Operating Agreement of Holdings
OPERATING AGREEMENT
OF
ALADDIN GAMING HOLDINGS, LLC,
a Nevada limited liability company
TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS
1.1 Above Limits Gaming...................................................2
1.2 Above Limits Gaming Losses............................................2
1.3 Above Limits Gaming Period............................................2
1.4 Above Limits Gaming Wins..............................................2
1.5 Accepting Members.....................................................2
1.6 Adjusted Capital Account Deficit......................................2
1.7 Affiliate.............................................................2
1.8 Agreement.............................................................3
1.9 Aladdin Development...................................................3
1.10 Aladdin Gaming........................................................3
1.11 Aladdin Holdings......................................................3
1.12 Applicable Percentage.................................................3
1.13 Articles..............................................................3
1.14 Assumed Rate..........................................................3
1.15 Available Cash........................................................3
1.16 Bank Financing........................................................3
1.17 Bank Lenders..........................................................4
1.18 Bankruptcy............................................................4
1.19 Bazaar................................................................4
1.20 Bazaar Lease..........................................................4
1.21 Board.................................................................4
1.22 Board Member..........................................................4
1.23 Board Supermajority...................................................4
1.24 Call..................................................................4
1.25 Capital Account.......................................................4
1.26 Capital Contribution..................................................5
1.27 Caused................................................................5
1.28 Certificate of Shares.................................................5
1.29 Change in Control.....................................................5
1.30 Code..................................................................5
1.31 Common Shares.........................................................5
1.32 Completion Guaranty...................................................5
1.33 Completion Guaranty Loan..............................................5
1.34 Completion Guaranty Payment...........................................5
1.35 Completion Guaranty Payment Due Date..................................6
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1.36 Contributing Obligor..................................................6
1.37 Contribution Agreement................................................6
1.38 Control...............................................................6
1.39 Covered Person........................................................6
1.40 Credit Agreement......................................................6
1.41 Cumulative Tax Liability Account......................................6
1.42 Delinquent Amount.....................................................6
1.43 Dilution Fraction.....................................................6
1.44 Disassociated Member..................................................7
1.45 Discount Notes........................................................7
1.46 Distribution..........................................................7
1.47 EBITDA Factor.........................................................7
1.48 EBITDA Shortfall Due Date.............................................7
1.49 EBITDA Shortfall Loan.................................................7
1.50 EBITDA Shortfall Payments.............................................7
1.51 Employment and Consulting Agreements..................................7
1.52 Equity Participation Agreement........................................8
1.53 Event of Default......................................................8
1.54 Exchange Act..........................................................8
1.55 Fiscal Year...........................................................8
1.56 Gaming Problem........................................................8
1.57 Gross Asset Value.....................................................8
1.58 Hotel and Casino EBITDA Difference....................................9
1.59 Hotel and Casino Percentage...........................................9
1.60 Hotel and Casino Projected EBITDA.....................................9
1.61 Interest..............................................................9
1.62 IPO..................................................................10
1.63 IPO Corporation......................................................10
1.64 Keep Well Agreement..................................................10
1.65 Keep Well Due Date...................................................10
1.66 Keep Well Loan.......................................................10
1.67 Keep Well Payment....................................................10
1.68 LCI Parent...........................................................10
1.69 LCI Purchase Agreement...............................................10
1.70 Majority.............................................................10
1.71 Majority Member......................................................10
1.72 Member...............................................................11
1.73 Member Nonrecourse Debt..............................................11
1.74 Member Nonrecourse Debt Minimum Gain.................................11
1.75 Member Nonrecourse Deductions........................................11
1.76 Minimum Gain.........................................................11
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1.77 Mountain Spa Resort..................................................11
1.78 Net Above Limits Gaming Losses.......................................11
1.79 Nevada Act...........................................................11
1.80 Nevada Commission....................................................11
1.81 Nevada Gaming Authorities............................................11
1.82 Non-Contributing Obligor.............................................12
1.83 Non-Default Keep Well Trigger........................................12
1.84 Non-Exercise Notice..................................................12
1.85 Nonrecourse Deductions...............................................12
1.86 Normal Gaming Limits.................................................12
1.87 Notice of Offer......................................................12
1.88 NRS..................................................................12
1.89 Offer Price..........................................................12
1.90 Offered Shares.......................................................12
1.91 Offeror..............................................................12
1.92 Officers.............................................................12
1.93 Opening Date.........................................................12
1.94 Oversubscribed Tag Along Member......................................12
1.95 Parking..............................................................13
1.96 Percentage Interest..................................................13
1.97 Permitted Transferee.................................................13
1.98 Person...............................................................13
1.99 Preferred Shares.....................................................13
1.100 Profits and Losses...................................................13
1.101 Prohibited Transferee................................................14
1.102 Property.............................................................14
1.103 Proportionate Percentage.............................................15
1.104 Purchase Option......................................................15
1.105 Purchasing Member....................................................15
1.106 Quarter..............................................................15
1.107 Reciprocal Easement Agreement........................................15
1.108 Records Office.......................................................15
1.109 Redevelopment........................................................15
1.111 Refusal Period.......................................................15
1.112 Related Party........................................................15
1.113 Restricted Membership Interests......................................16
1.114 Remaining Tag Along Shares...........................................16
1.115 Salle Privee Agreement...............................................16
1.116 Salle Privee Amount..................................................16
1.117 Salle Privee EBITDA Difference.......................................16
1.118 Salle Privee Facilities..............................................16
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1.119 Salle Privee Percentage..............................................16
1.120 Salle Privee Projected EBITDA........................................17
1.121 Second Hotel.........................................................17
1.122 Secretary of State...................................................17
1.123 Securities Act.......................................................17
1.124 Selling Member.......................................................17
1.125 Series A Invested Capital............................................17
1.126 Series A Preferred Return............................................17
1.127 Series B Preferred Shares............................................17
1.128 Series B Invested Capital............................................17
1.129 Series B Preferred Rate..............................................17
1.130 Series B Preferred Return............................................18
1.131 Share................................................................18
1.132 Shopping Center......................................................18
1.133 Stockholders and Registration Rights Agreement.......................18
1.134 Subsidiary...........................................................18
1.135 Substituted Member...................................................18
1.136 Supermajority........................................................18
1.137 Tag Along Members....................................................18
1.138 Tag Along Notice.....................................................19
1.139 Tag Along Offer......................................................19
1.140 Tag Along Period.....................................................19
1.141 Tag Along Price Per Share............................................19
1.142 Tag Along Sale.......................................................19
1.143 Tag Along Shares.....................................................19
1.144 Tag Along Transferee.................................................19
1.145 Tax Matters Partner..................................................19
1.146 Timeshare Parcel.....................................................19
1.147 Total Common Shares..................................................19
1.148 Transfer.............................................................19
1.149 Transferor...........................................................19
1.150 Treasury Regulations.................................................19
1.151 Trigger Event........................................................19
1.152 Triggering Member....................................................20
1.153 Trust................................................................20
1.154 Ultimate Percentage Interest.........................................20
1.158 Upstream Notice of Offer.............................................20
1.159 Upstream Offeror.....................................................20
1.160 Upstream Ownership Interest..........................................20
1.161 Upstream Transferor..................................................20
1.162 Warrants.............................................................21
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1.163 Warrant Agreement....................................................21
1.164 Warrant Shares.......................................................21
ARTICLE II
INTRODUCTORY MATTERS
2.1 Records Office.......................................................21
2.2 Other Offices........................................................21
2.3 Resident Agent and Registered Office.................................21
2.4 Purpose..............................................................21
2.5 No State Law Partnership; No Liability to Third Parties..............21
ARTICLE III
INTERESTS AND ADJUSTMENTS IN INTERESTS
3.1 Member's Interest....................................................22
3.2 Classes of Shares....................................................22
3.3 Completion Guaranty Payments.........................................23
3.4 Keep Well Payments...................................................24
3.5 EBITDA Shortfall Payments............................................27
3.6 Other Adjustments....................................................29
3.7 Adjustments..........................................................30
3.8 UCC Election.........................................................30
ARTICLE IV
CAPITAL ACCOUNTS
4.1 Initial Capital......................................................31
4.2 Capital Accounts.....................................................31
4.3 General Rules for Adjustment of Capital Accounts.....................31
4.4 Special Rules With Respect to Capital Accounts.......................33
4.5 Rights With Respect to Capital; Interest.............................33
4.6 Additional Capital Contributions.....................................33
4.7 Adjustment of Capital Accounts On Redemption of Discount Notes.......33
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ARTICLE V
PROFITS AND LOSSES
5.1 Profits..............................................................34
5.2 Losses...............................................................34
5.3 Special Allocations..................................................35
5.4 Section 704(c) Allocation............................................36
5.5 Federal Income Tax...................................................37
ARTICLE VI
DISTRIBUTIONS
6.1 Tax Distributions....................................................37
6.2 Distributions........................................................38
6.3 Limitations on Distribution..........................................38
ARTICLE VII
MEMBERS
7.1 Powers of Members....................................................39
7.2 Limitation of Liability..............................................39
7.3 Compensation of Members..............................................39
7.4 Action by the Members................................................39
7.5 Member Approval......................................................39
7.6 LCI Consent..........................................................42
7.7 Meetings of Members..................................................42
7.8 Waiver of Notice.....................................................43
7.9 Adjourned Meetings and Notice Thereof................................43
7.10 Action by Written Consent............................................43
7.11 Telephonic Meetings..................................................43
7.12 Quorum...............................................................43
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ARTICLE VIII
RESIGNATION, TRANSFER OF SHARES,
CHANGE IN CONTROL, TRUST MEMBERS
8.1 Resignation..........................................................44
8.2 Transfers of Interests...............................................44
8.3 Right of First Offer and Last Refusal................................44
8.4 Tag Along Rights.....................................................46
8.5 Transfers To Permitted Transferees...................................47
8.6 Transfer of Ownership Interests in Members...........................47
8.7 Call.................................................................48
8.8 Conveyance to Living Trust...........................................49
8.9 Gaming Control Act...................................................49
8.10 Further Restriction on Transfer of Shares............................49
ARTICLE IX
BOARD OF MANAGERS
9.1 Board of Managers....................................................50
9.2 Powers and Duties of the Board.......................................52
9.3 Election of Officers.................................................52
9.4 Removal, Resignation and Vacancies...................................52
9.5 Meetings of the Board................................................53
9.6 Compensation of Board Members; Compensation of Officers..............54
9.7 Expense Reimbursements...............................................54
ARTICLE X
ACCOUNTING, RECORDS AND BANK ACCOUNTS
10.1 Records and Accounting...............................................54
10.2 Access to Accounting Records.........................................54
10.3 Annual Tax Information...............................................55
10.4 Obligations of Members to Report Allocations.........................55
10.5 Tax Matters..........................................................55
10.6 Tax Elections........................................................55
10.7 Taxation as a Partnership............................................55
10.8 Tax Reporting........................................................55
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ARTICLE XI
IPO
11.1 IPO Timing...........................................................56
11.2 Pre-IPO Purchases....................................................56
11.3 Incorporation of Partnership.........................................57
ARTICLE XII
DISSOLUTION OF THE COMPANY AND
TERMINATION OF A MEMBER'S INTEREST
12.1 Dissolution..........................................................57
12.2 Death of a Member; Continuation......................................57
12.3 Company's Option To Purchase Bankrupt Member's Interest..............57
12.4 Members' Option to Purchase Bankrupt Member's Interest...............58
12.5 Distribution on Dissolution and Liquidation..........................59
ARTICLE XIII
LIABILITY, EXCULPATION AND INDEMNIFICATION
13.1 Exculpation..........................................................60
13.2 Fiduciary Duty.......................................................60
13.3 Outside Businesses...................................................61
13.4 Indemnity............................................................61
13.5 Indemnity for Actions By or In the Right of the Company.............61
13.6 Indemnity If Successful..............................................62
13.7 Determination of Right to Indemnification............................62
13.8 Advance Payment of Expenses..........................................62
13.9 Other Arrangements Not Excluded......................................63
13.10 Errors and Omissions Insurance.......................................63
13.11 Property of the Company..............................................64
13.12 Violation of this Agreement..........................................64
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ARTICLE XIV
GAMING MATTERS
14.1 Licensing............................................................64
14.2 Nominees.............................................................65
14.3 Gaming Problem.......................................................65
ARTICLE XV
NON-COMPETE
15.1 LCI..................................................................65
15.2 Sommer Enterprises...................................................66
15.3 Reasonable Terms.....................................................66
ARTICLE XVI
MISCELLANEOUS PROVISIONS
16.1 Notices..............................................................67
16.2 Insurance............................................................67
16.3 Membership Certificates..............................................67
16.4 Complete Agreement...................................................67
16.5 Amendments...........................................................68
16.6 Applicable Law; Jurisdiction.........................................68
16.7 Interpretation.......................................................68
16.8 Counterparts.........................................................68
16.9 Facsimile Copies.....................................................68
16.10 Severability.........................................................68
16.11 Waivers..............................................................69
16.12 No Third Party Beneficiaries.........................................69
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OPERATING AGREEMENT
OF
ALADDIN GAMING HOLDINGS, LLC,
a Nevada limited liability company
This Operating Agreement of Aladdin Gaming Holdings, LLC, a Nevada limited
liability company (the "Company"), is made and entered into as of this 26 day of
February, 1998, by and between Sommer Enterprises, LLC, a Nevada limited
liability company ("Sommer Enterprises"), London Clubs Nevada Inc., a Nevada
corporation ("LCI"), Aladdin Gaming Enterprises, Inc., a Nevada corporation
("Aladdin Enterprises"), GAI, LLC, a Nevada limited liability company ("GAI"),
and, from and after the vesting of their Interests as provided in their
respective Employment and Consulting Agreements (as herein defined), Richard J.
Goeglein ("Goeglein"), James H. McKennon ("McKennon"), Cornelius T. Klerk
("Klerk"), Jose A. Rueda ("Rueda") and Lee Galati ("Galati") (collectively, the
"Parties").
R E C I T A L S
A. Sommer Enterprises formed the Company on December 1, 1997 pursuant to
the provisions of Chapter 86 of the Nevada Revised Statutes;
B. On or prior to the date hereof the Parties have made the Capital
Contributions set forth opposite their respective names on Schedule 1 in
exchange for the number of Common Shares set forth opposite their respective
names on Schedule 1, and, to the extent that they hold Shares that have vested,
such Parties have been admitted as Members of the Company; and
C. The Parties desire by this Agreement to set forth their agreement as to
the relationships between the Company and the Members, and among the Parties
themselves and as to the conduct of the business and the internal affairs of the
Company.
THEREFORE, in consideration of the mutual covenants, agreements and
promises made herein, the Parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 Above Limits Gaming. "Above Limits Gaming" means all wagers made
in the Salle Privee Facilities during the Above Limits Gaming period by any
Person who has been granted the right by LCI Parent to exceed the Normal Gaming
Limits.
1.2 Above Limits Gaming Losses. "Above Limits Gaming Losses" means,
with respect to a specified Quarter, the aggregate of the amounts won by
customers from Aladdin Gaming in respect of Above Limits Gaming in such Quarter.
1.3 Above Limits Gaming Period. "Above Limits Gaming Period" means,
with respect to a particular Person, the period during which LCI Parent has
granted such Person the right to exceed the Normal Gaming Limits.
1.4 Above Limits Gaming Wins. "Above Limits Gaming Wins" means, with
respect to a specified Quarter, the aggregate of the amounts lost by customers
to Aladdin Gaming in respect of Above Limits Gaming in such Quarter.
1.5 Accepting Members. "Accepting Members" has the meaning ascribed
thereto in Section 8.3.
1.6 Adjusted Capital Account Deficit. "Adjusted Capital Account
Deficit" means, with respect to any Member, the deficit balance, if any, in such
Member's Capital Account as of the end of the relevant Fiscal Year, after giving
effect to the following adjustments:
(a) increase such Capital Account by any amounts which such
Member is obligated to contribute to the Company pursuant to the terms of this
Agreement or otherwise, or is deemed to be obligated to contribute pursuant to
Treasury Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and
(b) reduce such Capital Account by the amount of the items
described in Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
The foregoing definition of Adjusted Capital Account Deficit is
intended to comply with the provisions of Treasury Regulations Section
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
1.7 Affiliate. "Affiliate" means, with respect to a specified
Person, any other Person who or which is (a) the principal of the specified
Person, (b) directly or indirectly
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Controlling, Controlled by or under common Control with the specified Person, or
(c) any member, director, officer, manager, relative or spouse of the specified
Person; provided that, in no event shall (i) the holders of Warrants or Warrant
Shares be Affiliates of Sommer Enterprises by reason of ownership of such
Warrants or Warrant Shares or (ii) Goeglein or GAI, LLC be Affiliates of Sommer
Enterprises; and provided further that immediate family members of Viola Sommer
shall be deemed to be Affiliates of Sommer Enterprises, Aladdin Holdings and the
Trust.
1.8 Agreement. "Agreement" means this Operating Agreement, as
amended from time to time.
1.9 Aladdin Development. "Aladdin Development" means the land and
existing improvements on an approximately 35 acre site located at 3667 Las Vegas
Boulevard South, Las Vegas, Nevada.
1.10 Aladdin Gaming. "Aladdin Gaming" means Aladdin Gaming, LLC, a
Nevada limited liability company.
1.11 Aladdin Holdings. "Aladdin Holdings" means Aladdin Holdings,
LLC, a Delaware limited liability company.
1.12 Applicable Percentage. "Applicable Percentage" has the meaning
ascribed thereto in Section 8.3.
1.13 Articles. "Articles" means the Articles of Organization of the
Company, as amended from time to time.
1.14 Assumed Rate. "Assumed Rate" shall initially mean 40%. The
Board may adjust this rate upward or downward from time to time to avoid any
material discrepancy between the prevailing Assumed Rate and the effective
average rate of tax applicable to taxable income allocated from the Company to
Sommer Enterprises or LCI (whichever is higher). For this purpose, the effective
average rate of tax of Sommer Enterprises or any other pass-through entity for
tax purposes shall be determined by reference to the Members thereof.
1.15 Available Cash. "Available Cash" means cash available in the
accounts of the Company, less reasonable reserves established by the Board based
on an assessment of the Company's needs for the payment of Company expenses,
operations and contingencies.
1.16 Bank Financing. "Bank Financing" means the financing under a
senior credit facility in the amount of $410 million effective as of the date
hereof between Aladdin Gaming as borrower and the Bank Lenders.
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1.17 Bank Lenders. "Bank Lenders" means a syndicate of lenders,
including The Bank of Nova Scotia, Canadian Imperial Bank of Commerce and
Merrill Lynch Capital Corporation.
1.18 Bankruptcy. "Bankruptcy" means, and a Member shall be referred
to as a "Bankrupt Member" upon, (a) the entry of a decree or order for relief
against the Member by a court of competent jurisdiction in any voluntary or
involuntary case brought by or against the Member under any bankruptcy,
insolvency or similar law (collectively, "Debtor Relief Laws") generally
affecting the right of creditors and relief of debtors now or hereafter in
effect; (b) the appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator or other similar agent under applicable Debtor Relief Laws
for the Member or for any substantial part of the Member's assets or property;
(c) the ordering of the winding up or liquidation of the Member's affairs; (d)
the filing of a petition by or against the Member in any such voluntary or
involuntary bankruptcy case, which petition remains not dismissed for a period
of 180 days or which is not dismissed or suspended pursuant to Section 305 of
the Federal Bankruptcy Code (or any corresponding provision of any future United
States Bankruptcy Law); (e) the consent by the Member to the entry of an order
for relief in a voluntary or involuntary case under any Debtor Relief Laws or to
the appointment of, or the taking of any possession by, a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar agent under any
applicable Debtor Relief Laws for the Member or for any substantial part of the
Member's assets or property; or (f) the making by the Member of any general
assignment for the benefit of the Member's creditors.
1.19 Bazaar. "Bazaar" means Aladdin Bazaar, LLC, a Nevada limited
liability company.
1.20 Bazaar Lease. "Bazaar Lease" means the Lease dated on or about
the date hereof between Aladdin Gaming and Bazaar.
1.21 Board. "Board" means the Board of Managers of the Company, as
provided for in Section 9.1.
1.22 Board Member. "Board Member" means a member of the Board.
1.23 Board Supermajority. "Board Supermajority" means an affirmative
vote at a duly constituted meeting of the Board of at least eighty percent of
the Board Members.
1.24 Call. "Call" has the meaning ascribed thereto in Section 8.7.
1.25 Capital Account. "Capital Account" means, with respect to any
Member or Disassociated Member, the capital account maintained for such Member
or Disassociated Member as set forth in Section 4.2 after giving effect to the
adjustments set forth in Sections 4.3 and 4.4.
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1.26 Capital Contribution. "Capital Contribution" means the total
amount of cash and the agreed fair market value (net of liabilities) of any
property contributed at any time to the capital of the Company by a Member.
1.27 Caused. "Caused" means, with respect to a Person, that such
Person has caused an Event of Default by breach or non-performance of a term,
provision or covenant of any of the Keep Well Agreement, a Completion Guaranty
or the Credit Agreement; provided that a Person shall not be found to have
Caused an Event of Default as a result of such Person's or its Affiliates'
Control of the Company or Aladdin Gaming.
1.28 Certificate of Shares. "Certificate of Shares" means a
certificate of the Company representing Shares in the Company.
1.29 Change in Control. "Change in Control" means, in respect of a
Member, the occurrence of circumstances such that a Prohibited Transferee,
directly or indirectly, Controls such Member.
1.30 Code. "Code" means the Internal Revenue Code of 1986, as
amended from time to time, or any corresponding United States federal tax
statute enacted after the date of this Agreement. A reference to a specific
section of the Code refers not only to such specific section but also to any
corresponding provision of any United States federal tax statute enacted after
the date of this Agreement, as such specific section or corresponding provision
is in effect on the date of application of the provisions of this Agreement
containing such reference.
1.31 Common Shares. "Common Shares" means Shares with rights and
obligations as provided in Section 3.2(b).
