GAI CONTRIBUTION AND
AMENDMENT AGREEMENT
This Contribution and Amendment Agreement (the "Agreement") dated as of
February 26, 1998 is made between and among Aladdin Gaming, LLC (the "Company"),
Aladdin Gaming Holdings, LLC ("Gaming Holdings") and GAI, LLC (the
"Consultant").
WHEREAS, the Company, Aladdin Holdings and the Consultant entered into a
Consulting Agreement dated as of January 1, 1997 (and subsequently amended on
January 30, 1998) (as amended, the "Consulting Agreement");
WHEREAS, the Company is a subsidiary of Gaming Holdings; and
WHEREAS, the parties wish to enter into this Agreement to provide for the
Consultant to contribute its equity interest in the Company to Gaming Holdings
in return for an equity interest in Gaming Holdings and to amend the Consulting
Agreement in connection therewith.
NOW, THEREFORE, in consideration of the foregoing and the following mutual
covenants and agreements, the parties agree as follows:
1. On the date hereof (a) the Consultant shall contribute its three
percent Membership Interest in the Company to the capital of Gaming Holdings and
(b) in consideration therefor Gaming Holdings shall issue to the Consultant
30,000 common shares in the capital of Gaming Holdings (representing three
percent of the issued and outstanding common shares of Gaming Holdings on the
date hereof) and shall establish a capital account in respect thereof in the
amount of $6 million.
2. The parties agree that Gaming Holdings is hereby added as a party to
the Consulting Agreement as amended hereby.
3. Pursuant to Section 15 of the Consulting Agreement, the Consulting
Agreement is hereby amended as follows:
(a) Sections 4(b) (ii), (iii) and (iv) of the Consulting
Agreement are deleted in their entirety and replaced with the following:
"(ii) ANTI-DILUTION PURCHASES. Upon Gaming Holdings'
closing of a financing transaction or transactions involving the
sale of membership interests, equity (or securities convertible into
membership interests or equity) of Gaming Holdings (a "Financing
Transac-
tion"), and if Consultant is still providing services to the Company
upon such closing date or dates, Consultant shall have the right to
purchase that number of such instruments that would result in
Consultant owning, in the aggregate (together with all membership
interests or equity already held by Consultant at such time), three
percent (subject to adjustment pursuant to Section 3.6 of the
Operating Agreement of Gaming Holdings) of the fully-diluted
membership interests or equity of Gaming Holdings, as measured on
the date of such closing or closings; provided, however, that such
right to purchase shall only be effective with respect to
non-compensatory Financing Transactions (i.e. Consultant shall not
have the right to make anti-dilutive purchases with respect to
ordinary course of business compensatory sales of stock or
membership interests to Company or Gaming Holdings' Employees). Any
such right of Consultant to make an anti-dilutive purchase of stock
hereunder shall be at the most favorable price and on the most
favorable terms and conditions as are provided to any party in the
Financing Transaction. For purposes of this Agreement, "fully
diluted equity of Gaming Holdings" shall mean the aggregate amount
of membership interests (or the aggregate number of shares of all
outstanding common and preferred stock) plus the aggregate amount of
membership interests (or the number of shares of common and
preferred stock) that could be obtained through the exercise or
conversion of rights, options, warrants and convertible securities
(other than employee equity compensation). Notwithstanding the
foregoing, Consultant shall not have the right to make anti-dilutive
purchases (i) in any Financing Transaction in which Consultant's
equity ownership interest in Gaming Holdings is diluted to the same
extent as the indirect equity interest in Gaming Holdings held by
The Trust Under Article Sixth u/w/o Sigmund Sommer or its affiliates
(the "Trust"), or (ii) as a result of any sales or transfers arising
as a result of the death of Mrs. Viola Sommer or for the purpose of
satisfying attendant estate tax liabilities.
(iii) PUT RIGHT.
