<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 9, 1998
REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ALADDIN GAMING ENTERPRISES, INC.
(Exact name of Registrant as specified in its charter)
<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 APRIL 9, 1998
PROSPECTUS
[LOGO]
2,215,000 WARRANTS TO PURCHASE SHARES OF CLASS B COMMON STOCK OF
ALADDIN GAMING ENTERPRISES, INC.
------------
This Prospectus relates to the 2,215,000 warrants (the "Warrants") of
Aladdin Gaming Enterprises, Inc., a Nevada corporation (the "Issuer") to
purchase Class B non-voting common stock, no par value, (the "Common Stock") of
the Issuer. The Warrants are exercisable at any time on or after the Separation
Date (as defined herein) at an exercise price of $0.001 per Warrant Share (as
defined herein), subject to adjustment, and, unless exercised, will expire on
March 1, 2010. The Warrants were originally issued and sold on February 26, 1998
(the "Issue Date") to the Initial Purchasers (as defined herein) pursuant to an
offering (the "Offering") by Aladdin Gaming Holdings, LLC, a Nevada
limited-liability company ("Holdings"), Aladdin Capital Corp., a Nevada
corporation ("Capital" and together with Holdings, the "Note Issuers") and the
Issuer, (the Issuer, together with the Note Issuers, the "Aladdin Parties") of
221,500 Units (the "Units") each consisting of $1,000 principal amount at
maturity of 13 1/2 Senior Discount Notes (the "Notes") due 2010 of the Note
Issuers and 10 Warrants, and were simultaneously sold by the Initial Purchasers
in transactions exempt from the registration requirements of the Securities Act
of 1933, as amended (the "Securities Act") in the United States to persons
reasonably believed to be qualified institutional buyers as defined in Rule 144A
under the Securities Act.
The number of shares of Common Stock purchasable upon the exercise of the
Warrants and the Exercise Price (as defined herein) will be subject to
adjustment on the occurrence of certain events (subject to certain exceptions)
including (i) the payment by the Issuer of dividends (and other distributions)
in shares of any class of the Issuer's capital stock ("Issuer Stock"), (ii)
subdivisions, combinations and reclassifications of Issuer Stock, (iii)
issuances to all holders of Issuer Stock of rights, options, or warrants
entitling them to subscribe for Issuer Stock or of securities convertible into
or exchangeable for Issuer Stock for a consideration per share of Issuer Stock
which is less than the current market price per share of Issuer Stock and (iv)
the distribution to all holders of Issuer Stock of any of the Issuer's assets,
debt securities or any rights or warrants to purchase such securities (excluding
those rights and warrants referred to in clause (iii) above and excluding cash
dividends less than a specified amount).
Following the Registration Statement (as defined herein) being declared
effective by the Securities and Exchange Commission (the "Commission") the
Warrants and Warrant Shares may be offered and sold from time to time by holders
thereof or by their transferees, pledgees, donees, or successors (collectively
the "Selling Holders") pursuant to this Prospectus. The Warrants and the Warrant
Shares may be sold by the Selling Holders from time to time directly to
purchasers or through agents, underwriters or dealers. See "Plan of
Distribution". If required, the names of any such agents or underwriters
involved in the sale of the Warrants and the Warrant Shares and the applicable
agent's commission, dealer's purchase price or underwriters' discount, if any,
will be set forth in an accompanying supplement to this Prospectus. The Selling
Holders will receive all of the net proceeds from the sale of the Warrants and
the Warrant Shares and will pay all underwriting discounts, selling commissions
and transfer taxes, if any, applicable to any such sales. In accordance with the
terms of the Warrant Registration Rights Agreement (as defined herein) the
Issuer will pay other expenses incident to any such registration of the Warrants
and the Warrant Shares. The Selling Holders and any broker dealers, agents or
underwriters that participate in the distribution of the Warrants and the
Warrant Shares may be deemed to be "underwriters" within the meaning of the
Securities Act. See "Plan of Distribution" for a description of indemnification
arrangements.
SEE "RISK FACTORS" BEGINNING ON PAGE 14 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE WARRANTS OR WARRANT
SHARES.
-----------------
THE WARRANTS AND THE WARRANT SHARES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION OR
REGULATORY AUTHORITY, NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION OR REGULATORY AUTHORITY PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
NEITHER THE NEVADA GAMING COMMISSION NOR THE NEVADA STATE GAMING CONTROL BOARD
HAS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR THE
INVESTMENT MERITS OF THE SECURITIES OFFERED HEREBY. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
------------------
The date of this Prospectus is , 1998.
<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.
Each person receiving this Prospectus acknowledges that (i) such person has
been afforded an opportunity to request from the Aladdin Parties and the
Company, and to review and has received, all additional information considered
by it to be necessary to verify the accuracy and completeness of the information
herein and (ii) except as provided pursuant to (i) above, no person has been
authorized to give any information or to make any representation concerning the
Warrants or the Warrant Shares other than those contained herein and, if given
or made, such other information or representation should not be relied upon as
having been authorized by the Issuer.
------------------------
DISCLOSURE REGARDING FORWARD
LOOKING STATEMENTS
This Prospectus contains certain statements that are "forward looking
statements." Those statements include, among other things, the discussions of
the business strategies of the Aladdin Parties and the Company (as defined
herein) and expectations concerning future operations, margins, profitability
and liquidity and capital resources. Forward looking statements are included in
"Prospectus Summary," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and elsewhere in this Prospectus. Although
the Issuer believes that the expectations reflected in such forward looking
statements are reasonable, the Issuer does not give any assurance that such
expectations will prove to be correct. Generally, these statements relate to
business plans or strategies, projected or anticipated benefits or other
consequences of such plans or strategies of the Aladdin Parties and the Company
or financial projections involving anticipated revenues, expenses, earnings,
levels of capital expenditures or other aspects of operating results. All phases
of the operations of the Aladdin Parties and the Company are subject to a number
of uncertainties, risks and other influences, many of which are outside the
control of the Aladdin Parties and the Company and any one of which, or a
combination of which, could materially affect the results of operations of the
Aladdin Parties and the Company and whether the forward looking statements made
herein ultimately prove to be accurate. Important factors that could cause
actual results
i
<PAGE>
to differ materially from the Issuer's expectations are disclosed in "Risk
Factors" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
------------------------
CERTAIN DEFINITIONS
REFERENCES IN THIS PROSPECTUS TO (I) "HOLDINGS" REFER TO ALADDIN GAMING
HOLDINGS, LLC, A NEVADA LIMITED-LIABILITY COMPANY; (II) "CAPITAL" REFER TO
ALADDIN CAPITAL CORP., A NEVADA CORPORATION WHOLLY-OWNED BY HOLDINGS; (III)
"ISSUER" REFER TO ALADDIN GAMING ENTERPRISES, INC., A NEVADA CORPORATION, THE
SOLE ASSET OF WHICH IS A 25% MEMBERSHIP INTEREST IN HOLDINGS; (IV) "NOTE
ISSUERS" REFER TO HOLDINGS AND CAPITAL, COLLECTIVELY; (V) "ALADDIN PARTIES"
REFER TO HOLDINGS, THE ISSUER AND CAPITAL, COLLECTIVELY; (VI) THE "COMPANY"
REFER TO ALADDIN GAMING, LLC, A NEVADA LIMITED-LIABILITY COMPANY WHICH PLANS TO
DEVELOP, CONSTRUCT AND OPERATE THE ALADDIN; (VII) "HOLDINGS GROUP" REFER TO EACH
OF HOLDINGS AND ITS SUBSIDIARIES; (VIII) "LONDON CLUBS" REFER TO LONDON CLUBS
INTERNATIONAL, PLC, A UNITED KINGDOM PUBLIC LIMITED COMPANY AND (IX) "LCNI"
REFER TO LONDON CLUBS NEVADA INC., AN INDIRECT WHOLLY OWNED SUBSIDIARY OF LONDON
CLUBS. ALADDIN HOLDINGS, LLC ("AHL"), WHICH IS 95% OWNED BY THE TRUST UNDER
ARTICLE SIXTH U/W/O SIGMUND SOMMER (THE "TRUST"), DIRECTLY OWNS 98.7% OF THE
MEMBERSHIP INTERESTS OF SOMMER ENTERPRISES, LLC ("SOMMER ENTERPRISES"), A NEVADA
LIMITED-LIABILITY COMPANY, AND INDIRECTLY OWNS APPROXIMATELY 71% OF THE
MEMBERSHIP INTERESTS OF HOLDINGS PRIOR TO THE EXERCISE OF THE WARRANTS.
ii
<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 Hotel and Casino (the "Aladdin") as the centerpiece of an
approximately 35 acre world-class resort, casino and entertainment complex (the
"Complex") located on the site of the existing Aladdin hotel and casino in Las
Vegas, Nevada, a premier location at the center of Las Vegas Boulevard (the
"Strip"). The Aladdin has been designed to include a luxury themed hotel of
approximately 2,600 rooms (the "Hotel"), an approximately 116,000 square foot
casino (the "Casino"), an approximately 1,400-seat production showroom and seven
restaurants. The Casino's main gaming area will contain approximately 2,800 slot
machines, 87 table games, keno and a race and sports book facility. Included on
a separate level of the Casino will be a 15,000 square foot luxurious gaming
section (the "Salle Privee") which is expected to contain an additional 20 to 30
high limit table games and approximately 100 high limit slot machines. The Salle
Privee will cater to wealthy clientele and be operated and marketed in
conjunction with London Clubs, a prestigious, multi-national casino operator
which caters to international premium players. The Complex, which has been
designed to promote Casino traffic and to provide customers with a wide variety
of entertainment alternatives, will comprise (i) the Aladdin; (ii) a themed
entertainment shopping mall with approximately 462,000 square feet of retail
space (the "Desert Passage"); (iii) a second hotel and casino, with a music and
entertainment theme (the "Music Project"); (iv) a newly renovated 7,000-seat
Theater of the Performing Arts (the "Theater"); and (v) an approximately
4,800-space car parking facility (the "Carpark" and, together with the Desert
Passage, the "Mall Project"). The Mall Project and the Music Project will be
separately owned by affiliates of the Company. The Company's business and
marketing strategies are expected to capitalize on the Complex's premier
location, its superior designed, mixed-use, themed development, and strong
strategic partnering with highly successful public companies. The grand opening
date for the Aladdin and the Mall Project is currently anticipated to occur
during the first four months of the year 2000, with the opening of the Music
Project expected to occur within six months after the opening of the Aladdin.
The Company's management team is led by Chief Executive Officer Richard J.
Goeglein, the former President and Chief Executive Officer of Harrah's Hotels
and Casinos and President and Chief Operating Officer of Holiday Corp., who
during his term at Harrah's oversaw the expansion of the Harrah's brand,
including the development of Harrah's Hotel and Casino in Atlantic City.
Assisting Mr. Goeglein as Senior Vice President of the Company and
President/Chief Operating Officer of the Aladdin Hotel and Casino is James H.
McKennon, who as President and Chief Operating Officer of Caesars Tahoe was
instrumental in its financial turnaround and as President of Caesars World
International Marketing Corp. was responsible for the global marketing of the
Caesars brand.
1
<PAGE>
It is expected that approximately $75 million will be spent on theming in
the Aladdin and the Desert Passage, of which approximately $35 million will be
spent by the Company on the Aladdin. This theming will create an environment in
the Aladdin that will be based upon the Legends of the 1001 Arabian Nights,
including the intriguing tales of Aladdin, Ali Baba and the 40 Thieves, Sinbad
and other legendary stories woven around ancient wealth and wonders. The
Aladdin's exterior will be designed to include a highly articulated streetscape,
a themed Casino exterior shaped like a Bedouin tent, fountains, walkways,
sculptures and an outdoor restaurant. The sophisticated interior of the Aladdin
will utilize rich colors, textures and design, enhancing the fantasy of a
mystical romantic time and place. A significant feature of the Desert Passage
will be the themed area to be known as the "Lost City." The "Lost City" is
expected to contain a re-creation of an ancient mystical mountain city and will
house a variety of specialty shops and restaurants underneath a 10-story high
ceiling. The Company believes that the Aladdin, with its unique theme, together
with the Desert Passage, will ensure its place as a "must-see" destination in
one of the world's largest entertainment cities.
The Company believes that upon completion, the Aladdin, the Mall Project and
the Music Project together will constitute one of the largest and best-planned
integrated, mixed-use entertainment resorts in the world. Aladdin Bazaar
Holdings, LLC ("Bazaar Holdings"), a subsidiary of the Trust, and TH Bazaar
Centers Inc. ("THB"), a subsidiary of TrizecHahn Centers Inc. ("TrizecHahn"),
have entered into a joint venture agreement and formed Aladdin Bazaar, LLC
("Bazaar") to develop, construct, own and operate the Mall Project. TrizecHahn
is the principal retail subsidiary of TrizecHahn Corporation, one of the largest
publicly-traded real estate companies in North America. The Desert Passage is
expected to include an array of high-fashion specialty stores, exotic boutiques,
themed restaurants, cafes and other entertainment offerings. The Desert Passage
will be directly connected to the Casino to maximize Casino traffic.
Aladdin Music Holdings, LLC ("AMH"), a wholly owned subsidiary of the
Company, and a subsidiary of Planet Hollywood International, Inc. ("Planet
Hollywood") have entered into a binding memorandum of understanding (the "Music
Project Memorandum of Understanding") to form Aladdin Music, LLC ("Aladdin
Music"), which will own and develop the Music Project. The Music Project
Memorandum of Understanding is subject to the finalization of financing
commitments. Planet Hollywood is a creator and worldwide developer of themed
restaurants and consumer brands, most notably "Planet Hollywood" and the
"Official All Star Cafe." Planet Hollywood has announced that it intends to
position a brand of music-themed entertainment venues as its third major brand.
The Music Project, which will be managed by the Company, is expected to include
an approximately 1,000 room hotel, a 50,000 square foot casino, four
restaurants, including a music-themed restaurant which will feature its own
1,000-person nightclub, a health spa and an outdoor swimming pool. As part of
the development of the Complex, the Company expects to indirectly contribute to
Aladdin Music $21.3 million in cash and land having an appraised fair market
value of $15.0 million in exchange for a preferred membership interest in
Aladdin Music and to lease to Aladdin Music the existing 7,000-seat Theater for
a nominal amount. It is anticipated that Aladdin Music will carry out an
approximately $8 million renovation of the Theater, improving its decor, light
and sound systems and other facilities. A further distinguishing feature of the
Music Project is the anticipated active involvement of famous artists and
celebrities, some of whom are expected to be stockholders of Planet Hollywood
(or its affiliates), participate in the marketing of Planet Hollywood's
music-themed brand and perform at the Theater or make other personal appearances
at the Music Project. The Music Project, with its music and entertainment theme,
will complement the Aladdin and it is expected that together the two hotels will
offer an excitement and variety of entertainment alternatives that will further
distinguish the Complex from other venues on the Strip.
The development of the Aladdin commenced during the first quarter of 1998.
The existing Aladdin hotel and casino closed for business on November 25, 1997
and the implosion of the existing facility is expected to occur during April
1998. The development of the Mall Project is expected to commence during the
second quarter of 1998, followed thereafter by the expected commencement of the
development of the Music Project in the second half of 1998.
2
<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 certain other development projects, the average vehicular traffic that will
pass the Complex each day is expected to be approximately 54,000.
Another major feature of the Complex will be its easy access from Las Vegas'
McCarran International Airport ("McCarran Airport"), only 2.5 miles away.
According to the Las Vegas Convention and Visitors Authority (the "LVCVA"), the
number of visitors to Las Vegas has increased at a steady and significant rate
for the last 15 years, growing from approximately 10 million in 1980 to
approximately 19 million in 1990 to over 30 million in 1996, with approximately
44% of these visitors in 1996 arriving by air through McCarran Airport. McCarran
Airport, the tenth busiest airport in the United States, is currently in the
process of expanding its capacity through the addition of 26 new gates, and it
is expected that following completion thereof, the number and percentage of
visitors arriving in Las Vegas by air will further increase, making easy access
from McCarran Airport to Las Vegas' resorts even more crucial.
MASTER-PLANNED, MIXED-USE DEVELOPMENT. The Aladdin has been carefully and
strategically designed to promote Casino traffic. Each element of the Complex
has been sited and planned in a manner that maximizes pedestrian and vehicular
traffic so as to facilitate access to and from the Complex, as well as
circulation between the different parts of the Complex, with the Casino being
the nexus for the vast majority of pedestrian traffic. Significant portions of
the Desert Passage and all of the Theater's entrances and exits will be accessed
through, or be adjacent to, the Casino. The Casino will be located in front of
the Hotel, and unlike many of the newer projects on the Strip, will provide easy
access for pedestrians without requiring long walks into the Complex. Pedestrian
visitors to the Aladdin entering from the Aladdin's 800 feet of Strip frontage
will be able to enter the Hotel directly through the Casino or through the
Desert Passage entrances. Through the use of a circular internal roadway, guests
arriving by limousine, car service, taxi or private vehicle will be able to
enter the Complex directly and easily from the Strip and Harmon Avenue.
Furthermore, by the use of bridges and access ways, pedestrians will not be
required to cross roadways while moving between different attractions on the
Complex, thus facilitating ease of movement between the various parts of the
Complex and the Strip.
UNIQUE ENTERTAINMENT FACILITIES. The Aladdin is expected to benefit from
the Casino traffic generated from the broad variety of entertainment facilities
located throughout the Complex. The Aladdin will be adjacent to the existing
Theater, which is expected to continue to be used to hold major concerts and
theatrical performances and is one of the few venues of its size and type in
Nevada. The Theater's approximately $8 million renovation is expected to
transform it into a first-class venue and provide an additional source of
visitor traffic to the Complex.
The Aladdin will include a 1,400-seat showroom featuring a 1001 Arabian
Nights-themed production show on its mezzanine level, with elegant, exotic
costuming, music, lighting and choreography. In addition, the Desert Passage
will be designed to engage the customer in a themed shopping, entertainment and
dining experience. Of the approximately 462,000 square feet of retail space
within the Desert Passage, it is anticipated that approximately 25% will be
devoted to high pedestrian traffic generating food, beverage and entertainment
experiences. Furthermore, the Music Project is expected to contain a
1,000-person nightclub featuring regular live performances.
PRESTIGIOUS STRATEGIC PARTNERS.
The Company and the Complex will benefit from important relationships with
several prominent public companies, as follows:
3
<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 $455 million on April 2, 1998. London
Clubs has extensive experience in the international marketing of casinos to
premium players and maintains a strong presence in the United Kingdom (where
it controls the largest share of the London casino market), Europe, Asia and
the Middle East. In addition to its 25% ownership of the outstanding
Holdings Common Membership Interests, London Clubs, through LCNI, will
direct the operations of, and act as marketing consultant to, the Salle
Privee. The Company believes that the Salle Privee will be the first of its
kind in the United States managed by a European operator and based on the
European concept of full service gaming areas for premium players. The Salle
Privee's primary business and marketing focus will be to access London
Clubs' worldwide base of upscale casino clientele.
- - JOINT VENTURE WITH PLANET HOLLYWOOD. Through a subsidiary, Planet Hollywood
has agreed to be a 50% partner (on a fully diluted basis) in the Music
Project. Planet Hollywood is a creator and worldwide developer of consumer
brands, most notably "Planet Hollywood" and the "Official All Star Cafe,"
that capitalize on the universal appeal of the high energy environment of
movies, sports and other entertainment-based themes. The Company believes
that the exposure generated by the Music Project will enhance the Aladdin by
providing immediate excitement and press coverage for the Complex. Planet
Hollywood had an equity market capitalization of over $994 million on April
2, 1998.
- - STRATEGIC RELATIONSHIP WITH TRIZECHAHN. The Mall Project will be owned,
developed and operated by Bazaar, a joint venture between Bazaar Holdings
and THB, a subsidiary of TrizecHahn. TrizecHahn is a wholly-owned subsidiary
of TrizecHahn Corporation, one of the largest publicly traded real estate
companies in North America. TrizecHahn Corporation had an equity market
capitalization of over $3.4 billion on April 2, 1998. TrizecHahn was the
developer of Horton Plaza in San Diego, Bridgewater Commons in New Jersey,
Valley Fair in San Jose and Park Meadows in Denver. Investors should note
that TrizecHahn has announced that it is considering selling its operating
portfolio of regional shopping centers and on April 6, 1998 announced the
sale of 20 regional shopping centers for over $2.5 billion. See "Risk
Factors--Completion of the Mall Project and the Music Project."
STRATEGY
The Company's business and marketing strategies are expected to capitalize
on the Complex's premier location, its superior designed, mixed-use themed
development and strong strategic partnering with highly successful public
companies.
CREATE A "MUST-SEE" DESTINATION. The Company believes that the Aladdin,
with its unique design, together with the Desert Passage and the Music Project
will ensure its place as a "must-see" destination in one of the fastest growing
entertainment cities in the world. The Aladdin theme will be supported by a
sophisticated interior design enhancing the fantasy of a mystical and romantic
time and place. The Aladdin's main Casino traffic will be driven not only by
Hotel guests, but also by the customers directly attracted from the Strip.
Visitor traffic to the Aladdin will also be enhanced by the Desert Passage and
the adjoining Music Project.
TARGETED MARKET POSITIONING. The Company intends to focus on three
different market segments to attract customers to the Aladdin:
- - UPSCALE CLIENTELE. The Hotel will be designed to appeal to an upscale
clientele, providing the amenities and level of service such high-end guests
expect. Each of the Hotel's approximately 2,600 guest rooms will have an
area of not less than 450 square feet--exceeding that of the average Las
Vegas hotel room of approximately 360 to 400 square feet--and 24% of the
Hotel's guest rooms will have an area exceeding 620 square feet. The Hotel's
room inventory for the upscale market is expected to include 624 "king
parlors" and suites, ranging from 585 to 1,162 square feet. The Hotel will
provide extensive recreational facilities and amenities for its guests,
including a 20,000 square foot health spa with
4
<PAGE>
steam, sauna and massage services and an outdoor swimming-pool complex
surrounded by gardens and fountains. The Company intends to promote the
Aladdin's many features to the upscale market through a variety of media,
including high-end print publications, travel agents and events
sponsorships. A targeted-relationship marketing program is expected to
ensure clientele retention and repeat visitation.
- - INTERNATIONAL PREMIUM PLAYER CLIENTELE. The focus of the Salle Privee's
business will be the wealthy clientele that form the core of London Clubs'
business in London and elsewhere. The Hotel will include 30 suites primarily
for use by Salle Privee clientele, including 25 "Salle Privee suites"
(ranging from 815 to 930 square feet) and five "mega-suites" (ranging from
2,125 to 3,500 square feet). The Company will maintain the Salle Privee's
premium player atmosphere through more sophisticated dining options, higher
table limits and more formal levels of service and dress.
- - UPPER-MIDDLE MARKET CLIENTELE. The Hotel's variety of guest rooms, six of its
seven restaurants and the 1,400-seat production showroom, combined with the
heavily themed Casino, Theater and Desert Passage, are expected to appeal
broadly to the upper-middle market guest. Additionally, cooperative
advertising and promotion through various media, such as television, radio
and print, will be used to promote the Complex to the upper-middle market.
Furthermore, the Music Project is expected to attract younger, affluent
customers to the Complex through, among other things, its music and
entertainment-based theme.
LEVERAGE FROM STRATEGIC RELATIONSHIPS. The Company and its affiliates have
chosen as strategic partners an experienced team of retail, casino and themed
entertainment developers and operators. The Company intends to utilize the
unique expertise of its partners from the preliminary development stages of the
Complex through its promotion and operation.
- - DEVELOPMENT EXPERTISE. In establishing a strategic relationship with
TrizecHahn, the Company has obtained the knowledge, skills and capital of a
partner who has expertise in the coordination, construction and completion
in a timely manner of large, high quality projects.
- - MANAGEMENT AND OPERATING ABILITIES. The Complex is expected to benefit from
the experience of TrizecHahn, London Clubs and Planet Hollywood in its
operations. Through its management and ownership of shopping centers,
TrizecHahn has demonstrated its ability to successfully design, configure
and attract high quality tenants to its retail shopping projects. London
Clubs has extensive experience in the international marketing and operation
of casinos, in particular to premium players. In addition, Planet Hollywood
has successfully grown its concepts to 87 company-owned and franchised
Planet Hollywood and Official All Star Cafe units (as of December 31, 1997)
since commencing business in 1991.
- - CAPITALIZING ON BRAND NAMES. With access to some of the most well-known names
in their respective markets, the Company expects to capitalize on the
worldwide brand recognition of Planet Hollywood, London Clubs and
TrizecHahn, creating unique opportunities for the Complex.
- - ACCESSING NEW CLIENT BASE. London Clubs and Planet Hollywood are expected to
provide the Complex with access to market segments which the Company
believes have not been extensively penetrated by other hotel/casinos in Las
Vegas. London Clubs provides the Aladdin with a substantial network of
international premium players and superb promotional opportunities.
Furthermore, it is expected that Planet Hollywood will introduce a younger,
affluent clientele to the Complex through, among other things, celebrity
involvement in the Music Project.
CAREFULLY MANAGE CONSTRUCTION COSTS AND RISKS. The Company anticipates the
total cost of developing, financing, constructing and opening the Aladdin to be
approximately $790 million (excluding the Company's $21.3 million planned
indirect cash contribution and $15.0 million appraised fair market value land
contribution to Aladdin Music as part of the development funds for the Music
Project). As part of the Company's strategy of carefully managing construction
costs and risks, the Company has hired Tishman
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Construction Corporation of Nevada ("Tishman"), to be the construction manager.
Tishman is a subsidiary of Tishman Realty & Construction Co. Inc., a privately
held company with extensive experience in building quality hotels and casinos.
As construction manager, Tishman will advise with respect to scheduling,
administration and reporting in connection with the construction activities of
the Design/ Builder (as defined herein). In addition, the following arrangements
have been made to ensure the full and timely completion of the Aladdin.
- - BANK COMPLETION GUARANTY AND NOTEHOLDER COMPLETION GUARANTY. The Trust,
London Clubs and Bazaar Holdings have entered into a completion guaranty
(the "Bank Completion Guaranty") for the benefit of the lenders under the
Bank Credit Facility (the "Bank Lenders"), under which they have agreed to
guarantee, among other things, the completion of the Aladdin. The Bank
Completion Guaranty, is not subject to any maximum dollar limitations. The
Trust, London Clubs and Bazaar Holdings have also entered into a limited
completion guaranty for the benefit of the holders of the Notes (the
"Noteholder Completion Guaranty"), under which they have guaranteed
completion of the Aladdin, subject to certain important exceptions,
limitations and qualifications. None of Holdings, the Issuer nor the holders
of Warrants or Warrant Shares is a party to the Bank Completion Guaranty or
the Noteholder Completion Guaranty. See "Risk Factors--Limitations Under
Bank Completion Guaranty and Noteholder Completion Guaranty," "Description
of Noteholder Completion Guaranty and Disbursement Agreement--Noteholder
Completion Guaranty" and "Description of Certain Indebtedness and Other
Obligations--Completion Guaranty."
- - DESIGN/BUILD CONTRACT. Fluor Daniel, Inc. (the "Design/Builder") is the
design/builder for the Aladdin. The Design/Builder has entered into a
guaranteed maximum price design/build contract (subject to increases based
on scope changes) with the Company to design and construct the Aladdin (the
"Design/Build Contract"). The Design/Build Contract provides the
Design/Builder with incentives for completing the Aladdin ahead of schedule
and within budget and for payment of liquidated damages to the Company for
certain delays. The Design/Build Contract is guaranteed by Fluor Corporation
("Fluor"), the parent of the Design/Builder, pursuant to the Fluor Guaranty
(as defined herein). See "Certain Material Agreements--Design/Build
Contract."
- - MALL COMMITMENT LETTER AND MALL GUARANTY. Bazaar has obtained a commitment
letter from Fleet National Bank, as administrative agent for the lenders to
the Mall Project (the "Mall Lenders"), to fund the construction of the Mall
Project (the "Mall Financing"). Furthermore, upon closing of the Mall
Financing, TrizecHahn, the Trust, Bazaar Holdings and AHL have agreed,
pursuant to one or more agreements, to guarantee completion of the Mall
Project and Bazaar's indebtedness to the Mall Lenders until certain earnings
and loan to value targets have been met (collectively, the "Mall Guaranty").
See "Risk Factors--Completion of the Mall Project and the Music Project."
MANAGEMENT AND DEVELOPMENT TEAM
The Complex is being developed by a team with broad expertise in each of the
elements of the Complex and which, collectively, have a proven track record in
constructing, completing and operating significant hotel casino projects.
MANAGEMENT TEAM. The management team of the Company, which will develop and
operate the Aladdin and the Music Project, comprises a unique combination of
executives with an average of more than 20 years' experience in the management
of hotels, casinos, restaurants and large real estate projects. The team
includes:
- - Jack Sommer, Chairman of the Company, who has been a full-time resident of
Las Vegas since 1988 and has more than 25 years of experience as a developer
of real estate including luxury projects such as North Shore Towers, in
Queens County, New York, The Sovereign at 425 East 58th Street in Manhattan
and 280 Park Avenue, an 820,000 square foot office building in Manhattan
formerly owned and currently partially occupied by the Bankers Trust
Company.
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- - Richard J. Goeglein, Chief Executive Officer, President and a director of the
Company who has spent over 28 years in the hotel/casino and food service
industries. Mr. Goeglein has served as President and Chief Executive Officer
of Harrah's Hotels and Casinos and as President and Chief Operating Officer
of Holiday Corp. (the parent company of Holiday Inns, Harrah's, Hampton Inns
and Embassy Suites). Mr. Goeglein oversaw the acquisition of Harrah's and
the development of some of Harrah's most successful projects, including
Harrah's Hotel and Casino in Atlantic City, and its expansion into Southern
Nevada.
- - James H. McKennon, Senior Vice President of the Company and President/Chief
Operating Officer of the Aladdin Hotel and Casino, whose career spans over
21 years in the hotel and casino industry in a variety of executive
positions, including as President and Chief Operating Officer of Caesars
World International Marketing Corp. Mr. McKennon was also President and
Chief Operating Officer of Caesars Tahoe for 4 years and was instrumental in
its financial turnaround.
- - Cornelius T. Klerk, Senior Vice President/Chief Financial Officer of the
Company, has over 19 years experience in the hotel and casino industry both
at the corporate and property level, including as Vice President/Finance of
the Hilton Hotels Gaming Division from 1993 to 1997. Mr. Klerk also served
in a variety of senior financial management positions during the development
and operation of Harrah's Hotel and Casino in Atlantic City and Harrah's
Trump Plaza (now Trump Plaza) in Atlantic City.
DEVELOPMENT TEAM. The Company and its affiliates have been involved in the
design of the Complex for over 24 months and have assembled a development team
with proven experience in the development of high quality resort projects. The
team includes:
- - Tishman, the construction manager for the Aladdin (and, at AHL's option, the
Music Project, the Mall Project and the Theater). Tishman or its affiliates
have developed or built over 30,000 hotel rooms nationwide, including the
Golden Nugget and the Trump Castle Hotel and Casino in Atlantic City, the
400-room expansion of Harrah's Hotel and Casino in Atlantic City, the 2,300
room Walt Disney World Dolphin and Swan Hotel and Convention Complex and the
1,200 room Sheraton Chicago Hotel.
- - The Design/Builder, a subsidiary of Fluor. The Design/Builder is recognized
internationally as an industry leader in providing architectural,
engineering and construction services, including resort projects such as the
Guest Inn Timika in Indonesia, the Pan Pacific Hotel in Malaysia and the
Hyatt Regency Greenville Hotel.
- - ADP/FD of Nevada, Inc. ("ADP"), the Complex architect and an indirect
subsidiary of Fluor. ADP is wholly owned by ADP Marshall, Inc. ("ADP
Marshall"), which is well-known for its architecture work and mixed-use
projects. Its architecture client list includes Princess Hotels, Inc.
(Scottsdale and Acapulco) and Carefree Resorts (The Boulders, The Peaks,
Carmel Valley Ranch).
- - THB, a wholly-owned subsidiary of TrizecHahn and the joint venture partner of
ABH in the Mall Project. Prior to its recently announced sale of 20 regional
shopping centers, TrizecHahn owned and managed 27 regional shopping centers
in major markets throughout the United States, comprising over 25 million
square feet.
- - Brennan Beer Gorman Monk/Interiors ("BBGM"), the interior designer for the
Aladdin. BBGM specializes in hospitality design and has experience in
casinos, restaurants, retail, spa/fitness centers and specialty theme
projects, including the recently renovated and expanded Caesars Atlantic
City hotel, Mohegan Sun Casino and TropWorld. BBGM's hotel projects have
included the St. Regis, the Plaza and the Sheraton Hotel & Towers in New
York City.
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[LOGO]
8
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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 August
1998 (being approximately five months after the Issue Date). It is
anticipated that the Company will begin to draw down the Term A Loan,
subject to satisfaction of the conditions in the Disbursement Agreement, in
December 1999 (being approximately 21 months after the Issue Date). See
"Risk Factors--Conditions to Draw Down of Funds Under Funding Transactions."
All of the Loans will convert from construction loans into amortizing loans
on the Conversion Date (as defined herein), with substantial amounts due
during the final six quarters of the Term B Loan and the Term C Loan. The
Company has the option to pay interest at either LIBOR or the alternate base
rate ("ABR") published by The Bank of Nova Scotia ("Scotiabank"), in each
case plus certain margins. See "Description of Certain Indebtedness and
Other Obligations--Bank Credit Facility."
(2) The Company has entered into a commitment letter with the FF&E Lender (as
defined herein) for provision of the FF&E Financing. The FF&E Financing is
expected to consist of $60.0 million of operating leases and $20.0 million
in loans and is expected to be used by the Company to obtain the Gaming
Equipment and Specified Equipment. See "Description of Certain Indebtedness
and Other Obligations--FF&E Financing."
(3) Represents the gross proceeds of the Offering, which, net of expenses of
approximately $8 million, were contributed, together with approximately $8
million in cash received pursuant to the London Clubs Contribution, by
Holdings to the Company in exchange for Series A Preferred Interests.
(4) The land on which the Aladdin, the Music Project and the Plant (as defined
herein) will be built, including adjacent land of approximately 0.8 acres,
comprises a total of approximately 22.75 acres (the "Contributed Land") and
was contributed to the Company by Holdings in exchange for Common Membership
Interests. The Contributed Land has an appraised fair market value of $150.0
million (book value of $33.6 million as of December 31, 1997). Approximately
18 acres of the Contributed
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Land, having an appraised fair market value of $135.0 million, have been
retained by the Company and approximately 4.75 acres of the Contributed
Land, having an appraised fair market value of $15.0 million, will be
contributed to Aladdin Music for the Music Project.
(5) Represents (i) a $50.0 million cash contribution by London Clubs in exchange
for 25% of the Holdings Common Membership Interests and (ii) a $7.0 million
deemed equity contribution by the Issuer in exchange for Holdings Common
Membership Interests, consisting of certain pre-development costs incurred
by AHL in 1996, 1997 and 1998.
(6) Pursuant to the Site Work Agreement, the Company has agreed to complete the
construction of, among other things, certain shared structural space (the
"Mall Shared Space"), construction of which will commence prior to the
initial funding of the Mall Financing. Bazaar has agreed to reimburse the
Company for up to $14.2 million (including interest) of the costs associated
with such construction upon the completion of the Mall Shared Space. See
"Certain Material Agreements--Construction, Operation and Reciprocal
Easement Agreement and Related Agreements."
(7) Represents (i) the guaranteed maximum price of construction of the Aladdin
pursuant to the Design/ Build Contract of $267.0 million, less the
contingency allowance of $6.8 million and expected reimbursement from Bazaar
of $13.6 million (net of approximately $0.6 million of interest) as set
forth in note (6) above; (ii) approximately $35 million for theming the
Aladdin; (iii) $11.7 million for professional fees and disbursements; and
(iv) $2.3 million for permits and taxes. See "Risk Factors-- Completion of
the Mall Project and the Music Project." The Design/Build Contract contains
financial incentives for the Design/Builder to complete the Aladdin within
the construction budget and in a timely manner, as well as liquidated
damages payable to the Company for certain unexcused delays. See "Risk
Factors--Risks of New Construction," "--Risks Under Design/Build Contract
and Fluor Guaranty" and "Certain Material Agreements--Design/Build
Contract."
(8) Represents the cost of off-site improvements, including overhead pedestrian
walkways and widening of certain streets, for those parts of the Project
Site (as defined herein) on which the Aladdin will be built.
(9) Includes $26.5 million of gaming equipment and $81.0 million of furniture,
fixtures and other equipment (including the Specified Equipment consisting
of new furniture and equipment other than gaming equipment).
(10) Represents the appraised fair market value of the land on which the Aladdin
and the Plant will be built, together with adjacent land of approximately
0.8 acres.
(11) Represents the retirement on the Issue Date of $68.7 million of existing
indebtedness on the Contributed Land (with an interest rate of LIBOR plus
650 bps) and $5.8 million of existing debt owed by the Trust to GW Vegas LLC
("GW Vegas"), assumed by the Company as part of Holdings' equity
contribution to the Company.
(12) Represents capitalized gross interest under the Bank Credit Facility of
$57.4 million and capitalized gross interest of $2.4 million from leasing
expenses in connection with the FF&E Financing, from the date of the
Offering until the estimated completion of the Aladdin in the first four
months of the year 2000, net of interest income anticipated to be earned
upon the investment in cash equivalents of the funds (assumed to be at 5%
per annum) from the proceeds of the Offering and the proceeds of the Term B
Loan and Term C Loan.
(13) Represents $3.0 million of certain predevelopment costs incurred by AHL and
reimbursed on the Issue Date and up to $0.9 million of certain
predevelopment costs expected to be incurred and reimbursed over the
expected construction period.
(14) Represents cash on hand, inventories, deposits and other cash balances
required for the opening of the Aladdin.
(15) Comprises (i) the $6.8 million contingency included in the guaranteed
maximum price set forth in the Design/Build Contract and (ii) the $25.0
million general project contingency (collectively, the "Contingency").
(16) Represents the appraised fair market value of the approximately 4.75 acres
of land on which the Music Project will be built, which land will be
contributed by the Company to AMH in exchange for common membership
interests in AMH.
(17) Represents cash to be contributed by the Company to AMH in exchange for
common membership interests in AMH.
(18) Represents fees in connection with the organization of the Company and the
financing of the Aladdin, including approximately $8 million in expenses
incurred in connection with the Offering.
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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>
12
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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; ABILITY TO SERVICE DEBT
The Issuer does not have any material assets other than its ownership of 25%
of the Holdings Common Membership Interests. Holdings does not and may not in
the future have any material assets other than its ownership of 100% of the
Common Membership Interests in the Company and its ownership of 100% of the
Series A Preferred Interests in the Company, and does not and may not in the
future have any material operations or revenues (other than income derived from
its interest in the Company). Accordingly, the ability of the Holdings Group to
pay principal, interest, premium, if any, or any other payment obligations on
its indebtedness will be completely dependent on the operations of the Company.
The Holdings Group is, and upon completion of the Aladdin will be, highly
leveraged with substantial fixed debt service obligations in addition to
operating expenses, and is expected upon completion of the Aladdin to have
approximately $583 million of outstanding indebtedness, including $410.0 million
outstanding under the Bank Credit Facility, approximately $153 million
outstanding under the Notes (representing the approximate Accreted Value (as
defined in the Indenture) thereof on April 30, 2000) and an aggregate of $20.0
million outstanding under the loan portion of the FF&E Financing. The FF&E
Financing will also consist of $60 million of operating leases. Upon the opening
of the Aladdin, the Company is expected to have an aggregate of $10 million
available under a working capital facility. In addition, the Indenture allows
the Company to incur additional indebtedness under certain circumstances. See
"Description of Certain Indebtedness and Other Obligations--Senior Discount
Notes." The degree to which the Holdings Group is leveraged could have important
consequences to the holders of the Warrants and Warrant Shares, including, but
not limited to, the following: (i) increasing the Holdings Group's vulnerability
to adverse general economic and industry conditions; (ii) affecting the
proportion of the Holdings Group's operating cash flow required to pay
principal, interest and other amounts on indebtedness, thereby reducing the
funds available for operations and dividends or distributions to equity holders;
and (iii) impairing the Holdings Group's ability to obtain additional financing
for future working capital expenditures, acquisitions or other general corporate
purposes.
Pending the opening of the Aladdin, which is expected to occur in the first
four months of the year 2000, it is currently anticipated that the Company will
have no operations other than activities in connection with the development of
the Aladdin. The ability of the Holdings Group to pay principal, interest and
other amounts payable under its various debt facilities will be dependent upon
the successful completion of the Aladdin and the Company's future operating
performance which is dependent upon a number of factors, many of which are
outside the Holdings Group's control, including the successful completion of the
Mall Project, prevailing economic conditions and financial, business, regulatory
and other factors affecting the Company's operations. If the Company is unable
to complete the Aladdin within its construction budget or, once operating, is
unable to generate sufficient cash flow, it could be required to adopt one or
more alternatives, such as obtaining additional financing to the extent
permitted by the Indenture and the Bank Credit Facility, reducing or delaying
planned construction or capital expenditures, restructuring debt or obtaining
additional equity capital. There can be no assurance that any of these
alternatives could be effected on satisfactory terms, and the inability to
acquire additional financing could materially and adversely affect the Holdings
Group and the Issuer and so the value of the Warrants and the Warrant Shares.
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<PAGE>
Additionally, there can be no assurance that the Aladdin will be able to
attract a sufficient number of patrons to achieve the level of activity
necessary to permit the Holdings Group to meet its payment obligations in
connection with the Funding Transactions and any other indebtedness or
obligations of the Holdings Group. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and "Description of Certain
Indebtedness and Other Obligations."
CONDITIONS TO DRAW DOWN OF FUNDS UNDER FUNDING TRANSACTIONS
Financing for the construction and development of the Aladdin and of the
other components of the Complex has been provided by multiple parties,
including, with respect to the Aladdin, the holders of the Notes, the Bank
Lenders and the FF&E Lender, and with respect to the Mall Project, the Mall
Lenders. Concurrent with the closing of the Offering, the Company and Holdings
entered into the Disbursement Agreement with the Trustee (for the benefit of the
holders of the Notes) and Scotiabank, as Administrative Agent under the Bank
Credit Facility, Disbursement Agent on behalf of the Bank Lenders and the
holders of the Notes, and as securities intermediary (the "Securities
Intermediary") and U.S. Bank National Association as servicing agent (the
"Servicing Agent"). Pursuant to the Disbursement Agreement, the proceeds from
the Offering of the Notes that were not expended on the Issue Date (being
approximately $35 million) were deposited in the Note Construction Disbursement
Account, which was pledged to the Disbursement Agent for the benefit of the
holders of the Notes and the proceeds of the Term B Loan and Term C Loan were
deposited in the Cash Collateral Account, which was pledged to the Disbursement
Agent for the benefit of the Bank Lenders. Disbursements from the Note
Construction Disbursement Account and the Cash Collateral Account and advances
of the Term A Loan are subject to the conditions established in the Disbursement
Agreement. There are significant conditions on the Bank Lenders' obligations to
fund or provide advances, including, among other things, that (i) all of the
proceeds of the Offering have been disbursed, (ii) the absence of any material
adverse change in the financial condition, business, property or prospects and
the ability of the Company and the Project Parties (as defined herein) to
perform in all material respects their respective obligations under the
Operative Documents (as defined herein) to which they are a party, (iii) the
absence of any default or an event of default with respect to material Operative
Documents which would be reasonably likely to cause a material adverse effect on
the financial condition, business, property or prospects of the Company or to
the Company's knowledge, of the Project Parties and their ability to perform in
all material respects their respective obligations under the Operative Documents
to which they are a party, (iv) there being no failure on the part of the
Company to keep the Bank Credit Facility In Balance (as defined herein), and (v)
compliance by the Guarantors (as defined herein) under the Bank Completion
Guaranty and London Clubs and AHL, as Sponsors (as defined herein), under the
Keep-Well Agreement. See "Description of the Noteholder Completion Guaranty and
Disbursement Agreement--Disbursement Agreement."
The Company does not expect to draw down any funds under the Bank Credit
Facility until August 1998 (approximately five months after the Issue Date). If
the Company fails to satisfy the conditions to the draw down of funds under the
Bank Credit Facility, alternative sources of funding will need to be obtained
and/or the Trust, Bazaar Holdings and London Clubs will be required to make cash
contributions to the Company pursuant to the Bank Completion Guaranty in order
for the Company to complete the Aladdin. The failure of the Company to satisfy
the conditions to the drawdown of funds under the Bank Credit Facility could
have a material and adverse effect on the Company's ability to complete the
Aladdin and so the value of the Warrants and Warrant Shares.
General Electric Capital Corporation (the "FF&E Lender") has entered into a
commitment letter to provide the $80.0 million of aggregate financing required
to acquire the Specified Equipment and Gaming Equipment. The availability of the
FF&E Financing is subject to certain conditions, including negotiation of
definitive agreements and successful completion of due diligence. Prior to or
upon completion of the Aladdin, the Company is expected to finalize arrangements
for the FF&E Financing. However, if the Company is unable to finalize the FF&E
Financing for any reason, the financial position and results of
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<PAGE>
operations of the Company, and so the Aladdin Parties and holders of Warrants or
Warrant Shares, could be materially and adversely affected.
There can be no assurance that each lender will perform its obligations or
observe the limitations on the exercise of remedies as set forth under such
agreements. Failure of any one or more of the lenders to perform under the
Disbursement Agreement could materially and adversely affect the Company, the
Aladdin Parties and holders of Warrants or Warrant Shares. In addition,
financing by multiple lenders with security interests that are interrelated by
use or location of the underlying collateral may result in increased complexity
in a debt restructuring or other workout of the Company.
LIMITATION ON ACCESS TO CASH FLOW OF SUBSIDIARIES; HOLDING COMPANY STRUCTURE
The Issuer does not have any material assets other than its ownership of 25%
of the Holdings Common Membership Interests. Holdings is a holding company, and
its ability to make distributions to the Issuer is dependent upon the receipt of
distributions from its direct and indirect subsidiaries. Holdings does not have
and may not in the future have any material assets other than its ownership of
100% of the Common Membership Interests and 100% of the Series A Preferred
Interests of the Company.
The Company is a party to the Bank Credit Facility which imposes substantial
restrictions, including the satisfaction of certain financial conditions, on the
Company's ability to make distributions to Holdings. Holdings is a party to the
Indenture which imposes substantial restrictions, including the satisfaction of
certain financial covenants, on Holdings' ability to make distributions to the
Issuer. The ability of the Company to comply with such conditions in the Bank
Credit Facility and of Holdings to comply with such conditions in the Indenture
may be affected by events that are beyond the control of Holdings. If the
maturity of loans under the Bank Credit Facility or the Notes were to be
accelerated, all indebtedness outstanding thereunder would be required to be
paid in full before the Company or Holdings, as applicable, would be permitted
to distribute any assets or cash to its members. In addition, certain remedies
available to the Bank Lenders under the Bank Credit Facility could constitute
Events of Default under the Indenture and so cause acceleration of the Notes. In
such circumstances there can be no assurance that the assets of the Company
would be sufficient to repay all of such outstanding debt and then to make
distributions to Holdings to enable Holdings to meet its obligations under the
Indenture. Future borrowings by the Company can also be expected to contain
restrictions or prohibitions on distributions by the Company to Holdings and by
Holdings to the Issuer.
The Holdings Operating Agreement and the Company Operating Agreement (as
defined herein) also contain restrictions on distributions on the Holdings
Common Membership Interests and the Common Membership Interests, respectively.
In particular, no distributions, other than distributions to cover any tax
liability in respect of any Holdings Interests (as defined herein) may be made
on Holdings Common Membership Interests while any Holdings Series A Preferred
Interests (as defined herein) or Holdings Series B Preferred Interests (as
defined herein) are outstanding. Further, distributions by the Company (other
than distributions to cover tax liability) on Common Membership Interests are
also limited while Series A Preferred Interests are outstanding. Such
restrictions could materially and adversely affect holders of Holdings Common
Membership Interests such as the Issuer, and holders of Common Stock (such as
the Warrant Shares) and the Warrants. In addition, the Indenture contains
limitations on Holdings' ability to make distributions to its members. As a
result, the amount of distributions made to the Issuer, and therefore dividends
to the holders of Warrant Shares and other stockholders, will effectively be
restricted by the terms of the Indenture. Such restrictions could materially and
adversely affect returns available to holders of Warrant Shares and so the value
of the Warrants and Warrant Shares.
Any right of Holdings to receive assets of any of its subsidiaries upon such
subsidiary's liquidation or reorganization will be effectively subordinated to
the claims of that subsidiary's creditors, except to the extent, if any, that
Holdings itself is recognized as a creditor of such subsidiary, in which case
the claims of Holdings would still be subordinate to the claims of such
creditors who hold security in the assets of such
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<PAGE>
subsidiary to the extent of such assets and to the claims of such creditors who
hold indebtedness of such subsidiary senior to that held by Holdings.
CONTROLLING STOCKHOLDERS; LACK OF VOTING POWER FOR WARRANT SHARES
AHL owns 98.7% of the common membership interests of Sommer Enterprises, a
Nevada limited-liability company. Sommer Enterprises owns 100% of the issued and
outstanding Class A Common Stock (as defined herein) and the Common Stock of the
Issuer, prior to the exercise of the Warrants, and the Issuer holds 25% of the
Holdings Common Membership Interests. The remaining Holdings Common Membership
Interests are held approximately 47.0% by Sommer Enterprises, 25.0% by LCNI and
3.0% by GAI, LLC ("GAI"), a Nevada limited-liability company 100% beneficially
owned by Richard J. Goeglein, the Chief Executive Officer and a director of the
Company. Accordingly, AHL, through Sommer Enterprises, indirectly owns 98.7% of
the Issuer (prior to the exercise of the Warrants) and approximately 71.1% of
the Holdings Common Membership Interests. London Clubs, through LCNI, owns 25%
of the Holdings Common Membership Interests. Accordingly, AHL and London Clubs
(the "Controlling Stockholders") control the business, policies and affairs of
Holdings, and so the Company, including the election of directors and managers
and major corporate transactions of the Company.
If all of the Warrants are exercised, the holders of Warrant Shares will own
50% of the issued and outstanding Common Stock, representing an indirect
economic interest in 10% of the outstanding Holdings Common Membership
Interests. However, the holders of the Common Stock are not entitled to vote on
any matter submitted to the Issuer's shareholders, including the election of
directors of the Issuer, and will receive limited minority shareholder
protections. Accordingly, holders of Class A Common Stock will be able, without
the approval of the holders of the Common Stock, subject to applicable law, to
(i) amend the Issuer's Articles of Incorporation and Bylaws; (ii) effect mergers
and certain other major corporate transactions; (iii) elect the Issuer's
directors and (iv) otherwise control the outcome of virtually all matters
submitted to a general shareholder vote. Accordingly, even if all of the
Warrants are exercised, the Trust, through AHL and Sommer Enterprises, will
nevertheless continue to retain control of the Issuer and the Controlling
Stockholders will nevertheless continue to retain control of Holdings, and so
the Company, and the holders of Warrant Shares will be limited in their ability
to exercise any degree of control whatsoever over the Issuer, and so Holdings
and the Company. See "Certain Material Agreements--Equity Participation
Agreement."
Under the Holdings Operating Agreement, if the Trust fails to make its
required 75% contribution for any amounts required to be made under the Bank
Completion Guaranty, LCNI (rather than Sommer Enterprises through the Issuer)
will have certain rights to control the Board of Managers of Holdings and LCNI
and Sommer Enterprises will each have equal direct or indirect voting rights in
deciding matters with respect to Holdings. Furthermore, if AHL fails to make its
required 75% contributions for any amounts required to be made under the
Keep-Well Agreement, LCNI (in addition to any rights London Clubs may have
against AHL and Sommer Enterprises, which may include the ability of London
Clubs to obtain ownership of Sommer Enterprises' equity interests in the Issuer)
through the Issuer or otherwise will have the right to control the Board of
Managers of Holdings and increase its Holdings Common Membership Interests up to
a total of 72% of the Holdings Common Membership Interests, and Sommer
Enterprises' Holdings Common Membership Interests will correspondingly decrease,
subject to receipt of Gaming Approvals. For a description of certain
relationships between the Company, AHL and LCNI, see "Controlling Stockholders"
and "Certain Transactions."
ABSENCE OF DIVIDENDS AND DISTRIBUTIONS
None of the Issuer, Holdings or the Company has ever paid any dividends or
distributions on its common stock or membership interests and (except for
distributions to cover any tax liability in respect of Holdings Interests and
distributions on the Series A Preferred Interests) none of the Issuer, Holdings
or the Company has any plans to pay any dividends or distributions on its common
stock or membership interests in the foreseeable future. Except as stated in the
preceding sentence, the Company currently intends to retain all earnings for
reinvestment in its business and repayment of indebtedness. The Bank
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<PAGE>
Credit Facility, the Indenture, the Company Operating Agreement and the Holdings
Operating Agreement restrict the payment of distributions by the Company and
Holdings. Such restrictions could materially and adversely affect the Issuer's
ability to pay dividends on, and the value of, the Warrant Shares and so the
value of the Warrants. See "Dividends and Distributions", "Certain Material
Agreements--Holdings Operating Agreement" and "--Company Operating Agreement"
and "Description of Certain Indebtedness and other Obligations--Bank Credit
Facility" and "--Senior Discount Notes."
RISKS OF NEW CONSTRUCTION
Major construction projects (and particularly one of the anticipated size
and scale of the Aladdin) entail significant risks, including shortages of
materials or skilled labor, unforeseen engineering, environmental and/or
geological problems, work stoppages, weather interference, unanticipated cost
increases and unavailability of construction equipment. Construction, equipment
or staffing problems or difficulties in obtaining any of the requisite licenses,
permits, allocations or authorizations from regulatory authorities could
increase the total cost, delay, or prevent the construction or opening of the
Aladdin or the other components of the Complex or otherwise affect their
respective design and features.
The anticipated costs and opening dates for the Aladdin are based on
budgets, conceptual design documents (not all of which will be finalized at the
commencement of construction) and schedule estimates prepared by the Company
with the assistance of the architects and contractors described herein. See
"Business--Design and Construction Team." Under the terms of the Design/Build
Contract, the Design/Builder is responsible for all construction costs covered
by the Design/Build Contract that are in excess of the guaranteed maximum price
set forth therein, subject to certain qualifications. Pursuant to the Fluor
Guaranty, Fluor has made certain guarantees regarding the Design/Builder's
performance under the Design/Build Contract. However, the Design/Build Contract
provides that the guaranteed maximum price will be equitably adjusted on account
of (i) changes in the design documents at the request of the Company; (ii)
changes requested by the Company in the scope of the work to be performed
pursuant to the Design/Build Contract; and (iii) natural disasters, casualties
and certain other "force majeure" events beyond the reasonable control of the
Design/Builder. If any such events occur, the construction costs which must be
borne by the Company may increase. The Design/Build Contract requires that all
subcontractors engaged by the Design/Builder to perform work and/or supply
materials in connection with the construction of the Aladdin post bonds, at the
discretion of the Company and the Design/Builder, guaranteeing timely completion
of work and payment for all labor and materials. Nevertheless, there can be no
assurance that the Aladdin will commence operations on schedule, that
construction costs for the Aladdin will not exceed budgeted amounts or that the
Design/Builder will not challenge aspects of the guaranteed maximum price.
Failure to complete the Aladdin on budget or on schedule may have a material
adverse effect on the Company, and so the Aladdin Parties.
COMPLETION OF THE MALL PROJECT AND THE MUSIC PROJECT
A principal part of the Complex will be the Mall Project, which is comprised
of the Desert Passage and the Carpark, and the Music Project (including the
Theater). The Company's business plan assumes that the Desert Passage and the
Music Project will attract a substantial flow of pedestrian traffic to the
Casino and that the Carpark will provide essential parking facilities for both
overnight and casual guests at the Aladdin. However, the Company will neither
develop nor own the Desert Passage, the Carpark or the Music Project and the
completion of the Aladdin is not contingent on their completion. Failure of the
Mall Project or the Music Project to be developed or to become operating in a
timely manner will have a material adverse effect on the Company and the Aladdin
Parties.
The Mall Project will be developed and owned by Bazaar. Bazaar is 50%-owned
by Bazaar Holdings, which is controlled by the Trust and therefore is an
affiliate of the Issuer. Bazaar Holdings and THB have entered into an operating
agreement (the "Bazaar LLC Operating Agreement") under which each party has
agreed to cooperate in the development and operation of the Mall Project, and
Bazaar Holdings and THB have provided certain undertakings to effect the
development of the Mall Project in an agreed manner and time frame. Such
agreements and undertakings are conditional on certain matters, including
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<PAGE>
that the members of Bazaar have closed on the Mall Financing and that the Trust
has provided a form of credit enhancement with respect to a portion of its
obligations under the Mall Guaranty. The Company is not a party to the Bazaar
LLC Operating Agreement. See "Certain Material Agreements--Bazaar LLC Operating
Agreement."
Bazaar and the Mall Lenders have entered into a commitment letter for the
Mall Financing. The Mall Financing is subject to certain conditions. If Bazaar
fails to satisfy the conditions to the draw down of funds under the Mall
Financing, alternative sources of funding will need to be obtained. Upon closing
of the Mall Financing, TrizecHahn, the Trust, Bazaar Holdings and AHL have
agreed, pursuant to one or more agreements, to guarantee the completion of the
Mall Project and Bazaar's indebtedness to the Mall Lenders pursuant to the Mall
Guaranty. Neither the Company nor any of the Aladdin Parties is a party to the
Bazaar LLC Operating Agreement, the Mall Guaranty or the commitment letter for
the Mall Financing and so neither the Company nor any of the Aladdin Parties may
enforce or prevent the amendment or cancellation of any of the rights or
obligations thereunder. In addition, there can be no assurance that TrizecHahn,
the Trust, Bazaar Holdings and AHL will be in a position to comply with their
obligations under the Mall Guaranty. If the Mall Project is not completed, the
Company believes that it may need to incur additional costs to complete the
construction of the Aladdin, depending on the Aladdin's stage of construction.
If the Mall Project is abandoned after the construction of certain shared
structural space has begun, the Company believes that the costs of completing
the shared structural space (which would be used as retail space) and demolition
and construction expenses necessary to convert the site of the Mall Project into
surface parking would be approximately $23 million (including the $14.2 million,
including interest, no longer being reimbursed by Bazaar pursuant to the Site
Work Agreement).
The success of the Mall Project will depend significantly on the skills and
experience of TrizecHahn in the management of entertainment shopping malls such
as the Mall Project. However, under the Bazaar LLC Operating Agreement, THB is,
in certain circumstances, entitled to dispose of its interests in the Mall
Project on or after the fifth anniversary of the opening of the Mall Project.
Accordingly, there can be no assurance that, after such date, TrizecHahn will
continue to manage, or hold an equity interest in, the Mall Project. In
addition, on March 5, 1998, TrizecHahn announced that it is considering the sale
of its operating portfolio of regional shopping centers and on April 6, 1998
announced the sale of 20 regional shopping centers for over $2.5 billion.
TrizecHahn has indicated that its planned sales will not include TrizecHahn's
portfolio of development projects, including the Desert Passage. Although
TrizecHahn has indicated that it will proceed with and have sufficient financial
resources to complete the Desert Passage even if a sale of its entire operating
portfolio were to be consummated, no assurance can be made that TrizecHahn will
be in a position to satisfy its obligations under the Bazaar Operating
Agreement.
The Music Project is expected to be developed and owned by Aladdin Music.
Pursuant to the London Clubs Purchase Agreement, London Clubs, through its
wholly owned subsidiary LCNI, has agreed that so long as Aladdin Music obtains
financing for the Music Project on terms satisfactory to LCNI and provided that
certain other conditions are met, Aladdin Music may develop and own the Music
Project in accordance with the terms described herein. If such conditions are
not met, LCNI has the right to select the method in which it will participate in
the Music Project, if at all. There can be no assurance that the conditions will
be satisfied. If the conditions are not satisfied, there can be no assurance
that the Music Project will proceed as described herein, or at all.
As currently anticipated, the Company and Planet Hollywood intend to operate
the Music Project in a manner conducive to the joint achievement of the
Company's and Aladdin Music's business objectives. While the Company has signed
the Music Project Memorandum of Understanding with Planet Hollywood in
connection with the development, construction and operation of the Music
Project, funding for the Music Project has not yet been finalized and certain
significant matters, such as the appointment of a general contractor to
construct the Music Project, remain incomplete. If the Mall Project is not
completed, it may not be feasible to develop the Music Project. If the Music
Project is not completed, the Company intends to apply a portion of the funds
which it has allocated for its equity contribution to Aladdin Music to the
renovation of the Theater. However, without the support of Planet Hollywood
through the Music Project, the Company may not be able to attract the same
quality of performers to the Theater as it may
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otherwise have been able to attract. Further, even if the Music Project is
completed, there can be no assurance that the Music Project will be operated in
a manner conducive to the achievement of the Company's business objectives. In
addition, the Music Project and its owners must receive all required Gaming
Approvals (as defined herein) from the Nevada Gaming Authorities (as defined
herein) in order to conduct gaming operations.
There can be no assurance (i) that Bazaar or Aladdin Music will have or
obtain sufficient funding to finance the development and operation of the Mall
Project or the Music Project, respectively; (ii) that the Desert Passage or the
Music Project will be completed; (iii) that if completed, the Desert Passage or
the Music Project will attract the number and types of customers expected by the
Company; or (iv) that if completed, the Music Project and its owners will obtain
all required Gaming Approvals or that if obtained, they will be obtained on a
timely basis. Failure of Bazaar or Aladdin Music to develop and operate the Mall
Project or the Music Project, respectively, in the manner currently expected
could materially and adversely affect the success of the Aladdin and the
financial position and results of operations of the Company, and so the Aladdin
Parties.
COMPLETION OF ENERGY PLANT
Energy will be provided to certain parts of the Complex by an energy plant
to be developed and constructed pursuant to the Development Agreement (as
defined herein). The Company has entered into the Development Agreement with the
Energy Provider (as defined herein), pursuant to which the Energy Provider will
develop and construct the Plant (as defined herein) to serve the energy
requirements of certain parts of the Complex. See "Certain Material
Agreements--Development Agreement." The design and construction of the Plant
will be at the sole cost and expense of the Energy Provider, however, the Energy
Provider shall not be responsible for costs in excess of $40.0 million unless
agreed to by the Energy Provider. The obligations of the Energy Provider to
complete the Plant in accordance with the Development Agreement and in a manner
capable of delivering the energy requirements of such parts of the Complex in
accordance with the Energy Service Agreement (as defined herein) are guaranteed
by the Energy Provider's ultimate parent, Unicom Corporation ("Unicom"). Unicom
has agreed that if for any reason the Energy Provider shall fail or be unable to
punctually and fully perform or cause to be performed any of its obligations
under the Development Agreement, Unicom shall perform or cause to be performed
such obligations promptly upon demand. Unicom's obligations are limited to an
amount equal to $30.0 million (or, under certain circumstances, an amount less
than $30.0 million) and shall not be reduced until Substantial Completion (as
defined herein) of the Plant.
There can be no assurance that the Energy Provider will perform its
obligations under the Development Agreement, or that Unicom will perform its
obligations under the Unicom Guaranty (as defined herein). Failure of the Energy
Provider or Unicom to perform its obligations under the Development Agreement
and Unicom Guaranty or failure of the Energy Provider to perform its obligations
under the Energy Service Agreement, will materially and adversely affect the
Company, the Aladdin Parties and holders of the securities offered hereby. In
addition, the Company may have to make alternative arrangements for the
provision of energy for the Complex. There can be no assurance that such
arrangements could be made, or if made, on terms favorable to the Company.
RISKS OF NEW VENTURE
The Issuer's sole material asset is its 25% interest in the Holdings Common
Membership Interests. Holdings' material assets are its interests in the
Company. Accordingly, the Issuer's sole material asset is its indirect ownership
of 25% of the interests in the Company. The Company is a development stage
company formed to develop and operate the Aladdin. The Company has no history of
operations and has never been involved in developing, constructing or operating
a hotel/casino project. Although certain members of the Company's management
have experience developing and operating large scale hotels and casinos, none of
these individuals has developed or operated a development of the anticipated
size of the Aladdin, and only certain of these individuals have worked together
with certain other members of the Company's
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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
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
SUBSTANTIVE CONSOLIDATION
Under the Bankruptcy Code, it is possible that if AHL, the Company, the
Issuer, London Clubs, the Trust, Holdings or Capital, or any of their affiliates
(the "Affiliated Parties") becomes a debtor under applicable bankruptcy law, a
bankruptcy court could order substantive consolidation of the assets and
liabilities of any or all Affiliated Parties. Substantive consolidation is an
equitable, fact-based remedy, not prescribed by statute, with respect to which
the court has considerable discretion. While the separate legal existence of
each Affiliated Party and its observance of certain formalities and operating
procedures could effectively preclude, based on the present state of the case
law (i) a finding that the assets of an Affiliated Party is property of the
bankruptcy estates of any of the other Affiliated Parties and (ii) the
substantive consolidation of the assets and liabilities of an Affiliated Party
with those of any of the other Affiliated Parties, there can be no assurance
that substantive consolidation would not occur. In addition, there can be no
assurance that during litigation of such issues, delays will not occur in
payments of indebtedness, even if the court ultimately rules against substantive
consolidation, or that parties in interest might determine to settle such issues
to avoid the expense and delay of litigation. If the court concludes there is
substantive consolidation, however, payments of indebtedness could be delayed or
reduced, which in turn could delay distributions (if any) to equity holders,
including holders of Warrant Shares.
LIMITED-LIABILITY COMPANIES
Holdings and the Company are limited-liability companies organized under the
laws of the State of Nevada. Limited-liability companies ("LLCs") are relatively
recent creations not only under the laws of the State of Nevada but also under
the laws of other jurisdictions. Generally stated, LLCs are intended to provide
both the limited liability of the corporate form for their members and certain
advantages of partnerships, including "pass-through" income tax treatment for
members, and thus have attributes of both corporations and partnerships. Given
their recent creation, LLCs and their members have been involved in relatively
few bankruptcy cases as debtors, and there has been little reported judicial
authority addressing bankruptcy issues as they pertain to LLCs. Moreover, the
existing judicial authority on such issues in bankruptcies of analogous entities
(e.g. partnerships) is not well settled. Consequently, a bankruptcy of Holdings
or the Company, its members or any of their affiliates, may be litigated and
decided in the absence of dispositive judicial precedent, and thus, no assurance
can be made as to any particular outcome.
RISKS UNDER DESIGN/BUILD CONTRACT AND FLUOR GUARANTY
Certain obligations of the Design/Builder under the Design/Build Contract
are guaranteed by Fluor (the "Fluor Guaranty"). A default by either the
Design/Builder under the Design/Build Contract or Fluor under the Fluor Guaranty
could result in the Aladdin not being completed on schedule and have a material
adverse effect on the Company and the Aladdin Parties. If a bankruptcy case were
to be commenced voluntarily by or involuntarily against Fluor, remedies
available under the Fluor Guaranty would be limited or unavailable. The Fluor
Guaranty does not cover cost increases caused by certain acts commonly referred
to as "force majeure."
CHANGE OF CONTROL
Upon a Change of Control (as defined in the Indenture), each holder of the
Notes will have the right, at such holder's option, to require the Note Issuers
to purchase the Notes owned by such holder at a price equal to 101% of the
Accreted Value thereof plus accrued and unpaid interest, if any, and Liquidated
Damages (as defined in the Indenture), if any, to the date of purchase. There
can be no assurance that the Note Issuers will have sufficient funds to purchase
the Notes after such a Change of Control. In addition, upon a change of control
(as defined in the Bank Credit Facility) all amounts outstanding under the Bank
Credit Facility will immediately become due and payable. There can be no
assurance that the Company will have sufficient funds to repay the Bank Credit
Facility or any other indebtedness that becomes due as a
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result of such event. See "Description of Certain Indebtedness and Other
Obligations--Bank Credit Facility."
OPERATING RESTRICTIONS
The terms of the Indenture, the Bank Credit Facility and the other
agreements governing the indebtedness of the Company impose significant
operating and financial restrictions on the Company and the Aladdin Parties.
Such restrictions significantly limit or prohibit, among other things, the
incurrence of certain additional debt, distributions, transactions with
affiliates of the Company and Holdings and the sale of certain assets. These
restrictions, in combination with the degree to which the Company is leveraged,
could limit the ability of the Company to respond to market conditions or meet
extraordinary capital needs or could otherwise restrict corporate activities.
There can be no assurances that such restrictions will not materially and
adversely affect the ability of the Company to finance its future operations or
capital needs and the operation of its business. See "Description of Certain
Indebtedness and Other Obligations."
POSSIBLE CONFLICTS OF INTEREST
Potential for conflicts of interest exists between the Aladdin, on the one
hand, and the other businesses to be operated on the Complex. The Trust is
expected to hold significant interests in all of these businesses. Mr. Jack
Sommer, who is Chairman and a director of the Company and Holdings and President
of the Issuer, Mr. Ronald Dictrow, who is Executive Vice President/Secretary and
a director of the Company and Holdings and a Secretary and director of the
Issuer, are also directors of Bazaar. In addition, certain directors and
executives of the Company and Holdings are currently and are likely to continue
to be, directors and executives of Aladdin Music, which will develop and own the
Music Project. Further, it is expected that in addition to managing the Aladdin,
the Company, through its affiliate, will also manage the Music Project. The
objectives for each of these businesses may at times differ and such differences
may be material. In addition, all such businesses will share the use of certain
facilities on the Complex, including vehicular and pedestrian traffic ways, the
Carpark and certain utilities (such as the Plant, which will provide energy to
the Complex). For these reasons, potential exists for conflicts of interest,
including in relation to the division of management time between each of these
businesses, splitting of costs of shared facilities and the sharing of future
business opportunities arising in connection with the Complex.
In addition, Planet Hollywood, which is a 50% shareholder in Aladdin Music
(on a fully diluted basis) and the developer of the Music Project, is not
contractually restricted or otherwise prevented from developing other music or
entertainment theme hotel casinos in Las Vegas. The development of a competing
Planet Hollywood-owned hotel in Las Vegas could give rise to conflicts of
interest for Planet Hollywood and could materially and adversely affect the
Music Project and so Aladdin Music, the Company and the Aladdin Parties.
SHARED FACILITIES
Because the Aladdin, the Mall Project and the Music Project will share
certain operational facilities (the "Shared Facilities"), the construction of
all such projects will include the construction of the Shared Facilities in
sizes and/or capacities that will be sufficient for all such projects together,
but are in excess of what is minimally required for the Aladdin. The Shared
Facilities will include certain shared structural space, the Strip facade and
related retail areas of the Complex. The Company will bear the full cost of
constructing the Shared Facilities. However, Bazaar will be obligated to
reimburse the Company for a portion of the construction costs related to the
Shared Facilities if the Mall Project is completed. It is estimated that
Bazaar's share of the cost of constructing the Shared Facilities will be $14.2
million, including interest. If Bazaar is unable to obtain financing for the
Mall Project, it is unlikely that Bazaar will be able to reimburse the Company
for its share of the construction costs related to the Shared Facilities
pursuant to the Site Work Agreement.
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LIMITATIONS UNDER BANK COMPLETION GUARANTY AND NOTEHOLDER COMPLETION GUARANTY
Pursuant to the Bank Completion Guaranty, the Trust, London Clubs and Bazaar
Holdings have agreed among other things jointly and severally to guarantee the
development, construction and equipping of the Aladdin for the benefit of the
Bank Lenders. None of the holders of the Warrants, Warrant Shares, Holdings or
the Issuer is a party to the Bank Completion Guaranty, however, the Trust,
Bazaar Holdings and London Clubs have entered into the Noteholder Completion
Guaranty for the benefit of the holders of the Notes, subject to certain
important qualifications, limitations and exceptions. The Noteholder Completion
Guaranty contains certain intercreditor provisions which significantly limit the
rights of the State Street Bank and Trust Company, as trustee under the
Indenture (the "Trustee") and the holders of the Notes, including certain
standstill periods during which the Trustee and the holders of the Notes may not
enforce the Noteholder Completion Guaranty or seek remedies thereunder, even if
there is a default under the Bank Completion Guaranty and the Bank Lenders are
no longer advancing funds. See "Description of Noteholder Completion Guaranty
and Disbursement Agreement--Noteholder Completion Guaranty."
The Bank Completion Guaranty entered into by the Trust, Bazaar Holdings and
London Clubs requires that if the Company has insufficient funds available to
complete the Aladdin, the Trust, Bazaar Holdings and London Clubs must
contribute cash to the Company to enable such completion, subject to certain
qualifications. None of the holders of Warrants or Warrant Shares, Holdings or
the Issuer is party to the Bank Completion Guaranty and, accordingly, none of
them may enforce any rights thereunder. In addition, none of the holders of
Warrants or Warrant Shares, Holdings or the Issuer is party to the Noteholder
Completion Guaranty and, accordingly, none of them may enforce any rights
thereunder. The parties to the Bank Completion Guaranty have limited obligations
under the Bank Completion Guaranty until and unless the proceeds of the Funding
Transactions are, in the aggregate, insufficient to cover the construction cost
increases covered by the Bank Completion Guaranty. The Bank Completion Guaranty
terminates upon the indefeasible payment and performance of the Guaranteed
Obligations (as defined herein). See "Description of Certain Indebtedness and
Other Obligations--Bank Completion Guaranty."
The Trust, Bazaar Holdings and London Clubs are considering entering into a
completion guaranty in favor of a contingent guarantor pursuant to which the
Trust, Bazaar Holdings and London Clubs will guaranty the completion of the
Aladdin on substantially similar terms to the Bank Completion Guaranty under
certain conditions, including if the Administrative Agent does not enforce the
Bank Completion Guaranty and the Trustee does not enforce the Noteholder
Completion Guaranty.
Neither the Bank Completion Guaranty nor the Noteholder Completion Guaranty
contain restrictions on the ability of the parties thereto to incur indebtedness
junior in respect of right of payment to the Guaranteed Obligations (excluding
certain types of indebtedness). While such parties have informed the Company
that they believe they will be able to perform their respective obligations
thereunder, no assurance can be given that they will have available the
financial resources if they are called on under the Bank Completion Guaranty or
the Noteholder Completion Guaranty. If the Trust and Bazaar Holdings fail to
perform their obligations under the Bank Completion Guaranty or the Noteholder
Completion Guaranty, London Clubs is, in certain circumstances, entitled
(through its affiliates) to exercise equal voting power to the Trust and its
affiliates in the affairs of Holdings. If the parties under the Bank Completion
Guaranty or the Noteholder Completion Guaranty are unable to perform their
respective obligations thereunder, it may be an Event of Default under the
Indenture and the Bank Credit Facility and the Aladdin may not be completed.
Certain historical financial information concerning London Clubs is included
herein to assist investors in evaluating the ability of London Clubs to perform
its obligations under the Bank Completion Guaranty and the Noteholder Completion
Guaranty. Such information has been prepared in accordance with United Kingdom
generally accepted accounting principles ("U.K. GAAP"), which principles are not
consistent with, and materially differ from, United States generally accepted
accounting principles ("U.S. GAAP"). With respect to the historical financial
information of London Clubs included herein, such differences
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relate (among other things) to depreciation and amortization, valuation of fixed
assets, recognition of deferred taxes, accounting for employee stock options,
and accounting for pension costs. In making their investment decision, investors
should consider that if such financial information of London Clubs was restated
in accordance with U.S. GAAP, there are likely to be material differences from
such information as stated in accordance with U.K. GAAP. Such differences would
have no material effect on London Clubs' cash flows or liabilities and,
accordingly, also would have no material impact on its ability to meet its
obligations.
The U.K. Chancellor of the Exchequer has proposed to increase the highest
marginal rate of gaming duty (tax on casino betting profits) from 33 1/3% to
40%. If the proposed tax increase were to be enacted into law, London Clubs
could suffer a reduction of profits. The proposed tax increase is not certain to
be enacted, or if enacted, in the form in which it has been proposed.
RISK OF NON-PERFORMANCE UNDER KEEP-WELL AGREEMENT
AHL, London Clubs and Bazaar Holdings have agreed pursuant to an agreement
(the "Keep-Well Agreement") to contribute, if required, funds to the Company to
ensure the Company's compliance with certain financial ratios and other
requirements under the Bank Credit Facility, subject to certain conditions.
Neither Holdings, the Issuer nor the holders of Warrants or Warrant Shares is a
party to the Keep-Well Agreement. The Keep-Well Agreement does not constitute a
guaranty of the obligations of the Company under the Bank Credit Facility, the
Notes or otherwise. In particular, under the Keep-Well Agreement, the parties to
the Keep-Well Agreement are not required to contribute an aggregate of more than
$150.0 million to the Company ($30.0 million in any fiscal year), and are not
required to contribute any amounts to the Company on or after the earlier of the
date on which the Company, without the benefit of cash contributions from the
Controlling Stockholders or their affiliates, complies with all of the financial
covenants set forth in the Bank Credit Facility for six consecutive quarterly
periods from and after the Conversion Date (as defined herein) or the date on
which the aggregate outstanding principal amounts of the Bank Credit Facility
are reduced below certain amounts and prior to certain dates.
While the parties to the Keep-Well Agreement have informed the Company that
they believe they will be able to perform their obligations under the Keep-Well
Agreement, no assurance can be given that they will have available sufficient
financial resources if they are called on to make payments under the Keep-Well
Agreement. The obligations of London Clubs under the Keep-Well Agreement are
subordinated to other obligations of London Clubs under certain of its
pre-existing senior debt facilities. Furthermore, although the obligations of
London Clubs under the Keep-Well Agreement are guaranteed by certain
subsidiaries of London Clubs, such subsidiaries also currently guarantee senior
existing indebtedness of London Clubs. In addition, there are certain
restrictions on each of the parties' to the Keep-Well Agreement ability to incur
indebtedness or sell or transfer assets. If a party defaults in its obligations
under the Keep-Well Agreement, such party's (or its affiliate's) interest in
Holdings could be subject to dilution, which dilution could affect that party's
(or its affiliate's) ability to control or direct the policies of Holdings and
so the Company. Failure of each of the parties to the Keep-Well Agreement to
comply with their material obligations under the Keep-Well Agreement could have
a material and adverse effect on the Company and the Aladdin Parties, and will
constitute a default under the Indenture. The payments and issuance of
additional securities will be subject to the prior approval of the Nevada Gaming
Authorities. See "Controlling Stockholders--Keep-Well Agreement."
Certain historical financial information concerning London Clubs is included
herein to assist investors in evaluating the ability of London Clubs to perform
its obligations under the Keep Well Agreement. Such information has been
prepared in accordance with United Kingdom generally accepted accounting
principles ("U.K. GAAP"), which principles are not consistent with, and
materially differ from, United States generally accepted accounting principles
("U.S. GAAP"). With respect to the historical financial information of London
Clubs included herein, such differences relate (among other things) to
depreciation and amortization, valuation of fixed assets, recognition of
deferred taxes, accounting for employee stock
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options, and accounting for pension costs. In making their investment decision,
investors should consider that if such financial information of London Clubs was
restated in accordance with U.S. GAAP, there are likely to be material
differences from such information as stated in accordance with U.K. GAAP. Such
differences would have no material effect on London Clubs' cash flows or
liabilities and, accordingly, also would have no material impact on its ability
to meet its obligations.
The U.K. Chancellor of the Exchequer has proposed to increase the highest
marginal rate of gaming duty (tax on casino betting profits) from 33 1/3% to
40%. If the proposed tax increase were to be enacted into law, London Clubs
could suffer a reduction of profits. The proposed tax increase is not certain to
be enacted, or if enacted, in the form in which it has been proposed.
DEPENDENCE UPON KEY MANAGEMENT AND LACK OF EXPERIENCED PERSONNEL
The ability of the Company to maintain its competitive position is dependent
to a large degree on its ability to retain the services of its senior management
team, including Jack Sommer, Richard Goeglein and James McKennon. Although
certain of the senior managers of the Company have employment agreements with
the Company, there can be no assurance that such individuals will remain with
the Company. The loss of the services of any of these individuals or an
inability to attract and retain additional senior management personnel could
have a material adverse effect on the operation of the Aladdin. There can be no
assurance that the Company will be able to retain its existing senior management
personnel or to attract additional qualified senior management personnel. See
"Management."
Until construction of the Aladdin is close to completion, the Company
believes that it will not require extensive operational management and,
accordingly, has kept and intends to keep its permanent staff at relatively
minimal levels. However, the Company will be required to undertake a major
recruiting and training program prior to the opening of the Aladdin at a time
when other major new facilities may be approaching completion and also
recruiting employees. While the Company believes that it will be able to attract
and retain a sufficient number of qualified individuals to operate the Aladdin
on acceptable terms, the pool of experienced gaming and other personnel is
limited and competition to recruit and retain gaming and other personnel is
likely to intensify as more casinos are opened. No assurance can be given that
such employees will be available to the Company for use in managing the Aladdin.
RISK OF OVERCAPACITY; COMPETITION AND PLANNED CONSTRUCTION IN LAS VEGAS
The hotel/casino industry is highly competitive. Hotels located on or near
the Strip ("Strip Hotels") compete with other Strip Hotels and with other major
hotels in downtown Las Vegas. The Aladdin will also compete with a large number
of other hotels and motels located in and near Las Vegas. According to the Las
Vegas Convention and Visitors Authority (the "LVCVA"), as of December 31, 1996,
there were more than 99,000 hotel and motel rooms in the Las Vegas area. Direct
competitors of the Company will include theme-oriented mega-resorts on the Strip
such as Caesars Palace Hotel, The Mirage, Treasure Island Hotel and Casino, New
York-New York Hotel and Casino and the MGM Grand Hotel and Casino. Many
competitors of the Company are subsidiaries or divisions of large public
companies and may have greater financial and other resources than the Company.
In addition, the construction of several new major resort projects that will
compete with the Company and the expansion of several existing resorts have
commenced construction or have recently been announced. These include the
planned Bellagio, Paris Casino Resort, and Venetian Casino Resort, all currently
under construction. Additionally, expansions have recently been completed at
Caesars Palace Hotel and Harrah's Las Vegas. These projects and others are
expected to add approximately 20,000 hotel rooms to the Las Vegas inventory by
1999. The future operating results of the Company, and so the Aladdin Parties,
could be materially and adversely affected by such competitors and excess Las
Vegas room and gaming capacity generally.
The hotel/casino operations of the Company will also compete, to some
extent, with other hotel/casino facilities in Nevada and in Atlantic City, with
hotel/casino facilities elsewhere in the world and with state lotteries. In
addition, certain states have recently legalized, and others may or are likely
to legalize, casino
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gaming in specific areas, and passage of the Indian Gaming Regulatory Act in
1988 has led to rapid increases in American Indian gaming operations. The
Company expects many competitors to enter such new jurisdictions that authorize
gaming, some of which competitors may have greater financial and other resources
than the Company. Such proliferation of gaming activities could significantly
and adversely affect the business of the Company, and so the Aladdin Parties. In
particular, the legalization of casino gaming in or near any metropolitan area
from which the Company intends to attract customers could have a material
adverse effect on the business of the Company, and so the Aladdin Parties. See
"Business--The Las Vegas Market."
The Desert Passage will compete with retail malls in or near Las Vegas,
including the Fashion Show Mall, the Forum Shops at Caesars Palace and retailers
in theme-oriented mega resorts, all of which may attract consumers away from the
Desert Passage and so the Complex.
GOVERNMENT REGULATION
The gaming operations and the ownership of securities of the Company and the
Holdings Group will be subject to extensive regulation by the Nevada Gaming
Authorities. The Nevada Gaming Authorities will have broad authority with
respect to licensing and registration of entities and individuals involved with
the Company and the Holdings Group.
The Issuer may be required to disclose the identities of the holders of the
Warrants and Warrant Shares to the Nevada Gaming Authorities upon request. The
Nevada Commission (as defined herein) may, in its discretion, require the holder
of any security of a Registered Company (as defined herein), such as the
Warrants and the Warrant Shares, to file an application, be investigated and be
found suitable to own the security of a Registered Company. If the Nevada
Commission determines that a person is unsuitable to own such security, then
pursuant to the Nevada Act (as defined herein), the Registered Company can be
sanctioned, including the loss of its approvals if, without the prior approval
of the Nevada Commission, it: (i) pays to the unsuitable person any dividend,
interest, or any distribution whatsoever; (ii) recognizes any voting right by
such unsuitable person in connection with such securities; (iii) pays the
unsuitable person remuneration in any form, or (iv) makes any payment to the
unsuitable person by way of principal, redemption, conversion, exchange,
liquidation, or similar transaction.
Each holder of the Warrants and the Warrant Shares shall be deemed to have
agreed (to the extent permitted by law) that if the Nevada Gaming Authorities
determine that a holder or beneficial owner of the Warrants and the Warrant
Shares must be found suitable, and if such holder or beneficial owner either
refuses to file an application or is found unsuitable, such holder shall, upon
request of the Issuer, dispose of such holder's Warrants and the Warrant Shares
within 30 days after receipt of such request or such earlier date as may be
ordered by the Nevada Gaming Authorities. The Issuer will also have the right to
call for the redemption of the Warrants and the Warrant Shares by any holder at
any time to prevent the loss or impairment of a Gaming Approval or an
application for a Gaming Approval, at a redemption price equal to the cost paid
by such holder. The beneficial owners of the Warrants and Warrant Shares will be
subject to the requirement of obtaining Gaming Approvals in the discretion of
the Nevada Gaming Authorities. Any beneficial owner of more than 10% of the
voting securities of the Issuer will be required to obtain a Gaming Approval.
However, the Warrants are exercisable only into non-voting shares of common
stock of the Issuer.
The Nevada Gaming Authorities may also, among other things, revoke the
license of any entity licensed by the Nevada Gaming Authorities (a "Company
Licensee") or the registration of a Registered Company or any entity registered
as an intermediary company or a holding company of a Company Licensee. In
addition, the Nevada Gaming Authorities may revoke the license or finding of
suitability of any officer, director, manager, member, controlling person,
shareholder, noteholder or key employee of a licensed or registered entity. If
Gaming Approvals of the Company or Holdings were revoked for any reason, the
Nevada Gaming Authorities could require the closing of the Casino, which would
result in a material adverse effect on the Company and the Aladdin Parties. The
Company, and certain of its officers,
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directors, manager, members and key employees, have applied for licensing with
the Nevada Gaming Authorities. Also, the Company possesses or has applied for
all necessary state and local government approvals, licenses and permits, other
than Gaming Approvals, necessary to open and operate the facility.
In addition, any future public offering of debt or equity securities by the
Company, the Note Issuers or the Issuer, including the Exchange Offer (as
defined herein), any Qualified Public Offering and the issuance of Common Stock
of the Issuer upon the exercise of the Warrants, if the securities or the
proceeds from the sale thereof are intended to be used to pay for construction
of, or to acquire an interest in, any gaming facilities in Nevada, to finance
the gaming operations of an affiliated company or to retire or extend
obligations incurred for any such purpose, requires the prior approval of the
Nevada Commission or, a ruling from the Chairman of the Nevada Board (as defined
herein) that such approval is not required. See "Regulation and Licensing" and
"Description of Indebtedness and Other Obligations--Senior Discount Notes."
LACK OF PUBLIC MARKET FOR THE WARRANTS AND WARRANT SHARES
The Warrants and Warrant Shares are each new issues of securities for which
there is currently no trading market. There can be no assurance regarding the
future development of a market for the Warrants or Warrant Shares, or the
ability of the holders of the Warrants or Warrant Shares to sell such
securities, or the price at which such holders may be able to sell such
securities. If such a market were to develop, the Warrants and Warrant Shares
could trade at prices that may be higher or lower than the price paid by selling
holders of Warrants or Warrant Shares depending on many factors, including
prevailing interest rates, the Aladdin Parties' operating results and the market
for similar securities. Each of the Initial Purchasers has advised the Aladdin
Parties that it currently intends to make a market in the Warrants and Warrant
Shares. However, the Initial Purchasers are not obligated to do so and any
market making in respect to such securities may be discontinued at any time
without notice. Therefore, there can be no assurance as to the liquidity of any
trading market for the Warrants and Warrant Shares or that an active trading
market for such securities will develop. The Aladdin Parties do not intend to
apply for listing or quotation of the Warrants and Warrant Shares, on any
securities exchange or stock market. The Warrants and the Warrant Shares are
currently eligible for trading in the Private Offerings, Resales and Trading
through Automated Linkages ("PORTAL") market. Following the Registration
Statement being declared effective by the Commission, the Warrants and the
Warrant Shares will not be eligible for PORTAL trading.
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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>
29
<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 five months after the Issue Date. It is anticipated
that the Company will begin to draw down the Term A Loan, subject to
satisfaction of the conditions in the Disbursement Agreement, approximately
21 months after the Issue Date. See "Risk Factors--Drawn Down of Funds Under
Funding Transactions." All of the Loans will convert from construction loans
into amortizing loans on the Conversion Date. The Company has the option to
pay interest at either LIBOR or Scotiabank's ABR, in each case plus certain
margins. See "Description of Certain Indebtedness and Other
Obligations--Bank Credit Facility."
(2) The Company entered into a commitment letter with the FF&E Lender for
provision of the FF&E Financing. The FF&E Financing consists of $60.0
million of operating leases and $20.0 million in loans and is expected to be
used by the Company to obtain the Gaming Equipment and Specified Equipment.
See "Description of Certain Indebtedness and Other Obligations-- FF&E
Financing."
(3) Represents the gross proceeds of the Offering, which, net of expenses of
approximately $8 million, were contributed, together with approximately $8
million in cash received pursuant to the London Clubs Contribution, by
Holdings to the Company in exchange for Series A Preferred Interests.
(4) The land on which the Aladdin, the Music Project and the Plant will be
built, including adjacent land of approximately 0.8 acres, comprises a total
of approximately 22.75 acres (the "Contributed Land") and was contributed to
the Company by Holdings in exchange for Common Membership Interests. The
Contributed Land has an appraised fair market value of $150.0 million (book
value of $33.6 million as of December 31, 1997). Approximately 18 acres of
the Contributed Land, having an appraised fair market value of $135.0
million, will be retained by the Company and approximately 4.75 acres of the
Contributed Land, having an appraised fair market value of $15.0 million,
will be used for the Music Project.
(5) Represents (i) a $50.0 million cash contribution by London Clubs in exchange
for 25% of the Holdings Common Membership Interests and (ii) a $7.0 million
deemed equity contribution by the Issuer in exchange for Holdings Common
Membership Interests, consisting of certain pre-development costs incurred
by AHL in 1996, 1997 and 1998.
(6) Pursuant to the Site Work Agreement, the Company has agreed to complete the
construction of, among other things, the Mall Shared Space, construction of
which will commence prior to the initial funding of the Mall Financing.
Bazaar has agreed to reimburse the Company for up to $14.2 million
(including interest) of the costs associated with such construction upon the
completion of the Mall Shared Space. See "Certain Material
Agreements--Construction, Operation and Reciprocal Easement Agreement and
Related Agreements."
(7) Represents (i) the guaranteed maximum price of construction of the Aladdin
pursuant to the Design/Build Contract of $267.0 million, less the
contingency allowance of $6.8 million and expected reimbursement from Bazaar
of $13.6 million (net of approximately $0.6 million of interest) as set
forth in note (6) above; (ii) approximately $35 million for theming the
Aladdin; (iii) $11.7 million for professional fees and disbursements; and
(iv) $2.3 million for permits and taxes. See "Risk Factors-- Completion of
the Mall Project and the Music Project." The Design/Build Contract contains
financial incentives for the Design/ Builder to complete the Aladdin within
the construction budget and in a timely manner, as well as liquidated
damages payable to the Company for certain unexcused delays. See "Risk
Factors--Risks of New Construction," "Risks Under Design/Build Contract and
Fluor Guaranty" and "Certain Material Agreements--Design/Build Contract."
(8) Represents the cost of off-site improvements, including overhead pedestrian
walkways and widening of certain streets, for those parts of the Project
Site on which the Aladdin will be built.
(9) Includes $26.5 million of gaming equipment and $81.0 million of furniture,
fixtures and other equipment consisting of new furniture and equipment other
than gaming equipment).
(10) Represents the appraised fair market value of the land on which the Aladdin
and the Plant will be built, together with adjacent land of approximately
0.8 acres.
(11) Represents the retirement on the Issue Date of $68.7 million of existing
indebtedness on the Contributed Land with an interest rate of LIBOR plus 650
bps and $5.8 million of existing debt owed by the Trust to GW Vegas, assumed
by the Company as part of Holdings' equity contribution to the Company.
(12) Represents capitalized gross interest under the Bank Credit Facility of
$57.4 million and capitalized gross interest of $2.4 million from leasing
expenses in connection with the FF&E Financing, from the date of the
Offering until the estimated completion of the Aladdin in the first four
months of the year 2000, net of interest income anticipated to be earned
upon the investment in cash equivalents of the funds (assumed to be at 5%
per annum) from the proceeds of the Offering and the proceeds of the Term B
Loan and Term C Loan.
(13) Represents $3.0 million of certain predevelopment costs incurred by AHL and
reimbursed at closing and up to $0.9 million of certain predevelopment costs
expected to be incurred and reimbursed over the expected construction
period.
(14) Represents cash on hand, inventories, deposits and other cash balances
required for the opening of the Aladdin.
(15) Comprises (i) the $6.8 million contingency included in the guaranteed
maximum price set forth in the Design/Build Contract and (ii) the $25.0
million general project contingency.
(16) Represents the appraised fair market value of the approximately 4.75 acres
of land on which the Music Project will be built, which land will be
contributed by the Company to AMH in exchange for common membership
interests in AMH.
(17) Represents cash to be contributed by the Company to AMH for common
membership interests in AMH.
(18) Represents fees in connection with the organization of the Company and the
financing of the Aladdin, including approximately $8 million for expenses
incurred in connection with the Offering.
30
<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.
31
<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
August 1998 (being approximately five months after the Issue Date). All of
the Loans will convert from construction loans into amortizing loans on the
Conversion Date, with substantial amounts due during the final six quarters
of the Term B Loan and the Term C Loan. The Company has the option to pay
interest at either LIBOR or Scotiabank's ABR, in each case plus a certain
margin. See "Description of Certain Indebtedness and Other Obligations--Bank
Credit Facility."
(2) The Company entered into a commitment letter with the FF&E Lender for
provision of the FF&E Financing. The FF&E Financing consists of $20.0
million in loans and $60.0 million in operating leases and is expected to be
used by the Company to obtain the Gaming Equipment and Specified Equipment.
The FF&E Financing will begin to be funded six months prior to the opening
of the Aladdin. See "Description of Certain Indebtedness and Other
Obligations--FF&E Financing."
(3) The Notes have an initial Accreted Value of $115.0 million which equals the
gross proceeds of the Offering, such gross proceeds, net of expenses of
approximately $8 million, were contributed, together with approximately $8
million in cash received pursuant to the London Clubs Contribution, by
Holdings to the Company in exchange for Series A Preferred Interests. The
Aladdin Parties have allocated $100.0 million of the gross proceeds of the
Offering to the Notes and $15.0 million of such proceeds to the Warrants.
See "Use of Proceeds" and "Certain United States Federal Income Tax
Considerations."
(4) Represents: (i) the $33.6 million book value of the Contributed Land (such
land having an appraised fair market value of $150.0 million) and $15.0
million of the gross proceeds of the Offering allocated by the Aladdin
Parties to the sale of the Warrants and contributed by the Issuer to
Holdings for Holdings Common Membership Interests, net of approximately $69
million of indebtedness and $5.8 million of debt owed to GW Vegas and repaid
from the proceeds of the Offering, (ii) a $50.0 million cash contribution to
Holdings by London Clubs in exchange for 25% of the Holdings Common
Membership Interests, and (iii) a $7.0 million deemed equity contribution by
the Issuer, consisting of certain predevelopment costs incurred by AHL in
1996, 1997 and 1998.
(5) Does not include any ascribed value for the Bank Completion Guaranty.
32
<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."
33
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
DEVELOPMENT ACTIVITIES
The Issuer is an indirect subsidiary of AHL and was incorporated in December
1997 for the sole purpose of issuing the Warrants and Warrant Shares. The sole
material asset of the Issuer is 25% of the Holdings Common Membership Interests
which represents an indirect interest to the Warrant holders of 10% of the
outstanding Holdings Common Membership Interests on a fully diluted basis.
Holdings is a holding company, the material assets of which are 100% of the
outstanding Common Membership Interests and 100% of the outstanding Series A
Preferred Interests of the Company. The Company was organized in January 1997.
Since that time and until the Issue Date, the Company's activities have been
carried on by AHL on the Company's behalf. To date, the Company's activities
have principally been limited to arranging the design, construction and
financing of the Aladdin (including the Funding Transactions) and applying for
certain permits, licenses and approvals necessary for the development and
operation of the Aladdin. The Company plans to develop, construct and operate
the Aladdin as the centerpiece of an approximately 35 acre world-class resort,
casino and entertainment complex located on the site of the existing Aladdin
hotel and casino (the "Project Site"). The Aladdin will be situated at a premier
location at the center of the Strip in Las Vegas, Nevada. The original Aladdin
hotel and casino was built on the Project Site in 1966. The Theater was added in
1976. The Project Site was purchased by the Trust, through a
predecessor-in-interest to AHL, in December 1994. To maintain certain tax
attributes obtained in connection with the Trust's acquisition of the Project
Site, the original hotel and casino continued to be leased by JMJ, Inc., the
company which leased the Project Site from the former owners. In April, 1998,
the original Aladdin hotel and casino will be demolished to clear the Project
Site for the development of the Complex. The Aladdin is currently expected to
open in the first four months of the year 2000.
RESULTS OF OPERATIONS
The Aladdin Parties and the Company have had no significant operations to
date. Certain financial statements for the Issuer and Holdings (on a
consolidated basis), Capital and the Company are included herein. Such
historical operating results are not indicative of future operating results.
Future operating results of the Company, which will be relevant to the
ownership and operation of the Aladdin and so the Issuer, are subject to
significant business, economic, regulatory and competitive uncertainties and
contingencies, many of which are beyond the control of the Company and the
Aladdin Parties. While the Company believes that the Aladdin will be able to
attract a sufficient number of patrons and achieve the level of activity
necessary to permit the Note Issuers and the Company to meet their payment
obligations on their indebtedness and Holdings to make cash distributions on the
Holdings Common Membership Interests, no assurances can be given that they will
be able to do so.
LIQUIDITY AND CAPITAL RESOURCES
The approximately $790 million necessary to fund the development, financing,
construction and opening of the Aladdin (excluding the Company's $21.3 million
planned indirect cash contribution and $15.0 million appraised fair market value
land contribution to Aladdin Music, as part of the development funds for the
Music Project) will be derived from a combination of (i) borrowings of up to
$410.0 million under the Bank Credit Facility; (ii) operating lease and loan
obligations aggregating $80.0 million under the FF&E Financing; (iii) the Equity
and Series A Preferred Interest Financing, comprising an equity contribution by
London Clubs of $50.0 million in cash, $7.0 million in pre-development costs
incurred by AHL in 1996 and 1997, $150.0 million appraised fair market value in
land by Holdings and $115.0 million of gross proceeds from the Offering; and
(iv) anticipated reimbursement pursuant to the Site Work Agreement of $14.2
million, including interest. See "Use of Proceeds."
34
<PAGE>
On the Issue Date the Company entered into the Bank Credit Facility with the
Bank Lenders. The Bank Credit Facility consists of three separate term loans.
Term A Loan comprises a term loan of $136.0 million and matures seven years
after the initial borrowing date. Term B Loan comprises a term loan of $114.0
million and matures eight and one-half years after the initial borrowing date.
Term C Loan comprises a term loan of $160.0 million and matures ten years after
the initial borrowing date. The Term B Loan and the Term C Loan were funded on
the Issue Date into the Cash Collateral Account, and subject to satisfaction of
the conditions in the Disbursement Agreement, are expected to be drawn down
beginning in August 1998 (approximately five months after the Issue Date). It is
anticipated that the Company will begin to draw down the Term A Loan, subject to
satisfaction of the conditions in the Disbursement Agreement in December 1999
(approximately 21 months after the Issue Date). See "Risk Factors-- Conditions
to Drawdown of Funds under Funding Transactions." All of the Loans will convert
from construction loans into amortizing loans on the Conversion Date, with
substantial amounts due during the final six quarters of the Term B Loan and the
Term C Loan. The Company has the option to pay interest at either LIBOR or
Scotiabank's ABR, in both cases plus certain margins. See "Description of
Certain Indebtedness and Other Obligations--Bank Credit Facility."
On the Issue Date, the Note Issuers issued the Notes pursuant to the
Offering. The Notes mature on March 1, 2010. The initial Accreted Value of the
Notes was $519.40 per $1,000 principal amount at maturity of the Notes. The
Notes accrete at 13 1/2% (computed on a semi-annual bond equivalent basis) based
on the initial Accreted Value, calculated from the Issue Date. The Notes will
accrete to an aggregate principal amount of $221.5 million by March 1, 2003.
Cash interest will not accrue on the Notes prior to March 1, 2003. Commencing on
September 1, 2003, cash interest on the Notes will be payable, at a rate of
13 1/2% per annum, semiannually in arrears on March 1 and September 1 of each
year until maturity. See "Description of Certain Indebtedness and Other
Obligations--Senior Discount Notes."
The FF&E Financing provides for the operating lease financing of up to $60.0
million and loans of $20.0 million to obtain the Gaming Equipment and the
Specified Equipment. Under the terms of the FF&E Financing, repayments of
principal and interest are due in quarterly installments. The FF&E Financing is
secured by all of the Gaming Equipment and Specified Equipment financed pursuant
thereto. See "Description of Certain Indebtedness and Other Obligations--FF&E
Financing."
Pursuant to the Equity and Series A Preferred Interest Financing, Holdings
contributed to the Company the following property: (a) approximately $107
million in cash (comprising net proceeds from the Offering), (b) an
approximately 22.75 acre portion of the Project Site upon which the Aladdin, the
Music Project and the Plant will be built (together with adjacent land of
approximately 0.8 acres), which has an appraised fair market value of $150.0
million, (c) $7.0 million in the form of certain pre-development costs incurred
by AHL in 1996 and 1997, and (d) the London Clubs Contribution, consisting of
$50.0 million in cash.
The Trust, Bazaar Holdings and London Clubs have entered into the Bank
Completion Guaranty for the benefit of the Bank Lenders, and the Noteholder
Completion Guaranty for the benefit of the holders of the Notes, pursuant to
which the Trust, Bazaar Holdings and London Clubs are required, whenever there
are certain construction cost increases in connection with the work to be
performed pursuant to the Design/Build Contract, and subject to certain
qualifications, to contribute cash to the Company to fund all such increases in
construction costs. Neither the Issuer, holders of Issuer Stock (such as the
Warrant Shares) nor holders of the Warrants is party to, or entitled to enforce
the Bank Completion Guaranty or Noteholder Completion Guaranty. See "Risk
Factors--Limitations Under Bank Completion Guaranty and Noteholder Completion
Guaranty," "Description of Certain Indebtedness and Other Obligations--Bank
Completion Guaranty" and "Description of Noteholder Completion Guaranty and
Disbursement Agreement--Noteholder Completion Guaranty."
AHL, London Clubs, and Bazaar Holdings have entered into the Keep-Well
Agreement for the benefit of the Bank Lenders. Pursuant to the Keep-Well
Agreement, AHL, London Clubs and Bazaar
35
<PAGE>
Holdings have agreed to contribute funds to the Company to ensure the Company's
compliance with certain financial ratios and other requirements under the Bank
Credit Facility for the period up to the earlier of the date on which the
Company complies with all the financial covenants set forth in the Bank Credit
Facility for six consecutive quarterly periods from and after the Conversion
Date or the date on which the aggregate outstanding principal amounts of the
Bank Credit Facility are reduced below certain amounts and prior to certain
dates, subject to certain conditions. See "Controlling Stockholders--Keep-Well
Agreement."
The funds provided by the Funding Transactions are expected to be sufficient
to develop, complete and commence the operations of the Aladdin, assuming no
delays or construction cost overruns which (i) are not covered by the $31.8
million Contingency or (ii) Fluor and/or the Design/Builder are not responsible
for pursuant to the Fluor Guaranty and the Design/Build Contract, respectively.
The Company does not expect that additional external funding will need to be
obtained in order to develop and commence the operations of the Aladdin.
Following the commencement of operations of the Aladdin, the Company expects
to fund its operating and capital needs, as currently contemplated, with $15.0
million of working capital from the Funding Transactions and operating cash
flows. In addition, upon the opening of the Aladdin, the Company is expected to
have an aggregate of $10.0 million available under a working capital facility.
Although no additional financing is contemplated, the Company will seek, if
necessary and to the extent permitted under the Indenture and the terms of the
Bank Credit Facility, additional financing through additional bank borrowings or
debt or equity financings. There can be no assurance that additional financing,
if needed, will be available to the Company, or that, if available, the
financing will be on terms favorable to the Company. There can also be no
assurance that estimates by the Company of its reasonably anticipated liquidity
needs are accurate or that new business developments or other unforeseen events
will not occur, resulting in the need to raise additional funds.
36
<PAGE>
BUSINESS
OVERVIEW OF THE COMPLEX
The Company plans to develop, construct and operate the Aladdin as the
centerpiece of an approximately 35 acre world-class resort, casino and
entertainment complex located on the site of the existing Aladdin hotel and
casino in Las Vegas, Nevada, a premier location at the center of the Strip. The
Aladdin has been designed to include a luxury theme hotel of approximately 2,600
rooms, an approximately 116,000 square foot casino, an approximately 1,400-seat
production showroom and seven restaurants. The Casino's main gaming area will
contain approximately 2,800 slot machines, 87 table games, keno and a race and
sports book facility. Included on a separate level of the Casino will be the
15,000 square foot luxurious Salle Privee, which is expected to contain an
additional 20 to 30 high denomination table games and approximately 100 high
denomination slot machines. The Salle Privee will cater to wealthy clientele and
be operated and marketed in conjunction with London Clubs, a prestigious,
multi-national casino operator which caters to international premium players.
The Complex, which has been designed to promote Casino traffic and to provide
customers with a wide variety of entertainment alternatives, will comprise (i)
the Aladdin; (ii) the themed entertainment Desert Passage shopping mall with
approximately 462,000 square feet of retail space; (iii) the Music Project,
which will be a second hotel and casino with a music and entertainment theme;
(iv) the newly renovated 7,000-seat Theater; and (v) the approximately
4,800-space Carpark. The Mall Project and the Music Project will be separately
owned by affiliates of the Company. The Company's business and marketing
strategies are expected to capitalize on the Complex's premier location, its
superior designed, mixed-use, themed development, and strong strategic
partnering with highly successful public companies. The grand opening date for
the Aladdin and the Mall Project is currently anticipated to occur during the
first four months of the year 2000, with the opening of the Music Project
expected to occur within six months after the opening of the Aladdin.
The Company's management team is led by Chief Executive Officer Richard J.
Goeglein, the former President and Chief Executive Officer of Harrah's Hotels
and Casinos and President and Chief Operating Officer of Holiday Corp., who
during his term at Harrah's oversaw the expansion of the Harrah's brand,
including the development of Harrah's Hotel and Casino in Atlantic City.
Assisting Mr. Goeglein as Senior Vice President of the Company and
President/Chief Operating Officer of the Aladdin Hotel and Casino is James H.
McKennon, who as President and Chief Operating Officer of Caesars Tahoe was
instrumental in its financial turnaround and as President of Caesars World
International Marketing Corp. was responsible for the global marketing of the
Caesars brand.
It is expected that approximately $75 million will be spent on theming in
the Aladdin and the Desert Passage, of which approximately $35 million will be
spent by the Company on the Aladdin. This theming will create an environment in
the Aladdin that will be based upon the Legends of the 1001 Arabian Nights,
including the intriguing tales of Aladdin, Ali Baba and the 40 Thieves, Sinbad
and other legendary stories woven around ancient wealth and wonders. The Aladdin
theme will be carefully crafted through the interior and exterior architecture
of the facility. The Aladdin's exterior will be designed to include a highly
articulated streetscape, a themed Casino exterior shaped like a Bedouin tent,
fountains, walkways, sculptures and an outdoor restaurant. The sophisticated
interior of the Aladdin will utilize rich colors, textures and design, enhancing
the fantasy of a mystical romantic time and place. A significant feature of the
Desert Passage will be the themed area to be known as the "Lost City." The Lost
City is expected to contain a re-creation of an ancient mystical mountain city
and will house a variety of specialty shops and restaurants underneath a
10-story high ceiling. The Company believes that the Aladdin, with its unique
theme, together with the Desert Passage and Music Project, will ensure its place
as a "must-see" destination in one of the world's largest entertainment cities.
The Company believes that upon completion, the Aladdin, the Mall Project and
the Music Project together will constitute one of the largest and best-planned
integrated, mixed-use entertainment resorts in
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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 implosion of the existing facility is expected to occur during April of
1998. The development of the Mall Project is expected to commence during the
second quarter of 1998, followed thereafter by the expected commencement of the
development of the Music Project in the second half of 1998.
PREMIER LOCATION
The Aladdin's 800 feet of Strip frontage is located on the section of the
Strip between Flamingo Road at the north and Tropicana Boulevard at the south.
Based upon independent research and assuming completion of certain other
development projects, average vehicular traffic that will pass the Complex each
day is expected to be approximately 54,000.
AIRPORT ACCESS. Another major feature of the Complex will be its easy
access from Las Vegas' McCarran Airport, only 2.5 miles away. According to the
LVCVA, the number of visitors to Las Vegas has increased at a steady and
significant rate for the last 15 years, growing from approximately 10 million in
1980 to approximately 19 million in 1990 to over 30 million in 1996, with
approximately 44% of these visitors in 1996 arriving by air through McCarran
Airport. McCarran Airport, the tenth busiest airport in the United States, is
currently in the process of expanding its capacity through the addition of 26
new gates, and it is expected that following completion thereof, the number and
percentage of visitors arriving in Las Vegas by air will further increase,
making easy access from McCarran Airport to Las Vegas' resorts even more
crucial.
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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 462,000
square feet of retail space within the Desert Passage, it is anticipated that
approximately 25% will be devoted to high pedestrian traffic-generating food,
beverage and entertainment experiences. A significant feature of the Desert
Passage will be the themed area to be known as the "Lost City." The "Lost City"
is expected to contain a re-creation of an ancient mystical mountain city and
will house a variety of specialty shops and restaurants underneath a 10-story
high ceiling.
PRESTIGIOUS STRATEGIC PARTNERS
The Company has assembled a unique combination of partners for the
development of the Complex - London Clubs, TrizecHahn, Planet Hollywood and
Unicom Corporation. These partners bring a wealth of knowledge, capital,
networks and experience to the Complex.
LONDON CLUBS INVESTMENT. London Clubs, a prestigious multi-national casino
operator, owns through LCNI 25% of the outstanding Holdings Common Membership
Interests. London Clubs had an equity market capitalization of over $455 million
on April 2, 1998. London Clubs has extensive experience in the international
marketing of casinos to premium players and maintains a strong presence in the
United Kingdom (where it controls the largest share of the London casino
market), Europe, Asia and the Middle East. In addition to its 25% ownership of
the outstanding Holdings Common Membership Interests, London Clubs, through
LCNI, will direct the operations of, and act as marketing consultant to, the
Salle Privee, the luxurious 15,000 square foot gaming area to be located on the
mezzanine level of the Casino which will be designed to cater to the needs of
the international premium-play guest. The Company believes that the Salle Privee
will be the first of its kind in the United States managed by a European
operator and based on the European concept of full service gaming areas for
premium players. The Salle Privee's primary business and marketing focus will be
to access London Clubs' worldwide member base of upscale casino clientele. Salle
Privee Hotel guests will be escorted through a private entrance to a dedicated
registration lobby and then taken via a private elevator to the Salle Privee's
five private floors of suites at the apex of the Aladdin's main tower. Once
there, the 24-hour butler and concierge will cater to the care and comfort of
the Salle Privee guest. In the elegantly appointed Salle Privee casino, the
customer may dine in the 100-seat exclusive restaurant, offering fine cuisine
from around the world.
London Clubs provides the Aladdin with an extensive international network of
premium casino players, having established substantial goodwill and customer
loyalty from high-end customers in the United Kingdom, Europe, Asia and the
Middle East. In addition, London Clubs is an experienced service provider to
high-end gaming customers and brings a wealth of knowledge to the Aladdin in
building and maintaining relationships with and customer loyalty from such
clientele. London Clubs also provides the Company with superb promotional
opportunities, not only by word of mouth through its network of contacts, but
also through international sporting sponsorships, including horse racing and
motor racing, which are well recognized in the United Kingdom, Cyprus, Hong
Kong, Dubai and Malaysia, and its international print publications, which are
distributed to members worldwide utilizing London Clubs' substantial database of
premium clientele.
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JOINT VENTURE WITH PLANET HOLLYWOOD. Through a subsidiary, Planet Hollywood
has agreed to be a 50% partner (on a fully diluted basis) in the Music Project.
Planet Hollywood is a creator and worldwide developer of consumer brands, most
notably "Planet Hollywood" and the "Official All Star Cafe," that capitalize on
the universal appeal of the high energy environment of movies, sports and other
entertainment-based themes. As of December 31, 1997, there were 78 Planet
Hollywood brand restaurants and nine Official All Star Cafe brand restaurants
worldwide. Planet Hollywood has announced that it intends to position its brand
of music-themed entertainment venues as its third major brand. A distinguishing
feature of the Music Project is the anticipated active involvement of famous
artists and celebrities, some of whom are expected to be stockholders of Planet
Hollywood, participate in the marketing of Planet Hollywood's music-oriented
brand and help generate significant media attention and publicity. Planet
Hollywood plans to utilize its strategy of celebrity involvement with its
music-themed brand. The Company believes this exposure will enhance the Aladdin
by providing immediate excitement and press coverage for the Complex. Planet
Hollywood had an equity market capitalization of over $994 million on April 2,
1998.
STRATEGIC RELATIONSHIP WITH TRIZECHAHN. The Mall Project will be owned,
developed and operated by Aladdin Bazaar, a joint venture between Bazaar
Holdings and TBH, a wholly-owned subsidiary of TrizecHahn. TrizecHahn is a
wholly-owned subsidiary of TrizecHahn Corporation, one of the largest publicly
traded real estate companies in North America, with an equity market
capitalization of over $3.4 billion on April 2, 1998.
TrizecHahn was the developer of the Fashion Show Shopping Mall on the Strip
and other major shopping malls including Horton Plaza in San Diego, Bridgewater
Commons in New Jersey, Valley Fair in San Jose and Park Meadows in Denver. The
Company believes that TrizecHahn's proven ability in designing well laid-out
retail centers, attracting high quality tenants and successfully promoting and
operating its retail projects will benefit the Aladdin by attracting a
consistent stream of visitors to the Complex and its various attractions.
Investors should be aware that TrizeHahn has announced that it is considering
selling its operating portfolio of regional shopping centers and on April 6,
1998 announced the sale of 20 regional shopping centers for over $2.5 billion.
See "Risk Factors--Completion of the Mall Project and the Music Project."
ENERGY PLANT CONTRACT WITH ENERGY PROVIDER. Northwind Aladdin LLC (the
"Energy Provider"), a subsidiary of UT Holdings, Inc. ("UTH"), will be the
energy provider for certain parts of the Complex. The predecessor entity of UTH
was founded in 1993 to develop district energy projects, and UTH has developed
the largest district cooling system in the world, located in Chicago, Illinois.
UTH is also a partner in energy ventures in Boston, Houston and Windsor,
Ontario. The Energy Provider's obligations under the Development Agreement (as
defined herein) up to $30.0 million will be guaranteed by its ultimate parent,
Unicom. Unicom, which is listed on the New York Stock Exchange, had an equity
market capitalization of over $7.5 billion on April 2, 1998. See "Risk
Factors--Completion of the Energy Project."
CLOSE RELATIONSHIP BETWEEN MANAGEMENT AND OWNERS. On completion, it is
expected that the Complex will be one of only two independently constructed
hotel, casino and retail major Strip projects in Las Vegas (the other being the
Venetian Hotel and Casino). All other major competitors of the Aladdin are
corporate projects, such as the Bellagio, owned by Mirage Resorts, Inc. and
Paris Casino owned by Hilton. Management believes that the close relationship
between the Company's members and management will be conducive to more efficient
decision making and ultimately assist in the successful development and
operation of the Complex.
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STRATEGY
The Company's business and marketing strategies are linked together by the
Complex's premier location, its superior design, mixed-use theme development and
strong strategic partnering with highly successful public companies.
CREATE A "MUST-SEE" DESTINATION. The Company believes that the Aladdin,
with its unique, well-executed design, together with the Desert Passage and the
Music Project (including the newly renovated Theater), will ensure its place as
a "must-see" destination in one of the fastest growing entertainment cities in
the world. The Aladdin theme will be supported by a sophisticated interior
design enhancing the fantasy of mystical and romantic time and place. The
Aladdin's main Casino traffic will be driven not only by Hotel guests, but also
by the customers directly attracted from the Strip. Visitor traffic to the
Aladdin will also be enhanced by the attractiveness of the Desert Passage. With
the addition of the Music Project, which will address a somewhat younger
clientele, the Complex will have a combined room count of approximately 3,600
rooms and appeal to a broader customer demographic.
MARKET POSITIONING. The Company intends to focus on three different market
segments to attract customers to the Aladdin:
- UPSCALE CLIENTELE. The Hotel will be designed to appeal to upscale
clientele, providing the amenities and level of service such high-end
guests expect. In particular, each of the Hotel's approximately 2,600
guest rooms and suites will have an area of not less than 450 square
feet--exceeding that of the average Las Vegas hotel room of approximately
360 to 400 square feet--and 24% of the Hotel's guest rooms and suites will
have an area exceeding 620 square feet. The Hotel's room inventory for the
upscale market will include 400 "king parlors" (ranging from 620 to 680
square feet), 136 "tower end-cap suites" (ranging from 732 to 1,162 square
feet) and 58 "center king suites" (585 square feet). Each of the rooms and
suites will have a large four or five fixture bathroom with a separate
shower, bathtub, up to two washbasins and an enclosed watercloset. A
special feature of each of the rooms and suites will be the added width
given to the interior design allowing for a more residential feel. The
Hotel will provide extensive recreational facilities for its guests,
including a 20,000 square foot health spa with steam, sauna and massage
services and an outdoor swimming-pool complex located above the Desert
Passage and surrounded by gardens and fountains. The Company intends to
promote the Hotel's many features to the upscale market through a variety
of media, including high-end print publications, travel agents and events
sponsorships. A targeted relationship marketing program is expected to
ensure clientele retention and repeat visitation.
- INTERNATIONAL PREMIUM PLAYER CLIENTELE. The Company believes that the
Salle Privee will be the first of its kind in the United States managed by
a European operator and based on the European concept of full-service
gaming areas for premium players. The focus of the Salle Privee's business
will be the wealthy clientele that form the core of London Clubs' business
in London and elsewhere. The Hotel will include 30 suites primarily for
use by Salle Privee clientele, including 25 "Salle Privee" suites (ranging
from 815 to 930 square feet) and five "mega-suites" (ranging from 2,125 to
3,500 square feet). The Company will maintain the Salle Privee's premium
player atmosphere through more sophisticated dining options, higher table
limits and more formal levels of service and dress.
- UPPER-MIDDLE MARKET CLIENTELE. The Hotel's variety of guest rooms, six of
its seven restaurants and the 1,400-seat production showroom, combined
with the heavily-themed Casino, Theater and Desert Passage, are expected
to appeal broadly to the upper-middle market guest. In addition, the Music
Project is expected to appeal to the upper-middle market by attracting
younger, affluent customers to the Complex through its music and
entertainment-based theme. The Music Project is expected to include an
approximately 1,000 room hotel, four restaurants, including a music-themed
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restaurant which will feature its own 1,000-person nightclub, a health spa
and outdoor swimming pool, together with a 50,000 square foot casino. The
Theater, which will be a major feature of the Complex, will be central to
the Company's promotional strategies for this market segment, with
publicity expected to be gained through the booking of popular performers,
many of which are expected to be broadcast live to Planet Hollywood's
other music-themed entertainment venues. Cooperative advertising and
promotion through various media, such as television, radio and print, will
be used to promote the Complex to the upper-middle market.
LEVERAGE FROM STRATEGIC RELATIONSHIPS. The Company and its affiliates have
chosen as strategic partners an experienced team of retail, casino and themed
entertainment developers and operators. The Company intends to utilize the
unique expertise of its partners from the preliminary development stages of the
Complex through its promotion and operation.
- DEVELOPMENT EXPERTISE. In establishing a strategic relationship with
TrizecHahn, the Company has obtained the knowledge, skills and capital of
a partner who has expertise in the coordination, construction and
completion in a timely manner of large, high quality projects.
- MANAGEMENT AND OPERATING ABILITIES. The Complex will benefit from the
experience of TrizecHahn, London Clubs and Planet Hollywood in its
operations. Through its management and ownership of several shopping
centers, TrizecHahn has demonstrated its ability to successfully design,
configure and attract high quality tenants to its retail shopping
projects. London Clubs has extensive experience in the international
marketing and operation of casinos, in particular to premium players. In
addition, Planet Hollywood has successfully grown its concepts to 87
company-owned and franchised Planet Hollywood and Official All Star Cafe
units (as of December 31, 1997) since commencing business in 1991.
- CAPITALIZING ON BRAND NAMES. With access to some of the most well-known
names in the relevant markets, the Company expects to capitalize on the
worldwide brand recognition of Planet Hollywood, London Clubs and
TrizecHahn.
- ACCESSING NEW CLIENT BASE. London Clubs and Planet Hollywood are expected
to provide the Complex with access to market segments which the Company
believes have not been extensively penetrated by other hotel/casinos in
Las Vegas. London Clubs provides the Aladdin with one of the best networks
of international premium players in the world and superb promotional
opportunities. Furthermore, it is expected that Planet Hollywood will
introduce a younger, affluent clientele to the Complex through, among
other things, celebrity involvement in the Music Project.
CAREFULLY MANAGE CONSTRUCTION COSTS AND RISKS. The Company anticipates the
total cost of developing, financing, constructing and opening the Aladdin to be
approximately $790 million (excluding the Company's $21.3 million planned
indirect cash contribution and $15.0 million appraised fair market value land
contribution to Aladdin Music as part of the development funds for the Music
Project). As part of the Company's strategy of carefully managing construction
costs and risks, the Company has hired Tishman, a privately held company with
extensive experience in building quality hotels and casinos, to be the
construction manager. As construction manager, Tishman will advise with respect
to scheduling, administration and reporting in connection with the construction
activities of the Design/Builder. In addition, the following arrangements have
been made to ensure the full and timely completion of the Aladdin.
BANK COMPLETION GUARANTY AND NOTEHOLDER COMPLETION GUARANTY. The Trust,
London Clubs and Bazaar Holdings have entered into the Bank Completion Guaranty
for the benefit of the Bank Lenders, under which they have agreed, among other
things, to guarantee the completion of the Aladdin. The Bank Completion
Guaranty, which became effective as of the closing of the Offering, is not
subject to any maximum dollar limitations. The Trust, London Clubs and Bazaar
Holdings have entered into the
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Noteholder Completion Guaranty for the benefit of the holders of the Notes,
under which they guarantee completion of the Aladdin, subject to certain
important exceptions, limitations and qualifications. Neither Holdings, the
Issuer nor the holders of the Warrants or Warrant Shares are party to the Bank
Completion Guaranty or Noteholder Completion Guaranty. See "Risk
Factors--Limitations Under Bank Completion Guaranty and Noteholder Completion
Guaranty," "Description of Certain Indebtedness and Other Obligations--Bank
Completion Guaranty" and "Description of Noteholder Completion Guaranty and
Disbursement Agreement--Noteholder Completion Guaranty."
DESIGN/BUILD CONTRACT. Fluor Daniel, Inc. is the design/builder for the
Aladdin. The Design/Builder has entered into a guaranteed maximum price
design/build contract (subject to scope changes) with the Company to construct
the Aladdin. The Design/Build Contract provides the Design/Builder with
incentives for completing the Aladdin ahead of schedule and within budget and
for payment of liquidated damages to the Company for certain delays. The
Design/Build Contract is guaranteed by Fluor Corporation, the parent of the
Design/Builder, pursuant to the Fluor Guaranty. See "Certain Material
Agreements-- Design/Build Contract."
MALL COMMITMENT LETTER AND MALL GUARANTY. Bazaar has obtained a commitment
letter from the Mall Lenders to fund the construction of the Mall Project.
Furthermore, upon closing of the Mall Financing, TrizecHahn, the Trust, Bazaar
Holdings and AHL have agreed, pursuant to one or more agreements, to guarantee
completion of the Mall Project and Bazaar's indebtedness to the Mall Lenders
until certain earnings and loan to value targets have been met. See "Risk
Factors--Completion of the Mall Project and the Music Project" and "Certain
Material Agreements--Mall Financing."
THE ALADDIN
OVERVIEW. The Aladdin will comprise the Hotel and the Casino and will be
owned, developed and operated by the Company. The Aladdin will be constructed of
high quality materials, including floors covered in stone, marble and granite
set in intricate patterns; carpeting of wool axminster; and wall surfaces of
covered architectural veneers, tiles of stone, ceramic and mosaic. The main
ceiling treatment will combine actual tent drape with texture and design of a
matching motif.
THE ALADDIN HOTEL. The Hotel building is expected to comprise a 34-story,
400 foot main tower attached to two 17 story towers. The approximately
2,600-room Hotel room inventory will include standard rooms, 400 "king parlors"
(ranging from 620 to 680 square feet), 136 "tower end-cap suites" (ranging from
732 to 1,162 square feet), 58 "center king suites" (585 square feet), 25 "Salle
Privee Suites" (ranging from 815 to 930 square feet) and five "mega-suites", the
largest of which will be approximately 3,500 square feet. The design and
furnishings of the rooms will be spacious and luxurious, with appointments
inspired by the Aladdin theme. All guest rooms will include such amenities as a
dual line phone in the bathroom and two additional dual line speakerphones with
modem hook-up. The king parlors, tower end-cap, center king and Salle Privee
suites and the mega-suites will include a king-size or two queen-size beds, with
over-sized bathrooms featuring a separate bathtub and shower, dual sinks,
enclosed watercloset and, for the center king, Salle Privee and mega-suites,
such amenities as a separate living area with a fully-stocked minibar and a work
area with modem hook-up, fax machine/printer and video telephone technology. The
suites will be designed to accommodate informal business meetings involving both
business travelers and convention attendees. Approximately 93 of the suites will
be of a larger size, allowing for the possibility of casually entertaining up to
forty persons in the living area. The main tower will also house luxury suites
designed for Salle Privee and other VIP guests, including premium casino players
and convention and trade show attendees who require additional space for
entertaining.
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The Hotel is expected to provide extensive recreational facilities designed
to pamper its guests, including a 20,000 square foot health spa with steam,
sauna and massage services and an outdoor swim-ming-pool complex located above
the Desert Passage and surrounded by gardens and fountains.
The Aladdin is expected to include seven restaurants, with combined seating
capacity for over 2,300 customers, offering a wide range of dining selections.
Food service facilities at the Aladdin will include a buffet and food plaza
seating 800 customers, a 24-hour casual dining facility seating 575 customers
and a high-energy restaurant with indoor and outdoor seating which will overlook
the Strip and be located on the Casino level. This "al fresco" dining
experience, one of the first on the Strip, will further distinguish the Aladdin
from its competitors and will provide a lively attraction for pedestrians
traversing the Strip. The mezzanine level, which will offer a panoramic view of
the main casino floor, will feature a themed restaurant of 150 seats and a
steakhouse of 150 seats, both of which will offer indoor and outdoor terrace
dining. A Sushi/Chinese noodle shop with 50 seats and a casual dining/coffee bar
will complete the food offerings on the mezzanine. There will also be a poolside
restaurant with capacity to seat 150 people. To ensure consistent, high quality
service throughout the Aladdin, the Company will own and operate all food
service facilities in the Aladdin (other than the exclusive Salle Privee
restaurant, which will be operated by London Clubs).
THE SHOWROOM. In keeping with the Aladdin's Arabian Nights theme, the
Aladdin will include, on its mezzanine level, a 1,400-seat showroom which will
provide nightly entertainment for Hotel, Casino and other guests. The showroom
will feature a 1001 Arabian Nights-theme production show including elegant,
exotic costuming, music, lighting and choreography.
CONVENTION, MEETING AND RECEPTION FACILITIES. The Aladdin is expected to
include on the mezzanine floor of the main building over 70,000 square feet of
convention, conference, trade show and reception facilities, including a 28,500
square foot main ballroom, 25,600 square feet of pre-function space and 17,400
square feet of breakout space in 16 separate rooms. These facilities will be
made available for business and other conventions, trade shows, private
receptions and conferences throughout the year. The Company believes that
convention, meetings and special events customers will represent an important
market for the Aladdin, helping the Hotel obtain consistently high occupancy
rates and levels. See "-- Guest Mix--Conventions, Meetings and Special Events
Customers."
GUEST MIX. The Hotel guest mix, in order of magnitude, is expected to
include free and independent travelers, targeted casino customers (both
complimentary and at casino rates), convention, meetings and special events
customers, and tour and travel customers. Of these groups, all but one
(convention, meeting and special events customers) generally have substantial
leisure time to take advantage of the Complex's many attractions. According to
the LVCVA, approximately 66% of the visitors to Las Vegas came to Las Vegas for
vacation and pleasure in 1996.
The planned guest mix by category is as follows:
<TABLE>
<CAPTION>
SEGMENT MIX
- ------------------------------------------------------------------------------------ -------------
<S> <C>
Free and Independent Travelers...................................................... 30%
Casino Customers.................................................................... 30%
Convention/Meeting.................................................................. 20%
Tour & Travel....................................................................... 20%
</TABLE>
45
<PAGE>
FREE AND INDEPENDENT TRAVELERS. Free and independent travelers will be the
primary focus of the Complex with its array of resort services including
luxurious rooms, swimming pool and spa, fine restaurants (both in the Hotel,
Casino and the Desert Passage), extensive retail opportunities, and the multiple
entertainment offerings of the Theater, the Aladdin/Arabian Nights production
show and the Desert Passage. Free and independent travelers include persons who
travel to Las Vegas from throughout the world who are not affiliated with a
traveling group and make their reservations at the property of their choice.
These travelers are characterized by travel budgets higher on average than the
typical "tour group" traveler budget. They generally pay higher room rates, are
predominantly weekend customers and have a relatively high non-gaming budget but
still spend more money on gaming activities than the typical Las Vegas visitor.
Management believes the Aladdin's emphasis on high-quality accommodation and an
upscale integrated entertainment complex will broadly appeal to this market.
CASINO CUSTOMERS. Casino customers will be drawn from the upscale,
international premium and upper-middle segments of the market. Utilizing both
the resources of London Clubs and those internal to the Company, the Casino
marketing network will cover Europe, the Middle East, the Pacific Rim, Mexico
and Latin America, as well as the United States. The Company believes that the
Aladdin's high levels of service, distinctive and private accommodations and the
Salle Privee and its amenities will help differentiate it from its competitors.
Where appropriate, management will offer complementary suites to high quality,
repeat casino players and other premium players. In addition, the Casino will
offer a range of popular gaming alternatives, designed to attract the
upper-middle market guest.
CONVENTIONS, MEETINGS AND SPECIAL EVENTS CUSTOMERS. Conventions, meetings
and special events customers are expected to fill the mid-week time periods when
the demand by free and independent travelers is lower. Las Vegas is currently
the largest trade show market and the fourth largest convention market in the
United States, with Las Vegas hotels obtaining premium occupancy rates during
large conventions. By utilizing the Aladdin's 70,000 square feet of convention
and meeting space, the Aladdin will focus on groups that have both a good hotel
and gaming revenue profile. Demand for convention and meeting room nights will
be supplemented by convention guests being displaced from neighboring hotels.
TOUR AND TRAVEL CUSTOMERS. The tour and travel market consists of customers
who utilize "packages" to reduce the cost of travel, lodging and entertainment.
According to the LVCVA, approximately 27% of Las Vegas' visitors utilized such
tour packages in 1996. These "packages" are produced by wholesalers and travel
agents and emphasize mid-week stays in Las Vegas. Management believes that it
will be able to capture a significant portion of this market segment by offering
the extensive facilities (including non-gaming attractions and amenities) of the
Complex to tour and travel visitors during off-peak periods. The tour and travel
market will be utilized to fill rooms mid-week with nominal room blocks on the
weekends when demand by free and independent travelers is at its peak. With the
upper-middle and upscale focus of the Hotel, the Aladdin will focus on the
higher-end tour and travel guest from both domestic and international tour
operators.
THE CASINO. A highly-themed approximately 116,000 square foot casino will
be at the center of the Complex. The Casino's main gaming area will contain
approximately 2,800 slot machines, 87 table games, keno and a race and sports
book facility. Included on a separate level of the Casino will be the luxurious
15,000 square foot Salle Privee, which is expected to contain an additional
approximately 100 high limit slot machines and 20 to 30 high limit table games.
The Salle Privee will cater to wealthy clientele and will be operated and
marketed in conjunction with London Clubs, a prestigious, multi-national casino
operator which caters to international premium players. The Casino will be
located in front of the Hotel, and unlike many of the newer projects on the
Strip, will provide easy access for pedestrians without requiring long walks
into the Complex. The Casino will be the nexus for the vast majority of
pedestrian traffic on the fully integrated Complex, including the Desert
Passage, the Music Project and the Theater. The Casino's exterior will be
designed in the style of a large Bedouin sheik's tent, helping to introduce the
Aladdin theme to visitors even before they reach the Complex. On entering the
Casino, patrons will be surrounded
46
<PAGE>
by the Aladdin theme through sculptured surroundings, rich fabrics, strategic
lighting and music, evoking the mystery and luxury of the Legends of the 1001
Arabian Nights. At the center of the Casino will be "Scheherazade's Palace," a
series of themed architectural elements of domes, arches, and 65 foot polished
stone columns. The main level of Scheherazade's Palace will have a bar and live
entertainment lounge overlooking the Casino and across to the Mezzanine level.
THE SALLE PRIVEE AND THE SALLE PRIVEE MANAGEMENT AGREEMENT. A distinctive
feature of the Casino will be the Salle Privee, located on the mezzanine level
which will be designed to cater to the needs of the international premium guest.
The Salle Privee will contain 20 to 30 high limit table games including
baccarat, double zero roulette, single zero roulette and blackjack, and
approximately 100 high limit slot machines.
The Company believes that the Aladdin's Salle Privee will be the first of
its kind in the United States managed by a European operator and based on the
European concept of a luxurious, full-service, gaming area for international and
domestic premium players. The focus of the Salle Privee's business will be the
wealthy clientele that form the core of London Clubs' business in London and
elsewhere. The Company will maintain the Salle Privee's premium player
atmosphere through more sophisticated dining options, higher table limits and
more formal levels of service and dress.
The Company believes that the Salle Privee will prove to be a significant
attraction for premium players to stay at the Hotel and play at the Casino. In
order to take full advantage of this potential, the Company has entered into a
Consulting and Marketing Services Agreement (the "Salle Privee Management
Agreement") with London Clubs, one of the Controlling Stockholders, under which
London Clubs will promote the Salle Privee, marketing this aspect of the Aladdin
through its international network of premium casino customers. See "Certain
Material Agreements -- Salle Privee Management Agreement."
With an equity market capitalization of over $455 million as of April 2,
1998, London Clubs has extensive experience in the international marketing of
casinos to premium players. London Clubs operates seven casinos in London, one
in Cannes, France, three in Egypt and one in Lebanon. Each of London Clubs'
casinos offer their own individual style, but with comparable internationally
recognized standards of service. In recent years, London Clubs has embarked upon
a period of expansion, acquiring the Park Tower Casino in London's Knightsbridge
in October 1995 and re-opening and managing the casino operations of the famous
Casino du Liban in Lebanon in December 1996.
London Clubs maintains a strong presence in the United Kingdom (where it
controls a leading share of the London casino market), Europe, Asia and the
Middle East. Its international sporting sponsorships, including horse racing and
motor racing, are widely recognized, particularly in the United Kingdom, Cyprus,
Hong Kong, Dubai and Malaysia. In addition, London Clubs produces a print
publication for its clientele utilizing its substantial database of premium
customers which is a valuable means of direct communication with its clientele
worldwide. Each issue features developments in London Clubs' clubs, lifestyle
articles, member profiles and a popular social diary.
Under the Salle Privee Management Agreement, London Clubs will earn an
incentive fee based on the operating performance of the Salle Privee. As a
result of London Clubs' substantial network of casino players in the United
Kingdom, Europe, Asia and the Middle East and management's own extensive network
in North and South America and the Pacific Rim, the Company believes that the
Salle Privee will provide the Aladdin with a significant competitive advantage
over other hotels and casinos on the Las Vegas Strip in attracting customers
from the profitable international premium player market. Through London Clubs'
involvement in the promotion of the Salle Privee, its equity interest in
Holdings and its commitment to the Aladdin (demonstrated in part by the
Keep-Well Agreement and the Completion Guaranty), the Company also believes that
the Aladdin's international profile and financial stability will be
significantly strengthened.
47
<PAGE>
THE MALL PROJECT
OVERVIEW. Located on the Complex adjacent to the Aladdin will be the Desert
Passage, a shopping mall with approximately 462,000 square feet of retail space,
and the approximately 4,800-space Carpark, each of which will be developed,
owned and operated by Bazaar, a joint venture between Bazaar Holdings and THB, a
wholly-owned subsidiary of TrizecHahn. TrizecHahn has extensive experience in
developing retail properties, and prior to its recently announced sale of 20
regional shopping centers, TrizecHahn owned and managed 27 regional centers
throughout the United States, comprising over 25 million square feet.
TrizecHahn is a wholly-owned subsidiary of TrizecHahn Corporation, one of
the largest publicly traded real estate companies in North America, with an
equity market capitalization of over $3.4 billion as of April 2, 1998. Investors
should note that TrizecHahn has announced that it is considering selling its
operating portfolio of regional shopping centers and on April 6, 1998 announced
the sale of 20 regional shopping centers for over $2.5 billion. See "Risk
Factors--Completion of the Mall Project and the Music Project."
THE DESERT PASSAGE. The Desert Passage entertainment shopping mall will
constitute a key aspect of the Complex, and, like the Aladdin, will be heavily
themed on the Arabian Nights legends. With a strong presence and entrances on
the Strip, the Desert Passage will wrap around the Casino and Hotel buildings
and the Theater. The Desert Passage will consist of two stories of prime retail
space in the area closest to the Strip, reducing to one-level in the areas near
the rear of the Hotel, the Carpark and the Music Project. While the Desert
Passage will be of a similar size to the successful Forum Shops at Caesars
Palace, it will not be set back from the Strip, but will instead be located
close to the Strip, allowing passing pedestrian traffic to gain easy access.
Pedestrian visitors to the Aladdin entering from the Strip will be able to enter
directly through the Casino or through the Desert Passage entrances and
significant portions of the Desert Passage will flow directly into the Casino.
It is expected that the Desert Passage will provide a steady source of
pedestrians and Hotel guests to the Complex, many of whom it is expected will
also want to visit the Casino or dine at the Hotel.
The Desert Passage will be designed to engage the customer in a highly
themed shopping, entertainment and dining experience. Of the approximately
462,000 square feet of retail space within the mall, it is anticipated that
approximately 25% will be devoted to high pedestrian traffic-generating food,
beverage and entertainment experiences. The food service facilities located in
the Desert Passage will consist predominantly of establishments which complement
the dining alternatives in the Aladdin. A significant feature of the Desert
Passage will be the themed area to be known as the "Lost City." The "Lost City"
is expected to contain a re-creation of an ancient mystical mountain city and
will house a variety of specialty shops and restaurants underneath a 10-story
high ceiling.
CARPARK. As part of the Mall Project, Bazaar will develop an approximately
4,800-space carpark facility, to be located at the rear of the Complex, together
with an additional approximately 350 surface level parking spaces. The Carpark
will be accessible from Audrie Lane, the same street from which the Paris Casino
public carpark will be accessed, and from the circular internal roadway on the
Complex (accessible from Harmon Avenue and the Strip) which will provide direct
vehicular access to the Hotel. The Carpark will be directly linked through the
Desert Passage to the Hotel and Casino and the Music Project. Bazaar is
considering retaining an independent management company to operate the Carpark.
The Carpark and related surface level parking areas will include certain car
parking spaces to be used principally for valet parking. In addition, in
connection with the development of the Aladdin, parking facilities for
approximately 500 vehicles will be developed beneath the Hotel.
48
<PAGE>
THE MUSIC PROJECT
THE MUSIC PROJECT HOTEL AND CASINO. The Music Project is the second stage
of development to the Complex. The Music Project will involve the development of
a second hotel and casino, with a music and entertainment theme, on the
southeast edge of the Complex on the corner of Audrie Lane and Harmon Avenue.
AMH and a subsidiary of Planet Hollywood have entered into the Music Project
Memorandum of Understanding to own and operate the Music Project, subject to
finalization of financing, with each joint venture partner holding a 50%
interest (on a fully-diluted basis). See "Risk Factors--Completion of the Mall
Project and the Music Project" and "Certain Material Agreements--Music Project
Memorandum of Understanding."
The Music Project is expected to include an approximately 1,000 room hotel,
four restaurants, including a music-themed restaurant which will feature its own
1,000-person nightclub with regular live entertainment, a health spa and outdoor
swimming pool, together with a 50,000 square foot casino. The Music Project will
aim to expand the market by having a different theme and attracting a different
market segment to the Aladdin. The Music Project is expected to appeal to the
upper-middle market, attracting younger, affluent customers to the Complex
through its music and entertainment-based theme. In order to enhance the
Complex, the Music Project is intended to be integrated through walkways,
bridges and the internal circular roadway with the Aladdin, the Desert Passage
and the Carpark, providing yet another attraction on the Complex and
contributing to its mixed-use nature.
Through a subsidiary, Planet Hollywood will be a 50% partner (on a fully
diluted basis) in the Music Project. Planet Hollywood is a creator and worldwide
developer of consumer brands, most notably "Planet Hollywood" and the "Official
All Star Cafe," that capitalize on the appeal of the high-energy environment of
movies, sports and other entertainment-based themes. As of December 31, 1997,
there were 78 Planet Hollywood brand restaurants and nine Official All Star
Cafes brand restaurants worldwide. Planet Hollywood has announced that it
intends to position a brand of music-themed hotels and entertainment venues as
its third major brand. A distinguishing feature of the Music Project is the
anticipated active involvement of famous artists and celebrities, some of whom
are expected to be stockholders of Planet Hollywood, participate in the
marketing of Planet Hollywood's music-themed brand, perform at the Theater or
make other personal appearances at the Music Project, and help to generate
significant media attention and publicity. Brand recognition is expected to be
further enhanced through the high visibility of Planet Hollywood's music brand's
merchandise, such as jackets, T-shirts, sweatshirts and hats. The Company
believes this exposure will enhance the Aladdin by providing immediate
excitement and press coverage for the Complex.
It is currently anticipated that construction of the Music Project will
commence during the second half of 1998. Neither the development of the Aladdin
nor the Mall Project is contingent on the development of the Music Project.
THEATER OF THE PERFORMING ARTS. The Aladdin and the Desert Passage will be
adjacent to the Theater, a 7,000-seat entertainment facility that will be
accessible through the Casino. The Theater is an entertain-ment auditorium with
high-quality sight lines and acoustics and, with its 15,000 square foot stage,
is one of the few venues of its size and type in Nevada. As part of the
development of the Complex, the Company intends to enter into a 30-year lease of
the existing Theater for a nominal amount with Aladdin Music, which expects to
carry out an approximately $8 million renovation of the Theater, improving its
decor, light and sound systems and other facilities. The renovation will also
allow the Theater to be condensed into a smaller, approximately 2,000-seat
auditorium for more intimate performances. The Company will retain certain
rights to use the Theater for Company-promoted events at agreed commercial
rates.
In the past the Theater has hosted major concert artists, championship
boxing matches and Broadway shows and it is expected that the Theater will
continue to be used to hold major concerts and theatrical
49
<PAGE>
performances. The renovation and integration of the Theater into the first class
resort Complex is expected to provide another source of visitor traffic to the
Complex.
THE LAS VEGAS MARKET
OVERVIEW. Las Vegas is one of the fastest growing entertainment markets in
the country. Las Vegas hotel occupancy rates are among the highest of any major
market in the United States. According to the LVCVA, the number of visitors
traveling to Las Vegas has increased at a steady and significant rate for the
last ten years from 16.2 million in 1987 to 29.6 million visitors in 1996, a
compound annual growth rate of 7.0%. Aggregate expenditures by these visitors
increased at a compound annual growth rate of 11.3% from $8.6 billion in 1986 to
$22.5 billion in 1996.
EXPANDING HOTEL AND GAMING MARKET. Las Vegas has one of the strongest and
most resilient hotel markets in the country and is the largest gaming market in
the world. The number of hotel and motel rooms in Las Vegas has increased by 61%
from 61,394 in 1988 to 99,072 in 1996. Major properties on the Strip opening
over this time period include the Mirage, Excalibur, MGM Grand, Treasure Island,
the Luxor, Monte Carlo and New York New York. In addition, a number of existing
properties on the Strip embarked on expansions including Harrah's Las Vegas,
Caesars Palace, Circus Circus and the Luxor. Despite this significant increase
in the supply of rooms in Las Vegas, hotel occupancy rates exceeded on average
90.4% for the years 1990 to 1996, averaged 93.4% in 1996 and averaged 91.4% in
the first seven months of 1997. By the end of 1999, it is estimated that
approximately 20,000 additional hotel rooms will be opened on the Strip,
including the Bellagio, the Venetian and Paris resorts, all of which are
currently under construction.
[LOGO]
Gaming has continued to be a strong and growing business in Las Vegas.
According to the LVCVA, Clark County gaming revenues have increased at a
compound annual rate of 8.4% from approximately $2.8 billion in 1986 to
approximately $5.8 billion in 1996. As a result of the increased popularity of
gaming, Las Vegas has sought to increase its popularity as an overall vacation
resort destination. Management believes that the growth in the Las Vegas market
has been enhanced as a result of a dedicated program by the LVCVA and major Las
Vegas hotels to promote Las Vegas as a major vacation and convention site, the
increased capacity of McCarran Airport and the introduction of large, themed
destination resorts in Las Vegas.
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GROWTH OF LAS VEGAS RETAIL SECTOR AND NON-GAMING REVENUE EXPENDITURES. The
Las Vegas market continues to evolve from its historical gaming focus to a
broader entertainment offering. In addition to the traditional attractiveness of
gaming, the market is continuing to expand to include retail, sporting
activities, major concerts and other entertainment facilities. This
diversification has contributed to the growth of the market and broadened the
universe of individuals who would consider Las Vegas as a vacation destination.
The more diversified entertainment offerings present significant growth
opportunities.
An increasing number of destination resorts are developing non-gaming
entertainment to complement their gaming activities in order to draw additional
visitors. According to the LVCVA, while gaming revenues in Clark County have
increased from approximately $2.8 billion in 1986 to approximately $5.8 billion
in 1996, the percentage of an average tourist's budget spent on gaming has
declined from 32.6% in 1986 to 25.8% in 1996 with non-gaming tourist revenues
increasing from $5.8 billion in 1986 to $16.7 billion in 1996. The newer large
theme destination resorts have been designed to capitalize on this development
by providing better quality sleeping rooms at higher rates and by providing
expanded shopping, dining and entertainment opportunities to their patrons in
addition to gaming.
LAS VEGAS AS A CONVENTION CENTER ATTRACTION. Las Vegas is one of the
largest convention and trade show destinations in the country. In 1987,
approximately 1.7 million persons attended conventions in Las Vegas providing
approximately $1.2 billion in non-gaming convention revenue. In 1996, the number
of convention attendees increased to more than 3.3 million, providing
approximately $3.9 billion in non-gaming convention revenue. Las Vegas offers
convention and trade shows unique infrastructure for handling the world's
largest shows, including a concentration of high-end hotel rooms located on the
Strip, two convention centers with a total of over 2.3 million square feet of
convention and exhibition space and unparalleled entertainment options. The
proposed expansion of the Las Vegas Convention Center ("LVCC") and the planned
construction of the Congress Center will further increase convention and exhibit
space. Management believes that Las Vegas will continue to evolve as one of the
country's preferred convention destinations.
MCCARRAN AIRPORT EXPANSION. During the past five years, the facilities of
McCarran Airport, the tenth busiest airport in the United States, have been
expanded to accommodate the increased number of airlines and passengers which it
services. The number of passengers traveling through McCarran Airport has
increased from approximately 15.6 million in 1987 to approximately 30.5 million
in 1996, a compound annual growth rate of 7.8%. According to the LVCVA, in 1996
visitors to Las Vegas arrived by the following methods of transportation: 44% by
air; 41% by auto; 7% by bus; and 8% by recreational vehicle. An approximately
$500 million expansion project at McCarran Airport is scheduled for completion
in 1998. Long-term expansion plans for McCarran Airport provide for additional
runways, three new satellite concourses, 65 additional gates, improved public
transportation, roads and other infrastructure leading from McCarran Airport to
the Strip and other facilities which would allow McCarran Airport to
significantly increase visitor capacity. To the extent that McCarran Airport is
not expanded in accordance with its plans, the occupancy rates and average daily
hotel room rates in Las Vegas could be adversely affected due to the planned
construction of new hotel rooms.
STATISTICS ON THE LAS VEGAS GAMING INDUSTRY. The following table sets forth
certain information derived from published reports of the LVCVA and the Nevada
State Gaming Control Board concerning Las Vegas Strip gaming revenues and
visitor volume and hotel data for the years 1986 to 1996. As shown in the table,
the Las Vegas market has achieved significant growth in visitor volume and
tourist revenues and favorably absorbed significant additional room capacity
despite the occurrence of a series of adverse economic, regulatory and
competitive events during the past decade such as the recession of the early
1990s, the expansion of gaming into new jurisdictions, the modification of
existing regulations in other jurisdictions and the expansion of Native American
gaming.
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HISTORICAL DATA FOR LAS VEGAS GAMING INDUSTRY(1)
<TABLE>
<CAPTION>
1987 1988 1989 1990 1991 1992 1993
----------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <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
Percentage Change........... 6.7% 6.1% 5.4% 15.6% 1.7% 2.7% 7.5%
Total Visitor
Expenditures(2)........... $ 8,602,966 $ 10,039,448 $ 11,912,941 $ 14,320,746 $ 14,326,554 $ 14,686,644 $ 15,127,267
Percentage Change........... 15.3% 16.7% 18.7% 20.2% 0.0% 2.5% 3.0%
Las Vegas Convention
Attendance................ 1,677,716 1,702,158 1,508,842 1,742,194 1,794,444 1,969,435 2,439,734
Percentage Change........... 10.4% 1.5% (11.4)% 15.5% 3.0% 9.8% 23.9%
Las Vegas Hotel
Occupancy Rate............ 87.0% 89.3% 89.8% 89.1% 85.2% 88.8% 92.6%
Las Vegas Hotel/Motel Room
Supply.................... 58,474 61,394 67,391 73,730 76,879 76,523 86,053
Percentage Change........... 3.5% 5.0% 9.8% 9.4% 4.3% (0.5)% 12.5%
<CAPTION>
1994 1995 1996
------------ ----------- -----------
<S> <C> <C> <C>
Las Vegas Visitor
Volume.................... 28,214,362 29,002,122 29,636,631
Percentage Change........... 19.9% 2.8% 2.2%
Total Visitor
Expenditures(2)........... $ 19,163,212 20,686,800 22,533,258
Percentage Change........... 26.7% 8.0% 8.9%
Las Vegas Convention
Attendance................ 2,684,171 2,924,879 3,305,507
Percentage Change........... 10.0% 9.0% 13.0%
Las Vegas Hotel
Occupancy Rate............ 92.6% 91.4% 93.4%
Las Vegas Hotel/Motel Room
Supply.................... 88,560 90,046 99,072
Percentage Change........... 2.9% 1.7% 10.0%
</TABLE>
- ------------------------
(1) Sources: LVCVA and Nevada State Gaming Control Board for the fiscal years
ended December 31.
(2) In thousands.
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CONSTRUCTION SCHEDULE AND BUDGET
The development of the Aladdin commenced during the first quarter of 1998.
The existing Aladdin hotel and casino closed for business on November 25, 1997
and the implosion of the existing facility is expected to occur during April of
1998. The development of the Mall Project is expected to commence during the
second quarter of 1998, followed soon thereafter by the commencement of the
development of the Music Project in the second half of 1998. The Company
anticipates the cost of developing, financing, constructing and opening the
Aladdin to be approximately $790 million (excluding the Company's $21.3 million
planned indirect cash contribution and $15.0 million appraised fair market value
land contribution to Aladdin Music, as part of the development funds for the
Music Project). Pursuant to the Design/Build Contract, the Design/Builder has
committed itself to a 26 month work schedule to complete the Aladdin, subject to
certain scope changes. An equitable adjustment in the Contract Date (as defined
herein) and guaranteed maximum price will be made for changes that either
increase or decrease the Design/Builders' time for performance and/or cost of
construction. See "Certain Material Agreements--Design/Build Contract." The
Company believes that the construction budget is reasonable and the Design/Build
Contract sets forth a procedure designed to ensure the timely completion of the
Aladdin. However, given the risks inherent in the construction process, it is
possible that construction costs could be significantly higher than budget and
that delays could occur. If construction costs do exceed the amounts set forth
in the construction budget, it is expected the potential sources to pay such
excess include (a) the $31.8 million Contingency; (b) the Trust, London Clubs
and Bazaar Holdings pursuant to their obligations under the Bank Completion
Guaranty; and (c) the Design/Builder, a subsidiary of Fluor, pursuant to its
liability under the Design/Build Contract, which liability is guaranteed by
Fluor pursuant to the Fluor Guaranty. See "Risk Factors--Risks of New
Construction" and "--Risks Under Design/Build Contract and Fluor Guaranty" and
"Certain Material Agreements."
The Mall Project is not being developed by the Company, but is being
developed by Bazaar. The Mall Project is budgeted to cost approximately $215.0
million, all of which amount will be paid by Bazaar. Upon completion of the Mall
Financing, TrizecHahn, the Trust, Bazaar Holdings and AHL have agreed to
guarantee completion of the Mall Project and Bazaar's indebtedness to the Mall
Lenders until certain earnings and loan to value targets have been met. See
"Risk Factors--Risk of New Construction" and "--Completion of the Mall Project
and the Music Project," "Use of Proceeds" and "Certain Material
Agreements--Bazaar LLC Operating Agreement."
The Aladdin, together with the Mall Project, will be developed as the first
phase of a planned two-phase redevelopment of the Complex. In the second phase,
Aladdin Music will develop the Music Project which, like the Mall Project, will
be financed independently and such financing will not be guaranteed by the
Company. On commencement of construction of the Music Project, the Company is
required to transfer ownership of the land parcel upon which the Music Project
will be built to Aladdin Music. The opening of the Music Project is expected to
occur within six months after the opening of the Aladdin. See "Risk
Factors--Completion of the Mall Project and the Music Project," "--Possible
Conflicts of Interest" and "Certain Material Agreements--The Music Project
Memorandum of Understanding."
The completion and full operation of the Aladdin is not contingent upon the
subsequent financing or completion of the Mall Project or the Music Project.
Investors should note that funding arrangements for the completion of the Mall
Project and the Music Project have not yet been finalized, and there can be no
assurance that such funding arrangements will be finalized at any time or that
the Mall Project or Music Project will be completed. See "Risk
Factors--Completion of the Mall Project and the Music Project."
DESIGN AND CONSTRUCTION TEAM
The Company has assembled what it believes to be a highly qualified team of
specialists to design and construct the Aladdin.
TISHMAN. Tishman has been appointed as the construction manager for the
Aladdin and, at AHL's option, the Music Project, the Mall Project and the
Theater. Tishman is a privately-held construction firm. Tishman or its
affiliates have built or renovated over 30,000 hotel rooms nationwide, including
the
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500-room, one million square foot Golden Nugget hotel and casino in Atlantic
City, the 635-room, two million square foot Trump Castle Hotel and Casino in
Atlantic City, the 400-room expansion of Harrah's Hotel and Casino in Atlantic
City, the 2,300-room Walt Disney World Dolphin and Swan Hotel and convention
complex, the 1,200-room Sheraton Chicago Hotel & Towers, the 800-room Hilton in
Walt Disney World Village and the 600-room Westin Rio Mar Beach Resort & Country
Club.
Entertainment projects built by Tishman include Caesars Magical Empire in
Las Vegas, several Official All Star Cafes throughout the United States, the
Goodwill Games '98 Aquatics Center, Pacific Park in California, restoration of
the New Amsterdam Theater in New York and EPCOT Center in Orlando, Florida.
FLUOR DANIEL. Fluor Daniel, Inc. is the design/builder for the Aladdin. The
Design/Builder is a subsidiary of Fluor, a Fortune 500 Company offering
architectural, engineering, construction management, construction and
maintenance services to projects around the world. The Design/Builder has been
ranked the number one engineering and construction company in the United States
based on total revenue by Engineering News-Record for nine of the last ten
years. In October 1997, the Design/Builder was recognized by Fortune as the most
admired public engineering firm in the world. The Design/Builder has entered
into a guaranteed maximum price Design/Build Contract (subject to scope changes)
with the Company to design and construct the Aladdin. The Design/Build Contract
provides the Design/Builder with incentives for completing the Aladdin ahead of
schedule and within budget and for payment of liquidated damages to the Company
for certain delays. The Design/Build Contract is guaranteed by Fluor, the parent
of the Design/Builder, pursuant to the Fluor Guaranty. See "Certain Material
Agreements-- Design/Build Contract." On April 2, 1998, Fluor had an equity
market capitalization of over $4 billion.
ADP/FD OF NEVADA, INC. ADP, an indirect subsidiary of Fluor, will be the
Complex architect. ADP is wholly-owned by ADP Marshall, Inc. ("ADP Marshall").
ADP Marshall, which is based in Phoenix, Arizona, is well-known for its
architecture work and mixed-use projects. Such projects include resorts, hotels,
timeshare/vacation ownership, gaming, mixed-use/planning, recreational (golf
clubs, spas, tennis centers, etc.) and specialty entertainment/retail/restaurant
projects. Among ADP Marshall's many award-winning efforts are Five Star ranked
properties. Its client list includes Princess Hotels, Inc. (Scottsdale and
Acapulco), Carefree Resorts (The Boulders, The Peaks, Carmel Valley Ranch) and
PGA Family Golf Center (Scottsdale).
ADP's philosophy is that design and systems efficiency must support the
operations of a project, especially where the client has a long-term involvement
in the completed development. The firm aims to establish strong client
relationships by thoroughly understanding its clients' needs, the intricacies of
their operations and their development, financial and market specific goals.
TRIZECHAHN. THB, a wholly-owned subsidiary of TrizecHahn, is the joint
venture partner of Bazaar Holdings in the Mall Project. Prior to its recently
announced sale of 20 regional shopping centers, TrizecHahn owned and managed 27
regional centers in major markets throughout the United States, comprising over
25 million square feet and was one of the largest owners, developers and
managers of regional shopping centers in the United States. Investors should
note that TrizecHahn has announced that it is considering selling its entire
operating portfolio of regional shopping centers and on April 6, 1998 announced
the sale of 20 regional shopping centers for over $2.5 billion. See "Risk
Factors--Completion of the Mall Project and the Music Project."
BBGM. The interior designer for the project, BBGM, specializes in
hospitality design and has experience in casinos, restaurants, retail,
spa/fitness centers and specialty/theme projects. BBGM's experience includes the
recently renovated and expanded Caesars Atlantic City hotel, casino, restaurants
and public space. Other projects have included the Mohegan Sun Casino in
Connecticut and TropWorld in Atlantic City. BBGM's hotel projects have included
the St. Regis, The Plaza and the Sheraton Hotel & Towers located in New York
City.
THE ENERGY PROVIDER. The Energy Provider, a wholly-owned subsidiary of UTH,
will be the energy provider for certain parts of the Complex, including the
Aladdin. The predecessor to UTH was founded in
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July 1993 as a subsidiary of Unicom to develop district energy projects. Unicom,
which is listed on the New York Stock Exchange, had an equity market
capitalization of over $7.5 billion on April 2, 1998. Unicom is also the parent
of Commonwealth Edison Company, one of the largest electric utilities in the
United States. Since 1993, UTH has developed the largest district cooling system
in the world, located in Chicago, Illinois, and is a partner in energy ventures
in Boston, Houston and Windsor, Ontario.
OPERATIONAL FACILITIES
The Complex has been designed to include certain operational facilities and
advantages which will assist the Company in providing a high level of service to
guests.
SERVICE FACILITIES. The north side of the Complex will border on a service
road, which will include service elevators, loading docks, receiving and
purchasing facilities and storage areas. These service facilities will be
located near the majority of the Complex's restaurants and food service areas,
which will be the principal users of such facilities.
ELEVATOR BANKS. The Hotel will be designed so that elevator banks are
located at strategic locations, enabling Hotel guests and employees to access
the Hotel guest areas easily. Within the Hotel, special waiter elevators will
provide waiters with direct access from Hotel kitchens to rooms and suites,
allowing guests to receive full room service on a timely basis.
ENERGY. The Complex, once fully constructed, will require substantial
amounts of electricity, hot and cold water and heating and cooling. For this
purpose, the Company has entered into certain agreements with the Energy
Provider for the supply of electricity and heating and cooling to certain parts
of the Complex. The Energy Provider has agreed to provide the Aladdin with all
its electricity, heating and cooling needs, as specified by the Company, from
the date of completion of the Aladdin. Pursuant to the Development Agreement, in
order to supply the Aladdin's energy requirements, the Energy Provider has
agreed to construct and operate, at its own cost, a thermal energy plant (the
"Plant") on an approximately 0.64 acre portion of the Complex (the "Plant
Site"). The Energy Provider's obligations under the Development Agreement are
guaranteed up to $30.0 million by the Energy Provider's ultimate parent, Unicom,
one of the largest electric utility companies in the United States. See "Certain
Material Agreements--Development Agreement," "--Unicom Guaranty" and "--Energy
Service Agreement."
The Music Project will also use electricity, hot and cold water and heating
and cooling supplied by the Energy Provider. TrizecHahn is currently considering
whether to utilize the Plant or arrange for alternate energy sources for the
provision of electricity, hot and cold water and heating and cooling for the
Mall Project.
SECURITY. The Aladdin will include state-of-the-art security systems,
including internally operated camera surveillance systems for the Casino. The
Company will employ extensive supervision and accounting procedures to control
the handling of cash in the Casino. These measures will include security
personnel, closed-circuit television for observation of critical areas of the
casino, locked cash boxes, independent auditors and observers, strict sign-in
and sign-out procedures which ensure, to the extent practicable, that gaming
chips issued by and returned to the Casino cashiers' cages are accurately
accounted for, and procedures for the regular observation of gaming employees.
EMPLOYEES
The Company anticipates that immediately prior to completion of the Aladdin,
it will employ approximately 3,600 employees in connection with the Aladdin. The
Company will be required to undertake a major recruiting and training program
prior to the opening of the Aladdin at a time when other major new facilities
may be approaching completion and also recruiting employees. The Company
believes it will be able to attract and retain a sufficient number of qualified
individuals to operate the Aladdin. However, there can be no assurance that it
will be able to do so. Furthermore, the Company does not know whether or to what
extent such employees will be covered by collective bargaining agreements, as
that determination will be ultimately made by such employees.
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SERVICE MARKS
On the Issue Date, AHL transferred to the Company four federally registered
service marks involving the word "Aladdin" and used in connection with the
provision of casino and casino entertainment services and hotel and restaurant
services (the "Marks"). Two of the Marks were registered on July 13, 1993, a
third on July 29, 1993 and the fourth on August 24, 1993. A statement of
continuing use with respect to each of the Marks must be filed with the United
States Patent and Trademark Office (the "PTO") between the fifth and sixth
anniversary of the date such Mark was registered in order to maintain the
effectiveness of the registration with respect to such Mark. Although the
Company will not be using the Marks during the period of the Aladdin's
construction, the Company does not expect that this will adversely affect the
registration of the Marks, provided that the reason for the non-use of the Marks
is explained to the PTO at the time the statement of continuing use is filed.
Each of the registrations for the Marks has a duration of ten years and, unless
renewed, will expire on the tenth anniversary of such Mark's date of
registration. The Company has recorded its ownership of the Marks with the PTO.
A lien on the Marks was granted to the Bank Lenders on the Issue Date. See
"Description of Certain Indebtedness and Other Obligations--Bank Credit
Facility."
INSURANCE
Prior to the commencement of operation of the Aladdin, the Company intends
to obtain the types and amounts of insurance coverage that it considers
appropriate for a company in its business. While management intends to ensure
that the Company's insurance coverage will be adequate, if the Company were held
liable for amounts exceeding the limits of its insurance coverage or for claims
outside of the scope of its insurance coverage, the Company's business and
results of operations could be materially and adversely affected.
With respect to the construction of the Aladdin, the Company and the
Design/Builder have elected to implement a controlled insurance program (the
"CIP") whereby the Design/Builder will provide General Liability, Workers'
Compensation, Excess Liability, Contractual Liability, Builders Risk and Transit
coverages for the Design/Builder and all subcontractors. The Company will pay
the Design/Builder for all premiums and costs associated with the CIP. Where
necessary, the Company will be named as a named insured or as an additional
insured on each policy procured by the Design/Builder pursuant to the CIP. In
addition, in lieu of procuring a liquidated damages insurance policy or a
business interruption insurance policy to compensate for late completion of the
Aladdin, the Company has paid the Design/Builder $2.0 million as a bonus
advance. The Design/Builder may elect to purchase liquidated damages insurance
or it may elect to self-insure. In either event, the Design/Builder is entitled
to keep the bonus advance if the Aladdin is finished on or before the date set
for Substantial Completion (as defined herein) (the "Contract Date"). As a
further bonus, the Design/Builder will receive $100,000 for each day, up to but
not to exceed 90 days, that the Aladdin is substantially completed in advance of
the Contract Date. If the Aladdin is not substantially completed by the Contract
Date, the Design/Builder must pay back the advance bonus plus $100,000 per day
commencing on the first day following the Contract Date and continuing up to 90
days thereafter. See "Certain Material Agreements--Design/Build Contract."
LITIGATION
The Company and the Aladdin Parties are not currently party to any pending
claim or legal action. However, Mr. Jack Sommer, who is the Chairman of the
Holdings Board and the Company Board (each as defined herein), a director of
Holdings, Capital, the Company and the Issuer, and a trustee of the Trust, and
the other trustees of the Trust are currently co-defendants in a legal action
relating to the existing Aladdin hotel and casino. See "Controlling
Stockholders--Trust Litigation."
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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 intends to file a written request (the "Ruling Request") with the Nevada
Board Chairman for a ruling that it is not necessary to submit the Warrant
Public Offering for prior approval. No assurance can be given that the Ruling
Request will be granted or that it will be considered on a timely basis. If the
Nevada Board Chairman rules that approval of the Warrant Public Offering is
required, the Issuer will file an application for such approval. If the Ruling
Request is not granted, the Warrant Public Offering could be significantly
delayed while the Issuer seeks approval of the Nevada Board and the Nevada
Commission for the Warrant Public Offering. No assurance can be given that
approval of the Warrant Public Offering, if required, will be granted. If
Holdings or the Company shall become an IPO Entity prior to receiving its Gaming
Approvals, they intend to file a Ruling Request with the Nevada Board Chairman
for a ruling that it is not necessary to submit the Qualified Public Offering
for prior approval. No assurance can be given that such a Ruling Request will be
granted or that it will be considered on a timely basis. If the Nevada Board
Chairman rules that approval of the Qualified Public Offering is required, the
Company or Holdings, as applicable, will file an application for such approval.
If the Ruling Request is not granted, the Qualified Public Offering could be
significantly delayed while the Company or Holdings seeks approval of the Nevada
Board and the Nevada Commission for the Qualified Public Offering. No assurance
can be given that approval of the Qualified Public Offering, if required, will
be granted.
Changes in control of a Registered Company through merger, consolidation,
stock or asset acquisitions, management or consulting agreements, or any act or
conduct by a person whereby he obtains control, may not occur without the prior
approval of the Nevada Commission. Entities seeking to acquire control of a
Registered Company must satisfy the Nevada Board and Nevada Commission in a
variety of stringent standards prior to assuming control of such Registered
Company. The Nevada Commission may also require controlling stockholders,
officers, directors and other persons having a material relationship or
involvement with the entity proposing to acquire control, to be investigated and
licensed as part of the approval process relating to the transaction.
The Nevada legislature has declared that some corporate acquisitions opposed
by management, repurchases of voting securities and corporate defense tactics
affecting Nevada gaming licensees, and Registered Companies that are affiliated
with those operations, may be injurious to stable and productive corporate
gaming. The Nevada Commission has established a regulatory scheme to ameliorate
the potentially adverse effects of these business practices upon Nevada's gaming
industry and to further Nevada's policy to: (i) assure the financial stability
of corporate gaming operators and their affiliates; (ii) preserve the beneficial
aspects of conducting business in the corporate form; and (iii) promote a
neutral environment for the orderly governance of corporate affairs. Approvals
are, in certain circumstances, required from the Nevada Commission before the
Registered Company can make exceptional repurchases of voting securities above
the current market price thereof and before a corporate acquisition opposed by
management can be consummated. The Nevada Act also requires prior approval of a
plan of recapitalization proposed by the Registered Company's Board of Directors
in response to a tender offer
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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 that
are harmful to the State of Nevada or its ability to collect gaming taxes and
fees, or employ a person in the foreign operation who has been denied a license
or a finding of suitability in Nevada on the ground of personal unsuitability.
The sale of alcoholic beverages by the Company on the premises of the
Aladdin is also subject to licensing, control and regulation by the CCLGLB. All
licenses are revocable and are not transferable. The CCLGLB have full power to
limit, condition, suspend or revoke any such license, and any such disciplinary
action could (and revocation would) have a material adverse effect on the
financial position and results of operations of the Company and the Aladdin
Parties.
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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.................................. 50 Chairman of the Company Board and the Holdings Board;
Director of the Issuer and Capital; President of the Issuer
Richard J. Goeglein.......................... 63 Chief Executive Officer and President of the Company,
Holdings and Capital; Director of the Company, Holdings and
Capital
Ronald Dictrow............................... 54 Executive Vice President/Secretary and Director of the
Company, Holdings and Capital; Director and Secretary of the
Issuer
Alan Goodenough.............................. 54 Director of the Company, Holdings and Capital
G. Barry C. Hardy............................ 50 Director of the Company, Holdings and Capital
James H. McKennon............................ 43 Senior Vice President of the Company, Holdings and Capital;
President/Chief Operating Officer of the Aladdin Hotel and
Casino
Cornelius T. Klerk........................... 44 Senior Vice President/Chief Financial Officer of the
Company, Holdings and Capital; Treasurer of the Issuer
Lee A. Galati................................ 55 Senior Vice President/Human Resources of the Company,
Holdings and Capital
Jose A. Rueda................................ 60 Senior Vice President/Electronic Gaming of the Company,
Holdings and Capital
</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.
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
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Executive Officer of Harrah's from 1980 to the Fall of 1984 and as President and
Chief Operating Officer of Holiday Corp. (the parent company of Holiday Inns,
Harrah's, Hampton Inns and Embassy Suites) from October 1984 through 1987. From
1988 to 1992, Mr. Goeglein participated in several corporate turnarounds in the
technology and consumer services fields. In 1992, Mr. Goeglein formed Gaming
Associates, Inc. ("Gaming Associates") to take management control of Dunes Hotel
and Casino in Las Vegas and to prepare a plan of closure for and carry out the
closure of the property. He remains a principal of that company. Gaming
Associates provided consulting services to the lodging and gaming industries.
Mr. Goeglein recently served as a member of the Gaming Oversight Committee of
Marriott Corporation ("Marriott") and through Gaming Associates, provided
consulting services to Marriott's gaming operations situated outside of the
United States through December 1997. Mr. Goeglein is also a director of two
listed companies, Hollywood Park, Inc. and Platinum Software, Inc.
RONALD DICTROW is Executive Vice President/Secretary and a director of the
Company, Holdings and Capital and a director and Secretary of the Issuer. Mr.
Dictrow spent the first 12 years of his professional career as a CPA with the
New York accounting firm of David Berdon & Company and has a master's degree in
accounting and taxation. In 1979, he was hired by Sigmund Sommer as Controller
with financial responsibility for all of Mr. Sommer's properties. In 1984, Mr.
Dictrow became Treasurer and Chief Financial Officer of the Trust with the
additional responsibility for the operations and management of these properties.
Mr. Dictrow is an advisor and consultant to Mrs. Viola Sommer and has been an
officer and director of Sovereign Apartments, Inc., a New York City cooperative
apartment building since 1979. Mr. Dictrow has had business dealings with the
Sommer family for over 20 years.
ALAN GOODENOUGH is a director of the Company, Holdings and Capital. Mr.
Goodenough, who is chief executive officer of London Clubs, has over 30 years of
experience in the leisure and gaming industry, having worked as a public company
director and at other senior levels with several major public leisure and casino
companies in the United Kingdom. In 1990 Mr. Goodenough founded Lyric Hotels
Limited, a United Kingdom hotel company, raising over $40 million from United
Kingdom-based institutions. He remains Chairman of the Lyric Group which
currently operates three and four star hotels throughout England. As chief
executive officer of London Clubs, Mr. Goodenough was instrumental in that
company's initial public offering on the London Stock Exchange in June 1994. Mr.
Goodenough is also presently a fellow of the United Kingdom Hotel and Catering
Institute and a member of the Institute of Directors of England and Wales.
G. BARRY C. HARDY is a director of the Company, Holdings and Capital. Mr.
Hardy has served as Finance Director of London Clubs since 1989. Before joining
London Clubs, Mr. Hardy had extensive business experience in the leisure and
gaming industries. Such experience included executive level positions with
Pleasurama, plc where he held the offices of Development Director, Group Finance
Director and Company Secretary. In addition, Mr. Hardy was actively involved in
the development of Pleasurama's leisure and casino interests. In 1988, after the
acquisition of Pleasurama by Mecca Leisure Ltd., Mr. Hardy was appointed to
Mecca's Board as Managing Director of its casino division.
JAMES H. MCKENNON is Senior Vice President of the Company, Holdings and
Capital and President/ Chief Operating Officer of the Aladdin Hotel and Casino.
Mr. McKennon's career spans over 21 years in the hotel and casino industry in a
variety of executive positions. He was President and Chief Operating Officer of
Caesars World International Marketing (the casino marketing division of Caesars
World) from 1994 to 1996 and served as the President and Chief Operating Officer
of Caesars Tahoe from 1991 to 1994. Mr. McKennon first joined Caesars as the
Senior Vice President-Hotel Operations for Caesars Palace in Las Vegas, a
position he held until his promotion in 1991. From 1976 to 1988 he held a
variety of managerial positions at both the property and corporate level for
Westin Hotels.
CORNELIUS T. KLERK is the Senior Vice President/Chief Financial Officer of
the Company, Holdings and Capital and Treasurer of the Issuer. He has over 19
years of experience in the hotel and casino industry both at the corporate and
property level. From 1993 to 1997 Mr. Klerk was Vice President--Finance for
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Hilton Gaming Division (the gaming division of Hilton Hotels Corporation
("Hilton")). In that position he was responsible for the financial oversight of
all gaming properties owned and operated by Hilton. He was employed by Harrah's
from 1979 to 1985 and again from 1989 to 1993 in a variety of financial
management positions ranging from Casino Controller for Harrah's Atlantic City
to Vice President, Finance--Southern Nevada. From 1985 to 1987, Mr. Klerk was
Vice President of Gilpin, Peyton and Pierce, a regional advertising agency and
from 1987 to 1989, he was Corporate Controller for Forte Hotels International in
San Diego, California. Mr. Klerk was previously a CPA with the accounting firm
of Price Waterhouse.
LEE A. GALATI is the Senior Vice President/Human Resources of the Company,
Holdings and Capital. Mr. Galati has 22 years of human resources experience in a
variety of industries in both the public and private sectors. He was most
recently the Director of Human Resources for Sky Ute Casino in Durango, Colorado
from 1996 to 1997. Mr. Galati served as the Director of Human Resources for La
Plata County, Colorado from 1993 to 1995. From 1990 to 1993, Mr. Galati served
as an adjunct professor in the School of Business at Fort Lewis College in
Durango, Colorado. His experience also includes serving as Director of
Operations Support Services and Human Resources for Northern Telecom in San
Diego from 1984 to 1990 as well as Director of Human Resources for Beckman
Instruments in Fullerton, California from 1980 to 1984. Mr. Galati earned a
Masters in Human Resources and Organization Development from the University of
San Francisco in 1984.
JOSE A. RUEDA is the Senior Vice President of Electronic Gaming for the
Company, Holdings and Capital. Mr. Rueda's 28 years experience in the gaming
industry includes gaming operations as well as the sale and distribution of
gaming equipment. He was the Vice President, North East Region of Mikohn Gaming
Corporation from 1995 to 1997. Mikohn is a leading supplier of gaming equipment
to the casino industry. Prior to joining Mikohn, Mr. Rueda was with Harrah's for
24 years in a variety of management positions that included Director of Slot
Operations, Harrah's Atlantic City, from 1986 to 1994; Vice President of
Gaming/Slots, Harrah's Corporate from 1984 to 1986; Vice President of
Operations, Harrah's at Trump Plaza from 1983 to 1984 and Vice President of
Gaming, Harrah's Corporate from 1980 to 1983. Mr. Rueda has extensive experience
in property research and development along with creative product positioning. He
holds a business management degree from the University of Nevada at Reno.
COMMITTEES
There are currently no committees of the board of directors of the Issuer
(the "Issuer Board"). The Holdings Operating Agreement provides that there will
be Executive Management Committees which will be responsible for the day to day
management of Holdings and the Company. The Executive Management Committee of
the Company includes the following persons: the President and Chief Executive
Officer of the Company, the Chief Financial Officer of the Company, the
President and Chief Operating Officer of the Aladdin, the President and Chief
Operating Officer of the Music Project, the Senior Vice President of Human
Resources of the Company, the Senior Vice President of Electronic Gaming of the
Company and the Managing Director of the Salle Privee. See "Certain Material
Agreements--Holdings Operating Agreement." The Holdings Board may also establish
committees of the Holdings Board as it may deem necessary or advisable. Each of
London Clubs and Sommer Enterprises is entitled to have one of its nominee
Holdings Board members on each such committee. Presently, no committees of the
Holdings Board have been established.
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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, plus certain other benefits. See "--Employment Agreements."
(9) The aggregate amount of all perquisites and other personal benefits received
by Mr. McKennon were less than 10% of the salary and bonus he was paid in
1997.
(10) Mr. McKennon purchased unvested Holdings Common Membership Interests
representing approximately 1.0% of the outstanding Holdings Common
Membership Interests for a purchase price of $600. Such interests had a fair
market value of $600 on the date of purchase. Twenty-five percent of such
interests vest on the date of the opening of the Aladdin and an additional
25% vests on each annual anniversary of such opening date.
EMPLOYMENT AGREEMENTS
Richard J. Goeglein, James H. McKennon, Cornelius T. Klerk, Lee A. Galati
and Jose A. Rueda (the "Officers") each signed an employment agreement (each, an
"Employment Agreement") with the Company during 1997. The terms of the
Employment Agreements were amended on February 26, 1998, such that Holdings
became a party and the Officers contributed their Restricted Membership
Interests in the Company to Holdings in return for Restricted Membership
Interests in Holdings. The initial term of Mr. Goeglein's Employment Agreement
is five years and six months, and the remaining Officers' Employment Agreements
have an initial duration of four years. Pursuant to each Employment Agreement,
the Officers have such authority, responsibilities and duties as are customarily
associated with their positions with the Company. The Employment Agreements
provide that, during the term of their employment, the Officers will devote
their full time, efforts and attention to the business and affairs of the
Company.
The terms of the Employment Agreements provide for an annual base salary for
Mr. Goeglein, Mr. McKennon, Mr. Klerk, Mr. Galati and Mr. Rueda of $500,000
($600,000 after the opening of the Aladdin), $325,000, $200,000, $150,000 and
$250,000, respectively, plus any bonus granted by the Board of Directors based
on relevant criteria and performance standards. All of the Officers have been
receiving and are expected to continue to receive their compensation from the
Company, except that prior to the Issue Date, such amounts have been and will
continue to be paid by AHL on the Company's behalf. Mr. Goeglein's Employment
Agreement provides for annual bonuses based upon "on target" performances,
ranging from
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50% to 75% of his base salary, and is subject to certain tax provisions. The
Company Board will consider increases to the Officers' base salary no less
frequently than annually, commencing at the end of each Officer's first
employment year. Any increase in base salary shall be within the sole discretion
of the Company Board. The Employment Agreements provide that the Officers'
salary cannot be reduced. After the initial term of Mr. Goeglein's Employment
Agreement, the Company has agreed to retain Mr. Goeglein as a consultant to the
Company for an additional five years at $100,000 per year. The Officers are
entitled to receive other employee benefits from the Company, such as health,
pension and retirement and reimbursement of certain expenses.
Pursuant to the terms of the Employment Agreements, as amended, Mr.
Goeglein, Mr. McKennon, Mr. Klerk, Mr. Galati and Mr. Rueda have purchased for a
total purchase price of $1,200, $600, $450, $150 and $450, respectively,
unvested Common Membership Interest which were contributed to Holdings on
February 26, 1998 in return for unvested Holdings Common Membership Interests
representing approximately 2.0%, 1.0%, .75%, .25% and .75% (subject to dilution
upon exercise of the Warrants, whether vested or unvested at such time),
respectively of the Holdings Common Membership Interests (the "Restricted
Membership Interests"), subject to the receipt of applicable Gaming Approvals.
Except with respect to Mr. Goeglein, during the terms of the Employment
Agreements, 25% of each Officer's Restricted Membership Interests vest on the
date of the opening of the Aladdin, and a further 25% vest on each annual
anniversary of the opening of the Aladdin. If the Company continues to employ
each Officer after the expiration of the term of each Officer's Employment
Agreement, 25% of the Officer's Restricted Membership Interests will continue to
vest on each anniversary of the opening date until such interests are fully
vested. After the terms of the Employment Agreements, if the Company does not
continue to employ the Officer other than for Cause, or if the Officer no longer
continues his employment for Good Reason, only an additional 25% of the
Officer's Restricted Membership Interests vests. Mr. Goeglein's Restricted
Membership Interests are expected to become fully vested at the earlier of July
1, 2002 and the date on which such interests become publicly traded, conditioned
upon Mr. Goeglein's continued relationship with the Company. If an Officer's
employment with the Company and Holdings terminates, the Company and Holdings
are expected to have the right to repurchase any unvested portion of the
Officer's Restricted Membership Interest for an amount equal to the purchase
price originally paid by the Officer for the Common Membership Interest. Under
certain circumstances as set forth in the Employment Agreements, including if an
initial public offering with respect to the Restricted Membership Interests has
not occurred prior to the full vesting of such interests, the Officers have the
right to sell their vested Restricted Membership Interests to Holdings at fair
market value (subject to the receipt of applicable Gaming Approvals and to
certain restrictions on restricted payments set forth in the Indenture and the
Bank Credit Facility). If Holdings does not satisfy its obligation to purchase
the Restricted Membership Interests within seven days, the Officers have the
right to require the Company to purchase such interests at fair market value
(subject to certain restrictions on Restricted Payments set forth in the
Indenture). After the Company has satisfied its obligation to purchase the
Restricted Membership Interests, Holdings has the right to call such interests
from the Company for nominal consideration. If, prior to the date of an initial
public offering with respect to the Restricted Membership Interests, an Officer
is terminated for Cause, except with respect to Mr. Goeglein, the Company and
Holdings have the right to purchase any vested Restricted Membership Interests
from the Officers at two times the original price paid by the Officer for such
interests, (in each case with corresponding rights in Holdings to purchase the
Common Membership Interests which correspond to such Restricted Membership
Interests for nominal consideration).
The Employment Agreements may be terminated by the Company with or without
Cause (as defined in each Employment Agreement) or by the Officers for Good
Reason (as defined in each Employment Agreement). If an Officer is terminated
for Cause, he shall be entitled only to such salary, bonus and benefits then
accrued or vested. If an Officer is terminated without Cause or upon a Change in
Control (as defined in the Employment Agreements), the Officer shall be entitled
to such salary, bonus and benefits he would have been entitled for the remainder
of the four-year term or twelve months, whichever is longer (in
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the case of Mr. Goeglein, any such amount remaining in connection with his term
plus certain other amounts).
Each Officer has agreed not to compete with the Company during the term of
the Employment Agreements (plus one additional year if the Officer was
terminated for Cause) and has agreed to refrain from certain other activities in
competition with the Company.
Each of the Employment Agreements provides that the Company shall indemnify
and hold the Officers harmless to the fullest extent permitted by Nevada law
against costs, expenses, liabilities and losses, including reasonable attorney's
fees and disbursements of counsel, incurred or suffered by the Officer in
connection with his services as an employee of the Company during the term of
the respective Employment Agreement.
Mr. Goeglein's Employment Agreement provides Mr. Goeglein with relocation
expense reimbursement, an interest-free mortgage loan of up to $500,000, and
certain excise tax gross-up provisions.
GAI CONSULTING AGREEMENT
The Company has entered into a consulting agreement (as amended, the
"Consulting Agreement") with GAI, LLC ("GAI"), a Nevada limited-liability
company 100% beneficially owned by Richard Goeglein, which was subsequently
amended on February 26, 1998 to add Holdings as a party and pursuant to which
amendment GAI contributed its Common Membership Interests in the Company to
Holdings in return for Holdings Common Membership Interests. Pursuant to the
Consulting Agreement, GAI will render such consulting services as are reasonably
requested by the Company Board until June 30, 2002.
During the term of the Consulting Agreement, the Company shall pay GAI a
retainer of $12,500 each month as payment for remaining on call to provide
services and expertise for such month. In addition, GAI purchased a 3% Common
Membership Interests in the Company which was contributed to Holdings on
February 26, 1998 in return for a 3% Holdings Common Membership Interest (the
"GAI Membership Interest") for a purchase price of $1,800. The GAI Membership
Interest is fully vested and is subject to certain anti-dilution provisions
contained in the Consulting Agreement (but subject to dilution upon exercise of
the Warrants). In addition, (a) if Richard Goeglein is terminated from his
employment with the Company other than for "Cause" or voluntarily terminates for
"Good Reason" (as such terms are defined in Mr. Goeglein's Employment Agreement
with the Company) after the consummation of the Funding Transactions and the
Offering or (b) if an initial public offering in respect of the GAI Membership
Interest has not occurred prior to July 1, 2002, GAI has the right to sell any
shares purchased under the Consulting Agreement back to Holdings at their fair
market value at the time of such sale (subject to the receipt of applicable
Gaming Approvals and to certain restrictions on restricted payments set forth in
the Indenture and the Bank Credit Facility). If Holdings does not satisfy its
obligation to purchase the GAI Membership Interest within seven days, GAI has
the right to require the Company to purchase such interests at fair market
value. After the Company has satisfied its obligation to purchase the GAI
Membership Interest, Holdings will have the right to call such interests from
the Company at nominal value.
Pursuant to the Consulting Agreement, GAI has certain "piggyback"
registration rights with respect to its interests purchased pursuant to the
Consulting Agreement. Holdings has agreed to indemnify GAI, its legal counsel
and independent accountants against all expenses, claims, losses, damages and
liabilities which may arise out of certain acts or omissions committed in
connection with the registration of such membership interests, and, in
connection with certain acts or omissions not committed in connection with the
registration of such membership interests, to the same extent that other senior
management and directors of the Company and Holdings are indemnified.
BONUS AND INCENTIVE PLANS
The Company and Holdings currently do not have any bonus or incentive plans.
However, the Company anticipates adopting such a plan at such time as it may
deem appropriate (subject to supermajority approval by the Holdings Members (as
defined herein), such approval not to be unreasonably withheld). It is expected
that the terms of any such plan would be comparable to those customary in the
industry.
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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".
London Clubs (together with AHL, the "Controlling Stockholders") owns 25% of
the Holdings Common Membership Interests through subsidiaries. On the opening
date of the Aladdin, 0.5% of the Holdings Common Membership Interests will be
transferred from London Clubs to Sommer Enterprises and, upon the vesting of
certain employees' membership interests in Holdings, London Clubs' percentage of
the Holdings Common Membership Interests, and Sommer Enterprises' percentage of
the Holdings Common Membership Interests, will be further diluted
proportionately to account for such vesting, subject to applicable Gaming
Approvals. London Clubs is one of the world's leading casino operators, with
seven casinos in London (including Les Ambassadors Club and the Ritz Club), one
in Cannes, France, three in Egypt and one in Lebanon. Each of London Clubs'
casinos offers its own individual style, but with the same
internationally-recognized standards of service.
In recent years, London Clubs has embarked upon a period of expansion,
acquiring the Park Tower Casino in London's Knightsbridge in October 1996 and in
December 1996 re-opening and managing the casino operations of the famous Casino
du Liban in Lebanon. On April 2, 1998 London Clubs had an equity market
capitalization of over $455 million. London Clubs is listed on the London Stock
Exchange. See "Risk Factors--Controlling Stockholders" and "--Possible Conflicts
of Interest."
HOLDINGS OPERATING AGREEMENT
The members of Holdings (the "Holdings Members") are parties to the Holdings
Operating Agreement which sets forth their agreement as to the relationships
between Holdings and the Holdings Members and among the Holdings Members
themselves and as to the conduct of the business and internal affairs of
Holdings and its subsidiaries. For a summary of certain key provisions of the
Holdings Operating Agreement, see "Certain Material Agreements--Holdings
Operating Agreement."
EQUITY AND SERIES A PREFERRED INTEREST FINANCING
Concurrent with or prior to the Offering, the following contributions were
made in order to effect the equity and Series A Preferred Interest contribution
to the Company by Holdings: (i) Sommer Enterprises (a) contributed a portion of
the Contributed Land and $7.0 million consisting of the benefit of certain
predevelopment costs incurred by AHL to the Issuer in exchange for Class A
Common Stock in the Issuer and (b) contributed a portion of the Contributed Land
to Holdings in exchange for Holdings Common
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Membership Interests, (ii) the Issuer contributed the portion of the Contributed
Land and the benefit of the $7.0 million of certain predevelopment costs
received from Sommer Enterprises and the net proceeds allocable from the sale of
the Warrants to Holdings in exchange for Holdings Common Membership Interests
((i) and (ii) collectively, the "Sommer Equity Financing"), (iii) Holdings
contributed the Contributed Land appraised at $150.0 million, approximately $42
million from the London Clubs Contribution and the $7.0 million consisting of
the benefit of certain predevelopment costs incurred by AHL to the Company in
exchange for Common Membership Interests in the Company and (iv) Holdings
contributed $115.0 million in cash, consisting of the net proceeds of the sale
of the Units and approximately $8 million of the London Clubs Contribution, to
the Company in exchange for Series A Preferred Interests of the Company.
LAND APPRAISAL. The Project Site represents the Company's most material
asset. The Bank of Nova Scotia, as arranger of the Bank Credit Facility retained
HVS International, a division of Hotel Consulting, Inc., to prepare and deliver
an appraisal of the Project Site and the Hotel/Casino (the "Appraisal"). The
Appraisal was completed and delivered to the Bank of Nova Scotia and the Company
on October 7, 1997. The Appraisal states that as of August 7, 1997, the "market
value" of the Project Site was $180.0 million and of the site on which the
Aladdin and the Plant will be built (as well as an adjacent approximately 0.8
acre portion of the Project Site) was $135.0 million.
KEEP-WELL AGREEMENT
AHL, Bazaar Holdings and London Clubs (collectively, the "Sponsors") have
entered into the Keep-Well Agreement in favor of the Administrative Agent and
the Bank Lenders. Neither the Issuer, Holdings nor holders of the Warrants or
Warrant Shares are party to the Keep-Well Agreement. Capitalized terms used and
not defined in this section have the meanings assigned to such terms in the
Keep-Well Agreement.
The Keep-Well Agreement is the joint and several agreement of the Sponsors
to make certain quarterly Cash Equity Contributions (as defined below) to the
Company from and after the Conversion Date if the Company fails to comply with
the Minimum Fixed Charges Coverage Ratio set forth in the Bank Credit Facility.
The Bank Credit Facility defines the Minimum Fixed Charges Coverage Ratio as the
ratio of the Company's EBITDA for any period of four consecutive fiscal quarters
to the Company's fixed charges for such period. For the Company's first three
fiscal quarters after the Conversion Date, the Minimum Fixed Charges Coverage
Ratio shall be calculated by annualizing the Company's Minimum Fixed Charges
Coverage Ratio for such fiscal quarters.
The Cash Equity Contributions to the Company shall be in an amount that,
when added to the Company's EBITDA for the four quarter period ending on the
last day of such fiscal quarter, would rectify such breach. In no event shall
the aggregate Cash Equity Contributions required to be made by the Sponsors in
any fiscal year of the Company exceed $30.0 million. The $30.0 million annual
limitation on Cash Equity Contribution shall not apply to, or in any way limit,
any obligation of the Sponsors to pay the Accelerated Payment Amount (as defined
below).
The Cash Equity Contributions are cash contributions by the Sponsors to the
Company in exchange for Holdings Series A Preferred Interests or Holdings Series
B Preferred Interests having terms and conditions satisfactory to the Bank
Lenders (including, without limitation, no mandatory redemption provisions and
no requirements for the distribution of cash). The Holdings Operating Agreement
makes provision for adjustment of the proportion of Holdings Common Membership
Interests held by Sommer Enterprises and London Clubs for circumstances where
the portion of payment made by either Sponsor is in excess of 25% with respect
to London Clubs and 75% with respect to Sommer Enterprises. The Cash Equity
Contributions and the issuance of Holdings Common Membership Interests or the
Holdings Series A Preferred Interests and Holdings Series B Preferred Interests
will require the approval of the Nevada Gaming Authorities.
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Cash Equity Contributions made under the Bank Completion Guaranty will not
count for purposes of the Keep-Well Agreement, and vice-versa.
The Keep-Well Agreement will terminate (the "Keep-Well Termination Date") on
the date which is the earliest of (i) the day on which full and indefeasible
payment of the Obligations of the Company under the Bank Credit Facility has
been made to reduce the commitments of the Bank Lenders thereunder (the
"Commitments") to $145.0 million or less, (ii) the last day of the period of six
consecutive fiscal quarters from and after the Conversion Date during which the
Company has satisfied each of the financial covenants set forth in the Bank
Credit Facility (without giving effect to any payments to or investments by the
Sponsors in or for the benefit of the Company), (iii) the date on which both of
the following shall have been satisfied: (a) construction of the Aladdin and
renovation of the Theater have been completed in accordance with the terms of
the Bank Credit Facility and (b) the Commitments and the aggregate outstanding
principal amount of the Obligations under the Bank Credit Facility shall have
been reduced to an amount not in excess of a certain amount specified for such
date pursuant to a schedule of the 20 quarters following the Conversion Date,
(iv) the date on which the Sponsors shall have made full payment of the
Accelerated Payment Amount (as defined below) or (v) in the case of London Clubs
only, the date on which it shall have made full payment of the Accelerated
Payment Amount in respect of certain London Clubs specified events.
The Accelerated Payment Amount is, as of any date, an amount equal to the
sum of (a) the product of (i) $7.5 million times (ii) the number of scheduled
quarterly amortization payments remaining under the Bank Credit Facility (which
have not been paid by or on behalf of the Company) plus (b) any accrued and
unpaid amounts owed by the Sponsors under certain provisions of the Keep-Well
Agreement; provided, however, that at no time shall the Accelerated Payment
Amount exceed the lesser of (x) the outstanding Obligations of the Company under
the Bank Credit Facility and (y) $150.0 million plus amounts due under clause
(b) above, minus the product of (A) $7.5 million and (B) the number of complete
calendar quarters that have elapsed since the Conversion date which is six
calendar quarters after the Conversion Date.
The maximum amount of the Accelerated Payment Amount will be $150.0 million
plus any unpaid Cash Equity Contributions previously required to be made under
the Keep-Well Agreement. The maximum amount of the Accelerated Payment Amount
shall decrease by $7.5 million for each quarterly amortization payment which is
paid or prepaid.
Should certain specified exceptional events under the Keep-Well Agreement
occur, London Clubs is obligated to pay the Accelerated Payment Amount. The
specified exceptional events will include breaches by London Clubs of various
financial covenants and a covenant limiting the amount of secured debt which
London Clubs can incur, as well as certain events which will be triggered if
other indebtedness of London Clubs is accelerated or if London Clubs becomes
insolvent. Any such payments by London Clubs shall be used to repay bank
indebtedness under the Bank Credit Facility.
The obligations of London Clubs under the Keep-Well Agreement are
subordinated to other obligations of London Clubs under certain of its
pre-existing senior debt facilities. In addition, obligations of London Clubs
under the Keep-Well Agreement are guaranteed by certain subsidiaries of London
Clubs, which subsidiaries currently guarantee other indebtedness of London
Clubs.
Pursuant to the Salle Privee Management Agreement, London Clubs will receive
certain fees in consideration for its obligations under the Keep-Well Agreement.
See "Certain Transactions--Other Payments to Controlling Stockholders."
The Keep-Well Agreement contains representations and warranties, covenants
and events of default that are customary for the type of transaction.
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TRUST LITIGATION
Mr. Jack Sommer, who is a trustee of the Trust, and the other trustees of
the Trust, are co-defendants in a legal action relating to the existing Aladdin
hotel and casino commenced by members of the Aronow family (the "Aronow
Plaintiffs") in May 1995 in the Supreme Court of the State of New York, County
of New York. In their complaint, the Aronow Plaintiffs allege that Mr. Jack
Sommer and the Aronow Plaintiffs were parties to a joint venture to acquire and
develop the existing Aladdin hotel and casino and that Mr. Sommer breached such
alleged agreement when the Trust acquired an interest in the Aladdin hotel and
casino in December, 1994. The Aronow Plaintiffs are seeking (among other
remedies) to impress a constructive trust upon the Trust's interest in the
Aladdin hotel and casino, an accounting, compensatory damages of not less than
$200.0 million and punitive damages of not less than $500.0 million.
Mr. Sommer and the trustees of the Trust have informed the Company that they
believe the Aronow Plaintiffs' claims lack merit and that they intend to
vigorously defend such action. However, in the event that the action is
successful, the Trust might be required to pay substantial damages and/or the
Aronow Plaintiffs might be entitled to part of the Trust's interest in the
Aladdin hotel and casino. An adverse decision could have a material and adverse
effect on the Company and the Aladdin Parties.
Mr. Sommer and the other trustees of the Trust were also co-defendants in a
legal action commenced by Edward Kanbar, Romano Tio and Adina Winston (the
"Kanbar Plaintiffs" and together with the Aronow Plaintiffs, the "Plaintiffs")
in January 1997 in the Supreme Court of the State of New York, County of New
York. In their complaint, the Kanbar Plaintiffs alleged that they were partners
in an alleged partnership with Joseph Aronow, which partnership was formed to
seek and develop business opportunities with Mr. Sommer. The Kanbar Plaintiffs
were seeking (among other remedies) to impress a constructive trust upon the
Trust's interest in the Aladdin hotel and casino, compensatory damages of not
less than $20.0 million and punitive damages of not less than $50.0 million. On
January 15, 1998, the court granted the trustees of the Trust's motion to
dismiss this action in its entirety.
In 1988, the Trust and two related entities commenced an action in the
Southern District of New York against certain entities owned and controlled by
Bronfman family interests (the "Bronfman Defendants") alleging, among other
things, that the Bronfman Defendants committed violations of Rule 10b-5 under
the Securities Exchange Act of 1934, as amended, as well as multiple breaches of
fiduciary duties as general partner of a partnership in which the Trust owns
limited partnership interests. Relief requested includes an accounting,
imposition of a constructive trust and damages in excess of $100.0 million.
The Bronfman Defendants have asserted counterclaims against plaintiffs and
certain Sommer family members individually alleging causes of action for breach
of contract, fraud and various related torts. The Bronfman Defendants claim
damages in excess of $100.0 million.
The trustees of the Trust have informed the Company that they believe the
Bronfman Defendants' counterclaims to be without merit and they intend
vigorously to defend the counterclaim. However, in the event the Bronfman
Defendants are successful, the Trust might be required to pay substantial
damages. An adverse decision could have a material and adverse effect on the
Trust.
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<PAGE>
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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<PAGE>
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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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 Noteholder Completion Guaranty provides that the
Guarantors jointly and severally guarantee, among other things, to the Trustee
(for the benefit of the Noteholders) and covenant and agree to make any and all
payments to or on behalf of the Company as may be necessary in order to permit
and assure that:
(i) the Company will promptly carry out the work required for the
construction of the Aladdin with due diligence and continuity, in an
expeditious and first-class workmanlike manner in accordance with the
Approved Plans and Specifications (as defined below) in all material
respects and will correct as soon as possible any material defect in
such work or material deviation from the Approved Plans and
Specifications;
(ii) the Company will punctually pay all costs, expenses and liabilities
incurred by the Company in connection with the construction of the
Aladdin in accordance with the Approved Plans and Specifications, and
all claims and demands for labor, material and services incurred by the
Company prior to completion of the work and in connection with cost
overruns of any type and all amounts which the Company may be required
to pay from time to time in order to keep the project "In Balance" as
such term is defined in the Noteholder Completion Guaranty;
(iii) the Company will complete the construction of the required Minimum
Aladdin Facilities on schedule and in accordance with the Approved
Plans and Specifications lien-free other than Permitted Liens;
(iv) the Company will provide the expertise necessary to supervise such work
at no cost to the Trustee;
(v) in the event the Guarantors fail to pay and/or perform their respective
obligations under the Noteholder Completion Guaranty, the Trustee (in
addition to any other rights and remedies afforded by applicable law)
may pay and perform the Guaranteed Obligations on behalf of the
Guarantors, in which case the Guarantors, upon demand, must reimburse
the Trustee for all costs, expenses and liabilities incurred in
connection therewith; and
(vi) the Guarantors shall pay the Trustee all reasonable out-of-pocket costs
and expenses of the Trustee in connection with the enforcement of the
Noteholders' rights and remedies under the Noteholder Completion
Guaranty.
The obligations of the Guarantors under the Noteholder Completion Guaranty
are subject to certain important qualifications. In particular, the Trustee may
not exercise any rights or declare any default under the Noteholder Completion
Guaranty and shall not pursue any remedies thereunder including, but not limited
to demanding payment or performance during any period that the Bank Completion
Guaranty is in effect and the Guarantors thereunder have not been released in
writing by the Bank Lenders. Notwithstanding the foregoing, however, the Trustee
shall be permitted to exercise any and all rights, declare a default, commence
enforcement proceedings and pursue any and all remedies under the Noteholder
Completion Guaranty:
(i) at any time prior to the date that any funds have been advanced or
disbursed to the Company pursuant to the Bank Credit Facility;
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(ii) at any time prior to Completion and from after the date on which all
indebtedness evidenced and secured by the Bank Credit Facility has been
indefeasibly paid in full and the Bank Lenders have released the
Guarantors in writing from their obligations under the Bank Completion
Guaranty; and
(iii) at any time after which all of the following events have occurred and
are continuing:
(a) an event of default under the Bank Completion Guaranty has occurred
and is continuing and such event of default has remained uncured for
the number of applicable Trigger Days (as defined herein);
(b) a Funding Cessation (as defined herein) has occurred and is
continuing for the aggregate number of applicable Trigger Days;
PROVIDED, HOWEVER, in no event shall aggregate Funding Cessations
exceed 180 days in the aggregate (which shall be extended for the
number of days during which a Force Majeure Event (as defined below)
or Insolvency Proceeding of the Company which impairs the Bank
Lenders directly or indirectly from enforcing the Bank Completion
Guaranty has occurred and is continuing which such extension shall
terminate upon the filing by the Bank Lenders of an action against
the Guarantors under the Bank Completion Guaranty to enforce the
obligations of the Guarantors thereunder which are susceptible of
performance notwithstanding the Insolvency Proceeding of the Company)
in any consecutive 365 day period; and
(c) the construction work which has been substantially completed in
accordance with the Approved Plans and Specifications (as certified
by the Construction Consultant) on the date in question has not
progressed to the stage of completion set forth for such date
(subject to any extensions based upon Force Majeure Events or an
Insolvency Proceeding of the Company which impairs the Bank Lenders,
directly or indirectly, from enforcing the Bank Completion Guaranty
has occurred and is continuing, which such extension shall terminate
upon the filing by the Bank Lenders of an action against the
Guarantors under the Bank Completion Guaranty to enforce the
obligations of the Guarantors thereunder which are susceptible of
performance notwithstanding the Insolvency Proceeding of the Company)
in the Construction Benchmark Schedule (as defined in the Noteholder
Completion Guaranty).
The Noteholder Completion Guaranty also provides that performance in all
material respects of the obligations of the Guarantors under the Bank Completion
Guaranty (as in effect on the Issue Date, or as may be amended from time to time
so long as in connection with each such amendment the Construction Consultant
certifies to the Trustee that, after giving effect to such amendment, (i) the
Minimum Aladdin Facilities are still capable of being completed by the Operating
Deadline, and (ii) the Guarantors have consented to such amendment) shall be
deemed to be performance of the corresponding obligations under the Noteholder
Completion Guaranty and performance in all material respects of the obligations
of the Guarantors under the Noteholder Completion Guaranty shall be deemed to be
performance of the corresponding obligations under the Bank Completion Guaranty.
Under the Noteholder Completion Guaranty, the Trustee covenants and agrees
that (i) the right of the Trustee to demand payment and/or performance of the
obligations under the Noteholder Completion Guaranty, to exercise any rights,
remedies and options and/or to commence enforcement proceedings under the
Noteholder Completion Guaranty shall be subject to the delivery by the Trustee
of a written notice to the Administrative Agent no later than 10 business days
prior to the making of such demand for payment and/or performance, exercise of
rights remedies and options, or commencement of enforcement proceedings, as
applicable, (ii) the Bank Lenders shall have all rights at law and equity
including, without limitation, the right to seek an injunction or other
extraordinary remedy to prevent or prohibit the making of any demand for payment
and/or performance, exercise of rights remedies and options, or commencement of
enforcement proceedings by the Trustee which is in contravention of the
"standstill" provisions of
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the Noteholder Completion Guaranty described above, and (iii) the Noteholder
Completion Guaranty shall not have been amended, modified, and/or amended and
restated without the prior written consent of the Administrative Agent in its
sole discretion; provided that the consent of the Administrative Agent shall not
be required in connection with to corrective amendments required to be made to
the Noteholder Completion Guaranty as and when corresponding amendments are made
to the Bank Completion Guaranty.
In addition, the Trustee on its own behalf and on behalf of the
Noteholders has covenanted and agreed that the rights, remedies and options of
the Trustee under the Noteholder Completion Guaranty in no way restrict the
rights and remedies of the Administrative Agent and the Bank Lenders under the
Bank Credit Facility or any security therefor including, without limitation, the
right to commence and prosecute to completion enforcement of the Bank Credit
Facility and any documents evidencing or securing the obligations under the Bank
Credit Facility. The Trustee agreed on its own behalf and on behalf of the
Noteholders that no Person shall have any right whatsoever to interpose a right
of offset, defense, claim or counterclaim with respect to any enforcement of the
Bank Credit Facility documents based upon a claim that the Trustee has the right
to performance of the guaranteed obligations before such enforcement can be
commenced or prosecuted or judgment thereon can be executed by or on behalf of
the Bank Lenders.
"Approved Plans and Specifications" shall mean all plans, specifications,
design documents, schematic drawings and related items for the design,
architecture and construction of the Aladdin, as delivered to the Trustee on the
Issue Date, as the same may be (x) finalized in a manner that reflects a natural
evolution of their status on the date hereof and in a manner consistent with the
standards set forth in the Credit Agreement with respect to the Bank Credit
Facility (the "Bank Credit Agreement") and (y) amended in accordance with the
Bank Credit Agreement.
"Construction Benchmark Schedule" shall have the meaning set forth in the
Noteholder Completion Guaranty and the Bank Credit Agreement.
A "Funding Cessation" shall occur at any time that funds are unavailable
to the Company (from any source whatsoever) to fund draws under the Bank Credit
Facility in an amount equal to 75% of the draw request in question or the
Construction Consultant fails to deliver the On Schedule Certificate as
contemplated by the Engagement Letter among Rider Hunt (NV) L.L.C., the
Administrative Agent, the Disbursement Agent, the Trustee, and others.
"Force Majeure Event" shall mean any event which is defined as a "Force
Majeure" in the Design/ Build Contract and/or that causes a delay in the
construction of the Aladdin and is outside the Company's control but only to the
extent (a) such event does not arise out of (i) the negligence, willful
misconduct or inefficiencies of the Company, (ii) late performance by the
Design/Builder or ADP, (iii) any cause or circumstances resulting in delays,
stoppage or any other interference with the construction of the Aladdin caused
by the insolvency, bankruptcy or any lack of funds by the Company, any of the
other Project Parties (as defined herein), the Energy Provider, Unicom, and/or
ADP, or (iv) delays, stoppage or other interference with the construction of the
Aladdin caused by the insolvency, bankruptcy or any lack of funds by Bazaar,
Aladdin Music and/or the construction contractors and project architects with
respect to the Mall Project, the Music Project and/or the Energy Project, and
(b) such event consists of an Act of God (such as tornado, flood, hurricane,
etc.), fires and other casualties; strikes, lockouts or other labor disturbances
(except to the extent taking place at the Project Site only); riots,
insurrections or civil commotions; embargoes, shortages or unavailability of
materials, supplies, labor, equipment and systems that first arise after the
Issue Date, but only to the extent caused by another act, event or condition
covered by this clause (b); sabotage; vandalism; the requirements of law,
statutes, regulations and other legal requirements enacted after the Issue Date
(unless the Company should, in the exercise of due diligence and prudent
judgment, have anticipated such enactment); orders or judgments; or any similar
types of events, provided, that (x) the Company has sought to mitigate the
impact of the delay, (y) any delay resulting from the foregoing shall not exceed
365 days, and (z) the period during which a Force Majeure
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Event exists shall commence on the date that the Company has given the Trustee
and the Administrative Agent written notice describing in reasonable detail the
event which constitutes a Force Majeure Event and the Trustee and the
Administrative Agent have confirmed the existence of such Force Majeure Event on
the date of such notice and shall end on the date that such Force Majeure Event
no longer exists, whether or not notice is given to the Trustee and the
Administrative Agent, as determined by the Construction Consultant.
"Trigger Days" shall be defined as follows:
(i) an aggregate of 60 calendar days during any period in which the Bank
Lenders have disbursed more than $1 and up to and including $35.0
million of the Bank Credit Facility to the Company;
(ii) an aggregate of 90 calendar days during any period in which the Bank
Lenders have disbursed more than $35.0 million and up to and including
$70.0 million of the Bank Credit Facility to the Company;
(iii) an aggregate of 120 calendar days during any period in which the Bank
Lenders have disbursed more than $70.0 million and up to and including
$110.0 million of the Bank Credit Facility to the Company; and
(iv) an aggregate of 180 calendar days during any period in which the Bank
Lenders have disbursed more than $110.0 million of the Bank Credit
Facility to the Company.
DISBURSEMENT AGREEMENT
The Company, Holdings, Scotiabank, as the Administrative Agent under the
Bank Credit Facility, the Trustee, Scotiabank, as the Disbursement Agent on
behalf of the Bank Lenders and the Trustee (the "Disbursement Agent"), and as
Securities Intermediary and the Servicing Agent entered into the Disbursement
Agreement concurrently with the closing of the Offering. The following summary
of the material provisions of the Disbursement Agreement does not purport to be
complete and is qualified in its entirety by reference to the Disbursement
Agreement, including the definitions therein of certain terms used below.
Capitalized terms that are used hereunder but not otherwise defined in this
Prospectus have the meanings assigned to them in the Disbursement Agreement.
Pursuant to the Disbursement Agreement, on the Issue Date approximately
$35 million of the net proceeds of the Offering were deposited into the Note
Construction Disbursement Account, which is subject to the sole dominion and
control of the Disbursement Agent on behalf of the Trustee (for the benefit of
the Noteholders) and the proceeds from the Term B Loan and the Term C Loan were
advanced to the Company and thereafter deposited by the Company into the Cash
Collateral Account, which will be subject to the sole dominion and control of
the Disbursement Agent on behalf of the Bank Lenders who have made the Term B
Loans and the Term C Loans. All funds in the Note Construction Disbursement
Account are pledged to the Disbursement Agent for the benefit of the Trustee to
secure repayment of the Notes and all funds in the Cash Collateral Account are
pledged to the Disbursement Agent to secure repayment of the Term B Loans and
Term C Loans. The Disbursement Agreement establishes the conditions to, and the
sequencing of, the making of disbursements of the proceeds of the Offering, the
funds from the Term B Loan and Term C Loan and the advances of the Term A Loan
and from other sources. Pursuant to the Disbursement Agreement, (i) all of the
proceeds from the Offering must be expended before any proceeds from the Term B
Loan and Term C Loan may be disbursed; (ii) the proceeds from the Term B Loan
and the Term C Loan will be disbursed pro rata; and (iii) advances under the
Term A Loan will only be made after all of the proceeds of the Term B Loan and
Term C Loan are expended (other than to fund draws under Letters of Credit which
are issued as part of the Bank Credit Facility). The drawdown of funds under the
FF&E Financing will not be subject to the provisions of the Disbursement
Agreement.
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The Disbursement Agreement authorizes disbursement from the Note
Construction Disbursement Account and the Cash Collateral Account only upon the
satisfaction of various conditions precedent set forth in the Disbursement
Agreement. These conditions include, among other things:
(i) delivery by the Company of a disbursement request and certificate
certifying as to, among other things, (a) the application of funds to be
disbursed, (b) the substantial conformity of construction undertaken to
date with the Approved Plans and Specifications, as amended from time to
time, in accordance herewith, (c) the expectation that the Aladdin will
be completed by the Operating Deadline, (d) the accuracy of the budget
for the construction of the Aladdin, as amended from time to time in
accordance with the Bank Credit Agreement, (e) the sufficiency of
remaining funds to complete the Aladdin by the Operating Deadline, (f)
compliance with line item budget allocations, taking into account
allocations for contingencies; (g) the accuracy of the representations
and warranties contained in the Disbursement Agreement, the other Loan
Documents, the Bank Completion Guaranty, the Noteholder Completion
Guaranty, and the other material project documents (collectively, the
"Operative Documents"), as if made on such date (except those that
relate to a different date) unless the failure of the foregoing to be
the case would not have a material adverse effect on the financial
condition, business, property, prospects or the ability of the Company,
and to the Company's knowledge each of AHL, Holdings, London Clubs,
LCNI, Design/Builder and Fluor (collectively, the "Project Parties") to
perform in all material respects their respective obligations under the
Operative Documents to which they are a party; (h) the Operative
Documents continue to be in full force and effect and (i) the absence of
an event of default with respect to certain material covenants in the
Operative Documents which would be reasonably likely to cause a material
adverse effect on the financial condition, business, property, prospects
or the ability of the Company or (to the Company's knowledge) any of the
Project Parties to perform their respective obligations under the
Operative Documents to which they are a party;
(ii) the absence of any default or an event of default (each as defined in
the Bank Credit Agreement) with respect to the Operative Documents
which would be reasonably likely to cause a material adverse effect on
the financial condition, business, property or prospects of the
Company, or to the Company's knowledge of the Project Parties and their
ability to perform in all material respects their respective
obligations under the Operative Documents to which they are a party;
(iii) delivery by the Construction Manager, the Construction Consultant and
the Project Architect of certificates corroborating various matters set
forth in the Company's disbursement request and certificate;
(iv) compliance by the Guarantors under the Bank Completion Guaranty and
London Clubs and AHL, as Sponsors, of their respective obligations
under the Keep-Well Agreement;
(v) receipt by the Company of the governmental approvals required to be in
effect at such time;
(vi) delivery by the Company to the Disbursement Agent of the acknowledgment
of payment and lien releases required under the Disbursement Agreement;
(vii) the procurement of all insurance policies required under the
Disbursement Agreement, including required endorsements,
(viii) the absence of pending material litigation which materially and
adversely affects the financial condition, business, property,
prospects or ability of the Company or the Project Parties to perform
in all material respects their respective obligations under the
Operative Documents to which they are a party;
(ix) all of the documents evidencing the Disbursement Agent's security
interest in the proceeds, if any, in the Note Construction Disbursement
Account (for the sole and exclusive benefit of the
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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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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
synthetic lease facility (the "Lease Facility") with the FF&E Lender for the
purpose of acquiring approximately $60 million of new furniture and equipment
(other than gaming equipment) for the Aladdin. The Lease Facility is expected to
contain provisions as described herein and is structured as a lease intended for
security (the "Lease"). The Company will be considered the owner of the
Specified Equipment (as defined herein) for tax purposes and the lease will be
treated as an operating lease for accounting purposes. The lease will commence
on
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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 10.1875% which represents a spread
of 425 bps over the reserve adjusted 90-day LIBOR (the "Base Index") (5.9375%).
Five days prior to the Basic Lease Term Commencement Date, the Lease Rental
Factor will be adjusted and calculated on the basis of the floating rate Base
Index plus the higher of (a) 425 bps, or (b) the weighted average spread used to
calculate the interest rate on the Bank Credit Facility plus 125 bps, and such
spread shall be maintained throughout the Basic Lease Term and any available
Renewal Lease Terms. The Lease Rental Factor will be adjusted quarterly based on
changes to the Base Index.
Subject to the satisfaction of the conditions precedent and to there being
no default, the FF&E Lender will commence funding of deliveries of the Specified
Equipment and/or the Gaming Equipment (as defined herein) up to six months prior
to the Construction Completion Date (the "Interim Funding Date").
An interim lease funding amount (the "Interim Lease Funding Amount") of up
to $60.0 million will be available, subject to no default then having occurred
and continuing under the Company's financing, construction or other material
agreements, and satisfaction of all conditions precedent to funding. Advances of
the Interim Lease Funding Amount shall be made once per month during the Interim
Funding Period. Any Interim Lease Funding Amount advanced under the Lease
Facility shall be made under an interim schedule, which shall be converted to a
final schedule under the Lease on the Basic Lease Term Commencement Date.
The interim lease repayment terms (the "Interim Lease Repayment Terms") will
be floating rate interest-only payments due monthly in arrears during the period
from the Interim Funding Date through the Construction Completion Date (the
"Interim Funding Period") based on the Interim Lease Funding Amount. At the
Company's option, interest will be calculated at either (a) the reserve adjusted
30-day LIBOR on the date of determination ("30-day LIBOR") plus the higher of
(i) 425 bps, or (ii) the weighted average spread used to calculate the interest
rate of the Bank Credit Facility plus 125 bps, or (b) the prime rate published
in the Wall Street Journal on the date of the determination (the "Prime Rate")
plus 275 bps, and such spread shall be fixed throughout the Interim Funding
Period, and 30-day LIBOR or the Prime Rate will be adjusted monthly based on
changes thereto.
Subject to certain provisions, at the end of the Basic Lease Term or any
Renewal Lease term, the Company may (i) purchase all, but not less than all, of
the Specified Equipment at a fixed purchase price, estimated to represent the
Specified Equipment's then fair value, (ii) renew the Lease for all, but not
less than all, of the Specified Equipment for up to two additional one-year
terms, or (iii) return all, but not less than all, of the Specified Equipment to
the FF&E Lender subject to certain return conditions, including payment of a
contingent rental amount.
Upon termination of the Lease at the end of the Basic Lease Term or any
Renewal Lease term, should the Specified Equipment be returned to the FF&E
Lender by the Company, the FF&E Lender will calculate a contingent rental for
the full lease term, on a quarterly basis, based on certain factors.
TERM LOAN FACILITY. The Company has entered into a commitment letter for an
approximately $20 million five year term loan facility (the "Term Loan
Facility") with the FF&E Lender for the purposes
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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) 425 bps, or (b) the weighted average spread used to
calculate the interest rate on the Bank Credit Facility on such date plus 125
bps, and such spread shall be maintained throughout the five year term. The
Interest Rate will be adjusted quarterly, based on changes to the Base Index, if
applicable.
An interim term loan funding amount (the "Interim Term Loan Funding Amount")
of up to $20.0 million will be available, subject to no default then having
occurred and continuing under the Company's financing, construction or other
material agreements and satisfaction of all conditions precedent to funding.
Advances of the Interim Term Loan Funding Amount shall be made once per month
during the Interim Funding Period. An Interim Term Loan Funding Amount advanced
under the Term Loan Facility shall be evidenced by an interim promissory note,
which shall be converted to a final promissory note on the Term Loan
Commencement Date.
The interim term loan repayment terms (the "Interim Term Loan Repayment
Terms") will be floating rate interest-only payments due monthly in arrears
during the Interim Funding Period based on the Interim Term Loan Funding Amount.
At the Company's option, interest will be calculated at either (a) the 30-day
LIBOR plus the higher of (i) 425 bps, or (ii) the weighted average spread used
to calculate the interest rate of the Bank Credit Facility plus 125 bps, or (b)
the Prime Rate plus 275 bps, and such spread shall be fixed throughout the
Interim Funding Period and 30-Day LIBOR or the Prime Rate will be adjusted
monthly based on changes thereto.
SECURITY. The security interests granted by the Company will be a first
priority security interest in a pool of new furniture and equipment (other than
gaming equipment) (the "Specified Equipment"), and specified new gaming
equipment including gaming devices such as slot machines, cashless wagering
systems and associated equipment (the "Gaming Equipment"), and assignment of all
improvements and/or additions to the Specified Equipment and the Gaming
Equipment hereafter acquired. The Specified Equipment and the Gaming Equipment
will be required to be free of all junior liens or encumbrances. Any and all
existing and to be issued obligations of the Company shall acknowledge that the
Term Loan Facility and the Lease Facility have a first priority lien on the
Gaming Equipment and the Specified Equipment. During the Interim Funding Period,
the Company shall assign to the FF&E Lender its rights under the purchase
contracts for the Specified Equipment.
CONDITIONS PRECEDENT. The FF&E Financing is subject to customary conditions
precedent.
COVENANTS AND EVENTS OF DEFAULT. Except for covenants related to the
Specified Equipment or the Gaming Equipment, the covenants and events of default
in the FF&E Financing will be similar to those in the Bank Credit Facility. The
disposition of collateral consisting of Gaming Equipment is subject to the
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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. Specified Events include, but are not limited to,
breaches by London Clubs of various financial covenants (including borrowing
ratios), and a covenant limiting the amount of indebtedness which London Clubs
can incur, as well as certain events which will be triggered if other
indebtedness of London Clubs is accelerated or if London Clubs becomes
insolvent.
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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 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 is currently considering whether to utilize the
Plant or arrange for alternate energy sources for the provision of electricity,
hot and cold water and heating and cooling for the Mall Project.
DEVELOPMENT AGREEMENT
The Company has entered into a Development Agreement with the Energy
Provider, pursuant to which the Energy Provider will develop and construct the
Plant to serve the energy requirements of certain parts of the Complex. Once
developed and constructed in accordance with the Development Agreement, the
Plant will supply the Services to such parts of the Complex pursuant to the
Energy Service Agreement, described below. The design and construction of the
Plant will be at the sole cost and expense of the Energy Provider; provided,
however, the Energy Provider shall not be responsible for costs in excess of $40
million unless agreed to by the Energy Provider. Specifically, the Energy
Provider will be responsible, at its sole cost and expense, for, among other
things: (i) designing, engineering, procuring, constructing,
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start-up, and performance testing of the Plant; (ii) compliance with applicable
Laws and Government Approvals; (iii) safeguards for the protection of the Plant;
(iv) obtaining all necessary construction materials, equipment and supplies; (v)
providing all necessary labor and personnel; (vi) developing and complying with
a Quality Control and Inspection Program; and (vii) completing the Plant in
accordance with the schedule set forth in the Development Agreement. As
discussed below, payments to the Energy Provider for the Capacity Charge (as
defined herein) under the Energy Service Agreement will be based, in part, on
the costs incurred by the Energy Provider for the design and construction of the
Plant.
The Energy Provider will appoint a Project Manager who will be responsible
for daily supervision of all activities relating to the design and construction
of the Plant. The Project Manager will serve as a single point of contact for
the Company with the Energy Provider. The Energy Provider also will develop a
Project Plan, which will be comprised of a schedule for the development and
construction of the Plant. The Project Plan will include a definition of the
work to be completed as well as a schedule of milestones and Critical Path
Activities. In consultation with the Company, the Energy Provider will prepare a
request for proposals for an Engineering, Procurement and Construction
Contractor ("EPC Contractor"), and will solicit bids from at least three
qualified contractors. From the bids that are received that are acceptable to
the Company, the Energy Provider will retain an EPC Contractor. The EPC
Contractor will provide a guaranteed maximum price for the design and
construction of the Plant. The Energy Provider and the EPC Contractor will then
prepare design development plans and specifications for the Plant. The Plant
will be constructed in accordance with such plans and specifications. The
Company has the right to inspect all of the work performed and to comment on all
aspects of the design and construction of the Plant.
In the event the Energy Provider has failed to achieve Critical Path
Activities when and as set forth in the Project Plan, and the Company reasonably
and in good faith believes that such failure is reasonably likely to prevent the
Energy Provider from achieving Substantial Completion by the Substantial
Completion Deadline and Final Completion by the Final Completion Deadline, the
Company may so inform the Energy Provider. If the Energy Provider does not
improve performance to the Company's satisfaction, the Company may require an
increase in the Energy Provider's labor force, number of shifts, overtime
operations, days of work per week and/or equipment, all costs of which shall be
borne by the Energy Provider. The Energy Provider also will have a Contingency
Plan in place which provides for the rental by the Energy Provider of
transportable boiler and chiller plants to ensure delivery of hot water and
chilled water in accordance with the terms of the Energy Service Agreement in
the event completion of the Plant is delayed for any reason. Unless the delay is
due to a Force Majeure Event or the fault of the Company, the Contingency Plan
will be implemented at the Energy Provider's sole cost and expense.
If the Energy Provider is in default of its obligations pursuant to the
Development Agreement and the Energy Provider either fails to cure such default
within ten days or fails to satisfy the Company that the default can be cured
within a time period reasonably satisfactory to the Company and promptly
commences and pursues remedial action, the Company may terminate the Development
Agreement. As explained below, Unicom, the Energy Provider's ultimate parent,
has guaranteed completion of the Plant in accordance with the Development
Agreement up to a maximum liability of $30.0 million. See "--Unicom Guaranty."
Upon the Company's termination of the Development Agreement, Unicom Corporation
either will complete the Plant in accordance with the terms of the Development
Agreement or will pay up to $30.0 million to have the Plant so completed.
In the event the performance of the Company or the Energy Provider is
delayed or prevented due to a Force Majeure Event (as defined in the Energy
Service Agreement) and such delay or prevention could not reasonably be avoided
or mitigated, the party claiming such delay or prevention will be excused from
performing its obligations under the Development Agreement for the period of
delay or interruption caused by the Force Majeure Event. Within 72 hours after a
party does become or should become aware of a Force Majeure Event, such party
will notify the other. Within seven days of such notice, the party claiming the
Force Majeure Event will deliver a notice to the other describing the
anticipated impact of the Force Majeure Event and within 10 days of the end of
the Force Majeure Event will provide a notice of
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extension of its obligations. If the parties disagree as to the latter notice
and are unable to resolve their dispute, the dispute will be resolved in
accordance with the dispute resolution provisions of the Development Agreement,
described below.
The Company will not be responsible for the Work or for the Energy
Provider's failure to perform the Work in accordance with the terms of the
Development Agreement. Nor will the Company be responsible for the acts or
omissions of the Energy Provider or its agents, contractors or employees. The
Company assumes no responsibility for injury or claims resulting from failure of
the Work to comply with applicable Laws or Government Approvals or from Defects
or Deficiencies.
The Company and the Energy Provider agree to cooperate and to communicate
with each other concerning the terms of the Development Agreement and other
matters relating to the Plant. If a dispute arises between the Company and the
Energy Provider, the parties jointly may request that the dispute be resolved by
arbitration in accordance with the provisions of the Commercial Arbitration
Rules of the American Arbitration Association. If the parties do not agree to
submit the dispute to arbitration, either party may bring the dispute to any
court of competent jurisdiction for resolution. The Development Agreement will
be governed by and construed in accordance with the laws of the State of Nevada.
Neither the Company nor the Energy Provider may assign its interest or
delegate its duties under the Development Agreement without the prior written
consent of the other (not to be unreasonably withheld), except that either party
may assign its interest in the Development Agreement if a concurrent assignment
of its interests in the ESA has been made pursuant to the ESA to the same
entity.
LEASE
Pursuant to a lease (the "Lease"), the Company has leased the Plant Site to
the Energy Provider for a fixed monthly base rent of $1.00. The Lease, which has
a 20-year term and provides for 5-year renewal terms, is a "net" lease, pursuant
to which the Energy Provider will pay all Impositions. The Energy Provider may
not use the Plant Site to provide services other than the Services without the
prior consent of the Company. In the event the Company gives such consent, the
fixed monthly base rent will be adjusted and other reasonable modifications will
be made to the Lease.
UNICOM GUARANTY
The obligations of the Energy Provider to complete the Plant in accordance
with the Development Agreement and in a manner capable of delivering the energy
requirements in accordance with the Energy Service Agreement are guaranteed by
the Energy Provider's ultimate parent, Unicom ("the Unicom Guaranty"). Unicom
agrees that the Unicom Guaranty shall be a continuing guaranty and that the
Company shall not be required to prosecute enforcement or other remedies against
the Energy Provider or any other guarantor of the Energy Provider's obligations
before calling on Unicom for performance. Unicom agrees that if for any reason
the Energy Provider shall fail or be unable to punctually and fully perform or
cause to be performed any of its obligations under the Development Agreement,
Unicom shall perform or cause to be performed such obligations promptly upon
demand. Unicom's obligations are limited to an amount equal to $30.0 million
dollars (or, under certain circumstances, an amount less than $30.0 million) and
shall not be reduced until Substantial Completion of the Plant. Upon Substantial
Completion, the Unicom Guaranty shall be reduced by the amount invested by the
Energy Provider, except that ten percent shall be retained to provide assurance
that Final Completion shall occur in accordance with the milestone schedule
under the Development Agreement.
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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. The Site Work Agreement further
provides that the Company will construct the Aladdin Improvements and Bazaar
will construct the Bazaar Improvements in accordance with a certain construction
schedule and pursuant to good and workmanlike standards and with first-class
materials.
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The Site Work Agreement and the REA provide that the Company will: (i)
construct a first-class hotel and casino facility (the "Aladdin Improvements")
on the Gaming Site (as defined in the REA); (ii) lease the Bazaar Site (as
defined in the REA) to Bazaar, which covenants to construct and operate a
first-class Retail Facility (as defined in the REA) and related improvements
(the "Bazaar Improvements"); (iii) lease the Aladdin Music Site (as defined in
the REA) to AMH, which covenants to construct and operate a first-class hotel
and casino facility (i.e., the Music Project hotel and casino); and (iv) lease
the Utility Site (as defined in the REA) to the Energy Provider, which covenants
to construct and operate a central utility plant (the "Central Utility Plant").
The Bazaar Improvements include the Carpark and additional surface-level parking
facilities beneath and adjacent to the Retail Facility for approximately 350
motor vehicles (the "Common Parking Area").
The REA also provides that Bazaar grants, as to its ownership or leasehold
interest in its tract, to the other REA Parties, as to their ownership or
leasehold interests in their tracts, a non-exclusive easement for automobile
parking in and on the Common Parking Area. The use and operation of the Common
Parking Area is also subject to the Common Parking Area Use Agreement (the
"Parking Agreement") entered into between the Company and Bazaar, pursuant to
which Bazaar covenants to maintain and operate the Common Parking Area for the
non-exclusive use of all the REA Parties. The Parking Agreement provides, among
other things, that the Company (i) will pay a fee of $3.2 million per year,
payable monthly and adjusted annually pursuant to a consumer price index-based
formula, for usage of the Common Parking Area, (ii) will pay its proportionate
share of the operating costs attributable to the Common Parking Area, and (iii)
has the right to assign a portion of its usage rights and obligations to Aladdin
Music, although such assignment may not relieve the Company of any of its
obligations in connection therewith. If and when Planet Hollywood's subsidiary
becomes a member of Aladdin Music, the Parking Agreement, by its terms, shall be
amended and restated to add Aladdin Music as a party, and the Company's
proportionate share of the operating costs attributable to the Common Parking
Area shall be reduced.
The REA contains agreements pursuant to which the REA Parties, as to their
ownership or leasehold interests in their respective tracts, grant to the other
REA Parties, as to their ownership or leasehold interests in their respective
tracts, easements for, among other things, (i) vehicular and pedestrian access,
(ii) installation and operation of utilities, (iii) construction, (iv) common
structural support, (v) installation and maintenance of exterior lights to
highlight grantees' buildings, (vi) truck loading, (vii) encroachments and the
maintenance thereof, (viii) roof space for the installation and operation of
certain telecommunication and ventilation equipment, (ix) setbacks, (x)
maintenance and construction of grantees' buildings, (xi) construction and
operation of a proposed monorail and (xii) signage.
The REA sets forth covenants among the REA Parties to, among other things,
(i) perform the construction of the Redeveloped Aladdin (as defined in the REA)
in accordance with first-class standards, (ii) cooperate with one another and
with each REA Party's architects, engineers and contractors and (iii) exchange
certain plans and specifications and other information. Certain modifications of
any REA Party's plans or specifications will be subject to certain approval
rights of certain other affected REA Parties. The REA also provides that the
Company may construct certain optional improvements, including an office tower
and/or time-share facilities.
Pursuant to the terms of the REA, the Company has covenanted that it shall
complete (subject to force majeure) the Aladdin Improvements, and Bazaar has
covenanted that it shall complete (subject to force majeure) the Bazaar
Improvements, on or before the First Scheduled Opening Date (as defined in the
Site Work Agreement). Similarly, AMH has covenanted that it shall complete the
Music Project hotel and casino on or before the Second Scheduled Opening Date
(which is currently anticipated to be six (6) months after the First Scheduled
Opening Date).
The REA provides that, subject to certain operational requirements of the
other REA Parties, each REA Party will operate the improvements on its tract in
a first-class manner, as more particularly set forth in the REA.
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The REA contains agreements among the REA Parties to maintain their
improvements in good order and in first-class condition, reasonable wear and
tear excepted. The REA also allocates responsibility among the REA Parties to
maintain the Common Area (as defined in the REA) of the Site (as defined in the
REA). Responsibility for the payment of the costs for such Common Area
maintenance is allocated proportionately; and the Company has the right to
assign a portion of its payment obligation to AMH, although such assignment may
not relieve the Company of any of its obligations in connection therewith.
The REA contains provisions requiring that in the event of any casualty or
condemnation, each REA Party shall, at its cost and expense, restore the
improvements located on its respective tract or tracts, including the Common
Area thereon, regardless of the availability of insurance proceeds or
condemnation awards; provided, however, that (a) with respect to damage or
condemnation affecting the Common Parking Area, the costs and expenses in excess
of available insurance proceeds or condemnation awards shall be shared by each
REA Party in accordance with its respective tract's proportionate share of
parking spaces required in accordance with local law, and (b) certain
restoration obligations expire 25 years (or such longer period approved by the
REA Parties) after the Second Scheduled Opening Date.
The REA contains provisions establishing self-help remedies for REA Parties
affected by an REA Party's failure to meet its maintenance or restoration
obligations set forth in the REA.
Certain disputes between the REA Parties that arise under the REA are,
pursuant to the REA, to be decided pursuant to binding arbitration, as more
particularly set forth in the REA. The REA Parties' maximum liability to one
another under the REA is limited to such REA Parties' interests in the
Redeveloped Aladdin, as more particularly set forth in the REA.
AGREEMENTS RELATING TO THE MALL PROJECT OR THE MUSIC PROJECT
BAZAAR LLC OPERATING AGREEMENT
TH Bazaar Centers Inc. ("THB"), a wholly owned subsidiary of TrizecHahn, and
Bazaar Holdings (collectively, the "Bazaar Members") are parties to an operating
agreement (the "Bazaar LLC Operating Agreement") setting forth their agreement
as to the relationship between Bazaar and the Bazaar Members and among the
Bazaar Members themselves as to the conduct of the business and internal affairs
of Bazaar. The Bazaar Operating Agreement may be amended or terminated by the
Bazaar Members without the consent of any of the Aladdin Parties, London Clubs,
the Company, or the holders of the Notes or the Warrants.
MANAGEMENT. Pursuant to the Bazaar LLC Operating Agreement, the business
and affairs of Bazaar shall be managed by a board of managers (the "Bazaar
Board"), consisting of four members (each, a "Bazaar Board Member"). Each Bazaar
Member has designated two Bazaar Board Members and may, from time to time,
change its designated representatives on the Bazaar Board. The number of
representatives on the Bazaar Board may be increased by the Bazaar Board so long
as each Bazaar Member maintains an equal number of representatives.
Notwithstanding the foregoing, if any Bazaar Member acquires or obtains a
greater than 50% interest in Bazaar, then such controlling Bazaar Member shall
have the right to designate a majority of the representatives on the Bazaar
Board, and the number of representatives selected by the minority Bazaar Member
shall be reduced proportionately.
MALL GUARANTY. Subject to certain conditions, THB's parent, TrizecHahn,
Bazaar Holdings, AHL and the Trust have agreed to jointly and severally assume
recourse liability and enter into the Mall Guaranty in favor of the Mall Lender
upon completion of the Mall Financing, until certain earnings and loan to value
targets have been met.
CONDITIONS PRECEDENT. The Bazaar LLC Operating Agreement contains certain
conditions precedent to the construction of the Mall Project, including that the
Bazaar Members have closed on the Mall Financing and that the Trust shall
provide a form of credit enhancement with respect to a portion of its
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obligations under the Mall Guaranty. See "Risk Factors--Completion of the Mall
Project and the Music Project."
TRANSFER RESTRICTIONS. The Bazaar LLC Operating Agreement contains
customary restrictions on the transfer of interests by Bazaar Members. In
particular, no Bazaar Member may transfer its interests to a Prohibited
Transferee without the prior consent of the other Bazaar Members.
The term "Prohibited Transferee" includes: (a) any owner, operator or
manager of any resort hotel located in Clark County, Nevada, (b) any shopping
center owner, manager and/or developer if THB will continue to be a Bazaar
Member following the transfer, (c) any person or entity primarily engaged in the
business of owning or operating a casino or other similar type of gambling
facility, (d) any person who has been found unsuitable or has withdrawn an
application to be found suitable by the Nevada Gaming Authorities, or (e) FOCUS
2000, Inc., a Nevada corporation, or the then current owner or lessee of the
real property located at the northeast corner of the Strip and Harmon Avenue, in
Las Vegas, Nevada.
MARKETING AND SALE OF THE MALL PROJECT. Commencing on the fifth anniversary
of the opening of the Mall Project and continuing for five years, any Bazaar
Member (the "Selling Member") holding a 50% or greater interest in Bazaar may
cause Bazaar to offer the Mall Project for sale on the open market by delivering
written notice to the other Bazaar Member (the "Non-Selling Member"). If any
offer is received that the Selling Member desires to accept, the Selling Member
must give written notice specifying all terms of the proposed sale to the
Non-Selling Member, who shall have 30 days to elect to purchase the entire
interest at the terms specified in the notice.
TERM. Bazaar will continue to operate as a limited liability company until
December 31, 2099, unless earlier dissolved or extended by unanimous agreement
of the Bazaar Members.
MALL FINANCING
Bazaar has entered into a commitment letter with a syndicate of financial
institutions (the "Mall Lenders") and Fleet National Bank, as Administrative
Agent ("Mall Agent") for a credit facility (the "Mall Financing"), whereby the
Mall Lenders will agree to lend up to $194.0 million to Bazaar to finance the
Mall Project. The proceeds from the Mall Financing will be used for the
construction of the themed Desert Passage, expected to contain approximately
462,000 square feet of retail space, and the approximately 4,800-space Carpark.
The Mall Project is expected to open in the first quarter of the year 2000, as
such date may be extended for force majeure events.
TERM. The Commitment Letter provides that the Mall Financing shall mature
five years from its closing. Bazaar shall have two one-year extension options if
certain conditions are satisfied and at the end of the initial five year term,
any unfunded commitment amount will be automatically cancelled.
AMORTIZATION AND PREPAYMENT. The Commitment Letter provides that the Mall
Financing will be interest-only during the initial term. During the extension
terms, Bazaar will be required to amortize principal based on 25-year (during
the first extension term) and 24-year (during the second extension term)
mortgage-style amortization and an interest rate derived based on the then
prevailing 10 year Treasury rate plus 150 bps.
FEES. Bazaar will be required to pay a fee of 10 bps per annum on the
unfunded loan amount. Such fee shall be computed on an actual/360-day basis and
shall be payable quarterly in arrears from and after the closing.
SECURITY. The loan will be secured by a deed of trust, assignment of leases
and rents and security agreement which shall be a first lien on Bazaar's
interest in the premises on which the Mall Project is built and the Mall Project
itself.
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COVENANTS. The Mall Financing will contain a project financial covenant
based on loan to value and customary affirmative and negative covenants typical
for this type of transaction.
EVENTS OF DEFAULT. The Commitment Letter provides that all customary events
of default for similar loan transactions, consistent with the following, shall
constitute events of default under the loan documents, including: (i) (a)
insolvency or bankruptcy of the Borrower or TrizecHahn, (b) breach of TrizecHahn
guarantor covenants or (c) judgements against TrizecHahn in excess of $25.0
million individually or in the aggregate (which are not discharged or appealed
within 60 days) and (ii) failure to pay debt service within five days after due.
CONDITIONS PRECEDENT. The Commitment Letter provides that the Mall Agent's
obligation to make the initial advance of the Mall Financing is subject to the
satisfaction of certain conditions, including the following: (i) a minimum of
25% of total project costs shall be contributed as up-front equity prior to
funding of the loan. Equity must include a minimum of $30.0 million in the form
of cash invested in the Mall Project; (ii) the Mall Guaranty to be provided by
TrizecHahn, Bazaar Holdings, AHL and the Trust shall be in full force and
effect; (iii) the proceeds of the cash equity contribution from London Clubs and
Holdings shall have been expended and the land contributions shall have been
made; (iv) construction financing in the amount of approximately $410.0 million
for the Aladdin shall have closed and funding thereof shall have commenced; and
(v) the Bank Lenders shall have approved the commitment for FF&E Financing for
the Aladdin of approximately $80.0 million.
MUSIC PROJECT MEMORANDUM OF UNDERSTANDING
The Company and Planet Hollywood have entered into a Memorandum of
Understanding and Letter of Intent, dated as of September 2, 1997, as amended by
a letter agreement dated as of October 15, 1997 (as so amended, the "Music
Project Memorandum of Understanding") in connection with the formation of a
joint venture between subsidiaries of the Company and Planet Hollywood to own,
develop and operate the Music Project. The Music Project Memorandum of
Understanding is intended to be a binding agreement (subject to certain limited
conditions) with respect to certain matters regarding the formation and
operation of Aladdin Music, however the parties have agreed to use their best
efforts promptly to complete and execute all agreements and other documents that
may be reasonably necessary to carry out the provisions of the Music Project
Memorandum of Understanding. The Company anticipates that such agreements will
include the following-described agreements, although the terms described below
are subject to further revision and may be modified by the Company and Planet
Hollywood prior to the execution of definitive documentation.
ALADDIN MUSIC OPERATING AGREEMENT. It is expected that AMH and a subsidiary
of Planet Hollywood (the "Music Project Members") will enter into an operating
agreement (the "Aladdin Music Operating Agreement") to govern the operations of
Aladdin Music. The Company has formed AMH, which it anticipates will hold (on a
fully diluted basis through shares and warrants) a 50% member interest in
Aladdin Music. Prior to the exercise of its warrants (the "Music Project
Warrants"), AMH will own a 49% preferred membership interest ("Music Preferred
Shares") and a 49% common membership interest ("Music Common Shares") in Aladdin
Music, however, exercise of the Music Project Warrants will increase AMH's
percentage interest in Aladdin Music to 50%. Planet Hollywood, through a
subsidiary (the "Planet Hollywood Member"), will initially hold the remaining
interests in Aladdin Music.
CAPITAL CONTRIBUTIONS. Through AMH, the Company is expected to contribute
to Aladdin Music (i) a ground lease, at nominal rent, of the approximately 4.75
acre parcel of land for the Music Project (including a right to acquire the fee
interest in such land upon the receipt by the Company of necessary permits and
subdivision approvals) and (ii) approximately $21.25 million in cash. The
contribution value of the ground lease will be approximately $20.0 million. The
Planet Hollywood Member will contribute cash to Aladdin Music in the amount of
approximately $41.25 million. The contributions of the Music Project Members
will be made immediately prior to, or concurrently with, the closing of
construction financing
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with respect to the Music Project, however certain pre-development costs of
Aladdin Music incurred with respect to the Music Project will be contributed to
Aladdin Music prior to such date. These predevelopment costs include design,
architecture and organization costs.
SHARES. Aladdin Music is expected to have two classes of shares (which
represent units of membership interests in Aladdin Music): Music Common Shares
and Music Preferred Shares (collectively, "Music Project Shares"). The
above-described contributions of the Music Project Members will be deemed
contributions in respect of Music Preferred Shares. Except with respect to
distributions to cover tax liability of Music Project Members (or, if any Music
Project Member is a pass-through entity, its equity interest holders) arising
from their interest in Music, the Music Preferred Shares will have distribution,
redemption and liquidation preferences over all Music Common Shares. Rights to
allocations to the capital account and distributions in respect of the Music
Preferred Shares will cumulate (but not compound) quarterly at the rate of 12%
per annum on the capital account balance in respect thereof. Preferred
distributions to the Planet Hollywood Member will have priority of payment over
preferred distributions to AMH. In addition, to the extent that there is
insufficient cash available for distribution to make such preferred
distributions, the amounts which are not distributed will accrue (but not
compound) for the benefit of the party entitled thereto. Distributions of such
accrued amounts to the Planet Hollywood Member will have priority over
distributions to AMH.
MANAGEMENT AND DAY-TO-DAY OPERATIONS. Management of Aladdin Music will be
the responsibility of a board of managers (the "Music Project Board"), comprised
initially of four members designated by the Planet Hollywood Member and three
members designated by AMH, until AMH exercises its warrants for the acquisition
of additional Music Project Shares, at which time the Music Project Board will
be comprised of four representatives each of AMH and the Planet Hollywood
Member. Major decisions of the Music Project Board will require the vote of a
supermajority of the board members. All decisions other than such major
decisions will be delegated to an operating committee comprised of two
representatives each of AMH and the Planet Hollywood Member (the "Operating
Committee"). The development of the Music Project and renovation of the Theater
will be delegated to the Company under the Music Project Development Agreement.
Day-to-day management and operation of the Music Project and the Theater will be
delegated to the Company under the Music Project Management Agreement.
TRANSFERS OF SHARES. Transfers of Music Project Shares will only be
permitted:
(i) to affiliates of Music Project Members or persons approved by a
majority of the interests held by Music Project Members; and
(ii) to persons other than certain prohibited transferees after giving
other Music Project Members a right of first negotiation for the acquisition
of such Shares.
LIABILITY, EXCULPATION AND INDEMNIFICATION. The Aladdin Music Operating
Agreement will contain provisions relieving the Music Project Members, officers,
employees and Music ProjectBoard Members and Operating Committee members from
certain liability, fiduciary duties and conflicts and will also provide for
various indemnities to such persons in respect of payment of expenses and errors
and omissions insurance.
GAMING MATTERS. Capital contributions, admission of new Music Project
Members, transfers of shares and payment of distributions by Aladdin Music will
be subject to receipt of Nevada Gaming Approvals. Music Project Members and
their affiliates, directors and employees will cooperate to obtain Gaming
Approvals from the Nevada Gaming Authorities, as necessary. If Nevada gaming
problems arise prior to a finding of unsuitability by the Nevada Gaming
Authorities, the Music Project Member causing such problem (or whose director,
officer or affiliate caused such problem) shall cooperate to remedy it and, if
not remedied, may be forced to sell its Music Project Shares to Aladdin Music or
its designee at fair market value.
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TERM. Aladdin Music shall continue until January 24, 2097, or such other
time as agreed in writing by all Members.
THE MUSIC PROJECT DEVELOPMENT AGREEMENT. Aladdin Music shall contract with
the Company for the development of the Music Project and the Theater renovation
pursuant to a development agreement (the "Music Project Development Agreement")
on terms, and in form and substance, satisfactory to Aladdin Music and the
Company. Pursuant to the Music Project Development Agreement, the Company will
agree to provide services with respect to such development and renovation,
including (a) the selection of contractors, subcontractors and the professional
team including architects, engineers, surveyors, designers, decorators and other
technical and professional consultants; (b) the negotiation on behalf of Aladdin
Music of the agreements under which the contractors, subcontractors and the
professional team are to be retained by Aladdin Music; (c) the supervision of
the preparation of preliminary and final plans, including landscaping, interior
design and graphics; and (d) the preparation of preliminary cost estimates and
projections of cash flow requirements covering the development costs during the
Development Period, and the preparation and updating from time to time of the
development budget for approval by Aladdin Music.
COMPENSATION UNDER MUSIC PROJECT DEVELOPMENT AGREEMENT. The Company will be
reimbursed for its costs and expenses in connection with its activities under
the Music Project Development Agreement.
TERMINATION. Each of the Company and Aladdin Music are anticipated to have
certain limited termination rights with respect to the Music Project Development
Agreement. Any termination of the Music Project Development Agreement will
entitle the Company to terminate the Music Project Management Agreement.
INDEMNIFICATION. Aladdin Music shall indemnify and hold the Company
harmless from claims arising out of the performance by Company of services under
the Music Project Development Agreement. The Company shall indemnify and hold
Aladdin Music harmless from and against any and all claims arising from or in
connection with the Company's gross negligence or willful misconduct.
MUSIC PROJECT MANAGEMENT AGREEMENT. Aladdin Music intends to contract with
the Company for the day-to-day management and operations of the Music Project
and the Theater and certain promotional services, pursuant to a management
agreement in form and substance satisfactory to Aladdin Music and the Company
(the "Music Project Management Agreement"). The terms of the Music Project
Management Agreement are expected to be on terms at least as favorable as those
which would be available from an independent third party vendor.
COMPENSATION UNDER MUSIC PROJECT MANAGEMENT AGREEMENT. The Music Project
Management Agreement will provide for the provision of management services by
the Company for the Music Project and the Theater in exchange for a base
management fee (the "Base Management Fee"), payable quarterly, equal to 1.50% of
the net revenue from the Music Project and the Theater and for an additional
management fee (the "Incentive Management Fee"), payable quarterly, equal to 6%
of the Management Excess Net Revenue (which is the amount obtained by dividing
(i) the amount of quarterly Adjusted Music EBITDA in excess of the Adjusted
Management EBITDA Threshold by (ii) Profit Margin). "Adjusted Music EBITDA"
means for any period Aladdin Music's earnings before (i) deductions for
interest, taxes, depreciation and amortization, (ii) payment of the Incentive
Management Fee, the Incentive Marketing Fee, and (iii) payment of leases for
furniture, fixtures or equipment. "Profit Margin" means for any quarter,
quarterly Adjusted EBITDA divided by quarterly Net Revenue. "Incentive Marketing
Fee" means an additional marketing fee, payable quarterly from Aladdin Music to
Planet Hollywood pursuant to the Marketing and Consulting Agreement (as defined
herein) between Aladdin Music and Planet Hollywood, equal to 6% of the Marketing
and Consulting Excess Net Revenue. "Marketing and Consulting Excess Net Revenue"
means the amount obtained by dividing (i) the amount of quarterly Adjusted
EBITDA in excess of the Adjusted Marketing EBITDA Threshold by (ii) the Profit
Margin. The "Adjusted Management EBITDA Threshold" means quarterly Adjusted
EBITDA of $10.0 million. The "Adjusted Marketing
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<PAGE>
EBITDA Threshold" means quarterly Adjusted EBITDA of $8.75 million. The
Incentive Management Fee shall at all times (including, without limitation, if
the Adjusted Management EBITDA Threshold is met or if there is sufficient cash
available for distribution) be subordinate to debt service. To the extent that
the Adjusted Management EBITDA Threshold is met but there is insufficient cash
available for distribution for the payment of any or all of such Incentive
Management Fee and the payment of the Incentive Marketing Fee, or if Aladdin
Music is otherwise restricted by a lender from paying such fees, the Incentive
Management Fee shall be subordinate to the payment of the Incentive Marketing
Fee. Incentive Management Fees which are due but not paid shall accrue (together
with interest thereon) for the benefit of the Company. The Incentive Management
Fee shall not be payable to the Company for any quarter in which the Adjusted
Management EBITDA Threshold is not achieved. In addition, pursuant to the Music
Project Management Agreement, the Company shall provide certain services to the
Music Project and the Theater, including, without limitation, accounting and
financial services, MIS, general management and investor relation services,
promotional services and other agreed upon services in the ordinary course of
business by the Company for the Music Project and the Theater in exchange for
reimbursement of the fully allocated cost of such services.
TERM. The term of the Music Project Management Agreement shall be thirty
(30) years, subject to an option on the part of the Company to extend the term
for three successive ten year periods.
TERMINATION FEE. In the event that the Music Project Management Agreement
is terminated by Aladdin Music prior to the expiration of its term (including
extension options) and prior to the time that the Music Project Warrants may be
exercised, then (except under certain circumstances) the Company shall be paid a
termination fee of $50.0 million and AMH shall have the right to put its
investments in Aladdin Music to Planet Hollywood for an amount equal to such
investment's fair market value. Once AMH is able to exercise the Music Project
Warrant, all provisions relating to the termination fee and fair market purchase
option shall terminate.
