-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ImPpCZK05Pdj5HeoW1bCBpFLQC0dTMpfSNQDePZAPs7rkG9XGwZWaTcA9KKslVgP xbHa6K8g5a74v1tTLq9hzw== 0000850994-02-000002.txt : 20020508 0000850994-02-000002.hdr.sgml : 20020508 ACCESSION NUMBER: 0000850994-02-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020508 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LAS VEGAS SANDS INC CENTRAL INDEX KEY: 0000850994 STANDARD INDUSTRIAL CLASSIFICATION: HOTELS & MOTELS [7011] IRS NUMBER: 043010100 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-42147 FILM NUMBER: 02638136 BUSINESS ADDRESS: STREET 1: 3355 LAS VEGAS BLVD SOUTH RM 1A CITY: LAS VEGAS STATE: NV ZIP: 89109 BUSINESS PHONE: 702414452 MAIL ADDRESS: STREET 1: 3355 LAS VEGAS BOULEVARD SOUTH CITY: LAS VEGAS STATE: NV ZIP: 89109 10-Q 1 lvsi1stqtr02-10q.txt FIRST QUARTER FORM 10-Q OF 2002 ================================================================================ LAS VEGAS SANDS, INC. UNITED STATES SECURITIES & EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2002 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition period from _______ to ______ ---------- Commission File Number 333-42147 ---------- LAS VEGAS SANDS, INC. (Exact name of registration as specified in its charter) Nevada 04-3010100 - ---------------------------------- ------------------------------------ (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 3355 Las Vegas Boulevard South, Room 1A Las Vegas, Nevada 89109 - --------------------------------------------- ------------------- (Address of principal executive offices) (Zip Code) (702) 414-1000 ----------------------------------------------------- (Registrant's telephone number, including area code) -------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of May 8, 2002 Class Outstanding at May 8, 2002 - -------------------------------------- ----------------------------------- Common Stock, $.10 par value 1,000,000 shares ================================================================================ 1 LAS VEGAS SANDS, INC.
Table of Contents Part I FINANCIAL INFORMATION Item 1. Consolidated Balance Sheets At March 31, 2002 (unaudited) and December 31, 2001................1 Consolidated Statements of Operations for the Three Months Ended March 31, 2002 (unaudited) and March 31, 2001 (unaudited)..........2 Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2002 (unaudited) and March 31, 2001 (unaudited)..........3 Notes to Consolidated Financial Statements.........................4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..................18 Item 3. Quantitative and Qualitative Disclosures About Market Risk........27 Part II OTHER INFORMATION Item 1. Legal Proceedings.................................................29 Item 2. Changes in Securities and Use of Proceeds.........................29 Item 6. Exhibits and Reports on Form 8-K..................................29 Signatures........................................................30
Item 1. Financial Statements LAS VEGAS SANDS, INC. Consolidated Balance Sheets (Dollars in thousands)
March 31, December 31, 2002 2001 ----------- ----------- Unaudited ASSETS Current assets: Cash and cash equivalents ................................ $ 35,365 $ 54,936 Restricted cash and investments .......................... 435 2,646 Accounts receivable, net ................................. 64,262 57,092 Inventories .............................................. 4,465 4,747 Prepaid expenses ......................................... 3,917 3,862 ----------- ----------- Total current assets ......................................... 108,444 123,283 Property and equipment, net .................................. 1,093,617 1,096,307 Deferred offering costs, net ................................. 16,680 18,989 Other assets, net ............................................ 31,926 33,207 ----------- ----------- $ 1,250,667 $ 1,271,786 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable ......................................... $ 24,294 $ 36,353 Construction payables .................................... 9,746 26,115 Construction payables-contested .......................... 7,232 7,232 Accrued interest payable ................................. 27,524 10,008 Other accrued liabilities ................................ 69,029 70,035 Current maturities of long-term debt ..................... 203,961 129,113 ----------- ----------- Total current liabilities .................................... 341,786 278,856 Other long-term liabilities .................................. 1,359 3,274 Long-term debt ............................................... 652,861 745,746 Long-term subordinated loans payable to Principal Stockholder 66,123 66,123 ----------- ----------- 1,062,129 1,093,999 ----------- ----------- Redeemable Preferred Interest in Venetian Casino Resort, LLC, a wholly owned subsidiary ................................ 194,441 188,778 ----------- ----------- Commitments and contingencies Stockholders' equity (Deficit): Common stock, $.10 par value, 3,000,000 shares authorized, 1,000,000 shares issued and outstanding ............... 100 92 Capital in excess of par value ........................... 140,760 140,768 Accumulated deficit since June 30, 1996 .................. (146,763) (151,851) ----------- ----------- (5,903) (10,991) ----------- ----------- $ 1,250,667 $ 1,271,786 =========== =========== The accompanying notes are an integral part of these consolidated financial statements.
