Document:

Fitzgeralds Gaming Corp., Exhibit 10.5

Table of Contents

EXHIBIT 10.5

GORDON & SILVER, LTD.

GERALD M. GORDON, ESQ.

Nevada Bar No. 229

WILLIAM M. NOALL, ESQ.

Nevada Bar No. 3549

THOMAS H. FELL, ESQ.

Nevada Bar No. 3717

3960 Howard Hughes Pkwy, 9th Fl.

Las Vegas, Nevada 89109

Telephone (702) 796-5555

Facsimile (702) 369-2666

Attorneys
 for Debtors

UNITED STATES BANKRUPTCY COURT

DISTRICT OF NEVADA

	In re
	 
	 
	Case
 No. BK-N-00-33467-GWZ  Chapter 11

	 
	 
	 
	Joint
 Administration With:

	FITZGERALDS GAMING
	 
	 
	BK-N-00-33468
	 
	(Fitzgeralds South, Inc.)

	CORPORATION, a
 Nevada corporation,
	 
	 
	BK-N-00-33469
	 
	(Fitzgeralds Reno, Inc.)

	 
	 
	 
	BK-N-00-33470
	 
	(Fitzgeralds, Inc.)

	Debtor.
	 
	 
	BK-N-00-33471
	 
	(Fitzgeralds
 Las Vegas, Inc.)

	 
	 
	 
	BK-N-00-33472
	 
	(Fitzgeralds
 Mississippi, Inc.)

	o

 Affects this Debtor.
	/
	 
	BK-N-00-33473
	 
	(Fitzgeralds
 Black Hawk, Inc.)

	
	 
	 
	BK-N-00-33474
	 
	(Fitzgeralds
 Black Hawk II, Inc.)

	 
	 
	 
	BK-N-00-33475
	 
	(101 Main
 Street LLC)

	x

 Affects all Debtors.
	/
	 
	BK-N-00-33476
	 
	(Fitzgeralds
 Fremont Experience

	
	 
	 
	 
	 
	 

	 
	 
	 
	 
	 
	 

	o

 Affects FITZGERALDS SOUTH, INC.,
	 
	 
	 
	 
	 

	a Nevada corporation,
	/
	 
	DISCLOSURE
 STATEMENT TO

	
	 
	 
	ACCOMPANY
 DEBTORS FIRST AMENDED
	 
	 
	 
	PLAN
 OF REORGANIZATION

	o

 Affects FITZGERALDS RENO, INC.,
	 
	 
	 
	a Nevada corporation,
	/
	 
	 

	
	 
	 
	 

	 
	 
	 
	 
	 
	 

	o

 Affects FITZGERALDS INCORPORATED,
	 
	 
	 
	 
	 

	a Nevada corporation,
	/
	 
	 
	 
	 

	
	 
	 
	 
	 
	 

	 
	 
	 
	 
	 
	 

	o

 Affects FITZGERALDS LAS VEGAS, INC.,
	 
	 
	 
	 
	 

	a Nevada corporation,
	/
	 
	 
	 
	 

	
	 
	 
	 
	 
	 

	 
	 
	 
	 
	 
	 

	o

 Affects FITZGERALDS MISSISSIPPI, INC.,
	 
	 
	 
	 
	 

	a Mississippi corporation,
	/
	 
	 
	 
	 

	
	 
	 
	 
	 
	 

	 
	 
	 
	 
	 
	 

	o

 Affects FITZGERALDS BLACK HAWK,
	 
	 
	 
	 
	 

	INC., a Nevada corporation,
	/
	 
	 
	 
	 

	
	 
	 
	 
	 
	 

	 
	 
	 
	 
	 
	 

	o

 Affects FITZGERALDS BLACK HAWK II,
	 
	 
	Date:
 February 10, 2003

	INC., a
 Colorado corporation,
	/
	 
	Time:
 2:00 p.m.

	
	 
	 
	 
	 
	 

	 
	 
	 
	 
	 
	 

	o

 Affects 101 MAIN STREET LIMITED
	 
	 
	 
	 
	 

	LIABILITY
 COMPANY, a Colorado limited
	/
	 
	 
	 
	 

	liability company,
	 
	 
	 
	 
	 

	
	 
	 
	 
	 
	 

	 
	 
	 
	 
	 
	 

	o

 Affects FITZGERALDS FREMONT
	 
	 
	 
	 
	 

	EXPERIENCE
 CORPORATION,
	 
	 
	 
	 
	 

	a Nevada
 corporation,
	/
	 
	 
	 
	 

	
	 
	 
	 
	 
	 

TABLE OF CONTENTS

									
		A. Introduction
	I. INTRODUCTION
	II. INFORMATION REGARDING THE PLAN AND DISCLOSURE STATEMENT
	III. REPRESENTATIONS
	IV. GENERAL OVERVIEW OF THE PLAN
	V. SUMMARY OF VOTING PROCESS
		A. Who May Vote to Accept or Reject the Plan
		B. Summary of Voting Requirements
	VI. DESCRIPTION OF THE DEBTORS
		A. General Corporate Structure
			1. Fitzgeralds Gaming Corporation
			2. Fitzgeralds South, Inc
			3. Fitzgeralds Reno, Inc
			4. Fitzgeralds, Inc
			5. Fitzgeralds Las Vegas, Inc
			6. Fitzgeralds Mississippi, Inc
			7. Fitzgeralds Black Hawk, Inc
			8. Fitzgeralds Black Hawk II, Inc
			 9. 101 Main Street Limited Liability Company
			10. Fitzgeralds Fremont Experience Corporation
			11. Current Ownership of Subsidiary Equity Securities
		B. Description Of The Operating Properties
			1. Fitzgeralds Las Vegas
			2. Fitzgeralds Reno
			3. Fitzgeralds Tunica
			4. Fitzgeralds Black Hawk
	VII. OFFICERS AND DIRECTORS OF THE DEBTORS
		A. Philip D. Griffith
		B. Michael E. McPherson
		C. Max L. Page
		D. Patricia A. Becker
		E. Philip P. Hannifin
		F. Paul H. Manske
	VIII. EVENTS LEADING UP TO THE FILING OF THE BANKRUPTCY CASES
		A. Prepetition Default
		B. The Workout and Bankruptcy Filing
		C. Debtors’ Pre-Bankruptcy Operating Results
	IX. SIGNIFICANT EVENTS DURING THE REORGANIZED CASES
		A. First Day Motions
			1. General Ex Parte Applications
		B. Other Pleadings
			1. Assumption of Reno Parking Garage Ground Lease
			2. Assumption of Real Property Leases
	X. DETAILED DESCRIPTION OF THE PLAN
		A. Treatment of Unclassified Claims Under the Plan
			1. Treatment of Administrative Claims
			2. Treatment of Preserved Ordinary Course Administrative Claims
			3. Retention and Severance
			4. Cash Distribution Incentive
			5. Treatment of Priority Tax Claims
		B. Classification of Treatment of Claims and Equity Interests Under the Plan.
			1. Treatment of Class 1 (Priority Wage Claims)
			2. Treatment of Class 2 (Priority Benefit Plan Contribution Claims)
			3. Treatment of Class 3 (Priority Customer Deposit Claims)
			4. Treatment of Class 4 (Secured Tax Claims)
			5. Treatment of Class 5 (Miscellaneous Secured Claims)
			6. Treatment of Class 6 (Noteholders Secured Claims)
			7. Treatment of Class 7 (General Unsecured Claims)
			8. Treatment of Class 8 (Noteholder Deficiency Claims)
			9. Noteholder Deficiency Claims
			10. Treatment of Class 9 (Intercompany Claims)
			11. Treatment of Class 10 (Subsidiary Equity Securities)
			12. Treatment of Class 11 (Old FGC Preferred Stock)
			13. Treatment of Class 12 (FSI Warrant Claims)
			 14. Treatment of Class 13 (Old FGC Common Stock)
		C. Means of Implementation of the Plan
			1. Plan Implementation Steps Occurring on Effective Date
			2. Distribution of Plan Distribution Cash
			3. Notice of Effectiveness
			4. Surrender of Securities or Debt Instruments
			5. Ratification of Liquidation Trust
			6. No Corporate Action Required
			7. Informal Committee
			8. Duties of Indenture Trustee
			9. Executory Contracts and Unexpired Leases
			10. Indemnification Obligations
		D. Conditions to Confirmation of Plan
			1. Conditions To Confirmation
			2. Conditions To Effectiveness
			3. Waiver of Conditions
	XI. RISK FACTORS
	XII. POST EFFECTIVE DATE OPERATIONS AND PROJECTIONS
		A. Summary of Title to Property and Dischargeability
			1. Revesting of Assets
			2. Preservation of Litigation Claims
			3. Discharge
			4. Injunction
		B. Exculpation and Limitation of Liability
		C. Post Confirmation Reporting and Quarterly Fees to the United States Trustee
	XIII. CERTAIN FEDERAL INCOME TAX CONSEQUENCES
		A. Introduction
		B. Tax Consequences To The Debtors
			1. Sale of Business Assets
			2. Cancellation of Debt
			3. Distribution of Liquidation Trust Shares
		C. Taxation of the Liquidation Trust
			1. General
			2. Holders of Liquidation Trust Shares
		D. Tax Consequences to Creditors
			1. General
			2. Receipt of Liquidating Trust Shares
			3. Treatment of Accrued Interest
			4. Character of Gain or Loss Recognized
			5. Long-term vs. Short-term Gains and Losses
			6. Withholding
		E. Tax Consequences To Holders Of FGC Equity Securities
			1. Old FGC Common Stock
			2. Old FGC Preferred Stock
			3. Subsidiary Equity Securities
			4. FSI Warrant Claims
	XIV. SECURITIES LAW CONSIDERATION
		A. Exemptions from Registration
			1. Securities Act of 1933, As Amended (the “1933 Act”)
			2. Securities Exchange Act of 1934, As Amended (the “1934 Act”)
			3. Trust Indenture Act of 1939, As Amended (the “TIA”)
			4. Investment Company Act of 1940, As Amended (the “1940 Act”)
		B. Restrictions on Transfer
	XV. GAMING REGULATION AND LICENSING
	XVI. CONFIRMATION OF THE PLAN
		A. Confirmation of the Plan
		B. Objections to Confirmation of the Plan
			1. Best Interest of Creditors and Liquidation Analysis
			2. Feasibility
			3. Accepting Impaired Class
			4. Acceptance of Plan
			5. Confirmation over Dissenting Class (“Cram Down”)
			6. Allowed Claims
			7. Impaired Claims and Equity Securities
			8. Voting Procedures
	XVII. ALTERNATIVE TO THE PLAN
		A. Alternative Plans of Reorganization
		B. Liquidation Under Chapter 7
		C. Preference and Other Avoidance Actions
	XVIII. RECOMMENDATION AND CONCLUSION
	EXHIBIT 10.2
	EXHIBIT 10.3
	EXHIBIT 10.4
	EXHIBIT 10.5

Table of Contents

	 

	 

	 

	
TABLE OF CONTENTS

	
 

	
 

	
Page

	I.

	
INTRODUCTION

	
1

	
II.

	

INFORMATION REGARDING THE PLAN AND DISCLOSURE STATEMENT

	
2

	
III.

	
REPRESENTATIONS

	
3

	
IV.

	
GENERAL OVERVIEW OF THE PLAN

	
3

	
V.

	
SUMMARY OF VOTING PROCESS

	
8

	
 

	

A.   Who May Vote to Accept or Reject the Plan

	
8

	
 

	

B.   Summary of Voting Requirements

	
9

	
VI.

	
DESCRIPTION OF THE DEBTORS

	
10

	
 

	
A.   General Corporate Structure

	
10

	
 

	
1.   Fitzgeralds Gaming Corporation

	
10

	
 

	
2.   Fitzgeralds South, Inc

	
11

	
 

	
3.   Fitzgeralds Reno, Inc

	
11

	
 

	
4.   Fitzgeralds, Inc

	
11

	
 

	
5.   Fitzgeralds Las Vegas, Inc

	
11

	
 

	
6.   Fitzgeralds Mississippi, Inc

	
11

	
 

	
7.   Fitzgeralds Black Hawk, Inc

	
11

	
 

	
8.   Fitzgeralds Black Hawk II, Inc

	
11

	
 

	
9.   
101Main Street Limited Liability Company

	
12

	
 

	
10.  
Fitzgeralds Fremont Experience Corporation

	
12

	
 

	
11.  
Current Ownership of Subsidiary Equity Securities

	
12

	
 

	
B.   
Description Of The Operating Properties

	
13

	
 

	
1.   Fitzgeralds Las Vegas

	
13

	
 

	
2.   Fitzgeralds Reno

	
14

	
 

	
3.   Fitzgeralds Tunica

	
19

	
 

	
4.   Fitzgeralds Black Hawk

	
19

	
VII.

	
OFFICERS AND DIRECTORS OF THE DEBTORS

	
20

	
 

	
A.   Philip D. Griffith

	
20

	
 

	
B.   Michael E. McPherson

	
20

	
 

	
C.   Max L. Page

	
20

	
 

	
D.   Patricia A. Becker

	
20

	
 

	
E.   Philip P. Hannifin

	
20

	
 

	
F.   Paul H. Manske

	
20

	
VIII.

	

EVENTS LEADING UP TO THE FILING OF THE BANKRUPTCY CASES

	
20

	
 

	
A.   Prepetition Default

	
20

i

Table of Contents

	
 

	
B.   The Workout and Bankruptcy Filing

	
22

	
 

	
C.   
Debtors' Pre-Bankruptcy Operating Results

	
24

	
IX.

	
SIGNIFICANT EVENTS DURING THE REORGANIZED CASES

	
25

	
 

	
A.   First Day Motions

	
25

	
 

	
1.   General Ex Parte Applications

	
25

	
 

	
B.   Other Pleadings

	
27

	
 

	
1.   
Assumption of Reno Parking Garage Ground Lease

	
27

	
 

	
2.   
Assumption of Real Property Leases

	
27

	
X.

	
DETAILED DESCRIPTION OF THE PLAN

	
28

	
 

	
A.   
Treatment of Unclassified Claims Under the Plan

	
28

	
 

	
1.   
Treatment of Administrative Claims

	
28

	
 

	
2.   
Treatment of Preserved Ordinary Course Administrative Claims

	
28

	
 

	
3.   Retention and Severance

	
28

	
 

	
4.   Cash Distribution Incentive

	
29

	
 

	
5.   Treatment of Priority Tax Claims

	
30

	
 

	
B.   
Classification of Treatment of Claims and Equity Interests Under the Plan

	
30

	
 

	
1.   
Treatment of Class 1 (Priority Wage Claims)

	
30

	
 

	
2.   
Treatment of Class 2 (Priority Benefit Plan Contribution Claims)

	
30

	
 

	
3.   
Treatment of Class 3 (Priority Customer Deposit Claims)

	
31

	
 

	
4.   
Treatment of Class 4 (Secured Tax Claims)

	
31

	
 

	
5.   
Treatment of Class 5 (Miscellaneous Secured Claims)

	
31

	
 

	
6.   
Treatment of Class 6 (Noteholders Secured Claims)

	
32

	
 

	
7.   
Treatment of Class 7 (General Unsecured Claims)

	
32

	
 

	
8.   
Treatment of Class 8 (Noteholder Deficiency Claims)

	
33

	
 

	
9.   Noteholder Deficiency Claims

	
33

	
 

	
10.   
Treatment of Class 9 (Intercompany Claims)

	
35

	
 

	
11.  Treatment of Class 10 (Subsidiary Equity Securities)

	
35

	
 

	
12.  Treatment of Class 11 (Old FGC Preferred Stock)

	
35

	
 

	
13.  Treatment of Class 12 (FSI Warrant Claims)

	
35

	
 

	
14.  Treatment of Class 13 (Old FGC Common Stock)

	
36

	
 

	
C.   
Means of Implementation of the Plan

	
36

	
 

	
1.   
Plan Implementation Steps Occurring on Effective Date.

	
36

	
 

	
2.   
Distribution of Plan Distribution Cash

	
38

	
 

	
3.   Notice of Effectiveness

	
38

	
 

	
4.   
Surrender of Securities or Debt Instruments

	
38

	
 

	
5.   Ratification of Liquidation Trust

	
39

	
 

	
6.   No Corporate Action Required

	
39

	
 

	
7.   Informal Committee

	
39

	
 

	
8.   Duties of Indenture Trustee

	
40

	
 

	
9.   
Executory Contracts and Unexpired Leases

	
40

	
 

	
10.  Indemnification Obligations

	
42

	
 

	
D.   
Conditions to Confirmation of Plan

	
42

	
 

	
1.   Conditions To Confirmation

	
42

	
 

	
2.   Conditions To Effectiveness

	
43

	
 

	
3.   Waiver of Conditions

	
44

ii

Table of Contents

	
XI.

	
RISK FACTORS

	
44

	
XII. 

	
POST EFFECTIVE DATE OPERATIONS AND PROJECTIONS

	
45

	
 

	
A.   
Summary of Title to Property and Dischargeability

	
45

	
 

	
1.   Revesting of Assets

	
45

	
 

	
2.   Preservation of Litigation Claims

	
45

	
 

	
3.   Discharge

	
45

	
 

	
4.   Injunction

	
46

	
 

	
B.   
Exculpation and Limitation of Liability

	
46

	
 

	
C.   
Post Confirmation Reporting and Quarterly fees to the United States Trustee

	
47

	
XIII. 

	
CERTAIN FEDERAL INCOME TAX CONSEQUENCES

	
48

	
 

	

A.   Introduction

	
48

	
 

	
B.   Tax Consequences To The Debtors

	
49

	
 

	
1.   Sale of Business Assets

	
49

	
 

	
2.   Cancellation of Debt

	
51

	
 

	
3.   
Distribution of Liquidation Trust Shares

	
52

	
 

	
C.   
Taxation of the Liquidation Trust

	
53

	
 

	
1.   General.

	
53

	
 

	
2.   
Holders of Liquidation Trust Shares.

	
53

	
 

	
D.   Tax Consequences to Creditors

	
54

	
 

	
1.   General.

	
54

	
 

	
2.   
Receipt of Liquidating Trust Shares.

	
54

	
 

	
3.   Treatment of Accrued Interest.

	
54

	
 

	
4.   
Character of Gain or Loss Recognized.

	
55

	
 

	
5.   
Long-term vs. Short-term Gains and Losses

	
56

	
 

	
6.   Withholding

	
56

	
 

	
E.   
TAX CONSEQUENCES TO HOLDERS OF FGC EQUITY SECURITIES

	
56

	
 

	
1.   Old FGC Common Stock

	
56

	
 

	
2.   Old FGC Preferred Stock

	
56

	
 

	
3.   Subsidiary Equity Securities

	
57

	
 

	
4.   FSI Warrant Claims

	
57

	
XIV. 

	
SECURITIES LAW CONSIDERATION

	
57

	
 

	
A.   Exemptions from Registration

	
57

	
 

	
1.   
Securities Act of 1933, As Amended (the “1933 Act”)

	
57

	
 

	
2.   
Securities Exchange Act of 1934, As Amended (the “1934 Act”)

	
58

	
 

	
3.   
Trust Indenture Act of 1939, As Amended (the “TIA”)

	
59

	
 

	
4.   
Investment Company Act of 1940, as amended (the “1940 Act”)

	
59

	
 

	
B.   Restrictions on Transfer

	
59

	
XV. 

	
GAMING REGULATION AND LICENSING

	
63

	
 

	
1.   Nevada Gaming Regulation

	
63

	
XVI. 

	
CONFIRMATION OF THE PLAN

	
71

	
 

	
A.   Confirmation of the Plan

	
71

	
 

	
B.   
Objections to Confirmation of the Plan

	
71

iii

Table of Contents

	
 

	
1.   
Best Interest of Creditors and Liquidation Analysis

	
72

	
 

	
2.   Feasibility

	
75

	
 

	
3.   Accepting Impaired Class

	
75

	
 

	
4.   Acceptance of Plan

	
75

	
 

	
5.   
Confirmation over Dissenting Class (“Cram Down”)

	
76

	
 

	
6.   Allowed Claims

	
76

	
 

	
7.   
Impaired Claims and Equity Securities

	
77

	
 

	
8.   Voting Procedures

	
77

	
XVII. 

	
 ALTERNATIVE TO THE PLAN

	
78

	
 

	
A.   
Alternative Plans of Reorganization

	
79

	
 

	
B.   Liquidation Under Chapter 7

	
79

	
 

	
C.   
Preference and Other Avoidance Actions

	
80

	
XVIII.

	
RECOMMENDATION AND CONCLUSION

	
82

iv

Table of Contents

APPENDIX

	EXHIBIT “A”

	 	FIRST AMENDED PLAN OF REORGANIZATION

	
EXHIBIT “B”

	 

	
LIQUIDATION ANALYSIS

	EXHIBIT “C”

	 

	
RESTRUCTURING AGREEMENT

	EXHIBIT “D”

	 

	
LIQUIDATING TRUST AGREEMENT

v

Table of Contents

	I.

	 

	
INTRODUCTION

     
On
December 5, 2000 (the“Petition Date”), Fitzgeralds Gaming Corporation,
a Nevada corporation (“FGC”), Fitzgeralds South, Inc., a Nevada corporation
(“FSI”), Fitzgeralds Reno, Inc., a Nevada corporation (“FRI”), Fitzgeralds
Incorporated, a Nevada corporation (“FI”), Fitzgeralds Las Vegas, Inc., a
Nevada corporation (“FLVI”), Fitzgeralds Mississippi, Inc., a Mississippi
corporation (“FMI”), Fitzgeralds Black Hawk, Inc., a Nevada corporation
(“FBHI”), Fitzgeralds Black Hawk II, Inc., a Colorado corporation (“FBHII”),
101 Main Street Limited Liability Company, a Colorado limited liability company
(“101Main”) and Fitzgeralds Fremont Experience Corporation, a Nevada
corporation (“FFEC” and together with FGC, FSI, FRI, FI, FLVI, FMI, FBHI, FBHII
and 101Main, the “Debtors”), filed petitions for relief (the “Petitions”) under
Title 11, Chapter 11 of the United States Code (the “Bankruptcy Code”).
Concurrent with the filing of the Petitions, the Debtors jointly filed a Motion
for Joint Administration, which was granted by order entered on December 5,
2000.

     
The Debtors have prepared
 this Disclosure Statement (“Disclosure
Statement”) in connection with the solicitation of votes on the First Amended
Plan of Reorganization (‘the “Plan”) dated December 5, 2002, proposed by the
Debtors to treat the Claims of Creditors of Debtors and the Persons holding
Equity Securities in Debtors. Capitalized terms not otherwise defined herein
will have the same meanings as are ascribed to such terms in the Plan.

     
The various exhibits to
 this Disclosure Statement included
in the Appendix are incorporated into and are a part of this Disclosure Statement. The Plan is
included as Exhibit “A” in the Appendix. Any interested party desiring further
information should contact:

	 
	Gordon & Silver, Ltd.

3960 Howard Hughes Parkway, 9th Floor

Las Vegas, Nevada 89109

Telephone Number: (702) 796-5555

Facsimile Number: (702) 369-2666

Attn: Thomas H. Fell, Esq

1

Table of Contents

     
Interested parties may also obtain further
information from the United States Bankruptcy Court for the District of Nevada at its website:
http://www.nvb.uscourts.gov.

	II.

	 

	INFORMATION REGARDING THE PLAN AND DISCLOSURE STATEMENT

     
The objective of
 a Chapter 11 case is the
confirmation (i.e., approval by the bankruptcy court) of a plan of reorganization. A plan describes in detail
(and in language appropriate for a legal contract) the means for satisfying the
claims against, and equity interests in, a debtor. After a plan has been
filed, the holders of such claims and equity securities that are impaired (as
defined in Bankruptcy Code Section 1124) are permitted to vote to accept or
reject the plan. Before a debtor or other plan proponent can solicit
acceptances of a plan, Bankruptcy Code Section 1125 requires the debtor or
other plan proponent to prepare a disclosure statement containing adequate
information of a kind, and in sufficient detail, to enable those parties
entitled to vote on the plan to make an informed judgment about the plan and
whether they should accept or reject the plan.

     
The purpose of this Disclosure Statement is to provide sufficient
information about the Debtors and the Plan to enable Creditors and holders of
Equity Securities to make an informed decision in exercising their rights to
accept or reject the Plan. This Disclosure Statement will be used to solicit
acceptances of the Plan only after the Bankruptcy Court has found that this
Disclosure Statement provides adequate information in accordance with
Bankruptcy Code Section 1125 and has entered an order approving this Disclosure
Statement. Approval by the Bankruptcy Court is not an opinion or ruling on the
merits of this Disclosure Statement and it does not mean that the Plan itself
has been or will be approved by the Bankruptcy Court.

     After this Disclosure Statement has been approved by
the Bankruptcy Court and the appropriate Persons have voted on whether to accept or reject the Plan,
there will be a hearing on the Plan to determine whether it should be
confirmed. At the Confirmation Hearing, the

2

Table of Contents

Bankruptcy Court will consider whether the Plan satisfies the various requirements
of the Bankruptcy Code. The Bankruptcy Court will also receive and consider a
Ballot summary which will present a tally of the votes of Classes accepting or
rejecting the Plan cast by those entitled to vote. Once confirmed, the Plan
will be treated essentially as a contract binding on all Creditors, holders of
Equity Securities and other parties-in-interest in the Chapter 11 Cases.

     THIS DISCLOSURE STATEMENT IS NOT THE PLAN. FOR THE
CONVENIENCE OF CREDITORS AND HOLDERS OF EQUITY SECURITIES, THE PLAN IS SUMMARIZED IN THIS
DISCLOSURE STATEMENT. ALL SUMMARIES ARE QUALIFIED IN THEIR ENTIRETY BY THE
PLAN ITSELF. IN THE EVENT OF ANY INCONSISTENCY BETWEEN THIS DISCLOSURE
STATEMENT AND THE PLAN, THE PLAN WILL CONTROL.

	III.

	 

	REPRESENTATIONS

     
Unless otherwise specifically noted, the financial
information in this Disclosure Statement has not been subject to audit. Instead, this Disclosure
Statement was prepared from information compiled from records maintained in the
ordinary course of the Debtors’ businesses. The Debtors have attempted to be
accurate in the preparation of this Disclosure Statement.

     Other than as stated in this Disclosure Statement,
the Debtors have not authorized any representations or assurances concerning the Debtors and their
operations or the value of their respective assets. Therefore, in deciding
whether to accept or reject the Plan, you should not rely on any information
relating to the Debtors or the Plan other than that contained in this
Disclosure Statement or in the Plan itself.

	IV.

	 

	GENERAL OVERVIEW OF THE PLAN

     
The following is a general overview of the provisions
of the Plan. This overview is qualified in its entirety by reference to the provisions of the
Plan. For a more detailed description of the terms and provisions of the Plan,
see Article X hereof and the Plan. Pursuant to Section 1123(a)(1) of the
Bankruptcy Code, Administrative Claims, Preserved Ordinary Course
Administrative Claims, Allowed Priority Tax Claims and Allowed Executive
Incentive Claims

3

Table of Contents

are not designated as Classes. The holders of such
unclassified Claims shall be paid in full under the Plan consistent with the requirements of Section 1129(a)(9)(A) of the
Bankruptcy Code and are not entitled to vote on the Plan. The distributions
under the Plan to each Class are summarized in the following table:

	 	 	 	 	 	 	 	 	 
	Class

	 

	
Description

	 

	Treatment

	 

	Estimated amount of
Claim

	
	 

	
	 

	
	 

	

	Class 1:

	 

	
Priority Wage Claims

	 

	Unimpaired. Paid in
full in Cash.

	 

	$

	0

	 

	 

	Class 2:

	 

	
Priority Benefit

Plan Contribution

Claims

	 

	Unimpaired. Paid in
full in Cash.

	 

	$

	0

	 

	 

	Class 3:

	 

	
Priority Customer

Deposit

Claims

	 

	Unimpaired. Paid in
full in Cash

	 

	$

	0

	 

	 

	Class 4:

	 

	
Secured Tax Claims

	 

	Unimpaired. Cured
or paid in full in
Cash. See X.B.5.

	 

	$

	0

	 

	 

	Class 5:

	 

	
Miscellaneous

Secured Claims

	 

	Unimpaired. Cured
or paid in full in
Cash. See X.B.5.

	 

	$

	0

	 

	 

	Class 6:

	 

	
Noteholder Secured

Claims

	 

	Impaired. Pro rata
share of the
proceeds of their
collateral.

	 

	$

	123,025,000.00

	 

	 

	Class 7:

	 

	
General Unsecured

Claims

	 

	Unimpaired. Paid in
full in Cash.

	 

	 

	Extimated
not to exceed

	 

	 

	 

	 

	 

	 

	$

	4,000,000.00

	 

	 

	Class 8:

	 

	
Noteholder

Deficiency Claims

	 

	Impaired. Pro rata
share of the shares
of the Liquidation
Trust.

	 

	$

	138,210,000.00

	 

	 

	Class 9:

	 

	
Intercompany Claims

	 

	Impaired. No
distribution.

	 

	$

	242,712,320.00

	 

	 

	Class 10:

	 

	
Subsidiary Equity

Securities

	 

	Impaired.
No Distribution.

	 

	$

	0

	 

	 

	Class 11:

	 

	
Old FGC Preferred

Stock

	 

	Impaired. No
distribution.

	 

	$

	0

	 

	 

	Class 12:

	 

	
FSI Warrant Claims

	 

	Impaired.
No distribution.

	 

	$

	0

	 

	 

	Class 13:

	 

	
Old FGC Common Stock

	 

	Impaired.
No distribution.