THE MARKETING AND CONSULTING AGREEMENT. Aladdin Music is expected to
contract with Planet Hollywood and an affiliate of Planet Hollywood for the
provision of certain marketing and consulting services to be provided to the
Music Project and for the license to the Aladdin Music of all rights to the
trademarks, tradenames and related agreements which are necessary or desirable
to operate and maintain a "music-themed" hotel and restaurant on the Music
Project land, pursuant to a marketing and consulting agreement in form and
substance satisfactory to Planet Hollywood and Aladdin Music (the "Marketing and
Consulting Agreement"). The Marketing and Consulting Agreement is expected to
provide for the provision of marketing and consulting services by Planet
Hollywood (and/or its affiliates) for the Music Project in exchange for a base
fee (the "Base Marketing Fee"), payable quarterly, equal to 2.00% of the Music
Project's quarterly Net Revenue and for an additional marketing fee (the
"Incentive Marketing Fee"), payable quarterly, equal to 6% of the Marketing and
Consulting Excess Net Revenue. The Incentive Marketing Fee shall not be payable
for any quarter in which the Adjusted Marketing EBITDA Threshold is not
achieved. In addition, to the extent that the Adjusted Marketing EBITDA
Threshold is met but there is insufficient cash available for distribution for
the payment of any or all of such fees, or if Aladdin Music is otherwise
restricted by a lender from paying the Incentive Marketing Fee, the Incentive
Marketing Fee shall accrue (together with interest thereon) for the benefit of
Planet Hollywood. In addition to the Base Marketing Fee and the Incentive
Marketing Fee, the Marketing and Consulting Agreement shall provide that Planet
Hollywood shall be reimbursed, on a quarterly basis, for its costs and expenses
under the Marketing and Consulting Agreement in an amount equal to 0.5% of
quarterly Net Revenue, without supporting documentation as well as for certain
other approved expenses. The Marketing and Consulting Agreement is further
expected to provide that Planet Hollywood shall be restricted from allowing the
use or operation of similar "music concept" themed restaurants at any location
in Clark County, Nevada, other than at the Music Project.
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<PAGE>
THE GROUND LEASE. The Company is expected to assign its ground lease (the
"Music Project Lease") of the site designated for the Music Project to AMH and
AMH shall assign the Music Project Lease to Aladdin Music. The Music Project
Lease shall be for nominal rent and shall include the right of Aladdin Music to
acquire fee title to the Music Project land upon completion of the division of
the Project Site into separate legal parcels. Pursuant to the Music Project
Lease, Aladdin Music shall be required to cooperate with such division and to
fund its pro rata share of the costs thereof, based upon the ratio that the
acreage of the Music Project land bears to the total acreage of the Project
Site.
THE THEATER LEASE. The Company is expected to enter into a lease agreement
(the "Theater Lease") with respect to the Theater pursuant to which, among other
matters, (i) Aladdin Music shall lease the Theater from the Company for a period
of at least thirty (30) years on a "triple-net" basis, for nominal rent, (ii)
the Company shall have certain rights with respect to the lease-back of the
Theater, (iii) certain provisions shall be made relating to the promotional and
security services for the Theater, (iv) Aladdin Music shall agree to renovate
the Theater prior to the opening of the Aladdin and to maintain the Theater in a
"first class" condition during the term of the Theater Lease.
MUSIC PROJECT FINANCING
Prior to the commencement of the development of the Music Project, Aladdin
Music is expected to enter into a commitment letter for a credit facility with a
syndicate of lenders whereby the lenders will agree to finance the construction
of the Music Project. Currently, Aladdin Music is considering several proposals
for such financing.
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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
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<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.
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<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.
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<PAGE>
LEGAL MATTERS
Certain legal matters in connection with the registration of Warrants and
Warrant Shares pursuant to this Prospectus will be passed upon for the Issuer by
Schreck Morris, Las Vegas, Nevada. Certain matters with respect to tax issues
will be passed upon by Skadden, Arps, Slate, Meagher & Flom LLP.
EXPERTS
The balance sheets of the Issuer, Holdings, Capital and the Company as of
December 31, 1997 and the statements of changes in equity and cash flows of each
such entity for the period from their inception to December 31, 1997, together
with the notes thereto, appearing in this Prospectus, have been audited by
Arthur Andersen LLP, independent public accountants, as set forth in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
The financial statements of London Clubs as of March 30, 1997 and March 24,
1996 and for the 53 week period ended March 30, 1997, and the 52 week period
ended March 24, 1996 included in this Prospectus have been so included in
reliance on the report of Price Waterhouse, independent accountants, given on
the authority of said firm as experts in accounting and auditing.
With respect to the unaudited consolidated financial information of London
Clubs for the 26 week periods ended September 28, 1997 and September 22, 1996
included in this Prospectus, Price Waterhouse reported that they have applied
limited procedures in accordance with professional standards for a review of
such information. However, their separate report dated December 5, 1997 states
that they did not audit and they do not express an opinion on that unaudited
consolidated financial information. Price Waterhouse has not carried out any
significant or additional audit tests beyond those which would have been
necessary if their report had not been included. Accordingly, the degree of
reliance on their report on such information should be restricted in light of
the limited nature of the review procedures applied. Price Waterhouse is not
subject to the liability provisions of Section 11 of the Securities Act of 1933
for their report on the unaudited consolidated financial information because
that report is not a "report" or a "part" of the registration statement prepared
or certified by Price Waterhouse within the meaning of Sections 7 and 11 of the
Act.
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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
Aladdin Capital Corp.
Report of Independent Public Accountants................................................................. F-12
Balance Sheet............................................................................................ F-13
Statement of Stockholders' Equity........................................................................ F-14
Statements of Cash Flows................................................................................. F-15
Notes to Financial Statements............................................................................ F-16
Aladdin Gaming, LLC
Report of Independent Public Accountants................................................................. F-19
Balance Sheet............................................................................................ F-20
Statement of Members' Equity............................................................................. F-21
Statement of Cash Flows.................................................................................. F-22
Notes to Financial Statements............................................................................ F-23
Aladdin Gaming Enterprises, Inc.
Report of Independent Public Accountants................................................................. F-26
Balance Sheet............................................................................................ F-27
Statement of Stockholders' Equity........................................................................ F-28
Statement of Cash Flows.................................................................................. F-29
Notes to Financial Statements............................................................................ F-30
</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 CAPITAL CORP.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1997
F-11
<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-12
<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-13
<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-14
<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-15
<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-16
<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-17
<PAGE>
ALADDIN GAMING, LLC
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1997
F-18
<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-19
<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-20
<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-21
<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-22
<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-23
<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 on Gaming Holdings in the Company. The
Note Construction Disbursement Account is comprised of approximately $35 million
remaining proceeds from the Offering, after the application of the net proceeds
to repay certain previously existing indebtedness and certain fees and expenses.
The Indenture to the Notes contains certain covenants that (subject to
certain exceptions) restrict the ability of the Issuers and certain of their
subsidiaries to, among other things: (i) make restricted payments; (ii) incur
additional indebtedness and issue preferred stock; (iii) incur liens; (iv) pay
dividends or make other distributions; (v) enter into mergers or consolidations;
(vi) enter into certain transactions with affiliates or (vii) enter into new
lines of business.
Equity Contributions
Gaming Holdings contributed land appraised at $150.0 million, approximately
$42 million in cash from a contribution from London Clubs Nevada Inc. ("LCNI")
and $7.0 million of predevelopment costs in exchange for 100% of the common
membership interests in the Company. Gaming Holdings also contributed $115
million in cash, consisting of the net proceeds of the sale of the Units and
approximately $8 million from LCNI to the Company in exchange for 100% of the
Series A Preferred Interests.
Bank Indebtedness
On February 26, 1998, the Company entered into the bank credit facility for
$410 million as discussed above in Note 3.
F-24
<PAGE>
ALADDIN GAMING ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1997
F-25
<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-26
<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-27
<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-28
<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-29
<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-30
<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-31
<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.................................... 14
Use of Proceeds................................. 29
Capitalization.................................. 31
Dividends and Distributions..................... 33
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 34
Business........................................ 37
Regulation and Licensing........................ 57
Management...................................... 62
Controlling Stockholders........................ 68
Certain Transactions............................ 72
Security Ownership of Certain Beneficial
Owners........................................ 74
Description of Capital Stock.................... 77
Description of the Warrants..................... 79
Description of Noteholder Completion Guaranty
and Disbursement Agreement.................... 82
Description of Certain Indebtedness and Other
Obligations................................... 88
Certain Material Agreements..................... 97
Certain United States Federal Income Tax
Considerations................................ 122
Plan of Distribution............................ 124
Legal Matters................................... 125
Experts......................................... 125
Index to Historical Financial Information of the
Aladdin Parties and the Company............... F-1
Annex A
Certain Historical Consolidated Financial
Information of London Clubs................. A-1
</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>
3.1 Articles of Incorporation of Aladdin Gaming Enterprises, Inc. ("Enterprises").
3.2 Amendment No. 1 to Articles of Incorporation of Enterprises.
3.3 Articles of Organization of Aladdin Gaming Holdings, LLC ("Holdings").
3.4 Articles of Incorporation of Aladdin Capital Corp. ("Capital").
3.5 Articles of Organization of Aladdin Gaming, LLC (the "Company").
3.6 Bylaws of Enterprises.
* 3.7 Operating Agreement of Holdings.
3.8 Bylaws of Capital.
3.9 Operating Agreement of the Company.
4.1 Warrant Agreement, dated February 26, 1998, among Enterprises and State Street Bank and Trust Company,
as Warrant Agent (the "Warrant Agent").
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
4.2 Warrant Registration Rights Agreement dated February 26, 1998, among Enterprises and the Initial
Purchasers (as defined).
4.3 Equity Participation Agreement, dated February 26, 1998, among Sommer Enterprises, LLC, Enterprises,
London Clubs Nevada, Inc. ("LCNI") and the Trustee (as defined).
* 5.1 Opinion of Schreck Morris regarding legality of the securities being registered.
* 8.1 Opinion of Skadden, Arps, Slate, Meagher and Flom LLP regarding certain tax matters.
10.1 Indenture, dated February 26, 1998, among Holdings, Capital and State Street Bank and Trust Company, as
trustee (the "Trustee").
10.2 Note Registration Rights Agreement, dated February 26, 1998, among Holdings, Capital and the Initial
Purchasers.
* 10.3 Noteholder Completion Guaranty, dated February 26, 1998, among the Trust Under Article Sixth u/w/o
Sigmund Sommer, London Clubs International plc ("London Clubs"), Aladdin Bazaar Holdings, LLC and the
Trustee.
* 10.4 Disbursement Agreement, dated February 26, 1998, among Holdings, the Company, the Bank of Nova Scotia,
as Administrative Agent under the Bank Credit Facility, Disbursement Agent, and Securities Intermediary,
U.S. Bank National Association as Servicing Agent and the Trustee.
* 10.5 The LLC Interest Pledge and Security Agreement, dated February 26, 1998, between Holdings and the
Trustee.
* 10.6 The Holdings Collateral Account Agreement, dated February 26, 1998, between Holdings and the Trustee.
10.7 Subsidiary Guaranty, dated February 26, 1998, among subsidiaries of London Clubs and the Trustee.
10.8 Amended and Restated London Clubs Purchase Agreement, dated February 26, 1998, among LCNI, London Clubs,
Holdings, Aladdin Holdings, LLC, the Company, Sommer Enterprises, LLC and the Trust Under Article Sixth
u/w/o Sigmund Sommer.
10.9 Closing Schedules to Amended and Restated London Clubs Purchase Agreement.
10.10 Contribution Agreement, dated February 26, 1998, among the Trust Under Article Sixth u/w/o Sigmund
Sommer, Aladdin Holdings, LLC, Sommer Enterprises, LLC, London Clubs and LCNI.
10.11 Salle Privee Agreement, dated February 26, 1998, among the Company, LCNI and London Clubs.
* 10.12 Tax Indemnity Agreement, dated February 26, 1998, among the Trust Under Article Sixth u/w/o Sigmund
Sommer, Aladdin Holdings, LLC and LCNI.
* 10.13 Credit Agreement, dated February 26, 1998, among the Company, a syndicate of lenders (the "Bank
Lenders"), The Bank of Nova Scotia as Administrative Agent, Merrill Lynch Capital Corporation as
Syndication Agent and CIBC Oppenheimer Corp. as Documentation Agent.
* 10.14 Bank Completion Guaranty, dated February 26, 1998, among the Trust Under Article Sixth u/ w/o Sigmund
Sommer, London Clubs, Aladdin Bazaar Holdings, LLC and the Bank Lenders.
* 10.15 Keep-Well Agreement, dated February 26, 1998, among Aladdin Holdings, LLC, London Clubs and Aladdin
Bazaar Holdings, LLC.
10.16 Design/Build Contract, dated December 4, 1997, between the Company and Fluor Daniel, Inc.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
* 10.17 Amendment No. 1 to Design/Build Contract, dated January 21, 1998, between the Company and Fluor Daniel,
Inc.
* 10.18 Amendment No. 2 to Design/Build Contract, dated January 28, 1998, between the Company and Fluor Daniel,
Inc.
* 10.19 Fluor Guaranty, dated December 4, 1997, between the Company and Fluor Corporation.
* 10.20 Site Work, Development and Construction Agreement, dated February 26, 1998, among the Company, Aladdin
Bazaar, LLC and Aladdin Holdings, LLC.
* 10.21 Construction, Operation and Reciprocal Easement Agreement, dated February 26, 1998, among the Company,
Aladdin Bazaar, LLC and Aladdin Music Holdings, LLC.
* 10.22 Common Parking Area Use Agreement, dated February 26, 1998 between the Company and Aladdin Bazaar, LLC.
* 10.23 Music Project Lease, dated February 26, 1998, between the Company and Aladdin Music Holdings, LLC.
* 10.24 Mall Project Lease, dated February 26, 1998, between the Company and Aladdin Bazaar, LLC.
* 10.25 Deed of Trust, Assignment of Rents and Leases, Fixture Filing and Security Agreement, dated February 26,
1998, made by the Company to Stewart Title of Nevada, as trustee for the benefit of the Bank of Nova
Scotia.
10.26 Development Agreement, dated December 3, 1998, between the Company and Northwind Aladdin, LLC.
* 10.27 Energy Service Agreement, dated , 1998, between the Company and Northwind Aladdin, LLC.
10.28 Energy Lease, dated December 3, 1997, between the Company and Northwind Aladdin, LLC.
10.29 Unicom Guaranty, dated December 3, 1997, between Unicom Corporation and the Company.
10.30 Limited Liability Company Agreement of Aladdin Bazaar, LLC, dated September 3, 1997, between TH Bazaar
Centers Inc. and Aladdin Bazaar Holdings, LLC.
10.31 First Amendment to the Limited Liability Company Operating Agreement of Aladdin Bazaar, LLC, dated
October 16, 1997.
* 10.32 Music Project Memorandum of Understanding and Letter of Intent, dated September 2, 1997, between the
Company and Planet Hollywood International, Inc.
* 10.33 Amendment to Music Project Memorandum of Understanding and Letter of Intent, dated October 15, 1997,
between the Company and Planet Hollywood International, Inc.
10.34 GAI Contribution and Amendment Agreement, dated February 26, 1998, among the Company, Holdings and GAI,
LLC.
10.35 Goeglein Contribution and Amendment Agreement, dated February 26, 1998, among the Company, Holdings and
Richard J. Goeglein.
10.36 McKennon Contribution and Amendment Agreement, dated February 26, 1998, among the Company, Holdings and
James H. McKennon.
10.37 Klerk Contribution and Amendment Agreement, dated February 26, 1998, among the Company, Holdings and
Cornelius T. Klerk.
10.38 Galati Contribution and Amendment Agreement, dated February 26, 1998, among the Company, Holdings, and
Lee A. Galati.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
10.39 Rueda Contribution and Amendment Agreement, dated February 26, 1998, among the Company, Holdings and
Jose A. Rueda.
* 10.40 GAI Consulting Agreement, dated July 1, 1997, between GAI, LLC and the Company.
* 10.41 Employment and Consulting Agreement, dated July 1, 1997, between the Company and Richard J. Goeglein.
* 10.42 Employment Agreement, dated July 28, 1997, between the Company and James H. McKennon.
* 10.43 Employment Agrement, dated July 28, 1997, between the Company and Cornelius T. Klerk.
* 10.44 Employment Agreement, dated August 19, 1997, between the Company and Lee A. Galati.
* 10.45 Employment Agreement, dated July 1, 1997, between the Company and Jose A. Rueda.
10.46 FF&E Commitment Letter, dated January 23, 1998, between the Company and General Electric Capital
Corporation.
* 10.47 Mall Commitment Letter, dated December 29, 1997, between Aladdin Bazaar, LLC and Fleet National Bank, as
Administrative Agent.
10.48 Purchase Agreement, dated February 18, 1998, among Enterprises, Holdings, Capital, Aladdin Holdings,
LLC, the Trust Under Article Sixth u/w/o Sigmund Sommer, London Clubs and Merrill Lynch, Pierce, Fenner
& Smith Incorporated, Credit Suisse First Boston Corporation, CIBC Oppenheimer Corp. and Scotia Capital
Markets (USA) Inc. (the "Initial Purchasers").
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Price Waterhouse.
* 23.3 Consent of Schreck Morris (included in exhibit 5.1).
* 23.4 Consent of Skadden, Arps, Slate, Meagher & Flom, LLP (included in exhibit 8.1).
23.5 Awareness Letter from Price Waterhouse.
</TABLE>
- ------------------------
* To be filed by amendment.
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 Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Las Vegas, State of Nevada
on April 8, 1998.
<TABLE>
<S> <C> <C>
ALADDIN GAMING ENTERPRISES, INC.
By: /s/ JACK SOMMER
-----------------------------------------
Jack Sommer
PRESIDENT/DIRECTOR
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
/s/ JACK SOMMER
- ------------------------------ President/Director April 8, 1998
Jack Sommer
/s/ RONALD DICTROW
- ------------------------------ Secretary/Director April 8, 1998
Ronald Dictrow
/s/ CORNELIUS T. KLERK
- ------------------------------ Treasurer April 8, 1998
Cornelius T. Klerk
II-8
<PAGE>
ARTICLES OF INCORPORATION
OF
ALADDIN GAMING ENTERPRISES, INC.
The undersigned, for the purpose of forming a corporation pursuant to and
by virtue of Chapter 78 of the Nevada Revised Statutes, hereby adopts, executes
and acknowledges the following Articles of Incorporation.
ARTICLE I
NAME
The name of the corporation shall be ALADDIN GAMING ENTERPRISES, INC.
ARTICLE II
REGISTERED OFFICE
The name of the initial resident agent and the street address of the
initial registered office in the State of Nevada where process may be served
upon the corporation is Schreck Morris, 300 South Fourth Street, Suite 1200, Las
Vegas, Clark County, Nevada 89101. The corporation may, from time to time, in
the manner provided by law, change the resident agent and the registered office
within the State of Nevada. The corporation may also maintain an office or
offices for the conduct of its business, either within or without the State of
Nevada.
ARTICLE III
CAPITAL STOCK
Section 1. AUTHORIZED SHARES. The aggregate number of shares which the
corporation shall have authority to issue shall consist of two thousand five
hundred (2,500) shares of common stock without par value.
Section 2. CONSIDERATION FOR SHARES. The common stock authorized by
Section 1 of this Article shall be issued for such consideration as shall be
fixed, from time to time, by the Board of Directors.
Section 3. ASSESSMENT OF STOCK. The capital stock of this corporation,
after the amount of the subscription price has been fully paid in, shall not be
assessable for any purpose, and no stock issued as fully paid shall ever be
assessable or assessed. No stockholder of the corporation is individually
liable for the debts or liabilities of the corporation.
Section 4. CUMULATIVE VOTING FOR DIRECTORS. No stockholder of the
corporation shall be entitled to cumulative voting of his shares for the
election of directors.
<PAGE>
Section 5. PREEMPTIVE RIGHTS. No stockholder of the corporation shall
have any preemptive rights.
ARTICLE IV
DIRECTORS AND OFFICERS
Section 1. NUMBER OF DIRECTORS. The members of the governing board of
the corporation are styled as directors. The Board of Directors of the
corporation shall consist of at least one (1) individual who shall be elected in
such manner as shall be provided in the bylaws of the corporation. The number
of directors may be changed from time to time in such manner as shall be
provided in the bylaws of the corporation.
Section 2. INITIAL DIRECTORS. The name and post office box or street
address of each of the directors constituting the first Board of Directors,
which be one (1) in number, is:
NAME ADDRESS
Jack Sommer 2810 W. Charleston Blvd., Ste. F-58
Las Vegas, Nevada 89102
Section 3. LIMITATION OF PERSONAL LIABILITY. No director or officer of
the corporation shall be personally liable to the corporation or its
stockholders for damages for breach of fiduciary duty as a director or officer;
provided, however, that the foregoing provision does not eliminate or limit the
liability of a director or officer of the corporation for:
(a) Acts or omissions which involve intentional misconduct, fraud or
a knowing violation of law; or
(b) The payment of distributions in violation of Nevada Revised
Statutes 78.300.
Section 4. PAYMENT OF EXPENSES. In addition to any other rights of
indemnification permitted by the law of the State of Nevada as may be provided
for by the corporation in its bylaws or by agreement, the expenses of officers
and directors incurred in defending a civil or criminal action, suit or
proceeding, involving alleged acts or omissions of such officer or director in
his or her capacity as an officer or director of the corporation, must be paid,
by the corporation or through insurance purchased and maintained by the
corporation or through other financial arrangements made by the corporation, as
they are incurred and in advance of the final disposition of the action, suit or
proceeding, upon receipt of an undertaking by or on behalf of the director or
officer to repay the amount if it is ultimately determined by a court of
competent jurisdiction that he or she is not entitled to be indemnified by the
corporation.
Section 5. REPEAL AND CONFLICTS. Any repeal or modification of
Sections 3 or 4
<PAGE>
above approved by the stockholders of the corporation shall be prospective only.
In the event of any conflict between Sections 3 or 4 of this Article and any
other Article of the corporation's Articles of Incorporation, the terms and
provisions of Sections 3 or 4 of this Article shall control.
ARTICLE V
INCORPORATOR
The name and post office box or street address of the incorporator signing
these Articles of Incorporation is:
NAME ADDRESS
Ellen L. Schulhofer, Esq. 300 S. Fourth Street, Ste. 1200
Las Vegas, Nevada 89101
IN WITNESS WHEREOF, I have executed these Articles of Incorporation this
3rd day of December, 1997.
/s/ Ellen L. Schulhofer
---------------------------------------------
Ellen L. Schulhofer, Esq.
State of Nevada )
) ss.
County of Clark )
This instrument was acknowledged before me on December 3, 1997, by Ellen L.
Schulhofer as Incorporator of Aladdin Gaming Enterprises, Inc.
---------------------------------------------
Notary Public
<PAGE>
CERTIFICATE OF AMENDMENT OF
ARTICLES OF INCORPORATION
OF
ALADDIN GAMING ENTERPRISES, INC.
THIS IS TO CERTIFY that on the 17th day of February, 1998, Aladdin Gaming
Enterprises, Inc., a Nevada corporation (the "Corporation"), pursuant to the
unanimous written consent of the Board of Directors of the Corporation, adopted
the following resolutions in accordance with Nevada Revised Statutes Sections
78.385 and 78.390:
RESOLVED, that the Corporation's Articles of Incorporation
be amended so as to replace Article III, which shall read in
its entirety as follows:
"ARTICLE III
CAPITAL STOCK
Section 1. AUTHORIZED SHARES. The aggregate number of
shares which the corporation shall have authority to issue
shall consist of ten million (10,000,000) shares of common
stock without par value. Such common stock shall be divided
into two classes, Class A voting common stock which shall
have two million (2,000,000) shares authorized for issuance
(the "Class A Stock"), and Class B non-voting common stock
which shall have eight million (8,000,000) shares authorized
for issuance (the "Class B Stock").
Section 2. VOTING RIGHTS. The holders of Class A Stock
shall be entitled to one vote for each share of Class A
Stock held on all matters to be voted on by the stockholders
of the corporation. Except as otherwise expressly required
by law, the holders of Class B Stock shall have no right to
vote on any matter to be voted on by the stockholders of the
corporation (including, without limitation, any election or
removal of the directors of the Corporation) and the Class B
Stock shall not be included in determining the number of
shares voting or entitled to vote on such matters.
Section 3. OTHER RIGHTS. Except as set forth in Section
2 of this Article, holders of Class A Stock and holders of
Class B Stock shall have the same rights and privileges and
shall rank equally, share ratably and be identical in all
respects as to all matters, including rights to dividends
<PAGE>
and rights in liquidation.
Section 4. CONSIDERATION FOR SHARES. The common stock
authorized by Section 1 of this Article shall be issued for
such consideration as shall be fixed, from time to time, by
the Board of Directors.
Section 5. ASSESSMENT OF STOCK. The capital stock of
this corporation, after the amount of the subscription price
has been fully paid in, shall not be assessable for any
purpose, and no stock issued as fully paid shall ever be
assessable or assessed. No stockholder of the corporation
is individually liable for the debts or liabilities of the
corporation.
Section 6. CUMULATIVE VOTING FOR DIRECTORS. No
stockholder of the corporation shall be entitled to
cumulative voting of such stockholder's shares for the
election of directors.
Section 7. PREEMPTIVE RIGHTS. No stockholder of the
corporation shall have any preemptive rights.
Section 8. SUBDIVISION AND COMBINATION OF SHARES. If the
corporation in any manner subdivides or combines the
outstanding shares of one class of common stock, the
outstanding shares of the other class of common stock shall
be likewise subdivided or combined."
We further hereby certify that the written consent of the sole stockholder
of the Corporation was secured immediately subsequent to the written consent of
the Board of Directors approving the amendment of the Articles of Incorporation
as provided in the foregoing resolution.
DATED this 17th day of February, 1998.
/s/ Jack Sommer
--------------------------------
Jack Sommer, President
/s/ Ronald Dictrow
--------------------------------
Ronald Dictrow, Secretary
<PAGE>
State of Nevada )
) ss.
County of Clark )
This instrument was acknowledged before me on February , 1998 by
Jack Sommer as President of Aladdin Gaming Enterprises, Inc.
_________________________________
(Signature of notarial officer)
State of New York )
) ss.
County of _________ )
This instrument was acknowledged before me on February , 1998 by
Ronald Dictrow as Secretary of Aladdin Gaming Enterprises, Inc.
_________________________________
(Signature of notarial officer)
<PAGE>
ARTICLES OF ORGANIZATION
OF
ALADDIN GAMING HOLDINGS, LLC
The undersigned, for the purpose of forming a limited-liability company
(the "company"), pursuant to and by virtue of Chapter 86 of Nevada Revised
Statutes, hereby adopts, executes and acknowledges the following articles of
organization.
ARTICLE I
NAME
The name of the company is Aladdin Gaming Holdings, LLC.
ARTICLE II
REGISTERED OFFICE AND RESIDENT AGENT
The name of the initial resident agent and the initial address of the
registered office where process may be served in the State of Nevada is Schreck
Morris, 300 S. Fourth Street, Suite 1200, Las Vegas, Nevada 89101. The company
may, from time to time, in the manner provided by Nevada law, change the
resident agent and the registered office within the State of Nevada.
ARTICLE III
ORGANIZER
The name and post office box or street address of the organizer signing
these articles of organization is:
NAME ADDRESS
Ellen L. Schulhofer 300 S. Fourth Street, Suite 1200
Las Vegas, Nevada 89101
ARTICLE IV
INDEMNIFICATION AND PAYMENT OF EXPENSES
Section 6.1 INDEMNIFICATION AND PAYMENT OF EXPENSES. In addition to any
other rights of indemnification permitted by the laws of the State of Nevada as
may be provided for by the company in its operating agreement or by any other
agreement, the expenses of members and managers incurred in defending a civil or
criminal action, suit or proceeding, involving alleged acts or omissions of such
member or manager in his or her capacity as a member or manager of the company,
must be paid by the company, or through insurance purchased and maintained by
the company or through other
<PAGE>
financial arrangements made by the company as permitted by the laws of the State
of Nevada, as they are incurred and in advance of the final disposition of the
action, suit or proceeding, upon receipt of an unsecured undertaking by or on
behalf of the member or manager to repay the amount if it is ultimately
determined by a court of competent jurisdiction that he or she is not entitled
to be indemnified by the company.
Section 6.2 REPEAL, MODIFICATION AND CONFLICTS. Any repeal or
modification of Section 6.1 approved by the members of the company shall be
prospective only. In the event of any conflict between Section 6.1 and any
other article of the company's articles of organization, the terms and
provisions of Section 6.1 shall control.
ARTICLE V
MANAGEMENT
Section 7.1 NUMBER OF MANAGERS. The management of the company shall be
vested in managers. The number of managers may be changed from time to time in
such manner as shall be provided in the company's operating agreement. The
manager or managers shall be elected in the manner prescribed by the company's
operating agreement. The manager or managers shall hold the offices and have
the responsibilities accorded to them by the members and set forth in the
company's operating agreement.
Section 7.2 INITIAL MANAGERS. The name and address of the manager
constituting the initial manager of the company, which shall be one (1) in
number, is:
NAME ADDRESS
Jack Sommer 2810 W. Charleston Blvd., Ste. F-58
Las Vegas, Nevada 89102
IN WITNESS WHEREOF, pursuant to Nevada Revised Statutes 86.151, I have
executed these articles of organization this 1st day of December, 1997.
/s/ Ellen L. Schulhofer
-----------------------------------
Ellen L. Schulhofer, Organizer
State of Nevada )
) ss.
County of Clark )
This instrument was acknowledged before me on the 1st day of December,
1997, by Ellen L. Schulhofer, as organizer of Aladdin Gaming Holdings, LLC
------------------------------------
Notary Public
<PAGE>
ARTICLES OF INCORPORATION
OF
ALADDIN CAPITAL CORP.
The undersigned, for the purpose of forming a corporation pursuant to and
by virtue of Chapter 78 of the Nevada Revised Statutes, hereby adopts, executes
and acknowledges the following Articles of Incorporation.
ARTICLE I
NAME
The name of the corporation shall be Aladdin Capital Corp.
ARTICLE II
REGISTERED OFFICE
The name of the initial resident agent and the street address of the
initial registered office in the State of Nevada where process may be served
upon the corporation is Schreck Morris, 300 South Fourth Street, Suite 1200, Las
Vegas, Clark County, Nevada 89101. The corporation may, from time to time, in
the manner provided by law, change the resident agent and the registered office
within the State of Nevada. The corporation may also maintain an office or
offices for the conduct of its business, either within or without the State of
Nevada.
ARTICLE III
CAPITAL STOCK
Section 1. AUTHORIZED SHARES. The aggregate number of shares which the
corporation shall have authority to issue shall consist of two thousand five
hundred (2,500) shares of common stock without par value.
Section 2. CONSIDERATION FOR SHARES. The common stock authorized by
Section 1 of this Article shall be issued for such consideration as shall be
fixed, from time to time, by the Board of Directors.
Section 3. ASSESSMENT OF STOCK. The capital stock of this corporation,
after the amount of the subscription price has been fully paid in, shall not be
assessable for any purpose, and no stock issued as fully paid shall ever be
assessable or assessed. No stockholder of the corporation is individually
liable for the debts or liabilities of the corporation.
Section 4. CUMULATIVE VOTING FOR DIRECTORS. No stockholder of the
corporation shall be entitled to cumulative voting of his shares for the
election of directors.
<PAGE>
Section 5. PREEMPTIVE RIGHTS. No stockholder of the corporation shall
have any preemptive rights.
ARTICLE IV
DIRECTORS AND OFFICERS
Section 1. NUMBER OF DIRECTORS. The members of the governing board of
the corporation are styled as directors. The Board of Directors of the
corporation shall consist of at least one (1) individual who shall be elected in
such manner as shall be provided in the bylaws of the corporation. The number
of directors may be changed from time to time in such manner as shall be
provided in the bylaws of the corporation.
Section 2. INITIAL DIRECTORS. The name and post office box or street
address of each of the directors constituting the first Board of Directors,
which be one (1) in number, is:
NAME ADDRESS
Jack Sommer 2810 W. Charleston Blvd., Ste. F-58
Las Vegas, Nevada 89102
Section 3. LIMITATION OF PERSONAL LIABILITY. No director or officer of
the corporation shall be personally liable to the corporation or its
stockholders for damages for breach of fiduciary duty as a director or officer;
provided, however, that the foregoing provision does not eliminate or limit the
liability of a director or officer of the corporation for:
(a) Acts or omissions which involve intentional misconduct, fraud or
a knowing violation of law; or
(b) The payment of distributions in violation of Nevada Revised
Statutes 78.300.
Section 4. PAYMENT OF EXPENSES. In addition to any other rights of
indemnification permitted by the law of the State of Nevada as may be provided
for by the corporation in its bylaws or by agreement, the expenses of officers
and directors incurred in defending a civil or criminal action, suit or
proceeding, involving alleged acts or omissions of such officer or director in
his or her capacity as an officer or director of the corporation, must be paid,
by the corporation or through insurance purchased and maintained by the
corporation or through other financial arrangements made by the corporation, as
they are incurred and in advance of the final disposition of the action, suit or
proceeding, upon receipt of an undertaking by or on behalf of the director or
officer to repay the amount if it is ultimately determined by a court of
competent jurisdiction that he or she is not entitled to be indemnified by the
corporation.
Section 5. REPEAL AND CONFLICTS. Any repeal or modification of
Sections 3 or 4
<PAGE>
above approved by the stockholders of the corporation shall be prospective only.
In the event of any conflict between Sections 3 or 4 of this Article and any
other Article of the corporation's Articles of Incorporation, the terms and
provisions of Sections 3 or 4 of this Article shall control.
ARTICLE V
INCORPORATOR
The name and post office box or street address of the incorporator signing
these Articles of Incorporation is:
NAME ADDRESS
Ellen L. Schulhofer, Esq. 300 S. Fourth Street, Ste. 1200
Las Vegas, Nevada 89101
IN WITNESS WHEREOF, I have executed these Articles of Incorporation this
1st day of December, 1997.
/s/ Ellen Schulhofer
-----------------------------------------
Ellen L. Schulhofer, Esq.
State of Nevada )
) ss.
County of Clark )
This instrument was acknowledged before me on December 1, 1997, by Ellen L.
Schulhofer as Incorporator of Aladdin Capital Corp.
_____________________________________________
Notary Public
<PAGE>
ARTICLES OF ORGANIZATION
OF
ALADDIN GAMING, LLC
The undersigned, for the purpose of forming a limited-liability company
(the "company"), pursuant to and by virtue of Chapter 86 of Nevada Revised
Statutes, hereby adopts, executes and acknowledges the following articles of
organization.
ARTICLE I
NAME
The name of the company is Aladdin Gaming, LLC.
ARTICLE II
TERM
The latest date upon which the company is to dissolve shall be January
24, 2097.
ARTICLE III
REGISTERED OFFICE AND RESIDENT AGENT
The name of the initial resident agent and the initial address of the
registered office where process may be served in the State of Nevada is Schreck
Morris, 300 S. Fourth Street, Suite 1200, Las Vegas, Nevada 89101. The company
may, from time to time, in the manner provided by Nevada law, change the
resident agent and the registered office within the State of Nevada.
ARTICLE IV
CONTINUANCE OF COMPANY BUSINESS
Upon the consent of not less than a majority in interest of the
remaining members, the business of the company shall continue on the death,
insanity, retirement, resignation, expulsion, bankruptcy or dissolution of a
member or occurrence of any other event which terminates the continued
membership of a member in the company.
1 of 4
<PAGE>
ARTICLE V
ORGANIZER
The name and post office box or street address of the organizer signing
these articles of organization is:
NAME ADDRESS
Ellen L. Schulhofer 300 S. Fourth Street, Suite 1200
Las Vegas, NV 89101
ARTICLE VI
INDEMNIFICATION AND PAYMENT OF EXPENSES
Section 6.1 Indemnification and Payment of Expenses. In addition to any
other rights of indemnification permitted by the laws of the State of Nevada as
may be provided for by the company in its operating agreement or by any other
agreement, the expenses of members and managers incurred in defending a civil or
criminal action, suit or proceeding, involving alleged acts or omissions of such
member or manager in his or her capacity as a member or manager of the company,
must be paid by the company, or through insurance purchased and maintained by
the company or through other financial arrangements made by the company as
permitted by the laws of the State of Nevada, as they are incurred and in
advance of the final disposition of the action, suit or proceeding, upon receipt
of an unsecured undertaking by or on behalf of the member or manager to repay
the amount if it is ultimately determined by a court of competent jurisdiction
that he or she is not entitled to be indemnified by the company.
Section 6.2 Repeal, Modification and Conflicts. Any repeal or
modification of Section 6.1 approved by the members of the company shall be
prospective only. In the event of any conflict between Section 6.1 and any other
article of the company's articles of organization, the terms and provisions of
Section 6.1 shall control.
ARTICLE VII
MANAGEMENT
Section 7.1 Number of Managers. The management of the company shall be
vested in a manager. The number of managers may be changed from time to time in
such manner as shall be provided in the company's operating agreement. The
manager or managers shall be elected in the manner prescribed by the company's
operating agreement. The manager of managers shall hold the offices and have the
responsibilities accorded to them by the members and set forth in the company's
operating agreement.
2 of 4
<PAGE>
Section 7.2 Initial Manager. The name and address of the manager
constituting the initial manager of the company, which shall be one (1) in
number, is:
NAME ADDRESS
Aladdin Gaming Corp. 2820 W. Charleston Blvd., Ste. 41
Las Vegas, NV 89102
ARTICLE VIII
PURPOSES
The character and general nature of the business to be conducted by the
company is to operate, manage, and conduct gaming in a gaming casino on or
within the premises known as the Aladdin Hotel & Casino and located at 3667 S.
Las Vegas Blvd., Las Vegas, Nevada 89109.
ARTICLE IX
RESTRICTIONS
Section 9.1 Transfer of Interest in the Company. Notwithstanding
anything to the contrary expressed or implied in these articles of organization,
the sale, assignment, transfer, pledge or other disposition of any interest in
the company is ineffective unless approved in advance by the Nevada Gaming
Commission. If at any time the Commission finds that a member which owns any
such interest is unsuitable to hold that interest, the Commission shall
immediately notify the company of that fact. The company shall, within 10 days
from the date that it receives the notice from the Commission, return to the
unsuitable member the amount of his capital account as reflected on the books of
the company. Beginning on the date when the Commission serves notice of a
determination of unsuitability, pursuant to the preceding sentence, upon the
company, it is unlawful for the unsuitable member: (a) to receive any share of
the distribution of profits or cash or any other property of, or payments upon
dissolution of, the company, other than a return of capital as required above;
(b) to exercise directly or through a trustee or nominee, any voting right
conferred by such interest; (c) to participate in the management of the business
and affairs of the company; or (d) to receive any remuneration in any form from
the company, for services rendered or otherwise.
Section 9.2 Determination of Unsuitability. Any member that is found
unsuitable by the Nevada Gaming Commission shall return all evidence of any
ownership in the company to the company, at which time the company shall, within
10 days, after the company receives notice from the Commission, return to the
member in cash, the amount of his capital account as reflected on the books of
the company, and the unsuitable member shall no longer have any direct or
indirect interest in the company.
3 of 4
<PAGE>
IN WITNESS WHEREOF, pursuant to Nevada Revised Statutes 86.151, I have
executed these articles of organization this 24th day of January, 1997.
/s/ Ellen L. Schulhofer
------------------------------------
Ellen L. Schulhofer, Esq., Organizer
State of Nevada )
) ss.
County of Clark )
This instrument was acknowledged before me on the 24th day of January,
1997, by Ellen L. Schulhofer, Esq., as organizer of Aladdin Gaming, LLC.
------------------------------------
Notary Public
4 of 4
<PAGE>
BYLAWS
OF
ALADDIN GAMING ENTERPRISES, INC.
ARTICLE I
STOCKHOLDERS
SECTION 1.01 ANNUAL MEETING. An annual meeting of the stockholders of
the corporation shall be held at 2:00 o'clock in the afternoon on the second
Thursday of December in each year, commencing after the first anniversary of
incorporation, but if such date is a legal holiday, then on the next succeeding
business day, for the purpose of electing directors of the corporation to serve
during the ensuing year and for the transaction of such other business as may
properly come before the meeting. If the election of the directors is not held
on the day designated herein for any annual meeting of the stockholders, or at
any adjournment thereof, the president shall cause the election to be held at a
special meeting of the stockholders as soon thereafter as is convenient.
SECTION 1.02 SPECIAL MEETINGS.
(a) Special meetings of the stockholders may be called by the
Chairman of the Board of Directors or the president and shall be called by the
Chairman of the Board of Directors, the president or the Board of Directors at
the written request of the holders of not less than 51% of the voting power of
any class of the corporation's stock entitled to vote.
(b) No business shall be acted upon at a special meeting except as
set forth in the notice calling the meeting, unless one of the conditions for
the holding of a meeting without notice set forth in Section 1.05 shall be
satisfied, in which case any business may be transacted and the meeting shall be
valid for all purposes.
SECTION 1.03 PLACE OF MEETINGS. Any meeting of the stockholders of the
corporation may be held at its registered office in the State of Nevada or at
such other place in or out of the United States as the Board of Directors may
designate. A waiver of notice signed by stockholders entitled to vote may
designate any place for the holding of such meeting.
SECTION 1.04 NOTICE OF MEETINGS.
(a) The president, a vice president, the secretary, an assistant
secretary or any other individual designated by the Board of Directors shall
sign and deliver written notice of any meeting at least ten (10) days, but not
more than sixty (60) days, before the date of such meeting. The notice shall
state the place, date and time of the meeting and the purpose or purposes for
which the meeting is called.
<PAGE>
(b) In the case of an annual meeting, any proper business may be
presented for action, except that action on any of the following items shall be
taken only if the general nature of the proposal is stated in the notice:
(1) Action with respect to any contract or transaction between
the corporation and one or more of its directors or officers or between the
corporation and any corporation, firm or association in which one or more of the
corporation's directors or officers is a director or officer or is financially
interested;
(2) Adoption of amendments to the Articles of Incorporation; or
(3) Action with respect to a merger, share exchange,
reorganization, partial or complete liquidation, or dissolution of the
corporation.
(c) A copy of the notice shall be personally delivered or mailed
postage prepaid to each stockholder of record entitled to vote at the meeting at
the address appearing on the records of the corporation, and the notice shall be
deemed delivered the date the same is deposited in the United States mail for
transmission to such stockholder. If the address of any stockholder does not
appear upon the records of the corporation, it will be sufficient to address any
notice to such stockholder at the registered office of the corporation.
(d) The written certificate of the individual signing a notice of
meeting, setting forth the substance of the notice or having a copy thereof
attached, the date the notice was mailed or personally delivered to the
stockholders and the addresses to which the notice was mailed, shall be prima
facie evidence of the manner and fact of giving such notice.
(e) Any stockholder may waive notice of any meeting by a signed
writing, either before or after the meeting.
SECTION 1.05 MEETING WITHOUT NOTICE.
(a) Whenever all persons entitled to vote at any meeting consent,
either by:
(1) A writing on the records of the meeting or filed with the
secretary; or
(2) Presence at such meeting and oral consent entered on the
minutes; or
(3) Taking part in the deliberations at such meeting without
objection;
the doings of such meeting shall be as valid as if had at a meeting regularly
called and noticed.
(b) At such meeting any business may be transacted which is not
<PAGE>
excepted from the written consent or to the consideration of which no objection
for want of notice is made at the time.
(c) If any meeting be irregular for want of notice or of such
consent, provided a quorum was present at such meeting, the proceedings of the
meeting may be ratified and approved and rendered likewise valid and the
irregularity or defect therein waived by a writing signed by all parties having
the right to vote at such meeting.
(d) Such consent or approval may be by proxy or attorney, but all
such proxies and powers of attorney must be in writing.
SECTION 1.06 DETERMINATION OF STOCKHOLDERS OF RECORD.
(a) For the purpose of determining the stockholders entitled to
notice of and to vote at any meeting of stockholders or any adjournment thereof,
or to express consent to corporate action in writing without a meeting, or
entitled to receive payment of any distribution or the allotment of any rights,
or entitled to exercise any rights in respect of any change, conversion, or
exchange of stock or for the purpose of any other lawful action, the directors
may fix, in advance, a record date, which shall not be more than sixty (60) days
nor less than ten (10) days before the date of such meeting, nor more than sixty
(60) days prior to any other action.
(b) If no record date is fixed, the record date for determining
stockholders: (i) entitled to notice of and to vote at a meeting of stockholders
shall be at the close of business on the day next preceding the day on which
notice is given, or, if notice is waived, at the close of business on the day
next preceding the day on which the meeting is held; (ii) entitled to express
consent to corporate action in writing without a meeting shall be the day on
which the first written consent is expressed; and (iii) for any other purpose
shall be at the close of business on the day on which the Board of Directors
adopts the resolution relating thereto. A determination of stockholders of
record entitled to notice of or to vote an any meeting of stockholders shall
apply to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
SECTION 1.07 QUORUM; ADJOURNED MEETINGS.
(a) Unless the Articles of Incorporation provide for a different
proportion, stockholders holding at least a majority of the voting power of the
corporation's stock, represented in person or by proxy, are necessary to
constitute a quorum for the transaction of business at any meeting. If, on any
issue, voting by classes is required by the laws of the State of Nevada, the
Articles of Incorporation or these Bylaws, at least a majority of the voting
power within each such class is necessary to constitute a quorum of each such
class.
(b) If a quorum is not represented, a majority of the voting power so
represented may adjourn the meeting from time to time until holders of the
voting power required to constitute a quorum shall be represented. At any such
adjourned meeting
<PAGE>
at which a quorum shall be represented, any business may be transacted which
might have been transacted as originally called. When a stockholders' meeting
is adjourned to another time or place hereunder, notice need not be given of the
adjourned meeting if the time and place thereof are announced at the meeting at
which the adjournment is taken. The stockholders present at a duly convened
meeting may continue to transact business until adjournment, notwithstanding the
withdrawal of enough stockholders to leave less than a quorum of the voting
power.
SECTION 1.08 VOTING.
(a) Unless otherwise provided in the Articles of Incorporation, or in
the resolution providing for the issuance of the stock adopted by the Board of
Directors pursuant to authority expressly vested in it by the provisions of the
Articles of Incorporation, each stockholder of record, or such stockholder's
duly authorized proxy or attorney-in-fact, shall be entitled to one (1) vote for
each share of voting stock standing registered in such stockholder's name on the
record date.
(b) Except as otherwise provided herein, all votes with respect to
shares standing in the name of an individual on the record date (including
pledged shares) shall be cast only by that individual or such individual's duly
authorized proxy, attorney-in-fact, or voting trustee(s) pursuant to a voting
trust. With respect to shares held by a representative of the estate of a
deceased stockholder, guardian, conservator, custodian or trustee, votes may be
cast by such holder upon proof of capacity, even though the shares do not stand
in the name of such holder. In the case of shares under the control of a
receiver, the receiver may cast votes carried by such shares even though the
shares do not stand in the name of the receiver; provided, that the order of the
court of competent jurisdiction which appoints the receiver contains the
authority to cast votes carried by such shares. If shares stand in the name of
a minor, votes may be cast only by the duly appointed guardian of the estate of
such minor if such guardian has provided the corporation with written proof of
such appointment.
(c) With respect to shares standing in the name of another
corporation, partnership, limited liability company or other legal entity on the
record date, votes may be cast: (i) in the case of a corporation, by such
individual as the bylaws of such other corporation prescribe, by such individual
as may be appointed by resolution of the board of directors of such other
corporation or by such individual (including the officer making the
authorization) authorized in writing to do so by the Chairman of the Board of
Directors, president or any vice president of such corporation and (ii) in the
case of a partnership, limited liability company or other legal entity, by an
individual representing such stockholder upon presentation to the corporation of
satisfactory evidence of his authority to do so.
(d) Notwithstanding anything to the contrary herein contained, no
votes may be cast for shares owned by this corporation or its subsidiaries, if
any. If shares are held by this corporation or its subsidiaries, if any, in a
fiduciary capacity, no
<PAGE>
votes shall be cast with respect thereto on any matter except to the extent that
the beneficial owner thereof possesses and exercises either a right to vote or
to give the corporation holding the same binding instructions on how to vote.
(e) Any holder of shares entitled to vote on any matter may cast a
portion of the votes in favor of such matter and refrain from casting the
remaining votes or cast the same against the proposal, except in the case of
elections of directors. If such holder entitled to vote fails to specify the
number of affirmative votes, it will be conclusively presumed that the holder is
casting affirmative votes with respect to all shares held.
<PAGE>
(f) With respect to shares standing in the name of two or more
persons, whether fiduciaries, members of a partnership, joint tenants, tenants
in common, husband and wife as community property, tenants by the entirety,
voting trustees, persons entitled to vote under a stockholder voting agreement
or otherwise and shares held by two or more persons (including proxy holders)
having the same fiduciary relationship in respect to the same shares, votes may
be cast in the following manner:
(1) If only one person votes, the vote of such person binds all.
(2) If more than one person casts votes, the act of the majority
so voting binds all.
(3) If more than one person casts votes, but the vote is evenly
split on a particular matter, the votes shall be deemed cast proportionately, as
split.
(g) If a quorum is present, unless the Articles of Incorporation
provide for a different proportion, the affirmative vote of holders of at least
a majority of the voting power represented at the meeting and entitled to vote
on any matter shall be the act of the stockholders, unless voting by classes is
required for any action of the stockholders by the laws of the State of Nevada,
the Articles of Incorporation or these Bylaws, in which case the affirmative
vote of holders of a least a majority of the voting power of each such class
shall be required.
SECTION 1.09 PROXIES. At any meeting of stockholders, any holder of
shares entitled to vote may designate, in a manner permitted by the laws of the
State of Nevada, another person or persons to act as a proxy or proxies. No
proxy is valid after the expiration of six (6) months from the date of its
creation, unless it is coupled with an interest or unless otherwise specified in
the proxy. In no event shall the term of a proxy exceed seven (7) years from
the date of its creation. Every proxy shall continue in full force and effect
until its expiration or revocation in a manner permitted by the laws of the
State of Nevada.
SECTION 1.10 ORDER OF BUSINESS. At the annual stockholder's meeting, the
regular order of business shall be as follows:
1. Determination of stockholders present and existence of quorum,
in person or by proxy;
2. Reading and approval of the minutes of the previous meeting or
meetings;
3. Reports of the Board of Directors, and, if any, the president,
treasurer and secretary of the corporation;
<PAGE>
4. Reports of committees;
5. Election of directors;
6. Unfinished business;
7. New business;
8. Adjournment.
SECTION 1.11 ABSENTEES' CONSENT TO MEETINGS. Transactions of any meeting
of the stockholders are as valid as though had at a meeting duly held after
regular call and notice if a quorum is represented, either in person or by
proxy, and if, either before or after the meeting, each of the persons entitled
to vote, not represented in person or by proxy (and those who, although present,
either object at the beginning of the meeting to the transaction of any business
because the meeting has not been lawfully called or convened or expressly object
at the meeting to the consideration of matters not included in the notice which
are legally required to be included therein), signs a written waiver of notice
and/or consent to the holding of the meeting or an approval of the minutes
thereof. All such waivers, consents, and approvals shall be filed with the
corporate records and made a part of the minutes of the meeting. Attendance of
a person at a meeting shall constitute a waiver of notice of such meeting,
except when the person objects at the beginning of the meeting to the
transaction of any business because the meeting is not lawfully called or
convened and except that attendance at a meeting is not a waiver of any right to
object to the consideration of matters not properly included in the notice if
such objection is expressly made at the time any such matters are presented at
the meeting. Neither the business to be transacted at nor the purpose of any
regular or special meeting of stockholders need be specified in any written
waiver of notice or consent, except as otherwise provided in Section 1.04(a) and
(b) of these Bylaws.
SECTION 1.12 TELEPHONIC MEETINGS. Stockholders may participate in a
meeting of the stockholders by means of a telephone conference or similar method
of communication by which all individuals participating in the meeting can hear
each other. Participation in a meeting pursuant to this Section 1.12
constitutes presence in person at the meeting.
SECTION 1.13 ACTION WITHOUT MEETING. Any action required or permitted to
be taken at a meeting of the stockholders may be taken without a meeting if a
written consent thereto is signed by the holders of the voting power of the
corporation that would be required at a meeting to constitute the act of the
stockholders. Whenever action is taken by written consent, a meeting of
stockholders need not be called or notice given. The written consent may be
signed in counterparts and must be filed with the minutes of the proceedings of
the stockholders.
ARTICLE II
DIRECTORS
<PAGE>
SECTION 2.01 NUMBER, TENURE, AND QUALIFICATIONS. Unless a larger number
is required by the laws of the State of Nevada or the Articles of Incorporation
or until changed in the manner provided herein, the Board of Directors of the
corporation shall consist of at least one (1) individual who shall be elected at
the annual meeting of the stockholders of the corporation and who shall hold
office for one (1) year or until his or her successor or successors are elected
and qualify. A director need not be a stockholder of the corporation.
<PAGE>
SECTION 2.02 CHANGE IN NUMBER. Subject to any limitations in the laws of
the State of Nevada, the Articles of Incorporation or these Bylaws, the number
of directors may be changed from time to time by resolution adopted by the Board
of Directors or the stockholders.
SECTION 2.03 REDUCTION IN NUMBER. No reduction of the number of
directors shall have the effect of removing any director prior to the expiration
of his term of office.
SECTION 2.04 RESIGNATION. Any director may resign effective upon giving
written notice to the Chairman of the Board of Directors, the president, the
secretary, or in the absence of all of them, any other officer, unless the
notice specifies a later time for effectiveness of such resignation. A majority
of the remaining directors, though less than a quorum, may appoint a successor
to take office when the resignation becomes effective, each director so
appointed to hold office during the remainder of the term of office of the
resigning director.
SECTION 2.05 REMOVAL.
(a) The Board of Directors of the corporation, by majority vote, may
declare vacant the office of a director who has been declared incompetent by an
order of a court of competent jurisdiction or convicted of a felony.
(b) Any director may be removed from office by the vote or written
consent of stockholders representing not less than two-thirds of the voting
power of the issued and outstanding stock entitled to vote, except that if the
corporation's Articles of Incorporation provide for the election of directors by
cumulative voting, no director may be removed from office except upon the vote
of stockholders owning sufficient shares to have prevented such director's
election to office in the first instance.
SECTION 2.06 VACANCIES.
(a) All vacancies, including those caused by an increase in the
number of directors, may be filled by a majority of the remaining directors,
though less than a quorum, unless it is otherwise provided in the Articles of
Incorporation unless, in the case of removal of a director, the stockholders by
a majority of voting power shall have appointed a successor to the removed
director. Subject to the provisions of Subsection (b) below, (i) in the case of
the replacement of a director, the appointed director shall hold office during
the remainder of the term of office of the replaced director, and (ii) in the
case of an increase in the number of directors, the appointed director shall
hold office until the next meeting of stockholders at which directors are
elected.
(b) If, after the filling of any vacancy by the directors, the
directors then in office who have been elected by the stockholders shall
constitute less than a majority of the directors then in office, any holder or
holders of an aggregate of five percent (5%)
<PAGE>
or more of the total voting power entitled to vote may call a special meeting of
the stockholders to elect the entire Board of Directors. The term of office of
any director shall terminate upon such election of a successor.
<PAGE>
SECTION 2.07 ANNUAL AND REGULAR MEETINGS. Immediately following the
adjournment of, and at the same place as, the annual or any special meeting of
the stockholders at which directors are elected other than pursuant to Section
2.06 of this Article, the Board of Directors, including directors newly elected,
shall hold its annual meeting without notice, other than this provision, to
elect officers and to transact such further business as may be necessary or
appropriate. The Board of Directors may provide by resolution the place, date,
and hour for holding regular meetings between annual meetings.
SECTION 2.08 SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the Chairman of the Board of Directors, or if there
be no Chairman, by the president or secretary, and shall be called by the
Chairman of the Board of Directors, the president or the secretary upon the
request of any two (2) directors. If the Chairman of the Board of Directors, or
if there be no Chairman, both the president and secretary, refuses or neglects
to call such special meeting, a special meeting may be called by notice signed
by any two (2) directors.
SECTION 2.09 PLACE OF MEETINGS. Any regular or special meeting of the
directors of the corporation may be held at such place as the Board of
Directors, or in the absence of such designation, as the notice calling such
meeting, may designate. A waiver of notice signed by directors may designate
any place for the holding of such meeting.
SECTION 2.10 NOTICE OF MEETINGS. Except as otherwise provided in Section
2.07, there shall be delivered to all directors, at least forty-eight (48) hours
before the time of such meeting, a copy of a written notice of any meeting by
delivery of such notice personally by mailing such notice postage prepaid or by
telegram. Such notice shall be addressed in the manner provided for notice to
stockholders in Section 1.04(c). If mailed, the notice shall be deemed
delivered two (2) business days following the date the same is deposited in the
United States mail, postage prepaid. Any director may waive notice of any
meeting, and the attendance of a director at a meeting and oral consent entered
on the minutes of such meeting shall constitute waiver of notice of the meeting
unless such director objects, prior to the transaction of any business, that the
meeting was not lawfully called or convened. Attendance for the express purpose
of objecting to the transaction of business because the meeting was not properly
called or convened shall not constitute presence nor a waiver of notice for
purposes hereof.
SECTION 2.11 QUORUM; ADJOURNED MEETINGS.
(a) A majority of the directors in office, at a meeting duly
assembled, is necessary to constitute a quorum for the transaction of business.
(b) At any meeting of the Board of Directors where a quorum is not
present, a majority of those present may adjourn, from time to time, until a
quorum is
<PAGE>
present, and no notice of such adjournment shall be required. At any adjourned
meeting where a quorum is present, any business may be transacted which could
have been transacted at the meeting originally called.
SECTION 2.12 BOARD OF DIRECTORS' DECISIONS. The affirmative vote of a
majority of the directors present at a meeting at which a quorum is present is
the act of the Board of Directors.
SECTION 2.13 TELEPHONIC MEETINGS. Members of the Board of Directors or
of any committee designated by the Board of Directors may participate in a
meeting of the Board of Directors or such committee by means of a telephone
conference or similar method of communication by which all persons participating
in such meeting can hear each other. Participation in a meeting pursuant to
this Section 2.13 constitutes presence in person at the meeting.
SECTION 2.14 ACTION WITHOUT MEETING. Any action required or permitted to
be taken at a meeting of the Board of Directors or of a committee thereof may be
taken without a meeting if, before or after the action, a written consent
thereto is signed by all of the members of the Board of Directors or the
committee. The written consent may be signed in counterparts and must be filed
with the minutes of the proceedings of the Board of Directors or committee.
SECTION 2.15 POWERS AND DUTIES.
(a) Except as otherwise restricted in the laws of the State of Nevada
or the Articles of Incorporation, the Board of Directors has full control over
the affairs of the corporation. The Board of Directors may delegate any of its
authority to manage, control or conduct the business of the corporation to any
standing or special committee or to any officer or agent and to appoint any
persons to be agents of the corporation with such powers, including the power to
subdelegate, and upon such terms as may be deemed fit.
(b) The Board of Directors may present to the stockholders at annual
meetings of the stockholders, and when called for by a majority vote of the
stockholders at an annual meeting or a special meeting of the stockholders shall
so present, a full and clear report of the condition of the corporation.
(c) The Board of Directors, in its discretion, may submit any
contract or act for approval or ratification at any annual meeting of the
stockholders or any special meeting properly called for the purpose of
considering any such contract or act, provided a quorum is present.
SECTION 2.16 COMPENSATION. The directors and members of committees shall
be allowed and paid all necessary expenses incurred in attending any meetings of
the Board of Directors or committees. Subject to any limitations contained in
the laws of the State of Nevada, the Articles of Incorporation or any contract
or agreement to which the corporation is a party, directors may receive
compensation for their services as directors as determined by the Board of
Directors, but only during such times as the
<PAGE>
corporation may legally declare and pay distributions on its stock, unless the
payment of such compensation is first approved by the stockholders entitled to
vote for the election of directors.
SECTION 2.17 BOARD OF DIRECTORS' OFFICERS; CHAIRMAN PRESIDING OVER
MEETINGS.
(a) At its annual meeting, the Board of Directors may elect, from
among its members, a Chairman of the Board of Directors, who may serve as the
chief executive officer of the corporation and who may preside at meetings of
the Board of Directors and at meetings of the stockholders. If no Chairman of
the Board of Directors is elected, or if the stockholders or the Board of
Directors determine that the Chairman of the Board of Directors shall not
preside at a meeting of the stockholders or of the Board, respectively, or if
the Chairman of the Board of Directors elects not to preside at a meeting or is
absent, the stockholders and the Board of Directors may appoint a chairman, who
need not be from among their or its members, who may preside over such meetings
of the stockholders and the Board of Directors, respectively, or, in the absence
of any such appointment, the president shall preside at such meetings and
perform such other duties as shall be prescribed by the Board of Directors. The
Board of Directors shall also elect such other officers of the Board of
Directors and for such term as it may, from time to time, determine advisable.
(b) Any vacancy in any office of the Board of Directors because of
death, resignation, removal or otherwise may be filled by the Board of Directors
for the unexpired portion of the term of such office.
SECTION 2.18 ORDER OF BUSINESS. The order of business at any meeting of
the Board of Directors shall be as follows:
1. Determination of members present and existence of quorum;
2. Reading and approval of the minutes of any previous meeting or
meetings;
3. Reports of officers and committeemen;
4. Election of officers (annual meeting);
5. Unfinished business;
6. New business;
7. Adjournment.
ARTICLE III
OFFICERS
SECTION 3.01 ELECTION. The Board of Directors, at its annual meeting,
shall elect
<PAGE>
a president, a secretary and a treasurer to hold office for a term of one (1)
year or until their successors are chosen and qualify. Any individual may hold
two or more offices. The Board of Directors may, from time to time, by
resolution, elect a chief executive officer and one or more vice presidents,
assistant secretaries and assistant treasurers and appoint agents of the
corporation, prescribe their duties and fix their compensation.
SECTION 3.02 REMOVAL; RESIGNATION. Any officer or agent elected or
appointed by the Board of Directors may be removed by it with or without cause.
Any officer may resign at any time upon written notice to the corporation. Any
such removal or resignation shall be subject to the rights, if any, of the
respective parties under any contract between the corporation and such officer
or agent.
<PAGE>
SECTION 3.03 VACANCIES. Any vacancy in any office because of death,
resignation, removal or otherwise may be filled by the Board of Directors for
the unexpired portion of the term of such office.
SECTION 3.04 PRESIDENT; CHIEF EXECUTIVE OFFICER.
(a) The president may also be the chief executive officer of the
corporation, or, if the Chairman of the Board of Directors or any other
individual has been designated as the chief executive officer, the president
shall be the chief operations officer of the corporation, in either case subject
to the supervision and control of the Board of Directors. The president shall
direct the corporate affairs, with full power to execute all resolutions and
orders of the Board of Directors not expressly delegated to some other officer
or agent of the corporation.
(b) The president shall have full power and authority on behalf of
the corporation to attend and to act and to vote, or designate such other
officer or agent of the corporation to attend and to act and to vote, at any
meetings of the stockholders of any corporation in which the corporation may
hold stock and, at any such meetings, shall possess and may exercise any and all
rights and powers incident to the ownership of such stock. The Board of
Directors, by resolution from time to time, may confer like powers on any person
or persons in place of the president to exercise such powers for these purposes.
(c) The chief executive officer shall perform such duties as usually
pertain to the position of chief executive officer and such duties as may be
prescribed by the Board of Directors.
SECTION 3.05 VICE PRESIDENTS. The Board of Directors may elect one or
more vice presidents who shall be vested with all the powers and perform all the
duties of the president whenever the president is absent or unable to act and
such other duties as shall be prescribed by the Board of Directors or the
president.
SECTION 3.06 SECRETARY. The secretary shall keep, or cause to be kept,
the minutes of proceedings of the stockholders and the Board of Directors in
books provided for that purpose. The secretary shall attend to the giving and
service of all notices of the corporation, may sign with the president in the
name of the corporation all contracts in which the corporation is authorized to
enter, shall have the custody or designate control of the corporate seal, shall
affix the corporate seal to all certificates of stock duly issued by the
corporation, shall have charge or designate control of stock certificate books,
transfer books and stock ledgers, and such other books and papers as the Board
of Directors or appropriate committee may direct, and shall, in general, perform
all duties incident to the office of the secretary.
SECTION 3.07 ASSISTANT SECRETARIES. The Board of Directors may appoint
one
<PAGE>
or more assistant secretaries who shall have such powers and perform such duties
as may be prescribed by the Board of Directors or the secretary.
SECTION 3.08 TREASURER. The treasurer shall be the chief financial
officer of the corporation, subject to the supervision and control of the Board
of Directors, and shall have custody of all the funds and securities of the
corporation. When necessary or proper, the treasurer shall endorse on behalf of
the corporation for collection checks, notes, and other obligations, and shall
deposit all monies to the credit of the corporation in such bank or banks or
other depository as the Board of Directors may designate, and shall sign all
receipts and vouchers for payments made by the corporation. Unless otherwise
specified by the Board of Directors, the treasurer may sign with the president
all bills of exchange and promissory notes of the corporation, shall also have
the care and custody of the stocks, bonds, certificates, vouchers, evidence of
debts, securities, and such other property belonging to the corporation as the
Board of Directors shall designate, and shall sign all papers required by law,
by these Bylaws, or by the Board of Directors to be signed by the treasurer.
The treasurer shall enter, or cause to be entered, regularly in the financial
records of the corporation, to be kept for that purpose, full and accurate
accounts of all monies received and paid on account of the corporation and,
whenever required by the Board of Directors, the treasurer shall render a
statement of any or all accounts. The treasurer shall at all reasonable times
exhibit the books of account to any director of the corporation and shall
perform all acts incident to the position of treasurer subject to the control of
the Board of Directors. The treasurer shall, if required by the Board of
Directors, give bond to the corporation in such sum and with such security as
shall be approved by the Board of Directors for the faithful performance of all
the duties of treasurer and for restoration to the corporation, in the event of
the treasurer's death, resignation, retirement or removal from office, of all
books, records, papers, vouchers, money and other property in the treasurer's
custody or control and belonging to the corporation. The expense of such bond
shall be borne by the corporation.
SECTION 3.09 ASSISTANT TREASURERS. The Board of Directors may appoint
one or more assistant treasurers who shall have such powers and perform such
duties as may be prescribed by the Board of Directors or the treasurer. The
Board of Directors may require an assistant treasurer to give a bond to the
corporation in such sum and with such security as it may approve, for the
faithful performance of the duties of assistant treasurer, and for restoration
to the corporation, in the event of the assistant treasurer's death,
resignation, retirement or removal from office, of all books, records, papers,
vouchers, money and other property in the assistant treasurer's custody or
control and belonging to the corporation. The expense of such bond shall be
borne by the corporation.
ARTICLE IV
CAPITAL STOCK
SECTION 4.01 ISSUANCE. Shares of the corporation's authorized stock
shall, subject to any provisions or limitations of the laws of the State of
Nevada, the Articles of Incorporation or any contracts or agreements to which
the corporation may be a party, be issued in such manner, at such times, upon
such conditions and for such
<PAGE>
consideration as shall be prescribed by the Board of Directors.
SECTION 4.02 CERTIFICATES. Ownership in the corporation shall be
evidenced by certificates for shares of stock in such form as shall be
prescribed by the Board of Directors, shall be under the seal of the corporation
and shall be manually signed by the president or a vice president and also by
the secretary or an assistant secretary; provided, however, whenever any
certificate is countersigned or otherwise authenticated by a transfer agent or
transfer clerk, and by a registrar, then a facsimile of the signatures of said
officers of the corporation may be printed or lithographed upon the certificate
in lieu of the actual signatures. If the Corporation uses facsimile signatures
of its officers on its stock certificates, it shall not act as registrar of its
own stock, but its transfer agent and registrar may be identical if the
institution acting in those dual capacities countersigns any stock certificates
in both capacities. Each certificate shall contain the name of the record
holder, the number, designation, if any, class or series of shares represented,
a statement or summary of any applicable rights, preferences, privileges or
restrictions thereon, and a statement, if applicable, that the shares are
assessable. All certificates shall be consecutively numbered. If provided by
the stockholder, the name, address and federal tax identification number of the
stockholder, the number of shares, and the date of issue shall be entered in the
stock transfer records of the corporation.
SECTION 4.03 SURRENDERED; LOST OR DESTROYED CERTIFICATES. All
certificates surrendered to the corporation, except those representing shares of
treasury stock, shall be canceled and no new certificate shall be issued until
the former certificate for a like number of shares shall have been canceled,
except that in case of a lost, stolen, destroyed or mutilated certificate, a new
one may be issued therefor. However, any stockholder applying for the issuance
of a stock certificate in lieu of one alleged to have been lost, stolen,
destroyed or mutilated shall, prior to the issuance of a replacement, provide
the corporation with his, her or its affidavit of the facts surrounding the
loss, theft, destruction or mutilation and, if required by the Board of
Directors, an indemnity bond in an amount not less than twice the current market
value of the stock, and upon such terms as the treasurer or the Board of
Directors shall require which shall indemnify the corporation against any loss,
damage, cost or inconvenience arising as a consequence of the issuance of a
replacement certificate.
SECTION 4.04 REPLACEMENT CERTIFICATE. When the Articles of Incorporation
are amended in any way affecting the statements contained in the certificates
for outstanding shares of capital stock of the corporation or it becomes
desirable for any reason, in the discretion of the Board of Directors,
including, without limitation, the merger of the corporation with another
corporation or the reorganization of the corporation, to cancel any outstanding
certificate for shares and issue a new certificate therefor conforming to the
rights of the holder, the Board of Directors may order any holders of
outstanding certificates for shares to surrender and exchange the same for new
certificates within a reasonable time to be fixed by the Board of Directors.
The order may provide that a holder of any certificate(s) ordered to be
surrendered shall not be entitled to vote, receive distributions or exercise any
other rights of stockholders of record until the holder has complied with the
order, but the order operates to suspend such rights only after notice and until
compliance.
<PAGE>
SECTION 4.05 TRANSFER OF SHARES. No transfer of stock shall be valid as
against the corporation except on surrender and cancellation of the certificates
therefor accompanied by an assignment or transfer by the registered owner made
either in person or under assignment. Whenever any transfer shall be expressly
made for collateral security and not absolutely, the collateral nature of the
transfer shall be reflected in the entry of transfer in the records of the
corporation.
SECTION 4.06 TRANSFER AGENT; REGISTRARS. The Board of Directors may
appoint one or more transfer agents, transfer clerk and registrars of transfer
and may require all certificates for shares of stock to bear the signature of
such transfer agent, transfer clerk and/or registrar of transfer.
SECTION 4.07 STOCK TRANSFER RECORDS. The stock transfer records shall be
closed for a period of at least ten (10) days prior to all meetings of the
stockholders and shall be closed for the payment of distributions as provided in
Article V hereof and during such periods as, from time to time, may be fixed by
the Board of Directors, and, during such periods, no stock shall be transferable
for purposes of Article V and no voting rights shall be deemed transferred
during such periods. Subject to the forgoing limitations, nothing contained
herein shall cause transfers during such periods to be void or voidable.
SECTION 4.08 MISCELLANEOUS. The Board of Directors shall have the power
and authority to make such rules and regulations not inconsistent herewith as it
may deem expedient concerning the issue, transfer, and registration of
certificates for shares of the corporation's stock.
ARTICLE V
DISTRIBUTIONS
SECTION 5.01 Distributions may be declared, subject to the provisions of
the laws of the State of Nevada and the Articles of Incorporation, by the Board
of Directors at any regular or special meeting and may be paid in cash,
property, shares of corporate stock, or any other medium. The Board of
Directors may fix in advance a record date, as provided in Section 1.06, prior
to the distribution for the purpose of determining stockholders entitled to
receive any distribution. The Board of Directors may close the stock transfer
books for such purpose for a period of not more than ten (10) days prior to the
date of such distribution.
ARTICLE VI
RECORDS; REPORTS; SEAL; AND FINANCIAL MATTERS
SECTION 6.01 RECORDS. All original records of the corporation shall be
kept by or under the direction of the secretary or at such places as may be
prescribed by the Board of Directors.
SECTION 6.02 DIRECTORS' AND OFFICERS' RIGHT OF INSPECTION. Every
director and officer shall have the absolute right at any reasonable time for a
purpose reasonably
<PAGE>
related to the exercise of such individual's duties to inspect and copy all of
the corporation's books, records, and documents of every kind and to inspect the
physical properties of the corporation and/or its subsidiary corporations. Such
inspection may be made in person or by agent or attorney.
SECTION 6.03 CORPORATE SEAL. The Board of Directors may, by resolution,
authorize a seal, and the seal may be used by causing it, or a facsimile, to be
impressed or affixed or reproduced or otherwise. Except when otherwise
specifically provided herein, any officer of the corporation shall have the
authority to affix the seal to any document requiring it.
SECTION 6.04 FISCAL YEAR-END. The fiscal year-end of the corporation
shall be such date as may be fixed from time to time by resolution of the Board
of Directors.
SECTION 6.05 RESERVES. The Board of Directors may create, by resolution,
such reserves as the directors may, from time to time, in their discretion,
think proper to provide for contingencies, or to equalize distributions or to
repair or maintain any property of the corporation, or for such
<PAGE>
other purpose as the Board of Directors may deem beneficial to the corporation,
and the directors may modify or abolish any such reserves in the manner in which
they were created.
ARTICLE VII
INDEMNIFICATION
SECTION 7.01 INDEMNIFICATION AND INSURANCE.
(a) INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(i) For purposes of this Article, (A) "Indemnitee" shall mean
each director or officer who was or is a party to, or is threatened to be made a
party to, or is otherwise involved in, any Proceeding (as hereinafter defined),
by reason of the fact that he or she is or was a director or officer of the
corporation or is or was serving in any capacity at the request of the
corporation as a director, officer, employee, agent, partner, or fiduciary of,
or in any other capacity for, another corporation or any partnership, joint
venture, trust, or other enterprise; and (B) "Proceeding" shall mean any
threatened, pending or completed action or suit (including without limitation an
action, suit or proceeding by or in the right of the corporation), whether
civil, criminal, administrative or investigative.
(ii) Each Indemnitee shall be indemnified and held harmless by
the corporation for all actions taken by him or her and for all omissions
(regardless of the date of any such action or omission), to the fullest extent
permitted by Nevada law, against all expense, liability and loss (including
without limitation attorneys' fees, judgments, fines, taxes, penalties, and
amounts paid or to be paid in settlement) reasonably incurred or suffered by the
Indemnitee in connection with any Proceeding.
(iii) Indemnification pursuant to this Section shall continue as
to an Indemnitee who has ceased to be a director or officer and shall inure to
the benefit of his or her heirs, executors and administrators.
(b) INDEMNIFICATION OF EMPLOYEES AND OTHER PERSONS.
The corporation may, by action of its Board of Directors and to
the extent provided in such action, indemnify employees and other persons as
though they were Indemnitees.
(c) NON-EXCLUSIVITY OF RIGHTS.
The rights to indemnification provided in this Article shall not
be exclusive of any other rights that any person may have or hereafter acquire
under any statute, provision of the corporation's Articles of Incorporation or
Bylaws, agreement,
<PAGE>
vote of stockholders or directors, or otherwise.
(d) INSURANCE.
The corporation may purchase and maintain insurance or make other
financial arrangements on behalf of any person who is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise for any
liability asserted against him or her and liability and expenses incurred by him
or her in his or her capacity as a director, officer, employee or agent, or
arising out of his or her status as such, whether or not the corporation has the
authority to indemnify him or her against such liability and expenses.
(e) OTHER FINANCIAL ARRANGEMENTS.
The other financial arrangements which may be made by the
corporation may include the following (i) the creation of a trust fund; (ii) the
establishment of a program of self-insurance; (iii) the securing of its
obligation of indemnification by granting a security interest or other lien on
any assets of the corporation; (iv) the establishment of a letter of credit,
guarantee or surety. No financial arrangement made pursuant to this subsection
may provide protection for a person adjudged by a court of competent
jurisdiction, after exhaustion of all appeals therefrom, to be liable for
intentional misconduct, fraud, or a knowing violation of law, except with
respect to advancement of expenses or indemnification ordered by a court.
(f) OTHER MATTERS RELATING TO INSURANCE OR FINANCIAL ARRANGEMENTS.
Any insurance or other financial arrangement made on behalf of a
person pursuant to this section may be provided by the corporation or any other
person approved by the Board of Directors, even if all or part of the other
person's stock or other securities is owned by the corporation. In the absence
of fraud:
(i) the decision of the Board of Directors as to the propriety
of the terms and conditions of any insurance or other financial arrangement made
pursuant to this section and the choice of the person to provide the insurance
or other financial arrangement is conclusive; and
(ii) the insurance or other financial arrangement:
(A) is not void or voidable; and
(B) does not subject any director approving it to personal
liability for his action, even if a director approving
the insurance or other financial arrangement is a
beneficiary of the insurance or other financial
arrangement.
<PAGE>
SECTION 7.02 AMENDMENT. The provisions of this Article relating to
indemnification shall constitute a contract between the corporation and each of
its directors and officers which may be modified as to any director or officer
only with that person's consent or as specifically provided in this Section.
Notwithstanding any other provision of these Bylaws relating to their amendment
generally, any repeal or amendment of this Article which is adverse to any
director or officer shall apply to such director or officer only on a
prospective basis and shall not limit the rights of an Indemnitee to
indemnification with respect to any action or failure to act occurring prior to
the time of such repeal or amendment. Notwithstanding any other provision of
these Bylaws, no repeal or amendment of these Bylaws shall affect any or all of
this Article so as to limit or reduce the indemnification in any manner unless
adopted by (a) the unanimous vote of the directors of the
<PAGE>
corporation then serving, or (b) by the stockholders as set forth in Article
VIII hereof; provided that no such amendment shall have retroactive effect
inconsistent with the preceding sentence.
SECTION 7.03 CHANGES IN NEVADA LAW. References in this Article to Nevada
law or to any provision thereof shall be to such law as it existed on the date
this Article was adopted or as such law thereafter may be changed; provided that
(a) in the case of any change which expands the liability of directors or
officers or limits the indemnification rights or the rights to advancement of
expenses which the corporation may provide, the rights to limited liability, to
indemnification and to the advancement of expenses provided in the corporation's
Articles of Incorporation and/or these Bylaws shall continue as theretofore to
the extent permitted by law; and (b) if such change permits the corporation,
without the requirement of any further action by stockholders or directors, to
limit further the liability of directors (or limit the liability of officers) or
to provide broader indemnification rights or rights to the advancement of
expenses than the corporation was permitted to provide prior to such change,
then liability thereupon shall be so limited and the rights to indemnification
and the advancement of expenses shall be so broadened to the extent permitted by
law.
ARTICLE VIII
AMENDMENT OR REPEAL
SECTION 8.01 AMENDMENT. Except as otherwise restricted in the Articles
of Incorporation or these Bylaws:
(a) Any provision of these Bylaws may be altered, amended or repealed
at the annual or any regular meeting of the Board of Directors without prior
notice, or at any special meeting of the Board of Directors if notice of such
alteration, amendment or repeal be contained in the notice of such special
meeting.
(b) These Bylaws may also be altered, amended, or repealed at a duly
convened meeting of the stockholders by the affirmative vote of the holders of
51% of the voting power of the corporation entitled to vote. The stockholders
may provide by resolution that any Bylaw provision altered, amended or repealed
by them, or any Bylaw provision adopted by them, may not be altered, amended or
repealed by the Board of Directors.
CERTIFICATION
The undersigned duly elected secretary of the corporation, does hereby
certify that the foregoing Bylaws were adopted by the Board of Directors on the
4th day of December, 1997.
<PAGE>
/s/ Ronald Dictrow
--------------------------------
Ronald Dictrow, Secretary
<PAGE>
BYLAWS
OF
ALADDIN CAPITAL CORP.
ARTICLE I
STOCKHOLDERS
SECTION 1.01 ANNUAL MEETING. An annual meeting of the stockholders of
the corporation shall be held at 2:00 o'clock in the afternoon on the second
Thursday of December in each year, commencing after the first anniversary of
incorporation, but if such date is a legal holiday, then on the next succeeding
business day, for the purpose of electing directors of the corporation to serve
during the ensuing year and for the transaction of such other business as may
properly come before the meeting. If the election of the directors is not held
on the day designated herein for any annual meeting of the stockholders, or at
any adjournment thereof, the president shall cause the election to be held at a
special meeting of the stockholders as soon thereafter as is convenient.
SECTION 1.02 SPECIAL MEETINGS.
(a) Special meetings of the stockholders may be called by the
Chairman of the Board of Directors or the president and shall be called by the
Chairman of the Board of Directors, the president or the Board of Directors at
the written request of the holders of not less than 51% of the voting power of
any class of the corporation's stock entitled to vote.
(b) No business shall be acted upon at a special meeting except as
set forth in the notice calling the meeting, unless one of the conditions for
the holding of a meeting without notice set forth in Section 1.05 shall be
satisfied, in which case any business may be transacted and the meeting shall be
valid for all purposes.
SECTION 1.03 PLACE OF MEETINGS. Any meeting of the stockholders of the
corporation may be held at its registered office in the State of Nevada or at
such other place in or out of the United States as the Board of Directors may
designate. A waiver of notice signed by stockholders entitled to vote may
designate any place for the holding of such meeting.
SECTION 1.04 NOTICE OF MEETINGS.
(a) The president, a vice president, the secretary, an assistant
secretary or any other individual designated by the Board of Directors shall
sign and deliver written notice of any meeting at least ten (10) days, but not
more than sixty (60) days, before the date of such meeting. The notice shall
state the place, date and time of the meeting and the purpose or purposes for
which the meeting is called.
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(b) In the case of an annual meeting, any proper business may be
presented for action, except that action on any of the following items shall be
taken only if the general nature of the proposal is stated in the notice:
(1) Action with respect to any contract or transaction between
the corporation and one or more of its directors or officers or between the
corporation and any corporation, firm or association in which one or more of the
corporation's directors or officers is a director or officer or is financially
interested;
(2) Adoption of amendments to the Articles of Incorporation; or
(3) Action with respect to a merger, share exchange,
reorganization, partial or complete liquidation, or dissolution of the
corporation.
(c) A copy of the notice shall be personally delivered or mailed
postage prepaid to each stockholder of record entitled to vote at the meeting at
the address appearing on the records of the corporation, and the notice shall be
deemed delivered the date the same is deposited in the United States mail for
transmission to such stockholder. If the address of any stockholder does not
appear upon the records of the corporation, it will be sufficient to address any
notice to such stockholder at the registered office of the corporation.
(d) The written certificate of the individual signing a notice of
meeting, setting forth the substance of the notice or having a copy thereof
attached, the date the notice was mailed or personally delivered to the
stockholders and the addresses to which the notice was mailed, shall be prima
facie evidence of the manner and fact of giving such notice.
(e) Any stockholder may waive notice of any meeting by a signed
writing, either before or after the meeting.
SECTION 1.05 MEETING WITHOUT NOTICE.
(a) Whenever all persons entitled to vote at any meeting consent,
either by:
(1) A writing on the records of the meeting or filed with the
secretary; or
(2) Presence at such meeting and oral consent entered on the
minutes; or
(3) Taking part in the deliberations at such meeting without
objection;
the doings of such meeting shall be as valid as if had at a meeting regularly
called and noticed.
(b) At such meeting any business may be transacted which is not
<PAGE>
excepted from the written consent or to the consideration of which no objection
for want of notice is made at the time.
(c) If any meeting be irregular for want of notice or of such
consent, provided a quorum was present at such meeting, the proceedings of the
meeting may be ratified and approved and rendered likewise valid and the
irregularity or defect therein waived by a writing signed by all parties having
the right to vote at such meeting.
(d) Such consent or approval may be by proxy or attorney, but all
such proxies and powers of attorney must be in writing.
SECTION 1.06 DETERMINATION OF STOCKHOLDERS OF RECORD.
(a) For the purpose of determining the stockholders entitled to
notice of and to vote at any meeting of stockholders or any adjournment thereof,
or to express consent to corporate action in writing without a meeting, or
entitled to receive payment of any distribution or the allotment of any rights,
or entitled to exercise any rights in respect of any change, conversion, or
exchange of stock or for the purpose of any other lawful action, the directors
may fix, in advance, a record date, which shall not be more than sixty (60) days
nor less than ten (10) days before the date of such meeting, nor more than sixty
(60) days prior to any other action.
(b) If no record date is fixed, the record date for determining
stockholders: (i) entitled to notice of and to vote at a meeting of stockholders
shall be at the close of business on the day next preceding the day on which
notice is given, or, if notice is waived, at the close of business on the day
next preceding the day on which the meeting is held; (ii) entitled to express
consent to corporate action in writing without a meeting shall be the day on
which the first written consent is expressed; and (iii) for any other purpose
shall be at the close of business on the day on which the Board of Directors
adopts the resolution relating thereto. A determination of stockholders of
record entitled to notice of or to vote an any meeting of stockholders shall
apply to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
SECTION 1.07 QUORUM; ADJOURNED MEETINGS.
(a) Unless the Articles of Incorporation provide for a different
proportion, stockholders holding at least a majority of the voting power of the
corporation's stock, represented in person or by proxy, are necessary to
constitute a quorum for the transaction of business at any meeting. If, on any
issue, voting by classes is required by the laws of the State of Nevada, the
Articles of Incorporation or these Bylaws, at least a majority of the voting
power within each such class is necessary to constitute a quorum of each such
class.
(b) If a quorum is not represented, a majority of the voting power so
represented may adjourn the meeting from time to time until holders of the
voting power required to constitute a quorum shall be represented. At any such
adjourned meeting
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at which a quorum shall be represented, any business may be transacted which
might have been transacted as originally called. When a stockholders' meeting
is adjourned to another time or place hereunder, notice need not be given of the
adjourned meeting if the time and place thereof are announced at the meeting at
which the adjournment is taken. The stockholders present at a duly convened
meeting may continue to transact business until adjournment, notwithstanding the
withdrawal of enough stockholders to leave less than a quorum of the voting
power.
SECTION 1.08 VOTING.
(a) Unless otherwise provided in the Articles of Incorporation, or in
the resolution providing for the issuance of the stock adopted by the Board of
Directors pursuant to authority expressly vested in it by the provisions of the
Articles of Incorporation, each stockholder of record, or such stockholder's
duly authorized proxy or attorney-in-fact, shall be entitled to one (1) vote for
each share of voting stock standing registered in such stockholder's name on the
record date.
(b) Except as otherwise provided herein, all votes with respect to
shares standing in the name of an individual on the record date (including
pledged shares) shall be cast only by that individual or such individual's duly
authorized proxy, attorney-in-fact, or voting trustee(s) pursuant to a voting
trust. With respect to shares held by a representative of the estate of a
deceased stockholder, guardian, conservator, custodian or trustee, votes may be
cast by such holder upon proof of capacity, even though the shares do not stand
in the name of such holder. In the case of shares under the control of a
receiver, the receiver may cast votes carried by such shares even though the
shares do not stand in the name of the receiver; provided, that the order of the
court of competent jurisdiction which appoints the receiver contains the
authority to cast votes carried by such shares. If shares stand in the name of
a minor, votes may be cast only by the duly appointed guardian of the estate of
such minor if such guardian has provided the corporation with written proof of
such appointment.
(c) With respect to shares standing in the name of another
corporation, partnership, limited liability company or other legal entity on the
record date, votes may be cast: (i) in the case of a corporation, by such
individual as the bylaws of such other corporation prescribe, by such individual
as may be appointed by resolution of the board of directors of such other
corporation or by such individual (including the officer making the
authorization) authorized in writing to do so by the Chairman of the Board of
Directors, president or any vice president of such corporation and (ii) in the
case of a partnership, limited liability company or other legal entity, by an
individual representing such stockholder upon presentation to the corporation of
satisfactory evidence of his authority to do so.
(d) Notwithstanding anything to the contrary herein contained, no
votes may be cast for shares owned by this corporation or its subsidiaries, if
any. If shares are held by this corporation or its subsidiaries, if any, in a
fiduciary capacity, no
<PAGE>
votes shall be cast with respect thereto on any matter except to the extent that
the beneficial owner thereof possesses and exercises either a right to vote or
to give the corporation holding the same binding instructions on how to vote.
(e) Any holder of shares entitled to vote on any matter may cast a
portion of the votes in favor of such matter and refrain from casting the
remaining votes or cast the same against the proposal, except in the case of
elections of directors. If such holder entitled to vote fails to specify the
number of affirmative votes, it will be conclusively presumed that the holder is
casting affirmative votes with respect to all shares held.
<PAGE>
(f) With respect to shares standing in the name of two or more
persons, whether fiduciaries, members of a partnership, joint tenants, tenants
in common, husband and wife as community property, tenants by the entirety,
voting trustees, persons entitled to vote under a stockholder voting agreement
or otherwise and shares held by two or more persons (including proxy holders)
having the same fiduciary relationship in respect to the same shares, votes may
be cast in the following manner:
(1) If only one person votes, the vote of such person binds all.
(2) If more than one person casts votes, the act of the majority
so voting binds all.
(3) If more than one person casts votes, but the vote is evenly
split on a particular matter, the votes shall be deemed cast proportionately, as
split.
(g) If a quorum is present, unless the Articles of Incorporation
provide for a different proportion, the affirmative vote of holders of at least
a majority of the voting power represented at the meeting and entitled to vote
on any matter shall be the act of the stockholders, unless voting by classes is
required for any action of the stockholders by the laws of the State of Nevada,
the Articles of Incorporation or these Bylaws, in which case the affirmative
vote of holders of a least a majority of the voting power of each such class
shall be required.
SECTION 1.09 PROXIES. At any meeting of stockholders, any holder of
shares entitled to vote may designate, in a manner permitted by the laws of the
State of Nevada, another person or persons to act as a proxy or proxies. No
proxy is valid after the expiration of six (6) months from the date of its
creation, unless it is coupled with an interest or unless otherwise specified in
the proxy. In no event shall the term of a proxy exceed seven (7) years from
the date of its creation. Every proxy shall continue in full force and effect
until its expiration or revocation in a manner permitted by the laws of the
State of Nevada.
SECTION 1.10 ORDER OF BUSINESS. At the annual stockholder's meeting, the
regular order of business shall be as follows:
1. Determination of stockholders present and existence of quorum,
in person or by proxy;
2. Reading and approval of the minutes of the previous meeting or
meetings;
3. Reports of the Board of Directors, and, if any, the president,
treasurer and secretary of the corporation;
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4. Reports of committees;
5. Election of directors;
6. Unfinished business;
7. New business;
8. Adjournment.
SECTION 1.11 ABSENTEES' CONSENT TO MEETINGS. Transactions of any meeting
of the stockholders are as valid as though had at a meeting duly held after
regular call and notice if a quorum is represented, either in person or by
proxy, and if, either before or after the meeting, each of the persons entitled
to vote, not represented in person or by proxy (and those who, although present,
either object at the beginning of the meeting to the transaction of any business
because the meeting has not been lawfully called or convened or expressly object
at the meeting to the consideration of matters not included in the notice which
are legally required to be included therein), signs a written waiver of notice
and/or consent to the holding of the meeting or an approval of the minutes
thereof. All such waivers, consents, and approvals shall be filed with the
corporate records and made a part of the minutes of the meeting. Attendance of
a person at a meeting shall constitute a waiver of notice of such meeting,
except when the person objects at the beginning of the meeting to the
transaction of any business because the meeting is not lawfully called or
convened and except that attendance at a meeting is not a waiver of any right to
object to the consideration of matters not properly included in the notice if
such objection is expressly made at the time any such matters are presented at
the meeting. Neither the business to be transacted at nor the purpose of any
regular or special meeting of stockholders need be specified in any written
waiver of notice or consent, except as otherwise provided in Section 1.04(a) and
(b) of these Bylaws.
SECTION 1.12 TELEPHONIC MEETINGS. Stockholders may participate in a
meeting of the stockholders by means of a telephone conference or similar method
of communication by which all individuals participating in the meeting can hear
each other. Participation in a meeting pursuant to this Section 1.12
constitutes presence in person at the meeting.
SECTION 1.13 ACTION WITHOUT MEETING. Any action required or permitted to
be taken at a meeting of the stockholders may be taken without a meeting if a
written consent thereto is signed by the holders of the voting power of the
corporation that would be required at a meeting to constitute the act of the
stockholders. Whenever action is taken by written consent, a meeting of
stockholders need not be called or notice given. The written consent may be
signed in counterparts and must be filed with the minutes of the proceedings of
the stockholders.
<PAGE>
ARTICLE II
DIRECTORS
SECTION 2.01 NUMBER, TENURE, AND QUALIFICATIONS. Unless a larger number
is required by the laws of the State of Nevada or the Articles of Incorporation
or until changed in the manner provided herein, the Board of Directors of the
corporation shall consist of at least one (1) individual who shall be elected at
the annual meeting of the stockholders of the corporation and who shall hold
office for one (1) year or until his or her successor or successors are elected
and qualify. A director need not be a stockholder of the corporation.
<PAGE>
SECTION 2.02 CHANGE IN NUMBER. Subject to any limitations in the laws of
the State of Nevada, the Articles of Incorporation or these Bylaws, the number
of directors may be changed from time to time by resolution adopted by the Board
of Directors or the stockholders.
SECTION 2.03 REDUCTION IN NUMBER. No reduction of the number of
directors shall have the effect of removing any director prior to the expiration
of his term of office.
SECTION 2.04 RESIGNATION. Any director may resign effective upon giving
written notice to the Chairman of the Board of Directors, the president, the
secretary, or in the absence of all of them, any other officer, unless the
notice specifies a later time for effectiveness of such resignation. A majority
of the remaining directors, though less than a quorum, may appoint a successor
to take office when the resignation becomes effective, each director so
appointed to hold office during the remainder of the term of office of the
resigning director.
SECTION 2.05 REMOVAL.
(a) The Board of Directors of the corporation, by majority vote, may
declare vacant the office of a director who has been declared incompetent by an
order of a court of competent jurisdiction or convicted of a felony.
(b) Any director may be removed from office by the vote or written
consent of stockholders representing not less than two-thirds of the voting
power of the issued and outstanding stock entitled to vote, except that if the
corporation's Articles of Incorporation provide for the election of directors by
cumulative voting, no director may be removed from office except upon the vote
of stockholders owning sufficient shares to have prevented such director's
election to office in the first instance.
SECTION 2.06 VACANCIES.
(a) All vacancies, including those caused by an increase in the
number of directors, may be filled by a majority of the remaining directors,
though less than a quorum, unless it is otherwise provided in the Articles of
Incorporation unless, in the case of removal of a director, the stockholders by
a majority of voting power shall have appointed a successor to the removed
director. Subject to the provisions of Subsection (b) below, (i) in the case of
the replacement of a director, the appointed director shall hold office during
the remainder of the term of office of the replaced director, and (ii) in the
case of an increase in the number of directors, the appointed director shall
hold office until the next meeting of stockholders at which directors are
elected.
(b) If, after the filling of any vacancy by the directors, the
directors then in office who have been elected by the stockholders shall
constitute less than a majority of the directors then in office, any holder or
holders of an aggregate of five percent (5%) or more of the total voting power
entitled to vote may call a special meeting of the stockholders to elect the
entire Board of Directors. The term of office of any director shall terminate
upon such election of a successor.
<PAGE>
SECTION 2.07 ANNUAL AND REGULAR MEETINGS. Immediately following the
adjournment of, and at the same place as, the annual or any special meeting of
the stockholders at which directors are elected other than pursuant to Section
2.06 of this Article, the Board of Directors, including directors newly elected,
shall hold its annual meeting without notice, other than this provision, to
elect officers and to transact such further business as may be necessary or
appropriate. The Board of Directors may provide by resolution the place, date,
and hour for holding regular meetings between annual meetings.
SECTION 2.08 SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the Chairman of the Board of Directors, or if there
be no Chairman, by the president or secretary, and shall be called by the
Chairman of the Board of Directors, the president or the secretary upon the
request of any two (2) directors. If the Chairman of the Board of Directors, or
if there be no Chairman, both the president and secretary, refuses or neglects
to call such special meeting, a special meeting may be called by notice signed
by any two (2) directors.
SECTION 2.09 PLACE OF MEETINGS. Any regular or special meeting of the
directors of the corporation may be held at such place as the Board of
Directors, or in the absence of such designation, as the notice calling such
meeting, may designate. A waiver of notice signed by directors may designate
any place for the holding of such meeting.
SECTION 2.10 NOTICE OF MEETINGS. Except as otherwise provided in Section
2.07, there shall be delivered to all directors, at least forty-eight (48) hours
before the time of such meeting, a copy of a written notice of any meeting by
delivery of such notice personally by mailing such notice postage prepaid or by
telegram. Such notice shall be addressed in the manner provided for notice to
stockholders in Section 1.04(c). If mailed, the notice shall be deemed
delivered two (2) business days following the date the same is deposited in the
United States mail, postage prepaid. Any director may waive notice of any
meeting, and the attendance of a director at a meeting and oral consent entered
on the minutes of such meeting shall constitute waiver of notice of the meeting
unless such director objects, prior to the transaction of any business, that the
meeting was not lawfully called or convened. Attendance for the express purpose
of objecting to the transaction of business because the meeting was not properly
called or convened shall not constitute presence nor a waiver of notice for
purposes hereof.
SECTION 2.11 QUORUM; ADJOURNED MEETINGS.
(a) A majority of the directors in office, at a meeting duly
assembled, is necessary to constitute a quorum for the transaction of business.
(b) At any meeting of the Board of Directors where a quorum is not
present, a majority of those present may adjourn, from time to time, until a
quorum is
<PAGE>
present, and no notice of such adjournment shall be required. At any adjourned
meeting where a quorum is present, any business may be transacted which could
have been transacted at the meeting originally called.
SECTION 2.12 BOARD OF DIRECTORS' DECISIONS. The affirmative vote of a
majority of the directors present at a meeting at which a quorum is present is
the act of the Board of Directors.
SECTION 2.13 TELEPHONIC MEETINGS. Members of the Board of Directors or
of any committee designated by the Board of Directors may participate in a
meeting of the Board of Directors or such committee by means of a telephone
conference or similar method of communication by which all persons participating
in such meeting can hear each other. Participation in a meeting pursuant to
this Section 2.13 constitutes presence in person at the meeting.
SECTION 2.14 ACTION WITHOUT MEETING. Any action required or permitted to
be taken at a meeting of the Board of Directors or of a committee thereof may be
taken without a meeting if, before or after the action, a written consent
thereto is signed by all of the members of the Board of Directors or the
committee. The written consent may be signed in counterparts and must be filed
with the minutes of the proceedings of the Board of Directors or committee.
SECTION 2.15 POWERS AND DUTIES.
(a) Except as otherwise restricted in the laws of the State of Nevada
or the Articles of Incorporation, the Board of Directors has full control over
the affairs of the corporation. The Board of Directors may delegate any of its
authority to manage, control or conduct the business of the corporation to any
standing or special committee or to any officer or agent and to appoint any
persons to be agents of the corporation with such powers, including the power to
subdelegate, and upon such terms as may be deemed fit.
(b) The Board of Directors may present to the stockholders at annual
meetings of the stockholders, and when called for by a majority vote of the
stockholders at an annual meeting or a special meeting of the stockholders shall
so present, a full and clear report of the condition of the corporation.
(c) The Board of Directors, in its discretion, may submit any
contract or act for approval or ratification at any annual meeting of the
stockholders or any special meeting properly called for the purpose of
considering any such contract or act, provided a quorum is present.
SECTION 2.16 COMPENSATION. The directors and members of committees shall
be allowed and paid all necessary expenses incurred in attending any meetings of
the Board of Directors or committees. Subject to any limitations contained in
the laws of the State of Nevada, the Articles of Incorporation or any contract
or agreement to which the corporation is a party, directors may receive
compensation for their services as directors as determined by the Board of
Directors, but only during such times as the
<PAGE>
corporation may legally declare and pay distributions on its stock, unless the
payment of such compensation is first approved by the stockholders entitled to
vote for the election of directors.
SECTION 2.17 BOARD OF DIRECTORS' OFFICERS; CHAIRMAN PRESIDING OVER
MEETINGS.
(a) At its annual meeting, the Board of Directors may elect, from
among its members, a Chairman of the Board of Directors, who may serve as the
chief executive officer of the corporation and who may preside at meetings of
the Board of Directors and at meetings of the stockholders. If no Chairman of
the Board of Directors is elected, or if the stockholders or the Board of
Directors determine that the Chairman of the Board of Directors shall not
preside at a meeting of the stockholders or of the Board, respectively, or if
the Chairman of the Board of Directors elects not to preside at a meeting or is
absent, the stockholders and the Board of Directors may appoint a chairman, who
need not be from among their or its members, who may preside over such meetings
of the stockholders and the Board of Directors, respectively, or, in the absence
of any such appointment, the president shall preside at such meetings and
perform such other duties as shall be prescribed by the Board of Directors. The
Board of Directors shall also elect such other officers of the Board of
Directors and for such term as it may, from time to time, determine advisable.
(b) Any vacancy in any office of the Board of Directors because of
death, resignation, removal or otherwise may be filled by the Board of Directors
for the unexpired portion of the term of such office.
SECTION 2.18 ORDER OF BUSINESS. The order of business at any meeting of
the Board of Directors shall be as follows:
1. Determination of members present and existence of quorum;
2. Reading and approval of the minutes of any previous meeting or
meetings;
3. Reports of officers and committeemen;
4. Election of officers (annual meeting);
5. Unfinished business;
6. New business;
7. Adjournment.
ARTICLE III
OFFICERS
SECTION 3.01 ELECTION. The Board of Directors, at its annual meeting,
shall elect
<PAGE>
a president, a secretary and a treasurer to hold office for a term of one (1)
year or until their successors are chosen and qualify. Any individual may hold
two or more offices. The Board of Directors may, from time to time, by
resolution, elect a chief executive officer and one or more vice presidents,
assistant secretaries and assistant treasurers and appoint agents of the
corporation, prescribe their duties and fix their compensation.
SECTION 3.02 REMOVAL; RESIGNATION. Any officer or agent elected or
appointed by the Board of Directors may be removed by it with or without cause.
Any officer may resign at any time upon written notice to the corporation. Any
such removal or resignation shall be subject to the rights, if any, of the
respective parties under any contract between the corporation and such officer
or agent.
<PAGE>
SECTION 3.03 VACANCIES. Any vacancy in any office because of death,
resignation, removal or otherwise may be filled by the Board of Directors for
the unexpired portion of the term of such office.
SECTION 3.04 PRESIDENT; CHIEF EXECUTIVE OFFICER.
(a) The president may also be the chief executive officer of the
corporation, or, if the Chairman of the Board of Directors or any other
individual has been designated as the chief executive officer, the president
shall be the chief operations officer of the corporation, in either case subject
to the supervision and control of the Board of Directors. The president shall
direct the corporate affairs, with full power to execute all resolutions and
orders of the Board of Directors not expressly delegated to some other officer
or agent of the corporation.
(b) The president shall have full power and authority on behalf of
the corporation to attend and to act and to vote, or designate such other
officer or agent of the corporation to attend and to act and to vote, at any
meetings of the stockholders of any corporation in which the corporation may
hold stock and, at any such meetings, shall possess and may exercise any and all
rights and powers incident to the ownership of such stock. The Board of
Directors, by resolution from time to time, may confer like powers on any person
or persons in place of the president to exercise such powers for these purposes.
(c) The chief executive officer shall perform such duties as usually
pertain to the position of chief executive officer and such duties as may be
prescribed by the Board of Directors.
SECTION 3.05 VICE PRESIDENTS. The Board of Directors may elect one or
more vice presidents who shall be vested with all the powers and perform all the
duties of the president whenever the president is absent or unable to act and
such other duties as shall be prescribed by the Board of Directors or the
president.
SECTION 3.06 SECRETARY. The secretary shall keep, or cause to be kept,
the minutes of proceedings of the stockholders and the Board of Directors in
books provided for that purpose. The secretary shall attend to the giving and
service of all notices of the corporation, may sign with the president in the
name of the corporation all contracts in which the corporation is authorized to
enter, shall have the custody or designate control of the corporate seal, shall
affix the corporate seal to all certificates of stock duly issued by the
corporation, shall have charge or designate control of stock certificate books,
transfer books and stock ledgers, and such other books and papers as the Board
of Directors or appropriate committee may direct, and shall, in general, perform
all duties incident to the office of the secretary.
<PAGE>
SECTION 3.07 ASSISTANT SECRETARIES. The Board of Directors may appoint
one or more assistant secretaries who shall have such powers and perform such
duties as may be prescribed by the Board of Directors or the secretary.
SECTION 3.08 TREASURER. The treasurer shall be the chief financial
officer of the corporation, subject to the supervision and control of the Board
of Directors, and shall have custody of all the funds and securities of the
corporation. When necessary or proper, the treasurer shall endorse on behalf of
the corporation for collection checks, notes, and other obligations, and shall
deposit all monies to the credit of the corporation in such bank or banks or
other depository as the Board of Directors may designate, and shall sign all
receipts and vouchers for payments made by the corporation. Unless otherwise
specified by the Board of Directors, the treasurer may sign with the president
all bills of exchange and promissory notes of the corporation, shall also have
the care and custody of the stocks, bonds, certificates, vouchers, evidence of
debts, securities, and such other property belonging to the corporation as the
Board of Directors shall designate, and shall sign all papers required by law,
by these Bylaws, or by the Board of Directors to be signed by the treasurer.
The treasurer shall enter, or cause to be entered, regularly in the financial
records of the corporation, to be kept for that purpose, full and accurate
accounts of all monies received and paid on account of the corporation and,
whenever required by the Board of Directors, the treasurer shall render a
statement of any or all accounts. The treasurer shall at all reasonable times
exhibit the books of account to any director of the corporation and shall
perform all acts incident to the position of treasurer subject to the control of
the Board of Directors. The treasurer shall, if required by the Board of
Directors, give bond to the corporation in such sum and with such security as
shall be approved by the Board of Directors for the faithful performance of all
the duties of treasurer and for restoration to the corporation, in the event of
the treasurer's death, resignation, retirement or removal from office, of all
books, records, papers, vouchers, money and other property in the treasurer's
custody or control and belonging to the corporation. The expense of such bond
shall be borne by the corporation.
SECTION 3.09 ASSISTANT TREASURERS. The Board of Directors may appoint
one or more assistant treasurers who shall have such powers and perform such
duties as may be prescribed by the Board of Directors or the treasurer. The
Board of Directors may require an assistant treasurer to give a bond to the
corporation in such sum and with such security as it may approve, for the
faithful performance of the duties of assistant treasurer, and for restoration
to the corporation, in the event of the assistant treasurer's death,
resignation, retirement or removal from office, of all books, records, papers,
vouchers, money and other property in the assistant treasurer's custody or
control and belonging to the corporation. The expense of such bond shall be
borne by the corporation.
ARTICLE IV
CAPITAL STOCK
SECTION 4.01 ISSUANCE. Shares of the corporation's authorized stock
shall, subject to any provisions or limitations of the laws of the State of
Nevada, the Articles of Incorporation or any contracts or agreements to which
the corporation may be a party, be issued in such manner, at such times, upon
such conditions and for such
<PAGE>
consideration as shall be prescribed by the Board of Directors.
SECTION 4.02 CERTIFICATES. Ownership in the corporation shall be
evidenced by certificates for shares of stock in such form as shall be
prescribed by the Board of Directors, shall be under the seal of the corporation
and shall be manually signed by the president or a vice president and also by
the secretary or an assistant secretary; provided, however, whenever any
certificate is countersigned or otherwise authenticated by a transfer agent or
transfer clerk, and by a registrar, then a facsimile of the signatures of said
officers of the corporation may be printed or lithographed upon the certificate
in lieu of the actual signatures. If the Corporation uses facsimile signatures
of its officers on its stock certificates, it shall not act as registrar of its
own stock, but its transfer agent and registrar may be identical if the
institution acting in those dual capacities countersigns any stock certificates
in both capacities. Each certificate shall contain the name of the record
holder, the number, designation, if any, class or series of shares represented,
a statement or summary of any applicable rights, preferences, privileges or
restrictions thereon, and a statement, if applicable, that the shares are
assessable. All certificates shall be consecutively numbered. If provided by
the stockholder, the name, address and federal tax identification number of the
stockholder, the number of shares, and the date of issue shall be entered in the
stock transfer records of the corporation.
SECTION 4.03 SURRENDERED; LOST OR DESTROYED CERTIFICATES. All
certificates surrendered to the corporation, except those representing shares of
treasury stock, shall be canceled and no new certificate shall be issued until
the former certificate for a like number of shares shall have been canceled,
except that in case of a lost, stolen, destroyed or mutilated certificate, a new
one may be issued therefor. However, any stockholder applying for the issuance
of a stock certificate in lieu of one alleged to have been lost, stolen,
destroyed or mutilated shall, prior to the issuance of a replacement, provide
the corporation with his, her or its affidavit of the facts surrounding the
loss, theft, destruction or mutilation and, if required by the Board of
Directors, an indemnity bond in an amount not less than twice the current market
value of the stock, and upon such terms as the treasurer or the Board of
Directors shall require which shall indemnify the corporation against any loss,
damage, cost or inconvenience arising as a consequence of the issuance of a
replacement certificate.
SECTION 4.04 REPLACEMENT CERTIFICATE. When the Articles of Incorporation
are amended in any way affecting the statements contained in the certificates
for outstanding shares of capital stock of the corporation or it becomes
desirable for any reason, in the discretion of the Board of Directors,
including, without limitation, the merger of the corporation with another
corporation or the reorganization of the corporation, to cancel any outstanding
certificate for shares and issue a new certificate therefor conforming to the
rights of the holder, the Board of Directors may order any holders of
outstanding certificates for shares to surrender and exchange the same for new
certificates within a reasonable time to be fixed by the Board of Directors.
The order may provide that a holder of any certificate(s) ordered to be
surrendered shall not be entitled to vote, receive distributions or exercise any
other rights of stockholders of record until the holder has complied with the
order, but the order operates to suspend such rights only after notice and until
compliance.
<PAGE>
SECTION 4.05 TRANSFER OF SHARES. No transfer of stock shall be valid as
against the corporation except on surrender and cancellation of the certificates
therefor accompanied by an assignment or transfer by the registered owner made
either in person or under assignment. Whenever any transfer shall be expressly
made for collateral security and not absolutely, the collateral nature of the
transfer shall be reflected in the entry of transfer in the records of the
corporation.
SECTION 4.06 TRANSFER AGENT; REGISTRARS. The Board of Directors may
appoint one or more transfer agents, transfer clerk and registrars of transfer
and may require all certificates for shares of stock to bear the signature of
such transfer agent, transfer clerk and/or registrar of transfer.
SECTION 4.07 STOCK TRANSFER RECORDS. The stock transfer records shall be
closed for a period of at least ten (10) days prior to all meetings of the
stockholders and shall be closed for the payment of distributions as provided in
Article V hereof and during such periods as, from time to time, may be fixed by
the Board of Directors, and, during such periods, no stock shall be transferable
for purposes of Article V and no voting rights shall be deemed transferred
during such periods. Subject to the forgoing limitations, nothing contained
herein shall cause transfers during such periods to be void or voidable.
SECTION 4.08 MISCELLANEOUS. The Board of Directors shall have the power
and authority to make such rules and regulations not inconsistent herewith as it
may deem expedient concerning the issue, transfer, and registration of
certificates for shares of the corporation's stock.
ARTICLE V
DISTRIBUTIONS
SECTION 5.01 Distributions may be declared, subject to the provisions of
the laws of the State of Nevada and the Articles of Incorporation, by the Board
of Directors at any regular or special meeting and may be paid in cash,
property, shares of corporate stock, or any other medium. The Board of
Directors may fix in advance a record date, as provided in Section 1.06, prior
to the distribution for the purpose of determining stockholders entitled to
receive any distribution. The Board of Directors may close the stock transfer
books for such purpose for a period of not more than ten (10) days prior to the
date of such distribution.
ARTICLE VI
RECORDS; REPORTS; SEAL; AND FINANCIAL MATTERS
SECTION 6.01 RECORDS. All original records of the corporation shall be
kept by or under the direction of the secretary or at such places as may be
prescribed by the Board of Directors.
SECTION 6.02 DIRECTORS' AND OFFICERS' RIGHT OF INSPECTION. Every
director and officer shall have the absolute right at any reasonable time for a
purpose reasonably
<PAGE>
related to the exercise of such individual's duties to inspect and copy all of
the corporation's books, records, and documents of every kind and to inspect the
physical properties of the corporation and/or its subsidiary corporations. Such
inspection may be made in person or by agent or attorney.
SECTION 6.03 CORPORATE SEAL. The Board of Directors may, by resolution,
authorize a seal, and the seal may be used by causing it, or a facsimile, to be
impressed or affixed or reproduced or otherwise. Except when otherwise
specifically provided herein, any officer of the corporation shall have the
authority to affix the seal to any document requiring it.
SECTION 6.04 FISCAL YEAR-END. The fiscal year-end of the corporation
shall be such date as may be fixed from time to time by resolution of the Board
of Directors.
SECTION 6.05 RESERVES. The Board of Directors may create, by resolution,
such reserves as the directors may, from time to time, in their discretion,
think proper to provide for contingencies, or to equalize distributions or to
repair or maintain any property of the corporation, or for such
<PAGE>
other purpose as the Board of Directors may deem beneficial to the corporation,
and the directors may modify or abolish any such reserves in the manner in which
they were created.
ARTICLE VII
INDEMNIFICATION
SECTION 7.01 INDEMNIFICATION AND INSURANCE.
(a) INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(i) For purposes of this Article, (A) "Indemnitee" shall mean
each director or officer who was or is a party to, or is threatened to be made a
party to, or is otherwise involved in, any Proceeding (as hereinafter defined),
by reason of the fact that he or she is or was a director or officer of the
corporation or is or was serving in any capacity at the request of the
corporation as a director, officer, employee, agent, partner, or fiduciary of,
or in any other capacity for, another corporation or any partnership, joint
venture, trust, or other enterprise; and (B) "Proceeding" shall mean any
threatened, pending or completed action or suit (including without limitation an
action, suit or proceeding by or in the right of the corporation), whether
civil, criminal, administrative or investigative.
(ii) Each Indemnitee shall be indemnified and held harmless by
the corporation for all actions taken by him or her and for all omissions
(regardless of the date of any such action or omission), to the fullest extent
permitted by Nevada law, against all expense, liability and loss (including
without limitation attorneys' fees, judgments, fines, taxes, penalties, and
amounts paid or to be paid in settlement) reasonably incurred or suffered by the
Indemnitee in connection with any Proceeding.
(iii) Indemnification pursuant to this Section shall continue as
to an Indemnitee who has ceased to be a director or officer and shall inure to
the benefit of his or her heirs, executors and administrators.
(b) INDEMNIFICATION OF EMPLOYEES AND OTHER PERSONS.
The corporation may, by action of its Board of Directors and to
the extent provided in such action, indemnify employees and other persons as
though they were Indemnitees.
(c) NON-EXCLUSIVITY OF RIGHTS.
The rights to indemnification provided in this Article shall not
be exclusive of any other rights that any person may have or hereafter acquire
under any statute, provision of the corporation's Articles of Incorporation or
Bylaws, agreement,
<PAGE>
vote of stockholders or directors, or otherwise.
(d) INSURANCE.
The corporation may purchase and maintain insurance or make other
financial arrangements on behalf of any person who is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise for any
liability asserted against him or her and liability and expenses incurred by him
or her in his or her capacity as a director, officer, employee or agent, or
arising out of his or her status as such, whether or not the corporation has the
authority to indemnify him or her against such liability and expenses.
(e) OTHER FINANCIAL ARRANGEMENTS.
The other financial arrangements which may be made by the
corporation may include the following (i) the creation of a trust fund; (ii) the
establishment of a program of self-insurance; (iii) the securing of its
obligation of indemnification by granting a security interest or other lien on
any assets of the corporation; (iv) the establishment of a letter of credit,
guarantee or surety. No financial arrangement made pursuant to this subsection
may provide protection for a person adjudged by a court of competent
jurisdiction, after exhaustion of all appeals therefrom, to be liable for
intentional misconduct, fraud, or a knowing violation of law, except with
respect to advancement of expenses or indemnification ordered by a court.
(f) OTHER MATTERS RELATING TO INSURANCE OR FINANCIAL ARRANGEMENTS.
Any insurance or other financial arrangement made on behalf of a
person pursuant to this section may be provided by the corporation or any other
person approved by the Board of Directors, even if all or part of the other
person's stock or other securities is owned by the corporation. In the absence
of fraud:
(i) the decision of the Board of Directors as to the propriety
of the terms and conditions of any insurance or other financial arrangement made
pursuant to this section and the choice of the person to provide the insurance
or other financial arrangement is conclusive; and
(ii) the insurance or other financial arrangement:
(A) is not void or voidable; and
(B) does not subject any director approving it to personal
liability for his action, even if a director approving
the insurance or other financial arrangement is a
beneficiary of the insurance or other financial
arrangement.
<PAGE>
SECTION 7.02 AMENDMENT. The provisions of this Article relating to
indemnification shall constitute a contract between the corporation and each of
its directors and officers which may be modified as to any director or officer
only with that person's consent or as specifically provided in this Section.
Notwithstanding any other provision of these Bylaws relating to their amendment
generally, any repeal or amendment of this Article which is adverse to any
director or officer shall apply to such director or officer only on a
prospective basis and shall not limit the rights of an Indemnitee to
indemnification with respect to any action or failure to act occurring prior to
the time of such repeal or amendment. Notwithstanding any other provision of
these Bylaws, no repeal or amendment of these Bylaws shall affect any or all of
this Article so as to limit or reduce the indemnification in any manner unless
adopted by (a) the unanimous vote of the directors of the
<PAGE>
corporation then serving, or (b) by the stockholders as set forth in Article
VIII hereof; provided that no such amendment shall have retroactive effect
inconsistent with the preceding sentence.
SECTION 7.03 CHANGES IN NEVADA LAW. References in this Article to Nevada
law or to any provision thereof shall be to such law as it existed on the date
this Article was adopted or as such law thereafter may be changed; provided that
(a) in the case of any change which expands the liability of directors or
officers or limits the indemnification rights or the rights to advancement of
expenses which the corporation may provide, the rights to limited liability, to
indemnification and to the advancement of expenses provided in the corporation's
Articles of Incorporation and/or these Bylaws shall continue as theretofore to
the extent permitted by law; and (b) if such change permits the corporation,
without the requirement of any further action by stockholders or directors, to
limit further the liability of directors (or limit the liability of officers) or
to provide broader indemnification rights or rights to the advancement of
expenses than the corporation was permitted to provide prior to such change,
then liability thereupon shall be so limited and the rights to indemnification
and the advancement of expenses shall be so broadened to the extent permitted by
law.
ARTICLE VIII
AMENDMENT OR REPEAL
SECTION 8.01 AMENDMENT. Except as otherwise restricted in the Articles
of Incorporation or these Bylaws:
(a) Any provision of these Bylaws may be altered, amended or repealed
at the annual or any regular meeting of the Board of Directors without prior
notice, or at any special meeting of the Board of Directors if notice of such
alteration, amendment or repeal be contained in the notice of such special
meeting.
(b) These Bylaws may also be altered, amended, or repealed at a duly
convened meeting of the stockholders by the affirmative vote of the holders of
51% of the voting power of the corporation entitled to vote. The stockholders
may provide by resolution that any Bylaw provision altered, amended or repealed
by them, or any Bylaw provision adopted by them, may not be altered, amended or
repealed by the Board of Directors.
CERTIFICATION
The undersigned duly elected secretary of the corporation, does hereby
certify that the foregoing Bylaws were adopted by the Board of Directors on the
2nd day of December, 1997.
<PAGE>
/s/ Ronald Dictrow
---------------------------------
Ronald Dictrow, Secretary
<PAGE>
OPERATING AGREEMENT
OF
ALADDIN GAMING, LLC,
A NEVADA LIMITED LIABILITY COMPANY
<PAGE>
TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS
1.1 Adjusted Capital Account Deficit. . . . . . . . . . . . . . . . . . . 1
1.2 Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Aladdin Enterprises . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 Articles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 Assumed Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7 Available Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.8 Bank Financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.9 Bank Lenders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.10 Bankruptcy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.11 Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.12 Board Member. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.13 Board Supermajority . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.14 Capital Account . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.15 Capital Contribution. . . . . . . . . . . . . . . . . . . . . . . . . 3
1.16 Certificate of Shares . . . . . . . . . . . . . . . . . . . . . . . . 3
1.17 Code. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.18 Common Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.19 Completion Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.20 Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.21 Covered Person. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.23 Discount Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.24 Distribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.25 Employment and Consulting Agreements. . . . . . . . . . . . . . . . . 4
1.26 Executive Management Committee. . . . . . . . . . . . . . . . . . . . 5
1.27 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.28 Gaming Problem. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.29 Gross Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.30 Guaranteed Payment. . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.31 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.32 LCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.33 Member. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.34 Member Nonrecourse Debt . . . . . . . . . . . . . . . . . . . . . . . 6
1.35 Member Nonrecourse Debt Minimum Gain. . . . . . . . . . . . . . . . . 6
1.36 Member Nonrecourse Deductions . . . . . . . . . . . . . . . . . . . . 7
i
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1.37 Minimum Gain. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.38 Nevada Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.39 Nevada Commission . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.40 Nevada Gaming Authorities . . . . . . . . . . . . . . . . . . . . . . 7
1.41 Non-Exercise Notice . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.42 Nonrecourse Deductions. . . . . . . . . . . . . . . . . . . . . . . . 7
1.43 NRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.44 Officers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.45 Percentage Interest . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.46 Person. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.47 Profits and Losses. . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.48 Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.49 Purchase Option . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.50 Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.51 Records Office. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.52 Related Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.53 Required Series A Capital Account Balance . . . . . . . . . . . . . . 9
1.54 Salle Privee Facilities . . . . . . . . . . . . . . . . . . . . . . . 9
1.55 Secretary of State. . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.56 Series A Preferred Return . . . . . . . . . . . . . . . . . . . . . . 9
1.57 Series A Preferred Shares . . . . . . . . . . . . . . . . . . . . . . 9
1.58 Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.59 Subsidiary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.60 Substituted Member. . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.61 Total Common Shares . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.62 Transfer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.63 Treasury Regulations. . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE II
INTRODUCTORY MATTERS
2.1 Records Office. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.2 Other Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.3 Resident Agent and Registered Office. . . . . . . . . . . . . . . . . 10
2.4 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.5 No Liability to Third Parties . . . . . . . . . . . . . . . . . . . . 11
ii
<PAGE>
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ARTICLE III
INTERESTS
3.1 Member's Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.2 Classes of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.3 UCC Election. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE IV
CAPITAL ACCOUNTS
4.1 Initial Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.2 Capital Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.5 Additional Capital Contributions. . . . . . . . . . . . . . . . . . . 12
ARTICLE V
PROFITS AND LOSSES
5.1 Profits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.2 Losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.3 Special Allocation to Series A Preferred Shares . . . . . . . . . . . 13
5.4 Special Allocations . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.5 Section 704(c) Allocation . . . . . . . . . . . . . . . . . . . . . . 15
5.6 Federal Income Tax. . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE VI
DISTRIBUTIONS
6.1 Priority Distributions. . . . . . . . . . . . . . . . . . . . . . . . 16
6.2 Tax Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.3 Distributions on Common Shares. . . . . . . . . . . . . . . . . . . . 16
6.4 Limitations on Distribution . . . . . . . . . . . . . . . . . . . . . 17
iii
<PAGE>
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ARTICLE VII
MEMBERS
7.1 Powers of Members . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.2 Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . 17
7.3 Action by the Members . . . . . . . . . . . . . . . . . . . . . . . . 17
7.4 Meetings of Members . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.5 Waiver of Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.6 Adjourned Meetings and Notice Thereof . . . . . . . . . . . . . . . . 18
7.7 Action by Written Consent . . . . . . . . . . . . . . . . . . . . . . 18
7.8 Telephonic Meetings . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.9 Quorum. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VIII
RESIGNATION, TRANSFER OF SHARES,
CHANGE IN CONTROL, TRUST MEMBERS
8.1 Resignation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.2 Transfers of Interests. . . . . . . . . . . . . . . . . . . . . . . . 19
8.3 Gaming Control Act. . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.4 Further Restriction on Transfer of Shares . . . . . . . . . . . . . . 19
8.5 Gaming Holdings Shares. . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE IX
BOARD OF MANAGERS
9.1 Board of Managers . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9.2 Powers and Duties of the Board. . . . . . . . . . . . . . . . . . . . 20
9.3 Election of Officers. . . . . . . . . . . . . . . . . . . . . . . . . 21
9.4 Removal, Resignation and Vacancies. . . . . . . . . . . . . . . . . . 21
9.5 Meetings of the Board . . . . . . . . . . . . . . . . . . . . . . . . 21
9.6 Compensation of Board Members; Compensation of Officers . . . . . . . 22
9.7 Expense Reimbursements. . . . . . . . . . . . . . . . . . . . . . . . 22
iv
<PAGE>
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ARTICLE X
ACCOUNTING, RECORDS AND BANK ACCOUNTS
10.1 Records and Accounting. . . . . . . . . . . . . . . . . . . . . . . . 23
10.2 Access to Accounting Records. . . . . . . . . . . . . . . . . . . . . 23
10.3 Annual Tax Information. . . . . . . . . . . . . . . . . . . . . . . . 23
10.4 Obligations of Members to Report Allocations. . . . . . . . . . . . . 23
10.5 Tax Status. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE XI
DISSOLUTION OF THE COMPANY AND
TERMINATION OF A MEMBER'S INTEREST
11.1 Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11.2 Company's Option To Purchase Bankrupt Member's Interest . . . . . . . 24
11.3 Distribution on Dissolution and Liquidation . . . . . . . . . . . . . 24
ARTICLE XII
LIABILITY, EXCULPATION AND INDEMNIFICATION
12.1 Exculpation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
12.2 Fiduciary Duty. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
12.3 Outside Businesses. . . . . . . . . . . . . . . . . . . . . . . . . . 26
12.4 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
12.5 Indemnity for Actions By or In the Right of the Company. . . . . . . 27
12.6 Indemnity If Successful . . . . . . . . . . . . . . . . . . . . . . . 27
12.7 Determination of Right to Indemnification . . . . . . . . . . . . . . 27
12.8 Advance Payment of Expenses . . . . . . . . . . . . . . . . . . . . . 28
12.9 Other Arrangements Not Excluded . . . . . . . . . . . . . . . . . . . 28
12.10 Errors and Omissions Insurance. . . . . . . . . . . . . . . . . . . . 28
12.11 Property of the Company . . . . . . . . . . . . . . . . . . . . . . . 29
12.12 Violation of this Agreement . . . . . . . . . . . . . . . . . . . . . 29
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Page
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ARTICLE XIII
MISCELLANEOUS PROVISIONS
13.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
13.2 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
13.3 Membership Certificates . . . . . . . . . . . . . . . . . . . . . . . 29
13.4 Complete Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . 30
13.5 Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
13.6 Applicable Law; Jurisdiction. . . . . . . . . . . . . . . . . . . . . 30
13.7 Interpretation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
13.8 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
13.9 Facsimile Copies. . . . . . . . . . . . . . . . . . . . . . . . . . . 31
13.10 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
13.11 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
13.12 No Third Party Beneficiaries. . . . . . . . . . . . . . . . . . . . . 31
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OPERATING AGREEMENT
OF
ALADDIN GAMING, LLC,
A NEVADA LIMITED LIABILITY COMPANY
This Operating Agreement of Aladdin Gaming, LLC, a Nevada limited
liability company (the "Company") is made and entered into at Las Vegas, Nevada,
as of this 26th day of February, 1998, by and between the Company and Aladdin
Gaming Holdings, LLC, a Nevada limited liability company ("Gaming Holdings").
R E C I T A L S
A. The Company was formed on January 24, 1997 pursuant to the
provisions of Chapter 86 of the Nevada Revised Statutes;
B. On or prior to the date hereof Gaming Holdings has made the Capital
Contributions set forth on Schedule 1 in exchange for the number of Common
Shares set forth on Schedule 1, and has been admitted as the sole member of the
Company.
C. Gaming Holdings and the Company desire by this Agreement to set
forth their agreement as to the relationships between the Company and the
Members, and among the Members themselves and as to the conduct of the business
and the internal affairs of the Company.
THEREFORE, in consideration of the mutual covenants, agreements and
promises made herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 ADJUSTED CAPITAL ACCOUNT DEFICIT. "Adjusted Capital Account
Deficit" means, with respect to any Member, the deficit balance, if any, in such
Member's Capital Account as of the end of the relevant Fiscal Year, after giving
effect to the following adjustments:
(a) increase such Capital Account by any amounts which such
Member is obligated to contribute to the Company pursuant to the terms of this
Agreement or otherwise, or is deemed to be obligated to contribute pursuant to
Treasury Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and
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(b) reduce such Capital Account by the amount of the items
described in Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
The foregoing definition of Adjusted Capital Account Deficit is
intended to comply with the provisions of Treasury Regulations Section
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
1.2 AFFILIATE. "Affiliate" means, with respect to a specified
Person, any other Person who or which is (a) the principal of the specified
Person, (b) directly or indirectly Controlling, Controlled by or under common
Control with the specified Person, or (c) any member, director, officer,
manager, relative or spouse of the specified Person.
1.3 AGREEMENT. "Agreement" means this Operating Agreement, as
amended from time to time.
1.4 ALADDIN ENTERPRISES. "Aladdin Enterprises" means Aladdin
Gaming Enterprises, Inc., a Nevada limited liability company.
1.5 ARTICLES. "Articles" means the Articles of Organization of
the Company, as amended from time to time.
1.6 ASSUMED RATE. "Assumed Rate" shall initially mean 40%. The
Board may adjust this rate upward or downward from time to time to avoid any
material discrepancy between the prevailing Assumed Rate and the effective
average rate of tax applicable to taxable income allocated from the Company to
Gaming Holdings. For this purpose, the effective average rate of tax of Gaming
Holdings or any other pass-through entity for tax purposes shall be determined
by reference to the members thereof.
1.7 AVAILABLE CASH. "Available Cash" means cash available in
the accounts of the Company, less reasonable reserves established by the Board
based on an assessment of the Company's needs for the payment of Company
expenses, operations and contingencies.
1.8 BANK FINANCING. "Bank Financing" means the financing under
a senior credit facility in the amount of $410 million effective as of the date
hereof between the Company as borrower and the Bank Lenders.
1.9 BANK LENDERS. "Bank Lenders" means a syndicate of lenders,
including The Bank of Nova Scotia, Canadian Imperial Bank of Commerce and
Merrill Lynch Capital Corporation.
1.10 BANKRUPTCY. "Bankruptcy" means, and a Member shall be
referred to as a "Bankrupt Member" upon, (a) the entry of a decree or order for
relief against the Member by a court of competent jurisdiction in any voluntary
or involuntary case brought by or against the Member
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under any bankruptcy, insolvency or similar law (collectively, "Debtor Relief
Laws") generally affecting the right of creditors and relief of debtors now or
hereafter in effect; (b) the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator or other similar agent under applicable Debtor
Relief Laws for the Member or for any substantial part of the Member's assets or
property; (c) the ordering of the winding up or liquidation of the Member's
affairs; (d) the filing of a petition by or against the Member in any such
voluntary or involuntary bankruptcy case, which petition remains not dismissed
for a period of 180 days or which is not dismissed or suspended pursuant to
Section 305 of the Federal Bankruptcy Code (or any corresponding provision of
any future United States Bankruptcy Law); (e) the consent by the Member to the
entry of an order for relief in a voluntary or involuntary case under any Debtor
Relief Laws or to the appointment of, or the taking of any possession by, a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar agent under any applicable Debtor Relief Laws for the Member or for any
substantial part of the Member's assets or property; or (f) the making by the
Member of any general assignment for the benefit of the Member's creditors.
1.11 BOARD. "Board" means the Board of Managers of the Company,
as provided for in Section 9.1.
1.12 BOARD MEMBER. "Board Member" means a member of the Board.
1.13 BOARD SUPERMAJORITY. "Board Supermajority" means an
affirmative vote of at least eighty percent of the Board Members.
1.14 CAPITAL ACCOUNT. "Capital Account" means, with respect to
any Member or Disassociated Member, the capital account maintained for such
Member or Disassociated Member as set forth in Section 4.2 after giving effect
to the adjustments set forth in Section 4.3.
1.15 CAPITAL CONTRIBUTION. "Capital Contribution" means the
total amount of cash and the agreed fair market value (net of liabilities) of
any property contributed at any time to the capital of the Company by a Member.
1.16 CERTIFICATE OF SHARES. "Certificate of Shares" means a
certificate of the Company representing Shares in the Company.
1.17 CODE. "Code" means the Internal Revenue Code of 1986, as
amended from time to time, or any corresponding United States federal tax
statute enacted after the date of this Agreement. A reference to a specific
section of the Code refers not only to such specific section but also to any
corresponding provision of any United States federal tax statute enacted after
the date of this Agreement, as such specific section or corresponding provision
is in effect on the date of application of the provisions of this Agreement
containing such reference.
1.18 COMMON SHARES. "Common Shares" means Shares with rights and
obligations as provided in Section 3.2(b).
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1.19 COMPLETION GUARANTY. "Completion Guaranty" means any of (a)
the Guaranty of Performance and Completion dated as of the date hereof, made by
the Trust, Aladdin Bazaar Holdings, LLC and LCI Parent in favor of the Bank
Lenders, (b) the Guaranty of Performance and Completion dated as of the date
hereof, made by the Trust, Aladdin Bazaar Holdings, LLC and LCI Parent in favor
of the holders of the Discount Notes or (c) the Guaranty of Performance and
Completion to be entered into after the date hereof by the Trust, Aladdin Bazaar
Holdings, LLC and LCI Parent in respect of the Aladdin development.
1.20 CONTROL. "Control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of a Person, whether through ownership of voting securities, by
contract or otherwise, and "Controlling" and "Controlled" shall have
corresponding meanings.
1.21 COVERED PERSON. "Covered Person" means (a) a Member or any
Affiliate of a Member, (b) any officers, directors, shareholders, members,
controlling Persons, partners, employees, representatives or agents of a Member
or a Board Member, (c) any Board Member, officer, employee, representative or
agent of the Company or its Affiliates, or (d) any Person who was, at the time
of the act or omission in question, a Person described in any of the preceding
clauses (a) through (c).
1.22 CUMULATIVE TAX LIABILITY ACCOUNT. "Cumulative Tax Liability
Account" means, with respect to each Member for any Quarter, the product of (a)
the Assumed Rate and (b) the excess of the cumulative amount of federal taxable
income or gain expected to be allocated to such Member in respect of its Common
Shares for such Quarter and actually allocated or expected to be allocated for
all prior Quarters pursuant to Article V, over the cumulative amount of federal
taxable loss or deduction allocated to such Member in respect of its Common
Shares for such Quarter and actually allocated or expected to be allocated for
all prior Quarters pursuant to Article V.
1.23 DISCOUNT NOTES. "Discount Notes" means 13.5% senior
discount notes accreting to an aggregate principal amount of $221.5 million at
maturity, due 2010 issued by Gaming Holdings and Aladdin Capital Corp. on or
about the date hereof.
1.24 DISTRIBUTION. "Distribution" means a distribution of cash
or other property made by the Company with respect to Shares, including upon
dissolution or liquidation of the Company or in respect of a redemption of
Shares, but shall not mean payments or transfers of cash or other property to
Members for reasons other than their ownership of Shares.
1.25 EMPLOYMENT AND CONSULTING AGREEMENTS. "Employment and
Consulting Agreements" means (a) the Employment and Consulting Agreement
effective January 1, 1997 entered into by and among Goeglein, the Company,
Aladdin Gaming and Aladdin Holdings as amended on January 30, 1998 and February
26, 1998, (b) the Consulting Agreement effective January 1, 1997 entered into by
and among GAI, the Company, Aladdin Gaming and Aladdin
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Holdings as amended on January 30, 1998 and February 26, 1998, (c) the
Employment Agreement effective April 15, 1997 entered into by and among
McKennon, the Company, Aladdin Gaming and Aladdin Holdings as amended on
February 26, 1998, (d) the Employment Agreement effective July 1, 1997 entered
into by and among Klerk, the Company, Aladdin Gaming and Aladdin Holdings as
amended on February 26, 1998, (e) the Employment Agreement effective July 1,
1997 entered into by and among Rueda, the Company, Aladdin Gaming and Aladdin
Holdings as amended on February 26, 1998, (f) the Employment Agreement effective
July 1, 1997 entered into by and among Galati, the Company, Aladdin Gaming and
Aladdin Holdings as amended on February 26, 1998.
1.26 EXECUTIVE MANAGEMENT COMMITTEE. "Executive Management
Committee" means the committee of the management of the Company with the
day-to-day responsibility for the operation of the Company's business, as
provided for in Section 9.2.
1.27 FISCAL YEAR. "Fiscal Year" means the period commencing on
January 1 of each calendar year and terminating on December 31 of the same
calendar year, or such other period as determined by the Board and permitted by
the Code, the Treasury Regulations or any other applicable laws.
1.28 GAMING PROBLEM. "Gaming Problem" means circumstances such
that any Member, any Affiliate of any Member or any Related Party of any Member
or of any Affiliate of any Member may preclude or materially delay, impede or
impair the ability of the Company to obtain or retain any licenses required by
the Nevada Gaming Authorities for the conduct of business of the Company and its
Subsidiaries, or such as may result in the imposition of materially burdensome
terms and conditions on any such license.
1.29 GROSS ASSET VALUE. "Gross Asset Value" means, with respect
to any Company asset, the asset's adjusted basis for federal income tax
purposes, except as follows:
(a) the initial Gross Asset Value of any asset contributed
by a Member to the Company shall be the fair market value of such asset on the
date of contribution; PROVIDED, that the Gross Asset Value of any asset (other
than cash) contributed by a Member shall be as set forth on Schedule 1;
(b) the Gross Asset Value of all Company assets shall be
adjusted to equal their respective fair market values as of the following times:
(i) the acquisition of an additional Interest by any new or existing Member in
exchange for more than a de minimis Capital Contribution; (ii) the distribution
by the Company to a Member of more than a de minimis amount of Company property
as consideration for an Interest; and (iii) the liquidation of the Company
within the meaning of Treasury Regulations Section 1.704-1(b)(2)(ii)(g);
PROVIDED, however, that the adjustment pursuant to clauses (i) and (ii) shall be
made only if the Board reasonably determines that such adjustments are necessary
or appropriate to reflect the relative economic interests of the Members in the
Company;
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(c) the Gross Asset Value of any Company asset distributed
to any Member shall be adjusted to equal the fair market value of such asset on
the date of the Distribution; and
(d) the Gross Asset Values of the Company assets shall be
increased (or decreased) to reflect any adjustments to the adjusted basis of
such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to
the extent that such adjustments are taken into account in determining Capital
Accounts pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m);
PROVIDED, however, that Gross Asset Values shall not be adjusted pursuant to
this paragraph (d) to the extent the Board determines that an adjustment
pursuant to paragraph (b) is necessary or appropriate in connection with a
transaction that would otherwise result in an adjustment pursuant to this
paragraph (d).
If the Gross Asset Value of an asset has been determined or adjusted
pursuant to paragraphs (a), (b) or (d) above, such Gross Asset Value shall
thereafter be adjusted by the depreciation taken into account with respect to
such asset for purposes of computing Profits and Losses.
1.30 GUARANTEED PAYMENT. "Guaranteed Payment" means a payment
determined without regard to income of the Company, made to a Member for the use
of capital, as described under Section 707(c) of the Code.
1.31 INTEREST. "Interest" means the entire ownership interest of
a Member in the Company at any time, including the right of such Member to any
and all benefits to which a Member may be entitled as provided under the NRS and
in this Agreement and includes the ownership interests in respect of both Common
Shares and Series A Preferred Shares.
1.32 LCI. "LCI" means London Clubs Nevada, Inc., a Nevada
corporation.
1.33 MEMBER. "Member" means a Person who has been admitted to
the Company as a member in accordance with the NRS and this Agreement.
1.34 MEMBER NONRECOURSE DEBT. "Member Nonrecourse Debt" has the
meaning set forth in Treasury Regulations Section 1.704-2(b)(4) for "partner
non-recourse debt".
1.35 MEMBER NONRECOURSE DEBT MINIMUM GAIN. "Member Nonrecourse
Debt Minimum Gain" means an amount, with respect to each Member Nonrecourse
Debt, equal to the Minimum Gain that would result if such Member Nonrecourse
Debt were treated as a nonrecourse liability of the Company, determined in
accordance with Treasury Regulations Sections 1.704-2(i)(3).
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1.36 MEMBER NONRECOURSE DEDUCTIONS. "Member Nonrecourse
Deductions" has the meaning set forth in Treasury Regulations Sections
1.704-2(i)(l) and 1.704-2(i)(2) for "partner non-recourse deductions".
1.37 MINIMUM GAIN. "Minimum Gain" means the amount determined by
computing, with respect to each nonrecourse liability of the Company, the amount
of gain (of whatever character), if any, that would be realized by the Company
if it disposed (in a taxable transaction) of the Property subject to such
liability in full satisfaction thereof, and by then aggregating the amounts so
computed as set forth in Treasury Regulations Sections 1.704-2(b)(2) and
1.704-2(d).
1.38 NEVADA ACT. "Nevada Act" means the Nevada Gaming Control
Act (or any successor statute), and any rules or regulations promulgated
thereunder.
1.39 NEVADA COMMISSION. "Nevada Commission" means the Nevada
Gaming Commission.
1.40 NEVADA GAMING AUTHORITIES. "Nevada Gaming Authorities"
means the Nevada Commission, the Nevada State Gaming Control Board and any other
applicable governmental or administrative state or local agency involved in the
regulation of gaming or gaming activities in the State of Nevada.
1.41 NON-EXERCISE NOTICE. "Non-Exercise Notice" has the meaning
ascribed thereto in Section 11.2.
1.42 NONRECOURSE DEDUCTIONS. "Nonrecourse Deductions" has the
meaning set forth in Treasury Regulations Section 1.704-2(b)(1) and 1.704-2(c).
1.43 NRS. "NRS" means the Nevada Revised Statutes, as amended
from time to time.
1.44 OFFICERS. "Officers" means the officers of the Company, as
elected by the Board from time to time.
1.45 PERCENTAGE INTEREST. "Percentage Interest" means, with
respect to a specified Member, the proportionate share of such Member's Common
Shares in the Company, computed by dividing the number of Common Shares held by
such Member by the Total Common Shares.
1.46 PERSON. "Person" means a natural person, any form of
business or social organization and any other nongovernmental legal entity,
whether domestic or foreign, including, but not limited to, a corporation,
partnership, association, trust, unincorporated organization, estate or limited
liability company.
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1.47 PROFITS AND LOSSES. "Profits" and "Losses" mean, for any
applicable period, an amount equal to the Company's taxable income or loss for
such year or period, determined in accordance with Code Section 703(a) (for this
purpose, all items of income, gain, loss, or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in taxable
income or loss), with the following adjustments:
(a) any income of the Company that is exempt from gross
income for federal income tax purposes and not otherwise taken into account in
computing Profits or Losses shall be included in computing Profits or Losses;
(b) any expenditures of the Company that are described in
Code Section 705(a)(2)(B) or that are treated as expenditures described in that
Code Section pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(i) and
not otherwise taken into account in computing Profits or Losses shall reduce
Profits or Losses;
(c) in the event that the Gross Asset Value of any Company
asset is adjusted pursuant to clause (b), (c) or (d) of the definition thereof,
such adjustment shall be taken into account as gain or loss from disposition of
such asset for purposes of computing Profits and Losses;
(d) gain or loss resulting from a disposition of property
with respect to which gain or loss has been recognized for federal income tax
purposes shall be computed by reference to the Gross Asset Value of the property
disposed of, notwithstanding that the adjusted tax basis of such property
differs from such value;
(e) an amount equal to the depreciation, depletion,
amortization, and gain or loss or other cost recovery reduction allowable with
respect to an asset for such Fiscal Year or other period, determined in a manner
consistent with Treasury Regulations Section 1.704-1(b)(2)(iv)(g) shall be taken
into account in computing Profits or Losses; and
(f) notwithstanding any other provisions of this
definition, any items of income, gain, loss or deduction which are specifically
allocated shall not be taken into account in computing Profits or Losses.
1.48 PROPERTY. "Property" means all assets of the Company,
including all real, personal and intangible property, or any portion thereof.
1.49 PURCHASE OPTION. "Purchase Option" has the meaning ascribed
thereto in Section 11.2.
1.50 QUARTER. "Quarter" means any three month period commencing
on January 1, April 1, July 1 or October 1 of any year during the term of this
Agreement.
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1.51 RECORDS OFFICE. "Records Office" means the records office
of the Company maintained in the State of Nevada.
1.52 RELATED PARTY. "Related Party" means, in respect of a
Member, its Affiliates, and the Member's and the Affiliates' respective
shareholders, partners, members, directors and officers.
1.53 REQUIRED SERIES A CAPITAL ACCOUNT BALANCE. "Required Series
A Capital Account Balance" means, as of the date of determination, the sum of
(a) the Capital Contributions with respect to the Series A Preferred Shares,
plus (b) the sum of (i) the cumulative Series A Preferred Return and (ii) any
premium currently due and payable on the Discount Notes, less (c) any actual
Distributions previously made with respect to the Series A Preferred Shares
(other than Distributions made pursuant to Section 6.2). It is anticipated that
the Required Series A Capital Account Balance will be $221,500,000 on March 1,
2003.
1.54 SALLE PRIVEE FACILITIES. "Salle Privee Facilities" means
facilities open to the public at large, consisting of (a) a gaming facility,
containing approximately 20 to 30 high limit tables and approximately 100 high
limit slot devices, located on the mezzanine level directly above the main
gaming floor of the Aladdin hotel and casino;(b) a super-premium gourmet
restaurant facility, located adjacent to and as part of the gaming facility of
the Salle Privee Facilities and containing a separate kitchen, a bar,
approximately 25 dining tables inside the restaurant, as well as several
additional dining tables located in a roof garden accessible through the
restaurant;(c) an exclusive hospitality facility comprising approximately 25
double-module luxury suites, 5 triple-module suites, a concierge facility and
guest bar and lounge, to be located in the main tower of the Aladdin hotel and
casino;(d) a separate entrance and reception area for guests of the Salle Privee
Facilities, offering secure and discrete access for arrivals and departures; and
(e) vertical and horizontal circulation infrastructure providing for private
elevator access to the hospitality facility and private corridor access from the
hospitality facility to the gaming facility of the Salle Privee Facilities.
1.55 SECRETARY OF STATE. "Secretary of State" means the office
of the Nevada Secretary of State.
1.56 SERIES A PREFERRED RETURN. "Series A Preferred Return"
means, as of the date of determination, with respect to a holder of Series A
Preferred Shares, (a) in respect of the first five years after the initial
issuance of the Series A Preferred Interests, an amount equal to the product of
(i) 13.5 % on a semi-annual bond equivalent basis and (ii) the Required Series A
Capital Account Balance, and (b) beginning in the sixth year after the initial
issuance of the Series A Preferred Interests, an amount equal to the product of
(i) 13.5% per annum and (ii) $221.5 million.
1.57 SERIES A PREFERRED SHARES. "Series A Preferred Shares"
means cumulative and compounding preferred Shares with rights and obligations as
provided in Section 3.2(c).
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1.58 SHARE. "Share" represents a share of an Interest in the
Company held by a Member, and includes Common Shares and Series A Preferred
Shares.
1.59 SUBSIDIARY. "Subsidiary" means, with respect to a specified
Person, any other entity of which securities or other ownership interests having
ordinary voting power to elect a majority of the board of directors or other
Persons performing similar functions are at the time directly or indirectly
owned by the specified Person. Unless a contrary intention is indicated in this
Agreement, any reference to a Subsidiary shall mean a Subsidiary of the Company.
1.60 SUBSTITUTED MEMBER. "Substituted Member" means the
transferee of a Member's Shares, or a permitted successor or assign of such
Member who is admitted to the Company as a Member.
1.61 TOTAL COMMON SHARES. "Total Common Shares" means all issued
and outstanding Common Shares.
1.62 TRANSFER. "Transfer" means any transfer, sale, conveyance,
distribution, hypothecation, pledge, encumbrance, assignment or other disposal,
either voluntary or involuntary.
1.63 TREASURY REGULATIONS. "Treasury Regulations" means the U.S.
federal income tax regulations promulgated by the U.S. Treasury Department under
the Code and codified at Title 26 of the Code of Federal Regulations, as amended
from time to time.
ARTICLE II
INTRODUCTORY MATTERS
2.1 RECORDS OFFICE. The Company shall continuously maintain in
the state of Nevada a Records Office, which may, but need not be, a place of its
business in the state of Nevada, at which it shall keep all records identified
in NRS 86.241. As of the date hereof, the Records Office shall be 2810 West
Charleston Boulevard, Suite F-58, Las Vegas, Nevada 89102. The Records Office
may be changed to another location within the State of Nevada as the Board may
from time to time determine.
2.2 OTHER OFFICES. The Company may establish and maintain other
offices at any time and at any place or places as the Members may designate or
as the business of the Company may require.
2.3 RESIDENT AGENT AND REGISTERED OFFICE. The resident agent
for service of process shall be as set forth in the Articles. The resident
agent may be changed as the Board may from time to time determine. The Company
shall have as its registered office in the state of Nevada the street address of
its resident agent.
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2.4 PURPOSE. The Company is organized for the purpose(s) of
developing, constructing, financing, owning and operating hotels and casinos and
related businesses and to engage in such other lawful enterprises as may be
incidental or appurtenant to the foregoing.
2.5 NO LIABILITY TO THIRD PARTIES. No Member shall be liable
for the debts, obligations or liabilities of the Company, including under a
judgment decree or order of a court.
.
ARTICLE III
INTERESTS
3.1 MEMBER'S INTEREST. A Member's Interests shall for all
purposes be personal property. A Member shall have no interest in specific
Company assets or property, including any assets or property contributed to the
Company by such Member as part of any Capital Contribution.
3.2 CLASSES OF SHARES. (a) The Shares shall be divided between
Common Shares and Series A Preferred Shares.
(b) There shall be authorized 10,000,000 Common Shares.
Each of such Shares shall have identical rights and terms in all respects except
as specifically set forth in this Agreement. The Common Shares shall have
rights to an allocation of Profits and Losses and to any Distributions as may be
authorized under this Agreement and under the NRS. Except as specifically
provided in this Agreement or under the NRS, the Common Shares collectively
shall have all management and voting rights of the Company.
(c) There shall be authorized 5,000,000 Series A Preferred
Shares. Each of such Shares shall have identical rights and terms in all
respects. The Series A Preferred Shares shall have rights to an allocation of
Profits and Losses, other allocations and any Distributions as may be authorized
under this Agreement and under the NRS. Except as specifically provided in this
Agreement or the NRS, the Series A Preferred Shares shall not have management or
voting rights under the NRS or otherwise. Notwithstanding anything, express or
implied, to the contrary in this Agreement but subject to the following
sentence, at any relevant date, the aggregate Distribution, redemption and
liquidation preference (without duplication) that the Members holding Series A
Preferred Shares are entitled to receive from the Company prior to any
Distribution with respect to Common (other than tax Distributions and any other
mandatory Distributions provided for in Article IV) shall equal the Required
Series A Capital Account Balance. Nothing in the foregoing sentence shall be
interpreted to override the limitations of Members' liabilities and obligations
to the Company and other Members set forth in Sections 2.5, 4.6 and 7.2. The
Series A Preferred Shares may be redeemed at the option of the Company, but in
no event shall any Series A Preferred Shares be redeemed for an amount less than
the portion of the Required Series A Capital Account Balance attributable to
such Shares.
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3.3 UCC ELECTION. The Company hereby irrevocably elects that
all Interests shall be securities governed by Article 8 of the Uniform
Commercial Code. Each Certificate of Shares shall bear the following legend:
"This certificate evidences an interest in Aladdin Gaming, LLC and shall be a
security for purposes of Article 8 of the Uniform Commercial Code." No change
to this provision shall be effective until the all outstanding Certificates of
Shares have been surrendered for cancellation and any new Certificates of Shares
thereafter issued shall not bear the foregoing legend.
ARTICLE IV
CAPITAL ACCOUNTS
4.1 INITIAL CAPITAL. As of the date hereof the capital of the
Company shall be the Capital Contributions of the Members on or prior to the
date hereof in such amounts or value as are set forth opposite the name of each
Member on Schedule 1, such Capital Contributions made in exchange for the Shares
indicated on Schedule 1. No such initial Capital Contributions shall be
accepted by the Company and no Shares shall be issued until all necessary
approvals under the Nevada Act are obtained with respect to such Capital
Contribution and issuance of Shares.
4.2 CAPITAL ACCOUNTS. Capital Accounts shall be established on
the Company's books representing the Members' respective Capital Contributions
to the Company. A separate Capital Account shall be maintained for each Member
and, for book purposes, separated into a contribution account and an income
(loss) account for each class of Shares held by each Member at any time
maintained in accordance with the accounting methods elected to be followed by
the Company. The Capital Account of each contributing Member shall be credited
with the amount of such Member's initial Capital Contribution and any subsequent
Capital Contributions upon receipt thereof by the Company; PROVIDED, however,
that the Capital Account of a Member shall not be credited with the amount of
any Capital Contribution until all necessary approvals under the Nevada Act are
obtained with respect to such initial Capital Contribution.
4.3 ADJUSTMENT OF CAPITAL ACCOUNTS. To the extent consistent
with Section 5.4, the Member's Capital Account shall be maintained and adjusted
in accordance with the Code and the Treasury Regulations, including Treasury
Regulation Section 1.704-1(b)(2)(iv).
4.4 RIGHTS WITH RESPECT TO CAPITAL; INTEREST. No Member shall
have the right to withdraw or receive any return of such Member's Capital
Contribution, and no Capital Contribution must be returned in the form of
property other than cash except as specifically provided herein. No interest
shall be paid or credited to the Members on their Capital Accounts or upon any
undistributed profits left on deposit with the Company.
4.5 ADDITIONAL CAPITAL CONTRIBUTIONS. Except as specifically
provided in this Agreement, the Keep Well Agreement or the Contribution
Agreement,
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(a) no Member shall be required to make an additional Capital Contribution to
the Company, or to make any loan (or cause any loan to be made) to the Company,
and (b) no Member shall have the right to make an additional Capital
Contribution to the Company without the consent of the Company.
ARTICLE V
PROFITS AND LOSSES
5.1 PROFITS. After giving effect to the special allocations set
forth in Sections 5.3 and 5.4, Profits for any Fiscal Year shall be allocated
among the Members holding Common Shares in proportion to their Percentage
Interests.
5.2 LOSSES. After giving effect to the special allocations set
forth in Sections 5.3 and 5.4, Losses for any Fiscal Year shall be allocated in
the following order and priority:
(a) first, to the Members holding Common Shares in
proportion to and to the extent of the Members' Capital Accounts with
respect to the Common Shares;
(b) second, to the Members holding Series A Preferred
Shares to the extent of the Members' Capital Account with respect to the
Series A Preferred Shares; and
(c) the balance, if any, among the Members holding Common
Shares in proportion to their Percentage Interests.
5.3 SPECIAL ALLOCATION TO SERIES A PREFERRED SHARES. Subsequent
to any allocations pursuant to Section 5.4 but prior to any allocations pursuant
to Sections 5.1 or 5.2, items of gross income of the Company shall be allocated
semi-annually to the Capital Account in respect of the Series A Preferred Shares
in an amount sufficient to cause the Capital Account in respect of the Series A
Preferred Shares to equal the Required Series A Capital Account Balance;
PROVIDED, that if there is insufficient gross income of the Company to satisfy
such allocation, items of gross income, to the extent available, shall be
allocated to the Capital Account in respect of the Series A Preferred Shares
pursuant to the foregoing and then the Company shall make a Guaranteed Payment
to the Series A Preferred Shareholders in the form of an increase in their
capital accounts with respect to such Series A Preferred Shares in an amount
which, together with the gross income allocation under this Section 5.3, causes
the Capital Account in respect of the Series A Preferred Shares to equal the
Required Series A Capital Account Balance before taking into account current
year allocations under Section 5.2.
5.4 SPECIAL ALLOCATIONS. Notwithstanding any other provision of
this Article V, the following special allocations shall be made:
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(a) MINIMUM GAIN CHARGEBACK. Except as provided in Treasury
Regulations Section 1.704.2(f), notwithstanding any other provision of this
Article V, if there is a net decrease in Minimum Gain during any Fiscal Year,
each Member shall be specially allocated items of Company income and gain for
such Fiscal Year (and, if necessary, subsequent years) in proportion to and to
the extent of an amount equal to such Member's share of the net decrease in
Minimum Gain determined in accordance with Treasury Regulations Section
1.704-2(g). Items to be so allocated shall be determined in accordance with
Treasury Regulations Sections 1.704-2(f)(6) and 1.704-2(j)(2). This Section
5.4(a) is intended to comply with the "minimum gain chargeback" provisions of
Treasury Regulations Section 1.704-2(f) and shall be interpreted consistently
therewith.
(b) MEMBER MINIMUM GAIN CHARGEBACK. Except as provided in
Treasury Regulations Section 1.704-2(i)(4), notwithstanding any other provision
of this Article V, if there is a net decrease in Member Nonrecourse Debt Minimum
Gain attributable to a Member Nonrecourse Debt during any Fiscal Year of the
Company, each Member who has a share of the Member Nonrecourse Debt Minimum Gain
attributable to such Member Nonrecourse Debt, determined in accordance with
Treasury Regulations Section 1.704-2(i)(5), shall be specially allocated items
of income and gain for such year (and, if necessary, subsequent years) in an
amount equal to such Member's share of the net decrease in Member Nonrecourse
Debt Minimum Gain attributable to such Member Nonrecourse Debt, determined in
accordance with Treasury Regulations Sections 1.704-2(i)(4). Allocations
pursuant to the previous sentence shall be made in proportion to the respective
amounts required to be allocated to each Member pursuant thereto. The items to
be so allocated shall be determined in accordance with Treasury Regulations
Sections 1.704-2(i)(4) and 1.704-2(j)(2). This Section 5.4(b) is intended to
comply with the "minimum gain chargeback" requirement of Treasury Regulations
Section 1.704-2(i)(4) and shall be interpreted consistently therewith.
(c) QUALIFIED INCOME OFFSET. In the event any Member
unexpectedly receives any adjustments, allocations or distributions described in
clauses (4), (5) or (6) of Treasury Regulations Section 1.704-1(b)(2)(ii)(d),
items of income and gain shall be specially allocated to each such Member in an
amount and manner sufficient to eliminate, to the extent required by the
Treasury Regulations, the Adjusted Capital Account Deficit created by such
adjustments, allocations or distributions of such Member as quickly as possible.
Allocation pursuant to this Section 5.4(c) shall be made only if and to the
extent that such Member would have an Adjusted Capital Account Deficit after all
other allocations provided for in this Article V have been tentatively made as
if this Section 5.4(c) were not in the Agreement. This Section 5.4(c) is
intended to constitute a "qualified income offset" within the meaning of
Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(3).
(d) GROSS INCOME ALLOCATION. In the event any Member has a
deficit Capital Account at the end of any Fiscal Year which is in excess of the
sum of (i) the amount such Member is obligated to restore pursuant to any
provision of the Agreement and (ii) the amount such Member is deemed to be
obligated to restore pursuant to the penultimate sentences of Treasury
Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), each such Member shall be
specially allocated
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items of income and gain in the amount of such excess as quickly as possible,
provided that an allocation pursuant to this Section 5.4(d) shall be made only
if and to the extent that such Member would have a deficit Capital Account in
excess of such sum after all other allocations provided for in this Article V
have been made as if Sections 5.4(c) and 5.4(d) were not in this Agreement.
(e) MEMBER NONRECOURSE DEDUCTIONS. Any Member Nonrecourse
Deductions for any Fiscal Year or other period shall be specially allocated to
the Member who bears (or is deemed to bear) the economic risk of loss with
respect to the Member Nonrecourse Debt to which such Member Nonrecourse
Deductions are attributable in accordance with Treasury Regulations Section
1.704-2(i)(1).
(f) NONRECOURSE DEDUCTIONS. Nonrecourse Deductions for any
year shall be specially allocated among the Members pro rata in proportion to
their Percentage Interests.
(g) REGULATORY ALLOCATIONS. Any special allocation of
items pursuant to this Section 5.4 shall be taken into account in determining
subsequent allocations pursuant to Sections 5.1, 5.2 and 5.3 so that the
cumulative net amount of all items allocated to each Member shall, to the extent
possible, be equal to the amount that would have been allocated to such Member
if there had never been any special allocation pursuant to this Section 5.4.
5.5 SECTION 704(C) ALLOCATION. For tax purposes, all items of
income, gain, loss, deduction, expense and credit, other than tax items
corresponding to items allocated pursuant to Section 5.4, shall be allocated in
the same manner as are Profits and Losses; PROVIDED that in accordance with Code
Section 704(c) and the Treasury Regulations promulgated thereunder, income,
gain, loss and deduction with respect to property contributed to the capital of
the Company shall, solely for tax purposes, be allocated among the Members so as
to take account of any variation between the adjusted basis of such property for
federal income tax purposes and its fair market value. In the event that any
asset of the Company is revalued pursuant to this Agreement in accordance with
Section 704 of the Code and the regulations thereunder, subsequent allocations
of income, gain, loss and deduction with respect to such asset shall take
account of any variation between the adjusted basis of such asset for federal
income tax purposes and its fair market value in the same manner as under Code
Section 704(c) and the Treasury Regulations promulgated thereunder. Any
elections or other decisions relating to allocations referred to in this Section
5.5 shall be made by the Board in any manner that reasonably reflects the
purpose and intention of this Agreement; PROVIDED that the Company elects to
apply the traditional method described in Treasury Regulations Section
1.704-3(b) without curative allocations. Allocations pursuant to this Section
5.5 are solely for purposes of federal, state and local taxes and shall not
affect, or in any way be taken into account in computing, any Member's Capital
Account or share of Profits, Losses, other items, or distributions pursuant to
any provision of this Agreement.
5.6 FEDERAL INCOME TAX. It is the intent of the Company and its
Member, that for so long as the Company has only one Member, the Company shall
be disregarded as an entity
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separate from its owner for federal income tax purposes, and all actions
necessary to carry out such intent shall be taken by the Company or its Member.
ARTICLE VI
DISTRIBUTIONS
6.1 PRIORITY DISTRIBUTIONS. Distributions of Available Cash
shall be made on the Series A Preferred Shares from time to time as may be
determined by the Board, PROVIDED that (i) in the 6th and each subsequent year
after initial issuance of the Series A Preferred Shares a Distribution shall be
made in an amount equal to the Series A Preferred Return for such year, and (ii)
prior to the end of the twelfth year after the initial issuance of the Series A
Preferred Shares, a Distribution in redemption of the Series A Preferred Shares
shall be made in an amount equal to the portion of the Required Series A Capital
Account Balance attributable to the Series A Preferred Shares redeemed.
6.2 TAX DISTRIBUTIONS. (a) Subject to having made all
Distributions provided for in Section 6.1, no later than thirty days following
the end of each Quarter, the Company shall, to the extent of Available Cash,
make a Distribution of cash pro-rata to each Member (based on the balance in
each Member's Cumulative Liability Account) to the extent that the balance in
that Member's Cumulative Tax Liability Account (determined as of the end of such
Quarter) exceeds the cumulative Distributions of cash made to such Member
pursuant to Section 6.2.
(b) If and to the extent a Member establishes, to the
reasonable satisfaction of the Board, that such Member or, if such Member is a
pass through entity for federal income tax purposes, its direct or indirect
equity holders, will incur a material tax liability with respect to its income
derived from the Company (including any liability arising under tax
indemnification agreements among the members of Gaming Holdings) in excess of
tax Distributions otherwise receivable, the Board may provide for appropriate
additional Distributions to such Member with respect to its tax liability.
(c) Amounts distributed pursuant to this Section 6.2 shall
be treated as non-interest bearing advances of Distributions under this Article
VI, and shall be taken into account in determining the amount of future
Distributions under this Article VI.
6.3 DISTRIBUTIONS ON COMMON SHARES. (a) the Company shall be
required to distribute any Available Cash (after making all required
Distributions provided for in Sections 6.1 and 6.2) to Gaming Holdings, in
respect of its Common Shares, in an amount sufficient to permit Gaming Holdings
to satisfy any additional obligations it may have to make payments on the
Discount Notes.
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(b) Subject to having made all Distributions required by
Sections 6.1, 6.2 and 6.3(a), additional Distributions shall be made Quarterly
as determined by the Board among the Members holding Common Shares in proportion
to their Percentage Interests;
6.4 LIMITATIONS ON DISTRIBUTION. Notwithstanding any other
provision of this Agreement, the Company shall not make any Distribution if such
Distribution would violate the NRS, the Nevada Act or other applicable law or
would cause a breach or default under any agreement or instrument to which the
Company is a party or by which the Company or any of its assets are bound, but
shall instead make such Distribution as soon as practicable after the making of
such Distribution would not cause such violation, breach or default.
ARTICLE VII
MEMBERS
7.1 POWERS OF MEMBERS. Except as provided in Section 7.3,
Members shall not have the authority to bind the Company by virtue of their
status as Members.
7.2 LIMITATION OF LIABILITY. No Member shall be individually
liable under a judgment, decree or order of a court, or in any other manner, for
a debt, obligation or liability of the Company or any other Member, except as
provided by law or in an agreement signed by the Member to be charged. No
Member shall be required to loan any funds to the Company, nor shall any Member
be required to make any contribution to the Company, nor shall any Member be
subject to any liability to the Company, the other Members, or any third party,
solely as a result of a Member's negative Capital Account balance.
7.3 ACTION BY THE MEMBERS. Except as otherwise specifically
provided in this Agreement, all actions of the Members shall be taken by the
Members in proportion to their Percentage Interests at the time of the action
taken. Except as otherwise specifically provided herein, the Members may vote,
approve a matter or take any action by the vote of the Members at a meeting at
which a quorum is present, in person or by proxy, or without a meeting by
written consent as provided in Section 7.7. The vote or written consent of a
majority of the Members shall be required to approve any matter or to take any
action at any meeting of Members at which a quorum is present, unless a greater
or lesser vote or consent is provided for by this Agreement or required by the
NRS.
7.4 MEETINGS OF MEMBERS. Meetings of the Members for any
purpose may be called at any time by the Board or by one or more Members holding
in the aggregate more than a ten percent Percentage Interest. Except in special
cases where other express provision is made by the NRS, written notice of each
meeting, signed by a Board representative or by a Member or Members, as the case
may be, shall be given to each Member entitled to vote. All notices shall be
sent in accordance with Section 13.1 to each Member entitled thereto not less
than ten (except in
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respect of an adjournment of a meeting of the Members) nor more than sixty days
before each meeting, and shall specify the place, date and time of such meeting,
as well as the purpose or purposes for which the meeting is called.
7.5 WAIVER OF NOTICE. The transactions carried out at any
meeting of the Members, however called and noticed or wherever held, shall be as
valid as though carried out at a meeting regularly called and noticed if (a) all
of the Members holding Common Shares are present at the meeting or (b) a quorum
of the Members is present and if, either before or after the meeting, each of
the Members holding Common Shares who are not present signs a written waiver of
notice or a consent to holding such meeting or an approval of the minutes
thereof, which waiver, consent or approval shall be filed with the other records
of the Company or made a part of the minutes of the meeting; PROVIDED that no
Member holding Common Shares attending such meeting without notice protests
prior to the meeting or at its commencement that notice was not given to such
Member.
7.6 ADJOURNED MEETINGS AND NOTICE THEREOF. Any Members'
meeting, whether or not a quorum is present, may be adjourned from time to time
by the vote of a majority of Members holding Common Shares present in person or
represented by proxy, but in the absence of a quorum no other business may be
transacted at any such meeting. When any Members' meeting is adjourned for five
days or more, notice of the adjourned meeting shall be given as in the case of
an original meeting, otherwise it shall not be necessary to give any notice of
an adjournment or of the business to be transacted at an adjourned meeting other
than by announcement at the meeting at which such adjournment is taken.
7.7 ACTION BY WRITTEN CONSENT. Any action which may be taken at
a meeting of Members may be taken by the Members without a meeting if authorized
by the written consent of a majority of the Members, or such other greater or
lesser Percentage Interest as is provided for in this Agreement or required by
the NRS. Whenever action is taken by written consent, a meeting of Members need
not be called nor notice of meeting given. The written consent may be executed
in one or more counterparts and by facsimile, and each such consent so executed
shall be deemed an original. A copy of such consent shall be sent to each
Member holding Common Shares.
7.8 TELEPHONIC MEETINGS. Members may participate in a meeting
of the Members by means of a telephone conference or similar method of
communication by which all individuals participating in the meeting can hear
each other. Participation in a meeting pursuant to this Section 7.8 constitutes
presence in person at the meeting.
7.9 QUORUM. Members holding an aggregate fifty percent
Percentage Interest, represented in person or by proxy, shall constitute a
quorum for the transaction of business. Except as specifically provided in this
Agreement, each Member shall be entitled to vote in proportion to such Member's
Percentage Interest, provided that if, pursuant to the NRS or the terms of this
Agreement, a Member is not entitled to vote on a specific matter, then such
Member's vote and Percentage Interest shall not be considered for purposes of
determining whether a quorum is present
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or whether approval by the vote of the Members has been obtained in respect of
such specific matter.
ARTICLE VIII
RESIGNATION, TRANSFER OF SHARES,
CHANGE IN CONTROL, TRUST MEMBERS
8.1 RESIGNATION. A Member may not resign from the Company
before the dissolution and winding up of the Company, subject to the provisions
of Chapter 463 of the NRS or other applicable law. Except as specifically
provided in this Agreement, any right of a Member under applicable law to demand
a return of that Member's Capital Contribution prior to dissolution is hereby
waived.
8.2 TRANSFERS OF INTERESTS. (a) Except for any pledge in
connection with the arrangements in respect of the Bank Financing or the
exercise of remedies in respect of such pledge (including, without limitation,
any sale or transfer in connection with the enforcement of such pledge), the
Common Shares of each Member are personal property, and such Shares may not be
Transferred and any attempt to Transfer shall be null and void and of no effect
whatsoever.
(b) Except for a pledge to the holders of the Discount
Notes, the exercise of remedies in respect of such pledge, or any Transfers
after foreclosure under such pledge, the holders of the Series A Preferred
Shares may not Transfer any Series A Preferred Share and any attempt to do so
shall be null and void and of no effect whatsoever.
8.3 GAMING CONTROL ACT. Notwithstanding any other provision of
this Agreement, no Shares or other ownership interest in the Company, and no
Upstream Ownership Interest, shall be issued or Transferred in any manner
whatsoever except in compliance with the provisions of the Nevada Act.
8.4 FURTHER RESTRICTION ON TRANSFER OF SHARES. In addition to
the other restrictions set forth in this Agreement, no Member may assign,
convey, sell, encumber or in any way alienate all or any part of such Member's
Shares, if the Shares to be assigned, conveyed, sold or encumbered, when added
to the total of all other Shares assigned, conveyed, sold or encumbered in the
preceding twelve months, would result in the termination of the Company under
Code Section 708, if such termination will result in adverse tax consequences to
the non-transferring Member.
8.5 GAMING HOLDINGS SHARES. If the Company purchases any shares
in Gaming Holdings pursuant to the Employment and Consulting Agreements, the
parties agree that forthwith thereafter Gaming Holdings shall purchase such
shares from the Company for a total consideration of $1.
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ARTICLE IX
BOARD OF MANAGERS
9.1 BOARD OF MANAGERS. (a) Except for matters expressly
requiring the approval of the Members (or a percentage or class of the Members)
pursuant to this Agreement or the NRS, the business and affairs of the Company
shall be managed by a Board of Managers pursuant to this Article IX. Subject to
the provisions of the Nevada Act and except as specifically provided in this
Agreement, the Board Members shall each serve for a three year term or until
such Board Member shall resign or be removed or otherwise disqualified to serve,
or until such Board Member's successor shall have been appointed.
(b) The Board shall be comprised of Board Members appointed
by Gaming Holdings to reflect the same representation that Aladdin Enterprises
and LCI have on the Board of Managers of Gaming Holdings. On the date hereof,
the Board Members shall be: Jack Sommer, Ronald B. Dictrow and Richard J.
Goeglein as representatives of Aladdin Enterprises and Alan L. Goodenough and G.
Barry C. Hardy as representatives of LCI.
9.2 POWERS AND DUTIES OF THE BOARD. (a) The Board (or the
Executive Management Committee or any Officer acting at the direction of the
Board) shall manage the business affairs of the Company. The Board shall have
the general powers and duties of management typically vested in a director or
board of directors of a corporation, and all powers and duties necessary,
advisable or convenient to administer and operate the business and affairs of
the Company, and such other powers and duties as may be prescribed by the
Members or implied by law. Subject to the provisions of this Agreement, such
powers and duties shall include, without limitation, the following: (i) to
select and remove all Officers (as more fully described in Section 9.3), agents
and employees of the Company, prescribe such powers and duties for them as may
be consistent with law, the Articles and this Agreement, and fix their
compensation; (ii) to borrow money and incur indebtedness on behalf of the
Company for the purposes of the Company, and to cause to be executed and
delivered therefor, in the name of the Company, promissory notes, bonds,
debentures, deeds of trust, mortgages, pledges, hypothecations or other evidence
of debt and securities; (iii) to change the principal office of the Company from
one location to another within Nevada and to establish from time to time one or
more subsidiary offices of the Company; and (iv) to enter into or commit to any
agreement, contract, commitment, instrument, deed, mortgage or obligation on
behalf of the Company for any Company purpose.
(b) For each Fiscal Year the Board shall adopt an annual
operating budget, capital budget and marketing plan, which shall include a
detailed operating budget and marketing plan in respect of the Salle Privee
Facilities.
(c) The Board shall be responsible for establishing and
overseeing all policies and procedures in connection with the operation of the
Company's business, but shall delegate day-to-day management responsibility to
the Executive Management Committee. The
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Executive Management Committee shall include (without limitation) the following
persons: the president and chief executive officer of the Company, the chief
financial officer of the Company, the senior vice president of the Company who
is the president and chief operating officer of the Aladdin hotel and casino,
the senior vice president of the Company who is the president and chief
operating officer of the Second Hotel and casino, the senior vice president
human resources of the Company, the senior vice president electronic gaming of
the Company and the managing director of the Salle Privee Facilities.
9.3 ELECTION OF OFFICERS. Subject to the applicable provisions
of the Nevada Act, the Board may from time to time elect such Officers as the
Board shall deem appropriate. Subject to the provisions of this Agreement, the
Board may confer upon any of the Officers such duties, authority and titles as
the business of the Company may require in the reasonable judgment of the Board
(including the authority to represent and bind the Company in accordance with
the scope of the particular duties involved and such other general powers and
duties of a type similar to those typically vested in an officer of a
corporation). The Officers shall serve at the sole discretion of the Board.
9.4 REMOVAL, RESIGNATION AND VACANCIES. (a) Board Members may
be removed or appointed by Gaming Holdings at any time to ensure that Aladdin
Enterprises and LCI have the same representation of the Board as they have on
the Board of Managers of Gaming Holdings.
(b) In the event any Person elected to serve as a Board
Member at any time is found by the Nevada Gaming Authorities to be unsuitable to
hold a gaming license, such Person shall thereupon automatically cease to be a
Board Member without any further action.
(c) Any Board Member may resign at any time by giving
written notice to the Company and the Members. Any such resignation shall take
effect at the date of the receipt of such notice or at any later time specified
therein; and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
9.5 MEETINGS OF THE BOARD. (a) PLACE AND TIME OF MEETINGS.
The meetings of the Board shall be held at least Quarterly at the Records
Office, unless some other place is designated in the notice of the meeting.
Meetings of the Board shall be held at such times as is determined by the Board.
Accurate minutes of any meeting of the Board shall be maintained by the Officer
designated by the Board for such purpose.
(b) SPECIAL MEETINGS; NOTICE. Special meetings of the
Board for any purpose may be called at any time by any Board Member. At least
forty-eight hours written notice of the time and place of a special meeting of
the Board shall be delivered personally to the Board Members at their last known
business addresses as it is shown on the records of the Company or personally
communicated to them by a Board Member or officer of the Company by telegraph or
facsimile. Such telegraphing, faxing or delivery shall be considered due, legal
and personal notice to such Board Member.
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(c) WAIVER OF NOTICE. The transactions carried out at any
meeting of the Board, however called and noticed or wherever held, shall be as
valid as though had at a meeting regularly called and noticed if: (i) all Board
Members are present at the meeting or (ii) if a majority of the Board Members
are present and if, either before or after the meeting, those not present sign a
waiver of notice of such meeting or a consent to holding the meeting or an
approval of the minutes thereof, which waiver, consent or approval shall be
filed with the other records of the Company or made a part of the minutes of the
meeting; PROVIDED that no Board Member attending such meeting without notice
protests prior to the meeting or at its commencement that notice was not given
to him or her.
(d) ACTION BY WRITTEN CONSENT. Any action required or
permitted to be taken by the Board may be taken without a meeting and will have
the same force and effect as if taken by a vote of the Board Members at a
meeting properly called and noticed, if authorized by the written consent of
all, but not less than all, of the Board Members. In no instance where action
is authorized by written consent need a meeting of the Board be called or
noticed. A copy of the action taken by written consent shall be filed with the
records of the Company. The written consent may be executed in one or more
counterparts and by facsimile, and each such consent so executed shall be deemed
an original.
(e) QUORUM. Three incumbent Board Members present in
person or by proxy shall be necessary to constitute a quorum for the transaction
of business at any meeting of the Board. Except as otherwise provided in this
Agreement or by the NRS, the action of a majority of the Board Members present
in person or by proxy at any meeting at which there is a quorum, when duly
assembled, is valid. A meeting at which a quorum is initially present may
continue to transact business, notwithstanding the withdrawal of Board Members,
if any action taken is approved by a majority of the required quorum for such
meeting.
(f) TELEPHONIC MEETINGS. Board Members may participate in
a meeting of the Board by means of a telephone conference call or similar method
of communication so long as all Persons participating in the meeting can hear
one another. Participation in a meeting of the Board pursuant to this Section
9.5(f) constitutes presence in person at the meeting.
9.6 COMPENSATION OF BOARD MEMBERS; COMPENSATION OF OFFICERS.
The Company shall not pay any Board Member in their capacity as a Board Member
any salary or other benefits, other than such insurance and/or indemnification
as may be determined by the Board and is permitted under the Articles, this
Agreement and the NRS. The Company shall pay to each Officer such salary and
other benefits as shall be approved from time to time by the Board.
9.7 EXPENSE REIMBURSEMENTS. The Company shall reimburse the
Board Members for all expenses reasonably incurred by the Board Members on
behalf of the Company or in connection with the performance of the obligations
of the Board Members hereunder.
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<PAGE>
ARTICLE X
ACCOUNTING, RECORDS AND BANK ACCOUNTS
10.1 RECORDS AND ACCOUNTING. The books and records of the
Company shall be kept, and the financial position and the results of its
operations recorded, in accordance with the accounting methods elected to be
followed by the Company for federal income tax purposes. The books and records
of the Company shall reflect all Company transactions and shall be appropriate
and adequate for the Company's business.
10.2 ACCESS TO ACCOUNTING RECORDS. All accounting books and
records of the Company, including files, tax returns and information, shall be
maintained at an office of the Company or at the Records Office. Each Member,
and its duly authorized representative, agent or attorney, upon written demand
providing at least five days notice, shall have access to such books and records
and the right to inspect, examine and copy them (at such Member's expense) at
reasonable times during normal business hours. The rights authorized by this
Section 10.2 may be denied to a Member upon such Member's refusal to provide to
the Company an affidavit stating that such inspection, extracts or audit is not
desired for any purpose not related to the Member's interest in the Company as a
Member.
10.3 ANNUAL TAX INFORMATION. The Board shall use its best
efforts to cause the Company to deliver to each Member within ninety days after
the end of each Fiscal Year all information necessary for the preparation of
such Member's federal income tax return. Federal, state and local tax returns
of the Company, if any are required under applicable law, shall be prepared or
caused to be prepared and filed in a timely manner by the Board.
10.4 OBLIGATIONS OF MEMBERS TO REPORT ALLOCATIONS. The Members
are aware of the income tax consequences of the allocations made by this
Agreement and hereby agree to be bound by the provisions of this Agreement in
reporting their shares of the income and loss for income tax purposes.
10.5 TAX STATUS. For so long as the Company has only one Member,
the Company shall be disregarded as an entity separate from its owner for
federal income tax purposes and the Member agrees not to take any action
inconsistent with such classification for federal income tax purposes.
23
<PAGE>
ARTICLE XI
DISSOLUTION OF THE COMPANY AND
TERMINATION OF A MEMBER'S INTEREST
11.1 DISSOLUTION. The Company shall be dissolved and its affairs
wound up (a) at the time specified in the Articles or (b) upon the written
agreement of all of the Members, in which event the Members will proceed with
reasonable promptness to liquidate the Company. The death, insanity,
retirement, resignation, expulsion, Bankruptcy or dissolution of any Member, or
the occurrence of any other event which terminates a Member's continued
membership in the Company shall not, in and of itself, cause the dissolution of
the Company.
11.2 COMPANY'S OPTION TO PURCHASE BANKRUPT MEMBER'S INTEREST.
Upon the institution of a Bankruptcy by or against a Member, the Company shall
have the option (the "Purchase Option"), exercisable by written notice to all
the Members within 120 days of the date the Bankruptcy petition is filed by or
against the Bankrupt Member, to purchase the Bankrupt Member's Common Shares,
subject, however, to receipt of all required approvals under the Nevada Act
(such approvals to be obtained as soon as reasonably practicable), for an agreed
upon price, or if no price can be agreed upon, for the fair market value of such
Common Shares at the time of such Bankruptcy, as determined by an independent
qualified appraiser appointed by unanimous agreement by the Members and the
Company. If they cannot agree on an appraiser, the Bankrupt Member, on the one
hand, and the Company, on the other hand, shall each select an appraiser, which
appraisers together shall select a third appraiser, which third appraiser shall
determine the fair market value of such Common Shares, which determination shall
be binding upon the parties. If the Company elects to exercise the Purchase
Option, it shall pay the agreed price or the fair market value, as the case may
be, of the Bankrupt Member's Shares to the Bankrupt Member, in cash, within such
120-day period or at such later time as all approvals required under the Nevada
Act are obtained. If the Company elects to not exercise the Purchase Option, the
Company shall notify the Bankrupt Member of its decision in writing (the
"Non-Exercise Notice"), within such 120-day period.
11.3 DISTRIBUTION ON DISSOLUTION AND LIQUIDATION. In the event
of the dissolution of the Company for any reason, the business of the Company
shall be continued to the extent necessary to allow an orderly winding up of its
affairs, including the liquidation and termination of the Company pursuant to
the provisions of this Section 11.3, as promptly as practicable thereafter, and
each of the following shall be accomplished:
(a) holders of a majority of the Common Shares shall elect
or appoint a liquidator;
(b) the liquidator shall cause to be prepared a statement
setting forth the Property and liabilities of the Company as of the date of
dissolution, a copy of which statement shall be furnished to the Members;
24
<PAGE>
(c) the Property of the Company shall be liquidated by the
liquidator as promptly as possible, but in an orderly and businesslike manner.
The liquidator may, in the exercise of its business judgment, determine not to
sell all or any portion of the Property, in which event such Property shall be
distributed in kind based upon fair market value as of the date of such
distribution;
(d) any Profits or Losses realized by the Company upon the
sale of its Property shall be recognized and allocated to the Members in the
manner set forth in Article V; and
(e) the proceeds of sale and all other Property of the
Company shall be applied and distributed as follows and in the following order
of priority:
(i) to the expenses of liquidation;
(ii) to the payment of the debts and liabilities of
the Company (including loans from Members);
(iii) to the setting up of any reserves which the
liquidator shall determine to be reasonably necessary, for such period as
the liquidator shall deem advisable, for contingent, unliquidated or
unforeseen liabilities or obligations of the Company or the Members
arising out of or in connection with the Company. Such reserves shall be
held by the liquidator or paid over to a bank or title company selected
by it, to be held by such bank or title company as escrow holder or
liquidator for the purposes of disbursing such reserves to satisfy the
liabilities and obligations described above;
(iv) to the holders of the Series A Preferred Shares
in an amount equal to the Required Series A Capital Account Balance; and
(v) the balance (including amounts released from any
unnecessary reserves set up pursuant to Section 11.3(e)(iii)), if any,
after giving effect to all contributions, distributions and allocations
for all periods, to the holders of Common Shares pro rata in proportion
to their positive Capital Account balances.
Each Member understands and agrees that by accepting the provisions
of this Section 11.3 setting forth the priority of the distribution of assets of
the Company to be made upon a liquidation, such Member expressly waives any
right which it, as a creditor of the Company, might otherwise have to receive
distributions of assets pari passu with the other creditors of the Company in
connection with a distribution of assets of the Company in satisfaction of any
liability of the Company, and hereby subordinates to said creditors any such
right.
25
<PAGE>
ARTICLE XII
LIABILITY, EXCULPATION AND INDEMNIFICATION
12.1 EXCULPATION. (a) No Covered Person shall be liable to the
Company or any other Covered Person for any loss, damage or claim incurred by
reason of any act or omission performed or omitted by such Covered Person in
good faith on behalf of the Company and in a manner reasonably believed to be
within the scope of authority conferred on such Covered Person by this
Agreement, the Board or an appropriate Officer or employee of the Company,
except that a Covered Person shall be liable for any such loss, damage or claim
incurred by reason of such Covered Person's gross negligence, fraud or willful
misconduct.
(b) A Covered Person shall be fully protected in relying in
good faith upon the records of the Company and upon such information, opinions,
reports or statements presented to the Company by any Person as to matters the
Covered Person reasonably believes are within such other Person's professional
or expert competence, including information, opinions, reports or statements as
to the value and amount of the assets, liabilities, Profits or Losses or any
other facts pertinent to the existence and amount of assets from which
distributions to Members might properly be paid.
12.2 FIDUCIARY DUTY. To the extent that, at law or in equity, a
Covered Person has duties (including fiduciary duties) and liabilities relating
thereto to the Company or to any Member, then, to the fullest extent permitted
by applicable law, a Covered Person acting under this Agreement shall not be
liable to the Company or to any Member for its good faith acts or omissions in
reliance on the provisions of this Agreement. The provisions of this Agreement,
to the extent that they restrict the duties and liabilities of a Covered Person
otherwise existing at law or in equity, are agreed by the parties hereto to
replace such other duties and liabilities of such Covered Person.
12.3 OUTSIDE BUSINESSES. Subject to any other agreement to the
contrary, any Covered Person, Member or Affiliate thereof may engage in or
possess an interest in other business ventures of any nature or description,
independently or with others, similar or dissimilar to the business of the
Company, and the Company and the Members shall have no rights by virtue of this
Agreement in and to such independent ventures or the income or profits derived
therefrom, and the pursuit of any such venture, even if competitive with the
business of the Company, shall not be deemed wrongful or improper. Subject to
any agreement to the contrary, no Covered Person, Member or Affiliate thereof
shall be obligated to present any particular investment opportunity to the
Company even if such opportunity is of a character that, if presented to the
Company, could be taken by the Company, and any Covered Person, Member or
Affiliate thereof shall have the right to take for its own account (individually
or as a partner or fiduciary) or to recommend to others any such particular
investment opportunity.
12.4 INDEMNITY. The Company does hereby indemnify and hold
harmless each Covered Person who was or is a party or is threatened to be made a
party to any threatened, pending
26
<PAGE>
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, except an action by or in the right of the Company, by reason
of the fact that he or she is or was a Member, Affiliate, Board Member, Officer,
employee or agent of the Company, or is or was serving at the request of the
Company as manager, member, director, officer, employee or agent of another
limited-liability company, corporation, partnership, joint venture, trust or
other enterprise against expenses, including attorneys' fees, judgment, fines
and amounts paid in settlement actually and reasonably incurred by him or her in
connection with the action, suit or proceeding, if he or she acted in good faith
and in a manner which he or she reasonably believed to be in or not opposed to
the best interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order, settlement
or conviction, or upon a plea of nolo contendere or its equivalent, does not, of
itself, create a presumption that the Covered Person did not act in good faith
and in a manner which he or she reasonably believed to be in or not opposed to
the best interests of the Company, and that, with respect to any criminal action
or proceeding, he or she had reasonable cause to believe that his or her conduct
was unlawful.
12.5 INDEMNITY FOR ACTIONS BY OR IN THE RIGHT OF THE COMPANY.
The Company does hereby indemnify each Covered Person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the Company to procure a judgment in its favor by
reason of the fact that he or she is or was a Member, Affiliate, manager, Board
Member, Officer, employee or agent of the Company, or is or was serving at the
request of the Company as a director, manager, officer, employee or agent of
another limited-liability company, corporation, partnership, joint venture,
trust or other enterprise against expenses, including amounts paid in settlement
and attorneys' fees actually and reasonably incurred by him or her in connection
with the defense or settlement of the action or suit, if he or she acted in good
faith and in a manner which he or she reasonably believed to be in or not
opposed to the best interests of the Company. Indemnification may not be made
for any claim, issue or matter as to which such Covered Person has been adjudged
by a court of competent jurisdiction, after exhaustion of all appeals therefrom,
to be liable to the Company or for amounts paid in settlement to the Company,
unless and only to the extent that the court in which the action or suit was
brought or other court of competent jurisdiction determines upon application
that, in view of all the circumstances of the case, he or she is fairly and
reasonably entitled to indemnity for such expenses as the court deems proper.
12.6 INDEMNITY IF SUCCESSFUL. To the extent that a Covered
Person has been successful on the merits or otherwise in defense of any action,
suit or proceeding referred to in Sections 12.4 and 12.5, or in defense of any
claim, issue or matter therein, the Company does hereby indemnify such Covered
Person against expenses, including attorneys' fees actually and reasonably
incurred by it in connection with the defense.
12.7 DETERMINATION OF RIGHT TO INDEMNIFICATION. Any
indemnification under Sections 12.4 and 12.5, unless ordered by a court or
advanced pursuant to Section 12.8 below, must be made by the Company only as
authorized in the specific case upon a determination that
27
<PAGE>
indemnification of the Covered Person is proper in the circumstances. The
determination must be made:
12.8 ADVANCE PAYMENT OF EXPENSES. The expenses of Members and
Board Members incurred in defending a civil or criminal action, suit or
proceeding shall be paid by the Company as they are incurred and in advance of
the final disposition of the action, suit or proceeding, upon receipt of an
undertaking by or on behalf of the Member or Board Member to repay the amount if
it is ultimately determined by a court of competent jurisdiction that he or she
is not entitled to be indemnified by the Company. The provisions of this
subsection do not affect any rights to advancement of expenses to which
personnel of the Company other than Members or Board Members may be entitled
under any contract or otherwise by law.
12.9 OTHER ARRANGEMENTS NOT EXCLUDED. The indemnification and
advancement of expenses authorized in or ordered by a court pursuant to this
Article XII:
(a) do not exclude any other rights to which a person
seeking indemnification or advancement of expenses may be entitled under the
Articles or any agreement, vote of Members, or disinterested Board Members, if
any, or otherwise, for an action in their official capacity or an action in
another capacity while holding their office, except that indemnification, unless
ordered by a court pursuant to Section 12.5 or for the advancement of expenses
made pursuant to Section 12.8, may not be made to or on behalf of any Member or
Board Member if a final adjudication establishes that their acts or omissions
involved intentional misconduct, fraud or a knowing violation of the law which
was material to the cause of action; and
(b) continue for a Person who has ceased to be a Member,
Board Member, Officer, employee or agent and inures to the benefit of his or her
heirs, executors and administrators.
12.10 ERRORS AND OMISSIONS INSURANCE. (a) The Company may
purchase and maintain insurance or (by a Board Supermajority) make other
financial arrangements on behalf of any Covered Person for any liability
asserted against him or her and liability and expenses incurred by him or her in
his or her capacity as a Board Member, an officer, director, employee or agent
of the Company or of another entity at the request of the Company, or arising
out of his or her status as such, whether or not the Company has the authority
to indemnify him or her against such liability and expenses.
(b) The other financial arrangements made by the Company
pursuant to Section 12.10(a) may include (i) the creation of a trust fund; (ii)
the establishment of a program of self-insurance; (iii) the security of its
obligation of indemnification by granting a security interest or other lien on
any assets of the Company; and (iv) the establishment of a letter of credit,
guaranty or surety. No financial arrangement made pursuant hereto may provide
protection for a person adjudged by a court of competent jurisdiction, after
exhaustion of all appeals therefrom, to be liable for intentional misconduct,
fraud or a knowing violation of law, except with respect to the advancement of
expenses or indemnification ordered by a court.
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<PAGE>
(c) In the absence of fraud, no Board Member or Member
approving the insurance or financial arrangement made pursuant to this Section
12.10 shall be subject to personal liability for such action, even if the Board
Member approving the insurance or other financial arrangement is a beneficiary
of the insurance or other financial arrangement.
12.11 PROPERTY OF THE COMPANY. Any indemnification under this
Article XII shall be satisfied solely out of the Property of the Company.
12.12 VIOLATION OF THIS AGREEMENT. Any Member who commits fraud
or otherwise violates any of the terms, conditions and provisions of this
Agreement will keep and save harmless the Property and the Company, and will
indemnify the Company and the other Members from any and all claims, demands and
actions of every kind and nature whatsoever which may arise out of or by reason
of such fraud or violation.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
13.1 NOTICES. All notices to be given hereunder shall be in
writing and shall be addressed to the party at such party's last known address
or facsimile number appearing on the books of the Company. If no such address
or facsimile number has been provided, it will be sufficient to address any
notice (or fax any notice that may be faxed) to such party at the Records Office
of the Company. Notice shall, for all purposes, be deemed given and received,
(a) if hand-delivered, when the notice is received, (b) if sent by an
internationally recognized delivery service, when the notice is received, or (c)
if sent by facsimile, when the facsimile is transmitted and confirmation of
complete receipt is received by the transmitting party during normal business
hours. If any notice is sent by facsimile, the transmitting party shall send a
duplicate copy of the notice to the parties to whom it is faxed by regular mail.
If notice is tendered and is refused by the intended recipient, the notice shall
nonetheless be considered to have been given and shall be effective as of the
date of such refusal. The contrary notwithstanding, any notice given in a
manner other than that provided in this Section 13.1 that is actually received
by the intended recipient shall be deemed an effective delivery of such notice.
Any party may, at any time, by giving ten days written notice to the Company,
designate a new address for the giving of notice to such party.
13.2 INSURANCE. The Company shall carry liability insurance in
such amounts as deemed appropriate by the Board.
13.3 MEMBERSHIP CERTIFICATES. The Company shall issue a
Certificate to each Member to represent such Member's Shares in the Company upon
execution of this Agreement and the payment of the Capital Contributions by such
Member. The Company shall issue a new Certificate in place of any previously
issued if the record holder of the Certificate (a) presents proof by affidavit,
in form and substance satisfactory to the Board, that a previously issued
Certificate has
29
<PAGE>
been lost, destroyed or stolen, or (b) if requested by the Board, delivers to
the Company a bond, in form and substance reasonably satisfactory to the Board,
with such surety or sureties and with fixed or open penalty as the Board may
direct in its reasonable discretion, to indemnify the Company against any claim
that may be made on account of the alleged loss, destruction or theft of the
Certificate. If a Member fails to notify the Company within a reasonable time
after it has knowledge of the loss, destruction or theft of a Certificate, and a
transfer of the Member's Shares represented by that Certificate is registered
before receiving such notification, the Company shall have no liability with
respect to any claim against the Company for such transfer or for the issuance
of a new Certificate consistent with such registration.
13.4 COMPLETE AGREEMENT. This Agreement, together with the
Articles to the extent referenced herein, constitute the complete and exclusive
agreement and understanding of the Members with respect to the subject matter
contained herein. This Agreement and the Articles replace and supersede all
prior agreements, negotiations, statements, memoranda and understandings,
whether written or oral, by and among the Members or any of them.
13.5 AMENDMENTS. This Agreement may be amended by the Members
only if all of the Members agree to the proposed amendment and such amendment is
set forth in a writing signed by all Members; PROVIDED that this Agreement,
including Schedule 1, shall be amended to reflect any admission of a new Member,
Transfer of Shares or change in Percentage Interests pursuant to the terms of
this Agreement.
13.6 APPLICABLE LAW; JURISDICTION. This Agreement and the rights
and obligations of the parties hereto shall be interpreted and enforced in
accordance with and governed by the laws of the State of Nevada without regard
to the conflict laws of that State. Each party further agrees that service of
any process, summons, notice or document by U.S. registered mail to its
respective address set forth in this Agreement shall be effective service of
process for any action brought against it in connection with this Agreement in
said court.
13.7 INTERPRETATION. The headings in this Agreement are inserted
for convenience only and are in no way intended to describe, interpret, define,
or limit the scope, extent or intent of this Agreement or any provisions
contained herein. In the interpretation of this Agreement, the singular may be
read as the plural, and VICE VERSA, the neuter gender as the masculine or
feminine, and VICE VERSA, and the future tense as the past or present, and VICE
VERSA, all interchangeably as the context may require in order to fully
effectuate the intent of the parties and the transactions contemplated herein.
13.8 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which shall
be deemed to constitute one and the same instrument, and it shall be sufficient
for each party to have executed at least one, but not necessarily the same,
counterpart.
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13.9 FACSIMILE COPIES. Facsimile copies of this Agreement or of
any counterpart, and facsimile signatures hereon or on any counterpart, shall
have the same force and effect as originals.
13.10 SEVERABILITY. If any provision of this Agreement, or any
application thereof, should be held by a court of competent jurisdiction to be
invalid, void, illegal or unenforceable to any extent, that provision shall be
deemed severable and the remainder of this Agreement, and all applications
thereof, shall not be affected, impaired or invalidated thereby, and shall
continue in full force and effect to the fullest extent permitted by law.
13.11 WAIVERS. No waiver of any of the provisions of this
Agreement shall be deemed, or shall constitute, a waiver of any other provision,
whether or not similar, nor shall any waiver constitute a continuing waiver, and
no waiver shall be binding unless evidenced by an instrument in writing and
executed by the party making the waiver.
13.12 NO THIRD PARTY BENEFICIARIES. This Agreement is made solely
among and for the benefit of the Members and their respective successors and
assigns, and no other Person shall have any rights, interest or claims hereunder
or be entitled to any benefits under or on account of this Agreement as a third
party beneficiary or otherwise.
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<PAGE>
IN WITNESS WHEREOF, this Agreement was executed as of the date
first-above written.
ALADDIN GAMING, LLC
By: /s/ Jack Sommer
-------------------------------
Name: Jack Sommer
Title: Chairman
ALADDIN GAMING HOLDINGS, LLC
By: /s/ Jack Sommer
-------------------------------
Name: Jack Sommer
Title: Chairman
32
<PAGE>
SCHEDULE 1
CAPITAL STRUCTURE
<TABLE>
<CAPTION>
SERIES A
CAPITAL CAPITAL PERCENTAGE COMMON PREFERRED
MEMBER CONTRIBUTION ACCOUNT INTEREST SHARES SHARES
- ------ ------------ ------- -------- ------ ------
<S> <C> <C> <C> <C> <C>
Gaming Holdings $165 million in cash, $322 million 100% 1,000,000 1,150,000
$7 million in pre-
development costs
and 100% of the
Aladdin site.
</TABLE>
<PAGE>
________________________________
Warrant Agreement
Dated As of February 26, 1998
among
Aladdin Gaming Enterprises, Inc.,
Aladdin Gaming Holdings, Inc.
and
State Street Bank and Trust Company,
as Warrant Agent
__________________________________
<PAGE>
WARRANT AGREEMENT ("Agreement"), dated as of February 26, 1998, by and
between Aladdin Gaming Enterprises, Inc. a Nevada corporation ("Enterprises"),
Aladdin Gaming Holdings, LLC, a Nevada limited-liability company ("Holdings"),
and State Street Bank and Trust Company, as warrant agent (the "Warrant Agent").
WHEREAS, Aladdin Gaming Holdings, LLC, a Nevada limited-liability
company ("Holdings"), Aladdin Capital Corp., a Nevada corporation ("Capital"
and, together with Enterprises and Holdings, the "Aladdin Parties"),
Enterprises, Aladdin Holdings, LLC, a Delaware limited liability company, the
Trust Under Article Sixth u/w/o Sigmund Sommer and London Clubs International,
plc, a United Kingdom public limited company under the laws of England and
Wales, have entered into a Purchase Agreement (the "Purchase Agreement") dated
February 18, 1998, with Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Credit Suisse First Boston Corporation, CIBC Oppenheimer Corp. and Scotia
Capital Markets (USA) Inc. (collectively, the "Initial Purchasers") under which
the Aladdin Parties have agreed to sell to the Initial Purchasers 221,500 Units
(the "Units"), each Unit consisting of (i) $1,000 principal amount at maturity
of 13 1/2% Senior Discount Notes due 2010 of Holdings and Capital (the "Notes")
to be issued under an Indenture, dated as of the date hereof (the "Indenture"),
among Holdings, Capital and State Street Bank and Trust Company, as trustee (the
"Trustee") and (ii) 10 Warrants (the "Warrants") to purchase 10 shares (the
"Warrant Shares") of Class B non-voting Common Stock, no par value, of
Enterprises (the "Class B Stock");
WHEREAS, Enterprises desires the Warrant Agent to assist Enterprises in
connection with the issuance, exchange, cancellation, replacement and exercise
of the Warrants, and in this Agreement wishes to set forth, among other things,
the terms and conditions on which the Warrants may be issued, exchanged,
canceled, replaced and exercised;
WHEREAS, the holders of outstanding membership interests of Holdings
desire for Enterprises to have the benefit of certain anti-dilution protections;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
SECTION 1. Appointment of Warrant Agent. Enterprises hereby appoints
the Warrant Agent to act as agent for Enterprises in accordance with the
instructions set forth hereinafter in this Agreement, and the Warrant Agent
hereby accepts such appointment.
SECTION 2. Warrant Certificates. The certificates evidencing the
Warrants (the "Warrant Certificates") shall be in registered form only and shall
be substantially in the form set forth in Exhibit A attached hereto. Each
Warrant Certificate shall, prior to the Separation Date (as defined herein),
bear the legend set forth in Exhibit B attached hereto.
All of the Warrants initially will be issued in global form (the
"Global Warrant"), substantially in the form of Exhibit A attached hereto
(including the text referred to in footnote 1 thereto).
<PAGE>
Each Global Warrant shall represent such of the outstanding Warrants as
shall be specified therein and shall provide that it shall represent the
aggregate amount of outstanding Warrants from time to time endorsed thereon and
that the aggregate amount of outstanding Warrants represented thereby may from
time to time be reduced or increased, as appropriate, to reflect exchanges and
exercises. Any endorsement of a Global Warrant to reflect the amount of any
increase or decrease in the amount of outstanding Warrants represented thereby
shall be made by the Warrant Agent or the depositary with respect to the Global
Warrants (the "Depositary") in accordance with instructions given by the holder
thereof. Enterprises initially appoints The Depository Trust Company ("DTC") to
act as Depositary with respect to the Warrants in global form.
Subject to Section 5(n), beneficial owners of interests in a Global
Warrant may receive Warrants in definitive form (the "Definitive Warrants"),
substantially in the form of Exhibit A attached hereto (but without the text
referred to in footnote 1 thereto) in the name of such beneficial owners in
accordance with the procedures of the Warrant Agent and the Depositary. Subject
to Section 5(n), in connection with the execution and delivery of such
Definitive Warrants, the Warrant Agent shall reflect on its books and records a
decrease in the amount of the Warrants represented by the relevant Global
Warrant equal to the amount of such Definitive Warrants and Enterprises shall
execute and the Warrant Agent shall countersign and deliver one or more
Definitive Warrants in an aggregate amount equal to the amount of such decrease.
SECTION 3. Execution of Warrant Certificates. (a) Warrant Certificates
shall be signed on behalf of Enterprises by its Chairman of the Board, Chief
Executive Officer, its President or a Vice President and by its Secretary or an
Assistant Secretary. Each such signature upon the Warrant Certificates may be in
the form of a facsimile signature of the present or any future Chairman of the
Board, Chief Executive Officer, President, Vice President, Secretary or
Assistant Secretary and may be imprinted or otherwise reproduced on the Warrant
Certificates and for that purpose Enterprises may adopt and use the facsimile
signature of any person who shall have been Chairman of the Board, Chief
Executive Officer, President, Vice President, Secretary or Assistant Secretary,
notwithstanding the fact that at the time the Warrant Certificates shall be
countersigned and delivered or disposed of such person shall have ceased to hold
such office. The seal of Enterprises may be in the form of a facsimile thereof
and may be impressed, affixed, imprinted or otherwise reproduced on the Warrant
Certificates.
(b) In case any officer of Enterprises who shall have signed
any of the Warrant Certificates shall cease to be such officer before the
Warrant Certificates so signed shall have been countersigned by the Warrant
Agent, or disposed of by Enterprises, such Warrant Certificates nevertheless may
be countersigned and delivered or disposed of as though such person had not
ceased to be such officer of Enterprises; and any Warrant Certificate may be
signed on behalf of Enterprises by any person who, at the actual date of the
execution of such Warrant Certificate, shall be a proper officer of Enterprises
to sign such Warrant Certificate, although at the date of the execution of this
Warrant Agreement any such person was not such officer.
<PAGE>
(c) Warrant Certificates shall be dated the date of
countersignature by the Warrant Agent.
SECTION 4. Registration and Countersignature. (a) The Warrant Agent, on
behalf of Enterprises, shall number and register the Warrant Certificates in a
register as they are issued by Enterprises.
(b) In the case of offers and sales of Warrants outside the
United States without registration under the Securities Act, Enterprises shall,
and the Warrant Agent, on behalf of Enterprises, shall refuse register any
transfer of the Warrants not made in accordance with the provisions of
Regulation S under the Securities Act; provided, however, that if foreign law
prevents Enterprises from refusing to register securities transfers, other
reasonable procedures (such as a legend to the effect that transfer is
prohibited except in accordance with the provisions of Regulation S under the
Securities Act) shall be implemented to prevent any transfer of the securities
not made in accordance with the provisions of Regulation S under the Securities
Act.
(c) Warrant Certificates shall be manually countersigned by
the Warrant Agent and shall not be valid for any purpose unless so
countersigned. The Warrant Agent shall, upon written instructions of the
Chairman of the Board, the Chief Executive Officer, the President, a Vice
President, the Treasurer or the Controller of Enterprises, initially
countersign, issue and deliver Warrant Certificates entitling the holders
thereof to purchase not more than the number of Warrant Shares referred to above
in the first recital hereof and shall countersign and deliver Warrant
Certificates as otherwise provided in this Agreement.
(d) Enterprises and the Warrant Agent may deem and treat a
registered holder of a Warrant Certificate as the absolute owner thereof
(notwithstanding any notation of ownership or other writing thereon made by
anyone) for all purposes, and neither Enterprises nor the Warrant Agent shall be
affected by any notice to the contrary.
SECTION 5. Registration of Transfers and Exchanges. (a) Transfer and
Exchange of Global Warrants. A Global Warrant may not be transferred as a whole
except by the Depositary to a nominee of the Depositary, by a nominee of the
Depositary to the Depositary or to another nominee of the Depositary, by the
Depositary or any such nominee to a successor Depositary or a nominee of such
successor Depositary. A Global Warrant will be exchanged by Enterprises for
Definitive Warrants if (i) Enterprises delivers to the Warrant Agent notice from
the Depositary that it is unwilling or unable to continue to act as Depositary
or that it is no longer a clearing agency registered under the Securities
Exchange Act of 1934, as amended, and, in either case, a successor Depositary is
not appointed by Enterprises within 120 days after the date of such notice from
the Depositary or (ii) Enterprises in its sole discretion determines that a
Global Warrant (in whole but not in part) should be exchanged for Definitive
Warrants and delivers a written notice to such effect to the Warrant Agent;
provided that in no event shall a Regulation S Global Warrant be exchanged by
Enterprises for Definitive Warrants prior to (x) the expiration of the
Restricted Period (as defined herein) and (y) the receipt by the Warrant Agent
of any certificates required pursuant to Rule 903 under the Securities Act. Upon
the occurrence of either of the preceding events in (i) or (ii) above,
Definitive Warrants shall be issued in such names as
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the Depositary shall
identify as beneficial owners to the Warrant Agent. Global Warrants also may be
exchanged or replaced, in whole or in part. Every Warrant authenticated and
delivered in exchange for, or in lieu of, a Global Warrant or any portion
thereof, pursuant to this Section 5, shall be authenticated and delivered in the
form of, and shall be, a Global Warrant. A Global Warrant may not be exchanged
for another Warrant other than as provided in this Section 5(a); however,
beneficial interests in a Global Warrant may be transferred and exchanged as
provided in Section 5(b) or (c) hereof.
(b) Transfer and Exchange of Beneficial Interests in the
Global Warrants. The transfer and exchange of beneficial interests in the Global
Warrants shall be effected through the Depositary, in accordance with the
provisions of this Warrant Agreement and the rules and procedures of the
Depositary, Morgan Guaranty Trust Company of New York, Brussels office, as
operator of the Euroclear system ("Euroclear"), and Cedel Bank, SA ("Cedel")
that apply to such transfer or exchange (the "Applicable Procedures").
Beneficial interests in a Global Warrant bearing the Private Placement Legend
(as defined herein) (a "Restricted Global Warrant") shall be subject to
restrictions on transfer comparable to those set forth herein to the extent
required by the Securities Act. Transfers of beneficial interests in the Global
Warrants also shall require compliance with either subparagraph (i) or (ii)
below, as applicable, as well as one or more of the other following
subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global Warrant.
Beneficial interests in any Restricted Global Warrant may be
transferred to any individual, corporation, partnership,
limited-liability company or partnership, joint venture,
association, joint-stock company, trust, unincorporated
organization, government or any agency or political
subdivision thereof or any other entity (each, a "Person") who
takes delivery thereof in the form of a beneficial interest in
the same Restricted Global Warrant in accordance with the
transfer restrictions set forth in the legend set forth in
Section 5(f) hereof (the "Private Placement Legend");
provided, however, that prior to the expiration of the 1-year
restricted period as defined in Regulation S under the
Securities Act (the "Restricted Period"), transfers of
beneficial interests in the Global Note bearing the Private
Placement Legend and deposited with or on behalf of the
Depositary and registered in the name of the Depositary or its
nominee, issued in an amount equal to the outstanding Warrants
initially sold in reliance on Rule 903 of Regulation S (the
"Regulation S Global Warrant") may not be made to a U.S.
person (as defined in Rule 902(o) under the Securities Act) or
for the account or benefit of a U.S. person (other than the
Initial Purchaser). Beneficial interests in any Unrestricted
Global Warrant (defined for purposes hereof as any Global
Warrant in the form of Exhibit A hereto that bears the legend
set forth in Section 2 hereof and that has the
"Schedule of Exchanges of Global Warrants" attached thereto,
and that is deposited with or on behalf of the Depositary,
representing Warrants that do not bear the Private Placement
Legend) may be transferred to Persons who take delivery
thereof in the form of a beneficial
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<PAGE>
interest in an Unrestricted Global Warrant. No written orders
or instructions shall be required to be delivered to the
Warrant Agent to effect the transfers described in this
Section 5(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests in
Global Warrant. In connection with all transfers and exchanges
of beneficial interests that are not subject to Section
5(b)(i) above, the transferor of such beneficial interest must
deliver to the Warrant Agent either (A)(1) a written order
from a Person who has an account with the Depositary,
Euroclear or Cedel (a "Participant") or with a Person who has
an account with a Participant (an "Indirect Participant")
given to the Depositary in accordance with the Applicable
Procedures directing the Depositary to credit or cause to be
credited a beneficial interest in another Global Warrant in an
amount equal to the beneficial interest to be transferred or
exchanged and (2) instructions given in accordance with the
Applicable Procedures containing information regarding the
Participant account to be credited with such increase or
(B)(1) a written order from a Participant or an Indirect
Participant given to the Depositary in accordance with the
Applicable Procedures directing the Depositary to cause to be
issued a Definitive Warrant in an amount equal to the
beneficial interest to be transferred or exchanged and (2)
instructions given by the Depositary to the Warrant Agent
containing information regarding the Person in whose name such
Definitive Warrant shall be registered to effect the transfer
or exchange referred to in (1) above; provided that in no
event shall Definitive Warrants be issued upon the transfer or
exchange of beneficial interests in the Regulation S Global
Warrant prior to (x) the expiration of the Restricted Period
and (y) the receipt by the Warrant Agent of any certificates
required pursuant to Rule 903 under the Securities Act. Upon
satisfaction of all of the requirements for transfer or
exchange of beneficial interests in Global Warrants contained
in this Warrant Agreement, the Warrant Agent shall adjust the
amount of the relevant Global Warrant(s) pursuant to Section
5(g) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted Global
Warrant. A beneficial interest in any Restricted Global
Warrant may be transferred to a Person who takes delivery
thereof in the form of a beneficial interest in another
Restricted Global Warrant if the transfer complies with the
requirements of Section 5(b)(ii) above and the Warrant Agent
receives the following:
(A) if the transferee will take delivery in the form of a
beneficial interest in a 144A Global Warrant (defined
for purposes hereof as any Global Warrant in the form
of Exhibit A hereto that bears the Private Placement
Legend and the legend set forth in Section 2 hereof
and that is deposited with or on behalf of, and
registered in
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<PAGE>
the name of, the Depositary or its nominee that will
be issued in an amount equal to the amount of
Warrants sold in reliance on Rule 144A under the
Securities Act), then the transferor must deliver a
certificate in the form of Exhibit C hereto,
including the certifications in item (1) thereof;
(B) if the transferee will take delivery in the form of
a beneficial interest in the Regulation S Global
Warrant, then the transferor must deliver a
certificate in the form of Exhibit C hereto,
including the certifications in item (2)
thereof; and
(C) if the transferee will take delivery in the form of a
beneficial interest in the IAI Global Warrant
(defined for purposes hereof as any Global Warrant in
the form of Exhibit A hereto that bears the Private
Placement Legend and the --------- legend set forth
in Section 2 hereof and that is deposited with or on
behalf of, and registered in the name of, the
Depositary or its nominee that will be issued in an
amount equal to the amount of Warrants sold to
institutional "accredited investors" (as defined in
Rule 501(a)(1), (2), (3) or (7) of Regulation D under
the Securities Act) ("Institutional Accredited
Investors")), then the transferor must deliver a
certificate in the form of Exhibit C hereto,
including the certifications and certificates and
Opinion of --------- Counsel required by item (3)
thereof, if applicable.
(iv) Transfer and Exchange of Beneficial Interests in a Restricted
Global Warrant for Beneficial Interests in the Unrestricted
Global Warrant. A beneficial interest in any Restricted Global
Warrant may be exchanged by any holder thereof for a
beneficial interest in an Unrestricted Global Warrant or
transferred to a Person who takes delivery thereof in the form
of a beneficial interest in an Unrestricted Global Warrant if
the exchange or transfer complies with the requirements of
Section 5(b)(ii) above and:
(A) such transfer is effected pursuant to a Registration
Statement in accordance with the Warrant Registration
Rights Agreement; or
(B) the Warrant Agent receives the following:
(1) if the holder of such beneficial interest in
a Restricted Global Warrant proposes to
exchange such beneficial interest for a
beneficial interest in an Unrestricted
Global Warrant, a certificate from such
holder in the form of Exhibit D hereto,
including the certifications in item (l)(a)
thereof; or
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<PAGE>
(2) if the holder of such beneficial interest in
a Restricted Global Warrant proposes to
transfer such beneficial interest to a
Person who shall take delivery thereof in
the form of a beneficial interest in an
Unrestricted Global Warrant, a certificate
from such holder in the form of Exhibit C
hereto, including the certifications in item
(4) thereof;
and, in each such case set forth in this subparagraph
(B), if the Warrant Agent or Enterprises so requests
or if the Applicable Procedures so require, an
opinion of counsel from legal counsel reasonably
acceptable to the Warrant Agent or Enterprises, as
applicable, (an "Opinion of Counsel") to the effect
that such exchange or transfer is in compliance with
the Securities Act and that the restrictions on
transfer contained herein and in the Private
Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
If any such transfer is effected pursuant to
subparagraph (B) above at a time when an Unrestricted
Global Warrant has not yet been issued, Enterprises
shall issue and, upon receipt of written instructions
from Enterprises, the Warrant Agent shall countersign
one or more Unrestricted Global Warrants in an
aggregate amount equal to the aggregate amount of
beneficial interests transferred pursuant to
subparagraph (B) above.
Beneficial interests in an Unrestricted Global
Warrant cannot be exchanged for, or transferred to
Persons who take delivery thereof in the form of, a
beneficial interest in a Restricted Global Warrant.
(c) Transfer or Exchange of Beneficial Interests for
Definitive Warrants.
(i) Beneficial Interests in Restricted Global Warrants to
Restricted Definitive Warrants. If any holder of a
beneficial interest in a Restricted Global Warrant
proposes to exchange such beneficial interest for a
Restricted Definitive Warrant or to transfer such
beneficial interest to a Person who takes delivery
thereof in the form of a Restricted Definitive
Warrant, then, upon receipt by the Warrant Agent of
the following documentation:
(A) if the holder of such beneficial interest in
a Restricted Global Warrant proposes to
exchange such beneficial interest for a
Restricted Definitive Warrant, a certificate
from such holder in the form of Exhibit D
hereto, including the certifications in item
(2)(a) thereof;
(B) if such beneficial interest is being
transferred to a "qualified institutional
buyer" as defined in Rule 144A under the
Securities Act (a "QIB") in accordance with
Rule 144A under the Securities
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<PAGE>
Act,a certificate to the effect set forth in
Exhibit C hereto, including the
certifications in item (1) thereof;
(C) if such beneficial interest is being
transferred to a person who is not a U.S.
person (a "Non-U.S. Person") in an offshore
transaction in accordance with Rule 903 or
Rule 904 under the Securities Act, a
certificate to the effect set forth in
Exhibit C hereto, including the
certifications in item (2) thereof;
(D) if such beneficial interest is being
transferred pursuant to an exemption from
the registration requirements of the
Securities Act in accordance with Rule 144
under the Securities Act, a certificate to
the effect set forth in Exhibit C hereto,
including the certifications in item (3)(a)
thereof;
(E) if such beneficial interest is being
transferred to an Institutional Accredited
Investor in reliance on an exemption from
the registration requirements of the
Securities Act other than those listed in
subparagraphs (B) through (D) above, a
certificate to the effect set forth in
Exhibit C hereto, including the
certifications, certificates and Opinion of
Counsel required by item (3) thereof, if
applicable;
(F) if such beneficial interest is being
transferred to Enterprises or any of its
subsidiaries, a certificate to the effect
set forth in Exhibit C hereto, including the
certifications in item (3)(b) thereof; or
(G) if such beneficial interest is being
transferred pursuant to an effective
registration statement under the Securities
Act, a certificate to the effect set forth
in Exhibit C hereto, including the
certifications in item (3)(c) thereof,
the Warrant Agent shall cause the aggregate amount of
the applicable Global Warrant to be reduced
accordingly pursuant to Section 5(g) hereof, and
Enterprises shall execute and the Warrant Agent shall
countersign and deliver to the Person designated in
the instructions a Definitive Warrant in the
appropriate amount. Any Definitive Warrant issued in
exchange for a beneficial interest in a Restricted
Global Warrant pursuant to this Section 5(c) shall be
registered in such name or names and in such
authorized denomination or denominations as the
holder of such beneficial interest shall instruct the
Warrant Agent through instructions from the
Depositary and the Participant or Indirect
Participant. The Warrant Agent shall deliver such
Definitive Warrants to the Persons in whose names
such Warrants are so registered. Any Definitive
Warrant issued in exchange for a beneficial interest
in a Restricted Global Warrant pursuant to this
Section 5(c)(i) shall bear the
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<PAGE>
Private Placement Legend and shall be subject to all
restrictions on transfer contained therein.
Notwithstanding Sections 5(c)(i)(A) and (C)
hereof, a beneficial interest in the Regulation S
Global Warrant may not be exchanged for a Definitive
Warrant or transferred to a Person who takes delivery
thereof in the form of a Definitive Warrant prior to
(x) the expiration of the Restricted Period and (y)
the receipt by the Warrant Agent of any certificates
required pursuant to Rule 903 under the Securities
Act, except in the case of a transfer pursuant to an
exemption from the registration requirements of the
Securities Act other than Rule 903 or Rule 904.
(ii) Beneficial Interests in Restricted Global Warrants to
Unrestricted Definitive Warrants. A holder of a
beneficial interest in a Restricted Global Warrant
may exchange such beneficial interest for an
Unrestricted Definitive Warrant or may transfer such
beneficial interest to a Person who takes delivery
thereof in the form of an Unrestricted Definitive
Warrant only if:
(A) such transfer is effected pursuant to a
Registration Statement in accordance with
the Warrant Registration Rights Agreement;
or
(B) the Warrant Agent receives the following:
(1) if the holder of such beneficial
interest in a Restricted Global
Warrant proposes to exchange such
beneficial interest for a Definitive
Warrant that does not bear the
Private Placement Legend, a
certificate from such holder in the
form of Exhibit D hereto, including
the certifications in item (l)(b)
thereof; or
(2) if the holder of such beneficial
interest in a Restricted Global
Warrant proposes to transfer such
beneficial interest to a Person who
shall take delivery thereof in the
form of a Definitive Warrant that
does not bear the Private Placement
Legend, a certificate from such
holder in the form of Exhibit C
hereto, including the certifications
in item (4) thereof;
and, in each such case set forth in this subparagraph
(B), if the Warrant Agent or Enterprises so requests
or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to
the Warrant Agent or Enterprises, as applicable, to
the effect that such exchange or transfer is in
compliance with the Securities Act and that the
restrictions on transfer contained herein
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<PAGE>
and in the Private Placement Legend are no longer
required in order to maintain compliance with the
Securities Act.
(iii) Beneficial Interests in Unrestricted Global Warrants
to Unrestricted Definitive Warrants. If any holder of
a beneficial interest in an Unrestricted Global
Warrant proposes to exchange such beneficial interest
for a Definitive Warrant or to transfer such
beneficial interest to a Person who takes delivery
thereof in the form of a Definitive Warrant, then,
upon satisfaction of the conditions set forth in
Section 5(b)(ii) hereof, the Warrant Agent shall
cause the aggregate amount of the applicable Global
Warrant to be reduced accordingly pursuant to Section
5(g) hereof, and Enterprises shall execute and the
Warrant Agent shall countersign and deliver to the
Person designated in the instructions a Definitive
Warrant in the appropriate amount. Any Definitive
Warrant issued in exchange for a beneficial interest
pursuant to this Section 5(c)(iii) shall be
registered in such name or names and in such
authorized denomination or denominations as the
holder of such beneficial interest shall instruct the
Warrant Agent through instructions from the
Depositary and the Participant or Indirect
Participant. The Warrant Agent shall deliver such
Definitive Warrants to the Persons in whose names
such Warrants are so registered. Any Definitive
Warrant issued in exchange for a beneficial interest
pursuant to this Section 5(c)(iii) shall not bear the
Private Placement Legend.
(d) Transfer and Exchange of Definitive Warrants for
Beneficial Interests.
(i) Restricted Definitive Warrants to Beneficial
Interests in Restricted Global Warrants. If any
holder of a Restricted Definitive Warrant proposes to
exchange such Warrant for a beneficial interest in a
Restricted Global Warrant or to transfer such
Restricted Definitive Warrants to a Person who takes
delivery thereof in the form of a beneficial interest
in a Restricted Global Warrant, then, upon receipt by
the Warrant Agent of the following documentation:
(A) if the holder of such Restricted Definitive
Warrant proposes to exchange such Warrant
for a beneficial interest in a Restricted
Global Warrant, a certificate from such
holder in the form of Exhibit D hereto,
including the certifications in item (2)(b)
thereof;
(B) if such Restricted Definitive Warrant is
being transferred to a QIB in accordance
with Rule 144A under the Securities Act, a
certificate to the effect set forth in
Exhibit C hereto, including the
certifications in item (1) thereof;
(C) if such Restricted Definitive Warrant is
being transferred to a Non-U.S. person in an
offshore transaction in accordance with
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<PAGE>
Rule 903 or Rule 904 under the Securities
Act, a certificate to the effect set forth
in Exhibit C hereto, including the
certifications in item (2) thereof;
(D) if such Restricted Definitive Warrant is
being transferred pursuant to an exemption
from the registration requirements of the
Securities Act in accordance with Rule 144
under the Securities Act, a certificate to
the effect set forth in Exhibit C hereto,
including the certifications in item (3)(a)
thereof;
(E) if such Restricted Definitive Warrant is
being transferred to an Institutional
Accredited Investor in reliance on an
exemption from the registration requirements
of the Securities Act other than those
listed in subparagraphs (B) through (D)
above, a certificate to the effect set forth
in Exhibit C hereto, including the
certifications, certificates and Opinion of
Counsel required by item (3) thereof, if
applicable;
(F) if such Restricted Definitive Warrant is
being transferred to Enterprises or any of
its subsidiaries, a certificate to the
effect set forth in Exhibit C hereto,
including the certifications in item (3)(b)
thereof; or
(G) if such Restricted Definitive Warrant is
being transferred pursuant to an effective
registration statement under the Securities
Act, a certificate to the effect set forth
in Exhibit C hereto, including the
certifications in item (3)(c) thereof,
the Warrant Agent shall cancel the Restricted
Definitive Warrant, increase or cause to be increased
the aggregate amount of, in the case of clause (A)
above, the appropriate Restricted Global Warrant, in
the case of clause (B) above, the 144A Global
Warrant, in the case of clause (C) above, the
Regulation S Global Warrant, and in all other cases,
the IAI Global Warrant.
(ii) Restricted Definitive Warrants to Beneficial
Interests in Unrestricted Global Warrants. A holder
of a Restricted Definitive Warrant may exchange such
Warrant for a beneficial interest in an Unrestricted
Global Warrant or transfer such Restricted Definitive
Warrant to a Person who takes delivery thereof in the
form of a beneficial interest in an Unrestricted
Global Warrant only if:
(A) such transfer is effected pursuant to a
Registration Statement in accordance with
the Warrant Registration Rights Agreement;
or
(B) the Warrant Agent receives the following:
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<PAGE>
(1) if the holder of such Definitive
Warrants proposes to exchange such
Warrants for a beneficial interest
in the Unrestricted Global Warrant,
a certificate from such holder in
the form of Exhibit D hereto,
including the certifications in item
(l)(c) thereof; or
(2) if the holder of such Definitive
Warrants proposes to transfer such
Warrants to a Person who shall take
delivery thereof in the form of a
beneficial interest in the
Unrestricted Global Warrant, a
certificate from such holder in the
form of Exhibit C hereto, including
the certifications in item (4)
thereof;
and, in each such case set forth in this subparagraph
(B), if the Warrant Agent or Enterprises so requests
or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to
the Warrant Agent or Enterprises, as applicable, to
the effect that such exchange or transfer is in
compliance with the Securities Act and that the
restrictions on transfer contained herein and in the
Private Placement Legend are no longer required in
order to maintain compliance with the Securities Act.
Upon satisfaction of the conditions of any of the
subparagraphs in this Section 5(d)(ii), the Warrant
Agent shall cancel the Definitive Warrants and
increase or cause to be increased the aggregate
amount of the Unrestricted Global Warrant.
(iii) Unrestricted Definitive Warrants to Beneficial
Interests in Unrestricted Global Warrants. A holder
of an Unrestricted Definitive Warrant may exchange
such Warrant for a beneficial interest in an
Unrestricted Global Warrant or transfer such
Definitive Warrants to a Person who takes delivery
thereof in the form of a beneficial interest in an
Unrestricted Global Warrant at any time. Upon receipt
of a request for such an exchange or transfer, the
Warrant Agent shall cancel the applicable
Unrestricted Definitive Warrant and increase or cause
to be increased the aggregate amount of one of the
Unrestricted Global Warrants.
If any such exchange or transfer from a Definitive
Warrant to a beneficial interest is effected pursuant
to subparagraphs (ii) or (iii) above at a time when
an Unrestricted Global Warrant has not yet been
issued, Enterprises shall issue and, upon receipt of
written instructions from Enterprises, the Warrant
Agent shall countersign one or more Unrestricted
Global Warrants in an aggregate amount equal to the
amount of Definitive Warrants so transferred.
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(e) Transfer and Exchange of Definitive Warrants for
Definitive Warrants. Upon request by a holder of Definitive Warrants and such
holder's compliance with the provisions of this Section 5(e), the Warrant Agent
shall register the transfer or exchange of Definitive Warrants. Prior to such
registration of transfer or exchange, the requesting holder shall present or
surrender to the Warrant Agent the Definitive Warrants duly endorsed or
accompanied by a written instruction of transfer in form satisfactory to the
Warrant Agent duly executed by such holder or by his attorney, duly authorized
in writing. In addition, the requesting holder shall provide any additional
certifications, documents and information, as applicable, required pursuant to
the following provisions of this Section 5(e).
(i) Restricted Definitive Warrants to Restricted
Definitive Warrants. Any Restricted Definitive
Warrant may be transferred to and registered in the
name of Persons who take delivery thereof in the form
of a Restricted Definitive Warrant if the Warrant
Agent receives the following:
(A) if the transfer will be made pursuant to
Rule 144A under the Securities Act, then the
transferor must deliver a certificate in the
form of Exhibit C hereto, including the
certifications in item (1) thereof;
(B) if the transfer will be made pursuant to
Rule 903 or Rule 904, then the transferor
must deliver a certificate in the form of
Exhibit C hereto, including the
certifications in item (2) thereof; and
(C) if the transfer will be made pursuant to any
other exemption from the registration
requirements of the Securities Act, then the
transferor must deliver a certificate in the
form of Exhibit C hereto, including the
certifications, certificates and Opinion of
Counsel required by item (3) thereof, if
applicable.
(ii) Restricted Definitive Warrants to Unrestricted
Definitive Warrants. Any Restricted Definitive
Warrant may be exchanged by the holder thereof for an
Unrestricted Definitive Warrant or transferred to a
Person or Persons who take delivery thereof in the
form of an Unrestricted Definitive Warrant if:
(A) any such transfer is effected pursuant to a
Registration Statement in accordance with
the Warrant Registration Rights Agreement;
or
(B) the Warrant Agent receives the following:
(1) if the holder of such Restricted
Definitive Warrants proposes to exchange
such Warrants for an Unrestricted Definitive
Warrant, a certificate from such holder in
the form of Exhibit D hereto, including the
certifications in item (l)(d) thereof; or
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<PAGE>
(2) if the holder of such Restricted
Definitive Warrants proposes to transfer
such Warrants to a Person who shall take
delivery thereof in the form of an
Unrestricted Definitive Warrant, a
certificate from such holder in the form of
Exhibit C hereto, including the
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph
(B), if the Warrant Agent or Enterprises so requests,
an Opinion of Counsel in form reasonably acceptable
to the Warrant Agent or Enterprises, as applicable,
to the effect that such exchange or transfer is in
compliance with the Securities Act and that the
restrictions on transfer contained herein and in the
Private Placement Legend are no longer required in
order to maintain compliance with the Securities Act.
(iii) Unrestricted Definitive Warrants to Unrestricted
Definitive Warrants. A holder of Unrestricted
Definitive Warrants may transfer such Warrants to a
Person who takes delivery thereof in the form of an
Unrestricted Definitive Warrant.
Upon receipt of a request to register such a
transfer, the Warrant Agent shall register the
Unrestricted Definitive Warrants pursuant to the
instructions from the holder thereof.
(f) Legends. The following legend shall appear on the face of
all Global Warrants and Definitive Warrants issued under this Warrant Agreement
unless specifically stated otherwise in the applicable provisions of this
Warrant Agreement.
(i) Except as permitted by subparagraph (ii) below, each
Global Warrant and each Definitive Warrant (and all
Warrants issued in exchange therefor or substitution
thereof) shall bear the legend in substantially the
following form:
"THE SECURITIES HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT
FROM, OR NOT SUBJECT TO, REGISTRATION AS SET FORTH
BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT ("RULE 144A")), (B) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED
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IN RULE 501(A) (1), (2), (3) OR (7) UNDER THE
SECURITIES ACT) OR (C) IT IS A NON-U.S. PERSON AS
DEFINED IN RULE 904 UNDER THE SECURITIES ACT (2)
AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH
SECURITY PRIOR TO THE DATE WHICH IS TWO YEARS AFTER
THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE
LAST DATE ON WHICH ENTERPRISES OR ANY AFFILIATE OF
ENTERPRISES WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF THIS SECURITY) ONLY (A) TO
ENTERPRISES, (B) PURSUANT TO A REGISTRATION STATEMENT
WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A INSIDE THE
UNITED STATES, TO A PERSON IT REASONABLY BELIEVES IS
A QUALIFIED INSTITUTIONAL BUYER THAT PURCHASES FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D)
PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT
OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT, (E) INSIDE THE
UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR
THAT IS ACQUIRING THE SECURITIES FOR ITS OWN ACCOUNT,
OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT
WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION
WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES
ACT OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT, SUBJECT TO ENTERPRISES' AND THE WARRANT AGENT'S
RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I)
PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION
AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF
THEM, AND (II) IN EACH OF THE FOREGOING CASES, TO
REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM
APPEARING ON THE OTHER SIDE OF THIS SECURITY IS
COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE
WARRANT AGENT."
(ii) Notwithstanding the foregoing, any Global Warrant or
Definitive Warrant issued pursuant to subparagraphs
(b)(iv), (c)(ii), (c)(iii), (d)(ii), (d)(iii),
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<PAGE>
(e)(ii) or (e)(iii) to this Section 5 and all
Warrants issued in exchange therefor or substitution
thereof) shall not bear the Private Placement Legend.
(g) Cancellation and/or Adjustment of Global Warrants. At such time as
all beneficial interests in a particular Global Warrant have been exchanged for
Definitive Warrants or a particular Global Warrant has been redeemed,
repurchased or canceled in whole and not in part, each such Global Warrant shall
be returned to or retained and canceled by the Warrant Agent in accordance with
Section 5(k). At any time prior to such cancellation, if any beneficial interest
in a Global Warrant is exchanged for or transferred to a Person who will take
delivery thereof in the form of a beneficial interest in another Global Warrant
or for Definitive Warrants, the amount of Warrants represented by such Global
Warrant shall be reduced accordingly and an adjustment shall be made on such
Global Warrant or on the schedule maintained by the Depositary in respect of
such Global Warrant for such purposes, in accordance with the rules and
procedures of the Depositary, or by the Depositary at the direction of the
Warrant Agent to reflect such reduction; and if the beneficial interest is being
exchanged for or transferred to a Person who will take delivery thereof in the
form of a beneficial interest in another Global Warrant, such other Global
Warrant shall be increased accordingly and an adjustment shall be made on the
books and records of the Warrant Agent respecting such Global Warrant or by the
Depositary at the direction of the Warrant Agent to reflect such increase.
(h) Indemnification. Each holder of a Warrant Certificate
agrees to indemnify Enterprises and the Warrant Agent against any losses,
claims, liabilities, damages or expenses, whatsoever, that may result from the
transfer, exchange or assignment of such holder's Warrant Certificate in
violation of any provision of this Agreement and/or applicable law.
(i) Depositary. Members of, or participants in, the Depositary
("Agent Members") shall have no rights under this Agreement with respect to the
Global Warrants, as the case may be, held on their behalf by the Depositary or
the Warrant Agent as its custodian, and the Depositary may be treated by
Enterprises, the Warrant Agent and any agent of Enterprises or the Warrant Agent
as the absolute owner of such Global Warrants for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent Enterprises, the
Warrant Agent or any agent of Enterprises or the Warrant Agent, from giving
effect to any written certification, proxy or other authorization furnished by
the Depositary or impair, as between the Depositary and its Agent Members, the
operation of customary practices governing the exercise of the rights of a
holder of any Warrants.
(j) Notices. The Warrant Agent shall retain copies of all
letters, notices and other written communications received pursuant to this
Section 5. Enterprises shall have the right to inspect and make copies of all
such letters, notices or other written communications at any reasonable time
upon the giving of reasonable written notice to the Warrant Agent.
(k) Cancellation of Warrant Certificates. Any Warrant
Certificate surrendered for registration of transfer, exchange or exercise of
the Warrants represented thereby shall, if surrendered to Enterprises, be
delivered to the Warrant Agent, and all Warrant Certificates
16
<PAGE>
surrendered or so delivered to the Warrant Agent shall be promptly canceled by
the Warrant Agent and shall not be reissued by Enterprises and, except as
provided in this Section 5 in case of an exchange, Section 6 hereof in case of
the exercise of less than all the Warrants represented thereby or Section 8
hereof in case of a mutilated Warrant Certificate, no Warrant Certificate shall
be issued hereunder in lieu thereof. The Warrant Agent shall deliver to
Enterprises from time to time or otherwise dispose of such canceled Warrant
Certificates as Enterprises may direct in writing.
(l) Countersignature of New Certificates. The Warrant Agent is
hereby authorized to countersign, in accordance with the provisions of this
Section 5 and of Section 4 hereof, the new Warrant Certificates required
pursuant to the provisions of this Section 5.
(m) Charges. No service charge shall be made for registration
of transfer or exchange upon surrender of any Warrant Certificate at the office
of the Warrant Agent maintained for that purpose. Enterprises may require from
Warrant holders payment of a sum sufficient to cover all taxes and/or other
governmental charges (including, without limitation, documentary and stamp
taxes) that may be imposed in connection with any registration, transfer or
exchange of Warrant Certificates.
(n) Warrant Endorsement. Notwithstanding the foregoing
provisions of this Section 5, until Separated (as defined herein) each Warrant
will be held by the Trustee, as custodian for the registered holders of each
Note or Note in global form, and will be registered in the name of the
registered holder of such Note initially in the amount specified in writing to
the Warrant Agent by Enterprises. Such holder may, at any time, on or after the
Separation Date (as defined herein), at its option, by notice to the Trustee
elect to separate and/or separately transfer the Notes and the Warrants
represented by such Note or Note in global form containing a Warrant Endorsement
(as defined in the Indenture), in whole or in part, for a definitive Warrant
Certificate or Warrant Certificates or a beneficial interest in a Global Warrant
evidencing the underlying Warrants (in accordance with this Agreement) and for a
Note or Notes or a beneficial interest in a global Note of a like aggregate
principal amount at maturity of authorized denominations and not containing a
Warrant Endorsement in accordance with the Indenture (such surrender and
exchange being referred to herein as a "Separation" and the related Warrants
being referred to as "Separated"); provided that no delay or failure on the part
of the Trustee or the Warrant Agent to exchange such Warrant Certificate and
Note or Notes shall affect the Separation of the Notes and the Warrants or their
separate transferability. Prior to Separation, record ownership of the Warrants
will be evidenced by the certificates for Notes or a global Note registered in
the names of the holders of the Notes or global Notes, which certificates or
global Note will bear thereon a Warrant Endorsement substantially in the form
set forth in the Indenture, and the right to receive or exercise Warrants will
be transferable only in connection with the transfer of such Notes or a
beneficial interest in a global Note.
All Notes and global Notes containing a Warrant Endorsement presented
for Separation shall be duly endorsed by the registered holder or holders
thereof or by the duly appointed legal representative thereof or by a duly
authorized attorney, and in the case of transfer, such signature shall be
medallion guaranteed by an institution which is a member of a Securities
17
<PAGE>
Transfer Association recognized signature guarantee program. Upon notice from
the Trustee of a Separation, the Warrant Agent shall, with respect to Definitive
Warrants, deliver (or cause to be delivered) to such holder, legal
representative or authorized attorney the Warrant Certificate or Warrant
Certificates executed by Enterprises and countersigned by the Warrant Agent in
the name of such registered holder or holders or such transferee or transferees
or shall, with respect to (i) 144A Global Warrants, deliver (or cause to be
delivered) to the Depositary or its nominee a 144A Global Warrant, (ii)
Regulation S Global Warrants, deliver (or cause to be delivered) to the
Depositary or its nominee a Regulation S Global Warrant and (iii) IAI Global
Warrants, deliver (or cause to be delivered) to the Depositary or its nominee an
IAI Global Warrant, in each case, executed by Enterprises and countersigned by
the Warrant Agent in the name of the Depositary or its nominee for such
aggregate amount of Warrants (or, with respect to a Global Warrant, increasing
the amount of Warrants represented thereby in such amount) as shall equal one
Warrant for each $1,000 principal amount at maturity of Notes so exchanged for
Separation, bearing numbers or other distinguishing symbols not
contemporaneously outstanding, to the Person or Persons entitled thereto. Upon
registration of transfer or exchange of a Warrant Certificate, the Warrant Agent
shall countersign and deliver by certified mail a new Warrant Certificate to the
holders of the Notes so separated or the transferee or transferees thereof, as
the case may be.
SECTION 6. Separation, Terms and Exercise of Warrants. (a) The Notes
and the Warrants will not be separately transferable until the earliest of (i)
September 1, 1998, (ii) the date on which a registration statement with respect
to the Notes or a registration statement with respect to the Warrants and the
Warrant Shares is filed with the Commission under the Securities Act, (iii) the
occurrence of a Change of Control (as defined in the Indenture) or a sale or
recapitalization of Enterprises, Holdings or Aladdin Gaming, LLC, a Nevada
limited-liability company, occurs, (iv) 30 days after a Qualified Public
Offering (as defined in the Indenture) occurs, (v) the occurrence of an Event of
Default (as defined in the Indenture) or (vi) such earlier date as determined by
Merrill Lynch & Co. in its sole discretion (the date of the earliest occurrence
of an event specified in clauses (i) through (vi) is referred to herein as the
"Separation Date"), at which time such Warrants shall become separately
transferable. Subject to the terms of this Agreement, each Warrant holder shall
have the right, which may be exercised during the period commencing at the
opening of business on the Separation Date (the "Warrant Exercise Commencement
Date") and until 5:00 p.m., New York City time on March 1, 2010 (the "Warrant
Exercise Period") to receive from Enterprises upon payment of the exercise price
(the "Exercise Price") then in effect for each Warrant Share and subject to
other conditions to exercise the number of fully paid and nonassessable Warrant
Shares which the holder may at the time be entitled to receive on exercise of
such Warrants; provided that holders shall be able to exercise their Warrants
only if a registration statement relating to the Warrant Shares is then in
effect, or the exercise of such Warrants is exempt from the registration
requirements of the Securities Act, and such securities are qualified for sale
or exempt from qualification under the applicable securities laws of the states
in which the various holders of the Warrants or other Persons to whom it is
proposed that the Warrant Shares be issued on exercise of the Warrants reside.
Each holder of Warrants may exercise its right, during the Warrant Exercise
Period, to receive Warrant Shares when such holder makes a payment to
Enterprises in cash (or in the form of certified or official bank check payable
to the order of Enterprises) in an amount equal to the Exercise Price of the
Warrants being exercised by such holder. Each Initial Warrant not exercised
18
<PAGE>
prior to 5:00 p.m., New York City time, on March 1, 2010 (the "Warrant
Expiration Date") shall lapse and become void and all rights thereunder and all
rights in respect thereof under this agreement shall cease as of such time. No
adjustments as to dividends will be made upon exercise of the Warrants.
Enterprises will give notice of expiration of the Warrants not less than 90 and
not more than 120 days prior to the Expiration Date to the registered holders of
the then outstanding Warrants and to the Warrant Agent. If Enterprises fails to
give such notice, the Warrants will not expire until 90 days after Enterprises
gives notice. In no event will holders of Warrants be entitled to any damages or
other remedy for Enterprises' failure to give such notice other than any such
extension.
(b) In order to exercise all or any of the Warrants
represented by a Warrant Certificate, (i) in the case of Definitive Warrants,
the holder thereof must surrender for exercise the Warrant Certificate to
Enterprises at the office of the Warrant Agent at its corporate trust office set
forth in Section 20 (which office shall be maintained in Boston) hereof, or the
affiliate office of the Warrant Agent (which office shall be maintained in New
York), (ii) in the case of a book-entry interest in a Global Warrant, the
exercising Agent Member whose name appears on a securities position listing of
the Depositary as the holder of such book-entry interest must comply with the
Depositary's procedures relating to the exercise of such book-entry interest in
such Global Warrant and (iii) in the case of both Global Warrants and Definitive
Warrants, the holder thereof or the Agent Member, as applicable, must deliver to
Enterprises at the office of the Warrant Agent the form of election to purchase
on the reverse thereof duly filled in and signed, which signature shall be
medallion guaranteed by an institution which is a member of a Securities
Transfer Association recognized signature guarantee program, and upon payment to
the Warrant Agent in New York for the account of Enterprises of the Exercise
Price, which is set forth in the form of Warrant Certificate attached hereto as
Exhibit A as adjusted as herein provided, for the number of Warrant Shares in
respect of which such Warrants are then exercised.
(c) Subject to the provisions of Section 7 hereof, upon
compliance with clause (b) above, Enterprises shall deliver or cause to be
delivered with all reasonable dispatch, to or upon the written order of the
holder and in such name or names as the Warrant holder or Agent Member may
designate, a certificate or certificates for the number of whole Warrant Shares
issuable upon the exercise of such Warrants or other securities or property to
which such holder is entitled hereunder, together with cash (if any) as provided
in Section 13 hereof; provided that if any consolidation, merger or lease or
sale of assets is proposed to be effected by Enterprises as described in Section
11(m) hereof, or a tender offer or an exchange offer for shares of Class B Stock
shall be made, upon such surrender of Warrants and payment of the Exercise Price
as aforesaid, Enterprises shall, as soon as possible, but in any event not later
than two business days thereafter, deliver or cause to be delivered the full
number of Warrant Shares issuable upon the exercise of such Warrants in the
manner described in this sentence or other securities or property to which such
holder is entitled hereunder, together with cash as provided in Section 13
hereof (if any). Such certificate or certificates shall be deemed to have been
issued and any Person so designated to be named therein shall be deemed to have
become a holder of record of such Warrant Shares as of the date of the surrender
of such Warrants and payment of the Exercise Price.
19
<PAGE>
(d) The Warrants shall be exercisable, at the election of the
holders thereof, either in full or from time to time in part. If less than all
the Warrants represented by a Definitive Warrant are exercised, such Definitive
Warrant shall be surrendered and a new Definitive Warrant of the same tenor and
for the number of Warrants which were not exercised shall be executed by
Enterprises and delivered to the Warrant Agent and the Warrant Agent shall
countersign the new Definitive Warrant, registered in such name or names as may
be directed in writing by the holder, and shall deliver the new Definitive
Warrant to the Person or Persons entitled to receive the same. The Warrant Agent
shall make such notations on Schedule A to each Global Warrant as are required
to reflect any change in the number of Warrants represented by such Global
Warrant resulting from any exercise in accordance with the terms hereof.
(e) All Warrant Certificates surrendered upon exercise of
Warrants shall be canceled by the Warrant Agent. Such canceled Warrant
Certificates shall then be disposed of by the Warrant Agent in a manner
satisfactory to Enterprises. The Warrant Agent shall account promptly to
Enterprises with respect to Warrants exercised and concurrently pay to
Enterprises all moneys received by the Warrant Agent for the purchase of the
Warrant Shares through the exercise of such Warrants.
(f) The Warrant Agent shall keep copies of this Agreement and
any notices given or received hereunder available for inspection upon reasonable
notice by the registered holders during normal business hours at its office.
Enterprises shall supply the Warrant Agent with such numbers of copies of this
Agreement as the Warrant Agent may reasonably request from time to time.
SECTION 7. Payment of Taxes. Enterprises will pay all documentary stamp
taxes attributable to the initial issuance of Warrant Shares upon the exercise
of Warrants; provided that Enterprises shall not be required to pay any tax or
taxes which may be payable in respect of any transfer involved in the issue of
any Warrant Certificates or any certificates for Warrant Shares in a name other
than that of the registered holder of a Warrant Certificate surrendered upon the
exercise of a Warrant, and Enterprises shall not be required to issue or deliver
such Warrant Certificates unless or until the Person or Persons requesting the
issuance thereof shall have paid to Enterprises the amount of such tax or shall
have established to the satisfaction of Enterprises that such tax has been paid.
Holders will be responsible for the payment of any and all brokerage costs,
documentary, stamp and transfer taxes and associated costs and expenses upon the
subsequent sale of Warrant Shares.
SECTION 8. Mutilated or Missing Warrant Certificates. In case any of
the Warrant Certificates shall be mutilated, lost, stolen or destroyed,
Enterprises shall issue and the Warrant Agent shall countersign, in exchange and
substitution for and upon cancellation of the mutilated Warrant Certificate, or
in lieu of and substitution for the Warrant Certificate lost, stolen or
destroyed, a new Warrant Certificate of like tenor and representing an
equivalent number of Warrants, but only upon receipt of evidence satisfactory to
Enterprises and the Warrant Agent of such loss, theft or destruction of such
Warrant Certificate and indemnity or bond, if requested, also satisfactory to
them. Applicants for such substitute Warrant Certificates shall also comply
20
<PAGE>
with such other reasonable regulations and pay such other reasonable charges as
Enterprises or the Warrant Agent may prescribe.
SECTION 9. Reservation of Warrant Shares. (a) Enterprises will at all
times reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued Class B Stock or its authorized and
issued Class B Stock held in its treasury, for the purpose of enabling it to
satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the
maximum number of shares of Class B Stock which may then be deliverable upon the
exercise of all outstanding Warrants.
(b) Enterprises or, if appointed, the transfer agent for the
Class B Stock (the "Transfer Agent") and every subsequent transfer agent for any
shares of Enterprises' capital stock issuable upon the exercise of any of the
rights of the Warrants as aforesaid will be irrevocably authorized and directed
at all times to reserve such number of authorized shares as shall be required
for such purpose. Enterprises will keep a copy of this Agreement on file with
the Transfer Agent and with every subsequent transfer agent for any shares of
Enterprises' capital stock issuable upon the exercise of the rights of purchase
represented by the Warrants. Enterprises will furnish such Transfer Agent a copy
of all notices of adjustments, and certificates related thereto, transmitted to
each holder pursuant to Section 15 hereof. The Warrant Agent is hereby
irrevocably authorized to requisition from time to time from such Transfer Agent
the stock certificates required to honor outstanding Warrants upon exercise
thereof in accordance with the terms of this Agreement. Enterprises will supply
such Transfer Agent with duly executed certificates for such purposes and will
provide or otherwise make available any cash which may be payable as provided in
Section 13.
(c) Before taking any action which would cause an adjustment
pursuant to Section 11 hereof to reduce the Exercise Price below the then par
value (if any) of the Warrant Shares, Enterprises will take any corporate action
which may, in the opinion of its counsel (which may be counsel employed by
Enterprises), be necessary in order that Enterprises may validly and legally
issue fully paid and nonassessable Warrant Shares at the Exercise Price as so
adjusted.
(d) Enterprises covenants that all Warrant Shares which may be
issued upon exercise of Warrants will, upon issue in accordance with the terms
of this Agreement, be fully paid, nonassessable, free of preemptive rights and
free from all taxes, liens, charges and security interests with respect to the
issuance thereof.
SECTION 10. Obtaining Stock Exchange Listings. Enterprises will from
time to time use its reasonable best efforts to take all action which may be
necessary so that the Warrant Shares, immediately upon their issuance upon the
exercise of Warrants, will be listed on the principal securities exchanges and
markets within the United States of America, if any, on which other shares of
Class B Stock are then listed, if any. Upon the listing of such Warrant Shares,
Enterprises shall notify the Warrant Agent in writing. Enterprises will obtain
and keep all required permits and records in connection with such listing.
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<PAGE>
SECTION 11. Adjustment of Exercise Price and Number of Warrant Shares
Issuable. The Exercise Price and the number of Warrant Shares issuable upon the
exercise of each Warrant are subject to adjustment from time to time upon the
occurrence of the events enumerated in this Section 11. For purposes of this
Section 11, "Common Stock" means, as applicable, shares now or hereafter
authorized of any class of common stock of Enterprises and any other stock of
Enterprises, however designated, that have the right (subject to any prior
rights of any class or series of preferred stock) to participate in any
distribution of the assets or earnings of Enterprises without limit as to per
share amount.
(a) Adjustment for Change in Capital Stock. If Enterprises (i)
pays a dividend or makes a distribution on its Common Stock in shares of its
Common Stock, (ii) subdivides its outstanding shares of Common Stock into a
greater number of shares, (iii) combines its outstanding shares of Common Stock
into a smaller number of shares, (iv) makes a distribution on its Common Stock
in shares of its capital stock other than Common Stock or (v) issues by
reclassification of its Common Stock any shares of its capital stock; then the
Exercise Price in effect immediately prior to such action shall be
proportionately adjusted so that the holder of any Warrant thereafter exercised
may receive the aggregate number and kind of shares of capital stock of
Enterprises which he would have owned immediately following such action if such
Warrant had been exercised immediately prior to such action.
The adjustment shall become effective immediately after the
record date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification.
If, after an adjustment, a holder of a Warrant upon exercise of it may receive
shares of two or more classes of capital stock of Enterprises, Enterprises shall
determine the allocation of the adjusted Exercise Price between the classes of
capital stock. After such allocation, the exercise privilege and the Exercise
Price of each class of capital stock shall thereafter be subject to adjustment
on terms comparable to those applicable to Common Stock in this Section 11. Such
adjustment shall be made successively whenever any event listed above shall
occur. If the occurrence of any event listed in this subsection (a) results in
an adjustment under any provision of this Section 11 other than Section 11(q),
no adjustment shall be made under this subsection (a).
(b) Adjustment for Rights Issue. If Enterprises distributes
any rights, options or warrants to all holders of its Common Stock entitling
them to purchase shares of Common Stock at a price per share less than the Fair
Value (as defined herein) per share on that record date, the Exercise Price
shall be adjusted in accordance with the formula:
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<PAGE>
O + N x P
-----
E' = E x M
--------
O + N
where:
E' = the adjusted Exercise Price.
