Document:

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                                                                    EXHIBIT 10.2

                          REGISTRATION RIGHTS AGREEMENT

                                     BETWEEN

                                STEMCELLS, INC.,

                                   MARK LEVIN

                                       AND

                            IRVING L. WEISSMAN, M.D.

                                 APRIL 13, 2000

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                             INDEX OF DEFINED TERMS

<TABLE>
<CAPTION>
                                                                                                AS DEFINED IN
                                                                                                -------------
<S>                                                                                                      <C>
Act...................................................................................................... 3
Additional Preferred Shares.............................................................................. 2
Agreement................................................................................................ 2
Applicable Percentage.................................................................................... 6
Blue Sky................................................................................................. 5
Certificate.............................................................................................. 2
Closing.................................................................................................. 2
Closing Date............................................................................................. 2
Commission............................................................................................... 2
Common Shares............................................................................................ 2
Common Stock............................................................................................. 2
Company.................................................................................................. 2
Conversion/Exercise Deficiency........................................................................... 9
due diligence............................................................................................ 3
Filing Date.............................................................................................. 2
Holder................................................................................................... 2
Holders.................................................................................................. 2
Indemnified Party........................................................................................15
Indemnifying Party.......................................................................................15
Investors................................................................................................ 2
Mandatory Repurchase Price............................................................................... 7
Monthly Delay Payment.................................................................................... 7
Preferred Shares......................................................................................... 2
Purchase Agreement....................................................................................... 2
register................................................................................................. 3
registered............................................................................................... 3
Registrable Securities................................................................................... 3
registration............................................................................................. 3
Registration Expenses.................................................................................... 3
Registration Statement................................................................................... 3
Regulation D............................................................................................. 3
SEC...................................................................................................... 2
Securities Act........................................................................................... 3
Selling Expenses......................................................................................... 3
Warrants................................................................................................. 2
</TABLE>

                          REGISTRATION RIGHTS AGREEMENT

       This Registration Rights Agreement ("Agreement") is entered into as of
April 13, 2000, between StemCells, Inc., with offices at 525 Del Rey Avenue,
Suite C, Sunnyvale, California 94086 (the "Company"), and Mark Levin and Irving
L. Weissman, M.D. (each, an "Investor," and collectively, the "Investors").

                                       i

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                              W I T N E S S E T H:

       WHEREAS, pursuant to that certain Securities Purchase Agreement, dated on
or about the date hereof, by and between the Company and the Investors (the
"Purchase Agreement"), the Company has agreed to sell and issue to the
Investors, and the Investors have agreed to purchase from the Company, an
aggregate of 1,500 shares (750 per Investor), Liquidation Preference $1,000
each, of the Company's Series 6% Convertible Preferred Stock (the "Preferred
Shares") subject to the terms and conditions set forth therein, and 75,000
Warrants (37,500 per Investor) (the "Warrants") to purchase shares of the
Company's Common Stock, par value $0.01 per share (the "Common Stock") subject
to the terms and conditions set forth therein; and

       WHEREAS, the Purchase Agreement provides each Investor an option under
certain circumstances to purchase up to 563 additional Preferred Shares (the
"Additional Preferred Shares"), on the terms and conditions set forth therein;
and

       WHEREAS, the Purchase Agreement contemplates that the Preferred Shares
(including Additional Preferred Shares) will be convertible into shares (the
"Common Shares") of Common Stock pursuant to the terms and conditions set forth
in the Certificate of Designations for the Preferred Shares (the "Certificate");
and

       NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in the Purchase Agreement and
this Agreement, the Company and the Investors agree as follows:

          1. CERTAIN DEFINITIONS. Capitalized terms used herein and not
otherwise defined shall have the meaning ascribed thereto in the Purchase
Agreement or the Certificate. As used in this Agreement, the following terms
shall have the following respective meanings:

       "Closing" and "Closing Date" shall have the meanings ascribed to such
terms in the Purchase Agreement; provided that they shall refer to the initial
Closing and Closing Date scheduled under the Purchase Agreement.

       "Commission" or "SEC" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act.

       "Filing Date" shall mean the earliest of (i) 30 days after receipt of a
written request from either of the Investors; (ii) the filing of any
registration statement with the Commission pursuant to Rule 415 under the
Securities Act; or (iii) the date 10 business days after becoming eligible to
file a registration statement Form S-3 under the Securities Act, regardless of
whether the Company has actually filed a registration statement on or before
such date.

       "Holder" and "Holders" shall include the Investors and any transferee or

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transferees of the Preferred Shares, Additional Preferred Shares, Warrants,
Common Shares or Registrable Securities which have not been sold to the public,
to whom the registration rights conferred by this Agreement have been
transferred in compliance with this Agreement and the Purchase Agreement.

       The terms "register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.

       "Registrable Securities" shall mean: (i) the Common Shares or other
securities issued or issuable to each Holder or its permitted transferee or
designee upon conversion of the Preferred Shares or Additional Preferred Shares
or exercise of the Warrants; (ii) securities issued or issuable upon any stock
split, stock dividend, recapitalization or similar event with respect to such
Common Shares; and (iii) any other security issued as a dividend or other
distribution with respect to, in exchange for or in replacement of the
securities referred to in the preceding clauses.

       "Registration Expenses" shall mean all expenses to be incurred by the
Company in connection with each Holder's registration rights under this
Agreement, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel for the Company, blue sky
fees and expenses, reasonable fees and disbursements of counsel to Holders
(using a single counsel selected by a majority in interest of the Holders) for a
"due diligence" examination of the Company and review of the Registration
Statement and related documents, and the expense of any special audits incident
to or required by any such registration (but excluding the compensation of
regular employees of the Company, which shall be paid in any event by the
Company).

       "Registration Statement" shall have the meaning set forth in Section 2(a)
herein.

       "Regulation D" shall mean Regulation D as promulgated pursuant to the
Securities Act, and as subsequently amended.

       "Securities Act" or "Act" shall mean the Securities Act of 1933, as
amended.

       "Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities and all fees and
disbursements of counsel for Holders not included within "Registration
Expenses."

          2. REGISTRATION REQUIREMENTS. The Company shall use its best efforts
to effect the registration of the Registrable Securities (including, without
limitation, the execution of an undertaking to file post-effective amendments,
appropriate qualification under applicable blue sky or other state securities
laws and appropriate compliance with applicable regulations issued under the
Securities Act) as would permit or facilitate the sale or distribution of all
the Registrable Securities in the manner (including manner of sale) and in all
states reasonably requested by the Holder. Such best efforts by the

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Company shall include, without limitation, the following:

               (a) The Company shall, no later than the Filing Date:

                  (i) Prepare and file a registration statement with the
          Commission pursuant to Rule 415 under the Securities Act on such form
          as the Company is then eligible to use under the Securities Act
          covering resales by the Holders of the Registrable Securities
          ("Registration Statement"), which Registration Statement, to the
          extent allowable under the Securities Act and the rules promulgated
          thereunder (including Rule 416), shall state that such Registration
          Statement also covers such indeterminate number of additional shares
          of Common Stock as may become issuable upon conversion of the
          Preferred Shares and Additional Preferred Shares and exercise of the
          Warrants. The number of shares of Common Stock initially included in
          such Registration Statement shall be no less than the sum of two times
          the number of Common Shares that are then issuable upon conversion of
          the Preferred Shares and Additional Preferred Shares and exercise of
          the Warrants (assuming full conversion or exercise, respectively, at
          the then applicable Conversion Price (as defined in the Certificate)
          or Exercise Price (as defined in the Warrant) plus such number of
          shares of Common Stock other than the Registrable Securities as the
          Company may in its sole discretion include in such registration
          statement. Nothing in the preceding sentence will limit the Company's
          obligations to reserve shares of Common Stock pursuant to Section 3.7
          of the Purchase Agreement. Thereafter the Company shall use its best
          efforts to cause such Registration Statement and other filings to be
          declared effective as soon as possible, and in any event prior to 90
          days following the Filing Date. Without limiting the foregoing, the
          Company will promptly respond to all SEC comments, inquiries and
          requests, and shall request acceleration of effectiveness at the
          earliest possible date. The Company shall provide the Holders upon
          request reasonable opportunity to review any such Registration
          Statement or amendment or supplement thereto prior to filing.

                  (ii) Prepare and file with the SEC such amendments and
          supplements to such Registration Statement and the prospectus used in
          connection with such Registration Statement as may be necessary to
          comply with the provisions of the Act with respect to the disposition
          of all securities covered by such Registration Statement and notify
          the Holders of the filing and effectiveness of such Registration
          Statement and any amendments or supplements.

                  (iii) Furnish to each Holder such numbers of copies of a
          current prospectus conforming with the requirements of the Act, copies
          of the Registration Statement, any amendment or supplement thereto and
          any documents incorporated by reference therein and such other
          documents as

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          such Holder may reasonably require in order to facilitate the
          disposition of Registrable Securities owned by such Holder.

                  (iv) Register and qualify the securities covered by such
          Registration Statement under the securities or "Blue Sky" laws of all
          domestic jurisdictions; provided that the Company shall not be
          required in connection therewith or as a condition thereto to qualify
          to do business or to file a general consent to service of process in
          any such states or jurisdictions.