	 

	$

	0

	 

     As fully set forth
 in Section VIII below, in 1999,
the Debtors entered into negotiations with
 an informal committee (the “Informal Committee”)
comprised of beneficial owners of over

4

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two-thirds principal amount of the
12.25% Senior Secured Notes due 2004 issued by FGC (the “Notes,” and such owners of the
 Notes, together with
any of the transferees or their assignees, the “Consenting Noteholders”). The Debtors and
the Informal Committee reached an agreement concerning the sale of Debtors’
assets, including going concern sales of its three hotel/casinos, Fitzgeralds
Las Vegas Hotel and Casino (“Fitzgeralds Las Vegas”), Fitzgeralds Reno Hotel
and Casino (“Fitzgeralds Reno”) and Fitzgeralds Tunica Hotel and Casino
(“Fitzgeralds Tunica”), and one casino, Fitzgeralds Black Hawk Casino
(“Fitzgeralds Black Hawk,” and together with Fitzgeralds Las Vegas, Fitzgeralds
Reno and Fitzgerald Tunica, the “Operating Companies”) operated by certain of
the Debtors, substantially all of which are collateral for the Notes. The
terms of such agreement are embodied in that certain Agreement Regarding
Pre-Negotiated Restructuring and documents referred to and incorporated
therein, dated December 1, 2000 (as amended from time to time, the“Restructuring
 Agreement”), among the Debtors, Senior Management1 and the
Consenting Noteholders. A copy of the Restructuring Agreement is included as
Exhibit “C” in the Appendix.

     
The primary objective of the restructuring is to maximize
returns to Creditors including the value of Noteholders’ recoveries inasmuch as the
obligations owed by the Debtors to the Noteholders constitutes in excess of
ninety (90) percent of the Debtors’ liabilities, and it is the Debtors’ desire
to obtain this objective through an expeditious and orderly sale of the
Operating Companies as going concerns by asset and/or stock sales and the
distribution of the net proceeds therefrom. The Debtors have filed the Plan in
order to conclude the Chapter 11 Cases and effectuate the remaining terms of
the Restructuring Agreement.

     The Restructuring Agreement requires the closing of the
sales of the Operating Companies prior
 to the consummation of the Plan. In order to achieve this
objective, on the

	1 Senior Management is defined collectively
 as Philip D. Griffith, Michael E.
McPherson, Paul H. Manske and Max L. Page.

5

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Petition Date, the Debtors filed a Motion for Order Approving Procedures
for Sale of Assets Free and Clear of Liens, Claims and Interest and Assumption
and Assignment of Certain Executory Contracts and Unexpired Leases (the“Protocol
 Motion”) regarding the proposed sales of the assets of the Operating
Companies. The Protocol Motion requested (a) authority to sell the Operating
Companies free and clear of Liens pursuant to Section 363 of the Bankruptcy
Code; and (b) that procedures be established by which such sales and
assignments are documented, advertised and brought before the Court for
approval. By establishing these procedures in advance of any motion to approve
such sales and assignments, uncertainty respecting the sales’ process is
diminished, and the sales’ process has been expedited and costs significantly
reduced. The motion was heard on December 21, 2000, and an order granting the
Protocol Motion was entered December 21, 2000 (the “Protocol Order”).

     On the Petition Date, the Debtors filed a Motion for
Order Approving (i) The Sale of Assets Free and Clear of Liens, Claims and Interests Pursuant to
Bankruptcy Code Section 363(f); and (ii) Assumption and Assignment of Certain
Executory Contracts and Unexpired Leases Pursuant to Section 365 of the
Bankruptcy Code (the “363 Motion”) regarding the proposed sale of substantially
all of the assets of Fitzgeralds Las Vegas, Fitzgeralds Tunica and Fitzgeralds
Black Hawk, and the transfer of FFEC’s membership interest in The Fremont
Street Experience Limited Liability Company to Majestic Investor, LLC
(“Majestic Investor”). The 363 Motion (as amended) was approved on March 19,
2001. The Purchase and Sale Agreement is dated as of November 22, 2000 (as
amended) and is by and between Majestic Investor, as purchaser, FLVI, 101Main,
FMI, and FFEC, as sellers, and FGC, as parent, (the “Purchase Agreement”)2.
The closing took place on December 6, 2001. The Debtors are actively seeking a

	2 On
 October 5, 2001, the Debtors filed a Motion to Approve Assignment,
Assumption and Consent Agreement wherein a wholly-owned subsidiary of Majestic
Investor, LLC was assigned the Purchase Agreement. An order approving the
motion was entered on November 1, 2001.

6

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purchaser for the assets of Fitzgeralds Reno. There is no deadline to conclude
such a sale, but as discussed below this final sale is a condition to the
Effective Date of the Plan.

     
Section 4.3 of the Restructuring Agreement,
Distribution of Sale Proceeds, provides that upon the sale of assets or stock of a given Operating Company, a
portion of the proceeds would be reserved for Tail Liabilities in an amount
determined by Debtors and the Informal Committee. Pursuant to the Court’s
Stipulation and Order Re: Amount of Net Sale Proceeds from Sale of Assets to
Majestic Investor Holdings, LLC Reserved for Amounts Due in Connection with the
Senior Management Incentive Program and Amount of “Reasonable Reserve” for Tail
Liabilities, docketed on December 14, 2001, an additional eight million five
hundred thousand dollars ($8,500,000.00) was added to cash reserves already
retained by Debtors. Pursuant to the Amended and Restated Restructuring
Agreement, therefore, Debtor reserved sixteen million five hundred thousand
dollars ($16,500,000.00) for payment of ongoing operational costs and cash
sufficient to fund Tail Liabilities.

     The claims of the Noteholders are bifurcated into
two classes, Class 6 representing the Noteholder Secured Claims, and Class 8 representing the
Noteholder Deficiency Claims. In accordance with the Restructuring Agreement
and as provided for in the Protocol Order as well as the 363 Motion Order, the
Indenture Trustee is to receive on behalf of the Noteholders the proceeds from
the sale of the Collateral for the Notes. As such, regarding the Noteholder
Secured Claims, each Noteholder shall receive in consideration for the Allowed
Secured Claim portion of their Allowed Claim, the balance of the proceeds of
Collateral for the Notes to the extent that such proceeds are not distributed
to the Indenture Trustee prior to the Effective Date of the Plan. Such
proceeds shall be distributed to the Indenture Trustee for the benefit of and
distribution to the Noteholders in accordance with the Indenture. The Allowed
Noteholder Deficiency Claims shall be satisfied by the distribution to the
Indenture Trustee on the

7

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Distribution Date
 its proportionate share of the Liquidation Trust Shares to be
distributed to the Noteholders. The Liquidation Trust shall be created on the
Effective Date of the Plan for the purpose of holding, liquidating and
distributing the assets of the Liquidation Trust pursuant to the Liquidation
Trust Agreement with no objective to engage in the conduct of a trade of
business. The name of the Liquidation Trust shall be the “Fitzgeralds Gaming
Corporation Liquidation Trust.” All the Residual Assets3 shall be transferred
to the Liquidation Trust and the Tail Liabilities4 assumed by the Liquidation Trust.

     
General Unsecured Claims are provided for in Class 7.
Holders of Class 7 Claims are unimpaired. Each holder of an Allowed General Unsecured Claim shall
receive Plan Distribution Cash equivalent to its Allowed General Unsecured
Claim plus interest at the Federal Judgment Rate from the Petition Date until
paid.

     All Priority Wage Claims, Priority
Contribution Claims, Priority Benefit Plan Contribution Claims, Priority Customer Deposit, Secured Tax Claims, and
Miscellaneous Secured Claims, are unimpaired pursuant to the Plan and shall be
paid in full in cash. Intercompany Claims shall receive no distribution, and
all Equity Securities will be cancelled and terminated.

	V.

	 

	SUMMARY OF VOTING PROCESS

	 

	A.

	 

	Who May Vote to Accept or Reject the Plan.

     
Generally, holders of allowed claims or equity interests
that are “impaired” under a plan are permitted to vote on the plan. A claim is defined
by the Bankruptcy Code and the Plan to include a right to payment from a
debtor; an equity security represents an ownership stake in a

	
3 Residual Assets is defined in the Restructuring Agreement as all tangible and
intangible assets belonging to the Debtors and to the Liquidation Trust which,
as of the Liquidation Date (as defined therein) are not a Purchase Note,
Nevada Purchase Note, or operating assets (or stock) of any Operating Company
that has not been sold.

	4 Tail Liabilities is defined in the Plan as any and all pre-Effective Date
Allowed Claims (excluding the Notes) and Allowed Unclassified Claims of any of
the Debtors not assumed in connection with the purchase of the assets or the
stock of the Operating Companies.

8

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debtor. In order
to vote, a creditor must first have an allowed claim. The solicitation of
votes on the Plan will be sought only from those holders of Allowed Claims whose
Claims are impaired and which will receive property or rights under the Plan.
As explained more fully below, to be entitled to vote, a Claim must be both“
Allowed” and “Impaired.”

	B.

	 

	Summary of Voting Requirements.

     
In order for the Plan to be confirmed, the Plan must be
accepted by at least one non-insider, impaired Class of Claims. A class of claims is deemed to have
accepted a plan when allowed votes representing at least two-thirds (2/3) in amount and a
majority in number of the claims of the class actually voting cast votes in
favor of a plan. A class of equity securities has accepted a plan when votes
representing at least two-thirds (2/3) in amount of the outstanding equity
securities of the class actually voting cast votes in favor of a plan. The
Debtors are soliciting votes from holders of Allowed Claims in the following
Classes which are impaired under the Plan:

	 	 	 
	Class

	 

	
Description

	
	 

	

	Class 6

	 

	
Noteholder Secured Claims

	Class 8

	 

	
Noteholder Deficiency Claims

     
The Debtors will have the right to supplement this
Disclosure Statement as to additional impaired Classes, if any. The treatment of each Class is
described in the Plan and is summarized generally in Articles IV and X of this
Disclosure Statement.

     
A VOTE FOR ACCEPTANCE OF THE PLAN BY THOSE HOLDERS OF
CLAIMS WHO ARE ENTITLED TO VOTE IS MOST IMPORTANT. THE DEBTORS ASSERT THAT THE TREATMENT OF
CREDITORS UNDER THE PLAN IS THE BEST ALTERNATIVE FOR CREDITORS AND THE DEBTORS
RECOMMEND THAT THE HOLDERS OF ALLOWED CLAIMS VOTE IN FAVOR OF THE PLAN.

9

Table of Contents

	VI.

	 

	DESCRIPTION OF THE DEBTORS

	 

	A.

	 

	General Corporate Structure.

     
          1. Fitzgeralds
Gaming Corporation. FGC is a diversified multi-jurisdictional gaming holding company that until December 6, 2001 owned
and operated three Fitzgeralds-brand casino-hotels, namely: Fitzgeralds Las
Vegas in downtown Las Vegas, Nevada, Fitzgeralds Reno in Reno, Nevada and
Fitzgeralds Tunica in Tunica, Mississippi; and one casino: Fitzgeralds Black
Hawk in Black Hawk, Colorado. On December 6, 2001, the Company sold
substantially all of the assets and related liabilities of its Fitzgeralds Las
Vegas, Fitzgeralds Tunica and Fitzgeralds Black Hawk properties to Majestic
Investor. As of December 31, 2001, the Company operated only its Fitzgeralds
Reno property, which has a total of 868 slot machines, 25 table games and
approximately 351 hotel rooms. FGC currently conducts substantially all of its
business through wholly-owned subsidiaries: FRI, FSI and FI. FRI directly
owns and operates Fitzgeralds Reno; FSI owns the residual assets and
liabilities of Fitzgeralds Las Vegas and Fitzgeralds Tunica through
wholly-owned subsidiaries; and FI owns the residual assets and liabilities of
Fitzgeralds Black Hawk through wholly-owned subsidiaries, including 101Main.
FGC, a Nevada corporation, was formed on November 10, 1994. Directly and
through several intermediate corporations, FGC owns one hundred percent (100%)
of the other Debtors. Prior to FGC’s formation, two of the casino-hotels,
Fitzgeralds Reno and Fitzgeralds Las Vegas, which began operations in 1985 and
1987, respectively, were separate and independently owned and controlled by
Jerome H. Turk (“Turk”) and Philip D. Griffith (“Griffith”).

     
Subsequent to FGC’s formation, between
December 1994 and February 1995, a business combination was effected, resulting in the existing single ownership
structure for the companies operating Fitzgeralds-brand casinos.

10

Table of Contents

     
          2.
Fitzgeralds South, Inc. FSI, a Nevada corporation, was formed on
December 3, 1993. It is the parent of FLVI and FMI, which two entities
wholly-owned and operated Fitzgeralds Las Vegas and Fitzgeralds Tunica,
respectively. FSI is a wholly-owned subsidiary of FGC. FSI, formally known as
Fitzgeralds Gaming Corporation (the “Old FGC”), was a different entity from
FSI’s current parent company. The Old FGC was wholly-owned by Turk and
Griffith, who later changed the corporation’s name to FSI.

     
          
3. Fitzgeralds Reno, Inc. FRI, a Nevada corporation, was formed on
October 23, 1984 and is a wholly-owned subsidiary of FGC. It owns the
Fitzgeralds Reno hotel/casino in Reno, Nevada.

     
          
4. Fitzgeralds, Inc. FI, a Nevada corporation, was formed on December 17,
1992 and is a wholly-owned subsidiary of FGC. It is the successor entity to
Griffith Gaming, Inc. FI holds one hundred percent (100%) of the equity
interests in FBHI and eighty-five percent (85%) of the equity interests in
Fitzgeralds Arizona Management, Inc.

     
          
5. Fitzgeralds Las Vegas, Inc. FLVI, a Nevada corporation, was formed on
December 6, 1990. It is a wholly-owned subsidiary of FSI.

     
          
6. Fitzgeralds Mississippi, Inc. FMI, a Mississippi corporation, formerly
known as Polk Landing Entertainment Corporation (“PLEC”), was formed in April
1993. PLEC became FMI after FSI acquired a one hundred percent (100%) interest
in PLEC.

     
          
7. Fitzgeralds Black Hawk, Inc. FBHI, a Nevada corporation, was formed on
March 3, 1994, and is a wholly-owned subsidiary of FI. It, in turn, is a one
hundred percent (100%) equity interest holder in FBHII, a Colorado corporation.

     
          
8. Fitzgeralds Black Hawk II, Inc. FBHII, a Colorado corporation, was
formed on July 31, 1997, by FBHI for the purpose of acquiring an interest in
101Main. The corporation is the parent company of 101Main, a Colorado limited
liability company.

11

Table of Contents

     
          
 9. 101 Main Street Limited Liability Company. 101Main, a Colorado limited
liability company, was formed on March 12, 1993 and is a wholly-owned
subsidiary of FBHII.

     
          
10. Fitzgeralds Fremont Experience Corporation. FFEC, a Nevada
corporation, was formed on July 8, 1993 and is a wholly-owned subsidiary of
FLVI.

     
          
11. Current Ownership of Subsidiary Equity Securities. The following
chart illustrates the flow of Subsidiary Equity Securities up to FGC:

/ / /

/ / /

/ / /

/ / /

/ / /

/ / /

/ / /

/ / /

/ / /

/ / /

/ / /

/ / /

/ / /

/ / /

/ / /

/ / /

/ / /

/ / /

12

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	*

	Entities that are debtors in the above-captioned
 Chapter 11 cases

	**

	Other shareholders: Michael Luzich (11.25%);
 Martin Cohen (3.75%)

	 

	B.

	 

	Description Of The Operating Properties.

     
          
1. Fitzgeralds Las Vegas. Fitzgeralds Las Vegas is located on the city
block bounded by Fremont, Carson, Third and Fourth Streets at the Fremont
Street Experience in downtown Las Vegas. The 34-story building recently
underwent an approximately $18.0 million

13

Table of Contents

refurbishment of the hotel and remodeling and expansion of the casino
which was substantially completed in December 1996. The facility now contains
a 638-room hotel (including 14 suites) and a casino currently offering 1,108
slot machines, 27 table games, a 48-seat keno lounge and a sports book
(operated by a third party). Fitzgeralds Las Vegas’ amenities include four
restaurants, three bars, an ice cream parlor, a special events center, a gift
shop and an entertainment area. Also part of Fitzgeralds Las Vegas is a
323-space parking structure and an adjacent surface parking area with an
additional 76 spaces.

     
In September 1995, Fitzgeralds Las Vegas entered into a
13-year franchise license agreement with Holiday Hospitality Franchising, Inc. (“Holiday Inn”) to
operate Fitzgeralds Las Vegas as a Holiday Inn commencing in July 1996.
Subject to the terms and conditions of the agreement, Fitzgeralds Las Vegas was
included in the Holiday Inn Worldwide Reservation System and had use of Holiday
Inn copyrights, trademarks and similar proprietary rights used by other Holiday
Inn licensees. Fitzgeralds Las Vegas was the exclusive licensee of Holiday
Inn-branded hotels within the defined territory encompassing downtown Las
Vegas. Fitzgeralds Las Vegas paid a monthly royalty based on a percentage of
Fitzgeralds Las Vegas’ revenues from room rentals after deduction of sales and
room taxes and a portion of complimentary rooms. Fitzgeralds Las Vegas also
paid marketing reservations and similar fees based on such revenues or the
number of guestrooms. The franchise license agreement was not assumed and
assigned as part of the sale to Majestic Investor. As such, it is anticipated
that Holiday Inn will file a General Unsecured Claim in the approximate amount
of $1,650,000.00, which claim Debtors will dispute.

          
     
2. Fitzgeralds Reno. Fitzgeralds Reno is located in downtown Reno on the
corner of Virginia Street and Commercial Row next to the landmark Reno Arch.
Fitzgeralds Reno consists of a 16-story 351-room hotel and a casino currently
offering 868 slot machines, 25 table games, an 89-seat keno lounge and a sports
book (operated by a third party). Amenities include

14

Table of Contents

three restaurants, four bars, an entertainment lounge, and a gift shop. During
the period from 1998-2001, the Company renovated portions of Fitzgeralds Reno
at a cost of approximately One Hundred Eight Million Dollars ($108,000,000.00).
Historically, Fitzgeralds Reno leased parking spaces in an adjacent 834-space
parking garage on an annual basis with no certainty that the lease would be
renewed from year to year. Since available parking in downtown Reno is
limited, losing access to these spaces would substantially impair the
performance of Fitzgeralds Reno unless an alternative site became available.
Therefore, on February 1, 2000, Fitzgeralds Reno acquired ownership of the
garage for Three Million Dollars ($3,000,000.00) as well as an assignment of
the underlying ground lease on which the garage is located. The original term
of the ground lease expires on February 28, 2013, and may be extended for one
additional period of ten years.

     
In October 1998, the Reno City Council approved a
special assessment district to finance a portion of the costs to lower the railroad tracks that
run through downtown Reno, Nevada (the “ReTRAC Project”). Plans for the ReTRAC
Project provide for the construction of a temporary rail bypass that will be
used to divert rail traffic around the main railroad during construction. The
City of Reno (the “City”) estimates that a period of more than three years will
be required to complete the ReTRAC Project. The southern boundary of the
bypass will extend out into the middle of Commercial Row, the street where
Fitzgeralds Reno hotel entrance, valet parking area and hotel loading zone are
situated.

     
Based on plans prepared by the City, Fitzgeralds Reno would
expect to lose permanently approximately 3,802 square feet of land and temporarily 22,979
square feet of land through eminent domain, several parking spaces, the current
valet parking area, an outdoor billboard structure advertising available rooms
and a building used to house administrative offices, and would during
construction of the ReTRAC Project experience up to a 70 percent reduction in
ingress and egress for the hotel entrance currently on Commercial Row. The
City has also

15

Table of Contents

 indicated that the ReTRAC Project might require the demolition of the
Fitzgeralds Reno Rainbow Skyway if the structure cannot be preserved by
underpinnings during construction of the ReTRAC Project. Implementation of the
ReTRAC Project under these circumstances would cause the Company to suffer
significant and permanent loss in business revenue and income; certain
operating inefficiencies from demolished or impaired physical structures; and a
portion of its existing customer base as a result of the construction and
operation of the proposed rail bypass.

     
On November 30, 1998, the Company filed a lawsuit
against the City to challenge the method by which the special assessment to be levied against the
Company was determined. The City of Reno filed an answer to the Company’s
lawsuit on January 19, 1999. Subsequent thereto, George Kradanis and Robert
Maloff d/b/a Sundowner Hotel and Casino (the “Sundowner”) were permitted by
court order to file a complaint in intervention. Notwithstanding that
intervention, on December 22, 1999, the Court granted the City’s Motion for
Summary Judgment against the Sundowner, which motion was joined in by
Fitzgeralds Reno’s. After hearing oral arguments and considering the parties’
briefs, the Nevada District Court concluded that there was insufficient
evidence before the Reno City Council to support a finding that the ReTRAC
Project confers a special benefit on Fitzgeralds Reno as is required by statute
before a special assessment may be imposed. The Nevada District Court remanded
the matter to the Reno City Council and directed the Council to conduct a new
hearing to consider evidence as to whether Fitzgeralds Reno would receive a
special benefit from the proposed project.

     
On June 20, 2001, the Reno City Council commenced a
public hearing in compliance with the remand order of the Court. That public hearing was
recessed and continued to November 29, 2001. After resuming the hearing on
November 29, 2001, the Reno City Council again recessed and continued the
proceedings to January 4, 2002, at which time the hearing was

16

Table of Contents

completed
 and the matter was submitted for decision of the Reno City Council. On
February 19, 2002, the Reno City Council voted on the matter. By a 4-3
decision, the Reno City Council concluded that the ReTRAC Project would confer
a special benefit on Fitzgeralds Reno. On a 5-2 decision, however, the Reno
City Council determined that the value of the special benefit in light of the
evidence presented was $1.00. The decisions of the Reno City Council are
subject to judicial review, a petition for which must be filed within thirty
days of the decisions. No judicial review petition was filed within the
required period.

     
On February 27, 2001, the Reno City Council voted
to continue the process of determining the actual cost of construction of the ReTRAC Project, which the
City has recently estimated to be $282 million. On May 24, 2001, Fitzgeralds
Reno commenced an action, CV-N-01-0329-PMP-RAM, in the United States District
Court for the District of Nevada, against the Federal Highway Administration
(“FHWA”), the Nevada Department of Transportation (“NDOT”), and the City of
Reno (collectively, the “Defendants”) for violations of the National
Environmental Policy Act (“NEPA”), codified at 42 U.S.C. §§ 4321-4327. The
claims against all Defendants allege a violation of 42 U.S.C. § 4332 (Violation
of NEPA: Failure to Consider Reasonable Alternatives & Failure to Consider and
Provide Adequate Mitigation Measures). Specifically, Fitzgeralds Reno asserts
the Defendants failed to consider the Partial Cover and Cut Tunnel Alternative
and the use of the Feather River Route on a temporary basis, and failed to
include a plan for mitigating the adverse environmental impacts, including
construction disruption, loss of operating facilities, noise and vibration
impacts, that will be caused by the ReTRAC Project and incurred by Fitzgeralds
Reno and others.

     
On or about June 12, 2001, NDOT filed a motion
to dismiss the Company’s NEPA complaint based on a claim of sovereign immunity and the Company moved to
amend its complaint to substitute as a defendant the Director of NDOT, Thomas
E. Stephens, for the

17

Table of Contents

Defendant NDOT, in lieu of considering NDOT’s Eleventh Amendment immunity
claim. The Court granted this unopposed motion on August 17, 2001, and the
Company filed its amended complaint on August 23, 2001. Defendant FHWA filed
its answer to the Complaint on September 6, 2001, and Defendant Stephens filed
his answer on October 3, 2001. The City filed a motion to dismiss the amended
complaint so far as it named the City as defendant on September 6, 2001. The
Company filed an opposition to that motion on October 24, 2001, and the City
filed a reply in support of its motion to dismiss on or about November 12,
2001. On February 15, 2002, the United States District Court held a hearing to
consider the City’s motion to dismiss. The City’s motion to dismiss was fully
argued and submitted to the Court for a ruling. On March 11, 2002, the Court
issued an order dismissing all of the Company’s claims against the City. The
Court ruled the ReTRAC Project must comply with NEPA but the specific federal
aid statute under which the City is receiving funding for the ReTRAC Project
does not explicitly require the local government body to consent to suit under
NEPA. Accordingly, the Court found the City is not a proper party in the case.
The Court, however, denied the motions to dismiss by FHWA and NDOT stating the
Company is entitled to proceed on the claims against those agencies for a
violation of NEPA. The Company, FHWA and NDOT have agreed to a procedural
schedule that provides for the parties to submit legal briefs on the remaining
NEPA claims against FHWA and NDOT. This schedule calls for the parties to file
opening briefs by December 23, 2002, and answering briefs by February 7, 2003.

     
The City completed its construction cost analysis in July 2002.
Construction contracts for the ReTRAC Project were awarded by the City Council
on July 16, 2002. Preliminary construction activities have commenced and the
Company has been informed by the City that eminent domain proceedings will be
commenced at some time in the future to acquire from the Company fee title to
approximately 3,802 square feet of land and a 4,524 square foot

18

Table of Contents

administrative office building owned and used by the Company, as well as
temporary easements for another approximately 22, 979 square feet of land to
facilitate construction of the ReTRAC Project.

     
The Debtors believe that Fitzgeralds Reno will suffer
a significant loss in business revenue and income while the ReTRAC Project is under construction.
Once completed, the impact of the ReTRAC Project on Fitzgeralds Reno’s business
revenue and income is uncertain; however, the Debtors believe the impact will
be detrimental as a result of the impairment of the physical structures. With
the current uncertainty surrounding the ReTRAC Project, the Debtors are unable
to determine its effect on the value and ultimate sales price for the
Fitzgeralds Reno.

     
          
3. Fitzgeralds Tunica. Fitzgeralds Tunica, which opened in June 1994, is
located in north Tunica County, Mississippi, approximately 30 miles from
downtown Memphis, Tennessee. The actual facility is designed as an Irish
castle and is the focal point of a heavily wooded 121-acre company-owned site
situated by the Mississippi River. The facility was expanded in 1996 and costs
approximately $34,000,000.00. At December 31, 2000, the facility included a
507-room hotel, special events center and indoor swimming pool and a casino
offering 1,336 slot machines, 34 table games, two bars, three restaurants and a
gift shop. In June 2000, construction was completed on a 411 space, covered
parking garage and 170 spaces of surface parking at a cost of $5,600,000.00.

     
          
4. Fitzgeralds Black Hawk. Fitzgeralds Black Hawk is located adjacent to
the entrance to the gaming area of Black Hawk, Colorado, next to the Gilpin
Casino and across the street from Bullwhackers. Fitzgeralds Black Hawk consists
of a casino currently offering 506 slot machines, 12 table games, a restaurant,
a bar and an entertainment area. Fitzgeralds Black Hawk also has a parking
garage (which provides 400 valet parking spaces) adjacent to the casino, which
is currently the only covered parking at a Black Hawk casino and differentiates
Fitzgeralds Black

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Table of Contents

Hawk from its competitors. The garage foundation was
designed to accommodate a 70 to 80-room hotel and was completed in late Spring 1998. In August 2000, Fitzgeralds Black Hawk
acquired an adjoining parcel of land as part of its plan to expand.

	VII.

	 

	OFFICERS AND DIRECTORS OF THE DEBTORS

     
          
A. Philip D. Griffith (“Griffith”) is the chairman, president and chief
executive officer of FGC and holds similar positions at FSI, FRI, FMI, FLVI,
FI, FFEC, FBHI, FBHII and is president and chief executive officer of 101Main.
Griffith holds a sixty-two percent (62.0%) equity interest in FGC.

     
          
B. Michael E. McPherson (“McPherson”) serves as the executive
vice-president, treasurer, secretary, and chief financial officer for all the
Debtors. McPherson is not a director of any of the Fitzgeralds’ entities.

     
          
C. Max L. Page (“Page”) is a member of the board of directors of FGC and
FRI, with a two point two percent (2.2%) equity ownership interest in FGC. He
currently serves as the executive vice president of FRI and general manager of
Fitzgeralds Reno.

     
          
D. Patricia A. Becker (“Becker”) is a member of the board of directors of
FGC.

     
          
E. Philip P. Hannifin (“Hannifin”) is a member of the board of directors
of FGC.

     
          
F. Paul H. Manske is Executive Vice President of Marketing of FGC.

	VIII.

	 

	EVENTS LEADING UP TO THE FILING OF THE BANKRUPTCY CASES

	 

	A.

	 

	Prepetition Default.

     
FGC issued Two Hundred Five Million Dollars ($205,000,000)
of Notes (the “Notes”) pursuant to the Indenture (the “Indenture”) dated December 30, 1997,
by and among FGC, as issuer, FSI, FRI, FI, FMI, FLVI, FBHI, FBHII, 101Main and
FFEC, as guarantors, and Bank of New York, a New York banking corporation, as
Trustee (“Indenture Trustee”). Of the Two Hundred Two Million Six Hundred
Thousand Dollars ($202,600,000) net proceeds, FGC used One

20

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Hundred Twenty-Three
Million Dollars ($123,000,000) to retire its 13% Senior Secured Notes due 2002,
Five Million Four Hundred Thousand Dollars ($5,400,000) to retire its 13%
Priority Secured Notes due 1998, Thirty-Nine Million Seven Hundred Thousand Dollars ($39,700,000) to retire the
101Main Notes and approximately Twenty Million One Hundred Thousand Dollars
($20,100,000) to retire other secured indebtedness (primarily related to
Fitzgeralds Reno). Of the remaining proceeds, Eight Million Seven Hundred
Thousand Dollars ($8,700,000) was used for expenses of the offering and Five
Million Seven Hundred Thousand Dollars ($5,700,000) was applied to accrued
interest on the retired obligations totaling approximately Ten Million Six
Hundred Thousand Dollars ($10,600,000) on December 30, 1997.

     
The Notes are guaranteed by FSI, FRI, FI, FLVI, FMI,
FBHI, FBHII, 101Main and FFEC. Pursuant to the Security and Pledge Agreement dated December 30,
1997, granted by the Debtors to the Bank of New York as Collateral Agent, a
security interest was taken in each of the Debtors’ inventory, accounts,
pledged securities, distributions, collateral accounts, collateral records,
documents, chattel paper, general intangibles, interments, receivables,
receivables records, intellectual property collateral, contracts, equipment,
fixtures, hedging agreements, insurance policies, motor vehicles, and all
assessions and additions to, all substitutions and replacements for, and all
proceeds or products of any or all of the foregoing (collectively, the“Collateral”).
 The assets excluded from the Collateral are: cash, deposit
accounts, and other cash equivalents, furniture, fixtures and equipment
securing non-recourse indebtedness permitted to be incurred under the
Indenture, assets securing purchase money obligations or capital lease
obligations permitted under the Indenture and any contracts, permits and
licenses which cannot be subjected to a lien without the consent of the parties
(collectively, the “Excluded Assets”). Additionally, on December 30, 1997, the
Debtors executed in favor of the Bank of New York three (3) Security Agreements
in their trademarks, copyrights and patents.