1.32 Completion Guaranty. "Completion Guaranty" means (a) the
Guaranty of Completion and Performance dated as of the date hereof, made by the
Trust, Aladdin Bazaar Holdings, LLC and LCI Parent in favor of the Bank Lenders,
(b) the Guaranty of Completion and Performance dated as of the date hereof, made
by the Trust, Aladdin Bazaar Holdings, LLC and LCI Parent in favor of the
holders of the Discount Notes and (c) a Guaranty of Completion and Performance
to be entered into after the date hereof by the Trust, Aladdin Bazaar Holdings,
LLC and LCI Parent in favor of a Contingent Guarantor (as shall be defined in
such Guaranty of Completion and Performance).
1.33 Completion Guaranty Loan. "Completion Guaranty Loan" has the
meaning ascribed thereto in Section 3.3.
1.34 Completion Guaranty Payment. "Completion Guaranty Payment" has
the meaning ascribed thereto in Section 3.3.
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1.35 Completion Guaranty Payment Due Date. "Completion Guaranty
Payment Due Date" has the meaning ascribed thereto in Section 3.3.
1.36 Contributing Obligor. "Contributing Obligor" has the meaning
ascribed thereto in Sections 3.3, 3.4 and 3.5.
1.37 Contribution Agreement. "Contribution Agreement" means the
Contribution Agreement dated as of the date hereof between the Trust, Aladdin
Holdings, Sommer Enterprises, LCI and LCI Parent.
1.38 Control. "Control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of a Person, whether through ownership of voting securities, by
contract or otherwise, and "Controlling" and "Controlled" shall have
corresponding meanings.
1.39 Covered Person. "Covered Person" means (a) a Member or any
Affiliate of a Member, (b) any officers, directors, shareholders, members,
controlling Persons, partners, employees, representatives or agents of a Member
or a Board Member, (c) any Board Member, officer, employee, representative or
agent of the Company or its Affiliates, or (d) any Person who was, at the time
of the act or omission in question, a Person described in any of the preceding
clauses (a) through (c).
1.40 Credit Agreement. "Credit Agreement" means the Credit Agreement
in respect of the Bank Financing dated as of the date hereof between Aladdin
Gaming and the Bank Lenders.
1.41 Cumulative Tax Liability Account. "Cumulative Tax Liability
Account" means, with respect to each Member for any Quarter, the product of (a)
the Assumed Rate and (b) the excess of the cumulative amount of federal taxable
income or gain expected to be allocated to such Member in respect of its Common
Shares for such Quarter and actually allocated or expected to be allocated for
all prior Quarters pursuant to Article V, over the cumulative amount of federal
taxable loss or deduction allocated to such Member in respect of its Common
Shares for such Quarter and actually allocated or expected to be allocated for
all prior Quarters pursuant to Article V.
1.42 Delinquent Amount. "Delinquent Amount" has the meanings
ascribed thereto in Sections 3.3, 3.4 and 3.5.
1.43 Dilution Fraction. "Dilution Fraction" has the meaning ascribed
thereto in Sections 3.4 and 3.5.
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1.44 Disassociated Member. "Disassociated Member" means the
transferee of a Member's Shares, or a personal representative or heir or legatee
of such Member, who is not admitted to the Company as a Member.
1.45 Discount Notes. "Discount Notes" means 13.5% senior discount
notes, accreting to an aggregate principal amount of $221.5 million at maturity,
due 2010 issued by the Company and Aladdin Capital Corp. on or about the date
hereof.
1.46 Distribution. "Distribution" means a distribution of cash or
other property made by the Company with respect to Shares, including upon
dissolution or liquidation of the Company or in respect of a redemption of
Shares, but shall not mean payments or transfers of cash or other property to
Members for reasons other than their ownership of Shares.
1.47 EBITDA Factor. "EBITDA Factor" means, with respect to a
specified Quarter, a factor equal to 1.00 minus the fraction the numerator of
which is the Hotel and Casino Percentage for such Quarter and the denominator of
which is the Salle Privee Percentage for such Quarter; provided that if the
Salle Privee Percentage exceeds the Hotel and Casino Percentage for that
Quarter, the EBITDA Factor shall be zero.
1.48 EBITDA Shortfall Due Date. "EBITDA Shortfall Due Date" has the
meaning ascribed thereto in Section 3.5.
1.49 EBITDA Shortfall Loan. "EBITDA Shortfall Loan" has the meaning
ascribed thereto in Section 3.5.
1.50 EBITDA Shortfall Payments. "EBITDA Shortfall Payments" has the
meaning ascribed thereto in Section 3.5.
1.51 Employment and Consulting Agreements. "Employment and
Consulting Agreements" means (a) the Employment and Consulting Agreement
effective January 1, 1997 entered into by and among Goeglein, the Company,
Aladdin Gaming and Aladdin Holdings as amended on January 30, 1998 and February
26, 1998, (b) the Consulting Agreement effective January 1, 1997 entered into by
and among GAI, the Company, Aladdin Gaming and Aladdin Holdings as amended on
January 30, 1998 and February 26, 1998, (c) the Employment Agreement effective
April 15, 1997 entered into by and among McKennon, the Company, Aladdin Gaming
and Aladdin Holdings as amended on February 26, 1998, (d) the Employment
Agreement effective July 1, 1997 entered into by and among Klerk, the Company,
Aladdin Gaming and Aladdin Holdings as amended on February 26, 1998, (e) the
Employment Agreement effective July 1, 1997 entered into by and among Rueda, the
Company, Aladdin Gaming and Aladdin Holdings as amended on February 26, 1998,
(f) the Employment Agreement effective July 1, 1997 entered into by and among
Galati, the Company, Aladdin Gaming and Aladdin Holdings as amended on February
26, 1998.
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1.52 Equity Participation Agreement. "Equity Participation
Agreement" means the Equity Participation Agreement dated as of the date hereof
among Sommer Enterprises, Aladdin Enterprises, LCI and State Street Bank and
Trust Company as warrant agent.
1.53 Event of Default. "Event of Default" means any of (a) an Event
of Default under the Credit Agreement, (b) a Specified Event under any
Completion Guaranty or the Keep Well Agreement or (c) any breach or default
under the Keep Well Agreement or any Completion Guaranty, in each case pursuant
to which the Bank Lenders, the holders of the Discount Notes or the Contingent
Guarantor (as defined in the relevant Completion Guaranty) have exercised any
rights or remedies under any of the Credit Agreement, a Completion Guaranty or
the Keep Well Agreement, but shall exclude any of the foregoing events which
only gives rise to a payment by LCI Parent pursuant to Section 13 of the Keep
Well Agreement.
1.54 Exchange Act. "Exchange Act" means the Securities Exchange Act
of 1934, as amended.
1.55 Fiscal Year. "Fiscal Year" means the period commencing on
January 1 of each calendar year and terminating on December 31 of the same
calendar year, or such other period as determined by the Board and permitted by
the Code, the Treasury Regulations or any other applicable laws.
1.56 Gaming Problem. "Gaming Problem" means circumstances such that
any Member, any Affiliate of any Member or any Related Party of any Member or of
any Affiliate of any Related Party may preclude or materially delay, impede or
impair the ability of the Company or Aladdin Gaming to obtain or retain any
licenses required by the Nevada Gaming Authorities for the conduct of business
of the Company, Aladdin Gaming and their Subsidiaries, or such as may result in
the imposition of materially burdensome terms and conditions on any such
license.
1.57 Gross Asset Value. "Gross Asset Value" means, with respect to
any Company asset, the asset's adjusted basis for federal income tax purposes,
except as follows:
(a) the initial Gross Asset Value of any asset contributed by
a Member to the Company shall be the fair market value of such asset on the date
of contribution; provided, that the Gross Asset Value of any asset (other than
cash) contributed by a Member shall be as set forth on Schedule 1;
(b) the Gross Asset Value of all Company assets shall be
adjusted to equal their respective fair market values as of the following times:
(i) the acquisition of an additional Interest by any new or existing Member in
exchange for more than a de minimis Capital Contribution; (ii) the distribution
by the Company to a Member of more than a de minimis amount of Company property
as consideration for an Interest; and (iii) the liquidation of the Company
within
8
the meaning of Treasury Regulations Section 1.704-1(b)(2)(ii)(g); provided,
however, that the adjustment pursuant to clauses (i) and (ii) shall be made only
if the Board reasonably determines that such adjustments are necessary or
appropriate to reflect the relative economic interests of the Members in the
Company;
(c) the Gross Asset Value of any Company asset distributed to
any Member shall be adjusted to equal the fair market value of such asset on the
date of the Distribution; and
(d) the Gross Asset Values of the Company assets shall be
increased (or decreased) to reflect any adjustments to the adjusted basis of
such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to
the extent that such adjustments are taken into account in determining Capital
Accounts pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m);
provided, however, that Gross Asset Values shall not be adjusted pursuant to
this paragraph (d) to the extent the Board determines that an adjustment
pursuant to paragraph (b) is necessary or appropriate in connection with a
transaction that would otherwise result in an adjustment pursuant to this
paragraph (d).
If the Gross Asset Value of an asset has been determined or adjusted
pursuant to paragraphs (a), (b) or (d) above, such Gross Asset Value shall
thereafter be adjusted by the depreciation taken into account with respect to
such asset for purposes of computing Profits and Losses.
1.58 Hotel and Casino EBITDA Difference. "Hotel and Casino EBITDA
Difference" means, with respect to a specified Quarter, (a) the Hotel and Casino
Projected EBITDA for such Quarter, less (b) the EBITDA (as determined in
accordance with the Keep Well Agreement) attributable to the Aladdin Hotel and
Casino (exclusive of the Salle Privee Facilities) for such Quarter; provided
that if such amount is negative, the Hotel and Casino EBITDA Difference shall be
zero.
1.59 Hotel and Casino Percentage. "Hotel and Casino Percentage"
means, with respect to a specified Quarter, the fraction, expressed as a
percentage, the numerator of which is the Hotel and Casino EBITDA Difference for
such Quarter and the denominator of which is the Hotel and Casino Projected
EBITDA for such Quarter.
1.60 Hotel and Casino Projected EBITDA. "Hotel and Casino Projected
EBITDA" means, with respect to a specified Quarter, the projected EBITDA for the
Aladdin Hotel and Casino (exclusive of the Salle Privee Facilities) for such
Quarter, as set forth on Schedule 2.
1.61 Interest. "Interest" means the entire ownership interest of a
Member in the Company at any time, including the right of such Member to any and
all benefits to which a Member
9
may be entitled as provided under the NRS and in this Agreement and includes
ownership interests in respect of both Common Shares and Preferred Shares.
1.62 IPO. "IPO" means the initial underwritten offering pursuant to
which common shares of IPO Corporation become registered under Section 12(g) of
the Exchange Act.
1.63 IPO Corporation. "IPO Corporation" means the entity which
itself or through its Subsidiaries carries on the business of the Aladdin Hotel
and Casino and whose common shares become registered under Section 12(g) of the
Exchange Act in connection with the IPO.
1.64 Keep Well Agreement. "Keep Well Agreement" means the Keep-Well
Agreement dated as of the date hereof made by Aladdin Holdings, Aladdin Bazaar
Holdings, LLC and LCI Parent in respect of the Bank Financing in favor of the
Bank Lenders.
1.65 Keep Well Due Date. "Keep Well Due Date" has the meaning
ascribed thereto in Section 3.4.
1.66 Keep Well Loan. "Keep Well Loan" has the meaning ascribed
thereto in Section 3.4.
1.67 Keep Well Payment. "Keep Well Payment" has the meaning ascribed
thereto in Section 3.4.
1.68 LCI Parent. "LCI Parent" means London Clubs International,
p.l.c., a company registered in England and Wales.
1.69 LCI Purchase Agreement. "LCI Purchase Agreement" means the
Purchase Agreement dated as of September 24, 1997, as amended on October 16,
1997, November 18, 1997, December 1, 1997 and February 16, 1998 and amended and
restated on February 26, 1998 among the Company, Aladdin Gaming, LCI, LCI
Parent, Sommer Enterprises, the Trust and Aladdin Holdings.
1.70 Majority. "Majority" means an affirmative vote or consent of
the Member or Members owning an aggregate of more than fifty percent of the
Percentage Interests.
1.71 Majority Member. "Majority Member" means either (if any) (a)
Sommer Enterprises, if designees of Sommer Enterprises (whether through Aladdin
Enterprises appointing its designees pursuant to Section 9.1 or otherwise)
constitute a majority of the Board or (b) LCI, if designees of LCI (whether
through Aladdin Enterprises appointing its designees pursuant to Section 9.1 or
otherwise) constitute a majority of the Board.
10
1.72 Member. "Member" means a Person who has been admitted to the
Company as a member in accordance with the NRS and this Agreement.
1.73 Member Nonrecourse Debt. "Member Nonrecourse Debt" has the
meaning set forth in Treasury Regulations Section 1.704-2(b)(4) for "partner
non-recourse debt".
1.74 Member Nonrecourse Debt Minimum Gain. "Member Nonrecourse Debt
Minimum Gain" means an amount, with respect to each Member Nonrecourse Debt,
equal to the Minimum Gain that would result if such Member Nonrecourse Debt were
treated as a nonrecourse liability of the Company, determined in accordance with
Treasury Regulations Sections 1.704-2(i)(3).
1.75 Member Nonrecourse Deductions. "Member Nonrecourse Deductions"
has the meaning set forth in Treasury Regulations Sections 1.704-2(i)(l) and
1.704-2(i)(2) for "partner non-recourse deductions".
1.76 Minimum Gain. "Minimum Gain" means the amount determined by
computing, with respect to each nonrecourse liability of the Company, the amount
of gain (of whatever character), if any, that would be realized by the Company
if it disposed (in a taxable transaction) of the Property subject to such
liability in full satisfaction thereof, and by then aggregating the amounts so
computed as set forth in Treasury Regulations Sections 1.704-2(b)(2) and
1.704-2(d).
1.77 Mountain Spa Resort. "Mountain Spa Resort" means the hotel, spa
and casino resort being developed by Mountain Spa Development, Inc. and its
Affiliates known as the "Mountain Spa Resort" located in Las Vegas, Nevada.
1.78 Net Above Limits Gaming Losses. "Net Above Limits Gaming
Losses" means, with respect to a specified Quarter, the amount, if any, by which
Above Limits Gaming Losses exceeds Above Limits Gaming Wins for such Quarter.
1.79 Nevada Act. "Nevada Act" means the Nevada Gaming Control Act
(or any successor statute), and any rules or regulations promulgated thereunder.
1.80 Nevada Commission. "Nevada Commission" means the Nevada Gaming
Commission.
1.81 Nevada Gaming Authorities. "Nevada Gaming Authorities" means
the Nevada Commission, the Nevada State Gaming Control Board and any other
applicable governmental or administrative state or local agency involved in the
regulation of gaming or gaming activities in the State of Nevada.
11
1.82 Non-Contributing Obligor. "Non-Contributing Obligor" has the
meanings ascribed thereto in Sections 3.3, 3.4 and 3.5.
1.83 Non-Default Keep Well Trigger. "Non-Default Keep Well Trigger"
means the occurrence of payments pursuant to the Keep Well Agreement, exclusive
of any and all Salle Privee Amounts, (a) exceeding $8.125 million in each of two
successive Quarters, (b) exceeding in the aggregate $18.28 million over three or
fewer successive Quarters, or (iii) exceeding in the aggregate $30.0 million
over four or fewer successive Quarters.
1.84 Non-Exercise Notice. "Non-Exercise Notice" has the meaning
ascribed thereto in Section 12.3.
1.85 Nonrecourse Deductions. "Nonrecourse Deductions" has the
meaning set forth in Treasury Regulations Section 1.704-2(b)(1) and 1.704-2(c).
1.86 Normal Gaming Limits. "Normal Gaming Limits" means the gaming
limits as established from time to time by Aladdin Gaming and LCI Parent in
respect of the Salle Privee Facilities.
1.87 Notice of Offer. "Notice of Offer" has the meaning ascribed
thereto in Section 8.3.
1.88 NRS. "NRS" means the Nevada Revised Statutes, as amended from
time to time.
1.89 Offer Price. "Offer Price" has the meaning ascribed thereto in
Section 8.3.
1.90 Offered Shares. "Offered Shares" has the meaning ascribed
thereto in Section 8.3
1.91 Offeror. "Offeror" has the meaning ascribed thereto in Section
8.3.
1.92 Officers. "Officers" means the officers of the Company, as
elected by the Board from time to time.
1.93 Opening Date. "Opening Date" means the date of the opening of
the Aladdin Hotel and Casino after completion of the Redevelopment.
1.94 Oversubscribed Tag Along Member. "Oversubscribed Tag Along
Member" has the meaning ascribed thereto in Section 8.4.
12
1.95 Parking. "Parking" means the multi-level parking structure and
other parking areas for approximately 4,800 motor vehicles to be developed by
Bazaar and the Company as part of the Redevelopment.
1.96 Percentage Interest. "Percentage Interest" means, with respect
to a specified Member, the proportionate share of such Member's Common Shares in
the Company, computed by dividing the number of Common Shares held by such
Member by the Total Common Shares.
1.97 Permitted Transferee. "Permitted Transferee" means, with
respect to a particular Member, a Person other than a Prohibited Transferee who
is (a) an Affiliate of the Member which, other than in respect of immediate
family members of Viola Sommer and Jack Sommer, is approved by the other Members
in writing, such approval not to be unreasonably withheld or delayed, (b) a
wholly owned subsidiary of the Member, (c) another Member (other than Goeglein,
McKennon, Klerk, Rueda and Galati) or (d) any other Person approved in writing
by all the other holders of Common Shares.
1.98 Person. "Person" means a natural person, any form of business
or social organization and any other nongovernmental legal entity, whether
domestic or foreign, including, but not limited to, a corporation, partnership,
association, trust, unincorporated organization, estate or limited liability
company.
1.99 Preferred Shares. "Preferred Shares" means Series A Preferred
Shares or Series B Preferred Shares, as the context requires.
1.100 Profits and Losses. "Profits" and "Losses" mean, for any
applicable period, an amount equal to the Company's taxable income or loss for
such year or period, determined in accordance with Code Section 703(a) (for this
purpose, all items of income, gain, loss, or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in taxable
income or loss), with the following adjustments:
(a) any income of the Company that is exempt from gross income
for federal income tax purposes and not otherwise taken into account in
computing Profits or Losses shall be included in computing Profits or Losses;
(b) any expenditures of the Company that are described in Code
Section 705(a)(2)(B) or that are treated as expenditures described in that Code
Section pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(i) and not
otherwise taken into account in computing Profits or Losses shall reduce Profits
or Losses;
(c) in the event that the Gross Asset Value of any Company
asset is adjusted pursuant to clause (b), (c) or (d) of the definition thereof,
such adjustment shall be taken
13
into account as gain or loss from disposition of such asset for purposes of
computing Profits and Losses;
(d) gain or loss resulting from a disposition of property with
respect to which gain or loss has been recognized for federal income tax
purposes shall be computed by reference to the Gross Asset Value of the property
disposed of, notwithstanding that the adjusted tax basis of such property
differs from such value;
(e) an amount equal to the depreciation, depletion,
amortization, and gain or loss or other cost recovery reduction allowable with
respect to an asset for such Fiscal Year or other period, determined in a manner
consistent with Treasury Regulations Section 1.704- 1(b)(2)(iv)(g) shall be
taken into account in computing Profits or Losses; and
(f) notwithstanding any other provisions of this definition,
any items of income, gain, loss or deduction which are specifically allocated
shall not be taken into account in computing Profits or Losses.
1.101 Prohibited Transferee. "Prohibited Transferee" means (a) any
owner, operator or manager of a hotel or casino competitive with Aladdin Gaming
in locations where Aladdin Gaming or any of its Affiliates has hotel or casino
operations (other than Viola Sommer and Jack Sommer and their immediate family
members, Sommer Enterprises and its Affiliates or LCI and its Affiliates), (b)
any "non-profit" or "not-for-profit" corporation, association, trust, fund,
foundation or other similar entity organized and operated exclusively for
charitable purposes that qualifies as a tax-exempt entity under applicable
federal and state tax law or corresponding foreign law, (c) any federal, state,
local or foreign governmental agency, instrumentality or other similar entity,
(d) any Person primarily engaged in the business of owning or operating a casino
or other similar type of gambling facility (other than Viola Sommer and Jack
Sommer and their immediate family members, Sommer Enterprises and its Affiliates
or LCI and its Affiliates), (e) any Person that has been convicted of a felony,
(f) any Person regularly engaged in or affiliated with the production or
distribution of alcoholic beverages, (g) any Person who has been found
unsuitable or has withdrawn an application to be found suitable by the Nevada
Gaming Authorities, (h) FOCUS 2000, Inc. or the then current owner or lessee
(unless such owner or lessee is an Affiliate of a Member) of the real property
located at the northeast corner of Las Vegas Boulevard and Harmon Avenue, in Las
Vegas, Nevada, or (i) any Person if the consummation of a Transfer to such
Person would result in a breach of or violation in any transfer restrictions
contained in any loan documentation (including the Completion Guaranty and the
Keep Well Agreement) relative to any indebtedness encumbering all or any portion
of the Aladdin Development, and such transfer restrictions are not waived by the
applicable lender(s).
1.102 Property. "Property" means all assets of the Company,
including all real, personal and intangible property, or any portion thereof.
14
1.103 Proportionate Percentage. "Proportionate Percentage" means, as
to each Tag Along Member, the quotient obtained (expressed as a percentage) by
dividing the number of Common Shares owned by such Tag Along Member by the
aggregate number of Common Shares owned by all Tag Along Members.
1.104 Purchase Option. "Purchase Option" has the meaning ascribed
thereto in Section 12.3.
1.105 Purchasing Member. "Purchasing Member" has the meaning
ascribed thereto in Section 12.4.
1.106 Quarter. "Quarter" means any three month period commencing on
January 1, April 1, July 1 or October 1 of any year during the term of this
Agreement.
1.107 Reciprocal Easement Agreement. "Reciprocal Easement Agreement"
means the Construction, Operation and Reciprocal Easement Agreement by and among
Aladdin Gaming, Bazaar and Aladdin Music, LLC dated on or about the date hereof.