                  (v) Notify each Holder immediately of the happening of any
          event (but not the substance or details of any such events unless
          specifically requested by a Holder) as a result of which the
          prospectus (including any supplements thereto or thereof) included in
          such Registration Statement, as then in effect, includes an untrue
          statement of material fact or omits to state a material fact required
          to be stated therein or necessary to make the statements therein not
          misleading in light of the circumstances then existing, and use its
          best efforts to promptly update and/or correct such prospectus.

                  (vi) Notify each Holder immediately of the issuance by the
          Commission or any state securities commission or agency of any stop
          order suspending the effectiveness of the Registration Statement or
          the threat or initiation of any proceedings for that purpose. The
          Company shall use its best efforts to prevent the issuance of any stop
          order and, if any stop order is issued, to obtain the lifting thereof
          at the earliest possible time.

                  (vii) Permit counsel to the Holders to review the Registration
          Statement and all amendments and supplements thereto within a
          reasonable period of time (but not less than 3 full Trading Days (as
          defined in the Certificate)) prior to each filing, and shall not file
          any document in a form to which such counsel reasonably objects and
          will not request acceleration of the Registration Statement without
          prior notice to such counsel.

                  (viii) List the Registrable Securities covered by such
          Registration Statement with all securities exchange(s) and/or markets
          on which the Common Stock is then listed and prepare and file any
          required filings with the Nasdaq National Market or any exchange or
          market where the Common Shares are traded.

                  (ix) Take all steps necessary to enable Holders to avail
          themselves of the prospectus delivery mechanism set forth in Rule 153
          (or successor thereto) under the Act (if applicable).

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               (b) Set forth below in this Section 2(b) are (I) events that may
arise that the Investors consider will interfere with the full enjoyment of
their rights under this Agreement, the Purchase Agreement, the Warrants and the
Certificate (the "Interfering Events"), and (II) certain remedies applicable in
each of these events.

               Paragraphs (i) through (iv) of this Section 2(b) describe the
Interfering Events, provide a remedy to the Investors if an Interfering Event
occurs and provide that the Investors may require that the Company repurchase
outstanding Preferred Shares and Warrants at a specified price if certain
Interfering Events are not timely cured.

               Paragraph (v) provides, inter alia, that if default adjustments
required as the remedy in the case of certain of the Interfering Events are not
provided when due, the Company may be required by the Investors to redeem
outstanding Preferred Shares and Warrants at a specified price.

               Paragraph (vi) provides, inter alia, that the Investors have the
right to specific performance.

               The preceding paragraphs in this Section 2(b) are meant to serve
only as an introduction to this Section 2(b), are for convenience only, and are
not to be considered in applying, construing or interpreting this Section 2(b).

          (i)  DELAY IN EFFECTIVENESS OF REGISTRATION STATEMENT.

                    (A) (1) In the event that such Registration Statement has
               not been declared effective within 90 days from the Filing Date,
               then the Conversion Price (as defined in the Certificate) shall
               be permanently reduced so that thereafter (subject to further
               adjustment as set forth herein, in the Certificate and in the
               other Transaction Documents) it shall be equal to the otherwise
               applicable Conversion Price multiplied by the "Applicable
               Percentage." The Applicable Percentage shall be 98% in the event
               the Registration Statement becomes effective within the first 30
               day period after 90 days from the Filing Date. The Applicable
               Percentage shall be permanently reduced by an additional 1.5% if
               the Registration Statement is not effective within 120 days from
               the Filing Date and shall be further reduced an additional 1.5%
               during each successive 30 day period. For example, if the
               Registration Statement becomes effective on the 160th day
               following the Filing Date, the Applicable Percentage shall equal
               5%, so that thereafter the Conversion Price shall be 95% of the
               otherwise applicable Conversion Price. Any adjustments made
               pursuant to the foregoing provisions shall also apply to the
               Conversion Price of Additional Preferred Shares.

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                    In addition to the foregoing, if the Registration Statement
               has not been declared effective within 150 days after the Filing
               Date, then each Holder shall have the right to sell, at any time
               after the 150th day after the Filing Date, any or all of its
               Preferred Shares, and Warrants to the Company for consideration
               (the "Mandatory Repurchase Price") equal to (I) for the Preferred
               Shares, the greater of (x) 120% of the Liquidation Preference of
               all such Preferred Shares being sold to the Company, or (y) the
               Liquidation Preference for the Preferred Shares being sold to the
               Company divided by the then applicable Conversion Price
               multiplied by the greater of the last closing price of the Common
               Stock on (i) the date a Holder exercises its option pursuant to
               this Section 2(b) to require repurchase of Preferred Shares or
               (ii) the date on which the event triggering Holder's remedies
               under this Section 2(b) first occurred, in each case payable in
               cash and (II) for the Warrants 120% of the product of (a) the
               difference between the greater of clauses (i) or (ii) above and
               the exercise price of the Warrants, multiplied by (b) the number
               of Warrants being sold to the Company, payable in cash.

                         (2) In the event that the Company at any time fails to
               issue unlegended Registrable Securities as required by Article VI
               of the Purchase Agreement, then the Company shall pay each Holder
               a Monthly Delay Payment (as defined below) for each 30 day period
               (or portion thereof) that effectiveness of the Registration
               Statement is delayed or failure to issue such unlegended
               Registrable Securities persists.

                    (B) As used in this Agreement, a "Monthly Delay Payment"
               shall be a cash payment equal to 1% of the Liquidation Preference
               of the Preferred Shares held by a Holder for the first 30 day
               period (or portion thereof) that the specified condition in this
               Section 2(b) has not been fulfilled or the specified deficiency
               has not been remedied, 2% of such Liquidation Preference for the
               next 30 day period (or portion thereof) that the specified
               condition in this Section 2(b) has not been fulfilled or the
               specified deficiency has not been remedied, and 3% of such
               Liquidation Preference thereafter for each subsequent 30 day
               period (or portion thereof) that the specified condition in this
               Section 2(b) has not been fulfilled or the specified deficiency
               has not been remedied. Payment of the Monthly Delay Payments and
               Mandatory Repurchase Price shall be due and payable from the
               Company to such Holder within 5 business days of demand therefor.
               Without limiting the foregoing, if cash payment of the Mandatory
               Repurchase Price is not made within such 5 business day period,
               the Holder may revoke and withdraw its election to cause the
               Company to make such mandatory purchase at any time prior to its

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               receipt of such cash. At the option of the Holder, Monthly Delay
               Payments may be added to the Liquidation Preference of the
               Preferred Shares held by it.

          (ii) NO LISTING; PREMIUM PRICE REDEMPTION FOR DELISTING OF CLASS OF
               SHARES.

                    (A) In the event that the Company fails, refuses or for any
               other reason is unable to cause the Registrable Securities to be
               listed with Nasdaq National Market or one of the other Approved
               Markets (as defined in the Purchase Agreement) at all times
               during the period ("Listing Period") from the earlier of the
               effectiveness of the Registration Statement and the 90th day
               following the Filing Date until such time as the registration
               period specified in Section 5 terminates, then the Company shall
               provide to each Holder a Monthly Delay Payment, for each 30 day
               period or portion thereof during which such listing is not in
               effect. In addition to the foregoing, following the 10th day that
               such listing is not in effect, each Holder shall have the right
               to sell to the Company any or all of its Preferred Shares and
               Warrants at the Mandatory Repurchase Price. The provisions of
               Section 2(b)(i)(B) shall apply to this Section 2(b)(ii)(A).

                    (B) In the event that shares of Common Stock of the Company
               are not listed on any of the Approved Markets at all times
               following the Filing Date, or are otherwise suspended from
               trading and remain unlisted or suspended for 3 consecutive days,
               then the Company shall provide to each Holder a Monthly Delay
               Payment for each 30 day period or portion thereof during which
               such listing is not in effect. In addition to the foregoing,
               following the 5th day that the shares are not so listed or are
               otherwise suspended, at the option of each Holder and to the
               extent such Holder so elects, each Holder shall have the right to
               sell to the Company the Preferred Shares and the Warrants held by
               such Holder, in whole or in part, for the Mandatory Repurchase
               Price on the terms set forth in Section 2(b)(i)(B) above.

         (iii) BLACKOUT PERIODS. In the event that any Holder's ability to sell
               Registrable Securities under the Registration Statement is
               suspended for more than (i) five (5) consecutive days or (ii)
               twenty (20) days in any calendar year ("Suspension Grace
               Period"), including without limitation by reason of any
               suspension or stop order with respect to the Registration
               Statement or the fact that an event has occurred as a result of
               which the prospectus (including any supplements thereto) included
               in such Registration Statement then in effect includes an untrue
               statement of material fact or omits

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               to state a material fact required to be stated therein or
               necessary to make the statements therein not misleading in light
               of the circumstances then existing (a "Blackout"), then the
               Company shall provide to each Holder a Monthly Delay Payment for
               each 30 day period or portion thereof from and after the
               expiration of the Suspension Grace Period, on the terms set forth
               in Section 2(b)(i)(B) above. In addition, at any time following
               the expiration of the Suspension Grace Period if the Blackout
               continues for more than five (5) additional consecutive days, a
               Holder shall have the right to sell to the Company its Preferred
               Shares and/or Warrants in whole or in part for the Mandatory
               Repurchase Price on the terms set forth in Section 2(b)(i)(B)
               above.