1 LAS VEGAS SANDS, INC. Consolidated Statements of Operations (In thousands, except per share data) (Unaudited)
Three Months Ended March 31, 2002 2001 --------- -------- Revenues: Casino ................................................. $ 50,473 $ 58,477 Rooms .................................................. 56,378 59,586 Food and beverage ...................................... 21,879 18,829 Retail and other ....................................... 16,761 17,284 --------- -------- 145,491 154,176 Less-promotional allowances ............................... (9,058) (12,286) --------- -------- Net revenues ........................................... 136,433 141,890 --------- -------- Operating expenses: Casino ................................................. 29,695 39,999 Rooms .................................................. 13,034 13,171 Food and beverage ...................................... 9,971 8,307 Retail and other ....................................... 7,102 7,198 Provision for doubtful accounts ........................ 3,335 3,718 General and administrative ............................. 21,467 22,011 Corporate expense ...................................... 1,909 1,888 Rental expense ......................................... 1,654 2,191 Pre-opening and developmental expense .................. 665 Depreciation and amortization .......................... 10,985 10,206 --------- -------- 99,817 108,689 --------- -------- Operating income .......................................... 36,616 33,201 Other income (expense): Interest income ......................................... 181 418 Interest expense, net of amounts capitalized ............ (24,382) (26,751) Interest expense on indebtedness to Principal Stockholder (2,334) (2,189) Other income (expense) .................................. 670 -- --------- -------- Income before preferred return ............................ 10,751 4,679 Preferred return on Redeemable Preferred Interest in Venetian Casino Resort, LLC (2001, as restated) ... (5,663) (5,040) --------- -------- Net income (loss) (2001, as restated) ..................... $ 5,088 $ (361) ========= ========= Basic and diluted income (loss) per share ................. $ 5.09 $ (0.36) ========= ========= The accompanying notes are an integral part of these consolidated financial statements.
2 LAS VEGAS SANDS, INC. Consolidated Statements of Cash Flows (Dollars in thousands) (Unaudited)
Three Months Ended March 31, 2002 2001 ----------- ----------- Cash flows from operating activities: Net income (loss) (2001, as restated) ................................. $ 5,088 $ (361) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization ................................. 10,985 10,206 Amortization of debt offering costs and original issue discount 2,664 2,125 Non-cash preferred return on Redeemable Preferred Interest in Venetian (2001, as restated) ............................. 5,663 5,040 Provision for doubtful accounts ............................... 3,335 3,718 Changes in operating assets and liabilities: Accounts receivable ......................................... (10,505) (7,259) Inventories ................................................. 282 (230) Prepaid expenses ............................................ (55) 448 Other assets ................................................ 1,281 1,851 Accounts payable ............................................ (12,059) (5,119) Accrued interest payable .................................... 17,516 16,435 Other accrued liabilities ................................... (2,921) (12,918) ----------- ----------- Net cash provided by operating activities ............................. 21,274 13,936 ----------- ----------- Cash flows from investing activities: (Increase) decrease in restricted cash ................................ 2,211 (25) Capital expenditures .................................................. (24,664) (9,566) ----------- ----------- Net cash used in investing activities ................................. (22,453) (9,591) ----------- ----------- Cash flows from financing activities: Repayments on bank credit facility-tranche B term loan ................ -- (125) Repayments on bank credit term facility ............................... (382) -- Repayments on bank credit facility-revolver ........................... (15,000) -- Proceeds from bank credit facility-revolver ........................... 