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EQUITY PARTICIPATION AGREEMENT
among
▇▇▇▇▇▇ ENTERPRISES, LLC,
ALADDIN GAMING ENTERPRISES, INC.,
LONDON CLUBS NEVADA INC.
and
STATE STREET BANK AND TRUST COMPANY.
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EQUITY PARTICIPATION AGREEMENT
This Equity Participation Agreement (this "Agreement"), dated as of
February 26, 1998 is made by ▇▇▇▇▇▇ Enterprises, LLC, a Nevada limited liability
company ("▇▇▇▇▇▇ Enterprises"), Aladdin Gaming Enterprises, Inc., a Nevada
corporation ("Aladdin Enterprises"), London Clubs Nevada Inc., a Nevada
corporation ("LCNI"), and State Street Bank and Trust Company, as warrant agent
(the "Warrant Agent"), pursuant to the Warrant Agreement (as defined herein).
WITNESSETH:
WHEREAS, ▇▇▇▇▇▇ Enterprises, Aladdin Enterprises and LCNI are members
of Aladdin Gaming Holdings, LLC, a Nevada limited liability company ("Gaming
Holdings"), owning an aggregate of 97 percent of the issued and outstanding
common membership interests of Gaming Holdings ("Holdings Common Shares") as of
the date hereof;
WHEREAS, on the date hereof ▇▇▇▇▇▇ Enterprises owns all of the issued
and outstanding class A voting common stock of Aladdin Enterprises (the "Class A
Common Stock"), and Aladdin Enterprises owns 25 percent of the issued and
outstanding Holdings Common Shares;
WHEREAS, on the date hereof (a) Aladdin Enterprises entered into a
warrant agreement (the "Warrant
Agreement") with the Warrant Agent and pursuant thereto issued to various
persons (the "Warrantholders") warrants (the "Warrants") to purchase class B
non-voting common stock of Aladdin Enterprises (the "Class B Common Stock" and,
together with the Class A Common Stock, the "Common Stock") representing 40
percent of the Common Stock and (b) Aladdin Enterprises entered into a
registration rights agreement in favour of the Warrantholders (the "Warrant
Registration Rights Agreement");
WHEREAS, upon exercise of all of the Warrants, the Warrantholders will
indirectly own, through their ownership of Class B Common Stock, an aggregate of
10 percent of the membership interests of Gaming Holdings;
WHEREAS, the parties desire by this Agreement to set forth their
agreement as to certain arrangements in respect of (a) an initial underwritten
offering pursuant to which common shares of Aladdin Enterprises, Gaming
Holdings, Aladdin Gaming, LLC, a Nevada limited liability company and a wholly
owned subsidiary of Gaming Holdings, or a newly formed successor entity to any
of them (as the case may be, the "IPO Entity") are sold to the public pursuant
to a registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), and become registered under Section 12(g) of the Securities
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Exchange Act of 1934, as amended (an "IPO"), (b) the rights and obligations of
the Warrantholders to participate in tag along arrangements among the members of
Gaming Holdings, and (c) providing that Aladdin Enterprises does not become an
Investment Company (as herein defined) prior to the IPO.
THEREFORE, in consideration of the mutual covenants, agreements and
promises made herein, the parties agree as follows:
1. (a) The parties shall not effect an IPO unless, prior to such
IPO, ▇▇▇▇▇▇ Enterprises, LCNI and the Warrantholders each are given the right to
hold an equity interest in the IPO Entity immediately prior to the IPO equal to
their respective equity interests at such time in Gaming Holdings (whether such
equity interests are held at such time directly or indirectly through Aladdin
Enterprises), subject to any appropriate adjustments in respect of any built-in
tax or other liabilities. The parties agree to use their reasonable best
efforts when forming the IPO Entity (if applicable) and effecting the IPO such
that the Warrantholders shall not recognize income or gain for federal tax
purposes (other than as a result of any sale of shares held by them in such
IPO).
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(b) The parties agree that immediately prior to the IPO, they shall
cause the IPO Entity (if not Aladdin Enterprises) to enter into a supplement to
the Warrant Registration Rights Agreement and to assume all of the rights and
obligations of Aladdin Enterprises thereunder with respect to the shares of
stock of the IPO Entity to be owned by the Warrantholders to the same extent as
Aladdin Enterprises obligations under the Warrant Registration Rights Agreement
with respect to the Common Stock (defined thereunder as "Transfer Restricted
Securities") in accordance with Section 6 of the Warrant Registration Rights
Agreement.
2. Prior to any IPO, ▇▇▇▇▇▇ Enterprises, LCNI and Aladdin
Enterprises agree that they shall not take or permit any action that would
result in Aladdin Enterprises becoming an "investment company" (as that term is
defined in the Investment Company Act of 1940, as amended) (the "1940 Act")
required to register under the 1940 Act ("Investment Company") and shall use
commercially reasonable efforts to ensure that Aladdin Enterprises does not
become an Investment Company.