1.108 Records Office. "Records Office" means the records office of
the Company maintained in the State of Nevada.
1.109 Redevelopment. "Redevelopment" means (a) the redevelopment of
the exist ing Aladdin hotel and casino to include a total of approximately 2,600
rooms and approximately 116,000 square feet of main casino space; (b) the
development of the Shopping Center and the Parking; (c) the development of the
Salle Privee Facilities; and (d) the construction, fitting out and furnishing of
all or any part of the foregoing.
1.110 Redevelopment Document. "Redevelopment Document" means (a) any
and all material contracts and agreements relating to the construction phase of
the Redevelopment or any part thereof, (b) any and all material contracts and
agreements relating to the financing of the Redevelopment or any part thereof,
(c) any and all budgets relating to the construction phase of the Redevelopment
or any part thereof and (d) any and all material plans and specifications
relating to the Redevelopment or any part thereof.
1.111 Refusal Period. "Refusal Period" has the meaning ascribed
thereto in Section 8.3.
1.112 Related Party. "Related Party" means, in respect of a Member,
its Affiliates, and such Member's and its Affiliates' respective shareholders,
partners, members, directors, managers and officers.
15
1.113 Restricted Membership Interests. "Restricted Membership
Interests" means any unvested Interests issued pursuant to the Employment and
Consulting Agreements.
1.114 Remaining Tag Along Shares. "Remaining Tag Along Shares" has
the meaning ascribed thereto in Section 8.4.
1.115 Salle Privee Agreement. "Salle Privee Agreement" means the
agreement dated as of the date hereof between LCI, LCI Parent and Aladdin Gaming
with respect to the construction, operation, maintenance and marketing of the
Salle Privee Facilities.
1.116 Salle Privee Amount. "Salle Privee Amount" means with respect
to a specified Quarter, an amount equal to the product of (a) the Salle Privee
EBITDA Difference for such Quarter and (b) the EBITDA Factor for such Quarter.
1.117 Salle Privee EBITDA Difference. The "Salle Privee EBITDA
Difference" means, with respect to a specified Quarter, the (a) the Salle Privee
Projected EBITDA for such Quarter, less (b) the EBITDA (as determined in
accordance with the Keep Well Agreement) attributable to the Salle Privee
Facilities for such Quarter, after deducting or excluding therefrom, as the case
may be, any Net Above Limits Gaming Losses for such Quarter which LCI Parent has
paid (or, to the extent acceptable to the Bank Lenders, guaranteed) pursuant to
the Salle Privee Agreement; provided that, if such amount is negative, the Salle
Privee EBITDA Difference shall be zero.
1.118 Salle Privee Facilities. "Salle Privee Facilities" means
facilities open to the public at large, consisting of (a) a gaming facility,
containing approximately 20 to 30 high limit tables and approximately 100 high
limit slot devices, located on the mezzanine level directly above the main
gaming floor of the Aladdin hotel and casino; (b) a super-premium gourmet
restaurant facility, located adjacent to and as part of the gaming facility of
the Salle Privee Facilities and containing a separate kitchen, a bar,
approximately 25 dining tables inside the restaurant, as well as several
additional dining tables located in a roof garden accessible through the
restaurant; (c) an exclusive hospitality facility comprising approximately 25
double-module luxury suites, 5 triple-module suites, a concierge facility and
guest bar and lounge, to be located in the main tower of the Aladdin hotel and
casino; (d) a separate entrance and reception area for guests of the Salle
Privee Facilities, offering secure and discrete access for arrivals and
departures; and (e) vertical and horizontal circulation infrastructure providing
for private elevator access to the hospitality facility and private corridor
access from the hospitality facility to the gaming facility of the Salle Privee
Facilities.
1.119 Salle Privee Percentage. "Salle Privee Percentage" means, with
respect to a specified Quarter, the fraction, expressed as a percentage, the
numerator of which is the Salle Privee EBITDA Difference for such Quarter and
the denominator of which is the Salle Privee Projected EBITDA for such Quarter.
16
1.120 Salle Privee Projected EBITDA. "Salle Privee Projected EBITDA"
means, with respect to a specified Quarter, projected EBITDA for the Salle
Privee Facilities for the applicable Quarter, as set forth on Schedule 3.
1.121 Second Hotel. "Second Hotel" means a second hotel and casino
separately themed to the Aladdin hotel and casino to be developed on the Aladdin
Development with approximately 1,000 rooms and approximately 50,000 square feet
of casino space.
1.122 Secretary of State. "Secretary of State" means the office of
the Nevada Secretary of State.
1.123 Securities Act. "Securities Act" means the Securities Act of
1933, or any similar federal statute, and the rules and regulations of the
Securities and Exchange Commission thereunder, all as shall be in effect at the
time.
1.124 Selling Member. "Selling Member" has the meaning ascribed
thereto in Section 8.4.
1.125 Series A Invested Capital. "Series A Invested Capital" means,
with respect to each Member, the cumulative capital contributions of that Member
in respect of the Series A Preferred Shares as reflected on Schedule 1, as the
same may be amended from time to time, less cumulative amounts distributed
pursuant to Section 6.2(b).
1.126 Series A Preferred Return. "Series A Preferred Return" means,
as of any date of determination, with respect to a holder of Series A Preferred
Shares, an amount equal to twelve percent per annum, cumulative and compounded
semi-annually, on the amount of the holder's Series A Invested Capital, from the
date of the initial Capital Contribution in respect of such Series A Preferred
Shares to the date of determination (taking into account, as appropriate,
payments pursuant to Section 6.2(a) with respect to such Series A Preferred
Return).
1.127 Series B Preferred Shares. "Series B Preferred Shares" means
cumulative and compounding preferred Shares with rights and obligations as
provided in Section 3.2(d).
1.128 Series B Invested Capital. "Series B Invested Capital" means,
with respect to each Member, the cumulative capital contributions of that Member
in respect of the Series B Preferred Shares as reflected on Schedule 1, as the
same may be amended from time to time, less cumulative amounts distributed
pursuant to Section 6.2(d).
1.129 Series B Preferred Rate. "Series B Preferred Rate" means with
respect to each holder of Series B Preferred Shares, an interest rate equal to
the weighted average interest rate from
17
time to time of the debt under the Bank Financing which was repaid with the
funds paid to or on behalf of Aladdin Gaming for the relevant Series B Preferred
Shares.
1.130 Series B Preferred Return. "Series B Preferred Return" means,
as of any date of determination, with respect to a holder of Series B Preferred
Shares, an amount equal to the Series B Preferred Rate, cumulative and
compounded semi-annually, on the amount of the holder's Series B Invested
Capital, from the date of the initial Capital Contribution in respect of such
Series B Shares to the date of determination (taking into account, as
appropriate, payments pursuant to Section 6.2(c) with respect to such Series B
Preferred Return).
1.131 Share. "Share" represents a share of an Interest in the
Company held by a Member, and includes Preferred Shares and Common Shares.
1.132 Shopping Center. "Shopping Center" means a themed
entertainment shopping center containing approximately 462,000 square feet of
gross leasable area to be developed by Bazaar as part of the Redevelopment.
1.133 Stockholders and Registration Rights Agreement. "Stockholders
and Registration Rights Agreement" means a Stockholders and Registration Rights
Agreement to be entered into by certain of the stockholders of the IPO
Corporation prior to the IPO, substantially, in the form set forth in Exhibit A.
1.134 Subsidiary. "Subsidiary" means (subject to the second sentence
of this definition), with respect to a specified Person, any other entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other Persons performing similar
functions are at the time directly or indirectly owned by the specified Person.
Unless a contrary intention is indicated in this Agreement, any reference to a
Subsidiary shall mean a Subsidiary of the Company, which shall include Aladdin
Gaming and, if Aladdin Gaming owns more than fifty percent of the common stock
of Aladdin Music Holdings, LLC, Aladdin Music Holdings, LLC, but
(notwithstanding the foregoing sentence) shall not include Aladdin Music, LLC or
any Subsidiary of Aladdin Music, LLC.
1.135 Substituted Member. "Substituted Member" means the transferee
of a Member's Shares, or a permitted successor or assign of such Member who is
admitted to the Company as a Member.
1.136 Supermajority. "Supermajority" means an affirmative vote or
consent of the Member or Members owning an aggregate of at least eighty percent
of the Percentage Interests.
1.137 Tag Along Members. "Tag Along Members" has the meaning
ascribed thereto in Section 8.4.
18
1.138 Tag Along Notice. "Tag Along Notice" has the meaning ascribed
thereto in Section 8.4.
1.139 Tag Along Offer. "Tag Along Offer" has the meaning ascribed
thereto in Section 8.4.
1.140 Tag Along Period. "Tag Along Period" has the meaning ascribed
thereto in Section 8.4.
1.141 Tag Along Price Per Share. "Tag Along Price Per Share" has the
meaning ascribed thereto in Section 8.4.
1.142 Tag Along Sale. "Tag Along Sale" has the meaning ascribed
thereto in Section 8.4.
1.143 Tag Along Shares. "Tag Along Shares" has the meaning ascribed
thereto in Section 8.4.
1.144 Tag Along Transferee. "Tag Along Transferee" has the meaning
ascribed thereto in Section 8.4.
1.145 Tax Matters Partner. "Tax Matters Partner" means the Person
designated as Tax Matters Partner pursuant to Section 10.5.
1.146 Timeshare Parcel. "Timeshare Parcel" has the meaning ascribed
thereto in the LCI Purchase Agreement.
1.147 Total Common Shares. "Total Common Shares" means all issued
and outstanding Common Shares.
1.148 Transfer. "Transfer" means any transfer, sale, conveyance,
distribution, hypothecation, pledge, encumbrance, assignment or other disposal,
either voluntary or involuntary.
1.149 Transferor. "Transferor" has the meaning ascribed thereto in
Section 8.3.
1.150 Treasury Regulations. "Treasury Regulations" means the U.S.
federal income tax regulations promulgated by the U.S. Treasury Department under
the Code and codified at Title 26 of the Code of Federal Regulations, as amended
from time to time.
1.151 Trigger Event. "Trigger Event" has the meaning ascribed
thereto in Section 8.7.
19
1.152 Triggering Member. "Triggering Member" has the meaning
ascribed thereto in Section 8.7.
1.153 Trust. "Trust" means Trust Under Article Sixth u/w/o Sigmund
Sommer, a New York trust.
1.154 Ultimate Percentage Interest. "Ultimate Percentage Interest"
means, with respect to a specified Person, the aggregate directly and indirectly
held Percentage Interest of such Person, calculated by adding (a) such Person's
Percentage Interest, plus (b) the percentage of the issued and outstanding
shares (class A voting common stock and class B non-voting common stock) in the
capital of Aladdin Enterprises owned by such Person multiplied by Aladdin
Enterprises' Percentage Interest.
1.155 Unpaid Preferred Return. "Unpaid Preferred Return" means, with
respect to any Series A Preferred Shares or Series B Preferred Shares, at any
time of determination, the excess, if any, of (i) the Series A Preferred Return
or Series B Preferred Return, as relevant, with respect to such Shares, over
(ii) the cumulative Distributions made pursuant to section 6.2(a) or (c), as
appropriate, through such time with respect to such Shares.
1.156 Unrecovered Series A Invested Capital. "Unrecovered Series A
Invested Capital" means, at any time of determination, and with respect to any
Member, the Series A Invested Capital less the cumulative Distributions, if any,
theretofore made pursuant to section 6.2(b) through such time.
1.157 Unrecovered Series B Invested Capital. "Unrecovered Series B
Invested Capital" means, at any time of determination, and with respect to any
Member, the Series B Invested Capital less the cumulative Distributions, if any,
theretofore made pursuant to section 6.2(d) through such time. 1.158 Upstream
Notice of Offer. "Upstream Notice of Offer" has the meaning ascribed thereto in
Section 8.6.
1.159 Upstream Offeror. "Upstream Offeror" has the meaning ascribed
thereto in Section 8.6.
1.160 Upstream Ownership Interest. "Upstream Ownership Interest" has
the meaning ascribed thereto in Section 8.6.
1.161 Upstream Transferor. "Upstream Transferor" has the meaning
ascribed thereto in Section 8.6.
20
1.162 Warrants. "Warrants" means warrants issued by Aladdin
Enterprises on or about the date hereof to purchase class B non-voting common
stock in the capital of Aladdin Enterprises.
1.163 Warrant Agreement. "Warrant Agreement" means the Warrant
Agreement dated the date hereof among Aladdin Enterprises, the Company and State
Street Bank and Trust Company as warrant agent.
1.164 Warrant Shares. "Warrant Shares" means class B non-voting
common stock in the capital of Aladdin Enterprises issued upon the exercise of
any Warrants.
ARTICLE II
INTRODUCTORY MATTERS
2.1 Records Office. The Company shall continuously maintain in the
state of Nevada a Records Office, which may, but need not be, a place of its
business in the state of Nevada, at which it shall keep all records identified
in NRS 86.241. As of the date hereof, the Records Office shall be 2810 West
Charleston Boulevard, Suite F-58, Las Vegas, Nevada 89102. The Records Office
may be changed to another location within the State of Nevada as the Board may
from time to time determine.
2.2 Other Offices. The Company may establish and maintain other
offices at any time and at any place or places as the Members may designate or
as the business of the Company may require.
2.3 Resident Agent and Registered Office. The resident agent for
service of process shall be as set forth in the Articles. The resident agent may
be changed as the Board may from time to time determine. The Company shall have
as its registered office in the state of Nevada the street address of its
resident agent.
2.4 Purpose. The Company is organized for the purpose(s) of
developing, constructing, financing, owning and operating hotels and casinos and
related businesses and to engage in such other lawful enterprises as may be
incidental or appurtenant to the foregoing.
2.5 No State Law Partnership; No Liability to Third Parties. The
Members intend that the Company not be a partnership (including, without
limitation, a limited partnership) or joint venture, and that no Member be a
partner or joint venturer of any other Member, for any purposes other than
federal, state and local tax purposes, and this Agreement not be construed to
suggest otherwise. No Member shall be liable for the debts, obligations or
liabilities of the Company, including under a judgment decree or order of a
court.
21
2.6 Legend. In addition to any legend required pursuant to Section
3.8, each Certificate of Shares shall bear the following legend: "The securities
represented by this certificate are subject to that certain operating agreement
of the company dated February 26, 1998 (the "Operating Agreement") and the
provisions set forth therein, including, without limitation provisions relating
to: (a) the voting rights of the members, (b) circumstances under which
distributions to the members may be diverted and (c) circumstances under which
the interests of the members may be subject to mandatory transfer. A copy of the
Operating Agreement is available for inspection at the company's registered
office during regular business hours".
ARTICLE III
INTERESTS AND ADJUSTMENTS IN INTERESTS
3.1 Member's Interest. A Member's Interests shall for all purposes
be personal property. A Member shall have no interest in specific Company assets
or property, including any assets or property contributed to the Company by such
Member as part of any Capital Contribution.
3.2 Classes of Shares. (a) The Shares shall be divided between
Common Shares, Series A Preferred Shares and Series B Preferred Shares.
(b) There shall be authorized 10,000,000 Common Shares. Each
of such Shares shall have identical rights and terms in all respects except as
specifically set forth in this Agreement. The Common Shares shall have rights to
an allocation of Profits and Losses and to any Distributions as may be
authorized under this Agreement and under the NRS. Except as specifically
provided in this Agreement or under the NRS, the Common Shares collectively
shall have all management and voting rights of the Company.
(c) There shall be authorized 1,500,000 Series A Preferred
Shares. Each of such Shares shall have identical rights and terms in all
respects. The Series A Preferred Shares shall have rights to an allocation of
Profits and Losses, other allocations and any Distributions as may be authorized
under this Agreement and under the NRS. Except as specifically provided in this
Agreement or the NRS, the Series A Preferred Shares shall not have management or
voting rights under the NRS or otherwise.
(d) There shall be authorized 1,500,000 Series B Preferred
Shares. Each of such Shares shall have identical rights and terms in all
respects. The Series B Preferred Shares shall have rights to an allocation of
Profits and Losses and to any Distributions as may be authorized under this
Agreement and under the NRS. Except as specifically provided in this Agreement
or the NRS, the Series B Preferred Shares shall not have management or voting
rights under the NRS or otherwise.
22
3.3 Completion Guaranty Payments. (a) Any payment required pursuant
to the Completion Guaranty ("Completion Guaranty Payments") by LCI Parent or the
Trust shall be made by them in the proportions as provided in the Contribution
Agreement. Series A Preferred Shares shall be issued in consideration for such
payments to LCI, in the case of a payment by LCI Parent, or to Sommer
Enterprises, in the case of a payment by the Trust, at the rate of one Series A
Preferred Share per $100 paid. The Company shall issue such Series A Preferred
Shares and shall establish and credit a Capital Account for the relevant Member
in respect of such Preferred Shares in the amount of the relevant payment.
(b) Without limiting Section 3.3(a) or the Contribution
Agreement, if either LCI Parent or the Trust (the "Non-Contributing Obligor")
fails to make its share of a Completion Guaranty Payment as provided in the
Contribution Agreement (the "Delinquent Amount"), then the other such Person
(the "Contributing Obligor") may, in addition to any and all other rights and
remedies the Contributing Obligor may have at law and in equity, in addition to
its payment obligations under the Contribution Agreement, pay as provided in the
Completion Guaranty an additional amount equal to the Delinquent Amount, and
such payment of the amount equal to the Delinquent Amount shall be treated as a
recourse loan (a "Completion Guaranty Loan") by the Contributing Obligor to the
Non-Contributing Obligor on the terms and conditions provided in the
Contribution Agreement. As of the date of any advance of a Completion Guaranty
Loan, the Non-Contributing Obligor, shall be deemed to have paid to Aladdin
Gaming an amount equal to the principal amount of such Completion Guaranty Loan
and Series A Preferred Shares shall be issued to LCI or Sommer Enterprises (as
the case may be) pursuant to Section 3.3(a). Until any and all Completion
Guaranty Loans are repaid in full, LCI, if LCI Parent is the Non-Contributing
Obligor, or Sommer Enterprises, if the Trust is the Non-Contributing Obligor,
shall draw no further Distributions in respect of any Shares or shares in
Aladdin Enterprises, and all cash or property otherwise distributable to such
Member with respect to any Shares or shares in Aladdin Enterprises shall be paid
to the Contributing Obligor in repayment of the outstanding balance of the
Completion Guaranty Loan, with such funds being applied first to reduce any and
all interest accrued on such Completion Guaranty Loan and then to reduce the
principal amount thereof. Any amounts so applied shall be treated, for all
purposes under this Agreement, as having actually been distributed to LCI, if
LCI Parent is the Non-Contributing Obligor, or to Sommer Enterprises, if the
Trust is the Non-Contributing Obligor, and applied to repay the outstanding
Completion Guaranty Loan.
(c) In order to secure the repayment of any and all Completion
Guaranty Loans made to the Non-Contributing Obligor, LCI, if LCI Parent is the
Non-Contributing Obligor, or Sommer Enterprises, if the Trust is the
Non-Contributing Obligor, hereby grants a security interest and continuing lien
in favor of the Contributing Obligor in and to all Shares and any shares in
Aladdin Enterprises held by such Person at any time, and hereby irrevocably
appoints the Contributing Obligor, and any of the Contributing Obligor's
respective agents, officers, or employees, as such Person's attorneys-in-fact,
with full power to prepare, execute, acknowledge, and deliver, as applicable,
all documents, instruments and agreements memorializing or securing such
23
Completion Guaranty Loans including, without limitation, such Uniform Commercial
Code financing and continuation statements, pledge or security agreements,
mortgages and other security instruments as may be reasonably appropriate to
perfect and continue the security interest in favor of the Contributing Obligor;
provided that such security interest and continuing lien shall be (i)
subordinated to the security interests and liens granted in favor of the Bank
Lenders pursuant to the Loan Documents (as defined in the Credit Agreement) and
the Contributing Obligor shall not enforce any such security interest or
continuing lien until all Loans (as defined in the Credit Agreement) and other
Obligations (as defined in the Credit Agreement) have been paid in full in cash,
all Letters of Credit (as defined in the Credit Agreement) have been terminated
or expired and all Commitments (as defined in the Credit Agreement) have been
terminated under the Credit Agreement (provided that to the extent any
distributions on any relevant shares or membership interests are permitted to be
made to the holder(s) thereof under the Loan Documents, the Contributing Obligor
shall be permitted to enforce its security interest and continuing lien thereon,
including, without limitation, diverting distributions thereon to the
Contributing Obligor), and (ii) suspended for any period in which an Event of
Default exists which was Caused by the Contributing Obligor or its Affiliates.
(d) If an Affiliate of the Majority Member (if any) fails to
make its pro rata share of any Completion Guaranty Payment as required by the
Contribution Agreement, then, provided that (i) the Contributing Obligor or its
Affiliates have not Caused an existing Event of Default and (ii) the
Contributing Obligor does not already have an Ultimate Percentage Interest
greater than fifty percent, from the date on which the relevant Completion
Guaranty Payment would have been past due if not paid (the "Completion Guaranty
Payment Due Date") until such payments are made, the Non-Contributing Obligor
and its Affiliates shall vote their Common Shares and, if applicable, shall
cause Aladdin Enterprises to vote its Common Shares so that (taking into account
any Common Shares held by the Contributing Obligor or its Affiliates) the
Contributing Obligor controls fifty percent of the voting power of the Total
Common Shares.
3.4 Keep Well Payments. (a) Any payment required pursuant to the
Keep Well Agreement ("Keep Well Payments") by LCI Parent or Aladdin Holdings
shall be made by them in the proportions as provided in the Contribution
Agreement. Where such payments are required other than pursuant to Section 13 of
the Keep Well Agreement, Series A Preferred Shares shall be issued in
consideration therefor to LCI, in the case of a payment by LCI Parent, or to
Sommer Enterprises, in the case of a payment by Aladdin Holdings, at the rate of
one Series A Preferred Share per $100 paid. Where such payments are required to
be made by LCI Parent pursuant to Section 13 of the Keep Well Agreement, Series
B Preferred Shares shall be issued in consideration therefor to LCI at the rate
of one Series B Preferred Share per $100 paid. The Company shall issue such
Series A Preferred Shares or Series B Preferred Shares and shall establish and
credit a Capital Account for the relevant Member in respect of such Preferred
Shares in the amount of the relevant payment.