          (iv) REDEMPTION FOR CONVERSION DEFICIENCY. In the event that the
               Company does not have a sufficient number of Common Shares
               available to satisfy the Company's obligations to any Holder upon
               receipt of a Conversion Notice (as defined in the Certificate) or
               exercise of the Warrants or the Company is otherwise unable or
               unwilling for any reason to issue such Common Shares (other than
               failure of the Holder to comply with the conversion notice and
               delivery requirements of Section 5 of the Certificate) (each, a
               "Conversion/Exercise Deficiency") in accordance with the terms of
               the Certificate, Purchase Agreement and Warrants for any reason
               after receipt of a Conversion Notice or exercise notice from any
               Holder, then:

                    (A) The Company shall provide to each Holder a Monthly Delay
               Payment for each 30 day period or portion thereof following the
               Conversion/Exercise Deficiency on all outstanding Preferred
               Shares and Warrants, on the terms set forth in Section 2(b)(i)(B)
               above.

                    (B) At any time five days after the commencement of the
               running of the first 30-day period described above in clause (A)
               of this paragraph (iv), at the request of any Holder, the Company
               promptly shall purchase from such Holder, for the Mandatory
               Repurchase Price and on the terms set forth in Section 2(b)(i)(B)
               above, any and all outstanding Preferred Shares and/or Warrants,
               if the failure to issue Common Shares results from the lack of a
               sufficient number thereof and shall purchase all of such Holder's
               Preferred Shares and/or Warrants (or such portion requested by
               such Holder) for such consideration and on such terms if the
               failure to issue Common Shares results from any other cause, or
               is without cause.

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          (v)  MANDATORY PURCHASE PRICE FOR DEFAULTS.

               (A) The Company acknowledges that any failure, refusal or
               inability by the Company to perform the obligations described in
               the foregoing paragraphs (i) through (iv) will cause the Holders
               to suffer damages in an amount that will be difficult to
               ascertain, including without limitation damages resulting from
               the loss of liquidity in the Registrable Securities and the
               additional investment risk in holding the Preferred Shares,
               Warrants and Registrable Securities. Accordingly, the parties
               agree, after consulting with counsel, that it is appropriate to
               include in this Agreement the foregoing provisions for Monthly
               Delay Payments and mandatory redemptions in order to compensate
               the Holders for such damages. The parties acknowledge and agree
               that the Monthly Delay Payments and mandatory redemptions set
               forth above represent the parties' good faith effort to quantify
               such damages and, as such, agree that the form and amount of such
               payments and mandatory redemptions are reasonable and will not
               constitute a penalty.

               (B) In the event that the Company fails to pay any Monthly Delay
               Payment within 5 business days of demand therefor, each Holder
               shall have the right to sell to the Company any or all of its
               Preferred Shares and/or Warrants at the Mandatory Repurchase
               Price on the terms set forth in Section 2(b)(i)(B) above.

               (C) The Holder shall have the right to withdraw any request for
               redemption hereunder at any time prior to its receipt of the
               Mandatory Repurchase Price.

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          (vi) CUMULATIVE REMEDIES. The Monthly Delay Payments and mandatory
               purchases provided for above are in addition to and not in lieu
               or limitation of any other rights the Holders may have at law, in
               equity or under the terms of the Certificate, the Purchase
               Agreement, the Warrants and this Agreement, including without
               limitation the right to monetary contract damages and specific
               performance. Each Holder shall be entitled to specific
               performance of any and all obligations of the Company in
               connection with the registration rights of the Holders hereunder.
               Each Monthly Delay Payment provided for herein in the foregoing
               clauses shall be in addition to each other Monthly Delay Payment;
               PROVIDED, HOWEVER, that in no event shall the Company be
               obligated to pay to any holder an aggregate amount greater than
               three percent (3%) of the Liquidation Preference for the
               Preferred Shares held by such holder for any 30-day period,
               provided, that this sentence shall not in any way affect the
               Company's mandatory purchase obligations hereunder.

         (vii) REMEDIES FOR REGISTRABLE SECURITIES. In any case in which a
               Holder of Preferred Shares and/or Warrants has the right to cause
               the purchase of its securities under this Section 2(b), it shall
               also have the right to cause the Company to purchase the
               Registrable Securities that such Holder owns, in whole or in part
               at the Holder's option, at a purchase price equal to 120% of the
               product of (a) the greater of the last closing price of the
               Common Stock on (i) the date a Holder exercises its option
               pursuant to this Section 2(b) or (ii) the date on which the event
               triggering Holder's remedies under this Section 2(b) first
               occurred, multiplied by (b) the number of Registrable Securities
               being sold to the Company, payable in cash.

               In the case in which a Holder of Preferred Shares or Warrants
               would have the right to receive Monthly Delay Payments with
               respect to Preferred Shares or Warrants under Section 2(b), it
               shall also have the right to receive payments with respect to
               Registrable Securities owned by it in an amount at the rate of
               the Monthly Delay Payments that would have applied to the
               Preferred Shares or Warrants converted into or exercised for
               Common Shares had such Preferred Shares or Warrants not been
               converted or exercised.

        (viii) REMEDIES FOR ADDITIONAL PREFERRED SHARES. All rights and
               remedies set forth herein that are stated to apply to Preferred
               Shares shall also apply, MUTATIS MUTANDIS, to Additional
               Preferred Shares.

               (c) If the Holder(s) intend to distribute the Registrable
Securities by means of an underwriting, the Holder(s) shall so advise the
Company. Any

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such underwriting may only be administered by nationally or regionally
recognized investment bankers reasonably satisfactory to the Company.

               (d) The Company shall enter into such customary agreements for
secondary offerings (including a customary underwriting agreement with the
underwriter or underwriters, if any) and take all such other reasonable
actions reasonably requested by the Holders in connection therewith in order
to expedite or facilitate the disposition of such Registrable Securities.
Whether or not an underwriting agreement is entered into and whether or not
the Registrable Securities are to be sold in an underwritten offering, the
Company shall:

                     (i) make such representations and warranties to the
          Holders and the underwriter or underwriters, if any, in form,
          substance and scope as are customarily made by issuers to
          underwriters in secondary offerings;

                    (ii) cause to be delivered to the sellers of Registrable
          Securities and the underwriter or underwriters, if any, opinions of
          independent counsel to the Company, on and dated as of each effective
          day (or in the case of an underwritten offering, dated the date of
          delivery of any Registrable Securities sold pursuant thereto) of the
          Registration Statement, and within ninety (90) days following the end
          of each fiscal year thereafter, which counsel and opinions (in form,
          scope and substance) shall be reasonably satisfactory to the Holders
          and the underwriter(s), if any, and their counsel and covering,
          without limitation, such matters as the due authorization and issuance
          of the securities being registered and compliance with securities laws
          by the Company in connection with the authorization, issuance and
          registration thereof and other matters that are customarily given to
          underwriters in underwritten offerings, addressed to the Holders and
          each underwriter, if any;

                    (iii) cause to be delivered, immediately prior to the
          effectiveness of the Registration Statement (and, in the case of an
          underwritten offering, at the time of delivery of any Registrable
          Securities sold pursuant thereto), and at the beginning of each fiscal
          year following a year during which the Company's independent certified
          public accountants shall have reviewed any of the Company's books or
          records, a "comfort" letter from the Company's independent certified
          public accountants addressed to the Holders and each underwriter, if
          any, stating that such accountants are independent public accountants
          within the meaning of the Securities Act and the applicable published
          rules and regulations thereunder, and otherwise in customary form and
          covering such financial and accounting matters as are customarily
          covered by letters of the independent certified public accountants
          delivered in connection with secondary offerings; such accountants
          shall have undertaken in each such letter to update the same during
          each such fiscal year in which such books

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          or records are being reviewed so that each such letter shall remain
          current, correct and complete throughout such fiscal year; and each
          such letter and update thereof, if any, shall be reasonably
          satisfactory to the Holders;

                    (iv) if an underwriting agreement is entered into, the same
          shall include customary indemnification and contribution provisions to
          and from the underwriters and procedures for secondary underwritten
          offerings; and

                    (v) deliver such documents and certificates as may be
          reasonably requested by the Holders of the Registrable Securities
          being sold or the managing underwriter or underwriters, if any, to
          evidence compliance with clause (i) above and with any customary
          conditions contained in the underwriting agreement, if any.

                    (e) The Company shall make available for inspection by the
Holders, representative(s) of all the Holders together, any underwriter
participating in any disposition pursuant to a Registration Statement, and any
attorney or accountant retained by any Holder or underwriter, all financial and
other records customary for purposes of the Holders' due diligence examination
of the Company and review of any Registration Statement, all SEC Documents (as
defined in the Purchase Agreement) filed subsequent to the Closing, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors and employees to supply all information reasonably requested
by any such representative, underwriter, attorney or accountant in connection
with such Registration Statement, provided that such parties agree to keep such
information confidential.