E = the current Exercise Price.
O = the number of shares of Common Stock issued and
outstanding on the record date.
N = the number of additional shares of Common Stock offered.
P = the offering price per share of the additional shares.
M = the Fair Value per share on the record date of Common
Stock offered.
The adjustment shall be made successively whenever any such rights,
options or warrants are issued and shall become effective immediately after the
record date for the determination of stockholders entitled to receive the
rights, options or warrants. Subject to paragraph (p) of this Section 11, if at
the end of the period during which such rights, options or warrants are
exercisable, not all rights, options or warrants shall have been exercised, the
Exercise Price (and any subsequent adjustment thereto) shall be immediately
readjusted to what it would have been if "N" in the above formula had been the
number of shares actually issued.
(c) Adjustment for Other Distributions. If Enterprises
distributes to all holders of its Common Stock any of its assets (including,
without limitation, cash) or debt securities or any rights or warrants to
purchase debt securities, assets or other securities of Enterprises, the
Exercise Price shall be adjusted in accordance with the formula:
23
<PAGE>
E' = E x M - F
-----
M
where:
E' = the adjusted Exercise Price.
E = the current Exercise Price.
M = the current market price per share of Class B Stock on the record
date mentioned below.
F = the fair market value on the record date of the assets,
securities, rights or warrants to be distributed in respect of
one share of Class B Stock as determined in good faith by the
Board of Directors of Enterprises (the "Board of Directors").
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the distribution.
Subject to paragraph (p) of this Section 11, if an adjustment is made pursuant
to this subsection (c) as a result of the issuance of rights or warrants and at
the end of the period during which any such rights or warrants are exercisable,
not all such rights or warrants shall have been exercised, the Exercise Price
(and any subsequent adjustments thereto) shall be immediately readjusted as if
"F" in the above formula was the fair market value on the record date of the
assets, securities, rights or warrants actually distributed upon exercise of
such rights or warrants divided by the number of shares of Common Stock
outstanding on the record date.
This Section 11(c) does not apply to, and no adjustment shall be made
whatsoever for, cash dividends or cash distributions paid out of consolidated
current or retained earnings as shown on the books of Enterprises prepared in
accordance with generally accepted accounting principles. Also, this Section
11(c) does not apply to, and no adjustment shall be made pursuant to this
Section 11(c) with respect to, rights, options or warrants referred to in
Section 11(b) or for which adjustments are made under any provision of this
Section 11 other than Section 11(q).
(d) Adjustment for Common Stock Issue. If Enterprises issues
shares of Common Stock for a consideration per share less than the Fair Value
per share on the date Enterprises fixes the offering price of such additional
shares, the Exercise Price shall be adjusted in accordance with the formula:
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<PAGE>
P
-
E' = E x O + M
-----
A
where:
E' = the adjusted Exercise Price.
E = the then current Exercise Price.
O = the number of shares outstanding immediately prior to the issuance
of such additional shares.
P = the aggregate consideration received for the issuance of such
additional shares.
M = the Fair Value per share on the date of issuance of such additional
shares.
A = the number of shares issued and outstanding immediately after
the issuance of such additional shares.
The adjustment shall be made successively whenever any such issuance is
made, and shall become effective immediately after such issuance.
This subsection (d) does not apply to and no adjustment shall be made
pursuant to this subsection (d) with respect to:
(1) any of the transactions described in subsections (b) and (c) of
this Section 11 or for which adjustments are made under any provision of this
Section 11 other than Section 11(q),
(2) the exercise of Warrants, or the conversion or exchange of other
securities convertible or exchangeable for Common Stock,
(3) Common Stock issued in a bona fide public offering
(4) Common Stock issued upon the exercise of rights or warrants issued
to the holders of Common Stock, or
(5) Common Stock issued to shareholders of any Person which merges into
Enterprises in proportion to their stock holdings of such Person immediately
prior to such merger, upon such merger.
(e) Adjustment for Convertible Securities Issue. If
Enterprises issues any securities convertible into or exchangeable for Common
Stock (other than securities issued in transactions described in subsections
(a), (b), (c) or (d) of this Section 11) for a consideration per share of Common
Stock initially deliverable upon conversion or exchange of such securities less
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<PAGE>
than the Fair Value per share on the date of issuance of such securities, the
Exercise Price shall be adjusted in accordance with this formula:
P
-
E' = E x O + M
-----
O + D
where:
E' = the adjusted Exercise Price.
E = the then current Exercise Price.
O = the number of shares issued and outstanding immediately prior to
the issuance of such securities.
P = the aggregate consideration received for the issuance of such
securities.
M = the Fair Value per share on the date of issuance of such
securities.
D = the maximum number of shares deliverable upon conversion or in
exchange for such securities at the initial conversion or
exchange rate.
The adjustment shall be made successively whenever any such issuance is
made, and shall become effective immediately after such issuance.
If all of the shares deliverable upon conversion or exchange of such
securities have not been issued when such securities are no longer outstanding,
then the Exercise Price (and any subsequent adjustment thereto) shall promptly
be readjusted to the Exercise Price which would then be in effect had the
adjustment upon the issuance of such securities been made on the basis of the
actual number of shares of common stock issued upon conversion or exchange of
such securities.
This subsection (e) does not apply to:
(1) convertible securities issued to shareholders of any Person which
merges into Enterprises, or with a subsidiary of Enterprises, in proportion to
their stock holdings of such Person immediately prior to such merger, upon such
merger,
(2) convertible securities issued in a bona fide public offering, or
(3) convertible securities issued in a bona fide private placement
through a placement agent which is a member firm of the National Association of
Securities Dealers, Inc. (except to the extent that any discount from the
current market price attributable to restrictions on transferability of Common
Stock issuable upon conversion, as determined in good faith by the
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Board of Directors of Enterprises (the "Board of Directors") and described in a
resolution thereof which shall be filed with the Warrant Agent, shall exceed 20%
of the then current market price).
(f) Consideration Received. For purposes of any computation
respecting consideration received pursuant to subsections (d) and (e) of this
Section 11, the following shall apply:
(1) in the case of the issuance of shares of Common Stock for cash, the
consideration shall be the amount of such cash, provided that deductions may be
made for any commissions, discounts or other expenses incurred by Enterprises
for any underwriting of the issue or otherwise in connection therewith;
(2) in the case of the issuance of shares of Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair market value thereof as determined in good
faith by the Board of Directors (irrespective of the accounting treatment
thereof), whose determination shall be conclusive, and described in a resolution
thereof which shall be filed with the Warrant Agent;
(3) in the case of the issuance of securities convertible into or
exchangeable for shares, the aggregate consideration received therefor shall be
deemed to be the consideration received by Enterprises for the issuance of such
securities plus the additional consideration, if any, to be received by
Enterprises upon the conversion or exchange thereof (the consideration in each
case to be determined in the same manner as provided in clauses (1) and (2) of
this subsection); and
(4) in the case of the issuance of shares of Common Stock pursuant to
rights, options or warrants which rights, options or warrants were originally
issued together with one or more other securities as part of a unit, the
consideration shall be deemed to be (i) the fair value of such rights, options
or warrants at the time of issuance thereof as determined in good faith by the
Board of Directors whose determination shall be conclusive and described in a
resolution thereof which shall be filed with the Warrant Agent plus (ii) the
additional consideration, if any, to be received by Enterprises upon the
exercise, conversion or exchange thereof (as determined in the same manner as
provided in clause (1) and (2) of this subsection).
(g) Fair Value. In Sections 11(b), (c), (d) and (e) hereof,
the "Fair Value" per security at any date of determination shall be (1) in
connection with a sale by Enterprises to a party that is not an Affiliate (as
defined below) of Enterprises in an arm's-length transaction (a "Non-Affiliate
Sale"), the price per security at which such security is sold and (2) in
connection with any sale by Enterprises to an Affiliate of Enterprises, (a) the
last price per security at which such security was sold in a Non-Affiliate Sale
within the three-month period preceding such date of determination or (b) if
clause (a) is not applicable, the fair market value of such security determined
in good faith by a nationally recognized investment banking, appraisal or
valuation firm, which is not an Affiliate of Enterprises, in each case, taking
into account, among all other factors deemed relevant by such investment
banking, appraisal or valuation firm, the trading price and volume of such
security on any national securities exchange or automated quotation system on
which such security is traded. Notwithstanding the foregoing, any sale to the
Initial
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Purchasers (or any successor thereto) pursuant to an underwritten public
offering registered under the Securities Act shall be deemed to be and treated
as a Non-Affiliate Sale.
For purposes of this Section 11(g), "Affiliate" of any specified Person
means (A) any other Person directly or indirectly controlling or controlled by
or under direct or indirect common control with such specified Person and (B)
any director, officer or employee of such specified Person. For purposes of this
definition "control" (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with") as used with
respect to any Person, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities, by agreement or
otherwise.
(h) When De Minimis Adjustment May Be Deferred. No adjustment
in the Exercise Price need be made unless the adjustment would require an
increase or decrease of at least 1% in the Exercise Price. Any adjustments that
are not made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be made to the nearest
1/1000th of a cent or to the nearest 1/l000th of a share, as the case may be.
(i) No Dilution of Impairment. Enterprises will not, by
amendment of its articles of incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of the Warrants, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the holders of
the Warrants against dilution or other impairment. Without limiting the
generality of the foregoing, Enterprises (1) will take all such action as may be
necessary or appropriate in order that Enterprises may validly and legally issue
fully paid and nonassessable shares of Common Stock on the exercise of the
Warrants from time to time outstanding and (2) will not take any action which
results in any adjustment of the Exercise Price if the total number of Warrant
Shares issuable after the action upon the exercise of all of the Warrants would
exceed the total number of shares of Common Stock then authorized by
Enterprises' certificate of incorporation and available for the purpose of issue
upon such exercise. A consolidation, merger, reorganization or transfer of
assets involving Enterprises covered by Section 11(m) shall not be prohibited by
or require any adjustment under this Section 11(i).
(j) Notice of Adjustment. Whenever the Exercise Price is
adjusted, Enterprises shall provide the notices required by Section 14 hereof.
(k) Voluntary Reduction. Enterprises from time to time may
reduce the Exercise Price by any amount for any period of time, if the period is
at least 20 days and if the reduction is irrevocable during the period. Whenever
the Exercise Price is reduced, Enterprises shall mail to the Warrant Agent and
the Warrant holders a notice of the reduction. Enterprises shall mail the notice
at least 15 days before the date the reduced Exercise Price takes effect. The
notice shall state the reduced Exercise Price and the period in which it will be
in effect. A
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reduction of the Exercise Price does not change or adjust the
Exercise Price otherwise in effect for purposes of Sections 11(a), (b), (c),
(d), (e) and (g) hereof.
(1) Notice of Certain Transactions. If (i) Enterprises takes
any action that would require an adjustment in the Exercise Price pursuant to
this Section 11, (ii) Enterprises takes any action that would require a
supplemental Warrant Agreement pursuant to Section 11(m) hereof or (iii) there
is a liquidation or dissolution of Enterprises, then Enterprises shall mail to
the Warrant Agent and the Warrant holders a notice stating the proposed record
date (if any) for a dividend or distribution or the proposed effective date of a
subdivision, combination, reclassification, consolidation, merger, transfer,
lease, liquidation or dissolution. Enterprises shall mail the notice at least 15
days before such date. Failure to mail the notice or any defect in it shall not
affect the validity or proposed timing of the transaction.
(m) Reorganization of Enterprises. If Enterprises consolidates
or merges with or into, or transfers or leases all or substantially all its
assets to, any Person, upon consummation of such transaction the Warrants shall
automatically become exercisable for the kind and amount of securities, cash or
other assets which the holder of a Warrant would have owned immediately after
the consolidation, merger, transfer or lease if the holder had exercised the
Warrant immediately before the effective date of the transaction. Concurrently
with the consummation of such transaction, the corporation formed by or
surviving any such consolidation or merger if other than Enterprises, or the
Person to which such sale or conveyance shall have been made, shall enter into a
supplemental Warrant Agreement so providing and further providing for
adjustments which shall be as nearly equivalent as may be practical to the
adjustments provided for in this Section 11(m). The successor company shall mail
to Warrant holders a notice describing the supplemental Warrant Agreement. If
the issuer of securities deliverable upon exercise of Warrants under the
supplemental Warrant Agreement is an affiliate of the formed, surviving,
transferee or lessee corporation, that issuer shall join in the supplemental
Warrant Agreement.
(n) When No Adjustment Required. No adjustment need be made
for a transaction referred to in this Section 11 hereof, if Warrant holders are
to participate in the transaction on a basis (and with notice) that the Board of
Directors determines to be fair and appropriate in light of the basis (and
notice) on which holders of Common Stock participate in the transaction. No
adjustment need be made for (i) rights to purchase Common Stock pursuant to an
Enterprises plan for reinvestment of dividends or interest or (ii) a change in
the par value or no par value of the Common Stock. To the extent the Warrants
become convertible into cash, no adjustment need be made thereafter as to the
cash. Interest will not accrue on any cash amounts relating to adjustments
hereunder.
(o) Warrant Agent's Disclaimer. The Warrant Agent has no duty
to determine when an adjustment under this Section 11 should be made, how it
should be made or what it should be. The Warrant Agent has no duty to determine
whether any provisions of a supplemental Warrant Agreement under Section 11(m)
hereof are correct. The Warrant Agent makes no representation as to the validity
or value of any securities or assets issued upon
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exercise of Warrants. The Warrant Agent shall not be responsible for
Enterprises' failure to comply with this Section 11 or any of Enterprises' other
obligations hereunder.
(p) When Issuance or Payment May Be Deferred. In any case in
which this Section 11 shall require that an adjustment in the Exercise Price be
made effective as of a record date for a specified event, Enterprises may elect
to defer until the final adjustment or readjustment required in connection with
the occurrence of such event is able to be made (i) issuing to the holder of any
Warrant exercised after such record date the Warrant Shares and other capital
stock of Enterprises, if any, issuable upon such exercise over and above the
Warrant Shares and other capital stock of Enterprises, if any, issuable upon
such exercise on the basis of the Exercise Price immediately before adjustment
is made for the specified event and (ii) paying to such holder any amount in
cash in lieu of a fractional share pursuant to Section 13 hereof; provided that
Enterprises shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such additional Warrant
Shares, other capital stock and cash upon the occurrence of the event requiring
such adjustment, subject to the following sentence. Upon the final adjustment or
readjustment required in connection with the occurrence of the event referred to
in the previous sentence, Enterprises shall be required to deliver to a holder
of Warrants exercised after such date only such cash or number of Warrant Shares
or capital stock of Enterprises issuable based upon the Exercise Price
determined as of the time of such final adjustment or readjustment.
(q) Adjustment in Number of Shares. Upon each adjustment of
the Exercise Price pursuant to this Section 11 (including any readjustment),
each Warrant outstanding prior to the making of the adjustment in the Exercise
Price shall thereafter evidence the right to receive upon payment of the
adjusted Exercise Price that number of shares of Common Stock (calculated to the
nearest hundredth) obtained from the following formula:
N' = N x E
--
E'
where:
N' = the adjusted number of Warrant Shares issuable upon
exercise of a Warrant by payment of the adjusted Exercise
Price.
N = the number or Warrant Shares previously issuable upon
exercise of a Warrant by payment of the Exercise Price
prior to adjustment.
E' = the adjusted Exercise Price.
E = the Exercise Price prior to adjustment.
(r) Form of Warrants. In respect of any adjustments in the
Exercise Price or the number or kind of shares purchasable upon the exercise of
the Warrants, Warrants theretofore or thereafter issued may continue to express
the same price and number and kind of shares as are stated in the Warrants
initially issuable pursuant to this Agreement.
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(s) No Duplicative Adjustments. Other than pursuant to Section
11(q) hereof, no adjustment shall be made under any provision of this Agreement
for an issuance of securities by Enterprises for which an adjustment is made
under any other provision of this Agreement. Furthermore, notwithstanding
anything to the contrary herein, if an adjustment is made under this Section 11
upon the issuance by Enterprises of any rights, options, warrants or any other
securities convertible into or exchangeable into Common Stock, no further
adjustment shall be made hereunder upon the exercise, conversion or exchange of
such securities and the issuance of Common Stock therefrom.
SECTION 12. Holdings Anti-Dilution. In addition to any adjustment to
the Exercise Price and number of Warrant Shares issuable upon exercise of the
Warrants pursuant to Section 11 hereof, if any event of the type described in
Section 11 hereof occurs with respect to the outstanding common membership
interests of Holdings, Enterprises' common membership interest in Holdings shall
be adjusted and the number of Warrant Shares issuable upon exercise of the
Warrants shall be adjusted (without duplication), in each case, so that the
holders of the Warrants shall thereafter, in the aggregate, have the same
indirect ownership of the common membership interests of Holdings after the
occurrence of such event that such Holders, in the aggregate, had immediately
before the occurrence of such event; provided that any such adjustment shall be
subject to readjustment and to the limitations and restrictions of the types set
forth in Section 11 hereof.
SECTION 13. Fractional Interests. Notwithstanding any adjustment
required pursuant to this Agreement, Enterprises shall not be required to issue
fractional Warrant Shares on the exercise of Warrants. If more than one Warrant
shall be presented for exercise in full at the same time by the same holder, the
number of full Warrant Shares which shall be issuable upon the exercise thereof
shall be computed on the basis of the aggregate number of Warrant Shares
purchasable on exercise of the Warrants so presented. If any fraction of a
Warrants (or specified portion thereof), Enterprises shall pay an amount in cash
equal to the Fair Value per Warrant Share, as determined on the day immediately
preceding the date the Warrant is presented for exercise, multiplied by such
fraction, computed to the nearest whole U.S. cent.
SECTION 14. Notices to Warrant Holders and the Warrant Agent. (a) Upon
any adjustment of the Exercise Price pursuant to Section 11 hereof, Enterprises
shall, as soon as reasonably practicable, thereafter (i) cause to be filed with
the Warrant Agent a certificate of a firm of independent public accountants of
recognized standing selected by the Board of Directors (who may be the regular
auditors of Enterprises) setting forth the Exercise Price after such adjustment
and setting forth in reasonable detail the method of calculation and the facts
upon which such calculations are based and setting forth the number of Warrant
Shares (or portion thereof) issuable after such adjustment in the Exercise Price
upon exercise of a Warrant and payment of the adjusted Exercise Price, which
certificate shall be conclusive evidence of the correctness of the matters set
forth therein, and (ii) cause to be given to each such registered holders of
Warrants at the address appearing on the Warrant register for each such
registered holder written notice of such adjustments by first-class mail,
postage prepaid. Where appropriate, such notice may be given in advance and
included as a part of the notice required to be mailed under the other
provisions of this Section 14.
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(b) In case:
(i) Enterprises shall authorize the issuance to all holders of shares
of Class B Stock of rights, options or warrants to subscribe for or purchase
shares of Class B Stock or of any other subscription rights or warrants;
(ii) Enterprises shall authorize the distribution to all holders of
shares of Class B Stock of evidences of its indebtedness or assets (other than
issuances of securities of Enterprises by Enterprises and other than cash
dividends or cash distributions payable out of consolidated earnings or earned
surplus or dividends payable in shares of Class B Stock or distributions
referred to in Section 11(a) hereof);
(iii) of any consolidation or merger to which Enterprises is a party
and for which approval of any stockholders of Enterprises is required, or of the
conveyance or transfer of the properties and assets of Enterprises substantially
as an entirety, or of any reclassification or change of Class B Stock issuable
upon exercise of the Warrants (other than a change in par value, or from par
value to no par value, or from no par value to par value, or as a result of a
subdivision or combination), or a tender offer or exchange offer for shares of
Class B Stock;
(iv) of the voluntary or involuntary dissolution, liquidation or
winding up of Enterprises;
(v) a Change of Control occurs; or (vi) Enterprises proposes to take
any action which would require an adjustment of the Exercise Price pursuant to
Section 11 hereof;
then Enterprises shall cause to be filed with the Warrant Agent and shall cause
to be given to each of the registered holders of Warrants at his address
appearing on the Warrant register, at least 20 days (or 10 days in any case
specified in clauses (i) or (ii) above) or, if not reasonably practicable, as
soon as reasonably practicable thereafter, prior to the applicable record date
hereinafter specified, or promptly in the case of events for which there is no
record date, by first-class mail, postage prepaid, a written notice stating (x)
the date as of which the holders of record of shares of Class B Stock to be
entitled to receive any such rights, options, warrants or distribution are to be
determined, (y) the initial expiration date set forth in any tender offer or
exchange offer for shares of Class B Stock or (z) the date on which any such
consolidation, merger, conveyance, transfer, dissolution, liquidation or winding
up is expected to become effective or consummated, and the date as of which it
is expected that holders of record of shares of Class B Stock shall be entitled
to exchange such shares for securities or other property, if any, deliverable
upon such reclassification, consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up. The failure to give the notice required
by this Section 14 or any defect therein shall not affect the legality or
validity of any distribution, right, option, warrant, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up, or the vote upon
any action.
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(c) Nothing contained in this Agreement or in any of the
Warrant Certificates shall be construed as conferring upon the holders of
Warrants the right to vote or to consent or to receive notice as stockholders in
respect of the meetings of stockholders or the election of directors of
Enterprises or any other matter, or any rights whatsoever as stockholders of
Enterprises.
SECTION 15. Merger, Consolidation or Change of Name of Warrant Agent.
Any corporation into which the Warrant Agent may be merged or with which it may
be consolidated, or any corporation resulting from any merger or consolidation
to which the Warrant Agent shall be a party, or any corporation succeeding to
the corporate trust business of the Warrant Agent, shall be the successor to the
Warrant Agent hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto, provided that such
corporation would be eligible for appointment as a successor warrant agent under
the provisions of Section 17 hereof. In case at the time such successor to the
Warrant Agent shall succeed to the agency created by this Agreement, and in case
at that time any of the Warrant Certificates shall have been countersigned but
not delivered, any such successor to the Warrant Agent may adopt the
countersignature of the original Warrant Agent; and in case at that time any of
the Warrant Certificates shall not have been countersigned, any successor to the
Warrant Agent may countersign such Warrant Certificates either in the name of
the predecessor Warrant Agent or in the name of the successor to the Warrant
Agent; and in all such cases such Warrant Certificates shall have the full force
and effect provided in the Warrant Certificates and in this Agreement.
In case at any time the name of the Warrant Agent shall be changed and
at such time any of the Warrant Certificates shall have been countersigned but
not delivered, the Warrant Agent whose name has been changed may adopt the
countersignature under its prior name, and in case at that time any of the
Warrant Certificates shall not have been countersigned, the Warrant Agent may
countersign such Warrant Certificates either in its prior name or in its changed
name, and in all such cases such Warrant Certificates shall have the full force
and effect provided in the Warrant Certificates and in this Agreement.
SECTION 16. Warrant Agent. The Warrant Agent undertakes the duties and
obligations imposed by this Agreement upon the following terms and conditions,
by all of which Enterprises and the holders of Warrants, by their acceptance
thereof, shall be bound:
(a) The statements contained herein and in the Warrant
Certificates shall be taken as statements of Enterprises and the Warrant Agent
assumes no responsibility for the correctness of any of the same except as such
describe the Warrant Agent or action taken or to be taken by it. The Warrant
Agent assumes no responsibility with respect to the distribution of the Warrant
Certificates except as herein otherwise expressly provided.
(b) The Warrant Agent shall not be responsible for any failure
of Enterprises to comply with any of the covenants or obligations contained in
this Agreement or in the Warrant Certificates to be complied with by
Enterprises.
(c) The Warrant Agent may consult at any time with counsel
satisfactory to it (who may be counsel for Enterprises) and the Warrant Agent
shall incur no liability or
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responsibility to Enterprises or to any holder of any Warrant Certificate in
respect of any action taken, suffered or omitted by it hereunder in good faith
and in accordance with the opinion or the advice of such counsel.
(d) The Warrant Agent in absence of good faith shall incur no
liability or responsibility to Enterprises or to any holder of any Warrant
Certificate for any action taken in reliance on any Warrant Certificate,
certificate of shares, notice, resolution, waiver, consent, order, opinion,
certificate, or other paper, document or instrument believed by it to be genuine
and to have been signed, sent or presented by the proper party or parties. The
Warrant Agent shall not be liable for any action it takes or omits to take in
good faith that it believes to be authorized or within its powers and shall not
be liable for any error of judgment made in good faith by one of its officers
unless the Warrant Agent is held to have been negligent.
(e) Enterprises agrees to pay to the Warrant Agent reasonable
compensation for all services rendered by the Warrant Agent in the execution and
performance of this Agreement, to reimburse the Warrant Agent for all expenses
(including the fees and expenses of its counsel), taxes and governmental charges
and other charges of any kind and nature incurred by the Warrant Agent in the
execution of this Agreement and to indemnify and hold harmless the Warrant
Agent. Enterprises shall indemnify the Warrant Agent against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Warrant Agreement,
including the costs and expenses of enforcing this Warrant Agreement against
Enterprises (including this Section 16) and defending itself against any claim
(whether asserted by Enterprises or any holder or any other Person) or liability
in connection with the exercise or performance of any of its powers or duties
hereunder, except to the extent any such loss, liability or expense may be
attributable to its negligence or bad faith. The Warrant Agent shall notify
Enterprises promptly of any claim for which it may seek indemnity. Failure by
the Warrant Agent to so notify Enterprises shall not relieve Enterprises of its
obligations hereunder. Enterprises shall defend the claim and the Warrant Agent
shall cooperate in the defense. The Warrant Agent may have separate counsel and
Enterprises shall pay the reasonable fees and expenses of such counsel.
Enterprises need not pay for any settlement made without its consent, which
consent shall not be unreasonably withheld.
(f) The Warrant Agent shall be under no obligation to
institute any action, suit or legal proceeding or to take any other action
likely to involve expense unless Enterprises or one or more registered holders
of Warrants shall furnish the Warrant Agent with reasonable security and
indemnity for any costs and expenses which may be incurred, but this provision
shall not affect the power of the Warrant Agent to take such action as it may
consider proper, whether with or without any such security or indemnity. All
rights of action under this Agreement or under any of the Warrants may be
enforced by the Warrant Agent without the possession of any of the Warrant
Certificates or the production thereof at any trial or other proceeding relative
thereto, and any such action, suit or proceeding instituted by the Warrant Agent
shall be brought in its name as Warrant Agent and any recovery of judgment shall
be for the ratable benefit of the registered holders of the Warrants, as their
respective rights or interests may appear.
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(g) The Warrant Agent, and any stockholder, director, officer
or employee of it, may buy, sell or deal in any of the Warrants or other
securities of Enterprises or become pecuniarily interested in any transaction in
which Enterprises may be interested, or contract with or lend money to
Enterprises or otherwise act as fully and freely as though it were not Warrant
Agent or stockholder, director, officer or employee under this Agreement.
Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for Enterprises or for any other legal entity.
(h) The Warrant Agent shall act hereunder solely as agent for
Enterprises, and its duties shall be determined solely by the provisions hereof.
The Warrant Agent shall not be liable for anything which it may do or refrain
from doing in connection with this Agreement except for its own negligence or
bad faith.
(i) The Warrant Agent shall not at any time be under any duty
or responsibility to any holder of any Warrant Certificate to make or cause to
be made any adjustment of the Exercise Price or number of the Warrant Shares or
other securities or property deliverable as provided in this Agreement, or to
determine whether any facts exist which may require any of such adjustments, or
with respect to the nature or extent of any such adjustments, when made, or with
respect to the method employed in making the same. The Warrant Agent shall not
be accountable with respect to the validity or value or the kind or amount of
any Warrant Certificates or Warrant Shares or of any securities or property
which may at any time be issued or delivered upon the exercise of any Warrant or
with respect to whether any such Warrant Shares or other securities will when
issued be validly issued and fully paid and nonassessable, and makes no
representation with respect thereto.
(j) The duties of the Warrant Agent shall be determined solely
by the express provisions of this Warrant Agreement and the Warrant Agent need
perform only those duties that are specifically set forth in this Warrant
Agreement and no others, and no implied covenants or obligations shall be read
into this Warrant Agreement against the Warrant Agent. In the absence of bad
faith on its part, the Warrant Agent may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Warrant Agent and conforming to the
requirements of this Warrant Agreement. However, the Warrant Agent shall examine
the certificates and opinions to determine whether or not they conform to the
requirements of this Warrant Agreement.
(k) Unless otherwise specifically provided in this Warrant
Agreement, any demand, request, direction or notice from Enterprises shall be
sufficient if signed by an officer of Enterprises.
SECTION 17. Resignation and Removal of Warrant Agent. No resignation or
removal of the Warrant Agent and no appointment of a successor warrant agent
shall become effective until the acceptance of appointment by the successor
warrant agent as provided herein. The Warrant Agent may resign its duties and be
discharged from all further duties and liability hereunder (except liability
arising as a result of the Warrant Agent's own negligence or willful misconduct)
after giving written notice to Enterprises. Enterprises or the holders of a
majority of
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the unexercised Warrants may remove the Warrant Agent upon written notice, and
the Warrant Agent shall thereupon in like manner be discharged from all further
duties and liabilities hereunder, except as aforesaid. The Warrant Agent shall,
at Enterprises' expense, cause to be mailed (by first class mail, postage
prepaid) to each holder of a Warrant at his last address as shown on the
register of Enterprises maintained by the Warrant Agent a copy of said notice of
resignation or notice of removal, as the case may be. Upon such resignation or
removal, Enterprises shall appoint in writing a new warrant agent. If
Enterprises shall fail to make such appointment within a period of 30 days after
it has been notified in writing of such resignation by the resigning Warrant
Agent or after such removal, then the resigning Warrant Agent or the holder of
any Warrant may apply to any court of competent jurisdiction for the appointment
of a new warrant agent. Any new warrant agent, whether appointed by Enterprises
or by such a court, shall be a corporation doing business under the laws of the
United States or any state thereof, in good standing and having a combined
capital and surplus of not less than $50,000,000. The combined capital and
surplus of any such new warrant agent shall be deemed to be the combined capital
and surplus as set forth in the most recent annual report of its condition
published by such warrant agent prior to its appointment, provided that such
reports are published at least annually pursuant to law or to the requirements
of a federal or state supervising or examining authority. After acceptance in
writing of such appointment by the new warrant agent, it shall be vested with
the same powers, rights, duties and responsibilities as if it had been
originally named herein as the Warrant Agent, without any further assurance,
conveyance, act or deed; but if for any reason it shall be necessary or
expedient to execute and deliver any further assurance, conveyance, act or deed,
the same shall be done at the expense of Enterprises and shall be legally and
validly executed and delivered by the resigning or removed Warrant Agent. Not
later than the effective date of any such appointment, Enterprises shall give
notice thereof to the resigning or removed Warrant Agent. Failure to give any
notice provided for in this Section 17, however, or any defect therein, shall
not affect the legality or validity of the resignation of the Warrant Agent or
the appointment of a new warrant agent, as the case may be.
SECTION 18. Registration. The Initial Purchasers and each subsequent
holder of Warrants shall be able to exercise their Warrants only if a
registration statement relating to the Warrant Shares is then in effect, or the
exercise of such Warrants is exempt from the registration requirements of the
Securities Act, and such securities are qualified for sale or exempt from
qualification under the applicable securities laws of the states in which the
various holders of the Warrants or other Persons to whom it is proposed that the
Warrant Shares be issued on exercise of the Warrants reside. The Initial
Purchaser and each subsequent holder of Warrants shall have the registration
rights set forth in the Warrant Registration Rights Agreement, dated as of the
date hereof, by and between Enterprises and the Initial Purchasers (the "Warrant
Registration Rights Agreement").
SECTION 19. Reports. (a) Whether or not required by the rules and
regulations of the Securities and Exchange Commission (the "Commission"), for so
long as any Warrants remain outstanding, Enterprises shall file with the
Commission (unless the Commission will not accept such a filing (i) all
quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if Enterprises
were required to file such forms, including a "Management's Discussion and
Analysis of Financial Condition
36
<PAGE>
and Results of Operations" and, with respect to the annual information only, a
report thereon by Enterprises' certified independent accountants, (ii) all
reports that would be required to be filed with the Commission on Form 8-K if
Enterprises were required to file such reports and (iii) any other information,
documents and other reports which Enterprises would be required to file with the
Commission if it were subject to Section 13 or 15(d) of the Exchange Act. In
addition, whether or not required by the rules and regulations of the
Commission, Enterprises shall make such information available to securities
analysts and prospective investors upon request. Furthermore, for so long as any
of the Warrants remain outstanding, Enterprises shall make available to any
prospective purchaser of the Warrants, the information required by Rule
144A(d)(4) under the Securities Act. Any such request should be directed to Jack
Sommer, President of Enterprises, c/o Aladdin Gaming, LLC, P.O. Box 94827, Las
Vegas, Nevada 89193, telephone (702) 736-7114; facsimile: (702) 736-7107.
(b) Enterprises shall provide the Warrant Agent with a
sufficient number of copies of all such reports that the Warrant Agent may be
required to deliver to the holders of the Warrants under this Section 19. The
Warrant Agent shall have no responsibilities with respect to any such reports,
except to distribute them to holders if required pursuant to this Section 19.
SECTION 20. Notices to Enterprises and Warrant Agent. Any notice or
demand authorized by this Agreement to be given or made by the Warrant Agent or
by the registered holder of any Warrant to or on Enterprises shall be
sufficiently given or made when and if deposited in the mail, first class or
registered, postage prepaid, addressed (until another address is filed in
writing by Enterprises with the Warrant Agent) as follows:
Aladdin Gaming Enterprises, Inc.
c/o Aladdin Gaming, LLC
P.O. Box 94827
Las Vegas, Nevada 89193
Attn: Richard J. Goeglein
With a copy (which shall not constitute notice) to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022
Attn: Wallace L. Schwartz, Esq.
In case Enterprises shall fail to maintain such office or agency or
shall fail to give such notice of the location or of any change in the location
thereof, presentations may be made and notices and demands may be served at the
principal office of the Warrant Agent.
Any notice pursuant to this Agreement to be given by Enterprises or by
the registered holder(s) of any Warrant to the Warrant Agent shall be
sufficiently given when and if deposited in the mail, first-class or registered,
postage prepaid, addressed (until another address is filed in writing by the
Warrant Agent with Enterprises) to the Warrant Agent as follows:
37
<PAGE>
State Street Bank and Trust Company
Two International Place
Boston, MA 02110
Attn: Corporate Trust Division
SECTION 21. Supplements and Amendments. Enterprises and the Warrant
Agent may from time to time supplement or amend this Agreement without the
approval of any holders of Warrants in order to cure any ambiguity or to correct
or supplement any provision contained herein which may be defective or
inconsistent with any other provision herein, or to make any other changes in
regard to matters or questions arising hereunder which Enterprises and the
Warrant Agent may deem necessary or desirable and which shall not in any way
materially and adversely affect the interests of the holders of Warrants. Any
amendment or supplement to this Agreement that has a material adverse effect on
the interests of the holders of Warrants shall require the written consent of
the holders of a majority of the then outstanding Warrants (excluding Warrants
held by Enterprises or any of its affiliates). The consent of each holder of
Warrants affected shall be required for any amendment pursuant to which the
Exercise Price would be increased or the number of Warrant Shares purchasable
upon exercise of Warrants would be decreased (other than pursuant to adjustments
provided in this Agreement).
SECTION 22. Successors. All the covenants and provisions of this
Agreement by or for the benefit of Enterprises or the Warrant Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder,
whether so expressed or not.
SECTION 23. Termination. This Agreement shall terminate at 5:00 p.m.,
New York City time on March 1, 2010.
SECTION 24. GOVERNING LAW. THIS AGREEMENT AND EACH WARRANT CERTIFICATE
ISSUED HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE
STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF SAID STATE, WITHOUT REGARD TO THE CONFLICT OF LAW RULES
THEREOF.
SECTION 25. Benefits of This Agreement. (a) Nothing in this Agreement
shall be construed to give to any Person or corporation other than Enterprises,
the Warrant Agent and the registered holders of Warrants any legal or equitable
right, remedy or claim under this Agreement; but this Agreement shall be for the
sole and exclusive benefit of Enterprises, the Warrant Agent and the registered
holders of Warrants.
(b) All rights of action in respect of this Agreement are
vested in the holders of the Warrants Certificates, and any holder of any
Warrant Certificates, without the consent of the Warrant Agent or the holder of
any other Warrant Certificates, may, on such holder's own behalf and for such
holder's own benefit, enforce, and may institute and maintain any suit, action
or proceeding against Enterprises suitable to enforce, or otherwise in respect
of, such holder's
38
<PAGE>
rights hereunder, including the right to exercise, exchange or
surrender for purchase such holder's Warrants in the manner provided in this
Agreement.
SECTION 26. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
[Signature Page Follows]
39
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
ALADDIN GAMING ENTERPRISES, INC.
By: /s/ Jack Sommer
----------------------------
Name: Jack Sommer
Title: President
STATE STREET BANK AND TRUST COMPANY,
as Warrant Agent
By: /s/ Ruth A. Smith
----------------------------
Name: Ruth A. Smith
Title: Vice President
<PAGE>
EXHIBIT A
[FORM OF WARRANT]
[Face of Warrant Certificate]
WARRANT CERTIFICATE
ALADDIN GAMING ENTERPRISES, INC.
No. [ ] [ ] Warrants
CUSIP Number [ ]
This Warrant Certificate certifies that [ ], or registered
assigns, is the registered holder of ________________ (_______) warrants (the
"Warrants") to purchase shares of Class B non-voting common stock, no par value
(the "Class B Stock"), of ALADDIN GAMING ENTERPRISES, INC., a Nevada corporation
("Enterprises"). Each Warrant entitles the holder upon exercise to receive from
Enterprises commencing on the Warrant Exercise Commencement Date (as defined in
the Warrant Agreement (as defined below)) until 5:00 p.m. New York City Time on
March 1, 2010, the number of fully paid and nonassessable Warrant Shares as set
forth in the Warrant Agreement, subject to adjustment as set forth in Section 11
of the Warrant Agreement, at the initial exercise price (the "Exercise Price")
of $.001 per share payable pursuant to the provisions of Section 6 of the
Warrant Agreement upon surrender of this Warrant Certificate and payment of the
Exercise Price at the office or agency of the Warrant Agent, but only subject to
the conditions set forth herein and in the Warrant Agreement referred to on the
reverse hereof. The Exercise Price and number of Warrant Shares issuable upon
exercise of the Warrants are subject to adjustment upon the occurrence of
certain events set forth in the Warrant Agreement. Subject to the provisions of
the Warrant Agreement, no Warrant may be exercised after 5:00 p.m., New York
City Time on March 1, 2010, and to the extent not exercised by such time such
Warrants shall become void. Reference is hereby made to the further provisions
of this Warrant Certificate set forth on the reverse hereof and such further
provisions shall for all purposes have the same effect as though fully set forth
at this place. This Warrant Certificate shall not be valid unless countersigned
by the Warrant Agent, as such term is used in the Warrant Agreement. This
Warrant Certificate shall be governed and construed in accordance with the
internal laws of the State of New York.
Reference is hereby made to the further provisions on the reverse
hereof which provisions shall for all purposes have the same effect as though
fully set forth at this place.
Terms used and not otherwise defined in this Warrant Certificate shall
have the meanings given them in the Warrant Agreement.
This Warrant Certificate shall not be valid unless countersigned by the
Warrant Agent, as such term is used in the Warrant Agreement.
This Warrant Certificate shall be governed by and construed in
accordance with the internal laws of the State of New York.
A-1
<PAGE>
IN WITNESS WHEREOF, Aladdin Gaming Enterprises, Inc. has caused this
Warrant Certificate to be signed by its authorized officers and may cause its
corporate seal to be affixed hereunto or imprinted hereon.
Dated:__________________
ALADDIN GAMING ENTERPRISES, INC.
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
Countersigned:
STATE STREET BANK AND TRUST COMPANY,
as Warrant Agent
By:________________________________
Authorized Signatory
A-2
<PAGE>
[FORM OF WARRANT]
[Reverse of Warrant Certificate]
[Unless and until it is exchanged in whole or in part for
Warrants in certificated form, this Warrant may not be transferred except as a
whole by the Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary or by the
Depositary or any such nominee to a successor Depositary or a nominee of such
successor Depositary. Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation ("DTC"),
to the issuer or its agent for registration of transfer, exchange or payment,
and any certificate issued is registered in the name of Cede & Co. or such other
name as requested by an authorized representative of DTC (and any payment is
made to Cede & Co. or such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.]1
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES
LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS
SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION AS SET
FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT
(A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT ("RULE 144A")), (B) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A) (1), (2), (3) OR (7)
UNDER THE SECURITIES ACT) OR (C) IT IS A NON-U.S. PERSON AS DEFINED IN
RULE 904 UNDER THE SECURITIES ACT (2) AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITY PRIOR TO THE DATE WHICH IS TWO YEARS
AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON
WHICH ENTERPRISES OR ANY AFFILIATE OF ENTERPRISES WAS THE OWNER OF THIS
SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) ONLY (A) TO ENTERPRISES,
(B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES
ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A INSIDE THE UNITED STATES,
TO A PERSON IT REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
_________________
1 This paragraph is to be included only if the Warrant is in global form.
A-3
<PAGE>
THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT
TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED
STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E)
INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT
IS ACQUIRING THE SECURITIES FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF
SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND
NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, SUBJECT TO THE ENTERPRISES' AND THE WARRANT AGENT'S
RIGHTS PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO
CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF
THEM, AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A
CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS
SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE WARRANT
AGENT.
[THE WARRANTS EVIDENCED BY THIS CERTIFICATE ARE NOT
TRANSFERABLE SEPARATELY FROM THE NOTES ORIGINALLY SOLD AS A UNIT WITH
THE WARRANTS UNTIL THE EARLIEST OF (I) SEPTEMBER 1, 1998, (II) THE DATE
ON WHICH A REGISTRATION STATEMENT WITH RESPECT TO THE NOTES OR A
REGISTRATION STATEMENT WITH RESPECT TO THE WARRANTS AND THE WARRANT
SHARES IS FILED WITH THE COMMISSION UNDER THE SECURITIES ACT (III) THE
OCCURRENCE OF A CHANGE OF CONTROL (AS DEFINED IN THE INDENTURE RELATING
TO THE NOTES) OR A SALE OR RECAPITALIZATION OF ENTERPRISES, ALADDIN
GAMING HOLDINGS, LLC OR THE ALADDIN GAMING, LLC OCCURS, (IV) 30 DAYS
AFTER A QUALIFIED PUBLIC OFFERING (AS DEFINED IN THE INDENTURE RELATING
TO THE NOTES) OCCURS, (V) THE OCCURRENCE OF AN EVENT OF DEFAULT (AS
DEFINED IN THE INDENTURE RELATING TO THE NOTES) OR (VI) SUCH EARLIER
DATE AS DETERMINED BY MERRILL LYNCH & CO. IN ITS SOLE DISCRETION. PRIOR
TO SUCH DATE, THE WARRANTS EVIDENCED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY WITH THE SIMULTANEOUS TRANSFER TO THE TRANSFEREE OF
$1,000 PRINCIPAL AMOUNT OF NOTES FOR EACH WARRANT SO TRANSFERRED.]
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants expiring March 1, 2010 entitling the holder on
exercise to receive shares of Class B Stock, and are issued or to be issued
pursuant to a Warrant Agreement dated as of February 26, 1998 (the "Warrant
Agreement"), duly executed and delivered by Enterprises to State Street
A-4
<PAGE>
Bank and Trust Company, as warrant agent (the " Warrant Agent"), which Warrant
Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Warrant Agent,
Enterprises and the holders (the words "holders" or "holder" meaning the
registered holders or registered holder) of the Warrants. A copy of the Warrant
Agreement may be obtained by the holder hereof upon written request to
Enterprises.
Warrants may be exercised at any time on or after the Warrant Exercise
Commencement Date and on or before March 1, 2010; provided that holders shall be
able to exercise their Warrants only if a registration statement relating to the
Warrant Shares is then in effect, or the exercise of such Warrants is exempt
from the registration requirements of the Securities Act of 1933, as amended
(the "Securities Act"), and such securities are qualified for sale or exempt
from qualification under the applicable securities laws of the states in which
the various holders of the Warrants or other Persons to whom it is proposed that
the Warrant Shares be issued on exercise of the Warrants reside. In order to
exercise all or any of the Warrants represented by this Warrant Certificate, (i)
in the case of Definitive Warrants, the holder must surrender for exercise this
Warrant Certificate to the Warrant Agent at its corporate trust office set forth
in Section 20 of the Warrant Agreement, (ii) in the case of a book-entry
interest in a Global Warrant, the exercising Agent Member whose name appears on
a securities position listing of the Depositary as the holder of such book-entry
interest must comply with the Depositary's procedures relating to the exercise
of such book-entry interest in such Global Warrant and (iii) in the case of both
Global Warrants and Definitive Warrants, the holder thereof or the Agent Member,
as applicable, must deliver to the Warrant Agent the form of election to
purchase on the reverse hereof duly filled in and signed, which signature shall
be medallion guaranteed by an institution which is a member of a Securities
Transfer Association recognized signature guarantee program, and upon payment to
the Warrant Agent for the account of Enterprises of the Exercise Price, as
adjusted as provided in the Warrant Agreement, for the number of Warrant Shares
in respect of which such Warrants are then exercised. No adjustment shall be
made for any dividends on any Class B Stock issuable upon exercise of this
Warrant.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price set forth on the face hereof may, subject to certain
conditions, be adjusted. If the Exercise Price is adjusted, the Warrant
Agreement provides that the number of shares of Class B Stock issuable upon the
exercise of each Warrant shall be adjusted. No fractions of a share of Class B
Stock will be issued upon the exercise of any Warrant, but Enterprises will pay
the cash value thereof determined as provided in the Warrant Agreement. In
addition to any adjustment to the Exercise Price and number of Warrant Shares
issuable upon exercise of the Warrants pursuant to Section 11 hereof, if any
event of the type described in Section 11 hereof occurs with respect to the
outstanding common membership interests of Holdings, Enterprises' common
membership interest in Holdings shall be adjusted and the number of Warrant
Shares issuable upon exercise of the Warrants shall be adjusted (without
duplication), in each case, so that the holders of the Warrants shall
thereafter, in the aggregate, have the same indirect ownership of the common
membership interests of Holdings after the occurrence of such event that such
Holders, in the aggregate, had immediately before the occurrence of such event;
provided that any such
A-5
<PAGE>
adjustment shall be subject to readjustment and to the limitations and
restrictions of the types set forth in Section 11 hereof.
The holders of the Warrants shall have the registration rights set
forth in the Warrant Registration Rights Agreement, dated as of the date hereof,
by and between Enterprises and the Initial Purchasers.
Warrant Certificates, when surrendered at the office of the Warrant
Agent by the registered holder thereof in person or by legal representative or
attorney duly authorized in writing, may be exchanged, in the manner and subject
to the limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of like
tenor evidencing in the aggregate a like number of Warrants.
Upon due presentation for registration of transfer of this Warrant
Certificate at the office of the Warrant Agent a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided in the Warrant Agreement,
without charge except for any tax or other governmental charge imposed in
connection therewith.
Enterprises and the Warrant Agent may deem and treat the registered
holder(s) thereof as the absolute owner(s) of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise hereof, of any distribution to the
holder(s) hereof, and for all other purposes, and neither Enterprises nor the
Warrant Agent shall be affected by any notice to the contrary. Neither the
Warrants nor this Warrant Certificate entitles any holder hereof to any rights
of a stockholder of Enterprises.
A-6
<PAGE>
[FORM OF] SCHEDULE A
SCHEDULE OF EXCHANGES OF GLOBAL WARRANT
The following exchanges of a part of this Global Warrant for an
interest in another Global Warrant, or of other Restricted Global Warrants for
an interest in this Global Warrant, have been made:
<TABLE>
<CAPTION>
Amount of
Warrants represented by Signature of
Amount of Amount of this Global authorized
decrease in increase in Warrant following officer of
number of number of such decrease (or Warrant Agent
Date of Warrants of this Warrants of this increase) or Warrant
Exchange Global Warrant Global Warrant Custodian
<S> <C> <C> <C> <C>
</TABLE>
A-7
<PAGE>
[FORM OF]
ELECTION TO EXERCISE
(To be executed upon exercise of Warrants)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to receive [ ] shares of Class
B Stock and herewith tenders payment for such shares to the order of
Enterprises in the amount of $[ ] in accordance with Section 6 of the
Warrant Agreement. The undersigned requests that a certificate for such
shares be registered in the name of [ ], whose address is [ ] and
that such shares be delivered to [ ] whose address is [ ]. If said
number of shares is less than all of the shares of Class B Stock purchasable
hereunder, the undersigned requests that a new Warrant Certificate
representing the remaining balance of such shares be registered in the name
of [ ], whose address is [ ], and that such Warrant Certificate be
delivered to [ ], whose address is [ ].
Date:___________
-------------------------------------------
(Signature)
Note: The above signature must correspond
with the name as written upon the
face of this Warrant Certificate in
every particular, without
alteration or enlargement or any
change whatever.
-------------------------------------------
(Signature Guaranteed)
Note: Signature must be guaranteed by an
"eligible guarantor institution"
meeting the requirements of the
Warrant Agent, which requirements
include membership or participation
in the Securities Transfer Agents
Medallion Program ("STAMP") or such
other "signature guarantee program"
as may be determined by the Warrant
Agent in addition to, or in
substitution for, STAMP, all in
accordance with the Securities
Exchange Act of 1934, as amended.
Tax Identification or
Social Security Number:_____________________
Address:__________________________________
<PAGE>
[FORM OF]
ASSIGNMENT
For value received [ ] hereby sells, assigns and transfers unto
[ ] the within Warrant Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute and appoint [ ]
attorney, to transfer said Warrant Certificate on the books of Enterprises,
with full power of substitution in the premises.
Date__________________________
-------------------------------------------
(Signature)
Note: The above signature must correspond
with the name as written upon the
face of this Warrant Certificate in
every particular, without
alteration or enlargement or any
change whatever.
-------------------------------------------
(Signature Guaranteed)
Note: Signature must be guaranteed by an
"eligible guarantor institution"
meeting the requirements of the
Warrant Agent, which requirements
include membership or participation
in the Securities Transfer Agents
Medallion Program ("STAMP") or such
other "signature guarantee program"
as may be determined by the Warrant
Agent in addition to, or in
substitution for, STAMP, all in
accordance with the Securities
Exchange Act of 1934, as amended.
<PAGE>
EXHIBIT B
Each Certificate evidencing Warrants originally issued as part of a
Unit of Notes and Warrants issued by Enterprises (and each Certificate
evidencing Warrants issued on registration of transfer thereof or in exchange or
substitution therefor prior to the close of business on the Separation Date (as
defined)) shall bear a legend, which may be affixed by stamp or sticker, in
substantially the following form:
THE WARRANTS EVIDENCED BY THIS CERTIFICATE ARE NOT TRANSFERABLE
SEPARATELY FROM THE NOTES ORIGINALLY SOLD AS A UNIT WITH THE WARRANTS
UNTIL THE EARLIEST OF (I) SEPTEMBER 1, 1998, (II) THE DATE ON WHICH A
REGISTRATION STATEMENT WITH RESPECT TO THE NOTES OR A REGISTRATION
STATEMENT WITH RESPECT TO THE WARRANTS AND THE WARRANT SHARES IS FILED
WITH THE COMMISSION UNDER THE SECURITIES ACT (III) THE OCCURRENCE OF A
CHANGE OF CONTROL (AS DEFINED IN THE INDENTURE RELATING TO THE NOTES)
OR A SALE OR RECAPITALIZATION OF ENTERPRISES, ALADDIN GAMING HOLDINGS,
LLC OR ALADDIN GAMING, LLC OCCURS, (IV) 30 DAYS AFTER A QUALIFIED
PUBLIC OFFERING (AS DEFINED IN THE INDENTURE RELATING TO THE NOTES)
OCCURS, (V) THE OCCURRENCE OF AN EVENT OF DEFAULT (AS DEFINED IN THE
INDENTURE RELATING TO THE NOTES) OR (VI) SUCH EARLIER DATE AS
DETERMINED BY MERRILL LYNCH & CO. IN ITS SOLE DISCRETION. PRIOR TO SUCH
DATE, THE WARRANTS EVIDENCED BY THIS CERTIFICATE MAY BE TRANSFERRED
ONLY WITH THE SIMULTANEOUS TRANSFER TO THE TRANSFEREE OF $1,000
PRINCIPAL AMOUNT OF NOTES FOR EACH WARRANT SO TRANSFERRED.
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF TRANSFER
Aladdin Gaming Enterprises, Inc.
3667 Las Vegas Blvd. South
Las Vegas, NV 89109
Attn: Corporate Secretary
State Street Bank and Trust Company
Two International Place
Boston, MA 02110
Attn: Corporate Trust Division
Re: Warrants to Purchase Class B Stock of Aladdin Gaming Enterprises, Inc.
Reference is hereby made to the Warrant Agreement dated as of February
26, 1998 (the "Warrant Agreement"), between Aladdin Gaming Enterprises, Inc.
("Enterprises"), and State Street Bank and Trust Company, as warrant agent.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Warrant Agreement.
[ ], (the "Transferor") owns and proposes to transfer the
Warrant[s] or interest in such Warrant[s] specified in Annex A hereto, in the
amount of [ ] Warrants or interests (the "Transfer"), to [ ] (the
"Transferee"), as further specified in Annex A hereto. In connection with the
Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. / / Check if Transferee will take delivery of a beneficial interest
in the 144A Global Warrant or a Definitive Warrant Pursuant to Rule 144A. The
Transfer is being effected pursuant to and in accordance with Rule 144A under
the United States Securities Act of 1933, as amended (the "Securities Act"),
and, accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Warrant is being transferred to a Person that the
Transferor reasonably believed and believes is purchasing the beneficial
interest or Definitive Warrant for its own account, or for one or more
accounts with respect to which such Person exercises sole investment
discretion, and such Person and each such account is a "qualified
institutional buyer" within the meaning of Rule 144A in a transaction meeting
the requirements of Rule 144A and such Transfer is in compliance with any
applicable blue sky securities laws of any state of the United States. Upon
consummation of the proposed Transfer in accordance with the terms of the
Warrant Agreement, the transferred beneficial interest or Definitive Warrant
will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the 144A Global Warrant and/or the Definitive
Warrant and in the Warrant Agreement and the Securities Act.
C-1
<PAGE>
2. / / Check if Transferee will take delivery of a beneficial interest in the
Regulation S Global Warrant or a Definitive Warrant pursuant to Regulation S.
The Transfer is being effected pursuant to and in accordance with Rule 903 or
Rule 904 under the Securities Act and, accordingly, the Transferor hereby
further certifies that (i) the Transfer is not being made to a Person in the
United States and (x) at the time the buy order was originated, the Transferee
was outside the United States or such Transferor and any Person acting on its
behalf reasonably believed and believes that the Transferee was outside the
United States or (y) the transaction was executed in, on or through the
facilities of a designated offshore securities market and neither such
Transferor nor any Person acting on its behalf knows that the transaction was
prearranged with a buyer in the United States, (ii) no directed selling efforts
have been made in contravention of the requirements of Rule 903 or Rule 904 of
Regulation S under the Securities Act, (iii) the transaction is not part of a
plan or scheme to evade the registration requirements of the Securities Act and
(iv) if the proposed transfer is being made prior to the expiration of the
Restricted Period, the transfer is not being made to a U.S. Person or for the
account or benefit of a U.S. Person (other than an Initial Purchaser). Upon
consummation of the proposed transfer in accordance with the terms of the
Warrant Agreement, the transferred beneficial interest or Definitive Warrant
will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Regulation S Global Note and/or the Definitive
Note and in the Warrant Agreement and the Securities Act.
3. / / Check and complete if Transferee will take delivery of a beneficial
interest in the IAI Global Warrant or a Definitive Warrant pursuant to any
provision of the Securities Act other than Rule 144A or Regulation S. The
Transfer is being effected in compliance with the transfer restrictions
applicable to beneficial interests in Restricted Global Warrants and Restricted
Definitive Warrants and pursuant to and in accordance with the Securities Act
and any applicable blue sky securities laws of any state of the United States,
and accordingly the Transferor hereby further certifies that (check one):
(a) / / such Transfer is being effected pursuant to and in accordance
with Rule 144 under the Securities Act;
or
(b) / / such Transfer is being effected to Enterprises or a subsidiary
thereof;
or
(c) / / such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act;
or
C-2
<PAGE>
(d) / / such Transfer is being effected to an Institutional Accredited
Investor and pursuant to an exemption from the registration requirements of the
Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor
hereby further certifies that it has not engaged in any general solicitation
within the meaning of Regulation D under the Securities Act and the Transfer
complies with the transfer restrictions applicable to beneficial interests in a
Restricted Global Warrant or Restricted Definitive Warrants and the requirements
of the exemption claimed, which certification is supported by (1) a certificate
executed by the Transferee in the form of Exhibit E to the Warrant Agreement and
(2) an Opinion of Counsel provided by the Transferor or the Transferee (a copy
of which the Transferor has attached to this certification), to the effect that
such Transfer is in compliance with the Securities Act. Upon consummation of the
proposed transfer in accordance with the terms of the Warrant Agreement, the
transferred beneficial interest or Definitive Warrant will be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the IAI Global Warrant and/or the Definitive Warrants and in the Warrant
Agreement and the Securities Act.
4. / / Check if Transferee will take delivery of a beneficial interest in an
Unrestricted Global Warrant or of an Unrestricted Definitive Warrant.
(a) / / Check if Transfer is pursuant to Rule 144. (i) The Transfer is
being effected pursuant to and in accordance with Rule 144 under the Securities
Act and in compliance with the transfer restrictions contained in the Warrant
Agreement and any applicable blue sky securities laws of any state of the United
States and (ii) the restrictions on transfer contained in the Warrant Agreement
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Warrant Agreement, the transferred
beneficial interest or Definitive Warrant will no longer be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Global Warrants, on Restricted Definitive Warrants and in the
Warrant Agreement.
(b) / / Check if Transfer is Pursuant to Regulation S. (i) The Transfer
is being effected pursuant to and in accordance with Rule 903 or Rule 904 under
the Securities Act and in compliance with the transfer restrictions contained in
the Warrant Agreement and any applicable blue sky securities laws of any state
of the United States and (ii) the restrictions on transfer contained in the
Warrant Agreement and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act. Upon consummation of the proposed
Transfer in accordance with the terms of the Warrant Agreement, the transferred
beneficial interest or Definitive Warrant will no longer be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Global Warrants, on Restricted Definitive Warrants and in the
Warrant Agreement.
(c) / / Check if Transfer is Pursuant to Other Exemption. (i) The
Transfer is being effected pursuant to and in compliance with an exemption from
the registration requirements of the Securities Act other than Rule 144, Rule
903 or Rule 904 under the Securities Act and in compliance with the transfer
restrictions contained in the Warrant Agreement and any applicable blue sky
securities laws of any State of the United States and (ii)
C-3
<PAGE>
the restrictions on transfer contained in the Warrant Agreement and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act. Upon consummation of the proposed Transfer in accordance with
the terms of the Warrant Agreement, the transferred beneficial interest or
Definitive Warrant will not be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Warrants or Restricted Definitive Warrants and in the Warrant Agreement.
This certificate and the statements contained herein are made for your
benefit and the benefit of Enterprises.
_____________________________________________
[Insert Name of Transferor]
_____________________________________________
(Signature)
Note: The above signature must correspond
with the name as written upon the
face of this Warrant Certificate in
every particular, without
alteration or enlargement or any
change whatever.
_____________________________________________
(Signature Guaranteed)
Note: Signature must be guaranteed by an
"eligible guarantor institution"
meeting the requirements of the
Warrant Agent, which requirements
include membership or participation
in the Securities Transfer Agents
Medallion Program ("STAMP") or such
other "signature guarantee program"
as may be determined by the Warrant
Agent in addition to, or in
substitution for, STAMP, all in
accordance with the Securities
Exchange Act of 1934, as amended.
Dated:
C-4
<PAGE>
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) / / a beneficial interest in the:
(i) / / 144A Global Warrant, or
(ii) / / Regulation S Global Warrant, or
(iii) / / IAI Global Warrant, or
(b) / / a Restricted Definitive Warrant.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) / / a beneficial interest in the:
(i) / / 144A Global Warrant, or
(ii) / / Regulation S Global Warrant, or
(iii) / / IAI Global Warrant, or
(iv) / / Unrestricted Global Warrant, or
(b) / / a Restricted Definitive Warrant, or
(c) / / an Unrestricted Definitive Warrant.
in accordance with the terms of the Warrant Agreement.
C-5
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE OF EXCHANGE
Aladdin Gaming Enterprises, Inc.
3667 Las Vegas Blvd. South
Las Vegas, NV 89109
Attn: Secretary
State Street Bank and Trust Company
Two International Place
Boston, MA 02110
Attn: Corporate Trust Division
Re: Warrants to Purchase Class B Stock of Aladdin Gaming Enterprises, Inc.
Reference is hereby made to the Warrant Agreement, dated as of
February 26, 1998 (the "Warrant Agreement"), between Aladdin Gaming Enterprises,
Inc., as issuer ("Enterprises"), and State Street Bank and Trust Company, as
warrant agent. Capitalized terms used but not defined herein shall have the
meanings given to them in the Warrant Agreement.
[ ], (the "Owner") owns and proposes to exchange
the Warrant[s] or interest in such Warrant[s] specified herein, in the amount
of [ ] Warrant[s] or interests (the "Exchange"). In connection with the
Exchange, the Owner hereby certifies that:
1. / / Exchange of Restricted Definitive Warrants or Beneficial Interests in a
Restricted Global Warrant for Unrestricted Definitive Warrants or Beneficial
Interests in an Unrestricted Global Warrant
(a) / / Check if Exchange is from beneficial interest in a
Restricted Global Warrant to beneficial interest in an Unrestricted Global
Warrant. In connection with the Exchange of the Owner's beneficial interest in a
Restricted Global Warrant for a beneficial interest in an Unrestricted Global
Warrant in an equal amount, the Owner hereby certifies (i) the beneficial
interest is being acquired for the Owner's own account without transfer, (ii)
such Exchange has been effected in compliance with the transfer restrictions
applicable to the Global Warrants and pursuant to and in accordance with the
United States Securities Act of 1933, as amended (the "Securities Act"), (iii)
the restrictions on transfer contained in the Warrant Agreement and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act and (iv) the beneficial interest in an Unrestricted Global
Warrant is being acquired in compliance with any applicable blue sky securities
laws of any state of the United States.
(b) / / Check if Exchange is from beneficial interest in a
Restricted Global Warrant to Unrestricted Definitive
D-1
<PAGE>
Warrant. In connection with the Exchange of the Owner's beneficial interest in a
Restricted Global Warrant for an Unrestricted Definitive Warrant, the Owner
hereby certifies (i) the Definitive Warrant is being acquired for the Owner's
own account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to the Restricted Global Warrants and
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Warrant Agreement and the Private Placement Legend are
not required in order to maintain compliance with the Securities Act and (iv)
the Definitive Warrant is being acquired in compliance with any applicable blue
sky securities laws of any state of the United States.
(c) / / Check if Exchange is from Restricted Definitive
Warrant to beneficial interest in an Unrestricted Global Warrant. In connection
with the Owner's Exchange of a Restricted Definitive Warrant for a beneficial
interest in an Unrestricted Global Warrant, the Owner hereby certifies (i) the
beneficial interest is being acquired for the Owner's own account without
transfer, (ii) such Exchange has been effected in compliance with the transfer
restrictions applicable to Restricted Definitive Warrants and pursuant to and in
accordance with the Securities Act, (iii) the restrictions on transfer contained
in the Warrant Agreement and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act and (iv) the beneficial
interest is being acquired in compliance with any applicable blue sky securities
laws of any state of the United States.
(d) / / Check if Exchange is from Restricted Definitive
Warrant to Unrestricted Definitive Warrant. In connection with the Owner's
Exchange of a Restricted Definitive Warrant for an Unrestricted Definitive
Warrant, the Owner hereby certifies (i) the Unrestricted Definitive Warrant is
being acquired for the Owner's own account without transfer, (ii) such Exchange
has been effected in compliance with the transfer restrictions applicable to
Restricted Definitive Warrants and pursuant to and in accordance with the
Securities Act, (iii) the restrictions on transfer contained in the Warrant
Agreement and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the Unrestricted Definitive Warrant
is being acquired in compliance with any applicable blue sky securities laws of
any state of the United States.
2. / / Exchange of Restricted Definitive Warrants or Beneficial Interests in
Restricted Global Warrants for Restricted Definitive Warrants or Beneficial
Interests in Restricted Global Warrants
(a) / / Check if Exchange is from beneficial interest in a
Restricted Global Warrant to Restricted Definitive Warrant. In connection with
the Exchange of the Owner's beneficial interest in a Restricted Global Warrant
for a Restricted Definitive Warrant with an equal amount, the Owner hereby
certifies that the Restricted Definitive Warrant is being acquired for the
Owner's own account without transfer. Upon consummation of the proposed Exchange
in accordance with the terms of the Warrant Agreement, the Restricted Definitive
Warrant issued will continue to be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Definitive
Warrant and in the Indenture and the Securities Act.
D-2
<PAGE>
(b) / / Check if Exchange is from Restricted Definitive
Warrant to beneficial interest in a Restricted Global Warrant. In connection
with the Exchange of the Owner's Restricted Definitive Warrant for a beneficial
interest in the [CHECK ONE] / / 144A Global Warrant, / / Regulation S Global
Warrant, / / IAI Global Warrant with an equal amount, the Owner hereby certifies
(i) the beneficial interest is being acquired for the Owner's own account
without transfer and (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to the Restricted Global Warrants and pursuant
to and in accordance with the Securities Act, and in compliance with any
applicable blue sky securities laws of any state of the United States. Upon
consummation of the proposed Exchange in accordance with the terms of the
Warrant Agreement, the beneficial interest issued will be subject to the
restrictions on transfer enumerated in the Private
Placement Legend printed on the relevant Restricted Global
Warrant and in the Warrant Agreement and the Securities Act.
This certificate and the statements contained herein are made
for your benefit and the benefit of Enterprises.
_____________________________________________
[Insert Name of Owner]
_____________________________________________
(Signature)
Note: The above signature must correspond
with the name as written upon the
face of this Warrant Certificate in
every particular, without
alteration or enlargement or any
change whatever.
_____________________________________________
(Signature Guaranteed)
Note: Signature must be guaranteed by an
"eligible guarantor institution"
meeting the requirements of the
Warrant Agent, which requirements
include membership or participation
in the Securities Transfer Agents
Medallion Program ("STAMP") or such
other "signature guarantee program"
as may be determined by the Warrant
Agent in
D-3
<PAGE>
addition to, or in substitution
for, STAMP, all in accordance with
the Securities Exchange Act of
1934, as amended.
Dated:
D-4
<PAGE>
EXHIBIT E
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Aladdin Gaming Enterprises, Inc.
3667 Las Vegas Blvd. South
Las Vegas, NV 89109
Attn: Secretary
State Street Bank and Trust Company
Two International Place
Boston, MA 02110
Attn: Corporate Trust Division
Re: Warrants to Purchase Class B Stock of Aladdin Gaming Enterprises, Inc.
Reference is hereby made to the Warrant Agreement, dated as of
February 26, 1998 (the "Warrant Agreement"), between Aladdin Gaming Enterprises,
Inc., as issuer ("Enterprises"), and State Street Bank and Trust Company, as
warrant agent. Capitalized terms used but not defined herein shall have the
meanings given to them in the Warrant Agreement.
In connection with our proposed purchase of [ ] number of:
(a) / / a beneficial interest in a Global Warrant, or
(b) / / a Definitive Warrant,
we confirm that:
1. We understand that any subsequent transfer of the Warrants
or any interest therein is subject to certain restrictions and conditions set
forth in the Warrant Agreement and the undersigned agrees to be bound by, and
not to resell, pledge or otherwise transfer the Warrants or any interest therein
except in compliance with, such restrictions and conditions and the United
States Securities Act of 1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Warrants have
not been registered under the Securities Act, and that the Warrants and any
interest therein may not be offered or sold except as permitted in the following
sentence. We agree, on our own behalf and on behalf of any accounts for which we
are acting as hereinafter stated, that if we should sell the Warrants or any
interest therein, we will do so only (A) to Enterprises or any subsidiary
thereof, (B) in accordance with Rule 144A under the Securities Act to a
"qualified institutional buyer" (as defined therein), (c) to an institutional
"accredited investor" (as defined below) that, prior to such transfer, furnishes
(or has furnished on its behalf by a U.S. broker-dealer) to you and to
Enterprises a signed letter substantially in the form of this letter and an
Opinion of Counsel in
E-1
<PAGE>
form reasonably acceptable to Enterprises to the effect that such transfer is in
compliance with the Securities Act, (D) outside the United States in accordance
with Rule 904 of Regulation S under the Securities Act, (E) pursuant to the
provisions of Rule 144(k) under the Securities Act or (F) pursuant to an
effective registration statement under the Securities Act, and we further agree
to provide to any Person purchasing the Definitive Warrant or beneficial
interest in a Global Warrant from us in a transaction meeting the requirements
of clauses (A) through (E) of this paragraph a notice advising such purchaser
that resales thereof are restricted as stated herein.
3. We understand that, on any proposed resale of the Warrants
or beneficial interest therein, we will be required to furnish to you and
Enterprises such certifications, legal opinions and other information as you and
Enterprises may reasonably require to confirm that the proposed sale complies
with the foregoing restrictions. We further understand that the Warrants
purchased by us will bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the Warrants,
and we and any accounts for which we are acting are each able to bear the
economic risk of our or its investment.
5. We are acquiring the Warrants or beneficial interest
therein purchased by us for our own account or for one or more accounts (each of
which is an institutional "accredited investor") as to each of which we exercise
sole investment discretion.
You are entitled to rely upon this letter and are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceedings or official inquiry with respect to the
matters covered hereby.
_____________________________________________
[Insert Name of Accredited Investor]
_____________________________________________
(Signature)
Note: The above signature must correspond
with the name as written upon the
face of this Warrant Certificate in
every particular, without
alteration or enlargement or any
change whatever.
E-2
<PAGE>
_____________________________________________
(Signature Guaranteed)
Note: Signature must be guaranteed by an
"eligible guarantor institution"
meeting the requirements of the
Warrant Agent, which requirements
include membership or participation
in the Securities Transfer Agents
Medallion Program ("STAMP") or such
other "signature guarantee program"
as may be determined by the Warrant
Agent in addition to, or in
substitution for, STAMP, all in
accordance with the Securities
Exchange Act of 1934, as amended.
Dated:
<PAGE>
________________________________________
Warrant Registration Rights Agreement
Dated As of February 26, 1998
among
Aladdin Gaming Enterprises, Inc.,
and
Merrill Lynch, Pierce, Fenner & Smith
Incorporated,
Credit Suisse First Boston Corporation,
CIBC Oppenheimer Corp.
and
Scotia Capital Markets (USA) Inc.
________________________________________
<PAGE>
WARRANT REGISTRATION RIGHTS AGREEMENT
This Warrant Registration Rights Agreement (the "Agreement")
is made and entered into this 26th day of February, 1998, among Aladdin Gaming
Enterprises, Inc., a Nevada corporation ("Enterprises"), and Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Credit Suisse First Boston Corporation,
CIBC Oppenheimer Corp. and Scotia Capital Markets (USA) Inc. (collectively, the
"Initial Purchasers").
This Agreement is made pursuant to the Purchase Agreement
dated February 18, 1998, among Aladdin Gaming Holdings, LLC ("Holdings"), a
Nevada limited-liability company, Aladdin Capital Corp., a Nevada corporation,
Enterprises, Aladdin Holdings, LLC, a Delaware limited liability company, the
Trust Under Article Sixth u/w/o Sigmund Sommer, London Clubs International, plc,
a United Kingdom public limited company, and the Initial Purchasers (the
"Purchase Agreement"), which provides for, among other things, the sale by
Enterprises to the Initial Purchasers of 2,215,000 Warrants (the "Warrants") to
purchase 2,215,000 shares of Class B non-voting Common Stock, no par value (the
"Common Stock"), of Enterprises. The Warrants have been issued pursuant to the
Warrant Agreement dated as of February 26, 1998, among Enterprises, Holdings and
State Street Bank and Trust Company, as warrant agent. In order to induce the
Initial Purchasers to enter into the Purchase Agreement, Enterprises has agreed
to provide to the Initial Purchasers and their direct and indirect transferees
the registration rights set forth in this Agreement. The execution of this
Agreement is a condition to the closing under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as follows:
1. Definitions.
As used in this Agreement, the following capitalized defined
terms shall have the following meanings:
"Agreement" shall have the meaning set forth in the preamble.
"Black Out Period" shall have the meaning set forth in Section
2.2(b).
"Commission" shall mean the Securities and Exchange Commission
or any successor agency or government body performing the functions
currently performed by the United States Securities and Exchange
Commission.
"Common Stock" shall have the meaning set forth in the
preamble.
"Company" shall mean Aladdin Gaming, LLC, a Nevada
limited-liability company.
"Depositary" shall mean The Depository Trust Company, or any
other depositary appointed by Enterprises, provided, however, that such
depositary must have an address in the Borough of Manhattan, in the
City of New York.
<PAGE>
"Enterprises" shall have the meaning set forth in the preamble.
"Exchange Act" shall mean the Securities Exchange Act of 19
34, as amended.
"Holder" shall mean a Person who owns Transfer Restricted
Securities or has the right to acquire such Transfer Restricted
Securities, whether or not such acquisition has actually been effected
and disregarding any legal restrictions upon the exercise of such
right.
"Holdings" shall have the meaning set forth in the preamble.
"Initial Purchasers" shall have the meaning set forth in the
preamble.
"IPO Entity" shall mean Enterprises, Holdings or another
entity which controls the Company.
"Issue Date" shall mean February 26, 1998.
"Majority Holders" shall mean the Holders of a majority of the
outstanding Transfer Restricted Securities; provided that whenever the
consent or approval of Holders of a specified percentage of Transfer
Restricted Securities is required hereunder, Transfer Restricted
Securities held by Enterprises or any Affiliate (as defined in the
Warrant Agreement) of Enterprises shall be disregarded in determining
whether such consent or approval was given by the Holders of such
required percentage amount.
"Participating Broker-Dealer" shall mean any of Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Credit Suisse First Boston
Corporation, CIBC Oppenheimer Corp. and Scotia Capital Markets (USA)
Inc. and any other broker-dealer which makes a market in the Securities
or the Warrant Shares.
"Person" shall mean an individual, partnership (general or
limited), corporation, limited liability company, trust or
unincorporated organization, or a governmental agency or body or
political subdivision thereof.
"Prospectus" shall mean the prospectus included in the Warrant
Shelf Registration Statement, including any preliminary prospectus, and
any such prospectus as amended or supplemented by any prospectus
supplement, including any such prospectus supplement with respect to
the terms of the offering of any portion of the Transfer Restricted
Securities covered by the Warrant Shelf Registration Statement, and by
all other amendments and supplements to a prospectus, including
post-effective amendments, and in each case including all material
incorporated by reference therein.
"Purchase Agreement" shall have the meaning set forth in the
preamble.
"Qualified Public Offering" shall have the meaning set forth
in Section 2.1(c).
2
<PAGE>
"Registration Expenses" shall mean any and all expenses
incident to performance of or compliance by Enterprises with this
Agreement, including without limitation: (i) all Commission, stock
exchange or National Association of Securities Dealers, Inc. (the
"NASD") registration and filing fees, including, if applicable, the
fees and expenses of any "qualified independent underwriter" (and its
counsel) that is required to be retained by any holder of Transfer
Restricted Securities in accordance with the rules and regulations of
the NASD, (ii) all fees and expenses incurred in connection with
compliance with state securities or blue sky laws and compliance with
the rules of the NASD (including reasonable fees and disbursements of
counsel for any underwriters or Holders in connection with blue sky
qualification of any of the Transfer Restricted Securities and any
filings with the NASD), (iii) all expenses of any Persons in preparing
or assisting in preparing, word processing, printing and distributing
the Warrant Shelf Registration Statement, any Prospectus, any
amendments or supplements thereto, any underwriting agreements,
securities sales agreements and other documents relating to the
performance of and compliance with this Agreement, except for such
expenses incurred by Holders, underwriters or their respective counsel,
(iv) all fees and expenses incurred in connection with the listing if
any, of any of the Transfer Restricted Securities on any securities
exchange or exchanges, (v) the fees and disbursements of counsel for
Enterprises and of the independent public accountants of Enterprises,
including the expenses of any special audits or "cold comfort" letters
required by or incident to such performance and compliance, (vi) the
fees and expenses of the Warrant Agent, but excluding, except as
otherwise expressly provided in clauses (i) through (vi) above, (a) the
fees and expenses of the Initial Purchasers in connection with the
Warrant Shelf Registration, including fees and expenses of counsel of
the Initial Purchasers in connection therewith and (b) underwriting
discounts and commissions and transfer taxes, if any, relating to the
sale or disposition of Transfer Restricted Securities by a Holder.
"Rule 144" shall mean Rule 144 promulgated under the
Securities Act, as such Rule may be amended from time to time, or any
similar rule (other than Rule 144A) or regulation hereafter adopted by
the Commission providing for offers and sales of securities made in
compliance therewith resulting in offers and sales by subsequent
holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the
Securities Act.
"Rule 144A" shall mean Rule 144A promulgated under the
Securities Act, as such Rule may be amended from time to time, or any
similar rule (other than Rule 144) or regulation hereafter adopted by
the Commission.
"Securities" shall mean the Warrants and the Warrant Shares,
collectively.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Transfer Restricted Securities" shall mean the Warrants,
Warrant Shares, any securities issued to a holder of Warrants or
Warrant Shares pursuant to the provisions of Section 11(m) of the
Warrant Agreement (the "New Securities") and any other securities
3
<PAGE>
issued or issuable with respect to the Warrants, Warrant Shares or New
Securities by way of a stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation
or other reorganization; provided that a security shall cease to be a
Transfer Restricted Security when it, as applicable, (i) has been
effectively registered under the Securities Act and disposed of in
accordance with the Warrant Shelf Registration Statement, (ii) is
distributed to the public pursuant to Rule 144 or (iii) may be sold or
transferred pursuant to Rule 144(k) (or any similar provisions then in
force) under the Act or otherwise.
"Warrant Agent" shall mean the warrant agent with respect to
the Securities under the Warrant Agreement.
"Warrant Agreement" shall mean the Warrant Agreement relating
to the Securities dated as of February 26, 1998, between Enterprises,
Holdings and State Street Bank and Trust Company, as warrant agent, as
the same may be amended, supplemented, waived or otherwise modified
from time to time in accordance with the terms thereof.
"Warrant Expiration Date" shall mean March 1, 2010.
"Warrant Shares" shall mean the shares of Common Stock
delivered or deliverable upon exercise of the Warrants.
"Warrant Shelf Registration" shall mean a registration
effected pursuant to Section 2.1 hereof.
"Warrant Shelf Registration Statement" shall mean a "shelf"
registration statement of Enterprises pursuant to the provisions of
Section 2.1 of this Agreement which covers all of the Transfer
Restricted Securities on an appropriate form under Rule 415 under the
Securities Act, or any similar rule that may be adopted by the
Commission, and all amendments and supplements to such registration
statement, including post-effective amendments, in each case including
the Prospectus contained therein, all exhibits thereto and all material
incorporated by reference therein.
"Warrants" shall have the meaning set forth in the preamble.
2. Registration Under the Securities Act.
2.1. Warrant Shelf Registration. Enterprises shall, at its
cost:
(a) use its reasonable best efforts to file no later
than 45 days after the Issue Date with the Commission the Warrant Shelf
Registration Statement covering (i) the offer and sale of the Warrants and
the Warrant Shares and (ii) the issuance of Warrant Shares upon the exercise
of Warrants that were sold pursuant to the Warrant Shelf Registration
Statement;
4
<PAGE>
(b) use its reasonable best efforts to cause such
Warrant Shelf Registration Statement to be declared effective by the
Commission on or prior to 150 days after the Issue Date; and
(c) subject to Section 2.2 hereof, use its reasonable
best efforts to continuously maintain the effectiveness of the Warrant Shelf
Registration Statement under the Securities Act in order to permit the
Prospectus included therein to be lawfully delivered by Enterprises to the
Holders offering and selling Warrants or Warrant Shares or exercising the
Warrants until the earlier of (i) the date on which (x) there are no Warrants
outstanding and (y) all Warrant Shares have been sold pursuant to the Warrant
Shelf Registration Statement or pursuant to Rule 144 under the Securities Act
and (ii) the consummation of a public offering of common stock registered
under the Securities Act and resulting in proceeds of at least $50.0 million
(a "Qualified Public Offering") of an IPO Entity other than Enterprises.
2.2 Limitations, Conditions and Qualifications to Obligations Under
Registration Covenants
The obligations of Enterprises set forth in Section 2.1 hereof are
subject to each of the following limitations, conditions and qualifications:
(a) Subject to the next proviso of this paragraph,
Enterprises shall be entitled to postpone, for a reasonable period of time,
the filing or effectiveness of, or suspend the rights of any Holders to,
directly or indirectly, sell, offer to sell, pledge, contract to sell, sell
any option or contract to purchase any option or contract to sell or grant
any option, right or warrant for the sale of the Warrants or the Warrant
Shares pursuant to, the Warrant Shelf Registration Statement otherwise
required to be prepared, filed and made and kept effective pursuant to
Section 2.1 of this Agreement or otherwise; provided, however, that the
duration of such postponement or suspension may not exceed 180 days after the
date of the good faith determination of the Board of Directors of Enterprises
that the filing or effectiveness of, or sales pursuant to, the Warrant Shelf
Registration Statement would materially impede, delay or interfere with or
affect the marketing of any material financing, offer or sale of securities,
acquisition, corporate reorganization or other significant transaction
involving Enterprises which material financing, offer or sale of securities,
acquisition, corporate reorganization or other significant transaction is
under active consideration at the time of such postponement or suspension;
provided, however, that Enterprises shall not be entitled to such
postponement or suspension more than twice in any 12-month period;
(b) Enterprises shall not be required to amend or
supplement the Warrant Shelf Registration Statement filed pursuant to Section
2.1 of this Agreement, any related prospectus or any document incorporated
therein by reference, for a period (a "Black Out Period") not to exceed, for
so long as this Agreement is in effect, an aggregate of 120 days in any
calendar year, in the event that (i) the Board of Directors of Enterprises
determines in good faith that sales pursuant to the Warrant Shelf
Registration Statement would materially impede, delay or interfere with or
affect the marketing of any material financing, offer or sale of securities,
acquisition, corporate reorganization or other significant transaction
involving Enterprises which
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material financing, offer or sale of securities, acquisition, corporate
reorganization or other significant transaction is under active consideration at
the time of such postponement or suspension, (ii) an event occurs and is
continuing as a result of which the Warrant Shelf Registration Statement, any
related prospectus or any document incorporated therein by reference as then
amended or supplemented would, in the good faith judgment of the Board of
Directors of Enterprises, contain an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading or
(iii) the disclosure otherwise relates to a material business transaction which
has not yet been publicly disclosed; provided that no Black Out Period may be in
effect during the 60 days prior to the Warrant Expiration Date; and
(c) Enterprises' obligations shall be subject to the
obligations of the Holders, which the Holders acknowledge, to furnish all
information and materials required of such Holders and to take any and all
actions required of such Holders as may be required under applicable federal
and state securities laws and regulations to permit Enterprises to comply
with all applicable requirements of the Commission and to obtain any
acceleration of the effective date of the Warrant Shelf Registration
Statement.
2.3. Rule 144 and Rule 144A
Enterprises covenants that it will file the reports required to be
filed by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the Commission thereunder in a timely manner and, if at
any time Enterprises is not required to file such reports, it will, upon the
request of any Holder or beneficial owner of Transfer Restricted Securities,
make available such information necessary to permit sales pursuant to Rule 144A
under the Securities Act. Enterprises further covenants that it will take such
further reasonable action as any Holder of Transfer Restricted Securities may
reasonably request, to the extent required from time to time to enable such
Holder to sell Transfer Restricted Securities without registration under the
Securities Act within the limitation of the exemptions provided by (a) Rule
144(k) and Rule 144A under the Securities Act, as such Rules may be amended from
time to time, or (b) any similar rule or regulation hereafter adopted by the
Commission (it being expressly understood that the foregoing shall not create
any obligation on the part of Enterprises to file periodic reports or other
reports under the Exchange Act at any time that it is not then required to file
such reports pursuant to the Exchange Act). Upon the written request of any
Holder of Transfer Restricted Securities, Enterprises will in a timely manner
deliver to such Holder a written statement as to whether it has complied with
such information requirements.
3. "Market Stand-Off" Agreement
(a) Each Holder hereby agrees that it shall not, to the extent
requested by a managing underwriter of common stock or common equivalents of
Enterprises, sell or otherwise transfer or dispose of any Transfer Restricted
Securities of Enterprises then owned by such Holder (other than to donees or
partners of the Holder who agree to be similarly bound) for up to 180 days
following the date of the final Prospectus in connection with the Warrant
Shelf Registration Statement filed under the Securities Act; provided,
however, that such agreement (i)
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shall not be applicable to Transfer Restricted Securities sold pursuant to such
registration as part of that offering and (ii) shall only be applicable if the
managing underwriters request such agreement from each Holder.
(b) In order to enforce the foregoing covenant, Enterprises shall
have the right to impose stop transfer instructions with respect to the
Transfer Restricted Securities until the end of such period. The provisions
of this Section 3 shall be binding upon any transferee of any Transfer
Restricted Securities.
4. Registration Procedures. In connection with the obligations of
Enterprises with respect to the Warrant Shelf Registration Statement pursuant to
Sections 2.1 hereof, Enterprises shall, except as otherwise provided:
(a) Use its reasonable best efforts to prepare and file with the
Commission no later than 45 days after the Issue Date the Warrant Shelf
Registration Statement as provided herein, on the appropriate form under the
Securities Act, which form (i) shall be selected by Enterprises, (ii) shall
be available for the sale of the Transfer Restricted Securities by the
selling Holders thereof, (iii) shall comply as to form in all material
respects with the requirements of the applicable form and include or
incorporate by reference all financial statements required by the Commission
to be filed therewith or incorporated by reference therein and (iv) shall
comply in all material respects with the requirements of Regulation S-T under
the Securities Act;
(b) Use its reasonable best efforts to (i) prepare and file with
the Commission such amendments and post-effective amendments to the Warrant
Shelf Registration Statement as may be necessary to keep the Warrant Shelf
Registration Statement continuously effective for the time period prescribed
hereby; and (ii) cause the related Prospectus to be supplemented by any
required prospectus supplement, and as so supplemented to be filed pursuant
to Rule 424 (or any similar provisions then in force) promulgated under the
Securities Act; and (iii) materially comply with the provisions of the
Securities Act, the Exchange Act and the rules and regulations of the
Commission promulgated thereunder applicable to it with respect to the
Warrant Shelf Registration Statement as so amended or in such prospectus as
so supplemented;
(c) Upon receiving notice of any of the following events, notify
promptly each Holder of Transfer Restricted Securities and the managing
underwriter or underwriters, if any, and, if requested by such Holder,
managing underwriter or underwriters, confirm such notice in writing promptly
(i) when the Warrant Shelf Registration Statement or any post-effective
amendment has become effective (including in such notice a written statement
that any Holder may, upon request, obtain, without charge, one conformed copy
of the Warrant Shelf Registration Statement or post-effective amendment
including financial statements and schedules and exhibits), (ii) of any
request by the Commission or any state securities authority for
post-effective amendments and supplements to the Warrant Shelf Registration
Statement and Prospectus or for additional information after the Warrant
Shelf Registration Statement has become effective, (iii) of the issuance by
the Commission or any state securities authority of any
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stop order suspending the effectiveness of the Warrant Shelf Registration
Statement or the initiation of any proceedings for that purpose, (iv) if at any
time when a prospectus is required by the Securities Act to be delivered in
connection with sales of the Transfer Restricted Securities, the representations
and warranties of Enterprises contained in any underwriting agreement,
securities sales agreement or other similar agreement, if any, relating to the
offering cease to be true and correct in all material respects, (v) of the
happening of any event or the discovery of any facts during the period the
Warrant Shelf Registration Statement is effective which makes any statement made
in such Warrant Shelf Registration Statement or the related Prospectus untrue in
any material respect or which requires the making of any changes in such Warrant
Shelf Registration Statement or Prospectus in order to make the statements
therein not misleading in any material respect, (vi) of the receipt by
Enterprises of any notification with respect to the suspension of the
qualification of the Transfer Restricted Securities for sale in any jurisdiction
or the initiation of any proceeding for such purpose and (vii) of any
determination by Enterprises that a post-effective amendment to such Warrant
Shelf Registration Statement would be appropriate;
(d) Make commercially reasonable efforts to obtain the withdrawal
of any order suspending the effectiveness of the Warrant Shelf Registration
Statement as soon as reasonably practicable;
(e) A reasonable time prior to filing the Warrant Shelf
Registration Statement, any Prospectus forming a part thereof, any amendment
to such Warrant Shelf Registration Statement or amendment or supplement to
such Prospectus, make such changes in any such document prior to the filing
thereof as the Initial Purchasers, the counsel to the Holders or the
underwriter or underwriters reasonably request if Enterprises, acting
reasonably and in good faith, deems such changes to be reasonable, and not
file any such document in a form to which the Majority Holders, the Initial
Purchasers on behalf of the Holders of Transfer Restricted Securities,
counsel for the Holders of Transfer Restricted Securities or any underwriter
shall not have previously been advised and furnished a copy of or to which
the Majority Holders, the Initial Purchasers on behalf of the Holders of
Transfer Restricted Securities, counsel to the Holders of Transfer Restricted
Securities or any underwriter shall reasonably object if Enterprises, acting
reasonably and in good faith, deems such objection to be reasonable, and make
the representatives of Enterprises available for discussion of such document
as shall be reasonably requested by the Holders of Transfer Restricted
Securities, the Initial Purchasers on behalf of such Holders, counsel for the
Holders of Transfer Restricted Securities or any underwriter;
(f) Furnish to each Holder of Transfer Restricted Securities who
so requests and to counsel for the Holders of Transfer Restricted Securities
and each managing underwriter, if any, without charge, upon written request,
one conformed copy of the Warrant Shelf Registration Statement and each
post-effective amendment thereto, including financial statements and
schedules, and, if requested, of all documents incorporated or deemed to be
incorporated therein by reference and all exhibits (including exhibits
incorporated by reference);
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(g) Deliver to each Holder of Transfer Restricted Securities,
their counsel and each underwriter, if any, without charge, a reasonable
number of copies of each Prospectus (including each form of prospectus) and
each amendment or supplement thereto as such Persons may reasonably request;
and, subject to the last paragraph of this Section 4, Enterprises consents to
the use of such Prospectus and each amendment or supplement thereto by each
of the Holders of Transfer Restricted Securities and the underwriter or
underwriters or agents, if any, in connection with the offering and sale of
the Transfer Restricted Securities covered by such Prospectus and any
amendment or supplement thereto.
(h) Use its reasonable best efforts to register or qualify the
Transfer Restricted Securities under all applicable state securities or "blue
sky" laws of such jurisdictions within the United States as any Holder of
Transfer Restricted Securities covered by the Warrant Shelf Registration and,
each underwriter of an underwritten offering of Transfer Restricted
Securities shall reasonably request in writing a reasonable period of time
prior to the time the Warrant Shelf Registration Statement is declared
effective by the Commission, and do any and all other acts and things which
may be reasonably necessary or advisable to enable any such Holder or
underwriter to consummate the disposition in each such jurisdiction of such
Transfer Restricted Securities during the period the Warrant Shelf
Registration Statement is required to remain effective pursuant to Section
2.1 hereof; provided, however, that Enterprises shall not be required to (i)
qualify as a foreign corporation or as a dealer in securities in any
jurisdiction where they would not otherwise be required to qualify but for
this Section 4(h), or (ii) take any action which would subject them to
general service of process or taxation in any such jurisdiction where it is
not then so subject;
(i) Cooperate with the Holders of Transfer Restricted Securities
and the managing underwriter or underwriters, if any, to facilitate the
timely preparation and delivery of certificates representing Transfer
Restricted Securities to be sold, which certificates shall not bear any
restrictive legends whatsoever and shall be in a form eligible for deposit
with The Depository Trust Company ("DTC"); and enable such Transfer
Restricted Securities to be in such denominations and registered in such
names as the managing underwriter or underwriters, if any, or Holders may
reasonably request at least three business days prior to any sale of Transfer
Restricted Securities in a firm commitment underwritten public offering;
(j) Pay all Registration Expenses in connection with the
registration requested pursuant to Section 2.1 hereof. Each Holder of
Transfer Restricted Securities shall pay all underwriting discounts and
commissions and transfer taxes, if any, relating to, and all fees and other
costs of counsel in connection with, the sale or disposition of such Holder's
Transfer Restricted Securities pursuant to the Warrant Shelf Registration
Statement;
(k) Upon the occurrence of any event contemplated by Section
4(c)(v) or 4(c)(vi) above, as promptly as practicable, use its reasonable
best efforts to prepare a supplement or post-effective amendment to the
Warrant Shelf Registration Statement or a supplement to the related
Prospectus or any document incorporated or deemed to be incorporated therein
by reference, and, subject to Section 4(a) hereof, file such with the
Commission so that, as thereafter delivered to the purchasers of Transfer
Restricted Securities being sold thereunder,
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<PAGE>
such Prospectus will not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading;
(l) Not later than the effective date of the Warrant Shelf
Registration Statement, (i) provide the registrar for the Transfer Restricted
Securities with certificates for such securities in a form eligible for
deposit with DTC and (ii) provide a CUSIP number for such securities;
(m) Enter into an underwriting agreement in form, scope and
substance as is customary in underwritten offerings and take all such other
actions as are reasonably requested by the managing underwriter or
underwriters in order to expedite or facilitate the registration or
disposition of such Transfer Restricted Securities in any underwritten
offering to be made of the Transfer Restricted Securities in accordance with
this Agreement, and in such connection, if requested by any Holder of
Transfer Restricted Securities or underwriter, (i) make such representations
and warranties to the Holders of such Transfer Restricted Securities and the
underwriters, if any, in form, substance and scope as are customarily made by
issuers to underwriters in similar underwritten offerings and as may be
reasonably requested by them; (ii) obtain opinions of counsel reasonably
satisfactory to the managing underwriters, if any, and the Majority Holders,
covering (x) the matters and subject to the qualifications and exceptions
customarily received by such managing underwriters requested in connection
with a warrant shelf registration statement and (y) such other matters as may
be reasonably requested by the managing underwriters, if any, or the Majority
Holders; (iii) obtain "cold comfort" letters and updates thereof from
Enterprises' independent certified public accountants (and, if necessary,
independent certified public accountants of London Clubs, the Trust, any
subsidiary of the Enterprises, London Clubs or the Trust or of any business
acquired by Enterprises for which financial statements are, or are required
to be, included in the Warrant Shelf Registration Statement) addressed to the
underwriters, if any, and use reasonable efforts to have such letter
addressed to the selling Holders of Transfer Restricted Securities (to the
extent consistent with Statement on Auditing Standards No. 72 of the American
Institute of Certified Public Accounts), such letters to be in customary form
and covering matters of the type customarily covered in "cold comfort"
letters to underwriters in connection with similar underwritten offerings;
(iv) enter into a securities sales agreement with the Holders and an agent of
the Holders providing for, among other things, the appointment of such agent
for the selling Holders for the purpose of soliciting purchases of Transfer
Restricted Securities, which agreement shall be in form, substance and scope
customary for similar offerings; (v) if an underwriting agreement is entered
into, cause it to set forth indemnification provisions and procedures
substantially equivalent to the indemnification provisions and procedures set
forth in Section 5 hereof with respect to the underwriters and all other
parties to be indemnified pursuant to said Section or, at the request of any
underwriters, in the form customarily provided to such underwriters in
similar types of transactions; and (vi) deliver such documents and
certificates as may be reasonably requested and as are customarily delivered
in similar offerings to the Holders of a majority in number of the Transfer
Restricted Securities being sold and the managing underwriters, if any.
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The obligations of Enterprises under this paragraph (m) are subject to the
Holders and underwriters providing representations, warranties and
indemnifications customarily provided by such persons under such agreements, and
the Holders entering into custody agreements and powers of attorney containing
the representations, warranties and indemnifications customarily provided by
such persons in connection with secondary offerings of securities.
(n) Make available for inspection by representatives of the
Holders of Transfer Restricted Securities, any underwriters participating in
any such disposition pursuant to the Warrant Shelf Registration Statement,
any Participating Broker-Dealer and any counsel or accountant retained by any
of the foregoing (collectively, the "Inspectors"), all financial and other
records, pertinent corporate documents and properties of Enterprises
reasonably necessary to the Inspectors to enable them to conduct any due
diligence as is customary, and cause the officers, directors and employees of
Enterprises to supply all information in each case reasonably requested by
the Inspectors in connection therewith, and make such representatives of
Enterprises available for discussion of such documents as shall be reasonably
requested by the Initial Purchasers in connection therewith; provided, that
records which Enterprises determines, in good faith, to be confidential and
which Enterprises notifies the Inspectors are confidential shall not be
disclosed by the Inspector unless (i) the disclosure of such records shall be
necessary to avoid or correct a material misstatement or omission in the
Warrant Shelf Registration Statement, (ii) the release of such records is
ordered pursuant to a subpoena or other order from a court of competent
jurisdiction or is otherwise required by law or (iii) the information
contained in such records has been made generally available to the public
(other than by a breach of these provisions by the Inspectors or any of their
officers, employees or agents). Each Holder and each such Participating
Broker-Dealer will be required to agree in writing that any such confidential
information shall not be disclosed other than pursuant to clauses (i), (ii)
or (iii) of the previous sentence;
(o) otherwise materially comply with all material applicable
rules and regulations of the Commission and make available to their security
holders, as soon as reasonably practicable, an earnings statement covering at
least 12 months which shall satisfy the provisions of Section 11(a) of the
1933 Act and Rule 158 thereunder (i) commencing at the end of any fiscal
quarter in which Transfer Restricted Securities are sold to an underwriter or
to underwriters in a firm commitment or best efforts underwritten offering
and (ii) if not sold to an underwriter or to underwriters in such an
offering, commencing on the first day of the first fiscal quarter of
Enterprises after the effective date of the Warrant Shelf Registration
Statement, which statements shall cover such 12-month periods;
(p) Use commercially reasonable efforts to cause all Transfer
Restricted Securities to be listed on any securities exchange on which
similar equity securities issued by Enterprises are then listed if requested
by the Majority Holders, or if requested by the underwriter or underwriters
of an underwritten offering of Transfer Restricted Securities, if any, on
which similar securities issued by Enterprises as applicable, are then listed;
(q) Cooperate with the Holders of Transfer Restricted Securities
to facilitate the timely preparation and delivery of certificates
representing Transfer Restricted
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Securities to be sold and not bearing any restrictive legends and registered in
such names as the Holders may reasonably request at least two business days
prior to the closing of any sale of Transfer Restricted Securities.
Enterprises may require each seller of Transfer Restricted Securities
as to which a registration is being effected to furnish to Enterprises such
information regarding such seller as may be required by the staff of the
Commission to be included in the Warrant Shelf Registration Statement and
Enterprises may exclude from such registration the Transfer Restricted
Securities of any seller who fails to furnish such information within a
reasonable time (which amount of reasonable time shall be reasonably determined
by Enterprises); provided, that Enterprises shall provide written notice to any
such seller of any such request.
Each Holder agrees that, upon receipt of any notice from Enterprises of
the happening of any event or the discovery of any facts, each of the kind
described in Section 4(c)(ii), 4(c)(iv), 4(c)(v), or 4(c)(vi) hereof, such
Holder will forthwith discontinue disposition of such Transfer Restricted
Securities pursuant to the Warrant Shelf Registration Statement or Prospectus
until such Holder's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 4(k) hereof), and, if so directed by
Enterprises, such Holder will deliver to Enterprises (at its expense) all copies
in such Holder's possession, other than permanent file copies, then in such
Holder's possession of the Prospectus covering such Transfer Restricted
Securities current at the time of receipt of such notice.
No Holder may participate in any underwritten registration hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in any underwriting arrangements approved by
the Persons entitled hereunder to approve such arrangements and (b) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements, custody agreements and other documents required under the terms of
such underwriting agreements.
5. Indemnification; Contribution
(a) Enterprises agrees to indemnify and hold harmless
each Initial Purchaser, each Holder, each Participating Broker-Dealer, each
Person who participates as an underwriter (any such Person being an
"Underwriter") and each Person, if any, who controls any Holder or
Underwriter within the meaning of Section 15 of the Securities Act or Section
15 of the Exchange Act as follows:
(i) against any and all loss, liability, claim,
damage and expense whatsoever, as incurred, arising out of any
untrue statement or alleged untrue statement of a material
fact contained in any Warrant Shelf Registration Statement (or
any amendment or supplement thereto) pursuant to which
Transfer Restricted Securities were registered under the
Securities Act, including all documents incorporated therein
by reference, or the omission or alleged omission therefrom of
a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances
under which they were made, not
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misleading, or arising out of any untrue statement or alleged
untrue statement of a material fact contained in any
Prospectus (or any amendment or supplement thereto) or the
omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading;
(ii) against any and all loss, liability, claim,
damage and expense whatsoever, as incurred, to the extent of
the aggregate amount paid in settlement of any litigation, or
any investigation or proceeding by any governmental agency or
body, commenced or threatened, or of any claim whatsoever
based upon any such untrue statement or omission, or any such
alleged untrue statement or omission; provided that (subject
to Section 5(d) below) any such settlement is effected with
the written consent of Enterprises; and
(iii) against any and all expense whatsoever, as
incurred (including the fees and disbursements of counsel
chosen by any indemnified party), reasonably incurred in
investigating, preparing or defending against any litigation,
or any investigation or proceeding by any governmental agency
or body, commenced or threatened, or any claim whatsoever
based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, to the extent that any
such expense is not paid under subparagraph (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any
loss, liability, claim, damage or expense to the extent arising out of any
untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with written information furnished to
Enterprises by the Holders, Initial Purchaser, Participating Broker-Dealer or
Underwriter expressly for use in the Warrant Shelf Registration Statement (or
any amendment thereto) or any Prospectus (or any amendment or supplement
thereto). The foregoing indemnity with respect to any untrue statement contained
in or any omission from any preliminary Prospectus shall not inure to the
benefit to any Holder, Initial Purchaser, Participating Broker-Dealer or
Underwriter (or any person controlling any such person) from whom the person
asserting such loss, liability, claim, damage or expense purchased Securities
that are the subject thereof if (i) the untrue statement or omission contained
in such preliminary Prospectus (excluding documents incorporated by reference)
was corrected; (ii) such person was not sent or given a copy of the final
Prospectus (excluding documents incorporated by reference) which corrected the
untrue statement or omission at or prior to the written confirmation of the sale
of such Securities to such person; and (iii) Enterprises satisfied its
obligation pursuant to Section 4 of this Agreement to provide a sufficient
number of copies of the final Prospectus to the Holder, Initial Purchaser,
Participating Broker-Dealer or Underwriter.
(b) Each Holder, Initial Purchaser, Participating
Broker-Dealer and Underwriter severally, but not jointly, agrees to indemnify
and hold harmless Enterprises, the Initial Purchasers, the Participating
Broker-Dealers, each Underwriter and the other selling Holders, and each of
their respective directors and officers, and each Person, if any, who
controls Enterprises, the Initial Purchasers, the Participating
Broker-Dealers, any Underwriter or any
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other selling Holder within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, against any and all loss, liability, claim,
damage and expense described in the indemnity contained in Section 5(a) hereof,
as incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Warrant Shelf Registration Statement
(or any amendment thereto) or any Prospectus included therein (or any amendment
or supplement thereto) in reliance upon and in conformity with written
information with respect to such Holder, Initial Purchaser, Participating
Broker-Dealer or Underwriter furnished to Enterprises by such Holder, Initial
Purchaser, Participating Broker-Dealer or Underwriter expressly for use in the
Warrant Shelf Registration Statement (or any amendment thereto) or such
Prospectus (or any amendment or supplement thereto); provided, however, that no
such Holder, Initial Purchaser, Participating Broker-Dealer or Underwriter shall
be liable for any claims hereunder in excess of the amount of net proceeds
received by such Holder, Initial Purchaser, Participating Broker-Dealer or
Underwriter from the sale of Transfer Restricted Securities pursuant to such
Warrant Shelf Registration Statement.
(c) Each indemnified party shall give notice as
promptly as reasonably practicable to each indemnifying party of any action
or proceeding commenced against it in respect of which indemnity may be
sought hereunder, but failure so to notify an indemnifying party shall not
relieve such indemnifying party from any liability hereunder to the extent it
is not materially prejudiced as a result thereof and in any event shall not
relieve it from any liability which it may have otherwise than on account of
this indemnity agreement. An indemnifying party may participate at its own
expense in the defense of such action; provided, however, that counsel to the
indemnifying party shall not (except with the consent of the indemnified
party) also be counsel to the indemnified party. In no event shall the
indemnifying party or parties be liable for the fees and expenses of more
than one counsel (in addition to any local counsel) separate from their own
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out
of the same general allegations or circumstances. No indemnifying party
shall, without the prior written consent of the indemnified parties, settle
or compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 5 (whether
or not the indemnified parties are actual or potential parties thereto),
unless such settlement, compromise or consent (i) includes an unconditional
release of each indemnified party from all liability arising out of such
litigation, investigation, proceeding or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act by
or on behalf of any indemnified party.
(d) If at any time an indemnified party shall have
requested an indemnifying party to reimburse the indemnified party for fees
and expenses of counsel, such indemnifying party agrees that it shall be
liable for any settlement of the nature contemplated by Section 5(a)(ii)
effected without its written consent if (i) such settlement is entered into
more than 45 days after receipt by such indemnifying party of the aforesaid
request, (ii) such indemnifying party shall have received notice of the terms
of such settlement at least 30 days prior to such settlement being entered
into and (iii) such indemnifying party shall not have
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reimbursed such indemnified party in accordance with such request prior to the
date of such settlement. Notwithstanding the immediately preceding sentence, if
at any time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel, an
indemnifying party shall not liable for any settlement of the nature
contemplated by Section 5 (a) (ii) effected without its consent if such
indemnifying party (i) reimburses such indemnified party in accordance with such
request to the extent that it considers such request to be reasonable and (ii)
provides written notice to the indemnified party substantiating the unpaid
balance as unreasonable, in each case prior to date of such settlement.
(e) If the indemnification provided for in this
Section 5 is for any reason unavailable to or insufficient to hold harmless
an indemnified party in respect of any losses, liabilities, claims, damages
or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount of such losses, liabilities, claims,
damages and expenses incurred by such indemnified party, as incurred, in such
proportion as is appropriate to reflect the relative fault of Enterprises on
the one hand and the Holders and the Underwriters on the other hand in
connection with the statements or omissions which resulted in such losses,
liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.
The relative fault of Enterprises on the one hand and the Holders and
the Underwriters on the other hand shall be determined by reference to, among
other things, whether any such untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact relates to
information supplied by Enterprises, the Holders or the Underwriters and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
Enterprises and the Initial Purchasers agree that it would not be
just and equitable if contribution pursuant to this Section 5 were determined
by pro rata allocation (even if the Initial Purchasers were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this
Section 5. The aggregate amount of losses, liabilities, claims, damages and
expenses incurred by an indemnified party and referred to above in this
Section 5 shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever
based upon any such untrue or alleged untrue statement or omission or alleged
omission.
Notwithstanding the provisions of this Section 5, no Underwriter
shall be required to contribute any amount in excess of the amount by which
the total price at which the Securities sold by it were offered exceeds the
amount of any damages which such Underwriter has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or
alleged omission.
No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution
from any Person who was not guilty of such fraudulent misrepresentation.
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For purposes of this Section 5, each Person, if any, who controls an
Initial Purchaser or Holder within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act shall have the same rights to contribution
as such Initial Purchaser or Holder, and each manager or director of
Enterprises, and each Person, if any, who controls Enterprises within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
shall have the same rights to contribution as Enterprises. The Initial
Purchasers' respective obligations to contribute pursuant to this Section 5 are
several in proportion to the principal amount of Securities set forth opposite
their respective names in Schedule A to the Purchase Agreement and not joint.
6. Assumption of Obligations. Enterprises hereby covenants to cause (i)
any entity that enters into a supplemental Warrant Agreement pursuant to the
terms of Section 11(m) of the Warrant Agreement to enter into a supplemental
Warrant Registration Rights Agreement providing that such entity shall, with
respect to any securities issued to holders of the Warrants or the Warrant
Shares pursuant to such supplemental Warrant Agreement, assume all of the rights
and obligations of Enterprises with respect to the Warrants and Warrant Shares
under this Agreement and (ii) any other entity that issues any securities to the
holders of the Warrants or the Warrant Shares pursuant to the terms of the
Equity Participation Agreement to, with respect to all such securities, assume
all of the rights and obligations of Enterprises with respect to the Warrants
and Warrant Shares under this Agreement; provided that Enterprises shall cause
any such entity to (i) cause to become effective under the Securities Act, to
the extent legally possible, immediately prior to the execution of such
supplemental Warrant Agreement or the consummation of the issuance of the
securities described in clause (ii) above, a shelf registration statement
covering (a) the offer and sale of the securities issued to holders of the
Warrants and the Warrant Shares pursuant to such supplemental Warrant Agreement,
(b) the offer and sale of the securities issued to holders of the Warrants and
the Warrant Shares pursuant to clause (ii) above and (c) the issuance of any
securities issuable upon the exercise thereof that were sold pursuant to any
such shelf registration statement and (ii) maintain, on the same terms and
conditions as Enterprises is required to under this Agreement, the effectiveness
of any such shelf registration statement under the Securities Act in order to
permit the Prospectus included therein to be lawfully delivered by the relevant
entity to the Holders offering and selling Warrants or Warrant Shares or
exercising the Warrants until the earlier of (i) the date on which (x) there are
no Warrants outstanding and (y) all Warrant Shares have been sold pursuant to
the Warrant Shelf Registration Statement or pursuant to Rule 144 under the
Securities Act and (ii) the consummation of a Qualified Public Offering of an
IPO Entity other than Enterprises. Upon the execution of a supplemental Warrant
Registration Rights Agreement, the successor company shall mail to holders of
Warrants a notice describing the supplemental Warrant Registration Rights
Agreement.
7. Miscellaneous
7.1. No Inconsistent Agreements. Enterprises has not entered into and,
after the date of this Agreement, will not enter into any agreement which is
inconsistent with the rights
16
<PAGE>
granted to the Holders of Transfer Restricted Securities in this Agreement or
otherwise conflicts with the provisions hereof. The rights granted to the
Holders hereunder do not and will not for the term of this Agreement in any way
conflict with the rights granted to the holders of other issued and outstanding
securities of Enterprises under any such agreements.
7.2. Amendments and Waivers. The provisions of this Agreement including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given unless Enterprises has obtained the written consent of Holders of at least
a majority in aggregate principal amount of the outstanding Transfer Restricted
Securities affected by such amendment, modification, supplement, waiver or
departure.
7.3. Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery (a) if to a Holder, at the most current address given by such Holder to
Enterprises by means of a notice given in accordance with the provisions of this
Section 7.3, which address initially is the address set forth in the Purchase
Agreement with respect to the Initial Purchasers, with a copy to Latham &
Watkins, 633 West Fifth Street, Suite 4000, Los Angeles, California 90071-2007,
Attention: Pamela B. Kelly, Esq.; and (b) if to Enterprises, initially at
Enterprises' address set forth in the Purchase Agreement, and thereafter at such
other address of which notice is given in accordance with the provisions of this
Section 7.3, with a copy to Skadden, Arps, Slate, Meagher & Flom L.L.P., 919
Third Avenue, New York, New York, Attention: Wallace L. Schwartz, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; two business days
after being deposited in the mail, postage prepaid, if mailed; when answered
back, if telexed; when receipt is acknowledged, if telecopied; and on the next
business day if timely delivered to an air courier guaranteeing overnight
delivery.
Copies of all such notices, demands, or other communications shall be
concurrently delivered by the person giving the same to the Warrant Agent under
the Warrant Agreement, at the address specified in such Warrant Agreement.
7.4. Successor and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors, assigns and transferees of each of the
parties, including, without limitation and without the need for an express
assignment, subsequent Holders; provided, however, that nothing herein shall be
deemed to permit any assignment, transfer or other disposition of Transfer
Restricted Securities in violation of the terms of the Purchase Agreement or the
Warrant Agreement. If any transferee of any Holder shall acquire Transfer
Restricted Securities, in any manner, whether by operation of law or otherwise,
such Transfer Restricted Securities shall be held subject to all of the terms of
this Agreement, and by taking and holding such Transfer Restricted Securities
such person shall be conclusively deemed to have agreed to be bound by and to
perform all of the terms and provisions of this Agreement, including the
17
<PAGE>
restrictions on resale set forth in this Agreement and, if applicable, the
Purchase Agreement, and such person shall be entitled to receive the benefits
hereof.
7.5. Third Party Beneficiaries. The Initial Purchasers (even if the
Initial Purchasers are not Holders of Transfer Restricted Securities) shall be
third party beneficiaries to the agreements made hereunder between Enterprises,
on the one hand, and the Holders, on the other hand, and shall have the right to
enforce such agreements directly to the extent they deem such enforcement
necessary or advisable to protect their rights or the rights of Holders
hereunder. Each Holder of Transfer Restricted Securities shall be a third party
beneficiary to the agreements made hereunder between Enterprises, on the one
hand, and the Initial Purchasers, on the other hand, and shall have the right to
enforce such agreements directly to the extent it deems such enforcement
necessary or advisable to protect its rights hereunder.
7.6. Specific Enforcement. Without limiting the remedies available to
the Initial Purchasers and the Holders, Enterprises acknowledges that any
failure by Enterprises to comply with its obligations under Section 2.1 hereof
may result in material irreparable injury to the Initial Purchasers or the
Holders for which monetary damages would not be adequate, that it would not be
possible to measure damages for such injuries precisely and that, in the event
of any such failure, the Initial Purchasers or any Holder may obtain such relief
as may be required to specifically enforce Enterprises' obligations under
Section 2.1.
7.7. Restriction on Resales. Until the expiration of two years after
the original issuance of the Securities, Enterprises will not, and will cause
its "affiliates" (as such term is defined in Rule 144(a)(1) under the Securities
Act) to not, resell any Securities which are "restricted securities" (as such
term is defined under Rule 144(a)(3) under the Securities Act) that have been
reacquired by any of them and shall immediately upon any purchase of any such
Securities submit such Securities to the Warrant Agent for cancellation.
7.8. Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
7.9. Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
7.10. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICT OF LAWS THEREOF.
7.11. Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
18
<PAGE>
7.12. Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by Enterprises with respect to
the Securities sold pursuant to the Purchase Agreement. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
19
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
ALADDIN GAMING ENTERPRISES, INC.
By: /s/ Jack Sommer
------------------------
Name: Jack Sommer
Title: President
Confirmed and accepted as
of the date first above
written:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
CREDIT SUISSE FIRST BOSTON CORPORATION
CIBC OPPENHEIMER CORP.
SCOTIA CAPITAL MARKETS (USA) INC.
BY: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: /s/ Gregory Margolies
----------------------------
Name: Gregory Margolies
Title: Authorized Signatory
As representative of the several Initial Purchasers.
<PAGE>
-----------------------------------------------------------
EQUITY PARTICIPATION AGREEMENT
among
SOMMER ENTERPRISES, LLC,
ALADDIN GAMING ENTERPRISES, INC.,
LONDON CLUBS NEVADA INC.
and
STATE STREET BANK AND TRUST COMPANY.
-----------------------------------------------------------
<PAGE>
EQUITY PARTICIPATION AGREEMENT
This Equity Participation Agreement (this "Agreement"), dated as of
February 26, 1998 is made by Sommer Enterprises, LLC, a Nevada limited liability
company ("Sommer Enterprises"), Aladdin Gaming Enterprises, Inc., a Nevada
corporation ("Aladdin Enterprises"), London Clubs Nevada Inc., a Nevada
corporation ("LCNI"), and State Street Bank and Trust Company, as warrant agent
(the "Warrant Agent"), pursuant to the Warrant Agreement (as defined herein).
WITNESSETH:
WHEREAS, Sommer Enterprises, Aladdin Enterprises and LCNI are members
of Aladdin Gaming Holdings, LLC, a Nevada limited liability company ("Gaming
Holdings"), owning an aggregate of 97 percent of the issued and outstanding
common membership interests of Gaming Holdings ("Holdings Common Shares") as of
the date hereof;
WHEREAS, on the date hereof Sommer Enterprises owns all of the issued
and outstanding class A voting common stock of Aladdin Enterprises (the "Class A
Common Stock"), and Aladdin Enterprises owns 25 percent of the issued and
outstanding Holdings Common Shares;
WHEREAS, on the date hereof (a) Aladdin Enterprises entered into a
warrant agreement (the "Warrant
<PAGE>
Agreement") with the Warrant Agent and pursuant thereto issued to various
persons (the "Warrantholders") warrants (the "Warrants") to purchase class B
non-voting common stock of Aladdin Enterprises (the "Class B Common Stock" and,
together with the Class A Common Stock, the "Common Stock") representing 40
percent of the Common Stock and (b) Aladdin Enterprises entered into a
registration rights agreement in favour of the Warrantholders (the "Warrant
Registration Rights Agreement");
WHEREAS, upon exercise of all of the Warrants, the Warrantholders will
indirectly own, through their ownership of Class B Common Stock, an aggregate of
10 percent of the membership interests of Gaming Holdings;
WHEREAS, the parties desire by this Agreement to set forth their
agreement as to certain arrangements in respect of (a) an initial underwritten
offering pursuant to which common shares of Aladdin Enterprises, Gaming
Holdings, Aladdin Gaming, LLC, a Nevada limited liability company and a wholly
owned subsidiary of Gaming Holdings, or a newly formed successor entity to any
of them (as the case may be, the "IPO Entity") are sold to the public pursuant
to a registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), and become registered under Section 12(g) of the Securities
2
<PAGE>
Exchange Act of 1934, as amended (an "IPO"), (b) the rights and obligations of
the Warrantholders to participate in tag along arrangements among the members of
Gaming Holdings, and (c) providing that Aladdin Enterprises does not become an
Investment Company (as herein defined) prior to the IPO.
THEREFORE, in consideration of the mutual covenants, agreements and
promises made herein, the parties agree as follows:
1. (a) The parties shall not effect an IPO unless, prior to such
IPO, Sommer Enterprises, LCNI and the Warrantholders each are given the right to
hold an equity interest in the IPO Entity immediately prior to the IPO equal to
their respective equity interests at such time in Gaming Holdings (whether such
equity interests are held at such time directly or indirectly through Aladdin
Enterprises), subject to any appropriate adjustments in respect of any built-in
tax or other liabilities. The parties agree to use their reasonable best
efforts when forming the IPO Entity (if applicable) and effecting the IPO such
that the Warrantholders shall not recognize income or gain for federal tax
purposes (other than as a result of any sale of shares held by them in such
IPO).
3
<PAGE>
(b) The parties agree that immediately prior to the IPO, they shall
cause the IPO Entity (if not Aladdin Enterprises) to enter into a supplement to
the Warrant Registration Rights Agreement and to assume all of the rights and
obligations of Aladdin Enterprises thereunder with respect to the shares of
stock of the IPO Entity to be owned by the Warrantholders to the same extent as
Aladdin Enterprises obligations under the Warrant Registration Rights Agreement
with respect to the Common Stock (defined thereunder as "Transfer Restricted
Securities") in accordance with Section 6 of the Warrant Registration Rights
Agreement.
2. Prior to any IPO, Sommer Enterprises, LCNI and Aladdin
Enterprises agree that they shall not take or permit any action that would
result in Aladdin Enterprises becoming an "investment company" (as that term is
defined in the Investment Company Act of 1940, as amended) (the "1940 Act")
required to register under the 1940 Act ("Investment Company") and shall use
commercially reasonable efforts to ensure that Aladdin Enterprises does not
become an Investment Company.
3. (a) Aladdin Enterprises shall provide written notice to the
Warrant Agent (a "Warrantholder Notice") within three days after receipt of any
written
4
<PAGE>
notice (a "Tag Along Notice") by Aladdin Enterprises pursuant to Section 8.4 of
the Operating Agreement of Gaming Holdings (the "Holdings Operating Agreement"),
and shall include a copy of the Tag Along Notice in the Warrantholder Notice.
Aladdin Enterprises shall take no action under Section 8.4 of the Holdings
Operating Agreement in respect of the Tag Along Notice until the expiration of
ten days from the giving of the Warrantholder Notice (the "Warrantholder Tag
Period").
(b) The Warrantholders who hold Common Stock at any time prior
to the expiration of the Warrantholder Tag Period, or who give Aladdin
Enterprises valid, irrevocable notice of exercise of Warrants together with
payment of the exercise price prior to the expiration of the Warrantholder Tag
Period (the Common Stock and Common Stock issued or to be issued following such
Warrant exercise, collectively, "Tag Eligible Shares") may during the
Warrantholder Tag Period by written notice from such Warrantholders to the
Warrant Agent and from the Warrant Agent to Aladdin Enterprises (a "Tag
Acceptance Notice") request that Aladdin Enterprises accept the offer contained
in the Tag Along Notice in respect of all or part of the Holdings Common Shares
held by Aladdin Enterprises which represent the indirect interest in
5
<PAGE>
Gaming Holdings which correspond to the Tag Eligible Shares held by such
Warrantholder. Any Tag Acceptance Notice shall be irrevocable and any notice
received outside the Warrantholder Exercise Period shall be of no effect
whatsoever. Sommer Enterprises shall not be required to give a Tag Acceptance
Notice to Aladdin Enterprises in order to cause Aladdin Enterprises to accept
the offer contained in the Tag Along Notice in respect of all or part of the
Holdings Common Shares which correspond to the Common Stock held by Sommer
Enterprises.
(c) Aladdin Enterprises shall accept the offer in the Tag Along
Notice for all of (but no more than) the Holdings Common Shares in respect of
which Warrantholders ("Accepting Warrantholders") have caused the Warrant Agent
to deliver a valid Tag Acceptance Notice within the Warrantholder Tag Period as
well as any Holdings Common Shares which correspond to Common Stock held by
Sommer Enterprises which Sommer Enterprises desires to be sold. If a Tag
Acceptance Notice is not given in respect of any Tag Eligible Shares (other than
Tag Eligible Shares held by Sommer Enterprises) within the Warrantholder Tag
Period, Aladdin Enterprises shall be deemed to have been instructed not to
accept the offer
6
<PAGE>
in the Tag Along Notice in respect of the Holdings Common Shares corresponding
to such Tag Eligible Shares.
(d) If pursuant to Section 8.4 of the Holdings Operating
Agreement Aladdin Enterprises sells all of the Holdings Common Shares which it
was requested to sell pursuant to this Section 3, or which it attempted to sell
for the benefit of Sommer Enterprises, (collectively, the "Participating
Holdings Common Shares") the Accepting Warrantholders and Sommer Enterprises
shall be allocated the full number of Holdings Common Shares that they requested
be sold. If Aladdin Enterprises sells less than all Participating Holdings
Common Shares, the Holdings Common Shares actually sold shall be allocated
between each Accepting Warrantholder and Sommer Enterprises pro rata in
proportion to the number of Participating Holdings Common Shares that Aladdin
Enterprises was requested to sell for the benefit of each Accepting
Warrantholder or attempted to sell for the benefit of Sommer Enterprises.
(e) Upon receipt by Aladdin Enterprises of the purchase price in
respect of a sale pursuant to Section 8.4 of the Holdings Operating Agreement,
the parties agree that Aladdin Enterprises shall redeem Common Stock (in the
case of Sommer Enterprises, first
7
<PAGE>
redeeming Class B Common Stock) held by the Accepting Warrantholders and Sommer
Enterprises which correspond to the Holdings Common Shares allocated to them
pursuant to Section 3(d) in consideration for the payment by Aladdin Enterprises
to the Warrant Agent (as agent for such Accepting Warrantholders) and Sommer
Enterprises of their share of such purchase price (determined in proportion to
the number of Holdings Common Shares allocated to them pursuant to Section
3(d)).
4. WARRANTHOLDER CONVERSION RIGHTS. Subject to compliance with the
provisions of the Nevada Gaming Control Act (or any successor statute) and the
rules and regulations promulgated thereunder, each Warrantholder shall have the
right, exercisable upon written notice to Aladdin Enterprises accompanied by
payment of any exercise price in respect of any Warrants held by such
Warrantholder, to exchange its Warrants or Class B Common Stock for Holdings
Common Shares in such number as shall result in such Warrantholder having a
Percentage Interest (as defined in the Holdings Operating Agreement) equal to
the percentage of the total Securities (defined as issued and outstanding Common
Stock and all Common Stock issuable on the exercise of all Warrants) held by
such Warrantholder applied to Aladdin Enterprises'
8
<PAGE>
Percentage Interest, such right to be exercisable within twenty days after (and
shall be deemed exercised immediately prior to) Aladdin Enterprises taking any
of the following actions:
(i) Any merger or consolidation involving Aladdin Enterprises,
as a result of which the holders of Class B Common Stock will receive
any consideration other than common equity securities of the IPO
Entity or any holder of Class B Common Stock will receive, as a result
of such transaction, any consideration different than that received by
any other holder of the Common Stock;
(ii) Any sale, lease, exchange, transfer or other disposition,
directly or indirectly, in a single transaction or series of related
transactions, of all or a substantial part of Aladdin Enterprises'
assets, to or with any Person;
(iii) Any transfer by Aladdin Enterprises of any of the Holdings
Common Shares held by it as of the date hereof other than pursuant to
Section 3;
9
<PAGE>
(iv) Any recapitalization of Aladdin Enterprises by means of a
redemption of shares or a distribution to stockholders, other than as
permitted by the Warrant Agreement or in connection with the IPO;
(v) Any voluntary dissolution or liquidation of Aladdin
Enterprises;
(vi) A repurchase or redemption of Common Stock from a
stockholder of Aladdin Enterprises that is not pro rata among all
stockholders of Aladdin Enterprises (except repurchases of the Common
Stock held by an Accepting Warrantholder or Sommer Enterprises
following the consummation of a "Tag-Along" sale in accordance with
Section 3, or repurchases required as the result of a holder of Common
Stock being found unsuitable by the Nevada gaming authorities); and
(vii) Any issuance of Common Stock (including securities
convertible into Common Stock) by Aladdin Enterprises to any Person
other than (A) the Warrantholders upon exercise of the Warrants or (B)
in connection with an issuance in which the proceeds thereof are
10
<PAGE>
contributed to Gaming Holdings in exchange for a number of Holdings
Common Shares, the fair market value of which is equal to such
contribution.
5. AMENDMENT AND WAIVER. Any provision of this Agreement may be
amended or waived only by an amendment or waiver in writing signed by the
parties.
6. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties and their respective
successors and assigns.
7. NO THIRD-PARTY BENEFICIARIES. This Agreement is for the sole
benefit of the parties and their permitted assigns and nothing herein express or
implied shall give or be construed to give to any person, other than the parties
and such assigns, any legal or equitable rights hereunder.
8. NOTICES. All notices provided for in this Agreement shall be
deemed to have been given when received and shall be in writing, duly signed by
the party giving such notice, and shall be hand delivered, faxed or mailed by
registered or certified mail or overnight courier service, as follows:
11
<PAGE>
(a) if to Aladdin Enterprises or Sommer Enterprises:
Aladdin Enterprises, LLC
c/o Aladdin Holdings, LLC
2810 West Charleston Boulevard
Suite 58
Las Vegas, Nevada 89102-1934
Telephone: 702-870-1234
Telecopier: 702-870-8733
Attention of Jack Sommer
with a copy to:
Sigmund Sommer Properties
280 Park Avenue
New York, New York 10017
Telephone: 212-661-0700
Telecopier: 212-661-0844
Attention of Ronald Dictrow
and
Schreck Morris
300 South Fourth Street
Suite 1200
Las Vegas, Nevada 89101
Telephone: 702-474-9400
Telecopier: 702-474-9422
Attention of Frank A. Schreck, Esq.
and
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Telephone: 212-735-3000
Telecopier: 212-735-2000
Attention of Wallace L. Schwartz, Esq.
12
<PAGE>
(b) if to LCNI:
London Clubs Nevada, Inc.
c/o London Clubs International, plc
10 Brick Street
London W1Y 8HQ, England
Telephone: 011-44-171-518-0000
Telecopier: 011-44-171-493-6981
Attention of Linda M. Lillis
with a copy to:
Ohrenstein & Brown, LLP
230 Park Avenue
New York, New York 10169
Telephone: 212-682-4500
Telecopier: 212-557-0910
Attention of Peter J. Kiernan, Esq.
and
Lionel, Sawyer & Collins
300 South 4th Street
Suite 1700
Las Vegas, Nevada 89101
Telephone: 702-383-8888
Telecopier: 702-383-8845
Attention of P. Gregory Giordano, Esq.
(c) if to the Warrant Agent:
State Street Bank and Trust Company
Two International Place
Boston, Massachusetts 02110
Telephone:
Telecopier:
Attention of Corporate Trust
Administration
with a copy to:
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071-2007
Telephone: 213-485-1234
Telecopier: 213-891-8763
Attention of Pamela B. Kelly, Esq.
13
<PAGE>
9. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall constitute an original and all of which together shall
constitute one and the same instrument.
10. APPLICABLE LAW AND JURISDICTION. This Agreement and the rights
and obligations of the parties under this Agreement shall be interpreted and
enforced in accordance with and governed by the laws of the State of Nevada
without regard to the conflict laws of that State.
11. COMPLIANCE WITH GAMING LAWS. Notwithstanding any other provision
of this Agreement, no shares or other equity securities or interest in any
entity shall be issued, transferred or otherwise disposed of in any manner
pursuant to this Agreement except in compliance with the provisions of the
Nevada Gaming Control Act (or any successor statute) and the rules and
regulations promulgated thereunder.
14
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective duly authorized officers as of the
date first above written.
SOMMER ENTERPRISES, LLC
By: /s/ Jack Sommer
-------------------------------
Name: Jack Sommer
Title: Manager
LONDON CLUBS NEVADA INC.
By: /s/ Linda Lillis
-------------------------------
Name: Linda Lillis
Title: Assistant Secretary
ALADDIN GAMING ENTERPRISES, INC.
By: /s/ Jack Sommer
-------------------------------
Name: Jack Sommer
Title: President
STATE STREET BANK AND TRUST
COMPANY, as warrant agent.
By: /s/ Ruth A. Smith
-------------------------------
Name: Ruth A. Smith
Title: Vice President
15
<PAGE>
ALADDIN GAMING HOLDINGS, LLC
ALADDIN CAPITAL CORP.
SERIES A AND SERIES B
13 1/2 % SENIOR DISCOUNT NOTES DUE 2010
INDENTURE
Dated as of February 26, 1998
STATE STREET BANK AND TRUST COMPANY
Trustee
<PAGE>
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Trust Indenture
Act Section Indenture Section
<S> <C>
310 (a)(1)...............................................................................................7.10
(a)(2)...............................................................................................7.10
(a)(3)...............................................................................................N.A.
(a)(4)...............................................................................................N.A.
(a)(5)...............................................................................................7.10
(i)(b)...............................................................................................7.10
(ii)(c)..............................................................................................N.A.
311 (a)..................................................................................................7.11
(b)..................................................................................................7.11
(iii)(c).............................................................................................N.A.
312 (a)..................................................................................................2.05
(b)..................................................................................................13.03
(iv)(c)..............................................................................................13.03
313 (a)..................................................................................................7.06
(b)(2)...............................................................................................7.07
(v)(c)...............................................................................................7.06;
13.02
(vi)(d)..............................................................................................7.06
314 (a)..................................................................................................4.03;
13.02
(A)(b)...............................................................................................10.02
(c)(1)...............................................................................................13.04
(c)(2)...............................................................................................13.04
(c)(3)...............................................................................................N.A.
(vii)(e).............................................................................................13.05
(f)..................................................................................................N.A.
315 (a)..................................................................................................7.01
(b)..................................................................................................7.05,
13.02
(A)(c)...............................................................................................7.01
(d)..................................................................................................7.01
(e)..................................................................................................6.11
316 (a)(last sentence)...................................................................................2.09
(a)(1)(A)............................................................................................6.05
(a)(1)(B)............................................................................................6.04
(a)(2)...............................................................................................N.A.
(b)..................................................................................................6.07
(B)(c)...............................................................................................2.12
317(a)(1)............................................................................................6.08
(a)(2)...............................................................................................6.09
(b)..................................................................................................2.04
318 (a)..................................................................................................13.01
(b)..................................................................................................N.A.
(c)..................................................................................................13.01
</TABLE>
N.A. means not applicable
*This Cross-Reference Table is not part of the Indenture.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE.............................................................1
Section 1.01. Definitions................................................................................1
Section 1.02. Other Definitions.........................................................................22
Section 1.03. Incorporation by Reference................................................................22
Section 1.04. Rules of Construction.....................................................................23
ARTICLE 2. THE NOTES.............................................................................................23
Section 2.01. Form and Dating...........................................................................23
Section 2.02. Execution and Authentication..............................................................24
Section 2.03. Registrar and Paying Agent................................................................29
Section 2.04. Paying Agent to Hold Money in Trust.......................................................29
Section 2.05. Holder Lists..............................................................................29
Section 2.06. Transfer and Exchange.....................................................................30
Section 2.07. Replacement Notes.........................................................................42
Section 2.08. Outstanding Notes.........................................................................42
Section 2.09. Treasury Notes............................................................................43
Section 2.10. Temporary Notes...........................................................................43
Section 2.11. Cancellation..............................................................................43
Section 2.12. Defaulted Interest........................................................................43
ARTICLE 3. REDEMPTION AND PREPAYMENT.............................................................................43
Section 3.01. Notices to Trustee........................................................................43
Section 3.02. Selection of Notes to Be Redeemed.........................................................44
Section 3.03. Notice of Redemption......................................................................44
Section 3.04. Effect of Notice of Redemption............................................................45
Section 3.05. Deposit of Redemption Price...............................................................45
Section 3.06. Notes Redeemed in Part....................................................................45
Section 3.07. Optional Redemption.......................................................................45
Section 3.08. Gaming Redemption.........................................................................46
Section 3.09. Mandatory Redemption......................................................................47
Section 3.10. Offer to Purchase by Application of Excess Proceeds.......................................47
ARTICLE 4. COVENANTS.............................................................................................48
Section 4.01. Payment of Notes..........................................................................48
Section 4.02. Maintenance of Office or Agency...........................................................48
Section 4.03. Reports...................................................................................49
Section 4.04. Compliance Certificate....................................................................49
Section 4.05. Taxes.....................................................................................50
Section 4.06. Stay, Extension and Usury Laws............................................................50
Section 4.07. Restricted Payments.......................................................................50
Section 4.08. Distribution and Other Payment Restrictions Affecting Restricted Subsidiaries.............54
Section 4.09. Limitations on Incurrence of Indebtedness and Issuance of Preferred Stock.................55
Section 4.10. Asset Sales...............................................................................58
</TABLE>
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<CAPTION>
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Section 4.11. Transactions with Affiliates..............................................................59
Section 4.12. Liens.....................................................................................60
Section 4.13. Line of Business..........................................................................60
Section 4.14. Corporate Existence.......................................................................60
Section 4.15. Offer to Repurchase Upon Change of Control................................................60
Section 4.16. Limitations on Issues and Sales of Capital Stock of Wholly Owned
Restricted Subsidiaries..................................................................61
Section 4.17. Insurance.................................................................................61
Section 4.18. Limitations on Status as Investment Company...............................................62
Section 4.19. Gaming Approvals..........................................................................62
Section 4.20. Construction..............................................................................62
Section 4.21. Limitation on Use of Proceeds.............................................................62
Section 4.22. Restrictions on Activities of Capital.....................................................63
Section 4.23. Series A Preferred Interests..............................................................63
ARTICLE 5. SUCCESSORS............................................................................................63
Section 5.01. Merger, Consolidation, or Sale of Assets..................................................63
Section 5.02. Successor Corporation Substituted.........................................................64
ARTICLE 6. DEFAULTS AND REMEDIES.................................................................................64
Section 6.01. Events of Default.........................................................................64
Section 6.02. Acceleration..............................................................................66
Section 6.03. Other Remedies............................................................................67
Section 6.04. Waiver of Past Defaults...................................................................67
Section 6.05. Control by Majority.......................................................................67
Section 6.06. Limitation on Suits.......................................................................67
Section 6.07. Rights of Holders of Notes to Receive Payment.............................................68
Section 6.08. Collection Suit by Trustee................................................................68
Section 6.09. Trustee May File Proofs of Claim..........................................................68
Section 6.10. Priorities................................................................................69
Section 6.11. Undertaking for Costs.....................................................................69
ARTICLE 7. TRUSTEE...............................................................................................69
Section 7.01. Duties of Trustee.........................................................................69
Section 7.02. Rights of Trustee.........................................................................71
Section 7.03. Individual Rights of Trustee..............................................................71
Section 7.04. Trustee's Disclaimer......................................................................71
Section 7.05. Notice of Defaults........................................................................72
Section 7.06. Reports by Trustee to Holders of the Notes................................................72
Section 7.07. Compensation and Indemnity................................................................72
Section 7.08. Replacement of Trustee....................................................................73
Section 7.09. Successor Trustee by Merger, etc..........................................................74
Section 7.10. Eligibility; Disqualification.............................................................74
Section 7.11. Preferential Collection of Claims Against issuers.........................................74
ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE..............................................................74
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance..................................74
Section 8.02. Legal Defeasance and Discharge............................................................74
</TABLE>
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Section 8.03. Covenant Defeasance.......................................................................75
Section 8.04. Conditions to Legal or Covenant Defeasance................................................75
Section 8.05. Deposited Money and Government Securities to be Held in Trust; Other
Miscellaneous Provisions.................................................................76
Section 8.06. Repayment to Issuers......................................................................77
Section 8.07. Reinstatement.............................................................................77
ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER......................................................................77
Section 9.01. Without Consent of Holders of Notes.......................................................77
Section 9.02. With Consent of Holders of Notes..........................................................78
Section 9.03. Compliance with Trust Indenture Act.......................................................79
Section 9.04. Revocation and Effect of Consents.........................................................80
Section 9.05. Notation on or Exchange of Notes..........................................................80
Section 9.06. Trustee to Sign Amendments, etc...........................................................80
ARTICLE 10. COLLATERAL AND SECURITY..............................................................................80
Section 10.01. Pledge Agreements........................................................................80
Section 10.02. Authorization of Receipt of Funds by the Trustee Under the Pledge Agreements.............81
Section 10.03. Termination of Security Interest.........................................................81
ARTICLE 11. JOINT AND SEVERAL LIABILITY..........................................................................81
Section 11.01. Joint and Several Liability..............................................................81
ARTICLE 12. INTERCREDITOR AGREEMENT WITH LENDERS UNDER THE BANK CREDIT FACILITY..................................82
Section 12.01. Non-Petition Covenant....................................................................82
Section 12.02. Subordination Upon Substantive Consolidation.............................................83
Section 12.03. When Distribution Must Be Paid Over......................................................83
Section 12.04. Notice by Issuers........................................................................84
Section 12.05. Subrogation..............................................................................84
Section 12.06. Relative Rights..........................................................................84
Section 12.07. Subordination May Not Be Impaired........................................................84
Section 12.08. Distribution or Notice to Credit Agent...................................................85
Section 12.09. Rights of Trustee and Paying Agent.......................................................85
Section 12.10. Authorization to Effect Subordination....................................................85
Section 12.11. Requirement of Certain Provision in Senior Debt..........................................86
ARTICLE 13. MISCELLANEOUS........................................................................................86
Section 13.01. Trust Indenture Act Controls.............................................................86
Section 13.02. Notices..................................................................................86
Section 13.03. Communication by Holders of Notes with Other Holders of Notes............................87
Section 13.04. Certificate and Opinion as to Conditions Precedent.......................................87
Section 13.05. Statements Required in Certificate or Opinion............................................87
Section 13.06. Rules by Trustee and Agents..............................................................88
Section 13.07. No Personal Liability of Directors, Managers, Officers, Employees,
Incorporators or Members................................................................88
Section 13.08. Governing Law............................................................................88
</TABLE>
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Section 13.09. No Adverse Interpretation of Other Agreements............................................88
Section 13.10. Successors...............................................................................88
Section 13.11. Severability.............................................................................88
Section 13.12. Counterpart Originals....................................................................88
Section 13.13. Table of Contents, Headings, etc.........................................................89
Section 13.14. Contingent Guaranty......................................................................89
Section 13.15. Trustee's Execution of Other Agreements..................................................89
</TABLE>
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EXHIBITS
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Exhibit A-1 FORM OF GLOBAL NOTE
Exhibit A-2 FORM OF TEMPORARY REGULATION S GLOBAL NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFER
Exhibit C FORM OF CERTIFICATE OF EXCHANGE
Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED
INVESTOR
Exhibit E FORM OF CONTINGENT GUARANTY OF PERFORMANCE AND COMPLETION
</TABLE>
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<PAGE>
INDENTURE dated as of February 26, 1998, among Aladdin Gaming
Holdings, LLC, a Nevada limited-liability company ("Holdings"), Aladdin Capital
Corp., a Nevada corporation and a wholly owned subsidiary of Holdings ("Capital"
and, together with Holdings, the "Issuers"), and State Street Bank and Trust
Company, as trustee (the "Trustee").
The Issuers and the Trustee agree as follows for the benefit
of each other and for the equal and ratable benefit of the Holders of the 13 1/2
% Series A Senior Discount Notes due 2010 (the "Series A Notes") and the 13 1/2
% Series B Senior Discount Notes due 2010 (the "Series B Notes" and, together
with the Series A Notes, the "Notes"):
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"144A Global Note" means a global note in the form of Exhibit
A-1 attached hereto bearing the Global Note Legend and the Private Placement
Legend and deposited with or on behalf of, and registered in the name of, the
Depositary or its nominee that will be issued in a denomination equal to the
outstanding principal amount of the Notes sold in reliance on Rule 144A.
"Accreted Value" means, (i) as of any date of determination
prior to March 1, 2003, with respect to any Note, the sum of (a) the initial
offering price (which shall be calculated by discounting the aggregate principal
amount at maturity of such Note at a rate of 13 1/2 % per annum, compounded
semi-annually on each March 1 and September 1 from March 1, 2003 to the date of
issuance) of such Note and (b) the portion of the excess of the principal amount
of such Note over such initial offering price which shall have been accreted
thereon through such date, such amount to be so accreted on a daily basis at a
rate of 13 1/2 % per annum of the initial offering price of such Note,
compounded semi-annually on each March 1 and September 1 from the date of
issuance of the Notes through the date of determination, computed on the basis
of a 360-day year of twelve 30-day months and (ii) as of any date of
determination on or after March 1, 2003, with respect to any Note, $1,000.
"Acquired Indebtedness" means, with respect to any specified
Person, (i) Indebtedness of any other Person existing at the time such other
Person merged with or into or became a Subsidiary of such specified Person,
including, without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person and (ii) Indebtedness encumbering any asset
acquired by such specified Person.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities, by agreement or otherwise;
provided, however, that beneficial ownership of 10% or more of the voting
securities of a Person shall be deemed to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
"AHL" means Aladdin Holdings, LLC, a Delaware limited
liability company.
<PAGE>
"Aladdin" means the pending project to develop, construct,
equip and operate the Aladdin Hotel & Casino, as described in the Offering
Memorandum of the Issuers dated February 18, 1998, relating to the Units.
"Aladdin Bazaar" means Aladdin Bazaar, LLC, a Nevada
limited-liability company.
"Aladdin Music" means Aladdin Music, LLC, a Nevada
limited-liability company and a joint venture between the Company and Planet
Hollywood International, Inc.
"Aladdin Music Operating Agreement" means the Operating
Agreement of Aladdin Music, as amended from time to time.
"Aladdin Site" means the approximately 18-acre parcel of
property located in Las Vegas, Nevada on which the Aladdin is to be constructed.
"AMH" means Aladdin Music Holdings, LLC, a Nevada
limited-liability company.
"Applicable Procedures" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Note, the rules and
procedures of the Depositary, Euroclear and Cedel that apply to such transfer or
exchange.
"Approved Plans and Specifications" shall mean all plans,
specifications, design documents, schematic drawings and related items for the
design, architecture and construction of the Aladdin, as delivered to the
Trustee on the Issue Date, as the same may be (i) finalized in a manner that
reflects a natural evolution of their status on the date hereof and in a manner
consistent with the standards set forth in the Bank Credit Facility and (ii)
amended in accordance with the Bank Credit Facility.
"Asset Sale" means (i) the sale, lease, conveyance or other
disposition of any assets or rights (including, without limitation, by way of a
sale and leaseback) (provided that the sale, lease, conveyance or other
disposition of all or substantially all of the assets of Holdings and its
Restricted Subsidiaries, taken as a whole, shall be governed by Sections 4.15
and/or 5.1 hereof and not by Section 4.10 hereof), (ii) an Event of Loss or
(iii) the issuance or sale by Holdings or any of its Restricted Subsidiaries of
Equity Interests of any of Holdings' Subsidiaries, in the case of either clause
(i) or (ii), whether in a single transaction or a series of related transactions
(a) that have a fair market value in excess of $5.0 million or (b) for net
proceeds in excess of $5.0 million. Notwithstanding the foregoing, none of the
following items shall be deemed to be an Asset Sale: (i) a transfer of assets by
Holdings to a Wholly Owned Subsidiary of Holdings or by a Wholly Owned
Subsidiary to Holdings or to another Wholly Owned Subsidiary of Holdings, (ii)
an issuance of Equity Interests by a Wholly Owned Subsidiary of Holdings to
Holdings or to another Wholly Owned Subsidiary of Holdings, (iii) a Restricted
Payment that is permitted by Section 4.7 hereof, (iv) the grant on or after the
Issue Date by the Company to Aladdin Bazaar of a ground lease on the Desert
Passage Site and, upon the subdivision of the Project Site, the transfer by the
Company to Aladdin Bazaar of the fee interest in the Desert Passage Site, (v)
the grant on or after the Issue Date of a ground lease on the Music Project Site
by the Company to AMH and, upon satisfaction of the Music Project Financing, an
Investment not to exceed $21.3 million plus the transfer of the Music Project
Site, in each case by the Company to AMH and by AMH to Aladdin Music, (vi) the
grant on or after the Issue Date of a ground lease relating to the Energy Plant
Site by the Company to the Energy Provider, (vii) the transactions contemplated
by the Theater Lease in effect on the Issue Date or as described in the Offering
Memorandum of the Issuers dated February 18,
2
<PAGE>
1998, relating to the Units, (viii) any licensing of trade names or trademarks
in the ordinary course of business by Holdings or any of its Restricted
Subsidiaries, (ix) leases of space in the Aladdin, in the ordinary course of
business, and (x) (a) the transfer of the Aladdin Site and other assets of the
Company as a result of the exercise of remedies in respect of the Deed of Trust
or the other Lender security documents, including a foreclosure by the Lenders
pursuant to the terms of the Deed of Trust or the acceptance by the Lenders of a
transfer in lieu of foreclosure or other exercise of remedies and (b) the
transfer of the Common Membership Interests as a result of the exercise of
remedies by the Lenders in respect of the pledge of such Common Membership
Interests pursuant to the Lenders' security documents.
"Bank Completion Guaranty" means the Completion Guaranty dated
as of the Issue Date, executed by the Trust, London Clubs and Bazaar Holdings in
favor of the Administrative Agent and the Lenders.
"Bank Construction Disbursement Account" means one or more
accounts established pursuant to the Disbursement Agreement into which the
proceeds under the Bank Credit Facility are funded and in which the
Administrative Agent has a security interest.
"Bank Credit Facility" means the Credit Agreement dated as of
the Issue Date, among the Company and the lenders named therein for which The
Bank of Nova Scotia is acting as Administrative Agent, Merrill Lynch Capital
Corporation is acting as Syndication Agent, and Canadian Imperial Bank of
Commerce, is acting as Documentation Agent, as such agreement may be amended,
supplemented, extended, modified, renewed, replaced or refinanced, from time to
time, including any agreement to renew, extend, refinance or replace all or any
portion of such facility.
"Bankruptcy Law" means Title 11, U.S. Code or any similar
federal or state law for the relief of debtors.
"Bazaar Holdings" means Aladdin Bazaar Holdings, LLC, a Nevada
limited-liability company.
"Board of Managers" means (i) for so long as Holdings is a
limited-liability company, the Board of Managers appointed pursuant to the
Operating Agreement, or (ii) otherwise, the Board of Directors of Holdings.
"Business Day" means any day other than a Legal Holiday.
"Capital" has the meaning assigned to it in the preamble to
this Indenture.
"Capital Lease Obligation" means, at the time any
determination thereof is to be made, the amount of the liability in respect of a
capital lease that would at such time be required to be capitalized on a balance
sheet in accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation,
corporate stock, (ii) in the case of an association or business entity, any and
all shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership, partnership
interests (whether general or limited), (iv) in the case of a limited-liability
company, membership interests and (v) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing person (other than the Management
Fee).
3
<PAGE>
"Cash Equivalents" means (i) United States Dollars, (ii)
securities issued or directly and fully guaranteed or insured by the United
States Government or any agency or instrumentality thereof (provided that the
full faith and credit of the United States is pledged in support thereof) having
maturities of not more than six months from the date of acquisition, (iii)
certificates of deposit and eurodollar time deposits with maturities of six
months or less from the date of acquisition, bankers' acceptances with
maturities not exceeding six months and overnight bank deposits, in each case
with any domestic commercial bank having capital and surplus in excess of $500
million and a Thompson Bank Watch Rating of "B" or better, (iv) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clauses (ii) and (iii) above entered into with any
financial institution meeting the qualifications specified in clause (iii)
above, (v) commercial paper having the highest rating obtainable from Moody's
Investors Service, Inc. or Standard & Poor's Corporation and in each case
maturing within six months after the date of acquisition and (vi) money market
funds at least 95% of the assets of which constitute Cash Equivalents of the
kinds described in clauses (i)-(v) of this definition.
"Cedel" means Cedel Bank, SA.
"Change of Control" means the occurrence of any of the
following: (i) the sale, lease or transfer, conveyance or other disposition
(other than by way of merger or consolidation), in one or a series of
transactions, of all or substantially all of the assets of Holdings and its
Subsidiaries, taken as a whole to any "person" (as such term is used in Section
13(d)(3) of the Exchange Act) other than to either of Principals, any Related
Party or the IPO Entity, (ii) the adoption of a plan relating to the liquidation
or dissolution of Holdings, (iii) the liquidation or dissolution of Holdings,
(iv) prior to the consummation of a Qualified Public Offering, the consummation
of any transaction (including, without limitation, any merger or consolidation)
the result of which is that the Trust, or the beneficiaries of the Trust
(whether current or contingent) as of the date hereof which control AHL or
Sommer Enterprises, and London Clubs cease to individually or collectively
control, directly or indirectly, a majority of the voting power of Holdings, (v)
after the consummation of a Qualified Public Offering, the IPO Entity becomes
aware of (by way of a report or any other filing pursuant to Section 13(d) of
the Exchange Act, proxy, vote, written notice or otherwise) the acquisition by
any person or group (within the meaning of Section 13(d)(3) or Section 14(d)(2)
of the Exchange Act, or any successor provision, including any group acting for
the purpose of acquiring, holding or disposing of securities within the meaning
of Rule 13d-5(b)(1) under the Exchange Act) in a single transaction or in a
related series of transactions, by way of merger, consolidation or other
business combination or purchase of beneficial ownership (within the meaning of
Rule 13d-3 under the Exchange Act, or any successor provision) of 35% or more of
the total voting power entitled to vote in the election of the Board of
Managers, and, at such time, the Trust and London Clubs shall fail to
collectively beneficially own, directly or indirectly, securities representing
greater than the combined voting power of Holdings' Capital Stock as is
beneficially owned by such person or group, (vi) the first day on which Holdings
fails to own 100% of the issued and outstanding Equity Interests of the Company
or Capital, or (vii) the first day on which a majority of the members of the
Board of Managers are not nominees of the Trust, or the beneficiaries of the
Trust (whether current or contingent) as of the date hereof which control AHL or
Sommer Enterprises, or London Clubs or any Subsidiary of the Trust, or the
beneficiaries of the Trust (whether current or contingent) as of the date hereof
which control AHL or Sommer Enterprises, or London Clubs which is a member of
Holdings.
"Collateral" has the meaning set forth in the Pledge
Agreements.
"Commission" means the Securities and Exchange Commission.
4
<PAGE>
"Common Membership Interests" means the common membership
interests of the Company.
"Company" means Aladdin Gaming, LLC, a Nevada
limited-liability company, or any successor thereto.
"Complex" means the Complex to be constructed in Las Vegas,
Nevada, as described in the Offering Memorandum of the Issuers dated February
18, 1998, relating to the Units.
"Consolidated Cash Flow" means, with respect to any Person for
any period, the Consolidated Net Income of such Person for such period plus (i)
an amount equal to any extraordinary loss plus any net loss realized in
connection with an Asset Sale (to the extent such losses were deducted in
computing Consolidated Net Income), plus (ii) provision for taxes based upon
consolidated net income or net profits of such Person and its Restricted
Subsidiaries for such period, to the extent such provision for taxes was
deducted in computing Consolidated Net Income, plus (iii) Consolidated Interest
Expense of such Person and its Restricted Subsidiaries for such period, to the
extent such expenses were deducted in computing Consolidated Net Income plus
(iv) Consolidated Depreciation and Amortization Expense of such Person for such
period, to the extent such expenses were deducted in computing Consolidated Net
Income plus (v) any other non-cash extraordinary and nonrecurring items
decreasing such Consolidated Net Income for such period, minus (vi) non-cash
items increasing such Consolidated Net Income for such period, in each case, on
a consolidated basis for such Person and its Restricted Subsidiaries and
determined in accordance with GAAP. Notwithstanding the foregoing, the provision
for taxes based on the income or profits of, and the depreciation and
amortization and other non-cash charges of, a Subsidiary of a Person shall be
added to Consolidated Net Income to compute Consolidated Cash Flow only to the
extent (and in the same proportion) that the Net Income of such Subsidiary was
included in calculating the Consolidated Net Income of such Person and only if a
corresponding amount would be permitted at the date of determination to be
dividended or distributed, as applicable, to Holdings by such Subsidiary without
prior approval (that has not been obtained), pursuant to the terms of its
charter and all agreements, instruments, judgments, decrees, orders, statutes,
rules and governmental regulations applicable to such Subsidiary or its
stockholders.
"Consolidated Depreciation and Amortization Expense" means
with respect to any Person for any period, the total amount of depreciation and
amortization expense and other non-cash expenses (excluding any non-cash expense
that represents an accrual, reserve or amortization of a cash expenditure for a
past, present or future period) of such Person and its Restricted Subsidiaries
for such period on a consolidated basis as defined in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any
person for any period, the sum of (i) the consolidated interest expense of such
Person and its Restricted Subsidiaries for such period, whether paid or accrued,
to the extent such expense was deducted in computing Consolidated Net Income
(including amortization of debt issuance costs and original issue discount and
deferred financing fees, non-cash interest payments, the interest component of
Capital Lease Obligations, and net payments (if any) pursuant to Hedging
Obligations, excluding amortization of deferred financing fees), (ii)
commissions, discounts and other fees and charges paid or accrued with respect
to letters of credit and bankers' acceptance financing, (iii) the consolidated
interest expense of such person and its Restricted Subsidiaries that was
capitalized during such period and (iv) to the extent not included above, (a)
the maximum amount of interest which would have to be paid by such Person or its
Restricted Subsidiaries under a Guaranty of Indebtedness of any other Person if
such Guaranty were called upon and (b) payment to London Clubs on the Issue Date
of a fee equal to 1% of the amount of Indebtedness
5
<PAGE>
supported and enhanced by the Keep-Well Agreement on the Issue Date and payment
of an annual fee equal to 1.5% of the annual average Indebtedness outstanding
under the Bank Credit Facility which is supported and enhanced by the Keep-Well
Agreement, in each case as set forth in the London Clubs Purchase Agreement as
in effect on the date of this Indenture.
"Consolidated Net Income" means, with respect to any Person
for any period, the aggregate of the Net Income of such Person and its
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided, that (i) the Net Income but not loss for such period of any
Person that is not a Restricted Subsidiary or that is accounted for by the
equity method of accounting shall be included only to the extent of the amount
of dividends, if applicable, or distributions paid in cash to the referent
Person or a Wholly Owned Restricted Subsidiary thereof in respect of such
period, (ii) the Net Income of any Person acquired in a pooling of interests
transaction shall not be included for any period prior to the date of such
acquisition, (iii) the Net Income for such period of any Restricted Subsidiary
shall be excluded to the extent that the declaration or payment of dividends, if
applicable, or similar distributions by that Restricted Subsidiary of that Net
Income is not at the date of determination permitted without any prior
governmental approval (which has not been obtained or waived in writing) or,
directly or indirectly, by the operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Restricted Subsidiary or its equity, (iv) the
cumulative effect of a change in accounting principles shall be excluded, and
(v) the Net Income (but not loss) of any Unrestricted Subsidiary shall be
excluded, whether or not distributed to Holdings or one of its Restricted
Subsidiaries.
"Consolidated Net Worth" means, with respect to any Person as
of any date, the sum of (i) the consolidated equity of the common equity holders
of such Person and its consolidated Restricted Subsidiaries as of such date plus
(ii) the respective amounts reported on such Person's balance sheet as of such
date with respect to any series of preferred equity (other than Disqualified
Stock), less (x) all write-ups (other than write-ups resulting from foreign
currency translations and write-ups of tangible assets of a going concern
business made within 12 months after the acquisition of such business)
subsequent to the Issue Date in the book value of any asset owned by such Person
or a consolidated Restricted Subsidiary of such Person, (y) all investments as
of such date in unconsolidated Subsidiaries and in Persons that are not
Subsidiaries (except, in each case, Permitted Investments) and (z) all
unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"Corporate Trust Office of the Trustee" shall be at the
address of the Trustee specified in Section 13.02 hereof or such other address
as to which the Trustee may give notice to the Issuers.
"Credit Agent" means, at any time, the then acting
administrative agent as defined in and under the Bank Credit Facility, which
initially shall be The Bank of Nova Scotia.
"Custodian" means the Trustee, as custodian with respect to
the Notes in global form, or any successor entity thereto.
"Deed of Trust" means the Deed of Trust to be executed by the
Company in favor of the Administrative Agent for the benefit of the Lenders.
"Default" means any event that is or with the passage of time
or the giving of notice or both would be an Event of Default.
6
<PAGE>
"Definitive Note" means a certificated Note registered in the
name of the Holder thereof and issued in accordance with Section 2.06 hereof, in
the form of Exhibit A-1 attached hereto except that such Note shall not bear the
Global Note Legend and shall not have the "Schedule of Exchanges of Interests in
the Global Note" attached thereto.
"Depositary" means, with respect to the Notes issuable or
issued in whole or in part in global form, the Person specified in Section 2.03
hereof as the Depositary with respect to the Notes, and any and all successors
thereto appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.
"Desert Passage" means the pending project by Aladdin Bazaar
to develop, construct and operate the Desert Passage, as described in the
Offering Memorandum of the Issuers dated February 18, 1998, relating to the
Units.
"Desert Passage Site" means the 12.42-acre portion of the
Project Site on which the Desert Passage is to be constructed.
"Disbursement Agent" means The Bank of Nova Scotia, as
disbursement agent under the Disbursement Agreement.
"Disbursement Agreement" means the Disbursement Agreement
among Holdings, the Company, The Bank of Nova Scotia, as Administrative Agent
under the Bank Credit Facility, the Disbursement Agent, the Investment
Intermediary and the Trustee.
"Disqualified Stock" means any Capital Stock that, by its
terms (or by the terms of any security into which it is convertible, or for
which it is exchangeable, at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the Holder
thereof, in whole or in part, on or prior to the date that is 91 days after the
date on which the Notes mature; provided, however, that any Capital Stock that
would constitute Disqualified Stock solely because the holders thereof have the
right to require Holdings to repurchase or redeem such Capital Stock upon the
occurrence of a Change of Control or an Asset Sale shall not constitute
Disqualified Stock if the terms of such Capital Stock provide that Holdings may
not repurchase or redeem any such Capital Stock pursuant to such provisions
prior to Holdings' compliance with Sections 4.10 or 4.15 hereof.
"Employment Agreements" means, collectively, (i) the
Employment & Consulting Agreement dated July 1, 1997, among Holdings, the
Company and Richard J. Goeglein, (ii) the Employment Agreement dated July 28,
1997, among Holdings, the Company and James H. McKennon, (iii) the Employment
Agreement dated July 28, 1997, among Holdings, the Company and Cornelius T.
Klerk, (iv) the Employment Agreement dated August 19, 1997, among Holdings, the
Company and Lee A. Galati (v) the Employment Agreement dated July 1, 1997, among
Holdings, the Company and Jose A. Rueda and (vi) the GAI Consulting Agreement.
"Energy Plant" means the pending project to develop, construct
and operate an energy plant to provide electricity, chilled water and hot water
to the Project.
"Energy Plant Site" means the 0.65-acre portion of the Project
Site on which the Energy Plant is to be constructed.
"Energy Provider" means Northwind Aladdin, LLC, a Nevada
limited-liability company.
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"Enterprises" means Aladdin Gaming Enterprises, Inc., a Nevada
corporation.
"Equity Interests" means Capital Stock and all warrants,
options or other rights to acquire Capital Stock (but excluding any debt
security that is convertible into, or exchangeable for, Capital Stock).
"Euroclear" means Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear system.
"Event of Loss" means, with respect to any property or asset
(tangible or intangible, real or personal) any of the following: (i) any loss,
destruction or damage of such property or assets; (ii) any institution of any
proceedings for the condemnation, seizure or taking of such property or asset or
for the exercise of any right of eminent domain; (iii) any actual condemnation,
seizure or taking by exercise of the power of eminent domain or otherwise of
such property or asset, or confiscation of such property or asset or the
requisition of the use of such property or asset; or (iv) any settlement in lieu
of clauses (ii) or (iii) above.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Notes" means the Notes issued in the Exchange Offer
pursuant to Section 2.06(f) hereof.
"Exchange Offer" has the meaning set forth in the Note
Registration Rights Agreement.
"Exchange Offer Registration Statement" has the meaning set
forth in the Note Registration Rights Agreement.
"Existing Indebtedness" means Indebtedness of Holdings and its
Restricted Subsidiaries in existence on the date of this Indenture, until such
amounts are repaid.
"FF&E" means any furniture, fixtures, equipment and other
personal property financed with the proceeds from the incurrence of Indebtedness
pursuant to clause (viii) of the second paragraph under Section 4.09 hereof.
"FF&E Financing" means the incurrence of Indebtedness, the
proceeds of which are utilized solely to finance or refinance the acquisition of
(or entry into a capital lease by Holdings or a Subsidiary of Holdings with
respect to) FF&E.
"Fixed Charge Coverage Ratio" means, with respect to any
Person for any period, the ratio of the Consolidated Cash Flow of such Person
for such period to the Fixed Charges of such Person for such period. In the
event that the referent Person or any of its Restricted Subsidiaries incurs,
assumes, Guarantees or redeems any Indebtedness (other than revolving credit
borrowings) or issues or redeems Preferred Stock subsequent to the commencement
of the period for which the Fixed Charge Coverage Ratio is being calculated but
prior to the event for which the calculation of the Fixed Charge Coverage Ratio
is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, Guaranty or
redemption of Indebtedness, or such issuance or redemption of Preferred Stock,
as if the same had occurred at the beginning of the applicable four-quarter
period. For purposes of making the computation referred to above, acquisitions,
dispositions and discontinued operations (as determined in accordance with GAAP)
that have been made by Holdings or any of its Restricted Subsidiaries, including
all mergers,
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consolidations and dispositions, during the four-quarter reference period or
subsequent to such reference period and on or prior to the Calculation Date
shall be calculated on a pro forma basis assuming that all such acquisitions,
dispositions, discontinued operations, mergers, consolidations (and the
reduction of any associated fixed charge obligations resulting therefrom) had
occurred on the first day of the four-quarter reference period.
"Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) Consolidated Interest Expense of
such Person for such period and (ii) the consolidated interest of such Person
and its Restricted Subsidiaries that was capitalized during such period and
(iii) any interest expense on Indebtedness of another Person that is Guaranteed
by such Person or one of its Restricted Subsidiaries or secured by a Lien on
assets of such Person or one of its Restricted Subsidiaries (whether or not such
Guaranty or Lien is called upon) and (iv) the product of (a) to the extent such
Person is not treated as (1) a pass-through entity or (2) a separate entity, in
either case for United States federal income tax purposes, all dividend
payments, whether or not in cash, on any series of Preferred Stock of such
Person or any of its Restricted Subsidiaries, other than dividend payments on
Equity Interests payable (x) solely in Equity Interests of Holdings (other than
Disqualified Stock) or (y) to Holdings or a Restricted Subsidiary of Holdings,
times (b) a fraction, the numerator of which is one and the denominator of which
is one minus the then current combined federal, state and local statutory income
tax rate of such Person, expressed as a decimal, in each case, on a consolidated
basis and in accordance with GAAP; provided, however, that dividends or
distributions paid on the Series A Preferred Interests shall not be counted to
the extent that interest payments on the Notes have been taken into account in
determining such Fixed Charges.
"Force Majeure Event" has the meaning ascribed thereto in the
Noteholder Completion Guaranty.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment
of the accounting profession, which are in effect on the Issue Date.
"GAI, LLC" means GAI, LLC, a Nevada limited-liability company.
"GAI Consulting Agreement" means the Consulting Agreement
dated as of July 1, 1997, between GAI, LLC and the Company.
"Gaming Approval" means every license, finding of suitability,
permit, authorization, registration or approval required to own, lease, operate
or otherwise conduct the gaming activities of the Company or any of its
Affiliates.
"Gaming Authority" means any agency, authority, board, bureau,
commission, department, office or instrumentality of any nature whatsoever of
the United States or foreign government, any state, province or any city or
other political subdivision, whether now or hereafter existing, or any officer
or official thereof, including without limitation, the Nevada Gaming Commission,
the Nevada State Gaming Control Board, the Clark County Liquor and Gaming
Licensing Board and any other agency with authority to regulate any gaming
operation (or proposed gaming operation) owned, managed or operated by Holdings
or any of its Subsidiaries.
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"Global Note Legend" means the legend set forth in Section
2.06(g)(ii), which is required to be placed on all Global Notes issued under
this Indenture.
"Global Notes" means, individually and collectively, each of
the Restricted Global Notes and the Unrestricted Global Notes, in the form of
Exhibit A-1 or Exhibit A-2 attached hereto issued in accordance with Sections
2.01, 2.06(b)(iv), 2.06(d)(ii) or 2.06(f) hereof.
"Government Securities" means securities that are (a) direct
obligations of the United States of America for the timely payment of which its
full faith and credit is pledged or (b) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the timely payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States of America, which, in either
case, are not callable or redeemable at the option of the issuer thereof, and
shall also include a depository receipt issued by a bank (as defined in Section
3(a)(2) of the Securities Act of 1933, as amended), as custodian with respect to
any such Government Security or a specific payment of principal of or interest
on any such Government Security held by such custodian for the account of the
holder of such depository receipt; provided, that (except as required by law)
such custodian is not authorized to make any deduction from the amount payable
to the holder of such depository receipt from any amount received by the
custodian in respect of the Government Security or the specific payment of
principal of or interest on the Government Security evidenced by such depository
receipt.
"Guaranty" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, by way of a
pledge of assets or through letters of credit or reimbursement agreements in
respect thereof), of all or any part of any Indebtedness.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) currency exchange or interest rate swap
agreements, currency exchange or interest rate cap agreements and currency
exchange or interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in currency
exchange or interest rates.
"Holder" means a Person in whose name a Note is registered.
"Holdings" has the meaning assigned to it in the preamble to
this Indenture.
"Holdings Common Membership Interest" means the common
membership interests of Holdings.
"Holdings Series A Preferred Interests" means Holdings' Series
A Preferred Membership Interests issued to London Clubs, AHL or the Trust
pursuant to the Operating Agreement in exchange for any payments required
pursuant to the Keep-Well Agreement or the Bank Completion Guaranty where none
of such parties is responsible for a default leading to such payment.
"Holdings Series B Preferred Interests" means the Holdings'
Series B Preferred Membership Interests issued to London Clubs, AHL or the Trust
pursuant to the Operating Agreement in exchange for payments required pursuant
to the Keep-Well Agreement or the Bank Completion Guaranty where one of such
parties is responsible for a default leading to such payment.
"IAI Global Note" means the global Note in the form of Exhibit
A-1 attached hereto bearing the Global Note Legend and the Private Placement
Legend and deposited with or on behalf of
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and registered in the name of the Depositary or its nominee that will be issued
in a denomination equal to the outstanding principal amount of the Notes sold to
Institutional Accredited Investors.
"In Balance" shall have the meaning ascribed thereto in the
Noteholder Completion Guaranty.
"Indebtedness" means, with respect to any Person, any
indebtedness of such Person, whether or not contingent, in respect of borrowed
money or evidenced by bonds, notes, debentures or similar instruments or letters
of credit (or reimbursement agreements in respect thereof) or banker's
acceptances or representing Capital Lease Obligations or the balance deferred
and unpaid of the purchase price of any property or representing any Hedging
Obligations, except any such balance that constitutes an accrued expense or
trade payable, if and to the extent any of the foregoing (other than letters of
credit and Hedging Obligations) would appear as a liability upon a balance sheet
of such Person prepared in accordance with GAAP, as well as all Indebtedness of
others secured by a Lien on any asset of such Person (whether or not such
Indebtedness is assumed by such Person) and, to the extent not otherwise
included, the Guaranty by such Person of any indebtedness of any other Person.
Except as stated under the penultimate paragraph under Section 4.09 hereof, the
amount of any Indebtedness outstanding as of any date shall be (i) the accreted
value thereof, in the case of any Indebtedness issued with original issue
discount and (ii) the principal amount thereof, together with any interest
thereon that is more than 30 days past due, in the case of any other
Indebtedness.
"Indenture" means this Indenture, as amended or supplemented
from time to time.
"Independent Construction Consultant" means Rider Hunt (NV),
L.L.C. or any successor thereto acceptable to the Trustee.
"Indirect Participant" means a Person who holds a beneficial
interest in a Global Note through a Participant.
"Institutional Accredited Investor" means an institution that
is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under
the Securities Act, who are not also QIBs.
"Investments" means, with respect to any Person, all
investments by such Person in other Persons (including Affiliates) in the form
of direct or indirect loans (including guarantees of indebtedness or other
obligations), advances or capital contributions (excluding commission, travel
and similar advances to officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities and all other items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If Holdings or any Subsidiary of Holdings sells or otherwise disposes of any
Equity Interests of any direct or indirect Subsidiary of Holdings such that,
after giving effect to any such sale or disposition, such Person is no longer a
subsidiary of Holdings, Holdings shall be deemed to have made an Investment on
the date of any such sale or disposition equal to the fair market value of the
Equity Interests of such Subsidiary not sold or disposed of in an amount
determined as provided in the final paragraph of Section 4.07 hereof.
"IPO Entity" means Holdings, Enterprises or another entity
which controls the Company.
"Issue Date" means the date of this Indenture.
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"Issuers" has the meaning assigned to it in the preamble to
this Indenture.
"Keep-Well Agreement" means the Keep-Well Agreement dated the
Issue Date, executed by AHL, London Clubs and Bazaar Holdings in favor of the
Administrative Agent under the Bank Credit Facility and the Lenders.
"LCNI" means London Clubs Nevada Inc., a Nevada corporation.
"Legal Holiday" means a Saturday, a Sunday or a day on which
banking institutions in the City of New York, the City of Boston, Massachusetts
or the City of Las Vegas, Nevada or at a place of payment are authorized by law,
regulation or executive order to remain closed. If a payment date is a Legal
Holiday at a place of payment, payment may be made at that place on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue on such
payment for the intervening period.
"Lenders" means the Lenders as defined in the Bank Credit
Facility.
"Letter of Transmittal" means the letter of transmittal to be
prepared by the Issuers and sent to all Holders of the Notes for use by such
Holders in connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under applicable
law (including any conditional sale or other title retention agreement, any
lease in the nature thereof, any option or other agreement to sell or give a
security interest in and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Liquidated Damages" means all liquidated damages then owing
pursuant to Section 2.5 of the Note Registration Rights Agreement.
"London Clubs" means London Clubs International, plc, a public
limited company organized under the laws of England and Wales.
"London Clubs Purchase Agreement" means the Purchase Agreement
dated September 24, 1997, among London Clubs, LCNI, AHL, Sommer Enterprises, the
Sommer Trust and the Company, as amended as of the date of this Indenture.
"Management Fee" means the fees payable by the Company to
London Clubs pursuant to the Salle Privee Management Agreement in consideration
for services to be provided by London Clubs to the Company.
"Minimum Aladdin Facilities" means, with respect to the
Aladdin, at least 2,465 operating slot machines, 91 operating table games, an
operating keno lounge, 1,870 restaurant seats, 1,750 usable parking spaces,
2,210 hotel rooms fit to receive guests, all banking, coin, security and other
ancillary equipment and facilities necessary to operate the Aladdin on a 24 hour
per day, seven days a week basis.
"Minimum Desert Passage Facilities" means, with respect to the
Desert Passage, at least 200,000 square feet of retail space, all necessary
common areas and all appropriate points of direct access from the Desert Passage
to the Aladdin and the exterior area surrounding the Aladdin.
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"Mountain Spa" means the Mountain Spa development located in
Las Vegas, Nevada.
"Music Project" means the pending project by Aladdin Music to
develop, construct and operate the Music Project, as described in the Offering
Memorandum of the Issuers dated February 18, 1998, relating to the Units.
"Music Project Financing" means the incurrence by Aladdin
Music of Indebtedness, the proceeds of which are utilized solely to finance the
development, construction and operation of the Music Project.
"Music Project Site" means the 4.75-acre portion of the
Project Site on which the Music Project is to be constructed.
"Net Income" means, with respect to any Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of Preferred Stock dividends or distributions, as
applicable, excluding, however, (i) any gain (but not loss), together with any
related provision for taxes on such gain (but not loss), realized in connection
with (a) any Asset Sale (including, without limitation, dispositions pursuant to
sale and leaseback transactions) or (b) the disposition of any securities, by,
or the extinguishment of any Indebtedness of, such Person or any of its
Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain (but not
loss), together with any related provision for taxes on such extraordinary or
nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by
Holdings or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting, investment banking fees and sales commissions, employee
severance and termination costs, any trade payables or similar liabilities
related to the assets sold and required to be paid by the seller as a result
thereof and sales, finder's or broker's commissions), and any relocation
expenses incurred as a result thereof, taxes paid or payable as a result thereof
(after taking into account any available tax credits or deductions and any tax
sharing arrangements), amounts required to be applied to the repayment of
Indebtedness secured by a Lien (other than the Bank Credit Facility) on the
asset or assets that are the subject of such Asset Sale and any reserve for
adjustment in respect of the sale price of such asset or assets established in
accordance with GAAP.
"Non-Recourse Debt" means Indebtedness (i) as to which neither
of the Issuers nor any of their Restricted Subsidiaries (a) provides credit
support of any kind (including any undertaking, agreement or instrument that
would constitute Indebtedness), (b) is directly or indirectly liable (as a
guarantor or otherwise) or (c) constitutes the lender; and (ii) no default with
respect to which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness (other than
the Notes being offered hereby) of the Issuers or any of their Restricted
Subsidiaries to declare a default on such other Indebtedness or cause the
payment thereof to be accelerated or payable prior to its stated maturity; and
(iii) as to which the lenders have been notified in writing that they will not
have any recourse to the stock or assets of the Issuers or any of their
Restricted Subsidiaries.
"Non-U.S. Person" means a Person who is not a U.S. Person.
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"Note Construction Disbursement Account" means the
Disbursement Account to be maintained by the Disbursement Agent and pledged to
the Disbursement Agent for the benefit of the Trustee pursuant to the terms of
the Disbursement Agreement into which approximately $37 million of the net
proceeds of the Offering will be deposited.
"Note Custodian" means the Trustee, as custodian with respect
to the Notes in global form, or any successor entity thereto.
"Noteholder Completion Guaranty" means the Noteholder
Completion Guaranty dated as of the Issue Date, executed by the Trust, London
Clubs and Bazaar Holdings in favor of the Trustee.
"Note Registration Rights Agreement" means the Note
Registration Rights Agreement dated as of the Issue Date, among the Issuers and
the Initial Purchasers.
"Notes" has the meaning assigned to it in the preamble to this
Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages, liquidated damages and other
liabilities payable under the documentation governing any Indebtedness.
"Offering" means the offering of the Units by the Issuers and
Enterprises.
"Officer" means, with respect to any Person, the Chairman of
the Board, the Chief Executive Officer, the President, the Chief Operating
Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer,
the Controller, the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf
of Holdings or Capital, as the case may be, by two Officers of Holdings or
Capital, one of whom must be the principal executive officer, the principal
financial officer, the treasurer or the principal accounting officer of Holdings
or Capital, that meets the requirements of Section 13.05 hereof.
"On Schedule Certificate" shall have the meaning ascribed
thereto in the Disbursement Agreement.
"Operating" means, (i) with respect to the Aladdin, the first
time that (a) all Gaming Approvals have been granted and are not then revoked or
suspended, (b) all Liens (other than Permitted Liens) related to the
development, construction, and equipping of the Aladdin have been paid or, if
payment is not yet due or if such payment is contested in good faith by
Holdings, either (1) sufficient funds remain in the Construction Disbursement
Account to discharge such Liens or (2) such Liens have been bonded, (c) the
Independent Construction Consultant, the general contractor and the architect of
the Aladdin shall have delivered one or more certificates to the Trustee each
certifying that the Aladdin is complete in all material respects in accordance
with the Approved Plans and Specifications therefor and all applicable building
laws, ordinances and regulations, (d) the Aladdin is in a condition (including
installation of furnishings, fixtures and equipment) to receive guests in the
ordinary course of business, (e) gaming and other operations in accordance with
applicable law are open to the general public and are being conducted at the
Aladdin with respect to at least the Minimum Aladdin Facilities, (f) a permanent
or temporary certificate of occupancy has been issued for the Aladdin by the
Clark County Building Department and (g) a notice of completion of the Aladdin
has been duly recorded; and (ii) with respect to the Desert Passage, the first
time that (a) the Desert Passage is in a condition (including installation of
all furnishings, fixtures and equipment) to receive customers in the ordinary
course of business, (b) retail
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operations in accordance with applicable law are open to the general public and
are being conducted at the Desert Passage with respect to at least the Minimum
Desert Passage Facilities, (c) a temporary certificate of occupancy has been
issued for the Desert Passage by the Clark County Building Department and (d) a
notice of completion of the Desert Passage has been duly recorded.
"Operating Agreement" means the Operating Agreement of
Holdings, as amended from time to time.
"Operating Deadline" means the date which is 28 months after
the Issue Date; provided that, if a Force Majeure Event occurs, the Operating
Deadline shall be extended for the amount of time that such Force Majeure Event
exists but in no event shall the Operating Deadline be extended past the date
which is 40 months after the Issue Date.
"Opinion of Counsel" means an opinion from legal counsel who
is reasonably acceptable to the Trustee, that meets the requirements of Section
13.05 hereof. The counsel may be an employee of or counsel to the Issuers, any
Subsidiary of the Issuers or the Trustee.
"Parking Use Agreement" means the Common Parking Area Use
Agreement dated as of the Issue Date, between the Company and Bazaar.
"Participant" means, with respect to the Depositary, Euroclear
or Cedel, a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to The Depository Trust Company, shall include
Euroclear and Cedel).
"Participating Broker-Dealer" has the meaning set forth in the
Note Registration Rights Agreement.
"Permitted Investments" means (i) any Investments in Holdings
or in a Wholly Owned Restricted Subsidiary of Holdings; (ii) any Investments in
Cash Equivalents; (iii) Investments by Holdings or any Restricted Subsidiary of
Holdings in a Person that is evidenced by Capital Stock if as a result of such
Investment (a) such Person becomes a Wholly Owned Restricted Subsidiary of
Holdings or (b) such Person is merged, consolidated or amalgamated with or into,
or transfers or conveys substantially all of its assets to, or is liquidated
into, Holdings or a Wholly Owned Restricted Subsidiary of Holdings; (iv) any
Investment made as a result of the receipt of non-cash consideration from an
Asset Sale that was made pursuant to and in compliance with Section 4.10 hereof;
(v) any acquisition of assets solely in exchange for the issuance of Equity
Interests (other than Disqualified Stock) of Holdings; (vi) Investments by
Holdings or any of its Restricted Subsidiaries in an amount not to exceed $5.0
million in any Person that is engaged in a line of business permitted under
Section 4.13 hereof; (vii) receivables owing to Holdings or any of its
Restricted Subsidiaries if created or acquired in the ordinary course of
business and payable or dischargeable in accordance with customary trade terms;
provided, however, that such trade terms may include such concessionary trade
terms as Holdings or any such Restricted Subsidiary deems reasonable under the
circumstances; and (viii) payroll, travel and similar advances to cover matters
that are expected at the time of such advances ultimately to be treated as
expenses for accounting purposes and that are made in the ordinary course of
business.
"Permitted Junior Securities" means securities of an Issuer
authorized by an order or decree of a court of competent jurisdiction in
connection with a reorganization that gave effect to (and states in such order
or decree that effect has been given to) the subordination of such securities to
all Senior Debt (and any debt securities issued in exchange for Senior Debt) to
substantially the same extent
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as, or to a greater extent than, the Notes are subordinated to Senior Debt;
provided that all such Senior Debt is assumed by the reorganized entity and the
rights of the holders of any such Senior Debt are not, without the consent of
such holders, altered by such reorganization, which consent shall be deemed to
have been given if the holders of such Senior Debt, individually or as a class,
shall have approved such reorganization.
"Permitted Liens" means (i) Liens in favor of Holdings or any
of its Restricted Subsidiaries; (ii) Liens on property of a Person existing at
the time such Person became a Restricted Subsidiary, is merged into or
consolidated with or into Holdings or any Restricted Subsidiary of Holdings;
provided, that such Liens were in existence prior to the contemplation of such
acquisition, merger or consolidation and do not extend to any other assets other
than those of the Person acquired by, merged into or consolidated with Holdings
or any Restricted Subsidiary of Holdings; (iii) Liens on property existing at
the time of acquisition thereof by Holdings or any Restricted Subsidiary of
Holdings; provided that such Liens were in existence prior to the contemplation
of such acquisition; (iv) Liens to secure the performance of statutory
obligations, surety or appeal bonds, performance bonds or other obligations of a
like nature incurred in the ordinary course of business or in the construction
of the Aladdin; provided, however, that Holdings has obtained a title insurance
endorsement insuring against losses arising therewith or if such Lien arises
after completion of the Aladdin, Holdings has bonded within a reasonable time
after becoming aware of the existence of such Lien; (v) Liens securing
obligations in respect of this Indenture or the Notes; (vi) Liens existing on
the Issue Date; (vii) (a) Liens for taxes, assessments or governmental charges
or claims or (b) statutory Liens of landlords, and carriers', warehousemen's,
mechanics', suppliers', materialmen's, repairmen's or other similar Liens
arising in the ordinary course of business or in the construction of the
Aladdin, in the case of each of (a) and (b), with respect to amounts that either
(1) are not yet delinquent or (2) are being diligently contested in good faith
by appropriate proceedings, provided that any reserve or other appropriate
provision as shall be required in conformity with GAAP shall have been made
therefor; (viii) easements, rights-of-way, navigational servitudes,
restrictions, minor defects or irregularities in title and other similar charges
or encumbrances which do not interfere in any material respect with the ordinary
conduct of business of Holdings and its Restricted Subsidiaries; (ix) a
leasehold mortgage in favor of a party financing the lessee of space within the
Aladdin; provided that neither Holdings nor any of its Restricted Subsidiaries
is liable for the payment of any principal of, or interest or premium on, such
financing; (x) Liens created by the Reciprocal Easement Agreement; (xi) Liens
created by the Disbursement Agreement; (xii) Liens to secure all Obligations
under the Bank Credit Facility or the Rate Protection Agreement (as defined in
the Bank Credit Facility), as applicable, incurred pursuant to clauses (i),
(vii), (viii), (ix), (x) and (xvi) of the second paragraph of Section 4.09
hereof; (xiii) Liens to secure all Obligations under FF&E Financing incurred
pursuant to clause (viii) and (x) of the second paragraph of Section 4.09
hereof; (xiv) Liens to secure Indebtedness permitted by clause (vi) of the
second paragraph of Section 4.09 hereof; (xv) Liens incurred in connection with
Hedging Obligations incurred pursuant to clause (vii) of the second paragraph
under Section 4.09 hereof; (xvi) licenses of patents, trademarks and other
intellectual property rights granted by Holdings or any of its Restricted
Subsidiaries in the ordinary course of business; (xvii) any judgment attachment
or judgment Lien not constituting an Event of Default; and (xviii) Liens on
assets of Unrestricted Subsidiaries that secure Non-Recourse Debt of such
Unrestricted Subsidiaries.
"Permitted Refinancing Indebtedness" means any Indebtedness of
Holdings or any of its Restricted Subsidiaries issued in exchange for, or the
net proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of Holdings or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); provided that: (i) the Accreted Value or
principal amount, as the case may be, of such Permitted Refinancing Indebtedness
does not exceed the Accreted Value or
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principal amount, as the case may be, plus accrued interest on, the Indebtedness
so extended, refinanced, renewed, replaced, defeased or refunded (plus the
amount of reasonable expenses incurred in connection therewith); (ii) such
Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and has a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of, the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the
Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded
is subordinate in right of payment to the Notes, such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the Notes on terms at least as
favorable to the Holders of the Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (iv) such Indebtedness is incurred either by Holdings
or by the Restricted Subsidiary who is the obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, partnership,
limited-liability company or partnership, joint venture, association,
joint-stock company, trust, unincorporated organization, government or any
agency or political subdivision thereof or any other entity.
"Pledge Agreements" means, collectively, the L.L.C. Interest
Pledge and Security Agreement dated as of the Issue Date, to be executed by
Holdings in favor of the Trustee pursuant to which Holdings will pledge all
Series A Preferred Interests to the Trustee for the benefit of the holders of
the Notes and the Holdings Collateral Account Agreement dated as of the Issue
Date, to be executed by Holdings in favor of the Disbursement Agent, as agent
for the Trustee, pursuant to which Holdings will pledge all of the amounts in
the Note Construction Disbursement Account to the Disbursement Agent, as agent
for the Trustee, for the benefit of the holders of the Notes.
"Preferred Stock" means any Equity Interest with preferential
right of payment of dividends or distributions, as applicable, or upon
liquidation, dissolution, or winding up.
"Principals" means the Trust, or the beneficiaries of the
Trust (whether current or contingent) as of the date hereof which control AHL or
Sommer Enterprises, and London Clubs.
"Private Placement Legend" means the legend set forth in
Section 2.06(g)(i) to be placed on all Notes issued under this Indenture except
where otherwise permitted by the provisions of this Indenture.
"Project Site" means the approximately 35-acre parcel of
property located in Las Vegas, Nevada on which the Complex is to be constructed.
"QIB" means a "qualified institutional buyer" as defined in
Rule 144A.
"Qualified Public Offering" means a public offering of common
stock of any IPO Entity which is registered under the Securities Act and results
in proceeds of at least $50.0 million; provided, that immediately prior to such
public offering, London Clubs, the Trust, or the beneficiaries of the Trust
(whether current or contingent) as of the date hereof which control AHL or
Sommer Enterprises, and holders of the Warrants and Warrant Shares each hold,
directly or indirectly, their respective equity interests in the IPO Entity;
provided, further, that London Clubs, the Trust, or the beneficiaries (whether
current or contingent) of the Trust as of the date hereof which control AHL or
Sommer Enterprises, and holders of the Warrants and Warrants Shares will use
their reasonable best efforts to effect such public offering such that the
holders of the Warrants and Warrant Shares (x) will not recognize income gain or
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loss for federal income tax purposes (other than as a result of a sale of their
Warrant Shares in such public offering) and (y) will be subject to federal
income tax in the same manner and at the same times as would have been the case
if the Warrants were originally issued by the IPO Entity.
"Reciprocal Easement Agreement" means the Construction,
Operation and Reciprocal Easement Agreement dated as of the Issue Date, among
the Company, Bazaar, Aladdin Music, as such agreement may be amended,
supplemented, restated or otherwise modified from time to time.
"Regulation S" means Regulation S promulgated under the
Securities Act.
"Regulation S Global Note" means a Regulation S Temporary
Global Note or Regulation S Permanent Global Note, as appropriate.
"Regulation S Permanent Global Note" means a permanent global
Note in the form of Exhibit A-1 hereto bearing the Global Note Legend and the
Private Placement Legend and deposited with or on behalf of and registered in
the name of the Depositary or its nominee, issued in a denomination equal to the
outstanding principal amount of the Regulation S Temporary Global Note upon
expiration of the Restricted Period.
"Regulation S Temporary Global Note" means a temporary global
Note in the form of Exhibit A-2 hereto bearing the Private Placement Legend and
the Regulation S Temporary Global Note Legend and deposited with or on behalf of
and registered in the name of the Depositary or its nominee, issued in a
denomination equal to the outstanding principal amount of the Notes initially
sold in reliance on Rule 903 of Regulation S.
"Related Party" means, with respect to any Principal, any
Subsidiary of such Principal.
"Responsible Officer," when used with respect to the Trustee,
means any officer within the Corporate Trust Division of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Definitive Note" means a Definitive Note bearing
the Private Placement Legend.
"Restricted Global Note" means a Global Note bearing the
Private Placement Legend.
"Restricted Investment" means an Investment other than a
Permitted Investment.
"Restricted Period" means the one-year restricted period as
defined in Regulation S.
"Restricted Subsidiary" of a Person means any Subsidiary of
the referent Person that is not an Unrestricted Subsidiary.
"Rule 144" means Rule 144 promulgated under the Securities
Act.
"Rule 144A" means Rule 144A promulgated under the Securities
Act.
"Rule 903" means Rule 903 promulgated under the Securities
Act.
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"Rule 904" means Rule 904 promulgated the Securities Act.
"Salle Privee Management Agreement" means the Salle Privee
Management Agreement dated the Issue Date, between the Company and London Clubs.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Debt" means (i) all Indebtedness outstanding on the
date hereof or hereafter incurred, assumed or guaranteed under the Bank Credit
Facility or any other arrangement with respect to the Bank Credit Facility with
any Lender (or any Affiliate of a Lender) and permitted under this Indenture,
including and together with any Hedging Obligations, and (ii) all Obligations
arising under any of the foregoing (including interest, whether or not allowable
in a bankruptcy, insolvency or similar proceeding, accruing on Indebtedness or
any other Obligation incurred pursuant to the Bank Credit Facility or any other
such arrangement after the filing of a petition initiating any proceeding under
any bankruptcy, insolvency or similar law or which would have accrued but for
such filing). Notwithstanding anything to the contrary in the foregoing, Senior
Debt shall specifically not include any Indebtedness that is incurred in
violation of this Indenture.
"Separation Date" means the earliest to occur of: (i)
September 1, 1998; (ii) the date on which a registration statement with respect
to the Notes or a registration statement with respect to the Warrants and the
Warrant Shares is filed with the Commission under the Securities Act; (iii) the
occurrence of a Change of Control or a sale or recapitalization of Enterprises,
Holdings or the Company occurs (a "Triggering Event"); (iv) 30 days after a
Qualified Public Offering; (v) the occurrence of an Event of Default; or (vi)
such earlier date as determined by Merrill Lynch & Co. in its sole discretion.
"Series A Notes" has the meaning assigned to it in the
preamble to this Indenture.
"Series A Preferred Interests" means the Company's Series A
Preferred Membership Interests.
"Series B Notes" has the meaning assigned to it in the
preamble to this Indenture.
"Shelf Registration Statement" means the Shelf Registration
Statement as defined in the Note Registration Rights Agreement.
"Significant Subsidiary" means any Subsidiary which would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the Issue Date.
"Site Work Agreement" means the Site Work, Development and
Construction Agreement dated as of the Issue Date, among the Company, Aladdin
Bazaar and AHL.
"Sommer Enterprises" means Sommer Enterprises, LLC, a Nevada
limited-liability company.
"Stated Maturity" means, with respect to any installment of
interest or principal on any Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
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repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereto.
"Subsidiary" means, with respect to any Person, (i) any
corporation, association, or other business entity (other than a partnership) of
which more than 50% of the total voting power of shares of Capital Stock
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time of
determination owned or controlled, directly or indirectly, by such Person or one
or more of the other Subsidiaries of that Person (or a combination thereof) and
(ii) any partnership (including an entity which is not treated as a separate
entity for income tax purposes) (a) the sole general partner or the managing
partner of which is such Person or a Subsidiary of such Person or (b) the only
general partners of which are such Person or one or more Subsidiaries of such
Person (or any combination thereof).
"Tax Amount" means, with respect to any period, without
duplication, the increase in the cumulative United States federal, state and
local tax liability of holders of equity interests in Holdings or the Company
(or, if such holder is a pass-through entity for United States income tax
purposes, holders of its equity interests) in respect of their interests in
Holdings or the Company for such period plus any additional amounts payable to
such holders to cover taxes arising from ownership of such equity interests.
"Theater Lease" means the lease of the Theater of the
Performing Arts between the Company and Aladdin Music to be entered into prior
to the opening of the Music Project.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.ss.ss.
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA.
"Trust" means the Trust under Article Sixth u/w/o Sigmund
Sommer.
"Trustee" means the party named as such in the preamble to
this Indenture until a successor replaces it in accordance with the applicable
provisions of this Indenture and thereafter means the successor serving
hereunder.
"Units" means the units issued by the Issuers and Enterprises
on the Issue Date, each consisting of $1,000 principal amount at maturity of
Series A Notes and 10 Warrants to purchase 10 shares of Class B non-voting
common stock, no par value, of Enterprises.
"Unrestricted Definitive Note" means one or more Definitive
Notes that do not bear and are not required to bear the Private Placement
Legend.
"Unrestricted Global Note" means a permanent global Note in
the form of Exhibit A-1 attached hereto that bears the Global Note Legend and
that has the "Schedule of Exchanges of Interests in the Global Note" attached
thereto, and that is deposited with or on behalf of and registered in the name
of the Depositary, representing a series of Notes that do not bear the Private
Placement Legend.
"Unrestricted Subsidiary" means (i) any Subsidiary that is
designated by the Board of Managers as an Unrestricted Subsidiary pursuant to a
Board Resolution; but only to the extent that such Subsidiary: (a) has no
Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement,
contract, arrangement or understanding with Holdings or any Restricted
Subsidiary of Holdings unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to Holdings or such
Restricted Subsidiary than those that might be obtained at the time from Persons
who
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are not Affiliates of Holdings; (c) is a Person with respect to which neither
Holdings nor any of its Restricted Subsidiaries has any direct or indirect
obligation (x) to subscribe for additional Equity Interests or (y) to maintain
or preserve such Person's financial condition or to cause such Person to achieve
any specified levels of operating results; (d) has not guaranteed or otherwise
directly or indirectly provided credit support for any Indebtedness of Holdings
or any of its Restricted Subsidiaries; and (e) has at least one director on its
Board of Managers or Board of Directors that is not a director or executive
officer of Holdings or any of its Restricted Subsidiaries and has at least one
executive officer that is not a director or executive officer of Holdings or any
of its Restricted Subsidiaries. Any such designation by the Board of Managers
shall be evidenced to the Trustee by filing with the Trustee a certified copy of
the Board Resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
conditions and was permitted by Section 4.07 hereof. If, at any time, any
Unrestricted Subsidiary would fail to meet the foregoing requirements as an
Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of this Indenture and any Indebtedness of such
Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of Holdings
as of such date (and, if such Indebtedness is not permitted to be incurred as of
such date under Section 4.09 hereof, Holdings shall be in default of such
covenant). Notwithstanding the above, each of AMH and Aladdin Music shall be an
Unrestricted Subsidiary until such time as it is designated to be a Restricted
Subsidiary pursuant to the terms of the last sentence of this definition. The
Board of Managers may at any time designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided that such designation shall be deemed to be an
incurrence of Indebtedness by a Restricted Subsidiary of Holdings of any
outstanding Indebtedness of such Unrestricted Subsidiary and such designation
shall only be permitted if (i) such Indebtedness is permitted under Section 4.09
hereof, calculated on a pro forma basis as if such designation had occurred at
the beginning of the four-quarter reference period, and (ii) no Default or Event
of Default would be in existence following such designation.
"U.S. Person" means a U.S. person as defined in Rule 902(o)
under the Securities Act.
"Warrant Registration Rights Agreement" means the Warrant
Registration Rights Agreement dated as of the Issue Date, among Enterprises and
the Initial Purchasers.
"Warrants" means the warrants to purchase an aggregate of
2,215,000 shares of Class B non-voting common stock, no par value, of
Enterprises, issued on the Issue Date as part of the Units.
"Warrant Shares" means the shares of Class B non-voting common
stock, no par value, of Enterprises issuable upon exercise of the Warrants.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years (calculated to the nearest
one-twelfth) obtained by dividing (i) the sum of the products obtained by
multiplying (a) the amount of each then remaining installment, sinking fund,
serial maturity or other required payments of principal, including payment at
final maturity, in respect thereof, by (b) the number of years (calculated to
the nearest one-twelfth) that will elapse between such date and the making of
such payment, by (ii) the then outstanding principal amount or liquidation
preference, as applicable, of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a
Restricted Subsidiary of such Person all of the outstanding Capital Stock or
other ownership interests of which (other than directors' qualifying shares)
shall at the time be owned by such Person or by one or more Wholly Owned
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Restricted Subsidiaries of such Person or by such Person and one or more Wholly
Owned Restricted Subsidiaries of such Person.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of
such Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person or by
such Person and one or more Wholly Owned Subsidiaries of such Person.
"Working Capital Facility" means a credit facility pursuant to
any agreement or agreements for the making of loans or advances on a revolving
basis, the issuance of letters of credit and/or the creation of bankers'
acceptances to fund the Company's general corporate requirements and any
amendment, supplement, extension, modification, renewal, replacement or
refinancing from time to time, including any agreement to renew, extend,
refinance or replace all or any portion of such facility.
SECTION 1.02. OTHER DEFINITIONS.
<TABLE>
<CAPTION>
Defined in
Term Section
<S> <C>
"Affiliate Transaction" 4.11
"Asset Sale Offer" 4.10
"Authentication Order" 2.02
"Benefitted Party" 10.01
"Change of Control Offer" 4.15
"Change of Control Payment" 4.15
"Change of Control Payment Date" 4.15
"Covenant Defeasance" 8.03
"DTC" 2.03
"Event of Default" 6.01
"Excess Proceeds" 4.10
"incur" 4.09
"Legal Defeasance" 8.02
"Note Obligations" 10.01
"Offer Amount" 3.10
"Offer Period" 3.10
"Payment Default" 6.01
"Paying Agent" 2.03
"Purchase Date" 3.10
"Registrar" 2.03
"Trustee" 8.05
"Restricted Payments" 4.07
"Warrant Endorsement" 2.02
</TABLE>
SECTION 1.03. INCORPORATION BY REFERENCE.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the
following meanings:
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"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the
Trustee; and
"obligor" on the Notes means the Issuers and any successor
obligor upon the Notes.
All other terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule under
the TIA have the meanings so assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined
has the meaning assigned to it in accordance with
GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the
plural, and in the plural include the singular;
(5) provisions apply to successive
events and transactions; and
(6) references to sections of or rules under
the Securities Act shall be deemed to include
substitute, replacement of successor sections or
rules adopted by the SEC from time to time.
ARTICLE 2.
THE NOTES
SECTION 2.01. FORM AND DATING.
(a) General. The Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A-1 or Exhibit A-2 attached
hereto. The Notes may have notations, legends or endorsements required by law,
stock exchange rule or usage. Each Note shall be dated the date of its
authentication. The Notes shall be in denominations of $1,000 and integral
multiples thereof.
The terms and provisions contained in the Notes shall
constitute, and are hereby expressly made, a part of this Indenture and the
Issuers and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby. However,
to the extent any provision of any Note conflicts with the express provisions of
this Indenture, the provisions of this Indenture shall govern and be
controlling.
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(b) Global Notes. Notes issued in global form shall be substantially in
the form of Exhibit A-1 or Exhibit A-2 attached hereto (including the Global
Note Legend thereon and the "Schedule of Exchanges of Interests in the Global
Note" attached thereto). Notes issued in definitive form shall be substantially
in the form of Exhibit A-1 attached hereto (but without the Global Note Legend
thereon and without the "Schedule of Exchanges of Interests in the Global Note"
attached thereto). Each Global Note shall represent such of the outstanding
Notes as shall be specified therein and each shall provide that it shall
represent the aggregate principal amount of outstanding Notes from time to time
endorsed thereon and that the aggregate principal amount of outstanding Notes
represented thereby may from time to time be reduced or increased, as
appropriate and in accordance with the practices and procedures of the
Depositary and the Trustee, to reflect exchanges and redemptions. Any
endorsement of a Global Note to reflect the amount of any increase or decrease
in the aggregate principal amount of outstanding Notes represented thereby shall
be made by the Trustee or the Note Custodian, at the direction of the Trustee,
in accordance with instructions given by the Holder thereof as required by
Section 2.06 hereof.
(c) Temporary Global Notes. Notes offered and sold in reliance on
Regulation S shall be issued initially in the form of the Regulation S Temporary
Global Note, which shall be deposited on behalf of the purchasers of the Notes
represented thereby with the Trustee, at its New York office, as custodian for
the Depositary, and registered in the name of the Depositary or the nominee of
the Depositary for the accounts of designated agents holding on behalf of
Euroclear or Cedel Bank, duly executed by the Issuers and authenticated by the
Trustee as hereinafter provided. The Restricted Period shall be terminated upon
the receipt by the Trustee of (i) a written certificate from the Depositary,
together with copies of certificates from Euroclear and Cedel Bank certifying
that they have received certification of non-United States beneficial ownership
of 100% of the aggregate principal amount of the Regulation S Temporary Global
Note (except to the extent of any beneficial owners thereof who acquired an
interest therein during the Restricted Period pursuant to another exemption from
registration under the Securities Act and who will take delivery of a beneficial
ownership interest in a 144A Global Note or an IAI Global Note bearing a Private
Placement Legend, all as contemplated by Section 2.06(a)(ii) hereof), and (ii)
an Officers' Certificate from the Issuers as required by Regulation S. Following
the termination of the Restricted Period, beneficial interests in the Regulation
S Temporary Global Note shall be exchanged for beneficial interests in
Regulation S Permanent Global Notes pursuant to the Applicable Procedures.
Simultaneously with the authentication of Regulation S Permanent Global Notes,
the Trustee shall cancel the Regulation S Temporary Global Note. The aggregate
principal amount of the Regulation S Temporary Global Note and the Regulation S
Permanent Global Notes may from time to time be increased or decreased by
adjustments made on the records of the Trustee and the Depositary or its
nominee, as the case may be, in connection with transfers of interest as
hereinafter provided.
(d) Euroclear and Cedel Procedures Applicable. The provisions
of the "Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank"
and "Customer Handbook" of Cedel Bank shall be applicable to transfers of
beneficial interests in the Regulation S Temporary Global Note and the
Regulation S Permanent Global Notes that are held by Participants through
Euroclear or Cedel Bank.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
Two Officers of each Issuer shall sign the Notes by manual or
facsimile signature. The seal of each of the Issuers may be reproduced on the
Notes and may be in facsimile form.
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<PAGE>
If an Officer whose signature is on a Note no longer holds
that office at the time a Note is authenticated, the Note shall nevertheless be
valid.
A Note shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that the
Note has been authenticated under this Indenture.
The Trustee shall, upon a written order of the Issuers signed
by two Officers of each Issuer (an "Authentication Order"), authenticate Notes
for original issue up to the aggregate principal amount stated in paragraph 4 of
the Notes. The aggregate principal amount of Notes outstanding at any time may
not exceed such amount except as provided in Section 2.06 hereof.
The Trustee may appoint an authenticating agent acceptable to
the Issuers to authenticate Notes. An authenticating agent may authenticate
Notes whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with Holders or an
Affiliate of the Issuers.
All Notes issued prior to the separation described below shall
have printed or overprinted thereon the following (the "Warrant Endorsement").
THE NOTES EVIDENCED BY THIS CERTIFICATE ARE NOT TRANSFERABLE
SEPARATELY FROM THE WARRANTS ATTACHED HERETO ORIGINALLY SOLD AS A UNIT
WITH THE NOTES UNTIL THE EARLIEST TO OCCUR OF (I) SEPTEMBER 1, 1998;
(II) THE DATE ON WHICH A REGISTRATION STATEMENT WITH RESPECT TO THE
NOTES OR A REGISTRATION STATEMENT WITH RESPECT TO THE WARRANTS AND THE
WARRANT SHARES IS FILED WITH THE COMMISSION UNDER THE SECURITIES ACT
(III) THE OCCURRENCE OF A CHANGE OF CONTROL OR A SALE OR
RECAPITALIZATION OF ENTERPRISES, HOLDINGS OR THE COMPANY OCCURS; (IV)
30 DAYS AFTER A QUALIFIED PUBLIC OFFERING; (V) THE OCCURRENCE OF AN
EVENT OF DEFAULT; OR (VI) SUCH EARLIER DATE AS DETERMINED BY MERRILL
LYNCH & CO. IN ITS SOLE DISCRETION (THE DATE OF OCCURRENCE OF AN EVENT
SPECIFIED IN CLAUSES (I) THROUGH (VI) BEING REFERRED TO AS THE
"SEPARATION DATE"). PRIOR TO SUCH DATE, THE NOTES EVIDENCED BY THIS
CERTIFICATE MAY BE TRANSFERRED ONLY IN INTEGRAL MULTIPLES OF $1,000
PRINCIPAL AMOUNT OF NOTES AND ONLY WITH THE SIMULTANEOUS TRANSFER TO
THE TRANSFEREE OF 10 WARRANTS FOR EACH $1,000 PRINCIPAL AMOUNT SO
TRANSFERRED.
Under the terms of the warrant agreement relating to the Warrants (the "Warrant
Agreement"), the holder of this security may at any time on or after the
Separation Date, at its option, by notice to the Trustee elect to separate or
separately transfer the Notes and the Warrants represented hereby, in whole or
in part, and shall thereafter surrender this security to the Trustee for the
exchange of this security, in part, for such Warrant or Warrants and for a Note
or Notes of a like aggregate principal amount and of authorized denominations
not bearing this Warrant Endorsement; provided that no delay or failure on the
part of the Trustee or the Warrant Agent to exchange this security for such
Warrant or Warrants and Note or Notes shall affect the separation of such Notes
and Warrants represented hereby or their separate transferability. Until such
separation, the holder of this security is, for each $1,000 principal amount of
Notes, also the record owner of 10 Warrants expiring March 1, 2010, each Warrant
to purchase 1 share
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<PAGE>
of Class B non-voting Common Stock, no par value (the "Common Stock"), of
Enterprises (subject to adjustment). Enterprises has deposited with the Trustee,
as custodian for the Holder of the Notes bearing this Warrant Endorsement, a
certificate or certificates for such Warrants to purchase an aggregate of
2,215,000 shares of Common Stock (subject to adjustment). Prior to the
separation of the Notes and the Warrants as described above, record ownership of
such Warrants is transferable only by the transfer of this Note on the Note
register maintained by the Issuers pursuant to the Indenture. After such
separation, ownership of a Warrant is transferable only by the transfer of the
certificate representing such Warrant in accordance with the provisions of the
Warrant Agreement.
By accepting a security bearing this Warrant Endorsement, each holder of this
security shall be bound by all of the terms and provisions of the Warrant
Agreement (a copy of which is available on request to Enterprises or the Warrant
Agent); provided, however, that no provision in this Indenture or in the Warrant
Agreement shall impose any obligation on the Issuers with respect to the
Warrants or the Warrant Agreement or on Enterprises with respect to the Notes or
this Indenture.
Election to Exercise. On or after the Warrant Exercise Commencement Date (as
such term is defined in the Warrant Agreement), the Warrants may be exercised by
obtaining from the Warrant Agent the required forms of election to exercise,
declaration form and instructions for payment of the Exercise Price (as such
term is defined in the Warrant Agreement), tendering the Exercise Price in
accordance with the Warrant Agreement and complying with the other conditions to
exercise contained in the Warrant Agreement. Upon receiving the required forms
and payment of such Exercise Price, the Warrant Agent shall exercise such
Warrants subject to, and in accordance with, the provisions of the Warrant
Agreement.
Election of Exchange. The undersigned registered holder of the security
represented hereby irrevocably elects to separate its Notes and Warrants and to
exchange this security for a new Note in the principal amount hereof and a
Warrant certificate.
The undersigned hereby irrevocably instructs the Trustee (A) to issue in the
name of the undersigned registered holder a new Note not containing the above
Warrant Endorsement in the principal amount equal to the principal amount hereof
and (B) to deliver this security to the Warrant Agent pursuant to the provisions
of the Warrant Agreement with instructions to issue in the name of the
undersigned registered holder a Warrant certificate representing the number of
Warrants equal to the number of Warrants represented by this security and to
issue (1) a new Warrant certificate to replace the Warrant certificate held on
deposit by the Warrant Agent equal to the difference between (x) the number of
Warrants represented by the Warrant certificate so held on deposit and (y) the
number of Warrants represented by this Security.
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Dated:
----------------------
Name of Holder of this security:
----------------------
Address:
----------------------
----------------------
Signature:
----------------------
Note: The above signature must correspond with the name as written upon the face
of this security in every particular, without alteration or enlargement whatever
and if the certificate representing any principal amount at maturity of this
security or the associated Warrants is to be registered in a name other than
that in which this security is registered.
Signature Guaranteed:
----------------------
Note: Signature must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Registrar, which requirements include membership
or participation in the Securities Transfer Agents Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.
Until any Note and the Warrant with which it is initially
issued are separated or separately transferred pursuant to the terms of the
Warrant Endorsement, the Trustee shall hold such Warrant as custodian on behalf
of the Holder of such Note bearing such legends, and the Note and Warrant shall
be accompanied by a Unit certificate which shall have printed or overprinted
thereon the following.
THIS GLOBAL UNIT IS COMPRISED OF THE ATTACHED GLOBAL NOTE AND
GLOBAL WARRANT. THE GLOBAL UNIT, THE GLOBAL NOTE AND THE GLOBAL WARRANT ARE
COLLECTIVELY REFERRED TO HEREIN AS THE "SECURITIES."
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
NEITHER THE SECURITIES NOR ANY INTEREST OR PARTICIPATION THEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION AS SET FORTH BELOW. BY ITS
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT ("RULE
144A")), (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(A) (1), (2), (3) OR (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED INVESTOR")
OR (C) IT IS A NON-U.S. PERSON AS DEFINED IN RULE 904 UNDER THE SECURITIES ACT,
(2) AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY PRIOR TO THE DATE
WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE
LAST DATE ON WHICH ALADDIN GAMING HOLDINGS, LLC, ALADDIN CAPITAL CORP. OR
ALADDIN GAMING ENTERPRISES, INC. (COLLECTIVELY "THE ALADDIN PARTIES") OR ANY
AFFILIATE OF THE ALADDIN PARTIES WAS THE OWNER OF THE SECURITIES (OR ANY
PREDECESSOR OF THE SECURITIES) ONLY (A) TO THE ALADDIN PARTIES, (B) PURSUANT TO
A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE
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PURSUANT TO RULE 144A INSIDE THE UNITED STATES, TO A PERSON IT REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER THAT PURCHASES FOR ITS OWN ACCOUNT
OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS
AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) INSIDE THE UNITED STATES
TO AN ACCREDITED INVESTOR THAT IS ACQUIRING THE SECURITIES FOR ITS OWN ACCOUNT,
OR FOR THE ACCOUNT OF SUCH AN ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND
NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE ALADDIN
PARTIES', THE TRUSTEE'S AND THE WARRANT AGENT'S RIGHTS PRIOR TO ANY SUCH OFFER,
SALE OR TRANSFER (I) PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY
OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO
EACH OF THEM AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A
CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE REVERSE OF THE GLOBAL NOTE
AND THE GLOBAL WARRANT ARE COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE
TRUSTEE.
THE SECURITIES ARE GLOBAL SECURITIES WITHIN THE MEANING OF THE
INDENTURE AND THE WARRANT AGREEMENT AND ARE REGISTERED IN THE NAME OF A
DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THE
SECURITIES ARE NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A
PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND THE WARRANT AGREEMENT, AND NO
TRANSFER OF THE SECURITIES (OTHER THAN A TRANSFER OF THE SECURITIES AS A WHOLE
BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE
DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE
REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
TO THE ALADDIN PARTIES OR THEIR AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND
ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THE NOTES AND THE WARRANTS CONSTITUTING A PART OF THE UNITS
WILL NOT BE SEPARATELY TRANSFERABLE UNTIL THE EARLIEST OF (I) SEPTEMBER 1, 1998,
(II) THE DATE ON WHICH A REGISTRATION STATEMENT WITH RESPECT TO THE NOTES OR A
REGISTRATION STATEMENT WITH RESPECT TO THE WARRANTS AND THE WARRANT SHARES IS
FILED WITH THE COMMISSION UNDER THE SECURITIES ACT, (III) THE OCCURRENCE OF A
CHANGE OF CONTROL (AS DEFINED IN THE INDENTURE) OR A
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SALE OR RECAPITALIZATION OF ENTERPRISES, ALADDIN GAMING HOLDINGS, LLC OR ALADDIN
GAMING, LLC, A NEVADA LIMITED-LIABILITY COMPANY, OCCURS, (IV) 30 DAYS AFTER A
QUALIFIED PUBLIC OFFERING (AS DEFINED IN THE INDENTURE) OCCURS, (V) THE
OCCURRENCE OF AN EVENT OF DEFAULT (AS DEFINED IN THE INDENTURE) OR (VI) SUCH
EARLIER DATE AS DETERMINED BY MERRILL LYNCH & CO. IN ITS SOLE DISCRETION.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Issuers shall maintain an office or agency where Notes may
be presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Issuers may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Issuers may change any
Paying Agent or Registrar without notice to any Holder. The Issuers shall notify
the Trustee in writing of the name and address of any Agent not a party to this
Indenture. If the Issuers fail to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. The Issuers or any of
their Subsidiaries may act as Paying Agent or Registrar.
The Issuers initially appoint The Depository Trust Company
("DTC") to act as Depositary with respect to the Global Notes.
The Issuers initially appoint the Trustee to act as the
Registrar and Paying Agent and to act as Note Custodian with respect to the
Global Notes.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Issuers shall require each Paying Agent other than the
Trustee to agree in writing that the Paying Agent will hold in trust for the
benefit of Holders or the Trustee all money held by the Paying Agent for the
payment of principal, premium or Liquidated Damages, if any, or interest on the
Notes, and will notify the Trustee of any default by the Issuers in making any
such payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. The Issuers at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon payment
over to the Trustee, the Paying Agent (if other than the Issuers or a
Subsidiary) shall have no further liability for the money. If the Issuers or a
Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust
fund for the benefit of the Holders all money held by it as Paying Agent. Upon
any bankruptcy or reorganization proceedings relating to the Issuers, the
Trustee shall serve as Paying Agent for the Notes.
SECTION 2.05. HOLDER LISTS.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of all Holders and shall otherwise comply with TIA ss. 312(a). If the
Trustee is not the Registrar, the Issuers shall furnish to the Trustee at least
seven Business Days before each interest payment date and at such other times as
the Trustee may request in writing, a list in such form and as of such date as
the Trustee may reasonably require of the names and addresses of the Holders of
Notes and the Issuers shall otherwise comply with TIA ss. 312(a).
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SECTION 2.06. TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Global Notes.
A Global Note may not be transferred as a whole except by the
Depositary to a nominee of the Depositary, by a nominee of the Depositary to the
Depositary or to another nominee of the Depositary, or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary. All Global Notes will be exchanged by the Issuers for Definitive
Notes if (i) the Issuers deliver to the Trustee notice from the Depositary that
it is unwilling or unable to continue to act as Depositary or that it is no
longer a clearing agency registered under the Exchange Act and, in either case,
a successor Depositary is not appointed by the Issuers within 120 days after the
date of such notice from the Depositary or (ii) the Issuers in their sole
discretion determine that the Global Notes (in whole but not in part) should be
exchanged for Definitive Notes and deliver a written notice to such effect to
the Trustee; provided that in no event shall the Regulation S Temporary Global
Note be exchanged by the Issuers for Definitive Notes prior to (x) the
expiration of the Restricted Period and (y) the receipt by the Registrar of any
certificates required pursuant to Rule 903 under the Securities Act. Upon the
occurrence of either of the preceding events in (i) or (ii) above, Definitive
Notes shall be issued in such names as the Depositary shall instruct the
Trustee. Global Notes also may be exchanged or replaced, in whole or in part, as
provided in Sections 2.06 and 2.10 hereof. Every Note authenticated and
delivered in exchange for, or in lieu of, a Global Note or any portion thereof,
pursuant to this Section 2.06 or Sections 2.07 or 2.10 hereof, shall be
authenticated and delivered in the form of, and shall be, a Global Note. A
Global Note may not be exchanged for another Note other than as provided in this
Section 2.06(a), however, beneficial interests in a Global Note may be
transferred and exchanged as provided in Section 2.06(b),(c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global Notes.
The transfer and exchange of beneficial interests in the
Global Notes shall be effected through the Depositary, in accordance with the
provisions of this Indenture and the Applicable Procedures. Beneficial interests
in the Restricted Global Notes shall be subject to restrictions on transfer
comparable to those set forth herein to the extent required by the Securities
Act. Transfers of beneficial interests in the Global Notes also shall require
compliance with either subparagraph (i) or (ii) below, as applicable, as well as
one or more of the other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note.
Beneficial interests in any Restricted Global Note may be transferred
to Persons who take delivery thereof in the form of a beneficial
interest in the same Restricted Global Note in accordance with the
transfer restrictions set forth in the Private Placement Legend;
provided, however that prior to the expiration of the Restricted
Period, transfers of beneficial interests in the Temporary Regulation S
Global Note may not be made to a U.S. Person or for the account or
benefit of a U.S. Person (other than an Initial Purchaser). Beneficial
interests in any Unrestricted Global Note may be transferred to Persons
who take delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note. No written orders or instructions shall be
required to be delivered to the Registrar to effect the transfers
described in this Section 2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests
in Global Notes. In connection with all transfers and exchanges of
beneficial interests that are not subject to Section 2.06(b)(i) above,
the transferor of such beneficial interest must deliver to the
Registrar either (A) (1) a written order from a Participant or an
Indirect Participant given to the Depositary in
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accordance with the Applicable Procedures directing the Depositary to
credit or cause to be credited a beneficial interest in another Global
Note in an amount equal to the beneficial interest to be transferred or
exchanged and (2) instructions given in accordance with the Applicable
Procedures containing information regarding the Participant account to
be credited with such increase or (B) (1) a written order from a
Participant or an Indirect Participant given to the Depositary in
accordance with the Applicable Procedures directing the Depositary to
cause to be issued a Definitive Note in an amount equal to the
beneficial interest to be transferred or exchanged and (2) instructions
given by the Depositary to the Registrar containing information
regarding the Person in whose name such Definitive Note shall be
registered to effect the transfer or exchange referred to in (1) above;
provided that in no event shall Definitive Notes be issued upon the
transfer or exchange of beneficial interests in the Regulation S
Temporary Global Note prior to (x) the expiration of the Restricted
Period and (y) the receipt by the Registrar of any certificates
required pursuant to Rule 903 under the Securities Act. Upon
consummation of an Exchange Offer by the Issuers in accordance with
Section 2.06(f) hereof, the requirements of this Section 2.06(b)(ii)
shall be deemed to have been satisfied upon receipt by the Registrar of
the instructions contained in the Letter of Transmittal delivered by
the Holder of such beneficial interests in the Restricted Global Notes.
Upon satisfaction of all of the requirements for transfer or exchange
of beneficial interests in Global Notes contained in this Indenture and
the Notes or otherwise applicable under the Securities Act, the Trustee
shall adjust the principal amount of the relevant Global Note(s)
pursuant to Section 2.06(h) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted
Global Note. A beneficial interest in any Restricted Global Note may be
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in another Restricted Global Note if the transfer
complies with the requirements of Section 2.06(b)(ii) above and the
Registrar receives the following:
(A) if the transferee will take delivery in the form
of a beneficial interest in the 144A Global Note, then the
transferor must deliver a certificate in the form of Exhibit B
hereto, including the certifications in item (1) thereof.
(B) if the transferee will take delivery in the form
of a beneficial interest in the Regulation S Temporary Global
Note or the Regulation S Global Note, then the transferor must
deliver a certificate in the form of Exhibit B hereto,
including the certifications in item (2) thereof; and
(C) if the transferee will take delivery in the form
of a beneficial interest in the IAI Global Note, then the
transferor must deliver a certificate in the form of Exhibit B
hereto, including the certifications and certificates and
Opinion of Counsel required by item (3) thereof, if
applicable.
(iv) Transfer and Exchange of Beneficial Interests in a
Restricted Global Note for Beneficial Interests in the Unrestricted
Global Note. A beneficial interest in any Restricted Global Note may be
exchanged by any holder thereof for a beneficial interest in an
Unrestricted Global Note or transferred to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global
Note if the exchange or transfer complies with the requirements of
Section 2.06(b)(ii) above and:
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Note Registration
Rights Agreement and the holder of the beneficial
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interest to be transferred, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the
applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution
of the Exchange Notes or (3) a Person who is an affiliate (as
defined in Rule 144) of the Issuers;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Note
Registration Rights Agreement;
(C) such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Note Registration Rights
Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial
interest in a Restricted Global Note proposes to
exchange such beneficial interest for a beneficial
interest in an Unrestricted Global Note, a
certificate from such holder in the form of Exhibit C
hereto, including the certifications in item (1)(a)
thereof; or
(2) if the holder of such beneficial
interest in a Restricted Global Note proposes to
transfer such beneficial interest to a Person who
shall take delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note, a
certificate from such holder in the form of Exhibit B
hereto, including the certifications in item (4)
thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar or the Issuers so request or if the Applicable Procedures so
require, an Opinion of Counsel in form reasonably acceptable to the
Registrar or the Issuers, as applicable, to the effect that such
exchange or transfer is in compliance with the Securities Act and that
the restrictions on transfer contained herein and in the Private
Placement Legend are no longer required in order to maintain compliance
with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B)
or (D) above at a time when an Unrestricted Global Note has not yet been issued,
the Issuers shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
aggregate principal amount of beneficial interests transferred pursuant to
subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the form
of, a beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive Notes.
(i) Beneficial Interests in Restricted Global Notes to
Restricted Definitive Notes. If any holder of a beneficial interest in
a Restricted Global Note proposes to exchange such beneficial interest
for a Restricted Definitive Note or to transfer such beneficial
interest to a Person who takes delivery thereof in the form of a
Restricted Definitive Note, then, upon receipt by the Registrar of the
following documentation:
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(A) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial
interest for a Restricted Definitive Note, a certificate from
such holder in the form of Exhibit C hereto, including the
certifications in item (2)(a) thereof;
(B) if such beneficial interest is being transferred
to a QIB in accordance with Rule 144A under the Securities
Act, a certificate to the effect set forth in Exhibit B
hereto, including the certifications in item (1) thereof;
(C) if such beneficial interest is being transferred
to a Non-U.S. Person in an offshore transaction in accordance
with Rule 903 or Rule 904 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (2) thereof;
(D) if such beneficial interest is being transferred
pursuant to an exemption from the registration requirements of
the Securities Act in accordance with Rule 144 under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (3)(a)
thereof;
(E) if such beneficial interest is being transferred
to an Institutional Accredited Investor in reliance on an
exemption from the registration requirements of the Securities
Act other than those listed in subparagraphs (B) through (D)
above, a certificate to the effect set forth in Exhibit B
hereto, including the certifications, certificates and Opinion
of Counsel required by item (3) thereof, if applicable;
(F) if such beneficial interest is being transferred
to the Issuers or any of their Subsidiaries, a certificate to
the effect set forth in Exhibit B hereto, including the
certifications in item (3)(b) thereof; or
(G) if such beneficial interest is being transferred
pursuant to an effective registration statement under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (3)(c)
thereof,
the Trustee shall cause the aggregate principal amount of the
applicable Global Note to be reduced accordingly pursuant to Section
2.06(h) hereof, and the Issuers shall execute and the Trustee shall
authenticate and deliver to the Person designated in the instructions a
Definitive Note in the appropriate principal amount. Any Definitive
Note issued in exchange for a beneficial interest in a Restricted
Global Note pursuant to this Section 2.06(c) shall be registered in
such name or names and in such authorized denomination or denominations
as the holder of such beneficial interest shall instruct the Registrar
through instructions from the Depositary and the Participant or
Indirect Participant. The Trustee shall deliver such Definitive Notes
to the Persons in whose names such Notes are so registered. Any
Definitive Note issued in exchange for a beneficial interest in a
Restricted Global Note pursuant to this Section 2.06(c)(i) shall bear
the Private Placement Legend and shall be subject to all restrictions
on transfer contained therein.
Without limiting, and in addition to the restrictions in, Sections
2.06(c)(i)(A) and (C) hereof, a beneficial interest in the Regulation S
Temporary Global Note may not be exchanged for a Definitive Note or
transferred to a Person who takes delivery thereof in the form of a
Definitive
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Note prior to (x) the expiration of the Restricted Period and (y) the
receipt by the Registrar of any certificates required pursuant to Rule
903 under the Securities Act, except in the case of a transfer pursuant
to an exemption from the registration requirements of the Securities
Act other than Rule 903 or Rule 904.
(ii) Beneficial Interests in Restricted Global Notes to
Unrestricted Definitive Notes. A holder of a beneficial interest in a
Restricted Global Note may exchange such beneficial interest for an
Unrestricted Definitive Note or may transfer such beneficial interest
to a Person who takes delivery thereof in the form of an Unrestricted
Definitive Note only if:
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Note Registration
Rights Agreement and the holder of such beneficial interest,
in the case of an exchange, or the transferee, in the case of
a transfer, certifies in the applicable Letter of Transmittal
that it is eligible to participate in the Exchange Offer and
is not (1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an
affiliate (as defined in Rule 144) of the Issuers;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Note
Registration Rights Agreement;
(C) such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Note Registration Rights
Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial
interest in a Restricted Global Note proposes to
exchange such beneficial interest for a Definitive
Note that does not bear the Private Placement Legend,
a certificate from such holder in the form of Exhibit
C hereto, including the certifications in item (1)(b)
thereof; or
(2) if the holder of such beneficial
interest in a Restricted Global Note proposes to
transfer such beneficial interest to a Person who
shall take delivery thereof in the form of a
Definitive Note that does not bear the Private
Placement Legend, a certificate from such holder in
the form of Exhibit B hereto, including the
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar (although it will have no obligation to do so) or the Issuers
so request or if the Applicable Procedures so require, an Opinion of
Counsel in form reasonably acceptable to the Registrar or the Issuers,
as applicable, to the effect that such exchange or transfer is in
compliance with the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement Legend are no
longer required in order to maintain compliance with the Securities
Act.
(iii) Beneficial Interests in Unrestricted Global Notes to
Unrestricted Definitive Notes. If any holder of a beneficial interest
in an Unrestricted Global Note proposes to exchange such beneficial
interest for a Definitive Note or to transfer such beneficial interest
to a Person who takes delivery thereof in the form of a Definitive
Note, then, upon satisfaction of the
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conditions set forth in Section 2.06(b)(ii) hereof, the Trustee shall
cause the aggregate principal amount of the applicable Global Note to
be reduced accordingly pursuant to Section 2.06(h) hereof, and the
Issuers shall execute and the Trustee shall authenticate and deliver to
the Person designated in the instructions a Definitive Note in the
appropriate principal amount. Any Definitive Note issued in exchange
for a beneficial interest pursuant to this Section 2.06(c)(iii) shall
be registered in such name or names and in such authorized denomination
or denominations as the holder of such beneficial interest shall
instruct the Registrar through instructions from the Depositary and the
Participant or Indirect Participant. The Trustee shall deliver such
Definitive Notes to the Persons in whose names such Notes are so
registered. Any Definitive Note issued in exchange for a beneficial
interest pursuant to this Section 2.06(c)(iii) shall not bear the
Private Placement Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial
Interests.
(i) Restricted Definitive Notes to Beneficial Interests in
Restricted Global Notes. If any Holder of a Restricted Definitive Note
proposes to exchange such Note for a beneficial interest in a
Restricted Global Note or to transfer such Restricted Definitive Notes
to a Person who takes delivery thereof in the form of a beneficial
interest in a Restricted Global Note, then, upon receipt by the
Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive Note
proposes to exchange such Note for a beneficial interest in a
Restricted Global Note, a certificate from such Holder in the
form of Exhibit C hereto, including the certifications in item
(2)(b) thereof;
(B) if such Restricted Definitive Note is being
transferred to a QIB in accordance with Rule 144A under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (1)
thereof;
(C) if such Restricted Definitive Note is being
transferred to a Non-U.S. Person in an offshore transaction in
accordance with Rule 903 or Rule 904 under the Securities Act,
a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (2) thereof;
(D) if such Restricted Definitive Note is being
transferred pursuant to an exemption from the registration
requirements of the Securities Act in accordance with Rule 144
under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in
item (3)(a) thereof;
(E) if such Restricted Definitive Note is being
transferred to an Institutional Accredited Investor in
reliance on an exemption from the registration requirements of
the Securities Act other than those listed in subparagraphs
(B) through (D) above, a certificate to the effect set forth
in Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3)
thereof, if applicable;
(F) if such Restricted Definitive Note is being
transferred to the Issuers or any of their Subsidiaries, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(b) thereof; or
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(G) if such Restricted Definitive Note is being
transferred pursuant to an effective registration statement
under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in
item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note, increase or
cause to be increased the aggregate principal amount of, in the case of
clause (A) above, the appropriate Restricted Global Note, in the case
of clause (B) above, the 144A Global Note in the case of clause (C)
above, the Regulation S Global Note, and in all other cases, the IAI
Global Note.
(ii) Restricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of a Restricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global
Note or transfer such Restricted Definitive Note to a Person who takes
delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note only if:
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Note Registration
Rights Agreement and the Holder, in the case of an exchange,
or the transferee, in the case of a transfer, certifies in the
applicable Letter of Transmittal that it is eligible to
participate in the Exchange Offer and is not (1) a
broker-dealer, (2) a Person participating in the distribution
of the Exchange Notes or (3) a Person who is an affiliate (as
defined in Rule 144) of the Issuers;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Note
Registration Rights Agreement;
(C) such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Note Registration Rights
Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes
proposes to exchange such Notes for a beneficial
interest in the Unrestricted Global Note, a
certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item (1)(c)
thereof; or
(2) if the Holder of such Definitive Notes
proposes to transfer such Notes to a Person who shall
take delivery thereof in the form of a beneficial
interest in the Unrestricted Global Note, a
certificate from such Holder in the form of Exhibit B
hereto, including the certifications in item (4)
thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar (although it shall have no obligation to do so) or the
Issuers so request or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar or
the Issuers, as applicable, to the effect that such exchange or
transfer is in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the Private Placement
Legend are no longer required in order to maintain compliance with the
Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs in this
Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes and
increase or cause to be increased in accordance
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with its standard operating procedures and practices the aggregate
principal amount of the Unrestricted Global Note.
(iii) Unrestricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note
may exchange such Note for a beneficial interest in an Unrestricted
Global Note or transfer such Definitive Notes to a Person who takes
delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note at any time. Upon receipt of a request for
such an exchange or transfer, the Trustee shall cancel the applicable
Unrestricted Definitive Note and increase or cause to be increased in
accordance with its standard operating procedures and practices the
aggregate principal amount of one of the Unrestricted Global Notes.
If any such exchange or transfer from a Definitive Note to a
beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or
(iii) above at a time when an Unrestricted Global Note has not yet been issued,
the Issuers shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
principal amount of Definitive Notes so transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive Notes.
Upon request by a Holder of Definitive Notes and such Holder's
compliance with the provisions of this Section 2.06(e), the Registrar shall
register the transfer or exchange of Definitive Notes. Prior to such
registration of transfer or exchange, the requesting Holder shall present or
surrender to the Registrar the Definitive Notes duly endorsed or accompanied by
a written instruction of transfer in form satisfactory to the Registrar duly
executed by such Holder or by his attorney, duly authorized in writing. In
addition, the requesting Holder shall provide any additional certifications,
documents and information, as applicable, required pursuant to the following
provisions of this Section 2.06(e).
(i) Restricted Definitive Notes to Restricted Definitive
Notes. Any Restricted Definitive Note may be transferred to and
registered in the name of Persons who take delivery thereof in the form
of a Restricted Definitive Note if the Registrar receives the
following:
(A) if the transfer will be made pursuant to Rule
144A under the Securities Act, then the transferor must
deliver a certificate in the form of Exhibit B hereto,
including the certifications in item (1) thereof;
(B) if the transfer will be made pursuant to Rule 903
or Rule 904, then the transferor must deliver a certificate in
the form of Exhibit B hereto, including the certifications in
item (2) thereof; and
(C) if the transfer will be made pursuant to any
other exemption from the registration requirements of the
Securities Act, then the transferor must deliver a certificate
in the form of Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3)
thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted Definitive
Notes. Any Restricted Definitive Note may be exchanged by the Holder
thereof for an Unrestricted Definitive Note or transferred to a Person
or Persons who take delivery thereof in the form of an Unrestricted
Definitive Note if:
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(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Note Registration
Rights Agreement and the Holder, in the case of an exchange,
or the transferee, in the case of a transfer, certifies in the
applicable Letter of Transmittal that it is eligible to
participate in the Exchange Offer and is not (1) a
broker-dealer, (2) a Person participating in the distribution
of the Exchange Notes or (3) a Person who is an affiliate (as
defined in Rule 144) of the Issuers;
(B) any such transfer is effected pursuant to the
Shelf Registration Statement in accordance with the Note
Registration Rights Agreement;
(C) any such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Note Registration Rights
Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted
Definitive Notes proposes to exchange such Notes for
an Unrestricted Definitive Note, a certificate from
such Holder in the form of Exhibit C hereto,
including the certifications in item (1)(d) thereof;
or
(2) if the Holder of such Restricted
Definitive Notes proposes to transfer such Notes to a
Person who shall take delivery thereof in the form of
an Unrestricted Definitive Note, a certificate from
such Holder in the form of Exhibit B hereto,
including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar (although it shall have no obligation to do so) or Issuers so
requests, an Opinion of Counsel in a form reasonably acceptable to the
Registrar or Issuers, as applicable, to the effect that such exchange
or transfer is in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the Private Placement
Legend are no longer required in order to maintain compliance with the
Securities Act.
(iii) Unrestricted Definitive Notes to Unrestricted Definitive
Notes. A Holder of Unrestricted Definitive Notes may transfer such
Notes to a Person who takes delivery thereof in the form of an
Unrestricted Definitive Note. Upon receipt of a request to register
such a transfer, the Registrar shall register the Unrestricted
Definitive Notes pursuant to the instructions from the Holder thereof.
(f) Exchange Offer. Upon the occurrence of the Exchange Offer in
accordance with the Note Registration Rights Agreement, the Issuers shall issue
and, upon receipt of an Authentication Order in accordance with Section 2.02 and
an Officer's Certificate from the Issuers to the effect that an Exchange Offer
in accordance with the Note Registration Rights Agreement has occurred, the
Trustee shall authenticate (i) one or more Unrestricted Global Notes in an
aggregate principal amount equal to the
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principal amount of the beneficial interests in the Restricted Global Notes
tendered for acceptance by Persons that certify in the applicable Letters of
Transmittal that they are eligible to participate in the Exchange Offer and (x)
they are not broker-dealers, (y) they are not participating in a distribution of
the Exchange Notes and (z) they are not affiliates (as defined in Rule 144) of
the Issuers, and accepted for exchange in the Exchange Offer and (ii) Definitive
Notes in an aggregate principal amount equal to the principal amount of the
Restricted Definitive Notes accepted for exchange in the Exchange Offer.
Concurrently with the issuance of such Notes, the Trustee shall cause the
aggregate principal amount of the applicable Restricted Global Notes to be
reduced accordingly in accordance with the practices and procedures of the
Depositary and the Trustee, and the Issuers shall execute and the Trustee shall
authenticate and deliver to the Persons designated by the Holders of Definitive
Notes so accepted Definitive Notes in the appropriate principal amount.
(g) Legends. The following legends shall appear on the face of all
Global Notes and Definitive Notes issued under this Indenture unless
specifically stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below,
each Global Note and each Definitive Note (and all Notes
issued in exchange therefor or substitution thereof) shall
bear the legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS
SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION AS SET
FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT
(A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT ("RULE 144A") OR (B) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A) (1), (2), (3) OR (7)
UNDER THE SECURITIES ACT) (AN "ACCREDITED INVESTOR"), (2) AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY PRIOR TO THE DATE WHICH
IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE
LAST DATE ON WHICH THE ISSUERS OR ANY AFFILIATE OF THE ISSUERS WAS THE
OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) ONLY (A)
TO THE ISSUERS, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE
SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A INSIDE THE
UNITED STATES, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM
NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR
OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT, (E) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR
THAT IS ACQUIRING THE SECURITIES FOR ITS OWN ACCOUNT, OR FOR THE
ACCOUNT OF SUCH ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT
WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, SUBJECT TO THE ISSUERS' AND THE TRUSTEE'S RIGHT PRIOR
TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSES (D),
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(E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM,
AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE
OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS
COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE.
(B) Notwithstanding the foregoing, any Global Note or
Definitive Note issued pursuant to subparagraphs (b)(iv),
(c)(ii), (c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f)
to this Section 2.06 (and all Notes issued in exchange
therefor or substitution thereof) shall not bear the Private
Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend
in substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE
BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY
PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE
SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.06 OF
THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT
IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL
NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO
SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE
TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF
THE ISSUERS."
(iii) Regulation S Temporary Global Note Legend. The
Regulation S Temporary Global Note shall bear a legend in substantially
the following form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND
THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR OTHER NOTES,
ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE
HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL
NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON."
(iv) Original Issue Discount Legend. Each Note shall bear a
legend in substantially the following form:
"FOR THE PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED, THIS SECURITY IS BEING ISSUED WITH
ORIGINAL ISSUE DISCOUNT; FOR EACH $1,000 PRINCIPAL AMOUNT OF THIS
SECURITY, THE ISSUE PRICE IS $519.40 THE AMOUNT OF ORIGINAL ISSUE
DISCOUNT IS $480.60, THE ISSUE DATE IS FEBRUARY 26, 1998 AND THE YIELD
TO MATURITY IS 15.06 % PER ANNUM."
(h) Cancellation and/or Adjustment of Global Notes. At such time as all
beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has
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been redeemed, repurchased or canceled in whole and not in part, each such
Global Note shall be returned to or retained and canceled by the Trustee in
accordance with Section 2.11 hereof. At any time prior to such cancellation, if
any beneficial interest in a Global Note is exchanged for or transferred to a
Person who will take delivery thereof in the form of a beneficial interest in
another Global Note or for Definitive Notes, the principal amount of Notes
represented by such Global Note shall be reduced accordingly and an endorsement
shall be made on such Global Note or on the schedule maintained by the
Depositary in respect of such Global Note for such purposes, in accordance with
the Applicable Procedures, by the Trustee or by the Depositary at the direction
of the Trustee to reflect such reduction; and if the beneficial interest is
being exchanged for or transferred to a Person who will take delivery thereof in
the form of a beneficial interest in another Global Note, such other Global Note
shall be increased accordingly and an endorsement or on the schedule maintained
by the Depositary in respect of such Global Note for such purposes, in
accordance with the Applicable Procedures, shall be made on such Global Note by
the Trustee or by the Depositary at the direction of the Trustee to reflect such
increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the
Issuers shall execute and the Trustee shall authenticate Global Notes
and Definitive Notes upon the Issuers' order or at the Registrar's
request.
(ii) No service charge shall be made to a holder of a
beneficial interest in a Global Note or to a Holder of a Definitive
Note for any registration of transfer or exchange, but the Issuers may
require payment of a sum sufficient to cover any documentary, stamp or
other transfer tax or similar governmental charge payable in connection
therewith (other than any such documentary, stamp or other transfer
taxes or similar governmental charge payable upon exchange or transfer
pursuant to Sections 2.10, 3.07, 3.10, 4.10, 4.15 and 9.05 hereof).
(iii) The Registrar shall not be required to register the
transfer of or exchange any Note selected for redemption in whole or in
part, except the unredeemed portion of any Note being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any
registration of transfer or exchange of Global Notes or Definitive
Notes shall be the valid obligations of the Issuers, evidencing the
same debt, and entitled to the same benefits under this Indenture, as
the Global Notes or Definitive Notes surrendered upon such registration
of transfer or exchange.
(v) The Issuers shall not be required (A) to issue, to
register the transfer of or to exchange any Notes during a period
beginning at the opening of business 15 days before the day of any
selection of Notes for redemption under Section 3.02 hereof and ending
at the close of business on the day of selection, (B) to register the
transfer of or to exchange any Note so selected for redemption in whole
or in part, except the unredeemed portion of any Note being redeemed in
part or (c) to register the transfer of or to exchange a Note between a
record date and the next succeeding Interest Payment Date.
(vi) Prior to due presentment for the registration of a
transfer of any Note, the Trustee, any Agent and the Issuers may deem
and treat the Person in whose name any Note is registered as the
absolute owner of such Note for the purpose of receiving payment of
principal
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of and interest on such Notes and for all other purposes, and none of
the Trustee, any Agent or the Issuers shall be affected by notice to
the contrary.
(vii) The Trustee shall authenticate Global Notes and
Definitive Notes in accordance with the provisions of Section 2.02
hereof.
(viii) All certifications, certificates and Opinions of
Counsel required to be submitted to the Registrar pursuant to this
Section 2.06 to effect a registration of transfer or exchange may be
submitted by facsimile (provided that the original is mailed by first
class mail within two business days thereafter).
SECTION 2.07. REPLACEMENT NOTES.
If any mutilated Note is surrendered to the Trustee or the
Issuers and the Trustee (and the Issuers if they reasonably request) receive
evidence to their satisfaction of the destruction, loss or theft of any Note,
the Issuers shall issue and the Trustee, upon receipt of an Authentication
Order, shall authenticate a replacement Note if the Trustee's requirements are
met. If required by the Trustee or the Issuers, an indemnity bond must be
supplied by the Holder that is sufficient in the judgment of the Trustee and the
Issuers to protect the Issuers, the Trustee, any Agent and any authenticating
agent from any loss that any of them may suffer if a Note is replaced. The
Issuers may charge for their expenses in replacing a Note.
Every replacement Note is an obligation of the Issuers and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued and outstanding hereunder.
SECTION 2.08. OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes
authenticated by the Trustee except for those canceled by it, those delivered to
it for cancellation, those reductions in the interest in a Global Note effected
by the Trustee in accordance with the provisions hereof and in accordance with
its standard operating procedures and practices, and those described in this
Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note
does not cease to be outstanding because the Issuers or an Affiliate of the
Issuers holds the Note; however, Notes held by the Issuers or a Subsidiary of
the Issuers shall not be deemed to be outstanding for purposes of Section
3.07(b) hereof.
If a Note is replaced pursuant to Section 2.07 hereof, it
ceases to be outstanding unless the Trustee receives proof satisfactory to it
that the replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under
Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to
accrue.
If the Paying Agent (other than the Issuers, a Subsidiary or
an Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date such
Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest.
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SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal
amount of Notes have concurred in any direction, waiver or consent, Notes owned
by the Issuers, or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Issuers, shall
be considered as though not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes that the Trustee knows are so owned
shall be so disregarded.
SECTION 2.10. TEMPORARY NOTES
Until certificates representing Notes are ready for delivery,
the Issuers may prepare and the Trustee, upon receipt of an Authentication
Order, shall authenticate temporary Notes. Temporary Notes shall be
substantially in the form of certificated Notes but may have variations that the
Issuers considers appropriate for temporary Notes and as shall be reasonably
acceptable to the Trustee. Without unreasonable delay, the Issuers shall prepare
and the Trustee shall authenticate definitive Notes in exchange for temporary
Notes.
Holders of temporary Notes shall be entitled to all of the
benefits of this Indenture.
SECTION 2.11. CANCELLATION.
The Issuers at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy
canceled Notes (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all canceled Notes shall be delivered
to the Issuers. The Issuers may not issue new Notes to replace Notes that it has
paid or that have been delivered to the Trustee for cancellation.
SECTION 2.12. DEFAULTED INTEREST.
If the Issuers default in a payment of interest on the Notes,
they shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Notes and in Section 4.01 hereof. The Issuers shall notify the Trustee in
writing of the amount of defaulted interest proposed to be paid on each Note and
the date of the proposed payment. The Issuers shall fix or cause to be fixed
each such special record date and payment date, provided that no such special
record date shall be less than 10 days prior to the related payment date for
such defaulted interest. At least 15 days before the special record date, the
Issuers (or, upon the written request of the Issuers, the Trustee in the name
and at the expense of the Issuers) shall mail or cause to be mailed to Holders a
notice that states the special record date, the related payment date and the
amount of such interest to be paid.
ARTICLE 3.
REDEMPTION AND PREPAYMENT
SECTION 3.01. NOTICES TO TRUSTEE.
If the Issuers elect to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 37 days but not more than 60 days before a
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redemption date, an Officers' Certificate setting forth (i) the clause of this
Indenture pursuant to which the redemption shall occur, (ii) the redemption
date, (iii) the Accreted Value of Notes to be redeemed, (iv) the redemption
price and (v) the amount of Liquidated Damages, if any.
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED.
If less than all of the Notes are to be redeemed or purchased
at any time, selection of Notes for redemption or purchase will be made by the
Trustee in compliance with the requirements of the principal national securities
exchange, if any, on which the Notes are listed, provided that the Issuers shall
notify the Trustee or any listing of the Notes on any national securities
exchange or, if the Notes are not so listed, on a pro rata basis, by lot or by
such other method as the Trustee shall deem fair and appropriate; provided, that
no Notes of $1,000 or less shall be purchased or redeemed in part. Notices of
redemption or purchase shall be mailed by first class mail at least 30 but not
more than 60 days before the redemption date or purchase date (except in the
case of redemption required by any Gaming Authority, which may be less than 30
days) to each Holder of Notes to be redeemed or purchased at such Holder's
registered address. Notices of redemption may not be conditional. If any Note is
to be redeemed or purchased in part only, any notice of redemption or purchase
that relates to such Note shall state the portion of the principal amount
thereof to be redeemed or purchased. On and after the redemption or purchase
date, interest and Liquidated Damages, if any, shall cease to accrete or accrue
on Notes or portions thereof called for redemption or purchase.
The Trustee shall promptly notify the Issuers in writing of
the Notes selected for redemption and, in the case of any Note selected for
partial redemption, the principal amount thereof to be redeemed. Notes and
portions of Notes selected shall be in amounts of $1,000 or whole multiples of
$1,000; except that if all of the Notes of a Holder are to be redeemed, the
entire outstanding amount of Notes held by such Holder, even if not a multiple
of $1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
SECTION 3.03. NOTICE OF REDEMPTION.
Subject to the provisions of Section 3.10 hereof, at least 30
days but not more than 60 days before a redemption date, the Issuers shall mail
or cause to be mailed, by first class mail, a notice of redemption to each
Holder whose Notes are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall
state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the Accreted
Value of such Note to be redeemed and that, after the redemption date upon
surrender of such Note, a new Note or Notes in Accreted Value equal to the
unredeemed portion shall be issued upon cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
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(f) that, unless the Issuers default in making such redemption payment,
interest on Notes called for redemption ceases to accrue on and after the
redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy of
the CUSIP number, if any, listed in such notice or printed on the Notes.
At the Issuers' request, the Trustee shall give the notice of
redemption in the Issuers' names and at their expense; provided, however, that
the Issuers shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as provided
in the preceding paragraph.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section
3.03 hereof, Notes called for redemption become irrevocably due and payable on
the redemption date at the redemption price. A notice of redemption may not be
conditional.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
On or prior to 10:00 a.m. (New York City time) on the
redemption date, the Issuers shall deposit with the Trustee or with the Paying
Agent money sufficient to pay the redemption price of and accrued interest on
all Notes to be redeemed on that date. The Trustee or the Paying Agent shall
promptly return to the Issuers any money deposited with the Trustee or the
Paying Agent by the Issuers in excess of the amounts necessary to pay the
redemption price of, and accrued interest on, all Notes to be redeemed.
If the Issuers comply with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrete or
accrue on the Notes or the portions of Notes called for redemption. If a Note is
redeemed on or after a record date for the payment of interest but on or prior
to the related interest payment date, then any accrued and unpaid interest shall
be paid to the Person in whose name such Note was registered at the close of
business on such record date. If any Note called for redemption shall not be so
paid upon surrender for redemption because of the failure of the Issuers to
comply with the preceding paragraph, interest shall be paid on the unpaid
principal, from the redemption date until such principal is paid, and to the
extent lawful on any interest not paid on such unpaid principal, in each case at
the rate provided in the Notes and in Section 4.01 hereof.
SECTION 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Issuers
shall issue and, upon the Issuers' written request, the Trustee shall
authenticate for the Holder at the expense of the Issuers a new Note equal in
principal amount to the unredeemed portion of the Note surrendered.
SECTION 3.07. OPTIONAL REDEMPTION.
(a) Except as set forth in clause (b) of this Section 3.07 and in
Section 3.08 hereof, the Notes shall not be redeemable at the option of the
Issuers prior to March 1, 2003. Thereafter, the Notes shall be subject to
redemption at the option of the Issuers, in whole or in part, upon not less than
30 nor more
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than 60 days' notice, at the redemption prices (expressed as percentages of
Accreted Value) set forth below, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the applicable date of redemption, if redeemed
during the twelve-month period beginning on of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
- ---- ----------
<S> <C>
2003.............................................................. 106.75 %
2004.............................................................. 104.50 %
2005.............................................................. 102.25 %
2006 and thereafter............................................... 100.00 %
</TABLE>
(b) Notwithstanding the provisions of clause (a) of this Section 3.07,
on or prior to March 1, 2001, the Issuers may redeem up to an aggregate of 35%
of the Accreted Value of the Notes at a redemption price of 113 1/2 % of the
Accreted Value thereof, plus Liquidated Damages, if any, thereon to the
redemption date, with the proceeds of a Qualified Public Offering (which
proceeds may be advanced or contributed to the Issuers by the IPO Entity);
provided that at least 65% of the Accreted Value remains outstanding immediately
after the occurrence of such redemption; and provided, further, that such
redemption shall occur within 60 days of the date of such Qualified Public
Offering.
(c) Any redemption pursuant to this Section 3.07 shall be made pursuant
to the provisions of Sections 3.01 through 3.06 hereof.
SECTION 3.08. GAMING REDEMPTION.
(a) Notwithstanding any other provision of this Indenture, if any
Gaming Authority requires that a holder or beneficial owner of Notes must be
licensed, qualified or found suitable under any applicable gaming law and such
holder or beneficial owner fails to apply for a license, qualification or
finding of suitability within 30 days after being requested to do so by such
Gaming Authority (or such lesser period that may be required by such Gaming
Authority), or if such holder or beneficial owner is notified by such Gaming
Authority that such holder or beneficial owner will not be so licensed,
qualified or found suitable, the Issuers shall have the right, at their option,
(i) to require that such holder or beneficial owner dispose of such holder's or
beneficial owner's Notes within 30 days (or such earlier date as may be required
by the applicable Gaming Authority) of (a) the termination of the period
described above for such holder or beneficial owner to apply for a license,
qualification or finding of suitability or (b) receipt of the notice from such
Gaming Authority that such holder or beneficial owner will not be licensed,
qualified or found suitable by such Gaming Authority or (ii) to call for
redemption of the Notes of such holder or beneficial owner at a redemption price
equal to the lesser of the price at which such holder or beneficial owner
acquired such Notes and the Accreted Value thereof, together with, in either
case, accrued and unpaid interest and Liquidated Damages, if any, thereon to the
date of redemption or the date of the finding that such holder or beneficial
owner will not be licensed, qualified or found suitable, which may be less than
30 days following the notice of redemption, if so ordered by such Gaming
Authority or required by applicable gaming laws.
(b) In connection with any redemption pursuant to this Section 3.08,
and except as may be required by a Gaming Authority, the Issuers shall be
required to comply with Sections 3.01 through 3.06 hereof.
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SECTION 3.09. MANDATORY REDEMPTION.
Except as set forth under 4.10 and 4.15 hereof, the Issuers
shall not be required to make mandatory redemptions or sinking fund payments
prior to maturity with respect to the Notes.
SECTION 3.10. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.
In the event that, pursuant to Section 4.10 hereof, the
Issuers shall be required to commence an Asset Sale Offer, they shall follow the
procedures specified below.
The Asset Sale Offer shall remain open for a period of not
less than 30 nor more than 60 days following its commencement and no longer,
except to the extent that a longer period is required by applicable law (the
"Offer Period"). Upon the termination of the Offer Period (the "Purchase Date"),
the Issuers shall purchase the principal amount of Notes required to be
purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than
the Offer Amount has been tendered, all Notes tendered in response to the Asset
Sale Offer. Payment for any Notes so purchased shall be made in the same manner
as interest payments are made.