24
(b) Without limiting Section 3.4(a) or the Contribution
Agreement, if either LCI Parent or Aladdin Holdings (the "Non-Contributing
Obligor") fails to make its share of a payment required under the Keep Well
Agreement as provided in the Contribution Agreement (the "Delinquent Amount"),
then the other such Person (the "Contributing Obligor") may, in addition to any
and all other rights and remedies the Contributing Obligor may have at law and
in equity, in addition to its payment obligations under the Contribution
Agreement, pay as provided in the Keep Well Agreement an additional amount equal
to the Delinquent Amount, and such payment of the amount equal to the Delinquent
Amount shall be treated as a recourse loan (a "Keep Well Loan") by the
Contributing Obligor to the Non-Contributing Obligor, on the terms and
conditions provided in the Contribution Agreement. As of the date of any advance
of a Keep Well Loan, the Non-Contributing Obligor shall be deemed to have paid
to Aladdin Gaming an amount equal to the principal amount of such Keep Well Loan
and Series A Preferred Shares or Series B Preferred Shares (as the case may be)
shall be issued to LCI or Sommer Enterprises (as the case may be) pursuant to
Section 3.4(a). Until any and all Keep Well Loans are repaid in full, LCI, if
LCI Parent is the Non-Contributing Obligor, or Sommer Enterprises, if Aladdin
Holdings is the NonContributing Obligor, shall draw no further Distributions in
respect of any Shares or shares in Aladdin Enterprises, and all cash or property
otherwise distributable to such Member with respect to Shares or shares in
Aladdin Enterprises shall be paid to the Contributing Obligor in repayment of
the outstanding balance of the Keep Well Loan, with such funds being applied
first to reduce any and all interest accrued on such Keep Well Loan and then to
reduce the principal amount thereof. Any amounts so applied shall be treated,
for all purposes under this Agreement, as having actually been distributed to
LCI, if LCI Parent is the Non-Contributing Obligor, or to Sommer Enterprises, if
Aladdin Holdings is the Non-Contributing Obligor, and applied to repay the
outstanding Keep Well Loan.
(c) In order to secure the repayment of any and all Keep Well
Loans made to the Non-Contributing Obligor, LCI, if LCI Parent is the
Non-Contributing Obligor, or Sommer Enterprises, if Aladdin Holdings is the
Non-Contributing Obligor, hereby grants a security interest and continuing lien
in favor of the Contributing Obligor in and to all Shares and any shares in
Aladdin Enterprises held by such Person at any time, and hereby irrevocably
appoints the Contributing Obligor, and any of the Contributing Obligor's
respective agents, officers, or employees, as such Person's attorneys-in-fact,
with full power to prepare, execute, acknowledge, and deliver, as applicable,
all documents, instruments and agreements memorializing or securing such Keep
Well Loans including, without limitation, such Uniform Commercial Code financing
and continuation statements, pledge or security agreements, mortgages and other
security instruments as may be reasonably appropriate to perfect and continue
the security interest in favor of the Contributing Obligor; provided that such
security interest and continuing lien shall be (i) subordinated to the security
interests and liens granted in favor of the Bank Lenders pursuant to the Loan
Documents (as defined in the Credit Agreement) and the Contributing Obligor
shall not enforce any such security interest or continuing lien until all Loans
(as defined in the Credit Agreement) and other Obligations (as defined in the
Credit Agreement) have been paid in full in
25
cash, all Letters of Credit (as defined in the Credit Agreement) have been
terminated or expired and all Commitments (as defined in the Credit Agreement)
have been terminated under the Credit Agreement (provided that to the extent any
distributions on any relevant shares or membership interests are permitted to be
made to the holder(s) thereof under the Loan Documents, the Contributing Obligor
shall be permitted to enforce its security interest and continuing lien thereon,
including, without limitation, diverting distributions thereon to the
Contributing Obligor), and (ii) suspended for any period in which an Event of
Default exists which was Caused by the Contributing Obligor or its Affiliates.
(d) If either LCI Parent or Aladdin Holdings is a
Non-Contributing Obligor by reason of its failure to make its pro rata share of
any Keep Well Payment as required by the Contribution Agreement and a Keep Well
Loan has been made by the Contributing Obligor to the Non-Contributing Obligor
for such Delinquent Amount pursuant to Section 3.4(b), then, provided that the
Contributing Obligor or its Affiliates have not Caused an existing Event of
Default, the directly held Percentage Interest of LCI, if LCI Parent is the
Non-Contributing Obligor, or of Sommer Enterprises, if Aladdin Holdings is the
Non-Contributing Obligor, shall be decreased, and the directly held Percentage
Interest of LCI or Sommer Enterprises, as the case may be, shall be
correspondingly increased, as of the date the relevant Keep Well Payment would
have been past due if not paid (the "Keep Well Due Date"), by an amount
(expressed as a percentage) equal to either (i) in the case of a failure by the
Non-Contributing Obligor to pay the Delinquent Amount within thirty business
days of the Keep Well Due Date, the fraction (the "Dilution Fraction") (A) the
numerator of which is the Delinquent Amount, and (B) the denominator of which is
$200 million, or (ii) in the case of a failure by the Non-Contributing Obligor
to pay the Delinquent Amount within forty-five business days of the Keep Well
Due Date, one and a half times the Dilution Fraction, or (iii) in the case of a
failure by the Non-Contributing Obligor to pay the Delinquent Amount within
sixty business days of the Keep Well Due Date, two times the Dilution Fraction.
The Parties agree that after the directly held Percentage Interest of LCI, if
LCI Parent is the Non-Contributing Obligor, or Sommer Enterprises, if Aladdin
Holdings is the Non-Contributing Obligor, is reduced to zero pursuant to the
foregoing sentence of this Section 3.4(d), if such Party holds any shares in
Aladdin Enterprises, a number of such shares shall be transferred to LCI or
Sommer Enterprises (as the case may be), with class A voting common stock being
transferred first and then class B non-voting common stock being transferred, in
order to give effect to the adjustments pursuant to the foregoing sentence by
thereby reducing and increasing the such Parties' Ultimate Percentage Interests
instead of their directly held Percentage Interests.
(e) If an Affiliate of the Majority Member (if any) fails to
make its pro rata share of any Keep Well Payment as required by the Contribution
Agreement, then, provided that (i) the Contributing Obligor or its Affiliates
have not Caused an existing Event of Default and (ii) the Contributing Obligor
does not already have an Ultimate Percentage Interest greater than fifty
percent, from the Keep Well Due Date until such payments are made, the
Non-Contributing Obligor and its Affiliates shall vote their Common Shares and,
if applicable, shall cause Aladdin Enterprises
26
to vote its Common Shares so that (taking into account any Common Shares held by
the Contributing Obligor or its Affiliates) the Contributing Obligor controls
fifty percent of the voting power of the Total Common Shares.
(f) Nothing in this Agreement shall give LCI or any of its
Affiliates or any other Person whatsoever any right or claim whatsoever against
the Trust for any reimbursement or other payment in connection with obligations
under the Keep Well Agreement.
3.5 EBITDA Shortfall Payments. (a) Any payment required pursuant to
Section 1(b) of the Contribution Agreement ("EBITDA Shortfall Payments") by LCI
Parent or the Trust shall, unless otherwise agreed by the Trust and LCI Parent,
be made by them in the proportions as provided in the Contribution Agreement.
Series A Preferred Shares shall be issued in consideration therefor to LCI, in
the case of a payment by LCI Parent, or Sommer Enterprises, in the case of a
payment by the Trust, at the rate of one Series A Preferred Share per $100 paid.
The Company shall issue such Series A Preferred Shares and shall establish and
credit a Capital Account for the relevant Member in respect of such Preferred
Shares in the amount of the relevant payment.
(b) Without limiting Section 3.5(a) or the Contribution
Agreement, if either LCI Parent or the Trust (the "Non-Contributing Obligor")
fails to make its share of an EBITDA Shortfall Payment (the "Delinquent
Amount"), then the other such Person (the "Contributing Obligor") may, in
addition to any and all other rights and remedies the Contributing Obligor may
have at law and in equity, in addition to its payment obligations under the
Contribution Agreement, pay to Aladdin Gaming an additional amount equal to the
Delinquent Amount, and such payment of the amount equal to the Delinquent Amount
shall be treated as a recourse loan (an "EBITDA Shortfall Loan") by the
Contributing Obligor to the Non-Contributing Obligor, on the terms and
conditions provided in the Contribution Agreement. As of the date of any advance
of a EBITDA Shortfall Loan, the Non-Contributing Obligor shall be deemed to have
paid to Aladdin Gaming an amount equal to the principal amount of such EBITDA
Shortfall Loan and Series A Preferred Shares shall be issued to LCI or Sommer
Enterprises (as the case may be) pursuant to Section 3.5(a). Until any and all
EBITDA Shortfall Loans are repaid in full, LCI, if LCI Parent is the
Non-Contributing Obligor, or Sommer Enterprises, if the Trust is the
Non-Contributing Obligor, shall draw no further Distributions in respect of any
Shares or shares in Aladdin Enterprises, and all cash or property otherwise
distributable to such Member with respect to Shares or shares in Aladdin
Enterprises shall be paid to the Contributing Obligor in repayment of the
outstanding balance of the EBITDA Shortfall Loan, with such funds being applied
first to reduce any and all interest accrued on such EBITDA Shortfall Loan and
then to reduce the principal amount thereof. Any amounts so applied shall be
treated, for all purposes under this Agreement, as having actually been
distributed to LCI, if LCI Parent is the Non-Contributing Obligor, or to Sommer
Enterprises, if the Trust is the Non-Contributing Obligor, and applied to repay
the outstanding EBITDA Shortfall Loan.
27
(c) In order to secure the repayment of any and all EBITDA
Shortfall Loans made to the Non-Contributing Obligor, LCI, if LCI Parent is the
Non-Contributing Obligor, or Sommer Enterprises, if the Trust is the
Non-Contributing Obligor, hereby grants a security interest and continuing lien
in favor of the Contributing Obligor in and to all Shares and any shares in
Aladdin Enterprises held by such Person at any time, and hereby irrevocably
appoints the Contributing Obligor, and any of the Contributing Obligor's
respective agents, officers, or employees, as such Person's attorneys-in-fact,
with full power to prepare, execute, acknowledge, and deliver, as applicable,
all documents, instruments and agreements memorializing or securing such EBITDA
Shortfall Loans including, without limitation, such Uniform Commercial Code
financing and continuation statements, pledge or security agreements, mortgages
and other security instruments as may be reasonably appropriate to perfect and
continue the security interest in favor of the Contributing Obligor; provided
that such security interest and continuing lien shall be (i) subordinated to the
security interests and liens granted in favor of the Bank Lenders pursuant to
the Loan Documents (as defined in the Credit Agreement) and the Contributing
Obligor shall not enforce any such security interest or continuing lien until
all Loans (as defined in the Credit Agreement) and other Obligations (as defined
in the Credit Agreement) have been paid in full in cash, all Letters of Credit
(as defined in the Credit Agreement) have been terminated or expired and all
Commitments (as defined in the Credit Agreement) have been terminated under the
Credit Agreement (provided that to the extent any distributions on any relevant
shares or membership interests are permitted to be made to the holder(s) thereof
under the Loan Documents, the Contributing Obligor shall be permitted to enforce
its security interest and continuing lien thereon, including, without
limitation, diverting distributions thereon to the Contributing Obligor), and
(ii) suspended for any period in which an Event of Default exists which was
Caused by the Contributing Obligor or its Affiliates.
(d) If either LCI Parent or the Trust is a Non-Contributing
Obligor by reason of its failure to make its pro rata share of any EBITDA
Shortfall Payment as required by the Contribution Agreement and an EBITDA
Shortfall Loan has been made by the Contributing Obligor to the Non-Contributing
Obligor for such Delinquent Amount pursuant to Section 3.5(b), then, provided
that the Contributing Obligor or its Affiliates have not Caused an existing
Event of Default, the directly held Percentage Interest of LCI, if LCI Parent is
the Non-Contributing Obligor, or of Sommer Enterprises, if the Trust is the
Non-Contributing Obligor, shall be decreased, and the directly held Percentage
Interest of LCI or Sommer Enterprises, as the case may be, shall be
correspondingly increased, as of the date the relevant EBITDA Shortfall Payment
would have been past due if not paid (the " EBITDA Shortfall Due Date"), by an
amount (expressed as a percentage) equal to either (i) in the case of a failure
by the Non-Contributing Obligor to pay the Delinquent Amount within thirty
business days of the EBITDA Shortfall Due Date, the fraction (the "Dilution
Fraction") (A) the numerator of which is the Delinquent Amount, and (B) the
denominator of which is $200 million, or (ii) in the case of a failure by the
Non-Contributing Obligor to pay the Delinquent Amount within forty-five business
days of the EBITDA Shortfall Due Date, one and a half times the Dilution
Fraction, or (iii) in the case of a failure by the Non-Contributing Obligor to
pay the Delin-
28
quent Amount within sixty business days of the Keep Well Due Date, two times the
Dilution Fraction. The Parties agree that after the directly held Percentage
Interest of LCI, if LCI Parent is the Non-Contributing Obligor, or Sommer
Enterprises, if the Trust is the Non-Contributing Obligor, is reduced to zero
pursuant to the foregoing sentence of this Section 3.5(d), if such Party holds
any shares in Aladdin Enterprises, a number of such shares shall be transferred
to LCI or Sommer Enterprises (as the case may be), with class A voting common
stock being transferred first and then class B non-voting common stock being
transferred, in order to give effect to the adjustments pursuant to the
foregoing sentence by thereby reducing and increasing the such Parties' Ultimate
Percentage Interests instead of their directly held Percentage Interests.
3.6 Other Adjustments. (a) On the Opening Date LCI's Percentage
Interest shall be decreased by 0.5% and Sommer Enterprises' Percentage Interest
shall be correspondingly increased by 0.5%.
(b) Upon (i) the vesting of Common Shares pursuant to any
Employment and Consulting Agreement, (ii) the exercise of any employee options
to purchase Common Shares or (iii) any other issuance of Common Shares after the
date hereof in accordance with this Agreement, Schedule 1 shall be updated to
include such new Common Shares and any Capital Contributions in connection
therewith and to reflect the changes in the Percentage Interests of the Members
resulting therefrom.
(c) Upon the exercise of any Warrants, the Percentage
Interests of all Members other than LCI and Aladdin Enterprises as well as the
Restricted Membership Interests shall be adjusted so that all such Members and
holders of Restricted Membership Interests shall bear the dilutive effect of
such exercise equally in proportion to their Ultimate Percentage Interests (or
intended Ultimate Percentage Interests upon vesting in the case of holders of
Restricted Membership Interests). The Parties acknowledge that consequential
adjustments to such Percentage Interests may be necessary, and if so shall
occur, upon the vesting of any Restricted Membership Interests to give effect to
such equal sharing of such dilutive effect.
(d) The Parties acknowledge that adjustments to the Percentage
Interest of Aladdin Enterprises shall occur in certain circumstances as provided
in the Warrant Agreement. Upon any such adjustment, the Percentage Interests of
all Members other than Aladdin Enterprises as well as the Restricted Membership
Interests shall be adjusted so that all such Members and holders of Restricted
Membership Interests shall bear the dilutive effect or the benefit of such
adjustments equally in proportion to their Ultimate Percentage Interests (or
intended Ultimate Percentage Interests in the case of the holders of Restricted
Membership Interests). The Parties acknowledge that consequential adjustments to
such Percentage Interests may be necessary, and if so shall occur, upon the
vesting of any Restricted Membership Interests to give effect to such equal
sharing of such dilutive effect or benefit.
29
(e) Upon the vesting of any Restricted Membership Interest, in
addition to any necessary consequential adjustments to the Members' Percentage
Interests pursuant to Sections 3.6(c) and (d), (i) the Percentage Interest of
Aladdin Enterprises shall not change; (ii) the Percentage Interest of LCI shall
be reduced by twenty-five percent of the dilutive effect of such vesting
(assuming, in the case of a vesting of a Restricted Membership Interest after
any Warrants have been exercised, that no adjustment to the Restricted
Membership Interest had occurred pursuant to Section 3.6(c)) and (iii) Sommer
Enterprises' Percentage Interest shall be reduced to bear the remaining dilutive
effect of such vesting, and the Capital Accounts of LCI and Sommer Enterprises
shall be reduced pro-rata in proportion to such reductions in Percentage
Interest to take account of any Capital Account to be established pursuant to
the relevant Employment and Consulting Agreement for the holder of such
Restricted Membership Interest upon the vesting of such Restricted Membership
Interest.
(f) Upon any Warrantholder validly exercising a right to
exchange its Warrants or Warrant Shares into Common Shares pursuant to Section 4
of the Equity Participation Agreement, the Company shall (subject to such
Warrantholder agreeing in writing to be bound by this Agreement) issue such
Common Shares to such Warrantholder as provided in the Equity Participation
Agreement, and admit such Warrantholder as a Member, and shall reduce Aladdin
Enterprises' Percentage Interest thereupon to ensure that Aladdin Enterprises
bears all of the dilutive effect of such issuance.
(g) No adjustments shall be made to the Capital Accounts of
Members with respect to any of the adjustments in Percentage Interests provided
for in this Section 3.6.
3.7 Adjustments. Following any adjustments of the Percentage
Interests of any Members pursuant to this Article III, the Common Shares issued
and outstanding shall be adjusted, Schedule 1 shall be updated and the Members
shall cooperate with the Company as necessary to amend, cancel or issue
Certificates accordingly. Notwithstanding anything else herein to the contrary,
any issuance of Shares and adjustment of Percentage Interests pursuant to this
Article III shall be subject to receipt of all approvals required by the Nevada
Act (such approval to be obtained as soon as reasonably practicable). In the
event that any Distributions are declared on the Shares during the period that
such approvals are pending under the Nevada Act, then to the extent permitted by
the Nevada Act and other applicable law the amount of such Distributions in
respect of the Shares to be transferred, issued or cancelled (without
duplication) shall be held in an escrow account by the Company until such
approvals are obtained, at which time such amount shall be paid to the new
holder of such Shares.
3.8 UCC Election. The Company hereby irrevocably elects that all
membership interests in the Company shall be securities governed by Article 8 of
the Uniform Commercial Code. Each Certificate of Shares shall bear the following
legend: "This certificate evidences an interest in Aladdin Gaming Holdings, LLC
and shall be a security for purposes of Article 8 of the Uniform
30
Commercial Code." No change to this provision shall be effective until all
outstanding Certificates of Shares have been surrendered for cancellation and
any new Certificates of Shares thereafter issued shall not bear the foregoing
legend.
ARTICLE IV
CAPITAL ACCOUNTS
4.1 Initial Capital. As of the date hereof the capital of the
Company shall be the Capital Contributions of the Members on or prior to the
date hereof in such amounts or value as are set forth opposite the name of each
Member on Schedule 1, such Capital Contributions made in exchange for the Shares
indicated on Schedule 1. No such initial Capital Contributions shall be accepted
by the Company and no Shares shall be issued until all necessary approvals under
the Nevada Act are obtained with respect to such Capital Contribution and
issuance of Shares.
4.2 Capital Accounts. Capital Accounts shall be established on the
Company's books representing the Members' respective Capital Contributions to
the Company. A separate Capital Account shall be maintained for each Member and,
for book purposes, separated into a contribution account and an income (loss)
account for each class of Shares held by each Member at any time maintained in
accordance with the accounting methods elected to be followed by the Company.
The Capital Account of each contributing Member shall be credited with the
amount of such Member's initial Capital Contribution and any subsequent Capital
Contributions upon receipt thereof by the Company (including payments pursuant
to the Completion Guaranty and Keep Well Agreement); provided, however, that the
Capital Account of a Member shall not be credited with the amount of any Capital
Contribution until all necessary approvals under the Nevada Act are obtained
with respect to such initial Capital Contribution.
4.3 General Rules for Adjustment of Capital Accounts. Subject to
Section 4.4, the Capital Account of each Member shall be:
(a) increased by:
(i) the amount of the Member's cash contributions to the
Company;
(ii) the agreed fair market value of any property
contributed by the Member to the Company (net of liabilities secured by
any such contributed property that the Company is considered to assume or
take subject to for purposes of Code Section 752);
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(iii) the amount of Profits allocated to the Member
pursuant to Article V or other provisions of this Agreement and any items
in the nature of income or gain which are specially allocated to the
Member;
(iv) the amount of any Company liabilities assumed by
the Member; and
(v) any other increases required by this Agreement or
the Treasury Regulations; and
(b) decreased by:
(i) all amounts paid or distributed to the Member, other
than amounts required to be treated as a payment for property or services
under the Code;
(ii) the agreed fair market value of any property
distributed in kind to the Member pursuant to this Agreement (net of any
liabilities secured by such distributed property that such Member is
considered to assume or take subject to for purposes of Code Section 752);
(iii) the amount of Losses allocated to the Member
pursuant to Article V or other provisions of this Agreement and any items
in the nature of expenses or losses which are specially allocated to the
Member;
(iv) the amount of any liabilities of the Member assumed
by the Company; and
(v) any other decreases required by this Agreement or
the Treasury Regulations.
In the event that any Shares are Transferred in accordance with the
terms of this Agreement (except with respect to Transfers referred to in Section
3.6), the transferee shall succeed to the Capital Account of the transferor to
the extent it relates to the transferred Shares.
Before decreasing a Member's Capital Account with respect to the
distribution of any property to such Member, all Members' accounts shall be
adjusted to reflect the manner in which the unrealized income gain, loss, and
deduction inherent in such property (that has not been previously reflected in
the Members' Capital Accounts) would be allocated among the Members if there
were a taxable disposition of such property by the Company on the date of
distribution, in accordance with Treasury Regulations Section
1.704-1(b)(2)(iv)(e).