                    (f) Subject to Section 2(b) above, the Company may suspend
the use of any prospectus used in connection with the Registration Statement
only in the event, and for such period of time as, such a suspension is required
by the rules and regulations of the Commission. The Company will use its best
efforts to cause such suspension to terminate at the earliest possible date.

                    (g) The Company shall file a Registration Statement with
respect to any newly authorized and/or reserved (which shall include all shares
required to be reserved) Registrable Securities consisting of Common Shares
described in clause (i) of the definition of Registrable Securities within five
(5) business days of any reservation (or the date reservation was required) or
stockholders meeting authorizing same and shall use its best efforts to cause
such Registration Statement to become effective within forty-five (45) days of
such reservation (or the date reservation was required) or stockholders meeting.
If the Holders become entitled, pursuant to an event described in clause (ii),
(iii) and (iv) of the definition of Registrable Securities, to receive any
securities in respect of Registrable Securities that were already included in a
Registration Statement, subsequent to the date such Registration Statement is
declared effective, and the Company is unable under the securities laws to add
such securities to the then effective Registration Statement, the Company shall
promptly file, in accordance

                                      -13-

<PAGE>

with the procedures set forth herein, an additional Registration Statement with
respect to such newly Registrable Securities. The Company shall use its best
efforts to (i) cause any such additional Registration Statement, when filed, to
become effective under the Securities Act, and (ii) keep such additional
Registration Statement effective during the period described in Section 5 below
and cause such Registration Statement to become effective within 45 days of that
date that the need to file the Registration Statement arose. All of the
registration rights and remedies under this Agreement shall apply to the
registration of such newly reserved shares and such new Registrable Securities,
including without limitation the provisions providing for default payments and
mandatory redemptions contained herein.

          3. EXPENSES OF REGISTRATION. All Registration Expenses in connection
with any registration, qualification or compliance with registration pursuant to
this Agreement shall be borne by the Company, and all Selling Expenses of a
Holder shall be borne by such Holder.

          4. REGISTRATION ON FORM S-3. The Company shall use its best efforts to
become qualified for registration on Form S-3 or any comparable or successor
form or forms and to remain qualified for registration on such form as the
Company is eligible to use under the Securities Act.

          5. REGISTRATION PERIOD. In the case of the registration effected by
the Company pursuant to this Agreement, the Company shall keep such registration
effective until the later of (a) the date on which all the Holders have
completed the sales or distribution described in the Registration Statement
relating thereto or, if earlier, until such Registrable Securities may be sold
by the Holders under Rule 144(k) (provided that the Company's transfer agent has
accepted an instruction from the Company to such effect), and (b) the fifth
(5th) anniversary of the Filing Date.

          6. INDEMNIFICATION.

               (a) COMPANY INDEMNITY. The Company will indemnify each Holder,
each of its officers, directors, agents and partners, and each person
controlling each of the foregoing, within the meaning of Section 15 of the
Securities Act and the rules and regulations thereunder with respect to which
registration, qualification or compliance has been effected pursuant to this
Agreement, and each underwriter, if any, and each person who controls, within
the meaning of Section 15 of the Securities Act and the rules and regulations
thereunder, any underwriter, against all claims, losses, damages and liabilities
(or actions in respect thereof) arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any prospectus,
offering circular or other document (including any related registration
statement, notification or the like) 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 not misleading in light of the circumstances under which
they were made, or any violation by the Company of the Securities Act or any
state securities law or in either case, any rule or regulation

                                      -14-

<PAGE>

thereunder applicable to the Company and relating to action or inaction required
of the Company in connection with any such registration, qualification or
compliance, and will reimburse each Holder, each of its officers, directors,
agents and partners, and each person controlling each of the foregoing, each
such underwriter and each person who controls any such underwriter, for any
legal and any other expenses reasonably incurred in connection with
investigating and defending any such claim, loss, damage, liability or action,
provided that the Company will not be liable in any such case to a Holder to the
extent that any such claim, loss, damage, liability or expense arises out of or
is based on any untrue statement or omission based upon written information
furnished to the Company by such Holder or the underwriter (if any) therefor and
stated to be specifically for use therein. The indemnity agreement contained in
this Section 6(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Company (which consent will not be unreasonably withheld).

               (b) HOLDER INDEMNITY. Each Holder will, severally and not
jointly, if Registrable Securities held by it are included in the securities as
to which such registration, qualification or compliance is being effected,
indemnify the Company, each of its directors, officers, agents and partners, and
each underwriter, if any, of the Company's securities covered by such a
registration statement, each person who controls the Company or such underwriter
within the meaning of Section 15 of the Securities Act and the rules and
regulations thereunder, each other Holder (if any), and each of their officers,
directors and partners, and each person controlling such other Holder(s) against
all claims, losses, damages and liabilities (or actions in respect thereof)
arising out of or based on any untrue statement (or alleged untrue statement) of
a material fact contained in any such registration statement, prospectus,
offering circular or other document, or any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statement therein not misleading in light of the circumstances under which
they were made, and will reimburse the Company and such other Holder(s) and
their directors, officers and partners, underwriters or control persons for any
legal or any other expenses reasonably incurred in connection with investigating
and defending any such claim, loss, damage, liability or action, in each case to
the extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by such Holder
and stated to be specifically for use therein, and provided that the maximum
amount for which such Holder shall be liable under this indemnity shall not
exceed the net proceeds received by such Holder from the sale of the Registrable
Securities pursuant to the registration statement in question. The indemnity
agreement contained in this Section 6(b) shall not apply to amounts paid in
settlement of any such claims, losses, damages or liabilities if such settlement
is effected without the consent of such Holder (which consent shall not be
unreasonably withheld).

               (c) PROCEDURE. Each party entitled to indemnification under this
Section 6 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has

                                      -15-

<PAGE>

actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim in any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
be unreasonably withheld), and the Indemnified Party may participate in such
defense at its own expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 6 except to the extent
that the Indemnifying Party is materially and adversely affected by such failure
to provide notice. 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. Each Indemnified Party shall furnish such non-privileged information
regarding itself or the claim in question as an Indemnifying Party may
reasonably request in writing and as shall be reasonably required in connection
with the defense of such claim and litigation resulting therefrom.

          7. CONTRIBUTION. If the indemnification provided for in Section 6
herein is unavailable to the Indemnified Parties in respect of any losses,
claims, damages or liabilities referred to herein (other than by reason of the
exceptions provided therein), then each such Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages or
liabilities as between the Company on the one hand and any Holder on the other,
in such proportion as is appropriate to reflect the relative fault of the
Company and of such Holder in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative fault of the Company on the one
hand and of any Holder on the other shall be determined by reference to, among
other things, whether the 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 Company or by such Holder.

          In no event shall the obligation of any Indemnifying Party to
contribute under this Section 7 exceed the amount that such Indemnifying Party
would have been obligated to pay by way of indemnification if the
indemnification provided for under Section 6(a) or 6(b) hereof had been
available under the circumstances.

          The Company and the Holders agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Holders or the underwriters 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 in the immediately preceding
paragraphs. The amount paid or payable by an Indemnified Party as a result of
the losses, claims, damages and liabilities referred to in the immediately
preceding paragraphs shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such Indemnified
Party in connection with investigating or defending any such action or claim.

                                      -16-

<PAGE>

Notwithstanding the provisions of this section, no Holder or underwriter shall
be required to contribute any amount in excess of the amount by which (i) in the
case of any Holder, the net proceeds received by such Holder from the sale of
Registrable Securities pursuant to the registration statement in question or
(ii) in the case of an underwriter, the total price at which the Registrable
Securities purchased by it and distributed to the public were offered to the
public exceeds, in any such case, the amount of any damages that such Holder or
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.

          8. SURVIVAL. The indemnity and contribution agreements contained in
Sections 6 and 7 and the representations and warranties of the Company referred
to in Section 2(d)(i) shall remain operative and in full force and effect
regardless of (i) any termination of this Agreement or the Purchase Agreement or
any underwriting agreement, (ii) any investigation made by or on behalf of any
Indemnified Party or by or on behalf of the Company, and (iii) the consummation
of the sale or successive resales of the Registrable Securities.

          9. INFORMATION BY HOLDERS. Each Holder shall furnish to the Company
such information regarding such Holder and the distribution and/or sale proposed
by such Holder as the Company may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in this Agreement. The intended method or methods of
disposition and/or sale (Plan of Distribution) of such securities as so provided
by such Investor shall be included without alteration in the Registration
Statement covering the Registrable Securities and shall not be changed without
written consent of such Holder.

          10. REPLACEMENT CERTIFICATES. The certificate(s) representing the
Preferred Shares, Additional Preferred Shares and/or Common Shares held by any
Investor (or then Holder) may be exchanged by such Investor (or such Holder) at
any time and from time to time for certificates with different denominations
representing an equal aggregate number of Preferred Shares, Additional Preferred
Shares and/or Common Shares, as reasonably requested by such Investor (or such
Holder) upon surrendering the same. No service charge will be made for such
registration or transfer or exchange. Upon receipt by the Corporation of
evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of any certificate representing the Preferred Shares, Additional
Preferred Shares or the Warrants, or the underlying Common Shares of any of the
foregoing, and, in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it, or upon surrender and cancellation of such
certificate if mutilated, the Corporation will make and deliver a new
certificate of like tenor and dated as of such cancellation at no charge to the
holder.