If the Purchase Date is on or after an interest record date
and on or before the related interest payment date, any accrued and unpaid
interest shall be paid to the Person in whose name a Note is registered at the
close of business on such record date, and no additional interest shall be
payable to Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Issuers
shall send, by first class mail, a notice to the Trustee and each of the
Holders, with a copy to the Trustee. The notice shall contain all instructions
and materials necessary to enable such Holders to tender Notes pursuant to the
Asset Sale Offer. The Asset Sale Offer shall be made to all Holders. The notice,
which shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to Section 4.10
hereof and the length of time the Asset Sale Offer shall remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall continue
to accrete or accrue interest;
(d) that, unless the Issuers default in making such payment, any Note
accepted for payment pursuant to the Asset Sale Offer shall cease to accrete or
accrue interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to an Asset
Sale Offer may only elect to have all of such Note purchased and may not elect
to have only a portion of such Note purchased;
(f) that Holders electing to have a Note purchased pursuant to any
Asset Sale Offer shall be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, or
transfer by book-entry transfer, to the Issuers, a depositary, if appointed by
the Issuers, or a Paying Agent at the address specified in the notice at least
three days before the Purchase Date;
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(g) that Holders shall be entitled to withdraw their election if the
Issuers, the depositary or the Paying Agent, as the case may be, receives, not
later than two Business Days prior to the expiration of the Offer Period, a
telegram, telex, facsimile transmission or letter duly executed by the Holder
setting forth the name of the Holder, the Accreted Value of the Note the Holder
delivered for purchase and a statement that such Holder is withdrawing his
election to have such Note purchased;
(h) that, if the aggregate Accreted Value of Notes surrendered by
Holders exceeds the Offer Amount, the Issuers shall select the Notes to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Issuers so that only Notes in denominations of $1,000, or
integral multiples thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall be
issued replacement Notes equal in Accreted Value to the unpurchased portion of
the Notes surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Issuers shall, to the
extent lawful, accept for payment, on a pro rata basis to the extent necessary,
the Offer Amount of Notes or portions thereof properly tendered pursuant to the
Asset Sale Offer, or if less than the Offer Amount has been tendered, all Notes
properly tendered, and shall deliver to the Trustee an Officers' Certificate
stating that such Notes or portions thereof were accepted for payment by the
Issuers in accordance with the terms of this Section 3.10. The Issuers, the
Depositary or the Paying Agent, as the case may be, shall promptly (but in any
case not later than five days after the Purchase Date) mail or deliver to each
tendering Holder an amount equal to the purchase price of the Notes tendered by
such Holder and accepted by the Issuers for purchase, and the Issuers shall
promptly issue a new Note, and the Trustee, upon written request from the
Issuers shall authenticate and mail or deliver such new Note to such Holder, in
a principal amount equal to any unpurchased portion of the Note surrendered. Any
Note not so accepted shall be promptly mailed or delivered by the Issuers to the
Holder thereof.
Other than as specifically provided in this Section 3.10, any
purchase pursuant to this Section 3.10 shall be made pursuant to the provisions
of Sections 3.01 through 3.06 hereof.
ARTICLE 4.
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.
The Issuers shall pay or cause to be paid the Accreted Value
of, premium, if any, and interest on the Notes on the dates and in the manner
provided in the Notes. Accreted Value, premium, if any, and interest shall be
considered paid on the date due if the Paying Agent, if other than the Issuers
or a Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on the due date
money deposited by the Issuers in immediately available funds and designated for
and sufficient to pay all Accreted Value, premium, if any, and interest then
due. The Issuers shall pay all Liquidated Damages, if any, in the same manner on
the dates and in the amounts set forth in the Note Registration Rights
Agreement.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Issuers shall maintain in the Borough of Manhattan, the
City of New York, an office or agency (which may be an office of the Trustee or
an affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or for exchange and where notices and
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demands to or upon the Issuers in respect of the Notes and this Indenture may be
served. The Issuers shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Issuers shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee.
The Issuers may also from time to time designate one or more
other offices or agencies where the Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Issuers of their obligation to maintain an office or agency in the
Borough of Manhattan, the City of New York for such purposes. The Issuers shall
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.
The Issuers hereby designate the Corporate Trust Office of the
Trustee as one such office or agency of the Issuers in accordance with Section
2.03.
SECTION 4.03. REPORTS.
Whether or not required by the rules and regulations of the Commission,
so long as any Notes are outstanding, the Issuers shall furnish to the Holders
(i) all quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if the Issuers
were required to file such Forms, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" that describes the
financial condition and results of operations of Holdings and its consolidated
Subsidiaries (provided that, prior to the time that the Issuers file such
information with the Commission for public availability, showing in reasonable
detail, either on the face of the financial statements or in the footnotes
thereto and in Management's Discussion and Analysis of Financial Condition and
Results of Operations, the financial condition and results of operations of
Holdings and its Restricted Subsidiaries separate from the financial condition
and results of operations of the Unrestricted Subsidiaries of Holdings and,
subsequent to such time, showing such reasonable detail as required by the
Commission) and, with respect to the annual information only, a report thereon
by the Issuers' certified independent accountants and (ii) all current reports
that would be required to be filed with the Commission on Form 8-K if the
Issuers were required to file such reports, in each case within the time periods
specified in the Commission's rules and regulations. In addition, following the
consummation of the exchange offer contemplated by the Note Registration Rights
Agreement, whether or not required by the rules and regulations of the
Commission, the Issuers shall file a copy of all such information and reports
with the Commission for public availability within the time periods specified in
the Commission's rules and regulations (unless the Commission will not accept
such a filing) and make such information available to securities analysts and
prospective investors upon request. In addition, the Issuers shall, for so long
as any Notes remain outstanding, furnish to the Holders and to securities
analysts and prospective investors, upon their request, the information required
to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
SECTION 4.04. COMPLIANCE CERTIFICATE.
(a) The Issuers shall deliver to the Trustee, within 120 days after the
end of each fiscal year, an Officers' Certificate stating that a review of the
activities of the Issuers and their Subsidiaries during the preceding fiscal
year has been made under the supervision of the signing Officers with a view to
determining whether the Issuers have kept, observed, performed and fulfilled
their obligations under this Indenture, and further stating, as to each such
Officer signing such certificate, that to the best of his or her
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<PAGE>
knowledge the Issuers have kept, observed, performed and fulfilled each and
every covenant contained in this Indenture and are not in default in the
performance or observance of any of the terms, provisions and conditions of this
Indenture (or, if a Default or Event of Default shall have occurred, describing
all such Defaults or Events of Default of which he or she may have knowledge and
what action the Issuers are taking or propose to take with respect thereto) and
that to the best of his or her knowledge no event has occurred and remains in
existence by reason of which payments on account of the Accreted Value of or
interest, if any, on the Notes is prohibited or if such event has occurred, a
description of the event and what action the Issuers are taking or propose to
take with respect thereto.
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03 above shall be accompanied by a
written statement of the Issuers' independent public accountants (who shall be a
firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Issuers have violated
any provisions of Article 4 or Article 5 hereof or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) The Issuers shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Issuers are taking or proposes to take with
respect thereto.
SECTION 4.05. TAXES.
The Issuers shall pay, and shall cause each of their
Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and
governmental levies of the Issuers or their Subsidiaries, as applicable, except
such as are contested in good faith and by appropriate proceedings or where the
failure to effect such payment is not adverse in any material respect to the
Holders of the Notes.
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.
The Issuers covenant (to the extent that it may lawfully do
so) that it shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay, extension or
usury law wherever enacted, now or at any time hereafter in force, that may
affect the covenants or the performance of this Indenture; and the Issuers (to
the extent that it may lawfully do so) hereby expressly waive all benefit or
advantage of any such law, and covenants that it shall not, by resort to any
such law, hinder, delay or impede the execution of any power herein granted to
the Trustee, but shall suffer and permit the execution of every such power as
though no such law has been enacted.
SECTION 4.07. RESTRICTED PAYMENTS.
(a) Prior to the date the Aladdin is Operating, except as permitted in
clauses (iv), (v), (vi), (vii), (viii), (xi), (xii), (xiv), (xv), (xix), (xx),
(xxi), (xxii) or (xxiv) of paragraph (c) below, Holdings shall not, and shall
not permit any of its Restricted Subsidiaries to, directly or indirectly: (i)
declare or pay any dividend, if applicable, or make any other payment or
distribution on account of Holdings' or any of its Restricted Subsidiaries'
Equity Interests (including, without limitation, any payment in connection with
any merger or consolidation involving either of the Issuers) or to the direct or
indirect
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holders of Holdings' or any of its Restricted Subsidiaries' Equity Interests in
any capacity (other than dividends, if applicable, or distributions payable in
Equity Interests (other than Disqualified Stock) of Holdings (or accretions
thereon) or dividends, if applicable, or distributions payable to Holdings by a
Wholly Owned Subsidiary of Holdings); (ii) purchase, redeem or otherwise acquire
or retire for value (including, without limitation, in connection with any
merger or consolidation involving either of the Issuers) any Equity Interests of
Holdings or any Subsidiary of Holdings or any direct or indirect parent of
Holdings or other Affiliate of Holdings (other than any such Equity Interests
owned by Holdings or any Wholly Owned Subsidiary of Holdings); (iii) make any
payment on or with respect to, or purchase, redeem, defease or otherwise acquire
or retire for value any Indebtedness that is pari passu with or subordinated to
the Notes (other than the Notes), except a payment of interest or principal at
Stated Maturity; or (iv) make any Restricted Investment (all such payments and
other actions set forth in clauses (i) through (iv) above being collectively
referred to as "Restricted Payments").
(b) Following the date on which the Aladdin is Operating, subject to
paragraph (c) below, Holdings shall not and shall not permit any of its
Restricted Subsidiaries to make, directly or indirectly, any Restricted Payments
unless, at the time of and after giving effect to such Restricted Payment:
(i) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(ii) Holdings would, at the time of such Restricted Payment,
have a Fixed Charge Coverage Ratio for its most recently ended four
full fiscal quarters for which internal financial statements are
available immediately preceding the date on which such Restricted
Payment is proposed to be made of at least 2.25 to 1.0, determined on a
pro forma basis after giving effect to such Restricted Payment as if it
had been made at the beginning of such four quarter period; and
(iii) such Restricted Payment, together with the aggregate
amount of all other Restricted Payments (except as provided in the last
sentence of paragraph (c) below) made by Holdings and its Restricted
Subsidiaries after the Issue Date is less than the sum, without
duplication, of (A) 50% of (1) the Consolidated Net Income of Holdings
for the period (taken as one accounting period) from the beginning of
the first fiscal quarter commencing after the date on which the Aladdin
becomes Operating to the end of Holdings' most recently ended fiscal
quarter for which internal financial statements are available (or, if
such Consolidated Net Income for such period is a deficit, less 100% of
such deficit) less (2) the amount paid or to be paid in respect of such
period pursuant to clause (v) of paragraph (c) below, plus (B) 100% of
the aggregate net cash proceeds received by Holdings since the Issue
Date from capital contributions or the issue or sale of Equity
Interests of Holdings (other than Disqualified Stock) or Disqualified
Stock or debt securities of the Issuers that have been converted into
such Equity Interests (other than Equity Interests (or Disqualified
Stock or convertible debt securities) sold to a Subsidiary of the
Issuers and other than Disqualified Stock or convertible debt
securities that have been converted into Disqualified Stock), in any
case other than (1) amounts received by Holdings pursuant to payments
being made by any party in connection with its obligations under the
Keep-Well Agreement or the Bank Completion Guaranty or (2) any amounts
received by Holdings or deemed received by Holdings from a Restricted
Subsidiary in connection with a conversion by Holdings to a corporation
(other than amounts received by Holdings from a new issuance of Equity
Interests of Holdings for cash), plus (C) to the extent not otherwise
included in Holdings' Consolidated Net Income, 100% of the cash
dividends, if applicable, or distributions or the amount of the cash
principal and interest payments received since the Issue Date by
Holdings or any Restricted Subsidiary from any Unrestricted Subsidiary
or in respect of
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any Restricted Investment (other than dividends, if applicable, or
distributions to pay obligations of or with respect to such
Unrestricted Subsidiary such as income taxes) until the entire amount
of the Investment in such Unrestricted Subsidiary has been received or
the entire amount of such Restricted Investment has been returned, as
the case may be, and 50% of such amounts thereafter. In the event that
the Issuers convert an Unrestricted Subsidiary to a Restricted
Subsidiary, the Issuers may add back to this clause (iii) the aggregate
amount of any Investment in such Subsidiary that was a Restricted
Payment at the time of such Investment.
(c) The provisions set forth in paragraph (b) above shall not prohibit
(i) the payment of any dividend, if applicable, or distribution within 60 days
after the date of declaration thereof, if at the date of declaration such
payment would have complied with the provisions of this Indenture; (ii) the
redemption, repurchase, retirement, defeasance or other acquisition of any pari
passu or subordinated indebtedness of Holdings or Equity Interests of Holdings
in exchange for, or out of the net cash proceeds of, the substantially
concurrent sale (other than to a Restricted Subsidiary of Holdings) of, other
Equity Interests of Holdings (other than any Disqualified Stock); provided that
the amount of any such net cash proceeds that are utilized for any such
redemption, repurchase, retirement, defeasance or other acquisition shall be
excluded from clause (b)(iii) of the preceding paragraph; (iii) the defeasance,
redemption, repurchase, retirement or other acquisition of any pari passu or
subordinated indebtedness with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness; (iv) any redemption required pursuant to
Section 3.08 hereof; (v) for so long as Holdings or the Company is treated as a
pass-through entity, or the Company is not treated as a separate entity, for
United States federal income tax purposes (as evidenced by an opinion of
counsel, subject to usual qualifications and in reliance on customary
representations, at least annually), distributions to equity holders of Holdings
or the Company, as applicable, in an amount not to exceed the Tax Amount for
such period; provided, however, that (A) prior to any distributions of Tax
Amounts, Holdings or the Company, as applicable, shall deliver an officers'
certificate to the Trustee to the effect that Holdings or the Company, as
applicable, is a limited-liability company taxable as a partnership or other
substantially similarly treated pass-through entity, or the Company is not
treated as a separate entity, for federal income tax purposes and (B) at the
time of such distributions, the most recent audited financial statements of
Holdings and the Company reflect that Holdings and the Company were each treated
as a limited-liability company taxable as a partnership or other substantially
similarly treated pass-through entity for federal income tax purposes for the
period covered by such financial statements; (vi) the grant on or after the
Issue Date by the Company to Aladdin Bazaar of a ground lease on the Desert
Passage Site and, upon the subdivision of the Project Site, the transfer by the
Company to Aladdin Bazaar of the fee interest in the Desert Passage Site; (vii)
the grant on or after the Issue Date of a ground lease relating to the Energy
Plant Site by the Company to the Energy Provider; (viii) the grant on or after
the Issue Date of a ground lease on the Music Project Site by the Company to AMH
and, upon consummation of the Music Project Financing, an Investment not to
exceed $21.3 million plus the transfer of the Music Project Site, in each case
by the Company to AMH and by AMH to Aladdin Music in exchange for preferred
membership interests in Aladdin Music pursuant to the Aladdin Music Operating
Agreement as in effect on the Issue Date; (ix) on and after September 1, 2003,
payments of cash distributions on the Series A Preferred Interests by the
Company to Holdings in an amount sufficient to enable Holdings to make payments
required to be made in respect of the Notes in an amount not to exceed the
amount payable thereunder in accordance with the terms thereof in effect on the
Issue Date; (x) payment to London Clubs of the Management Fee pursuant to the
Salle Privee Management Agreement as in effect on the Issue Date; (xi) payment
to London Clubs on the Issue Date of a fee equal to 1% of the amount of
Indebtedness supported and enhanced by the Keep-Well Agreement on the Issue Date
and payment of an annual fee equal to 1.5% of the annual average Indebtedness
outstanding under the Bank Credit Facility which is supported and enhanced by
the Keep-Well Agreement, in each case as set forth in the London Clubs Purchase
Agreement as in effect on the date hereof; (xii) payments or
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distributions by the Company to Holdings to effect redemptions of the Series A
Preferred Interests so long as Holdings utilizes the proceeds of such payments
to make an offer to purchase the Notes as required under this Indenture or to
redeem the Notes as permitted under this Indenture; (xiii) the repurchase,
redemption or other acquisition or retirement for value of any Equity Interests
of Holdings or any of its Restricted Subsidiaries held by any member of
Holdings' or any of its Restricted Subsidiaries' management pursuant to any
management equity subscription agreement or stock option agreement, including,
without limitation, pursuant to the exercise of puts of common membership
interests of Holdings by employees of Holdings as set forth in any Employment
Agreement; provided that the aggregate price paid for all such repurchased,
redeemed, acquired or retired Equity Interests shall not exceed $2.0 million in
the aggregate prior to the maturity of the Notes in any twelve-month period;
(xiv) the payment of salary, bonus and other benefits payable pursuant to the
Employment Agreements as amended from time to time; provided that any amendment
to any Employment Agreement has been determined by the Management Committee to
have been made in the ordinary course of business on terms customary in the
hotel/casino business; (xv) the issuance of Holdings Series A Preferred
Interests or Holdings Series B Preferred Interests and dividends, if applicable,
and distributions thereon made pursuant to the Operating Agreement as in effect
on the Issue Date in exchange for any payments required pursuant to the
Keep-Well Agreement or the Bank Completion Guaranty; (xvi) intercompany payments
between Holdings and its Wholly Owned Restricted Subsidiaries, including without
limitation, debt repayments between or among Holdings and its Wholly Owned
Restricted Subsidiaries; (xvii) following a Qualified Public Offering, dividends
or common stock buybacks in an aggregate amount in any calendar year not to
exceed 6% of the aggregate net proceeds received by the IPO Entity in connection
with such Qualified Public Offering; (xviii) repurchases of Capital Stock of
Holdings deemed to occur upon exercise of options to acquire Capital Stock of
Holdings if such repurchased Capital Stock represents a portion of the exercise
price of such options; (xix) payments by the Company to Holdings to enable
Holdings to pay any Liquidated Damages on the Notes so long as Holdings utilizes
the proceeds of such payments for the payment of such Liquidated Damages; (xx)
retainer payments made pursuant to Section 4(a) of the GAI Consulting Agreement;
(xxi) the payment of up to $3.0 million to the Trust to reimburse the Trust for
development costs incurred by the Trust on behalf of the Company prior to the
Issue Date and the payment of up to $0.9 million to reimburse the Trust for
development costs incurred by the Trust on behalf of the Company after the Issue
Date; (xxii) distributions to Holdings or Enterprises in an amount not to exceed
the fees and expenses incurred in connection with the obligation to file and
cause to become effective registration statements as required by the Note
Registration Rights Agreement and the Warrant Registration Rights Agreement;
(xxiii) the repurchase, redemption or other acquisition or retirement for value
of any Equity Interests of Holdings held by employees of Holdings or the Company
pursuant to any stock ownership or option plan in effect from time to time;
provided that the aggregate price paid for all such repurchased, redeemed,
acquired or retired Equity Interests shall not exceed $2.0 million in any
twelve-month period; and (xxiv) cancellations or redemptions of Holdings Common
Membership Interests held by GAI, LLC or any member of Holdings' management
pursuant to adjustments to be made under the Operating Agreement as in effect on
the Issue Date as a result of the exercise of Warrants; provided that no
payments permitted by clauses (i)-(ix) and (xi)-(xxiv) above shall be made if a
Default or an Event of Default shall have occurred and be continuing as a
consequence thereof. Any payments made pursuant to clauses (ii), (iii), (v),
(vi), (vii), (viii), (ix), (xi), (xii), (xiv), (xv), (xvi), (xviii), (xx),
(xxi), (xxii) and (xxiv) of this paragraph shall not be taken into account for
purposes of calculating the amount of Restricted Payments in clause (b)(iii)
above and all payments made pursuant to the remaining clauses of this paragraph
and under the definition of "Permitted Investments" shall be taken into account
for purposes of such clause (b)(iii) above.
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(d) The Board of Managers may designate any Restricted Subsidiary to be
an Unrestricted Subsidiary if such designation would not cause a Default. For
purposes of making such determination, all outstanding Investments by Holdings
and its Restricted Subsidiaries (except to the extent repaid in cash) in the
Subsidiary so designated will be deemed to be Restricted Payments at the time of
such designation and will reduce the amount available for Restricted Payments
under paragraph (b) above. All such outstanding Investments will be deemed to
constitute Investments in an amount equal to the fair market value of such
Investments at the time of such designation. Such designation will only be
permitted if such Restricted Payment would be permitted at such time and if such
Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary.
(e) The amount of all Restricted Payments (other than cash and those
Restricted Payments set forth in clauses (vi), (vii), (viii) and (xxiv) of
paragraph (c) of this Section 4.07) shall be the fair market value on the date
of the Restricted Payment of the assets or securities proposed to be transferred
or issued by Holdings or such Restricted Subsidiary, as the case may be,
pursuant to the Restricted Payment. The fair market value of any non-cash
Restricted Payment shall be determined by the Board of Managers whose resolution
with respect thereto shall be delivered to the Trustee. Not later than the date
of making any Restricted Payment, Holdings shall deliver to the Trustee an
Officers' Certificate stating that such Restricted Payment is permitted and
setting forth the basis upon which the calculations required by this Section
4.07 were computed.
SECTION 4.08. DISTRIBUTION AND OTHER PAYMENT RESTRICTIONS AFFECTING
RESTRICTED SUBSIDIARIES.
Holdings shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
such Restricted Subsidiary to (i) (a) pay dividends, if applicable, or make any
other distributions to Holdings or any of its Restricted Subsidiaries (1) on its
Capital Stock or (2) with respect to any other interest or participation in, or
measured by, its profits or (b) pay any Indebtedness owed to Holdings or any of
its Restricted Subsidiaries, (ii) make loans or advances to Holdings or any of
its Restricted Subsidiaries or (iii) transfer any of its properties or assets to
Holdings or any of its Restricted Subsidiaries, except, in each case, for such
encumbrances or restrictions existing under or by reason of (a) the Bank Credit
Facility, as in effect as of the Issue Date, and any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings thereof, provided that such amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings, are no more restrictive with respect to such dividend, if
applicable, and other payment restrictions than those contained in the Bank
Credit Facility as in effect on the Issue Date, (b) this Indenture and the
Notes, (c) any instrument governing Indebtedness or Capital Stock of a Person
acquired by Holdings or any of its Restricted Subsidiaries as in effect at the
time of such acquisition (except to the extent such Indebtedness was incurred in
connection with or in contemplation of such acquisition), which encumbrance or
restriction is not applicable to any Person, or the properties or assets of any
Person, other than the Person, or the property or assets of the Person, so
acquired, provided that in the case of Indebtedness, such Indebtedness was
permitted by the terms of this Indenture to be incurred, provided, further, that
any amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings of any such instrument are no more
restrictive, taken as a whole, than those contained in such instrument, (d)
customary non-assignment provisions in leases entered into in the ordinary
course of business, (e) purchase money obligations for property acquired in the
ordinary course of business that impose restrictions of the nature discussed in
clause (iii) above on the property so acquired, (f) any agreement for the sale
of a Restricted Subsidiary that restricts distributions by that Restricted
Subsidiary pending its sale, (g) applicable law or any applicable rule or order
of any Gaming Authority, (h) Permitted Liens, (i) Permitted Refinancing
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Indebtedness, provided that the restrictions contained in the agreements
governing such Permitted Refinancing Indebtedness are no more restrictive, taken
as a whole, than those contained in the agreements governing the Indebtedness
being refinanced, (j) secured Indebtedness otherwise permitted to be incurred
pursuant to Section 4.12 hereof that limits or restricts the right of the debtor
to dispose of the assets securing such Indebtedness, (k) provisions with respect
to the disposition or distribution of assets or property in joint venture
agreements and other similar agreements entered into in the ordinary course of
business, (l) rights of first refusal substantially of the type set forth in the
Operating Agreement, (m) contractual restrictions in effect on the Issue Date
and (n) any encumbrances or restrictions imposed by any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings of the contracts, instruments or obligations
referred to in clauses (b) and (d) through (n) above, provided, that such
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings are, in the good faith judgment of the
Board of Managers, no more restrictive with respect to such dividend, if
applicable, and other payment restrictions than those contained in the dividend,
if applicable, or other payment restrictions prior to such amendment,
modification, restatement, renewal, increase, supplement, refunding, replacement
or refinancing.
SECTION 4.09. LIMITATIONS ON INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF
PREFERRED STOCK.
Except as provided in the following paragraph, Holdings shall
not, and shall not permit any of its Restricted Subsidiaries to, directly or
indirectly, create, incur, issue, assume, guarantee or otherwise become directly
or indirectly liable, contingently or otherwise, with respect to (collectively,
"incur" and correlatively, an "incurrence" of) any Indebtedness (including
Acquired Indebtedness) or issue any shares of Disqualified Stock, and that
Holdings shall not permit any of its Restricted Subsidiaries to issue any shares
of Preferred Stock.
Holdings and its Restricted Subsidiaries may incur the
following Indebtedness or issue the following shares of Disqualified Stock:
(i) the Company may incur Indebtedness under the Bank Credit
Facility; provided that the aggregate principal amount of all
Indebtedness outstanding under the Bank Credit Facility after giving
effect to each such incurrence, including all Indebtedness incurred to
refinance or replace any Indebtedness incurred pursuant to this clause
(i), does not exceed $430.0 million less (a) the aggregate amount of
all permanent principal repayments, optional or mandatory, made from
time to time after the date hereof with respect to such Indebtedness
(other than repayments made in connection with a refinancing thereof)
and (b) permanent reductions in the available term Indebtedness under
the Bank Credit Facility resulting from the application of Asset Sales
proceeds; provided, further, that the maximum principal amount of
Indebtedness that may be outstanding under the Bank Credit Facility
pursuant to this clause (i) may be increased pursuant to the incurrence
of Indebtedness thereunder for the purposes and subject to the maximum
amounts and other limitations set forth in clauses (vii), (viii), (ix)
and (xvi) of this paragraph; provided that for any amount of such
Indebtedness incurred under this clause (i), the amount of Indebtedness
permitted to be incurred under such other clause shall be
correspondingly decreased;
(ii) Holdings or any of its Restricted Subsidiaries may incur
any Existing Indebtedness, including any Permitted Refinancing
Indebtedness incurred to refinance or replace any such Indebtedness;
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(iii) the Issuers may incur Indebtedness represented by the
Notes;
(iv) the Company may issue the Series A Preferred Interests to
Holdings, which shall pledge such interests to the Trustee for the
benefit of the Holders, and the Company may issue other shares of
Preferred Stock so long as such Preferred Stock is junior to the Series
A Preferred Interests, including any Preferred Stock issued in exchange
therefor with terms no less favorable to the holders of the Notes than
the Series A Preferred Interests;
(v) Holdings may issue Holdings Series A Preferred Interests
or Holdings Series B Preferred Interests pursuant to the terms of the
Operating Agreement as in effect on the date hereof made in
consideration of payments under the Keep-Well Agreement or the Bank
Completion Guaranty;
(vi) Holdings and its Restricted Subsidiaries may incur
Indebtedness represented by Capital Lease Obligations incurred for the
purpose of financing all or any part of the purchase price or cost of
construction or improvement of property, plant or equipment used in the
business of Holdings or such Restricted Subsidiary, in an aggregate
principal amount, including any Permitted Refinancing Indebtedness
incurred to refinance or replace any Indebtedness incurred pursuant to
this clause (vi), not to exceed $10.0 million at any time outstanding;
(vii) Holdings and its Restricted Subsidiaries may incur
Hedging Obligations that are incurred (a) for the purpose of fixing or
hedging interest rate risk with respect to any floating rate
Indebtedness that is permitted by the terms of this Indenture to be
outstanding or (b) for the purpose of fixing or hedging currency
exchange rate risk with respect to any currency exchange; provided,
however, that the notional principal amount of any such Hedging
Obligation does not exceed the principal amount of Indebtedness to
which such Hedging Obligations relate;
(viii) Holdings and the Company may incur the FF&E Financing;
provided, however, that (a) the principal amount of such Indebtedness
does not exceed the cost (including sales and excise taxes,
installation and delivery charges and other direct costs of, and other
direct expenses paid or charged in connection with, such purchase) of
the FF&E purchased or leased with the proceeds thereof and (b) the
aggregate principal amount of such Indebtedness, including any
Permitted Refinancing Indebtedness incurred to refinance or replace any
Indebtedness incurred pursuant to this clause (viii), does not exceed
$80.0 million (including obligations characterized as operating leases
or other off-balance sheet financing arrangements) outstanding at any
time;
(ix) to the extent that such incurrence does not result in
incurrence by Holdings or any of its Restricted Subsidiaries of any
obligation for the payment of borrowed money of others, Holdings or any
of its Restricted Subsidiaries may incur Indebtedness solely in respect
of performance bonds, standby letters of credit, bankers' acceptances
or completion guarantees, provided, that such Indebtedness was incurred
in the ordinary course of business of Holdings or any of its Restricted
Subsidiaries and in an aggregate principal amount outstanding under
this clause (ix) at any one time of not more than $10.0 million;
(x) the incurrence by Holdings or any Restricted Subsidiary of
(a) at any time prior to the Operating Deadline, additional
Indebtedness under clause (i) or (viii) of this paragraph in an
aggregate amount not to exceed $40.0 million, plus (b) after a default
of the "In Balance" requirements of this Indenture and at any time
prior to the Operating Deadline, additional Indebtedness under clause
(i) or (viii) in an aggregate amount not to exceed $50.0 million
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(provided that Indebtedness incurred pursuant to this clause (x)(b) is
matched, dollar for dollar, by additional equity investments by the
Principals or any Related Party);
(xi) after the Aladdin is Operating, Holdings may incur
Indebtedness (including Acquired Indebtedness) or issue shares of
Disqualified Stock if (a) the Fixed Charge Coverage Ratio for Holdings'
most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on
which such additional Indebtedness is incurred or such Disqualified
Stock is issued would have been at least 2.25 to 1.0, determined on a
pro forma basis (including a pro forma application of the net proceeds
therefrom) as if the additional Indebtedness had been incurred or the
Disqualified Stock had been issued, as the case may be, at the
beginning of such four-quarter period;
(xii) after the Aladdin is Operating, any Restricted
Subsidiary of Holdings may incur Indebtedness (including Acquired
Indebtedness) if the Fixed Charge Coverage Ratio for such Restricted
Subsidiary's most recently ended four full fiscal quarters for which
internal financial statements are available immediately preceding the
date on which such additional Indebtedness is incurred would have been
at least 2.5 to 1.0, determined on a pro forma basis (including a pro
forma application of the net proceeds therefrom) as if the additional
Indebtedness has been issued at the beginning of such four-quarter
period;
(xiii) Holdings and its Restricted Subsidiaries may incur
Permitted Refinancing Indebtedness in exchange for, or the net proceeds
of which are used to extend, refinance, renew, replace, substitute or
refund Indebtedness that was permitted to be incurred under clauses
(ii), (v), (vii), (xi), (xii) and (xiii) of this Section 4.09;
(xiv) after the Aladdin is Operating, intercompany
Indebtedness between or among Holdings and any of its Wholly Owned
Restricted Subsidiaries will be permitted; provided, however, that (a)
if Holdings is the obligor on such Indebtedness, such Indebtedness is
expressly subordinated to the prior payment in full in cash of all
obligations with respect to the Notes and (b)(1) any subsequent
issuance or transfer of Equity Interests that results in any such
Indebtedness being held by a Person other than Holdings or a Wholly
Owned Restricted Subsidiary thereof and (2) any sale or other transfer
of any such Indebtedness to a Person that is neither Holdings nor a
Wholly Owned Restricted Subsidiary thereof shall be deemed, in each
case, to constitute an incurrence of such Indebtedness by Holdings or
such Restricted Subsidiary, as the case may be, that was not permitted
by this clause (xiv);
(xv) after the Aladdin is Operating, the guaranty by Holdings
or any Restricted Subsidiary of Indebtedness of Holdings or a
Restricted Subsidiary that was permitted to be incurred by another
provision of this Section 4.09 shall be permitted;
(xvi) after the Aladdin is Operating, the Company may incur
Indebtedness under any Working Capital Facility in an aggregate amount
at any time outstanding not to exceed $20.0 million; and
(xvii) Holdings and its Restricted Subsidiaries may incur
Indebtedness in an aggregate principal amount outstanding not to exceed
$10.0 million.
For purposes of determining compliance with this Section 4.09,
in the event that an item of Indebtedness meets the criteria of more than one of
the categories of Indebtedness permitted in clauses
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of the second or third paragraph of this Section 4.09, the Issuers shall, in
their sole discretion, classify such item of Indebtedness in any manner that
complies with this Section 4.09 and such item of Indebtedness will be treated as
having been incurred pursuant to only such clause or clauses. Accrual of
interest, the accretion of the accreted value or principal and the payment of
interest in the form of additional Indebtedness will not be deemed to be an
incurrence of Indebtedness for purposes of this Section 4.09.
Holdings shall not incur any Indebtedness that is
contractually subordinated in right of payment to any other Indebtedness of
Holdings unless such Indebtedness is also contractually subordinated in right of
payment to Notes on substantially identical terms; provided, however, that no
Indebtedness of Holdings shall be deemed to be contractually subordinated in
right of payment to any other Indebtedness of Holdings solely by virtue of being
unsecured.
SECTION 4.10. ASSET SALES
Holdings shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale prior to the date the Aladdin is
Operating. After the date the Aladdin is Operating, Holdings shall not and shall
not permit any of its Restricted Subsidiaries to consummate an Asset Sale,
unless (i) no Default or Event of Default exists or is continuing immediately
prior to or after giving effect to such Asset Sale, (ii) Holdings or the
Restricted Subsidiary, as the case may be, receives consideration at the time of
such Asset Sale at least equal to the fair market value (evidenced by a
resolution of the Board of Managers or the Board of Directors, as the case may
be, and set forth in an Officers' Certificate delivered to the Trustee) of the
assets sold or otherwise disposed of and (iii) at least 75% of the consideration
therefor received by Holdings or such Restricted Subsidiary is in the form of
cash or Cash Equivalents; provided, however, that the amount of (a) any
liabilities (as shown on Holdings' or such Restricted Subsidiary's most recent
balance sheet (or the notes thereto)) of Holdings or such Restricted Subsidiary
(other than contingent liabilities and liabilities that are by their terms
expressly subordinated to the Notes or any guarantee thereof) that are assumed
by the transferee of any such assets pursuant to a customary novation agreement
that releases Holdings and such Restricted Subsidiary, as the case may be, from
further liability and (b) any securities, notes or other obligations received by
Holdings or such Restricted Subsidiary from such transferee that are within 20
days thereof converted by Holdings or such Restricted Subsidiary into cash (to
the extent of the cash received), shall be deemed to be cash for purposes of
this provision.
Within 180 days after the receipt of any Net Proceeds of any
Asset Sale, Holdings or such Restricted Subsidiary, as the case may be, may
apply such Net Proceeds (i) to the making of a capital expenditure or the
acquisition of long-term tangible assets of Holdings or such Restricted
Subsidiary used by or useful to Holdings or such Restricted Subsidiary in the
line of business in which Holdings or such Restricted Subsidiary is permitted to
be engaged pursuant to Section 4.13 hereof; or (ii) following the date on which
the Aladdin is Operating, to a repayment of, or permanent reduction of
commitments under Indebtedness of any Restricted Subsidiary, including without
limitation, amounts available under the Bank Credit Facility. Pending the final
application of any such Net Proceeds, Holdings or such Restricted Subsidiary may
temporarily reduce revolving credit borrowings or invest in Cash Equivalents.
Any Net Proceeds from Asset Sales that are not invested or applied as provided
in the first sentence of this paragraph will be deemed to constitute "Excess
Proceeds." When the aggregate amount of Excess Proceeds exceeds $10.0 million,
Holdings will be required to make an offer to all Holders (an "Asset Sale
Offer") to purchase the maximum Accreted Value of Notes that may be purchased
out of the Excess Proceeds, at an offer price in cash in an amount equal to 100%
of the Accreted Value thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the
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date of purchase, which date shall be no less than 30 nor more than 60 days
after the date of the Asset Sale Offer, in accordance with the procedures set
forth in this Indenture; provided, however, that if any Restricted Subsidiary of
Holdings receives proceeds from such Asset Sale, such Restricted Subsidiary
shall redeem, or make available to the Company such Excess Proceeds so that the
Company may redeem, an amount of Series A Preferred Interests sufficient for
Holdings to utilize the proceeds from such redemption to make the Asset Sale
Offer required by this provision. To the extent that the aggregate amount of
Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds,
Holdings or the Restricted Subsidiary, as the case may be, may, subject to the
provisions of this Indenture use any remaining Excess Proceeds for general
corporate purposes. If the aggregate Accreted Value of Notes surrendered by
Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select
the Notes to be purchased in the manner described under Section 3.02 hereof.
Upon completion of any such Asset Sale Offer, the amount of Excess Proceeds
shall be reset at zero.
SECTION 4.11. TRANSACTIONS WITH AFFILIATES.
Holdings shall not, and shall not permit any of its Restricted
Subsidiaries to, sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
or make or amend any transaction contract, agreement, understanding, loan,
advance or guarantee with, or for the benefit of, any Affiliate (each of the
foregoing, an "Affiliate Transaction"), unless (i) such Affiliate Transaction is
on terms that are no less favorable to Holdings or such Restricted Subsidiary
than those that would have been obtained in a comparable transaction by Holdings
or such Restricted Subsidiary with an unrelated Person and (ii) Holdings
delivers to the Trustee (a) with respect to any Affiliate Transaction or series
of related Affiliate Transactions involving aggregate consideration in excess of
$1.0 million, an Officers' Certificate certifying that such Affiliate
Transaction complies with clause (i) above, (b) with respect to any Affiliate
Transaction or series of Affiliate Transactions involving aggregate
consideration in excess of $5.0 million, a resolution of the Management
Committee set forth in an Officers' Certificate certifying that such Affiliate
Transaction complies with clause (i) above and that such Affiliate Transaction
has been approved unanimously by the Management Committee and (c) with respect
to any Affiliate Transaction involving aggregate consideration in excess of
$10.0 million, an opinion as to the fairness to Holders of such Affiliate
Transaction from a financial point of view issued by an accounting, appraisal or
investment banking firm of national standing. The foregoing provisions will not
apply to any payments, transfers or dispositions pursuant to the following: (i)
any employment, indemnification, noncompetition or confidentiality agreement
entered into by Holdings or any of its Restricted Subsidiaries in the ordinary
course of business on terms customary in the hotel/casino business; (ii)
transactions between or among Holdings and any of its Restricted Subsidiaries;
(iii) Restricted Payments permitted by Section 4.07 hereof; (iv) the Noteholder
Completion Guaranty; (v) the Keep-Well Agreement; (vi) the Salle Privee
Management Agreement; (vii) the Reciprocal Easement Agreement as in effect on
the Issue Date; (viii) the Parking Use Agreement as in effect on the Issue Date;
(ix) any amendments, modifications, restatements, renewals, supplements and
replacements to the Reciprocal Easement Agreement or the Parking Use Agreement;
provided, that the Board of Managers determines in good faith that any such
amendment is not materially adverse to the Holders; (x) the Theater Lease; (xi)
the payment by Aladdin Bazaar to the Company of up to $14.2 million pursuant to
Section 4.5(a) of the Site Work Agreement, (xii) loans or advances to employees
of Holdings or its Restricted Subsidiaries to fund the exercise price of options
granted under employment agreements or stock option plans or agreements of
Holdings or its Restricted Subsidiaries, in each case, as in effect on the Issue
Date, not to exceed $0.5 million outstanding at any one time; and (xiii) the
payment of reasonable fees to members of the Board of Managers or the Board of
Directors, as the case may be, of Holdings or any of its Restricted Subsidiaries
who are not employees of Holdings or any of its Restricted Subsidiaries.
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SECTION 4.12. LIENS.
Holdings shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly create, incur, assume or suffer to exist
any Lien on any asset owned as of the Issue Date or thereafter acquired, or any
proceeds, income or profits therefrom, or assign or convey any right to receive
income therefrom, unless the Notes are equally and ratably secured (except that
Liens securing Indebtedness which is subordinated to the Notes shall not be
permitted in any circumstances), except for (a) Liens securing the Notes; (b)
Liens securing Indebtedness which is incurred to refinance Indebtedness which
has been secured by a Lien permitted under this Indenture and which has been
incurred in accordance with the provisions of this Indenture; provided, however,
that such Liens do not extend to or cover any property or assets of Holdings or
any of its Restricted Subsidiaries not securing the Indebtedness so refinanced;
and (c) Permitted Liens.
SECTION 4.13. LINE OF BUSINESS.
For so long as any Notes are outstanding, Holdings shall not,
and shall not permit any of its Restricted Subsidiaries to, engage in any
business or activity other (i) than the gaming and hotel resort businesses and
such business activities as are incidental or related thereto or a reasonable
extension, development or expansion thereof or ancillary thereto, including,
without limitation, any entertainment, recreation, convention, trade show,
meeting, retail or other activity or business designed to promote, market,
support, develop, construct or enhance such business and (ii) the management of
gaming activities at Mountain Spa. In addition, until the Aladdin is Operating,
Holdings shall not, and shall not permit any of its Restricted Subsidiaries to,
engage in any business, development or investment activity other than (i) at or
in conjunction with the Complex and (ii) the management of gaming activities at
Mountain Spa.
SECTION 4.14. CORPORATE EXISTENCE.
Subject to Article 5 hereof, the Issuers shall do or cause to
be done all things necessary to preserve and keep in full force and effect (i)
their limited-liability company or corporate existence, as applicable, and the
corporate, limited-liability company, partnership or other existence of each of
their Subsidiaries, in accordance with the respective organizational documents
(as the same may be amended from time to time) of the Issuers or any such
Subsidiary and (ii) the rights (charter and statutory), licenses and franchises
of the Issuers and their Subsidiaries; provided, however, that the Issuers shall
not be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any of their Subsidiaries, if the
Board of Managers in good faith shall determine that the preservation thereof is
no longer desirable in the conduct of the business of the Issuers and their
Subsidiaries, taken as a whole.
SECTION 4.15. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
Upon the occurrence of a Change of Control, each Holder will
have the right to require the Issuers to purchase all or any part (equal to
$1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the
offer described below (the "Change of Control Offer") at a price in cash equal
to 101% of the Accreted Value thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the date of purchase (the "Change of
Control Payment"). Within ten days following any Change of Control, the Issuers
will mail a notice to each Holder describing the transaction or transactions
that constitute the Change of Control and offering to purchase Notes on the date
specified in such notice, which date shall be no earlier than 30 days nor later
than 60 days from the date such notice is mailed (the
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"Change of Control Payment Date"), pursuant to the procedures required by this
Indenture and described in such notice. The Issuers shall comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws or regulations are applicable
in connection with the purchase of the Notes as a result of a Change of Control.
On the Change of Control Payment Date, the Issuers shall, to
the extent permitted by law, (i) accept for payment all Notes or portions
thereof properly tendered pursuant to the Change of Control Offer, (ii) deposit
with the paying agent an amount equal to the aggregate Change of Control Payment
in respect of all Notes or portions thereof so tendered and (iii) deliver, or
cause to be delivered, to the Trustee for cancellation the Notes so accepted
together with an Officers' Certificate stating that such Notes or portions
thereof have been tendered to and purchased by the Issuers. The paying agent
will promptly mail to each Holder of Notes so tendered the Change of Control
Payment for such Notes, and the Trustee will promptly authenticate and mail to
each Holder (or cause to be transferred by book entry) a new Note equal in
principal amount to any unpurchased portion of the Notes surrendered, if any;
provided, that each such new Note will be in a principal amount of $1,000 or an
integral multiple thereof.
The Change of Control provisions described above will be
applicable whether or not any other provisions of this Indenture are applicable.
Except as described above with respect to a Change of Control, this Indenture
does not contain provisions that permit the Holders to require that the Issuers
purchase or redeem the Notes in the event of a takeover, recapitalization or
similar transaction.
The Issuers shall not be required to make a Change of Control
Offer upon a Change of Control if a third party makes the Change of Control
Offer in the manner, at the times and otherwise in compliance with the
requirements set forth in this Indenture applicable to a Change of Control Offer
made by the Issuers and purchases all Notes validly tendered and not withdrawn
under such Change of Control Offer.
SECTION 4.16. LIMITATIONS ON ISSUES AND SALES OF CAPITAL STOCK OF WHOLLY
OWNED RESTRICTED SUBSIDIARIES.
Holdings (i) shall not, and shall not permit any of its Wholly
Owned Restricted Subsidiaries to, transfer, convey, sell, lease or otherwise
dispose of any Capital Stock of any Wholly Owned Restricted Subsidiary of
Holdings (other than the transfer of Common Membership Interests as a result of
the exercise of remedies by the Lenders in respect of the pledge of such Common
Membership Interests pursuant to the Lenders' security documents) to any Person
(other than Holdings or a Wholly Owned Restricted Subsidiary of Holdings),
unless (a) such transfer, conveyance, sale, lease or other disposition is of all
the Capital Stock of such Wholly Owned Restricted Subsidiary and (b) the cash
Net Proceeds from such transfer, conveyance, sale, lease or other disposition
are applied in accordance with Section 4.10 hereof and (ii) shall not permit any
of its Wholly Owned Restricted Subsidiaries to issue any of its Equity Interests
(other than, if necessary, shares of its Capital Stock constituting directors'
or managers', as applicable, qualifying shares) to any Person other than to
Holdings or a Wholly Owned Restricted Subsidiary of Holdings.
SECTION 4.17. INSURANCE.
Until the Notes have been paid in full, Holdings shall, and
shall cause its Restricted Subsidiaries to, maintain insurance with responsible
carriers against such risks and in such amounts as is customarily carried by
similar businesses with such deductibles, retentions, self insured amounts and
coinsurance provisions as are customarily carried by similar businesses of
similar size, including,
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without limitation, property and casualty, and shall have provided insurance
certificates evidencing such insurance to the Trustee prior to the Issue Date
and shall thereafter provide such certificates prior to the anniversary or
renewal date of each such policy, which certificate shall expressly state the
expiration date for each policy listed.
SECTION 4.18. LIMITATIONS ON STATUS AS INVESTMENT COMPANY.
Neither the Issuers nor their Restricted Subsidiaries shall
become subject to registration as an "investment company" (as that term is
defined in the Investment Company Act of 1940, as amended), or from otherwise
becoming subject to regulation under the Investment Company Act of 1940, as
amended.
SECTION 4.19. GAMING APPROVALS.
Holdings shall, and shall cause its Subsidiaries to, use their
best efforts to obtain and retain in full force and effect at all times all
Gaming Approvals necessary for the operation of the Aladdin and the Music
Project.
SECTION 4.20. CONSTRUCTION.
Holdings shall cause the Company to (i) (a) prosecute the
construction of the Aladdin with due diligence and continuity, in an expeditious
and first-class workmanlike manner, (b) until the Minimum Aladdin Facilities are
completed, cause the Aladdin to be constructed, equipped and completed in
compliance with the Approved Plans and Specifications in all material respects
and (c) until the Minimum Aladdin Facilities are completed, correct or cause to
be corrected as soon as possible any material departure or variation from the
Approved Plans and Specifications not approved in writing by the Independent
Construction Consultant, (ii) provide the expertise necessary to supervise
performance of construction of the Aladdin at no cost to the Trustee, (iii)
submit monthly requests for disbursements from the Noteholder Construction
Disbursement Account and the Bank Construction Disbursement Account at the times
and in the amounts necessary so that such amounts, together with all other
sources for the funding of the Aladdin, are sufficient to cause the Minimum
Aladdin Facilities to be completed by the Operating Deadline and (iv) until the
Minimum Aladdin Facilities are completed, maintain the "In Balance" requirements
of this Indenture.
SECTION 4.21. LIMITATION ON USE OF PROCEEDS.
Holdings shall (i) contribute on the Issue Date $115.0 million
in cash to the Company in exchange for Series A Preferred Interests with an
initial liquidation preference of $115.0 million, and shall cause the Company to
deposit approximately $37 million of such proceeds in the Note Construction
Disbursement Account disbursed only in accordance with the Disbursement
Agreement and (ii) cause such amounts to be used to pay the costs incurred in
connection with developing, financing, constructing, equipping or opening the
Aladdin.
In addition, if the Music Project Financing has not been
consummated by February 28, 1999, Holdings shall cause the Company to expend up
to $8.0 million to remodel the Theater.
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SECTION 4.22. RESTRICTIONS ON ACTIVITIES OF CAPITAL.
Capital may not hold any material assets, become liable for
any obligations or engage in any business activities; provided that Capital may
be a co-obligor of the Notes pursuant to the terms of this Indenture and may
engage in any activities directly related thereto or necessary in connection
therewith.
SECTION 4.23. SERIES A PREFERRED INTERESTS.
Holdings shall not permit the Company to amend the provisions
of the Series A Preferred Interests in any manner that would be adverse to the
Holders of the Notes. In addition, Holdings shall not permit the Company to
authorize, create (by way of reclassification or otherwise) or issue any class
or series of, or any obligation or security convertible or exchangeable into or
evidencing a right to purchase shares of any class of, Capital Stock of the
Company ranking senior to or on a parity with the Series A Preferred Interests.
ARTICLE 5.
SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS.
Neither of the Issuers shall and Holdings shall not permit the
Company to, consolidate or merge with or into (whether or not such entity is the
surviving entity), or sell, assign, transfer, lease, convey or otherwise dispose
of all or substantially all of its properties or assets in one or more related
transactions (other than (i) the transfer of the Aladdin Site and other assets
of the Company as a result of the exercise of remedies in respect of the Deed of
Trust and other Lender security documents, including a foreclosure by the
Lenders pursuant to the terms of the Deed of Trust or the acceptance by the
Lenders of a transfer in lieu of foreclosure or other exercise of remedies and
(ii) the transfer of the Common Membership Interests as a result of the exercise
of remedies by the Lenders in respect of the pledge of such Common Membership
Interests pursuant to the Lenders' security documents) to, any Person unless (i)
such Issuer or the Company is the surviving Person or the Person formed by or
surviving any such consolidation or merger (if other than such Issuer or the
Company) or to which such sale, assignment, transfer, lease, conveyance or other
disposition will have been made is a Person organized or existing under the laws
of the United States, any state thereof, or the District of Columbia; (ii) the
Person formed by or surviving any such consolidation or merger (if other than
such Issuer or the Company) or the Person to which such sale, assignment,
transfer, lease, conveyance or other disposition will have been made assumes all
the obligations of such Issuer (but not the Company), under the Note
Registration Rights Agreement, the Notes, this Indenture and the Pledge
Agreements in form reasonably satisfactory to the Trustee; (iii) immediately
after such transaction no Default or Event of Default exists; (iv) such
transaction will not result in the loss or suspension or material impairment of
any material Gaming Approval; (v) except in the case of a merger of such Issuer
or the Company with or into a Wholly Owned Restricted Subsidiary of such Issuer,
such Issuer or any Person formed by or surviving any such consolidation or
merger (if other than such Issuer or the Company), or to which such sale,
assignment, transfer, lease, conveyance or other disposition will have been made
(a) will have Consolidated Net Worth immediately after the transaction equal to
or greater than the Consolidated Net Worth of such Issuer or the Company, as the
case may be, immediately preceding the transaction and (b) will, at the time of
such transaction and after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the applicable four-quarter period,
be permitted to incur at least $1.00 of additional Indebtedness pursuant to (A)
in the case of a merger of either of the Issuers, the Fixed Charge Coverage
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Ratio test described above in clause (xi) of the second paragraph under Section
4.09 hereof and (B) in the case of a merger of the Company, the Fixed Charge
Coverage Ratio test described above in clause (xii) of the second paragraph
pursuant to Section 4.09 hereof; and (vi) such transaction would not require any
Holder or beneficial owner of Notes (other than any Person acquiring such Issuer
or the Company or its assets and any Affiliate thereof) to obtain a gaming
license or be qualified or found suitable under the law of any applicable gaming
jurisdiction; provided that such Holder or beneficial owner would not have been
required to obtain a gaming license or be qualified or found suitable under the
laws of any applicable gaming jurisdiction in the absence of such transaction.
Notwithstanding the above, neither of the Issuers may consolidate or merge into
the other prior to and in connection with a Qualified Public Offering.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment,
transfer, lease, conveyance or other disposition of all or substantially all of
the assets of the Issuers in accordance with Section 5.01 hereof, the successor
corporation formed by such consolidation or into or with which the Issuers are
merged or to which such sale, assignment, transfer, lease, conveyance or other
disposition is made shall succeed to, and be substituted for (so that from and
after the date of such consolidation, merger, sale, lease, conveyance or other
disposition, the provisions of this Indenture referring to the "Issuers" shall
refer instead to the successor corporation and not to the Issuers), and may
exercise every right and power of the Issuers under this Indenture with the same
effect as if such successor Person had been named as the Issuers herein;
provided, however, that the predecessor Issuers shall not be relieved from the
obligation to pay the Accreted Value of and interest on the Notes except in the
case of a sale of all of the Issuers' assets that meets the requirements of
Section 5.01 hereof.
ARTICLE 6.
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
An "Event of Default" occurs if:
(a) the Issuers default for 30 days or more in the payment
when due of interest on, or Liquidated Damages, if any, with respect to, the
Notes;
(b) the Issuers default in payment when due of the Accreted
Value of or premium, if any, on the Notes when the same becomes due and payable
at maturity, upon redemption (including in connection with an offer to purchase)
or otherwise;
(c) the Issuers fail to comply with any of the provisions of
Sections 4.07, 4.09, 4.10, 4.15, 4.21, 4.22 or 5.01 hereof;
(d) the Issuers fail for 30 days after written notice by the
Trustee or the Holders of at least 25% in aggregate Accreted Value of the Notes
then outstanding voting as a single class to comply with any of their other
agreements in this Indenture or the Notes;
(e) a default occurs under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by Holdings or any of its
Restricted Subsidiaries (or the payment of which is guaranteed by Holdings or
any of its Restricted Subsidiaries), whether such Indebtedness now exists or is
created after the Issue Date,
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which default (a) is caused by a failure to pay when due principal of or
premium, if any, or interest on such Indebtedness (other than the Bank Credit
Facility) prior to the later of (1) 60 days after such default and (2) the
expiration of the grace period provided in such Indebtedness (a "Payment
Default") which Payment Default, together with all other Payment Defaults,
exceeds $1.0 million or (b) results in the acceleration of such Indebtedness
prior to its express maturity and, in each case, the principal amount of any
such Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a Payment Default or the maturity of
which has been so accelerated, aggregates $15.0 million or more;
(f) Holdings or any of its Restricted Subsidiaries fail to pay
final judgments aggregating in excess of $10.0 million, which judgments remain
unpaid, undischarged and unstayed for a period of more than 60 days;
(g) Holdings or any of its Significant Subsidiaries or any
group of Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary pursuant to or within the meaning of Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief
against it in an involuntary case,
(iii) consents to the appointment of a trustee in
bankruptcy of it or for all or substantially all of its property,
(iv) makes a general assignment for the benefit of
its creditors,
(v) generally is not able to pay its debts as they
become due;
(h) a court of competent jurisdiction enters an order
or decree under any Bankruptcy Law that:
(i) is for relief against Holdings or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary in an involuntary
case;
(ii) appoints trustee in bankruptcy of Holdings or
any of its Significant Subsidiaries or any group of Subsidiaries that,
taken as a whole, would constitute a Significant Subsidiary or for all
or substantially all of the property of Holdings or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary; or
(iii) orders the liquidation of Holdings or any of
its Significant Subsidiaries or any group of Subsidiaries that, taken
as a whole, would constitute a Significant Subsidiary;
and the order or decree remains unstayed and in
effect for 60 consecutive days;
(i) a default occurs by each of the Trust, London Clubs and
Bazaar Holdings in the performance of their material obligations set forth in
the Keep-Well Agreement, which default remains uncured for 180 days, or a
default occurs by AHL, London Clubs and Bazaar Holdings in the
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performance of their material obligations set forth in the Noteholder Completion
Guaranty or there is a repudiation by each of them of their respective
obligations under the Keep-Well Agreement, which has not been ratified and
reaffirmed within 180 days, or the Noteholder Completion Guaranty;
(j) Holdings breaches any material representation or warranty
set forth in either of the Pledge Agreements or a default occurs by Holdings in
the performance of any material covenant set forth in either of such agreements
or there is repudiation by Holdings of its obligations under either of such
agreements or the unenforceability of either of such agreements against Holdings
for any reason;
(k) a termination occurs of the Bank Credit Facility (other
than pursuant to a refinancing thereof in accordance with its terms and with the
terms of clause (i) under the second paragraph under Section 4.09 hereof) or
there is a repudiation of the Lenders obligations thereunder, including without
limitation, the withdrawal of the proceeds of the Term B Loans and Term C Loans
from the Bank Construction Disbursement Account, in each case prior to the date
the Aladdin is Operating (except for disbursements in accordance with the
Disbursement Agreement);
(l) (i) the Desert Passage fails to be Operating on or prior
to 90 days after the date the Aladdin becomes Operating and (ii) at any time
thereafter and prior to the date on which the Desert Passage becomes Operating,
the Company's Fixed Charge Coverage Ratio for its most recently ended four full
fiscal quarters (or such lesser number of quarters as have ended after the
Aladdin became Operating) for which internal financial statements are available
is not at least 1.75 to 1.0;
(m) after the Aladdin becomes Operating, there is a
revocation, termination, suspension or other cessation of effectiveness of any
Gaming Approval, which results in the cessation or suspension of gaming
operations at the Aladdin for a period of more than 90 days;
(n) the Aladdin fails to be Operating by the Operating
Deadline;
(o) there is a transfer of the Aladdin Site as a result of the
exercise of remedies in respect of the Deed of Trust, including a foreclosure by
the Lenders pursuant to the terms of the Deed of Trust or the acceptance by the
Lenders of a deed in lieu of foreclosure; and
(p) there is a transfer of the Common Membership Interests as
a result of the exercise of remedies by the Lenders in respect of the pledge of
such Common Membership Interests pursuant to the Lender's security documents.
SECTION 6.02. ACCELERATION.
If any Event of Default (other than an Event of Default
specified in clause (g) or (h) of Section 6.01 hereof with respect to either of
the Issuers, any Significant Subsidiary of either of the Issuers or any group of
Significant Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary) occurs and is continuing, the Trustee (upon receipt of actual
knowledge thereof) or the Holders of at least 25% in Accreted Value of the then
outstanding Notes may declare the Accreted Value of Notes (together with all
amounts outstanding thereunder) to be due and payable immediately. Upon any such
declaration, the Accreted Value of the Notes shall become due and payable
immediately. Notwithstanding the foregoing, if an Event of Default specified in
clause (g) or (h) of Section 6.01 hereof occurs with respect to either of the
Issuers, any Significant Subsidiary of the Issuers or any group of Subsidiaries
that, taken as a whole, would constitute a Significant Subsidiary, all
outstanding Notes shall be due and payable immediately without further action or
notice. The Holders of a majority in aggregate
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Accreted Value of the then outstanding Notes by written notice to the Trustee
may on behalf of all of the Holders rescind an acceleration and its consequences
if the rescission would not conflict with any judgment or decree and if all
existing Events of Default (except nonpayment of principal, interest or premium
that has become due solely because of the acceleration) have been cured or
waived.
If an Event of Default occurs on or after March 1, 2006 by
reason of any willful action (or inaction) taken (or not taken) by or on behalf
of the Issuers with the intention of avoiding payment of the premium that the
Issuers would have had to pay if the Issuers then had elected to redeem the
Notes pursuant to Section 3.07 hereof, then, upon acceleration of the Notes, an
equivalent premium shall also become and be immediately due and payable, to the
extent permitted by law, anything in this Indenture or in the Notes to the
contrary notwithstanding.
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy to collect the payment of principal, premium, if
any, and interest on the Notes or to enforce the performance of any provision of
the Notes, this Indenture or, subject to the provisions thereof, the Pledge
Agreements and the Noteholder Completion Guaranty.
The Trustee may maintain a proceeding even if it does not
possess any of the Notes or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Holder of a Note in exercising any right
or remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Holders of not less than a majority in aggregate Accreted
Value of the then outstanding Notes by notice to the Trustee may on behalf of
the Holders of all of the Notes waive an existing Default or Event of Default
and its consequences hereunder, except a continuing Default or Event of Default
in the payment of the principal of, premium and Liquidated Damages, if any, or
interest on, the Notes held by a non-consenting Holder (including in connection
with an offer to purchase) (provided, however, that the Holders of a majority in
Accreted Value of the then outstanding Notes may rescind an acceleration and its
consequences, including any related payment default that resulted from such
acceleration). Upon any such waiver, such Default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereon.
SECTION 6.05. CONTROL BY MAJORITY.
Holders of a majority of the aggregate Accreted Value of the
then outstanding Notes may direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee or exercising any
trust or power conferred on it. However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture that the Trustee determines
may be unduly prejudicial to the rights of other Holders of Notes or that may
involve the Trustee in personal liability.
SECTION 6.06. LIMITATION ON SUITS.
A Holder of a Note may pursue a remedy with respect to this
Indenture, the Pledge Agreements or the Notes only if:
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(a) the Holder of a Note gives to the Trustee written notice
of a continuing Event of Default;
(b) the Holders of at least 25% in Accreted Value of the then
outstanding Notes make a written request to the Trustee to pursue the remedy;
(c) such Holder of a Note or Holders of Notes offer and, if
requested, provide to the Trustee indemnity satisfactory to the Trustee against
any loss, liability or expense;
(d) the Trustee does not comply with the request within 60
days after receipt of the request and the offer and, if requested, the provision
of indemnity; and
(e) during such 60-day period the Holders of a majority in
Accreted Value of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the
rights of another Holder of a Note or to obtain a preference or priority over
another Holder of a Note.
SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the
right of any Holder of a Note to receive payment of principal, premium and
Liquidated Damages, if any, and interest on the Note, on or after the respective
due dates expressed in the Note (including in connection with an offer to
purchase), or to bring suit for the enforcement of any such payment on or after
such respective dates, shall not be impaired or affected without the consent of
such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(a) or (b)
occurs and is continuing, the Trustee is authorized to recover judgment in its
own name and as trustee of an express trust against the Issuers for the whole
amount of principal of, premium and Liquidated Damages, if any, and interest
remaining unpaid on the Notes and interest on overdue principal and, to the
extent lawful, interest and such further amount as shall be sufficient to cover
the costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and
other papers or documents and take such actions (including sitting on a
committee of creditors) as may be necessary or advisable in order to have the
claims of the Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel) and
the Holders of the Notes allowed in any judicial proceedings relative to the
Issuers (or any other obligor upon the Notes), their creditors or their property
and shall be entitled and empowered to collect, receive and distribute any money
or other property payable or deliverable on any such claims and any custodian in
any such judicial proceeding is hereby authorized by each Holder to make such
payments to the Trustee, and in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due to it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 7.07 hereof. To the extent that the payment of any such
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07 hereof out
of the estate in any
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such proceeding, shall be denied for any reason, payment of the same shall be
secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article, it
shall pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts
due under Section 7.07 hereof, including payment of all compensation, expense
and liabilities incurred, and all advances made, by the Trustee and the costs
and expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the
Notes for Accreted Value, premium and Liquidated Damages, if any, and interest,
ratably, without preference or priority of any kind, according to the amounts
due and payable on the Notes for Accreted Value, premium and Liquidated Damages,
if any and interest, respectively; and
Third: to the Issuers or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any
payment to Holders of Notes pursuant to this Section 6.10.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as a Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section does not apply to a suit by the Trustee, a suit by a
Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more
than 10% in Accreted Value of the then outstanding Notes.
ARTICLE 7.
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in its exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
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(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by
the express provisions of this Indenture and the Trustee need perform
only those duties that are specifically set forth in this Indenture and
no others, and no implied covenants or obligations shall be read into
this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture. However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements
of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b)
of this Section;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it is proved that
the Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Sections 6.04 or 6.05 hereof.
(iv) the Trustee shall not be charged with notice or knowledge
of any event or matter (including the occurrence of a default or event of
default) the occurrence of which would require it to take action or omit to take
action hereunder unless such event or matter is actually known to a Responsible
Officer of the Trustee or unless written notice thereof (making reference to
this Indenture or the Notes) has been received by the Trustee at its Corporate
Trust Office.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b), and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree in writing with the Issuers. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
(g) Unless otherwise expressly provided, the Trustee shall not have any
responsibility for the contents of reports referred to in Section 4.03.
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SECTION 7.02. RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely upon any document reasonably
believed by it to be genuine and to have been signed or presented by the proper
Person. The Trustee need not investigate any fact or matter stated in the
document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall not
be responsible for the misconduct or negligence of any agent appointed with due
care and without negligence or wilful misconduct.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture; provided that the Trustee's conduct
does not constitute wilful misconduct, negligence or bad faith.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Issuers shall be sufficient if
signed by an Officer of the Issuers.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that might be incurred by it in compliance with such request or direction.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Notes and may otherwise deal with the Issuers or any
Affiliate of the Issuers with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the SEC for
permission to continue as trustee or resign. Any Agent may do the same with like
rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture or the Notes, it
shall not be accountable for the Issuers' use of the proceeds from the Notes or
any money paid to the Issuers or upon the Issuers' direction under any provision
of this Indenture, it shall not be responsible for the use or application of any
money received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
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SECTION 7.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and
if it is known to a Responsible Officer of the Trustee, the Trustee shall mail
to Holders of Notes a notice of the Default or Event of Default within 90 days
after it occurs. Except in the case of a Default or Event of Default in payment
of principal of, premium, if any, or interest on any Note, the Trustee may
withhold the notice if and so long as a committee of its Responsible Officers in
good faith determines that withholding the notice is in the interests of the
Holders of the Notes.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.
Within 60 days after each May 15 beginning with the May 15
following the date of this Indenture, and for so long as Notes remain
outstanding, the Trustee shall mail to the Holders of the Notes a brief report
dated as of such reporting date that complies with TIA ss. 313(a) (but if no
event described in TIA ss. 313(a) has occurred within the twelve months
preceding the reporting date, no report need be transmitted). The Trustee also
shall comply with TIA ss. 313(b)(2). The Trustee shall also transmit by mail all
reports as required by TIA ss. 313(c).
A copy of each report at the time of its mailing to the
Holders of Notes shall be mailed to the Issuers and filed with the SEC and each
stock exchange on which the Notes are listed in accordance with TIA ss. 313(d).
The Issuers shall promptly notify the Trustee if the Notes are listed on any
stock exchange.
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Issuers shall pay to the Trustee from time to time
reasonable compensation for its acceptance of this Indenture and services
hereunder. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Issuers shall reimburse the
Trustee promptly upon request for all reasonable disbursements, advances and
expenses incurred or made by it in addition to the compensation for its
services. Such expenses shall include the reasonable compensation, disbursements
and expenses of the Trustee's agents and counsel.
The Issuers shall indemnify the Trustee, its officers,
directors, employees and agents against any and all losses, liabilities or
expenses incurred by it arising out of or in connection with the acceptance or
administration of its duties under this Indenture, including the costs and
expenses of enforcing this Indenture against the Issuers (including this Section
7.07) and defending itself against any claim (whether asserted by the Issuers or
any Holder or any other person) or liability in connection with the exercise or
performance of any of its powers or duties hereunder, except to the extent any
such loss, liability or expense may be attributable to its negligence or bad
faith. The Trustee shall notify the Issuers promptly of any claim for which it
may seek indemnity. Failure by the Trustee to so notify the Issuers shall not
relieve the Issuers of their obligations hereunder, except to the extent the
Issuers are prejudiced by such failure. The Issuers shall defend the claim and
the Trustee shall cooperate in the defense. The Trustee may have separate
counsel and the Issuers shall pay the reasonable fees and expenses of such
counsel. The Issuers need not pay for any settlement made without their consent,
which consent shall not be unreasonably withheld. The Issuers need not reimburse
any expense or indemnify against any loss or liability incurred by the Trustee
through negligence or bad faith.
The obligations of the Issuers under this Section 7.07 shall
survive the satisfaction and discharge of this Indenture.
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To secure the Issuers' payment obligations in this Section,
the Trustee shall have a Lien prior to the Notes on all money or property held
or collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(g) or (h) hereof occurs, the expenses
and the compensation for the services (including the fees and expenses of its
agents and counsel) are intended to constitute expenses of administration under
any Bankruptcy Law.
The Trustee shall comply with the provisions of TIA ss.
313(b)(2) to the extent applicable.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign in writing at any time and be
discharged from the trust hereby created by so notifying the Issuers. The
Holders of Notes of a majority in Accreted Value of the then outstanding Notes
may remove the Trustee by so notifying the Trustee and the Issuers in writing.
The Issuers may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Issuers shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office, the
Holders of a majority in Accreted Value of the then outstanding Notes may
appoint a successor Trustee to replace the successor Trustee appointed by the
Issuers.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Issuers, or the Holders of Notes of at least 10% in Accreted Value of the then
outstanding Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee, after written request by any Holder of a Note
who has been a Holder of a Note for at least six months, fails to comply with
Section 7.10, such Holder of a Note may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuers. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this
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Indenture. The successor Trustee shall mail a notice of its succession to
Holders of the Notes. The retiring Trustee shall promptly transfer all property
held by it as Trustee to the successor Trustee, provided all sums owing to the
Trustee hereunder have been paid and subject to the Lien provided for in Section
7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Issuers' obligations under Section 7.07 hereof shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a
corporation organized and doing business under the laws of the United States of
America or of any state thereof that is authorized under such laws to exercise
corporate trustee power, that is subject to supervision or examination by
federal or state authorities and that has a combined capital and surplus of at
least $100 million as set forth in its most recent published annual report of
condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA ss. 310(a)(1), (2) and (5). The Trustee is subject to TIA
ss. 310(b).
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUERS.
The Trustee is subject to TIA ss. 311(a), excluding any
creditor relationship listed in TIA ss. 311(b). A Trustee who has resigned or
been removed shall be subject to TIA ss. 311(a) to the extent indicated therein.
ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Issuers may, at the option of their Board of Managers or
Board of Directors, as the case may be, evidenced by a resolution set forth in
an Officers' Certificate, at any time, elect to have either Sections 8.02 or
8.03 hereof be applied to all outstanding Notes upon compliance with the
conditions set forth below in this Article Eight.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Issuers' exercise under Section 8.01 hereof of the
option applicable to this Section 8.02, the Issuers shall, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to
have been discharged from their obligations with respect to all outstanding
Notes on the date the conditions set forth below are satisfied (hereinafter,
"Legal Defeasance"). For this purpose, Legal Defeasance means that the Issuers
shall be deemed to have paid and discharged the entire Indebtedness represented
by the outstanding Notes, which shall thereafter be deemed to be "outstanding"
only for the purposes of Section 8.05 hereof and the other Sections of this
Indenture referred to in (a) and (b) below, and to have satisfied all their
other obligations under such Notes and this Indenture (and the Trustee, on
demand of and at the expense of the Issuers, shall execute proper instruments
acknowledging
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the same), except for the following provisions which shall survive until
otherwise terminated or discharged hereunder: (a) the rights of Holders of
outstanding Notes to receive solely from the trust fund described in Section
8.04 hereof, and as more fully set forth in such Section, payments in respect of
the Accreted Value of, premium and Liquidated Damages, if any, and interest on
such Notes when such payments are due, (b) the Issuers' obligations with respect
to such Notes under Article 2 and Section 4.02 hereof, (c) the rights, powers,
trusts, duties and immunities of the Trustee hereunder and the Issuers'
obligations in connection therewith and (d) this Article Eight. Subject to
compliance with this Article Eight, the Issuers may exercise their option under
this Section 8.02 notwithstanding the prior exercise of their option under
Section 8.03 hereof.
SECTION 8.03. COVENANT DEFEASANCE.
Upon the Issuers' exercise under Section 8.01 hereof of the
option applicable to this Section 8.03, the Issuers shall, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, be released
from their obligations under the covenants contained in Sections 4.07, 4.08,
4.09, 4.10, 4.11, 4.12, 4.13, 4.15, 4.16, 4.17, 4.18, 4.19, 4.20, 4.21, 4.22,
4.23 and 5.01 hereof with respect to the outstanding Notes on and after the date
the conditions set forth in Section 8.04 are satisfied (hereinafter, "Covenant
Defeasance"), and the Notes shall thereafter be deemed not "outstanding" for the
purposes of any direction, waiver, consent or declaration or act of Holders (and
the consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Notes shall not be deemed outstanding for accounting
purposes). For this purpose, Covenant Defeasance means that, with respect to the
outstanding Notes, the Issuers may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event of Default under Section 6.01
hereof, but, except as specified above, the remainder of this Indenture and such
Notes shall be unaffected thereby. In addition, upon the Issuers' exercise under
Section 8.01 hereof of the option applicable to this Section 8.03 hereof,
subject to the satisfaction of the conditions set forth in Section 8.04 hereof,
Sections 6.01(c) through 6.01(f) hereof shall not constitute Events of Default.
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of
either Sections 8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant
Defeasance:
(a) the Issuers must irrevocably deposit with the Trustee, in
trust, for the benefit of the Holders, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the Accreted Value of, premium, Liquidated Damages, if any,
and interest on the outstanding Notes on the stated maturity date or on the
applicable redemption date, as the case may be, and must specify whether the
Notes are being defeased to maturity or to a particular redemption date;
(b) in the case of an election under 8.02 hereof, the Issuers
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that (A) the Issuers have
received from, or there has been published by, the United States Internal
Revenue Service a ruling or (B) since the Issue Date, there has been a change in
the applicable U.S.
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federal income tax law, in either case to the effect that, and based thereon
such Opinion of Counsel in the United States shall confirm that the Holders of
the outstanding Notes shall not recognize income, gain or loss for U.S. federal
income tax purposes as a result of such Legal Defeasance and will be subject to
U.S. federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Legal Defeasance had not occurred;
(c) in the case of an election under 8.03 hereof, the Issuers
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes shall not recognize income, gain or loss for U.S. federal
income tax purposes as a result of such Covenant Defeasance and will be subject
to such tax on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of Default
resulting from the borrowing of funds to be applied to such deposit) or insofar
as Section 6.1(g) or 6.1(h) hereof is concerned, at any time in the period
ending on the 91st day after the date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a default under any material
agreement or instrument (other than this Indenture) to which the Issuers or any
of their Subsidiaries is a party or by which the Issuers or any of their
Subsidiaries is bound;
(f) after the passage of 91 days following the deposit (or,
with respect to any deposit transferred for the benefit of any person who may be
deemed to be an "insider" of the Issuers under 11 U.S.C. ss. 101(31), after the
passage of one year following such transfer), such deposit will not be subject
to avoidance under 11 U.S.C. ss. 547 if the Issuers were subsequently to become
the subject of a case under title 11 of the United States Bankruptcy Code;
(g) the Issuers shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by the Issuers with
the intent of defeating, hindering, delaying or defrauding any creditors of the
Issuers or others; and
(h) the Issuers shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel (which opinion may be subject to
customary exclusions, qualifications and assumptions) in the United States each
stating that all conditions precedent provided for or relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable
Government Securities (including the proceeds thereof) deposited with the
Trustee (or other qualifying trustee, collectively for purposes of this Section
8.05, the "Trustee") pursuant to Section 8.04 hereof in respect of the
outstanding Notes shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Notes and this Indenture, to the payment,
either directly or through any Paying Agent (including the Issuers acting as
Paying Agent) as the Trustee may determine, to the Holders of such Notes of all
sums due and to become due thereon in respect of principal, premium, if any, and
interest, but such money need not be segregated from other funds except to the
extent required by law.
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The Issuers shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the cash or non-callable
Government Securities deposited pursuant to Section 8.04 hereof or the principal
and interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of or required to be deducted or paid on
behalf of the Holders of the outstanding Notes.
Anything in this Article Eight to the contrary
notwithstanding, the Trustee shall deliver or pay to the Issuers from time to
time upon the request of the Issuers any money or non-callable Government
Securities held by it as provided in Section 8.04 hereof which, in the opinion
of a nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee (which may be the opinion
delivered under Section 8.04(a) hereof), are in excess of the amount thereof
that would then be required to be deposited to effect an equivalent Legal
Defeasance or Covenant Defeasance.
SECTION 8.06. REPAYMENT TO ISSUERS.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Issuers, in trust for the payment of the principal of, premium,
if any, or interest on any Note and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Issuers on their request or (if then held by the Issuers) shall be
discharged from such trust; and the Holder of such Note shall thereafter, as a
secured creditor, look only to the Issuers for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money,
and all liability of Issuers as trustee thereof, shall thereupon cease;
provided, however, that the Trustee or such Paying Agent, before being required
to make any such repayment, may at the expense and option of the Issuers cause
to be published once, in the New York Times and The Wall Street Journal
(national edition), notice that such money remains unclaimed and that, after a
date specified therein, which shall not be less than 30 days from the date of
such notification or publication, any unclaimed balance of such money then
remaining will be repaid to the Issuers.
SECTION 8.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United
States dollars or non-callable Government Securities in accordance with Sections
8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of
any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, then the Issuers' obligations under this Indenture
and the Notes shall be revived and reinstated as though no deposit had occurred
pursuant to Sections 8.02 or 8.03 hereof until such time as the Trustee or
Paying Agent is permitted to apply all such money in accordance with Sections
8.02 or 8.03 hereof, as the case may be; provided, however, that, if the Issuers
make any payment of principal of, premium, if any, or interest on any Note
following the reinstatement of its obligations, the Issuers shall be subrogated
to the rights of the Holders of such Notes to receive such payment from the
money held by the Trustee or Paying Agent.
ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES.
Notwithstanding Section 9.02 of this Indenture, the Issuers
and the Trustee may amend or supplement this Indenture or the Notes without the
consent of any Holder of a Note:
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(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes or to alter the provisions of Article 2 hereof (including the
related definitions) in a manner that does not materially adversely affect any
Holder;
(c) to provide for the assumption of the Issuers' obligations to the
Holders of the Notes by a successor to the Issuers pursuant to Article 5 hereof;
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights hereunder of any Holder of the Note; or
(e) to comply with requirements of the Commission in order to effect or
maintain the qualification of this Indenture under the TIA;
Upon the request of the Issuers accompanied by a resolution of
their Board of Managers or Board of Directors, as the case may be, authorizing
the execution of any such amended or supplemental Indenture, and upon receipt by
the Trustee of any documents described in Section 7.02 hereof and requested
pursuant thereto, the Trustee shall join with the Issuers in the execution of
any amended or supplemental Indenture authorized or permitted by the terms of
this Indenture and to make any further appropriate agreements and stipulations
that may be therein contained, but the Trustee shall not be obligated to enter
into such amended or supplemental Indenture that affects its own rights, duties
or immunities under this Indenture or otherwise.
SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES.
Except as provided below in this Section 9.02, the Issuers and
the Trustee may amend or supplement this Indenture (including Sections 3.10,
4.10 and 4.15 hereof) and the Notes may be amended or supplemented with the
consent of the Holders of at least a majority in Accreted Value of the Notes
then outstanding voting as a single class (including consents obtained in
connection with a tender offer or exchange offer for, or purchase of, the
Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or
Event of Default (other than a Default or Event of Default in the payment of the
Accreted Value of, premium and Liquidated Damages, if any, or interest on the
Notes, except a payment default resulting from an acceleration that has been
rescinded) or compliance with any provision of this Indenture or the Notes may
be waived with the consent of the Holders of a majority in Accreted Value of the
then outstanding Notes voting as a single class (including consents obtained in
connection with a tender offer or exchange offer for, or purchase of, the
Notes). Section 2.08 hereof shall determine which Notes are considered to be
"outstanding" for purposes of this Section 9.02.
Upon the request of the Issuers accompanied by a resolution of
their Board of Managers or Board of Directors, as applicable, authorizing the
execution of any such amended or supplemental Indenture, and upon the filing
with the Trustee of evidence satisfactory to the Trustee of the consent of the
Holders of Notes as aforesaid, and upon receipt by the Trustee of any documents
described in Section 7.02 hereof and required pursuant thereto, the Trustee
shall join with the Issuers in the execution of such amended or supplemental
Indenture unless such amended or supplemental Indenture directly affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise, in
which case the Trustee may in its discretion, but shall not be obligated to,
enter into such amended or supplemental Indenture.
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It shall not be necessary for the consent of the Holders of
Notes under this Section 9.02 to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section
becomes effective, the Issuers shall mail to the Holders of Notes affected
thereby a notice briefly describing the amendment, supplement or waiver. Any
failure of the Issuers to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amended or
supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the
Holders of a majority in aggregate Accreted Value of the Notes then outstanding
voting as a single class may waive compliance in a particular instance by the
Issuers with any provision of this Indenture or the Notes. However, without the
consent of each Holder affected, an amendment or waiver under this Section 9.02
may not (with respect to any Notes held by a non-consenting Holder):
(a) reduce the Accreted Value of Notes whose Holders must consent to an
amendment, supplement or waiver;
(b) reduce the Accreted Value of or change the fixed maturity of any
Note or alter or waive any of the provisions with respect to the redemption of
the Notes except as provided above with respect to Sections 3.10, 4.10 and 4.15
hereof or amend or modify the calculation of the Accreted Value so as to reduce
the amount of the Accreted Value of the Notes;
(c) reduce the rate of or change the time for payment of interest,
including default interest, on any Note;
(d) waive a Default or Event of Default in the payment of Accreted
Value of, premium and Liquidated Damages, if any, or interest on the Notes
(except a rescission of acceleration of the Notes by the Holders of at least a
majority in aggregate Accreted Value of the then outstanding Notes and a waiver
of the payment default that resulted from such acceleration);
(e) make any Note payable in money other than that stated in the Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive payments
of Accreted Value of or premium and Liquidated Damages, if any, or interest on
the Notes;
(g) waive a redemption payment with respect to any Note (except a
payment required by Sections 4.10 and 4.15 hereof; or
(h) make any change in Sections 6.04 or 6.07 hereof or in the foregoing
amendment and waiver provisions.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Notes
shall be set forth in a amended or supplemental Indenture that complies with the
TIA as then in effect.
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SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder of a Note is a continuing consent by the Holder of a
Note and every subsequent Holder of a Note or portion of a Note that evidences
the same debt as the consenting Holder's Note, even if notation of the consent
is not made on any Note. However, any such Holder of a Note or subsequent Holder
of a Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an
amendment, supplement or waiver on any Note thereafter authenticated. The
Issuers in exchange for all Notes may issue and the Trustee shall, upon receipt
of an Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new Note
shall not affect the validity and effect of such amendment, supplement or
waiver.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article Nine if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
The Issuers may not sign an amendment or supplemental Indenture until their
Board of Managers or Board of Directors, as the case may be, approves it. In
executing any amended or supplemental indenture, the Trustee shall be entitled
to receive and (subject to Section 7.01 hereof) shall be fully protected in
relying upon, in addition to the documents required by Section 13.04 hereof, an
Officer's Certificate and an Opinion of Counsel stating that the execution of
such amended or supplemental indenture is authorized or permitted by this
Indenture.
ARTICLE 10.
COLLATERAL AND SECURITY
SECTION 10.01. PLEDGE AGREEMENTS.
The due and punctual payment of the Accreted Value of, premium
and interest and Liquidated Damages, if any, on the Notes when and as the same
shall be due and payable, whether on an interest payment date, at maturity, by
acceleration, repurchase, redemption or otherwise, and interest on any overdue
Accreted Value of, premium and interest and Liquidated Damages, if any (to the
extent permitted by law), on the Notes and performance of all other obligations
of the Issuers to the Holders or the Trustee under this Indenture and the Notes,
according to the terms hereunder or thereunder, shall be secured as provided in
the Pledge Agreements which Holdings has entered into simultaneously with the
execution of this Indenture. Each Holder of Notes, by its acceptance thereof,
consents and agrees to the terms of the Pledge Agreements (including, without
limitation, the provisions providing for foreclosure) as the same may be in
effect or may be amended from time to time in accordance with their terms and
authorizes and directs the Trustee or the Disbursement Agent, as the case may
be, to enter into the Pledge Agreements and to perform their respective
obligations and exercise their respective rights thereunder in accordance
therewith.
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SECTION 10.02. AUTHORIZATION OF RECEIPT OF FUNDS BY THE TRUSTEE UNDER THE
PLEDGE AGREEMENTS.
The Trustee is authorized to receive any funds for the benefit
of the Holders of Notes distributed under the Pledge Agreements, and to make
further distributions of such funds to the Holders of Notes according to the
provisions of this Indenture.
SECTION 10.03. TERMINATION OF SECURITY INTEREST.
Upon the payment in full of all Obligations of the Issuers
under this Indenture and the Notes, or upon Legal Defeasance, the Trustee shall,
at the request of the Issuers, deliver a certificate to the Disbursement Agent
stating that such Obligations have been paid in full, and release and instruct
the Disbursement Agent to release the Liens pursuant to this Indenture and the
Pledge Agreements.
ARTICLE 11.
JOINT AND SEVERAL LIABILITY
SECTION 11.01. JOINT AND SEVERAL LIABILITY.
(a) Notwithstanding any contrary provision contained in this Indenture
or the Notes, the representations, warranties, covenants, agreements and
obligations of the Issuers, and either of them, contained in the Indenture and
the Notes shall be deemed joint and several. Any waiver including, without
limitation, any suretyship waiver, made by either Issuer in this Indenture or
the Notes shall be deemed to be made also by the other Issuer and references in
any such waiver to either Issuer shall be deemed to include the other Issuer and
each of them.
(b) Notwithstanding any contrary provision contained in this Indenture
or the Notes, this Indenture and the Notes shall be deemed to include, without
limitation, the following waivers:
Until all obligations of the Issuers to the Holders under or
in respect of the Notes are paid in full and discharged, each of the Issuers
hereby waives and relinquishes all rights and remedies accorded by applicable
law specifically to sureties or guarantors with respect to the joint and several
liabilities of the Issuers hereunder and agrees not to assert or take advantage
of any such rights or remedies, including, without limitation, (a) any right to
require the Trustee or any of the Holders (each a "Benefited Party") to proceed
against either of the Issuers or any other Person or to proceed against or
exhaust any security held by a Benefited Party at any time or to pursue any
other remedy in the power of a Benefited Party before proceeding against such
Issuer or other Person, (b) any defense based upon an election of remedies by a
Benefited Party, including, without limitation, an election to proceed by
non-judicial rather than judicial foreclosure, which destroys or otherwise
impairs the subrogation rights of either Issuer, the right of either Issuer to
proceed against the other Issuer or any other Person for reimbursement, or both,
(c) any defense based upon any statute or rule of law which provides that the
obligation of a surety must be neither larger in amount nor in other respects
more burdensome than that of the principal, (d) any duty on the part of a
Benefited Party to disclose to either Issuer any facts a Benefited Party may now
or hereafter know about either of the Issuers or any other Person, regardless of
whether a Benefited Party has reason to believe that any such facts materially
increase the risk beyond that which such Issuer intends to assume, or has reason
to believe that such facts are unknown to such Issuer, or has a reasonable
opportunity to communicate such facts to the either Issuer, because each Issuer
acknowledges that each Issuer is fully responsible for being and keeping
informed of the financial condition of each of the Issuers or any other Person
and of all circumstances bearing on the risk of non-
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payment of any Note Obligations, (e) any defense based upon any borrowing or
grant of a security interest by the other Issuer under Section 364 of the
Bankruptcy Law and (f) any claim or other rights which it may now or
hereafter acquire against the other Issuer or any other Person that arises
from the existence of performance of each Issuer of its obligations under
this Indenture or the Notes, including, without limitation, any right of
subrogation, reimbursement, exoneration, contribution, indemnification, any
right to participate in any claim or remedy by a Benefited Party against the
other Issuer or any collateral which a Benefited Party now has or hereafter
acquires, whether or not such claim, remedy or right arises in equity or
under contract, statute or common law, by any payment made hereunder or
otherwise, including, without limitation, the right to take or receive from
either of the Issuers or any other Person, directly or indirectly, in cash or
other property or by set-off or in any other manner, payment or security on
account of such claim or other rights. No failure or delay on the Trustee's
part in exercising any power, right or privilege under this Indenture shall
impair or waive one such power, right or privilege. Each of the Issuers
acknowledges and agrees that any nonrecourse or exculpation provided for in
this Indenture or the Notes, or any other provision of this Indenture or the
Notes, limiting the Benefited Parties' recourse to specific collateral, or
limiting the Benefited Parties' right to enforce a deficiency judgment
against the Issuers, shall have absolutely no application to the Issuers'
liability under this Indenture or the Notes.
(c) In the event of any inconsistency between the provisions of this
Section 11 and the corresponding provisions of this Indenture or the Notes, the
provisions of this Indenture shall govern.
ARTICLE 12.
INTERCREDITOR AGREEMENT WITH LENDERS UNDER THE BANK CREDIT FACILITY
SECTION 12.01. NON-PETITION COVENANT.
Each Holder, by accepting the Note or Notes issued to it,
covenants and agrees that, prior to the payment in full in cash of all
outstanding amounts under the Bank Credit Facility, neither it nor the Trustee
shall (a) institute against, or join any other Person in instituting against,
the Company any involuntary bankruptcy, reorganization, arrangement, insolvency
or liquidation case under the laws of the United States or any state of the
United States or (b) in any voluntary or involuntary bankruptcy case of the
Company, seek a substantive consolidation of the estate of the Company with the
estates of Holdings and/or Capital.
Notwithstanding the preceding paragraph, each Holder shall be
entitled in any such consolidated case arising without violation of the
preceding paragraph by such Holder or by Holders of at least 25% of the Accreted
Value of the then outstanding Notes, to exercise all rights available to such
Holder, as creditors or otherwise, and the Lenders under the Bank Credit
Facility, and any agent on their behalf, by accepting the benefits of this
Article 12 agree that they shall be prohibited from contesting any action of the
Holders in any such case which is not in violation of this Article 12 and from
seeking an equitable subordination of the Holders' claims.
The foregoing restrictions shall not restrict or limit in any
manner the exercise of any rights and remedies the Holders or the Trustee may
have against Holdings whether or not the estate of Holdings is substantively
consolidated with the estate of the Company in a bankruptcy case.
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SECTION 12.02. SUBORDINATION UPON SUBSTANTIVE CONSOLIDATION.
Notwithstanding Section 12.01 hereof (and without limitation
of any other rights or remedies of any holder of Senior Debt), upon any
substantive consolidation of the estate of the Company with the estates of
Holdings and/or Capital in any bankruptcy, reorganization, insolvency,
receivership or similar case relating to the Company or its property, the
Company agrees, and each Holder by accepting a Note agrees, that the
Indebtedness evidenced by the Notes and all Obligations with respect thereto,
including recission claims, are subordinated in right of payment, to the extent
and in the manner provided in this Article 12, to the prior payment in full in
cash of all Senior Debt (whether outstanding on the date hereof or hereafter
created, incurred, assumed or guaranteed), and that the subordination is for the
benefit of the holders of Senior Debt. In the event of any such substantive
consolidation of the estate of the Company with the estates of Holdings and/or
Capital:
(1) holders of Senior Debt shall be entitled to receive
payment in full in cash of all Obligations due in respect of such Senior Debt
(including interest after the commencement of any such proceeding at the rate
specified in the applicable Senior Debt) before Holders of the Notes shall be
entitled to receive any payment with respect to the Notes or any Obligations
with respect thereto, including recission claims (except that Holders may
receive (i) Permitted Junior Securities and (ii) payments and other
distributions made from any defeasance trust created pursuant to Section 8.01
hereof);
(2) until all Obligations with respect to Senior Debt (as
provided in subsection (1) above) are paid in full in cash, any distribution to
which Holders would be entitled but for this Article 12 shall be made to holders
of Senior Debt (except that Holders of Notes may receive (i) Permitted Junior
Securities and (ii) payments and other distributions made from any defeasance
trust created pursuant to Section 8.01 hereof), as their interests may appear.
SECTION 12.03. WHEN DISTRIBUTION MUST BE PAID OVER.
In the event that the Trustee or any Holder receives any
payment of any Obligations with respect to the Notes, including recission
claims, at a time when the Trustee or such Holder, as applicable, has actual
knowledge that such payment is prohibited by Section 12.02 hereof, such payment
shall be held by the Trustee or such Holder, in trust for the benefit of, and
shall be paid forthwith over and delivered, upon written request, to, the
holders of Senior Debt as their interests may appear or the Credit Agent under
the Bank Credit Facility or other agreement (if any) pursuant to which Senior
Debt may have been issued, as their respective interests may appear, for
application to the payment of all Obligations with respect to Senior Debt
remaining unpaid to the extent necessary to pay such Obligations in full in
accordance with their terms, after giving effect to any concurrent payment or
distribution in cash to or for the holders of Senior Debt.
With respect to the holders of Senior Debt, the Trustee
undertakes to perform only such obligations on the part of the Trustee as are
specifically set forth in this Article 12, and no implied covenants or
obligations with respect to the holders of Senior Debt shall be read into this
Indenture against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Debt, and shall not be liable to any
such holders if the Trustee shall pay over or distribute to or on behalf of
Holders or the Company or any other Person money or assets to which any holders
of Senior Debt shall be entitled by virtue of this Article 12, except if such
payment is made as a result of the willful misconduct or negligence of the
Trustee.
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SECTION 12.04. NOTICE BY ISSUERS.
The Issuers shall promptly (and the Credit Agent or other
representative of the Senior Debt may) notify the Trustee and the Paying
Agent of any facts known to the Issuers (or known to the Credit Agent or
other representative of the Senior Debt), as applicable, that would cause a
payment of any Obligations with respect to the Notes to violate this Article
12, but failure to give such notice shall not affect the subordination of the
Notes to the Senior Debt as provided in this Article 12.
SECTION 12.05. SUBROGATION.
After all Senior Debt is paid in full in cash and until the
Notes are paid in full, the Holders shall be subrogated (equally and ratably
with all other Indebtedness of the substantively consolidated entity pari passu
with the Notes) to the rights of holders of Senior Debt to receive distributions
applicable to Senior Debt to the extent that distributions otherwise payable to
the Holders have been applied to the payment of Senior Debt. A distribution made
under this Article 12 to holders of Senior Debt that otherwise would have been
made to Holders of Notes is not, as between the Issuers and Holders, a payment
by the Issuers on the Notes.
SECTION 12.06. RELATIVE RIGHTS.
This Article 12 defines the relative rights of Holders and
holders of Senior Debt. Nothing in this Indenture shall:
(1) impair, as between the Issuers and the Holders, the
obligation of the Issuers, which is absolute and unconditional, to pay Accreted
Value of and interest on the Notes in accordance with their terms;
(2) affect the relative rights of the Holders and creditors of
the Issuers other than their rights in relation to holders of Senior Debt; or
(3) prevent the Trustee or any Holder from exercising its
available remedies upon a Default or Event of Default, subject to the rights of
holders and owners of Senior Debt to receive distributions and payments
otherwise payable to Holders of Notes.
If the Issuers fail because of this Article 12 to pay the
Accreted Value of or interest on a Note on the due date, such failure is still a
Default or Event of Default.
SECTION 12.07. SUBORDINATION MAY NOT BE IMPAIRED.
No right of any holder of Senior Debt to enforce the
subordination of the Indebtedness evidenced by the Notes shall be impaired by
any act or failure to act by the Issuers or any Holder or any act by any holder
of such Senior Debt taken in good faith and not in violation of the provisions
of this Indenture or by the failure of the Issuers or any Holder to comply with
this Indenture.
Except as set forth in Section 10.22 of the Bank Credit
Facility, the holders of Senior Debt may extend, renew, modify or amend the
terms of the Senior Debt or any security therefor and release, sell or exchange
such security and otherwise deal freely with the Issuers, all without affecting
the liabilities and obligations of the parties to this Indenture or the Holders.
The subordination provisions of this Article 12 are solely for the benefit of
the holders from time to time of Senior Debt and may not be rescinded, canceled,
amended or modified in any way other than any amendment or modification that
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would not adversely affect the rights of any holder of Senior Debt or any
amendment or modification that is consented to by each holder of Senior Debt
that would be adversely affected thereby. The subordination provisions of this
Article 12 shall continue to be effective or be reinstated, as the case may be,
if at any time payment and performance of the Senior Debt is, pursuant to
applicable law, avoided, recovered or rescinded or must otherwise be restored or
returned by any holder of Senior Debt, whether as a "voidable preference,"
"fraudulent conveyance," "fraudulent transfer," or otherwise, all as though such
payment or performance had not been made.
SECTION 12.08. DISTRIBUTION OR NOTICE TO CREDIT AGENT.
Whenever a distribution is to be made or a notice given to
holders of Senior Debt, the distribution may be made and the notice given to the
Credit Agent.
Upon any payment or distribution of assets of the Issuers or
any substantively consolidated entity referred to in this Article 12, the
Trustee and the Holders shall be entitled to rely upon any order or decree made
by any court of competent jurisdiction or upon any certificate of such Credit
Agent or of the liquidating trustee or agent or other Person making any
distribution to the Trustee or to the Holders for the purpose of ascertaining
the Persons entitled to participate in such distribution, the holders of the
Senior Debt and other Indebtedness of the Issuers, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Article 12.
SECTION 12.09. RIGHTS OF TRUSTEE AND PAYING AGENT.
Notwithstanding the provisions of this Article 12 or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless the Trustee shall have received at its
Corporate Trust Office at least five Business Days prior to the date of such
payment written notice of facts that would cause the payment of any Obligations
with respect to the Notes to violate this Article 12. Only the Issuers or the
Credit Agent may give the notice. Nothing in this Article 12 shall impair the
claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof.
The Trustee in its individual or any other capacity may hold
Senior Debt with the same rights it would have if it were not Trustee. Any Agent
may do the same with like rights.
SECTION 12.10. AUTHORIZATION TO EFFECT SUBORDINATION.
Each Holder of Notes, by the Holder's acceptance thereof,
authorizes and directs the Trustee on such Holder's behalf to take such action
as may be necessary or appropriate to effectuate the subordination as provided
in this Article 12, and appoints the Trustee to act as such Holder's
attorney-in-fact for any and all such purposes. If the Trustee does not file a
proper proof of claim or proof of debt in the form required in any proceeding
referred to in Section 6.09 hereof at least 30 days before the expiration of the
time to file such claim, the Credit Agent (or other representative of the Senior
Debt) is hereby authorized to file an appropriate claim for and on behalf of the
Holders of the Notes.
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SECTION 12.11. REQUIREMENT OF CERTAIN PROVISION IN SENIOR DEBT.
Notwithstanding any other provision of Article 12 hereof, the
provisions of this Article 12 shall apply only for the benefit of Senior Debt
which contains a provision that is substantially similar to Section 10.22 of the
Bank Credit Facility.
ARTICLE 13.
MISCELLANEOUS
SECTION 13.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or
conflicts with the duties imposed by TIA ss. 318(c), the imposed duties shall
control.
SECTION 13.02. NOTICES.
Any notice or communication by the Issuers or the Trustee to
the others is duly given if in writing and delivered in Person or mailed by
first class mail (registered or certified, return receipt requested), telex,
telecopier or overnight air courier guaranteeing next day delivery, to the
others' address as follows:
If to the Issuers:
Aladdin Gaming Holdings, LLC
Aladdin Capital Corp.
c/o: Aladdin Gaming, LLC
3667 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Telecopier No.: (702) 736-7107
Attention: Chief Executive Officer
With a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP & Affiliates
919 Third Avenue
New York, New York 10022
Telecopier No. (212) 735-3000
Attention: Wallace L. Schwartz, Esq.
If to the Trustee:
State Street Bank and Trust Company
Two International Place
Boston, Massachusetts 02110
Telecopier No.: (617) 664-5371
Attention: Corporate Trust Department
The Issuers or the Trustee, by notice to the others, may
designate additional or different addresses for subsequent notices or
communications.
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All notices and communications (other than those sent to
Holders) shall be deemed to have been duly given: at the time delivered by hand,
if personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by
first class mail, certified or registered, return receipt requested, or by
overnight air courier guaranteeing next day delivery to its address shown on the
register kept by the Registrar. Any notice or communication shall also be so
mailed to any Person described in TIA ss. 313(c), to the extent required by the
TIA. Failure to mail a notice or communication to a Holder or any defect in it
shall not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided
above within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Issuers mail a notice or communication to Holders, they
shall mail a copy to the Trustee and each Agent at the same time.
SECTION 13.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES.
Holders may communicate pursuant to TIA ss. 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Issuers, the Trustee, the Registrar and anyone else shall have the protection of
TIA ss. 312(c).
SECTION 13.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Issuers to the Trustee
to take any action under this Indenture, the Issuers shall furnish to the
Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 13.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably satisfactory
to the Trustee (which shall include the statements set forth in Section 13.05
hereof) stating that, in the opinion of such counsel, all such conditions
precedent and covenants have been satisfied.
SECTION 13.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA ss. 314(a)(4)) shall comply with the provisions of TIA
ss. 314(e) and shall include:
(a) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
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(c) a statement that, in the opinion of such Person, he or she has made
such examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
satisfied; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
SECTION 13.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a
meeting of Holders. The Registrar or Paying Agent may make reasonable rules and
set reasonable requirements for its functions.
SECTION 13.07. NO PERSONAL LIABILITY OF DIRECTORS, MANAGERS, OFFICERS,
EMPLOYEES, INCORPORATORS OR MEMBERS.
No director, manager, officer, employee, incorporator or
member of the Issuers shall have any liability for any obligations of the
Issuers under the Notes or this Indenture or for any claim based on, in respect
of, or by reason of such obligations or their creation. Each Holder by accepting
a Note waives and releases all such liability. The waiver and release are part
of the consideration for issuance of the Notes.
SECTION 13.08. GOVERNING LAW.
THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN AND BE
USED TO CONSTRUE THIS INDENTURE AND THE NOTES WITHOUT REGARD TO THE CHOICE OF
LAW RULES THEREOF.
SECTION 13.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other
indenture, loan or debt agreement of the Issuers or their Subsidiaries or of any
other Person. Any such indenture, loan or debt agreement may not be used to
interpret this Indenture.
SECTION 13.10. SUCCESSORS.
All agreements of the Issuers in this Indenture and the Notes
shall bind their successors. All agreements of the Trustee in this Indenture
shall bind its successors.
SECTION 13.11. SEVERABILITY.
In case any provision in this Indenture or in the Notes shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
SECTION 13.12. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture.
Each signed copy shall be an original, but all of them together represent the
same agreement.
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SECTION 13.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of
the Articles and Sections of this Indenture have been inserted for convenience
of reference only, are not to be considered a part of this Indenture and shall
in no way modify or restrict any of the terms or provisions hereof.
SECTION 13.14. CONTINGENT GUARANTY
Notwithstanding any other provision of this Indenture, the
Company shall not be prevented from entering into a Contingent Guaranty of
Performance and Completion substantially in the form of Exhibit E hereto.
SECTION 13.15. TRUSTEE'S EXECUTION OF OTHER AGREEMENTS
On the Issue Date, the Trustee shall execute and deliver the
Disbursement Agreement and the Engagement Letter with Rider Hunt (NV) LLC.
Dated as of February 26, 1998 ALADDIN GAMING HOLDINGS, LLC
By: /s/ Richard Goeglein
-------------------------
Name: Richard Goeglein
Title: Chief Executive Officer/
President
Dated as of February 26, 1998 ALADDIN CAPITAL CORP.
By: /s/ Richard Goeglein
-------------------------
Name: Richard Goeglein
Title: Chief Executive Officer/
President
Dated as of February 26, 1998 STATE STREET BANK AND TRUST
COMPANY, as Trustee
By: /s/ Ruth A. Smith
-------------------------
Name: Ruth A. Smith
Title: Vice President
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EXHIBIT A-1
(Face of Note)
FOR THE PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED, THIS SECURITY IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT;
FOR EACH $1,000 PRINCIPAL AMOUNT OF THIS SECURITY, THE ISSUE PRICE IS $519.40,
THE AMOUNT OF ORIGINAL ISSUE DISCOUNT IS $480.60, THE ISSUE DATE IS FEBRUARY 26,
1998 AND THE YIELD TO MATURITY IS 15.06 % PER ANNUM.
13 1/2% [Series A] [Series B] Senior Discount Notes due 2010
No. ____
Cusip No. ____ $ ___
ALADDIN GAMING HOLDINGS, LLC AND
ALADDIN CAPITAL CORP.
promises to pay to
or registered assigns,
the principal sum of
Dollars on March 1, 2010
Interest Payment Dates: March 1 and September 1
Record Dates: February 15 and August 15
Dated: __________, ____
ALADDIN GAMING HOLDINGS, LLC
By:
----------------------
Name:
Title:
ALADDIN CAPITAL CORP.
By:
-----------------------
Name:
Title:
This is one of the [Global] Notes
referred to in the within-mentioned Indenture:
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By:_____________________________________
A-1-1
<PAGE>
(Back of Note)
13 1/2% [Series A] [Series B] Senior Discount Notes due 2010
[Insert the Global Note Legend, if applicable pursuant to the provisions of the
Indenture
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS
MAY BE REQUIRED PURSUANT TO SECTION 2.06 OF THE INDENTURE, (II) THIS GLOBAL
NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a)
OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE
FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS
GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR
WRITTEN CONSENT OF THE ISSUERS.]
[Insert the Private Placement Legend, if applicable pursuant to the provisions
of the Indenture
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR
NOT SUBJECT TO, REGISTRATION AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF,
THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER"
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT ("RULE 144A") OR (B) IT
IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A) (1),
(2), (3) OR (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED INVESTOR"), (2)
AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY PRIOR TO THE DATE
WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND
THE LAST DATE ON WHICH THE ISSUERS OR ANY AFFILIATE OF THE ISSUERS WAS THE
OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) ONLY (A) TO
THE ISSUERS, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE
SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A INSIDE THE UNITED
STATES, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR
THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT
THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS
AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN
THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) INSIDE THE UNITED
STATES TO AN ACCREDITED INVESTOR THAT IS ACQUIRING THE SECURITIES FOR ITS
OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH ACCREDITED INVESTOR, FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH,
ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO
A-1-2
<PAGE>
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, SUBJECT TO THE ISSUERS' AND THE TRUSTEE'S RIGHT PRIOR TO
ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSES (D), (E) OR (F) TO
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE FOREGOING
CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON
THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE
TRANSFEROR TO THE TRUSTEE.]
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
1. INTEREST. Aladdin Gaming Holdings, LLC, a Nevada limited-liability
company ("Holdings"), and Aladdin Capital Corp., a Nevada corporation ("Capital"
and, together with Holdings, the "Issuers"), promise to pay interest on the
Accreted Value of this Note at the rate and times and in the manner specified
below and shall pay the Liquidated Damages payable pursuant to Section 2.5 of
the Note Registration Rights Agreement referred to below. No interest will
accrue on the Notes until March 1, 2003, but the Accreted Value will increase
(representing amortization of original issue discount) between the date of
original issuance and March 1, 2003, on a semi-annual bond equivalent basis
using a 360-day year comprised of twelve 30-day months, such that the Accreted
Value will be equal to the full principal amount at maturity of the Notes on
March 1, 2003. Beginning on March 1, 2003, cash interest on the Notes will
accrue at the rate of 13 1/2% per annum until maturity. The Issuers will pay
cash interest and Liquidated Damages semi-annually on March 1 and September 1 of
each year, or if any such day is not a Business Day, on the next succeeding
Business Day (each an "Interest Payment Date"). Cash interest on the Notes will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from March 1, 2003. The Issuers shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue principal and premium, if any, in accordance with the Indenture; they
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Liquidated Damages
(without regard to any applicable grace periods) from time to time at the same
rate to the extent lawful in accordance with the Indenture. Cash interest will
be computed on the basis of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Issuers will pay interest on the Notes (except
defaulted interest) and Liquidated Damages to the Persons who are registered
Holders of Notes at the close of business on the February 15 or August 15 next
preceding the Interest Payment Date, even if such Notes are canceled after such
record date and on or before such Interest Payment Date, except as provided in
Section 2.12 of the Indenture with respect to defaulted interest. The Notes will
be payable as to Accreted Value, premium and Liquidated Damages, if any, and
interest at the office or agency of the Issuers maintained for such purpose
within or without the City and State of New York, or, at the option of the
Issuers, payment of interest and Liquidated Damages may be made by check mailed
to the Holders at their addresses set forth in the register of Holders; provided
that all payments with respect to at least $1.0 million in aggregate principal
amount at maturity of Notes, the Holders of which have given wire transfer
instructions to Holdings, will be required to be made by wire transfer of
immediately available funds to the accounts specified by the Holders thereof.
Such payment shall be in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts.
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<PAGE>
3. PAYING AGENT AND REGISTRAR. Initially, State Street Bank and Trust
Company, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Issuers may change any Paying Agent or Registrar without notice
to any Holder. The Issuers or any of their Subsidiaries may act in any such
capacity.
4. INDENTURE. The Issuers issued the Notes under an Indenture dated as of
February 26, 1998 (the "Indenture"), between the Issuers and the Trustee. The
terms of the Notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939, as amended (15
U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all such terms, and
Holders are referred to the Indenture and such Act for a statement of such
terms. To the extent any provision of this Note conflicts with the express
provisions of the Indenture, the provisions of the Indenture shall govern and be
controlling. The Notes are general obligations of the Issuers limited to $221.5
million in aggregate principal amount at maturity, plus amounts, if any, issued
to pay Liquidated Damages on outstanding Notes as set forth in Paragraph 2
hereof.
5. OPTIONAL REDEMPTION.
(a) Except as set forth in subparagraph (b) of this Paragraph 5 and
Paragraph 6 thereof, the Notes shall not be redeemable at the option of the
Issuers prior to March 1, 2003. Thereafter, the Notes shall be subject to
redemption at the option of the Issuers, in whole or in part, upon not less than
30 nor more than 60 days' notice, at the redemption prices (expressed as
percentages of Accreted Value) set forth below, plus accrued and unpaid interest
and Liquidated Damages, if any, thereon to the applicable date of redemption, if
redeemed during the twelve-month period beginning on March 1 of the years
indicated below:
<TABLE>
<CAPTION>
Year Percentage
- ---- ----------
<S> <C>
2003 ....................... 106.75%
2004 ....................... 104.50%
2005 ....................... 102.25%
2006 and thereafter ........ 100.00%
</TABLE>
(b) Notwithstanding the provisions of subparagraph (a) of this Paragraph 5,
on or prior to March 1, 2001, the Issuers may redeem up to an aggregate of 35%
of the Accreted Value of the Notes at a redemption price of 113 1/2% of the
Accreted Value thereof, plus Liquidated Damages, if any, thereon to the
redemption date, with the proceeds of a Qualified Public Offering (which
proceeds may be advanced or contributed to the Issuers by the IPO Entity);
provided that at least 65% of the Accreted Value remains outstanding immediately
after the occurrence of such redemption; and provided, further, that such
redemption shall occur within 60 days of the date of such Qualified Public
Offering.
6. GAMING REDEMPTION. Notwithstanding the provisions of subparagraph (a) of
Paragraph 5 above, if any Gaming Authority requires that a holder or beneficial
owner of Notes must be licensed, qualified or found suitable under any
applicable gaming law and such holder or beneficial owner fails to apply for a
license, qualification or finding of suitability within 30 days after being
requested to do so by such Gaming Authority (or such lesser period that may be
required by such Gaming Authority), or if such holder or beneficial owner is
notified by such Gaming Authority that such holder or beneficial owner will not
be so licensed, qualified or found suitable, the Issuers shall have the right,
at their option, (i) to require that such holder or beneficial owner dispose of
such holder's or beneficial owner's Notes within 30 days (or such earlier date
as may be required by the applicable
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<PAGE>
Gaming Authority) of (a) the termination of the period described above for such
holder or beneficial owner to apply for a license, qualification or finding of
suitability or (b) receipt of the notice from such Gaming Authority that such
holder or beneficial owner will not be licensed, qualified or found suitable by
such Gaming Authority or (ii) to call for redemption of the Notes of such holder
or beneficial owner at a redemption price equal to the lesser of the price at
which such holder or beneficial owner acquired such Notes and the Accreted Value
thereof, together with, in either case, accrued and unpaid interest and
Liquidated Damages, if any, thereon to the date of redemption or the date of the
finding that such holder or beneficial owner will not be licensed, qualified or
found suitable, which may be less than 30 days following the notice of
redemption, if so ordered by such Gaming Authority or required by applicable
gaming laws.
7. MANDATORY REDEMPTION. Except as set forth in Paragraph 8 below, the
Issuers, the Issuers shall not be required to make mandatory redemptions or
sinking fund payments prior to maturity with respect to the Notes.
8. REPURCHASE AT OPTION OF HOLDER.
(a) Upon the occurrence of a Change of Control, each Holder will have the
right to require the Issuers to purchase all or any part (equal to $1,000 or an
integral multiple thereof) of each Holder's Notes at a price in cash equal to
101% of the Accreted Value thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the date of purchase. Within 10 days
following any Change of Control, the Issuers shall mail a notice to each Holder
setting forth the procedures governing the Change of Control Offer as required
by the Indenture.
(b) If Holdings or a Restricted Subsidiary consummates any Asset Sales,
when the aggregate amount of Excess Proceeds exceeds $10.0 million, Holdings
shall commence an offer to all Holders (an "Asset Sale Offer") pursuant to
Section 4.10 of the Indenture to purchase the maximum Accreted Value of Notes
that may be purchased out of the Excess Proceeds, at an offer price in cash in
an amount equal to 100% of the Accreted Value thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the date fixed for the
closing of such offer in accordance with the procedures set forth in the
Indenture. To the extent that the aggregate amount of Notes tendered pursuant to
an Asset Sale Offer is less than the Excess Proceeds, Holdings or the Restricted
Subsidiary, as the case may be, may, subject to the provisions of the Indenture,
use any remaining Excess Proceeds for general corporate purposes. If the
aggregate Accreted Value of Notes surrendered by Holders thereof exceeds the
amount of Excess Proceeds, the Trustee shall select the Notes to be purchased in
accordance with Section 3.02 of the Indenture. Holders of Notes that are the
subject of an offer to purchase will receive an Asset Sale Offer from Holdings
prior to any related purchase date and may elect to have such Notes purchased by
completing the form entitled "Option of Holder to Elect Purchase" on the reverse
of the Notes.
9. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least 30
days but not more than 60 days before the redemption date to each Holder whose
Notes are to be redeemed at its registered address. Notes in denominations
larger than $1,000 may be redeemed in part but only in whole multiples of
$1,000, unless all of the Notes held by a Holder are to be redeemed. On and
after the redemption date interest ceases to accrue on Notes or portions thereof
called for redemption.
10. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000. The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. The Registrar and the Trustee
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<PAGE>
may require a Holder, among other things, to furnish appropriate endorsements
and transfer documents and the Issuers may require a Holder to pay any taxes and
fees required by law or permitted by the Indenture. The Issuers need not
exchange or register the transfer of any Note or portion of a Note selected for
redemption, except for the unredeemed portion of any Note being redeemed in
part. Also, the Issuers need not exchange or register the transfer of any Notes
for a period of 15 days before a selection of Notes to be redeemed or during the
period between a record date and the corresponding Interest Payment Date.
11. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated
as its owner for all purposes.
12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the
Indenture or the Notes may be amended or supplemented with the consent of the
Holders of at least a majority in Accreted Value of the Notes then outstanding
voting as a single class, and any existing default or compliance with any
provision of the Indenture or the Notes may be waived with the consent of the
Holders of a majority in Accreted Value of the then outstanding Notes voting as
a single class. Without the consent of any Holder of a Note, the Indenture or
the Notes may be amended or supplemented to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Notes in addition to or in place of
certificated Notes, to provide for the assumption of the Issuers' obligations to
Holders of the Notes in case of a merger or consolidation, to make any change
that would provide any additional rights or benefits to the Holders of the Notes
or that does not adversely affect the legal rights under the Indenture of any
such Holder, to comply with the requirements of the Commission in order to
effect or maintain the qualification of the Indenture under the Trust Indenture
Act.
13. DEFAULTS AND REMEDIES. Events of Default include: (i) default for 30
days in the payment when due of interest on, or Liquidated Damages, if any, with
respect to, the Notes; (ii) default in payment when due of the Accreted Value of
or premium, if any, on the Notes, (iii) failure by the Issuers to comply with
Section 4.07, 4.09, 4.10, 4.15, 4.21, 4.22, or 5.01 of the Indenture; (iv)
failure by the Issuers for 30 days after written notice to comply with any of
their agreements in the Indenture or the Notes; (v) default under certain other
agreements relating to Indebtedness of the Issuers which default (a) is caused
by failure to pay when due principal of or premium, if any, or interest on such
Indebtedness (other than the Bank Credit Facility) prior to the later of (1) 60
days after such default and (2) the expriation of the grace period provided in
such Indebtedness (a "Payment Default") which Payment Default, together with all
other Payment Defaults, exceeds $1.0 million or (b) results in the acceleration
of such Indebtedness prior to its express maturity and, in each case, the
principal amount of any such Indebtedness, together with the principal amount of
any other such Indebtedness under which there has been a Payment Default or the
maturity of which has been so accelerated, aggregates $15.0 million or more;
(vi) certain final judgments for the payment of money aggregating in excess of
$10.0 million that remain undischarged for a period of 60 days; (vii) certain
events of bankruptcy or insolvency with respect to Holdings or any of its
Significant Subsidiaries; (viii) a default by each of the Trust, London Clubs
and Bazaar Holdings in the performance of their material obligations set forth
in the Keep-Well Agreement, which default remains uncured for 180 days, or
default by AHL, London Clubs and Bazaar Holdings in the performance of their
material obligations set forth in the Noteholder Completion Guaranty or
repudiation by each of them of their respective obligations under the Keep-Well
Agreement, which has not been ratified and reaffirmed within 180 days, or the
Noteholder Completion Guaranty; (ix) Holdings breaches any material
representation or warranty set forth in either of the Pledge Agreements or
default by Holdings in the performance of any material covenant set forth in
either of such agreements or repudiation by Holdings of its obligations under
either of such agreements or the unenforceability of either of such agreements
against Holdings for any reason; (x) the termination of the
A-1-6
<PAGE>
Bank Credit Facility (other than pursuant to a refinancing thereof in accordance
with its terms and with the terms of clause (i) under the second paragraph under
Section 4.09 of the Indenture or the repudiation of the Lenders obligations
thereunder, including without limitation, the withdrawal of the proceeds of the
Term B Loans and Term C Loans from the Bank Construction Disbursement Account,
in each case prior to the date the Aladdin is Operating (except for
disbursements in accordance with the Disbursement Agreement); (xi) (a) a failure
of the Desert Passage to be Operating on or prior to 90 days after the date the
Aladdin becomes Operating and (b) at any time thereafter and prior to the date
on which the Desert Passage becomes Operating, the Company's Fixed Charge
Coverage Ratio for its most recently ended four full fiscal quarters (or such
lesser number of quarters as have ended after the Aladdin became Operating) for
which internal financial statements are available is not at least 1.75 to 1.0;
(xii) after the Aladdin becomes Operating, revocation, termination, suspension
or other cessation of effectiveness of any Gaming Approval, which results in the
cessation or suspension of gaming operations for a period of more than 90 days
at the Aladdin; (xiii) the failure of the Aladdin to be Operating by the
Operating Deadline; (xiv) the transfer of the Aladdin Site as a result of the
exercise of remedies in respect of the Deed of Trust, including a foreclosure by
the Lenders pursuant to the terms of the Deed of Trust or the acceptance by the
Lenders of a deed in lieu of foreclosure; and (xv) the transfer of the Common
Membership Interests as a result of the exercise of remedies by the Lenders in
respect of the pledge of such Common Membership Interests pursuant to the
Lender's security documents. If any Event of Default occurs and is continuing,
the Trustee or the Holders of at least 25% in Accreted Value of the then
outstanding Notes may declare all the Notes to be due and payable.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, all outstanding Notes will become
due and payable without further action or notice. Holders may not enforce the
Indenture or the Notes except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in Accreted Value of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power. The Trustee
may withhold from Holders of the Notes notice of any continuing Default or Event
of Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest. The Holders of a majority in aggregate Accreted Value of the Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of interest on, or the principal of, the Notes. The Issuers are required
to deliver to the Trustee annually a statement regarding compliance with the
Indenture, and the Issuers are required upon becoming aware of any Default or
Event of Default, to deliver to the Trustee a statement specifying such Default
or Event of Default.
14. TRUSTEE DEALINGS WITH ISSUERS. The Trustee, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for the Issuers or their Affiliates, and may otherwise deal with the Issuers or
their Affiliates, as if it were not the Trustee.
15. NO RECOURSE AGAINST OTHERS. A director, manager, officer, employee,
incorporator or member of the Issuers, as such, shall not have any liability for
any obligations of the Issuers under the Notes or the Indenture or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for the issuance of the Notes.
16. SECURITY. The due and punctual payment of the Accreted Value of,
premium and interest and Liquidated Damages, if any, on the Notes when and as
the same shall be due and payable, whether on an interest payment date, at
maturity, by acceleration, repurchase, redemption or otherwise, and interest on
any overdue Accreted Value of, premium and interest and Liquidated Damages, if
any (to the extent permitted by law), on the Notes and performance of all other
obligations
A-1-7
<PAGE>
of the Issuers to the Holders or the Trustee under this Indenture and the Notes,
according to the terms hereunder or thereunder, shall be secured as provided in
the Pledge Agreements which Holdings has entered into simultaneously with the
execution of this Indenture. Each Holder of Notes, by its acceptance thereof,
consents and agrees to the terms of the Pledge Agreements (including, without
limitation, the provisions providing for foreclosure) as the same may be in
effect or may be amended from time to time in accordance with their terms and
authorizes and directs the Trustee or the Disbursement Agent, as the case may
be, to enter into the Pledge Agreements and to perform their respective
obligations and exercise their respective rights thereunder in accordance
therewith.
17. INTERCREDITOR AGREEMENT. The Holders, while free to exercise their
rights and remedies against Holdings, are prohibited, for so long as any portion
of the Bank Credit Facility is outstanding, from initiating or intervening in an
insolvency proceeding of the Company and from seeking a substantive
consolidation of Holdings, the Company and/or Capital. In addition, in the event
of a substantive consolidation of Holdings, the Company and/or Capital, the
Holders (i) will not be entitled to receive any cash or other payments (other
than securities subordinated to the prior payment in full of the Bank Credit
Facility to the same extent of the Notes) in respect of the Notes until the Bank
Credit Facility has been indefeasibly paid in full in cash and (ii) will be
required to turn over to the Lenders under the Bank Credit Facility any payments
received in violation of such provisions.
18. AUTHENTICATION. This Note shall not be valid until authenticated by the
manual signature of the Trustee or an authenticating agent.
19. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
20. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND RESTRICTED
DEFINITIVE NOTES. In addition to the rights provided to Holders of Notes under
the Indenture, Holders of Restricted Global Notes and Restricted Definitive
Notes shall have all the rights set forth in the Note Registration Rights
Agreement dated as of February 26, 1998, between the Issuers and the parties
named on the signature pages thereof (the "Note Registration Rights Agreement").
21. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Issuers have caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
22. WARRANT ENDORSEMENT.
THE NOTES EVIDENCED BY THIS CERTIFICATE ARE NOT TRANSFERABLE SEPARATELY
FROM THE WARRANTS ATTACHED HERETO ORIGINALLY SOLD AS A UNIT WITH THE NOTES
UNTIL THE EARLIEST TO OCCUR OF (I) SEPTEMBER 1, 1998; (II) THE DATE ON
WHICH A REGISTRATION STATEMENT WITH RESPECT TO THE NOTES OR A REGISTRATION
STATEMENT WITH RESPECT TO THE WARRANTS AND THE WARRANT SHARES IS FILED WITH
THE COMMISSION UNDER THE SECURITIES ACT;
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<PAGE>
(III) THE OCCURRENCE OF A CHANGE OF CONTROL OR A SALE OR RECAPITALIZATION
OF ENTERPRISES, HOLDINGS OR THE COMPANY OCCURS; (IV) 30 DAYS AFTER A
QUALIFIED PUBLIC OFFERING; (V) THE OCCURRENCE OF AN EVENT OF DEFAULT; OR
(VI) SUCH EARLIER DATE AS DETERMINED BY MERRILL LYNCH & CO. IN ITS SOLE
DISCRETION (THE DATE OF OCCURRENCE OF AN EVENT SPECIFIED IN CLAUSES (I)
THROUGH (VI) BEING REFERRED TO AS THE "SEPARATION DATE"). PRIOR TO SUCH
DATE, THE NOTES EVIDENCED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN
INTEGRAL MULTIPLES OF $1,000 PRINCIPAL AMOUNT OF NOTES AND ONLY WITH THE
SIMULTANEOUS TRANSFER TO THE TRANSFEREE OF 10 WARRANTS FOR EACH $1,000
PRINCIPAL AMOUNT SO TRANSFERRED.
Under the terms of the warrant agreement relating to the Warrants (the "Warrant
Agreement"), the holder of this security may at any time on or after the
Separation Date, at its option, by notice to the Trustee elect to separate or
separately transfer the Notes and the Warrants represented hereby, in whole or
in part, and shall thereafter surrender this security to the Trustee for the
exchange of this security, in part, for such Warrant or Warrants and for a Note
or Notes of a like aggregate principal amount and of authorized denominations
not bearing this Warrant Endorsement; provided that no delay or failure on the
part of the Trustee or the Warrant Agent to exchange this security for such
Warrant or Warrants and Note or Notes shall affect the separation of such Notes
and Warrants represented hereby or their separate transferability. Until such
separation, the holder of this security is, for each $1,000 principal amount of
Notes, also the record owner of 10 Warrants expiring March 1, 2010, each Warrant
to purchase 1 share of Class B non-voting Common Stock, no par value (the
"Common Stock"), of Enterprises (subject to adjustment). Enterprises has
deposited with the Trustee, as custodian for the Holder of the Notes bearing
this Warrant Endorsement, a certificate or certificates for such Warrants to
purchase an aggregate of 2,215,000 shares of Common Stock (subject to
adjustment). Prior to the separation of the Notes and the Warrants as described
above, record ownership of such Warrants is transferable only by the transfer of
this Note on the Note register maintained by the Issuers pursuant to the
Indenture. After such separation, ownership of a Warrant is transferable only by
the transfer of the certificate representing such Warrant in accordance with the
provisions of the Warrant Agreement.
By accepting a security bearing this Warrant Endorsement, each holder of this
security is bound by all of the terms and provisions of the Warrant Agreement (a
copy of which is available on request to Enterprises or the Warrant Agent).
Election to Exercise. On or after the Warrant Exercise Commencement Date (as
such term is defined in the Warrant Agreement), the Warrants may be exercised by
obtaining from the Warrant Agent the required forms of election to exercise,
declaration form and instructions for payment of the Exercise Price (as such
term is defined in the Warrant Agreement). Upon receiving the required forms and
payment of such Exercise Price, the Warrant Agent shall exercise such Warrants
in accordance with the provisions of the Warrant Agreement.
Election of Exchange. The undersigned registered holder of the security
represented hereby irrevocably elects to separate its Notes and Warrants and to
exchange this security for a new Note in the principal amount hereof and a
Warrant certificate.
The undersigned hereby irrevocably instructs the Trustee (A) to issue in the
name of the undersigned registered holder a new Note not containing the above
Warrant Endorsement in the principal amount
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<PAGE>
equal to the principal amount hereof and (B) to deliver this security to the
Warrant Agent pursuant to the provisions of the Warrant Agreement with
instructions to issue in the name of the undersigned registered holder a Warrant
certificate representing the number of Warrants equal to the number of Warrants
represented by this security and to issue (1) a new Warrant certificate to
replace the Warrant certificate held on deposit by the Warrant Agent equal to
the difference between (x) the number of Warrants represented by the Warrant
certificate so held on deposit and (y) the number of Warrants represented by
this Security.
Dated: ______________________
Name of Holder of this security: ______________________
Address: ______________________
______________________
Signature: ______________________
Note: The above signature must correspond with the name as written upon the face
of this security in every particular, without alteration or enlargement whatever
and if the certificate representing any principal amount at maturity of this
security or the associated Warrants is to be registered in a name other than
that in which this security is registered.
Signature Guaranteed: ______________________
Note: Signature must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Registrar, which requirements include membership
or participation in the Securities Transfer Agents Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.
The Issuers will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Note Registration Rights Agreement.
Requests may be made to:
Aladdin Gaming Holdings, LLC
Aladdin Capital Corp.
c/o Aladdin Gaming Holdings, LLC
3667 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Attention: Corporate Secretary
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<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
- ------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint _____________________________________________________
to transfer this Note on the books of the Issuers. The agent may substitute
another to act for him.
- -----------------------------------------------------------------------------
Date:
-------------
Your Signature:
---------------------------------------
(Sign exactly as your name appears on the face of
this Note)
Signature Guarantee.
Note: Signature must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Registrar, which requirements include membership
or participation in the Securities Transfer Agents Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.
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<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Issuers pursuant to
Section 4.10 or 4.15 of the Indenture, check the box below:
/ / Section 4.10 / / Section 4.15
If you want to elect to have only part of the Note purchased by the Issuers
pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you
elect to have purchased: $________
Date: Your Signature:
------------- ------------------------------
(Sign exactly as your name appears on the Note)
Tax Identification No:
-----------------------
Signature Guarantee.
Note: Signature must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Registrar, which requirements include membership
or participation in the Securities Transfer Agents Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.
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<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE(1)
The following exchanges of a part of this Global Note for an
interest in another Global Note or for a Definitive Note, or exchanges of a part
of another Global Note or Definitive Note for an interest in this Global Note,
have been made:
<TABLE>
<CAPTION>
Amount of Accreted Value of
decrease in Amount of increase this Global Note Signature of
Accreted Value in Accreted Value following such authorized officer
of of decrease (or of Trustee or Note
Date of Exchange this Global Note this Global Note increase) Custodian
---------------- ---------------- ------------------ ----------------- ------------------
<S> <C> <C> <C> <C>
</TABLE>
- -----------------
1 This should be included only if the Note is issued in global form.
A-1-13
<PAGE>
EXHIBIT A-2
(Face of Regulation S Temporary Global Note)
FOR THE PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED, THIS SECURITY IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT;
FOR EACH $1,000 PRINCIPAL AMOUNT OF THIS SECURITY, THE ISSUE PRICE IS $519.40,
THE AMOUNT OF ORIGINAL ISSUE DISCOUNT IS $480.60, THE ISSUE DATE IS FEBRUARY 26,
1998 AND THE YIELD TO MATURITY IS 15.06 % PER ANNUM.
13 1/2% [Series A] [Series B] Senior Discount Notes due 2010
No. ____
Cusip No. ____ $__________
ALADDIN GAMING HOLDINGS, LLC AND
ALADDIN CAPITAL CORP.
promises to pay to
or registered assigns,
the principal sum of
Dollars on March 1, 2010
Interest Payment Dates: March 1 and September 1
Record Dates: February 15 and August 15
Dated: __________, ____
ALADDIN GAMING HOLDINGS, LLC
By:________________________
Name:
Title:
ALADDIN CAPITAL CORP.
By:_________________________
Name:
Title:
This is one of the [Global] Notes
referred to in the within-mentioned Indenture:
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By:___________________________________
A-2-1
<PAGE>
(Back of Regulation S Temporary Global Note)
13 1/2% [Series A] [Series B] Senior Discount Notes due 2010
[Insert the Regulation S Temporary Global Note Legend, if applicable pursuant
to the provisions of the Indenture
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR OTHER NOTES, ARE AS
SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE
BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE
ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON.]
[Insert the Global Note Legend, if applicable pursuant to the provisions of the
Indenture
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS
MAY BE REQUIRED PURSUANT TO SECTION 2.06 OF THE INDENTURE, (II) THIS GLOBAL
NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a)
OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE
FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS
GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR
WRITTEN CONSENT OF THE ISSUERS.]
[Insert the Private Placement Legend, if applicable pursuant to the provisions
of the Indenture
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR
NOT SUBJECT TO, REGISTRATION AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF,
THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT
("RULE 144A") OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(A) (1), (2), (3) OR (7) UNDER THE SECURITIES ACT) (AN
"ACCREDITED INVESTOR"), (2) AGREES TO OFFER, SELL OR OTHERWISE TRANSFER
SUCH SECURITY PRIOR TO THE DATE WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUERS OR ANY
AFFILIATE OF THE ISSUERS WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR
OF THIS SECURITY) ONLY (A) TO THE ISSUERS, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C)
FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A
INSIDE THE UNITED STATES, TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED
A-2-2
<PAGE>
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO
WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR
OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT, (E) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR THAT
IS ACQUIRING THE SECURITIES FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH
ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR
OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE ISSUERS'
AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I)
PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION
OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF
THEM, AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A
CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS
SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE.]
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
1. INTEREST. Aladdin Gaming Holdings, LLC, a Nevada limited-liability
company ("Holdings"), and Aladdin Capital Corp., a Nevada corporation ("Capital"
and, together with Holdings, the "Issuers"), promise to pay interest on the
Accreted Value of this Note at the rate and times and in the manner specified
below and shall pay the Liquidated Damages payable pursuant to Section 2.5 of
the Note Registration Rights Agreement referred to below. No interest will
accrue on the Notes until March 1, 2003, but the Accreted Value will increase
(representing amortization of original issue discount) between the date of
original issuance and March 1, 2003, on a semi-annual bond equivalent basis
using a 360-day year comprised of twelve 30-day months, such that the Accreted
Value will be equal to the full principal amount at maturity of the Notes on
March 1, 2003. Beginning on March 1, 2003, cash interest on the Notes will
accrue at the rate of 13 1/2% per annum until maturity. The Issuers will pay
cash interest and Liquidated Damages semi-annually on March 1 and September 1 of
each year, or if any such day is not a Business Day, on the next succeeding
Business Day (each an "Interest Payment Date"). Cash interest on the Notes will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from March 1, 2003. [The Issuers shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue principal and premium, if any, in accordance with the Indenture; they
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Liquidated Damages
(without regard to any applicable grace periods) from time to time at the same
rate to the extent lawful in accordance with the Indenture. Cash interest will
be computed on the basis of a 360-day year of twelve 30-day months.
Until this Regulation S Temporary Global Note is exchanged for one or more
Regulation S Permanent Global Notes, the Holder hereof shall not be entitled to
receive payments of interest hereon; until so exchanged in full, this Regulation
S Temporary Global Note shall in all other respects be entitled to the same
benefits as other Notes under the Indenture.
A-2-3
<PAGE>
2. METHOD OF PAYMENT. The Issuers will pay interest on the Notes (except
defaulted interest) and Liquidated Damages to the Persons who are registered
Holders of Notes at the close of business on the February 15 or August 15 next
preceding the Interest Payment Date, even if such Notes are canceled after such
record date and on or before such Interest Payment Date, except as provided in
Section 2.12 of the Indenture with respect to defaulted interest. The Notes will
be payable as to Accreted Value, premium and Liquidated Damages, if any, and
interest at the office or agency of the Issuers maintained for such purpose
within or without the City and State of New York, or, at the option of the
Issuers, payment of interest and Liquidated Damages may be made by check mailed
to the Holders at their addresses set forth in the register of Holders; provided
that all payments with respect to at least $1.0 million in aggregate principal
amount at maturity of Notes, the Holders of which have given wire transfer
instructions to Holdings, will be required to be made by wire transfer of
immediately available funds to the accounts specified by the Holders thereof.
Such payment shall be in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts.
3. PAYING AGENT AND REGISTRAR. Initially, State Street Bank and Trust
Company, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Issuers may change any Paying Agent or Registrar without notice
to any Holder. The Issuers or any of their Subsidiaries may act in any such
capacity.
4. INDENTURE. The Issuers issued the Notes under an Indenture dated as of
February 26, 1998 (the "Indenture"), between the Issuers and the Trustee. The
terms of the Notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939, as amended (15
U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all such terms, and
Holders are referred to the Indenture and such Act for a statement of such
terms. To the extent any provision of this Note conflicts with the express
provisions of the Indenture, the provisions of the Indenture shall govern and be
controlling. The Notes are general obligations of the Issuers limited to $221.5
million in aggregate principal amount at maturity, plus amounts, if any, issued
to pay Liquidated Damages on outstanding Notes as set forth in Paragraph 2
hereof.
5. OPTIONAL REDEMPTION.
(a) Except as set forth in subparagraph (b) of this Paragraph 5 and
Paragraph 6 thereof, the Notes shall not be redeemable at the option of the
Issuers prior to March 1, 2003. Thereafter, the Notes shall be subject to
redemption at the option of the Issuers, in whole or in part, upon not less than
30 nor more than 60 days' notice, at the redemption prices (expressed as
percentages of Accreted Value) set forth below, plus accrued and unpaid interest
and Liquidated Damages, if any, thereon to the applicable date of redemption, if
redeemed during the twelve-month period beginning on March 1 of the years
indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2003........................................................ 106.75%
2004........................................................ 104.50%
2005........................................................ 102.25%
2006 and thereafter......................................... 100.00%
</TABLE>
(b) Notwithstanding the provisions of subparagraph (a) of this Paragraph 5,
on or prior to March 1, 2001, the Issuers may redeem up to an aggregate of 35%
of the Accreted Value of
A-2-4
<PAGE>
the Notes at a redemption price of 113 1/2% of the Accreted Value thereof, plus
Liquidated Damages, if any, thereon to the redemption date, with the proceeds of
a Qualified Public Offering (which proceeds may be advanced or contributed to
the Issuers by the IPO Entity); provided that at least 65% of the Accreted Value
remains outstanding immediately after the occurrence of such redemption; and
provided, further, that such redemption shall occur within 60 days of the date
of such Qualified Public Offering.
6. GAMING REDEMPTION. Notwithstanding the provisions of subparagraph (a) of
Paragraph 5 above, if any Gaming Authority requires that a holder or beneficial
owner of Notes must be licensed, qualified or found suitable under any
applicable gaming law and such holder or beneficial owner fails to apply for a
license, qualification or finding of suitability within 30 days after being
requested to do so by such Gaming Authority (or such lesser period that may be
required by such Gaming Authority), or if such holder or beneficial owner is
notified by such Gaming Authority that such holder or beneficial owner will not
be so licensed, qualified or found suitable, the Issuers shall have the right,
at their option, (i) to require that such holder or beneficial owner dispose of
such holder's or beneficial owner's Notes within 30 days (or such earlier date
as may be required by the applicable Gaming Authority) of (a) the termination of
the period described above for such holder or beneficial owner to apply for a
license, qualification or finding of suitability or (b) receipt of the notice
from such Gaming Authority that such holder or beneficial owner will not be
licensed, qualified or found suitable by such Gaming Authority or (ii) to call
for redemption of the Notes of such holder or beneficial owner at a redemption
price equal to the lesser of the price at which such holder or beneficial owner
acquired such Notes and the Accreted Value thereof, together with, in either
case, accrued and unpaid interest and Liquidated Damages, if any, thereon to the
date of redemption or the date of the finding that such holder or beneficial
owner will not be licensed, qualified or found suitable, which may be less than
30 days following the notice of redemption, if so ordered by such Gaming
Authority or required by applicable gaming laws.
7. MANDATORY REDEMPTION. Except as set forth in Paragraph 8 below, the
Issuers, the Issuers shall not be required to make mandatory redemptions or
sinking fund payments prior to maturity with respect to the Notes.
8. REPURCHASE AT OPTION OF HOLDER.
(a) Upon the occurrence of a Change of Control, each Holder will have the
right to require the Issuers to purchase all or any part (equal to $1,000 or an
integral multiple thereof) of each Holder's Notes at a price in cash equal to
101% of the Accreted Value thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the date of purchase. Within 10 days
following any Change of Control, the Issuers shall mail a notice to each Holder
setting forth the procedures governing the Change of Control Offer as required
by the Indenture.
(b) If Holdings or a Restricted Subsidiary consummates any Asset Sales,
when the aggregate amount of Excess Proceeds exceeds $10.0 million, Holdings
shall commence an offer to all Holders (an "Asset Sale Offer") pursuant to
Section 4.10 of the Indenture to purchase the maximum Accreted Value of Notes
that may be purchased out of the Excess Proceeds, at an offer price in cash in
an amount equal to 100% of the Accreted Value thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the date fixed for the
closing of such offer in accordance with the procedures set forth in the
Indenture. To the extent that the aggregate amount of Notes tendered pursuant to
an Asset Sale Offer is less than the Excess Proceeds, Holdings or the Restricted
Subsidiary, as the case may be, may, subject to the provisions of the Indenture,
use any remaining Excess Proceeds for general corporate purposes. If the
aggregate Accreted Value of Notes surrendered by Holders thereof exceeds
A-2-5
<PAGE>
the amount of Excess Proceeds, the Trustee shall select the Notes to be
purchased in accordance with Section 3.02 of the Indenture. Holders of Notes
that are the subject of an offer to purchase will receive an Asset Sale Offer
from Holdings prior to any related purchase date and may elect to have such
Notes purchased by completing the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Notes.
9. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least 30
days but not more than 60 days before the redemption date to each Holder whose
Notes are to be redeemed at its registered address. Notes in denominations
larger than $1,000 may be redeemed in part but only in whole multiples of
$1,000, unless all of the Notes held by a Holder are to be redeemed. On and
after the redemption date interest ceases to accrue on Notes or portions thereof
called for redemption.
10. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000. The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Issuers may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Issuers need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Issuers
need not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.
This Regulation S Temporary Global Note is exchangeable in whole or in part
for one or more Global Notes only (i) on or after the termination of the
one-year period (as defined in Regulation S) and (ii) upon presentation of
certificates (accompanied by an Opinion of Counsel, if applicable) required by
Article 2 of the Indenture. Upon exchange of this Regulation S Temporary Global
Note for one or more Global Notes, the Trustee shall cancel this Regulation S
Temporary Global Note.
11. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated
as its owner for all purposes.
12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the
Indenture or the Notes may be amended or supplemented with the consent of the
Holders of at least a majority in Accreted Value of the Notes then outstanding
voting as a single class, and any existing default or compliance with any
provision of the Indenture or the Notes may be waived with the consent of the
Holders of a majority in Accreted Value of the then outstanding Notes voting as
a single class. Without the consent of any Holder of a Note, the Indenture or
the Notes may be amended or supplemented to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Notes in addition to or in place of
certificated Notes, to provide for the assumption of the Issuers' obligations to
Holders of the Notes in case of a merger or consolidation, to make any change
that would provide any additional rights or benefits to the Holders of the Notes
or that does not adversely affect the legal rights under the Indenture of any
such Holder, to comply with the requirements of the Commission in order to
effect or maintain the qualification of the Indenture under the Trust Indenture
Act.
13. DEFAULTS AND REMEDIES. Events of Default include: (i) default for 30
days in the payment when due of interest on, or Liquidated Damages, if any,
with respect to, the Notes; (ii) default in payment when due of the Accreted
Value of or premium, if any, on the Notes, (iii) failure by the Issuers to
comply with Section 4.07, 4.09, 4.10, 4.15, 4.21, 4.22, or 5.01 of the
Indenture; (iv) failure
A-2-6
<PAGE>
by the Issuers for 30 days after written notice to comply with any of their
agreements in the Indenture or the Notes; (v) default under certain other
agreements relating to Indebtedness of the Issuers which default (a) is
caused by failure to pay when due principal of or premium, if any, or
interest on such Indebtedness (other than the Bank Credit Facility) prior to
the later of (1) 60 days after such default and (2) the expriation of the
grace period provided in such Indebtedness (a "Payment Default") which
Payment Default, together with all other Payment Defaults, exceeds $1.0
million or (b) results in the acceleration of such Indebtedness prior to its
express maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a Payment Default or the maturity of
which has been so accelerated, aggregates $15.0 million or more; (vi) certain
final judgments for the payment of money aggregating in excess of $10.0
million that remain undischarged for a period of 60 days; (vii) certain
events of bankruptcy or insolvency with respect to Holdings or any of its
Significant Subsidiaries; (viii) a default by each of the Trust, London Clubs
and Bazaar Holdings in the performance of their material obligations set
forth in the Keep-Well Agreement, which default remains uncured for 180 days,
or default by AHL, London Clubs and Bazaar Holdings in the performance of
their material obligations set forth in the Noteholder Completion Guaranty or
repudiation by each of them of their respective obligations under the
Keep-Well Agreement, which has not been ratified and reaffirmed within 180
days, or the Noteholder Completion Guaranty; (ix) Holdings breaches any
material representation or warranty set forth in either of the Pledge
Agreements or default by Holdings in the performance of any material covenant
set forth in either of such agreements or repudiation by Holdings of its
obligations under either of such agreements or the unenforceability of either
of such agreements against Holdings for any reason; (x) the termination of
the Bank Credit Facility (other than pursuant to a refinancing thereof in
accordance with its terms and with the terms of clause (i) under the second
paragraph under Section 4.09 of the Indenture or the repudiation of the
Lenders obligations thereunder, including without limitation, the withdrawal
of the proceeds of the Term B Loans and Term C Loans from the Bank
Construction Disbursement Account, in each case prior to the date the Aladdin
is Operating (except for disbursements in accordance with the Disbursement
Agreement); (xi) (a) a failure of the Desert Passage to be Operating on or
prior to 90 days after the date the Aladdin becomes Operating and (b) at any
time thereafter and prior to the date on which the Desert Passage becomes
Operating, the Company's Fixed Charge Coverage Ratio for its most recently
ended four full fiscal quarters (or such lesser number of quarters as have
ended after the Aladdin became Operating) for which internal financial
statements are available is not at least 1.75 to 1.0; (xii) after the Aladdin
becomes Operating, revocation, termination, suspension or other cessation of
effectiveness of any Gaming Approval, which results in the cessation or
suspension of gaming operations for a period of more than 90 days at the
Aladdin; (xiii) the failure of the Aladdin to be Operating by the Operating
Deadline; (xiv) the transfer of the Aladdin Site as a result of the exercise
of remedies in respect of the Deed of Trust, including a foreclosure by the
Lenders pursuant to the terms of the Deed of Trust or the acceptance by the
Lenders of a deed in lieu of foreclosure; and (xv) the transfer of the Common
Membership Interests as a result of the exercise of remedies by the Lenders
in respect of the pledge of such Common Membership Interests pursuant to the
Lender's security documents. If any Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in Accreted Value of
the then outstanding Notes may declare all the Notes to be due and payable.
Notwithstanding the foregoing, in the case of an Event of Default arising
from certain events of bankruptcy or insolvency, all outstanding Notes will
become due and payable without further action or notice. Holders may not
enforce the Indenture or the Notes except as provided in the Indenture.
Subject to certain limitations, Holders of a majority in Accreted Value of
the then outstanding Notes may direct the Trustee in its exercise of any
trust or power. The Trustee may withhold from Holders of the Notes notice of
any continuing Default or Event of Default (except a Default or Event of
Default relating to the payment of principal or interest) if it determines
that withholding notice is in their interest. The Holders of a majority in
aggregate Accreted Value of the Notes then outstanding by notice to the
Trustee may on behalf of the Holders of all of the
A-2-7
<PAGE>
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the Notes. The Issuers are required to deliver
to the Trustee annually a statement regarding compliance with the Indenture, and
the Issuers are required upon becoming aware of any Default or Event of Default,
to deliver to the Trustee a statement specifying such Default or Event of
Default.
14. TRUSTEE DEALINGS WITH ISSUERS. The Trustee, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for the Issuers or their Affiliates, and may otherwise deal with the Issuers or
their Affiliates, as if it were not the Trustee.
15. NO RECOURSE AGAINST OTHERS. A director, manager, officer, employee,
incorporator or member of the Issuers, as such, shall not have any liability for
any obligations of the Issuers under the Notes or the Indenture or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for the issuance of the Notes.
16. SECURITY. The due and punctual payment of the Accreted Value of,
premium and interest and Liquidated Damages, if any, on the Notes when and as
the same shall be due and payable, whether on an interest payment date, at
maturity, by acceleration, repurchase, redemption or otherwise, and interest on
any overdue Accreted Value of, premium and interest and Liquidated Damages, if
any (to the extent permitted by law), on the Notes and performance of all other
obligations of the Issuers to the Holders or the Trustee under this Indenture
and the Notes, according to the terms hereunder or thereunder, shall be secured
as provided in the Pledge Agreements which Holdings has entered into
simultaneously with the execution of this Indenture. Each Holder of Notes, by
its acceptance thereof, consents and agrees to the terms of the Pledge
Agreements (including, without limitation, the provisions providing for
foreclosure) as the same may be in effect or may be amended from time to time in
accordance with their terms and authorizes and directs the Trustee or the
Disbursement Agent, as the case may be, to enter into the Pledge Agreements and
to perform their respective obligations and exercise their respective rights
thereunder in accordance therewith.
17. INTERCREDITOR AGREEMENT. The Holders, while free to exercise their
rights and remedies against Holdings, are prohibited, for so long as any portion
of the Bank Credit Facility is outstanding, from initiating or intervening in an
insolvency proceeding of the Company and from seeking a substantive
consolidation of Holdings, the Company and/or Capital. In addition, in the event
of a substantive consolidation of Holdings, the Company and/or Capital, the
Holders (i) will not be entitled to receive any cash or other payments (other
than securities subordinated to the prior payment in full of the Bank Credit
Facility to the same extent of the Notes) in respect of the Notes until the Bank
Credit Facility has been indefeasibly paid in full in cash and (ii) will be
required to turn over to the Lenders under the Bank Credit Facility any payments
received in violation of such provisions.
18. AUTHENTICATION. This Note shall not be valid until authenticated by the
manual signature of the Trustee or an authenticating agent.
19. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
A-2-8
<PAGE>
20. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND RESTRICTED
DEFINITIVE NOTES. In addition to the rights provided to Holders of Notes under
the Indenture, Holders of Restricted Global Notes and Restricted Definitive
Notes shall have all the rights set forth in the Note Registration Rights
Agreement dated as of February 26, 1998, between the Issuers and the parties
named on the signature pages thereof (the "Note Registration Rights Agreement").
21. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Issuers have caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
22. WARRANT ENDORSEMENT.
THE NOTES EVIDENCED BY THIS CERTIFICATE ARE NOT TRANSFERABLE SEPARATELY
FROM THE WARRANTS ATTACHED HERETO ORIGINALLY SOLD AS A UNIT WITH THE NOTES
UNTIL THE EARLIEST TO OCCUR OF (I) SEPTEMBER 1, 1998; (II) THE DATE ON
WHICH A REGISTRATION STATEMENT WITH RESPECT TO THE NOTES OR A REGISTRATION
STATEMENT WITH RESPECT TO THE WARRANTS AND THE WARRANT SHARES IS FILED WITH
THE COMMISSION UNDER THE SECURITIES ACT (III) THE OCCURRENCE OF A CHANGE OF
CONTROL OR A SALE OR RECAPITALIZATION OF ENTERPRISES, HOLDINGS OR THE
COMPANY OCCURS; (IV) 30 DAYS AFTER A QUALIFIED PUBLIC OFFERING; (V) THE
OCCURRENCE OF AN EVENT OF DEFAULT; OR (VI) SUCH EARLIER DATE AS DETERMINED
BY MERRILL LYNCH & CO. IN ITS SOLE DISCRETION (THE DATE OF OCCURRENCE OF AN
EVENT SPECIFIED IN CLAUSES (I) THROUGH (VI) BEING REFERRED TO AS THE
"SEPARATION DATE"). PRIOR TO SUCH DATE, THE NOTES EVIDENCED BY THIS
CERTIFICATE MAY BE TRANSFERRED ONLY IN INTEGRAL MULTIPLES OF $1,000
PRINCIPAL AMOUNT OF NOTES AND ONLY WITH THE SIMULTANEOUS TRANSFER TO THE
TRANSFEREE OF 10 WARRANTS FOR EACH $1,000 PRINCIPAL AMOUNT SO TRANSFERRED.
Under the terms of the warrant agreement relating to the Warrants (the "Warrant
Agreement"), the holder of this security may at any time on or after the
Separation Date, at its option, by notice to the Trustee elect to separate or
separately transfer the Notes and the Warrants represented hereby, in whole or
in part, and shall thereafter surrender this security to the Trustee for the
exchange of this security, in part, for such Warrant or Warrants and for a Note
or Notes of a like aggregate principal amount and of authorized denominations
not bearing this Warrant Endorsement; provided that no delay or failure on the
part of the Trustee or the Warrant Agent to exchange this security for such
Warrant or Warrants and Note or Notes shall affect the separation of such Notes
and Warrants represented hereby or their separate transferability. Until such
separation, the holder of this security is, for each $1,000 principal amount of
Notes, also the record owner of 10 Warrants expiring March 1, 2010, each Warrant
to purchase 1 share of Class B non-voting Common Stock, no par value (the
"Common Stock"), of Enterprises (subject to adjustment). Enterprises has
deposited with the Trustee, as custodian for the Holder of the Notes bearing
this Warrant Endorsement, a certificate or certificates for such Warrants to
purchase an aggregate of 2,215,000 shares of Common Stock (subject to
adjustment). Prior to the separation of the Notes and the
A-2-9
<PAGE>
Warrants as described above, record ownership of such Warrants is transferable
only by the transfer of this Note on the Note register maintained by the Issuers
pursuant to the Indenture. After such separation, ownership of a Warrant is
transferable only by the transfer of the certificate representing such Warrant
in accordance with the provisions of the Warrant Agreement.
By accepting a security bearing this Warrant Endorsement, each holder of this
security is bound by all of the terms and provisions of the Warrant Agreement (a
copy of which is available on request to Enterprises or the Warrant Agent).
Election to Exercise. On or after the Warrant Exercise Commencement Date (as
such term is defined in the Warrant Agreement), the Warrants may be exercised by
obtaining from the Warrant Agent the required forms of election to exercise,
declaration form and instructions for payment of the Exercise Price (as such
term is defined in the Warrant Agreement). Upon receiving the required forms and
payment of such Exercise Price, the Warrant Agent shall exercise such Warrants
in accordance with the provisions of the Warrant Agreement.
Election of Exchange. The undersigned registered holder of the security
represented hereby irrevocably elects to separate its Notes and Warrants and to
exchange this security for a new Note in the principal amount hereof and a
Warrant certificate.
The undersigned hereby irrevocably instructs the Trustee (A) to issue in the
name of the undersigned registered holder a new Note not containing the above
Warrant Endorsement in the principal amount equal to the principal amount hereof
and (B) to deliver this security to the Warrant Agent pursuant to the provisions
of the Warrant Agreement with instructions to issue in the name of the
undersigned registered holder a Warrant certificate representing the number of
Warrants equal to the number of Warrants represented by this security and to
issue (1) a new Warrant certificate to replace the Warrant certificate held on
deposit by the Warrant Agent equal to the difference between (x) the number of
Warrants represented by the Warrant certificate so held on deposit and (y) the
number of Warrants represented by this Security.
Dated: ______________________
Name of Holder of this security: ______________________
Address: ______________________
______________________
Signature: ______________________
Note: The above signature must correspond with the name as written upon the face
of this security in every particular, without alteration or enlargement whatever
and if the certificate representing any principal amount at maturity of this
security or the associated Warrants is to be registered in a name other than
that in which this security is registered.
Signature Guaranteed: ______________________
Note: Signature must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Registrar, which requirements include membership
or participation in the Securities Transfer Agents Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.
A-2-10
<PAGE>
The Issuers will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Note Registration Rights Agreement.
Requests may be made to:
Aladdin Gaming Holdings, LLC
Aladdin Capital Corp.
c/o Aladdin Gaming Holdings, LLC
3667 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Attention: Corporate Secretary
A-2-11
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
(Insert assignee's soc. sec. or tax I.D. no.)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint _____________________________________________________
to transfer this Note on the books of the Issuers. The agent may substitute
another to act for him.
- ------------------------------------------------------------------------------
Date:
-------------------
Your Signature:
------------------------------------------
(Sign exactly as your name appears on the face of
this Note)
Signature Guarantee.
Note: Signature must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Registrar, which requirements include membership
or participation in the Securities Transfer Agents Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.
A-2-12
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Issuers pursuant to
Section 4.10 or 4.15 of the Indenture, check the box below:
/ / Section 4.10 / / Section 4.15
If you want to elect to have only part of the Note purchased by the Issuers
pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you
elect to have purchased: $________
Date: Your Signature:
------------- -------------------------------
(Sign exactly as your name appears on the Note)
Tax Identification No:
------------------------
Signature Guarantee.
Note: Signature must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Registrar, which requirements include membership
or participation in the Securities Transfer Agents Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.
A-2-13
<PAGE>
SCHEDULE OF EXCHANGES OF REGULATION S TEMPORARY GLOBAL NOTE
The following exchanges of a part of this Regulation S Temporary Global
Note for an interest in another Global Note or for a Definitive Note, or
exchanges of a part of another Global Note or Definitive Note for an interest in
this Regulation S Temporary Global Note, have been made:
<TABLE>
<CAPTION>
Amount of Accreted Value of
decrease in Amount of increase this Global Note Signature of
Accreted Value in Accreted Value following such authorized officer
of of decrease (or of Trustee or Note
Date of Exchange this Global Note this Global Note increase) Custodian
---------------- ---------------- ------------------ ----------------- ------------------
<S> <C> <C> <C> <C>
</TABLE>
A-2-14
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Aladdin Gaming Holdings, LLC
Aladdin Capital Corp.
c/o: Aladdin Gaming, LLC
3667 Las Vegas Boulevard South
Las Vegas, Nevada 89109
State Street Bank and Trust Company
Two International Place
Boston, Massachusetts 02110
Attn: Corporate Trust Division
Re: ___% Senior Discount Notes due 2010
Reference is hereby made to the Indenture, dated as of February __, 1998
(the "Indenture"), between Aladdin Gaming Holdings, LLC and Aladdin Capital
Corp., as issuers (the "Issuers"), and State Street Bank and Trust Company, as
trustee. Capitalized terms used but not defined herein shall have the meanings
given to them in the Indenture.
______________, (the "Transferor") owns and proposes to transfer the
Note[s] or interest in such Note[s] specified in Annex A hereto, in the Accreted
Value of $___________ in such Note[s] or interests (the "Transfer"), to
__________ (the "Transferee"), as further specified in Annex A hereto. In
connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. / / Check if Transferee will take delivery of a beneficial interest in
the 144A Global Note or a Definitive Note Pursuant to Rule 144A. The Transfer
is being effected pursuant to and in accordance with Rule 144A under the
United States Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the
Transferor reasonably believed and believes is purchasing the beneficial
interest or Definitive Note for its own account, or for one or more accounts
with respect to which such Person exercises sole investment discretion, and
such Person and each such account is a "qualified institutional buyer" within
the meaning of Rule 144A in a transaction meeting the requirements of Rule
144A and such Transfer is in compliance with any applicable blue sky
securities laws of any state of the United States. Upon consummation of the
proposed Transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Note will be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed
on the 144A Global Note and/or the Definitive Note and in the Indenture and
the Securities Act.
2. / / Check if Transferee will take delivery of a beneficial interest in
the Temporary Regulation S Global Note, the Regulation S Global Note or a
Definitive Note pursuant to Regulation S. The Transfer is being effected
pursuant to and in accordance with Rule 903 or Rule 904 under the Securities
Act and, accordingly, the Transferor hereby further certifies that (i) the
Transfer is not being made to a person in the United States and (x) at the
time the buy order was originated, the
B-1
<PAGE>
Transferee was outside the United States or such Transferor and any Person
acting on its behalf reasonably believed and believes that the Transferee was
outside the United States or (y) the transaction was executed in, on or through
the facilities of a designated offshore securities market and neither such
Transferor nor any Person acting on its behalf knows that the transaction was
prearranged with a buyer in the United States, (ii) no directed selling efforts
have been made in contravention of the requirements of Rule 903(b) or Rule
904(b) of Regulation S under the Securities Act, (iii) the transaction is not
part of a plan or scheme to evade the registration requirements of the
Securities Act and (iv) if the proposed transfer is being made prior to the
expiration of the Restricted Period, the transfer is not being made to a U.S.
Person or for the account or benefit of a U.S. Person (other than an Initial
Purchaser). Upon consummation of the proposed transfer in accordance with the
terms of the Indenture, the transferred beneficial interest or Definitive Note
will be subject to the restrictions on Transfer enumerated in the Private
Placement Legend printed on the Regulation S Global Note, the Temporary
Regulation S Global Note and/or the Definitive Note and in the Indenture and the
Securities Act.
3. / / Check and complete if Transferee will take delivery of a beneficial
interest in the IAI Global Note or a Definitive Note pursuant to any
provision of the Securities Act other than Rule 144A or Regulation S. The
Transfer is being effected in compliance with the transfer restrictions
applicable to beneficial interests in Restricted Global Notes and Restricted
Definitive Notes and pursuant to and in accordance with the Securities Act
and any applicable blue sky securities laws of any state of the United
States, and accordingly the Transferor hereby further certifies that (check
one):
(a) / / such Transfer is being effected pursuant to and in accordance with
Rule 144 under the Securities Act;
or
(b) / / such Transfer is being effected to the Issuers or a subsidiary
thereof;
or
(c) / / such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act;
or
(d) / / such Transfer is being effected to an Institutional Accredited
Investor and pursuant to an exemption from the registration requirements of
the Securities Act other than Rule 144A, Rule 144 or Rule 904, and the
Transferor hereby further certifies that it has not engaged in any general
solicitation within the meaning of Regulation D under the Securities Act and
the Transfer complies with the transfer restrictions applicable to beneficial
interests in a Restricted Global Note or Restricted Definitive Notes and the
requirements of the exemption claimed, which certification is supported by
(1) a certificate executed by the Transferee in the form of Exhibit D to the
Indenture and (2) if such Transfer is in respect of a principal amount of
Notes at the time of transfer of less than $250,000, an Opinion of Counsel
provided by the Transferor or the Transferee (a copy of which the Transferor
has attached to this certification), to the effect that such Transfer is in
compliance with the Securities Act. Upon consummation of the proposed
transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will be subject to the restrictions on
transfer enumerated in the
B-2
<PAGE>
Private Placement Legend printed on the IAI Global Note and/or the Definitive
Notes and in the Indenture and the Securities Act.
4. / / Check if Transferee will take delivery of a beneficial interest in an
Unrestricted Global Note or of an Unrestricted Definitive Note.
(a) / / Check if Transfer is pursuant to Rule 144. (i) The Transfer is
being effected pursuant to and in accordance with Rule 144 under the
Securities Act and in compliance with the transfer restrictions contained in
the Indenture and any applicable blue sky securities laws of any state of the
United States and (ii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act. Upon consummation of the
proposed Transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Note will no longer be subject
to the restrictions on transfer enumerated in the Private Placement Legend
printed on the Restricted Global Notes, on Restricted Definitive Notes and in
the Indenture.
(b) / / Check if Transfer is Pursuant to Regulation S. (i) The Transfer
is being effected pursuant to and in accordance with Rule 903 or Rule 904
under the Securities Act and in compliance with the transfer restrictions
contained in the Indenture and any applicable blue sky securities laws of any
state of the United States and (ii) the restrictions on transfer contained in
the Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act. Upon consummation of the
proposed Transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Note will no longer be subject
to the restrictions on transfer enumerated in the Private Placement Legend
printed on the Restricted Global Notes, on Restricted Definitive Notes and in
the Indenture.
(c) / / Check if Transfer is Pursuant to Other Exemption. (i) The
Transfer is being effected pursuant to and in compliance with an exemption
from the registration requirements of the Securities Act other than Rule 144,
Rule 903 or Rule 904 and in compliance with the transfer restrictions
contained in the Indenture and any applicable blue sky securities laws of any
State of the United States and (ii) the restrictions on transfer contained in
the Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act. Upon consummation of the
proposed Transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Note will not be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed
on the Restricted Global Notes or Restricted Definitive Notes and in the
Indenture.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Issuers.
---------------------------------------
[Insert Name of Transferor]
By:____________________________________
Name:
Title:
Dated: __________,____
B-3
<PAGE>
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) / / a beneficial interest in the:
(i) / / 144A Global Note (CUSIP ), or
(ii) / / Regulation S Global Note (CUSIP ), or
(iii) / / IAI Global Note (CUSIP ); or
(b) / / a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) / / a beneficial interest in the:
(i) / / 144A Global Note (CUSIP ), or
(ii) / / Regulation S Global Note (CUSIP ), or
(iii) / / IAI Global Note (CUSIP ); or
(iv) / / Unrestricted Global Note (CUSIP ); or
(b) / / a Restricted Definitive Note; or
(c) / / an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
B-4
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Aladdin Gaming Holdings, LLC and
Aladdin Capital Corp.
c/o: Aladdin Gaming, LLC
3667 Las Vegas Boulevard South
Las Vegas, Nevada 89109
State Street Bank and Trust Company
Two International Place
Boston, Massachusetts 02110
Re: ___% Senior Discount Notes due 2010
(CUSIP______________)
Reference is hereby made to the Indenture, dated as of February __, 1998
(the "Indenture"), between Aladdin Gaming Holdings, LLC and Aladdin Capital
Corp., as issuers (the "Issuers"), and State Street Bank and Trust Company, as
trustee. Capitalized terms used but not defined herein shall have the meanings
given to them in the Indenture.
____________, (the "Owner") owns and proposes to exchange the Note[s] or
interest in such Note[s] specified herein, in the Accreted Value of
$____________ in such Note[s] or interests (the "Exchange").
In connection with the Exchange, the Owner hereby certifies that:
1. Exchange of Restricted Definitive Notes or Beneficial Interests in a
Restricted Global Note for Unrestricted Definitive Notes or Beneficial Interests
in an Unrestricted Global Note
(a) / / Check if Exchange is from beneficial interest in a Restricted
Global Note to beneficial interest in an Unrestricted Global Note. In
connection with the Exchange of the Owner's beneficial interest in a
Restricted Global Note for a beneficial interest in an Unrestricted Global
Note in an equal principal amount, the Owner hereby certifies (i) the
beneficial interest is being acquired for the Owner's own account without
transfer, (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to the Global Notes and pursuant to and in
accordance with the United States Securities Act of 1933, as amended (the
"Securities Act"), (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act and (iv) the beneficial interest
in an Unrestricted Global Note is being acquired in compliance with any
applicable blue sky securities laws of any state of the United States.
(b) / / Check if Exchange is from beneficial interest in a Restricted
Global Note to Unrestricted Definitive Note. In connection with the Exchange
of the Owner's beneficial interest in a Restricted Global Note for an
Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive
Note is being acquired for the Owner's own account without transfer, (ii)
such Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes and pursuant to and in accordance
with the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to
maintain compliance with
C-1
<PAGE>
the Securities Act and (iv) the Definitive Note is being acquired in compliance
with any applicable blue sky securities laws of any state of the United States.
(c) / / Check if Exchange is from Restricted Definitive Note to
beneficial interest in an Unrestricted Global Note. In connection with the
Owner's Exchange of a Restricted Definitive Note for a beneficial interest in
an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial
interest is being acquired for the Owner's own account without transfer, (ii)
such Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Notes and pursuant to and in accordance
with the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act and (iv) the beneficial interest
is being acquired in compliance with any applicable blue sky securities laws
of any state of the United States.
(d) / / Check if Exchange is from Restricted Definitive Note to
Unrestricted Definitive Note. In connection with the Owner's Exchange of a
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner
hereby certifies (i) the Unrestricted Definitive Note is being acquired for
the Owner's own account without transfer, (ii) such Exchange has been
effected in compliance with the transfer restrictions applicable to
Restricted Definitive Notes and pursuant to and in accordance with the
Securities Act, (iii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the Unrestricted Definitive Note
is being acquired in compliance with any applicable blue sky securities laws
of any state of the United States.
2. Exchange of Restricted Definitive Notes or Beneficial Interests in Restricted
Global Notes for Restricted Definitive Notes or Beneficial Interests in
Restricted Global Notes
(a) / / Check if Exchange is from beneficial interest in a Restricted
Global Note to Restricted Definitive Note. In connection with the Exchange of
the Owner's beneficial interest in a Restricted Global Note for a Restricted
Definitive Note with an equal principal amount, the Owner hereby certifies
that the Restricted Definitive Note is being acquired for the Owner's own
account without transfer. Upon consummation of the proposed Exchange in
accordance with the terms of the Indenture, the Restricted Definitive Note
issued will continue to be subject to the restrictions on transfer enumerated
in the Private Placement Legend printed on the Restricted Definitive Note and
in the Indenture and the Securities Act.
(b) / / Check if Exchange is from Restricted Definitive Note to
beneficial interest in a Restricted Global Note. In connection with the
Exchange of the Owner's Restricted Definitive Note for a beneficial interest
in the [CHECK ONE] / / 144A Global Note, / / Regulation S Global Note,
/ / IAI Global Note with an equal principal amount, the Owner hereby certifies
(i) the beneficial interest is being acquired for the Owner's own account
without transfer and (ii) such Exchange has been effected in compliance with
the transfer restrictions applicable to the Restricted Global Notes and
pursuant to and in accordance with the Securities Act, and in compliance with
any applicable blue sky securities laws of any state of the United States.
Upon consummation of the proposed Exchange in accordance with the terms of
the Indenture, the beneficial interest issued will be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed
on the relevant Restricted Global Note and in the Indenture and the
Securities Act.
C-2
<PAGE>
This certificate and the statements contained herein are made for your
benefit and the benefit of the Issuers.
-----------------------------------
[Insert Name of Owner]
By: _______________________________
Name:
Title:
Dated: __________, ____
C-3
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Aladdin Gaming Holdings, LLC and
Aladdin Capital Corp.
c/o: Aladdin Gaming, LLC
3667 Las Vegas Boulevard South
Las Vegas, Nevada 89109
State Street Bank and Trust Company
Two International Place
Boston, Massachusetts 02110
Attn: Corporate Trust Division
Re: 13 1/2% Senior Discount Notes due 2010
Reference is hereby made to the Indenture, dated as of February 26, 1998
(the "Indenture"), between Aladdin Gaming Holdings, LLC and Aladdin Capital
Corp., as issuers (the "Issuers"), and State Street Bank and Trust Company, as
trustee. Capitalized terms used but not defined herein shall have the meanings
given to them in the Indenture.
In connection with our proposed purchase of $____________ aggregate
principal amount of:
(a) / / a beneficial interest in a Global Note, or
(b) / / a Definitive Note,
we confirm that:
1. We understand that any subsequent transfer of the Notes or any interest
therein is subject to certain restrictions and conditions set forth in the
Indenture and the undersigned agrees to be bound by, and not to resell, pledge
or otherwise transfer the Notes or any interest therein except in compliance
with, such restrictions and conditions and the United States Securities Act of
1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes and any interest therein
may not be offered or sold except as permitted in the following sentence. We
agree, on our own behalf and on behalf of any accounts for which we are acting
as hereinafter stated, that if we should sell the Notes or any interest therein,
we will do so only (A) to the Issuers or any subsidiary thereof, (B) in
accordance with Rule 144A under the Securities Act to a "qualified institutional
buyer" (as defined therein), (c) to an institutional "accredited investor" (as
defined below) that, prior to such transfer, furnishes (or has
D-1
<PAGE>
furnished on its behalf by a U.S. broker-dealer) to you and to the Issuers a
signed letter substantially in the form of this letter and, if such transfer is
in respect of a principal amount of Notes, at the time of transfer of less than
$250,000, an Opinion of Counsel in form reasonably acceptable to the Company to
the effect that such transfer is in compliance with the Securities Act, (D)
outside the United States in accordance with Rule 904 of Regulation S under the
Securities Act, (E) pursuant to the provisions of Rule 144(k) under the
Securities Act or (F) pursuant to an effective registration statement under the
Securities Act, and we further agree to provide to any person purchasing the
Definitive Note or beneficial interest in a Global Note from us in a transaction
meeting the requirements of clauses (A) through (E) of this paragraph a notice
advising such purchaser that resales thereof are restricted as stated herein.
3. We understand that, on any proposed resale of the Notes or beneficial
interest therein, we will be required to furnish to you and the Issuers such
certifications, legal opinions and other information as you and the Issuers may
reasonably require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Notes purchased by us will bear a
legend to the foregoing effect. We further understand that any subsequent
transfer by us of the Notes or beneficial interest therein acquired by us must
be effected through one of the Placement Agents.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Notes, and we and
any accounts for which we are acting are each able to bear the economic risk of
our or its investment.
5. We are acquiring the Notes or beneficial interest therein purchased by
us for our own account or for one or more accounts (each of which is an
institutional "accredited investor") as to each of which we exercise sole
investment discretion.
You and the Issuers are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
------------------------------------------
[Insert Name of Accredited Investor]
By: _______________________________
Name:
Title:
Dated: ___________, ____
D-2
<PAGE>
EXHIBIT E
FORM OF CONTINGENT GUARANTY OF PERFORMANCE AND COMPLETION
CONTINGENT GUARANTY OF PERFORMANCE AND COMPLETION
THIS CONTINGENT GUARANTY OF PERFORMANCE AND COMPLETION, dated as of
__________, 1998 is made by LONDON CLUBS INTERNATIONAL PLC, a company
registered in England and Wales under company number 2862479 ("London
Clubs"), THE TRUST UNDER ARTICLE SIXTH U/W/O SIGMUND SOMMER or, in the event
of the dissolution thereof, the remaindermen thereof (the "Trust") and
ALADDIN BAZAAR HOLDINGS, LLC, a Nevada limited liability company ("ABH"; ABH,
the Trust and London Clubs are individually called a "Guarantor" and
collectively called the "Guarantors"), in favor of ___________ as Agent (the
"Agent") for [the parties set forth on Schedule A-1 hereto (the ___________
Contingent Guarantors")] (the "Agent").
WITNESSETH:
WHEREAS, Fleet Bank, NA has agreed to lend to Aladdin Bazaar, LLC ("Aladdin
Bazaar") sufficient funds to permit the construction of the Dessert Passage and
carpark (the "Mall Project") adjacent to the improvements (the "Fleet Loan") and
the Trust will act as a guarantor of the Fleet Loan; and
WHEREAS, the Contingent Guarantors have agreed to provide a limited
guaranty of certain of the Trust's obligations under the Fleet Loan (the
"Additional Guaranty") which Additional Guaranty requires the Contingent
Guarantors to make payments in the event, among others, that the Improvements
are no completed on a timely basis;
WHEREAS, it is in the best interest of the Guarantors to promote and induce
Aladdin Bazaar to construct the Mall Project adjacent to the Improvements and
(ii) the Contingent Guarantors to provide the Additional Guaranty, in connection
therewith; and
WHEREAS, pursuant to that certain credit agreement, dated February 26, 1998
(together with all amendments and other modifications, if any, from time to time
thereafter made thereto, the "Credit Agreement"), among Aladdin Gaming, LLC, a
Nevada limited liability company (the "Borrower"), the various lending
institutions (individually a "Lender" and collectively the "Lenders") as are, or
may from time to time become, parties thereto and The Bank of Nova Scotia
("Scotiabank") as the Administrative Agent for the Lenders, Merrill Lynch
Capital Corporation ("Merrill Lynch") as the Syndication Agent for the Lenders,
Canadian Imperial Bank of Commerce as the Documentation Agent for the Lenders,
and Scotiabank and Merrill Lynch as Arrangers, the Lenders have extended
Commitments to make Loans to the Borrower and to issue Letters of Credit for the
account of the Borrower; and
WHEREAS, pursuant to that certain indenture, dated February 26, 1998 (the
"Indenture") among the State Street bank and Trust Company (the "Discount Note
Indenture Trustee"), Aladdin Gaming Holdings, LLC ("Holdings") and Aladdin
Capital Corp., the Discount Notes were issued and the proceeds thereof, together
with the proceeds the Loans under the Credit Agreement were advanced
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to the Borrower pursuant to the terms of that certain Disbursement Agreement
dated February 26, 1998 (together with all amendments and other modifications,
if any, from time to time thereafter made thereto, the "Disbursement Agreement")
among the Borrower, Holdings, Scotiabank, as the Administrative Agent, the
Discount Note Indenture Trustee and Scotiabank, as the Disbursement Agent, and
initial Securities Intermediary; and
WHEREAS, as a condition precedent to the effectiveness of the Credit
Agreement, the Guarantors delivered a Guaranty of Performance and Completion
dated February 26, 1998 (the "Completion Guaranty") in favor of each of the
Administrative Agent and the Lenders and certain subsidiaries of London Clubs
(the "Subsidiary Guarantors") agreed to guarantee fully and unconditionally the
payment of London Clubs' obligations under the Completion Guaranty pursuant to a
separate guaranty agreement of even date herewith (the "Subsidiary Bank
Guaranty"; together with the Completion Guaranty, collectively, the "Bank
Guaranty"); and
WHEREAS, as a condition precedent to the effectiveness of the Indenture and
the issuance of the Discount Notes, the Guarantors delivered a Guaranty of
Performance and Completion dated February 26, 1998 (the "Guaranty of Performance
and Completion") and the Subsidiary Guarantors agreed to guarantee fully and
unconditionally the payment of London Clubs' obligations under the Guaranty of
Performance and Completion pursuant to a separate guaranty agreement dated
February 26,1998 (the "Subsidiary Guaranty"; together with the Guaranty of
Performance and Completion, the "Noteholder Completion Guaranty"); and
WHEREAS, as a condition precedent to the effectiveness of the Additional
Guaranty, the Guarantors are required to execute and deliver a Guaranty of
Performance and Completion the "Contingent Guaranty of Performance and
Completion" and the Subsidiary Guarantors have agreed to guarantee fully and
unconditionally the payment of London Clubs' obligations under the Contingent
Guaranty of Performance and Completion pursuant to a separate guaranty agreement
of even date herewith (the "Contingent Subsidiary Guaranty"; together with this
Contingent Guaranty of Performance and Completion, the "Contingent Completion
Guaranty"); and
WHEREAS, the Guarantors have duly authorized the execution, delivery and
performance of this Contingent Guaranty of Performance and Completion and the
Subsidiary Guarantors have duly authorized the execution, delivery and
performance of the Contingent Subsidiary Guaranty; and
WHEREAS, it is in the best interests of the Guarantors to execute this
Contingent Guaranty of Performance and Completion and the Subsidiary Guarantors
to execute the Contingent Subsidiary Guaranty inasmuch as the Guarantors and the
Subsidiary Guarantors will derive substantial direct and indirect benefits from
the proceeds of the Additional Guaranty.
NOW THEREFORE, for good and valuable consideration, the receipt of which is
hereby acknowledged, and in order to induce the Agent to enter into the
Additional Guaranty, the Guarantors agree, for the benefit of theAgent and the
Contingent Guarantors, as follows:
1. Definitions. Capitalized terms not otherwise defined in this Contingent
Completion Guaranty shall have the meanings set forth in Appendix A hereto. As
used herein, the following terms shall have the meanings set forth below.
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"Accreted Value" shall have the meaning ascribed to it in the Indenture.
"Additional Amounts" is defined in Section 15(a)(iii).
"Additional Guaranty" is defined in the second recital.
"Agent" is defined in the preamble.
"Bank Guaranty" is defined in the seventh recital.
"Bankruptcy Code" shall mean Title 11 of the United States Code as amended from
time to time.
"Change Order" shall have the meaning ascribed to it in the Credit Agreement as
in effect on the Effective Date.
"Commitment" shall have the meaning ascribed to it in the Credit Agreement as
in effect on the Effective Date.
"Completion" shall have the meaning ascribed to it in the Credit Agreement as in
effect on the Effective Date.
"Consolidated Intangibles" means, at a particular date, all assets of a
Guarantor and its consolidated Subsidiaries, determined on a consolidated basis,
that would, in conformity with GAAP, as applicable, be classified as intangible
assets, including, without limitation, unamortized debt discount and expense,
unamortized organization and reorganization expense, costs in excess of the fair
market value of acquired companies, patents, trade or service marks, franchises,
trade names, goodwill and, from and after March 30, 1997, the amount of all
write-ups in the book value of assets resulting from any revaluation thereof.
"Consolidated Tangible Assets" means, at a particular date, the amount equal to
(a) the amount which would be included as assets on the consolidated balance
sheet of a Guarantor and its consolidated Subsidiaries as at such date in
accordance with GAAP, minus (b) Consolidated Intangibles.
"Construction Benchmark Schedule" means the schedule attached hereto as Schedule
7.
"Contingent Completion Guaranty" is defined in the eighth recital.
"Contingent Guarantor" is defined in the preamble.
"Contingent Subsidiary Guaranty" is defined in the eighth recital.
"Credit Agreement" is defined in the fourth recital.
"Discount Notes" means the 13 1/2% Senior Discount Notes due 2010 issued
pursuant to the Indenture.
"Dormant Subsidiary" means any Subsidiary of a Guarantor which has no operating
assets or property and conducts no business.
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"Enforcement Costs" means all reasonable out-of-pocket costs and expenses of the
Agent in connection with the enforcement of the rights and remedies of the Agent
under this Contingent Completion Guaranty and any amendment, waiver or consent
relating hereto including, without limitation, reasonable attorneys' fees and
costs and expenses, court costs and filing fees in addition to all other amounts
due hereunder whether or not such Enforcement Costs are incurred in one or more
proceedings.
"Failure to Enforce" is defined in Section 3(a).
"Fleet Loan" is defined in the third recital.
"GAAP" means the generally accepted accounting principles as in effect from time
to time in the United Kingdom with respect to London Clubs and in the United
States with respect to the other Guarantors, as the case may be.
"Guaranteed Obligations" means the obligations of the Guarantors under Section
2.
"Guarantor" is defined in the preamble.
"Guaranty Deposit Account" is defined in Section 4(a).
"Imposition" shall have the meaning ascribed to it in the Credit Agreement as in
effect on the Effective Date.
"Improvement" shall have the meaning ascribed to it in the Credit Agreement as
in effect on the Effective Date.
"In Balance" shall have the meaning ascribed to it in the Credit Agreement as in
effect on the Effective Date.
"Indenture" is defined in the third recital.
"Insolvency Proceeding" means any case or proceeding, voluntary or involuntary,
under the Bankruptcy Code, or any similar existing or future law of any
jurisdiction, foreign, state or federal, relating to bankruptcy, insolvency,
reorganization or relief of debtors.
"Leases" means, collectively, all agreements relating to the use, occupancy and
possession of space with respect to the Main Project entered into by the
Borrower and a tenant from time to time.
"Material" means material in relation to the business, operations, affairs,
financial condition, assets, properties, or prospects of a Guarantor and its
Subsidiaries taken as a whole.
"Material Subsidiary" means each of the Subsidiaries of London Clubs that are
party to that certain Subsidiary Guaranty dated as of June 30, 1997 guaranteeing
the obligations of London Clubs under the Note Agreements. Each Material
Subsidiary of London Clubs as of the date hereof is listed on Schedule 1 hereof.
"Minimum Aladdin Facilities" has the meaning ascribed to it in the Indenture as
in effect on February 26, 1998.
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"Note Agreements" means the several identical Note Purchase Agreements dated as
of June 30, 1997 among London Clubs and the purchasers named therein relating to
London Clubs' $50,000,000 aggregate principal amount of 7.74% Guaranteed Senior
Notes due 2004 and as the same may be modified by amendments that would not, in
the aggregate, have the effect of making London Clubs' obligations thereunder
materially more onerous (it being understood and agreed that any amendment,
supplement or modification that increases the amount of the obligations of
London Clubs thereunder shall be deemed material).
"Noteholder Completion Guaranty" is defined in seventh recital
"Noteholders" means the holders of the Discount Notes.
"NRS" is defined in Section 4(a).
"Subsidiary Bank Guaranty" is defined in the sixth recital.
"Subsidiary Guarantors" is defined in the sixth recital.
"Subsidiary Guaranty" is defined in the seventh recital.
"Taxes" is defined in Section 15(a).
"Tax Refund" is defined in Section 15(c).
"Tenant Improvements" means (i) the portion of the Work to be performed by or on
behalf of the Borrower in the interior of the Casino pursuant to a Lease to
adapt the same for the initial use and occupancy by the tenant under such Lease
or (ii) if a tenant under a Lease undertakes to complete the work to the portion
of the Main Project covered by such Lease, any allowances or payments advanced
to such Person by the Borrower.
"Work" means the demolition work and the rehabilitation and/or construction,
equipping and completion of the Main Project to be performed by the Borrower in
accordance with the Plans and Specifications, the Reciprocal Easement Agreement
and the Site Work Agreement.
2. Guaranty of Completion and Performance. The Guarantors, jointly and
severally, absolutely, unconditionally and irrevocably, on the terms and subject
to the conditions set forth herein, covenant and guarantee to the Agent (for the
benefit of the Contingent Guarantors) and covenants and agrees to make any and
all payments to or on behalf of the Borrower as may be necessary in order to
permit and assure that:
(i) the Borrower shall (A) prosecute the Work and the construction of the
Improvements and the Tenant Improvements to Completion with due diligence and
continuity, in an expeditious and first-class workmanlike manner, (B) cause the
Work to be performed and the Improvements and the Tenant Improvements to be
constructed, equipped and completed in compliance with the Plans and
Specifications in all material respects and in compliance in all material
respects with the provisions of the Reciprocal Easement Agreement, the Site Work
Agreement, all Environmental Laws and all Legal Requirements, and (C) correct or
cause to be corrected as soon as possible any material defect in the
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Work, the Improvements and/or the Tenant Improvements (including, without
limitation, any material defect in workmanship or quality of construction or
materials) or any material departure or variation from the Plans and
Specifications, the requirements of the Reciprocal Easement Agreement and/or the
Site Work Agreement not made pursuant to Change Orders approved in writing by
the Construction Consultant and the Administrative Agent in accordance with the
Credit Agreement and the Disbursement Agreement; and
(ii) the Borrower shall punctually pay, discharge and/or contribute, as
appropriate, (A) any and all costs, expenses and liabilities incurred by the
Borrower for or in connection with the performance of the Work and the
Completion of the Improvements and the Tenant Improvements in accordance with
the Plans and Specifications, (B) all claims and demands for labor, materials
and services incurred by the Borrower for or in connection with the performance
of the Work and the Completion of the Improvements and the Tenant Improvements
and in connection with cost overruns of any type, in each case which are or may
become due and payable, or, if unpaid, are or may become Liens on the portion of
the Site owned by the Borrower, (C) all payments to be made or Work to be
performed by the Borrower under Leases for Tenant Improvements or under the
Reciprocal Easement Agreement or the Site Work Agreement, (D) Impositions and
premiums for insurance prior to the Completion of the Improvements and the
Tenant Improvements, (E) all amounts which the Borrower may be required to pay
from time to time in order to keep the Main Project Budget In Balance, and (F)
all amounts needed to cause the Work to be performed within the Construction
Benchmark Schedule; and
(iii) the Borrower shall perform the Work and complete construction of the
required Minimum Aladdin Facilities on schedule and in accordance with the Plans
and Specifications Lien-free other than Permitted Liens and the portion of the
Site owned by the Borrower shall be and remain free and clear of all Liens
arising from the furnishing of materials, labor or services for or in connection
with the performance of the Work and the Completion of the Improvements and the
Tenant Improvements; and
(iv) the Borrower shall provide the expertise necessary to supervise performance
of the Work and Completion of the Improvements and the Tenant Improvements at no
cost to the Agent, and
(v) in the event the Guarantors hereunder shall fail or refuse to pay and/or
perform the Guaranteed Obligations under this Contingent Completion Guaranty,
theAgent (in addition to any other rights and remedies afforded by applicable
law) may pay and/or perform the Guaranteed Obligations on behalf of the
Guarantors hereunder in which case the Guarantors, upon demand by the Agent,
shall pay any and all costs, expenses and liabilities for such costs and
expenses in connection with the performance of the Work and Completion of the
Improvements and the Tenant Improvements, or cause any Lien in connection with
the performance of the Work or the Completion of the Improvements and/or Tenant
Improvements or any claim or demand for the payment of the cost of the
performance of the Work and Completion of the Improvements and the Tenant
Improvements to be bonded, discharged, released or paid, and shall reimburse the
Agent for all sums paid and all costs, expenses or liabilities incurred by the
Agent in connection therewith; and
(vi) the Guarantors shall pay the Enforcement Costs.
3. Restrictions on Exercise of Rights and Remedies by the Agent.
(a) Except as expressly set forth in this Section 3(a), the Guarantors
shall have no obligation to pay and/or perform any of the Guaranteed Obligations
and the Agent covenants and agrees not to
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demand payment and/or performance of any of the Guaranteed Obligations or
exercise any rights, remedies or options under this Contingent Completion
Guaranty or commence any enforcement proceedings hereunder during any period
that the Bank Guaranty or Noteholder Completion Guaranty is in effect and the
Guarantors have not been released in writing by the Lenders or the Discount Note
Indenture Trustee, respectively; provided, however, the Agent shall be permitted
to demand payment and/or performance of the Guaranteed Obligations and exercise
all rights, remedies and options and commence enforcement proceedings under this
Contingent Completion Guaranty pursuant to this Section 3(a):
(i) at any time prior to Completion and from and after the date on which
all of the indebtedness evidenced by the Indenture and the Discount :Notes has
been indefeasibly paid in full and the Discount Note Indenture Trustee has
released the Guarantors in writing from their obligations under this Noteholder
Completion Guaranty;
(ii) at any time after the date on which all of the following events have
occurred and are continuing:
(A) the Contingent Guarantors fully funded their obligations under the
Additional Guaranty; and
(B) the Guarantors have defaulted in their Guaranteed Obligations owing to
the Discount Note Indenture Trustee and the Noteholders under the Noteholder
Completion Guaranty, and the Discount Note Indenture Trustee (or in accordance
with the terms of the Indenture, Noteholders holding at last 25% of the
aggregate Accreted Value of the Discount Notes) has or have failed to actively
enforce the Noteholder Completion Guaranty and to use reasonable efforts to
pursue their remedies under the Noteholder Completion Guaranty (a "Failure to
Enforce") and such Failure to Enforce has continued for 180 calendar days in the
aggregate (which shall be extended for the number of days during which a Force
Majeure Event and/or an Insolvency Proceeding of the Borrower which impairs the
Discount Note Indenture Trustee or the Noteholders directly from enforcing the
Noteholder Completion Guaranty has occurred and is continuing, which such
extension shall terminate upon the filing by the Discount Note Indenture Trustee
or the requisite Noteholders of any action against the Guarantors under the
Noteholder Completion Guaranty to enforce the obligations of the Guarantors
thereunder which are susceptible of performance notwithstanding such Insolvency
Proceeding); and
(C) the Work which has been substantially completed in accordance with the
Plans and Specifications on the date in question has not progressed to the stage
of completion set forth for such date (subject to any extensions based upon
Force Majeure Events or an Insolvency Proceeding of the Borrower which impairs
the Discount Note Indenture Trustee or the Noteholders directly or indirectly
from enforcing the Noteholder Completion Guaranty, which such extension shall
terminate upon the filing by the Discount Note Indenture Trustee or the
requisite Noteholders of any action against the Guarantors under the Noteholder
Completion Guaranty to enforce the obligations of the Guarantors thereunder
which are susceptible of performance notwithstanding such Insolvency Proceeding)
in the Construction Benchmark Schedule. The Discount Note Indenture Trustee and
the Noteholders shall be third party beneficiaries of this Section 3 (b) and
shall have all rights at law and equity to the enforcement thereof.
(b) Notwithstanding anything to the contrary in this Contingent Completion
Guaranty, performance in all material respects of the obligations of the
Guarantors under Section 2 of the Bank Guaranty or the
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Noteholder Completion Guaranty shall be deemed to be performance of the
Guaranteed Obligations hereunder and performance in all material respects of the
Guaranteed Obligations of the Guarantors hereunder shall be deemed to be
performance of the corresponding obligations under the Bank Guaranty or the
Noteholder Completion Guaranty.
(c) As a material inducement to the Lenders and the Discount Note Indenture
Trustee to consent to the delivery of this Contingent Completion Guaranty by the
Guarantors, the Agent covenants and agrees that (i) the right of the Agent to
demand payment and/or performance of the Guaranteed Obligations, to exercise any
rights, remedies and options and/or to commence enforcement proceedings under
this Contingent Completion Guaranty shall be subject in all events to the
delivery of a written notice to the Administrative Agent and Discount Note
Indenture Trustee no later than 10 Business Days prior to the making of such
demand for payment and/or performance, exercise of rights, remedies and options,
or commencement of enforcement proceedings, as applicable, (ii) the Lenders and
the Discount Note Indenture Trustee shall have all rights at law and equity
including, without limitation, the right to seek an injunction or other
extraordinary remedy to prevent or prohibit the making of any demand for payment
and/or performance, exercise of rights, remedies and options, or commencement of
enforcement proceedings by the Agent which is in contravention of Section 3(a),
and (iii) this Contingent Completion Guaranty shall not be amended, modified,
and/or amended and restated without the prior written consent of the
Administrative Agent and Discount Note Indenture Trustee in Administrative Agent
in their sole discretion provided that the consent of the Administrative Agent
and Discount Note Indenture Trustee shall not be required in connection with
corrective amendments required to be made to this Contingent Completion Guaranty
as and when corresponding amendments are made to the Bank Guaranty or the
Noteholder Completion Guaranty. The Administrative Agent and the Discount Note
Indenture Trustee (on behalf of the Noteholders shall be third party
beneficiaries of this Section 3(c) and shall have all rights at law and equity
to the enforcement hereof.
4. Payment Provisions. Subject to Nevada Gaming Laws (once the Borrower has been
licensed), all payments required to be made by the Guarantors pursuant to
Section 2 hereof shall be deemed to be capital contributions to the Borrower and
shall be made subject to the following terms:
(a) The Guarantors shall make cash payments in the amounts required under
Section 2 hereof into an interest-bearing deposit account designated and
controlled exclusively by the Agent (the "Guaranty Deposit Account") in which
the Agent is hereby granted a security interest. The Guaranty Deposit Account is
intended to be a "deposit account" for the purposes of Nevada Revised Statutes
("NRS") 40.430.4(g) and Section 9301(g) of the California Uniform Commercial
Code. Such funds shall be held in the Guaranty Deposit Account as collateral for
the Guaranteed Obligations of the Guarantors under this Contingent Completion
Guaranty and shall be applied to payment of the Guaranteed Obligations.
(b) The cash payments into the Guaranty Deposit Account and the funds
therein for the purpose of paying the Guaranteed Obligations under this
Contingent Completion Guaranty shall be free and clear of any third party claims
thereto, including any claims by the Borrower or Holding as a third party
beneficiary under this Contingent Completion Guaranty. The Guarantors and the
Agent specifically agree that the Borrower and Holdings are not intended third
party beneficiaries to this Contingent Completion Guaranty and that neither the
Borrower, Holdings, nor any other Person which is not party to this Contingent
Completion Guaranty (other than successors and assigns of each of the Agent)
shall have any rights under this Contingent Completion Guaranty.
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5. Continuation of Guaranty. In the event that the Trust is in default
under the Additional Guaranty this Contingent Completion Guaranty shall remain
in full force and effect. Subject to the provisions of Section 11 hereof, upon
the indefeasible payment and performance of the Guaranteed Obligations by the
Guarantors, this Contingent Completion Guaranty shall terminate.
6. Proof of Damages. If the Guarantors shall at any time or from time to time
fail to perform or comply with any of the Guaranteed Obligations contained
herein, then in each such case (i) it shall be assumed conclusively without
necessity of proof that such failure by the Guarantors was the sole and direct
cause of the Agent failing to receive such payment when due (to the extent of
the failure of the Guarantors to perform the Guaranteed Obligations contained
herein) irrespective of any other contributing or intervening cause whatsoever,
and (ii) the Guarantors further irrevocably waive to the fullest extent
permitted by law any right or defense the Guarantors may have to cause the Agent
to prove the cause or amount of such damages or to mitigate the same.
7. Rights of the Agent. To the extent permitted by the Nevada Gaming Laws, each
Guarantor authorizes the Agent in its sole discretion to perform any or all of
the following acts during such time as the Agent has the right to demand payment
and performance of the Guaranteed Obligations, all without notice to the
Guarantors (but with notice being given to the Administrative Agent and Discount
Note Indenture Trustee as required by Section 3(c) of this Contingent Completion
Guaranty) and without affecting the payment and performance of the Guaranteed
Obligations by the Guarantors:
(a) The Agent may take and hold security for the Guaranteed Obligations and
for the Trust's obligations under the Additional Guaranty, accept additional or
substituted security for any of the foregoing, and subordinate, exchange,
enforce, waive, release, compromise, fail to perfect and sell or otherwise
dispose of any such security.
(b) The Agent may direct the order and manner of any sale of all or any
part of any security now or later to be held for this Contingent Completion
Guaranty and may also bid at any such sale.
(c) The Agent may substitute, add or release any one or more Guarantors or
endorsers.
(d) The Agent may release the Trust of their liability for its obligations
under the Additional Guaranty.
(e) The Agent may extend other credit to the Trust, their Affiliates and
any of the Guarantors or their respective Affiliates and may take and hold
security for the credit so extended, all without affecting the Guarantors'
liability under this Contingent Completion Guaranty.
(f) The Agent may advance additional funds to Trust, the Guarantors and
their respective Affiliates for any purpose.
8. Contingent Completion Guaranty to be Absolute. The Guarantors expressly agree
that for as long as the obligations of the Guarantors under the Bank Guaranty,
the Noteholder Completion Guaranty and the Guaranteed Obligations hereunder
remain unperformed, the Guarantors shall not be released from the Guaranteed
Obligations hereunder by or because of:
(a) Any act or event which might otherwise discharge, reduce, limit or
modify the Guaranteed Obligations;
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(b) Any waiver, extension, modification, forbearance, delay or other act or
omission of the Agent, or any failure to proceed promptly or otherwise as
against the Trust, any Guarantor or any security; or
(c) Any action, omission or circumstance which might increase the
likelihood that the Guarantors may be called upon to perform under this
Contingent Completion Guaranty or which might affect the rights or remedies of
the Guarantors as against the Trust in its capacity as obligor under the
Additional Guaranty or any Guarantor; or
(d) Any dealings occurring at any time between the Borrower, the Trust, the
Lenders, the Discount Note Indenture Trustee, the Agent, the Noteholders or the
Guarantors with respect to amendments to the Bank Guaranty, the Credit
Agreement, the other Loan Documents, the Loans, the Noteholder Completion
Guaranty, the Indenture, the Discount Notes, the Additional Guaranty or
otherwise, as the case may be.
The Guarantors hereby expressly waive and surrender any defense to their
liability under this Contingent Completion Guaranty based upon any of the
foregoing acts, omissions, agreements, waivers or matters.
9. Guarantors' Waivers. The Guarantors waive:
(a) All statutes of limitations as a defense to any action or proceeding
brought against the Guarantors by the Agent, to the fullest extent permitted by
law;
(b) Any right they may have to require the Agent to proceed against the
Trust or to pursue any other remedy in their power to pursue;
(c) Any defense based on any claim that the Guaranteed Obligations exceed
or are more burdensome than those of the Trust under the Additional Guaranty;
(d) Any defense based on: (i) any legal disability of the Trust, (ii) any
discharge, modification, impairment or limitation of the liability of the Trust
under the Additional Guaranty or the Guarantors under the Additional Guaranty
from any cause, whether consented to by the Agent or arising by operation of law
or from any Insolvency Proceeding, (iii) the Guarantors' rights under NRS
104.3605, the Guarantors specifically agreeing that this clause (iii) shall
constitute a waiver of discharge under NRS 104.3605;
(e) Any defense based on any action taken or omitted (other than gross
negligence or willful misconduct) by the Agent in any Insolvency Proceeding
involving the Trust, including any election to have a claim allowed as being
secured, partially secured or unsecured, any extension of credit by the Agent to
the Trust in any Insolvency Proceeding, and the taking and holding by the Agent
of any security for any such extension of credit;
(f) All presentments, demands for performance, notices of nonperformance,
protests, notices of protest, notices of dishonor, notices of acceptance of this
Contingent Completion Guaranty and of the existence, creation, or incurring of
new or additional indebtedness, and demands and notices of every kind;
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(g) Any defense based on or arising out of any defense that the Trust may
have to the payment or performance of their obligations under the Additional
Guaranty or any portion of such obligations; and
(h) Any defense or benefit based on NRS 40.430 and judicial decisions
relating thereto and NRS 40.451 et seq. and judicial decisions relating thereto,
the Guarantors agreeing that the waiver in this clause (h) is intended to take
advantage of the two (2) waivers permitted by NRS 40.495 (1) and (2) to the
maximum extent permitted.
10. Waivers of Subrogation and Other Rights.
(a) Upon the occurrence of any event of default hereunder, the Agent in its
sole discretion, without prior notice to or consent of the Guarantors, may elect
to: (i) foreclose either judicially or nonjudicially against any real or
personal property security, if any, for the obligations under the Additional
Guaranty, in the case of the Trust, (ii) accept a transfer of any such security
in lieu of foreclosure, (iii) make any accommodation with the Trust or any
Guarantor, or (iv) exercise any other remedy against the Trust or any Guarantor
or any security. No such action by the Agent shall release or limit the
liability of the Guarantors, who shall remain liable under this Contingent
Completion Guaranty after the action, even if the effect of the action is to
deprive the Guarantors of any subrogation rights, rights of indemnity, or other
rights to collect reimbursement for any sums paid to the Agent, whether
contractual or arising by operation of law or otherwise. The Guarantors
expressly waive any defenses or benefits that may be derived from NRS Section
40.451, et seq. and judicial decisions relating thereto, or comparable
provisions of Nevada law which are comparable to California Civil Procedure
Sections 580a, 580b, 580d, or 726 or comparable provisions of the laws of any
other jurisdiction, and all other suretyship defenses they otherwise might or
would have under Nevada law or other applicable law. The Guarantors expressly
agree that under no circumstances shall they be deemed to have any right, title,
interest or claim in or to any real or personal property, if any, to be held by
the Agent or any third party after any foreclosure or transfer in lieu of
foreclosure of any security for the Guaranteed Obligations or the obligations
under the Additional Guaranty. For purposes of this Section 10, references to
the Trust are made with respect to the Trust in its capacity as obligor under
the Additional Guaranty.
(b) Regardless of whether the Guarantors may have made any payments to the
Agent under this Contingent Completion Guaranty, the Guarantors hereby waive:
(i) all rights of subrogation, all rights of indemnity, and any other rights to
collect reimbursement from the Trust for any sums paid to the Agent, whether
contractual or arising by operation of law (including the Bankruptcy Code) or
otherwise, (ii) all rights to enforce any remedy that the Agent may have against
the Trust or any other Person, and (iii) all rights to participate in any
security now or later to be held by the Agent for the obligations under the
Additional Guaranty. The waivers given in this Section 10(b) shall be effective
until the obligations under the Additional Guaranty have been indefeasibly paid
and performed in full.
(c) The Guarantors understand and acknowledge that if the Agent forecloses
judicially or nonjudicially against any real property or personal security, if
any, for the Guaranteed Obligations or the obligations under the Additional
Guaranty, that foreclosure could impair or destroy any ability that the
Guarantors may have to seek reimbursement, contribution or indemnification from
the Borrower, Holdings or the Trust or others based on any right the Guarantors
may have of subrogation, reimbursement, contribution or indemnification for any
amounts paid by the Guarantors under this Contingent Completion Guaranty. The
Guarantors further understand and acknowledge that in the absence of this
Section 10, such potential impairment or destruction of the Guarantors' rights,
if any,
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may entitle the Guarantors to assert a defense to this Contingent Completion
Guaranty. By executing this Contingent Completion Guaranty, the Guarantors
freely, irrevocably and unconditionally: (i) waive and relinquish that defense
and agree that the Guarantors will be fully liable under this Contingent
Completion Guaranty even though the Agent may foreclose judicially or
nonjudicially against any real property security, if any, for the obligations
under the Additional Guaranty; (ii) agree that the Guarantors will not assert
that defense in any action or proceeding which the Agent may commence to enforce
this Contingent Completion Guaranty; and (iii) acknowledge and agree that this
waiver is a material part of the consideration which they are receiving for
entering into the transactions contemplated hereby.
11. Revival and Reinstatement. If the Agent is required to pay, return or
restore to any of the Guarantors any amounts previously paid with respect to the
Guaranteed Obligations because of any Insolvency Proceeding of any of the
Guarantors, any stop notice or any other reason, the Guaranteed Obligations
shall be reinstated and revived and the rights of the Agent shall continue with
regard to such amounts, as though they had never been paid.
12. Representations and Warranties. Each Guarantor hereby represents and
warrants unto the Agent as follows:
(a) The most recent audited consolidated balance sheet of London Clubs and
ABH and their respective consolidated Subsidiaries (in the case of ABH, as of
December 31, 1996 and in the case of London Clubs, as of March 30, 1997) and the
related consolidated statements of earnings and stockholders' equity (or profit
and loss in the case of London Clubs) and of cash flows for the fiscal year
ended on such date, reported on by such Guarantor's independent public
accountants, copies of which have heretofore been furnished to the Agent, are
complete and correct and present fairly (or give a true and fair view of in the
case of London Clubs) the consolidated financial condition of such Guarantor and
its consolidated Subsidiaries as at such date, and the results of their
operations (or consolidated profit and loss in the case of London Clubs) and
their consolidated cash flows for the fiscal year then ended. The unaudited
consolidated balance sheet of such Guarantor and its consolidated Subsidiaries
as at September 30, 1997 and the related unaudited consolidated statements of
earnings and of cash flows for the nine-month period (or, in the case of London
Clubs, six month period) ended on such date, certified by a Authorized
Representative of such Guarantor, are complete and correct and present fairly
(or give a true and fair view of in the case of London Clubs) the consolidated
financial condition of such Guarantor and its consolidated Subsidiaries as at
such date, and the consolidated results of their operations and their
consolidated cash flows for the nine-month period (or, in the case of London
Clubs, six-month period) then ended (subject to normal year-end audit
adjustments). All such financial statements, including the related schedules and
notes thereto, have been prepared in accordance with GAAP or UK GAAP, as
applicable, applied consistently throughout the periods involved (except as
approved by such accountants or Authorized Representative, as the case may be,
and as disclosed therein).
(b) Since December 31, 1996, in the case of ABH and since March 30, 1997 in
the case of the Trust, there has been no development or event which has had or
could reasonably be expected to have a Material Adverse Effect.
(c) Each of such Guarantor and its Subsidiaries (a) is duly organized, and,
to the extent applicable, validly existing and in good standing under the laws
of the jurisdiction of its organization, (b) has the corporate or other power
and authority, and the legal right, to own and operate its property, to lease
the property it operates as lessee and to conduct the business in which it is
currently engaged, (c) to the extent applicable, is duly qualified as a foreign
corporation or company or trust and in good standing,
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under the laws of each jurisdiction where its ownership, lease or operation of
property or the conduct of its business requires such qualification and (d) by
Opening Date, is in compliance with all material Legal Requirements except where
failure to comply with any of the foregoing could not individually or in the
aggregate reasonably be expected to have a Material Adverse Effect.
(d) Each of such Guarantors has the corporate or other power and authority,
and the legal right, to make, deliver and perform this Contingent Completion
Guaranty and to provide the undertakings hereunder and has taken all necessary
corporate or other action to authorize the execution, delivery and performance
of this Contingent Completion Guaranty. No consent or authorization of, filing
with or other act by or in respect of, any Governmental Instrumentality or any
other Person is required to be obtained or made, as the case may be, by such
Guarantor in connection with this Contingent Completion Guaranty or with the
execution, delivery, performance, validity or enforceability of this Contingent
Completion Guaranty by or against such Guarantor, except as has been obtained
and remains in full force and effect on the date hereof, other than certain
Nevada Gaming Laws approvals, as applicable. This Contingent Completion Guaranty
has been duly executed and delivered on behalf of such Guarantor. This
Contingent Completion Guaranty constitutes a legal, valid and binding obligation
of such Guarantor enforceable against it in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
(e) Each Subsidiary Guarantor has the corporate power and authority, and
the legal right, to make, deliver and perform the Contingent Subsidiary Guaranty
and to provide the undertakings thereunder and has taken all necessary corporate
action to authorize the execution, delivery and performance of the Contingent
Subsidiary Guaranty. No consent or authorization of, filing with or other act by
or in respect of, any Governmental Instrumentality or any other Person is
required to be obtained or made, as the case may be, by such Subsidiary
Guarantor in connection with the Contingent Subsidiary Guaranty or with the
execution, delivery, performance, validity or enforceability of the Contingent
Subsidiary Guaranty by or against such Subsidiary Guarantor, except as has been
obtained and remains in full force and effect on the date hereof, other than
certain Nevada Gaming Laws approvals, as applicable. The Contingent Subsidiary
Guaranty has been duly executed and delivered on behalf of each Subsidiary
Guarantor. The Contingent Subsidiary Guaranty constitutes a legal, valid and
binding obligation of each Subsidiary Guarantor enforceable against it in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles
(whether enforcement is sought by proceedings in equity or at law).
(f) The execution, delivery and performance of this Contingent Completion
Guaranty by the Guarantors and the execution, delivery and performance by the
Subsidiary Guarantors of the Contingent Subsidiary Guaranty will not (i) violate
any Legal Requirement or obligation of such Guarantor or Subsidiary Guarantor,
(ii) result in, or require, the creation or imposition of any Lien on any of its
properties or revenues pursuant to any such Legal Requirement or obligation or
(iii) conflict with or result in a breach of any of the terms, conditions or
provisions of any order, judgment, decree or ruling of any court, arbitrator or
Governmental Instrumentality applicable to such Guarantor or Subsidiary
Guarantor.
(g) Schedule 2 contains (except as noted therein) complete and correct
lists of each of London Clubs' and ABH's Subsidiaries (other than Dormant
Subsidiaries), showing, as to each
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Subsidiary, the correct name thereof, the jurisdiction of its organization, and
the percentage of shares of each class of its capital stock or similar equity
interests outstanding owned by such Guarantor and each other Subsidiary of such
Guarantor. All of the outstanding shares of capital stock or similar equity
interests of each Subsidiary shown in Schedule 2 as being owned by such
Guarantor and its Subsidiaries have been validly issued, are fully paid and
nonassessable and are owned by such Guarantor or another Subsidiary free and
clear of any Lien (except as otherwise disclosed in Schedule 2). Each Subsidiary
identified in Schedule 2 is a corporation or other legal entity duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization, and is duly qualified as a foreign corporation or other legal
entity and is in good standing in each jurisdiction in which such qualification
is required by law, other than those jurisdictions as to which the failure to be
so qualified or in good standing could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the business,
assets, debt service capacity, property or financial condition, operations or
prospects of such Subsidiary. Each such Subsidiary has the corporate or other
power and authority to own or hold under lease the properties it purports to own
or hold under lease and to transact the business it transacts and proposes to
transact. No Subsidiary identified in Schedule 2 is a party to, or otherwise
subject to any legal restriction or any agreement (other than this Contingent
Completion Guaranty, the agreements listed on Schedule 2, restrictions imposed
by and approvals required under the Nevada gaming Laws and customary limitations
imposed by corporate law statutes) restricting the ability of such Subsidiary to
pay dividends out of profits or make any other similar distributions of profits
to its Guarantor parent or any of such Guarantor's Subsidiaries that owns
outstanding shares of capital stock or similar equity interests of such
Subsidiary.
(h) Except as disclosed in Schedule 3 there are no actions, suits or
proceedings pending or, to the knowledge of any Guarantor, threatened against or
affecting such Guarantor or any Subsidiary or any property of such Guarantor or
any Subsidiary in any court or before any arbitrator of any kind or before or by
any Governmental Instrumentality that, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect. Neither any Guarantor
nor any Subsidiary is in default under any term of any agreement or instrument
to which it is a party or by which it is bound, or any order, judgment, decree
or ruling of any court, arbitrator or Governmental Instrumentality or is in
violation of any applicable law, ordinance, rule or regulation (including
without limitation Environmental Laws) of any Governmental Instrumentality,
which default or violation, individually or in the aggregate, could reasonably
be expected to have a Material Adverse Effect.
(i) Each Guarantor and its Subsidiaries have filed all material tax returns
that are required to have been filed in any jurisdiction, and have paid all
material taxes shown to be due and payable on such returns and all other
material taxes and assessments levied upon them or their properties, assets,
income or franchises, to the extent such taxes and assessments have become due
and payable and before they have become delinquent, except for any taxes and
assessments (i) the non-payment of which could not reasonably be expected to
have a Material Adverse Effect or (ii) the amount, applicability or validity of
which is currently being contested in good faith by appropriate proceedings and
with respect to which such Guarantor or a Subsidiary, as the case may be, has
established adequate reserves in accordance with GAAP. Each Guarantor knows of
no basis for any other tax or assessment that could reasonably be expected to
have a Material Adverse Effect. The charges, accruals and reserves on the books
of each Guarantor and its Subsidiaries in respect of governmental or other taxes
for all fiscal periods are adequate.
(j) Each Guarantor and its Subsidiaries have adequate and appropriate
insurance with respect to their respective properties and businesses against
such casualties and contingencies, of such
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types, on such terms and in such amounts (including deductibles, co-insurance
and self-insurance) to the extent this is customary in the case of entities of
established reputations engaged in the same or a similar business and similarly
situated, except where the failure to so maintain insurance, individually or in
the aggregate, could not reasonably be expected to have a Material Adverse
Effect.
(k) Each of London Clubs, ABH and its Subsidiaries have good and sufficient
title to their respective properties that individually or in the aggregate are
Material, including all such properties reflected in the most recent audited
balance sheet referred to in clause (a) hereof or purported to have been
acquired by such Guarantor or any Subsidiary after said date (except as sold or
otherwise disposed of in the ordinary course of business), in each case free and
clear of Liens prohibited by this Contingent Completion Guaranty. All leases
that individually or in the aggregate are material are valid and subsisting and
are in full force and effect in all material respects.
(l) Except as disclosed in Schedule 4,
(i) each Guarantor and its Subsidiaries own or possess all licenses,
permits, franchises, authorizations, patents, copyrights, service marks,
trademarks and trade names, or rights thereto, that individually or in the
aggregate are material, without known conflict with the rights of others;
(ii) to the best knowledge of each Guarantor, no product or such
Guarantor infringes in any material respect on any license, permit, franchise,
authorization, patent, copyright, service mark, trademark, trade name or other
right owned by any other Person; and
(iii) to the best knowledge of each Guarantor, there is no material
violation by any Person of any right of such Guarantor or any of its
Subsidiaries with respect to any patent, copyright, service mark, trademark,
trade name or other right owned or used by such Guarantor or any of its
Subsidiaries.
(m) Except as described therein, Schedule 5 sets forth a complete and
correct list of all outstanding Indebtedness of each of London Clubs and ABH and
its Subsidiaries as of September 30, 1997, since which date there has been no
material changes in the amounts, interest rates, sinking funds, installment
payments or maturities of the Indebtedness of such Guarantor or its
Subsidiaries. Neither any such Guarantor nor any Subsidiary is in default and no
waiver of default is currently in effect, in the payment of any principal or
interest on any Indebtedness of such Guarantor or such Subsidiary and no event
or condition exists with respect to any Indebtedness of any such Guarantor or
any Subsidiary in an aggregate principal amount in excess of $1,500,000 that
would permit (or that with notice or the lapse of time, or both, would permit)
one or more Persons to cause such Indebtedness to become due and payable before
its stated maturity or before its regularly scheduled dates of payment. Except
as disclosed in Schedule 5, neither any such Guarantor nor any Subsidiary has
agreed or consented to cause or permit in the future (upon the happening of a
contingency or otherwise) any of its property, whether now owned or hereafter
acquired, to be subject to a Lien not permitted by Section 14(a), as applicable.
(n) Neither any Guarantor nor any Subsidiary is subject to regulation under
the Investment Company Act of 1940, as amended, the Public Utility Holding
Company Act of 1935, as amended, or the Federal Power Act, as amended.
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(o) Neither any Guarantor nor any Subsidiary has knowledge of any claim or
has received any notice of any claim, and no proceeding has been instituted
raising any claim against such Guarantor or any of its Subsidiaries or any of
their respective real properties now or formerly owned, leased or operated by
any of them or other assets, alleging any damage to the environment or violation
of any Environmental Laws, except, in each case, such as could not reasonably be
expected to result in a Material Adverse Effect.
(p) Each Guarantor's ownership interest in the Borrower as of the date
hereof is set forth on Schedule 6.
(q) London Clubs has delivered to the Administrative Agent and Discount
Note Indenture Trustee true, correct and complete copies of all material
documents, instruments, opinions and certificates with respect to the Existing
Senior Debt.
13. Affirmative Covenants. Until all of the Guaranteed Obligations have been
indefeasibly paid and performed, each Guarantor (other than London Clubs) agrees
as follows:
(a) (i) ABH shall furnish to the Agent:
(A) as soon as available, but in any event within 120 days after the
end of each fiscal year of ABH, a copy of the consolidated and consolidating
balance sheet of ABH and its consolidated Subsidiaries as at the end of such
year and the related consolidated and consolidating statements of earnings and
stockholders' equity and of cash flows for such year, setting forth in each case
in comparative form the figures for the previous year, reported on without a
"going concern" or like qualification or exception, or qualification arising out
of the scope of the audit, by independent certified public accountants of
nationally recognized standing; and
(B) as soon as available, but in any event not later than 60 days
after the end of each of the first three quarterly periods of each fiscal year
of ABH, (x) the unaudited consolidated and consolidating balance sheet of ABH
and its consolidated Subsidiaries as at the end of such quarter and in
comparative form the figures for the end of the previous fiscal year, (y) the
unaudited consolidated and consolidating statement of earnings of ABH and its
consolidated Subsidiaries for such quarter and the portion of the fiscal year
through the end of such quarter, and in comparative form the figures for the
previous year and (z) the consolidated and consolidating statement of cash flows
of ABH and its consolidated Subsidiaries for the portion of the fiscal year
through the end of such quarter, and in comparative form the figures for the
previous year, certified by an Authorized Representative of ABH as being fairly
stated in all material respects when considered in relation to the consolidated
and consolidating financial statements of ABH and its consolidated Subsidiaries
(subject to normal year-end audit adjustments);
all such financial statements to be complete and correct in all material
respects and to be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by such accountants or officer, as the case may be,
and disclosed therein).
(ii) The Trust shall furnish the Agent all financial information that the Trust
is providing to any other creditor in connection with the Main Project, the Mall
Project, and/or the Music Project.
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(b) Each Guarantor shall furnish to the Agent, within thirty days after the
same are sent, copies of all financial statements and reports which such
Guarantor sends to its stockholders, and, within thirty days after the same are
filed, copies of all financial statements and reports which such Guarantor may
make to, or file with, the Securities and Exchange Commission or any successor
or analogous Governmental Instrumentality. Each Guarantor shall furnish to the
Agent with reasonable promptness such additional financial and other information
as the Agent may from time to time reasonably request.
(c) ABH shall keep true and correct books of records and account in
conformity with GAAP and all Legal Requirements and permit the Agent:
(i) No Event of Default - if no event of default under this Contingent
Completion Guaranty, the Noteholder Completion Guaranty or the Bank Guaranty
then exists, at the expense of the Agent and upon reasonable prior notice to
such Guarantor, to visit the principal executive office of such Guarantor and to
discuss the affairs, finances and accounts of such Guarantor and its
Subsidiaries with such Guarantor's officers, all at such reasonable times and as
often as may be reasonably requested in writing; and
(ii) Event of Default - if an event of default under this Contingent
Completion Guaranty, the Noteholder Completion Guaranty or the Bank Guaranty
then exists, at the expense of such Guarantor to visit and inspect any of the
offices of properties of such Guarantor or any Subsidiary, to examine their
respective books and records and to make copies and extracts therefrom, and to
discuss their respective affairs, finances and accounts with their respective
officers and independent public accountants, all at such reasonable times and as
often as may be requested.
A Guarantor shall not be under any obligation under this Contingent Completion
Guaranty to provide information pursuant to the last sentence of Section 13(b)
or pursuant to this Section 13(c) if disclosure of such information, on the
written advice of such Guarantor's counsel provided to such Guarantor, would be
prohibited by law or by decree of any Governmental Instrumentality or arbitral
body or by the terms of any obligation of confidentiality contained in any
agreement binding upon such Guarantor and not entered into in contemplation of
this Section 13(c).
(d) ABH shall promptly give notice to the Agent of:
(i) any breach by ABH of any of the Guaranteed Obligations;
(ii) any (a) default or event of default under any material obligation
of ABH or any of its Subsidiaries or (b) litigation, investigation or proceeding
which may exist at any time between ABH or any of its Subsidiaries and any
Governmental Instrumentality, which in either case, if not cured or if adversely
determined, as the case may be, could reasonably be expected to have a Material
Adverse Effect;
(iii) any material litigation or proceeding affecting ABH or any of
its Subsidiaries; and
(iv) any development or other event which could reasonably be expected
to have a Material Adverse Effect.
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Each notice pursuant to this clause (d) shall be accompanied by a statement of
an Authorized Representative of ABH setting forth details of the occurrence
referred to therein and stating what action ABH or any of its Subsidiaries
proposes to take with respect thereto.
(e) ABH will cause each of its Subsidiaries to comply with all laws,
ordinances or governmental rules or regulations to which each of them is
subject, including, without limitation, Environmental Laws, and will obtain and
maintain in effect all licenses, certificates, permits, franchises and other
governmental authorizations necessary to the ownership of their respective
properties or to the conduct of their respective businesses, in each case to the
extent necessary to ensure that non-compliance with such laws, ordinances or
governmental rules or regulations or failures to obtain or maintain in effect
such licenses, certificates, permits, franchises and other governmental
authorizations could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(f) Each Guarantor will and will cause each of its Subsidiaries to
maintain, with institutions it reasonably believes to be financially sound
insurers, insurance with respect to their respective properties and businesses
against such casualties and contingencies, of such types, on such terms and in
such amounts (including deductibles, co-insurance and self-insurance if adequate
reserves are maintained with respect thereto) as is customary in the case of
entities of established reputations engaged in the same or similar business and
similarly situated.
(g) Each Guarantor will and will cause each of its Subsidiaries to maintain
and keep, or cause to be maintained and kept, their respective properties in
reasonably good repair, working order and condition (other than ordinary wear
and tear), so that the business carried on in connection therewith may be
properly conducted at all times, provided that this Section shall not prevent a
Guarantor from discontinuing the operation and maintenance of or the liquidation
of any Dormant Subsidiary and shall not prevent a Guarantor or any Subsidiary
from discontinuing the operation and the maintenance of any of its properties if
such discontinuance is desirable in the conduct of its business and such
Guarantor has concluded that such discontinuance could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.
(h) Each Guarantor will and will cause each of its Subsidiaries to file all
material tax returns required to be filed in any jurisdiction and to pay and
discharge all material taxes, assessments, governmental charges, or levies shown
to be due and payable on such returns and all other taxes imposed on them or any
of their properties, assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have become delinquent
and all claims for which sums have become due and payable that have or might
become a Lien on properties or assets of such Guarantor or any Subsidiary,
provided that neither a Guarantor nor any Subsidiary need to pay any such tax or
assessment or claims if (i) the amount, applicability or validity thereof is
contested by such Guarantor or such Subsidiary on a timely basis in good faith
in appropriate proceedings and such Guarantor or a Subsidiary has established
adequate reserves therefor in accordance with GAAP on the books of such
Guarantor or such Subsidiary or (ii) the nonpayment of all such taxes and
assessments in the aggregate could not reasonably be expected to have a Material
Adverse Effect.
(i) Each Guarantor will at all times preserve and keep in full force and
effect its corporate or other existence. ABH will at all times preserve and keep
in full force and effect the corporate existence of each of its Subsidiaries
(other than Dormant Subsidiaries or unless merged into ABH or a Subsidiary) and
all licenses, consents, certificates and authorizations of ABH and its
Subsidiaries unless, in the good-faith judgment of ABH, the termination of or
failure to preserve and keep in full force and effect
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such corporate existence, licenses, consents, certificates and authorizations
could not, individually or in the aggregate, have a Material Adverse Effect.
(j) Each Guarantor will, and will cause each of its Subsidiaries to, keep
proper books of record and account in accordance with GAAP as applied in the
jurisdiction of its incorporation as such Guarantor may deem appropriate from
time to time.
(k) Neither ABH nor any of its Subsidiaries will engage in any business if,
as a result, the general nature of the business, taken on a consolidated basis,
which would then be engaged in by ABH and its Subsidiaries would be materially
changed from the general nature of the business engaged in by ABH and its
Subsidiaries as of the date hereof.
14. Negative Covenants. At all times prior to indefeasible payment and
performance of the Guaranteed Obligations by the Guarantors hereunder:
(a) ABH will not, and will not permit any of its Subsidiaries to, directly
or indirectly create, incur, assume or permit to exist (upon the happening of a
contingency or otherwise) any Lien on or with respect to any property or asset
except:
(i) any Lien arising by operation of law (except for real property
taxes) which secures amounts not more than 45 days overdue or, if so overdue,
are being contested on a timely basis in good faith and in appropriate
proceedings;
(ii) any Lien imposed on ABH or any of its Subsidiaries in relation to
its purchase of goods, products or supplies in the ordinary course of business;
(iii) any rights of set-off in the normal course of trading or of any
bank or financial institution or combination of accounts arising in favor of
such bank or financial institution as a result of the day-to-day operation of
banking arrangements, including, without limitation, rights of set-off granted
to such bank or financial institution in respect of the issuance of letters of
credit, or as a result of any currency or interest rate hedging operations
carried out in the ordinary course of business, in each case, provided that
there is no agreement to confer a security interest;
(iv) statutory Liens of landlords, Liens over goods or documents of
title arising in the ordinary course of documentary credit transactions and
Liens of carriers, warehousemen, mechanics, materialmen and other similar Liens,
in each case, incurred in the ordinary course of business;
(v) Liens for taxes, assessments or other governmental charges which
are not yet due and payable;
(vi) Liens incurred or deposits made in the ordinary course of
business (A) in connection with workers' compensation, unemployment insurance
and other types of social security or retirement benefits, or (B) to secure (or
to obtain letters of credit that secure) the performance of tenders, statutory
obligations, surety bonds, appeal bonds, bids, leases (other than capital
leases), performance bonds, purchase, construction or sales contracts and other
similar obligations, in each case not incurred or made in connection with the
borrowing of money, the obtaining of advances or credit or the payment of the
deferred purchase price of property;
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(vii) leases or subleases granted to others, easements, rights-of-way,
restrictions and other similar charges or encumbrances, in each case incidental
to, and not interfering with, the ordinary conduct of business of ABH and its
Subsidiaries, provided that such Liens do not, in the aggregate, materially
detract from the value of such property;
(viii) any Lien not otherwise permitted by clauses (i) through (vii)
above, provided that on the date any Indebtedness secured by any such Lien, is
created, incurred, assumed or guaranteed by ABH or any of its Subsidiaries, and
immediately after giving effect thereto and to the concurrent retirement of any
other Indebtedness, the sum of (A) the aggregate principal amount of all
Indebtedness secured by Liens pursuant to this clause (viii) plus (B) all
unsecured Indebtedness of ABH and its Subsidiaries that is senior in any respect
in right of payment to the obligations of ABH hereunder, does not exceed 25% of
the Consolidated Tangible Assets of ABH as of such date.
(b) ABH will not, and will not permit any of its Subsidiaries to, directly
or indirectly create, incur, assume or suffer to exist any secured or unsecured
Indebtedness that is senior in any respect in right of payment to the Guaranteed
Obligations of ABH hereunder (excluding any Indebtedness secured by Liens
pursuant to clauses (i) through (vii) of Section 14(a) hereof but including any
Indebtedness secured by Liens pursuant to clause (viii) of Section 14(a) hereof)
if the aggregate amount of all such senior Indebtedness described in this clause
(b) would exceed 25% of the Consolidated Tangible Assets of ABH as of such date.
15. Payments Free and Clear of Taxes, etc. Each Guarantor hereby agrees that:
(a) All payments by such Guarantor hereunder shall be made free and clear
of and without deduction for any present or future income, excise, stamp or
franchise taxes and other taxes, fees, duties, withholdings or other charges of
any nature whatsoever imposed by any taxing authority, but excluding franchise
taxes and taxes imposed on or measured by the Agent's net income or receipts
(such non-excluded items being called "Taxes"). In the event that any
withholding or deduction from any payment to be made by a Guarantor hereunder is
required in respect of any Taxes pursuant to any applicable law, rule or
regulation, then such Guarantor will
(i) pay directly to the relevant authority the full amount required to
be so withheld or deducted;
(ii) promptly forward to the Agent an official receipt or other
documentation satisfactory to the Agent evidencing such payment to such
authority; and
(iii) pay to the Agent such additional amount or amounts ("Additional
Amounts") as are necessary to ensure that the net amount actually received will
equal the full amount that would have been received had no such withholding or
deduction been required.
Moreover, if any Taxes are directly asserted against the Borrower or the Agent
with respect to any payment received hereunder, the Agent may pay such Taxes and
the Guarantor will promptly pay such Additional Amounts (including any
penalties, interest or expenses ) as are necessary in order that the net amount
received after the payment of such Taxes (including any Taxes on such Additional
Amounts) shall equal the amount that would have been received had no such Taxes
been asserted.
E-20
<PAGE>
(b) If the Guarantor fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Agent the required receipts or other
required documentary evidence, the Guarantor shall indemnify the Borrower, the
Agent for any incremental Taxes, interest or penalties that may become payable
by the Borrower, the Agent as a result of any such failure.
(c) In the event that an Additional Amount is paid by a Guarantor for the
account of the Agent and the Agent is entitled to a refund of the Tax (a "Tax
Refund") to which such payment is attributable, then the Agent shall take all
reasonable steps which are necessary to obtain such Tax Refund, including
filings such forms, certificates, documents, applications or returns as may be
required to obtain such Tax Refund. If the Agent subsequently receives such a
Tax Refund, then the Agent shall reimburse such amount.
(d) Without prejudice to the survival of any other agreement of the
Guarantors hereunder, the agreements and obligations of the Guarantors contained
in this Section 15 shall survive the payment in full of the obligations under
the Additional Guaranty.
16. Judgment. Each Guarantor hereby agrees that:
(a) If, for the purposes of obtaining judgment in any court, it is
necessary to convert a sum due hereunder in United States Dollars into another
currency, such Guarantor agrees, to the fullest extent permitted by law, that
the rate of exchange used shall be that at which in accordance with normal
banking procedures the Agent could purchase United States Dollars with such
other currency on the Business Day preceding that on which final judgment is
given.
(b) The obligation of each Guarantor in respect of any sum due from it
hereunder shall, notwithstanding any judgment in a currency other than United
States Dollars, be discharged only to the extent that on the Business Day
following receipt by the Agent of any sum adjudged to be so due in such other
currency the Agent may, in accordance with normal banking procedures, purchase
United States Dollars with such other currency; in the event that the United
States Dollars so purchased are less that the sum originally due to the Agent in
United States Dollars, the Guarantor, as a separate obligation and
notwithstanding any such judgment, shall indemnify and hold harmless the Agent
and such holder against such loss, and if the United States Dollars so purchased
exceed the sum originally due to the Agent in United States Dollars, the Agent
shall remit to such Guarantor such excess.
17. Breaches by Any Guarantor. If, at any time that the Agent has the right to
demand payment and performance of the Guaranteed Obligations in accordance with
Section 3(a) of this Contingent Completion Guaranty and, prior to the
indefeasible payment and performance thereof, any of the Guarantors breaches the
Guaranteed Obligations (after the expiration of applicable grace, notice and/or
cure periods), then, at the option of the Agent, an event of default shall exist
under this Contingent Completion Guaranty and the Agent, without any further
notice to any of the Guarantors or any other Person, shall be entitled to
exercise all rights and remedies available hereunder but only to the extent
permitted under Section 3(a) hereof, and at law and equity.
E-21
<PAGE>
18. Miscellaneous Provisions.
(a) This Contingent Completion Guaranty shall be binding upon the
Guarantors and their permitted successors, transferees and assigns and shall
inure to the benefit of and be enforceable by the Agent and its respective
successors, transferees and assigns; provided, however, that the Guarantors
may not assign any of their Guaranteed Obligations hereunder without the
prior written consent of the Agent, and the Agent may not assign this
Contingent Completion Guaranty or any of its rights, remedies or options
hereunder without the prior written consent of the Administrative Agent and
Discount Note Indenture Trustee in their sole discretion. The Lenders and the
Discount Note Indenture Trustee shall be third party beneficiaries of this
Section 18(a) and shall have all rights at law and equity to the enforcement
hereof.
(b) No amendment to or waiver of any provision of this Contingent
Completion Guaranty, nor consent to any departure by any Guarantor herefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Agent and, with respect to amendments, consented to by the Administrative
Agent and Discount Note Indenture Trustee in their sole discretion, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given.
(c) All notices and other communications hereunder to the Guarantors shall
be in writing (including telefacsimile) and mailed or telecopied or delivered to
them, addressed to them at the address set forth below their signatures hereto
or at such other addresses as shall be designated by such Guarantor in a written
notice to the Agent at the address set forth below their signatures hereto
complying as to delivery with the terms of this Section. All such notices and
other communications shall, when mailed or telecopied, respectively, be
effective when deposited in the mails or transmitted, addressed as aforesaid.
All notices to the Administrative Agent under this Contingent Completion
Guaranty shall be addressed to The Bank of Nova Scotia, One Liberty Plaza, New
York, New York 10006, Attention: ________________, Facsimile No. (212) 225-5090.
All Notices to the Discount Note Indenture Trustee shall be addressed to
State Street Bank and Trust Company, Corporate Trust Division, Two
International Place, Boston, Massachusetts 02110, Attn: Aladdin Notes.
(d) No failure on the part of the Agent to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
(e) Section captions used in this Contingent Completion Guaranty are for
convenience of reference only, and shall not affect the construction of this
Contingent Completion Guaranty.
(f) Wherever possible each provision of this Contingent Completion Guaranty
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Contingent Completion Guaranty
shall be prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Contingent Completion Guaranty.
(g) THIS CONTINGENT COMPLETION GUARANTY SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK. THIS CONTINGENT
COMPLETION GUARANTY, AND THE ADDITIONAL GUARANTY (IF APPLICABLE) CONSTITUTE THE
ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER
HEREOF.
E-22
<PAGE>
(h) ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION
WITH, THIS CONTINGENT COMPLETION GUARANTY, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE AGENT OR THE
GUARANTORS SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE
STATE OF NEW YORK IN THE CITY OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING
ENFORCEMENT AGAINST ANY PROPERTY MAY BE BROUGHT, AT THE OPTION OF THE AGENT, IN
THE COURTS OF ANY JURISDICTION WHERE SUCH PROPERTY, IF ANY, MAY BE FOUND. THE
GUARANTORS HEREBY EXPRESSLY AND IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE
COURTS OF THE STATE OF NEW YORK IN THE CITY OF NEW YORK AND OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH
LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREE TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. THE GUARANTORS FURTHER
IRREVOCABLY CONSENT TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE
PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. THE
GUARANTORS HEREBY EXPRESSLY AND IRREVOCABLY WAIVE, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH THEY MAY HAVE OR HEREAFTER MAY HAVE TO THE
LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO
ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. TO THE EXTENT THAT THE GUARANTORS HAVE OR HEREAFTER MAY ACQUIRE ANY
IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER
THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF
EXECUTION OR OTHERWISE) WITH RESPECT TO THEMSELVES OR THEIR PROPERTY, THE
GUARANTORS HEREBY IRREVOCABLY WAIVE SUCH IMMUNITY IN RESPECT OF THE GUARANTEED
OBLIGATIONS UNDER THIS CONTINGENT COMPLETION GUARANTY, AND THE ADDITIONAL
GUARANTY.
(i) THE GUARANTORS HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS CONTINGENT
COMPLETION GUARANTY, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE AGENT OR THE GUARANTORS. THE
GUARANTORS ACKNOWLEDGE AND AGREE THAT THEY HAVE RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE AGENT TO ENTER INTO THE ADDITIONAL GUARANTY.
(j) Limitation on Liability. Notwithstanding anything to the contrary in
this Contingent Completion Guaranty, it is understood that no claim shall be
made by the Agent or any of its affiliates against the Guarantors or any of
their affiliates, directors, employees, attorneys or agents for any special,
indirect, consequential or punitive damages in respect of any breach or wrongful
conduct (whether or not the claim therefor is based on contract, tort or duty
imposed by law), in connection with, arising out of or in any way related to the
transactions contemplated by this Contingent Completion Guarantee or any act or
omission or event occurring in connection therewith.
E-23
<PAGE>
(k) No Restriction on Rights and Remedies of Administrative Agent, Lenders
and Discount Note Indenture Trustee. Notwithstanding anything to the contrary in
this Contingent Completion Guaranty, the Agent on its own behalf covenants and
agrees that this Contingent Completion Guaranty and the rights, remedies and
options of the Agent hereunder in no way restrict the rights and remedies of the
(i) Administrative Agent and the Lenders under the Credit Agreement and the
other Loan Documents including, without limitation, the right to commence and
prosecute to completion of enforcement of any or all of the Loan Documents, (ii)
the Discount Note Indenture Trustee under the Indenture. The Agent on its own
behalf agrees that no Person shall have any right whatsoever to interpose a
right of offset, defense, claim or counterclaim with respect to any enforcement
of one or more of the Loan Documents based upon a claim that the Agent has the
right to performance of the Guaranteed Obligations before such enforcement can
be commenced or prosecuted or judgment thereon can be executed by or on behalf
of the Lenders or the Discount Note Indenture Trustee. The Lenders and the
Discount Note Indenture Trustee shall be third party beneficiaries of this
Section 18(k) and shall have all rights at law and equity to the enforcement
hereof.
(I) Notwithstanding anything to the contrary in this contingent completion
Guaranty, in the event that the Trust has been indefeasibly released from its
obligations under the Additional Guaranty, all rights of the Agent, as agent for
the Contingent Guarantors, any have hereunder will terminate.
E-24
<PAGE>
IN WITNESS WHEREOF, the Guarantors have caused this Contingent
Completion Guaranty to be duly executed and delivered by their officers
thereunto duly authorized as of the date first above written.
ALADDIN BAZAAR HOLDINGS, LLC
By:
Title:
Address:
Attention:
Telecopy:
THE TRUST UNDER ARTICLE SIXTH UNDER THE
WILL OF SIGMUND SOMMER
By:
Title:
Address:
Attention:
Telecopy:
LONDON CLUBS INTERNATIONAL PLC
By:
Title:
Address: 10 Brick Street
London WI Y 8HQ
England
Attention:
Telecopy:
[Agent]
By:
Title:
Address:
Attention:
Telecopy:
E-25
<PAGE>
_______________________________________
Note Registration Rights Agreement
Dated As of February 26, 1998
among
Aladdin Gaming Holdings, LLC
and
Aladdin Capital Corp.
and
Merrill Lynch, Pierce, Fenner & Smith
Incorporated,
Credit Suisse First Boston Corporation,
CIBC Oppenheimer Corp.
and
Scotia Capital Markets (USA) Inc.
___________________________________________
<PAGE>
NOTE REGISTRATION RIGHTS AGREEMENT
This Note Registration Rights Agreement (the "Agreement") is
made and entered into this 26th day of February, 1998, among Aladdin Gaming
Holdings, LLC, a Nevada limited-liability company ("Holdings"), Aladdin Capital
Corp., a Nevada corporation ("Capital" and, together with Holdings, the
"Issuers"), and Merrill Lynch, Pierce, Fenner & Smith Incorporated, Credit
Suisse First Boston Corporation, CIBC Oppenheimer Corp. and Scotia Capital
Markets (USA) Inc. (collectively, the "Initial Purchasers").
This Agreement is made pursuant to the Purchase Agreement,
dated February 18, 1998, among the Issuers, Aladdin Gaming Enterprises, Inc., a
Nevada corporation ("Enterprises" and, together with the Issuers, the "Aladdin
Parties"), Aladdin Holdings, LLC, a Delaware limited liability company ("AHL"),
the Trust under Article Sixth u/w/o Sigmund Sommer (the "Trust"), London Clubs
International, plc, a United Kingdom public limited company ("London Clubs" and,
together with the Aladdin Parties, AHL and the Trust, the "Venture Parties") and
the Initial Purchasers (the "Purchase Agreement"), which provides for, among
other things, the sale by the Aladdin Parties to the Initial Purchasers of Units
consisting in the aggregate of $221.5 million principal amount at maturity of
the Issuers' 13-1/2% Senior Discount Notes due 2010 (the "Securities") and
Warrants to purchase an aggregate of 2,215,000 shares of Class B non-voting
common stock of Enterprises. In order to induce the Initial Purchasers to enter
into the Purchase Agreement, the Issuers have agreed to provide to the Initial
Purchasers and their direct and indirect transferees the registration rights set
forth in this Agreement. The execution of this Agreement is a condition to the
closing under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
1. Definitions.
As used in this Agreement, the following capitalized defined
terms shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended
from time to time.
"1934 Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"AHL" shall have the meaning set forth in the preamble.
"Aladdin Parties" shall have the meaning set forth in the
preamble.
"Capital" shall have the meaning set forth in the preamble.
"Closing Date" shall mean the Closing Time as defined in the
Purchase Agreement.
<PAGE>
"Consummate" means, with respect to an Exchange Offer, the
occurrence of (i) the filing and effectiveness under the Act of the
Exchange Offer Registration Statement relating to the Exchange
Securities to be issued in the Exchange Offer, (ii) the maintenance of
such Registration Statement continuously effective and the keeping of
the Exchange Offer open for a period not less than the minimum period
required pursuant to Section 2.1 hereof and (iii) the delivery by the
Issuers to the Trustee under the Indenture of Exchange Securities in
the same aggregate accreted value as the aggregate accreted value of
Securities that were tendered by Holders thereof pursuant to the
Exchange Offer.
"Depositary" shall mean The Depository Trust Company, or any
other depositary appointed by the Issuers, provided, however, that such
depositary must have an address in the Borough of Manhattan, in the
City of New York.
"Enterprises" shall have the same meaning set forth in the
preamble.
"Exchange Offer" shall mean the exchange offer by the Issuers
of Exchange Securities for Transfer Restricted Securities pursuant to
Section 2.1 hereof.
"Exchange Offer Registration" shall mean a registration under
the 1933 Act effected pursuant to Section 2.1 hereof.
"Exchange Offer Registration Statement" shall mean an exchange
offer registration statement on Form S-4 (or, if applicable, on another
appropriate form), and all amendments and supplements to such
registration statement, including the Prospectus contained therein, all
exhibits thereto and all documents incorporated by reference therein.
"Exchange Period" shall have the meaning set forth in Section
2.1 hereof.
"Exchange Securities" shall mean the 13-1/2% Senior Discount
Notes due 2010, issued by the Issuers under the Indenture containing
terms identical to the Securities in all material respects (except for
references to certain interest rate provisions, liquidated damages,
restrictions on transfers and restrictive legends), to be offered to
Holders in exchange for Transfer Restricted Securities pursuant to the
Exchange Offer.
"Holder" shall mean an Initial Purchaser, for so long as it
owns any Transfer Restricted Securities, and each of its successors,
assigns and direct and indirect transferees who become registered
owners of Transfer Restricted Securities under the Indenture and each
Participating Broker-Dealer that holds Exchange Securities for so long
as such Participating Broker-Dealer is required to deliver a prospectus
meeting the requirements of the 1933 Act in connection with any resale
of such Exchange Securities.
"Holdings" shall have the same meaning set forth in the
preamble.
"Indenture" shall mean the Indenture relating to the
Securities, dated as of February 26, 1998, between the Issuers and
State Street Bank and Trust Company, as
2
<PAGE>
trustee, as the same may be amended, supplemented, waived or otherwise
modified from time to time in accordance with the terms thereof.
"Initial Purchaser" or "Initial Purchasers" shall have the
meaning set forth in the preamble.
"Issuers" shall have the meaning set forth in the preamble.
"London Clubs" shall have the same meaning set forth in the
preamble.
"Majority Holders" shall mean the Holders of a majority of the
aggregate accreted value of the outstanding Transfer Restricted
Securities; provided that whenever the consent or approval of Holders
of a specified percentage of Transfer Restricted Securities is required
hereunder, Transfer Restricted Securities held by the Issuers or any
Affiliate (as defined in the Indenture) of the Issuers shall be
disregarded in determining whether such consent or approval was given
by the Holders of such required percentage amount.
"Participating Broker-Dealer" shall mean any of Merrill Lynch
Pierce, Fenner & Smith Incorporated, Credit Suisse First Boston
Corporation, CIBC Oppenheimer Corp. and Scotia Capital Markets (USA)
Inc. and any other broker-dealer which makes a market in the Securities
and exchanges Transfer Restricted Securities in the Exchange Offer for
Exchange Securities.
"Person" shall mean an individual, partnership (general or
limited), corporation, limited liability company, trust or
unincorporated organization, or a governmental agency or body or
political subdivision thereof.
"Private Exchange" shall have the meaning set forth in Section
2.1 hereof.
"Private Exchange Securities" shall have the meaning set forth
in Section 2.1 hereof.
"Prospectus" shall mean the prospectus included in a
Registration Statement, including any preliminary prospectus, and any
such prospectus as amended or supplemented by any prospectus
supplement, including any such prospectus supplement with respect to
the terms of the offering of any portion of the Transfer Restricted
Securities covered by a Shelf Registration Statement, and by all other
amendments and supplements to a prospectus, including post-effective
amendments, and in each case including all material incorporated by
reference therein.
"Purchase Agreement" shall have the meaning set forth in the
preamble.
"Registration Expenses" shall mean any and all expenses
incident to performance of or compliance by the Issuers with this
Agreement, including without limitation: (i) all SEC, stock exchange or
National Association of Securities Dealers, Inc. (the "NASD")
registration and filing fees, including, if applicable, the fees and
expenses of any
3
<PAGE>
"qualified independent underwriter" (and its counsel) that is required
to be retained by any holder of Transfer Restricted Securities in
accordance with the rules and regulations of the NASD, (ii) all fees
and expenses incurred in connection with compliance with state
securities or blue sky laws and compliance with the rules of the NASD
(including reasonable fees and disbursements of counsel for any
underwriters or Holders in connection with blue sky qualification of
any of the Exchange Securities or Transfer Restricted Securities and
any filings with the NASD), (iii) all expenses of any Persons in
preparing or assisting in preparing, word processing, printing and
distributing any Registration Statement, any Prospectus, any amendments
or supplements thereto, any underwriting agreements, securities sales
agreements and other documents relating to the performance of and
compliance with this Agreement, except for such expenses incurred by
Holders, underwriters or their respective counsel, (iv) all fees and
expenses incurred in connection with the listing if any, of any of the
Transfer Restricted Securities on any securities exchange or exchanges,
(v) all rating agency fees, (vi) the fees and disbursements of counsel
for any of the Venture Parties and of the independent public
accountants of any of the Venture Parties, including the expenses of
any special audits or "cold comfort" letters required by or incident to
such performance and compliance and (vii) the fees and expenses of the
Trustee, and any escrow agent or custodian, but excluding, except as
otherwise expressly provided in clauses (i) through (vii) above, (a)
the fees and expenses of the Initial Purchasers in connection with the
Exchange Offer or the Shelf Registration, including fees and expenses
of counsel to the Initial Purchasers in connection therewith, and (b)
underwriting discounts and commissions and transfer taxes, if any,
relating to the sale or disposition of Transfer Restricted Securities
by a Holder.
"Registration Statement" shall mean any registration statement
of the Issuers which covers any of the Exchange Securities or Transfer
Restricted Securities pursuant to the provisions of this Agreement, and
all amendments and supplements to any such Registration Statement,
including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all material
incorporated by reference therein.
"Rule 144" shall mean Rule 144 promulgated under the 1933 Act,
as such Rule may be amended from time to time, or any similar rule
(other than Rule 144A) or regulation hereafter adopted by the SEC
providing for offers and sales of securities made in compliance
therewith resulting in offers and sales by subsequent holders that are
not affiliates of an issuer of such securities being free of the
registration and prospectus delivery requirements of the 1933 Act.
"Rule 144A" shall mean Rule 144A promulgated under the 1933
Act, as such Rule may be amended from time to time, or any similar rule
(other than Rule 144) or regulation hereafter adopted by the SEC.
"SEC" shall mean the Securities and Exchange Commission or any
successor agency or government body performing the functions currently
performed by the United States Securities and Exchange Commission.
4
<PAGE>
"Securities" shall have the meaning set forth in the preamble.
"Shelf Registration" shall mean a registration effected
pursuant to Section 2.2 hereof.
"Shelf Registration Statement" shall mean a "shelf"
registration statement of the Issuers pursuant to the provisions of
Section 2.2 of this Agreement which covers all of the Transfer
Restricted Securities or all of the Private Exchange Securities on an
appropriate form under Rule 415 under the 1933 Act, or any similar rule
that may be adopted by the SEC, and all amendments and supplements to
such registration statement, including post-effective amendments, in
each case including the Prospectus contained therein, all exhibits
thereto and all material incorporated by reference therein.
"Transfer Restricted Securities" shall mean the Securities
and, if issued, the Private Exchange Securities; provided, however,
that each Security and, if issued, each Private Exchange Security,
shall continue to be a Transfer Restricted Security until (i) the date
on which such security has been exchanged by a Person other than a
broker-dealer for an Exchange Security in the Exchange Offer, (ii)
following the exchange by a Participating Broker-Dealer in the Exchange
Offer of a Security for an Exchange Security, the date on which such
Exchange Security is sold to a purchaser who receives from such
Participating Broker-Dealer on or prior to the date of such sale a copy
of the Prospectus contained in the Exchange Offer Registration
Statement, (iii) the date on which such Security has been effectively
registered under the 1933 Act and disposed of in accordance with the
Shelf Registration Statement or (iv) the date on which such Security is
distributed to the public pursuant to Rule 144 under the 1933 Act.
"Trust" shall have the meaning set forth in the preamble.
"Trustee" shall mean the trustee with respect to the
Securities under the Indenture.
"Venture Parties" shall have the meaning set forth in the
preamble.
2. Registration Under the 1933 Act.
2.1. Exchange Offer. The Issuers shall, for the benefit of the
Holders, at the Issuers' cost, (A) prepare and, as soon as practicable but not
later than 45 days following the Closing Date, file with the SEC an Exchange
Offer Registration Statement on an appropriate form under the 1933 Act with
respect to a proposed Exchange Offer and the issuance and delivery to the
Holders, in exchange for the Transfer Restricted Securities (other than Private
Exchange Securities), of a like principal amount of Exchange Securities, (B) use
their reasonable best efforts to cause the Exchange Offer Registration Statement
to be declared effective under the 1933 Act on or prior to 150 days from the
Closing Date, (C) use their reasonable best efforts to keep the Exchange Offer
Registration Statement effective until the closing of the Exchange Offer and (D)
use their reasonable best efforts to cause the Exchange Offer to be consummated
on or prior to 30 business days following the date on which the Exchange Offer
Registration Statement was declared effective by the SEC. The Exchange
Securities will be issued under the Indenture.
5
<PAGE>
Upon the effectiveness of the Exchange Offer Registration Statement, the Issuers
shall promptly commence the Exchange Offer, it being the objective of such
Exchange Offer to enable each Holder eligible and electing to exchange Transfer
Restricted Securities for Exchange Securities (assuming that such Holder (a) is
not an affiliate of the Issuers within the meaning of Rule 405 under the 1933
Act, (b) is not a broker-dealer tendering Transfer Restricted Securities
acquired directly from the Issuers for its own account, (c) acquired the
Exchange Securities in the ordinary course of such Holder's business and (d) has
no arrangements or understandings with any Person to participate in the Exchange
Offer for the purpose of distributing the Exchange Securities) and to transfer
such Exchange Securities from and after their receipt without any limitations or
restrictions under the 1933 Act and under state securities or blue sky laws.
In connection with the Exchange Offer, the Issuers shall:
(a) mail or cause to be mailed as promptly as
reasonably practicable to each Holder a copy of the Prospectus forming part of
the Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(b) keep the Exchange Offer open for acceptance for a
period of not less than 30
calendar days after the date notice thereof is mailed to the Holders (or longer
if required by applicable law) (such period referred to herein as the "Exchange
Period");
(c) utilize the services of the Depositary for
the Exchange Offer;
(d) permit Holders to withdraw tendered Transfer
Restricted Securities at any time prior to 5:00 p.m. (Eastern Time), on the
second to last business day of the Exchange Period, by sending to the
institution specified in the notice, a telegram, telex, facsimile transmission
or letter setting forth the name of such Holder, the principal amount of
Transfer Restricted Securities delivered for exchange, and a statement that such
Holder is withdrawing such Holder's election to have such Securities exchanged;
(e) notify each Holder that any Transfer Restricted
Security not tendered will
remain outstanding and continue to accrue interest, but will not retain any
rights under this Agreement (except in the case of the Initial Purchasers and
Participating Broker-Dealers as provided herein); and
(f) otherwise comply in all respects with all
applicable laws relating to the Exchange Offer.
If, prior to consummation of the Exchange Offer, the Initial
Purchasers hold any Securities acquired by them and having the status of an
unsold allotment in the initial distribution and determine upon advice of
external counsel that it is ineligible to participate in the Exchange Offer, as
soon as practicable upon receipt by the Issuers of a written request from such
Initial Purchaser, the Issuers shall issue and deliver to such Initial Purchaser
in exchange (the "Private Exchange") for the Securities held by such Initial
Purchaser, a like principal amount of debt securities of the Issuers, that are
identical (except that such securities shall bear appropriate transfer
restrictions) to the Exchange Securities (the "Private Exchange Securities").
6
<PAGE>
The Exchange Securities and the Private Exchange Securities
shall be issued under (i) the Indenture or (ii) an indenture identical in all
material respects to the Indenture and which, in either case, has been qualified
under the Trust Indenture Act of 1939, as amended (the "TIA"), or is exempt from
such qualification and shall provide that the Exchange Securities shall not be
subject to the transfer restrictions set forth in the Indenture but that the
Private Exchange Securities shall be subject to such transfer restrictions. The
Indenture or such indenture shall provide that the Exchange Securities, the
Private Exchange Securities and the Securities shall vote and consent together
on all matters as one class and that none of the Exchange Securities, the
Private Exchange Securities or the Securities will have the right to vote or
consent as a separate class on any matter. The Private Exchange Securities shall
be of the same series as, and the Issuers shall use commercially reasonable
efforts to have the Private Exchange Securities bear the same CUSIP number as,
the Exchange Securities. The Issuers shall not have any liability under this
Agreement solely as a result of such Private Exchange Securities not bearing the
same CUSIP number as the Exchange Securities.
