312,842 --- --- 943,611 --- ---
1984 12,843,433 4.0% 4.0% 10,141,809 (1.7)% (1.7)% 1,050,916 11.4% 11.4%
1985 14,194,189 10.5 7.2 10,924,047 7.7 2.9 1,072,629 2.1 6.6
1986 15,196,284 7.1 7.2 12,428,748 13.8 6.4 1,519,421 41.7 17.2
1987 16,216,102 6.7 7.0 15,582,302 25.4 10.9 1,677,716 10.4 15.5
1988 17,199,808 6.1 6.9 16,231,199 4.2 9.5 1,702,158 1.5 12.5
1989 18,129,684 5.4 6.6 17,106,948 5.4 8.8 1,508,842 (11.4) 8.1
1990 20,954,420 15.6 7.8 19,089,684 11.6 9.2 1,742,194 15.5 9.2
1991 21,315,116 1.7 7.1 20,171,557 5.7 8.7 1,794,444 3.0 8.4
1992 21,886,865 2.7 6.6 20,912,585 3.7 8.2 1,969,435 9.8 8.5
1993 23,522,593 7.5 6.7 22,492,156 7.6 8.1 2,439,734 23.9 10.0
1994 28,214,362 19.9 7.8 26,850,486 19.4 9.1 2,684,171 10.0 10.0
1995 29,002,122 2.8 7.4 28,027,239 4.4 8.7 2,924,879 9.0 9.9
1996 29,636,361 2.2 7.0 30,459,965 8.7 8.7 3,305,507 13.0 10.1
YTD 5/96 12,229,504 12,686,658 1,617,891
YTD 5/97 12,871,828 5.3% 12,808,522 1.0% 1,701,168 5.1%
</TABLE>
Interstate 15 Traffic
-------------------------------------
Annual
Compound
Year Total Vehicles % Change % Change
- ----------------------------------------------
1983 2,465,848 --- ---
1984 2,518,718 2.1% 2.1%
1985 2,596,633 3.1 2.6
1986 2,679,180 3.2 2.8
1987 2,908,674 8.6 4.2
1988 3,003,247 3.3 4.0
1989 3,444,577 14.7 5.7
1990 3,751,181 8.9 6.2
1991 3,757,233 0.2 5.4
1992 3,824,286 1.8 5.0
1993 3,943,857 3.1 4.8
1994 4,201,310 6.5 5.0
1995 4,276,658 1.8 4.7
1996 4,552,183 6.4 4.8
YTD 5/96 1,781,112
YTD 5/97 1,913,381 7.4%
Source: Las Vegas Convention and Visitors Authority
- --------------------------------------------------------------------------------
<PAGE>
HVS International, Mineola, New York Market Area Analysis 9
Las Vegas Tourism Statistics
[The following table was depicted as a bar chart in the printed material.]
Year Total Visitors Total Passengers Total Attendance Total Vehicles
- ---- -------------- ---------------- ---------------- --------------
1983 12,348,270 10,312,842 943,611 2,465,848
1984 12,843,433 10,141,809 1,050,916 2,518,718
1985 14,194,189 10,924,047 1,072,629 2,596,633
1986 15,196,284 12,428,748 1,519,421 2,679,180
1987 16,216,102 15,582,302 1,677,716 2,908,674
1988 17,199,808 16,231,199 1,702,158 3,003,247
1989 18,129,684 17,106,948 1,508,842 3,444,577
1990 20,954,420 19,089,684 1,742,194 3,751,181
1991 21,315,116 20,171,557 1,794,444 3,757,233
1992 21,886,865 20,912,585 1,969,435 3,824,286
1993 23,522,593 22,492,156 2,439,734 3,943,857
1994 28,214,362 26,850,486 2,684,171 4,201,310
1995 29,002,122 28,027,239 2,924,879 4,276,658
1996 29,636,361 30,459,965 3,305,507 4,552,183
<PAGE>
HVS International, Mineola, New York Market Area Analysis 10
As the preceding chart indicates, visitor volume in
Las Vegas has been rising for the past decade. While
1990 showed a notable increase in the amount of people
visiting Las Vegas, visitor volume growth in 1991 and
1992 slowed dramatically. The 1990 increase is
attributable to two new mega-resorts (the Excalibur
and Mirage) opening during this year. The subsequent
slowing of growth is attributable to the nationwide
economic recession, as well as the Persian Gulf War,
both of which caused considerable declines in travel
throughout the nation. In 1993, visitor volume began
to increase sharply once again, with 7.5% growth over
the 1992 level. In addition, 1994 statistics show a
dramatic increase (of 19.9%) over 1993 levels due to
low-cost air travel (brought about by price wars) as
well as another round of mega-resort openings in late
1993 and 1994 (Treasure Island, Luxor, MGM Grand). In
1995 and 1996, growth in visitor volume again slowed,
but posted positive overall growth rates of 2.8% and
2.2%, respectively. Through May 1997, total visitor
counts have increased 5.3% over the same period in
1996, owing to the addition of yet another
mega-resort, New York - New York, to Las Vegas. In the
future, visitors are expected to flock to Las Vegas in
the wake of another round of new mega-resort
development.
Airport volume statistics are also important
indicators of lodging demand. Depending on the type of
service provided by a particular airfield, a sizable
percentage of arriving passengers may require hotel
accommodations. Passenger count trends also reflect
local business activity and the overall economic
health of the area. As the previous chart indicates,
passenger counts at McCarran International Airport,
much like visitor volume, grew rapidly in 1990, then
receded in 1991 and 1992 due to the Persian Gulf War.
While 1991 and 1992 figures grew at a slower pace,
1993 figures grew significantly and 1994 figures show
a dramatic 19.4% increase over 1993. Statistics for
1995 showed a slowing of the strong growth witnessed
in 1994. However, passenger counts increased markedly
in 1996 by 8.7%. According to McCarran International
Airport's Planning Division, the increase in 1996
passenger levels is directly attributable to a
multi-million dollar expansion of the airport. A
tunnel connecting the airport with I-15 (to the south
of the airport) opened in late 1995, providing easier
access to and from the airport. In addition, a
nine-story parking structure with a capacity for 8,000
vehicles opened in 1996. Furthermore, construction is
underway for a new terminal building. According to
McCarran officials, the airport expects to service
approximately 35 million passengers annually by 2000.
Convention visitation is also an important statistic
in analyzing tourism and lodging demand. The Las Vegas
Convention Center is a state-of-the-art facility which
underwent a $45-million expansion and renovation in
1992. The convention center features 1.3 million
square feet of exhibit and meeting space and is
located roughly three miles from the subject property.
Convention trade publications consistently
<PAGE>
HVS International, Mineola, New York Market Area Analysis 11
rank Las Vegas among the nation's top convention and
meeting destinations. Delegate attendance, as depicted
in the previous chart, increased rapidly in 1990, at a
15.5% rate; growth slowed in 1991 to a 3.0% rate. In
1992, attendance increased at a favorable rate of
9.8%, while 1993 figures indicate phenomenal 23.9%
growth. While in 1994 and 1995 growth in convention
attendance slowed to 10.0% and 9.0% respectively,
these rates were still robust. In addition, convention
attendance surged in 1996 by 13.0% and has increased
by 5.1% through May 1997 as compared to the same
period.
In response to the tremendous growth witnessed in
convention visitation, there are plans to expand the
Las Vegas Convention Center. According to center
officials, the plans call for approximately double the
existing meeting and exhibit space. No time table has
been set for the completion of the project, but it is
expected by 2000.
In addition, the Las Vegas Convention center is well
pre-booked in the next few years. The following chart
shows pre-booking statistics for the Las Vegas
Convention Center for the next two years.
<PAGE>
HVS International, Mineola, New York Market Area Analysis 12
Major Conventions, Las Vegas Convention Center, 1998-1999
Expected
Dates Convention Attendance
- --------------------------------------------------------------------------------
1998 Jan. 8 - Jan. 11 Consumer Electronics Show 100,000
Jan. 18 - Jan 21 Souvenier Super Show 50,000
Jan. 27 - Feb. 30 Shooting and Hunting Outdoor Convention 35,000
Feb. 17 - Feb. 20 MAGIC - Men's Apparel Guild 70,000
Feb. 22 - Feb. 26 Associated Surplus Dealers 50,000
May 4 - May 8 NETWORLD+ INTEROP 60,000
May 19 - May 21 Intl. Council of Shopping Centers 30,000
Aug. 31 - Sept. 1 MAGIC - Men's Apparel Guild 90,000
Nov. 3 - Nov. 6 Specialty Equipment Marketing Assoc. 60,000
Nov. 16 - Nov. 19 COMDEX 210,000
1999 Jan. 7 - Jan. 10 Consumer Electronics Show 100,000
Jan. 19 - Jan. 22 World of Concrete Exposition 30,000
Mar. 24 - Mar. 28 CONEXPO - CON/AGG 130,000
Aug. 15 - Aug 19 Associated Surplus Dealers 32,000
Nov. 15 - Nov. 19 COMDEX 190,000
Source: Las Vegas Convention and Visitors Authority
- --------------------------------------------------------------------------------
As approximately 40% of visitors to Las Vegas arrive
by car, the volume of traffic passing through the
market can have a direct impact on gaming and lodging
demand. As mentioned, access to Las Vegas from its
primary feeder market of California is provided via
I-15. Traffic counts along this freeway at the Nevada
State Line have increased steadily over the past few
years. Specifically, traffic counts increased by 3.1%
in 1993, 6.5% in 1994, 1.8% in 1995, and 6.4% in 1996.
In addition, through May 1997, traffic counts have
surged 7.4% as compared to the same period in 1996.
Overall, the increase in traffic along I-15 bodes well
for the subject's market area.
In light of the recent resurgence in visitor volume,
McCarran International airport's expansion plans, the
planned expansion and strong pre-bookings at the Las
Vegas Convention Center, the significant increase in
convention attendance over the past few years, and
increasing traffic counts, Las Vegas appears poised to
continue its success in attracting tourists.
Conclusion Economic conditions in the subject market area tend to
vary with tourism and visitation to the area. During
the 1980s Las Vegas experienced substantial growth in
tourism and the economy expanded. The growth slowed in
the early 1990s but has resurged late, with the
opening of several mega-resorts between 1993 and 1997.
In addition, several new mega-resorts are slated to
open before 2000. As such, Las Vegas is experiencing
continued growth in tourism and additional growth is
<PAGE>
HVS International, Mineola, New York Market Area Analysis 13
expected. The following tables summarize the economic
and demographic trends discussed throughout this
section. All figures that reflect dollar amounts have
been adjusted for inflation, and thus the growth rates
reflect real change.
<PAGE>
HVS International, Mineola, New York Market Area Analysis 14
Economic and Demographic Data for the Subject Property's Market Area
<TABLE>
<CAPTION>
Avg. Annual
Data Type Period Data Point Data Point Comp. Change
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long-Term Historical Population
Clark County 1980-1996 469.2 1,026.0 5.0%
Las Vegas, NV-AZ MSA 1980-1996 535.1 1,177.2 5.1
State of Nevada 1980-1996 810.2 1,573.3 4.2
United States 1980-1996 227,225.6 265,225.5 1.0
Short-Term Historical Population
Clark County 1990-1996 754.6 1,026.0 5.3
Las Vegas, NV-AZ MSA 1990-1996 867.8 1,177.2 5.2
State of Nevada 1990-1996 1,218.6 1,573.3 4.3
United States 1990-1996 249,403.0 265,225.5 1.0
Projected Population
Clark County 1996-2000 1,026.0 1,157.1 3.1
Las Vegas, NV-AZ MSA 1996-2000 1,177.2 1,327.8 3.1
State of Nevada 1996-2000 1,573.3 1,741.6 2.6
United States 1996-2000 265,225.5 274,581.0 0.9
Long-Term Historical Retail Sales
Clark County 1980-1996 4,443.3 9,806.1 5.1
Las Vegas, NV-AZ MSA 1980-1996 4,943.0 11,069.0 5.2
State of Nevada 1980-1996 7,811.2 14,813.0 4.1
United States 1980-1996 1,636,425.6 2,143,737.6 1.7
Short-Term Historical Retail Sales
Clark County 1990-1996 6,832.5 9,806.1 6.2
Las Vegas, NV-AZ MSA 1990-1996 7,706.2 11,069.0 6.2
State of Nevada 1990-1996 10,936.8 14,813.0 5.2
United States 1990-1996 1,926,189.3 2,143,737.6 1.8
Projected Retail Sales
Clark County 1996-2000 9,806.1 11,175.6 3.3
Las Vegas, NV-AZ MSA 1996-2000 11,069.0 12,615.2 3.3
State of Nevada 1996-2000 14,813.0 16,535.0 2.8
United States 1996-2000 2,143,737.6 2,239,888.5 1.1
Long-Term Historical Retail Sales Per Capita
Clark County 1980-1996 9,470.0 9,557.6 0.1
Las Vegas, NV-AZ MSA 1980-1996 9,237.2 9,403.1 0.1
State of Nevada 1980-1996 9,640.8 9,415.1 (0.1)
United States 1980-1996 7,201.8 8,082.7 0.7
Short-Term Historical Retail Sales Per Capita
Clark County 1990-1996 9,054.9 9,557.6 0.9
Las Vegas, NV-AZ MSA 1990-1996 8,880.1 9,403.1 1.0
State of Nevada 1990-1996 8,974.6 9,415.1 0.8
United States 1990-1996 7,723.2 8,082.7 0.8
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
HVS International, Mineola, New York Market Area Analysis 15
Economic and Demographic Data for the Subject Property's Market Area
<TABLE>
<CAPTION>
Avg. Annual
Data Type Period Data Point Data Point Comp. Change
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Projected Personal Retail Sales Per Capita
Clark County 1996-2000 9,557.6 9,658.3 0.3
Las Vegas, NV-AZ MSA 1996-2000 9,403.1 9,500.8 0.3
State of Nevada 1996-2000 9,415.1 9,494.4 0.2
United States 1996-2000 8,082.7 8,157.5 0.2
Long-Term Historical Eating and Drinking Place Sales
Clark County 1980-1996 475.0 1,097.3 5.4
Las Vegas, NV-AZ MSA 1980-1996 519.5 1,210.5 5.4
State of Nevada 1980-1996 784.3 1,549.8 4.3
United States 1980-1996 153,945.2 225,235.6 2.4
Short-Term Historical Eating and Drinking Place Sales
Clark County 1990-1996 777.6 1,097.3 5.9
Las Vegas, NV-AZ MSA 1990-1996 854.8 1,210.5 6.0
State of Nevada 1990-1996 1,147.0 1,549.8 5.1
United States 1990-1996 199,371.1 225,235.6 2.1
Projected Eating and Drinking Place Sales
Clark County 1996-2000 1,097.3 1,295.6 4.2
Las Vegas, NV-AZ MSA 1996-2000 1,210.5 1,429.6 4.2
State of Nevada 1996-2000 1,549.8 1,798.6 3.8
United States 1996-2000 225,235.6 244,351.7 2.1
Long-Term Historical Eating and Drinking Place Sales Per Capita
Clark County 1980-1996 1,012.3 1,069.5 0.3
Las Vegas, NV-AZ MSA 1980-1996 970.7 1,028.3 0.4
State of Nevada 1980-1996 968.0 985.1 0.1
United States 1980-1996 677.5 849.2 1.4
Short-Term Historical Eating and Drinking Place Sales Per Capita
Clark County 1990-1996 1,030.5 1,069.5 0.6
Las Vegas, NV-AZ MSA 1990-1996 985.0 1,028.3 0.7
State of Nevada 1990-1996 941.2 985.1 0.8
United States 1990-1996 799.4 849.2 1.0
Projected Eating and Drinking Place Sales Per Capita
Clark County 1996-2000 1,069.5 1,119.7 1.2
Las Vegas, NV-AZ MSA 1996-2000 1,028.3 1,076.7 1.2
State of Nevada 1996-2000 985.1 1,032.7 1.2
United States 1996-2000 849.2 889.9 1.2
Long-Term Historical Personal Income
Clark County 1980-1996 8,873.4 23,417.1 6.3
Las Vegas, NV-AZ MSA 1980-1996 9,809.9 25,815.0 6.2
State of Nevada 1980-1996 16,003.1 36,775.7 5.3
United States 1980-1996 3,861,548.9 5,687,220.1 2.4
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
HVS International, Mineola, New York Market Area Analysis 16
Economic and Demographic Data for the Subject Property's Market Area
<TABLE>
<CAPTION>
Avg. Annual
Data Type Period Data Point Data Point Comp. Change
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Short-Term Historical Personal Income
Clark County 1990-1996 15,944.8 23,417.1 6.6
Las Vegas, NV-AZ MSA 1990-1996 17,688.9 25,815.0 6.5
State of Nevada 1990-1996 26,568.5 36,775.7 5.6
United States 1990-1996 5,011,216.3 5,687,220.1 2.1
Projected Personal Income
Clark County 1996-2000 23,417.1 27,826.0 4.4
Las Vegas, NV-AZ MSA 1996-2000 25,815.0 30,667.9 4.4
State of Nevada 1996-2000 36,775.7 42,764.1 3.8
United States 1996-2000 5,687,220.1 6,172,122.3 2.1
Long-Term Personal Income per Capita
Clark County 1980-1996 18,912.0 22,824.0 1.2
Las Vegas, NV-AZ MSA 1980-1996 18,332.0 21,930.0 1.1
State of Nevada 1980-1996 19,751.0 23,375.0 1.1
United States 1980-1996 16,994.0 21,443.0 1.5
Short-Term Historical Personal Income per Capita
Clark County 1990-1996 21,131.0 22,824.0 1.3
Las Vegas, NV-AZ MSA 1990-1996 20,383.0 21,930.0 1.2
State of Nevada 1990-1996 21,802.0 23,375.0 1.2
United States 1990-1996 20,093.0 21,443.0 1.1
Projected Personal Income per Capita
Clark County 1996-2000 22,824.0 24,048.0 1.3
Las Vegas, NV-AZ MSA 1996-2000 21,930.0 23,097.0 1.3
State of Nevada 1996-2000 23,375.0 24,555.0 1.2
United States 1996-2000 21,443.0 22,478.0 1.2
Long-Term Historical Employment - Clark County
Farm 1980-1996 0.4 0.4 (1.0)
Agriculture Services, Other 1980-1996 1.3 5.1 8.8
Mining 1980-1996 0.6 0.9 3.0
Construction 1980-1996 16.3 53.0 7.7
Manufacturing 1980-1996 7.3 16.5 5.3
Trans., Comm. & Public Utils 1980-1996 13.7 28.4 4.6
Total Trade 1980-1996 50.8 117.0 5.4
Wholesale Trade 1980-1996 6.5 18.9 6.9
Retail Trade 1980-1996 44.2 98.0 5.1
Finance, Insurance, & Real Estate 1980-1996 19.9 43.1 4.9
Services 1980-1996 116.9 292.4 5.9
Total Government 1980-1996 37.7 63.1 3.3
Federal Civilian Govt 1980-1996 4.9 8.0 3.1
Federal Military Govt 1980-1996 10.3 9.9 (0.3)
State & Local Govt 1980-1996 22.4 45.3 4.5
TOTAL 1980-1996 264.8 619.9 5.5
</TABLE>
<PAGE>
HVS International, Mineola, New York Market Area Analysis 17
Economic and Demographic Data for the Subject Property's Market Area
<TABLE>
<CAPTION>
Avg. Annual
Data Type Period Data Point Data Point Comp. Change
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Short-Term Historical Employment - Clark County
Farm 1990-1996 0.5 0.4 (3.9)
Agriculture Services, Other 1990-1996 3.6 5.1 6.0
Mining 1990-1996 0.7 0.9 4.0
Construction 1990-1996 40.1 53.0 4.8
Manufacturing 1990-1996 11.7 16.5 5.9
Trans., Comm. & Public Utils 1990-1996 20.9 28.4 5.3
Total Trade 1990-1996 86.7 117.0 5.1
Wholesale Trade 1990-1996 14.3 18.9 4.8
Retail Trade 1990-1996 72.4 98.0 5.2
Finance, Insurance, & Real Estate 1990-1996 32.3 43.1 5.0
Services 1990-1996 209.2 292.4 5.7
Total Government 1990-1996 50.9 63.1 3.7
Federal Civilian Govt. 1990-1996 7.0 8.0 2.2
Federal Military Govt. 1990-1996 11.0 9.9 (1.8)
State & Local Govt. 1990-1996 32.9 45.3 5.5
TOTAL 1990-1996 456.4 619.9 5.2
Projected Employment - Clark County
Farm 1996-2000 0.4 0.4 (0.1)
Agriculture Services, Other 1996-2000 5.1 5.7 3.0
Mining 1996-2000 0.9 1.1 3.0
Construction 1996-2000 53.0 60.2 3.2
Manufacturing 1996-2000 16.5 17.8 1.8
Trans., Comm. & Public Utils 1996-2000 28.4 30.6 2.0
Total Trade 1996-2000 117.0 131.5 3.0
Wholesale Trade 1996-2000 18.9 21.2 2.9
Retail Trade 1996-2000 98.0 110.2 3.0
Finance, Insurance, & Real Estate 1996-2000 43.1 49.7 3.6
Services 1996-2000 292.4 329.5 3.0
Total Government 1996-2000 63.1 67.8 1.8
Federal Civilian Govt 1996-2000 8.0 8.6 1.7
Federal Military Govt 1996-2000 9.9 9.9 0.1
State & Local Govt 1996-2000 45.3 49.4 2.2
TOTAL 1996-2000 619.9 694.3 2.9
</TABLE>
<PAGE>
HVS International, Mineola, New York Certification 1
16. Certification
We the undersigned appraisers, hereby certify:
A. that the statements and opinions presented in this
restricted appraisal report subject to the limiting
conditions set forth, are correct to the best of our
knowledge and belief;
B. that Mark D. Capasso and Anne R. Lloyd-Jones CRE,
personally inspected the property described in this
report and actively participated in the analysis;
C. that the appraisers have extensive experience in the
valuation of casino hotels and believe that they are
competent to undertake this appraisal;
D. that we have no current or contemplated interests in the
real estate that is the subject of this restricted
appraisal report;
E. that we have no personal interest or bias with respect
to the subject matter of this letter or the parties
involved;
F. that this restricted appraisal report sets forth all of
the limiting conditions (imposed by the terms of this
assignment) affecting the analyses, opinions, and
conclusions presented herein;
G. that the fee paid for the preparation of this study is
not contingent upon the amount of the value estimate;
H. that this restricted appraisal report has been prepared
in accordance with and is subject to the requirements of
the Code of Professional Ethics and Standards of
Professional Appraisal Practice of the Appraisal
Institute;
I. that the use of this letter is subject to the
requirements of the Appraisal Institute relating to
review by its duly authorized representatives;
J. that this letter has been prepared in accordance with
the Uniform Standards of Professional Appraisal Practice
(as adopted by the Appraisal Foundation);
K. that no one other than the undersigned prepared the
analyses, conclusions, and opinions concerning real
estate that are set forth in this appraisal report;
<PAGE>
HVS International, Mineola, New York Certification 2
L. that as of the date of this restricted appraisal report,
Stephen Rushmore, CRE, MAI, CHA has completed the
requirements of the continuing education program of the
Appraisal Institute;
M. that this appraisal is not based on a requested minimum
value, a specific value, or the approval of a loan.
Mark D. Capasso, as an employee of
Hotel Consulting Services, Inc.
Anne R. Lloyd Jones, CRE, as an employee
of Hotel Consulting Services, Inc.
/s/ Stephen Rushmore
Stephen Rushmore, CRE, MAI, CHA, as an
employee of Hotel Consulting Services,
Inc.
<PAGE>
November 25, 1997
Mr. Jim Riley
Bank of Nova Scotia, New York Agency
One Liberty Plaza
New York, New York 10005
(212) 225-5098 Phone
(212) 225-5172 Fax
Re: Excess Land for the Proposed Aladdin Hotel and Casino
Mixed-Use Development
Las Vegas, Nevada
HVS Ref.: #9710413
Dear Mr. Riley:
Pursuant to your request, we submit this restricted appraisal report pertaining
to the above-captioned property.
This letter, which complies with the requirements set forth in the Uniform
Standards of Professional Appraisal Practice for a restricted appraisal report,
is a brief recapitulation of the appraisers' data, analyses, and conclusions and
is intended to be read in tandem with the self-contained appraisal of the
Proposed Aladdin Hotel and Casino dated October 7, 1997 that we prepared for
you. This letter does not include full discussion of the data, reasoning, and
analyses that were utilized in the appraisal process to develop the appraisers'
opinion of value. Supporting documentation is retained in the appraisers' file
and in the aforementioned self-contained appraisal of the Proposed Aladdin Hotel
and Casino dated October 7, 1997. The valuation is expressly made subject to all
normal assumptions and limiting conditions, a copy of which is provided along
with the certification.
Subject of the
Appraisal
The subject of this restricted appraisal report are the fee simple interests in
a +/- 4.75-acre parcel of land and a +/- 12.42-acre parcel of land. These
parcels are a part of the +/- 34.31-acre parcel of land currently improved with
the Aladdin Hotel and Casino and Performing Arts Center. The subjects' civic
address is 3667 Las Vegas Boulevard, Las Vegas, Nevada. The +/- 4.75-acre parcel
is to be improved with a roughly 1,000-room hotel and casino with roughly 50,000
square feet of casino space, while the +/- 12.42-acre parcel will be improved
with a +/- 450,000 square foot shopping center and parking garage (the Desert
Passage). These two structures will be part of a larger mixed-use development
consisting of a 2,600-room hotel and a 100,000-square-foot casino (the Aladdin
Hotel and Casino), and the aforementioned smaller hotel casino and shopping
center.
Purpose of
the Assignment
1
<PAGE>
The purpose of the assignment is to estimate the market value of the +/- 4.75
acres of land allocated to the 1,000-room hotel and casino and the market value
of the +/- 12.42 acres of land allocated to the Desert Passage Shopping Center.
Market value is defined by the Office of the Comptroller of the Currency (OCC),
12CFR, Part 34 as follows:
The most probable price which a property should bring in a competitive and open
market under all conditions requisite to a fair sale, the buyer and seller each
acting prudently and knowledgeably, and assuming the price is not affected by
undue stimulus. Implicit in this definition is the consummation of a sale as of
a specified date and the passing of title from seller to buyer under conditions
whereby:
1. buyer and seller are typically motivated;
2. both parties are well informed or well advised, and acting in what
they consider their own best interests;
3. a reasonable time is allowed for exposure in the open market;
4. payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto; and
5. the price represents the normal consideration for the property sold
unaffected by special or creative financing or sales concessions
granted by anyone associated with the sale.
Intended Use
of the Report
The valuation is being prepared for Bank of Nova Scotia, New York Agency for
financing purposes. None of the information presented should be disseminated to
the public or third parties without the express consent of HVS International.
Date of Inspection
The subject property was inspected on August 7, 1997 by Mark D. Capasso and Anne
R. Lloyd Jones, CRE.
Interest Valued
The property rights appraised are the fee simple ownership of the two parcels of
land.
Effective Dates
of Value
The effective date of appraisal for both the +/- 4.75-acre site allocated to the
1,000 room hotel and casino and the +/- 12.45 acres of land allocated to the
Dessert Passage Shopping Center is August 7, 1997.
Scope of
the Appraisal
All information was collected and analyzed by staff of HVS International.
Descriptive data and site plans for the subject property were supplied by the
developers, Aladdin Holdings, LLC. The site has been inspected and the
2
<PAGE>
developers and future management have been interviewed. We have gathered
economic data and information on comparable land sales. We have spoken with
buyers, sellers, brokers, developers and public officials. We have analyzed this
information and have considered the sales comparison approach to value.
In the development of the opinion of value, the appraisers performed a complete
appraisal process as defined by the Uniform Standards of Professional Practice.
This means that no departures from Standard 1 were invoked. This restricted
appraisal report presents only the appraisers' conclusions. Supporting
documentation is retained in the appraisers' file and is presented in our
self-contained appraisal dated October 7, 1997. In addition, included as an
addendum to this letter is a land sales adjustment grid detailing the various
adjustments made to the comparable land sales in order to arrive at a land value
conclusion.
Highest
and Best Use
Highest and best use is defined as "the reasonably probable and legal use of
vacant land or an improved property, which is physically possible, appropriately
supported, financially feasible, and that results in the highest value. The four
criteria the highest and best use must meet are legal permissibility, physical
possibility, financial feasibility, and maximum profitability."(1) Using these
criteria, it is our opinion that the highest and best use of the subject land is
to be improved with a hotel and casino and a shopping mall.
Summary of Analysis and Valuation
- ----------
(1) Appraisal Institute. The Dictionary of Real Estate Appraisal. 3rd ed.
Chicago: Author, 1993, p. 171.
3
<PAGE>
As mentioned in our self-contained appraisal of the proposed Aladdin Hotel and
Casino, the market value of the entire mixed-use site was estimated to be
$180,000,000. In addition, the market value of the roundly 16 acres allocated to
the Aladdin Hotel and Casino was estimated to be $135,000,000. Based on the
available data, our analysis, and experience in the hotel and casino industries,
it is our opinion that the market value of the +/- 4.75 acres of land allocated
to the 1,000-room hotel and casino portion of the development, as vacant and
including the development rights and entitlements, as of August 7, 1997, is:
$15,100,000
FIFTEEN MILLION ONE HUNDRED THOUSAND DOLLARS
In addition, by subtracting the $135,000,000 value of the Aladdin Hotel and
Casino portion of the site and the $15,100,000 value of the 1,000-room hotel and
casino portion of the site from the $180,000,000 value of the entire site, we
are of the opinion that the +/- 12.42 acres of land allocated to the Desert
Passage Shopping Center portion of the development, as vacant and including the
development rights and entitlements, as of August 7, 1997, is:
$29,900,000
TWENTY-NINE MILLION NINE HUNDRED THOUSAND DOLLARS
Exposure and
Marketing Periods
Based upon current market conditions, we believe the properties could transact
at this price with exposure and marketing periods of up to six months.
4
<PAGE>
We hereby certify that we have no undisclosed interest in the property, and our
employment and compensation are not contingent upon our valuation. This
restricted appraisal report is for internal use only and, as previously noted,
does not include full discussion of the data, reasoning, and analyses that were
utilized in the appraisal process. The valuation is expressly made subject to
all normal and specific assumptions and limiting conditions, a copy of which is
included in this restricted appraisal report.
Very truly yours,
HVS International
A Division of Hotel Consulting Services, Inc.
Mark D. Capasso
Senior Associate
Anne R. Lloyd-Jones, CRE
Senior Vice President
Stephen Rushmore, CRE, MAI, CHA
President
5
<PAGE>
Statement of Assumptions
and Limiting Conditions
This restricted appraisal report complies with the requirements set forth under
Standards Rule 2-2(c) of the Uniform Standards of Professional Appraisal
Practice for a restricted appraisal report. As such, it does not include
discussions of the data, reasoning, and analyses that were used in the appraisal
process to develop the appraisers' opinion of value. Supporting documentation
concerning the data, reasoning, and analyses is retained in the appraisers'
file. The information contained in this letter is specific to the need of the
client and for the intended use stated in this letter. The appraisers are not
responsible for unauthorized use of this report.
This restricted appraisal report is to be used in whole and not in part.
No responsibility is assumed for matters of a legal nature, nor do we render any
opinion as to title, which is assumed to be marketable and free of any deed
restrictions and easements. The property is valued as though free and clear
unless otherwise stated.
There are no hidden or unapparent conditions of the property, sub-soil or
structures, such as underground storage tanks, that would render it more or less
valuable. No responsibility is assumed for these conditions or any engineering
that may be required to discover them.
We have not considered the existence of potentially hazardous materials used in
the construction or maintenance of the building, such as asbestos, urea
formaldehyde foam insulation, or PCBs, nor have we considered the presence of
any form of toxic waste. Furthermore, we have also not considered
polychlorinated biphengyls, pesticides, and lead-based paints. The appraisers
are not qualified to detect any hazardous substances and urge the client to
retain an expert in this field if desired.
We have made no survey of the property, and assume no responsibility in
connection with such matters. Any sketches, photographs, maps, and other
exhibits are included only to assist the reader in visualizing the property. It
is assumed that the use of the land and improvements is within the boundaries of
the property described, and that there is no encroachment or trespass unless
noted.
All information, financial operating statements, estimates, and opinions
obtained from parties not employed by HVS International are assumed to be true
and correct. We can assume no liability resulting from misinformation.
Unless noted, we assume that there are no encroachments, zoning violations, or
building violations encumbering the subject property.
The property is assumed to be in full compliance with all applicable federal,
state, local, and private codes, laws, consents, licenses, and regulations
(including a liquor license where appropriate), and that all licenses, permits,
certificates, franchises, and so forth can be freely renewed or transferred to a
purchaser.
All mortgages, liens, encumbrances, leases, and servitude's have been
disregarded unless specified otherwise.
No portions of this restricted appraisal report may be reproduced in any form
without our permission, and the report cannot be disseminated to the public
through advertising, public relations, news, sales, or other media.
We are not required to give testimony or attendance in court by reason of this
analysis without previous arrangements, and only when our standard per-diem fees
and travel costs are paid prior to the appearance.
6
<PAGE>
If the reader is making a fiduciary or individual investment decision and has
any questions concerning the material presented in this restricted appraisal
report, it is recommended that the reader contact us.
We take no responsibility for any events or circumstances that take place
subsequent to either the date of value or the date of our field inspection,
whichever occurs first.
The quality of a casino hotel facility's on-site management has a direct effect
on a property's economic viability and value. The financial forecasts presented
in this analysis assume responsible ownership and competent management. Any
variance from this assumption may have a significant impact on the projected
operating results and value estimate.
The value estimate developed for this restricted appraisal report is based on an
evaluation of the overall economy, and neither takes into account, nor makes
provision for, the effect of any sharp rise or decline in local or national
economic conditions. To the extent that wages and other operating expenses may
advance during the economic life of the property, we expect that the prices of
rooms, food, beverages, and services will be adjusted to at least offset these
advances. We do not warrant that the estimates will be attained, but they have
been prepared on the basis of information obtained during the course of this
study and are intended to reflect the expectations of typical investors.
This analysis assumes continuation of all Internal Revenue Service tax code
provisions as stated or interpreted on either the date of value or the date of
our field inspection, whichever occurs first.
Many of the figures developed for this restricted appraisal report were
generated using sophisticated computer models that make calculations based on
numbers carried out to three or more decimal places. In the interest of
simplicity, most numbers have been rounded to the nearest tenth of a percent.
Thus, these figures may be subject to small rounding errors.
It is agreed that our liability to the client is limited to the amount of the
fee paid as liquidated damages. Our responsibility is limited to the client, and
use of this restricted appraisal report by third parties shall be solely at the
risk of the client and/or third parties.
Although this analysis employs various mathematical calculations to provide
value indications, the final estimate is subjective and may be influenced by our
experience and other factors not specifically set forth is this letter.
Any distribution of the total value between the land and improvements or between
partial ownership interests applies only under the stated use. Moreover,
separate allocations between components are not valid if this restricted
appraisal report is used in conjunction with any other analysis.
The Americans with Disabilities Act (ADA) became effective on January 26, 1992.
We have conducted no specific compliance survey to determine whether the subject
property is in conformity with the various detailed requirements of the ADA. It
is possible that the property does not comply with the requirements of the act,
and this could have an unfavorable effect on the property value. Because we have
no direct evidence regarding this issue, our estimate of value does not consider
possible noncompliance with the ADA.
This study was prepared by HVS International, a division of Hotel Consulting
Services, Inc. All opinions, recommendations and conclusions expressed during
this assignment have been rendered by the staff of Hotel Consulting Services,
Inc. acting solely as employees and not as individuals.
7
<PAGE>
CERTIFICATION
We the undersigned appraisers, hereby certify:
that the statements and opinions presented in this restricted appraisal report
subject to the limiting conditions set forth, are correct to the best of our
knowledge and belief;
that Mark D. Capasso and Anne R. Lloyd-Jones CRE, personally inspected the
property described in this report and actively participated in the analysis;
that the appraisers have extensive experience in the valuation of casino hotels
and believe that they are competent to undertake this appraisal;
that we have no current or contemplated interests in the real estate that is the
subject of this restricted appraisal report;
that we have no personal interest or bias with respect to the subject matter of
this letter or the parties involved;
that this restricted appraisal report sets forth all of the limiting conditions
(imposed by the terms of this assignment) affecting the analyses, opinions, and
conclusions presented herein; that the fee paid for the preparation of this
study is not contingent upon the amount of the value estimate;
that this restricted appraisal report has been prepared in accordance with and
is subject to the requirements of the Code of Professional Ethics and Standards
of Professional Appraisal Practice of the Appraisal Institute;
that the use of this letter is subject to the requirements of the Appraisal
Institute relating to review by its duly authorized representatives;
that this letter has been prepared in accordance with the Uniform Standards of
Professional Appraisal Practice (as adopted by the Appraisal Foundation);
that no one other than the undersigned prepared the analyses, conclusions, and
opinions concerning real estate that are set forth in this appraisal report;
that as of the date of this restricted appraisal report, Stephen Rushmore, CRE,
MAI, CHA has completed the requirements of the continuing education program of
the Appraisal Institute; that this appraisal is not based on a requested minimum
value, a specific value, or the approval of a loan.
/s/ Mark D. Capasso
-----------------------------------------
Mark D. Capasso, as an employee of
Hotel Consulting Services, Inc.
/s/ Anne R. Lloyd
-----------------------------------------
Anne R. Lloyd Jones, CRE, as an
employee of Hotel Consulting Services, Inc.
8
<PAGE>
-----------------------------------------
Stephen Rushmore, CRE, MAI, CHA, as an
employee of Hotel Consulting Services,
Inc.
Land Sales Adjustment Grid
<TABLE>
<CAPTION>
Subject Land Sale #1 Land Sale #2 Land Sale #3 Land Sale #4 Land Sale #5 Land Sale #6
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Sale Price N/A $13,500,000 $4,750,000 $73,000,000 $8,000,000 $3,700,000 $31,500,000
Size (Sq. Ft.) 206,910 89,734 188,719 3,212,114 90,169 109,366 767,482
Price per Sq. Ft. N/A $150.45 $25.17 $22.73 $88.72 $33.83 $41.04
Date of Sale 08/07/97 03/01/97 01/16/96 03/03/95 02/17/95 03/07/94 12/15/92
- ----------------------------------------------------------------------------------------------------------------------------------
Market Conditions (Sale 6)
Adjustment 0.0% 0.0% 0.0% 0.0% 0.0% 100.0%
Adjusted Price $150.45 $25.17 $22.73 $88.72 $33.83 $82.09
- ----------------------------------------------------------------------------------------------------------------------------------
Market Conditions
Months 5 19 30 30 42 57
Adjustment* 12.5% 47.5% 75.0% 75.0% 105.0% 142.5%
Adjusted Price $169.25 $37.13 $39.77 $155.26 $69.35 $199.06
Cumulative Adjustment for Site Characteristics
- ----------------------------------------------------------------------------------------------------------------------------------
Location superior inferior inferior superior inferior superior
Adjustment -50.0% 30.0% 20.0% -50.0% 30.0% -50.0%
Functional Utility inferior inferior similar inferior inferior superior
Adjustment 30.0% 50.0% 0.0% 30.0% 20.0% -60.0%
Size smaller similar larger smaller smaller larger
Adjustment -35.0% 0.0% 60.0% -35.0% -35.0% 50.0%
----------- ---------- ----------- ---------- ---------- -----------
Total Cumulative Adjustment -55.0% 80.0% 80.0% -55.0% 15.0% -60.0%
Net Adjusted Price $76.16 $66.83 $71.59 $69.87 $79.76 $79.62
=========== ========== =========== ========== ========== ===========
</TABLE>
* Monthly adjustment factor of 2.50%
** Includes topography, configuration, offsite availability, and
capacity
9
<PAGE>
October 29, 1997
Mr. Jim Riley
The Bank of Nova Scotia, New York Agency
One Liberty Plaza
New York, New York 10005
(212) 225-5098
Re: Proposed Aladdin Hotel and Casino
Las Vegas, Nevada
HVS Ref.: #9710413
Dear Mr. Riley:
Enclosed please find ten final copies of the self-contained appraisal report
pertaining to the above-captioned property. It has been a pleasure performing
this assignment for you, and we look forward to working with you in the future.
Very truly yours,
HVS International
Mark D. Capasso
Senior Associate
MDC/nkw
<PAGE>
November 3, 1997
Mr. Jim Riley
The Bank of Nova Scotia, New York Agency
One Liberty Plaza, 26th Floor
New York, New York 10006
(212) 225-5098
Re: Proposed Aladdin Hotel and Casino
Las Vegas, Nevada
HVS Ref.: #9710413
Dear Mr. Riley:
Enclosed please find one unbound final copy of the self-contained appraisal
report pertaining to the above-captioned property. Federal Express is currently
tracking our shipment of ten final copies. We regret the inconvenience this may
have caused.
Very truly yours,
HVS International
Mark D. Capasso
Senior Associate
MDC/nkw
<PAGE>
November 12, 1997
Mr. Jim Riley
The Bank of Nova Scotia, New York Agency
One Liberty Plaza, 26th Floor
New York, New York 10006
(212) 225-5098
Re: Proposed Aladdin Hotel and Casino
Las Vegas, Nevada
HVS Ref.: #9710413
Dear Mr. Riley:
Enclosed please find ten final copies of the self-contained appraisal report
pertaining to the above-captioned property. It has been a pleasure performing
this assignment for you, and we look forward to working with you in the future.
Very truly yours,
HVS International
Mark D. Capasso
Senior Associate
MDC/nkw
<PAGE>
Land Sales Adjustment Grid
<TABLE>
<CAPTION>
Subject Land Sale #1 Land Sale #2 Land Sale #3 Land Sale #4 Land Sale #5 Land Sale #6
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Sale Price N/A $13,500,000 $4,750,000 $73,000,000 $8,000,000 $3,700,000 $31,500,000
Size (Sq. Ft.) 207,346 89,734 188,719 3,212,114 90,169 109,366 767,482
Price per Sq. Ft. N/A $150.45 $25.17 $22.73 $88.72 $33.83 $41.04
Date of Sale 08/07/97 03/01/97 01/16/96 03/03/95 02/17/95 03/07/94 12/15/92
- ----------------------------------------------------------------------------------------------------------------------------------
Market Conditions (Sale 6)
Adjustment 0.0% 0.0% 0.0% 0.0% 0.0% 100.0%
Adjusted Price $150.45 $25.17 $22.73 $88.72 $33.83 $82.09
- ----------------------------------------------------------------------------------------------------------------------------------
Market Conditions
Months 5 19 30 30 42 57
Adjustment* 12.5% 47.5% 75.0% 75.0% 105.0% 142.5%
Adjusted Price $169.25 $37.13 $39.77 $155.26 $69.35 $199.06
Cumulative Adjustment for Site Characteristics
- ----------------------------------------------------------------------------------------------------------------------------------
Location superior inferior inferior superior inferior superior
Adjustment -50.0% 30.0% 20.0% -50.0% 30.0% -50.0%
Functional Utility inferior inferior similar inferior inferior superior
Adjustment 30.0% 50.0% 0.0% 30.0% 20.0% -60.0%
Size smaller similar larger smaller smaller larger
Adjustment -35.0% 0.0% 60.0% -35.0% -35.0% 50.0%
----------- ---------- ----------- ---------- ---------- -----------
Total Cumulative Adjustment -55.0% 80.0% 80.0% -55.0% 15.0% -60.0%
Net Adjusted Price $76.16 $66.83 $71.59 $69.87 $79.76 $79.62
=========== ========== =========== ========== ========== ===========
</TABLE>
* Monthly adjustment factor of 2.50%
** Includes topography, configuration, offsite availability, and
capacity
<PAGE>
HVS International, Mineola, New York Table of Contents
================================================================================
Table of Contents
1. Summary of Salient Data and Conclusions 1
2. Nature of the Assignment 3
3. Property Description 9
4. Market Area Analysis 28
5. U.S. Gaming Overview 46
6. Gaming Supply and Demand Analysis 58
7. Forecast of Gaming Revenue 74
8. Lodging Supply and Demand Analysis 87
9. Highest and Best Use 105
10. Approaches to Value 107
<PAGE>
HVS International, Mineola, New York Table of Contents
11. Income Capitalization Approach 110
12. Cost Approach 147
13. Sales Comparison Approach 167
14. Reconciliation of Value Indications 173
15. Statement of Assumptions and Limiting Conditions 176
16. Certification 180
Addenda
Engagement Letter
Synopsis of LCI Agreement
Photographs of the Subject Property
Photographs of the Competitive Properties
Qualifications
Mark D. Capasso
Anne R. Lloyd-Jones, CRE
Stephen Rushmore, CRE, MAI, CHA
<PAGE>
HVS International, Mineola, New York Property Description 1
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3. Property Description The suitability of the site for the operation of a
casino hotel is an important consideration affecting
the property's economic viability. Factors such as
size, topography, access, visibility, and the
availability of utilities directly impact the
desirability of a particular site. In addition, the
quality of a facility's physical improvements
directly influences marketability, visitation, gaming
volume, occupancy, average rate, and gaming win. The
design and functionality of the structure can also
affect operating efficiency and overall
profitability. This section investigates the land
components of the subject property as well as the
proposed physical improvements and personal property
to determine how they contribute to the economic
viability of the overall development.
Description of the Site The subject site comprises two parcels, both owned in
fee simple interest. According to the Clark County
Assessor's Office, the two parcels total
approximately +/- 34.83 acres, or +/- 1,517,195
square feet. However, according to officials with the
Clark County Department of Planning, approximately
0.52 acres, or 22,651 square feet, will be deducted
from this area for the widening of Harmon Street. As
such, the total site area for purposes of this
appraisal equates to +/- 34.31 acres, or +/-
1,494,544 square feet. As mentioned, the proposed
Aladdin Hotel and Casino will use approximately 18.16
acres of the western portion of the site. The hotel
and casino parcel will have frontage along Harmon
Avenue and Las Vegas Boulevard. The remainder of the
site, situated to the east of the hotel and casino
parcel, will have frontage along Harmon Avenue and
Audrie Street. This area will be developed with other
components of the mixed-use development, including a
parking garage, a second hotel with 1,000 rooms, a
central utility plant, and a +/- 450,000-square-foot
shopping bazaar called the Desert Passage. As
mentioned, we have been asked to value only the hotel
and casino portion of the mixed-use development.
<PAGE>
HVS International, Mineola, New York Property Description 2
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INSERT ASSESSOR'S PARCEL MAP
<PAGE>
HVS International, Mineola, New York Property Description 3
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The site's topography is flat; the shape of the site
is slightly irregular, owing to an approximately
2.93-acre notch cut out of the southwestern corner of
the site. This land is not owned by the subject
site's owners and is currently improved with a small
structure advertising the Rio Hotel and Casino. The
reader is directed to the assessor's parcel map
located on the preceding following page for an
illustration of the site's irregular shape. Despite
its irregular shape, the +/- 34.31-acre site offers
ample space for a casino hotel development. An
additional asset is the site's frontage along Las
Vegas Boulevard, also known as "The Strip." According
to the assessor's parcel map, the site's western
boundary enjoys approximately 800 linear feet of
frontage along Las Vegas Boulevard.
The site is located at the northwestern corner of Las
Vegas Boulevard and Harmon Avenue. The subject site's
civic address is 3667 Las Vegas Boulevard, in the
city of Las Vegas, county of Clark, and state of
Nevada. The following map delineates the subject
site's boundaries.
Accessibility
Access to Las Vegas is chiefly provided via
Interstate 15 (I-15) and two U.S. Highways, U.S.
Highway 95 (U.S. 95), and U.S. Highway 93 (U.S. 93).
I-15 is a north-south route that originates in San
Diego, California, and continues through Riverside to
Las Vegas before proceeding north to the Canadian
border. I-15 serves as the major connector between
Las Vegas and its largest feeder market, Los Angeles;
U.S. 95, also a north-south route, connects Las Vegas
with a variety of small towns located in eastern
California and northern Nevada. The major highway
connecting Las Vegas with Arizona is U.S. 93, which
connects Las Vegas to the Phoenix metropolitan area.
Approximately 25 miles southeast of Las Vegas,
proximate to the Arizona-Nevada border, U.S. 93 and
95 converge in Boulder City. I-15 bisects Las Vegas
into eastern and western sections, serving as the
major north-south thoroughfare.
The subject property's main entrance will be accessed
via Harmon Avenue, a major east-west arterial
traversing the eastern section of Las Vegas.
Currently, Harmon Avenue terminates at Las Vegas
Boulevard; however, construction is underway to
extend Harmon Avenue to I-15 and points west via a
highway overpass bridge. In addition, there are plans
to add a highway exit at Harmon Avenue and I-15. This
exit would greatly alleviate traffic concerns along
Flamingo Road and Tropicana Avenue, currently the two
most traveled east-west thoroughfares in Las Vegas.
In addition, the exit would provide motorists direct
access from I-15 to the proposed subject property. As
mentioned, Harmon Avenue will be widened from four
lanes to six over an approximate two-block stretch at
the subject site's southern border. While this street
widening is expected to take away a portion of the
subject site's developable area, we believe the
widening of Harmon Avenue will provide a long-term
benefit to the proposed subject property by
alleviating traffic congestion.
<PAGE>
HVS International, Mineola, New York Property Description 4
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The subject site's main entrance will be along Harmon
Avenue and will consist of a large circular driveway.
The driveway will provide direct access to the hotel
and casino's lobby area, as well as to all portions
of the mixed-use development. It is planned that
Harmon Avenue will be improved with traffic lights
and a dedicated left turn lane at the subject
property's entrance, providing guests excellent
access. In addition to the site's primary entrance
along Harmon Avenue, several curb cuts will be
located along Las Vegas Boulevard, providing
secondary points of ingress and egress. These
secondary access points will be unique in that
pedestrian traffic will be diverted via arched
walkways over the curb cuts, further adding to the
site's access. No other casino located along the
strip can boast this unique feature.
The subject's access will also be benefited by a
fixed rail system that is expected to stretch from
the McCarran International Airport to the Strip.
According to the Regional Transportation Commission,
a terminal for the fixed rail system has been planned
for the intersection of Audrie Road and Harmon
Avenue, at the southern border of the subject site.
Visibility
Given the Proposed Aladdin Hotel and Casino's planned
35-story main tower and ample signage, the site will
be highly visible from Las Vegas Boulevard and the
surrounding area. In addition, exterior lighting of
the main tower and two secondary 17-story towers will
enhance the site's visibility along the Las Vegas
skyline.
Utilities
The subject property will be served by all necessary
utilities, supplied by the following entities.
Natural Gas: Southwest Gas
Sewage: Clark County Sanitation
Telephone: U.S. West Communications
Electricity and hot and chilled water will be
provided to the subject property and other components
of the mixed-use facility by the central utility
plant, discussed previously in this narrative.
Soil and Subsoil Conditions
Based on our visual inspection, the bearing qualities
of the level soils area appear adequate. No
extraordinary conditions were apparent. However, the
appraisers are not qualified to evaluate soils
conditions other than by a visual inspection of
surface conditions.
<PAGE>
HVS International, Mineola, New York Property Description 5
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Nuisances and Hazards
With the exception of some asbestos in the subject's
existing improvements, the appraisers have not been
informed of any other site-specific nuisances or
hazards. According to the property's developers, the
asbestos in the existing improvements will be removed
prior to demolition.
Flood Zone
According to the Federal Emergency Management Agency
(FEMA), panel #3200 3 2556 D, effective August 16,
1995, the subject site is located within flood zone
A. Flood zone A is defined as "areas inside the
100-year flood plain as determined in a Flood
Insurance Study."