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4.4 Special Rules With Respect to Capital Accounts. (a)
Notwithstanding any other provision of this Agreement, each Member's Capital
Account shall be maintained and adjusted in accordance with the Code and the
Treasury Regulations, including Treasury Regulations Section 1.704-1(b)(2)(iv)
and appropriate adjustments to the Capital Accounts permitted in the case of a
Member who receives the benefit of any special basis adjustments under Code
Sections 734, 743 and 754. In determining the amount of any liability for
purposes of Sections 4.3(a) and 4.3(b), there shall be taken into account Code
Section 752(c) and any other applicable provisions of the Code and the Treasury
Regulations.
(b) For purposes of computing the balance in a Member's
Capital Account no credit shall be given for any Capital Contribution which such
Member is to make until such Capital Contribution is actually received by the
Company.
(c) All provisions of this Agreement relating to the
maintenance of Capital Accounts are intended to comply with Treasury Regulations
Section 1.704-1(b) and shall be interpreted and applied in a manner consistent
with such Treasury Regulations. The Members shall make any appropriate
modifications in the event unanticipated events might otherwise cause this
Agreement not to comply with Treasury Regulations Section 1.704-1(b).
4.5 Rights With Respect to Capital; Interest. No Member shall have
the right to withdraw or receive any return of such Member's Capital
Contribution, and no Capital Contribution must be returned in the form of
property other than cash except as specifically provided herein. No interest
shall be paid or credited to the Members on their Capital Accounts or upon any
undistributed profits left on deposit with the Company.
4.6 Additional Capital Contributions. Except as specifically
provided in this Agreement, the Keep Well Agreement, the Keep Well Agreement or
the Contribution Agreement, (a) no Member shall be required to make an
additional Capital Contribution to the Company, or to make any loan (or cause
any loan to be made) to the Company, and (b) no Member shall have the right to
make an additional Capital Contribution to the Company without the consent of
the Company.
4.7 Adjustment of Capital Accounts On Redemption of Discount Notes.
After the redemption of any Discount Notes, and immediately prior to (a) any
material Distribution in redemption or liquidation of the Common Shares held by
Sommer Enterprises or LCI (or other substantial Distribution with respect to
such Shares as to which the adjustment would have material effect), or (b) any
merger or incorporation of the Company, or similar transaction preparatory to an
IPO, and with effect to the determination of the entitlement of the parties in
any transaction described in (a) or (b), Sommer Enterprises' Capital Account in
respect of its Common Shares shall be reduced by an amount equal to the product
of LCI's Percentage Interest at the time of such redemption multiplied by the
accreted value on the issue date of the Discount Notes redeemed, and
33
LCI's Capital Account shall be increased by the same amount. Immediately prior
to an adjustment to the relative Capital Accounts of Sommer Enterprises and LCI
pursuant to this Section 4.7, each asset of the Company shall be deemed to have
been sold at its fair market value, and Profits and Losses recognized upon such
deemed sale shall be allocated in accordance with Article V. Sommer Enterprises
and LCI shall mutually agree on an appropriate method for an equivalent payment
or transfer of value with respect to any redemption of Discount Notes which
takes place at the time of or after the Company has been merged or incorporated,
such payment or transfer of value to be made reasonably promptly at the time of
or after any such redemption.
ARTICLE V
PROFITS AND LOSSES
5.1 Profits. After giving effect to the special allocations set
forth in Section 5.3, Profits for any Fiscal Year shall be allocated in the
following order and priority:
(a) first, to the Members holding Series A Preferred Shares to
the extent of and in proportion to the excess of the sum of (A) the cumulative
Series A Preferred Return of the relevant Member from the commencement of the
Company through the last day of the relevant Fiscal Year, plus (B) the
cumulative Losses allocated to such Member pursuant to Section 5.2(c) for all
prior Fiscal Years, over (ii) the cumulative Profits allocated to such Member
pursuant to this Section 5.1(a) for all prior Fiscal Years; and
(b) second, to the Members holding Series B Preferred Shares
to the extent of an in proportion to the excess of the sum of (A) the cumulative
Series B Preferred Return of the relevant Member from the commencement of the
Company through the last day of the relevant Fiscal Year, plus (B) the
cumulative Losses allocated to such Member pursuant to Section 5.2(b) for all
prior Fiscal Years, over (ii) the cumulative Profits allocated to such Member
pursuant to this Section 5.1(b) for all prior Fiscal Years;
(c) third, to the Members holding Common Shares to the extent
of any excess of (i) the cumulative losses allocated to the Member's Common
Shares over (ii) the sum of the cumulative allocations of Profits, pursuant to
this Section 5.1(c), with respect to such Shares; and
(d) the balance, if any, among the Members holding Common
Shares in proportion to their Percentage Interests.
5.2 Losses. After giving effect to the special allocations set forth
in Section 5.3, Losses for any Fiscal Year shall be allocated in the following
order and priority:
34
(a) first, to the Members holding Common Shares, to reverse
any excess of (i) the sum of the cumulative allocations of Profits, pursuant to
Section 5.1(c), with respect to such Shares, over (ii) the cumulative allocation
of Losses with respect to such Shares, in proportion to and to the extent of
such excess;
(b) second, to the Members holding Common Shares in proportion
to, and to the extent of, the Member's Capital Account with respect to the
Common Shares;
(c) third, to the Members holding Series B Preferred Shares to
the extent of the Members' Capital Accounts with respect to the Series B
preferred Shares;
(d) fourth, to the Members holding Series A Preferred Shares
to the extent of the Members' Capital Account with respect to the Series A
Preferred Shares; and
(e) the balance, if any, among the Members holding Common
Shares in proportion to their Percentage Interests.
5.3 Special Allocations. (a) Minimum Gain Chargeback. Except as
provided in Treasury Regulations Section 1.704.2(f), notwithstanding any other
provision of this Article V, if there is a net decrease in Minimum Gain during
any Fiscal Year, each Member shall be specially allocated items of Company
income and gain for such Fiscal Year (and, if necessary, subsequent years) in
proportion to and to the extent of an amount equal to such Member's share of the
net decrease in Minimum Gain determined in accordance with Treasury Regulations
Section 1.704-2(g). Items to be so allocated shall be determined in accordance
with Treasury Regulations Sections 1.704-2(f)(6) and 1.704-2(j)(2). This Section
5.3(a) is intended to comply with the "minimum gain chargeback" provisions of
Treasury Regulations Section 1.704-2(f) and shall be interpreted consistently
therewith.
(b) Member Minimum Gain Chargeback. Except as provided in
Treasury Regulations Section 1.704-2(i)(4), notwithstanding any other provision
of this Article V, if there is a net decrease in Member Nonrecourse Debt Minimum
Gain attributable to a Member Nonrecourse Debt during any Fiscal Year of the
Company, each Member who has a share of the Member Nonrecourse Debt Minimum Gain
attributable to such Member Nonrecourse Debt, determined in accordance with
Treasury Regulations Section 1.704-2(i)(5), shall be specially allocated items
of income and gain for such year (and, if necessary, subsequent years) in an
amount equal to such Member's share of the net decrease in Member Nonrecourse
Debt Minimum Gain attributable to such Member Nonrecourse Debt, determined in
accordance with Treasury Regulations Sections 1.704-2(i)(4). Allocations
pursuant to the previous sentence shall be made in proportion to the respective
amounts required to be allocated to each Member pursuant thereto. The items to
be so allocated shall be determined in accordance with Treasury Regulations
Sections 1.704-2(i)(4) and 1.704-2(j)(2). This Section 5.3(b) is intended to
comply with the "minimum gain chargeback"
35
requirement of Treasury Regulations Section 1.704-2(i)(4) and shall be
interpreted consistently therewith.
(c) Qualified Income Offset. In the event any Member
unexpectedly receives any adjustments, allocations or distributions described in
clauses (4), (5) or (6) of Treasury Regulations Section 1.704-1(b)(2)(ii)(d),
items of income and gain shall be specially allocated to each such Member in an
amount and manner sufficient to eliminate, to the extent required by the
Treasury Regulations, the Adjusted Capital Account Deficit created by such
adjustments, allocations or distributions of such Member as quickly as possible.
Allocation pursuant to this Section 5.3(c) shall be made only if and to the
extent that such Member would have an Adjusted Capital Account Deficit after all
other allocations provided for in this Article V have been tentatively made as
if this Section 5.3(c) were not in the Agreement. This Section 5.3(c) is
intended to constitute a "qualified income offset" within the meaning of
Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(3).
(d) Gross Income Allocation. In the event any Member has a
deficit Capital Account at the end of any Fiscal Year which is in excess of the
sum of (i) the amount such Member is obligated to restore pursuant to any
provision of the Agreement and (ii) the amount such Member is deemed to be
obligated to restore pursuant to the penultimate sentences of Treasury
Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), each such Member shall be
specially allocated items of income and gain in the amount of such excess as
quickly as possible, provided that an allocation pursuant to this Section 5.3(d)
shall be made only if and to the extent that such Member would have a deficit
Capital Account in excess of such sum after all other allocations provided for
in this Article V have been made as if Sections 5.3(c) and 5.3(d) were not in
this Agreement.
(e) Member Nonrecourse Deductions. Any Member Nonrecourse
Deductions for any Fiscal Year or other period shall be specially allocated to
the Member who bears (or is deemed to bear) the economic risk of loss with
respect to the Member Nonrecourse Debt to which such Member Nonrecourse
Deductions are attributable in accordance with Treasury Regulations Section
1.704-2(i)(1).
(f) Nonrecourse Deductions. Nonrecourse Deductions for any
year shall be specially allocated among the Members pro rata in proportion to
their Percentage Interests.
(g) Regulatory Allocations. Any special allocation of items
pursuant to this Section 5.3 shall be taken into account in determining
subsequent allocations pursuant to Sections 5.1 and 5.2 so that the cumulative
net amount of all items allocated to each Member shall, to the extent possible,
be equal to the amount that would have been allocated to such Member if there
had never been any special allocation pursuant to this Section 5.3.
5.4 Section 704(c) Allocation. For tax purposes, all items of
income, gain, loss, deduction, expense and credit, other than tax items
corresponding to items allocated pursuant to
36
Section 5.3, shall be allocated in the same manner as are Profits and Losses;
provided that in accordance with Code Section 704(c) and the Treasury
Regulations promulgated thereunder, income, gain, loss and deduction with
respect to property contributed to the capital of the Company shall, solely for
tax purposes, be allocated among the Members so as to take account of any
variation between the adjusted basis of such property for federal income tax
purposes and its fair market value. In the event that any asset of the Company
is revalued pursuant to this Agreement in accordance with Section 704 of the
Code and the regulations thereunder, subsequent allocations of income, gain,
loss and deduction with respect to such asset shall take account of any
variation between the adjusted basis of such asset for federal income tax
purposes and its fair market value in the same manner as under Code Section
704(c) and the Treasury Regulations promulgated thereunder. Any elections or
other decisions relating to allocations referred to in this Section 5.4 shall be
made by the Board in any manner that reasonably reflects the purpose and
intention of this Agreement; provided that the Company elects to apply the
traditional method described in Treasury Regulations Section 1.704- 3(b) without
curative allocations; provided, however, that curative allocations as described
in Treasury Regulations Section 1.704-3(c) shall be made with respect to $7
million of prepaid costs contributed to the Company by Aladdin Enterprises.
Allocations pursuant to this Section 5.4 are solely for purposes of federal,
state and local taxes and shall not affect, or in any way be taken into account
in computing, any Member's Capital Account or share of Profits, Losses, other
items, or distributions pursuant to any provision of this Agreement.
5.5 Federal Income Tax. It is the intent of the Company and its
Members that the Company will be governed by the applicable provisions of
Subchapter K of Chapter 1 of the Code.
ARTICLE VI
DISTRIBUTIONS
6.1 Tax Distributions. (a) No later than thirty days following the
end of each Quarter, the Company shall, to the extent of Available Cash, make a
Distribution of cash pro-rata to each Member (based on the balance in each
Member's Cumulative Tax Liability Account) to the extent that the balance in
that Member's Cumulative Tax Liability Account (determined as of the end of such
Quarter) exceeds the cumulative Distributions of cash made to such Member
pursuant to this Section 6.1. In computing the Cumulative Tax Liability Account
of LCI for this purpose, the amount of LCI's federal taxable income or gain
allocated or expected to be allocated for any Quarter shall be increased by 25
percent of the increase in LCI's federal taxable income resulting from the
applicability of section 163(i) of the Code to the income and deductions
allocated, or expected to be allocated (as appropriate) to LCI.
(b) The Distribution to Aladdin Enterprises under Section
6.1(a) shall be increased to the extent necessary to finance the increase in
Aladdin Enterprise's tax liability resulting
37
from the applicability of Section 163(i) of the Code to the income and
deductions allocated, or expected to be allocated (as appropriate) to
Enterprises.
(c) Subject to making the current and anticipated
Distributions provided for in Sections 6.1(a) and (b), at the discretion of the
Board and to the extent of remaining available cash the Company may make a
Distribution to Sommer Enterprises to the extent that a payment is required at
such time under the Tax Indemnification Agreement dated February 26, 1998 among
the Trust, Sommer Enterprises and LCI.
(d) Amounts distributed pursuant to this Section 6.1 shall be
treated as non-interest bearing advances of Distributions under Section 6.2, and
shall be taken into account in determining the amount of future Distributions
under Section 6.2.
6.2 Distributions. Subject to having made all Distributions provided
for in Section 6.1 and subject to Section 7.5, additional Distributions shall be
made Quarterly as determined by the Board, subject to the following order of
priority:
(a) first, to the Members holding Series A Preferred Shares in
proportion to their Unpaid Preferred Return with respect to such Shares until
the balance of the Unpaid Preferred Return with respect to such Shares is zero;
(b) second, to the Members holding Series A Preferred Shares
in proportion to their Unrecovered Series A Invested Capital until the balance
of the Unrecovered Series A Invested Capital is zero;
(c) third, to the Members holding Series B Preferred Shares in
proportion to their Unpaid Preferred Return with respect to such Shares until
the balance of the Unpaid Preferred Return with respect to such Shares is zero;
(d) fourth, to the Members holding Series B Preferred Shares
in proportion to their Unrecovered Series B Invested Capital until the balance
of the Unrecovered Series B Invested Capital is zero; and
(e) the balance, if any, among the Members holding Common
Shares, in proportion to their Percentage Interests.
6.3 Limitations on Distribution. Notwithstanding any other provision
of this Agreement, the Company shall not make any Distribution if such
Distribution would violate the NRS, the Nevada Act or other applicable law or
would cause a breach or default under any agreement or instrument to which the
Company is a party or by which the Company or any of its
38
assets are bound, but shall instead make such Distribution as soon as
practicable after the making of such Distribution would not cause such
violation, breach or default.
ARTICLE VII
MEMBERS
7.1 Powers of Members. Except as provided in Section 7.4, Members
shall not have the authority to bind the Company by virtue of their status as
Members.
7.2 Limitation of Liability. No Member shall be individually liable
under a judgment, decree or order of a court, or in any other manner, for a
debt, obligation or liability of the Company or any other Member, except as
provided by law or in an agreement signed by the Member to be charged. No Member
shall be required to loan any funds to the Company, nor shall any Member be
required to make any contribution to the Company, nor shall any Member be
subject to any liability to the Company, the other Members, or any third party,
solely as a result of a Member's negative Capital Account balance.
7.3 Compensation of Members. Subject to Section 7.5, the Company
shall have authority to pay to any Member a reasonable salary for said Member's
services to the Company. It is understood that the salary paid to any Member
under the provisions of this Section 7.3 shall be determined without regard to
the income of the Company and shall be considered as an operating expense of the
Company and shall be deducted as an expense item in determining Profits and
Losses.
7.4 Action by the Members. Except as otherwise specifically provided
in this Agreement, all actions of the Members shall be taken by the Members in
proportion to their Percentage Interests at the time of the action taken. Except
as otherwise specifically provided herein, the Members may vote, approve a
matter or take any action by the vote of the Members at a meeting at which a
quorum is present, in person or by proxy, or without a meeting by written
consent as provided in Section 7.10. The vote or written consent of a Majority
shall be required to approve any matter or to take any action at any meeting of
Members at which a quorum is present, unless a greater or lesser vote or consent
is provided for by this Agreement or required by the NRS.
7.5 Member Approval. (a) Subject to Section 7.5(b) and except as
otherwise specifically provided for in this Agreement, any of the following
actions by the Company or any Subsidiary shall require the vote or consent in
writing of a Supermajority:
(i) except as contemplated in the Equity Participation
Agreement, the admission of a new Member, the acceptance of any Capital
Contributions not provided for in this Agreement, the Completion Guaranty,
the Keep Well Agreement or the Contribution Agreement, or the issuance of
additional Shares or securities of the Company or Aladdin
39
Gaming convertible into or exchangeable for Shares or the granting of any
options or other rights to acquire from the Company or Aladdin Gaming, or
other obligation of the Company or Aladdin Gaming to issue, any Shares or
securities convertible into or exchangeable for Shares (other than in
respect of the matters referred to in Section 7.5(a)(xvi) for which
Section 7.5(a)(xvi) shall govern), except for any such acceptance,
issuance or grant provided for in the Employment and Consulting
Agreements;
(ii) other than (A) dividends and distributions by
Subsidiaries, or (B) Distributions referred to in Sections 6.1 and 12.5,
any declaration, setting aside or payment of any Distribution;
(iii) any voluntary dissolution or liquidation of the Company
or any Subsidiary or the sale of all or substantially all of the assets of
the Company and its Subsidiaries;
(iv) any merger or consolidation of the Company or any
Subsidiary with any Person;
(v) any amendment to the Articles or this Agreement or the
adoption of or amendment to the Articles of Organization or Operating
Agreement of any Subsidiary;
(vi) (A) during the period that the Keep Well Agreement is in
force, the creation, incurrence, assumption or guarantee of any
indebtedness (excluding obligations under leases made in the ordinary
course of business) and (B) after the Keep Well Agreement is no longer in
force, the creation, incurrence, assumption or guarantee of any
indebtedness (excluding obligations under leases made in the ordinary
course of business) in excess of $10 million in any individual transaction
(such threshold limit to be increased at the end of each Fiscal Year by an
amount determined by the Board to correspond to increases in consumer
prices in the United States for such Fiscal Year);
(vii) the creation of any lien, pledge or other security
interest in assets of the Company or any Subsidiary securing indebtedness
of any third party which is not for the benefit of any business carried on
by the Company or any Subsidiary;
(viii) the commencement of a voluntary case under Title 11 of
the Untied States Code entitled "Bankruptcy" or any other voluntary
proceeding under any Debtor Relief Laws or any voluntary general
assignment for the benefit of creditors;
(ix) any material transactions (other than transactions
provided for in Sections 6.7(a) or 6.9 of the LCI Purchase Agreement)
between the Company or any
40
Subsidiary, on the one hand, and any Member or any Affiliate of any
Member, on the other hand;
(x) any entry into any new business opportunity unrelated to
the Aladdin Development;
(xi) the appointment or removal of the Company's or its
Subsidiaries' independent auditors;
(xii) any material amendment to, or any material waiver under,
the Bazaar Lease (such consent not to be unreasonably withheld);
(xiii) any material amendment to, or any material waiver
under, the Reciprocal Easement Agreement (such consent not to be
unreasonably withheld);
(xiv) any arrangement or agreement for the Company or any
Subsidiary to pay a salary to any Member or any Affiliate of any Member
(other than pursuant to the Employment and Consulting Agreements and other
than in respect of the matters referred to in Section 7.5(a)(xvi) for
which Section 7.5(a)(xvi) shall govern);
(xv) the employment of any member of the Executive Management
Committee of Aladdin Gaming or any material amendment to the terms of
employment of any such Person, including the Employment and Consulting
Agreements;
(xvi) the adoption of, or any material amendment to, any
employee benefit, profit sharing, incentive, bonus, pension, retirement or
employee stock option plans (such consent not to be unreasonably withheld
in the context of industry practice);
(xvii) any license of the Aladdin trademark to any Person
other than a Subsidiary or otherwise in connection with operations of any
Person in connection with the Aladdin Development (such consent not to be
unreasonably withheld);
(xviii)any contract (including leases) outside the ordinary
course of business or for capital expenditure not included in the
Company's annual budgets (such consent not to be unreasonably withheld);
and
(xix) the initiation or settlement of any material litigation
outside the ordinary course of business and the selection of counsel
therefor (such consent not to be unreasonably withheld).
41
(b) Without limiting Articles VIII and XIV, Section 7.5(a)
shall be of no further force and effect in the event that LCI (i) has Caused an
Event of Default or (ii) is a Bankrupt Member; provided that Section 7.5(a)
shall continue to be of force and effect at such time if LCI is the Majority
Member.
(c) Notwithstanding any other provision of this Agreement, the
rights of the holders of any class of Preferred Shares to Distributions pursuant
to this Agreement may not be diminished or adversely affected without the vote
of the holders of at least two-thirds of the issued and outstanding Shares of
that class.
(d) Notwithstanding any other provision of this Agreement,
Sections 3.6(d) and (f) and 8.4 may not be amended without the written consent
of Aladdin Enterprises.
7.6 LCI Consent. (a) In addition to any other requirements under
this Agreement or the NRS, the Company shall not enter into, or make any
material amendment to or material waiver under, any Redevelopment Document or
any part thereof (other than transactions provided for in Sections 6.7(a) or 6.9
of the LCI Purchase Agreement) without the consent of LCI or a Board Member
appointed by LCI. In addition, LCI shall have the rights in respect of
consultation and approval (a) in respect of the Redevelopment as provided in
Section 6.5 of the LCI Purchase Agreement, (b) in respect of the Second Hotel as
provided in Section 6.7(c) of the LCI Purchase Agreement and (c) in respect of
the Timeshare Parcel as provided in Section 6.9(b) of the LCI Purchase
Agreement; provided that such rights shall not extend to matters relating to
operation and maintenance of the Redevelopment, the Second Hotel or the
Timeshare Parcel. Without limiting Articles VIII and XIV, this Section 7.6 shall
be of no further force and effect if Sommer Enterprises is the Majority Member
and LCI (i) has Caused an Event of Default, or (ii) is Bankrupt.