As soon as practicable after the close of the Exchange Offer
and/or the Private Exchange, as the case may be, the Issuers shall:
(i) accept for exchange all Transfer Restricted
Securities duly tendered and not validly withdrawn pursuant to
the Exchange Offer in accordance with the terms of the
Exchange Offer Registration Statement and the letter of
transmittal which shall be an exhibit thereto;
(ii) accept for exchange all Securities properly
tendered pursuant to the Private Exchange;
(iii) deliver to the Trustee for cancellation all
Transfer Restricted Securities so accepted for exchange; and
(iv) cause the Trustee promptly to authenticate and
deliver Exchange Securities or Private Exchange Securities, as
the case may be, to each Holder of Transfer Restricted
Securities so accepted for exchange in a principal amount
equal to the principal amount of the Transfer Restricted
Securities of such Holder so accepted for exchange.
Interest on each Exchange Security and Private Exchange
Security will accrue from the last date on which interest was paid on the
Transfer Restricted Securities surrendered in exchange therefor or, if no
interest has been paid on the Transfer Restricted Securities, from the date of
original issuance. The Exchange Offer and the Private Exchange shall not be
subject to any conditions, other than (i) that the Exchange Offer or the Private
Exchange, or the making of any exchange by a Holder, does not violate applicable
law or any applicable interpretation of the staff of the SEC, (ii) the due
tendering of Transfer Restricted Securities in accordance with the Exchange
Offer and the Private Exchange, (iii) that each Holder of Transfer Restricted
Securities exchanged in the Exchange Offer shall have made customary
representations in connection therewith, including that all Exchange Securities
to be received by it shall be acquired in the ordinary course of its business
and that at the time of the consummation of the Exchange Offer it
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shall have no arrangement or understanding with any person to participate in the
distribution (within the meaning of the 1933 Act) of the Exchange Securities,
and shall have made such other representations as may be reasonably necessary
under applicable SEC rules, policy, regulations or interpretations to render the
use of Form S-4 or other appropriate form under the 1933 Act available and (iv)
that no action or proceeding shall have been instituted or threatened in any
court or by or before any governmental agency or body with respect to the
Exchange Offer or the Private Exchange which, in the Issuers' judgment, would
reasonably be expected to impair the ability of the Issuers to proceed with the
Exchange Offer or the Private Exchange. The Issuers shall inform the Initial
Purchasers of the names and addresses of the Holders to whom the Exchange Offer
is made, and the Initial Purchasers shall have the right to contact such Holders
and otherwise facilitate the tender of Transfer Restricted Securities in the
Exchange Offer.
2.2. Shelf Registration. If (i) the Issuers are not required
to file the Exchange Offer Registration Statement or permitted to consummate the
Exchange Offer as contemplated in Section 2.1 because the Exchange Offer is not
permitted by applicable law or by SEC rules or regulations or applicable
interpretations thereof by the staff of the SEC or (ii) any Holder of Transfer
Restricted Securities (having a reasonable basis to do so) notifies the Issuers
prior to the 20th day following consummation of the Exchange Offer that (A) it
is prohibited by law or SEC policy from participating in the Exchange Offer or
(B) it may not resell the Securities acquired by it in the Exchange Offer to the
public without delivering a Prospectus and the Prospectus contained in the
Exchange Offer Registration Statement is not appropriate or available for such
resales or (C) it is a Participating Broker-Dealer and owns Securities acquired
directly from the Issuers or an affiliate of the Issuers, then in case of each
of clauses (i) and (ii) the Issuers shall, at their cost:
(a) Use their reasonable best efforts to file with
the SEC on or prior to 45 days after the earlier of (x) the
date on which the Issuers determine or receive notice from the
SEC that the Exchange Offer Registration Statement cannot be
filed as a result of clause (i) above and (y) the date on
which the Issuers receive the notice specified in clause (ii)
above, (such earlier date, the "Filing Deadline"), a Shelf
Registration Statement relating to the offer and sale of the
Transfer Restricted Securities by the Holders from time to
time in accordance with the methods of distribution elected by
the Majority Holders participating in the Shelf Registration
and set forth in such Shelf Registration Statement, and use
their reasonable best efforts to cause such Shelf Registration
Statement to be declared effective by the SEC on or prior to
the later of (x) 90 days after the Filing Deadline for the
Shelf Registration Statement and (y) 150 days after the
Closing Date.
(b) Use their reasonable best efforts to keep the
Shelf Registration Statement continuously effective in order
to permit the Prospectus forming part thereof to be usable by
Holders for a period of two years (or nine months in the case
of a Shelf Registration Statement relating only to Private
Exchange Securities) from the date the Shelf Registration
Statement is declared effective by the SEC, or for such
shorter period that will terminate when all Transfer
8
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Restricted Securities covered by the Shelf Registration
Statement have been sold pursuant to the Shelf Registration
Statement or cease to be outstanding or otherwise to be
Transfer Restricted Securities (the "Effectiveness Period").
(c) Notwithstanding any other provisions hereof, use
their reasonable best efforts to ensure that (i) any Shelf
Registration Statement and any amendment thereto and any
Prospectus forming part thereof and any supplement thereto
complies in all material respects with the 1933 Act and the
rules and regulations thereunder, (ii) any Shelf Registration
Statement and any amendment thereto does not, when it becomes
effective, contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and
(iii) any Prospectus forming part of any Shelf Registration
Statement, and any supplement to such Prospectus (as amended
or supplemented from time to time), does not include an untrue
statement of a material fact or omit to state a material fact
necessary in order to make the statements, in light of the
circumstances under which they were made, not misleading.
The Issuers shall not permit any securities other than
Transfer Restricted Securities to be included in the Shelf Registration
Statement. The Issuers further agree, if necessary, to supplement or amend the
Shelf Registration Statement, as required by Section 3(b) below, and to furnish
to the Holders of Transfer Restricted Securities copies of any such supplement
or amendment promptly after its being used or filed with the SEC.
2.3. Expenses. The Issuers shall pay all Registration Expenses
in connection with the registration pursuant to Section 2.1 or 2.2. Each Holder
shall pay all underwriting discounts and commissions and transfer taxes, if any,
relating to, and fees and other costs of counsel in connection with, the sale or
disposition of such Holder's Transfer Restricted Securities pursuant to the
Shelf Registration Statement.
2.4. Effectiveness. An Exchange Offer Registration Statement
pursuant to Section 2.1 hereof or a Shelf Registration Statement pursuant to
Section 2.2 hereof will not be deemed to have become effective unless it has
been declared effective by the SEC; provided, however, that if, after it has
been declared effective, the offering of Transfer Restricted Securities pursuant
to an Exchange Offer Registration Statement or a Shelf Registration Statement is
interfered with by any stop order, injunction or other order or requirement of
the SEC or any other governmental agency or court, such Registration Statement
will be deemed not to have been effective during the period of such
interference, until the offering of Transfer Restricted Securities pursuant to
such Registration Statement may legally resume.
2.5. Interest.
The Issuers shall notify the Trustee within five business days
after each and every date on which an event occurs in respect of which
liquidated damages are required to be paid. All accrued liquidated damages shall
be paid on or before the applicable semiannual interest
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<PAGE>
payment date by wire transfer of immediately available funds or by federal funds
check as set forth in the Indenture. Following the cure of all Registration
Defaults relating to any particular Transfer Restricted Securities, the accrual
of liquidated damages with respect to such Transfer Restricted Securities will
cease.
3. Registration Procedures.
In connection with the obligations of the Issuers with respect
to Registration Statements pursuant to Sections 2.1 and 2.2 hereof, the Issuers
shall:
(a) prepare and file with the SEC a Registration Statement,
within the relevant time period specified in Section 2, on the appropriate form
under the 1933 Act, which form (i) shall be selected by the Issuers, (ii) shall,
in the case of a Shelf Registration, be available for the sale of the Transfer
Restricted Securities by the selling Holders thereof, (iii) shall comply as to
form in all material respects with the requirements of the applicable form and
include or incorporate by reference all financial statements required by the SEC
to be filed therewith or incorporated by reference therein and (iv) shall comply
in all material respects with the requirements of Regulation S-T under the 1933
Act;
(b) use their reasonable best efforts to prepare and file with
the SEC such amendments and post-effective amendments to each Registration
Statement as may be necessary under applicable law to keep such Registration
Statement effective for the applicable period; and use their reasonable best
efforts to cause each Prospectus to be supplemented by any required prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 (or any
similar provision then in force) under the 1933 Act and comply with the
provisions of the 1933 Act, the 1934 Act and the rules and regulations
thereunder applicable to them with respect to the disposition of all securities
covered by each Registration Statement during the applicable period in
accordance with the intended method or methods of distribution by the selling
Holders thereof (including sales by any Participating Broker-Dealer);
(c) in the case of a Shelf Registration, (i) notify each
Holder of Transfer Restricted Securities, at least three business days prior to
filing, that a Shelf Registration Statement with respect to the Transfer
Restricted Securities is being filed and advising such Holders that the
distribution of Transfer Restricted Securities will be made in accordance with
the method selected by the Majority Holders participating in the Shelf
Registration; (ii) furnish to each Holder of Transfer Restricted Securities and
to each underwriter of an underwritten offering of Transfer Restricted
Securities, if any, without charge, as many copies of each Prospectus, including
each preliminary Prospectus, and any amendment or supplement thereto and such
other documents as such Holder or underwriter may reasonably request, including
financial statements and schedules and, if the Holder so requests, a reasonable
number of copies of all exhibits in order to facilitate the public sale or other
disposition of the Transfer Restricted Securities; and (iii) consent to the use
of the Prospectus or any amendment or supplement thereto by each of the selling
Holders of Transfer Restricted Securities in connection with the offering and
sale of the Transfer Restricted Securities covered by the Prospectus or any
amendment or supplement thereto;
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(d) use their reasonable best efforts to register or qualify
the Transfer Restricted Securities under all applicable state securities or
"blue sky" laws of such jurisdictions in the United States as any Holder of
Transfer Restricted Securities covered by a Registration Statement and, in the
case of a Shelf Registration Statement, each underwriter of an underwritten
offering of Transfer Restricted Securities shall reasonably request in writing a
reasonable period of time prior to the time the applicable Registration
Statement is declared effective by the SEC, and do any and all other acts and
things which may be reasonably necessary or advisable to enable each such Holder
and underwriter to consummate the disposition or exchange in each such
jurisdiction of such Transfer Restricted Securities owned by such Holder;
provided, however, that the Issuers shall not be required to (i) qualify as a
foreign corporation or as a dealer in securities in any jurisdiction where they
would not otherwise be required to qualify but for this Section 3(d), or (ii)
take any action which would subject them to general service of process or
taxation in any such jurisdiction where they are not then so subject;
(e) upon receiving notice of any of the following events,
notify promptly each Holder of Transfer Restricted Securities under a Shelf
Registration or any Participating Broker-Dealer who has notified the Issuers
that it is utilizing the Exchange Offer Registration Statement as provided in
paragraph (f) below and, if requested by such Holder or Participating
Broker-Dealer, confirm such notice in writing promptly (i) when a Registration
Statement has become effective and when any post-effective amendments and
supplements thereto become effective, (ii) of any request by the SEC or any
state securities authority for post-effective amendments and supplements to a
Registration Statement and Prospectus or for additional information after the
Registration Statement has become effective, (iii) of the issuance by the SEC or
any state securities authority of any stop order suspending the effectiveness of
a Registration Statement or the initiation of any proceedings for that purpose,
(iv) in the case of a Shelf Registration, if, between the effective date of a
Registration Statement and the closing of any sale of Transfer Restricted
Securities covered thereby, the representations and warranties of the Issuers
contained in any underwriting agreement, securities sales agreement or other
similar agreement, if any, relating to the offering cease to be true and correct
in all material respects, (v) of the happening of any event or the discovery of
any facts during the period a Shelf Registration Statement is effective which
makes any statement made in such Registration Statement or the related
Prospectus untrue in any material respect or which requires the making of any
changes in such Registration Statement or Prospectus in order to make the
statements therein not misleading in any material respect, (vi) of the receipt
by the Issuers of any notification with respect to the suspension of the
qualification of the Transfer Restricted Securities or the Exchange Securities,
as the case may be, for sale in any jurisdiction or the initiation of any
proceeding for such purpose and (vii) of any determination by the Issuers that a
posteffective amendment to such Registration Statement would be appropriate;
(f) (A) in the case of the Exchange Offer Registration
Statement (i) include in the Exchange Offer Registration Statement a section
entitled "Plan of Distribution" which section shall be reasonably acceptable to
Merrill Lynch, Pierce, Fenner & Smith Incorporated on behalf of the
Participating Broker-Dealers, and which shall contain a summary statement of the
positions taken or policies made by the staff of the SEC with respect to the
potential "underwriter" status of any broker-dealer that holds Transfer
Restricted Securities acquired for its own account
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<PAGE>
as a result of market-making activities or other trading activities and that
will be the beneficial owner (as defined in Rule 13d-3 under the 1934 Act) of
Exchange Securities to be received by such broker-dealer in the Exchange Offer,
whether such positions or policies have been publicly disseminated by the staff
of the SEC or such positions or policies, in the reasonable judgment of Merrill
Lynch, Pierce, Fenner & Smith Incorporated on behalf of the Participating
Broker-Dealers and its counsel, represent the prevailing views of the staff of
the SEC, including a statement that any such broker-dealer who receives Exchange
Securities for Transfer Restricted Securities pursuant to the Exchange Offer may
be deemed a statutory underwriter and must deliver a prospectus meeting the
requirements of the 1933 Act in connection with any resale of such Exchange
Securities, (ii) furnish to each Participating Broker-Dealer who has delivered
to the Issuers the notice referred to in Section 3(e), without charge, as many
copies of each Prospectus included in the Exchange Offer Registration Statement,
including any preliminary prospectus, and any amendment or supplement thereto,
as such Participating Broker-Dealer may reasonably request, (iii) consent to the
use of the Prospectus forming part of the Exchange Offer Registration Statement
or any amendment or supplement thereto, by any Person subject to the prospectus
delivery requirements of the SEC, including all Participating Broker-Dealers, in
connection with the sale or transfer of the Exchange Securities covered by the
Prospectus or any amendment or supplement thereto, and (iv) include in the
transmittal letter or similar documentation to be executed by an exchange
offeree in order to participate in the Exchange Offer (x) the following
provision:
"If the exchange offeree is a broker-dealer holding Transfer
Restricted Securities acquired for its own account as a result
of market-making activities or other trading activities, it
will deliver a prospectus meeting the requirements of the 1933
Act in connection with any resale of Exchange Securities
received in respect of such Transfer Restricted Securities
pursuant to the Exchange Offer;" and
(y) a statement to the effect that by a broker-dealer making the acknowledgment
described in clause (x) and by delivering a Prospectus in connection with the
exchange of Transfer Restricted Securities, the broker-dealer will not be deemed
to admit that it is an underwriter within the meaning of the 1933 Act; and
(B) in the case of any Exchange Offer Registration Statement, the
Issuers agree to deliver to the Initial Purchasers on behalf of the
Participating Broker-Dealers, if requested by any such Initial Purchaser, upon
the Consummation of the Exchange Offer (i) an opinion of counsel or opinions of
counsel reasonably satisfactory to the Initial Purchasers covering (x) the
matters and subject to the qualfications and exceptions customarily received by
such Initial Purchasers requested in connection with the Exchange Offer
Registration Statement and (y) such other matters as may be reasonably
requested, (ii) officers' certificates substantially in the form customarily
delivered in a public offering of debt securities and (iii) a comfort letter or
comfort letters in customary form to the extent permitted by Statement on
Auditing Standards No. 72 of the American Institute of Certified Public
Accountants (or if such a comfort letter is not permitted, an agreed upon
procedures letter in customary form) from the Issuers' independent certified
public accountants and the independent certified accountants of London Clubs
(and, if necessary, independent certified public accountants of the Trust, any
subsidiary of the Issuers,
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<PAGE>
London Clubs or the Trust or of any business acquired by the Issuers for which
financial statements are, or are required to be, included in the Registration
Statement);
(g) (i) in the case of an Exchange Offer, furnish counsel for
the Initial Purchasers and (ii) in the case of a Shelf Registration, furnish
counsel for the Holders of Transfer Restricted Securities copies of any comment
letters received from the SEC or any other request by the SEC or any state
securities authority for amendments or supplements to a Registration Statement
and Prospectus or for additional information;
(h) make commercially reasonable efforts to obtain the
withdrawal of any order suspending the effectiveness of a Registration Statement
as soon as reasonably practicable;
(i) in the case of a Shelf Registration, furnish to each
Holder of Transfer Restricted Securities, and each underwriter, if any, without
charge, at least one conformed copy of each Registration Statement and any
post-effective amendment thereto, including financial statements and schedules
(without documents incorporated therein by reference and all exhibits thereto,
unless requested);
(j) in the case of a Shelf Registration, cooperate with the
selling Holders of Transfer Restricted Securities to facilitate the timely
preparation and delivery of certificates representing Transfer Restricted
Securities to be sold and not bearing any restrictive legends; and enable such
Transfer Restricted Securities to be in such denominations (consistent with the
provisions of the Indenture) and registered in such names as the selling Holders
or the underwriters, if any, may reasonably request at least three business days
prior to the closing of any sale of Transfer Restricted Securities;
(k) in the case of a Shelf Registration, upon the occurrence
of any event or the discovery of any facts, each as contemplated by Sections
3(e)(v) and 3(e)(vii) hereof, as promptly as practicable after the occurrence of
such an event, use their reasonable best efforts to prepare a supplement or
post-effective amendment to the Registration Statement or the related Prospectus
or any document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of the Transfer
Restricted Securities or Participating Broker-Dealers, such Prospectus will not
contain at the time of such delivery any untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading or will remain
so qualified. At such time as such public disclosure is otherwise made or the
Issuers determine that such disclosure is not necessary, in each case to correct
any misstatement of a material fact or to include any omitted material fact, the
Issuers agree promptly to notify each Holder of such determination and to
furnish each Holder such number of copies of the Prospectus as amended or
supplemented, as such Holder may reasonably request;
(l) in the case of a Shelf Registration, a reasonable time
prior to the filing of any Registration Statement, any Prospectus, any amendment
to a Registration Statement or amendment or supplement to a Prospectus or any
document which is to be incorporated by reference into a Registration Statement
or a Prospectus after initial filing of a Registration Statement, provide a
reasonable number of copies of such document to the Initial Purchasers on
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behalf of such Holders; and make representatives of the Issuers as shall be
reasonably requested by the Holders of Transfer Restricted Securities, or the
Initial Purchasers on behalf of such Holders, available for discussion of such
document;
(m) obtain a CUSIP number for all Exchange Securities, Private
Exchange Securities or Transfer Restricted Securities, as the case may be, not
later than the effective date of a Registration Statement, and provide the
Trustee with printed certificates for the Exchange Securities, Private Exchange
Securities or the Transfer Restricted Securities, as the case may be, in a form
eligible for deposit with the Depositary;
(n) (i) cause the Indenture to be qualified under the TIA in
connection with the registration of the Exchange Securities or Transfer
Restricted Securities, as the case may be, (ii) cooperate with the Trustee and
the Holders to effect such changes to the Indenture as may be required for the
Indenture to be so qualified in accordance with the terms of the TIA and (iii)
execute, and use their reasonable best efforts to cause the Trustee to execute,
all documents as may be required to effect such changes, and all other forms and
documents required to be filed with the SEC to enable the Indenture to be so
qualified in a timely manner;
(o) in the case of a Shelf Registration, enter into agreements
(including underwriting agreements) and take all other customary and appropriate
actions in order to expedite or facilitate the disposition of such Transfer
Restricted Securities, and in such connection whether or not an underwriting
agreement is entered into and whether or not the registration is an underwritten
registration, if requested by (x) any Initial Purchaser, in the case where an
Initial Purchaser holds Securities acquired by it as part of its initial
distribution and (y) any other Holder of Securities covered thereby:
(i) make such representations and warranties to the
Holders of such Transfer Restricted Securities and the
underwriters, if any, in form, substance and scope as are
customarily made by issuers to underwriters in similar
underwritten offerings as may be reasonably requested by them;
(ii) obtain opinions of counsel to the Issuers and
updates thereof (which counsel and opinions (in form, scope
and substance) shall be reasonably satisfactory to the
managing underwriters, if any, and the holders of a majority
in principal amount of the Transfer Restricted Securities
being sold) addressed to each selling Holder and the
underwriters, if any, covering the matters customarily covered
in opinions requested in sales of securities or underwritten
offerings and such other matters as may be reasonably
requested by such Holders and underwriters (provided that such
opinion may be subject to customary qualifications and
exceptions);
(iii) obtain "cold comfort" letters and updates
thereof from the Issuers' independent certified public
accountants and the independent certified public accountants
of London Clubs (and, if necessary, independent certified
public accountants of the Trust, any subsidiary of the
Issuers, London Clubs or the Trust or of any business acquired
by the Issuers for which financial statements are, or
14
<PAGE>
are required to be, included in the Registration Statement)
addressed to the underwriters, if any, and use reasonable
efforts to have such letter addressed to the selling Holders
of Transfer Restricted Securities (to the extent consistent
with Statement on Auditing Standards No. 72 of the American
Institute of Certified Public Accounts), such letters to be in
customary form and covering matters of the type customarily
covered in "cold comfort" letters to underwriters in
connection with similar underwritten offerings;
(iv) enter into a securities sales agreement with the
Holders and an agent of the Holders providing for, among other
things, the appointment of such agent for the selling Holders
for the purpose of soliciting purchases of Transfer Restricted
Securities, which agreement shall be in form, substance and
scope customary for similar offerings;
(v) if an underwriting agreement is entered into,
cause it to set forth indemnification provisions and
procedures substantially equivalent to the indemnification
provisions and procedures set forth in Section 4 hereof with
respect to the underwriters and all other parties to be
indemnified pursuant to said Section or, at the request of any
underwriters, in the form customarily provided to such
underwriters in similar types of transactions; and
(vi) deliver such documents and certificates as may
be reasonably requested and as are customarily delivered in
similar offerings to the Holders of a majority in principal
amount of the Transfer Restricted Securities being sold and
the managing underwriters, if any.
The obligations of the Issuers under this paragraph (o) are subject to the
Holders and underwriters providing representations, warranties and
indemnifications customarily provided by such persons under such agreements, and
the Holders entering into custody agreements and powers of attorney containing
the representations, warranties and indemnifications customarily provided by
such persons in connection with secondary offerings of securities. The above
shall be done at each closing under any underwriting or similar agreement as and
to the extent required thereunder;
(p) in the case of a Shelf Registration or if a Prospectus is
required to be delivered by any Participating Broker-Dealer in the case of an
Exchange Offer, make available for inspection by representatives of the Holders
of the Transfer Restricted Securities, any underwriters participating in any
disposition pursuant to a Shelf Registration Statement, any Participating
Broker-Dealer and any counsel or accountant retained by any of the foregoing
(collectively, the "Inspectors"), all financial and other records, pertinent
corporate documents and properties of the Issuers reasonably necessary to the
Inspectors to enable them to conduct any due diligence as is customary, and
cause the respective officers, directors, employees, and any other agents of the
Issuers to supply all information reasonably requested by the Inspectors in
connection therewith, and make such representatives of the Issuers available for
discussion of such documents as shall be reasonably requested by the Initial
Purchasers in connection
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therewith; provided that records which the Issuers
determine, in good faith, to be confidential and which the Issuers notify the
Inspectors are confidential shall not be disclosed by the Inspector unless: (i)
the disclosure of such records shall be necessary to avoid or correct a material
misstatement or omission in such Registration Statement, (ii) the release of
such records is ordered pursuant to a subpoena or other order from a court of
competent jurisdiction or is otherwise required by law or (iii) the information
contained in such records has been made generally available to the public (other
than by a breach of these provisions by the Inspectors or any of their officers,
employees or agents). Each Holder and each such Participating Broker-Dealer will
be required to agree in writing that any such confidential information shall not
be disclosed other than pursuant to clauses (i), (ii) or (iii) of the previous
sentence.
(q) (i) in the case of an Exchange Offer Registration
Statement, a reasonable time prior to the filing of any Exchange Offer
Registration Statement, any Prospectus forming a part thereof, any amendment to
any Exchange Offer Registration Statement or amendment or supplement to such
Prospectus, provide copies of such document to the Initial Purchasers and to
counsel to the Holders of Transfer Restricted Securities and to make such
changes in any such document prior to the filing thereof which the Initial
Purchasers or counsel to the Holders of Transfer Restricted Securities may
reasonably request if the Issuers, acting reasonably and in good faith, deem
such changes to be reasonable, and, except as otherwise required by applicable
law, not file any such document in a form to which the Initial Purchasers on
behalf of the Holders of Transfer Restricted Securities and counsel to the
Holders of Transfer Restricted Securities shall not have previously been advised
and furnished a copy of or to which the Initial Purchasers on behalf of the
Holders of Transfer Restricted Securities or counsel to the Holders of Transfer
Restricted Securities shall reasonably object if the Issuers, acting reasonably
and in good faith, deem such objection to be reasonable, and make the
representatives of the Issuers available for discussion of such documents as
shall be reasonably requested by the Initial Purchasers; and
(ii) in the case of a Shelf Registration, a reasonable
time prior to filing any Shelf Registration Statement, any Prospectus forming a
part thereof, any amendment to such Shelf Registration Statement or amendment or
supplement to such Prospectus, provide copies of such document to the Holders
of Transfer Restricted Securities, to the Initial Purchasers, to counsel for the
Holders and to the underwriter or underwriters of an underwritten offering of
Transfer Restricted Securities, if any, make such changes in any such document
prior to the filing thereof as the Initial Purchasers, the counsel to the
Holders or the underwriter or underwriters reasonably request if the Issuers,
acting reasonably and in good faith, deem such changes to be reasonable, and not
file any such document in a form to which the Majority Holders, the Initial
Purchasers on behalf of the Holders of Transfer Restricted Securities, counsel
for the Holders of Transfer Restricted Securities or any underwriter shall not
have previously been advised and furnished a copy of or to which the Majority
Holders, the Initial Purchasers of behalf of the Holders of Transfer Restricted
Securities, counsel to the Holders of Transfer Restricted Securities or any
underwriter shall reasonably object if the Issuers, acting reasonably and in
good faith, deem such objection to be reasonable, and make the representatives
of the Issuers available for discussion of such document as shall be reasonably
requested by the Holders of Transfer
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Restricted Securities, the Initial Purchasers on behalf of such Holders, counsel
for the Holders of Transfer Restricted Securities or any underwriter.
(r) in the case of a Shelf Registration, use their
commercially reasonable efforts to cause all Transfer Restricted Securities to
be listed on any securities exchange on which similar debt securities issued by
the Issuers are then listed if requested by the Majority Holders, or if
requested by the underwriter or underwriters of an underwritten offering of
Transfer Restricted Securities, if any;
(s) in the case of a Shelf Registration, use their reasonable
best efforts to cause the Transfer Restricted Securities to be rated by the
appropriate rating agencies, if so requested by the Majority Holders, or if
requested by the underwriter or underwriters of an underwritten offering of
Transfer Restricted Securities, if any;
(t) otherwise materially comply with all material applicable
rules and regulations of the SEC and make available to their security holders,
as soon as reasonably practicable, an earnings statement covering at least 12
months which shall satisfy the provisions of Section 11(a) of the 1933 Act and
Rule 158 thereunder;
(u) cooperate and assist in any filings required to be made
with the NASD and, in the case of a Shelf Registration, in the performance of
any due diligence investigation by any underwriter and its counsel (including
any "qualified independent underwriter" that is required to be retained in
accordance with the rules and regulations of the NASD); and
(v) upon consummation of an Exchange Offer or a Private
Exchange, obtain any customary opinion of counsel to the Issuers addressed to
the Trustee for the benefit of all Holders of Transfer Restricted Securities
participating in the Exchange Offer or Private Exchange, and which includes an
opinion that the issuance of the Exchange Securities or the Private Exchange
Securities, as applicable, has been duly authorized by the Issuers and, when the
Exchange Securities or the Private Exchange Securities have been duly executed,
authenticated and issued in accordance with the Indenture as contemplated by
this Agreement, shall constitute legal, valid and binding obligations of the
Issuers, enforceable against the Issuers in accordance with its respective terms
(with customary exceptions, qualifications and assumptions).
The Issuers may require each seller of Transfer Restricted
Securities as to which a registration is being effected to furnish to the
Issuers such information regarding such seller as may be required by the staff
of the SEC to be included in a Registration Statement and the Issuers may
exclude from such registration the Transfer Restricted Securities of any seller
who fails to furnish such information within a reasonable time (which amount of
reasonable time shall be reasonably determined by the Issuers); provided, that
the Issuers shall provide written notice to any such seller of any such request.
In the case of a Shelf Registration Statement, each Holder
agrees that, upon receipt of any notice from the Issuers of the happening of any
event or the discovery of any facts, each of the kind described in Section
3(e)(v) hereof, such Holder will forthwith discontinue disposition of Transfer
Restricted Securities pursuant to a Registration Statement until such
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Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 3(k) hereof, and, if so directed by the Issuers, such
Holder will deliver to the Issuers (at its expense) all copies in such Holder's
possession, other than permanent file copies then in such Holder's possession,
of the Prospectus covering such Transfer Restricted Securities current at the
time of receipt of such notice.
In the event that the Issuers fail to use their reasonable
best efforts to effect the Exchange Offer or file any Shelf Registration
Statement and maintain the effectiveness of any Shelf Registration Statement as
provided herein, the Issuers shall not without the consent of the Majority
Holders file any Registration Statement with respect to any securities (within
the meaning of Section 2(1) of the 1933 Act) of the Issuers other than Transfer
Restricted Securities.
If any of the Transfer Restricted Securities covered by any
Shelf Registration Statement are to be sold in an underwritten offering, the
underwriter or underwriters and manager or managers that will manage such
offering will be selected by the Majority Holders of such Transfer Restricted
Securities included in such offering and shall be acceptable to the Issuers. No
Holder of Transfer Restricted Securities may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Transfer Restricted Securities on the basis provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements and (b) completes and executes all questionnaires, powers of
attorney, custody agreements, indemnities, underwriting agreements and other
documents required under the terms of such underwriting arrangements.
4. Indemnification; Contribution
(a) The Issuers agree to indemnify and hold harmless each
Initial Purchaser, each Holder, each Participating Broker-Dealer, each Person
who participates as an underwriter (any such Person being an "Underwriter") and
each Person, if any, who controls any Holder or Underwriter within the meaning
of Section 15 of the 1933 Act or Section 15 of the 1934 Act as follows:
(i) against any and all loss, liability, claim,
damage and expense whatsoever, as incurred, arising out of any untrue
statement or alleged untrue statement of a material fact contained in
any Registration Statement (or any amendment or supplement thereto)
pursuant to which Exchange Securities or Transfer Restricted Securities
were registered under the 1933 Act, including all documents
incorporated therein by reference, or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under
which they were made, not misleading, or arising out of any untrue
statement or alleged untrue statement of a material fact contained in
any Prospectus (or any amendment or supplement thereto) or the omission
or alleged omission therefrom of a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading;
(ii) against any and all loss, liability, claim,
damage and expense whatsoever, as incurred, to the extent of the
aggregate amount paid in settlement of any
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litigation, or any investigation or proceeding by any governmental
agency or body, commenced or threatened, or of any claim whatsoever
based upon any such untrue statement or omission, or any such alleged
untrue statement or omission; provided that (subject to Section 4(d)
below) any such settlement is effected with the written consent of the
Issuers; and
(iii) against any and all expense whatsoever, as
incurred (including the fees and disbursements of counsel chosen by any
indemnified party), reasonably incurred in investigating, preparing or
defending against any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, to the extent that any such
expense is not paid under subparagraph (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Issuers by the
Holder, Initial Purchaser, Participating Broker-Dealer or Underwriter expressly
for use in a Registration Statement (or any amendment thereto) or any Prospectus
(or any amendment or supplement thereto). The foregoing indemnity with respect
to any untrue statement contained in or any omission from any preliminary
Prospectus shall not inure to the benefit of any Holder, Initial Purchaser,
Participating Broker-Dealer or Underwriter (or any person controlling any such
person) from whom the person asserting such loss, liability, claim, damage or
expense purchased Securities that are the subject thereof if (i) the untrue
statement or omission contained in such preliminary Prospectus (excluding
documents incorporated by reference) was corrected; (ii) such person was not
sent or given a copy of the final Prospectus (excluding documents incorporated
by reference) which corrected the untrue statement or omission at or prior to
the written confirmation of the sale of such Securities to such person; and
(iii) the Issuers satisfied their obligation pursuant to Section 3 of this
Agreement to provide a sufficient number of copies of the final Prospectus to
the Holder, Initial Purchaser, Participating Broker-Dealer or Underwriter.
(b) Each Holder, Initial Purchaser, Participating
Broker-Dealer and Underwriter severally, but not jointly, agrees to indemnify
and hold harmless the Issuers, the Initial Purchasers, the Participating
Broker-Dealers, each Underwriter and the other selling Holders, and each of
their respective directors and officers, and each Person, if any, who controls
the Issuers, the Participating Broker-Dealers, the Initial Purchasers, any
Underwriter or any other selling Holder within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act, against any and all loss, liability,
claim, damage and expense described in the indemnity contained in Section 4(a)
hereof, as incurred, but only with respect to untrue statements or omissions, or
alleged untrue statements or omissions, made in the Registration Statement (or
any amendment thereto) or any Prospectus included therein (or any amendment or
supplement thereto) in reliance upon and in conformity with written information
with respect to such Holder, Initial Purchaser, Participating Broker-Dealer or
Underwriter furnished to the Issuers by such Holder, Initial Purchaser,
Participating Broker-Dealer or Underwriter expressly for use in the
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Registration Statement (or any amendment thereto) or such Prospectus (or any
amendment or supplement thereto); provided, however, that no such Holder,
Initial Purchaser, Participating Broker-Dealer or Underwriter shall be liable
for any claims hereunder in excess of the amount of net proceeds received by
such Holder, Initial Purchaser, Participating Broker-Dealer or Underwriter from
the sale of Transfer Restricted Securities pursuant to such Registration
Statement.
(c) Each indemnified party shall give notice as promptly as
reasonably practicable to each indemnifying party of any action or proceeding
commenced against it in respect of which indemnity may be sought hereunder, but
failure so to notify an indemnifying party shall not relieve such indemnifying
party from any liability hereunder to the extent it is not materially prejudiced
as a result thereof and in any event shall not relieve it from any liability
which it may have otherwise than on account of this indemnity agreement. An
indemnifying party may participate at its own expense in the defense of such
action; provided, however, that counsel to the indemnifying party shall not
(except with the consent of the indemnified party) also be counsel to the
indemnified party. In no event shall the indemnifying party or parties be liable
for the fees and expenses of more than one counsel (in addition to any local
counsel) separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances.
No indemnifying party shall, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which indemnification or contribution could be sought
under this Section 4 (whether or not the indemnified parties are actual or
potential parties thereto), unless such settlement, compromise or consent (i)
includes an unconditional release of each indemnified party from all liability
arising out of such litigation, investigation, proceeding or claim and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party.
(d) If at any time an indemnified party shall have requested
an indemnifying party to reimburse the indemnified party for fees and expenses
of counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated by Section 4(a)(ii) effected without its
written consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement at
least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement.
Notwithstanding the immediately preceding sentence, if at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, an indemnifying party shall
not be liable for any settlement of the nature contemplated by Section 4(a)(ii)
effected without its consent if such indemnifying party (i) reimburses such
indemnified party in accordance with such request to the extent that it
considers such request to be reasonable and (ii) provides written notice to the
indemnified party substantiating the unpaid balance as unreasonable, in each
case prior to the date of such settlement.
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(e) (i) If the indemnification provided for in this Section
4(a) is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, in such proportion as is
appropriate to reflect the relative fault of the Issuers on the one hand and the
Holders and the Initial Purchasers on the other hand in connection with the
statements or omissions which resulted in such losses, liabilities, claims,
damages or expenses, as well as any other relevant equitable considerations.
(ii) If the indemnification provided for in this Section 4(b)
is for any reason unavailable to or insufficient to hold harmless an indemnified
party in respect of any losses, liabilities, claims, damages or expenses
referred to therein, then each indemnifying party shall contribute to the
aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, in such proportion as is
appropriate to reflect the relative fault of the such indemnifying party on the
one hand and each of the other Holders, Participating Broker-Dealers,
Underwriters and the Initial Purchasers and the Issuers on the other hand in
connection with the statements or omissions which resulted in such losses,
liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.
The relative fault of the Issuers, the Holders, Participating
Broker-Dealers, Underwriters and the Initial Purchasers, as applicable, shall be
determined by reference to, among other things, whether any such untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact relates to information supplied by the Issuers, the
Holders, Participating Broker-Dealers, Underwriters and the Initial Purchasers
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Issuers, the Holders and the Initial Purchasers agree that
it would not be just and equitable if contribution pursuant to this Section 4
were determined by pro rata allocation (even if the Initial Purchasers were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to above in
this Section 4. The aggregate amount of losses, liabilities, claims, damages and
expenses incurred by an indemnified party and referred to above in this Section
4 shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 4, no Initial
Purchaser shall be required to contribute any amount in excess of the amount by
which the total price at which the Securities sold by it were offered exceeds
the amount of any damages which such initial Purchaser has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission.
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No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 4, each Person, if any, who
controls an Initial Purchaser or Holder within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act shall have the same rights to
contribution as such Initial Purchaser or Holder, and each manager or director
of the Issuers, and each Person, if any, who controls the Issuers within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have
the same rights to contribution as the Issuers. The Initial Purchasers'
respective obligations to contribute pursuant to this Section 7 are several in
proportion to the principal amount of Securities set forth opposite their
respective names in Schedule A to the Purchase Agreement and not joint.
5. Miscellaneous
5.1. Rule 144 and Rule 144A. For so long as the Issuers are
subject to the reporting requirements of Section 13 or 15 of the 1934 Act, the
Issuers covenant that they will file the reports required to be filed by them
under the 1933 Act and Section 13(a) or l5-(d) of the 1934 Act and the rules and
regulations adopted by the SEC thereunder. If the Issuers cease to be so
required to file such reports, the Issuers covenant that they will upon the
request of any Holder of Transfer Restricted Securities (a) make publicly
available such information as is necessary to permit sales pursuant to Rule 144
under the 1933 Act, (b) deliver such information to a prospective purchaser as
is necessary to permit sales pursuant to Rule 144A under the 1933 Act and they
will take such further action as any Holder of Transfer Restricted Securities
may reasonably request, and (c) take such further action that is reasonable in
the circumstances, in each case, to the extent required from time to time to
enable such Holder to sell its Transfer Restricted Securities without
registration under the 1933 Act within the limitation of the exemptions provided
by (i) Rule 144 under the 1933 Act, as such Rule may be amended from time to
time, (ii) Rule 144A under the 1933 Act, as such Rule may be amended from time
to time, or (iii) any similar rules or regulations hereafter adopted by the SEC.
Upon the request of any Holder of Transfer Restricted Securities, the Issuers
will deliver to such Holder a written statement as to whether they have complied
with such requirements.
5.2. No Inconsistent Agreements. The Issuers have not entered
into and the Issuers will not after the date of this Agreement enter into any
agreement which is inconsistent with the rights granted to the Holders of
Transfer Restricted Securities in this Agreement or otherwise conflicts with the
provisions hereof. The rights granted to the Holders hereunder do not and will
not for the term of this Agreement in any way conflict with the rights granted
to the holders of the Issuers' other issued and outstanding securities under any
such agreements.
5.3. Participation in Underwritten Registrations. No Holder
may participate in any underwritten registration hereunder unless such Holder
(a) agrees to sell such Holder's Transfer Restricted Securities on the basis
provided in any underwriting arrangements approved by the Persons entitled
hereunder to approve such arrangements and (b) completes and executes all
questionairres, powers of attorney, indemnities, underwriting agreements,
lock-up letters,
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custody agreements and other documents required under the terms
of such underwriting agreements.
5.4. Amendments and Waivers. The provisions of this Agreement
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Issuers have obtained the written consent of Holders
of at least a majority in aggregate principal amount of the outstanding Transfer
Restricted Securities affected by such amendment, modification, supplement,
waiver or departure.
5.5. Notices. All notices and other communications provided
for or permitted hereunder shall be made in writing by hand delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery (a) if to a Holder, at the most current address given by such Holder to
the Issuers by means of a notice given in accordance with the provisions of this
Section 5.4, which address initially is the address set forth in the Purchase
Agreement with respect to the Initial Purchasers, with a copy to Latham &
Watkins, 633 West Fifth Street, Suite 4000, Los Angeles, California 90071-2007,
Attention: Pamela B. Kelly, Esq.; and (b) if to the Issuers, initially at the
Issuers' addresses set forth in the Purchase Agreement, and thereafter at such
other address of which notice is given in accordance with the provisions of this
Section 5.4, with a copy to Skadden, Arps, Slate, Meagher & Flom L.L.P. &
Affiliates, 919 Third Avenue, New York, New York, Attention: Wallace Schwartz,
Esq.
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; two
business days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied; and
on the next business day if timely delivered to an air courier guaranteeing
overnight delivery.
Copies of all such notices, demands, or other communications
shall be concurrently delivered by the person giving the same to the Trustee
under the Indenture, at the address specified in such Indenture.
5.6. Successor and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of each
of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders; provided, however, that nothing herein
shall be deemed to permit any assignment, transfer or other disposition of
Transfer Restricted Securities in violation of the terms of the Purchase
Agreement or the Indenture. If any transferee of any Holder shall acquire
Transfer Restricted Securities, in any manner, whether by operation of law or
otherwise, such Transfer Restricted Securities shall be held subject to all of
the terms of this Agreement, and by taking and holding such Transfer Restricted
Securities such person shall be conclusively deemed to have agreed to be bound
by and to perform all of the terms and provisions of this Agreement, including
the restrictions on resale set forth in this Agreement and, if applicable, the
Purchase Agreement, and such person shall be entitled to receive the benefits
hereof.
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5.7. Third Party Beneficiaries. The Initial Purchasers (even
if the Initial Purchasers are not Holders of Transfer Restricted Securities)
shall be third party beneficiaries to the agreements made hereunder between the
Issuers, on the one hand, and the Holders, on the other hand, and shall have the
right to enforce such agreements directly to the extent they deem such
enforcement necessary or advisable to protect their rights or the rights of
Holders hereunder. Each Holder of Transfer Restricted Securities shall be a
third party beneficiary to the agreements made hereunder between the Issuers, on
the one hand, and the Initial Purchasers, on the other hand, and shall have the
right to enforce such agreements directly to the extent it deems such
enforcement necessary or advisable to protect its rights hereunder.
5.8. Specific Enforcement. Without limiting the remedies
available to the Initial Purchasers and the Holders, the Issuers acknowledge
that any failure by the Issuers to comply with their obligations under Sections
2.1 through 2.4 hereof may result in material irreparable injury to the Initial
Purchasers or the Holders for which monetary damages would not be adequate, that
it would not be possible to measure damages for such injuries precisely and
that, in the event of any such failure, the Initial Purchasers or any Holder may
obtain such relief as may be required to specifically enforce the Issuers'
obligations under Sections 2.1 through 2.4 hereof.
5.9. Restriction on Resales. Until the expiration of two years
after the original issuance of the Securities the Issuers will not, and will
cause their "affiliates" (as such term is defined in Rule 144(a)(1) under the
1933 Act) not to, resell any Securities which are "restricted securities" (as
such term is defined under Rule 144(a)(3) under the 1933 Act) that have been
reacquired by any of them and shall immediately upon any purchase of any such
Securities submit such Securities to the Trustee for cancellation.
5.10. Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
5.11. Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
5.12. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO
THE PRINCIPLES OF CONFLICT OF LAWS THEREOF.
5.13. Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
ALADDIN GAMING HOLDINGS, LLC
By: /s/ Richard Goeglein
-------------------------------
Name: Richard Goeglein
Title: Chief Executive Officer/President
ALADDIN CAPITAL CORP.
By: /s/ Richard Goeglein
-------------------------------
Name: Richard Goeglein
Title: Chief Executive Officer/President
Confirmed and accepted as
of the date first above
written:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
CREDIT SUISSE FIRST BOSTON CORPORATION
CIBC OPPENHEIMER CORP.
SCOTIA CAPITAL MARKETS (USA) INC.
BY: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: /s/ Gregory Margolies
----------------------------
Name: Gregory Margolies
Title: Authorized Signatory
<PAGE>
SUBSIDIARY GUARANTY
THIS SUBSIDIARY GUARANTY, dated as of February 26, 1998 (this
"GUARANTY") and granted by each of the guarantors listed on the signature pages
hereof (the "GUARANTORS"), in favor of State Street Bank and Trust Company (the
"Discount Note Indenture Trustee"), for the benefit of the Noteholders (as
hereinafter defined) and their respective successors, transferees and assigns.
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of even date
herewith (together with all amendments and other modifications, if any, from
time to time thereafter made thereto, the "CREDIT AGREEMENT"), among Aladdin
Gaming, LLC, a Nevada limited-liability company (the "BORROWER"), the various
lending institutions (individually a "LENDER" and collectively the "LENDERS") as
are, or may from time to time become, parties thereto and The Bank of Nova
Scotia ("Scotiabank") as Administrative Agent for the Lenders, Merrill Lynch
Capital Corporation ("Merrill Lynch") as the Syndication Agent for the Lenders,
CIBC Oppenheimer Corp., as the Documentation Agent for the Lenders, and
Scotiabank and Merrill as Arrangers, the Lenders have extended Commitments to
make Loans to the Borrower and to issue Letters of Credit for the account of the
Borrower; and
WHEREAS, the Discount Note Indenture Trustee, Aladdin Gaming Holdings, LLC
and Aladdin Capital Corp. have entered into an indenture (the "INDENTURE") dated
as of even date herewith; and
WHEREAS, certain 131/2 % Senior Discount Notes due 2010 (the "Discount
Notes") will be issued pursuant to the Indenture; and
WHEREAS, as Aladdin Bazaar Holdings, LLC, a Nevada limited-liability
company ("ABH"), London Clubs International PLC, a company registered in England
and Wales under company no. 2862479 ("LCI") and the Trust under Article Sixth
U/W/O Sigmund Sommer (the "TRUST"; the Trust, ABH and LCI are collectively
called the "NOTEHOLDER COMPLETION GUARANTORS") have agreed to provide certain
undertakings for the benefit of the Discount Note Indenture Trustee pursuant to
a Guaranty of Performance and Completion, dated as of even date herewith
(together with all amendments and other modifications, if any, from time to time
thereafter made thereto, the "NOTEHOLDER COMPLETION GUARANTY"); and
<PAGE>
WHEREAS, as the Guarantors are required to execute and deliver this
Guaranty of the obligations of LCI under the Noteholder Completion Guaranty; and
WHEREAS, the Guarantors have duly authorized the execution, delivery
and performance of this Guaranty; and
WHEREAS, it is in the best interest of the Guarantors to execute this
Guaranty inasmuch as the Guarantors will derive substantial direct and indirect
benefits from the transactions contemplated hereby.
NOW THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, the Guarantors agree, in favor of the Discount
Note Indenture Trustee for the benefit of the Noteholders, as follows:
1. DEFINITIONS. Capitalized terms used herein but not otherwise defined shall
have the meanings assigned thereto in Appendix A attached hereto. As a used
herein, the following terms have the meanings set forth below.
"MATERIAL ADVERSE EFFECT" means, as the context may require, (i) a
materially adverse effect on the ability of a Guarantor to perform in all
material respects its obligations hereunder or (ii) irrespective of the
effect on such Guarantor or if the ability of any Guarantor to perform any
obligation is not at issue, a material impairment of the validity or
enforceability of, or a material impairment of the rights, remedies or
benefits available to the Discount Note Indenture Trustee under this
Guaranty.
"NOTEHOLDER" means the duly registered holder of a Discount Note.
2. GUARANTY.
2A. OBLIGATIONS GUARANTEED. In consideration of the Noteholders entering
into and performing their obligations under or in connection with the Indenture
(a copy of which each Guarantor acknowledges receiving), the Guarantors hereby
jointly and severally guarantee, irrevocably, absolutely and unconditionally,
the due, full and prompt payment in the manner specified in the Noteholder
Completion Guaranty of any and all obligations, indebtedness or liabilities
(including fees and out of pocket expenses) now or hereafter due and payable by
LCI under the Noteholder Completion Guaranty, any and all other obligations,
indebtedness or liabilities now or hereafter incurred by LCI pursuant to any
waiver, modification,
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amendment or change of any provision of the Noteholder Completion Guaranty and
all reasonable attorneys' fees, costs and expenses of collection incurred in
connection therewith and in connection with the enforcement of this Guaranty,
including without limitation fees, costs and expenses incurred in any insolvency
or bankruptcy case or proceeding and (b) the due, prompt and faithful
performance of, and compliance with, all other undertakings of LCI contained in
the Noteholder Completion Guaranty.
2B. CHARACTER OF GUARANTY. This Guaranty constitutes a primary obligation of
each Guarantor, is a guaranty of payment and not a guaranty of collection and,
accordingly, the Guarantors waive any right to require that any action be
brought against LCI or any other Person or to require that resort be had to any
direct or indirect security. The Discount Note Indenture Trustee may, at its
option, proceed against the Guarantors, or any of them, in the first instance to
collect money or otherwise enforce the Noteholder Completion Guaranty, the
payment and performance of which is guaranteed hereby, whether or not there
exists an event of default, without first proceeding against LCI or any other
Person, and without first resorting to any direct or indirect security or to any
other remedies, including, by way of example but not of limitation, any right of
set-off at the same or at different times, as the Discount Note Indenture
Trustee may deem advisable, and the liability of the Guarantors hereunder shall
in no way be affected or impaired by any acceptance by the Discount Note
Indenture Trustee of any direct or indirect security for, or other guarantees
of, any indebtedness, liability or obligation of LCI, or by any failure, delay,
neglect or omission by the Discount Note Indenture Trustee to realize upon or
protect any such indebtedness, liability or obligation of LCI, or by any
failure, delay, neglect or admission by the Discount Note Indenture Trustee to
realize upon or protect any such indebtedness, liability or obligation, or any
notes or other instruments evidencing the same or any direct or indirect
security therefore or by any approval, consent, waiver, or other action taken,
or omitted to be taken, by the Discount Note Indenture Trustee. In the event
that the Discount Note Indenture Trustee is required to repay or return any
amount previously paid to it, the payment of which amount is guaranteed under
the provisions hereof, then, immediately upon such repayment or return, this
Guaranty shall be reinstated with respect to such amount, in full force and
effect, as though such payment to such Person had not been made.
2C. PARTICULAR AGREEMENTS BY THE GUARANTORS. The Guarantors hereby agree that
the Discount Note Indenture Trustee from time to time, before or after any
default by LCI, with or without any further notice to or assent from the
Guarantors
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may, without in any manner affecting the liability of the Guarantors, to the
full extent permitted by law and upon such terms and conditions as the Discount
Note Indenture Trustee may agree to: extend in whole or in part (by renewal or
otherwise), modify, change, compromise or release any indebtedness, liability or
obligation of LCI or any other Person under the Noteholder Completion Guaranty
or of any other Person secondarily or otherwise liable for any indebtedness,
liability or obligation of LCI or any other such Person, or waive any default
with respect thereto, or waive, modify, amend or change any provision of the
Noteholder Completion Guaranty; sell, release, surrender, modify, impair,
exchange, substitute or extend the duration or the time for the performance or
payment of any and all property and rights of any nature and from whomsoever
received, held by, or on behalf of, the Discount Note Indenture Trustee as
direct or indirect security for the payment or performance of any indebtedness,
liability or obligation of LCI, or of any other Person primarily or secondarily
or otherwise liable for any indebtedness, liability or obligation under the
Noteholder Completion Guaranty; and settle, adjust or compromise any claim of
the Discount Note Indenture Trustee against LCI or any other Person primarily or
secondarily or otherwise liable for any indebtedness, liability of obligation
under the Noteholder Completion Guaranty. The Guarantors hereby ratify and
confirm any such extension, renewal, change, release, waiver, surrender,
exchange, modification, amendment, impairment, substitution, settlement,
adjustment or compromise and agree that the same shall be binding upon the
Guarantors, and hereby waive any and all defenses, counterclaims or offsets
which the Guarantors might or could have by reason thereof, it being understood
that the Guarantors shall at all times be bound by this Guaranty and remain
liable to the Discount Note Indenture Trustee hereunder to the extent that any
obligation of LCI to the Discount Note Indenture Trustee under the Noteholder
Completion Guaranty, or any obligation of the Guarantors to the Discount Note
Indenture Trustee hereunder, shall remain outstanding.
2D. WAIVER BY GUARANTORS. The Guarantors hereby unconditionally waive:
notice of acceptance of this Guaranty by the Discount Note Indenture Trustee or
of the creation, renewal or accrual of any liability of LCI, present or future,
of the reliance of the Discount Note Indenture Trustee upon this Guaranty (it
being understood that every indebtedness, liability and obligation of LCI to the
Discount Note Indenture Trustee created pursuant to the Noteholder Completion
Guaranty shall conclusively be presumed to have been created, contracted or
incurred in reliance upon the execution of this Guaranty); demand of payment by
the Discount Note Indenture Trustee from LCI or any other Person indebted in any
manner on or for any of the indebtedness, liabilities or obligations hereby
guaranteed; presentment for payment by the Discount Note Indenture Trustee of
any
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instrument of LCI or any other Person, protest thereof, and notice of its
dishonor to any party hereto and to the Guarantors; notice of any breach or
default by LCI with respect to any of its obligations under the Noteholder
Completion Guaranty, or any other notice that may be required, by statute, rule
of law or otherwise, to preserve the rights of the Discount Note Indenture
Trustee against any of the Guarantors; any right to the enforcement, assertion,
exercise or exhaustion by the Discount Note Indenture Trustee of any right,
power, privilege or remedy conferred in the Noteholder Completion Guaranty or
otherwise; any requirement of diligence on the part of the Discount Note
Indenture Trustee; any requirement to mitigate damages resulting from any
default under the Noteholder Completion Guaranty; any notice of any transfer,
exchange or other disposition by the Discount Note Indenture Trustee of any
right, title or interest in or to any Discount Note; any release of any
Guarantor from its obligations hereunder resulting from any loss by it of its
rights of subrogation hereunder and any other circumstance whatsoever which
might otherwise constitute a legal or equitable discharge, release or defense of
a guarantor or surety or which might otherwise limit recourse against any
Guarantor.
2E. EXPENSES. The Guarantors agree to pay and save the Discount Note Indenture
Trustee harmless against any liability for the payment of all reasonable
out-of-pocket expenses arising in connection with the transactions contemplated
hereby, including all attorneys' fees, costs and expenses of collection
incurred in connection therewith and in evaluation in connection with any
controversy or potential controversy and in enforcing its rights and remedies
under this Guaranty, any registration tax incurred in connection with the
registration or filing of the Guaranty or any judgment with respect thereto, and
all document production and duplication charges and the fees and expenses of any
special counsel engaged by the Discount Note Indenture Trustee in connection
with any subsequent proposed modification of, or proposed waiver or consent
under, this Guaranty, whether or not such proposed modification shall be
effected, or proposed waiver or consent granted.
3. CHARACTER OF OBLIGATIONS OF THE GUARANTORS.
3A. IRREVOCABILITY. The obligations of the Guarantors under this Guaranty
are primary, irrevocable, absolute, unconditional and continuing under any and
all circumstances and no such obligation shall be to any extent or in any way
discharged, impaired or otherwise affected, except by performance in full
thereof.
3B NO REDUCTION OR DEFENSE. The obligations of the Guarantors under this
Guaranty, and the rights of the Discount Note Indenture Trustee to enforce such
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obligations by any proceedings, whether by action at law, suit in equity or
otherwise, shall not be subject to any reduction, limitation, impairment or
termination, whether by reason of any claim of any character whatsoever or
otherwise, including, without limitation, claims of waiver, release, surrender,
alteration or compromise, and shall not be subject to any defense, deferment,
deduction, diminution, abatement, suspension, set-off, counterclaim, recoupment
or termination whatsoever.
Without limiting the generality of the foregoing, the obligations of the
Guarantors shall not be discharged, impaired, released or in any way affected
by:
(a) any default, failure or delay, wilful or otherwise, in the performance
of any obligations by LCI or any other Person;
(b) any creditors' rights, bankruptcy, receivership or other insolvency
proceeding of LCI or the Guarantors or any merger, consolidation,
reorganization, dissolution, liquidation or winding up or change in corporate
constitution or corporate identity or loss of corporate identity of LCI or the
Guarantors;
(c) impossibility or illegality of performance on the part of LCI under
the Noteholder Completion Guaranty;
(d) the invalidity, irregularity or unenforceability of the Noteholder
Completion Guaranty or any documents referred to therein or herein;
(e) in respect of LCI or the Guarantors, any change of circumstances,
whether or not foreseen or foreseeable, whether or not imputable to LCI or the
Guarantors, or other impossibility of performance through fire, explosion,
accident, labor disturbance, floods, droughts, embargoes, wars (whether or not
declared), civil commotions, acts of God or the public enemy, delays or failure
of suppliers or carriers, inability to obtain materials or any other causes
affecting performance, or any other force majeure, whether or not beyond the
control of LCI or the Guarantors and whether or not of the kind hereinbefore
specified;
(f) any attachment, claim, demand, charge, lien, order, process,
encumbrance or any other happening or event or reason, similar or dissimilar to
the foregoing, or any withholding or diminution at the source, by reason of any
taxes, assessments, expenses, indebtedness, obligations or liabilities of any
character, foreseen or unforeseen, and whether or not valid, incurred by or
against any Person or any claims, demands, charges, liens, or encumbrances of
any nature, foreseen or unfore-
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seen, incurred by any Person, or against any sums payable under this Guaranty,
so that such sums would be rendered inadequate or would be unavailable to make
the payments herein provided;
(g) any order, judgment, decree, ruling or regulation (whether or not
valid) of any court of any nation or of any political subdivision thereof or any
body, agency, department, official or administrative or regulatory agency of any
nation or any political subdivision thereof or any other action, happening,
event or reason whatsoever which shall delay, interfere with, hinder or prevent,
or in any way adversely affect, the performance by LCI of any of its respective
obligations under the Noteholders Completion Guaranty;
(h) any amendment of or change in, or termination or waiver of, any of the
Noteholders Completion Guaranty;
(i) any waiver of the payment, performance or observance of any of the
obligations, conditions, covenants or agreements contained in the Noteholder
Completion Guaranty, or any other waiver, consent, extension, indulgence,
compromise, settlement, release or other action or inaction under or in respect
of the Noteholder Completion Guaranty;
(j) any failure, omission or delay on the part of the Discount Note
Indenture Trustee to enforce, assert or exercise any right, power or remedy
conferred on it in this Guaranty;
(k) any merger or consolidation of LCI or any Guarantor into or with any
other corporation, or any sale, lease or transfer of any of the assets of LCI or
any Guarantor to any other Person;
(l) any change in the ownership of any shares of capital stock of LCI, or
any change in the corporate relationship between LCI and any Guarantor, or any
termination of such relationship; or
(m) any other occurrence, circumstance, happening or event whatsoever,
whether similar or dissimilar to the foregoing, whether foreseen or unforeseen,
and any other circumstance which might otherwise constitute a legal or equitable
defense or discharge of the liabilities of a Guarantor or surety or which might
otherwise limit recourse against any Guarantor.
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3C. FULL RECOURSE OBLIGATIONS. Subject to the provisions of Section 3E,
the obligations of each Guarantor set forth herein constitute full recourse
obligations of such Guarantor, enforceable against it to the full extent of all
its assets and properties.
3D. EFFECT OF BANKRUPTCY PROCEEDINGS, ETC.
(a) This Guaranty shall continue to be effective or be automatically
reinstated, as the case may be, if at any time any payment made by any Person on
account of any of the sums due under the Noteholder Completion Guaranty pursuant
to the terms thereof is rescinded or must otherwise be restored or returned by
the Discount Note Indenture Trustee upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of LCI or any other Person, or upon
or as a result of the appointment of a custodian, receiver, trustee or other
officer with similar powers with respect to LCI or other Person or any
substantial part of its property, or otherwise, all as though such payment had
not been made.
(b) If an even permitting the acceleration of the maturity of the
obligations of LCI under the Noteholder Completion Guaranty shall at any time
have occurred and be continuing, and such acceleration shall at such time be
prevented by reason of the pendency against LCI or any other Person of any case
or proceeding contemplated by the preceding paragraph (a) then, for the purpose
of defining the obligations of the Guarantors under this Guaranty, the maturity
of obligations of LCI under the Noteholder Completion Guaranty shall be deemed
to have been accelerated with the same effect as if an acceleration had occurred
in accordance with the terms of the Noteholder Completion Guaranty and the
Guarantors shall forthwith pay all amounts due under the Noteholder Completion
Guaranty upon acceleration of such obligations and any other amounts guaranteed
hereunder without further notice or demand.
3E. MAXIMUM LIABILITY. Notwithstanding any other provision hereof, the
liability of any Guarantor hereunder shall not exceed the greater of 95% of the
Adjusted Net Worth (as defined below) of such Guarantor as of the date hereof
and 95% of the Adjusted Net Worth of such Guarantor on the date on which
payment under this Guaranty is sought. As used herein, the term "Adjusted Net
Worth" of a Guarantor means the excess of (i) the amount of the fair saleable
value of the assets of such Guarantor determined in accordance with applicable
laws governing determinations of solvency over (ii) the amount of all
liabilities of such Guarantor, including
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contingent liabilities (but excluding contingent liabilities of such Guarantor
as a Guarantor hereunder), determined in accordance with such laws.
3F. CONTRIBUTION AMONG GUARANTORS. To the extent that any Guarantor has
paid more than is proportionate share of the guaranteed obligations paid by all
Guarantors, such Guarantor shall be entitled to seek and receive contribution
from any other Guarantor to the extent that such other Guarantor has paid less
than its proportionate share of the guaranteed obligations so paid. This
contribution obligation may not be enforced against any Guarantor until all the
obligations guaranteed hereby have been paid in full and such Guarantor's
obligations with respect thereto, together with all of its other obligations
hereunder, may not exceed its maximum liability under Section 3E.
4. REPRESENTATIONS AND WARRANTIES. Each Guarantor represents and warrants to
the Discount Note Indenture Trustee that:
4A. ORGANIZATION. It is duly organized and validly existing under the
laws of the jurisdiction in which it is incorporated and has the corporate power
to own and operate its property and to carry on its business as now being
conducted and is qualified to do business in each jurisdiction in which it is
necessary, except where the failure to so qualify would not individually or in
the aggregate reasonably be expected to have a Material Adverse Effect or a
material adverse effect on the ability of such Guarantor to perform its
obligations hereunder. Each Guarantor possesses all necessary licenses,
permits, consents and similar official authorizations which it requires for its
business except where the absence thereof would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect or a
material adverse effect on the ability of such Guarantor to perform its
obligations hereunder.
4B. POWERS AND AUTHORITY. It has the corporate power and authority to
enter into and perform, and has taken all necessary action to duly authorize the
entry into, performance and delivery of, this Guaranty and the transactions
contemplated hereby.
4C. ACTIONS PENDING.
(a) There is no action, suit, investigation or proceeding pending or, to
the knowledge of such Guarantor, threatened against or affecting such Guarantor
or any properties or rights of such Guarantor in or before any court, arbitrator
or administra-
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tor or Governmental Instrumentality which, if adversely determined, would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect or a material adverse effect on the ability of such Guarantor to
perform its obligations hereunder.
(b) Such Guarantor is not in default under any term of any agreement or
instrument to which it is a party or by which it or any of its properties are
bound, or any order, judgment, decree or ruling of any court, arbitrator,
administrator or Governmental Instrumentality, or in violation of any applicable
law, ordinance, sale or regulation (including without limitation Environmental
Laws) of any Governmental Instrumentality, which default or violation,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect or a material adverse effect on the ability of such
Guarantor to perform its obligations hereunder.
4D. COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC. The execution, delivery
and performance by the Guarantor of this Guaranty will not contravene, result
in any breach of, or constitute a default under, or result in the creation of
any Lien in respect of any property of the Guarantor under, any indenture,
mortgage, deed of trust, loan, purchase or credit agreement, lease, memorandum
or articles of association, any other material agreement or instrument to which
the Guarantor is bound or by which the Guarantor or any of its properties may be
bound or affected conflict with or result in a breach of any of the terms,
conditions or provisions of any order, judgment, decree, or ruling of any court,
arbitrator or Governmental Instrumentality applicable to the Guarantor or
violate any provision of any statute or other rule or regulation of any
Governmental Instrumentality applicable to the Guarantor.
4E. GOVERNMENTAL CONSENT. Neither the nature of the Guarantor nor any of
its businesses or properties, nor any relationship between the Guarantor or any
of its Subsidiaries or any other Person, nor any circumstance in connection with
the entry into, performance, validity and enforceability of the Guaranty and the
transactions contemplated hereby is such as to require any authorization,
consent, approval, exemption or other action by or notice to or filing,
registration or declaration with, any court or administrative body or other
Governmental Instrumentality in connection with the execution and delivery of
this Guaranty, or fulfillment of or compliance with the terms and provisions
hereof.
4F. LEGAL VALIDITY. This Guaranty constitutes the legal, valid and
binding obligation of each Guarantor, enforceable against each Guarantor in
accordance with
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its respective terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
5. ENTIRE AGREEMENT; WAIVERS. Each Guarantor hereby agrees that this
instrument contains the entire agreement between the parties and that there is
and can be no other oral or written agreement or understanding whereby the
provisions of this instrument have been or can be terminated, affected, varied,
waived, amended or modified in any manner, unless the same be set forth and
consented to in writing by the Discount Note Indenture Trustee.
6. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding upon the Guarantors
and their permitted successors, transferees and assigns and inure to the benefit
of the Discount Note Indenture Trustee. This Guaranty shall without further
consent of the Guarantors, pass to, and may be relied upon and enforced by, any
successor or assignee of the Discount Note Indenture Trustee and any permitted
transferee of any Note.
7. JURISDICTION; SERVICE OF PROCESS. EACH GUARANTOR HEREBY IRREVOCABLY AND
UNCONDITIONALLY AGREES THAT ANY SUIT, ACTION OR PROCEEDING WITH RESPECT TO THIS
GUARANTY, OR ANY ACTION OR PROCEEDING TO EXECUTE OR OTHERWISE ENFORCE ANY
JUDGMENT IN RESPECT OF ANY BREACH THEREOF, BROUGHT BY THE DISCOUNT NOTE
INDENTURE TRUSTEE AGAINST THE GUARANTOR OR ANY OF ITS PROPERTY, MAY BE BROUGHT
BY THE DISCOUNT NOTE INDENTURE TRUSTEE IN THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF NEW YORK OR ANY NEW YORK STATE COURT SITTING IN NEW
YORK CITY AS THE DISCOUNT NOTE INDENTURE TRUSTEE MAY IN ITS SOLE DISCRETION
ELECT, AND, BY THE EXECUTION AND DELIVER OF THIS GUARANTY, IRREVOCABLY SUBMITS
TO THE NON-EXCLUSIVE JURISDICTION OF EACH SUCH COURT; AND AGREES THAT PROCESS
SERVED EITHER PERSONALLY OR BY REGISTERED MAIL SHALL, TO THE EXTENT PERMITTED BY
LAW, CONSTITUTE ADEQUATE SERVICE OF PROCESS IN ANY SUCH SUIT, ACTION OR
PROCEEDING, WITHOUT LIMITING THE FOREGOING, EACH GUARANTOR HEREBY APPOINTS, IN
THE CASE OF ANY SUCH ACTION OR PROCEEDING BROUGHT IN THE COURTS OF OR IN THE
STATE OF NEW YORK, CT CORPORATION, WITH OFFICES ON THE DATE HEREOF
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AT 1633 BROADWAY, NEW YORK, NEW YORK 10019 TO RECEIVE, FOR IT AND ON ITS BEHALF,
SERVICE OF PROCESS IN THE STATE OF NEW YORK WITH RESPECT THERETO, PROVIDED EACH
GUARANTOR MAY APPOINT ANY OTHER PERSON, REASONABLY ACCEPTABLE TO THE DISCOUNT
NOTE INDENTURE TRUSTEE, WITH OFFICES IN THE STATE OF NEW YORK TO REPLACE SUCH
AGENT FOR SERVICE OF PROCESS UPON DELIVERY TO THE ADMINISTRATIVE AGENT OF A
REASONABLY ACCEPTABLE AGREEMENT OF SUCH NEW AGENT AGREEING SO TO ACT. IN
ADDITION, EACH GUARANTOR HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF VENUE IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
GUARANTY, BROUGHT IN THE SAID COURTS, AND HEREBY IRREVOCABLY WAIVES ANY CLAIM
THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN SHALL IN ANY WAY BE DEEMED TO
LIMIT THE ABILITY OF THE DISCOUNT NOTE INDENTURE TRUSTEE TO SERVE ANY SUCH
WRITS, PROCESS OR SUMMONSES, IN ANY MANNER PERMITTED BY APPLICABLE LAW OR TO
OBTAIN JURISDICTION OVER SUCH GUARANTOR, IN SUCH OTHER JURISDICTION, AND IN SUCH
MANNER, AS MAY BE PERMITTED BY APPLICABLE LAW.
8. NOTICES. All notices and communications provided for hereunder shall be in
writing and sent by telecopy if the sender on the same day sends a confirming
copy of such notice by a recognized overnight delivery service (charges
prepaid), or by registered or certified mail with return receipt requested
(postage prepaid), or by a recognized overnight delivery service (with charges
prepaid). Any such notice must be sent:
(i) if to the Discount Note Indenture Trustee Party to such Person at
State Street Bank & Trust Company, Two International Place,
Boston, MA 02110, Attn: Corporate Trust Department, or at such
other address as such Person shall have specified to each
Guarantor in writing, or
(ii) if to the Guarantor, to the Guarantor at c/o London Clubs
International PLC, 10 Brick Street, London WIY 8HO with a copy to
LCI to the same address, or at such other address as
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each Guarantor shall have specified to the the Discount Note
Indenture Trustee in writing.
(iii) Notices under this Section 8 will be deemed given only when
actually received.
9. GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK. THIS
GUARANTY AND THE OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG
THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY
PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT HERETO.
10. SUBROGATION. Each Guarantor irrevocably and unconditionally hereby waives
(until the obligations guaranteed hereunder shall have been indefeasibly paid in
full) all rights it may have to be subrogated to the rights of the Discount Note
Indenture Trustee, and all other remedies that it may have against LCI, in
respect of which any payment is made hereunder. If any amount shall be paid to
the Guarantors on account of any such subrogation rights or other remedy,
notwithstanding the waiver thereof, such amount shall be received in trust for
the benefit of the Discount Note Indenture Trustee and shall forthwith be paid
to the Discount Note Indenture Trustee to be credited and applied upon the
obligations guaranteed hereby, whether matured or unmatured, in accordance with
the terms hereof. Each Guarantor agrees that its obligations under this Section
10 shall be automatically reinstated if and to the extent that for any reason
any payment by or on behalf of LCI is rescinded or must be otherwise restored by
the Discount Note Indenture Trustee, whether as a result of any proceedings in
bankruptcy or reorganization or otherwise, all as though such amount had not
been paid.
11. PAYMENTS FREE AND CLEAR OF TAXES, ETC. Each Guarantor hereby agrees that:
(a) All payments by such Guarantor hereunder shall be made free and clear
of and without deduction for any present or future income, excise, stamp or
franchise taxes and other taxes, fees, duties, withholdings or other charges of
any nature whatsoever imposed by any taxing authority, but excluding franchise
taxes and taxes imposed on or measured by the Discount Note Indenture Trustee's
net income or receipts (such non-excluded items being called "TAXES"). In the
event that any withholding or deduction from any payment to be made by a
Guarantor hereun-
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der is required in respect of any Taxes pursuant to any applicable law, rule or
regulation, then such Guarantor will
(i) pay directly to the relevant authority the full amount required
to be so withheld or deducted;
(ii) promptly forward to the Discount Note Indenture Trustee an
official receipt or other documentation satisfactory to the
Discount Note Indenture Trustee evidencing such payment to such
authority; and
(iii) pay to the Discount Note Indenture Trustee such additional amount
or amounts ("ADDITIONAL AMOUNT") as is necessary to ensure that
the net amount actually received by the Discount Note Indenture
Trustee will equal the full amount the Discount Note Indenture
Trustee would have received had no such withholding or deduction
been required.
Moreover, if any Taxes are directly asserted against any the Discount
Note Indenture Trustee with respect to any payment received by the
Discount Note Indenture Trustee hereunder, the Discount Note Indenture
Trustee may pay such Taxes and the Guarantor will promptly pay such
Additional Amounts (including any penalties, interest or expenses) as
is necessary in order that the net amount received by the Discount
Note Indenture Trustee after the payment of such Taxes (including any
Taxes on such Additional Amounts) shall equal the amount the Discount
Note Indenture Trustee would have received had not such Taxes been
asserted.
(b) If the Guarantor fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Discount Note Indenture Trustee the
required receipts or other required documentary evidence, the Guarantor shall
indemnify the Discount Note Indenture Trustee for any incremental Taxes,
interest, or penalties that may become payable by the Discount Note Indenture
Trustee as a result of any such failure.
(c) In the event that an Additional Amount is paid by a Guarantor for the
account of the Discount Note Indenture Trustee and the Discount Note Indenture
Trustee is entitled to a refund of the Tax (a "Tax Refund") to which such
payment is
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attributable, then the Discount Note Indenture Trustee shall take all reasonable
steps which are necessary to obtain such Tax Refund, including filing such
forms, certificates, documents, applications or returns as may be required to
obtain such Tax Refund. If the Discount Note Indenture Trustee subsequently
receives such a Tax Refund, then the Discount Note Indenture Trustee shall
reimburse such amount.
(d) Without prejudice to the survival of any other agreement of the
Guarantors hereunder, the agreements and obligations of the Guarantors contained
in this SECTION 11 shall survive the payment in full of the obligations owing
under the Noteholder Completion Guaranty.
12. JUDGMENT. Each Guarantor hereby agrees that:
(a) If, for the purposes of obtaining judgment in any court, it is
necessary to convert a sum due hereunder in United States Dollars into another
currency, such Guarantor agrees, to the fullest extent permitted by law, that
the rate of exchange used shall be that at which in accordance with normal
banking procedures the Discount Note Indenture Trustee could purchase United
States Dollars with such other currency on the Business Day preceding that on
which final judgment is given.
(b) The obligation of each Guarantor in respect of any sum due from it to
the Discount Note Indenture Trustee hereunder shall, notwithstanding any
judgment in a currency other than United States Dollars, be discharged only to
the extent that on the Business Day following receipt by the Discount Note
Indenture Trustee of any sum adjudged to be so due in such other currency the
Discount Note Indenture Trustee may, in accordance with normal banking
procedures, purchase United States Dollars with such other currency; in the
event that the United States Dollars so purchased are less than the sum
originally due to the Discount Note Indenture Trustee in United Stated Dollars,
the Guarantor, as a separate obligation and notwithstanding any such judgment,
shall indemnify and hold harmless the Discount Note Indenture Trustee against
such loss, and if the United States Dollars so purchased exceed the sum
originally due to the Discount Note Indenture Trustee in United States Dollars,
the Discount Note Indenture Trustee shall remit to such Guarantor such excess.
13. NO WAIVER. No delay on the part of the Discount Note Indenture Trustee in
exercising any rights hereunder or failure to exercise the same shall operate as
a waiver of such rights; no notice to or demand on the Guarantors shall be
deemed to
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be a waiver of the obligation of the Guarantors or of the rights of the Discount
Note Indenture Trustee to take further action without notice or demand as
provided herein.
14. HEADINGS. The descriptive heading of the several paragraphs of this
Guaranty are inserted for convenience only and do not constitute a part of this
Guaranty.
15. COUNTERPARTS. This Guaranty may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, and it shall not be
necessary in making proof of this Guaranty to produce or account for more than
one such counterpart.
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties contained herein or made in writing by or on behalf of the Guarantors
in connection herewith shall survive the execution and delivery of this
Guaranty.
17. SEVERABILITY. Any provision of this Guaranty which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
18. TERM OF GUARANTY. This Guaranty and all covenants and agreements of the
Guarantors contained herein shall continue in full force and effect and shall
not be discharged until such time as all of the obligations guaranteed hereby
and any other independent payment obligations of the Guarantors hereunder shall
be paid and performed in full and all of the agreements of the Guarantors
hereunder shall be duly paid and performed in full.
19. WAIVER OF JURY TRIAL. THE GUARANTORS HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
GUARANTY, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF THE DISCOUNT NOTE INDENTURE TRUSTEE. THE
GUARANTORS ACKNOWLEDGE AND AGREE THAT THEY HAVE RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE DISCOUNT NOTE INDENTURE TRUSTEE ENTERING INTO THE INDENTURE.
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20. RIGHTS OF LENDERS. This Subsidiary Guaranty shall be binding upon the
Guarantors and their permitted successors, transferees and assigns and shall
inure to the benefit of and be enforceable by the Discount Note Indenture
Trustee and its respective successors, transferees and assigns; PROVIDED,
HOWEVER, that the Guarantors may not assign any of their Guaranteed Obligations
hereunder without the prior written consent of the Discount Note Indenture
Trustee, and the Discount Note Indenture Trustee may not assign this Subsidiary
Guaranty or any of its rights, remedies or options hereunder without the prior
written consent of the Administrative Agent in its sole discretion. The
Lenders shall be third party beneficiaries of this SECTION 20 and shall have all
rights at law and equity to the enforcement hereof.
17
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IN WITNESS whereof the Guarantors have caused this Guaranty to be executed
as a deed the day and year first above written.
EXECUTED AS A DEED by )
LONDON CLUBS HOLDINGS LIMITED ) Director
acting by two Directors )
or a Director and the Secretary ) Director/Secretary
EXECUTED AS A DEED by )
LONDON CLUBS MANAGEMENT LIMITED ) Director
acting by two Directors )
or a Director and the Secretary ) Director/Secretary
EXECUTED AS A DEED by )
THE SPORTSMAN CLUB LIMITED ) Director
acting by two Directors )
or a Director and the Secretary ) Director/Secretary
EXECUTED AS A DEED by )
RITZ CLUB (LONDON) LIMITED ) Director
acting by two Directors )
or a Director and the Secretary ) Director/Secretary
EXECUTED AS A DEED by )
GOLDEN NUGGET CLUB LIMITED ) Director
acting by two Directors )
or a Director and the Secretary ) Director/Secretary
EXECUTED AS A DEED by )
LES AMBASSADEURS CLUB LIMITED ) Director
acting by two Directors )
or a Director and the Secretary ) Director/Secretary
EXECUTED AS A DEED by )
RENDEZVOUS CLUB (LONDON) LIMITED ) Director
acting by two Directors )
or a Director and the Secretary ) Director/Secretary
EXECUTED AS A DEED by )
18
<PAGE>
PALM BEACH CLUB LIMITED ) Director
acting by two Directors )
or a Director and the Secretary ) Director/Secretary
EXECUTED AS A DEED by )
SIX HAMILTON PLACE LIMITED ) Director
acting by two Directors )
or a Director and the Secretary ) Director/Secretary
EXECUTED AS A DEED by )
BURLINGTON STREET SERVICES LIMITED ) Director
acting by two Directors )
or a Director and the Secretary ) Director/Secretary
EXECUTED AS A DEED by )
ZEALCASTLE LIMITED ) Director
acting by two Directors )
or a Director and the Secretary ) Director/Secretary
EXECUTED AS A DEED by )
CORBY LEISURE RETAIL ) Director
DEVELOPMENTS LIMITED )
acting by two Directors ) Director/Secretary
or a Director and the Secretary )
EXECUTED AS A DEED by )
UNITLAW TRADING LIMITED ) Director
acting by two Directors )
or a Director and the Secretary ) Director/Secretary
EXECUTED AS A DEED by )
LONDON PARK TOWER CLUB LIMITED ) Director
acting by two Directors )
or a Director and the Secretary ) Director/Secretary
EXECUTED AS A DEED by )
PUBLICACE LIMITED ) Director
acting by two Directors )
or a Director and the Secretary ) Director/Secretary
19
<PAGE>
EXECUTED AS A DEED by )
LOMASBOND PROPERTIES LIMITED ) Director
acting by two Directors )
or a Director and the Secretary ) Director/Secretary
EXECUTED AS A DEED by )
LONDON CLUBS (OVERSEAS) LIMITED ) Director
acting by two Directors )
or a Director and the Secretary ) Director/Secretary
EXECUTED AS A DEED by )
DECBURY LIMITED ) Director
acting by two Directors )
or a Director and the Secretary ) Director/Secretary
20
<PAGE>
APPENDIX A
To Subsidiary Guaranty
DEFINITIONS
DEFINED TERMS. The following terms (whether or not italicized) when used in the
Subsidiary Guaranty, including its preamble and recitals, shall, except where
the context otherwise requires, have the following meanings (such meanings to be
equally applicable to the singular and plural forms thereof):
"ABH" means Aladdin Bazaar Holdings, LLC, a Nevada limited-liability company.
"ADDITIONAL CONTRACT CERTIFICATE" means an Additional Contract Certificate
substantially in the form of EXHIBIT Y to the Credit Agreement.
"ADMINISTRATIVE AGENT" is defined in the PREAMBLE of the Credit Agreement and
includes each other Person as shall have subsequently been appointed as the
successor Administrative Agent pursuant to SECTION 9.4 of the Credit Agreement.
"AFFECTED LENDER" is defined in CLAUSE(A) of SECTION 4.11 of the Credit
Agreement.
"AFFILIATE" means, relative to any Person, any other Person which, directly or
indirectly, controls, is controlled by or is under common control with such
Person (EXCLUDING, HOWEVER, any trustee under, or any committee with
responsibility for administering, any Plan). With respect to any Lender,
Approved Fund, or Issuer, a Person shall be deemed to be "controlled by" another
Person if such other Person possesses, directly or indirectly, power to vote 51%
or more of the securities (on a fully diluted basis) having ordinary voting
power for the election of directors, managing general partners or managers, as
the case may be. With respect to all other Persons, a Person shall be deemed to
be "controlled by" another Person if such other Person possesses, directly or
indirectly, power
(a) to vote 10% or more of the securities (on a fully diluted basis) having
ordinary voting power for the election of directors, managing general partners
or managers, as the case may be; or
(b) to direct or cause the direction of the management and policies of such
Person whether by contract or otherwise.
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"AFFILIATE TRANSACTION" is defined in SECTION 7.2.13 of the Credit Agreement.
"AGENT" means the Administrative Agent, the Syndication Agent and/or the
Documentation Agent, as the context may require.
"AHL" means Aladdin Holdings, LLC, a Delaware limited liability company.
"AHL PLEDGE AGREEMENT" means, on any date, the Pledge Agreement executed
and delivered by an Authorized Representative of AHL pursuant to CLAUSE (D) of
SECTION 5.1.3 of the Credit Agreement, as originally in effect on the Closing
Date, in substantially the form of EXHIBIT E-2 to the Credit Agreement and as
thereafter from time to time amended, supplemented, amended and restated or
otherwise modified.
"ALADDIN BAZAAR" means Aladdin Bazaar, LLC, a Delaware limited liability
company.
"ALADDIN MUSIC" means Aladdin Music, LLC, a Nevada limited-liability
company.
"ALADDIN PARTIES" means, collectively, the Borrower, Holdings, Capital,
Enterprises, Sommer Enterprises, AHL, Aladdin Music, AMH, ABH and the Trust.
"ALTERNATE BASE RATE" means, on any date and relative to all Base Rate
Loans, a fluctuating rate of interest per annum (rounded upward, if necessary,
to the next highest 1/16 of 1%) equal to the higher of
(a) the Base Rate in effect on such day; and
(b) the Federal Funds Rate in effect on such day plus 1/2 of 1%.
Changes in the rate of interest on that portion of any Loans maintained as Base
Rate Loans will take effect simultaneously with each change in the Alternate
Base Rate. The Administrative Agent will give notice promptly to the Borrower
and the Lenders of changes in the Alternate Base Rate.
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"AMH" means Aladdin Music Holdings, LLC, a Nevada limited-liability
company.
"AMH PLEDGE AGREEMENT" means, on any date, the Pledge Agreement executed
and delivered by an Authorized Representative of AMH pursuant to CLAUSE (G) of
SECTION 5.1.3 of the Credit Agreement, as originally in effect on the Closing
Date, in substantially the form of EXHIBIT E-3 to the Credit Agreement and as
thereafter from time to time amended, supplemented, amended and restated or
otherwise modified.
"APPLICABLE BASE RATE MARGIN" means, (w) relative to any Term B Loan and
Term C Loan, the proceeds of which on any date are being held in the Bank
Proceeds Account, 1.00% PER ANNUM, (x) relative to any Term B Loan, the proceeds
of which on any date have been advanced to the Borrower from the Bank Proceeds
Account, 2.50% PER ANNUM, (y) relative to any Term C Loan, the proceeds of which
on any date have been advanced to the Borrower from the Bank Proceeds Account,
3.00% PER ANNUM and (z) relative to any Term A Loan, (1) on any date prior to
the date which is six months after the Conversion Date, 2.00% PER ANNUM and
(2) on any date from and after the date which is six months after the Conversion
Date, the PER ANNUM percentage set forth below opposite the Total Debt to EBITDA
Ratio set forth in the Current Compliance Certificate:
Total Debt to EBITDA Ratio Applicable Base Rate Margin
-------------------------------- ---------------------------
> or equal to 4.0:1 1.75%
> or equal to 3.5:1 and < 4.0:1 1.50%
> or equal to 3.0:1 and < 3.5:1 1.00%
> or equal to 2.5:1 and < 3.0:1 0.75%
< 2.5:1 0.50%
"APPLICABLE LIBO RATE MARGIN" means, (w) relative to any Term B Loan and
Term C Loan, the proceeds of which on any date are being held in the Bank
Proceeds Account, 2.00% PER ANNUM, (x) relative to any Term B Loan, the
proceeds of which on any date have been advanced to the Borrower from the Bank
Proceeds Account, 3.50% PER ANNUM, (y) relative to any Term C Loan, the proceeds
of which on any date have been advanced to the Borrower from the Bank Proceeds
Account,
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4.00% PER ANNUM and (z) relative to any Term A Loan, (1) on any date prior to
the date which is six months after the Conversion Date, 3.00% PER ANNUM and
(2) on any date from and after the date which is six months after the Conversion
Date, the PER ANNUM percentage set forth below opposite the Total Debt to EBITDA
Ratio set forth in the Current Compliance Certificate:
Total Debt to EBITDA Ratio Applicable LIBO Rate Margin
-------------------------------- ---------------------------
> or equal to 4.0:1 2.75%
> or equal to 3.5:1 and < 4.0:1 2.50%
> or equal to 3.0:1 and < 3.5:1 2.00%
> or equal to 2.5:1 and < 3.0:1 1.75%
< 2.5:1 1.50%
"APPLICABLE PERCENTAGE" means the percentage of Direct Costs actually paid
or payable by the Borrower to the Design/Builder pursuant to the Design/Build
Contract or, if applicable, to a Contractor or Subcontractor pursuant to a
Contract after taking into account the Retainage Amount.
"APPROVED EQUIPMENT FUNDING COMMITMENT" means, collectively, (x) the GECC
Commitment and (y) any replacement of the GECC Commitment from an institutional
or other lender approved by the Administrative Agent in its reasonable
discretion if (1) such commitment is in form and substance reasonably
satisfactory to the Administrative Agent and does not include any material
conditions to funding that are not included in the GECC Commitment and (2) the
lender providing such commitment executes an intercreditor agreement
substantially similar to the GECC Intercreditor Agreement.
"APPROVED FUND" means, relative to any Lender that is a fund that invests
in bank loans, any other fund that invests in bank loans and is advised or
managed by the same investment advisor as such Lender or by an Affiliate of such
investment advisor.
"APPURTENANT RIGHTS" means (x) all agreements, easements, rights of way or
use, rights of ingress or egress, privileges, appurtenances, tenements,
hereditaments and other rights and benefits at any time belonging or pertaining
to the
A-4
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Site or the Improvements, including the use of any streets, ways, alleys, vaults
or strips of land adjoining, abutting, adjacent or contiguous to the Site and
(y) all permits, licenses and rights, whether or not of record, appurtenant to
the Site.
"ARCHITECT OF RECORD" means ADP/FD of Nevada, Inc.
"ARCHITECT'S AGREEMENT" means, collectively, the agreements pursuant to
which architects, engineers and other design professionals have agreed with the
Borrower to provide services in connection with the Main Project.
"ARCHITECT'S CLOSING CERTIFICATE" means a closing certificate in the form
of EXHIBIT Q-3 to the Credit Agreement.
"ARRANGER" means Scotiabank or Merrill Lynch.
"ARRANGERS' FEE LETTER" means the confidential letter agreement, dated
December 4, 1997, among the Borrower, the Sponsors and the Arrangers.
"ASSIGNEE LENDER" is defined in SECTION 10.11.1 of the Credit Agreement.
"ASSIGNMENT OF CONTRACTS" means an assignment of any and all contracts,
agreements, proposals, Permits (to the extent such Permits are assignable),
approvals (to the extent such approvals are assignable), Plans and
Specifications pertaining to the Hotel/Casino Component, whether now existing or
subsequently entered into by the Borrower, including the Approved Equipment
Funding Commitments and the rights of the Borrower thereunder, management
contracts, the Contracts, development rights, consents (to the extent
assignable), architectural, engineering and leasing documents and such other
documents as may be designated by the Administrative Agent. Such Assignment of
Contracts shall include appropriate continuation agreements by the Contractors
and/or Subcontractors thereunder.
"AUTHORIZED REPRESENTATIVE" means, relative to any Person, those of its
officers or managing members (in the case of a limited liability company) whose
signatures and incumbency shall have been certified to the Administrative Agent
and the Lenders in a certificate of such Person delivered to the Administrative
Agent.
"AVAILABLE FUNDS" means, from time to time, the sum of (u) the aggregate of
the unutilized Commitments (EXCLUDING, HOWEVER, the Commitments of all
Defaulting Lenders) under the Bank Credit Facility, PLUS (v) the aggregate of
the
A-5
<PAGE>
amounts on deposit in the Borrower's Funds Account, the Construction Note
Disbursement Account and all Anticipated Earnings thereon, PLUS (w) the
aggregate of the amounts on deposit in the Guaranty Deposit Account, the Cash
Management Account, the Bank Proceeds Account, the Loss Proceeds Account and the
Interest Payment Account, PLUS (x) so long as (1) no default under the Site Work
Agreement and the Mall Project Loan and no Default under the Credit Agreement
have occurred and are continuing at the relevant time of computation, (2)
advances of the Mall Project Loan have commenced on or before June 30, 1998 and
have continued in accordance with the approved draw schedule for the Mall
Project Loan, (3) advances of the Mall Project Loan to reimburse the Borrower in
accordance with the Site Work Agreement are made within 45 days after the
Construction Consultant and the Owner Representative have approved the work to
be completed by the Borrower pursuant to the Site Work Agreement, the aggregate
amounts payable to the Borrower by Aladdin Bazaar pursuant to Section 4.5 of the
Site Work Agreement, PLUS (y) the lesser of (1) the aggregate of the amounts
available to be drawn under all Approved Equipment Funding Commitments and (2)
the aggregate amount of Remaining Costs on the date of calculation for the
Equipment Component (as in effect from time to time), PLUS (z) the aggregate
amount of Main Project Costs which the Design/Builder and/or Fluor have agreed
or confirmed in writing, to the reasonable satisfaction of the Disbursement
Agent, that they are responsible for paying (on a timely basis relative to the
Main Project's cash needs) from their own funds but which they have not yet
paid.
"BANK CREDIT FACILITY" means the Term A Loan Commitment, the Term B Loan
Commitment and the Term C Loan Commitment.
"BANK PROCEEDS ACCOUNT" means the account established by the Borrower with
the Disbursement Agent pursuant to the Borrower Collateral Account Agreement
into which the proceeds of the Loans shall be deposited by the Administrative
Agent from time to time.
"BASE RATE" means, at any time, the rate of interest then most recently
established by the Administrative Agent in New York, New York as its base rate
for U.S. dollars loaned in the United States. The Base Rate is not necessarily
intended to be the lowest rate of interest determined by the Administrative
Agent in connection with extensions of credit.
"BASE RATE LOAN" means a Loan bearing interest at a fluctuating rate
determined by reference to the Alternate Base Rate.
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"BOARD OF MANAGERS" means (x) for so long as the Borrower is a
limited-liability company, the Board of Managers appointed pursuant to the
Organizational Documents of the Borrower or (y) otherwise, the Board of
Directors of the Borrower.
"BORROWER" is defined in the PREAMBLE of the Credit Agreement.
"BORROWER COLLATERAL ACCOUNT AGREEMENT" means, on any date, the Borrower
Collateral Account Agreement, as originally in effect on the Closing Date, among
the Borrower, the Disbursement Agent and the Investment Intermediary and as
thereafter from time to time amended, supplemented, amended and restated or
otherwise modified in accordance with the terms of the Credit Agreement.
"BORROWER COMMON MEMBERSHIP INTEREST" means a Common Share as defined in
the Organizational Documents of the Borrower.
"BORROWER PLEDGE AGREEMENT" means, on any date, the Pledge Agreement
executed and delivered by an Authorized Representative of the Borrower pursuant
to CLAUSE (F) of SECTION 5.1.3 of the Credit Agreement, as originally in effect
on the Closing Date, in substantially the form of EXHIBIT E-1 to the Credit
Agreement and as thereafter from time to time amended, supplemented, amended and
restated or otherwise modified.
"BORROWER SERIES A PREFERRED MEMBERSHIP INTERESTS" means the Series A
Preferred Shares as defined in the Organizational Documents of the Borrower.
"BORROWER'S CLOSING CERTIFICATE" means a closing certificate in the form of
EXHIBIT Q-1 to the Credit Agreement.
"BORROWER'S COMPLETION CERTIFICATE" means a certificate in the form of
EXHIBIT S-1 to the Credit Agreement.
"BORROWER'S FINAL COMPLETION CERTIFICATE" means a certificate in the form
of EXHIBIT U-1 to the Credit Agreement.
"BORROWER'S FUNDS ACCOUNT" is defined in the Borrower Collateral Account
Agreement.
A-7
<PAGE>
"BORROWING" means the Loans of the same type and, in the case of LIBO Rate
Loans, having the same Interest Period made by all Lenders required to make such
Loans on the same Business Day and pursuant to the same Borrowing Request in
accordance with SECTION 2.1 of the Credit Agreement.
"BORROWING REQUEST" means a Loan request and certificate duly executed by
an Authorized Representative of the Borrower substantially in the form of
EXHIBIT L-1 to the Credit Agreement.
"BUILDING DEPARTMENT" means the Clark County Building Department.
"BUSINESS DAY" means
(a) any day which is neither a Saturday or Sunday nor a legal holiday
on which banks are authorized or required to be closed in Las Vegas, Nevada
or New York, New York; and
(b) relative to the making, continuing, prepaying or repaying of any
LIBO Rate Loans, any day described in CLAUSE (A) on which dealings in
Dollars are carried on in the London interbank eurodollar market.
"CAPITAL" means Aladdin Capital Corp., a Nevada corporation.
"CAPITAL EXPENDITURES" means, for any period, the aggregate amount of all
expenditures (other than any residual purchase payments under the FF&E Leases)
of the Borrower and the other Aladdin Parties for fixed or capital assets made
during such period which, in accordance with GAAP, would be classified as
capital expenditures.
"CAPITAL STOCK" means, relative to any Person, any and all shares,
interests (including Membership Interests), participations or other equivalents
(however designated, whether voting or non-voting) of such Person's capital,
whether now outstanding or issued after the Effective Date.
"CAPITALIZED LEASE LIABILITY" means, relative to any Person, any monetary
obligation of such Person under any leasing or similar arrangement which, in
accordance with GAAP, would be classified as a capitalized lease, and, for
purposes of this Agreement and each other Loan Document, the amount of such
obligation
A-8
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shall be the capitalized amount thereof, determined in accordance with GAAP, and
the stated maturity thereof shall be the date of the last payment of rent or any
other amount due under such lease prior to the first date upon which such lease
may be terminated by the lessee without payment of a premium or a penalty.
"CARPARK" is defined in CLAUSE (B) of the FOURTH RECITAL of the Credit
Agreement.
"CASH CONTRIBUTIONS TO CAPITAL" means optional contributions (other than
Cash Equity Contributions as defined in the Keep-Well Agreement), including to
cure a Default that would otherwise exist under the Loan Documents, made by the
Sponsors in cash to the Borrower, which contributions were (x) not made as a
loan, (y) made in exchange for Borrower Series A Preferred Membership Interests
and (z) made on terms and conditions satisfactory to the Administrative Agent as
determined on good faith in its sole discretion.
"CASH EQUIVALENT INVESTMENT" means, at any time, (u) United States Dollars,
(v) securities issued or directly and fully guaranteed or insured by the United
States Government or any agency or instrumentality thereof (provided that the
full faith and credit of the United States is pledged in support thereof) having
maturities of not more than six months from the date of acquisition,
(w) certificates of deposit and eurodollar time deposits with maturities of six
months or less from the date of acquisition, bankers' acceptances with
maturities not exceeding six months and overnight bank deposits, in each case
with any domestic commercial bank having capital and surplus in excess of $500
million and a Thompson Bank Watch Rating of "B" or better, (x) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in ITEM (V) and (W) entered into with any financial
institution meeting the qualifications specified in ITEM (W), (y) commercial
paper having the highest rating obtainable from Moody's Investors Service, Inc.
or Standard & Poor's Corporation and in each case maturing within six months
after the date of acquisition and (z) money market funds at least 95% of the
assets of which constitute Cash Equivalents of the kinds described in ITEMS
(W)-(Y) of this definition.
"CASINO" is defined in CLAUSE (A) of the FOURTH RECITAL of the Credit
Agreement.
"CERCLA" is defined in CLAUSE (A) of the definition of "Environmental Law".
A-9
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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
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$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;
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(g) the failure of Holdings to directly own, free and clear of all
Liens (other than Liens in favor of the Discount Note Indenture Trustee for
the benefit of the Discount Noteholders), the Borrower Series A Preferred
Membership Interests unless the failure to own the Borrower Series A
Preferred Membership Interests results from the exercise by the Discount
Note Indenture Trustee of the Lien in favor of the Discount Note Indenture
Trustee for the benefit of the Discount Noteholders;
(h) the failure of Holdings to directly own, free and clear of all
Liens (other than Liens in favor of the Administrative Agent for the
benefit of the Secured Parties), all of the Capital Stock of Capital or
otherwise have the ability to elect all of the members of the Board of
Directors of Capital;
(i) the failure of the Borrower to directly own, free and clear of
all Liens (other than Liens in favor of the Administrative Agent for the
benefit of the Secured Parties), all of the Membership Interests of AMH or
otherwise to have the ability to elect the managing member of AMH;
(j) the failure of AMH to directly own, free and clear of all Liens
(other than Liens in favor of the Administrative Agent for the benefit of
the Secured Parties), at least 49% of the Membership Interests of Aladdin
Music or otherwise to have the ability to elect the managing member of
Aladdin Music;
(k) the failure of LCNI to directly own, free and clear of all Liens
(other than Liens in favor of the Administrative Agent for the benefit of
the Secured Parties), at least 25.0% of the Holdings Common Membership
Interests (except that (v) on the Opening Date, the percentage interest of
LCNI in the Holdings Common Membership Interests may be decreased by 0.5%
provided that the percentage interest of Sommer Enterprises therein is
increased by a corresponding amount (w) in the event of a default by Sommer
Enterprises in payment of its share of amounts due under the Keep-Well
Agreement, the percentage interest of LCNI in the Holdings Common
Membership Interests may be increased by 1, 1.5 or 2 times (depending on
whether Sommer Enterprises is in default for 30 Business Days, 45
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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
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Administrative Agent, acting at the direction of the Required Lenders, to
the Borrower that the Commitments have been terminated.
"COMMON PARKING AREA USE AGREEMENT" means the Common Parking Area Use
Agreement to be entered into between the Borrower and Aladdin Bazaar in form and
substance satisfactory to the Administrative Agent determined in good faith in
its sole discretion, and as thereafter from time to time amended, supplemented,
amended and restated or otherwise modified in accordance with the terms of the
Credit Agreement.
"COMPLETION" means that each of the following has occurred:
(a) the construction of the Hotel/Casino and any Tenant Improvements
have been completed substantially in accordance with the Credit Agreement,
the Plans and Specifications, the provisions of the Reciprocal Easement
Agreement applicable to the Hotel/Casino and all of the other Operative
Documents to the extent that the development, construction, use or
operation of the Hotel/Casino are affected thereby, except for the Main
Project Punchlist Items applicable to the Hotel/Casino, and in substantial
compliance with all Legal Requirements pertaining to the construction of
the Hotel/Casino so as to allow the Hotel/Casino to be utilized for its
intended purpose;
(b) reasonable and safe means of access and facilities necessary for
the use and occupancy of the Hotel/Casino have been installed and are
operational including corridors, elevators, stairways, heating,
ventilation, air conditioning, sanitary, water and electrical facilities
and all security systems and life safety systems required by the Plans and
Specifications, the Reciprocal Easement Agreement, the other Operative
Documents and all Legal Requirements and that the Borrower has made
arrangements (from the Energy Project or an alternative source) to obtain
reliable electrical and other utility services at appropriate levels
required to start up, operate and maintain the Hotel/Casino in a safe,
efficient and reliable manner; and
(c) there are no outstanding claims or Liens by any Contractor or
Subcontractor or any other Person against any portion of the Hotel/Casino
Component except for Permitted Liens and Permitted Encumbrances.
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"COMPLETION CERTIFICATE" means, collectively, the Borrower's Completion
Certificate and the Construction Consultant's Completion Certificate in the form
of EXHIBITS S-1 and S-2 to the Credit Agreement, respectively.
"COMPLETION DATE" means the date on which Completion occurs but in no event
shall the Completion Date extend beyond the Outside Completion Deadline, time
being of the essence as to the Borrower.
"COMPLETION GUARANTOR" means, jointly and severally, each of London Clubs,
ABH and the Trust.
"COMPLETION GUARANTY" means, on any date, the Guaranty of Performance and
Completion, as originally in effect on the Closing Date, by the Completion
Guarantors in favor of the Lenders substantially in the form of EXHIBIT C to the
Credit Agreement and as thereafter from time to time amended, supplemented,
amended and restated or otherwise modified.
"COMPLEX" is defined in the FOURTH RECITAL of the Credit Agreement and is
more fully described in EXHIBIT N-2 to the Credit Agreement.
"COMPLIANCE CERTIFICATE" means a certificate duly completed and executed by
an Authorized Representative of the Borrower substantially in the form of
EXHIBIT R to the Credit Agreement, as amended, supplemented, amended and
restated or otherwise modified from time to time, together with such changes
thereto as the Administrative Agent may from time to time reasonably request for
the purpose of monitoring the Borrower's compliance with the financial covenants
contained in the Credit Agreement.
"CONSENT" means a consent, substantially in the form of EXHIBIT I to the
Credit Agreement, to the collateral assignment by the Borrower of the Main
Project Documents.
"CONSTRUCTION BENCHMARK SCHEDULE" means the schedule for construction and
completion of each Construction Component, the Main Project as a whole and the
other work that the Borrower is required to perform pursuant to the Operative
Documents in substantially the form of EXHIBIT X-1 to the Credit Agreement (as
amended from time to time in accordance with the terms of the Credit Agreement)
which (w) shall demonstrate that Substantial Completion will occur on or before
the Outside Completion Deadline, (x) includes a statement from the Owner
Representa-
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tive and the Design/Builder that the Construction Benchmark Schedule is
realistic and can be adhered to (subject to Force Majeure Events) in completing
the Main Project in accordance with the Plans and Specifications, (y) shows on a
monthly basis the anticipated progress of the Work and other activities
pertaining to the construction of the Hotel/Casino Component, the Energy Project
Component and Theater renovations, and (z) the Construction Consultant has
reviewed and certified in the Construction Consultant's Closing Certificate that
the statement from the Owner Representative in ITEM (X) is reasonable and that
it is appropriate for the Administrative Agent to rely thereon and on the other
schedules and benchmarks set forth in the Construction Benchmark Schedule.
"CONSTRUCTION COMPONENT" means the Hotel/Casino Component, the Energy
Project Component or the Equipment Component.
"CONSTRUCTION CONSULTANT" means Rider Hunt (NV), L.L.C. or any other Person
designated from time to time by the Administrative Agent to serve as the
Construction Consultant under the Credit Agreement and the Disbursement
Agreement.
"CONSTRUCTION CONSULTANT ENGAGEMENT AGREEMENT" means the Engagement Letter,
dated as of January 28, 1998, by and among the Construction Consultant, the
Borrower, the Administrative Agent, the Disbursement Agent and the Discount Note
Indenture Trustee.
"CONSTRUCTION CONSULTANT'S CLOSING CERTIFICATE" means a closing certificate
in the form of EXHIBIT Q-2 to the Credit Agreement.
"CONSTRUCTION CONSULTANT'S COMPLETION CERTIFICATE" means a certificate in
the form of EXHIBIT S-2 to the Credit Agreement.
"CONSTRUCTION CONSULTANT'S FINAL COMPLETION CERTIFICATE" means a
certificate in the form of EXHIBIT U-2 to the Credit Agreement.
"CONSTRUCTION CONSULTANT'S REPORT" means a report of the Construction
Consultant delivered to the Disbursement Agent and the Administrative Agent
pursuant to SECTION 3.1.10 of the Disbursement Agreement which shall include an
analysis of the Plans and Specifications, the Main Project Budget, the
Construction Benchmark Schedule, the Contracts, to the extent available, the
construction and renovation of the Theater the construction of the Energy
Project to be performed by
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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.
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"CREDIT EXTENSION" means, as the context may require,
(a) the making of a Loan by a Lender; or
(b) the issuance of any Letter of Credit, or the extension of any
Stated Expiry Date of any existing Letter of Credit, by an Issuer.
"CREDIT EXTENSION REQUEST" means, as the context may require, any Borrowing
Request or Letter of Credit Issuance Request.
"CURRENT COMPLIANCE CERTIFICATE" means the Compliance Certificate most
recently delivered by the Borrower to the Administrative Agent pursuant to
CLAUSE (D) of SECTION 7.1.1 of the Credit Agreement. Changes in the Applicable
Base Rate Margin or Applicable LIBO Rate Margin resulting, after the Conversion
Date, from a change in the Total Debt to EBITDA Ratio shall become effective
upon delivery by the Borrower to the Administrative Agent of a new Compliance
Certificate pursuant to CLAUSE (D) of SECTION 7.1.1 of the Credit Agreement. If
the Borrower shall fail to deliver a Compliance Certificate within the number of
days after the end of any Fiscal Quarter as required pursuant to CLAUSE (D) of
SECTION 7.1.1 of the Credit Agreement (without giving effect to any grace
period), the Applicable Base Rate Margin or Applicable LIBO Rate Margin, as the
case may be, from and including the first day after the date on which such
Compliance Certificate was required to be delivered to but not including the
date the Borrower delivers to the Administrative Agent a Compliance Certificate
shall conclusively equal the highest Applicable Base Rate Margin or Applicable
LIBO Rate Margin, as the case may be, set forth in the definition of such term.
"DEBT SERVICE" means all principal repayments or interest and other amounts
payable or accrued from time to time under any Loan Document or the Approved
Equipment Funding Commitments.
"DEED OF TRUST" means, on any date, the Deed of Trust, Assignment of Rents
and Leases, Security Agreement and Fixture Filing in the form of EXHIBIT B to
the Credit Agreement, as originally in effect on the date on which it is
recorded, made by the Borrower, as trustor, to the trustee named therein, for
the benefit of the Administrative Agent and the Lenders, as beneficiaries
covering the Site and as
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thereafter from time to time amended, supplemented, amended and restated or
otherwise modified.
"DEFAULT" means any Event of Default or any condition, occurrence or event
which, after notice or lapse of time or both, would constitute an Event of
Default.
"DEFAULTING LENDER" means any Lender with respect to which a Lender Default
is in effect.
"DESERT PASSAGE" is defined in CLAUSE (B) of the FOURTH RECITAL of the
Credit Agreement.
"DESIGN/BUILD CONTRACT" means, on any date, the Design/Build Contract, as
originally in effect on the Closing Date, between the Borrower and the
Design/Builder and as thereafter from time to time amended, supplemented,
amended and restated or otherwise modified in accordance with the terms of the
Credit Agreement.
"DESIGN/BUILD CONTRACT TIME" is defined in SECTION 14.1 of the Design/Build
Contract.
"DESIGN/BUILDER" means Fluor Daniel, Inc., a California corporation.
"DESIGN/BUILDER CONSENT AND ACKNOWLEDGMENT" means the Consent and
Acknowledgment by the Design/Builder in favor of the Lenders and the
Administrative Agent dated as of the Closing Date.
"DESIGN/BUILD FINAL COMPLETION" means "FINAL COMPLETION" as defined in
SECTION 31.9 of the General Conditions annexed to the Design/Build Contract as
ATTACHMENT D.
"DEVELOPMENT AGREEMENT" means, on any date, the Aladdin Hotel & Casino
Agreement, dated March 18, 1997, among Holdings, Aladdin Management Corporation
and the County of Clark, as assigned by Holdings and Aladdin Management
Corporation to the Borrower, and as thereafter from time to time amended,
supplemented, amended and restated or otherwise modified in accordance with the
terms of the Credit Agreement.
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<PAGE>
"DIRECT COSTS" means all Main Project Costs expended or incurred by the
Borrower for labor, services, materials, tools, utilities, equipment, fixtures
and furnishings in connection with the construction of the Main Project all as
set forth on the Main Project Budget.
"DISBURSEMENT AGENT" means Scotiabank, in its capacity as the disbursement
agent under the Disbursement Agreement and its successors in such capacity.
"DISBURSEMENT AGREEMENT" means, on any date, the Disbursement Agreement, as
originally in effect on the Closing Date, among the Borrower, Holdings, the
Administrative Agent, the Discount Note Indenture Trustee, the Disbursement
Agent, the Servicing Agent and the Investment Intermediary and as thereafter
from time to time amended, supplemented, amended and restated or otherwise
modified.
"DISCLOSURE SCHEDULE" means the Disclosure Schedule attached to the Credit
Agreement as SCHEDULE I, as it may be amended, supplemented, amended and
restated or otherwise modified from time to time by the Borrower with the
written consent of the Administrative Agent and the Required Lenders.
"DISCOUNT NOTE" means the 131/2% Series A and B Senior Discount Notes due
2010 of Holdings and Capital issued on the Closing Date for gross proceeds of
$115,000,000.
"DISCOUNT NOTE INDENTURE" means, on any date, the Indenture relating to the
Discount Notes, as originally in effect on the Effective Date, among Holdings,
Capital and the Discount Note Indenture Trustee and as thereafter from time to
time amended, supplemented, amended and restated or otherwise modified in
accordance with the terms of the Credit Agreement.
"DISCOUNT NOTE INDENTURE TRUSTEE" means State Street Bank and Trust
Company, in its capacity as the indenture trustee for the Discount Noteholders
under the Discount Note Indenture.
"DISCOUNT NOTE OFFERING CIRCULAR" means the offering memorandum, dated
February 14, 1998, with respect to the units, consisting of the Discount Notes
offered by Holdings and Capital and the Warrants offered by Enterprises.
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<PAGE>
"DISCOUNT NOTE PURCHASE AGREEMENT" means the Purchase Agreement with
respect to the Discount Notes and Warrants, dated as of February 18, 1998, among
Holdings, Capital, Enterprises, AHL, the Trust and Merrill Lynch and First
Boston (as representatives of the several initial purchasers).
"DISCOUNT NOTEHOLDER" means the duly registered holder of a Discount Note.
"DOCUMENTATION AGENT" is defined in the PREAMBLE of the Credit Agreement.
"DOLLAR" and the symbol "$" 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
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pass-through entity or is not treated as a separate entity for United
States federal income tax purposes, the amount of Restricted Payments
made by the Borrower in accordance with CLAUSE (C) of SECTION 7.2.6 of
the Credit Agreement, subject to the terms of the Credit Agreement;
PLUS
(iii) depreciation of assets of the Borrower;
PLUS
(iv) amortization;
PLUS
(v) the amount of Cash Equity Contributions (as defined in the
Keep-Well Agreement);
PLUS
(vi) the amount of Cash Contributions to Capital;
PROVIDED, HOWEVER, that in computing EBITDA for purposes of determining the
"Total Debt to EBITDA Ratio" in CLAUSE (H)(I)(B) of SECTION 7.2.6 of the Credit
Agreement or the amount of "Excess Cash Flow", the "Applicable Base Rate Margin"
or the "Applicable LIBO Rate Margin", SUBCLAUSES (B)(V) and (B)(VI) shall be
excluded from such computation; PROVIDED FURTHER, HOWEVER, that in computing
EBITDA for any period commencing on the Conversion Date and ending as of the
close of any Fiscal Quarter on or prior to the first anniversary of the
Conversion
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Date, EBITDA for such period shall equal the product of (x) the sum of the
amounts determined pursuant to CLAUSES (A) and (B) for such period MULTIPLIED BY
(y) a fraction, the numerator of which is equal to 365 and the denominator of
which is equal to the number of days that have elapsed in such period.
"EFFECTIVE DATE" means the date the Credit Agreement becomes effective
pursuant to SECTION 10.8 thereof.
"EMPLOYMENT AGREEMENT" means, collectively, (u) the Amended Employment and
Consulting Agreement among Holdings, the Borrower and Richard J. Goeglein
effective January 1, 1997, (v) the Amended Employment Agreement among Holdings,
the Borrower and James H. McKennon effective April 15, 1997, (w) the Amended
Employment Agreement among Holdings, the Borrower and Cornelius T. Klerk
effective July 1, 1997, (x) the Amended Employment Agreement among Holdings, the
Borrower and Lee A. Galati effective July 1, 1997, (y) the Amended Employment
Agreement among Holdings, the Borrower and Jose A. Rueda effective July 1, 1997
and (z) the Amended Consulting Agreement between GAI, LLC, Holdings and the
Borrower effective January 1, 1997.
"ENERGY PROJECT" is defined in CLAUSE (E) of the FOURTH RECITAL of the
Credit Agreement.
"ENERGY PROJECT COMMITMENT" means the commitment (as set forth in the
letter agreement, dated October 21, 1997, between the Energy Project Provider
and AHL) of the Energy Project Provider to enter into the Energy Project Ground
Lease, the Energy Project Development Agreement and the Energy Project Service
Agreement.
"ENERGY PROJECT COMPLETION" means that
(a) the construction of the Energy Project has been completed
substantially in accordance with the Energy Project Ground Lease and the
provisions of the Reciprocal Easement Agreement applicable to the Energy
Project except for any punchlist items applicable to the Energy Project and
in substantial compliance with all Legal Requirements pertaining to the
construction of the Energy Project so as to allow the Energy Project to be
utilized for its intended purposes;
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(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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"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.
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"ENVIRONMENTAL CONSULTANT" means ERM-Northeast, Inc., or any other Person
designated from time to time by the Administrative Agent in its sole discretion
to serve as the Environmental Consultant.
"ENVIRONMENTAL INDEMNITY" means, on any date, the Environmental Indemnity
Agreement, as originally in effect on the Effective Date, from the Borrower, the
Trust and London Clubs for the benefit of the Administrative Agent on behalf of
the Lenders in the form of EXHIBIT K to the Credit Agreement and as thereafter
from time to time amended, supplemented, amended and restated or otherwise
modified.
"ENVIRONMENTAL LAW" means any of:
(a) the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended (42 U.S.C. Section 9601, ET SEQ.)
("CERCLA");
(b) the Federal Water Pollution Control Act (33 U.S.C. Section 1251,
ET SEQ.) ("CLEAN WATER ACT" OR "CWA");
(c) the Resource Conservation and Recovery Act (42 U.S.C. Section
6901, ET SEQ.) ("RCRA");
(d) the Atomic Energy Act of 1954 (42 U.S.C. Section 2011, ET SEQ.);
(e) the Clean Air Act (42 U.S.C. Section 7401, ET SEQ.);
(f) the Emergency Planning and Community Right to Know Act (42 U.S.C.
Section 11001, ET SEQ.);
(g) the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C.
Section 136, ET SEQ.) ("FIFRA");
(h) the Oil Pollution Act of 1990 (P.L. 101-380, 104 Stat. 486);
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(i) the Safe Drinking Water Act (42 U.S.C. Sections 300f, ET SEQ.)
("SDWA");
(j) the Surface Mining Control and Reclamation Act of 1974 (30 U.S.C.
Sections 1201, ET SEQ.);
(k) the Toxic Substances Control Act (15 U.S.C. Section 2601, ET
SEQ.) ("TSCA");
(l) the Hazardous Materials Transportation Act (49 U.S.C. Section
1801, ET SEQ.) ("HMTA");
(m) the Uranium Mill Tailings Radiation Control Act of 1978 (42
U.S.C. Section 7901, ET SEQ.) ("UMTRCA");
(n) the Occupational Safety and Health Act (29 U.S.C. Section 651, ET
SEQ.) ("OSHA");
(o) the Nevada Hazardous Materials law (NRS Chapter 459);
(p) the Nevada Solid Waste/Disposal of Garbage or Sewage law (NRS
444.440 to 444.650, inclusive);
(q) the Nevada Water Controls/Pollution law (NRS Chapter 445A);
(r) the Nevada Air Pollution law (NRS Chapter 445B);
(s) the Nevada Cleanup of Discharged Petroleum law (NRS 590.700 to
590.920, inclusive);
(t) the Nevada Control of Asbestos law (NRS 618.750 to 618.850);
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(u) the Nevada Appropriation of Public Waters law (NRS 533.324 to
533.4385, inclusive);
(v) the Nevada Artificial Water Body Development Permit law (NRS
502.390);
(w) the Nevada Protection of Endangered Species, Endangered Wildlife
Permit (NRS 503.585) and Endangered Flora Permit law (NRS 527.270); and
(x) all other Federal, state and local Legal Requirements which
govern Hazardous Substances, and the regulations adopted and publications
promulgated pursuant to all such foregoing laws;
in each case as amended by an amendment thereto or succeeded by a successor law,
statute or regulation thereto.
"ENVIRONMENTAL MATTER" means any:
(a) release, emission, entry or introduction into the air including
the air within buildings and other natural or man-made structures above
ground;
(b) discharge, release or entry into water including into any river,
watercourse, lake or pond (whether natural or artificial or above ground or
which joins or flows into any such water outlet above ground) or reservoir,
or the surface of the riverbed or of other land supporting such waters,
ground waters, sewer or the sea;
(c) deposit, disposal, keeping, treatment, importation, exportation,
production, transportation, handling, processing, carrying, manufacture,
collection, sorting or presence of any Hazardous Substance (including, in
the case of waste, any substance which constitutes a scrap material or an
effluent or other unwanted surplus substance arising from the application
of any process or activity (including making it reusable or reclaiming
substances from it) and any substance or article which is required to be
disposed of as being broken, worn out, contaminated or otherwise spoiled);
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(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
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of all or a part of such property or asset or the requisition of the use of all
or a part of such property or asset or (z) any settlement in lieu of ITEM (Y).
"EXCESS CASH FLOW" means, for any Fiscal Quarter, the excess (if any), of
(a) EBITDA for such Fiscal Quarter
OVER
(b) the sum (during such Fiscal Quarter) of
(i) Interest Expense of the Borrower actually paid in cash by
the Borrower;
PLUS
(ii) scheduled payments, to the extent actually made, of the
principal amount of the Loans pursuant to SECTION 3.1.1 of the Credit
Agreement and scheduled payments, to the extent actually made, with
respect to the FF&E Financing;
PLUS
(iii) the amount of all federal, state and local income taxes
(whether paid in cash or deferred) of the Borrower paid in cash by the
Borrower or, if the Borrower is treated as a pass-through entity or is
not treated as a separate entity for
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United States federal income tax purposes, the amount of Restricted
Payments made in cash by the Borrower in accordance with CLAUSE (C) of
SECTION 7.2.6 of the Credit Agreement, subject to the terms thereof;
PLUS
(iv) the amount of all Restricted Payments on the Borrower Series
A Preferred Membership Interests made in accordance with CLAUSE (D) of
SECTION 7.2.6 of the Credit Agreement;
PLUS
(v) Capital Expenditures actually made or reserved by the
Borrower.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXISTING INDEBTEDNESS" means Indebtedness of the Borrower in existence on
the Effective Date (after giving effect to payment of Indebtedness that is being
discharged and retired on the Closing Date, including all Indebtedness to be
Paid) and identified in ITEM (B) OF SECTION 7.2.2 ("Existing Indebtedness") of
the Disclosure Schedule.
"FEDERAL FUNDS RATE" means, for any period, a fluctuating interest rate PER
ANNUM equal for each day during such period to
(a) the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by federal
funds brokers, as published
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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
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with the Main Project Document applicable thereto so as to allow such
improvements to be utilized for their intended purposes and in substantial
compliance with all Legal Requirements applicable thereto, (v) each of the Hotel
Casino, the Energy Project and the Theater shall have received a permanent Main
Project Certificate of Occupancy from the Building Department and the Energy
Project shall have received all Permits required by the Governmental
Instrumentality having or asserting jurisdiction over the operation of the
Energy Project (and a copy of each such certificate shall have been delivered to
the Administrative Agent), (w) a Notice of Completion shall have been posted
with respect to Hotel/Casino, the Energy Project and the Theater, as required,
and recorded in the Office of the County, (x) the Borrower shall have delivered
to the Administrative Agent its Final Completion Certificate certifying to the
extent set forth therein that all Main Project Punchlist Items have been
completed, (y) the Construction Consultant shall have delivered to the
Administrative Agent its Final Completion Certificate in which it verifies the
statements in items (r), (s), (t), (u), (v), and (w) and certifies that it is
appropriate for the Administrative Agent to rely on the Final Completion
Certificate of the Borrower delivered to the Administrative Agent pursuant to
ITEM (X) and (z) the Mall Project Parcel and the Music Project Parcel shall be
separate legal parcels in accordance with SECTION 7.1.19 of the Credit
Agreement.
"FINAL COMPLETION CERTIFICATE" means a Borrower's Final Completion
Certificate or a Construction Consultant's Final Completion Certificate in the
form of EXHIBIT U-1 or EXHIBIT U-2 to the Credit Agreement.
"FINAL COMPLETION DATE" means the date on which Final Completion occurs.
"FINAL PLANS AND SPECIFICATIONS" means, relative to any particular portion
of the Work or other improvement, Plans and Specifications for such portion
which (x) have received final approval from all Governmental Instrumentalities
required to approve such Plans and Specifications prior to completion of the
Work or improvements and (y) contain sufficient specificity to permit the
completion of such portion of the Work or other improvements.
"FISCAL QUARTER" or "FQ" means a calendar quarter ending on the last day of
March, June, September or December; references to a FQ with a following number
(E.G., FQ1) refer to the number of Fiscal Quarters then to have elapsed in whole
or in part since the Conversion Date.
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"FISCAL YEAR" means any period of twelve consecutive calendar months ending
on December 31; references to a Fiscal Year with a number corresponding to any
calendar year (E.G., the "1998 Fiscal Year") refer to the Fiscal Year ending on
December 31 of such calendar year.
"FLEET COMMITMENT" means, on any date, the Commitment Letter, as originally
in effect on the Effective Date, between Fleet National Bank and Aladdin Bazaar
and as thereafter from time to time amended, supplemented, amended and restated
or otherwise modified in accordance with the terms thereof.
"FLUOR" means Fluor Corporation, a California corporation.
"FLUOR GUARANTY" means, on any date, the Fluor Guaranty, as originally in
effect on the Effective Date, by Fluor in favor of the Borrower and as
thereafter from time to time amended, supplemented, amended and restated or
otherwise modified in accordance with the terms of the Credit Agreement.
"FORCE MAJEURE EVENT" means any event which is defined as "Force Majeure"
in the Design/Build Contract and/or that causes a delay in the construction of
the Main Project and is outside the Borrower's control but only to the extent
(a) such event does not arise out of (w) the negligence, willful
misconduct or inefficiencies of the Borrower, (x) late performance by the
Design/Builder or the Architect of Record, (y) any cause or circumstance
resulting in delays, stoppage or any other interference with the
construction of the Main Project caused by the insolvency, bankruptcy or
any lack of funds by the Borrower, any other Project Party, the Energy
Provider, the Energy Project Guarantor and/or the Architect of Record or
(z) delays, stoppage or other interference with the construction of the
Main Project caused by the insolvency, bankruptcy or any lack of funds by
Aladdin Bazaar, Aladdin Music and/or the construction contractors and
project architects with respect to the Mall Project, the Music Project
and/or the Energy Project; and
(b) such event consists of an act of God (such as tornado, flood,
hurricane, etc.), fires and other casualties; strikes, lockouts or other
labor disturbances (except to the extent taking place at the Site only);
riots, insurrections or civil commotions; embargos, shortages or
unavailability of materials, supplies, labor,
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equipment and systems that first arise after the Effective Date, but only
to the extent caused by another act, event or condition covered by this
CLAUSE (B); sabotage; vandalism; the requirements of law, statutes,
regulations and other Legal Requirements enacted after the Effective Date
(unless the Borrower should, in the exercise of due diligence and prudent
judgment, have anticipated such enactment); orders or judgments; or any
similar types of events;
PROVIDED, HOWEVER, that (x) the Borrower has sought to mitigate the impact of
the delay, (y) any delay resulting from the foregoing shall not exceed 365 days
and (z) the period during which a Force Majeure Event exists shall commence on
the date that the Borrower has given the Administrative Agent written notice
describing in reasonable detail the event which constitutes a Force Majeure
Event and the Administrative Agent has confirmed the existence of such Force
Majeure Event on the date of such notice and shall end on the date that such
Force Majeure Event no longer exists, whether or not notice is given to the
Administrative Agent, as determined by the Construction Consultant.
"F.R.S. BOARD" means the Board of Governors of the Federal Reserve System
or any successor thereto.
"GAAP" is defined in SECTION 1.4 of the Credit Agreement.
"GAI, LLC" means GAI, LLC, a Nevada limited-liability company.
"GAMING EQUIPMENT" means the gaming equipment and gaming devices which are
regulated gaming devices under any Nevada Gaming Law (such as slot machines,
cashless wagering systems and associated equipment) together with all
improvements and/or additions thereto financed by the $20,000,000 term loan
facility under the GECC Commitment.
"GAMING LICENSE" means any and all duly issued and valid licenses,
approvals, regulations, findings of suitability and authorizations relating to
gaming at the Hotel/Casino under the Nevada Gaming Laws or required by the
Nevada Gaming Authorities or necessary for the operation of gaming at the
Hotel/Casino.
"GECC" means General Electric Capital Corporation.
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"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 Investment Intermediary and the Disbursement Agent, for
the benefit of the Discount Note Indenture Trustee, and as thereafter from time
to time amended, supplemented, amended and restated or otherwise modified in
accordance with the terms of the Credit Agreement.
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<PAGE>
"HOLDINGS COMMON MEMBERSHIP INTEREST" means a Common Share as defined in
the Organizational Documents of Holdings.
"HOLDINGS PLEDGE AGREEMENT" means, on any date, the Pledge Agreement
executed and delivered by an Authorized Representative of Holdings pursuant to
CLAUSE (A) of SECTION 5.1.3 of the Credit Agreement, as originally in effect on
the Closing Date, in substantially the form of EXHIBIT E-5 to the Credit
Agreement and as thereafter from time to time amended, supplemented, amended and
restated or otherwise modified.
"HOLDINGS SERIES A PREFERRED MEMBERSHIP INTERESTS" means the Series A
Preferred Shares as defined in the Organizational Documents of Holdings and
issued to LCNI or Sommer Enterprises pursuant thereto in consideration for any
payments to the Borrower required by London Clubs, the Trust or AHL pursuant to
the Keep-Well Agreement, the Completion Guaranty or the Noteholder Completion
Guaranty, as the case may be, when such payments are Cash Equity Contributions
(as defined in the Keep-Well Agreement).
"HOLDINGS SERIES B PREFERRED MEMBERSHIP INTERESTS" means the Series B
Preferred Shares as defined in the Organizational Documents of Holdings and
issued to LCNI or Sommer Enterprises pursuant thereto in consideration for any
payments to the Borrower required by London Clubs, the Trust or AHL pursuant to
the Keep-Well Agreement when such payments are Cash Equity Contributions (as
defined in the Keep-Well Agreement).
"HOTEL" is defined in CLAUSE (A) of the FOURTH RECITAL of the Credit
Agreement.
"HOTEL/CASINO" is defined in CLAUSE (A) of the FOURTH RECITAL of the Credit
Agreement.
"HOTEL/CASINO COMPONENT" means the portion of the Complex described in
EXHIBIT N-8 to the Credit Agreement.
"HOTEL/CASINO COMPONENT FUNDING SOURCE" means the Land Equity, the London
Clubs Contribution, the proceeds of the Borrower Series A Preferred Membership
Interests, the Loans, the Approved Equipment Funding Commitments, the amounts
payable to the Borrower by Aladdin Bazaar pursuant to Section 4.5
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of the Site Work Agreement, together with any amounts payable under the
Completion Guaranty from time to time.
"IMPERMISSIBLE QUALIFICATION" means, relative to the opinion or
certification of any independent public accountant as to any financial statement
of the Borrower, any other Aladdin Party, LCNI, London Clubs Holdings or London
Clubs, any qualification or exception to such opinion or certification
(a) which is of a "going concern" or similar nature;
(b) which relates to the limited scope of examination of matters
relevant to such financial statement; or
(c) which relates to the treatment or classification of any item in
such financial statement and which, as a condition to its removal, would
require an adjustment to such item the effect of which would be to cause
the Borrower to be in default of any of its obligations under SECTION 7.2.4
of the Credit Agreement.
"IMPOSITION" means any real estate tax, payment in lieu of taxes or other
assessment levied, assessed or imposed against the portion of the Site owned by
the Borrower, and any water rates, sewer rentals or other governmental,
municipal or public dues, charges or impositions, of every nature and to
whomever assessed, that may now or hereafter be levied or assessed upon the
portion of the Site owned by the Borrower, or upon the rents, issues, income,
proceeds or profits thereof, whether the Imposition is levied directly or
indirectly against such portion of the Site owned by the Borrower or as excise
taxes or income taxes.
"IMPROVEMENT" means any building, structure or other improvements to be
located or constructed on the Main Project Parcel.
"IN BALANCE" will be deemed to exist when (x) the Unallocated Contingency
Balance equals or exceeds the Required Minimum Contingency, (y) after giving
effect to the requested Credit Extension, the Available Funds allocated to each
Line Item Category equals or exceeds for such Line Item Category the aggregate
of (1) the costs required to complete such Line Item Category, (2) the Retainage
Amount to be paid to Persons who have supplied labor or materials in connection
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with such Line Item Category and (3) the amount required to pay interest and all
other amounts due under the Credit Agreement and the Approval Equipment Funding
Commitments at the maximum rate of interest set forth in the Main Project Budget
through the Conversion Date and (z) the Guaranteed Maximum Price remains in
effect.
"INCLUDING" and "INCLUDE" means including, without limiting the generality
of any description preceding such term, and, for purposes of this Agreement and
each other Loan Document, the parties hereto agree that the rule of EJUSDEM
GENERIS shall not be applicable to limit a general statement, which is followed
by or referable to an enumeration of specific matters, to matters similar to the
matters specifically mentioned.
"INDEBTEDNESS" means, relative to any Person, without duplication:
(a) all obligations of such Person for borrowed money and all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments;
(b) all obligations, contingent or otherwise, relative to the face
amount of all letters of credit (or reimbursement agreements in respect
thereof), whether or not drawn, and banker's acceptances issued for the
account of such Person;
(c) all obligations of such Person as lessee under leases which have
been or should be, in accordance with GAAP, recorded as Capitalized Lease
Liabilities;
(d) all other items which, in accordance with GAAP, would be included
as liabilities on the liability side of the balance sheet of such Person as
of the date at which Indebtedness is to be determined;
(e) net liabilities of such Person under all Hedging Liabilities;
(f) whether or not so included as liabilities in accordance with
GAAP, all obligations of such Person to pay the deferred purchase price of
property or services, and indebtedness
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(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.
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"INSTRUMENT" means any contract, agreement, indenture, mortgage, deed of
trust, document or writing (whether by formal agreement, letter or otherwise)
under which any obligation is evidenced, assumed or undertaken, or any Lien (or
right or interest therein) is granted or perfected.
"INSURANCE CONSULTANT" means Sedgwick of Tennessee, Inc. or its successor
appointed pursuant to SECTION 9.8 of the Credit Agreement.
"INSURANCE REQUIREMENT" means any provisions of any insurance policy
covering or applicable to the Borrower, the Main Project or any portion thereof,
all requirements of the issuer of any such policy and all orders, rules,
regulations and other requirements of the National Board of Fire Underwriters
(or any body exercising similar functions) applicable to or affecting the Main
Project or any portion thereof, any use or condition thereof or the Borrower.
"INTEREST COVERAGE RATIO" means, at the close of any Fiscal Quarter, the
ratio computed for the period consisting of such Fiscal Quarter (or such shorter
portion of any Fiscal Quarter after the occurrence therein of the Conversion
Date and each of the three immediately prior Fiscal Quarters (or such lesser
number of Fiscal Quarters to have closed since the Conversion Date) of:
(a) EBITDA for such period
TO
(b) Interest Expense of the Borrower for such period;
PROVIDED, HOWEVER, that in computing the Interest Coverage Ratio for any such
period ending on or prior to the first anniversary of the Conversion Date, the
amount determined pursuant to CLAUSE (B) shall equal the product of (x) the
Interest Expense for such period MULTIPLIED BY (y) a fraction, the numerator of
which is equal to 365 and the denominator of which is equal to the number of
days that have elapsed in such period.
"INTEREST EXPENSE" means, for any period, the aggregate cash interest
expense (net of cash interest income) of the Borrower (including, to the extent
the Borrower has any Contingent Liability in respect of such interest expense,
the interest expense of other Persons) for such period, as determined in
accordance with
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GAAP, including the portion of any payments made in respect of Capitalized Lease
Liabilities allocable to interest expense, but EXCLUDING, HOWEVER, deferred
financing costs and other non-cash interest expense.
"INTEREST PAYMENT ACCOUNT" means the account established by the Borrower
with the Disbursement Agent pursuant to the Borrower Collateral Account
Agreement into which the proceeds of the Loans shall be deposited by the
Administrative Agent from time to time.
"INTEREST PERIOD" means, relative to any LIBO Rate Loan, the period
beginning on (and including) the date on which such LIBO Rate Loan is made or
continued as, or converted into, a LIBO Rate Loan pursuant to SECTION 2.3 or
SECTION 2.4 of the Credit Agreement and shall end on (but exclude) the day which
numerically corresponds to such date one, two, three, six or, if then generally
available from all Lenders, twelve months thereafter (or, if such month has no
numerically corresponding day, on the last Business Day of such month), as the
Borrower may select in its relevant notice pursuant to SECTION 2.3 or SECTION
2.4 of the Credit Agreement; PROVIDED, HOWEVER, that
(a) the Borrower shall not be permitted to select Interest Periods to
be in effect at any one time which have expiration dates,
(1) in the case of Term A Loans made or maintained as LIBO Rate
Loans, occurring on more than eight different dates,
(2) in the case of Term B Loans made or maintained as LIBO Rate
Loans, occurring on more than four different dates, and
(3) in the case of Term C Loans made or main-
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tained as LIBO Rate Loans, occurring on more than four different
dates;
(b) if such Interest Period would otherwise end on a day which is not
a Business Day, such Interest Period shall end on the next following
Business Day (unless such next following Business Day is the first Business
Day of a calendar month, in which case such Interest Period shall end on
the Business Day next preceding such numerically corresponding day); and
(c) no Interest Period for any Loan may end later than the Stated
Maturity Date for such Loan.
"INVESTMENT" means, relative to any Person,
(a) any loan or advance made by such Person to any other Person
(including Affiliates) (EXCLUDING, HOWEVER, commission, travel, petty cash
and similar advances to officers and employees made in the ordinary course
of business);
(b) any Contingent Liability of such Person incurred in connection
with loans or advances described in CLAUSE (A);
(c) any ownership or similar interest held by such Person in any
other Person; and
(d) any other item that is or would be classified as an investment on
a balance sheet of such Person prepared in accordance with GAAP.
The amount of any Investment shall be the original principal or capital amount
thereof less all returns of principal or equity thereon and shall, if made by
the transfer or exchange of property other than cash, be deemed to have been
made in an original principal or capital amount equal to the fair market value
of such property at the time of such Investment. If Holdings or any Subsidiary
of Holdings sells, assigns, transfers or otherwise disposes of any Equity
Interests of any direct or indirect
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Subsidiary of Holdings such that, after giving effect thereto, such Person is no
longer a Subsidiary of Holdings, Holdings or such Subsidiary shall be deemed to
have made an Investment on the date of such sale, assignment, transfer or other
disposition equal to the fair market value of the Equity Interests of such
Subsidiary not sold, assigned, transferred or otherwise disposed of in an amount
determined as provided in CLAUSE (D) of SECTION 7.2.6 of the Credit Agreement.
"ISSUANCE FEE OR EXPENSE" means any fee or expense incurred by the Borrower
in connection with the raising of debt or equity to finance the Main Project
which is paid on or before the Closing Date as more fully set forth on SCHEDULE
IX to the Credit Agreement.
"ISSUER" means Scotiabank in its capacity as issuer of the Letters of
Credit. At the request of Scotiabank, another Lender or an Affiliate of
Scotiabank may issue one or more Letters of Credit under the Credit Agreement.
"KEEP-WELL AGREEMENT" means, on any date, the Keep-Well Agreement, as
originally in effect on the Closing Date, by the Sponsors and ABH in favor of
the Lenders substantially in the form of EXHIBIT D to the Credit Agreement and
as thereafter from time to time amended, supplemented, amended and restated or
otherwise modified.
"KNOWLEDGE" of any Obligor means, at any time and relative to any matter,
knowledge which the Authorized Representatives of such Obligor would have after
inquiring of the current employees of such Obligor and its Subsidiaries who
would reasonably be expected to have knowledge regarding such matter, whether or
not such Authorized Representatives actually made inquiry of such employees.
"LAND EQUITY" is defined in CLAUSE (A) of the FIFTH RECITAL of the Credit
Agreement.
"LCNI" means London Clubs Nevada Inc., a Nevada corporation.
"LCNI PLEDGE AGREEMENT" means, on any date, the Pledge Agreement executed
and delivered by an Authorized Representative of LCNI pursuant to CLAUSE (B) of
SECTION 5.1.3 of the Credit Agreement, as originally in effect on the Closing
Date, in substantially the form of EXHIBIT E-6 to the Credit Agreement and as
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thereafter from time to time amended, supplemented, amended and restated or
otherwise modified.
"LEGAL REQUIREMENT" means, relative to any Person or property, all laws
(including Nevada Gaming Laws, if applicable), statutes, codes, regulations,
rules, acts, ordinances, permits, licenses, authorizations, directions and
requirements of all Governmental Instrumentalities, departments, commissions,
boards, courts, authorities, agencies, officials and officers, and any deed
restrictions or other requirements of record, applicable to such Person or such
property, or any portion thereof or interest therein or any use or condition of
such property or any portion thereof or interest therein (including those
relating to zoning, planning, subdivision, building, safety, health, use,
environmental quality and other similar matters).
"LENDER" is defined in the PREAMBLE of the Credit Agreement and, in
addition, shall include any commercial bank or other financial institution that
becomes a Lender pursuant to SECTION 10.11.1 of the Credit Agreement.
"LENDER ASSIGNMENT AGREEMENT" means a lender assignment agreement
substantially in the form of EXHIBIT H to the Credit Agreement.
"LENDER DEFAULT" means (x) the refusal (which has not been retracted) of a
Lender to make available its portion of any Borrowing or to fund its portion of
any unreimbursed payment under SECTION 2.6.1 of the Credit Agreement or (y) a
Lender having notified the Administrative Agent or the Borrower that it does not
intend to comply with its obligations under SECTION 2.3 or under SECTION 2.6.1
of the Credit Agreement, in either case, as a result of the appointment of a
receiver or conservator with respect to such Lender at the direction or request
of any regulatory agency or authority.
"LENDER'S ENVIRONMENTAL LIABILITY" means any and all losses, liabilities,
obligations, penalties, claims, litigation, demands, defenses, costs, judgments,
suits, proceedings, damages (including consequential damages), disbursements or
expenses of any kind or nature whatsoever (including reasonable attorneys' fees
at trial and appellate levels and consultants' and experts' fees and
disbursements and expenses incurred in investigating, defending against or
prosecuting any litigation, claim or proceeding) which may at any time be
imposed upon, incurred by or asserted or awarded against any Lender or any of
such Lender's parent and subsidiary corpora-
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tions, and their Affiliates, shareholders, directors, officers, employees, and
agents in connection with or arising from:
(a) any Hazardous Substances on, in, under or affecting all or any
portion of any property of the Borrower, any of the Borrower's Subsidiaries
or Aladdin Bazaar, the groundwater thereunder, or any surrounding areas
thereof to the extent caused by Releases from the Borrower, any of the
Borrower's Subsidiaries, any other Aladdin Party or Aladdin Bazaar or any
of their respective properties;
(b) any misrepresentation, inaccuracy or breach of any warranty,
contained or referred to in SECTION 6.12 of the Credit Agreement;
(c) any violation or claim of violation by the Borrower, any of the
Borrower's Subsidiaries, any other Aladdin Party or Aladdin Bazaar of any
Environmental Laws; or
(d) the imposition of any Lien for damages caused by or the recovery
of any costs for the cleanup, release or threatened release of Hazardous
Substances by the Borrower, any of the Borrower's Subsidiaries, any other
Aladdin Party or Aladdin Bazaar, or in connection with any property owned
or formerly owned by the Borrower, any of the Borrower's Subsidiaries, any
other Aladdin Party or Aladdin Bazaar, as the case may be.
"LENDER'S TAX" is defined in SECTION 4.6 of the Credit Agreement.
"LETTER OF CREDIT" is defined in SECTION 2.1.2 of the Credit Agreement.
"LETTER OF CREDIT COMMITMENT" means, (x) relative to an Issuer, such
Issuer's obligation to issue Letters of Credit pursuant to SECTION 2.1.2 of the
Credit Agreement and (y) relative to each Lender (other than the Issuer) that
has a Term A Loan Commitment, the obligation of such Lender to participate in
Letters of Credit pursuant to SECTION 2.6.1 of the Credit Agreement.
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"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
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Period for delivery on the first day of such Interest Period, and in an amount
approximately equal to the amount of the LIBO Rate Loans and for a period
approximately equal to such Interest Period.
"LIBO RATE LOAN" means a Loan bearing interest, at all times during an
Interest Period applicable to such Loan, at a fixed rate of interest determined
by reference to the LIBO Rate (Reserve Adjusted).
"LIBO RATE (RESERVE ADJUSTED)" means, relative to any Loan to be made,
continued or maintained as, or converted into, a LIBO Rate Loan for any Interest
Period, a rate per annum (rounded upwards, if necessary, to the nearest 1/16 of
1%) determined pursuant to the following formula:
LIBO Rate LIBO Rate
= -------------------------------
(Reserve Adjusted) 1.00 - LIBOR Reserve Percentage
The LIBO Rate (Reserve Adjusted) for any Interest Period for LIBO Rate Loans
will be determined by the Administrative Agent on the basis of the LIBOR Reserve
Percentage in effect, and the applicable rates furnished to and received by the
Administrative Agent from the Lenders, two Business Days before the first day of
such Interest Period.
"LIBOR RESERVE PERCENTAGE" means, relative to any Interest Period for LIBO
Rate Loans, the reserve percentage (expressed as a decimal) equal to the maximum
aggregate reserve requirements (including all basic, emergency, supplemental,
marginal and other reserves and taking into account any transitional adjustments
or other scheduled changes in reserve requirements) specified under regulations
issued from time to time by the F.R.S. Board and then applicable to assets or
liabilities consisting of or including "Eurocurrency Liabilities", as currently
defined in Regulation D of the F.R.S. Board, having a term approximately equal
or comparable to such Interest Period.
"LIEN" means, relative to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell or give a security interest
therein).
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"LINE ITEM" means each of the individual line items set forth in the Main
Project Budget.
"LINE ITEM CATEGORY" means each of the following line item categories of
the Main Project Budget:
(a) Construction Costs;
(b) Indirect Costs;
(c) Indirect Fees;
(d) General FF&E;
(e) Gaming Equipment;
(f) Owner FF&E;
(g) Theming;
(h) Project Contingency;
(i) Mall Project Reimbursement;
(j) Capitalized Interest;
(k) Fees/Other Expenses;
(l) Retirement of Existing Debt;
(m) Retirement of Partnership Debt;
(n) Pre-Opening Expenses;
(o) Working Capital;
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(p) Investment in Aladdin Music; and
(i) Land/Infrastructure Contract.
"LOAN" means a Term A Loan, a Term B Loan or a Term C Loan of any type.
"LOAN DOCUMENT" means, collectively, the Credit Agreement, the Notes, the
Letters of Credit, each Pledge Agreement, each Rate Protection Agreement, each
Borrowing Request, each Letter of Credit Issuance Request, the Security
Agreement, the Keep-Well Agreement, the Completion Guaranty, the GECC
Intercreditor Agreement, the Trademark Security Agreement, the Deed of Trust,
the Disbursement Agreement, the Mall Project Completion Assignment, the Fee
Letters, the Environmental Indemnity, the Assignment of Contracts, the Borrower
Collateral Account Agreement, the Holding Collateral Account Agreement, the
Servicing and Collateral Account Agreement, the Design/Builder Consent and
Acknowledgment and any other agreement, certificate, document or Instrument
delivered in connection with the Credit Agreement and such other agreements,
whether or not specifically mentioned herein or therein.
"LONDON CLUBS" means London Clubs International, plc, a company registered
in England and Wales.
"LONDON CLUBS CONTRIBUTION" means the $50,000,000 cash contribution by
London Clubs indirectly through London Clubs Holding and LCNI in consideration
for Common Membership Interests in Holdings.
"LONDON CLUBS HOLDINGS" means London Clubs Holdings, Ltd., a company
registered in England and Wales.
"LONDON CLUBS PARTIES" means, collectively, London Clubs and LCNI.
"LONDON CLUBS PURCHASE AGREEMENT" means the Amended and Restated Purchase
Agreement, dated the Effective Date, among London Clubs, LCNI, AHL, Sommer
Enterprises, the Trust, Holdings and the Borrower as originally in effect on the
Effective Date and as thereafter from time to time amended, supplemented,
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amended and restated or otherwise modified in accordance with the terms of the
Credit Agreement.
"LOSS PROCEEDS" is defined in SECTION 7.1.20 of the Credit Agreement.
"LOSS PROCEEDS ACCOUNT" is defined in the Borrower Collateral Account
Agreement.
"MAIN PROJECT" is defined in CLAUSE (A) of the FOURTH RECITAL of the Credit
Agreement.
"MAIN PROJECT BUDGET" means a budget in substantially the form of EXHIBIT
X-2 to the Credit Agreement (as amended from time to time in accordance with
SECTION 7.2.18 of the Credit Agreement) which shall include (w) a breakdown of
all Direct Costs and Indirect Costs by Line Item Categories, together with a
schedule of costs by trades and Main Project Costs (including Main Project Costs
incurred prior to, as well as after, the Effective Date, the Pre-Opening
Expenses, the Issuance Fees or Expenses, Debt Service and initial working
capital required to operate the Main Project on and after the Opening Date)
which (1) are to be paid from the Hotel/Casino Component Funding Sources and (2)
are to be constructed and paid for by the Borrower pursuant to the Site Work
Agreement for improvements to the Mall Project, (x) a schedule setting forth the
FF&E which is to be purchased from the proceeds of the Loans (which FF&E shall
not include any Gaming Equipment and/or Specified Equipment), (y) a drawdown
schedule for Advances necessary to achieve Final Completion and such other
information relative to such Main Project Costs and the funding thereof as the
Administrative Agent may reasonably require and (z) a balanced statement of
sources and uses of proceeds (and any other funds necessary to complete the Main
Project), broken down by Construction Component and Line Item. The Main Project
Costs shall not exceed $724,000,000.
"MAIN PROJECT BUDGET/SCHEDULE AMENDMENT CERTIFICATE" means a Main Project
Budget/Schedule Amendment Certificate substantially in the form of EXHIBIT X-3
to the Credit Agreement.
"MAIN PROJECT CERTIFICATE OF OCCUPANCY" means a permanent or temporary
certificate of occupancy, in either case, for the portion of the Main Project
specified in such certificate of occupancy issued by the Building Department
pursuant to applicable Legal Requirements which permanent or temporary
certificate of occupancy shall permit such portion of the Main Project to be
used for its intended
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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);
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(e) costs incurred in settling insurance claims in connection with
Events of Loss and collecting Loss Proceeds;
(f) amounts due under the Energy Project Service Agreement prior to
the Conversion Date; and
(g) without duplication, working capital costs.
"MAIN PROJECT DOCUMENT" means, collectively, the Design/Build Contract, the
Fluor Guaranty, the Contracts, the Energy Project Service Agreement, the Energy
Project Ground Lease, the Mall Project Ground Lease, the Music Project Ground
Lease, the Theater Lease (if entered into), the Reciprocal Easement Agreement,
the Common Parking Area Use Agreement, the Site Work Agreement, the Project
Management Agreement, the Development Agreement or any other document or
agreement entered into on, prior to or after the Effective Date, relating to the
development, construction, maintenance or operation of the Main Project (other
than the Loan Documents and the Discount Note Trust Indenture), as the same may
be amended from time to time in accordance with the terms and conditions of the
Credit Agreement and thereof.
"MAIN PROJECT EASEMENT" means any easement appurtenant, easement in gross,
license agreement or other right running for the benefit of the Borrower or
appurtenant to the Main Project Parcel, including those easements and licenses
described in the Reciprocal Easement Agreement and each Title Policy.
"MAIN PROJECT INTENDED USE" means each intended use of the Main Project, as
more particularly set forth on EXHIBIT O to the Credit Agreement.
"MAIN PROJECT PARCEL" means the portion of the Site described on
EXHIBIT N-3 to the Credit Agreement together with the Main Project Easements.
"MAIN PROJECT PUNCHLIST COMPLETION CERTIFICATE" means the Main Project
Punchlist Completion Certificate substantially in the form of EXHIBIT V to the
Credit Agreement.
"MAIN PROJECT PUNCHLIST ITEM" means any minor or insubstantial detail of
construction or mechanical adjustment, the non-completion of which, when all
such
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items are taken together, will not interfere in any material respect with the
use or occupancy of any portion of the Main Project for its intended purposes or
the ability of the owner of the Main Project or the Energy Project Provider, as
applicable, to perform work that is necessary or desirable to prepare such
portion of the Main Project for such use or occupancy; PROVIDED, HOWEVER, that,
in all events, "MAIN PROJECT PUNCHLIST ITEMS" shall include the items set forth
in the punchlist to be delivered by the Borrower in connection with Substantial
Completion (as defined in the Design/Build Contract) and all items that are
listed on the "punchlists" furnished by the Building Department, the Nevada
Department of Transportation or the Clark County Department of Public Works in
connection with, or after, the issuance of a temporary Main Project Certificate
of Occupancy for the portion of the Main Project covered thereby as those that
must be completed in order for the Building Department to issue a permanent Main
Project Certificate of Occupancy.
"MAIN PROJECT SECURITY" means all real and personal property which is
subject or is intended to become subject to the security interests or liens
granted by any of the Operative Documents.
"MAJOR CONTRACTOR" means a Contractor who is party to a Material Main
Project Document.
"MALL PROJECT" is defined in CLAUSE (B) of the FOURTH RECITAL of the Credit
Agreement.
"MALL PROJECT COMPLETION ASSIGNMENT" means, on any date, the Mall Project
Completion Assignment, as originally in effect on the Closing Date, from
Holdings in favor of the Lenders substantially in the form of EXHIBIT G to the
Credit Agreement and as thereafter from time to time amended, supplemented,
amended and restated or otherwise modified.
"MALL PROJECT EASEMENT" means any easement appurtenant, easement in gross,
license agreement or other right running for the benefit of Aladdin Bazaar or
appurtenant to the Mall Project Parcel, including those certain easements and
licenses described in the Reciprocal Easement Agreement and each Title Policy.
"MALL PROJECT GROUND LEASE" means, on any date, the Lease, as originally in
effect on the Effective Date, between the Borrower and Aladdin Bazaar and as
thereafter from time to time amended, supplemented, amended and restated or
otherwise modified in accordance with the terms of the Credit Agreement.
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"MALL PROJECT PARCEL" means the portion of the Site described on
EXHIBIT N-4 to the Credit Agreement, together with the Mall Project Easements.
"MALL PROJECT PARCEL CREATION DATE" means the date on which the Mall
Project Parcel is created in accordance with CLAUSE (B) of SECTION 7.1.19 of the
Credit Agreement.
"MANDATORY PREPAYMENT" is defined in CLAUSE (C) of SECTION 3.1.1 of the
Credit Agreement.
"MATERIAL ADVERSE EFFECT" means (x) a material adverse effect on the
financial condition, business, property, prospects of the Borrower or on its
ability to perform in all material respects its obligations under any Operative
Document to which it is a party, (y) a material adverse effect on the financial
condition, business, property, prospects and ability of any other Project Party
to perform in all material respects its obligations under any Operative Document
to which it is a party or (z) a material impairment of the validity or
enforceability of, or a material impairment of the rights, remedies or benefits
available to the Administrative Agent, the Issuer or the Lenders under the
Credit Agreement or any other Operative Document; PROVIDED, HOWEVER, that
whenever the term "Material Adverse Effect" is used in a representation or
warranty made by the Borrower, such representation or warranty as it relates to
CLAUSE (Y) above shall be deemed to have been made to the Borrower's Knowledge.
"MATERIAL MAIN PROJECT DOCUMENT" means the Mall Project Ground Lease, the
Music Project Ground Lease, the Reciprocal Easement Agreement, the Site Work
Agreement, the Common Parking Area Use Agreement, the Energy Project Ground
Lease, the Energy Project Service Agreement, the Theater Lease, the Design/Build
Contract, the Fluor Guaranty, the Project Management Agreement, the Development
Agreement any other material agreement, certificate, document or Instrument
delivered in connection with or by the Borrower and any other Person to any
Material Main Project document and such other agreements, whether or not
specifically mentioned herein or therein and, without duplication, any Main
Project Document with a total contract amount in excess of $2,500,000.
"MEMBERSHIP INTEREST" means, relative to any Person which is a limited
liability company, a membership interest or a limited liability company
interest, as the case may be, of such Person.
"MERRILL LYNCH" is defined in the PREAMBLE of the Credit Agreement.
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"MINIMUM FIXED CHARGE COVERAGE RATIO" means, as of the close of any Fiscal
Quarter, commencing with the close of the Fiscal Quarter in which the Conversion
Date occurs, the ratio computed for the period consisting of such Fiscal
Quarter (or such shorter period of any Fiscal Quarter after the occurrence
therein of the Conversion Date and each of the three immediately prior Fiscal
Quarters (or such lesser number of Fiscal Quarters to have closed since the
Conversion Date) of:
(a) EBITDA (for all such Fiscal Quarters or such shorter period, as
the case may be and determined for any period ending on or prior to the
first anniversary of the Conversion Date, consistently with the proviso to
the definition of "EBITDA");
TO
(b) the sum (for all such Fiscal Quarters or such shorter period, as
the case may be) of
(i) Interest Expense;
PLUS
(ii) scheduled principal repayments of the Loans pursuant to
CLAUSES (B) and (C) of SECTION 3.1.1 of the Credit Agreement after
giving effect to any reductions in such scheduled principal repayments
attributable to any optional or mandatory prepayments of the Loans and
scheduled payments made with respect to the FF&E Financing;
PLUS
(iii) the amount of all federal, state and local income taxes
(whether paid in cash or deferred) of the Borrower paid by the
Borrower or, if the Borrower is treated as a pass-through entity or is
not treated as a separate entity for United States federal income tax
purposes, the amount of Restricted Payments made by the Borrower in
accordance with CLAUSE (C) of SECTION 7.2.6 of the Credit Agreement,
subject to the terms thereof, in each case, in cash during such Fiscal
Quarters;
PLUS
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(iv) Restricted Payments of the types described in CLAUSE (D) of
SECTION 7.2.6 of the Credit Agreement made in cash during such Fiscal
Quarters;
PLUS
(v) Capital Expenditures of the Borrower actually made or
reserved during all such Fiscal Quarters pursuant to SECTION 7.2.7 of
the Credit Agreement;
PROVIDED, HOWEVER, that in computing the Minimum Fixed Charge Coverage Ratio for
any such period ending on or prior to the first anniversary of the Conversion
Date, the amount determined pursuant to CLAUSE (B) shall equal the product of
(x) the sum of the amounts determined pursuant to CLAUSE (B) for such period
MULTIPLIED BY (y) a fraction, the numerator of which is equal to 365 and the
denominator of which is equal to the number of days that have elapsed in such
period.
"MOODY'S" means Moody's Investors Service, Inc., a Delaware corporation, or
any successor thereto.
"MUSIC INVESTMENT PREPAYMENT" is defined in CLAUSE (D) of SECTION 3.1.1 of
the Credit Agreement.
"MUSIC PROJECT" is defined in CLAUSE (C) of the FOURTH RECITAL of the
Credit Agreement.
"MUSIC PROJECT EASEMENT" means any easement appurtenant, easement in gross,
license agreement or other right running for the benefit of Aladdin Music or
appurtenant to the Music Project Parcel, including those certain easements and
licenses described in the Reciprocal Easement Agreement and each Title Policy.
"MUSIC PROJECT GROUND LEASE" means, on any date, the Lease, as originally
in effect on the Effective Date, between the Borrower and Aladdin Music and as
thereafter from time to time amended, supplemented, amended and restated or
otherwise modified in accordance with the terms of the Credit Agreement.
"MUSIC PROJECT PARCEL" means the portion of the Site described on
EXHIBIT N-5 to the Credit Agreement, together with the Music Project Easements.
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"MUSIC PROJECT PARCEL CREATION DATE" means the date on which the Music
Project Parcel is created in accordance with CLAUSE (C) of SECTION 7.1.19 of the
Credit Agreement.
"NET DISTRIBUTION AMOUNT" means, for any period, the amount of fees paid to
AMH under any keep-well agreement relating to the Music Project and then paid as
distributions in cash to the Borrower by AMH to the extent permitted thereunder.
"NET INCOME" means, for any period, the aggregate of all amounts (including
extraordinary losses) which, in accordance with GAAP, would be included in
determining net income on the financial statements of the Borrower for such
period (EXCLUDING, HOWEVER, (x) all amounts in respect of any extraordinary
gains and any non-cash income and (y) net income of any Subsidiary, other than
any Net Distribution Amount paid in cash to the Borrower during such period).
"NET WORTH" means the net worth of the Borrower determined in accordance
with GAAP.
"NEVADA GAMING AUTHORITY" means the Nevada Gaming Commission, the Nevada
State Gaming Control Board or the Clark County Liquor and Gaming Licensing
Board.
"NEVADA GAMING LAW" means the Nevada Gaming Control Act, as codified in
Chapter 463 of the NRS, as amended from time to time, and the regulations of the
Nevada Gaming Commission promulgated thereunder, as amended from time to time,
and Clark County Code Sections 8.04.010 to 8.04.310 and 8.20.010 to 8.20.580, as
amended from time to time.
"NON-DEFAULTING LENDER" means and includes each Lender other than a
"Defaulting Lender".
"NOTE" means a Term A Note, a Term B Note, a Term C Note or a Registered
Note.
"NOTE CONSTRUCTION DISBURSEMENT ACCOUNT" is defined in the Holdings
Collateral Account Agreement.
"NOTEHOLDER COMPLETION GUARANTY" means, on any date, the Noteholder
Completion Guaranty, as originally in effect on the Effective Date, by the
Comple-
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tion Guarantors in favor of the Discount Note Indenture Trustee (for the benefit
of the Discount Noteholders) as thereafter from time to time amended,
supplemented, amended and restated or otherwise modified in accordance with the
terms of the Credit Agreement.
"NRS" means Nevada Revised Statutes.
"OBLIGATIONS" means (x) all loans, advances, debts, liabilities and
obligations, howsoever arising, owed by the Borrower under the Credit Agreement
to any Lender of every kind and description (whether or not evidenced by any
note or instrument and whether or not for the payment of money), direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, pursuant to the terms of the Disbursement Agreement, any of
the Loan Documents or any of the other Operative Documents, including all
interest, fees, charges, expenses, attorneys' fees, consultants' fees and
accountants' fees chargeable to the Borrower in connection with such Person's
dealings with the Borrower and payable by the Borrower under the Credit
Agreement or thereunder; (y) any and all sums advanced by the Lenders in order
to preserve the Main Project Security or preserve any Secured Parties' security
interest in the Main Project Security, including all protective advances; and
(z) in the event of any proceeding for the collection or enforcement of, or any
"working out" of, the Obligations after an Event of Default shall have occurred
and be continuing, the reasonable expenses of retaking, holding, preparing for
sale or lease, selling or otherwise disposing of or realizing on the Main
Project Security, or of any exercise by any Secured Party of its rights under
the Operative Documents, together with reasonable attorneys' fees and court
costs.
"OBLIGOR" means, as the context may require, the Borrower, each other
Aladdin Party, LCNI, London Clubs Holdings, London Clubs, each Sponsor, each
Completion Guarantor and each other Person (other than the Agents, the Issuer or
any Lender) to the extent such Person is obligated under the Credit Agreement or
any other Operative Document.
"ONGOING INVESTMENT" is any Investment listed in ITEM 7.2.5(A) on the
Disclosure Schedule.
"ON SCHEDULE CERTIFICATE" means a certificate in the form of EXHIBIT AA to
the Credit Agreement.
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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
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course of business, (x) gaming and other operations in accordance with
applicable Legal Requirements are open to the general public and are being
conducted at the Hotel/Casino, (y) a Main Project Certificate of Occupancy has
been issued for the Main Project by the Building Department and (z) a notice of
completion of the Main Project has been duly recorded.
"OPERATING COSTS" means all actual cash costs incurred by the Borrower and
related to the operation of the Main Project or any portion thereof in the
ordinary course of business, including costs incurred for labor, consumables,
utility services and all other operation-related costs; PROVIDED, HOWEVER, that
(x) Operating Costs shall not include non-cash charges (including depreciation
and amortization) and (y) Debt Service shall constitute Operating Costs from and
after the Conversion Date but not prior to such date.
"OPERATIVE DOCUMENT" means any Loan Document or Main Project Document.
"ORGANIZATIONAL DOCUMENT" means, relative to any Obligor, as applicable,
its certificate or articles of incorporation, by-laws, certificate of
partnership, partnership agreement, certificate of formation, articles of
organization, operating agreement, limited liability company or operating
agreement and all shareholder agreements, voting trusts and similar arrangements
applicable to any of such Obligor's partnership interests, limited liability
company interests or authorized shares of capital stock.
"OUTSIDE COMPLETION DEADLINE" means the date which is 28 months following
the Effective Date, time being of the essence; PROVIDED, HOWEVER, if a Force
Majeure Event occurs, then the Borrower shall be permitted to extend the
Completion Date for up to one year subject to the satisfaction by the Borrower
of the conditions to such extension as set forth in the definition of "Force
Majeure Event".
"OWNER REPRESENTATIVE" means Tishman Construction Corporation of Nevada.
"PARTICIPANT" is defined in SECTION 10.11.2 of the Credit Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
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"PENSION PLAN" means a "pension plan", as such term is defined in
Section 3(2) of ERISA, which is subject to Title IV of ERISA (EXCLUDING,
HOWEVER, a multiemployer plan as defined in Section 4001(a)(3) of ERISA), and to
which the Borrower or any corporation, trade or business that is, along with the
Borrower, a member of a Controlled Group, may have liability, including any
liability by reason of having been a substantial employer within the meaning of
Section 4063 of ERISA at any time during the preceding five years, or by reason
of being deemed to be a contributing sponsor under Section 4069 of ERISA.
"PERCENTAGE" means, relative to any Lender, the applicable percentage
relating to Term A Loans, Term B Loans or Term C Loans, as the case may be, as
set forth opposite its signature to the Credit Agreement under the applicable
column heading or as set forth in a Lender Assignment Agreement under the
applicable column heading, as such percentage may be adjusted from time to time
pursuant to Lender Assignment Agreement(s) executed by such Lender and its
Assignee Lender(s) and delivered pursuant to SECTION 10.11.1 of the Credit
Agreement. A Lender shall not have any Commitment to make Term A Loans, Term B
Loans or Term C Loans, as the case may be, if its percentage under the
applicable column heading is zero percent (0%).
"PERMIT" means any material building, construction, land use, environmental
or other permit, license, franchise, approval, consent and authorization
(including central bank and planning board approvals from applicable
Governmental Instrumentalities and approvals required under the Nevada Gaming
Law) required for or in connection with the construction, ownership, use,
occupation and operation of the Main Project and the transactions provided for
in the Credit Agreement and the other Operative Documents.
"PERMITTED ENCUMBRANCE" means any encumbrance against all or a portion of
the Site as set forth in EXHIBIT BB to the Credit Agreement.
"PERMITTED EXCEPTION" means any exception to title to all or a portion of
the Site as set forth in EXHIBIT CC to the Credit Agreement.
"PERMITTED LIEN" means any of the following types of Liens (EXCLUDING,
HOWEVER, any such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the
Internal Revenue Code or by ERISA, any such Lien relating to or imposed in
connection with any Environmental Claim and any such Lien expressly prohibited
by
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any applicable terms of any of the Operative Documents or the Discount Note
Indenture):
(a) Liens in favor of the Borrower;
(b) Liens to secure the performance of statutory obligations, surety
or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business or in the construction of the
Main Project; PROVIDED, HOWEVER, that the Borrower has obtained a title
insurance endorsement insuring against losses arising therewith or, if such
Lien arises after completion of the Main Project, the Borrower has bonded
such Lien within a reasonable time after becoming aware of the existence of
such Lien;
(c) Liens securing the Obligations under the Operative Documents;
(d) Liens existing on the Effective Date and set forth in ITEM 7.2.3
of the DISCLOSURE SCHEDULE;
(e) (x) Liens for Impositions or (y) statutory Liens of landlords,
and carriers', warehousemen's, mechanics', suppliers', materialmen's,
repairmen's or other similar Liens arising in the ordinary course of
business or in the construction of the Main Project, in the case of each of
ITEMS (X) and (Y), with respect to amounts that either (1) are not yet
delinquent or (2) are being diligently contested in good faith by
appropriate proceedings, PROVIDED, however, that, in each case, any reserve
or other appropriate provision as shall be required in conformity with GAAP
shall have been made therefor;
(f) easements, rights-of-way, avigational servitude, restrictions,
minor defects or irregularities in title and other similar charges or
encumbrances which do not interfere in any material respect with the
ordinary conduct of business of the Borrower;
(g) Liens created by the Reciprocal Easement Agreement;
(h) Liens created by the Disbursement Agreement;
(i) licenses of patents, trademarks and other intellectual property
rights granted by the Borrower in the ordinary course of business;
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(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
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accepted accounting principles shall have been made for any such contested
amounts, and (2) in the case of a Lien with respect to any portion of the
Main Project Security, such contest proceedings conclusively operate to
stay the sale of any portion of the Main Project Security on account of
such Lien;
(n) Liens for taxes, assessments or governmental charges or claims
the payment of which is not, at the time due and payable or which is being
contested in good faith by appropriate governmental proceedings promptly
instituted and diligently contested, so long as (x) such reserve or other
appropriate provision, if any, as shall be required in conformity with
generally accepted accounting principles shall have been made therefor
through an allocation in the Trade Detail Report and (y) in case of any
charge or claim which has or may become a Lien against any of the Main
Project Security, such contest proceedings conclusively operate to stay the
sale of any portion of the Main Project Security to satisfy such charge or
claim;
(o) Liens created by the Common Parking Area Use Agreement; and
(p) Liens created pursuant to Permitted Refinancing Indebtedness
which is incurred to refinance Indebtedness which has been secured by a
Lien and is permitted under SECTION 7.2.2 of the Credit Agreement and which
has been incurred in accordance with such Section; PROVIDED, HOWEVER, that
such Liens do not extend to cover any property or assets of the Borrower
not already securing the Indebtedness so refinanced.
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the Borrower
issued in exchange for, or the net proceeds of which are used to extend,
refinance, renew, replace, defease or refund other Indebtedness of the Borrower;
PROVIDED, HOWEVER, that (u) the principal amount of such Permitted Refinancing
Indebtedness does not exceed the principal amount plus accrued interest on the
Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded
(PLUS the amount of reasonable expenses incurred in connection therewith),
(v) such Permitted Refinancing Indebtedness has a final maturity date later than
the final maturity date of, and has a Weighted Average Life to Maturity equal to
or greater than the Weighted Average Life to Maturity of, the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded, (w) such
Indebtedness is incurred by the Borrower as the Obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded, (x) the
security, if any, for the Permitted Refinancing Indebtedness shall be the same
as that for the Indebtedness
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being refinanced (except to the extent that less security is granted to holders
of such refinancing Indebtedness), (y) the holders of the Permitted Refinancing
Indebtedness are not afforded covenants, defaults, rights or remedies more
burdensome to the obligor or obligors than those contained in the Indebtedness
being refinanced and (z) the Permitted Refinancing Indebtedness is subordinated
to the same degree, if any, as the Indebtedness being refinanced.
"PERSON" means any natural person, corporation, limited liability company,
partnership, joint venture, joint stock company, firm, association, trust or
unincorporated organization, government, governmental agency, Governmental
Instrumentality, court or any other legal entity, whether acting in an
individual, fiduciary or other capacity.
"PLAN" means any Pension Plan or Welfare Plan.
"PLANET HOLLYWOOD" means Planet Hollywood International, Inc.
"PLANS AND SPECIFICATIONS" means all plans, specifications, design
documents, schematic drawings and related items for the design, architecture and
construction of the Main Project that are listed on SCHEDULE VII to the Credit
Agreement, as the same may be (x) finalized in a manner that reflects a natural
evolution of their status on the date of the Credit Agreement and in a manner
consistent with the standards set forth in SECTION 7.2.17 of the Credit
Agreement and (y) amended in accordance with SECTION 7.2.17 of the Credit
Agreement.
"PLEDGE AGREEMENT" means, as the context may require, the Holdings Pledge
Agreement, the LCNI Pledge Agreement, the Sommer Enterprises Pledge Agreement,
the AHL Pledge Agreement, the Enterprises Pledge Agreement, the Borrower Pledge
Agreement or the AMH Pledge Agreement.
"PLEDGED ENTITY" means, at any time, each Person in respect of which the
Lenders have been granted, at such time, a security interest in and to, or a
pledge of, any of the issued and outstanding interests or shares of Capital
Stock of such Person.
"PREFERRED STOCK" means any Equity Interest with preferential right of
payment of dividends or distributions, as applicable, or upon liquidation,
dissolution or winding up.
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"PRE-OPENING EXPENSE" means any expense of the type listed in SCHEDULE VIII
to the Credit Agreement.
"PRE-OPENING REVENUES" means all operating revenues received by the
Borrower with respect to the Main Project prior to the Opening Date.
"PROCESS AGENT" is defined in SECTION 10.14 of the Credit Agreement.
"PROJECT MANAGEMENT AGREEMENT" means, on any date, the Project Management
Agreement, as originally in effect on the Effective Date, between AHL and the
Owner Representative and as thereafter from time to time amended, supplemented,
amended and restated or otherwise modified in accordance with the terms of the
Credit Agreement.
"PROJECT PARTY" means the Borrower, AHL, Sommer Enterprises, Capital,
Holdings, London Clubs, LCNI, the Design/Builder or Fluor.
"QUARTERLY PAYMENT DATE" means the last Business Day of each March, June,
September and December.
"RATE PROTECTION AGREEMENT" means any interest rate swap, cap, collar or
similar agreement entered into by the Borrower in respect of the Loans pursuant
to the terms of the Credit Agreement under which the counterparty to such
agreement is (or, at the time such Rate Protection Agreement was entered into,
was) a Lender or an Affiliate of a Lender reasonably acceptable to the
Administrative Agent.
"REAL PROPERTY" means, relative to any Person, such Person's present and
future right, title and interest (including any leasehold estate) in
(a) any plots, pieces or parcels of land;
(b) any improvements, buildings, structures and fixtures now or
hereafter located or erected thereon or attached thereto of every nature
whatsoever;
(c) any other interests in property constituting appurtenances to the
Site, or which hereafter shall in any way belong, relate or be appurtenant
thereto; and
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(d) all other rights and privileges thereunto belonging or
appertaining and all extensions, additions, improvements, betterments,
renewals, substitutions and replacements to or of any of the rights and
interests described in CLAUSE (C).
"REALIZED SAVINGS" means:
(a) the portion of any decrease to the Guaranteed Maximum Price
retained or to be retained by the Borrower in accordance with the
provisions of Attachment H to the Design/Build Contract in the "COST OF THE
WORK" (as defined in Section 3 of attachment G to the Design/Build
Contract) contemplated by a Line Item but only to the extent that the
Guaranteed Maximum Price has been reduced as a result of such decrease in
the anticipated "COST OF THE WORK" as approved in writing by the
Design/Builder and such reduction is confirmed by the Construction
Consultant;
(b) with respect to the Construction Period Interest Line Item, a
decrease in the anticipated cost of construction period interest resulting
from (x) a decrease in the interest rates payable by the Borrower prior to
the date which is six months after the Conversion Date as determined by the
Administrative Agent with the reasonable concurrence of the Borrower taking
into account the current and future anticipated interest rates and the
anticipated times and amounts of draws under the Bank Credit Facility for
the payment of Main Project Costs or (y) the anticipated Conversion Date
being earlier than the date set therefor in the Construction Benchmark
Schedule as determined by the Owner Representative with the reasonable
concurrence of the Construction Consultant; and
(c) with respect to any other Line Item, the amount by which the
total cost allocated to such Line Item exceeds the total cost incurred by
the Borrower to complete all aspects of the Work contemplated by such Line
Item which amount shall not be established until the Borrower has actually
completed 90% of all such Work;
in each case, which is documented by the Borrower in a Realized Savings
Certificate substantially in the form of EXHIBIT W to the Credit Agreement, duly
executed and completed with all exhibits and attachments thereto.
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"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.
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"REQUIRED MINIMUM CONTINGENCY" means (w) during the first month after the
Effective Date, no less than $24,000,000, (x) during the second month after the
Effective Date, no less than $23,000,000, (y) during the third month after the
Effective Date, no less than $22,000,000 and (z) thereafter the product of (1)
$25,000,000 REDUCED BY (2) the $25,000,000 multiplied by the percentage
completed in respect of such Line Item Category on the date that the Advance is
made.
"REQUIRED SCOPE CHANGE APPROVAL" means, relative to each proposed Scope
Change, the consent of the Administrative Agent.
"RESTRICTED PAYMENT" is defined in CLAUSE (B) of SECTION 7.2.6 of the
Credit Agreement.
"RETAINAGE AMOUNT" means, at any given time, amounts which have accrued and
are owing under the terms of the Design/Build Contract, a Contract or a
Subcontract, as the case may be, for work or services already provided but which
at such time (and in accordance with the terms of the Design/Build Contract, the
Contract or Subcontract, as the case may be) are being withheld from payment to
the Design/Builder, a Contractor or a Subcontractor, as the case may be, until
certain subsequent events (E.G., completion benchmarks) have been achieved under
the Design/Build Contract or relevant Contract or Subcontract.
"REVIEWING ACCOUNTANT" means Arthur Andersen LLP or any nationally
recognized firm of independent public accountants subsequently selected by the
Borrower with the consent of the Administrative Agent from time to time (which
shall not be unreasonably withheld or delayed), as auditors of the Borrower.
"S&P" means Standard & Poor's Ratings Group, Inc., a New York corporation,
or any successor thereto.
"SALLE PRIVEE MANAGEMENT AGREEMENT" means, on any date, the Management
Agreement, as originally in effect on the Effective Date, between the Borrower,
LCNI and London Clubs and as thereafter from time to time amended, supplemented,
amended and restated or otherwise modified in accordance with the terms of the
Credit Agreement.
"SCHEDULED AMORTIZATION" is defined in CLAUSE (B) of SECTION 3.1.1 of the
Credit Agreement.
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"SCOPE CHANGE" means any change in the "Services" or "Work".
"SCOTIABANK" is defined in the PREAMBLE of the Credit Agreement.
"SCOTIABANK FEE LETTER" means the confidential letter agreement, dated
December 4, 1997, among the Borrower, the Sponsors and Scotiabank.
"SEC" means the Securities and Exchange Commission.
"SECURED PARTY" means the Lenders, the Issuer, the Agents, each
counterparty to a Rate Protection Agreement that is (or at the time such Rate
Protection Agreement was entered into, was) a Lender or an Affiliate thereof
reasonably acceptable to the Administrative Agent and, in each case, each of
their respective successors, transferees and assigns.
"SECURITY AGREEMENT" means, on any date, the Security Agreement executed
and delivered by an Authorized Representative of the Borrower pursuant to
SECTION 5.1.5 of the Credit Agreement, as originally in effect on the Closing
Date, in substantially the form of EXHIBIT F to the Credit Agreement and as
thereafter from time to time amended, supplemented, amended and restated or
otherwise modified.
"SERVICES" is defined in SECTION 1.7 of the Design/Build Contract.
"SERVICING AND COLLATERAL ACCOUNT AGREEMENT" means, on any date, the
Servicing and Collateral Account Agreement, as originally in effect on the
Closing Date, among the Disbursement Agent, the Borrower and the Servicing Agent
and as thereafter from time to time amended, supplemented, amended and restated
or otherwise modified in accordance with the terms of the Credit Agreement.
"SHOULDER SPACE" means the property and space described in EXHIBIT N-6 to
the Credit Agreement.
"SITE" is defined in the FOURTH RECITAL of the Credit Agreement and is more
fully described in EXHIBIT N-1 to the Credit Agreement.
"SITE EASEMENT" means any easement appurtenant, easement in gross, license
agreement and other right running for the benefit of the Borrower, the Main
Project, the Mall Project and the owner of the Mall Project, the Music Project
and the owner of the Music Project, the Energy Project and the lessee of the
Energy Project or
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appurtenant to the Site, including those certain easements and licenses
described in the Title Policy.
"SITE WORK AGREEMENT" means, on any date, the Site Work Development and
Construction Agreement, as originally in effect on the Effective Date, among the
Borrower, AHL and Aladdin Bazaar and as thereafter from time to time amended,
supplemented, amended and restated or otherwise modified in accordance with the
terms of the Credit Agreement.
"SOLVENCY CERTIFICATE" means a solvency certificate to be executed and
delivered by the chief financial or accounting Authorized Representative of the
Borrower substantially in the form of EXHIBIT P to the Credit Agreement.
"SOLVENT" means, relative to any Person and its Subsidiaries on a
particular date, that on such date (w) the fair value of the property of such
Person and its Subsidiaries on a consolidated basis is greater than the total
amount of liabilities, including contingent liabilities, of such Person and its
Subsidiaries on a consolidated basis, (x) the present fair salable value of the
assets of such Person and its Subsidiaries on a consolidated basis is not less
than the amount that will be required to pay the probable liability of such
Person and its Subsidiaries on a consolidated basis on its debts as they become
absolute and matured, (y) such Person does not intend to, and does not believe
that it or its Subsidiaries will, incur debts or liabilities beyond the ability
of such Person and its Subsidiaries to pay as such debts and liabilities mature
and (z) such Person and its Subsidiaries on a consolidated basis are not engaged
in a business or transaction, and such Person and its Subsidiaries on a
consolidated basis are not about to engage in business or a transaction, for
which the property of such Person and its Subsidiaries on a consolidated basis
would constitute an unreasonably small capital.
"SOMMER ENTERPRISES" means Sommer Enterprises, LLC, a Nevada
limited-liability company.
"SOMMER ENTERPRISES PLEDGE AGREEMENT" means, on any date, the Pledge
Agreement executed and delivered by an Authorized Representative of Sommer
Enterprises pursuant to CLAUSE (C) of SECTION 5.1.3 of the Credit Agreement, as
originally in effect on the Closing Date, in substantially the form of
EXHIBIT E-7 to the Credit Agreement and as thereafter from time to time amended,
supplemented, amended and restated or otherwise modified.
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"SPECIFIED EQUIPMENT" means the portion of the new FF&E together with all
improvements and/or additions thereto covered by an FF&E Lease and financed by a
portion of the FF&E Financing.
"SPONSOR" means AHL or London Clubs.
"STATED AMOUNT" of each Letter of Credit means the total amount available
to be drawn under such Letter of Credit upon the issuance thereof.
"STATED MATURITY DATE" means
(a) with respect to all Term A Loans, the date which is the seventh
anniversary of the Closing Date;
(b) with respect to all Term B Loans, the date which is 8.5 years
after the Closing Date; and
(c) with respect to all Term C Loans, the tenth anniversary of the
Closing Date.
"SUBCONTRACT" means a contract between the Design/Builder and a
Subcontractor which has been entered into in accordance with the Design/Build
Contract.
"SUBCONTRACTOR" is defined in the Design/Build Contract.
"SUBSIDIARY" means, relative to any Person, any corporation, partnership or
other business entity of which more than 50% of the outstanding capital stock
(or other ownership interest) having ordinary voting power to elect the board of
directors, managers or other voting members of the governing body of such Person
(irrespective of whether at the time Capital Stock (or other ownership interest)
of any other class or classes of such Person shall or might have voting power
upon the occurrence of any contingency) is at the time directly or indirectly
owned by such Person, by such Person and one or more other Subsidiaries of such
Person, or by one or more other Subsidiaries of such Person. Except as
otherwise indicated herein, references to Subsidiaries refer to Subsidiaries of
the Borrower.
"SUBSTANTIAL COMPLETION" means that (x) the conditions set forth in the
definition of "Completion" have occurred, (y) "SUBSTANTIAL COMPLETION" (as such
is defined in SECTION 31.8 of the General Conditions annexed to the Design/Build
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Contract as ATTACHMENT D) has occurred and (z) a Main Project Certificate of
Occupancy has been issued and is outstanding for the Hotel/Casino.
"SURVEY" means, collectively, the surveys required by SECTION 3.1.24 of the
Disbursement Agreement.
"SYNDICATION AGENT" is defined in the PREAMBLE of the Credit Agreement.
"TAX" means any federal, state, local, foreign or other tax, levy, impost,
fee, assessment or other government charge, including income, estimated income,
business, occupation, franchise, property, payroll, personal property, sales,
transfer, use, employment, commercial rent, occupancy, franchise or withholding
taxes, and any premium, including interest, penalties and additions in
connection therewith.
"TAX AMOUNT" means, relative to any period, without duplication, the
increase in the cumulative United States federal, state and local income tax
liability of the holders of Equity Interests in the Borrower (or if the holder
is a pass-though entity for United States income tax purposes, the direct or
indirect holders of its equity interests subject to United States, state and
local income tax) in respect of such interests for such period, plus any
additional amounts payable to such holders for taxes arising from ownership of
such Equity Interests.
"TENANT IMPROVEMENT" means (x) the portion of the construction to be
performed by or on behalf of the Borrower in the interior of the Main Project
pursuant to a lease to adapt the same for the initial use and occupancy by the
tenant under such lease or (y) if a tenant under a Lease undertakes to complete
the work to the portion of the Main Project covered by such Lease, any
allowances or payments advanced to such Person by the Borrower.
"TERM A LENDER" means any Lender which has made a Term A Loan Commitment or
holds a Term A Loan.
"TERM A LOAN" is defined in SECTION 2.1.1 of the Credit Agreement.
"TERM A LOAN COMMITMENT" means the aggregate principal amount of Term A
Loans which the Term A Lenders are obligated to make pursuant to SECTION 2.1.1
of the Credit Agreement. The Term A Loan Commitment shall not exceed
$136,000,000.
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"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
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(b) the date on which any Commitment Termination Event occurs.
Upon the occurrence of any event described in CLAUSE (A) or (B), the Term B Loan
Commitments and the Term C Loan Commitments shall terminate automatically and
without any further action.
"TERM B LENDER" means any Lender which has made a Term B Loan Commitment or
holds a Term B Loan.
"TERM B LOAN" is defined in CLAUSE (A) of SECTION 2.1.3 of the Credit
Agreement.
"TERM B LOAN COMMITMENT" means the aggregate principal amount of Term B
Loans which the Term B Lenders are obligated to make pursuant to CLAUSE (B) of
SECTION 2.1.3 of the Credit Agreement. The Term B Loan Commitment shall not
exceed $114,000,000.
"TERM B LOAN COMMITMENT AMOUNT" means, on any date, relative to any Term B
Lender, the portion of the Term B Loan Commitment of such Term B Lender reduced
by the principal amount of any Term B Loans made by such Term B Lender as of
such date. The portion of the Term B Loan Commitment of each Term B Lender is
set forth below such Term B Lender's signature to the Credit Agreement or in a
Lender Assignment Agreement.
"TERM B NOTE" means, on any date, a promissory note of the Borrower payable
to any Term B Lender, in the form of EXHIBIT A-2 to the Credit Agreement (as
such promissory note may thereafter from time to time be amended, supplemented,
amended and restated, endorsed or otherwise modified), evidencing the aggregate
Indebtedness of the Borrower to such Term B Lender resulting from outstanding
Term B Loans, and also means all other promissory notes accepted from time to
time in substitution or replacement therefor or renewal thereof.
"TERM C LENDER" means any Lender which has made a Term C Loan Commitment or
holds a Term C Loan.
"TERM C LOAN" is defined in CLAUSE (B) of SECTION 2.1.3 of the Credit
Agreement.
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<PAGE>
"TERM C LOAN COMMITMENT"means the aggregate principal amount of Term C
Loans which the Term C Lenders are obligated to make pursuant to CLAUSE (C) of
SECTION 2.1.3 of the Credit Agreement. The Term C Loan Commitment shall not
exceed $160,000,000.
"TERM C LOAN COMMITMENT AMOUNT" means, on any date, relative to any Term C
Lender, the portion of the Term C Loan Commitment of such Term C Lender reduced
by the principal amount of any Term C Loans made by such Term C Lender as of
such date. The portion of the Term C Loan Commitment of each Term C Lender is
set forth below such Term C Lender's signature to the Credit Agreement or in a
Lender Assignment Agreement.
"TERM C NOTE" means, on any date, a promissory note of the Borrower payable
to any Term C Lender, in the form of EXHIBIT A-3 to the Credit Agreement (as
such promissory note may thereafter from time to time be amended, supplemented,
amended and restated, endorsed or otherwise modified), evidencing the aggregate
Indebtedness of the Borrower to such Term C Lender resulting from outstanding
Term C Loans, and also means all other promissory notes accepted from time to
time in substitution or replacement therefor or renewal thereof.
"THEATER" is defined in CLAUSE (D) of the FOURTH RECITAL of the Credit
Agreement.
"THEATER LEASE" means, on any date, the Lease, to be entered into between
the Borrower and Aladdin Music covering the Theater Space as the same may be
amended, supplemented, amended and restated, replaced or otherwise modified from
time to time in accordance with the terms of the Credit Agreement.
"THEATER RENOVATION COMPLETION" means that each of the following has
occurred:
(a) the renovation of the Theater has been completed substantially in
accordance with the Credit Agreement, the Plans and Specifications, the
provisions of the Reciprocal Easement Agreement applicable to the Theater
and all of the other Operative Documents to the extent that the
development, renovation, use or operation of the Theater are affected
thereby, except for the Main Project Punchlist Items applicable to the
Theater and in substantial compliance with all Legal Requirements
pertaining to the renovation of the Theater so as to allow the Theater to
be utilized for its intended purpose;
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<PAGE>
(b) reasonable and safe means of access and facilities necessary for
the use and occupancy of the Theater have been installed and are
operational including corridors, elevators, stairways, heating,
ventilation, air conditioning, sanitary, water and electrical facilities
and all security systems and life safety systems required by the Plans and
Specifications, the Reciprocal Easement Agreement, the other Operative
Documents and all Legal Requirements; and
(c) there are no outstanding claims or Liens by any Contractor or
Subcontractor or any other Person against any portion of the Hotel/Casino
Component except for Permitted Liens and Permitted Encumbrances.
"THEATER SPACE" means the property and the space described in EXHIBIT N-7
to the Credit Agreement.
"TITLE INSURER" means, collectively, Stewart Title Guaranty Company and
Lawyers Title Insurance Corporation.
"TITLE POLICY" means each lenders A.L.T.A. policy of title insurance issued
by the Title Insurer as of the Effective Date, as provided in SECTION 3.1.25 of
the Disbursement Agreement, including all amendments thereto, endorsements
thereof and substitutions or replacements therefor.
"TOTAL DEBT" means, on any date, the outstanding principal amount of all
Indebtedness of the Borrower of the type described in CLAUSES (A), (B) and (C)
of such definition and (without duplication) any Contingent Liability in respect
of any of the foregoing of any other Person.
"TOTAL DEBT TO EBITDA RATIO" means, as of the close of any Fiscal Quarter,
commencing with the close of the Fiscal Quarter in which the Conversion Date
occurs, the ratio of
(a) Total Debt outstanding on the last day of such Fiscal Quarter
TO
(b) EBITDA computed for the period consisting of such Fiscal Quarter
(or such shorter portion of any Fiscal Quarter after the occurrence therein
of the Conversion Date) and each of the three immediately preceding
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<PAGE>
Fiscal Quarters (or such lesser number of Fiscal Quarters to have closed
since the Conversion Date) and determined for any period ending on or prior
to the first anniversary of the Conversion Date, consistently with the
proviso to the definition of the term "EBITDA".
"TRADE DETAIL REPORT" means a Trade Detail Report in the form of EXHIBIT DD
to the Credit Agreement.
"TRADEMARK SECURITY AGREEMENT" means, on any date, the Trademark Security
Agreement executed and delivered by an Authorized Representative of the Borrower
pursuant to SECTION 5.1.6 of the Credit Agreement, as originally in effect on
the Closing Date, in substantially the form of Exhibit B to the Security
Agreement and as thereafter from time to time amended, supplemented, amended and
restated or otherwise modified.
"TRANSACTION" means the transactions contemplated by the Discount Note
Indenture and the Operative Documents.
"TRUST" means the Trust under Article Sixth u/w/o Sigmund Sommer, or in the
event of the dissolution of the Trust, the beneficiaries or the remaindermen
thereof.
"TRUST ESTATE" is defined in the Deed of Trust.
"TYPE" means, relative to any Loan, the portion thereof, if any, being
maintained as a Base Rate Loan or a LIBO Rate Loan.
"UCC" means the Uniform Commercial Code of the jurisdiction the law of
which governs the document with respect to the term used.
"UNALLOCATED CONTINGENCY BALANCE" means (w) during the first month after
the Effective Date, the greater of (1) $24,000,000 or (2) the Unallocated
Contingency Calculation, (x) during the second month after the Effective Date,
the greater of $23,000,000 or (2) the Unallocated Contingency Calculation, (y)
during the third month after the Effective Date, the greater of $22,000,000 or
(2) the Unallocated Contingency Calculation, and (z) thereafter, from time to
time, the Unallocated Contingency Calculation.
A-82
<PAGE>
"UNALLOCATED CONTINGENCY CALCULATION" means an amount equal to (x)
$25,000,000 MINUS (y) the product of (1) $25,000,000 MULTIPLIED BY (2) the
percentage of construction completed on the date that the Advance is to be made,
as determined by the Construction Consultant.
"UNITED STATES" or "U.S." means the United States of America, its fifty
states and the District of Columbia.
"UNSUITABLE LENDER" is defined in CLAUSE (C) of SECTION 4.11 of the Credit
Agreement.
"VOTING STOCK" means, with respect to any Person, Capital Stock of any
class or kind ordinarily having the power to vote for the election of directors,
managers or other voting members of the governing body of such Person.
"WARRANT" means the warrants issued by Enterprises on February 18, 1998
which, if exercised, will in the aggregate for all such warrants entitle the
holders thereof to acquire an aggregate of not more than 2,215,000 shares of the
Capital Stock of Enterprises representing an indirect interest in not more than
10% of the Holdings Common Membership Interests, plus, warrants for up to
1,107,500 shares of the Capital Stock of Enterprises which may be issued in
connection with the Mall Project credit enhancement on terms substantially the
same as the Warrants issued by Enterprises on February 18, 1998.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, relative to any Indebtedness at
any date, the number of years (calculated to the nearest one-twelfth) obtained
as the quotient of (x) the sum of the product of (1) the amount of each then
remaining installment, sinking fund, serial maturity or other required payments
of principal, including payment at final maturity, in respect thereof,
MULTIPLIED BY (2) the number of years (calculated to the nearest one-twelfth)
that will elapse between such date and the making of such payment DIVIDED BY
(y) the then outstanding principal amount or liquidation preference, as
applicable, of such Indebtedness.
"WELFARE PLAN" means a "WELFARE PLAN", as such term is defined in
Section 3(1) of ERISA.
"WHOLLY-OWNED" means, with respect to any direct or indirect Subsidiary,
any Subsidiary all of the outstanding common stock (or similar equity interest)
of which
A-83
<PAGE>
(other than any director's qualifying shares or investments by foreign nationals
mandated by applicable laws) is owned directly or indirectly by the Borrower.
"WORK" is defined in SECTION 1.7 of the Design/Build Contract.
A-84
<PAGE>
- --------------------------------------------------------------------------------
AMENDED AND RESTATED PURCHASE AGREEMENT
dated as of February 26, 1998
between
LONDON CLUBS NEVADA INC.,
LONDON CLUBS INTERNATIONAL, P.L.C.,
ALADDIN GAMING HOLDINGS, LLC,
ALADDIN GAMING, LLC,
ALADDIN HOLDINGS, LLC,
SOMMER ENTERPRISES, LLC
and
TRUST UNDER ARTICLE SIXTH U/W/O SIGMUND SOMMER
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions
SECTION 1.1. Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
Purchase and Sale of the Purchaser Shares
SECTION 2.1. Purchase and Sale of the Purchaser Shares. . . . . . . . . . . 14
SECTION 2.2. Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 2.3. Closing Deliveries . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE III
Representations and Warranties
of Gaming Holdings, Gaming, Holdings,
Sommer Enterprises and the Trust
SECTION 3.1. Organization and Good Standing. . . . . . . . . . . . . . . . 17
SECTION 3.2. Authority . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.3. Non-Contravention . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.4. Consents and Approvals. . . . . . . . . . . . . . . . . . . . 19
SECTION 3.5. Outstanding Shares. . . . . . . . . . . . . . . . . . . . . . 19
SECTION 3.6. Warranty. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 3.7. Title Matters . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 3.8. Compliance with Laws. . . . . . . . . . . . . . . . . . . . . 20
SECTION 3.9. No Event of Default . . . . . . . . . . . . . . . . . . . . . 20
SECTION 3.10. Hazardous Substances. . . . . . . . . . . . . . . . . . . . . 21
SECTION 3.11. Environmental and Soils Reports . . . . . . . . . . . . . . . 22
SECTION 3.12. Sommer Enterprises Interest . . . . . . . . . . . . . . . . . 22
SECTION 3.13. Holdings' Business. . . . . . . . . . . . . . . . . . . . . . 22
SECTION 3.14. Financial Statements. . . . . . . . . . . . . . . . . . . . . 22
SECTION 3.15. Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 3.16. Material Adverse Effect . . . . . . . . . . . . . . . . . . . 23
SECTION 3.17. Absence of Undisclosed Liabilities. . . . . . . . . . . . . . 23
Section 3.18. Assets of the Trust . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE IV
Representations and Warranties of
Gaming Holdings, Gaming, Sommer Enterprises and Holdings
SECTION 4.1. Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 4.2. Material Contracts. . . . . . . . . . . . . . . . . . . . . . 24
SECTION 4.3. Employees . . . . . . . . . . . . . . . . . . . . . . . . . . 25
i
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Page
----
SECTION 4.4. Employees Benefit Plans; ERISA. . . . . . . . . . . . . . . . 25
SECTION 4.5. Aladdin Names . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 4.6. Brokers or Finders. . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE V
Representations and Warranties of
the Purchaser and LCI Parent
SECTION 5.1. Organization and Good Standing. . . . . . . . . . . . . . . . 27
SECTION 5.2. Parent. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 5.3. Authority . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 5.4. Non-contravention . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 5.5. Consents and Approvals. . . . . . . . . . . . . . . . . . . . 28
SECTION 5.6. Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 5.7. Investment. . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 5.8. No Public Market. . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 5.9. Brokers and Finders . . . . . . . . . . . . . . . . . . . . . 29
SECTION 5.10. Material Adverse Effect . . . . . . . . . . . . . . . . . . . 29
ARTICLE VI
Covenants
SECTION 6.1. Redevelopment Documents . . . . . . . . . . . . . . . . . . . 29
SECTION 6.2. Financing . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 6.3. Discount Notes and Warrants . . . . . . . . . . . . . . . . . 33
SECTION 6.4. Interests of Employees,
Officers and Consultants . . . . . . . . . . . . . . . . . . 33
SECTION 6.5. Information and Consultation. . . . . . . . . . . . . . . . . 34
SECTION 6.6. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 6.7. Second Hotel. . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 6.8. Gaming Matters. . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 6.9. Conveyance of Land And
Existing Improvements . . . . . . . . . . . . . . . . . . . . 39
SECTION 6.10. JMJ Lease . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE VII
Conditions To Closing
SECTION 7.1. Conditions to the Purchaser's
and LCI Parent's Obligations. . . . . . . . . . . . . . . . . 41
SECTION 7.2. Conditions to Gaming Holdings's,
Gaming's, Holdings', Sommer
Enterprises' and the
Trust's Obligations . . . . . . . . . . . . . . . . . . . . . 44
ii
<PAGE>
Page
----
ARTICLE VIII
Guarantee
SECTION 8.1. Guarantee. . . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE IX
Termination
SECTION 9.1. Termination . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 9.2. Effect of Termination . . . . . . . . . . . . . . . . . . . . 47
ARTICLE X
SURVIVAL; INDEMNIFICATION
SECTION 10.1. Survival; Remedy for Breach. . . . . . . . . . . . . . . . . 47
SECTION 10.2. Indemnification. . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 10.3. Aronow Indemnification . . . . . . . . . . . . . . . . . . . 48
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 11.2. No Third-Party Beneficiaries . . . . . . . . . . . . . . . . 49
SECTION 11.3. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 11.4. Confidentiality. . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 11.5. Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 11.6. Further Assurances . . . . . . . . . . . . . . . . . . . . . 50
SECTION 11.7. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 11.8. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 11.9. Consents and Approvals . . . . . . . . . . . . . . . . . . . 53
SECTION 11.10. Counterparts; Effectiveness. . . . . . . . . . . . . . . . . 53
SECTION 11.11. Construction . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 11.12. Severance. . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 11.13. Non-Waiver . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 11.14. Applicable Law . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 11.15. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 11.16. Entirety of Agreement. . . . . . . . . . . . . . . . . . . . 55
iii
<PAGE>
AMENDED AND RESTATED PURCHASE AGREEMENT
This AMENDED AND RESTATED PURCHASE AGREEMENT, dated as of February 26,
1998 is entered into and made by and between ALADDIN GAMING HOLDINGS, LLC, a
Nevada limited-liability company ("Gaming Holdings"), LONDON CLUBS NEVADA INC.,
a Nevada corporation (the "PURCHASER"), LONDON CLUBS INTERNATIONAL, P.L.C., a
public limited company organized under the laws of England and Wales ("LCI
PARENT"), ALADDIN GAMING, LLC, a Nevada limited-liability company ("Gaming"),
ALADDIN HOLDINGS, LLC, a Delaware limited liability company ("HOLDINGS"), SOMMER
ENTERPRISES, LLC, a Nevada limited liability company ("SOMMER ENTERPRISES") and
TRUST UNDER ARTICLE SIXTH U/W/O SIGMUND SOMMER(the "TRUST") as an amendment to
and restatement of the Purchase Agreement dated as of September 24, 1997 (and
subsequently amended on October 16, 1997, November 18, 1997 and December 1,
1997), among certain of the undersigned.
WHEREAS, subject to the terms and conditions set forth herein, the
Purchaser desires to purchase from Gaming Holdings, and Gaming Holdings desires
to issue and sell to the Purchaser, the Purchaser Shares (as defined
hereinafter).
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions set forth in
this Agreement and intending to be legally bound, Gaming Holdings, the
Purchaser, LCI Parent, Gaming, Holdings, Sommer Enterprises and Trust agree as
follows:
ARTICLE I
Definitions
SECTION 1.1. DEFINED TERMS. As used in this Agreement, the following
terms have the meaning set forth below:
"ALADDIN ENTERPRISES" means Aladdin Gaming Enterprises, Inc., a Nevada
corporation, which will be a Member of Gaming Holdings on and after the Closing
Date.
"AFFILIATE" means, in respect of a specified Person, any Person who or
which is (a) directly or indi-
<PAGE>
rectly controlling, controlled by or under common control with such specified
Person, or (b) any member, director, officer, manager, relative or spouse of
such specified Person. For the purposes of this definition, "CONTROL" means the
right to exercise, directly or indirectly, more than fifty percent of the voting
power of the stockholders, members or owners, and, with respect to any
individual, partnership, trust or other entity or association, the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of the controlled entity, and "CONTROLLED" and
"CONTROLLING" shall have corresponding meanings.
"AFFIRMATIVE RESPONSE NOTICE" has the meaning set forth in Section
2.2.
"AGREEMENT" means this Amended and Restated Purchase Agreement.
"ALADDIN NAMES" has the meaning set forth in Section 4.5.
"AMENDED AND RESTATED ARTICLES" means the Amended and Restated
Articles of Organization of Gaming Holdings to be entered into on or prior to
the Closing.
"APPLICATIONS" has the meaning set forth in Section 6.5.
"APPROVALS" has the meaning set forth in Section 6.5.
"ARBITRATION PROVISION" has the meaning set forth in Section 6.7.
"ARTICLES OF ORGANIZATION" means the Articles of Organization of
Gaming Holdings filed with the Secretary of State of the State of Nevada on
December 1, 1997, as amended from time to time.
"BANK DEBT" means the portion of the Gaming Financing under a bank
credit facility, in the amount of $410 million.
"BANK LENDERS" has the meaning set forth in Section 6.2.
"BAZAAR" means Aladdin Bazaar, LLC, a Delaware limited liability
company.
2
<PAGE>
"BAZAAR FINANCING" means the bank financing, and/or high yield debt,
and/or such alternative financing as Bazaar shall enter into, in order for
Bazaar to finance the development of the Shopping Center and/or all or some of
the Parking.
"CERCLA" is defined in clause (a) of the definition of "Environmental
Laws".
"CERLIS" means the Comprehensive Environmental Response Compensation
Liability Information System List.
"CERTIFICATE OF SHARES" means a certificate of Gaming Holdings
representing Shares in Gaming Holdings.
"CLOSING" has the meaning set forth in Section 2.2.
"CLOSING DATE" has the meaning set forth in Section 2.2.
"CLOSING SCHEDULES" means Schedules to this Agreement in respect of
the representations and warranties of the parties to this Agreement made as of
the Closing Date.
"CODE" means the Internal Revenue Code of 1986, as amended from time
to time.
"GAMING HOLDINGS CLOSING CERTIFICATE" has the meaning set forth in
Section 7.1.
"COMPLETION GUARANTIES" has the meaning set forth in Section 6.2.
"CONFIDENTIAL INFORMATION" has the meaning set forth in Section 11.4.
"CONSENTS" has the meaning set forth in Section 5.5.
"CONTRIBUTION AGREEMENT" has the meaning set forth in Section 6.2.
"DISCOUNT NOTES" means 13.5% senior discount notes, accreting to an
aggregate principal amount of $221.5 million at maturity, due 2010 to be issued
by Gaming Holdings and Aladdin Capital Corp. on or about the Closing Date.
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"DOLLARS" and "$" means the lawful currency of the United States of
America.
"EFFECTIVE DATE" means September 24, 1997.
"EMPLOYEE PLANS" has the meaning set forth in Section 4.4.
"ERISA" has the meaning set forth in Section 4.4.
"ENVIRONMENTAL LAWS" means any of:
(a) the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended (42 U.S.C. Section 9601, ET SEQ.) ("CERCLA");
(b) the Federal Water Pollution Control Act (33 U.S.C. Section 1251,
ET SEQ.) ("CLEAN WATER ACT" OR "CWA");
(c) the Resource Conservation and Recovery Act (42 U.S.C. Section
6901, ET SEQ.) ("RCRA");
(d) the Atomic Energy Act of 1954 (42 U.S.C. Section 2011, ET SEQ.);
(e) the Clean Air Act (42 U.S.C. Section 7401, ET SEQ.);
(f) the Emergency Planning and Community Right to Know (42 U.S.C.
Section 11001, ET SEQ.);
(g) the Federal Insecticide, Fungicide, and Rondenticide Act (7 U.S.C.
Section 136, ET SEQ.) ("FIFRA");
(h) the Oil Pollution Act of 1990 (P.L. 101-380, 104 Stat. 486);
(i) the Safe Drinking Water Act (42 U.S.C. Sections 300f, ET SEQ.)
("SDWA");
(j) the Surface Mining Control and Reclamation Act of 1974 (30 U.S.C.
Sections 1201, ET SEQ.);
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(k) the Toxic Substances Control Act (15 U.S.C. Section 2601, ET
SEQ.);
(l) the Hazardous Material Transportation Act (49 U.S.C. Section 1801,
ET SEQ.) ("HMTA");
(m) the Uranium Mill Tailings Radiation Control Act of 1978 (42 U.S.C.
Section 7901, ET SEQ.) ("UMTRCA");
(n) the Occupational Safety and Health Act (29 U.S.C. Section 651, ET
SEQ.) ("OSHA");
(o) the Nevada Hazardous Material law (NRS Chapter 459);
(p) the Nevada Solid Waste/Disposal of Garbage or Sewage law (NRS
444.440 to 444.650, inclusive);
(q) the Nevada Water Controls/Pollution law (NRS Chapter 445A);
(r) the Nevada Air Pollution law (NRS Chapter 445B);
(s) the Nevada Cleanup of Discharged Petroleum law (NRS 590.700 to
590.920, inclusive);
(t) the Nevada Control of Asbestos law (NRS 618.750 to 618.850);
(u) the Nevada Appropriation of Public Waters law (NRS 533.324 to
533.4385, inclusive);
(v) the Nevada Artificial Water Body Development Permit law (NRS
502.390);
(w) the Nevada Protection of Endangered Species, Endangered Wildlife
Permit (NRS 503.585) and Endangered Flora Permit law (NRS 527.270); and
(x) all others Federal, state and local Legal Requirements which
govern Hazardous Substances, and the regulations adopted and publications
promulgated pursuant to such foregoing laws;
in each case as amended by an amendment thereto or succeeded by a successor law.
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"ESCROW AGENT" has the meaning set forth in Section 2.2.
"ESCROW AGREEMENT" has the meaning set forth in Section 2.2.
"EXERCISE" means, in respect of any Warrants, the exercise of such
Warrants into shares in Aladdin Enterprises, and "EXERCISED" shall have a
corresponding meaning.
"FINANCIAL STATEMENTS" has the meaning set forth in Section 3.14.
"FIRST AVAILABLE PROCEEDS" shall mean any and all amounts available at
any time the payment of which is not restricted under the arrangements in
respect of the Bank Financing and the Discount Notes.
"FF&E LOAN" means the approximately $80 million loan to Gaming secured
by, and/or capital lease to Gaming of, certain of the furniture, fixtures and
equipment located in the Redevelopment.
"GAI" means GAI, LLC, a Nevada limited liability company.
"GAI CONSULTING AGREEMENT" means the Consulting Agreement, as amended
as of the date hereof, effective as of June 16, 1997, among Gaming Holdings,
Gaming, Holdings and GAI.
"GAMING FINANCING" means the Bank Debt, the Discount Notes and the
FF&E Loan.
"GAMING PROBLEM" means circumstances such that any Member or any
Affiliate of any Member may preclude or materially delay, impede or impair the
ability of Gaming to obtain or retain any licenses required by the Nevada Gaming
Authorities in connection with the transactions contemplated hereby, including
for the conduct of business of Gaming, or such as may result in the imposition
of significantly burdensome terms and conditions on any such license.
"GAMING PROBLEM PARTY" has the meaning set forth in Section 6.8.
"GOEGLEIN" means Richard J. Goeglein.
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"GOEGLEIN EMPLOYMENT AND CONSULTING AGREEMENT" means the Employment
and Consulting Agreement, as amended on the date hereof, effective as of June
16, 1997, entered into by and among Gaming Holdings, Gaming, Holdings and
Goeglein.
"GOVERNMENTAL ENTITY" has the meaning set forth in Section 3.4.
"HAZARDOUS SUBSTANCES" means (statutory acronyms and abbreviations
having the meaning given them in the definition of "Environmental Laws")
substances defined as "hazardous substances," "pollutants" or "contaminants" in
Section 101 of the CERCLA; those substances defined as "hazardous waste,"
"hazardous materials" or "regulated substances" by the RCRA; those substances
designated as a "hazardous substance" pursuant to Section 311 of the CWA; those
substances defined as "hazardous materials" in Section 103 of the HMTA; those
substances regulated as a hazardous chemical substance or mixture or as an
imminently hazardous chemical substance or mixture pursuant to Sections 6 or 7
of the TSCA; those substances defined as "contaminants" by Section 1401 of the
SDWA, if present in excess of permissible levels; those substances regulated by
the Oil Pollution Act; those substances defined as a pesticide pursuant to
Section 2(u) of the FIFRA, those substances defined as a source, special nuclear
or by-product material by Section 11 of the AEA; those substances defined as
"residual radioactive material" by Section 101 of the UMTRCA; those substances
defined as "toxic materials" or "harmful physical agents" pursuant to Section 6
of the OSHA); those substances defined as hazardous wastes in 40 C.F.R. Part
261.3; those substances defined as hazardous waste constituents in 40 C.F.R.
Part 260.10, specifically including Appendices VII and VIII of Subpart D of 40
C.F.R. Part 261; those substances designated as hazardous substances in 40
C.F.R. Parts 116.4 and 302.4; those substances defined as hazardous substances
or hazardous materials in 49 C.F.R. Part 171.8; those substances regulated as
hazardous materials, hazardous substances or toxic substances in 40 C.F.R. Part
1910; those substances defined as hazardous materials, hazardous substances or
toxic substances in any other Environmental Laws; and those substances defined
as hazardous materials, hazardous substances or toxic substances in the
regulations adopted and publications promulgated pursuant to said laws, whether
or not such regulations or publications are specifically referenced herein.
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"INDEMNIFIED PARTIES" has the meaning set forth in Section 10.2.
"INDEMNIFYING PARTY" has the meaning set forth in Section 10.2.
"INTEREST" means the entire ownership interest in Gaming Holdings of a
Member holding Voting Shares at any particular time, including the right of such
Member to any and all benefits to which a Member may be entitled as provided
under the NRS and in the Operating Agreement.
"JMJ LEASE" means the Amended and Restated Lease Agreement dated
July 27, 1994 between BATCL-1991-1, Inc. and JMJ, Inc. in respect of the Land
And Existing Improvements.
"KEEP WELL AGREEMENT" has the meaning set forth in Section 6.2.
"LAND AND EXISTING IMPROVEMENTS" means the land and existing
improvements located on an approximately 35 acre site at 3667 Las Vegas
Boulevard South, Las Vegas, Nevada, as indicated on the site plans attached
hereto as Exhibit 1, and as more particularly described on Exhibit 1A.
"LAW" means any statute, law, judgment, writ, order, injunction,
decree, ordinance, rule or regulation of any Governmental Entity.
"LIABILITIES" has the meaning set forth in Section 3.17.
"LIEN" means any lien, encumbrance, security interest, charge, claim,
mortgage, pledge or restriction on transfer of any nature whatsoever.
"LOSS" has the meaning set forth in Section 10.2.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on assets,
liabilities, operations, intended operations, results of operations or financial
condition.
"MEMBER" means a Person who has been admitted to Gaming Holdings as a
member in accordance with the NRS and the Operating Agreement.
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"MUSIC HOLDINGS" means Aladdin Music Holdings, LLC, a Nevada limited
liability company.
"NEVADA ACT" means the Nevada State Gaming Control Act (NRS Ch. 463 et
seq) and the rules and regulations promulgated thereunder.
"NEVADA GAMING AUTHORITIES" means, collectively, the Nevada Gaming
Commission, the Nevada State Gaming Control Board and all other state and local
regulatory and licensing authorities in the State of Nevada.
"NOTE REGISTRATION RIGHTS AGREEMENT" means the Note Registration
Rights Agreement dated as of February 26, 1998 among Gaming Holdings, Aladdin
Capital Corp., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Credit Suisse
First Boston Corporation, CIBC Oppenheimer Corp. and Scotia Capital Markets
(USA) Inc.
"NRS" means the Nevada Revised Statutes, as amended from time to time.
"OPENING DATE" means the date of the opening of the Redevelopment,
currently expected to be in the first quarter of 2000.
"OPERATING AGREEMENT" means the Operating Agreement of Gaming
Holdings, to be dated as of the Closing Date (the Operating Agreement shall have
attached as an exhibit thereto a form of Shareholders and Registration Rights
Agreement to be entered into by the shareholders of a successor corporation to
Gaming Holdings or Gaming in certain circumstances).
"PARKING" means the multi-level parking structure and other parking
areas for approximately 4,000 motor vehicles to be developed by Bazaar and
Gaming as part of the Redevelopment.
"PERCENTAGE INTEREST" means, with respect to a particular Member, the
proportionate share (expressed as a percentage) of such Member's Interest in the
Voting Shares in Gaming Holdings, computed by dividing the number of Voting
Shares held by such Member by the total number of Voting Shares issued and
outstanding.
"PERMITTED ENCUMBRANCES" has the meaning ascribed thereto in Section
3.6.
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"PERSON" means a natural person, any form of business or social
organization and any other nongovernmental legal entity, whether domestic or
foreign, including a corporation, partnership, association, trust,
unincorporated organization, estate or limited liability company.
"PROHIBITED TRANSFEREES" means (a) an owner, operator or manager of a
hotel or casino competitive with the existing Aladdin Hotel and Casino or the
Redeveloped Aladdin, (b) a non-profit or governmental entity, (c) a Person
primarily in the business of owning or operating a casino or other gambling
facility, (d) Focus 2000, or the then current owner(s) and/or lessee(s) of the
property at the north-east corner of Las Vegas Boulevard and Harmon Avenue, and
their Affiliates, (e) Bazaar, any member of Bazaar and the Affiliates of Bazaar
or any such member, (f) an owner or operator of a distillery, winery, brewery or
distributorship of alcoholic beverages, or (g) a Person that has been convicted
of a felony crime.
"PURCHASE PRICE" has the meaning set forth in Section 2.1.
"PURCHASER CLOSING CERTIFICATE" has the meaning set forth in Section
7.2.
"PURCHASER SHARES" means the Voting Shares to be sold to the Purchaser
under this Agreement representing twenty-five percent of the outstanding Voting
Shares of Gaming Holdings at the Closing.
"RECEIVING PARTY" has the meaning set forth in Section 11.4.
"REDEVELOPMENT" means:
(a) the redevelopment of the existing Aladdin hotel and casino to include
a total of approximately 2,600 rooms and approximately 116,000 square feet of
main casino space (the "Redeveloped Aladdin");
(b) the development of the Shopping Center and the Parking;
(c) the development of the Salle Privee Facilities within the Redeveloped
Aladdin; and
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(d) the construction, fitting out, furnishing, maintenance and operation
of all or any part of the foregoing.
"REDEVELOPMENT AGREEMENTS" means any and all material contracts and
agreements relating to the Redevelopment or any part thereof, but does not
include any sub-lease in respect of the Shopping Center made by Bazaar as
sub-landlord, except any such sub-lease to Gaming as sub-tenant, and does not
include the Salle Privee Agreement and the Operating Agreement.
"REDEVELOPMENT BUDGETS" means any and all budgets relating to the
Redevelopment, or any part thereof.
"REDEVELOPMENT DOCUMENTS" means the Redevelopment Agreements, the
Redevelopment Financing Agreements, the Redevelopment Budgets and the
Redevelopment Plans and Specifications, including the construction contract with
Fluor Daniel, Inc.
"REDEVELOPMENT FINANCING AGREEMENTS" means any and all material
contracts or agreements relating to the Gaming Financing or the Bazaar
Financing, including the FF&E Loan and related agreements, inter-creditor
agreements, attornment agreements and guarantees of payment, performance,
completion or cash flow, other than the Contribution Agreement, the Completion
Guaranties and the Keep Well Agreement.
"REDEVELOPMENT PLANS AND SPECIFICATIONS" means any and all plans and
any and all specifications relating to the Redevelopment or any part thereof.
"RELEASE" means a "release", as such term is defined in CERCLA.
"RESOLUTION AGREEMENT" has the meaning set forth in Section 2.2.
"SALLE PRIVEE AGREEMENT" means an agreement between the Purchaser, LCI
Parent and Gaming with respect to the construction, operation, maintenance and
marketing of the Salle Privee Facilities.
"SALLE PRIVEE FACILITIES" means facilities open to the public at
large, consisting of:
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(a) a gaming facility, containing approximately 20 to 30 high limit tables
and approximately 100 high limit slot devices, located on the mezzanine level
directly above the main gaming floor of the Redeveloped Aladdin;
(b) a super-premium gourmet restaurant facility, located adjacent to and
as part of the gaming facility of the Salle Privee Facilities and containing a
separate kitchen, a bar, approximately 25 dining tables inside the restaurant,
as well as several additional dining tables located in a roof garden accessible
through the restaurant;
(c) an exclusive hospitality facility comprising approximately 25
double-module luxury suites, 5 triple-module suites, a concierge facility and
guest bar and lounge, to be located in the main tower of the Redeveloped
Aladdin;
(d) an entrance and reception area for guests of the Salle Privee
Facilities, offering secure and discrete access for arrivals and departures; and
(e) vertical and horizontal circulation infrastructure providing for
private elevator access to the hospitality facility and private corridor access
from the hospitality facility to the gaming facility of the Salle Privee
Facilities.
"SECOND HOTEL" means a second, separately themed hotel and casino on
the Second Hotel Parcel with approximately 1,000 rooms and approximately 50,000
square feet of casino space.
"SECOND HOTEL DOCUMENTS" has the meaning set forth in Section 6.5.
"SECOND HOTEL NOTICE" has the meaning set forth in Section 6.7.
"SECOND HOTEL PARCEL" means the approximately 4.7 acres of land which
is approximately the land indicated to be the Second Hotel Parcel on the site
plans attached hereto as Exhibit 1.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations of the Securities and Exchange Commission promulgated
thereunder.
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"SHARE" represents a share of an Interest in Gaming Holdings as shall
be provided in the Operating Agreement.
"SHOPPING CENTER" means a themed entertainment shopping center
containing approximately 450,000 square feet of gross leasable area to be
developed by Bazaar as part of the Redevelopment.
"SHOPPING CENTER PARCEL" means the approximately 11.4 acres of land
which is approximately the land indicated to be the Shopping Center Parcel on
the site plans attached hereto as Exhibit 1, together with an elevated area or
areas to be determined in accordance with the Redevelopment Plans and
Specifications.
"TAX INDEMNITY AGREEMENT" has the meaning set forth in Section 6.2.
"THIRD PARTY" means a Person who is not an Affiliate of Gaming
Holdings, the Purchaser, LCI Parent, Gaming, the Trust or Holdings.
"THRESHOLD" has the meaning set forth in Section 10.2.
"TIMESHARE PARCEL" means the area which is approximately the area
indicated to be the Timeshare Parcel on the site plans attached hereto as
Exhibit 1.
"TITLE REPORT" has the meaning set forth in Section 3.7.
"UTILITY PARCEL" means the approximately 0.64 acres of land which is
approximately the land indicated to be the CoGen Parcel on the site plans
attached hereto as Exhibit 1.
"VOTING SHARES" means Shares which have full voting rights attached
thereto.
"WARRANTS" means warrants to be issued by Aladdin Enterprises on or
about the Closing Date in connection with the issuance of the Discount Notes to
purchase Class B non-voting common shares in the capital of Aladdin Enterprises.
"WARRANT REGISTRATION RIGHTS AGREEMENT" means the Warrant Registration
Rights Agreement dated as of
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February 26, 1998 among Gaming Holdings, Aladdin Capital Corp., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Credit Suisse First Boston Corporation,
CIBC Oppenheimer Corp. and Scotia Capital Markets (USA) Inc.
ARTICLE II
PURCHASE AND SALE OF THE PURCHASER SHARES
SECTION 2.1. PURCHASE AND SALE OF THE PURCHASER SHARES. Upon the
terms and subject to the conditions of this Agreement Gaming Holdings agrees to
issue, sell and convey to the Purchaser, and the Purchaser agrees to purchase
from Gaming Holdings, the Purchaser Shares, free and clear of all Liens, for an
aggregate purchase price of $50,000,000 (the "PURCHASE PRICE").
SECTION 2.2. CLOSING. (a) When Gaming Holdings shall in good faith
believe that the conditions contained in Section 7.1 to the Purchaser's
obligations to effect the purchase and sale of the Purchaser Shares under this
Agreement are in such position either to be satisfied at the Closing, or, in
respect of those conditions (which shall be specifically identified in the
notice) that will not be satisfied, will be waived by the Purchaser at the
Closing, Gaming Holdings shall so notify the Purchaser.
(b) Upon receipt of such notice under Section 2.2(a) the Purchaser
shall have fifteen days to notify Gaming Holdings of its opinion as to whether
the conditions contained in Section 7.1 will be satisfied or waived by the
Purchaser at the Closing. Upon the failure of the Purchaser to deliver such a
notice within such fifteen day time period, time being of the essence, Gaming
Holdings may terminate this Agreement pursuant to Article IX. Any notice by the
Purchaser stating the Purchaser's opinion that the conditions will not be
satisfied or waived at the Closing shall identify the condition(s) the Purchaser
believes have not been satisfied or will not be waived by Purchaser and, for the
purposes of facilitating the good faith negotiations referred to below, shall
provide reasons for the Purchaser's opinion, which reasons shall not include in
respect of Sections 7.1(e) through (f) any Redevelopment Document approved
pursuant to Section 6.1 (except to the extent that the Purchaser makes a
subsequent determination to the contrary pursuant to Section 6.1(c) or
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7.1(g)). Upon receipt of such notice from the Purchaser stating the Purchaser's
opinion that the conditions will not be satisfied or waived at the Closing,
Gaming Holdings and the Purchaser shall promptly enter into good faith
negotiations for an additional fifteen day period in an effort to reach
agreement (the "RESOLUTION AGREEMENT") to resolve each other's concerns. Any
Resolution Agreement shall be in writing and duly signed. Upon the failure of
Gaming Holdings and the Purchaser to reach such agreement within such additional
fifteen day period, Gaming Holdings and the Purchaser shall each have the right
within fifteen days after the expiration of such additional fifteen day period
to terminate this Agreement pursuant to Article IX.
(c) If the Purchaser notifies Gaming Holdings within the initial
fifteen day period, time being of the essence, of its opinion that the
conditions contained in Section 7.1 will be satisfied or waived at the Closing
(the "AFFIRMATIVE RESPONSE NOTICE") or if the Resolution Agreement is made, if
required by the Gaming Financing, at such time prior to the Closing as is
required by the Gaming Financing, the Purchaser shall pay $50,000,000 into
escrow with an escrow agent (the "ESCROW AGENT") pursuant to an Escrow Agreement
(the "ESCROW AGREEMENT"), which Escrow Agreement is to be negotiated and
mutually agreed between Gaming Holdings, the Escrow Agent and the Purchaser.
(d) Subject to the terms and conditions of this Agreement, the
purchase and sale of the Purchaser Shares (the "CLOSING") shall take place after
conclusion of the process set forth in Section 2.2(a) through (c) above at 10:00
a.m. at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third
Avenue, New York, New York 10022, (i) on the thirtieth business day after the
Affirmative Response Notice has been given, or (ii) on the tenth business day
after the date the Resolution Agreement is made, as the case may be (the
"CLOSING DATE"), unless another date or time is mutually agreed to in writing by
Gaming Holdings and the Purchaser or is required by the Gaming Financing.
SECTION 2.3. CLOSING DELIVERIES. At the Closing:
(a)the Purchaser shall deliver or cause to be delivered to Gaming
Holdings:
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(i) $50,000,000 (delivered by the Purchaser or by the Escrow
Agent on behalf of the Purchaser pursuant to the terms of the Escrow
Agreement, as the case may be), apportioned between (A) and (B), below, as
the Purchaser may determine (subject to the requirements of the Gaming
Financing): (A) by wire transfer of immediately available funds to an
account designated in writing by Gaming Holdings, and (B) by delivery to
Gaming Holdings of an irrevocable letter of credit in favor of Gaming
Holdings and immediately callable by Gaming Holdings on demand in form and
substance and from a nationally recognized U.S. bank satisfactory to Gaming
Holdings;
(ii) a counterpart of the Operating Agreement, duly executed by
the Purchaser;
(iii) a counterpart of the Salle Privee Agreement, duly executed
by the Purchaser and LCI Parent;
(iv) a counterpart of the Contribution Agreement, duly executed
by LCI Parent;
(v) a counterpart of the Keep Well Agreement, duly executed by
LCI Parent;
(vi) a counterpart of the Completion Guaranties, duly executed
by LCI Parent;
(vii) a counterpart of the Tax Indemnity Agreement, duly executed
by the Purchaser and LCI Parent;
(viii) the Purchaser Closing Certificate; and
(ix)such other documents and certificates as shall be required to
satisfy the conditions to the obligations of Gaming Holdings set forth in
Section 7.2
(b) Gaming Holdings shall deliver or cause to be delivered to the
Purchaser:
(i) a Certificate of Shares in respect of the Purchaser Shares;
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(ii) a counterpart of the Operating Agreement, duly executed by
the Members of Gaming Holdings other than the Purchaser;
(iii) a counterpart of the Salle Privee Agreement, duly executed
by Gaming Holdings;
(iv) a counterpart of the Contribution Agreement, duly executed
by Holdings and the Trust;
(v) a counterpart of the Keep Well Agreement, duly executed by
Holdings;
(vi) a counterpart of the Completion Guaranties, duly executed
by the Trust;
(vii) a counterpart of the Tax Indemnity Agreement, duly executed
by Holdings and the Trust;
(viii) Gaming Holdings Closing Certificate;
(ix)the Closing Schedules; and
(x) such other documents and certificates as shall be required
to satisfy the conditions to the obligations of the Purchaser set forth in
Section 7.1.
ARTICLE III
Representations and Warranties of
Gaming Holdings, Gaming, Holdings, Sommer Enterprises
and the Trust
-----------------------------------------------------
Gaming Holdings, Gaming, Holdings, Sommer Enterprises and the Trust
jointly and severally represent and warrant to the Purchaser and LCI Parent as
of the Effective Date and as of the Closing Date that:
SECTION 3.1. ORGANIZATION AND GOOD STANDING. (a) Each of Gaming
Holdings, Music Holdings, Gaming and Sommer Enterprises is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Nevada.
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(b) Holdings is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Delaware.
(c) The Trust is a trust duly created under the will of Sigmund
Sommer, under the laws of the State of New York and is being validly
administered under the laws of the State of New York.
SECTION 3.2. AUTHORITY. Gaming Holdings, Gaming, Holdings, Sommer
Enterprises and the Trust have all requisite power and authority to enter into
this Agreement; the execution and delivery by Gaming Holdings, Gaming, Holdings,
Sommer Enterprises and the Trust of this Agreement and the consummation by
Gaming Holdings, Gaming, Holdings, Sommer Enterprises and the Trust of the
transactions contemplated hereby (including, as of the Closing Date, the
Operating Agreement, the Salle Privee Agreement, the Contribution Agreement and
the Tax Indemnity Agreement) have been duly authorized by all necessary
corporate and other action on the part of Gaming Holdings, Gaming, Holdings,
Sommer Enterprises and the Trust; and this Agreement has been duly and validly
executed and delivered by Gaming Holdings, Gaming, Holdings, Sommer Enterprises
and the Trust and constitutes and, as of the Closing Date, the Operating
Agreement, the Salle Privee Agreement, the Contribution Agreement and the Tax
Indemnity Agreement will constitute, (assuming the due and valid execution and
delivery thereof by the Purchaser and LCI Parent) the legal, valid and binding
obligation of Gaming Holdings, Gaming, Holdings, Sommer Enterprises and the
Trust, enforceable against Gaming Holdings, Gaming, Holdings, Sommer Enterprises
and the Trust in accordance with its terms, except as enforcement may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
enforcement of creditors' rights generally and by general equitable principles.
SECTION 3.3. NON-CONTRAVENTION. Neither the execution, delivery and
performance by Gaming Holdings, Gaming, Holdings, Sommer Enterprises and the
Trust of this Agreement nor the consummation of the transactions contemplated
hereby by Gaming Holdings, Gaming, Holdings, Sommer Enterprises or the Trust
will (i) result in a breach of any of the terms or provisions of the Articles of
Organization or Operating Agreement of Gaming Holdings, Gaming, Holdings or
Sommer Enterprises, or the will
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under which the Trust, was created, (ii) violate any applicable Law, or (iii)
result in a violation or breach of any of the terms, conditions or provisions of
any agreement to which Gaming Holdings, Gaming, Holdings, Sommer Enterprises or
the Trust is a party, except such violations or breaches which are not
reasonably likely to have a Material Adverse Effect on Gaming Holdings, Gaming,
Holdings, Sommer Enterprises or the Trust or materially and adversely affect any
of Gaming Holdings', Gaming's, Holdings', Sommer Enterprises' or the Trust's
obligations under this Agreement, or under any agreement to be entered into by
any of them pursuant hereto.
SECTION 3.4. CONSENTS AND APPROVALS. The execution and delivery by
Gaming Holdings, Gaming, Holdings, Sommer Enterprises and the Trust of this
Agreement and the consummation of the transactions contemplated hereby do not
require any filing by Gaming Holdings, Gaming, Holdings, Sommer Enterprises or
the Trust with, or approval or consent of any domestic or foreign governmental
or regulatory authority, agency or commission, including courts of competent
jurisdiction (each, a "GOVERNMENTAL ENTITY") which has not already been made or
obtained, except for (i) the filing of the Amended and Restated Articles with
the Secretary of State of the State of Nevada, (ii) such filings and approvals
as are required under the Nevada Act, and (iii) such filings, consents or
approvals that will have been made or obtained on or prior to the Closing Date
or the failure of which to make or obtain is not reasonably likely to have a
Material Adverse Effect on Gaming Holdings or Gaming or to materially and
adversely affect any of Gaming Holdings' or Gaming's obligations under this
Agreement.
SECTION 3.5. OUTSTANDING SHARES. (a) Subject to Gaming Holdings and
the Purchaser agreeing upon an alternate capital structure, immediately after
the Closing the only Members of Gaming Holdings and the outstanding Shares of
Gaming Holdings will be as set forth in Schedule 3.5 and all such Shares shall
be duly authorized and validly issued. Except as set forth on Schedule 3.5,
there are no rights of any kind or legal or equitable claims to memberships,
Interests or Shares in Gaming Holdings.
(b) At the Closing, the only members of Sommer Enterprises will be
Ronald Dictrow (who shall hold a 1.33 percent interest in the issued and
outstanding membership interests in Sommer Enterprises) and Holdings (which
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shall hold a 98.67 percent interest in the issued and outstanding membership
interests in Sommer Enterprises) and except as set forth in Schedule 3.15 there
are no other rights of any kind or legal or equitable claims to memberships,
Interests or Shares in Sommer Enterprises.
(c) At the Closing, Holdings shall be a ninety-five percent owned
subsidiary of the Trust.
SECTION 3.6. WARRANTY. As of the Effective Date Holdings owns, and
as of the Closing Date Gaming shall own, indefeasible and insurable fee simple
title to the Land And Existing Improvements subject only to those matters set
forth on Schedule 3.6 (the "PERMITTED ENCUMBRANCES").
SECTION 3.7. TITLE MATTERS. Except as provided in Section 6.9 or as
disclosed in Schedule 3.6, neither Gaming Holdings nor Gaming nor Holdings nor
the Trust nor Sommer Enterprises has created or have knowledge of any unrecorded
or undisclosed documents or any Liens, leases, rights of possession, covenants,
conditions, easements, restrictions on use or claims affecting the Land And
Existing Improvements, or other matters which affect title to the Land And
Existing Improvements which are not disclosed on Schedule 3.6 (including the
Title Report attached thereto (the "TITLE REPORT")).
SECTION 3.8. COMPLIANCE WITH LAWS. Gaming Holdings, Gaming,
Holdings, Sommer Enterprises, the Trust, and the Land And Existing Improvements
are in material compliance with all Laws, including all building and zoning
ordinances and codes.
SECTION 3.9. NO EVENT OF DEFAULT. None of Gaming Holdings, Gaming,
the Trust, Sommer Enterprises or Holdings is in default in any material respect
beyond any applicable grace period under or with respect to any mortgage or any
other material agreement or instrument to which either Gaming Holdings, Gaming,
the Trust, Sommer Enterprises or Holdings is a party or by which any of Gaming
Holdings, Gaming, the Trust, Sommer Enterprises or Holdings or any part of the
Land And Existing Improvements is bound in any respect, nor has any event
occurred, nor does any state of circumstances exist, the existence of which,
with or without the passage of time or the giving of notice or both, would
constitute an event of default under such mortgage, agreement or instrument.
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SECTION 3.10. HAZARDOUS SUBSTANCES. Except as otherwise disclosed in
the environmental reports described on Schedule 3.11:
(a) the Land And Existing Improvements and all existing uses and
conditions of the Land And Existing Improvements and the Redevelopment have
been, and continue to be, in material compliance with all Environmental Laws,
and neither Gaming Holdings, Gaming nor Holdings has received, and there are no
pending or threatended (i) claims, complaints, notices or requests for
information with respect to any alleged violation of any Environmental Law, or
(ii) complaints, notices or inquiries regarding potential liability under any
Environmental Law with respect to the Land And Existing Improvements or any
portion thereof or any use or condition thereof;
(b) there have been no Releases of Hazardous Substances at, or under
the Land And Existing Improvements by Gaming Holdings, Gaming or Holdings that
singly or in the aggregate, have, or may reasonably be expected to have, a
Material Adverse Effect on Gaming Holdings, Gaming or Holdings;
(c) Gaming Holdings, Gaming or Holdings have been issued and are in
material compliance with all permits, certificates, approvals, licenses and
other authorizations relating to environmental matters and necessary or
desireable for their businesses;
(d) no part of the Land And Existing Improvements now or previously
owned or leased by Gaming Holdings, Gaming or Holdings is listed or proposed for
listing (with respect to owned property only) on the National Priorities List
pursuant to CERCLA, on the CERCLIS or on any similar state list requiring
investigation or clean-up;
(e) there are no underground storage tanks, active or abandoned,
including petroleum storage tanks, on or under the Land And Existing
Improvements now or previously owned or leased by Gaming Holdings, Gaming or
Holdings that, singly or in the aggregate, have, or may reasonably be expected
to have, a Material Adverse Effect on Gaming Holdings, Gaming or Holdings;
(f) neither Gaming Holdings, Gaming nor Holdings has directly
transported or directly arranged for
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the transportation of any Hazardous Substances to any location which is listed
or proposed for listing on the National Priorities List pursuant to CERCLA, on
the CERLIS or on any similar state list or which is the subject of federal,
state or local enforcement actions or other investigations which may lead to
material claims against Gaming Holdings, Gaming or Holdings for any remedial
work, damage to natural resources or personal injury, including claims under
CERCLA;
(g) there are no polychlorinated biphenyls or friable asbestos on or
in the Land And Existing Improvements now or previously owned or leased by
Gaming Holdings, Gaming or Holdings that, singly or in the aggregate, have or
may reasonably be expected to have, a Material Adverse Effect on Gaming
Holdings, Gaming or Holdings; and
(h) no conditions exist at, on or under the Land And Existing
Improvements now or previously owned or leased by Gaming Holdings, Gaming or
Holdings which, with the passage of time, or the giving of notice or both, would
give rise to liability under any Environmental Law.
SECTION 3.11. ENVIRONMENTAL AND SOILS REPORTS. Schedule 3.11 sets
forth a complete list of all environmental, soils, seismic and geologic reports,
studies and certificates relating to the Land And Existing Improvements.
SECTION 3.12. SOMMER ENTERPRISES INTEREST. Sommer Enterprises owns,
free and clear of all encumbrances, its Interest in Gaming Holdings.
SECTION 3.13. HOLDINGS' BUSINESS. (a) Since its formation, the
business of Holdings has been to acquire the Land And Existing Improvements and
to engage in activities relating to the operation and development thereof,
including pursuant to the JMJ Lease, and in respect of the Redevelopment.
Except for the Land And Existing Improvements, (i) except as set forth in
item (i) on Schedule 3.13, Holdings has no material assets, and (ii) except as
set forth in item (ii) on Schedule 3.13, Holdings has no material liabilities.
SECTION 3.14. FINANCIAL STATEMENTS. (a) The unaudited consolidated
balance sheet of Gaming (with footnotes) and the related statements of income,
changes in Members' equity and cash flow previously delivered to
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Purchaser were prepared in accordance with generally accepted accounting
principles applied on a consistent basis and present fairly, in all material
respects, the financial condition of Gaming as of the date thereof and the
results of their operations for the period indicated.
(b) A consolidated balance sheet of Gaming Holdings (with footnotes)
and the related statements of income, changes in Members' equity and cash flow
shall be prepared as of the last day of the last month ending prior to the
Closing and included in the Closing Schedules and shall be audited to the extent
that audited financials are required on or around the Closing Date by the Gaming
Financing.
(c) The financial statements referred to in Sections 3.14(a) and (b),
collectively, the "Financial Statements."
SECTION 3.15. LITIGATION. Except as disclosed in Schedule 3.15,
there is no action, suit, judgement, decree, charge, complaint, injunction,
investigation or proceeding pending or, to the best knowledge of Gaming
Holdings, Gaming, Holdings, Sommer Enterprises or the Trust, threatened against
Gaming Holdings, Gaming, Holdings, Sommer Enterprises, the Trust, Music Holdings
or Jack Sommer.
SECTION 3.16. MATERIAL ADVERSE EFFECT. Except as disclosed in
Schedule 3.16, since the date of this Agreement there has been no event,
occurrence, or development, and there is not any state of circumstances or facts
which has had or is likely to have, a Material Adverse Effect on Gaming
Holdings, Gaming, Holdings, Sommer Enterprises, Music Holdings or the Trust.
SECTION 3.17. ABSENCE OF UNDISCLOSED LIABILITIES. Except as set
forth in Schedule 3.17, neither Gaming Holdings, Music Holdings nor Gaming has
any direct or indirect indebtedness, liability, claim, loss, damage, deficiency
or obligation, fixed or unfixed, choate or inchoate, liquidated or unliquidated,
secured or unsecured, accrued, absolute, contingent or otherwise (collectively,
the "LIABILITIES"), required under generally accepted accounting principles to
be reflected on a balance sheet (with footnotes) other than those Liabilities
fully and adequately reflected or reserved against on the Financial Statements.
Since the date of the latest Financial Statements, except as set forth in
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Schedule 3.17, neither Gaming Holdings nor Gaming has incurred any Liabilities
required under generally accepted accounting principles to be reflected on a
balance sheet (with footnotes), other than such Liabilities as are incurred
after the Effective Date under, pursuant to or as contemplated in a
Redevelopment Document which has been approved by Purchaser pursuant to Section
6.1.
Section 3.18. ASSETS OF THE TRUST. The Trust is possessed of assets
free of encumbrances to an extent sufficient to meet its obligations under the
Completion Guaranties, the Contribution Agreement, the Tax Indemnity Agreement,
this Purchase Agreement and any guaranty obligations it may undertake in
connection with any financing relating to the Shopping Center or the Second
Hotel.
ARTICLE IV
Representations and Warranties of
GAMING HOLDINGS, GAMING, SOMMER ENTERPRISES AND HOLDINGS
Gaming Holdings, Gaming, Sommer Enterprises and Holdings jointly and
severally represent and warrant to the Purchaser and LCI Parent as of the
Effective Date and as of the Closing Date that:
SECTION 4.1. SUBSIDIARIES. Except as set forth in Schedule 4.1
(which sets forth the extent of ownership), Gaming Holdings and Gaming have no
subsidiaries, and Gaming Holdings and Gaming have no legal or equitable right or
obligation to acquire any interest of any kind in any other Person.
SECTION 4.2. MATERIAL CONTRACTS. Except as disclosed in Schedule
4.2, neither Gaming Holdings, Music Holdings nor Gaming is a party to or bound
by:
(i)any lease or sublease of real or personal property providing for
annual rentals of $100,000 or more;
(ii)any agreement for the purchase of goods, services, equipment or
other assets that provides for annual payments by Gaming Holdings or Gaming
of $100,000 or more;
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(iii)any partnership, joint venture or other similar agreement or
arrangement;
(iv)any agreement relating to indebtedness (whether incurred, assumed,
guaranteed or secured by any asset) or indemnification, other than any such
agreement with an aggregate outstanding principal amount not exceeding
$100,000;
(v)any agreement with any Member, manager or officer of Gaming
Holdings, Music Holdings or Gaming or with any Affiliate of any such
Member, manager or officer; or
(vi)any other agreement, commitment, arrangement or plan that is
material to Gaming Holdings, Music Holdings or Gaming.
SECTION 4.3. EMPLOYEES. Except as set forth in Schedule 4.3, neither
Gaming Holdings, Music Holdings nor Gaming is a party to nor have they announced
or promulgated any agency, employment or consulting agreements or union
contracts. To the best knowledge of Gaming Holdings and Gaming each is in
compliance with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours.
SECTION 4.4. EMPLOYEES BENEFIT PLANS; ERISA. Schedule 4.4 contains a
list of each bonus, deferred compensation, incentive compensation, severance or
termination pay, hospitalization or other medical, stock purchase, stock option,
pension, life or other insurance, supplemental unemployment benefit,
profit-sharing or retirement plan, agreement or arrangement, maintained for the
benefit of any employee or former employee of Gaming Holdings, Music Holdings or
Gaming (the "EMPLOYEE PLANS"). Except as set forth in Schedule 4.4:
(a) No liability under Section 502 (i) or Title IV of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or a tax under
Section 4975 of the Code, has been incurred by Gaming Holdings or Gaming with
respect to any Employee Plan established or maintained, or to which
contributions are or have been made by Gaming Holdings, Music Holdings or Gaming
which is an employee pension benefit plan (within the meaning of Section 3(2) of
ERISA). No Employee Plans of Gaming Holdings or Gaming are multiemployer plans
(as defined in
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Section 3(37) of ERISA). No event has occurred, and no condition or set of
circumstances currently exists with respect to the Employee Plans which presents
a material risk of the occurrence of any event that might result in any
liability of Gaming Holdings, Music Holdings or Gaming under Section 502(i) of
ERISA, Title IV of ERISA or Section 4975 of the Code or other applicable Law.
(b) Each Employee Plan is in compliance with ERISA and all other
applicable Federal Laws and each Employee Plan that is intended to be qualified
under Section 401(a) of the Code is so qualified and Gaming Holdings and Gaming
know of no fact which has adversely affected or which will adversely affect the
qualified status of each Employee Plan.
SECTION 4.5. ALADDIN NAMES. Schedule 4.5 contains a true and
complete list of all trade names, trademarks, service marks, patents and
copyrights used in connection with the business of the Aladdin Hotel and Casino
(the "ALADDIN NAMES"). On the Closing Date, Gaming Holdings and Gaming shall
have the exclusive (subject to the rights of other Persons in respect of the
Redevelopment and the Land And Existing Developments as contemplated in this
Agreement or as contemplated under the JMJ Lease) right to use each registered
trademark and service mark listed on Schedule 4.5, and Gaming Holdings and
Gaming's use thereof does not infringe on any trademark, trade names, assumed
names, service marks, patents or copyrights or any other rights of any person or
entity.
SECTION 4.6. BROKERS OR FINDERS. Except as set forth in Schedule
4.2, neither Gaming Holdings, Music Holdings nor Gaming has employed any
investment banker, broker or finder or incurred any liability for any investment
banking fees, brokerage fees, commissions or finders' fees in connection with
the transactions contemplated by this Agreement, including the Gaming Financing
and the Bazaar Financing.
ARTICLE V
Representations and Warranties of
THE PURCHASER AND LCI PARENT
The Purchaser and LCI Parent jointly and severally represent and
warrant to Gaming Holdings, Gaming,
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Holdings, Sommer Enterprises and the Trust as of the Effective Date and as of
the Closing Date that:
SECTION 5.1. ORGANIZATION AND GOOD STANDING. (a) The Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of Nevada.
(b) LCI Parent is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation.
SECTION 5.2. PARENT. The Purchaser is an indirect wholly owned
subsidiary of LCI Parent.
SECTION 5.3. AUTHORITY. The Purchaser and LCI Parent have all
requisite power and authority to enter into this Agreement; the execution and
delivery by the Purchaser and LCI Parent of this Agreement and the consummation
by the Purchaser and LCI Parent of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of the
Purchaser and LCI Parent; and this Agreement has been duly and validly executed
and delivered by the Purchaser and LCI Parent and constitutes (assuming the due
and valid execution and delivery of this Agreement by Gaming Holdings, Gaming,
the Trust, Holdings and Sommer Enterprises) the legal, valid and binding
obligation of the Purchaser and of LCI Parent enforceable against the Purchaser
and LCI Parent in accordance with its terms, except as enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting enforcement of creditors' rights generally and by general equitable
principles.
SECTION 5.4. NON-CONTRAVENTION. Neither the execution, delivery and
performance by the Purchaser and LCI Parent of this Agreement nor the
consummation of the transactions contemplated hereby by the Purchaser and LCI
Parent will (i) violate the Articles of Organization of the Purchaser or the
Memorandum of Association and Articles of Association of LCI Parent,(ii) violate
any applicable Law, or (iii) result in a violation or breach of any of the
terms, conditions or provisions of any agreement to which the Purchaser or LCI
Parent is a party, except such violations or breaches which are not reasonably
likely to have material adverse effect on Gaming Holdings, Gaming, LCI Parent or
the Purchaser or any of the Purchaser's or LCI Parent's obligations under
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this Agreement, or under any agreement to be entered into by either of them
pursuant hereto.
SECTION 5.5. CONSENTS AND APPROVALS. The execution and delivery by
the Purchaser and LCI Parent of this Agreement and the consummation of the
transactions contemplated hereby do not require any filing by the Purchaser or
LCI Parent with, or approval or consent of, any Governmental Entity which has
not already been made or obtained, except such filings and approvals as are
required under the Nevada Act, and except for such filings, consents or
approvals that will have been obtained on or prior to the Closing Date or the
failure of which to make or obtain is not reasonably likely to have a Material
Adverse Effect on Gaming Holdings or Gaming or to materially and adversely
affect any of the Purchaser's or LCI Parent's obligations under this Agreement.
SECTION 5.6. LITIGATION. There is no action, suit, judgement,
decree, charge, complaint, injunction, investigation or proceeding pending or,
to the best knowledge of the Purchaser or LCI Parent, threatened against the
Purchaser or LCI Parent.
SECTION 5.7. INVESTMENT. The Purchaser is acquiring the Purchaser
Shares for investment for its own account, not as a nominee or agent, and not
with the view to, or for resale in connection with, any distribution thereof in
violation of the Securities Act. The Purchaser understands that the Purchaser
Shares to be purchased have not been, and will not be, registered under the
Securities Act by reason of a specific exemption from the registration
provisions of the Securities Act, the availability of which depends upon, among
other things, the bona fide nature of the investment intent and the accuracy of
the Purchaser's representations with respect thereto as expressed herein. The
Purchaser understands and acknowledges that the Purchaser Shares are subject to
restrictions on transfer pursuant to the terms of the Operating Agreement.
SECTION 5.8. NO PUBLIC MARKET. The Purchaser understands that no
public market now exists for any securities issued by Gaming Holdings, including
the Purchaser Shares, and that there can be no assurance that a public market
for such securities, including the Purchaser Shares, will develop in the future.
The Purchaser acknowledges that the Purchaser Shares must be held indefinitely
unless subsequently registered under the
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Securities Act or unless an exemption from such registration is available. The
Purchaser is aware of the provisions of Rule 144 promulgated under the
Securities Act which permit limited resales of securities purchased in a private
placement, subject to the satisfaction of certain conditions, and that there can
be no assurance that Rule 144 will ever be available for any resale of the
Purchaser Shares.
SECTION 5.9. BROKERS AND FINDERS. Except for Oppenheimer & Co.,
Inc., neither the Purchaser nor LCI Parent have employed any investment banker,
broker or finder or incurred any liability for any investment banking fees,
brokerage fees, commissions or finders' fees in connection with the transactions
contemplated by this Agreement.
SECTION 5.10. MATERIAL ADVERSE EFFECT. Since the date of this
Agreement, there has been no event, occurrence, or development, and there is not
any state of circumstances or facts which has had or is likely to have, a
Material Adverse Effect on the Purchaser or LCI Parent.
ARTICLE VI
COVENANTS
SECTION 6.1. REDEVELOPMENT DOCUMENTS. (a) When Gaming Holdings in
good faith believes that one or more of the Redevelopment Documents as to which
consultation and counseling has taken place pursuant to Section 6.5 is complete
and satisfactory, Gaming Holdings shall send a notice to the Purchaser to that
effect (a copy of the relevant Redevelopment Document(s) shall accompany such
notice and such notice shall make express reference to each Redevelopment
Document accompanying it). The Purchaser, in respect of each Redevelopment
Document included in such notice, within fifteen days after receipt by the
Purchaser of such notice, time being of the essence, in its sole discretion
shall either (i) approve such Redevelopment Document in that form, or (ii)
object to such Redevelopment Document and provide Gaming Holdings with written
reasons for its objection.
(b) If the Purchaser objects to a Redevelopment Document, or fails to
approve a Redevelopment Document within fifteen days of the Purchaser's notice
under
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Section 6.1(a), time being of the essence, Gaming Holdings and the Purchaser
shall enter into good faith negotiations for an additional fifteen day period
and use commercially reasonable efforts to reach agreement to resolve each
other's concerns. Upon the failure of Gaming Holdings and the Purchaser to
reach such agreement within such additional fifteen day period, either Gaming
Holdings or the Purchaser may within fifteen days of the expiration of such
additional fifteen day period terminate this Agreement pursuant to Article IX.
(c) Any Redevelopment Documents approved by the Purchaser at any time
pursuant to this Section 6.1 shall be deemed to have been approved by the
Purchaser for the purposes of Sections 2.2 and 7.1, and no new approval shall be
required from the Purchaser, except to the extent that the Purchaser determines
(i) that any such Redevelopment Document is adversely affected by or adversely
affects any subsequent Redevelopment Document(s) presented to the Purchaser for
approval hereunder, or (ii) that the effect of any subsequently presented
Redevelopment Document or the Redevelopment Documents taken as a whole,
materially increase LCI Parent's potential liability under the Completion
Guaranties or the Keep Well Agreement above reasonably anticipated levels.
(d) Gaming Holdings, subject to prior consultation and counseling with
the Purchaser pursuant to Section 6.5, may submit amendments of or variations to
any or all of the Redevelopment Documents to the Purchaser at any time, whether
or not the Purchaser has previously approved such Redevelopment Documents, and
the procedures and provisions of Sections 6.1(a), (b) and (c) above shall apply.
(e) As of the date hereof the Purchaser has approved for all purposes
herein the documents set forth on Schedule 6.1.
SECTION 6.2. FINANCING. (a) Subject to the provisions hereinafter
set forth, LCI Parent, Holdings, the Trust and the Purchaser agree that they
shall use commercially reasonable efforts to assist Gaming and Gaming Holdings
to arrange the Gaming Financing, including (i) with respect to LCI Parent and
the Trust, to enter into (A) a joint and several guaranty of performance and
completion in connection with the Bank Debt, and (B) a joint and several
guaranty of performance and completion in favor of the holders of the Discount
Notes
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and in favor of the Contingent Guarantor (as shall be defined therein)
(collectively, the "COMPLETION GUARANTIES"); (ii) with respect to LCI Parent and
Holdings, to enter into a Keep Well Agreement (the "KEEP WELL AGREEMENT") with
the providers of the Bank Debt (the "BANK LENDERS") under which Holdings and LCI
Parent shall jointly and severally covenant to make certain cash equity
contributions to Gaming in certain circumstances; (iii) with respect to LCI
Parent, Holdings and the Trust, to enter into a contribution agreement (the
"CONTRIBUTION AGREEMENT") pursuant to which (A) LCI Parent and the Trust shall
agree to be obligated, notwithstanding the joint and several obligations of LCI
Parent and the Trust stated in the Completion Guaranties, for such portion of
any liability incurred under the Completion Guaranties in the proportion of
twenty-five percent for LCI Parent and seventy-five percent for the Trust, and
(B) pursuant to which LCI Parent and Holdings shall agree to be obligated,
notwithstanding the joint and several obligations of LCI Parent and Holdings
stated in the Keep Well Agreement, for such portion of any liability incurred
under the Keep Well Agreement in the proportion of twenty-five percent for LCI
Parent and seventy-five percent for Holdings; and (iv) with respect to the
Purchaser, LCI Parent, the Trust and Holdings, to enter into a tax indemnity
agreement (the "Tax Indemnity Agreement") consistent with the terms of the
Agreement entered into by the Purchaser, LCI Parent, the Trust and Holdings,
dated as of January 29, 1998 pursuant to which the Trust and Holdings jointly
and severally shall agree to indemnify on an after tax basis the Purchaser and
LCI Parent, and each of them against various taxes, losses, costs or damages;
PROVIDED that the terms and conditions of each of the Completion Guaranties, the
Keep Well Agreement, the Contribution Agreement and the Tax Indemnity Agreement
are satisfactory to LCI Parent, Holdings and the Trust, each in its respective
sole discretion. In consideration of the foregoing, LCI Parent shall receive
(x) an initial fee of $2.65 million and (y) a fee accruing from the Closing Date
of one and one-half percent (1.5%) per annum of Gaming's average annual
indebtedness with respect to that portion of the Bank Debt which is supported
and enhanced by the Keep Well Agreement for each relevant twelve month period
(or part thereof) (which amount shall reflect the extent, if any, by which the
obligations under the Keep Well Agreement are reduced or eliminated under
certain circumstances over time), which (A) in respect of the fee accruing
during the period from the Closing Date to the Opening Date, shall be paid
following the Opening Date
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out of First Available Proceeds and (B) in respect of the fee accruing during
the period from and after the Opening Date shall be payable annually in arrears
within thirty days after each twelve month anniversary of the Opening Date,
failing which Gaming Holdings shall pay such fee by issuing to LCI Series A
Preferred Shares in the capital of Gaming Holdings at the rate of one Series A
Preferred Share for each $100 which is not paid at the end of such thirty day
period.
