GOEGLEIN CONTRIBUTION AND
AMENDMENT AGREEMENT
This Contribution and Amendment Agreement (the "Agreement") dated as of
February 26, 1998 is made between and among Aladdin Gaming, LLC (the "Company"),
Aladdin Gaming Holdings, LLC ("Gaming Holdings") and Richard J. Goeglein (the
"Executive").
WHEREAS, the Company, Aladdin Holdings and the Executive entered into an
Employment and Consulting Agreement effective as of January 1, 1997 (and
subsequently amended on January 30, 1998) (as amended, the "Employment and
Consulting Agreement");
WHEREAS, the Company is a subsidiary of Gaming Holdings; and
WHEREAS, the parties wish to enter into this Agreement to provide for the
Executive to contribute his Restricted Membership Interest (as defined in the
Employment and Consulting Agreement) in the Company to Gaming Holdings in return
for restricted membership interest in Gaming Holdings on the terms and
conditions herein and to amend the Employment and Consulting Agreement in
connection therewith.
NOW, THEREFORE, in consideration of the foregoing and the following mutual
covenants and agreements, the parties agree as follows:
1. On the date hereof (a) the Executive shall contribute his two
percent Restricted Membership Interest in the Company to the capital of Gaming
Holdings and (b) in consideration therefor Gaming Holdings shall issue to the
Executive a restricted membership interest in the capital of Gaming Holdings
(the "Holdings Restricted Membership Interest") on the same terms and conditions
as those which governed the Executive's Restricted Membership Interest in the
Company (taking account of the amendments to the Employment and Consulting
Agreement herein and the fact that the Holdings Restricted Membership Interest
has been issued by Gaming Holdings), such Holdings Restricted Membership
Interest representing upon the vesting thereof two percent of the issued and
outstanding common shares of Gaming Holdings, subject to adjustment as provided
in the Employment and Consulting Agreement as amended herein. At the time of
the vesting of the Holdings Restricted Membership Interest Gaming Holdings shall
establish a capital account in respect thereof in the amount of $4 million.
2. The parties agree that Gaming Holdings is hereby added as a party to
the Employment and Consulting Agreement as amended hereby.
3. Pursuant to Section 29 of the Employment and Consulting Agreement,
Section 4(c)(i) of the Employment and Consulting Agreement is hereby amended to
change the reference to "Restricted Membership Interest" in the last sentence
thereof to "Holdings Restricted Membership Interest (as defined in that certain
Goeglein Contribution and Amendment Agreement dated as of February 26, 1998)."
The Company and Gaming Holdings hereby agree that if the Company purchases the
unvested portion of the Holdings Restricted Membership Interest pursuant to such
amended Section 4(c)(i) of the Employment and Consulting Agreement, Gaming
Holdings shall promptly thereafter purchase such Restricted Membership Interest
from the Company for a purchase price of $1.