Legal Description
A copy of the subject property's legal description,
as provided by Aladdin Holdings LLC, is contained in
the addenda to this report.
Conclusion
The subject site's size, shape, topography, access,
visibility, potential hazards, and availability of
utilities have been examined and evaluated, with the
following advantages and a disadvantage noted.
Advantages:
o Entitlement of the site for mixed-use
development;
o Frontage along Las Vegas Boulevard, "The
Strip";
o Frontage along Harmon Avenue;
o Excellent accessibility from I-15 and Las
Vegas Boulevard, Las Vegas's primary
north-south thoroughfares;
o Excellent accessibility from Harmon Avenue and
Audrie Road, primary east-west thoroughfares;
o Excellent visibility from Las Vegas Boulevard
and the surrounding area;
o Unique access features; and
o Proximity to other casino hotels and tourist
attractions.
Disadvantage:
<PAGE>
HVS International, Mineola, New York Property Description 6
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o Irregular shape of the site.
The physical advantages of the site are considered to
significantly outweigh the drawback. We conclude that
the subject site is physically appropriate for
improvement with a hotel and casino facility.
Zoning According to the Clark County planning department,
the subject property is zoned:
H1 - Limited Resort and Apartment District
In Clark County, H-1 zoning is devoted to the
creation of a gaming enterprise district. To that
end, commercial development specific to the
hospitality and lodging markets is permitted. This
zoning district also permits the development of
multiple dwellings, dwelling groups, apartment
houses, and time-share units.
In the H-1 district, one parking space is required
per guestroom, plus additional spaces in proportion
to public and meeting space. According to the
subject's developers, parking for roughly 6,000 cars
will be available within the mixed-use development.
According to discussions with Clark County Planning
officials this will meet zoning requirements. In
addition, the proposed subject property is expected
to conform to the city's height and setback
requirements.
We assume that all necessary permits and approvals
are in place, and that the proposed subject property
will be in conformance with the local zoning
ordinances, building codes, and all other applicable
regulations. We further assume that all applicable
licenses, including gaming and liquor, will be
obtainable by the owners of the site.
<PAGE>
HVS International, Mineola, New York Property Description 7
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Description of the The size, layout, and quality of the facility are
Improvements integral to its market orientation, penetration, and
win-per-unit levels. The quality and design of the
hotel and casino and support facilities have a direct
influence on the ability to attract and retain gaming
customers. In addition, a property's design can have
a significant effect on operating efficiencies and
overall profitability. The proposed mixed-use
development for the subject site is expected to
consist of a 2,600-room hotel and a
110,000-square-foot casino (the Aladdin Hotel and
Casino). The hotel and casino are also expected to
include approximately 71,500 square feet of meeting
space, a 1,400-seat show room, a 7,000-seat
performing arts center, nine separate food and
beverage outlets, and an expansive array of
back-of-the-house facilities typical of a large hotel
and casino. The remaining components of the mixed-use
development will include a 450,000-square-foot
shopping bazaar, a parking garage, and a central
utility plant. As mentioned, a reciprocal easement
agreement will provide for the free flow of
pedestrian traffic between all components of the
project. For purposes of this analysis, we have been
asked to value only the 2,600-room casino hotel
portion of the mixed-use development.
Proposed Property Overview
The Proposed Aladdin Hotel and Casino will contain
one 35-story guestroom towers and two 17-story
guestroom towers. In addition, the property will
contain a vast amount of public and casino space
located on three floors, one of which will be located
below street grade. Access to the subject property
will be provided via a circular driveway off either
Harmon Avenue or Las Vegas Boulevard. The driveway
will encircle the existing Theater for Performing
Arts, the only remaining portion of the property's
existing improvements. According to the property's
developers, approximately $8,000,000 will be spent on
upgrading and renovating the theater. This renovation
is expected to address all cosmetic and building
system issues. Note that a detailed renovation budget
for the theater was not provided to the appraisers.
The hotel and casino's main entrance will be one
level below grade. Guest valet service will be
provided at the main entrance, with approximately 500
valet parking stalls located on a subterranean level.
The subject property's lobby area, front desk,
concierge area, and bell stand will be located inside
the main entrance. Another registration area, used
exclusively for premium casino-invited guests, will
also be located off the main lobby. In addition to
these registration areas, the property's buffet food
and beverage outlet and back-of-the-house areas will
be located on this level. Two escalators at either
side of the lobby will provide access to the ground
floor of the structure. Two elevator banks, at the
northern and southern ends of the lobby, will
transport guests to the property's guestrooms. In
addition, the southern elevator bank will provide two
cars to transport VIP guests from the dedicated
check-in area.
<PAGE>
HVS International, Mineola, New York Property Description 8
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The property's main floor will contain the primary
casino area, measuring approximately 95,000 square
feet, the subject's 24-hour coffee shop, a
high-energy specialty restaurant, and access to the
shopping bazaar portion of the mixed-use development,
as well as the Theater for the Performing Arts. In
addition to the aforementioned escalators from the
property's registration area, access to the
property's casino level will be provided via two
entrances on Las Vegas Boulevard at the northern and
southern ends of the building. In order to maximize
the capture of pedestrians along Las Vegas Boulevard,
these entrances will be eye-catching, consistent with
the theme of the casino. The subject's specialty
restaurant will be located between the two Las Vegas
Boulevard entrances, at the eastern edge of the
structure. This restaurant will offer patio seating
with views of the Strip and will provide additional
exposure of the property to pedestrians walking along
Las Vegas Boulevard.
From the main floor of the property, guests can use
any number of escalators or elevators to access the
property's third floor. The third floor of the
property will be open in the middle, providing a view
of the main casino floor. The third floor will house
the subject's production show theater in the
northeastern portion of the building, two
restaurants, and the property's meeting space in the
northwestern portion of the structure. The subject's
pool and full-service spa will be located in the
southwestern portion of the third floor, while the
property's high-end, 15,000-square-foot Salle Prive
casino will be located in the southeastern portion of
the third floor. The Salle Prive casino will cater to
the property's premium players and offer its own food
and beverage outlet exclusively for Salle Prive
customers.
Overall, the proposed Aladdin Hotel and Casino will
be an attractive and efficiently laid-out building,
designed to maximize guest access, as well as
pedestrian flow and walk-in traffic. The site plans
located on the following pages, provided by the
property's developers, will provide further insight
into the proposed subject's layout. In addition, each
component of the proposed subject property will be
discussed in greater detail in the following
narrative.
<PAGE>
HVS International, Mineola, New York Property Description 9
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INSERT FLOOR PLAN #1
<PAGE>
HVS International, Mineola, New York Property Description 10
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INSERT FLOOR PLAN #2
<PAGE>
HVS International, Mineola, New York Property Description 11
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INSERT FLOOR PLAN #3
<PAGE>
HVS International, Mineola, New York Property Description 12
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Casino Component
The subject property's primary 95,000-square-foot
casino will be located on the main floor of the
property. The primary casino will contain 2,800
gaming devices and 87 table games, located throughout
the casino floor. A sports book and keno lounge will
provide additional gaming opportunities for
customers. The property will offer the Salle Prive, a
high-end gaming area for premium players. This gaming
area will be located on the third floor of the
facility and will offer 30 gaming tables including
baccarat, double and single zero roulette, and
high-end blackjack. One hundred high-denomination
gaming devices will also be located in the Salle
Prive gaming area. Access to the Salle Prive area
will not be restricted but non-premium players are
not expected to frequent this area due to its high
limits and resultant atmosphere, as is the custom for
high-end gaming areas.
The subject's casino areas are designed in a logical
manner, funneling both hotel guests and patrons of
ancillary outlets through the casino floor. The
following table presents a summary of the casino
facilities.
<PAGE>
HVS International, Mineola, New York Property Description 13
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Summary of Casino Facilities
Casino
-----------------------------------------------------
Square Feet 100,000
Table Game Inventory (Main Casino) Units
Twenty-one 50
Craps 12
Roulette 7
Wheel 2
Baccarat 2
Mini Baccarat 2
Caribbean Stud 4
Let it Ride 2
Pai Gow 6
-------
Subtotal 87
Table Game Inventory (Salle Prive)
Twenty-one 12
Craps 2
Roulette 6
Baccarat 4
Caribbean Stud 2
Pai Gow 2
Let it Ride 2
-------
Subtotal 30
Total Table Games 117
Gaming Device Inventory (Main Casino)
5 Cent 284
25 Cent 1,224
50 Cent 292
$1 Dollar 826
$5 Dollar 152
$25 Dollar 16
$100 Dollar 6
-------
Subtotal 2,800
Gaming Device Inventory (Salle Prive)
$1 Dollar 74
$5 Dollar 16
$25 Dollar 6
$100 Dollar 4
-------
Subtotal 100
Total Gaming Devices 2,900
Sports Book
Race Book
Keno Lounge
Poker Room
----------------------------------------------------------
<PAGE>
HVS International, Mineola, New York Property Description 14
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Hotel Component
The subject property's hotel component will consist
of a 35-story main tower flanked by two secondary
17-story towers. The secondary towers will extend
east-west from the main tower. The Aladdin Hotel and
Casino will offer 2,600 guestrooms of various sizes
and configurations. According to information provided
by the project's developers, there will be
approximately 2,000 standard rooms of +/- 450 square
feet, 425 king parlor rooms of +/- 620 square feet,
and 175 suites ranging in size from +/- 600 square
feet to +/- 3,500 square feet. In addition,
approximately 25 suites will be dedicated to premium
casino-invited guests. These suites will be located
on the top five floors of the main tower and will
have dedicated vertical access, as well as private
guestroom access.
The subject property's guestrooms will be appointed
with high-quality furniture, fixtures, and equipment
and cater to the upper-middle tier traveler. Typical
guestroom appointments and fixtures will be as
follows:
Bedroom
o One king or two queen beds with night stands
and wall-mounted lamps and color-coordinated
sheets and bedspreads;
o Color-coordinated vinyl wallcovering and
wall-to-wall carpeting;
o Activity table with cushioned chairs;
o Armoire with remote-controlled, color
television and in-room movie system;
o Walk-in closet;
o Push-button telephone; and
o Framed artwork.
Bathroom
o Distinctive four- or five-fixture bathroom
amenities, including separate tub and shower
stalls, flush ceramic commode, one or two
sinks, and lighted vanity area;
o Fully tiled tub and shower walls;
o Tiled floor;
o Hair Dryers; and
o telephones.
<PAGE>
HVS International, Mineola, New York Property Description 15
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Due to the proposed high-quality appointments and
fixtures, the property is expected to successfully
penetrate the upper-middle tier of travelers. The
following table presents a summary of the hotel
facilities.
Summary of Hotel Facilities
Hotel Number of Units
--------------------------------------------------
Standard Rooms 2,000
King Parlor Rooms 425
Standard Suites 150
Salle Prive Suites 25
-----
Total 2,600
-----------------------------------------------------
Food and Beverage Component
The Aladdin Hotel and Casino will offer nine food and
beverage outlets to guests. Food and beverage choices
will cover a wide variety of tastes and styles, from
a buffet and food court to an exclusive high-end
restaurant. Like the property's guestrooms, the food
and beverage outlets will be appointed with
high-quality furniture, fixtures, and equipment and
provide patrons with a unique and pleasant dining
experience. The following table presents a summary of
the Aladdin's proposed food and beverage facilities.
Summary of Food and Beverage Facilities
Estimated Seating
Food and Beverage Facilities Capacity
-----------------------------------------------------
Restaurants
Buffet and Food Plaza 1,000
24-hour Coffee Shop 575
High-Energy Restaurant 225
Italian Restaurant 200
Themed Restaurant 150
Steakhouse 150
Sushi/Chinese Noodle Bar 50
Casual Dining Coffee Bar 50
Salle Prive Exclusive Restaurant 100
-----
Total 2,500
-----------------------------------------------------
The aforementioned restaurants will be located
throughout the Aladdin Hotel and Casino.
Specifically, the Buffet and Food Plaza will be
located on the subterranean level of the property.
The coffee shop and high-energy restaurant will be
located on the ground floor of the property. The
steakhouse, themed restaurant, noodle shop, coffee
bar, and Salle Prive restaurant will be located on
the third floor of the property. In addition to the
aforementioned restaurants, several bars and lounges
<PAGE>
HVS International, Mineola, New York Property Description 16
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will be located throughout the Aladdin Hotel and
Casino; however, the appraisers were not provided
with detailed information concerning the number,
style, or location of the bars and lounges.
Meeting Space
The Proposed Aladdin Hotel and Casino will contain a
flexible supply of meeting and banquet space used to
accommodate in-house groups and local functions. The
conference center will be located in the northeastern
section of the property's third floor and will
include a main ballroom, prefunction space, and 16
breakout rooms. Similar to the other components of
the subject property, the conference center will
feature high-quality appointments and fixtures and
have an efficient, functional design. The following
table presents a summary of the proposed meeting and
banquet space.
Summary of Meeting Facilities
Estimated Square
Conference Facilities Footage
-----------------------------------------------
Main Ballroom 28,500
Prefunction Space 25,600
Breakout Rooms (16) 17,400
------
Total 71,500
-----------------------------------------------------
Retail Outlets
The Proposed Aladdin Hotel and Casino will contain a
small retail component separate from the
450,000-square-foot shopping bazaar. This retail
component is expected to consist primarily of gift
shops and sundry outlets. These outlets will be
located throughout the property.
Theater for Performing Arts
As mentioned, the Theater for Performing Arts will be
the only structure remaining of the subject
property's existing improvements. The theater has
seating for approximately 7,000 and boasts
exceptional sight lines and acoustics. The center is
expected to host major concerts, Broadway shows, and
award shows. According to the developers of the
Aladdin Hotel and Casino, approximately $8,000,000
will be spent on renovating and refurbishing the
entire theater. This capital expenditure is expected
to be sufficient.
Production Show Theater
<PAGE>
HVS International, Mineola, New York Property Description 17
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In addition to the Theater for Performing Arts, the
subject property will offer a 1,400-seat production
show theater. The production show is currently
planned with a Scheherazade/1,001 Arabian Nights
theme and will offer nightly performances.
Spa and Health Club
The proposed subject property will also feature a
20,000-square-foot spa and health club. The spa will
offer a steam room, sauna, massage services, and
other pampering amenities typically found in a
full-service spa facility. The spa will be located
adjacent to the subject property's pool area in the
southeastern section of the third floor.
Back-of-the-House Facilities
The back-of-the-house facilities at the Proposed
Aladdin Hotel and Casino will be expansive,
consisting of several kitchens and preparation areas,
the shipping and receiving dock, the mechanical and
electrical equipment areas, the employee dining area,
the executive, administrative and sales offices, and
the security/surveillance area. Based on the site
plans provided by the property's developers, the
kitchen and preparation areas, offices, and employee
areas are of sufficient size to handle the property's
needs.
The subject property will offer approximately 500 to
600 valet parking spaces, located on a subterranean
level of the property. While this parking allotment
will be inadequate to service the needs of the entire
hotel and casino, a 6,000-stall parking garage will
be part of the shopping bazaar portion of the entire
mixed-use development. Access to this parking garage
will be covered by the reciprocal easement agreement
discussed earlier in this report. While we have not
included the shopping bazaar and parking garage in
our estimate of the prospective market value of the
hotel and casino, it is assumed parking issues will
not affect the subject property.
The proposed subject property's HVAC and air exchange
system will be a state-of-the-art, four-pipe system
with individual guestroom controls. A breakdown of
the equipment was not provided to the appraisers, but
it is assumed the system will be sufficient to handle
the needs of the subject property.
An integral part of every casino operation is video
surveillance. The subject property will have a
state-of-the-art video surveillance room consisting
of several videocassette recorders, a bank of video
monitors, and a control panel which can manipulate
any one of the video cameras located on the casino
floor, in the casino cage, or in the
back-of-the-house areas.
Conclusion
<PAGE>
HVS International, Mineola, New York Property Description 18
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We have evaluated the Aladdin Hotel and Casino's
proposed improvements. Based on this evaluation, we
believe the Aladdin Hotel and Casino will be an
efficient, high-quality facility with appropriate
casino, hotel, and ancillary spaces. Overall, the
subject's proposed improvements are expected to make
it a highly competitive and attractive hotel and
casino facility.
Neighborhood The neighborhood surrounding a casino hotel often has
Analysis an impact on a property's status, image, class, style
of operation, and sometimes its ability to attract
and properly serve a particular market segment. The
subject property's neighborhood can affect its casino
win-per-unit and penetration levels, occupancy,
average rate, food and beverage revenues, and overall
profitability.
As discussed, the subject site is located on Las
Vegas Boulevard, also known as "the Strip." The
neighborhood is characterized by the surrounding
casino hotels such as MGM Grand, Bally's, Monte
Carlo, New York - New York, Excalibur, Luxor, and the
soon-to-open Paris and Bellagio. Ancillary
development in the surrounding area consists of
tourism-related retail development, other gaming
venues, and themed restaurants such as the Country
Star, Harley Davidson Cafe, and All Star Cafe. The
immediate neighborhood is defined as the Las Vegas
Boulevard Corridor, bounded to the north by Sahara
Avenue and to the south by Russell. This stretch of
Las Vegas Boulevard measures approximately three
miles, with the subject site at the mid-point. This
section of the Las Vegas Strip has become a
high-demand area in recent years due to the opening
of several mega-resorts (such as MGM and New York New
York). As such, pedestrian traffic within the
subject's neighborhood is excellent and visitation to
the area from other resorts is also excellent. The
area represents the highest quality hotel and casino
properties and is the most favorable area for the
development of a new hotel and casino in the world.
In addition, the subject's Las Vegas Strip location
places it proximate to most of Las Vegas' demand
generators. These demand generators include McCarran
International Airport (two miles southeast),
University of Nevada, Las Vegas, the Thomas and Mack
Center (two miles due east), and the Las Vegas
Convention Center (three miles northeast).
Overall, the subject neighborhood is considered to be
appropriate and highly attractive for the subject
property's use and target market. The subject
neighborhood encompasses several key leisure demand
generators and also offers a setting that can be
perceived as very accessible and supportive of
gaming.
<PAGE>
HVS International, Mineola, New York Gaming Supply and Demand Analysis 1
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6. Gaming Supply and Demand Analysis
The initial step in analyzing supply and demand
trends within a given gaming market is to quantify
the existing level of gaming inventory, segmented by
table games and gaming devices. To quantify gaming
supply levels, a detailed review of all competitive
gaming facilities is performed. Once the market's
supply level and gaming mix are known, an analysis of
the demand for gaming facilities is performed.
Unlike traditional economic models of supply and
demand, the price variable associated with gaming is
largely determined by the consumer. Gaming is an
intangible product: the consumer is purchasing the
"experience" and "excitement" casino gaming offers.
The price that the consumer is willing to pay for
this experience is known as the "win," and is
quantified on a per-unit basis known as the "win per
unit per day" (WPUPD). Research indicates that the
WPUPD, or the price a market can bear for gaming
activity, is highly correlated to the level of
available gaming inventory. The actual WPUPD attained
by a market, say $250 per gaming device, provides an
indication of the marketwide demand for gaming
devices. As will be further discussed, these demand
levels within a market can be estimated through an
analysis of the actual WPUPD attained by the market.
Historical fluctuations in the marketwide WPUPD at
various levels of supply can provide insight into the
future demand for gaming. Further impacting the
demand for gaming facilities in the market are
current and projected trends in economic and
demographic factors such as population base,
employment, disposable income levels, and visitation
statistics. In addition, seasonal fluctuations must
be taken into consideration when analyzing demand
trends.
Once the various demand trends have been identified,
a variety of analytical methodologies may be employed
to forecast gaming revenue for an overall market or
an individual property. The employment of a specific
methodology must take into consideration the
reliability and availability of the data to be
utilized.
For the purposes of this analysis, the proposed
Aladdin Hotel and Casino has been classified as a
part of the Las Vegas Strip ($72 million and over)
gaming market. The following procedures are employed
in our analysis of gaming supply and demand trends.
Analysis of Supply:
o Identify all local and regional gaming
facilities;
o Determine whether additional gaming facilities
will enter the market in the foreseeable
future; and
<PAGE>
HVS International, Mineola, New York Gaming Supply and Demand Analysis 2
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o Quantify the number of existing and proposed
gaming facilities by gaming units (i.e., table
games and gaming devices) available in the
market area.
Analysis of Demand:
o Review the area and neighborhood economic and
demographic data to determine the market's
overall health and ability to support existing
and proposed levels of gaming supply;
o Examine the local and regional demand sources
by market segment to determine potential market
mix, demand levels, player gaming habits, and
the populace's propensity to gamble; and
o Review historical trends in WPUPD levels to
determine the potential for growth,
stabilization, or saturation.
Existing Supply As of December 1996, there were 19 casinos operating
within the Las Vegas Strip ($72 million and over)
market; the 19 casinos contained an aggregate of
1,495 table games and 37,197 gaming devices. The Las
Vegas Strip ($72 million and over) market is the
largest gaming market in the world including such
famous properties as the Mirage, the MGM Grand,
Caesars Palace, and Circus Circus. The following
table presents the Las Vegas Strip ($72 million and
over) gaming inventory level as of December 1996.
<PAGE>
HVS International, Mineola, New York Gaming Supply and Demand Analysis 3
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Existing Gaming Supply - Las Vegas Strip ($72 million and over)
<TABLE>
<CAPTION>
Casino
Square Casino SF Table Gaming
Market/Casino Owner Rooms Footage per Room Games Devices
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aladdin Casino Hotel Jack Sommer 1,100 34,452 31.3 26 1,005
Bally's Casino Resort Bally's Entertainment Corp. 2,814 54,603 19.4 86 1,860
Caesars Palace ITT Corp. 1,519 118,000 77.7 123 2,011
Circus Circus Circus Circus Enterprises 2,793 111,069 39.8 74 2,825
Excalibur Circus Circus Enterprises 4,032 123,944 30.7 80 2,600
Flamingo Hilton Hilton Corp. 3,642 80,334 22.1 86 1,800
Harrah's Las Vegas Harrah's Entertainment 1,711 73,754 43.1 78 1,777
Imperial Palace Imperial Palace, Inc. 2,636 47,625 18.1 43 1,900
Las Vegas Hilton Hilton Corp. 3,174 76,500 24.1 72 1,119
Luxor Circus Circus Enterprises 2,526 100,000 39.6 96 2,495
MGM Grand MGM Grand 5,005 171,500 34.3 170 3,720
The Mirage Mirage Resorts 3,049 95,300 31.3 120 2,225
Riviera Riviera Holding Corp. 2,109 102,300 48.5 43 1,389
Sahara Casino Hotel Gordon Gaming 2,045 26,956 13.2 41 1,550
Monte Carlo Circus & Mirage 715 36,438 51.0 95 2,312
Sheraton Desert Inn ITT Corp. 821 18,900 23.0 61 500
Stardust Resort and Casino Boyd Gaming Corp. 2,341 65,538 28.0 65 1,995
Treasure Island Mirage Resorts 2,900 75,294 26.0 86 2,320
Tropicana Resort and Casino Aztar Corp. 1,910 45,194 23.7 50 1,794
Totals 46,842 1,457,701 31.1 1,495 37,197
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The overall competitive environment of the Las Vegas
Strip is intense. The result of this intensity has
been the evolution of the Las Vegas Strip into a
group of diverse gaming properties each seeking to
induce and capture a specific niche. Property types
range from the $1.0-billion MGM Grand
Hotel/Casino/Theme Park, to the aged Sahara Casino
Hotel. Properties such as the Mirage, the Las Vegas
Hilton, the MGM Grand, and Caesars Palace cater to
the upper-middle and upper-income markets and high
rollers, while Circus Circus and the Excalibur have
successfully captured the lower-income "grind"
players. While the lower-income markets may not be as
glamorous, they do provide a steady stream of gaming
win. Conversely, high rollers, or "whales," can
impact an entire quarter's worth of gaming win in one
evening. The recent expansion of the Las Vegas Strip
has been designed to induce alternative demographic
groups by offering alternatives to gaming such as
theme parks, thrill rides, and high-tech
entertainment options. The MGM Grand, Circus Circus,
and the Luxor all have had varying degrees of success
capturing these new types of visitors.
<PAGE>
HVS International, Mineola, New York Gaming Supply and Demand Analysis 4
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The older properties located along the Strip have
been challenged by the new mega-resorts and the shift
in demand to the southern end of Las Vegas Boulevard.
Functional obsolescence and the lack of necessary
capital expenditures have severely impacted the
competitiveness of properties such as the Riviera,
the Sands, the Sahara, the Frontier, and the
Tropicana. These properties cannot offer the new
amenities that today's Las Vegas visitors crave and
must survive by accommodating the older Las Vegas
visitor demographic whose primary purpose is gaming.
It should be noted however, that all of the Las Vegas
Strip properties have benefited from the overall
increase in tourist visitation created by the new
mega-resorts. As will be further discussed, evidence
suggests that the Las Vegas Strip gaming market is
largely supply driven.
The proposed subject property will primarily be
marketed to the upper-middle income tier of Las Vegas
visitors. In addition, the added amenities and
high-quality product the subject will offer should
allow it to capture the new demographic groups. Also,
as mentioned, the subject property will joint venture
with London Clubs International (LCI). LCI will
greatly enhance the property's marketing to
international clientele, especially in Europe and the
Middle East.
Overall, the existing gaming inventory of the Las
Vegas Strip ($72 million and over) market ranges from
high-end mega-resorts to aged casino hotels.
Reflecting the migration of demand in the Las Vegas
Strip ($72 million and over) market to the southern
end of the Strip, as well as the desire of current
Las Vegas visitors for amenities other than gaming,
it is our opinion that the subject property will be
ideally located and outfitted to maximize the capture
of customers and subsequent revenue.
Proposed Additions to Based on conversations with local officials and
Supply knowledgeable parties, seven large additions to
supply, including the subject property, are projected
to enter the Las Vegas Strip ($72 million and over)
market within the next three years. As MGM Grand's
New York - New York opened in January 1997, its
inventory and revenue levels were not included in the
1996 data used as our basis for forecasting. As such,
for purposes of this analysis, it is considered an
addition to supply. In addition, other smaller
additions and expansions are expected to increase the
market's gaming supply. The following chart lists the
expected additions to supply in the Las Vegas Strip
($72 million and over) market. Note that the 1,000
room casino hotel proposed as part of the subject's
mixed-use development has not been included in the
following chart. Due to this property's size and
location (removed from Las Vegas Boulevard) it is not
expected to be included in the Las Vegas Strip ($72
million and over) category.
Additions to Supply - Las Vegas Strip ($72 million and over)
<PAGE>
HVS International, Mineola, New York Gaming Supply and Demand Analysis 5
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<TABLE>
<CAPTION>
Estimated Opening # Days Into Table Gaming
Casino Operator Date Projection Games Devices Guestrooms
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Bellagio Mirage Resorts 04/01/98 455 173 2,746 3,005
Project Paradise Circus Circus 10/01/98 638 110 2,400 3,800
Paris Hilton 04/01/99 820 75 3,000 3,000
Venetian Phase I Sheldon Adelson 06/01/99 881 100 3,000 3,000
Venetian Phase II Sheldon Adelson 01/01/2000 1095 50 1,000 3,000
Aladdin Aladdin Gaming, LLC 01/01/2000 1095 117 2,900 2,600
New York New York MGM 01/01/97 0 73 2,425 2,035
Other * N/A 01/01/97 0 104 976 0
* Represents expansions and additions to current properties
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
Note that the "other casino" category in the above
chart represents expansions and additions to current
properties within the Las Vegas Strip ($72 million
and over) category. These numbers have been utilized
to bring the year-end 1996 gaming unit levels up to
date with the year-to-date gaming unit levels.
Bellagio is a $1.3-billion resort being developed by
Mirage Resorts at the corner of Flamingo Road and Las
Vegas Boulevard, which is the site of the old Dunes
Hotel Casino just across Las Vegas Boulevard from the
proposed subject site. Given its high cost per room,
Bellagio will be marketed to the highest end of the
gaming spectrum. Reportedly, rack rates will be in
excess of $200 per night. We believe that Bellagio
will not compete directly with the subject property;
however, given its "must-see" appeal, it will bring
pedestrian traffic and demand to the subject
property's immediate area.
Project Paradise, the proposed $1-billion casino
hotel development by Circus Circus, recently began
construction on a site adjacent to the Luxor hotel
and casino. The project is expected to open in
October 1998. The massive Project Paradise is
expected to have as many as four different casinos
and a high-end Four Seasons Hotel as the primary
anchors. The first phase of development is expected
to consist of a 3,800-room casino, catering to the
upper income traveler. Average rates are expected to
exceed $200. Due to its high end orientation, this
property is expected to compete more with the
Bellagio than the subject property.
Paris, the proposed $420-million casino hotel
development by Bally's Entertainment (now part of
Hilton Hotels), recently began construction on a site
adjacent to the subject. According to published
reports, the project will open by the first quarter
of 1998. Similar to the New York-New York theme,
Paris will feature well-known attractions and
replicas of Parisian origin. Proposed is a 540-foot
facsimile of the Eiffel Tower, the Arc de Triomphe,
and the Paris Opera House. The property will be
marketed to the upper-middle tier of the Las Vegas
gaming market and be priced
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HVS International, Mineola, New York Gaming Supply and Demand Analysis 6
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above Bally's Hotel Casino. As such, it is expected
to compete primarily with the subject property.
The largest proposed addition to the Las Vegas gaming
market is the planned Venetian Resort on the site of
the old Sands Hotel and Casino. This development is
expected to include roughly 6,000 guestrooms, 500,000
square feet of retail space, an expansion of the
existing Sands Expo Center, and almost 200,000 square
feet of gaming space. The project's estimated cost is
$1.8 billion and it is expected to open in two
phases, by mid-1999 and by 2000. The Venetian will be
located at the northern end of the Strip and is
expected to help invigorate this area by competing
with the recent construction along the southern end
of the Strip. This property is expected to compete
directly with the subject property due to its
intended market orientation, as well as its large
retail component, similar to that of the subject.
The final proposed addition to supply is the proposed
subject property. As discussed, the subject is
expected to open by January 2000 and consist of a
450,000-square-foot retail facility, 110,000 square
feet of gaming space, and 2,600 guestrooms. The
subject will be marketed to the upper-middle tier of
Las Vegas visitors and is expected to compete to a
high degree with similar existing and proposed hotel
casinos located along the Las Vegas Strip.
As mentioned, New York-New York opened in January
1997 and is located at the northwest corner of the
Las Vegas Boulevard and Tropicana Avenue
intersection. This intersection, which is also home
to the Tropicana, the MGM Grand, and the Excalibur,
is known as the "New Four Corners." The cost of the
joint-venture between MGM Grand and Primadonna
Resorts, Inc., was estimated at $400 million. The New
York-New York is currently being marketed to the
"upper" mid-priced segment, with average room rates
between $100 and $150 per night. As such, we believe
the subject property will compete primarily with the
New York-New York.
We have also included the addition of 104 table games
and 976 gaming devices to account for the expansion
of several existing facilities of gaming inventory
within the proposed subject's market area.
In addition to the aforementioned additions to
supply, we have considered the demolition of the
existing Aladdin Hotel and Casino. As discussed, the
current Aladdin will be demolished in order for the
new property to be constructed. As such, we have
subtracted the gaming inventory of the current
Aladdin (26 table games and 1,005 gaming devices)
from our analysis beginning in January 1998, the
anticipated construction start date for the subject
property.
Supply Conclusion Summarizing the preceding discussion of existing and
proposed gaming supply, we believe that the Proposed
Aladdin Hotel and Casino will compete to varying
degrees
<PAGE>
HVS International, Mineola, New York Gaming Supply and Demand Analysis 7
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with the existing casinos located within the Las
Vegas Strip ($72 million and over) market. As of
December 1996, the Las Vegas Strip ($72 million and
over) market includes approximately 1,495 table games
and 37,197 gaming devices. Upon stabilization of the
Las Vegas Strip ($72 million and over) market in
2001, table game and gaming device inventory levels
are projected to be 2,388 and 57,539, respectively.
The following map shows the gaming supply located
within the Las Vegas Strip ($72 million and over)
market.
<PAGE>
HVS International, Mineola, New York Gaming Supply and Demand Analysis 8
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INSERT COMP MAP
<PAGE>
HVS International, Mineola, New York Gaming Supply and Demand Analysis 9
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Demand Analysis The proliferation of gaming throughout the United
States and the tremendous expansion of gaming in
southern Nevada have elevated gaming to a nationwide
industry. The development of multiple markets across
the nation has been spurred by state and local
governments' desire to increase the tax base. As a
result, aggregate gaming demand has been dispersed
across the nation. Prior to the development of Native
American reservation and riverboat gaming, the
primary gaming markets were southern Nevada and
Atlantic City, New Jersey; as such, aggregate gaming
demand could be reasonably estimated via an analysis
of these two markets. However, in today's prolific
gaming environment, demand is now a function of
available supply and the various economic and
demographic characteristics impacting a given region.
As such, the market as a whole is not as simple to
analyze. With each emerging market competing for and
capturing a portion of overall gaming demand, a
regional analysis is necessary to determine a
market's existing demand level and growth potential,
as well as its propensity to attract demand from
other regional and national gaming markets.
Economic and As described previously in the "Market Area Analysis"
Demographic Review section, the subject market appears well suited to
support a gaming inventory based on the capturable
adult population, the amount of discretionary income,
the populace's propensity to spend discretionary
income on entertainment and goods and services, and
the expansive tourism industry. With an estimated
local population of nearly 1.0 million people and
almost 30 million tourists visiting the metropolitan
Las Vegas area annually, the amount of existing and
potential gaming activity is significant. Given its
critical mass and billions of dollars in invested
capital, no other destination will be able to
duplicate the Las Vegas experience. As such, we
believe that the Las Vegas market will continue to be
the preeminent domestic and international gaming
destination.
Demand Sources Demand for gaming can be classified into four primary
sources: the leisure segment, the local residents,
tour and travel groups, and conventions. Each of
these gaming demand segments has distinct
characteristics which affect the market's potential
capacity utilization levels and subsequent gaming
revenues; these characteristics include gaming
frequency, duration of play, gaming budgets, game
preferences, and preferred facilities. With the
exception of local residents, the demand generally
originates from outside the subject property's
primary market. As mentioned, the primary feeder
market for the Las Vegas gaming market is Southern
California.
Leisure Demand
As previously discussed, leisure visitation to Las
Vegas is enormous, with visitors taking advantage of
the year-round favorable climate and multitude of
attractions. The leisure segment utilizes both table
games and gaming devices and has a higher propensity
to play table games than the other demand segments.
Gaming propensity
<PAGE>
HVS International, Mineola, New York Gaming Supply and Demand Analysis 10
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and frequency within the leisure segment vary
significantly, from novices, or "grind" players, to
rated players." Further, the gaming budgets of
leisure patrons vary considerably, as do their
average wagers. While the primary goal in attracting
the leisure traveler is gaming activity, food and
beverage outlets can also be priced to break even.
According to the Las Vegas Convention and Visitors
Authority, over 60% of visitors to Las Vegas were on
vacation. Of those polled, 87% of visitors said they
had gambled while in Las Vegas. The casino games most
often played were the slot machines, at approximately
53%, twenty-one was a distant second at 16%, followed
by video poker at 14%.
Local Demand
In emerging riverboat, dockside, and Native American
gaming markets, local residents constitute a
significant portion of the overall gaming demand. The
majority of patronage, an estimated 65% to 75%,
originates within a 50-mile radius. In markets such
as Las Vegas and Atlantic City, which possess a
critical mass of gaming, lodging, and entertainment
facilities, local demand plays a secondary role to
demand from the tour and travel, leisure, and
convention segments. However, local patronage is
necessary to provide a base level of annual demand,
offsetting the effects of seasonality on revenues. In
competitive markets, local patrons possess a high
degree of loyalty, based on personal service and
incentives. Such incentives include complimentary
food and beverage service, bonus winnings,
complimentary room nights, complimentary travel, and
gift items. Gaming frequency among local patrons
depends on a number of factors, including the
convenience of the casinos, the average age of the
populace, and disposable income levels. Typically,
local residents can be expected to allot a higher
percentage of discretionary income to gaming
activities than other demand segments. However, due
to higher frequency levels and longer play duration,
local residents tend to make lower average wagers.
Locals often possess superior gaming skills and seek
tables and devices which offer the highest payouts
and best odds. In certain markets, locals tend to be
seasonal in an attempt to circumvent the crowds
associated with peak demand periods of tourist and
leisure visitation.
The total contribution to Las Vegas' gaming revenue
by the local demand segment has been estimated at
$900 million per year. However, the local segment's
impact on the Las Vegas Strip ($72 million and over)
market is only moderate. According to the Las Vegas
Convention and Visitors Authority, only 23% of locals
gambled on the Strip, with the majority, 61%,
gambling neither on the Strip or downtown. Of the
locals polled, 20% gambled at least once a week and
33% gambled at least once a month.
<PAGE>
HVS International, Mineola, New York Gaming Supply and Demand Analysis 11
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Tour and Travel Demand
The seasonality of tour and travel demand varies,
depending on the type and mode of transportation.
Demand generated by the tour and travel segment is
primarily a function of an individual property's
marketing efforts, or their relationship with a
wholesaler. Tours organized by outside wholesalers
and recreational groups tend to be more seasonal,
while motor-coach tours, gaming junkets, and
all-inclusive vacations marketed by the individual
properties are booked in the shoulder and off seasons
to offset declining leisure visitation. The costs of
marketing to this segment are high, and in some
instances negate the potential gain in revenue. The
primary goal in attracting tour and travel groups is
gaming activity; rooms and food and beverage outlets
tend to be loss leaders. Gaming frequency among tour
and travel patrons is high, due to the purpose of the
trip and the limited length of stay. Traditionally,
tour and travel patrons favor gaming devices as
opposed to table games. Depending on the type of
group and predetermined gaming levels, tour and
travel patrons allocate a considerable portion of
their total travel budget for gaming activities and
tend to make median-sized wagers per hand, or pull.
The bus segment makes up a small portion of overall
demand within the Las Vegas market compared to a
market like Atlantic City, which is dependent on bus
tours running from the major population centers. The
wholesale market, which utilizes air transportation,
is the major component of the Las Vegas tour and
travel market.
Convention Demand
Convention demand within the Las Vegas market is
significant. In 1996, Las Vegas hosted over 3.3
million conventioneers, a 13.0% increase over 1995.
However, conventioneers tend to spend less time in
the casino than other market segments. As such,
casino hotels seeking to maximize occupied rooms in
terms of casino win, are less likely to accommodate
the convention segment.
Demand Conclusion
The Las Vegas market has evolved into a multi-faceted
gaming and entertainment destination. As evidenced,
new supply and "must-see" attractions have provided
an impetus for new demand. In our opinion the Las
Vegas market will continue to grow as new supply
enters the area, albeit at slightly lower rates. The
success of the proposed subject property is dependent
on several factors, including, but not limited to,
the following:
o The continued growth in overall visitation to
the Las Vegas area and Las Vegas's status as
the eminent gaming destination;
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HVS International, Mineola, New York Gaming Supply and Demand Analysis 12
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o The property's ability to attract and retain
visitors with its high-quality product, high
levels of customer service, and a diverse mix
of gaming and other entertainment options; and
o The region and nation's continued economic
growth.
WPUPD Analysis The win per unit per day (WPUPD) statistic provides
the basis for the analysis and projection of table
game and gaming device revenues. WPUPD is calculated
by dividing total gaming revenues generated by a
particular type of gaming unit by the number of
gaming units available. Gaming statistics published
in a majority of the gaming markets include the
number of gaming units and total win figures by
either table games and gaming devices or by
individual games and devices (i.e., twenty-one
tables, crap tables, five-cent devices,
twenty-five-cent devices, etc.). As will be shown,
the WPUPD figure provides insight into the efficiency
of a market, demand levels, and saturation levels. In
the forecast of gaming revenues, a WPUPD estimate is
applied to the projected level of supply to arrive at
an overall gaming win figure.
Analysis of the Las The following WPUPD levels provide the basis for our
Vegas Strip ($72 marketwide gaming revenue projections, as presented
million and over market) in the subsequent section entitled "Forecast of
Gaming Revenue." As mentioned, a detailed analysis
has been performed on the Las Vegas Strip ($72
million and over) gaming market. The data utilized in
our analysis have been derived from the Gaming
Revenue Report, published by the State of Nevada
Gaming Control Board. We have reviewed all the
available data for the market and believe the figures
presented in the following analysis to be accurate.
The following table presents a yearly analysis of the
Las Vegas Strip ($72 million and over) gaming market
segmented into table games and gaming devices. The
three primary statistics comprising the analysis are
total win, the number of units, and WPUPD.
<PAGE>
HVS International, Mineola, New York Gaming Supply and Demand Analysis 13
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Analysis of Las Vegas Strip ($72 million and over) Market
<TABLE>
<CAPTION>
Table Games Gaming Devices
--------------------------------------------------------- ------------------------------------------------------
Year Win % Change Units % Change WPUPD % Change Win % Change Units % Change WPUPD % Change
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1992 $ 974,174 --- 1,101 --- $2,424 --- $1,021,805 --- 26,525 --- $106 ---
1993 1,085,276 11.4% 1,116 1.4% 2,664 9.9% 1,078,632 5.6% 26,997 1.8% 109 3.7%
1994 1,441,155 32.8 1,476 32.3 2,675 0.4 1,428,500 32.4 37,245 38.0 105 (4.0)
1995 1,591,184 10.4 1,451 (1.7) 3,004 12.3 1,369,914 (4.1) 36,191 (2.8) 104 (1.3)
1996 1,515,105 (4.8) 1,495 3.0 2,777 (7.6) 1,442,373 5.3 37,197 2.8 106 2.4
Annual % Chg. 11.7% 7.9% 3.5% 9.0% 8.8% 0.2%
YTD 6/96 $ 755,625 --- 1,468 --- 1,410 --- $ 729,654 --- 36,896 --- 54 ---
YTD 6/97 827,644 9.5% 1,672 13.9% 1,356 (3.8)% 746,015 2.2% 40,598 10.0% 50 (7.1)%
LTM through 7/96 $1,727,721 --- 1,560 --- $3,034 $1,467,537 --- 37,483 --- $107
LTM through 7/97 1,724,658 (0.2)% 1,779 14.0% 2,656 (12.5)% 1,535,213 4.6% 42,104 12.3% 100 (6.9)%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
HVS International, Mineola, New York Gaming Supply and Demand Analysis 14
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Overall, the Las Vegas Strip ($72 million and over)
market for gaming devices has exhibited high levels
of demand and absorption, as evidenced by relatively
flat WPUPD levels during periods of increasing
inventory. Specifically, WPUPD levels showed an
average annual compounded percent change of only 0.2%
from 1992 to 1996, while supply increased by 8.8%
over the same period. In addition, total win
increased at an average annual rate of 9.0% from 1992
to 1996, only slightly more than supply.
Table game WPUPD levels appear to be more volatile
and subject to external forces. The major factor
influencing table game WPUPD volatility is the market
mix of individual casinos and the subsequent amount
of table game bets. While casinos catering to the
lower income level player do not witness large table
game volatility, the casinos that aggressively market
to higher income players and high rollers often
experience vast fluctuations in table game WPUPD
levels. This fact is most evident in baccarat play.
Typically baccarat players are high rollers, wagering
up to $200,000 per hand. In one night, such players
can win or lose $10,000,000. As such, table game
play, especially in the Las Vegas Strip ($72 million
and over) market can show vast WPUPD fluctuations. As
mentioned throughout this report, the subject
property is expected to cater to the upper-middle
tier Las Vegas visitor and not the extreme high
rollers. As such, the subject's table game revenues
are not expected to be as volatile as those of the
casinos that cater to higher end players.
In addition, increases in total gaming win have
mirrored the increase in available supply, an
excellent sign of the market's health and growth
potential. Given the area's favorable demographics
and healthy tourism industry, the Las Vegas Strip
($72 million and over) market has the potential for
further expansion. As evidenced, new supply has
historically provided the impetus for large increases
in demand. The next wave of new supply, including the
subject property, the Venetian, and Bellagio, is
anticipated to expand the overall market.
Conclusion Our forecast of marketwide gaming win, presented in
the following section of this report, factors in the
historical WPUPD levels attained by the market, and
the incremental change in WPUPD rates as inventory
levels either increase or decrease. Additional
factors impacting WPUPD levels are inflation,
population growth, economic expansion, lodging
supply, and tourism trends. In the following section
of this report, growth rates are applied to the
historical WPUPD levels in order to estimate future
market WPUPD levels. The WPUPD estimates are then
multiplied by the existing and proposed table game
and gaming device inventory levels presented earlier
in this section to arrive at a projection of
marketwide gaming win. In addition, the estimated
penetration rates attainable by the proposed Aladdin
Hotel and Casino will be applied to the marketwide
gaming win estimates in order to
<PAGE>
HVS International, Mineola, New York Gaming Supply and Demand Analysis 15
- --------------------------------------------------------------------------------
calculate the amount of gaming win projected to be
captured by the proposed subject property.
<PAGE>
HVS International, Mineola, New York Forecast of Gaming Revenue 1
7.
Forecast of Gaming Revenue
Once the subject market has been defined, and the supply and
demand factors analyzed and quantified, the anticipated amount
of gaming revenue generated by a specific casino operating
within this market can be determined. The compilation of
supply and demand data combined with research into the various
external factors impacting an individual property's market
share has led to the development of a market penetration
model. Utilizing the market derived data in the penetration
model results in a forecasting tool that can be applied with a
high degree of confidence. The market penetration model
utilizes the following four steps in deriving a forecast of
gaming revenue for the subject property.
1. The marketwide existing and proposed level of supply
is quantified by table games and gaming devices
throughout the projection period. The subject
property's proposed level of supply is quantified by
table games and gaming devices throughout the
projection period. The subject property's fair share
of marketwide gaming supply by table games and gaming
devices is then calculated.
2. A forecast of marketwide gaming revenue is developed
based on the WPUPD and supply trends presented in the
section of this narrative entitled "Gaming Supply and
Demand Analysis." Subjective factors such as latent
demand levels, induced demand, and shifting demand
patterns have been considered and included in the
forecast of WPUPD levels and the resultant projection
of marketwide gaming revenue.
3. Market penetration rates attainable by the subject
property are projected for table games and gaming
devices. The market penetration rates are then
multiplied by the subject property's calculated fair
share percentages to determine the subject's capture
rate. The subject property's capture rate is then
multiplied by the forecasted amount of marketwide
gaming revenue, equating to the gaming revenue
projected to be generated by the subject property.
4. The forecasted gaming win captured by the subject
property is reconciled with a WPUPD analysis to check
the reasonableness of the revenue projections.
Combining the table game and gaming device win
equates to an estimate of total gaming revenue.
Step One The subject property's fair share is calculated by dividing
the subject's gaming inventory by the marketwide gaming
inventory. For example, if the subject property
<PAGE>
HVS International, Mineola, New York Forecast of Gaming Revenue 2
has 100 table games and the total number of table games in the
market, including the subject property, is 1,000, the subject
property's fair share is equal to 10% (100 / 1,000 = 10%). The
level of existing and proposed supply by property, segmented
by table games and gaming devices, was presented in the
previous section entitled "Gaming Supply and Demand Analysis."
For the purpose of this analysis, gaming revenues will be
forecast on a calendar-year basis, commencing January 1, 2000.
As such, all additions to supply have been adjusted to reflect
the calendar year.
The following table presents the historical and projected
inventory levels of the Las Vegas Strip ($72 million and over)
market and the Proposed Aladdin Hotel and Casino segmented by
table games and gaming devices, as well as the subject
property's calculated fair share percentages.
<PAGE>
HVS International, Mineola, New York Forecast of Gaming Revenue 3
Projected Gaming Inventory and Calculated Fair Share
<TABLE>
<CAPTION>
1997 1998 1999 2000 2001 2002 2003 2004
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Table Games
Supply - LV Strip $72 Million & Over
Existing Table Games 1,495 1,646 1,804 2,045 2,388 2,388 2,388 2,388
Additions to Supply - Table Games 177 158 241 343 0 0 0 0
----- ----- ----- ----- ----- ----- ----- -----
Total Table Games 1,672 1,804 2,045 2,388 2,388 2,388 2,388 2,388
% Change 11.8% 7.9% 13.4% 16.8% 0.0% 0.0% 0.0% 0.0%
Aladdin Casino Hotel
Existing Table Games N/A N/A N/A 0 117 117 117 117
Additions to Supply - Table Games N/A N/A N/A 117 0 0 0 0
---- ---- ---- ---- ----
Total Table Games N/A N/A N/A 117 117 117 117 117
Calculated Fair Share - Table Games N/A N/A N/A 4.9% 4.9% 4.9% 4.9% 4.9%
Gaming Devices
Supply - LV Strip $72 Million & Over
Existing Gaming Devices 37,197 39,593 42,267 48,758 57,539 57,539 57,539 57,539
Additions to Supply - Gaming Devices 3,401 2,674 6,491 8,781 0 0 0 0
------ ------ ------ ------ ------ ------ ------ ------
Total Gaming Devices 40,598 42,267 48,758 57,539 57,539 57,539 57,539 57,539
% Change 9.1% 4.1% 15.4% 18.0% 0.0% 0.0% 0.0% 0.0%
Aladdin Casino Hotel
Existing Gaming Devices N/A N/A N/A 0 2,900 2,900 2,900 2,900
Additions to Supply - Gaming Devices N/A N/A N/A 2,900 0 0 0 0
------ ----- ----- ----- -----
Total Gaming Devices N/A N/A N/A 2,900 2,900 2,900 2,900 2,900
Calculated Fair Share - Gaming Devices N/A N/A N/A 5.0% 5.0% 5.0% 5.0% 5.0%
Overall Fair Share N/A N/A N/A 5.0% 5.0% 5.0% 5.0% 5.0%
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
2005 2006
- --------------------------------------------------------------------------------
<S> <C> <C>
Table Games
Supply - LV Strip $72 Million & Over
Existing Table Games 2,388 2,388
Additions to Supply - Table Games 0 0
------ ------
Total Table Games 2,388 2,388
% Change 0.0% 0.0%
Aladdin Casino Hotel
Existing Table Games 117 117
Additions to Supply - Table Games 0 0
------ ------
Total Table Games 117 117
Calculated Fair Share - Table Games 4.9% 4.9%
Gaming Devices
Supply - LV Strip $72 Million & Over
Existing Gaming Devices 57,539 57,539
Additions to Supply - Gaming Devices 0 0
------ ------
Total Gaming Devices 57,539 57,539
% Change 0.0% 0.0%
Aladdin Casino Hotel
Existing Gaming Devices 2,900 2,900
Additions to Supply - Gaming Devices 0 0
------ ------
Total Gaming Devices 2,900 2,900
Calculated Fair Share - Gaming Devices 5.0% 5.0%
Overall Fair Share 5.0% 5.0%
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
HVS International, Mineola, New York Forecast of Gaming Revenue 4
As evidenced,marketwide supply levels are expected to increase
significantly in coming years as several new properties come
on line. The proposed subject property is expected to open in
January 2000 with 117 table games and 2,900 devices. The
subject property's proposed inventory levels equate to a fair
share percentage of 4.9% for table games and 5.0% for gaming
devices.
For the purposes of this analysis, marketwide table game and
gaming device inventory levels are projected to stabilize in
2000 with the opening of the subject property and phase II of
the Venetian.
Step Two As discussed, step two involves the forecasting of marketwide
gaming revenue in each year of the projection period. The
annual revenue figures were divided by the average marketwide
table game and gaming device inventory levels as of December
31, 1996. The base year table game WPUPD estimate is
calculated as follows:
Table Game Win / Average Units / 365 = WPUPD
$1,515,105,000 / 1,495 / 365 = $2,776.57
Say $2,777
The calculated annual average WPUPD figure is used to derive a
base-year figure from which to project future WPUPD amounts.