5,000 -- Repayments on FF&E credit facility .................................... (5,374) (5,374) Repayments on Phase II Subsidary credit facility ...................... (2,500) -- Proceeds from Phase II Subsidiary unsecured bank loan ................. -- 792 Payments of deferred offering costs ................................... (136) (477) ----------- ----------- Net cash used in financing activities ................................. (18,392) (5,184) ----------- ----------- Decrease in cash and cash equivalents ................................. (19,571) (839) Cash and cash equivalents at beginning of period ...................... 54,936 42,606 ----------- ----------- Cash and cash equivalents at end of period ............................ $ 35,365 $ 41,767 =========== =========== Supplemental disclosure of cash flow information: Cash payments for interest .......................................... $ 6,282 $ 10,384 =========== =========== The accompanying notes are an integral part of these consolidated financial statements.
3 LAS VEGAS SANDS, INC. Notes to Financial Statements Note 1. Organization and Business of Company The accompanying consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2001. The year end balance sheet data was derived from audited financial statements but does not include all disclosures required by generally accepted accounting principles. In addition, certain amounts in the 2001 financial statements have been reclassified to conform with the 2002 presentation. In the opinion of management, all adjustments and normal recurring accruals considered necessary for a fair presentation of the results for the interim period have been included. The interim results reflected in the unaudited financial statements are not necessarily indicative of expected results for the full year. Las Vegas Sands, Inc. ("LVSI") is a Nevada corporation. On April 28, 1989, LVSI commenced gaming operations in Las Vegas, Nevada, by acquiring the Sands Hotel and Casino (the "Sands"). On June 30, 1996, LVSI closed the Sands and subsequently demolished the facility in order to construct a planned two-phase hotel-casino resort. The first phase of the hotel-casino resort (the "Casino Resort") includes 3,036 suites, casino space approximating 116,000 square feet, approximately 500,000 square feet of convention space, and approximately 475,000 gross leasable square feet of retail shops and restaurants. The consolidated financial statements include the accounts of LVSI and its wholly-owned subsidiaries (the "Subsidiaries"), including Venetian Casino Resort, LLC ("Venetian"), Grand Canal Shops Mall, LLC (the "Mall Subsidiary"), Grand Canal Shops Mall Subsidiary, LLC (the "New Mall Subsidiary"), Lido Casino Resort, LLC (the "Phase II Subsidiary"), Mall Intermediate Holding Company, LLC ("Mall Intermediate"), Grand Canal Shops Mall Construction, LLC ("Mall Construction"), Lido Intermediate Holding Company, LLC ("Lido Intermediate"), Grand Canal Shops Mall Holding Company, LLC, Grand Canal Shops Mall MM Subsidiary, Inc., Lido Casino Resort Holding Company, LLC, Grand Canal Shops Mall MM, Inc. and Lido Casino Resort MM, Inc. (collectively, and including all other direct and indirect subsidiaries of LVSI, the "Company"). Each of LVSI and the Subsidiaries is a separate legal entity and the assets of each such entity are intended to be available only to the creditors of such entity. Venetian was formed on March 20, 1997 to own and operate certain portions of the Casino Resort. LVSI is the managing member and owns 100% of the common voting equity in Venetian. The entire preferred interest in Venetian is owned by Interface Group Holding Company, Inc. ("Interface Holding"), which is wholly-owned by LVSI's principal stockholder (the "Principal Stockholder"). Mall Intermediate and Lido Intermediate are special purpose companies, which are wholly-owned subsidiaries of Venetian. They are guarantors or co-obligors of certain indebtedness related to the construction of the Casino Resort. The New Mall Subsidiary, an indirect wholly-owned subsidiary of LVSI, was formed on December 9, 1999 and owns and operates the retail mall in the Casino Resort (the "Mall"). The Casino Resort is physically connected to the approximately 1.15 million square foot Sands Expo and Convention Center (the "Expo Center"). Interface Group-Nevada, Inc. ("IGN"), the owner of the Expo Center, is beneficially owned by the Principal Stockholder. Venetian, the New Mall Subsidiary and IGN transact business with each other and are parties to certain agreements. Restatement of Previously Reported Amounts ------------------------------------------ As more fully described above, Interface Holding (an entity controlled by the Principal Stockholder) owns a redeemable preferred interest in LVSI's wholly-owned subsidiary, Venetian. The preferred return on the redeemable preferred interest has not been paid, but it has been accrued by Venetian each year and historically accounted for as a charge against capital (Note 5). Under guidance by the Emerging Issues Task Force ("EITF") of the Financial Accounting Standards Board, dividends on a subsidiary's preferred stock should be reflected as a minority interest and recognized as a charge against income. 