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The obligation of FGC and the guarantees of FSI, FRI, FI,
FMI, FLVI, FBHI, FBHII, 101Main and FFEC to the Bank of New York are further secured by: (1) the
common stock of FI, FSI, FRI, FMI, FLVI, FBHI and FBHII; (2) a pledge of FBHII’s membership
interest in 101Main; (3) a deed of trust, assignment of leases and security
interest in all of the real and personal property assets (excluding the
Excluded Assets) of Fitzgeralds Las Vegas; (4) a deed of trust, assignment of
leases and security interest in all of the real and personal property assets
(excluding the Excluded Assets) of Fitzgeralds Reno; (5) a deed of trust,
assignment of leases and security interest and ship mortgage in all of the real
and personal property assets (excluding the Excluded Assets) of Fitzgeralds
Tunica5; (6) a deed of trust, assignment of leases and security interest in all
of the real and personal property assets (excluding the Excluded Assets) of
Fitzgeralds Black Hawk; and (7) assignments of leases and rents for FMI and
101Main.

     
On May 13, 1999, FGC board of directors determined
that, pending a restructuring of its indebtedness, it would not be in the best interests of FGC
or the Debtors to make the regularly scheduled interest payments on the Notes.
As a result, FGC is currently in default of certain of its obligations with
respect to the Notes including, among other things, its failure to make
interest payments due thereunder prior to the Petition Date on June 15, 1999,
December 15, 1999 and June 15, 2000, which failures constitute prepetition“
 events of default” under the Indenture.

	 

	B.

	 

	The Workout and Bankruptcy Filing.

     
In 1999, the Debtors entered into negotiations
with the Informal Committee. The Debtors and the Consenting Noteholders reached an agreement
concerning the sale of Debtors’ assets, including going concern sales of the
Operating Companies, most of which is Collateral for the Notes. The terms of
such agreement are embodied in the Restructuring Agreement.

	
5 The Debtors believe that the Fitzgeralds Tunica riverboat is not the proper
subject of a preferred ship mortgage, and that the Indenture Trustee does not
have a perfected lien in the furniture and equipment located at Fitzgerald
Tunica as a result of the Indenture Trustee#s failure to file a UCC-1 financing
statement with the Mississippi Secretary of State.

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In order to maintain the stability of the operations
and gaming licensing during the process of selling the Operating Companies, the Restructuring
Agreement provides that each of the four executives (“Executive”) comprising of
Senior Management are to remain with FGC through the Liquidation Date to
maximize the value of the Noteholders recoveries. In conjunction therewith,
and although existing employment agreements with each of the Executives are not
to be assumed by FGC, each of the Executives agreed to continue to perform
their duties and carry out their responsibilities as more particularly
described in their existing employment agreements and to continue to be
compensated thereunder. As consideration therefor, the Restructuring Agreement
provided for the Senior Management Incentive Program, which was comprised of
four (4) components, compensation in the same form as contained in their
pre-petition employment agreements while employed during the Chapter 11 Cases,
the Cash Distribution Incentive, the Retention Payment and the non-compete
component. The Cash Distribution Incentive is a percentage of the
Distributable Cash to be disbursed to Senior Management from the Debtors or the
trustee of the Liquidation Trust, as applicable, pursuant to the formula set
forth in the Restructuring Agreement. The Retention Payment is a retention and
severance fund established by the Debtors in the aggregate amount of
$2,400,000.00 to be apportioned among the Executives to be paid on the earlier
of (i) the Effective Date of the Plan, (ii) the Liquidation Date, or (iii) the
date on which such Executive is terminated without cause by the Debtors. The
Retention Payment and the Cash Distribution Incentive Payment are subject to
certain non-compete provisions as more fully described in the Restructuring
Agreement. Finally, Senior Management is to receive Two Million Dollars
($2,000,000.00) in the aggregate for the agreement to execute non-compete
agreements that may be necessary to sell the Operating Companies. Further
details with regard to the four (4) components of the Senior Management
Incentive Program are set forth in detail in Section 5.5 of the Restructuring
Agreement.

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Concurrent with the negotiations with the Consenting
Noteholders, and in furtherance of the intent of the Restructuring Agreement, the Debtors commenced negotiations
with Majestic Investor for the sale of substantially all of the assets of
Fitzgeralds Tunica, Fitzgeralds Las Vegas, Fitzgeralds Black Hawk and the
membership interest in the Fremont Street Experience Limited Liability Company
owned by FFEC (the “FSELLC Membership Interest” and, collectively, the “Subject
Properties”). The negotiations culminated with the Purchase Agreement.

     
The financial pressure experienced by the Debtors
which necessitated the filing of their respective Petitions is primarily attributable to insufficient
EBITDA to service the Notes interest accruals, maintain the Debtors’ properties
and meet capital expenditure needs as a result of increased gaming competition
both within the Debtors’ various gaming venues and from outside venues.

	 

	C.

	 

	Debtors’ Pre-Bankruptcy Operating Results.

     
As of the Petition Date, the Debtors had on hand
and in their various bank accounts cash and cash equivalents of approximately Eighteen Million Four
Hundred Twenty-Three Thousand Dollars ($18,423,000). This included their
restricted casino bankroll of approximately Seven Million Eight Hundred
Thousand Dollars ($7,800,000). In addition, the Debtors had One Million Seven
Hundred Eighty Thousand Dollars ($1,780,000) of restricted cash serving as
collateral for One Million Seven Hundred Eighty Thousand Dollars ($1,780,000)
of letters of credit and One Million Dollars ($1,000,000) as collateral for
land lease obligations related to Fitzgeralds Las Vegas.

     
For calendar year ending December 31, 2000, the
Debtors reported an Adjusted EBITDA6

	6 “EBITDA” is defined generally as earnings before
interest, taxes on income, depreciation and amortization and is a supplemental financial measurement used
by many gaming business industry analysts in the valuation of gaming
businesses. EBITDA is calculated by adding depreciation and amortization
expenses to income from operations. Adjustments to EBITDA for 1998 and the
first quarter of 1999 included generally extraordinary or non-recurring income
and expenses unrelated to operational income, restructuring expenses and
expenses of FRI, FMI, FLVI and 101Main (#Adjusted EBITDA#).

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of Thirty-One Million Eight Hundred Sixty Thousand Dollars ($31,860,000).
For the calendar year ending December 31, 2001, the Debtors reported an
Adjusted EBITDA of Twenty-Nine Million Four Hundred Thirty-Four Thousand
Dollars ($29,434,000). The Debtors estimate that they will continue to report
positive EBITDA for 2002 in amounts generally commensurate with those reported
for 2000 and 2001. Total revenues for the Debtors were Two Hundred Thirty-One
Million One Hundred Eighty-Nine Thousand and Seventy-Eight Dollars
($231,189,078) and net operating revenues were One Hundred Ninety-Six Million
Thirty-One Thousand Dollars ($196,031,000) for 2001, representing decreases of
1.3% and 2.0%, respectively, over total revenues for the Debtors of Two Hundred
Thirty-Four Million One Hundred Forty-Three Two Hundred Twenty-Nine Dollars
($234,143,229) and net operating revenues of Two Hundred Million One Hundred
Two Thousand Dollars ($200,102,000) for 2000.

	IX.

	 

	SIGNIFICANT EVENTS DURING THE REORGANIZED CASES

     
The Debtors are currently operating their businesses as
debtors-in-possession. The Bankruptcy Court has certain supervisory powers
over the operations of the Debtors during the pendency of the Chapter 11 Cases.
These powers are generally limited to reviewing and ruling upon any objections
raised by a party-in-interest to business operations or proposed transactions
of the Debtors. Except as otherwise authorized by the Bankruptcy Court, the
Debtors are required to give notice of any transactions not in the ordinary
course of business and of the compromise of any controversy to
parties-in-interest who request such notice. In addition, the Bankruptcy Court
supervises the employment of attorneys, accountants and other professionals.

	 

	A.

	 

	First Day Motions.

     
          
General Ex Parte Applications. Concurrent with the filing of the
Petitions, the Debtors presented to the Bankruptcy Court various motions
designed to assist the Debtors in making a smooth transition into Chapter 11,
which “first day motions” included:

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1. Ex Parte Application for Order directing Joint Administration of Cases
Pursuant to Fed. R. Bankr. P. 1015(b).

     
          
2. (i) Ex Parte Application for Order Approving Employment of Gordon &
Silver, Ltd., as Attorneys for Debtors; (ii) an Ex Parte Application for Order
Approving Employment of Restructuring/Reorganization Advisor; (iii) an Ex Parte
Application for Order Approving Employment of Arthur Andersen LLP as Valuation
Advisors; (iv) Ex Parte Application for Order Approving Employment of Deloitte&
 Touche, LLP as Debtors’ Independent Auditors and Accountants; (v) Ex Parte
Application for Order Approving Employment of Eaton and Cottrell, P.A. as
Mississippi Gaming Counsel; (vi) Ex Parte Application for Order Approving
Employment of Hughes Hubbard & Reed LLP as Special Counsel; and (vii) Ex Parte
Application For Order Approving Employment of Lohf Shaiman P.C. as Colorado
Gaming Counsel.

     
          
3. Ex Parte Application for Order Authorizing Debtor-in-Possession to Pay
Pre-Petition Wages, Benefits and Reimbursable Employee Expenses.

     
          
4. Ex Parte Application for Order Permitting Debtor-in-Possession to Honor
Casino Chips, Tokens and Other Gaming Liabilities.

     
          
5. Ex Parte Application For Order Permitting Debtor to Honor Hotel Room
and Other Customer Deposits and to Honor Travel Agent Commissions.

     
          
6. Ex Parte Application For Order Authorizing Debtors-in-Possession to
Maintain and Use Existing Bank Accounts, Credit Card Merchant Numbers and
Depository Bank Accounts and Waiver of 11 U.S.C. §345(b).

     
          
7. Ex Parte Motion For Order Fixing Time Within Which Proofs of Claim Must
be Filed and Establishing Notice Procedures.

     
          
8. Ex Parte Application For Order Limiting Notice Pursuant To Bankruptcy
Rule 2002.

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 9. Ex Parte Application for Order Authorizing Debtors-in-possession to
Employ and Compensate Certain Attorneys in the Ordinary Course of Business.

     
These first day motions were approved and first day orders
entered by the Bankruptcy Court.

	 

	B.

	 

	Other Pleadings.

     
          
1. Assumption of Reno Parking Garage Ground Lease. On December 22, 2000,
the Debtors filed a Motion for Approval of Assumption of Reno Parking Garage
Ground Lease (“Lease”). The Debtors’ motion requested the approval of the
assumption of the Lease which provides Fitzgeralds Reno the land upon which the
Fitzgeralds Reno parking garage is situated. An interim order treating the
motion as requesting an extension of the deadline to assume the Lease was
entered and the matter has now been continued pending confirmation of the Plan.
All obligations due under the Lease are current. Prior to the consummation of
the sale of Fitzgeralds Reno, the Debtors will determine whether or not to
assume and assign the Lease. The non-debtor parties to the Lease have the
right to object to assumption and assignment of the Lease. All available
rights under the Bankruptcy Code and, except as limited by the Bankruptcy Code,
all available rights under state law, shall be preserved for the benefit of
non-debtor parties to the Lease and related agreements. Any claims arising
from the rejection of the Lease shall be a Class 7 Claim to the extent it is
determined to be an Allowed Claim by the Bankruptcy Court and shall be paid in
the same manner as other Class 7 Claims. Scout Development Corporation
(“Scout”) contends the Lease and its related obligations must be assumed or
rejected as an entire package by the buyer, unless agreed to in writing by the
non-debtor party to the Lease.

     
          
2. Assumption of Real Property Leases. On December 22, 2000, Debtors
filed a Motion for Order to Authorize Assumption of Leases of Nonresidential
Real Property. Debtors’ motion requested the approval of the assumption of
various non-residential leases, including ground

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leases upon which Fitzgeralds
Las Vegas is situated. The ground leases upon which Fitzgeralds Las
 Vegas is situated were assumed and assigned pursuant to the sale to
Majestic Investor. For all real property leases in the Reno area, the time to
assume or reject the leases was extended pending the sale of Fitzgeralds
Reno. All obligations due on these leases are current.

	X.

	 

	DETAILED DESCRIPTION OF THE PLAN

	 

	A.

	 

	Treatment of Unclassified Claims Under the Plan.

     
          
1. Treatment of Administrative Claims. Each Allowed Administrative Claim,
other than Preserved Ordinary Course Administrative Claims treated below, shall
be paid in full from Plan Distribution Cash (or otherwise satisfied in
accordance with its terms) upon the latest of: (i) the Distribution Date; (ii)
such date as may be fixed by the Bankruptcy Court, or as soon thereafter as
practicable; (iii) the tenth (10th) Business Day after such Claim is Allowed,
or as soon thereafter as practicable; and (iv) such date as the holder of such
Claim and the Debtors shall agree upon.

     
          
2. Treatment of Preserved Ordinary Course Administrative Claims. Each
Allowed Preserved Ordinary Course Administrative Claim not paid by a Debtor
prior to the Effective Date shall be paid, performed or settled by the
Liquidation Trust pursuant to the terms and conditions under which such Claim
arose.

     
          
3. Retention and Severance. Pursuant to that certain Order re: Motion for
Order (1) Confirming Fitzgeralds Gaming Corporations’ Authority to Use Debtor’s
Available Cash to Compensate, in the Ordinary Course of Business, Senior
Management; (2) Approving Implementation and Funding of (i) Senior Management
Retention and Severance Program and (ii) Distribution Incentive Program; and
(3) Approving Payments to Senior Management For Certain Non-competition
Agreements entered by the Court on December 21, 2000, Two Million Four Hundred
Thousand Dollars ($2,400,000.00) was earmarked for payment of the Retention
Payment

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and was placed in escrow established pursuant to that certain Escrow
Agreement dated December 1, 2000. Provided each of the Executives is paid his
Retention Payment from the escrowed funds, each of the Executives shall have no Administrative Claim in respect of
severance from any of their pre-petition employment agreements against Debtors’ estates or the
Liquidation Trust. Each Executive shall receive payment of his Retention
Payment from the escrowed funds in full in Cash on the earlier to occur of (i)
the Effective Date of a plan that effectuates the sale of the assets (or stock)
of the last Operating Company (to the extent not previously disposed of
pursuant to Bankruptcy Code Section 363) and transfers all Residual Assets and
Tail liabilities to a Liquidating Trust or (ii) the liquidation date or (iii)
the date on which such Executive is terminated without cause by the Debtors
(with consent of the Informal Committee ). To date, none of the Executives
have received any of the Retention Payment.

     
          
4. Cash Distribution Incentive. Each of the Executives shall have (in
addition to their rights in the Distributable Cash) an Allowed Administrative
Claim (the “Cash Incentive Claims”) in respect of amounts owing but unpaid to
them pursuant to Section 5.2 of the Restructuring Agreement which shall be paid
to the Executives on the Effective Date pursuant to Section 6.1.4 of the Plan.
Each of the Executives shall also receive, as distribution in respect of the
Cash Incentive Claims, beneficial interests in the Liquidating Trust with
regard to that Pro Rata Share of Net Residual Assets as provided for in the
Restructuring Agreement. Such beneficial interests shall entitle the
Executives pari passu to payments due to them with respect to any Cash
distributed to the Noteholders in respect of their beneficial interests in the
Liquidating Trust. To date, the Executives have received an aggregate of
$6,611,216.00 in respect of the Cash Distribution Incentive provisions in the
Restructuring Agreement. It is anticipated that the Executives will receive in
aggregate 8.5% of the Distributable Cash (as defined in the Restructurings
Agreement) once the Fitzgeralds Reno sale is concluded, and the Executives in
the

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aggregate will also receive 8.5 % of the Net Residual Assets distributed
from the Liquidating Trust.

     
          
5. Treatment of Priority Tax Claims. Each Allowed Priority Tax Claim, if
any, will be paid in full from Plan Distribution Cash the later of (i) the
Distribution Date; (ii) the tenth
 (10th) Business Day after the date on which an order allowing such Claim
becomes a Final Order; or (iii) such other time as is agreed upon by the holder
of such Claim and the Debtors prior to the Effective Date and after the
Effective Date, the Liquidation Trust.

	 

	B.

	 

	Classification of Treatment of Claims and Equity Interests Under the
Plan.

     
          
1. Treatment of Class 1 (Priority Wage Claims). Each Allowed Priority Wage
Claim, if any, shall be paid in full in Plan Distribution Cash upon the latest
of: (i) the Distribution Date; (ii) such date as may be fixed by the Bankruptcy
Court; (iii) the tenth (10th) Business Day after such Claim is Allowed, or as
soon thereafter as practicable; and (iv) such date as the holder of such Claim
and the Debtors, and after the Effective Date, the Liquidation Trust, shall
agree. All Allowed Priority Wage Claims shall be paid contemporaneous with
payment of the Allowed Claims, including interest from the Petition Date at the
Federal Judgment Rate. Class 1 is unimpaired under the Plan. Holders of
Claims in Class 1 are not entitled to vote on the Plan. The Debtors are
unaware of any Priority Wage Claims that were not paid pursuant to a first day
order.

     
          
2. Treatment of Class 2 (Priority Benefit Plan Contribution Claims). Each
Allowed Priority Benefit Plan Contribution Claim, if any, shall be paid in full
in Plan Distribution Cash upon the latest of: (i) the Distribution Date; (ii)
such date as may be fixed by the Bankruptcy Court; (iii) the tenth (10th)
Business Day after such Claim is Allowed, or as soon thereafter as practicable;
and (iv) such date as the holder of such Claim and the Debtors, and after the
Effective Date, the Liquidation Trust, shall agree. All Allowed Priority
Benefit Plan Contribution Claims shall be paid contemporaneous with payment of
the Allowed Claims, including interest from the Petition Date at the Federal
Judgment Rate. Class 2 is unimpaired under the Plan. Holders of

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 Claims in Class 2 are not entitled to vote on the Plan. Debtors are unaware of any
Priority Benefit Plan Contribution Claims that were not paid pursuant to a
first day order.

     
          
3. Treatment of Class 3 (Priority Customer Deposit Claims). Each Allowed
Priority Customer Deposit Claim, if any, shall be paid in full in Plan
Distribution Cash upon the latest of: (i) the Distribution Date; (ii) such date
as may be fixed by the Bankruptcy Court; (iii) the tenth (10th) Business Day
after such Claim is Allowed, or as soon thereafter as practicable; (iv) such
date as the holder of such Claim and the Debtors, and after the Effective Date,
the Liquidation Trust, shall agree; and (v) a date when such Priority Customer
Deposit Claim becomes due and owing. All Priority Customer Deposit Claims shall
be paid contemporaneous with payment of the Allowed Claims, including interest
from the Petition Date at the Federal Judgment Rate. Class 3 is unimpaired
under the Plan. Holders of Claims in Class 3 are not entitled to vote on the
Plan. The Debtors are unaware of any Priority Customer Deposit Claims that
were not honored pursuant to a first day order.

     
          
4. Treatment of Class 4 (Secured Tax Claims). Each Allowed Secured Tax
Claim shall be paid in full in Plan Distribution Cash upon the latest of: (i)
the Distribution Date; (ii) such date as may be fixed by the Bankruptcy Court;
(iii) the tenth (10th) Business Day after such Claim is Allowed, or as soon
thereafter as practicable; (iv) such date as the holder of such Claim and the
Debtors, and after the Effective Date, the Liquidation Trust, shall agree; and
(v) such date as the holder of such Claim and the Debtors, and after the
Effective Date, the Liquidation Trust, shall agree. Class 4 is unimpaired
under the Plan. Holders of Claims in Class 4 are not entitled to vote on the
Plan. The Debtors are unaware of any Secured Tax Claims.

     
          
5. Treatment of Class 5 (Miscellaneous Secured Claims). At the option of
the Informal Committee, the holder of any Allowed Secured Claim in Class 5
shall receive one (1) of the following alternative treatments:

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      a) on the Distribution Date, or on such other date thereafter as may be
agreed to by the holder of such Claim and the Debtors or the Liquidation Trust,
as the case may be, shall abandon the collateral securing such Claim to the
holder thereof in full satisfaction and release of such Claim; or

          
     
     b) on the Distribution Date, the holder of such Claim shall receive, on
account of such Claim, Plan Distribution Cash equal to its Allowed Secured
Claim or such lesser amount to which the holder of such Allowed Secured Claim
shall agree, in full satisfaction and release of such Allowed Secured Claim.

     
          
Class 5 is unimpaired under the Plan. Holders of Allowed Claims in Class
5 are not entitled to vote on the Plan.

     
          
6. Treatment of Class 6 (Noteholders Secured Claims).

     
          
     a) Distributions. From and after the Effective Date, each Noteholder as
of the Distribution Record Date shall be deemed to have received in
consideration for the Allowed Secured Claim portion of its Allowed Claim its
pro rata share of the balance of the proceeds of Collateral to the extent such
proceeds are not distributed to the Indenture Trustee prior to the Effective
Date. Such proceeds shall be distributed to the Indenture Trustee for the
benefit of and distribution to the Noteholders in accordance with the
Indenture. The Indenture Trustee shall release and discharge any remaining
Liens of the Notes Security Documents as required to receive related proceeds.

     
          
     b) Reserves. All distributions under the Plan to Noteholders and the
Indenture Trustee and under subsection 5.2 of the Plan are subject to the
requirements of subsection 9.2(d) of the Plan regarding Plan Distribution Cash.

     
          
7. Treatment of Class 7 (General Unsecured Claims). Each holder of an
Allowed General Unsecured Claim shall receive Plan Distribution Cash equivalent
to its Allowed

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General Unsecured Claim plus interest at the Federal Judgment
Rate from the Petition Date until paid upon the latest of: (i) the
Distribution Date; (ii) the tenth (10th) Business Day after such Claim is
Allowed, or as soon thereafter as practicable; and (iii) such date as the
holder of such Claim and the Debtors have agreed or shall agree. Class 7 is
unimpaired under the Plan. Holders of General Unsecured Claims in Class 7 are
not entitled to vote on the Plan.

     
          
8. Treatment of Class 8 (Noteholder Deficiency Claims).

     
          
     a) Noteholder Deficiency Claims. The Allowed Noteholder Deficiency Claims
shall be satisfied by the distribution to the Indenture Trustee on the
Distribution Date of its proportionate share of the Liquidation Trust Shares to
be distributed to the Noteholders. In order to qualify for a distribution,
Noteholders shall have complied with the following:

     
               
     i) Surrender of Securities or Debt Instruments. On or before the
Distribution Date, or as soon as practicable thereafter, each Noteholder shall
surrender the Notes evidencing its Allowed Noteholder Deficiency Claim to the
Indenture Trustee as the Disbursing Agent for the Class 8 Claims. No
distribution of property hereunder shall be made to or on behalf of any such
Noteholder unless and until the Notes are delivered to the Indenture Trustee,
or the unavailability of such Notes is reasonably established to the
satisfaction of the Liquidation Trust Board of Managers. In the event any
Noteholder seeks to establish the unavailability of the Note evidencing such
Allowed Noteholder Deficiency Claim, the Liquidation Trust Board of Managers
shall, within thirty (30) Business Days after receipt of the Noteholder’s
evidence of unavailability and statement of indemnity of the Liquidation Trust
Board of Managers, (i) provide the Noteholder, in writing, with a detailed
description regarding the rejection of such evidence and statement of
indemnity; or (ii) deliver to the Indenture Trustee a notice of compliance and
distribute to such Noteholder its Pro-Rata Share of Liquidation Trust Shares.
Any such Noteholder who fails to surrender or cause to be surrendered such
Notes or fails to execute and deliver an affidavit of loss

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and indemnity
reasonably satisfactory to the Liquidation Trust Board of Managers prior to the
second anniversary of the Effective Date, shall be deemed to have forfeited
all rights and claims in respect of such Notes and shall not participate in any
distribution hereunder, and all property in respect of such forfeited
distribution, including interest accrued thereon, shall revert to the
Liquidation Trust notwithstanding any federal or state escheat laws to the
contrary.

     
               
    ii) Distribution Record Date. At the close of business on the
Distribution Record Date, the transfer ledgers of the Indenture Trustee shall
be closed, and there shall be no further changes to the record of Noteholders.
The Liquidation Trust Board of Managers and the Indenture Trustee shall have no
obligation to recognize any transfer of such Notes occurring after the
Distribution Record Date. The Indenture Trustee and Liquidation Trust Board of
Managers shall be entitled instead to recognize and deal for all purposes
hereunder with only those Noteholders stated on the transfer ledgers as of the
close of business on the Distribution Record Date.

     
              
    iii) Delivery of Distributions. Distribution of property shall be made by
the Indenture Trustee to Noteholders at the addresses contained in the official
records of the Indenture Trustee. If any Noteholder’s distribution is returned
as undeliverable, no further distributions to such Noteholder shall be made
unless and until the Indenture Trustee and Liquidation Trust are notified of
such Noteholder’s then current address, at which time all missed distributions
shall be made to such holder without interest. Undeliverable distributions
shall be returned to the Indenture Trustee until such distributions are
claimed. All claims for undeliverable distributions shall be made on or before
the second anniversary of the Effective Date. After such date, all unclaimed
property shall revert to the Liquidation Trust and the claim of any Noteholder
or successor to such Noteholder with respect to such property shall be
discharged and forever barred notwithstanding any federal or state escheat laws
to the contrary.

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   iv) Distribution of Liquidation Trust Funds. All funds or other property
received by the Liquidation Trust shall be applied and distributed in
accordance with the Liquidation Trust Agreement and the Plan.

     
          
9. Treatment of Class 9 (Intercompany Claims). All Intercompany Claims in
existence on the Effective Date shall be extinguished and none of the Debtors
shall receive any consideration from any other Debtor as a result of any
Intercompany Claim. Class 9 is impaired under
the Plan. Class 9 is deemed to have voted to reject the Plan. Holders of
Claims in Class 9 will not be solicited to vote on the Plan.

     
          
10. Treatment of Class 10 (Subsidiary Equity Securities). All Subsidiary
Equity Securities shall be canceled and terminated without any further act or
action under any applicable agreement, law, regulation, order or rule. Class
10 is impaired under the Plan. Class 10 is deemed to have voted to reject the
Plan. Holders of Claims in Class 10 will not be solicited to vote on the Plan.

     
          
11. Treatment of Class 11 (Old FGC Preferred Stock). Holders of Old FGC
Preferred Stock shall receive nothing for their Old FGC Preferred Stock, and
the Old FGC Preferred Stock shall be canceled and extinguished without further
act or action under any applicable agreement, law, regulation, order or rule.
Class 11 is impaired under the Plan. Class 11 is deemed to have voted to
reject the Plan. Holders of Claims in Class 11 will not be solicited to vote
on the Plan.

     
          
12. Treatment of Class 12 (FSI Warrant Claims). Holders of FSI Warrant
Claims shall receive nothing for their FSI Warrant Claims, and the FSI Warrants
shall be canceled and extinguished without further act or action under any
applicable agreement, law, regulation, order or rule. Class 12 is impaired
under the Plan. Class 12 is deemed to have voted to reject the Plan. Holders
of Claims in Class 12 will not be solicited to vote on the Plan.

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 13. Treatment of Class 13 (Old FGC Common Stock). Holders of Old FGC
Common Stock and any remaining FGC Equity Securities shall receive nothing for
their Old Common Stock and remaining FGC Equity Securities, and the Old FGC
Common Stock shall be canceled and extinguished without further act or action
under any applicable agreement, law, regulation, order or rule. Nothing
contained herein shall affect the right of a holder of Old FGC Common Stock to
receive other consideration elsewhere under the Plan or through Final Orders of
the Bankruptcy Court not related to the Old FGC Common Stock. Class 13 is
impaired under the Plan. Class 13 is deemed to have voted to reject the Plan.
Holders of Claims in Class 13 will not be solicited to vote on the Plan.

	 

	C.

	 

	Means of Implementation of the Plan.

     
          
1. Plan Implementation Steps Occurring on Effective Date. On the
Effective Date, the following events shall occur in the following sequence:

     
          
     a) FGC shall cause FMC and NCI to be merged with and into FGC pursuant to
NRS Chapter 92A, with FGC being the surviving entity in the mergers. At or
about the same time as such mergers, FGC and FI shall cause FAMI to be merged
with and into FGC pursuant to NRS Chapter 92A, with FGC being the surviving
entity and with no consideration being paid to FAMI’s shareholders in such
merger. On or before the Effective Date, FGC shall execute or cause to be
executed, and shall file or cause to be filed with the Nevada Secretary, the
articles of merger and any related documents required for the mergers of FMC,
NCI and FAMI to be effective at the earliest time reasonably practicable on the
Effective Date.

     
          
     b) Each of the Debtor Subsidiaries shall merge with and into FGC pursuant
to NRS Chapter 92A, with FGC being the surviving entity and with no
consideration being paid to the respective shareholders of the Debtor
Subsidiaries in such mergers. On or before the Effective Date, the Debtors
shall execute or cause to be executed, and shall file or cause to be

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filed with the Nevada Secretary and any other applicable governmental authorities, the
articles of merger and any related documents required for the mergers of the
Debtor Subsidiaries to be effective at the earliest time reasonably practicable
on the Effective Date after the mergers specified in Section 6.1.1 of the Plan.

     
          
     c) The Plan Distribution Cash shall be delivered to the Liquidation Trust
to be held and preserved by the Liquidation Trust as property of the Estate to
be paid in accordance with the Plan.

     
          
     d) Payment from Plan Distribution Cash of all monies due but not yet paid
in accordance with the Senior Management Incentive Program, including the
Retention Payments and Cash Incentive Claims to the extent not previously paid, and delivery to
Senior Management of their Liquidation Trust Shares as provided for in the
Plan, the Restructuring Agreement and Compensation Order.

     
          
     e) The Liquidation Trust Agreement in substantially the same form as
Exhibit “D” attached hereto shall be executed and the Liquidation Trust shall
be deemed effective. FGC shall settle the Liquidation Trust by irrevocably
delivering and conveying to the Liquidating Trust (1) all Residual Assets; (2)
all of the remaining assets of FGC; and (3) all rights to prosecute Litigation
Claims. The Liquidation Trust shall assume all of the Tail Liabilities of FGC.
The Liquidation Trust shares shall be distributed as provided for in the Plan,
the Liquidation Trust Agreement and the Restructuring Agreement.