(b) Without limiting any of the foregoing, (i) any change
order in the budget or the plans and specifications relating to the construction
and fitting out of the Salle Privee Facilities shall require the approval of LCI
in its sole discretion and (ii) any change order in the budget or the plans and
specifications relating to the construction phase of the Redevelopment, or any
part thereof, which is in excess of $1 million or any change order of $1 million
or less, to the extent such changes cumulatively exceed $10 million shall be
subject to LCI's approval, such approval not to be unreasonably withheld.
7.7 Meetings of Members. Meetings of the Members for any purpose may
be called at any time by the Board or by one or more Members holding in the
aggregate more than a ten percent Percentage Interest. Except in special cases
where other express provision is made by the NRS, written notice of each
meeting, signed by a Board representative or by a Member or Members, as the case
may be, shall be given to each Member entitled to vote. All notices shall be
sent in accordance with Section 16.1 to each Member entitled thereto not less
than ten (except in respect of an adjournment of a meeting of the Members) nor
more than sixty days before each
42
meeting, and shall specify the place, date and time of such meeting, as well as
the purpose or purposes for which the meeting is called.
7.8 Waiver of Notice. The transactions carried out at any meeting of
the Members, however called and noticed or wherever held, shall be as valid as
though carried out at a meeting regularly called and noticed if (a) all of the
Members holding Common Shares are present at the meeting or (b) a quorum of the
Members is present and if, either before or after the meeting, each of the
Members holding Common Shares who are not present signs a written waiver of
notice or a consent to holding such meeting or an approval of the minutes
thereof, which waiver, consent or approval shall be filed with the other records
of the Company or made a part of the minutes of the meeting; provided that no
Member holding Common Shares attending such meeting without notice protests
prior to the meeting or at its commencement that notice was not given to such
Member.
7.9 Adjourned Meetings and Notice Thereof. Any Members' meeting,
whether or not a quorum is present, may be adjourned from time to time by the
vote of a majority of Members holding Common Shares present in person or
represented by proxy, but in the absence of a quorum no other business may be
transacted at any such meeting. When any Members' meeting is adjourned for five
days or more, notice of the adjourned meeting shall be given as in the case of
an original meeting, otherwise it shall not be necessary to give any notice of
an adjournment or of the business to be transacted at an adjourned meeting other
than by announcement at the meeting at which such adjournment is taken.
7.10 Action by Written Consent. Any action which may be taken at a
meeting of Members may be taken by the Members without a meeting if authorized
by the written consent of Members holding at least a Majority, or such other
greater or lesser Percentage Interest as is provided for in this Agreement or
required by the NRS. Whenever action is taken by written consent, a meeting of
Members need not be called nor notice of meeting given. The written consent may
be executed in one or more counterparts and by facsimile, and each such consent
so executed shall be deemed an original. A copy of such consent shall be sent to
each Member holding Common Shares.
7.11 Telephonic Meetings. Members may participate in a meeting of
the Members by means of a telephone conference or similar method of
communication by which all individuals participating in the meeting can hear
each other. Participation in a meeting pursuant to this Section 7.11 constitutes
presence in person at the meeting.
7.12 Quorum. A Majority, represented in person or by proxy, shall
constitute a quorum for the transaction of business. Except as specifically
provided in this Agreement, each Member shall be entitled to vote in proportion
to such Member's Percentage Interest, provided that if, pursuant to the NRS or
the terms of this Agreement, a Member is not entitled to vote on a specific
matter, then such Member's vote and Percentage Interest shall not be considered
for purposes of
43
determining whether a quorum is present or whether approval by the vote of the
Members has been obtained in respect of such specific matter.
ARTICLE VIII
RESIGNATION, TRANSFER OF SHARES,
CHANGE IN CONTROL, TRUST MEMBERS
8.1 Resignation. A Member may not resign from the Company before the
dissolution and winding up of the Company, subject to the provisions of Chapter
463 of the NRS or other applicable law. Except as specifically provided in this
Agreement, any right of a Member under applicable law to demand a return of that
Member's Capital Contribution prior to dissolution is hereby waived.
8.2 Transfers of Interests. (a) The Common Shares of each Member are
personal property, and such Shares may be Transferred only as provided in this
Agreement and any attempt to Transfer other than as provided in this Agreement
shall be null and void and of no effect whatsoever. If a Member Transfers any of
its Common Shares to any Person pursuant to the provisions of this Article VIII,
in addition to any other requirements under this Agreement, no such Transfer
shall be effective unless and until the proposed transferee (i) notifies the
Company in writing of such Transfer, and (ii) agrees in writing to be bound by
the terms and provisions of and to assume all obligations of the transferor and
to be subject to all obligations with respect to voting, adjustments to
Percentage Interests, and restrictions (including all security interests) to
which the transferor was and is subject under the Articles and this Agreement.
Any new Member shall pay any reasonable expenses in connection with admission as
a new Member, including the costs associated with any approval required by the
Nevada Act. In addition, no Person shall be admitted as a Member until all
approvals required by the Nevada Act are obtained.
(b) Except as specifically provided in this Agreement, a
Member may not Transfer any Preferred Share to any Person other than a Permitted
Transferee without the consent of a Supermajority and any attempt to do so shall
be null and void and of no effect whatsoever.
8.3 Right of First Offer and Last Refusal. (a) Any Member (a
"Transferor") who wishes to Transfer any or all of its Common Shares (the
"Offered Shares") to any Person other than a Permitted Transferee shall, prior
to soliciting or pursuing any offer from any Person, by written notice, offer
the other Members holding Common Shares the right to purchase such Offered
Shares at a stated price (the "Offer Price"). For the period (a "Refusal
Period") of sixty days following receipt of such offer each other Member may
purchase that percentage of the Offered Shares which is equal to the percentage
of the Total Common Shares (excluding the Offered Shares) owned by each such
Member ("Applicable Percentage"). To the extent any Member shall fail to
purchase the Applicable Percentage of the Offered Shares prior to the expiration
of the Refusal Period, the
44
Members accepting the offer ("Accepting Members") may purchase such Shares on a
pro rata basis in proportion to the number of Common Shares owned by each of
them. If any of the Offered Shares remain unsold thereafter, the Transferor may
for a period of six months from the expiration of the Refusal Period solicit and
pursue offers at or above the stated per Share price in the written notice in
the foregoing procedure for such remaining Offered Shares from non-Member third
Parties who are not Prohibited Transferees.
(b) Except for Sections 3.7, 8.9 and 8.10, nothing in this
Agreement shall prohibit or restrict a Transfer of Common Shares (i) in
connection with the adjustments in Percentage Interests provided in Article III,
(ii) pursuant to the Employment and Consulting Agreements or (iii) in connection
with the purchase of Common Shares from Aladdin Gaming by the Company pursuant
to the Operating Agreement of Aladdin Gaming following the Transfer of such
Common Shares to Aladdin Gaming pursuant to the Employment and Consulting
Agreements; provided that Transfers referred to in clauses (ii) and (iii)
immediately above shall be subject to Section 8.2(a)(ii).
(c) Any Member who, having followed the procedure in Section
8.3(a), shall subsequently receive a bona fide offer from any Person (the
"Offeror") who is not a Prohibited Transferee for the purchase of all or any
portion of its Common Shares shall, prior to accepting such offer, provide
written notice (the "Notice of Offer") thereof to each other Member holding
Common Shares, which notice shall set forth the terms and conditions of the
offer so received, including the per Share purchase price and the identity of
the Offeror. Following the delivery to the other Members holding Common Shares
of the Notice of Offer, each other Member may purchase its Applicable Percentage
during a thirty day Refusal Period on the terms set forth in the Notice of
Offer. To the extent any Member shall fail to purchase its Applicable Percentage
prior to the expiration of the Refusal Period, the Accepting Members may
purchase such Shares on a pro rata basis in proportion to the number of Common
Shares owned by each of them (and the foregoing procedure shall be repeated in
respect of any Shares not purchased until all Accepting Members have had an
opportunity to purchase any remaining Shares).
(d) Subject to Sections 8.2, 8.4 and 8.5, if all or any of the
Offered Shares shall remain unsold after completion of the procedures set forth
in Sections 8.3(a) and (b), the Transferor may sell such remaining Offered
Shares to the Offeror within six months of the completion of such procedures on
terms no more favorable than those set forth in the Notice of Offer; provided
that the Offeror is not a Prohibited Transferee. To the extent any of the
Offered Shares are not sold in accordance with the foregoing, the Members shall
continue to have a right of first refusal under this Section 8.3 with respect to
any Transfers to any Person which are subsequently proposed by such Transferor.
(e) The closing of a purchase by a Member under this Section
8.3 shall occur within the Refusal Period or at such later date when all
approvals required by the Nevada Act
45
are obtained (such approvals to be obtained as soon as is reasonably
practicable). At such closing the Transferor and the relevant Accepting Member
(and any or all other Members, as may be required) shall execute an assignment
and assumption agreement and any other instruments and documents as may be
reasonably required by such Member to effectuate the transfer of such Shares
free and clear of any liens, claims or encumbrances, other than as specifically
permitted hereunder. Any Transfer to any Person which does not comply with the
provisions of this Section 8.3, other than a Transfer expressly provided for in
the other provisions of this Agreement, shall be null and void and of no effect
whatsoever.
8.4 Tag Along Rights. (a) No Member may, alone or in concert with
any other Member, in any transaction or series of related transactions, Transfer
any Common Shares to another Person or Persons other than a Transfer to a
Permitted Transferee if, after giving effect to such Transfer of Common Shares,
such Person or Persons together with their Affiliates would own in the aggregate
an amount of Common Shares greater than ten percent of the Total Common Shares
(such Transfer being referred to herein as a "Tag Along Sale"), except in
accordance with the procedures set forth in this Section 8.4.
(b)(i) If a Member (a "Selling Member") proposes to make a Tag
Along Sale the Selling Member shall first deliver to each other Member holding
Common Shares a written notice (the "Tag Along Notice"), which shall
specifically identify the proposed transferee or transferees (the "Tag Along
Transferee"), the number of Common Shares being Transferred (the "Tag Along
Shares"), the purchase price per Share therefor ("Tag Along Price Per Share"),
and a summary of the other material terms and conditions of the proposed Tag
Along Sale, and shall contain an offer (the "Tag Along Offer") by the Tag Along
Transferee to each Member holding Common Shares other than the Selling Member,
which shall be irrevocable for a period of twenty days after the delivery
thereof (the "Tag Along Period"), to purchase such Member's Common Shares at a
price per share equal to the Tag Along Price Per Share and upon all such other
terms offered by the Tag Along Transferee to the Selling Member including,
without limitation, those set forth in the Tag Along Notice.
(ii) The Tag Along Offer may be accepted in whole or in part
at the option of each of the Members. Notice of a Member's intention to accept a
Tag Along Offer, in whole or in part, shall be evidenced by a writing signed by
such Member and delivered to the Selling Member, the Tag Along Transferee and
the Company prior to the end of the Tag Along Period, setting forth the amount
of Common Shares that such Member elects to sell.
(iii) Upon the expiration of the Tag Along Period, the Tag
Along Shares shall be allocated among the Selling Member and the other Members
who have accepted the Tag Along Offer in whole or part (collectively, the "Tag
Along Members") as follows: (A) First, each Tag Along Member shall be entitled
to sell no more than its Proportionate Percentage of the Tag Along Shares; (B)
second, if an amount of Tag Along Shares has not been allocated for sale
pursuant to
46
clause (A) (the "Remaining Tag Along Shares"), each Tag Along Member (an
"Oversubscribed Tag Along Member") which had accepted the Tag Along Offer with
respect to an amount of Tag Along Shares in excess of the amount of Common
Shares allocated to it for sale under clause (A) shall be entitled to sell an
amount of Remaining Tag Along Shares equal to no more than its Proportionate
Percentage (treating only Oversubscribed Tag Along Members as Tag Along Members
for these purposes) of the Remaining Tag Along Shares; and (C) third, the
process set forth in clause (B) shall be repeated with respect to any amounts of
Tag Along Shares not allocated for sale until the Tag Along Shares are allocated
for sale in their entirety.
(c) All sales of Common Shares to the Tag Along Transferee
shall be consummated contemporaneously at the offices of the Company on the
later of (i) a mutually satisfactory business day as soon as practicable, but in
no event more than thirty days after the expiration of the Tag Along Period,
(ii) the closing date, if any, set forth in the Tag Along Notice, (iii) the
fifth business day following the expiration or termination of all waiting
periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, applicable to such sales, and (iv) the date when all approvals in
respect of such sales required by the Nevada Act are obtained (such approvals to
be obtained as soon as is reasonably practicable). The delivery of certificates
or other instruments evidencing the Tag Along Shares as allocated pursuant to
this Section 8.4 duly endorsed for Transfer shall be made on such date against
payment of the purchase price for such Shares.
(d) The Parties acknowledge the rights of the holders of
Warrants and Warrant Shares under the Equity Participation Agreement to
participate in the arrangements in this Section 8.4.
8.5 Transfers To Permitted Transferees. Subject to Section 8.2, a
Member may Transfer its Common Shares, or any part thereof, at any time to a
Permitted Transferee, and shall not be required to comply with the procedures
set forth in Sections 8.3 and 8.4 in respect of such Transfers.
8.6 Transfer of Ownership Interests in Members. (a) Except for (i)
the Transfer of any Warrants and, the issuance or Transfer of Warrant Shares,
(ii) any change in any ownership interest in LCI Parent, (iii) any Transfer to a
revocable, inter vivos trust of which the transferee is the sole trustee and of
which the transferee and/or his or her family is a beneficiary or (iv) any
purchase of any interest in Aladdin Holdings by the Trust, in respect of each of
which this Section 8.6 shall not apply, any Transfer or issuance of any
ownership interest in any holder of Common Shares or in any entity that directly
or indirectly owns a majority ownership interest in a holder of Common Shares
(an "Upstream Ownership Interest"), other than to a Permitted Transferee, shall
be prohibited unless in compliance with the procedures and requirements set
forth in this Section 8.6. Notwithstanding any other provision of this
Agreement, no Upstream Ownership Interest shall be Transferred or issued until
all approvals required by the Nevada Act are obtained.
47
(b) Any holder of any Upstream Ownership Interest in any
holder of Common Shares or in any entity that owns a majority ownership interest
in a holder of Common Shares (an "Upstream Transferor") who shall receive a bona
fide offer from any Person (an "Upstream Offeror") who is not a Prohibited
Transferee for the purchase of all or any portion of its Upstream Ownership
Interest shall, prior to accepting such offer, provide written notice (the
"Upstream Notice of Offer") thereof to each other holder of Common Shares, which
notice shall set forth the terms and conditions of the offer so received,
including the purchase price and the identity of the Upstream Offeror. Following
the delivery to the other holders of Common Shares of the Upstream Notice of
Offer, each other holder of Common Shares may purchase the percentage of the
Common Shares indirectly owned by the Upstream Transferor equal to the
percentage of the Total Common Shares (excluding the Common Shares indirectly
owned by the Upstream Transferor) owned by each such other holder of Common
Shares during a thirty day Refusal Period on terms equivalent to those set forth
in the Upstream Notice of Offer in respect of the Upstream Ownership Interest.
To the extent any holder of Common Shares shall fail to purchase such percentage
prior to the expiration of the Refusal Period, the accepting holders of Common
Shares may purchase such Common Shares on a pro rata basis in proportion to the
number of Common Shares owned by each of them.
(c) The closing of a purchase by a Member under this Section
8.6 shall occur within the Refusal Period or at such later date when all
approvals required by the Nevada Act are obtained (such approvals to be obtained
as soon as practicable). At later of the expiration of the Refusal Period and
the Closing of the sales of Common Shares under this Section 8.6, the Upstream
Transferor may sell the Upstream Ownership Interest to the Upstream Offeror on
terms no more favorable than those set forth in the Upstream Notice of Offer (as
adjusted for any sales of Common Shares under this Section 8.6); provided that,
if any Common Shares remain owned by the Person in whom the Upstream Ownership
Interest exists, the Upstream Offeror is not a Prohibited Transferee. To the
extent any of the Upstream Ownership Interests are not sold in accordance with
the foregoing within six months after giving the Upstream Notice of Offer, the
holders of Common Shares shall continue to have a right of first refusal under
this Section 8.6 with respect to any Transfers to any Person which are
subsequently proposed by such Upstream Transferor.
8.7 Call. After the occurrence of (a) any Change In Control with
respect to a Member (other than a Transfer of an Upstream Ownership Interest
permitted under Section 8.6), (b) any Transfer in breach of Section 8.6, or (c)
any breach of Article XV (each, a "Trigger Event"), the Company (acting without
the Member to which the Trigger Event relates (the "Triggering Member") or Board
Members appointed by the Triggering Member) shall have an irrevocable right (the
"Call") to purchase, or have its nominee purchase, within ninety days after the
Company's first knowledge of such Trigger Event (other than knowledge imputed
from the Triggering Member or Board Members appointed by the Triggering Member),
all of the Triggering Member's Common Shares for a cash purchase price equal to
seventy-five percent of the fair market value of such Common Shares at such
time, as determined after the exercise of the Call by an independent qualified
48
appraiser appointed by the Company (acting without the Triggering Member or the
Board Members appointed by such Triggering Member appointed by the Triggering
Member). The fees and expenses of such appraiser shall be paid by the Triggering
Member and its determination of fair market value shall be conclusive and
binding on the Company and the Triggering Member. The Call may be exercised
within the ninety day exercise period by delivery of a written notice by the
Company to the Triggering Member and the other Members holding Common Shares
stating that the Company is exercising its Call and specifying the identity of
the Person that will be purchasing the Shares; provided that the Triggering
Member shall have thirty days from receipt of such written notice to cure the
Trigger Event and thereby avoid a purchase of its Common Shares under this
Section 8.7. The closing of the purchase of such Common Shares shall take place
on a date to be designated by the Company within thirty days of the
determination of the fair market value of the Common Shares.
8.8 Conveyance to Living Trust. (a) The foregoing notwithstanding,
any Member shall be entitled to Transfer all such Member's Common Shares or
Preferred Shares, without consideration, to a revocable, inter vivos trust of
which the Member is trustee and of which the Member and/or his or her family is
a beneficiary, without obtaining the consent of the other Members; provided,
however, that transfers pursuant to this Section 8.8 shall not be effective
until all approvals required under the Nevada Act are obtained. Transfers
pursuant to this Section 8.8 shall be subject to Section 8.2.
(b) When any such trustee becomes a Member, such trustee shall
be a Member not individually but solely as a trustee, in the exercise of and
under the power and authority conferred upon and vested in such trustee. Nothing
contained in this Agreement shall be construed as creating any personal
liability for any such trustee to pay any amounts required to be paid hereunder,
or to perform any covenant, either express or implied, contained herein. The
claim of any such liability is hereby expressly waived by the other Members. Any
liability of any Member which is a trust (whether to the Company or to any third
person) shall be a liability to the full extent of the trust estate and shall
not be a personal liability of any trustee, grantor or beneficiary of any trust.
(c) Any successor trustee or co-trustee of any trust which is
a Member shall be entitled to exercise the same rights and privileges and be
subject to the same duties and obligations as the predecessor trustee. As used
in this Section 8.8, the term "trustee" shall include any and all such successor
trustees.
8.9 Gaming Control Act. Notwithstanding any other provision of this
Agreement, no Shares or other ownership interest in the Company, and no Upstream
Ownership Interest, shall be issued or Transferred in any manner whatsoever
except in compliance with the provisions of the Nevada Act.
8.10 Further Restriction on Transfer of Shares. In addition to the
other restrictions set forth in this Agreement, no Member may assign, convey,
sell, encumber or in any way alienate
49
all or any part of such Member's Shares, if the Shares to be assigned, conveyed,
sold or encumbered, when added to the total of all other Shares assigned,
conveyed, sold or encumbered in the preceding twelve months, would result in the
termination of the Company under Code Section 708, if such termination will
result in adverse tax consequences to the non-transferring Member.
ARTICLE IX
BOARD OF MANAGERS
9.1 Board of Managers. (a) Except for matters expressly requiring
the approval of the Members (or a percentage or class of the Members) pursuant
to this Agreement or the NRS, the business and affairs of the Company shall be
managed by a Board of Managers pursuant to this Article IX. Subject to the
provisions of the Nevada Act and except as specifically provided in this
Agreement, the Board Members shall each serve for a three year term or until
such Board Member shall resign or be removed or otherwise disqualified to serve,
or until such Board Member's successor shall have been appointed.
(b) The Members agree to take all necessary action such that
each Member shall have rights identical to those set forth in this Article IX
with respect to the boards of management (or comparable bodies) and management
of the Subsidiaries.
(c) Subject to the remaining provisions of this Section 9.1,
the Members shall appoint five Board Members as follows: (i) Aladdin Enterprises
shall appoint three Board Members (who shall be deemed to have been designated
by the Person who Controls Aladdin Enterprises) and (ii) LCI shall designate and
appoint two Board Members. On the date hereof the Board Members shall be: Jack
Sommer, Ronald B. Dictrow and Richard J. Goeglein as Aladdin Enterprises
appointees and Alan L. Goodenough and G. Barry C. Hardy as LCI appointees. Each
of Aladdin Enterprises and LCI shall have the right to have one of the Board
Members appointed by it on any committee of the Board. The first Chairman of the
Board shall be Jack Sommer. In the event of the resignation or removal of Jack
Sommer as the Chairman of the Board prior to the Opening Date, the successor
Chairman of the Board shall be a Person with a substantially similar or higher
level of experience as Jack Sommer with respect to the development of commercial
properties and shall be appointed by Aladdin Enterprises subject to the approval
of LCI, such approval not to be unreasonably withheld.
(d) Provided that the Member with the highest Percentage
Interest, other than the Majority Member (if any) and its Affiliates have not
Caused an existing Event of Default and have paid their pro rata share (as
provided in the Contribution Agreement) of all Completion Guaranty Payments up
to such time, if the Majority Member or its Affiliates fails to pay their pro
rata share (as provided in the Contribution Agreement) of any two separate
Completion Guaranty Payments, then such Majority Member shall remove, or (if
such Majority Member Controls Aladdin
50
Enterprises) such Majority Member shall cause Aladdin Enterprises to remove,
from the Board one of the Board Members designated by such Majority Member, as
of the relevant second Completion Guaranty Payment Due Date, and such Party
removing a Board Member shall appoint a new independent Board Member agreed by
the remaining Board Members who shall be Chairman of the Board.