(b) On or prior to the Closing, Gaming Holdings and Gaming shall enter
into all Redevelopment Documents comprising the Gaming Financing that have been
approved by the Purchaser pursuant to Section 6.1 or Section 2.2.
(c) Each of Holdings and the Purchaser agrees to pay, within thirty
days after receipt of a request therefor (together with reasonably detailed
documentation evidencing such costs), its pro rata share (i.e., seventy-five
percent for Holdings and twenty-five percent for the Purchaser) of all fees and
expenses paid or incurred in connection with the Gaming Financing to the extent
previously mutually approved in writing by the Purchaser and Holdings. Without
limiting the foregoing, the parties acknowledge and agree to pay their
respective shares of the commitment fee which is due upon execution of a
commitment letter in respect of the Bank Debt. All such payments shall become
obligations of Gaming (and shall be reimbursed as appropriate) as of the Closing
Date.
(d) Subject to the consummation of the Closing, Gaming shall pay (i)
the fees of Westwood Capital, LLC and HK Group, LLC, respectively, arising under
the agreements set forth in Schedule 4.2, and (ii) the fees of Oppenheimer & Co.
in connection with the transactions contemplated herein, and (iii) the legal
fees relating to the transactions contemplated herein. The parties acknowledge
that Gaming shall pay to the Trust (A) in consideration for certain expenses
incurred by the Trust prior to the Closing, $3 million at the Closing and
(B) after the Closing, amounts to reimburse the Trust for out-of-pocket expenses
relating to the Redevelopment, not to exceed $900,000.
(e) The parties agree to exercise reasonable diligent efforts to
coordinate the Gaming Financing and the Bazaar Financing, including facilitating
inter-creditor agreements and the delivery of attornment and
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nondisturbance agreements; PROVIDED that the terms and conditions thereof are
satisfactory to each of the parties in their respective sole discretion.
SECTION 6.3. DISCOUNT NOTES AND WARRANTS. At the Closing, Gaming
shall issue the Discount Notes and Sommer Enterprises shall cause Aladdin
Enterprises to issue the Warrants.
SECTION 6.4. INTERESTS OF EMPLOYEES, OFFICERS AND CONSULTANTS. (a)
The parties acknowledge that in consideration for the contribution of certain
interests in Gaming, Gaming Holdings shall at the Closing (i) issue to Goeglein
an unvested Interest in Gaming Holdings equal to a two percent Percentage
Interest on the terms and conditions of the Goeglein Employment and Consulting
Agreement, (ii) issue to GAI an Interest in Gaming Holdings equal to a three
percent Percentage Interest, fully vested, on the terms and conditions of the
GAI Consulting Agreement and (iii) issue to various other officers and employees
of Gaming certain unvested Interests in Gaming Holdings on the terms and
conditions of various amended employment agreements disclosed in Schedule 4.3.
The parties further acknowledge that Goeglein, GAI and such other officers and
employees of Gaming will, pursuant to the Goeglein Employment and Consulting
Agreement and the GAI Consulting Agreement and the above-mentioned other amended
employment agreements with officers and employees of Gaming disclosed in
Schedule 4.3, respectively, each have the right to purchase additional
securities in certain circumstances to avoid dilution of their respective
Interests and/or put their Interests to Gaming Holdings in certain circumstances
and on certain terms and conditions.
(b) The capital structure of Gaming Holdings at the Closing shall
reflect that immediately after the Closing GAI shall have a three percent (3%)
Percentage Interest, and Sommer Enterprises' Interest shall be diluted to
accommodate such three percent interest of GAI and the Purchaser's Interest
shall not be diluted thereby. Subject to the consummation of the Closing, on
the Opening Date the Purchaser's Percentage Interest shall be decreased by 0.5%
and Sommer Enterprises' Percentage Interest shall be correspondingly increased
by 0.5%. Notwithstanding the foregoing, Goeglein's two percent (2%) Percentage
Interest (whether vested or unvested), GAI's three percent (3%) Percentage
Interest and the Interests of the other officers and employees of Gaming
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referred to in Section 6.4(a) (whether vested or unvested) shall be subject to
dilution upon the Exercise of any Warrants.
(c) Gaming Holdings shall, on or prior to the Closing, ensure that the
Goeglein Employment and Consulting Agreement is amended to provide that a change
of control which occurs, pursuant to the provisions of the Operating Agreement,
in connection with defaults and/or calls under the Completion Guaranties, the
Keep Well Agreement or the Contribution Agreement, shall not be deemed a change
of control for purposes of the Goeglein Employment and Consulting Agreement.
SECTION 6.5. INFORMATION AND CONSULTATION. (a) Within ten days after
the Effective Date, Gaming shall endeavor to deliver to the Purchaser a copy of
all items set forth on the Schedules hereto the most recent drafts as at the
Effective Date of the Redevelopment Documents, to the extent that such
Redevelopment Documents exist, copies of all licenses, applications (other than
applications relating to the submissions to the Nevada Gaming Authorities),
permits and other approvals and notices from Governmental Entities relating to
the Redevelopment, or any part thereof (collectively "APPLICATIONS" and
"APPROVALS") and copies of all documents, deeds, proposals, letters of intent
and agreements relating to the construction, financing, fitting out and
furnishing, maintenance and operation of the Second Hotel, provided, however,
that to the extent that the Purchaser shall have elected to proceed pursuant to
Section 6.7(a)(iii), such documents and agreements shall be only those which
directly or indirectly affect the Redevelopment (the "SECOND HOTEL DOCUMENTS").
(b) From and after the Effective Date and until and including the
Closing Gaming shall:
(i) promptly and regularly consult and counsel with Purchaser
with respect to all material issues arising with respect to the Redevelopment
and any part thereof, the Redevelopment Documents, the Applications and
Approvals, and the Second Hotel Documents, as such issues arise and to the
extent such issues will be the subject of discussions or negotiations with third
parties, cooperate with Purchaser in developing Gaming's positions, and afford
the Purchaser the opportunity to attend meetings at which such issues will be
negotiated;
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(ii) without limiting the foregoing, promptly consult and
counsel with the Purchaser with respect to the development of Redevelopment
Plans and Specifications, and the Redevelopment Budgets;
(iii) without limiting the foregoing, promptly and regularly
consult and counsel with the Purchaser with respect to any proposed material
commitment of Gaming Holdings, Music Holdings or Gaming with respect to the
Redevelopment or any part thereof; and
(iv) without limiting the foregoing, Gaming shall promptly
provide to the Purchaser the latest drafts of the Redevelopment Documents, the
Second Hotel Documents, and all Applications, Approvals and notices from
Governmental Entities, shall notify the Purchaser of, and invite representatives
of the Purchaser to attend, all of Gaming's project meetings, and upon
reasonable notice shall provide the Purchaser with access to all books, records
and key employees of Gaming, Gaming Holdings and Music Holdings.
SECTION 6.6. INSURANCE. From and after the Closing Gaming shall
maintain insurance in kind and amount reasonably necessary to protect against
the risks inherent or associated with the business of Gaming, including the
operations and marketing of the Salle Privee Facilities, which insurance, in
kind and amount, shall at all times comply with the requirements of the Gaming
Financing and shall include LCI Parent and the Purchaser as named insureds.
SECTION 6.7. SECOND HOTEL. (a) Subject to (i) the constituent draft
Redevelopment Documents in respect of the Second Hotel which have been provided
to LCI as of the date hereof being unchanged, (ii) an adequate and satisfactory
financing commitment being in place for the Second Hotel, (iii) there being no
use, directly or indirectly of the credit support and enhancement which LCI is
providing pursuant to Section 6.2 (including the Keep Well Agreement and
Completion Guaranties) and (iii) the terms of the Second Hotel venture being
satisfactory to Trizec Hahn Centres, Inc., Purchaser has agreed that Gaming will
proceed with the development of the Second Hotel through a partially owned
subsidiary of Music Holdings, PROVIDED that the material terms of the Second
Hotel Documents shall provide for the development of the Second Hotel without
utilizing, and shall specifically indemnify LCI Parent against the use
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of, the credit support and enhancement which LCI Parent is providing pursuant to
Section 6.2 (including the Keep Well Agreement and Completion Guaranties).
(b) If Purchaser decides not to proceed with the Second Hotel venture
on the terms of Section 6.7(a) on the grounds of any of the matters listed in
clauses (i)-(iv) Gaming may propose by notice (the "SECOND HOTEL NOTICE") to the
Purchaser that Gaming proceed with the development of the Second Hotel at some
point during or subsequent to the Redevelopment, which Second Hotel Notice shall
contain the material terms of such proposed development (including the financing
thereof). The Purchaser shall notify Gaming, within thirty days after delivery
of the Second Hotel Notice, time being of the essence, as to which of the
following courses of action it shall pursue (the failure to so notify being
deemed to be the election of choice (iii) below):
(i) Gaming may proceed with the development of the Second Hotel
substantially in accordance with the Second Hotel Notice and utilizing the
Gaming Financing and the credit support and enhancement which LCI Parent is
providing pursuant to Section 6.2.
(ii)Gaming may proceed with the development of the Second Hotel
substantially in accordance with the Second Hotel Notice, provided that the
material terms shall provide for the development of the Second Hotel without
utilizing, and shall specifically indemnify LCI Parent against the use of, the
credit support and enhancement which LCI Parent is providing pursuant to Section
6.2 (including the Keep Well Agreement and Completion Guaranty).
(iii) Holdings shall have the right to cause Gaming to convey to
Holdings or an Affiliate thereof, or to a joint venture involving Holdings or an
Affiliate thereof, or to a third party, the Second Hotel Parcel, and such entity
shall thereafter have the right to develop the Second Hotel. In such event, the
Purchaser at Purchaser's election shall have the right to receive either (A)
cash equal to twenty-five percent (25%) of the independently assessed market
value of the Second Hotel Parcel or (B) twenty-five percent (25%) of the equity
interest of Holdings and its Affiliates in the entity which will own and develop
the Second Hotel.
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(c) The Purchaser shall have the right to approve, such approval not
to be unreasonably withheld, matters relating to the Second Hotel to the extent
such matters directly or indirectly affect the Aladdin Redevelopment or Gaming
Holdings, Music Holdings or Gaming, including (if the Second Hotel proceeds as a
partially owned subsidiary of Music Holdings pursuant to Section 6.7(a)) any
proposed rights or remedies to be afforded to the Trust of any of its Affiliates
in connection with any completion guaranty or keep well obligations undertaken
by the Trust or any Affiliate of the Trust. Such reasonableness on the part of
the Purchaser shall include, without limitation, any potential detrimental
effect such Second Hotel (other than its mere existence, as to which the
Purchaser shall not have the right to object) may have on the financial risks of
the Purchaser or its Affiliates in connection with the Aladdin Redevelopment.
(d) Any dispute between the Purchaser and Gaming or Holdings in
connection with any determination pursuant to Section 6.7(c) shall be finally
settled through binding arbitration by a sole, disinterested arbitrator in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association. The arbitrator shall be jointly selected by the Purchaser and
Holdings but, if the Purchaser and Holdings do not agree on an arbitrator within
thirty days after demand for arbitration is made, they shall request that the
arbitrator be designated by the American Arbitration Association. The award of
the arbitrator shall be final and conclusive upon the Purchaser, Gaming and
Holdings. Each party to the arbitration shall pay the compensation, costs, fees
and expenses of its own witnesses, experts and counsel. The compensation and
any costs and expenses of the arbitrator shall be borne equally by the Purchaser
and Gaming. Judgement upon the award rendered may be entered in any court
having jurisdiction thereof, which court may order appropriate relief at law or
equity. All proceedings relating to any such arbitration, and all testimony,
written submissions and award of the arbitrator therein, shall be private and
confidential as among the parties thereto, and shall not be disclosed to any
other Person, except as required by law and except as reasonably necessary to
prosecute or defend any judicial action to enforce, vacate or modify such
arbitration award.
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SECTION 6.8. GAMING MATTERS. (a) The parties agree that from the
Effective Date they shall be subject to the provisions of the Nevada Act and to
the licensing and regulatory control of the Nevada Gaming Authorities. The
parties acknowledge that, in order for Gaming Holdings and Gaming to carry on
their business, Sommer Enterprises, Holdings, the Trust, the Purchaser, LCI
Parent and their Affiliates and respective employees, officers and directors may
be required to submit personal history and financial information to, and be
found suitable by, the Nevada Gaming Authorities and gaming authorities of other
jurisdictions. If required by the Nevada Gaming Authorities or gaming
authorities of other jurisdictions, Sommer Enterprises, Gaming Holdings,
Holdings, the Trust, the Purchaser and LCI Parent shall each, and shall cause
their respective Affiliates, employees, officers and directors to, (i) promptly
submit such personal history and financial history, (ii) cooperate in any
investigation and (iii) seek a finding of suitability. Sommer Enterprises,
Gaming Holdings, Holdings, the Trust, the Purchaser and LCI Parent each shall be
responsible for its own costs and expenses (i.e., the costs and expenses
incurred by them, their Affiliates and their respective principals/members and
employees, officers and directors) in connection with obtaining, attempting to
obtain or retaining a license in accordance with this Section 6.8.
(b) The parties acknowledge, understand and agree that, to the extent
that the prior approval of the Nevada Gaming Authorities is required pursuant to
the Nevada Act for the taking of any action under, or the operation and
effectiveness of, any provision of this Agreement, each of them will use
commercially reasonable efforts to obtain same.
(c) If Gaming Holdings or Purchaser shall determine prior to the
Closing Date, in good faith, based upon verifiable information and specific
provisions of the applicable gaming statutes and rules promulgated thereunder or
upon specific information received from the Nevada Gaming Authorities, that a
Gaming Problem exists in respect of either Sommer Enterprises, Gaming Holdings,
Gaming, Holdings, the Trust or their respective Affiliates (in the case of a
determination by the Purchaser) or the Purchaser, LCI Parent or their respective
Affiliates (in the case of a determination by Gaming Holdings), then Gaming
Holdings or the Purchaser, as the case may be, shall provide written notice to
the other such party (the "GAMING PROBLEM PARTY") requesting that the Gaming
Prob-
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lem Party provide for the elimination of the Gaming Problem, and:
(i) (A) if the Gaming Problem is caused by directors, officers,
managers or trustees of the Gaming Problem Party, the Gaming Problem Party shall
terminate the employment of such Person and (B) if the Gaming Problem is caused
by a shareholder, partner, member or beneficiary of the Gaming Problem Party,
the Gaming Problem Party shall either purchase such Person's ownership or other
interest in the Gaming Problem Party or require such Person to transfer its
ownership or other interest in the Gaming Problem Party to a trust or other
entity (if any) that would eliminate the Gaming Problem; or
(ii) after providing the Gaming Problem Party with such written
notice and ninety days to eliminate such Gaming Problem, Gaming Holdings (where
the Purchaser or LCI Parent is the Gaming Problem Party) or the Purchaser (where
Sommer Enterprises, Gaming Holdings, Gaming, Holdings or the Trust is the Gaming
Problem Party) may elect to terminate this Agreement pursuant to Article IX,
without further liability hereunder (other than pursuant to Sections 6.2(c) and
11.4), if the Gaming Problem Party does not eliminate such Gaming Problem within
such ninety day period, time being of the essence.
SECTION 6.9. CONVEYANCE OF LAND AND EXISTING IMPROVEMENTS. (a) On or
prior to the Closing, simultaneously upon the fulfillment of the conditions set
forth in Section 7.2 hereof and the delivery of all items set forth in Section
2.3(a) hereof, the Trust and Holdings shall cause (i) the Land And Existing
Improvements to be conveyed to Gaming with title as warranted in this Agreement,
and (ii) to the extent permitted by law, all Applications and Approvals to be
assigned to Gaming.
(b) The parties agree that Gaming may (i) lease and/or convey the
Second Hotel Parcel to another entity pursuant to and subject to the
requirements of Section 6.7, (ii) subject to Gaming receiving the economic terms
set forth on Exhibit 2, lease and/or convey the Shopping Center Parcel to Bazaar
or an Affiliate of Bazaar, (iii) lease and/or convey the Utility Parcel to a
third party in consideration for such party's agreement to construct, maintain
and operate a cogeneration or central utility plant, and (iv) in the event that
Gaming, with the Purchaser's approval, shall decline to develop
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the Timeshare Parcel, lease and/or convey the Timeshare Parcel to Sommer
Enterprises, an Affiliate of Sommer Enterprises or a Third Party in
consideration for the appraised market value, independently assessed, of the
Timeshare Parcel, and otherwise on terms and conditions reasonably approved by
the Purchaser and provided that the Purchaser shall have the right to approve
all documents, deeds, proposals, letters of intent and agreements, including
financing agreements, relating to the construction, fitting out, maintenance and
operation of the Utility Parcel or the Timeshare Parcel developments which,
directly or indirectly, affect the Redevelopment.
SECTION 6.10. JMJ LEASE. The parties agree that Holdings shall be
responsible for all payments made to JMJ, Inc. under the JMJ Lease, as a result
of the termination of the JMJ Lease, except that Gaming shall be responsible for
all payments required to be made in respect of the federal WARN statute. Gaming
shall have the benefit of the proceeds received from the sale of salvageable
equipment on the Land And Existing Improvements owned by Gaming Holdings,
Gaming, Holdings, Sommer Enterprises, the Trust and their respective Affiliates
after the termination of the JMJ Lease.
SECTION 6.11. FINANCIAL INFORMATION. (a) If, in connection with the
registration of the Discount Notes or Warrants under the Securities Act or the
Securities Exchange Act of 1934, as amended, a registration statement is, in the
reasonable opinion of counsel to Gaming Holdings, Aladdin Capital Corp. and
Aladdin Enterprises ("Issuers' Counsel") or the Securities and Exchange
Commission ("SEC"), required to contain financial statements and/or other
financial information of or concerning LCI Parent, then LCI Parent agrees to
provide to Gaming Holdings, Aladdin Capital Corp. and Aladdin Enterprises such
financial statements and/or financial information prepared and presented in the
manner required by Issuers' Counsel or the SEC, as applicable (including
reconciliation of such statements and information to United States generally
accepted accounting principles, if required) within a sufficient time period to
allow Gaming Holdings, Aladdin Capital Corp. and Aladdin Enterprises to comply
with their obligations under the Notes Registration Rights Agreement and the
Warrant Registration Rights Agreement within the time periods required
thereunder.
(b) In the event that financial statements and/or other financial
information of or concerning LCI
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Parent as of any dates or periods which do not correspond with the dates or
periods when or in respect of which LCI Parent regularly prepares such
information, both Gaming Holdings and Gaming and LCI Parent shall use their best
endeavors to submit to the SEC that such dates or periods are impractical and to
persuade the SEC not to require such statements and/or information as of those
dates or periods.
(c) All costs and expenses in connection with any adaptation whether
as to dates, time periods or otherwise, or any reconciliation of LCI Parent
financial statements and/or financial information and any effort undertaken on
behalf of LCI Parent to persuade the SEC as aforesaid (including, without
limitation, the fees and expenses of counsel and of auditors or other advisors
or experts), shall be borne by Gaming Holdings or Gaming.
ARTICLE VII
CONDITIONS TO CLOSING
SECTION 7.1. CONDITIONS TO THE PURCHASER'S AND LCI PARENT'S
OBLIGATIONS. The obligation of the Purchaser and LCI Parent to consummate the
purchase of the Purchaser Shares and the other transactions contemplated hereby
is subject to the satisfaction (or waiver by the Purchaser or LCI Parent, in
their sole discretion) at or prior to the Closing of the following conditions:
(a) The representations and warranties of Gaming Holdings, Gaming,
Holdings, Sommer Enterprises and the Trust made in this Agreement shall be true
and correct in all material respects as of the Effective Date and as of the
Closing Date with the same effect as if made at and as of the Closing Date.
Gaming Holdings, Gaming, Holdings, Sommer Enterprises or the Trust shall have
performed in all material respects the agreements required to be performed by
Gaming Holdings, Gaming, Holdings, Sommer Enterprises or the Trust on or prior
to the Closing Date. Gaming Holdings shall have delivered to the Purchaser a
certificate of an officer of Gaming Holdings to the foregoing effect (the
"GAMING HOLDINGS CLOSING CERTIFICATE").
(b) No injunction or order of any Governmental Entity shall be in
effect as of the Closing Date, and no lawsuit, claim, arbitration, proceeding or
investigation shall be pending before any Governmental Entity as of the
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Closing Date, and there shall be no outstanding judgment, order or decree of any
Governmental Entity, in each case, which would restrain or prohibit the issuance
and sale of the Purchaser Shares on the Closing Date or the consummation of any
of the other transactions contemplated by this Agreement or invalidate or
suspend any provision of this Agreement.
(c) Since the Effective Date, there shall have been no event,
occurrence, or development and there shall not be any state of circumstances or
facts (whether or not disclosed in the Closing Schedules or the Gaming Holdings
Closing Certificate) which has had or is likely to have a Material Adverse
Effect on Gaming Holdings, Gaming, Holdings, Sommer Enterprises or the Trust.
(d) Gaming shall have delivered to the Purchaser an opinion of counsel
to Gaming Holdings, Gaming, Holdings, Sommer Enterprises and the Trust in form
and substance satisfactory to the Purchaser.
(e) The Purchaser shall be satisfied, in its sole discretion, that all
Redevelopment Documents necessary for the timely completion of the construction,
furnishing and fitting out of the Redevelopment are in full force and effect and
all of such Redevelopment Documents shall have theretofore been presented to,
and approved by, the Purchaser in its sole discretion pursuant to Section 6.1 or
Section 2.2.
(f) Without limiting the foregoing, the Gaming Financing shall, on
terms and conditions satisfactory to the Purchaser in its sole discretion, have
been consummated and be in full force and effect, and with respect to Bazaar
Financing, a financing commitment shall be in full force and effect on terms and
conditions satisfactory to the Purchaser in its sole discretion to the extent
that such terms and conditions directly or indirectly affect the Redeveloped
Aladdin, Gaming Holdings or Gaming.
(g) The Purchaser shall be satisfied in its sole discretion that the
Redevelopment Documents taken as a whole do not materially increase LCI Parent's
liability under the Completion Guaranties or the Keep Well Agreement above
reasonably anticipated levels.
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(h) A counterpart of each of the Operating Agreement, Salle Privee
Agreement and Contribution Agreement shall have been duly executed by the other
party or parties thereto, shall have been delivered to the Purchaser, and shall
be in full force and effect, assuming due and valid execution and delivery by
the Purchaser and LCI Parent of each such agreement to which they are a party.
(i) A counterpart of the Completion Guaranties and the Keep Well
Agreement containing terms and conditions satisfactory to LCI Parent in its sole
discretion shall have respectively been duly executed by Holdings and the Trust,
and Holdings, delivered to the Bank Lenders, and be in full force and effect,
assuming due and valid execution and delivery by LCI Parent.
(j) A counterpart of the Tax Indemnity Agreement shall have been duly
executed by the Trust and Holdings, shall have been delivered to LCI Parent and
the Purchaser and shall be in full force and effect, assuming due and valid
execution and delivery by the Purchaser and LLC Parent.
(k) If an Escrow Agreement is required by the Gaming Financing, a
counterpart of the Escrow Agreement with an Escrow Agent, and on terms and
conditions satisfactory to the Purchaser in its sole discretion, shall have been
duly executed by the other parties thereto, and a counterpart thereof shall have
been delivered to the Purchaser.
(l) An amendment to the Goeglein Employment and Consulting Agreement
providing that a change of control which occurs, pursuant to the provisions of
the Operating Agreement, in connection with defaults and/or calls under the
Completion Guaranties, the Keep Well Agreement or the Contribution Agreement,
shall not be deemed a change of control for purposes of the Goeglein Employment
and Consulting Agreement.
(m) An ALTA Policy of Title Insurance in the amount of at least $180
million insuring in favor of Gaming's title to the Land And Existing
Improvements as warranted in this Agreement and issued by a title insurer (and
if reinsured, reinsured by reinsurers) reasonably satisfactory to the Purchaser,
shall have been delivered to Gaming, and shall be in full force and effect.
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(n) The Amended and Restated Articles shall have been entered into.
(o) The closing of the sale of the Discount Notes and Warrants shall
have taken place.
SECTION 7.2. CONDITIONS TO GAMING HOLDINGS'S, GAMING'S, HOLDINGS',
SOMMER ENTERPRISES' AND THE TRUST'S OBLIGATIONS. The obligation of Gaming
Holdings, Gaming, Holdings, Sommer Enterprises and the Trust to consummate the
issuance and sale of the Purchaser Shares and the other transactions
contemplated hereby is subject to the satisfaction (or waiver by Gaming
Holdings, Gaming, Holdings, Sommer Enterprises or the Trust, in their sole
discretion) at or prior to the Closing of the following conditions:
(a) The representations and warranties of the Purchaser and LCI Parent
made in this Agreement shall be true and correct in all material respects as of
the Effective Date and as of the Closing Date with the same effect as if made at
and as of the Closing Date. The Purchaser or LCI Parent shall have performed in
all material respects the agreements required to be performed by the Purchaser
or LCI Parent on or prior to the Closing Date. The Purchaser shall have
delivered to Gaming Holdings a certificate of an officer of the Purchaser to the
foregoing effect (the "PURCHASER CLOSING CERTIFICATE").
(b) No injunction or order of any Governmental Entity shall be in
effect as of the Closing Date, and no lawsuit, claim, arbitration, proceeding or
investigation shall be pending before any Governmental Entity as of the Closing
Date, and there shall be no outstanding judgment, order or decree of any
Governmental Entity, in each case, which would restrain or prohibit the issuance
and sale of the Purchaser Shares on the Closing Date or the consummation of any
of the other transactions contemplated by this Agreement or invalidate or
suspend any provision of this Agreement.
(c) Each of the Redevelopment Documents that, in Gaming Holdings'
opinion in its sole discretion, are necessary for the timely completion of the
construction, furnishing and fitting out of the Redevelopment shall have been
presented to and approved by the Purchaser pursuant to Section 6.1, and the
Redevelopment Agreements and the Redevelopment Financing Agreements shall have
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been duly executed and delivered by the parties thereto and shall be in full
force and effect.
(d) Without limiting the foregoing, the Gaming Financing shall, on
terms and conditions satisfactory to Gaming Holdings in its sole discretion,
have been consummated and be in full force and effect, and with respect to the
Bazaar Financing, a financing commitment shall be in full force and effect on
the terms and conditions satisfactory to Gaming Holdings and Gaming in its sole
discretion.
(e) A counterpart of each of the Operating Agreement, Salle Privee
Agreement and Contribution Agreement shall have been duly executed by the other
party or parties thereto, shall have been delivered to Gaming Holdings, and
shall be in full force and effect, assuming due and valid execution and delivery
by Gaming, Holdings and the Trust of each such agreement to which they are a
party.
(f) A counterpart of each of the Completion Guaranties and the Keep
Well Agreement containing terms and conditions satisfactory to the Trust and
Holdings, respectively, in their sole discretion shall have been duly executed
by LCI Parent, delivered to the Bank Lenders, and be in full force and effect,
assuming due and valid execution and delivery by the Trust and Holdings,
respectively.
(g) If an Escrow Agreement is required by the Gaming Financing, a
counterpart of the Escrow Agreement with an Escrow Agent, and on terms and
conditions satisfactory to Gaming Holdings in its sole discretion, shall have
been duly executed by the other parties thereto, and a counterpart thereof shall
have been delivered to Gaming Holdings.
(h) The Purchaser shall have paid the Purchase Price to Gaming
Holdings, as provided in Section 2.3(a)(i).
(i) Since the Effective Date, there shall have been no event,
occurrence, development, state of circumstances or facts (whether or not
disclosed in the Purchaser Closing Certificate) which has had or is likely to
have a Material Adverse Effect on the Purchaser or LCI Parent.
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(j) The Discount Notes and Warrants shall be issued and outstanding.
(k) The Purchaser shall have delivered to Gaming an opinion of counsel
to the Purchaser and LCI Parent in form and substance satisfactory to Gaming.
ARTICLE VIII
GUARANTEE
SECTION 8.1. GUARANTEE. LCI Parent hereby unconditionally and
irrevocably guarantees to Gaming Holdings the prompt and complete performance by
the Purchaser, when due, of the Purchaser's obligations under this Agreement.
ARTICLE IX
TERMINATION
SECTION 9.1. TERMINATION. This Agreement may be terminated at any
time prior to the Closing Date:
(a) by mutual agreement in writing of the Purchaser and Gaming
Holdings;
(b) by written notice given by Gaming Holdings or by Purchaser as
provided in Sections 2.2(b) and 6.1(b);
(c) by written notice by Gaming Holdings or Gaming if (i) LCI Parent
or the Purchaser fails to cure a Gaming Problem within the ninety day period
provided in Section 6.8(c)(ii), time being of the essence, or (ii) LCI Parent or
the Purchaser or any of their respective Affiliates or any of their respective
employees, officers or directors fails to make any filing or disclosure required
or requested by, or withdraws any filing or disclosure made to, the Nevada
Gaming Authorities;
(d) by written notice by the Purchaser if (i) Sommer Enterprises,
Gaming Holdings, Gaming, Holdings or the Trust fails to cure a Gaming Problem
within the ninety day period provided in Section 6.8(c)(ii), time being of the
essence, or (ii) Sommer Enterprises, Gaming Holdings, Gaming, Holdings or the
Trust or any of their
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respective Affiliates or any of their respective employees, officers or
directors fails to make any filing or disclosure required or requested by, or
withdraws any filing or disclosure made to, the Nevada Gaming Authorities;
(e) by written notice given on or before March 6, 1998 by Gaming
Holdings or by the Purchaser if the Closing is not consummated on or before
March 3, 1998; or
(f) by written notice on or before March 6, 1998 by Gaming Holdings or
the Purchaser if the consents have not been received on or before March 3, 1998;
(g) by Gaming Holdings or the Purchaser by written notice if any
Governmental Entity will have issued an order, decree or ruling or taken any
other action restraining, enjoining or otherwise prohibiting any of the
transactions contemplated hereby and such order, decree, ruling or other action
will have become final and nonappealable; PROVIDED that the right to terminate
this Agreement pursuant to this Section 9.1(j) shall not be available to any
party whose failure to fulfill any of its obligations under this Agreement has
been the cause of such action by the Governmental Entity.
SECTION 9.2. EFFECT OF TERMINATION. Except for Sections 6.2(c) and
11.4 which shall remain in effect, upon termination pursuant to this Article IX,
this Agreement shall terminate and be void and have no effect, the transactions
contemplated hereby shall be abandoned, no party hereto shall have any liability
to any other party hereto, and the parties shall bear their own expenses,
including counsel fees.
ARTICLE X
SURVIVAL; INDEMNIFICATION
SECTION 10.1. SURVIVAL; REMEDY FOR BREACH. The representations and
warranties of the parties contained in this Agreement shall (except with respect
to the representations and warranties contained in Sections 3.5, 3.7, 3.10,
3.11, 3.12, 3.13, 3.16, 3.17, 3.18 and 5.10, which shall survive for a period of
three years after the Closing Date) survive the Closing for a period of one year
after the Closing Date, after which all representations and warranties made by
the parties herein
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or pursuant hereto shall expire. Notwithstanding the foregoing, any
representation or warranty in respect of which indemnity may be sought under any
Section of this Agreement shall survive the time at which it would otherwise
terminate pursuant to this Agreement if notice of the breach of the
representation or warranty giving rise to such indemnity shall have been give to
the party against whom such indemnity may be sought, prior to such time. After
the Closing, the sole and exclusive remedy of any party for any incorrect
representation or warranty contained herein shall be the indemnities contained
in Section 10.2, provided that the foregoing shall not limit the right of the
parties to such equitable remedies as may be available.
SECTION 10.2. INDEMNIFICATION. Each party hereto (the "INDEMNIFYING
PARTY") hereby indemnifies each other party hereto (the "INDEMNIFIED PARTIES")
against and agrees to hold them harmless from any and all damage, loss,
liability and expense (including, without limitation, reasonable expenses of
investigation and attorneys' fees and expenses) ("LOSS"), incurred or suffered
by the Indemnified Parties arising out of or relating, directly or indirectly,
to any breach of any representation or warranty of the Indemnifying Party made
to such Indemnified Party which is contained in this Agreement. Notwithstanding
the foregoing, the Indemnifying Party shall not be liable under this Section
10.2 unless the aggregate amount of liability under this Section 10.2 to any
party or its Affiliates exceeds $1 million (the "THRESHOLD") whereupon such
Indemnified Party shall be entitled to indemnification hereunder for the
aggregate amount of such liability.
SECTION 10.3. ARONOW INDEMNIFICATION. Holdings and the Trust hereby
jointly and severally indemnify Gaming Holdings, Gaming, the Purchaser and LCI
Parent against and agree to hold them harmless from, all Loss incurred or
suffered by Gaming Holdings, Gaming, the Purchaser or LCI Parent arising out of
or relating, directly or indirectly, to (i) that certain litigation filed in the
Supreme Court of the State of New York, County of New York, Index No. 112618/95
entitled "Joseph Aronow, et al., vs. Jack Sommer, et al.," or any subsequent
claims made by the parties thereto; (ii) that certain litigation filed in the
Supreme Court of the State of New York, County of New York, Index No. 600301/97
entitled "Kanbar, et al. v. Aronow, et al.", or any subsequent claims made by
the parties thereto, or
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(iii) that certain litigation filed in the Southern District of New York, Case
No. 88 CIV. 2537 (DAB), entitled "Sommer, et al. v. PMEC", or any subsequent
claims made by the parties thereto.
SECTION 10.4. ENVIRONMENTAL INDEMNITY. Notwithstanding any other
provision of this Agreement, the Trust hereby indemnifies and holds LCI Parent,
and any Affiliates of LCI Parent that are signatories to the Subsidiary
Guarantee to be delivered to the Bank Lenders in respect of the Bank Debt,
harmless from and against all Loss incurred or suffered by them or any of them
arising out of or relating directly or indirectly to the Environmental Indemnity
Agreement, Exhibit J-1 to the Credit Agreement entered into in respect of the
Bank Debt. Holdings and Sommer Enterprises hereby join in said indemnification.
This indemnification shall not be in duplication of any other indemnity
hereunder.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. ASSIGNMENT. This Agreement and the rights hereunder
shall not be assignable or transferable by any party hereto (by operation of law
or otherwise) without the prior written consent of the other parties hereto.
SECTION 11.2. NO THIRD-PARTY BENEFICIARIES. This Agreement is for
the sole benefit of the parties hereto and their permitted assigns and nothing
herein expressed or implied shall give or be construed to give to any person,
other than the parties hereto and such assigns, any legal or equitable rights
hereunder.
SECTION 11.3. EXPENSES. Except as otherwise provided in this
Agreement, all costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby shall be paid by the party incurring such
costs or expenses.
SECTION 11.4. CONFIDENTIALITY. Each party shall treat as
confidential and not use or disseminate, other than as contemplated under or in
connection with this Agreement (including such use by or dissemination to their
advisors or counsel as may be reasonably necessary in the context of the
transactions contemplated under and in connection with this Agreement) all
documents and
49
<PAGE>
information concerning this Agreement, the Redevelopment, the Salle Privee
Facilities, the transactions contemplated by this Agreement and Gaming Holdings
or Gaming which has been furnished to such party (the "RECEIVING PARTY") by any
of the other parties or their Affiliates (collectively, the "CONFIDENTIAL
INFORMATION"), except to the extent that such information can be shown to have
been (i) previously known on a non-confidential basis by the Receiving Party,
(ii) in the public domain through no fault of the Receiving Party or (iii)
previously or later acquired through sources other than such other party and its
Affiliates. The parties agree that upon the expiration or termination of this
Agreement (i) each party shall promptly return all written material containing
or reflecting Confidential Information, (ii) no party will retain any copies or
other reproductions in whole or part containing or reflecting any Confidential
Information and (iii) all documents, memos, notes and other writings prepared by
each party or its respective advisors containing or reflecting Confidential
Information shall be destroyed, and such destruction shall be certified in
writing to the other parties by an authorized officer of the destroying party
supervising such destruction.
SECTION 11.5. PUBLICITY. The parties agree that no public release,
announcement or other form of publicity concerning the purchase of the Purchaser
Shares by the Purchaser and the other transactions contemplated hereby shall be
issued by any party hereto without the prior written consent of the other
parties, except as such release or announcement may be required by a
Governmental Entity or by Law or the rules or regulations of any securities
exchange; PROVIDED, HOWEVER, in the event of a release or announcement by the
Purchaser pursuant to the immediately preceding clause, the Purchaser shall
provide Gaming Holdings with prompt prior notice of such request and cooperate
with Gaming Holdings with respect thereto.
SECTION 11.6. FURTHER ASSURANCES. Gaming Holdings, Gaming, Holdings
and the Trust shall use their reasonable efforts to obtain and to assist the
Purchaser and LCI Parent, and the Purchaser and LCI Parent shall use their
reasonable efforts to obtain and to assist Gaming Holdings, Gaming, Holdings and
the Trust, as the case may be, in obtaining promptly all necessary consents or
approvals from any Governmental Entity or any other Person for any exercise by
the Purchaser, Gaming Holdings, Gaming, Holdings, the Trust or the LCI Parent,
as
50
<PAGE>
the case may be, of its rights under this Agreement and to take such other
actions as may reasonably be requested by the Purchaser, LCI Parent or Gaming
Holdings or Gaming, as the case may be, to effect the purpose of this Agreement.
SECTION 11.7. AMENDMENTS. The terms and provisions of this Agreement
may not be amended except by a written instrument signed by the parties hereto
making express reference to this Agreement and expressly stating that such
written instrument is an amendment of this Agreement.
SECTION 11.8. NOTICES. (a) All notices, consents and other
communications given under this Agreement shall be in writing and shall be
deemed to have been duly given and delivered (i) when delivered by hand or by
DHL or Federal Express or a courier of similar international standing to the
party for whom intended, (ii) five days after being deposited in any official
government post office in the United States of America or England, as the case
may be, enclosed in an airmail postage prepaid registered or certified envelope
addressed to, or (iii) when successfully transmitted by facsimile to, the party
for whom intended at the address or facsimile number for such party set forth
below, or to such other address or facsimile number as may be furnished by such
party by notice in the manner provided herein; PROVIDED, HOWEVER, that any
notice of change of address or facsimile number shall be effective only upon
receipt. All notices shall specifically state: (A) the provision (or
provisions) of this Agreement with respect to which such notice is given, and
(B) the relevant time period, if any, in which the party given such notice must
respond.
(b) Subject to Section 11.8(a), the addresses and facsimile members of
the parties for notices, consents and other communications given under this
Agreement shall be as follows:
(i) if to Gaming Holdings, Gaming, Sommer Enterprises, Holdings or the
Trust:
Aladdin Gaming, LLC
2810 West Charleston Boulevard
Suite 58
Las Vegas, Nevada 89102-1934
Telephone: 702-870-1234
Telecopier: 702-870-8733
51
<PAGE>
Attention of Jack Sommer
with a copy to:
Sigmund Sommer Properties
280 Park Avenue
New York, New York 10017
Telephone: 212-661-0700
Telecopier: 212-661-0844
Attention of Ronald Dictrow
and
Schreck Morris
300 South Fourth Street
Suite 1200
Las Vegas, Nevada 89101
Telephone: 702-474-9400
Telecopier: 702-474-9422
Attention of Frank A. Schreck, Esq.
and
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Telephone: 212-735-3000
Telecopier: 212-735-2000
Attention of Wallace L. Schwartz, Esq.
(ii) if to the Purchaser or LCI Parent:
London Clubs International, plc
10 Brick Street
London W1Y 8HQ, England
Telephone: 011-44-171-518-0000
Telecopier: 011-44-171-493-6981
Attention of Linda M. Lillis
with a copy to:
Ohrenstein & Brown, LLP
230 Park Avenue
New York, New York 10169
Telephone: 212-682-4500
Telecopier: 212-557-0910
Attention of Peter J. Kiernan, Esq.
52
<PAGE>
and
Lionel, Sawyer & Collins
300 South 4th Street
Suite 1700
Las Vegas, Nevada 89101
Telephone: 702-383-8888
Telecopier: 702-383-8845
Attention of P. Gregory Giordano, Esq.
SECTION 11.9. CONSENTS AND APPROVALS. Whenever in this Agreement
reference is made to the Purchaser being satisfied, to the Purchaser's
satisfaction, to the Purchaser's approval, or to Purchaser's consent (or any
similar reference), such satisfaction, approval or consent, as the case may be,
may for purposes of this Agreement be effective only if in writing, signed by
the Purchaser, making express reference to this Agreement and to the document,
state of facts or other matter involved, and expressly stating that it is an
approval, consent, or state of satisfaction or of being satisfied, as the case
may be. Any representation or warranty herein referring to Music Holdings
shall, to the extent that it relates to Music Holdings, be made only as of the
Closing Date and not as of the Effective Date.
SECTION 11.10. COUNTERPARTS; EFFECTIVENESS. This Agreement may be
executed in any number of counterparts, each of which shall be considered an
original, but all such counterparts shall together constitute but one and the
same contract.
SECTION 11.11. CONSTRUCTION. Definitions shall apply equally to both
the singular and plural forms of the terms defined. Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms. The words "include", "includes" and "including" shall be deemed
to be followed by the phrase "without limitation". Any references to any
agreement, instrument, statute or regulation is to it as amended and
supplemented from time to time (and in the case of statute or regulation, to any
successor provision). The table of contents, headings of Articles, Sections,
Schedules or other subdivisions have been inserted for convenience of reference
only and are not intended to be a part of or to affect the meaning of or
interpretation of this Agreement. Any reference to any Schedule in this
Agreement shall mean, as the case may
53
<PAGE>
be, (a) in connection with a representation and warranty of any party as of the
Effective Date, the Schedules attached to this Agreement as of the Effective
Date, and (b) in connection with a representation and warranty of any party as
of the Closing Date, the Closing Schedules. If any parties' representations and
warranties under this Agreement are incorrect or untrue as of the Closing Date
by reason of any event, occurrence or development after the Effective Date, or
state of circumstances or facts arising after the Effective Date, same shall not
be an actionable breach of contract under this Agreement; PROVIDED that such
event, occurrence, development, state of circumstances or facts is disclosed in
the Purchaser Closing Certificate or the Gaming Holdings Closing Certificate, as
the case may be. Any representation or warranty herein referring to Music
Holdings shall, to the extent that it relates to Music Holdings, be made only as
of the Closing Date and not as of the Effective Date.
SECTION 11.12. SEVERANCE. Every provision of this Agreement is
intended to be severable. If any term or provision hereof is illegal or invalid
for any reason whatsoever, such term or provision shall be enforced to the
maximum extent permitted by law and, in any event, such illegality or invalidity
shall not affect the validity of the remainder of this Agreement.
SECTION 11.13. NON-WAIVER. No provision of this Agreement shall be
deemed to have been waived except if the giving of such waiver is contained in a
written notice given to the party claiming such waiver and signed by the party
giving such waiver and expressly making reference to this Agreement and the
matter being waived and expressly stating that it is a waiver. No such waiver
shall be deemed to be a waiver of any other or further obligation or liability
of the party or parties in whose favor the waiver was given.
SECTION 11.14. APPLICABLE LAW AND JURISDICTION. This Agreement and
the rights and obligations of the parties hereto shall be interpreted and
enforced in accordance with and governed by the laws of the State of New York
without regard to the conflict laws of that State. Except as otherwise
expressly provided with respect to arbitration pursuant to Section 6.7 of this
Agreement and the Arbitration Provision, any suit, action or proceeding seeking
to enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated hereby
54
<PAGE>
shall only be brought in the United States District Court for the Southern
District of New York and each party hereto consents to the jurisdiction of the
United States District Court for the Southern District of New York, and each
party further agrees that service of any process, summons, notice or document by
U.S. registered mail to its respective address set forth in this Agreement shall
be effective service of process for any action brought against it in connection
with this Agreement in said court.
SECTION 11.15. REMEDIES. Except as otherwise expressly provided in
this Agreement, the rights and remedies herein provided shall be cumulative and
not exclusive of any rights or remedies provided by law or equity.
SECTION 11.16. ENTIRETY OF AGREEMENT. This Agreement sets forth the
entire understanding of the parties with respect to the transactions
contemplated hereby, and merges and supersedes all prior and contemporaneous
understandings, representations and warranties with respect to such
transactions. Except as expressly set forth in this Agreement, none of the
parties hereto or thereto makes any representation or warranty to any other
party.
55
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Purchase Agreement as of the day and year first above written.
ALADDIN GAMING HOLDINGS, LLC
By: /s/ Jack Sommer
------------------------------
Name: Jack Sommer
Title: Chairman
ALADDIN GAMING, LLC
By: Aladdin Gaming Corp., its
Manager
By: /s/ Jack Sommer
-----------------------------------
Name: Jack Sommer
Title: Secretary
LONDON CLUBS NEVADA INC.
By: /s/ Linda Lillis
-----------------------------------
Name: Linda Lillis
Title: Assistant Secretary
LONDON CLUBS INTERNATIONAL, P.L.C.
By: /s/ Barry Hardy
-----------------------------------
Name: Barry Hardy
Title: Finance Director
56
<PAGE>
ALADDIN HOLDINGS, LLC
By: Aladdin Management Corporation, its
Manager
By: /s/ Viola Sommer
------------------------------
Viola Sommer
President
By: /s/ Jack Sommer
------------------------------
Jack Sommer
Vice President
SOMMER ENTERPRISES, LLC
By: /s/ Jack Sommer
-----------------------------------
Name: Jack Sommer
Title: Chairman
TRUST UNDER ARTICLE SIXTH U/W/O
SIGMUND SOMMER
By: /s/ Viola Sommer
-----------------------------------
Viola Sommer, as trustee and not
individually
By: /s/ Jack Sommer
-----------------------------------
Jack Sommer, as trustee and not
individually
By: /s/ Eugene Landsberg
-----------------------------------
Eugene Landsberg, as trustee and
not individually
57
<PAGE>
SCHEDULE 3.5
PROPOSED CAPITAL STRUCTURE IMMEDIATELY AFTER THE CLOSING
A. VOTING INTERESTS
PERSON PERCENTAGE INTEREST
Sommer Enterprises 47%
Aladdin Enterprises 25%
Purchaser 25%
GAI 3%
B. RIGHTS OR CLAIMS TO MEMBERSHIPS, INTERESTS OR SHARES
See Schedules 3.15 and 4.3.
<PAGE>
SCHEDULE 3.6
PERMITTED ENCUMBRANCES
PERMITTED ENCUMBRANCES: Shall mean:
(i) Liens for impositions not yet due and payable or Liens which are
being diligently contested in good faith by appropriate proceedings promptly
instituted;
(ii) Statutory Liens of carriers, warehousemen, mechanics, materialmen
and other similar Liens arising by operation of law, which are incurred in the
ordinary course of business for sums which are being contested in good faith;
(iii) All immaterial easements, rights-of-way, restrictions and other
similar charges or non-monetary encumbrances against real property and other
agreements which do not materially and adversely affect (A) the ability of
Holdings, Gaming Holdings or Gaming to pay any of their obligations to any
Person as and when due, (B)the marketability of title to the Land And Existing
Improvements (C) the fair market value of the Land And Existing Improvements or
(D) the use or operation of the Land And Existing Improvements;
(iv) The leases, under lettings, concession agreements and licenses of
the Land And Existing Improvements or any part thereof, entered into by
Holdings, Gaming Holdings or Gaming set forth below (collectively, the
"LEASES"):
The JMJ Lease
(v) Those items set forth in the attached Title Report.
<PAGE>
SCHEDULE 3.11
ENVIRONMENTAL AND SOILS REPORTS
1. Phase 1 Environmental Site Assessment dated July 25, 1994, prepared by
Western Technologies, Inc.
2. Asbestos Air Sampling Survey dated September 2, 1994, prepared by Converse
Environmental Consultants Southwest, Inc.
3. Phase 1 Environmental Site Assessment dated October 23, 1996, prepared by
Ninyo & Moore Geotechnical and Environmental Sciences Consultants.
4. Limited Soil and Groundwater Investigation dated March 25, 1997, prepared
by Converse Environmental Consultants Southwest, Inc.
<PAGE>
SCHEDULE 3.13
HOLDINGS MATERIAL ASSETS AND LIABILITIES
ITEM (I): ASSETS
1. 98.67% interest in the issued and outstanding interests in Sommer
Enterprises.
2. Title to the Land And Existing Developments.
3. Rights under the JMJ Lease.
4. Rights under the this Agreement.
5. Rights under Aladdin Hotel & Casino Agreement, by and between County of
Clark, Holdings and Aladdin Management Corporation dated March 18, 1997.
ITEM (II): LIABILITIES
1. Obligations under JMJ Lease.
2. Obligations under this Agreement.
3. Obligations under Aladdin Hotel & Casino Agreement, by and between County
of Clark, Holdings and Aladdin Management Corporation dated March 18, 1997.
<PAGE>
SCHEDULE 3.14
FINANCIAL STATEMENTS
Delivered in October, 1997.
<PAGE>
SCHEDULE 3.15
LITIGATION
1. ARONOW, ET AL. V. SOMMER, ET AL.,
Index No. 112618/95 (New York Sup. Ct.)
In May 1995 the above-referenced action was commenced in the Supreme
Court of the State of New York, County of New York (the "Court"), against
defendants Jack Sommer, individually and as Trustee Under Article Sixth u/w/o
Sigmund Sommer (the "Trust"); Viola Sommer, individually and as Trustee of the
Trust; Eugene Landsberg, as Trustee of the Trust; and GW Vegas, L.L.C.
Plaintiffs allege, among other things, that a joint venture was formed between
plaintiffs and Jack Sommer to acquire and develop the Aladdin Hotel and Casino
in Las Vegas, Nevada. Plaintiffs' alleged causes of action include impressing a
constructive trust, breach of a joint venture agreement, breach of fiduciary
duty, misappropriation of an opportunity, unjust enrichment and an accounting.
Plaintiffs seek, among other things, to impress a constructive trust, an
accounting, compensatory damages of not less than $200 million and punitive
damages not less than $500 million.
Defendants moved to dismiss the complaint and, on May 20, 1996, the
Court granted in part and denied in part said motion. Plaintiffs have since
filed an Amended Complaint. Defendants have answered the Amended Complaint and
Jack Sommer, individually, has asserted a counterclaim for fraudulent
inducement. Subsequently, plaintiffs moved for partial summary judgment, to
dismiss the affirmative defenses and the individual counterclaim of Jack Sommer,
and for a preliminary injunction entitling them to advance notice of any
transfer or encumbrance of defendants' interest in the Aladdin. On February 18,
1997, the Court denied all of plaintiffs' motions, except the Court dismissed
two of defendants' affirmative defenses.
2. KANBAR, ET AL. V. ARONOW, ET AL.,
Index No. 600301/97 (New York Sup. Ct.)
In January 1997 the above-referenced action was filed in the Supreme
Court of the State of New York, County of New York, against, among others, Jack
Sommer, Viola Sommer and Eugene Landsberg, each individually and as Trustees of
the Trust (the "Trustees"). Plaintiffs allege that they were in a partnership
with Joseph Aronow which was formed to seek and develop business opportunities
with Jack Sommer. Plaintiffs, among other things, allege that they were
fraudulently induced into entering a settlement agreement with Jack Sommer
related to these very same issues involved in the lawsuit.
Plaintiffs seek against the Trustees, a constructive trust in the
Aladdin Hotel and Casino, declaratory judgment, damages not less than $20
million and punitive damages not less than $50 million. The Trustees have moved
to dismiss this action.
<PAGE>
SCHEDULE 3.16
MATERIAL ADVERSE EFFECT
None.
<PAGE>
SCHEDULE 3.17
LIABILITIES NOT REFLECTED ON FINANCIAL STATEMENTS
None.
<PAGE>
SCHEDULE 4.1
SUBSIDIARIES
<PAGE>
SCHEDULE 4.2
MATERIAL CONTRACTS
1. Letter Agreement dated December 23, 1996 between Westwood Capital, LLC
("WESTWOOD"), Trust Under Article Sixth u/w/o Sigmund Sommer ("TRUST"),
Holdings and Gaming under which the obligations, agreements, liabilities
and other commitments of the Trust pursuant to a Letter Agreement between
Westwood and Trust dated May 31, 1996 were assigned, conveyed and otherwise
transferred to Holdings, Gaming and other entities to be formed by the
Trust and Holdings in connection with the Redevelopment, jointly and
severally.
2. Letter Agreement dated September 11, 1996 between the Trust and HK Group,
LLC ("HK GROUP") under which the Trust agreed that a $2 million success fee
for the introduction of Gaming to the Purchaser would, subject to the terms
and conditions of such Letter Agreement, be paid by Gaming to HK Group.
3. See also Schedule 4.3.
<PAGE>
SCHEDULE 4.3
EMPLOYEES
1. Goeglein Employment and Consulting Agreement.
2. GAI Consulting Agreement.
3. Employment Agreement dated as of July 1, 1997 between Gaming, Holdings and
James H. McKennon.
4. Employment Agreement dated as of July 1, 1997 between Gaming, Holdings and
Cornelius T. Klerk.
5. Employment Agreement dated as of July 1, 1997 between Gaming, Holdings and
Lee Galati.
6. Employment Agreement dated as of July 1, 1997 between Gaming, Holdings and
Jose A. Rueda.
<PAGE>
SCHEDULE 4.4
EMPLOYEE BENEFIT PLANS; ERISA
None.
<PAGE>
SCHEDULE 4.5
ALADDIN NAMES
1. Service Mark (Reg. No. 1,789,789), "Aladdin Hotel & Casino".
Registered August 24, 1993 for Hotel and Restaurant Services.
2. Service Mark (Reg. No. 1,781,854), "Aladdin".
Registered June 13, 1993 for Casino and Casino Entertainment Services.
3. Service Mark (Reg. No. 1,779,369) "Aladdin".
Registered June 29, 1993 for Hotel and Restaurant Services.
4. Service Mark (Reg. No. 1,781,855), "Aladdin".
Registered July 13, 1993 for Casino and Casino Entertainment Services.
<PAGE>
SCHEDULE 6.1
REDEVELOPMENT AGREEMENTS APPROVED BY LCI
To be included in the Closing Schedules only.
<PAGE>
EXHIBIT 2
ECONOMIC TERMS OF TRANSFER OF SHOPPING CENTER PARCEL
A subordinated and unsecured self-amortizing promissory note (or equivalent
lease terms) in the principal amount of $16,666,667, with an interest rate of
12% per annum and a maturity date 69 years from the Closing Date, and on other
terms and conditions customary for a subordinated and unsecured self-amortizing
promissory note.
<PAGE>
CLOSING SCHEDULES
TO THE
AMENDED AND RESTATED LCI PURCHASE AGREEMENT
DATED AS OF SEPTEMBER 24, 1997,
AS AMENDED
<PAGE>
SCHEDULE 3.5
PROPOSED CAPITAL STRUCTURE IMMEDIATELY AFTER THE CLOSING
A. VOTING INTERESTS
PERSON PERCENTAGE INTEREST
Sommer Enterprises 47%
Aladdin Enterprises 25%
Purchaser 25%
GAI 3%
RESTRICTED MEMBERSHIP INTERESTS (UNVESTED)
Goeglein 2%
McKennon 1%
Klerk .75%
Rueda .75%
Galati .25%
B. RIGHTS OR CLAIMS TO MEMBERSHIPS, INTERESTS OR SHARES
Various rights or legal or equitable claims to Memberships, Interests or
Shares in Gaming Holdings arise under the following agreements and
arrangements:
(a) Under the Pledge Agreements dated as of the date of the Indenture, to
be executed by Gaming Holdings in favor of the holders of the Notes.
(b) Pledge and security agreements to be entered into pursuant to the
Credit Agreement whereby all of Gaming Holdings' interests in Gaming
is to be pledged to the Bank Lenders other than the Series A Preferred
Interests.
See also Schedules 3.15 and 4.3.
<PAGE>
SCHEDULE 3.6
PERMITTED ENCUMBRANCES
PERMITTED ENCUMBRANCES: Shall mean:
(i) Liens for impositions not yet due and payable or Liens which
are being diligently contested in good faith by appropriate proceedings promptly
instituted;
(ii) Statutory Liens of carriers, warehousemen, mechanics,
materialmen and other similar Liens arising by operation of law, which are
incurred in the ordinary course of business for sums which are being contested
in good faith;
(iii) All immaterial easements, rights-of-way, restrictions and other
similar charges or non-monetary encumbrances against real property and other
agreements which do not materially and adversely affect (A) the ability of
Holdings or Gaming to pay any of its obligations to any Person as and when due,
(B)the marketability of title to the Land And Existing Improvements (C) the fair
market value of the Land And Existing Improvements or (D) the use or operation
of the Land And Existing Improvements;
(iv) The leases, under lettings, concession agreements and licenses
of the Land And Existing Improvements or any part thereof, entered into by
Holdings or Gaming set forth below (collectively, the "LEASES"):
The JMJ Lease
(v) Those items set forth in the attached Title Report.
<PAGE>
SCHEDULE 3.11
ENVIRONMENTAL AND SOILS REPORTS
1. Phase 1 Environmental Site Assessment dated July 25, 1994, prepared by
Western Technologies, Inc.
2. Asbestos Air Sampling Survey dated September 2, 1994, prepared by Converse
Environmental Consultants Southwest, Inc.
3. Phase 1 Environmental Site Assessment dated October 23, 1996, prepared by
Ninyo & Moore Geotechnical and Environmental Sciences Consultants.
4. Limited Soil and Groundwater Investigation dated March 25, 1997, prepared
by Converse Environmental Consultants Southwest, Inc.
5. Phase 1 Environmental Site Assessment Update dated February 13, 1998,
prepared by Ninyo & Moore Geotechnical and Environmental Sciences
Consultants.
<PAGE>
SCHEDULE 3.13
HOLDINGS MATERIAL ASSETS AND LIABILITIES
ITEM (I): ASSETS
1. 98.67% interest in the issued and outstanding interests in Sommer
Enterprises.
2. Title to the Land And Existing Developments.
3. Rights under this Agreement.
4. Rights under Aladdin Hotel & Casino Agreement, by and between County of
Clark, Holdings and Aladdin Management Corporation dated March 18, 1997.
5. Rights under an oral agreement with LVI in relation to the remediation of
asbestos and environmentally hazardous substances.
6. Rights under a Letter Agreement by and between Holdings and Fluor Daniel,
Inc. dated as of August 15, 1997 (and since modified by amendment on
September 18, 1997, November 24, 1997, December 31, 1997 and January 21,
1998).
ITEM (II): LIABILITIES
1. Obligations relating to the termination of the JMJ Lease (which survive).
2. Obligations under this Agreement.
3. Obligations under Aladdin Hotel & Casino Agreement, by and between County
of Clark, Holdings and Aladdin Management Corporation dated March 18, 1997.
4. Obligations under an oral agreement with LVI in relation to the remediation
of asbestos and environmentally hazardous substances.
5. Obligations under a Letter Agreement by and between Holdings and Fluor
Daniel, Inc. dated as of August 15, 1997 (and since modified by amendment
on September 18, 1997, November 24, 1997, December 31, 1997 and January 21,
1998).
<PAGE>
SCHEDULE 3.14
FINANCIAL STATEMENTS
See attached
<PAGE>
SCHEDULE 3.15
LITIGATION
1. ARONOW, ET AL. V. SOMMER, ET AL.,
Index No. 112618/95 (New York Sup. Ct.)
In May 1995 the above-referenced action was commenced in the Supreme
Court of the State of New York, County of New York (the "Court"), against
defendants Jack Sommer, individually and as Trustee Under Article Sixth u/w/o
Sigmund Sommer (the "Trust"); Viola Sommer, individually and as Trustee of the
Trust; Eugene Landsberg, as Trustee of the Trust; and GW Vegas, L.L.C.
Plaintiffs allege, among other things, that a joint venture was formed between
plaintiffs and Jack Sommer to acquire and develop the Aladdin Hotel and Casino
in Las Vegas, Nevada. Plaintiffs' alleged causes of action include impressing a
constructive trust, breach of a joint venture agreement, breach of fiduciary
duty, misappropriation of an opportunity, unjust enrichment and an accounting.
Plaintiffs seek, among other things, to impress a constructive trust, an
accounting, compensatory damages of not less than $200 million and punitive
damages not less than $500 million.
Defendants moved to dismiss the complaint and, on May 20, 1996, the
Court granted in part and denied in part said motion. Plaintiffs have since
filed an Amended Complaint. Defendants have answered the Amended Complaint and
Jack Sommer, individually, has asserted a counterclaim for fraudulent
inducement. Subsequently, plaintiffs moved for partial summary judgment, to
dismiss the affirmative defenses and the individual counterclaim of Jack Sommer,
and for a preliminary injunction entitling them to advance notice of any
transfer or encumbrance of defendants' interest in the Aladdin. On February 18,
1997, the Court denied all of plaintiffs' motions, except the Court dismissed
two of defendants' affirmative defenses.
2. SOMMER, ET AL. V. PMEC,
Case No. 88 CIV. 2537 (DAB) (United States District Court; Southern
District of New York)
In 1988, the Trust and two related entities commenced an action in the
Southern District of New York against certain entities owned and controlled by
Bronfman family interests (the "Bronfman Defendants") alleging, among other
things, that the Bronfman Defendants committed violations of Rule 10b-5 under
the Securities Exchange Act of 1934, as amended, as well as multiple breaches of
fiduciary duties as general partner of a partnership in which the Trust owns
limited partnership interests. Relief requested includes an accounting,
imposition of a constructive trust and damages in excess of $100 million.
The Bronfman Defendants have asserted counterclaims against plaintiffs
and certain Sommer family members individually
<PAGE>
alleging causes of action for breach of contract, fraud and various related
torts. The Bronfman Defendants claim damages of $75 million.
<PAGE>
SCHEDULE 3.16
MATERIAL ADVERSE EFFECT
None.
<PAGE>
SCHEDULE 3.17
LIABILITIES NOT REFLECTED ON FINANCIAL STATEMENTS
None.
<PAGE>
SCHEDULE 4.1
SUBSIDIARIES
Aladdin Capital Corp.
Gaming
Aladdin Music Holdings, LLC
<PAGE>
SCHEDULE 4.2
MATERIAL CONTRACTS
1. Letter Agreement dated December 23, 1996 between Westwood Capital, LLC
("WESTWOOD"), Trust Under Article Sixth u/w/o Sigmund Sommer ("TRUST"),
Holdings and Gaming under which the obligations, agreements, liabilities
and other commitments of the Trust pursuant to a Letter Agreement between
Westwood and Trust dated May 31, 1996 were assigned, conveyed and otherwise
transferred to Holdings, Gaming and other entities to be formed by the
Trust and Holdings in connection with the Redevelopment, jointly and
severally.
2. Letter Agreement dated September 11, 1996 between the Trust and HK Group,
LLC ("HK GROUP") under which the Trust agreed that a $2 million success fee
for the introduction of the Company to the Purchaser would, subject to the
terms and conditions of such Letter Agreement, be paid by Gaming to HK
Group.
3. Memorandum of Understanding and Letter of Intent dated September 2, 1997
between Holdings, Gaming and Planet Hollywood International, Inc. (as
amended).
4. Energy Service Agreement dated January __, 1998 between Gaming and
Northwind Aladdin, LLC, and other agreements set out in Section 2.1(f) of
the Construction, Operation and Reciprocal Easement Agreement between
Gaming, Bazaar and Aladdin Music, LLC, including the Development Agreement
and the Unicom Guaranty.
5. $80 million Financing Facility Commitment Letter from General Electric
Capital Corporation to Gaming dated January 23, 1998
6. Letter of Agreement dated on or about September 22, 1997 between MMG
Worldwide and Aladdin Management Corp.
7. Credit Agreement among Gaming, Various Financial Institutions, The Bank of
Nova Scotia, Merrill Lynch Capital Corporation and Canadian Imperial Bank
of Commerce for $410 million dated February 26, 1998.
8. "Material Main Project Documents" and "Main Project Documents" as defined
in section 1.1 of the Credit Agreement including: the Mall Project Ground
Lease, the Music Project Ground Lease, the Construction, Operation and
Reciprocal Easement Agreement, the Site Work Agreement, the Theater Lease,
the Design/Build Contract, the Interior Design
<PAGE>
Contract, the Fluor Guaranty and the Project Coordination Agreement.
9. "Loan Documents" as defined in section 1.1 of the Credit Agreement
including: the Notes the Letters of Credit, each Pledge Agreement, each
Rate Protector Agreement, each Borrowing Request, the Security Agreement,
the Keep-Well Agreement, the Completion Guaranty, the GECC Inter-creditor
Agreement, the Trademark Security Agreement, the Copyright Security
Agreement, the Patent Security Agreement, the Deed of Trust, the
Disbursement Agreement, the Mall Project Completion Assignment, the Fee
Letters, the Environmental Indemnity, the Assignment of Contracts, the
Borrower Collateral Account Agreement, the Holiday Collateral Account
Agreement and the Servicing and Collateral Account Agreement.
10. General Liability and other Insurance, including LCI Nevada, LCI and Bank
Lenders as named insureds.
11. Salle Prive Agreement by and among Gaming, the Purchaser and LCI Parent
dated February 26, 1998.
12. Contribution Agreement among the Trust, Holdings, Sommer Enterprises, LCI
Parent and the Purchaser dated February 26, 1998.
13. Construction Consultant Engagement Letter Agreement by and among Rider Hunt
(NV),LLC, Gaming, The Bank of Nova Scotia and the State Street Bank and
Trust Company dated January 28, 1998.
14. Operating Agreement of Gaming by and between Gaming and Gaming Holdings
dated February 26, 1998.
15. The Bazaar Lease, the Second Hotel Lease, the Utility Parcel Lease and the
Gaming Lease.
16. Promissory Note between JMJ, Inc. aba Aladdin Hotel & Casino and Community
Bank of Nevada dated as of June 12, 1995.
17. Commercial Guaranty between JMJ, Inc. aba Aladdin Hotel & Casino, Community
Bank of Nevada and the Trust dated as of June 12, 1995.
18. Bankers Master Lease Agreement between Bankers Leasing Association, Inc.
and JMJ, Inc. dates June 16, 1996. (including Equipment Schedule)
19. Bankers Guaranty between Bankers Leasing Association, Inc., JMJ, Inc., the
Trust and GW Vegas, LLC dated July 9, 1996.
<PAGE>
SCHEDULE 4.3
EMPLOYEES
1. Goeglein Employment and Consulting Agreement.
2. GAI Consulting Agreement.
3. Employment Agreement effective as of July 1, 1997 between the Company,
Holdings and James H. McKennon (as amended on February 26, 1998).
4. Employment Agreement effective as of July 1, 1997 between the Company,
Holdings and Cornelius T. Klerk (as amended on February 26, 1998).
5. Employment Agreement effective as of July 1, 1997 between the Company,
Holdings and Lee Galati (as amended on February 26, 1998).
6. Employment Agreement effective as of July 1, 1997 between the Company,
Holdings and Jose A. Rueda (as amended on February 26, 1998).
7. GAI Contribution and Amendment Agreement dated as of February 26, 1998
between the Company, Gaming Holdings and GAI.
8. Goeglein Contribution and Amendment Agreement dated as of February 26, 1998
between the Company, Gaming Holdings and Goeglein.
9. McKennon Contribution and Amendment Agreement dated as of February 26, 1998
between the Company, Gaming Holdings and McKennon.
10. Klerk Contribution and Amendment Agreement dated as of February 26, 1998
between the Company, Gaming Holdings and Klerk.
11. Galati Contribution and Amendment Agreement dated as of February 26, 1998
between the Company, Gaming Holdings and Galati.
12. Rueda Contribution and Amendment Agreement dated as of February 26, 1998
between the Company, Gaming Holdings and Rueda.
<PAGE>
SCHEDULE 4.4
EMPLOYEE BENEFIT PLANS; ERISA
None.
<PAGE>
SCHEDULE 4.5
ALADDIN NAMES
1. Service Mark (Reg. No. 1,789,789), "Aladdin Hotel & Casino".Registered
August 24, 1993 for Hotel and Restaurant Services.
2. Service Mark (Reg. No. 1,781,854), "Aladdin".
Registered June 13, 1993 for Casino and Casino Entertainment Services.
3. Service Mark (Reg. No. 1,779,369) "Aladdin".
Registered June 29, 1993 for Hotel and Restaurant Services.
4. Service Mark (Reg. No. 1,781,855), "Aladdin".
Registered July 13, 1993 for Casino and Casino Entertainment Services.
5. Other Aladdin Names which are not material and not presently subject to a
registration or application.
<PAGE>
SCHEDULE 6.1
REDEVELOPMENT AGREEMENTS APPROVED BY LCI
In addition to, and including, those Material Contracts set out on schedule 4.2,
the following agreements:
1. Construction Contract with Fluor.
2. Commitment letter from Fleet National Bank to Aladdin Bazar, LLC for a loan
of $194 million dated as of December 30, 1997.
3. Equity Participation Agreement among Sommer Enterprises, Aladdin Gaming
Enterprises, Inc., the Purchaser and State Street Bank and Trust Company
dated as of February 26, 1998.
4. Warrant Agreement between Aladdin Gaming Enterprises and State Street Bank
Trust Company dated February 26, 1998.
5. Operating Agreement of Gaming Holdings by and between Sommer Enterprises,
the Purchaser, Aladdin Enterprises, GAI, Geoglein, McKennon, Klerk, Rueda
and Galati dated February 26, 1998.
6. Tax Indemnity Agreement by and between the Purchaser, LCI Parent, the Trust
and Holdings dated February 26, 1998.
7. Memorandum of Understanding between Aladdin Music, LLC and Planet
Hollywood.
8. The Indenture by and among Gaming Holdings, Aladdin Capital Corp. and the
State Street Bank and Trust Company dated February 26, 1998.
9. Warrant Registration Rights Agreement among Enterprises and Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Credit Suisse First Boston
Corporation, CIBC Oppenheimer Corp. and Scotia Capital Markets (USA) Inc.
dated February 26, 1998.
10. Notes Registration Rights Agreement among Enterprises and Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Credit Suisse First Boston
Corporation, CIBC Oppenheimer Corp. and Scotia Capital Markets (USA) Inc.
dated February 26, 1998.
11. Satisfaction Notice.
12. Common Parking Use Agreement.
13. Reciprocal Easement Agreement.
14. Site Work Agreement.
<PAGE>
15. Redevelopment Budgets exhibited to the Credit Agreement.
16. Redevelopment Plans and Specifications attached as exhibits to the
Reciprocal Easement Agreement.
17. See also Schedules 4.2 and 4.3.
<PAGE>
================================================================================
CONTRIBUTION AGREEMENT
among
TRUST UNDER ARTICLE SIXTH U/W/O SIGMUND SOMMER,
ALADDIN HOLDINGS, LLC,
SOMMER ENTERPRISES, LLC,
LONDON CLUBS INTERNATIONAL, P.L.C.
and
LONDON CLUBS NEVADA INC.
================================================================================
<PAGE>
CONTRIBUTION AGREEMENT
CONTRIBUTION AGREEMENT, dated as of this 26th day of February, 1998,
between Trust Under Article Sixth u/w/o Sigmund Sommer, a New York Trust (the
"Trust"), Aladdin Holdings, LLC, a Delaware limited liability company ("Aladdin
Holdings"), Sommer Enterprises, LLC, a Nevada limited liability company ("Sommer
Enterprises"), London Clubs International, p.l.c., a company registered in
England and Wales ("LCI"), and London Clubs Nevada Inc., a Nevada corporation
("LCI Nevada").
WHEREAS, Aladdin Gaming, LLC, a Nevada limited liability company
("Aladdin Gaming"), is entering into a Credit Agreement (the "Credit Agreement")
dated as of the date hereof with a syndicate of lenders, including The Bank of
Nova Scotia, Canadian Imperial Bank of Commerce and Merrill Lynch Capital
Corporation (the "Lenders");
WHEREAS, Aladdin Gaming Holdings, LLC, a Nevada limited liability
company ("Gaming Holdings"), the owner of all the issued and outstanding shares
of Aladdin Gaming, is issuing discount notes (the "Discount Notes") as of the
date hereof to certain persons (the "Discount Noteholders");
WHEREAS, in connection with entering into the Credit Agreement and
issuing the Discount Notes and otherwise, (a) the Trust and LCI (the "Comple-
1
<PAGE>
tion Guaranty Obligors") and Aladdin Bazaar Holdings, LLC, a Nevada limited
liability company ("Bazaar"), are entering into (i) a Guaranty of Performance
and Completion in favor of the Lenders dated as of the date hereof (the "Bank
Completion Guaranty"), (ii) a Guaranty of Performance and Completion in favor of
the Discount Noteholders dated as of the date hereof (the "Discount Note
Completion Guaranty") and (iii) a Guarantee of Performance and Completion to be
entered into in favor of a Contingent Guarantor after the date hereof (the
"Junior Completion Guaranty" and, together with the Bank Completion Guaranty and
the Discount Note Completion Guaranty, the "Completion Guaranties") pursuant to
each of which the Completion Guaranty Obligors and Bazaar have joint and several
obligations for certain payments in connection with the completion of the
redevelopment of the Aladdin hotel and casino by Aladdin Gaming (together with
the obligations of LCI and the Trust pursuant to Section 1(c), the "Completion
Guaranty Obligations") and (b) Aladdin Holdings, LCI (the "Keep Well Obligors",
and, together with the Completion Guaranty Obligors, the "Obligors") and Bazaar
are entering into a Keep-Well Agreement in favor of the Lenders dated as of the
date hereof (the "Keep Well Agreement") pursuant to which the Keep Well Obligors
and Bazaar are jointly and severally liable for making certain payments in
certain circumstances (the "Keep Well Obligations");
2
<PAGE>
WHEREAS, LCI owns, indirectly (through its wholly owned subsidiary,
London Clubs Holdings Ltd.), 100% of LCI Nevada which as of the date hereof owns
25% of the issued and outstanding Common Shares of Gaming Holdings;
WHEREAS, the Trust owns 95% of Aladdin Holdings, Aladdin Holdings owns
98.67% of Sommer Enterprises, and Sommer Enterprises directly and indirectly
(through its interest in Aladdin Gaming Enterprises, Inc., a Nevada corporation
("Aladdin Enterprises")) owns 72% of the issued and outstanding Common Shares of
Gaming Holdings; and
WHEREAS, the Trust, Aladdin Holdings, Sommer Enterprises, LCI and LCI
Nevada wish to enter into this Agreement to effect a sharing of (a) the
Completion Guaranty Obligations in the proportion of 75% to the Trust and 25% to
LCI and (b) the Keep Well Obligations in the proportion of 75% to Aladdin
Holdings and 25% to LCI.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. COMPLETION GUARANTY CONTRIBUTIONS. (a) At any time a payment is
required by a Completion Guaranty Obligor pursuant to a Completion Guaranty (a
"Completion Guaranty Payment"), the Completion Guaranty Obligor receiving the
demand for such payment under a Completion Guaranty (a "Completion Guaranty
3
<PAGE>
Demand") shall within two business days of the receipt of such Completion
Guaranty Demand give written notice to the other Completion Guaranty Obligor of
the Completion Guaranty Demand and shall include in such written notice a copy
of the Completion Guaranty Demand. Each Completion Guaranty Payment shall be
made by LCI on the one hand, and the Trust on the other hand, in proportion to
their respective Completion Guaranty Contribution Percentages (as provided in
Section 3); PROVIDED that if the Completion Guaranty Payment is required as a
result of an Event of Default (as hereinafter defined) Caused (as hereinafter
defined) by one of the Completion Guaranty Obligors or its Affiliates, the
Completion Guaranty Obligor which Caused (or whose Affiliates Caused) such Event
of Default shall make all of such Completion Guaranty Payment.
(b) In the event that any party hereto shall receive notification from
the Lenders to the effect that EBITDA (as defined in the Credit Agreement) shall
be less than the Minimum EBITDA (as defined in the Credit Agreement) (such
difference being referred to herein as the "EBITDA Shortfall"), LCI on the one
hand, and the Trust on the other hand, shall, unless they otherwise agree, make
payment in an aggregate amount equal to the EBITDA shortfall (the "EBITDA
Shortfall Payment"), in proportion to their respective Completion Guaranty
Contribution Percentages (as provided in Section 3).
4
<PAGE>
(c) Without limiting Sections 1(a) and 1(b), if a Completion Guaranty
Payment or an EBITDA Shortfall Payment is required and, by reason of a failure
or refusal of a Completion Guaranty Obligor to make its Completion Guaranty
Payment or EBITDA Shortfall Payment as required by Section 1(a) or 1(b), is made
by the other Completion Guaranty Obligor (the "Contributing Completion Guaranty
Obligor") in excess of the amount such Completion Guaranty Obligor is required
to pay pursuant to Section 1(a) or 1(b) (such excess, the "Completion Guaranty
Excess Amount"), from the date such Excess Amount becomes past due, such
Completion Guaranty Excess Amount shall be treated as a loan from the
Contributing Completion Guaranty Obligor to the other Completion Guaranty
Obligor (the "Non-Contributing Completion Guaranty Obligor") and shall accrue
interest as provided in Section 4.
2. KEEP WELL CONTRIBUTIONS. (a) At any time a payment is required
by a Keep Well Obligor pursuant to the Keep Well Agreement (a "Keep Well
Payment"), the Keep Well Obligor receiving the demand for such payment under the
Keep Well Agreement (a "Keep Well Demand") shall within two business days of the
receipt of such Keep Well Demand give written notice to the other Keep Well
Obligor of the Keep Well Demand and shall include in such written notice a copy
of the Keep Well Demand. A Keep Well Payment shall be made by LCI, on the one
hand, and Aladdin Holdings, on the other hand, in proportion to their respec-
5
<PAGE>
tive Keep Well Contribution Percentages (as provided in Section 3); PROVIDED
that if the Keep Well Payment is required as a result of an Event of Default
Caused by one of the Keep Well Obligors or its Affiliates, the Keep Well Obligor
which Caused (or whose Affiliates Caused) such Event of Default shall make all
of such Keep Well Payment.
(b) If the aggregate distributions at any time on the Series B
Preferred Shares in Gaming Holdings ("Series B Shares") are less than the
aggregate payments which would have been required to be made by Aladdin Gaming
under the Credit Agreement in respect of such amount had such debt under the
Credit Agreement not been repaid or partially repaid pursuant to the Keep Well
Agreement with the amounts in respect of which the Series B Shares were issued
(such shortfall, a "Series B Distribution Shortfall"), the parties acknowledge
that they should bear the economic burden of such Series B Distribution
Shortfall in the proportion of 25 percent for LCI and 75 percent for Aladdin
Holdings. Accordingly, in the event of a Series B Distribution Shortfall,
within thirty days of receipt of written notice from LCI requesting a payment in
respect thereof, Aladdin Holdings shall pay to LCI Nevada 75 percent of (i) the
Series B Distribution Shortfall multiplied by (ii) the number of Series B Shares
held by LCI Nevada, divided by (iii) the total issued and outstanding Series B
Shares, and upon and in consideration for such payment LCI Nevada shall transfer
to Sommer Enterprises one Series B Preferred Share for each
6
<PAGE>
$100 paid by Aladdin Holdings; PROVIDED that no such payment shall be required
to the extent that the Series B Distribution Shortfall is not paid by Gaming
Holdings due to restrictions on distributions to Gaming Holdings by Aladdin
Gaming in the Credit Agreement or related arrangements with the Lenders or
restrictions on distributions by Gaming Holdings to the members of Gaming
Holdings in the arrangements in respect of the Discount Notes.
(c) Without limiting Sections 2(a) and (b), if a Keep Well Payment is
required and, by reason of a failure or refusal of a Keep Well Obligor to make
its Keep Well Payment as required by Section 2(a), is made by the other Keep
Well Obligor (the "Contributing Keep Well Obligor") in excess of the amount such
Keep Well Obligor is required to pay pursuant to Section 2(a) (such excess, the
"Keep Well Excess Amount"), from the date such Excess Amount becomes past due,
such Keep Well Excess Amount shall be treated as a loan from the Contributing
Keep Well Obligor to the other Keep Well Obligor (the "Non-Contributing Keep
Well Obligor") and interest shall accrue as provided in Section 4.
(d) Notwithstanding any other provision of this Agreement, in no event
shall this Agreement create any liability or obligation whatsoever on the part
of the Trust in respect of the Keep Well Obligations.
3. CONTRIBUTION PERCENTAGE As used in this Agreement, the
"Contribution Percentage" shall mean for all purposes hereof, and whether or not
7
<PAGE>
there are changes in the Percentage Interests (as defined in the Operating
Agreement of Gaming Holdings) of LCI Nevada or Sommer Enterprises (a) 75% in the
case of the Trust or Aladdin Holdings (as the case may be) and (b) 25% in the
case of LCI.
4. INTEREST. (a) Any Completion Guaranty Excess Amount or Keep Well
Excess Amount (an "Excess Amount") not paid by the Non-Contributing Completion
Guaranty Obligor or Non-Contributing Keep Well Obligor (a "Non-Contributing
Obligor") on or before the time that the relevant Completion Guaranty Payment or
Keep Well Payment is due (the "Due Date") shall, without limiting any rights of
the Contributing Completion Guaranty Obligor or Contributing Keep Well Obligor
(a "Contributing Obligor") or its Affiliates to recover such Excess Amount, be
treated as a loan from the Contributing Obligor to the Non-Contributing Obligor
and shall be subject to interest from the Due Date at the rate of twenty percent
per annum; PROVIDED that no such interest shall accrue during any period that
there is an Event of Default in existence which was Caused by the Contributing
Obligor or its Affiliates.
(b) Any payment from the Non-Contributing Obligor or its Affiliates to
the Contributing Obligor or its Affiliates under this Agreement shall be first
be applied to payment of any interest accrued under this Section 4 on the
relevant loan and then to payment of the principal of such loan.
8
<PAGE>
5. SECURITY INTEREST. (a) As security for the prompt and complete
payment and performance in full of the obligations of a Non-Contributing Obligor
under this Agreement, in addition to any security interest granted under the
Operating Agreement of Gaming Holdings, to the extent permitted by the
arrangements with the Lenders in respect of the Credit Agreement, the
arrangements with the Discount Noteholders in respect of the Discount Notes, and
related arrangements in respect of each of the foregoing and otherwise at law
(including, without limitation, the Nevada gaming laws):
(i) in respect of when LCI is the Non-Contributing Obligor, LCI Nevada
hereby grants to the Contributing Obligor a security interest in and continuing
lien on all of LCI Nevada's rights to distributions on any common shares in
Gaming Holdings; and
(ii) in respect of when the Trust or Aladdin Holdings is the
Non-Contributing Obligor, Sommer Enterprises hereby grants to the Contributing
Obligor a security interest in and continuing lien on all of Sommer Enterprises'
rights to distributions on any common shares in Gaming Holdings and all of
Sommer Enterprises' rights to distributions on any class A voting common stock
or class B non-voting common stock in Aladdin Enterprises;
PROVIDED that such security interest and continuing lien shall be (A)
subordinated to the security interests and liens granted in favor of the Lenders
9
<PAGE>
pursuant to the Loan Documents (as defined in the Credit Agreement) and by its
signature below, the Contributing Obligor hereby agrees that it will not enforce
any such security interest or continuing lien until all Loans (as defined in the
Credit Agreement) and other Obligations (as defined in the Credit Agreement)
have been paid in full in cash, all Letters of Credit (as defined in the Credit
Agreement) have been terminated or expired and all Commitments (as defined in
the Credit Agreement) have been terminated under the Credit Agreement (PROVIDED
that to the extent any distributions on any relevant shares or membership
interests are permitted to be made to the holder(s) thereof under the Loan
Documents, the Contributing Obligor shall be permitted to enforce its security
interest and continuing lien thereon, including, without limitation, diverting
distributions thereon to the Contributing Obligor), and (B) suspended for any
period in which an Event of Default exists which was Caused by the Contributing
Obligor or its Affiliates.
(b) In connection with the security interests referred to in Section
5(a), the Non-Contributing Obligor hereby irrevocably appoints the Contributing
Obligor, and any of the Contributing Obligor's respective agents, officers, or
employees, as the Non-Contributing Obligors' attorney(s)-in-fact, with full
power to prepare, execute, acknowledge, and deliver, as applicable, all
documents, instruments, and/or agreements memorializing and/or securing such
loan(s) including, without limitation, such Uniform Commercial Code financing
and continuation
10
<PAGE>
statements, pledge and/or security agreements, mortgages and other security
instruments as may be reasonably appropriate to perfect and continue the
security interest in favor of the Contributing Obligor to the extent permitted
in subclause (A) of the proviso to Section 5(a) and by the Nevada gaming laws.
6. RIGHT OF SET OFF. The parties agree that the Completion Guaranty
Obligors and the Keep Well Obligors shall be entitled to set off any obligation
under this Agreement (the "Payment Obligations") (including loans hereunder)
from any other Completion Guaranty Obligor or Keep Well Obligor in whole or
partial satisfaction of a Payment Obligation they have such other Completion
Guaranty Obligor or Keep Well Obligor under this Agreement. Any such set off
shall discharge the relevant obligations of such parties to the extent of such
set off.
7. AMENDMENT AND WAIVER. Any provision of this Agreement may be
amended or waived only by an amendment or waiver in writing signed by the
parties hereto making express reference to this Agreement and expressly stating
that it is an amendment or waiver, as the case may be, of this Agreement.
8. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns and, in the event of the dissolution of the
Trust, the remaindermen thereof.
11
<PAGE>
9. NO THIRD-PARTY BENEFICIARIES. This Agreement is for the sole
benefit of the parties hereto and their permitted assigns and nothing herein
express or implied shall give or be construed to give to any person, other than
the parties hereto and such assigns, any legal or equitable rights hereunder.
10. DEFINITIONS. In this Agreement (a) "Affiliate" means, with
respect to a specified person, any other person who or which is directly or
indirectly controlling, controlled by, or under common control with the
specified person or any member, stockholder, director, officer, manager,
relative or spouse of the specified person; PROVIDED that neither Gaming
Holdings nor Aladdin Gaming shall be an Affiliate of Aladdin Gaming Enterprises,
Inc., Sommer Enterprises, Aladdin Holdings, the Trust, LCI or LCI Nevada (b)
"Caused" means, with respect to a person, that such person has caused an Event
of Default by breach or non-performance of a term, provision or covenant of any
of the Keep Well Agreement, the Completion Guaranties or the Credit Agreement;
PROVIDED that a person shall not be found to have caused an Event of Default as
result of such Person's or its Affiliates' control of Gaming Holdings or Aladdin
Gaming; (c) "control" means the possession, directly or indirectly, of the power
to cause the direction of the management or policies of a person, whether
through ownership of voting securities, by contract or otherwise, and
"controlling" and "controlled" shall have corresponding meanings; and (d) "Event
of Default" means (i) an Event of Default under the Credit Agreement; (ii) a
12
<PAGE>
Specified Event under the Keep Well Agreement or any Completion Guaranty; or
(iii) any breach or default under the Keep Well Agreement or any Completion
Guaranty, in each case pursuant to which the Lenders, the Discount Noteholders
or the Contingent Guarantor (as the case may be) have exercised rights or
remedies under any of the Credit Agreement, the Completions Guaranties or the
Keep Well Agreement, but shall exclude any of the forgoing events which only
gives rise to a payment by LCI pursuant to Section 13 of the Keep Well
Agreement.
11. NOTICES. All notices provided for in this Agreement shall be
deemed to have been given when received and shall be in writing, duly signed by
the party giving such notice, and shall be hand delivered, faxed or mailed by
registered or certified mail or overnight courier service, as follows:
(a) if to Aladdin Holdings, the Trust or Sommer Enterprises:
Aladdin Holdings, LLC
2810 West Charleston Boulevard
Suite 58
Las Vegas, Nevada 89102-1934
Telephone: 702-870-1234
Telecopier: 702-870-8733
Attention of Jack Sommer
13
<PAGE>
with a copy to:
Sigmund Sommer Properties
280 Park Avenue
New York, New York 10017
Telephone: 212-661-0700
Telecopier: 212-661-0844
Attention of Ronald Dictrow
and
Schreck Morris
300 South Fourth Street
Suite 1200
Las Vegas, Nevada 89101
Telephone: 702-474-9400
Telecopier: 702-474-9422
Attention of Frank A. Schreck, Esq.
and
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Telephone: 212-735-3000
Telecopier: 212-735-2000
Attention of Wallace L. Schwartz, Esq.
(b) if to LCI or LCI Nevada:
London Clubs International, plc
10 Brick Street
London W1Y 8HQ, England
Telephone: 011-44-171-518-0000
Telecopier: 011-44-171-493-6981
Attention of Linda M. Lillis
14
<PAGE>
with a copy to:
Ohrenstein & Brown, LLP
230 Park Avenue
New York, New York 10169
Telephone: 212-682-4500
Telecopier: 212-557-0910
Attention of Peter J. Kiernan, Esq.
and
Lionel, Sawyer & Collins
300 South 4th Street
Suite 1700
Las Vegas, Nevada 89101
Telephone: 702-383-8888
Telecopier: 702-383-8845
Attention of P. Gregory Giordano, Esq.
12. TERM. This Agreement, as it may be amended, supplemented or
otherwise modified from time to time, shall remain in effect until (i) the
termination or expiration of each of the Completion Guaranties and the Keep Well
Agreement, (ii) termination or expiration of the Completion Guaranty Obligations
and the Keep Well Obligations and (iii) the payment in full of all amounts due
under the Completion Guaranties and the Keep Well Agreement and hereunder,
including, without limitation, any loans hereunder.
13. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall constitute an original and all of which together shall
constitute one and the same instrument.
15
<PAGE>
14. APPLICABLE LAW AND JURISDICTION. This Agreement and the rights
and obligations of the parties hereto shall be interpreted and enforced in
accordance with and governed by the laws of the State of Nevada without regard
to the conflict laws of that State.
15. TIMELY NOTICE. The failure of a party to give timely notice
hereunder shall not relieve the other party of its obligations hereunder.
16. COMPLIANCE WITH GAMING LAWS. Notwithstanding any other provision
of this Agreement, no shares or other ownership interests in any entity shall be
issued or transferred, encumbered or disposed of, and no rights to distributions
on any shares or other ownership interests in any entity shall be transferred,
encumbered or otherwise disposed of in any manner pursuant to this Agreement
except in compliance with the provisions of the Nevada Gaming Control Act (or
any successor statute) and the rules or regulations promulgated thereunder.
16
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective duly authorized officers as of the
date first above written.
TRUST UNDER ARTICLE SIXTH u/w/o
SIGMUND SOMMER
By: /s/ Viola Sommer
-----------------------------------------------
Viola Sommer, as trustee and not individually
By: /s/ Jack Sommer
-----------------------------------------------
Jack Sommer, as trustee and not individually
By: /s/ Eugene Landsberg
-----------------------------------------------
Eugene Landsberg, as trustee and not individually
ALADDIN HOLDINGS, LLC
By: Aladdin Management Corporation, its manager
By: /s/ Viola Sommer
-----------------------------------------------
Name: Viola Sommer
Title: President
By: /s/ Jack Sommer
-----------------------------------------------
Name: Jack Sommer
Title: Vice President
17
<PAGE>
SOMMER ENTERPRISES, LLC
By: /s/ Jack Sommer
-----------------------------------------------
Name: Jack Sommer
Title: Manager
LONDON CLUBS INTERNATIONAL, P.L.C.
By: /s/ Barry Hardy
-----------------------------------------------
Name: Barry Hardy
Title: Finance Director
LONDON CLUBS NEVADA INC.
By: /s/ Linda Lillis
-----------------------------------------------
Name: Linda Lillis
Title: Assistant Secretary
18
<PAGE>
SALLE PRIVEE AGREEMENT
BY AND AMONG
ALADDIN GAMING, LLC,
LONDON CLUBS NEVADA INC.
AND
LONDON CLUBS INTERNATIONAL, PLC
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SALLE PRIVEE AGREEMENT, dated as of February 26, 1998, by and among
ALADDIN GAMING, LLC, a Nevada limited liability company with its principal
office located at 2810 West Charleston Boulevard, Suite 58, Las Vegas, NE
89102-1934 ("Aladdin"), LONDON CLUBS NEVADA INC., a Nevada corporation with its
principal office located at 300 South Forth Street, Suite 1700, Las Vegas, NE
89101 ("London Clubs") and LONDON CLUBS INTERNATIONAL, PLC, a United Kingdom
public limited company with its principal office located at 10 Brick Street,
London, W1Y 8HQ, England ("Guarantor").
W I T N E S S E T H :
WHEREAS, Aladdin owns that certain parcel of land and the existing
improvements thereon (including, without limitation, the Aladdin Hotel and
Casino) located at 3667 Las Vegas Boulevard South, Las Vegas, Nevada (the
"Premises"), as the same is more particularly described in the Purchase
Agreement dated as of September 24, 1997, as amended, entered into among, INTER
ALIA, Aladdin, London Clubs and Guarantor (the "Purchase Agreement");
WHEREAS, Aladdin is undertaking, among other things, to redevelop the
Aladdin Hotel and Casino (as so redeveloped, the "Redeveloped Aladdin");
WHEREAS, Aladdin and Aladdin Hotel will acquire and maintain all necessary
licenses and permits in their respective names as shall be necessary to
authorize them to legally operate and maintain gaming operations and a casino at
the Redeveloped Aladdin;
WHEREAS, London Clubs and Guarantor will acquire and maintain all necessary
licenses, approvals or permits in their respective names as shall be necessary
to permit each of London Clubs and Guarantor to perform their respective
obligations hereunder;
WHEREAS, the group of companies of which London Clubs is an Affiliate (as
hereinafter defined) has considerable experience and acknowledged expertise and
know-how in operating premium casino businesses, and Aladdin wishes to have
access to the expertise, advice and know-how of London Clubs;
WHEREAS, the "Salle Privee Facilities" (as hereinafter defined) are to be
included in the Redeveloped Aladdin and it has been agreed that London Clubs
shall (i) provide advice and consulting services regarding the development and
fitting out of the Salle Privee Facilities, and (ii) provide certain worldwide
marketing and promotional services in relation thereto, and shall direct the
operations thereof, pursuant to the principles, policies, procedures and
standards as set forth in Article 6 hereof
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and such additional principles, policies, procedures and standards as shall be
determined from time to time by London Clubs in consultation with Aladdin (the
"Policies and Procedures");
WHEREAS, Guarantor has agreed to guarantee the obligations and liabilities
of London Clubs under this Agreement on the terms set forth herein; and
WHEREAS, this Agreement is being entered into pursuant to the Purchase
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein set forth, the parties hereto agree as follows:
1. DEFINITIONS.
Capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in the Purchase Agreement. In addition, the following terms
shall have the following meanings:
"ABOVE LIMITS GAMING" means all wagers made in the Salle Privee Facilities
during the "Above Limits Gaming Period" by any person who has been granted the
right by London Clubs to exceed the Normal Gaming Limits.
"ABOVE LIMITS GAMING LOSSES" means the aggregate of the amounts won by
customers in respect of Above Limits Gaming in any Financial Year.
"ABOVE LIMITS GAMING PERIOD" means, with respect to a particular person,
the period during which London Clubs has granted such person the right to
exceed the Normal Gaming Limits.
"ABOVE LIMITS GAMING WINS" means the aggregate of the amounts lost by
customers in respect of Above Limits Gaming in any Financial Year.
"ABOVE LIMITS GUARANTY" means the guaranty of certain Net Above Limits
Gaming Losses as set forth in Section 6.3 (b) hereof.
"AFFILIATE" means, in respect of a specified Person, any Person who or
which is (a) directly or indirectly controlling, controlled by or under common
control with such specified person, or (b) any member, director, officer,
manager, relative or spouse of such specified person. For the purpose of this
definition, "CONTROL" means the right to exercise, directly or indirectly, more
than fifty percent of the voting power of the stockholders, members or owners,
and, with respect to any individual, partnership, trust or other entity or
association, the possession, directly or indirectly, of the power to direct or
cause the direction of the
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management or policies of the controlled entity, and "CONTROLLED" and
"CONTROLLING" shall have corresponding meanings.
"BOARD" means the Board of Managers of Aladdin.
"EXECUTIVE MANAGEMENT COMMITTEE" means the committee of the management of
Aladdin which shall include, without limitation, the following persons: the
president and chief executive officer of Aladdin, the chief financial officer of
Aladdin, the senior vice president of Aladdin who is the president and chief
operating officer of the Aladdin hotel and casino, the senior vice president of
Aladdin who is the president and chief operating officer of the second hotel and
casino to be located on the Premises, the senior vice president human resources
of Aladdin, the senior vice president electronic gaming of Aladdin and the
managing director of the Salle Privee.
"FINANCIAL YEAR" means the Initial Financial Year and each period from
January 1 to December 31 in each year after the Initial Financial Year.
"GAMING LICENSE" means all casino and gaming licenses or other necessary
authorizations which are required by the laws of the State of Nevada or Clark
county at any time and which authorizes Aladdin to operate a casino at the
Redeveloped Aladdin, including the Salle Privee Facilities.
"GAMING PROBLEM" means circumstances such that any member of Aladdin, any
Affiliate of any member of Aladdin or any Related Party of any member of Aladdin
may preclude or materially delay, impede or impair the ability of Aladdin to
obtain or retain any licenses required by the Nevada Gaming Authorities for the
conduct of business of the Aladdin and its subsidiaries, or such as may result
in the imposition of materially burdensome terms and conditions on any such
license.
"INITIAL FINANCIAL YEAR" means the period from the Opening Date to December
31 of such calendar year.
"NET ABOVE LIMITS GAMING LOSSES" means for any Financial Year, the amount,
if any, by which Above Limits Gaming Losses exceeds Above Limits Gaming Wins for
such Financial Year.
"NET ABOVE LIMITS GAMING WINS" means for any Financial Year, the amount, if
any, by which Above Limits Gamins Wins exceeds Above Limits Gaming Losses for
such Financial Year.
"NEVADA GAMING AUTHORITIES" means the Nevada Gaming Commission, the Nevada
State Gaming Control Board and any other applicable governmental or
administrative state or local agency involved in the regulation of gaming or
gaming activities in the State of Nevada.
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"NORMAL GAMING LIMITS" means the gaming limits as jointly established from
time to time by Aladdin and LCI in respect of the Salle Privee.
"OPENING DATE" means the day on which the Salle Privee first opens its
doors for the commencement of gaming operations.
"OPERATING AGREEMENT" means the Operating Agreement of Aladdin of even date
herewith among Aladdin and Aladdin Gaming Holdings LLC.
"PERSON" means a natural person, any form of business or social
organization and any other nongovernmental legal entity, whether domestic or
foreign, including a corporation, partnership, association, trust,
unincorporated organization, estate or limited liability company.
"REDEVELOPMENT" means the redevelopment and expansion of the Aladdin Hotel
and Casino and related improvements including the Salle Privee Facilities.
"RELATED PARTY" means, in respect of any member of Aladdin, its
Affiliates, and the member's and the Affiliates respective shareholders,
partners, members, directors and officers.
"SALLE PRIVEE FACILITIES" means the following components to be constructed
as part of the Redevelopment: (a) a gaming facility containing approximately 20
to 30 high limit tables and approximately 100 high limit slot devices, located
on the mezzanine level directly above the main gaming floor of the Aladdin
casino (the "Salle Privee"); (b) a super-premium gourmet restaurant facility
located adjacent to and as part of the Salle Privee and containing a separate
kitchen, a bar, approximately 25 dining tables inside the restaurant as well as
several additional dining tables located in a roof garden accessible through the
restaurant (the "Restaurant"); (c) an exclusive hospitality facility comprising
approximately 25 double-module luxury suites, 5 triple-module suites, a
concierge facility and a guest bar and lounge, to be located in the main tower
of the Redeveloped Aladdin (the "Hospitality Facility"); (d) a separate entrance
and reception area for guests of the Salle Privee offering secure and discreet
access for arrivals and departures; and (e) vertical and horizontal circulation
infrastructure providing for private elevator access to the Hospitality Facility
and private corridor access from the Hospitality Facility to the Salle Privee.
"SALLE PRIVEE EBITDA" means, for the period for which the determination is
being made (the "Determination Period") the sum of (x) the "Salle Privee Gross
Gaming Revenue" (as hereinafter defined) and (y) all other gross receipts from
all sources attributable to the Salle Privee Facilities, including, without
limitation, sales of food, beverages, and hotel accommodation which
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sales in accordance with common industry practice shall include, at the agreed
value thereof, food, beverages and hotel accommodation provided on a
complimentary basis in the Salle Privee Facilities to persons designated for
complimentary treatment in accordance with the Policies and Procedures, less (z)
all costs and expenses directly attributable to the Salle Privee without any
allocation being made for items of Aladdin's general overhead not specifically
attributable to the Salle Privee. For purposes of determining Salle Privee
EBITDA, the following items SHALL NOT be deducted:
(i) interest of any kind payable or receivable by Aladdin;
(ii) any federal, state, local or county taxes of any kind and
however measured, except for the gaming taxes of the State of Nevada
and Clark County and any applicable sales or use taxes payable by
Aladdin in respect of the Determination Period but only in respect of
the Salle Privee Facilities;
(iii) depreciation charges of any kind;
(iv) amortization charges of any kind; or
(v) any item of cost or expense not directly attributable to the
Salle Privee.
"SALLE PRIVEE GROSS GAMING REVENUE" means with respect to any
Determination Period, the Gross Revenue (as such term is defined in
Section 463.0161 of the Nevada Revised Statutes, as amended) from gaming
operations at the Salle Privee during such Determination Period.
"SALLE PRIVEE MARKETING PLAN" means the marketing plan in respect of the
Salle Privee Facilities.
2. TERM OF THE AGREEMENT.
The term of this Agreement shall commence on the date hereof and shall
continue until the earlier of (i) the sixty ninth (69) anniversary of the date
of commencement of gaming operations at the Aladdin, (ii) the date of
termination of this Agreement under Section 11 hereof, or (iii) the date of
termination hereof by written agreement of the parties hereto.
3. THE REDEVELOPMENT AND FITTING
OUT OF THE SALLE PRIVEE FACILITIES.
Aladdin, at its sole cost and expense, and in accordance with the plans,
specifications, and budgets in such form as shall have been approved pursuant to
the Purchase Agreement and the Operating
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Agreement, shall construct, furnish and fit out the Salle Privee Facilities,
which shall include, without limitation, such furniture, fixtures, gaming
equipment and security equipment for the Salle Privee Facilities as London Clubs
may advise, with such advice and direction from London Clubs with respect to
design, lay-out, decor and style and with respect to such other matters as will
assure that the Salle Privee Facilities are in full and effective operation from
and after the Opening Date.
4. THE MARKETING AND PROMOTION
OF THE SALLE PRIVEE FACILITIES.
Throughout the term of this Agreement, London Clubs shall direct worldwide
marketing and promotional services targeted at its international clientele,
based on a Marketing Plan (the "Salle Privee Marketing Plan") to be prepared by
London Clubs and submitted to the Executive Management Committee for its advice
and comment approximately six (6) months prior to the planned Opening Date. The
Salle Privee Marketing Plan shall provide for the marketing and promoting to
such clientele of the Redeveloped Aladdin generally and the Salle Privee
Facilities particularly. The Salle Privee Marketing Plan shall include a plan
for cross-marketing the Salle Privee Facilities with London Clubs and its
affiliates' other gaming facilities. London Clubs shall utilize commercially
reasonable efforts to deploy their respective group sales and marketing
functions and staff in the provision of such services, PROVIDED, HOWEVER, that
London Clubs, at all times, shall determine the method by which such marketing
and promotional activities are to be conducted. The Salle Privee shall be open
to the public at all times that it is open for business.
5. THE OPERATION OF THE SALLE PRIVEE FACILITIES.
Throughout the term of this Agreement, London Clubs shall direct the
operations of the Salle Privee Facilities in accordance with the Policies and
Procedures and with the regulations relating to gaming and any other applicable
laws of the State of Nevada and consistent with an international premium
standard and in accordance with Aladdin's operating budget and marketing plan.
London Clubs shall inform and consult with the Board in connection with all
material issues that may arise affecting the operation of the Salle Privee
Facilities.
6. OPERATING PRINCIPLES, POLICIES, PROCEDURES
AND STANDARDS OF THE SALLE PRIVEE FACILITIES.
The following Policies and Procedures shall apply to the operation of the
Salle Privee Facilities in consultation with the Executive Management Committee.
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6.1 OPERATING PRINCIPLES, ETC. Except as otherwise expressly provided
herein, London Clubs shall determine Policies and Procedures of the Salle Privee
Facilities in consultation with the Executive Management Committee.
6.2 GAMING FACILITIES. London Clubs shall direct the gaming and
promotional operations of the Salle Privee Facilities and shall determine the
type, number and location of gaming facilities, tables and devices to be
installed in the Salle Privee, it being understood that the Salle Privee is
expected initially to contain approximately 20 to 30 high limit table games and
approximately 100 high limit slot devices.
6.3 CREDIT MANAGEMENT AND GAMING LIMITS.(a) The Salle Privee will be part
of the Redeveloped Aladdin's financial control facilities and credit management
will be administered by Aladdin's central credit oversight department, PROVIDED
that Aladdin will consult regularly with London Clubs with regard to London
Clubs' recommendations regarding credit management issues. Basic risk
management policies regarding gaming limits and credit facilities for the Salle
Privee shall be established by the Board based upon the input and recommendation
of London Clubs. In addition, in an effort to provide the same wagering
flexibility that London Clubs provides its clientele in its overseas operations,
Aladdin shall permit London Clubs greater latitude with respect to the wagering
limits imposed upon London Clubs' clientele in connection with wagering in the
Salle Privee. In consideration for Aladdin granting London Clubs' clientele such
latitude, London Clubs agrees that Net Above Limits Gaming Losses suffered by
Aladdin shall be reimbursed by London Clubs to the extent and as set forth in
subsection (b) of this Section 6.3.
(b)(i) Within sixty (60) days after the close of each Financial
Year, Aladdin shall determine the amount of Net Above Limits Gaming
Losses or Net Above Limits Gaming Wins for that year, and notify
London Clubs of the determination. London Clubs may, within thirty
(30) days thereafter, notify Aladdin that it either accepts the
determination, or wishes the auditors regularly employed by Aladdin to
audit Aladdin's financial statements for purposes of confirming the
amount of Net Above Limits Gaming Losses or Net Above Limits Gaming
Wins, as the case may be, for that Financial Year. The auditors, if
requested as above provided, shall so audit and confirm, and send
notice of their determination to Aladdin and London Clubs, within
thirty (30) days thereafter.
(ii) Within thirty (30) days after (x) London Clubs shall have
accepted Aladdin's determination, or (y) the auditors shall have
notified London Clubs and Aladdin of their determination, London Clubs
shall pay to Aladdin
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the amount, if any, of any Net Above Limits Gaming Losses, or, at the
option of London Clubs, apply any amounts due London Clubs under this
Agreement (whether in respect of Incentive Marketing and Consulting Fees or
expense reimbursements as provided in Section 8.9) and pay the balance, if
any, remaining after such application. Any amounts not paid or applied as
set forth above shall be offset against the next amount of any fees
otherwise due to London Clubs hereunder.
(iii) If during the period of the next two Financial Years
immediately following a Financial Year in respect of which London
Clubs shall have made a payment to Aladdin of Net Above Limits Gaming
Losses as provided in subsection (b) (ii), there shall be Net Above
Limits Gaming Wins, Aladdin shall, within thirty (30) days after its,
or its auditors' (as the case may be), determination of the amount of
Net Above Limits Gaming Wins for such year, reimburse to London Clubs
the amount thereof, but not in excess of the aggregate of all amounts
theretofore paid by London Clubs to Aladdin pursuant to subsection (b)
(ii) in respect of Net Above Limits Gaming Losses not theretofore
reimbursed by Aladdin.
6.4 RESTAURANT AND HOSPITALITY EMPLOYEES. London Clubs will direct the
Restaurant and the Hospitality Facility. Employees in the Restaurant and the
Hospitality Facility will be staffed by the managing director of the Salle
Privee Facilities. London Clubs shall provide such training for the employees
engaged in the Salle Privee Facilities as it deems necessary in consultation
with the Executive Management Committee and consistent with an international
premium standard.
6.5 LEGAL PROCEEDINGS IN RESPECT OF SALLE PRIVEE CUSTOMERS. Aladdin will
consult with London Clubs before initiating legal proceedings against any
customer of the Salle Privee, and will keep London Clubs fully informed of all
actions proposed to be taken in connection with credit collection or the status
of any legal proceedings.
6.6 REFURBISHMENT, REPAIR AND REDECORATION. Aladdin will be responsible
for undertaking such works of refurbishment, repair and redecoration in respect
of the Salle Privee Facilities as London Clubs shall advise from time to time as
being reasonably necessary to maintain the Salle Privee Facilities at their
international premium standard consistent with the Aladdin's budget approved by
the Board. London Clubs shall advise Aladdin from time to time in respect of
any refurbishment, repair and redecoration of the Salle Privee Facilities that
may be required.
6.7 SECURITY. Aladdin shall provide security facilities, equipment and
services for the Salle Privee Facilities as directed
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by London Clubs, provided that such security requests shall be consistent with
and not disruptive of the security arrangements for the Redeveloped Aladdin.
6.8 PRICES FOR FOOD, BEVERAGE AND HOSPITALITY FACILITY ACCOMMODATIONS.
All pricing in respect of food and beverage charges and Hospitality Facility
accommodations shall be determined by London Clubs from time to time in
consultation with the Executive Management Committee.
6.9 SALLE PRIVEE COMMITTEE. When, during the term of this Agreement,
matters shall arise requiring consultation between London Clubs and Aladdin with
respect to the Salle Privee Facilities, such matters shall be referred to a
special committee of the Board (the "SALLE PRIVEE COMMITTEE"). The Salle Privee
Committee shall consist of the Chief Executive Officer of Aladdin and a member
of the Board designated by London Clubs.
7. ACCOUNTING AND REPORTING.
Aladdin shall:
(i) maintain, in accordance with generally accepted accounting
principles, complete and accurate books of account and records
relating to the Salle Privee Facilities which shall be made available
at any time on reasonable notice to Aladdin for inspection by London
Clubs or its agents;
(ii) cause to be rendered to London Clubs, in an agreed format,
daily reports and weekly summary reports as to drop, win, major
players, credit facilities granted and other operating and financial
statistics in relation to the Salle Privee Facilities;
(iii) cause to be rendered to London Clubs, in an agreed format,
monthly reports and accounts relating to the Salle Privee Facilities
detailing for each month (A) the Salle Privee EBITDA, and (B) the
results of Above Limits Gaming, each of such reports and accounts to
be rendered in every case within fifteen (15) days from the conclusion
of the month to which they relate;
(iv) cause to be rendered to London Clubs, quarterly reports and
accounts relating to the Salle Privee Facilities detailing the
calculation of the Salle Privee EBITDA for that quarter, each of such
reports and accounts to be rendered in every case within thirty (30)
days from the conclusion of the quarter to which they relate; and
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(v) cause to be submitted to London Clubs on or prior to sixty
(60) days following the end of the Initial Financial Year and each
Financial Year thereafter, a draft Statement of Accounts in respect of
the Salle Privee Facilities for such Financial Year, such Statement
detailing the Salle Privee Gaming Win and the Salle Privee EBITDA for
such Financial Year.
(vi) Any disputes regarding the definition of Salle Privee
EBITDA, the components thereof, the allocation or non- allocation of
any items of Aladdin's general overhead and the nature and amount of
any line items incorporated in Salle Privee EBITDA shall be determined
by Aladdin's regular auditors.
8. INCENTIVE MARKETING AND CONSULTING FEE.
8.1 In consideration of the services to be furnished by London Clubs
hereunder, Aladdin shall pay to London Clubs, in relation to the Initial
Financial Year and each Financial Year thereafter, an incentive marketing and
consulting fee (the "Incentive Marketing and Consulting Fee") calculated as
follows:
(i) 10% of the Salle Privee EBITDA, in excess of $0, up to
and including $15,000,000; plus
(ii) 12.5% of the Salle Privee EBITDA, in excess of
$15,000,000, up to and including $17,000,000; plus
(iii) 25% of the Salle Privee EBITDA, in excess of
$17,000,000, up to and including $20,000,000; plus
(iv) 50% of the Salle Privee EBITDA over the amount of
$20,000,000.
8.2 In respect of the Initial Financial Year or the Financial Year in
which this Agreement terminates, if not a full twelve month period, the dollar
thresholds of the Incentive Marketing and Consulting Fee set forth in clauses
(i) through (iv) of Section 8.1 (each such threshold a "Dollar Threshold" and,
collectively, the "Dollar Thresholds") shall be pro-rated by multiplying each
Dollar Threshold amount by a fraction, the numerator of which shall be the
number of days in the Initial Financial Year or such final Financial Year (as
the case may be) and the denominator of which shall be three hundred sixty-five
(365).
8.3 The Dollar Thresholds shall be adjusted on every fifth anniversary of
the Opening Date by such percentage as shall be equal to the percentage change,
if any, in the Consumer Price Index
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for All Urban Consumers, U.S. City Average All Items - (CPI-U; 1982 - 1984 =
100), published by the Bureau of Labor Statistics of the United States
Department of Labor ("CPI"), by comparing the CPI for the month immediately
preceding the month in which such fifth anniversary occurs and the CPI for the
month in which the Opening Date occurs. If publication of the Consumer Price
Index is discontinued, the parties shall accept comparable statistics on the
cost of living as computed and published by an agency of the United States or by
a responsible financial periodical of recognized authority to be selected by the
parties.
8.4 For the purpose of determining the quarterly payments provided in
Section 8.5 below, the Dollar Thresholds set forth in Section 9.1 shall be
pro-rated by quarter.
8.5 Payments on account of the Incentive Marketing and Consulting Fee
shall be made by Aladdin to London Clubs within thirty (30) days after the end
of each calendar quarter and the amounts of such payments shall be based on the
reports to be provided by Aladdin pursuant to Section 7 (iv) above.
8.6 Any adjustment that may be required to the Incentive Marketing and
Consulting Fee shall be made after the Salle Privee EBITDA for the relevant
Financial Year has been mutually agreed upon by Aladdin and London Clubs. In
the absence of such agreement, and upon the request of either party, Aladdin's
regularly retained auditors shall conduct an audit of the Salle Privee EBITDA in
accordance with Generally Accepted Auditing Standards and shall certify the
Salle Privee EBITDA for the relevant Financial Year in accordance with the
definition thereof set forth in Section 1 of this Agreement. Such certification
shall be completed within fifteen (15) days of completion of the audit of
Aladdin's accounts for the Financial Year in question or within thirty (30) days
after a request, whichever shall last expire. For purposes of performing any
audit hereunder, Aladdin and London Clubs shall provide said auditors with
reasonable access to all accounts, books, records, working papers and other
information.
8.7 Aladdin shall make further payment to London Clubs or London Clubs
shall reimburse to Aladdin the amount of such adjustment required, if any,
within fifteen (15) days of such agreement or certification as is referred to in
Section 8.6 above.
8.8 The Incentive Marketing and Consulting Fee shall be determined and be
made payable in US dollars.
8.9 In addition to the Incentive Marketing and Consulting Fee, London
Clubs shall be entitled to prompt reimbursement from Aladdin subject to
Aladdin's budget and upon submission by London Clubs of any report setting forth
all expenses incurred by London Clubs in the provision of marketing, promotional
and advertising service and in the provision of any staff of London Clubs for
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employment by Aladdin in the Salle Privee Facilities and of all travel
accommodations and related expenses properly incurred in connection with
services rendered by such staff and also in connection with marketing,
promotional and advertising services rendered by executives of any Affiliate of
London Clubs, all of which, to the extent actually reimbursed by Aladdin, shall
be deducted in calculating the Salle Privee EBITDA.
9. MANAGEMENT AND PERSONNEL.
9.1 The Salle Privee Facilities shall be operated as a department within
the Redeveloped Aladdin. All personnel to be engaged from time to time in
relation to any of the Salle Privee Facilities shall be approved by London Clubs
and shall be employees of Aladdin. London Clubs shall provide such additional
training for employees engaged in the Salle Privee Facilities as it shall deem
appropriate in order for the Salle Privee Facilities to be operated at their
international premium standard. Aladdin and London Clubs agree that they shall
endeavor to promote employees of the Redeveloped Aladdin who have exhibited
exemplary work performance into employment positions in the Salle Privee
Facilities when such positions become available.
9.2 London Clubs shall source and nominate, and may from time to time
second or assign, the managing director for the Salle Privee Facilities and
experienced employees to staff the principal management posts in the Salle
Privee Facilities, including, but not limited to, the heads of the Salle Privee,
the Restaurant, the Hospitality Facility, the registration desk and the
marketing departments of the Salle Privee Facilities. The employment of such
nominees will be subject to the approval of Aladdin, which approval shall not be
unreasonably withheld or delayed. In this connection, London Clubs shall
arrange prior to the Opening Date for training of employees designated by London
Clubs for key positions in the Salle Privee Facilities who will take up their
posts on or (as necessary) before the Opening Date.
9.3 Aladdin shall use all reasonable efforts to resolve any immigration
requirements for any of the foregoing persons and shall use all reasonable
efforts to obtain such work permits and visas as may be required.
9.4 The employees of the Salle Privee Facilities will participate
equitably with all other employees of the Redeveloped Aladdin with respect to
all employment policies and benefits including, but not limited to, the pooling
of gratuities, incentive compensation and stock option and ownership plans based
upon the relative seniority, performance and position of individual employees.
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9.5 Without limitation to the definition of Salle Privee EBITDA, Aladdin
shall procure and maintain in force at all times during this Agreement (which
may be within its insurance coverage for the Aladdin Hotel and Casino
generally), workers compensation, employer's liability and public and commercial
general liability insurance coverages against any claims for personal injury,
death, loss or damage to property or any other claim made by or against
employees of Aladdin serving in the Salle Privee Facilities, including any
employees seconded or assigned by London Clubs. Such policies shall include
London Clubs and Guarantor as additional named insureds. Aladdin hereby further
agrees to produce evidence of all such coverages to London Clubs upon demand.
10. NAME.
10.1 Throughout the term of this Agreement, the Salle Privee shall be known
as the "Salle Privee at the Aladdin" or such other name as shall be selected by
London Clubs subject to approval by Aladdin not to be unreasonably withheld or
delayed.
10.2 The name "London Clubs" is and shall remain the exclusive property of
London Clubs and its use, and the use of any logos in connection therewith,
shall be strictly controlled by London Clubs in its sole discretion. No right
to use such name, whether on its own or in conjunction with any other word or
words, shall be conferred on Aladdin by this Agreement or following the
termination hereof. London Clubs agrees to allow Aladdin to use the name
"London Clubs" and related logos in connection with the Redeveloped Aladdin,
provided that such use shall require the express prior written approval of
London Clubs in each instance (except for on-going usage in the normal course of
business previously approved pursuant to this Section 10.2).
11. TERMINATION.
11.1 This Agreement may be terminated by London Clubs or Aladdin:
(i) in the event of any default in the performance of any
obligation by the other party, thirty (30) days after the date of the
delivery of written notice specifying the nature of the asserted
default, unless the defaulting party shall have cured same within said
thirty (30) days hereunder or, if the default is of such a nature that
it cannot be cured within thirty (30) days, unless during such thirty
(30) days the defaulting party shall have commenced curing such
default and have proceeded with diligence to effect the cure within a
reasonable period thereafter; or
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(ii) in the event of the failure of the other party to make any
payment due hereunder within ten (10) days after the date of provision
of written notice from the non-defaulting party specifying the amount
due.
11.2 This Agreement may be terminated by London Clubs immediately upon
provision of notice in writing to Aladdin, without prejudice to any claim which
London Clubs may have against Aladdin, if, at any time during the term of this
Agreement, Aladdin shall have a Gaming Problem not directly attributable to
London Clubs or any Related Party of London Clubs.
11.3 This Agreement shall be terminated effective as of the date that
London Clubs shall no longer own any common membership interest or common stock,
as the case may be, of Aladdin or any successor entity.
11.4 This Agreement shall be terminated if London Clubs has a Gaming
Problem which would prevent it from operating the Salle Privee Facilities as
contemplated by the terms of this Agreement; provided, however, that this
Agreement shall be reinstated effective immediately upon the resolution of the
Gaming Problem in a manner that would permit London Clubs to operate the Salle
Privee Facilities as contemplated by the terms of this Agreement.
11.5 This Agreement may be terminated immediately by Aladdin upon the
filing by London Clubs or Guarantor of a voluntary petition in bankruptcy or
insolvency under any applicable law; the filing by London Clubs or Guarantor of
any petition or answer seeking or acquiescing in any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief; the making by London Clubs or Guarantor of any general assignment for
the benefit of creditors; London Clubs' or Guarantor's failure generally to pay
its debts as such debts become due; London Clubs' or Guarantor's notice to any
governmental body of insolvency, pending insolvency or suspension of operations;
or the entry by a court of competent jurisdiction of an order, judgment or
decree approving a petition filed against London Clubs or Guarantor seeking any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any applicable law or regulation relating to bankruptcy,
insolvency or other relief, which order, judgment or decree remains unvacated
and unstayed for an aggregate of sixty (60) days from the date of entry thereof.
11.6 This Agreement may be terminated immediately by London Clubs upon the
filing by Aladdin or Aladdin Hotel of a voluntary petition in bankruptcy or
insolvency under any applicable law; the filing by Aladdin or Aladdin Hotel of
any petition or answer seeking or acquiescing in any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief; the making by Aladdin or Aladdin Hotel of any general assignment for the
benefit of creditors; Aladdin's or Aladdin
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Hotel's failure generally to pay its debts as such debts become due; Aladdin's
or Aladdin Hotel's notice to any governmental body of insolvency, pending
insolvency or suspension of operations; or the entry by a court of competent
jurisdiction of an order, judgment or decree approving a petition filed against
Aladdin or Aladdin Hotel seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any applicable
law or regulation relating to bankruptcy, insolvency or other relief, which
order, judgment or decree remains unvacated and unstayed for an aggregate of
sixty (60) days from the date of entry thereof.
11.7 In the event of a termination of this Agreement for the reasons set
forth in Section 11.2, London Clubs shall have the right, exercisable upon
written notice to Sommer Enterprises, LLC ("Sommer") within one hundred and
eighty (180) days after the date of termination of this Agreement, to cause
Sommer to purchase London Clubs' entire interest in Aladdin including, without
limitation, any voting shares or preferred shares, (collectively referred to
herein as the "Interest") then owned by London Clubs, for a mutually agreed upon
price, or if no price can be mutually agreed, at a price equal to the fair
market value of the Interest on the date of the notice, as determined by an
independent qualified appraiser appointed by Sommer and London Clubs. If Sommer
and London Clubs cannot agree on an appraiser within ten (10) days after the
date of the notice, they shall each select an appraiser, which appraisers
together shall select a third appraiser, which third appraiser shall determine
the fair market value of the Interest. The determination of said third
appraiser shall be binding upon the parties. The agreed price or the fair
market value of London Clubs' Interest shall be payable in cash, within one
hundred and twenty (120) days from the date of agreement or from the date of
determination thereof, as the case may be.
11.8 Guarantor hereby absolutely and unconditionally guarantees to Aladdin
and its successors and/or permitted assigns the performance by London Clubs of
all of the obligations and liabilities of London Clubs under this Agreement,
including, without limitation, London Clubs' obligation to reimburse Aladdin for
Net Above Limits Gaming Losses pursuant to Section 6.3 hereof. It is expressly
understood and agreed that this is a continuing guarantee.
12. FORCE MAJEURE.
If a party is unable to perform its obligations under this Agreement, in
whole or in part, by reason of war, riots, civil commotion, labor disputes,
strikes, lockouts, inability to obtain labor or materials, fire or other acts of
elements, acts of God, catastrophic events, accidents, government restrictions
or appropriation or other causes, whether like or unlike the forego-
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ing, beyond its reasonable control, the party shall be relieved of those
obligations to the extent that it is so unable to perform for as long as it is
so unable to perform, and no liability shall arise from the said
non-performance; PROVIDED that in the event any of such events occurs, the
Dollar Thresholds shall be pro-rated to reflect the period of time during which
the event of force majeure subsists.
13. MISCELLANEOUS PROVISIONS.
13.1 Nothing in this Agreement shall be deemed to constitute a partnership
or joint venture between Aladdin and London Clubs, nor shall London Clubs be
deemed to be an agent of Aladdin.
13.2 This Agreement and the respective rights and obligations of the
parties hereunder shall not be assignable (whether by operation of law or
otherwise, including, without limitation, by way of merger, combination or
similar transaction) without the prior written consent of the other party.
Notwithstanding the foregoing, PROVIDED that Guarantor shall continue to
guarantee the obligations of London Clubs or its permitted assigns hereunder,
London Clubs (i) shall be entitled to assign its rights and obligations
hereunder to an Affiliate, and (ii) London Clubs shall be entitled to assign its
right to receive any payment hereunder, PROVIDED, HOWEVER, that no assignment by
London Clubs hereunder shall relieve London Clubs of any of its obligations
under this Agreement unless Aladdin expressly agrees to such release in
writing. Notwithstanding the foregoing, Aladdin shall have the right to assign
this Agreement without the consent of London Clubs (i) to any Person which is a
successor to Aladdin either by merger, consolidation or other similar
transaction, or (ii) to a purchaser of all or substantially all of Aladdin's
assets, provided that such merger, consolidation or other similar transaction or
purchase was made in compliance with, or not in contravention of, the Operating
Agreement or the Shareholders Agreement annexed thereto as Exhibit A (whichever
shall then be in effect). In addition, nothing contained herein shall prevent
Aladdin from making a collateral assignment of this Agreement to a lender or
mortgagee of the Premises.
13.3 The validity, construction, performance and effect of this Agreement
shall be governed exclusively by the laws of the State of Nevada applicable to
contracts made in that state, without giving effect to its conflicts of laws
rules. All disputes, claims and proceedings between the parties relating to the
validity, construction, breach or performance of this Agreement shall be subject
to the exclusive jurisdiction of the Federal Courts of the State of Nevada to
which the parties hereto irrevocably submit.
13.4 All notices, consents and other communications given under this
Agreement shall be in writing and shall be deemed to
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have been duly given and delivered (a) when delivered by hand or by DHL or
Federal Express or a courier of similar international standing to the party for
whom intended, (b) five days after being deposited in any official government
post office in the United States of America or Great Britain, as the case may
be, enclosed in an airmail postage prepaid, registered or certified envelope
addressed to the party for whom intended, or (c) when successfully transmitted
by facsimile to the party for whom intended at the address or facsimile number
for such party set forth below, or to such other address or facsimile number as
may be furnished by such party by notice in the manner provided herein;
PROVIDED, HOWEVER, that any notice of change of address or facsimile number
shall be effective only upon receipt.
If to Aladdin, Aladdin Holdings or to Sommer Enterprises:
ALADDIN GAMING, LLC
2810 W. Charleston Blvd.
Suite F-58
Las Vegas, Nevada 89102-1934
Attention: Richard Goeglein and Jack Sommer
Fax (702) 870-8733
with a copy to:
ALADDIN GAMING, LLC
280 Park Avenue
New York, New York 10017
Attention: Ronald Dictrow
Fax: (212) 661-0844
and a copy to:
SKADDEN ARPS SLATE MEAGHER & FLOM, LLP
919 Third Avenue
New York, New York 10022
Attention: Wallace L. Schwartz, Esq.
Fax: (212) 735-2000
If to London Clubs or Guarantor:
Chief Executive Officer
LONDON CLUBS NEVADA INC.
c/o London Clubs International, plc
10 Brick Street
London, England, W1Y 8HQ
Fax: 011-44-171-493-6981
with a copy to:
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OHRENSTEIN & BROWN, LLP
230 Park Avenue, 32nd Floor
New York, New York 10169
Attention: Peter J. Kiernan, Esq.
Fax: (212) 557-0910
and a copy to:
LIONEL SAWYER & COLLINS
300 South Fourth Street
Suite 1700
Las Vegas, Nevada 89101
Attention: Greg Giordano, Esq.
Fax: (702) 383-8845
Either party may at any time change the address for notices to such party by
giving notice as provided above.
13.5 No claimed waiver of any provision of this Agreement shall be
effective unless such waiver is contained in a writing signed by the party
giving such waiver and expressly making reference to this Agreement and the
matter being waived and expressly stating that it is a waiver. No such waiver
shall be deemed to be a waiver of any other or further obligation or liability
of the party or parties in whose favor the waiver was given.
13.6 Notwithstanding termination of this Agreement for any reason, all
obligations of any party provided for herein that need to survive such
termination in order to give effect to the intention of the parties (including,
without limitation, the payment of monies) shall survive and continue until they
have been fully satisfied and performed.
13.7 The Exhibits hereto form part of this Agreement and shall be construed
and shall have the same full force and effect as if expressly set out in this
Agreement.
13.8 Neither Aladdin nor London Clubs shall at any time use or disclose the
terms of this Agreement or any confidential information concerning each other,
their respective customers or suppliers other than for the purposes of this
Agreement, and as to disclosure, solely to the extent that such disclosure is
required by law, by the rules of any competent stock exchange or by any
regulatory body, or is specifically authorized in writing by the other party, or
comes into the public domain through no act or omission of the disclosing party.
13.9 This Agreement, together with the Operating Agreement to the extent
referenced herein, contains the entire Agreement between the parties with
respect to the subject matter hereof, and supersedes all prior or
contemporaneous agreements, negotiations or
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understandings. This Agreement may not be amended, modified, superseded, or
canceled, and the terms and conditions hereof may be waived only by an
instrument making express reference to this Agreement, stating that it is an
amendment, modification, supersession or cancellation thereof as the case may
be, executed by the party to be charged.
13.10 This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted assigns,
including specifically and without limitation any corporation that shall become
a successor to Aladdin as provided in the Operating Agreement.
13.11 The parties agree that six (6) months after the Opening Date,
they shall consult with respect to the operations of the Redeveloped Aladdin,
including the Salle Privee Facilities. The parties agree to consider in good
faith each others advice and views with respect thereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered on and as of the day and year first above written.
ALADDIN GAMING, LLC.
By: /s/ Richard Goeglein
----------------------------
Name: Richard Goeglein
Title: Chief Executive
Officer/President
LONDON CLUBS NEVADA INC.
By: /s/ Linda Lillis
----------------------------
Name: Linda Lillis
Title: Assistant Secretary
LONDON CLUBS INTERNATIONAL, PLC
By: /s/ Barry Hardy
----------------------------
Name: Barry Hardy
Title: Finance Director
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SOMMER ENTERPRISES, LLC,
solely as to Section 11.7 hereof
By: /s/ Jack Sommer
----------------------------
Name: Jack Sommer
Title: Chairman
20
<PAGE>
CONTRACT
BETWEEN
ALADDIN GAMING, LLC ("OWNER")
AND
FLUOR DANIEL, INC. ("DESIGN/BUILDER")
FOR
DESIGN/BUILD SERVICES
This Contract made this 4th day of December, 1997 (Effective Date), by and
between Aladdin Gaming, LLC ("Owner"), a Nevada limited liability company with
offices at 2810 West Charleston Boulevard, Suite F-58, Las Vegas, Nevada 89102
and Fluor Daniel, Inc. ("Design/Builder"), a California corporation with offices
at 3335 Michelson Drive, Irvine, California 92698, may hereinafter be referred
to as "Contract" or "Agreement".
BACKGROUND
Owner desires to retain the services of Design/Builder to perform
pre-construction and design/build services pertaining to the demolition and
renovation of existing structures and construction of new structures and
associated infrastructure. Design/Builder desires to provide such services in
accordance with the terms and conditions set forth in this Contract.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and other valuable consideration, the parties agree as follows:
ARTICLE 1
DEFINITIONS
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December 9, 1997
Page 1 ______
<PAGE>
For the purpose of this Contract, the following terms shall have meanings
ascribed to them below:
1.1 "Design/Builder" - Design/Builder means Fluor Daniel, Inc.
1.2 "Drawings", "Specifications" and/or "Plans" shall mean all those
documents prepared by Design/Builder, approved by Owner and set forth in
Attachment E - including the final set of plans and specifications used for the
construction of the Project.
1.3 "Owner"- Owner means the Aladdin Gaming LLC or its successor or
permitted assign or Owner Representative as defined in paragraph 1.4 below.
1.4 "Owner Representative" - Owner Representative means Tishman Realty
and Construction Co. ("Tishman") or any other entity acting as on-site
representative of Owner designated by Owner in writing as the Owner
Representative for this Contract. In no event shall there be more than one
entity at a time designated as the Owner Representative.
1.5 "Project" - Project means the new Aladdin Hotel & Casino, the London
Clubs International facilities, parts of the retail shell and associated parking
facilities located in Clark County, Nevada and as further described and
illustrated in Attachments A and E.
1.6 "Architect of Record" or "Engineer" shall mean ADP/FD of Nevada,
Inc., a Nevada corporation and/or its successor in interest.
1.7 "Services" or "Work" shall mean all design, engineering,
pre-construction services, materials, equipment, components, and other items of
any nature covered by this Contract and to be provided or performed by
Design/Builder, its consultants and lower tier subcontractors, including
responsibilities and obligations relative to punch list items and warranty after
acceptance. "Services" will also include Article 3.1 herein.
1.8 "Contract Documents" consist of the Contract and all the Attachments
thereto, including all modifications made thereto.
1.9 "Consultants" shall mean all engineering and specialty consulting
firms retained by Design/Builder, the coordination and management of whom shall
be the responsibility of Design/Builder.
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December 9, 1997
Page 2 ______
<PAGE>
1.10 "Lender" is the bank or other financial institution or entity
providing Owner with funds to pay for the Work.
Other defined terms shall be deemed to have the meaning ascribed to them in
General Conditions, Attachment D.
ARTICLE 2
CONTRACT ATTACHMENTS
This Contract shall include the following attachments:
Attachment A: Scope of Services
Attachment B: Invoicing Format
Attachment C : Lien Waiver (Partial and Final)
Attachment D: General Conditions
Attachment E: GMP/Baseline Design Development Documents
Attachment F: Progress Schedule
Attachment G: Payment
Attachment H: Incentive Bonus
Attachment I: Insurance
Attachment J: Tests Furnished By Design/Builder
Attachment K: Permit Responsibility Matrix
Attachment L: Design/Builder's Key Personnel
Attachment M: Consultants To Be Retained By Design/Builder
Attachment N: Bonds and Guarantee
Attachment O: Subcontractor Bid Package
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December 9, 1997
Page 3 ______
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Attachment P: Letter of Credit
Attachment Q: Construction Site Logistics and Staging Plan
In the event this Contract and/or its Attachments contain any
inconsistency, such inconsistencies shall be resolved by giving precedence in
the following order:
- the Contract (Articles 1-27)
- Attachment D: General Conditions
- Attachment E: GMP/Baseline Design Development Documents
- Attachment A: Scope of Services
- Other Attachments and Documents
provided, however, that to the extent any of the Attachments expand upon the
rights and obligations of the parties set forth herein, such provisions shall be
deemed to be consistent with this Contract, yielding the broadest interpretation
of the Contract.
ARTICLE 3
SCOPE OF SERVICES
3.1 DESIGN/BUILD SERVICES. The scope of the Design/Build Services
(hereinafter referred to as "Services" or "Work") will be as set forth in the
Attachments including, without limitation, Attachment A, D and E. The Services,
whether performed by Design/Builder or its subcontractors, shall be performed by
qualified design professionals, construction contractors and suppliers, licensed
as required by law, selected and paid by Design/Builder. Nothing in this Article
3 shall create any professional obligation or contractual relationship between
such persons and Owner.
3.2 Owner shall pay for the Phased Design And Construction Plan Review
Fee (as defined in the Clark County Building Code - 1997), off-site impact fees,
water/sewer tap fees, zoning variances and other government approval fees
necessary for the Project; however, Design/Builder shall be responsible for
preparing all the necessary paperwork, supporting data and revisions required
for government permitting and approval. Design/Builder shall be responsible for
ensuring that all the design and
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December 9, 1997
Page 4 ______
<PAGE>
construction related paperwork, supporting data and revisions required for
government permitting and approval is timely furnished to Owner to allow
commencement of construction of the Project and completion of the Project in
accordance with this Contract. Notwithstanding the above, Design/Builder is not
accountable for paperwork that can only be furnished by Owner.
3.3 Subject to Subsection 2.9.10 of the General Conditions, Attachment
D, the Owner Representative shall participate with Design/Builder in the
negotiation of all subcontracts and purchase orders for the Work and Services to
be performed and all said subcontracts and purchase orders shall be let subject
to the written approval (said approval shall be made within five (5) days from
receipt of Design/Builder's written recommendation) of Owner or the Owner
Representative.
ARTICLE 4
COST OF THE SERVICES
4.1 GUARANTEED MAXIMUM PRICE. Design/Builder shall be paid on a
Guaranteed Maximum Price ("GMP") basis as described in Attachment G. Subject to
additions and deductions which may be made in accordance with the Contract
Documents, Design/Builder agrees that the total costs payable by Owner for the
Work described in Attachments A and E shall not exceed a Guaranteed Maximum
Price of Two Hundred Sixty-Seven Million Dollars ($267,000,000.00), as set
forth in Attachment G. Design/Builder agrees to honor the GMP provided that the
Notice to Proceed is received on or before February 1, 1998. In the event that
the Notice to Proceed is not received on or before February 1, 1998,
Design/Builder reserves the right to revise the GMP. In the event that the
Notice to Proceed is not received on or before March 1, 1998, Design/Builder may
terminate this Contract without any further obligation.
4.2 The Design/Builder's General Conditions Costs shall not exceed the
lump sum amount of Sixteen Million Five Hundred Eighty-Eight Thousand Two
Hundred Fifteen Dollars ($16,588,215.00) and shall consist of those costs
described in Section 3 of Attachment G and more specifically set forth in
Appendix 1 attached thereto. Design/Builder acknowledges and agrees to notify
the Owner Representative if any General Conditions Costs are reallocated to a
trade subcontract.
4.3 DESIGN/BUILDER'S RESPONSIBILITY FOR TAXES AND FEES. Only those
taxes and fees directly attributable to the Work are allowable costs pursuant to
the provisions of Attachment G. It is expressly understood that the Guaranteed
Maximum Price includes all federal, state and local taxes, duties, excise taxes,
personal taxes on equipment and property owned by Design/Builder, and income
taxes including, without
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December 9, 1997
Page 5 ______
<PAGE>
limitation, the following state and local taxes: Sales and Use Taxes, Initial
and Annual Corporate Filing Fees, Business Privilege Tax, Realty and Tangible
Personal Property Taxes (on property owned by Design/Builder), Contractors'
Licenses and Occupational Taxes, Local License Taxes, Unemployment Insurance
Taxes, and Motor Carrier and Fuel Taxes. The payment of all other taxes are
Owner's responsibility.
ARTICLE 5
PERFORMANCE/PAYMENT BONDS/CORPORATE GUARANTEE
5.1 Design/Builder, in lieu of furnishing full performance and payment
bonds, shall provide a creditworthy corporate guarantee from its parent the
Fluor Corporation. The guarantee must be acceptable to Lender and it shall
cover all of Design/Builder's obligations under this Contract. The guarantee
shall be in the form as set forth in Attachment N(3).
5.2 Performance and payment bonds (issued by a surety listed in the
Treasury Department listing published in the Federal Register, licensed in the
State of Nevada and rated by the A.M. Best Company as "A" or better) are
required from each of Design/Builder's Subcontractors; however, upon the
parties's mutual consent, a Subcontractor may provide a creditworthy corporate
guarantee in lieu of furnishing said bonds. Performance and payment Bonds shall
be in the form as set forth in Attachment N(1) and N(2).
ARTICLE 6
CHANGES IN SERVICES
6.1 RIGHT TO MAKE CHANGES. Owner may make changes in the Services in
accordance with Section 18.0 of the General Conditions, Attachment D.
ARTICLE 7
INSURANCE
7.1 The parties have elected to implement a Controlled Insurance Program
("CIP") whereby Owner shall reimburse Design/Builder for all associated premiums
and costs which will provide General Liability (including Contractual
Liability), Workers'
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Page 6 ______
<PAGE>
Compensation, Excess Liability, Builders Risk and Transit coverages for
Design/Builder and all Subcontractors of any tier. The terms and conditions of
the CIP are set forth in Attachment I annexed hereto. Design/Builder
acknowledges that, unless otherwise specified, each policy it procures must: 1)
identify Owner as a Named Insured, 2) identify Tishman Realty & Construction
Co., Inc. and the Owner's lender(s) as Additional Insured(s), 3) identify
Aladdin Bazaar, LLC as Additional Insured and 4) must contain full waivers of
subrogation.
ARTICLE 8
INDEMNIFICATION
8.1 Design/Builder shall indemnify Owner in accordance with the terms
and provisions set forth in Section 12.0 of the General Conditions, Attachment
D.
ARTICLE 9
OBLIGATIONS
9.1 EXECUTION OF CONTRACT OBLIGATIONS. Design/Builder's execution of its
obligations as set forth under this Contract shall be subject to the approval of
Owner Representative; provided, however, such approval by Owner Representative
shall not relieve or discharge Design/Builder, either expressly or by
implication, from any responsibility under this Contract. Approval by the Owner
Representative shall not be unreasonably withheld. Design/Builder acknowledges
that approval by the Owner Representative shall not constitute a waiver of
Design/Builder's obligations to perform the Work and Services in accordance with
the requirements of the Contract.
9.2 Design/Builder acknowledges that a specified portion of the Work is
to be performed for the benefit of Aladdin/Bazaar, LLC, a Nevada limited
liability company. Said portion of the Work to be performed for the benefit of
Aladdin/Bazaar, LLC shall be known as the "Retail Shell" and is more
specifically defined in Attachment E, GMP/Baseline Development Documents.
Notwithstanding the above, Aladdin/Bazaar, LLC is not a third-party beneficiary
of this Agreement and its involvement in any meetings, negotiations or decisions
related to the Retail Shell or the overall Project shall not convey or be
construed to impart third-party beneficiary status. Design/Builder shall not be
obligated to take direction from Aladdin Bazaar, LLC; therefor all instructions
given in connection with the Retail Shell must issue from the Owner's
Representative.
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December 9, 1997
Page 7 ______
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9.3 INQUIRIES. All inquiries Design/Builder may have concerning this
Contract shall be made to Owner or Owner Representative as provided herein or in
the General Conditions, Attachment D. If Design/Builder is in doubt as to whom
inquiry should be made, the inquiry shall be made to both Owner and Owner
Representative.
ARTICLE 10
TERMINATION
10.1 Owner may terminate this Contract in accordance with the General
Conditions, Attachment D. If Owner terminates this Contract after Services have
been undertaken by Design/Builder, compensation for work performed shall be as
per Sections 28.0 and 30.0 of the General Conditions, Attachment D.
ARTICLE 11
INVOICES
11.1 Design/Builder's monthly invoices shall be submitted to Owner for
approval in accordance with the provisions set forth in Section 31.0 of the
General Conditions, Attachment D.
11.2 Design/Builder's invoice shall:
11.2.1 Reflect the Schedule of Values for Work and Services
performed as submitted by Design/Builder and approved by Owner Representative
and any lender(s) representative(s), and shall:
11.2.2 Be sequentially numbered.
11.2.3 Be submitted to the attention of Owner Representative.
11.2.4 Be submitted in accordance with the format of Attachment B.
11.5.5 Reflect retainage in the amount as provided for elsewhere in
the Contract Documents.
11.2.6 Be submitted on the 25th day of each month.
11.2.7 Be accompanied by other supporting documentation as may be
reasonably requested by Owner Representative.
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Page 8 ______
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11.2.8 Each invoice submitted by Design/Builder shall be
accompanied by a copy of Attachment C - Lien Waiver executed in accordance with
the laws of the State of Nevada.
ARTICLE 12
PAYMENT
12.1 Payment shall be governed by the terms of the Attachments,
including, without limitations, Section 31.0 of the General Conditions,
Attachment D.
ARTICLE 13
LIEN WAIVER
13.1 Acceptance by Design/Builder of any payment from Owner for any
invoice submitted shall constitute a lien waiver by Design/Builder for any and
all work performed and materials supplied to the extent that such costs were
included in that submitted invoice and Design/Builder shall provide written
release waivers (Attachment C) with respect to such costs and materials.
ARTICLE 14
COMPLETION DATE
14.1 SUBSTANTIAL COMPLETION. Design/Builder agrees to cause the
Substantial Completion of the Work (as defined in subsection 31.8 of the General
Conditions, Attachment D) on or before 790 calendar days from either January 12,
1998 or the date Notice to Proceed is received from Owner - whichever is later.
Said period shall be known as the Contract Time and may only be adjusted in
accordance with this Agreement.
14.2 TIME. Time limits stated in this Contract are of the essence.
Design/Builder's failure to achieve Substantial Completion within the Contract
Time specified in Article 14.1 shall be governed by the provisions of Article
14.3 below.
14.3 COMPENSATION FOR EARLY/LATE COMPLETION. In lieu of Owner procuring,
at Design/Builder's cost, a liquidated damages insurance policy or a business
interruption
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<PAGE>
insurance policy to compensate Owner for late completion of the Work, the
parties agree as follows: Owner shall pay Design/Builder Two Million Dollars
($2,000,000.00) as a Bonus Advance upon the issuance of the Notice to Proceed.
Design/Builder may, at its option, use the Bonus Advance to purchase liquidated
damages insurance or it may elect to self-insure. In either event,
Design/Builder shall be entitled to keep the Bonus Advance as a bonus if the
Project is Substantially Complete within the Contract Time.
As a further bonus, Design/Builder shall be entitled to receive one hundred
thousand dollars ($100,000.00) for each day, up to but not to exceed ninety (90)
days, that the Project is Substantially Completed in advance of the Contract
Time.
If Design/Builder fails to achieve Substantial Completion of the Project
within the Contract Time, Design/Builder must pay back the Two Million Dollars
($2,000,000.00) Bonus Advance to Owner because Design/Builder will have failed
to earn these bonus monies and further Design/Builder shall pay Owner, as
liquidated damages and not as a penalty, one hundred thousand dollars
($100,000.00) per day commencing upon the first day following expiration of the
Contract Time and continuing up to ninety (90) days thereafter. The parties
agree that such liquidated damages are a reasonable estimate of damages Owner
will incur as a result of delayed completion of the Work inasmuch as it is not
possible to ascertain in advance the actual damages which Owner may incur as a
result of the delayed Substantial Completion of the Work.
Owner may deduct liquidated damages as described above from any unpaid
amounts then or thereafter due to Design/Builder under this Agreement. Any
liquidated damages not so deducted from any unpaid amounts due Design/Builder
shall be payable immediately to Owner upon Owner's demand.
The parties agree that Design/Builder's payment of these liquidated damages
and the return of the Bonus Advance shall be Owner's sole and exclusive remedy
for Design/Builder's failure to achieve Substantial Completion within the
Contract Time.
The terms Substantial Completion and Substantially Complete as used herein
shall have the same meaning.
The bonuses referred to in this Article are not included in the GMP.
ARTICLE 15
SUBCONTRACTORS AND SUB-SUBCONTRACTORS
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15.1 Design/Builder hereby warrants that it is licensed and qualified to
act in the capacity of a contractor and an architect/engineer as of the date
hereof and that it will contract with all Subcontractors (as hereinafter
defined) as are necessary to complete the Work and Services hereunder, and
further agrees to timely pay all such Subcontractors in accordance with payments
received for same from Owner.
15.2 All Subcontractors of any tier of Design/Builder (hereinafter
referred to collectively as Subcontractors) shall be the exclusive
responsibility of Design/Builder. However, before a Subcontractor begins work
under the terms of this Contract, Design/Builder shall warrant and produce all
relevant documentation to demonstrate that the Subcontractor has furnished all
insurance documents required under the provisions of Attachment D and Attachment
I necessary to comply with the CIP.
ARTICLE 16
PRIVITY OF CONTRACT
16.1 Owner shall have no contractual obligation to Subcontractors and
shall communicate with such Subcontractors only through Design/Builder.
Design/Builder shall include in all its subcontracts a provision which
acknowledges that there is no privity of contract with Owner by reason of the
subcontract. However, Owner, or any Lender providing Owner financing on any
portion of the Project may contact any Subcontractor directly if Design/Builder
is in default hereunder or under any other agreement between Owner and
Design/Builder. Design/Builder shall provide in all its subcontracts that if
Design/Builder is in default under the Contract, that the subcontract (plus any
related performance and/or payment bonds), at Owner's option, shall be deemed
assigned to Owner or Owner's designee, and the Subcontractor shall continue to
perform its work for Owner pursuant to the terms of the subcontract. The term
"subcontract" used in this Article shall also refer to all purchase orders,
vendor agreements and professional service agreements with Design/Builder or
Design/Builder's Subcontractors. Furthermore, Design/Builder hereby agrees to
perform its Work at the Project for Lender if Owner has been declared in default
under any loan agreement with such Lender, as long as Design/Builder is paid in
accordance with the Contract and Lender agrees to be bound by the terms and
conditions of this Agreement.
ARTICLE 17
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HAZARDOUS MATERIALS
17.1 Pre-Existing Contamination. Anything herein to the contrary
notwithstanding, title to, ownership of and legal responsibility for all
pre-existing contamination shall remain with Owner. "Pre-existing
contamination" is defined as and limited to all hazardous or toxic substances
that were not introduced to the Jobsite or negligently disturbed by
Design/Builder.
17.2 If Owner has such knowledge, Owner shall advise Design/Builder of
the existence of hazardous or toxic substances on the Project site and Owner
shall undertake the abatement and disposal of such material which shall include,
but not be limited to, asbestos. In the event Design/Builder encounters
pre-existing on-site materials or construction reasonably believed to be
hazardous or health threatening, then Design/Builder shall notify Owner and stop
work until an environmental laboratory properly certified by the applicable
State Health or equivalent agency and an environmental engineering consulting
firm, both retained directly by Owner, verifies that the materials or
construction complained of has been removed or rendered harmless. Until such
time Design/Builder shall not be obligated to commence or continue to work in
that area of the Project suspected to contain hazardous or health threatening
materials under Change Orders or directives issued by Owner and Design/Builder
shall be entitled to an equitable adjustment in the Contract Time and reasonable
delay related costs.
17.3 Design/Builder shall comply with all applicable environmental laws
in the performance of the Work.
17.3.1 All solid and liquid wastes, hazardous substances, and
hazardous materials used by Design/Builder (including but not limited to all
solvents, cleaners, waste oils, and trash) shall be handled and/or disposed of
in full compliance with all applicable federal, state and local statutes,
regulations, ordinances and rules.
17.3.2 As soon as the Work is completed, Design/Builder shall clear
the premises of all debris, waste, and equipment of every kind and nature
remaining from the Work and shall haul all materials belonging to Owner to local
storage or the nearest on site shipping point as directed by Owner.
ARTICLE 18
TAX EXEMPTION
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Owner shall, if applicable, execute, provide and deliver to Design/Builder,
any and all documents required of Design/Builder by the taxing authorities with
jurisdiction over this Project to demonstrate any claimed, full or partial, tax
exemption (i.e., IDA Resolution, Tax Exemption Certificate, Certificate of
Capital Improvement or the like).
ARTICLE 19
LAWS
19.1 The Project is located and this Contract is entered into in Clark
County, Nevada. Design/Builder shall comply with all laws, statutes,
ordinances, rules and regulations of all applicable governmental entities and,
to the fullest extent permitted by law, Design/Builder shall indemnify and hold
Owner harmless from any fines, penalties, costs, or liability arising from the
failure of Design/Builder or Design/Builder's Subcontractors to comply
therewith. Design/Builder warrants that it is duly authorized to do business in
the State of Nevada, that it has the knowledge and capability and is fully
licensed to act as Design/Builder under the terms of this Contract and that it
will evidence said authorization and capability to Owner upon request.
19.2 This Agreement shall be governed and interpreted in accordance with
the laws of the State of Nevada without any reference to conflict of laws
principles.
ARTICLE 20
PARTIAL VALIDITY
20.1 In the event that any portion of this Contract is held to be
unlawful or unenforceable as a matter of law, the balance of the Contract shall
remain in full force and effect and will be binding upon the parties. In the
event of a continuing breach or default on the part of either party, the failure
of the other party to insist upon the strict performance of the terms and
conditions hereof shall not be construed as a waiver.
ARTICLE 21
EFFECTIVE DATE
21.1 This Contract shall take full force and effect on the date shown on
page 1 ("Effective Date") and all Attachments and documents shall be referenced
as of that date for purposes of determining their meaning and effect. The GMP is
established on the basis of Plans, Drawings, Specifications, General Conditions
and all other Contract
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Documents identified or referred to herein. Changes after the Effective Date of
this Contract shall be made only as provided by this Contract. Any Work
commenced and any payments made pursuant to an award, letter of intent, or any
preliminary agreement shall be deemed to have been completed and paid after the
Effective Date and under the terms of this Contract.
21.2 Design/Builder acknowledges receipt from Owner of payments in the
total sum of Three Million Forty-Four Thousand Eight Hundred Thirty Nine Dollars
($3,044,839.00) ("Advance Payments") which were made prior to the Effective Date
and the parties agree that the Advance Payments are to be credited in their full
amount as payments made to Design/Builder for its Fee as described in Attachment
G.
ARTICLE 22
CONSEQUENTIAL DAMAGES
22.1 Neither party hereto shall be liable to the other for any indirect,
incidental or consequential damages of any nature whatsoever, except as
otherwise provided in Section 12.0 of the General Conditions, Attachment D.
ARTICLE 23
REPRESENTATIONS AND REMEDIES
23.1 Owner and Design/Builder make no representations, covenants,
warranties or guaranties, express or implied, other than those of good faith and
fair dealing or expressly set forth in the Contract Documents. The parties'
rights, liabilities, and limitations on liabilities, responsibilities and
remedies hereunder shall be exclusively those expressly set forth in the
Contract Documents and shall apply even in the event of default or termination,
the negligence, or strict liability of the party indemnified or released or
whose liability is limited or assumed or against whom rights of subrogation are
waived, shall survive the default and/or termination of Design/Builder and shall
be enforceable and extend to the parties, their respective officers, directors,
employees, agents and related entities.
ARTICLE 24
WARRANTY/GUARANTEE OBLIGATIONS
24.1 All warranties/guarantees referred to in this Article shall apply
solely to
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construction related services rendered by Design/Builder, its Subcontractors and
Vendors. The provisions of this Article shall not be interpreted or construed
to limit responsibility for any design related service rendered by
Design/Builder. All design Services performed by Design/Builder shall be free
of negligent errors and omissions and must comply with the highest customary and
applicable standards of professional care and the failure to meet these
standards shall be governed in accordance with prevailing law.
24.2 All warranties/guarantees and undertakings by Design/Builder in
favor of Owner shall apply to all materials, equipment or Services as
applicable, provided by either Design/Builder, its Subcontractors of any tier,
Vendors, or anyone directly or indirectly employed by any of them, to the same
extent as if provided by Design/Builder on a direct basis. Design/Builder's
guarantee and/or warranty obligations shall be as follows:
a. Design/Builder guarantees that its construction workmanship
shall be in conformance with good construction practices applicable to projects
of this type, that all work shall be done by skilled persons and performed in
the best workmanlike manner and that such Work shall be in full compliance with
the requirements of the Contract Documents and in compliance with all applicable
laws, codes and regulations.
b. Design/Builder further guarantees that all materials, equipment
and supplies incorporated into the Work shall be new, of the best quality of the
kind specified in accordance with industry standards, and shall be fit for its
intended purpose. At the time specified in "d" below, Design/Builder agrees to
pass on and assign to Owner, all Subcontractor, Vendor and manufacturer's
guarantees and warranties and to prosecute the enforcement thereof in
cooperation with Owner at Design/Builder's cost and expense during the one (1)
year period after Substantial Completion as defined in Subsection 31.8.1 of the
General Conditions, Attachment D.
c. Design/Builder warrants that (i) Design/Builder and its
Subcontractors are experienced, qualified and, where required by law, licensed
to perform their respective portions of the Work; (ii) the design of the Work
will be in accordance with all agreed upon Project requirements, and all
applicable federal, state, local codes, rules ordinances and regulations.
Owner's review and approval of drawings or other submittals shall not relieve or
discharge Design/Builder either expressly or by implication from any
responsibility under this provision.
d. Design/Builder's construction warranties and/or guarantees as
set forth in this Article shall extend for one (1) year after the date of
Substantial Completion. Design/Builder shall assign all Subcontract, Vendor and
manufacturers warranties
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and/or guarantees still surviving and in effect one (1) year after Substantial
Completion.
e. Upon receipt of written notice of defect(s) by Owner at any
time during the Warranty/Guarantee Period, Design/Builder shall, at no cost to
Owner, promptly furnish and provide all labor, equipment, materials and other
services at the Jobsite and elsewhere as may be necessary to correct such
defect(s) whether they be latent or patent and cause the Work to fully conform
with the foregoing warranties and/or guarantees. In performing such corrective
work, Design/Builder shall perform its Work so as to cause the least
inconvenience to Owner's business which may require performance of Work at hours
when Owner's business is least active. Design/Builder shall not be entitled to
the extra costs, if any, incurred in connection with performing corrective Work
at non-business hours.
f. In the event Design/Builder fails to correct any warranty
and/or guarantee defect, or fails to promptly commence correction to Owner's
reasonable satisfaction, within thirty (30) calendar days of receipt of Owner's
written notice, Owner shall have the right without any further notice to correct
or arrange for the correction of such defects at Design/Builder's sole risk and
expense.
g. Owner may, in its sole discretion, elect to accept a part of
the Work which is not in accordance with the requirements of the Contract
Documents. In such case, the GMP shall be reduced as appropriate and equitable.
Owner's acceptance of any nonconforming Work shall not waive or otherwise effect
Owner's right to demand that Design/Builder correct any other defects or areas
of nonconforming Work.
h. Warranty and/or Guarantee Exclusions and other Remedies:
(i) Design/Builder's warranty and/or guarantee obligations
shall exclude damages or defects caused by modifications to the Work directed by
Owner and not performed by Design/Builder or its Subcontractors.
(ii) Design/Builder's warranty obligation shall not apply to
damages or defects caused by ordinary wear and tear, insufficient maintenance,
improper operation or improper use by Owner.
ARTICLE 25
ENTIRE CONTRACT
25.1 This Contract and the above listed Attachments constitute the entire
and
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integrated agreement between Owner and Design/Builder and supersede all prior
negotiations, statements, representations, agreements, letters of intent,
awards, or proposals, either written or oral unless incorporated herein by
specific reference. This Contract may be modified only by a written instrument
signed by both Owner and Design/Builder.
25.1.1 In the event a dispute arises out of or in connection with
the meaning of the language set forth in this Agreement or any of the
Attachments hereto, the parties covenant and agree that neither party shall, in
an effort to establish the intent of the parties or to interpret the aforesaid
Contract Documents, be permitted to introduce any prior drafts, notes or
memoranda generated in connection with the contract negotiations leading up the
execution of this Agreement.
25.2 The parties agree to look solely to each other with respect to
performance of this Contract and the Services hereunder. This Contract and each
and every provision hereof is for the exclusive benefit of Owner and
Design/Builder and not for the benefit of any third party, except to the extent
such benefits have been expressly extended pursuant to this Contract.
25.3 The provisions of this Contract which, by their nature, are intended
to survive the termination, cancellation, completion or expiration of the
Contract, including, but not limited to, any indemnifications, express
limitations of or releases from liability, warranties and guarantees all of
which shall continue as valid and enforceable obligations of parties,
notwithstanding any such termination, cancellation, completion or expiration.
25.4 Headings and titles of Articles, Sections, Paragraphs and other
sub-parts of this Contract are for convenience of reference only and shall not
be considered in interpreting the text of this Contract.
ARTICLE 26
ASSIGNMENT
26.1 By reason of the special experience and unique nature of the
services to be rendered by Design/Builder under the Contract, Design/Builder
shall not assign its interest, or any part thereof, in this Contract unless such
assignment is consented to by Owner in writing, which consent may be refused for
any reason or no reason whatsoever, even if it be considered unreasonable. Any
purported assignment by Design/Builder without such consent shall be null and
void. Owner may, upon notice
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and without consent of Design/Builder, assign this Contract to one or more
lenders providing financing for the Project, including, without limitation, the
lender(s) providing financing to Owner and, to the extent this Agreement
pertains to the Retail Shell, to the lender(s) providing financing to Aladdin
Bazaar, LLC for the design/construction of the Retail Shell, or to any entity
which acquires all or substantially all of Owner's interest in the Project.
Upon any assignment by Owner, Owner shall be released from all prospective
liability under the Agreement and the Attachments thereto. In the event of such
assignment by Owner, Design/Builder may request that Owner provide reasonable
evidence in writing that the assignee has adequate financing in place for the
purposes of completing the Project and that assignee has specifically agreed to
make payments due under this Contract.
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ARTICLE 27
NOTICES
27.1 All notices pertaining to this Contract shall be in writing and, if
to Owner, shall be sufficient when sent registered or certified mail or
nationally recognized overnight delivery service and telecopied (with oral
confirmation) to Owner at the following addresses:
Mr. Jack Sommer
Aladdin Gaming, LLC
Aladdin Management Corp.
2810 W. Charleston Blvd., Ste. F-58
Las Vegas, Nevada 89102
Telecopy Number: (702) 870-8733
Mr. Ronald Dictrow
Aladdin Gaming, LLC
280 Park Avenue, 38th Fl.
New York, New York 10017
Telecopy Number: (212) 661-0844
Mr. Robert Accardi
Tishman Construction Corp.
666 Fifth Avenue
New York, New York 10103
Telecopy Number: (212) 708-6750
With a copy to:
Peter Goetz, Esq.
Goetz, Fitzpatrick, Carbone, Eiseman, Finegan & Rubin, LLP
One Pennsylvania Plaza
New York, New York 10119
Telecopy Number: (212) 629-4013
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27.2 All notices pertaining to this Contract shall be in writing and, if
to Design/Builder, shall be sufficient when sent registered or certified mail or
nationally recognized overnight delivery service and telecopied (with oral
confirmation) to Design/Builder at the following addresses:
Robert A. McNamara
Fluor Daniel, Inc.
75 Newman Avenue
Rumford, Rhode Island 02916
Telecopy Number: (401) 438-7281
Larry Kessinger
Senior Project Director
Phoenix Plaza, 19th Floor
2929 N. Central Avenue
Phoenix, Arizona 85012
Telecopy Number: (602) 230-9760
With a copy to:
Curtis Culver, Esq.
Assistant General Counsel
Fluor Daniel, Inc.
One Fluor Daniel Drive
Sugarland, Texas 77478-3899
Telecopy Number: (281) 263-4093
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IN WITNESS WHEREOF, the parties hereto have executed this Contract, on the
day and year first written above.
OWNER:
ALADDIN GAMING, LLC, a Nevada Limited
Liability Company
By: ALADDIN GAMING CORP. a Nevada
Corporation, its Manager
By: /s/ Ronald Dictrow
--------------------------------
Name: Ronald Dictrow
--------------------------
Title: Executive Vice President/
Secretary
-------------------------
Date:
--------------------------
DESIGN/BUILDER:
FLUOR DANIEL, INC.
By: /s/ Robert McNamara
--------------------------------
Name: Robert McNamara
--------------------------
Title:
-------------------------
Date:
--------------------------
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DEVELOPMENT AGREEMENT
THIS DEVELOPMENT AGREEMENT is made as of the third day of December, 1997,
between ALADDIN GAMING, LLC, a Nevada limited-liability company ("Aladdin"), and
NORTHWIND ALADDIN, LLC, a Nevada limited-liability company ("Northwind")
(together, the "Parties").
W I T N E S S E T H:
WHEREAS, Aladdin is constructing a casino, hotel, theater, and retail
shopping complex in Las Vegas, Nevada (the "Aladdin Project") and requested bids
to construct, own and operate an energy facility in Las Vegas, Nevada, to supply
hot water, chilled water and electricity to the Aladdin Project; and
WHEREAS, Northwind has been selected by Aladdin to develop and construct
such energy production facility (the "Plant") to serve the energy requirements
of the Aladdin Project and the Parties concurrently are entering into an Energy
Service Agreement pursuant to which Northwind will provide hot water, chilled
water and electricity to the Aladdin Project;
WHEREAS, Aladdin shall be leasing space to Northwind within the Aladdin
Lands (as defined below) in which the Plant shall be installed and operated; and
WHEREAS, Aladdin and Northwind desire to set forth in this Agreement the
terms and conditions of their agreement regarding the construction of the Plant.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. DEFINITIONS. As used herein, the following terms shall have the
meanings specified herein and shall apply equally to single and plural forms:
"Agreement" shall mean this agreement and all Exhibits attached hereto, as
the same may from time to time be amended, restated, modified, or supplemented
and in effect.
"Aladdin Lands" shall mean the lands owned by Aladdin in Clark County,
Nevada upon which the Aladdin Project shall be constructed and which lands shall
be more particularly described on Exhibit A, which exhibit shall be attached
hereto by Aladdin no later than ten (10) days after a Notice to Proceed is
received by Northwind.
<PAGE>
"Buildings" shall mean the entire casino, hotel, theater, and shopping
buildings to be developed by Aladdin, the Mall Owner and the Sound Asylum Owner
on the Aladdin Lands, including, without limitation, all retail and commercial
sections, parking facilities and common areas and facilities whether located at,
above or below grade.
"Business Day" shall mean a weekday which is not a statutory legal holiday
in Clark County, Nevada.
"Codes and Standards" shall mean those codes and standards relating to
design, engineering, construction, workmanship, equipment, and components set
forth in or called for by the Plant Scope or, if ambiguous or not so specified
therein, those codes and standards considered, in accordance with generally
accepted construction management practices, to be applicable to the Work and
such design, construction, workmanship, equipment, and components.
"Commencement Date" shall have the meaning ascribed thereto in the Energy
Service Agreement.
"Construction Financing Cost" shall mean all reasonable costs and expenses
to Northwind, including, without limitation, interest, any arrangement fees and
closing fees and all reasonable costs and expenses of counsel for Northwind and
of counsel for the lenders providing such financing, of negotiating, documenting
and closing of financing the construction of the Plant; provided, however, that
to the extent that funds for the construction of the Plant are provided by
Northwind and not borrowed from third parties, for purposes of determining
Construction Financing Cost hereunder it shall be assumed that (a) the portion
of such funds which are provided by Northwind not in excess of forty (40)
percent of the aggregate of all funds borrowed or provided by Northwind to fund
construction of the Plant bear interest at twenty (20) percent per annum, (b)
the portion of such funds which are provided by Northwind in excess of forty
(40) percent of the aggregate of all funds borrowed or provided by Northwind to
fund construction of the Plant bear interest at a rate equal to prime rate as
published in the "Money Rates" section of the WALL STREET JOURNAL from time to
time and (c) a closing fee in respect of the portion of such funds provided by
Northwind referred to in clause (b) preceding equal to one and one-quarter
(1.25) percent was payable.
"Critical Path Activity" shall mean an activity characterized as a
"critical path activity" in the Plant Schedule.
"Defects or Deficiencies" shall mean any designs, engineering, materials,
equipment, supplies, or installations which (i) do not conform to the Plant
Scope, Good Engineering Practices, or Plant Plans and Specifications, or are of
inferior workmanship as determined by
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applicable Codes and Standards or (ii) would materially and adversely affect the
ability of Northwind to achieve the Final Completion Deadline.
"Development Costs" shall have the meaning ascribed thereto in the Energy
Service Agreement.
"Energy Service Agreement" shall have the meaning ascribed thereto in
Section 3(a) below.
"EPC Contract" shall mean the contract described in Section 5(c) hereof, as
the same may be amended, restated, modified, or supplemented, and in effect from
time to time.
"EPC Contractor" shall have the meaning ascribed thereto in Section 5(c)
hereof.
"Final Completion" shall mean completion of the Plant in accordance with
and to the extent set forth in the Plant Scope.
"Final Completion Certificate" shall have the meaning ascribed thereto in
Section 8(b) below.
"Final Completion Deadline" shall mean the date which is one month after
the date of Substantial Completion, as such date may be extended from time to
time pursuant to the express provisions hereof.
"Financial Closing" shall mean the closing of each of (a) the issuance and
sale of ____ Units consisting of (i) ___% Senior Discount Notes due 2009 of
Aladdin Gaming Holdings, LLC, and Aladdin Capital Corp. and (ii) ____ Initial
Warrants and ____ Contingent Warrants to purchase shares of common stock of
Aladdin Enterprise, Inc., yielding gross proceeds of approximately $110,000,000
and (b) closing of the senior secured construction/term loan facilities
consisting of three construction/term loans (i) a $165,000,000 term A loan that
will have a stated maturity of seven (7) years, (ii) a $100,000,000 term B loan
that will have a stated maturity of eight and one half (8.5) years, and (iii) a
$145,000,000 term C loan that will have a stated maturity of ten (10) years.
"Financing Costs" shall mean all reasonable costs of arranging for,
negotiating, documenting and closing of permanent financing for the Northwind
Facilities, including any arrangement fees and closing fees and all reasonable
costs and expenses of counsel for Northwind and of counsel for the lenders
providing such financing, and shall not include Construction Financing Costs.
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"Force Majeure Event" shall have the meaning ascribed thereto in the Energy
Service Agreement.
"GMP" shall mean the guaranteed maximum price of the Plant determined by
Northwind based on the price set forth in the EPC Contract(s) [AND ALL OTHER
CONTRACTS], plus a contingency reflective of potential unknowns at the time that
the EPC bids are received, such contingency to be determined in accordance with
Section 9(b)(i) hereof.
"GMPP" shall mean the guaranteed maximum plant price, which shall consist
of the GMP, Development Costs, Construction Financing Costs, Other Costs, and
Financing Costs, and shall be determined in accordance with Exhibit B, including
the caps for specific elements of the GMPP set forth therein.
"Good Engineering Practices" shall mean those practices, methods,
equipment, specifications, and standards of safety and performance utilizing
good, safe and prudent engineering practices in connection with the design,
construction, operation, maintenance, repair, and use in similar plants.
"Government Approval" shall mean any authorization, consent, approval,
license, ruling, permit, tariff, rate, certification, exemption, filing
variance, order, judgment, decree, publication, notices to, declarations of or
with or registration by or with any Government Authority relating to the
ownership, construction, operation, or maintenance of the Plant or to the
execution, delivery or performance of this Agreement.
"Government Authority" shall mean any Federal, national, state, municipal,
local, territorial, or other governmental department, commission, board, bureau,
agency, regulatory authority, instrumentality, judicial or administrative body,
domestic or foreign.
"Independent Engineer" shall mean an engineering firm mutually agreed to by
the Parties within ninety (90) days after Northwind receives a Notice to
Proceed.
"Law" shall mean, as of any relevant date, (a) any statute, law, rule,
regulation, code, ordinance, judgment, decree, writ, order, concession, grant,
franchise, license, agreement, directive, guideline, policy, requirement or
other governmental restriction or any similar form of decision of or
determination by, or any interpretation or administration of any of the
foregoing by, any Government Authority, whether now or hereafter in effect or
(b) any requirements or conditions on or with respect to the issuance,
maintenance, or renewal of any Government Approval or applications therefore
then in effect.
"Mall" shall mean the parking and retail shopping mall to be built on a
portion of the Aladdin Lands and owned and operated by the Mall Owner.
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"Mall Owner" shall mean Aladdin Bazaar, LLC, a Delaware limited-liability
company.
"Minor Modification" shall mean a minor modification or adjustment to the
Work that (i) does not involve any increase to the Plant Price, (ii) is not
reasonably likely to affect the ability of Northwind to achieve the Substantial
Completion Deadline and/or the Final Completion Deadline, and (iii) results in
the quality of the Work being provided under this Agreement being of the same or
better quality than as described in the Plant Scope and does not constitute a
material change.
"Northwind Lease" shall have the meaning ascribed thereto in Section 3(c)
below.
"Notice to Proceed" shall mean a written notice from Aladdin to Northwind
stating that Northwind shall commence the physical construction of the Plant,
and shall not be issued by Aladdin until Aladdin has achieved Financial Closing,
and in any event not earlier than January 1, 1998.
"Other Costs" shall mean all costs and expenses, incurred after the date of
execution of this Agreement, other than Construction Financing Costs,
Development Costs, Financing Costs, and amounts payable to the EPC Contractor,
incurred by Northwind in construction and completion of the Plant, including,
without limitation, costs of insurance, construction administration costs and
any applicable Tax.
"Performance Tests" shall mean the tests to demonstrate that the Plant can
produce Services in accordance with the Plant Plans and Specifications, as such
tests are agreed upon by Aladdin and Northwind in connection with the
establishment of the Plant Plans and Specifications.
"Plant" shall mean the energy production facility to be constructed, owned
and operated by Northwind primarily located within that portion of the Aladdin
Lands to be leased from Aladdin.
"Plant Plans and Specifications" shall have the meaning ascribed thereto in
Section 5(c) below.
"Plant Price" shall mean an amount as determined in accordance with Exhibit
B hereof, and shall be comprised of: (i) the cost paid by Northwind pursuant to
the EPC Contract; (ii) the Construction Financing Cost; (iii) Other Costs; and
(iv) Development Costs, provided that the total of such Development Costs
attributable to internal Northwind costs (such internal Northwind costs to
include the internal costs of Northwind affiliates), including the
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cost of the Project Manager, does not exceed $375,000 without the prior written
approval of Aladdin.
"Plant Schedule" shall mean the schedule for completion of the Work to be
provided by Northwind to Aladdin as part of the Project Plan.
"Plant Scope" shall mean the description of the Plant set forth in Exhibit
A to the Energy Service Agreement, which description shall be agreed to by
Aladdin and Northwind prior to Northwind's receipt of a Notice to Proceed.
"Progress Report" shall mean the monthly report submitted by Northwind to
Aladdin pursuant to Section 6 hereof.
"Project Manager" shall mean that person or persons appointed and
designated from time to time by Northwind for the purpose of providing
management and daily supervision of all activities relating to the design,
construction and operation of the Plant, as described further in Section 4(a)
below.
"Project Plan" shall have the meaning ascribed thereto in Section 4(b)
below.
"Reciprocal Easement Agreement" shall have the meaning ascribed thereto in
Section 3(b) below.
"Related Agreements" shall mean, collectively, the Energy Service
Agreement, the Reciprocal Easement Agreement and Northwind Lease, as, from time
to time, each may be amended, restated, modified or supplemented and in effect.
"Scope Change" shall mean any material addition to, deletion from,
suspension of or other modification to the quality, quantity, function or intent
of the Work, including, without limitation, any such addition, deletion,
suspension, or other modification which requires an increase in the Plant Price,
a delay of the Substantial Completion Deadline or the Final Completion Deadline,
and/or a change in the Project Plan or the Plant Plans and Specifications. A
Minor Modification shall not constitute a Scope Change.
"Scope Change Order" shall mean a written order to Northwind issued and
signed by Aladdin authorizing a Scope Change, and an equitable adjustment in one
or more of the Plant Price, the Substantial Completion Deadline, the Final
Completion Deadline, the Project Plan, the Plant Plans and Specifications or any
other amendment to the terms and conditions of this Agreement.
"Services" shall have the meaning ascribed thereto in the Energy Service
Agreement.
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"Sound Asylum Owner" shall mean Aladdin Music, LLC, a Nevada limited-
liability company.
"Sound Asylum Project" shall mean the hotel, casino and entertainment
complex to be built on a portion of the Aladdin Lands and owned by the Sound
Asylum Owner.
"Start-up" shall mean the preparation and execution of all activities
required to place the Plant in operation, including without limitation,
precommissioning, commissioning and performance of functional testing.
"Substantial Completion" shall mean substantial completion of the Plant in
accordance with Section 8(a) hereof.
"Substantial Completion Certificate" shall have the meaning ascribed
thereto in Section 8(a) below.
"Substantial Completion Deadline" shall mean the date which is eighteen
(18) months after the date upon which Northwind receives the Notice to Proceed,
provided that Aladdin is willing and able to include all of Northwind's
structural steel in Aladdin's mill order for structural steel and the steel
fabricator will and does deliver Northwind's steel approximately one month after
shop drawings therefor are provided to the steel fabricator; otherwise,
"Substantial Completion Deadline" shall be determined based upon the committed
delivery schedule for Northwind's structural steel agreed upon with the supplier
thereof, but in any event, shall be not later than twenty (20) months after the
date upon which Northwind receives the Notice to Proceed, as such date may be
extended from time to time pursuant to the express provisions hereof.
"Tax" shall have the meaning ascribed thereto in the Energy Service
Agreement.
"Unicom Guaranty" shall mean the guaranty appended hereto as Exhibit C,
duly executed and delivered by Unicom Corporation.
"Work" shall mean, except as otherwise stated herein, all acts or action
required for the design, procurement, engineering, and construction of the Plant
to Final Completion and for the performance of Northwind's obligations as
further described herein, including, but not limited to, (i) designing the
Plant, (ii) constructing the Plant in conformance with applicable Laws and
Government Approvals, (iii) procuring and handling materials, (iv) Start-up and
testing of the Plant, and (v) all other acts as may be necessary to achieve
Final Completion.
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2. GENERAL TERMS.
(a) TERM. This Agreement shall be effective and binding on the
Parties as of the date hereof and shall remain in effect until the Parties
have completed their obligations in accordance with the terms hereof,
unless earlier terminated in accordance with the terms of this Agreement.
(b) PLANT LOCATION AND PURPOSE. The Plant shall be located on
Aladdin Lands and shall be constructed, owned and operated by Northwind (or
its agents, contractors or employees) in accordance with the terms of this
Agreement in order to provide Services to the Buildings.
(c) PURCHASE OF SERVICES. Services shall be sold by Northwind
pursuant to the terms and conditions of the Energy Service Agreement and/or
as otherwise permitted thereby and by the Lease.
(d) DESIGN AND CONSTRUCTION OF THE PLANT. Except as expressly
provided to the contrary in this Agreement (i) the design and construction
of the Plant will be at the sole cost and expense of Northwind and (ii)
Northwind agrees to perform all Work in accordance with the Agreement as
shall be necessary to assure Substantial Completion on or before the
Substantial Completion Deadline and Final Completion on or before the Final
Completion Deadline.
(e) ALADDIN NOT RESPONSIBLE FOR ACTS OF NORTHWIND. Aladdin will not
be responsible for and will not have control over or charge of construction
means, methods, techniques, sequences, or procedures, or for safety
precautions and programs in connection with the Work, and Aladdin will not
be responsible for Northwind's failure to carry out the Work in accordance
with this Agreement. Aladdin will not be responsible for or have control
or charge over the acts or omissions of Northwind (or its agents,
contractors or employees). No inspection, or failure to inspect, by
Aladdin shall be a waiver of Northwind's obligations, or be construed as
approval or acceptance of the Work or any part thereof.
(f) CLAIMS UPON FAILURE OF WORK. Aladdin assumes no responsibility
for injury or claims resulting from (i) failure of such Work to comply with
applicable Laws or Government Approvals or (ii) Defects or Deficiencies.
Northwind's performance of the Work shall include the provision of all
necessary permanent safety devices for the Plant required by applicable
Government Authorities and applicable Laws or Government Approvals. Work
performed hereunder will comply in every respect with all the requirements
referred to above and the terms of the Agreement.
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(g) ALADDIN'S ACCESS TO WORK. Aladdin shall at all times, consistent
with Northwind's safety requirements, have access to the Work wherever it
is in preparation and progress and Northwind shall provide for such access;
provided, however, that Aladdin shall not interfere with or delay
performance of the Work on account of such access.
(h) RESPONSIBILITIES OF NORTHWIND. Subject to the terms of this
Agreement, Northwind shall:
(i) Prosecute the Work diligently in accordance with the Plant
Schedule, using only qualified and competent personnel, and complete
the Work in a manner that meets Good Engineering Practices and is in
accordance with the provisions of this Agreement;
(ii) Perform or cause to be performed the Work, including
designing, engineering, procuring, constructing, Start-up, and
performance testing of the Plant in accordance with Good Engineering
Practices and standards of professional care, skill, diligence and
competence applicable to engineering, construction and project
management practices for similar facilities, and all Government
Approvals so that (a) the Work is performed in accordance with and the
Plant meets all requirements of applicable Laws and Government
Approvals and Good Engineering Practices, (b) the Plant is safe and in
accordance with the Plant Plans and Specifications, (c) consistent
with a Plant Price estimate of $30 million which has been
preliminarily identified by Northwind and Aladdin, Northwind designs
the Plant to minimize, consistent with Good Engineering Practices, the
amount of operation and maintenance expense, (d) the Plant is free
from Defects and Deficiencies and (e) the Plant is capable of and does
comply with all applicable Laws and Government Approvals, including,
without limitation, environmental Laws and Government Approvals;
(iii) Be responsible for all damages, fines and penalties which
may arise because of Northwind's noncompliance with Laws or Government
Approvals; provided, however, that Northwind shall be permitted to
contest any such damages, fines or penalties provided that (i)
Northwind does so in accordance with acceptable practices therefor and
(ii) doing so does not materially delay or otherwise adversely affect
the performance of the Work;
(iv) Provide all required safeguards, signs, security services,
fire protection, and the like, for the protection of the Work site,
the Work and the
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Plant and of all persons while on the Work site and other property
related thereto;
(v) Provide and pay for, in Northwind's name as an independent
contractor and not as an agent for Aladdin, all construction
materials, equipment, supplies, and facilities, and all contractor and
subcontractor labor and manufacturing and related services;
(vi) Provide or cause to be provided, at Northwind's expense,
all labor and personnel required in connection with the performance of
the Work. All personnel used by Northwind in the performance of the
Work shall be qualified by training, licenses or certifications, and
experience, as required to perform their assigned tasks;
(vii) Replace any of Northwind's personnel performing the Work if
Aladdin and Northwind mutually agree that such personnel are creating
a risk to the timely completion of the Work in accordance with the
Agreement;
(viii) Protect any and all parallel, converging and intersecting
electric lines and poles, telephone lines and poles, highways,
waterways, railroads, sewer lines, natural gas pipelines, drainage
ditches, culverts and any and all property of others, including, but
not limited to, the Buildings, from damage as a result of its
performance of the Work. In the event that any such property is
damaged or destroyed in the course of Northwind's performance of the
Work, Northwind, at its own expense, shall rebuild, restore or replace
such damaged or destroyed property;
(ix) Procure, as required, the appropriate proprietary rights,
licenses, agreements, and permissions for materials, methods,
processes and systems incorporated into the Plant;
(x) Investigate as soon as reasonably practicable the Aladdin
Lands and surrounding locations to familiarize itself with and satisfy
itself with respect to the nature and location of the Work, and the
general and local conditions with respect to environment,
transportation, access, waste disposal, handling and storage of
materials, availability and quality of electric power, availability
and condition of roads, climatic conditions and seasons, physical
conditions at the Work site and the surrounding area as a whole,
topography and ground surface conditions, nature of surface materials
to be encountered, location of underground utilities, and equipment
and facilities needed prior to and during
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performance of all of Northwind's obligations under this Agreement
(collectively the "Work Site Conditions");
(xi) Provided that Aladdin shall have provided to Northwind the
legal description of the portion of the Aladdin Lands upon which the
Plant is to be located and a survey of such portion of the Aladdin
Lands and information describing all underground rights of way
affecting such portion of the Aladdin lands, prior to execution of the
EPC Coontract, acknowledge and accept the Work Site Conditions and
agree that neither the Substantial Completion Deadline nor the Final
Completion Deadline shall be extended as a result of any Work Site
Conditions unless Section 11 provides for such an extension;
(xii) Confirm, by execution of this Agreement, that Northwind
has knowledge of all of the legal requirements and business practices
that must be followed in performing the Work and that the Work will be
in conformance with such requirements and practices and in compliance
with all Laws and applicable Government Approvals. All engineering
services to be provided as part of the Work shall be provided by one
or more engineers qualified to perform such services in the state in
which the Plant is to be constructed;
(xiii) Concurrently with execution of this Agreement, deliver
the Unicom Guaranty, duly executed by Unicom Corporation;
(xiv) Comply with and not contravene the provisions of any Law
applicable to Northwind's execution and performance of this Agreement
and obtain any and all Government Approvals.
(xv) Acknowledge that the Aladdin Project is a union site and
agree not to cause a job action at the site of the Aladdin Project.
(i) REPRESENTATIONS AND WARRANTIES. Each party (the "Representing
Party") represents and warrants to the other:
(i) that it has the requisite limited-liability company capacity
to enter into this Agreement and fulfill its obligations hereunder,
that the execution and delivery by it of this Agreement and the
performance by it of its obligations hereunder have been duly
authorized by all requisite action of its members, and by its board of
directors or other governing body, and that, subject to obtaining any
applicable Government Approvals and compliance with any applicable
Laws, the entering into of this Agreement and the fulfillment of its
obligations hereunder does not contravene any law, statute or
contractual obligation of the Representing Party;
(ii) that no suit, action or arbitration, or legal,
administrative or other proceeding is pending or has been threatened
against the Representing Party that would affect the validity or
enforceability of this Agreement or the ability of the Representing
Party to fulfill its commitments hereunder, or that could
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result in any material adverse change in the business or financial
condition of the Representing Party; and
(iii) the consummation of the transactions contemplated by the
Agreement shall not result in a breach of any of the terms or
conditions of, or constitute a default under, any indenture, mortgage,
deed of trust, or other agreement to which the Representing Party is
now a party, or violate any judgment, order, writ, injunction, or
decree of any Government Authority to which the Representing Party is
a party or by which it or any of its assets is bound.
(j) INSURANCE. The respective insurance requirements for Aladdin and
Northwind are set forth in Exhibit D attached hereto, and shall be
maintained throughout the term of this Agreement. The liability of each
party under this Agreement to the other party shall not be diminished by
the insurance limitation set forth in said Exhibit D. All insurance
policies required by this section shall provide that such policies may not
be cancelled or terminated without 30 days prior written notice to both
Aladdin and Northwind. Each party hereby releases and waives, to the
extent legally possible for it to do so without invalidating its insurance
coverages for itself and on behalf of its insurer, the other party hereto
and its respective officers, directors, agents, members, partners, servants
and employees from liability for any loss or damage to any or all property
located on the Aladdin Lands which loss or damage is of the type and within
the limits covered by the "all-risk" property damage insurance and other
property / casualty insurance which the parties have agreed to obtain and
maintain in effect pursuant to this Section 2(j) irrespective of any
negligence on the part of the released party and its respective officers,
directors, agents, members, partners, servants, or employees, which may
have contributed to or caused such loss or damage. Each party covenants
that it will, if available, obtain for the benefit of the other party and
its officers, directors, agents, members, partners, servants and employees,
a waiver of any right of subrogation which the insurer of such party may
acquire against such party by virtue of the payment of any such loss
covered by insurance. In the event a party is by law, statute or
governmental regulation unable to obtain a waiver of the right of
subrogation for the benefit of the other party (and its respective
officers, directors, agents, members, partners, servants, or employees) or
its insurance carriers will not give such a waiver or its property /
casualty insurance will be invalidated by the waiver and release set forth
in the fourth sentence of this Section 2(j), then during any period of time
when such waiver is unobtainable, said party shall not have been deemed to
have released any subrogated claim of its insurance carrier against such
other party (or its respective officers, directors, agents, members,
partners, servants, or employees), and during the same period of time, such
other party shall not have been deemed to have released the party which has
been unable to obtain such waiver (or such party's respective officers,
directors, agents,
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members, partners, servants, or employees) from any claims it or its
insurance carrier may assert which otherwise would have been released
pursuant to this Section 2(j). All policies of insurance provided for in
Exhibit D shall name Mall Owner and its designated lender(s) as additional
insureds.
(k) CONDEMNATION. In the event of a condemnation or eminent domain
taking of all or part of the site upon which the Plant is to be located (a
"Taking"), Northwind shall, as soon as practicable, determine whether it is
commercially reasonable and technically feasible in the circumstances for
Northwind to proceed with construction of the Plant hereunder. In the
event that Northwind determines that it is commercially reasonable and
technically feasible, Northwind will so inform Aladdin and promptly will
recommence the activities on its part contemplated hereby and this
Agreement shall remain in force and, to the extent set forth in Section 8.2
of the Northwind Lease, Northwind shall be entitled to the award or awards
from such Taking and the Contract Capacity Charges payable under the Energy
Service Agreement thereafter may be adjusted. In such event, if necessary,
equitable adjustments in the Substantial Completion Deadline, the Final
Completion Deadline, the times for achievement of Critical Path Activities
and all other time frames applicable to the obligations of the Parties
hereunder shall be made. In the event that Northwind determines that it is
not commercially reasonable or technically feasible in the circumstances to
proceed with construction of the Plant hereunder, then Northwind shall so
notify Aladdin and such notice shall also constitute termination of this
Agreement, effective upon the date when such Taking becomes effective, and,
to the extent set forth in Section 8.1 of the Northwind Lease, Northwind
shall be entitled to the award or awards from such Taking. Notwithstanding
the foregoing, in the event Northwind and Aladdin disagree as to whether it
is commercially reasonably and technically feasible in the circumstances
for Northwind to proceed with construction of the Plant hereunder, then
Northwind and Aladdin shall promptly meet and use their best efforts to
resolve such dispute. If the Parties are unable to resolve such dispute
within ten (10) days, then the Parties shall refer such dispute to the
Independent Engineer. The Independent Engineer's conclusion as to whether
it is commercially reasonable and technically feasible in the circumstances
for Northwind to proceed with construction of the Plant hereunder shall be
accepted by and binding upon the Parties.
(l) NO PRESUMPTION. Wherever in this Agreement it is provided that
an activity or obligation is at Northwind's sole cost and expense, such
provision shall not imply or be construed to imply or mean any limitation
on any right which Northwind may have under the Energy Service Agreement to
include such cost or expense (or some portion thereof) in charges payable
to Northwind thereunder.
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3. ADDITIONAL AGREEMENTS AND DOCUMENTS.
(a) Aladdin and Northwind agree that the following agreements are
being or will be executed and delivered: (i) an Energy Service Agreement
(as executed and as it may be amended, restated, modified, or supplemented
and in effect from time to time, the "Energy Service Agreement") between
Aladdin and Northwind pursuant to which Northwind shall provide to the
Aladdin Project Services produced by the Plant and (ii) a Lease (as
executed and as it may be amended, restated, modified, or supplemented and
in effect from time to time, the "Northwind Lease") between Aladdin and
Northwind for the lease to Northwind of the portion of the Aladdin Lands on
which the Plant shall be constructed and operated.
(b) Aladdin and Northwind acknowledge that they intend to be parties,
along with the Mall Owner and the Sound Asylum Owner, to a Reciprocal
Easement Agreement, pursuant to which all such entities shall grant to each
other easements with respect to their respective interests in the Aladdin
Lands (such agreement, as executed and as it may be amended, restated,
modified, or supplemented and in effect from time to time, being herein
referred to as the "Reciprocal Easement Agreement"). Each of Northwind and
Aladdin agrees that they shall use their best efforts to cause such
agreement to be finalized, executed and delivered within one hundred (100)
days following the date of execution of this Agreement.
4. PROJECT MANAGEMENT.
(a) PROJECT MANAGER. Northwind shall establish a project
construction management office in Clark County and shall appoint a project
manager no later than forty-five (45) days after Northwind receives from
Aladdin a Notice to Proceed.
(i) The Project Manager shall report directly to Northwind and
shall be responsible for daily supervision of all activities relating
to the design and construction of the Plant. The Project Manager will
have full authority to act for Northwind concerning performance of the
Work, act as a single point of contact with Aladdin in all matters on
behalf of Northwind concerning performance of the Work and furnish
information to Aladdin; provided that no amendment or modification to
this Agreement shall be effected except by an Amendment in accordance
with Section 14(f) hereof.
(ii) The Project Manager shall conduct biweekly meetings, at a
time and day mutually acceptable to Northwind and Aladdin, at which
meetings the Project Manager will (i) provide an update with respect
to the Work and (ii)
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answer any questions and address any comments Aladdin may have with
respect to the Work. The Project Manager shall consider in good faith
any and all comments made by Aladdin at such biweekly meetings.
Comment or failure by Aladdin to comment at such biweekly meetings
shall not in any way affect or reduce Northwind's obligations to
complete the Work in accordance with the terms of this Agreement.
(iii) The Project Manager (and any replacement Project Manager)
must be reasonably satisfactory to Aladdin. If Aladdin believes a
Project Manager appointed by Northwind to be unsatisfactory, the
reasons for such belief must be stated in writing to Northwind within
five (5) Business Days after Aladdin is notified of the name of such
Project Manager (or any such replacement Project Manager). Failure by
Aladdin to object to any such appointment within said five (5)
Business Day period shall be deemed to be acceptance thereof.
Northwind shall not voluntarily change the Project Manager, unless
such change is for cause, without the prior written consent of
Aladdin, which consent shall not be unreasonably withheld or delayed.
In the event Northwind does change the Project Manager for cause,
Northwind shall notify Aladdin of such change as soon as reasonably
practicable.
(b) PROJECT EXECUTION PLAN.
(i) Northwind shall develop a project execution plan (the
"Project Plan") that shall be comprised of a Plant Schedule and
estimated Plant testing and Start-up dates. The Project Plan, which
shall be based on the Plant Scope, shall include a definition of the
construction work, major milestones, Critical Path Activities, and
scheduled date of completion and shall state that the Plant is
scheduled to commence operation no later than the Final Completion
Deadline.
(a) The Plant Schedule shall identify as Critical Path
Activities those key milestones to be achieved in order to
achieve Substantial Completion on or before the Substantial
Completion Deadline. The Plant Schedule also shall indicate the
proposed dates of starting and completion of the Work, including
dates for fabrication, assembly, installation, testing and
completion of the Critical Path Activities and other major
components of the Work. In preparing the Plant Schedule and in
order to complete the Work within the time required by this
Agreement, Northwind will take into consideration and make
allowance for customary delays and hindrances incident to such
Work in accordance
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with generally accepted construction management practices,
whether growing out of delays of common carriers, delays in
securing materials or workmen, delays in Northwind securing
necessary approvals, Northwind delays or otherwise (excluding
delays for which an extension of time is allowable under Section
11). Northwind, in consultation with Aladdin, shall update the
Plant Schedule to reflect changes necessitated by Sections 9
and/or 11 hereof.
(ii) An initial draft of the Project Plan shall be delivered
by Northwind to Aladdin for Aladdin's review no later than thirty (30)
days after receipt by Northwind from Aladdin of a Notice to Proceed.
Aladdin agrees to provide any comments regarding the Project Plan to
Northwind within ten (10) days of receipt thereof. Aladdin's failure
to comment in writing within such period shall be deemed to constitute
Aladdin's acceptance of the Project Plan. Review, comment or
acceptance (or the lack thereof) by Aladdin shall not in any way
affect or reduce Northwind's obligations to complete the Work in
accordance with the terms of this Agreement. Northwind agrees to
consider in good faith any and all comments made by Aladdin. Within
ten (10) days of receipt of comments from Aladdin, Northwind and
Aladdin shall meet at a mutually acceptable time and place to discuss
Aladdin's comments. If Northwind has determined that revisions
suggested by Aladdin are necessary in accordance with Good Engineering
Practices, Northwind shall so inform Aladdin at the meeting and shall
amend the Project Plan accordingly. If Northwind determines that
revisions are not necessary, Northwind shall so inform Aladdin at the
meeting, and orally shall explain the reasons why it proposes
rejecting the revisions. Within fifteen (15) Business Days after the
meeting, Northwind shall provide to Aladdin written minutes of the
meeting, including a clear statement as to why any revisions suggested
by Aladdin were not made. Northwind shall confirm the final Project
Plan within ten (10) days after execution of the EPC Contract(s).
(iii) Northwind may make Minor Modifications to the Project
Plan; PROVIDED, HOWEVER, that Northwind shall notify Aladdin thereof
in writing prior to, or if not reasonably practicable, as soon as
reasonably practicable subsequent to, Northwind's effecting any such
Northwind-initiated Minor Modification. All other revisions shall be
subject to compliance with Section 9 hereof.
(iv) In the event Northwind fails to achieve one or more
Critical Path Activities in accordance with the Plant Schedule and
Aladdin reasonably
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and in good faith concludes that Northwind's failure to achieve such
Critical Path Activity(ies) when and as set forth in the Plant
Schedule is reasonably likely to prevent Northwind's ability to
achieve Substantial Completion on or before the Substantial Completion
Deadline and/or Final Completion on or before the Final Completion
Deadline, Aladdin may, but shall not be obligated to, give Northwind
notice of such conclusion and the basis for such conclusion. Within
five (5) days of receipt of such notice, Northwind shall submit to
Aladdin Northwind's proposal to improve performance of the Work to
assure Northwind's ability to achieve Substantial Completion on or
before the Substantial Completion Deadline and/or Final Completion on
or before the Final Completion Deadline for approval by Aladdin. If
within a reasonable period of time, as reasonably determined by
Aladdin, Northwind does not improve performance to meet the Critical
Path Activities, Aladdin may require an increase in Northwind's labor
force, the number of shifts, overtime operations, additional days of
work per week, and/or an increase in the amount of construction
equipment, all costs of which shall be borne solely by Northwind.
Neither such notice by Aladdin nor Aladdin's failure to issue such
notice shall relieve Northwind of its obligation to achieve
Substantial Completion on or before the Substantial Completion
Deadline and/or Final Completion on or before the Final Completion
Deadline. In the event Northwind fails to comply with Aladdin's
instructions and Aladdin continues to believe, reasonably and in good
faith, that because of such failure Northwind will not be able to
achieve Substantial Completion on or before the Substantial Completion
Deadline or Final Completion on or before the Final Completion
Deadline, then Northwind shall be considered in default of this
Agreement in accordance with Section 10(a) hereof and Aladdin may
exercise its rights as set forth in Section 10(b) hereof.
5. PLANT DESIGN.
(a) PLANT OVERSIGHT. Subject to the terms of this Agreement,
Northwind shall oversee, administer and approve the design, construction
and operation of the Plant.
(b) SCOPE. Northwind and Aladdin will jointly develop and agree upon
the Plant Scope. The Plant Scope will include a detailed description of
the major components of the Plant (including energy transfer stations and
the communications systems), respectively, and the details of the specific
energy requirements of Aladdin and, together with the performance standards
set forth in Exhibit A to the Energy
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Service Agreement, prescribe the agreed upon performance and operating
characteristics of the Plant.
(c) PLANT PLANS AND SPECIFICATIONS.
(i) In consultation with Aladdin, Northwind shall prepare a
request for proposals ("RFP") from engineering, procurement and
construction ("EPC") contractors to design and build the Plant. As
part of such RFP preparation process, Aladdin shall, with the aid of a
qualified engineering company, provide to Northwind within forty-five
(45) days of execution of this Agreement all site interfaces,
including an overall site plan, information on site soil conditions,
overall Aladdin Complex arrangement drawings, underground rights of
way, electrical connection requirements, hot and chilled water
connection locations and all architectural requirements for the
exterior of the Plant and maintenance buildings. Aladdin shall also
provide, within forty-five (45) days of execution of this Agreement,
specifications and related documentation for the energy transfer
stations ("ETSs") to be included as part of the Plant, which
specifications shall be reasonably acceptable to Northwind in its
reasonable business judgment (taking into account the Substantial
Completion Deadline). Once the RFP is complete (and provided that
Aladdin has provided to Northwind the specifications and related
documentation for the ETSs within forty-five (45) days of execution of
this Agreement), Northwind shall solicit bids from at least three (3)
qualified EPC contractors (except as to structural steel, which
Northwind may purchase from Aladdin's supplier) and provided, however,
that if in good faith and after consultation with its engineers and
suppliers, Northwind determines that achievement of the Substantial
Completion Deadline cannot be met unless a sole source contractor
(including a sole source provider of structural steel other than
Aladdin's supplier) is promptly engaged to construct the Plant, then
Northwind shall so notify Aladdin and, unless Aladdin agrees to an
equitable extension of the Substantial Completion Deadline, Northwind
may dispense with submitting the RFP to multiple bidders and may
proceed to negotiate and enter into an EPC Contract with a contractor
of its choosing which contractor and EPC Contract shall be acceptable
to Aladdin (such acceptance not to be unreasonably withheld).
Northwind shall consider in good faith any EPC contractor suggested by
Aladdin. From such bids as may be received and are acceptable to
Aladdin and Northwind, Northwind shall retain a qualified EPC
contractor (the "EPC Contractor") to design and build the Plant and
shall enter into a contract with the EPC Contractor (the "EPC
Contract") pursuant to which the EPC Contractor shall design and build
the Plant in accordance with this Agreement. If based on bids
received from the EPC contractors it appears that the Plant Price is
likely to exceed $40 million, then Northwind shall have the right to
terminate this Agreement without liability unless within ninety (90)
days after receipt of bids from the prospective EPC contractors either
(i) Aladdin and Northwind, using good faith efforts, are able to
effect changes to the Project Scope or otherwise to effect
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changes which result in a projected Plant Price of less than $40
million or (ii) Aladdin agrees to pay, in cash, the amount of the
Plant Price in excess of $40 million, such payment to be made prior to
the execution of the EPC Contract, provided that any amount so paid by
Aladdin shall not be included in Total Project Investment for purposes
of and as defined in the Energy Service Agreement. If this Agreement
is terminated as provided in this Section, Aladdin shall pay to
Northwind those costs and expenses described in the final sentence of
Section 10(e) hereof; if this Agreement is not terminated, delays
occasioned by clause (i) above shall extend the Substantial Completion
Deadline and the Final Completion Deadline as appropriate. The EPC
Contractor, together with Northwind, shall prepare design development
plans and specifications for the Plant (the "Plant Plans and
Specifications") consistent with the Plant Scope and mindful of the
preliminary Plant Price estimate of $ 30 million. Copies of the Plant
Plans and Specifications shall be delivered to Aladdin for Aladdin's
review no later than one hundred and twenty (120) days after Northwind
receives from Aladdin a Notice to Proceed. Aladdin agrees to provide
any comments regarding the Plant Plans and Specifications within ten
(10) days of receipt thereof. Aladdin's failure to comment in writing
within such period shall be deemed to constitute Aladdin's acceptance
of the Plant Plans and Specifications. Review, comment or acceptance
(or the lack thereof) by Aladdin shall not in any way affect or reduce
Northwind's obligations to complete the Work in accordance with the
terms of this Agreement. Northwind agrees to consider in good faith
any and all comments made by Aladdin. Within ten (10) days of receipt
of comments from Aladdin, Northwind and Aladdin shall meet at a
mutually acceptable time and place to discuss Aladdin's comments. If
Northwind has determined that revisions suggested by Aladdin are
necessary in accordance with Good Engineering Practices, Northwind
shall so inform Aladdin at the meeting and shall amend the Plant Plans
and Specifications accordingly. If Northwind determines that
revisions are not necessary, Northwind shall so inform Aladdin at the
meeting, and orally shall explain the reasons why it proposes
rejecting the revisions. Within fifteen (15) Business Days after the
meeting, Northwind shall provide to Aladdin written minutes of the
meeting, including a clear statement as to why any revisions suggested
by Aladdin were not made.
(ii) Sixty (60) days following Northwind's finalizing the
Plant Plans and Specifications pursuant to clause (c)(i) above,
Northwind shall have detailed design drawings prepared, five (5)
copies of which shall be provided to Aladdin for Aladdin's review.
Aladdin agrees to provide any comments regarding the detailed design
drawings within ten (10) days of receipt thereof.
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Aladdin's failure to comment in writing within such period shall be
deemed to constitute Aladdin's acceptance of the detailed design
drawings. Review, comment or acceptance (or the lack thereof) by
Aladdin shall not in any way affect or reduce Northwind's obligations
to complete the Work in accordance with the terms of this Agreement.
Northwind agrees to consider in good faith any and all comments made
by Aladdin. Within ten (10) days of receipt of comments from Aladdin,
Northwind and Aladdin shall meet at a mutually acceptable time and
place to discuss Aladdin's comments. If Northwind has determined that
revisions suggested by Aladdin are necessary in accordance with Good
Engineering Practices, Northwind shall so inform Aladdin at the
meeting and shall amend the detailed design drawings and accordingly.
If Northwind determines that revisions are not necessary, Northwind
shall so inform Aladdin at the meeting, and orally shall explain the
reasons why it proposes rejecting the revisions. Within fifteen (15)
Business Days after the meeting, Northwind shall provide to Aladdin
written minutes of the meeting, including a clear statement as to why
any revisions suggested by Aladdin were not made.
(iii) Two hundred and forty (240) days following Northwind's
finalizing the Plant Plans and Specifications pursuant to clause
(c)(i) above, Northwind shall have detailed operation manuals
prepared, five (5) copies of which shall be provided to Aladdin for
Aladdin's review. Aladdin agrees to provide any comments regarding
the detailed operation manuals within ten (10) days of receipt
thereof. Aladdin's failure to comment in writing within such period
shall be deemed to constitute Aladdin's acceptance of the detailed
operation manuals. Review, comment or acceptance (or the lack
thereof) by Aladdin shall not in any way affect or reduce Northwind's
obligations to complete the Work in accordance with the terms of this
Agreement. Northwind agrees to consider in good faith any and all
comments made by Aladdin. Within ten (10) days of receipt of comments
from Aladdin, Northwind and Aladdin shall meet at a mutually
acceptable time and place to discuss Aladdin's comments. If Northwind
has determined that revisions suggested by Aladdin are necessary in
accordance with Good Engineering Practices, Northwind shall so inform
Aladdin at the meeting and shall amend the detailed operation manuals
accordingly. If Northwind determines that revisions are not
necessary, Northwind shall so inform Aladdin at the meeting, and
orally shall explain the reasons why it proposes rejecting the
revisions. Within fifteen (15) Business Days after the meeting,
Northwind shall provide to Aladdin written minutes of the meeting,
including a clear statement as to why any revisions suggested by
Aladdin were not made.
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(iv) Northwind may make Minor Modifications to the Plant
Plans and Specifications; PROVIDED, HOWEVER, that Northwind shall
notify Aladdin thereof in writing prior to or, if not reasonably
practicable, as soon as reasonably practicable after Northwind's
effecting any such Northwind-initiated Minor Modification. All other
revisions shall be subject to Section 9 hereof.
(v) The review and approval by Aladdin of the Plant Plans and
Specifications shall not relieve Northwind of any of its duties,
liabilities or obligations under this Agreement or any Related
Agreement.
6. PLANT CONSTRUCTION; CONSTRUCTION REPORTS AND MEETINGS.
The EPC Contractor retained by Northwind shall construct the Plant in
accordance with the Plant Plans and Specifications. Northwind shall
provide monthly construction progress reports to Aladdin, in a form
reasonably satisfactory to Aladdin (which reports shall be provided on the
fifth (5th) day of each calendar month and shall include, with respect to
the prior month, a work progress statement and a schedule report showing
project milestones and critical path activity and shall also include a
schedule report showing future project milestones and critical path
activity and the future construction schedule). A representative of
Aladdin may attend (but not actively participate in) construction meetings
between the EPC Contractor and Northwind (or the Project Manager). If
Aladdin believes that the Plant is not being constructed in a manner
consistent with the Plant Plans and Specifications (as the same may be
modified from time to time in accordance with the terms of Section 5
above), or has any additional comments with respect to the construction of
the Plant, Aladdin shall inform Northwind (or the Project Manager) of such
belief or additional comments at the biweekly meetings conducted by the
Project Manager pursuant to Section 4(a) hereof. Northwind shall consider
promptly and in good faith any and all comments made by Aladdin. Northwind
shall determine whether corrective measures are necessary in response to
Aladdin's comments using a reasonable standard applicable to construction
practices for energy producing facilities similar to the Plant, taking into
account Codes and Standards, Good Engineering Practices and the Plant Plans
and Specifications. If Northwind agrees with Aladdin, Northwind shall so
inform Aladdin at the earliest possible biweekly meeting, and shall take
(or cause to be taken) appropriate corrective measures. If Northwind,
after consultation with the EPC Contractor, does not agree with Aladdin,
Northwind shall so inform Aladdin at the earliest possible biweekly meeting
and shall provide a clear written statement explaining Northwind's
disagreement in the next monthly construction progress report to be
provided by Northwind to Aladdin pursuant to Section 6 hereof. Comments by
Aladdin (or the absence thereof) with respect to the construction of the
Plant shall not in any way affect or reduce
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Northwind's obligations to complete the Work in accordance with the
provisions of this Agreement.
7. QUALITY CONTROL AND INSPECTION.
(a) IN GENERAL. Northwind shall perform all quality control and
inspection activities related to the Work as required by Northwind's
Quality Control and Inspection Program (as defined below), this Agreement
and Good Engineering Practices. Northwind shall inspect and test the Work
on a continuing basis. Northwind shall correct all Defaults or
Deficiencies in a reasonable time. All Defects or Deficiencies identified
by such inspection or testing shall be the subject of a monthly report to
Aladdin. The report shall describe in detail (i) all Defects or
Deficiencies identified which are reasonably likely to have an adverse
impact on the Plant Schedule, (ii) all corrections, all Work that was
re-performed and related services rendered during the immediately preceding
month and (iii) all Defects not then corrected or re-performed.
(b) QUALITY CONTROL AND INSPECTION PROGRAM. Within one hundred (100)
days of receipt by Northwind of the Notice to Proceed, Northwind shall
prepare and deliver to Aladdin a formal program for inspecting and testing
the Work ("Quality Control and Inspection Program"). The person responsible
for implementing the Quality Control and Inspection Program shall be
identified by Northwind to Aladdin. The Quality Control and Inspection
Program must be adequate to meet all the quality control and inspection
needs of the Work. Aladdin agrees to provide its comments within thirty
(30) days of receipt of such program. Aladdin's failure to comment within
such period shall be deemed to constitute Aladdin's approval. Review,
comment or acceptance (or the lack thereof) by Aladdin shall not in any way
affect or reduce Northwind's obligations to complete the Work in accordance
with the terms of this Agreement. Northwind agrees to consider in good
faith any and all comments made by Aladdin. Within ten (10) days of
receipt of comments from Aladdin, Northwind and Aladdin shall meet at a
mutually acceptable time and place to discuss Aladdin's comments. If
Northwind has determined that revisions suggested by Aladdin are necessary
in accordance with Good Engineering Practices, Northwind shall so inform
Aladdin orally at the meeting and shall amend the Quality Control and
Inspection Program accordingly. If Northwind determines that revisions are
not necessary, Northwind shall so inform Aladdin orally at the meeting, and
shall orally explain the reasons why it proposes rejecting the revisions.
Within fifteen (15) Business Days after the meeting, Northwind shall
provide to Aladdin written minutes of the meeting, including a clear
statement as to why any revisions suggested by Aladdin were not made.
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(c) INSPECTION RIGHTS. Aladdin shall have the right to inspect all
Work performed and witness all tests hereunder, and Northwind shall arrange
such inspection, upon reasonable notice from Aladdin; provided, however,
that Aladdin's inspection shall not interfere with or delay performance of
the Work. Aladdin shall have the right to comment to Northwind, in
writing, at any time, regarding any portion of the Work, including, without
limitation, any design, engineering, materials, equipment, installation,
tools, or supplies, which in Aladdin's reasonable judgment does not conform
to this Agreement, the Work or the Plant Plans and Specifications, or which
contains Defects or Deficiencies. Aladdin shall inform Northwind (or the
Project Manager) of such belief or additional comments at the biweekly
meetings conducted by the Project Manager pursuant to Section 4(a) hereof.
Northwind shall consider promptly and in good faith any and all comments
made by Aladdin. Northwind shall determine whether corrective measures are
necessary in response to Aladdin's comments using a reasonable standard
applicable to construction practices for energy producing facilities
similar to the Plant, taking into account Codes and Standards, Good
Engineering Practices and the Plant Plans and Specifications. If Northwind
agrees with Aladdin, Northwind shall so inform Aladdin at the earliest
possible biweekly meeting, and shall take (or cause to be taken)
appropriate corrective measures. If Northwind, after consultation with the
Design and Specifications Engineer, does not agree with Aladdin, Northwind
shall so inform Aladdin at the earliest possible biweekly meeting and shall
provide a clear written statement explaining Northwind's disagreement in
the next monthly construction progress report to be provided by Northwind
to Aladdin pursuant to Section 6 hereof. Comments by Aladdin (or the
absence thereof) with respect to the construction of the Plant shall not in
any way affect or reduce Northwind's obligations to complete the Work in
accordance with the provisions of this Agreement.
(d) EFFECT OF WAIVER OF INSPECTION RIGHTS. If Aladdin shall waive or
fail to exercise its right to inspect and witness any test as herein
provided, Northwind in no way shall be relieved of liability for the
quality, character, proper operation, and performance of the Work, nor
shall the rights of Aladdin set forth in this Agreement be prejudiced or
affected. Nor shall any witness of any test or inspection by Aladdin or
any failure to witness any test or inspection be construed as an approval
or acceptance of the Work.
8. COMPLETION.
(a) SUBSTANTIAL COMPLETION. Upon a determination by Northwind that
the Plant has been substantially completed in accordance with the Plant
Plans and Specifications, which shall only be when (i) the Plant has
demonstrated performance in
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accordance with the design requirements, all applicable Laws and Government
Approvals, the Quality Control and Inspection Program, and the Performance
Tests, and Northwind has so certified to Aladdin, (ii) Northwind has
further certified to Aladdin that the Plant has been designed and
constructed and is operating in accordance with the Work and this Agreement
and (iii) Northwind has performed all obligations under this Agreement to
be then performed by Northwind, Northwind shall deliver to Aladdin a
certificate of substantial completion (the "Substantial Completion
Certificate"), which shall be in the form agreed to, initialed by the
Parties and attached hereto as Exhibit E by not later than thirty (30) days
after Notice to Proceed is received by Northwind. If Aladdin believes, at
the time of such certification by Northwind, that the Plant has not reached
Substantial Completion, then, within ten (10) Business Days after Aladdin
receives the Substantial Completion Certificate, Aladdin shall provide
Northwind with written notice clearly setting forth the basis for Aladdin's
belief. Any portions of the Plant to which timely objection is not made by
Aladdin shall be considered substantially complete. Failure by Aladdin to
deliver any notice within said ten (10) Business Day period shall be deemed
to be acceptance of the Plant as substantially complete. If Aladdin
delivers a notice as aforesaid, Northwind shall determine whether it agrees
with such notice, and if Northwind does so agree, Northwind shall complete
the Plant in the manner required by the terms of this Agreement diligently
and in good faith. If Northwind does not agree with Aladdin's notice,
Northwind shall so inform Aladdin and Northwind and Aladdin promptly shall
confer and exert their best efforts in good faith to reach a reasonable and
equitable resolution of the issue. If Northwind and Aladdin are unable to
resolve the issue within five (5) Business Days, then the matter shall be
referred to the Independent Engineer, and the Parties agree to accept the
Independent Engineer's determination as binding, and act accordingly.
(b) FINAL COMPLETION. In order to achieve Final Completion,
Northwind must have: (i) achieved Substantial Completion, (ii) corrected
all conditions constituting Defects and Deficiencies identified in writing
by Aladdin to Northwind, (iii) performed all other obligations of Northwind
under this Agreement to be then performed, in a manner reasonably
satisfactory to Aladdin, and (iv) delivered to Aladdin a certificate of
final completion (the "Final Completion Certificate"), which shall be in
the form agreed to by the Parties, initialed by the Parties and attached
hereto as Exhibit F by not later than thirty (30) days after Notice to
Proceed is received by Northwind. If Aladdin believes, at the time of such
certification by Northwind, that the Plant has not reached Final
Completion, then within ten (10) Business Days of Aladdin's receipt of the
Final Completion Certificate, Aladdin shall provide Northwind with written
notice clearly setting forth the basis for Aladdin's belief. Any portions
of the Plant to which timely objection is not made by Aladdin shall be
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considered to have reached Final Completion. Failure by Aladdin to deliver
any notice within such ten (10) Business Day period shall be deemed
acknowledgment by Aladdin that Final Completion has occurred. If Aladdin
delivers a notice to Northwind as aforesaid, Northwind shall determine
whether it agrees with Aladdin's notice. If Northwind agrees with
Aladdin's notice, Northwind shall take the actions necessary to bring the
Plant to Final Completion. In the event Northwind contests Aladdin's
notification that Final Completion has not been achieved, Aladdin and
Northwind shall promptly confer and exert their best efforts in good faith
to reach a reasonable and equitable resolution of the issue. If Aladdin
and Northwind are unable to resolve the issue within five (5) Business
Days, the matter shall be referred to the Independent Engineer. The
Parties agree to accept the determination made by the Independent Engineer
with respect to whether Final Completion has been achieved and to act
accordingly.
(c) TIMELY COMPLETION OF THE PLANT. TIME IS OF THE ESSENCE WITH
RESPECT TO NORTHWIND'S PERFORMANCE OF THE WORK. In accordance with and
subject to the terms of this Agreement, Northwind guarantees that
Substantial Completion shall occur not later than the Substantial
Completion Deadline, as it may be extended time to time pursuant to this
Agreement, and further guarantees that Final Completion shall not occur
later than the Final Completion Deadline, as it may be extended from time
to time pursuant to this Agreement. Northwind will design the Plant,
specify and procure equipment and schedule its activities taking into
account good and generally accepted construction management practices and
take all reasonably necessary measures to complete the Plant on or before
the Substantial Completion Deadline.
(d) CONTINGENCY PLAN. Northwind shall have a contingency plan that
conforms with Codes and Standards and Good Engineering Practices which
provides for the rental by Northwind of transportable boiler and chiller
plants to ensure delivery of hot and chilled water in accordance with the
Energy Service Agreement if completion of the Plant is delayed for any
reason and (i) such delay is expected to prevent Northwind from commencing
the delivery of the Chilled Water Services and/or the Hot Water Services in
accordance with the terms of the Energy Service Agreement, and (ii) Aladdin
would otherwise be capable of receiving and using the Services if the Plant
had been completed. In the event of such a delay, the contingency plan
shall be instituted by Northwind at Northwind's sole cost, except that (1)
implementation of the Contingency Plan in order to provide Initial Services
(as defined in the Energy Service Agreement) to the Customer during the
period from the Initial Services Date through but not including the
Substantial Completion Deadline shall be at Aladdin's sole cost and
expense, and (2) if such delay is caused by an
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event described in Section 11 hereof or by the acts or omissions of
Aladdin, the Mall Owner or the Sound Asylum Owner, then the Contingency
Plan will be implemented at Aladdin's sole cost. Northwind shall implement
the contingency plan to ensure that there is no delay and/or lapse in the
delivery of hot and chilled water. If Aladdin determines, in its sole
discretion, that Northwind is failing to implement the contingency plan in
a timely manner, and Northwind's failure to implement the contingency plan
is not caused by a breach by Aladdin of its obligations under this
Agreement or the acts of the Mall Owner or the Sound Asylum Owner, Aladdin
may implement the contingency plan, and Northwind agrees that it will pay
all the costs thereof except as otherwise set forth above in this Section
8(d).
9. SCOPE CHANGES.
(a) FURTHER REFINEMENT, CORRECTIONS AND DETAILING NOT SCOPE CHANGES.
It is understood and agreed that the Work shall be subject to further
refinement, correction and detailing by the Parties from time to time, and
that Northwind shall receive no additional compensation for such
refinement, correction or detailing that does not constitute Scope Changes.
(b) SCOPE CHANGES.
(i) From time to time prior to completion of the Work,
Northwind shall have the right, without obtaining the prior approval
of Aladdin, to effect Scope Changes (each, a "Northwind Allowed Scope
Change" and collectively, "Northwind Allowed Scope Changes"), on and
subject to the following conditions and limitations, and the cost of
all such Northwind Allowed Scope Changes shall be included in the
Plant Price:
(a) Each Northwind Allowed Scope Change shall be expected by
Northwind, in good faith and in accordance with Good Engineering
Practices, to enhance the reliability, efficiency or longevity of
the Plant or to have a beneficial effect on the operation or
maintenance of the Plant;
(b) It cannot reasonably be expected by Northwind that such
Northwind Allowed Scope Change will delay Substantial Completion
beyond the Substantial Completion Deadline or Final Completion
beyond the Final Completion Deadline;
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(c) The Northwind Allowed Scope Change shall be compatible with
the Plant Scope;
(d) Northwind shall notify Aladdin in detail of the Northwind
Allowed Scope Change as soon as reasonably practicable, and in
any event, prior to performance of the work contemplated thereby;
and
(e) The additional cost of the Work attributable to (i) any
single Northwind Allowed Scope Change shall not exceed fifty (50)
percent of the Available Pool (as hereinafter defined) and (ii)
all Northwind Allowed Scope Changes in the aggregate shall not
exceed one hundred (100) percent of the Available Pool.
For purposes of this Section 9(b), the term "Available Pool" shall
mean, as of any date of determination, the excess of (i) the GMP and
Other Costs plus a reasonable contingency amount for discretionary
changes by Aladdin (which amount shall be established by Northwind and
provided to Aladdin within thirty (30) days after execution of the EPC
Contract(s)), such contingency amount to be reasonably acceptable to
Aladdin, as increased by the Cost of Scope Changes theretofore
approved by Aladdin over (ii) the estimated total cost of the Work as
reflected in Northwind's forecast therefor prepared not more than
thirty (30) days preceding the date of authorization of such Northwind
Approved Scope Change, which forecast shall reflect all costs
theretofore incurred, the cost of then unperformed portions of the
Work for which contracts exist and a good faith estimate, in
accordance with applicable Codes and Standards, of the costs of all
portions of the Work, if any, for which Northwind has not made
contractual arrangements.
(ii) Aladdin may order Scope Changes to the Work, in which event
one or more of the Plant Price, the Substantial Completion Deadline,
the Final Completion Deadline, the Project Plan, the Plant Plans and
Specifications and other terms and conditions of the Agreement shall
be adjusted accordingly, if and to the extent necessary. All Scope
Changes (but not Northwind Allowed Scope Changes) shall be authorized
by a Scope Change Order.
(c) PROCEDURE FOR SCOPE CHANGES.
(i) In addition to the right of Northwind to effect Northwind
Allowed Scope Changes, as soon as Northwind becomes aware of any
circumstance which Northwind has reason to believe may necessitate a
Scope
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Change, Northwind shall issue to Aladdin a written notice thereof (a
"Scope Change Order Notice"). All Scope Change Order Notices shall
include documentation sufficient to enable Aladdin to determine: (i)
the factors necessitating the possibility of a Scope Change; (ii) the
impact which the Scope Change is likely to have on the Plant Price;
(iii) the impact which the Scope Change is likely to have on
scheduling and the Substantial and Final Completion Deadlines; and
(iv) such other information which Aladdin may reasonably request in
connection with evaluating such Scope Change.
(ii) If Aladdin desires to make a Scope Change (other than
pursuant to a Scope Change Order Notice), Aladdin shall submit a
written proposal requesting a Scope Change (a "Scope Change Order
Request") to Northwind.
(a) Northwind shall promptly review the Scope Change Order
Request and notify Aladdin in writing of its preliminary good
faith view of the options for implementing the proposed Scope
Change and of Northwind's good faith estimate of the effect, if
any, each option would have on the Plant Price, the Substantial
and Final Completion Deadlines, the Project Plan, and the Plant
Plans and Specifications.
(b) After receipt of Northwind's preliminary estimates,
Aladdin shall inform Northwind, within five (5) Business Days,
whether Northwind shall provide cost, schedule and performance
level guarantee impacts to Aladdin for the Scope Changes proposed
by Aladdin. Northwind's costs for preparing such guarantee
impacts shall not exceed a price mutually agreed upon by the
Parties prior to Northwind's undertaking such analysis. Aladdin
may, but shall not be obligated to, issue a Scope Change Order
covering such proposed Scope Change, in which event the contents
of Northwind's notice of impacts described in this Section
9(c)(ii)(b) shall be binding on Northwind, and Northwind's
reasonable costs in preparing such notice of impacts, subject to
the maximum price agreed to by the Parties, shall be included in
any Plant Price change.
(c) In the event Aladdin disagrees with Northwind's
statement of the cost, schedule and performance level guarantee
impacts of such proposed Scope Change, and Northwind has
estimated that the proposed Scope Change would increase the Plant
Price by $100,000 or more, Aladdin and Northwind shall promptly
confer and exert their best efforts in good faith to agree upon
the cost, schedule and performance
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level guarantee impacts of the proposed Scope Change. If Aladdin
and Northwind are unable to agree on the cost, schedule or
performance level guarantee impacts of the proposed Scope Change,
and if the difference is (1) a difference in the Parties'
estimates of the costs of the proposed Scope Change and such
difference is greater than $10,000 or (2) a difference in the
Parties' estimate of the effect on the schedule or the
performance level guarantee impacts of the proposed Scope Change,
then the Parties shall refer the issue to the Independent
Engineer. The Independent Engineer's estimate of the cost,
schedule or performance level impacts of the proposed Scope
Change (as applicable) shall be accepted by the Parties. In the
event Aladdin disagrees with Northwind's statement of the cost of
such proposed Scope Change, and Northwind has estimated that the
proposed Scope Change would increase the Plant Price by less than
$100,000 in the specific instance or by less than $250,000 when
aggregated with all other Scope Changes under this Section 9(c),
Aladdin may proceed with issuance of the Scope Change Order and
the dispute shall be resolved as provided in this Agreement.
(d) In the event Aladdin declines to issue the Scope Change
Order, Northwind's reasonable costs in preparing the cost,
schedule and performance level guarantee impacts, subject to the
maximum price therefor agreed to by the Parties pursuant to
Section 9(c)(ii)(b), shall be added to the Plant Price.
(e) The cost of Scope Changes initiated by Aladdin, the
costs of which shall be included in the Plant Price, shall not
exceed five (5) percent of the GMP established pursuant to
Exhibit B.
(f) Any reasonable delays in Substantial Completion or
Final Completion of the Plant arising by reason of investigation
of any Scope Change proposed by Aladdin that are reasonably
consistent with Northwind's preliminary good faith view, as set
forth in Section 9(c)(ii)(a)hereof, shall extend the Substantial
Completion Deadline or the Final Completion Deadline accordingly.
(d) SCOPE CHANGES DUE TO NORTHWIND ERROR. Notwithstanding anything
in this section to the contrary, no Scope Change Order shall be issued and
no adjustment of the Plant Price, the Substantial and Final Completion
Deadlines, the Project Plan, or the Plant Plans and Specifications shall be
made in connection with any correction
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of errors, omission, deficiencies or improper or defective work on the part
of Northwind or any of its subcontractors in the performance of the Work.
(e) SCOPE CHANGES DUE TO FORCE MAJEURE AND CHANGE IN LAW. Any change
in the Plant Plans and Specifications or the Work which is necessitated by
a change in applicable Law that became effective after the date of this
Agreement or a Force Majeure Event and is not a Minor Modification shall be
treated as a Scope Change under Section 9(b) hereof which Aladdin shall not
have the right to approve and Northwind shall implement without obtaining
Aladdin's approval, provided that (i) Northwind shall notify Aladdin in
detail thereof as soon as reasonably practicable and in any event prior to
performance of the work contemplated thereby, (ii) Northwind otherwise
complies with the requirements of Section 9(b)(i)(c) hereof with respect to
such Scope Change, (iii) Northwind's determination that such change in the
Plant Plans or Specifications or the Work is necessary and Northwind's
implementation of such change both shall be made in good faith and in
accordance with Good Engineering Practices; provided, however, that this
Section 9(e) shall not apply to any change in any applicable Law resulting
directly or indirectly from the negligent acts, errors or omissions of
Northwind.
10. DEFAULT; TERMINATION.
(a) NORTHWIND EVENTS OF DEFAULT. Northwind shall be in default of
its obligations pursuant to this Agreement should any of the following
events or conditions arise or exist and Northwind shall fail to remedy the
same within ten (10) days, or, if such remedy cannot reasonably be
completed within ten (10) days, Northwind shall fail promptly to provide
Aladdin with evidence reasonably satisfactory to Aladdin that such default
can be cured by Northwind in a time period reasonably satisfactory to
Aladdin and promptly to commence and diligently pursue and conclude
remedial action within such agreed period:
(i) Admitted abandonment of the Plant by Northwind or failure
to prosecute the Plant with reasonable diligence after notice from
Aladdin stating that it believes that Northwind has abandoned the
Plant;
(ii) Northwind assigns or transfers this Agreement or its
right or interest herein, except as expressly permitted under Section
14(e) of this Agreement;
(iii) Northwind fails, neglects, refuses, or, other than
because of a Force Majeure Event, is unable at any time during the
course of the performance of the Work, to provide sufficient material,
equipment, services, or labor to perform the Work in accordance with
this Agreement;
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(iv) Any representation or warranty made by Northwind was
materially incorrect when made and as a result thereof it reasonably
is expected that Northwind will be unable to observe and perform its
material obligations hereunder and such inability will not be cured
within a reasonable period of time;
(v) Northwind defaults, in any material respect, in its
observance of or performance under any material provision of this
Agreement (provided that such failure does not arise when Northwind
has refused to proceed with a proposed Scope Change when Northwind is
not obligated at that time to proceed with such proposed Scope
Change);
(vi) Unicom Corporation repudiates or disavows its obligations
under the Unicom Guaranty;
(vii) Northwind fails to comply with any Law or Government
Approval applicable to the Work or to Northwind's performance of its
obligations under this Agreement;
(viii) Unless otherwise permitted pursuant to this Agreement, a
material change or deviation in the Project Plan or Plant Plans and
Specifications shall be made or authorized by Northwind without the
prior approval of Aladdin; or
(ix) The failure by Northwind to provide the Project Plan or
Plant Plans and Specifications to Aladdin in accordance with this
Agreement.
(b) TERMINATION OPTION AND OTHER REMEDIES FOR NORTHWIND DEFAULT. If
a Northwind Event of Default has occurred, Aladdin may terminate this
Agreement by written notice to Northwind of the termination hereof. Upon
such termination, Aladdin shall demand performance of the Unicom Guaranty
and, unless within three (3) Business Days of such demand Unicom
Corporation, the Guarantor, informs Aladdin in writing that Unicom
Corporation shall perform the obligations of Northwind as set forth in this
Agreement, Aladdin may cause the obligations of Northwind pursuant to this
Agreement to be performed at the sole expense of Unicom Corporation in
accordance with the terms of the Unicom Guaranty. In the event Unicom
Corporation elects to perform the obligations of Northwind, Unicom
Corporation shall perform the Work and shall meet the Substantial
Completion Deadline and the Final Completion Deadline in accordance with
the terms of this Agreement, and shall have the right to perform
Northwind's obligations under the Related Agreements
31
<PAGE>
pursuant to the terms thereof. In the event Aladdin shall cause the
obligations of Northwind pursuant to this Agreement to be performed at
Unicom Corporation's sole expense, Northwind promptly shall withdraw from
the Work site and transfer its rights, title and interest in the Plant and
the Plant Plans and Specifications to Aladdin. In addition, Northwind
promptly shall assign to Aladdin such of its contracts, including but not
limited to warranties and guarantees, related to the Plant and the Work as
Aladdin may request, and promptly remove such materials, equipment, tools,
and instruments used by, and any debris or waste materials generated by,
Northwind in the performance of the Work as Aladdin may direct, and Aladdin
may take possession of any and all designs, materials, equipment, tools,
and facilities of Northwind which are on the Work site. If Aladdin
exercises such option, (i) Aladdin shall assume the obligations of
Northwind under any contracts assigned to Aladdin pursuant to this section
which are not in default by Northwind, (ii) upon completion of the Plant,
Aladdin shall pay to Northwind an amount equal to the Plant Price less the
cost to Aladdin to complete the Plant, provided that such amount does not
exceed an amount equal to (x) the amount actually spent to date by
Northwind in accordance with the terms of this Agreement plus (y) all
amounts which Northwind is then contractually obligated to pay in respect
of equipment and materials previously delivered to the Plant Site and labor
and services previously performed in connection with the construction of
the Plant, or which Aladdin subsequently elects, in its sole discretion, to
accept from Northwind's suppliers pursuant to Northwind's purchase
commitments therefor, and provided further that the payment amount shall
not provide for any return on Northwind's investment in the Plant and (iii)
the Energy Service Agreement and the Northwind Lease shall concurrently
terminate. Aladdin shall have the right to have the Work finished without
incurring any liability to Northwind or assuming any liabilities incurred
by Northwind.
(c) ALADDIN EVENTS OF DEFAULT. Aladdin shall be in default of its
obligations pursuant to this Agreement should any of the following events
or conditions arise or exist and Aladdin shall fail to remedy the same
within ten (10) days, or Aladdin shall fail promptly to provide Northwind
with evidence reasonably satisfactory to Northwind that such default can be
cured by Aladdin in a time period reasonably satisfactory to Northwind and
promptly to commence and diligently pursue and conclude remedial action
within such agreed period:
(i) The Notice to Proceed shall not have been received by
Northwind by May 1, 1998;
(ii) Abandonment of the Aladdin Project by Aladdin after May
1, 1998;
32
<PAGE>
(iii) Aladdin assigns or transfers this Agreement or its right
or interest herein, except as expressly permitted by Section 14(e)
hereof; or
(iv) Any representation or warranty made by Aladdin in Section
2(i) hereof was materially incorrect when made and as a result thereof
it is reasonably expected that Aladdin will be unable to perform its
material obligations hereunder, and such inability will not be cured
within a reasonable period of time.
(d) TERMINATION OPTION AND OTHER REMEDIES FOR ALADDIN DEFAULT. If an
Aladdin Event of Default has occurred pursuant to Section 10(c) of this
Agreement, Northwind may terminate this Agreement by written notice to
Aladdin of such termination. If Northwind terminates this Agreement
because an Aladdin Event of Default has occurred pursuant to Section 10(c)
of this Agreement, Aladdin shall be liable for and shall pay to Northwind
all costs and expenses reasonably incurred by Northwind in connection with
Northwind's obligations under this Agreement for the time period from and
including the date hereof to the effective date of such termination and all
third party engineering and consulting costs and expenses incurred prior to
the date hereof through the effective date of termination. If Northwind
terminates this Agreement because an Aladdin Event of Default has occurred
pursuant to Section 10(c)(ii), (iii) or (iv) of this Agreement, Aladdin
shall also pay to Northwind a twenty (20) percent return on the unfinanced
portion of such costs and expenses, such portion not to exceed forty (40)
percent of the total of such costs and expenses.
(e) Northwind shall be permitted to terminate this Agreement at any
time after March 1, 1998 if Aladdin shall not have acquired fee title to
the Aladdin Lands by such date or if the Financial Closing shall not have
occurred by such date. Either Party hereto may terminate this Agreement at
any time after January 31, 1998 if the Energy Service Agreement, in
substantially the form attached hereto as Exhibit G (with such changes as
the Parties may agree upon) has not been executed by such date, provided
that such Party has acted in good faith to execute the Energy Service
Agreement by such date. Any termination of this Agreement pursuant to this
Section 10(e) shall be in writing and shall be effective when given (unless
such termination expressly provides for effectiveness at a later date, in
which case such termination shall be effective on the stated date). If
this Agreement is so terminated, Aladdin shall be liable for and shall pay
to Northwind all costs and expenses reasonably incurred by Northwind in
connection with Northwind's obligations under this Agreement for the time
period from and including the date hereof to the effective date of such
termination and all third party engineering and consulting costs and
expenses incurred prior to the date hereof through the effective date of
such termination.
33
<PAGE>
(f) CONSEQUENTIAL DAMAGES DISCLAIMER. Notwithstanding anything to
the contrary contained in this Agreement, neither Party shall be liable to
the other Party, whether in contract, tort, negligence, indemnity, strict
liability, or otherwise, for any special, indirect, incidental, or
consequential damages in connection with or arising out of the Work, or the
performance, non-performance or breach of this Agreement.
11. FORCE MAJEURE EVENT. If either Aladdin or Northwind shall be actually
delayed in or is prevented from performing any of its obligations hereunder due
to a Force Majeure Event, including an "Unforeseen Site Condition" as defined
below, and to the extent such delay in or prevention of performance could not be
avoided or mitigated by any reasonable method, the party claiming such delay or
prevention shall be excused from performing its obligations hereunder for the
period of delay or interruption caused by such Force Majeure Event.
(i) Within 72 hours after a party becomes aware or should, with due
diligence, have become aware of the occurrence of a Force Majeure Event,
such party shall deliver to the other a notice of such event stating the
nature thereof. Within seven (7) days of such notice, the party claiming
the occurrence of a Force Majeure Event shall deliver to the other party a
notice describing the anticipated impact of such delay on the performance
or the party's obligations hereunder, and within ten (10) days following
the end of such Force Majeure Event shall provide a written notice of
extension of performance of such party's obligations. Such notice shall
describe in detail the event causing the delay, the precise effect thereof
on the performance of such party's obligations, the length of delay, and
the measures taken or to be taken to minimize such delay. In the event
that a Party receiving a notice of delay caused by a Force Majeure Event
disagrees with such notice, the Parties shall promptly meet and attempt to
resolve such dispute. If the Parties are not able to resolve such dispute
within five (5) Business Days, then the dispute shall be resolved pursuant
to Section 13 hereof.
(ii) If after a Force Majeure Event has caused Northwind to suspend
or delay performance of the Work, Northwind has failed to take such action
as Aladdin could and would lawfully and reasonably initiate to remove or
relieve either the cause thereof or its direct or indirect effects, Aladdin
may, in its sole discretion and, after notice to Northwind, initiate, at
Aladdin's sole expense, such reasonable measures as will be designed to
remove or relieve such Force Majeure Event or its direct or indirect
effects and thereafter require Northwind to resume full or partial
performance of the Work.
34
<PAGE>
For purposes of this Section 11, "Unforeseen Site Conditions" shall mean
conditions, not caused by Northwind (including, but not limited to, Northwind's
agents, subcontractors or any other contractor affiliated with Northwind),
existing as of the date upon which Northwind receives the Notice to Proceed, or
thereafter caused by Aladdin or third parties unrelated to Northwind, which,
notwithstanding Northwind's investigation of the Site (and provided that
Northwind's investigation of the Site is in accordance with Good Engineering
Practices), was not disclosed or discovered prior to the execution of the EPC
Contract(s).
12. CONFIDENTIAL INFORMATION. Northwind and Aladdin each agree to treat
in confidence all information regarding this Agreement and the performance by
the parties of their obligations hereunder and all information which either
Northwind or Aladdin will have obtained from the other party in contemplation of
entering into, or in the performance of, this Agreement and not make any use of
any of such information for any purpose other than complying with its
obligations under this Agreement and the Related Agreements. Such information
will not be communicated to any person other than Northwind or Aladdin and their
respective affiliates, officers, directors, employees, agents, attorneys, and
professional consultants, except to the extent disclosure of such information:
1. is required by law or governmental authority;
2. is made by a Party pursuant to litigation in which such Party is
a party; or
3. is made to any lender or prospective lender to such party
(PROVIDED such lender or prospective lender agrees in writing to
keep such information confidential on the terms set forth in this
Section 12).
If either party is required to disclose confidential information
pursuant to clause (a) above, such party will take reasonable steps to limit the
extent of the disclosure and to make such disclosure confidential under the
circumstances and will, to the extent it reasonably can do so in the
circumstances, afford the other party hereto notice of such request for
disclosure so as to permit such other party to seek an appropriate protective
order or other means by which such information may be maintained in confidence
pursuant to such disclosure. Information provided by a party hereunder will
remain the sole property of the party providing such information. The
obligation of each party to treat in confidence, and not to use, information
which it will have obtained from the other party will not apply to any
information which (x) is or becomes available to such party from a source not
otherwise under obligations of confidentiality with respect thereto, other than
the party providing such information, or (y) is or becomes available to the
public other than as a result of disclosure by such party or its agents in
breach of this Section 12.
35
<PAGE>
13. DISPUTE RESOLUTION. If a dispute between the parties arises
concerning the design or construction of the Plant, the parties may jointly
request that such dispute be resolved by arbitration in accordance with the
provisions of the Commercial Arbitration Rules of the American Arbitration
Association, as in effect at the time. If the parties do not agree to submit
such dispute to arbitration and are not otherwise able to resolve such dispute,
either party may bring such dispute to any court of competent jurisdiction for
resolution. Notwithstanding the foregoing, neither party hereto shall seek
resolution of a dispute in a manner that delays or hinders the orderly and
continuous construction of the Plant. Notwithstanding any litigation or any
dispute or controversy, and regardless of the basis thereof or grounds therefor,
Northwind agrees that it will, for so long as the Agreement has not been
terminated, diligently prosecute the Work to Final Completion, all in accordance
with the terms of this Agreement.
14. GENERAL.
(a) NO PARTNERSHIP. Northwind is an independent contractor and this
Agreement shall not be construed to create a partnership, agency, joint
venture, lease, license, or any other relationship between Aladdin and
Northwind save as expressly contemplated herein and solely for the limited
purposes noted.
(b) REMEDIES AND LIMITATIONS. Remedies of the parties outlined or
referred herein are not intended to be exclusive and shall be in addition
to any other remedies at law or in equity which may be available to an
aggrieved party, except as limited by this Agreement.
(c) NOTICES. Notices shall be delivered under this Agreement in the
same manner as set forth in Section 10.1 of the Energy Service Agreement.
(d) APPROVALS AND OBJECTIONS. In cases where either party in any
part of this Agreement is given the right or option to review, approve or
object to any matter, provide a notice or attend a meeting, the exercise of
(or failure to exercise) such right or option shall not relieve Aladdin or
Northwind from their respective obligations and duties under this Agreement
or any Related Agreement.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the Parties and their respective successors
and assigns. Neither Party shall assign its interest or delegate its
duties under this Agreement without the prior written consent of the other
party (which consent shall not be unreasonably withheld) except that either
Party may assign its interest hereunder in connection with a concurrent
assignment of its interest in the Energy Service Agreement
36
<PAGE>
made in accordance with the provisions of such agreement, provided that
such assignment hereunder is being made to the same entity to which
assignment is being made under the Energy Service Agreement. In the event
of such assignment, the assignee shall have the same notice, cure and
assumption rights under this Agreement as is provided to such assignee
under Section 10.2(a)(ii) of the Energy Service Agreement.
(f) ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the Exhibits
referred to herein and the Related Agreements and the documents delivered
pursuant hereto and thereto contain the entire understanding of the parties
hereto with regard to the subject matter contained herein or therein, and
supersede all prior agreements or understandings between or among any of
the parties hereto. This Agreement will not be amended, restated,
modified, or supplemented except by a written instrument signed by an
authorized representative of each of the parties hereto.
(g) INTERPRETATION. Article titles and headings to sections herein
are inserted for convenience of reference only and are not intended to be a
part of or to affect the meaning or interpretation of this Agreement.
(h) WAIVERS. Any term or provision of this Agreement may be waived,
or the time for its performance may be extended, by the party or parties
entitled to the benefit thereof. Any such waiver will be validly and
sufficiently authorized for the purposes of this Agreement if, as to any
party, it is authorized in writing by an authorized representative of such
party. The failure of any party hereto to enforce at any time any
provision of this Agreement will not be construed to be a waiver of such
provision, nor in any way to affect the validity of this Agreement or any
part hereof or the right of any party thereafter to enforce each and every
such provision. No waiver of any breach of this Agreement will be held to
constitute a waiver of any other or subsequent breach.
(i) EXPENSES. Each party hereto will pay all costs and expenses
incident to its negotiation and preparation of this Agreement and, except
as set forth herein, to its performance and compliance with all agreements
and conditions contained herein on its part to be performed or complied
with, including the fees, expenses and disbursements of its counsel and
accountants.
37
<PAGE>
(j) PARTIAL INVALIDITY. Wherever possible, each provision hereof
will be interpreted in such manner as to be effective and valid under
applicable law, but in case any one or more of the provisions contained
herein will, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such provision will be ineffective to the
extent, but only to the extent, of such invalidity, illegality or
unenforceability without invalidating the remainder of such invalid,
illegal or unenforceable provision or provisions or any other provisions
hereof, unless such a construction would be unreasonable. Upon any such
determination that any term or other provision hereof is invalid, illegal
or unenforceable, the parties hereto shall negotiate in good faith to
modify this Agreement so as to affect the original intent of the parties as
closely as possible in an acceptable manner, to the end that the
transactions contemplated hereby are fulfilled to the extent possible in
the circumstances.
(k) OPERATION OF THIS AGREEMENT. Aladdin and Northwind desire that
this Agreement operate between them fairly and reasonably, and agree to
cooperate and to communicate with each other concerning the terms hereof
and concerning matters relating to the Plant during the term of this
Agreement.
(l) EXECUTION IN COUNTERPARTS. This Agreement may be executed in one
or more counterparts, each of which will be considered an original
instrument, but all of which will be considered one and the same agreement,
and will become binding when one or more counterparts have been signed by
each of the parties hereto and delivered to Aladdin and Northwind.
(m) GOVERNING LAW. This Agreement will be governed by and construed
in accordance with the internal laws and decisions of the State of Nevada.
(n) TIME. Time is of the essence hereof.
[Balance of page intentionally left blank; signature page follows.]
38
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth above.
NORTHWIND ALADDIN, LLC ALADDIN GAMING, LLC
By: UTT Las Vegas, Inc., its manager
By: /s/ Donald Petkus By: /s/ Ronald Dictrow
---------------------- -----------------------------
Name: Donald Petkus Name: Ronald Dictrow
Title: President Title: Exec. Vice President
39
<PAGE>
Aladdin Holdings, LLC, a Nevada limited liability company ("AH")
hereby (i) executes the Development Agreement to which this signature page is
attached for the purpose of confirming that it is jointly and severally liable
with Aladdin until the earlier of (i) Financial Closing or (ii) the acquisition
of fee title to the Aladdin Lands by Aladdin, to Northwind for payment due to
Northwind under Sections 5(c)(i), 10(d) and 10(e) of such Development Agreement
on account of an Aladdin Event of Default under Section 10(c) of such
Development Agreement or under Section 5(c)(i) or Section 10(e) pursuant to the
terms thereof and (ii) represents and warrants to Northwind, as an inducement to
Northwind to execute such Development Agreement, that as of the date hereof, AH
is the sole and exclusive owner of fee title to the Aladdin Lands (as defined in
the Northwind Lease) and all improvements thereto free and clear of all liens,
claims, encumbrances, and rights of others, other than (i) a deed of trust (a
copy of which is attached hereto) securing the note (a copy of which is attached
hereto) in the initial amount of $65 million and (ii) matters attached hereto in
Attachment A.
Dated: December 3, 1997
ALADDIN HOLDINGS, LLC
By: Aladdin Management Corporation
By: /s/ Ronald Dictrow
------------------------
Ronald Dictrow
Title: Treasurer
<PAGE>
EXHIBIT A
DESCRIPTION OF ALADDIN LANDS
<PAGE>
EXHIBIT B
PLANT PRICE AND GMPP
<PAGE>
EXHIBIT C
UNICOM GUARANTY
<PAGE>
EXHIBIT D
INSURANCE
1. Northwind will maintain:
(i) Workers' compensation insurance, with limits of liability at least
equal to the statutory requirements therefor;
(ii) Employer's liability insurance of not less than $1,000,000;
(iii) Comprehensive general liability insurance against liability for
injury to or death of any person or damage to property in
connection with the use, operation or condition of the Plant of not
less that $2,000,000 combined single limit per occurrence and
annual aggregate;
(iv) "All-risk" property insurance covering the Plant to the extent of
the full replacement cost thereof and, during construction of the
Plant, "all-risk builder's risk" insurance covering the Plant to
the extent of the full replacement thereof;
(v) During any and all periods of construction of the Plant, Northwind
shall cause its general contractors (including all contractors who
contract directly with Northwind) to obtain (i) commercial general
liability insurance with a minimum limit of liability of $5,000,000
combined single limit for bodily injury, personal injury and
property damage and include Aladdin and Aladdin's lenders as
additional insureds and (ii) workers' compensation insurance, with
limits of liability at least equal to the statutory requirements
therefor and employer's liability insurance of not less than
$1,000,000; and
(vi ) Excess liability umbrella coverage of at least $50,000,000.
<PAGE>
2. Aladdin shall maintain:
(i) Workers' compensation insurance, with limits of liability at least
equal to the statutory requirements therefor;
(ii) Employer's liability insurance of not less than $1,000,000;
(iii) Comprehensive general liability (including public liability and
property damage) insurance coverage covering occurrences, accidents
and incidents on the Aladdin Lands that (1) occur from and after
the date hereof (regardless of when the claim is filed) and (2)
result in bodily injury, personal injury or death to any person or
entity and/or damage or destruction of property. Said insurance
shall have a combined single limit of liability per occurrence of
not less than $1,000,000 on a primary basis and not less than
$50,000,000 on an excess/umbrella basis, or such greater amounts as
are typical for similar casino-hotel projects in Las Vegas; and
(iv) "All-risk" property insurance covering the Aladdin Lands and
improvements thereon to the extent of the full replacement cost
thereof.
Each party hereto agrees that the insurance described above to be provided by
the other party may be provided by and through blanket coverages which may be
provided in whole or in part through a policy or policies covering other
liabilities and locations of the party obligated to provide such insurance and
its affiliates.
<PAGE>
EXHIBIT E
SUBSTANTIAL COMPLETION CERTIFICATE FORM
<PAGE>
EXHIBIT F
FINAL COMPLETION CERTIFICATE FORM
<PAGE>
EXHIBIT G
ENERGY SERVICE AGREEMENT
<PAGE>
TABLE OF CONTENTS
PAGE
1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . .1
2. General Terms. . . . . . . . . . . . . . . . . . . . . . . . . . .8
(a) Term . . . . . . . . . . . . . . . . . . . . . . . . . . .8
(b) Plant Location and Purpose . . . . . . . . . . . . . . . .8
(c) Purchase of Services . . . . . . . . . . . . . . . . . . .8
(d) Design and Construction of the Plant . . . . . . . . . . .8
(e) Aladdin Not Responsible for Acts of Northwind. . . . . . .8
(f) Claims Upon Failure of Work. . . . . . . . . . . . . . . .9
(g) Aladdin's Access to Work . . . . . . . . . . . . . . . . .9
(h) Responsibilities of Northwind. . . . . . . . . . . . . . .9
(i) Representations and Warranties . . . . . . . . . . . . . 11
(j) Insurance. . . . . . . . . . . . . . . . . . . . . . . . 12
(k) Condemnation . . . . . . . . . . . . . . . . . . . . . . 13
3. Additional Agreements and Documents. . . . . . . . . . . . . . . 14
4. Project Management . . . . . . . . . . . . . . . . . . . . . . . 14
(a) Project Manager. . . . . . . . . . . . . . . . . . . . . 14
(b) Project Execution Plan . . . . . . . . . . . . . . . . . 15
5. Plant Design . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(a) Plant Oversight. . . . . . . . . . . . . . . . . . . . . 18
(b) Scope. . . . . . . . . . . . . . . . . . . . . . . . . . 18
(c) Plant Plans and Specifications . . . . . . . . . . . . . 18
6. Plant Construction; Construction Reports and Meetings. . . . . . 21
7. Quality Control and Inspection . . . . . . . . . . . . . . . . . 22
(a) In General . . . . . . . . . . . . . . . . . . . . . . . 22
(b) Quality Control and Inspection Program . . . . . . . . . 22
(c) Inspection Rights. . . . . . . . . . . . . . . . . . . . 23
(d) Effect of Waiver of Inspection Rights. . . . . . . . . . 24
8. Completion . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(a) Substantial Completion . . . . . . . . . . . . . . . . . 24
(b) Final Completion . . . . . . . . . . . . . . . . . . . . 25
(c) Timely Completion of the Plant . . . . . . . . . . . . . 25
(d) Contingency Plan . . . . . . . . . . . . . . . . . . . . 26
<PAGE>
9. Scope Changes. . . . . . . . . . . . . . . . . . . . . . . . . . 26
(a) Further Refinement, Corrections and Detailing Not Scope
Changes. . . . . . . . . . . . . . . . . . . . . . . . 26
(b) Scope Changes. . . . . . . . . . . . . . . . . . . . . . 26
(c) Procedure for Scope Changes. . . . . . . . . . . . . . . 28
(d) Scope Changes Due to Northwind Error . . . . . . . . . . 30
(e) Scope Changes Due to Change in Law . . . . . . . . . . . 30
10. Default; Termination . . . . . . . . . . . . . . . . . . . . . . 30
(a) Northwind Events of Default. . . . . . . . . . . . . . . 30
(b) Termination Option and Other Remedies for Northwind
Default. . . . . . . . . . . . . . . . . . . . . . . . 32
(c) Aladdin Events of Default. . . . . . . . . . . . . . . . 33
(d) Termination Option and Other Remedies for Aladdin
Default. . . . . . . . . . . . . . . . . . . . . . . . 33
(f) Consequential Damages Disclaimer . . . . . . . . . . . . 34
11. Force Majeure Event. . . . . . . . . . . . . . . . . . . . . . . 34
12. Confidential Information . . . . . . . . . . . . . . . . . . . . 35
13. Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . 36
14. General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(a) No Partnership . . . . . . . . . . . . . . . . . . . . . 36
(b) Remedies and Limitations . . . . . . . . . . . . . . . . 37
(c) Notices. . . . . . . . . . . . . . . . . . . . . . . . . 37
(d) Approvals and Objections . . . . . . . . . . . . . . . . 37
(e) Successors and Assigns . . . . . . . . . . . . . . . . . 37
(f) Entire Agreement; Amendments . . . . . . . . . . . . . . 37
(g) Interpretation . . . . . . . . . . . . . . . . . . . . . 38
(h) Waivers. . . . . . . . . . . . . . . . . . . . . . . . . 38
(i) Expenses . . . . . . . . . . . . . . . . . . . . . . . . 38
(j) Partial Invalidity . . . . . . . . . . . . . . . . . . . 38
(k) Operation of this Agreement. . . . . . . . . . . . . . . 38
(l) Execution in Counterparts. . . . . . . . . . . . . . . . 39
(m) Governing Law. . . . . . . . . . . . . . . . . . . . . . 39
(n) Time . . . . . . . . . . . . . . . . . . . . . . . . . . 39
<PAGE>
LEASE
THIS LEASE (as amended, restated, modified, and supplemented and in
effect from time to time, this "Lease") is made as of the 3rd day of December,
1997, by and between ALADDIN GAMING, LLC, a Nevada limited-liability company
("Landlord"), and NORTHWIND ALADDIN, LLC, a Nevada limited-liability company
("Tenant").