     
          
     f) The FGC Equity Securities shall be deemed cancelled. FGC shall be
dissolved pursuant to NRS 78.622 without action on the part of the directors,
officers or holders of old FGC Common Stock. All of the officers and directors
of FGC shall be deemed to have resigned. FGC shall provide such officers and
directors with “tail” errors and omissions insurance coverage for a period of
not less than three (3) years after the Effective Date similar to that provided

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officers and directors as of the Confirmation Date. From the Confirmation
Date until the Effective Date, all the existing outside directors of FGC will
continue to be compensated at their present levels.

     
          
     g) All fund or other property received by the Liquidation Trust shall be
applied and distributed in accordance with the Liquidation Trust Agreement and
the Plan.

     
          
2. Distribution of Plan Distribution Cash. The Debtors shall determine
the necessary amount of Plan Distribution Cash with the consent of the Informal
Committee (not to be unreasonably withheld). In the event agreement cannot be
reached between the Debtors and the Informal Committee prior to the Effective
Date, the Bankruptcy Court shall determine the amount of Plan Distribution
Cash.

          
     
3. Notice of Effectiveness. When all of the steps contemplated by Section
6.1 of the Plan have been completed, the Debtors shall file with the Bankruptcy
Court and serve upon all holders of Claims and all potential holders of
Administrative Claims known to the Debtors (whether or not disputed), a Notice
of Effective Date of Plan. The notice shall include notice of the
Administrative Claim Bar Date and Professional Fee Claim Bar Date.

     
          
4. Surrender of Securities or Debt Instruments. On or before the
Distribution Date, or as soon as practicable thereafter, each Noteholder shall
surrender the Notes evidencing its Allowed Noteholder Deficiency Claim to the
Indenture Trustee as the Disbursing Agent for the Class 8 Claims. No
distribution of property hereunder shall be made to or on behalf of any such
Noteholder unless and until the Notes are delivered to the Indenture Trustee or
the unavailability of such Notes is reasonably established to the satisfaction
of the Liquidation Trust Board of Managers. In the event any Noteholder seeks
to establish the unavailability of the Note evidencing such Allowed Noteholder
Deficiency Claim, the Liquidation Trust Board of Managers shall, within thirty
(30) Business Days after receipt of the Noteholder’s evidence of unavailability
and statement of

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indemnity of the Liquidation Trust Board of Managers, (i)
provide the Noteholder, in writing, with a detailed description regarding the
rejection of such evidence and statement of indemnity; or (ii) deliver to the
Indenture Trustee a notice of compliance and distribute to such Noteholder any
amounts distributable from the Liquidation Trust. Any such Noteholder who
fails to surrender or cause to be surrendered such Notes or fails to execute
and deliver an affidavit of loss and indemnity reasonably satisfactory to the
Liquidation Trust Board of Managers prior to the second anniversary of the
Effective Date, shall be deemed to have forfeited all rights and claims in
respect of such Notes and shall not participate in any distribution hereunder,
and all property in respect of such forfeited distribution, including interest
accrued thereon, shall revert to the Liquidation Trust notwithstanding any
federal or state escheat laws to the contrary.

     
          
5. Ratification of Liquidation Trust. On the Effective Date, each Person
to whom an interest in the Liquidation Trust is distributed shall be deemed to
have ratified and become bound by the terms of the Liquidation Trust Agreement.

     
          
6. No Corporate Action Required. As of the Effective Date: (i) the
adoption, execution, delivery and implementation or assignment of all
contracts, leases, instruments, releases and other agreements related to or
contemplated by the Plan; (ii) the transfer of Estate assets provided for in
Section 6.1 of the Plan; (iii) the mergers contemplated by Section 6.1 of the
Plan; and (iv) the other matters provided for under or in furtherance of the
Plan involving corporate action to be taken by or required of the Debtors shall
be deemed to have occurred and be effective as provided therein, and shall be
authorized and approved in all respects without further order of the Bankruptcy
Court or any requirement of further action by the stockholders, directors or
officers of the Debtors.

     
          
7. Informal Committee. Any consent, waiver or other action pursuant to
this Plan to be given by, or power conferred on, the Informal Committee shall
be exercised by a vote of

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members of the Informal Committee who in the
aggregate own, beneficially own or have investment discretion with respect to
Notes comprising at least a majority of the outstanding principal amount of the
Notes. There shall be no requirement of a meeting or notice to all Noteholders
or Informal Committee members as a prerequisite to such a vote, and the vote
may be by written consent of sufficient members of the Informal Committee.

     
          
8. Duties of Indenture Trustee. Following the Effective Date, the
Indenture shall remain in effect to the extent required under the Plan and the
Liquidation Trust. The Indenture Trustee shall take only those actions as from
time-to-time requested by the Liquidation Trust Board of Managers on behalf of
the Liquidation Trust, in accordance with the Indenture. On and after the
Effective Date, the indemnity obligations to the Indenture Trustee under the
Indenture shall become the obligations of the Liquidation Trust but in no event
shall the Plan Distribution Cash of the beneficial interest of holders of General Unsecured Claims or Senior Management be
subject to such indemnity claims.

     
          
9. Executory Contracts and Unexpired Leases.

     
          
     a) Executory Contracts. All executory contracts and unexpired leases that
both exist on the Confirmation Date and are set forth on the schedule of
assumed executory contracts and unexpired leases attached to the Plan as
Schedule “7.1,” shall be deemed assumed by the Debtors and assigned to the
purchaser of substantially all of the assets of the Fitzgeralds Reno Hotel
Casino, or, at the election of the informal committee, the Liquidation Trust.
Schedule 7.1 may be modified by the Debtors up to the Effective Date, with
notice to the non-debtor party to the contract affected by such modification
and the Informal Committee.

     
          
     b) Approval of Assumption or Rejection. Entry of the Confirmation Order
shall constitute as of the Effective Date: (i) approval, pursuant to Bankruptcy
Code Section 365(a), of the assumption by the relevant Debtors of each
executory contract and unexpired lease

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listed on Schedule 7.1, (ii) approval,
pursuant to Bankruptcy Code Section 365(f), of the assignment of each such
executory contract and unexpired lease to the Liquidation Trust; and (iii)
authorization for the relevant Debtors to reject each executory contract and
unexpired lease to which any of the Debtors are parties and which is not listed
on Schedule 7.1 and merely assumed, assumed and assigned nor rejected by
separate order prior to the Effective Date. Upon the Effective Date, each
counter party to an executory contract or unexpired lease listed on Schedule
7.1 of the Plan shall be deemed to have consented to assumption and assignment
contemplated by Bankruptcy Code Section 365(c)(1)(B), to the extent such
consent is necessary for such assumption and assignment. Notwithstanding
anything contained herein to the contrary, up to the Confirmation Date the
Debtors, with the consent of the Informal Committee, shall have the right to
add to or delete from Schedule 7.1 of the Plan any executory contract or
unexpired lease.

     
          
     c) Cure of Defaults. The Liquidation Trust shall Cure any defaults
respecting each executory contract or unexpired lease assumed pursuant to
Section 7.1 of the Plan upon the latest of (i) the Effective Date or as soon
thereafter as practicable; (ii) such dates as may be fixed by the Bankruptcy
Court or agreed upon by the Debtors, with the consent of the Informal Committee
and after the Effective Date, the Liquidation Trust; or (iii) the tenth (10th)
Business Day after the entry of a Final Order resolving any dispute regarding
(a) a Cure amount; (b) the ability of FGC or the Liquidation Trust to provide“
 adequate assurance of future performance” under the executory contract or
unexpired lease assumed pursuant to the Plan in accordance with Section
365(b)(1) of the Bankruptcy Code; or (c) any matter pertaining to assumption,
assignment or the Cure of a particular executory contract or an unexpired
lease.

     
          
     d) Post-Petition Date Contracts and Leases. Executory contracts and
unexpired leases entered into and other obligations incurred after the Petition
Date by the Debtors

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shall be performed by the Debtors or the Liquidation Trust, as applicable, in
the ordinary course of their business.

     
          
     e) Restructuring Agreement. Entry of the Confirmation Order shall
constitute authorization for the assumption and assignment on the Effective
Date by Debtors to the Liquidation Trust of the (a) Restructuring Agreement to
the extent obligations and rights contained therein remain unperformed, (b) the
Risk Management Contracts existing as of the Effective Date. The Liquidation
Trust shall assume and be bound by all such obligations and rights which
remain.

     
          
     f) Bar Date. All proofs of Claims with respect to Claims arising from the
rejection of any executory contract or unexpired lease shall be filed with
KPMG, LLP, Claims Agent, Attention: Jeff Truitt, 355 South Grand Avenue, #2000,
Los Angeles, California 90071, no later than thirty (30) days after the entry
of the Effective Date. Any Claim not filed within such time shall be forever
barred.

     
          
10. Indemnification Obligations. Any obligations of the Debtors to
indemnify any officer, director or employee serving as a fiduciary of any
employee benefit plan or program of the Debtors, pursuant to charter, by-laws,
contract or applicable state law shall be deemed to be, and shall be treated
as, an executory contract and assumed by (and where applicable, assigned to)
the Liquidation Trust on the Effective Date; provided, however, that all
obligations of FGC under such executory contracts shall be deemed satisfied by
FGC’s payment in full prior to the Effective Date of the premium for a
claims-made insurance policy providing $10,000,000.00 of tail coverage with a
three-year term, substantially on the same terms as the FGC Directors’ &
Officers’ insurance policy in effect as of the Confirmation Date.

	 

	D.

	 

	Conditions to Confirmation of Plan.

     
          
1. Conditions To Confirmation. The following are conditions precedent to
confirmation of the Plan:

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     a) The Confirmation Order shall have been entered and be in form and
substance reasonably acceptable to the Debtors and the Informal Committee;

     
          
     b) There shall have been no Consenting Noteholder Default, Debtor Default
or Senior Management Default under the Restructuring Agreement, which default
has not been waived pursuant to such agreement, and there shall have been no
termination upon condition subsequent of the Restructuring Agreement

     
          
2. Conditions To Effectiveness. The following are conditions precedent to
the occurrence of the Effective Date:

     
          
     a) The Confirmation Order shall be a Final Order, except that the Debtors
reserve the right, with the consent of the Informal Committee, to cause the
Effective Date to occur notwithstanding the pendency of an appeal of the
Confirmation Order, under circumstances that would moot such appeal;

     
          
     b) No request for revocation of the Confirmation Order under Section 1144
of the Bankruptcy Code shall have been made, or, if made, shall remain pending,
including any appeal;

     
          
     c) All documents necessary to implement the transactions contemplated by
the Plan shall be in form and substance reasonably acceptable to the Debtors
and the Informal Committee;

     
          
     d) Sufficient Plan Distribution Cash is set aside, reserved and withheld
to make distributions required by the Bankruptcy Code and the Plan;

     
          
     e) Final Orders are entered approving the sale by 363 Motion of the
Operating Companies; and

     
          
     f) The sales of the Operating Companies have been consummated and the
Debtors have ceased to have any gaming activities;

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      g) The Debtors shall have received any and all required approvals by the
Gaming Authorities to consummate the sales of the Operating Companies and the
Plan; and

     
          
     
h) The Debtors shall not have adopted any retention or severance plans for
employees.

     
          
3. Waiver of Conditions. The Conditions to Confirmation and Conditions to
Effectiveness may be waived in whole or in part by the Debtors and the Informal
Committee at any time, without notice, an order of the Bankruptcy Court or any
further action other than proceeding to Confirmation and consummation of the
Plan.

	XI.

	 

	RISK FACTORS

     
In addition to matters addressed elsewhere in this
Disclosure Statement, the Plan involves certain significant risks which should be taken into
consideration.

     
Even if the requisite acceptances are received, the Plan may not be
confirmed by the Bankruptcy Court. Confirmation of the Plan requires, among
other things, a finding by the Bankruptcy Court that it is not likely that
there will be a need for further financial reorganization and that the value of
distributions to dissenting members of impaired Classes of Creditors and Equity
Securities not be less than the value of distributions such Creditors and
holders of Equity Securities would receive if the Debtors were liquidated under
Chapter 7 of the Bankruptcy Code. Although the Debtors believe that the Plan
will not be followed by a need for further financial reorganization and that
dissenting members of impaired Classes of Creditors and Equity Securities will
receive distributions at least as great as would be received in a liquidation
under Chapter 7 of the Bankruptcy Code, there can be no assurance that the
Bankruptcy Court will conclude that these tests have been met.

     
Because the Plan provides for the orderly liquidation of
the Debtors, common risk factors found in typical reorganizations are not deemed to be
material or otherwise applicable with respect

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 to the Plan. The Debtors are not
being reorganized as going concerns. As such, there are no financing or
regulatory (gaming or otherwise) contingencies. Rather, the only
financing issues involve the sale of the Operating Companies, but those issues
belong to the potential buyer(s), and are not a condition to confirmation or
the effectuation of the Plan or performance thereunder. As of the date of this
Disclosure Statement, the only sale which is not concluded is Fitzgeralds Reno.

     
A condition to the effectiveness of the Plan is that the
sales of the Operating Companies have been consummated. Although the Plan may be confirmed,
there is a risk that the Debtors will be unable to conclude the final sale of
Fitzgeralds Reno. The Plan would have to be modified or alternative plans
would have to be considered in such a case.

	XII.

	 

	POST EFFECTIVE DATE OPERATIONS AND PROJECTIONS

	 

	A.

	 

	Summary of Title to Property and Dischargeability.

     
          
1. Revesting of Assets. Subject to the provisions of the Plan, the
property of the Estates shall be transferred to the Liquidation Trust on the
Effective Date. As of the Effective Date, all such property shall be free and
clear of all Liens, Claims, and Equity Securities except as otherwise provided
in the Plan.

     
          
2. Preservation of Litigation Claims. In accordance with Section
1123(b)(3) of the Bankruptcy Code, and except as otherwise expressly provided
herein, all Litigation Claims shall be transferred to the Liquidation Trust
pursuant to Section 6.1.5 of the Plan. In the event Allowed General Unsecured
Claims are not paid in full in Cash in accordance with subsection 5.2 of the
Plan, and instead, receive beneficial interests in the Liquidation Trust, the
Avoidance Actions as part of Litigation Claims, shall include the right to
Postpetition Date Cash Distributions and Prepetition Date Excess Cash
Distributions.

     
          
3. Discharge. All of the Debtors’ assets will be liquidated and the
proceeds of which will be distributed pursuant to this Plan. As such, no
assets are being retained by Debtors

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and the Debtors shall not receive a
discharge.

     
          
4. Injunction. From and after the Effective Date, and except as provided
in the Plan and the Confirmation Order, all entities that have held, currently
hold or may hold a Claim or other debt or liability or an Equity Security or
other right of an Equity Security holder that is terminated pursuant to the
terms of the Plan are permanently enjoined from taking any of the following
actions on account of any such Claims, debts or liabilities or terminated
Equity Security or rights: (i) commencing or continuing in any manner any
action or other proceeding against the Liquidation Trust or its respective
property; (ii) enforcing, attaching, collecting or recovering in any manner any
judgment, award, decree or order against the Liquidation Trust or its
respective property; (iii) creating, perfecting or enforcing any Lien or
encumbrance against the Liquidation Trust or its respective property; (iv)
asserting a setoff, right of subrogation or recoupment of any kind against any
debt, liability or obligation due to the Liquidation Trust or its respective
property; and (v) commencing or continuing any action, in any manner or any
place, that does not comply with or is inconsistent with the provisions of the
Plan or the Bankruptcy Code. By accepting distributions pursuant to the Plan,
each holder of an Allowed Claim receiving distributions pursuant to the Plan
will be deemed to have specifically consented to the injunction set forth in
this section.

	 

	B.

	 

	Exculpation and Limitation of Liability.

     
From and after the Effective Date, none of the Debtors, the
Liquidation Trust, or the Informal Committee nor any of their respective present or former
members, directors, officers, managers, employees, advisors, attorneys or
agents, shall have or incur any liability to any holder of a Claim or Equity
Security or any other party-in-interest, or any of their respective agents,
employees, representatives, financial advisors, attorneys or Affiliates, or any
of their successors or assigns, for any act or omission in connection with,
relating to, or arising out of, the Chapter 11 Cases, Liquidation Trust, 363
Motion, the pursuit of confirmation of the Plan or the consummation

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of the Plan, except for (i) under the Restructuring Agreement to the extent assumed
and assigned to the Liquidation Trust, (ii) violations of the Risk Management Contracts, (iii) gross negligence and
(iv) willful misconduct, and in all respects shall be entitled to reasonably
rely upon the advice of counsel with respect to their duties and
responsibilities under the Plan or in the context of the Chapter 11 Cases. No
holder of a Claim or Equity Security, nor any other party-in-interest,
including their respective agents, employees, representatives, financial
advisors, attorneys or Affiliates, shall have any right of action against the
Debtors, the Liquidation Trust, the Informal Committee or any of their
respective present or former members, officers, directors, managers, employees,
advisors, attorneys or agents, for any act or omission in connection with,
relating to, or arising out of, the Chapter 11 Cases, the pursuit of
confirmation of the Plan, the consummation of the Plan or the administration of
the Plan, except for (i) their willful misconduct or gross negligence, (ii)
matters specifically contemplated by either the Plan or the Liquidation Trust
and (iii) any liability of an attorney to its client not subject to exculpation
under the Bankruptcy Code.

	 

	C.

	 

	Post Confirmation Reporting and Quarterly Fees to the United States
Trustee.

     
Prior to the Effective Date, Debtors, and after the
Effective Date the Liquidation Trust, are obligated to pay the United States Trustee quarterly
fees based upon all disbursements in accordance with the sliding scale set
forth in 28 U.S.C. §1930(a)(6). These fees accrue throughout the pendency of
the Chapter 11 Cases until entry of a final decree. United States Trustee fees
paid prior to confirmation of the Plan will be reported in operating reports
required by 11 U.S.C. §704(8), 1106(a)(1), 1107(a) and the United States
Trustee Guidelines. All United States Trustee quarterly fees accrued prior to
confirmation of the Plan will be paid on or before the Effective Date pursuant
to 11 U.S.C. §1129(a)(12). All United States Trustee fees accrued
post-confirmation will be timely paid on a calendar quarter basis and reported
both on post-confirmation reports required by Local Rule 3020 and in
post-confirmation operating reports required by the United States

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 Trustee
Guidelines. Final fees will be paid on or before the entry of a final decree
in these Chapter 11 Cases.

	XIII.

	 

	CERTAIN FEDERAL INCOME TAX CONSEQUENCES

	 

	A.

	 

	Introduction.

     
Implementation of the Plan may have federal, state, and local tax
consequences to the Debtors and to the holders of Allowed Claims, FGC Equity
Securities, and FSI Warrants. The following summary does not address the
federal income tax consequences to holders whose Allowed Claims are entitled to
reinstatement or payment in full in cash under the Plan (e.g., Priority Wage
Claims, Priority Benefit Plan Contribution Claims, Priority Customer Deposit
Claims, Miscellaneous Secured Claims and General Unsecured Claims).

     
NO TAX OPINION HAS BEEN SOUGHT OR WILL BE OBTAINED
WITH RESPECT TO ANY CONSEQUENCES OF THE PLAN. THE FOLLOWING DISCLOSURE (THE “TAX DISCLOSURE”) DOES
NOT CONSTITUTE AND IS NOT INTENDED TO CONSTITUTE EITHER A TAX OPINION OR TAX
ADVICE TO ANY PERSON. RATHER, THE TAX DISCLOSURE IS PROVIDED FOR INFORMATIONAL
PURPOSES ONLY.

     
The Tax Disclosure summarizes certain United States
federal income tax aspects of the Plan, assuming the Plan is implemented as described herein, and
does not attempt to comment on all such aspects. The Tax Disclosure does not
attempt to consider any facts or limitations applicable to any particular
holder of an Allowed Claim, FGC Equity Security or FSI Warrant which may modify
or alter the following discussion. The Tax Disclosure does not address state,
local, or foreign tax or any federal tax aspects of the Plan other than certain
federal income tax aspects.

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The Tax Disclosure is based upon the provisions of the
Internal Revenue Code of 1986, as amended (for purposes of this Tax Disclosure, the “IRC”). No
assurance can be given that legislative, judicial or administrative changes
will not be forthcoming that would affect the accuracy of the Tax Disclosure.
Any such changes could be material and could be retroactive with respect to the transactions entered into or completed
prior to the enactment or promulgation thereof. Finally, the federal income tax treatment of certain
aspects of the Plan may be uncertain due to a lack of applicable legal
authority and may be subject to judicial or administrative interpretations that
differ from the information discussed in the Tax Disclosure.

     
HOLDERS OF ALLOWED CLAIMS, FGC EQUITY SECURITIES
AND FSI WARRANTS ARE ADVISED TO CONSULT WITH THEIR OWN TAX ADVISORS REGARDING THE TAX CONSEQUENCES
(INCLUDING FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES) TO THEM AND/OR
TO THE DEBTORS ARISING FROM THE TRANSACTIONS CONTEMPLATED BY THE PLAN.

	 

	B.

	 

	Tax Consequences To The Debtors.

     
          
1. Sale of Business Assets. The Restructuring Agreement requires the
closing of the sales of the assets of the Operating Companies prior to the
consummation of the Plan. Substantially all of the assets of the Operating
Companies are collateral for the Notes. On December 6, 2001, pursuant to the
Purchase Agreement, Majestic Investor acquired substantially all of the assets
of FLVI (including the FSELLC Membership Interest), FMI, and 101 Main in
exchange for $149,000,000.00 and the assumption by Majestic Investor of certain
liabilities of FLVI, FMI, and 101 Main. It is also contemplated by the
Restructuring Agreement, and assumed for purposes of this Tax Disclosure, that
the Debtors will sell, on a going concern basis, substantially all of the
assets of FRI, subject to the assumption of certain liabilities, to a
third-party buyer.

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The Debtors and certain FGC non-Debtor subsidiaries
(collectively, the “Group”) are consolidated for tax purposes. The Group will recognize gain or
loss on the required disposition of each of its assets. FGC believes that, in
the aggregate, the sale of the Group’s remaining assets will result in a net
taxable gain to the Group. Any such gain will be offset, in whole or in part,
by the Group’s net operating loss (“NOL”) carryforwards. As of December 31,
2001, the Group had combined NOL carryforwards of approximately $63 million. If the net
taxable gain resulting from the required dispositions of the Group’s assets
does not exceed the Group’s NOL carryforwards (including, for such purposes,
any NOL carryforwards attributable to taxable years ending after December 31,
2001), plus any NOLs generated in the year of such dispositions, the Group
would not incur a regular federal income tax liability as a result of such
dispositions.

     
In addition to the corporate income tax, the IRC
imposes an alternative minimum tax (“AMT”) on a corporation’s income at a twenty percent (20%) rate to
the extent, if any, that such tax exceeds the corporation’s regular corporate
income tax liability. Special NOL computation rules apply to corporate
taxpayers subject to the AMT. Generally, those rules provide that only ninety
percent (90%) of a corporation’s taxable income (as computed for AMT purposes)
may be offset by available NOL carryforwards (as computed for such purposes).
An exception to those rules was provided by the Job Creation and Worker
Assistance Act of 2002 (the “2002 JCA”). The 2002 JCA increases to 100% the
amount by which a corporation’s taxable income (as computed for AMT purposes)
may be offset by available NOL carryforwards (as computed for such purposes)
generated or carried forward into taxable years ending in 2001 or 2002.
Whether the Group will be subject to AMT on dispositions of remaining assets
thus depends on the timing of such dispositions. With respect to asset
dispositions after December 31, 2002, the exception provided by the 2002 JCA
would not apply and the general limitation discussed above may cause the Group
to be liable for AMT on a portion of any net taxable gain recognized.

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2. Cancellation of Debt. By operation of the Plan, the Allowed Claims
will either be satisfied, in full or in part, or extinguished for no
consideration. This section discusses the tax implications (for the Group)
arising from the treatment of Allowed Claims pursuant to the Plan.

     
          
     a) Discharge of Indebtedness Income.

     
          
          
i) In General. The IRC generally provides that a taxpayer
must include in gross income the amount of any income resulting from the cancellation or
discharge of indebtedness (“COD income”) during the taxable year. No COD
income results if payment of the discharged liability would have given rise to
a deduction.

     
          
          ii) Exception for Discharge in Title 11 Case.
Section 108(a)(1) of the IRC provides an exception to the general rule of income inclusion if a
discharge of indebtedness occurs in a title 11 case. For this purpose, a“title
 11 case” is defined as a case under title 11 of the United States Code
(relating to bankruptcy) if the taxpayer is under the jurisdiction of the
bankruptcy court in such case and the discharge of indebtedness is granted by
the court or is pursuant to a plan approved by the court.

     
          
          iii) Tax Attribute Reduction. To the extent section
108(a)(1) of the IRC applies to exclude COD income from gross income, a taxpayer is generally
required to reduce certain tax attributes. The following tax attributes are
reduced in the listed order of priority: (i) NOLs; (ii) general business
credits; (iii) minimum tax credits; (iv) capital loss carryovers; (v) tax basis
of assets; (vi) passive activity loss and credit carryovers; and (vii) foreign
tax credit carryovers. The tax attributes, other than credits, are generally
reduced by one dollar for each dollar of COD income excluded from gross income
under section 108(a)(1). Tax credit carryovers (i.e., general business
credits, minimum tax credits, passive activity loss credits, and foreign tax
credits) are reduced 33? cents for each dollar of COD income excluded from
gross income under section 108(a)(1) of the IRC.

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     b) Application to the Debtors. Pursuant to the Plan, the Debtors will
satisfy the Notes by distributing to the Indenture Trustee (for the benefit of
and distribution to the Noteholders): (i) the cash proceeds of the collateral
for the Notes; and (ii) Liquidation Trust Shares.

     
          
For federal income tax purposes, the Debtors will realize COD income to
the extent (and in the amount) that the principal amount of the debt discharged
exceeds the cash proceeds of the collateral for the Notes, plus the fair market value of the Liquidation Trust Shares
distributed to the holders of Allowed Claims. This COD income will be excluded
from the Group’s gross income as the discharge will be made in a title 11 case.
Under the general rule discussed above, FGC would be required to reduce
certain of its tax attributes by the amount of such COD income (in the order
and amounts discussed above), after the determination of taxable income or loss
for the taxable year of discharge. However, implementation of the Plan as
described herein would result in the liquidation of FGC for federal income tax
purposes. Assuming FGC is so liquidated, any remaining tax attributes (e.g.,
NOL carryforwards) would simply disappear.

     
          
3. Distribution of Liquidation Trust Shares. For federal income tax
purposes, as discussed below, the Debtors intend to treat each holder of an
Allowed Claim that receives Liquidation Trust Shares as if such holder received
its pro rata share of the assets (and any liabilities) to be held by the
Liquidation Trust (such assets and liabilities, the “Liquidation Trust
Property”). Simultaneous with such constructive transfer, each holder of an
Allowed Claim that receives Liquidation Trust Shares will be deemed to transfer
the Liquidation Trust Property deemed received from the Debtors to the
Liquidation Trust, with consequences discussed below.

     
          
For federal income tax purposes, the Debtors will recognize gain or loss,
if any, on the constructive transfer of Liquidation Trust Property to holders
of Allowed Claims. Taxable gain or loss for such purposes will generally be
computed as the difference between the fair market value and adjusted tax basis
of the Liquidation Trust Property. However, if any Liquidation Trust

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Property is subject to a liability, the fair market value of such Property will be
deemed to be the greater of fair market value or the amount of the associated
liability.

	 

	C.

	 

	Taxation of the Liquidation Trust

     
          
1. General. The Plan provides that on the Effective Date, FGC shall take
all other steps necessary to establish the Liquidation Trust. Treasury
Regulation Section 301.7701-4(d) provides that a trust will be considered a liquidating trust if: (i) it is
organized for the primary purpose of liquidating and distributing the assets
transferred to it; and (ii) its activities are all that is reasonably necessary
to, and consistent with, the accomplishment of that purpose. Although no
assurances can be provided, FGC believes that the Liquidation Trust will
qualify as a liquidating trust pursuant to Treasury Regulation Section
301.7701-4(d).

     
          
2. Holders of Liquidation Trust Shares. Because FGC believes that the
Liquidation Trust will qualify as a liquidating trust for federal income tax
purposes, FGC intends to treat the Liquidation Trust as a grantor trust for
such purposes.

     
The trustee of the Liquidation Trust will be required to:
(i) value any property transferred to the Liquidation Trust consistent with the valuation of
such property established by the holders of Allowed Claims; and (ii) employ
such value for all federal income tax purposes. Pursuant to the Plan and
Liquidation Trust Agreement, the trustee of the Liquidation Trust will be
required to file income tax returns for the Liquidation Trust as a grantor
trust.

     
Each holder of an Allowed Claim that receives and
holds Liquidation Trust Shares will be treated as a beneficiary of the Liquidation Trust, subject to
taxation under section 671 of the IRC. Each holder of Liquidation Trust
Shares, as a beneficiary of a grantor trust, will be subject to current
taxation on the income, if any, generated by the Liquidation Trust. There is a
risk that cash distributions from the Liquidation Trust during a taxable year
may be insufficient to offset the

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income taxes, if any, resulting from a
beneficiary’s distributive share of any income generated by the Liquidation
Trust during such year.

	 

	D.

	 

	Tax Consequences to Creditors.

     
          
1. General. Each holder of an Allowed Claim will recognize gain or loss
on the actual or constructive exchange of such holder’s existing Allowed Claim
(other than an Allowed Claim for accrued interest, as discussed below) for: (i)
the cash proceeds of the collateral for the Notes; and (ii) the Liquidation Trust Property deemed received by
such holder and deemed contributed to the Liquidation Trust (as discussed below).

For such purposes, gain will be recognized if the amount of cash actually
received, and the fair market value of the Liquidation Trust Property deemed
received by a holder, exceeds such holder’s adjusted tax basis in its Allowed
Claim. Loss will be recognized if a holder’s adjusted tax basis in its Allowed
Claim exceeds the amount of cash actually received, and the fair market value
of the Liquidation Trust Property deemed received by the holder. The tax basis
of a holder’s Liquidation Trust Shares received pursuant to the Plan of
Reorganization will be equal to the fair market value of the Liquidation Trust
Property deemed distributed to the holder (as discussed below).