Growth rates are applied to the base year figure to calculate
marketwide gaming revenues.
Based on the historical WPUPD trend of the market, the
incremental changes in gaming supply, and the anticipated
impact of the new supply on the demand trends within the
market, capacity growth rates in WPUPD levels are estimated.
The WPUPD figure is multiplied by the projected level of table
game or gaming device inventory to arrive at a forecast of
marketwide gaming revenue. The following table presents the
10-year forecast of Las Vegas Strip ($72 million and over)
gaming revenues.
<PAGE>
HVS International, Mineola, New York Forecast of Gaming Revenue 5
Forecast of Marketwide Gaming Revenue - Las Vegas Strip ($72 million and over)
Market
<TABLE>
<CAPTION>
Historical Historical
1994 1995 BASE YEAR 1997 1998 1999 2000
- -----------------------------------------------------------------------------------------------------------------------
Table Games
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Estimated Growth Rate -2.0% 3.0% -5.0% -6.0%
Estimated WPUPD $ 2,675 3,004 $ 2,777 $ 2,721 $ 2,803 $ 2,663 $ 2,503
Units 1,476 1,451 1,495 1,672 1,804 2,045 2,388
Win (000s) $1,441,155 $1,591,184 $1,515,228 $1,660,730 $1,845,596 $1,987,545 $2,181,654
Growth Rate 10.4% 9.6% 11.1% 7.7% 9.8%
Gaming Devices
Estimated Growth Rate -3.0% 1.0% -2.0% -2.0%
Estimated WPUPD $ 105 $ 104 $ 106 $ 103 $ 104 $ 102 $ 100
Units 37,245 36,191 37,197 40,598 42,267 48,758 57,539
Win (000s) $1,428,500 $1,369,914 $1,442,566 $1,527,229 $1,605,914 $1,815,486 $2,099,594
Growth Rate -4.1% 5.9% 5.2% 13.1% 15.6%
Total Gaming Win (000s) $2,869,655 $2,961,098 $2,957,794 $3,187,959 $3,451,510 $3,803,031 $4,281,248
Growth Rate 3.2% 7.8% 8.3% 10.2% 12.6%
Revenue Mix
Table Games 50.2% 53.7% 51.2% 52.1% 53.5% 52.3% 51.0%
Gaming Devices 49.8% 46.3% 48.8% 47.9% 46.5% 47.7% 49.0%
2001 2002 2003 2004 2005 2006
- -------------------------------------------------------------------------------------------------------
Table Games
<S> <C> <C> <C> <C> <C> <C>
Estimated Growth Rate 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
Estimated WPUPD $ 2,578 $ 2,655 $ 2,735 $ 2,817 $ 2,902 $ 2,989
Units 2,388 2,388 2,388 2,388 2,388 2,388
Win (000s) $2,247,103 $2,314,516 $2,383,952 $2,455,470 $2,529,134 $2,605,008
Growth Rate 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
Gaming Devices
Estimated Growth Rate 2.0% 3.0% 3.0% 3.0% 3.0% 3.0%
Estimated WPUPD $ 102 $ 105 $ 108 $ 111 $ 115 $ 118
Units 57,539 57,539 57,539 57,539 57,539 57,539
Win (000s) $2,141,586 $2,205,833 $2,272,008 $2,340,169 $2,410,374 $2,482,685
Growth Rate 2.0% 3.0% 3.0% 3.0% 3.0% 3.0%
Total Gaming Win (000s) $4,388,689 $4,520,349 $4,655,960 $4,795,639 $4,939,508 $5,087,693
Growth Rate 2.5% 3.0% 3.0% 3.0% 3.0% 3.0%
Revenue Mix
Table Games 51.2% 51.2% 51.2% 51.2% 51.2% 51.2%
Gaming Devices 48.8% 48.8% 48.8% 48.8% 48.8% 48.8%
</TABLE>
<PAGE>
HVS International, Mineola, New York Forecast of Gaming Revenue 6
As shown, table game WPUPD levels are forecast to decrease by
2.0% in 1997 reflecting the increase in supply brought about
by the opening of New York -New York in January. This decrease
in the WPUPD level is consistent with the year-to-date table
game WPUPD trend shown previously in this section of the
report. In 1998, the additional table game supply is expected
to be absorbed by the market and WPUPD levels are forecast to
increase by 3.0%, the underlying rate of inflation. Table game
WPUPD levels are then forecast to decrease by 5.0% and 6.0% in
1999 and 2000, respectively, due to the large increases in
supply forecast to enter the market in those years. These
decreases are consistent with the market's historical reaction
to supply increases of this magnitude. WPUPD levels are
forecast to rebound in 2001, increasing 3.0% before
stabilizing at 3.0% growth per year in 2002 and thereafter.
Overall, table game WPUPD levels are forecast to stabilize at
$2,578 in 2001.
Given the historic stability of gaming device WPUPD levels
discussed previously, they are not expected to fluctuate as
drastically as table game WPUPD levels. Specifically, gaming
device WPUPD levels are forecast to decrease by 3.0% in 1997,
increase by 1.0% in 1998, decrease by 2.0% in 1999 and 2000,
and increase by 2.0% in 2001 before stabilizing at 3.0% growth
per year in 2002 and thereafter. The decreases in gaming
device WPUPD levels in 1997, 1999, and 2000 are attributable
to the forecasted increases in supply. However, as in the
past, the Las Vegas Strip ($72 million and over) market is
expected to quickly absorb the supply increases. Overall, the
marketwide gaming device WPUPD is expected to reach a low of
$100 in 2000 and to stabilize at $105 in 2002.
Step Three Step three of the analysis includes projections of the subject
property's market penetration rates. A penetration rate is
defined as the percentage of marketwide gaming revenue the
subject property will capture in relation to its fair share.
For example, if the subject property's fair share of the
marketwide gaming device inventory was 10%, and the property
penetrates the gaming device segment at 110%, the subject
would capture approximately 11% of marketwide gaming device
revenue (1.10 x 0.10 = 0.11). The capture rate is then applied
to the aggregate amount of marketwide gaming revenue to derive
the subject property's gaming revenue forecast. The following
chart shows the estimated 1996 penetration rates of hotel
casinos located within the Las Vegas Strip ($72 million and
over) market deemed most similar to the proposed subject
property.
<PAGE>
HVS International, Mineola, New York Forecast of Gaming Revenue 7
1996 Estimated Penetration Rates for Selected Hotel Casinos - Las Vegas Strip
($72 million and over)
<TABLE>
<CAPTION>
Market Mirage Treasure Island Caesars
---------------------------- ------------------------- ---------------------- -----------------------
Tables Devices Tables Devices Tables Devices Tables Devices
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue 1,545,405 1,442,373 179,300 120,000 58,900 86,600 144,000 97,000
Units 1,495 37,197 122 2,225 97 2,220 125 1,980
Fair Share 8.2% 6.0% 6.5% 6.0% 8.4% 5.3%
Penetration 142.2% 139.1% 58.7% 100.6% 111.4% 126.3%
Market Mix Tables 5% 4% 6%
Market Mix Devices 95% 96% 94%
Total Penetration 139% 99% 125%
Source: Individual Company Forms 10K and 10Q, Nevada Gaming Control Board, HVS International
<CAPTION>
MGM Luxor
------------------------ ----------------------
Tables Devices Tables Devices
------------------------------------------------
<S> <C> <C> <C> <C>
Revenue 340,000 145,000 71,100 47,400
Units 178 3,720 106 2,400
Fair Share 11.9% 10.0% 7.1% 6.5%
Penetration 184.8% 100.5% 64.9% 50.9%
Market Mix Tables 5% 4%
Market Mix Devices 95% 96%
Total Penetration 104% 52%
Source: Individual Company Forms 10K and 10Q, Nevada Gaming Control Board, HVS International
</TABLE>
<PAGE>
HVS International, Mineola, New York Forecast of Gaming Revenue 8
As shown, the Mirage and Caesars Palace enjoy the highest
penetration rates within the market, followed by the MGM,
Treasure Island, and the Luxor. The Luxor's low overall
penetration rate compared to the other selected properties is
attributable to the historically low room count at the
property. Based on published reports, the Luxor did not have a
sufficient number of rooms to support its casino size.
Consequently, Circus Circus Corporation recently completed an
expansion of the property totaling 1,900 guestrooms. In the
future, the Luxor is expected to benefit from this rooms
expansion and increase its penetration of the market.
As mentioned throughout this report, the proposed subject
property will primarily target the upper-middle tier of the
Las Vegas gaming market. As such, its market mix is expected
to be most like that of the Treasure Island Casino. However,
the proposed subject's high-quality product and superior
amenities package are expected to enable it to penetrate the
market at a higher level than Treasure Island. In addition,
the subject property's penetration levels are expected to be
higher than the Treasure Island due to the subject's joint
venture with LCI and subsequent marketing efforts to
international clientele. Specifically, the proposed subject is
expected to penetrate the Las Vegas Strip ($72 million and
over) market at a level equivalent to Caesars Palace but lower
than the Mirage.
Our forecast of the market penetration rates attainable by the
Proposed Aladdin Hotel and Casino takes into consideration its
proposed improvements, target market, LCI partnership, and the
impact of new competitive facilities. We have forecast the
proposed subject property to penetrate the table game segment
at a stabilized level of 125% and the gaming device segment at
a stabilized level of 130%. This equates to an overall
stabilized penetration level of 129.8%.
The following table presents the subject property's projected
penetration rates and captured gaming revenue by table games
and gaming devices.
<PAGE>
International, Mineola, New York Forecast of Gaming Revenue 9
Projected Penetration Rates and Captured Gaming Revenue - Proposed Aladdin Hotel
and Casino
<TABLE>
<CAPTION>
1997 1998 1999 2000 2001 2002 2003
- -------------------------------------------------------------------------------------------------------------------
Marketwide Gaming Win
<S> <C> <C> <C> <C> <C> <C> <C>
Table Games $1,660,730 $1,845,596 $1,987,545 $2,181,654 $2,247,103 $2,314,516 $2,383,952
Gaming Devices $1,527,229 $1,605,914 $1,815,486 $2,099,594 $2,141,586 $2,205,833 $2,272,008
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Gaming Win (000s) $3,187,959 $3,451,510 $3,803,031 $4,281,248 $4,388,689 $4,520,349 $4,655,960
Estimated Penetration Factors
Table Games N/A N/A N/A 125.0% 125.0% 125.0% 125.0%
Gaming Devices N/A N/A N/A 130.0% 130.0% 130.0% 130.0%
------- ------- ------- -------
Overall N/A N/A N/A 129.8% 129.8% 129.8% 129.8%
Captured Gaming Win
Table Games N/A N/A N/A $133,610 $137,620 $141,750 $146,000
Gaming Devices N/A N/A N/A $137,570 $140,320 $144,530 $148,860
-------- -------- -------- --------
Total N/A N/A N/A $271,180 $277,940 $286,280 $294,860
Growth Rate
Table Games N/A N/A N/A 3.0% 3.0% 3.0%
Gaming Devices N/A N/A N/A 2.0% 3.0% 3.0%
----- ----- -----
Total N/A N/A N/A 2.5% 3.0% 3.0%
Revenue Mix
Table Games N/A N/A N/A 49.3% 49.5% 49.5% 49.5%
Gaming Devices N/A N/A N/A 50.7% 50.5% 50.5% 50.5%
------- ------ ------ ------
Total N/A N/A N/A 100.0% 100.0% 100.0% 100.0%
2004 2005 2006
- --------------------------------------------------------------------------------
Marketwide Gaming Win
<S> <C> <C> <C>
Table Games $2,455,470 $2,529,134 $2,605,008
Gaming Devices $2,340,169 $2,410,374 $2,482,685
---------- ---------- ----------
Total Gaming Win (000s) $4,795,639 $4,939,508 $5,087,693
Estimated Penetration Factors
Table Games 125.0% 125.0% 125.0%
Gaming Devices 130.0% 130.0% 130.0%
------ ------ ------
Overall 129.8% 129.8% 129.8%
Captured Gaming Win
Table Games $150,380 $154,890 $159,540
Gaming Devices $153,330 $157,930 $162,670
-------- -------- --------
Total $303,710 $312,820 $322,210
Growth Rate
Table Games 3.0% 3.0% 3.0%
Gaming Devices 3.0% 3.0% 3.0%
----- ----- -----
Total 3.0% 3.0% 3.0%
Revenue Mix
Table Games 49.5% 49.5% 49.5%
Gaming Devices 50.5% 50.5% 50.5%
------ ------ ------
Total 100.0% 100.0% 100.0%
</TABLE>
<PAGE>
HVS International, Mineola, New York Forecast of Gaming Revenue 10
As market conditions stabilize in 2002, total gaming revenue
is projected to increase at an average annual compounded rate
of 3.0% throughout the projection period. Reflecting the
assumed market mix of the Proposed Aladdin Hotel and Casino,
revenues generated by gaming devices are projected to account
for 50.5% of total gaming revenue throughout the projection
period, while revenue generated by table games is expected to
generate 49.5% of total gaming revenue.
Step Four In step four, the projection of gaming revenue derived via the
market penetration analysis is reconciled with a WPUPD
analysis. In addition, other gaming win derived from the race
and sports book, poker, and keno lounge has been forecast
based on the historical market operations of these ancillary
outlets, as well as the proposed subject's intended market
orientation. The following table presents a historical
analysis of other gaming win as a percentage of table game and
gaming device win for the Las Vegas Strip ($72 million and
over) market.
Analysis of Other Gaming Win
<TABLE>
<CAPTION>
1993/94 1995/96 1995/96
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Table and Device Win $2,518,296 $2,956,165 $3,028,819
Keno 38,157 36,706 34,530
% of Table/Device Win 1.5% 1.2% 1.1%
Poker 109,260 32,880 30,944
% of Table/Device Win 4.3% 1.1% 1.0%
Race Book 53,409 48,760 50,799
% of Table/Device Win 2.1% 1.6% 1.7%
Sports Book 41,295 48,290 49,436
% of Table/Device Win 1.6% 1.6% 1.6%
Total Other Win 42,121 166,635 165,708
% of Table/Device Win 9.6% 5.6% 5.5%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
Overall, the market's other gaming win has been relatively
stable over the past two years ranging from 5.6% of table and
device win in 1994/95 to 5.5% in 1995/96. Based on recent
trends and the subject's intended market orientation and the
limited nature of its other gaming outlets, we have projected
other gaming win equal to 4.0% of table game and gaming device
win throughout the projection period.
The following table presents our estimated WPUPD projections
for the subject property throughout the 10-year projection
period.
<PAGE>
HVS International, Mineola, New York Forecast of Gaming Revenue 11
Projected Capacity Utilization Levels, WPUPD, and Total Gaming Win - Proposed
Aladdin Hotel and Casino
<TABLE>
<CAPTION>
2000 2001 2002 2003
<S> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------
Table Games
WPUPD $3,129 $3,223 $3,319 $3,419
Units 117 117 117 117
Win $133,610 $137,620 $141,750 $146,000
Gaming Devices
WPUPD $130 $133 $137 $141
Units 2,900 2,900 2,900 2,900
Win $137,570 $140,320 $144,530 $148,860
Table and Device Win $271,180 $277,940 $286,280 $294,860
Other Gaming Revenues @ 4.0% $10,850 $11,120 $11,450 $11,790
-------- -------- -------- --------
Total Gaming Win $282,030 $289,060 $297,730 $306,650
======== ======== ======== ========
Growth Rate -- 2.5% 3.0% 3.0%
<CAPTION>
2004 2005 2006
<S> <C> <C> <C>
------------------------------------------------------------------------------
Table Games
WPUPD $3,521 $3,627 $3,736
Units 117 117 117
Win $150,380 $154,890 $159,540
Gaming Devices
WPUPD $145 $149 $154
Units 2,900 2,900 2,900
Win $153,330 $157,930 $162,670
Table and Device Win $303,710 $312,820 $322,210
Other Gaming Revenues @ 4.0% $12,150 $12,510 $12,890
-------- -------- --------
Total Gaming Win $315,860 $325,330 $335,100
======== ======== ========
Growth Rate 3.0% 3.0% 3.0%
</TABLE>
<PAGE>
HVS International, Mineola, New York Forecast of Gaming Revenue 12
The projection of gaming revenues presented will be utilized
in the "Income Capitalization Approach" section of the
narrative to derive the market value of the Proposed Aladdin
Hotel and Casino.
<PAGE>
HVS International, Mineola, New York Lodging Supply and Demand Analysis 1
8.
Lodging Supply and Demand Analysis
This section presents an overview of the Las Vegas lodging
market through an analysis of annual and monthly inventory and
occupancy levels. Market segmentation, competitive casino
hotels, and additions to supply will be discussed and
evaluated as they relate to the Proposed Aladdin Hotel and
Casino.
Historically, the Las Vegas lodging market has attained
occupancy levels well above the national average. As presented
in the following table, available inventory and occupied rooms
have increased at average annual rates of 4.2% and 5.8%,
respectively. As a result, occupancy has risen from the
low-70% range to the low-90% range over the 13-year period.
Growth in demand has historically been a function of new
supply, as evidenced by the 17.4% increase in occupied rooms
in 1993 and the 13.0% increase in 1996. In 1993, supply
increased by 12.5%, or roundly 9,500 rooms, while in 1996,
supply increased by 10.0% or roundly 9,000 rooms. The
following table presents an analysis of the Las Vegas lodging
market over the past 13 years. The subsequent charts
illustrate the growth in the Las Vegas market on an annual and
monthly basis.
<PAGE>
HVS International, Mineola, New York Lodging Supply and Demand Analysis 2
<TABLE>
<CAPTION>
Analysis of Las Vegas Lodging Statistics
Hotel Motel
Year Inventory % Change Occupancy % Change Occupancy % Change
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1983 52,529 --- 77.4% --- 63.3% ---
1984 54,129 3.0% 78.1 0.9% 61.7 (2.5%)
1985 53,067 (2.0) 84.7 8.5 70.1 13.6
1986 56,494 6.5 86.3 1.9 70.9 1.1
1987 58,474 3.5 87.0 0.8 74.0 4.4
1988 61,394 5.0 89.3 2.6 73.7 (0.4)
1989 67,391 9.8 89.9 0.7 72.5 (1.6)
1990 73,730 9.4 89.1 (0.9) 69.8 (3.7)
1991 76,879 4.3 85.2 (4.4) 62.6 (10.3)
1992 76,523 (0.5) 88.8 4.2 66.1 5.6
1993 86,053 12.5 92.6 4.3 69.7 5.4
1994 88,560 2.9 92.6 0.0 73.2 5.0
1995 90,046 1.7 91.4 (1.3) 72.4 (1.1)
1996 99,072 10.0 93.4 2.2 75.7 4.6
YTD 5/96 91,720 --- 95.1 --- 79.2 ---
YTD 5/97 102,536 11.8 92.6% (2.6) 74.5% (5.9)
Average Annual % Change 4.2% 1.3% 1.0%
</TABLE>
Total Total
Year Occupancy % Change Rooms Occupied % Change
- ------------------------------------------------------------------------------
1983 72.6% --- 13,919,660 ---
1984 72.5 (0.1%) 14,323,887 2.9%
1985 79.8 10.1 15,456,825 7.9
1986 81.4 2.0 16,784,932 8.6
1987 83.4 2.5 17,800,070 6.0
1988 85.1 2.0 19,069,897 7.1
1989 85.2 0.1 20,957,253 9.9
1990 84.7 (0.6) 22,793,998 8.8
1991 80.3 (5.2) 22,532,851 (1.1)
1992 83.9 4.5 23,434,021 4.0
1993 87.6 4.4 27,514,586 17.4
1994 89.0 1.6 28,768,716 4.6
1995 88.0 (1.1) 28,922,775 0.5
1996 90.4 2.7 32,689,797 13.0
YTD 5/96 92.3 --- 12,688,051 ---
YTD 5/97 89.4% (3.1) 13,723,378 8.2
1.5% 5.%
Source: Las Vegas Convention and Visitors Authority
<PAGE>
HVS International, Mineola, New York Lodging Supply and Demand Analysis 3
Las Vegas Annual Lodging Trend
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH/BAR CHART IN THE PRINTED
MATERIAL.]
Room Motel Hotel
Inventory Occupancy Occupancy
- -----------------------------------------------------------
1983 52,529 63.3% 77.4%
1984 54,129 61.7 78.1
1985 53,067 70.1 84.7
1986 56,494 70.9 86.3
1987 58,474 74.0 87.0
1988 61,394 73.7 89.3
1989 67,391 72.5 89.9
1990 73,730 69.8 89.1
1991 76,879 62.6 85.2
1992 76,523 66.1 88.8
1993 86,053 69.7 92.6
1994 88,560 73.2 92.6
1995 90,046 72.4 91.4
1996 99,072 75.7 93.4
YTD 5/96 91,720 79.2 95.1
YTD 5/97 102,536 74.5% 92.6%
<PAGE>
HVS International, Mineola, New York Lodging Supply and Demand Analysis 4
Las Vegas Room Inventory and Occupancy Percentage
by Month
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Occupancy % Room Inventory
- -----------------------------------------------
Jan 93 76.2% 75,475
Feb 88.8% 75,475
Mar 88.6% 75,475
Apr 90.5% 75,475
May 86.5% 75,475
Jun 86.9% 75,846
Jul 91.0% 75,846
Aug 94.0% 75,846
Sep 89.9% 76,145
Oct 92.3% 81,670
Nov 87.5% 86,053
Dec 79.2% 86,053
Jan 94 80.0% 86,053
Feb 90.6% 86,053
Mar 94.4% 86,053
Apr 93.3% 86,053
May 91.3% 86,603
Jun 89.7% 86,603
Jul 91.3% 86,759
Aug 91.0% 87,677
Sep 90.3% 87,845
Oct 91.6% 87,845
Nov 89.0% 87,845
Dec 83.0% 88,560
Jan 95 82.6% 88,737
Feb 88.9% 88,055
Mar 94.1% 88,720
Apr 91.8% 89,065
May 86.7% 89,065
Jun 88.9% 89,594
Jul 87.8% 89,723
Aug 90.5% 89,723
Sep 88.9% 89,723
Oct 91.4% 89,723
Nov 84.7% 89,723
Dec 79.9% 90,046
Jan 96 87.3% 90,046
Feb 92.4% 90,046
Mar 95.8% 90,266
Apr 94.8% 90,161
May 91.1% 91,720
Jun 90.1% 93,997
Jul 89.7% 94,056
Aug 93.2% 94,289
Sep 90.3% 95,092
Oct 92.9% 95,336
Nov 88.1% 94,776
Dec 78.7% 99,072
<PAGE>
HVS International, Mineola, New York Lodging Supply and Demand Analysis 5
The following table presents the most recent market trends for
the Las Vegas Strip ($72 million and over) market.
Las Vegas Strip ($72 million and over) - Lodging Statistics
<TABLE>
<CAPTION>
Fiscal Year Occupancy % Change Average Rule % Change REVPAR % Change
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1990 90.6% --- $62.74 --- $56.81 ---
1991 89.0 (1.7)% 58.83 (6.2)% 52.35 (7.9)%
1992 89.9 1.0 57.32 (2.6) 51.51 (1.6)
1993 92.8 3.2 61.63 7.5 57.16 11.0
1994 95.5 3.0 66.20 7.4 63.25 10.6
1995 94.1 (1.6) 74.61 12.7 70.17 10.9
1996 94.8 0.8 79.19 6.1 75.05 7.0
Average Annual % Change 0.8% 3.5% 4.3%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
As evidenced, occupancy within this segment has only grown at
an annual average rate of 0.8%. However, the market has
experienced the largest increase in supply during this period.
Overall, occupancy levels are strong despite a moderate
decline in 1995. Average rates have grown at an average annual
rate of 3.5% since 1990, with the largest increase in 1995 at
12.7%. Revenue per available room (RevPAR) has increased at an
average annual rate of 4.3%, reflecting gains in both
occupancy and average rate. In addition, RevPAR has grown
significantly since 1993, when the new mega-resorts began to
open.
Demand
Segmentation Similar to our analysis of gaming demand, lodging demand
within the Las Vegas market is generally classified into four
major segments: leisure, casino, convention, and wholesale.
The leisure segment is characterized by individuals and
families drawn to the Las Vegas area for purposes of gaming,
tourism, and recreation. In that leisure segment guests are
price sensitive, this demand is often attracted by promotional
activities that feature a high price-value relationship. This
demand peaks on weekends, in the summer, and during holiday
periods.
The casino segment generally consists of those patrons
classified as "casino-invited guests." A casino-invited guest
can range from a rated slot player to a "high roller."
Casino-invited guests are targeted by marketing campaigns and
usually "comped" (given complimentary rooms, food, and/or
beverages) in return for specific levels of casino play. The
casino segment usually accounts for 25% to 50% of a casino
hotel's total accommodated room nights.
The convention segment includes citywide conventions,
meetings, and trade association shows. Given the size and high
price-value of the Las Vegas Convention
<PAGE>
HVS International, Mineola, New York Lodging Supply and Demand Analysis 6
Center, Las Vegas is home to some of the largest conventions
and trade shows in the nation. The average length of stay for
a typical convention ranges from three to five days.
Room night demand generated by the wholesale market typically
consist of a block of rooms sold by the casino hotel to an
outside wholesaler at a lower rate ensuring a base occupancy
level. The wholesaler packages the room with other amenities
and charges a premium, profiting on the spread. Room blocks
allocated to wholesalers will vary depending on the season and
the day of the week.
Competition An integral component of the supply and demand relationship
that has a direct impact on the availability of lodging demand
is the current and anticipated supply of competitive lodging
facilities.
Based on our evaluation of the market orientation, location,
facilities, and amenities of the area's casino hotels, we have
identified five properties that will compete most directly
with the Proposed Aladdin Hotel and Casino. However, given the
highly competitive nature of the Las Vegas market, the subject
property competes indirectly with all casino hotels to some
degree.
The following chart describes the characteristics pertinent to
the subject property and each of its competitors, including
number of rooms, casino square footage, meeting space, and
estimates of their 1996 market segmentation, occupancy,
average rate.
<PAGE>
HVS International, Mineola, New York Lodging Supply and Demand Analysis 7
Competitive Review
<TABLE>
<CAPTION>
Estimated 1996 Segmentation
---------------------------------------------------------
Casino
Number Square Meeting
Property of Rooms Footage Space S.F. Leisure Casino Convention Wholesale
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Mirage 3,044 95,900 71,000 30.0% 40.0% 20.0% 10.0%
Caesars 1,400 118,000 100,000 20.0 40.0 30.0 10.0
MGM 5,005 171,500 50,000 20.0 40.0 20.0 20.0
Luxor 4,425 120,000 20,000 20.0 30.0 20.0 30.0
Treasure Island 2,891 82,000 16,000 30.0 40.0 20.0 10.0
----- ------ ------ ---- ---- ---- ----
Total/Avg 16,765 587,400 257,000 24.0% 38.0% 22.0% 16.0%
<CAPTION>
Estimated 1996
---------------------------------------------------------------------------------------
Occupancy Average Rate Yield
Property Occupancy Average Rate RevPAR Penetration Penetration Penetration
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Mirage 97.0% $130.00 $126.10 104.1% 115.0% 119.7%
Caesars 91.0 130.00 118.30 97.6 115.0 112.3
MGM 92.0 110.00 101.20 98.7 97.3 96.1
Luxor 92.0 95.00 87.40 98.7 84.1 83.0
Treasure Island 94.0 100.00 94.00 100.9 88.5 89.3$
---- ------ ----- ----- ---- -----
Total/Avg 93.2% $113.00 $105.32 100.0% 100.0% 100.0%
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
HVS International, Mineola, New York Lodging Supply and Demand Analysis 8
These properties compete for the mid-to upper-priced segment
of the leisure, casino, convention, and wholesale demand
segments. Overall, these properties attained an occupancy of
93.2% and an average rate of $113 in 1996. The occupancy and
average rate leader was the Mirage (97% and $130), with
Caesars Palace obtaining a similar average rate at a lower
occupancy (91%). All of the properties listed obtained
occupancies above the 90% level and an average rate above
$100, with the exception of the Luxor with an average rate of
$95. The Luxor's average rate was below those of the other
competitors primarily due to the owners' (Circus Circus),
philosophy of selling rooms at a steep discount to maximize
casino traffic.
Additions to Similar to the additions to supply discussed in the "Gaming
Supply Supply and Demand Analysis" section of this report, we believe
the proposed mega-resorts slated for opening over the next
several years will compete for lodging demand with the subject
property. The following is a list of these properties.
Additions to Supply - Las Vegas Strip ($72 million and over) market
Estimated
Cost Opening
Name/Location (millions) Operator Date Rooms
- --------------------------------------------------------------------
Bellagio 1,350.0 Mirage Resorts 4/1/98 3,005
Project Paradise 1,000.0 Circus Circus 10/1/98 3,800
Paris 750.0 Hilton 4/1/99 3,000
Venetian Phase I 1,800.0 Sheldon Adelson 6/1/99 3,000
Venetian Phase II -- Sheldon Adelson 1/1/00 3,000
New York - New York 460.0 MGM Grand 1/1/97 2,035
-------- ------
Total $5,360.0 17,840
Source: Las Vegas Convention and Visitors Authority
- --------------------------------------------------------------------------------
As with gaming, the subject property is not expected to
compete directly with the Bellagio and Project Paradise for
lodging demand, due to these properties' high-end
orientations. However, Hilton's Paris project and the Venetian
project are expected to compete primarily with the proposed
Aladdin Hotel and Casino.
Lodging As mentioned throughout this study, Las Vegas is a one of the
Seasonality top leisure destination markets in the world. In addition, Las
Analysis Vegas is a leading convention market, hosting several of the
nation's largest conventions and trade shows each year at the
Las Vegas Convention Center. Reflecting the market's leisure
orientation and large-scale conventions, demand and pricing
levels fluctuate materially depending on the season, the level
of convention activity, and between weekend and mid-week
periods. Further, demand peaks during holiday periods and
throughout the year over the course of various special events
such as high-profile boxing matches, rodeos, and other
sporting events.
<PAGE>
HVS International, Mineola, New York Lodging Supply and Demand Analysis 9
Our fieldwork and research indicate that the subject
property's attainable occupancy level is a function of
management's ability to attract and accommodate demand already
present in the market, as well as capture demand induced by
the new mega-resorts opening in the next few years. Successful
penetration into the market is dependent on several factors
including:
The overall quality of the subject's physical improvements,
including the exterior, interior design and layout, and room
design and layout;
The appeal and acceptance of the property's theme;
Access to the property, including egress and ingress from Las
Vegas Boulevard, and available parking;
Promotional programs and public relations exposure;
Targeted marketing programs; and
Appropriate segmented pricing strategy.
A seasonality model forecasts the overall occupancy of a
lodging property based on attainable occupancy levels during
specific periods of demand prevalent over the course of a
typical year. Weekend and mid-week days are categorized as
belonging to one of the four periods: peak, non-peak,
city-wide convention, and special-event. Once demand levels
are assessed, the subject's market mix is projected, resulting
in a forecast of accommodated room nights by market segment.
The subject property's average rate is then forecast based on
a segmented pricing strategy.
To derive a forecast of occupancy for the subject property, a
seasonality analysis is performed. The first step in
performing a seasonality analysis is to define the different
periods of demand prevalent within the market. For the purpose
of this analysis we have divided the year into the following
three seasons: peak, shoulder, and off. Further, we have
segmented the three seasons by weekend and mid-week,
reflecting the weekly fluctuations in demand. The
corresponding occupancy level for each demand period is then
multiplied by the subject property's total number of available
rooms to derive the number of occupied room nights during each
demand period.
Occupied Room Nights: Peak Weekend = (2,600 x 99.0% =
2,574)
The number of days within each demand period by month is
estimated and then multiplied by the calculated number of
occupied room nights for the corresponding demand period.
Occupied Room Nights: Peak Weekends in January = (3 x
2,574 = 7,722)
This calculation is performed for each demand period, and the
results are totaled. The total number of occupied room nights
is then divided by the total number of available room nights
to arrive at the monthly weighted average occupancy level.
<PAGE>
HVS International, Mineola, New York Lodging Supply and Demand Analysis 10
The monthly totals are then summed to arrive at an annual
estimate of occupied room nights, which is divided by the
annual number of available rooms equating to the subject
property's annual occupancy figure.
The total occupied room nights by month are then multiplied by
the corresponding market mix percentages, and summed together,
to arrive at the annual market mix for the property.
Occupancy by The first process in deriving annual occupancy is to estimate
Season the occupancy level the subject property is likely to achieve
on weekend and mid-week days during the peak and non-peak
seasons and throughout special event and convention demand
periods.
In order to gauge demand fluctuations between the peak and
non-peak seasons, a review of monthly operating statistics was
performed. The following table presents monthly marketwide
occupancy levels by total properties, hotels, motels,
mid-week, and weekend for 1995 and 1996, as published by the
Las Vegas Convention and Visitors Authority.
<PAGE>
HVS International, Mineola, New York Lodging Supply and Demand Analysis 11
Marketwide Occupancy by Month - Las Vegas, NV
<TABLE>
<CAPTION>
1995 1996
------------------------------------------ ------------------------------------------
Month Total Hotel Motel Mid-week Weekend Total Hotel Motel Mid-week Weekend
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January 82.6% 86.1% 66.7% 78.0% 92.1% 87.3% 90.8% 71.0% 84.8% 93.5%
February 88.9 91.9 75.5 85.8 95.6 92.4 94.7 81.7 90.3 97.1
March 94.1 96.0 85.4 92.9 97.1 95.8 97.8 86.6 94.7 98.2
April 91.8 95.1 76.6 90.0 95.9 94.8 97.4 82.7 93.8 97.5
May 86.7 90.2 70.6 83.3 94.9 91.1 94.7 74.1 88.8 96.1
June 88.9 92.7 71.7 86.9 93.8 90.1 93.8 72.1 88.2 94.5
July 87.8 91.5 70.5 86.5 91.1 89.7 92.9 73.9 88.3 92.6
August 90.5 93.8 74.9 89.1 94.6 93.2 96.1 79.1 92.6 94.5
September 88.9 92.3 73.0 86.4 93.4 90.3 93.2 76.1 88.3 94.8
October 91.4 94.3 77.8 89.4 97.2 92.9 95.7 79.4 91.1 98.0
November 84.7 88.6 65.9 81.6 91.9 88.1 91.0 74.2 86.5 90.9
December 79.9 84.1 60.5 77.4 84.0 78.7 83.1 57.6 76.5 85.0
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Average 88.0% 91.4% 72.4% 85.6% 93.5% 90.4% 93.4% 75.7% 88.7% 94.4%
</TABLE>
Source: Las Vegas Convention and Visitors Authority
- --------------------------------------------------------------------------------
As noted, occupancy levels generally peak in March, April,
May, August, and October before dropping in November,
December, and January. The difference between the high and low
monthly occupancies, which was 17 percentage points in 1996,
is low compared to other leisure destinations. Occupancy
levels in Las Vegas are higher during the weekend periods,
which is defined as Friday night and Saturday. As evidenced,
the spread between weekend and mid-week occupancy was 5.7
percentage points in 1996. The fluctuations in marketwide
demand on a weekly and seasonal basis mirror the anticipated
results of the subject property. The following table presents
our projections of the subject property's attainable occupancy
level in each demand period.
Projection of Seasonal Occupancy Levels
2000 2001
Estimated Estimated
Demand Period Occupancy % Occupancy %
-------------------------------------------------------------
Peak Weekend 99.0% 99.0%
Peak Mid-week 94.0 94.0
Non-Peak Weekend 89.0 89.0
Non-Peak Mid-week 82.0 82.0
Convention 94.0 94.0
Special Event 99.0 99.0
-------------------------------------------------------------
Peak demand within the subject's market area occurs primarily
during the months of March, April, May, August, and October.
Peak weekend and mid-week occupancy
<PAGE>
HVS International, Mineola, New York Lodging Supply and Demand Analysis 12
rates of 99% and 94%, respectively, have been deemed
attainable, given existing levels of unaccommodated and
accommodated demand in the market. In addition, the subject
property, through public relations and advertising, will
induce a significant portion of demand. Fluctuations in the
non-peak season are commensurate with weather conditions and
demand softens through September, November, December, January,
and February. During this period, demand is estimated to vary
between weekend and mid-week by approximately 10%, with an
attainable weekend occupancy estimated to be 89%, and an
attainable mid-week occupancy of 82%. We have estimated the
subject property to attain an average occupancy of 94% during
citywide conventions and 98% during special events. For the
purpose of this analysis we have included the top three
citywide conventions, COMDEX, the Consumer Electronics Show,
and National Association of Broadcasters, as special events.
Estimated Demand The second process involves identifying each demand period by
Periods day over the course of a year. For the purpose of this
analysis we have utilized convention booking and special event
reports published by the Las Vegas Convention and Visitors
Authority to estimate the number of citywide convention days
and special events. Peak and non-peak days have been estimated
based on monthly trends and our conversations with local
operators.
Market The following projected market segmentation has been estimated
Segmentation based on the current trends prevalent in the local area and
our estimates of demand which the property will induce. The
objective of a traditional hotel casino is to obtain an
optimal demand mix throughout the year that will increase the
overall utilization of the casino. As such, we have utilized a
stabilized demand mix throughout the year. The following chart
sets forth an estimate of the market segmentation by month for
the proposed Aladdin Hotel and Casino.
<PAGE>
HVS International, Mineola, New York Lodging Supply and Demand Analysis 13
Estimated Market Segmentation by Month - Proposed Aladdin Hotel and Casino
2000 Market Segmentation
--------------------------------------
FIT Casino Wholesale Group
--------------------------------------------------
January 30.0% 30.0% 20.0% 20.0%
February 30.0 30.0 20.0 20.0
March 30.0 30.0 20.0 20.0
April 30.0 30.0 20.0 20.0
May 30.0 30.0 20.0 20.0
June 30.0 30.0 20.0 20.0
July 30.0 30.0 20.0 20.0
August 30.0 30.0 20.0 20.0
September 30.0 30.0 20.0 20.0
October 30.0 30.0 20.0 20.0
November 30.0 30.0 20.0 20.0
December 30.0 30.0 20.0 20.0
---- ---- ---- ----
Average 30.0% 30.0% 20.0% 20.0%
--------------------------------------------------------------
As shown the subject property is expected to receive a
majority of its lodging demand from the FIT and casino invited
guest segments. This is typical of a hotel casino offering the
high quality product and amenities package of the subject. The
following table shows the forecast of the subject property's
occupancy based on the preceding analysis.
<PAGE>
HVS International, Mineola, New York Lodging Supply and Demand Analysis 14
Occupancy Forecast - Proposed Aladdin Hotel and Casino
<TABLE>
<CAPTION>
2000 Estimated Days of Each Type
-------------------------------------------------------------
Peak Peak Non-Peak Non-Peak Special Nights Room
Month Weekend Mid-week Weekend Mid-week Convention Event Available Nights Occupancy
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January 3 0 3 11 6 8 80,600 73,372 91.0%
February 2 7 2 3 10 4 72,800 68,016 93.4
March 4 17 0 0 5 5 80,600 76,934 95.5
April 4 13 0 1 4 8 78,000 74,568 95.6
May 6 12 0 0 6 7 80,600 77,454 96.1
June 8 19 0 0 3 0 78,000 74,360 95.3
July 8 9 0 11 0 3 80,600 73,762 91.5
August 8 15 0 0 8 0 80,600 76,804 95.3
September 2 6 4 7 7 4 78,000 71,396 91.5
October 10 13 0 4 4 0 80,600 75,816 94.1
November 0 0 6 16 0 8 78,000 68,588 87.9
December 0 0 6 16 0 9 80,000 71,162 88.3
- - - -- - - ------ ------ ----
Totals 55 111 21 69 53 56 949,000 832,232 93.0%
</TABLE>
<TABLE>
<CAPTION>
2000 Market Segmentation Segmented Room Nights
------------------------------------ ------------------------------------
Month Leisure Casino Wholesale Group Leisure Casino Wholesale Group
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
January 30.0% 30.0% 20.0% 20.0% 22,012 22,012 14,674 14,674
February 30.0 30.0 20.0 20.0 20,405 20,405 13,603 13,603
March 30.0 30.0 20.0 20.0 23,080 23,080 15,387 15,387
April 30.0 30.0 20.0 20.0 22,370 22,370 14,914 14,914
May 30.0 30.0 20.0 20.0 23,236 23,236 15,491 15,491
June 30.0 30.0 20.0 20.0 22,308 22,308 14,872 14,872
July 30.0 30.0 20.0 20.0 22,129 22,129 14,752 14,752
August 30.0 30.0 20.0 20.0 23,041 23,041 15,361 15,361
September 30.0 30.0 20.0 20.0 21,419 21,419 14,279 14,279
October 30.0 30.0 20.0 20.0 22,475 22,475 15,163 15,163
November 30.0 30.0 20.0 20.0 20,576 20,576 13,718 13,718
December 30.0 30.0 20.0 20.0 21,349 21,349 14,232 14,232
---- ---- ---- ---- ------ ------ ------ ------
Totals 30.0% 30.0% 20.0% 20.0% 264,670 264,670 176,446 176,446
</TABLE>
<PAGE>
HVS International, Mineola, New York Lodging Supply and Demand Analysis 15
We have forecast a stabilized occupancy level of
93% in 2000. The stabilized occupancy is intended
to reflect the anticipated results of the property
over its remaining economic life, given any and
all changes in the life cycle of the property.
Thus, the stabilized occupancy excludes from
consideration any abnormal relationships between
supply and demand, as well as any nonrecurring
conditions that may result in unusually high or
low occupancies. Although the subject property may
operate at occupancies above this stabilized
level, we believe it equally possible for new
competition and temporary economic downturns to
force the occupancy below this selected point of
stability.
Average Rate Forecast Average rate is more formally defined as the
average rate per occupied room, and is calculated
by dividing the total rooms revenue achieved
during a specified period by the number of rooms
sold during the same period. Where occupancy is a
measure of rooms volume, average rate is a measure
of price, and the two together equate to total
rooms revenue. Although the average rate analysis
presented here follows the occupancy analysis,
these two statistics are highly correlated; in
reality, occupancy cannot be projected without
specific assumptions being made about average
rate.
Our forecast of average rate is based upon the
most probable rate attainment for the subject
property (segmented by demand period) and
projected growth rates applied to this indicator.
The following table presents the subject
property's estimated average rate levels by market
segment and demand period for the first projection
year, 2000. The segmented rate projections have
been deflated to year-end 1996 in order to compare
our forecast to the actual operating results of
the competitive properties.
<PAGE>
HVS International, Mineola, New York Lodging Supply and Demand Analysis 16
Estimated Average Rate by Segment and Period
<TABLE>
<CAPTION>
Base Year Segmented Rate Assumptions
-------------------------------------------
Annual Deflated
Demand Period FIT Casino Wholesale Group Average ADR (1996)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Peak Weekend $175.00 $150.00 $125.00 $140.00 $150.00 $133.72
Peak Mid-week 140.00 125.00 100.00 110.00 121.50 107.95
Non-Peak Weekend 110.00 100.00 85.00 90.00 98.00 87.07
Non-Peak Mid-week 95.00 85.00 80.00 85.00 87.00 77.30
Convention 200.00 150.00 120.00 160.00 161.00 143.05
Special Event 250.00 200.00 180.00 185.00 208.00 184.81
------- ------- ------- -------
Annual Average $160.63 $134.90 $114.30 $127.41
Deflated ADR (1996) $142.72 $119.86 $101.56 $113.20
Total Average Rate $137.00
Deflated ADR (1996) $121.73
</TABLE>
- --------------------------------------------------------------------------------
In positioning the average rate of the subject
property in 1996 dollars, we assume that the hotel
will be constructed in a first-class manner and
that the property will achieve an occupancy level
slightly below that of the current competitive
market. Based on this premise, and considering the
benefits of the subject property's theme and
amenities package, we have conservatively
positioned the average rate of the subject
property at $137.00, or $121.73 in 1996 dollars.
This represents an average rate above that of the
competitive market ($113) but below that of the
Mirage and Caesars Palace ($130). Although the
subject property may attain a higher average rate,
it is also possible that increased capacity in the
market may result in a lower level.
As indicated in the table, the FIT segment is
projected to command the highest average rates
throughout the entire year. The wholesale segment
is projected to achieve the lowest average rate.
As discussed, the degree to which a casino will
discount and its complimentary policy are
commensurate with the competitiveness of the
market and the target market. The group and casino
segments have been priced according to the type
and amount of group and casino demand that will
likely be pursued. Citywide conventions and
special event periods are priced to maximize rate
without gouging the consumer.
<PAGE>
HVS International, Mineola, New York Lodging Supply and Demand Analysis 17
Average Rate Growth
Because average rates are affected by market
conditions such as the relationship between supply
and demand, increases do not necessarily mirror
the underlying monetary inflation rate. A hotel's
ability to raise room rates is affected by a
number of factors, including the following.
Supply and Demand Relationships - The relationship between supply and demand is
one of the factors that determine hotel occupancies and average rates. Strong
markets where lodging demand is increasing faster than supply are often
characterized by rate growth that exceeds inflation. Markets that are overbuilt
or suffering from declining demand are unlikely to exhibit any significant
increases in average rates.
Inflationary Pressures - Price increases caused by inflation affect hotel room
rates by eroding profit margins and encouraging operators to raise prices. This
strategy is effective only in markets that are characterized by a healthy supply
and demand relationship.
Improving the Competitive Standard - When a new facility enters a mature market,
its rates may be set higher than the marketwide average in an effort to justify
the development costs. This may allow other competitors to achieve corresponding
gains by effectively raising the amount the market will bear. However, if the
addition to supply has a severe impact on the occupancy levels of other hotels,
price competition may ensue.
Property-Specific Improvements - Changes that make a hotel more or less
attractive to guests can have an impact on average rate. An expansion,
renovation, upgrading, or the introduction of additional facilities and
amenities may enable greater-than-inflationary room rate increases. Likewise,
deferred maintenance may make a property less competitive, engendering a decline
in room rates.
In determining average rate projections, changes
that occur prior to occupancy stabilization are
generally attributable to factors that are
specific to the property and the market. After a
hotel achieves a stabilized occupancy, room rates
are generally expected to continue to increase at
the underlying inflation rate throughout the
remainder of the projection period.
Based on the topics discussed previously, as well
as the historical performance of the Las Vegas
hotel market, we believe average rate growth for
the subject will mirror the rate of inflation
throughout the projection period. As such, average
rates have been forecast to increase by 3.0% per
year for all segments.
Projection of The following chart summarizes our forecast of
Occupancy and occupancy and average rate for the proposed
Average Rate Aladdin Hotel and Casino.
Forecast of Occupancy and Average Rate
<PAGE>
HVS International, Mineola, New York Lodging Supply and Demand Analysis 18
2000
--------------------------------------------
Calendar Year Occupancy 93.0%
Calendar Year Average Rate $137.00
--------------------------------------------------
We have chosen a stabilized occupancy and average
rate level of 93.0% and $137, respectively, in
2000. The subject property's anticipated
stabilized occupancy and average rate reflect the
following key benefits and risks.
The outlook for the Las Vegas lodging market is strong, and the health of the
regional economy is likely to support further increases in demand as allowed by
increases in supply.
The subject site is located in a prime location of the Las Vegas Strip.
The risks of future supply-side expansion are significant. Were the barriers to
entry greater, a higher stabilized occupancy and average rate could reasonably
be supported.
<PAGE>
xxxxx
HVS International, Mineola, New York Income Capitalization Approach 1
11. Income Capitalization Approach
The income capitalization approach is based on the
principle that the value of a property is indicated by the
net return to the going concern or what is also known as
the present worth of future benefits. The future benefits
from income-producing properties, such as casinos, casino
hotels, hotels, and motels, are the net income before debt
service and depreciation, derived from a forecast of
income and expense. These future benefits can then be
converted into an indication of market value through a
mortgage equity capitalization process and a traditional
discounted cash flow analysis.
Using the income capitalization approach, we have
estimated the subject property's market value. Based on an
analysis of the Las Vegas Strip ($72 million and over)
gaming market's existing and proposed gaming supply,
followed by an examination of regional and local demand
trends, we have developed a forecast of income and expense
that reflects current and future anticipated income
trends, as well as area cost components, up through a
stabilized year of operation.
The forecast of income and expense is expressed in current
dollars as of the date of each forecasted year. The last
forecasted year, or what is referred to as the stabilized
year, is intended to reflect the anticipated operating
results of the property over its remaining economic life,
given any and all applicable stages of build-up, plateau,
and decline in the life cycle of the gaming property.
Therefore, such income and expense estimates from the
stabilized year forward exclude from consideration any
abnormal relation of supply and demand, and also any
transitory or nonrecurring conditions which may result in
unusual revenue or expenses of the property.
As stated in the textbook entitled Hotels and Motels: A
Guide to Market Analysis, Investment Analysis, and
Valuations, published by the Appraisal Institute, "of the
three valuation approaches available to the appraiser, the
income capitalization approach generally provides the most
persuasive and supportable conclusions when valuing a
lodging facility." This text notes that using a 10-year
forecast and an equity yield rate "most accurately
reflects the actions of typical hotel buyers, who purchase
properties based on their leveraged discounted cash flow."
The simpler procedure of using a 10-year forecast and a
discount rate is "less reliable because the derivation of
the discount rate has little support. Moreover, it is
difficult to adjust the discount rate for changes in the
cost of capital."(8) These same principles apply to the
valuation of gaming properties due to the labor-intense
nature of the entities.
------------
(8) Hotels and Motels: A Guide to Market Analysis,
Investment Analysis, and Valuations, Stephen
Rushmore, Appraisal Institute, Chicago, IL, 1992,
p. 236.
<PAGE>
HVS International, Mineola, New York Income Capitalization Approach 2
The subject property has been valued using both a
traditional 10-year discounted cash flow analysis and a
10-year discounted cash flow analysis in which the cash
flow to equity and the equity reversion are discounted to
the present value at the equity yield rate and the income
to the mortgagee is discounted at a mortgage interest
rate. The sum of the equity and mortgage values is the
total property value.
To convert the forecasted income stream into an estimate
of value, the anticipated net income (before debt service
and depreciation) is allocated to the mortgage and equity
components based on market rates of return and
loan-to-value ratios. The total of the mortgage component
and the equity component equals the value of the property.
The process of estimating the value of the mortgage and
equity components is described as follows.
1. The terms of typical gaming property investors
financing are set forth, including interest rate,
amortization term, and loan-to-value ratio.
2. An equity yield rate of return is established.
Many gaming property investors base their equity
investments on a 10-year equity yield rate
projection that takes into account ownership
benefits such as periodic cash flow distributions,
residual sale or refinancing distributions that
return any property appreciation and mortgage
amortization, income tax benefits, and various
non-financial considerations such as status and
prestige. The equity yield rate is also known as
the internal rate of return on equity.
3. The value of the equity component is calculated by
first deducting the annual debt service from the
projected net income before debt service, leaving
the net income to equity for each projection year.
The net income as of the 11th year is capitalized
into a reversionary value. After deducting the
mortgage balance at the end of the 10th year and
the typical brokerage and legal costs, the equity
residual is discounted back to the date of value
at the equity yield rate. The net income to equity
for each of the 10 projection years is also
discounted to the present value. The sum of these
discounted values equates to the value of the
equity component. Adding the equity component to
the initial mortgage balance yields the overall
property value.