RECITALS:
A. Landlord is constructing a casino, hotel, theater, shopping and
parking complex in Las Vegas, Nevada (the "Aladdin Complex"), and has selected
Tenant to develop, construct, own and operate an energy production facility to
supply hot water, chilled water and electricity to said complex.
B. The site on which the aforementioned energy facility shall be
constructed shall be leased by Landlord to Tenant pursuant to the terms and
conditions of this Lease. Additionally, Landlord and Tenant are executing
concurrently herewith a certain Development Agreement of even date herewith (as
amended, restated, modified, or supplemented and in effect from time to time,
the "Development Agreement") regarding the construction of such facility and
have agreed in substance to the form of an Energy Service Agreement (which form
is attached to the Development Agreement, such Energy Service Agreement, in the
form in which it shall finally be executed and delivered, and as it may
thereafter be amended, restated, modified, or supplemented and in effect from
time to time, being herein referred to as the "ESA") regarding the terms and
conditions of the sale by Tenant to Landlord of hot water, chilled water and
electricity.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, it is hereby agreed between Tenant and Landlord as
follows:
Article 1. REPRESENTATIONS AND WARRANTIES.
1.1 Landlord hereby represents and warrants to Tenant as
follows:
1.1.1 Landlord is a limited-liability company duly
organized and existing in good standing under the laws of the
State of Nevada;
1.1.2 Landlord possesses all requisite limited
liability company power and authority to enter into
and perform this Lease and to carry out the
transaction contemplated herein;
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1.1.3 Landlord's execution, delivery and performance of
this Lease have been duly authorized by, or are in
accordance with, its organic instruments; this Lease
has been duly executed and delivered for it by the
signatories so authorized; this Lease constitutes
Landlord's legal, valid and binding obligation;
Landlord's execution, delivery and performance of
this Lease will not result in a breach or violation
of, or constitute a default under, any agreement,
lease, or instrument to which it is a party or by
which it or its properties may be bound or affected;
and
1.1.4 No suit, action or arbitration, or legal,
administrative or other proceedings is pending or has
been threatened against Landlord that would affect
the validity or enforceability of this Lease or the
ability of Landlord to fulfill its commitments
hereunder, or that could result in any material
adverse change in the business or financial condition
of Landlord.
1.2 Tenant hereby represents and warrants to Landlord as
follows:
1.2.1 Tenant is a limited liability company duly
organized and existing in good standing under the
laws of the State of Nevada;
1.2.2 Tenant possesses all requisite limited liability
company power and authority to enter into and perform
this Lease and to carry out the transaction
contemplated herein;
1.2.3 Tenant's execution, delivery and performance of
this Lease have been duly authorized by, or are in
accordance with, its organic instruments; this Lease
has been duly executed and delivered for it by the
signatories so authorized; this Lease constitutes
Tenant's legal, valid and binding obligation;
Tenant's execution, delivery and performance of this
Lease will not result in a breach or violation of, or
constitute a default under, any agreement, lease, or
instrument to which it is a party or by which it or
its properties may be bound or affected;
1.2.4 No suit, action or arbitration, or legal,
administrative or other proceedings is pending or has
been threatened against Tenant that would affect the
validity or enforceability of this Lease or the
ability of Tenant to fulfill its commitments
hereunder, or that could result in any material
adverse change in the business or financial condition
of Tenant; and
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1.2.5 Tenant agrees not to permit any transfer of any
membership interest in Tenant by the sole member of
Tenant as of the date of this Lease, and not to issue
any new membership interest in Tenant, without the
prior written consent of Landlord, such consent not
to be unreasonably withheld; provided, however, that
upon prior notice to Landlord and without Landlord's
prior consent, Tenant shall be permitted to allow
Nevada Electric Investment Company (which is a
wholly-owned subsidiary of Nevada Power Company),
Boston Edison, Ontario Hydro or Houston Industries to
own a membership interest in Tenant, such interest to
be less than or equal to the interest retained by UTT
Las Vegas Inc., a Nevada corporation and a
wholly-owned, indirect subsidiary of Unicom
Corporation, that, as of the date of execution of
this Lease, owns a 100% interest in Tenant.
Article 2. GRANT AND TERM.
2.1 GRANT. For and in consideration of the rents herein
reserved and of the covenants and agreements herein contained on the part of
Tenant to be performed:
2.1.1 Landlord hereby leases to Tenant, and Tenant
hereby leases from Landlord, the real property
located in Clark County, Nevada that is legally
described on Exhibit A (the "Project Site"), which
exhibit shall be attached hereto by Landlord no later
than ten (10) days after Notice to Proceed is
received by Northwind pursuant to the Development
Agreement.
2.1.2 Landlord hereby grants to Tenant and its
successors and assigns a non-exclusive easement in
the real property described on Exhibit B (the
"Landlord's Property"), which exhibit shall be
attached hereto by Landlord no later than ten (10)
days after Notice to Proceed is received by Northwind
pursuant to the Development Agreement (i) for the
purpose of providing access to the Project Site, and
the other property of Tenant located on, in or under
the Landlord's Property, and (ii) to permit access
for, such access not to be unreasonably denied, and
the installation, maintenance, repair, security and
replacement of, pipes, ducts, cables, conduit and
other equipment and apparatus (including the energy
transfer stations) used or to be used by Tenant in
the operation of the Project (as defined in Article 4
below) and the provision of Services (as defined in
Article 4 below) to users, distributors and/or
vendors.
Any such use by Tenant of the Landlord's Property shall be in
accordance with all safety and security rules, regulations and policies then in
effect on Landlord's Property or such other reasonable rules or requirements
which Landlord imposes, and provided further that such use by Tenant shall in no
way have an adverse effect on
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Landlord's other activities. Landlord agrees that Landlord's activities shall
not have an adverse effect on Tenant's activities. For the purposes of this
paragraph, "adverse effect" means a materially detrimental effect on the
ownership, construction, maintenance, repair, or operation of the Project, in
the case of Tenant, or the Aladdin Complex, in the case of Landlord. The
easements granted in this Section shall continue so long as this Lease remains
in effect and shall expire and be of no further force or effect upon the earlier
of the execution of the Reciprocal Easement Agreement (as defined in the
Development Agreement) or the expiration or termination of this Lease. Each
easement granted under this Lease shall exist by virtue of this Lease, without
the necessity of or confirmation by any other document, and shall run with the
Landlord's Property. Upon the expiration, termination (in whole or in part) or
the release of any such easement in accordance with the provisions of this
Lease, the same shall be deemed to have expired, or have been terminated or
released without the necessity of confirmation by any other document.
2.1 TERM. The terms and conditions of this Lease shall
be effective as of the date of this Lease. The initial term of this Lease (the
"Initial Term") shall commence on the earlier of March 1, 2000 or the date upon
which the Aladdin Complex is first opened for business to the public (the
"Commencement Date"). Except as otherwise provided in this Lease to the
contrary, the Initial Term of this Lease shall end on the day immediately
preceding the twentieth anniversary of the Commencement Date and the Initial
Term shall be subject to extension and renewal as provided for in Section 2.3
below. The term of this Lease, as the same may be extended or renewed is
referred to herein as the "Term".
2.3 RENEWAL TERMS.
2.3.1 The Initial Term of this Lease shall be
automatically extended for a period of five years
commencing on the twentieth anniversary of the
Commencement Date and expiring on the day immediately
preceding the twenty-fifth anniversary of the
Commencement Date unless either party gives the other
party written notice not later than twelve (12)
months before the twentieth anniversary of the
Commencement Date that such party is terminating the
Lease as of the twentieth anniversary of the
Commencement Date. The five year renewal period
for in this Section 2.3.1 and each
subsequent five year renewal period provided for in
Section 2.3.2 below are hereinafter referred to as
"Renewal Terms".
2.3.2 The first Renewal Term shall be automatically
extended and renewed for a five year period
commencing upon the expiration of the first Renewal
Term, and each subsequent Renewal Term shall be
automatically extended for an additional five year
renewal period commencing upon the
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expiration of the then existing Renewal Term and expiring
on the day preceding the fifth anniversary thereof, unless
either party gives the other party written notice not
later than twelve (12) months prior to the scheduled
expiration of the then existing Renewal Term that
such party is terminating this Lease as of the
scheduled expiration of such then existing Renewal Term.
2.3.3. Notwithstanding anything herein to the
contrary, the Term shall automatically continue or be extended
for so long as the ESA (as defined in Section 2.4 hereof)
shall continue in effect.
2.4 EARLY TERMINATION RIGHTS. Subject to the terms of
Article 18.2 below, if either the ESA or the Development Agreement is terminated
in accordance with the terms thereof, then each party hereto shall have the
right to terminate this Lease on the effective date of the termination of the
ESA or the Development Agreement, as applicable, by notifying the other party
hereto in writing of such termination, provided, however, that Landlord may not
terminate this Lease by reason of termination of the ESA or the Development
Agreement if such termination of the ESA or the Development Agreement was by the
Tenant pursuant to the Landlord's default thereunder and the Landlord did not
acquire the Project pursuant to such termination.
2.5 ACCEPTANCE OF PROJECT SITE. Tenant hereby acknowledges (a)
that it has been advised to satisfy itself with respect to the condition of the
Project Site (including but not limited to the environmental aspects, compliance
with Applicable Law, (as defined in Section 4.2), and the level of utilities and
services available to the Project Site), (b) that Tenant will make such
investigation as it deems necessary with reference to such matters and, subject
to the provisions of the Development Agreement and the Energy Service Agreement
governing the cost of the Project and the charges payable in respect of
Services, assumes all responsibility therefor as the same relate to Tenant's
occupancy of the Project Site and/or the Term of this Lease, except with respect
to any Hazardous Material located on the Project Site as of the date hereof or
any other conditions of the Project Site existing as of the date hereof which
violate any Environmental Requirements, as to which Landlord shall have
responsibility and from and against which Landlord agrees to indemnify, defend
and hold Tenant harmless, and (c) that neither Landlord, nor any of Landlord's
agents, has made any oral or written representations or warranties with respect
to said matters, other than as set forth in this Lease, and Landlord has no
obligation and has made no promises to alter, remodel, improve, repair or
renovate the Project Site or any part thereof, other than as expressly set forth
in this Lease, the ESA or the Development Agreement.
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Article 3. RENT.
3.1 BASE RENT. Tenant shall pay to Landlord a fixed
monthly base rent equal to $1.00 (the "Base Rent") per month throughout the
Term. Landlord hereby acknowledges receipt of $240 as prepayment of the Base
Rent for the entire Initial Term.
3.2 NET LEASE. Except as provided below, this Lease
shall be deemed to be a "net" lease, and Tenant shall pay, as provided herein,
all Impositions (as hereinafter defined). Tenant shall pay to Landlord,
absolutely net throughout the Term, the Base Rent and other payments hereunder,
free of any charges, assessments, impositions or deductions of any kind, and,
except as contemplated by the Development Agreement and the ESA with respect to
the cost of construction, maintenance, service, repair, ownership, and operation
of the energy production facility, under no circumstances or conditions, whether
now existing or hereafter arising, or whether beyond the present contemplation
of the parties, shall Landlord be expected or required to make any payment of
any kind whatsoever relating to the Project Site. As used herein, "Impositions"
shall mean all operating, maintenance, repair and improvement costs and
insurance premiums owing with respect to the improvements being constructed by
Tenant, in accordance with the terms of the Development Agreement and the ESA,
on the Project Site (collectively, the "Improvements") and the property being
installed by Tenant, in accordance with the terms of the Development Agreement
and the ESA, on, in or under the Landlord's Property (collectively, the
"Additional Property") and all taxes, levies and assessments; use and occupancy
taxes; water and water assessments, fees and use charges; charges for public
utilities; excises; levies; license and permit fees; transit taxes; real estate
taxes; taxes on rentals; intangible and other personal property taxes; business
and occupation taxes; gross sales taxes; occupational license taxes; and all
other governmental impositions and charges of every kind and nature whatsoever,
whether the same are extraordinary or ordinary, general or special, or
unforeseen or foreseen, which at any time from and after the date hereof shall
be or become due and payable, but shall not include any general income taxes or
franchise fees assessed against Landlord; provided, however, that
notwithstanding the foregoing, nothing herein is intended to require Tenant to
pay any charges, fees, costs or expenses that Landlord is required to pay under
the ESA or the Development Agreement, and the term "Impositions" shall not be
deemed to include any of such charges, fees, costs or expenses.
3.3 RENT. As used herein the term "Rent" shall mean
the sum of the Base Rent and any and all other amounts which are due from Tenant
pursuant to the provisions of this Lease. Rent which has not been prepaid as of
the date hereof shall be due and payable to Landlord on the last day of each
month and shall be paid to Landlord at Las Vegas, Nevada or at such other place
as Landlord may designate from time to time. All payments of Rent shall be made
in lawful money of the United States.
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3.4 NO PRESUMPTION. Wherever in this Lease it is
provided that an activity or obligation is at Tenant's cost or expense, such
provision shall not imply or be construed to imply or mean any limitation on any
right which Tenant may have under the ESA and/or the Development Agreement to
include such cost or expense (or some portion thereof) in charges payable to
Tenant thereunder.
Article 4. USE AND POSSESSION.
4.1 USE AND POSSESSION. In accordance with the terms
of the Development Agreement and the ESA, Tenant shall construct on, in and/or
under the Project Site, and shall operate and maintain thereon, an energy
facility (such facility, including the Improvements and the Additional Property,
is referred to herein as the "Project") that will provide hot water, cold water
and electricity (collectively, the "Services") for the Landlord's Property, as
described more fully in the ESA. The Project shall include fiber optic cable and
conduit and related equipment installed by Tenant for use in connection with
providing and monitoring the Services. In accordance with the terms of the
Development Agreement and the ESA, equipment and other improvements necessary to
control and monitor the Project may also be located at the Project Site and on,
in or under the Landlord's Property. Title to the Improvements and to all of the
personal property owned by Tenant and used in connection with the construction,
operation and maintenance of the Project is now and shall be and remain in
Tenant from and after the date hereof, subject to Landlord's potential future
interest in the Improvements, which shall become a possessory interest upon the
expiration or earlier termination of the Term and subject to the other terms and
conditions contained in this Lease.
4.2 LIMITATIONS ON USE. Tenant shall not use or occupy the Project
Site, or permit the use or occupancy of the Project Site, in any manner or for
any purpose which: (a) would violate any law, statute, ordinance or other
federal, state or local governmental rule, regulation or requirement
("Applicable Law") including, without limitation, those with respect to
hazardous or toxic materials, or the provisions of any applicable governmental
permit or document related to the Project Site; (b) would violate any safety,
security or other rule, regulation or policy of Landlord; (c) would in any way
cause an adverse effect on any of Landlord's activities or Landlord's use of
Landlord's property (provided that the handling of interruptions of Services is
exclusively addressed in the ESA); or (d) would cause the cancellation or
ineffectiveness of any fire or other insurance maintained or required hereunder
to be maintained by Tenant. Tenant shall not use the Project Site for any
purpose other than those intended by the Development Agreement and the ESA or as
otherwise permitted by this Lease.
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4.3 APPLICABLE LAW. Tenant shall not do anything or suffer anything to
be done in or about the Project Site which conflicts with or violates any
Applicable Law then in effect. At its sole cost and expense, Tenant shall
promptly comply with all requirements of Applicable Law relating to or arising
out of the use, occupancy, repair or alteration of the Project Site and the
improvements located thereon (provided that Tenant's compliance obligations in
respect of matters addressed by Section 5.7 of the ESA shall be governed thereby
and not hereby).
4.4 OTHER USES.
4.4.1 Tenant may not use the Project Site to provide services
other than the Services without obtaining the prior written consent of
Landlord, and provided that such consent, if granted, will result in an
equitable adjustment to the Base Rent and/or consumption and capacity
charges under the ESA and other reasonable modifications to this Lease
and/or the ESA. When Tenant presents Landlord with a proposal pursuant
to which Tenant would provide services other than the Services,
Landlord shall consider such proposal promptly (and with respect to a
proposal by Tenant to provide services to Bally's, Paris, and/or
Flamingo within seven (7) days of receipt of such proposal) and in good
faith.
4.4.2 Notwithstanding the foregoing, Landlord agrees that
Tenant may network the Project with another energy production facility
(or facilities) provided that: (i) Landlord determines, in its sole
discretion, that such networking will not adversely affect the ability
of the Project to provide the Services for the Landlord's Property and
(ii) the customer(s) of the energy production facility or facilities to
which the Project is networked are not charged rates for hot water,
cold water and/or electricity services provided by the Project which
are less than those charged for the Services pursuant to the terms of
the ESA; provided, that if Tenant disagrees with Landlord as to whether
the charges to third parties for services are less than those payable
by Landlord for Services under the ESA, then the matter shall be
referred to the "Independent Engineer" (as defined in the Development
Agreement) or another mutually acceptable arbitrator, whose decision
shall be final and binding on the parties, and provided further that
Tenant shall have the right to remedy any discrepancy in such charges
by decreasing the charges payable under the ESA and/or by agreeing to
increase the charges for services paid by third parties.
4.4.3 Notwithstanding the foregoing, in the event Tenant
terminates the ESA in accordance with the terms thereof because of a
Landlord default under the ESA or the Development Agreement, and
Landlord does not acquire the energy production facility at Tenant's
request pursuant to such termination, then without Landlord's
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consent, Tenant may provide and sell to third parties services,
provided, however, that Tenant's provision of such services other than
the Services will result in an equitable adjustment to the Base Rent
and/or consumption and capacity charges under the ESA and other
reasonable modifications to this Lease and/or the ESA.
Article 5. POSSESSION AND CONSTRUCTION OF IMPROVEMENTS.
5.1 POSSESSION; ACCESS. In addition to the interests
and rights granted by Landlord to Tenant in Section 2.1 above, Landlord shall
deliver to Tenant, within five (5) days of Landlord's issuance of a Notice to
Proceed pursuant to the Development Agreement, possession of the Project Site
and reasonable and necessary access to the Landlord's Property as is necessary
to enable Tenant to construct the Project and install and secure Tenant's
equipment and fixtures and otherwise to make the Project Site ready for Tenant
use and occupancy in the manner described herein and in the ESA and the
Development Agreement. In addition, Landlord shall permit Tenant access to the
Project Site at all reasonable times after execution of this Lease for the
purposes of investigating surface and subsurface conditions on and around the
Project Site, including taking soil samples and borings. Such entry to the
Landlord's Property shall be subject to all the terms and conditions of this
Lease, excluding payment of Base Rent, during the period commencing on the date
of Tenant's entry and ending on the earlier of (i) the Commencement Date or (ii)
the commencement of operation of Tenant's business from the Project Site or any
part thereof.
5.2 TENANT'S WORK. For purposes of this Article 5, the
term "Tenant's Work" shall mean and refer to the construction and installation
of all aspects of the Project as set forth in detail in the Development
Agreement, including the Improvements, and all other equipment, fixtures, pipes,
wiring, mechanical systems and other property and systems necessary to the
operation of the Project. All of Tenant's work shall be done in the manner
required by the Development Agreement and shall be completely lien-free (except
as provided in Sections 11.1 and 11.2 hereof, and except as otherwise permitted
by the Development Agreement and the ESA). Tenant shall use commercially
reasonable efforts to obtain warranties for Tenant's Work from its contractors
and to enforce such warranties so that defects in Tenant's Work are corrected.
If any warranties are not assignable to Landlord, Tenant shall nevertheless use
reasonable diligence to keep such warranties in effect and to enforce the same.
Tenant further agrees that if it determines that any portion of the Tenant's
Work contains a material defect, it shall promptly notify Landlord of such
defect and of the action which Tenant proposes to take or requires its
contractors to take to remedy the same, provided that Tenant shall not take any
action that may prejudice Landlord's ability to assert its warranty rights (if
any) without Landlord's prior written consent. Without limiting the foregoing,
Tenant reserves the right to install its own security system on the
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Project Site and Landlord, notwithstanding any other provision of this Lease to
the contrary, understands and agrees that Tenant shall have the right to limit
or restrict Landlord's access to the Project Site for reasonable safety and
security purposes, but subject to Landlord's rights under Section 14.1 below and
as provided for in the ESA and the Development Agreement. Subject to the rights
of Tenant under Sections 11.1 and 11.2 hereof, and except as permitted by the
Development Agreement and the ESA, all of Tenant's Work shall be completed
lien-free and in accordance with all Applicable Law. At Landlord's election, all
Tenant's Work shall be coordinated with Landlord's construction manager (who
shall not unreasonably interfere with the rendition of Tenant's Work).
5.3 LANDLORD'S WORK. The work to be performed by
Landlord in connection with the construction and development of the Project is
described in detail in the Development Agreement (such work being referred to
herein as the "Landlord's Work"). The Landlord's Work shall be performed in
accordance with all Applicable Law and in accordance with the Development
Agreement. Landlord shall use commercially reasonable efforts to obtain
warranties for Landlord's Work from its contractors and to enforce such
warranties so that defects in Landlord's Work are corrected.
5.4 LAYDOWN AND STAGING AREAS. Landlord shall give
Tenant the right to use, at no cost to Tenant and at such times as reasonably
required by Tenant before or after the Commencement Date, such portion of the
property of Landlord reasonably needed by Tenant for staging of construction of
the Project, storing materials and parking for Tenant's contractors and
subcontractors and their respective employees, such portion of the property to
be designated by the Landlord.
5.5 MUTUAL COOPERATION. Landlord and Tenant, both
acting reasonably, agree to cooperate with each other so that the Landlord's
Work and Tenant's Work can be completed in a timely manner.
Article 6. INSURANCE AND WAIVER OF SUBROGATION.
6.1 INSURANCE.
(a) At all times from and after the date hereof, Tenant shall,
at its sole expense, purchase and maintain in full force and effect,
the following insurance coverages:
(i) Workers' compensation insurance, with limits of liability
at least equal to the statutory requirements therefor;
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(ii) Employer's liability insurance of not less than
$1,000,000;
(iii) Comprehensive general liability insurance against
liability for injury to or death of any person or damage
to property in connection with the use, operation or
condition of the Project of not less that $2,000,000
combined single limit per occurrence and annual
aggregate;
(iv) "All-risk" property insurance covering the Project to
the extent of the full replacement cost thereof and,
during construction of the Project, "all-risk builder's
risk" insurance covering the Project to the extent of
the full replacement thereof;
(v) During any and all periods of construction of the
Project, Tenant shall cause its general contractors
(including all contractors who contract directly with
Tenant) to obtain (i) commercial general liability
insurance with a minimum limit of liability of
$5,000,000 combined single limit for bodily injury,
personal injury and property damage and include Landlord
and Landlord's lenders as additional insureds and (ii)
workers' compensation insurance, with limits of
liability at least equal to the statutory requirements
therefor and employer's liability insurance of not less
than $1,000,000; and
(vi) Excess liability umbrella coverage of at least
$50,000,000.
(b) At all times from and after the date hereof, Landlord
shall, at its sole expense, purchase and maintain in full force and
effect, the following insurance coverages:
(i) Comprehensive general liability (including public
liability and property damage) insurance coverage
covering occurrences, accidents and incidents on the
Landlord's Property that (1) occur from and after the
date hereof (regardless of when the claim is filed) and
(2) result in bodily injury, personal injury or death to
any person or entity and/or damage or destruction of
property. Said insurance shall have a combined single
limit of liability per occurrence of not less than
$1,000,000 on a primary basis and not less than
$50,000,000 on an excess/umbrella basis, or such greater
amounts as are typical for similar casino-hotel projects
in Las Vegas; and
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(ii) "All-risk" property insurance covering the Landlord's
Property and improvements thereon to the extent of the
full replacement cost thereof.
(c) Each party hereto agrees that the insurance described
above to be provided by the other party may be provided by and through
blanket coverages which may be provided in whole or in part through a
policy or policies covering other liabilities and locations of the
party obligated to provide such insurance and its affiliates.
Except as otherwise set forth in Articles 13 and 15 hereof, Tenant shall be
liable for any deductible amount in the event of any loss under the policies
required by Section 6.1.
6.2 ADDITIONAL REQUIREMENTS. All insurance required to
be purchased by Tenant pursuant to this Article 6 shall be placed with reputable
companies licensed to do business in the State of Nevada and shall provide for
deductibles reasonably acceptable to Landlord. Prior to the Commencement Date,
Tenant shall deliver to Landlord certificates of insurance evidencing the
insurance required hereby. All such insurance will require not less than thirty
(30) days prior written notice to both parties in the event of modification or
cancellation of coverage.
6.3 WAIVER OF SUBROGATION RIGHTS; DEFAULT. Each party
hereby releases and waives, to the extent legally possible for it to do so
without invalidating its insurance coverages, for itself and on behalf of its
insurer, the other party hereto and its respective officers, directors, agents,
members, partners, servants, and employees from liability for any loss or damage
to any or all property located on the Aladdin Lands (as defined in the
Development Agreement) which loss or damage is of the type and within the limits
covered by the "all-risk" property damage insurance and other property /
casualty insurance which the parties have agreed to obtain and maintain in
effect pursuant to clauses (a) and (b) of Section 6.1, irrespective of any
negligence on the part of the released party and its respective officers,
directors, agents, partners, members, servants, or employees, which may have
contributed to or cause such loss or damage. Each party covenants that it will,
if available, obtain for the benefit of the other party and its officers,
directors, agents, members, partners, servants, and employees, a waiver of any
right of subrogation which the insurer of such party may acquire against such
party by virtue of the payment of any such loss covered by insurance. In the
event a party is by law, statute or governmental regulation unable to obtain a
waiver of the right of subrogation for the benefit of the other party (and its
respective, officers, directors, agents, members, partners, servants, and
employees) or its insurance carriers will not give such a waiver or its property
/ casualty insurance will be invalidated or terminated by the waiver and release
set forth in the first sentence of this Section 6.3, then, during any period of
time when such waiver is unobtainable, said party shall not have been deemed to
have released any subrogated claim of its insurance carrier against such other
party (or its respective officers, directors, agents, members, partners,
servants, or employees), and during the same period of time, such other party
shall not have been deemed to have released the party which has been
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unable to obtain such waiver (or such party's respective officers, directors,
agents, members, partners, servants, or employees) from any claims it or its
insurance carrier may assert which otherwise would have been released pursuant
to this Section 6.3.
If Tenant at any time fails to provide the insurance coverage
required by this Article 6, Landlord will be entitled to purchase such coverage,
after written notice of Landlord's intent, and to collect the cost of such
coverage from Tenant. Notwithstanding anything to the contrary in this Lease, in
no event shall Landlord or Tenant be liable to the other for any lost business,
loss of profits or other special and/or consequential damages, whether direct or
indirect, in respect of which each hereby excuses the other and waives any and
all such claims against the other, provided that the foregoing is not intended
to be a waiver of any rights or obligations of Tenant or Landlord under the ESA
or the Development Agreement.
Article 7. DAMAGE OR DESTRUCTION. In the event the Project or
any part thereof is damaged or destroyed by fire, explosion or other casualty,
except as otherwise provided below in this Article 7, Tenant shall repair,
restore or rebuild with due diligence the damaged portion of the Project. Said
damage and destruction shall not affect in any way the obligation of Tenant to
pay Rent or release Tenant of or from any obligation imposed on Tenant under
this Lease. Tenant shall commence the repair, restoration or rebuilding of the
Project as soon as is reasonably practicable after such damage or destruction
occurs and shall complete such repair, restoration or rebuilding as promptly as
is reasonably possible in order to comply with its obligations under the ESA,
and shall in the course thereof comply with the terms of the Development
Agreement and with Section 5.2 hereof, provided that Tenant may make such
revisions and changes to the Tenant's Work as Tenant deems appropriate under the
circumstances, after obtaining Landlord's prior approval, which shall not be
unreasonably withheld or delayed, to such revisions and changes; provided,
however, that any such changes are made in accordance with the terms of the
Development Agreement during the term thereof. In the event that the net
proceeds of insurance payable in respect of such casualty is not sufficient to
fully restore the damaged portion of the Project (and provided that such
shortfall is not attributable to any failure by Tenant to maintain the property
/ casualty insurance coverage required by this Lease), such that Tenant shall
have to provide additional funds in order to comply with its obligations under
this Article 7, then the "Investment in Northwind Facilities" under the ESA
shall be increased by the amount of such additional funds in excess of net
proceeds of insurance and Landlord's obligation to pay the Contract Capacity
Charge under the ESA during the balance of the term thereof then in effect shall
be modified in accordance therewith.
Article 8. CONDEMNATION.
8.1 COMPLETE TAKING. If, at any time during the Term,
title to all or substantially all of the Project Site shall be taken in
condemnation proceedings or by any right of eminent domain, this Lease shall
terminate and expire on the date of such taking and the Rent payable hereunder
shall be apportioned and paid to the date of such taking. For purposes of this
Article, substantially all of the Project Site shall be deemed to have been
taken if the untaken portion cannot be practically and economically used or
converted for use by Tenant for the Project in a manner permitting Tenant to
comply with its obligations under the ESA and the Development Agreement. Upon
the occurrence of any such taking and the
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termination of this Lease, Landlord and Tenant shall share any award or awards
as follows: (i) if the aggregate amount of such award or awards equals or
exceeds (x) the purchase price then payable under Section 9.3 of the ESA plus
(y) the fair value of the portion of the Project Site being taken, then Landlord
shall be entitled to receive an amount equal to the fair value of the Project
Site being taken and Tenant shall be entitled to receive an amount equal to the
purchase price which would then be payable under Section 9 of the ESA if the
Project were then purchased by Landlord from Tenant pursuant to such section,
and Landlord and Tenant shall each be entitled to receive an amount equal to
fifty (50) percent of the amount (if any) by which the aggregate awards exceeds
the amount described in clauses (x) and (y) immediately preceding; and (ii) if
the aggregate awards are less than an amount equal to the aggregate amount under
clauses (i)(x) and (i)(y) preceding, then Landlord shall be entitled to receive
an amount equal to the fair value of the portion of the Project Site being taken
multiplied by a fraction, the numerator of which is the aggregate awards and the
denominator of which is the aggregate of the amounts described in clauses (i)(x)
and (i)(y) preceding, and the Tenant shall be entitled to receive the balance of
the aggregate awards. In either case, Tenant shall be entitled to collect the
entire award and withhold therefrom the portion thereof to which Tenant is
entitled pursuant to this Section 8.1 and pay to Landlord the portion thereof to
which Landlord is entitled. Tenant shall execute any and all documents that may
be required in order to facilitate the collection and distribution of the award
in accordance with the terms of this section. In the event of a dispute between
Landlord and Tenant as to whether or not the untaken portion of the Project Site
can be practically and economically used or converted by Tenant as aforesaid,
and the parties cannot agree within thirty days after such taking, such dispute
shall be resolved in the manner provided in Section 7.1(c) of the ESA.
8.2 PARTIAL TAKING. Upon any such taking of less than
the whole or substantially all of the Project Site, as promptly as possible a
determination under the ESA shall be made as to whether the ESA shall be
terminated pursuant to Section 7.1(c) thereof. (a) If the ESA is terminated as a
result of such partial taking, then this Lease shall be terminated concurrently
with the termination of the ESA and Landlord and Tenant shall share any award or
awards as follows: (i) if the aggregate amount of such awards equals or exceeds
(x) the purchase price then payable under Section 9.3 of the ESA plus (y) the
fair value of the portion of the Project Site being taken, then Landlord shall
be entitled to receive an amount equal to the fair value of the Project Site
being taken and Tenant shall be entitled to receive an amount equal to the
purchase price which would then be payable under Section 9 of the ESA if the
Project were then purchased by Landlord from Tenant pursuant to such section,
and Landlord and Tenant shall each be entitled to receive an amount equal to
fifty (50) percent of the amount (if any) by which the aggregate awards exceed
the amount described in clauses (x) and (y) immediately preceding; and (ii) if
the aggregate awards are less than an amount equal to the aggregate amount under
clauses (i)(x) and (i)(y) preceding,
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then Landlord shall be entitled to receive an amount equal to the fair value of
the portion of the Project Site being taken multiplied by a fraction, the
numerator of which is the aggregate awards and the denominator of which is the
aggregate of the amounts described in clauses (i)(x) and (i)(y) preceding, and
the Tenant shall be entitled to receive the balance of the aggregate awards. In
either case, Tenant shall be entitled to collect the entire award and withhold
therefrom the portion thereof to which Tenant is entitled pursuant to this
Section 8.2(a) and pay to Landlord the portion thereof to which Landlord is
entitled. Tenant shall execute any and all documents that may be required in
order to facilitate the collection and distribution of the award in accordance
with the terms of this section. (b) If the ESA is not terminated as a result of
such partial taking, then (i) Tenant, at its sole cost and expense, shall
complete Tenant's Work and comply with its obligations in respect of restoring
the Project set forth in Section 7.1(a) of the ESA; (ii) this Lease shall
continue and the Term shall not be reduced or affected in any way; and (iii) at
Tenant's election, the award or awards made in connection with such taking shall
be distributed to Tenant in whole or in part and the amount which Tenant
receives shall be applied to the cost and expense of restoring the Project, with
any excess deemed to be a payment in reduction of the "Investment in the
Northwind Facilities" under the ESA. In the event such excess is applied to
reduce the "Investment in the Northwind Facilities," the Contract Capacity
Charge payable by Landlord under the ESA shall be reduced to reflect such
payment (such reduction to be determined by assuming that such payment is
applied 60% in reduction of debt incurred to finance the Project and 40% as a
return of Tenant's capital). If the ESA is not terminated, then, to the extent
(if any) that the cost of restoring the Project exceeds any award or awards
which are received by Tenant, the "Investment in the Northwind Facilities" shall
be adjusted accordingly and Landlord's obligation to pay the Contract Capacity
Charge under the ESA during the balance of the term thereof then in effect shall
be modified in accordance therewith.
8.3 SETTLEMENT. Landlord and Tenant shall each be
entitled to participate at their own expense in the negotiation and settlement
of any amounts or other compensation resulting from or in connection with the
condemnation or other taking of the Project Site or any part thereof.
Article 9. MAINTENANCE AND ALTERATIONS.
9.1 LANDLORD'S MAINTENANCE. During the Term, Landlord
shall keep and maintain, repair and replace the Landlord's Work and the
Landlord's Property in good working order and repair in compliance with all
Applicable Law and in the manner necessary to enable Tenant to perform its
obligations under the Development Agreement and the ESA.
9.2 TENANT'S MAINTENANCE. During the Term, Tenant
shall keep and maintain, repair and replace, at Tenant's sole cost and expense
(subject to the provisions of
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the Development Agreement and the ESA governing the cost of the Project and the
charges payable in respect of Services), the Project and the Project Site in
good working order and repair in compliance with all Applicable Law.
9.3 ALTERATIONS. Tenant shall have the right to make
additions, improvements and alterations in and to the Project and the Project
Site (collectively, "Alterations") from time to time during the Term, provided
such Alterations comply with the terms of the Development Agreement, the ESA and
this Lease, and provided that for material Alterations Tenant first obtains
Landlord's consent, which consent may be withheld in Landlord's sole discretion,
except as otherwise provided in Section 4.4 hereof. Tenant agrees that any
Alterations made shall be made in a good and workmanlike manner and shall be
made in accordance with the terms of the Development Agreement, the ESA, all
Applicable Law, and the requirements of Section 5.2 herein and will be completed
on a lien-free basis (except as provided in Section 11.1 hereof.)
Article 10. ASSIGNMENT AND SUBLETTING.
10.1 ASSIGNMENT AND SUBLETTING. Except for a "Permitted
Transfer" (as such term is herein defined) or an assignment made in accordance
with the terms of Section 11.2 below, any of which shall be permitted at any
time without Landlord's consent, but only after prior written notice to
Landlord, Tenant shall not, either prior or subsequent to the commencement of
the Term, (i) assign this Lease or any interest under this Lease, or (ii) sublet
the Project Site or any part thereof, without Landlord's prior written consent,
which shall not be unreasonably withheld or delayed.
10.1.1 For purposes of this Article 10, the term
"Permitted Transfer" shall mean any transfer or
assignment of Tenant's interest in this Lease made in
connection with a transfer of Tenant's interest in
the ESA or the Development Agreement which is
permitted under the terms thereof.
Landlord acknowledges and agrees that the transferee under any assignment or
transfer to which Landlord has consented as aforesaid, as well as the transferee
or assignee under any Permitted Transfer, shall be deemed to be the "Tenant" for
purposes of this Lease and shall be afforded all of the rights, benefits and
obligations of Tenant hereunder (regardless of whether or not such assignment
occurs concurrently with a transfer, sale or assignment of all or a portion of
Tenant's right, title and interest in the Project). In the event of an
assignment, transfer or sublease, other than a Permitted Transfer, the
transferee shall expressly assume the obligations of Tenant in writing, and the
terms of this Lease shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns. Any assignment or
sublease in violation of this Article 10 shall be null and void.
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10.2 CONSENT NOT A RELEASE. Neither a Permitted
Transfer nor the consent by Landlord to any assignment or subletting shall
operate to relieve Tenant from any covenant or obligation hereunder except to
the extent, if any, expressly provided for in such consent and except, with
respect to a Permitted Transfer, to the extent that Tenant is relieved of its
obligations under the ESA and the Development Agreement, or be deemed to be a
consent to or relieve Tenant from obtaining Landlord's consent to any subsequent
assignment or subletting requiring consent under Section 10.1 above.
Article 11. LIENS AND ENCUMBRANCES.
11.1 ENCUMBERING LANDLORD'S TITLE. Tenant shall make
all payments and take all actions at its own cost and expense as may be
necessary to ensure that no lien, charge, or order for payment of money is
registered against Landlord's interest in and to the Project Site that results
from any work, services or materials supplied to Tenant or the Project Site or
any act or omission of Tenant and that is not discharged or vacated (or with
respect to which payment has not been secured by the placement of a bond in an
amount, form and content reasonably acceptable to Landlord) within ten (10)
business days after Tenant receives notice of such registration. Tenant shall
indemnify and save harmless Landlord against any and all costs, liabilities,
suits, penalties, claims and demands, including reasonable attorney's fees,
arising therefrom. Any claim to, or lien upon, the Project Site arising from the
acts or omissions of Tenant shall accrue only against the leasehold estate of
Tenant. If Tenant fails to cause such lien, charge or order to be discharged of
record or bonded within twenty (20) days after Tenant receives notice of such
registration, then Landlord shall have the right to cause the same to be
discharged. All amounts paid by Landlord to cause any such lien, charge or order
to be discharged shall constitute additional rent payable by Tenant to Landlord,
or, at Landlord's option, may be recovered from Tenant in an appropriate
proceeding.
11.2 COLLATERAL ASSIGNMENT AND LIENS. Landlord agrees
that Tenant shall have the right to grant to a lender a security interest in
Tenant's interest in this Lease for collateral purposes and to grant to such
lender security interests in and liens on the personal property, machinery and
equipment of Tenant located at the Project Site.
Article 3. UTILITIES; SERVICES. Tenant shall purchase the
water, gas and sewage services necessary for the operation of the Project
directly from the utility, authority or municipality providing such service, and
shall pay for such services when such payments are due. Tenant covenants to pay
all such charges for these utility services and any others required in the
operation of its business on or before their due date.
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Article 13. INDEMNITY.
13.1 GENERALLY. Subject to Section 13.2 below, each
party hereto shall protect, indemnify and save the other party and its agents
and employees harmless from and against all liabilities, obligations, claims,
damages (other than lost business, lost profits and other special and/or
consequential damages, whether direct or indirect, all claims for which are
hereby irrevocably waived, provided that this shall not be deemed to waive any
rights or obligations of Tenant or Landlord under the ESA or the Development
Agreement), penalties, causes of action, costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses) imposed upon or asserted
against such other party by reason of any accident, physical injury to or death
of persons or physical loss of or physical damage to property arising (i) from
the indemnifying party's entry upon or occupancy of the Project Site or conduct
of such party's business in or from the Project Site; (ii) from any breach or
default on the part of the indemnifying party in the performance of any covenant
or agreement on the part of such party to be performed pursuant to the terms of
this Lease; (iii) any violation of Federal, state or local law, regulation or
action governing environmental or safety statutes applicable to the Project; or
(iv) due to any other legally actionable act or omission of the indemnifying
party or its agents, contractors or employees. In case any action, suit or
proceeding is brought against a party hereto by reason of any such occurrence,
the other party shall, at the indemnified party's option, at the indemnifying
party's expense, by counsel selected by the indemnifying party (which counsel
must be reasonably satisfactory to the indemnified party), defend such action,
suit or proceeding, or cause the same to be defended.
13.2 EFFECT OF WAIVER. The indemnities of either party
contained in this Lease shall not apply or pertain to liabilities, obligations,
claims, damages, penalties, causes of action, costs or expenses to the extent
such party has waived claims in respect thereto pursuant to Section 6.3 above.
13.3 SURVIVAL OF OBLIGATION. The duty to indemnify
under this Article will continue in full force and effect notwithstanding the
expiration or termination of this Lease, with respect to any loss, liability,
damage or other expense based on factors and conditions which occurred prior to
such termination.
Article 14. RIGHTS RESERVED TO LANDLORD; ADDITIONAL LANDLORD
REPRESENTATIONS, WARRANTIES AND COVENANTS.
14.1 INSPECTION. Landlord shall have the right, upon
reasonable advance written notice to Tenant, except in case of emergency, when
no notice shall be required, to inspect the operation of the Project during
normal business hours to determine whether it is being operated in compliance
with all Applicable Law and in the manner required under this
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Lease and to enable Landlord to perform its obligations hereunder. Tenant or its
designated representative shall have the right to be present during any such
inspection.
14.2 REPRESENTATIONS AND WARRANTIES. Landlord hereby
represents and warrants to Tenant that:
14.2.1 There are no leasing or rental agreements in
effect demising the Project Site other than the
Lease, and there are no executory contracts, options
or agreements in existence which relate to the
purchase of all or any portion of the Project Site or
any interest therein.
14.2.2 Landlord has no knowledge of any outstanding
violations of any applicable pollution, zoning,
Environmental Protection Agency, health, safety,
OSHA, fire, environmental, sewerage and building
codes, statutes, ordinances and regulations
pertaining to the Project Site.
14.2.3 Landlord has no knowledge of any special taxes
or assessments against the Project Site, or any
portion thereof.
14.2.4 Landlord has no knowledge of any increase in
the real estate tax assessment of the Project Site or
any portion thereof.
14.2.5 To Landlord's knowledge, during Landlord's
ownership of the Project Site, (i) no "Hazardous
Materials" (as hereinafter defined) have been located
on the Project Site or have been released into the
environment, or discharged, placed or disposed of at,
on or under the Project Site; (ii) no underground
storage tanks have been located on the Project Site;
(iii) the Project Site has never been used as a dump
for waste material; (iv) no portion of the Project
Site is located in an area that has been designated a
wetlands or other environmental protection area; and
(v) the Project Site and its prior uses comply with
and at all times have complied with, any applicable
governmental law, regulation or requirement relating
to environmental and occupational health and safety
matters and Hazardous Materials.
14.2.6 Landlord believes it has not misstated any
material fact, or failed to disclose any material
fact, relating to the Project Site or Landlord's
Property.
14.3 SECURITY; NO OBSTRUCTION. Landlord, at its sole
expense, shall at all times from and after the date hereof provide reasonable
security for and protection of all
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property of Tenant located on, in or under the Landlord's Property in accordance
with the terms of this Lease.
Article 15. ENVIRONMENTAL MATTERS.
15.1 DEFINITIONS. For the purposes of this Article 15,
the following terms shall have the following meanings: (i) the term "Hazardous
Material" shall mean any material or substance that, whether by its nature or
use, is now or hereafter defined as a hazardous waste, hazardous substance,
pollutant or contaminant under any Environmental Requirement, or which is toxic,
explosive, corrosive, flammable, infectious, radioactive, carcinogenic,
mutagenic or otherwise hazardous and which is now or hereafter regulated under
any Environmental Requirement, or which is or contains ammonia, petroleum,
gasoline, diesel fuel or any other petroleum hydrocarbon product or material,
(ii) the term "Environmental Requirements" shall collectively mean all present
and future laws, statutes, ordinances, rules, regulations, orders, codes,
licenses, permits, decrees, judgments, directives or the equivalent of or by any
Governmental Authority and relating to or addressing the protection of the
environment or human health or safety, and (iii) the term "Governmental
Authority" shall mean any of the following having jurisdiction over the Project
Site, the Project or any part of either thereof: the federal or state government
or any political subdivision thereof, or any agency, court or body of the
federal or state government or any political subdivision thereof, exercising
executive, legislative, judicial, regulatory or administrative functions.
15.2 COMPLIANCE WITH ENVIRONMENTAL REQUIREMENTS. Each
party to this Agreement agrees that it will not use, store or bring onto the
Project Site any Hazardous Material in violation of Environmental Requirements
without first obtaining the prior written consent of the other party. Each party
shall comply in all material respects with all Environmental Requirements, and
will not generate, store, handle, process, dispose of or otherwise use Hazardous
Materials at, in, on, under or about the Project Site in a manner that causes
the imposition on Tenant, Landlord, the Project Site or any part thereof of any
liability or lien of any nature whatsoever under any Environmental Requirement.
Each party shall notify the other party promptly in the event that such party
receives notice of any spill or other release of any Hazardous Material at, in,
on, under or about the Project Site which is required to be reported to a
Governmental Authority under any Environmental Requirement, will promptly
forward to the other party copies of any notices received by such party relating
to alleged violations by such party of any Environmental Requirement. If at any
time it is determined by a Governmental Authority that a party's operation or
use of the Project Site violates any applicable Environmental Requirement or
that as a consequence of such party's action or inaction there are Hazardous
Materials located at, in, on, under or about the Project Site which, under any
Environmental Requirement, require special handling in collection,
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storage, treatment or disposal, or any other form of cleanup or corrective
action, such party shall, within thirty days after receipt of notice from any
Governmental Authority, or sooner if required by such notice, take, at the sole
cost and expense of such party (except as otherwise set forth in the ESA), such
actions as may be necessary to fully comply in all respects with all
Environmental Requirements; provided, however, that if such compliance cannot
reasonably be completed within such thirty day period, such party shall commence
such necessary action within such thirty-day period and shall thereafter
diligently and expeditiously proceed to fully comply in all respects and in a
timely fashion with all Environmental Requirements.
15.3 ENVIRONMENTAL INDEMNITY. Subject to the terms of
Article 13 above, each party (the "Indemnifying Party") shall defend, indemnify,
and hold harmless the other party, its members, employees, agents, officers, and
directors (the "Indemnified Parties"), from and against any and all claims,
demands, penalties, causes of action, fines, liabilities, settlements, damages
(other than lost business, lost profits and other special and/or consequential
damages, whether direct or indirect, all claims for which are hereby irrevocably
waived), costs, or expenses of whatever kind or nature, known or unknown,
foreseen or unforeseen, contingent or otherwise (including, without limitation,
reasonable counsel and consultant fees and expenses, investigation and
laboratory fees and expenses, court costs, and litigation expenses) arising out
of, or in any way related to, (i) any breach by the Indemnifying Party of the
provisions of Section 15.2 above or by Landlord of the representations and
warranties contained in Section 14.2.5 above, (ii) the presence, disposal,
spillage, discharge, emission, leakage, release, or threatened release of any
Hazardous Material which is at, in, on, under, about, from or affecting the
Project Site or any portion thereof, including, without limitation, any damage
or injury resulting from any such Hazardous Material to or affecting the Project
Site or the soil, water, air, vegetation, buildings, personal property, persons
or animals located on the Project Site or on any other property or otherwise,
which arose or occurred through the act or omission of the Indemnifying Party or
resulted from the Indemnifying Party's use or occupancy of the Project Site,
(iii) any personal injury (including wrongful death) or property damage (real or
personal) arising out of or related to the generation, storage, handling,
processing, disposal of or use of any such Hazardous Material by the
Indemnifying Party, (iv) any lawsuit brought, settlement reached, or order or
directive of or by any Governmental Authority relating to the Indemnifying
Party's use of such Hazardous Material, or (v) any violation by the Indemnifying
Party of any Environmental Requirement.
15.4 LIMITATION ON INDEMNITY. The aforesaid
indemnification shall not be applicable to any claim, demand, penalty, cause of
action, fine, liability, settlement, damage, cost or other expense of any type
whatsoever occasioned, arising and caused solely and directly as the result of
the negligence or willful misconduct of a party claiming a right to be
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indemnified, or, with respect to Tenant's indemnification obligations, arising
in connection with (i) an environmental condition occurring prior to the date
upon which Tenant enters upon the Project Site, or (ii) an environmental
condition occurring subsequent to the date upon which Landlord acquires
possession of the Project Site if such claim, demand, penalty, cause of action,
fine, liability, settlement, damage, cost or other expense was not caused by an
act or omission of Tenant or an employee, agent or contractor of Tenant, and
Landlord shall be solely responsible for all claims and other expenses resulting
from the conditions described in the preceding clauses (i) and (ii).
15.5 SURVIVAL OF INDEMNITY. Except as hereinabove
specifically provided to the contrary in this Article 15, the obligations and
liabilities of Landlord and Tenant under this Article 15 in respect to a claim
which arises or accrues prior to the expiration or termination of the Term shall
survive and continue in full force and effect and shall not be terminated,
discharged or released, in whole or in part, irrespective of whether the Lease
has terminated pursuant to the provisions of this Lease or acceptance by
Landlord of possession of the Project Site.
Article 16. TITLE; SUBORDINATION. Landlord represents and
warrants to Tenant that prior to the date upon which the Notice to Proceed (as
defined in the Development Agreement) is received by Northwind, Landlord will
hold fee simple title to the Aladdin Lands and the Project Site. Landlord will
promptly notify Tenant in writing if any mortgage, trust deed or ground lease
encumbers the Project Site. If at any time the Project Site shall become subject
to any mortgage, trust deed or ground lease, then within thirty (30) days after
the creation of such lien or the commencement of the term of such ground lease,
as the case may be, Landlord shall deliver to Tenant a recordable
non-disturbance agreement (pursuant to which, among other things, the Lease, and
Tenant's right of possession of the Project Site and the Landlord's Property on
the terms and conditions set forth in the Lease, would be honored by any lender,
ground lessor or person or entity claiming by, through or under such lender or
ground lessor, in the event a foreclosure or deed-in-lieu of foreclosure
occurred or a ground lease was terminated and no Tenant Default then existed)
satisfactory in form and substance to Tenant acting in a commercially reasonable
manner (herein called a "Non-Disturbance Agreement") signed by such lender or
ground lessor, as the case may be. Without limiting the foregoing, if the
mortgagee or trustee in any first mortgage or first trust deed hereafter made
desires this Lease to be subject and subordinate to its first mortgage or first
trust deed, then all or a portion of the rights and interests of Tenant under
this Lease (other than rights in respect of any casualty loss of the Project or
under Sections 8.1 and 8.2 hereof) shall be subject and subordinate to such
first mortgage or first trust deed and to any and all advances to be made
thereunder, and to the interest thereon, and all renewals, replacements and
extensions
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thereof, if and only if such mortgagee or trust deed holder or such
ground lessor, as the case may be, has theretofore delivered to Tenant a
Non-Disturbance Agreement signed by such lender or ground lessor, as the case
may be. Any mortgagee or trustee in any first mortgage or trust deed may elect
that, instead of making this Lease subject and subordinate to its first mortgage
or first trust deed, the rights and interest of Tenant under this Lease shall
have priority over the lien of its mortgage or trust deed. Tenant agrees that in
the event that any trustee or mortgagee or ground lessor elects to make this
Lease subordinate to its mortgage, trust deed or ground lease, and Tenant has
received from such lender or ground lessor a signed Non-Disturbance Agreement,
Tenant shall, upon the request thereof, attorn to any such trustee or mortgagee
who becomes owner of the Project Site through foreclosure or deed in lieu of
foreclosure or to any other purchaser of the Project Site at a foreclosure sale
or to such ground lessor, as the case may be.
Article 17. SURRENDER AND HOLDOVER.
17.1 SURRENDER AND REMOVAL OF IMPROVEMENTS. In the
event that Landlord requires Tenant to remove the "Northwind Facilities"
pursuant to Section 9.2 of the ESA, then no later than the 180th day following
the date on which this Lease expires or is terminated in accordance with the
terms hereof, Tenant shall surrender the Project Site and shall remove therefrom
any and all machinery, equipment and personal property at Landlord's expense,
except that in the event Tenant negligently performs such removal or willfully
causes any damage in the course of performing such removal, Tenant shall be
responsible at its sole expense for repairing all damage it negligently or
willfully caused. Otherwise Tenant shall surrender the Project Site immediately
following the date of expiration or termination and Tenant shall not remove such
property if Landlord or its assignee has exercised any rights it may have to
acquire the same under the terms and conditions of the Development Agreement or
the ESA. Tenant shall restore the Project Site to a condition approved by
Landlord, which approval shall not be unreasonably withheld or delayed, and
Tenant shall repair any damage to Landlord's Property which is due to Tenant's
use thereof. Tenant's interest in all improvements remaining on the Project Site
after the expiration or earlier termination of the Lease shall be vacated and
surrendered by Tenant to Landlord and shall automatically become the property of
Landlord except to the extent that Landlord requires Tenant to remove the same,
and Tenant agrees to execute and deliver to Landlord such deeds, bills of sale,
assignments or other instruments of conveyance as Landlord may deem reasonably
necessary to evidence such transfer of such improvements to Landlord.
17.2 HOLDING OVER. Except as necessary to comply with
its obligations under Section 17.1 hereof, Tenant shall have no right to occupy
the Project Site or any portion thereof after the expiration of the Term or
after termination of the Lease or of Tenant's right to possession. In the event
Tenant holds over, Landlord may exercise any and
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all remedies available to it at law or in equity to recover possession of the
Project Site and for any damages resulting from such holdover.
Article 18. DEFAULT AND REMEDIES.
18.1 TENANT DEFAULTS. Tenant agrees that any one or more of the
following events shall be considered "Tenant Defaults" as said term is used
herein:
18.1.1 Tenant shall fail to pay any Rent or other
charge owing by Tenant pursuant to the terms of this
Lease within thirty days after receipt of written
notice from Landlord that such amount is due and
payable;
18.1.2 Tenant shall fail to keep, observe or perform
any of the other covenants or agreements herein
contained to be kept, observed and performed by
Tenant, and such failure shall continue for thirty
days (or such shorter period as is specifically
referred to in this Lease for any particular breach)
after notice thereof in writing to Tenant; PROVIDED,
however, in the event that such failure cannot
reasonably be cured within the aforesaid thirty day
period (or shorter period, if applicable), and Tenant
shall within said period commence to cure said
default and diligently thereafter prosecutes to
correction said failure, the period for completion
shall be extended for so long as is reasonably
required to cure said default;
18.1.3 The estate or interest of Tenant in the Project
Site or the Project is levied upon or attached in any
proceeding and such process is not stayed, vacated or
discharged within ninety (90) days after such levy or
attachment;
18.1.4 Any representation or warranty made by Tenant
to Landlord in connection with this Lease is false or
misleading in any material respect when made; or
18.1.5 Tenant is in default under the ESA or the
Development Agreement.
18.2 LANDLORD REMEDIES; TERMINATION EVENT. Upon the
occurrence of any one or more of such Tenant Defaults, Landlord shall be
entitled to recover as damages all past due Rent and other sums then due and
payable by Tenant including costs and expenses reasonably incurred in the
exercise of Landlord's remedy (including reasonable attorney's fees), to seek
appropriate equitable relief including the termination of this Lease (but only
if
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the Development Agreement and the ESA also are terminated in accordance with
their respective terms) and to pursue any and all remedies available at law, in
equity, in bankruptcy or in other appropriate proceedings and to seek
appropriate equitable relief. Upon the effective date of such termination (but
subject to the rights and obligations of Tenant under Section 17.1 above and to
Landlord's payment to Tenant of any amounts payable under the ESA and the
Development Agreement pursuant to termination thereof), Tenant shall surrender
possession of the Project Site to Landlord. If the Lease is terminated by
Landlord due to the occurrence of the events described in this Section, Landlord
shall be entitled to recover as damages all past due Rent and other sums due and
payable by Tenant on the date of termination including costs and expenses
reasonably incurred in the exercise of Landlord's remedy (including reasonable
attorney's fees). Subject to the foregoing, Landlord shall have such rights and
remedies for Tenant defaults as provided elsewhere in this Lease and at law and
in equity, and all remedies shall be cumulative such that Landlord's exercise or
failure to exercise of any remedy shall not limit or prevent Landlord from
exercising any other remedy available to Landlord.
18.3 PERFORMANCE BY TENANT'S LENDER. Landlord agrees
and acknowledges that in the event that Tenant grants a security interest in the
Project and/or Tenant's leasehold interest in or to the Project Site to a third
party lender, Landlord shall negotiate and enter into an agreement by which such
lender will be given notice and an opportunity to cure Tenant Defaults under
this Lease. Without limiting the foregoing, Landlord shall reasonably cooperate
with all commercially customary requests by such lender as such lender may
reasonably request.
18.4 LANDLORD DEFAULT; TENANT REMEDIES. In the event
Landlord shall fail to keep, observe or perform any of its covenants or
agreements contained in this Lease, and such failure shall continue for thirty
(30) days (if such failure is a monetary duty or obligation) or forty-five (45)
days (if such failure is a non-monetary duty or obligation) after written notice
from Tenant to Landlord, then Tenant shall have the right to exercise all
remedies available to Tenant at law and in equity (excluding the termination of
the Lease); provided, however, that Tenant may, at its election by written
notice to Landlord, terminate this Lease if and only if the ESA and/or
Development Agreement has been terminated or otherwise expires in accordance
with its terms. The effective date of such termination shall be the later of the
effective termination date of the ESA or Development Agreement. Subject to the
foregoing, Tenant shall have such rights and remedies for a breach by Landlord
of its obligations under this Lease as are set forth herein, and all remedies
shall be cumulative such that Tenant's exercise or failure to exercise of any
remedy shall not limit or prevent Tenant from exercising any other remedy
available to Tenant.
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Article 19. MISCELLANEOUS.
19.1 ESTOPPEL CERTIFICATES.
19.1.1 Tenant shall, at any time and from time to time
upon not less than thirty days' prior written request from
Landlord, execute, acknowledge and deliver to Landlord, in form
reasonably satisfactory to Landlord, a written statement
certifying (if true) that Tenant has accepted the Project Site,
that this Lease is unmodified and in full force and effect (or,
if there have been modifications, that the same is in full
force and effect as modified and stating the modifications),
that, to the best of Tenant's knowledge, Landlord is not in
default hereunder (or if there is a default, stating the nature
of said default), the date to which the rental and other
charges have been paid, and such other accurate certifications
as may reasonably be required by Landlord or Landlord's
mortgagee. Any statement delivered by Tenant pursuant to this
Section may be relied upon by Landlord and Landlord's lenders
and prospective lenders.
19.1.2 Landlord shall, at any time and from time to
time upon not less than thirty days' prior written request from
Tenant, execute, acknowledge and deliver to Tenant, in form
reasonably satisfactory to Tenant, a written statement
certifying (if true) that this Lease is unmodified and in full
force and effect (or, if there have been modifications, that
the same is in full force and effect as modified and stating
the modifications), that, to the best of Landlord's knowledge,
no Tenant Default then exists (or if there is a Tenant Default,
stating the nature thereof), the date to which the rental and
other charges have been paid and such other accurate
certifications as may reasonably be required by Tenant or by
such other person or entity, as the case may be. Any statement
delivered by Landlord pursuant to this Section may be relied
upon by Tenant and Tenant's lenders and prospective lenders.
19.2 AMENDMENTS MUST BE IN WRITING. None of the
covenants, terms or conditions of this Lease, to be kept and performed by either
party, shall in any manner be altered, waived, modified, changed or abandoned
except by a written instrument, duly signed by both parties and delivered.
19.3 NOTICES. All notices or other communications
required or permitted hereunder shall be in writing addressed to the respective
party as set forth below and shall be
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personally served, telecopied or sent by reputable overnight courier service and
shall be deemed to have been given: (a) if delivered in person, when delivered;
(b) if delivered by telecopy, on the date of transmission if transmitted on a
Business Day before 4:00 p.m. Chicago time, otherwise on the next Business Day
(provided, in either case, that receipt of such transmission is confirmed); and
(c) if delivered by overnight courier, one day after delivery to the courier
service properly addressed. Notices and other communications shall be addressed
to the applicable party as follows:
If to Landlord, then to:
Aladdin Gaming, LLC
c/o Aladdin Management Corporation
280 Park Avenue, 38th Floor
New York, New York 10017
Attention: Ronald Dictrow
Fax: 212-661-0844
If to Tenant, then to:
Northwind Aladdin, LLC
c/o Unicom Thermal Technologies Inc.
30 West Monroe Street, Suite 500
Chicago, IL 60603
Attention: President
Fax: 312-346-3201
Any party hereto may change its address for notices and other communications
hereunder by a notice delivered to the other party hereto in accordance with
this Section as then in effect.
19.4 TIME OF ESSENCE. Time is of the essence of this
Lease, and all provisions herein relating thereto shall be strictly construed.
19.5 RELATIONSHIP OF PARTIES. Nothing contained herein
shall be deemed or construed by the parties hereto, nor by any third party, as
creating the relationship of principal and agent or of partnership, or of joint
venture, between Landlord and Tenant, it being understood and agreed that no
provision in this Lease or any acts of the parties hereto shall be deemed to
create any relationship other than the relationship of landlord and tenant.
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19.6 CAPTIONS. The captions of this Lease are for
convenience only and are not to be construed as part of this Lease and shall not
be construed as defining or limiting in any way the scope or intent of the
provisions hereof.
19.7 SEVERABILITY. If any term or provision of this
Lease shall to any extent be held invalid or unenforceable, or shall be in
conflict with the requirements of any law, such term or provision shall be
deemed to be inapplicable and the remaining terms and provisions of this Lease
shall not be affected thereby, but each term and provision of this Lease shall
be valid and be enforced to the fullest extent permitted by law.
19.8 LAW APPLICABLE. This Lease shall be construed and enforced
in accordance with the law of the State of Nevada.
19.9 COVENANTS BINDING ON SUCCESSORS; NO THIRD PARTY
BENEFICIARIES. All of the covenants, agreements, conditions and undertakings
contained in this Lease shall extend and inure to and be binding upon the
successors and permitted assigns of the respective parties hereto, the same as
if they were in every case specifically named, and wherever in this Lease
reference is made to either of the parties hereto, it shall be held to include
and apply to, wherever applicable, the successors and permitted assigns of such
party. Nothing herein contained shall be construed to grant or confer upon any
person or persons, firm, corporation or governmental authority, other than the
parties hereto and their successors and permitted assigns, any right, claim or
privilege by virtue of any covenant, agreement, condition or undertaking in this
Lease contained.
19.10 RECORDING OF LEASE. A short form notice of this
Lease and the easements created hereby (but not the Lease itself) may be
recorded against the Project Site by either party hereto, provided the form
thereof has received the prior approval of Landlord, which approval shall not be
unreasonably delayed or withheld.
19.11 DEFAULT RATE OF INTEREST. Any amount owing by
either party under this Lease that is not paid on or before the 15th day after
the due date of such amount shall bear interest at a rate equal to one and
one-half percent (1.50%) per month, or the maximum legal rate, whichever is
less, from such date through and including the date of payment thereof
(calculated using actual days elapsed and a year of 365 or 366 days, as
applicable).
19.12 ARBITRATION. Landlord and Tenant shall negotiate
in good faith and attempt to resolve promptly any dispute between them which may
develop under this Lease; however, if Landlord and Tenant are unable to resolve
any such dispute, then Landlord and Tenant jointly may request that such dispute
be resolved by arbitration in accordance with the provisions of the Commercial
Arbitration Rules of the American Arbitration Association. If
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Landlord and Tenant do not agree to submit such dispute to arbitration and are
not otherwise able to resolve such dispute, either Landlord or Tenant may bring
such dispute to any court of competent jurisdiction for resolution. The
provisions of this Section shall survive the termination or expiration of this
Lease.
19.13 SELF-HELP. Landlord may, but shall not be
obligated to, perform any duty or obligation of the Tenant under this Lease
(including, without limitation, the performance of maintenance, repairs and
replacements pursuant to Section 9) if and to the extent Tenant fails to perform
such duty or obligation and such failure continues for thirty days after written
notice thereof (which thirty day period shall not apply or pertain to any such
failure which creates an emergency situation). If Landlord so elects to cure or
attempt to cure such failure of the Tenant, then all reasonable costs and
expenses incurred by Landlord in curing or attempting to cure such failure,
including without limitation reasonable attorneys' fees and court costs (all
such costs and expenses being hereinafter referred to collectively as the
"Self-Help Expenses") shall be repaid by the Tenant within five business days
after a written request therefor (together with an invoice and reasonable
back-up therefor). The rights and remedies provided for in this Section are
non-exclusive, and nothing herein shall prevent Landlord from exercising any
other right or remedy available to it under this Lease or at law or in equity
(subject to the limitations set forth in this Lease).
19.14 NO MERGER. There shall be no merger of this Lease
nor of the leasehold estate created by this Lease with the fee estate in the
Project Site or any part thereof by reason of the fact that the same person may
own or acquire or hold, directly or indirectly (a) this Lease or the leasehold
estate created by this Lease or any interest in this Lease or in any such
leasehold estate and (b) the fee estate in the Project Site or any part thereof
or any interest in such fee estate and no such merger shall occur unless and
until Landlord, Tenant, each holder of a mortgage on the fee estate in the
Project Site and each holder of a mortgage on the leasehold estate created by
this Lease shall join in a written instrument effecting such merger.
19.15 NOTICE OF TRANSFER. This Lease shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns. Neither party shall assign its interest or delegate its
duties under this Lease without the prior written consent of the other party
(which consent shall not be unreasonably withheld) except that either party may
assign its interest hereunder in connection with a concurrent assignment of its
interest in the ESA made in accordance with the provisions of the ESA, provided
that such assignment hereunder is being made to the same entity to which
assignment is being made under the ESA. In the event of such assignment by
Landlord, the assignee shall have the same notice, cure and assumption rights
under this Lease as is provided to such assignee under Section 10.2(a)(ii) of
the ESA. Subject to the foregoing, the term "Landlord" as used herein means the
owner of the Project Site, and in the event of the sale, assignment or transfer
by such owner of its interest in the Project Site, the Landlord shall promptly
give notice of the fact to Tenant setting forth the name and address of the
transferee, and thereupon, except as otherwise required in connection with any
concurrent assignment of the Landlord's interest in the ESA, the owner selling,
assigning or transferring its interest in the Project Site shall be released and
discharged as Landlord herein from all liabilities and obligations thereafter
accruing and thereupon all such liabilities and obligations shall be binding
upon the transferee.
19.16 NON-LIABILITY. Neither Landlord nor any partner,
joint venturer, director, officer, agent, servant or employee of Landlord shall
be liable to Tenant for any
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loss, injury or damage to Tenant, or to its property, unless the cause of such
injury, damage or loss was the gross negligence or willful misconduct of
Landlord, its agents, contractors, shareholders, servants or employees.
Landlord's total liability under this Lease shall in all events be limited to
Landlord's interest in the Project Site, or, if applicable, net proceeds derived
from the sale thereof.
[Balance of page intentionally left blank; signature page follows.]
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IN WITNESS WHEREOF, Landlord and Tenant have executed and delivered
this Lease as of the day and year first above written.
ALADDIN GAMING LLC, a NORTHWIND ALADDIN, LLC, a
Nevada limited-liability company Nevada limited-liability company
By: /s/ Ronald Dictrow By: UTT Las Vegas Inc.,
------------------------------ a Nevada corporation, its manager
Ronald Dictrow
Title: Exec. Vice President By: /s/ Donald Petkus
-----------------------------------
Name: Donald Petkus
Title: President
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EXHIBIT A
Description of Project Site
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EXHIBIT B
Description of Landlord's Property
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GUARANTY
THIS GUARANTY is dated as of December 3, 1997, by UNICOM CORPORATION, an
Illinois corporation (the "Guarantor") to and for the benefit of Aladdin Gaming,
LLC, a Nevada limited-liability company (the "Customer").
RECITALS:
WHEREAS, the Customer is in the process of constructing the Aladdin Hotel
and Casino, the Sound Asylum Hotel & Casino, a performing arts theater, a
conference center, and a Retail Mall and service courts (collectively, the
"Aladdin Complex") in Las Vegas, Nevada, and desires that Northwind Aladdin,
LLC, a Nevada limited-liability company ("Northwind") construct and operate
district heating and cooling and cogeneration facilities for the production and
distribution to the Aladdin Complex of hot water, chilled water and electricity,
and further agree to procure additional electrical energy for the Aladdin
Complex, all on the terms and conditions set forth in a Development Agreement
and an Energy Service Agreement of even date herewith, each, between the
Customer and Northwind;
WHEREAS, it is a condition precedent to the Customer's entering into such
Development Agreement and Energy Service Agreement that the Guarantor agree to
guaranty certain obligations of Northwind to the Customer on the terms of this
Guaranty;
WHEREAS, as of the date hereof the Guarantor is the indirect parent of
Northwind and the Guarantor will derive benefit from the Customer's entering
into the Development Agreement and the Energy Service Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Guarantor hereby agrees as
follows:
1. Guaranty. Subject to the limitation set forth in Section 15 below, the
Guarantor hereby unconditionally and irrevocably guaranties to the Customer and
its successors, transferees, and assigns the obligations and duties of Northwind
under the Development Agreement and the Energy Services Agreement to construct
and demonstrate "Final Completion" of the "Plant" (as such terms are defined in
the Development Agreement) (such obligations and duties are hereinafter
collectively referred to as "Northwind's Obligations"). The Guarantor agrees
that the Guaranty described in this Section 1 is a present and continuing
guaranty of payment and performance and that the Customer shall not be required
to prosecute enforcement or
<PAGE>
other remedies against Northwind or any other guarantor of Northwind's
Obligations before calling on the Guarantor for performance and observance.
The Guarantor agrees that if for any reason Northwind shall fail or be unable
to punctually and fully perform any of Northwind's Obligations, the Guarantor
shall perform or cause to be performed such obligations promptly upon demand.
The Guarantor agrees that one or more successive actions may be brought
against the Guarantor, as often as the Customer deems advisable, until all of
Northwind's Obligations are performed in full.
2. Representations and Warranties. The Guarantor represents and
warrants to the Customer that the Guarantor has all requisite corporate power
and authority to enter into and perform its obligations under this Guaranty
and that this guaranty has been duly and validly executed and delivered by
the Guarantor and constitutes the valid and binding obligation of the
Guarantor, enforceable in accordance with its terms, except as such
enforcement may be limited by bankruptcy, insolvency, moratorium and other
similar laws affecting creditors' rights generally, and except as enforcement
may be limited by general principles of equity.
3. Continuing guaranty. The Guarantor agrees that the obligations of
the Guarantor under this Guaranty shall be primary, absolute and
unconditional irrespective of, and unaffected by:
(a) The existence of any claim, set-off, defense, counterclaim or
other right which the Guarantor may have against the Customer or any other
natural person, governmental entity or any other entity whether acting in an
individual fiduciary or other capacity (each, a "Person");
(b) the occurence or continuance of any event of bankruptcy,
reorganization or insolvency proceeding with respect to Northwind or any other
Person (other than the Customer where such bankruptcy is not voluntary and
such bankruptcy, reorganization or insolvency proceeding remains undismissed
for more than sixty (60) days after the commencement thereof);
(c) any amendment, change, or other modification to the
Development Agreement, the Energy Service Agreement and/or this Guaranty made
pursuant to the terms thereof;
(d) the exercise, non-exercise or delay in exercising by the
Customer of any of its rights or remedies under this Guaranty;
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(e) any permitted assignment or other permitted transfer of this
Guaranty by the Customer or any permitted assignment or other permitted transfer
of the Development Agreement and/or the Energy Service Agreement;
(f) the absence of any notice to, or knowledge by, Guarantor of the
existence or occurrence of any of the matters or events set forth in the
foregoing clauses; or
(g) any other similar circumstance, condition or event that might
constitute or give rise to a defense to performance by Guarantor of its
obligations under this Guaranty.
4. Waiver. The Guarantor:
(a) waives, and agrees it shall not at any time insist upon, plead,
claim or take the benefit or advantage of, any appraisal, valuation, stay,
extension, marshaling of assets or redemption laws, or exemption, whether now or
at any time hereafter in force, which may delay, prevent or otherwise affect the
performance by the Guarantor of its obligations under, or the enforcement by the
Customer of, this Guaranty;
(b) waives, and agrees that it shall not at any time claim or take
the benefit or advantage of Section 365(e)(2) of the Title 11, United States
Code or any other state or federal insolvency, reorganization, moratorium or
similar law for the relief of debtors; provided, however, that, except as
provided in this paragraph 4(b), this waiver shall not apply with respect to any
bankruptcy by or against the Customer or any of its affiliates, it being the
express intent of the parties that, in the event of a bankruptcy by or against
the Customer, this Guaranty may not be enforced by the Customer (or any
affiliate of the Customer) as a debtor-in-possession, or by any trustee
appointed with respect to the Customer or any affiliate of the Customer or any
of their respective assets unless the party seeking enforcement has elected to
affirm and assume all obligations of the Customer under the Development
Agreement, the Energy Service Agreement and that certain Lease between the
Customer and Northwind dated of even date with the Development Agreement and has
complied with all applicable conditions to affirming and assuming such
agreements under all applicable laws, regulations and bankruptcy rules,
including, without limitation, curing of any defaults thereunder and providing
adequate assurances of performance thereunder;
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(c) waives all notices, diligence, presentment and demand (whether
for non-payment or protest or of acceptance, maturity, extension of time, change
in nature or form of Northwind's Obligations, acceptance of security, release of
security, composition or agreement arrived at as to the amount of, or the terms
of, Northwind's Obligations, notice of adverse change in Northwind's financial
condition or any other fact which might materially increase the risk to the
Guarantor hereunder) with respect to any of Northwind's Obligations, other than
any notices or demands required to be given to Northwind under the Energy
Service Agreement or the Development Agreement, and all other demands whatsoever
and waives the benefit of all provisions of law which are or might be in
conflict with the terms of this Guaranty;
(d) agrees that its obligations under this Guaranty shall be
unaffected by the existence of any claim, set-off, defense, counterclaim or
other right which the Guarantor may have against the Customer or any other
natural person, governmental authority or any other entity whether acting in an
individual fiduciary or other capacity (each, a "Person");
(e) irrevocably waives until Northwind's Obligations have been
satisfied (i) any rights which it may have acquired against Northwind by way of
subrogation under this Guaranty or otherwise, (ii) any rights to seek any
reimbursement from Northwind in respect of payments made by the Guarantor
hereunder, and (iii) any claim, counterclaim or set-off which it may have
against Northwind and the right to exercise any rights or remedies or commence
any proceedings with respect thereto;
(f) irrevocably waives any right to require the Customer to proceed
against Northwind or any other guarantor at any time, to proceed against or
exhaust any security held by the Customer at any time, and except to the extent
that Northwind has or would have had any such a right under the Development
Agreement and/or the Energy Service Agreement, the right to require the Customer
to mitigate damages or to pursue any other remedy whatsoever at any time; and
(g) irrevocably waives any defense based upon an election of
remedies by the Customer, including any election to proceed by judicial or
nonjudicial foreclosure of any security, whether real property or personal
property security, or by deed in lieu thereof, and whether or not every aspect
of any foreclosure sale is commercially reasonable, or any election of remedies,
including but not limited to remedies relating to real property or personal
property security, that
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destroys or otherwise impairs the right of the Guarantor against Northwind for
reimbursement.
5. Term of Guaranty. This Guaranty is a continuing guaranty and shall
remain in full force and effect until the date on which all Northwind's
Obligations have been performed and paid in full; provided that the Guarantor
has obtained the prior written consent of the Customer to such termination, such
consent not to be unreasonably withheld. Each and every default in the payment
or performance of Northwind's Obligations shall give rise to a separate cause of
action hereunder and separate causes of action may be brought hereunder as each
such cause of action arises.
6. Reinstatement. The obligations of the Guarantor pursuant to this
Guaranty shall continue to be effective or automatically be reinstated, as the
case may be, if at any time satisfaction of any of Northwind's Obligations or
the Guarantor's obligations under this Guaranty is rescinded or otherwise must
be restored or returned by the Customer upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of the Guarantor or otherwise, all as
though such satisfaction had not been made.
7. Bankruptcy No Discharge; Repayments; Reinstatement.
(a) Bankruptcy Proceedings. The Guarantor shall not commence or join
with any other party in commencing any bankruptcy, reorganization, or insolvency
proceedings of or against Northwind. The Guarantor understands and acknowledges
that by virtue of this Guaranty, the Guarantor has specifically assumed any and
all risks of a bankruptcy or reorganization case or similar proceeding with
respect to Northwind. As an example and not in any way a limitation, a
subsequent modification of Northwind's Obligations or any rejection or
disaffirmance thereof by any trustee, receiver or liquidating agency of
Northwind or of any of its properties, or any settlement or compromise of any
claim made in any such case, in any reorganization case concerning Northwind
shall not affect the obligation of the Guarantor to pay and perform Northwind's
Obligations in accordance with their original terms.
(b) Repayment and Reinstatement. If any claim is made upon the
Customer or any Person claiming through the Customer for repayment or
disgorgement of any amount or amounts received by the Customer in payment of
Northwind's Obligations and the Customer or such Person, as the case may be, is
compelled by law to repay or disgorge all or any part of said amount, then,
notwith-
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standing any revocation or termination of this Guaranty, the Guarantor shall be
and remain liable to the Customer or such Person, as the case may be, for the
amount so repaid, to the same extent as if such amount had never originally been
received by the Customer or such Person, as the case may be.
8. Successors and Assigns. This Guaranty shall inure to the benefit of the
Customer and its successors and assigns and not to any third party, nor shall
any third party have recourse to the Guarantor in connection with this Guaranty.
This Guaranty shall be binding on the Guarantor and shall not be assigned
without the prior written consent of the Guarantor, such consent not to be
unreasonably withheld. Notwithstanding anything to the contrary contained
herein, Guarantor's consent shall not be required for an assignment of this
Guaranty to one or more of the Customer's lenders and Customer's Affiliates (as
defined in the Energy Service Agreement) (and one or more of the Affiliates'
lenders) provided that any such assignee(s) (including any of such lenders)
shall (i) have a fee interest or a leasehold interest of not less than twenty
(20) years in and to a substantial portion of the Aladdin Lands (as such term is
defined in the Development Agreement), (ii) be diligently pursuing to completion
its respective portion of the Aladdin Complex (i.e., the Aladdin Hotel and
Casino, the Mall and/or the Sound Asylum Project (the "Mall" and the "Sound
Asylum Project" as defined in the Development Agreement)), and (iii) be required
to assume the Customer's obligations under the Development Agreement and the
Energy Service Agreement prior to and at the time of enforcing Guarantor's
obligations under this Guaranty.
9. Amendments; Waivers, etc. Neither this instrument nor any term hereof
may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the Customer and the Guarantor. No delay or
failure by the Customer to exercise any remedy against Northwind or the
Guarantor will be construed as a waiver of that right or remedy. No failure on
the part of the Customer to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any right hereunder preclude any other or further exercise thereof
or the exercise of any other right. The remedies herein provided are cumulative
and not exclusive of any remedies provided by any applicable governmental rule.
10. Joinder. The Guarantor agrees that any action to enforce this Guaranty
may be brought against the Guarantor without any reimbursement or joinder of
Northwind or any other guarantor of Northwind's Obligations in such action.
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11. Severability. In the event that any provision of this Guaranty is
deemed to be invalid by reason of the operation of law, or by reason of the
interpretation placed thereon by any administrative agency or any court, the
Guarantor and the Customer shall negotiate an equitable adjustment in the
provisions of the same in order to effect, to the maximum extent permitted by
law, the purpose of this Guaranty and the validity and enforceability of the
remaining provisions, or portions or applications thereof, shall not be affected
thereby and shall remain in full force and effect.
12. Applicable Law. This Guaranty shall be governed as to validity,
interpretation, effect and in all other respects by the laws and decisions of
the State of Illinois.
13. Waiver of Jury Trial. The Guarantor and the Customer irrevocably waive
all right of trial by jury in any action, proceeding or counterclaim arising out
of or in connection with this Guaranty or any matter arising hereunder.
14. Notice. All notices, communications and waivers under this Guaranty
shall be in writing and shall be (i) delivered in person or (ii) mailed, postage
prepaid, either by registered or certified mail, return receipt requested, or
(iii) by overnight express carrier, addressed in each case as follows:
If to the Customer, to:
Aladdin Gaming, LLC
c/o Aladdin Management Corporation
280 Park Avenue, 38th Floor
New York, New York 10017
Attention: Ronald Dictrow
Fax: (212) 661-0844
If to the Guarantor, to:
Unicom Corporation
P.O. Box 767
One First National Plaza, Suite 3700
Chicago, Illinois 60690
Attention: Treasurer
Fax: (312) 394-3110
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or to any other address as to any of the parties hereto, as such party shall
designate in a written notice to the other party hereto. All notices sent
pursuant to the terms of this Section 14 shall be deemed received (i) if
personally delivered, then on the date of delivery, (ii) if sent by overnight,
express carrier, then on the next business day immediately following the day
sent, or (iii) if sent by registered or certified mail, then on the earlier of
the third business day following the day sent or when actually received.
15. Limitation of Liability. Notwithstanding anything hereinabove set
forth to the contrary the aggregate liability of the Guarantor under this
Guaranty shall be limited to an amount equal to (a) the lesser of (i) Thirty
Million Dollars ($30,000,000) or (ii) the GMP, as finally determined and agreed
upon pursuant to the Development Agreement, plus interim operating costs up to
the Substantial Completion Date, minus (b) the aggregate dollar amount of any
"Substitute Performance Assurances" (as defined below) which are hereafter
provided in favor of the Customer with respect to Northwind's Obligations and
are in effect from time to time.
For purposes hereof, "Substitute Performance Assurances" means: (i) a
guaranty of Northwind's Obligations in favor of the Customer in form and
substance satisfactory to the Customer in its sole discretion and provided by a
general contractor for the Project, a manufacturer of major components for the
Project, or by an entity having a direct or indirect ownership interest in
Northwind and, in either case, also having a commercial paper rating comparable
to the commercial paper rating of the Guarantor at the time such guaranty is
issued; and/or (ii) a letter of credit issued in favor of the Customer by a
financial institution reasonably satisfactory to the Customer providing that the
Customer may draw thereunder in the event that Northwind shall default in
performance of Northwind's Obligations and otherwise in form and substance
reasonably satisfactory to the Customer.
Upon Substantial Completion, the Guarantor's liability under this Guaranty
shall decrease by the amount of debt and equity contributed by Northwind towards
completion of the Plant, minus ten percent (10%) which shall be retained by the
Customer pending Final Completion.
8
<PAGE>
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty as of the
date first above written.
UNICOM CORPORATION
By: /s/ Donald A. Petkus
-----------------------------
Name: Donald A. Petkus
Title: Senior Vice President
9
<PAGE>
LIMITED LIABILITY COMPANY AGREEMENT
OF
ALADDIN BAZAAR, LLC
-------------------
THIS LIMITED LIABILITY COMPANY AGREEMENT OF ALADDIN BAZAAR, LLC, is entered
into effective as of September 3, 1997, by and between TH BAZAAR CENTERS INC., a
Delaware corporation ("TRIZECHAHN"), and ALADDIN BAZAAR HOLDINGS, LLC, a Nevada
limited liability company ("HOLDINGS II"). The capitalized terms used herein
shall have the respective meanings assigned to such terms in Article XII.
R E C I T A L S :
A. The Members desire to jointly develop a themed entertainment shopping
center (the "CENTER") on the site (the "MASTER SITE") of the renovated and
expanded Aladdin Hotel and Casino in Las Vegas, Nevada containing approximately
2,600 rooms and a an approximately 100,000 to 125,000 square foot casino,
together with related and physically attached facilities (the "ALADDIN HOTEL AND
CASINO") including an 800 room, themed casino/hotel on the corner of Harmon
Avenue and Audrie Street (the "AUDRIE/HARMON HOTEL"), (collectively, the
"REDEVELOPED ALADDIN") and a structured parking facility with spaces for
approximately 5,000 cars (the "PARKING FACILITIES"). In addition to the Parking
Facilities there will be an additional structured parking beneath the Aladdin
Hotel and Casino for approximately five hundred (500) cars (the "OTHER
PARKING").
B. The Center and the Parking Facilities, are together referred to herein
as the "BAZAAR IMPROVEMENTS." The Redeveloped Aladdin, the Other Parking and
the Bazaar Improvements are together referred to as the "MASTER DEVELOPMENT".
EXHIBIT "A", attached hereto and incorporated herein, contains the site plans
and renderings of the Master Development as envisioned as of the date hereof.
ARTICLE I
FORMATION
1.01 FORMATION
The Members shall form a Delaware limited liability company pursuant
to the provisions of the Delaware Act and this Agreement. In connection
therewith, a duly authorized representative of the Company shall execute a
Certificate of Formation for the Company in accordance with the Delaware Act,
which shall be duly filed with the Secretary of State of the State of Delaware.
Such duly authorized representative also shall execute, acknowledge and/or
verify such other documents and/or instruments as may be necessary and/or
appropriate in order to form the Company under the Delaware Act and/or to
continue its existence in accordance with the provisions of the Delaware Act
and/or to register, qualify to do business and/or operate its
<PAGE>
business as a foreign limited liability company in any other state in which the
Company conducts business.
1.02 NAMES AND ADDRESSES
The name of the Company is "Aladdin Bazaar, LLC" The registered
office of the Company in the State of Delaware shall be at 1013 Centre Road,
Wilmington, Delaware 19805-1297. The name and address registered agent for the
Company in the State of Delaware shall be The Prentice-Hall Corporation System,
Inc., 1013 Centre Road, Wilmington, Delaware 19805-1297. The name and address
of the resident agent for the Company in the State of Nevada shall be CSC
Services of Nevada, Inc., 501 E. John Street, Room E, Carson City, Nevada
89706-3078.
The name, address and facsimile number of TrizecHahn are as follows:
TH Bazaar Centers Inc.
4350 La Jolla Village Drive, Suite 400
San Diego, California 92122-1233
Attention: Mr. Wayne Finley and Wendy Godoy
(619) 546-3307
With a copy to:
TH Bazaar Centers Inc.
4350 La Jolla Village Drive, Suite 400
San Diego, California 92122-1233
Attention: General Counsel
The name, address and facsimile number of Holdings II are as follows:
Aladdin Bazaar Holdings, LLC
c/o Mr. Jack Sommer
2810 W. Charleston Boulevard, Suite 58
Las Vegas, Nevada 89102
(702) 870-8733
With a copy to:
Mr. Ronald B. Dictrow
Sigmund Sommer Properties
280 Park Avenue
New York, New York 10017
(212) 661-0844
1.03 NATURE OF BUSINESS
The express, limited and only purposes of the Company are (i) acquire
a ground lease (the "LEASE") for approximately 17.5 acres located within the
Master Site upon which the Bazaar Improvements are to be developed (the
"PROPERTY") and enter into a Reciprocal Easement Agreement with the owners and
certain lessees of the Master Development; (ii) develop and
<PAGE>
construct the Bazaar Improvements, consisting of approximately 450,000 square
feet of gross leasable area and the Parking Facilities; (iii) to own, renovate,
rehabilitate, market, operate, lease, manage, hold for investment, finance,
refinance, hypothecate sell and/or otherwise realize the economic benefit from
the Bazaar Improvements; and (iv) to engage in such other activities as are
necessary and/or appropriate to accomplish the foregoing purposes.
1.04 FIDUCIARY DUTIES
(a) During the period commencing as of the date hereof and ending
upon the earlier of (i) five (5) years after the opening of the Bazaar
Improvements to the public ("OPENING"), (ii) the failure to satisfy the
Conditions Precedent and the abandonment of the Bazaar Improvements by the
Members pursuant to Section 3.06, (iii) TrizecHahn's failure to approve a
Satisfaction Notice pursuant to Section 3.06, (iv) the sale by TrizecHahn
of its Interest to a bona fide third party (and not an Affiliate of
TrizecHahn) and not for the purpose of circumventing this Section 1.04(a)
through such sale, or (v) the dissolution of the Company (the
"NON-COMPETITION PERIOD"), TrizecHahn hereby agrees that TrizecHahn and any
Affiliate of TrizecHahn shall not, without the prior written consent of
Holdings II, which consent may be withheld in Holdings II's sole
discretion, directly or indirectly (other than through its ownership
interest in the Company), develop any "Competing Retail Project", as
defined below, which competes with the Bazaar Improvements within the
"Non-Competition Area", as defined below. For purposes of this Section
1.04(a), the term "COMPETING RETAIL PROJECT" shall mean a shopping center
attached to a casino hotel. Any expansions, remodels or acquisitions of
the Fashion Show or interests therein are specifically excluded from the
definition of a "Competing Retail Project" (in the event that a casino
hotel at some later date may attach to the Fashion Show). For purposes of
this Section 1.04(a), the term "NON-COMPETITION AREA" shall mean only that
portion of the Las Vegas strip north of the Aladdin Hotel to Spring
Mountain Road, and south of the Aladdin Hotel to Hacienda Avenue.
Notwithstanding the foregoing, the Members hereby acknowledge and agree
that the prohibitions contained in this Section 1.04(a) shall not apply to
(i) the acquisition (including interests therein) or management of a
Competing Retail Project within the Non-Competition Period and within the
Non-Competition Area, (ii) any other type of retail development which is
not a Competing Retail Project within the Non-Competition Area, (iii) any
activity conducted outside of the Non-Competition Area, or (iv) any
activity conducted after the Non-Competition Period.
(b) In view of the limited purposes of the Company, but subject to
Section 1.04(a) above, no Member shall have any obligations (fiduciary or
otherwise) with respect to the Company or to the other Member insofar as
making other investment opportunities available to the Company or to the
other Member. Each Member may, notwithstanding the existence of this
Agreement, engage in whatever activities such Member may choose, whether
the same are competitive with the Company or otherwise, without having or
incurring any obligation to offer any interest in such activities to the
Company or to the other Member. Neither this Agreement nor any activities
undertaken pursuant hereto shall prevent any Member from engaging in such
activities, and the fiduciary duties of the Members to each other and to
the Company shall be limited solely to those arising from the purposes of
the Company described in Section 1.03 above.
<PAGE>
1.05 TERM OF COMPANY
The term of the Agreement shall commence on the date the Articles of
Organization for the Company is filed with the Delaware Secretary of State and
shall continue until December 31, 2099, unless dissolved pursuant to Article IX
or unless extended by the unanimous agreement of the Members.
ARTICLE II
MANAGEMENT OF THE COMPANY
2.01 DEVELOPMENT PLAN
The Members have approved a preliminary development plan (the
"DEVELOPMENT PLAN") for the development and construction of the Bazaar
Improvements, a copy of which is attached hereto as EXHIBIT "B." The
Development Plan includes, without limitation, (i) a pro forma development
budget (the "DEVELOPMENT BUDGET") containing a cost breakdown setting forth the
estimated development and construction costs that will be incurred by the
Members in connection with the development and construction of the Improvements,
together with projected revenues for the applicable period; and (ii) a leasing
plan ("LEASING PLAN"). When approved by the Members, the Development Plan shall
be updated to include (i) a preliminary site plan for the Bazaar Improvements
(the "SITE PLAN") showing the location of all improvements, parking, drives and
points of ingress and egress; (ii) an estimated time schedule for the completion
of the Improvements (the "CONSTRUCTION SCHEDULE"); (iii) an updated Leasing Plan
setting forth in reasonable detail the following items: (A) a description of
the proposed size of, type of tenants for and rent proforma for each tenant
space and tenant improvement allowances; and (B) a statement of projected
operating costs and lease revenues stated for the first calendar year following
the Opening, and (iv) the plans and specifications for the development and
construction of the Improvements (the "PLANS AND SPECIFICATIONS"). Upon the
earlier of (i) approval by the Board of the final Development Plan, or (ii)
commencement of construction, any changes to the Development Plan may only be
proposed by TrizecHahn.
2.02 DAY TO DAY OPERATIONS
TrizecHahn shall be responsible for, and shall make any and all
decisions relating to, the day-to-day operations of the Company. Any and all
agreements, contracts and other documents or instruments affecting or relating
to the day-to-day development and operational business and affairs of the
Company may be executed on the Company's behalf by TrizecHahn alone and without
execution by Holdings II provided that the amount involved for any such
agreement or other document is within the parameters established in the
Development Budget (as the same may be revised in accordance with the provisions
of Section 2.04 below) or in the Operating Budget (as the same may be revised in
accordance with the provisions of Section 2.05 below), or otherwise approved by
Holdings II. TrizecHahn shall use its reasonable efforts to carry out the
day-to-day business and affairs of the Company and shall devote such time to the
Company as is necessary, in the reasonable discretion of TrizecHahn, for the
efficient operation of the day-to-day business and affairs of the Company.
<PAGE>
Without limiting TrizecHahn's authority set forth above in this Section 2.02,
but subject to the restrictions on TrizecHahn's authority set forth below in
Section 2.04, TrizecHahn (on behalf and at the expense of the Company) shall
have the right, power, and authority to undertake (or cause to be undertaken)
any and all of the following:
(a) Act as representative of the Company with respect to any
authorization or approval required pursuant to any agreement entered into
by the Company, including, but not limited to, the Development Agreement,
the Management Agreement, the Site Work Agreement, the Development
Agreement between Clark County and Holdings, the Lease, the Reciprocal
Easement Agreement and the Parking Use Agreement unless such approval or
action constitutes a decision exclusively reserved to the Board pursuant to
the provisions of Section 2.04 below. It is understood that TrizecHahn
alone may execute on behalf of the Company any documents, agreements or
approvals pursuant to the Development Agreement or the Management
Agreement, to the extent that such items are within the parameters
established in the Development Budget or Operating Budget, as the case may
be.
(b) Prepare, pursuant to the provisions of Section 2.05 hereof, and
regularly update, the Development Plan and Operating Budget for the Bazaar
Improvements. Upon the earlier of (i) approval by the Board of the final
Development Plan, or (ii) commencement of construction, changes to the
Development Plan may only be proposed by TrizecHahn.
2.03 BOARD OF MANAGERS
Except as otherwise provided in this Agreement, all aspects of the
business and affairs of the Company shall be managed, and all decisions
affecting the business and affairs of the Company shall be made, by a board of
managers (the "BOARD") composed of four (4) representatives in accordance with
the following:
(a) Subject to Section 2.03(o) and Section 3.02, TrizecHahn shall be
entitled to select two (2) representatives of the Board and Holdings II
shall be entitled to select two (2) representatives of the Board.
TrizecHahn hereby designates Wayne Finley and Wendy Godoy as its initial
representatives of the Board; and Holdings II hereby designates Jack Sommer
and Ronald Dictrow as its initial representatives of the Board. Each
Member may, from time to time, change such Member's designated
representative(s) of the Board by giving written notice thereof to the
other Member, provided that either (i) any replacement representative is a
partner, trustee, member, managing member, shareholder, officer or director
of such Member or an Affiliate thereof, or (ii) such replacement
representative is approved by the other Member, which approval shall not be
unreasonably withheld. The Board shall have the authority to make all
decisions affecting the business and affairs of the Company as fully and
completely as if the Members were themselves making such decisions.
(b) The number of representatives of the Board may be increased or
decreased from time to time by the Board so long as an equal number of the
representatives of the Board are appointed by each of TrizecHahn and
Holdings II.
<PAGE>
(c) Regular meetings of the Board shall be held at the principal
office of the Company in Nevada (or at such other place(s) as are
designated by the Board) at such times as shall be designated from time to
time by the Board.
(d) Special meetings of the Board may be called by or at the request
of any representative of the Board and shall be held at the principal
office of the Company in Nevada (or at such other place(s) as are
designated by the Board). The person(s) authorized to call any special
meeting of the Board may designate any reasonable time for holding of the
special meeting.
(e) Representatives of the Board may participate in any regularly
scheduled or special meetings of the Board telephonically or through other
similar communications equipment, as long as all of the representatives
participating in the meeting can hear one another. Participation in a
meeting pursuant to the preceding sentence shall constitute presence in
person at such meeting for all purposes of this Agreement.
(f) Except for any regularly scheduled or special meeting of the
representatives of the Board, it is the express intent of the Members that
there shall not be any required (or regularly scheduled) meetings of the
Members.
(g) Notice of any meeting of the Board shall be given no fewer than
ten (10) business days and no more than thirty (30) days prior to the date
of the meeting. The attendance of a representative of the Board at a
meeting of the Board shall constitute a waiver of notice of such meeting,
except where a representative of the Board attends a meeting for the
express purpose of objecting to the transaction of any business because the
meeting is not properly called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the
Board need be specified in the notice or waiver of notice of such meeting.
(h) Provided that notice of a meeting has been given or waived in the
manner set forth herein, a majority (in number) of the members of the Board
shall constitute a quorum for the transaction of business at any meeting of
the Board, provided that if less than a majority of such number of
representatives of the Board are present at such meeting, a majority of the
representatives of the Board present may adjourn the meeting at any time
without further notice.
(i) Provided that notice of a meeting has been given or waived in the
manner set forth herein, the act of a majority (in number) of the
representatives of the Board present shall be the act of the Board and
shall constitute a decision of the Board and such decision shall be binding
upon the Company and on each Member.
(j) Any action required or permitted to be taken at a meeting of the
Board may be taken without a meeting if a consent in writing, setting forth
the actions so taken, shall be signed by a majority (in number) of the
representatives of the Board entitled to vote with respect to the subject
matter thereof provided that each Member shall be provided with at least
one (1) business day prior notice of such proposed action.
<PAGE>
Provided that such notice is given or waived in writing, any such consent
signed by a majority (in number) of the representatives of the Board shall
have the same effect as an act of a majority (in number) of the
representatives of the Board at a properly called and constituted meeting
of the Board at which all of the representatives of the Board were present
and voting.
(k) Except as otherwise determined by the Board or as approved as
part of the Development Budget or Operating Budget, no representative of
the Board nor any officer of the Company shall be entitled to receive any
salary or remuneration from the Company for services as a representative of
the Board or an officer of the Company.
(l) The Board may, by resolution, designate one (1) or more
individuals as employees or agents of the Company in furtherance of its
business and purposes. No such employee or agent need be a Member of the
Company. Each employee or agent shall have the authority and shall perform
the duties as designated by the Board from time to time. Any employee or
agent so appointed by the Board may be removed by the Board for any reason
or no reason whatsoever, with or without cause.
(m) Except as provided in Section 2.02, or as authorized pursuant to
the Development Agreement or the Management Agreement, all contracts,
agreements and other documents or instruments affecting or relating to the
business and affairs of the Company may be executed on the Company's behalf
only by the Member(s), officer(s) or such other authorized person(s) as are
designated in writing by the Board and without execution by any other
Member.
(n) Except as provided in Section 2.02 or elsewhere in this
Agreement, none of the Members or officers of the Company, without the
prior consent of the Board, shall take any action on behalf of or in the
name of the Company, or enter into any commitment or obligation binding
upon the Company, except for (i) actions expressly authorized by this
Agreement, (ii) actions on or after the date of this Agreement by any
Member (or officer) within the scope of such Member's (or officer's)
authority granted hereunder except as set forth in Schedule 2.14(d) or
otherwise authorized pursuant to Section 3.01, and (iii) actions authorized
by the Board in the manner set forth herein. Each Member hereby
indemnifies, defends, protects and holds harmless the other Member and each
such other Member's Affiliates, shareholders, officers, directors,
partners, members, employees, agents, and representatives (including the
representative(s) to the Board appointed by such Member) from and against
any and all losses, liability, damages, costs and/or expenses (including
attorneys' fees) arising out of the breach of any of the foregoing
provisions by such indemnifying Member, any representative of the Board
selected by such Member or such Member's Affiliates, shareholders,
officers, directors, constituent partners, members, managers, employees,
agents, or representatives.
(o) Notwithstanding the provisions of this Section 2.03 to the
contrary, to the extent that any Member acquires or obtains more than fifty
percent (50%) of the Percentage Interests of the Company (I.E., as a result
of a permitted transfer of a portion of a Member's Interest or, subject to
the sole discretion approval of the Members, the
<PAGE>
admission of an additional Member to the Company), then such controlling
Member shall have the right at all times to appoint a majority in number of
the representatives of the Board, and the number of representatives
selected by the minority Members of the Company shall be reduced
proportionately. For example, in the event that a Member acquires more
than fifty percent (50%) of the Percentage Interest of the Company (either
as a result of the permitted transfer of a portion of a Member's Interest
or, subject to the sole discretion approval of the Members, the admission
of an additional Member to the Company), then such controlling Member shall
have the right to appoint three (3) of the representatives to the Board,
and the non-controlling Member shall have the right to appoint one (1)
representative to the Board.
2.04 AUTHORITY OF THE BOARD
Without limiting the generality of Section 2.02, and except as
otherwise provided by this Agreement, the consent of the Board shall be required
for, and the Board shall have the sole and exclusive right, power and authority
to approve the following:
(a) Any financing, refinancing or securitization of all or any
portion of the Bazaar Improvements and the use of any proceeds therefrom,
including, without limitation, interim, construction and permanent
financing, and any other financing or refinancing of the Company's
indebtedness and the execution and delivery of any documents, agreements or
instruments evidencing, securing or relating to any such financing,
refinancing and/or securitization;
(b) Subject to Section 2.02(b), approve any major development
decision, including but not limited to any material change to the
Development Plan, except for change orders which are consistent with the
ordinary course of construction of projects similar in scope and use to the
Bazaar Improvements;
(c) Any lease of space within the Bazaar Improvements in excess
of Twelve Thousand Five Hundred (12,500) square feet;
(d) The making of any expenditure by the Company that is not
specifically included or contemplated under the Development Budget or the
applicable Operating Budget, other than as permitted within any parameters
agreed to by the Members in any such Budget (e.g., application of line item
cost savings, contingency line item amounts, etc., except that TrizecHahn
shall not have the authority to increase the tenant improvement and theming
line items without Board approval); provided, however that TrizecHahn shall
have the authority to make any expenditure necessary to comply with
previously approved obligations of the Company;
(e) The Construction Contract for the development of the Bazaar
Improvements; and
(f) The delivery of a notice of default pursuant to the
Management Agreement or the Development Agreement.
<PAGE>
In the event that the Board shall become deadlocked concerning any of the major
decisions listed above, then any Board member shall have the right to institute
arbitration proceedings pursuant to Section 11.13.
2.05 OPERATING BUDGET
THCM or its successors and assigns, as property manager of the Bazaar
Improvements, shall prepare and submit to the Board, for the Board's review and
approval, prior to the issuance of a certificate of occupancy for the Bazaar
Improvements and thereafter at least thirty (30) days prior to the end of each
fiscal year of the Partnership, a budget ("OPERATING BUDGET") for the ensuing
fiscal year or portion thereof. Following the approval of an Operating Budget,
TrizecHahn acting alone shall have the power to authorize THCM to incur any
expenditures authorized to be incurred under such approved Operating Budget for
the period covered by such approved Operating Budget, without the consent of the
Board. If the Board does not approve any proposed Operating Budget for any
fiscal year of the Company, then the last approved Operating Budget (as
previously increased, if applicable, pursuant to the following provisions of
this sentence) shall be deemed to apply with respect to such fiscal year until a
revised Operating Budget is approved for such fiscal year; provided, however,
(i) appropriate adjustments to such last approved Operating Budget shall
automatically be made to reflect actual increases in real property taxes,
insurance premiums, utility charges, and similar items over which the Company
has no control, and (ii) each other item other than any non-recurring items
(e.g., capital expenditures, including tenant improvements in excess of the
applicable amount set forth in the last approved Operating Budget) in such last
approved Operating Budget shall be increased by ten percent (10%) annually until
such time as the Board is able to agree upon a revised Operating Budget. In
addition, TrizecHahn acting alone shall be authorized without the consent of the
Board to incur, or authorize THCM to incur, expenditures on behalf of the
Company in excess of the various line item amounts that TrizecHahn is authorized
to incur in the last approved Operating Budget provided the sum of such
expenditures and the expenses projected to be incurred in the future under such
Operating Budget in the aggregate do not exceed one hundred five percent (105%)
of the aggregate estimated expenditures set forth in, and with respect to the
period covered by, such approved Operating Budget. Following the Opening,
THCM's responsibilities shall be as follows:
(a) THCM shall establish an on-site property management team to
manage, market, operate, lease and maintain the Bazaar Improvements.
(b) The Company shall provide THCM on-site office space (with
respect only for the management and leasing of the Center) at the Center
for a management office without any fee or charge for such space not to
exceed six thousand (6,000) square feet.
(c) THCM shall perform, or cause to be performed, all duties of
the Company as lessor under the leases with tenants leasing space in the
Center.
(d) THCM shall collect all rent and other monies due from
tenants and any sums otherwise due the Company with respect to the Center
in the ordinary course of business.
<PAGE>
(e) THCM shall coordinate the leasing of space in the Center
(including the initial leasing of space in the Center, as well as all
subsequent re-leasing of space), and shall procure new leases and lease
renewals for the Company on terms and conditions which are in general
accordance with the approved leasing plan. When appropriate, THCM will
delegate the leasing of space in the Center, or a portion thereof, to
third-party independent leasing agents or brokers; provided, however, that
the total leasing commission shall not exceed the fees set forth pursuant
to Section 2.08. Any leasing commission payable to third-party independent
leasing agents or brokers previously in communication with Holdings II or
representing tenants (and not engaged by THCM on behalf of the Company)
shall not reduce the fees payable to THCM or its affiliates as set forth
pursuant to Section 2.08 under Leasing Fees. It is the understanding of
the parties that third party brokers previously in communication with
Holdings II shall be paid as third party brokers if and when appropriate in
accordance with the provisions of this Agreement.
(f) Upon the Company's approval by the Board of the Leasing Plan
or updated Leasing Plan, THCM shall negotiate and execute on behalf of and
as the agent of the Company all new leases, lease renewals and any
assignments, amendments or terminations thereof that are consistent with
the Leasing Plan, provided, however, that leases for space in excess of
12,500 square feet shall be submitted to the Board for approval prior to
execution.
(g) THCM shall prepare all documentation for any lease
transaction at the agreed-upon lease documentation rate.
(h) THCM shall, at the Company's cost and expense and subject to
the approval of the Board, retain the services of a Marketing Director who
shall provide specialized marketing services for the Center.
(i) THCM shall, on behalf of and at the Company's cost and
expense, enforce all lease provisions to be performed by tenants of the
Center.
(j) THCM shall coordinate the security for the Center.
(k) THCM shall, at the Company's cost and expense, operate and
maintain the Center as a first-class regional shopping center and cause the
Company to comply with its Operating Covenant under the REA.
2.06 DEVELOPMENT FEES
As consideration for providing developments services in connection
with the project, THCM shall be paid a development fee ("DEVELOPMENT FEE")
pursuant to the terms of a separate development agreement ("DEVELOPMENT
AGREEMENT"), entered into between the Company and THCM in the form of EXHIBIT
"C" attached hereto. Pursuant to the Development Agreement, the Company shall
pay THCM a Development Fee in an amount equal to four percent (4%) of all costs
and expenses identified as "Construction Contracts", "Building Owner", "Site
Work and Utilities Contribution" costs, and total Parking Facilities costs,
prior to the
<PAGE>
reduction for the "Parking Facilities Contribution from Hotel/Casino"
(collectively, "HARD CONSTRUCTION COSTS") identified as such in the Development
Budget for the Bazaar Improvements. Development administration costs shall be
charged directly to the Company. Upon execution of the Development Agreement in
form approved by the Company and THCM, then the provisions of this Section 2.06
shall be of no further force and effect.
2.07 MANAGEMENT FEES
As consideration for providing property management services for the
project, THCM shall be paid a management fee pursuant to the terms of the
management agreement ("MANAGEMENT AGREEMENT"), entered into between the Company
and THCM in the form attached hereto as EXHIBIT "D." The Company shall pay THCM
a fee based on four percent (4%) of rents and miscellaneous (operating) income
paid to the Company, or THCM on behalf of the Company, by tenants or other
individuals or entities associated with the Center (but not by Aladdin Gaming in
connection with the Use Agreement) during each calendar year or any partial
calendar year including, but not limited to, minimum rental, percentage rental,
and additional rental paid by tenants for the right to lease space in the Center
but excluding CAM charges, marketing charges and other "pass-through" charges
paid by tenants. Upon execution of the Management Agreement in form approved by
the Company and THCM, then the provisions of this Section 2.07 and Section 2.08
(below) shall be of no further force and effect.
2.08 LEASING FEES
In connection with leasing of the Center undertaken by THCM or its
affiliates, the Company will pay to THCM a leasing commission equal to five
percent (5%) of minimum annual rental for the first five years of any lease plus
two percent (2%) of minimum annual rental thereafter, with a fifty percent (50%)
discount on renewed space as more fully set forth in the Management Agreement.
In addition, the Company will pay to THCM a leasing commission equal to ten
percent (10%) of the minimum annual rental and percentage rental (if applicable)
for temporary tenants (I.E., a lease/license agreement for less than or equal to
twelve [12] months).
2.09 LIABILITY AND INDEMNITY
No Member, officer of the Company, representative of the Board or
other authorized representative of the Company ("INDEMNIFIED PARTY") shall be
liable or accountable in damages or otherwise to the Company or to the other
Member for any error of judgment or any mistake of fact or law or for anything
that such Indemnified Party may do or refrain from doing hereafter, except in
the case of fraud, willful misconduct or gross negligence in performing or
failing to perform such Indemnified Party's duties hereunder. To the fullest
extent permitted by law, the Company hereby indemnifies, defends, protects and
agrees to hold each Indemnified Party wholly harmless from and against any and
all loss, expense or damage suffered by such Indemnified Party by reason of
anything which such Indemnified Party may do or refrain from doing hereafter for
and on behalf of the Company and in furtherance of its interest; provided,
however, (i) no Indemnified Party shall be indemnified, defended and/or held
harmless from any loss, cost, expense or damage which such Indemnified Party may
suffer as a result of such Indemnified Party's fraud, willful misconduct or
gross negligence in performing or in failing to perform such Indemnified Party's
duties hereunder, and (ii) any such indemnity shall be recoverable only from the
assets of the Company. The provisions of this Agreement, to the
<PAGE>
extent that they restrict the duties and liabilities of a Member (and/or an
officer or representative thereof) otherwise existing at law or in equity, are
agreed by the Members to replace such duties and liabilities of such Member
(and/or such officer or representative).
2.10 DESIGNATION OF OFFICERS
The Board may, from time to time, designate officers of the Company
and delegate to such officers such authority and duties as the Board may deem
advisable and may assign titles (including, without limitation, chief executive
officer, president, vice-president, secretary and/or treasurer) to any such
officer. Unless the Board otherwise determines, if the title assigned to an
officer of the Company is one commonly used for officers of a business
corporation formed under the Delaware Corporation Law, then the assignment of
such title shall constitute the delegation to such officer of the authority and
duties that are customarily associated with such office pursuant to the Delaware
Corporation Law. Any number of titles may be held by the same officer. Any
officer to whom a delegation is made pursuant to the foregoing shall serve in
the capacity delegated unless and until such delegation is revoked by the Board
or such officer resigns. The Company shall not have any managers within the
meaning of the Delaware Act.
2.11 COMPENSATION
Except as otherwise expressly provided in this Agreement or as
provided in any applicable Development Budget or Operating Budget, no Member or
any constituent partner, member, shareholder, officer, director, employee,
agent, trustee or representative of a Member, or any Affiliate thereof, shall
incur any obligation or make any expenditures on behalf of the Company, or be
entitled to receive any remuneration for services rendered to the Company or to
be reimbursed for general administrative and overhead expenses.
2.12 TREATMENT OF FEES AND REIMBURSEMENTS
For financial and income tax reporting purposes, any and all fees paid
by the Company to any Member and/or any Affiliate thereof shall be treated as
expenses of the Company and, if paid to any Member, as guaranteed payments
within the meaning of Section 707(c) of the Code. To the extent any accrued
portion of any such fee is not paid in full prior to the liquidation of the
Company, such unpaid portion of such fee shall constitute a debt of the Company
payable upon such liquidation.
2.13 APPROVAL RIGHTS OVER RELATED ALADDIN DEVELOPMENT
TrizecHahn shall have reasonable approval of the quality of
development and planning for the development of the Redeveloped Aladdin. This
approval right shall also be contained in the Reciprocal Easement Agreement. It
is the intention of Holdings II that such development shall be equal to or
better than the general quality of the Mirage, including but not limited to
interior finish, theming and attraction package, and standard hotel room, with a
higher percentage of suites and king parlors. Such standards are intended to
attract as a primary target the upper middle market segment, with an ambiance
equal to or better than Bally's and Mirage. Upon the opening, the Redeveloped
Aladdin is intended to be one of the top five hotels on the Las Vegas strip
taking into consideration for such purposes the hotels existing and/or announced
<PAGE>
as of the date hereof in terms of market segment, average daily room rate, and
overall ambiance and market perception. Additionally, it is contemplated that
London Clubs International will market a five-star international premium class
Salle Privee facility, including a restaurant, 15,000 square foot casino and
high-end hotel suites. Attached hereto as EXHIBIT "E" is a preliminary
construction proforma and plans and drawings for the Redeveloped Aladdin. The
preliminary construction pro forma indicates a total project costs of
approximately Seven Hundred Million Dollars ($700,000,000), including a theming
budget of Thirty-Five Million Dollars ($35,000,000), for the Redeveloped Aladdin
(excluding the Audrie/Harmon Hotel). TrizecHahn acknowledges that nothing
contained herein is intended to be a guaranty of the economic performance of the
Redeveloped Aladdin or the Center, and none of the parties hereto shall have any
liability with respect to such economic performance. Such approval by
TrizecHahn shall include, but not be limited to, quality of traffic and
pedestrian circulation, ingress and egress, contractors, plans, drawings and
construction schedule. Aladdin Holdings, LLC and Aladdin Gaming will cause the
Redeveloped Aladdin, containing approximately 2,600 rooms and an approximately
100,000 to 125,000 square foot casino, to be developed on the Master Site
together with related facilities and infrastructure as depicted in EXHIBIT "A"
and shall have the right at a later date to construct the "Optional
Improvements" (as such term is defined in the current draft of the REA).
2.14 HOLDINGS II'S REPRESENTATIONS AND WARRANTIES
Holdings II hereby makes the following representations and warranties
to the Company and to TrizecHahn, with the understanding that each such
representation and warranty is material and is being relied upon by the Company
and by TrizecHahn. Any reference in this Section to "HOLDINGS II'S BEST
KNOWLEDGE" or words to similar effect means the actual knowledge of Jack Sommer,
Mel Lacquement and Ronald Dictrow (collectively, the "HOLDINGS II PRIMARY
INDIVIDUALS"), after the Holdings II Primary Individuals have reviewed their
files and the files maintained by Holdings II with respect to the Property.
(a) DEFINITION OF BEST KNOWLEDGE. The Holdings II Primary
Individuals are officers or employees of Holdings II or a Holdings II
Affiliate, and are the individuals who collectively have primary
responsibility for managing the ownership, operation and development of the
Property and overseeing the business activities of Holdings II, including
but not limited to the supervision, directly or indirectly, of the
employees and agents of Holdings II and Holdings II Affiliates with respect
to the Property. To Holdings II's best knowledge, no other officer or
employee of Holdings II or an Holdings II Affiliate is likely to possess
material information or knowledge with respect to the Property which is not
also possessed or known by one of the Holdings II Primary Individuals.
(b) AUTHORITY AND DUE FORMATION. Holdings II has the requisite
power and authority to own its assets and conduct business as and how the
same are now owned or conducted and as and how the same will be conducted
under the Agreement. Holdings II is duly organized, validly existing and
in good standing under the laws of the State of its formation, and the
execution, delivery and performance of this Agreement, and when delivered,
the other documents contemplated by this Agreement to be executed by
Holdings II, as applicable, have been or will have been, when delivered,
duly and
<PAGE>
validly authorized by all necessary action and proceedings, and no further
action or authorization is necessary on the part of Holdings II in order to
consummate the transactions contemplated herein. Neither the execution and
delivery of this Agreement, nor the execution and delivery of the documents
referenced herein or the incurrence of the obligations set forth herein or
therein, nor the consummation of the transactions contemplated herein,
conflict with or result in the material breach of any terms, conditions or
provisions of, or constitute a default under, any loan documents or other
evidence of indebtedness, or any contract, lease, permit, or other
agreements or instruments to which Holdings II is a party or by which the
Property is bound. This Agreement is, and when delivered, the other
documents to be executed by Holdings II in connection herewith, will be,
legal, valid and binding obligations of Holdings II, as applicable,
enforceable in accordance with their respective terms, except as such
enforceability may be limited by the effect of bankruptcy and similar laws
relating to creditors' rights and the availability of equitable remedies.
(c) ENTITLEMENTS, PERMITS AND LICENSES. Attached hereto as
SCHEDULE 2.14(C) is a list of all entitlements, development agreements,
maps, permits, licenses, certificates, franchises, consents, and other
approvals granted as of the date hereof by any Governmental Authority
claiming jurisdiction over the Property or Holdings II, together with any
and all development rights, licenses, easements, rights of way, consents
and other approvals required from private parties to own, develop, market
and operate the Property (collectively, the "EXISTING ENTITLEMENTS").
Except as described on SCHEDULE 2.14(C): (i) the Existing Entitlements are
fully vested, are not subject to challenge, further approval, or
revocation, and are currently in full force and effect; (ii) no fees,
penalties or other payments are due or will be payable in connection with
the Existing Entitlements; (iii) the Existing Entitlements will not expire
other than those which are periodic in nature and renewable upon
satisfaction of ministerial conditions; and (iv) no consent from any
Governmental Authority or private party must be obtained in order for the
Holdings II or its Affiliates to transfer to the Company all right, title
and interest of Holdings II in and to the Existing Entitlements. Other
than the Existing Entitlements, to Holding's best knowledge the only
entitlements, development agreements, maps, permits, licenses,
certificates, franchises, consents and other approvals which must be
obtained from Governmental Authorities claiming jurisdiction over the
Property, together with all development rights, licenses, easements, rights
of way, consents and other approvals required from private parties, in
order to own, develop, market, and operate the Property as contemplated by
the Development Plan are listed on SCHEDULE 2.14(C) attached hereto
(collectively, the "REMAINING ENTITLEMENTS"). As of the projected
commencement of construction of the Project as set forth in the Development
Plan and except as described on SCHEDULE 2.14(C): (w) the Remaining
Entitlements will be fully vested, will not be subject to challenge,
further appeal or revocation, and will be in full force and effect; (x) no
fees, penalties or other payments will be payable in connection with the
Remaining Entitlements; (y) the Remaining Entitlements will not expire
other than those which are periodic in nature and renewable upon
satisfaction of ministerial conditions; and (z) no consent from any
Governmental Authority or private party must be obtained in order for
Holdings II or its Affiliates to transfer to the Company all right, title
and interest of Holdings II or its Affiliates in and to the Remaining
Entitlements.
<PAGE>
(d) CONTRACTS. There are no agreements or other obligations to
which Holdings II is party or by which it or the Property is or may be
bound in connection with the ownership, management, maintenance, operation,
development, construction or financing of the Property.
(e) NO CONSENT. Neither the execution and delivery of this
Agreement or the other documents to be executed by Holdings II in
connection herewith, nor performance of any of Holdings II's obligations
hereunder, nor consummation of the transactions contemplated hereby,
including but not limited to the assignment of the Contracts to the
Company: (i) will require any authorization, consent, approval, license,
exemption of, filing with or notice to any Governmental Authority or
private party; (ii) will result in the imposition of a lien on all or any
portion of the Property; or (iii) will conflict with, result in a breach
of, or constitute a default under, the terms and conditions of the
organizational documents pursuant to which Holdings II was organized, or
any indenture, mortgage, deed of trust, agreement, undertaking, instrument
or document to which Holdings II or any Holdings II Affiliate is a party or
is bound, or any order or regulation of any court, regulatory body,
administrative agency or governmental body having jurisdiction over
Holdings II.
(f) HAZARDOUS MATERIALS. Except as otherwise disclosed in the
environmental reports described on SCHEDULE 2.14(F) attached hereto:
(i) the Property and all existing uses and conditions of
the Property are in compliance with all Environmental Laws, and
neither Holdings II nor, to Holdings II's best knowledge, any previous
owners of any of the Property has received any written notice of
violation issued pursuant to any Environmental Law with respect to the
Property or any portion thereof or any use or condition thereof.
(ii) there are no Hazardous Materials present on, in or
under the Property and no Hazardous Materials are stored on the
Property by Holdings II or, to Holdings II's best knowledge, by any
other previous owner thereof.
(iii) neither Holdings II nor, to Holdings II's best
knowledge, any present or former owner, tenant, occupant or user of
all or any portion of the Property has used, handled, generated,
produced, manufactured, treated, stored, transported, released,
discharged or disposed of any Hazardous Material in on, under or from
the Property.
(iv) there is no Release or threatened Release of any
Hazardous Material existing on, beneath or from or in the surface or
ground water associated with the Property, and, to Holdings II's best
knowledge, no Release or threatened Release of Hazardous Materials on,
beneath or from the Property has occurred at any time in the past.
(v) there exists no writ, injunction, decree, order or
judgment outstanding, nor any lawsuit, claim, proceeding, citation,
directive, summons or
<PAGE>
investigation pending or, to Holdings II's best knowledge, threatened
pursuant to any Environmental Law relating to (i) the use, ownership,
management, maintenance, operation or development of the Property,
(ii) any alleged violation of any Environmental Law by Holdings II or,
to Holdings II's best knowledge, any other current or former owner,
tenant, occupant or user of any portion of the Property or (iii) the
suspected presence, Release or threatened Release of any Hazardous
Material on, under, in or from any portion of the Property.
(vi) there are no above-ground or underground tanks
located on the Property used or formerly used for the purpose of
storing any Hazardous Material, and, to Holdings II's knowledge, there
have never been any.
(vii) there are no asbestos-containing building materials
on or in the Property, and no asbestos abatement or remediation work
has been performed on the Property.
(viii) there is no PCB-containing equipment or
PCB-containing material located on or in the Property.
(g) ENVIRONMENTAL AND SOILS REPORTS. Attached hereto as
SCHEDULE 2.14(G) is a complete list of all environmental, soils, seismic
and geologic reports, studies and certificates relating to the Property.
(h) LITIGATION. Attached hereto as SCHEDULE 2.14(H) is a
complete list of all pleadings, filings and other papers filed in
connection with any pending lawsuit affecting the Property or Holdings II.
To Holdings II's best knowledge, no other litigation affecting the Property
or Holdings II is threatened or contemplated. To the fullest extent
permitted by law, Holdings II, Aladdin Holdings and the Sommer Trust, by
their execution hereof hereby, jointly and severally, agree to indemnify,
defend, protect and agree to hold the Company and TrizecHahn wholly
harmless from and against any and all loss, expense or damage suffered by
the Company or by TrizecHahn arising or relating directly or indirectly to
that certain litigation filed in the Supreme Court of the State of New
York, County of New York, Index No. 112618/95 entitled "Joseph Aronow, et
al., vs. Jack Sommer, et al," or any subsequent claims made by the parties
thereto.
(i) TAXES AND CONDEMNATION. Except as otherwise disclosed on
Schedule 2.14(i) attached hereto, there are no presently pending or, to
Holdings II's knowledge, contemplated special taxes or assessments which
will affect the Property. There are no presently pending or, to Holdings
II's knowledge, contemplated proceedings to condemn all or any portion of
the Property.
(j) TITLE MATTERS. Holdings II has not created any, and to
Holdings II's best knowledge there are no, rights of purchase, rights of
first refusal, rights of reverter, ground lease interests or options
relating to all or any portion of the Property or any interest therein
(except as set forth in this Agreement or pursuant to that certain Option
Agreement and Purchase and Sale Agreement between the Sommer Trust and GW
Vegas, L.L.C., a Delaware limited liability company, dated December 2,
1996). To Holdings II's best knowledge, there are no unrecorded or
undisclosed documents or other
<PAGE>
matters which affect title to the Property which are not disclosed on the
Preliminary Title Report prepared by Stewart Title, dated March 17, 1997.
(k) BANKRUPTCY. Neither Holdings II nor any Holdings II
Affiliate has (i) made a general assignment for the benefit of creditors;
(ii) filed any voluntary petition in bankruptcy or suffered the filing of
an involuntary petition by its creditors; (iii) suffered the appointment of
a receiver to take possession of all or substantially all of its assets;
(iv) suffered the attachment or other judicial seizure of all or
substantially all of its assets; (v) admitted in writing its inability to
pay its debts as they become due; or (vi) made an offer of settlement,
extension or composition to its creditors generally.
(l) BROKERS. All negotiations relating to this Agreement and
the other documents to be executed in connection herewith and the
transactions contemplated thereby have been conducted without the
involvement of any person or entity acting or purporting to act on behalf
of Holdings II or any Holdings II Affiliate in such manner as to give rise
to any claim for a broker's commission or finder's fee or similar
compensation.
(m) ACCURACY OF INFORMATION. No representation, warranty,
certification or statement of Holdings II in this Agreement or any other
agreement, statement, certificate, exhibit or schedule furnished or to be
furnished by Holdings II in connection with the transactions contemplated
hereby contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary to make not
misleading the statement or facts contained therein.
2.15 TRIZECHAHN'S REPRESENTATIONS AND WARRANTIES
TrizecHahn hereby makes the following representations and warranties
to the Company and to Holdings II, with the understanding that each such
representation and warranty is material and is being relied upon by the Company
and by Holdings II. Any reference in this Section to "TRIZECHAHN'S BEST
KNOWLEDGE" or words to similar effect means the actual knowledge of Lee Wagman,
Wayne Finley, Wendy Godoy, John Bedard and Doug Hageman (collectively, the
"TRIZECHAHN'S PRIMARY INDIVIDUALS"), after the TrizecHahn Primary Individuals
have reviewed their files and the files maintained by TrizecHahn with respect to
the Property.
(a) DEFINITION OF BEST KNOWLEDGE. The TrizecHahn Primary
Individuals are officers or employees of TrizecHahn or an TrizecHahn
Affiliate, and are the individuals who collectively have primary
responsibility for managing the ownership, operation and development of the
Property and overseeing the business activities of TrizecHahn, including
but not limited to the supervision, directly or indirectly, of the
employees and agents of TrizecHahn and TrizecHahn Affiliates with respect
to the Property. To TrizecHahn's best knowledge, no other officer or
employee of TrizecHahn or a TrizecHahn Affiliate is likely to possess
material information or knowledge with respect to the Property which is not
also possessed or known by one of the TrizecHahn Primary Individuals.
<PAGE>
(b) AUTHORITY AND DUE FORMATION. TrizecHahn has the requisite
power and authority to own its assets and conduct business as and how the
same are now owned or conducted and as and how the same will be conducted
under the Agreement. TrizecHahn is duly organized, validly existing and in
good standing under the laws of the State of its formation, and the
execution, delivery and performance of this Agreement, and when delivered,
the other documents contemplated by this Agreement to be executed by
TrizecHahn, as applicable, have been or will have been, when delivered,
duly and validly authorized by all necessary action and proceedings, and no
further action or authorization is necessary on the part of TrizecHahn in
order to consummate the transactions contemplated herein. Neither the
execution and delivery of this Agreement, nor the execution and delivery of
the documents referenced herein or the incurrence of the obligations set
forth herein or therein, nor the consummation of the transactions
contemplated herein, conflict with or result in the material breach of any
terms, conditions or provisions of, or constitute a default under, any loan
documents or other evidence of indebtedness, or any contract, lease,
permit, or other agreements or instruments to which TrizecHahn is a party
or by which the Property is bound. This Agreement is, and when delivered,
the other documents to be executed by TrizecHahn in connection herewith,
will be, legal, valid and binding obligations of TrizecHahn, as applicable,
enforceable in accordance with their respective terms, except as such
enforceability may be limited by the effect of bankruptcy and similar laws
relating to creditors' rights and the availability of equitable remedies.
(c) NO CONSENT. Neither the execution and delivery of this
Agreement or the other documents to be executed by TrizecHahn in connection
herewith, nor performance of any of TrizecHahn' obligations hereunder, nor
consummation of the transactions contemplated hereby: (i) will require any
authorization, consent, approval, license, exemption of, filing with or
notice to any Governmental Authority or private party; (ii) will result in
the imposition of a lien on all or any portion of the Property; or (iii)
will conflict with, result in a breach of, or constitute a default under,
the terms and conditions of the organizational documents pursuant to which
TrizecHahn was organized, or any indenture, mortgage, deed of trust,
agreement, undertaking, instrument or document to which TrizecHahn or any
TrizecHahn Affiliate is a party or is bound, or any order or regulation of
any court, regulatory body, administrative agency or governmental body
having jurisdiction over TrizecHahn.
(d) LITIGATION. To TrizecHahn's best knowledge, no litigation
affecting TrizecHahn is pending, threatened or contemplated.
(e) BANKRUPTCY. Neither TrizecHahn nor any TrizecHahn Affiliate
has (i) made a general assignment for the benefit of creditors; (ii) filed
any voluntary petition in bankruptcy or suffered the filing of an
involuntary petition by its creditors; (iii) suffered the appointment of a
receiver to take possession of all or substantially all of its assets; (iv)
suffered the attachment or other judicial seizure of all or substantially
all of its assets; (v) admitted in writing its inability to pay its debts
as they become due; or (vi) made an offer of settlement, extension or
composition to its creditors generally.
<PAGE>
(f) BROKERS. All negotiations relating to this Agreement and
the other documents to be executed in connection herewith and the
transactions contemplated thereby have been conducted without the
involvement of any person or entity acting or purporting to act on behalf
of TrizecHahn or any TrizecHahn Affiliate in such manner as to give rise to
any claim for a broker's commission or finder's fee or similar
compensation.
(g) ACCURACY OF INFORMATION. No representation, warranty,
certification or statement of TrizecHahn in this Agreement or any other
agreement, statement, certificate, exhibit or schedule furnished or to be
furnished by TrizecHahn in connection with the transactions contemplated
hereby contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary to make not
misleading the statement or facts contained therein.
ARTICLE III
MEMBERS' CONTRIBUTIONS TO COMPANY
3.01 CAPITAL CONTRIBUTIONS FOR PRE-DEVELOPMENT COSTS
Commencing as of the date hereof, approved Predevelopment Costs for
the Center including, but not limited to, architectural, engineering and design
services (but excluding predevelopment-stage fees to either Holdings II or
TrizecHahn) will be funded by Holdings II and TrizecHahn in accordance with
their Percentage Interests in an amount not to exceed the amount set forth in
the Pre-Development Budget attached hereto as EXHIBIT "F". Commencing as of the
date hereof, Predevelopment Costs for the Parking Facilities will be funded by
Holdings and Holdings II and the Company based on a parking space prorata
allocation; the Company's allocation to be funded by Holdings II and TrizecHahn
in accordance with their respective Percentage Interests. Predevelopment costs
incurred by Aladdin Holdings, LLC or by its affiliates which have accrued prior
to (but not after) March 17, 1997, and which are reasonably allocable to the
Center and the Parking Facilities as reasonably determined by TrizecHahn shall
be credited to the amount Holdings II is required to contribute pursuant to the
Pre-Development Budget following TrizecHahn's receipt and approval of paid
invoices from Aladdin Holdings, LLC; provided, however, in no event shall such
amount exceed Two Hundred Thousand Dollars ($200,000). Accordingly, commencing
as of the date hereof, TrizecHahn shall fund one hundred percent (100%) of
Predevelopment Costs until such time as its funding of such costs shall be equal
to that of Holdings II, and thereafter all such costs shall be funded equally by
TrizecHahn and Holdings II, in accordance with the provisions hereof. If the
Redeveloped Aladdin improvements plan is abandoned by Aladdin Holdings, LLC,
then Holdings II shall promptly reimburse TrizecHahn for its share of the Bazaar
Improvements Predevelopment Costs pursuant to Section 3.06 below. The parties
acknowledge that Predevelopment Costs may also constitute costs included within
the Bazaar Company's Site Work and Utilities Contribution or costs allocable to
the Parking Facilities (as such terms are defined below). As used herein, the
term "PREDEVELOPMENT COSTS" means the types, categories and amounts of
pre-development costs and/or expenses approved in the Development Plan attached
hereto including, without limitation, architectural fees, engineering fees, and
other similar fees and expenses incurred in connection
<PAGE>
with the pre-development of the Bazaar Improvements. A preliminary estimate of
the approximate amounts for the items comprising the Pre-Development Costs is
set forth in the Development Plan. Any and all contributions required to be
made by any Member to the capital of the Company for Pre-Development Costs
pursuant to this Section 3.01 or pursuant to Section 3.02, (i) shall be made
within ten (10) business days following the effective date of written notice
delivered to the Members by TrizecHahn requesting such amounts (which notice
shall include, without limitation, reasonably supporting documentation for such
Pre-Development Costs), and (ii) shall be credited to the Capital Account and
Unrecovered Contribution Account of such Member as and when any such
contribution is made.
3.02 ADDITIONAL CAPITAL CONTRIBUTIONS
Once all Conditions Precedent (as defined in the Glossary) required to
begin construction are satisfied and the Company has obtained financing approved
by the Members, (i) TrizecHahn shall contribute, as and when required by the
Bazaar Company, the TrizecHahn Investment, less a credit for predevelopment
expenditures incurred by TrizecHahn and approved by the Company, and (ii) the
Company and Holdings shall execute the Lease in form approved by the Board, and
Holdings II's Capital Account and Unrecovered Contribution Account shall be
credited with the amount of Ten Million Dollars ($10,000,000) reflecting the
arrangement by Holdings II for the Company to obtain the Lease of the Property
with below market rate ground rent. The contribution of the TrizecHahn
Investment shall be guaranteed by TrizecHahn Centers Inc., in the form attached
hereto as EXHIBIT "G." In structuring the economics of this transaction,
TrizecHahn has assumed that the Company will be able to obtain mortgage
indebtedness, at market rates and on market terms based upon market terms and
conditions typically obtained by TrizecHahn, for the balance of the construction
costs. If the mortgage indebtedness together with the original capital
contributions is not sufficient to pay all construction costs, the Company will
first attempt to obtain additional indebtedness if available at reasonable
market rates and market terms as mutually determined by TrizecHahn and Holdings
II before requiring additional capital contributions. To the extent additional
capital ("ADDITIONAL CAPITAL") is required, Holdings II and TrizecHahn shall
each contribute such capital in the ratio of their Percentage Interests pursuant
to Section 3.04. Holdings II and TrizecHahn may elect to bring in a third-party
investor as an additional Member of the Company, subject to the sole discretion
approval of the other Member, to contribute their Additional Capital. If such
third-party investor is admitted as a member, the non-contributing party or
parties shall bear a dilution of its or their Percentage Interest.
Additionally, the two seats each on the Board may be divided between the
non-contributing party and its third-party investor, or if an additional seat is
added for the third-party investor, an additional seat will be added for the
contributing party.
3.03 CONSTRUCTION FINANCING
TrizecHahn and Holdings II will each use reasonable/diligent efforts
to obtain the construction financing for the Bazaar Improvements. It is the
intent of both parties to obtain construction/mini-perm financing from
third-party, institutional sources in an amount equal to at least 70% of the
costs of the development of the Bazaar Improvements. TrizecHahn Centers Inc.
("TrizecHahn Centers"), Aladdin Holdings, LLC, a Delaware limited liability
company ("ALADDIN HOLDINGS") and the Trust Under Article Sixth U/W/O Sigmund
Sommer ("SOMMER
<PAGE>
TRUST") shall jointly and severally assume recourse liability and enter into a
completion guarantee in favor of the lender for the construction loan (but
neither party shall be obligated to assume recourse liability with respect to
any permanent or "take-out" financing). During any period of time in which any
such guarantee by TrizecHahn Centers, Aladdin Holdings and/or the Sommer Trust
in favor of the Company's lender is in effect, TrizecHahn Centers shall
guarantee the obligations of TrizecHahn to contribute capital to the Company,
and Aladdin Holdings and the Sommer Trust shall jointly and severally guarantee
the obligations of Holdings II to contribute capital to the Company, each in the
respective form of guaranty attached hereto as EXHIBITS "G" and EXHIBIT "H,"
respectively ("MEMBER CAPITAL OBLIGATION GUARANTEE"). Once nonrecourse
financing is obtained by the Company and the Company's lender fully and
unconditionally releases all guarantors, then in such event, the Member Capital
Obligation Guarantee shall automatically be of no further force and effect.
TrizecHahn and Holdings II anticipate that a commitment for the
construction financing for the Bazaar Improvements will be entered into
substantially concurrently with the financing obtained by Aladdin Holdings, LLC
and its affiliates with respect to the Redeveloped Aladdin. Both parties agree
to exercise reasonable/diligent efforts to coordinate the two financing efforts,
including but not limited to facilitating inter-creditor agreements and the
delivery of attornment and nondisturbance agreements. Any and all amounts
required to be paid by any Member pursuant to any recourse liability to a lender
to the Company shall be deemed to be contributed by such Member to the capital
of the Company and credited to such Member's Capital Account and Unrecovered
Contribution Account as and when any such payment is made.
3.04 CASH FLOW DEFICIT CONTRIBUTION
If TrizecHahn determines that additional funds are necessary for the
Company to meet its current or projected financial requirements, including,
without limitation, any financial requirements attributable to any Construction
Overruns and/or any operating shortfalls, then TrizecHahn may elect any one (1)
or more of the following: (i) to cause any such amounts to be obtained from one
(1) or more third-party lenders on such terms and conditions as are determined
in the reasonable discretion of the Board, (ii) to deliver written notice of
such actual or projected cash deficit to the Members, which notice shall include
a contribution date ("CONTRIBUTION DATE") (which shall not be less than ten (10)
business days following the Effective Date of such notice) upon which the
Members shall be obligated to contribute to the capital of the Company, in cash,
the entire amount of such cash deficit in proportion to their Percentage
Interests. Any and all contributions made to the capital of the Company by any
Member pursuant to this Section 3.04 shall be credited to the Capital Account
and the Unrecovered Contribution Account of such Member as and when any such
contribution is made.
3.05 REMEDY FOR FAILURE TO CONTRIBUTE CAPITAL
If a Member (the "NON-CONTRIBUTING MEMBER") fails to contribute all or
any portion of any additional capital such Member is required to contribute
pursuant to Sections 3.01, 3.02 and/or 3.04 (the "DELINQUENT CONTRIBUTION"),
then the other Member (the "CONTRIBUTING MEMBER") in addition to any and all
other rights and/or remedies the Contributing Member may have at law and/or in
equity, shall have the right to select one (1) or more of the following options
in accordance with the terms and conditions set forth below in this Section
3.05:
<PAGE>
(a) The Contributing Member may advance to the Company, in cash,
within thirty (30) days following the Contribution Date, an amount equal to
the Delinquent Contribution, and such advance shall be treated as a
recourse loan ("MEMBER LOAN") by the Contributing Member to the
Non-Contributing Member, bearing interest at a rate equal to the lesser of
(i) fifteen percent (15%) per annum, compounded monthly, or (ii) the
maximum, nonusurious rate then permitted by law for such loans. Each
Member Loan shall be payable upon the first to occur of the written demand
by the Contributing Member or the liquidation of the Company.
As of the Effective Date of any advance of a Member Loan, the
Non-Contributing Member shall be deemed to have contributed an amount equal
to the principal amount of such Member Loan to the capital of the Company,
and the Capital Account and the Unrecovered Contribution Account of the
Non-Contributing Member shall be credited with a like amount.
Notwithstanding the provisions of Articles II, V and IX, until any and all
Member Loans are repaid in full the Non-Contributing Member shall draw no
further distributions from the Company, and all cash or property otherwise
distributable with respect to the Non-Contributing Member's Interest shall
be distributed to the Contributing Member in repayment of the outstanding
balance of the Member Loan, with such funds being applied first to reduce
any and all interest accrued on such Member Loan and then to reduce the
principal amount thereof. Any amounts so applied shall be treated, for all
purposes under this Agreement, as having actually been distributed to the
Non-Contributing Member and applied by the Non-Contributing Member to repay
the outstanding Member Loan.
In order to secure the repayment of any and all Member Loans made
on behalf of the Non-Contributing Member, the Non-Contributing Member
hereby grants a security interest in favor of the Contributing Member in
and to all distributions to which the Non-Contributing Member may be
entitled to receive under this Agreement, and hereby irrevocably appoints
the Contributing Member, and any of the Contributing Member's respective
agents, officers, or employees, as the Non-Contributing Member's
attorney(s)-in-fact, with full power to prepare, execute, acknowledge, and
deliver, as applicable, all documents, instruments, and/or agreements
memorializing and/or securing such Member Loan(s) including, without
limitation, such Uniform Commercial Code financing and continuation
statements, pledge and/or security agreements, mortgages and other security
instruments as may be reasonably appropriate to perfect and continue the
security interest in favor of the Contributing Member.
If, upon any demand for the repayment of a Member Loan, any
principal thereof and/or accrued interest thereon remains outstanding ten
(10) Business Days following such demand, the Contributing Member may elect
any one (1) of the following options: (i) to continue to have such Member
Loan (or portion thereof) be payable upon demand pursuant to the terms and
provisions of this Section 3.05(a); (ii) to contribute all or any portion
of such outstanding principal of and accrued, unpaid interest on such
Member Loan (or portion thereof) to the capital of the Company and dilute
the Percentage Interest of the Non-Contributing Member in accordance with
the provisions of Section 3.05(b); or (iii) to institute legal (or other)
proceedings against the Non-
<PAGE>
Contributing Member to collect such loan which may include, without
limitation, foreclosing upon the security interest granted above. The
Contributing Member may elect any of the options set forth in the
immediately preceding sentence by giving written notice of such election to
the Non-Contributing Member at any time after the expiration of the ten
(10) Business Day period set forth above.
(b) The Contributing Member may contribute to the capital of the
Company, in cash, within thirty (30) days following the Contribution Date
and by delivering written notice ("DILUTION NOTICE") thereof to the
Non-Contributing Member, an amount equal to the Delinquent Contribution,
and the Contributing Member's Capital Account and the Unrecovered
Contribution Account each shall be credited with the amount so contributed.
In addition, if a Member Loan is not fully repaid within the ten (10)
Business Day period set forth above, then the Contributing Member may at
any time thereafter deliver a Dilution Notice to the Non-Contributing
Member and thereby contribute to the capital of the Company, in accordance
with the provisions of Section 3.05(a) above, all or any portion of the
outstanding principal of and/or accrued, unpaid interest on such Member
Loan (or portion thereof). In the event of any such contribution, (i) the
amount of such outstanding principal and/or interest so contributed shall
be deemed repaid and satisfied, (ii) the Capital Account and the
Unrecovered Contribution Account of the Non-Contributing Member shall be
decreased, by the amount of such outstanding principal and/or interest so
contributed, (iii) the Capital Account and the Additional Unrecovered
Contribution Account, of the Contributing Member shall be increased by the
amount of such outstanding principal and/or interest so contributed; and
(iv) distributions of Cash Flow shall thereafter be made in accordance with
Sections 5.03 and 5.04.
In the event of the contribution of the Delinquent Contribution
and/or the outstanding balance of a Member Loan by the Contributing Member
pursuant to the foregoing provisions of this Section 3.05(b), the
Percentage Interest of the Non-Contributing Member shall be decreased, as
of the Effective Date of the Dilution Notice, by an amount (expressed in
percentage points) equal to the a fraction, (i) the numerator of which is
the Delinquent Contribution (or the outstanding principal of, and accrued,
unpaid interest on, a Member Loan, as the case may be), and (ii) the
denominator of which is the sum of the Members' Unrecovered Contribution
Accounts and Additional Unrecovered Contribution Accounts; provided,
however, for purposes of this Section 3.05(b) only, Holdings II initial
Unrecovered Contribution Account shall be increased by Twenty Million
Dollars ($20,000,000). The Percentage Interest of the Contributing Partner
shall be correspondingly increased by a like amount of percentage points.
In addition, the Non-Contributing Member shall not be entitled to appoint
any representatives to the Board, and the Contributing Member alone shall
appoint all representatives of the Board.
(c) If the Contributing Member advances any amount to the
Company pursuant to this Section 3.05 but fails to specify which of the
foregoing options such Contributing Member has elected within ten (10) days
after the Effective Date that such Contributing Member makes such advance,
then such Contributing Member shall be deemed to have elected the option
set forth in Section 3.05(a) above with respect to such
<PAGE>
advance. Any and all adjustments to the Non-Contributing Member's
Percentage Interest shall be rounded to the nearest one one-hundredth of
one percentage point (.01%) and the Contributing Member shall not succeed
to all or any portion of the Capital Account, Unrecovered Contribution
Account and/or accrued, unpaid Preferred Return of the Non-Contributing
Member as the result of any such adjustment. Notwithstanding any other
term of this Agreement, the Non-Contributing Member shall have no right to
participate in the management or control of the Company and/or any other
decisions relating to the Company from and after the date that such Member
Loan remains outstanding (unless subsequently repaid in full) or such
Member's Percentage Interest is reduced pursuant to Section 3.05(b).
3.06 FAILURE TO SATISFY CONDITIONS PRECEDENT
TrizecHahn and Holdings II acknowledge that at the date of the
execution hereof there remains a substantial question as to whether or not
Aladdin Gaming can, or is prepared to, construct the Audrie/Harmon Hotel, on a
schedule that will permit the Audrie/Harmon Hotel to open prior to or
simultaneously with the Bazaar Improvements. The parties have proposed
alternative plans in connection with the development of the Audrie/Harmon Hotel
which the parties are in the process of reviewing as of the date hereof.
Holdings II or its Affiliates has entered into a non-binding letter of intent
with Planet Hollywood International to enter into a joint development for the
Audrie/Harmon Hotel, which contemplates a music-themed hotel/casino. However,
the letter of intent is subject to mutual due diligence and documentation. It
is further acknowledged that the delay or failure to develop the Audrie/Harmon
Hotel will have an adverse impact on the leasing of the Center. Furthermore,
the parties acknowledge that Aladdin Holdings, LLC and its Affiliates may seek
construction financing with respect to the Redeveloped Aladdin prior to the time
that sufficient progress has been made in the Center's leasing effort to satisfy
TrizecHahn in its sole discretion. It is understood that TrizecHahn is seeking
commitment from tenants evidenced by letters of intent for a minimum of
twenty-five percent (25%) of the leaseable area of the Center and leases for at
least two of the primary "strip-front end-cap" spaces of the Center, which are
in each case approved by TrizecHahn. Accordingly, TrizecHahn and Holdings II
agree to enter into good faith negotiations to resolve the matter. In the event
that the parties have not entered into an amendment to this Agreement with
respect to the Audrie/Harmon Hotel and the pre-leasing requirement which is
satisfactory to each party, in each party's sole discretion, on or before the
earlier of (i) thirty (30) days after the delivery of a Satisfaction Notice as
described below, or (ii) thirty (30) days after either Member delivers notice
that it reasonably believes that the Conditions Precedent have been satisfied,
or (iii) September 30, 1997, then either Member may at any time deliver a notice
to the other Member ("AUDRIE/HARMON TERMINATION NOTICE"), in which event the
Company shall promptly reimburse TrizecHahn for all of its Predevelopment Costs
(whereupon the Company shall own the work product for which such Predevelopment
Costs have been paid), and this Agreement shall automatically become null and
void and the parties and their Affiliates shall have no further rights, duties
or obligations to each other whatsoever (other than the reimbursement provisions
provided in this Section 3.06). The parties expressly acknowledge and agree
that either party shall have no obligation or liability to approve the proposal
made by the other, and that the sole and exclusive remedy for the failure to
approve such proposal shall be to terminate this Agreement.
<PAGE>
Holdings II shall deliver to TrizecHahn a notice ("SATISFACTION
NOTICE") at such time as Aladdin Gaming and Holdings II are prepared to proceed
with the Project and that, but for the resolution of the issues relating to the
Audrie/Harmon Hotel and the pre-leasing requirement, the Conditions Precedent
set forth in Section 12.10 are satisfied. The Satisfaction Notice shall include
reasonable supporting evidence that the Conditions Precedent are satisfied. The
Satisfaction Notice shall indicate that (a) Holdings II believes that the
development of the Bazaar Improvements, as contemplated in the Plans and
Specifications, is economically feasible and desirable; (b) Holdings II has
approved the level of pre-leasing existing as of that date; (c) Holdings II has
approved the Site Work Agreement, the Development Agreement, the Lease, the
Reciprocal Easement Agreement and the Parking Use Agreement, and an agreement
has been entered into to construct and operate a central utility plant or to
cause to be constructed and operated a cogeneration facility for the Master
Development; (d) all necessary permits and governmental approvals to begin
construction of the Aladdin Hotel and Casino have been received; (e) subject to
completion of certain leasing requirements and other customary conditions, there
is an irrevocable commitment (which has been fully negotiated, approved by the
lender and ready for signature) to fund at least seventy percent (70%) of the
costs of construction of the Bazaar Improvements upon competitive market rate
terms and conditions which is satisfactory to Holdings II; (f) the construction
contract and architect/engineer contract with respect to the Aladdin Hotel and
Casino is satisfactory to Holdings II; and (g) subject to payment of any
applicable financing fees and other customary conditions, there are irrevocable
commitments to fund (and Holdings II and its underwriters are prepared to
immediately print and distribute to investors offering documents) all equity and
debt financing necessary to construct the Aladdin Hotel and Casino, the Other
Parking and the costs of the Parking Facilities allocable to the Aladdin Hotel
and Casino, and to operate the same through the Opening which is satisfactory to
Holdings II. In such event, TrizecHahn shall notify Holdings II within five (5)
business days thereafter that it approves or disapproves of the satisfaction of
the conditions as provided in the Satisfaction Notice. If TrizecHahn does not
approve or if TrizecHahn shall not respond within said five (5) business days,
time being of the essence, then the Company shall promptly reimburse TrizecHahn
for all of its Predevelopment Costs, and this Agreement shall automatically
become null and void and the parties and their Affiliates shall have no further
rights, duties or obligations to each other whatsoever (other than the
reimbursement provisions provided in this Section 3.06).
In the event that the Conditions Precedent are not satisfied or
construction has not commenced by the third anniversary of the date of this
Agreement, then the Company shall promptly reimburse TrizecHahn for all of its
Predevelopment Costs, unless TrizecHahn elects to extend the deadline for
satisfaction of the Conditions Precedent to the fourth anniversary of the date
of this Agreement. If the project is abandoned by Holdings and the Aladdin
Hotel is to be sold, then the Company shall promptly reimburse TrizecHahn for
all of its Predevelopment Costs, and during the period of one (1) year after
such abandonment, TrizecHahn shall have an exclusive thirty (30) day right of
first negotiation to acquire the fee underlying the Center and/or the entire
Aladdin Hotel, at TrizecHahn's election; provided, however, that such right of
first negotiation shall be subordinate to any similar rights held by equity
investors of Holdings. After the end of said thirty (30) day period,
TrizecHahn's right of first negotiation shall expire. If TrizecHahn abandons
the Project prior to the expiration of the third (3rd) anniversary date of this
Agreement, then the Company shall have no further reimbursement obligation.
<PAGE>
Aladdin Holdings, LLC, a Delaware limited liability company
("Holdings"), and the owner of the fee estate underlying the Lease, hereby
guarantees the reimbursement obligation set forth in this Section 3.06 pursuant
to the terms of the guarantee attached hereto as EXHIBIT "I".
3.07 CAPITAL CONTRIBUTIONS IN GENERAL
Except as otherwise expressly provided in this Agreement, (a) no part
of the contributions of any Member to the capital of the Company may be
withdrawn by such Member, (b) no Member shall be entitled to receive interest on
such Member's contributions to the capital of the Company, (c) no Member shall
have the right to demand or receive property other than cash in return for such
Member's contribution to the Company, and (d) no Member shall be required or be
entitled to contribute additional capital to the Company other than as permitted
or required by this Article III.
ARTICLE IV
ALLOCATION OF PROFITS AND LOSSES
4.01 NET LOSSES FROM OPERATIONS PRIOR TO DILUTION
Net Losses resulting from the operations of the Company (as
distinguished from an Extraordinary Event) prior to any dilution pursuant to
Section 3.05(b) for each fiscal year (or part thereof) shall be allocated to the
Members at the end of such fiscal year (or part thereof) in the following order
of priority:
(a) First, to the Members to the extent of, and in proportion
to, the amount by which the cumulative Net Profits allocated to each such
Member pursuant to Section 4.03(d) exceeds the cumulative Net Losses
allocated to each such Member pursuant to this Section 4.01(a);
(b) Second, to the Members to the extent of, and in proportion
to, the amount by which the cumulative Net Profits allocated to each such
Member pursuant to Section 4.03(c) exceeds the cumulative Net Losses
allocated to each such Member pursuant to this Section 4.01(b);
(c) Third, to the Members to the extent of, and in proportion
to, their respective positive Capital Account balances, if any; and
(d) Thereafter, to the Members in proportion to their respective
Percentage Interests.
4.02 NET LOSSES FROM EXTRAORDINARY EVENTS PRIOR TO DILUTION
Net Losses of the Company resulting from an Extraordinary Event prior
to any dilution pursuant to Section 3.05(b) shall be allocated to the Members:
(i) after adjusting the Capital Accounts of the Members for all previous
allocations of Net Profits and Net Losses resulting from the operations of the
Company and all previous distributions of Ordinary Cash
<PAGE>
Flow for the fiscal year of such Extraordinary Event, but prior to the
distribution of the proceeds derived from such Extraordinary Event, or (ii) at
the end of the fiscal year in which such event occurred but following the
adjustments to the Members' respective Capital Accounts referenced in clause (i)
above of this Section, whichever occurs earlier:
(a) First, to the Members in proportion to, and to the extent
of, the amount necessary to cause each Member's positive Capital Account
balance, if any, to equal the sum, if any, of such Member's positive
Unrecovered Contribution Account balance and such Member's accrued and
unpaid Preferred Return;
(b) Second, to the Members in proportion to, and to the extent
of, the amount necessary to cause each Member's positive Capital Account
balance, if any, to equal such Member's accrued and unpaid Preferred
Return;
(c) Third, to the Members to the extent of, and in proportion
to, their respective positive Capital Account balances, if any; and
(d) Thereafter, to the Members in proportion to their respective
Percentage Interests.
4.03 NET PROFITS FROM OPERATIONS PRIOR TO DILUTION
Net Profits resulting from the operations of the Company (as
distinguished from an Extraordinary Event) prior to any dilution pursuant to
Section 3.05(b) for each fiscal year (or part thereof) shall be allocated to the
Members at the end of such fiscal year (or part thereof) in the following order
of priority:
(a) First, to the Members to the extent of, and in proportion
to, the amount by which the cumulative Net Losses allocated to each such
Member pursuant to Section 4.01(d) exceeds the cumulative Net Profits
allocated to each such Member pursuant to this Section 4.03(a);
(b) Second, to the Members to the extent of, and in proportion
to, the amount by which the cumulative Net Losses allocated to each such
Member pursuant to Section 4.01(c) exceeds the cumulative Net Profits
allocated to each such Member pursuant to this Section 4.03(b);
(c) Third, to the Members to the extent of, and in proportion
to, the amount by which the cumulative accrued Preferred Return, if any, of
each such Member exceeds the amount, if any, by which (i) the cumulative
Net Profits previously allocated to each such Member pursuant to this
Section 4.03(c), exceeds (ii) the cumulative Net Losses allocated to each
such Member pursuant to Section 4.01(b); and
(d) Thereafter, to the Members in proportion to their respective
Percentage Interests.
4.04 NET PROFITS FROM EXTRAORDINARY EVENTS PRIOR TO DILUTION
<PAGE>
Net Profits of the Company resulting from an Extraordinary Event prior
to any dilution pursuant to Section 3.05(b) shall be allocated to the Members:
(i) after adjusting the Capital Accounts of the Members for all previous
allocations of Net Profits and Net Losses resulting from the operations of the
Company and all previous distributions of Ordinary Cash Flow for the fiscal year
of such Extraordinary Event, but prior to the distribution of the proceeds
derived from such Extraordinary Event, or (ii) at the end of the fiscal year in
which such event occurred but following the adjustments to the Members'
respective Capital Accounts referenced in clause (i) above of this Section,
whichever occurs earlier:
(a) First, to the Members to the extent of, and in proportion
to, their respective negative Capital Account balances, if any;
(b) Second, if the Capital Account balance of any Member is less
than such Member's accrued and unpaid Preferred Return, then to each such
Member to the extent of, and in proportion to, such variances;
(c) Third, if the Capital Account balance of any Member is less
than the sum, if any, of such Member's accrued and unpaid Preferred Return
and such Member's positive Unrecovered Contribution Account balance, then
to each such Member to the extent of, and in proportion to, such variances;
and
(d) Thereafter, to the Members in proportion to their respective
Percentage Interests.
4.05 NET LOSSES FROM OPERATIONS FOLLOWING DILUTION
Net Losses resulting from the operations of the Company (as
distinguished from an Extraordinary Event) following any dilution pursuant to
Section 3.05(b) for each fiscal year (or part thereof) shall be allocated to the
Members at the end of such fiscal year (or part thereof) in the following order
of priority:
(a) First, to the Members to the extent of, and in proportion
to, the amount by which the cumulative Net Profits allocated to each such
Member pursuant to Sections 4.03(d) and 4.07(f) exceeds the cumulative Net
Losses allocated to each such Member pursuant to Section 4.01(a) and this
Section 4.05(a);
(b) Second, to the Non-Contributing Member to the extent of the
amount by which the cumulative Net Profits allocated to such Member
pursuant to Sections 4.03(c) and 4.07(e) exceeds the cumulative Net Losses
allocated to such Member pursuant to Section 4.01(b) and this Section
4.05(b);
(c) Third, to the Non-Contributing Member to the extent of such
Member's positive Capital Account balance, if any;
(d) Fourth, to the Contributing Member to the extent of the
amount by which the cumulative Net Profits allocated to such Member
pursuant to Sections 4.03(c)
<PAGE>
and 4.07(c) exceeds the cumulative Net Losses allocated to such Member
pursuant to Section 4.01(b) and this Section 4.05(c);
(e) Fifth, to the Contributing Members to the extent of such
Member's positive Capital Account balances, if any; and
(f) Thereafter, to the Members in proportion to their respective
Percentage Interests.
4.06 NET LOSSES FROM EXTRAORDINARY EVENTS FOLLOWING DILUTION
Net Losses of the Company resulting from an Extraordinary Event
following any dilution pursuant to Section 3.05(b) shall be allocated to the
Members: (i) after adjusting the Capital Accounts of the Members for all
previous allocations of Net Profits and Net Losses resulting from the operations
of the Company and all previous distributions of Ordinary Cash Flow for the
fiscal year of such Extraordinary Event, but prior to the distribution of the
proceeds derived from such Extraordinary Event, or (ii) at the end of the fiscal
year in which such event occurred but following the adjustments to the Members'
respective Capital Accounts referenced in clause (i) above of this Section,
whichever occurs earlier:
(a) First, to the Members in proportion to, and to the extent
of, (i) in the case of the Contributing Member, the amount necessary to
cause such Member's positive Capital Account balance, if any, to equal the
sum of such Member's positive Additional Unrecovered Contribution Account
balance, Unrecovered Contribution Account balance, and accrued and unpaid
Preferred Return, and (ii) in the case of the Non-Contributing Member, the
amount necessary to cause such Member's positive Capital Account balance,
if any, to equal the sum, if any, of such Member's positive Unrecovered
Contribution Account balance and such Member's accrued and unpaid Preferred
Return;
(b) Second, to the Non-Contributing Member to the extent of such
Member's positive Capital Account balance, if any;
(c) Third, to the Contributing Member to the extent of such
Member's positive Capital Account balance, if any; and
(d) Thereafter, to the Members in proportion to their respective
Percentage Interests.
4.07 NET PROFITS FROM OPERATIONS FOLLOWING DILUTION
Net Profits resulting from the operations of the Company (as
distinguished from an Extraordinary Event) following any dilution pursuant to
Section 3.05(b) for each fiscal year (or part thereof) shall be allocated to the
Members at the end of such fiscal year (or part thereof) in the following order
of priority:
(a) First, to the Members to the extent of, and in proportion
to, the amount by which the cumulative Net Losses allocated to each such
Member pursuant to
<PAGE>
Sections 4.01(d) and 4.05(f) exceeds the cumulative Net Profits allocated
to each such Member pursuant to Section 4.03(a) and this Section 4.07(a);
(b) Second, to the Contributing Member to the extent of the
amount by which the cumulative Net Losses allocated to such Member pursuant
to Sections 4.01(c) and 4.05(e) exceeds the cumulative Net Profits
allocated to such Member pursuant to Section 4.03(b) and this Section
4.07(b);
(c) Third, to the Contributing Member to the extent of the
amount by which the cumulative accrued Preferred Return, if any, of such
Member exceeds the amount, if any, by which (i) the cumulative Net Profits
previously allocated to such Member pursuant to Section 4.03(c) and this
Section 4.07(c), exceeds (ii) the cumulative Net Losses allocated to such
Member pursuant to Sections 4.01(b) and 4.05(d);
(d) Fourth, to the Non-Contributing Member to the extent of the
amount by which the cumulative Net Losses allocated to such Member pursuant
to Sections 4.01(c) and 4.05(c) exceeds the cumulative Net Profits
allocated to such Member pursuant to Section 4.03(b) and this Section
4.07(d);
(e) Fifth, to the Non-Contributing Member to the extent of the
amount by which the cumulative accrued Preferred Return, if any, of such
Member exceeds the amount, if any, by which (i) the cumulative Net Profits
previously allocated to such Member pursuant to Section 4.03(c) and this
Section 4.07(e), exceeds (ii) the cumulative Net Losses allocated to such
Member pursuant to Sections 4.01(b) and 4.05(b); and
(f) Thereafter, to the Members in proportion to their respective
Percentage Interests.
4.08 NET PROFITS FROM EXTRAORDINARY EVENTS FOLLOWING DILUTION
Net Profits of the Company resulting from an Extraordinary Event
following any dilution pursuant to Section 3.05(b) shall be allocated to the
Members: (i) after adjusting the Capital Accounts of the Members for all
previous allocations of Net Profits and Net Losses resulting from the operations
of the Company and all previous distributions of Ordinary Cash Flow for the
fiscal year of such Extraordinary Event, but prior to the distribution of the
proceeds derived from such Extraordinary Event, or (ii) at the end of the fiscal
year in which such event occurred but following the adjustments to the Members'
respective Capital Accounts referenced in clause (i) above of this Section,
whichever occurs earlier:
(a) First, to the Members to the extent of, and in proportion
to, their respective negative Capital Account balances, if any;
(b) Second, if the Capital Account balance of the Contributing
Member is less than the sum, if any, of (i) such Member's accrued and
unpaid Preferred Return, (ii) such Member's positive Additional Unrecovered
Contribution Account balance, and (iii) such Member's positive Unrecovered
Contribution Account balance, then to such Member to the extent of such
variance;
<PAGE>
(c) Third, if the Capital Account balance of the
Non-Contributing Member is less than the sum, if any, of (i) such Member's
accrued and unpaid Preferred Return, and (ii) such Member's positive
Unrecovered Contribution Account balance, then to such Member to the extent
of such variance; and
(d) Thereafter, to the Members in proportion to their respective
Percentage Interests.
4.09 SPECIAL ALLOCATIONS
Notwithstanding any other provision of this Agreement, no allocation
of Net Losses shall be made to any Member to the extent such an allocation would
cause or increase a deficit balance standing in such Member's Capital Account
(in excess of such Member's allocable share of minimum gain and after taking
into account any adjustments set forth in Treasury Regulation Section
1.704(b)-1(b)(2)(ii)(D)) and any such Net Losses instead shall be allocated one
hundred percent (100%) to the other Member. If any such allocation of Net
Losses would cause or increase a deficit balance standing in both Members'
respective Capital Accounts (in excess of such Members' respective allocable
shares of minimum gain and after taking into account any adjustments set forth
in Treasury Regulation Section 1.704(b)-1(b)(2)(ii)(D)), then such Net Losses
shall be allocated to the Members in proportion to their respective Percentage
Interests. In addition, items of income and gain shall be specially allocated
to the Members in accordance with the qualified income offset provisions set
forth in Treasury Regulation Section 1.704-1(b)(2)(ii)(D). Notwithstanding any
other provision in this Article IV, (i) any and all "partnership nonrecourse
deductions" (as defined in Treasury Regulation Section 1.704-2(b)(1)) of the
Company for any fiscal year or other period shall be allocated to the Members in
proportion to their respective Percentage Interests; (ii) any and all "partner
nonrecourse deductions" (as such term is defined in Treasury Regulation Sections
1.704-2(i)(2)) attributable to any "partner nonrecourse debt" (as such term is
defined in Treasury Regulation Section 1.70-2(b)(4)) shall be allocated to the
Member that bears the "economic risk of loss" (as determined under Treasury
Regulation Section 1.752-2) for such "partner nonrecourse debt" in accordance
with Treasury Regulation Section 1.704-2(i)(l); (iii) each Member shall be
specially allocated items of Company income and gain in accordance with the
partnership minimum gain chargeback requirements set forth in Treasury
Regulation Sections 1.704-2(f) and 1.704-2(g); and (iv) each Member with a share
of the minimum gain attributable to any "partner nonrecourse debt" (as defined
above in this Section 4.09) shall be specially allocated items of Company income
and gain in accordance with the partner minimum chargeback requirements of
Treasury Regulation Sections 1.704-2(i)(4) and 1.704-2(i)(5). For purposes of
determining the Members' respective shares of Company nonrecourse liabilities
pursuant to Section 752 of the Code and the Treasury Regulations promulgated
thereunder, (i) a Member's interest in Company profits shall be deemed to
include the allocable share of minimum gain (as determined under Treasury
Regulation Section 1.704-2(g)), Code Section 704(c) gain and any Net Profits
allocable to such Member pursuant to this Article IV, and (ii) such Company
profits shall be deemed allocable to the Members in the following order of
priority: (a) first, to the Members to the extent of, and in proportion to,
their respective allocable shares of minimum gain, (b) second, to the Members to
the extent of, and in proportion to, their respective shares of Code Section
704(c) gain, (c) third, to the Members to the extent of, and in proportion to,
their respective negative Capital Account
<PAGE>
balances, if any; and (d) thereafter, to the Members in proportion to their
respective Percentage Interests.
4.10 CURATIVE ALLOCATIONS
The effect of the limitation on the amount of Net Losses and the
qualified income offset provision set forth in the first two (2) sentences of
Section 4.09 above shall be taken into account in calculating subsequent
allocations of Net Profits and Net Losses pursuant to this Article IV, so that
the net amount of any items so allocated and the Net Profits, Net Losses and all
other items allocated to each Member pursuant to this Article IV shall, to the
extent possible, be equal to the net amount that would have been allocated to
each such Member pursuant to the provisions of this Article IV if such special
allocations had not occurred.
4.11 DIFFERING TAX BASIS; TAX ALLOCATION
The Members shall cause depreciation and/or cost recovery deductions
and gain or loss with respect to each item of property treated as contributed to
the capital of the Company to be allocated between the Members for federal
income tax purposes in accordance with the principles of Section 704(c) of the
Code and the Treasury Regulations promulgated thereunder, and for state income
tax purposes in accordance with comparable provisions of applicable state law,
so as to take into account the variation, if any, between the adjusted tax basis
of such property and its book value (as determined for purposes of the
maintenance of Capital Accounts in accordance with this Agreement and Treasury
Regulation Section 1.704-1(b)(2)(iv)(g)). In the event that any property of the
Company is revalued pursuant to Treasury Regulation 1.704-1(b)(2)(iv)(f),
subsequent allocations of income, gain, loss and deduction with respect to such
property shall take into account any variation between the adjusted basis of
such property for federal income tax purposes and its book value in the same
manner as under Section 704(c) of the Code and the Treasury Regulations
promulgated thereunder.
ARTICLE V
DISTRIBUTIONS
5.01 DISTRIBUTION OF ORDINARY CASH FLOW
Subject to Section 5.03, Ordinary Cash Flow shall be determined and
distributed monthly in the following order of priority:
(a) First, to the Members to the extent of, and in proportion
to, each such Member's accrued and unpaid Preferred Return; and
(b) Thereafter, to the Members in proportion to their respective
Percentage Interests.
5.02 DISTRIBUTION OF EXTRAORDINARY CASH FLOW
<PAGE>
Subject to Sections 5.04 and 9.02, Extraordinary Cash Flow shall be
distributed to the Members as soon as practicable following the Company's
receipt thereof in the following order of priority:
(a) First to the Members to the extent of, and in proportion to,
each such Member's accrued and unpaid Preferred Return, if any;
(b) Second, to the Members to the extent of, and in proportion
to, the positive balance standing in each such Member's Unrecovered
Contribution Account, if any; and
(c) Thereafter, to the Members in proportion to their respective
Percentage Interests.
5.03 DISTRIBUTION OF ORDINARY CASH FLOW FOLLOWING DILUTION
Notwithstanding Section 5.01 above, in the event that a Contributing
Member makes a Delinquent Contribution on behalf of a Non-Contributing Member
and elects to dilute the Percentage Interest of the Non-Contributing Member
pursuant to Section 3.05(b) above, then Ordinary Cash Flow shall be determined
and distributed monthly, in the following order of priority:
(a) First, to the Contributing Member to the extent of the
Contributing Member's accrued and unpaid Preferred Return;
(b) Second, to the Contributing Member to the extent of the
Contributing Member's Additional Unrecovered Contribution Account;
(c) Third, to the Non-Contributing Member to the extent of the
Non-Contributing Member's accrued and unpaid Preferred Return; and
(d) Thereafter, to the Members in proportion to their respective
Percentage Interests.
5.04 DISTRIBUTION OF EXTRAORDINARY CASH FLOW FOLLOWING DILUTION
Notwithstanding Section 5.02 above, in the event that a Contributing
Member makes a Delinquent contribution on behalf of a Non-Contributing Member
and elects to dilute the Percentage Interest of the Non-Contributing Member
pursuant to Section 3.05(b) above, then, subject to Section 9.02, Extraordinary
Cash Flow shall be distributed to the Members as soon as practicable following
the Company's receipt thereof in the following order of priority:
(a) First, to the Contributing Member to the extent of the
Contributing Member's accrued and unpaid and Preferred Return;
(b) Second, to the Contributing Member to the extent of the
positive balance standing in the Contributing Member's Additional
Unrecovered Contribution Account, if any;
<PAGE>
(c) Third, to the Contributing Member to the extent of the
positive balance standing in the Contributing Member's Unrecovered
Contribution Account, if any;
(d) Fourth, to the Non-Contributing Member to the extent of the
Non-Contributing Member's accrued and unpaid Preferred Return;
(e) Fifth, to the Non-Contributing Member to the extent of the
positive balance standing in the Non-Contributing Member's Unrecovered
Contribution Account, if any; and
(f) Thereafter, to the Members in proportion to their respective
Percentage Interests.
5.05 LIMITATIONS ON DISTRIBUTIONS
Notwithstanding any other provision contained in this Agreement, the
Company shall not make a distribution of Cash Flow (or other proceeds) to any
Member if such distribution would violate Section 18-607 of the Delaware Act or
other applicable law.
5.06 IN-KIND DISTRIBUTION
Assets of the Company (other than cash) shall not be distributed in
kind to the Members without the prior written approval of both Members. If any
assets of the Company are distributed to the Members in kind, then for purposes
of this Agreement, such assets shall be valued on the basis of the agreed upon
fair market value thereof (taking into account Section 7701(g) of the Code) on
the date of distribution, and any Member entitled to any interest in such assets
shall receive such interest as a tenant-in-common with the other Members(s) so
entitled with an undivided interest in such assets in proportion to their
respective Capital Accounts (after taking into account all Capital Account
adjustments, including any book-up or book-down caused by such distribution) or
as such Members may otherwise unanimously agree. Upon such distribution, the
Capital Accounts of the Members shall be adjusted to reflect the amount of gain
or loss that would have been allocated to the Members pursuant to the
appropriate provisions of this Agreement had the Company sold the assets being
distributed for their agreed upon fair market value (taking into account Section
7701(g) of the Code) immediately prior to their distribution.
ARTICLE VI
RESTRICTIONS ON TRANSFERS OF INTERESTS
6.01 LIMITATIONS ON TRANSFER
Except as otherwise expressly permitted pursuant to this Article VI,
Article VII and/or Article VIII, no Member shall be entitled to sell, exchange,
assign, transfer, or otherwise dispose of, pledge, hypothecate, encumber or
otherwise grant a security interest in, directly or indirectly, all or any part
of such Member's Interest, without the prior written consent of the other
<PAGE>
Member, which consent may be withheld in such other Member's sole discretion.
Any transfer or encumbrance by any constituent owner of any Member of all or any
portion of such owner's ownership interest in such Member shall constitute a
transfer or encumbrance by such Member of its Interest for purposes of this
Article VI. Any attempted transfer, encumbrance or withdrawal in violation of
the restrictions set forth in this Article VI shall be null and void AB INITIO
and of no force or effect.
6.02 PERMITTED TRANSFERS
Any Member may transfer all or any portion of such Member's Interest
to any of the following (collectively, "PERMITTED TRANSFEREES") without
complying with the provisions of Section 6.01:
(a) Any Affiliate of such Member;
(b) Any other Member of the Company, subject to any applicable
rights of first offer and/or refusal in accordance with the provisions of
Section 6.03;
(c) At any time on or after the Opening, any person or entity
other than a Prohibited Transferee, subject to any applicable rights of
first offer and/or refusal in accordance with the provisions of Section
6.03;
(d) To an institutional lender as a pledge or security for any
loan; and the Members agree to execute any separate consent to assignment
reasonably required by such institutional lender; or
(e) Any transferee approved in the sole discretion of the other
Member, provided that it is not a Prohibited Transferee.
In addition, any Member may transfer ownership interests in such
Member (which transfers would otherwise be a prohibited indirect transfer
pursuant to Section 6.01 above), without complying with the provisions of
Section 6.01, provided that all of the following conditions are satisfied:
(1) The transfer of interests in such Member is made solely for
the purposes of raising capital to be contributed by the Member to the
Company pursuant to a Contribution Notice, and such transfer is made within
the three hundred sixty (360) day period beginning one hundred eighty (180)
days before a Contribution Notice and ending one hundred eighty (180) days
after a Contribution Notice;
(2) The owners of the Member transfer an interest in such Member
continue to control the management interests of such Member following the
transfers, with the result that the Board representatives appointed by such
Member transferring indirect interests shall remain unchanged following
such transfers;
(3) The transfer is not to a Prohibited Transferee;
(4) The Non-Transferring Member reasonably approves of such
transfer, unless such transferee is an Institutional Investor; and
<PAGE>
(5) The Transferring Member gives the Non-Transferring Member
advance notice of such intended transfer, and for a period of thirty (30)
days the Non-Transferring Member shall have an exclusive right of first
negotiation with respect to such transfer. After the end of said thirty
(30) day period, the Non-Transferring Member's right of first negotiation
shall expire.
As used herein the term "PROHIBITED TRANSFEREE" means any of the
following: (i) any owner, operator or manager of any "resort hotel" (as defined
in Clark County Code Section 8.04.010) located in Clark County, Nevada, (ii) any
shopping center owner, manager and/or developer if TrizecHahn will continue to
be a Member of the Company following the transfer, (iii) any "non-profit" or
"not-for-profit" corporation, association, trust, fund, foundation or other
similar entity organized and operated exclusively for charitable purposes that
qualifies as a tax-exempt entity under applicable federal and state tax law,
(iv) any federal, state or local governmental agency, instrumentality or other
similar entity, (v) any person or entity primarily engaged in the business of
owning or operating a casino or other similar type of gambling facility, (vi)
any person or entity that has been convicted of a felony, (vii) any person or
entity regularly engaged in or affiliated with the production or distribution of
alcoholic beverages, (viii) any person who has been found unsuitable or has
withdrawn an application to be found suitable by the gaming authorities of the
State of Nevada, or (ix) FOCUS 2000, Inc., a Nevada corporation, or the then
current owner or lessee (unless such owner or lessee is an Affiliate of a
Member) of the real property located at the northeast corner of Las Vegas
Boulevard and Harmon Avenue, in the City of Las Vegas, County of Clark, State of
Nevada, or (x) to any person or entity if the consummation of such transfer
would result in a breach of or violation in any transfer restrictions contained
in any loan documentation (and/or guaranty) relative to any indebtedness
encumbering all or any portion of the Bazaar Improvements, and such transfer
restrictions are not waived by the non-transferring Member and the applicable
lender.
Any Permitted Transferee shall receive and hold such Interest or
portion thereof subject to the terms of this Agreement and to the obligations
hereunder of the transferor and there shall be no further transfer of such
Interest or portion thereof except to a person or entity to whom such Permitted
Transferee could have transferred Interest, ownership interest or portion
thereof in accordance with this Section 6.02 had such Permitted Transferee
originally been a Member or otherwise in accordance with the terms of this
Agreement.
6.03 RIGHT OF FIRST OFFER/RIGHT OF FIRST REFUSAL
(a) If any Member (the "TRANSFERRING MEMBER") desires to
transfer all or any portion of such Member's Interest (the "OFFERED
INTEREST") to any person or entity other than a Prohibited Transferee at
any time on or after the date of the Opening, then the Transferring Member
shall give written notice (the "FIRST OFFERING NOTICE") thereof to the
other Member (the "NON-TRANSFERRING MEMBER"). The First Offering Notice
shall specify the Offered Interest to be transferred, the purchase price
and the other terms upon which the Transferring Member intends to so
transfer. For a period of thirty (30) days following the effective date of
the First Offering Notice, the Non-Transferring Member shall have the
right, but not the obligation, to elect to purchase all, but not less than
all, of the Offered Interest for the purchase price (and on the other
terms) specified in
<PAGE>
the First Offering Notice by delivering written notice of such election to
the Transferring Member.
(b) If the Non-Transferring Member fails to timely and validly
elect to purchase the Offered Interest in accordance with the terms of the
First Offering Notice (or rejects the opportunity to purchase), time being
of the essence, then, notwithstanding the failure of the Transferring
Member to obtain the consent required for the transfer of the Offered
Interest pursuant to Section 6.01, the Transferring Member may offer the
Offered Interest for sale on the open market for a period of one (1) year
following the effective date of the First Offering Notice. If, during such
one (1) year period, an offer is received from an independent third party
that is not directly or indirectly affiliated with either Member and is not
a Prohibited Transferee ("THIRD PARTY") and if the net effective purchase
price offered by such Third Party is equal to or greater than the price
previously offered to the Transferring Member and the Third Party is a
Pre-Approved Transferee, then the Transferring Member shall be permitted to
transfer the Offered Interest to such Pre-Approved Transferee without any
further consent or rights of first offer and/or refusal in favor of the
Non-Transferring Member. If the net effective purchase price offered by
such Third Party is less than the purchase price previously offered to the
Non-Transferring Member or if the purchase price is equal to or greater
than the purchase price previously offered to the Non-Transferring Member
and the Third Party is not a Pre-Approved Transferee, then the Transferring
Member shall deliver written notice (the "SECOND OFFERING NOTICE") thereof
to the Non-Transferring Member. The Second Offering Notice shall specify
the identity of the Third Party, the purchase price made in the offer by
such Third Party and the other terms of purchase. For a period of thirty
(30) days following the effective date of the Second Offering Notice, the
Non-Transferring Member shall have the right, but not the obligation, to
elect to purchase all, but not less than all, of the Offered Interest for
the purchase price (and on the other terms) specified in the Second
Offering Notice by delivering written notice of such election to the
Transferring Member.
(c) If the Non-Transferring Member fails to timely and validly
elect to purchase the Offered Interest in accordance with the terms of the
Second Offering Notice (or rejects the opportunity to purchase), then the
Transferring Member may transfer the Offered Interest to the Third Party
identified in the Second Offering Notice at the same price and on the same
terms as are specified in the Second Offering Notice for a period of one
(1) year following the date of the Second Offering Notice without any
further consent or rights of first offer and/or refusal in favor of the
Non-Transferring Member.
(d) If the Non-Transferring Member timely and validly elects to
purchase the Offered Interest in accordance with the provisions of Section
6.03(a) or 6.03(b) above, then the closing for such purchase shall be held
at the principal office of the Company in Nevada within sixty (60) days
following the effective date of the First Offering Notice or the Second
Offering Notice, as the case may be.
(e) If the Non-Transferring Member timely and validly elects to
acquire the Offered Interest in accordance with the foregoing provisions of
this Section 6.03, but fails to consummate such purchase, then the Offered
Interest shall
<PAGE>
thereafter be freely transferable by the Non-Transferring Member to any
Third Party without any further consent or rights of first offer and/or
refusal in favor of the Non-Transferring Member.
(f) The Members acknowledge and agree that either Member may
assign such Member's rights of first offer and/or rights of first refusal
set forth above in this Section 6.02 to any Affiliate of such Member (which
shall include, without limitation, Aladdin Gaming, in the case of Holdings
II) without the consent of the other Member so as to enable any such
Affiliate to acquire the Offered Interest.
(g) This Section 6.03 shall not apply to a transfer described in
Article VII or Article VIII below.
The term "PRE-APPROVED TRANSFEREE" means any publicly-traded real
estate investment trust, any financial institution or pension fund, any mutual
fund or other institutional investor, any investment bank, and any
publicly-traded real estate ownership or operating company with experience in
the ownership of shopping centers, in each case with assets in excess of One
Hundred Million Dollars ($100,000,000), and any corporation, partnership,
limited liability company, trust or private fund in which any of the foregoing
is an investor or advisor, provided that such entity also has assets in excess
of One Hundred Million Dollars ($100,000,000.00) or is guaranteed by any one of
the foregoing entities having assets in excess of One Hundred Million Dollars
($100,000,000.00).
6.04 REGULATORY AND LENDER PROHIBITIONS
Notwithstanding any other provision of this Agreement, no Member may
transfer all or any portion of such Member's Interest if (i) such transfer would
result in a breach of or violation of the Nevada gaming laws or in the
regulatory requirements of the Nevada gaming authorities, or (ii) such transfer
would result in a breach of or violation in any loan documentation (and/or
guaranty) relative to any indebtedness governing all or any portion of the
Bazaar Improvements (and such restrictions are not waived by the applicable
lender).
6.05 ADMISSION OF SUBSTITUTED MEMBERS
If any Member transfers such Member's Interest to a transferee in
accordance with Sections 6.01, 6.02, 6.03 and/or Article VII, then such
transferee shall only be entitled to be admitted into the Company as a
substituted member if (a) this Agreement is amended to reflect such admission in
accordance with the provisions of the Nevada Act, (b) the non-transferring
Member reasonably approves the form and content of the instrument of transfer;
(c) the transferor and transferee named therein execute and acknowledge such
other instruments as the non-transferring Member may deem reasonably necessary
to effectuate such admission; (d) the transferee in writing accepts and adopts
all of the terms and conditions of this Agreement, as the same may have been
amended; and (e) the transferor pays, as the non-transferring Member may
reasonably determine, all reasonable expenses incurred in connection with such
admission, including, without limitation, legal fees and costs. To the fullest
extent permitted by law, any transferee of an Interest who does not become a
substituted member shall have no right to require any information or account of
the Company's transactions, to inspect the Company books, or to vote on any of
the matters as to which a Member would be entitled to vote under this Agreement.
<PAGE>
Any such transferee shall only be entitled to share in such Net Profits and Net
Losses, to receive such distributions, and to receive such allocations of
income, gain, loss, deduction or credit or similar items to which the transferor
was entitled, to the extent assigned. A Member that transfers its Interest
shall not cease to be a member of the Company until the admission of the
transferee as a substituted member of the Company and, except as provided in the
preceding sentence, shall continue to be entitled to exercise, and shall
continue to be subject to, all of the rights, duties and obligations of such
Member under this Agreement.
6.06 ELECTION; ALLOCATIONS BETWEEN TRANSFEROR AND TRANSFEREE
In the event of the transfer of the Interest of any Member or the
distribution of any property of the Company to a Member, the Company may file,
in the reasonable discretion of the Board, an election in accordance with
applicable Treasury Regulations, to cause the basis of the Company property to
be adjusted for federal income tax purposes as provided by Sections 734 and 743
of the Code. Upon the transfer of all or any part of the Interest of a Member
as hereinabove provided, Net Profits and Net Losses shall be allocated between
the transferor and transferee on the basis of the computation method which in
the reasonable discretion of TrizecHahn, is in the best interests of the
Company, provided such method is in conformity with the methods prescribed by
Section 706 of the Code and Treasury Regulation Section 1.706-1(c)(2)(ii).
6.07 PARTITION
No Member shall have the right to partition any assets of the Company
or any interest therein, nor shall a Member make application or proceeding for a
partition thereto and, upon any breach of the provisions of this Section 6.07 by
any Member, the other Member (in addition to all rights and remedies afforded by
law or equity) shall be entitled to a decree or order restraining or enjoining
such application, action or proceeding.
6.08 WAIVER OF WITHDRAWAL AND PURCHASE RIGHTS
Except in connection with any transfer permitted pursuant to Sections
6.01, 6.02, 6.03 and/or Article VII, no Member may voluntarily withdraw, resign
or retire from the Company without the prior written consent of the other
Member, which consent may be withheld in such other Member's sole discretion.
Each Member hereby waives any and all rights such Member may have to withdraw
and/or resign from the Company pursuant to Section 18-603 of the Delaware Act
and hereby waives any and all rights such Member may have to receive the fair
value of such Member's Interest in the Company upon such withdrawal, resignation
and/or retirement pursuant to Section 18-604 of the Delaware Act.
ARTICLE VII
MARKETING AND SALE OF THE BAZAAR IMPROVEMENTS
7.01 RIGHT TO MARKET DURING YEARS FIVE THROUGH TEN
(a) At any time during the period commencing on the fifth (5th)
anniversary of the Opening and expiring on the last day prior to the tenth
(10th)
<PAGE>
anniversary of the Opening (the "INITIAL SALE PERIOD"), any Member holding
fifty percent (50%) or more of the Interests (the "SELLING MEMBER") shall
have the right to cause the Company to offer all, but not less than all, of
the Bazaar Improvements for sale on the open market by delivering written
notice thereof to the other Member (the "NON-SELLING MEMBER").
(b) If any offer is received by the Company and/or the Selling
Member for the Bazaar Improvements and the Selling Member desires to sell
on such terms, but the Non-Selling Member does not, then the Selling Member
shall deliver written notice thereof (the "FIRST SALE NOTICE") to the
Non-Selling Member. The First Sale Notice shall specify the identity of
the Third Party, the purchase price made in the offer by such Third Party
and the other terms of purchase. For a period of thirty (30) days
following the effective date of the First Sale Notice, the Non-Selling
Member shall have the right, but not the obligation, to elect to purchase
the entire Interest of the Selling Member (which right may be assigned to
an Affiliate) on the terms and conditions set forth in the First Sale
Notice for a purchase price (the "SELLING MEMBER'S PURCHASE PRICE") equal
to the amount that would be distributed to the Selling Member pursuant to
Section 9.02(b) if the Bazaar Improvements had been sold to the Third Party
for cash at the price set forth in the First Sale Notice, net of the Sales
Costs, and the Company was liquidated. As used herein, the term "SALES
COSTS" means any and all third-party costs and/or expenses reasonably
expected to be incurred in connection with the sale of the Bazaar
Improvements, including, without limitation, brokerage and/or sales
commissions, escrow fees, title, documentary and other transfer taxes and
the like. If the Non-Selling Member fails to timely and validly elect to
purchase the Interest of the Selling Member or rejects the opportunity to
purchase, then the Selling Member shall have the right, but not the
obligation, to elect to purchase from the Non-Selling Member a one percent
(1%) residual ownership interest in the Net Profits, Net Losses and Cash
Flow of the Company (the "CONTROL INTEREST") for a purchase price equal to
the Control Premium. The Members acknowledge and agree that the Control
Interest shall not include any portion of the Capital Account, the
Unrecovered Contribution Account and/or the accrued, unpaid Preferred
Return of the Non-Selling Member. As used herein, the term "CONTROL
PREMIUM" means an amount equal to the product of (i) five percent (5%)
multiplied by (ii) the purchase price offered by the Third Party for the
Bazaar Improvements, net of any indebtedness encumbering the Bazaar
Improvements and the Sales Costs. If the Selling Member timely and validly
elects to purchase the Control Interest, then the closing of the purchase
and sale shall be held at the principal office of the Company in Nevada
concurrently with the close of the Selling Member's Interest in the Company
to the Third Party identified in the First Sale Notice. If the Non-Selling
Member fails to timely and validly elect to purchase the Interest of the
Selling Member, then for a period of one hundred eighty (180) days
following the expiration of the thirty (30) day period following the First
Sale Notice, the Selling Member shall thereafter have the right, but not
the obligation, to sell such Member's entire Interest in the Company
(including, without limitation, the Control Interest) to the Third Party
identified in the First Sale Notice for a purchase price equal to the
Selling Member's Purchase Price, plus the Control Premium without any
further consent or rights of first offer and/or refusal in favor of the
Non-Selling Member. From and after the date of the acquisition of the
Control Premium, (i) the Third Party identified in the First Sale Notice
shall have the right, but not the
<PAGE>
obligation, to appoint one (1) additional voting representative to the
Board and (ii) the Non-Selling Member shall have no right to appoint any
representatives to the Board, and the voting rights of the Non-Selling
Member under the Agreement shall be limited solely to those expressly
mandated by the Delaware Act.
7.02 RIGHT TO REQUIRE SALE AFTER YEAR TEN
(a) At any time after the expiration of the Initial Sale Period,
either Member shall have the right to cause the Company to offer all, but
not less than all, of the Bazaar Improvements for sale on the open market
by delivering written notice thereof to the other Member.
(b) If any offer is received by the Company and/or the Selling
Member for the Bazaar Improvements and the Selling Member desires to sell
on such terms but the Non-Selling member does not, then the Selling Member
shall deliver written notice thereof (the "PROJECT SALE NOTICE") to the
Non-Selling Member. The Project Sale Notice shall specify the identity of
the Third Party, the purchase price made in the offer by such Third Party
and the other terms of purchase. For a period of thirty (30) days
following the effective date of the Project Sale Notice, the Non-Selling
Member shall have the right, but not the obligation, to elect to purchase
the entire Interest of the Selling Member on the terms and conditions set
forth in the Project Sale Notice for a purchase price equal to the amount
that would be distributed to the Selling Member pursuant to Section 9.02(b)
if the Bazaar Improvements had been sold to the Third Party for cash at the
price set forth in the Project Sale Notice, net of the Sales Costs, and the
Company was liquidated. If the Non-Selling Member fails to timely and
validly elect to purchase the Selling Member's Interest (or rejects the
opportunity to purchase), then the Selling Member shall have the right, but
not the obligation, to cause the Company to sell the Bazaar Improvements to
the Third Party specified in the Project Sale Notice at the same price and
on the same terms specified in the Project Sale Notice without any further
consent or rights of first offer and/or refusal in favor of the Non-Selling
Member.
7.03 GENERAL SALES PROCEDURES
(a) If the Non-Selling Member timely and validly elects to
purchase the Interest of the Selling Member in accordance with the
provisions of Section 7.01 or 7.02 above, then the closing for such
purchase shall be held at the principal office of the Company in Nevada
within sixty (60) days following the effective date of the First Sale
Notice or the Project Sale Notice, as the case may be.
(b) If the Non-Selling Member timely and validly elects to
acquire the Interest of the Selling Member in accordance with the
provisions of Section 7.01 or 7.02 above, but fails to consummate such
purchase, then the Selling Member shall thereafter be entitled to cause the
sale of the Bazaar Improvements and/or the Selling Member's Interest to any
Third Party without any further consent or rights of first offer and/or
refusal in favor of the Non-Selling Member.
(c) The Members acknowledge and agree that the Non-Selling
Member may assign such Member's rights of first refusal set forth above in
this
<PAGE>
Article VII to any Affiliate of such Member without the consent of the
other Member so as to enable any such Affiliate to acquire the Interest of
the Selling Member.
ARTICLE VIII
DEFAULT BUY/SELL AGREEMENT
8.01 BUY/SELL EVENTS
For purposes of this Article VIII, the following shall constitute
"BUY/SELL EVENTS":
(a) PROHIBITED WITHDRAWAL OR RETIREMENT. The withdrawal,
retirement, or other cessation to serve as a member of the Company by any
Member in violation of the terms of this Agreement;
(b) PROHIBITED TRANSFER OR ENCUMBRANCE. Any transfer or
encumbrance or attempted transfer or encumbrance by any Member of such
Member's Interest contrary to the provisions of Article VI or Article VII,
which has not been cured or withdrawn within ten (10) business days after
receipt of the Default Notice;
(c) BANKRUPTCY OR INSOLVENCY. The rendering, by a court with
appropriate jurisdiction, of a decree or order (i) adjudging a Member
bankrupt or insolvent; or (ii) approving as properly filed a petition
seeking reorganization, readjustment, arrangement, composition, or similar
relief for a Member under the federal bankruptcy laws or any other similar
applicable law or practice, and if such decree or order referred to in this
Section 8.01(c) shall have continued undischarged and unstayed for a period
of sixty (60) days;
(d) APPOINTMENT OF RECEIVER. The rendering, by a court with
appropriate jurisdiction, of a decree or order (i) for the appointment of a
receiver, a liquidator, or a trustee or assignee in bankruptcy or
insolvency of a Member, or for the winding up and liquidation of a Member's
affairs, provided that such decree or order shall have remained in force
undischarged and unstayed for a period of sixty (60) days; or (ii) for the
sequestration or attachment of any property of a Member without its return
to the possession of such Member or its release from such sequestration or
attachment within sixty (60) days thereafter; or
(e) BANKRUPTCY PROCEEDINGS. A Member (i) institutes proceedings
to be adjudicated a voluntary bankrupt or an insolvent; (ii) consents to
the filing of a bankruptcy proceeding against such Member; (iii) files a
petition or answer or consent seeking reorganization, readjustment,
arrangement, composition, or similar relief for such Member under the
federal bankruptcy laws or any other similar applicable law or practice;
(iv) consents to the filing of any such petition, or to the appointment of
a receiver, a liquidator, or a trustee or assignee in bankruptcy or
insolvency for such Member or a substantial part of such Member's property;
(v) makes an assignment for the benefit of such Member's creditors; (vi) is
unable to or admits in writing such Member's
inability to pay such Member's debts generally as they become due; or (vii)
takes any action in furtherance of any of the aforesaid purposes.
<PAGE>
For the purposes of implementing the provisions contained in this
Article VIII, the "DEFAULTING MEMBER" shall be (i) in the case of the occurrence
of the event referenced in Section 8.01(a), the Member that has withdrawn,
retired or ceased to serve as a Member of the Company in violation of the terms
of this Agreement; (ii) in the case of the occurrence of the event referenced in
Section 8.01(b), the Member that has transferred such Member's rights or
interests contrary to the provisions of Article VI or Article VII; and (iii) in
the case of any of the events referenced in Section 8.01(c), (d), or (e), the
Member who is the subject of such court decree or order or has instituted such
proceedings or filed such petitions or who is insolvent, etc. The
"NON-DEFAULTING MEMBER" is the Member that is not the Defaulting Member.
8.02 RIGHTS ARISING FROM A BUY/SELL EVENT
At any time following one (1) year after the date that the
Non-Defaulting Members obtain actual knowledge of the occurrence of a Buy/Sell
Event, the Non-Defaulting Member shall have the right, but not the obligation,
to implement the buy/sell procedures set forth in this Article VIII by
delivering written notice ("DEFAULT NOTICE") thereof to the Defaulting Member.
For a period of ten (10) days following the Effective Date of the Default
Notice, the Members shall attempt to agree upon a purchase price for the
Defaulting Member's Interest (the "PURCHASE PRICE"). If the Members are unable
to agree, then the Purchase Price shall be determined in accordance with the
provisions of Section 8.03.
8.03 DETERMINATION OF PURCHASE PRICE
Within thirty (30) days after the determination of the Appraised Value
of the assets of the Company, the Members shall for a period of ten (10) days
attempt to jointly determine the amount of cash which would be distributed to
each Member pursuant to Section 5.04, if applicable, or Section 5.02 (if no
dilution event has occurred) if (i) the assets of the Company were sold for the
Appraised Value thereof as of the Effective Date of the Default Notice; (ii) the
liabilities of the Company were liquidated in accordance with Section 9.02,
(iii) reasonable reserves for any contingent, conditional or unmatured
liabilities of the Company were established by the Non-Defaulting Member; and
(iv) the Company made its required distributions to the Members pursuant to
Section 5.04, if applicable, or Section 5.02 (if no dilution event has
occurred). If the Members are unable to agree upon such determination within
the applicable ten (10) day period, then the accountants regularly employed by
the Company shall make such determination and shall give each Member written
notice ("PRICE DETERMINATION NOTICE") thereof. The determination by the
accountants of such amounts, including all components thereof, shall be deemed
conclusive absent any material computational error. Ninety percent (90%) of the
amount that would be distributed to the Defaulting Member pursuant to clause
(iv) above shall be deemed to be the Purchase Price for purposes of this Article
VIII.
(a) DETERMINATION OF APPRAISED VALUE. For purposes of this
Article VIII, the appraised value ("APPRAISED VALUE") of the assets of the
Company shall be determined by real estate appraiser(s) all of whom shall
be independent qualified M.A.I. appraisers. The Non-Defaulting Member
shall select one (1) appraiser. The Defaulting
<PAGE>
Member shall either agree to the appraiser selected by the Non-Defaulting
Member or select a second appraiser within fifteen (15) days of the
Effective Date of the Default Notice and give written notice to the
Non-Defaulting Member of the person so selected. In the event of the
failure of the Defaulting Member to appoint such an appraiser within the
times specified and after expiration of five (5) days following the
Effective Date of written demand that an appraiser be appointed, the
appraiser duly appointed by the Non-Defaulting Member shall proceed to make
the appraisal as herein set forth and the determination thereof shall be
conclusive on all the Members.
If two (2) appraisers are selected, then such selected appraisers
shall thereafter appoint a third (3rd) appraiser. If the two (2) selected
appraisers fail to appoint a third (3rd) appraiser within ten (10) days
following the Effective Date of written notice from the Defaulting Member
notifying the Non-Defaulting Member of the selection of the second (2nd)
appraiser, then any Member may petition a court of competent jurisdiction
to appoint a third (3rd) appraiser in the same manner as provided for the
appointment of an arbitrator pursuant to Section 11.14.
The appraiser or three appraisers, as the case may be, shall
promptly fix a time for the completion of the appraisal which shall not be
later than thirty (30) days from the date of appointment of the last
appraiser.
The appraiser(s) shall determine the Appraised Value by
determining the fair market value of the assets of the Company, such fair
market value being the fairest price estimated in terms of money which the
Company could obtain if such assets were sold in the open market, allowing
a reasonable time to find a purchaser who purchases with knowledge of the
uses which such assets in their then condition are adapted and for which
such assets are capable of being used as of the Effective Date of the
Default Notice.
Upon submission of the appraisals setting forth the opinions as
to the appraised value of the assets of the Company, (A) if only one (1)
appraiser is selected, then such appraisal shall constitute the Appraised
Value of the assets of the Company, or (B) if three (3) appraisers are
selected, then the two (2) such appraisals which are nearest in amount
shall be retained, and the third appraisal shall be discarded. The average
of the two (2) retained appraisals shall constitute the Appraised Value of
the assets of the Company, unless one (1) appraisal is the mean of the
other two (2) appraisals in which case such appraisal shall constitute the
Appraised Value.
(b) PAYMENT OF COSTS. The Defaulting Member shall pay for the
services of the accountant and the services of all appraisers appointed
pursuant to this Section 8.03 (the "APPRAISAL COSTS"), or at the
Non-Defaulting Member's election, the Non-Defaulting Member may pay such
costs and reduce the Purchase Price by such amount.
8.04 NON-DEFAULTING MEMBER'S OPTION
For a period of thirty (30) days following the Effective Date of the
Price Determination Notice, the Non-Defaulting Member shall have the right, but
not the obligation, to
<PAGE>
elect to purchase the entire Defaulting Member's Interest for the Purchase Price
thereof (as adjusted pursuant to Section 8.08), and on the terms and conditions
set forth in this Article VIII by giving written notice thereof to the
Defaulting Member within such thirty (30)-day period.
8.05 CLOSING OF PURCHASE AND SALE
The closing of a purchase pursuant to this Article VIII shall be held
at the principal office of the Company in Nevada on or before the ninetieth
(90th) day after the expiration of the thirty (30)-day period set forth in
Section 8.04, or such longer period if reasonably necessary in order to obtain
any required bankruptcy court approval. The Defaulting Member shall transfer to
the Non-Defaulting Member (or such Member's nominee(s)) the entire Interest of
the Defaulting Member free and clear of all liens, security interests, and
competing claims and shall deliver to the Non-Defaulting Member (or such
Member's nominee(s)) such instruments of transfer and such evidence of due
authorization, execution, and delivery, and of the absence of any such liens,
security interests, or competing claims as such Non-Defaulting Member (or such
Member's nominee(s)) shall reasonably request.
8.06 PAYMENT OF PURCHASE PRICE
The Purchase Price (as adjusted pursuant to Section 8.08) shall be
paid by the Non-Defaulting Member (or such Member's nominee(s)) at the closing,
in cash or one (1) or more certified or bank cashier's checks drawn and made
payable to the order of the Defaulting Member for an amount equal to twenty
percent (20%) (or more at the election of the Non-Defaulting Member) of the
Purchase Price and a nonrecourse promissory note in an amount equal to the
balance of such Purchase Price executed by the Non-Defaulting Member (or such
Member's nominee(s)).
Any promissory note shall bear simple (non-compounded) interest at the
then current prime rate as most recently reported by the Western Edition of the
Wall Street Journal (or, if less, the maximum non-usurious rate then permitted
by law for such loans), and shall be repayable only from such funds as may
thereafter be received by the Non-Defaulting Member on account of the
Non-Defaulting Member's purchase of the Interest of the Defaulting Member
hereunder, which funds would otherwise have been received by the Defaulting
Member from the Company but for such purchase. Except for the Non-Defaulting
Member's proportionate share of such funds, the Defaulting Member shall have no
recourse whatsoever against any other property or assets of the Non-Defaulting
Member for the repayment of such promissory note. Until such time as all
principal and accrued interest under such promissory note has been paid in full,
payments thereunder shall be made quarterly, commencing with the first calendar
quarter from the date of closing. Each such quarterly payment shall be equal to
the Non-Defaulting Member's proportionate share of the aggregate amount of such
funds received and collected by the Non-Defaulting Member (if any) that would
have otherwise been received by the Defaulting Member but for such purchase
during the calendar quarter period immediately preceding the date of such
payment. All payments under such promissory note shall first be credited
against accrued interest and thereafter against principal. Notwithstanding
anything contained hereinabove to the contrary, if any such promissory note has
not been paid in full (together with all accrued interest thereon) on or before
the expiration of five (5) years from the date of closing, such promissory
<PAGE>
note shall be deemed canceled in full, and the Defaulting Member shall be
entitled to no further payments of principal or interest thereunder.
8.07 RELEASE
On or before the closing of a purchase held pursuant to this Article
VIII, the Non-Defaulting Member shall use such Member's reasonable efforts
(without the obligation to incur additional costs or liabilities) to obtain
written releases of the Defaulting Member (and/or such Member's Affiliates) from
all liabilities of the Company and from all guarantees of such liabilities of
the Company previously executed by the Defaulting Member (and/or its
Affiliates).
8.08 REPAYMENT OF MEMBER LOANS
The Purchase Price to be paid by the Non-Defaulting Member for the
Interest of the Defaulting Member shall be offset at the closing of such
purchase by the then outstanding principal balance of any and all Member Loan(s)
(together with all accrued, unpaid interest thereon) made by the Non-Defaulting
Member to the Defaulting Member. Such Member Loan(s) (together with all
accrued, unpaid interest thereon) shall be deemed paid to the extent of such
offset, with such deemed payment to be applied first to the accrued interest
thereon and thereafter to the payment of the outstanding principal amount
thereof. If the Purchase Price for the Defaulting Member's Interest is
insufficient to fully offset the then unpaid principal balance of any and all
Default Loans (together with all accrued, unpaid interest thereon) made by the
Non-Defaulting Member to the Defaulting Member, then the portion of any such
Member Loan(s) (and accrued, unpaid interest thereon) that remains outstanding
following such offset shall be due and payable in full at the closing of the
purchase of the Defaulting Member's Interest pursuant to this Article VIII. Any
Member Loans offset against the Purchase Price to be paid by the Non-Defaulting
Member shall be applied first to reduce the portion of the Purchase Price, if
any, to be paid with cash or by certified or bank cashier's check and thereafter
to reduce the portion of the Purchase Price, if any, to be paid by the delivery
of a promissory note.
8.09 VOTING RIGHTS FOLLOWING BUY/SELL EVENT
From and after the occurrence of a Buy/Sell Event, (i) the Defaulting
Member shall not be entitled to participate in the management of the Company or
appoint a representative to the Board, or otherwise vote upon, any matter
affecting the business and affairs of, the Company or any matter that such
Member is entitled to vote upon under this Agreement, and (ii) the rights of the
Defaulting Member shall be limited solely to those of an assignee as set forth
in Section 6.05.
ARTICLE IX
DISSOLUTION AND WINDING UP OF THE COMPANY
9.01 EVENTS CAUSING DISSOLUTION OF THE COMPANY
If any Member retires, resigns or otherwise ceases to serve in
compliance with the terms of this Agreement, then the Company shall be dissolved
and its affairs wound up, unless the remaining Member(s) (or their
successor(s)-in-interest), within ninety (90) days after such
<PAGE>
retirement, reorganization or other event of non-compliance with this Agreement,
unanimously elect to continue the business of the Company. In addition, the
Company shall be dissolved upon the first to occur of: (a) the expiration of
the term of the Company unless such term has been extended by the unanimous
agreement of the Members; (b) the sale, transfer or other disposition by the
Company of all or substantially all of its assets and the collection by the
Company of any and all Cash Flow derived therefrom; (c) the failure to satisfy
the Conditions Precedent and the reimbursement of TrizecHahn of its
Predevelopment Costs (if applicable) pursuant to Section 3.06; or (d) the
affirmative election of all of the Members to dissolve the Company. Except as
permitted above in this Section 9.01, no Member shall have the right to, and
each Member hereby agrees that it shall not, seek to dissolve or cause the
dissolution of the Company or to seek to cause a partial or whole distribution
or sale of Company assets whether by court action or otherwise, it being agreed
that any actual or attempted dissolution, distribution or sale would cause a
substantial hardship to the Company and the remaining Member(s) and shall
constitute a breach and contravention of this Agreement. The admission of any
new Member into the Company shall not dissolve the Company, but the business of
the Company shall continue without interruption and without any break in
continuity.
9.02 WINDING UP OF THE COMPANY
Upon the Liquidation of the Company caused by other than the
termination of the Company under Section 708(b)(1)(B) of the Code (in which
latter case the Company shall remain in existence in accordance with the
provisions of such Section of the Code), TrizecHahn shall proceed to the winding
up of the affairs of the Company. During such winding up process, the Net
Profits, Net Losses and Cash Flow distributions shall continue to be shared by
the Members in accordance with this Agreement. The assets shall be liquidated as
promptly as consistent with obtaining a fair value therefor, and the proceeds
therefrom, to the extent available, shall be applied and distributed by the
Company on or before the end of the taxable year of such Liquidation or, if
later, within ninety (90) days after such Liquidation, in the following order:
(a) first, to creditors of the Company (including Members who are creditors), in
the order of priority as provided by law, including, without limitation, to the
setting up of any reasonable reserves which TrizecHahn deems reasonably
necessary for any contingent, conditional or unmatured liabilities or
obligations of the Company (which shall be distributed as soon as reasonably
practicable to the Members in the order of priority set forth in Section 5.04,
if applicable, or Section 5.02 if no dilution event has occurred), and (b)
thereafter, after giving effect to all contributions, distributions and
allocations for all periods to the Members in accordance with their relative
positive Capital Account balances.
9.03 NEGATIVE CAPITAL ACCOUNT RESTORATION
No Member shall have any obligation whatsoever upon the Liquidation of
such Member's Interest, the Liquidation of the Company or in any other event, to
contribute all or any portion of any negative balance standing in such Member's
Capital Account to the Company, to any other Member or to any other person or
entity.
ARTICLE X
BOOKS AND RECORDS; ACCOUNTING; TAX ELECTIONS
<PAGE>
10.01 COMPANY BOOKS
TrizecHahn shall cause to be kept, at the principal place of business
of TrizecHahn, or at such other location as TrizecHahn shall reasonably deem
appropriate, full and proper ledgers, other books of account, and records of all
receipts and disbursements, other financial activities, and the internal affairs
of the Company for at least the current and past four fiscal years.
10.02 DELIVERY OF RECORDS; INSPECTION
Upon the reasonable written request of any Member for any purpose
reasonably related to such Member's Interest, TrizecHahn shall deliver to such
requesting Member (or, to the extent so directed, to its agent or attorney) a
copy of the following information, to the extent such is requested in writing:
(a) true and full information regarding the status of the
business and financial condition of the Company (including, without
limitation, the annual financial reports and all reasonable supporting
calculations and information for such reports);
(b) promptly after becoming available, a copy of the Company's
federal, state and local income or information tax returns for the year;
(c) a current list of the name and last known-business,
residence or mailing address of each Member;
(d) a copy of this Agreement, as amended, and Certificates,
together with executed copies of any written powers of attorney pursuant to
which this Agreement, as amended, and any Certificate have been executed;
and
(e) true and full information regarding the amount of cash and a
description and statement of the agreed value of any other property or
services contributed by each Member and which each Member has agreed to
contribute in the future, and the date on which each became a Member.
Any Member (personally or through an authorized representative) may,
for any purpose reasonably related to such Member's Interest, inspect and copy
(at their own cost and expense) the books and records of the Company at all
reasonable business hours.
10.03 REPORTS AND TAX INFORMATION
TrizecHahn shall cause to be prepared, at the expense of the Company,
and delivered to each Member at such times as are determined by the Board (or
otherwise in accordance with the terms of this Agreement), the Development Plan,
the Development Budget, the Operating Budgets, any and all construction reports
and budgets, monthly operating reports, and any and all other financial
statements and/or reports requested from time to time by the Board. In
addition, TrizecHahn shall cause to be prepared, at the expense of the Company,
and delivered to each Member, within ninety (90) days after the end of each tax
year, the information
<PAGE>
necessary for such Member to complete its federal, state and local income tax or
information returns.
10.04 COMPANY TAX ELECTIONS; TAX CONTROVERSIES
TrizecHahn shall have the right to make elections for the Company
provided for in the Code, including, but not limited to, the elections provided
for in Section 754 of the Code. TrizecHahn is hereby designated as the "TAX
MATTERS MEMBER" pursuant to the requirements of Section 6231(a)(7) of the Code
and the Treasury Regulations promulgated thereunder. In its capacity as Tax
Matters Member, TrizecHahn shall represent the Company in any disputes,
controversies or proceedings with the Internal Revenue Service.
10.05 ACCOUNTING AND FISCAL YEAR
Subject to Section 448 of the Code, the books of the Company shall be
kept on such method of accounting for tax purposes as determined by the Board,
and for financial reporting purposes in accordance with generally accepted
accounting principles. The fiscal year of the Company shall be the calendar
year.
10.06 CONFIDENTIALITY OF INFORMATION
Each party hereto agrees that the provisions of this Agreement, all
understandings, agreements and other arrangements between and among the parties,
and all other non-public information received from or otherwise relating to, the
Company shall be confidential, and shall not be disclosed or otherwise released
to any other person or entity (other than another party hereto), without the
written consent of the Board. Accordingly, each party hereto shall, and shall
cause its agents and attorneys to, hold in confidence all such information.
ARTICLE XI
MISCELLANEOUS
11.01 INVESTMENT INTEREST; NATURE OF INVESTMENT
Each Member hereby represents and warrants to the Company and to each
other Member that such Member is acquiring its Interest in the Company for its
own account and not with a view to, or for resale in connection with, any
distribution thereof in violation of the Securities Act of 1933, as amended (the
"SECURITIES ACT"), or any applicable state securities laws. Such Member also
understands that its Membership Interest may not be transferred absent
compliance with the registration requirements of the Securities Act and
applicable state securities laws or pursuant to an exemption therefrom and
otherwise in compliance with the terms of this Agreement. Each Member
understands the meaning and consequences of the representations, warranties and
covenants made by such Member set forth herein and that the Company has relied
upon such representations, warranties and covenants. Each Member hereby
indemnifies, defends, protects and holds wholly free and harmless the Company
from and against any and all losses, damages, expenses or liabilities arising
out of the breach and/or inaccuracy of any such representation, warranty and/or
covenant. All representations, warranties and covenants
<PAGE>
contained herein shall survive the execution of this Agreement, the formation of
the Company, and the liquidation of the Company.
11.02 AMENDMENT
Except as otherwise provided by this Agreement, the written consent of
each Member shall be required to amend or waive any provision of this Agreement,
which consent may be given, withheld or made subject to such conditions as are
determined by each such Member in such Member's sole and absolute discretion.
11.03 NO ASSIGNMENTS; BINDING EFFECT
This Agreement shall not be assigned or otherwise transferred (by
operation of law or otherwise) by any Member except as is otherwise permitted in
Articles VI, VII and VIII. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their heirs, executors, administrators,
successors, legal representatives and assigns permitted in accordance with this
Agreement and the Nevada Act.
11.04 FURTHER ASSURANCES
Each of the parties hereby does hereby covenant and agree on behalf of
itself, its successors, and its assigns, without further consideration, to
prepare, execute, acknowledge, verify file, record, publish and deliver such
other instruments, documents and statements, and to take such other action as
may be required by law or reasonably necessary to effectively carry out the
purposes of this Agreement.
11.05 NOTICES
Any notice, approval, consent, payment, demand or communication
required or permitted to be given to any Member under this Agreement shall be in
writing and delivered at the address specified in Section 1.02, and shall be
deemed to have been duly given or made as of the date (the "EFFECTIVE DATE") set
forth below: (i) if delivered personally by courier or otherwise, then as of
the date delivered or if delivery is refused, then as of the date presented;
(ii) if sent or mailed by Federal Express, Express Mail or other overnight mail
service to the Company at its principal office and to each Member at its address
appearing in the current records of the Company, then as of the first Business
Day after the date so mailed; (ii) if sent or mailed by certified U.S. Mail,
return receipt requested, to the Company at its principal office in California
and to each Member at its address appearing in the current records of the
Company, then as of the third Business Day after the date so mailed; or (iv) if
sent by facsimile to the Company at its facsimile telephone number or to any
Member at its facsimile telephone number appearing in the current records of the
Company, then either (x) as of the date on which the appropriate electronic
confirmation of receipt is received by the sending party at or before 5:00 p.m.
(receiver's time) on any Business Day or (y) as of the next Business Day if the
time of the appropriate electronic confirmation of receipt is received by the
sending party after 5:00 p.m. (receiver's time).
11.06 WAIVERS
<PAGE>
No waiver by any Member of any default with respect to any provision,
condition or requirement hereof shall be deemed to be a waiver of any other
provision, condition or requirement hereof; nor shall any delay or omission of
any Member to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it hereafter.
11.07 PRESERVATION OF INTENT
If any provision of this Agreement is determined by an arbitrator or
any court having jurisdiction to be illegal or in conflict with any laws of any
state or jurisdiction, then the Members agree that such provision shall be
modified to the extent legally possible so that the intent of this Agreement may
be legally carried out. If any one or more of the provisions contained herein,
or the application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect or for any reason, then the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired or affected, it being
intended that all of the Members' rights and privileges shall be enforceable to
the fullest extent permitted by law.
11.08 ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the parties
hereto pertaining to the subject matter hereto and fully supersedes any and all
prior or contemporaneous agreements or understandings between the parties
thereto pertaining to the subject matter hereof, except for any written (but not
oral) agreements executed by the parties contemporaneously herewith.
11.09 CERTAIN RULES OF CONSTRUCTION
Any ambiguities shall be resolved without reference to which party may
have drafted this Agreement. All Article or Section titles or other captions in
this Agreement are for convenience only, and they shall not be deemed part of
this Agreement and in no way defined, limit, extend or describe the scope or
intent of any provisions hereof. Unless the context otherwise requires: (i) a
term has the meaning assigned to it; (ii) an accounting term not otherwise
defined has the meaning assigned to it in accordance with generally accepted
accounting principles; (iii) "or" is not exclusive; (iv) words in the singular
include the plural, and words in the plural include the singular; (v) provisions
apply to successive events and transactions; (vi) "herein", "hereof" and other
words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision; (vii) all references to
"clauses", "Sections" or "Articles" refer to clauses, Sections or Articles of
this Agreement; and (viii) any pronoun used in this Agreement shall include the
corresponding masculine, feminine or neuter forms.
11.10 COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which, taken together, shall
constitute one and the same instrument.
<PAGE>
11.11 CERTAIN OTHER MATTERS
Time is of the essence of this Agreement. The provisions of this
Agreement shall be construed and enforced in accordance with the laws of the
State of Nevada, and all rights, duties, obligations and remedies shall be
governed by the laws of the State of Nevada without regard to principles of
conflict of laws (except to the extent the dispute requires the interpretation
or operation of this Agreement under the Delaware Act, the substantive laws of
the State of Delaware). If any proceeding is brought by any Member against any
other Member that arises out of, or is connected with, this Agreement, then such
action shall be brought in Clark County, Nevada and the prevailing Member in
such proceeding shall be entitled to recover reasonable attorneys' fees and
costs. Any agreement to pay any amount and any assumption of liability herein
contained, express or implied, shall be only for the benefit of the Members and
their respective successors and assigns, and such agreements and assumptions
shall not inure to the benefit of the obligees of any indebtedness or any other
party, whomsoever, deemed to be a third-party beneficiary of this Agreement.
11.12 COMPANY INTENDED SOLELY FOR TAX PURPOSES.
The Members have formed the Company as a Delaware limited liability
company under the Delaware Act, and do not intend to form a corporation or a
general or limited partnership under Delaware or any other state law. The
Members do not intend to be shareholders and/or partners to one another. The
Members intend the Company to be classified and treated as a partnership solely
for federal and state income taxation purposes. Each Member agrees to act
consistently with the foregoing provisions of this Section 11.12 for all
purposes, including, without limitation, for purposes of reporting the
transactions contemplated herein to the Internal Revenue Service and all state
and local taxing authorities.
11.13 ARBITRATION OF DISPUTES
Any controversy or claim arising out of or relating to this Agreement,
or the claimed breach or interpretation thereof, including, but not limited to,
any impasse reached by the Board pursuant to Section 2.04, shall be resolved by
binding arbitration, subject to the following additional provisions:
(a) The Member seeking arbitration ("DEMANDING MEMBER") shall
deliver a written notice of demand to resolve dispute (the "DEMAND") to the
other Member ("NON-DEMANDING MEMBER"). The demand shall include a brief
statement of the Demanding Member's claim or controversy, the amount
thereof, and the name of the proposed arbitrator to decide the dispute
("ARBITRATOR"). Within ten (10) days after receipt of the demand, the
Non-Demanding Member against whom a demand is made shall deliver a written
response to the Demanding Member. Such response shall include a short and
plain statement of the Non-Demanding Member's defenses to the claim and
shall also state whether such Member agrees to the arbitrator chosen by the
Demanding Member. If the Non-Demanding Member fails to agree to the
arbitrator chosen by the Demanding Member, then such Non-Demanding Member
shall state in its response the name of the proposed arbitrator chosen by
such Non-Demanding Member as the proposed arbitrator. If the Non-Demanding
Member fails to deliver its written response to the
<PAGE>
Demanding Member within ten (10) days after receipt of the demand, or if
the Non-Demanding Member fails to select in its written response a proposed
arbitrator, then the arbitrator selected by the Demanding Member shall
serve as the arbitrator. An arbitrator shall not be employed by any Member
or its Affiliate, directly, indirectly or as an agent, except in connection
with the arbitration proceeding. Any person appointed as an arbitrator
shall be knowledgeable and experienced in the matters sought to be
arbitrated. As examples, if the arbitrable dispute deals with construction
issues, the arbitrator so appointed shall be experienced and knowledgeable
as to construction practice of shopping centers.
(b) The locale of the arbitration shall be in Las Vegas, Nevada.
(c) If the Non-Demanding Member selects a proposed arbitrator
different than the arbitrator selected by the Demanding Member, and such
selection is indicated by the Non-Demanding Member in its written response
to the Demanding Member made within ten (10) days after receipt of the
demand, then the parties shall, for ten (10) days after the Demanding
Member's receipt of the Non-Demanding Member's written response to the
demand, attempt to agree upon an arbitrator. If the parties cannot agree
upon an arbitrator within said ten (10) day period, then a single neutral
arbitrator shall be appointed by the then Presiding Judge of the Eighth
Judicial District Court of the State of Nevada, acting in his individual
and nonofficial capacity on the application of the Demanding Member.
(d) The arbitrator's powers shall be limited as follows: the
arbitrator shall follow the substantive laws of the State of Nevada (or, to
the extent the dispute requires the interpretation or operation of this
Agreement under the Delaware Act, the substantive laws of the State of
Delaware), and the Rules of Evidence of Nevada, and his/her decision shall
be subject to review thereon as would the decision of the Presiding Judge
of the Eighth Judicial District Court of the State of Nevada sitting
without a jury.
(e) The costs of the resolution (including all reporter costs)
shall be split between the Members prorata in accordance with their
Percentage Interests, provided, however, that such costs, along with all
other costs and expenses, including attorneys' fees, shall be subject to
award, in full or in part, by the arbitrator, in his/her discretion, to the
prevailing party. Unless the arbitrator so awards attorneys' fees, each
Member shall be responsible for its own attorneys' fees.
(f) To the extent possible, the arbitration hearings shall be
conducted on consecutive days, excluding Saturdays, Sundays and holidays,
until the completion of the hearings.
(g) In connection with any arbitration proceedings commenced
hereunder, either Member shall have the right to join any third parties in
such proceedings in order to resolve any other disputes, the facts of which
are related to the matters submitted for arbitration hereunder.
<PAGE>
(h) The arbitrator shall render her/his decision(s) concerning
the substantive issue(s) in dispute in writing. The written decision shall
be sent to the parties no later than thirty (30) days following the last
hearing date.
(i) All hearings shall be concluded within ninety (90) days from
the day the arbitrator is selected or appointed, unless the arbitrator
determines that this deadline is impractical.
(j) Notwithstanding the foregoing, in the event the dispute
concerns a deadlock by the Board to deliver a notice of default under the
Management Agreement or Development Agreement pursuant to Section 2.04(f)
above, then all hearings shall be concluded and the arbitrator shall render
his/her decision within thirty (30) days of the date of the Demand, unless
the arbitrator determines that this deadline is impractical.
(k) If any of the provisions relating to arbitration are not
adhered to or complied with either party may petition the Presiding Judge
of the Eighth Judicial District Court of the State of Nevada, for
appropriate relief.
(l) The award of the arbitrator may be entered as a judgment in
a court of competent jurisdiction. All arbitration conducted under this
Section 11.13 shall be in accordance with the rules of the American
Arbitration Association to the extent such rules do not conflict with the
procedures herein set forth. To the extent permitted by law, compliance
with this Section 11.13 is a condition precedent to the commencement by any
Member of a judicial proceeding arising out of any dispute relating
directly or indirectly to this Agreement.
ARTICLE XII
DEFINITIONS
12.01 ADDITIONAL UNRECOVERED CONTRIBUTION ACCOUNT
The term "ADDITIONAL UNRECOVERED CONTRIBUTION ACCOUNT" means with
respect to each Member, the amount of money contributed by such Member to the
capital of the Company pursuant to Section 3.05 (both on its own account and on
behalf of a Non-Contributing Member), and DECREASED by the amount of money
distributed (or deemed distributed) by the Company to such Member pursuant to
Section 5.03(b) and 5.04(b).
12.02 AFFILIATE
The term "AFFILIATE" means any person or entity which, directly or
indirectly through one (1) or more intermediaries, controls or is controlled by
or is under common control with another person or entity. The term "control" as
used herein (including the terms "controlling," "controlled by," and "under
common control with") means the possession, direct or indirect, of the power to
(i) vote fifty-one percent (51%) or more of the outstanding voting securities of
such person or entity, or (ii) otherwise direct management policies of such
person by
<PAGE>
contract or otherwise. With respect to Holdings II, the term "Affiliate" also
means any member of the family of Viola Sommer or any trust for the exclusive
benefit of any of them.
12.03 AGREEMENT
The term "AGREEMENT" means this Limited Liability Company Agreement of
Aladdin Bazaar, LLC.
12.04 BUSINESS DAY
The term "BUSINESS DAY" means any weekday excluding any legal holiday
observed pursuant to United States federal law or Nevada state law or
regulation.
12.05 CAPITAL ACCOUNT
The term "CAPITAL ACCOUNT" means with respect to each Member the
amount of money contributed by such Member to the capital of the Company,
INCREASED by the aggregate fair market value at the time of contribution (as
determined by the Board) of all property contributed by such Member to the
capital of the Company (net of liabilities secured by such contributed property
that the Company is considered to assume or take subject to under Section 752 of
the Code), the aggregate amount of all Net Profits allocated to such Member, and
any and all items of gross income or gain specially allocated to such Member
pursuant to Section 4.04, and DECREASED by the amount of money distributed to
such Member by the Company (exclusive of any guaranteed payment within the
meaning of Section 707(c) of the Code paid to such Member), the aggregate fair
market value at the time of distribution (as determined by the Board) of all
property distributed to such Member by the Company (net of liabilities secured
by such distributed property that such Member is considered to assume or take
subject to under Section 752 of the Code), the amount of any Net Losses charged
to such Member, and any and all partnership and/or partner "nonrecourse
deductions" specially allocated to such Member pursuant to Section 4.04. For
purposes of Section 4.04 only, each Member's Capital Account shall be further
adjusted in the manner set forth in the second and third sentences of Treasury
Regulation Section 1.704-1(b)(2)(ii)(D) and shall be INCREASED for (i) such
member's allocable share of minimum gain (as determined pursuant to Treasury
Regulation Section 1.704-2(g)) that is attributable to the Capital Account and
(ii) the amount such Member is unconditionally obligated to contribute to the
capital of the Company pursuant to this Agreement. Each member's Capital
Account shall be further adjusted in accordance with, and upon the occurrence of
an event described in, Treasury Regulation Section 1.704-1(b)(2)(iv)(f) to
reflect a revaluation of the Company's property on the Company's books. Such
adjustments to the Members' Capital Accounts shall be made in accordance with
Treasury Regulation Section 1.704-1(b)(2)(iv)(g) for allocations of
depreciation, depletion, amortization and gain or loss with respect to such
revalued property.
12.06 CAPITAL CONTRIBUTION
The term "CAPITAL CONTRIBUTION" means with respect to each Member the
aggregate amount of any and all amounts credited to such Member's Unrecovered
Contribution Account in accordance with the terms of this Agreement.
<PAGE>
12.07 CASH FLOW
The term "CASH FLOW" means the sum of any and all Ordinary Cash Flow
and Extraordinary Cash Flow.
12.08 CODE
The term "CODE" means the Internal Revenue Code of 1986, as heretofore
and hereafter amended from time to time (and/or any corresponding provision of
any superseding revenue law).
12.09 COMPANY
The term "COMPANY" means the limited liability company created
pursuant to this Agreement and the filing of a Certificate of Formation with the
Delaware Secretary of State in accordance with the provisions of the Delaware
Act.
12.10 CONDITIONS PRECEDENT
The term "CONDITIONS PRECEDENT" means: (a) the approval by TrizecHahn
and Holdings II, in each party's reasonable discretion, not to be unreasonably
delayed, that the development of the Bazaar Improvements is economically
feasible and desirable (including each party's judgment as to the progress of
the leasing effort and pro forma rents achievable as of the date such judgment
is made); (b) the parties have entered into an amendment pursuant to Section
3.06 above, which amendment is approved by the parties in each party's sole
discretion; (c) the approval by the TrizecHahn and Holdings II, in each party's
reasonable discretion, not to be unreasonably delayed, of the terms and
conditions of the Site Work Agreement, the Development Agreement between Clark
County and Holdings, the Lease, the Reciprocal Easement Agreement and the
Parking Use Agreement; (d) the receipt of all necessary permits and governmental
approvals to begin construction of the initial planned floor area; (e) the
achievement of space leases or letters of intent to enter into space leases for
a gross leasable area of the Bazaar Improvements sufficient to induce a
construction lender (offering competitive market rate terms and conditions based
upon market rate terms and conditions typically obtained by TrizecHahn or its
Affiliates) to enter into a construction loan necessary to build the Bazaar
Improvements, which construction loan shall cover at least seventy percent (70%)
of the costs of the Bazaar Improvements; (f) the execution by each of Aladdin
Gaming and the Company of separate contracts with the project contractor and the
project architect/engineer, each reasonably satisfactory to the other party,
which approval shall not be unreasonably withheld or delayed, upon economic
terms in conformance with the proforma Development Budget attached hereto as
EXHIBIT "F"; (g) the closing of a construction loan covering at least seventy
percent (70%) of the costs of the Bazaar Improvements; and (h) evidence
reasonably satisfactory to TrizecHahn and Holdings II that Aladdin Gaming or its
Affiliates have received funds or irrevocable commitments from debt and equity
sources in sufficient amounts to fund the construction of the initial planned
floor area of the Redevelopment Aladdin and to operate same through the Opening
Date.
12.11 DELAWARE ACT
<PAGE>
The term "DELAWARE ACT" means the Delaware Limited Liability Company
Act (6 Del. C. Section 18-101, ET SEQ.), as hereafter amended from time to time.
12.12 EXTRAORDINARY CASH FLOW
The term "EXTRAORDINARY CASH FLOW" means the cash proceeds (including,
without limitation, any insurance proceeds, recoveries, damages and awards)
realized by the Company, directly or indirectly, as a result of the occurrence
of an Extraordinary Event, plus cash interest payments received with respect to
such proceeds, DECREASED by the sum of (i) the amount of such proceeds applied
by the Company to pay debts and liabilities of the Company which are then due
and payable (inclusive of any guaranteed payment within the meaning of Section
707(c) of the Code paid to any Member); (ii) the amount of such proceeds used,
set aside or committed by the Company or required to be used by any secured
lender for the Bazaar Improvements for restoration and repair of any property in
the event of damage or destruction to such property; (iii) any incidental or
ancillary expenses, costs or liabilities incurred by the Company in effecting or
obtaining any such Extraordinary Event, or the proceeds thereof (including,
without limitation, attorneys' fees, expert witness' fees, accountants' fees,
court costs, recording fees, transfer taxes and fees, appraisal costs and the
like) all of which expenses, costs and liabilities shall be paid from the gross
amount of such cash proceeds to the extent thereof; (iv) the payment of such
other Company debts and liabilities as are determined in the reasonable
discretion of TrizecHahn; and (v) a reserve, established in the reasonable
discretion of TrizecHahn, for anticipated cash disbursements that will have to
be made before additional cash receipts from third parties will provide funds
therefor.
12.13 EXTRAORDINARY EVENT
The term "EXTRAORDINARY EVENT" means the sale, financing, refinancing
or other disposition, condemnation or acquisition by an entity with the power of
eminent domain in lieu of formal condemnation proceedings, damage or
destruction, of all or any portion of the Bazaar Improvements, but excluding any
incidental sales or exchanges of tangible personal property and fixtures.
12.14 INSTITUTIONAL INVESTOR
The term "INSTITUTIONAL INVESTOR" means any financial institution,
pension fund, mutual fund, investment bank, or banking institution, which is a
non-operating company with a net worth in excess of One Hundred Million Dollars
($100,000,000.00).
12.15 INTEREST
The term "INTEREST" means in respect to any Member, all of such
Member's right, title and interest in and to the Net Profits, Net Losses, Cash
Flow, distributions and capital of the Company, and any and all other interests
therein in accordance with the provision of this Agreement and the Delaware Act.
12.16 LIQUIDATION
<PAGE>
The term "LIQUIDATION" means, (i) in respect to the Company the
earlier of the date upon which the Company is terminated under Section 708(b)(1)
of the Code or the date upon which the Company ceases to be a going concern
(even though it may continue in existence for the purpose of winding up its
affairs, paying its debts and distributing any remaining balance to its
Members), and (ii) in respect to a Member wherein the Company is not in
Liquidation, means the liquidation of a Member's interest in the Company under
Treasury Regulation Section 1.761-1(d).
12.17 MEMBER(S)
The term "MEMBERS" means TrizecHahn and Holdings II; collectively; the
term "MEMBER" means any one (1) of the Members.
12.18 NET PROFITS AND NET LOSSES
The terms "NET PROFITS" and "NET LOSSES" mean, for each fiscal year or
other period, an amount equal to the Company's taxable income or loss, as the
case may be, for such year or period, determined in accordance with Section
703(a) of the Code (for this purpose, all items of income, gain, loss and
deduction required to be stated separately pursuant to Section 703(a)(1) of the
Code shall be included in taxable income or loss); provided, however, for
purposes of computing such taxable income or loss, (i) such taxable income or
loss shall be adjusted by any and all adjustments required to be made in order
to maintain Capital Account balances in compliance with Treasury Regulation
Sections 1.704-1(b) and (ii) any and all items of gross income or gain and
partnership and/or partner "nonrecourse deductions" specially allocated to any
Member pursuant to Section 4.04 shall not be taken into account in calculating
such taxable income or loss.
12.19 ORDINARY CASH FLOW
The term "ORDINARY CASH FLOW" means the amount, if any, of all cash
receipts of the Company (exclusive of the proceeds of an Extraordinary Event;
inclusive, however, of the proceeds from any rent or business interruption
insurance) as of any applicable determination date in excess of the sum of (i)
all cash disbursements (inclusive of any guaranteed payment within the meaning
of Code Section 707(c) paid to any Member but exclusive of disbursements made
from the proceeds of an Extraordinary Event and/or disbursements made to the
Members in their capacities as such) of the Company prior to that date; and (ii)
a reserve, established in the reasonable discretion of TrizecHahn for
anticipated cash disbursements that will have to be made before additional cash
receipts from third parties that are attributable to such Bazaar Improvements
will provide the funds therefor.
12.20 PERCENTAGE INTEREST
The term "PERCENTAGE INTEREST" means in respect to TrizecHahn, fifty
percent (50%), and in respect to Holdings II, fifty percent (50%); subject to
adjustment as provided in this Agreement.
12.21 PREFERRED RETURN
<PAGE>
The term "PREFERRED RETURN" means, with respect to each Member, an
amount calculated like interest and accrued on the sum of the balances standing
from time to time in such Member's Unrecovered Contribution Account and
Additional Unrecovered Contribution Account, if any, at a rate equal to twelve
percent (12%) per annum, compounded monthly, and determined on a cumulative
basis. For financial and income tax reporting purposes, neither accrual nor
payment of the Preferred Return shall be treated as an expense of the Company or
as a guaranteed payment under Section 707(c) of the Code.
12.22 TREASURY REGULATION
The term "TREASURY REGULATION" means any proposed, temporary, and/or
final federal income tax regulation promulgated by the United States Department
of the Treasury as heretofore and hereafter amended from time to time (and/or
any corresponding provisions of any superseding revenue law and/or regulation).
12.23 TRIZECHAHN INVESTMENT
The term "TRIZECHAHN INVESTMENT" means the sum of Thirty Million
Dollars ($30,000,000), as reduced by the amount of all capital contributions
made from time to time by TrizecHahn to the Company. Once the TrizecHahn
Investment has been contributed to the Company (or such lesser amount in the
event that the full TrizecHahn Investment is not needed to complete construction
of the Bazaar Improvements), then the TrizecHahn Investment shall be reduced to
zero (0) with the intent that TrizecHahn's obligation to contribute the
TrizecHahn Investment shall not be a revolving obligation.
12.24 UNRECOVERED CONTRIBUTION ACCOUNT
The term "UNRECOVERED CONTRIBUTION ACCOUNT" means with respect to each
Member, the amount of money and/or the agreed upon fair market value (as
mutually determined by the Members) of any property contributed (or deemed
contributed) by such Member to the capital of the Company (net of liabilities
secured by such contributed property that the Company is considered to assume or
take subject to pursuant to Section 752 of the Code), and DECREASED by the
amount of money distributed (or deemed distributed) by the Company to such
Member pursuant to Section 5.02(b) and Section 5.04(c) and the agreed upon fair
market value (as mutually determined by the Members) of any property distributed
to such Member by the Company (net of liabilities secured by such distributed
property that such Member is considered to assume or take subject to under
Section 752 of the Code) pursuant to Section 5.02(b) and Section 5.04(c).
Notwithstanding the foregoing, in no event shall property be contributed by the
Members to the Company (other than the Ground lease) or distributed by the
Company to the Members without the prior written consent of all Members.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the day and year first above written.
"TrizecHahn" TH BAZAAR CENTERS INC., a Delaware
corporation
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
"Holdings II" ALADDIN BAZAAR HOLDINGS, LLC, a Nevada
limited liability company
By: ALADDIN MANAGEMENT CORPORATION,
its Manager
By:
-----------------------------
Viola Sommer
President
By:
-----------------------------
Jack Sommer
Vice President
<PAGE>
By their execution hereof, Aladdin Holdings and the Sommer Trust consent and
agree to be bound by the obligations contained in Section 2.14(h) and Section
3.06 (as to Aladdin Holdings only and not the Sommer Trust) of this Agreement.
ALADDIN HOLDINGS, LLC, a Delaware
limited liability company
By: ALADDIN MANAGEMENT
CORPORATION, its Manager
By: /s/ Viola Sommer
-----------------------------
Viola Sommer
President
By: /s/ Jack Sommer
-----------------------------
Jack Sommer
Vice President
TRUST UNDER ARTICLE SIXTH U/W/O SIGMUND
SOMMER
By: /s/ Viola Sommer
----------------------------------
Viola Sommer, as Trustee
and not an individual
By: /s/ Eugene Landsberg
----------------------------------
Eugene Landsberg, as Trustee
and not an individual
By: /s/ Jack Sommer
----------------------------------
Jack Sommer, as Trustee
and not an individual
<PAGE>
EXHIBIT "A"
MASTER DEVELOPMENT SITE PLANS AND RENDERINGS
<PAGE>
EXHIBIT "B"
DEVELOPMENT PLAN
<PAGE>
EXHIBIT "C"
DEVELOPMENT AGREEMENT
<PAGE>
EXHIBIT "D"
MANAGEMENT AGREEMENT
<PAGE>
EXHIBIT "E"
PRELIMINARY CONSTRUCTION PROFORMA
AND PLANS AND DRAWINGS FOR THE REDEVELOPED ALADDIN
[To Be Attached]
<PAGE>
EXHIBIT "F"
PRE-DEVELOPMENT BUDGET
[To Be Attached]
<PAGE>
EXHIBIT "G"
GUARANTY OF TRIZECHAHN CENTERS INC.
-----------------------------------
1. GUARANTY. In consideration of the covenants, terms and
conditions of the Limited Liability Company Agreement ("AGREEMENT") of Aladdin
Bazaar, LLC, a Delaware limited liability company ("COMPANY") to which this
Guaranty is attached, and as a material inducement to Aladdin Holdings, LLC, a
Delaware limited liability company ("HOLDINGS"), to enter into the Agreement,
TrizecHahn Centers Inc., a California corporation ("GUARANTOR"), hereby
absolutely, presently, continually, unconditionally, irrevocably and jointly and
severally guarantees to and for the benefit of Holdings and the Company that TH
Bazaar Centers Inc., a Delaware corporation ("TRIZECHAHN") shall perform its
obligation to contribute capital to the Company pursuant to the Agreement.
Capitalized terms not otherwise defined herein shall have the meanings ascribed
to such terms in the Agreement.
2. STANDARD PROVISIONS. A separate action may be brought or
prosecuted against Guarantor whether or not the action is brought or prosecuted
against TrizecHahn. If TrizecHahn defaults under the Agreement, Holdings or the
Company may proceed immediately against Guarantor or TrizecHahn, or both, or
Holdings or the Company may enforce against Guarantor or TrizecHahn, or both,
any rights that it has under the Agreement or against Guarantor pursuant to this
Guaranty. If the Agreement terminates Holdings may enforce any remaining rights
thereunder against Guarantor without giving previous notice to TrizecHahn or
Guarantor, and without making any demand on either of them. This Guaranty shall
not be affected by Holdings' failure or delay to enforce any of its rights
hereunder or under the Agreement. TrizecHahn hereby waives notice of or the
giving of its consent to any amendments which may hereafter be made to the terms
of the Agreement, and this Guaranty shall guarantee the performance of the
Agreement as amended, or as the same may be assigned from time to time.
Guarantor waives the right to require Holdings or the Company to (i) proceed
against TrizecHahn; (ii) proceed against or exhaust any security that Holdings
or the Company holds from TrizecHahn; or (iii) pursue any remedy in Holdings' or
the Company's power. Guarantor waives any defense by reason of any disability
of TrizecHahn, the statute of limitations and any other defense based on the
termination of TrizecHahn's liability from any cause. Until all of TrizecHahn's
obligations to the Company and Holdings have been discharged in full, Guarantor
shall have no right of subrogation against TrizecHahn. Guarantor waives its
right to enforce any remedies that Holdings or the Company now has, or later may
have, against TrizecHahn. Guarantor waives any right to participate in any
security now or later held by Holdings or the Company. Guarantor waives all
presentments, demands for performance, notices of nonperformance, protests,
notices of protest, notices of dishonor, and notices of acceptance of this
Guaranty, and waives all notices of existence, creation, or incurring of new or
additional obligations from TrizecHahn to the Company. If Holdings disposes of
its interest in the Agreement, "Holdings," as used in this Guaranty, shall mean
Holdings' successors in interest and assigns. If Holdings is required to
enforce Guarantor's obligations by legal proceedings, Guarantor shall pay to
Holdings all costs incurred, including, without limitation, Holdings' reasonable
attorneys' fees and all costs and other expenses incurred in any collection or
attempted
<PAGE>
collection or in any negotiations relative to the obligations hereby guaranteed,
or in enforcing this Guaranty against the undersigned, individually and jointly.
This Guaranty will continue unchanged by any bankruptcy, reorganization or
insolvency of the TrizecHahn or any successor or assignee thereof or by any
disaffirmance or abandonment by a trustee of TrizecHahn. Guarantor's
obligations under this Guaranty may not be assigned and shall be binding upon
Guarantor's heirs and successors. This Guaranty shall be governed by the laws
of, and may be enforced in the courts of, the State of Nevada.
3. TERMINATION OF GUARANTY. This Guaranty shall automatically
terminate, and shall be of no further force or effect, upon the date that the
Company first obtains financing for the Bazaar Improvements which does not
require a guarantee by either The Trust under Article Sixth u/w/o Sigmund Sommer
or Guarantor, and the Company's lender fully and unconditionally releases all
guarantors thereunder.
4. NOTICES. Any notice to Guarantor or to the Holdings given under
this Guaranty shall be delivered in the manner specified in the Agreement for
the delivery of notices to the Holdings, and if to Guarantor, as follows:
Guarantor: Douglas L. Hageman, Esq.
Sr. Vice President, General Counsel
TrizecHahn Centers
4350 La Jolla Village Drive, Suite 400
San Diego, California 92122
IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of this
_____ day of ____________, 1997.
"Guarantor" TRIZECHAHN CENTERS INC., a Delaware
corporation
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
<PAGE>
EXHIBIT "H"
GUARANTY OF TRUST UNDER ARTICLE SIXTH
U/W/O SIGMUND SOMMER
--------------------
1. GUARANTY. In consideration of the covenants, terms and
conditions of the Limited Liability Company Agreement ("AGREEMENT") of Aladdin
Bazaar, LLC, a Delaware limited liability company ("COMPANY") to which this
Guaranty is attached, and as a material inducement to TH Bazaar Centers Inc., a
Delaware corporation ("TRIZECHAHN"), to enter into the Agreement, The Trust
under Article Sixth u/w/o Sigmund Sommer ("GUARANTOR"), hereby absolutely,
presently, continually, unconditionally, irrevocably and jointly and severally
guarantees to and for the benefit of TrizecHahn and the Company that Aladdin
Bazaar Holdings, LLC, a Nevada limited liability company ("HOLDINGS") shall
perform its obligation to contribute capital to the Company pursuant to the
Agreement. Capitalized terms not otherwise defined herein shall have the
meanings ascribed to such terms in the Agreement.
2. STANDARD PROVISIONS. A separate action may be brought or
prosecuted against Guarantor whether or not the action is brought or prosecuted
against Holdings. If Holdings defaults under the Agreement, TrizecHahn or the
Company may proceed immediately against Guarantor or Holdings, or both, or
TrizecHahn or the Company may enforce against Guarantor or Holdings, or both,
any rights that it has under the Agreement or against Guarantor pursuant to this
Guaranty. If the Agreement terminates TrizecHahn may enforce any remaining
rights thereunder against Guarantor without giving previous notice to Holdings
or Guarantor, and without making any demand on either of them. This Guaranty
shall not be affected by TrizecHahn's failure or delay to enforce any of its
rights hereunder or under the Agreement. Guarantor hereby waives notice of or
the giving of its consent to any amendments which may hereafter be made to the
terms of the Agreement, and this Guaranty shall guarantee the performance of the
Agreement as amended, or as the same may be assigned from time to time.
Guarantor waives the right to require TrizecHahn or the Company to (i) proceed
against Holdings; (ii) proceed against or exhaust any security that TrizecHahn
or the Company holds from Holdings; or (iii) pursue any remedy in TrizecHahn's
or the Company's power. Guarantor waives any defense by reason of any
disability of Holdings, the statute of limitations and any other defense based
on the termination of Holdings' liability from any cause. Until all of
Holdings' obligations to the Company and TrizecHahn have been discharged in
full, Guarantor shall have no right of subrogation against Holdings. Guarantor
waives its right to enforce any remedies that TrizecHahn or the Company now has,
or later may have, against Holdings. Guarantor waives any right to participate
in any security now or later held by TrizecHahn or the Company. Guarantor
waives all presentments, demands for performance, notices of nonperformance,
protests, notices of protest, notices of dishonor, and notices of acceptance of
this Guaranty, and waives all notices of existence, creation, or incurring of
new or additional obligations from Holdings to the Company. If TrizecHahn
disposes of its interest in the Agreement, "TrizecHahn," as used in this
Guaranty, shall mean TrizecHahn's successors in interest and assigns. If
TrizecHahn is required to enforce Guarantor's obligations by legal proceedings,
Guarantor shall pay to TrizecHahn all costs incurred, including, without
limitation,
<PAGE>
TrizecHahn's reasonable attorneys' fees and all costs and other expenses
incurred in any collection or attempted collection or in any negotiations
relative to the obligations hereby guaranteed, or in enforcing this Guaranty
against the undersigned, individually and jointly. This Guaranty will continue
unchanged by any bankruptcy, reorganization or insolvency of Holdings or any
successor or assignee thereof or by any disaffirmance or abandonment by a
trustee of Holdings. Guarantor's obligations under this Guaranty may not be
assigned and shall be binding upon Guarantor's heirs and successors. This
Guaranty shall be governed by the laws of, and may be enforced in the courts of,
the State of Nevada.
3. TERMINATION OF GUARANTY. This Guaranty shall automatically
terminate, and shall be of no further force or effect, upon the date that the
Company first obtains financing for the Bazaar Improvements which does not
require a guarantee by either TrizecHahn Centers Inc., a California corporation,
or Guarantor, and the Company's lender fully and unconditionally releases all
guarantors thereunder.
4. NOTICES. Any notice to Guarantor or to the TrizecHahn given
under this Guaranty shall, in the case of TrizecHahn, be delivered in the manner
specified in the Agreement for the delivery of notices to the TrizecHahn, and if
to Guarantor, as follows:
Guarantor: Mr. Ronald B. Dictrow
c/o Sigmund Sommer Properties
280 Park Avenue
New York, NY 10017
IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of this
_____ day of ____________, 1997.
"Guarantor" TRUST UNDER ARTICLE SIXTH U/W/O
SIGMUND SOMMER
By:
----------------------------------
Viola Sommer, as Trustee
and not an individual
By:
----------------------------------
Eugene Landsberg, as Trustee
and not an individual
By:
----------------------------------
Jack Sommer, as Trustee
and not an individual
<PAGE>
EXHIBIT "I"
GUARANTY OF ALADDIN HOLDINGS LLC
1. GUARANTY. In consideration of the covenants, terms and
conditions of the Limited Liability Company Agreement ("AGREEMENT") of Aladdin
Bazaar, LLC, a Delaware limited liability company ("COMPANY") to which this
Guaranty is attached, and as a material inducement to TH Bazaar Centers Inc., a
Delaware corporation ("TRIZECHAHN"), to enter into the Agreement, Aladdin
Holdings, LLC, a Delaware limited liability company ("GUARANTOR"), hereby
absolutely, presently, continually, unconditionally, irrevocably and jointly and
severally guarantees to and for the benefit of TrizecHahn and the Company that
Aladdin Bazaar Holdings, LLC, a Nevada limited liability company ("HOLDINGS")
shall perform its obligation to reimburse TrizecHahn its share of Predevelopment
Costs pursuant to Section 3.06 of the Agreement. Capitalized terms not
otherwise defined herein shall have the meanings ascribed to such terms in the
Agreement.
2. STANDARD PROVISIONS. A separate action may be brought or
prosecuted against Guarantor whether or not the action is brought or prosecuted
against Holdings. If Holdings defaults under the Agreement, TrizecHahn or the
Company may proceed immediately against Guarantor or Holdings, or both, or
TrizecHahn or the Company may enforce against Guarantor or Holdings, or both,
any rights that it has under the Agreement or against Guarantor pursuant to this
Guaranty. If the Agreement terminates TrizecHahn may enforce any remaining
rights thereunder against Guarantor without giving previous notice to Holdings
or Guarantor, and without making any demand on either of them. This Guaranty
shall not be affected by TrizecHahn's failure or delay to enforce any of its
rights hereunder or under the Agreement. Guarantor hereby waives notice of or
the giving of its consent to any amendments which may hereafter be made to the
terms of the Agreement, and this Guaranty shall guarantee the performance of the
Agreement as amended, or as the same may be assigned from time to time.
Guarantor waives the right to require TrizecHahn or the Company to (i) proceed
against Holdings; (ii) proceed against or exhaust any security that TrizecHahn
or the Company holds from Holdings; or (iii) pursue any remedy in TrizecHahn's
or the Company's power. Guarantor waives any defense by reason of any
disability of Holdings, the statute of limitations and any other defense based
on the termination of Holdings' liability from any cause. Until all of
Holdings' obligations to the Company and TrizecHahn have been discharged in
full, Guarantor shall have no right of subrogation against Holdings. Guarantor
waives its right to enforce any remedies that TrizecHahn or the Company now has,
or later may have, against Holdings. Guarantor waives any right to participate
in any security now or later held by TrizecHahn or the Company. Guarantor
waives all presentments, demands for performance, notices of nonperformance,
protests, notices of protest, notices of dishonor, and notices of acceptance of
this Guaranty, and waives all notices of existence, creation, or incurring of
new or additional obligations from Holdings to the Company. If TrizecHahn
disposes of its interest in the Agreement, "TrizecHahn," as used in this
Guaranty, shall mean TrizecHahn's successors in interest and assigns. If
TrizecHahn is required to enforce Guarantor's obligations by legal proceedings,
Guarantor shall pay to TrizecHahn all costs incurred, including, without
limitation, TrizecHahn's reasonable attorneys' fees and all costs and other
expenses incurred in any
<PAGE>
collection or attempted collection or in any negotiations relative to the
obligations hereby guaranteed, or in enforcing this Guaranty against the
undersigned, individually and jointly. This Guaranty will continue unchanged by
any bankruptcy, reorganization or insolvency of Holdings or any successor or
assignee thereof or by any disaffirmance or abandonment by a trustee of
Holdings. Guarantor's obligations under this Guaranty may not be assigned and
shall be binding upon Guarantor's heirs and successors. This Guaranty shall be
governed by the laws of, and may be enforced in the courts of, the State of
Nevada.
3. TERMINATION OF GUARANTY. This Guaranty shall automatically
terminate, and shall be of no further force or effect, upon the date that the
Company first obtains financing for the Bazaar Improvements which does not
require a guarantee by either TrizecHahn Centers Inc., a California corporation,
or Guarantor, and the Company's lender fully and unconditionally releases all
guarantors thereunder.