4 Notes to Financial Statements Note 1. Organization and Business of Company (Continued) The Company has recognized the preferred return as a charge against income in the accompanying 2002 financial statements, and has restated certain income statement items for the period ended March 31, 2001 to include the preferred return, which amount was $5.0 million. The restatement has no impact on the previously reported carrying balances of the redeemable preferred interest, or on the previously reported financial position of the Company. In addition, because such preferred return was deducted from income available to common stockholders in calculating earnings per share, the restatement has no impact on previously reported amounts for earnings per share. Note 2. Stockholders' Equity, Stockholders' Agreement and Per Share Data The Company established a nonqualified stock option plan, which provides for the granting of stock options pursuant to the applicable provisions of the Internal Revenue Code and regulations. The stock option plan provides that the Principal Stockholder may assume the obligations of the Company under the plan and provides for the granting of up to 75,000 shares of common stock to officers and other key employees of the Company. As of December 31, 2001, no grants under the stock option plan had occurred. In the first quarter of 2002, options to purchase 49,900 shares, which represented approximately 5% of the Company's outstanding common stock, were granted from the Company to certain key employees of the Company. Immediately thereafter, the Principal Stockholder assumed the obligations of the Company under the stock option plan. On the date of grant, the exercise price of the options of $271 per share was higher than the fair market value of the Company's common stock based upon a determination of the fair market value of a per share minority interest in the common stock of LVSI, performed by an independent third-party appraiser. The options granted were fully vested and exercisable upon grant. All of the options were exercised immediately after issuance by the respective employees by delivery of a notice of exercise. The exercise price of the options was loaned to the optionees by the Principal Stockholder on a collateralized basis under full recourse notes. During the first quarter of 2002, the Company entered into a stockholders' agreement with the respective employees (the "additional stockholders") and the Principal Stockholder. This agreement restricts the ability of the additional stockholders and any of their permitted transferees who has agreed to be bound by the terms and conditions of the agreement to sell, assign, pledge, encumber or otherwise dispose of any shares of common stock of LVSI, except in accordance with the provisions of the agreement. All transfers are subject to certain conditions, including: compliance with applicable state and foreign securities laws, receipt of necessary licenses or approvals from the Nevada gaming authorities, and compliance with all federal laws, rules and regulations relating to subchapter S corporations. If at any time before LVSI completes an initial public offering, the Principal Stockholder wishes to sell 20% or more of his ownership interest in LVSI to any third party transferee, each additional stockholder shall have the right to participate in such sale on the same terms as those offered to the Principal Stockholder. The additional stockholders also have certain piggyback registration rights. If at any time LVSI completes an initial public offering or proposes to register any shares of common stock, the additional stockholders may request registration of their securities. Common stock will be included in the registration statement in the following order of priority: first, all securities of LVSI to be sold for its own account, second, securities of stockholders (other than the Principal