3. (a) Aladdin Enterprises shall provide written notice to the
Warrant Agent (a "Warrantholder Notice") within three days after receipt of any
written
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notice (a "Tag Along Notice") by Aladdin Enterprises pursuant to Section 8.4 of
the Operating Agreement of Gaming Holdings (the "Holdings Operating Agreement"),
and shall include a copy of the Tag Along Notice in the Warrantholder Notice.
Aladdin Enterprises shall take no action under Section 8.4 of the Holdings
Operating Agreement in respect of the Tag Along Notice until the expiration of
ten days from the giving of the Warrantholder Notice (the "Warrantholder Tag
Period").
(b) The Warrantholders who hold Common Stock at any time prior
to the expiration of the Warrantholder Tag Period, or who give Aladdin
Enterprises valid, irrevocable notice of exercise of Warrants together with
payment of the exercise price prior to the expiration of the Warrantholder Tag
Period (the Common Stock and Common Stock issued or to be issued following such
Warrant exercise, collectively, "Tag Eligible Shares") may during the
Warrantholder Tag Period by written notice from such Warrantholders to the
Warrant Agent and from the Warrant Agent to Aladdin Enterprises (a "Tag
Acceptance Notice") request that Aladdin Enterprises accept the offer contained
in the Tag Along Notice in respect of all or part of the Holdings Common Shares
held by Aladdin Enterprises which represent the indirect interest in
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Gaming Holdings which correspond to the Tag Eligible Shares held by such
Warrantholder. Any Tag Acceptance Notice shall be irrevocable and any notice
received outside the Warrantholder Exercise Period shall be of no effect
whatsoever. ▇▇▇▇▇▇ Enterprises shall not be required to give a Tag Acceptance
Notice to Aladdin Enterprises in order to cause Aladdin Enterprises to accept
the offer contained in the Tag Along Notice in respect of all or part of the
Holdings Common Shares which correspond to the Common Stock held by ▇▇▇▇▇▇
Enterprises.
(c) Aladdin Enterprises shall accept the offer in the Tag Along
Notice for all of (but no more than) the Holdings Common Shares in respect of
which Warrantholders ("Accepting Warrantholders") have caused the Warrant Agent
to deliver a valid Tag Acceptance Notice within the Warrantholder Tag Period as
well as any Holdings Common Shares which correspond to Common Stock held by
▇▇▇▇▇▇ Enterprises which ▇▇▇▇▇▇ Enterprises desires to be sold. If a Tag
Acceptance Notice is not given in respect of any Tag Eligible Shares (other than
Tag Eligible Shares held by ▇▇▇▇▇▇ Enterprises) within the Warrantholder Tag
Period, Aladdin Enterprises shall be deemed to have been instructed not to
accept the offer
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in the Tag Along Notice in respect of the Holdings Common Shares corresponding
to such Tag Eligible Shares.
(d) If pursuant to Section 8.4 of the Holdings Operating
Agreement Aladdin Enterprises sells all of the Holdings Common Shares which it
was requested to sell pursuant to this Section 3, or which it attempted to sell
for the benefit of ▇▇▇▇▇▇ Enterprises, (collectively, the "Participating
Holdings Common Shares") the Accepting Warrantholders and ▇▇▇▇▇▇ Enterprises
shall be allocated the full number of Holdings Common Shares that they requested
be sold. If Aladdin Enterprises sells less than all Participating Holdings
Common Shares, the Holdings Common Shares actually sold shall be allocated
between each Accepting Warrantholder and ▇▇▇▇▇▇ Enterprises pro rata in
proportion to the number of Participating Holdings Common Shares that Aladdin
Enterprises was requested to sell for the benefit of each Accepting
Warrantholder or attempted to sell for the benefit of ▇▇▇▇▇▇ Enterprises.
(e) Upon receipt by Aladdin Enterprises of the purchase price in
respect of a sale pursuant to Section 8.4 of the Holdings Operating Agreement,
the parties agree that Aladdin Enterprises shall redeem Common Stock (in the
case of ▇▇▇▇▇▇ Enterprises, first
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redeeming Class B Common Stock) held by the Accepting Warrantholders and ▇▇▇▇▇▇
Enterprises which correspond to the Holdings Common Shares allocated to them
pursuant to Section 3(d) in consideration for the payment by Aladdin Enterprises
to the Warrant Agent (as agent for such Accepting Warrantholders) and ▇▇▇▇▇▇
Enterprises of their share of such purchase price (determined in proportion to
the number of Holdings Common Shares allocated to them pursuant to Section
3(d)).