(e) Provided that the Member with the highest Percentage
Interest, other than the Majority Member (if any) and its Affiliates have not
Caused an existing Event of Default under the Keep Well Agreement and have paid
their pro rata share (as provided in the Contribution Agreement) of all Keep
Well Payments up to such time, if the Majority Member or its Affiliates (i)
fails to pay their pro rata share (as provided in the Contribution Agreement) of
a Keep Well Payment (provided that no alterations to the Board have occurred
pursuant to Section 9.1(d)) such Majority Member shall remove, or (if such
Majority Member Controls Aladdin Enterprises) such Member shall cause Aladdin
Enterprises to remove, from the Board one of the Board Members designated by
such Majority Member, as of the relevant Keep Well Due Date and such Party
removing a Board Member shall appoint a new independent Board Member agreed by
the remaining Board Members who shall be Chairman of the Board and (ii) fails to
make its pro rata share (as provided in the Contribution Agreement) of a second
Keep Well Payment, the independent Board Member shall be removed from the Board
and such Party removing a Board Member shall appoint a new Board Member
designated by the Member holding the highest Percentage Interest, other than any
Majority Member, as of the relevant second Keep Well Due Date and such new Board
Member shall be Chairman of the Board.
(f) Provided (i) that Sommer Enterprises and its Affiliates
(if LCI is the Majority Member) or LCI and its Affiliates (if Sommer Enterprises
is the Majority Member) have not Caused an existing Event of Default under the
Keep Well Agreement and has paid their pro rata share (as provided in the
Contribution Agreement) of all Keep Well Payments up to such time and (ii) no
alterations to the Board have occurred pursuant to Section 9.1(d) or (e), if
there is a Non-Default Keep Well Trigger, the Majority Member shall, or (if such
Majority Member Controls Aladdin Enterprises) such Majority Member shall cause
Aladdin Enterprises to, remove one of the Board Members designated from the
Board as of the commencement of the Non-Default Keep Well Trigger and designate
a new independent Board Member who shall be Chairman of the Board; provided
that, if Jack Sommer is Chairman of the Board at such time, Jack Sommer shall
remain as Chairman of the Board. At any time after the occurrence of a
Non-Default Keep Well Trigger, upon the occurrence of four successive Quarters
when no payments are due (other than any Salle Privee Amount) under the Keep
Well Agreement, then the Party who removed the Board Member shall restore to the
Board a designee of the Member which originally designated such Board Member who
was removed and shall remove the independent Board Member, if any, designated
pursuant to the preceding sentence.
51
9.2 Powers and Duties of the Board. The Board (or any Officer acting
at the direction of the Board) shall manage the business affairs of the Company.
The Board shall have the general powers and duties of management typically
vested in a director or board of directors of a corporation, and all powers and
duties necessary, advisable or convenient to administer and operate the business
and affairs of the Company, and such other powers and duties as may be
prescribed by the Members or implied by law. Subject to the provisions of this
Agreement, such powers and duties shall include, without limitation, the
following: (i) to select and remove all Officers (as more fully described in
Section 9.3), agents and employees of the Company, prescribe such powers and
duties for them as may be consistent with law, the Articles and this Agreement,
and fix their compensation; (ii) to borrow money and incur indebtedness on
behalf of the Company for the purposes of the Company, and to cause to be
executed and delivered therefor, in the name of the Company, promissory notes,
bonds, debentures, deeds of trust, mortgages, pledges, hypothecations or other
evidence of debt and securities; (iii) to change the principal office of the
Company from one location to another within Nevada and to establish from time to
time one or more subsidiary offices of the Company; and (iv) to enter into or
commit to any agreement, contract, commitment, instrument, deed, mortgage or
obligation on behalf of the Company for any Company purpose.
9.3 Election of Officers. Subject to the applicable provisions of
the Nevada Act, the Board may from time to time elect such Officers as the Board
shall deem appropriate. Subject to the provisions of this Agreement, the Board
may confer upon any of the Officers such duties, authority and titles as the
business of the Company may require in the reasonable judgment of the Board
(including the authority to represent and bind the Company in accordance with
the scope of the particular duties involved and such other general powers and
duties of a type similar to those typically vested in an officer of a
corporation). The Officers shall serve at the sole discretion of the Board.
9.4 Removal, Resignation and Vacancies. (a) A Board Member may be
removed at any time for any reason (i) by Aladdin Enterprises, if such Board
Member was appointed by Aladdin Enterprises and (ii) by LCI, if such Board
Member was appointed by LCI. In addition, a Majority may remove any Board Member
for incapacity to carry out, or acting with malfeasance in connection with, his
or her duties, powers or obligations hereunder. In the event any Person elected
to serve as a Board Member at any time is found by the Nevada Gaming Authorities
to be unsuitable to hold a gaming license, such Person shall thereupon
automatically cease to be a Board Member without any further action and a
substitute Board Member shall be appointed in accordance with Section 9.4(c).
(b) Any Board Member may resign at any time by giving written
notice to the Company and the Members. Any such resignation shall take effect at
the date of the receipt of such notice or at any later time specified therein;
and, unless otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
52
(c) Subject to the applicable provisions of the Nevada Act,
any vacancy on the Board shall be filled by the appointment of a successor Board
Member. Such successor Board Member shall be (i) appointed by Aladdin
Enterprises if such successor Board Member's predecessor was appointed by
Aladdin Enterprises and (ii) appointed by LCI if such successor Board Member's
predecessor was appointed by LCI.
9.5 Meetings of the Board. (a) Place and Time of Meetings. The
meetings of the Board shall be held at least quarterly at the Records Office,
unless some other place is designated in the notice of the meeting. Meetings of
the Board shall be held at such times as is determined by the Board; provided
that one meeting of the Board shall be held in New York, New York in each Fiscal
Year unless the Members agree otherwise in writing. Accurate minutes of any
meeting of the Board shall be maintained by the Officer designated by the Board
for such purpose.
(b) Special Meetings; Notice. Special meetings of the Board
for any purpose may be called at any time by any Board Member. At least
forty-eight hours written notice of the time and place of a special meeting of
the Board shall be delivered personally to the Board Members at their last known
business addresses as it is shown on the records of the Company or personally
communicated to them by a Board Member or officer of the Company by telegraph or
facsimile. Such telegraphing, faxing or delivery shall be considered due, legal
and personal notice to such Board Member.
(c) Waiver of Notice. The transactions carried out at any
meeting of the Board, however called and noticed or wherever held, shall be as
valid as though had at a meeting regularly called and noticed if: (i) all Board
Members are present at the meeting or (ii) if a majority of the Board Members
are present and if, either before or after the meeting, those not present sign a
waiver of notice of such meeting or a consent to holding the meeting or an
approval of the minutes thereof, which waiver, consent or approval shall be
filed with the other records of the Company or made a part of the minutes of the
meeting; provided that no Board Member attending such meeting without notice
protests prior to the meeting or at its commencement that notice was not given
to him or her.
(d) Action by Written Consent. Any action required or
permitted to be taken by the Board may be taken without a meeting and will have
the same force and effect as if taken by a vote of the Board Members at a
meeting properly called and noticed, if authorized by the written consent of
all, but not less than all, of the Board Members. In no instance where action is
authorized by written consent need a meeting of the Board be called or noticed.
A copy of the action taken by written consent shall be filed with the records of
the Company. The written consent may be executed in one or more counterparts and
by facsimile, and each such consent so executed shall be deemed an original.
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(e) Quorum. Three incumbent Board Members present in person or
by proxy shall be necessary to constitute a quorum for the transaction of
business at any meeting of the Board. Except as otherwise provided in this
Agreement or by the NRS, the action of a majority of the Board Members present
in person or by proxy at any meeting at which there is a quorum, when duly
assembled, is valid. A meeting at which a quorum is initially present may
continue to transact business, notwithstanding the withdrawal of Board Members,
if any action taken is approved by a majority of the required quorum for such
meeting.
(f) Telephonic Meetings. Board Members may participate in a
meeting of the Board by means of a telephone conference call or similar method
of communication so long as all Persons participating in the meeting can hear
one another. Participation in a meeting of the Board pursuant to this Section
9.5(f) constitutes presence in person at the meeting.
9.6 Compensation of Board Members; Compensation of Officers. The
Company shall not pay any Board Member in their capacity as a Board Member any
salary or other benefits, other than such insurance and/or indemnification as
may be determined by the Board and is permitted under the Articles, this
Agreement and the NRS. The Company shall pay to each Officer such salary and
other benefits as shall be approved from time to time by the Board.
9.7 Expense Reimbursements. The Company shall reimburse the Board
Members for all expenses reasonably incurred by the Board Members on behalf of
the Company or in connection with the performance of the obligations of the
Board Members hereunder.
9.8 Employment and Consulting Agreements. The Parties acknowledge
that the Company has entered into the Employment and Consulting Agreements and
that such Employment and Consulting Agreements shall prevail notwithstanding any
other provision of this Agreement other than Section 3.6.
ARTICLE X
ACCOUNTING, RECORDS AND BANK ACCOUNTS
10.1 Records and Accounting. The books and records of the Company
shall be kept, and the financial position and the results of its operations
recorded, in accordance with the accounting methods elected to be followed by
the Company for federal income tax purposes. The books and records of the
Company shall reflect all Company transactions and shall be appropriate and
adequate for the Company's business.
10.2 Access to Accounting Records. All accounting books and records
of the Company and its Subsidiaries, including files, tax returns and
information, shall be maintained at an office of the Company or at the Records
Office. Each Member, and its duly authorized
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representative, agent or attorney, upon written demand providing at least five
days notice, shall have access to such books and records and the right to
inspect, examine and copy them (at such Member's expense) at reasonable times
during normal business hours. The rights authorized by this Section 10.2 may be
denied to a Member upon such Member's refusal to provide to the Company an
affidavit stating that such inspection, extracts or audit is not desired for any
purpose not related to the Member's interest in the Company as a Member.
10.3 Annual Tax Information. The Board shall use its best efforts to
cause the Company to deliver to each Member within ninety days after the end of
each Fiscal Year all information necessary for the preparation of such Member's
federal income tax return. Federal, state and local tax returns of the Company
shall be prepared or caused to be prepared and filed in a timely manner by the
Board.
10.4 Obligations of Members to Report Allocations. The Members are
aware of the income tax consequences of the allocations made by this Agreement
and hereby agree to be bound by the provisions of this Agreement in reporting
their shares of the income and loss for income tax purposes.
10.5 Tax Matters. Sommer Enterprises is hereby designated "Tax
Matters Partner" (as that term is defined in Code Section 6231) and is
authorized to represent the Company in connection with all tax examinations and
proceedings (whether judicial or administrative) and to oversee the Company's
tax affairs all in a manner consistent with the best interests of the Company;
provided that if Sommer Enterprises is the Tax Matters Partner it shall keep LCI
reasonably informed as to the status of any audit of the Company's tax affairs
by any taxing authority and shall not settle any audit or other controversy
without the consent of LCI, such consent not to be unreasonably withheld. The
Members agree to cooperate with the Tax Matters Partner and to do or refrain
from doing any or all things reasonably required by the Tax Matters Partner in
connection with any such examinations or proceedings. The Board may from time
to time designate any other Member to serve as "Tax Matters Partner".
10.6 Tax Elections. The Board may in its discretion determine
whether or not to make any available elections pursuant to the Code.
10.7 Taxation as a Partnership. The Company shall be treated as a
partnership for United States federal income tax purposes and each Member agrees
not to take any action inconsistent with the Company's classification as a
partnership for United States federal, state or local income tax purposes.
10.8 Tax Reporting. The Company shall timely file such tax returns
and information reports as required by the Code and applicable foreign, state
and local taxing jurisdictions. Each income tax return of the Company shall be
delivered to LCI for its review at least
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[thirty] days prior to earlier of (a) the final due date (with extensions) of
such return or (b) the date such return is to be filed. If LCI objects in
writing to the reporting of any item on any such income tax return, the Company
shall not finalize the form of such return without the written consent of LCI,
such consent not to be unreasonably withheld. If no agreement is reached with
respect to an item contained in any such return prior to fifteen days prior to
the final due date (with extensions) of such return, the Company's position with
respect to such item shall be reflected on the final form of the return provided
an independent nationally recognized accounting firm mutually selected by LCI
and the Company, at the Company's expense, determines that the Company has a
reasonable basis for its reporting position with respect to the item.
ARTICLE XI
IPO
11.1 IPO Timing. (a) The Parties anticipate that an IPO will be
executed as soon as it is commercially reasonable to do so after the Opening
Date.
(b) If an IPO has not taken place within three years from the
Opening Date, Sommer Enterprises and LCI shall each have the right to demand
that such an IPO be executed; provided that at the time of the demand such party
and its Affiliates have a Percentage Interest equal to at least twenty percent,
and provided further that Sommer Enterprises or LCI, as the case may be, first
submits to the Board a letter from a reputable, nationally recognized
underwriter stating that the public sale of such shares is economically and
commercially feasible, and provided further that Sommer Enterprises shall have
the right to defer such an IPO demanded by LCI for up to twelve months if, in
the reasonable opinion of Sommer Enterprises, it is commercially reasonable to
do so and if and for so long as Sommer Enterprises is the Majority Member.
(c) Concurrently with or prior to any IPO the Members shall
enter into the Stockholders and Registration Rights Agreement governing their
rights and obligations as members or stockholders of the IPO Corporation.
11.2 Pre-IPO Purchases. (a) LCI and Sommer Enterprises will,
immediately prior to, or as part of, the IPO, be entitled (subject to the market
requirements in respect of such IPO and subject further to any restrictions
imposed by any law including the Nevada Act) acquire additional Common Shares in
the IPO Corporation, at a mutually agreeable price (based on the IPO price
discounted to reflect the absence of underwriters' fees and costs).
(b) Notwithstanding Sommer Enterprises' rights under Section
11.2 (a), LCI shall have the right to purchase at a mutually agreeable price
(based on the IPO price discounted to reflect the absence of underwriters' fees
and costs) from either (at the option of Sommer Enterprises) the IPO Corporation
pursuant to Section 11.2(a) or from Sommer Enterprises immediately prior to
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or as part of, the IPO, Common Shares in the IPO Corporation sufficient for it
to maintain a holding of more than twenty percent of the common shares of IPO
Corporation after the IPO.
11.3 Incorporation of Partnership. In connection with an IPO, if the
Company changes its classification for federal income tax purposes from a
partnership to an association (or publicly traded partnership) taxable as a
corporation, the Members hereto acknowledge that it is intended that such change
be effected as a tax-free incorporation and each Member shall, to the extent
commercially feasible, use its best efforts to effect such intent.
ARTICLE XII
DISSOLUTION OF THE COMPANY AND
TERMINATION OF A MEMBER'S INTEREST
12.1 Dissolution. The Company shall be dissolved and its affairs
wound up (a) at the time specified in the Articles or (b) upon the written
agreement of all of the Members, in which event the Members will proceed with
reasonable promptness to liquidate the Company. The death, insanity, retirement,
resignation, expulsion, Bankruptcy or dissolution of any Member, or the
occurrence of any other event which terminates a Member's continued membership
in the Company shall not, in and of itself, cause the dissolution of the
Company.
12.2 Death of a Member; Continuation. After the death of a Member,
the deceased Member shall cease to be a Member and the personal representative
of the deceased Member and, after the distribution of the deceased Member's
estate, the deceased Member's heirs or legatees (in place and instead of the
personal representative), shall have no right to participate in the management
of the business and affairs of the Company, but shall be Disassociated Members
and entitled only to receive distributions and any other share of profits to
which the deceased Member would have been entitled under this Agreement and the
NRS but for the death of such Member; provided that if a majority of the
remaining Members consent, the personal representative of the deceased Member
and, after the distribution of the deceased Member's estate, the deceased
Member's heirs and legatees (in place and instead of the personal
representative), shall succeed to the Shares of the deceased Member as a
Substituted Member or Substituted Members.
12.3 Company's Option To Purchase Bankrupt Member's Interest. Upon
the institution of a Bankruptcy by or against a Member, the Company shall have
the option (the "Purchase Option"), exercisable by written notice to all the
Members within 120 days of the date the Bankruptcy petition is filed by or
against the Bankrupt Member, to purchase the Bankrupt Member's Common Shares,
subject, however, to receipt of all required approvals under the Nevada Act
(such approvals to be obtained as soon as reasonably practicable), for an agreed
upon price, or if no price can be agreed upon, for the fair market value of such
Common Shares at the time of such Bankruptcy, as determined by an independent
qualified appraiser appointed by unanimous agreement
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by the Members, including the Bankrupt Member. If they cannot agree on an
appraiser, the Members not including the Bankrupt Member and its Affiliates, on
the one hand, and the Bankrupt Member, on the other hand, shall each select an
appraiser, which appraisers together shall select a third appraiser, which third
appraiser shall determine the fair market value of such Common Shares, which
determination shall be binding upon the Parties. If the Company elects to
exercise the Purchase Option, it shall pay the agreed price or the fair market
value, as the case may be, of the Bankrupt Member's Shares to the Bankrupt
Member, in cash, within such 120-day period or at such later time as all
approvals required under the Nevada Act are obtained. If the Company elects to
not exercise the Purchase Option, the Company shall notify the Members including
the Bankrupt Member of its decision in writing (the "Non-Exercise Notice"),
within such 120-day period.
12.4 Members' Option to Purchase Bankrupt Member's Interest. Upon
the institution of a Bankruptcy by or against a Member, if the Company does not
exercise the Purchase Option, the Members not including the Bankrupt Member
shall have the right to purchase the Bankrupt Member's Common Shares, subject,
however, to receipt of all required approvals under the Nevada Act (such
approvals to be obtained as soon as reasonably practicable), for an agreed upon
price, or if no price can be agreed upon, for the price previously determined
under the independent appraisal procedure in Section 12.3 or, if no such price
has been so determined, for the fair market value of such Shares at the time of
such Bankruptcy, as determined by an independent qualified appraiser appointed
by the Members, including the Bankrupt Member. If they cannot agree on an
appraiser, the Members not including the Bankrupt Member and its Affiliates, on
the one hand, and the Bankrupt Member, on the other hand, shall each select an
appraiser, which appraisers together shall select a third appraiser, which third
appraiser shall determine the fair market value of such Common Shares, which
determination shall be binding upon the Parties. The Member or Members wishing
to purchase all or a part of the Shares of the Bankrupt Member (each, a
"Purchasing Member") shall pay the agreed price or the fair market value of such
Shares to the Bankrupt Member, in cash, by the earlier of (a) 120 days after the
Company delivers the Non-Exercise Notice to the Members, and (b) 240 days after
the date the Bankruptcy petition is filed by or against the Bankrupt Member;
provided, that such purchase shall not occur until all approvals required under
the Nevada Act are obtained. Each Purchasing Member must notify the other
Members of such Purchasing Member's desire to purchase all or a portion of the
Bankrupt Member's Shares in writing by the earlier of (x) twenty days after the
Company delivers the Non-Exercise Notice to the Members, and (y) 140 days after
the date the Bankruptcy petition is filed by or against the Bankrupt Member.
Unless they agree otherwise, if there is more than one Purchasing Member, each
Purchasing Member may purchase up to the proportion of the Bankrupt Member's
Shares that such Purchasing Member's Percentage Interest bears to the Ultimate
Percentage Interests of all Purchasing Members (if any Purchasing Member elects
to Purchase less than its full entitlement hereunder the other Purchasing
Members may purchase such entitlement pro rata). If no remaining Member wishes
to purchase the Bankrupt Member's Shares, or the Purchasing Members do not
purchase the Bankrupt Member's Shares within the earlier of the time periods set
forth above, then all rights to
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purchase the Bankrupt Member's Shares pursuant to this Section 12.4 shall
terminate and the Bankrupt Member shall retain such Shares as a Disassociated
Member.
12.5 Distribution on Dissolution and Liquidation. In the event of
the dissolution of the Company for any reason, the business of the Company shall
be continued to the extent necessary to allow an orderly winding up of its
affairs, including the liquidation and termination of the Company pursuant to
the provisions of this Section 12.5, as promptly as practicable thereafter, and
each of the following shall be accomplished:
(a) holders of a Supermajority of the Common Shares shall
elect or appoint a liquidator;
(b) the liquidator shall cause to be prepared a statement
setting forth the Property and liabilities of the Company as of the date of
dissolution, a copy of which statement shall be furnished to the Members;
(c) the Property of the Company shall be liquidated by the
liquidator as promptly as possible, but in an orderly and businesslike manner.
The liquidator may, in the exercise of its business judgment, determine not to
sell all or any portion of the Property, in which event such Property shall be
distributed in kind based upon fair market value as of the date of such
distribution;
(d) any Profits or Losses realized by the Company upon the
sale of its Property shall be recognized and allocated to the Members in the
manner set forth in Article V; and
(e) the proceeds of sale and all other Property of the Company
shall be applied and distributed as follows and in the following order of
priority:
(i) to the expenses of liquidation;
(ii) to the payment of the debts and liabilities of the
Company (including loans from Members);
(iii) to the setting up of any reserves which the
liquidator shall determine to be reasonably necessary, for such period as
the liquidator shall deem advisable, for contingent, unliquidated or
unforeseen liabilities or obligations of the Company or the Members
arising out of or in connection with the Company. Such reserves shall be
held by the liquidator or paid over to a bank or title company selected by
it, to be held by such bank or title company as escrow holder or
liquidator for the purposes of disbursing such reserves to satisfy the
liabilities and obligations described above;
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(iv) to the holder of the Series A Preferred Shares to
the extent of its Capital Account balance in respect of the Series A
Preferred Shares;
(v) to the holders of the Series B Preferred Shares to
the extent of their pro rata share of the Capital Account balance in
respect of the Series B Preferred Shares; and
(vi) the balance (including amounts released from any
unnecessary reserves set up pursuant to Section 12.5(e)(iii)), if any,
after giving effect to all contributions, distributions and allocations
for all periods, to the holders of Common Shares pro rata in proportion to
their positive Capital Account balances.