Because the mortgage and the debt service amounts
are unknown but the loan-to-value ratio was
determined in step #1, the preceding calculation
can be solved through an iterative process or by
use of a linear algebraic equation that computes
the total property value. The algebraic equation
that solves for the total property value using a
ten-year mortgage/equity technique was developed
by Suzanne R. Mellen, CRE, MAI, managing director
of the San Francisco office of HVS International.
A complete
<PAGE>
HVS International, Mineola, New York Income Capitalization Approach 3
discussion of the technique is presented in her
article entitled, "Simultaneous Valuation: A New
Technique."(9)
4. The value is proven by allocating the total
property value between the mortgage and equity
components and verifying that the rates of return
set forth in steps #1 and #2 can be met from the
forecasted net income.
Comparable In the forecast of income and expense, presented later in
Income and this section, the composite statements will be utilized as
Expense Statements a basis of comparison to ascertain the reasonableness of
our forecast where applicable.
We have presented a composite statement of casino hotels
located within the Las Vegas Strip ($72 million & over)
market as compiled by the Nevada Gaming Control Board and
published in the Nevada Gaming Abstract, 1995 and 1996.
Historical Statements of Income and Expense - Proposed Aladdin Hotel and Casino
----------
(9) Suzanne R. Mellen. "Simultaneous Valuation: A New
Technique," Appraisal Journal, April, 1983.
<PAGE>
HVS International, Mineola, New York Income Capitalization Approach 4
<TABLE>
<S> <C> <C>
Fiscal Year 1996 1995
Location Las Vegas Strip Las Vegas Strip
Number of Locations 19 19
Number of Rooms 45,291 44,490
Occupancy 94.8% 94.1%
Average Rate $79.19 $74.61
Occupied Rooms 15,666,731 15,272,638
<CAPTION>
(000s) % Gross PAR(1) POR(2) (000s) % Gross PAR(1) POR(2)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues
Gaming $3,194,527 52.6% $70,533 $203.91 $3,086,131 53.6% $69,367 $202.07
Rooms 1,240,619 20.4 27,392 79.19 1,139,558 19.8 25,614 74.61
Food 656,570 10.8 14,497 41.91 632,475 11.0 14,216 41.41
Beverage 277,885 4.6 6,136 17.74 273,743 4.8 6,153 17.92
Other Income 700,428 11.5 15,465 44.71 621,797 10.8 13,976 40.71
---------- ---- ------- ------ ---------- ---- ------- ------
Total Revenues 6,070,029 100.0 134,022 387.45 5,753,705 100.0 129,326 376.73
Departmental Expense *
Casino 1,826,188 57.2 40,321 116.56 1,768,141 57.3 39,742 115.77
Rooms 451,921 36.4 9,978 28.85 430,029 37.7 9,666 28.16
Food 678,850 103.4 14,989 43.33 669,096 105.8 15,039 43.81
Beverage 183,764 66.1 4,057 11.73 182,125 66.5 4,094 11.92
Other Income 427,180 61.0 9,432 27.27 422,055 67.9 9,487 27.63
---------- ---- ------- ------ ---------- ---- ------- ------
Total Departmental Exp 3,567,904 58.8 78,777 227.74 3,471,445 60.3 78,028 227.30
Departmental Income 2,502,125 41.2 55,245 159.71 2,282,260 39.7 51,298 149.43
Undistributed Operating Expenses
Administrative and General 663,174 10.9 14,642 42.33 640,544 11.1 14,397 41.94
Marketing 90,967 1.5 2,008 5.81 89,770 1.6 2,018 5.88
Energy 88,971 1.5 1,964 5.68 89,844 1.6 2,019 5.88
Complimentary/Promotions 40,152 0.7 887 2.56 35,979 0.6 809 2.36
Entertainment 63,314 1.0 1,398 4.04 55,473 1.0 1,247 3.63
---------- ---- ------- ------ ---------- ---- ------- ------
Total 946,577 15.6 20,900 60.42 911,611 15.8 20,490 59.69
House Profit 1,555,549 25.6 34,345 99.29 1,370,649 23.8 30,808 89.75
Fixed Charges
Property Tax 46,350 0.8 1,023 2.96 45,238 0.8 1,017 2.96
Rent of Premises 18,157 0.3 401 1.16 17,638 0.3 396 1.15
Equipment Lease 3,162 0.1 70 0.20 7,811 0.1 176 0.51
---------- ---- ------- ------ ---------- ---- ------- ------
Total 67,670 1.1 1,494 4.32 70,687 1.2 1,589 4.63
Net Income $1,487,879 24.5% $32,851 $94.97 $1,299,962 22.6% $29,219 $85.12
========== ==== ======= ====== ========== ==== ======= ======
Food as a % of Gaming Revenue 20.6% 20.5%
Beverage as a % of Gaming Revenue 8.7 8.9
Other Income as a % of Gaming Revenue 21.9 20.1
</TABLE>
* Departmental expenses expressed as a percentage of departmental revenues
(1) Per Available Room
(2) Per Occupied Room
Sources: Nevada Gaming Abstract, State Gaming Control Board HVS Gaming Services
- --------------------------------------------------------------------------------
<PAGE>
HVS International, Mineola, New York Income Capitalization Approach 5
As shown, the Las Vegas Strip ($72 million and over)
market has shown increasing profitability over the past
two years. Specifically house profit equated to 25.6% of
total revenue in 1996, up from 23.8% of total revenue in
1995. Similarly, net income increased from 22.6% of total
revenue in 1995 to 24.5% of total revenue in 1996. The
increased profitability of the Las Vegas Strip ($72
million and over) market is attributable to overall
revenue increases as well as decreases in departmental and
undistributed operating expenses. Revenue increases from
1995 to 1996 were spurred by a 3.5% increase in gaming
revenue and a 8.9% increase in rooms revenue. The rooms
revenue increase was achieved through a 6.1% increase in
average rate and a minimal increase in occupancy.
Departmental expenses ratios were pared from 60.3% of
departmental income in 1995 to 58.8% in 1996, while
undistributed operating expenses decreased minimally from
15.8% of total revenue to 15.6% of total revenue.
In addition, we have investigated the performance of
several of the larger casino companies operating within
the Las Vegas Strip ($72 million and over) market. The
following chart details operating expense ratios for these
selected companies.
Casino Department Expenses, Selected Properties Las Vegas Strip ($72 million and
over)
Casino Expenses Rooms Expenses Food & Beverage Expenses
----------------- ---------------- ------------------------
1996 1995 1996 1995 1996 1995
----------------- ---------------- ------------------------
Mirage 51.% 49.5% 29.2% 30.% 63.% 50.%
Circus Circus 46.1 41.5 39.6 39.6 95.4 93.7
Hilton 54.4 50.6 N/A N/A N/A N/A
Caesars 57.4 51.4 35.7 35.7 89.9 114.3
Source: Individual Company 10K Reports
- --------------------------------------------------------------------------------
These ratios will also be used as a basis for forecasting
the subject property's expense levels.
Inflation Analysis To forecast income and expense levels, we must establish a
general rate of inflation. The following table shows how
the consumer price index for the urban consumer, all
items, has changed in the Western United States between
1990 and 1996 (data specific to Las Vegas were not
available).
<PAGE>
HVS International, Mineola, New York Income Capitalization Approach 6
Consumer Price Index - Western United States Area
Consumer Percentage
Year Price Index Change
- -------------------------------------------------------------------------
1990 131.5 ---
1991 137.3 4.4%
1992 142.0 3.4
1993 146.2 3.0
1994 149.6 2.3
1995 153.5 2.6
1996 157.6 2.7
Average Annual % Change 1990-96: 3.1%
Source: Bureau of Labor Statistics
- --------------------------------------------------------------------------------
In consideration of these data and the trends of the last
three years, our assessment of probable property
appreciation levels, and the subject property's ability to
control costs, we have applied an underlying inflation
rate of 3.0% to all appropriate revenue and expense items.
This stabilized inflation rate takes into account normal,
recurring inflation cycles. Inflation is likely to
fluctuate above and below this level during the projection
period.
Fixed and In forecasting revenues and expenses for a gaming
Variable Component property, HVS International uses a fixed and variable
Analysis component model. The logic behind this model is based on
the premise that gaming property revenue and expenses have
a component that is fixed and another component that
varies directly with gaming volume and facility use.
Therefore, a projection can be made by taking a known
level of revenue or expense and calculating the fixed
component, as well as the variable portion. The fixed
component is then held at a constant level, while the
variable component is adjusted for the percentage change
in either the projected gaming/lodging volume or facility
use, which produces the known level of revenue or expense.
The following table illustrates the revenue and expense
categories that can be projected using this fixed and
variable component model. These percentages show the
portion of each category that is typically fixed and
variable. The last column describes the basis for
calculating the percentage of variability.
<PAGE>
HVS International, Mineola, New York Income Capitalization Approach 7
Range of Fixed and Variable Ratios
<TABLE>
<CAPTION>
Revenue and Expense Category Percent Fixed Percent Variable Index of Variability
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues
Food 0 - 30 % 70 - 100 % Gaming/Occ.
Beverage 0 - 30 70 - 100 Gaming/Food Rev.
Retail 10 - 40 60 - 90 Gaming/Occ.
Other Income 30 - 60 40 - 70 Gaming/Occ.
Departmental Expenses
Casino 60 - 90 10 - 40 Gaming
Rooms 50 - 70 30 - 50 Occupancy
Food and Beverage 35 - 60 40 - 65 Food & Bev. Rev.
Other Income 30 - 60 40 - 70 Other Income
Undistributed Operating Expenses
Administrative & General 65 - 85 15 - 35 Total Revenue
Marketing 65 - 85 15 - 35 Total Revenue
Property Operation & Maintenance 65 - 85 15 - 35 Total Revenue
Energy 65 - 85 15 - 35 Total Revenue
Complimentary/Promo 65 - 85 15 - 35 Total Revenue
Entertainment 60 - 80 20 - 40 Total Revenue
Management Fees 0 - 40 60 - 100 Gam./Total Revenue
Incentive Management Fees 0 100 EBITA
Fixed Expenses
Property Taxes 100 0 N/A
Insurance 100 0 N/A
Reserve for Replacement 0 100 Total Revenue
- ----------------------------------------------------------------------------------------------------------
</TABLE>
The forecast of revenue and expense is accomplished
through a step-by-step approach. Each category of revenue
and expense is estimated separately and combined at the
end in the final statement of income and expense.
Forecast of Income The following description sets forth the basis for the
and Expense forecast of income and expense for the subject property.
We anticipate that it will take three years for the
subject property to reach a stabilized level of operation.
The following text refers directly to the subsequent chart
where the forecast of income and expense is shown through
the 10-year holding period.
Revenues Gaming Revenue
As delineated in the "Forecast of Gaming Revenue" section
of the narrative, gaming revenue has been forecast through
the 10-year projection period based on a market
penetration model and reconciled with a WPUPD analysis.
Our forecast of gaming revenue reflects the historical
performance of the Las Vegas Strip ($72 million and over)
market and the anticipated performance and penetration of
the subject
<PAGE>
HVS International, Mineola, New York Income Capitalization Approach 8
property. Gaming revenues are anticipated to stabilize in
2002, and WPUPD rates are anticipated to increase at a
rate of 3.0% per year thereafter.
Rooms Revenue
Rooms revenue is determined by two variables: occupancy
and average room rate. In the section entitled "Lodging
Supply and Demand Analysis," we projected occupancy and
average rate for the subject property. The Proposed
Aladdin Hotel and Casino is expected to stabilize in the
first projection year at an occupancy of 93% and an
average daily rate of $137.00. From the stabilized year
forward, the average rate is forecast to increase at an
inflationary rate of 3.0% per year.
Food and Beverage Revenue
The subject property's food and beverage revenue will be
captured by eight food and beverage outlets, the various
beverage service areas located throughout the main casino
floor, and the property's roughly 75,000 square feet of
meeting space where banquet and catering charges will be
generated. Food revenue is anticipated to mirror changes
in gaming volume. Due to the subject property's Strip
location, the food and beverage outlets are anticipated to
draw only a moderate amount of patronage from the local
community. The ratio of food revenue to gaming win for the
Las Vegas Strip ($72 million and over) market equated to
20.6% in 1996, up from 20.5% in 1995. Based on these
results, as well as the proposed subject's high-quality
food and beverage outlets and amount of meeting space,
food revenue has been projected at 21.7% of gaming revenue
per year throughout the projection period. As mentioned,
food revenue is projected to remain commensurate with
gaming volume throughout the projection period.
Beverage revenue has been forecast at 9.1% of gaming win
per year throughout the projection period. This ratio
compares to the historical performance of the Las Vegas
Strip ($72 million and over) market, which recorded
beverage revenue at 8.7% of gaming win in 1996. Based on
the projected WPUPD rates, casino patrons' propensity to
consume beverages, and the complimentary service granted
to gamblers, these projections appear reasonable.
<PAGE>
HVS International, Mineola, New York Income Capitalization Approach 9
Telephone Income
Telephone revenue is not individually tracked by the State
Gaming Control Board; however, according to interviews
with area managers, as well as our experience in the
gaming and hotel industries, we have forecast telephone
revenue for the subject property at 1.3% of gaming win, or
2.9% of rooms revenue throughout the projection period.
Entertainment Income
The subject property will derive entertainment income from
the operation of its production show theater and the
Center for Performing Arts. The subject property's
production show is expected to have a 1,001 Arabian
Nights/Scheherazade theme, while the Center for Performing
Arts will continue to host Broadway Shows and mainstream
concerts. Based on the proposed quality of the subject
property's entertainment offerings, as well as interviews
conducted with area managers, we have forecast
entertainment income to equal 13.7% of gaming revenue per
year throughout the projection period.
Spa Income
As mentioned previously in this report, the subject
property will offer a +/-20,000-square-foot spa. The spa
will include massage service, a sauna, steam rooms, and
other pampering amenities. Based on our experience in the
gaming and hotel industries, we have forecast spa revenue
at 5.4% of gaming revenue per year throughout the
projection period.
Miscellaneous Income
Miscellaneous income at the subject property is expected
to be derived from card and dice sales, vending machines,
various gift shops and retail outlets, and ATMs. Based on
this, we have forecast miscellaneous income equal to
approximately 5.5% of gaming revenue per year throughout
the projection period. Note that in the composite
statement of casinos in the Las Vegas Strip ($72 million
and over) market, other income equated to 20.1% of gaming
revenue in 1995 and 21.9% in 1996. While this ratio is
higher than the ratio we have forecast for the subject
property, other income in the composite statement includes
telephone revenue, entertainment revenue, and other
ancillary revenues which we have forecast separately.
<PAGE>
HVS International, Mineola, New York Income Capitalization Approach 10
Departmental Expenses Casino Expense
Casino expense consists of items relating to the operation
and general upkeep of the casino areas, including the
table games and gaming devices. Salaries, wages, and
employee benefits account for a substantial portion of
this category. The wages paid to dealers and personnel
tend to be variable; however, they are offset by the
relatively fixed payroll for pit and slot supervisors, pit
and slot managers, the casino manager, casino cage
personnel, change personnel, and the casino host. Overall,
salaries, wages, and employee benefits are somewhat
dependent on management's scheduling and forecasting
abilities. Other casino expenses include gaming equipment
maintenance, gaming supplies, uniforms, and other
miscellaneous departmental operating expenses for the
casino and cage.
Casino expenses as a ratio to casino revenue for the Las
Vegas Strip ($72 million and over) market equated to 57.3%
of gaming revenue in 1995 and 57.2% of gaming revenue in
1996. In addition, the selected casino companies presented
previously reported casino expenses ranging from a low of
46.1% to a high of 57.4% in 1996.
Based on these results as well as the forecasted gaming
revenue levels for the subject property, we have forecast
casino expenses to equate to 50.7% of casino revenue per
year throughout the projection period.
Rooms Expense
Rooms expense consists of items relating to the sale and
upkeep of guestrooms and public space. Salaries, wages,
and employee benefits account for a substantial portion of
this category. Although the wages paid to maids and
housemen tend to be highly occupancy sensitive, they are
somewhat offset by the relatively fixed payroll for front
desk personnel, public area cleaners, the housekeeper, and
the assistant manager. The overall result is that
salaries, wages, and employee benefits are only moderately
occupancy sensitive. Commissions and reservation expenses
are usually based on room sales and are, therefore, highly
occupancy and rate sensitive. Linen, operating supplies,
other operating expenses, and uniforms are only slightly
affected by changes in volume and are classified as very
slightly occupancy sensitive.
The Las Vegas Strip ($72 million and over) composite rooms
expense ratio equated to 37.7% in 1995, decreasing to
36.4% in 1996. In addition, the selected casino companies
reported a range of rooms expenses of 29.2% to 39.6% in
1996. Given the forecasted level of rooms revenue at the
subject property and the comparable information, we have
forecast the proposed subject's rooms expenses at 33.0% of
rooms revenue per year throughout the projection period.
Food and Beverage Expenses
<PAGE>
HVS International, Mineola, New York Income Capitalization Approach 11
Food expense for the Las Vegas Strip ($72 million and
over) market has historically been quite high.
Specifically, food expenses equated to 105.8% and 103.4%
of food revenue in 1995 and 1996, respectively. Beverage
expenses within the market equated to 66.1% of beverage
revenue in 1996, down from 66.5% in 1995. Overall, food
and beverage expenses equated to 93.9% of food and
beverage revenue in 1995, decreasing to 92.3% in 1996. The
selected casino companies reported food and beverage
expense of between 63.5% of food and beverage revenues to
95.4% in 1996. Based on the aforementioned information, we
have forecast food expenses at 97.0% of food revenue and
beverage expenses at 64.0% of beverage revenue throughout
the projection period. This equates to an overall food and
beverage expense ratio of 87.2% per year, within the
comparable range.
Telephone Expense
Telephone expense has had been forecast to stabilize at
40.0% of telephone revenue and increase at an inflationary
rate of 3.0% per annum thereafter.
Entertainment Expense
As mentioned, the subject will generate entertainment
revenue from the production show and the Center for
Performing Arts. Given the high cost of producing shows in
Las Vegas and attracting Broadway shows and concert
headliners to the Center for Performing Arts, as well as
the labor-intensive nature of operating theaters, we have
forecast entertainment expenses at 90% of entertainment
revenues throughout the projection period.
Spa Expense
Similar to the theaters, spas are labor-intensive
operations which require staffing even during down-times.
As such, we have forecast spa expenses at 75% of spa
revenues throughout the projection period.
<PAGE>
HVS International, Mineola, New York Income Capitalization Approach 12
Miscellaneous Expense
Miscellaneous expense is made up of labor costs and the
costs of goods sold associated with the various retail
outlets. We have forecast miscellaneous expense at 75.0%
of miscellaneous revenue throughout the projection period.
Undistributed Administrative and General
Operating Expenses
Administrative and general expenses include items related
to the management and operation of the property such as
management salaries and wages, human resources, data
processing, collections, legal and consulting fees,
equipment leases, and other service fees. Most
administrative and general expenses are relatively fixed.
The exceptions are cash overages and shortages;
commissions on credit card charges; and credit and
collection charges, which are moderately affected by the
quantity of transactions or total revenue. Another
significant expense incurred by casino hotels is the cost
associated with surveillance.
Administrative and general expenses for the Las Vegas
Strip ($72 million and over) market equated to 11.1% of
total revenue in 1995, decreasing to 10.9% of total
revenue in 1996. We have projected administrative and
general expense to be approximately 10.5% of total revenue
per year throughout the projection period.
Marketing
The marketing category is unique in that all of the
expense items, with the exception of commissions, are
entirely controlled by management. Most gaming properties
establish an annual marketing budget which sets forth all
planned expenditures. If the budget is followed throughout
the period, total marketing expenses can be accurately
forecast. Although there is a lag period before results
are realized, marketing expenditures are unusual because
the benefits are often extended over a long period.
Depending on the type and scope of the advertising program
implemented, the lag time can be as short as a few weeks
or as long as several years. However, the positive results
of an effective marketing campaign tend to linger, and a
property often enjoys the benefits of a concentrated sales
effort for many months.
The comparable statement of income and expense presented
earlier shows marketing expenses equating to 1.5% of total
revenues in 1996, down from 1.6% of total revenues in
1995. We have forecast marketing expenses for the subject
property at 1.7% of total revenues in the first projection
year, stabilizing at 1.5% of total revenue per year
thereafter. The higher expense ratio in the first
projection year is due to the increased marketing costs
associated with opening a new hotel casino property.
<PAGE>
HVS International, Mineola, New York Income Capitalization Approach 13
Property Operations and Maintenance
Property operations and maintenance (PO&M) is another
expense category that is largely controlled by management.
Except for repairs that are necessary to keep the facility
open and to prevent damage (e.g., plumbing, heating, and
electrical), most maintenance items can be deferred for
varying lengths of time. All expense items in this
category are relatively fixed. Maintenance is an
accumulating expense. If management elects to postpone
performing a required procedure, they have not eliminated
or saved the expenditure, they have only deferred payment
until a later date. We have forecast property operations
and maintenance expenses at 1.8% of total revenues, or
$3,867 per available room in the first projection year.
These expenses are forecast to increase to a stabilized
level of 2.1% of total revenues or $4,821 per available
room in the third projection year, increasing in line with
the underlying rate of inflation of 3.0% per year
thereafter. The lower property operations and maintenance
expenses forecast in the initial years are due to the
relative newness of the facility. Typically, new
properties incur lower maintenance expenses in the first
years of operation and are still covered by several
manufacturers' warranties.
Energy
As the casino is open 24 hours, the public areas are
continually lighted and heated or air conditioned. The
design and layout of a casino facility have a notable
impact on the level of energy expense it incurs.
Considering the subject's layout, design, and age, as well
as the cost of energy in the Las Vegas area, we have
forecast energy expense at 1.5% of total revenue or $3,247
per available room in the first projection year, with
inflationary gains anticipated thereafter. This forecast
is in line with the Las Vegas Strip ($72 million and over)
comparables presented earlier.
Complimentary and Promotion
We have projected the promotions expense at 0.6% of total
revenue, or roundly $3.6 million dollars in the first
projection year. Promotions expense is projected to
increase at an inflationary rate throughout the projection
period. The level of promotions expense reflects the
highly competitive market and the importance of promotions
for maintaining market share.
LCI Fee
As mentioned previously in this report, the subject
property will be jointly owned by Aladdin Holdings, LLC,
and London Clubs International (LCI). LCI is one of the
world's leading casino operators with seven casinos in
London, one in France, three in Egypt, and one in Lebanon.
In addition, they operate casinos on board three
<PAGE>
HVS International, Mineola, New York Income Capitalization Approach 14
cruise liners. According to the property's developers,
Aladdin Gaming, LLC, will employ LCI professionals to
operate the property's Salle Prive high-end casino. In
return for LCI's operations expertise, Aladdin will pay
LCI an incentive marketing and consulting fee. This fee is
based on the EBITDA generated by the Salle Prive. The
following chart dictates the terms of the agreement as
provided by the property's developers.
LCI Incentive Marketing and Consulting Fee
EBITDA Percentage Entitlement
-----------------------------------------------------------------
$0-$15M 10%
$15M-$17M 12.5
$17M-$20M 25
> $20M 50
- --------------------------------------------------------------------------------
The chart on the following page shows our estimation of
the Salle Prive EBITDA for the 10-year holding period.
<PAGE>
HVS International, Mineola, New York Income Capitalization Approach 15
Forecast of LCI Fees
<TABLE>
<CAPTION>
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Salle Prive Revenues* $73,157 $75,166 $77,421 $79,742 $82,135 $84,599 $87,138 $89,752 $92,445 $95,218
Salle Prive Expenses** 62,183 63,891 65,808 67,780 69,815 71,909 74,067 76,289 78,578 80,935
EBITDA 10,974 11,275 11,613 11,961 12,320 12,690 13,071 13,463 13,867 14,283
Terms
- ----------------------
10% up to 15M 1,097 1,127 1,161 1,196 1,232 1,269 1,307 1,346 1,387 1,428
12.5% 15M - 17M 0 0 0 0 0 0 0 0 0 0
25% 17M - 20M 0 0 0 0 0 0 0 0 0 0
50% 20M + 0 0 0 0 0 0 0 0 0 0
Total $ 1,097 $ 1,127 $ 1,161 $ 1,196 $ 1,232 $ 1,269 $ 1,307 $ 1,346 $ 1,387 $ 1,428
</TABLE>
* Based on 13% of total gaming revenue
** Based on 85% of Salle Prive revenue
- --------------------------------------------------------------------------------
<PAGE>
HVS International, Mineola, New York Income Capitalization Approach 16
As shown, LCI Revenue has been forecast based on 13% of
total revenue. According to the property's developers, the
LCI fee is based on all gaming and non-gaming revenue
generated by the Salle Prive, including the operation of
the Salle Prive exclusive restaurant. Salle Prive expenses
were forecast at 85% of revenues. This expense ratio
includes the increased marketing and complimentary costs
associated with operating a high-end casino. Overall, the
Salle Prive EBITDA is not forecasted to a reach a level
where higher incentive payments than the base 10% are due.
As such, LCI fees have been forecast at 10% of the Salle
Prive EBITDA per year, throughout the projection period.
Fixed Charges Property Taxes
According to the Clark County Assessor's Office, the
assessed value of the Proposed Aladdin Hotel and Casino
will be determined via the cost approach based on Marshall
& Swift cost estimates. According to the property's
developers, the construction cost of the subject property
excluding land costs is estimated at roundly $630,000,000.
In addition, we have estimated the land value of the
proposed subject property at $7.4 million per acre, or
roundly $134,400,000 for the +/-18.16 acre site. As such,
the total budgeted development cost for the subject
property equates to roundly $765,400,000. In addition,
Clark County assesses property at 35% of market value for
taxing purposes. As such, the forecasted taxable value of
the proposed Aladdin Hotel and Casino equates to roundly
$268,000,000. We have utilized a millage rate of 2.6% in
our analysis for the first period. Property taxes are
projected to increase at inflationary rates throughout the
projection period. The following table presents the
estimated first-year property tax burden of the subject
property.
Estimated Property Tax Burden - First Projection Year
Cost (000,000)
----------------------------------------------
Project Development $ 462.2
Financial and Other 168.8
Land Value 135.0
------------
Total $ 766.0
@ 35% assessment $ 268.1
Tax Rate 2.61%
------------
Taxes $ 6.99759
Say 7
- --------------------------------------------------------------------------------
Insurance Expense
<PAGE>
HVS International, Mineola, New York Income Capitalization Approach 17
The insurance expense category includes the cost of
insuring the building and its contents against damage or
destruction from fire, weather, sprinkler leakage, boiler
explosion, plate glass breakage, and so forth. Insurance
rates are based on many factors, including building design
and construction, fire detection and extinguishing
equipment, fire district, distance from fire house, and
the area's fire experience. Based on our experience in the
casino and hotel industries, we have forecast insurance
expense at a total of $1,188,000 in the first projection
year, or $457 per available room, with inflationary gains
projected thereafter.
EBITDA Margin As evidenced in the following income and expense
statements, we project that earnings before interest,
taxes, depreciation, and amortization (EBITDA) will equate
to 25.8% of total revenues in the first projection year,
decreasing to 25.7% of total revenues in the third
projection year. The following table presents estimated
EBITDA margins of Las Vegas and riverboat properties for
1996, as estimated by Donaldson, Lufkin, and Jennette.
Comparable EBITDA Ratios
MYSTERY TABLE MISSING
- --------------------------------------------------------------------------------
As evidenced, the subject property's estimated stabilized
EBITDA ratio of 25.7% is within the actual range of
comparable EBITDA ratios.
Capital Reserves Furniture, fixtures, and equipment are essential to the
operation of a casino hotel, and their quality often
influences the class of a property. Included in this
category are all non-real estate items that are normally
capitalized, not expensed. Furniture,
<PAGE>
HVS International, Mineola, New York Income Capitalization Approach 18
fixtures, and equipment are exposed to heavy use and must
be replaced at regular intervals. The useful life of these
items is determined by their quality and durability and
the amount of guest traffic and use. Periodic replacement
of furniture, fixtures, and equipment is essential to
maintain the quality, image, and income of a casino hotel.
Items specific to the casino operation include table game
felts, upholstered chairs, surveillance equipment, and
change carts. The replacement of these items generally
depends on the volume of business and quality of the
materials, while replacing the most important item in the
casino, the gaming devices, is more uncertain. Gaming
devices, like other computer equipment, generally have an
economic life of five to ten years. However, with the
advances in computerized gaming technology, devices may
become obsolete within a few years. The replacement of
technologically obsolete devices should reflect the
competitive set, player preferences, and demand trends.
Since capitalized expenditures are not included in the
operating statement, but nevertheless affect an owner's
cash flow, an appraisal should reflect these expenses in
the form of an appropriate reserve for replacement. The
annual deduction of a reserve for replacement from the
projected income stream effectively provides for a return
of furniture, fixtures, and equipment in both the casino
and the hotel components.
Reserves for replacement specific to the gaming industry
are typically deducted at between 0.5% and 2.5% of total
revenue. This deduction includes an allowance for both the
hotel and the casino components. An annual capital reserve
equal to 1.0% of total revenues has been deemed reasonable
for the subject property, as it will be a high-quality new
build product.
Free Cash Flow We project the Aladdin Hotel and Casino will generate
approximately $139,338,000 in free cash flow in the first
projection year. In the second projection year, free cash
flow is projected to increase to $143,143,000, or 24.8% of
total revenue. As mentioned, the subject is anticipated to
stabilize in the third year of the projection period and
generate roundly $146,185,000 in free cash flow, or 24.5%
of total revenue.
<PAGE>
HVS International, Mineola, New York Income Capitalization Approach 19
Forecast of Income Based on the preceding analyses, the forecast of income
and Expense and expense has been formulated. The following chart
presents a detailed forecast of income and expenses
through the stabilized year of operation. Following the
detailed income and expense statement, the 10-year
forecast of income and expense is presented. The forecast
pertains to fiscal operating years beginning January 1,
2000 and is expressed in inflated dollars for each year.
<PAGE>
Detailed Income and Expense Statement - Proposed Aladdin Hotel and Casino
<TABLE>
<CAPTION>
Calendar Years Ending: 2000 2001
<S> <C> <C>
Number of Rooms: 2,600 2,600
Occupancy: 93.0% 93.0%
Average Rate: $137.00 $141.11
Occupied Rooms: 882,570 882,570
<CAPTION>
$(000s) %Gross PAR(1) POR(2) $(000) %Gross PAR(1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUE
Gaming $ 282,030 50.1% $ 108,473 $ 320.00 $ 289,060 50.0% $ 111,177
Rooms 120,912 21.5 46,505 137.00 124,539 21.5 47,900
Food 61,222 10.9 23,547 69.37 63,058 10.9 24,253
Beverage 25,777 4.6 9,914 29.21 26,551 4.6 10,212
Telephone 3,529 0.6 1,357 4.00 3,635 0.6 1,398
Entertainment 38,666 6.9 14,872 43.81 39,826 6.9 15,318
Spa 15,144 2.7 5,825 17.16 15,599 2.7 6,000
Miscellaneous 15,466 2.7 5,948 17.52 15,930 2.8 6,127
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Revenues 562,746 100.0 216,441 637.62 578,198 100.0 222,384
---------- ---------- ---------- ---------- ---------- ---------- ----------
DEPARTMENTAL EXPENSES *
Casino 142,881 50.7 54,954 161.89 146,525 50.7 56,356
Rooms 39,923 33.0 15,355 45.23 41,121 33.0 15,816
Food 59,385 97.0 22,840 67.29 61,166 97.0 23,525
Beverage 16,497 64.0 6,345 18.69 16,993 64.0 6,536
Telephone 1,412 40.0 543 1.60 1,454 40.0 559
Entertainment 34,800 90.0 13,385 39.43 35,844 90.0 13,786
Spa 11,358 75.0 4,368 12.87 11,699 75.0 4,500
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Dept. Expenses 317,856 56.5 122,252 360.15 326,750 56.5 125,673
---------- ---------- ---------- ---------- ---------- ---------- ----------
DEPARTMENTAL INCOME 244,890 43.5 94,188 277.47 251,448 43.5 96,711
---------- ---------- ---------- ---------- ---------- ---------- ----------
UNDISTRIBUTED EXPENSES
Administrative and General 59,146 10.5 22,748 67.02 60,848 10.5 23,403
Marketing 9,380 1.7 3,608 10.63 8,764 1.5 3,371
Property Maintenance 10,055 1.8 3,867 11.39 10,953 1.9 4,213
Energy 8,441 1.5 3,247 9.56 8,673 1.5 3,336
Complimentary/Promo 3,618 0.6 1,392 4.10 3,724 0.6 1,432
LCI Fee 1,097 0.2 422 1.24 1,127 0.2 434
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Operating Expenses 91,737 16.3 35,283 103.94 94,089 16.2 36,188
---------- ---------- ---------- ---------- ---------- ---------- ----------
HOUSE PROFIT 153,153 27.2 58,905 173.53 157,359 27.3 60,523
---------- ---------- ---------- ---------- ---------- ---------- ----------
FIXED EXPENSES
Property Taxes 7,000 1.2 2,692 7.93 7,210 1.2 2,773
Insurance 1,188 0.2 457 1.3 1,224 0.2 471
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total 8,188 1.5 3,149 9.28 8,434 1.5 3,244
EBITDA $ 144,965 25.7% $ 55,756 $ 164.25 $ 148,925 25.8% $ 57,279
Reserve for Replacement 5,627 1.0 2,164 6.38 5,782 1.0 2,224
Free Cash Flow $ 139,338 24.8% $ 53,591 $ 157.88 $ 143,143 24.8% $ 55,055
========== ========== ========== ========== ========== ========== ==========
Food as a % of Gaming Rev 21.7% 21.8%
Beverage as a % of Gaming Rev 9.1 9.2
Beverage as a % of Food Rev 42.1 42.1
Telephone as a % of Gaming Rev 1.3 1.3
Telephone as a % of Rooms Rev 2.9 2.9
Entertainment as a % of Gaming Rev 13.7 13.8
Entertainment as a % of Rooms Rev 32.0 32.0
<CAPTION>
Calendar Years Ending: 2002
<S> <C>
Number of Rooms: 2,600
Occupancy: 93.0%
Average Rate: $145.34
Occupied Rooms: 882,570
<CAPTION>
POR(2) $(000) %Gross PAR(1) POR(2)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUE
Gaming $ 327.52 $ 297,730 50.0% $ 114,512 $ 337.34
Rooms 141.11 128,276 21.5 49,337 145.34
Food 71.45 64,950 10.9 24,981 73.59
Beverage 30.08 27,347 4.6 10,518 30.99
Telephone 4.12 3,744 0.6 1,440 4.24
Entertainment 45.13 41,021 6.9 15,777 46.48
Spa 17.67 16,067 2.7 6,180 18.20
Miscellaneous 18.05 16,408 2.8 6,311 18.59
---------- ---------- ---------- ---------- ----------
Total Revenues 655.13 595,543 100.0 229,055 674.78
---------- ---------- ---------- ---------- ----------
DEPARTMENTAL EXPENSES *
Casino 166.02 150,920 50.7 58,046 171.00
Rooms 46.59 42,354 33.0 16,290 47.99
Food 69.30 63,001 97.0 24,231 71.38
Beverage 19.25 17,502 64.0 6,732 19.83
Telephone 1.65 1,498 40.0 576 1.70
Entertainment 40.61 36,919 90.0 14,200 41.83
Spa 13.26 12,050 75.0 4,635 13.65
---------- ---------- ---------- ---------- ----------
Total Dept. Expenses 370.23 336,550 56.5 129,442 381.33
---------- ---------- ---------- ---------- ----------
DEPARTMENTAL INCOME 284.90 258,993 43.5 99,613 293.45
---------- ---------- ---------- ---------- ----------
UNDISTRIBUTED EXPENSES
Administrative and General 68.94 62,674 10.5 24,105 71.01
Marketing 9.93 9,027 1.5 3,472 10.23
Property Maintenance 12.41 12,535 2.1 4,821 14.20
Energy 9.83 8,933 1.5 3,436 10.12
Complimentary/Promo 4.22 3,835 0.6 1,475 4.35
LCI Fee 1.28 1,161 0.2 447 1.32
---------- ---------- ---------- ---------- ----------
Total Operating Expenses 106.61 98,165 16.4 37,756 111.23
---------- ---------- ---------- ---------- ----------
HOUSE PROFIT 178.30 160,828 27.1 61,857 182.23
---------- ---------- ---------- ---------- ----------
FIXED EXPENSES
Property Taxes 8.17 7,426 1.2 2,856 8.41
Insurance 1.4 1,261 0.2 485 1.43
---------- ---------- ---------- ---------- ----------
Total 9.56 8,687 1.5 3,341 9.84
EBITDA $ 168.74 $ 152,140 25.6% $ 58,516 $ 172.38
Reserve for Replacement 6.55 5,955 1.0 2,291 6.75
Free Cash Flow $ 162.19 $ 146,185 24.5% $ 56,225 $ 165.64
========== ========== ========== ========== ==========
Food as a % of Gaming Rev 21.8%
Beverage as a % of Gaming Rev 9.2
Beverage as a % of Food Rev 42.1
Telephone as a % of Gaming Rev 1.3
Telephone as a % of Rooms Rev 2.9
Entertainment as a % of Gaming Rev 13.8
Entertainment as a % of Rooms Rev 32.0
</TABLE>
* Departmental expenses expressed as a percentage of departmental revenues
(1) Per Available Room
(2) Per Occupied Room
- --------------------------------------------------------------------------------
<PAGE>
10-Year Forecast of Income and Expense - Proposed Aladdin Hotel and Casino, Las
Vegas, Nevada
<TABLE>
<CAPTION>
Calendar Years Ending: 2000 2001 2002 2003 2004
------------------- ------------------- ------------------- ------------------ -----------
<S> <C> <C> <C> <C> <C>
Number of Rooms: 2600 2600 2600 2600 2600
Occupied Rooms: 882,570 882,570 882,570 882,570 882,570
Occupancy: 93.0% 93.0% 93.0% 93.0% 93.0%
Average Rate: $137.00 $141.11 $145.34 $149.70 $154.19
<CAPTION>
% of % of % of % of
$(000s) Gross $(000s) Gross $(000s) Gross $(000s) Gross $(000s)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUE
Gaming $282,030 50.1% $289,060 50.0% $297,730 50.0% $306,660 50.0% $315,860
Rooms 120,912 21.5 124,539 21.5 128,276 21.5 132,124 21.5 136,088
Food 61,222 10.9 63,058 10.9 64,950 10.9 66,898 10.9 68,905
Beverage 25,777 4.6 26,551 4.6 27,347 4.6 28,168 4.6 29,013
Telephone 3,529 0.6 3,635 0.6 3,744 0.6 3,856 0.6 3,972
Entertainment 38,666 6.9 39,826 6.9 41,021 6.9 42,252 6.9 43,519
Spa 15,144 2.7 15,599 2.7 16,067 2.7 16,549 2.7 17,045
Miscellaneous 15,466 2.7 15,930 2.8 16,408 2.8 16,901 2.8 17,408
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total 562,746 100.0 578,198 100.0 595,543 100.0 613,398 100.0 631,810
DEPT. EXPENSES*
Casino 142,881 50.7 146,525 50.7 150,920 50.7 155,442 50.7 160,110
Rooms 39,923 33.0 41,121 33.0 42,354 33.0 43,625 33.0 44,934
Food 59,385 97.0 61,166 97.0 63,001 97.0 64,891 97.0 66,838
Beverage 16,497 64.0 16,993 64.0 17,502 64.0 18,027 64.0 18,568
Telephone 1,412 40.0 1,454 40.0 1,498 40.0 1,542 40.0 1,589
Entertainment 34,800 90.0 35,844 90.0 36,919 90.0 38,027 90.0 39,167
Spa 11,358 75.0 11,699 75.0 12,050 75.0 12,412 75.0 12,784
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total 317,856 56.5 326,750 56.5 336,550 56.5 346,642 56.5 357,046
DEPT. INCOME 244,890 43.5 251,448 43.5 258,993 43.5 266,756 43.5 274,764
OPER. EXPENSES
Administrative and General 59,146 10.5 60,848 10.5 62,674 10.5 64,553 10.5 66,491
Marketing 9,380 1.7 8,764 1.5 9,027 1.5 9,297 1.5 9,576
Property Maintenance 10,055 1.8 10,953 1.9 12,535 2.1 12,911 2.1 13,298
Energy 8,441 1.5 8,673 1.5 8,933 1.5 9,201 1.5 9,477
Complimentary/Promo 3,618 0.6 3,724 0.6 3,835 0.6 3,950 0.6 4,069
LCI Fee 1,097 0.2 1,127 0.2 1,161 0.2 1,196 0.2 1,232
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total 91,737 16.3 94,089 16.2 98,165 16.4 101,108 16.4 104,143
HOUSE PROFIT 153,153 27.2 157,359 27.3 160,828 27.1 165,648 27.1 170,621
FIXED EXPENSES
Property Taxes 7,000 1.2 7,210 1.2 7,426 1.2 7,649 1.2 7,879
Insurance 1188 0.2 1,224 0.2 1,261 0.2 1,298 0.2 1,337
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total 8,188 1.4 8,434 1.4 8,687 1.4 8,947 1.4 9,216
EBITDA 144,965 25.8 148,925 25.9 152,140 25.7 156,701 25.7 161,405
Reserve for Repl 5,627 1.0 5,782 1.0 5,955 1.0 6,134 1.0 6,318
-------- -------- -------- -------- -------- -------- -------- -------- --------
Free Cash Flow $139,338 24.8% $143,143 24.9% $146,185 24.7% $150,567 24.7% $155,087
======== ==== ======== ==== ======== ==== ======== ==== ========
<CAPTION>
Calendar Years Ending: 2004 2005 2006 2007 2008
--------- ------------------- ------------------- -------------------- ----------
<S> <C> <C> <C> <C>
Number of Rooms: 2600 2600 2600 2600
Occupied Rooms: 882,570 882,570 882,570 882,570
Occupancy: 93.0% 93.0% 93.0% 93.0%
Average Rate: $158.82 $163.59 $168.49 $173.55
<CAPTION>
% of % of % of % of
Gross $(000s) Gross $(000s) Gross $(000s) Gross $(000s)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUE
Gaming 50.0% $325,330 50.0% $335,100 50.0% $345,153 50.0% $355,508
Rooms 21.5 140,170 21.5 144,375 21.5 148,707 21.5 153,168
Food 10.9 70,973 10.9 73,102 10.9 75,295 10.9 77,554
Beverage 4.6 29,883 4.6 30,780 4.6 31,703 4.6 32,654
Telephone 0.6 4,091 0.6 4,214 0.6 4,340 0.6 4,471
Entertainment 6.9 44,825 6.9 46,170 6.9 47,555 6.9 48,981
Spa 2.7 17,556 2.7 18,083 2.7 18,626 2.7 19,184
Miscellaneous 2.8 17,930 2.8 18,468 2.8 19,022 2.8 19,592
-------- -------- -------- -------- -------- -------- -------- --------
Total 100.0 650,758 100.0 670,292 100.0 690,401 100.0 711,112
DEPT. EXPENSES*
Casino 50.7 164,910 50.7 169,862 50.7 174,958 50.7 180,207
Rooms 33.0 46,282 33.0 47,670 33.0 49,100 33.0 50,573
Food 97.0 68,844 97.0 70,909 97.0 73,036 97.0 75,227
Beverage 64.0 19,125 64.0 19,699 64.0 20,290 64.0 20,899
Telephone 40.0 1,636 40.0 1,686 40.0 1,736 40.0 1,788
Entertainment 90.0 40,342 90.0 41,553 90.0 42,799 90.0 44,083
Spa 75.0 13,167 75.0 13,562 75.0 13,969 75.0 14,388
-------- -------- -------- -------- -------- -------- -------- --------
Total 56.5 367,753 56.5 378,792 56.5 390,154 56.5 401,859
DEPT. INCOME 43.5 283,005 43.5 291,500 43.5 300,247 43.5 309,253
OPER. EXPENSES
Administrative and General 10.5 68,485 10.5 70,540 10.5 72,656 10.5 74,836
Marketing 1.5 9,864 1.5 10,160 1.5 10,465 1.5 10,778
Property Maintenance 2.1 13,697 2.1 14,108 2.1 14,531 2.1 14,967
Energy 1.5 9,761 1.5 10,054 1.5 10,356 1.5 10,667
Complimentary/Promo 0.6 4,191 0.6 4,317 0.6 4,446 0.6 4,580
LCI Fee 0.2 1,269 0.2 1,307 0.2 1,346 0.2 1,387
-------- -------- -------- -------- -------- -------- -------- --------
Total 16.4 107,267 16.4 110,486 16.4 113,800 16.4 117,215
HOUSE PROFIT 27.1 175,738 27.1 181,014 27.1 186,447 27.1 192,038
FIXED EXPENSES
Property Taxes 1.2 8,115 1.2 8,358 1.2 8,609 1.2 8,867
Insurance 0.2 1,377 0.2 1,419 0.2 1,461 0.2 1,505
-------- -------- -------- -------- -------- -------- -------- --------
Total 1.4 9,492 1.4 9,777 1.4 10,070 1.4 10,372
EBITDA 25.7 166,246 25.7 171,237 25.7 176,377 25.7 181,666
Reserve for Repl 1.0 6,508 1.0 6,703 1.0 6,904 1.0 7,111
-------- -------- -------- -------- -------- -------- -------- --------
Free Cash Flow 24.7% $159,739 24.7% $164,534 24.7% $169,473 24.7% $174,554
==== ======== ==== ======== ==== ======== ==== ========
</TABLE>
Calendar Years Ending: 2008 2009
--------- ------------------
Number of Rooms: 2600
Occupied Rooms: 882,570
Occupancy: 93.0%
Average Rate: $178.75
% of % of
Gross $(000s) Gross
- ----------------------------------------------------------------
REVENUE
Gaming 50.0% $366,173 50.0%
Rooms 21.5 157,763 21.5
Food 10.9 79,880 10.9
Beverage 4.6 33,634 4.6
Telephone 0.6 4,605 0.6
Entertainment 6.9 50,451 6.9
Spa 2.7 19,760 2.7
Miscellaneous 2.8 20,180 2.8
-------- -------- --------
Total 100.0 732,446 100.0
DEPT. EXPENSES*
Casino 50.7 185,613 50.7
Rooms 33.0 52,090 33.0
Food 97.0 77,484 97.0
Beverage 64.0 21,526 64.0
Telephone 40.0 1,842 40.0
Entertainment 90.0 45,406 90.0
Spa 75.0 14,820 75.0
-------- -------- --------
Total 56.5 413,916 56.5
DEPT. INCOME 43.5 318,530 43.5
OPER. EXPENSES
Administrative and General 10.5 77,081 10.5
Marketing 1.5 11,102 1.5
Property Maintenance 2.1 15,416 2.1
Energy 1.5 10,987 1.5
Complimentary/Promo 0.6 4,717 0.6
LCI Fee 0.2 1,428 0.2
-------- -------- --------
Total 16.4 120,731 16.4
HOUSE PROFIT 27.1 197,799 27.1
FIXED EXPENSES
Property Taxes 1.2 9,133 1.2
Insurance 0.2 1,550 0.2
-------- -------- --------
Total 1.4 10,683 1.4
EBITDA 25.7 187,115 25.7
Reserve for Repl 1.0 7,324 1.0
-------- -------- --------
Free Cash Flow 24.7% $179,791 24.7
==== ======== ====
* Departmental expenses expressed as a percentage of departmental revenues.
- --------------------------------------------------------------------------------
<PAGE>
HVS International, Mineola, New York Income Capitalization Approach 22
Capitalization of The conversion of a property's forecasted net income into
Net Income Into an estimate of value is based on the premise that
Market Value investors typically purchase real estate with a small
Estimate amount of equity cash (25% to 50%) and a large amount of
mortgage financing (50% to 75%). The amounts and terms of
available mortgage financing and the rates of return that
are required to attract sufficient equity capital form the
basis for allocating the net income between the mortgage
and equity components and deriving a value estimate.
Other investment parameters used by the appraisers in the
income capitalization approach include an overall
capitalization rate and total property yield. An overall
terminal capitalization rate is utilized to calculate the
property's reversionary sales proceeds at the end of the
assumed 10-year holding period in the discounted cash flow
analysis. Once the value of the property is estimated via
the mortgage-equity capitalization technique, the
appraisers perform analyses to cross-check the
appropriateness of the value estimate based upon other
market derived parameters. The overall capitalization rate
equating the subject's first-year net income to the
estimated market value is compared with overall rates
derived from comparable sales and investor surveys. The
total property yield, which is the discount rate equating
the property's forecasted net income before debt service
to the estimated market value, is also compared with total
property yields derived from comparable sales and investor
surveys.
Mortgage Component The appraisers have used financing data specific to the
gaming industry in formulating an applicable interest
rate, term, amortization period, and debt service constant
for the valuation of the Proposed Aladdin Hotel and
Casino. Our interviews with representatives from lending
institutions indicate that financing is available to those
companies with a proven track record of successful
operations.
We have found that investors view casinos and casino
hotels as hybrid investments. Such an investment combines
the attributes of traditional real estate with the
business value inherent in a gaming enterprise. Therefore,
investment collateral to secure the loan is largely
constituted of the business and real estate value of the
property as a going concern. Therefore, financed gaming
investments typically have loan-to-value ratios, terms,
amortization periods, and interest rates commensurate with
the amount of risk inherent in the enterprise as a going
concern. According to Loan Syndications and Trading, over
80% of gaming companies are rated as speculative grade
credit.
The following chart summarizes the borrower, loan purpose,
facility type, facility size, risk premium, and term for a
variety of gaming transactions in 1996.
<PAGE>
HVS International, Mineola, New York Income Capitalization Approach 23
1996 Gaming Transactions
<TABLE>
<CAPTION>
Facility Basis
Rating at Size Points
Company Close Deal Purpose Facility Type (mm) (LIBOR plus)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Boyd Gaming Corporation BB+ Debt Repay. Revolver/Line >=1 Yr. $ 500.0 175.0
Circus Circus - Eldorado Joint Venture NR Debt Repay. Revolver/Line >=1 Yr. 220.0 112.5
Circus Circus Enterprises BBB+ Debt Repay. Revolver/Line >=1 Yr. 1500.0 75.0
Dover Downs Entertainment NR Working Capital Revolver/Line >=1 Yr. 8.0 NA
Dover Downs Entertainment NR Working Capital Revolver/Line >=1 Yr. 2.0 NA
Dover Downs Entertainment NR Working Capital Standby Letter of Credit 0.1 NA
Gem Gaming NR Corp. Purposes Revolver/Line < 1 Yr. 25.0 NA
Grand Casinos Inc. NR Proj. Finance Term Loan 120.0 250.0
Harrah's Entertainment, Inc. NR Corp. Purposes Revolver/Line >=1 Yr. 150.0 75.0
Harrah's Entertainment, Inc. NR Corp. Purposes Revolver/Line >=1 Yr. 950.0 50.0
Hemmeter Enterprises, Inc. NR Debtor-in-poss. Revolver/Line < 1 Yr. 13.0 NA
MGM Grand BB Debt Repay. Bridge Loan 125.0 150.0
MGM Grand BB Debt Repay. Revolver/Line >=1 Yr. 500.0 200.0
Nev Star Gaming Corp. NR Proj. Finance Term Loan 50.0 NA
Nev Star Gaming Corp. NR Proj. Finance Term Loan 1.0 NA
Penn National Gaming NR Corp. Purposes Revolver/Line >=1 Yr. 5.0 300.0
Penn National Gaming NR Corp. Purposes Term Loan 47.0 300.0
Penn National Gaming NR Corp. Purposes Term Loan 23.0 300.0
Rio Properties NR Working Capital Revolver/Line >=1 Yr. 200.0 NA
Seven Feathers Gaming Corp. NR Corp. Purposes Revolver/Line >=1 Yr. 24.0 270.0
Sodak Gaming NR Working Capital Revolver/Line >=1 Yr. 20.0 200.0
Sodak Gaming NR Corp. Purposes Revolver/Line >=1 Yr. 30.0 200.0
Stanley Leisure NR Corp. Purposes Revolver/Line < 1 Yr. 108.0 NA
Station Casinos BB Debt Repay. Revolver/Line >=1 Yr. 400.0 NA
Station Casinos BB Proj. Finance Term Loan 110.0 375.0
Stratosphere NR Equip. Lease Other 37.5 NA
Stuart Entertainment NR Corp. Purposes Revolver/Line < 1 Yr. 30.0 150.0
Sun International Bahamas Ltd. NR Proj. Finance Term Loan 200.0 250.0
Sun International Bahamas Ltd. NR Debt Repay. Term Loan 250.0 225.0
Sunset Station NR Corp. Purposes Revolver/Line < 1 Yr. 110.0 NA
Sunset Station NR Corp. Purposes Revolver/Line < 1 Yr. 40.0 NA
Average 203.2
</TABLE>
Source: BancAmerica Securities, Inc. and Loan Pricing Corporation
- --------------------------------------------------------------------------------
As indicated, the risk premiums range between 50 and 375
basis points over the London Interbank Offered Rate
(LIBOR), with an average of 203 basis points. The majority
of the loan facilities closed in 1996 were revolving
credit lines with terms greater than one year. Of the 31
transactions in 1996, eight were term loans with risk
premiums ranging between 225 and 375 basis points over
LIBOR. The average length of a term loan transacted in
1996 is 57 months, or roundly five years. The following
presents a range of calculated interest rates based on the
current LIBOR as
<PAGE>
HVS International, Mineola, New York Income Capitalization Approach 24
published in the Wall Street Journal as of September 29,
1997, and a range of risk premiums.