4. NOTICES. Any notice to Guarantor or to the TrizecHahn given
under this Guaranty shall, in the case of TrizecHahn, be delivered in the manner
specified in the Agreement for the delivery of notices to the TrizecHahn, and if
to Guarantor, as follows:
Guarantor: Aladdin Holdings LLC
c/o Mr. Jack Sommer
2810 W. Charleston Boulevard, Suite 58
Las Vegas, Nevada 89102
IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of this
_____ day of ____________, 1997.
"Guarantor" ALADDIN HOLDINGS, LLC, a Delaware
limited liability company
By: ALADDIN MANAGEMENT
CORPORATION, its Manager
By:
-----------------------------
Viola Sommer
President
By:
-----------------------------
Jack Sommer
Vice President
<PAGE>
LIMITED LIABILITY COMPANY AGREEMENT
OF
ALADDIN BAZAAR, LLC
THIS SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION UNDER THE SECURITIES ACT OF 1933, 15 U.S.C. Section 15b ET SEQ., AS
AMENDED (THE "FEDERAL ACT"), IN RELIANCE UPON ONE (1) OR MORE EXEMPTIONS FROM
THE REGISTRATION REQUIREMENTS OF THE FEDERAL ACT. IN ADDITION, THE ISSUANCE OF
THIS SECURITY HAS NOT BEEN QUALIFIED UNDER THE DELAWARE SECURITIES ACT, THE
CALIFORNIA CORPORATE SECURITIES LAW OF 1968 OR ANY OTHER STATE SECURITIES LAWS
(COLLECTIVELY, THE "STATE ACTS"), IN RELIANCE UPON ONE (1) OR MORE EXEMPTIONS
FROM THE REGISTRATION PROVISIONS OF THE STATE ACTS. IT IS UNLAWFUL TO
CONSUMMATE A SALE OR OTHER TRANSFER OF THIS SECURITY OR ANY INTEREST THEREIN TO,
OR TO RECEIVE ANY CONSIDERATION THEREFOR FROM, ANY PERSON OR ENTITY WITHOUT THE
OPINION OF COUNSEL FOR THE COMPANY THAT THE PROPOSED SALE OR OTHER TRANSFER OF
THIS SECURITY DOES NOT AFFECT THE AVAILABILITY TO THE COMPANY OF SUCH EXEMPTIONS
FROM REGISTRATION AND QUALIFICATION, AND THAT SUCH PROPOSED SALE OR OTHER
TRANSFER IS IN COMPLIANCE WITH ALL APPLICABLE STATE AND FEDERAL SECURITIES LAWS.
THE TRANSFER OF THIS SECURITY IS FURTHER RESTRICTED UNDER THE TERMS OF THE
LIMITED LIABILITY COMPANY AGREEMENT GOVERNING THE COMPANY, A COPY OF WHICH IS ON
FILE WITH THE COMPANY.
<PAGE>
LIMITED LIABILITY COMPANY AGREEMENT
OF
ALADDIN BAZAAR, LLC
TABLE OF CONTENTS
Page
ARTICLE I FORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.01 Formation. . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.02 Names and Addresses. . . . . . . . . . . . . . . . . . . . . . . .2
1.03 Nature of Business . . . . . . . . . . . . . . . . . . . . . . . .3
1.04 Fiduciary Duties . . . . . . . . . . . . . . . . . . . . . . . . .3
1.05 Term of Company. . . . . . . . . . . . . . . . . . . . . . . . . .4
ARTICLE II MANAGEMENT OF THE COMPANY. . . . . . . . . . . . . . . . . . . .4
2.01 Development Plan . . . . . . . . . . . . . . . . . . . . . . . . .4
2.02 Day to Day Operations. . . . . . . . . . . . . . . . . . . . . . .4
2.03 Board of Managers. . . . . . . . . . . . . . . . . . . . . . . . .5
2.04 Authority of the Board . . . . . . . . . . . . . . . . . . . . . .8
2.05 Operating Budget . . . . . . . . . . . . . . . . . . . . . . . . .9
2.06 Development Fees . . . . . . . . . . . . . . . . . . . . . . . . 11
2.07 Management Fees. . . . . . . . . . . . . . . . . . . . . . . . . 11
2.08 Leasing Fees . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.09 Liability and Indemnity. . . . . . . . . . . . . . . . . . . . . 12
2.10 Designation of Officers. . . . . . . . . . . . . . . . . . . . . 12
2.11 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.12 Treatment of Fees and Reimbursements . . . . . . . . . . . . . . 13
2.13 Approval Rights Over Related Aladdin Development . . . . . . . . 13
2.14 Holdings II's Representations and Warranties . . . . . . . . . . 13
2.15 TrizecHahn's Representations and Warranties. . . . . . . . . . . 18
ARTICLE III MEMBERS' CONTRIBUTIONS TO COMPANY. . . . . . . . . . . . . . . 19
3.01 Capital Contributions for Pre-Development Costs. . . . . . . . . 19
3.02 Additional Capital Contributions . . . . . . . . . . . . . . . . 20
3.03 Construction Financing . . . . . . . . . . . . . . . . . . . . . 21
3.04 Cash Flow Deficit Contribution . . . . . . . . . . . . . . . . . 22
3.05 Remedy For Failure to Contribute Capital . . . . . . . . . . . . 22
3.06 Failure to Satisfy Conditions Precedent. . . . . . . . . . . . . 24
3.07 Capital Contributions in General . . . . . . . . . . . . . . . . 26
<PAGE>
ARTICLE IV ALLOCATION OF PROFITS AND LOSSES . . . . . . . . . . . . . . . 27
4.01 Net Losses from Operations Prior to Dilution . . . . . . . . . . 27
4.02 Net Losses from Extraordinary Events Prior to Dilution . . . . . 27
4.03 Net Profits from Operations Prior to Dilution. . . . . . . . . . 28
4.04 Net Profits From Extraordinary Events Prior to Dilution. . . . . 28
4.05 Net Losses from Operations Following Dilution. . . . . . . . . . 29
4.06 Net Losses from Extraordinary Events Following Dilution. . . . . 29
4.07 Net Profits from Operations Following Dilution . . . . . . . . . 30
4.08 Net Profits From Extraordinary Events Following Dilution . . . . 31
4.09 Special Allocations. . . . . . . . . . . . . . . . . . . . . . . 31
4.10 Curative Allocations . . . . . . . . . . . . . . . . . . . . . . 32
4.11 Differing Tax Basis; Tax Allocation. . . . . . . . . . . . . . . 33
ARTICLE V DISTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . . . . . 33
5.01 Distribution of Ordinary Cash Flow . . . . . . . . . . . . . . . 33
5.02 Distribution of Extraordinary Cash Flow. . . . . . . . . . . . . 33
5.03 Distribution of Ordinary Cash Flow Following Dilution. . . . . . 34
5.04 Distribution of Extraordinary Cash Flow Following Dilution . . . 34
5.05 Limitations on Distributions . . . . . . . . . . . . . . . . . . 35
5.06 In-Kind Distribution . . . . . . . . . . . . . . . . . . . . . . 35
6.01 Limitations on Transfer. . . . . . . . . . . . . . . . . . . . . 35
6.02 Permitted Transfers. . . . . . . . . . . . . . . . . . . . . . . 35
6.03 Right of First Offer/Right of First Refusal. . . . . . . . . . . 37
6.04 Regulatory and Lender Prohibitions . . . . . . . . . . . . . . . 39
6.05 Admission of Substituted Members . . . . . . . . . . . . . . . . 39
6.06 Election; Allocations Between Transferor and Transferee. . . . . 40
6.07 Partition. . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.08 Waiver of Withdrawal and Purchase Rights . . . . . . . . . . . . 40
ARTICLE VII MARKETING AND SALE OF THE BAZAAR IMPROVEMENTS. . . . . . . . . 40
7.01 Right to Market During Years Five Through Ten. . . . . . . . . . 40
7.02 Right to Require Sale After Year Ten . . . . . . . . . . . . . . 42
7.03 General Sales Procedures . . . . . . . . . . . . . . . . . . . . 42
ARTICLE VIII DEFAULT BUY/SELL AGREEMENT . . . . . . . . . . . . . . . . . . 43
8.01 Buy/Sell Events. . . . . . . . . . . . . . . . . . . . . . . . . 43
8.02 Rights Arising From a Buy/Sell Event . . . . . . . . . . . . . . 44
8.03 Determination of Purchase Price. . . . . . . . . . . . . . . . . 44
8.04 Non-Defaulting Member's Option . . . . . . . . . . . . . . . . . 45
8.05 Closing of Purchase and Sale . . . . . . . . . . . . . . . . . . 46
8.06 Payment of Purchase Price. . . . . . . . . . . . . . . . . . . . 46
8.07 Release. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.08 Repayment of Member Loans. . . . . . . . . . . . . . . . . . . . 47
8.09 Voting Rights Following Buy/Sell Event . . . . . . . . . . . . . 47
ARTICLE IX DISSOLUTION AND WINDING UP OF THE COMPANY. . . . . . . . . . . 47
<PAGE>
9.01 Events Causing Dissolution of the Company. . . . . . . . . . . . 47
9.02 Winding Up of the Company. . . . . . . . . . . . . . . . . . . . 48
9.03 Negative Capital Account Restoration . . . . . . . . . . . . . . 48
ARTICLE X BOOKS AND RECORDS; ACCOUNTING; TAX ELECTIONS . . . . . . . . . 49
10.01 Company Books. . . . . . . . . . . . . . . . . . . . . . . . . . 49
10.02 Delivery of Records; Inspection. . . . . . . . . . . . . . . . . 49
10.03 Reports and Tax Information. . . . . . . . . . . . . . . . . . . 49
10.04 Company Tax Elections; Tax Controversies . . . . . . . . . . . . 50
10.05 Accounting and Fiscal Year . . . . . . . . . . . . . . . . . . . 50
10.06 Confidentiality of Information . . . . . . . . . . . . . . . . . 50
ARTICLE XI MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . 50
11.01 Investment Interest; Nature of Investment. . . . . . . . . . . . 50
11.02 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
11.03 No Assignments; Binding Effect . . . . . . . . . . . . . . . . . 51
11.04 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . 51
11.05 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
11.06 Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
11.07 Preservation of Intent . . . . . . . . . . . . . . . . . . . . . 52
11.08 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . 52
11.09 Certain Rules of Construction. . . . . . . . . . . . . . . . . . 52
11.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 53
11.11 Certain Other Matters. . . . . . . . . . . . . . . . . . . . . . 53
11.12 Company Intended Solely for Tax Purposes.. . . . . . . . . . . . 53
11.13 Arbitration of Disputes. . . . . . . . . . . . . . . . . . . . . 53
ARTICLE XII DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 55
12.01 Additional Unrecovered Contribution Account. . . . . . . . . . . 55
12.02 Affiliate. . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
12.03 Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
12.04 Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . 56
12.05 Capital Account. . . . . . . . . . . . . . . . . . . . . . . . . 56
12.06 Capital Contribution . . . . . . . . . . . . . . . . . . . . . . 57
12.07 Cash Flow. . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
12.08 Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
12.09 Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
12.10 Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . 57
12.11 Delaware Act . . . . . . . . . . . . . . . . . . . . . . . . . . 58
12.12 Extraordinary Cash Flow. . . . . . . . . . . . . . . . . . . . . 58
12.13 Extraordinary Event. . . . . . . . . . . . . . . . . . . . . . . 58
12.14 Institutional Investor . . . . . . . . . . . . . . . . . . . . . 58
12.15 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
12.16 Liquidation. . . . . . . . . . . . . . . . . . . . . . . . . . . 59
12.17 Member(s). . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
12.18 Net Profits and Net Losses . . . . . . . . . . . . . . . . . . . 59
<PAGE>
12.19 Ordinary Cash Flow . . . . . . . . . . . . . . . . . . . . . . . 59
12.20 Percentage Interest. . . . . . . . . . . . . . . . . . . . . . . 60
12.21 Preferred Return . . . . . . . . . . . . . . . . . . . . . . . . 60
12.22 Treasury Regulation. . . . . . . . . . . . . . . . . . . . . . . 60
12.23 TrizecHahn Investment. . . . . . . . . . . . . . . . . . . . . . 60
12.24 Unrecovered Contribution Account . . . . . . . . . . . . . . . . 60
SIGNATURE PAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
EXHIBITS:
- ---------
EXHIBIT "A" MASTER DEVELOPMENT SITE PLANS AND RENDERINGS
EXHIBIT "B" DEVELOPMENT PLAN
EXHIBIT "C" DEVELOPMENT AGREEMENT
EXHIBIT "D" MANAGEMENT AGREEMENT
EXHIBIT "E" PRELIMINARY CONSTRUCTION PROFORMA AND PLANS AND DRAWINGS FOR THE
REDEVELOPED ALADDIN
EXHIBIT "F" PRE-DEVELOPMENT BUDGET
EXHIBIT "G" GUARANTY OF TRIZECHAHN CENTERS INC.
EXHIBIT "H" GUARANTY OF TRUST UNDER ARTICLE SIXTH U/W/O SIGMUND SOMMER
EXHIBIT "I" GUARANTY OF ALADDIN HOLDINGS, LLC
<PAGE>
GLOSSARY OF TERMS
Page
Additional Capital. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Additional Unrecovered Contribution Account . . . . . . . . . . . . . . 55
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Aladdin Holdings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Aladdin Hotel and Casino. . . . . . . . . . . . . . . . . . . . . . . . .1
Appraisal Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Appraised Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Arbitrator. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Audrie/Harmon Hotel . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Audrie/Harmon Termination Notice. . . . . . . . . . . . . . . . . . . . 25
Bazaar Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Business Day. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Buy/Sell Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Capital Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Capital Contribution. . . . . . . . . . . . . . . . . . . . . . . . . . 57
Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Center. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Code. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Competing Retail Project. . . . . . . . . . . . . . . . . . . . . . . . .3
Conditions Precedent. . . . . . . . . . . . . . . . . . . . . . . . . . 57
Construction Schedule . . . . . . . . . . . . . . . . . . . . . . . . . .4
Contributing Member . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Contribution Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Control Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Control Premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Default Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Defaulting Member . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Delaware Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Delinquent Contribution . . . . . . . . . . . . . . . . . . . . . . . . 22
Demand. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Demanding Member. . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Development Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 11
Development Budget. . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Development Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Development Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Dilution Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
<PAGE>
Effective Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Existing Entitlements . . . . . . . . . . . . . . . . . . . . . . . . . 14
Extraordinary Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . 58
Extraordinary Event . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Federal Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
First Offering Notice . . . . . . . . . . . . . . . . . . . . . . . . . 37
First Sale Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Hard Construction Costs . . . . . . . . . . . . . . . . . . . . . . . . 11
Holdings II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Holdings II Primary Individuals . . . . . . . . . . . . . . . . . . . . 14
Holdings II's best knowledge. . . . . . . . . . . . . . . . . . . . . . 13
Indemnified Party . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Initial Sale Period . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Institutional Investor. . . . . . . . . . . . . . . . . . . . . . . . . 58
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Leasing Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Liquidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Management Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . 11
Master Development. . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Master Site . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Member. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Member Capital Obligation Guarantee . . . . . . . . . . . . . . . . . . 21
Member Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Net Losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Net Profits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Non-Competition Area. . . . . . . . . . . . . . . . . . . . . . . . . . .3
Non-Competition Period. . . . . . . . . . . . . . . . . . . . . . . . . .3
Non-Contributing Member . . . . . . . . . . . . . . . . . . . . . . . . 22
Non-Defaulting Member . . . . . . . . . . . . . . . . . . . . . . . . . 44
Non-Demanding Member. . . . . . . . . . . . . . . . . . . . . . . . . . 53
Non-Selling Member. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Non-Transferring Member . . . . . . . . . . . . . . . . . . . . . . . . 37
Offered Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Opening . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Operating Budget. . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Ordinary Cash Flow. . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Other Parking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Parking Facilities. . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Percentage Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Permitted Transferees . . . . . . . . . . . . . . . . . . . . . . . . . 35
Plans and Specifications. . . . . . . . . . . . . . . . . . . . . . . . .4
Pre-Approved Transferee . . . . . . . . . . . . . . . . . . . . . . . . 39
Predevelopment Costs. . . . . . . . . . . . . . . . . . . . . . . . . . 20
Preferred Return. . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Price Determination Notice. . . . . . . . . . . . . . . . . . . . . . . 44
<PAGE>
Prohibited Transferee. . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Project Sale Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Redeveloped Aladdin. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Remaining Entitlements . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Sales Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Satisfaction Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Second Offering Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Selling Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Selling Member's Purchase Price. . . . . . . . . . . . . . . . . . . . . . . 41
Site Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Sommer Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
State Acts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Tax Matters Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Third Party. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Transferring Member. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Treasury Regulation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
TrizecHahn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
TrizecHahn Investment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
TrizecHahn's best knowledge. . . . . . . . . . . . . . . . . . . . . . . . . 18
TrizecHahn's Primary Individuals . . . . . . . . . . . . . . . . . . . . . . 18
Unrecovered Contribution Account . . . . . . . . . . . . . . . . . . . . . . 60
<PAGE>
FIRST AMENDMENT TO THE LIMITED
LIABILITY COMPANY AGREEMENT OF ALADDIN BAZAAR, LLC
THIS FIRST AMENDMENT (the "Amendment") is entered into effective as of
October 16, 1997, by and between TH BAZAAR CENTERS INC., a Delaware corporation
("TrizecHahn"), and ALADDIN BAZAAR HOLDINGS, LLC, a Nevada limited liability
company ("Holdings II"). The capitalized terms used herein shall have the
respective meanings assigned to such terms in the Limited Liability Company
Agreement (the "Agreement") of ALADDIN BAZAAR, LLC (the "Company"), dated as of
September 3, 1997, between TrizecHahn and Holdings II.
R E C I T A L S :
A. Pursuant to Section 3.06 of the Agreement, TrizecHahn and Holdings II
agreed to enter into good faith negotiations regarding a number of issues which
were unresolved on the date the Agreement was executed. The parties have since
completed such negotiations and agree to amend the Agreement as follows:
1. AGREEMENT REGARDING COMMITMENT TO FUND AND CONSTRUCT THE CENTER.
Holdings II has requested that TrizecHahn be required to commit as of
the date it is provided with a Satisfaction Notice (as such term is modified
below), irrevocably and subject only to the TrizecHahn Investment Conditions
(defined below) to (a) contribute to the Company the TrizecHahn Investment as
and when required by the terms of the Construction Loan; (b) commence
construction of the Center by May 31, 1998 (or on such later date mutually
agreed by the parties as being appropriate in order to complete construction of
the Center contemporaneously with the completion of the Aladdin Hotel and
Casino, in either case the "Construction Commencement Date"); and (c) together
with the Sommer Trust, execute such guarantees as are necessary (pursuant to the
terms of the Agreement) to obtain construction financing for the Center at
competitive market rate terms and conditions and with no pre-leasing
requirements. The Satisfaction Notice shall include, in addition to the
requirements set forth in Section 3.06 of the Agreement, reasonable supporting
evidence that the additional Conditions Precedent added as Section 12.10(i)
through (k), inclusive, pursuant to Paragraph 3 of this Amendment have been
satisfied, which shall include, but not be limited to, true, correct and
complete copies of all agreements between Aladdin Gaming, LLC ("Gaming") and
Planet Hollywood International, Inc. ("PH"), and each of their Affiliates. In
addition, the Satisfaction Notice may only be validly given if Holdings II has
previously delivered to TrizecHahn a notice ("Pre-Satisfaction Notice") at least
fifteen (15) days prior to the date of the Satisfaction Notice, but not more
than thirty (30) days prior to the date of the Satisfaction Notice. The
Pre-Satisfaction Notice shall state that Holdings II reasonably expects to
deliver to TrizecHahn a Satisfaction Notice within such fifteen (15) day period
(I.E., the period beginning sixteen (16) days after the date of the
Pre-Satisfaction Notice
<PAGE>
and ending thirty (30) days after such date). In consideration of the
provisions set forth below, TrizecHahn hereby agrees to either (i) commit to the
obligations set forth in the preceding sentence or (ii) if TrizecHahn does not
elect to commit to such obligations or if TrizecHahn fails to respond within
five (5) business days of being furnished with the Satisfaction Notice (as
provided in the Agreement, and modified by the preceding sentence of this
Amendment), time being of the essence as to such response, then the provisions
of Section 3.06 of the Agreement shall apply (I.E., the Company shall promptly
reimburse TrizecHahn for all of its Predevelopment Costs, the Agreement shall
automatically become null and void and the parties and their Affiliates shall
have no further rights, duties or obligations to each other whatsoever, other
than the reimbursement provisions provided in Section 3.06 of the Agreement).
The "TrizecHahn Investment Conditions" are (a) the Company has
obtained and is prepared to immediately close the construction loan identified
in the Satisfaction Notice by Holdings II, with no conditions to draw against
such loan other than TrizecHahn's commitment to contribute the TrizecHahn
Investment; (b) all equity and debt financing necessary to construct the Aladdin
Hotel and Casino, the Other Parking and the cost of the Parking Facility
allocable to Aladdin Hotel and Casino, and to operate the same through the
Opening have closed, no material default is currently pending, and construction
is on schedule and within budget in all material respects; and (c) TrizecHahn
has approved in its reasonable discretion, all material agreements, including
the final forms of the Site Work Agreement, the Development Agreement between
Clark County and Holdings (if such agreement is entered into), the Lease, the
Subordinated Debt (described below), the Reciprocal Easement Agreement, the
Parking Use Agreement and all loan documents.
If TrizecHahn elects to commit to the obligations set forth in the
first sentence of Paragraph 1 above, then notwithstanding anything in Article V
to the contrary all, distributions of (i) Ordinary Cash Flow and/or (ii)
Extraordinary Cash Flow shall be made first in the following of priority:
(a) First, to TrizecHahn to the extent of TrizecHahn's accrued and
unpaid Priority Preferred Return (defined below);
(b) Second, to TrizecHahn to the extent of TrizecHahn's Priority
Unrecovered Contribution Account (defined below); and
(c) Thereafter, to the Members in accordance with Article V of the
Agreement.
The term "Priority Preferred Return" means, with respect to TrizecHahn
only, an amount calculated like interest and accrued on the sum of the balance
standing from time to time in TrizecHahn's Priority Unrecovered Contribution
Account (defined below), if any, at a rate equal to twenty percent (20%) per
annum, compounded monthly, and determined on a cumulative basis. For financial
and income tax reporting purposes, neither accrual nor payment of the Priority
Preferred Return shall be treated as an expense of the Company or as a
guaranteed payment under Section 707(c) of the Code.
<PAGE>
The term "Priority Unrecovered Contribution Account" means with
respect to TrizecHahn only, the difference between (x) the amount of capital
contributions made by TrizecHahn to the Company (whether otherwise attributable
to TrizecHahn's Unrecovered Contribution Account or Additional Unrecovered
Contribution Account under the Agreement), and (y) Holdings II's Unrecovered
Contribution Account in the amount of Ten Million Dollars ($10,000,000.00). For
example, TrizecHahn's Priority Unrecovered Contribution Account would equal
Twenty Million Dollars ($20,000,000.00) upon contribution in full of the
TrizecHahn Investment. In addition, if and only if the Audrie/Harmon Hotel is
not completed and open for business on the date which is nine (9) months
following the date of the Opening, time being of the essence, then TrizecHahn's
Priority Unrecovered Contribution Account shall be increased to equal the
remaining unpaid balance of TrizecHahn's total capital contributions to the
Company (and shall not be reduced by the Ten Million Dollars ($10,000,000.00)
attributable to Holdings II's Unrecovered Contribution Account). For example,
TrizecHahn's Priority Unrecovered Contribution Account would equal Thirty
Million Dollars ($30,000,000.00) upon contribution in full of the TrizecHahn
Investment (and assuming no prior distributions attributable to the Priority
Unrecovered Contribution Account) if the Audrie/Harmon Hotel was not constructed
and open for business on the date which is nine (9) months following the date of
the Opening. TrizecHahn's Priority Unrecovered Contribution Account shall be
decreased by the amount of Cash Flow distributed to TrizecHahn pursuant to
sub-paragraph (b) above and attributable to TrizecHahn's Priority Unrecovered
Contribution Account. Article IV of the Agreement shall be revised to treat the
payment of TrizecHahn's Priority Preferred Return like a distribution of
Preferred Return for purposes of allocating Net Income and Net Loss. To avoid
duplication, amounts credited to TrizecHahn's Priority Unrecovered Contribution
Account shall not also be credited to TrizecHahn's Unrecovered Contribution
Account or Additional Unrecovered Contribution Account. If the Audrie/Harmon
Hotel is not constructed and open for business on the date which is nine (9)
months following the Opening, time being of the essence, then TrizecHahn's
Unrecovered Contribution Account shall be debited, and TrizecHahn's Priority
Unrecovered Contribution shall be credited, by the balance of TrizecHahn's
Unrecovered Contribution Account as of such date (E.G., Ten Million Dollars
($10,000,000.00).
2. FEE PAYABLE TO HOLDINGS II.
Upon the initial draw of the Company's construction loan ("Draw
Date"), through the date of Opening, Holdings II shall be entitled to receive a
development fee (the "Holdings II Development Fee") in an amount equal to One
Hundred Thousand Dollars ($100,000.00) per month, payable on the first day of
the month following the Draw Date. In no event shall the Holdings II
Development Fee exceed One Million Eight Hundred Thousand Dollars
($1,800,000.00). Following the date which is five (5) years after the Opening
Date, Holdings II shall be obligated to pay to TrizecHahn an amount equal to
one-half (1/2) of the Holdings II Development Fee, payable on the first day of
the month following the fifth (5th) anniversary of the Opening and on the first
day of each following month in an equal monthly amount of Fifty Thousand Dollars
<PAGE>
($50,000.00) per month, until such amount is paid in full, without interest. In
addition to all other rights and/or remedies TrizecHahn may have at law and/or
in equity to enforce such payment obligation, TrizecHahn shall be entitled to
withhold distributions of Cash Flow otherwise payable to Holdings II in
satisfaction of Holdings II's obligation to pay any accrued but unpaid monthly
payments of Fifty Thousand Dollars ($50,000.00) per month over this period.
3. AGREEMENT REGARDING THE AUDRIE/HARMON HOTEL.
As set forth in the Agreement, Gaming and PH have entered into a
non-binding Memorandum of Understanding and Letter of Intent dated September 2,
1997 (the "MOU") to develop a music entertainment themed hotel casino on the
Audrie/Harmon Hotel site. A copy of the MOU is attached hereto for reference.
The MOU envisions that Aladdin Gaming and PH will enter into a formal agreement
by October 15, 1997, to develop the Audrie/Harmon Hotel and will immediately
move forward to obtain the financing required to develop and construct the
Audrie/Harmon Hotel. TrizecHahn has reviewed the development concept and is
supportive of the plans and intentions of Aladdin Gaming and PH with regard to
the Audrie/Harmon Hotel. Notwithstanding the forgoing, however, TrizecHahn
believes it is critical to ensure that a credible development plan for the
Audrie/Harmon Hotel is firmly in place as a Condition Precedent to the
construction of (or TrizecHahn's irrevocable commitment to fund and construct,
subject only to the TrizecHahn Investment Conditions) the Center. Accordingly,
Section 12.10 of the Agreement is hereby amended to add the following Conditions
Precedent:
"(i) Aladdin Gaming and PH have entered into a definitive joint
venture agreement (the "Venture") to develop the Audrie/Harmon Hotel
as set forth in the Memorandum of Understanding and Letter of Intent
between Gaming and PH dated September 2, 1997 attached hereto as
Exhibit J;
(j) Gaming and PH have made a public announcement of their intention
to develop the Audrie/Harmon Hotel; and
(k) evidence reasonably satisfactory to TrizecHahn and Holdings II
that (I) Aladdin Gaming or its Affiliates have received funds or
irrevocable commitments from debt and equity sources (which has been
fully negotiated, approved by the lenders and equity investors and
ready for signature) in an amount sufficient to fund Gaming's share of
the equity to be contributed to the Venture, (II) PH has irrevocably
committed to contribute PH's share of the equity to the Venture
(subject only to the closing of the construction financing set forth
in clause III below), and (III) the Venture has a fully negotiated
term sheet or
<PAGE>
expression of interest from one or more lenders for the construction
of the Audrie/Harmon Hotel as set forth in the Memorandum of
Understanding and Letter of Intent between Gaming and PH referenced
above, and PH and Gaming have agreed in writing that the terms of the
proposed construction financing are acceptable to each of them;"
Notwithstanding Gaming's expectation that it will be able to
successfully enter into the PH Agreement with PH, TrizecHahn and Holdings II
agree that there can be no assurance that Gaming will be successful. However,
Gaming and Holdings II shall continue to use commercially reasonable efforts to
assure that the Audrie/Harmon Hotel is constructed and opened as soon as
possible following the Opening.
4. CONVEYANCE OF PROPERTY AND TERMINATION OF LEASE.
Aladdin Holdings agrees that it shall on or before the Opening, cause
the Property to be subdivided into a separate parcel or parcels from the Master
Site, in accordance with Nevada Revised Statutes ("NRS") 278.320 through NRS
278.469, inclusive, or into a separate condominium unit or units from the Master
Site, in accordance with Chapter 116 of the NRS, whichever the parties hereto
mutually determine to be more appropriate in the context of the entire site.
Upon such subdivision or creation of a separate condominium unit, the Property
shall be conveyed by Aladdin Holdings to the Company (without any additional
credit to the Capital Account or Unrecovered Contribution Account of Holdings
II), and the Lease shall be terminated. The Company shall pay a nominal amount
of rent ($10.00 per year) pursuant to the Lease. Upon the later of (i) the
Opening, or (ii) the transfer of the Property as a separate legal parcel or a
separate condominium unit, in either case unencumbered by any monetary lien or
encumbrance and subject only to title exceptions reasonably approved by the
parties, the Company shall issue a subordinated debenture (the "Subordinated
Debt"), payable to Holdings II out of available Cash Flow of the Company upon
the terms and conditions described below. The Subordinated Debt shall be junior
to all other debt or operating obligations of the Company. The Subordinated
Debt shall be unsecured and shall have no right to declare any event of default
or exercise any remedies during any period that any debt or operating
obligations of the Company remain outstanding. In the event that during any
period there are insufficient distributions of Cash Flow to return to TrizecHahn
a twelve percent (12%) preferred return on the sum of TrizecHahn's (i) Priority
Unrecovered Contribution Account, and (ii) Unrecovered Contribution Account
("TrizecHahn 12% Minimum Return"), then payments of the Subordinated Debt shall
be made PARI PASSU with the TrizecHahn 12% Minimum Return. Subject to the
foregoing, the Subordinated Debt shall be senior to distributions of Ordinary
Cash Flow and Extraordinary Cash Flow to the Members pursuant to Article V of
the Agreement. The amount of the Subordinated Debt shall be Sixteen Million Six
Hundred Sixty-Six Thousand Six Hundred Sixty-Seven Dollars ($16,666,667.00). To
the extent of available Cash Flow, the Subordinated Debt shall be payable in
equal monthly installments aggregating Two Million Dollars ($2,000,000.00) per
annum, payable to the extent of
<PAGE>
available Cash Flow within ten (10) business days of the first (1st) day of each
month during the term of the Subordinated Debt. The Subordinated Debt shall be
fully amortized over a term of sixty-nine (69) years. Any accrued but unpaid
payments shall not accrue additional interest.
5. SOMMER TRUST FINANCIAL STATEMENTS.
On or before October 31, 1997, Holdings II shall deliver certain
financial information of the Sommer Trust to TrizecHahn sufficient to give
comfort to TrizecHahn in its sole discretion on the ability of the Sommer Trust
to perform its obligations under the Agreement. TrizecHahn agrees to keep the
financial information confidential, except for any disclosure required to comply
with court order or law.
6. FINANCING FEE.
The Company shall pay to TrizecHahn a financing fee upon closing of
the construction loan for the Bazaar Improvements in an amount equal to one
percent (1%) of the total amount of the loan, and a fee in an amount equal to
one quarter of one percent (.25%) to Westwood Capital LLC. Holdings II shall
pay a fee in an amount equal to (or greater than) one quarter of one percent
(.25%) to Westwood Capital LLC concurrent with payment by the Company. Holdings
II represents that no fee will be due and owing to CS First Boston in connection
with the loan.
7. SOMMER RETAIL SPACE.
Aladdin Holdings or its Affiliates or principals shall have the right
to lease, in connection with the initial lease-up of the Center, up to two
thousand five hundred (2,500) rentable square feet of tenant space (or such
lesser amount as Aladdin Holdings shall indicate in a notice to TrizecHahn no
later than _____________, 1997), at a location in the Center reasonably mutually
acceptable to both parties, for a term of ten (10) years, at a rental rate equal
to fifty percent (50%) of the market rental being paid by tenants of comparable
space for comparable terms in comparable locations in the Center, for a use
which is consistent with the first-class quality of the Center and which does
not conflict with the rights of any other tenants of the Center, and otherwise
on terms and conditions reasonably mutually acceptable to both parties (based on
the standard form of lease for the Center). TrizecHahn shall notify Aladdin
Holdings of the proposed location, size and rental rate for such space no later
than _________________, 1997.
8. CB COMMERCIAL.
Holdings II shall be solely responsible to pay any alleged "finders
fee" payable to CB Commercial in excess of Fifty Thousand Dollars ($50,000.00)
(although the parties do not believe that such fee is properly payable).
Except as expressly modified hereby, all of the terms and provisions of the
Agreement shall remain in full force and effect, are incorporated herein by this
reference (including, but not limited to, Article XI of the Agreement), and
shall govern the conduct of the
<PAGE>
parties hereto; provided, however, to the extent of any inconsistency between
the provisions of the Agreement and the provisions of this Amendment, the
provisions of this Amendment shall control.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as
of the day and year first above written.
"TrizecHahn" TH BAZAAR CENTERS INC.,
a Delaware corporation
By: /s/ Wendy M. Godoy
---------------------------------------
Wendy M. Godoy, Senior Vice President
By: /s/ Wayne J. Finley
---------------------------------------
Wayne J. Finley, Senior Vice President
"Holdings II" ALADDIN BAZAAR HOLDINGS, LLC,
a Nevada limited liability company
By: ALADDIN MANAGEMENT
CORPORATION, its Manager
By: /s/ Ronald B. Dictrow
-----------------------------------
Ronald B. Dictrow, Treasurer
By: /s/ Jack Sommer
-----------------------------------
Jack Sommer, Vice President
<PAGE>
GAI CONTRIBUTION AND
AMENDMENT AGREEMENT
This Contribution and Amendment Agreement (the "Agreement") dated as of
February 26, 1998 is made between and among Aladdin Gaming, LLC (the "Company"),
Aladdin Gaming Holdings, LLC ("Gaming Holdings") and GAI, LLC (the
"Consultant").
WHEREAS, the Company, Aladdin Holdings and the Consultant entered into a
Consulting Agreement dated as of January 1, 1997 (and subsequently amended on
January 30, 1998) (as amended, the "Consulting Agreement");
WHEREAS, the Company is a subsidiary of Gaming Holdings; and
WHEREAS, the parties wish to enter into this Agreement to provide for the
Consultant to contribute its equity interest in the Company to Gaming Holdings
in return for an equity interest in Gaming Holdings and to amend the Consulting
Agreement in connection therewith.
NOW, THEREFORE, in consideration of the foregoing and the following mutual
covenants and agreements, the parties agree as follows:
1. On the date hereof (a) the Consultant shall contribute its three
percent Membership Interest in the Company to the capital of Gaming Holdings and
(b) in consideration therefor Gaming Holdings shall issue to the Consultant
30,000 common shares in the capital of Gaming Holdings (representing three
percent of the issued and outstanding common shares of Gaming Holdings on the
date hereof) and shall establish a capital account in respect thereof in the
amount of $6 million.
2. The parties agree that Gaming Holdings is hereby added as a party to
the Consulting Agreement as amended hereby.
3. Pursuant to Section 15 of the Consulting Agreement, the Consulting
Agreement is hereby amended as follows:
(a) Sections 4(b) (ii), (iii) and (iv) of the Consulting
Agreement are deleted in their entirety and replaced with the following:
"(ii) ANTI-DILUTION PURCHASES. Upon Gaming Holdings'
closing of a financing transaction or transactions involving the
sale of membership interests, equity (or securities convertible into
membership interests or equity) of Gaming Holdings (a "Financing
Transac-
<PAGE>
tion"), and if Consultant is still providing services to the Company
upon such closing date or dates, Consultant shall have the right to
purchase that number of such instruments that would result in
Consultant owning, in the aggregate (together with all membership
interests or equity already held by Consultant at such time), three
percent (subject to adjustment pursuant to Section 3.6 of the
Operating Agreement of Gaming Holdings) of the fully-diluted
membership interests or equity of Gaming Holdings, as measured on
the date of such closing or closings; provided, however, that such
right to purchase shall only be effective with respect to
non-compensatory Financing Transactions (i.e. Consultant shall not
have the right to make anti-dilutive purchases with respect to
ordinary course of business compensatory sales of stock or
membership interests to Company or Gaming Holdings' Employees). Any
such right of Consultant to make an anti-dilutive purchase of stock
hereunder shall be at the most favorable price and on the most
favorable terms and conditions as are provided to any party in the
Financing Transaction. For purposes of this Agreement, "fully
diluted equity of Gaming Holdings" shall mean the aggregate amount
of membership interests (or the aggregate number of shares of all
outstanding common and preferred stock) plus the aggregate amount of
membership interests (or the number of shares of common and
preferred stock) that could be obtained through the exercise or
conversion of rights, options, warrants and convertible securities
(other than employee equity compensation). Notwithstanding the
foregoing, Consultant shall not have the right to make anti-dilutive
purchases (i) in any Financing Transaction in which Consultant's
equity ownership interest in Gaming Holdings is diluted to the same
extent as the indirect equity interest in Gaming Holdings held by
The Trust Under Article Sixth u/w/o Sigmund Sommer or its affiliates
(the "Trust"), or (ii) as a result of any sales or transfers arising
as a result of the death of Mrs. Viola Sommer or for the purpose of
satisfying attendant estate tax liabilities.
(iii) PUT RIGHT.
(A) CERTAIN TERMINATIONS DURING CONSULTING
TERM. In the event that, during the Consulting Term, Richard
J. Goeglein is terminated from his employment with the Company
other than for "Cause" or voluntarily terminates for "Good
Reason" (both as defined in Section 9 of the employment
agreement (as amended) by and between Richard J. Goeglein and
the Company (the "Employment Agreement")),
2
<PAGE>
then Consultant shall have the right (but not the obligation)
to sell any shares issued pursuant to that certain GAI
Contribution and Amendment Agreement dated as of February 26,
1998 between the Company, Gaming Holdings and Consultant (the
"GAI Contribution Agreement") or purchased hereunder back to
Gaming Holdings on the date that is the one year anniversary of
the date of such termination of employment or end of the
Consulting Term (the "Anniversary Date") (so long as the IPO
has not occurred by such date) at a price equal to the fair
market value of such shares on the Anniversary Date, as
determined by an independent appraisal firm mutually agreed to
by and between Gaming Holdings and Consultant, with the costs
of such appraisal being paid by the Company (the "Put Right").
The Put Right must be exercised in writing by Consultant by the
Anniversary Date or it shall become void and without further
effect. If the Put Right is exercised and Gaming Holdings does
not satisfy its obligation to purchase the shares subject to
the Put Right within seven days following receipt of
Consultant's written notice of exercise thereof, the Consultant
shall have the right to require the Company (rather than Gaming
Holdings) to purchase such shares at fair market value. If the
Company purchases such shares, the Company and Gaming Holdings
hereby agree that Gaming Holdings shall promptly thereafter
purchase such shares from the Company for a purchase price of
$1.
(B) LAPSING OF CONSULTING TERM PRIOR TO IPO.
In the event that the IPO has not occurred by the end of the
Consulting Term (the "Consulting Term Lapse Date"), then
Consultant shall have the right (but not the obligation) to
sell any shares issued pursuant to the GAI Contribution
Agreement or purchased hereunder back to Gaming Holdings at a
price equal to the fair market value of such shares on the
Consulting Term Lapse Date, as determined by an independent
appraisal firm mutually agreed to by and between Gaming
Holdings and Consultant, with the costs of such appraisal being
paid by the Company (the "Consulting Term Lapse Put Right").
The Consulting Term Lapse Put Right must be exercised in
writing by Consultant within thirty days following the
Consulting Term Lapse Date or it shall become void and without
further effect. If the Consulting Term Lapse Put Right is
exercised, and Gaming Holdings does not satisfy its obligation
to purchase shares subject to the Consulting Term
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Lapse Put Right within seven days following receipt of
Consultant's written notice of exercise thereof, the Consultant
shall have the right to require the Company (rather than Gaming
Holdings) to purchase such shares at fair market value. If the
Company purchases such shares, the Company and Gaming Holdings
hereby agree that Gaming Holdings shall promptly thereafter
purchase such shares from the Company for a purchase price of
$1.
(iv) LLC DISTRIBUTIONS. While Gaming Holdings remains a
pass-through entity for federal income tax purposes, Gaming Holdings
will periodically distribute cash, to the extent available, to
Consultant in an amount equal to the increase in the cumulative tax
liability of Consultant (or, if Consultant is a pass-through entity
for federal income tax purposes, Consultant's interest holders) with
respect to its interest in Gaming Holdings."
(b) Section 5 of the Consulting Agreement is deleted in its
entirety and replaced with the following;
"5. PIGGYBACK REGISTRATION RIGHTS.
(i) CERTAIN DEFINITIONS. As used in this Section 5, the
following terms shall have the following respective meanings:
"COMMISSION" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the
Securities Act.
"SECURITIES ACT" shall mean the Securities Act of 1933,
as amended, or any similar federal statute and the rules and
regulations of the Commission thereunder, all as the same shall be
in effect at the time.
"REGISTRABLE SECURITIES" means shares issued in respect
of the Membership Interest.
The terms "REGISTER", "REGISTERED" and "REGISTRATION"
refer to a registration effected by preparing and filing a
registration statement in compliance with the Securities Act, and
the declaration or ordering of the effectiveness of such
registration statement.
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"REGISTRATION EXPENSES" shall mean all expenses
incurred by Gaming Holdings in complying with this Section 5,
including, without limitation, all registration, qualification and
filing fees, printing expenses, escrow fees, fees and disbursements
of counsel for Gaming Holdings, blue sky fees and expenses, and the
expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of
Gaming Holdings which shall be paid in any event by the Company or
Gaming Holdings).
"SELLING EXPENSES" shall mean all underwriting
discounts, selling commissions and stock transfer taxes applicable
to the securities registered by the Consultant and all fees and
disbursements of counsel for the Consultant.
(ii) REGISTRATION.
a. NOTICE OF REGISTRATION. If at any time Gaming
Holdings shall determine to register any of its securities, either for
its own account or the account of a security holder, other than (i) a
registration relating solely to employee benefit plans, or (ii) a
registration relating solely to a Commission Rule 145 transaction, Gaming
Holdings will:
b. promptly give to the Consultant written notice
thereof; and
c. include in such registration (and any related
qualification under blue sky laws or other compliance), and in any
underwriting involved therein, all the Registrable Securities specified
in a written request or requests, made within 15 days after receipt of
such written notice from Gaming Holdings, by the Consultant subject to
the provisions of Section 5(iii).
(iii) UNDERWRITING. If the registration of which Gaming
Holdings gives notice is for a registered public offering involving an
underwriting, Gaming Holdings shall so advise the Consultant as a part of
the written notice given pursuant to this Section 5. In such event the
right of the Consultant to registration pursuant to this Section 5 shall
be conditioned upon the Consultant's participation in such underwriting
and the inclusion of the Consultant's Registrable Securities in the
underwriting to the extent provided herein. The Consultant shall
(together with Gaming Holdings and the other holders distributing their
securities through such underwriting) enter into an underwriting
agreement in customary form with the managing
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<PAGE>
underwriter selected for such underwriting by Gaming Holdings.
Notwithstanding any other provision of this Section 5, if the managing
underwriter determines that marketing factors require a limitation of the
number of shares to be underwritten, the underwriter may limit the number
of the Registrable Securities to be included in such registration and
underwriting. In such event, Gaming Holdings shall so advise all holders
distributing their securities through such underwriting, and the number
of shares of Registrable Securities that may be included in the
registration and underwriting shall be allocated among all holders
thereof, including the Consultant, in proportion, as nearly as
practicable, to the respective amounts of equity interests in Gaming
Holdings held by all such holders at the time filing the registration
statement. If the Consultant disapproves of the terms of any such
underwriting, the Consultant may elect to withdraw therefrom by written
notice to Gaming Holdings and the managing underwriter. Any securities
excluded or withdrawn from such underwriting shall be withdrawn from such
registration, but shall not be transferred in a public distribution prior
to ninety (90) days after the effective date of the registration
statement relating thereto.
(iv) EXPENSES OF REGISTRATION. All Registration Expenses
incurred in connection with any registration, qualification or compliance
pursuant to Section 5 shall be borne by Gaming Holdings. Unless
otherwise stated, all Selling Expenses relating to securities registered
by the Consultant shall be borne by the Consultant.
(v) REGISTRATION PROCEDURES. In the case of each
registration, qualification or compliance effect by Gaming Holdings
pursuant to this Section 5, Gaming Holdings will keep the Consultant
advised in writing as to the initiation of each registration,
qualification and compliance and as to the completion thereof. At its
expense Gaming Holdings will furnish such number of prospectuses and
other documents incident thereto as the Consultant from time to time may
reasonably request.
(vi) INDEMNIFICATION.
a. Gaming Holdings will indemnify the Consultant,
each of its officers and directors and the Consultant's legal counsel and
independent accountants, and each person controlling the Consultant
within the meaning of Section 15 of the Securities Act, with respect to
which registration, qualification or compliance has been effected
pursuant to this Section 5, and each underwriter, if any, and each person
who controls any underwriter within the meaning of Section 15 of the
Securities Act, against all expenses, claims, losses, damages and
liabilities (or actions in respect thereof), including any of the
foregoing incurred in settlement of any litiga-
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<PAGE>
tion, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in
any registration statement, prospectus, offering circular or other
document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any omission (or
alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, or any violation
by Gaming Holdings of any rule or regulation promulgated under the
Securities Act applicable to Gaming Holdings and relating to action or
inaction required of Gaming Holdings in connection with any such
registration, qualification or compliance, and will reimburse the
Consultant, each of its officers and directors and the Consultant's legal
counsel and independent accountants, and each person controlling the
Consultant, each such underwriter and each person who controls any such
underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating, preparing or defending any such claim,
loss, damage, liability or action, provided that Gaming Holdings will not
be liable in any such case to the extent that any such claim, loss,
damage, liability or expense arises out of or is based on any untrue
statement or omission or alleged untrue statement or alleged omission,
made in reliance upon and in conformity with written information
furnished to Gaming Holdings by an instrument duly executed by the
Consultant or underwriter and stated to be specifically for use therein.
b. Each party entitled to indemnification under this
Section 5 (the "Indemnified Party") shall give notice to the party
required to provide indemnification (the "Indemnifying Party") promptly
after such Indemnified Party has actual knowledge of any claim as to
which indemnity may be sought. Gaming Holdings shall be entitled to
assume the defense of any such claim or any litigation resulting
therefrom, provided that counsel for the Indemnified Party, who shall
conduct the defense of such claim or litigation, shall be approved by the
Indemnified Party (whose approval shall not unreasonably be withheld).
The failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this
Section 5, unless the Indemnifying Party is materially prejudiced by the
failure to give notice promptly. No Indemnifying Party, in the defense
of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a
release from all liability in respect to such claim or litigation.
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<PAGE>
(vii) INFORMATION BY CONSULTANT. The Consultant shall
furnish to Gaming Holdings such information regarding the Consultant and
the distribution proposed by the Consultant as Gaming Holdings may
request in writing and as shall be required in connection with any
registration, qualification or compliance referred to in this Section 5.
(viii) RULE 144 REPORTING. With a view to making available
the benefits of certain rules and regulations of the Securities and
Exchange Commission which may at any time permit the sale of the
restricted securities to the public without registration, after such time
as a public market exists for the Common Stock of Gaming Holdings, Gaming
Holdings agrees to:
a. Make and keep public information available, as
those terms are understood and defined in Rule 144 under the Securities
Act, at all times after the effective date of the first registration
under the Securities Act filed by Gaming Holdings for an offering of its
securities to the general public;
b. Use its best efforts to then file with the
Commission in a timely manner all reports and other documents required of
Gaming Holdings under the Securities Act and the Securities Exchange Act
of 1934, as amended (at any time after it has become subject to such
reporting requirements); and
c. So long as the Consultant owns any Registrable
Securities, to furnish to the Consultant upon request a written statement
by Gaming Holdings as to its compliance with the reporting requirements
of said Rule 144 (at any time after 90 days after the effective date of
the first registration statement filed by Gaming Holdings for an offering
of its securities to the general public), and of the Securities Act and
of the Securities Exchange Act of 1934 (at any time after it has become
subject to such reporting requirements), a copy of the most recent annual
or quarterly report of Gaming Holdings, and such other reports and
documents of Gaming Holdings as the Consultant may reasonably request in
availing itself of any rule or regulation of the Securities and Exchange
Commission allowing the Consultant to sell any such securities without
registration.
(ix) TRANSFER AND EXPIRATION OF REGISTRATION RIGHTS. The
rights to cause Gaming Holdings to register securities granted the
Consultant under this Section 5 may not be assigned to a transferee or
assignee in connection with the transfer or assignment of shares of the
Restricted Securities. The registration rights granted to the Consultant
under this Section 5
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<PAGE>
shall expire when the Consultant is able to sell all its Registrable
Securities in any three month period."
(c) Sections 9, 10, 11 and 15 of the Consulting Agreement are
hereby amended so that Gaming Holdings has the same rights and
obligations under such Sections as the Company.
4. GAMING LAW. Anything to the contrary herein or in the Consulting
Agreement notwithstanding, the parties hereto agree and acknowledge that they
are subject to and that they shall comply in all respects with the gaming laws
of the State of Nevada, including the Nevada Gaming Control Act and (or any
successor statute) the rules and regulations promulgated by the Nevada Gaming
Commission and the State Gaming Control Board. To the extent anything in this
Agreement or the Consulting Agreement is inconsistent with any gaming laws or
regulations, the gaming laws and regulations shall control.
5. CONFIDENTIALITY. The Consultant (and all of its officers, directors
and employees) acknowledges that the Company has a substantial, legitimate and
continuing interest in the protection of its business relationships with others
including without limitation current and prospective employees, consultants,
advisors, customers, vendors, suppliers, partners or joint venturers, and
financing sources, and in the protection of its Confidential Information, and
has invested substantial sums, time and effort and will continue to invest
substantial sums, time and effort to develop, maintain and protect such
relationships and Information. Accordingly, the Consultant (and all of its
officers, directors and employees) covenants and agrees that during the
Consulting Term (as defined in the Consulting Agreement) and thereafter, the
Consultant (and all of its officers, directors and employees) shall keep secret
and retain in strictest confidence and shall not, without the prior written
consent of the Company, furnish, make available or disclose to any third party
or use for the benefit of itself or any third party any Confidential
Information. Confidential Information is information related to or concerning
the Company or Gaming Holdings and their businesses which is confidential,
proprietary or not generally known to and cannot be readily ascertained through
proper means by persons or entities (including the Company's present or future
competitors), who can obtain any type of value from its disclosure or use.
Confidential Information includes all secret, confidential or proprietary
information, knowledge or data relating to the Company or Gaming Holdings, such
as, without limitation, finances and financing methods, sources, proposals or
plans; operational methods; marketing or development proposals, plans or
strategies; pricing strategies; business or property acquisition or development
proposals or plans; new personnel acquisition proposals or plans; customer lists
and any descriptions or data concerning current or prospective customers;
provided, however, while employed by the Company and in furtherance of the
business and for the benefit of the Company, the Consultant may provide
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<PAGE>
Confidential Information as appropriate to attorneys, accountants, financial
institutions and other persons or entities engaged in business with the Company
or Gaming Holdings.
6. ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of any successor of the Company or Gaming Holdings. Any such successor
of the Company or Gaming Holdings shall be deemed substituted for the Company or
Gaming Holdings under the terms of this Agreement for all purposes. As used
herein, "successor" shall include any person, firm, corporation or other
business entity which at any time, whether by purchase, merger or otherwise,
directly or indirectly acquires all or substantially all of the assets or
business of the Company or Gaming Holdings.
7. ENTIRE AGREEMENT. This Agreement and the Consulting Agreement
represent the entire agreement and understanding between the Company, Gaming
Holdings, Aladdin Holdings, LLC and the Consultant concerning the matters
herein.
8. NO ORAL MODIFICATION, CANCELLATION OR DISCHARGE. This Agreement may
only be amended, cancelled or discharged in writing signed by Consultant, Gaming
Holdings and the Company.
9. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Nevada.
10. CAPITALIZED TERMS. Capitalized terms not defined herein shall have
the meanings described thereto in the Consulting Agreement.
11. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be considered an original, but all such
counterparts shall together constitute but one and the same contract.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first above written.
ALADDIN GAMING, LLC
By: /s/ Ronald Dictrow
-------------------------------
Name: Ronald Dictrow
Title: Executive Vice
President/Secretary
ALADDIN GAMING HOLDINGS, LLC
By: /s/ Ronald Dictrow
-------------------------------
Name: Ronald Dictrow
Title: Executive Vice
President/Secretary
GAI, LLC
By: /s/ Richard J. Goeglein
-------------------------------
Name: Richard J. Goeglein
Title: Principal
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<PAGE>
GOEGLEIN CONTRIBUTION AND
AMENDMENT AGREEMENT
This Contribution and Amendment Agreement (the "Agreement") dated as of
February 26, 1998 is made between and among Aladdin Gaming, LLC (the "Company"),
Aladdin Gaming Holdings, LLC ("Gaming Holdings") and Richard J. Goeglein (the
"Executive").
WHEREAS, the Company, Aladdin Holdings and the Executive entered into an
Employment and Consulting Agreement effective as of January 1, 1997 (and
subsequently amended on January 30, 1998) (as amended, the "Employment and
Consulting Agreement");
WHEREAS, the Company is a subsidiary of Gaming Holdings; and
WHEREAS, the parties wish to enter into this Agreement to provide for the
Executive to contribute his Restricted Membership Interest (as defined in the
Employment and Consulting Agreement) in the Company to Gaming Holdings in return
for restricted membership interest in Gaming Holdings on the terms and
conditions herein and to amend the Employment and Consulting Agreement in
connection therewith.
NOW, THEREFORE, in consideration of the foregoing and the following mutual
covenants and agreements, the parties agree as follows:
1. On the date hereof (a) the Executive shall contribute his two
percent Restricted Membership Interest in the Company to the capital of Gaming
Holdings and (b) in consideration therefor Gaming Holdings shall issue to the
Executive a restricted membership interest in the capital of Gaming Holdings
(the "Holdings Restricted Membership Interest") on the same terms and conditions
as those which governed the Executive's Restricted Membership Interest in the
Company (taking account of the amendments to the Employment and Consulting
Agreement herein and the fact that the Holdings Restricted Membership Interest
has been issued by Gaming Holdings), such Holdings Restricted Membership
Interest representing upon the vesting thereof two percent of the issued and
outstanding common shares of Gaming Holdings, subject to adjustment as provided
in the Employment and Consulting Agreement as amended herein. At the time of
the vesting of the Holdings Restricted Membership Interest Gaming Holdings shall
establish a capital account in respect thereof in the amount of $4 million.
2. The parties agree that Gaming Holdings is hereby added as a party to
the Employment and Consulting Agreement as amended hereby.
<PAGE>
3. Pursuant to Section 29 of the Employment and Consulting Agreement,
Section 4(c)(i) of the Employment and Consulting Agreement is hereby amended to
change the reference to "Restricted Membership Interest" in the last sentence
thereof to "Holdings Restricted Membership Interest (as defined in that certain
Goeglein Contribution and Amendment Agreement dated as of February 26, 1998)."
The Company and Gaming Holdings hereby agree that if the Company purchases the
unvested portion of the Holdings Restricted Membership Interest pursuant to such
amended Section 4(c)(i) of the Employment and Consulting Agreement, Gaming
Holdings shall promptly thereafter purchase such Restricted Membership Interest
from the Company for a purchase price of $1.
4. Pursuant to Section 29 of the Employment and Consulting Agreement,
the Employment and Consulting Agreement is hereby amended as follows:
(a) Sections 4(c)(ii), (iii) and (iv) and (d) of the
Employment and Consulting Agreement are deleted in their entirety and
replaced with the following:
"(ii) ANTI-DILUTION PURCHASES. Upon Gaming Holdings' closing
of a financing transaction or transactions involving the sale of
membership interests, equity (or securities convertible into
membership interests or equity) of Gaming Holdings (a "Financing
Transaction"), and if Executive is employed by the Company upon such
closing date or dates, Executive shall have the right to purchase
that number of such instruments that would result in Executive
owning, in the aggregate (together with all membership interests or
equity or interests already held by Executive at such time which
may vest into membership interests or equity) two percent (subject
to adjustment pursuant to Section 3.6 of the Operating Agreement of
Gaming Holdings) of the fully diluted membership interests or equity
of Gaming Holdings, as measured on the date of such closing or
closings; provided, however, that such right to purchase shall only
be effective with respect to non-compensatory Financing Transactions
(i.e., Executive shall not have the right to make anti-dilutive
purchases with respect to ordinary course of business compensatory
sales of stock or membership interests to Company or Gaming
Holdings' employees). Any such right of Executive to make an
anti-dilutive purchase of stock hereunder shall be at the most
favorable price and on the most favorable terms and conditions as
are provided to any party in the Financing Transaction. For
purposes of this Agreement, "fully diluted equity of Gaming
Holdings" shall mean the aggregate amount of membership interests
(or the aggregate number of shares of
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<PAGE>
all outstanding common and preferred stock) plus the aggregate
amount of membership interests (or the number of shares of common
and preferred stock) that could be obtained through the exercise or
conversion of rights, options, warrants and convertible securities
(other than employee equity compensation). Notwithstanding the
foregoing, Executive shall not have the right to make anti-dilutive
purchases (i) in any Financing Transaction in which his equity
ownership interest in Gaming Holdings is diluted to the same extent
as the indirect equity interest in Gaming Holdings held by The Trust
Under Article Sixth u/w/o Sigmund Sommer or its affiliates (the
"Trust"), or (ii) as a result of any sales or transfers arising as a
result of the death of Mrs. Viola Sommer or for the purpose of
satisfying attendant estate tax liabilities. If, in the event of a
public offering, underwriters take issue with Executive's rights
under this paragraph, the underwriters, Gaming Holdings and
Executive will address such issues on a mutually approved and
reasonable basis, taking into account the interests of all involved.
(iii) PUT RIGHT.
(A) CERTAIN TERMINATIONS DURING EMPLOYMENT TERM. In
the event that, during the Employment Term, Executive is terminated
other than for "Cause" or voluntarily terminates for "Good Reason"
(both as defined in Section 9 hereof), then Executive shall have the
right (but not the obligation) to sell its Holdings Restricted
Membership Interest and any other membership interest (or shares
exchanged for such interests) purchased hereunder back to Gaming
Holdings on the date that is the one year anniversary of the date of
such termination of employment (the "Anniversary Date") (so long as
the IPO has not occurred by such date) at a price equal to the fair
market value of such membership interest or shares on the
Anniversary Date, as determined by an independent appraisal firm
mutually agreed to by and between Gaming Holdings and Executive,
with the costs of such appraisal being paid by the Company (the
"Employment Term Put Right"). The Employment Term Put Right must be
exercised in writing by Executive by the Anniversary Date or it
shall become void and without further effect. If the Employment
Term Put Right is exercised, and Gaming Holdings does not satisfy
its obligation to purchase the membership interest or shares subject
to the Employment Term Put Right within seven days following receipt
of Executive's written notice of exercise thereof, the Executive
shall have the right to require the Company (rather than Gaming
Holdings) to purchase such membership interest or shares at fair
market value.
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If the Company purchases such membership interest or shares, the
Company and Gaming Holdings hereby agree that Gaming Holdings shall
promptly thereafter purchase such membership interest or shares from
the Company for a purchase price of $1.
(B) LAPSING OF EMPLOYMENT TERM PRIOR TO IPO. In the
event that the IPO has not occurred by the end of the Employment
Term (the "Employment Term Lapse Date"), then Executive shall have
the right (but not the obligation) to sell its Holdings Restricted
Membership Interest and any other membership interest purchased
hereunder (or shares exchanged for such interests) back to Gaming
Holdings at a price equal to the fair market value of such
membership interest or shares on the Employment Term Lapse Date, as
determined by an independent appraisal firm mutually agreed to by
and between Gaming Holdings and Executive, with the costs of such
appraisal being paid by the Company (the "Employment Term Lapse Put
Right"). The Employment Term Lapse Put Right must be exercised in
writing by Executive within thirty days following the Employment
Term Lapse Date or it shall become void and without further effect.
If the Employment Term Lapse Put Right is exercised, and Gaming
Holdings does not satisfy its obligation to purchase the membership
interest or shares subject to the Employment Term Lapse Put Right
within seven days following receipt of Executive's written notice of
exercise thereof, the Executive shall have the right to require the
Company (rather than Gaming Holdings) to purchase such membership
interest or shares at fair market value. If the Company purchases
such membership interest or shares, the Company and Gaming Holdings
hereby agree that Gaming Holdings shall promptly thereafter purchase
such membership interest or shares from the Company for a purchase
price of $1.
(iv) LLC DISTRIBUTIONS. While Gaming Holdings remains a
pass-through entity for federal income tax purposes, Gaming Holdings
will periodically distribute cash, to the extent available, to
Executive in an amount equal to the increase in his cumulative tax
liability with respect to his interest in Gaming Holdings.
(d) STOCK OPTION. On the date, if any, upon which Gaming
Holdings (or an affiliate or successor entity of Gaming Holdings)
effects an initial public offering for its securities (the "IPO"),
Executive shall be granted a stock option covering such securities
(the "Stock Option"). The number of shares subject to such option
shall be equal to the number derived by dividing the 125% of the
Base
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<PAGE>
Salary by the "Price to Public" share price in such offering. The
Stock Option per share exercise price shall be equal to the "Price
to Public" share price. The Stock Option, shall qualify, to the
maximum extent permitted by Internal Revenue Code Section 422(d) or
its successor provision, as an "incentive stock option." Subject to
accelerated vesting as set forth elsewhere herein, the Stock Option
shall vest as to one third of the shares subject to the Stock Option
as of the date of grant, and as to an additional one third of such
shares on each anniversary of the date of grant, so as to be 100%
vested on the second anniversary of the date of grant, conditioned
upon Executive's continued employment, consulting or director
relationship with the Company as of each vesting date. Gaming
Holdings agrees to register the Stock Option and the stock issuable
thereunder on a Form-S-8 (or its successor form) with the Securities
and Exchange Commission following the date of grant. In good faith
and giving consideration to Executive's interests, Gaming Holdings,
and Executive will agree upon the registration date(s)."
(b) Section 9(iii) of the Employment and Consulting
Agreement is hereby amended so that references to the "Restricted
Membership Interest" or "any equity compensation granted to Executive by
the Company" are, respectively, changed to the "Holdings Restricted
Membership Interest" and "any equity compensation granted by Gaming
Holdings."
(c) Section 10 of the Employment and Consulting Agreement
is deleted in its entirety and replaced with the following:
"10. CHANGE OF CONTROL In the event of a "Change of
Control" (as defined herein) of Gaming Holdings occurring while
Executive is employed by the Company, Executive's Equity
Compensation shall have its vesting accelerated in full so as to
become 100% vested as of the date of the Change of Control. For
this purpose, "Change of Control" of Gaming Holdings is defined as:
(a) Any "person" as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (other than
a group consisting of the members of the Board as of the Effective
Date and their affiliated investment funds and the partners thereof)
becomes the "beneficial owner" (as defined in Rule 13d-3 under said
Act), directly or indirectly, of securities of Gaming Holdings
representing 50% or more of the total voting power represented by
Gaming Holdings' then outstanding voting securities; provided,
however, that a "Change of Control" will not be deemed to occur
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<PAGE>
under this paragraph with respect to (i) intra-family transfers
among the Sommer family, (ii) sales or transfers arising as a result
of the death of Mrs. Viola Sommer or for the purpose of satisfying
attendant estate tax liabilities or (iii) adjustments in membership
interests pursuant to Article III of the Operating Agreement of
Gaming Holdings; or
(b) The consummation of a merger or consolidation of Gaming
Holdings with any other corporation other than a merger or
consolidation which would result in the voting securities of Gaming
Holdings outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least fifty
percent (50%) of the total voting power represented by the voting
securities of Gaming Holdings or such surviving entity outstanding
immediately after such merger or consolidation; or
(c) A change in the composition of the Board of Directors
of Gaming Holdings occurring within a two-year period, as a result
of which fewer than a majority of the directors are Incumbent
Directors. "Incumbent Directors" shall mean directors who either
(A) are directors of Gaming Holdings as of the date hereof, or (B)
are elected, or nominated for election, to the Board of Directors of
Gaming Holdings with the affirmative votes of at least a majority of
the Incumbent Directors at the time of such election or nomination
(but shall not include an individual whose election or nomination is
in connection with an actual or threatened proxy contest relating to
the election of directors to Gaming Holdings); or
(d) The approval by the Board of a plan of complete
liquidation of Gaming Holdings or of an agreement for the sale or
disposition by Gaming Holdings of all or substantially all of Gaming
Holdings' assets."
(d) Sections 22, 24, 25 and 29 of the Employment and
Consulting Agreement are hereby amended so that Gaming Holdings has the
same rights and obligations under such Sections as the Company.
5. GAMING LAW. Anything to the contrary herein or in the Employment and
Consulting Agreement notwithstanding, the parties hereto agree and acknowledge
that they are subject to and that they shall comply in all respects with the
gaming laws of the State of Nevada, including the Nevada Gaming Control Act and
(or any successor statute) the rules and regulations promulgated by the Nevada
6
<PAGE>
Gaming Commission and the State Gaming Control Board. To the extent anything in
this Agreement or the Employment and Consulting Agreement is inconsistent with
any gaming laws or regulations, the gaming laws and regulations shall control.
6. CONFIDENTIALITY. The Executive acknowledges that the Company has a
substantial, legitimate and continuing interest in the protection of its
business relationships with others including without limitation current and
prospective employees, consultants, advisors, customers, vendors, suppliers,
partners or joint venturers, and financing sources, and in the protection of its
Confidential Information, and has invested substantial sums, time and effort and
will continue to invest substantial sums, time and effort to develop, maintain
and protect such relationships and Information. Accordingly, Executive
covenants and agrees that during the Employment Term (as defined in the
Employment and Consulting Agreement) and thereafter, the Executive shall keep
secret and retain in strictest confidence and shall not, without the prior
written consent of the Company, furnish, make available or disclose to any third
party or use for the benefit of himself or any third party any Confidential
Information. Confidential Information is information related to or concerning
the Company or Gaming Holdings and their businesses which is confidential,
proprietary or not generally known to and cannot be readily ascertained through
proper means by persons or entities (including the Company's present or future
competitors), who can obtain any type of value from its disclosure or use.
Confidential Information includes all secret, confidential or proprietary
information, knowledge or data relating to the Company or Gaming Holdings, such
as, without limitation, finances and financing methods, sources, proposals or
plans; operational methods; marketing or development proposals, plans or
strategies; pricing strategies; business or property acquisition or development
proposals or plans; new personnel acquisition proposals or plans; customer lists
and any descriptions or data concerning current or prospective customers;
provided, however, while employed by the Company and in furtherance of the
business and for the benefit of the Company, Executive may provide Confidential
Information as appropriate to attorneys, accountants, financial institutions and
other persons or entities engaged in business with the Company or Gaming
Holdings.
7. ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of any successor of the Company or Gaming Holdings. Any such successor
of the Company or Gaming Holdings shall be deemed substituted for the Company or
Gaming Holdings under the terms of this Agreement for all purposes. As used
herein, "successor" shall include any person, firm, corporation or other
business entity which at any time, whether by purchase, merger or otherwise,
directly or indirectly acquires all or substantially all of the assets or
business of the Company or Gaming Holdings.
7
<PAGE>
8. ENTIRE AGREEMENT. This Agreement and the Employment and Consulting
Agreement represent the entire agreement and understanding between the Company,
Gaming Holdings, Aladdin Holdings, LLC and the Executive concerning the matters
herein.
9. NO ORAL MODIFICATION, CANCELLATION OR DISCHARGE. This Agreement may
only be amended, cancelled or discharged in writing signed by the Executive,
Gaming Holdings and the Company.
10. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Nevada.
11. CAPITALIZED TERMS. Capitalized terms not defined herein shall have
the meanings described thereto in the Employment and Consulting Agreement.
12. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be considered an original, but all such
counterparts shall together constitute but one and the same contract.
8
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first above written.
ALADDIN GAMING, LLC
By: /s/ Ronald Dictrow
-------------------------------
Name: Ronald Dictrow
Title: Executive Vice
President/Secretary
ALADDIN GAMING HOLDINGS, LLC
By: /s/ Ronald Dictrow
-------------------------------
Name: Ronald Dictrow
Title: Executive Vice
President/Secretary
/s/ Richard J. Goeglein
-------------------------------
Name: RICHARD J. GOEGLEIN
Title: Chief Executive Officer
9
<PAGE>
MCKENNON CONTRIBUTION AND
AMENDMENT AGREEMENT
This Contribution and Amendment Agreement (the "Agreement") dated as of
February 26, 1998 is made between and among Aladdin Gaming, LLC (the "Company"),
Aladdin Gaming Holdings, LLC ("Gaming Holdings") and James H. McKennon (the
"Executive").
WHEREAS, the Company, Aladdin Holdings and the Executive entered into an
Employment Agreement effective as of April 15, 1997 (the "Employment
Agreement");
WHEREAS, the Company is a subsidiary of Gaming Holdings; and
WHEREAS, the parties wish to enter into this Agreement to provide for the
Executive to contribute his Restricted Membership Interest (as defined in the
Employment Agreement) in the Company to Gaming Holdings in return for a
restricted membership interest in Gaming Holdings on the terms and conditions
herein and to amend the Employment and Consulting Agreement in connection
therewith.
NOW, THEREFORE, in consideration of the foregoing and the following mutual
covenants and agreements, the parties agree as follows:
1. On the date hereof (a) the Executive shall contribute his one
percent Restricted Membership Interest in the Company to the capital of Gaming
Holdings and (b) in consideration therefor Gaming Holdings shall issue to the
Executive a restricted membership interest in the capital of Gaming Holdings
(the "Holdings Restricted Membership Interest") on the same terms and conditions
as those which governed the Executive's Restricted Membership Interest in the
Company (taking account of the amendments to the Employment Agreement herein and
the fact that the Holdings Restricted Membership Interest has been issued by
Gaming Holdings), such Holdings Restricted Membership Interest representing upon
the vesting thereof one percent of the issued and outstanding common shares of
Gaming Holdings, subject to adjustment as provided in the Employment Agreement
as amended herein. At the time of any vesting of any Holdings Restricted
Membership Interest Gaming Holdings shall establish or increase the capital
account in respect thereof in the amount of the proportion of the Holding
Restricted Membership Interest that is vesting at such time applied against $2
million.
2. The parties agree that Gaming Holdings is hereby added as a party to
the Employment Agreement as amended hereby.
<PAGE>
3. Pursuant to Section 9(d) of the Employment Agreement, Sections
4(f)(1) and 4(f)(3) of the Employment Agreement are hereby amended to change the
reference to "Restricted Membership Interest" therein to "Holdings Restricted
Membership Interest" (as defined in that certain McKennon Contribution and
Amendment Agreement dated as of February 26, 1998). The Company and Gaming
Holdings hereby agree that if the Company purchases the unvested portion of the
Holdings Restricted Membership Interest pursuant to such amended Section 4(f)(3)
of the Employment Agreement, Gaming Holdings shall promptly thereafter purchase
such Holdings Restricted Membership Interest from the Company for a purchase
price of $1.
4. Pursuant to Section 9(d) of the Employment Agreement, the Employment
Agreement is hereby amended as follows:
(a) Section 4(f) (4) of the Employment Agreement is deleted
in its entirety and replaced with the following:
"(4) While Gaming Holdings remains a pass-through entity for
federal income tax purposes, Gaming Holdings will periodically
distribute cash, to the extent available, to Executive in an
amount equal to the increase in his cumulative tax liability
with respect to his interest in Gaming Holdings and Gaming
Holdings may, at the discretion of the Gaming Holdings Board,
periodically distribute additional cash, to the extent
available, to Executive to satisfy any additional tax liability
arising from his interest in Gaming Holdings in excess of
distributions otherwise receivable."
(b) Sections 4(g) and (h) of the Employment Agreement are
deleted in their entirety and replaced with the following:
"g. EXECUTIVE'S PUT RIGHT. Executive has the right but not the
obligation to sell his vested Holdings Restricted Membership
Interest (or shares exchanged by such Interest) back to Gaming
Holdings or to the Company only in the following circumstances:
(1) Gaming Holdings' IPO has not occurred upon expiration of
the original four-year term of this Agreement and Company does not
continue to employ Executive for reason(s) not constituting Cause as
defined in Section 5(d)(1-4) hereof or the Executive does not
continue his employment at the request of the Company for reason(s)
constituting Good Reason as defined in Section 5(d)(5). This Put
2
<PAGE>
right must be exercised in writing by Executive within thirty (30)
days of the expiration of the four-year term hereunder or it shall
become void and without further effect.
(2) Gaming Holdings' IPO has not occurred upon Executive
becoming 100% vested in Holdings Restricted Membership Interest.
This Put right must be exercised in writing by Executive within
thirty days of Executive being 100% vested or it shall become void
and without further effect.
The Put purchase price is the fair market value of such
Interest (or shares) on the Valuation Date. Under this Agreement,
the Valuation Date is: (i) the expiration of the four-year term of
this Agreement, in the event of a Put under Section 4(g)(i), or (ii)
the date Executive becomes 100% vested, in the event of a Put under
Section 4(g)(2). In either case of (i) or (ii) in the preceding
sentence, the fair market value shall be determined by an
independent appraisal firm mutually agreed to by Gaming Holdings and
Executive, with the cost of such appraisal being paid by the
Company. If Executive exercises the Put hereunder, and Gaming
Holdings does not satisfy its obligation to purchase the membership
interest or shares within seven days of Executive's written notice
of exercise of the Put, Executive shall have the right to require
the Company (rather than gaming Holdings) to purchase such
membership interest or shares at fair market value. If the Company
purchases such membership interest or shares, the Company and Gaming
Holdings hereby agree that Gaming Holdings shall promptly
thereafter purchase such membership interest or shares from the
Company for a purchase price of $1.
h. COMPANY'S CALL RIGHT. If, prior to the date of the Company's
IPO, the Company terminates Executive for Cause as defined in
Section 5(d) hereof (including Executive quitting without Good
Reason under Section 5(d)(5)), then Gaming Holdings and the Company
shall have the right but not the obligation to purchase any vested
membership interest (or shares exchanged by such interest) within
thirty days of the Termination Date at a price equal to two times
the price Executive originally paid Gaming Holdings for such
membership interest. The Call right must be exercised in writing by
Gaming Holdings or the Company within thirty days of the Termination
Date or it shall become void and without further effect. If Gaming
Holdings or the Company exercises the Call hereunder, Executive must
tender such membership interest or shares and otherwise complete the
transaction hereunder within thirty days of Gaming Holdings' or the
3
<PAGE>
Company's exercise of the Call. If the Company purchases such
membership interest or shares, the Company and Gaming Holdings
hereby agree that Gaming Holdings shall promptly thereafter purchase
such membership interest or shares from the Company for a purchase
price of $1."
(c) Sections 6(a), 9(a), (b), (d), (h) and (k) of the
Employment Agreement are hereby amended so that Gaming Holdings has the
same rights and obligations under such Sections as the Company.
5. GAMING LAW. Anything to the contrary herein or in the Employment and
Consulting Agreement notwithstanding, the parties hereto agree and acknowledge
that they are subject to and that they shall comply in all respects with the
gaming laws of the State of Nevada, including the Nevada Gaming Control Act and
(or any successor statute) the rules and regulations promulgated by the Nevada
Gaming Commission and the State Gaming Control Board. To the extent anything in
this Agreement or the Employment Agreement is inconsistent with any gaming laws
or regulations, the gaming laws and regulations shall control.
6. ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of any successor of the Company or Gaming Holdings. Any such successor
of the Company or Gaming Holdings shall be deemed substituted for the Company or
Gaming Holdings under the terms of this Agreement for all purposes. As used
herein, "successor" shall include any person, firm, corporation or other
business entity which at any time, whether by purchase, merger or otherwise,
directly or indirectly acquires all or substantially all of the assets or
business of the Company or Gaming Holdings and supercede any prior
understandings or agreements between the parties hereto and Aladdin Holdings,
LLC..
7. ENTIRE AGREEMENT. This Agreement and the Employment Agreement
represent the entire agreement and understanding between the Company, Gaming
Holdings, Aladdin Holdings, LLC and the Executive concerning the matters herein
and supercede any prior understandings or agreements between the parties hereto
and Aladdin Holdings, LLC.
8. NO ORAL MODIFICATION, CANCELLATION OR DISCHARGE. This Agreement may
only be amended, cancelled or discharged in writing signed by the Executive,
Gaming Holdings and the Company.
9. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Nevada.
4
<PAGE>
10. CAPITALIZED TERMS. Capitalized terms not defined herein shall have
the meanings described thereto in the Employment Agreement.
11. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be considered an original, but all such
counterparts shall together constitute but one and the same contract.
5
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first above written.
ALADDIN GAMING, LLC
By: /s/ Ronald Dictrow
-------------------------------
Name: Ronald Dictrow
Title: Executive Vice
President/Secretary
ALADDIN GAMING HOLDINGS, LLC
By: /s/ Ronald Dictrow
-------------------------------
Name: Ronald Dictrow
Title: Executive Vice
President/Secretary
/s/ James H. Mckennon
-------------------------------
Name: JAMES H. MCKENNON
Title: Senior Vice President
6
<PAGE>
KLERK CONTRIBUTION AND
AMENDMENT AGREEMENT
This Contribution and Amendment Agreement (the "Agreement") dated as of
February 26, 1998 is made between and among Aladdin Gaming, LLC (the "Company"),
Aladdin Gaming Holdings, LLC ("Gaming Holdings") and Cornelius T. Klerk (the
"Executive").
WHEREAS, the Company, Aladdin Holdings and the Executive entered into an
Employment Agreement effective as of July 1, 1997 (the "Employment Agreement");
WHEREAS, the Company is a subsidiary of Gaming Holdings; and
WHEREAS, the parties wish to enter into this Agreement to provide for the
Executive to contribute his Restricted Membership Interest (as defined in the
Employment Agreement) in the Company to Gaming Holdings in return for a
restricted membership interest in Gaming Holdings on the terms and conditions
herein and to amend the Employment and Consulting Agreement in connection
therewith.
NOW, THEREFORE, in consideration of the foregoing and the following mutual
covenants and agreements, the parties agree as follows:
1. On the date hereof (a) the Executive shall contribute his 0.75%
Restricted Membership Interest in the Company to the capital of Gaming Holdings
and (b) in consideration therefor Gaming Holdings shall issue to the Executive a
restricted membership interest in the capital of Gaming Holdings (the "Holdings
Restricted Membership Interest") on the same terms and conditions as those which
governed the Executive's Restricted Membership Interest in the Company (taking
account of the amendments to the Employment Agreement herein and the fact that
the Holdings Restricted Membership Interest has been issued by Gaming Holdings),
such Holdings Restricted Membership Interest representing upon the vesting
thereof 0.75% of the issued and outstanding common shares of Gaming Holdings,
subject to adjustment as provided in the Employment Agreement as amended herein.
At the time of any vesting of any Holdings Restricted Membership Interest Gaming
Holdings shall establish or increase the capital account in respect thereof in
the amount of the proportion of the Holding Restricted Membership Interest that
is vesting at such time applied against $1.5 million.
2. The parties agree that Gaming Holdings is hereby added as a party to
the Employment Agreement as amended hereby.
<PAGE>
3. Pursuant to Section 9(d) of the Employment Agreement, Sections
4(f)(1) and 4(f)(3) of the Employment Agreement are hereby amended to change the
reference to "Restricted Membership Interest" therein to "Holdings Restricted
Membership Interest" (as defined in that certain Klerk Contribution and
Amendment Agreement dated as of February 26, 1998). The Company and Gaming
Holdings hereby agree that if the Company purchases the unvested portion of the
Holdings Restricted Membership Interest pursuant to such amended Section 4(f)(3)
of the Employment Agreement, Gaming Holdings shall promptly thereafter purchase
such Holdings Restricted Membership Interest from the Company for a purchase
price of $1.
4. Pursuant to Section 9(d) of the Employment Agreement, the Employment
Agreement is hereby amended as follows:
(a) Section 4(f)(4) of the Employment Agreement is deleted
in its entirety and replaced with the following:
"(4) While Gaming Holdings remains a pass-through entity for
federal income tax purposes, Gaming Holdings will periodically
distribute cash, to the extent available, to Executive in an
amount equal to the increase in his cumulative tax liability
with respect to his interest in Gaming Holdings and Gaming
Holdings may, at the discretion of the Gaming Holdings Board,
periodically distribute additional cash, to the extent
available, to Executive to satisfy any additional tax liability
arising from his interest in Gaming Holdings in excess of
distributions otherwise receivable."
(b) Sections 4(g) and (h) of the Employment Agreement are
deleted in their entirety and replaced with the following:
"g. EXECUTIVE'S PUT RIGHT. Executive has the right but not the
obligation to sell his vested Holdings Restricted Membership
Interest (or shares exchanged by such Interest) back to Gaming
Holdings or to the Company only in the following circumstances:
(1) Gaming Holdings' IPO has not occurred upon expiration of
the original four-year term of this Agreement and Company does not
continue to employ Executive for reason(s) not constituting Cause as
defined in Section 5(d)(1-4) hereof or the Executive does not
continue his employment at the request of the Company for reason(s)
constituting Good Reason as defined in Section 5(d)(5). This Put
2
<PAGE>
right must be exercised in writing by Executive within thirty (30)
days of the expiration of the four-year term hereunder or it shall
become void and without further effect.
(2) Gaming Holdings' IPO has not occurred upon Executive
becoming 100% vested in Holdings Restricted Membership Interest.
This Put right must be exercised in writing by Executive within
thirty days of Executive being 100% vested or it shall become void
and without further effect.
The Put purchase price is the fair market value of such
Interest (or shares) on the Valuation Date. Under this Agreement,
the Valuation Date is: (i) the expiration of the four-year term of
this Agreement, in the event of a Put under Section 4(g)(i), or (ii)
the date Executive becomes 100% vested, in the event of a Put under
Section 4(g)(2). In either case of (i) or (ii) in the preceding
sentence, the fair market value shall be determined by an
independent appraisal firm mutually agreed to by Gaming Holdings and
Executive, with the cost of such appraisal being paid by the
Company. If Executive exercises the Put hereunder, and Gaming
Holdings does not satisfy its obligation to purchase the membership
interest or shares within seven days of Executive's written notice
of exercise of the Put, Executive shall have the right to require
the Company (rather than gaming Holdings) to purchase such
membership interest or shares at fair market value. If the Company
purchases such membership interest or shares, the Company and Gaming
Holdings hereby agree that Gaming Holdings shall promptly
thereafter purchase such membership interest or shares from the
Company for a purchase price of $1.
h. COMPANY'S CALL RIGHT. If, prior to the date of the Company's
IPO, the Company terminates Executive for Cause as defined in
Section 5(d) hereof (including Executive quitting without Good
Reason under Section 5(d)(5)), then Gaming Holdings and the Company
shall have the right but not the obligation to purchase any vested
membership interest (or shares exchanged by such interest) within
thirty days of the Termination Date at a price equal to two times
the price Executive originally paid Gaming Holdings for such
membership interest. The Call right must be exercised in writing by
Gaming Holdings or the Company within thirty days of the Termination
Date or it shall become void and without further effect. If Gaming
Holdings or the Company exercises the Call hereunder, Executive must
tender such membership interest or shares and otherwise complete the
transaction hereunder within thirty days of Gaming Holdings' or the
3
<PAGE>
Company's exercise of the Call. If the Company purchases such
membership interest or shares, the Company and Gaming Holdings
hereby agree that Gaming Holdings shall promptly thereafter purchase
such membership interest or shares from the Company for a purchase
price of $1."
(c) Sections 6(a), 9(a), (b), (d), (h) and (k) of the
Employment Agreement are hereby amended so that Gaming Holdings has the
same rights and obligations under such Sections as the Company.
5. GAMING LAW. Anything to the contrary herein or in the Employment and
Consulting Agreement notwithstanding, the parties hereto agree and acknowledge
that they are subject to and that they shall comply in all respects with the
gaming laws of the State of Nevada, including the Nevada Gaming Control Act and
(or any successor statute) the rules and regulations promulgated by the Nevada
Gaming Commission and the State Gaming Control Board. To the extent anything in
this Agreement or the Employment Agreement is inconsistent with any gaming laws
or regulations, the gaming laws and regulations shall control.
6. ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of any successor of the Company or Gaming Holdings. Any such successor
of the Company or Gaming Holdings shall be deemed substituted for the Company or
Gaming Holdings under the terms of this Agreement for all purposes. As used
herein, "successor" shall include any person, firm, corporation or other
business entity which at any time, whether by purchase, merger or otherwise,
directly or indirectly acquires all or substantially all of the assets or
business of the Company or Gaming Holdings and supercede any prior
understandings or agreements between the parties hereto and Aladdin Holdings,
LLC.
7. ENTIRE AGREEMENT. This Agreement and the Employment Agreement
represent the entire agreement and understanding between the Company, Gaming
Holdings, Aladdin Holdings, LLC and the Executive concerning the matters herein
and supercede any prior understandings or agreements between the parties hereto
and Aladdin Holdings, LLC.
8. NO ORAL MODIFICATION, CANCELLATION OR DISCHARGE. This Agreement may
only be amended, cancelled or discharged in writing signed by the Executive,
Gaming Holdings and the Company.
9. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Nevada.
4
<PAGE>
10. CAPITALIZED TERMS. Capitalized terms not defined herein shall have
the meanings described thereto in the Employment Agreement.
11. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be considered an original, but all such
counterparts shall together constitute but one and the same contract.
5
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first above written.
ALADDIN GAMING, LLC
By: /s/ Ronald Dictrow
-------------------------------
Name: Ronald Dictrow
Title: Executive Vice
President/Secretary
ALADDIN GAMING HOLDINGS, LLC
By: /s/ Ronald Dictrow
-------------------------------
Name: Ronald Dictrow
Title: Executive Vice
President/Secretary
/s/ Cornelius T. Klerk
-------------------------------
CORNELIUS T. KLERK
6
<PAGE>
GALATI CONTRIBUTION AND
AMENDMENT AGREEMENT
This Contribution and Amendment Agreement (the "Agreement") dated as of
February 26, 1998 is made between and among Aladdin Gaming, LLC (the "Company"),
Aladdin Gaming Holdings, LLC ("Gaming Holdings") and Lee Galati (the
"Executive").
WHEREAS, the Company, Aladdin Holdings and the Executive entered into an
Employment Agreement effective as of July 1, 1997 (the "Employment Agreement");
WHEREAS, the Company is a subsidiary of Gaming Holdings; and
WHEREAS, the parties wish to enter into this Agreement to provide for the
Executive to contribute his Restricted Membership Interest (as defined in the
Employment Agreement) in the Company to Gaming Holdings in return for a
restricted membership interest in Gaming Holdings on the terms and conditions
herein and to amend the Employment and Consulting Agreement in connection
therewith.
NOW, THEREFORE, in consideration of the foregoing and the following mutual
covenants and agreements, the parties agree as follows:
1. On the date hereof (a) the Executive shall contribute his 0.25%
Restricted Membership Interest in the Company to the capital of Gaming Holdings
and (b) in consideration therefor Gaming Holdings shall issue to the Executive a
restricted membership interest in the capital of Gaming Holdings (the "Holdings
Restricted Membership Interest") on the same terms and conditions as those which
governed the Executive's Restricted Membership Interest in the Company (taking
account of the amendments to the Employment Agreement herein and the fact that
the Holdings Restricted Membership Interest has been issued by Gaming Holdings),
such Holdings Restricted Membership Interest representing upon the vesting
thereof 0.25% of the issued and outstanding common shares of Gaming Holdings,
subject to adjustment as provided in the Employment Agreement as amended herein.
At the time of any vesting of any Holdings Restricted Membership Interest Gaming
Holdings shall establish or increase the capital account in respect thereof in
the amount of the proportion of the Holding Restricted Membership Interest that
is vesting at such time applied against $0.5 million.
2. The parties agree that Gaming Holdings is hereby added as a party to
the Employment Agreement as amended hereby.
<PAGE>
3. Pursuant to Section 9(d) of the Employment Agreement, Sections
4(f)(1) and 4(f)(3) of the Employment Agreement are hereby amended to change the
reference to "Restricted Membership Interest" therein to "Holdings Restricted
Membership Interest" (as defined in that certain Galati Contribution and
Amendment Agreement dated as of February 26, 1998). The Company and Gaming
Holdings hereby agree that if the Company purchases the unvested portion of the
Holdings Restricted Membership Interest pursuant to such amended Section 4(f)(3)
of the Employment Agreement, Gaming Holdings shall promptly thereafter purchase
such Holdings Restricted Membership Interest from the Company for a purchase
price of $1.
4. Pursuant to Section 9(d) of the Employment Agreement, the Employment
Agreement is hereby amended as follows:
(a) Section 4(f)(4) of the Employment Agreement is deleted
in its entirety and replaced with the following:
"(4) While Gaming Holdings remains a pass-through entity for
federal income tax purposes, Gaming Holdings will periodically
distribute cash, to the extent available, to Executive in an
amount equal to the increase in his cumulative tax liability
with respect to his interest in Gaming Holdings and Gaming
Holdings may, at the discretion of the Gaming Holdings Board,
periodically distribute additional cash, to the extent
available, to Executive to satisfy any additional tax liability
arising from his interest in Gaming Holdings in excess of
distributions otherwise receivable."
(b) Sections 4(g) and (h) of the Employment Agreement are
deleted in their entirety and replaced with the following:
"g. EXECUTIVE'S PUT RIGHT. Executive has the right but not the
obligation to sell his vested Holdings Restricted Membership
Interest (or shares exchanged by such Interest) back to Gaming
Holdings or to the Company only in the following circumstances:
(1) Gaming Holdings' IPO has not occurred upon expiration of
the original four-year term of this Agreement and Company does not
continue to employ Executive for reason(s) not constituting Cause as
defined in Section 5(d)(1-4) hereof or the Executive does not
continue his employment at the request of the Company for reason(s)
constituting Good Reason as defined in Section 5(d)(5). This Put
2
<PAGE>
right must be exercised in writing by Executive within thirty (30)
days of the expiration of the four-year term hereunder or it shall
become void and without further effect.
(2) Gaming Holdings' IPO has not occurred upon Executive
becoming 100% vested in Holdings Restricted Membership Interest.
This Put right must be exercised in writing by Executive within
thirty days of Executive being 100% vested or it shall become void
and without further effect.
The Put purchase price is the fair market value of such
Interest (or shares) on the Valuation Date. Under this Agreement,
the Valuation Date is: (i) the expiration of the four-year term of
this Agreement, in the event of a Put under Section 4(g)(i), or (ii)
the date Executive becomes 100% vested, in the event of a Put under
Section 4(g)(2). In either case of (i) or (ii) in the preceding
sentence, the fair market value shall be determined by an
independent appraisal firm mutually agreed to by Gaming Holdings and
Executive, with the cost of such appraisal being paid by the
Company. If Executive exercises the Put hereunder, and Gaming
Holdings does not satisfy its obligation to purchase the membership
interest or shares within seven days of Executive's written notice
of exercise of the Put, Executive shall have the right to require
the Company (rather than gaming Holdings) to purchase such
membership interest or shares at fair market value. If the Company
purchases such membership interest or shares, the Company and Gaming
Holdings hereby agree that Gaming Holdings shall promptly
thereafter purchase such membership interest or shares from the
Company for a purchase price of $1.
h. COMPANY'S CALL RIGHT. If, prior to the date of the Company's
IPO, the Company terminates Executive for Cause as defined in
Section 5(d) hereof (including Executive quitting without Good
Reason under Section 5(d)(5)), then Gaming Holdings and the Company
shall have the right but not the obligation to purchase any vested
membership interest (or shares exchanged by such interest) within
thirty days of the Termination Date at a price equal to two times
the price Executive originally paid Gaming Holdings for such
membership interest. The Call right must be exercised in writing by
Gaming Holdings or the Company within thirty days of the Termination
Date or it shall become void and without further effect. If Gaming
Holdings or the Company exercises the Call hereunder, Executive must
tender such membership interest or shares and otherwise complete the
transaction hereunder within thirty days of Gaming Holdings' or the
3
<PAGE>
Company's exercise of the Call. If the Company purchases such
membership interest or shares, the Company and Gaming Holdings
hereby agree that Gaming Holdings shall promptly thereafter purchase
such membership interest or shares from the Company for a purchase
price of $1."
(c) Sections 6(a), 9(a), (b), (d), (h) and (k) of the
Employment Agreement are hereby amended so that Gaming Holdings has the
same rights and obligations under such Sections as the Company.
5. GAMING LAW. Anything to the contrary herein or in the Employment and
Consulting Agreement notwithstanding, the parties hereto agree and acknowledge
that they are subject to and that they shall comply in all respects with the
gaming laws of the State of Nevada, including the Nevada Gaming Control Act and
(or any successor statute) the rules and regulations promulgated by the Nevada
Gaming Commission and the State Gaming Control Board. To the extent anything in
this Agreement or the Employment Agreement is inconsistent with any gaming laws
or regulations, the gaming laws and regulations shall control.
6. ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of any successor of the Company or Gaming Holdings. Any such successor
of the Company or Gaming Holdings shall be deemed substituted for the Company or
Gaming Holdings under the terms of this Agreement for all purposes. As used
herein, "successor" shall include any person, firm, corporation or other
business entity which at any time, whether by purchase, merger or otherwise,
directly or indirectly acquires all or substantially all of the assets or
business of the Company or Gaming Holdings and supercede any prior
understandings or agreements between the parties hereto and Aladdin Holdings,
LLC.
7. ENTIRE AGREEMENT. This Agreement and the Employment Agreement
represent the entire agreement and understanding between the Company, Gaming
Holdings, Aladdin Holdings, LLC and the Executive concerning the matters herein
and supercede any prior understandings or agreements between the parties hereto
and Aladdin Holdings, LLC.
8. NO ORAL MODIFICATION, CANCELLATION OR DISCHARGE. This Agreement may
only be amended, cancelled or discharged in writing signed by the Executive,
Gaming Holdings and the Company.
9. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Nevada.
4
<PAGE>
10. CAPITALIZED TERMS. Capitalized terms not defined herein shall have
the meanings described thereto in the Employment Agreement.
11. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be considered an original, but all such
counterparts shall together constitute but one and the same contract.
5
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first above written.
ALADDIN GAMING, LLC
By: /s/ Ronald Dictrow
-------------------------------
Name: Ronald Dictrow
Title: Executive Vice
President/Secretary
ALADDIN GAMING HOLDINGS, LLC
By: /s/ Ronald Dictrow
-------------------------------
Name: Ronald Dictrow
Title: Executive Vice
President/Secretary
/s/ Lee Galati
-------------------------------
Name: Lee Galati
Title: Senior Vice President/Human
Resources
6
<PAGE>
RUEDA CONTRIBUTION AND
AMENDMENT AGREEMENT
This Contribution and Amendment Agreement (the "Agreement") dated as of
February 26, 1998 is made between and among Aladdin Gaming, LLC (the "Company"),
Aladdin Gaming Holdings, LLC ("Gaming Holdings") and Jose A. Rueda (the
"Executive").
WHEREAS, the Company, Aladdin Holdings and the Executive entered into an
Employment Agreement effective as of July 1, 1997 (the "Employment Agreement");
WHEREAS, the Company is a subsidiary of Gaming Holdings; and
WHEREAS, the parties wish to enter into this Agreement to provide for the
Executive to contribute his Restricted Membership Interest (as defined in the
Employment Agreement) in the Company to Gaming Holdings in return for a
restricted membership interest in Gaming Holdings on the terms and conditions
herein and to amend the Employment and Consulting Agreement in connection
therewith.
NOW, THEREFORE, in consideration of the foregoing and the following mutual
covenants and agreements, the parties agree as follows:
1. On the date hereof (a) the Executive shall contribute his 0.75%
Restricted Membership Interest in the Company to the capital of Gaming Holdings
and (b) in consideration therefor Gaming Holdings shall issue to the Executive a
restricted membership interest in the capital of Gaming Holdings (the "Holdings
Restricted Membership Interest") on the same terms and conditions as those which
governed the Executive's Restricted Membership Interest in the Company (taking
account of the amendments to the Employment Agreement herein and the fact that
the Holdings Restricted Membership Interest has been issued by Gaming Holdings),
such Holdings Restricted Membership Interest representing upon the vesting
thereof 0.75% of the issued and outstanding common shares of Gaming Holdings,
subject to adjustment as provided in the Employment Agreement as amended herein.
At the time of any vesting of any Holdings Restricted Membership Interest Gaming
Holdings shall establish or increase the capital account in respect thereof in
the amount of the proportion of the Holding Restricted Membership Interest that
is vesting at such time applied against $1.5 million.
2. The parties agree that Gaming Holdings is hereby added as a party to
the Employment Agreement as amended hereby.
<PAGE>
3. Pursuant to Section 9(d) of the Employment Agreement, Sections
4(f)(1) and 4(f)(3) of the Employment Agreement are hereby amended to change the
reference to "Restricted Membership Interest" therein to "Holdings Restricted
Membership Interest" (as defined in that certain Rueda Contribution and
Amendment Agreement dated as of February 26, 1998). The Company and Gaming
Holdings hereby agree that if the Company purchases the unvested portion of the
Holdings Restricted Membership Interest pursuant to such amended Section 4(f)(3)
of the Employment Agreement, Gaming Holdings shall promptly thereafter purchase
such Holdings Restricted Membership Interest from the Company for a purchase
price of $1.
4. Pursuant to Section 9(d) of the Employment Agreement, the Employment
Agreement is hereby amended as follows:
(a) Section 4(f)(4) of the Employment Agreement is deleted
in its entirety and replaced with the following:
"(4) While Gaming Holdings remains a pass-through entity for
federal income tax purposes, Gaming Holdings will periodically
distribute cash, to the extent available, to Executive in an
amount equal to the increase in his cumulative tax liability
with respect to his interest in Gaming Holdings and Gaming
Holdings may, at the discretion of the Gaming Holdings Board,
periodically distribute additional cash, to the extent
available, to Executive to satisfy any additional tax liability
arising from his interest in Gaming Holdings in excess of
distributions otherwise receivable."
(b) Sections 4(g) and (h) of the Employment Agreement are
deleted in their entirety and replaced with the following:
"g. EXECUTIVE'S PUT RIGHT. Executive has the right but not the
obligation to sell his vested Holdings Restricted Membership
Interest (or shares exchanged by such Interest) back to Gaming
Holdings or to the Company only in the following circumstances:
(1) Gaming Holdings' IPO has not occurred upon expiration of
the original four-year term of this Agreement and Company does not
continue to employ Executive for reason(s) not constituting Cause as
defined in Section 5(d)(1-4) hereof or the Executive does not
continue his employment at the request of the Company for reason(s)
constituting Good Reason as defined in Section 5(d)(5). This Put
2
<PAGE>
right must be exercised in writing by Executive within thirty (30)
days of the expiration of the four-year term hereunder or it shall
become void and without further effect.
(2) Gaming Holdings' IPO has not occurred upon Executive
becoming 100% vested in Holdings Restricted Membership Interest.
This Put right must be exercised in writing by Executive within
thirty days of Executive being 100% vested or it shall become void
and without further effect.
The Put purchase price is the fair market value of such
Interest (or shares) on the Valuation Date. Under this Agreement,
the Valuation Date is: (i) the expiration of the four-year term of
this Agreement, in the event of a Put under Section 4(g)(i), or (ii)
the date Executive becomes 100% vested, in the event of a Put under
Section 4(g)(2). In either case of (i) or (ii) in the preceding
sentence, the fair market value shall be determined by an
independent appraisal firm mutually agreed to by Gaming Holdings and
Executive, with the cost of such appraisal being paid by the
Company. If Executive exercises the Put hereunder, and Gaming
Holdings does not satisfy its obligation to purchase the membership
interest or shares within seven days of Executive's written notice
of exercise of the Put, Executive shall have the right to require
the Company (rather than gaming Holdings) to purchase such
membership interest or shares at fair market value. If the Company
purchases such membership interest or shares, the Company and Gaming
Holdings hereby agree that Gaming Holdings shall promptly
thereafter purchase such membership interest or shares from the
Company for a purchase price of $1.
h. COMPANY'S CALL RIGHT. If, prior to the date of the Company's
IPO, the Company terminates Executive for Cause as defined in
Section 5(d) hereof (including Executive quitting without Good
Reason under Section 5(d)(5)), then Gaming Holdings and the Company
shall have the right but not the obligation to purchase any vested
membership interest (or shares exchanged by such interest) within
thirty days of the Termination Date at a price equal to two times
the price Executive originally paid Gaming Holdings for such
membership interest. The Call right must be exercised in writing by
Gaming Holdings or the Company within thirty days of the Termination
Date or it shall become void and without further effect. If Gaming
Holdings or the Company exercises the Call hereunder, Executive must
tender such membership interest or shares and otherwise complete the
transaction hereunder within thirty days of Gaming Holdings' or the
3
<PAGE>
Company's exercise of the Call. If the Company purchases such
membership interest or shares, the Company and Gaming Holdings
hereby agree that Gaming Holdings shall promptly thereafter purchase
such membership interest or shares from the Company for a purchase
price of $1."
(c) Sections 6(a), 9(a), (b), (d), (h) and (k) of the
Employment Agreement are hereby amended so that Gaming Holdings has the
same rights and obligations under such Sections as the Company.
5. GAMING LAW. Anything to the contrary herein or in the Employment and
Consulting Agreement notwithstanding, the parties hereto agree and acknowledge
that they are subject to and that they shall comply in all respects with the
gaming laws of the State of Nevada, including the Nevada Gaming Control Act and
(or any successor statute) the rules and regulations promulgated by the Nevada
Gaming Commission and the State Gaming Control Board. To the extent anything in
this Agreement or the Employment Agreement is inconsistent with any gaming laws
or regulations, the gaming laws and regulations shall control.
6. ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of any successor of the Company or Gaming Holdings. Any such successor
of the Company or Gaming Holdings shall be deemed substituted for the Company or
Gaming Holdings under the terms of this Agreement for all purposes. As used
herein, "successor" shall include any person, firm, corporation or other
business entity which at any time, whether by purchase, merger or otherwise,
directly or indirectly acquires all or substantially all of the assets or
business of the Company or Gaming Holdings and supercede any prior
understandings or agreements between the parties hereto and Aladdin Holdings,
LLC.
7. ENTIRE AGREEMENT. This Agreement and the Employment Agreement
represent the entire agreement and understanding between the Company, Gaming
Holdings, Aladdin Holdings, LLC and the Executive concerning the matters herein
and supercede any prior understandings or agreements between the parties hereto
and Aladdin Holdings, LLC.
8. NO ORAL MODIFICATION, CANCELLATION OR DISCHARGE. This Agreement may
only be amended, cancelled or discharged in writing signed by the Executive,
Gaming Holdings and the Company.
9. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Nevada.
4
<PAGE>
10. CAPITALIZED TERMS. Capitalized terms not defined herein shall have
the meanings described thereto in the Employment Agreement.
11. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be considered an original, but all such
counterparts shall together constitute but one and the same contract.
5
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first above written.
ALADDIN GAMING, LLC
By: /s/ Ronald Dictrow
-------------------------------
Name: Ronald Dictrow
Title: Executive Vice
President/Secretary
ALADDIN GAMING HOLDINGS, LLC
By: /s/ Ronald Dictrow
-------------------------------
Name: Ronald Dictrow
Title: Executive Vice
President/Secretary
/s/ Jose A. Rueda
-------------------------------
Name: Jose A. Rueda
Title: Senior Vice
President/Electronic Gaming
6
<PAGE>
January 23, 1998
CONFIDENTIAL
Aladdin Gaming, LLC
3667 Las Vegas Blvd. South
Las Vegas, NV 89109
Attn: Mr. Cornelius T. Klerk
Chief Financial Officer
Re: $80,000,000 Financing Facility from General Electric Capital
Corporation ("GE Capital") to Aladdin Gaming, LLC (the "Obligor")
Ladies and Gentlemen:
Obligor has advised GE Capital that Obligor is seeking up to $80 million of
financing (the "Financing") for the proposed purchase by Obligor of new
furniture and equipment, and gaming equipment, for the Aladdin Hotel Casino (the
"Transaction").
We anticipate that Obligor is a domestic operating company that will
directly own and operate the assets used in its business.
You have asked that the Financing include: $60 million to purchase new
furniture and equipment (other than gaming equipment) for the Aladdin Hotel
Casino (the "Synthetic Lease Facility") and a $20 million term loan to purchase
gaming equipment for the Aladdin Hotel Casino (the "Term Loan Facility"; and
together with the Synthetic Lease Facility being referred to, collectively, as
the "Facilities").
Based on our understanding of the Transaction as described above and the
information which you have provided to us, GE Capital is pleased to advise you
(a) of its commitment to provide the Financing described in this letter (the
"Commitment Letter") in the amount of $60 million, and (b) of the commitment of
Credit Suisse First Boston Corporation ("First Boston") to provide the financing
described in this letter in the amount of $20 million, subject to the following
terms and conditions. GE Capital's affiliate, GECC Capital Markets Group, Inc.
("GECMG") will seek to arrange for a portion of the Financing to be syndicated
to other financial institutions on the terms and conditions more fully described
herein.
<PAGE>
Aladdin Gaming, LLC
Page 2
CO-AGENTS: GE Capital and First Boston
SYNDICATION AND
DOCUMENTATION AGENT: GECMG
SUMMARY OF PROPOSED TERMS FOR SYNTHETIC LEASE FACILITY
TRANSACTION TYPE: The Synthetic Lease Facility is structured as a lease
intended for security ("Lease"). The parties
acknowledge that it is the intention of Obligor to be
considered the owner of the Lease Property (as
hereinafter defined) for tax purposes, and it is the
desire of Obligor to structure the Synthetic Lease
Facility as an operating lease for accounting purposes.
LESSOR: GE Capital and other parties acceptable to GE Capital
and to Obligor (which acceptance by Obligor shall not
unreasonably be withheld, delayed or conditioned)
LESSEE: Aladdin Gaming, LLC.
AMOUNT: $60 million.
BASIC LEASE TERM
COMMENCEMENT DATE: Same as Construction Completion Date (as hereinafter
defined).
BASIC LEASE TERM: Three (3) years from Basic Lease Term Commencement
Date.
RENEWAL LEASE TERM: At Obligor's option, up to two (2) one-year renewal
periods from the end of the Basic Lease Term.
PAYMENTS/AMORTIZATION: Payments shall be made quarterly, in arrears,
calculated such that there will be eighty percent (80%)
amortization of principal at the end of the Basic Lease
Term and the maximum two (2) Renewal Lease Terms. The
remaining balloon payment will be twenty percent (20%)
of the principal.
LEASE RENTAL FACTOR: Calculated to be 5.6639% of the Lease Funding Amount
(as hereinafter defined) per quarter. The quarterly
rental installment shall consist of distinct principal
and interest components. The Lease Rental Factor was
calculated at an interest rate of 10.1875% which
represents a spread of 425 basis points over the Base
Index (as hereinafter defined) (5.9375%). Five (5)
days prior
<PAGE>
Aladdin Gaming, LLC
Page 3
to the Basic Lease Term Commencement Date, the Lease
Rental Factor will be calculated on the basis of the
floating rate Base Index plus the higher of (a) 425
basis points, or (b) the weighted average spread used
to calculate the interest rate on Obligor's Senior
Credit Facility (as hereinafter defined) plus 125 basis
points; and such spread shall be fixed throughout the
Basic Lease Term and any available Renewal Lease Terms.
The Lease Rental Factor will be adjusted quarterly
based on changes to the Base Index.
BASE INDEX: The reserve-adjusted 90-day London Interbank Offering
Rate.
LEASE PROPERTY: GE Capital shall be secured by a first priority
security interest in specified assets (but not the
income generated therefrom), mutually agreed upon by
Obligor and GE Capital, selected from a pool of new
furniture and equipment (other than gaming equipment),
substantially similar to the types of furniture and
equipment described on Exhibit A attached hereto, with
an estimated cost of $60 million, including freight,
installation, sales tax and other costs not to exceed
twelve percent (12%) of total cost.
EQUIPMENT LOCATION: The Aladdin Hotel Casino located in Las Vegas, Nevada.
LEASE FUNDING AMOUNT: 100% of Obligor's acquisition cost of the Lease
Property, up to $60 million.
INTERIM LEASE
FUNDING AMOUNT: Up to $60 million, subject to no default then having
occurred and be continuing under any of Obligor's
financing, construction or other material agreements
(subject to the rights with respect to assumption
and/or cure of the lenders under Obligor's Senior
Credit Facility, as set forth in an intercreditor
agreement to be negotiated between such lenders and
GE Capital (the "Intercreditor Agreement")), and
satisfaction of all conditions precedent to funding as
outlined herein and as defined in the definitive
documents between the parties. Advances of the Interim
Lease Funding Amount shall be made once per month
during the Interim Funding Period.
Any Interim Lease Funding Amount advanced under the
Synthetic Lease Facility shall be made under an interim
schedule, which shall be converted to a final schedule
under the Lease on the Basic Lease Term Commencement
Date.
INTERIM LEASE
REPAYMENT TERMS: Floating rate interest-only payments due monthly in
arrears
<PAGE>
Aladdin Gaming, LLC
Page 4
during the Interim Funding Period (as hereinafter
defined) based on the Interim Lease Funding Amount. At
Obligor's option, interest will be calculated at either
(a) 30-Day LIBOR plus the higher of (1) 425 basis
points, or (2) the weighted average spread used to
calculate the interest rate on Obligor's Senior Credit
Facility plus 125 basis points, or (b) the Prime Rate
(as hereinafter defined) plus 275 basis points; and
such spread shall be fixed throughout the Interim
Funding Period, and 30-Day LIBOR or the Prime Rate will
be adjusted monthly based on changes thereto. For
purposes hereof, "30-Day LIBOR" shall mean the
reserve-adjusted 30-day London Interbank Offering Rate
on the date of determination. For purposes hereof, the
"Prime Rate" shall mean the prime rate of interest
published in THE WALL STREET JOURNAL on the date of
determination. Obligor shall elect such option prior
to the initial Interim Lease Funding Date and such
election shall remain in effect during the Interim
Funding Period.
OPTIONS AT LEASE
TERM EXPIRATION: Subject to the Fixed Purchase Price provisions set
forth below, at the end of the Basic Lease Term or any
Renewal Lease Term, Obligor may: (i) purchase all, but
not less than all, of the Lease Property at the
purchase price calculated as specified below (the
"Fixed Purchase Price"), estimated to represent the
Lease Property's then fair value, (ii) renew the Lease
for all, but not less than all, of the Lease Property
for up to two (2) additional one-year terms (with
respect to the end of the Basic Lease Term) at the
Lease Rental Factor set forth above, subject to the
conditions set forth above in the Renewal Lease Term
section, or (iii) return all but not less than all, of
the Lease Property to GE Capital subject to
GE Capital's return conditions and the payment to
GE Capital of the Fixed Purchase Price as outlined
below.
FIXED PURCHASE PRICE: If Obligor elects to return the Lease Property at the
expiration of the Basic Lease Term or any subsequent
Renewal Lease Term, Obligor would pay to GE Capital a
rent payment equal to the Fixed Purchase Price.
Obligor and GE Capital would then arrange for the sale
of the Lease Property. Upon the sale of all of the
Lease Property, GE Capital would return to Obligor an
amount equal to the Lessor's Residual Risk Amount (as
hereinafter calculated) plus any net sale proceeds in
excess of the GE Capital's Residual Risk Amount, less
reasonable remarketing and carrying costs (which amount
to be returned by GE Capital to Obligor may be subject
to a security interest grated by Obligor to the Lenders
under Obligor's Senior Credit Facility).
Fixed Lessee's Lessor's Residual
End of Year Purchase Price* Obligations* Risk Amount*
----------- --------------- ------------ ------------
-------------------------------------------------------------------
3 56.8849 43.2267 13.6582
-------------------------------------------------------------------
4 39.3693 33.0159 6.3534
-------------------------------------------------------------------
5 20.0000 15.6029 4.3971
-------------------------------------------------------------------
<PAGE>
Aladdin Gaming, LLC
Page 5
(*expressed as a percentage of the Funding Amount)
LESSOR'S RESIDUAL
RISK AMOUNT: Lessor's Residual Risk Amount as outlined above,
provided there is no default under the Lease (as
defined in the definitive financing documents to be
executed between the parties), is non-recourse to
Obligor, i.e. GE Capital will look solely to the value
of the Lease Property for repayment.
CONTINGENT RENTAL: Upon termination of the Lease at the end of the Basic
Lease Term or any Renewal Lease Term, should the Lease
Property be returned to GE Capital by Obligor,
GE Capital will calculate a Contingent Rental for the
full lease term, on a quarterly basis, equal to the sum
of (a) 85% of the per annum increase in the United
States Consumer Price Index reported in each quarter as
currently calculated, or a replacement index with a
similar calculation acceptable to GE Capital,
multiplied by the Lease Funding Amount, and (b) an
amount to be determined based on the differential
between (1) the average annual revenues generated at
the Aladdin Hotel Casino for the period from November
1, 1992 through termination of current operations
(estimated to be November 25, 1997), and (2) the
average annual revenues generated at the Aladdin Hotel
Casino for the period from the Construction Completion
Date through and including the subsequent sixty (60)
months. The total amount of Contingent Rental will be
capped at a maximum percentage of the Lease Funding
Amount as follows:
Floating Rate
Lease Termination Maximum
at End of Year Contingent Rental*
----------------- ------------------
------------------------------------------------------
3 13.66%
------------------------------------------------------
4 6.36%
------------------------------------------------------
5 4.40%
------------------------------------------------------
(*expressed as a percentage of the Funding Amount)
Upon completion of the sale of the Lease Property to a
third party, Lessee shall pay to Lessor that portion
(if any) of the Lessor's Residual Risk Amount not
satisfied by application of the net sale proceeds;
provided, however, that in no event shall the amount of
Contingent Rent required to be paid by Obligor to
GE Capital exceed the Floating Rate Maximum Contingent
Rental specified above.
<PAGE>
Aladdin Gaming, LLC
Page 6
SUMMARY OF PROPOSED TERMS FOR TERM LOAN FACILITY
LENDER: GE Capital and other parties acceptable to GE Capital
and to Obligor (which acceptance by Obligor shall not
unreasonably be withheld, delayed or conditioned).
BORROWER: Aladdin Gaming, LLC
AMOUNT: $20 million
TERM: Five (5) years.
TERM LOAN
COMMENCEMENT DATE: Same as Construction Completion Date.
PAYMENTS/AMORTIZATION: Payments shall be made quarterly, in arrears,
calculated such that principal will be amortized as
follows:
Quarter Percent Amortization
------- --------------------
1-4 3.25
5-8 3.5
9-12 4.0
13-16 4.5
17-19 4.75
20 24.75
INTEREST RATE: The interest rate will be calculated five (5) days
prior to the Term Loan Commencement Date on the basis
of the floating rate Base Index plus the higher of
(a) 425 basis points, or (b) the weighted average
spread used to calculate the interest rate on Obligor's
Senior Credit Facility on such date plus 125 basis
points; and such spread shall be fixed throughout the
Term. The Interest Rate will be adjusted quarterly,
based on changes to the Base Index, if applicable.
COLLATERAL: GE Capital shall be secured by a first priority
security interest in specified new gaming equipment,
mutually agreed upon by Obligor and GE Capital with an
estimated cost of $20 million, including freight,
installation, sales tax and other costs not to exceed
twelve percent (12%) of total cost. The Lender shall
not be considered the owner of
<PAGE>
Aladdin Gaming, LLC
Page 7
the Collateral for Nevada regulatory purposes.
COLLATERAL LOCATION: The Aladdin Hotel Casino located in Las Vegas, Nevada.
TERM LOAN
FUNDING AMOUNT: One hundred percent (100%) of Obligor's acquisition
cost of the Collateral, up to $20 million.
INTERIM TERM LOAN
FUNDING AMOUNT: Up to $20 million, subject to no default then having
occurred and be continuing under any of Obligor's
financing, construction or other material agreements
(subject to the rights with respect to assumption
and/or cure of the lenders under Obligor's Senior
Credit Facility, as set forth in the Intercreditor
Agreement), and satisfaction of all conditions
precedent to funding as outlined herein and as defined
in the definitive documents between the parties.
Advances of the Interim Term Loan Funding Amount shall
be made once per month during the Interim Funding
Period.
Any Interim Term Loan Funding Amount advanced under the
Term Loan Facility shall be evidenced by an interim
promissory note, which shall be converted to a final
promissory note on the Term Loan Commencement Date.
INTERIM TERM LOAN
REPAYMENT TERMS: Floating rate interest-only payments due monthly in
arrears during the Interim Funding Period based on the
Interim Term Loan Funding Amount. At Obligor's option,
interest will be calculated at either (a) 30-Day LIBOR
plus the higher of (1) 425 basis points, or (2) the
weighted average spread used to calculate the interest
rate on Obligor's Senior Credit Facility plus 125 basis
points, or (b) the Prime Rate plus 275 basis points;
and such spread shall be fixed throughout the Interim
Funding Period, and 30-Day LIBOR or the Prime Rate will
be adjusted monthly based on changes thereto. Obligor
shall elect such option prior to the Interim Funding
Date and such election shall remain in effect during
the Interim Funding Period.
SUMMARY OF GENERAL TERMS
CONSTRUCTION Trust Under Article 6 u/w/o Sigmund Sommer (the
"Trust"),
COMPLETION GUARANTORS: London Clubs International PLC ("LCI"), and Aladdin
Bazaar Holdings, LLC ("Bazaar Holdings").
<PAGE>
Aladdin Gaming, LLC
Page 8
CONSTRUCTION
COMPLETION DATE: The date on which construction of the Aladdin Hotel
Casino reasonably can be expected to be completed.
INTERIM FUNDING DATE: Subject to the satisfaction of the conditions precedent
and to there being no default, GE Capital will commence
funding of deliveries of the Lease Property and/or the
Collateral up to six (6) months prior to the
Construction Completion Date upon delivery to
GE Capital on a monthly basis of such substantiation
with respect to the Lease Property and the Collateral,
and of the delivery thereof to Obligor, as may be
required by GE Capital. GE Capital's construction
consultant will certify to GE Capital that the
Construction Completion Date is reasonably anticipated
to occur not more than six (6) months after the Initial
Funding Date.
INTERIM FUNDING PERIOD: The Interim Funding Date through the Construction
Completion Date.
VOLUNTARY TERMINATION: Obligor will not have the ability to terminate the
Lease within the first twelve (12) months after the
Basic Lease Term Commencement Date. Obligor will not
have the ability to prepay the Term Loan within the
first twelve (12) months after the Term Loan
Commencement Date. Thereafter, voluntary early
termination and/or prepayment will be subject to the
following penalties:
TERMINATION/PREPAYMENT DATE PENALTY*
--------------------------- --------
> 12 months and < 24 months 2.0%
-
> 24 months and < 48 months 1.0%
-
> 48 months 0%
-
(*expressed as a percentage of the Funding Amount)
DEFAULT RATE: From and after the occurrence of a default, the
interest rate will be increased by 200 basis points per
annum over the implicit interest rate until the default
or defaults are cured.
USE OF PREMISES: In the event of a default which leads to a liquidation
of the Lease Property and/or the Collateral, subject
to the provisions of the Intercreditor Agreement,
Obligor would provide GE Capital with a time period of
up to twelve (12) months in which to sell the Lease
Property and/or the Collateral on site, without cost to
GE Capital.
FEES: As described in that certain fee letter of even date
herewith.
TRANSACTION EXPENSES: All reasonable and necessary documented transaction
<PAGE>
Aladdin Gaming, LLC
Page 9
expenses including, but not necessarily limited to,
expenses of counsel (including counsel for GE Capital),
due diligence, lien searches, UCC filings, and field
audit(s), etc., would be for the account of Obligor.
SECURITY INTEREST: The security interest granted by Obligor will be a
first priority security interest in the Lease Property
and the Collateral (but not the income generated
therefrom), and assignment of all improvements and/or
additions to the Lease Property and the Collateral
hereafter acquired. The Lease Property and the
Collateral shall be free of all junior liens or
encumbrances. Any and all existing and to be issued
obligations of Obligor shall acknowledge the Facilities
as senior indebtedness of Obligor. During the Interim
Funding Period, Obligor shall assign to GE Capital its
rights under the purchase contracts for the Lease
Property.
DOCUMENTATION: The Financing documentation will contain
representations and warranties; conditions precedent;
indemnities; events of default and remedies as required
by GE Capital. Relevant documents shall include, but
not be limited to, inter-creditor agreements and other
material agreements, to be acceptable to GE Capital and
shall contain cross-default and cross-acceleration
provisions with all other indebtedness, and
affirmative, negative and financial covenants similar
to those contained in Obligor's Senior Credit Facility.
Financial reporting requirements shall be included in
such documentation, as required from time to time, as
specified therein, including (without limitation) a
compliance certificate with supporting covenant
computation signed by an authorized representative of
Obligor. It is understood and agreed that GE Capital's
counsel will draft all documentation (other than the
Intercreditor Agreement) to be used in the Transaction.
SYNDICATION: GECMG will syndicate the Financing with the assistance
of Obligor. Such assistance shall include, but not be
limited to (i) prompt assistance in the preparation of
an information memorandum to include any and all
information pertinent to the syndication of the
Financing ("Information Memorandum") and the
verification of the completeness and accuracy of the
information contained therein; (ii) preparation of
offering materials and projections by Obligor and its
advisors taking into account the proposed Transaction
and Financing; (iii) providing GECMG with all
information reasonably deemed necessary by GECMG to
successfully complete the syndication;
(iv) confirmation as to the accuracy and completeness
of such offering materials, information and
projections; (v) participation of the senior management
of Obligor and its affiliates in
<PAGE>
Aladdin Gaming, LLC
Page 10
meetings and conference calls with potential
participants at such times and places as GECMG
reasonably may request; and (vi) using best efforts to
ensure that the syndication efforts benefit from
existing lending relationships of Obligor and its
affiliates.
GE Capital shall not commence the syndication of the
Facilities until the earlier of (a) the completion of
the Syndication of Obligor's Senior Credit Facility
(but not before the closing thereof), or (b) three (3)
months from the date on which Obligor's Senior Credit
Facility is closed.
OTHER TERMS: The Financing of the Facilities will require, among
other things, deliveries of, or compliance with
covenants pertaining to, the following all in form and
substance satisfactory to GE Capital:
- If necessary, Obligor and GE Capital shall
negotiate and put in place an Agency Agreement
whereby Obligor may acquire Lease Property as
agent for GE Capital ("Agency Agreement").
- Obligor shall bear all risk of loss and damage to
the Lease Property and the Collateral. Obligor is
responsible for keeping the Lease Property and the
Collateral insured with commercially reasonable
insurance protection for Obligor's industry, size
and risk and GE Capital's collateral protection
(terms, underwriter, scope, and coverage to be
acceptable to GE Capital); GE Capital named as
loss payee (property/casualty) and additional
insured (liability); and
non-renewal/cancellation/amendment endorsements to
provide thirty (30) days' advance notice to
GE Capital; plus breach of warranty and waiver of
subrogation endorsements. Any co-insurance
coverage would be reviewed by GE Capital for
acceptability.
- GE Capital shall require, on an itemized basis,
fixed asset lists with complete descriptions of
the Lease Property and the Collateral, including
make (manufacturer), model numbers, serial numbers
(if available), and original cost breakdown.
GE Capital shall also be granted the right to
review purchase orders and
<PAGE>
Aladdin Gaming, LLC
Page 11
invoices for the Lease Property and the Collateral
to verify payment. It is understood that such
information shall, within five (5) days of any
request by GE Capital, be provided by Obligor
and/or its equipment vendor to GE Capital.
- Obligor will have the right to remove
predetermined Lease Property and Collateral and
substitute with like equipment equal to or greater
in value and utility upon such further terms and
conditions as Obligor and GE Capital shall agree.
- GE Capital shall require Obligor to indemnify it
against any liability for environmental risks or
hazards and any legal proceedings (etc.) as a
result of an environmental related action or
incident.
- Obligor shall maintain the Lease Property and the
Collateral in accordance with standards consistent
with manufacturer's specifications and customary
to industry practice. Maintenance programs may be
reviewed by GE Capital.
- The Facilities will be a net financing. Without
limiting the generality of the foregoing, Obligor
shall be responsible for all expenses,
maintenance, insurance and taxes (other than taxes
based solely upon the net income of GE Capital)
relating to the purchase, lease, possession, use
or rental of the Lease Property and the
Collateral.
- All obligations of Obligor under the Facilities
will be cross-defaulted to each other and to all
other material indebtedness of Obligor. In
addition, all such obligations under the
Facilities shall be cross-collateralized with each
other.
- Limitations on commercial transactions, management
agreements, service agreements, and borrowing
transactions between its officers, directors,
employees and affiliates and intercompany loans
among
<PAGE>
Aladdin Gaming, LLC
Page 12
Obligor and its affiliates.
- Limitations on, or prohibitions of, cash
dividends, other distributions to equity holders,
payments in respect of subordinated debt, payment
of management fees to affiliates and redemption of
membership interests, common stock and preferred
stock of Obligor or Construction Completion
Guarantors (other than dividends issued with
respect to the preferred stock of Aladdin Gaming
Holdings, LLC ("Holdings") and reasonable
management fees).
- Prohibitions of mergers, acquisitions, sale of
Obligor, its stock membership interests or
material portion of assets.
- Prohibitions of a direct or indirect change in
control of Obligor.
- Financial covenants similar to those included in
Obligor's Senior Credit Facility.
- Governing law: New York
CONDITIONS PRECEDENT Closing of the Financing will be conditioned upon
receipt or satisfaction (all to GE Capital's
TO CLOSING: satisfaction) of conditions precedent customary for
these types of credit facilities and others to be
reasonably specified by GE Capital, including (without
limitation) the following:
- Execution and delivery of all Transaction
documents to GE Capital in a timely manner on or
before March 31, 1998. The Transaction shall have
been consummated on terms satisfactory to
GE Capital.
- Obligor shall have obtained financing of a senior
credit facility in the amount of $410 million
("Senior Credit Facility"), on terms and
conditions substantially the same as the terms and
conditions contained in that certain commitment
letter dated December 4, 1997, as
<PAGE>
Aladdin Gaming, LLC
Page 13
amended to date, issued by The Bank of Nova Scotia
and Merrill Lynch Capital Corporation to Obligor,
Holdings, and LCI (the "Senior Credit Facility
Commitment Letter").
- Obligor shall have received a cash equity
contribution from Holdings of $110 million,
accomplished by the sale of membership interests
of Obligor, on terms and conditions substantially
the same as the terms and conditions contained in
the Holdings' offering memorandum (draft dated
January 14, 1998) (the "Offering Memorandum").
- Contribution of an additional $50 million in cash
equity to Obligor by LCI, on terms and conditions
substantially the same as the terms and conditions
contained in the Offering Memorandum.
- Contribution of land (the "Site") as equity in the
amount of $77 million, satisfactory in all
respects to GE Capital, in the Aladdin Hotel
Casino, on terms and conditions substantially the
same as the terms and conditions contained in the
Offering Memorandum.
- Construction of the Aladdin Hotel Casino shall be
substantially completed as defined by the parties
and GE Capital's construction consultant shall
provide to GE Capital a certificate confirming
such substantial completion (at Obligor's
expense).
- Completion by GE Capital of all legal due
diligence with results satisfactory to GE Capital.
Without limiting the foregoing, such due diligence
shall include: review by GE Capital of, and
GE Capital's reasonable satisfaction with, (i) the
final capital (debt and equity) and legal
structure of the Aladdin Hotel Casino (the
"Project"), (ii) the final sources and uses of
funds to be used to consummate the Project,
(iii) a market study, (iv) cash flow projections,
(v) the Project budget, and (vi) other
<PAGE>
Aladdin Gaming, LLC
Page 14
debt instruments and material contracts relating
to the Project.
- If and to the extent requested by GE Capital,
environmental surveys or reviews in scope and
form, by firms, and with results, acceptable to
GE Capital.
- An independent appraiser shall substantiate the
Lease Property's remaining useful economic life
and requisite values at selected points throughout
the Basic Lease Term and Renewal Lease Terms,
including GE Capital's residual value assumptions.
The appraisal shall be commissioned by and
acceptable to GE Capital. The cost of such
appraisal shall be paid by Obligor.
- A letter from a certified public accounting firm
acceptable to GE Capital regarding Obligor's
solvency at closing after taking into account the
Transaction.
- GE Capital shall have received Obligor's projected
pro-forma income statements, balance sheets and
cash flow statements for five (5) years.
- The execution of a Keep-Well Agreement by
Holdings, LCI and Bazaar Holdings in form and
substance satisfactory to GE Capital (provided,
however, that it is acknowledged that GE Capital
is not a direct beneficiary thereof and has no
rights with respect thereto, including no right to
bring a cause of action with respect thereto).
<PAGE>
Aladdin Gaming, LLC
Page 15
- The execution of a Guaranty of Performance and
Completion by the Trust, LCI and Bazaar Holdings
in favor of each of the Administrative Agent and
the Lenders under Obligor's Senior Credit
Facility, in form and substance satisfactory to
GE Capital (provided, however, that it is
acknowledged that GE Capital is not a direct
beneficiary thereof and has no rights with respect
thereto, including no right to bring a cause of
action with respect thereto).
- The execution of a Guaranty of Performance and
Completion by the Trust, LCI and Bazaar Holdings
in favor of the Noteholders with respect to
Holdings' senior discount notes and the Contingent
Guarantor (specified therein) in form and
substance satisfactory to GE Capital (provided,
however, that it is acknowledged that GE Capital
is not a direct beneficiary thereof and has no
rights with respect thereto, including no right to
bring a cause of action with respect thereto).
- Obligor shall have obtained all permits, licenses,
and similar governmental authorizations then
required to have been obtained in connection with
the development and construction of the Project,
and any other required permits, licenses or
governmental authorizations which have not then
been obtained are of a type that are routinely
granted on application and no facts or
circumstances exist which indicate that any such
required permit, license or governmental
authorization will not be timely obtainable by
Obligor without material difficulty, expense or
delay prior to the time that it is required to
have been obtained; and the Project shall be in
compliance with any and all applicable gaming and
regulatory requirements.
- At no time prior to a foreclosure of the Leased
Property and/or the Collateral shall GE Capital or
any other Lessor or Lender with respect to the
Facilities be required to obtain any gaming or
related licenses as a result of the Transaction
(assuming no repossession of the Leased Property
and/or the Collateral upon the occurrence of an
event of default). GE Capital shall receive a
favorable written opinion of counsel for Obligor,
acceptable to GE Capital, regarding such licenses,
in form and substance reasonably satisfactory to
GE Capital, at Obligor's expense.
- Other satisfactory closing certificates and
opinions of counsel in form and substance
reasonably satisfactory to GE Capital, at
Obligor's expense.
<PAGE>
Aladdin Gaming, LLC
Page 16
- GE Capital shall have received all fees and
expenses required to be paid.
- There shall exist no pending or threatened
material litigation, proceedings or investigations
which (x) contest the consummation of the
Transaction or the Project, or (y) could
reasonably be expected to have a material adverse
effect on the Transaction, the Project or on the
financial condition, operations, assets, business,
properties or prospects of Obligor, Holdings, LCI
or Bazaar Holdings.
- All representations and warranties of Obligor in
the Transaction documents shall be true, correct
and complete in all material respects and Obligor
shall deliver a certificate pursuant to which all
such representations and warranties are reaffirmed
in full and without material modification from
such representations and warranties as originally
made in the Transaction documents.
- No default or event which, with the giving of
notice or the lapse of time, or both, would
constitute a default by Obligor under the Senior
Credit Facility, under any other agreement
relating to the Transaction or the Project, or
with respect to the Financing, shall have occurred
and be continuing (subject to the rights with
respect to assumption and/or cure of the lenders
under Obligor's Senior Credit Facility, as set
forth in the Intercreditor Agreement).
- A certified copy of the organizational documents
and operating agreement of Obligor, together with
a good standing certificate issued by the
Secretary of State of Nevada with respect to
Obligor.
- Certified resolutions and incumbency with respect
to Obligor.
- All corporate proceedings required in connection
with the Transaction on the part of Obligor shall
be reasonably
<PAGE>
Aladdin Gaming, LLC
Page 17
satisfactory in form and substance to GE Capital.
- Evidence of insurance with respect to the
coverages required by the Financing documents.
- Execution, delivery and filing or recording, as
appropriate (at Obligor's expense), of all Uniform
Commercial Code financing statements and other
security documents (including lien releases) as
may be required by GE Capital to perfect a first
priority security interest in the Leased Property
and the Collateral.
- GE Capital's construction consultant's certificate
confirming that construction of the Project
reasonably can be expected to be completed within
six (6) months after the Interim Funding Date.
- The lenders with respect to the Senior Credit
Facility, GE Capital and any other Lessor or
Lender with respect to the Facilities or the
Project shall have entered into the Inter-creditor
Agreement, the form and content of which shall be
satisfactory to GE Capital in its sole discretion
and to the Administrative Agent under the Senior
Credit Facility in its sole discretion. The
Intercreditor Agreement shall include, among other
provisions, (1) that for a period of up to six (6)
months after the date on which the lenders under
Obligor's Senior Credit Facility (or their
nominee) take possession or assume control of the
Aladdin Hotel & Casino, GE Capital shall have the
right to sell the Leased Property and/or
Collateral, on site, without cost to GE Capital;
and (2) during such six (6) month period, the
lenders under Obligor's Senior Credit Facility may
cause the Leased Property and/or the Collateral to
be placed in safe, secure storage on site or shall
cause the then prevailing payments required to be
paid under the Lease and the Term Loan to be paid
to GE Capital unless and until GE Capital causes
the Leased Property and/or the Collateral to be
removed from the Aladdin Hotel & Casino.
- At all times, the funds then available to Obligor
from all
<PAGE>
Aladdin Gaming, LLC
Page 18
sources shall be sufficient to pay all remaining
costs anticipated to be incurred in connection
with the completion of the Project, including
(without limitation) interest payments and fees
due to GE Capital and other Lessors and Lenders
with respect to the Facilities during the period
through the Construction Completion Date.
- The Financing shall not violate any law,
governmental rule or regulation, including
(without limitation) Regulation G, Regulation T,
Regulation U or Regulation X of the Board of
Governors of the Federal Reserve System.
- There shall have been no material adverse change
in the financial condition, operations, assets,
business, properties or prospects of Holdings or
LCI since the date of their most recent audited
financial statements delivered to GE Capital
(subject to the rights with respect to assumption
and/or cure of the lenders under Obligor's Senior
Credit Facility, as set forth in the Intercreditor
Agreement).
- The specified conditions must be satisfied with
respect to the initial closing of the Financing
and with respect to each funding of the Financing,
including the provision of such bring-down
certificates, opinions and confirmations as may be
required by GE Capital.
GE Capital's commitment hereunder is further subject to the execution and
delivery of final legal, documentation reasonably acceptable to GE Capital and
its counsel incorporating, without limitation, the terms set forth in this
Commitment Letter, and completion of other customary conditions to GE Capital
and its counsel's reasonable satisfaction.
You agree that GECMG will act as the sole syndicate agent for the
Transaction and that no additional agents, co-agents or arrangers will be
appointed, or other titles conferred, without GECMG's consent.
To ensure an orderly and effective syndication of the Financing, you agree
that until the termination of the syndication, as determined by GECMG, you will
not attempt to syndicate or issue, announce or authorize the announcement of the
syndication of or issuance of, or engage in
<PAGE>
Aladdin Gaming, LLC
Page 19
discussions concerning the syndication or issuance of, any debt facility or debt
security (including any renewals thereof) (other than with respect to the Senior
Credit Facility and the offering of Holdings' senior discount notes pursuant to
the Offering Memorandum, which shall be closed not later than March 31, 1998),
the financing of the Theater of the Performing Arts, the development on the Site
of a retail project and another hotel project known as the Audrie/Harmon
Project), without the prior written consent of GECMG.
By signing this Commitment Letter, each party acknowledges that this
Commitment Letter supersedes any and all discussions and understandings, written
or oral, between or among GE Capital and any other person as to the subject
matter hereof, including, without limitation, the proposal letter dated
September 17, 1997 between GE Capital and Obligor (the "Proposal Letter"). No
amendments, waivers or modifications of this Commitment Letter or any of its
contents shall be effective unless expressly set forth in writing and executed
by the parties hereto.
This Commitment Letter is being provided to you on the condition that,
except as required by law and except to the extent required in connection with
the Offering Memorandum, neither it, the Proposal Letter, nor their contents
will be disclosed publicly or privately except to those individuals who have a
need to know of them as a result of their being specifically involved in the
Transaction under consideration and then only on the condition that such matters
may not, except as required by law, be further disclosed. No person to whom
this Commitment Letter may be shown in violation of the above provisions is
entitled to rely upon this Commitment Letter or any of its contents. Without
limiting the generality of the foregoing, none of such persons shall, except as
required by law, use the name of, or refer to, GE Capital, or any of its
affiliates, in any correspondence, discussions, advertisement or disclosure made
in connection with the Transaction without the prior written consent of
GE Capital.
Regardless of whether the Transaction or the Financing closes, Obligor
agrees to pay upon demand to GE Capital all out-of-pocket expenses which may be
incurred by GE Capital, First Boston or GECMG in connection with the Financing
or the Transaction (including all reasonable legal, environmental, and other
consultant costs and fees incurred in the preparation of this Commitment Letter,
the Proposal Letter, and evaluation of any documenting of the Financing and the
Transaction). Regardless of whether the Transaction or the Financing closes,
Obligor shall indemnify and hold harmless each of GE Capital, First Boston,
GECMG, their respective affiliates, and the directors, officers, employees,
agents, attorneys and representatives of any of them (each, an "Indemnified
Person"), from and against all suits, actions, proceedings, claims, damages,
losses, liabilities and expenses (including, but not limited to, attorneys' fees
and disbursements and other costs of investigation or defense, including those
incurred upon any appeal), which may be instituted or asserted against or
incurred by any such Indemnified Person in connection with, or arising out of,
this Commitment Letter, the Proposal Letter, the Financing or the Transaction
under consideration, the documentation related thereto, any other financing
<PAGE>
Aladdin Gaming, LLC
Page 20
related thereto, any actions or failures to act in connection therewith, and any
and all environmental liabilities and legal costs and expenses arising out of or
incurred in connection with any disputes between or among any parties to any of
the foregoing, and any investigation, litigation, or proceeding related to any
such matters. Notwithstanding the preceding sentence, the indemnitors shall not
be liable for any indemnification to an Indemnified Person to the extent that
any such suit, action, proceeding, claim, damage, loss, liability or expense
results solely from that Indemnified Person's gross negligence or willful
misconduct, as finally determined by a court of competent jurisdiction. Under
no circumstances shall GE Capital, First Boston, GECMG, or any of their
respective affiliates be liable to you or any other person for any punitive,
exemplary, consequential or indirect damages which may be alleged to result from
this Commitment Letter, the Proposal Letter, the Transaction, the Financing, the
documentation related thereto or any other financing, regardless of whether the
Transaction or the Financing closes.
Each party hereby expressly waives any right to trial by jury of any claim,
demand, action or cause of action arising under this Commitment Letter, the
Proposal Letter, any transaction relating hereto or thereto, or any other
instrument, document or agreement executed or delivered in connection herewith
or therewith, whether sounding in contract, tort or otherwise. Each party
hereto consents and agrees that the state or federal courts located in New York
County, City of New York, New York, shall have exclusive jurisdiction to hear
and determine any claims or disputes between or among any of the parties hereto
pertaining to this Commitment Letter, the Proposal Letter, the Financing or the
Transaction under consideration, any other financing related thereto, and any
investigation, litigation, or proceeding related to or arising out of any such
matters, PROVIDED, that the parties hereto acknowledge that any appeals from
those courts may have to be heard by a court located outside of such
jurisdiction. Each party hereto expressly submits and consents in advance to
such jurisdiction in any action or suit commenced in any such court, and hereby
waives any objection which such party may have based upon lack of personal
jurisdiction, improper venue or inconvenient forum.
This Commitment Letter is governed by and shall be construed in accordance
with the internal laws (as opposed to conflicts of law provisions) of the State
of New York.
GE Capital shall have access to all relevant facilities, personnel and
accountants of Obligor and its affiliates, and copies of all documents of
Obligor and its affiliates which GE Capital may request, including business
plans, financial statements (actual and pro forma), books, records, and other
documents.
This Commitment Letter shall be of no force and effect unless and until
(a) this Commitment Letter is executed and delivered to GE Capital on or before
5:00 p.m. Eastern Standard Time on January 30, 1998, at 777 Long Ridge Road,
Building B - First Floor, Stamford, Connecticut 06927, and (b) such delivery is
accompanied by payment of the initial portion of the Commitment Fee and any
other fees or deposits due and payable to GE Capital as
<PAGE>
Aladdin Gaming, LLC
Page 21
herein provided. Once effective, GE Capital's obligation to provide financing
in accordance with the terms of this Commitment Letter shall cease if the
Transaction does not close, or the funding of the Financing is not completed for
any reason, on or before that date which is twenty-six (26) months after
Obligor's Senior Credit Facility closes (if no FORCE MAJEURE has then occurred;
provided that such date may be extended for up to twelve (12) months if a FORCE
MAJEURE has then occurred) (unless extended beyond such date with the prior
written consent of GE Capital and First Boston, at their sole discretion); and
GE Capital, First Boston and their affiliates shall not have any liability to
any person in connection with its refusal to fund the Financing or any portion
thereof after such date.
<PAGE>
Aladdin Gaming, LLC
Page 22
We look forward to continuing to work with you toward completing this
transaction.
Sincerely,
GENERAL ELECTRIC CAPITAL CORPORATION
CAPITAL FUNDING, INC.
By:
------------------------------------
Daniel P. Gioia
Senior Risk Analyst
AGREED AND ACCEPTED this
23rd day of January, 1998
ALADDIN GAMING, LLC
By:
---------------------------
Its:
-------------------------
<PAGE>
$221,500,000
PRINCIPAL AMOUNT AT MATURITY
ALADDIN GAMING HOLDINGS, LLC
ALADDIN CAPITAL CORP.
ALADDIN GAMING ENTERPRISES, INC.
ALADDIN HOLDINGS, LLC
THE TRUST UNDER ARTICLE SIXTH U/W/O SIGMUND SOMMER
LONDON CLUBS INTERNATIONAL, PLC
PURCHASE AGREEMENT
February 18, 1998
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Credit Suisse First Boston Corporation
as Representatives of the several Initial Purchasers
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
Aladdin Gaming Holdings, LLC, a Nevada limited-liability company
("Holdings"), Aladdin Capital Corp., a Nevada corporation and a wholly owned
subsidiary of Holdings ("Capital" and, together with Holdings, the "Issuers"),
Aladdin Gaming Enterprises, Inc., a Nevada corporation ("Enterprises" and,
together with the Issuers, the "Aladdin Parties"), Aladdin Holdings, LLC, a
Delaware limited liability company ("AHL"), the Trust under Article Sixth u/w/o
Sigmund Sommer (the "Trust"), and London Clubs International, plc, a public
limited company under the laws of England and Wales ("London Clubs" and,
together with the Aladdin Parties, AHL and the Trust, collectively referred to
herein as the "Venture Parties") confirm their agreement with Merrill Lynch &
Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and
each of the other Initial Purchasers named in Schedule A hereto (collectively,
the "Initial Purchasers", which term shall also include any initial purchaser
<PAGE>
substituted as hereinafter provided in Section 13 hereof), for whom Merrill
Lynch and Credit Suisse First Boston Corporation are acting as representatives
(in such capacity, the "Representatives"), with respect to the issue and sale by
the Aladdin Parties and the purchase by the Initial Purchasers, acting severally
and not jointly, of the respective number of units (the "Units") set forth in
said Schedule A, consisting in the aggregate of $221,500,000 principal amount at
maturity of the Issuers' Senior Discount Notes due 2010 (the "Series A Notes")
and 2,215,000 Warrants (the "Warrants") to purchase 2,215,000 shares (the
"Warrant Shares") of Enterprises' Class B non-voting common stock, no par value
(the "Common Stock"). The Series A Notes are to be issued pursuant to an
indenture dated as of February 26, 1998 (the "Indenture"), among the Issuers and
State Street Bank and Trust Company, as trustee (the "Trustee"). The Series A
Notes and the Series B Notes (as defined below) issuable in exchange therefor
are collectively referred to herein as the "Notes." The Warrants are to be
issued pursuant to a warrant agreement dated as of February 26, 1998 (the
"Warrant Agreement"), between Enterprises, Holdings and State Street Bank and
Trust Company, as warrant agent (the "Warrant Agent"). The Notes and the
Warrants will not be separately transferable until the earliest of: (i)
September 1, 1998; (ii) the date on which a registration statement with respect
to the Series A Notes or a registration statement with respect to the Warrants
and the Warrant Shares is filed with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "1933 Act");
(iii) the occurrence of a Change of Control (as defined in the Indenture) or a
sale or recapitalization of Enterprises, Holdings or Aladdin Gaming, LLC, a
Nevada limited-liability company (the "Company") occurs; (iv) 30 days after a
Qualified Public Offering (as defined in the Indenture); (v) the occurrence of
an Event of Default (as defined in the Indenture); or (vi) such earlier date as
determined by Merrill Lynch in its sole discretion. The Units, the Notes, the
Warrants and the Warrant Shares are collectively referred to herein as the
"Securities." Securities issued in book-entry form will be issued to Cede & Co.
as nominee of The Depository Trust Company ("DTC") pursuant to a letter
agreement, to be dated as of the Closing Time (as defined in Section 4(b)) (the
"DTC Agreement"), among the Aladdin Parties, the Trustee, the Warrant Agent and
DTC.
The Venture Parties understand that the Initial Purchasers propose to
make an offering of the Units on the terms and in the manner set forth herein
and agree that the Initial Purchasers may resell, subject to the conditions set
forth herein, all or a portion of the Units to purchasers ("Subsequent
Purchasers") at any time after the date of this Agreement. The Units are to be
offered and sold through the Initial Purchasers without being registered under
the 1933 Act, in reliance upon exemptions therefrom. Pursuant to the terms of
the Securities, the Indenture and the Warrant Agreement, investors that acquire
any of the Securities may only resell or otherwise transfer such Securities if
such Securities are hereafter registered under the 1933 Act or if an exemption
from the registration requirements of the 1933 Act is available (including the
exemption afforded by Rule 144A ("Rule 144A") of the rules and regulations
promulgated under the 1933 Act by the Commission).
Holders (including subsequent transferees) of the Series A Notes will
have the registration rights set forth in the Note Registration Rights Agreement
(the "Note Registration Rights Agreement") to be dated as of the Closing Time
among the Issuers and the Initial Purchasers and holders (including subsequent
transferees) of the Warrants will have registration
2
<PAGE>
rights set forth in the Warrant Registration Rights Agreement (the "Warrant
Registration Rights Agreement") to be dated as of the Closing Time among
Enterprises and the Initial Purchasers, for so long as such Notes, Warrants or
any Warrant Shares constitute "Transfer Restricted Securities" (as defined in
each such agreement, respectively). Pursuant to the Note Registration Rights
Agreement, the Issuers will agree to file with Commission, under the
circumstances set forth therein, (i) a registration statement under the 1933 Act
(the "Exchange Offer Registration Statement") relating to the Issuers' Series B
Senior Discount Notes due 2010 (the "Series B Notes"), to be offered in exchange
for the Series A Notes (such offer to exchange being referred to as the
"Exchange Offer") and (ii) a shelf registration statement pursuant to Rule 415
under the 1933 Act (the "Shelf Registration Statement" and, together with the
Exchange Offer Registration Statement, the "Notes Registration Statements")
relating to the resale by certain holders of the Series A Notes and to use their
reasonable best efforts to cause such Notes Registration Statements to be
declared and remain effective for the periods specified in the Note Registration
Rights Agreement and to consummate the Exchange Offer. Pursuant to the Warrant
Registration Rights Agreement, Enterprises will agree to use its reasonable best
efforts to file with the Commission, under the circumstances set forth therein,
a shelf registration statement pursuant to Rule 415 under the 1933 Act (the
"Warrant Shelf Registration Statement") relating to the offer and sale of the
Warrants and the Warrant Shares and the issuance of Warrant Shares upon the
exercise of Warrants that were sold pursuant to the Warrant Shelf Registration
Statement, and to use its reasonable best efforts to cause such Warrant Shelf
Registration Statement to be declared effective.
The following documents are hereinafter collectively referred to as
"Operative Documents": (i) this Agreement, (ii) the Indenture, (iii) the Warrant
Agreement, (iv) the Units, (v) the Notes, (vi) the Warrants, (vii) the Warrant
Shares, (viii) the Note Registration Rights Agreement and (ix) the Warrant
Registration Rights Agreement.
The following documents are hereinafter collectively referred to as
"Executed Transaction Documents": (i) the Company Operating Agreement (the
"Company Operating Agreement") as amended as of the Closing Time, (ii) the
London Clubs Purchase Agreement (the "London Clubs Purchase Agreement") dated
September 24, 1997 (subsequently amended on October 16, 1997, November 18, 1997
and December 1, 1997 and as otherwise amended as of the Closing Time) among
London Clubs, London Clubs Nevada, Inc. a Nevada corporation ("LCNI"), AHL,
Sommer Enterprises, LLC, a Nevada limited-liability company ("Sommer
Enterprises"), the Trust and the Company, (iii) the Development Agreement (the
"Development Agreement") dated as of December 3, 1997 between the Company and
Northwind Aladdin, LLC, a Nevada limited-liability company (the "Energy
Provider") and (iv) the Design Build Contract (the "Design Build Contract")
dated as of December 4, 1997 (as subsequently amended), between the Company and
Fluor Daniel, Inc., a California corporation (the "Design/Builder").
The following documents are hereinafter collectively referred to as
"Executory Transaction Documents":
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(i) the Holdings Operating Agreement (the "Holdings Operating
Agreement") to be executed as of the Closing Time among the Sommer Enterprises,
Enterprises, GAI, LLC, a Nevada limited-liability company, and LCNI,
(ii) the Equity Participation Agreement to be executed as of the
Closing Time among the Trust, London Clubs, Holdings and the Warrant Agent,
(iii) the Bank Credit Facility (the "Bank Credit Facility") to be
executed as of the Closing Time among the Company, as borrower, various
financial institutions, as lenders (the "Bank Lenders"), The Bank of Nova
Scotia, as Administrative Agent (the "Administrative Agent"), Merrill Lynch
Capital Corporation, as Syndication Agent, and Canadian Imperial Bank of
Commerce, as Documentation Agent,
(iv) the Noteholder Completion Guaranty (the "Noteholder Completion
Guaranty") to be executed as of the Closing Time between London Clubs, the Trust
and Aladdin Bazaar Holdings, LLC, a Nevada limited-liability company ("Bazaar
Holdings") in favor of the Trustee,
(v) the Completion Guaranty to be executed as of the Closing Time
between London Clubs, the Trust and Bazaar Holdings in favor of the
Administrative Agent and the Bank Lenders,
(vi) the Disbursement Agreement (the "Disbursement Agreement") to be
executed as of the Closing Time between Holdings, the Company, the Trustee, The
Bank of Nova Scotia as Administrative Agent under the Bank Credit Facility, The
Bank of Nova Scotia as Disbursement Agent on behalf of the Bank Lenders and the
Trustee (the "Disbursement Agent") and an investment intermediary,
(vii) the Keep-Well Agreement (the "Keep-Well Agreement") to be
executed as of the Closing Time among AHL, Bazaar Holdings and London Clubs in
favor of the Administrative Agent under the Bank Credit Facility,
(viii) the Pledge Agreement to be executed as of the Closing Time,
between Holdings and the Trustee relating to the Series A Preferred Membership
Interests of the Company (the "Preferred Membership Interests Pledge
Agreement"),
(ix) the Note Construction Pledge Agreement to be executed as of the
Closing Time, between the Company and the Trustee relating to the funds
deposited in the Note Construction Disbursement Account (as defined in the
Disbursement Agreement) pursuant to the Disbursement Agreement,
(x) the Salle Privee Management Agreement to be executed as of the
Closing Time, among the Company, London Clubs and LCNI,
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(xi) the Construction, Operation and Reciprocal Easement Agreement to
be executed as of the Closing Time between the Company, Bazaar, and Aladdin
Music, LLC, a Nevada limited-liability company ("Aladdin Music"),
(xii) the Site Work Development and Construction Agreement (the "Site
Work Agreement") to be executed as of the Closing Time between the Company and
Aladdin Bazaar, LLC, a Delaware limited-liability company ("Bazaar"),
(xiii) the Fluor Guaranty (the "Fluor Guaranty") to be executed as of
the Closing Time between the Company and the Fluor Corporation, a California
corporation ("Fluor"),
(xiv) the Lease to be executed as of the Closing Time, between the
Company and the Energy Provider, and
(xv) the Unicom Guaranty (the "Unicom Guaranty") executed as of the
Closing Time between the Company and Unicom Corporation, an Illinois corporation
("Unicom").
The Aladdin Parties have prepared and delivered to each Initial
Purchaser copies of a preliminary offering memorandum dated January 30, 1998
(the "Preliminary Offering Memorandum") and have prepared and will deliver to
each Initial Purchaser, on the date hereof or the next succeeding day, copies of
a final offering memorandum dated February 19, 1998 (the "Final Offering
Memorandum"), each for use by such Initial Purchaser in connection with its
solicitation of purchases of, or offering of, the Units. "Offering Memorandum"
means, with respect to any date or time referred to in this Agreement, the most
recent offering memorandum (whether the Preliminary Offering Memorandum or the
Final Offering Memorandum, or any amendment or supplement to either such
document), which has been prepared and delivered by the Aladdin Parties to the
Initial Purchasers in connection with their solicitation of purchases of, or
offering of, the Units.
SECTION 1. Representations and Warranties of the Aladdin Parties.
(a) Representations and Warranties by the Aladdin Parties.
Each of the Aladdin Parties represents and warrants to each Initial Purchaser as
of the date hereof and as of the Closing Time, and agrees with each Initial
Purchaser as follows:
(i) Similar Offerings. None of the Aladdin Parties
has, directly or indirectly, solicited any offer to buy or
offered to sell, and will not, directly or indirectly, solicit
any offer to buy or offer to sell, any security which is or
would be integrated with the sale of the Units, Notes or
Warrants in a manner that would require the Units, Notes or
Warrants to be registered under the 1933 Act.
(ii) Offering Memorandum. The Offering Memorandum
does not, and at the Closing Time will not, include an untrue
statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading; provided that this representation, warranty and
agreement shall not apply to
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statements in or omissions from the Offering Memorandum made
in reliance upon and in conformity with information furnished
to the Aladdin Parties in writing by any Initial Purchaser
through the Representatives expressly for use in the Offering
Memorandum.
(iii) Independent Accountants. The accountants who
certified the financial statements of the Aladdin Parties and
the Company included in the Offering Memorandum are
independent certified public accountants with respect to each
of the Aladdin Parties and their subsidiaries and the Company
within the meaning of Regulation S-X under the 1933 Act.
(iv) Financial Statements. The financial statements
of Holdings and its consolidated subsidiaries, Enterprises,
Capital and the Company, together with the related schedules
and notes included in the Offering Memorandum present fairly
the financial position, results of operation and changes in
financial position of each such entity at the dates indicated
and for the respective periods specified; said financial
statements have been prepared in conformity with generally
accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods involved. The
forward-looking statements contained in the Offering
Memorandum are based upon good faith estimates and assumptions
believed by the Aladdin Parties to have been reasonable when
made.
(v) No Material Adverse Change in Business. Since the
respective dates as of which information is given in the
Offering Memorandum, except as otherwise stated therein, (A)
with respect to the Issuers, there has been no material
adverse change in the condition, financial or otherwise, or in
the earnings, business affairs or business prospects of the
Issuers and their subsidiaries considered as one enterprise
and, with respect to Enterprises, there has been no material
adverse change in the condition, financial or otherwise, or in
the earnings, business affairs or business prospects of
Enterprises (with respect to either, a "Material Adverse
Effect"), whether or not arising in the ordinary course of
business and (B) there have been no transactions entered into
by any of the Aladdin Parties or any of their subsidiaries,
other than those in the ordinary course of business, which are
material with respect to the Issuers and their subsidiaries
considered as one enterprise or Enterprises.
(vi) Good Standing of the Aladdin Parties. Each of
the Aladdin Parties has been duly organized or incorporated,
as applicable, and is validly existing as a limited-liability
company or corporation, as applicable, in good standing under
the laws of the State of Nevada and has all necessary power
and authority to own, lease and operate its properties and to
conduct its business as described in the Offering Memorandum
and to enter into and perform its obligations under this
Agreement; and each of the Aladdin Parties is duly qualified
as a foreign limited-liability company or corporation, as
applicable, to transact business and is in good standing in
each other jurisdiction in which such
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qualification is required, whether by reason of the ownership
or leasing of property or the conduct of business.
(vii) Good Standing of Designated Subsidiaries. Each
"significant subsidiary" of any of the Aladdin Parties (as
such term is defined in Rule 1-02 of Regulation S-X) (each a
"Designated Subsidiary" and, collectively, the "Designated
Subsidiaries") has been duly organized or incorporated, as
applicable, and is validly existing as a limited-liability
company or corporation, as applicable, in good standing under
the laws of the jurisdiction of its organization or
incorporation, as applicable, has all necessary power and
authority to own, lease and operate its properties and to
conduct its business as described in the Offering Memorandum
and is duly qualified as a foreign limited-liability company
or corporation, as applicable, to transact business and is in
good standing in each jurisdiction in which such qualification
is required, whether by reason of the ownership or leasing of
property or the conduct of business; except as otherwise
disclosed in the Offering Memorandum, all of the issued and
outstanding membership interests or shares of capital stock,
as applicable, of each Designated Subsidiary have been duly
authorized and validly issued and are owned by the applicable
Aladdin Party, directly or through subsidiaries, free and
clear of any security interest, mortgage, pledge, lien,
encumbrance, claim or equity, except for any security
interest, mortgage, pledge, lien, encumbrance, claim or equity
granted or agreed to be granted pursuant to an Executed
Transaction Document or Executory Transaction Document; none
of the outstanding membership interests or shares of capital
stock, as applicable, of the Designated Subsidiaries was
issued in violation of any preemptive or similar rights
arising by operation of law, or under the charter, by-laws or
any other organizational document of such Designated
Subsidiary or under any agreement to which any of the Aladdin
Parties or any Designated Subsidiary is a party.
(viii) Capitalization of Holdings. All outstanding
membership interests of Holdings have been duly authorized and
validly issued and are not subject to any preemptive and
similar rights and are free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or
equity, except for any security interest, mortgage, pledge,
lien, encumbrance, claim or equity granted or agreed to be
granted pursuant to an Executed Transaction Document or
Executory Transaction Document. The table relating to the
capitalization of Holdings under the caption "Capitalization"
in the Offering Memorandum, including the footnotes thereto,
presents fairly, as of its date (i) the capitalization of
Holdings, (ii) the expected capitalization of Holdings after
giving effect to the consummation of the offering of the Units
and the application by Holdings of the net proceeds received
by it therefrom and (iii) the expected capitalization of
Holdings on a consolidated basis after giving effect to the
consummation of the Funding Transactions (as defined in the
Offering Memorandum), the organization of Capital, the
issuance of the Units and the application by Holdings of the
net proceeds received by it therefrom. Capital, the Company
and Aladdin Music Holdings, LLC, a Nevada
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limited-liability company ("Aladdin Music Holdings") are the
only subsidiaries of Holdings.
(ix) Capitalization of Capital. All outstanding
shares of capital stock of Capital have been duly authorized
and validly issued and are fully paid, non-assessable and not
subject to any preemptive or similar rights and are directly
owned by Holdings free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equity. Capital
has no subsidiaries.
(x) Capitalization of Enterprises. All outstanding
shares of capital stock of Enterprises have been duly
authorized and validly issued and are fully paid,
non-assessable and not subject to any preemptive or similar
rights and are free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equity, except
for any security interest, mortgage, pledge, lien,
encumbrance, claim or equity granted or agreed to be granted
pursuant to an Executed Transaction Document or Executory
Transaction Document. The Warrants will entitle the holders
thereof to acquire an aggregate of 2,215,000 shares of Common
Stock. As of the Closing Time, there will be 8,000,000 shares
of Common Stock authorized, of which 2,215,000 will be issued
and outstanding. Enterprises has no subsidiaries.
(xi) Subscription Rights. Except as described in the
Offering Memorandum, none of the Aladdin Parties nor any of
their subsidiaries has any outstanding options to purchase, or
any preemptive rights or other rights to subscribe for or
purchase, any securities or obligations convertible into, or
any contracts or commitments to issue or sell, any of its
equity interests or any such options, rights, convertible
securities or obligations.
(xii) Ranking. When issued, the Notes will rank pari
passu in right of payment with all senior Indebtedness (as
defined in the Indenture) of the Issuers and will rank senior
in right of payment to all subordinated Indebtedness of the
Issuers. As of the Closing Time, and after giving effect to
the Funding Transactions, the Notes will be the only
outstanding Indebtedness of the Issuers.
(xiii) Authorization of Agreement. This Agreement has
been duly authorized, executed and delivered by each of the
Aladdin Parties.
(xiv) Authorization of the Units. The Units have been
duly authorized by each of the Aladdin Parties. At the Closing
Time, the Units will conform in all material respects to the
description thereof contained in the Offering Memorandum.
(xv) Authorization of the Series A Notes. The Series
A Notes have been duly authorized and, at the Closing Time,
will have been duly executed by each of the Issuers and, when
authenticated in the manner provided for in the Indenture and
delivered against payment of the purchase price therefor, will
8
<PAGE>
constitute valid and binding obligations of each of the
Issuers, enforceable against each of the Issuers in accordance
with their terms, except as the enforcement thereof may be
limited by bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or other similar laws relating to
or affecting enforcement of creditors' rights generally, or by
general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at
law), and will be in the form contemplated by, and entitled to
the benefits of, the Indenture. At the Closing Time, the
Series A Notes will conform in all material respects to the
description thereof contained in the Offering Memorandum.
(xvi) Authorization of the Series B Notes. The Series
B Notes have been duly authorized by each of the Issuers. When
the Series B Notes are issued, executed and authenticated in
the manner provided for by the terms of the Exchange Offer and
the Indenture, the Series B Notes will constitute valid and
binding obligations of each of the Issuers, enforceable
against each of the Issuers in accordance with their terms,
except as the enforcement thereof may be limited by
bankruptcy, insolvency (including, without limitation, all
laws relating to fraudulent transfers), reorganization,
moratorium or other similar laws relating to or affecting
enforcement of creditors' rights generally, or by general
principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law), and will be
in the form contemplated by, and entitled to the benefits of,
the Indenture.
(xvii) Authorization of the Series A Preferred
Membership Interests. The Company's Series A Preferred
Membership Interests (the "Preferred Membership Interests")
have been duly authorized by the Company and, when issued and
delivered to Holdings in the manner set forth under the
caption "Use of Proceeds" in the Offering Memorandum, will be
validly issued and not subject to any preemptive or similar
rights and, other than in connection with and subject to the
Preferred Membership Interests Pledge Agreement, will be
directly owned by Holdings free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or
equity. At the Closing Time, the Preferred Membership
Interests will conform in all material respects to the
description thereof contained in the Offering Memorandum.
(xviii) Authorization of the Indenture. The Indenture
has been duly authorized by each of the Issuers and, at the
Closing Time, will have been duly executed and delivered by
each of the Issuers and will constitute a valid and binding
agreement of each of the Issuers, enforceable against each of
the Issuers in accordance with its terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or other
similar laws relating to or affecting enforcement of
creditors' rights generally, or by general principles of
equity (regardless of whether enforcement is considered in a
proceeding in equity
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or at law). At the Closing Time, the Indenture will conform
in all material respects to the requirements of the Trust
Indenture Act of 1939, as amended (the "1939 Act"), and
the rules and regulations of the Commission applicable to
an indenture which qualified thereunder.
(xix) Authorization of the Note Registration Rights
Agreement. The Note Registration Rights Agreement has been
duly authorized by each of the Issuers and, at the Closing
Time, will have been duly executed and delivered by each of
the Issuers and will constitute a valid and binding agreement
of each of the Issuers, enforceable against each of the
Issuers in accordance with its terms except (i) as the
enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or other
similar laws relating to or affecting enforcement of
creditors' rights generally, or by general principles of
equity (regardless of whether enforcement is considered in a
proceeding in equity or at law) and (ii) as limited by
state or federal securities laws prohibiting or limiting
the availability of, and public policy against,
indemnification or contribution. At the Closing Time,
the Note Registration Rights Agreement will conform in
all material respects to the description thereof contained
in the Offering Memorandum.
(xx) Authorization of the Warrants. The Warrants have
been duly authorized and at the Closing Time, will have been
duly executed by Enterprises, and when issued in the manner
provided for in the Warrant Agreement and delivered against
payment of the purchase price therefor will constitute valid
and binding obligations of Enterprises, enforceable against
Enterprises in accordance with their terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or other
similar laws relating to or affecting enforcement of
creditors' rights generally, or by general principles of
equity (regardless of whether enforcement is considered in a
proceeding in equity or at law), and will be in the form
contemplated by, and entitled to the benefits, of the Warrant
Agreement. At the Closing Time, the Warrants will conform in
all material respects to the description thereof contained in
the Offering Memorandum.
(xxi) Authorization of the Warrant Shares. The
Warrants are exercisable into Warrant Shares in accordance
with the terms of the Warrant Agreement. Enterprises has duly
authorized and reserved for issuance the Warrant Shares and,
when issued and paid for upon exercise of the Warrants in
accordance with the terms thereof, the Warrant Shares will be
validly issued, fully paid and nonassessable, free of any
preemptive or similar rights. At the Closing Time, the Warrant
Shares will conform in all material respects to the
description thereof contained in the Offering Memorandum.
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(xxii) Authorization of the Warrant Agreement. The
Warrant Agreement has been duly authorized by Enterprises and,
at the Closing Time, will have been duly executed and
delivered by Enterprises and will constitute a valid and
binding agreement of Enterprises, enforceable against
Enterprises in accordance with its terms except as the
enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or other
similar laws relating to or affecting enforcement of
creditors' rights generally, or by general principles of
equity (regardless of whether enforcement is considered in a
proceeding in equity or at law).
(xxiii) Authorization of the Warrant Registration
Rights Agreement. The Warrant Registration Rights Agreement
has been duly authorized by Enterprises and, at the Closing
Time, will have been duly executed and delivered by
Enterprises and will constitute a valid and binding agreement
of Enterprises, enforceable against Enterprises in accordance
with its terms except (i) as the enforcement thereof may be
limited by bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or other similar laws relating to
or affecting enforcement of creditors' rights generally, or by
general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law)
and (ii) as limited by state or federal securities laws
prohibiting or limiting the availability of, and public policy
against, indemnification or contribution. At the Closing Time,
the Warrant Registration Rights Agreement will conform in all
material respects to the description thereof contained in the
Offering Memorandum.
(xxiv) Authorization of the Executed Transaction
Documents. Each of the Executed Transaction Documents to which
an Aladdin Party is a party has been duly authorized, executed
and delivered by each such Aladdin Party that is a party
thereto and constitutes a valid and binding agreement of each
such party, enforceable against each such party in accordance
with its terms except as the enforcement thereof may be
limited by bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or other similar laws relating to
or affecting enforcement of creditors' rights generally, or by
general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at
law). At the Closing Time, each of the Executed Transaction
Documents that is described in the Offering Memorandum will
conform in all material respects to the description thereof
contained in the Offering Memorandum.
(xxv) Authorization of the Executory Transaction
Documents. Each of the Executory Transaction Documents to
which an Aladdin Party is a party has been duly authorized by
each such Aladdin Party that is a party thereto and, at the
Closing Time, will have been duly executed and delivered by
each such party and will constitute a valid and binding
agreement of each such party, enforceable
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against each such party in accordance with its terms except as
the enforcement thereof may be limited by bankruptcy,
insolvency (including, without limitation, all laws relating
to fraudulent transfers), reorganization, moratorium or other
similar laws relating to or affecting enforcement of
creditors' rights generally, or by general principles of
equity (regardless of whether enforcement is considered in a
proceeding in equity or at law). At the Closing Time, each of
the Executory Transaction Documents will conform in all
material respects to the description thereof contained in the
Offering Memorandum.
(xxvi) Absence of Defaults and Conflicts. None of the
Aladdin Parties or any of their subsidiaries is in violation
of its charter, by-laws or any other organizational document
or in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, deed of trust, loan or credit
agreement, note, lease or other agreement or instrument to
which it is a party or by which it may be bound, or to which
any of its property or assets is subject (collectively,
"Agreements and Instruments") except for such defaults that
would not result in a Material Adverse Effect; and the
execution, delivery and performance of this Agreement, the
Units, the Series A Notes, the Series B Notes, the Indenture,
the Note Registration Rights Agreements, the Warrant
Agreement, the Warrants, the Warrant Registration Rights
Agreements, the Executed Transaction Documents to the extent
that any of the Aladdin Parties is a party, the Executory
Transaction Documents to the extent that any of the Aladdin
Parties will be a party and any other agreement or instrument
entered into or issued or to be entered into or issued by any
of the Aladdin Parties or any of their subsidiaries in
connection with the transactions contemplated hereby or
thereby or in the Offering Memorandum and the consummation of
the transactions contemplated herein and in the Offering
Memorandum (including the issuance and sale of the Units and
the use of the proceeds from the sale of the Units as
described in the Offering Memorandum under the caption "Use of
Proceeds") and compliance by any of the Aladdin Parties with
their obligations hereunder have been duly authorized by all
necessary action and do not and will not, whether with or
without the giving of notice or passage of time or both,
conflict with or constitute a breach of, or default or a
Repayment Event (as defined below) under, or, except with
respect to the transactions contemplated by the Offering
Memorandum, result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of any of
the Aladdin Parties or any of their subsidiaries pursuant to,
the Agreements and Instruments except for such conflicts,
breaches or defaults or liens, charges or encumbrances that,
singly or in the aggregate, would not result in a Material
Adverse Effect, nor will such execution, delivery, performance
or compliance result in any violation of the provisions of the
charter, by-laws or any other organizational document of such
Aladdin Party or any such subsidiary or, except as would not
have a Material Adverse Effect, any applicable law, statute,
rule, regulation, judgment, order, writ or decree of any
government, government instrumentality or court, domestic or
foreign, having jurisdiction over it or any of
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its assets or properties. As used herein, a "Repayment Event"
means any event or condition which gives the holder of any
note, debenture or other evidence of indebtedness (or any
person acting on such holder's behalf) the right to require
the repurchase, redemption or repayment of all or a portion of
such indebtedness by any of the Aladdin Parties or any of
their subsidiaries.
(xxvii) Absence of Labor Dispute. No labor dispute
with the employees of any of the Aladdin Parties or any of
their subsidiaries exists or, to the knowledge of any of the
Aladdin Parties, is imminent, and none of the Aladdin Parties
is aware of any existing or imminent material labor
disturbance by the employees of any of their or any of the
Company's principal suppliers or contractors, which, in either
case, may reasonably be expected to result in a Material
Adverse Effect.
(xxviii) Absence of Proceedings. There is no action,
suit, proceeding, inquiry or investigation before or by any
court or governmental agency or body, domestic or foreign, now
pending, or, to the knowledge of any of the Aladdin Parties,
threatened, against or affecting any of the Aladdin Parties or
any subsidiary thereof which might reasonably be expected to
result in a Material Adverse Effect, or which might reasonably
be expected to materially and adversely affect the properties
or assets of any of the Aladdin Parties or any of their
subsidiaries or the consummation of this Agreement or the
performance by any of the Aladdin Parties of their obligations
hereunder or under any of the other Operative Documents, the
Executed Transaction Documents or the Executory Transaction
Documents, except as disclosed in the Offering Memorandum.
Except as disclosed in the Offering Memorandum, the aggregate
of all pending legal or governmental proceedings to which any
of the Aladdin Parties or any subsidiary thereof is a party or
of which any of their respective property or assets is the
subject, including ordinary routine litigation incidental to
the business, could not reasonably be expected to result in a
Material Adverse Effect.
(xxix) Possession of Intellectual Property. The
Company will at the Closing Time own or have contractual
rights to acquire or be able to acquire on reasonable terms,
adequate licenses, copyrights, know-how (including trade
secrets and other unpatented and/or unpatentable proprietary
or confidential information, systems or procedures),
trademarks, service marks, trade names or other intellectual
property (collectively, "Intellectual Property") which will be
employed by it in connection with the operation of its
business in the manner described in the Offering Memorandum,
and none of the Aladdin Parties or any of their subsidiaries
has received any notice or is otherwise aware of any
infringement of or conflict with asserted rights of others
with respect to any Intellectual Property or of any facts or
circumstances which would render any Intellectual Property
invalid or inadequate to protect the interest of the Company,
and which infringement or conflict (if the subject of any
unfavorable decision,
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ruling or finding) or invalidity or inadequacy, singly or in
the aggregate, would result in a Material Adverse Effect.
(xxx) Absence of Further Requirements. No filing
with, or authorization, approval, consent, license, order,
registration, qualification or decree of, any court or
governmental authority or agency is necessary or required for
the performance by any of the Aladdin Parties of their
obligations hereunder or in connection with issuance and sale
of the Units hereunder or, except as contemplated by the
Offering Memorandum, for the consummation of the transactions
contemplated by this Agreement.
(xxxi) Possession of Licenses and Permits. Each of
the Aladdin Parties and their subsidiaries possesses such
permits, licenses, franchises, certificates, approvals,
consents and other authorizations (collectively, "Governmental
Licenses") issued by, and has made all declarations and
filings with the appropriate federal, state, local or foreign
regulatory agencies or bodies necessary to own, lease and
operate its respective properties and to conduct the
businesses now operated by them, except (i) where the failure
thereof would not, singly or in the aggregate, have a Material
Adverse Effect, (ii) for Governmental Licenses which the
Aladdin Parties and their subsidiaries would not customarily
possess at the date hereof but which customarily would be
obtained in the ordinary course of development of the Aladdin
(as defined in the Indenture) and (iii) for any Governmental
Licenses to be issued by any Gaming Authority (as defined in
the Indenture) which are necessary for any of the Aladdin
Parties or any of their subsidiaries to own and operate the
Aladdin, and no such Government License contains, or is
expected by the Aladdin Parties to contain, a materially
burdensome restriction; each of the Aladdin Parties and their
subsidiaries is in compliance with the terms and conditions of
all such Governmental Licenses, except where the failure so to
comply would not, singly or in the aggregate, have a Material
Adverse Effect; all of the Governmental Licenses are valid and
in full force and effect, except when the invalidity of such
Governmental Licenses or the failure of such Governmental
Licenses to be in full force and effect would not have a
Material Adverse Effect; and none of the Aladdin Parties or
any of their subsidiaries has received any notice of
proceedings relating to the revocation or modification of any
such Governmental Licenses which, singly or in the aggregate,
if the subject of an unfavorable decision, ruling or finding,
would result in a Material Adverse Effect. None of the Aladdin
Parties nor any of their subsidiaries believes that any such
Governmental Authorization necessary in the future to own or
operate the Aladdin in the manner described in the Offering
Memorandum will not be granted in due course following
application or that any governmental agency is investigating
any of the Aladdin Parties or any of their subsidiaries, other
than ordinary course administrative reviews or any ordinary
course review of the transactions contemplated hereby or by
any such application.
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(xxxii) Title to Property. Each of the Aladdin
Parties and their subsidiaries have good and marketable title
to all real and personal property and other assets reflected
in the financial statements in the Offering Memorandum as
owned by them, free and clear of all security interests,
mortgages, pledges, liens, encumbrances, claims or equities of
any kind except such as (a) are described in the Offering
Memorandum or (b) do not, singly or in the aggregate,
materially affect the value of such property and do not
interfere with the use made and proposed to be made of such
property by any of the Aladdin Parties or any of their
subsidiaries; and, except as would not, singly or in the
aggregate, have a Material Adverse Effect, all of the leases
and subleases material to the businesses of any of the Issuers
and their subsidiaries considered as one enterprise, or
Enterprises and their subsidiaries considered as one
enterprise, and under which any of the Aladdin Parties or any
of their subsidiaries holds properties described in the
Offering Memorandum, are valid and binding and in full force
and effect; and, except as would not, singly or in the
aggregate, have a Material Adverse Effect, none of the Aladdin
Parties or any of their subsidiaries has any notice of any
default or material claim of any sort that has been asserted
by anyone adverse to the rights of any of the Aladdin Parties
or any of their subsidiaries under any of the leases or
subleases mentioned above, or affecting or questioning the
rights of any of the Aladdin Parties or any of their
subsidiaries to the continued possession of the leased or
subleased premises under any such lease or sublease.
(xxxiii) Personal and Real Property of the Company.
At the Closing Time, the Company will have good and marketable
title in fee simple to the Project Site (as defined in the
Indenture) and good and marketable title to all personal
property owned by the Company which is material to the
business of the Company, free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equity
and defects, except (i) as contemplated by the Executed
Transaction Documents or the Executory Transaction Documents
and (ii) such as do not materially affect the value of such
property and do not interfere with the use made and proposed
to be made of such property by the Company in connection with
its business as described in the Offering Memorandum; and
there are no leases under which the Company holds real
property.
(xxxiv) Tax Returns. Each of the Aladdin Parties and
their subsidiaries have filed all federal, state, local and
foreign tax returns that are required to be filed or have duly
requested extensions thereof and have paid all taxes required
to be paid by any of them and any related assessments, fines
or penalties, except for any such tax, assessment, fine or
penalty that is being contested in good faith and by
appropriate proceedings; and adequate charges, accruals and
reserves have been provided for in the financial statements
referred to in Section 1(a)(iv) above in respect of all
federal, state, local and foreign taxes for all periods to
which such financial statements relate as to which the tax
liability of any of the Aladdin
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Parties or any of their subsidiaries has not been finally
determined or remains open to examination by applicable taxing
authorities.
(xxxv) Environmental Laws. Except as described in the
Offering Memorandum and except such matters as would not,
singly or in the aggregate, result in a Material Adverse
Effect, (A) none of the Aladdin Parties or any of their
subsidiaries is in violation of any federal, state or local
statute, law, rule, regulation, ordinance, code, policy or
rule of common law or any judicial or administrative
interpretation thereof, including any judicial or
administrative order, consent, decree or judgment, relating to
pollution or protection of human health, the environment
(including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or wildlife,
including, without limitation, laws and regulations relating
to the release or threatened release of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances,
petroleum or petroleum products (collectively, "Hazardous
Materials") or to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of
Hazardous Materials (collectively, "Environmental Laws"), (B)
each of the Aladdin Parties and their subsidiaries have all
permits, authorizations and approvals required under any
applicable Environmental Laws and are each in compliance with
their requirements, (C) there are no pending or, to the
knowledge of the Aladdin Parties, threatened administrative,
regulatory or judicial actions, suits, demands, demand
letters, claims, liens, notices of noncompliance or violation,
investigation or proceedings relating to any Environmental Law
against any of the Aladdin Parties or any of their
subsidiaries and (D) there are no events or circumstances that
might reasonably be expected to form the basis of an order for
clean-up or remediation, or an action, suit or proceeding by
any private party or governmental body or agency, against or
affecting any of the Aladdin Parties or any of their
subsidiaries relating to Hazardous Materials or Environmental
Laws.
(xxxvi) Investment Company Act. None of the Aladdin
Parties are, and upon the issuance and sale of the Units as
herein contemplated and the application of the net proceeds
therefrom as described in the Offering Memorandum, will not
be, an "investment company" or an entity "controlled" by an
"investment company" as such terms are defined in the
Investment Company Act of 1940, as amended (the "1940 Act"),
required to register under the 1940 Act.
(xxxvii) Rule 144A Eligibility. The Securities are
eligible for resale pursuant to Rule 144A and will not be, at
the Closing Time, of the same class as securities listed on a
national securities exchange registered under Section 6 of the
Securities Exchange Act of 1934, as amended (the "1934 Act"),
or quoted in a U.S. automated interdealer quotation system.
(xxxviii) No General Solicitation. None of the
Aladdin Parties or their subsidiaries or any person acting on
their respective behalf (other than the Initial
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Purchasers, their officers, employees and agents, as to whom
the Aladdin Parties make no representation) has engaged or
will engage, in connection with the offering of the Units, in
any form of general solicitation or general advertising within
the meaning of Rule 502(c) under the 1933 Act.
(xxxix) No Registration Required. Subject to
compliance by the Initial Purchasers with the representations
and warranties set forth in Section 4 and the procedures set
forth in Section 8 hereof, it is not necessary in connection
with the offer, sale and delivery of the Units to the Initial
Purchasers and to each Subsequent Purchaser in the manner
contemplated by this Agreement and the Offering Memorandum to
register the Securities under the 1933 Act or to qualify the
Indenture under the 1939 Act.
(xl) Accounting System. Each of the Aladdin Parties
and their subsidiaries maintains a system of internal
accounting controls sufficient to provide reasonable
assurances that (A) transactions are executed in accordance
with management's general or specific authorization, (B)
transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for
assets, (C) access to assets is permitted only in accordance
with management's general or specific authorization and (D)
the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(xli) Insurance. As of the Closing Time, the Aladdin
Parties and their subsidiaries are insured by and maintain
insurance covering, or are the named beneficiaries of
insurance maintained by third parties covering, their
respective properties, with insurers of recognized financial
responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in
which they are engaged; and none of the Aladdin Parties nor
their subsidiaries has any reason to believe that such
insurance coverage can not be renewed as and when such
coverage expires or that similar coverage could not be
obtained from similar insurers at a cost that would not have a
Material Adverse Effect.
(xlii) No Agreement for Filing a Registration
Statement. There are no persons with registration rights or
other similar rights to have any securities registered
pursuant to any registration statement or otherwise registered
by any of the Aladdin Parties under the 1933 Act, except
persons having such rights pursuant to the Notes Registration
Statements, the Warrant Shelf Registration Statement and the
Consulting Agreement dated as of July 1, 1997, between GAI,
LLC and the Company.
(xliii) Distribution of the Offering Memorandum. None of
the Aladdin Parties or any of their subsidiaries has
distributed and, prior to the later to occur of
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(i) the Closing Time and (ii) completion of the distribution
of the Units, will distribute any offering materials in
connection with the offering and sale of the Units other than
the Preliminary Offering Memorandum, the Final Offering
Memorandum and any amendment and supplements thereto, if any,
unless permitted by the 1933 Act and approved by the
Representatives (which approval shall not be unreasonably
withheld or delayed).
(xliv) Tax Treatment. Holdings qualifies as a
partnership and not an association or publicly traded
partnership taxable as a corporation and the Company qualifies
as a division of Holdings for federal income tax purposes.
(xlv) Compliance with Federal Reserve System
Regulations. None of the Aladdin Parties, any of their
subsidiaries or any agent thereof acting on the behalf of any
of them has taken, and none of them will take, any action that
might cause this Agreement or the issuance or sale of the
Units to violate Regulation G (12 C.F.R. Part 207), Regulation
T (12 C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or
Regulation X (12 C.F.R. Part 224) of the Board of Governors of
the Federal Reserve System.
(xlvi) Compliance with Rule 144A. Each of the
Preliminary Offering Memorandum and the Offering Memorandum,
as of its date, contains all the information specified in, and
meeting the requirements of, Rule 144A(d)(4) under the 1933
Act.
(xlvii) No Change in Rating. No "nationally recognized
statistical rating organization" as such term is defined for
purposes of Rule 436(g)(2) under the 1933 Act (i) has imposed
(or has informed any of the Aladdin Parties that it is
considering imposing) any condition (financial or otherwise)
on any of the Aladdin Parties retaining any rating assigned to
any of the Aladdin Parties or any securities of any of the
Aladdin Parties or (ii) has indicated to any of the Aladdin
Parties that it is considering (a) the downgrading,
suspension, or withdrawal of, or any review for a possible
change that does not indicate the direction of the possible
change in, any rating so assigned or (b) any change in the
outlook for any rating of any of the Aladdin Parties or any
securities of any of the Aladdin Parties.
(xlviii) ERISA. None of the Aladdin Parties or any of
their subsidiaries has violated any provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"),
or the rules and regulations promulgated thereunder, except
for such violations which, singly or in the aggregate, would
not have a Material Adverse Effect. If any such plan is
adopted, the execution and delivery of this Agreement and the
sale of the Units will not involve any non-exempt prohibited
transaction within the meaning of Section 406 of ERISA or
Section 4975 of the Internal Revenue Code of 1986, as amended.
The representations made in the preceding sentence are made in
reliance upon and subject to the accuracy of, and compliance
with, the representations and covenants
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made or deemed made by the Initial Purchasers as set forth in
the Offering Memorandum under "Notice to Investors."
(xlix) Operation of the Aladdin. The contemplated
operation and use of the Aladdin, including the construction
of the Aladdin, will be (giving effect to any waivers or
variances which may be obtained) in compliance with all
applicable municipal, county, state and federal laws,
regulations, ordinances, standards, orders, and other
regulations, except as would not, singly or in the aggregate,
have a Material Adverse Effect. Under applicable zoning and
use laws, ordinances, rules and regulations, the Aladdin may
be used for the purposes contemplated in the Offering
Memorandum.
(l) Plans and Specifications. The Initial Purchasers
have been furnished with a copy of the plans and
specifications for the construction of the improvements of the
Aladdin and other necessary expenditures. Such plans and
specifications are satisfactory to the Aladdin Parties. The
anticipated cost by the Aladdin Parties as of the Closing Time
of such improvements (including interest, legal,
architectural, engineering, planning, zoning and other similar
costs) does not exceed the amounts for such costs set forth
under the caption "Use of Proceeds" in the Offering
Memorandum. In addition, each of the other amounts set forth
in the section entitled "Sources and Uses of Funds" under the
caption "Use of Proceeds" in the Offering Memorandum are based
upon reasonable assumptions as to all matters material to the
estimates set forth therein and are not expected by the
Aladdin Parties to exceed the amounts set forth for such
items.
(li) Disbursement Budget and Construction Schedule.
The Disbursement Budget (as defined in the Disbursement
Agreement) and the Construction Schedule (as defined in the
Disbursement Agreement), as of the Closing Time, (i) are, in
the opinion of the Aladdin Parties after due investigation,
based on reasonable assumptions as to all legal and factual
matters material to the estimates set forth therein and
relying to a large extent on professional advisors and (ii)
call for the construction of the Minimum Aladdin Facilities
(as defined in the Indenture) on or prior to the Operating
Deadline (as defined in the Indenture).
(b) Officer's Certificates. Any certificate signed by any
officer of any of the Aladdin Parties or any of their subsidiaries delivered to
the Representatives or to counsel for the Initial Purchasers shall be deemed a
representation and warranty by such Aladdin Party to each Initial Purchaser as
to the matters covered thereby.
SECTION 2. Representations and Warranties of London Clubs.
(a) Representations and Warranties by London Clubs. London
Clubs represents and warrants to each Initial Purchaser as of the date hereof
and as of the Closing Time, and agrees with each Initial Purchaser as follows:
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(i) Good Standing of London Clubs and LCNI. Each of
London Clubs and LCNI has been duly incorporated, is validly
existing and is a corporation in good standing under the laws
of its jurisdiction of incorporation and has all necessary
corporate power and authority to carry on its business and to
own, lease and operate its properties, and is duly qualified
and is in good standing as a foreign corporation authorized to
do business in each jurisdiction in which the nature of its
business or its ownership or leasing of property requires such
qualification, except, with respect to London Clubs, where the
failure to be so qualified would not have a material adverse
effect on its business, prospects, financial condition or
results of operations. London Clubs owns all of the
outstanding shares of capital stock of LCNI.
(ii) Authorization of this Agreement. This Agreement
has been duly authorized, executed and delivered by London
Clubs.
(iii) Absence of Defaults and Conflicts. Neither of
London Clubs or LCNI is in violation of its charter, by-laws
or any other organizational document or in default in the
performance or observance of any obligation, agreement,
covenant or condition contained in any contract, indenture,
mortgage, deed of trust, loan or credit agreement, note, lease
or other agreement or instrument to which either of them is a
party or by which or either of them may be bound, or to which
any of the property or assets of either of them is subject
(collectively, "LCI Agreements and Instruments") except for
such defaults that would not result in a material adverse
change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of either of
London Clubs or LCNI; and the execution, delivery and
performance of this Agreement and compliance by either of
London Clubs or LCNI with their obligations hereunder have
been duly authorized by all necessary action, other than in
connection with the U.S. Facilities Agreement banks with
National Westminster PLC as arranger and U.S. 1997 Noteholders
which shall be obtained prior to the Closing Time, and do not
and will not, whether with or without the giving of notice or
passage of time or both, conflict with or constitute a breach
of, or default or any event or condition which gives the
holder of any note, debenture or other evidence of
indebtedness (or any person acting on such holder's behalf)
the right to require the repurchase, redemption or repayment
of all or a portion of such indebtedness by London Clubs or
LCNI under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of
either of them pursuant to, the LCI Agreements and Instruments
except for such conflicts, breaches or defaults or liens,
charges or encumbrances that, singly or in the aggregate,
would not result in a material adverse change in the
condition, financial or otherwise, or in the earnings,
business affairs or business prospects of either of London
Clubs or LCNI, nor will such action result in any violation of
the provisions of the charter, by-laws or any other
organizational document of any of either London Clubs or LCNI
or any applicable law, statute, rule, regulation, judgment,
order, writ or
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decree of any government, government instrumentality or court,
domestic or foreign, having jurisdiction over either or them
or any of their assets or properties.
(iv) Absence of Further Requirements. Other than the
approval of the shareholders of London Clubs and approvals
necessary in connection with the U.S. Facilities Agreement
banks with National Westminster PLC as arranger and U.S. 1997
Noteholders, each of which shall be obtained prior to the
Closing Time, no filing with, or authorization, approval,
consent, license, order, registration, qualification or decree
of, any court or governmental authority or agency or any other
party is necessary or required for the performance by either
of London Clubs or LCNI of their obligations hereunder.
(v) Independent Accountants. The accountants who
audited the financial statements of London Clubs included in
the Offering Memorandum are independent certified public
accountants with respect to London Clubs and their
subsidiaries within the meaning of Regulation S-X under the
1933 Act.
(b) Officer's Certificates. Any certificate signed by any
officer of London Clubs or LCNI delivered to the Representatives or to counsel
for the Initial Purchasers shall be deemed a representation and warranty by
London Clubs or LCNI, as applicable, to each Initial Purchaser as to the matters
covered thereby.
SECTION 3.Representations and Warranties of the Trust and AHL.
(a) Representations and Warranties by the Trust and AHL. Each
of the Trust and AHL represents and warrants to each Initial Purchaser as of the
date hereof and as of the Closing Time, and agrees with each Initial Purchaser
as follows:
(i) Good Standing of the Trust and AHL. Each of the
Trust and AHL has been duly organized or incorporated, as
applicable, is validly existing and is a trust or
limited-liability company, as applicable, in good standing
under the laws of its jurisdiction of organization or
incorporation, as applicable, and has all necessary power and
authority to carry on its business and to own, lease and
operate its properties, and is duly qualified and is in good
standing as a foreign trust or limited-liability company, as
applicable, authorized to do business in each jurisdiction in
which the nature of its business or its ownership or leasing
of property requires such qualification, except, with respect
to the Trust, where the failure to be so qualified would not
have a material adverse effect on its business, prospects,
financial condition or results of operations. The Trust owns
95% of the outstanding membership interests of AHL.
(ii) Authorization of this Agreement. This Agreement
has been duly authorized, executed and delivered by each of
the Trust and AHL.
(iii) Absence of Defaults and Conflicts. Neither of
the Trust or AHL is in violation of its charter, by-laws or
any other organizational document or in
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default in the performance or observance of any obligation,
agreement, covenant or condition contained in any contract,
indenture, mortgage, deed of trust, loan or credit agreement,
note, lease or other agreement or instrument to which either
of them is a party or by which or either of them may be bound,
or to which any of the property or assets of either of them is
subject (collectively, "Sommer Agreements and Instruments")
except for such defaults that would not result in a material
adverse change in the condition, financial or otherwise, or in
the earnings, business affairs or business prospects of either
of the Trust or AHL; and the execution, delivery and
performance of this Agreement and compliance by either of the
Trust or AHL with their obligations hereunder have been duly
authorized by all necessary action and do not and will not,
whether with or without the giving of notice or passage of
time or both, conflict with or constitute a breach of, or
default or any event or condition which gives the holder of
any note, debenture or other evidence of indebtedness (or any
person acting on such holder's behalf) the right to require
the repurchase, redemption or repayment of all or a portion of
such indebtedness by the Trust or AHL under, or result in the
creation or imposition of any lien, charge or encumbrance upon
any property or assets of either of them pursuant to, the
Sommer Agreements and Instruments except for such conflicts,
breaches or defaults or liens, charges or encumbrances that,
singly or in the aggregate, would not result in a material
adverse change in the condition, financial or otherwise, or in
the earnings, business affairs or business prospects of either
of the Trust or AHL, nor will such action result in any
violation of the provisions of the charter, by-laws or any
other organizational document of any of either the Trust or
AHL or , except to the extent that such action would not
result in a material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs
or business prospects of either of the Trust or AHL, any
applicable law, statute, rule, regulation, judgment, order,
writ or decree of any government, government instrumentality
or court, domestic or foreign, having jurisdiction over either
or them or any of their assets or properties.
(iv) Absence of Further Requirements. No filing with,
or authorization, approval, consent, license, order,
registration, qualification or decree of, any court or
governmental authority or agency is necessary or required for
the performance by either the Trust or AHL of their
obligations hereunder.
(b) Officer's Certificates. Any certificate signed by any
officer of the Trust or AHL delivered to the Representatives or to counsel for
the Initial Purchasers shall be deemed a representation and warranty by the
Trust or AHL, as applicable, to each Initial Purchaser as to the matters covered
thereby.
SECTION 4. Sale and Delivery to Initial Purchasers; Closing.
(a) Units. On the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Aladdin Parties agree to sell to each Initial Purchaser, severally and not
jointly, and each Initial Purchaser, severally and not jointly,
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agrees to purchase from the Aladdin Parties, at the price set forth in Schedule
B, the number of Units set forth in Schedule A opposite the name of such Initial
Purchaser, plus any additional Units which such Initial Purchaser may become
obligated to purchase pursuant to the provisions of Section 13 hereof.
(b) Payment. Payment of the purchase price for, and delivery
of certificates for, the Units shall be made at the office of Mayer Brown &
Platt, 1675 Broadway, New York, New York, or at such other place as shall be
agreed upon by the Representatives and the Aladdin Parties, at 9:00 A.M. (New
York City time), on the fifth business day after the date hereof (unless
postponed in accordance with the provisions of Section 13), or such other time
not later than ten business days after such date as shall be agreed upon by the
Representatives and the Aladdin Parties (such time and date of payment and
delivery being herein called the "Closing Time").
Payment shall be made to the Aladdin Parties by wire transfer of
immediately available funds to bank accounts designated by the Aladdin Parties,
against delivery to the Representatives for the respective accounts of the
Initial Purchasers of certificates for the Units to be purchased by them. It is
understood that each Initial Purchaser has authorized the Representatives, for
its account, to accept delivery of, receipt for, and make payment of the
purchase price for, the Units which it has agreed to purchase. Merrill Lynch,
individually and not as representative of the Initial Purchasers, may (but shall
not be obligated to) make payment of the purchase price for the Units to be
purchased by any Initial Purchaser whose funds have not been received by the
Closing Time, but such payment shall not relieve such Initial Purchaser from its
obligations hereunder. The certificates representing the Units shall be
registered in the name of Cede & Co. pursuant to the DTC Agreement and shall be
made available for examination and packaging by the Initial Purchasers in the
City of New York not later than 3:00 p.m. (New York City time) on the last
business day prior to the Closing Time.
(c) Qualified Institutional Buyer. Each Initial Purchaser
severally and not jointly represents and warrants to, and agrees with, the
Aladdin Parties that it is a "qualified institutional buyer" within the meaning
of Rule 144A under the 1933 Act (a "Qualified Institutional Buyer") and an
"accredited investor" within the meaning of Rule 501(a) under the 1933 Act (an
"Accredited Investor").
(d) Registration; Denominations. One or more Units in
definitive global form, registered in the name of Cede & Co., as nominee of the
Depository Trust Company ("DTC"), having an aggregate amount corresponding to
the aggregate amount of the Units sold to Subsequent Purchasers (collectively,
the "Global Unit"), shall be delivered by the Aladdin Parties to the
Representatives (or as the Representatives direct) in each case with any
transfer taxes thereon duly paid by the Aladdin Parties, against payment by the
Representatives of the purchase price therefor in accordance with this Section
4. The Global Unit shall be made available to the Representatives for inspection
not later than 3:00 p.m. (New York City time) on the business day immediately
preceding the Closing Time.
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SECTION 5. Covenants of Each of the Aladdin Parties. Each of the
Aladdin Parties covenants with each Initial Purchaser as follows:
(a) Suspension of Qualification. The Aladdin Parties will, as
promptly as possible after receipt of notice thereof, advise each Initial
Purchaser of the issuance by any state securities commission of any stop order
suspending the qualification or exemption from qualification of any Units for
offering or sale in any jurisdiction, or the initiation of any proceeding by any
state securities commission or other federal or state regulatory agency for such
purpose. The Aladdin Parties shall use their best efforts to prevent the
issuance of any stop order or order suspending the qualification or exemption of
any of the Units under any state securities or Blue Sky laws, and if at any time
any state securities commission or other federal or state regulatory authority
shall issue an order suspending the qualification or exemption of any Units
under any state securities or Blue Sky laws, the Aladdin Parties shall use their
best efforts to obtain the withdrawal or lifting of such order at the earliest
possible time.
(b) Offering Memorandum. The Aladdin Parties, as promptly as
possible, will furnish to each Initial Purchaser, without charge, such number of
copies of the Preliminary Offering Memorandum, the Final Offering Memorandum and
any amendments and supplements thereto and documents incorporated by reference
therein as such Initial Purchaser may reasonably request.
(c) Notice and Effect of Material Events. The Aladdin Parties
will as promptly as reasonably practicable notify each Initial Purchaser, and
confirm such notice in writing, of (x) any filing made by any of the Aladdin
Parties of information relating to the offering of the Units with any securities
exchange or any other regulatory body in the United States or any other
jurisdiction, and (y) prior to the completion of the placement of the Units by
the Initial Purchasers as evidenced by a notice in writing from the Initial
Purchasers to the Aladdin Parties, any material changes in or affecting the
earnings, business affairs or business prospects of any of the Aladdin Parties
and their subsidiaries, the Trust, AHL, London Clubs or LCNI which (i) make any
statement of fact in the Offering Memorandum untrue or (ii) constitute an
omission of material fact from the Offering Memorandum necessary so that the
Offering Memorandum will omit to state a material fact necessary in order to
make the statements therein, in light of the circumstances in which they were
made, not misleading. In such event or if during such time any event shall occur
as a result of which it is necessary, in the reasonable opinion of any of the
Aladdin Parties, their counsel, the Initial Purchasers or counsel for the
Initial Purchasers, to amend or supplement the Final Offering Memorandum in
order that the Final Offering Memorandum not include any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein not misleading in the light of the circumstances then
existing, the Aladdin Parties will forthwith amend or supplement the Final
Offering Memorandum by preparing and furnishing to each Initial Purchaser an
amendment or amendments of, or a supplement or supplements to, the Final
Offering Memorandum (in form and substance satisfactory in the reasonable
opinion of counsel for the Initial Purchasers) so that, as so amended or
supplemented, the Final Offering Memorandum will not include an untrue statement
of a material fact or omit to state a material fact necessary in order to make
the
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statements therein, in the light of the circumstances existing at the time
it is delivered to a Subsequent Purchaser, not misleading.
(d) Amendment to Offering Memorandum and Supplements. The
Aladdin Parties will advise each Initial Purchaser promptly of any proposal to
amend or supplement the Offering Memorandum and will not effect such amendment
or supplement without the consent of the Initial Purchasers (which consent will
not be unreasonably withheld or delayed). Neither the consent of the Initial
Purchasers, nor the Initial Purchasers' delivery of any such amendment or
supplement, shall constitute a waiver of any of the conditions set forth in
Section 7 hereof.
(e) Qualification of Units for Offer and Sale. The Aladdin
Parties will use their best efforts, in cooperation with the Initial Purchasers,
to qualify the Units for offering and sale under the applicable securities laws
of such jurisdictions within the United States as the Representatives may
reasonably designate and will maintain such qualifications in effect as long as
required for the sale of the Units; provided, however, that the Aladdin Parties
shall not be obligated to file any general consent to service of process or to
qualify as a foreign corporation or as a dealer in securities in any
jurisdiction in which it is not so qualified or to subject itself to taxation in
respect of doing business in any jurisdiction in which it is not otherwise so
subject.
(f) DTC. The Aladdin Parties will cooperate with the
Representatives and use their best efforts to permit the Securities to be
eligible for clearance and settlement through the facilities of DTC.
(g) Use of Proceeds. Each of the Aladdin Parties will use the
net proceeds received by it from the sale of the Units, and Holdings will cause
the Company to use the net proceeds from the sale of the Units contributed to it
by Holdings, substantially in the manner specified in the Offering Memorandum
under "Use of Proceeds" and to comply with the provisions of the Disbursement
Agreement.
(h) Restriction on Sale of Securities. During a period of 120
days from the date of the Offering Memorandum, the Aladdin Parties will not,
without the prior written consent of Merrill Lynch, directly or indirectly,
offer, pledge, sell, contract to sell, sell any option or contract to purchase
any option or contract to sell, grant any option, right or warrant for the sale
of or otherwise dispose of or transfer any debt securities of the Issuers, other
than pursuant to this Agreement, or file a registration statement under the 1933
Act with respect to the foregoing, other than pursuant to the Note Registration
Rights Agreement.
(i) Comply with Agreements. To comply with all of their
respective agreements set forth in each of the Note Registration Rights
Agreement and the Warrant Registration Rights Agreement.
(j) Furnish Reports. So long as any Securities are
outstanding, to furnish to the Initial Purchasers as promptly as practicable
after they are available copies of all reports or other communications furnished
to or filed with the Commission or any national securities exchange on which any
class of securities of the Aladdin Parties are listed and such other
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publicly available information concerning the Aladdin Parties and/or its
subsidiaries as the Initial Purchaser may reasonably request.
(k) Portal Registration. To use its best efforts to effect the
inclusion of the Securities in PORTAL and to maintain the listing of each of the
Securities on PORTAL for so long as any of such Securities are outstanding.
(l) Exercise of Warrants. Enterprises will reserve and
continue to reserve, so long as any Warrants are outstanding, a sufficient
number of shares of Common Stock for issuance upon exercise of the Warrants.
(m) Performance of Duties. To use its best efforts (i) to do
and perform all things required or necessary to be done and performed under this
Agreement by it prior to the Closing Time and (ii) to satisfy all conditions
precedent to the delivery of the Units.
SECTION 6. Payment of Expenses.
(a) Expenses. The Aladdin Parties will pay, whether or not the
transactions contemplated in this Agreement are consummated or this Agreement is
terminated, all expenses incident to the performance of their obligations under
this Agreement, including, without limitation, (i) the preparation, printing and
any filing of the Offering Memorandum (including financial statements and any
exhibits and any document incorporated therein by reference) and of each
amendment or supplement thereto, (ii) the preparation, printing and delivery to
the Initial Purchasers of this Agreement, the Indenture, the Warrant Agreement,
the Note Registration Rights Agreement, the Warrant Registration Rights
Agreement, the Executed Transaction Documents, the Executory Transaction
Documents and such other documents as may be required in connection with the
offering, purchase, sale and delivery of the Units, except for fees and expenses
of the Initial Purchasers (including the fees and expenses of counsel to the
Initial Purchasers) other than as set forth in clause (xii) below, (iii) the
preparation, issuance and delivery of the certificates for the Units to the
Initial Purchasers, including any charges of DTC in connection therewith; (iv)
the fees and disbursements of any of the Venture Parties' counsel, accountants
and other advisors, (v) the qualification of the Units under securities laws in
accordance with the provisions of Section 5(d) hereof, including filing fees and
the reasonable fees and disbursements of counsel for the Initial Purchasers in
connection therewith and in connection with the preparation of the Blue Sky
Memoranda and any supplement thereto, (vi) the fees and expenses of the Trustee,
including the fees and disbursements of counsel for the Trustee in connection
with the Indenture and the Notes, (vii) the fees and expenses of the Warrant
Agent, including the fees and disbursements of counsel for the Warrant Agent in
connection with the Warrant Agreement, the Warrants and the Warrant Shares,
(viii) any fees payable to the review by the National Association of Securities
Dealers, Inc. (the "NASD") in connection with the initial and continued
designation of the Securities as PORTAL securities under the PORTAL Market Rules
pursuant to NASD Rule 5322, (ix) all costs and expenses of the Exchange Offer
and any Registration Statement, as set forth in and subject to the Note
Registration Rights Agreement, (x) all cost and expenses of any Warrant
Registration Statements as set forth in and subject to the Warrant Registration
Rights Agreement, (xi) the fees and expenses of the
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Disbursement Agent pursuant to the Disbursement Agreement and (xii) the expenses
and disbursements of the Initial Purchasers (including reasonable fees, expenses
and disbursements of counsel for the Initial Purchasers) up to a maximum of
$500,000.
(b) Termination of Agreement. If this Agreement is terminated
by the Representatives in accordance with the provisions of Section 7 or Section
12(a)(i) hereof, the Aladdin Parties and the Trust, jointly and severally, shall
reimburse the Initial Purchasers for all of their reasonable out-of-pocket
expenses, including the reasonable fees and disbursements of counsel for the
Initial Purchasers.
SECTION 7. Conditions of Initial Purchasers' Obligations.The
obligations of the several Initial Purchasers hereunder are subject to the
accuracy of the representations and warranties of the Aladdin Parties contained
in Section 1 hereof, the representations and warranties of London Clubs
contained in Section 2 hereof and the representations and warranties of the
Trust and AHL contained in Section 3 hereof or in certificates of any officer of
any of the Venture Parties or any of their subsidiaries delivered pursuant to
the provisions hereof, to the performance by each of the Venture Parties of
their respective covenants and other obligations hereunder, and to the following
further conditions:
(a) Opinion of Counsel for the Venture Parties.
(i) At the Closing Time, the Representatives shall
have received the favorable opinion, dated as of the Closing
Time, of Skadden, Arps, Slate, Meagher & Flom LLP &
Affiliates, counsel for the Aladdin Parties, the Trust and AHL
in form and substance satisfactory to counsel for the Initial
Purchasers, together with signed or reproduced copies of such
letter for each of the other Initial Purchasers substantially
to the effect set forth in Exhibit A hereto and to such
further effect as counsel to the Initial Purchasers may
reasonably request.
(ii) At the Closing Time, the Representatives shall
have received the favorable opinion, dated as of the Closing
Time, of Schreck Morris, counsel for the Aladdin Parties in
form and substance satisfactory to counsel for the Initial
Purchasers, together with signed or reproduced copies of such
letter for each of the other Initial Purchasers substantially
to the effect set forth in Exhibit B hereto and to such
further effect as counsel to the Initial Purchasers may
reasonably request.
(iii) At the Closing Time, the Representatives shall
have received the favorable opinion, dated as of the Closing
Time, of Ohrenstein & Brown, counsel for London Clubs in form
and substance satisfactory to counsel for the Initial
Purchasers, together with signed or reproduced copies of such
letter for each of the other Initial Purchasers substantially
to the effect set forth in Exhibit C hereto and to such
further effect as counsel to the Initial Purchasers may
reasonably request.
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(b) Opinion of Counsel for Initial Purchasers. At the Closing
Time, the Representatives shall have received the favorable opinion, dated as of
the Closing Time, of Latham & Watkins, counsel for the Initial Purchasers,
together with signed or reproduced copies of such letter for each of the other
Initial Purchasers with respect to the matters set forth in (i), (ii), (vi)
through (x), inclusive, (xii) (solely as to the information in the Offering
Memorandum under "Description of the Units", "Description of the Notes" and
"Description of the Warrants") and the penultimate paragraph of Exhibit A
hereto. In giving such opinion such counsel may rely, as to all matters governed
by the laws of jurisdictions other than the law of the State of New York and the
federal law of the United States and the General Corporation Law of the State of
Delaware, upon the opinions of counsel satisfactory to the Representatives. Such
counsel may also state that, insofar as such opinion involves factual matters,
they have relied, to the extent they deem proper, upon certificates of officers
of the Venture Parties and their subsidiaries and certificates of public
officials.
(c) Officers' Certificates.
(i) (A) At the Closing Time, there shall not have
been, since the date hereof or since the respective dates as
of which information is given in the Offering Memorandum, any
material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business
prospects of either of the Issuers and their subsidiaries
considered as one enterprise or Enterprises, whether or not
arising in the ordinary course of business, (B) the
Representatives shall have received a certificate of the
President or a Vice President of each of the Aladdin Parties
and of the chief financial or chief accounting officer of each
of the Aladdin Parties, dated as of the Closing Time, to the
effect that there has been no such material adverse change and
(C) the Representatives shall have received a certificate of
the President or a Vice President of each of the Venture
Parties and of the chief financial or chief accounting officer
of each of the Venture Parties, dated as of the Closing Time,
that (1) to the extent applicable to such Venture Party, the
representations and warranties in Section 1 hereof with
respect to the Aladdin Parties, the representations and
warranties in Section 2 hereof with respect to London Clubs
and LCNI and the representations and warranties in Section 3
hereof with respect to the Trust and AHL are true and correct
with the same force and effect as though expressly made at and
as of the Closing Time and (2) the applicable Venture Party
has complied with all agreements and satisfied all conditions
on its part to be performed or satisfied at or prior to the
Closing Time.
(ii) The Representatives shall have received a
certificate of the President or a Vice President of London
Clubs and of the chief financial or chief accounting officer
of London Clubs, dated as of the Closing Time, to the effect
that London Clubs has obtained all consents from creditors of
London Clubs, necessary or required for the performance by
London Clubs or any of its subsidiaries of their obligations
hereunder, in connection with the offering, issuance or sale
of the Units hereunder or the consummation of the transactions
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contemplated by this Agreement or otherwise described in the
Offering Memorandum.
(iii) The Representatives shall have received a
certificate of the chief financial or chief accounting officer
of AHL, dated as of the Closing Time, setting forth (i) the
nature of and the amount of pre-development costs which have
been incurred prior to the Closing Time by AHL and which are
to be reimbursed at the Closing Time as described in the
Offering Memorandum and (ii) the nature of and the estimated
amount of pre-development costs which AHL expects to incur on
behalf of the Company after the Closing Time.
(d) Accountants' Comfort Letters.
(i) At the time of the execution of this Agreement,
the Representatives shall have received from Arthur Andersen
LLP with respect to the Aladdin Parties, a letter dated such
date, in form and substance satisfactory to the
Representatives, together with signed or reproduced copies of
such letter for each of the other Initial Purchasers
containing statements and information of the type ordinarily
included in accountants' "comfort letters" to Initial
Purchasers with respect to the financial statements and
certain financial information of the Aladdin Parties contained
in the Offering Memorandum and substantially the form of
Example A of SAS 72.
(ii) At the time of the execution of this Agreement,
the Representatives shall have received from Price Waterhouse
with respect to London Clubs, a letter dated such date, in
form and substance satisfactory to the Representatives,
together with signed or reproduced copies of such letter for
each of the other Initial Purchasers containing statements and
information of the type ordinarily included in accountants'
"comfort letters" to Initial Purchasers with respect to the
financial statements of London Clubs contained in the Offering
Memorandum and substantially the form of Example A of SAS 72.
(e) Bring-down Comfort Letters.
(i) At the Closing Time, the Representatives shall
have received from Arthur Andersen LLP with respect to the
Aladdin Parties, a letter, dated as of the Closing Time, to
the effect that they reaffirm the statements made in the
letter furnished pursuant to subsection (d)(i) of this
Section, except that the specified date referred to shall
be a date not more than three business days prior to the
Closing Time.
(ii) At the Closing Time, the Representatives shall
have received from Price Waterhouse with respect to London
Clubs, a letter, dated as of the Closing Time, to the effect
that they reaffirm the statements made in the letter furnished
pursuant to subsection (d)(ii) of this Section, except that
the specified
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date referred to shall be a date not more than three business
days prior to the Closing Time.
(f) Maintenance of Rating. Since the date of this Agreement,
there shall not have occurred a downgrading in the rating assigned any of the
Aladdin Parties' securities by any nationally recognized securities rating
agency, and no such securities rating agency shall have publicly announced that
it has under surveillance or review, with possible negative implications, its
rating of such securities.
(g) PORTAL. At the Closing Time, the Units, the Notes, the
Warrants and the Warrant Shares shall have been designated for trading on
PORTAL.
(h) Transaction Documents.
(i) All the representations and warranties contained
in each of the Executed Transaction Documents and Executory
Transaction Documents shall be true and correct in all
material respects at the Closing Time with the same force and
effect as if made on and as of the Closing Time.
(ii) All of the Executed Transaction Documents and
Executory Transaction Documents shall have been executed and
shall be in full force and effect and the Initial Purchasers
shall have received fully executed copies thereof. The Venture
Parties shall have received the requisite governmental and
regulatory approval in connection with each of the Executed
Transaction Documents and Executory Transaction Documents and
transactions contemplated by the Offering Memorandum to be
completed on or before the Closing Time.
(iii) No party shall have failed materially at or
prior to the Closing Time to perform or comply with any of the
agreements contained in any of the Executed Transaction
Documents or Executory Transaction Documents and required to
be performed or complied with by such party at or prior to the
Closing Time.
(iv) All documents and agreement shall have been
filed, and other actions shall have been taken, as may be
required to perfect the security interests of the Trustee in
the Series A Notes and the Note Construction Disbursement
Account, and to accord the Trustee the priorities over other
creditors of the Issuers as contemplated by the Offering
Memorandum, the Pledge Agreement and the Note Construction
Pledge Agreement.
(v) No injunction, restraining order or order of any
nature by a court, government body or agency shall have been
issued as of the Closing Time that would prevent or interfere
with the issuance and sale of the Units; and no stop order
suspending the qualification or exemption from qualification
of any of the Units in any jurisdiction shall have been issued
and no action, claim, suit or proceeding (including without
limitation an investigation or partial proceeding
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such as a deposition) for that purpose shall have been
commenced or be pending or contemplated as of the Closing
Time.
(i) Bank Credit Facility. At the Closing Time, (i) the Bank
Credit Facility will conform in all material respects to the description thereof
contained in the Offering Memorandum and (ii) the Term B Loan (as defined in the
Offering Memorandum) and the Term C Loan (as defined in the Offering Memorandum)
shall have been advanced to the Company.
(j) Title Commitments. The Trustee shall have received
irrevocable commitments for title insurance for the Project Site from Stewart
Title Guaranty Company and Lawyers Title Insurance Company, in a form and
substance reasonably satisfactory to the Representatives, subject only to
Permitted Liens under the Indenture.
(k) Additional Documents.
(i) At the Closing Time, counsel for the Initial
Purchasers shall have been furnished with such documents and
opinions as they may require for the purpose of enabling them
to pass upon the issuance and sale of the Units as herein
contemplated, or in order to evidence the accuracy of any of
the representations or warranties, or the fulfillment of any
of the conditions, herein contained; and all proceedings taken
by the Aladdin Parties in connection with the issuance and
sale of the Units as herein contemplated shall be reasonably
satisfactory in form and substance to the Representatives and
counsel for the Initial Purchasers.
(ii) At the Closing Time, the Initial Purchasers
shall have received copies of all certificates, documents and
opinions reasonably requested by the Initial Purchasers or
counsel to the Initial Purchasers delivered by any of the
Venture Parties or any of their counsels and such other
certificates, documents and opinions reasonably obtainable by
any of the Venture Parties in connection with any of the
Funding Transactions or any other transactions contemplated in
the Offering Memorandum, together with letters addressed to
the Initial Purchasers stating that the Initial Purchasers may
rely on such certificates as if they had been address to the
Initial Purchasers.
(l) Termination of Agreement. If any condition specified in
this Section shall not have been fulfilled when and as required to be fulfilled,
this Agreement may be terminated by the Representatives by notice to the Aladdin
Parties at any time at or prior to the Closing Time, and such termination shall
be without liability of any party to any other party except as provided in
Section 6 and except that Sections 1, 2, 3, 9, 10 and 13 shall survive any such
termination and remain in full force and effect.
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SECTION 8. Subsequent Offers and Resales of the Units.
(a) Offer and Sale Procedures. Each of the Initial Purchasers
and each of the Aladdin Parties hereby establish and agree to observe the
following procedures in connection with the offer and sale of the Units:
(i) Offers and Sales Only to Qualified Institutional
Buyers. Offers and sales of the Units will be made only by the
Initial Purchasers or Affiliates (as such term is defined in
Rule 501(b) under the 1933 Act) thereof qualified to do so in
the jurisdictions in which such offers or sales are made. Each
such offer or sale shall only be made to persons whom the
offeror or seller reasonably believes to be qualified
institutional buyers (as defined in Rule 144A under the 1933
Act).
(ii) No General Solicitation. The Units will be
offered by approaching prospective Subsequent Purchasers on an
individual basis. No general solicitation or general
advertising (within the meaning of Rule 502(c) under the 1933
Act) will be used in the United States in connection with the
offering of the Units.
(iii) Purchases by Non-Bank Fiduciaries. In the case
of a non-bank Subsequent Purchaser of a Unit acting as a
fiduciary for one or more third parties, in connection with an
offer and sale to such purchaser pursuant to this clause (a),
each third party shall, in the reasonable judgment of the
applicable Initial Purchaser, be a Qualified Institutional
Buyer.
(iv) Subsequent Purchaser Notification. Each Initial
Purchaser will take reasonable steps to inform, and cause each
of its U.S. Affiliates to take reasonable steps to inform,
persons acquiring Units from such Initial Purchaser or
affiliate, as the case may be, in the United States that the
Units (A) have not been and will not be registered under the
1933 Act, (B) are being sold to them without registration
under the 1933 Act in reliance on Rule 144A and (C) may not be
offered, sold or otherwise transferred except (1) to the
Aladdin Parties, (2) outside the United States in accordance
with Rule 904 of Regulation S or (3) inside the United States
in accordance with (x) Rule 144A to a person whom the seller
reasonably believes is a Qualified Institutional Buyer that is
purchasing such Units for its own account or for the account
of a Qualified Institutional Buyer to whom notice is given
that the offer, sale or transfer is being made in reliance on
Rule 144A or (y) the exemption from registration under the
1933 Act provided by Rule 144, if available.
(v) Minimum Principal Amount. No sale of the Units to
any one Subsequent Purchaser will be for consideration of less
than U.S. $150,000. If the Subsequent Purchaser is a non-bank
fiduciary acting on behalf of others, each
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person for whom it is acting must purchase Units for
consideration of at least U.S. $150,000.
(vi) Restrictions on Transfer. The transfer
restrictions and the other provisions set forth in Article 2
of the Indenture and Sections 2, 3, 4 and 5 of the Warrant
Agreement, including any legends required thereby, shall apply
to the Securities except as otherwise agreed by the Aladdin
Parties and the Initial Purchasers. Following the sale and
transfer of the Units by the Initial Purchasers to Subsequent
Purchasers pursuant to the terms hereof, the Initial
Purchasers shall not be liable or responsible to the Aladdin
Parties for any losses, damages or liabilities suffered or
incurred by the Aladdin Parties, including any losses, damages
or liabilities under the 1933 Act, arising from or relating to
any resale or transfer of any Security.
(vii) Delivery of Offering Memorandum. Each Initial
Purchaser will deliver to each purchaser of the Units from
such Initial Purchaser, in connection with its original
distribution of the Units, a copy of the Offering Memorandum,
as amended and supplemented at the date of such delivery.
(b) Covenants of the Aladdin Parties. Each of the Aladdin
Parties covenants with each Initial Purchaser as follows:
(i) Due Diligence. In connection with the original
distribution of the Units, each of the Aladdin Parties agrees
that, prior to any offer or resale of the Units by the Initial
Purchasers, the Initial Purchasers and counsel for the Initial
Purchasers shall have the right to make reasonable inquiries
into the business of each of the Aladdin Parties and their
subsidiaries. Each of the Aladdin Parties also agrees to
provide answers to each prospective Subsequent Purchaser of
Units who so reasonably requests concerning the Aladdin
Parties and their subsidiaries (to the extent that such
information is available or can be acquired and made available
to prospective Subsequent Purchasers without unreasonable
effort or expense and to the extent the provision thereof is
not prohibited by applicable law and to the extent such
disclosure, in the reasonable opinion of the Aladdin Parties,
could not adversely effect the business, earnings, business
prospects or condition (financial or otherwise) of the Aladdin
Parties or their subsidiaries) and the terms and conditions of
the offering of the Units, as provided in the Offering
Memorandum.
(ii) Integration. (a) The Aladdin Parties agree that
they will not and will cause their Affiliates not to make any
offer or sale of securities of the Aladdin Parties of any
class if, as a result of the doctrine of "integration"
referred to in Rule 502 under the 1933 Act, such offer or sale
would render invalid (for the purpose of (i) the sale of the
Units by the Aladdin Parties to the Initial Purchasers, (ii)
the resale of the Units by the Initial Purchasers to
Subsequent Purchasers or (iii) the resale of the Units by such
Subsequent Purchasers to others) the
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exemption from the registration requirements of the 1933 Act
provided by Section 4(2) thereof or by Rule 144A or otherwise.
(iii) Rule 144A Information. The Aladdin Parties
agree that, in order to render the Securities eligible for
resale pursuant to Rule 144A under the 1933 Act, while any of
the Securities remain outstanding, it will make available,
upon request, to any holder of any of the Securities or
prospective purchasers of any of the information specified in
Rule 144A(d)(4), unless the Aladdin Parties furnish
information to the Commission pursuant to Section 13 or 15(d)
of the 1934 Act (such information, whether made available to
holders or prospective purchasers or furnished to the
Commission, is herein referred to as "Additional
Information").
(iv) Restriction on Repurchases. Until the expiration
of two years after the original issuance of the Units, the
Aladdin Parties will not, and will cause their Affiliates not
to, purchase or agree to purchase or otherwise acquire any of
the Securities which are "restricted securities" (as such term
is defined under Rule 144(a)(3) under the 1933 Act), whether
as beneficial owner or otherwise (except as agent acting as a
securities broker on behalf of and for the account of
customers in the ordinary course of business in unsolicited
broker's transactions) unless, immediately upon any such
purchase, the Aladdin Parties or any Affiliate shall submit
such Securities to the Trustee or the Warrant Agent, as
applicable, for cancellation.
SECTION 9. Indemnification.
(a) Indemnification of Initial Purchasers. The Aladdin Parties
and the Trust agree, jointly and severally, to indemnify and hold harmless each
Initial Purchaser and each person, if any, who controls any Initial Purchaser
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act
as follows:
(i) against any and all loss, liability, claim,
damage and expense whatsoever, as incurred, arising out of any
untrue statement or alleged untrue statement of a material
fact contained in any Preliminary Offering Memorandum or the
Final Offering Memorandum (or any amendment or supplement
thereto), or the omission or alleged omission therefrom of a
material fact necessary in order to make the statements
therein, in the light of the circumstances under which they
were made, not misleading;
(ii) against any and all loss, liability, claim,
damage and expense whatsoever, as incurred, to the extent of
the aggregate amount paid in settlement of any litigation, or
any investigation or proceeding by any governmental agency or
body, commenced or threatened, or of any claim whatsoever
based upon any such untrue statement or omission, or any such
alleged untrue statement or omission; provided that (subject
to Section 9(d) below) any such settlement is effected with
the written consent of the Aladdin Parties and the Trust; and
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(iii) against any and all expense whatsoever, as
incurred (including the fees and disbursements of counsel
chosen by Merrill Lynch), reasonably incurred in
investigating, preparing or defending against any litigation,
or any investigation or proceeding by any governmental agency
or body, commenced or threatened, or any claim whatsoever
based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, to the extent that any
such expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Aladdin Parties
by any Initial Purchaser through the Representatives expressly for use in the
Offering Memorandum (or any amendment thereto). The foregoing indemnity with
respect to any untrue statement contained in or any omission from the
Preliminary Offering Memorandum shall not inure to the benefit of any Initial
Purchaser (or any person controlling such Initial Purchaser) from whom the
person asserting such loss, liability, claim, damage or expense purchased any of
the Units that are the subject thereof if (i) the untrue statement or omission
contained in the Preliminary Offering Memorandum (excluding documents
incorporated by reference) was corrected; (ii) such person was not sent or given
a copy of the Final Offering Memorandum (excluding documents incorporated by
reference) which corrected the untrue statement or omission at or prior to the
written confirmation of the sale of such Units to such person; and (iii) the
Aladdin Parties and the Trust satisfied their obligation pursuant to Section
5(b) of this Agreement to provide a sufficient number of copies of the Final
Offering Memorandum to the Initial Purchasers.
(b) Indemnification of Aladdin Parties, Managers, Directors
and Officers and the Trust. Each Initial Purchaser severally agrees to indemnify
and hold harmless any of the Aladdin Parties and the Trust, their managers,
directors, and officers and each person, if any, who controls the Aladdin
Parties and the Trust within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act against any and all loss, liability, claim, damage
and expense described in the indemnity contained in subsection (a) of this
Section, as incurred, but only with respect to untrue statements or omissions,
or alleged untrue statements or omissions, made in the Offering Memorandum in
reliance upon and in conformity with written information furnished to the
Aladdin Parties by such Initial Purchaser through the Representatives expressly
for use in the Offering Memorandum.
(c) Actions against Parties; Notification. Each indemnified
party shall give notice as promptly as reasonably practicable to each
indemnifying party of any action commenced against it in respect of which
indemnity may be sought hereunder, but failure to so notify an indemnifying
party shall not relieve such indemnifying party from any liability hereunder to
the extent it is not materially prejudiced as a result thereof and in any event
shall not relieve it from any liability which it may have otherwise than on
account of this indemnity agreement. In the case of parties indemnified pursuant
to Section 9(a) above, counsel to the indemnified parties shall be selected by
Merrill Lynch, and, in the case of parties indemnified pursuant to Section 9(b)
above, counsel to the indemnified parties shall be selected by the
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Aladdin Parties and the Trust. An indemnifying party may participate at its own
expense in the defense of any such action; provided, however, that counsel to
the indemnifying party shall not (except with the consent of the indemnified
party) also be counsel to the indemnified party. In no event shall the
indemnifying parties be liable for fees and expenses of more than one counsel
(in addition to any local counsel) separate from their own counsel for all
indemnified parties in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances. No indemnifying party shall, without the prior
written consent of the indemnified parties, settle or compromise or consent to
the entry of any judgment with respect to any litigation, or any investigation
or proceeding by any governmental agency or body, commenced or threatened, or
any claim whatsoever in respect of which indemnification or contribution could
be sought under this Section 9 or Section 10 hereof (whether or not the
indemnified parties are actual or potential parties thereto), unless such
settlement, compromise or consent (i) includes an unconditional release of each
indemnified party from all liability arising out of such litigation,
investigation, proceeding or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act by or on behalf of any
indemnified party.
(d) Settlement without Consent if Failure to Reimburse. If at
any time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel, such
indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated by Section 9(a)(ii) effected without its written consent if
(i) such settlement is entered into more than 45 days after receipt by such
indemnifying party of the aforesaid request, (ii) such indemnifying party shall
have received notice of the terms of such settlement at least 30 days prior to
such settlement being entered into and (iii) such indemnifying party shall not
have reimbursed such indemnified party in accordance with such request prior to
the date of such settlement. Notwithstanding the immediately preceding sentence,
if at any time an indemnified party shall have requested an indemnifying party
to reimburse the indemnified party for fees and expenses of counsel, an
indemnifying party shall not be liable for any settlement of the nature
contemplated by Section 9(a)(ii) effected without its consent if such
indemnifying party (i) reimburses such indemnified party in accordance with such
request to the extent that it considers such request to be reasonable and (ii)
provides written notice to the indemnified party substantiating the unpaid
balance as unreasonable, in each case prior to the date of such settlement.
SECTION 10. Contribution. If the indemnification provided for
in Section 9 hereof is for any reason unavailable to or insufficient to hold
harmless an indemnified party in respect of any losses, liabilities, claims,
damages or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount of such losses, liabilities, claims, damages
and expenses incurred by such indemnified party, as incurred, (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Aladdin Parties on the one hand and the Initial Purchasers on the other hand
from the offering of the Units pursuant to this Agreement or (ii) if the
allocation provided by clause (i) is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Aladdin Parties and
the Trust on the one hand and of the Initial Purchasers on the other hand in
connection with the statements or omissions which resulted in
36
<PAGE>
such losses, liabilities, claims, damages or expenses, as well as any other
relevant equitable considerations.
The relative benefits received by the Aladdin Parties on the one hand
and the Initial Purchasers on the other hand in connection with the offering of
the Units pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the Units
pursuant to this Agreement (before deducting expenses) received by the Aladdin
Parties and the total underwriting discount received by the Initial Purchasers,
bear to the aggregate initial offering price of the Units.
The relative fault of the Aladdin Parties and the Trust on the one hand
and the Initial Purchasers on the other hand shall be determined by reference
to, among other things, whether any such untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Aladdin Parties or the Trust or by the Initial
Purchasers and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
The Aladdin Parties and the Trust and the Initial Purchasers agree that
it would not be just and equitable if contribution pursuant to this Section 10
were determined by pro rata allocation (even if the Initial Purchasers were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to above in
this Section 10. The aggregate amount of losses, liabilities, claims, damages
and expenses incurred by an indemnified party and referred to above in this
Section 10 shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any governmental
agency or body, commenced or threatened, or any claim whatsoever based upon any
such untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 10, no Initial Purchaser
shall be required to contribute any amount in excess of the amount by which the
total price at which the Units underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such Initial
Purchaser has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 10, each person, if any, who controls an
Initial Purchaser within the meaning of Section 15 of the 1933 Act or Section 20
of the 1934 Act shall have the same rights to contribution as such Initial
Purchaser, and each director, trustee or manager of the Aladdin Parties, each
officer of the Aladdin Parties, and each person, if any, who controls the
Aladdin Parties or the Trust within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act shall have the same rights to contribution as the
Aladdin Parties and the Trust, as applicable. The Initial Purchasers' respective
obligations to contribute pursuant to this Section
37
<PAGE>
10 are several in proportion to the principal amount of Units set forth opposite
their respective names in Schedule A hereto and not joint.
SECTION 11. Representations, Warranties and Agreements to
Survive Delivery. All representations, warranties and agreements contained in
this Agreement or certificates of officers of any of the Venture Parties and the
Initial Purchasers submitted pursuant hereto, shall remain operative and in full
force and effect, regardless of any investigation made by or on behalf of any
Initial Purchaser, Venture Party or controlling person, or by or on behalf of
the Venture Parties or the Initial Purchasers, and shall survive delivery of the
Units to the Initial Purchasers.
SECTION 12. Termination of Agreement.
(a) Termination; General. The Representatives may terminate
this Agreement, by notice to the Venture Parties, at any time at or prior to the
Closing Time (i) if there has been, since the time of execution of this
Agreement or since the respective dates as of which information is given in the
Offering Memorandum, any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of any of
Holdings and its subsidiaries considered as one enterprise or Enterprises,
whether or not arising in the ordinary course of business, or (ii) if there has
occurred any material adverse change in the financial markets in the United
States or the international financial markets, any outbreak of hostilities or
escalation thereof or other calamity or crisis or any change or development
involving a prospective change in national or international political, financial
or economic conditions, in each case the effect of which is such as to make it,
in the judgment of the Representatives, impracticable to market the Units or to
enforce contracts for the sale of the Units, or (iii) if trading in any
securities of any of the Venture Parties has been suspended or limited by the
Commission or any stock exchange, or if trading generally on the American Stock
Exchange or the New York Stock Exchange or in the NASDAQ National Market System
has been suspended or limited, or minimum or maximum prices for trading have
been fixed, or maximum ranges for prices have been required, by any of said
exchanges or by such system or by order of the Commission, the NASD or any other
governmental authority, or (iv) if a banking moratorium has been declared by
either Federal or New York authorities.
(b) Liabilities. If this Agreement is terminated pursuant to
this Section, such termination shall be without liability of any party to any
other party except as provided in Section 6 hereof, and provided further that
Sections 1, 2, 3, 9 and 10 shall survive such termination and remain in full
force and effect.
SECTION 13. Default by One or More of the Initial Purchasers.
If one or more of the Initial Purchasers shall fail at the Closing Time to
purchase the Units which it or they are obligated to purchase under this
Agreement (the "Defaulted Units"), the Representatives shall have the right,
within 24 hours thereafter, to make arrangements for one or more of the
non-defaulting Initial Purchasers, or any other Initial Purchasers, to purchase
all, but not less than all, of the Defaulted Units in such amounts as may be
agreed upon and upon the terms herein set
38
<PAGE>
forth; if, however, the Representatives shall not have completed such
arrangements within such 24-hour period, then:
(a) if the number of Defaulted Units does not exceed 10% of
the number of Units to be purchased hereunder, each of the
non-defaulting Initial Purchasers shall be obligated, severally and not
jointly, to purchase the full amount thereof in the proportions that
their respective obligations hereunder bear to the obligations of all
non-defaulting Initial Purchasers, or
(b) if the number of Defaulted Units exceeds 10% of the number
of Units to be purchased hereunder, this Agreement shall terminate
without liability on the part of any non-defaulting Initial Purchaser.
No action taken pursuant to this Section shall relieve any defaulting
Initial Purchaser from liability in respect of its default.
In the event of any such default which does not result in a termination
of this Agreement, either the Representatives or the Aladdin Parties shall have
the right to postpone the Closing Time for a period not exceeding seven days in
order to effect any required changes in the Offering Memorandum or in any other
documents or arrangements. As used herein, the term "Initial Purchaser" includes
any person substituted for an Initial Purchaser under this Section 13.
SECTION 14. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
mailed or transmitted by any standard form of telecommunication. Notices to the
Initial Purchasers shall be directed to the Representatives c/o Merrill Lynch,
Pierce, Fenner & Smith Incorporated at North Tower, World Financial Center, New
York, New York 10281-1201, attention of Edmond Moriarty; notices to the Issuers
shall be directed to such party at P.O. Box 94827, Las Vegas, Nevada 89193,
attention of Richard J. Goeglein; notices to Enterprises shall be directed to it
at P.O. Box 94827, Las Vegas, Nevada 89193, attention of Richard J. Goeglein;
notices to London Clubs shall be directed to it at 30 Old Burlington Street,
London, WIX, 2LN England, attention of Barry Hardy; notices to LCNI shall be
directed to it c/o Lionel, Sawyer & Collins, 300 South Fourth Street, Suite
1700, Las Vegas, Nevada 89101, attention of Greg Giordano; notices to the Trust
shall be directed to it at 280 Park Avenue, New York, New York 10017, attention
of Ronald Dictrow; and notices to AHL shall be directed to it at 280 Park
Avenue, New York, New York 10017, attention of Ronald Dictrow.
SECTION 15. Parties. This Agreement shall each inure to the
benefit of and be binding upon the Initial Purchasers and the Venture Parties
and their respective successors. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any person, firm or
corporation, other than the Initial Purchasers and the Venture Parties and their
respective successors and the controlling persons and officers, trustees,
managers and directors referred to in Section 9 and 10 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. This Agreement and
all conditions and provisions hereof are intended to be for the sole and
39
<PAGE>
exclusive benefit of the Initial Purchasers and the Venture Parties and their
respective successors, and said controlling persons and officers, trustees,
managers and directors and their heirs and legal representatives, and for the
benefit of no other person, firm or corporation. No purchaser of Units from any
Initial Purchaser shall be deemed to be a successor by reason merely of such
purchase.
SECTION 16. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED
TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 17. Consent to Jurisdiction. Each of the Venture Parties and,
with respect to clause (i) below, each of the Initial Purchasers hereby
irrevocably and unconditionally:
(a) submits itself and its property to any legal action or
proceeding relating to this Agreement, or for recognition and enforcement of any
judgment in respect of this Agreement, to the non-exclusive general jurisdiction
of the courts of the State of New York, the courts of the United States of
America for the Southern District of New York and appellate courts for such
state and federal courts;
(b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;
(c) agrees that service of process in any such action or
proceeding may be effected by registered or certified mail (or any substantially
similar form of mail), postage prepaid, to LCNI at its address set forth in
Section 14 above; and
(d) agrees that nothing in this Agreement shall affect the
right to effect service of process in any other manner permitted by law or shall
limit the right to sue in any other jurisdiction.
SECTION 18. Effect of Headings. The Article and Section headings herein
and the Table of Contents are for convenience only and shall not affect the
construction hereof.
40
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Venture Parties a counterpart hereof,
whereupon this instrument, along with all counterparts, will become a binding
agreement between the Initial Purchasers and the Venture Parties in accordance
with its terms.
ALADDIN GAMING HOLDINGS, LLC
By /s/ Ronald Dictrow
--------------------------------------
Name: Ronald Dictrow
Title: Executive Vice President/Secretary
ALADDIN CAPITAL CORP.
By /s/ Ronald Dictrow
--------------------------------------
Name: Ronald Dictrow
Title: Executive Vice President/Secretary
ALADDIN GAMING ENTERPRISES, INC.
By /s/ Ronald Dictrow
--------------------------------------
Name: Ronald Dictrow
Title: Secretary
ALADDIN HOLDINGS, LLC
By /s/ Ronald Dictrow
--------------------------------------
Name: Ronald Dictrow
Title: Vice President
41
<PAGE>
THE TRUST UNDER ARTICLE SIXTH U/W/O SIGMUND SOMMER
By /s/ Viola Sommer
----------------------------------------------
Name: Viola Sommer
Title: Trustee
LONDON CLUBS INTERNATIONAL, PLC
By /s/ Barry Hardy
----------------------------------------------
Name: Barry Hardy
Title: Financial Director
CONFIRMED AND ACCEPTED, as of the date first above written:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
CREDIT SUISSE FIRST BOSTON CORPORATION
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By /s/ Gregory Margolies
----------------------------------------------
Authorized Signatory
For themselves and as Representatives of the other Initial Purchasers named in
Schedule A hereto.
42
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Name of Initial Purchaser Number of Units
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated........................... 128,470
Credit Suisse First Boston Corporation................ 64,235
CIBC Oppenheimer Corp................................. 14,398
Scotia Capital Markets (USA) Inc...................... 14,397
-------
Total..................................... 221,500
</TABLE>
<PAGE>
SCHEDULE B
ALADDIN GAMING HOLDINGS, LLC
ALADDIN CAPITAL CORP.
ALADDIN GAMING ENTERPRISES, INC.
221,500 Units consisting of in the aggregate of $221,500,000 principal amount at
maturity of Senior Discount Notes due 2010 of Aladdin Gaming Holdings, LLC and
Aladdin Capital Corp. (the "Notes") and Warrants (the "Warrants") to purchase an
aggregate of 2,215,000 shares of Common Stock of Aladdin Gaming Enterprises,
Inc.
1. The initial public offering price of the Units shall be $519.40 per
Unit, plus accrued interest on the Notes, if any, from the date of issuance.
2. The purchase price to be paid by the Initial Purchasers for the
Units shall be $499.92 per Unit.
<PAGE>
Exhibit A
<PAGE>
Exhibit B
FORM OF OPINION OF SPECIAL COUNSEL TO THE ALADDIN PARTIES
TO BE DELIVERED PURSUANT TO
SECTION 7(a)(ii)
(i) Each of the Aladdin Parties has been duly organized or
incorporated, as applicable, and is validly existing as a limited-liability
company or corporation, as applicable, in good standing under the laws of the
State of Nevada.
(ii) Each of the Aladdin Parties has all necessary power and authority
to own, lease and operate its properties and to conduct its business as
described in the Offering Memorandum and to enter into and perform its
obligations under the Purchase Agreement.
(iii) Each of the Aladdin Parties is duly qualified as a foreign
limited-liability company or corporation, as applicable, to transact business
and is in good standing in each jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of property or the
conduct of business.
(iv) Each Designated Subsidiary has been duly organized or
incorporated, as applicable, and is validly existing as a limited-liability
company or corporation, as applicable, in good standing under the laws of the
jurisdiction of its organization or incorporation, as applicable, has all
necessary power and authority to own, lease and operate its properties and to
conduct its business as described in the Offering Memorandum and is duly
qualified as a foreign limited-liability company or corporation, as applicable,
to transact business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business; except as otherwise disclosed in the
Offering Memorandum, all of the issued and outstanding membership interests or
shares of capital stock, as applicable, of each Designated Subsidiary has been
duly authorized and validly issued, is fully paid and non-assessable and, to the
best of our knowledge and information, is owned by the applicable Aladdin Party,
directly or through subsidiaries, free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equity.
(v) All outstanding membership interests of Holdings have been duly
authorized and validly issued and are fully paid, non-assessable and not subject
to any preemptive and similar rights and are free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equity and is as set
forth in the column entitled "At the Closing Time" under the table relating to
the capitalization of Holdings under the caption "Capitalization" in the
Offering Memorandum. Capital, the Company and Aladdin Music Holdings are the
only subsidiaries of Holdings.
(vi) All outstanding shares of capital stock of Capital have been duly
authorized and validly issued and are fully paid, non-assessable and not subject
to any preemptive or similar rights and are directly owned by Holdings free and
clear of any security interest, mortgage, pledge, lien, encumbrance, claim or
equity. Capital has no subsidiaries.
B-1
<PAGE>
(vii) All outstanding shares of capital stock of Enterprises have been
duly authorized and validly issued and are fully paid, non-assessable and not
subject to any preemptive or similar rights and are free and clear of any
security interest, mortgage, pledge, lien, encumbrance, claim or equity and is
as set forth in the column entitled "At the Closing Time" under the table
relating to the capitalization of Enterprises under the caption "Capitalization"
in the Offering Memorandum. Enterprises has no subsidiaries.
(viii) Each of the Trust and AHL is duly qualified as a foreign trust
or limited-liability company, as applicable, to transact business and the Trust
is in good standing in each jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure so to qualify or to be in good
standing would not result in a material adverse effect on its business,
prospects, financial condition or results of operations.
(ix) The Preferred Membership Interests have been duly authorized by
the Company, and are validly issued, fully-paid, non-assessable and not subject
to any preemptive or similar rights and, other than in connection with the
Preferred Membership Interests Pledge Agreement, are directly owned by Holdings
free and clear of any security interest, mortgage, pledge, lien, encumbrance,
claim or equity.
(x) Each of the Aladdin Parties and their subsidiaries possesses such
permits, licenses, approvals, consents and other authorizations (collectively,
"Governmental Licenses") issued by the appropriate federal, state, local or
foreign regulatory agencies or bodies necessary to conduct the business now
operated by them; each of the Aladdin Parties and their subsidiaries is in
compliance with the terms and conditions of all such Governmental Licenses,
except where the failure so to comply would not, singly or in the aggregate,
have a Material Adverse Effect; all of the Governmental Licenses are valid and
in full force and effect, except when the invalidity of such Governmental
Licenses or the failure of such Governmental Licenses to be in full force and
effect would not have a Material Adverse Effect; and none of the Aladdin Parties
or any of their subsidiaries has received any notice of proceedings relating to
the revocation or modification of any such Governmental Licenses which, singly
or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would result in a Material Adverse Effect.
(xi) The issuance of the Warrant Shares has been duly authorized by all
requisite corporate action of Enterprises; and upon issuance thereof and payment
therefor in accordance with the terms of the Warrant Agreement, the Warrant
Shares will be duly authorized, validly issued, fully paid and nonassessable and
free of preemptive or similar rights. Enterprises has reserved the number of
Warrant shares contemplated by the Warrant Agreement for issuance under the
Warrants.
(xii) None of the Aladdin Parties or any of their subsidiaries is in
violation of its charter, by-laws or any other organizational document and, to
the best of our knowledge, no default by any of the Aladdin Parties or any of
their subsidiaries exists in the due performance or observance of any material
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, deed of trust, loan or credit agreement, note, lease or
other
B-2
<PAGE>
agreement or instrument to which any of the Aladdin Parties or any of
their subsidiaries is a party that is described or referred to in the Offering
Memorandum.
(xiii) Except as set forth in Section ___ of the Holdings Operating
Agreement, none of the Aladdin Parties nor any of their subsidiaries has any
outstanding options to purchase, or any preemptive rights or other rights to
subscribe for or purchase, any securities or obligations convertible into, or
any contracts or commitments to issue or sell, equity interests or any such
options, rights, convertible securities or obligations.
(xiv) The statements under the caption "Risk Factors--Ability to
Realize on Collateral; "Risk Factors--Certain Bankruptcy Considerations," "Risk
Factors--Mechanic's Liens," "Risk Factors-Government Regulation" and "Regulation
and Licensing"" in the Offering Memorandum, insofar as such statements
constitute a summary of the legal matters, documents or proceedings referred to
therein with respect to Nevada law, fairly present in all material respects such
legal matters, documents and proceedings.
(xv) After due inquiry, such counsel does not know of any legal or
governmental proceedings pending or threatened to which any of the Aladdin
Parties is or could be a party or to which any of their respective property is
or could be subject, which might result, singly or in the aggregate, in a
Material Adverse Effect.
(xvi) None of the Aladdin Parties has violated any Environmental Laws
or any provisions of ERISA, or the rules and regulations promulgated thereunder,
except for such violations which, singly or in the aggregate, would not have a
Material Adverse Effect.
(xvii) Other than as disclosed in the Offering Memorandum, there exists
no fact or any event which has occurred or which is reasonably likely to result
in material liability (including, without limitation, alleged or potential
liability for investigatory costs, cleanup costs, governmental response costs,
natural resource damages, property damages, personal injuries or penalties)
arising out of, based on or resulting from the presence or release into the
environment of any hazardous material (including without limitation any
pollutant or contaminant or hazardous, dangerous or toxic chemical, material,
waste or substance regulated under or within the meaning of any Environmental
Law) or any violation of any Environmental Law with respect to the Contributed
Land.
(xviii) Each of the Aladdin Parties and their subsidiaries possesses
such Governmental Licenses issued by the appropriate federal, state, local or
foreign regulatory agencies or bodies necessary to conduct the business now
operated by them; each of the Aladdin Parties and their subsidiaries is in
compliance with the terms and conditions of all such Governmental Licenses,
except where the failure so to comply would not, singly or in the aggregate,
have a Material Adverse Effect; all of the Governmental Licenses are valid and
in full force and effect, except when the invalidity of such Governmental
Licenses or the failure of such Governmental Licenses to be in full force and
effect would not have a Material Adverse Effect; and none of the Aladdin Parties
or any of their subsidiaries has received any notice of proceedings relating to
the revocation or modification of any such Governmental Licenses which, singly
or in the aggregate,
B-3
<PAGE>
if the subject of an unfavorable decision, ruling or finding, would result in a
Material Adverse Effect.
(xix) The Company has good and marketable title in fee simple to the
Project Site and good and marketable title to all personal property owned by the
Company which is material to the business of the Company, free and clear of any
security interest, mortgage, pledge, lien, encumbrance, claim or equity and
defects, except such as do not materially affect the value of such property and
do not interfere with the use made and proposed to be made of such property by
the Company in connection with its business as described in the Offering
Memorandum; and any real property held under lease by the Company is held under
valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such
property by the Company in connection with its business as described in the
Offering Memorandum, and the Company enjoys peaceful and undisturbed possession
under all such leases.
(xx) To the best knowledge of such counsel, there is no statute, rule,
regulation or order that has been enacted, adopted or issued by any governmental
agency which could have a Material Adverse Effect.
(xxi) The contemplated operation and use of the Aladdin, including the
construction of the Aladdin, will be (giving effect to any waivers or variances
which may be obtained) in compliance with all applicable municipal, county,
state and federal laws, regulations, ordinances, standards, orders, and other
regulations, where the failure to comply therewith could have a Material Adverse
Effect. Under applicable zoning and use laws, ordinances, rules and regulations,
the Aladdin may be used for the purposes contemplated in the Offering
Memorandum.
(xxii) It is our opinion that a federal or state court sitting in
Nevada will honor the parties' choice of the internal laws of the State of New
York as the law applicable to the Executed Transaction Documents and the
Executory Transaction Documents (to the extent set forth in such documents) and
to the determination of whether the obligations created by the Executed
Transaction Documents and Executory Transaction Documents are usurious.
(xxiii) The Pledge Agreements are in a form that substantially meets
the requirements of the Nevada Act and the Nevada Gaming Authorities.
(xxiv) The (a) deposit of the proceeds from the sale of the Units into
the Note Construction Disbursement Account, (b) execution of the Disbursement
Agreement and the Note Construction Pledge Agreement and the Escrow Agreement by
Holdings or the Company, as applicable, and (c) filing of the financing
statements in the office of the Nevada Secretary of State, shall cause the
Trustee, for the ratable benefit of the holders of the Notes, to have, as
security for the payment of obligations under the Indenture and the Notes, a
valid and perfected security interest or lien in the proceeds from the sale of
the Units deposited into the Note Construction Disbursement Account, and the
actions and filings described in clauses (a), (b) and (c) are hte only actions
and filings necessary to publish notice of the validity of such security
interests or liens and to perfect such security interest or liens as may be
perfected by filing. From
B-4
<PAGE>
and after the date hereof (assuming the due filing of Holdings' financing
statements and continuation statements required by Nevada law, without
intervening liens or security interests), the liens or security interests
created by the Disbursement Agreement and the Note Construction Pledge
Agreement which are to be perfected by the filing of a UCC-1 financing
statement will be duly perfected.
(xxv) Assuming the Preferred Membership Interests Pledge Agreement
create a valid security interest in the Pledged Interest (as defined in the
Preferred Membership Interests Pledge Agreement) under New York law, after
giving effect to the delivery to the Trustee for the benefit of the Noteholders
in the State of Nevada of the certificates representing the Pledged Interests,
in good faith and without notice of any adverse claim and in bearer form, or in
registered form endorsed to the Trustee or in blank by an effective enforsement
or registered in the name of the Trustee upon registration of transfer by the
issuer, the Trustee for the benefit of the Noteholders will have a perfected
security interest in such Pledged Interests.
B-5
<PAGE>
Exhibit C
FORM OF OPINION OF COUNSEL TO LONDON CLUBS AND LCNI
TO BE DELIVERED PURSUANT TO
SECTION 7(a)(iii)
(i) Each of London Clubs and LCNI has been duly incorporated, is
validly existing and is a corporation in good standing under the laws of its
jurisdiction of incorporation.
(ii) Each of London Clubs and LCNI has all necessary corporate power
and authority to carry on its business and to own, lease and operate its
properties. London Clubs owns all of the outstanding shares of capital stock of
LCNI.
(iii) Each of London Clubs and LCNI is duly qualified and is in good
standing as a foreign corporation authorized to do business in each jurisdiction
in which the nature of its business or its ownership or leasing of property
requires such qualification, except, with respect to London Clubs, where the
failure to be so qualified would not have a material adverse effect on its
business, prospects, financial condition or results of operations.
(iv) The Purchase Agreement has been duly authorized, executed and
delivered by London Clubs.
(v) Neither London Clubs or LCNI is in violation of its charter,
by-laws or any other organizational document and, to the best of our knowledge,
no default by London Clubs or LCNI exists in the due performance or observance
of any material obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, deed of trust, loan or credit agreement, note,
lease or other agreement or instrument to which London Clubs or LCNI is a party
that is described or referred to in the Offering Memorandum.
(vi) Other than the approval of the shareholders of London Clubs and
approvals necessary in connection with the U.S. Facilities Agreement banks with
National Westminster PLC as arranger and U.S. 1997 Noteholders, each of which
shall be obtained prior to the Closing Time, no filing with, or authorization,
approval, consent, license, order, registration, qualification or decree of, any
court or governmental authority or agency or any other party is necessary or
required for the performance by either of London Clubs or LCNI of their
obligations hereunder.
<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 Registration Statement (Form S-1) and
related Prospectus of Aladdin Gaming Enterprises, Inc. for the registration of
2,215,000 warrants to purchase 2,215,000 of Class B non-voting Common Stock of
Aladdin Gaming Enterprises, Inc. and to the incorporation by reference therein
of our reports dated January 15, 1998, with respect to the consolidated
financial statements of Aladdin Gaming Holdings, LLC and subsidiaries and the
financial statements of Aladdin Gaming, LLC, Aladdin Gaming Enterprises, Inc.
and Aladdin Capital Corp.
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
April 3, 1998
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of Aladdin Gaming Enterprises, Inc. of our
report dated 20 May 1997 relating to the financial statements of London Clubs
International plc, which appears in such Prospectus. We also consent to the
reference to us under the heading "Experts" in such Prospectus.
/s/ PRICE WATERHOUSE
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Price Waterhouse
CHARTERED ACCOUNTANTS
AND REGISTERED AUDITORS
London
8 April 1998
<PAGE>
8 April 1998
PRIVATE AND CONFIDENTIAL
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
USA
Ladies and Gentlemen
We are aware that Aladdin Gaming Enterprises, Inc. has included our report dated
5 December 1997 (issued pursuant to the provisions of United Kingdom Bulletin
"Review of Interim Financial Information", issued by the United Kingdom
Accounting Practices Board, which provisions are substantially consistent with
the provisions of Statement on Auditing Standards No. 71) in the Prospectus
constituting part of its Registration Statement on Form S-1 to be filed on or
about 8 April 1998. We are also aware of our responsibilities under the
Securities Act of 1933.
Yours very truly
/s/ PRICE WATERHOUSE
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Price Waterhouse