     
          
2. Receipt of Liquidating Trust Shares. For federal income tax purposes,
FGC intends to treat each holder of an Allowed Claim that receives Liquidation
Trust Shares as if such holder received its pro rata share of the Liquidation
Trust Property and transferred such Property to the Liquidation Trust. This
characterization applies only to property that is directly transferred by FGC
to the Liquidation Trust and does not apply to property that is directly
transferred by FGC to holders of Allowed Claims.

     
          
3. Treatment of Accrued Interest. Income attributable to accrued but
unpaid interest will be treated as ordinary income regardless of whether a
holder’s existing Allowed Claim

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is a capital asset in its hands. If a holder
of an existing Allowed Claim
was not required to include in income accrued but
unpaid interest attributable to such Allowed Claim, and exchanges or is deemed
to exchange its Allowed Claim (including the portion reflecting accrued but
unpaid interest) for cash or Liquidation Trust Property pursuant to the Plan,
such holder will be treated as receiving ordinary income to the extent that any
consideration so received is allocable to the accrued interest. The foregoing
rule will apply regardless of whether such holder realizes an overall gain or
loss as a result of the exchange of its Allowed Claim. A holder that included
in income accrued but unpaid interest attributable to its existing Allowed Claim will recognize a loss to the
extent the accrued but unpaid interest is not fully satisfied.

     
Each Noteholder is urged to consult its tax advisor
regarding the allocation of consideration it receives pursuant to the Plan of Reorganization,
and the deductibility of any unpaid interest or amortized original issue
discount (“OID”) for tax purposes.

     
          
4. Character of Gain or Loss Recognized.

     
          
     a. In General. The character of the gain or loss recognized by each
Noteholder will depend upon the nature of the Noteholder’s Allowed Claim. Gain
or loss recognized by a Noteholder in whose hands the Allowed Claim constitutes
a capital asset will be characterized as capital gain or capital loss, except
to the extent of property received that is attributable to interest (including
accrued market discount, if any).

     
          
     b. Treatment of Market Discount. Section 1276 of the IRC provides that
any gain recognized upon the disposition of certain debt instruments will be
treated as ordinary income to the extent of accrued market discount, computed
either under the constant interest rate or ratable accrual method. A debt
instrument acquired after its original issuance for an amount lower than the
sum of: (i) the issue price of the debt instrument; and (ii) the aggregate
amount of OID includible in gross income of all holders for periods before the
acquisition of the debt instrument by

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the taxpayer has been acquired at a
market discount (e.g., because interest rates have risen since the original
issue date). A debt instrument acquired at its original issuance is generally
not treated as acquired at a market discount unless: (i) the tax basis in the
debt instrument is determined under section 1012 of the IRC and is less than
the issue price of the debt instrument; or (ii) the debt instrument was issued
pursuant to a plan of reorganization in exchange for another debt instrument
having market discount.

     
          
5. Long-term vs. Short-term Gains and Losses. In general, any capital
gains or losses recognized by a holder of an Allowed Claim or FGC Equity
Security will be classified as short-term capital gains or losses if the capital gains or losses are
attributable to assets held for not more than one year. Conversely, any
capital gains or losses recognized by a holder of an Allowed Claim or FGC
Equity Security will be classified as long-term capital gains or losses if the
capital gains or losses are attributable to assets held for more than one year.

     
          
6. Withholding. The Disbursing Agent will withhold any amounts required
by law from payments made to Noteholders. This may require payments by certain
Noteholders of the required withholding tax with respect to the non-cash
consideration issued under the Plan. In addition, Noteholders may be required
to provide general tax information to the Disbursing Agent.

	 

	E.

	 

	Tax Consequences To Holders Of FGC Equity Securities.

     
          
1. Old FGC Common Stock. By operation of the Plan, the Old FGC Common
Stock will be cancelled. Holders of the Old FGC Common Stock will not receive
any consideration for their cancelled stock. If the holders of Old FGC Common
Stock hold the stock as a capital asset, the holders should, on the Effective
Date, recognize a capital loss equal to their adjusted tax basis in the Old FGC
Common Stock.

     
          
2. Old FGC Preferred Stock. By operation of the Plan, the Old FGC
Preferred Stock will be cancelled. Holders of the Old FGC Preferred Stock will
not receive any consideration

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for their cancelled stock. If the holders of the
Old FGC Preferred Stock hold the stock as a capital asset, the holders should,
on the Effective Date, recognize a capital loss equal to their adjusted tax
basis in the Old FGC Preferred Stock.

     
          
3. Subsidiary Equity Securities. By operation of the Plan, Subsidiary
Equity Securities will be cancelled. Holders of the Subsidiary Equity
Securities will not receive any consideration for their cancelled securities.
If the holders of Subsidiary Equity Securities hold such stock as a capital
asset, the holders should recognize on the Effective Date a loss equal to their
adjusted tax basis in the Subsidiary Equity Securities.

     
          
4. FSI Warrant Claims. By operation of the Plan, the FSI Warrants will be
cancelled. Holders of the FSI Warrants will not receive any consideration for
their cancelled warrants. If the holders of the FSI Warrants hold such
warrants as a capital asset, the holders should, on the Effective Date,
recognize a capital loss equal to their adjusted tax basis in the FSI Warrants.

	XIV.

	 

	SECURITIES LAW CONSIDERATION

	 

	A.

	 

	Exemptions from Registration.

     
          
1. Securities Act of 1933, As Amended (the “1933 Act”). The Confirmation
Order will authorize the issuance of the Liquidation Trust Shares to the
Noteholders on account of their Allowed Noteholder Deficiency Claims and to
members of Senior Management to the extent of their entitlement under the
Restructuring Agreement and the Compensation Order. Such issuance will be
without registration under the 1933 Act or under state securities laws in
reliance on the exemption set forth in Section 1145 of the Bankruptcy Code
(“Section 1145”). The Confirmation Order will include provisions to the effect
that such exemption is available for the issuance of the Liquidation Trust
Shares and that the Liquidation Trust is a “successor” to FGC within the
meaning of Section 1145.

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Under Section 1145, the issuance of the Liquidation
Trust Shares will be exempt from registration under the 1933 Act if the following three requirements
are satisfied: (a) the securities must be issued by a debtor (or its
successor) under a plan of reorganization; (b) each recipient of the securities
must hold a claim against the debtor or an affiliate, an interest in the debtor
or an affiliate, or a claim for an administrative expense against the debtor or
an affiliate; and (c) the securities must be issued in exchange for the
recipient’s claim against or interest in the debtor or an affiliate, or
principally in such exchange and partly for cash or other property. The
Debtors believe that the issuance of the Liquidation Trust Shares will satisfy
all three requirements because (a) the Liquidation Trust will be a successor to
the Debtors due to its acquisition of the Debtors’ assets; (b) the recipients
of the Liquidation Trust Shares will be holders of claims against the Debtors;
and (c) the recipients of the Liquidation Trust Shares will receive those
securities principally in exchange for their claims against the Debtors.

     
     
     
2. Securities Exchange Act of 1934, As Amended (the “1934 Act”). Based on
the anticipated number of record owners of Liquidation Trust Shares as of the
Effective Date, the Debtors believe that the Liquidation Trust will not have to
be subject to the registration or reporting requirements of the 1934 Act (“1934
Act Reporting”). However, the Debtors do not know if the Liquidation Trust
will choose to be subject to 1934 Act Reporting notwithstanding the absence of
a legal requirement to do so. If it so chooses, then it would be subject to a
continuing public reporting process, requiring annual reports with audited
financial statements, quarterly reports and other periodic reports to be filed
with the SEC. Additionally, if the Liquidation Trust chooses to be subject to
1934 Act Reporting, then (i) the solicitation of votes of holders of the
Liquidation Trust Shares may also be subject to the proxy requirements of
Section 14 of the 1934 Act and (ii) Section 16 of the 1934 Act, which imposes
certain short-swing liability and reporting obligations in

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connection with purchases and sales of securities, and the beneficial
ownership reporting provisions of Section 13(d) of the 1934 Act may be
applicable to certain holders of Liquidation Trust Shares.

     
     
     
3. Trust Indenture Act of 1939, As Amended (the “TIA”). The Debtors
believe that the Liquidation Trust will not be subject to the TIA with respect
to the creation of interests in the Liquidation Trust and the issuance of the
Liquidation Trust Shares. Among other reasons, this is because the interests
in the Liquidation Trust will not constitute unconditional obligations founded
upon a contractual obligation to pay a sum certain, but rather only the right
to receive a portion of the proceeds ultimately distributed by the Liquidation
Trust upon liquidation of its assets.

     
     
     
4. Investment Company Act of 1940, As Amended (the “1940 Act”). The
Debtors believe that the Liquidation Trust will not have to register under the
1940 Act. Among other reasons, this is because the issuance of the Liquidation
Trust Shares will be merely incidental to the liquidation and dissolution of
FGC and the Liquidation Trust (i) will exist solely to liquidate the assets of
FGC, (ii) will not hold itself out as an investment company or conduct a trade
or business, (iii) will terminate within three years after the Effective Date
and (iv) will be under the jurisdiction of the Bankruptcy Court. Further, the
Debtors do not contemplate that an active trading market for the Liquidation
Trust Shares will develop nor do they contemplate that the Liquidation Trust or
the Liquidation Trust Board of Managers will take affirmative action to
facilitate such trading.

	 

	B.

	 

	Restrictions on Transfer.

     
In general, the Liquidation Trust Shares may be resold by
any person receiving them under the Plan without registration under the 1933 Act or under
state securities laws, except by a person who is deemed an “underwriter” with
respect to such securities. Paragraph (b) of Section 1145 (“Section 1145(b)”)
defines underwriter as a person or entity who (i) purchases a claim against or
equity interest in a debtor with a view to the distribution of the securities
received on account of

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 such claim or equity interest; (ii) offers to sell such
securities on behalf of the holders thereof (except offers to sell fractional
interests); (iii) offers to buy such securities from the holders if such
offer to buy is with a view to the distribution thereof pursuant to an
agreement made in connection with a plan, the consummation of a plan or the
offer or sale of securities under a plan; or (iv) is an “issuer” with respect
to the securities received, as that term is defined in Section 2(11) of the
1933 Act. In this context, an “issuer” of Liquidation Trust Shares would be
any person directly or indirectly controlling, controlled by, or under direct
or indirect common control with, the Liquidation Trust.

     
Whether a person is an “issuer” and, therefore,
an “underwriter” for purposes of Section 1145(b) will depend on a number of factors, including the
relative size of the person’s interest in the Liquidation Trust; the
distribution and concentration of other interests in the Liquidation Trust; the
contractual or other relationships giving that person direct or indirect power
over management policies and decisions of the Liquidation Trust; and whether
the person actually has such power notwithstanding the absence of formal
indicia of control. Members of the Liquidation Trust Board of Managers might,
under all relevant facts and circumstances, be viewed as issuers and,
therefore, as underwriters for purposes of Section 1145(b).

     
Based on the published views of the SEC or its staff,
the Debtors believe that a person who acquires less than one percent (1%) of a class of securities
generally would not, by virtue of such acquisition, be deemed an underwriter
with respect to those securities. The legislative history of Section 1145
suggests that a creditor who owns at least ten percent (10%) of the securities
of a reorganized debtor may be presumed to be a “control person” and,
therefore, an underwriter. These published views and legislative history do
not provide sufficient guidance on whether a person who receives more than one
percent (1%) but less than ten percent (10%) of the securities of a reorganized
debtor would be deemed an underwriter.

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Persons who are underwriters, as described above, and who
want to resell their securities must either have the securities registered for resale or use
an available exemption from registration. The Debtors have no plans to register under the 1933 Act any of the
Liquidation Trust Shares to be distributed under the Plan nor are the Debtors
aware of any plans for the Liquidation Trust to take such action. Accordingly,
persons who are underwriters will be able to resell such securities only in
limited circumstances in reliance on an exemption from the 1933 Act
registration requirements, certain of which are discussed below in this
Section, and in compliance with applicable state securities laws.

     
Persons who are underwriters but are not “affiliates”
(as defined in the next paragraph) of the Liquidation Trust may be eligible, without registration
under the 1933 Act or state securities laws, to resell the Liquidation Trust
Shares in “ordinary trading transactions” (within the meaning of Section
1145(b)). The Bankruptcy Code does not define “ordinary trading transactions”
and the SEC has not given definitive guidance on the proper construction of
that term. In no-action letters, however, the staff of the SEC has expressed
no objection to the view that a transaction will be an “ordinary trading
transaction” if (i) it is carried out on an exchange or in the over-the-counter
market and the issuer of the traded securities is subject to the reporting
requirements of the 1934 Act Reporting, and (ii) such transaction does not
involve concerted action by recipients (or their distributors) to sell such
securities, the preparation or use of informational documents, or the payment
of special compensation to brokers or dealers in connection with such sale.
The Debtors, however, believe that as of the Effective Date, the Liquidation
Trust will not have to be subject to 1934 Act Reporting and they do not know if
the Liquidation Trust will choose to be subject to 1934 Act Reporting even
though not legally required to do so. Therefore, underwriters may be unable to
rely on the “ordinary trading transactions” provision of Section 1145(b) for
resales of Liquidation Trust Shares.

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Also, based on the position taken by the staff of the
SEC in no-action letters, recipients of Liquidation Trust Shares who are affiliates of the
issuer would be eligible to resell those securities (if not registered) under
Rule 144 under the 1933 Act (“Rule 144”), as Rule 144 applies to sales by
affiliates of securities which are not restricted securities. Under Rule 144,
an “affiliate” of an issuer of securities is a person that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with,
such issuer. This definition of “affiliate” is essentially the same as the
definition of “issuer,” as the latter term is used in the definition of“
 underwriter” in Section 1145(b), as discussed above.

     
In the context of securities which (i) were issued
pursuant to the Section 1145 exemption from securities law registration and (ii) are held by affiliates
of the issuer, Rule 144 provides that if certain conditions are met, including
volume limitations, manner of sale and availability of current information
about the issuer, affiliates of the issuer may resell their securities without
registration.

     
Broker-dealers effecting sales of Liquidation Trust
Shares distributed under the Plan will have an obligation under paragraph (a)(4) of Section 1145
for a period of 40 days after the distribution to provide purchasers of such
securities with a copy of this Disclosure Statement (and any supplements
thereto, if ordered by the Bankruptcy Court) at or before the time of delivery
of such securities.

     
THE FOREGOING SUMMARY IS GENERAL IN NATURE AND HAS
BEEN INCLUDED IN THIS DISCLOSURE STATEMENT SOLELY FOR GENERAL INFORMATIONAL PURPOSES. THE DEBTORS
MAKE NO REPRESENTATIONS CONCERNING, AND ARE NOT PROVIDING ANY OPINION OR ADVICE
WITH RESPECT TO, THE SECURITIES LAW MATTERS DESCRIBED ABOVE AS THEY APPLY TO
ANY PARTICULAR PERSON RECEIVING SECURITIES UNDER THE PLAN OR AS THEY APPLY
UNDER ANY INDIVIDUAL CIRCUMSTANCES. IN LIGHT OF THE COMPLEXITY AND
SUBJECTIVITY INVOLVED IN DETERMINING WHETHER A PARTICULAR HOLDER OF SECURITIES
DESCRIBED HEREIN MAY BE DEEMED AN “UNDERWRITER,” “AFFILIATE” OR “CONTROL
PERSON” UNDER THE LAWS AND REGULATIONS DISCUSSED ABOVE AND, CONSEQUENTLY, THE
UNCERTAINTIES CONCERNING THE AVAILABILITY OF EXEMPTIONS FROM SECURITIES LAW
REGISTRATION IN CONNECTION WITH RESALES OR OTHER DISPOSITIONS OF THOSE

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SECURITIES, THE DEBTORS URGE EACH CLAIMANT TO CONSIDER CAREFULLY AND CONSULT
WITH HIS, HER, OR ITS OWN LEGAL ADVISERS WITH RESPECT TO THOSE (AND ANY
RELATED) MATTERS.

     
FURTHERMORE, ALTHOUGH THE DEBTORS HAVE EXPRESSED
CERTAIN VIEWS HEREIN ON THE LIKELY STATUS UNDER THE SECURITIES LAWS OF THE LIQUIDATION TRUST AND THE
LIQUIDATION TRUST SHARES, IT IS THE LIQUIDATION TRUST (WHICH IS NOT A DEBTOR)
OR IN SOME SITUATIONS THE HOLDER OF LIQUIDATION TRUST SHARES THAT WILL BEAR THE
ULTIMATE RESPONSIBILITY FOR DETERMINING SUCH STATUS AND COMPLYING WITH THE APPLICABLE SECURITIES LAWS. THE DEBTORS DO NOT KNOW
WHAT POSITION THE LIQUIDATION TRUST WILL TAKE ON ANY RELEVANT SECURITIES LAW
ISSUES.

     
THIS DISCLOSURE STATEMENT HAS NOT BEEN APPROVED OR DISAPPROVED
BY THE SEC NOR HAS THE SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THE STATEMENTS
CONTAINED HEREIN.

	XV.

	 

	GAMING REGULATION AND LICENSING

     
As previously set forth, the Plan provides for
the liquidation of the Operating Companies and the total cessation of gaming activities by the
Debtors. The Debtors, through the Operating Companies, conducted business in
multiple jurisdictions, each with their own regulatory requirements. Because
the nature and structure of the purchaser of the remaining hotel/casino,
Fitzgeralds Reno, is unknown at this time, the following is a general overview
of gaming regulation and licensing in Nevada. Since the Effective Date of the
Plan is conditioned upon the closing of sales of the Operating Companies, this
overview will not be applicable to the Liquidation Trust since it will not have
any gaming activities.

     
The ownership and operation of casino gaming facilities
in Nevada are subject to the Nevada Gaming Control Act and the regulations promulgated
thereunder (the “Nevada Act”) and to the licensing and regulatory control of
the Nevada Gaming Commission (the “Nevada Commission”), the Nevada State Gaming
Control Board (the “Nevada Board”) and various local ordinances and
regulations, including, without limitation, applicable city and county gaming
and liquor licensing authorities (collectively, the “Nevada Gaming
Authorities”).

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The laws, regulations and supervisory procedures of
the Nevada Gaming Authorities are based upon declarations of public policy which are concerned
with, among other things: (i) the prevention of unsavory or unsuitable persons
from having a direct or indirect involvement with gaming at any time or in any
capacity; (ii) the establishment and maintenance of responsible accounting
practices and procedures; (iii) the maintenance of effective controls over the
financial practices of licensees, including the establishment of minimum procedures for internal fiscal affairs and
the safeguarding of assets and revenues, providing reliable record keeping and
filing periodic reports with the Nevada Gaming Authorities; (iv) the prevention
of cheating and fraudulent practices; and (v) providing a source of state and
local revenues through taxation and licensing fees. Change in such laws,
regulations and procedures could have an adverse effect on the Company’s gaming
operations.

     
In regard to a proposed purchase of Fitzgeralds Reno
(“Nevada Gaming Subsidiary”), the proposed purchasing company (the “Purchaser”) and its direct
and indirect subsidiaries that would conduct gaming operations are required to
be licensed by the Nevada Gaming Authorities. The gaming licenses require the
periodic payment of fees and taxes and are not transferable. No person may
become a stockholder of, or receive any percentage of profits from the
Purchaser or a Nevada Gaming Subsidiary without first obtaining licenses and
approvals from the Nevada Gaming Authorities.

     
The Nevada Gaming Authorities may investigate any
individual who has a material relationship to, or material involvement with, the Purchaser, an
intermediary company or a Nevada Gaming Subsidiary in order to determine
whether such individual is suitable or should be licensed as a business
associate of a gaming licensee. Officers, directors and certain key employees
of a Nevada Gaming Subsidiary must file applications with the Nevada Gaming
Authorities and may be required to be licensed or found suitable by the Nevada
Gaming Authorities. Officers, directors and

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key employees of the Purchaser and
any intermediary company which is actively and directly involved in gaming
activities of a Nevada Gaming Subsidiary may be required to be licensed or
found suitable by the Nevada Gaming Authorities. The Nevada Gaming Authorities
may deny an application for licensing for any cause which they deem reasonable.
A finding of suitability is comparable to licensing, and both require
submission of detailed personal and financial information followed by a
thorough investigation. The applicant for licensing or a finding of suitability
must pay all the costs of the investigation. Changes in licensed positions must
be reported to the Nevada Gaming Authorities and, in addition to their authority to deny an application for
a finding of suitability or licensure, the Nevada Gaming Authorities have jurisdiction to disapprove a
change in a corporate position.

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

     
The Purchaser, any intermediary company and the
Nevada Gaming Subsidiary are required periodically to submit detailed financial and operating reports to
the Nevada Commission and furnish any other information which the Nevada
Commission may require. Substantially all material loans, leases, sales of
securities and similar financing transactions by a Nevada Gaming Subsidiary
must be reported to or approved by the Nevada Commission.

     
If it were determined that the Nevada Act was violated
by the Purchaser, any intermediary company or a Nevada Gaming Subsidiary, any registration or
gaming licenses they hold could be

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limited, conditioned, suspended or revoked,
subject to compliance with certain statutory and regulatory procedures. In
addition, the Purchaser, any intermediary company, the Nevada Gaming Subsidiary
and the persons involved could be subject to substantial fines for each
separate violation of the Nevada Act at the discretion of the Nevada
Commission. Further, a supervisor could be appointed by the Nevada Commission
to operate a Nevada Gaming Subsidiary and, under certain circumstances,
earnings generated during the supervisor’s appointment (except for reasonable
rental value of the casino) could be forfeited to the State of Nevada.

     
In the event that the proposed purchaser is a
publicly-traded corporation that would be required to be registered under the Nevada Act (“Registered Corporation”),
any beneficial holder of a Registered Corporation’s voting securities (or
rights to acquire such securities), regardless of the number of shares owned,
may be required to file an application, be investigated and have its
suitability as a beneficial holder of the Registered Corporation’s voting
securities determined if the Nevada Commission has reason to believe that such
ownership would otherwise be inconsistent with the declared policies of the
State of Nevada. The applicant must pay all costs of investigation incurred by
the Nevada Gaming Authorities in conducting any such investigation.

     
The Nevada Act requires any person who acquires
beneficial ownership of more than five percent (5%) of a Registered Corporation’s voting securities to
report the acquisition to the Nevada Commission. The Nevada Act requires that
beneficial owners of more than ten percent (10%) of the voting securities of a
Registered Corporation apply to the Nevada Commission for a finding of
suitability within thirty days after the Chairman of the Nevada Board mails the
written notice requiring such filing. Under certain circumstances, an“
 institutional investor,” as defined in the Nevada Act, which acquires more
than ten percent (10%), but not more than fifteen percent (15%), of a
Registered Corporation’s voting securities may apply to the Nevada Commission
for a waiver of such finding of suitability if such institutional investor
holds the voting securities for “investment

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purposes only.” An institutional
investor shall not be deemed to hold voting securities for investment purposes
unless the voting securities were acquired and are held in the ordinary course
of business as an institutional investor and not for the purpose of causing,
directly or indirectly, the election of a majority of the members of the board
of directors of the Registered Corporation, any change in the corporate
charter, bylaws, management, policies or operations of the Registered
Corporation, or any of its gaming affiliates, or any other action which the
Nevada Commission finds to be inconsistent with holding the Registered
Corporation’s voting securities for investment purposes only. Activities which
are not deemed to be inconsistent with holding voting securities for investment
purposes only include: (i) voting on all matters voted on by stockholders; (ii) making financial and
other inquiries of management of the type normally made by securities’ analysts
for informational purposes and not to cause a change in its management,
policies or operations; and (iii) such other activities as the Nevada
Commission may determine to be consistent with such investment intent. If the
beneficial holder of voting securities who must be found suitable is a
corporation, partnership or trust, it must submit detailed business and
financial information, including a list of beneficial owners. The applicant is
required to pay all costs of investigation. Under certain circumstances, the
Nevada Commission may find that an entity qualifies as an “institutional
investor” even if the interest held is not in a publicly registered company.
However, the same maximum investment of fifteen percent (15%) of the equity
would remain.

     
Any person who fails or refuses to apply for a finding
of suitability or a license within 30 days after being ordered to do so by the Nevada Commission or
the Chairman of the Nevada Board, may be found unsuitable. The same
restrictions apply to a record owner if the record owner, after request, fails
to identify the beneficial owner. Any stockholder found unsuitable and who
holds, directly or indirectly, any beneficial ownership of the voting
securities of a Registered Corporation beyond such period of time as may be
prescribed by the Nevada Commission may be guilty of a

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criminal offense. The
Purchaser will be subject to disciplinary action if, after it receives notice
that a person is unsuitable to be a stockholder or to have any other
relationship with the Purchaser, any intermediary company, or the Nevada Gaming
Subsidiary, the Purchaser (i) pays that person any dividend or interest upon
voting securities of the Purchaser, (ii) allows that person to exercise,
directly or indirectly, any voting right conferred through securities held by
that person, (iii) pays remuneration in any form to that person for services
rendered or otherwise, or (iv) fails to pursue all lawful efforts to require
such unsuitable person to relinquish his voting securities including, if
necessary, the immediate purchase of said voting securities for cash at fair
market value. Additionally, the City of Reno, would have the authority to
approve all persons owning or controlling the stock of any corporation
controlling a gaming licensee.

     
The Nevada Commission may, in its discretion, require
the holder of any debt or similar security of a Registered Corporation, such as the Notes, to
file applications, be investigated and be found suitable to own the debt
security of a Registered Corporation if the Nevada Commission has reason to
believe that such ownership would otherwise be inconsistent with the declared
policies of the State of Nevada. If the Nevada Commission determines that a
person is unsuitable to own such security, then pursuant to the Nevada Act, the
Registered Corporation can be sanctioned, including the loss of its approvals,
if without the prior approval of the Nevada Commission, it: (i) pays to the
unsuitable person any dividend, interest, or any distribution whatsoever; (ii)
recognizes any voting right by such unsuitable person in connection with such
securities; (iii) pays the unsuitable person remuneration in any form; or (iv)
makes any payment to the unsuitable person by way of principal, redemption,
conversion, exchange, liquidation, or similar transaction. In addition, the
Purchaser has the right to require a holder of Notes who fails to apply for a
license or a finding of suitability as required by any Nevada Gaming Authority
to dispose of its Notes or to redeem such notes.

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The Purchaser and the Nevada Gaming Subsidiary would
be required to maintain a current stock ledger in Nevada, which may be examined by the Nevada
Gaming Authorities at any time. If any securities are held in trust by an agent
or by a nominee, the record holder may be required to disclose the identity of
the beneficial owner to the Nevada Gaming Authorities. A failure to make such
disclosure may be grounds for finding the record holder unsuitable. The
Purchaser will also be required to render maximum assistance in determining the
identity of the beneficial owner. The Nevada Commission has the power to
require the Purchaser’s stock certificates to bear a legend indicating that the
securities are subject to the Nevada Act.

     
The Purchaser may not make a public offering of
its securities without the prior approval of the Nevada Commission if the securities or proceeds therefrom
are intended to be used to construct, acquire or finance gaming facilities in
Nevada, or to retire or extend obligations incurred for such purposes. The
pledge of the equity securities of a Corporate Licensee or an entity that is
registered as an intermediary company (“Stock Pledges”) also requires the prior
approval of the Nevada Commission. In addition, restrictions on the transfer of
an equity security issued by a corporate licensee or intermediary company and
agreements not to encumber such securities (collectively, “Stock Restrictions”)
are ineffective without the prior approval of the Nevada Commission.

     
Changes in control of a Registered
Corporation through merger, consolidation, stock or asset acquisitions, management or consulting
agreements, or any act or conduct by a person whereby he obtains control, may
not occur without the prior approval of the Nevada Commission. Entities seeking
to acquire control of a Registered Corporation must satisfy the Nevada Board
and Nevada Commission in a variety of stringent standards prior to assuming
control of such Registered Corporation. The Nevada Commission may also require
controlling stockholders, officers, directors and other persons having a
material relationship or involvement with the entity proposing to acquire
control, to be investigated and licensed as part of the approval process
relating to the transaction.

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The Nevada legislature has declared that some
corporate acquisitions opposed by management, repurchases of voting securities and corporate defense
tactics affecting Nevada corporate gaming licensees, and Registered
Corporations that are affiliated with those operations, may be injurious to
stable and productive corporate gaming. The Nevada Commission has established a
regulatory scheme to ameliorate the potentially adverse effects of these
business practices upon Nevada’s gaming industry and to further Nevada’s policy
to: (i) assure the financial stability of corporate gaming licensees and their
affiliates; (ii) preserve the beneficial aspects of conducting business in the
corporate form; and (iii) promote a neutral environment for the orderly
governance of corporate affairs. Approvals are, in certain circumstances,
required from the Nevada Commission before the Registered Corporation can make
exceptional repurchases of voting securities above the current market price
thereof and before a corporate acquisition opposed by management can be
consummated. The Nevada Act also requires prior approval of a plan of
recapitalization proposed by the Registered Corporation’s Board of Directors in
response to a tender offer made directly to the Registered Corporation’s
stockholders for the purposes of acquiring control of the Registered
Corporation.

     
License fees and taxes, computed in various ways
depending on the type of gaming or activity involved, are payable to the State of Nevada and to the
counties and cities in which the Nevada licensee’s respective operations are
conducted. Depending upon the particular fee or tax involved, these fees and
taxes are payable either monthly, quarterly or annually and are based upon
either: (i) a percentage of the gross revenues received; (ii) the number of
gaming devices operated; or (iii) the number of table games operated. A casino
entertainment tax is also paid by casino operations where entertainment is
furnished in connection with the serving or selling of food or refreshments or
the selling of any merchandise. Nevada licensees that hold a manufacturer’s
license or a distributor’s license also pay certain fees and taxes to the State
of Nevada.