Risk Premium Range Calculated Range of
LIBOR (Basis Points) Interest Rates
----- -------------- --------------
6.0% plus 50 to 375 = 6.50% to 9.75%
Based on the preceding analysis and adjusting for specific
risk factors, we believe that a mortgage lender financing
the Proposed Aladdin Hotel and Casino would require a risk
premium of approximately 300 basis points over LIBOR. The
risk premium is intended to reflect the creditworthiness
of the borrower as well as the loan collateral. This
spread equates to a 9.0% interest rate; applying a 20-year
amortization and a ten-year term, the mortgage constant
equates to 0.107967. We believe that a mortgage lender
will lend up to 60% of the subject's market value, as
determined by this appraisal.
Equity Component The remaining capital required for investment generally
comes from the equity investor. The rate of return that an
equity investor expects over a 10-year holding period is
known as the equity yield. Unlike the equity dividend,
which is a short-term rate of return, an equity yield
specifically considers a long-term holding period
(generally 10 years), annual inflation-adjusted cash
flows, property appreciation, mortgage amortization, and
proceeds from a sale at the end of the holding period. The
following table presents equity yield and discount rates
derived from three major investor surveys that pertain
specifically to the lodging industry.
<PAGE>
HVS International, Mineola, New York Income Capitalization Approach 25
Hotel Investor Surveys
MISSING TABLE
- --------------------------------------------------------------------------------
In Landauer Hospitality Services' Hotel Investment Outlook
for 1997, leveraged yield rates ranged from 15.0% to
25.0%, with a survey average of 18.7%. The Korpacz Real
Estate Investor Survey for the first quarter of 1997
indicates that leveraged equity internal rates of return
(IRRs), assuming 50.0% to 60.0% debt, average between
20.0% and 26.0%. The Korpacz survey also provides a range
of "free and clear" equity IRRs for full-service hotels,
which is essentially a measure of appropriate discount
rates, or overall property yields. The Korpacz survey
cites a range from 11.0% to 16.0% for this indicator, with
a survey average of 13.4%. Landauer's survey also provides
a range of free and clear yield rates from 12.0% to 16.0%,
with a survey average of 13.5%. CB Commercial's National
Investor Survey for the first quarter of 1997 does not
provide a range of equity yield rates, but provides a
range of overall discount rates from 12.0% to 13.5%, with
a survey average of 12.7%.
It is difficult to quantify the rate of return required by
equity investors who are seeking to purchase casino and
casino hotel properties. To establish an appropriate
equity yield rate, we have compared the rates of return as
indicated in the investor surveys for hotel investments to
the rates of return specific to the gaming community. From
this information we extrapolated an equity yield rate for
the subject property utilizing an iterative calculation
via the Simultaneous Valuation Formula. Based on this
analysis we have derived an equity yield of 31.0% for use
in the valuation of the subject property. This equity
yield rate reflects the assumed debt parameters and the
risk inherent in achieving the projected income stream
given the uncertainty regarding additional competition and
economic growth over the holding period.
<PAGE>
HVS International, Mineola, New York Income Capitalization Approach 26
To check the reasonableness of our equity yield rate
assumption, we have compared the derived overall "free and
clear" discount rate of 19.1%, which is based on the
estimated debt and equity rates of 9.0% and 31.0%,
respectively, to the calculated discount rates based on
investor surveys. According to a survey of gaming
companies and lenders conducted by HVS Gaming Services,
going-in capitalization rates range from 15% to 25%
depending on the risk inherent in the location, market,
and historical operation of the property. However, it
should be noted that these rates do not reflect a
deduction in cash flows for capital expenditures.
Converting this range of going-in capitalization rates to
discount rates can be accomplished by adding an inflation
assumption. For the purposes of this analysis, a 3.0%
inflation rate was added to the going-in rates. Combining
the going-in rates with our inflation assumption results
in a range of discount rates from 18.0% to 28.0%, compared
to our derived discount rate of 19.1%. Both the applied
equity yield rate and the discount rate are considered to
be supported by the preceding data. As evidenced, our
discount rate is at the low end of the acceptable range.
However, adjusting for the reserve for replacement expense
of 1.0% of total revenues, our discount rate equates to
20.1%. In addition, our discount rate reflects the
stability of operating within the Las Vegas Strip ($72
million and over) gaming market. As will be discussed
later in this section, the cash-on-cash rates of return
and the debt coverage ratios provide further support for
our yield conclusions.
Terminal Capitalization Rate
Inherent in this valuation process is the assumption of a
sale at the end of the 10-year holding period. The
estimated reversionary sales price as of this date is
calculated by capitalizing the 11th year's net income by
an overall terminal capitalization rate. An allocation for
the seller's brokerage and legal fees is deducted from
this sales price, and the net proceeds to the equity
interest (also known as the equity residual) are
calculated by deducting the outstanding mortgage balance
from the reversion. Based on the risk associated with the
uncertainty regarding sustaining the projected cash flow
beyond the 10-year holding period, we have applied a
terminal capitalization rate of 18.0%.
Valuation of The terms and loan-to-value ratio of current financing
Mortgage and applicable to the subject property have been selected.
Equity Components However, the annual debt service and resultant net income
to equity cannot be calculated without knowing the
property's total value, the very unknown which we are
attempting to calculate. In essence, the property's value
must be determined by forecasting net income available for
debt service, and by calculating, through an iterative
process, the amount of the mortgage which the net income
is capable of supporting at the assumed interest rate and
a specified loan-to-value ratio.
<PAGE>
HVS International, Mineola, New York Income Capitalization Approach 27
The property's value may also be calculated directly
through what is termed the Simultaneous Valuation Formula.
Given the known variables of equity investor yield
requirements, two equations may be set up to
simultaneously solve for the unknown value.
To illustrate the Simultaneous Valuation Formula, the
following symbols are used:
NI = Net income available for debt service
V = Value
M = Loan-to-value ratio
f = Annual debt service constant
n = Number of years in the projection period
de = Annual cash available to equity
dr = Residual equity value
b = Brokerage and legal cost percentage
P = Fraction of the loan paid off during the projection period
fp = Annual constant required to amortize the entire loan during
the projection period
<PAGE>
HVS International, Mineola, New York Income Capitalization Approach 27
Rr = Overall terminal capitalization rate applied to the net income
to calculate the total property reversion (sales price at the
end of the projection period)
1/Sn= Current worth of a $1 factor (discount factor) at the equity
yield rate
*P = (f-i)/(fp-i) where i=interest rate of mortgage
**S = 1+i where i=equity yield rate
Equation #1 Calculation of annual cash flow to equity (equity dividend
and reversion):
NI1 - (f x M x V) = de1
NI2 - (f x M x V) = de2...
... NI10 - (f x M x V) = de10
(NI11/Rr) - (b (NI11/Rr) - ((1 - P) x M x V) = dr
Equation #2 Calculation of equity as sum of discounted cash flows:
(de1 x 1/S1) + (de2 x 1/S2) +... + (de10 x 1/S10) + (dr x 1/S10) = (1 - M) V
Simultaneous Valuation Formula
Combination of Equations #1 and #2:
((NI1 - (f x M x V)) 1/S1) + ((NI2 - (f x M x V)) 1/S2) + . . .
((NI10 - (f x M x V)) 1/S10) +
(((NI11/Rr) - (b (NI11/Rr)) - ((1 - P) x M x V)) 1/S10) = (1 -M) V
The following values are assigned to the variable
components for the purposes of this valuation.
<PAGE>
HVS International, Mineola, New York Income Capitalization Approach 29
Loan-To-Value Ratio M 60.0%
Debt Service Constant f 0.107967
Equity Yield 1/Sn 31.0%
Brokerage and Legal Fees b 5.0%
Interest Rate i 9.0%
Annual Constant Required to
Amortize the Loan in Ten Years fp 0.152011
Terminal Capitalization Rate Rr 18.0%
<PAGE>
HVS International, Mineola, New York Income Capitalization Approach 30
Forecast of Net Income
Period Net Operating Income
- -----------------------------------------------------
1 = $139,338,000
2 = 143,143,000
3 = 146,185,000
4 = 150,567,000
5 = 155,087,000
6 = 159,739,000
7 = 164,534,000
8 = 169,473,000
9 = 174,554,000
10 = 179,791,000
11 = 185,186,000
- --------------------------------------------------------------------------------
The Simultaneous Valuation Formula is applied to the
subject property's forecasted net income as follows.
Intermediary calculations:
(f x M x V)= 0.107967 x 0.60 x V = 0.064780 V
P = (0.107967 - 0.090) / (0.152011 - 0.090) = 0.289741
Expressing formula in terms of V:
( 139,338,000 - 0.064780 V ) x 0.763359 +
( 143,143,000 - 0.064780 V ) x 0.582717 +
( 146,185,000 - 0.064780 V ) x 0.444822 +
( 150,567,000 - 0.064780 V ) x 0.339559 +
( 155,087,000 - 0.064780 V ) x 0.259205 +
( 159,739,000 - 0.064780 V ) x 0.197866 +
( 164,534,000 - 0.064780 V ) x 0.151043 +
( 169,473,000 - 0.064780 V ) x 0.115300 +
( 174,554,000 - 0.064780 V ) x 0.088015 +
( 179,791,000 - 0.064780 V ) x 0.067187 +
((( 185,186,000 / 0.180 ) - ( 0.05 x ( 185,186,000 / 0.180 )) -
<PAGE>
HVS International, Mineola, New York Income Capitalization Approach 31
(( 1 - 0.289741 ) x 0.60 x V)) x 0.067187 )= ( 1 - 0.60 )V
Like terms are combined and the equation is solved for
"V":
$515,237,579 - 0.223561 = V (1 - 0.60)V
$515,237,579 = 0.62356 V
V = $515,237,579 / 0.62356
V = $826,282,831
Market Value
via the Simultaneous Valuation Formula
on or about January 1, 2000 (Say) = $826,300,000
Based on the previous analysis, we estimate the market
value of the subject property, as of January 1, 2000, to
be: $825,000,000.
The estimated market value, as determined by the
Simultaneous Valuation Formula, may be mathematically
proven by discounting the net income to equity at the
equity yield rate. Annual deductions for debt service are
derived based on the mortgage terms.
Mortgage Component (60%) $495,770,000
Equity Component (40%) 330,513,000
------------
Total $826,283,000
Mortgage Component $495,770,000
Mortgage Constant 0.107967
------------
Annual Debt Service $ 53,526,856
The 11-year forecast of net income and 10-year forecast of
net income to equity are presented in the following table.
<PAGE>
HVS International, Mineola, New York Income Capitalization Approach 32
11-Year Forecast of Net Income and 10-Year Forecast of Net Income to Equity
<TABLE>
<CAPTION>
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Occupancy 93% 93% 93% 93% 93% 93% 93% 93% 93% 93% 93%
Average Rate $137.00 $141.11 $145.34 $149.70 $154.19 $158.82 $163.59 $168.49 $173.55 $178.75 $184.12
Net Income Before
Debt Service $139,338 $143,143 $146,185 $150,567 $155,087 $159,739 $164,534 $169,473 $174,554 $179,791 $185,186
Less: Debt Service 53,527 53,527 53,527 53,527 53,527 53,527 53,527 53,527 53,527 53,527
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Income to Equity $85,811 $89,616 $92,658 $97,040 $101,560 $106,212 $111,007 $115,946 $121,027 $126,264
Debt Coverage Ratio 2.60 2.67 2.73 2.81 2.90 2.98 3.07 3.17 3.26 3.36
Cash-on-Cash Return 26.0% 27.1% 28.0% 29.4% 30.7% 32.1% 33.6% 35.1% 36.6% 38.2%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
HVS International, Mineola, New York Income Capitalization Approach 33
As evidenced, the subject property's first year debt
coverage ratio is projected at 2.60, increasing to 2.73 by
the third projection year. Similarly, cash-on-cash returns
are forecast to increase from 26.0% in the first year to
28.0% by the third projection year. Both the debt coverage
ratio and cash-on-cash return in the third year are
commensurate with comparable industry averages.
The net proceeds to equity upon sale of the property are
determined by deducting sales expenses (brokerage and
legal fees) and the outstanding mortgage balance. The
equity residual at the end of the 10th year is calculated
by deducting brokerage and legal fees and the mortgage
balance from the reversionary value. The reversionary
value is calculated as the 11th year's net income
capitalized by the terminal capitalization rate. The
calculation is shown as follows.
Reversionary Value ($185,186,000 /0.1800) $1,028,811,000
Less:
Brokerage and Legal Fees 51,441,000
Mortgage Balance 352,125,000
--------------
Net Sale Proceeds to Equity $625,245,000
The overall property yield (before debt service), the
yield to the lender, and the yield to the equity position
have been calculated by computer with the following
results.
Overall Property Yields
Projected Yield
(Internal Rate of Return)
Position Value Over 10-Year Holding Period
=========================================================================
Total Property $826,283,000 19.1%
Mortgage 495,770,000 8.9*
Equity 330,513,000 31.0
* Whereas the mortgage constant and value are calculated on the basis of
monthly mortgage payments, the yield in this proof assumes single annual
payments. As a result, the proof's derived yeild is slightly less than
that actually input.
- -------------------------------------------------------------------------
We believe that these internal rates of return, while at
the low end of acceptable ranges, reasonably reflect the
level of risk inherent in attaining the projected cash
flows over the 10-year holding period. The discounted cash
flow procedure substantiating the yield to each position
is presented as follows.
Total Property Yield
<PAGE>
HVS International, Mineola, New York Income Capitalization Approach 34
<TABLE>
<CAPTION>
Net Income before Present Worth of $1 Discounted
Year Debt Service Factor @ 19.1% Cash Flow
===================================================================================
<S> <C> <C> <C>
2000 $ 139,338,000 x 0.839329 = $116,950,000
2001 143,143,000 x 0.704473 = 100,840,000
2002 146,185,000 x 0.591284 = 86,437,000
2003 150,567,000 x 0.496282 = 74,724,000
2004 155,087,000 x 0.416544 = 64,600,000
2005 159,739,000 x 0.349617 = 55,847,000
2006 164,534,000 x 0.293444 = 48,281,000
2007 169,473,000 x 0.246296 = 41,740,000
2008 174,554,000 x 0.206723 = 36,084,000
2009 1,157,162,000* x 0.173509 = 200,777,000
------------
Total Property Value $826,280,000
*10th year net income of $179,791,000 plus sales proceeds of $977,371,000
- -----------------------------------------------------------------------------------
</TABLE>
Mortgage Component Yield
<TABLE>
<CAPTION>
Total Annual Present Worth of $1 Discounted
Year Debt Service Factor @ 8.9% Cash Flow
===================================================================================
<S> <C> <C> <C>
2000 $ 53,527,000 x 0.918455 = $ 49,162,000
2001 53,527,000 x 0.843559 = 45,153,000
2002 53,527,000 x 0.774770 = 41,471,000
2003 53,527,000 x 0.711591 = 38,089,000
2004 53,527,000 x 0.653564 = 34,983,000
2005 53,527,000 x 0.600269 = 32,131,000
2006 53,527,000 x 0.551320 = 29,511,000
2007 53,527,000 x 0.506362 = 27,104,000
2008 53,527,000 x 0.465071 = 24,894,000
2009 53,527,000 x 0.427146 = 22,864,000
------------
Value Of Mortgage Component $345,362,000
- -----------------------------------------------------------------------------------
</TABLE>
<PAGE>
HVS International, Mineola, New York Income Capitalization Approach 35
Equity Component Yield
<TABLE>
<CAPTION>
Net Income Present Worth of $1 Discounted
Year to Equity Factor @ 31.0% Cash Flow
===================================================================================
<S> <C> <C> <C>
2000 $ 85,811,000 x 0.763359 = $65,505,000
2001 89,616,000 x 0.582717 = 52,221,000
2002 92,658,000 x 0.444822 = 41,216,000
2003 97,040,000 x 0.339559 = 32,951,000
2004 101,560,000 x 0.259205 = 26,325,000
2005 106,212,000 x 0.197866 = 21,016,000
2006 111,007,000 x 0.151043 = 16,767,000
2007 115,946,000 x 0.115300 = 13,369,000
2008 121,027,000 x 0.088015 = 10,652,000
2009 751,510,000* x 0.067187 = 50,492,000
------------
Value of Equity Component $330,514,000
*10th year net income to equity of $126,264,000 plus sales proceeds of $625,246,000
- -----------------------------------------------------------------------------------
</TABLE>
Discounted Cash Flow In addition to using the Simultaneous Valuation Formula,
Analysis the appraisers have performed a discounted cash flow
analysis based on the financing parameters discussed
earlier in this section. We conclude that a 19.1% discount
rate is appropriate to apply to the forecasted income
stream and reversionary proceeds for the subject property.
While the discount rate falls at the low end of the range
determined by our survey, we believe that it is
commensurate with the level of risk inherent in the
subject property and the Las Vegas Strip ($72 million and
over) gaming market; additionally, it reflects a 1.0%
reserve for replacement which, when adjusted out of our
forecast, increases the discount rate some 100 basis
points. Further, a terminal capitalization rate of 18.0%
has been applied to the 11th year's net income to arrive
at the reversionary proceeds figure, reflecting the
speculation inherent in forecasting additional competition
and economic growth over the 10-year holding period. The
following table presents our discounted cash flow
analysis.
<PAGE>
HVS International, Mineola, New York Income Capitalization Approach 36
Discounted Cash Flow Analysis - Proposed Aladdin Hotel and Casino (000s)
Discount Rate: 19.1%
Holding Period: 10 years
Terminal Capitalization Rate: 18.0%
Broker and Legal Fees: 5.0%
<TABLE>
<CAPTION>
Calendar Years Ending: 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Forecasted Net Income $139,338 $143,143 $146,185 $150,567 $155,087 $159,739 $164,534 $169,473 $174,554 $179,791
Net Revisionary Proceeds $977,371
--------
10th Year Net Income plus
Reversionary Proceeds $1,157,162
Discount Factor @ 19.1% 0.83933 0.70447 0.59128 0.49628 0.41654 0.34962 0.29344 0.24630 0.20672 0.17351
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Discounted Net Income $116,950 $100,840 $86,437 $74,724 $64,600 $55,847 $48,281 $41,740 $36,084 $200,777
Cummulative Total $116,950 $217,791 $304,228 $378,951 $443,552 $499,399 $547,681 $589,421 $625,505 $826,283
<CAPTION>
<S> <C> <C> <C>
Reversion Analysis: Indicated Value via Discounted Cash Flow Analysis $826,283
- ----------------------------------------------------
(Say) $826,300
11th Year Net Income $185,186 ========
Terminal Capitalization Rate 18.0%
----
Total Sale Proceeds $1,028,811
Less: Broker and Legal Fees @ 5.0% $51,441
Net Reversionary Proceeds $977,371
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
HVS International, Mineola, New York Income Capitalization Approach 37
Conclusion - Market We have valued the subject property via the income
Value capitalization approach utilizing two different valuation
methodologies with the following results.
Estimated Value via Simultaneous Valuation Formula $826,300,000
Estimated Value via Discounted Cash Flow Analysis $826,300,000
We conclude that the market value of the Proposed Aladdin
Hotel and Casino, as of January 1, 2000, will be:
$825,000,000
Business Value The Financial Institutions Reform, Recovery, and
Enforcement Act (FIRREA) stipulates that ". . . any
business interest or other intangible item should be
valued separately within the appraisal."(10) As mentioned,
casinos have both business and real estate components;
without the business expertise necessary to operate the
facility, a casino would have little real estate value.
The business value component of a gaming property reflects
a number of intangibles including competitive positioning,
marketing strategy, management expertise, cost control,
and ultimately profitability. In the case of a highly
profitable gaming property, the value of the property via
the income capitalization approach will generally exceed
its development cost. The value attributable to the
business component is quantified via a residual technique
in which the appraiser first estimates the market value
"as is" of the going concern, then deducts the allocations
to the real estate and the furniture, fixtures, and
equipment. The residual value represents the business
value component of the subject property.
For the purpose of estimating the business value component
of the subject property, we have utilized the
aforementioned residual technique. Based on our
prospective market value estimate via the income
capitalization approach of $825,000,000, and the
prospective market value estimate via the cost approach of
$760,000,000, we conclude the total business value
component is equal to roundly $65,000,000.
----------
(10) Federal Register, Vol. 55, No. 143, July 25, 1990, p.
30205.
<PAGE>
HVS International, Mineola, New York
Statement of Assumptions and Limiting Conditions 1
15. Statement of Assumptions and Limiting Conditions
A. This self-contained appraisal report is to be used in whole and not
in part.
B. No responsibility is assumed for matters of a legal nature, nor do
we render any opinion as to title, which is assumed to be marketable
and free of any deed restrictions and easements. The property is
valued as though free and clear unless otherwise stated.
C. There are no hidden or unapparent conditions of the property,
sub-soil or structures, such as underground storage tanks, that
would render it more or less valuable. No responsibility is assumed
for these conditions or any engineering that may be required to
discover them.
D. We have not considered the existence of potentially hazardous
materials used in the construction or maintenance of the building,
such as asbestos, urea formaldehyde foam insulation, or PCBs, nor
have we considered the presence of any form of toxic waste.
Furthermore, we have also not considered polychlorinated biphengyls,
pesticides, and lead-based paints. The appraisers are not qualified
to detect any hazardous substances and urge the client to retain an
expert in this field if desired.
E. We have made no survey of the property, and assume no responsibility
in connection with such matters. Any sketches, photographs, maps,
and other exhibits are included only to assist the reader in
visualizing the property. It is assumed that the use of the land and
improvements is within the boundaries of the property described, and
that there is no encroachment or trespass unless noted.
F. All information, financial operating statements, estimates, and
opinions obtained from parties not employed by HVS International are
assumed to be true and correct. We can assume no liability resulting
from misinformation.
G. Unless noted, we assume that there are no encroachments, zoning
violations, or building violations encumbering the subject property.
H. The property is assumed to be in full compliance with all applicable
federal, state, local, and private codes, laws, consents, licenses,
and regulations (including a liquor license where appropriate), and
that all licenses, permits, certificates, franchises, and so forth
can be freely renewed or transferred to a purchaser.
<PAGE>
HVS International, Mineola, New York
Statement of Assumptions and Limiting Conditions 2
I. All mortgages, liens, encumbrances, leases, and servitude's have
been disregarded unless specified otherwise.
J. No portions of this appraisal report may be reproduced in any form
without our permission, and the report cannot be disseminated to the
public through advertising, public relations, news, sales, or other
media.
K. We are not required to give testimony or attendance in court by
reason of this analysis without previous arrangements, and only when
our standard per-diem fees and travel costs are paid prior to the
appearance.
L. If the reader is making a fiduciary or individual investment
decision and has any questions concerning the material presented in
this restricted appraisal report, it is recommended that the reader
contact us.
M. We take no responsibility for any events or circumstances that take
place subsequent to either the date of value or the date of our
field inspection, whichever occurs first.
N. The quality of a casino hotel facility's on-site management has a
direct effect on a property's economic viability and value. The
financial forecasts presented in this analysis assume responsible
ownership and competent management. Any variance from this
assumption may have a significant impact on the projected operating
results and value estimate.
O. The value estimate developed for this appraisal report is based on
an evaluation of the overall economy, and neither takes into
account, nor makes provision for, the effect of any sharp rise or
decline in local or national economic conditions. To the extent that
wages and other operating expenses may advance during the economic
life of the property, we expect that the prices of rooms, food,
beverages, and services will be adjusted to at least offset these
advances. We do not warrant that the estimates will be attained, but
they have been prepared on the basis of information obtained during
the course of this study and are intended to reflect the
expectations of typical investors.
P. This analysis assumes continuation of all Internal Revenue Service
tax code provisions as stated or interpreted on either the date of
value or the date of our field inspection, whichever occurs first.
Q. Many of the figures developed for this restricted appraisal report
were generated using sophisticated computer models that make
calculations based on numbers carried out to three or more decimal
places. In the
<PAGE>
HVS International, Mineola, New York
Statement of Assumptions and Limiting Conditions 3
interest of simplicity, most numbers have been rounded to the
nearest tenth of a percent. Thus, these figures may be subject to
small rounding errors.
R. Although this analysis employs various mathematical calculations to
provide value indications, the final estimate is subjective and may
be influenced by our experience and other factors not specifically
set forth is this letter.
S. Any distribution of the total value between the land and
improvements or between partial ownership interests applies only
under the stated use. Moreover, separate allocations between
components are not valid if this restricted appraisal report is used
in conjunction with any other analysis.
T. The Americans with Disabilities Act (ADA) became effective on
January 26, 1992. We have conducted no specific compliance survey to
determine whether the subject property is in conformity with the
various detailed requirements of the ADA. It is possible that the
property does not comply with the requirements of the act, and this
could have an unfavorable effect on the property value. Because we
have no direct evidence regarding this issue, our estimate of value
does not consider possible noncompliance with the ADA.
U. This study was prepared by HVS International, a division of Hotel
Consulting Services, Inc. All opinions, recommendations and
conclusions expressed during this assignment have been rendered by
the staff of Hotel Consulting Services, Inc. acting solely as
employees and not as individuals.
V. This appraisal assumes the existence of a reciprocal easement
agreement allowing the free flow of pedestrian traffic between all
portions of the Proposed Aladdin Hotel and Casino Mixed-Use
Development.
<PAGE>
HVS International, Mineola, New York Addenda
Addenda
Engagement Letter
Synopsis of LCI Agreement
Photographs of the Subject Property
Photographs of the Competitive Properties
<PAGE>
HVS International, Mineola, New York Qualifications
Qualifications
Mark D. Capasso
Anne R. Lloyd-Jones, CRE
Stephen Rushmore, CRE, MAI, CHA
<PAGE>
Sunrise Casino Hotel
<TABLE>
<CAPTION>
Calendar Years Ending: 2000 2001
Number of Rooms: 2,600 2,600
Occupancy: 93.0% 93.0%
Average Rate: $137.00 $141.11
Occupied Rooms: 882,570 882,570
$ (000s) %Gross PAR(1) POR(2) $ (000s) %Gross PAR(1) POR(2)
- --------------------------------------------------------------------------------------------------------------------------------
REVENUE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gaming $282,030 50.1% $108,473 $ 320 $289,060 50.0% $111,177 $327.52
Rooms 120,912 21.5 46,505 137.00 124,539 21.5 47,900 141.11
Food 61,222 10.9 23,547 69.37 63,058 10.9 24,253 71.45
Beverage 25,777 4.6 9,914 29.21 26,551 4.6 10,212 30.08
Telephone 3,529 0.6 1,357 4.00 3,635 0.6 1,398 4.12
Entertainment 38,666 6.9 14,872 43.81 39,826 6.9 15,318 45.13
Spa 15,144 2.7 5,825 17.16 15,599 2.7 6,000 17.67
Miscellaneous 15,466 2.7 5,948 17.52 15,930 2.8 6,127 18.05
-------- ------- -------- ------- -------- ------- -------- -------
Total Revenues 562,746 100.0 216,441 637.62 578,198 100.0 222,384 655.13
-------- ------- -------- ------- -------- ------- -------- -------
DEPARTMENTAL EXPENSES *
Casino 142,881 50.7 54,954 161.89 146,525 50.7 56,356 166.02
Rooms 39,923 33.0 15,355 45.23 41,121 33.0 15,816 46.59
Food 59,385 97.0 22,840 67.29 61,166 97.0 23,525 69.30
Beverage 16,497 64.0 6,345 18.69 16,993 64.0 6,536 19.25
Telephone 1,412 40.0 543 1.60 1,454 40.0 559 1.65
Entertainment 34,800 90.0 13,385 39.43 35,844 90.0 13,786 40.61
Spa 11,358 75.0 4,368 12.87 11,699 75.0 4,500 13.26
-------- ------- -------- ------- -------- ------- -------- -------
Total Dept. Expenses 317,856 56.5 122,252 360.15 326,750 56.5 125,673 370.23
-------- ------- -------- ------- -------- ------- -------- -------
DEPARTMENTAL INCOME 244,890 43.5 94,188 277.47 251,448 43.5 96,711 284.90
-------- ------- -------- ------- -------- ------- -------- -------
UNDISTRIBUTED EXPENSES
Administrative and General 59,146 10.5 22,748 67.02 60,848 10.5 23,403 68.94
Marketing 9,380 1.7 3,608 10.63 8,764 1.5 3,371 9.93
Property Maintenance 10,055 1.8 3,867 11.39 10,953 1.9 4,213 12.41
Energy 8,441 1.5 3,247 9.56 8,673 1.5 3,336 9.83
Complimentary/Promo 3,618 0.6 1,392 4.10 3,724 0.6 1,432 4.22
LCI Fee 1,097 0.2 422 1.24 1,127 0.2 434 1.28
-------- ------- -------- ------- -------- ------- -------- -------
Total Operating Expenses 91,737 16.3 35,283 103.94 94,089 16.2 36,188 106.61
-------- ------- -------- ------- -------- ------- -------- -------
HOUSE PROFIT 153,153 27.2 58,905 173.53 157,359 27.3 60,523 178.30
-------- ------- -------- ------- -------- ------- -------- -------
FIXED EXPENSES
Property Taxes 7,000 1.2 2,692 7.93 7,210 1.2 2,773 8.17
Insurance 1,188 0.2 457 1.3 1,224 0.2 471 1.4
-------- ------- -------- ------- -------- ------- -------- -------
Total 8,188 1.5 3,149 9.28 8,434 1.5 3,244 9.56
EBITDA $144,965 25.7 $ 55,756 $164.25 $148,925 25.8 $ 57,279 $168.74
Reserve for Replacement 5,627 1.0 2,164 6.38 5,782 1.0 2,224 6.55
Free Cash Flow $139,338 24.8% $ 53,591 $157.88 $143,143 24.8% $ 55,055 $162.19
======== ======= ======== ======= ======== ======= ======== =======
Food as a % of Gaming Rev 21.7% 21.8%
Beverage as a % of Gaming Rev 9.1 9.2
Beverage as a % of Food Rev 42.1 42.1
Telephone as a % of Gaming Rev 1.3 1.3
Telephone as a % of Rooms Rev 2.9 2.9
Entertainment as a % of Gaming Rev 13.7 13.8
Entertainment as a % of Rooms Rev 32.0 32.0
<CAPTION>
Calendar Years Ending: 2002
Number of Rooms: 2,600
Occupancy: 93.0%
Average Rate: $145.34
Occupied Rooms: 882,570
$ (000s) %Gross PAR(1) POR(2)
- ----------------------------------------------------------------------------------------------------
REVENUE
<S> <C> <C> <C> <C>
Gaming $297,730 50.0% $114,512 $ 337.34
Rooms 128,276 21.5 49,337 145.34
Food 64,950 10.9 24,981 73.59
Beverage 27,347 4.6 10,518 30.99
Telephone 3,744 0.6 1,440 4.24
Entertainment 41,021 6.9 15,777 46.48
Spa 16,067 2.7 6,180 18.20
Miscellaneous 16,408 2.8 6,311 18.59
-------- ------- -------- ----------
Total Revenues 595,543 100.0 229,055 674.78
-------- ------- -------- ----------
DEPARTMENTAL EXPENSES *
Casino 150,920 50.7 58,046 171.00
Rooms 42,354 33.0 16,290 47.99
Food 63,001 97.0 24,231 71.38
Beverage 17,502 64.0 6,732 19.83
Telephone 1,498 40.0 576 1.70
Entertainment 36,919 90.0 14,200 41.83
Spa 12,050 75.0 4,635 13.65
-------- ------- -------- ----------
Total Dept. Expenses 336,550 56.5 129,442 381.33
-------- ------- -------- ----------
DEPARTMENTAL INCOME 258,993 43.5 99,613 293.45
-------- ------- -------- ----------
UNDISTRIBUTED EXPENSES
Administrative and General 62,674 10.5 24,105 71.01
Marketing 9,027 1.5 3,472 10.23
Property Maintenance 12,535 2.1 4,821 14.20
Energy 8,933 1.5 3,436 10.12
Complimentary/Promo 3,835 0.6 1,475 4.35
LCI Fee 1,161 0.2 447 1.32
-------- ------- -------- ----------
Total Operating Expenses 98,165 16.4 37,756 111.23
-------- ------- -------- ----------
HOUSE PROFIT 160,828 27.1 61,857 182.23
-------- ------- -------- ----------
FIXED EXPENSES
Property Taxes 7,426 1.2 2,856 8.41
Insurance 1,261 0.2 485 1.43
-------- ------- -------- ----------
Total 8,687 1.5 3,341 9.84
EBITDA $152,140 25.6 $ 58,516 $ 172.38
Reserve for Replacement 5,955 1.0 2,291 6.75
Free Cash Flow $146,185 24.5% $ 56,225 $ 165.64
======== ======= ======== ==========
Food as a % of Gaming Rev 21.8%
Beverage as a % of Gaming Rev 9.2
Beverage as a % of Food Rev 42.1
Telephone as a % of Gaming Rev 1.3
Telephone as a % of Rooms Rev 2.9
Entertainment as a % of Gaming Rev 13.8
Entertainment as a % of Rooms Rev 32.0
<CAPTION>
Calendar Years Ending: 2003
Number of Rooms: 2,600
Occupancy: 93.0%
Average Rate: $149.70
Occupied Rooms: 882,570
$ (000s) %Gross PAR(1) POR(2)
- ----------------------------------------------------------------------------------------------------
REVENUE
<S> <C> <C> <C> <C>
Gaming $306,650 50.0 $117,942 $ 347.45
Rooms 132,124 21.5 50,817 149.70
Food 66,898 10.9 25,730 75.80
Beverage 28,168 4.6 10,834 31.92
Telephone 3,856 0.6 1,483 4.37
Entertainment 42,252 6.9 16,251 47.87
Spa 16,549 2.7 6,365 18.75
Miscellaneous 16,901 2.8 6,500 19.15
-------- ------- -------- ----------
Total Revenues 613,398 100.0 235,922 695.01
-------- ------- -------- ----------
DEPARTMENTAL EXPENSES *
Casino 155,442 50.7 59,785 176.12
Rooms 43,625 33.0 16,779 49.43
Food 64,891 97.0 24,958 73.53
Beverage 18,027 64.0 6,933 20.43
Telephone 1,542 40.0 593 1.75
Entertainment 38,027 90.0 14,626 43.09
Spa 12,412 75.0 4,774 14.06
-------- ------- -------- ----------
Total Dept. Expenses 346,642 56.5 133,324 392.76
-------- ------- -------- ----------
DEPARTMENTAL INCOME 266,756 43.5 102,598 302.25
-------- ------- -------- ----------
UNDISTRIBUTED EXPENSES
Administrative and General 64,553 10.5 24,828 73.14
Marketing 9,297 1.5 3,576 10.53
Property Maintenance 12,911 2.1 4,966 14.63
Energy 9,201 1.5 3,539 10.43
Complimentary/Promo 3,950 0.6 1,519 4.48
LCI Fee 1,196 0.2 460 1.36
-------- ------- -------- ----------
Total Operating Expenses 101,108 16.4 38,888 114.56
-------- ------- -------- ----------
HOUSE PROFIT 165,648 27.1 63,711 187.69
-------- ------- -------- ----------
FIXED EXPENSES
Property Taxes 7,649 1.2 2,942 8.67
Insurance 1,298 0.2 499 1.47
-------- ------- -------- ----------
Total 8,947 1.5 3,441 10.14
EBITDA $156,701 25.6 $ 60,270 $ 177.55
Reserve for Replacement 6,134 1.0 2,359 6.95
Free Cash Flow $150,567 24.5% $ 57,910 $ 170.60
======== ======= ======== ==========
Food as a % of Gaming Rev 21.8%
Beverage as a % of Gaming Rev 9.2
Beverage as a % of Food Rev 42.1
Telephone as a % of Gaming Rev 1.3
Telephone as a % of Rooms Rev 2.9
Entertainment as a % of Gaming Rev 13.8
Entertainment as a % of Rooms Rev 32.0
</TABLE>
* Departmental expenses expressed as a percentage of departmental revenues
(1) Per Available Room
(2) Per Occupied Room
<PAGE>
==========================================================
Gaming Devices
- --------------
Weighted Average Wager $2.45
Weighted Average Decision per Minute 7.5
Weighted Average Hold 6.51%
Hours Open 12.0
Subject:
Weighted Average Wager ERR
Weighted Average Decision per Minute ERR
Weighted Average Hold ERR
==========================================================
<TABLE>
<CAPTION>
==============================================================================================================================
Calculation of Marketwide Gaming Revenue - Gaming Devices
Year Units Absolute Change % change Utilization Factor WPU/day Total WIN Absolute Change
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Historical 1994 37,245 12.2% $105 $1,428,500,000
Historical 1995 36,191 (1,054) -2.8% 12.7% $104 $1,369,914,000 (58,586,000)
Prior Year LTM 37,483 12.4% $107 $1,467,537,000
-----------------------------------------------------------------------------------------------
Historical 1996 37,197 1,006 2.8% 11.6% $106 $1,442,373,000 (25,164,000)
-----------------------------------------------------------------------------------------------
LTM Adjustment:
Year Month Day
-------------------------------------
New Competition Enters Market 1997 1 1 01-Jan-97
-------------------------------------
Periods to Inflate Base 0.00
---------------
Growth Rate 5.0%
- ------------------------------------------------------
-----------------------------------------------------------------------------------------------
BASE YEAR 37,197 0 0.0% 12.3% $106 $1,442,565,817 192,817
- ------------------------------------------------------------------------------------------------------------------------------
Projected growth rate
1997 40,598 3,401 9.14% -3.0% $103 $1,527,229,000 $84,663,183
1998 42,267 1,669 4.11% 1.0% $104 $1,605,914,000 $78,685,000
1999 48,758 6,491 15.36% -2.0% $102 $1,815,486,000 $209,572,000
2000 57,539 8,781 18.01% -2.0% $100 $2,099,594,000 $284,108,000
2001 57,539 0 0.00% 2.0% $102 $2,141,586,000 $41,992,000
2002 57,539 0 0.00% 3.0% $105 $2,205,833,000 $64,247,000
2003 57,539 0 0.00% 3.0% $108 $2,272,008,000 $66,175,000
2004 57,539 0 0.00% 3.0% $111 $2,340,169,000 $68,161,000
2005 57,539 0 0.00% 3.0% $115 $2,410,374,000 $70,205,000
2006 57,539 0 0.00% 3.0% $118 $2,482,685,000 $72,311,000
Avg Annual % Chg 3.95% 5.55%
==============================================================================================================================
</TABLE>
Year % change
- ---------------------------------------
Historical 1994
Historical 1995 -4.1%
Prior Year LTM
----------
Historical 1996 -1.7%
----------
LTM Adjustment:
New Competition Enters Market
Periods to Inflate Base
Growth Rate
- -----------------------------
----------
BASE YEAR 5.0%
- ---------------------------------------
Projected
1997 5.87%
1998 5.15%
1999 13.05%
2000 15.65%
2001 2.00%
2002 3.00%
2003 3.00%
2004 3.00%
2005 3.00%
2006 3.00%
Avg Annual % Chg
=======================================
================================================================================
Regression Analysis
X Coefficient ERR
Constant ERR
----------------
% of Demand Induced -8.50%
----------------
----------------
Phase In - 1997 100.00%
Phase In - 1998 -35.00%
Phase In - 1999 -41.00%
Phase In - 2000 -44.00%
Phase In - 2001 -47.00%
----------------
----------------
Annual Growth Rate 3.00%
----------------
================================================================================
<PAGE>
==========================================================
Gaming Devices
- --------------
Weighted Average Wager $2.45
Weighted Average Decision per Minute 7.5
Weighted Average Hold 6.51%
Hours Open 12.0
Subject:
Weighted Average Wager ERR
Weighted Average Decision per Minute ERR
Weighted Average Hold ERR
==========================================================
<TABLE>
<CAPTION>
==============================================================================================================================
Calculation of Marketwide Gaming Revenue - Gaming Devices
Year Units Absolute Change % change Utilization Factor WPU/day Total WIN Absolute Change
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Historical 1994 37,245 12.2% $105 $1,428,500,000
Historical 1995 36,191 (1,054) -2.8% 12.7% $104 $1,369,914,000 (58,586,000)
Prior Year LTM 37,483 12.4% $107 $1,467,537,000
-----------------------------------------------------------------------------------------------
Historical 1996 37,197 1,006 2.8% 11.6% $106 $1,442,373,000 (25,164,000)
-----------------------------------------------------------------------------------------------
LTM Adjustment:
Year Month Day
-------------------------------------
New Competition Enters Market 1997 1 1 01-Jan-97
-------------------------------------
Periods to Inflate Base 0.00
---------------
Growth Rate 5.0%
- ------------------------------------------------------
-----------------------------------------------------------------------------------------------
BASE YEAR 37,197 0 0.0% 12.3% $106 $1,442,565,817 192,817
- ------------------------------------------------------------------------------------------------------------------------------
Projected growth rate
1997 40,598 3,401 9.14% -3.0% $103 $1,527,229,000 $84,663,183
1998 42,267 1,669 4.11% 1.0% $104 $1,605,914,000 $78,685,000
1999 48,758 6,491 15.36% -2.0% $102 $1,815,486,000 $209,572,000
2000 57,539 8,781 18.01% -2.0% $100 $2,099,594,000 $284,108,000
2001 57,539 0 0.00% 2.0% $102 $2,141,586,000 $41,992,000
2002 57,539 0 0.00% 3.0% $105 $2,205,833,000 $64,247,000
2003 57,539 0 0.00% 3.0% $108 $2,272,008,000 $66,175,000
2004 57,539 0 0.00% 3.0% $111 $2,340,169,000 $68,161,000
2005 57,539 0 0.00% 3.0% $115 $2,410,374,000 $70,205,000
2006 57,539 0 0.00% 3.0% $118 $2,482,685,000 $72,311,000
Avg Annual % Chg 3.95% 5.55%
==============================================================================================================================
</TABLE>
Year % change
- ---------------------------------------
Historical 1994
Historical 1995 -4.1%
Prior Year LTM
----------
Historical 1996 -1.7%
----------
LTM Adjustment:
New Competition Enters Market
Periods to Inflate Base
Growth Rate
- -----------------------------
----------
BASE YEAR 5.0%
- ---------------------------------------
Projected
1997 5.87%
1998 5.15%
1999 13.05%
2000 15.65%
2001 2.00%
2002 3.00%
2003 3.00%
2004 3.00%
2005 3.00%
2006 3.00%
Avg Annual % Chg
=======================================
================================================================================
Regression Analysis
X Coefficient ERR
Constant ERR
----------------
% of Demand Induced -8.50%
----------------
----------------
Phase In - 1997 100.00%
Phase In - 1998 -35.00%
Phase In - 1999 -41.00%
Phase In - 2000 -44.00%
Phase In - 2001 -47.00%
----------------
----------------
Annual Growth Rate 3.00%
----------------
================================================================================
<PAGE>
HVS International, Mineola, New York Nature of the Assignment 1
2. Nature of the Assignment
Subject of the
Appraisal The subject of the appraisal is the fee simple interest
in a +/- 34.31-acre parcel of land currently improved
with the Aladdin Hotel and Casino and Performing Arts
Center. The subject's civic address is 3667 Las Vegas
Boulevard, Las Vegas, Nevada. While the site is
currently improved, this appraisal assumes the
demolition of all of the current improvements, with the
exception of the Performing Arts Center. A new
mixed-use development is currently proposed for the
subject site consisting of a 2,600-room hotel and a
110,000-square-foot casino (the Aladdin Hotel and
Casino). The hotel and casino are also expected to
include approximately 71,500 square feet of meeting
space, a 1,400-seat show room, a 7,000-seat performing
arts center, nine separate food and beverage outlets,
and an expansive array of back-of-the-house facilities
typical of a large hotel and casino. The remaining
components of the mixed-use development will include a
450,000-square-foot shopping mall, a parking garage, a
second hotel with 1,000 rooms, and a central utility
plant. According to the developers, a reciprocal
easement agreement will be signed between all parties
involved with the mixed-use development. As such, a
free flow of pedestrian traffic will be allowed between
all components of the development. A draft copy of the
reciprocal easement agreement, as provided by the
developers of the project, is contained in the
appraisers' workfile.
Based on a site plan provided by the project's
developers, the hotel and casino portion of the
development will encompass +/- 18.16 acres of the
+/- 34.31-acre site. For purposes of this appraisal, we
have been asked to render an opinion as to the
prospective market value of the land and improvements
for the Aladdin Hotel and Casino portion of the
development, the market value of the entire +/- 34.31
acres of land as if vacant and ready for development,
and the market value of the +/- 18.16 acres of land
allocated to the redeveloped Aladdin Hotel and Casino
as if vacant and ready for development. As mentioned,
the subject site is located on Las Vegas Boulevard (The
Strip) in Las Vegas, Nevada.
<PAGE>
HVS International, Mineola, New York Nature of the Assignment 2
INSERT STATE MAP
<PAGE>
HVS International, Mineola, New York Nature of the Assignment 3
Objective of the The purpose of the assignment is to estimate the
Appraisal prospective market value of the Aladdin Hotel and Casino
when construction has been completed and the improvements
are operational; the market value of the underlying
+/- 34.31 acres of land of the entire site; and the
market value of the +/- 18.16 acres of land allocated to
the Aladdin Hotel and Casino portion of the development.
Market value is defined by the Office of the Comptroller
of the Currency (OCC), 12CFR, Part 34 as follows:
The most probable price which a property should bring
in a competitive and open market under all conditions
requisite to a fair sale, the buyer and seller each
acting prudently and knowledgeably, and assuming the
price is not affected by undue stimulus. Implicit in
this definition is the consummation of a sale as of a
specified date and the passing of title from seller
to buyer under conditions whereby:
1. buyer and seller are typically motivated;
2. both parties are well informed or well advised,
and acting in what they consider their own best
interests;
3. a reasonable time is allowed for exposure in the
open market;
4. payment is made in terms of cash in United States
dollars or in terms of financial arrangements
comparable thereto; and
5. the price represents the normal consideration for
the property sold unaffected by special or
creative financing or sales concessions granted by
anyone associated with the sale.(1)
"Prospective" market value is the forecast of the value
expected at a specified future date.
Marketing and We estimate the marketing period for valuation purposes
Exposure Periods of the subject property to be up to six months, assuming
that it is ultimately transacted at or near the concluded
market value. Historically, the market for gaming
investments has comprised a limited number of licensed
individuals, partnerships, and corporations with
extensive gaming experience. In addition, the significant
barriers to entry have substantially limited the pool of
qualified buyers. However, of the limited pool of buyers,
many would be eager to purchase a hotel and casino of the
size, scope, and location of the proposed subject
property. The exposure period, referring to the amount of
time necessary for the real estate to have been exposed
retrospectively, prior to our date of value, is also
estimated to be less than or equal to six months.
- ----------
(1) The Dictionary of Real Estate Appraisal - Third Edition, Appraisal
Institute, Chicago, IL, 1993, pp. 222-223.
<PAGE>
HVS International, Mineola, New York Nature of the Assignment 4
Use of the Appraisal This appraisal is being prepared for use by The Bank of
Nova Scotia, New York Agency, in connection with
financing sought by Aladdin Gaming, LLC.
Property Rights The property right appraised is the fee simple interest
Appraised in the land and improvements, including furniture,
fixtures, and equipment. Fee simple interest is defined
as "absolute ownership unencumbered by any other interest
or estate, subject only to the limitations imposed by the
governmental powers of taxation, eminent domain, police
power, and escheat."(2) The subject property is being
appraised as a going concern (i.e., an open and operating
facility).
Method of Study The methodology used to develop this appraisal is based
on the market research and valuation techniques set forth
in the textbooks we authored for the American Institute
of Real Estate Appraisers and the Appraisal Institute,
entitled The Valuation of Hotels and Motels,(3) Hotels,
Motels and Restaurants: Valuations and Market Studies,(4)
The Computerized Income Approach to Hotel/Motel Market
Studies and Valuations,(5) and Hotels and Motels: A Guide
to Market Analysis, Investment Analysis, and
Valuations.(6) In addition, forecasting models developed
by HVS Gaming Services have been utilized in the analysis
of the regional market and the subject property. The
specific steps incorporated in our analysis are outlined
as follows:
1. The subject site has been evaluated from the
viewpoint of its physical utility for the
operation of a casino hotel, as well as access,
visibility, and other relevant locational factors.
2. The surrounding economic environment, on both an
area and neighborhood level, have been reviewed to
identify specific gaming- and lodging-related
economic and demographic trends that may have an
impact on the demand for gaming and lodging
facilities.
3. An overview of the U.S. gaming industry has been
presented to provide an expanded vision of the
industry.
- ----------
(2) The Dictionary of Real Estate Appraisal - Third Edition, Appraisal
Institute, Chicago, IL, 1993, p. 140.
(3) The Valuation of Hotels and Motels, Stephen Rushmore, American Institute
of Real Estate Appraisers, Chicago, IL, 1978.
(4) Hotels, Motels and Restaurants: Valuations and Market Studies, Stephen
Rushmore, American Institute of Real Estate Appraisers, Chicago, IL, 1983.
(5) The Computerized Income Approach to Hotel/Motel Market Studies and
Valuations, Stephen Rushmore, American Institute of Real Estate
Appraisers, Chicago, IL, 1990.
(6) Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and
Valuations, Stephen Rushmore, Appraisal Institute, Chicago, IL, 1992.
<PAGE>
HVS International, Mineola, New York Nature of the Assignment 5
4. An analysis of the market's and the subject
property's table game and gaming device supply and
demand was performed via a win per unit per day
(WPUPD) model. The WPUPD model is based on the
actual WPUPD attained by the market. The resultant
statistic provides insight into demand at given
supply levels.
5. The projected marketwide table game and gaming
device WPUPD figures were then multiplied by the
proposed gaming inventory levels to arrive at an
estimate of total gaming win.
6. The subject property's gaming revenue, or win, was
projected based on a market penetration model.