          11. TRANSFER OR ASSIGNMENT. Except as otherwise provided herein, this
Agreement shall be binding upon and inure to the benefit of the parties and
their

                                      -17-

<PAGE>

successors and permitted assigns. The rights granted to the Investors by
the Company under this Agreement to cause the Company to register Registrable
Securities may be transferred or assigned (in whole or in part) to a transferee
or assignee of Preferred Shares, Additional Preferred Shares, Warrants or
Registrable Securities, and all other rights granted to the Investors by the
Company hereunder may be transferred or assigned to any transferee or assignee
of any Preferred Shares, Additional Preferred Shares, Warrants or Registrable
Securities; provided in each case that the Company must be given written notice
by the such Investor at the time of or within a reasonable time after said
transfer or assignment, stating the name and address of said transferee or
assignee and identifying the securities with respect to which such registration
rights are being transferred or assigned; and provided further that the
transferee or assignee of such rights agrees in writing to be bound by the
registration provisions of this Agreement.

          12. MISCELLANEOUS.

               (a) REMEDIES. The Company and the Investors acknowledge and agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent or cure breaches of the
provisions of this Agreement and to enforce specifically the terms and
provisions hereof, this being in addition to any other remedy to which any of
them may be entitled by law or equity.

               (b) JURISDICTION. The Company and each Investor (i) hereby
irrevocably submits to the exclusive jurisdiction of the United States District
Court, the California State courts and other courts of the United States sitting
in the Northern District of California for the purposes of any suit, action or
proceeding arising out of or relating to this Agreement and (ii) hereby waives,
and agrees not to assert in any such suit action or proceeding, any claim that
it is not personally subject to the jurisdiction of such court, that the suit,
action or proceeding is brought in an inconvenient forum or that the venue of
the suit, action or proceeding is improper. The Company and the Investors
consent to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing in this paragraph
shall affect or limit any right to serve process in any other manner permitted
by law.

               (c) NOTICES. Any notice or other communication required or
permitted to be given hereunder shall be in writing by facsimile, mail or
personal delivery and shall be effective upon actual receipt of such notice. The
addresses for such communications shall be:

                                      -18-

<PAGE>

                  to the Company:

                           StemCells, Inc.
                           525 Del Rey Avenue, Suite C
                           Sunnyvale, CA  92887
                           Telephone: (408) 731-8670
                           Facsimile: (408) 731-8674
                           Attention: President

                  with a copy to:

                           Ropes & Gray
                           One International Place
                           Boston, MA  02110
                           Telephone: (617) 951-7000
                           Facsimile: (617) 951-7050
                           Attention: Geoffrey B. Davis, Esq.

                  to Mark Levin:

                           ----------------------

                           ----------------------

                           ----------------------

                  with a copy to:

                           ----------------------

                           ----------------------

                           ----------------------

                  to Irving L. Weissman, M.D.:

                           ----------------------

                           ----------------------

                           ----------------------

                  with a copy to:

                           ----------------------

                           ----------------------

                           ----------------------

Any party hereto may from time to time change its address for notices by giving
at least five days' written notice of such changed address to the other parties
hereto.

               (d) INDEMNITY. Each party shall indemnify each other party
against any loss, cost or damages (including reasonable attorney's fees)
incurred as a

                                      -19-

<PAGE>

result of such parties' breach of any representation, warranty, covenant or
agreement in this Agreement, including, without limitation, any enforcement of
this indemnity.

               (e) WAIVERS. No waiver by any party of any default with respect
to any provision, condition or requirement of this Agreement shall be deemed to
be a continuing waiver in the future or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or omission of any party to
exercise any right hereunder in any manner impair the exercise of any such right
accruing to it thereafter. The representations and warranties and the agreements
and covenants of the Company and each Investor contained herein shall survive
the Closing.

               (f) EXECUTION IN COUNTERPART. This Agreement may be executed in
two or more counterparts, all of which shall be considered one and the same
agreement, it being understood that all parties need not sign the same
counterpart.

               (g) SIGNATURES. Facsimile signatures shall be valid and binding
on each party submitting the same.

               (h) ENTIRE AGREEMENT; AMENDMENT. This Agreement, together with
the Purchase Agreement, the Certificate, the Warrants and the agreements and
documents contemplated hereby and thereby, contains the entire understanding and
agreement of the parties, and may not be amended, modified or terminated except
by a written agreement signed by the Company plus the Holders of 75% of the
Preferred Shares issued under the Purchase Agreement to that date; provided that
for the purposes of this Section 12(h)) the Holders of Common Shares still
entitled to registration rights under this Agreement will be deemed to still be
Holders of that number of Preferred Shares which were converted into such number
of Common Shares issued upon conversion which are still held by them.

               (i) GOVERNING LAW. This Agreement and the validity and
performance of the terms hereof shall be governed by and construed in accordance
with the laws of the State of California applicable to contracts executed and to
be performed entirely within such state, except to the extent that the law of
the State of Delaware regulates the Company's issuance of securities.

               (j) JURY TRIAL. EACH PARTY HERETO WAIVES THE RIGHT TO A TRIAL BY
JURY.

               (k) TITLES. The titles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.

               (l) NO STRICT CONSTRUCTION. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rule of strict construction will be applied against any party.

                                      -20-

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.

                                    STEMCELLS, INC.

                                    By:
                                       ----------------------------------------
                                    Name:  George W. Dunbar, Jr.
                                    Title: Acting President and CEO

                                           ------------------------------------
                                           Mark Levin

                                           ------------------------------------
                                           Irving L. Weissman, M.D.

                                     -21-<PAGE>

                                                             EXHIBIT 10.01

                               THIRD AMENDMENT TO
                                CREDIT AGREEMENT

                            Dated as of June 1, 2000

                         (amending the Credit Agreement,
                                   dated as of
                               February 26, 1998)

                                      among

                              ALADDIN GAMING, LLC,
                                as the Borrower,

                         VARIOUS FINANCIAL INSTITUTIONS,
                                 as the Lenders,

                            THE BANK OF NOVA SCOTIA,
                  as the Administrative Agent for the Lenders,

                       MERRILL LYNCH CAPITAL CORPORATION,
                    as the Syndication Agent for the Lenders,

                                       and

                             CIBC OPPENHEIMER CORP.,
                   as the Documentation Agent for the Lenders

<PAGE>

                       THIRD AMENDMENT TO CREDIT AGREEMENT

     THIS THIRD AMENDMENT TO CREDIT AGREEMENT (this "THIRD AMENDMENT TO CREDIT
AGREEMENT") dated as of June 1, 2000, by and among ALADDIN GAMING, LLC, a Nevada
limited-liability company (the "BORROWER"), the various financial institutions
as are or may become parties hereto (collectively, the "LENDERS"), THE BANK OF
NOVA SCOTIA, as administrative agent (together with any successor thereto in
such capacity, the "ADMINISTRATIVE AGENT") for the Lenders, MERRILL LYNCH
CAPITAL CORPORATION, as syndication agent (together with any successor thereto
in such capacity, the "SYNDICATION AGENT") for the Lenders, and CIBC OPPENHEIMER
CORP., as documentation agent (together with any successor thereto in such
capacity, the "DOCUMENTATION AGENT") for the Lenders.

     In consideration of the mutual agreements herein contained and other good
and valuable consideration, receipt of which is hereby acknowledged, the parties
hereto, intending to be legally bound, agree as follows:

                              W I T N E S S E T H:

     WHEREAS, the Borrower, the Lenders, the Administrative Agent, the
Syndication Agent and the Documentation Agent have heretofore entered into (x)
that certain Credit Agreement (the "CA"), dated as of February 26, 1998, (y)
that certain First Amendment to Credit Agreement (the "FIRST AMENDMENT TO CREDIT
AGREEMENT") dated as of January 29, 1999 and (z) that certain Second Amendment
to Credit Agreement (the "SECOND AMENDMENT TO CREDIT AGREEMENT") dated as of
April 5, 1999, effective as of March 10, 1999 (the CA, as amended by the First
Amendment to Credit Agreement and the Second Amendment to Credit Agreement,
shall be referred to herein as the "CREDIT AGREEMENT"); and

     WHEREAS, the Borrower has requested the Lenders to enter into certain
amendments of the Credit Agreement and the Disbursement Agreement; and

     WHEREAS, each of the parties hereto is willing, on the terms and subject to
the conditions hereinafter set forth, to so amend the Credit Agreement and the
Disbursement Agreement, but only upon the terms and conditions set forth below.

     NOW, THEREFORE, in consideration of the agreements contained herein, the
parties hereto agree as follows:

                                       1
<PAGE>

                                    ARTICLE I

                                   DEFINITIONS

SECTION I.1. CERTAIN DEFINED TERMS. The following terms (whether or not
italicized) when used in this Third Amendment to Credit Agreement, including its
preamble and recitals, shall, except where the context otherwise requires, have
the following meanings:

         "FIRST AMENDMENT TO CREDIT AGREEMENT" is defined in the FIRST RECITAL.