4. Pursuant to Section 29 of the Employment and Consulting Agreement,
the Employment and Consulting Agreement is hereby amended as follows:
(a) Sections 4(c)(ii), (iii) and (iv) and (d) of the
Employment and Consulting Agreement are deleted in their entirety and
replaced with the following:
"(ii) ANTI-DILUTION PURCHASES. Upon Gaming Holdings' closing
of a financing transaction or transactions involving the sale of
membership interests, equity (or securities convertible into
membership interests or equity) of Gaming Holdings (a "Financing
Transaction"), and if Executive is employed by the Company upon such
closing date or dates, Executive shall have the right to purchase
that number of such instruments that would result in Executive
owning, in the aggregate (together with all membership interests or
equity or interests already held by Executive at such time which
may vest into membership interests or equity) two percent (subject
to adjustment pursuant to Section 3.6 of the Operating Agreement of
Gaming Holdings) of the fully diluted membership interests or equity
of Gaming Holdings, as measured on the date of such closing or
closings; provided, however, that such right to purchase shall only
be effective with respect to non-compensatory Financing Transactions
(i.e., Executive shall not have the right to make anti-dilutive
purchases with respect to ordinary course of business compensatory
sales of stock or membership interests to Company or Gaming
Holdings' employees). Any such right of Executive to make an
anti-dilutive purchase of stock hereunder shall be at the most
favorable price and on the most favorable terms and conditions as
are provided to any party in the Financing Transaction. For
purposes of this Agreement, "fully diluted equity of Gaming
Holdings" shall mean the aggregate amount of membership interests
(or the aggregate number of shares of
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all outstanding common and preferred stock) plus the aggregate
amount of membership interests (or the number of shares of common
and preferred stock) that could be obtained through the exercise or
conversion of rights, options, warrants and convertible securities
(other than employee equity compensation). Notwithstanding the
foregoing, Executive shall not have the right to make anti-dilutive
purchases (i) in any Financing Transaction in which his equity
ownership interest in Gaming Holdings is diluted to the same extent
as the indirect equity interest in Gaming Holdings held by The Trust
Under Article Sixth u/w/o Sigmund Sommer or its affiliates (the
"Trust"), or (ii) as a result of any sales or transfers arising as a
result of the death of Mrs. Viola Sommer or for the purpose of
satisfying attendant estate tax liabilities. If, in the event of a
public offering, underwriters take issue with Executive's rights
under this paragraph, the underwriters, Gaming Holdings and
Executive will address such issues on a mutually approved and
reasonable basis, taking into account the interests of all involved.
(iii) PUT RIGHT.
(A) CERTAIN TERMINATIONS DURING EMPLOYMENT TERM. In
the event that, during the Employment Term, Executive is terminated
other than for "Cause" or voluntarily terminates for "Good Reason"
(both as defined in Section 9 hereof), then Executive shall have the
right (but not the obligation) to sell its Holdings Restricted
Membership Interest and any other membership interest (or shares
exchanged for such interests) purchased hereunder back to Gaming
Holdings on the date that is the one year anniversary of the date of
such termination of employment (the "Anniversary Date") (so long as
the IPO has not occurred by such date) at a price equal to the fair
market value of such membership interest or shares on the
Anniversary Date, as determined by an independent appraisal firm
mutually agreed to by and between Gaming Holdings and Executive,
with the costs of such appraisal being paid by the Company (the
"Employment Term Put Right"). The Employment Term Put Right must be
exercised in writing by Executive by the Anniversary Date or it
shall become void and without further effect. If the Employment
Term Put Right is exercised, and Gaming Holdings does not satisfy
its obligation to purchase the membership interest or shares subject
to the Employment Term Put Right within seven days following receipt
of Executive's written notice of exercise thereof, the Executive
shall have the right to require the Company (rather than Gaming
Holdings) to purchase such membership interest or shares at fair
market value.
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If the Company purchases such membership interest or shares, the
Company and Gaming Holdings hereby agree that Gaming Holdings shall
promptly thereafter purchase such membership interest or shares from
the Company for a purchase price of $1.
(B) LAPSING OF EMPLOYMENT TERM PRIOR TO IPO. In the
event that the IPO has not occurred by the end of the Employment
Term (the "Employment Term Lapse Date"), then Executive shall have
the right (but not the obligation) to sell its Holdings Restricted
Membership Interest and any other membership interest purchased
hereunder (or shares exchanged for such interests) back to Gaming
Holdings at a price equal to the fair market value of such
membership interest or shares on the Employment Term Lapse Date, as
determined by an independent appraisal firm mutually agreed to by
and between Gaming Holdings and Executive, with the costs of such
appraisal being paid by the Company (the "Employment Term Lapse Put
Right"). The Employment Term Lapse Put Right must be exercised in
writing by Executive within thirty days following the Employment
Term Lapse Date or it shall become void and without further effect.
If the Employment Term Lapse Put Right is exercised, and Gaming
Holdings does not satisfy its obligation to purchase the membership
interest or shares subject to the Employment Term Lapse Put Right
within seven days following receipt of Executive's written notice of
exercise thereof, the Executive shall have the right to require the
Company (rather than Gaming Holdings) to purchase such membership
interest or shares at fair market value. If the Company purchases
such membership interest or shares, the Company and Gaming Holdings
hereby agree that Gaming Holdings shall promptly thereafter purchase
such membership interest or shares from the Company for a purchase
price of $1.