(A) CERTAIN TERMINATIONS DURING CONSULTING
TERM. In the event that, during the Consulting Term, Richard
J. Goeglein is terminated from his employment with the Company
other than for "Cause" or voluntarily terminates for "Good
Reason" (both as defined in Section 9 of the employment
agreement (as amended) by and between Richard J. Goeglein and
the Company (the "Employment Agreement")),
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then Consultant shall have the right (but not the obligation)
to sell any shares issued pursuant to that certain GAI
Contribution and Amendment Agreement dated as of February 26,
1998 between the Company, Gaming Holdings and Consultant (the
"GAI Contribution Agreement") or purchased hereunder back to
Gaming Holdings on the date that is the one year anniversary of
the date of such termination of employment or end of the
Consulting Term (the "Anniversary Date") (so long as the IPO
has not occurred by such date) at a price equal to the fair
market value of such shares on the Anniversary Date, as
determined by an independent appraisal firm mutually agreed to
by and between Gaming Holdings and Consultant, with the costs
of such appraisal being paid by the Company (the "Put Right").
The Put Right must be exercised in writing by Consultant by the
Anniversary Date or it shall become void and without further
effect. If the Put Right is exercised and Gaming Holdings does
not satisfy its obligation to purchase the shares subject to
the Put Right within seven days following receipt of
Consultant's written notice of exercise thereof, the Consultant
shall have the right to require the Company (rather than Gaming
Holdings) to purchase such shares at fair market value. If the
Company purchases such shares, the Company and Gaming Holdings
hereby agree that Gaming Holdings shall promptly thereafter
purchase such shares from the Company for a purchase price of
$1.
(B) LAPSING OF CONSULTING TERM PRIOR TO IPO.
In the event that the IPO has not occurred by the end of the
Consulting Term (the "Consulting Term Lapse Date"), then
Consultant shall have the right (but not the obligation) to
sell any shares issued pursuant to the GAI Contribution
Agreement or purchased hereunder back to Gaming Holdings at a
price equal to the fair market value of such shares on the
Consulting Term Lapse Date, as determined by an independent
appraisal firm mutually agreed to by and between Gaming
Holdings and Consultant, with the costs of such appraisal being
paid by the Company (the "Consulting Term Lapse Put Right").
The Consulting Term Lapse Put Right must be exercised in
writing by Consultant within thirty days following the
Consulting Term Lapse Date or it shall become void and without
further effect. If the Consulting Term Lapse Put Right is
exercised, and Gaming Holdings does not satisfy its obligation
to purchase shares subject to the Consulting Term
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Lapse Put Right within seven days following receipt of
Consultant's written notice of exercise thereof, the Consultant
shall have the right to require the Company (rather than Gaming
Holdings) to purchase such shares at fair market value. If the
Company purchases such shares, the Company and Gaming Holdings
hereby agree that Gaming Holdings shall promptly thereafter
purchase such shares from the Company for a purchase price of
$1.
(iv) LLC DISTRIBUTIONS. While Gaming Holdings remains a
pass-through entity for federal income tax purposes, Gaming Holdings
will periodically distribute cash, to the extent available, to
Consultant in an amount equal to the increase in the cumulative tax
liability of Consultant (or, if Consultant is a pass-through entity
for federal income tax purposes, Consultant's interest holders) with
respect to its interest in Gaming Holdings."
(b) Section 5 of the Consulting Agreement is deleted in its
entirety and replaced with the following;
"5. PIGGYBACK REGISTRATION RIGHTS.
(i) CERTAIN DEFINITIONS. As used in this Section 5, the
following terms shall have the following respective meanings:
"COMMISSION" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the
Securities Act.
"SECURITIES ACT" shall mean the Securities Act of 1933,
as amended, or any similar federal statute and the rules and
regulations of the Commission thereunder, all as the same shall be
in effect at the time.
"REGISTRABLE SECURITIES" means shares issued in respect
of the Membership Interest.
The terms "REGISTER", "REGISTERED" and "REGISTRATION"
refer to a registration effected by preparing and filing a
registration statement in compliance with the Securities Act, and
the declaration or ordering of the effectiveness of such
registration statement.