         "GECC FACILITIES AGREEMENT" shall mean that certain Facilities
Agreement between General Electric Capital Corporation ("GECC"), for itself and
as agent for certain participants, and the Borrower dated as of June 26, 1998,
as amended by that certain First Amendment to Facilities Agreement between GECC,
for itself and as agent for certain participants, and the Borrower dated as of
September 2, 1998, as the same may from time to time be further amended,
supplemented, amended and restated or otherwise modified in accordance with the
terms of the Credit Agreement, as amended by the Third Amendment to Credit
Agreement, and the GECC Intercreditor Agreement.

         "GECC INTERCREDITOR AGREEMENT" shall mean that certain Intercreditor
Agreement by and among the Administrative Agent, GECC and the Borrower dated as
of June 30, 1998 and as thereafter from time to time amended, supplemented,
amended and restated or otherwise modified in accordance with the terms thereof.

         "SECOND AMENDMENT TO CREDIT AGREEMENT" is defined in the FIRST RECITAL.

         "THIRD AMENDMENT TO CREDIT AGREEMENT" is defined in the PREAMBLE.

         SECTION I.2. OTHER DEFINED TERMS; CONSTRUCTION. For purposes of this
Third Amendment to Credit Agreement, capitalized terms used but not defined
herein shall have the meanings assigned to them in the Credit Agreement, as
amended by this Third Amendment to Credit Agreement, and the rules of
construction set forth in ARTICLE I of the Credit Agreement shall apply to this
Third Amendment to Credit Agreement.

                                   ARTICLE II

                                   AMENDMENTS

     SECTION II.1. AMENDMENTS. The parties hereto hereby agree as follows:

          (a) Provided that the Borrower has delivered an opinion of counsel
which conforms to the requirements of CLAUSE (H) OF SECTION 3.1 (the "COUNSEL
OPINION") which expressly provides, in relevant part, that no approval is
required under the GECC Facilities Agreement or the GECC Intercreditor Agreement
for the amendment set forth below (or alternatively, the Borrower delivers a
consent by GECC under the GECC Facilities Agreement to the amendment of the
Credit

                                       2
<PAGE>

Agreement as set forth herein), the last sentence of SECTION 7.19 of the Credit
Agreement shall be amended in its entirety to read as set forth below:

          "The Borrower shall not, at any time prior to the Completion Date,
     open or establish any bank, deposit or any other accounts at any financial
     institution other than the Accounts provided for herein without the prior
     consent of the Administrative Agent which consent shall not be unreasonably
     withheld if (x) such bank, deposit or other account is required by the
     Borrower in the ordinary course of its business after the Opening Date, (y)
     the Borrower has agreed to such other conditions required by the
     Administrative Agent (which may include the granting of a security interest
     to the Administrative Agent on behalf of the Lenders) and (z) with respect
     to deposits in any such account (1) prior to the Opening Date, the amount
     of such deposits does not exceed $1,000,000 at any time, (2) after the
     Opening Date, the amount of such deposits does not exceed $5,000,000 at any
     time (or such greater amount approved by the Administrative Agent in its
     sole discretion) and (3) in each case, the amount of such deposits shall be
     reduced to a level which reasonably meets the requirements of the
     Borrower's business as determined by the Administrative Agent."

     The Lenders hereby agree that the Administrative Agent shall have the right
to approve such bank, deposit or other accounts on behalf of the Lenders after
the Administrative Agent has determined that the condition set forth in clause
(x) above has been satisfied in all material respects.

          (b) Provided that the Borrower has delivered a Counsel Opinion which
expressly provides, in relevant part, that no approval is required under the
GECC Facilities Agreement or the GECC Intercreditor Agreement for the amendment
set forth below (or alternatively, the Borrower delivers an amendment to the
GECC Facilities Agreement or the GECC Intercreditor Agreement which includes a
consent to the amendment of the Credit Agreement as set forth herein and which
is substantially similar to the amendment set forth below), the following
sentence shall be added to the end of SECTION 7.2.5 of the Credit Agreement:

          "Notwithstanding the foregoing, the Borrower may make an Investment in
     any wholly-owned Subsidiary which is created by the Borrower for the
     purpose of owning and controlling bank, deposit or any other accounts at
     any financial institution permitted under this Agreement or which otherwise
     are created for purposes of the Borrower's operation of the Casino so long
     as the Administrative Agent has consented thereto which consent shall not
     be unreasonably withheld if (x) such Subsidiary is required by the Borrower
     in the ordinary course of its business after the Opening Date, (y) the
     Borrower has agreed to such other reasonable conditions required by the
     Administrative Agent based upon the nature of the business of such
     Subsidiary (which may require that such Subsidiary be a bankruptcy remote
     single purpose entity and provide a guaranty of the Obligations under the
     Loan Documents) and (z) with respect to any such Investment (1) prior to
     the Opening Date, the amount of such Investment does not exceed $1,000,000,
     (2) after the Opening Date, the amount of such Investment does not exceed
     $5,000,000 PER

                                       3
<PAGE>

     ANNUM (or such greater amount approved by the Administrative Agent in its
     sole discretion) and (3) in each case, the amount thereof shall be reduced
     to a level which reasonably meets the requirements of the Borrower's
     business as determined by the Administrative Agent."

     The Lenders hereby agree that the Administrative Agent shall have the right
to approve each such Investment after the Administrative Agent has determined
that the condition set forth in clause (x) above has been satisfied in all
material respects.

          (c) Provided that the Borrower has delivered a Counsel Opinion which
expressly provides, in relevant part, that no approval is required under the
GECC Facilities Agreement or the GECC Intercreditor Agreement for the amendment
set forth below (or alternatively, the Borrower delivers an amendment to the
GECC Facilities Agreement or the GECC Intercreditor Agreement which includes a
consent to the amendment of the Credit Agreement as set forth herein and which
is substantially similar to the amendment set forth below), SECTION 7.2.8 of the
Credit Agreement shall be amended in its entirety as set forth below:

         "The Borrower will not, and will not permit any Subsidiary to, enter
         into at any time any arrangement (other than the arrangement described
         in CLAUSE (C) of the FIFTH RECITAL) which involves the leasing by the
         Borrower from any lessor of any real or personal property (or any
         interest therein), which does not create a Capitalized Lease Liability
         and except arrangements which, together with all other such
         arrangements which shall then be in effect, will not require the
         payment of an aggregate amount in any Fiscal Year of rentals by the
         Borrower or any Subsidiary in excess of, in the case of any such
         arrangements entered into prior to the date which is 90 days after the
         Opening Date, $2,000,000 PER ANNUM and, in the case of any such
         arrangement entered into on or subsequent to the date which is 90 days
         after the Opening Date, $5,000,000 PER ANNUM."

               (d) Provided that the Borrower has delivered the Counsel Opinion
which expressly provides, in relevant part, that no approval is required under
the GECC Facilities Agreement or the GECC Intercreditor Agreement for the waiver
set forth herein (or alternatively, the Borrower delivers a consent from GECC
under the GECC Facilities Agreement to the waiver set forth herein), the
Administrative Agent shall waive the limitation in the amount of $5,000,000 in
SECTION 2.3.4 of the Disbursement Agreement and agree to direct the Disbursement
Agent to increase such limitation to $10,000,000.

               (e) Provided that the Borrower has delivered a Counsel Opinion
which expressly provides, in relevant part, that no approval is required under
the GECC Facilities Agreement or the GECC Intercreditor Agreement for the waiver
set forth herein (or alternatively, the Borrower delivers a consent from GECC
under the GECC Facilities Agreement to the waiver set forth herein), the
Administrative Agent shall waive with respect to payroll payments only the
requirement in SECTION 2.2.5 of the Disbursement Agreement that the Disbursement
Agent receive satisfactory evidence that Indirect Costs are then due and payable
so that the Administrative Agent can provide

                                       4
<PAGE>

funds for payroll payments to be made within 30 days after the Advance Date
PROVIDED THAT (x) all such amounts are funded from Line Items and Line Item
Categories approved by the Administrative Agent and from no other Line Items or
Line Item Categories, as the case may be, (y) all such amounts are deposited and
held in the Servicing Agent's Payroll Account and (z) all such amounts are paid
to the Person entitled thereto in accordance with the Servicing and Collateral
Account Agreement. The Advance Request required by SECTION 3.2.6 of the
Disbursement Agreement shall conform to the waiver set forth herein.