(iv) LLC DISTRIBUTIONS. While Gaming Holdings remains a
pass-through entity for federal income tax purposes, Gaming Holdings
will periodically distribute cash, to the extent available, to
Executive in an amount equal to the increase in his cumulative tax
liability with respect to his interest in Gaming Holdings.
(d) STOCK OPTION. On the date, if any, upon which Gaming
Holdings (or an affiliate or successor entity of Gaming Holdings)
effects an initial public offering for its securities (the "IPO"),
Executive shall be granted a stock option covering such securities
(the "Stock Option"). The number of shares subject to such option
shall be equal to the number derived by dividing the 125% of the
Base
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Salary by the "Price to Public" share price in such offering. The
Stock Option per share exercise price shall be equal to the "Price
to Public" share price. The Stock Option, shall qualify, to the
maximum extent permitted by Internal Revenue Code Section 422(d) or
its successor provision, as an "incentive stock option." Subject to
accelerated vesting as set forth elsewhere herein, the Stock Option
shall vest as to one third of the shares subject to the Stock Option
as of the date of grant, and as to an additional one third of such
shares on each anniversary of the date of grant, so as to be 100%
vested on the second anniversary of the date of grant, conditioned
upon Executive's continued employment, consulting or director
relationship with the Company as of each vesting date. Gaming
Holdings agrees to register the Stock Option and the stock issuable
thereunder on a Form-S-8 (or its successor form) with the Securities
and Exchange Commission following the date of grant. In good faith
and giving consideration to Executive's interests, Gaming Holdings,
and Executive will agree upon the registration date(s)."
(b) Section 9(iii) of the Employment and Consulting
Agreement is hereby amended so that references to the "Restricted
Membership Interest" or "any equity compensation granted to Executive by
the Company" are, respectively, changed to the "Holdings Restricted
Membership Interest" and "any equity compensation granted by Gaming
Holdings."
(c) Section 10 of the Employment and Consulting Agreement
is deleted in its entirety and replaced with the following:
"10. CHANGE OF CONTROL In the event of a "Change of
Control" (as defined herein) of Gaming Holdings occurring while
Executive is employed by the Company, Executive's Equity
Compensation shall have its vesting accelerated in full so as to
become 100% vested as of the date of the Change of Control. For
this purpose, "Change of Control" of Gaming Holdings is defined as:
(a) Any "person" as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (other than
a group consisting of the members of the Board as of the Effective
Date and their affiliated investment funds and the partners thereof)
becomes the "beneficial owner" (as defined in Rule 13d-3 under said
Act), directly or indirectly, of securities of Gaming Holdings
representing 50% or more of the total voting power represented by
Gaming Holdings' then outstanding voting securities; provided,
however, that a "Change of Control" will not be deemed to occur
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under this paragraph with respect to (i) intra-family transfers
among the Sommer family, (ii) sales or transfers arising as a result
of the death of Mrs. Viola Sommer or for the purpose of satisfying
attendant estate tax liabilities or (iii) adjustments in membership
interests pursuant to Article III of the Operating Agreement of
Gaming Holdings; or
(b) The consummation of a merger or consolidation of Gaming
Holdings with any other corporation other than a merger or
consolidation which would result in the voting securities of Gaming
Holdings outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least fifty
percent (50%) of the total voting power represented by the voting
securities of Gaming Holdings or such surviving entity outstanding
immediately after such merger or consolidation; or
(c) A change in the composition of the Board of Directors
of Gaming Holdings occurring within a two-year period, as a result
of which fewer than a majority of the directors are Incumbent
Directors. "Incumbent Directors" shall mean directors who either
(A) are directors of Gaming Holdings as of the date hereof, or (B)
are elected, or nominated for election, to the Board of Directors of
Gaming Holdings with the affirmative votes of at least a majority of
the Incumbent Directors at the time of such election or nomination
(but shall not include an individual whose election or nomination is
in connection with an actual or threatened proxy contest relating to
the election of directors to Gaming Holdings); or
(d) The approval by the Board of a plan of complete
liquidation of Gaming Holdings or of an agreement for the sale or
disposition by Gaming Holdings of all or substantially all of Gaming
Holdings' assets."