Stockholder) who have demand registration rights and third, such securities requested to be included in such registration statement by the Principal Stockholder and the additional stockholders (pro rata based on the number of registrable securities owned by such stockholders). Finally, if at any time prior to the completion by LVSI of an initial public offering LVSI wishes to issue any new securities, the additional stockholders will have the right to purchase that number of shares of LVSI common stock, at the proposed purchase price of the new securities, such that the additional stockholders' percentage ownership of LVSI would remain the same following such issuance. Basic and diluted income (loss) per share are calculated based upon the weighted average number of shares outstanding. In the first quarter of 2002, the Company completed a stock split whereby the number of shares of common stock outstanding was increased from 925,000 to 1,000,000. At the date of the stock split, the Principal Stockholder maintained 100% ownership of the Company's common stock. All references to share and per share data herein have been adjusted retroactively to give effect to the increase in shares of common stock outstanding to 1,000,000. Note 3. Property and Equipment Property and equipment consists of the following (in thousands):
March 31, December 31, 2002 2001 ----------- ----------- Land and land improvements .............................. $ 113,309 $ 113,309 Building and improvements ............................... 886,624 882,395 Equipment, furniture, fixtures and leasehold improvements 139,378 138,978 Construction in progress ................................ 72,148 68,542 ----------- ----------- 1,211,459 1,203,224 Less: accumulated depreciation and amortization (117,842) (106,917) ----------- ----------- $ 1,093,617 $ 1,096,307 =========== ===========
During the three month periods ended March 31, 2002 and March 31, 2001, the Company capitalized interest expense of $0.3 million and $0.0 million, respectively. As of March 31, 2002, construction in progress represented project design and shared facilities costs for the planned second phase of the Casino Resort, to be owned by the Phase II Subsidiary (the "Phase II Resort"), and on-going capital improvement projects at the Casino Resort. 5 Notes to Financial Statements (Continued) Note 4. Long-Term Debt Long-term debt consists of the following (in thousands):
March 31, December 31, 2002 2001 ----------- ----------- Indebtedness of the Company and its Subsidiaries other than the New Mall Subsidiary: - ----------------------------------- 12 1/4% Mortgage Notes, due November 15, 2004 $ 425,000 $ 425,000 14 1/4% Senior Subordinated Notes, due November 15, 2005 (net of unamortized discount of $3,168 in 2002 and $3,387 in 2001) 94,332 94,113 Bank Credit Facility-Revolver 30,000 40,000 Bank Credit Facility- Term Loan 151,604 151,986 FF&E Credit Facility 48,361 53,735 Indebtedness of the New Mall Subsidiary: - ---------------------------------------- Mall Tranche A Take-out Loan 105,000 105,000 Indebtedness of the Phase II Subsidiary: - ---------------------------------------- Phase II Subsidiary Credit Facility 1,433 3,933 Phase II Unsecured Bank Loan 1,092 1,092 Less: current maturities (203,961) (129,113) ----------- ----------- Total long-term debt $ 652,861 $ 745,746 =========== =========== Subordinated Owner Indebtedness: - -------------------------------- Completion Guaranty Loan (Indebtedness of Venetian) $ 31,123 $ 31,123 Subordinated Mall Tranche B Take-out Loan from Principal Stockholder (Indebtedness of New Mall Subsidiary) 35,000 35,000 ----------- ----------- Total long-term subordinated loans payable to Principal Stockholder $ 66,123 $ 66,123 =========== ===========
6 Notes to Financial Statements (Continued) Note 4. Long-Term Debt (Continued) In connection with the financing for the Casino Resort, the Company entered into a series of transactions during 1997 to provide for the development and construction of the Casino Resort. In November 1997, the Company issued $425.0 million aggregate principal amount of Mortgage Notes (the "Mortgage Notes") and $97.5 million aggregate principal amount of Senior Subordinated Notes (the "Senior Subordinated Notes" and, together with the Mortgage Notes, the "Notes") in a private placement. On June 1, 1998, LVSI and Venetian completed an exchange offer to exchange the Notes for other notes with substantially the same terms. In November 1997, LVSI and Venetian and a syndicate of lenders entered