          (f) Provided that the Borrower has delivered the Counsel Opinion which
expressly provides, in relevant part, that no approval is required under the
GECC Facilities Agreement or the GECC Intercreditor Agreement for the waiver set
forth herein (or alternatively, the Borrower delivers a consent by GECC under
the GECC Facilities Agreement to the waiver set forth herein), the
Administrative Agent will waive the prohibitions set forth in the Disbursement
Agreement which prohibit any Advance which is funded from the Bank Proceeds
Account or from a Term A Loan from being used as a down payment for the Gaming
Equipment or the Specified Equipment which is to be leased under an FF&E Lease
or financed by the credit facilities contemplated by the Approved Equipment
Funding Commitments so long as the following conditions have been met:

          To the extent that any Advance Request shall include any amount in
          respect of a deposit or progress payment for Gaming Equipment or
          Specified Equipment, the Disbursement Agent will, upon satisfaction of
          the applicable conditions set forth in the Disbursement Agreement and
          the Credit Agreement, include such amount in an Advance only if (i)
          the aggregate amount advanced for deposits or progress payments for
          Gaming Equipment and Specified Equipment from and after the date of
          this Third Amendment to Credit Agreement is not greater than
          $12,000,000, (ii) any amount being Advanced for the Gaming Equipment
          and the Specified Equipment, as applicable, shall be from the Line
          Items and Line Item Categories approved by the Administrative Agent
          and from no other Line Items or Line Item Categories, as the case may
          be, (iii) the Borrower shall have provided the Administrative Agent
          with a copy of the Contract covering the Gaming Equipment or Specified
          Equipment (and all amendments thereto or modifications thereof), (iv)
          as collateral security, the Borrower shall have assigned each such
          Contract to the Lenders, (v) the Borrower shall have provided evidence
          satisfactory to the Administrative Agent that such Gaming Equipment or
          Specified Equipment is adequately insured for the benefit of the
          Lenders, (vi) if permitted by applicable Law, the Borrower shall have
          granted the Lenders a perfected and continuing first security interest
          in such Gaming Equipment or Specified Equipment prior to or
          simultaneously with the making of any such Advance, (vii) GECC shall
          have confirmed in writing that upon delivery of such Gaming Equipment
          or Specified Equipment to the Project and satisfaction of the
          requirements of the GECC Facilities Agreement, all amounts advanced to
          the Borrower from the Loans to fund a deposit or make a progress
          payment shall be advanced on behalf of the Borrower to the Guaranty
          Deposit Account and the balance due with respect to such Gaming
          Equipment or Specified Equipment shall be funded

                                       5
<PAGE>

          in full under the GECC Facility Agreement, and (viii) GECC shall
          covenant and agree to advance all reimbursements for deposits and
          progress payments on behalf of the Borrower to the Guaranty Deposit
          Account (upon such fundings by GECC, the Administrative Agent shall
          release the Lenders' Liens and security interests from such Gaming
          Equipment and Specified Equipment as contemplated by CLAUSE (G) of
          this Third Amendment to Credit Agreement). After delivery to the Main
          Project (i) such Gaming Equipment and Specified Equipment shall be
          installed in the Main Project for its intended use or otherwise stored
          in a secure area, in each case protected from theft, vandalism and
          weather conditions to the reasonable satisfaction of the
          Administrative Agent, (ii) the Administrative Agent shall have
          received satisfactory evidence that such Gaming Equipment and
          Specified Equipment are adequately insured for the benefit of the
          Lenders, (iii) the Borrower shall have provided the Administrative
          Agent with a detailed inventory of such stored Gaming Equipment and
          the Specified Equipment and verified that such Gaming Equipment and
          Specified Equipment are stored as herein required and (iv) the
          Borrower shall have granted the Lenders a perfected and continuing
          first security interest in such Gaming Equipment and Specified
          Equipment.

               (g) The Lenders hereby authorize and direct the Agent from time
to time to release from the Lien of the Mortgage and security interests granted
by the Loan Documents items for which GECC has agreed are to be funded from the
GECC Facility in exchange for payment from the GECC Facility of an amount equal
to that which was funded for such items from the Loans. All amounts funded by
GECC shall be deposited into the Guaranty Deposit Account.

               (h) The Lenders hereby agree that (x) the requirement in SECTION
2.3.4 of the Credit Agreement that an additional borrowing of a Term B Loan
and/or Term C Loan from a Lender described in clause (i) and (ii) of said
section must be made prior to the date that all of the Term B Loans and Term C
Loans have been advanced from the Bank Proceeds Account is hereby waived and (y)
such additional borrowing may be a Term A Loan, Term B Loan and/or Term C Loan.

               (i) The Lenders hereby agree that notwithstanding anything to the
contrary in the Credit Agreement, any transaction (x) which is consummated in
accordance with the provisions of CLAUSE (F) and CLAUSE (G) of this Third
Amendment to Credit Agreement or (y) by which (1) the Borrower transfers to GECC
an Ownership interest in Gaming Equipment or Specified Equipment which was
financed with proceeds from the Loans, (2) GECC funds the purchase price thereof
from an advance under the GECC Facilities Agreement (which purchase price shall
be no less than the purchase price thereof funded from the Loans) and (3)
simultaneously therewith GECC and the Borrower enter into a lease agreement for
such Gaming Equipment or Specified Equipment in accordance with the Facilities
Agreement shall not constitute a breach under the Credit Agreement including,
without limitation, the restriction on sales and leasebacks under SECTION 7.2.15
of the Credit Agreement.

                                       6
<PAGE>

                                   ARTICLE III

                        CONDITIONS PRECEDENT AND COVENANT

     SECTION III.1. CONDITIONS TO EFFECTIVENESS. This Third Amendment to Credit
Agreement shall be and become effective on the date (the "THIRD AMENDMENT DATE")
on which each of the following conditions precedent shall have been satisfied.

          (a) EXECUTION OF DOCUMENTS. The Administrative Agent shall have
     received counterparts of (i) the Ratification of the Completion Guaranty
     executed by Authorized Representatives of the parties thereto, (ii) this
     Third Amendment to Credit Agreement executed by Authorized Representatives
     of the Borrower, the Administrative Agent, the Syndication Agent, the
     Documentation Agent and the Required Lenders and (iii) the First Amendment
     to Disbursement Agreement executed by Authorized Representatives of the
     Parties thereto.

          (b) INCUMBENCY, ETC. The Administrative Agent shall have received
     (with copies for each Lender) a certificate, dated the Third Amendment
     Date, of an Authorized Representative of the Borrower certifying:

               (i) as to the incumbency and signatures of the Person or Persons
          authorized to execute and deliver this Third Amendment to Credit
          Agreement and any instruments or agreements required hereunder,

               (ii) as to an attached copy of one or more resolutions or other
          authorizations of the manager of the Borrower certified by the
          Authorized Representative of such manager as being in full force and
          effect on the date hereof, authorizing the execution, delivery and
          performance of this Third Amendment to Credit Agreement and any
          instruments or agreements required hereunder, and

               (iii) that the Organizational Documents of the Borrower have not
          been modified other than by the letter agreement dated December 10,
          1999, a true, correct and complete copy of which has been delivered to
          the Administrative Agent,

     upon which certificate the Administrative Agent, the Syndication Agent, the
     Documentation Agent and each Consenting Lender (collectively, the
     "FINANCING PARTIES") may conclusively rely until it shall have received a
     further certificate of an Authorized Representative of the Borrower
     canceling or amending such prior certificate.

          (c) FEES. All reasonable fees and costs and expenses of Mayer, Brown &
     Platt and other professionals employed by the Administrative Agent and all
     other reasonable expenses of the Administrative Agent in connection with
     the negotiation, execution and delivery of this Third Amendment to Credit
     Agreement and the transactions contemplated herein shall have been paid in
     full.

                                       7
<PAGE>

          (d) SATISFACTORY LEGAL FORM. Each Financing Party and its counsel
     shall have received all information, approvals, opinions, documents or
     instruments as each Financing Party or its counsel may have reasonably
     requested, and all documents executed or submitted pursuant hereto by or on
     behalf of the Borrower shall be satisfactory in form and substance to each
     Financing Party and its counsel.

          (e) DEFAULT. After giving effect to this Third Amendment to Credit
     Agreement the following statements shall be true and correct: (i) to the
     best knowledge of the Borrower, no act or condition exists which, with the
     giving of notice or passage of time would constitute a "DEFAULT" or "EVENT
     OF DEFAULT" (as defined in the Credit Agreement and the GECC Facilities
     Agreement) has occurred and is continuing as of the date hereof, and (ii)
     no material adverse change in (A) the financial condition, business,
     property, prospects or ability of the Borrower to perform in all material
     respects its obligations under any Operative Document or any of the
     documents evidencing and securing the FF&E Financing to which it is a party
     or (B) the financial condition, business, property, prospects and ability
     of any other Aladdin Party or, to the best knowledge of the Borrower, LCNI,
     the Design/Builder or Fluor to perform in all material respects its
     obligations under any Operative Document to which it is a party has
     occurred since the Closing Date.

          (f) CONSENTS AND APPROVALS. All approvals and consents required to be
     taken, given or obtained, as the case may be, by or from any Governmental
     Instrumentality or another Person, or by or from any trustee (including,
     without limitation, GECC and the Discount Note Indenture Trustee) or holder
     of any indebtedness or obligation of the Borrower, that are necessary or,
     in the reasonable opinion of the Administrative Agent, advisable in
     connection with the execution, delivery and performance of this Third
     Amendment to Credit Agreement by all parties hereto, shall have been taken,
     given or obtained, as the case may be, shall be in full force and effect
     and the time for appeal with respect to any thereof shall have expired (or,
     if an appeal shall have been taken, the same shall have been dismissed) and
     shall not be subject to any pending proceedings or appeals (administrative,
     judicial or otherwise) and shall be in form and substance satisfactory to
     the Administrative Agent.

          (g) DELIVERY OF THIRD AMENDMENT TO CREDIT AGREEMENT. The Borrower
     shall have delivered this Third Amendment to Credit Agreement to all
     Persons entitled under the Operative Documents to receive delivery hereof.