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Any person who is licensed, required to be licensed,
registered, required to be registered, or is under common control with such
persons (collectively,“Licensees”), and
 who proposes to become involved in a gaming venture outside of Nevada, is
required to deposit with the Nevada Board, and thereafter maintain, a revolving
fund in the amount of $10,000 to pay the expenses of investigation by the
Nevada Board of their participation in such foreign gaming. The revolving fund
is subject to increase or decrease in the discretion of the Nevada Commission.
Thereafter, foreign Licensees are required to comply with certain reporting
requirements imposed by the Nevada Act. Such Licensees are also subject to
disciplinary action by the Nevada Commission if they knowingly violate any laws
of the foreign jurisdiction pertaining to the foreign gaming operation, fail to
conduct the foreign gaming operation in accordance with the standards of
honesty and integrity required of Nevada gaming operations, engage in
activities or enter into associations that are harmful to the State of Nevada
or its ability to collect gaming taxes and fees, or employ, contract or
associate with a person in the foreign operation who has been denied a license
or finding of suitability in Nevada on the grounds of personal unsuitability.

     
The sale of alcoholic beverages is subject to licensing,
control and regulation by City of Reno. All such licenses are revocable and are not
transferable. The agencies involved have full power to limit, condition,
suspend or revoke any such license.

	XVI.

	 

	CONFIRMATION OF THE PLAN

	 

	A.

	 

	Confirmation of the Plan.

     
Pursuant to Section 1128(a) of the Bankruptcy Code,
the Bankruptcy Court will hold a hearing regarding confirmation of the Plan at the United States
Bankruptcy Court, 300 Booth Street, Reno, Nevada 89509, commencing on February
10, 2003 at 2:00 p.m. PST.

	 

	B.

	 

	Objections to Confirmation of the Plan.

     
Section 1128(b) provides that any party-in-interest
may object to confirmation of a plan. Any objections to confirmation of the Plan must be in
writing, must state with specificity the

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 grounds for any such objections and
must be filed with the Bankruptcy Court and served upon the following parties so as to be received on or before the time
fixed by the Bankruptcy Court:

	 
	Counsel for the Debtors:

Gordon & Silver, Ltd.

3960 Howard Hughes Parkway, 9th Floor

Las Vegas, Nevada 89109

Telephone: 702-796-5555

Facsimile: 702-369-2666

Attn: Gerald M. Gordon, Esq

     
For the Plan to be confirmed, the Plan must satisfy
the requirements stated in Section 1129 of the Bankruptcy Code. In this regard, the Plan must
satisfy, among other things, the following requirements.

     
     
     
1. Best Interest of Creditors and Liquidation Analysis. Pursuant to
Section 1129(a)(7) of the Bankruptcy Code, for the Plan to be confirmed, it
must provide that Creditors and holders of Equity Securities will receive at
least as much under the Plan as they would receive in a liquidation of the
Debtors under Chapter 7 of the Bankruptcy Code (the “Best Interest Test”). The
Best Interest Test with respect to each impaired Class requires that each
holder of a Claim or Equity Security of such Class either: (i) accepts the
Plan; or (ii) receives or retains under the Plan property of a value, as of the
Effective Date, that is not less than the value such holder would receive or
retain if the Debtors were liquidated under Chapter 7 of the Bankruptcy Code.
The Bankruptcy Court will determine whether the value received under the Plan
by the holders of Claims in each Class of Creditors or Equity Securities equals
or exceeds the value that would be allocated to such holders in a liquidation
under Chapter 7 of the Bankruptcy Code. The Debtors believe that the Plan meets
the Best Interest Test and provides value which is not less than that which
would be recovered by each such holder in a Chapter 7 bankruptcy proceeding.

     
Generally, to determine what Creditors and holders of
Equity Securities in each impaired Class would receive if the Debtors were liquidated, the
Bankruptcy Court must determine what

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 funds would be generated from the
liquidation of the Debtors’ assets and properties in the context of a Chapter 7
liquidation case, which for Unsecured Creditors would consist of the
proceeds resulting from the disposition of the unsecured assets of the Debtors,
augmented by the unencumbered Cash held by the Debtors at the time of the
commencement of the liquidation case. Such Cash amounts would be reduced by
the costs and expenses of the liquidation and by such additional Administrative
Claims and Priority Claims as may result from the termination of the Debtors’
businesses and the use of Chapter 7 for the purpose of liquidation.

     
The Debtors’ costs of liquidation under Chapter 7
would include the fees payable to a trustee in bankruptcy, as well as those which might be payable to
additional attorneys and other professionals that such trustee might engage,
plus any unpaid expenses incurred by the Debtors during the Chapter 11 Cases,
such as compensation for attorneys, financial advisors and accountants and
costs and expenses of members of any committees that are allowed in a Chapter 7
case. In addition, Claims would arise by reason of the breach or rejection of
obligations incurred and executory contracts entered into by the Debtors during
the pendency of the Chapter 11 Cases.

     
The foregoing types of Claims and such other Claims
that may arise in the Chapter 7 case or result from the Chapter 11 Cases would be paid in full from
the liquidation proceeds before the balance of those proceeds would be made
available to pay pre-Chapter 11 Allowed Priority Claims, Allowed General
Unsecured Claims and Equity Securities.

     
The distributions from the liquidation proceeds
would be paid Pro Rata according to the amount of the aggregate Claims held by each Creditor. The
Debtors believe that the most likely outcome of liquidation proceeds under
Chapter 7 would be the application of the “absolute priority rule.” Under that
rule, no junior Creditor may receive any distribution until all senior
Creditors are paid in full, with interest, and no Equity Security holder may
receive any distribution until all Creditors are paid in full.

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The Debtors have determined that confirmation of the
Plan will provide each Creditor and holder of an Equity Security with no less of a recovery than it would
receive if the Debtors were liquidated under a Chapter 7. In a liquidation
under Chapter 7, the Debtors have determined that (i) holders of Administrative
Claims will be paid in full; (ii) holders of Miscellaneous Secured Claims will
be paid in full from liquidation of their collateral; and (iii) holders of the
Notes will not be paid in full from liquidation of the Collateral. As such,
all other Priority and General Unsecured Claims, including the Deficiency
Claims of Noteholders will not be paid in full. Holders of Equity Securities
will receive nothing in liquidation.

     
This determination is based upon the effect that a
Chapter 7 liquidation would have on the ultimate proceeds available for distribution to Creditors and
holders of Equity Securities, including: (i) the likelihood of revocation of
the Debtors’ gaming license in Nevada upon the occurrence of any such
liquidation; (ii) the increased costs and expenses of a liquidation under
Chapter 7 arising from fees payable to a trustee in bankruptcy and professional
advisors to such trustee; (iii) the erosion in value of assets in a Chapter 7
case in the context of the expeditious liquidation required under Chapter 7 and
the “forced sale” atmosphere that would prevail; (iv) the adverse effects on
the salability of business segments as a result of the departure of key
employees and the loss of major customers; (v) the amount of existing Claims
and the substantial increases in Claims that would have to be satisfied on a
priority basis or on a parity basis with Creditors in the Chapter 11 Cases; and
(vi) the fair market value of the Debtors’ assets.

     
The Debtors also believe that the value of any
distributions from the liquidation proceeds to Allowed Claims in Chapter 7 cases would be less than
the value of distributions under the Plan because such distributions in the
Chapter 7 cases would not occur for a substantial period of time. In the
likely event litigation were necessary to resolve Claims asserted in the
Chapter 7 cases, the delay could be prolonged for several years.

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As of the Petition Date, substantially all of
the Debtors’ assets were encumbered by deeds of trusts and security agreements in favor of the Indenture Trustee
on behalf of the Noteholders securing the principal amount of $205,000,000.00 plus
accrued interest, for a total $248,235,132.72 as of the Petition Date. Based in
part upon the sales price for Fitzgeralds Black Hawk, Fitzgeralds Tunica and
Fitzgeralds Las Vegas to Majestic Investor, the fair market value of the
Debtors’ real and personal property is estimated at $191,258,000.00 without
regard to cash and cash equivalents), which is less than the above stated
amount owed to the Noteholders as of the Petition Date. When the cost of
liquidation of such property is considered as well as the time delay in
receiving distributions, the Debtors believe that certain Creditors will
receive substantially smaller distributions pursuant to a Chapter 7 liquidation
than under the Plan. The Liquidation Analysis attached hereto as Exhibit “B”
summarizes the Debtors’ best estimate of recoveries by Creditors in the event
of liquidation of the Debtors as of December 31, 2002.

     
Under the Plan, the impaired Classes of Claims are
Classes 6, 8, 9, 10, 11, 12, and 13. The value provided under the Plan to these Classes is not less
than they would receive in liquidation.

     
     
     
2. Feasibility. The Bankruptcy Code requires that in order to confirm the
Plan, the Bankruptcy Court must find that Confirmation of the Plan is not
likely to be followed by liquidation or the need for further financial
reorganization of the Debtors (the “Feasibility Test”). For the Plan to meet
the Feasibility Test, the Bankruptcy Court must find that the Debtors will
possess the resources and working capital necessary to meet their obligations
under the Plan.

     
     
     
3. Accepting Impaired Class. Since a Class of Claims is impaired under
the Plan, for the Plan to be confirmed, the Plan must be accepted by at least
one impaired Class of Claims (not including the votes of insiders of the
Debtors).

     
     
     
4. Acceptance of Plan. For an impaired Class of Claims to accept the Plan,
those representing at least two-thirds (2/3) in amount and a majority in number
of the Allowed

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Claims voted in that Class must be cast for acceptance of the
Plan. Similarly, for an impaired Class of Equity Securities to accept the Plan, votes representing at least two-thirds
(2/3) in amount of the outstanding Equity Securities voted in that Class must
be cast for acceptance of the Plan.

     
     
     
5. Confirmation over Dissenting Class (“Cram Down”). If there is less than
unanimous acceptance of the Plan by impaired Classes of Claims or Equity
Securities, the Bankruptcy Court nevertheless may confirm the Plan at the
Debtors’ request. Bankruptcy Code Section 1129(b) provides that if all other
requirements of Bankruptcy Code Section 1129(a) are satisfied and if the
Bankruptcy Court finds that: (i) the Plan does not discriminate unfairly and
(ii) the Plan is fair and equitable with respect to the rejecting Class(es) of
Claims or Equity Securities impaired under the Plan, the Bankruptcy Court may
confirm the Plan despite the rejection of the Plan by dissenting impaired Class
of Claims or Equity Securities. The Debtors will request confirmation of the
Plan pursuant to Bankruptcy Code Section 1129(b) with respect to any impaired
Class or Claims of Equity Security which does not vote to accept the Plan. The
Debtors believe that the Plan satisfies all of the statutory requirements for
Confirmation, that the Debtors have complied with or will have complied with
all the statutory requirements for Confirmation of the Plan and that the Plan
is proposed in good faith. At the Confirmation Hearing, the Bankruptcy Court
will determine whether the Plan satisfies the statutory requirements for
Confirmation.

     
     
     
6. Allowed Claims. You have an Allowed Claim if: (i) you or your
representative timely file a proof of Claim and no objection has been filed to
your Claim within the time period set for the filing of such objections; (ii)
you or your representative timely file a proof of Claim and an objection was
filed to your Claim upon which the Bankruptcy Court has ruled and allowed your
Claim; (iii) your Claim is listed by any of the Debtors in their respective
schedules or any amendments thereto (which are on file with the Bankruptcy
Court as a public record) as liquidated in amount and undisputed and no
objection has been filed to your Claim; or (iv) your

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Claim is listed by any of
the Debtors in their respective schedules as liquidated in amount and
undisputed and an objection was filed to your Claim upon which the Bankruptcy Court has ruled to allow your Claim. Under the
Plan, the deadline for filing objections to Claims is ninety (90) days
following the Effective Date. If your Claim is not an Allowed Claim, it is a
Disputed Claim and you will not be entitled to vote on the Plan unless the
Bankruptcy Court temporarily or provisionally allows your Claim for voting
purposes pursuant to Bankruptcy Rule 3018. If you are uncertain as to the
status of your Claim or Equity Security or if you have a dispute with any of
the Debtors, you should check the Bankruptcy Court record carefully, including
the schedules of the Debtors, and you should seek appropriate legal advice.
The Debtors and their professionals cannot advise you about such matters.

     
     
     
7. Impaired Claims and Equity Securities. Impaired Claims and Equity
Securities include those whose legal, equitable or contractual rights are
altered by the Plan, even if the alteration is beneficial to the Creditor or
Equity Security holder, or if the full amount of the Allowed Claims will not be
paid under the Plan. Holders of Claims which are not impaired under the Plan
are deemed to have accepted the Plan pursuant to Section 1126(f) of the
Bankruptcy Code and the Debtors need not solicit the acceptances of the Plan of
such unimpaired Claims. Holders of Claims or Equity Securities which are to
receive nothing under the Plan are deemed to have voted to reject the Plan. As
such, only holders of Claims in impaired Classes 6 and 8 under the Plan are
entitled to vote.

     
     
     
8. Voting Procedures.

     
          
     a) Submission of Ballots. All Creditors entitled to vote
will be sent a Ballot, together with instructions for voting, a copy of this approved
Disclosure Statement and a copy of the Plan. You should read the Ballot
carefully and follow the instructions contained therein. Please use only the
Ballot that was sent with this Disclosure Statement. Unless otherwise

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instructed by a record holder of Notes, you should complete your Ballot and
return it as follows:

	 
	GORDON & SILVER, LTD.

3960 HOWARD HUGHES PARKWAY, 9TH FLOOR

LAS VEGAS, NV 89109

ATTN: THOMAS H. FELL, ESQ.

TELEPHONE: (702) 796-5555

FACSIMILE: (702) 369-2666

     
TO BE COUNTED, YOUR BALLOT MUST BE RECEIVED AT THE
ADDRESS LISTED ABOVE BY 5:00 P.M. PACIFIC STANDARD TIME, FEBRUARY 3, 2003.

     
          
     
b) Incomplete Ballots. Unless otherwise ordered by
the Bankruptcy court, Ballots which are signed, dated and timely received, but on which a vote to
accept or reject the Plan has not been indicated, will be counted as a vote on
the Plan.

     
          
     
c) Withdrawal of Ballots. A Ballot may not be withdrawn
or changed after it is cast unless the Bankruptcy Court permits you to do so after notice and a
hearing to determine whether sufficient cause exists to permit the change.

     
          
     
d) Questions and lost or damaged Ballots. If you have any questions
concerning these voting procedures, if your Ballot is damaged or lost or if you
believe you should have received a Ballot but did not receive one, you may
contact:

	 
	GORDON & SILVER, LTD.

3960 HOWARD HUGHES PARKWAY, 9TH FLOOR

LAS VEGAS, NV 89109

Attn: Thomas H. Fell, Esq.

TELEPHONE: (702) 796-5555

FACSIMILE: (702) 369-2666

	XVII.

	 

	ALTERNATIVE TO THE PLAN

     
The Debtors believe that the Plan provides Creditors
and holders of Equity Securities the best and most complete form of recovery available. As a result,
the Debtors believe that the Plan serves the best interests of all Creditors
and parties-in-interest in the Chapter 11 Cases.

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In formulating and developing the Plan, the Debtors
have explored numerous other alternatives and engaged in an extensive negotiation process with the
Informal Committee. The Debtors believe not only that the Plan, as described
herein, fairly adjusts the rights of various Classes of Creditors and enables
the Creditors to realize the greatest sum possible under the circumstances, but
also that rejection of the Plan in favor of some theoretical alternative method
of reconciling the Claims and Equity Securities of the various Classes will
require, at the very least, an extensive and time consuming negotiation process
and will not result in a better recovery for any Class. It is not atypical for
bankruptcy proceedings involving substantial entities to continue for months or
years before a plan of reorganization is consummated and payments are made.

	 

	A.

	 

	Alternative Plans of Reorganization.

     
Under the Bankruptcy Code, a debtor has an exclusive
period of one hundred and twenty (120) days and an additional vote solicitation period of sixty (60)
days from the entry of the order for relief during which time, assuming that no
trustee has been appointed by the Bankruptcy Court, only a debtor may propose
and confirm a plan. After the expiration of the initial one hundred and eighty
(180) day period and any extensions thereof, the debtor, or any other
party-in-interest, may propose a different plan provided the exclusivity period
is not further extended by the Bankruptcy Court. Such an alternative plan
might involve either a reorganization and continuation of a debtor’s business,
an orderly liquidation of the assets or some combination thereof.

	 

	B.

	 

	Liquidation Under Chapter 7.

     
If a plan cannot be confirmed, a chapter 11
case may be converted to a case under chapter 7, in which a trustee would be elected or appointed to
liquidate the assets of the debtor for distribution to their creditors and
holders of equity security in accordance with the priorities established by the
Bankruptcy Code. For a discussion of the effect that a chapter 7 liquidation
would have on the recovery by creditors, see Section XVI B.1. “Confirmation of
the Plan – Best Interest of Creditors

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 and Liquidation Analysis.”

     
As previously stated, the Debtors believe that
a liquidation under Chapter 7 would result in a substantially reduced recovery of funds by their Estates
because of: (i) an enormous loss of value resulting from the possible
revocation of gaming and regulatory licenses; (ii) a significant loss of value
resulting from the possible authorization by the Gaming Authorities of a
trustee who would be authorized to operate the Estates and could be authorized
to sell the assets and the additional Administrative Expenses and fees
associated therewith (iii) additional Administrative Expenses involved in the
appointment of a trustee for the Debtors and attorneys and other professionals
to assist such trustee; and (iv) additional expenses and Claims, some of which
would be entitled to priority, which would be generated during the liquidation
and from the rejection of leases and other executory contracts in connection
with a cessation of the Debtors’ operations. Accordingly, the Debtors believe
that holders of certain classes of Claims may be expected to receive
substantially smaller distributions pursuant to a Chapter 7 liquidation than
under the Plan.

	 

	C.

	 

	Preference and Other Avoidance Actions.

     
A bankruptcy trustee (or the entity as
debtor-in-possession) may avoid as a preference a transfer of property made by a debtor to a creditor on account
of an antecedent debt while a debtor was insolvent, where that creditor
receives more than it would have received in a liquidation of the entity under
Chapter 7 of the Bankruptcy Code had the payment not been made, if (i) the
payment was made within ninety (90) days before the date the bankruptcy case
was commenced; or (ii) if the creditor is found to have been an “insider” as
defined in the Bankruptcy Code, within one (1) year before the commencement of
the bankruptcy case. A debtor is presumed to have been insolvent during the
ninety (90) days proceeding the commencement case. A bankruptcy trustee (or
the entity as debtor-in-possession) may avoid as a fraudulent

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transfer a transfer of property made by a debtor within one year (and under applicable
Nevada law, three years) before the date the bankruptcy case was commenced if (i) the debtor
received less than a reasonably equivalent value in exchange for such transfer;
and (ii) was insolvent on the date of such transfer or became insolvent as a
result of such transfer, such transfer left the debtor with an unreasonably
small capital, or the debtor intended to incur debts that would be beyond
debtor’s ability to pay as such debts matured.

     
Although the Debtors have not fully analyzed
various potential preference or other avoidance actions, it is possible that some possible prepetition
transactions may be avoidable. Pursuant to the Restructuring Agreement, the
Indenture Trustee on behalf of the Noteholders received $6,227,708.00 on
December 4, 2000. Additionally, various professionals employed by the
Indenture Trustee and Noteholders received payments for fees and costs. Such
payments to the Indenture Trustee and the various professionals are potential
preferential transfers, provided other General Unsecured Claims are not paid in
full.

     
The Debtors have not fully analyzed all payments made
to various vendors during the months proceeding the filing of the Chapter 11 Cases. Although the
Debtors believe they were current with vendors and made payments in the
ordinary course of business, payments may have been made that are potential
preferential transfers.

     
At the present time, the Debtors do not intend to
pursue these potential preference actions so long as Class 7 General Unsecured Creditors are paid in
full.

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/ / /

/ / /

/ / /

/ / /

/ / /

	XVIII.

	 

	RECOMMENDATION AND CONCLUSION

     
The Plan provides the best possible recovery
for Creditors. Accordingly, the Debtors recommend that all Creditors who are entitled to vote on the Plan
should vote to accept the Plan.

     
DATED this _____ day of December, 2002.

	 	 	 
	 

	 

	
FITZGERALDS GAMING CORPORATION,

a Nevada corporation

	 

	 

	 

	 

	 

	
FITZGERALDS SOUTH, INC.,

a Nevada corporation

	 

	 

	 

	 

	 

	
FITZGERALDS RENO, INC.,

a Nevada corporation

	 

	 

	 

	 

	 

	
FITZGERALDS INCORPORATED,

a Nevada corporation

	 

	 

	 

	 

	 

	
FITZGERALDS LAS VEGAS, INC.,

a Nevada corporation

	 

	 

	 

	 

	 

	
FITZGERALDS MISSISSIPPI, INC.,

a Nevada corporation

	 

	 

	 

	 

	 

	
FITZGERALDS BLACK HAWK, INC.,

a Nevada corporation

	 

	 

	 

	 

	 

	
FITZGERALDS BLACK HAWK II, INC.,

a Colorado corporation

	 

	 

	 

	 

	 

	
101 MAIN STREET LIMITED LIABILITY COMPANY, a

Colorado Limited Liability Company

	 

	 

	 

	 

	 

	
FITZGERALDS FREMONT EXPERIENCE

CORPORATION, a Nevada Corporation

	 

	 

	 

	 	 	By

	 
	 

	 

	
 

	

	 

	 

	 	
MICHAEL E. MCPHERSON

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PREPARED AND SUBMITTED BY:

GORDON & SILVER, LTD.

	By:	 	 
	 	 	

	 

	 

	
GERALD M. GORDON, ESQ.

Nevada Bar No. 229

WILLIAM M. NOALL, ESQ.

Nevada Bar No. 3549

THOMAS H. FELL, ESQ.

Nevada Bar No. 3717

3960 Howard Hughes Parkway, 9th Fl.

Las Vegas, Nevada 89109

   Attorneys for Debtors

83<PAGE>

                                                                    EXHIBIT 10.1

                               PURCHASE AGREEMENT

         THIS PURCHASE AGREEMENT, dated as of February 20, 2003 (this
"Agreement"), is made and entered into by and among Coeur d'Alene Mines
Corporation, an Idaho corporation (the "Company"), and each of the persons
signatory and listed on Annex A hereto (each, a "Purchaser").

                                    RECITALS

      WHEREAS, the Company has proposed to create and issue a new series of
convertible debt securities (the "Notes");

      WHEREAS, the Company and each Purchaser desire, on the terms and
conditions set forth herein, that each Purchaser shall purchase an amount of
Notes; and

      WHEREAS, simultaneously with the execution of this Agreement, the Company
will enter into agreements to sell the Notes to other purchasers pursuant to
agreements identical to this Agreement.

                                    AGREEMENT

      NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereby agree as follows:

      SECTION 1. PURCHASE OF NOTES FOR CASH

      1.1 Purchase. Subject to the terms and conditions hereof, each Purchaser
agrees severally and not jointly to purchase at the Closing (as defined below)
and the Company agrees to sell and issue to each Purchaser at the Closing the
principal amount of Notes as set forth opposite such Purchaser's name on Annex A
hereto. In consideration for the issuance of the Notes pursuant to this
Agreement, each Purchaser shall pay to the Company at Closing the dollar amount
set forth opposite such Purchaser's name on Annex A hereto. Simultaneously with
the execution of this Agreement, the Company is executing other purchase
agreements identical to this Agreement (the "Other Purchase Agreements") with
other purchasers (the "Other Purchasers" and, together with each Purchaser
hereunder, the "Purchasers"). The aggregate principal amount of the Notes to be
issued to the Purchasers is Thirty-Seven Million One Hundred Eighty-Five
Thousand Dollars ($37,185,000). The aggregate consideration to be paid for the
Notes by the Purchasers is Thirty-Three Million Seven Hundred Eighty-Six
Thousand Two Hundred Ninety-One Dollars ($33,786,291).

      1.2 Terms of Notes; Indenture. The Notes will be issued pursuant to an
Indenture (the "Indenture") to be dated as of the Closing Date, in form and
substance reasonably acceptable to the Company and the Purchasers and otherwise
as set forth in Annex C attached hereto, between the Company and The Bank of New
York (or another trustee as agreed by the Company and the Purchasers), as
trustee (the "Trustee"). Such Indenture shall contain terms substantially
similar to the final term sheet for the offering of the Notes, a form of which
is attached hereto as Annex D.
<PAGE>
      1.3 Registration Rights. The Notes will be subject to the registration
rights set forth in a registration rights agreement among the Company and the
Purchasers signatory hereto, dated as of Closing Date, and in form and substance
reasonably acceptable to the Company and such Purchasers and otherwise as set
forth in Annex E attached hereto (the "Registration Rights Agreement"). Pursuant
to the Registration Rights Agreement, the Company will agree, among other
things, to use its best efforts to file with the SEC a shelf registration
statement pursuant to Rule 415 under the Securities Act of 1933, as amended (the
"Securities Act") relating to the resale of the Notes and the Company's common
stock, par value $1.00 per share (the "Common Stock") issuable upon conversion
of the Notes (the "Shelf Registration Statement") and to keep the Shelf
Registration Statement continuously effective, supplemented and amended as
required, in order to permit the prospectus forming part thereof to be usable by
the Purchasers signatory hereto for a period of two years after the Closing Date
or, if earlier, when all of the registrable securities covered by such Shelf
Registration Statement (i) have been sold pursuant to the Shelf Registration
Statement in accordance with the intended method of distribution thereunder,
(ii) become eligible for resale pursuant to Rule 144(k) under the 1933 Act or
(iii) cease to be registrable securities under the Registration Rights
Agreement. The Registration Rights agreement will provide, among other things,
that if the Shelf Registration Statement is not declared effective by the SEC
within 90 days after the Closing Date, then on the 91st day after the Closing
Date, the Company shall make a cash payment to the holders of the Notes equal to
$9.086 for each $1,000 principal amount of the Notes held. If the Shelf
Registration Statement is not declared effective by the SEC within 120 days
after the Closing Date, then on the 121st day after the Closing Date (or the 5th
day after the date on which such Shelf Registration Statement ceases to be
effective or usable by the Purchasers signatory hereto for any reason for any
period other than the mutually agreed blackout periods contemplated by the
Registration Rights Agreement) and on each date which is 30 days after any such
date, the Company shall make a cash payment to the holders of the Notes equal to
$12.1147 for each $1,000 principal amount of the Notes held, until such time as
the Shelf Registration Statement shall be declared effective by the SEC, at
which time the Company's obligation to make such cash payments shall cease.
Except as set forth above or as otherwise provided for in the Indenture or the
Registration Rights Agreement, no additional interest shall be payable on the
Notes due to any delay in having the Shelf Registration Statement declared
effective by the SEC.

      SECTION 2. CLOSING.

      2.1 Closing. Upon satisfaction of the conditions set forth in Sections 6.1
and 6.2, the closing of the transactions contemplated hereby shall take place at
the offices of Gibson, Dunn & Crutcher LLP, 333 South Grand Avenue, Los Angeles,
CA 90071, on February 28, 2003 (the "Closing Date"), or at such other time and
place as the parties may agree (the "Closing").

      2.2 Delivery at the Closing. Deliveries of certificates for the Notes
shall be made at the Closing and payment of the purchase price for the Notes
shall be made by the Purchasers via wire transfer of immediately available funds
contemporaneous with Closing to the Company at Bank of America, Coeur d'Alene,
Idaho, ABA #125000024, Account #67520304, Beneficiary: Coeur d'Alene Mines
Corporation, Reference: New Note Proceeds. Certificates for the Notes shall be
in such denominations as the Purchasers may request in writing prior to the
Closing Time. Each global certificate representing Notes shall be registered in
the name of Cede & Co. pursuant to the Letter of Representations with The
Depository Trust Company ("DTC"). DTC

                                       2
<PAGE>
will credit the accounts of the Purchasers to reflect their purchase of the
Notes acquired by them hereunder.

      SECTION 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each Purchaser, as of the date hereof and as of the
Closing Date, except as set forth in any reports required to be filed by it with
the SEC under the Exchange Act, including pursuant to Section 13(a) or 15(d)
thereof (the foregoing materials being collectively referred to herein as the
"SEC Reports"), as follows:

      3.1 SEC Reports. The Company has timely filed all SEC Reports since
January 1, 2000. As of their respective filing dates, the SEC Reports complied
in all material respects with the requirements of the Securities Act and the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations of the SEC promulgated thereunder applicable to such SEC
Reports. None of the SEC Reports as of their respective dates contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading (except to
the extent corrected, updated, modified or superceded by a subsequently filed
SEC Report).

      3.2 Financial Statements. Except as set forth on Schedule 3.2, the
financial statements of the Company included in the SEC Reports (including the
related notes and supporting schedules) (a) complied as of their respective
dates of filing with the SEC in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, (b) have been prepared (i) in accordance with generally accepted
accounting principles ("GAAP") (except, in the case of unaudited statements, as
permitted by Regulation S-X promulgated by the SEC), (ii) on a consistent basis
for all periods presented (except as may be indicated in the notes thereto), and
(iii) in accordance with the books and records of the Company, (c) are complete
and correct in all material respects, and (d) fairly present in all material
respects the financial condition of the Company as at said dates, and the
results of operations and cash flows for the periods stated (subject, in the
case of unaudited statements, to normal year-end audit adjustments, which are
consistent in magnitude and scope with audit adjustments made in prior audited
periods included in the SEC Reports). As of the date hereof and except as set
forth on Schedule 3.2 or Schedule 3.3 (item 5), the Company is not aware of any
material adjustments to its historical financial statements that will be
required in connection with the audit of the Company's financial statements at
December 31, 2002 or for the three-year period then ended.

      3.3 No Material Adverse Change in Business. Since September 30, 2002,
except as otherwise stated in the SEC Reports, as contemplated therein or as set
forth in Schedule 3.3 attached hereto, there has not been (A) any material
adverse change in the condition, financial or otherwise, or in the revenues,
earnings, business or affairs of the Company and its subsidiaries considered as
a whole, whether or not arising in the ordinary course of business (a "Material
Adverse Effect"), (B) any transaction entered into by the Company or any of its
subsidiaries, other than in the ordinary course of business, that is material to
the Company and its subsidiaries considered as a whole, or (C) any dividend or
distribution of any kind declared, paid or made by the Company on any class or
series of its capital stock other than regular quarterly dividends on the
Company's Common Stock.