Market penetration levels were based on the
historical performance of the subject property and
the quality and quantity of current and proposed
competition.
7. Documentation for an occupancy and average rate
projection was derived from an analysis based on
marketwide lodging activity and trends.
8. A detailed projection of income and expense shows
the anticipated economic benefits of the subject
property and provides the basis for the income
capitalization approach.
9. The appraisal considered the three approaches to
value: cost, sales comparison, and income
capitalization. Because casino hotel facilities
are income-producing properties that are normally
bought and sold on the basis of capitalization of
their anticipated stabilized earning power, the
greatest weight is given to the value indicated by
the income capitalization approach. We find that
most investors employ a similar procedure in
formulating their purchase decisions, and thus the
income capitalization approach most closely
reflects the rationale of typical buyers.
Scope of the All information was collected and analyzed by staff of
Assignment HVS International. Descriptive data and site plans for
the proposed subject property were supplied by the
developers, Aladdin Holdings, LLC. The site has been
inspected and the developers and future management have
been interviewed. We have gathered economic data and
information on improved sales, areawide and competitive
casino revenues, occupancies and average rates, operating
expenses, construction costs, and capitalization and
equity yield rates. We have spoken with buyers, sellers,
brokers, developers and public officials. We have
analyzed this information and have considered the sales
comparison, cost, and income approaches to value. Based
on our findings, we have prepared a forecast of income
and expense representing a
<PAGE>
HVS International, Mineola, New York Nature of the Assignment 6
stabilized year and capitalized the net income based on
current required debt and equity returns. The value
conclusion is based upon this investigation and analysis
and is conveyed herein.
Ownership and The subject property is being developed by Aladdin Gaming
Management LLC and will be owned jointly by Aladdin Gaming, LLC,
London Clubs International, and Preferred Shareholders.
This appraisal is predicated upon professional management
of the subject property by Aladdin Gaming, LLC, or an
alternative professional gaming company with a proven,
successful record of managing facilities of this nature.
Pertinent Dates The subject site was inspected by Mark D. Capasso and
Anne R. Lloyd-Jones, CRE, on August 7, 1997. Stephen
Rushmore, CRE, MAI, CHA did not physically inspect the
subject site but actively participated in the analysis.
The effective date of the prospective market value for
the Aladdin Hotel and Casino is January 1, 2000, the
anticipated date of opening. The effective date of value
for both the entire +/- 34.31-acre site and the +/- 18.16
acres of land allocated to the hotel and casino portion
of the development is August 7, 1997. All projections are
expressed in inflated dollars. The prospective market
value estimate of the Aladdin Hotel and Casino represents
2000 dollars, while the value estimates for the entire
subject site and the hotel and casino portion of the site
represent 1997 dollars.
<PAGE>
==========================================================
Gaming Devices
- --------------
Weighted Average Wager $2.45
Weighted Average Decision per Minute 7.5
Weighted Average Hold 6.51%
Hours Open 12.0
Subject:
Weighted Average Wager ERR
Weighted Average Decision per Minute ERR
Weighted Average Hold ERR
==========================================================
<TABLE>
<CAPTION>
==============================================================================================================================
Calculation of Marketwide Gaming Revenue - Gaming Devices
Year Units Absolute Change % change Utilization Factor WPU/day Total WIN Absolute Change
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Historical 1994 37,245 12.2% $105 $1,428,500,000
Historical 1995 36,191 (1,054) -2.8% 12.7% $104 $1,369,914,000 (58,586,000)
Prior Year LTM 37,483 12.4% $107 $1,467,537,000
-----------------------------------------------------------------------------------------------
Historical 1996 37,197 1,006 2.8% 11.6% $106 $1,442,373,000 (25,164,000)
-----------------------------------------------------------------------------------------------
LTM Adjustment:
Year Month Day
-------------------------------------
New Competition Enters Market 1997 1 1 01-Jan-97
-------------------------------------
Periods to Inflate Base 0.00
---------------
Growth Rate 5.0%
- ------------------------------------------------------
-----------------------------------------------------------------------------------------------
BASE YEAR 37,197 0 0.0% 12.3% $106 $1,442,565,817 192,817
- ------------------------------------------------------------------------------------------------------------------------------
Projected growth rate
1997 40,598 3,401 9.14% -3.0% $103 $1,527,229,000 $84,663,183
1998 42,267 1,669 4.11% 1.0% $104 $1,605,914,000 $78,685,000
1999 48,758 6,491 15.36% -2.0% $102 $1,815,486,000 $209,572,000
2000 57,539 8,781 18.01% -2.0% $100 $2,099,594,000 $284,108,000
2001 57,539 0 0.00% 2.0% $102 $2,141,586,000 $41,992,000
2002 57,539 0 0.00% 3.0% $105 $2,205,833,000 $64,247,000
2003 57,539 0 0.00% 3.0% $108 $2,272,008,000 $66,175,000
2004 57,539 0 0.00% 3.0% $111 $2,340,169,000 $68,161,000
2005 57,539 0 0.00% 3.0% $115 $2,410,374,000 $70,205,000
2006 57,539 0 0.00% 3.0% $118 $2,482,685,000 $72,311,000
Avg Annual % Chg 3.95% 5.55%
==============================================================================================================================
</TABLE>
Year % change
- ---------------------------------------
Historical 1994
Historical 1995 -4.1%
Prior Year LTM
----------
Historical 1996 -1.7%
----------
LTM Adjustment:
New Competition Enters Market
Periods to Inflate Base
Growth Rate
- -----------------------------
----------
BASE YEAR 5.0%
- ---------------------------------------
Projected
1997 5.87%
1998 5.15%
1999 13.05%
2000 15.65%
2001 2.00%
2002 3.00%
2003 3.00%
2004 3.00%
2005 3.00%
2006 3.00%
Avg Annual % Chg
=======================================
================================================================================
Regression Analysis
X Coefficient ERR
Constant ERR
----------------
% of Demand Induced -8.50%
----------------
----------------
Phase In - 1997 100.00%
Phase In - 1998 -35.00%
Phase In - 1999 -41.00%
Phase In - 2000 -44.00%
Phase In - 2001 -47.00%
----------------
----------------
Annual Growth Rate 3.00%
----------------
================================================================================
<PAGE>
HVS International, Mineola, New York Highest and Best Use 1
9. Highest and Best Use
The Appraisal Institute recognizes the concept of highest
and best use as a fundamental element in the
determination of value of real property, either as if
vacant or as improved. Highest and best use is defined as
follows:
The reasonably probable and legal use of vacant land or
an improved property, which is physically possible,
appropriately supported, financially feasible, and that
results in the highest value. The four criteria the
highest and best use must meet are legal permissibility,
physical possibility, financial feasibility, and maximum
profitability.(7)
As if Vacant An analysis as to the highest and best use of the land
should be made first and may be influenced by many
factors. In estimating highest and best use, there are
four stages of analysis:
1. Physically possible use. What uses of the site are
physically possible?
Despite the site's slightly irregular layout, the
size of the subject site (+/- 34.31 acres) and its
location and frontage along the Las Vegas Strip,
are considered to be highly conducive to a
large-scale mixed-use development with a hotel and
casino and various other developments. All
utilities are available to the site. In general,
the site is appropriate for a mixed-use
development including a hotel and casino.
2. Legally permissible use. What uses are permitted
by zoning and deed restrictions?
As detailed in the "Property Description" section
of this report, the site is zoned H1 - Limited
Resort and Apartment District. This ordinance
allows for a variety of uses, including lodging
and casino gaming.
3. Financially feasible use. Which possible and
permissible uses will produce a net return to the
owner of the site?
Despite several new hotel and casino developments
currently proposed for the Las Vegas Strip, the
market continues to support an efficiently
operated and marketed hotel and casino. In
addition, other forms of commercial development,
such as retail, appear to be in demand. As such,
some form of
<PAGE>
HVS International, Mineola, New York Highest and Best Use 2
mixed-use development consisting of a hotel and
casino and retail represents the highest possible
return to the owner of the site.
4. Maximally productive use. Among the feasible uses,
which use will produce the highest net return or
the highest present worth?
In consideration of the foregoing factors
influencing development in the subject's immediate
area, it is the appraisers' opinion that the
highest and best use of the subject site as if
vacant is as a mixed-use development consisting of
a hotel and casino, retail component, and various
other facilities.
- --------
(7) The Dictionary of Real Estate Appraisal - Third Edition, Appraisal
Institute, Chicago, IL., 1992, p. 149
<PAGE>
HVS International, Mineola, New York Cost Approach 1
12.
Cost Approach Market value is determined via the cost approach by first
estimating the market value of the subject land as if
vacant and available for its highest and best use, and
then adding the cost to construct the proposed subject
improvements.
We have found that knowledgeable buyers of gaming
facilities generally base their purchase decisions on
economic factors such as forecasted net income and return
on investment. In addition, gaming facilities are a
hybrid real estate and business investment. The gaming
portion of the investment, which generates the majority
of the income (and value) of a casino or a casino hotel,
is a management-intensive business which requires special
licensing and intangible expertise to operate profitably.
As gaming revenue and profit bear no relationship to the
rental of space, as is normally the case in real estate
investments, the net income and value of a casino also
bear no relationship to the replacement cost new of such
a facility. Successful casinos often generate income to
support values well in excess of the replacement cost new
of the physical plant which houses the business. In such
cases, the amount by which the value of the casino
exceeds the replacement cost new of the physical land and
improvements is considered to be the value attributable
to the business, not the real and personal property
components of the investment.
In the valuation of successful casinos, the cost approach
is relevant to distinguish the value of the real and
personal property components from that of the business
component. However, not all casinos are highly successful
and, in fact, many generate levels of net income which
are insufficient to cover the cost of capital for new
development. Such properties generally suffer from a
combination of depreciation due to physical deterioration
and incurable functional obsolescence. The reliability of
the cost approach in estimating market value is further
diminished by the quantification of incurable functional
obsolescence, which is based on numerous subjective
adjustments.
In the case of a proposed hotel and casino, the
comparison of the development cost budget with the market
value estimate based on the project's economic return
forms the basis for the feasibility conclusion.
Land Value The sales comparison approach is typically the most
appropriate technique for valuing land. This technique
compares the sales data to the subject site and adjusts
for discrepancies in the real property rights conveyed,
financing terms, conditions of sale, date of sale, and
physical attributes such as size, topography,
configuration, location, existing entitlement,
accessibility, availability of off-site improvements, and
removal of non-contributory existing improvements.
<PAGE>
HVS International, Mineola, New York Cost Approach 2
In an attempt to locate comparable land sales for the
subject property, we have used several sources, including
real estate brokers, local appraisers, and county
officials. The following data pertain to the most
comparable vacant land sales that have occurred in the
subject's area in recent years. Based on discussions with
local real estate brokers and appraisers, the following
land sales offer the most current indication of land
value. Note that the entire subject site consists of
approximately 34.31 acres of land or +/- 1,494,544 square
feet. In addition, the portion of the subject site to
contain the hotel and casino equates to +/- 18.16 acres,
or +/- 791,050 square feet.
<PAGE>
HVS International, Mineola, New York Cost Approach 3
The six comparable land transactions are described as follows:
Land Sale #1:
- -------------
Location: 3782 Las Vegas Boulevard, North of Tropicana
Avenue
Las Vegas, Nevada
Grantor: New York-New York (MGM Grand)
Grantee: La Quinta Inns
Size: +/- 2.06 acres, or +/- 89,734 square feet
Zoning: H1, Clark County
Date of Sale: March 1, 1997
Consideration: $13,500,000
Terms: All cash
Price per Acre: $6,553,998
Price per Square Foot: $150.45
Frontage on Las Vegas Blvd. 200 feet
Proposed Use: Currently improved with a La Quinta motel and
Carrows Restaurant. Purchased for future
expansion of the New York-New York Hotel and
Casino.
<PAGE>
HVS International, Mineola, New York Cost Approach 4
Land Sale #2:
- -------------
Location: 4375 Las Vegas Boulevard, South of Diablo Street
Las Vegas, Nevada
Grantor: Starfield Golf
Grantee: Cheung S. Kheng
Size: +/- 4.32 acres, or +/- 188,179 square feet
Zoning: H1, Clark County
Date of Sale: January 16, 1996
Consideration: $4,750,000
Terms: All cash
Price per Acre: $1,099,537
Price per Square Foot: $25.24
Frontage on Las Vegas Blvd. 324 feet
Proposed Use: Currently improved with a 144-unit motel in poor
condition. Future uses are unknown.
<PAGE>
HVS International, Mineola, New York Cost Approach 5
Land Sale #3:
- -------------
Location: 2616 E. Russel Road, SEC of Russel Road and Las
Vegas Boulevard
Las Vegas, Nevada
Grantor: Russell/I-15 Ltd.
Grantee: Circus Circus Enterprises
Size: +/- 73.74 acres, or +/- 3,212,114 square feet
Zoning: H1, Clark County
Date of Sale: March 3, 1995
Consideration: $73,000,000
Terms: All cash
Price per Acre: $989,965
Price per Square Foot: $22.73
Frontage on Las Vegas Blvd.: 1,600 feet
Proposed Use: Currently vacant land, it will be the future
site of Project Paradise.
<PAGE>
HVS International, Mineola, New York Cost Approach 6
Land Sale #4:
- -------------
Location: 3786 Las Vegas Boulevard, North of Tropicana
Las Vegas, Nevada
Grantor: Patricia L. Goldman
Grantee: New York-New York (MGM Grand)
Size: +/- 2.07 acres, or +/- 90,169 square feet
Zoning: H1, Clark County
Date of Sale: February 17, 1995
Consideration: $8,000,000
Terms: All cash
Price per Acre: $3,864,734
Price per Square Foot: $88.72
Frontage on Las Vegas Blvd.: 152 feet
Proposed Use: Improved with a 72-unit motel at the time of
sale. The site was purchased in order to
construct the New York-New York Hotel and
Casino.
<PAGE>
HVS International, Mineola, New York Cost Approach 7
Land Sale #5:
- -------------
Location: Las Vegas Boulevard, NEC of Las Vegas Boulevard
and Diablo Street
Las Vegas, Nevada
Grantor: Benjamin Schlomi
Grantee: Chetak Development
Size: +/- 2.51 acres, or +/- 109,336 square feet
Zoning: H1, Clark County
Date of Sale: March 7, 1994
Consideration: $3,700,000
Terms: All cash
Price per Acre: $1,474,104
Price per Square Foot: $33.84
Frontage on Las Vegas Blvd.: 260 feet
Proposed Use: Currently vacant land. The site is being held
for future development.
<PAGE>
HVS International, Mineola, New York Cost Approach 8
Land Sale #6:
-------------
Location: Las Vegas Boulevard, NWC of
Las Vegas Boulevard and
Tropicana Avenue
Las Vegas, Nevada
Grantor: Universal Resorts
Grantee: Tracinda Corporation (New
York-New York, MGM Grand)
Size: +/- 17.619 acres,
or +/- 767,482 square feet
Zoning: H1, Clark County
Date of Sale: December 15, 1992
Consideration: $31,500,000
Terms: All cash
Price per Acre: $1,787,843
Price per Square Foot: $41.04
Frontage on Las Vegas Blvd.: 692 feet
Proposed Use: The site was the main
parcel of the New York-New
York Hotel and Casino.
In addition to the previous land sales, we have
investigated one listing for an +/- 11-acre site located
across Las Vegas Boulevard from the subject property.
This site is currently vacant with the exception of a
heliport and tour company which conducts Grand Canyon
sightseeing tours. According to the site's broker, the
owner of the property turned down an offer of
$72,000,000, or roundly $6,500,000 per acre for the site.
This offer was made roughly one and a half years ago by
Steve Wynn, the owner of Mirage Resorts. In addition, the
owner of the vacant site turned down an offer by Harvey's
Casino Corporation roughly two months ago for
$90,000,000, or roundly $8,200,000 per acre. The owner's
asking price is reportedly $10,000,000 per acre. While
this information does not constitute specific evidence of
market values, it does reflect the value perceptions of
two professional casino developers for land within the
immediate vicinity of the subject property.
Land Valuation - Hotel and Casino Site
As mentioned in the "Nature of the Assignment" section of
this report, we have been instructed by our client to
value the entire +/- 34.31-acre subject site and the
+/- 18.16 acres of land dedicated to the construction of
the Proposed Aladdin Hotel and Casino. In order to derive
an estimate of value for the portion of the site
dedicated to the Proposed Aladdin Hotel and Casino from
the preceding sales data, we have created the following
land sales adjustment grid. The six sales range from
December 1992 to March 1997. We have made linear
adjustments at 30% per year to account
<PAGE>
HVS International, Mineola, New York Cost Approach 9
for the passage of time for these sales. While this
adjustment for time appears high, the current development
environment has created a significant upward pressure on
land values. This is evidenced by the difference in sales
prices for sale four and sale one. Sale four represents
the transaction of a roughly two-acre parcel used for the
New York-New York hotel and casino. Sale one was also a
roughly two-acre parcel used for the New York-New York
Hotel and Casino. These two sales took place
approximately two years apart and the difference in price
equated to $5,500,000. This equates to roughly a 30%
per-year increase, or 2.5% per month.
We have also interviewed various real estate brokers in
the Las Vegas area who indicated land values, especially
on the Strip, have averaged increases of between 25% and
50% per year since 1995. The tremendous increases in land
values on the Strip are attributable to the success of
the new, large, mega-resorts that have been developed
over the past few years. As investors realized the
strength and depth of the Las Vegas Strip gaming market,
it became clear that higher and higher land costs were
justified. As the major Strip mega-resort development
took place between 1994 and 1995, we have added an
additional upward adjustment to sale six for time. Sale
six transacted in December 1992 before the first
mega-resorts opened and investors realized the value of a
Strip location.
Cumulative adjustments necessary to account for
differences in location and size have also been applied.
The following grid details the various adjustments made
to the aforementioned land sales.
<PAGE>
HVS International, Mineola, New York Cost Approach 10
Land Sales Adjustment Grid
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Subject Land Sale #1 Land Sale #2 Land Sale #3 Land Sale #4 Land Sale #5 Land Sale #6
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Sale Price N/A $13,500,000 $4,750,000 $73,000,000 $8,000,000 $3,700,000 $31,500,000
Size (Sq. Ft.) 791,050 89,734 188,719 3,212,114 90,169 109,366 767,482
Price per Sq. Ft. N/A $150.45 $25.17 $22.73 $88.72 $33.83 $41.04
Date of Sale 08/07/97 03/01/97 01/16/96 03/03/95 02/17/95 03/07/94 12/15/92
- --------------------------------------------------------------------------------------- ---------------------------
- --------------------------------------------------------------------------------------- ------------- ------------
Market Conditions (Sale 6)
Adjustment 0.0% 0.0% 0.0% 0.0% 0.0% 100.0%
Adjusted Price $150.45 $25.17 $22.73 $88.72 $33.83 $82.09
- --------------------------------------------------------------------------------------------------------------------
Market Conditions
Months 5 19 30 30 42 57
Adjustment* 12.5% 47.5% 75.0% 75.0% 105.0% 142.5%
Adjusted Price $169.25 $37.13 $39.77 $155.26 $69.35 $199.06
Cumulative Adjustment for Site Characteristics
- --------------------------------------------------------------------------------------------------------------------
Location similar inferior inferior similar inferior similar
Adjustment 0.0% 100.0% 70.0% 0.0% 100.0% 0.0%
Functional Utility inferior inferior similar inferior inferior superior
Adjustment 30.0% 100.0% 0.0% 30.0% 90.0% -10.0%
Size smaller smaller larger smaller smaller similar
Adjustment -30.0% -30.0% 85.0% -30.0% -30.0% 0.0%
------ ------ ------ ------ ------ ------
Total Cumulative Adjustment 0.0% 170.0% 155.0% 0.0% 160.0% -10.0%
Net Adjusted Price $169.25 $100.24 $101.42 $155.26 $180.32 $179.15
========= ========= ========= ========= ========= =========
</TABLE>
* Monthly adjustment 2.50%
- --------------------------------------------------------------------------------
<PAGE>
HVS International, Mineola, New York Cost Approach 11
INSERT LAND SALE MAP
<PAGE>
HVS International, Mineola, New York Cost Approach 12
Location
Sales one, four, and six were deemed to have locations
similar to the subject property, as these transactions
represent land used for the development of the New
York-New York Hotel and Casino, located at the corner of
Tropicana Avenue and Las Vegas Boulevard approximately
one block south of the subject site. Sales two and five
were adjusted upward by 100% for their inferior location
compared to that of the subject. These sites are located
at the intersection of Las Vegas Boulevard and Diablo
street approximately one mile south of the subject site.
This area is beyond the primary development of Las Vegas
Boulevard and does not benefit from pedestrian traffic as
the subject site does. Sale three was adjusted upward by
70% for its inferior location as compared to the subject
site. Like sales two and five, sale three is located
south of the primary development of Las Vegas Boulevard.
However, it is located on the western side of Las Vegas
Boulevard and represents the future site of Project
Paradise. This project will be linked to the Luxor and
Excalibur Hotel Casinos located north of the Project
Paradise site, enhancing its location.
Functional Utility
The functional utility of land encompasses several
factors including offsite availability, topography,
configuration, and capacity. Sales one, two, four, and
five were adjusted upward by 30%, 100%, 30%, and 90%,
respectively, for their inferior functional utility as
compared to the subject property. As mentioned, sales one
and four were assemblage parcel used to construct the New
York-New York Hotel and Casino. These parcels were very
irregular in shape and lack the density needed to
construct sufficiently sized hotel casinos. Similarly,
sites two and five are irregular parcels that, while they
have frontage along Las Vegas Boulevard, do not contain
the depth needed to construct a large-scale hotel and
casino. In addition, these sites abut the McCarran
International Airport. Due to zoning restrictions, the
height of any development on these parcels is limited.
Sale three, the Project Paradise site, is considered to
have similar functional utility to the subject site and
was not adjusted. Sale six, the primary parcel used for
the construction of the New York-New York Hotel and
Casino occupies a corner parcel. As such, it was adjusted
downward by 10% for its superior functional utility as
compared to the subject site.
<PAGE>
HVS International, Mineola, New York Cost Approach 13
Size
Sales one, two, four, and five were significantly smaller
than the subject site, necessitating a 30% downward
adjustment. Sale three was roughly four times as large as
the subject site, necessitating an upward adjustment of
85%. Sale six represents the transaction of a site
similar in size to the subject. As such, sale six was not
adjusted for size.
After adjustment, the sales prices ranged from roundly
$100 to $180 per square foot, or roundly $4,400,000 to
$7,900,000 per acre. The sales that are most similar to
the subject site in terms of location establish a
narrower range of roundly $155 to $179 per square foot,
or $6,750,000 to $7,800,000 per acre. The most recent
sale reflects an adjusted price of $169.25 per square
foot, or $7,375,000 per acre. Based on this analysis, we
conclude a land value for the hotel and casino portion of
the subject site at $170 per square foot, or $7,400,000
per acre. Multiplying our per-square-foot value
conclusion by the 791,050 square feet of the subject site
results in an estimate of land value for the hotel and
casino portion of the subject site of roundly
$135,000,000.
Land Valuation - Entire Site
In order to value the entire +/- 34.31-acre subject site,
we have valued the +/- 16.15 acres of the site not being
used for the hotel and casino portion of the development
and added this value to our estimate of land value for
the hotel and casino portion of the site. The same sales
data used for our previous valuation of the hotel and
casino portion of the site was used for the non-hotel and
casino land.
As with our previous land valuation, each of the sales
was adjusted upward by 30% per year in order to account
for the passage of time. In addition, sale six received
an additional upward adjustment as it was transacted in
December 1992, before the surge in mega-resort
development. The following grid details the various
adjustments made to the comparable land sales.
<PAGE>
HVS International, Mineola, New York Cost Approach 14
Land Sales Adjustment Grid - Non-Hotel and Casino Land
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Subject Land Sale #1 Land Sale #2 Land Sale #3 Land Sale #4 Land Sale #5 Land Sale #6
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Sale Price N/A $13,500,000 $4,750,000 $73,000,000 $8,000,000 $3,700,000 $31,500,000
Size (Sq. Ft.) 703,494 89,734 188,719 3,212,114 90,169 109,366 767,482
Price per Sq. Ft. N/A $150.45 $25.17 $22.73 $88.72 $33.83 $41.04
Date of Sale 08/07/97 03/01/97 01/16/96 03/03/95 02/17/95 03/07/94 12/15/92
- -------------------------------------------------------------------------------------- --------------------------
Market Conditions (Sale 6)
Adjustment 0.0% 0.0% 0.0% 0.0% 0.0% 100.0%
Adjusted Price $150.45 $25.17 $22.73 $88.72 $33.83 $82.09
- ------------------------------------------------------------------------------------------------------------------
Market Conditions
Months 5 19 30 30 42 57
Adjustment* 12.5% 47.5% 75.0% 75.0% 105.0% 142.5%
Adjusted Price $169.25 $37.13 $39.77 $155.26 $69.35 $199.06
Cumulative Adjustment for Site Characteristics
- ------------------------------------------------------------------------------------------------------------------
Location superior inferior inferior superior inferior superior
Adjustment -60.0% 20.0% 10.0% -60.0% 20.0% -60.0%
Functional Utility inferior inferior similar inferior inferior superior
Adjustment 30.0% 50.0% 0.0% 30.0% 20.0% -10.0%
Size smaller smaller larger smaller smaller similar
Adjustment -30.0% -30.0% 85.0% -30.0% -30.0% 0.0%
----------- ---------- ----------- ---------- ---------- -----------
Total Cumulative Adjustment -60.0% 40.0% 95.0% -60.0% 10.0% -70.0%
Net Adjusted Price $67.70 $51.98 $77.55 $62.11 $76.29 $59.72
=========== ========== =========== ========== ========== ===========
</TABLE>
* Monthly adjustment 2.50%
- --------------------------------------------------------------------------------
<PAGE>
HVS International, Mineola, New York Cost Approach 15
Location
The portion of the subject site not used for the
development of the Proposed Aladdin Hotel and Casino will
not have any frontage along Las Vegas Boulevard. As such,
sales one, four, and six are considered superior to this
portion of the subject site and were adjusted downward by
60%. Note that sales one, four, and six represent the
three parcels used to develop the New York-New York Hotel
and Casino. Sales two, three, and five were deemed
inferior to the subject site and adjusted upward by 20%,
10%, and 20%, respectively. While these sites offer
frontage along Las Vegas Boulevard it is at its extreme
southern end. As mentioned, pedestrian traffic is limited
along this area of the Strip.
Functional Utility
Sales one, two, four, and five were considered to be
inferior to the non-hotel casino portion of the subject
site. Specifically, sales one and four were adjusted
upward by 30% as these parcels are irregular in shape and
do not contain the density of the subject site. Sale two
was adjusted upward by 50% as it is also irregular in
shape and is extremely limited in its development
potential by its location adjacent to McCarran
International Airport. Similarly, sale five is irregular
in shape and abuts McCarran International Airport;
however, the density of the site is superior to that of
sale two. As such, this sale was adjusted upward by 20%.
Sale six's corner location necessitates a 10% downward
adjustment for superior functional utility. Sale three's
functional utility was deemed similar to that of the
subject and was not adjusted.
Size
Sales one, two, four, and five were adjusted downward 30%
for their smaller size as compared to the non-hotel and
casino portion of the subject site. Sale three was
adjusted upward by 85% as it is significantly larger than
the subject. Sale six is similar in size to the subject
site and was not adjusted.
After adjustment, the sales prices ranged from roundly
$52 to $78 per square foot or roundly $2,300,000 to
$6,900,000 per acre. Based on this analysis, we conclude
a land value for the non-hotel and casino portion of the
subject site at $65 per square foot, or $2,800,000 per
acre. Multiplying our per-square-foot value conclusion by
the 703,494 square feet of the subject site results in an
estimate of land value for the hotel and casino portion
of the subject site of roundly $45,730,000.
Adding the estimated market value of the casino portion
of the site to the estimated market value of the
non-hotel casino portion of the site equates to roundly
<PAGE>
HVS International, Mineola, New York Cost Approach 16
$180,000,000 or $5,250,000 per acre for the +/-
34.31-acre site, or $121 per square foot for the
1,494,544-square-foot site.
Development Budget The following chart details the construction cost budget
for the proposed subject property, as prepared by the
hotel's developers.
<PAGE>
HVS International, Mineola, New York Cost Approach 17
Development Budget
Use of Funds Cost (000,000)
- ------------------------------------------------------------------------------
Project Development Costs
Direct Construction Costs $250.0
Contractor Fees and Expenses 12.3
Direct Soft Costs/Professional Fees 4.2
FF&E Soft Costs/Professional Fees 4.2
Permits and Offsite Improvements 8
Insurance Wrap Around 9.2
Model Rooms 0.4
General FF&E 58.5
Gaming Equipment 26.5
Other Owner Furnished FF&E 28.9
Theming 35
Project Contingency - Direct 12.5
Project Contingency - FF&E 12.5
-----------
Subtotal $462.2
Financial and Other Costs
Construction Interest Expense $40.8
Fees and Other Expenses 30.92
Retire Existing Debt 68.5
Repay Existing Partner Debt 5
Credit for Expenses Prepaid by Holdings -5
Credit for Sitework Contribution from Bazaar -1.4
Pre-opening Expenses 15
Working Capital 15
-----------
Subtotal $168.8
Land $135.0
-----------
Total $766.0
===========
Source: Aladdin Gaming, LLC
- --------------------------------------------------------------------------------
As shown, the total development cost estimate, excluding
land, totals roughly $631,000,000. When the appraisers'
estimate of land value is added, the total development
cost estimate for the subject property equates to roundly
$766,000,000. As a check on the reasonableness of the
development budget by the property's developers, we have
calculated the development cost of the proposed subject
property utilizing the Marshall & Swift Cost Estimator
Program.
<PAGE>
HVS International, Mineola, New York Cost Approach 18
Development Cost One of the nationally recognized authorities on
replacement cost information is Marshall & Swift. HVS
International uses the Commercial Estimator computer
program produced by Marshall & Swift. The computer cost
program employs the square-foot method in cost
estimating, which approximates the replacement cost of
the building's major components in terms of dollars per
unit of area or volume, based on known costs of similar
structures adjusted for time and physical differences.
The estimate of replacement cost by this method includes
all direct costs plus a portion of indirect costs, such
as construction financing, temporary utilities, and
general conditions.
For the purpose of developing a cost estimate using the
Marshall & Swift Commercial Estimator program, the
subject property has been classified as a hotel under
Section 41 of the Marshall Valuation Service cost guide,
with an average cost range rating for a Class A building.
According to the developers, the proposed building area
is approximately +/- 2,000,000 square feet.
Based on these considerations, as well as locational and
time adjustment factors and other criteria related to
building systems, the replacement cost of the building as
if new has been estimated through the Commercial
Estimator program. The replacement cost of the subject
hotel is estimated to be $251,360,000, or say,
$251,000,000.
Besides approximating the replacement cost of the
buildings, we have estimated the cost of the additional
site improvements. The estimated cost of the outdoor
swimming pools needs to be added to the replacement cost
of the building. The following table summarizes the cost
estimates of the site improvements. Also, indirect costs
have been derived based upon the appraisers' estimate of
financing fees, real estate taxes, and brokerage fees
associated with the subject's development. Indirect costs
have been calculated for this analysis as being equal to
5.0% of the replacement cost of the total improvements.
<PAGE>
HVS International, Mineola, New York Cost Approach 19
Development Cost
Item Total
- -----------------------------------------------------------------------------
Replacement Cost New from M&S $251,360,000
Surface Parking 568,000
Swimming Pool 243,000
------------
Subtotal 252,171,000
Indirect Costs @ 5.0% (Real Estate Taxes and Loan Fees) 12,609,000
------------
Total Improvement Replacement Cost $264,780,000
- --------------------------------------------------------------------------------
Opening Costs In addition to the replacement cost of the improvements,
opening costs must be considered. Opening costs include
the preopening marketing and administrative expenditures
of the casino, hotel, and a working capital reserve to
maintain adequate cash flow until the operation achieves
a break-even point. The following table presents the
estimated opening costs for the subject property.
Estimate of Opening Costs
Cost Per No. of
Expenses Room Rooms Total Cost
- -------------------------------------------------------------------------------
Preopening Expenses $10,000 2,600 $26,000,000
Working Capital 5,000 2,600 13,000,000
-----------
Total Opening Costs $39,000,000
- --------------------------------------------------------------------------------
Adding this component to the replacement cost of the
improvements, the total replacement cost of the property
is estimated to be roundly $304,000,000.
Personal Property Our estimate of the cost of furniture, fixtures, and
equipment is based on our knowledge and expertise in the
hotel and gaming industries, as well as on the developers
estimates of FF&E costs. As such, we have estimated the
cost of the proposed subject property's furniture,
fixtures, and equipment to be equal to roughly $65,000
per room, or a total of roundly $169,000,000
Allocation of The appraisers have considered a 25% entrepreneurial
Developer's Profit profit to be necessary and appropriate to reflect the
financial incentive required for new hotel casino
development. Developer's profit is applied to the
buildings; the furniture, fixtures, and equipment; and
the land as follows.
Allocation of Developer's Profit
<PAGE>
HVS International, Mineola, New York Cost Approach 20
Profit
Component Cost Ratio Profit
- --------------------------------------------------------------------------------
Building Improvements $303,780,000 25.0% $75,945,000
Furniture, Fixtures, and Equipment 169,000,000 25.0 42,250,000
Land 135,000,000 25.0 33,750,000
------------
Total Developer's Profit $151,945,000
- --------------------------------------------------------------------------------
Conclusion In the estimation of value according to the cost
approach, the values of several components of the total
property were quantified. The market value of the land
was determined via the sales comparison approach. The
estimated construction cost of the building improvements
was calculated according to the square-foot cost method
using a computer program developed by Marshall & Swift.
Incurable physical deterioration and external and
incurable functional obsolescence deductions were deemed
inapplicable considering the subject property's new
construction. The following table presents the various
components used to arrive at the prospective market value
via the cost approach
Summary of Value via the Cost Approach
Replacement Cost of Improvements $303,780,000
Replacement Cost of Furniture, Fixtures, and Equipment 169,000,000
Land Value 135,000,000
Developer's Profit 151,945,000
------------
Total Replacement Cost New $759,725,000
Estimated Value via the Cost Approach (Say) (Say) $760,000,000
- --------------------------------------------------------------------------------
<PAGE>
HVS International, Mineola, New York Reconciliation of Value Indications 1
- --------------------------------------------------------------------------------
================================================================================
14. Reconciliation of Value Indications
The reconciliation, which is the last step in the
appraisal process, involves summarizing and correlating
the data and procedures employed throughout the analysis.
The final conclusion of value is arrived at after
reviewing the estimates indicated by the cost, sales
comparison, and income capitalization approaches. The
relative significance, applicability, and defensibility
of each indicated value are considered, and the greatest
weight is given to that approach deemed most appropriate
for the property being appraised. The purpose of this
report is to estimate the market value of the fee simple
interest in the subject property. Our appraisal involves
a careful analysis of the property itself and the
economic, demographic, political, physical, and
environmental factors that influence real estate values.
Based on the data set forth in this report, the following
value indications were developed for theproposed hotel
and casino.
Prospective Market Value:
Approach Valuation Indication
Cost $760,000,000
Sales Comparison Not applicable
Income Capitalization $826,300,000
We generally give the cost approach limited weight in
arriving at a final value estimate because knowledgeable
buyers of gaming facilities generally base their purchase
decisions on economic factors such as forecasted net
income and return on investment rather than a property's
replacement cost. As discussed in the "Cost Approach"
section of the narrative, the principle of substitution,
upon which the cost approach is based, is highly
constrained given the circumstances of gaming in the
greater Las Vegas area. However, the appraisers have
arrived at a value estimate utilizing the cost approach.
Sales Comparison The sales comparison approach uses actual sales of
Approach similar properties to provide an indication of the
subject property's value. The strength of this approach
is that it measures value based on the investment
decisions made by actual buyers and sellers. Although we
have investigated a number of sales in an attempt to
develop a range of value indications, the lack of
comparable sales transactions and the nature of the
<PAGE>
HVS International, Mineola, New York Reconciliation of Value Indications 2
- --------------------------------------------------------------------------------
subject property's operation preclude the use of the
sales comparison approach to arrive at an estimate of
value.
Income Capitalization To estimate the subject property's value via the income
Approach capitalization approach, we analyzed the local and
regional gaming and lodging markets, examined the
competitive environment, projected penetration and WPUPD
levels, and developed a forecast of income and expense
that reflects anticipated income trends and cost
components through a stabilized year of operation. The
subject property's forecasted net income before debt
service was allocated to the mortgage and equity
components based on market rates of return and
loan-to-value ratios. Through a discounted cash flow and
income capitalization procedure, the value of each
component was calculated; the total of the mortgage and
equity components equates to the value of the property.
Our nationwide experience indicates that the procedures
used in estimating market value by the income
capitalization approach are comparable to those employed
by the investors who constitute the marketplace. For this
reason, we believe that the income capitalization
approach produces the most supportable value estimate,
and it is given the greatest weight in our final estimate
of the subject property's market value.
Value Conclusion Careful consideration has been given to the strengths and
weaknesses of the three approaches to value discussed
above. In recognition of the purpose of this appraisal,
we have given primary weight to the value indicated by
the income capitalization approach.
Based on our analysis, it is our opinion that the
prospective market value of the fee simple interest in
the Proposed Aladdin Hotel and Casino, as of January 1,
2000, is:
$825,000,000
EIGHT HUNDRED TWENTY-FIVE MILLION DOLLARS
In addition, it is our opinion that the market value of
the total +/- 34.31-acre subject site, as vacant and
including the development rights and entitlements, as of
August 7, 1997, is:
$180,000,000
ONE HUNDRED EIGHTY MILLION DOLLARS
In addition, it is our opinion that the market value of
the +/- 18.16 acres of land allocated to the Aladdin
Hotel and Casino portion of the development, as vacant
and including the development rights and entitlements, as
of August 7, 1997, is:
<PAGE>
HVS International, Mineola, New York Reconciliation of Value Indications 3
- --------------------------------------------------------------------------------
$135,000,000
ONE HUNDRED THIRTY-FIVE MILLION DOLLARS
<PAGE>
GLOBAL REFERENCES
CLIENT
Client: Mr. Jim Riley
Title:
Department:
Firm: The Bank of Nova Scotia, New York Agency
Address1:
Address2: One Liberty Plaza
City: New York, New York 10005
Phone: (212) 225-5098
Salut: Mr. Riley
Office
Firm: HVS International
Office: Mineola, New York
Header Middle
Job Number: 9710413
Property Description
The proposed mixed-use development for the subject site is expected to consist
of a 2,600-room hotel and a 110,000-square-foot casino (the Aladdin Hotel and
Casino). The hotel and casino are also expected to include approximately 71,500
square feet of meeting space, a 1,400-seat show room, a 7,000-seat performing
arts center, nine separate food and beverage outlets, and an expansive array of
back-of-the-house facilities typical of a large hotel and casino. The remaining
components of the mixed-use development will include a 450,000-square-foot
shopping bazaar, a parking garage, and a central utility plant.
GLOBAL VARIABLES
Property Name Proposed Aladdin Hotel and Casino
Prop Address 3667 Las Vegas Boulevard
Prop City Las Vegas
Prop Gov Other
Prop State Nevada
Prop County Clark
Prop Zip 89109
Owner Aladdin Holdings LLC
MSA Las Vegas Strip ($72 million and over)
Date Of Value January 1, 2000
Fiscal/Calendar Calendar
Date of Inspection August 7, 1997
Report Type Appraisal
Value Type prospective market value
Interest Appraised fee simple
Site Area (Acres) +/- 34.31
Site Area (SF) +/- 1,494,544
<PAGE>
Hotel Units 2,600
Date Built
Building Stories
Block and Lot
Zoning H1 - Limited Resort and Apartment District
Historical (Base) Year
Stabilized Year 2002
Years to Stabilize: three
Value Text EIGHT HUNDRED TWENTY-FIVE MILLION DOLLARS
Value Number $825,000,000
Value per Room
Income Value $824,100,000
Sales Value Not applicable
Cost Value $760,000,000
INCOME VARIABLES
Inflation Rate 3%
Loan To Value 60%
Interest Rate 9.0%
Amortization 20
Mortgage Constant 0.107967
Equity Yield 31.0%
Terminal Cap Rate 18.0%
Broker & Legal Commission: 2.0%
SECTION NUMBERS SECTION NAME
SExec 1 Summary of Salient Data and Conclusions
SNat 2 Nature of the Assignment
SLand 3 Property Description
SArea 4 Market Area Analysis
SOver 5 U.S. Gaming Overview
SLouis Nevada Gaming Overview
SComp 6 Gaming Supply and Demand Analysis
SGame 7 Forecast of Gaming Revenue
SLodg 8 Lodging Supply and Demand Analysis
SHBU 9 Highest and Best Use
SApps 10 Approaches to Value
SInc 11 Income Capitalization Approach
SCost 12 Cost Approach
SSales 13 Sales Comparison Approach
SRec 14 Reconciliation of Value Indications
SAssu 15 Statement of Assumptions and Limiting Conditions
SCert 16 Certification
<PAGE>
1. Summary of Salient Data and Conclusions ............................... 1
2. Nature of the Assignment .............................................. 3
3. Property Description .................................................. 9
4. Market Area Analysis .................................................. 28
5. U.S. Gaming Overview .................................................. 46
6. Gaming Supply and Demand Analysis ..................................... 58
7. Forecast of Gaming Revenue ............................................ 74
8. Lodging Supply and Demand Analysis .................................... 87
9. Highest and Best Use .................................................. 105
10. Approaches to Value .................................................. 107
11. Income Capitalization Approach ....................................... 110
12. Cost Approach ........................................................ 147
13. Sales Comparison Approach ............................................ 167
14. Reconciliation of Value Indications .................................. 173
15. Statement of Assumptions and Limiting Conditions ..................... 176
16. Certification ........................................................ 180
<PAGE>
<TABLE>
<CAPTION>
Base Year Segmented Rate Assumptions
------------------------------------
Demand Period FIT Casino Wholesale Group Annual Average Deflated ADR(1996)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Peak Weekend $175.00 $150.00 $125.00 $140.00 $150.50 $133.72
Peak Mid-week 140.00 125.00 100.00 110.00 121.50 107.95
Non-Peak Weekend 110.00 100.00 85.00 90.00 98.00 87.07
Non-Peak Mid-week 95.00 85.00 80.00 85.00 87.00 77.30
Convention 200.00 150.00 120.00 160.00 161.00 143.05
Special Event 250.00 200.00 180.00 185.00 208.00 184.81
------- ------- ------- -------
Annual Average $160.63 $134.90 $114.30 $127.41
Deflated ADR (1996) $142.72 $119.86 $101.56 $113.20
</TABLE>
<PAGE>
HVS International, San Francisco, California Qualifications of Mark D. Capasso
================================================================================
Mark D. Capasso
Employment
1994 to present HVS GAMING SERVICES
San Francisco, California
(Casino Valuations, Market Studies, Feasibility
Reports, and Gaming Analysis)
1994 to present
HOSPITALITY VALUATION SERVICES
San Francisco, California
(Hotel/Motel Valuations, Market Studies, Feasibility
Reports, and Investment Counseling)
1993 to 1994
LAS VEGAS HILTON
Las Vegas, Nevada
1992
1993 to 1994
CALIFORNIA CASINO HOTEL
Las Vegas, Nevada
1990 to 1993
QUALITY INN SUNRISE SUITES HOTEL
Las Vegas, Nevada
1988 to 1990
BRISTOL SUITES HOTEL
Dallas, Texas
Education
BS - School of Hotel Administration, University of
Nevada, Las Vegas
Scuola Administratione di Aziendale; Turin, Italy,
European Economic Community Studies
Courses: 310 Income Capitalization; SPPA; SPPB -
Appraisal Institute
Teaching and Lecture
Assignments University of Nevada, Las Vegas: Hotel Feasibility
Analysis - Guest Lecturer
Published Articles and HVS Gaming Services Industry Profile. "The
Chapters Metamorphosis of Glitter Gulch," July, 1996
<PAGE>
HVS International, San Francisco, California Qualifications of Mark D. Capasso
Casino Executive Magazine. "Managing the
Casino/Hotel," Bi-Monthly Column
Corporate and Bank of San Francisco
Institutional Clients Bank of the West
Served Banker's Trust
Boyd Gaming Corporation
CIBC Wood Gundy
CS First Boston
Caesar's World Gaming
Canadian Imperial Bank of
Commerce
Citicorp Real Estate, Inc.
Colorado Casino Resorts, Inc.
Coopers & Lybrand
Credit Lyonnais
Cupertino National Bank & Trust
Dai-Ichi Kangyo Bank, Ltd.
Evergreen Associates
First Security Commercial Mortgage
Glendale Redevelopment Agency
Hospitality Franchise System
(Ramada)
Host Marriott
IMPAC Hotels
International Bank of California
K & S Enterprises (USA) Corporation
Legacy Hospitality
Lehman Brothers
M & M Development
Manor Care
Marriott International
N & S Development
Nations Credit Commercial Corporation
Nomura Asset Capital Corporation
Northwest Lodging, Inc.
Park Lane Hotels
Patriot American Hospitality
Piccadilly Inn Hotels
The Prudential Real Estate Group
Red Lion Hotels and Inns
Redwood Bank
San Jose National Bank
The Shaner Hotel Group
Starwood Lodging
Summerfield Suites Hotel Corporation
Teacher's Insurance & Annuity Association
U.S. Bancorp
Union Bank of California
Wells Fargo Bank
West L.B.
Windsor Capital
Yasuda Trust
<PAGE>
October 7, 1997
Mr. Jim Riley
The Bank of Nova Scotia, New York Agency
One Liberty Plaza
New York, New York 10005
(212) 225-5098
Re:
Proposed Aladdin Hotel and Casino
Las Vegas, Nevada
HVS Ref.: #9710413
Dear Mr. Riley:
Enclosed please find one draft copy of the self-contained appraisal report
pertaining to the above-captioned property. We will proceed with the production
of the final reports upon your authorization. Please do not hesitate to call
with your questions or comments.