          (h) OPINIONS. The Administrative Agent shall have received such
     opinions of counsel as it deems necessary, dated the Third Amendment Date
     and addressed to the Administrative Agent, the Lenders and, if applicable,
     the Disbursement Agent, which shall be in form and substance satisfactory
     to the Administrative Agent.

                                       8

<PAGE>

                                   ARTICLE IV

                         REPRESENTATIONS AND WARRANTIES

     In order to induce each Financing Party to enter into this Third Amendment
to Credit Agreement, the Borrower hereby reaffirms, as of the Third Amendment
Date, its representations and warranties contained in Article VI of the Credit
Agreement and additionally represents and warrants unto each Financing Party as
set forth in this ARTICLE V.

     SECTION IV.1. MATTERS PERTAINING TO THE GECC FACILITIES AGREEMENT.

          (a) The Borrower has not directly or indirectly amended (by Change
     Order or otherwise), modified (by Change Order or otherwise), allocated,
     reallocated or supplemented or permitted or consented to the amendment (by
     Change Order or otherwise), modification (by Change Order or otherwise)
     allocation, reallocation or supplementation of the Construction Benchmark
     Schedule in any manner which would extend the Completion Date.

          (b) Prior to and after giving effect to this Third Amendment, no
     "DEFAULT" or "EVENT OF DEFAULT" exists under the GECC Facilities Agreement
     (without giving effect to the GECC Intercreditor Agreement).

     SECTION IV.2. DUE AUTHORIZATION, NON-CONTRAVENTION, ETC. The execution,
delivery and performance by the Borrower of this Third Amendment to Credit
Agreement and each other document executed or to be executed by it in connection
with this Third Amendment to Credit Agreement are within the Borrower's powers,
have been duly authorized by all necessary action, and do not:

          (a) contravene the Borrower's Organizational Documents;

          (b) contravene any contractual restriction binding on or affecting the
     Borrower;

          (c) contravene any court decree or order or Legal Requirement binding
     on or affecting the Borrower; or

          (d) result in, or require the creation or imposition of, any Lien on
     any of the Borrower's properties except as expressly contemplated by the
     Operative Documents,

and the Financing Parties may conclusively rely on such representation and
warranty.

     SECTION IV.3. GOVERNMENT APPROVAL, REGULATION, ETC. No authorization or
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body or other Person is required for the due execution,
delivery or performance by the Borrower of this Third Amendment to Credit
Agreement or any other document to be executed by it in connection with this
Third Amendment to Credit Agreement.

                                       9
<PAGE>

     SECTION IV.4. VALIDITY, ETC. This Third Amendment to Credit Agreement
constitutes, and each other document executed by the Borrower in connection with
this Third Amendment to Credit Agreement, on the due execution and delivery
thereof, will constitute, the legal, valid and binding obligations of the
Borrower enforceable in accordance with their respective terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency or similar
laws affecting the enforcement of creditors rights generally and by general
principles of equity.

     SECTION IV.5. LIMITATION. Except as expressly provided hereby, all of the
representations, warranties, terms, covenants and conditions of the Credit
Agreement and each other Operative Document shall remain unamended and unwaived
and shall continue to be, and shall remain, in full force and effect in
accordance with their respective terms. The amendments, modifications and
consents set forth herein shall be limited precisely as provided for herein, and
shall not be deemed to be a waiver of, amendment of, consent to or modification
of any other term or provision of the Credit Agreement, the GECC Facilities
Agreement, any Operative Document, or other Instrument referred to therein or
herein, or of any transaction or further or future action on the part of the
Borrower or any other Person which would require the consent of the Agents, the
Lenders, GECC or the Discount Note Indenture Trustee.

     SECTION IV.6. OFFSETS AND DEFENSES. The Borrower has no offsets or defenses
to its obligations under the Loan Documents or the documents evidencing and
securing the FF&E Financing and no claims or counterclaims against any of the
Agents, the Lenders or the Construction Consultant.

                                    ARTICLE V

                            MISCELLANEOUS PROVISIONS

     SECTION V.1. RATIFICATION OF AND REFERENCES TO THE CREDIT AGREEMENT. This
Third Amendment to Credit Agreement shall be deemed to be an amendment to the
Credit Agreement, and the Credit Agreement, as amended by this Third Amendment
to Credit Agreement, shall continue in full force and effect and is hereby
ratified, approved and confirmed in each and every respect. All references to
the Credit Agreement in any other document, instrument, agreement or writing
shall hereafter be deemed to refer to the Credit Agreement, as amended by this
Third Amendment to Credit Agreement.

     SECTION V.2. HEADINGS. The various headings of this Third Amendment to
Credit Agreement are inserted for convenience only and shall not affect the
meaning or interpretation of this Third Amendment to Credit Agreement or any
provisions hereof.

     SECTION V.3. APPLICABLE LAW. THIS THIRD AMENDMENT TO CREDIT AGREEMENT AND
THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS THIRD AMENDMENT TO CREDIT
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAWS OF THE

                                       10
<PAGE>

STATE OF NEW YORK, INCLUDING SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS
LAW, BUT EXCLUDING ALL OTHER CHOICE OF LAW AND CONFLICTS OF LAW RULES OF SUCH
STATE.

     SECTION V.4. CROSS-REFERENCES. References in this Third Amendment to Credit
Agreement to any Article or Section are, unless otherwise specified, to such
Article or Section of this Third Amendment to Credit Agreement.

     SECTION V.5. OPERATIVE DOCUMENT. This Third Amendment to Credit Agreement
is a Loan Document executed pursuant to the Credit Agreement and shall (unless
otherwise expressly indicated therein) be construed, administered and applied in
accordance with the terms and provisions of the Credit Agreement.

     SECTION V.6. SUCCESSORS AND ASSIGNS. This Third Amendment to Credit
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.

     SECTION V.7. COUNTERPARTS. This Third Amendment to Credit Agreement may be
executed by the parties hereto in any number of counterparts and on separate
counterparts, each of which shall be an original but all of which together shall
constitute one and the same instrument.

     SECTION V.8. RESERVATION OF RIGHTS. The Borrower agrees that neither this
Third Amendment to Credit Agreement nor the making of any Advance by the
Disbursement Agent and the Administrative Agent's consent thereto shall
constitute (w) an approval of all or any portion of any Advance Request, (x) a
waiver or forbearance by the Disbursement Agent or the Administrative Agent
under any of the Loan Documents, (y) the acceptance by the Disbursement Agent or
the Administrative Agent of any course of conduct by the Borrower, the
Completion Guarantors or any of the Aladdin Parties or the London Clubs Parties
(including, without limitation, matters relating to transfers of direct and
indirect interests in Holdings between the members thereof) or (z) an agreement
by the Administrative Agent to amend any of the Loan Documents or waive any of
the provisions thereof without the approval from the Required Lenders and a
corresponding amendment of the GECC Facilities Agreement or waiver from GECC, as
the case may be. The Borrower further agrees that the Administrative Agent and
the Disbursement Agent reserve all rights, remedies and options under the Loan
Documents to require the Borrower to satisfy in all respects the conditions
relating to each Advance and perform all of its obligations under the Loan
Documents which are then due and owing or are susceptible of performance, as the
case may be.

                                       11

<PAGE>

     IN WITNESS WHEREOF, the parties hereto have executed this Third Amendment
to Credit Agreement as of the day and year first above written.

                                      ALADDIN GAMING, LLC

                                      By:  /s/ RICHARD J. GOEGLEIN
                                         --------------------------------------
                                      Name: Richard J. Goeglein
                                      Title: President & Chief Executive Officer

                                      THE BANK OF NOVA SCOTIA, as the
                                      Administrative Agent

                                      By:
                                         ----------------------------------
                                      Name:
                                      Title:

                                      MERRILL LYNCH CAPITAL
                                      CORPORATION, as the Syndication Agent

                                      By:
                                         ----------------------------------
                                      Name:
                                      Title:

                                      CIBC OPPENHEIMER CORP.,
                                      as the Documentation Agent

                                      By:
                                         ----------------------------------
                                      Name:
                                      Title:

                                       12

<PAGE>

 By signing below, the Guarantors confirm their agreement to the terms of this
Third Amendment to Credit Agreement.

ALADDIN BAZAAR HOLDINGS, LLC

By: /s/ RONALD DICTROW
   ----------------------------
Name:  Ronald Dictrow
Title: Secretary/Treasurer

THE TRUST UNDER ARTICLE SIXTH
UNDER THE  WILL OF SIGMUND SOMMER

By: /s/VIOLA SOMMER
   -----------------------------
Name:  Viola Sommer
Title: Trustee

By: /s/ JACK SOMMER
   -----------------------------
Name:  Jack Sommer
Title: Trustee

LONDON CLUBS INTERNATIONAL PLC

By: /s/ WILLIAM TIMMINS
   -----------------------------
Name:  William Timmins
Title: Executive Director

By signing below, the Disbursement Agent confirms receipt of this Third
Amendment to Credit Agreement.

THE BANK OF NOVA SCOTIA,
as the Disbursement Agent

By:
   ------------------------------
Name:
Title:

                                       13

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