                                       3
<PAGE>
      3.4 Due Incorporation and Good Standing of the Company. The Company has
been duly organized and is validly existing as a corporation in good standing
under the laws of the State of Idaho, with all requisite power and authority
under such laws to own, lease and operate its properties, to conduct its
business as now being conducted and to enter into and perform its obligations
under this Agreement, the Indenture, the Notes, the Registration Rights
Agreement; the Company is duly qualified or registered as a foreign corporation
and is in good standing in each jurisdiction in which such qualification or
registration is required, whether by reason of the ownership or leasing of
properties or the conduct of business, except where the failure to so qualify or
register would not have a Material Adverse Effect.

      3.5 Due Organization and Good Standing of Significant Subsidiaries. Each
subsidiary of the Company that is a "significant subsidiary" (as defined in
Section 1-02 of Regulation S-X, a "Significant Subsidiary") has been duly
organized and is validly existing as a corporation, limited partnership, limited
liability company or other entity, as the case may be, in good standing under
the laws of its jurisdiction of organization (to the extent the "good standing"
concept is applicable in the case of any jurisdiction outside the United
States), with all requisite power and authority to own, lease and operate its
properties and to conduct its business as being conducted; and each Significant
Subsidiary is duly qualified or registered as a foreign corporation, limited
partnership or limited liability company or other entity, as the case may be, to
transact business and is in good standing in each jurisdiction in which such
qualification or registration is required (to the extent the "good standing"
concept is applicable in the case of any jurisdiction outside the United
States), whether by reason of the ownership or leasing of properties or the
conduct of business, except where the failure to so qualify or register would
not have a Material Adverse Effect.

      3.6 Capital Stock Duly Authorized and Validly Issued. All of the issued
and outstanding capital stock of the Company has been duly authorized and
validly issued and is fully paid and nonassessable; all of the issued and
outstanding capital stock or other equity interests of each Significant
Subsidiary of the Company has been duly authorized and validly issued, is fully
paid and nonassessable and is owned by the Company, directly or through
subsidiaries (except for directors' qualifying shares), free and clear of any
security interest, mortgage, pledge, lien, encumbrance, claim or equitable right
(collectively, "Liens"); and none of the issued and outstanding capital stock or
other equity interests of the Company or any of its Significant Subsidiaries was
issued in violation of any preemptive or similar rights arising by operation of
law, under the charter, bylaws or other organizational documents of the Company
or any of its subsidiaries or under any agreement to which the Company or any of
its subsidiaries is a party.

      3.7 Capitalization. The authorized, issued and outstanding capital stock
and long-term indebtedness of the Company is as set forth in Schedule 3.7
attached hereto, as of the dates set forth on such schedule; and there has not
been (A) any subsequent issuance of capital stock of the Company, except for
subsequent issuances, if any, pursuant to any outstanding securities or benefit
or compensation plans described in the SEC Reports or (B) any subsequent
increase exceeding five percent of the amount shown under the heading "Other
long-term liabilities", if any, in the outstanding principal amount of other
long-term liabilities, except as otherwise disclosed in the SEC Reports.

                                       4
<PAGE>
      3.8 Authorization of Agreements. This Agreement has been duly authorized,
executed and delivered by the Company and constitutes a valid and legally
binding agreement of the Company, enforceable against the Company in accordance
with its terms, except as enforcement is limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or conveyance or other similar
laws now or hereafter in effect relating to creditors' rights generally or by
general principles of equity (regardless of whether enforceability is considered
in a proceeding at law or in equity) (collectively, the "Enforceability
Exceptions"). Each of the Indenture, the Notes and the Registration Rights
Agreement has been duly authorized, and when executed and delivered by the
Company upon the Closing Date will constitute a valid and legally binding
agreement of the Company, enforceable against the Company in accordance with its
terms, except to the extent enforceability may be limited by the Enforceability
Exceptions and except that enforcement of rights to indemnification and
contribution contained therein may be limited by applicable federal or state
laws or the public policy underlying such laws.

      3.9 Not an Investment Company. The Company and each of its subsidiaries
has conducted, and as of the date hereof intends in the future to conduct, its
affairs in such a manner as to ensure that it is not and will not become an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended (the "1940 Act"),
and the Rules and Regulations thereunder.

      3.10 Absence of Defaults and Conflicts. Neither the Company nor any of its
Significant Subsidiaries is in violation of its charter, bylaws or other
organizational documents, as the case may be; none of the other subsidiaries of
the Company are in violation of their respective charter, bylaws or other
organizational documents, as the case may be, in any material respect; neither
the Company nor any of its subsidiaries is in default in the performance or
observance of any obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, deed of trust, loan or credit agreement, note,
lease or other agreement or instrument to which it is a party or by which it or
any of them may be bound or to which any of their respective properties or
assets is subject (collectively, "Agreements and Instruments"), except for such
defaults under Agreements and Instruments that would not result in a Material
Adverse Effect; and the execution, delivery and performance of this Agreement,
the Indenture and the Registration Rights Agreement by the Company, the
issuance, sale and delivery of the Notes, the consummation of the transactions
contemplated by this Agreement, the Indenture and the Registration Rights
Agreement, and compliance by the Company with the terms of this Agreement, the
Indenture, the Registration Rights Agreement, the Notes, have been duly
authorized by all necessary corporate action on the part of the Company and do
not and will not, whether with or without the giving of notice or passage of
time or both, violate, conflict with or constitute a breach of, or default
under, or result in the creation or imposition of any Lien upon any properties
or assets of the Company or any of its subsidiaries pursuant to, any Agreements
and Instruments, except for such conflicts, breaches, defaults or Liens that,
singularly or in the aggregate, would not result in a Material Adverse Effect
and that would not (i) jeopardize the Company's ability to consummate the
transactions contemplated by this Agreement, the Indenture and the Registration
Rights Agreement or (ii) impair or adversely affect the enforceability of this
Agreement, the Indenture or the Registration Rights Agreement against the
Company, nor will any of the foregoing result in any violation of the provisions
of the charter, bylaws or other organizational documents of the Company or any
of its subsidiaries or any violation by the Company or any of its subsidiaries
of any applicable laws, statutes, rules,

                                       5
<PAGE>
regulations, judgments, orders, writs or decrees of any government, governmental
authority, agency or instrumentality or court (collectively, "Governmental
Entities").

      3.11 Absence of Labor Dispute. Except as set forth on Schedule 3.11, no
labor dispute with the employees of the Company or any subsidiary exists or, to
the knowledge of the Company, has been threatened, and the Company has not
received written notice of any existing or threatened labor disturbance by the
employees of any of its or any subsidiary's principal suppliers, manufacturers,
customers or contractors, which, in either case, may reasonably be expected to
result in a Material Adverse Effect.

      3.12 Absence of Proceedings. There is no action, suit, proceeding, inquiry
or investigation before or brought by any Governmental Entity, now pending, or,
to the knowledge of the Company, threatened, against the Company or any of its
subsidiaries, which is not disclosed in the SEC Reports and which would
reasonably be expected to result in a Material Adverse Effect, or which could
materially and adversely affect the consummation of the transactions
contemplated by this Agreement, the Indenture or the Registration Rights
Agreement or the performance by the Company of its obligations hereunder,
thereunder or under the Notes; and the aggregate of all pending legal or
governmental proceedings to which the Company or any of its subsidiaries is a
party or of which any of their respective properties or assets is the subject
which are not described in the SEC Reports, including ordinary routine
litigation incidental to the business, would not reasonably be expected to
result in a Material Adverse Effect.

      3.13 Absence of Further Requirements. No filing with, or authorization,
approval, consent, license, order, registration, qualification or decree of, any
Governmental Entity is necessary or required for the execution, delivery or
performance by the Company of its obligations under this Agreement, the
Indenture, the Notes, the Registration Rights Agreement, or the consummation by
the Company of the transactions contemplated by this Agreement, the Indenture or
the Registration Rights Agreement, except as may be required under the
securities laws of the various states and foreign jurisdictions in which the
Notes will be offered and sold or as may be required by the Federal and state
securities laws with respect to the Company's obligations under the Registration
Rights Agreement.

      3.14 Possession of Licenses and Permits. Each of the Company and its
subsidiaries possesses such permits, licenses, approvals, consents and other
authorizations (collectively, "Governmental Licenses") issued by the appropriate
Governmental Entities necessary to conduct the business now conducted by them,
except where the failure to possess any such Governmental License would not
result in a Material Adverse Effect; each of the Company and its subsidiaries is
in compliance with the terms and conditions of all Governmental Licenses, except
where the failure so to comply would not, singly or in the aggregate, result in
a Material Adverse Effect; all Governmental Licenses are valid and in full force
and effect, except where the invalidity of Governmental Licenses or the failure
of Governmental Licenses to be in full force and effect would not result in a
Material Adverse Effect; and neither the Company nor any of its subsidiaries has
received any notice of proceedings relating to the revocation or modification of
any Governmental Licenses which would, singly or in the aggregate, result in a
Material Adverse Effect.

                                       6
<PAGE>
      3.15 Title to Property. Each of the Company and its subsidiaries has good
and marketable title to all of their respective real properties owned by them
and good title to their respective personal properties owned by them, in each
case free and clear of all Liens, except (i) as disclosed in the SEC Reports or
(ii) as does not have a Material Adverse Effect and does not interfere in any
material respect with the use made and proposed to be made of such property by
the Company and its subsidiaries considered as a whole; and all of the leases
and subleases material to the business of the Company and its subsidiaries
considered as a whole, and under which the Company or any of its subsidiaries
holds properties, are in full force and effect and neither the Company nor any
of its subsidiaries has any notice of any claim of any sort that has been
asserted by anyone adverse to the rights of the Company or any of its
subsidiaries under any of such leases or subleases, or affecting or questioning
the rights of such entity to the continued possession of the leased or subleased
premises under any such lease or sublease, except where such claims would not
reasonably be expected to result in a Material Adverse Effect.

      3.16 Intellectual Property. Each of the Company and its subsidiaries owns
or possesses, or can acquire on reasonable terms, adequate patents, patent
rights, licenses, inventions, copyrights, know how (including trade secrets and
other unpatented and/or unpatentable proprietary or confidential information,
systems or procedures), trademarks, service marks, trade names or other
intellectual property (collectively, "Intellectual Property") presently employed
by them in connection with the business now operated by them or reasonably
necessary in order to conduct such business, except where the failure to own,
possess or acquire any such Intellectual Property would not reasonably be
expected to result in a Material Adverse Effect; and neither the Company nor any
of its subsidiaries has received any notice or is otherwise aware of any
infringement of or conflict with asserted rights of others with respect to any
Intellectual Property or of any facts or circumstances which would render any
Intellectual Property invalid or inadequate to protect the interest of the
Company or any of its subsidiaries therein, and which infringement or conflict
(if the subject of any unfavorable decision, ruling or finding) or invalidity or
inadequacy would, singly or in the aggregate, reasonably be expected to result
in a Material Adverse Effect.

      3.17 No Registration. Subject to the accuracy of the representations of
the Purchasers, and except as otherwise contemplated in the Registration Rights
Agreement, it is not necessary in connection with the offer, sale and delivery
of the Notes to the Purchasers in the manner contemplated by this Agreement (it
being understood that the aforementioned representation shall not cover any
subsequent resales of the Notes) to register the Notes under the Securities Act
or to qualify the Indenture under the Trust Indenture Act of 1939, as amended
(the "1939 Act").

      3.18 Trust Indenture Act. The Indenture complies as to form in all
material respects with the requirements of the 1939 Act and the rules and
regulations of the SEC applicable to an indenture which is qualified thereunder.

      3.19 No General Solicitation. None of the Company or any of its
"affiliates" (as such term is defined in Rule 501(b) of Regulation D of the
Securities Act ("Regulation D")), has, directly or through an agent, engaged in
any form of general solicitation or general advertising in connection with the
offering of the Notes under the Securities Act or in any manner involving a
public offering within the meaning of Section 4(2) of the Securities Act; and
the Company has

                                       7
<PAGE>
not entered into any contractual arrangement with respect to the distribution of
the Notes, except for this Agreement and the Registration Rights Agreement and
the Company will not enter into any such arrangement.

      3.20 No Integration. None of the Company or any of its affiliates has,
directly or through any agent, sold, offered for sale, solicited offers to buy
or otherwise negotiated in respect of, any "security" (as defined in the
Securities Act) which is or will be integrated with the sale of the Notes in a
manner that would require the registration under the Securities Act of the
Notes.

      3.21 Ore Reserve Reports. All of the information provided by the Company
in connection with the preparation of its ore reserve reports was, at the time
provided, and continues to be as of the date hereof, true and correct in all
material respects. The Company believes that all of the assumptions made by its
internal Ore Reserve Committee and/or independent third parties in reaching the
conclusions stated in the ore reserve reports are reasonable and appropriate,
and that the production estimates of the Company which are based on the ore
reserve reports are reasonable and appropriate.

      3.22 Mining Rights. The Company or each of its subsidiaries holds freehold
title, mining leases, mining claims or other conventional proprietary interests
or rights recognized in the jurisdiction in which each property described in the
SEC Reports is located, in the ore bodies and mineral inventories described in
the SEC Reports (and all properties respectively relating thereto) under valid,
subsisting and enforceable title documents, contracts, leases, licenses of
occupation, mining concessions, permits, or other recognized and enforceable
instruments and documents, sufficient to permit the Company or each of its
subsidiaries, as the case may be, to explore for, extract, exploit, remove,
process and refine the minerals relating thereto, except where the failure to so
hold such interests or rights would not have a Material Adverse Effect. In
addition, either the Company or each of its subsidiaries has all necessary
surface rights, water rights and rights in water, rights of way, licenses,
easements, ingress, egress and access rights, and all other necessary rights and
interests granting the Company or each of its subsidiaries, as the case may be,
the rights and ability to explore for, mine, extract, and remove the minerals
derived from the ore bodies and mineral inventories described in the SEC Reports
and to transport for refinement or market or distribute the ore and metals
produced, all as referred to in the SEC Reports, with only such exceptions as
are described in the SEC Reports or as do not have a Material Adverse Effect.
Each of the aforementioned interests and rights is currently in good standing
except for those interests and claims which, if not kept in good standing, would
not have a Material Adverse Effect.

      3.23 Independent Auditors. Ernst & Young LLP, who has reported upon the
fiscal year 1998 audited financial statements of the Company, and Arthur
Andersen LLP, who has reported upon the fiscal year 1999, fiscal year 2000 and
fiscal year 2001 audited financial statements of the Company, are, and during
the periods covered by the reports were, independent of the Company as defined
under the Securities Act. KPMG LLP, who is expected to report upon the fiscal
year 2002 audited financial statements of the Company, will be, and during the
periods covered by the reports, will have been, independent of the Company as
defined under the Securities Act.

                                       8
<PAGE>
      3.24 Regulation M. The Company has not taken and will not take, directly
or indirectly, any action resulting in a violation of Rule 102 of Regulation M
promulgated under the Exchange Act or designed to or that might reasonably be
expected to cause or result in stabilization or manipulation of the price of the
Common Stock to facilitate the distribution of the Notes.

      3.25 Environmental Matters. Except as disclosed in the SEC Reports and
except as would not, singly or in the aggregate, result in a Material Adverse
Effect, (i) neither the Company nor any of its subsidiaries is in violation of
or has liability under any federal, state, local, municipal or foreign statute,
law, rule, regulation, ordinance, code, policy or rule of common law or any
judicial or administrative interpretation thereof, including any judicial or
administrative order, consent, decree or judgment, relating to pollution or
protection of human health, the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata) or
wildlife, including, without limitation, laws and regulations relating to the
release or threatened release of chemicals, pollutants, contaminants, wastes,
toxic substances, hazardous substances, petroleum or petroleum products
(collectively, "Hazardous Materials"), to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials, or to the restoration, reclamation of or compensation for
natural resources (collectively, "Environmental Laws"), (ii) the Company and its
subsidiaries have all permits, authorizations and approvals required under any
applicable Environmental Laws and are each in compliance with their
requirements, (iii) there are no pending or, to the knowledge of the Company,
threatened administrative, regulatory or judicial actions, suits, demands,
demand letters, claims, liens, notices of noncompliance or violation,
investigation or proceedings relating to any Environmental Law against the
Company or any of its subsidiaries and (iv) to the knowledge of the Company,
there are no events or circumstances that might reasonably be expected to form
the basis of an order for clean-up or remediation, or an action, suit or
proceeding by any private party or governmental body or agency, against or
affecting the Company or any of its subsidiaries relating to Hazardous Materials
or any Environmental Laws.

      3.26 Common Stock. Except as set forth on Schedule 3.26 attached hereto,
the Company has not received any notice from the New York Stock Exchange
regarding the de-listing of its Common Stock and the board of directors of the
Company has not taken any action to de-list the Company's Common Stock from the
New York Stock Exchange or to effect any stock split, reverse stock split or
similar transaction relating to the Company's Common Stock.

      3.27 Authorization of Common Shares. At or prior to the Closing, the
Company will have reserved for issuance the shares of Common Stock issuable upon
conversion of the Notes. Upon their issuance in accordance with the terms of the
Notes, the shares of Common Stock issued upon conversion of the Notes will be
duly authorized, validly issued, fully paid and non-assessable shares of Common
Stock free of all preemptive or similar rights.

      3.28 Non-public Information. The Company has not disclosed to the
Purchasers, orally or in writing, any information (including information
contained in any schedule to this Agreement) which the Company's directors or
officers are aware, that has not been disclosed to the public in SEC Reports
which the Company considers to be material to the financial

                                       9
<PAGE>
condition, operating results or assets of the Company or that it considers
material to purchasers and sellers of the Company's Common Stock.

      3.29 Other Registration Rights Obligations. Except with respect to the
rights contained in the Registration Rights Agreement and with respect to the
contractual right of Asarco Incorporated to require registration for public
resale of 7,125,000 shares of common stock (as to which Asarco Incorporated has
required such registration), there are no contracts, agreements or other
documents between the Company and any person granting such person the right to
require the Company to file a registration statement under the Securities Act
with respect to any securities of the Company owned or to be owned, directly or
indirectly, by such person

      SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each
Purchaser represents and warrants to the Company that:

      4.1 Investment Intent. The Purchaser is acquiring the Notes pursuant to
this Agreement with its own funds or property for its own account and not as a
nominee or agent for the account of any other person. The Purchaser is
purchasing the Notes for investment purposes and not with a view to the sale or
distribution of any Notes in contravention of the Securities Act.

      4.2 No Public Offering. The Purchaser is able to bear the economic risk of
its investment in the Notes. The Purchaser is aware that it must be prepared to
hold the Notes for an indefinite period and that the Notes have not been, and
when issued will not be, registered under the Securities Act or registered or
qualified under any state securities law, on the ground that the Notes are being
issued by the Company without any public offering within the meaning of Section
4(2) of the Securities Act. The Purchaser understands that the Company's
reliance on such exemption is predicated on the Purchaser's representations set
forth herein; provided, however, that by making the representations herein, such
Purchaser does not agree to hold any of the Notes for any minimum or other
specific term and reserves the right to dispose of the Notes at any time in
accordance with or pursuant to a registration statement or an exemption under
the Securities Act.

      4.3 Receipt of Information. The Purchaser has had an opportunity to
discuss the terms and conditions of the offering of the Notes and the Company's
business, management and financial affairs with the Company's management and to
obtain additional information necessary to verify the accuracy of any
information furnished to the Purchaser or to which the Purchaser had access. The
Purchaser is not subscribing for the Notes as a result of any advertisement,
article, notice or other communication published in any newspaper, magazine or
similar media or broadcast over television or radio or any solicitation of a
subscription by any person not previously known to the Purchaser in connection
with investments in securities generally.

      4.4 Securities will be "Restricted Securities". The Purchaser understands
that the Notes, and any shares of Common Stock issued upon any conversion
thereof, will be "restricted securities" as that term is defined in Rule 144
promulgated under the Securities Act and, accordingly, that the Notes may not be
sold, transferred or otherwise disposed of unless they are subsequently
registered under the Securities Act or an exemption from such registration is
available. The Purchaser understands and agrees that, except as provided herein
and in the Registration Rights Agreement, the Company is not under any
obligation to register the Notes

                                       10
<PAGE>
under the Securities Act. The Purchaser is aware that the Notes (and any common
stock issued on the conversion thereof) may not be sold pursuant to Rule 144
promulgated under the Securities Act unless the conditions of that Rule are met
or such rule is no longer applicable.

      4.5 Accredited Purchaser. The Purchaser has been advised or is aware of
the provisions of Regulation D under the Securities Act relating to the
accreditation of Purchasers, and the Purchaser is an "accredited purchaser" as
defined in Rule 501 of Regulation D promulgated under the Securities Act.

      4.6 Sophistication of the Purchaser. The Purchaser has such knowledge and
experience in financial and business matters that the Purchaser is capable of
evaluating the merits and risks of the investment contemplated by this Agreement
and has the capacity to protect its own interests. The Purchaser acknowledges
that investment in the Notes is highly speculative and involves a substantial
and high degree of risk of loss of the Purchaser's entire investment. The
Purchaser has adequate means of providing for current and anticipated financial
needs and contingencies, is able to bear the economic risk of the investment for
an indefinite period of time and could afford complete loss of such investment.

      4.7 Brokers' Fees. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf of
the Purchaser.

      4.8 Due Organization and Good Standing of the Purchaser. The Purchaser has
been duly organized and is validly existing as an entity in good standing under
the laws of the state of its organization, with all requisite power and
authority under such laws to enter into and perform its obligations under this
Agreement and the Registration Rights Agreement.

      4.9 Authorization of Agreements. This Agreement has been duly authorized,
executed and delivered by the Purchaser and constitutes a valid and legally
binding agreement of the Purchaser, enforceable against the Purchaser in
accordance with its terms, except as enforcement is limited by the
Enforceability Exceptions. Prior to the Closing, the Registration Rights
Agreement will have been duly authorized, and when executed and delivered by the
Purchaser upon the Closing Date will constitute a valid and legally binding
agreement of the Purchaser, enforceable against the Purchaser in accordance with
its terms, except to the extent enforceability may be limited by the
Enforceability Exceptions and except that enforcement of rights to
indemnification and contribution contained therein may be limited by applicable
federal or state laws or the public policy underlying such laws.

      4.10 Absence of Proceedings. There is no action, suit, proceeding, inquiry
or investigation before or brought by any Governmental Entity, now pending, or,
to the knowledge of the Purchaser, threatened, against the Purchaser which could
materially and adversely affect the consummation of the transactions
contemplated by this Agreement or the performance by the Purchaser of its
obligations hereunder.

      4.11 Absence of Further Requirements. No filing with, or authorization,
approval, consent, license, order, registration, qualification or decree of, any
Governmental Entity is necessary or required for the execution, delivery or
performance by the Purchaser of its

                                       11
<PAGE>
obligations under this Agreement, the Registration Rights Agreement, or the
consummation by the Purchaser of the transactions contemplated by this Agreement
or the Registration Rights Agreement, except as may be required under the
securities laws of the various states and foreign jurisdictions in which the
Notes will be offered and sold or as may be required by the Federal and state
securities laws with respect to the Company's obligations under the Registration
Rights Agreement.

      4.12 Financial Wherewithal. Purchaser has and will have on the Closing
Date sufficient liquidity to pay the cash consideration set forth opposite its
name on Annex A attached hereto.

      4.13 Current Ownership of Common Stock. Each Purchaser, individually, is
not the beneficial owner (as determined in accordance with Rule 13d-3 under the
Exchange Act) of more than 6,886,453 shares of Common Stock (including for such
purposes, securities convertible into shares of Common Stock) before giving
effect to the purchase of any Notes under this Agreement.

      SECTION 5. COVENANTS.

      5.1 Notices of Certain Events. From the date hereof to the Closing Date,
each party shall promptly notify the other party, of:

          (i) the receipt by the Company or any of the Purchasers of any notice
      or other communication from any person alleging that the consent of such
      person is or may be required in connection with the transactions
      contemplated by this Agreement;

          (ii) the receipt by the Company or any of the Purchasers of any notice
      or other communication from any governmental entity in connection with the
      transactions contemplated by this Agreement;

          (iii) the Company or any of the Purchasers obtaining knowledge of any
      actions, suits, claims investigations or proceedings commenced or
      threatened against, relating to or involving or otherwise affecting the
      Company or any of the Purchasers, as the case may be, or any of their
      respective subsidiaries which relate to the consummation of the
      transactions contemplated by this Agreement; and

          (iv) the Company or any of the Purchasers obtaining knowledge of the
      occurrence, or failure to occur, of any event which occurrence or failure
      to occur will be likely to cause (i) any representation or warranty
      contained in this Agreement to be untrue or inaccurate in any material
      respect, or (ii) any material failure of any party to comply with or
      satisfy any covenant, condition or agreement to be complied with or
      satisfied by it under this Agreement.

      5.2 Efforts.

          (a) The Company shall cooperate and use commercially reasonable
      efforts to take, or cause to be taken, all appropriate action required of
      the Company, and to make, or cause to be made, all filings required to be
      made by the Company necessary, proper or

                                       12
<PAGE>
      advisable under applicable laws and regulations to consummate and make
      effective the transactions contemplated by this Agreement, including,
      without limitation, commercially reasonable efforts to (i) obtain, prior
      to the Closing Date, all licenses, permits, consents, approvals,
      authorizations, qualifications and orders of governmental authorities and
      parties to contracts with the Company required to be obtained by the
      Company, and (ii) defend against and respond to any action, suit,
      proceeding or investigation against the Company relating to the
      transactions contemplated by this Agreement, in each case as are necessary
      for consummation of the transactions contemplated by this Agreement and to
      fulfill the conditions the Company is required to fulfill with respect to
      the transactions contemplated hereby.

          (b) Each Purchaser shall cooperate and use commercially reasonable
      efforts to take, or cause to be taken, all appropriate action required of
      each such Purchaser, and to make, or cause to be made, all filings
      required to be made by each such Purchaser necessary, proper or advisable
      under applicable laws and regulations to consummate and make effective the
      transactions contemplated by this Agreement, including, without
      limitation, commercially reasonable efforts to (i) obtain, prior to the
      Closing Date, all licenses, permits, consents, approvals, authorizations,
      qualifications and orders of governmental authorities and parties to
      contracts with each such Purchaser required to be obtained by each such
      Purchaser and (ii) defend against and respond to any action, suit,
      proceeding or investigation against each such Purchaser relating to the
      transactions contemplated by this Agreement, in each case as are necessary
      for consummation of the transactions contemplated by this Agreement and to
      fulfill the conditions each such Purchaser is required to fulfill with
      respect to the transactions contemplated hereby.

      5.3 Expenses. The Company shall be responsible for all of its expenses
incident to the performance of its obligations under this Agreement, including
(i) the preparation, printing and delivery to the Purchasers of this Agreement,
the Indenture, the Registration Rights Agreement and such other documents as may
be required in connection with the offering, purchase, sale and delivery of the
Notes, (ii) the preparation, issuance and delivery of the certificates for the
Notes to each Purchaser, (iii) the fees and disbursements of the Company's
counsel, accountants and other advisors, (iv) any rating agency fees and (v) the
fees and expenses of the Trustee appointed under the Indenture, including the
fees and disbursements of counsel for the Trustee. In addition, the Company
agrees to promptly reimburse each Purchaser for the reasonable fees and expenses
of Latham & Watkins LLP, counsel for the Purchasers, in connection with the
transactions contemplated hereby, including work done prior to the date hereof
with respect to earlier financing proposals (including the reasonable fees and
expenses incurred in the preparation of any 13D/13G filing which any Purchaser
is required to make as a result of the transactions contemplated herein) upon
submission of reasonable invoices for the services of Latham & Watkins LLP
(subject to maintenance of the attorney-client privilege between Latham &
Watkins LLP and each Purchaser).

      5.4 Voting Agreements.

          (a) Voting. If any Purchaser converts the Notes into shares of Common
      Stock, then such Purchaser agrees until the date which is eighteen (18)
      months after the Closing Date that it will, at any meeting of the
      stockholders of the Company, however

                                       13
<PAGE>
      called, or in connection with any written consent of the stockholders
      of the Company, vote (or cause to be voted) the shares of Common Stock so
      issued upon such conversion and held of record and beneficially by such
      party in a manner consistent, if at all, with the Other Stockholders' Vote
      (as defined below) on each and every matter proposed for approval by the
      stockholders of the Company (other than any proposal to effectuate a
      reverse stock split of the Common Stock). In addition, each Purchaser
      agrees until the date which is eighteen (18) months after the Closing Date
      to vote any shares of Common Stock acquired by it and held beneficially by
      such party, if any, on or about the Closing Date, upon conversion of
      certain of the Company's debt securities, consistent with the foregoing
      provisions, if at all. The term "Other Stockholders' Vote" shall mean the
      results of voting on such matter that shall result from the votes cast by
      all other stockholders (other than stockholders who are officers of the
      Company) prior to the casting of votes by the Purchaser on such matter.

          (b) Until the date which is eighteen (18) months after the Closing
      Date, each Purchaser agrees that it will cause (i) any Affiliate (as
      defined below) or (ii) any other party with whom it has an agreement
      regarding the voting of Common Stock, who has acquired shares of Common
      Stock or Notes subject to the provisions of Section 5.4(a) from the
      Purchaser, to agree for the benefit of the Company to cast their votes in
      accordance with Section 5.4(a). "Affiliate" shall mean (w) any person that
      directly or indirectly, through one or more intermediaries, controls or is
      controlled by or is under common control with the Purchaser; (x) any
      person who, from time to time, is a spouse or immediate relative of the
      Purchaser; (y) any person who, from time to time, is an officer, director
      or manager of the Purchaser; or (z) any person who, directly or
      indirectly, is the beneficial owner of 50% or more of any class of equity
      securities or other ownership interests of the Purchaser, or of which the
      Purchaser is directly or indirectly the owner of 50% or more of any class
      of equity securities or other ownership interests.

          (c) Survival: Specific Performance. The obligations of each Purchaser
      under this Section 5.4 shall survive the Closing. The parties hereto agree
      that damages would be an inadequate remedy for the Company in the event of
      breach or threatened breach of this Section 5.4 and thus, in any such
      event, the Company may, either with or without pursuing any potential
      damage remedies, immediately obtain and enforce an injunction prohibiting
      any Purchaser from violating this Section 5.4. For the avoidance of doubt,
      the Company acknowledges that the restrictions contained in this Section
      5.4 shall not apply to any transferee of the Notes which is not a person
      referred to in clauses 5.4(b)(i) or (ii) above.