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"REGISTRATION EXPENSES" shall mean all expenses
incurred by Gaming Holdings in complying with this Section 5,
including, without limitation, all registration, qualification and
filing fees, printing expenses, escrow fees, fees and disbursements
of counsel for Gaming Holdings, blue sky fees and expenses, and the
expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of
Gaming Holdings which shall be paid in any event by the Company or
Gaming Holdings).
"SELLING EXPENSES" shall mean all underwriting
discounts, selling commissions and stock transfer taxes applicable
to the securities registered by the Consultant and all fees and
disbursements of counsel for the Consultant.
(ii) REGISTRATION.
a. NOTICE OF REGISTRATION. If at any time Gaming
Holdings shall determine to register any of its securities, either for
its own account or the account of a security holder, other than (i) a
registration relating solely to employee benefit plans, or (ii) a
registration relating solely to a Commission Rule 145 transaction, Gaming
Holdings will:
b. promptly give to the Consultant written notice
thereof; and
c. include in such registration (and any related
qualification under blue sky laws or other compliance), and in any
underwriting involved therein, all the Registrable Securities specified
in a written request or requests, made within 15 days after receipt of
such written notice from Gaming Holdings, by the Consultant subject to
the provisions of Section 5(iii).
(iii) UNDERWRITING. If the registration of which Gaming
Holdings gives notice is for a registered public offering involving an
underwriting, Gaming Holdings shall so advise the Consultant as a part of
the written notice given pursuant to this Section 5. In such event the
right of the Consultant to registration pursuant to this Section 5 shall
be conditioned upon the Consultant's participation in such underwriting
and the inclusion of the Consultant's Registrable Securities in the
underwriting to the extent provided herein. The Consultant shall
(together with Gaming Holdings and the other holders distributing their
securities through such underwriting) enter into an underwriting
agreement in customary form with the managing
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underwriter selected for such underwriting by Gaming Holdings.
Notwithstanding any other provision of this Section 5, if the managing
underwriter determines that marketing factors require a limitation of the
number of shares to be underwritten, the underwriter may limit the number
of the Registrable Securities to be included in such registration and
underwriting. In such event, Gaming Holdings shall so advise all holders
distributing their securities through such underwriting, and the number
of shares of Registrable Securities that may be included in the
registration and underwriting shall be allocated among all holders
thereof, including the Consultant, in proportion, as nearly as
practicable, to the respective amounts of equity interests in Gaming
Holdings held by all such holders at the time filing the registration
statement. If the Consultant disapproves of the terms of any such
underwriting, the Consultant may elect to withdraw therefrom by written
notice to Gaming Holdings and the managing underwriter. Any securities
excluded or withdrawn from such underwriting shall be withdrawn from such
registration, but shall not be transferred in a public distribution prior
to ninety (90) days after the effective date of the registration
statement relating thereto.
(iv) EXPENSES OF REGISTRATION. All Registration Expenses
incurred in connection with any registration, qualification or compliance
pursuant to Section 5 shall be borne by Gaming Holdings. Unless
otherwise stated, all Selling Expenses relating to securities registered
by the Consultant shall be borne by the Consultant.
(v) REGISTRATION PROCEDURES. In the case of each
registration, qualification or compliance effect by Gaming Holdings
pursuant to this Section 5, Gaming Holdings will keep the Consultant
advised in writing as to the initiation of each registration,
qualification and compliance and as to the completion thereof. At its
expense Gaming Holdings will furnish such number of prospectuses and
other documents incident thereto as the Consultant from time to time may
reasonably request.