Very truly yours,
HVS International
Mark D. Capasso
Senior Associate
MDC/nkw
<PAGE>
============================
Land Sale Map
-------------
* SUBJECT
1 La Mansion del Rio
2 Havana River Walk Inn
============================
<PAGE>
================================================================================
Variables
===============================================================
Room Count 2,600
Building SF: 2,000,000
Overall Cost Rank (low=1; high=4) 4
Construction Class (A=1, B=2, C=3, D=4) 1
================================================================================
================================================================================
Marshall Valuation Data
===============================================================
Replacement Cost $251,360,000
================================================================================
================================================================================
Multipliers
===============================================================
Current Cost Multiplier 1.00
Local Multiplier 1.00
================================================================================
================================================================================
Property Improvements
===============================================================
Signs $0
Parking Spaces (0 if included in M&S) 500
Landscaped Area 0
Swimming Pool (small=1, big=4) 4
================================================================================
================================================================================
Capital Expenditure
===============================================================
Curable Building Items $0
Curable FF&E Items 0
Total Capital Expenditures $0
================================================================================
================================================================================
Age of Improvements
===============================================================
Chronological Age 0 average
Effective Age 0
================================================================================
================================================================================
FF&E
===============================================================
Per Room $
-------- -----------------
FF&E Replacement Cost 65,000 $169,000,000
Effective Age of FF&E 0
FF&E Depreciation ERR
================================================================================
================================================================================
Improvement Replacement Cost
===============================================================
Item Total Cost
--------------------------------------------------------
Building $251,360,000
Signs 0
Surface Parking 568,000
Landscaping 0
Swimming Pool 243,000
----------------
Subtotal 252,171,000
Indirect Costs @ 5.0% (Real Estate
Taxes and Loan Fees) 12,609,000
----------------
$264,780,000
Total Improvement Replacement Cost
================================================================================
<TABLE>
<CAPTION>
================================================================================
Land Value - Ground Lease Method
===============================================================
<S> <C> <C> <C>
------------------------------------
Stabilized Total Revenue (current $) $0 xxxxx -----> Stabilized Total Revenue $0
Ground Lease % 0.0% Projection Year 0
-------------
Economic Ground Rent 0 Inflation Rate 4.0%
-------------
Deflated Rooms Revenue $0
Land Capitalization Rate 0.000
====================================
Land Value ERR
Say ERR
================================================================================
</TABLE>
================================================================================
Land Value - Sales Comparison Method
===============================================================
Land Value per Sq. Ft. $170
Site Size 791,051
-------------
Land Value $134,478,670
Say $135,000,000
================================================================================
================================================================================
Opening Costs
===============================================================
No. of
Cost Rooms $
---- ----- -
Pre-opening Expenses $10,000 2,600 $26,000,000
Working Capital $5,000 2,600 13,000,000
Total Opening Costs $39,000,000
Total Replacement Cost New $303,780,000
================================================================================
================================================================================
Developer's Profit
===============================================================
Profit
Cost Ratio $
---- ----- -
Building Improvements $303,780,000 25% $75,945,000
Furniture, Fixtures,
and Equipment 169,000,000 25% 42,250,000
Land 135,000,000 25% 33,750,000
------------
Total Developer's Profit $151,945,000
================================================================================
<PAGE>
================================================================================
Total Replacement Cost
===============================================================
Hotel Cost Total Cost Per Room
--------------------------------------------------------
Building Improvements $303,780,000 $116,838
Furniture, Fixtures
and Equipment 169,000,000 65,000
Land Value 135,000,000 51,923
Developer's Profit 151,945,000 58,440
----------- ------
Total $759,725,000 $292,202
================================================================================
================================================================================
Physical Deterioration - Improvements
===============================================================
Physical Curable - Improvements
Replacement Cost of Improvements $379,725,000
Curable Physical Deterioration 0
---------
Depreciated Replacement Cost of
Improvements $379,725,000
Physical Incurable - Improvements
Chronological Age 0
Effective age 0
Typical Economic Life 60
Remaining Economic Life 60
--------------
Percent Depreciated 0.0%
Depreciated Replacement Cost of
Improvements $379,725,000
Percent Depreciated 0.0%
--------------
Incurable Physical Deterioration $0
================================================================================
================================================================================
Personal Property Deterioration and Values
===============================================================
Physical Incurable - FF&E
Replacement Cost of FF&E $211,250,000
Less: Curable FF&E Deterioration 0
--------------
Depreciated Replacement Cost of FF&E $211,250,000
Percent Depreciated ERR
Incurable Physical Deterioration ERR
Market Value of FF&E ERR
Value in Use - FF&E
Market Value of Subject via Income Approach $0
Personal Property Ratio 0.0%
--------------
Value in Use of Personal Property $0
================================================================================
================================================================================
Economic Obsolescence
===============================================================
Subject Comparable
------- ----------
Value
Stabilized (Deflated) ADR $0.00 $0.00 $760,000,000
Number of days Open 365 365
Number of Rooms 2,600 2600
Stabilized Occupancy 0.0% 0.0%
------- -----------
Rooms Revenue $0 $0
Loss in Revenue Due to External Factors $0
Incremental Net Operating Ratio 60.0%
------------
Incremental Net Income $0
Capitalization Rate 10.0%
------------
Gross Economic Obsolescence $0
Adjust for Land Component
Land Value $135,000,000
Income Approach Value 0
------------
Land to Value Ratio ERR
Percentage Attributable to
Incurable Obsolescence ERR
Net Economic Obsolescence ERR
================================================================================
================================================================================
Conclusion
===============================================================
Replacement Cost of Improvements $303,780,000
Replacement Cost of Furniture, Fixtures, and Equipment $169,000,000
Land Value $135,000,000
Developer's Profit $151,945,000
--------------
Total Replacement Cost New $759,725,000
Less: Curable Physical Deterioration-Building 0
Less: Incurable Physical Deterioriation-Building 0
Less: Curable Physical Deterioration-FF&E 0
Less: Incurable Physical Deterioriation-FF&E 0
Less: Economic Obsolecence 0
---------
Total Depreciation 0
Estimated Value by Cost Approach $759,725,000
(Say) $760,000,000
================================================================================
<TABLE>
<CAPTION>
Lookup Tables
1 2 3 4
<S> <C> <C> <C> <C>
Pre-opening Expense 1,200 2,700 4,200 5,700
Working Capital 1,200 2,000 2,800 3,500
Landscaping $2.20 $2.90 $3.85 $4.00
Swimming Pool $58,875 $111,000 $178,150 $243,250
Surface Parking $620 $760 $925 $1,135
Economic Life 1 2 3 4
Good to Exlt. 60 60 55 50
Economic Life 1 2 3 4
Low to Average 55 55 50 45
Multipliers 1.00 1.00 1.00 1.00
FF&E Depreciation:
1 40.0%
2 60.0%
3 70.0%
4 75.0%
5 80.0%
6 85.0%
7 89.0%
8 92.0%
9 95.0%
0 98.0%
Parking Cost Per Space $1,135
Landscaping Cost Per Sq. Ft. $4.00
</TABLE>
<PAGE>
========================================================
COST ANALYSIS MODEL VERSION: WIN 1.0
Developed for: April 14, 1994
HOSPITALITY VALUATION SERVICES
Developed by: Modified by:
Dexter Wood and Frank Dougherty Jin Y. Lee
========================================================
<PAGE>
05/27/1998 Market Analysis
<TABLE>
<CAPTION>
Table Games Gaming Devices
------------------------------------------------------- --------------------------------------------------------
Year Win % Change Units % Change WPUPD % Change Win % Change Units % Change WPUPD % Change
- -------------------------------------------------------------------------- --------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1992 $974,174 -- 1,101 -- $2,424 -- $1,021,805 -- 26,525 -- $106 --
1993 1,085,276 11.4% 1,116 1.4% 2,664 9.9% 1,078,632 5.6% 26,997 1.8% 109 3.7%
1994 1,441,155 32.8 1,476 32.3 2,675 0.4 1,428,500 32.4 37,245 38.0 105 (4.0)
1995 1,591,184 10.4 1,451 (1.7) 3,004 12.3 1,369,914 (4.1) 36,191 (2.8) 104 (1.3)
1996 1,515,105 (4.8) 1,495 3.0 2,777 (7.6) 1,442,373 5.3 37,197 2.8 106 2.4
Annual% Chg 11.7% 7.9% 3.5% 9.0% 8.8% 0.2%
YTD 6/96 $755,625 -- 1,468 -- 1,410 -- $729,654 -- 36,896 -- 54 --
YTD 6/97 827,644 9.5% 1,672 13.9% 1,356 (3.8)% 746,015 2.2% 40,598 10.0% 50 (7.1)%
LTM through 7/96 $1,727,721 -- 1,560 -- $3,034 -- $1,467,537 -- 37,483 -- $107
LTM through 7/97 1,724,658 (0.2)% 1,779 14.0% 2,656 (12.5)% 1,535,213 4.6% 42,104 12.3% 100 (6.9)%
</TABLE>
<PAGE>
Sunrise Casino Hotel
Interactive Value Calculation and Proof - Market Value
Value $824,143,111
Loan-to-value 60.00%
Debt Service Constant 0.158581
Term 10
Amortization 10
Interest Rate 10.00%
Terminal Cap 18.00%
Equity Yield: 30.00%
Period Total Value Debt Equity
- ------ ------------ ------------ ------------
($824,143,111) ($494,485,866) ($329,657,244)
Year1 136,148,000 78,416,006 59,729,994
Year2 142,522,000 78,416,006 64,105,994
Year3 145,559,000 78,416,006 67,142,994
Year4 149,925,000 78,416,006 71,508,994
Year5 154,424,000 78,416,006 76,007,994
Year6 159,057,000 78,416,006 80,640,994
Year7 163,827,000 78,416,006 85,410,994
Year8 168,745,000 78,416,006 90,328,994
Year9 173,806,000 78,416,006 95,389,994
Year10 1,182,921,111 78,416,006 1,104,505,105
Total Property IRR Debt IRR Equity IRR
19.2% 9.4% 27.1%
<PAGE>
Available Percent Occupied Percent Vacancy
Year Space Change Space Change Rate
- -----------------------------------------------------------------------
1991 2,149,403 -- 1,794,752 -- 16.5%
1992 2,266,181 5.4% 1,919,455 6.9% 15.3
1993 2,441,514 7.7 2,150,974 12.1 11.9
1994 2,630,558 7.7 2,446,419 13.7 7.0
1995 2,681,046 1.9 2,581,847 5.5 3.7
Avg. Annual Comp. Change,1991-95
Available Space 5.7%
Occupied Space 9.5%
Source: Metropolitan Las Vegas Office Market Conditions
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year 1996
Location Las Vegas Strip
Number of Locations 19
Number of Rooms 45,291
Occupancy 94.8%
Average Rate $79.19
Occupied Rooms 15,666,731
(000s) % Gross PAR(1) POR(2)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues
Gaming $3,194,527 52.6 % $70,533 $203.91
Rooms 1,240,619 20.4 27,392 79.19
Food 656,570 10.8 14,497 41.91
Beverage 277,885 4.6 6,136 17.74
Other Income 700,428 11.5 15,465 44.71
------- ---- ------ -----
Total Revenues 6,070,029 100.0 134,022 387.45
Departmental Expense *
Casino 1,826,188 57.2 40,321 116.56
Rooms 451,921 36.4 9,978 28.85
Food 678,850 103.4 14,989 43.33
Beverage 183,764 66.1 4,057 11.73
Other Income 427,180 61.0 9,432 27.27
------- ---- ----- -----
Total Departmental Exp 3,567,904 58.8 78,777 227.74
Departmental Income 2,502,125 41.2 55,245 159.71
Undistributed Operating Expenses
Administrative and General 663,174 10.9 14,642 42.33
Marketing 90,967 1.5 2,008 5.81
Energy 88,971 1.5 1,964 5.68
Complimentary/Promotions 40,152 0.7 887 2.56
Entertainment 63,314 1.0 1,398 4.04
------ --- ----- ----
Total 946,577 15.6 20,900 60.42
House Profit 1,555,549 25.6 34,345 99.29
Fixed Charges
Property Tax 46,350 0.8 1,023 2.96
Rent of Premises 18,157 0.3 401 1.16
Equipment Lease 3,162 0.1 70 0.20
----- --- -- ----
Total 67,670 1.1 1,494 4.32
Net Income $1,487,879 24.5 % $32,851 $94.97
========== ==== ======= ======
Food as a % of Gaming Revenue 20.6 %
Beverage as a % of Gaming Revenue 8.7
Other Income as a % of Gaming Revenue 21.9
<CAPTION>
Fiscal Year 1995
Location Las Vegas Strip
Number of Locations 19
Number of Rooms 44,490
Occupancy 94.1%
Average Rate $74.61
Occupied Rooms 15,272,638
(000s) % Gross PAR(1) POR(2)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues
Gaming $3,086,131 53.6 % $69,367 $202.07
Rooms 1,139,558 19.8 25,614 74.61
Food 632,475 11.0 14,216 41.41
Beverage 273,743 4.8 6,153 17.92
Other Income 621,797 10.8 13,976 40.71
------- ---- ------ -----
Total Revenues 5,753,705 100.0 129,326 376.73
Departmental Expense *
Casino 1,768,141 57.3 39,742 115.77
Rooms 430,029 37.7 9,666 28.16
Food 669,096 105.8 15,039 43.81
Beverage 182,125 66.5 4,094 11.92
Other Income 422,055 67.9 9,487 27.63
------- ---- ----- -----
Total Departmental Exp 3,471,445 60.3 78,028 227.30
Departmental Income 2,282,260 39.7 51,298 149.43
Undistributed Operating Expenses
Administrative and General 640,544 11.1 14,397 41.94
Marketing 89,770 1.6 2,018 5.88
Energy 89,844 1.6 2,019 5.88
Complimentary/Promotions 35,979 0.6 809 2.36
Entertainment 55,473 1.0 1,247 3.63
------ --- ----- ----
Total 911,611 15.8 20,490 59.69
House Profit 1,370,649 23.8 30,808 89.75
Fixed Charges
Property Tax 45,238 0.8 1,017 2.96
Rent of Premises 17,638 0.3 396 1.15
Equipment Lease 7,811 0.1 176 0.51
----- --- --- ----
Total 70,687 1.2 1,589 4.63
Net Income $1,299,962 22.6 % $29,219 $85.12
========== ==== ======= ======
Food as a % of Gaming Revenue 20.5 %
Beverage as a % of Gaming Revenue 8.9
Other Income as a % of Gaming Revenue 20.1
<CAPTION>
Fiscal Year 1994
Location Las Vegas Strip
Number of Locations 19
Number of Rooms 39,880
Occupancy 95.5%
Average Rate $66.20
Occupied Rooms 13,906,906
(000s) % Gross PAR POR
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues
Gaming $2,761,356 54.9 % $69,242 $198.56
Rooms 920,694 18.3 23,087 66.20
Food 566,971 11.3 14,217 40.77
Beverage 249,803 5.0 6,264 17.96
Other Income 528,005 10.5 13,240 37.97
------- ---- ------ -----
Total Revenues 5,026,830 100.0 126,050 361.46
Departmental Expense *
Casino 1,500,719 54.3 37,631 107.91
Rooms 382,610 41.6 9,594 27.51
Food 608,813 107.4 15,266 43.78
Beverage 170,017 68.1 4,263 12.23
Other Income 326,165 61.8 8,179 23.45
------- ---- ----- -----
Total Departmental Exp 2,988,324 59.4 74,933 214.88
Departmental Income 2,038,505 40.6 51,116 146.58
Undistributed Operating Expenses
Administrative and General 635,787 12.6 15,943 45.72
Marketing 85,595 1.7 2,146 6.15
Energy 76,265 1.5 1,912 5.48
Complimentary/Promotions 37,542 0.7 941 2.70
Entertainment 59,114 1.2 1,482 4.25
------ --- ----- ----
Total 894,302 17.8 22,425 64.31
House Profit 1,144,203 22.8 28,691 82.28
Fixed Charges
Property Tax 33,152 0.7 831 2.38
Rent of Premises 14,538 0.3 365 1.05
Equipment Lease 4,246 0.1 106 0.31
----- --- --- ----
Total 51,936 1.0 1,302 3.73
Net Income $1,092,267 21.7 % $27,389 $78.54
========== ==== ======= ======
Food as a % of Gaming Revenue 20.5 %
Beverage as a % of Gaming Revenue 9.0
Other Income as a % of Gaming Revenue 19.1
</TABLE>
* Departmental expenses expressed as a percentage of departmental revenues
(1) Per Available Room
(2) Per Occupied Room
Sources: Nevada Gaming Abstract, State Gaming Control Board
HVS Gaming Services
<PAGE>
September 12, 1997
Mr. Jim Riley
Bank of Nova Scotia, New York Agency
One Liberty Plaza
New York, New York 10005
(212) 225-5098 Phone
(212) 225-5172 Fax
Re: Proposed Aladdin Hotel and Casino
Las Vegas, Nevada
HVS Ref.: #9710413
Dear Mr. Riley:
Pursuant to your request, we submit this restricted appraisal
report pertaining to the above-captioned property. We have
inspected the site and facilities and analyzed the casino
hotel market conditions in the Las Vegas market area.
This letter, which complies with the requirements set forth in
the Uniform Standards of Professional Appraisal Practice for a
restricted appraisal report, is a brief recapitulation of the
appraisers' data, analyses, and conclusions. It does not
include full discussion of the data, reasoning, and analyses
that were utilized in the appraisal process to develop the
appraisers' opinion of value. Supporting documentation is
retained in the appraisers' file and will be presented in the
self-contained appraisal we are in the process of preparing,
and which should be delivered to you in approximately three
weeks. The valuation is expressly made subject to all normal
assumptions and limiting conditions, a copy of which is
provided along with the certification.
Subject of the
Appraisal The subject of the appraisal is the fee simple interest in a
+/- 34.31-acre parcel of land currently improved with the
Aladdin Hotel and Casino and Performing Arts Center. The
subject's civic address is 3667 Las Vegas Boulevard, Las
Vegas, Nevada. While the site is currently improved, this
appraisal assumes the demolition of all of the current
improvements, with the exception of the Performing Arts
Center. A new mixed-use development is currently proposed for
the subject site consisting of a 2,600-room hotel and a
100,000 square foot casino (the Aladdin Hotel and Casino), a
450,000-square-foot shopping mall, a parking garage, and a
co-generation plant. Based on a site plan provided by the
project's developers, the hotel and casino portion of the
development will encompass +/- 18.16 acres of the
+/- 34.31-acre site. For purposes of this appraisal, we have
been asked to render an opinion as to the prospective market
value of the land and improvements for the Aladdin Hotel and
Casino portion of the development, the market value of the
entire +/- 34.31 acres of land as if vacant and ready for
development, and the market value of the +/- 18.16 acres of
land allocated to the redeveloped Aladdin Hotel and Casino as
if vacant and ready for development. As
<PAGE>
mentioned, the subject site is located on Las Vegas Boulevard
(The Strip) in Las Vegas, Nevada.
Purpose of
the Assignment The purpose of the assignment is to estimate the prospective
market value of the Aladdin Hotel and Casino when construction
has been completed and the improvements are operational; the
market value of the underlying +/- 34.31 of land of the entire
site; and the market value of the +/- 18.16 acres of land
allocated to the Aladdin Hotel and Casino portion of the
development. Market value is defined by the Office of the
Comptroller of the Currency (OCC), 12 CFR, Part 34 as follows:
The most probable price which a property should bring in a
competitive and open market under all conditions requisite to
a fair sale, the buyer and seller each acting prudently and
knowledgeably, and assuming the price is not affected by undue
stimulus. Implicit in this definition is the consummation of a
sale as of a specified date and the passing of title from
seller to buyer under conditions whereby:
1. buyer and seller are typically motivated;
2. both parties are well informed or well advised,
and acting in what they consider their own best
interests;
3. a reasonable time is allowed for exposure in the
open market;
4. payment is made in terms of cash in U.S. dollars
or in terms of financial arrangements comparable
thereto; and
5. the price represents the normal consideration for
the property sold unaffected by special or
creative financing or sales concessions granted by
anyone associated with the sale.
"Prospective" market value is the forecast of the value
expected at a specified future date.
2
<PAGE>
Intended Use The valuation is being prepared for Bank of Nova Scotia, New
of the Report York Agency for financing purposes. None of the information
presented should be disseminated to the public or third
parties without the express consent of HVS International.
Date of The subject property was inspected on August 7, 1997 by Mark
Inspection D. Capasso and Anne R. Lloyd Jones, CRE.
Interest Valued The property rights appraised are the fee simple ownership of
the land and improvements including furniture, fixtures, and
equipment.
Effective Dates The effective date of the prospective market value for the
of Value Aladdin Hotel and Casino is January 1, 2000, the anticipated
date of opening. The effective date of value for both the
entire +/- 34.31-acre site and the +/- 18.16 acres of land
allocated to the hotel and casino portion of the development
is August 7, 1997.
Scope of
the Appraisal All information was collected and analyzed by staff of HVS
International. Descriptive data and site plans for the
proposed subject property were supplied by the developers,
Aladdin Holdings, LLC. The site has been inspected and the
developers and future management have been interviewed. We
have gathered economic data and information on improved sales,
areawide and competitive casino revenues, occupancies and
average rates, operating expenses, construction costs, and
capitalization and equity yield rates. We have spoken with
buyers, sellers, brokers, developers and public officials. We
have analyzed this information and have considered the sales
comparison, cost, and income approaches to value. Based on our
findings, we have prepared a forecast of income and expense
representing a stabilized year and capitalized the net income
based on current required debt and equity returns. The value
conclusion is based upon this investigation and analysis and
is conveyed herein.
In the development of the opinion of value, the appraisers
performed a complete appraisal process as defined by the
Uniform Standards of Professional Practice. This means that no
departures from Standard 1 were invoked. This restricted
appraisal report presents only the appraisers' conclusions.
Supporting documentation is retained in the appraisers' file
and will be presented in our narrative self-contained report,
which we are in the process of preparing.
3
<PAGE>
Highest Highest and best use is defined as "the reasonably probable
and Best Use and legal use of vacant land or an improved property, which is
physically possible, appropriately supported, financially
feasible, and that results in the highest value. The four
criteria the highest and best use must meet are legal
permissibility, physical possibility, financial feasibility,
and maximum profitability." (1) Using these criteria, it is
our opinion that the highest and best use of the subject land
is to be improved with a mixed use development consisting of a
hotel and casino, shopping mall, and various other facilities.
Summary of
Analysis and The final conclusion of value is arrived at after reviewing
Valuation the estimates indicated by the income capitalization, sales
comparison, and cost approaches. The relative significance,
applicability, and defensibility of each value is considered,
and the greatest weight is given to that approach deemed most
appropriate for the property being appraised. In recognition
of the purpose of this appraisal, we have given primary weight
to the value indicated by the income capitalization approach
and made some subjective adjustments based on the sales
comparison and cost approaches, in developing an estimate of
the prospective value of the proposed property. In developing
an estimate of value of the subject sites, as vacant, we have
relied primarily on the sales comparison approach.
Based on the available data, our analysis and experience in
the hotel industry, it is our opinion that the "prospective"
market value of the fee simple interest in the proposed
Aladdin Hotel and Casino (as previously described), as of the
date the project is complete and operational, assumed to be on
or about January 1, 2000, will be:
$825,000,000
EIGHT HUNDRED TWENTY FIVE MILLION DOLLARS
In addition, it is our opinion that the market value of the
total, +/- 34.31-acre subject site, as vacant and including
the development rights and entitlements, as of August 7, 1997,
is:
$180,000,000
ONE HUNDRED EIGHTY MILLION DOLLARS
--------
(1) Appraisal Institute. The Dictionary of Real Estate
Appraisal. 3rd ed. Chicago: Author, 1993, p. 171.
4
<PAGE>
In addition, it is our opinion that the market value of the
+/- 18.16 acres of land allocated to the Aladdin Hotel and
Casino portion of the development, as vacant and including the
development rights and entitlements, as of August 7, 1997, is:
$135,000,000
ONE HUNDRED THIRTY FIVE MILLION DOLLARS
Exposure and
Marketing
Periods Based upon current market conditions, we believe the property
could transact at this price with exposure and marketing
periods of up to six months.
We hereby certify that we have no undisclosed interest in the
property, and our employment and compensation are not
contingent upon our valuation. This restricted appraisal
report is for internal use only and, as previously noted, does
not include full discussion of the data, reasoning, and
analyses that were utilized in the appraisal process. The
valuation is expressly made subject to all normal and specific
assumptions and limiting conditions, a copy of which is
included in this restricted appraisal report.
Very truly yours,
HVS International
A Division of Hotel Consulting
Services, Inc.
Mark D. Capasso
Senior Associate
Anne R. Lloyd-Jones, CRE
Senior Vice President
Stephen Rushmore, CRE, MAI, CHA
President
5
<PAGE>
Statement of Assumptions and Limiting Conditions
This restricted appraisal report complies with the requirements set forth under
Standards Rule 2-2(c) of the Uniform Standards of Professional Appraisal
Practice for a restricted appraisal report. As such, it does not include
discussions of the data, reasoning, and analyses that were used in the appraisal
process to develop the appraisers' opinion of value. Supporting documentation
concerning the data, reasoning, and analyses is retained in the appraisers'
file. The information contained in this letter is specific to the need of the
client and for the intended use stated in this letter. The appraisers are not
responsible for unauthorized use of this report. This restricted appraisal
report is to be used in whole and not in part.
No responsibility is assumed for matters of a legal nature, nor do we render any
opinion as to title, which is assumed to be marketable and free of any deed
restrictions and easements. The property is valued as though free and clear
unless otherwise stated.
There are no hidden or unapparent conditions of the property, sub-soil or
structures, such as underground storage tanks, that would render it more or less
valuable. No responsibility is assumed for these conditions or any engineering
that may be required to discover them.
We have not considered the existence of potentially hazardous materials used in
the construction or maintenance of the building, such as asbestos, urea
formaldehyde foam insulation, or PCBs, nor have we considered the presence of
any form of toxic waste. Furthermore, we have also not considered
polychlorinated biphengyls, pesticides, and lead-based paints. The appraisers
are not qualified to detect any hazardous substances and urge the client to
retain an expert in this field if desired.
We have made no survey of the property, and assume no responsibility in
connection with such matters. Any sketches, photographs, maps, and other
exhibits are included only to assist the reader in visualizing the property. It
is assumed that the use of the land and improvements is within the boundaries of
the property described, and that there is no encroachment or trespass unless
noted.
All information, financial operating statements, estimates, and opinions
obtained from parties not employed by HVS International are assumed to be true
and correct. We can assume no liability resulting from misinformation.
Unless noted, we assume that there are no encroachments, zoning violations, or
building violations encumbering the subject property.
The property is assumed to be in full compliance with all applicable federal,
state, local, and private codes, laws, consents, licenses, and regulations
(including a liquor license where appropriate), and that all licenses, permits,
certificates, franchises, and so forth can be freely renewed or transferred to a
purchaser.
All mortgages, liens, encumbrances, leases, and servitude's have been
disregarded unless specified otherwise.
No portions of this restricted appraisal report may be reproduced in any form
without our permission, and the report cannot be disseminated to the public
through advertising, public relations, news, sales, or other media.
We are not required to give testimony or attendance in court by reason of this
analysis without previous arrangements, and only when our standard per-diem fees
and travel costs are paid prior to the appearance.
6
<PAGE>
If the reader is making a fiduciary or individual investment decision and has
any questions concerning the material presented in this restricted appraisal
report, it is recommended that the reader contact us.
We take no responsibility for any events or circumstances that take place
subsequent to either the date of value or the date of our field inspection,
whichever occurs first.
The quality of a casino hotel facility's on-site management has a direct effect
on a property's economic viability and value. The financial forecasts presented
in this analysis assume responsible ownership and competent management. Any
variance from this assumption may have a significant impact on the projected
operating results and value estimate.
The value estimate developed for this restricted appraisal report is based on an
evaluation of the overall economy, and neither takes into account, nor makes
provision for, the effect of any sharp rise or decline in local or national
economic conditions. To the extent that wages and other operating expenses may
advance during the economic life of the property, we expect that the prices of
rooms, food, beverages, and services will be adjusted to at least offset these
advances. We do not warrant that the estimates will be attained, but they have
been prepared on the basis of information obtained during the course of this
study and are intended to reflect the expectations of typical investors.
This analysis assumes continuation of all Internal Revenue Service tax code
provisions as stated or interpreted on either the date of value or the date of
our field inspection, whichever occurs first.
Many of the figures developed for this restricted appraisal report were
generated using sophisticated computer models that make calculations based on
numbers carried out to three or more decimal places. In the interest of
simplicity, most numbers have been rounded to the nearest tenth of a percent.
Thus, these figures may be subject to small rounding errors.
It is agreed that our liability to the client is limited to the amount of the
fee paid as liquidated damages. Our responsibility is limited to the client, and
use of this restricted appraisal report by third parties shall be solely at the
risk of the client and/or third parties.
Although this analysis employs various mathematical calculations to provide
value indications, the final estimate is subjective and may be influenced by our
experience and other factors not specifically set forth is this letter.
Any distribution of the total value between the land and improvements or between
partial ownership interests applies only under the stated use. Moreover,
separate allocations between components are not valid if this restricted
appraisal report is used in conjunction with any other analysis.
The Americans with Disabilities Act (ADA) became effective on January 26, 1992.
We have conducted no specific compliance survey to determine whether the subject
property is in conformity with the various detailed requirements of the ADA. It
is possible that the property does not comply with the requirements of the act,
and this could have an unfavorable effect on the property value. Because we have
no direct evidence regarding this issue, our estimate of value does not consider
possible noncompliance with the ADA.
7
<PAGE>
This study was prepared by HVS International, a division of Hotel Consulting
Services, Inc. All opinions, recommendations and conclusions expressed during
this assignment have been rendered by the staff of Hotel Consulting Services,
Inc. acting solely as employees and not as individuals.
CERTIFICATION
We the undersigned appraisers, hereby certify:
that the statements and opinions presented in this restricted appraisal report
subject to the limiting conditions set forth, are correct to the best of our
knowledge and belief;
that Mark D. Capasso and Anne R. Lloyd-Jones CRE, personally inspected the
property described in this report and actively participated in the analysis;
that the appraisers have extensive experience in the valuation of casino hotels
and believe that they are competent to undertake this appraisal;
that we have no current or contemplated interests in the real estate that is the
subject of this restricted appraisal report;
that we have no personal interest or bias with respect to the subject matter of
this letter or the parties involved;
that this restricted appraisal report sets forth all of the limiting conditions
(imposed by the terms of this assignment) affecting the analyses, opinions, and
conclusions presented herein;
that the fee paid for the preparation of this study is not contingent upon the
amount of the value estimate;
that this restricted appraisal report has been prepared in accordance with and
is subject to the requirements of the Code of Professional Ethics and Standards
of Professional Appraisal Practice of the Appraisal Institute;
that the use of this letter is subject to the requirements of the Appraisal
Institute relating to review by its duly authorized representatives;
that this letter has been prepared in accordance with the Uniform Standards of
Professional Appraisal Practice (as adopted by the Appraisal Foundation);
that no one other than the undersigned prepared the analyses, conclusions, and
opinions concerning real estate that are set forth in this appraisal report;
that as of the date of this restricted appraisal report, Stephen Rushmore, CRE,
MAI, CHA has completed the requirements of the continuing education program of
the Appraisal Institute;
that this appraisal is not based on a requested minimum value, a specific value,
or the approval of a loan.
/s/ Mark D. Capasso
-----------------------------------------
Mark D. Capasso, as an employee of
Hotel Consulting Services, Inc.
8
<PAGE>
/s/ Anne R. Lloyd
-----------------------------------------
Anne R. Lloyd Jones, CRE, as an
employee of Hotel Consulting Services,
Inc.
/s/ Stephen Rushmore
-----------------------------------------
Stephen Rushmore, CRE, MAI, CHA, as an
employee of Hotel Consulting Services,
Inc.
9
<PAGE>
Passenger Percent Percent Total Percent Percent
Year Enplanements Change(1) Change(2) Passengers Change(1) Change(2)
- --------------------------------------------------------------------------------
1985 123,064 -- -- 246,098 -- --
1986 164,072 33.3% 33.3% 326,946 32.9% 32.9%
1987 176,503 7.6 19.8 354,028 8.3 19.9
1988 145,541 (17.5) 5.8 294,783 (16.7) 6.2
1989 144,094 (1.0) 4.0 288,665 (2.1) 4.1
1990 140,814 (2.3) 2.7 283,550 (1.8) 2.9
1991 139,357 (1.0) 2.1 279,495 (1.4) 2.1
1992 156,529 12.3 3.5 314,312 12.5 3.6
1993 153,344 (2.0) 2.8 307,621 (2.1) 2.8
1994 168,000 -- --
1995 183,000 8.9% 8.9%
1996 198,000 8.2 8.6
(1) Annual average compounded percentage change from the previous year
(2) Annual average compounded percentage change from 1985 for historicals;
from 1994 for forecasts
Source: Medford-Jackson County Airport; FAA Terminal Forecasts
<PAGE>
Hospitality Valuation Services, Mineola, New York
Qualifications of Anne R. Lloyd-Jones, CRE
- --------------------------------------------------------------------------------
================================================================================
Anne R. Lloyd-Jones, CRE
Employment
1982 to present
HOSPITALITY VALUATION SERVICES
(Division of Hotel Appraisals, Inc.)
Mineola, New York
(Hotel/Motel Valuations, Market Studies,
Feasibility Reports and Investment Counseling)
1981
FAIRMONT HOTEL
Dallas, Texas
1979 - 1980
SAGA FOOD SERVICE
SWARTHMORE COLLEGE
Swarthmore, Pennsylvania
1977 - 1980
DARANNE CATERERS
Swarthmore, Pennsylvania
Professional
Affiliations
American Society of Real Estate Counselors -
Member (CRE)
Appraisal Institute - Candidate for Membership
Cornell Society of Hotelmen
Education
MPS - School of Hotel Administration, Cornell University
BA - Swarthmore College
Appraisal Institute
Course 1A1 - Real Estate Appraisal Principles
Course 1A2 - Basic Valuation Procedures
Course 1BA - Capitalization Theory and Techniques,
Part A
Course 1BB - Capitalization Theory and Techniques,
Part B
Course 2-1 - Case Studies in Real Estate Valuation
<PAGE>
Hospitality Valuation Services, Mineola, New York
Qualifications of Anne R. Lloyd-Jones, CRE
- --------------------------------------------------------------------------------
Course 2-3 - Standards of Professional Practice
Course 3-1 - Report Writing
<PAGE>
Hospitality Valuation Services, Mineola, New York
Qualifications of Anne R. Lloyd-Jones, CRE
- --------------------------------------------------------------------------------
Examples of Corporate
and Institutional Clients Chase Manhattan Bank, N. A.
Served Chemical
Citibank
Doubletree Hotels
Federal Home Loan Bank Board
Great Western Bank
Holiday Inns, Inc.
Interstate Hotels
Metropolitan Life
MassMutual
Marriott Corporation
Morgan Guaranty Trust
North Carolina National Bank
Paine Inc.
Salomon Inc
Sheraton Hotels
Union Bank U.
S. Economic Development Authority
Winegardner & Hammons
Wyndham Hotel Company
Hotel Chains and
Management Doubletree Hotels
Companies Appraised or Compri Hotels
Evaluated Interstate Hotels
Fairmont Hotels
Guest Quarters
Hilton Hotels Corporation
Omni International Hotels
Ramada Hotel Corp.
Servico Hotel Corp.
Winegardner & Hammons
Appearance as an
Expert Witness
Federal Bankruptcy Court, San Diego, California
Federal Bankruptcy Court, Jefferson City, Missouri
Federal Bankruptcy Court, Columbia, South Carolina
Federal Bankruptcy Court, Houston, Texas
Federal Bankruptcy Court, New York, New York
Federal Bankruptcy Court, San Bernardino,
California
Federal Bankruptcy Court, Los Angeles, California
Federal Bankruptcy Court, Charlotte, North
Carolina
Federal Bankruptcy Court, Miami, Florida
Federal District Court, Central Division, Salt
Lake City, Utah
Iowa District Court, Story County, Iowa
Texas District Court, Harris County, Texas
Federal Bankruptcy Court, Tampa, Florida
Utah District Court, Salt Lake County, Utah
<PAGE>
Hospitality Valuation Services, Mineola, New York
Qualifications of Anne R. Lloyd-Jones, CRE
- --------------------------------------------------------------------------------
Examples of Hotels
Appraised or Evaluated Arizona
- Wyndham Garden Hotel, Chandler
- Wyndham Garden Hotel
- Airport, Phoenix
- Wyndham Garden Hotel
- Union Hills, Phoenix
- Canyon Ranch Spa & Fitness Resort, Tucson
Alabama
- Holiday Inn, Birmingham
- Proposed Sheraton, Gulf Shores
- Proposed Inn, Mobile
- Holiday Inn, Sheffield
California
- Industry Hills Sheraton Hotel, City of Industry
- Piccadilly Inn, Fresno
- Proposed Inn at Foss Creek, Healdsburg
- Sunset Towers Hotel, Hollywood
- Proposed La Quinta, Irvine
- Wyndham Garden Hotel, La Jolla
- Days Inn, La Palma
- Proposed Marriott Courtyard, Palm Springs
- Proposed Club Hilton Hotel, Pleasanton
- Center Pointe Development, San Diego
- Holiday Inn-Embarcadero, San Diego
- Holiday Inn-Harbor View, San Diego
- Seven Seas Lodge, San Diego
- Proposed Fountaingrove Inn, Santa Rosa
- Sheraton Round Barn Inn, Santa Rosa
- Wyndham Garden Hotel, Sunnyvale
- Westlake Plaza Hotel, Thousand Oaks
- Proposed Marriott Courtyard, Torrance
Colorado
- Proposed Hotel, Keystone
Connecticut
- Holiday Inn, Milford
- Holiday Inn, New Britain
District of Columbia
- Grand Hotel, Washington
- Wyndham Bristol Hotel, Washington
Florida
- Kon Tiki Village, Kissimmee
- Sheraton Lakeside, Kissimmee
- Holiday Inn, 22nd Street, Miami Beach
- Holiday Inn, 87th Street, Miami Beach
- Holiday Inn, 180th Street, Miami Beach
- Sheraton Resort & Marina, St. Petersburg
- Hilton Hotel, Singer Island
- Royce Hotel, West Palm Beach
Georgia
- Marriott Hotel, Atlanta
- Wyndham Garden Hotel, Atlanta
- Holiday Inn, Brunswick
- Holiday Inn, Jekyll Island
- Mullberry Inn, Savannah
- Royal Savannah Inn, Savannah
Hawaii
- Hobron in Waikiki, Honolulu
Idaho
- Holiday Inn, Boise
- Red Lion Inn, Boise
- Super 8, Boise
Illinois
- Ramada Inn, Bloomington
- Proposed Marriott Courtyard, Glenview
- Wyndham Garden Hotel, Naperville
Indiana
- Holiday Inn, Bloomington
- Inn at the Four Winds, Bloomington
- Ramada Inn, Bloomington
- Hilton Hotel, Fort Wayne
- Airport Hilton Inn, Indianapolis
- Hilton at the Circle, Indianapolis
Iowa
- Holiday Inn, Ames
- Proposed Fairfield Inn, Des Moines
<PAGE>
Hospitality Valuation Services, Mineola, New York
Qualifications of Anne R. Lloyd-Jones, CRE
- --------------------------------------------------------------------------------
Examples of Hotels
Appraised or Evaluated Kentucky
(cont'd) - Proposed Super 8, London
- Proposed Super 8, Radcliff
Louisiana
- Sheraton Inn, Kenner
- Hotel Meridien, New Orleans
Maine
- Proposed Hotel, Old Orchard Beach
Maryland
- Brookshire Hotel, Baltimore
- Lord Baltimore Hotel, Baltimore
- Hyatt Regency, Bethesda
Massachusetts
- Proposed Marriott Courtyard, Andover
- Hyatt Regency, Cambridge
- Proposed Hotel, Franklin
- Sheraton Inn, Hyannis
- Marriott Hotel, Worcester
Michigan
- Bay Valley Inn, Bay City
- Hilton Airport, Detroit
- Westin Renaissance Center, Detroit
- Hotel Pontchartrain, Detroit
- Proposed Embassy Suites, Lansing
- Hilton Inn, Northfield
- Holiday Inn, Saginaw
Minnesota
- Wyndham Garden Hotel, Bloomington
- Marriott Hotel, Minnetonka
Missouri
- Inn at Grand Glaize, Osage Beach
- Bel Air Hilton, St. Louis
- Holiday Inn Riverfront, St. Louis
Nebraska
- Holiday Inn - Airport, Lincoln
- Holiday Inn - Northeast, Lincoln
- Marriott Hotel, Omaha
Nebraska(cont'd)
- Ramada Inn, Omaha
- Red Lion Inn, Omaha
Nevada
- Proposed Super 8, Las Vegas
New Jersey
- Ramada Inn, Edison
- Marriott Hotel, Hanover
- Headquarters Plaza, Morristown
- Hyatt Regency, New Brunswick
- Holiday Inn, North Brunswick
New York
- Hilton Hotel, Albany
- Proposed Embassy Suites, Amherst
- Holiday Inn - Arena, Binghamton
- Holiday Inn - SUNY, Binghamton
- Proposed Hotel, Binghamton
- Proposed Hilton, Brooklyn
- Marriott Hotel, Dewitt
- Metropole Hotel, Flushing
- Midway Hotel, Flushing
- Ramada Inn, Kingston
- Royce Hotel, La Guardia
- Holiday Inn, Latham
- Proposed Crowne Plaza, Manhattan
- Proposed Prince Street Hotel, Manhattan
- Proposed Roslyn Inn, Roslyn
- Proposed Le Richmonde, Rye Brook
- Hilton Hotel, Syracuse
- Hotel Syracuse, Syracuse
- Proposed Hotel, Watertown
North Carolina
- Proposed Inn, Chapel Hill
- Proposed Indep. Center Marriott Hotel,Charlotte
- Royce Hotel, Charlotte
- Howard Johnson's - North, Charlotte
- Holiday Inn - West, Durham
- Sheraton University Inn, Durham
- Holiday Inn, Fayetteville
- Holiday Inn - Downtown, Raleigh
<PAGE>
Hospitality Valuation Services, Mineola, New York
Qualifications of Anne R. Lloyd-Jones, CRE
- --------------------------------------------------------------------------------
Examples of Hotels
Appraised or Evaluated Ohio
(cont'd) - Proposed Hyatt Hotel, Cleveland
- Proposed Marriott Hotel, Cleveland
Oregon
- Holiday Inn - Airport, Portland
- Holiday Inn - South, Portland
Pennsylvania
- Quality Inn, Allentown
- Holiday Inn, Bensalem
- Proposed Marriott Courtyard, Devon
- Proposed Lafayette Inn, Easton
- Ramada Inn, Erie
- Holiday Inn, Harrisburg
- Marriott Hotel, Harrisburg
- Proposed Super 8, Harrisburg
- Proposed Super 8, Lancaster
- Holiday Inn - West, Monroeville
- Days Inn Philadelphia
- Franklin Plaza Hotel, Philadelphia
- Franklin Towne EconoLodge, Philadelphia
- Guest Quarters Hotel, Philadelphia
- Hilton Inn, Northeast, Philadelphia
- Marriott Airport Hotel, Philadelphia
- Holiday Inn - Greentree, Pittsburgh
- Holiday Inn - Parkway East, Pittsburgh
- Holiday Inn - North, Pittsburgh
- Holiday Inn - Parkway West, Pittsburgh
- Proposed Hotel, Pittsburgh
- Royce Hotel, Pittsburgh
- Westin William Penn Hotel, Pittsburgh
- Hilton Hotel, Scranton
- Proposed Marriott Courtyard, Valley Forge
- Holiday Inn - Meadowlands, Washington
- Ramada Inn, York
- Proposed Super 8, York
Rhode Island
- Proposed Hotel, Providence
- Omni Biltmore Hotel, Providence
South Carolina
- Proposed Charleston Center Hotel, Charleston
- Proposed Cooper River Inn, Charleston
South Carolina (cont'd)
- Howard Johnson's, Spartanburg
- Proposed Middleton Inn and
Conference Center, Charleston
- Best Western, North Charleston
- Proposed Marriott Courtyard, Columbia
- Fairfield Inn, Florence
- Holiday Inn, Florence
- Fairfield Inn, Greenville
- Proposed Marriott Courtyard, Greenville
- Fairfield Inn, Hilton Head
- Holiday Inn, Hilton Head
Tennessee
- Hampton Inn, Brentwood
- Proposed Marriott Courtyard, Brentwood
- Howard Johnson's, Chattanooga
- Sheraton Hotel, Chattanooga
- Howard Johnson's, Knoxville
- Proposed Capital Mall Convention Center Hotel,
Nashville
- Clarion Maxwell House, Nashville
- Holiday Inn - Briley Parkway, Nashville
- Proposed Marriott Courtyard, Nashville
- Sheraton Music City, Nashville
- Stouffer's Nashville Hotel, Nashville
- Proposed Super 8, Nashville
- Union Station Hotel, Nashville
- Wyndham Garden Hotel, Nashville
- Proposed Super 8, Union City
Texas
- Proposed Marriott Courtyard, Addison
- Proposed Marriott Courtyard, Arlington
- La Mansion, Austin
- Proposed Marriott Courtyard, Bedford
- Airport Hilton, El Paso
- Hotel Meridien, Houston
- Sheraton Hotel, Houston
- Proposed Marriott Courtyard, Las Colinas
- Proposed Marriott Courtyard, North Dallas
- La Mansion Del Norte, San Antonio
- La Mansion Del Rio, San Antonio
<PAGE>
Hospitality Valuation Services, Mineola, New York
Qualifications of Anne R. Lloyd-Jones, CRE
- --------------------------------------------------------------------------------
Examples of Hotels
Appraised or Evaluated Texas (cont'd)
(cont'd) - Proposed Marriott Courtyard, San Antonio
- Proposed Marriott Courtyard - Medical Center,
San Antonio
Utah
- Deer Valley Resort, Park City
- Hilton Inn, Salt Lake City
- Holiday Inn, Salt Lake City
- Sheraton Hotel, Salt Lake City
Virginia
- Mountain Lake Hotel, Blacksburg
- Howard Johnson's, Bristol
- Boars Head Inn, Charlottesville
- Proposed Fairfield Inn, Hampton
- Proposed Embassy Suites, Herndon
- Ramada Renaissance, Herndon
- Proposed Marriott Courtyard, Manassas
- Omni Hotel, Norfolk
- Proposed Marriott, Norfolk
- Howard Johnson's, Richmond
- Howard Johnson's, Roanoke
- Howard Johnson's, Roanoke Rapids
- Wyndham Hotel, Williamsburg
Washington
- Wyndham Garden Hotel, Bothell
- Redmond Hotel, Redmond
- Wyndham Garden Hotel, SeaTac
West Virginia
Proposed Budget Motel, Princeton
Wisconsin
- Proposed Granada Royale, Green Bay
- Holiday Inn-Downtown, Green Bay
Canada
- Inn on the Park, Toronto
Puerto Rico
- Carib Inn, San Juan
Virgin Islands
- Virgin Grand Beach Hotel, St. Thomas
Jamaica
- Holiday Inn, Montego Bay
<PAGE>
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
- --------------------------------------------------------------------------------
================================================================================
Stephen Rushmore, CRE, MAI, CHA
Employment
1980 to present
HOSPITALITY VALUATION SERVICES
(Division of Hotel Appraisals, Inc.)
Mineola, New York
(Hotel/Motel Valuations, Market Studies,
Feasibility Reports, and Investment Counseling)
1977 - 1980
1971 - 1974 HELMSLEY-SPEAR HOSPITALITY SERVICES, INC.
New York, New York
(Real Estate)
1974 - 1977
JAMES E. GIBBONS ASSOCIATES
Garden City, New York
(Mortgage Banking, Appraisals, Hotel Operations)
Affiliated
Ownership Interests HOSPITALITY VALUATION SERVICES (SAN FRANCISCO,
CALIFORNIA)
West coast office for hotel/motel appraisals and
counseling
HOSPITALITY VALUATION SERVICES (MIAMI, FLORIDA)
Southeast office for hotel/motel appraisals and
counseling
HOSPITALITY VALUATION SERVICES (BOULDER, COLORADO)
Midwest office for hotel/motel appraisals and counseling
HOSPITALITY VALUATION SERVICES - CANADA (VANCOUVER,
CANADA)
Canadian office for hotel/motel appraisals and
counseling
HOSPITALITY VALUATION SERVICES INTERNATIONAL
(LONDON, ENGLAND)
European office for hotel/motel appraisals and
counseling
HVS - FINANCIAL SERVICES
Investment banking for the hotel industry
<PAGE>
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
- --------------------------------------------------------------------------------
HVS - EXECUTIVE SEARCH
Hotel/motel executive search and human resource
consulting
<PAGE>
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
- --------------------------------------------------------------------------------
================================================================================
Affiliated
Ownership Interests HVS - ECO SERVICES
(continued) Environmental consulting for hotels and motels;
administrator of the ECOTEL designation
HOSPITALITY EQUITY INVESTORS, INC.
Hotel and motel investment and management company
TRUMBULL MARRIOTT HOTEL
General partner of a 324-room hotel and conference
center
PRINCETON HOTEL ASSOCIATES
General partner of a 128-unit Residence Inn in
Princeton, New Jersey
SEAVIEW GOLF RESORT ASSOCIATES
General partner of a 298-unit, 424-acre Marriott resort
in Absecon, New Jersey
SHELTON HOTEL ASSOCIATES
General partner of a 96-unit Residence Inn in Shelton,
Connecticut
DANBURY HOTEL ASSOCIATES
General partner of a 243-unit Hilton Hotel in Danbury,
Connecticut
PRUDENTIAL - HEI JOINT VENTURE
Joint venture partner with Prudential Insurance Company
of America on a 234-unit Embassy Suites in Atlanta,
Georgia
WESTPORT NORFOLK ASSOCIATES
General partner of a 425-unit Omni Hotel in Norfolk,
Virginia
WESTPORT BWI, LLC
General partner of a 310-unit Marriott Hotel in
Baltimore, Maryland
WESTPORT RARITAN, LLC
General partner of a 274-unit Crowne Plaza Hotel in
Raritan, New Jersey
<PAGE>
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
- --------------------------------------------------------------------------------
================================================================================
Affiliated
Ownership Interests WESTPORT NOVI BWI, LLC
(continued) General partner of a 193-unit Hilton Hotel in Novi,
Michigan
HOSPITALITY VALUATION SOFTWARE, INC.
Founder of software company that develops and
distributes hotel financial analysis software
Hotels Managed
Sheraton Hotel, Smithtown, New York
Marriott Hotel, Baltimore Airport, Maryland
Hilton Hotel, Danbury, Connecticut
Residence Inn, Princeton, New Jersey
Embassy Suites, Atlanta Airport, Georgia
Omni Hotel, Norfolk, Virginia
Crowne Plaza, Raritan, New Jersey
Hilton Hotel, Novi, Michigan
Hilton Hotel, Wilmington, Delaware
Professional
Affiliations
American Society of Real Estate Counselors - Member
(CRE) - Board of Governors
Appraisal Institute - Member (MAI) (SREA)
- Developer and Instructor, Hotel Investment and
Valuation Seminar
- Developer and Instructor, Hotel Computer Valuation
Seminar
American Hotel and Motel Association
- Certified Hotel Administrator (CHA)
- Industry Real Estate Financing Advisory Council
(IREFAC)
International Society of Hospitality Consultants -
Member (ISHC)
Foodservice Consultants Society International -
Professional Member (FCSI)
New York University - Adjunct Assistant Professor
Michigan State University - Honorary Faculty, Honorary
Alumnus
<PAGE>
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
- --------------------------------------------------------------------------------
================================================================================
Professional
Affiliations
(continued) Certified General Appraiser - Arizona, Colorado,
Connecticut, Delaware, District of Columbia, Georgia,
Illinois, Iowa, Maryland, Massachusetts, Michigan,
Minnesota, Mississippi, Missouri, Nebraska, New
Hampshire, New Jersey, New York, Oregon, Pennsylvania,
South Carolina, Tennessee, Utah, Virginia, West
Virginia, Wyoming
Licensed Real Estate Broker - New York, Pennsylvania
Board of Advisers
- Real Estate Finance Journal
- Real Estate Workouts & Asset Management
American Arbitration Association - National Real Estate
Valuation Council
Cornell Society of Hotelmen
NY University Masters in Hospitality Management -
Advisory Board
Hospitality Investment Conference - Board of Advisors
Beta Gamma Sigma - National Honor Society in Business
and Management
Endowment
Hospitality Valuation Services Professor of Hotel
Finance and Real Estate
- School of Hotel Administration, Cornell University
(currently held by Professor James J. Eyster)
BS - School of Hotel Administration, Cornell University
Education
MBA - Graduate School of Business Administration
(Finance), University of Buffalo
Candidate for PhD - School of Education, Department of
Food Service Management, New York University
List of Teaching and
Lecture Assignments Cornell University - Computer Valuation Techniques
Michigan State University - Hotel Management Contracts
University of North Carolina - Hotel Market Studies
University of Virginia - Assessing Hotels
American Arbitration Association - Real Estate
Arbitration
<PAGE>
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
- --------------------------------------------------------------------------------
================================================================================
List of Teaching and
Lecture Assignments
(continued) American Hotel and Motel Association - Hotel
Obsolescence
Appraisal Institute - Hotel Valuation
International Association of Assessing Officers - Hotel
Valuation
Montreal Appraisal Society - Total Project Analysis
Society of Real Estate Appraisers - Lease Seminar
Published Books
and Seminars
Textbooks
The Valuation of Hotels and Motels,
Appraisal Institute, Chicago, Illinois, 1978
Hotels, Motels and Restaurants: Valuations and Market
Studies,
Appraisal Institute, Chicago, Illinois, 1983
How to Perform an Economic Feasibility Study of a
Proposed Hotel/Motel,
American Society of Real Estate Counselors, Chicago,
Illinois, 1986
Hotel Investments: A Guide for Owners and Lenders,
Warren, Gorham and Lamont, Inc., New York, New York,
1990
The Computerized Income Approach to Hotel Market Studies
and Valuations,
Appraisal Institute, Chicago, Illinois, 1990
Hotel Investments: A Guide for Owners and Lenders, 1992
Supplement,
Warren, Gorham and Lamont, Inc., New York, New York,
1992
Hotel Investments: A Guide for Owners and Lenders, 1993
Supplement,
Warren, Gorham and Lamont, Inc., New York, New York,
1992
Hotels and Motels: A Guide to Market Analysis,
Investment Analysis, and Valuations, Appraisal
Institute, Chicago, Illinois, 1992
Student Manuals
The Valuation of Lease Interests,
Society of Real Estate Appraisers, Chicago, Illinois,
1976
Hotel-Motel Valuation Seminar,
Appraisal Institute, Chicago, Illinois, 1981, 1988, 1990
<PAGE>
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
- --------------------------------------------------------------------------------
The Computerized Approach to Hotel Market Studies and
Valuations Seminar,
Appraisal Institute, Chicago, Illinois, 1991
<PAGE>
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
- --------------------------------------------------------------------------------
================================================================================
Published Books
and Seminars (continued)
Demonstration
Appraisal Demonstration Appraisal of a Proposed Hotel, Spring
Valley, New York, Hospitality
Valuation Services, Mineola, New York, 1983, 1990
Chapters
The Real Estate Handbook-Second Edition, Dow
Jones-Irwin, 1989, "Hotels and Motels"
Arbitration of Real Estate Valuation Principles,
American Arbitration Association, 1987, "Arbitration in
the Hospitality Industry"
Ethics in Hospitality Management: A Book of Readings,
Educational Institute of the American Hotel and Motel
Association, 1992, "Ethics in Hotel Appraising"
The Lodging and Food Service Industry, Educational
Institute of the American Hotel and Motel Association,
1993, "Insider's Insights"
Published Articles
The Appraisal Journal
"Using Total Project Analysis to Compete for Investment
Capital," October, 1975
"The Appraisal of Food Service Facilities," July, 1980
"Publish and Prosper," October, 1980
"Valuation of Hotels and Motels for Assessment
Purposes," April, 1984
"Adjusting Comparable Sales for Hotel Assessment
Appeals," July, 1986
"Hotel Business Value and Working Capital: A
Clarification," January, 1987
"Ethics in Hotel Appraising," July, 1993
The Appraiser
"Hotel-Motel Appraisal Misconceptions Set Straight,"
January, 1979
"No Conventional Financing Available for Hotels:
Rushmore," December, 1979
"Estimating Hotel Land Values Using Comparable Ground
Leases," April, 1980
Bulletin of the Cornell
Society of Hotelmen
"Employment Philosophy for a Consulting Practice," July,
1984
The Canadian Appraiser
"Hotel/Motel Market Sales Update," Summer, 1987
<PAGE>
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
- --------------------------------------------------------------------------------
================================================================================
Published Articles
(continued)
Capital Sources
for Real Estate
"Stephen Rushmore Discusses the Future of the Lodging
Industry," December, 1994
Cayuga Advisor
"Secrets to Success in Consulting," October, 1992
Chapter News and Notes
"Quantifying a Hotel's Business Value," November, 1979
Cornell Hotel &
Restaurant
Administration
Quarterly "A Preliminary Market Study," November, 1974
"How Much is Your Place Worth Today? A Case Study in
Hotel Motel Valuation," May, 1975
"What Can Be Done About Your Hotel's Real Estate Taxes?"