(d) Sections 22, 24, 25 and 29 of the Employment and
Consulting Agreement are hereby amended so that Gaming Holdings has the
same rights and obligations under such Sections as the Company.
5. GAMING LAW. Anything to the contrary herein or in the Employment and
Consulting Agreement notwithstanding, the parties hereto agree and acknowledge
that they are subject to and that they shall comply in all respects with the
gaming laws of the State of Nevada, including the Nevada Gaming Control Act and
(or any successor statute) the rules and regulations promulgated by the Nevada
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Gaming Commission and the State Gaming Control Board. To the extent anything in
this Agreement or the Employment and Consulting Agreement is inconsistent with
any gaming laws or regulations, the gaming laws and regulations shall control.
6. CONFIDENTIALITY. The Executive acknowledges that the Company has a
substantial, legitimate and continuing interest in the protection of its
business relationships with others including without limitation current and
prospective employees, consultants, advisors, customers, vendors, suppliers,
partners or joint venturers, and financing sources, and in the protection of its
Confidential Information, and has invested substantial sums, time and effort and
will continue to invest substantial sums, time and effort to develop, maintain
and protect such relationships and Information. Accordingly, Executive
covenants and agrees that during the Employment Term (as defined in the
Employment and Consulting Agreement) and thereafter, the Executive shall keep
secret and retain in strictest confidence and shall not, without the prior
written consent of the Company, furnish, make available or disclose to any third
party or use for the benefit of himself or any third party any Confidential
Information. Confidential Information is information related to or concerning
the Company or Gaming Holdings and their businesses which is confidential,
proprietary or not generally known to and cannot be readily ascertained through
proper means by persons or entities (including the Company's present or future
competitors), who can obtain any type of value from its disclosure or use.
Confidential Information includes all secret, confidential or proprietary
information, knowledge or data relating to the Company or Gaming Holdings, such
as, without limitation, finances and financing methods, sources, proposals or
plans; operational methods; marketing or development proposals, plans or
strategies; pricing strategies; business or property acquisition or development
proposals or plans; new personnel acquisition proposals or plans; customer lists
and any descriptions or data concerning current or prospective customers;
provided, however, while employed by the Company and in furtherance of the
business and for the benefit of the Company, Executive may provide Confidential
Information as appropriate to attorneys, accountants, financial institutions and
other persons or entities engaged in business with the Company or Gaming
Holdings.
7. ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of any successor of the Company or Gaming Holdings. Any such successor
of the Company or Gaming Holdings shall be deemed substituted for the Company or
Gaming Holdings under the terms of this Agreement for all purposes. As used
herein, "successor" shall include any person, firm, corporation or other
business entity which at any time, whether by purchase, merger or otherwise,
directly or indirectly acquires all or substantially all of the assets or
business of the Company or Gaming Holdings.
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8. ENTIRE AGREEMENT. This Agreement and the Employment and Consulting
Agreement represent the entire agreement and understanding between the Company,
Gaming Holdings, Aladdin Holdings, LLC and the Executive concerning the matters
herein.
9. NO ORAL MODIFICATION, CANCELLATION OR DISCHARGE. This Agreement may
only be amended, cancelled or discharged in writing signed by the Executive,
Gaming Holdings and the Company.
10. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Nevada.
11. CAPITALIZED TERMS. Capitalized terms not defined herein shall have
the meanings described thereto in the Employment and Consulting Agreement.
12. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be considered an original, but all such
counterparts shall together constitute but one and the same contract.
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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
/s/ Richard J. Goeglein
-------------------------------
Name: RICHARD J. GOEGLEIN
Title: Chief Executive Officer
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