into a Bank Credit Facility (the "Bank Credit Facility") providing for multiple draw term loans to the Company for construction and development of the Casino Resort. On September 17, 2001, the Company entered into its second amendment and restatement of the Bank Credit Facility in order to (1) combine the $97.5 million tranche A term loan, $49.5 million tranche B term loan and $5.8 million tranche C term loan into a single term loan of $152.8 million, (2) modify the Company's scheduled amortization payments to now repay $381,875 per quarter until December 2002, to be followed by two bullet payments of $75.2 million during each of March 2003 and June 2003, (3) extend the commitment termination date of the Company's $40.0 million revolving credit line (the "Revolver") from September 15, 2001 to June 30, 2003, (4) eliminate the "cash sweep" provision of such agreement in connection with any excess cash flows of the Company, and (5) modify the financial covenants. Each of the term loan and revolving loans under the Bank Credit Facility has an interest rate of 350 basis points over LIBOR. In December 1997, the Company also entered into an agreement (the "FF&E Credit Facility") with certain lenders to provide for $97.7 million of financing for certain furniture, fixtures and equipment to be secured under the FF&E Credit Facility and an electrical substation. On September 28, 2001, the Company entered into a fourth amendment to the FF&E Credit Facility in order to modify its financial covenants to substantially match those under the amended and restated Bank Credit Facility and consent to the amendments to the Bank Credit Facility. On November 12, 1999, an advance of approximately $23.5 million was made under the Principal Stockholder's completion guaranty (the "Completion Guaranty"). Interest expense added to the principal balance increased the balance of the Completion Guaranty to $31.1 million as of March 31, 2002. Advances made under the Completion Guaranty up to $25.0 million (excluding accrued interest) are treated as a junior loan from the Principal Stockholder to Venetian that is subordinated in right of payment to the indebtedness under the Bank Credit Facility, the FF&E Credit Facility and the Notes. On December 20, 1999, certain take-out lenders (collectively, the "Tranche A Take-out Lender") funded a $105.0 million tranche A take-out loan to the New Mall Subsidiary (the "Tranche A Take-out Loan"). The proceeds were used to repay indebtedness under the mall construction loan facility for the Mall. The indebtedness under the Tranche A Take-out Loan is secured by first priority liens on the assets that comprise the Mall (the "Mall Assets"). Also, on December 20, 1999, an entity wholly-owned by the Principal Stockholder funded a tranche B take-out loan to provide $35.0 million in financing to the New Mall Subsidiary (the "Tranche B Take-out Loan" and, together with the Tranche A Take-out Loan, the "Mall Take-out Financing"). The proceeds, along with $105.0 million of proceeds from the Tranche A Take-out Loan, were used to repay the mall construction loan facility in full. In February 2001, the Phase II Subsidiary entered into an unsecured bank line of credit (the "Phase II Unsecured Bank Loan"), as amended on May 31, 2001, for $1.1 million and payable on July 15, 2002. This line of credit bears interest at LIBOR plus 100 basis points. The proceeds of the line of credit were used to fund payments of Phase II Subsidiary operating costs. 7 Notes to Financial Statements (Continued) Note 4. Long-Term Debt (Continued) On October 19, 2001, the Phase II Subsidiary entered into a loan agreement providing for a $17.5 million term and revolving loan, with a one time option to increase such loan to $30.0 million (the "Phase II Subsidiary Credit Facility"). The Phase II Subsidiary Credit Facility is secured by the Phase II Subsidiary's land on the site located adjacent to the Casino Resort (the "Phase II Land"), as well as the Phase II Subsidiary's leasehold interest in a five-year lease of the Phase II Land to Venetian for an annual rental payment of $8.0 million (the "Phase II Lease"). The Phase II Subsidiary Credit Facility and proceeds from rental payments from Venetian to the Phase II Subsidiary under the Phase II Lease are each available for any Phase II Resort pre-development expenses (up to $30 million after October 19, 2001) or may be loaned or distributed by the Phase II Subsidiary to the Company for other liquidity needs. The Phase II Subsidiary Credit Facility bears