May, 1977
"The Appraisal of Lodging Facilities," August, 1978
"The Appraisal of Food Service Facilities," February,
1979
"The Appraisal of Lodging Facilities - Update,"
November, 1984
"Hotel Sales Prices Down More Than 12%," May, 1991
"Seven Current Hotel Valuation Techniques," August, 1992
"The Valuation of Distressed Hotels," October, 1992
FCI Spec Sheet
"Employment Philosophy for a Consulting Practice,"
September, 1984
Hotel and Motel
Management "Average Rate vs. Project Cost," May 1, 1974
"How to Increase the Marketability of Your Motel,"
April, 1981
"Tougher Lending, Lower Room Rate Hikes On Way?" June,
1981
"What is That Mortgage Loan Going to Cost You?" August,
1981
"How to Perform a Study of Your Property's Market,"
October, 1981
"How do High Interest Rates Affect Your Motel's Value?"
December, 1981
"How to Buy a Feasibility Study That Works for You,"
February, 1982
<PAGE>
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
- --------------------------------------------------------------------------------
"Settling Lease Conflicts Quickly Through Arbitration,"
April, 1982
"Are Casino Hotels Really Worth $500,000 Per Room?"
June, 1982
"Discount Rates and Internal Rate of Return," August,
1982
"Determining a Property's Extended Life Cycle,"
November, 1982
<PAGE>
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
- --------------------------------------------------------------------------------
================================================================================
Published Articles
(continued) "Using Microcomputers for Forecasting," December, 1982
"Update on Hotel Development Costs," January, 1983
Hotel and Motel "Estimating a Site's Worth by Finding Its Profit Value,"
Management June, 1983
(continued) "Hotel Construction May Be Slowing Down a Little Bit,"
April, 1983
"The Investor's Risk Sways to Prevailing Economic
Winds," August, 1983
"Is Your Property Tax at as Low a Level as it Should
Be?" October, 1983
"The Ultimate Guest Room: Could it Ever Exist Anywhere?"
December, 1983
Hotel-Motor Inn
Journal A Preventive Maintenance System for Motels," March, 1975
Hotel Valuation
Journal
"Hotel Valuation Index Peaks During 1989," Fall, 1990
"Hotel Development Costs," Winter, 1991
"Hotel Valuation Index for 1990," Spring, 1991
"Bad Year for Hotel Sales Prices Confirmed," Spring,
1992
"Hotel Sales Prices on the Rise," Fall, 1994
Institutions/
Volume Feeding
"Greater Risk/Greater Profit Potential: Hotel Management
Contract," May, 1973
Lodging Hospitality
"How to Finance Renovation Projects," January, 1974
"Controlling Your Real Estate Taxes," July, 1978
"Putting Together a Sound Financial Package," December,
1978
"Favorable Outlook for Lodging Values," December, 1983
"Are Your Property Taxes Too High? (Part I and II)," May
and June, 1984
"Hotel Development Costs," July, 1984
"The Right Management Contract for You," September, 1984
"Selecting the Firm to Prepare Your Feasibility Study,"
October, 1984
"A Quick How-To In Hotel Valuation," November, 1984
"Updating Lodging Interest Rates," December, 1984
"Is Your Guest Experience Up to Par?" January, 1985
<PAGE>
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
- --------------------------------------------------------------------------------
================================================================================
Published Articles
(continued)
Lodging Hospitality
(continued)
"How to Perform a Breakeven Analysis," May, 1985
"Evaluating Operating Performance," June, 1985
"Hotel Lenders Toughen Underwriting Requirements," July,
1985
"Don't Forget the Pre-Opening Agreement," August, 1985
"Management Companies Should Participate in Financing,"
October, 1985
"Current Techniques for Valuing Hotel Land," November,
1985
"Hotel Development Costs," December, 1985
"Sourcing Debt Into the 1990's," January, 1986
"Hotel Valuation Thumb Rule," February, 1986
"Value in Use Versus Value in Exchange," March, 1986
"Stretching Feasibility," April, 1986
"The Management Question," May, 1986
"How to Commission a Feasibility Study," June, 1986
"Macro Trends Affecting Property Values," July, 1986
"Hotel-Motel Market Sales Update," August, 1986
"Financing Alternatives: Zero Coupon Mortgages,"
September, 1986
"Forecasting Lodging Energy Costs," October, 1986
"Portfolio Financing a Better Way," November, 1986
"Profit by Looking at History," December, 1986
"Why New York Isn't Overbuilt," February, 1987
"How to Discourage Hotel Overbuilding: A Case Study,"
April, 1987
"Structuring an Incentive Management Fee," June, 1987
"Franchising Questions and Answers," July, 1987
"Comparing Hotel Development Costs," August, 1987
"Understanding Economic Life," September, 1987
"Prices Rise for Lodging Properties," October, 1987
"Management Companies Are Key to Success," November,
1987
"Evaluating a Management Contract Fee Structure,"
December, 1987
"Check Profits Before Selecting Hotel Operator,"
January, 1988
"It's a Good Time to Review Your Taxes," February, 1988
<PAGE>
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
- --------------------------------------------------------------------------------
================================================================================
Published Articles "How to Use a Management Company Rating System," March,
(continued) 1988
"Make Sure Management Contracts Contain These Terms,"
Lodging Hospitality April, 1988
(continued) "Hotel Access and Visibility," May, 1988
"Chain Sale Strategies," July, 1988
"Evaluating a Hotel Franchise," August, 1988
"Evaluating Franchise Fees," September, 1988
"Opportunities in Economy Lodging," October, 1988
"How to Obtain a Hotel Mortgage," November, 1988
"Arbitration in the Hospitality Industry," December,
1988
"Lodging Development Cost Update," January, 1989
"Amenities as Profit Builders," February, 1989
"Hotel Values Mirror the Times," March, 1989
"Forecasting Revenue and Expenses," April, 1989
"Real Estate Jargon Made Simple," May, 1989
"Pricing a Management Contract," June, 1989
"Trends in Valuation," July, 1989
"Rescuing the Distressed Hotel," August, 1989
"Shielding Against Incompetence," September, 1989
"Hotel Valuation Revisited," October, 1989
"New Breed of Hard Budgets," November, 1989
"Figuring Cap Rates," December, 1989
"A Glance Backward," January, 1990
"Costs Creeping Up," February, 1990
"Valuing Distressed Properties," March, 1990
"Cap and Discount Rates," April, 1990
"An Open Letter," May, 1990
"Misconceptions About Appraisals," June, 1990
"Hotel Values Still Growing," July, 1990
"Hotel Renovation is Key to `90s," August, 1990
"Time Right for Hotel Leases," September, 1990
<PAGE>
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
- --------------------------------------------------------------------------------
================================================================================
Published Articles "Getting a Fix on Rates," October, 1990
(continued) "The Wrinkles of Class," November, 1990
"A Glance Backward," December, 1990
Lodging Hospitality "The Price Dropoff," January, 1991
(continued) "The Cost Washout," February, 1991
"Survival of the Fittest," March, 1991
"Looking Out and Up," April, 1991
"The Bottom is in Sight," May, 1991
"The Pitfalls of Liquidation," June, 1991
"Extra! Extra! Hospitality News," July, 1991
"The Art of Hotel Renovation," August, 1991
"No Better Time for a Tax Review," September, 1991
"No Time for Passivity," October, 1991
"What a Franchise Really Costs," November, 1991
"In Case You Hadn't Heard," January, 1992
"Negotiation - The Name of the Game," February, 1992
"Now Could be the Time to Build," March, 1992
"The Well May Stay Dry," April, 1992
"Hotel Life Expectancy," May, 1992
"Hotel Values - What a Downer," June, 1992
"How to Make Money Now," July, 1992
"Hotel Chain Class Survey," August, 1992
"Budget Dining with Rushmore," September, 1992
"Bookings Up, Rates Will Follow," October, 1992
"Hospitality Master's Good Preparation," November, 1992
"What's New on the Job Front?" January, 1993
"Where Have All the Hotels Gone?" February, 1993
"Hotel Building Costs Continue to Fall," March, 1993
"Hotel Values Head Upward," April, 1993
"The Rise and Fall of Trophy Hotels," May, 1993
<PAGE>
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
- --------------------------------------------------------------------------------
================================================================================
Published Articles "Hotel Sales and Prices Rebound," June, 1993
(continued) "Third Parties Loosening Purse Strings," July, 1993
"Beyond Recycling: The Ecotel," August, 1993
Lodging Hospitality "Time to Reduce Property Taxes," September, 1993
(continued) "Lodging: The Way I See It," October, 1993
"Choosing an Appraiser," November, 1993
"Who Needs an Asset Manager?" January, 1994
"Investing by the Numbers," February, 1994
"Fire Your Staff and Lease Them Back," March, 1994
"Published Rates Hint at Recovery," April, 1994
"Now is the Time to Start Building," May, 1994
"Hotel Values Heading Up," June, 1994
"Farewell, Friend," July, 1994
"Sales Prices Creeping Up," August, 1994
"Selecting Green Hotel Supplies," September, 1994
"Don't Write Off Full-Service Hotels," October, 1994
"Lodging REITS Are on the Rise," November, 1994
Michigan Lodging
"Hotel Development Costs," January, 1988
The Mortgage and
Real Estate
Executives Report
"Atlantic City Building Game Involves High Stakes,"
August, 1979
"How Interest Rates Affect Real Estate Values," June,
1982
"Update on Hotel Development Costs," May 1, 1983
Motel-Hotel Insider
"The $100,000 Plus Hotel Room Has Become a Reality,"
November 19, 1979
"Update on Hotel Development Costs," April 4, 1983
NAIFA - The
Appraisal Review
"Hotel Valuation Techniques," Vol. 44, 1991
Real Estate Digest
"Why Should the Management Team be Important to Hotel
Lenders," Fall, 1988
<PAGE>
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
- --------------------------------------------------------------------------------
================================================================================
<PAGE>
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
- --------------------------------------------------------------------------------
================================================================================
Published Articles
(continued)
Real Estate
Finance Journal "What is a Typical Fee for a Hotel Management Contract?"
Fall, 1988
"Hotel Franchise Fees," Winter 1989
"Why the Management Team Should be Important to Hotel
Lenders," Spring, 1989
"Hotel Values and Costs," Summer, 1989
"Structuring a Hotel Investment," Fall, 1989
"A Guide for Lenders Holding Distressed Hotel Loans,"
Winter, 1990
"Estimating Current Interest Rates for Hotel Financing,"
Spring, 1990
"Hotel Valuation Techniques," Summer, 1990
"Now is the Time to Review Your Hotel's Property Taxes,"
Fall, 1990
"Property Tax Assessments for Hotels and Motels,"
Winter, 1991
"Putting Together Hotel Management Agreements - Part I,"
Spring 1991
"Putting Together Hotel Management Agreements - Part
II," Summer, 1991
"The 1980s - The Decade of Change," Fall, 1991
"An Overview of the Hotel Industry: Past, Present, and
Future," Spring, 1994
Real Estate Forum "Casino Hotels Raise Valuation Questions," November,
1981
Real Estate
Investment Ideas "How Fuel and Energy Shortages Should Affect Investment
Decisions in the Hospitality Industry," March,
1974
"Upward Trend Continues for Sales Price of Hotel-Motel
Properties," May, 1988
"High Prices Paid for Hotel-Motel Properties," February,
1990
Real Estate Issues
"Employee Compensation for a Consulting Practice,"
Fall/Winter, 1985
"Hotel/Motel Market Sales Update," Spring/Summer, 1987
Real Estate
Newsletter
"Computers in Hotel Appraising," May 15, 1989
Real Estate
Investment Ideas
<PAGE>
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
- --------------------------------------------------------------------------------
"Hotel-Sales Update," Winter 1986
<PAGE>
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
- --------------------------------------------------------------------------------
================================================================================
Published Articles
(continued)
Real Estate Review
"Valuing Motels and Hotel in the Current Market," Fall,
1972
"Dealing With Distressed Hostelry Loans," Fall, 1975
"The Mortgage Underwriting Consultant Comes of Age,"
Fall, 1977
"Real Estate Compensation," Winter 1977
Real Estate Workouts
and Asset Management
"Stephen Rushmore on Directions in the Hospitality
Industry," September, 1992
Real Values
"Hotel Construction Cost Update," April, 1986
Restaurant and "How Much Should the Renovation Be?" March, 1986
Hotel Design "14 Notable Hotel Development Firms," December, 1987
Rushmore on
Hotel Valuation "Mortgage - Equity," Winter, 1979
"Atlantic City - From Bust to Boom," Winter, 1979
"Mortgage - Equity," Spring, 1979
"Developing Mortgage Data," Spring 1979
"Gasoline and Market Values, " Spring, 1979
"Mortgage - Equity," Fall, 1979
"Quantifying a Hotel's Business Value," Fall, 1979
"What Has Happened to Typical Hotel-Motel Development
Costs?," Fall, 1979
"Mortgage-Equity," Winter, 1980
"Extending Hotel Economic Life Through Renovation,"
Winter, 1980
"Estimating Hotel Land Values Using Comparable Ground
Leases," Winter, 1980
"Quantifying the Value of Personal Property to a Going
Hotel," Spring, 1980
"Recent Changes in New York City's Hotel Market,"
Spring, 1980
"Hotel-Motel Economic Lives," Fall, 1980
"Mortgage - Equity," Fall, 1980
"Mortgage - Equity," Winter, 1981
<PAGE>
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
- --------------------------------------------------------------------------------
"Developing Mortgage Data," Winter, 1981
"Statistical Support for Food and Beverage Projections,"
Winter, 1981
"Mortgage - Equity," Spring/Summer, 1981
<PAGE>
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
- --------------------------------------------------------------------------------
================================================================================
Published Articles
(continued) "Quantifying a Hotel's Demand," Spring/Summer, 1981
"A Five-Year Overview of Typical Hotel-Motel Development
Rushmore on Hotel Costs," Spring/Summer, 1981
Valuation (continued) "Mortgage - Equity," Winter/Spring, 1982
"Update on Hotel Capitalization Rates," Winter/Spring,
1982
"Mortgage - Equity," Summer/Fall, 1982
"Are Casino Hotels Really Worth $500,000 Per Room?"
Summer/Fall, 1982
"The Hotel-Motel Life Cycle, Summer/Fall, 1982
"Mortgage - Equity," Winter/Spring, 1983
"Update on Hotel Development Costs," Winter/Spring, 1983
"The Valuation of Hotels and Motels for Assessment
Purposes," Winter, 1984
"Hotel Capitalization Rates," Summer, 1984
"Hotel Development Cost Survey," Summer, 1984
"Selecting a Hotel Management Company," Fall, 1984
"Hotel Capitalization Rates," Spring, 1985
"How to Perform a Breakeven Analysis," Spring, 1985
"Hotel Capitalization Rates," Winter, 1986
"Hotel Development Costs," Winter, 1986
"Hotel Valuation Survey," Winter, 1987
"Impact of New Tax Laws on Hotel Values," Winter, 1987
"Hotel-Motel Market Sales Update," Winter, 1987
"Structuring an Incentive Management Fee," Fall, 1987
"Understanding Your Hotel's Economic Life," Fall, 1987
"Hotel Development Costs," Fall, 1987
"Hotel, Motel Market Sales Update," Winter, 1988
"Amenity Creep," Winter, 1989
"Hotel Franchise Fees," Winter, 1989
"Hotel Valuation Index," Fall, 1989
"Latest Trends in Hotel Values," Fall, 1989
<PAGE>
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
- --------------------------------------------------------------------------------
================================================================================
Published Articles
(continued)
U.S. Real Estate Week
"All-Suites Market Entering Second Phase," May 4, 1987
Valuation
"Hotel-Motel Market Sales Update," February, 1987
Quarterly Newsletter
Hotel Valuation Journal
Professional newsletter with a circulation of 10,000
Real Estate Column
Lodging Hospitality
Real estate editor for a major monthly hospitality
periodical
Hospitality Column
Real Estate Finance
Journal
Contributing hospitality editor
Computer Software
Hospitality Valuation
Software Hotel financial software for room night analyses, income
and expense forecasts, and valuation calculations -
developed and distributed for the Appraisal Institute
Hotel-Motel Market Data
Hospitality Market Data
Exchange Software
National clearinghouse for information pertaining to
hotel and motel transactions
Hotel Valuation Index
National index of hotel value trends for 24 individual
market areas
Hospitality
Seminar Series
Intensive short courses for hotel and restaurant
professionals
Hospitality
Bibliography
<PAGE>
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
- --------------------------------------------------------------------------------
Comprehensive literature index of hotel and restaurant
books and articles
Awards
Robert H. Armstrong
Award For the most significant contribution to The Appraisal
Journal in 1975
Activities
Commercial pilot, instrument, multi-engine; sailing;
skiing
<PAGE>
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
- --------------------------------------------------------------------------------
================================================================================
Corporate and Aetna Life Insurance
Institutional Clients AIG Real Estate Investment
Served Aldrich Eastman and Waltch
Allstate
American Airlines
America's Best Inns
Arthur Anderson & Company
Bankers Trust Company
Bank of America
Bank of Boston
Bank of Montreal
Bank of New York
Bank of Nova Scotia
Bank of Tokyo
Bank One-Columbus
Banque Indosuez
Barclay's Bank
Baybank Boston
The Beacon Companies
Bear, Stearns & Company, Inc.
Best Inns
Best Western International
Boykin Management Co.
Bradbury Suites
C. Itoh
Caesar's World
California Dept. of Transportation
Chase Lincoln First Bank, N.A.
Chase Manhattan Bank
Chemical Bank
Chrysler Capital Corporation
CIGNA
Citibank
Citicorp Real Estate
City of Boston
City of Detroit
City of Grand Rapids
City of Kalamazoo
City of Orlando
City of Philadelphia
City of Santa Monica
City of Toronto
Columbia Sussex Corporation
Continental Illinois National Bank
Copley Real Estate Advisors
Corporex Development
CRI, Inc.
Cushman and Wakefield
Days Inns
Edward J. DeBartolo Corp.
Deer Valley Ski Corporation
Doubletree Hotels
Drury Inns
Econo Lodge
Economic Development Admin.
EIE Regent International
<PAGE>
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
- --------------------------------------------------------------------------------
================================================================================
Corporate and
Institutional Clients Embassy Suites
Served (continued) Equitable Life Assurance
Equitable Real Estate Investment
European American Bank
Fairmont Hotels
Federal Deposit Insurance Corp.
First Boston
First California Savings
First Interstate Bank
First National Bank of Chicago
Four Seasons Hotels
Goldman, Sachs
Greater Orlando Aviation Authority
Great Western Bank
Great Western Savings
Guest Quarters
Hampton Inns
Hilton Hotels, Corp.
Hilton International
Holiday Corporation
Holiday Inns
Home Savings of America
Howard Johnson's
Hudson Hotels Corporation
Hyatt Hotels
Industrial Bank of Japan
Interstate Hotels
The Irvine Company
ITT Commercial Finance Corp.
Japan Airlines
JDC (America) Corporation
John Q. Hammons
John Hancock Life Insurance
Johnson & Wales College
Kenneth Leventhal & Assoc.
Kidder Peabody & Company, Inc.
La Quinta
Larken, Inc.
Lexington Companies
Loews Hotels
Harry Macklowe Real Estate
Marine Midland Bank, N.A.
Marriott Corporation
MA Bay Transit Authority
Massachusetts Mutual Life
Mellon Bank
Meridien Hotels
Merrill Lynch
Merrill Lynch Capital Markets
Metropolitan Life Insurance
Microtel
Midlantic Bank
Mitsubishi
Morgan Guaranty Bank & Trust Co.
J.P. Morgan Investment Management
Morgan Stanley
<PAGE>
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
- --------------------------------------------------------------------------------
================================================================================
Corporate and
Institutional Clients Motel 6, Inc.
Served (continued) Mutual Benefit Co.
National Westminster Bank
New York Life Insurance
Nippon Credit Bank
Nomura Securities Int'l
North American Taisei Corporation
Northwestern Mutual Life
Omni Hotels
Parabas Bank
Prime Motor Inns
Property Capital Trust
Prudential Life Insurance
Radisson Hotels
Ramada Inns
Red Lion Inns
Regent International
Registry Hotels
Residence Inns
Resolution Trust Corporation
Rhode Island Hospital Trust
Ritz-Carlton Hotels
Rodeway Inns
Rose Associates
Salomon Brothers
San Antonio Hotel/Motel Assoc.
Sanwa Bank
Security Pacific Bank
Servico Management Corp.
Sheraton Hotels
Sonesta Hotels
Sonnenblick-Goldman
Steamboat Ski Corporation
Stouffer Hotels
Stratton Corporation
Sumitomo Bank
Summerfield Hotel Corporation
Super 8 Hotels
Swiss Bank Corporation
Taisei
Texas Commerce Bancshares, Inc.
Tishman Realty Corporation
Trans World Airlines
Travelers Insurance
TraveLodge
Trusthouse Forte
UBS Securities
Union Labor Life
United Bank of Switzerland
United Inns, Inc.
United States Steel
Universal Hotels
U.S. Air Force
U.S. Department of Justice
U.S. Department of the Army
U.S. Department of the Interior
<PAGE>
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
- --------------------------------------------------------------------------------
================================================================================
Corporate and
Institutional Clients U.S. Economic Development Authority
Served (continued) U.S. Trust Company
Walt Disney Productions
Westin Hotels
Williams Hospitality Corporation
Winegardner & Hammons
Winthrop Financial Associates
Wyndham Hotels
Zeckendorf Company
Appearance as
an Expert Witness Administrative Law Court - SEC, Washington, DC
Appellate Tax Board, Boston, Massachusetts
Assessment Appeals Board, Los Angeles County, Los
Angeles, California
Board of Equalization and Review, Washington, District
of Columbia (2)
Board of Taxation, Atlantic City, New Jersey
Bureau de Revision Evaluation Fonciere du Quebec,
Montreal, Canada
Circuit Court, Orange County, Orlando, Florida
Condemnation Review Board, Minneapolis, Minnesota
Corporation Committee, Rhode Island State Senate
Court of Common Pleas, Allegheny County, Pennsylvania
Court of Common Pleas, Franklin County, Ohio
Court of Common Pleas, Montgomery, Pennsylvania
Court of Common Pleas, Pittsburgh, Pennsylvania
Court of Common Pleas, Philadelphia, Pennsylvania
Court of Queen's Bench of Alberta, Canada
District Court, Arapahoe County, Colorado
District Court, Dallas County, Texas
District Court, Harris County, Texas
District Court, Hennepin County, Minneapolis, Minnesota
District Court, Knoxville, Tennessee
Federal Bankruptcy Court, Oakland, California
Federal Bankruptcy Court, Los Angeles, California
Federal Bankruptcy Court, San Diego, California
Federal Bankruptcy Court, Denver, Colorado
<PAGE>
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
- --------------------------------------------------------------------------------
================================================================================
Appearance as
an Expert Witness Federal Bankruptcy Court, District of Columbia
(continued) Federal Bankruptcy Court, Miami, Florida (2)
Federal Bankruptcy Court, Chicago, Illinois
Federal Bankruptcy Court, New Orleans, Louisiana
Federal Bankruptcy Court, Greenbelt, Maryland
Federal Bankruptcy Court, Baltimore, Maryland
Federal Bankruptcy Court, Rockville, Maryland
Federal Bankruptcy Court, Boston, Massachusetts
Federal Bankruptcy Court, Grand Rapids, Michigan
Federal Bankruptcy Court, Las Vegas, Nevada
Federal Bankruptcy Court, Newark, New Jersey (2)
Federal Bankruptcy Court, Manhattan, New York (2)
Federal Bankruptcy Court, Westbury, New York
Federal Bankruptcy Court, Philadelphia, Pennsylvania
Federal Bankruptcy Court, Reading, Pennsylvania
Federal Bankruptcy Court, Salt Lake City, Utah
Federal Bankruptcy Court, Madison, Wisconsin (2)
Federal District Court, Rochester, New York
Federal District Court, Philadelphia, Pennsylvania
Judicial Arbitration and Mediation Services, Dallas,
Texas
Michigan Tax Tribunal, Detroit, Michigan
New Jersey Tax Court, Newark, New Jersey
Superior Court, District of Columbia
Superior Court, Clayton County, Georgia (2)
Superior Court of North Carolina
Supreme Court, New York State, Buffalo, New York
Supreme Court, New York State, Manhattan, New York
Supreme Court, New York State, Riverhead, New York
Tax Review Board, San Joaquin County, Stockton,
California
<PAGE>
Hospitality Valuation Services, Mineola, New York
Qualifications of Stephen Rushmore, CRE, MAI, CHA
- --------------------------------------------------------------------------------
================================================================================
Appearance as Tax Review Board, Bangor, Maine
an Expert Witness Tax Review Board, Schenectady, New York
(continued) Tax Review Board, Yorktown, New York
Tax Review Board, North Carolina
Tax Review Board, Philadelphia, Pennsylvania (2)
U.S. District Court, Wilmington, Delaware
U.S. District Court, Madison, Wisconsin
<PAGE>
SECOND AMENDMENT TO THE LIMITED
LIABILITY COMPANY AGREEMENT OF ALADDIN BAZAAR, LLC
THIS SECOND AMENDMENT TO THE LIMITED LIABILITY COMPANY AGREEMENT OF
ALADDIN BAZAAR, LLC (the "Amendment") is entered into effective as of May __
1998, by and between THE BAZAAR CENTERS INC., a Delaware corporation
("TrizecHahn"), and ALADDIN BAZAAR HOLDINGS, LLC, a Nevada limited-liability
company ("Holdings II"). Capitalized terms not otherwise defined herein shall
have the respective meanings assigned to such terms in the Limited Liability
Company Agreement (the "Agreement") of ALADDIN BAZAAR, LLC (the "Company"),
dated as of September 3, 1997, between TrizecHahn and Holdings II, as amended
by that certain First Amendment to the Limited Liability Company Agreement of
Aladdin Bazaar, LLC, dated October 16, 1997.
R E C I T A L S :
A. Pursuant to that certain Satisfaction Notice dated January 23, 1998,
delivered by TrizecHahn and TrizecHahn Centers under the Agreement, TrizecHahn
and TrizecHahn Centers required that Holdings II and the Sommer Trust deliver
a letter of credit, guaranty or other form of credit enhancement with respect
to certain guaranteed obligations of the Sommer Trust and Aladdin Holdings in
the amount of Thirty Million Dollars ($30,000,000) satisfactory to TrizecHahn
in its sole and absolute discretion.
B. The Members now desire to amend the Agreement to reflect the
implementation of the terms of the above recitals, and to provide for such
other changes to the Agreement as the Members deem appropriate.
NOW, THEREFORE, in consideration of the covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, and intending to be legally bound hereby, the parties
hereby covenant and agree as follows:
1. Exhibits. At the time of execution of the Agreement, certain
Exhibits and Schedules to the Agreement were not fully completed. Set forth
below is a list of the Exhibits and Schedules to the Agreement. These
Exhibits and Schedules, as completed (or omitted) pursuant to the terms of
this Amendment, are attached hereto, are hereby approved by the Members (other
than as specifically noted thereon, as to which items the Members will approve
as promptly as practicable), and are described below:
<PAGE>
EXHIBIT "A" MASTER DEVELOPMENT SITE PLANS AND RENDERINGS.
Exhibit "A" attached hereto.
EXHIBIT "B" DEVELOPMENT PLAN. The Final Development Plan is
attached hereto as Exhibit "B".
EXHIBIT "C" DEVELOPMENT AGREEMENT. Agreement executed
concurrently herewith.
EXHIBIT "D" MANAGEMENT AGREEMENT. Agreement executed
concurrently herewith.
EXHIBIT "E" PRELIMINARY CONSTRUCTION PROFORMA AND PLANS AND
DRAWINGS FOR THE REDEVELOPED ALADDIN. Exhibit "E"
attached hereto.
EXHIBIT "F" PRE-DEVELOPMENT BUDGET. Omitted.
EXHIBIT "G" GUARANTY OF TRIZECHAHN CENTERS INC. Executed
effective February 26, 1998.
EXHIBIT "H" GUARANTY OF TRUST UNDER ARTICLE SIXTH U/W/O SIGMUND
SOMMER. Executed effective February 26, 1998.
EXHIBIT "I" GUARANTY OF ALADDIN HOLDINGS, LLC. Executed
effective February 26, 1998.
SCHEDULE 2.14(C) EXISTING ENTITLEMENTS. Schedule 2.14(c) attached
hereto.
SCHEDULE 2.14(E) REMAINING ENTITLEMENTS. Schedule 2.14(e) attached
hereto.
SCHEDULE 2.14(F) HAZARDOUS MATERIALS. Schedule 2.14(f) attached
hereto.
SCHEDULE 2.14(G) ENVIRONMENTAL AND SOILS REPORT. Schedule 2.14(g)
attached hereto.
SCHEDULE 2.14(H) LITIGATION. Schedule 2.14(h) attached hereto.
2
<PAGE>
2. Additional Member Capital Contribution Obligation Guaranty.
Pursuant to the terms of the Fleet Construction Loan (defined below)
TrizecHahn Office Properties Inc., a Delaware corporation ("THOPI"), has
agreed to guaranty the Company's construction loan. Attached hereto as
Exhibit "J" is a Member Capital Contribution Obligation Guaranty, whereby
THOPI agrees to guaranty the obligations of TrizecHahn to contribute capital
to the Company under the terms described in Section 3.03 of the Agreement and
in the Member Capital Contribution Obligation Guaranty attached hereto as
Exhibit "J".
3. Loan Facility. In accordance with the terms and provisions of this
Agreement, TrizecHahn Centers hereby provides a Facility (as defined below) to
Holdings II for the purpose of funding certain Designated Obligations (as
defined below) in the event that Holdings II fails to contribute such funds to
the capital of the Company. The terms of the Facility are described in
Paragraph 4 below.
4. Terms of Facility and Certain Definitions. The terms of the
Facility, and certain additional definitions to be added to Article XII of the
Agreement are described below:
4.1. Borrower: Holdings II. The organizational
documents of Holdings II shall be in
the form attached hereto as Exhibit
"K."
4.2. Lender: TrizecHahn Centers Inc.
4.3. Purpose: Back-up facility (the "Facility") to
provide credit enhancement for the
payment of the Designated
Obligations 9defined below).
4.4. Type of Facility: Multiple draw facility
4.5. Amount of Facility: Up to $30,000,000 of principal
indebtedness (the "Maximum Amount")
4.6. Term of Facility/Final The Facility shall expire upon the
Draw Date: earliest of (a) the 7th anniversary
of the Facility, (b) the date on
which the amounts drawn under the
Facility reach the Maximum Amount,
(c) the date on which the Bazaar
Improvements achieves a DSCR
(defined in the Fleet Building Loan
Agree-
3
<PAGE>
ment (defined below) of 1.40, (d)
the date on which the Fleet
Guaranties (defined below) are
irrevocably terminated and
satisfied, (e) the day after the
last date on which a Trigger Event
(defined below) could occur (each, a
"Termination Event"). A Termination
Event shall be effective only with
respect to Designated Obligations
that arise after the Termination
Event.
4.7. Maturity of Facility: The earlier of (i) six months from
the first draw under the Facility
and (ii) a Termination Event.
4.8. Annual Interest Rate: The lesser of (i) 24.90% or (ii) the
maximum rate permitted under
applicable New York law (the
"Interest Rate"), payable monthly in
arrears and upon the Maturity
(and/or the earlier acceleration) of
the Facility. Interest on any
amount not paid when due will accrue
at an annual rate equal to the
lesser of (x) 4% in excess of the
Interest Rate and (y) the maximum
rate permitted under applicable New
York law, and will be payable on
demand.
4.9. Percentage Interest: Concurrently with the date of this
Agreement, Holdings II's interest in
the Company, including, but not
limited to, its Percentage Interest,
Preferred Return and Unrecovered
Contribution Account, shall be
reduced by twenty-five percent 25%
of such current amount and
TrizecHahn's Percentage Interest,
Preferred Return and Unrecovered
Contribution Account shall be
increased in a like amount.
Therefore, on and after the date of
this Agreement, the term "Percentage
Interest" shall mean in respect to
TrizecHahn sixty-two and one-half
percent (62.5%); and in respect to
Holdings II, thirty-seven and
one-half percent (37.5%); subject to
adjustment as provided in the
Agreement. Holdings II's Capital
Account and Unrecovered Contribution
Account shall be reduced by
twenty-five percent (25%) of the
credit attributable to the Lease as
set forth in
4
<PAGE>
Section 3.02 of the Agreement, or by
Two Million five Hundred Thousand
Dollars ($2,500,000.00), and
TrizecHahn's Capital account and
Unrecovered Contribution Account
shall be increased by such amount.
Notwithstanding the foregoing, for
purposes only of computing
TrizecHahn's Priority Unrecovered
Contribution Account, as set forth
in Paragraph 1 of the First
Amendment of the Limited Liability
company Agreement of Aladdin Bazaar,
LLC, dated October 16, 1997, (i)
Holdings II's Unrecovered
Contribution Account shall be deemed
to have not been reduced by the two
Million five Hundred dollars
($2,500,000) adjustment described
above, and (ii) TrizecHahn's
Unrecovered Contribution Account
shall bot be deemed to have been
increased by the two Million Five
Hundred thousand dollars
($2,500,000) adjustment described
above, with the result that
TrizecHahn shall earn only the 12%
Preferred Return on the $2,500,000
amount by which TrizecHahn's Capital
Account and Unrecovered Contribution
Account is increased hereby, and
TrizecHahn shall not earn the 20%
Priority Preferred Return on such
increased amount. The amount by
which Holdings II's Unrecovered
Contribution Account is increased
for purposes of computing the
dilution formula set forth in
Section 3.05(b) of the Agreement
shall also be reduced by twenty-five
percent (25%) (i.e., rather than
increasing Holdings II's Unrecovered
Contribution Account by Twenty
Million Dollars ($20,000,000.00) for
purposes of Section 3.05(b), Holding
II's Unrecovered Contribution
Account shall be increased by
Fifteen Million ($15,000,000.00) for
purposes of Section 3.05(b) only).
Notwithstanding the foregoing, until
the date an advance is made pursuant
to the Facility or Holdings II's
Percentage Interest is otherwise
adjusted as permitted pursuant to
the Agreement, Holdings II shall
continue to have the right to
appoint two representatives of the
Board,
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notwithstanding the provisions of
Section 2.03(o) or any other similar
provisions of the Agreement to the
contrary. On or after the date that
any advance is made pursuant to the
Facility, Holdings II shall lose its
rights to appoint any
representatives to the Board unless
and until the Facility is repaid in
full prior to Maturity
4.10. Right of First If TrizecHahn is a Transferring
Offer/right of first Member the meaning of Section 6.03
Refusal With Respect of the Agreement, then,
to Transferred notwithstanding the terms of Section
Interests: 6.03(a) of the Agreement, Holdings
II, as a Non-Transferring Member
shall for a period of thirty (30)
days following the effective date of
the First Offering Notice, have the
right, but not the obligation to
elect to purchase a twelve and
one-half percent (12.5%) Percentage
Interest in the Company from
TrizecHahn for the allocable
purchase price (and on the other
terms) specified in the First
Offering Notice by delivering
written notice of such election to
TrizecHahn. This option to purchase
the 12.5% Percentage Interest shall
be in addition to, and not in lieu
of, the option to purchase all of
the Offered Interest pursuant to
the terms of Section 6.03(a).
Notwithstanding the foregoing,
Holdings II shall not have the right
to purchase the 12.5% Percentage
Interest if Holdings II is in
default of any of its material
obligations under this Amendment
beyond applicable grace periods
(including any of the obligations
arising under the exhibits attached
hereto), the Agreement, or if the
Sommer Trust is in default any of
its material obligations arising
under the Sommer Trust Agreement,
dated February 26, 1988, beyond
applicable grace periods.
4.11. Payments/ Mandatory Payments: Without
Prepayments: affecting any of TrizecHahn Center's
rights or remedies, all
distributions made by the Company to
Holding II
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shall be delivered immediately to
TrizecHahn Centers to repay any
amounts (principal, interest and
other) outstanding from time to time
under the Facility.
Permissive Prepayment: Prepayment
shall be permitted in whole or in
part with prior notice. Amounts
repaid/prepaid (mandatory or
permissive) may not be reborrowed.
4.12. Designated The Company and Fleet National Bank
Obligations ("Fleet") have entered into a
Building Loan Agreement pursuant to
which Fleet agrees to lend up to
$194,000,000 (the "Construction
Loan") to Bazaar Company to finance
the construction of the Bazaar
Improvements. In connection with
the Construction Loan, TrizecHahn
Centers, THOPI, Holdings II, Aladdin
Holdings and the Sommer Trust
(collectively, the "Fleet
Guarantors") have entered into a
joint and several (i) completion
guaranty (the "Completion Guaranty")
and (ii) payment guaranty (the
"Payment Guaranty" and, together
with the Completion Guaranty, the
"Fleet Guaranties"), each in favor
of Fleet.
Pursuant to a contribution agreement
among the Fleet Guarantors (the
"Fleet Contribution Agreement"),
Holdings II, Aladdin Holdings and
the Sommer Trust agree to reimburse
TrizecHahn, TrizecHahn Centers and
THOPI for all payments required to
be and actually made by TrizecHahn,
TrizecHahn Centers and/or TrizecHahn
Office Properties under the Fleet
Guaranties in excess of TrizecHahn,
TrizecHahn Centers and/or THOPI
collective (i) fifty percent (50%)
share of such payments with respect
to any Fleet Guaranty Event, and
(ii) sixty-two and one-half percent
(62.5%) share of such payments with
respect to all other obligations.
Conversely, under the Fleet
Contribution Agreement, TrizecHahn,
TrizecHahn Centers and/or
7
<PAGE>
THOPI agree to reimburse Holdings
II, Aladdin Holdings and the Sommer
Trust for all payments required to
be, and actually made by, such Fleet
Guarantors under the Fleet
Guaranties in excess of such Fleet
Guarantors' collective (i) fifty
percent (50%) of such payments with
respect to any Fleet Guaranty Event,
and (ii) thirty-seven and one-half
percent (37.5%) share of such
payments with respect to all other
obligations.
The Sommer Trust and Aladdin
Holdings have delivered the Member
Capital Contribution Guaranty
pursuant to the Agreement.
"Obligation" shall mean any of the
following: (a) an interest payment
due and owing to Fleet under the
Construction Loan (an "Interest
Obligation"); (b) as substantiated
by a request for balancing payment
under the Construction Loan, or by
backup reasonably acceptable to the
Company, that portion of any
construction on cost that exceeds
the itemized amount for such cost as
set forth in a construction budget
previously approved by the Company,
after application of reserves or
contingency amounts set forth in and
to the extent permitted by, such
budget and the Construction Loan (a
"Construction Obligation"); and (c)
a principal payment due and owing to
Fleet under the Construction Loan
upon acceleration thereof (prior to
scheduled maturity) (a "Principal
Obligation").
"Designated Obligation" means the
aggregate, up to the Maximum Amount,
of:
(a) (i) the amount owed by Holdings
II, from time to time, under
the Agreement and (ii) the
amount owed by the Sommer Trust
and/or Aladdin Holdings, from
time to time, under the Member
Capital Obligation Guarantee,
in
8
<PAGE>
each case, in the event of a
Partner Contribution Event
(defined below); and
(b) the amount owed by the Sommer
Trust, Aladdin Holdings and
Holdings II (without
duplication), from time to
time, in the event of a Fleet
Guaranty Event (defined below).
"Partner Contribution Event" means
that all of the following events
exist:
(a) amounts are required by the
Company in order to satisfy an
Obligation due and owing, and,
subject to the retention of
reserves acceptable to the
Company, the company has
insufficient cash or other
sources available to make such
payment;
(b) a Trigger Event has occurred
and is continuing and is the
Cause (defined below) of the
insufficiency described in
paragraph (a) above;
(c) Holdings II, Aladdin Holdings
and the Sommer Trust have
failed to deliver funds to
cover such insufficiency, to
the extent required under the
terms of the Agreement and/or
the Member Capital Obligation
Guarantee, as applicable,
within fifteen (15) business
days following original written
demand therefor; and
(d) as certified to Holdings II in
a writing by a financial
officer of TrizecHahn in the
form attached hereto as Exhibit
"L," without the requirement of
proof as to the accuracy of any
of the following: (i)
TrizecHahn, TrizecHahn Centers
and/or TrizecHahn Office
Properties Inc. have paid all
of their respective share of
funding obligations under the
Agreement and
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<PAGE>
capital contribution guaranty
to the Company, as applicable
and (ii) neither TrizecHahn nor
TrizecHahn Centers has breached
or is in default (beyond any
applicable notice and cure
periods) under the Agreement or
under its respective
obligations under TrizecHahn
Centers' capital contribution
guaranty to Bazaar Company or
TrizecHahn's and TrizecHahn
Centers' respective obligations
under the Fleet Guaranties and
the Fleet Contribution
Agreement and neither
TrizecHahn nor TrizecHahn
Centers has caused Bazaar
Company to breach or default
(beyond any applicable notice
and cure periods) in Bazaar
Company's obligations under the
Construction Loan, which breach
or default is the cause of the
Partner Contribution Event (in
each case, a "Trizec Default")
and no other Termination Event
exists;
"Fleet Guaranty Event" means all of
the following events exist:
(a) the Trust, Aladdin Holdings and
Holdings II have failed to
deliver (pursuant to the Fleet
Contribution Agreement), within
ten (10) days following written
demand therefor, funds in an
amount equal to fifty percent
(50%) of any demand made by
Fleet under the Fleet
guaranties for an Obligation
due and owing;
(b) a Trigger Event has occurred
and is continuing and is the
Cause of Fleet's demand
described in paragraph
(a)above; and
(c) as certified to Holdings II
in a writing by a financial
officer of TrizecHahn Centers,
in the form attached hereto as
Exhibit "L," (i) TrizecHahn
Centers has delivered to Fleet
its respective 50% of such
demand under the
10
<PAGE>
Fleet Guaranties (pursuant to
the Fleet Contribution
Agreement) and (ii) no Trizec
Default or other Termination
Event exists.
"Cause" means (a) with respect to an
Interest Obligation or a Principal
Obligation, a proximate causal
relationship with the occurrence of
a specified Trigger Event as
certified in a writing by an officer
of TrizecHahn Centers and/or
TrizecHahn, as applicable, and (b)
with respect to a Construction
Obligation, a proximate causal
relationship with the occurrence of
a specified Trigger Event as
certified in a writing by an officer
of TrizecHahn Centers and/or
TrizecHahn, as applicable.
Notwithstanding any provision hereof
to the contrary, "Cause" need not
exist or be certified by an officer
of TrizecHahn Centers and/or
TrizecHahn, as applicable, with
respect to any "operating cash flow
shortfall (which shall include costs
of tenant improvements)."
"Trigger Event" shall mean any one
of the following:
(a) a Construction Cessation (as
defined below) has occurred and
is continuing for 90
consecutive days (subject to
extension for the number of
days during which such
Construction Cessation shall be
the result of Force Majeure, as
such term is defined in that
certain Site Work Development
and Construction Agreement
entered into among Aladdin
Holdings, Aladdin Gaming, LLC
and the Company (the "Site Work
Agreement"), subject to a
maximum aggregate number of
days of extension for Force
Majeure of one year. A
"Construction Cessation" shall
occur at any time that funds
are unavailable to Aladdin
Gaming, LLC (from any source
whatsoever) to fund draws,
under the construction
financing (the "Scotia
11
<PAGE>
Loan") for the Aladdin Hotel
and Casino provided by Scotia
Bank, in an amount equal to 75%
of the draw request in question
or Rider Hunt fails to deliver
the On Schedule Certificate as
contemplated by that certain
Engagement Letter among Rider
Hunt, Scotia Bank, and the
Administrative Agent, the
Disbursement Agent and the
Trustee under the Scotia Loan;
or
(b) construction of the Aladdin
Hotel and Casino is not
completed within 60 days after
the First Scheduled (as such
term is defined in the Site
Work Agreement, subject to a
maximum aggregate number of
days of extension for Force
Majeure of one year, or
(c) if the Aladdin Hotel and Casino
ceases to be open to the
general public, for reasons
other than damage or
destruction, for a period of
more than 30 consecutive days
prior to the date which is 24
months after the First
Scheduled Opening Date of the
Aladdin Hotel and Casino.
4.13. Security: The Facility will be secured by,
among other things (collectively,
the "Security"), a perfected first
priority pledge of (i) the entire
(Holdings II) interest in Bazaar
Company, pursuant to the Security
Agreement in the form of Exhibit "L"
attached hereto, and (ii) all direct
and indirect equity and other
interests of the Sommer Trust or
Aladdin Holdings in Holdings II
owned or held in the future owned or
held by Aladdin Holdings or the
Sommer Trust or Aladdin Holdings in
Holdings II owned or held in the
future owned or held by Aladdin
Holdings or the Sommer Trust in the
form attached hereto as Exhibit "M."
Subject to the terms of the Trust
Agreement, to the extent the Sommer
Trust pledges, or
12
<PAGE>
grants a security interest in or
otherwise assigns all or a portion
of its assets to any person or
entity, TrizecHahn Centers shall
receive an identical pledge,
security interest of assignment in
such assets to secure the Facility.
The Trust delivered to TrizecHahn
Centers an agreement, dated February
26, 1998, whereby the Sommer Trust
certifies as to its
assets/liabilities and agrees to
certain restrictions on Trust
distributions and the transfer or
encumbrance of the Trust's assets
(the "Trust Agreement").
Additional security arrangements,
acceptable to TrizecHahn Centers,
shall be provided to TrizecHahn
Centers in order for TrizecHahn
Centers to enforce covenant breaches
or defaults made by Holdings II
under the Facility prior to any
draw.
4.14. Guarantees: The Facility will be guaranteed, on
a joint and several basis, by the
Sommer Trust and Aladdin Holdings
(collectively, the "Facility
Guaranties"), in the form attached
hereto as Exhibit "N."
4.15. Priority: Except for the Security hereunder,
and the proceeds thereof, each of
which TrizecHahn Centers shall have
a first priority payment claim
against, all obligations owing to
TrizecHahn Centers by Holdings II,
Aladdin Holdings or the Sommer Trust
under or in connection with this
Facility and the Facility Guaranties
shall be pari-passu in payment,
priority, enforcement or otherwise
with all obligations of such
entities to TrizecHahn Centers or
TrizecHahn.
4.16. Promissory Note: Holdings II shall execute and
deliver the
4.17. Applicable Law: the Facility shall be governed by
New York law.
5. Agreement to Make Loan for Certain Additional Capital Contributions.
The Members acknowledge that the final Development Plan attached as Exhibit
"B" includes a
13
<PAGE>
Development Budget which requires capital contributions from the Members in
excess of the TrizecHahn Investment. Notwithstanding the terms of Sections
3.04 and 3.05 of the Agreement, TrizecHahn agrees to loan to Holdings II its
thirty-seven and one-half percent (37.5%) of such additional capital
contributions, up to a maximum amount of One Million Eight Hundred
Seventy-Five Thousand dollars ($1,875,000.00) (the "TrizecHahn Loan"), which
amount, when added to TrizecHahn's share of such additional contribution,
equals a cumulative additional capital contribution to the Company in the
amount of Five Million Dollars ($5,000,000.00). TrizecHahn's agreement to
make the TrizecHahn Loan shall terminate as of the opening of the Center.
Notwithstanding the terms of Sections 3.05 and 3.06 of the Agreement, the
TrizecHahn Loan to Holdings II shall bear interest at a rate equal to the
lesser of (i) twenty percent (20%) per annum, compounded monthly or (ii) the
maximum, non-usurious rate then permitted by law for such loans.
Notwithstanding the provisions of any other term of the Agreement, including,
but not limited to, Articles II, V, and IX, until such TrizecHahn loan is
repaid in full, Holdings II shall draw no further distributions from the
Company, and all cash or other property otherwise distributable with respect
to Holdings II shall be distributed to TrizecHahn loan is repaid in full,
Holdings II shall draw no further distributions from the Company, and all cash
or other property otherwise distributable with respect to Holdings II shall be
distributed to TrizecHahn in repayment of the outstanding balance of the
TrizecHahn Loan, with such funds being applied first to reduce any and all
accrued interest on such loan, and then to reduce the principal amount
thereof.
Except as expressly modified hereby, all of the terms and provisions
of the Agreement shall remain in full force and effect, are incorporated
herein by this reference (including, but not limited to, Article XI of the
Agreement), and shall govern the conduct of the parties hereto; provided,
however, to the extent of any inconsistency between the provisions of the
Agreement and the provisions of this Amendment, the provisions of this
Amendment shall control.
6. Subordinated Debt. Attached hereto as Exhibit "P" is the form of
the Subordinated Debt to be issued in accordance with the terms of the First
Amendment to the Limited Liability company Agreement of Aladdin Bazaar, LLC,
dated October 16, 1997.
7. Garbage Budget. Notwithstanding anything to the contrary contained
in the Agreement, the approval of the design/build construction contract and
the final budget related to the Common Parking area (as such term is defined
in the Site Work Agreement) shall be deemed to be a major development decision
to be approved by the Board in accordance with the provisions of Section 2.04
of the Agreement. The scope of the Common Parking Area shall be substantially
consistent with the scope parameters set forth on Exhibit "Q" attached hereto.
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<PAGE>
8. Title Indemnity. The Company hereby indemnifies the Sommer Trust
from and against any and all claims, losses, damages, liabilities and expenses
(collectively, "Losses") arising out of that certain Indemnity Agreement,
dated the date hereof, from the Sommer Trust to Lawyers Title Insurance
Company and the Commonwealth Land Title Insurance Company, to the extent such
Losses relate to matters arising under the contract between Aladdin Gaming and
Fluor Daniel, Inc., dated as of December 4, 1997, specifically relating to the
Reimbursement Obligation (as defined in the Site Work Agreement), except
Losses arising from the Sommer Trust's or its affiliates' own gross negligence
or willful misconduct.
15
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the day and year first above written.
"TrizecHahn" THE BAZAAR CENTERS INC.,
A Delaware corporation
By: /s/ Wendy Godoy
----------------
Wendy M. Godoy, Senior Vice President
By: /s/ Wayne Finley
-----------------
Wayne J. Finley, Senior Vice President
"Holdings II" ALADDIN BAZAAR HOLDINGS, LLC,
a Nevada limited-liability company
By: ALADDIN MANAGEMENT
CORPORATION, its Manager
By: /s/ Ronald Dictrow
-------------------
Ronald B. Dictrow, Treasurer
By:
-------------------------------
Jack Sommer, Vice President
16
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the reference of our
firm under the caption "Experts" in this Amendment No. 1 to the Registration
Statement (Form S-1) and related Prospectus of Aladdin Gaming Enterprises, Inc.
for the registration of 2,215,000 warrants to purchase 2,215,000 of Class B
non-voting Common Stock of Aladdin Gaming Enterprises, Inc. and to the
incorporation by reference therein of our reports dated January 15, 1998, with
respect to the consolidated financial statements of Aladdin Gaming Holdings, LLC
and subsidiaries and the financial statements of Aladdin Gaming, LLC, Aladdin
Gaming Enterprises, Inc. and Aladdin Capital Corp.
/s/ ARTHUR ANDERSEN LLP
Las Vegas, Nevada
June 5, 1998