Each Member understands and agrees that by accepting the provisions
of this Section 12.5 setting forth the priority of the distribution of assets of
the Company to be made upon a liquidation, such Member expressly waives any
right which it, as a creditor of the Company, might otherwise have to receive
distributions of assets pari passu with the other creditors of the Company in
connection with a distribution of assets of the Company in satisfaction of any
liability of the Company, and hereby subordinates to said creditors any such
right.
ARTICLE XIII
LIABILITY, EXCULPATION AND INDEMNIFICATION
13.1 Exculpation. (a) No Covered Person shall be liable to the
Company or any other Covered Person for any loss, damage or claim incurred by
reason of any act or omission performed or omitted by such Covered Person in
good faith on behalf of the Company and in a manner reasonably believed to be
within the scope of authority conferred on such Covered Person by this
Agreement, the Board or an appropriate Officer or employee of the Company,
except that a Covered Person shall be liable for any such loss, damage or claim
incurred by reason of such Covered Person's gross negligence, fraud or willful
misconduct.
(b) A Covered Person shall be fully protected in relying in
good faith upon the records of the Company and upon such information, opinions,
reports or statements presented to the Company by any Person as to matters the
Covered Person reasonably believes are within such other Person's professional
or expert competence, including information, opinions, reports or statements as
to the value and amount of the assets, liabilities, Profits or Losses or any
other facts pertinent to the existence and amount of assets from which
distributions to Members might properly be paid.
13.2 Fiduciary Duty. To the extent that, at law or in equity, a
Covered Person has duties (including fiduciary duties) and liabilities relating
thereto to the Company or to any Member,
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then, to the fullest extent permitted by applicable law, a Covered Person acting
under this Agreement shall not be liable to the Company or to any Member for its
good faith acts or omissions in reliance on the provisions of this Agreement.
The provisions of this Agreement, to the extent that they restrict the duties
and liabilities of a Covered Person otherwise existing at law or in equity, are
agreed by the Parties to replace such other duties and liabilities of such
Covered Person.
13.3 Outside Businesses. Subject to Article XV and to any other
agreement to the contrary, any Covered Person, Member or Affiliate thereof may
engage in or possess an interest in other business ventures of any nature or
description, independently or with others, similar or dissimilar to the business
of the Company, and the Company and the Members shall have no rights by virtue
of this Agreement in and to such independent ventures or the income or profits
derived therefrom, and the pursuit of any such venture, even if competitive with
the business of the Company, shall not be deemed wrongful or improper. Subject
to any agreement to the contrary, no Covered Person, Member or Affiliate thereof
shall be obligated to present any particular investment opportunity to the
Company even if such opportunity is of a character that, if presented to the
Company, could be taken by the Company, and any Covered Person, Member or
Affiliate thereof shall have the right to take for its own account (individually
or as a partner or fiduciary) or to recommend to others any such particular
investment opportunity.
13.4 Indemnity. The Company does hereby indemnify and hold harmless
each Covered Person who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, except an action by or in the right
of the Company, by reason of the fact that he or she is or was a Member,
Affiliate, Board Member, Officer, employee or agent of the Company, or is or was
serving at the request of the Company as manager, member, director, officer,
employee or agent of another limited-liability company, corporation,
partnership, joint venture, trust or other enterprise against expenses,
including attorneys' fees, judgment, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection with the action,
suit or proceeding, if he or she acted in good faith and in a manner which he or
she reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement or conviction, or
upon a plea of nolo contendere or its equivalent, does not, of itself, create a
presumption that the Covered Person did not act in good faith and in a manner
which he or she reasonably believed to be in or not opposed to the best
interests of the Company, and that, with respect to any criminal action or
proceeding, he or she had reasonable cause to believe that his or her conduct
was unlawful.
13.5 Indemnity for Actions By or In the Right of the Company. The
Company does hereby indemnify each Covered Person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Company to procure a judgment in its favor by
reason of the fact that he or she is or was a Member, Affiliate,
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manager, Board Member, Officer, employee or agent of the Company, or is or was
serving at the request of the Company as a director, manager, officer, employee
or agent of another limited-liability company, corporation, partnership, joint
venture, trust or other enterprise against expenses, including amounts paid in
settlement and attorneys' fees actually and reasonably incurred by him or her in
connection with the defense or settlement of the action or suit, if he or she
acted in good faith and in a manner which he or she reasonably believed to be in
or not opposed to the best interests of the Company. Indemnification may not be
made for any claim, issue or matter as to which such Covered Person has been
adjudged by a court of competent jurisdiction, after exhaustion of all appeals
therefrom, to be liable to the Company or for amounts paid in settlement to the
Company, unless and only to the extent that the court in which the action or
suit was brought or other court of competent jurisdiction determines upon
application that, in view of all the circumstances of the case, he or she is
fairly and reasonably entitled to indemnity for such expenses as the court deems
proper.
13.6 Indemnity If Successful. To the extent that a Covered Person
has been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Sections 13.4 and 13.5, or in defense of any claim,
issue or matter therein, the Company does hereby indemnify such Covered Person
against expenses, including attorneys' fees actually and reasonably incurred by
it in connection with the defense.
13.7 Determination of Right to Indemnification. Any indemnification
under Sections 13.4 and 13.5, unless ordered by a court or advanced pursuant to
Section 13.8 below, must be made by the Company only as authorized in the
specific case upon a determination that indemnification of the Covered Person is
proper in the circumstances. The determination must be made:
(a) by a Majority at a meeting at which a quorum is present,
which quorum must consist of Members who (and who's Affiliates) were not parties
to the action, suit or proceeding; or
(b) by independent legal counsel in a written opinion, (i) if
a Majority at a meeting at which a quorum is present so orders, which quorum
must consist of Members who (and who's Affiliates) were not parties to the
action, suit or proceeding, or (ii) if at a meeting of the Members, a quorum
consisting of Members who (and who's Affiliates) were not parties to the action,
suit or proceeding cannot be obtained.
13.8 Advance Payment of Expenses. The expenses of Members and Board
Members incurred in defending a civil or criminal action, suit or proceeding
shall be paid by the Company as they are incurred and in advance of the final
disposition of the action, suit or proceeding, upon receipt of an undertaking by
or on behalf of the Member or Board Member to repay the amount if it is
ultimately determined by a court of competent jurisdiction that he or she is not
entitled to be indemnified by the Company. The provisions of this subsection do
not affect any
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rights to advancement of expenses to which personnel of the Company other than
Members or Board Members may be entitled under any contract or otherwise by law.
13.9 Other Arrangements Not Excluded. The indemnification and
advancement of expenses authorized in or ordered by a court pursuant to this
Article XIII:
(a) do not exclude any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under the Articles or
any agreement, vote of Members, or disinterested Board Members, if any, or
otherwise, for an action in their official capacity or an action in another
capacity while holding their office, except that indemnification, unless ordered
by a court pursuant to Section 13.5 or for the advancement of expenses made
pursuant to Section 13.8, may not be made to or on behalf of any Member or Board
Member if a final adjudication establishes that their acts or omissions involved
intentional misconduct, fraud or a knowing violation of the law which was
material to the cause of action; and
(b) continue for a Person who has ceased to be a Member, Board
Member, Officer, employee or agent and inures to the benefit of his or her
heirs, executors and administrators.
13.10 Errors and Omissions Insurance. (a) The Company may purchase
and maintain insurance or (by a Board Supermajority) make other financial
arrangements on behalf of any Covered Person for any liability asserted against
him or her and liability and expenses incurred by him or her in his or her
capacity as a Board Member, an officer, director, employee or agent of the
Company or of another entity at the request of the Company, or arising out of
his or her status as such, whether or not the Company has the authority to
indemnify him or her against such liability and expenses.
(b) The other financial arrangements made by the Company
pursuant to Section 13.10(a) may include (i) the creation of a trust fund; (ii)
the establishment of a program of self-insurance; (iii) the security of its
obligation of indemnification by granting a security interest or other lien on
any assets of the Company; and (iv) the establishment of a letter of credit,
guaranty or surety. No financial arrangement made pursuant hereto may provide
protection for a person adjudged by a court of competent jurisdiction, after
exhaustion of all appeals therefrom, to be liable for intentional misconduct,
fraud or a knowing violation of law, except with respect to the advancement of
expenses or indemnification ordered by a court.
(c) In the absence of fraud, no Board Member or Member
approving the insurance or financial arrangement made pursuant to this Section
13.10 shall be subject to personal liability for such action, even if the Board
Member approving the insurance or other financial arrangement is a beneficiary
of the insurance or other financial arrangement.
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13.11 Property of the Company. Any indemnification under this
Article XIII shall be satisfied solely out of the Property of the Company.
13.12 Violation of this Agreement. Any Member who commits fraud or
otherwise violates any of the terms, conditions and provisions of this Agreement
will keep and save harmless the Property and the Company, and will indemnify the
Company and the other Members from any and all claims, demands and actions of
every kind and nature whatsoever which may arise out of or by reason of such
fraud or violation.
ARTICLE XIV
GAMING MATTERS
14.1 Licensing. (a) The Members and their Related Parties will be
subject to the provisions of the Nevada Act and to the licensing and regulatory
control of the Nevada Gaming Authorities. Each Member acknowledges that, in
order for the Company to carry on its business, each Member and its Related
Parties may be required to submit personal history and financial information to,
and be found suitable by, the Nevada Gaming Authorities and gaming authorities
of other jurisdictions. If required by the Nevada Gaming Authorities or gaming
authorities of other jurisdictions, each Member shall, and shall cause its
respective Related Parties to, (i) promptly submit such personal history and
financial history, (ii) cooperate in any investigation and (iii) diligently seek
a finding of suitability.
(b) Each Member shall be responsible for paying or causing to
be paid all of its and its Related Parties' costs and expenses in connection
with obtaining, attempting to obtain or retaining a license in accordance with
this Article XIV.
(c) In addition, the Company anticipates that in due course
the Company may register pursuant to Section 12(g) of the Exchange Act. From and
after such registration under the Exchange Act (i) any Person who acquires more
than five percent of the Total Common Shares shall promptly report the
acquisition to the Nevada Commission in a filing prepared in accordance with
applicable law and (ii) beneficial owners of more than ten percent of the Total
Common Shares must apply to the Nevada Commission for a finding of suitability
within thirty days after the Chairman of the Nevada State Gaming Control Board
mails written notice requiring such filing. Notwithstanding the foregoing, any
member who (i) acquires more than ten percent, but not more than fifteen
percent, of the Total Common Shares, (ii) holds such Shares for investment
purposes only, and (iii) qualifies as an "Institutional Investor" as such term
is defined in the Nevada Act, may apply to the Nevada Commission for a waiver of
such finding of suitability, and need not apply for such finding of suitability
if such waiver is granted.
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14.2 Nominees. If any Share(s) shall be held in trust by an agent or
by a nominee, the record holder must, immediately upon the request of the Nevada
Gaming Authorities, disclose to said authorities the identity of the beneficial
owner of any such Share(s). Each record owner of any Share must comply with all
applicable rules and regulations of the Nevada Gaming Authorities.
14.3 Gaming Problem. In the event the Board shall determine, in good
faith, based upon verifiable information and specific provisions of the
applicable gaming statutes and rules promulgated thereunder or upon specific
information received from the Nevada Gaming Authorities, that a Gaming Problem
exists, then the Company shall provide written notice to the applicable Member
requesting that such Member provide for the elimination of the Gaming Problem,
and:
(a) (i) if the Gaming Problem is caused by a director, officer
or manager or trustee of such Member, such Member shall terminate the employment
of such Person and (ii) if the Gaming Problem is caused by a shareholder,
partner, member or beneficiary, of such Member, such Member shall either
purchase such Person's ownership or other interest in such Member or require
such Person to transfer its ownership or other interest to a trust or other
entity (if any) that would eliminate the Gaming Problem; or
(b) after providing the applicable Member with ninety days to
eliminate such Gaming Problem, the Company shall redeem or have other Persons
purchase all of the Shares held or owned by such Member at a redemption price
equal to the fair market value of such Shares, as determined by an independent
qualified appraiser appointed by the Company and the applicable Member or, if
there is a Majority Member, by the applicable Member and the Member with the
highest Percentage Interest (other than the applicable Member). If they cannot
agree on an appraiser, the such persons shall each select an appraiser, which
appraisers together shall select a third appraiser, which third appraiser shall
determine the fair market value of such Shares, which determination shall be
binding upon the Parties. Subject to the applicable provisions of the Nevada
Act, the foregoing right of redemption shall be exercised upon twenty days'
prior written notice to the applicable Member. On and after the date set forth
in such notice as the date of redemption, all rights of such Member as a Member
of the Company shall cease and terminate and the such Member's Shares shall no
longer be deemed outstanding.
ARTICLE XV
NON-COMPETE
15.1 LCI. So long as LCI is a Member and for a period of one year
thereafter, LCI agrees that, other than through the Company, LCI and its
Affiliates shall not, directly or indirectly, engage in the development of or
own, operate, lease, manage, control, invest in, act as consultant or advisor to
or otherwise assist any Person that engages in the development or operation of
gaming operations which (a) involve or are in any way associated with golf
resorts located in Clark County,
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Nevada or (b) involve or are in any way associated with operations of a type
similar to the Salle Privee Facilities located in Las Vegas, Nevada, without the
consent of the Company; provided that LCI and its Affiliates may own and/or
operate a casino and/or hotel project in Las Vegas, Nevada that is so involved
or associated if they first provide to the Company detailed written descriptions
of such proposed venture (including financial analysis and projections) and
offer the Company the opportunity to invest equally with and on substantially
the same terms as LCI and its Affiliates, and the Company (by way of the Board
excluding the Board Members appointed by LCI) declines such opportunity or fails
to take up such opportunity within a reasonable time period.
15.2 Sommer Enterprises. So long as Sommer Enterprises is a Member
and for a period of one year thereafter, Sommer Enterprises agrees that, other
than through the Company, Sommer Enterprises and its Affiliates shall not,
directly or indirectly, engage in the development of or own, operate, lease,
manage, control, invest in, act as consultant or advisor to or otherwise assist
any Person that engages in the development or operation of any casino and/or
hotel project in Las Vegas, Nevada, other than the Mountain Spa Resort; provided
that Sommer Enterprises and its Affiliates may own and/or operate a casino
and/or hotel project in Las Vegas, Nevada if such opportunity has been offered
to the Company and LCI, or the Board Members other than the Board Members
appointed by Sommer Enterprises, have caused the Company to decline to take up,
or to fail to pursue, such opportunity.
15.3 Reasonable Terms. (a) LCI and Sommer Enterprises acknowledge
and agree that the covenants set forth in this Article XV are reasonable in
geographical and temporal scope and in all other respects and that the other
Parties would not have entered into this Agreement but for the covenants
contained in this Article XV.
(b) If, at the time of enforcement of this Article XV, a court
shall hold that the duration, scope, or area restrictions stated herein are
unreasonable under the circumstances then existing, the Parties agree that the
maximum duration, scope, or area reasonable under such circumstances shall be
substituted for the stated duration, scope, or area.
(c) LCI and Sommer Enterprises recognize and affirm that in
the event of a breach of any provision of this Article XV the exercise of the
Call under Section 8.7 and money damages would both be inadequate and the
damaged party would have no adequate remedy at law. Accordingly, the Company and
the Parties hereto shall have the right, in addition to any other rights and
remedies existing in their favor, to enforce their rights under this Article XV
not only by the exercise of the Call under Section 8.7 and an action or actions
for damages, but also by an action or actions for specific performance,
injunction and/or equitable relief in order to enforce or prevent any violations
(whether anticipatory, continuing or future) of the provisions of this Article
XV.
ARTICLE XVI
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MISCELLANEOUS PROVISIONS
16.1 Notices. All notices to be given hereunder shall be in writing
and shall be addressed to the party at such party's last known address or
facsimile number appearing on the books of the Company. If no such address or
facsimile number has been provided, it will be sufficient to address any notice
(or fax any notice that may be faxed) to such party at the Records Office of the
Company. Notice shall, for all purposes, be deemed given and received, (a) if
hand-delivered, when the notice is received, (b) if sent by an internationally
recognized delivery service, when the notice is received, or (c) if sent by
facsimile, when the facsimile is transmitted and confirmation of complete
receipt is received by the transmitting party during normal business hours. If
any notice is sent by facsimile, the transmitting party shall send a duplicate
copy of the notice to the Parties to whom it is faxed by regular mail. If notice
is tendered and is refused by the intended recipient, the notice shall
nonetheless be considered to have been given and shall be effective as of the
date of such refusal. The contrary notwithstanding, any notice given in a manner
other than that provided in this Section 16.1 that is actually received by the
intended recipient shall be deemed an effective delivery of such notice. Any
party may, at any time, by giving ten days written notice to the Company,
designate a new address for the giving of notice to such party.
16.2 Insurance. The Company shall carry insurance in such amounts as
deemed appropriate by the Board and as may be required by lenders or contract
(including, without limitation, liability insurance).
16.3 Membership Certificates. The Company shall issue a Certificate
to each Member to represent such Member's Shares in the Company upon execution
of this Agreement and the payment of the Capital Contributions by such Member.
The Company shall issue a new Certificate in place of any previously issued if
the record holder of the Certificate (a) presents proof by affidavit, in form
and substance satisfactory to the Board, that a previously issued Certificate
has been lost, destroyed or stolen, or (b) if requested by the Board, delivers
to the Company a bond, in form and substance reasonably satisfactory to the
Board, with such surety or sureties and with fixed or open penalty as the Board
may direct in its reasonable discretion, to indemnify the Company against any
claim that may be made on account of the alleged loss, destruction or theft of
the Certificate. If a Member fails to notify the Company within a reasonable
time after it has knowledge of the loss, destruction or theft of a Certificate,
and a transfer of the Member's Shares represented by that Certificate is
registered before receiving such notification, the Company shall have no
liability with respect to any claim against the Company for such transfer or for
the issuance of a new Certificate consistent with such registration.
16.4 Complete Agreement. This Agreement, together with the Articles
to the extent referenced herein, constitute the complete and exclusive agreement
and understanding of the Members with respect to the subject matter contained
herein. This Agreement and the Articles
67
replace and supersede all prior agreements, negotiations, statements, memoranda
and understandings, whether written or oral, by and among the Members or any of
them.
16.5 Amendments. This Agreement may be amended by the Members only
if all of the Members agree to the proposed amendment and such amendment is set
forth in a writing signed by all Members making express reference to this
Agreement and expressly stating that such writing is an amendment of this
Agreement; provided that this Agreement, including Schedule 1, shall be amended
to reflect any admission of a new Member, Transfer of Shares or change in
Percentage Interests pursuant to the terms of this Agreement.
16.6 Applicable Law; Jurisdiction. This Agreement and the rights and
obligations of the Parties hereto shall be interpreted and enforced in
accordance with and governed by the laws of the State of Nevada without regard
to the conflict laws of that State. Each party further agrees that service of
any process, summons, notice or document by U.S. registered mail to its
respective address set forth in this Agreement shall be effective service of
process for any action brought against it in connection with this Agreement in
said court.
16.7 Interpretation. The headings in this Agreement are inserted for
convenience only and are in no way intended to describe, interpret, define, or
limit the scope, extent or intent of this Agreement or any provisions contained
herein. In the interpretation of this Agreement, the singular may be read as the
plural, and vice versa, the neuter gender as the masculine or feminine, and vice
versa, and the future tense as the past or present, and vice versa, all
interchangeably as the context may require in order to fully effectuate the
intent of the Parties and the transactions contemplated herein.
16.8 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which shall
be deemed to constitute one and the same instrument, and it shall be sufficient
for each party to have executed at least one, but not necessarily the same,
counterpart.
16.9 Facsimile Copies. Facsimile copies of this Agreement or of any
counterpart, and facsimile signatures hereon or on any counterpart, shall have
the same force and effect as originals.
16.10 Severability. If any provision of this Agreement, or any
application thereof, should be held by a court of competent jurisdiction to be
invalid, void, illegal or unenforceable to any extent, that provision shall be
deemed severable and the remainder of this Agreement, and all applications
thereof, shall not be affected, impaired or invalidated thereby, and shall
continue in full force and effect to the fullest extent permitted by law.
68
16.11 Waivers. No waiver of any of the provisions of this Agreement
shall be deemed, or shall constitute, a waiver of any other provision, whether
or not similar, nor shall any waiver constitute a continuing waiver, and no
waiver shall be binding unless evidenced by an instrument in writing and
executed by the Party making the waiver, expressly making reference to this
Agreement and to the matter being waived and expressly stating that it is a
waiver.
16.12 No Third Party Beneficiaries. This Agreement is made solely
among and for the benefit of the Members and their respective successors and
assigns, and no other Person shall have any rights, interest or claims hereunder
or be entitled to any benefits under or on account of this Agreement as a third
party beneficiary or otherwise.
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IN WITNESS WHEREOF, this Agreement was executed as of the date
first-above written.
SOMMER ENTERPRISES, LLC
By: /s/ Jack Sommer
-------------------------------
Name: Jack Sommer
Title: Manager
LONDON CLUBS NEVADA INC.
By: /s/ Linda Lillis
-------------------------------
Name: Linda Lillis
Title: Assistant Secretary
ALADDIN GAMING ENTERPRISES, INC.
By: /s/ Jack Sommer
-------------------------------
Name: Jack Sommer
Title: Chairman and President
GAI, LLC
By: /s/ Richard Goeglein
-------------------------------
Name: Richard J. Goeglein
Title:
70
/s/ Richard J. Goeglein
-------------------------------
RICHARD J. GOEGLEIN
/s/ James H. McKennon
-------------------------------
JAMES H. MCKENNON
/s/ Cornelius T. Klerk
-------------------------------
CORNELIUS T. KLERK
/s/ Jose A. Rueda
-------------------------------
JOSE A. RUEDA
/s/ Lee Galati
-------------------------------
LEE GALATI
71