      5.5 Listing of Common Stock. The Company shall cause all shares of Common
Stock issuable upon conversion of the Notes to be listed on the New York Stock
Exchange.

      5.6 Use of Proceeds. The Company shall use the proceeds from the offering
of the Notes pursuant to this Agreement solely (a) with respect to the first
$10,000,000 of such proceeds, for general working capital purposes and (b) with
respect to the remainder, to use all such remaining amounts to repurchase or
redeem a portion of the Company's outstanding 6 3/8% Convertible Subordinated
Notes due 2004 (the "2004 Notes") (such amount to be irrevocably deposited with
the trustee for the 2004 Notes within 35 days of the Closing). Within 5 days of

                                       14
<PAGE>
the Closing, the Company will deliver the notice of redemption contemplated in
Section 3.03 of the indenture governing the 2004 Notes.

      SECTION 6. CONDITIONS TO CLOSING.

      6.1 Conditions to the Purchasers' Obligations to Close. The obligations of
each Purchaser to effect the transactions contemplated hereby are subject to the
fulfillment, prior to or at the Closing, of the following conditions:

          (a) Representations and Warranties; Performance. The representations
      and warranties of the Company contained in Section 3 shall be true and
      correct when made and as of the Closing with the same effect as though
      such representations and warranties had been made on and as of the date of
      the Closing, except to the extent of changes caused by transactions
      contemplated herein (it being understood and agreed by the Purchasers
      that, in the case of any representation and warranty of the Company
      contained herein which is not hereinabove qualified by application thereto
      of a materiality standard (including for this purpose Material Adverse
      Effect), such representation and warranty need be true and correct only in
      all material respects in order to satisfy as to such representation or
      warranty the condition precedent set forth in the foregoing provisions of
      this Section 6.1(a)). The Company shall have performed and complied in all
      material respects with all agreements, obligations and conditions
      contained in this Agreement that are required to be performed by it or
      with which it is required to have complied with on or before the Closing.

          (b) Consents, Permits and Waivers. The Company shall have obtained any
      and all material consents, approvals, licenses, permits, orders,
      authorizations, waivers and the like required to be obtained by the
      Company necessary for consummation of the transactions contemplated by
      this Agreement.

          (c) Absence of Litigation. No proceeding challenging this Agreement or
      the transactions contemplated hereby or thereby, or seeking to obtain
      damages or prohibit, alter, prevent or delay the Closing, shall have been
      instituted against the Company before any Governmental Entity and shall be
      pending.

          (d) Compliance Certificate. The Company shall deliver to the
      Purchasers at the Closing a certificate signed by an executive officer of
      the Company stating that the Company has complied with or satisfied each
      of the conditions to the Purchasers' obligation to consummate the Closing
      set forth in Sections 6.1(a), (b) and (c), unless waived in writing by the
      Purchasers.

          (e) Registration Rights Agreement. The Registration Rights Agreement
      shall be in form and substance reasonably satisfactory to the Purchasers
      and shall have been executed by the Company on or prior to such Closing.

          (f) Indenture and Notes. The Indenture and the Notes shall be in form
      and substance reasonably satisfactory to the Purchasers and shall have
      been executed by the Company on or prior to such Closing.

                                       15
<PAGE>
          (g) Opinion of Counsel. The Company shall deliver to the Purchasers at
      the Closing opinions of Gibson, Dunn & Crutcher LLP and other counsel for
      the Company reasonably acceptable to Purchasers in the form as set forth
      on Annex B.

          (h) Legal Prohibition. The transactions contemplated hereby shall not
      be prohibited by any law or governmental order or regulation.

          (i) Listing of Common Stock. The Company shall have caused all shares
      of Common Stock issuable upon conversion of the Notes to be listed on the
      New York Stock Exchange.

      6.2 Conditions to the Company's Obligations to Close. The obligations of
the Company to effect the transactions contemplated hereby are subject to the
fulfillment, prior to or at the Closing, of the following conditions:

          (a) Representations and Warranties; Performance. The representations
      and warranties of each Purchaser contained in Section 4 hereof shall be
      true and correct on and as of the Closing (it being understood and agreed
      by the Company that, in the case of any representation and warranty of any
      Purchaser contained herein which is not hereinabove qualified by
      application thereto of a materiality standard (including for this purpose
      Material Adverse Effect), such representation and warranty need be true
      and correct only in all material respects in order to satisfy as to such
      representation or warranty the condition precedent set forth in the
      foregoing provisions of this Section 6.2(a). Each Purchaser shall have
      performed and complied in all material respects with all agreements,
      obligations, and conditions contained in the Agreement that are required
      to be performed by it or with which it are required to have complied with
      on or before the Closing.

          (b) Consents, Permits and Waivers. Each Purchaser shall have obtained
      any and all material consents, approvals, licenses, permits, orders,
      authorizations, waivers and the like required to be obtained by such
      Purchaser necessary for consummation of the transactions contemplated by
      this Agreement.

          (c) Absence of Litigation. No proceeding challenging this Agreement or
      the transactions contemplated hereby or thereby, or seeking to prohibit,
      alter, prevent or delay the Closing, shall have been instituted against
      any Purchaser before any Governmental Entity and shall be pending.

          (d) Legal Prohibition. The transactions contemplated hereby shall not
      be prohibited by any law or governmental order or regulation.

          (e) Tax Deliveries. Each Purchaser shall have executed and delivered
      to the Company, if required by applicable law, a Form W-9 or Form W-8, as
      applicable, and a FIRPTA certificate.

          (f) Registration Rights Agreement. The Registration Rights Agreement
      shall be in form and substance reasonably satisfactory to the Company and
      shall have been executed by the Purchasers on or prior to such Closing.

                                       16
<PAGE>
          (g) Indenture and Notes. The Indenture and the Notes shall be in form
      and substance reasonably satisfactory to the Company.

      SECTION 7. TERMINATION OF AGREEMENT.

      7.1 Termination. This Agreement may be terminated (except for provisions
that expressly contemplate performance after termination) and the transactions
contemplated hereunder abandoned at any time prior to the Closing only as
follows:

          (a) by the Purchasers hereunder, upon notice to the Company, if the
      conditions set forth in Section 6.1 shall not have been satisfied on or
      prior to February 28, 2003;

          (b) by the Company, upon notice to the Purchasers hereunder, if the
      conditions set forth in Section 6.2 shall not have been satisfied on or
      prior to February 28, 2003; or

          (c) at any time by mutual agreement of the Company and the Purchasers
      hereunder.

      7.2 Liability. Except as otherwise provided herein, any termination
pursuant to this Section 7 shall be without liability on the part of any party,
unless such termination is the result of a material breach of this Agreement by
a party to this Agreement (which is not cured as permitted under Section 7.1(d)
or 7.1(e)) in which case such breaching party shall remain liable for such
breach notwithstanding any termination of this Agreement.

      SECTION 8. INDEMNIFICATION AND CONTRIBUTION.

      8.1 Indemnification.

          (a) The Company (the "Indemnifying Party") hereby agrees to indemnify
      each Purchaser and its agents and affiliates (collectively, the
      "Indemnified Parties") against, and hold them harmless from, all losses,
      claims, damages, liabilities, costs (including the costs of preparation
      and reasonable attorneys' fees and expenses) (collectively, "Losses")
      incurred by them and arising out of or related to the transactions
      contemplated by this Agreement as a result of (i) any breach of any
      representation, warranty, agreement or covenant of the Company contained
      herein, (ii) any allegations, claims or investigations by shareholders or
      Governmental Entities of a breach of fiduciary duty or other misconduct by
      the Company's officers or directors, (iii) any other shareholder
      derivative actions (it being understood that Losses shall exclude any
      monetary loss resulting from the resale, or other decline in value, of any
      Notes or Common Stock issued upon conversion thereof and provided that
      such exclusion shall not prevent the Indemnified Parties from seeking
      indemnification or damages from the Indemnifying Party under any other
      applicable provision of this Agreement), other than to the extent, and
      only to the extent, that any Losses directly result from action on the
      part of any Indemnified Party which is finally judicially determined to
      constitute either gross negligence or willful misconduct. The Indemnifying
      Party agrees to reimburse any Indemnified Party for all such Losses
      promptly after such Losses are finally judicially

                                       17
<PAGE>
      determined to by subject to indemnification hereunder. The obligations of
      the Indemnifying Party to each Indemnified Party hereunder shall be
      separate obligations and the Indemnifying Party's liability to any such
      Indemnified Party hereunder shall not be extinguished solely because any
      other Indemnified Party is not entitled to indemnity hereunder.

          (b) The obligations of the Indemnifying Party under this Section 8.1
      shall survive the termination of this Agreement; provided that the
      warranties and representations of the Company and each Purchaser contained
      in or made pursuant to this Agreement shall expire and terminate on the
      date that is eighteen (18) months following the Closing; provided further
      that such representations and warranties shall survive for the duration of
      a claim, if any, for indemnification alleging a breach of such
      representations or warranties that is made during such eighteen (18)
      months following the Closing.

          (c) In case any action shall be brought against any Indemnified Party
      with respect to which indemnity may be sought against the Indemnifying
      Party hereunder, such Indemnified Party shall promptly notify the
      Indemnifying Party in writing and the Indemnifying Party shall, if it so
      desires, assume the defense thereof, including the employment of counsel
      reasonably satisfactory to such Indemnified Party and payment of all
      reasonable fees and expenses. The failure to so notify the Indemnifying
      Party shall not affect any obligation the Indemnifying Party may have to
      any Indemnified Party under this Agreement or otherwise unless the
      Indemnifying Party is materially adversely affected by such failure. Each
      Indemnified Party shall have the right to employ separate counsel in such
      action and participate in the defense thereof, but the fees and expenses
      of such counsel shall be at the expense of the Indemnified Party unless:
      (i) the Indemnifying Party has agreed in writing (other than pursuant to
      this Agreement) to pay such expenses; or (ii) the Indemnifying Party,
      after timely notice of such claim, has failed to assume the defense and
      employ counsel or (iii) the named parties to any such action (including
      any impleaded parties) include any Indemnified Party and the Indemnifying
      Party, and such Indemnified Party shall have been reasonably advised by
      outside counsel that there may be one or more legal defenses available to
      it which are inconsistent with or additional to those available to the
      Indemnifying Party, provided that, if such Indemnified Party notifies the
      Indemnifying Party in writing that it elects to employ separate counsel in
      the circumstances described in clauses (i), (ii) or (iii) above, the
      Indemnifying Party shall not have the right to assume the defense of such
      action or proceeding; provided, however, that the Indemnifying Party shall
      not, in connection with any one such action or proceeding or separate but
      substantially similar or related actions or proceedings in the same
      jurisdiction arising out of the same general allegations or circumstances,
      be responsible hereunder for the fees and expenses of more than one such
      firm of separate counsel (in addition to any necessary local counsel),
      which counsel shall be designated by such Indemnified Party. The
      Indemnifying Party shall not be liable for any settlement of any such
      action effected without its written consent (which shall not be
      unreasonably withheld). The Indemnifying Party agrees that it will not,
      without the Indemnified Parties' prior written consent (which shall not be
      unreasonably withheld) settle or compromise any pending or threatened
      claim, action or suit in respect of which indemnification or contribution
      may be sought hereunder unless the foregoing contains

                                       18
<PAGE>
      an unconditional release of the Indemnified Parties from all liability and
      obligation arising therefrom.

      8.2 Contribution.

      If the indemnification provided for in Section 8.1 is unavailable to any
Indemnified Party in respect of any Losses referred to therein, then the
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall have
an obligation to contribute to the amount paid or payable by such Indemnified
Party as a result of such Losses in such proportion as is appropriate to reflect
the relative fault of the Indemnifying Party, its subsidiaries and/or any other
entity or person (other than the Purchasers and the other Indemnified Parties)
and such Indemnified Party in connection with the actions which resulted in such
Losses as well as any other relevant equitable considerations. The amount paid
or payable as a result of the Losses referred to above shall be deemed to
include, subject to the limitations set forth in Section 8.1, any legal or other
fees or expenses reasonably incurred by such Indemnified Party in connection
with any investigation, lawsuit or legal or administrative action or proceeding.

      The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 8.2 were determined by pro rata allocation
or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. No
party guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any party
who was not guilty of such fraudulent misrepresentation.

      SECTION 9. MISCELLANEOUS.

      9.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if mailed or transmitted by
any standard form of telecommunication. Notices to any Purchaser shall be
directed to the name and address of such Purchaser as set forth on Annex A
attached hereto, with a copy to Latham & Watkins LLP, 633 West Fifth Street,
Suite 4000, Los Angeles, CA 90071, Attention: Thomas C. Sadler, Esq., and
notices to the Company shall be directed to Coeur d'Alene Mines Corporation, 505
Front Avenue, P.O. Box I, Coeur d'Alene, Idaho 83816-0316, Attention: General
Counsel, with a copy to Gibson, Dunn & Crutcher LLP, 333 South Grand Avenue, Los
Angeles, California 90071, Attention: Andrew E. Bogen, Esq.

      9.2 Assignment. Neither the Company nor any Purchaser may assign or
delegate (whether by contract or operation of law, it being agreed that a merger
(other than a merger that does not constitute a "Change of Control" as defined
in the Indenture) shall be deemed to constitute an assignment) its rights,
duties or obligations under this Agreement without the prior written consent of
the other party hereto. Any attempted or purported assignment or delegation in
violation of the preceding sentence shall be void.

      9.3 Amendment. Any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and each of the Purchasers.

                                       19
<PAGE>
      9.4 Counterparts; Facsimile. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, and
signature pages may be delivered by facsimile, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.

      9.5 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS, AND NOT THE LAWS PERTAINING TO CONFLICTS OR
CHOICE OF LAW, OF THE STATE OF NEW YORK.

      9.6 Effect of Headings. The Section headings herein are for convenience
only and shall not affect the construction hereof.

      9.7 Severability. If any provision of this Agreement is held by a court of
competent jurisdiction to be unenforceable under applicable law, such provision
shall be replaced with a provision that accomplishes, to the extent possible,
the original business purpose of such provision in a valid and enforceable
manner, and the balance of the Agreement shall be interpreted as if such
provision were so modified and shall be enforceable in accordance with its
terms.

      9.8 Confidentiality. No disclosure shall be made by the Company to any
person or entity of (i) the fact that this Agreement has been entered into or
(ii) the identity of any Purchaser, without the prior written consent of such
Purchaser, except on a need to know basis to directors, officers, employees,
agents and/or representatives of the Company who have agreed to the limitations
on use imposed by this Agreement, unless in the opinion of counsel for the
Company, disclosure is required to be made under applicable law, provided that,
if the Company proposes to make any disclosure based upon the opinion of its
counsel as aforesaid, the Company will advise and consult with each Purchaser
prior to such disclosure concerning the information it proposes to disclose.
Notwithstanding the foregoing, it is understood and agreed to by each Purchaser
that the Company intends to file a form of this Agreement, excluding from such
form the identity of any of the Purchasers, as an exhibit to a Form 8-K filing
promptly after the date hereof and that the Company shall not be obligated to
advise and consult with each Purchaser prior to such disclosure (such
disclosures to also not include the identity of any of the Purchasers) or any
other similar disclosure required pursuant to the rules and regulations of the
SEC.

                            [Signature page follows]

                                       20
<PAGE>
      IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date above first written.

                                                 COEUR D'ALENE MINES CORPORATION

                                                 By: ...........................
                                                     Name:
                                                     Title:

                                      S-1
<PAGE>
                                                     [NAME OF PURCHASER]

                                                 By: ...........................
                                                     Name:
                                                     Title:

                                      S-2
<PAGE>
                                     ANNEX A
<TABLE>
<CAPTION>

NAME AND ADDRESS OF PURCHASER          PRINCIPAL AMOUNT OF NOTES   PURCHASE PRICE
-----------------------------          -------------------------   --------------
<S>                                    <C>                         <C>
                                                                   $
</TABLE>

                                    Annex A

<PAGE>

                                     ANNEX B

                       FORM OF OPINION OF COMPANY COUNSEL

      (a) The Purchasers shall have received the opinion of Gibson, Dunn &
Crutcher LLP, counsel for the Company (or other counsel reasonably acceptable to
the Purchasers), dated the Closing Date addressed to the Purchasers to the
effect that (subject to customary assumptions, qualifications and limitations):

                  (i) Assuming the due authorization, execution and delivery of
            this Agreement, it constitutes a legal, valid and binding agreement
            of the Company enforceable against the Company in accordance with
            its terms;

                  (ii) Assuming the due authorization, execution and delivery of
            the Registration Rights Agreement, it constitutes a legal, valid and
            binding agreement of the Company enforceable against the Company in
            accordance with its terms;

                  (iii) Assuming the due authorization, execution and delivery
            of the Indenture, it constitutes a legal, valid and binding
            agreement of the Company enforceable against the Company in
            accordance with its terms;

                  (iv) The Notes are in the form contemplated by the Indenture,
            have been duly authorized, executed and delivered by the Company
            and, assuming that the Notes have been duly authenticated by the
            Trustee in the manner described in the authentication order
            delivered to the Trustee by the Company on the date hereof upon
            payment therefor, the Notes have been duly issued and delivered by
            the Company and constitute legally valid and binding obligations of
            the Company, enforceable against the Company in accordance with
            their terms and will be entitled to the benefits of the Indenture;

                  (v) The Company is not, and after giving effect to the
            transactions contemplated by this Agreement, will not be, directly
            or indirectly "controlled" by an "investment company," as such terms
            are defined in the 1940 Act;

                  (vi) The execution and delivery by the Company of, and the
            performance by the Company of its obligations under, this Agreement,
            the Registration Rights Agreement, the Indenture and the Notes, and
            the consummation of the transactions contemplated in this Agreement
            will not, to such counsel's knowledge, result in a material breach
            or violation of any of the terms and provisions of, or constitute a
            default under, any applicable U.S. federal or New York statute, rule
            or regulation known to such counsel to be applicable to the Company,
            or, to such counsel's knowledge, any order, writ or decree of any
            U.S. federal or New York court, government or governmental agency or
            body having jurisdiction over the Company or any of its subsidiaries
            or over any of their properties or operations (the opinion will also
            state that our opinion in this paragraph is based upon our
            consideration of only those statutes, rules and regulations which,
            in our experience, are normally applicable to offerings of debt

                                ANNEX B - PAGE 1
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            securities and we will express no opinion as to compliance by any of
            the parties to the above referenced agreements with any state or
            federal laws or regulations applicable to the subject transaction
            because of the nature or extent of their business);

                  (vii) To our knowledge, no consent, approval, authorization,
            permit or order of or qualification with any U.S. federal or New
            York court, government or governmental or body having jurisdiction
            over the Company or any of its subsidiaries, or over any of their
            properties or operations, is necessary in connection with the
            consummation by the Company of its obligations under this Agreement,
            the Registration Rights Agreement and the Indenture (the opinion
            will also state that our opinion in this paragraph is based upon our
            consideration of only those statutes, rules and regulations which,
            in our experience, are normally applicable to offerings of debt
            securities and we will express no opinion as to compliance by any of
            the parties to the above referenced agreements with any state or
            federal laws or regulations applicable to the subject transaction
            because of the nature or extent of their business);

                  (viii) Assuming the accuracy of the representations and
            warranties made by each of the Purchasers, it is not necessary in
            connection with the issuance and delivery of the Notes to the
            Purchasers pursuant to the terms of this Agreement to register such
            Notes under the Securities Act or to qualify the Indenture under the
            Trust Indenture Act of 1939, as amended (the "1939 Act"); and

                  (ix) the Indenture complies as to form in all material
            respects with the requirements of the 1939 Act, and the rules and
            regulations of the SEC applicable to an indenture which is qualified
            thereunder.

      (b) The Purchasers shall have received the opinion of William Boyd,
counsel for the Company, dated the Closing Date, addressed to the Purchasers to
the effect that (subject to customary assumptions, qualifications and
limitations):

                  (i) The Company has been duly incorporated and is validly
            existing as a corporation in good standing under the laws of the
            state of Idaho;

                  (ii) The Company has the requisite corporate power and
            authority to enter into this Agreement, the Registration Rights
            Agreement and the Indenture;

                  (iii) This Agreement, the performance by the Company of its
            obligations hereunder and the issuance and delivery by the Company
            of the Notes have been duly authorized by all necessary corporate
            action on the part of the Company; and this Agreement has been duly
            executed and delivered by the Company;

                  (iv) The Registration Rights Agreement and the performance by
            the Company of its obligations thereunder have been duly authorized
            by all necessary corporate action on the part of the Company; and
            the Registration Rights Agreement has been duly executed and
            delivered by the Company;

                                ANNEX B - PAGE 2
<PAGE>
                  (v) The Indenture and the performance by the Company of its
            obligations thereunder have been duly authorized by all necessary
            corporate action on the part of the Company; and the Indenture has
            been duly executed and delivered by the Company;

                  (vi) The Common Stock issuable upon conversion of the Notes
            has been duly authorized and reserved for issuance and delivery and
            when issued in accordance with the terms of the Notes, will be
            validly issued, fully paid and non-assessable, and the issuance of
            such Common Stock is not subject to any preemptive or similar rights
            under the Company's certificate of incorporation or bylaws or the
            Idaho Business Corporation Act;

                  (vii) The execution and delivery by the Company of, and the
            performance by the Company of its obligations under, this Agreement,
            the Registration Rights Agreement, the Indenture and the Notes and
            the consummation of the transactions contemplated in this Agreement
            will not, to such counsel's knowledge, result in any violation of
            the Company's charter or bylaws or any contract, indenture, mortgage
            deed of trust, loan or credit agreement, note, lease or any other
            agreement or investment to which the Company is a party.

                  (viii)      The authorized, issued and outstanding capital
            stock of the Company is as set forth in Section 3.7 of this
            Agreement;

                  (ix) To such counsel's knowledge, after due inquiry, the
            Company has not failed to obtain any license, claim, permit,
            franchise or other administrative or governmental authorization
            necessary to the ownership or lease of its properties and assets or
            to the conduct of its business as it is presently conducted, which
            failure to obtain would, individually or in the aggregate, have a
            Material Adverse Effect, or which might, if determined adversely to
            the company, materially and adversely affect the execution, delivery
            or performance by the Company of this Agreement and, all such
            licenses, claims, permits, franchises or other administrative or
            governmental authorizations which are so required are valid and
            subsisting and in good standing;

                  (x) To such counsel's knowledge, after due inquiry, the
            Company and each of Coeur Rochester Inc., Coeur Silver Valley Inc.,
            and Coeur Alaska Inc. (each a "Domestic Subsidiary" and together,
            the "Domestic Subsidiaries") holds freehold title, mining leases,
            mining claims or other conventional proprietary interests or rights
            recognized in the relevant jurisdiction in which each property
            described in the SEC Reports is located, in the ore bodies and
            mineral inventories described in the SEC Reports (and all properties
            respectively relating thereto) under valid, subsisting and
            enforceable title documents, contracts, leases, licenses of
            occupation, mining concessions, permits, or other recognized and
            enforceable instruments and documents, sufficient to permit the
            Company or each of its subsidiaries, as the case may be, to explore
            for, extract, exploit, remove, process and refine the minerals
            relating thereto, except where the failure to so hold such

                                ANNEX B - PAGE 3
<PAGE>
            interests or rights would not have a Material Adverse Effect. In
            addition, to such counsel's knowledge, after due inquiry, either the
            Company or each of its subsidiaries has all necessary surface
            rights, water rights and rights in water, rights of way, licenses,
            easement, ingress, egress and access rights, and all other necessary
            rights and interests granting the Company or any of its
            subsidiaries, as the case may be, the rights and ability to explore
            for, mine, extract, and remove the minerals derived from the ore
            bodies and mineral inventories described in the SEC Reports and to
            transport for refinement or market or distribute the ore and metals
            produced, all as referred to in the SEC Reports, with only such
            exceptions as are described in the SEC Reports or as do not have a
            Material Adverse Effect, and each of the aforementioned interests
            and rights is currently in good standing except for those interests
            and claims which, if not kept in good standing, would not have a
            Material Adverse Effect;

                  (xi) Each of the Company's Domestic Subsidiaries has been duly
            incorporated and is validly existing as a corporation in good
            standing under the laws of its jurisdiction of incorporation, and
            has the corporate power to own, lease and operate its properties and
            to conduct its business as described in the SEC Reports, and is
            qualified to do business as a foreign corporation and is in good
            standing in each jurisdiction, if any, in which the ownership and
            leasing of its properties or the conduct of its business requires
            such qualification, except where the failure to be so qualified or
            be in good standing would not have a Material Adverse Effect; and

                  (xii) All issued and outstanding shares of capital stock of
            each of the Company's Domestic Subsidiaries have been duly
            authorized and validly issued and are fully paid and nonassessable
            and, to such counsel's knowledge, have not been issued in violation
            of or subject to any preemptive right, co-sale right, registration
            right, right of first refusal or other similar right and, except as
            disclosed in the SEC Reports, are owned by the Company directly or
            indirectly through one or more subsidiaries of the Company, free and
            clear of any pledge, lien, security interest, encumbrance, claim or
            equitable interest (other than such preemptive rights or other
            rights to subscribe for or purchase securities as were fully
            complied with or expressly waived or with respect to the violation
            of which the right to make a claim is barred by the applicable
            statute of limitations).

      (c) The Purchasers shall have received opinions substantially, in the form
below for each of CDE Fachinal Ltd., Compania Minera CDE Petorca, and Empressa
Minera Manquirie S.R.L. (each a "Foreign Subsidiary" and together, the "Foreign
Subsidiaries"), opinions customary to such foreign jurisdiction of incorporation
of each Foreign Subsidiary of foreign counsel that is satisfactory to the
Purchasers, addressed to the Purchasers and to the effect that (subject to
customary assumptions, qualifications and limitations):

                  (i) Each of the Company's Foreign Subsidiaries has been duly
            incorporated and is validly existing as a corporation in good
            standing under the laws of its jurisdiction of incorporation, and
            has the corporate power to own, lease and operate its properties and
            to conduct its business as described in the SEC

                                ANNEX B - PAGE 4
<PAGE>
            Reports, and is qualified to do business as a foreign corporation
            and is in good standing in each jurisdiction, if any, in which the
            ownership and leasing of its properties or the conduct of its
            business requires such qualification, except where the failure to be
            so qualified or be in good standing would not have a Material
            Adverse Effect;

                  (ii) All issued and outstanding shares of capital stock of
            each of the Company's Foreign Subsidiaries have been duly authorized
            and validly issued and are fully paid and nonassessable and, to such
            counsel's knowledge, have not been issued in violation of or subject
            to any preemptive right, co-sale right, registration right, right of
            first refusal or other similar right and, except as disclosed in the
            SEC Reports are owned by the Company directly or indirectly through
            one or more subsidiaries of the Company, free and clear of any
            pledge, lien, security interest, encumbrance, claim or equitable
            interest (other than such preemptive rights or other rights to
            subscribe for or purchase securities as were fully complied with or
            expressly waived or with respect to the violation of which the right
            to make a claim is barred by the applicable statute of limitations);

                  (iii) To such counsel's knowledge, after due inquiry, each of
            the Company's Foreign Subsidiaries has not failed to obtain any
            license, claim, permit, franchise or other administrative or
            governmental authorization necessary to the ownership or lease of
            its properties and assets or to the conduct of its business as it is
            presently conducted, which failure to obtain would, individually or
            in the aggregate, have a Material Adverse Effect, or which might, if
            determined adversely to the Company, materially and adversely affect
            the execution, delivery or performance by the Company of this
            Agreement and, all such licenses, claims, permits, franchises or
            other administrative or governmental authorizations which are so
            required are valid and subsisting and in good standing; and

                  (iv) To such counsel's knowledge, after due inquiry, the
            Company and each of its Foreign Subsidiaries holds freehold title,
            mining leases, mining claims or other conventional proprietary
            interests or rights recognized in the relevant jurisdiction in which
            each property described in the SEC Reports is located, in the ore
            bodies and mineral inventories described in the SEC Reports (and all
            properties respectively relating thereto) under valid, subsisting
            and enforceable title documents, contracts, leases, licenses of
            occupation, mining concessions, permits, or other recognized and
            enforceable instruments and documents, sufficient to permit the
            Company or each of its subsidiaries, as the case may be, to explore
            for, extract, exploit, remove, process and refine the minerals
            relating thereto, except where the failure to so hold such interests
            or rights would not have a Material Adverse Effect. In addition, to
            such counsel's knowledge, after due inquiry, each of the Company's
            Foreign Subsidiaries has all necessary surface rights, water rights
            and rights in water, rights of way, licenses, easement, ingress,
            egress and access rights, and all other necessary rights and
            interests granting the relevant Foreign Subsidiary, as the case may
            be, the right and ability to explore for, mine, extract, and remove
            the minerals derived from the ore bodies and mineral inventories
            described in the SEC Reports and to transport for refinement

                                ANNEX B - PAGE 5
<PAGE>
            or market or distribute the ore and metals produced, all as referred
            to in the SEC Reports, with only such exceptions as are described in
            the SEC Reports or as do not have a Material Adverse Effect, and
            each of the aforementioned interests and rights is currently in good
            standing except for those interests and claims which, if not kept in
            good standing, would not have a Material Adverse Effect.

      The opinions set forth above that any document is valid, binding or
enforceable according to its terms are qualified as to:

                  (i) limitations imposed by bankruptcy, insolvency,
            reorganization, arrangement, fraudulent conveyance, moratorium or
            other similar laws relating to or affecting the rights and remedies
            of creditors generally;

                  (ii)  rights to indemnification and contribution which may
            be limited by applicable law or equitable principles; and

                  (iii) general principles of equity, including, without
            limitation, the possible unavailability of specific performance or
            injunctive relief, and limitations or rights of acceleration,
            regardless of whether enforceability is considered in a proceeding
            at law or in equity.

      (d) Counsel rendering the foregoing opinions may rely as to questions of
law not involving the laws of the United States of America or the applicable
state law, upon opinions of local counsel, and as to questions of fact upon
representations or certifications of officers of the Company, and of government
officials, in which case their opinion is to state that they are so relying and
that they have no knowledge of any material misstatement or inaccuracy in any
such opinion, representation or certificate. Copies of any opinion,
representation or certificate so relied upon shall be delivered to the
Purchasers and to their counsel, Latham & Watkins.

                                ANNEX B - PAGE 6

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