(vi) INDEMNIFICATION.
a. Gaming Holdings will indemnify the Consultant,
each of its officers and directors and the Consultant's legal counsel and
independent accountants, and each person controlling the Consultant
within the meaning of Section 15 of the Securities Act, with respect to
which registration, qualification or compliance has been effected
pursuant to this Section 5, and each underwriter, if any, and each person
who controls any underwriter within the meaning of Section 15 of the
Securities Act, against all expenses, claims, losses, damages and
liabilities (or actions in respect thereof), including any of the
foregoing incurred in settlement of any litiga-
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tion, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in
any registration statement, prospectus, offering circular or other
document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any omission (or
alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, or any violation
by Gaming Holdings of any rule or regulation promulgated under the
Securities Act applicable to Gaming Holdings and relating to action or
inaction required of Gaming Holdings in connection with any such
registration, qualification or compliance, and will reimburse the
Consultant, each of its officers and directors and the Consultant's legal
counsel and independent accountants, and each person controlling the
Consultant, each such underwriter and each person who controls any such
underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating, preparing or defending any such claim,
loss, damage, liability or action, provided that Gaming Holdings will not
be liable in any such case to the extent that any such claim, loss,
damage, liability or expense arises out of or is based on any untrue
statement or omission or alleged untrue statement or alleged omission,
made in reliance upon and in conformity with written information
furnished to Gaming Holdings by an instrument duly executed by the
Consultant or underwriter and stated to be specifically for use therein.
b. Each party entitled to indemnification under this
Section 5 (the "Indemnified Party") shall give notice to the party
required to provide indemnification (the "Indemnifying Party") promptly
after such Indemnified Party has actual knowledge of any claim as to
which indemnity may be sought. Gaming Holdings shall be entitled to
assume the defense of any such claim or any litigation resulting
therefrom, provided that counsel for the Indemnified Party, who shall
conduct the defense of such claim or litigation, shall be approved by the
Indemnified Party (whose approval shall not unreasonably be withheld).
The failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this
Section 5, unless the Indemnifying Party is materially prejudiced by the
failure to give notice promptly. No Indemnifying Party, in the defense
of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a
release from all liability in respect to such claim or litigation.
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(vii) INFORMATION BY CONSULTANT. The Consultant shall
furnish to Gaming Holdings such information regarding the Consultant and
the distribution proposed by the Consultant as Gaming Holdings may
request in writing and as shall be required in connection with any
registration, qualification or compliance referred to in this Section 5.
(viii) RULE 144 REPORTING. With a view to making available
the benefits of certain rules and regulations of the Securities and
Exchange Commission which may at any time permit the sale of the
restricted securities to the public without registration, after such time
as a public market exists for the Common Stock of Gaming Holdings, Gaming
Holdings agrees to:
a. Make and keep public information available, as
those terms are understood and defined in Rule 144 under the Securities
Act, at all times after the effective date of the first registration
under the Securities Act filed by Gaming Holdings for an offering of its
securities to the general public;
b. Use its best efforts to then file with the
Commission in a timely manner all reports and other documents required of
Gaming Holdings under the Securities Act and the Securities Exchange Act
of 1934, as amended (at any time after it has become subject to such
reporting requirements); and
c. So long as the Consultant owns any Registrable
Securities, to furnish to the Consultant upon request a written statement
by Gaming Holdings as to its compliance with the reporting requirements
of said Rule 144 (at any time after 90 days after the effective date of
the first registration statement filed by Gaming Holdings for an offering
of its securities to the general public), and of the Securities Act and
of the Securities Exchange Act of 1934 (at any time after it has become
subject to such reporting requirements), a copy of the most recent annual
or quarterly report of Gaming Holdings, and such other reports and
documents of Gaming Holdings as the Consultant may reasonably request in
availing itself of any rule or regulation of the Securities and Exchange
Commission allowing the Consultant to sell any such securities without
registration.
(ix) TRANSFER AND EXPIRATION OF REGISTRATION RIGHTS. The
rights to cause Gaming Holdings to register securities granted the
Consultant under this Section 5 may not be assigned to a transferee or
assignee in connection with the transfer or assignment of shares of the
Restricted Securities. The registration rights granted to the Consultant
under this Section 5
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shall expire when the Consultant is able to sell all its Registrable
Securities in any three month period."