4. WARRANTHOLDER CONVERSION RIGHTS. Subject to compliance with the
provisions of the Nevada Gaming Control Act (or any successor statute) and the
rules and regulations promulgated thereunder, each Warrantholder shall have the
right, exercisable upon written notice to Aladdin Enterprises accompanied by
payment of any exercise price in respect of any Warrants held by such
Warrantholder, to exchange its Warrants or Class B Common Stock for Holdings
Common Shares in such number as shall result in such Warrantholder having a
Percentage Interest (as defined in the Holdings Operating Agreement) equal to
the percentage of the total Securities (defined as issued and outstanding Common
Stock and all Common Stock issuable on the exercise of all Warrants) held by
such Warrantholder applied to Aladdin Enterprises'
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Percentage Interest, such right to be exercisable within twenty days after (and
shall be deemed exercised immediately prior to) Aladdin Enterprises taking any
of the following actions:
(i) Any merger or consolidation involving Aladdin Enterprises,
as a result of which the holders of Class B Common Stock will receive
any consideration other than common equity securities of the IPO
Entity or any holder of Class B Common Stock will receive, as a result
of such transaction, any consideration different than that received by
any other holder of the Common Stock;
(ii) Any sale, lease, exchange, transfer or other disposition,
directly or indirectly, in a single transaction or series of related
transactions, of all or a substantial part of Aladdin Enterprises'
assets, to or with any Person;
(iii) Any transfer by Aladdin Enterprises of any of the Holdings
Common Shares held by it as of the date hereof other than pursuant to
Section 3;
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(iv) Any recapitalization of Aladdin Enterprises by means of a
redemption of shares or a distribution to stockholders, other than as
permitted by the Warrant Agreement or in connection with the IPO;
(v) Any voluntary dissolution or liquidation of Aladdin
Enterprises;
(vi) A repurchase or redemption of Common Stock from a
stockholder of Aladdin Enterprises that is not pro rata among all
stockholders of Aladdin Enterprises (except repurchases of the Common
Stock held by an Accepting Warrantholder or ▇▇▇▇▇▇ Enterprises
following the consummation of a "Tag-Along" sale in accordance with
Section 3, or repurchases required as the result of a holder of Common
Stock being found unsuitable by the Nevada gaming authorities); and
(vii) Any issuance of Common Stock (including securities
convertible into Common Stock) by Aladdin Enterprises to any Person
other than (A) the Warrantholders upon exercise of the Warrants or (B)
in connection with an issuance in which the proceeds thereof are
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contributed to Gaming Holdings in exchange for a number of Holdings
Common Shares, the fair market value of which is equal to such
contribution.
5. AMENDMENT AND WAIVER. Any provision of this Agreement may be
amended or waived only by an amendment or waiver in writing signed by the
parties.
6. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties and their respective
successors and assigns.
7. NO THIRD-PARTY BENEFICIARIES. This Agreement is for the sole
benefit of the parties and their permitted assigns and nothing herein express or
implied shall give or be construed to give to any person, other than the parties
and such assigns, any legal or equitable rights hereunder.
8. NOTICES. All notices provided for in this Agreement shall be
deemed to have been given when received and shall be in writing, duly signed by
the party giving such notice, and shall be hand delivered, faxed or mailed by
registered or certified mail or overnight courier service, as follows:
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(a) if to Aladdin Enterprises or ▇▇▇▇▇▇ Enterprises:
Aladdin Enterprises, LLC
c/o Aladdin Holdings, LLC
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
Attention of ▇▇▇▇ ▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Properties
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
Attention of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
and
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
Attention of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
and
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
Attention of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
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(b) if to LCNI:
London Clubs Nevada, Inc.
c/o London Clubs International, plc
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇
Telephone: ▇▇▇-▇▇-▇▇▇-▇▇▇-▇▇▇▇
Telecopier: 011-44-171-493-6981
Attention of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
with a copy to:
Ohrenstein & ▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
Attention of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
and
Lionel, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
Attention of P. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
(c) if to the Warrant Agent:
State Street Bank and Trust Company
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone:
Telecopier:
Attention of Corporate Trust
Administration
with a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopier: 213-891-8763
Attention of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
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9. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall constitute an original and all of which together shall
constitute one and the same instrument.
10. APPLICABLE LAW AND JURISDICTION. This Agreement and the rights
and obligations of the parties under this Agreement 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.
11. COMPLIANCE WITH GAMING LAWS. Notwithstanding any other provision
of this Agreement, no shares or other equity securities or interest in any
entity shall be issued, transferred or otherwise disposed of in any manner
pursuant to this Agreement except in compliance with the provisions of the
Nevada Gaming Control Act (or any successor statute) and the rules and
regulations promulgated thereunder.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective duly authorized officers as of the
date first above written.
▇▇▇▇▇▇ ENTERPRISES, LLC
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Manager
LONDON CLUBS NEVADA INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Assistant Secretary
ALADDIN GAMING ENTERPRISES, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: President
STATE STREET BANK AND TRUST
COMPANY, as warrant agent.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
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