(c) Sections 9, 10, 11 and 15 of the Consulting Agreement are
hereby amended so that Gaming Holdings has the same rights and
obligations under such Sections as the Company.
4. GAMING LAW. Anything to the contrary herein or in the Consulting
Agreement notwithstanding, the parties hereto agree and acknowledge that they
are subject to and that they shall comply in all respects with the gaming laws
of the State of Nevada, including the Nevada Gaming Control Act and (or any
successor statute) the rules and regulations promulgated by the Nevada Gaming
Commission and the State Gaming Control Board. To the extent anything in this
Agreement or the Consulting Agreement is inconsistent with any gaming laws or
regulations, the gaming laws and regulations shall control.
5. CONFIDENTIALITY. The Consultant (and all of its officers, directors
and employees) acknowledges that the Company has a substantial, legitimate and
continuing interest in the protection of its business relationships with others
including without limitation current and prospective employees, consultants,
advisors, customers, vendors, suppliers, partners or joint venturers, and
financing sources, and in the protection of its Confidential Information, and
has invested substantial sums, time and effort and will continue to invest
substantial sums, time and effort to develop, maintain and protect such
relationships and Information. Accordingly, the Consultant (and all of its
officers, directors and employees) covenants and agrees that during the
Consulting Term (as defined in the Consulting Agreement) and thereafter, the
Consultant (and all of its officers, directors and employees) shall keep secret
and retain in strictest confidence and shall not, without the prior written
consent of the Company, furnish, make available or disclose to any third party
or use for the benefit of itself or any third party any Confidential
Information. Confidential Information is information related to or concerning
the Company or Gaming Holdings and their businesses which is confidential,
proprietary or not generally known to and cannot be readily ascertained through
proper means by persons or entities (including the Company's present or future
competitors), who can obtain any type of value from its disclosure or use.
Confidential Information includes all secret, confidential or proprietary
information, knowledge or data relating to the Company or Gaming Holdings, such
as, without limitation, finances and financing methods, sources, proposals or
plans; operational methods; marketing or development proposals, plans or
strategies; pricing strategies; business or property acquisition or development
proposals or plans; new personnel acquisition proposals or plans; customer lists
and any descriptions or data concerning current or prospective customers;
provided, however, while employed by the Company and in furtherance of the
business and for the benefit of the Company, the Consultant may provide
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Confidential Information as appropriate to attorneys, accountants, financial
institutions and other persons or entities engaged in business with the Company
or Gaming Holdings.
6. ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of any successor of the Company or Gaming Holdings. Any such successor
of the Company or Gaming Holdings shall be deemed substituted for the Company or
Gaming Holdings under the terms of this Agreement for all purposes. As used
herein, "successor" shall include any person, firm, corporation or other
business entity which at any time, whether by purchase, merger or otherwise,
directly or indirectly acquires all or substantially all of the assets or
business of the Company or Gaming Holdings.
7. ENTIRE AGREEMENT. This Agreement and the Consulting Agreement
represent the entire agreement and understanding between the Company, Gaming
Holdings, Aladdin Holdings, LLC and the Consultant concerning the matters
herein.
8. NO ORAL MODIFICATION, CANCELLATION OR DISCHARGE. This Agreement may
only be amended, cancelled or discharged in writing signed by Consultant, Gaming
Holdings and the Company.
9. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Nevada.
10. CAPITALIZED TERMS. Capitalized terms not defined herein shall have
the meanings described thereto in the Consulting Agreement.
11. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be considered an original, but all such
counterparts shall together constitute but one and the same contract.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first above written.
ALADDIN GAMING, LLC
By: /s/ Ronald Dictrow
-------------------------------
Name: Ronald Dictrow
Title: Executive Vice
President/Secretary
ALADDIN GAMING HOLDINGS, LLC
By: /s/ Ronald Dictrow
-------------------------------
Name: Ronald Dictrow
Title: Executive Vice
President/Secretary
GAI, LLC
By: /s/ Richard J. Goeglein
-------------------------------
Name: Richard J. Goeglein
Title: Principal
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