interest at LIBOR plus 400 basis points and is due on June 30, 2003. The Company's existing debt instruments contain certain restrictions that, among other things, limit the ability of the Company and/or certain subsidiaries to incur additional indebtedness, issue disqualified stock or equity interests, pay dividends or make other distributions, repurchase equity interests or certain indebtedness, create certain liens, enter into certain transactions with affiliates, enter into certain mergers or consolidations or sell assets of the Company without prior approval of the lenders or noteholders. Financial covenants included in the Bank Credit Facility and the FF&E Credit Facility include a minimum fixed charge ratio, maximum leverage ratio, minimum consolidated adjusted EBITDA standard, minimum equity standard and maximum capital expenditures standard. The financial covenants in the Bank Credit Facility and the FF&E Credit Facility involving EBITDA are applied on a rolling four quarter basis, and the Company's compliance with financial covenants can be temporarily affected if the Company experiences a decline in hotel occupancy or room rates, or an unusually low win percentage in a particular quarter, which is not offset in subsequent quarters or by other results of operations. As a result of these fluctuations, no assurance can be given that the Company will be in compliance with its financial covenants. The Company was challenged to meet these covenant tests for certain quarters in 2001 and the first quarter of 2002 due to an extremely low win percentage and reduced travel to Las Vegas because of the September 11th terrorist attacks. These covenants allow the Principal Stockholder to increase EBITDA for measurement purposes by issuing a standby letter of credit to the Company's lenders. The covenants also allow the New Mall Subsidiary and the Phase II Subsidiary, subject to certain limitations, to make distributions to LVSI which would increase EBITDA for debt covenant measurement purposes. The Company used the letter of credit mechanism in the amount of $10.0 million during the first quarter of 2001. Pursuant to the terms of the Company's indebtedness, the letter of credit was subsequently reduced to $6.9 million during the third quarter of 2001. During the fourth quarter of 2001 and the first quarter of 2002, the Company entered into a limited waiver amendment to the Bank Credit Facility and FF&E Credit Facility to obtain a waiver with respect to the minimum consolidated adjusted EBITDA requirement. During the first quarter of 2002, the New Mall Subsidiary paid a $7.0 million distribution to Venetian. The Company expects to be challenged to meet certain of its existing covenant tests in the second quarter of 2002 due to the carry-over effects that the terrorist attacks on September 11th and the extremely low win percentage for certain of its fiscal 2001 quarters will have on the rolling measurement period. The Company has certain options available to it in the event that it needs to seek a cure in order to meet such covenants, including the ability to draw down on the Phase II Subsidiary Credit Facility, make distributions of excess cash from the Mall under the terms of the Tranche A Take-out Loan. The Company anticipates that ultimately its win percentage will return to normal levels and that it will no longer need to rely on the various cures and waivers described above. On May 6, 2002, the Company announced its intention to offer approximately $850 million in aggregate principal amount of mortgage notes in a Rule 144A offering, and to enter into a new senior secured credit facility and Mall loan facility, in an aggregate amount of approximately $480 million, during the second quarter of 2002 (collectively, the "Refinancing Transactions"). The Company intends to use the proceeds of the Refinancing Transactions to repay, redeem or repurchase all of its outstanding indebtedness (including the Notes, the Bank Credit Facility, the FF&E Facility, the Mall Take-out Financing, the Completion Guaranty, the Phase II Subsidiary Credit Facility and the Phase II Unsecured Bank Loan), to finance the construction and development of the Phase IA Addition (which the Company currently estimates will cost $235.0 million to complete) and to pay all fees and expenses associated with the Refinancing Transactions. In connection with the Refinancing Transactions, the Company expects to incur an extraordinary loss on early retirement of indebtedness of $53.3 million which will be comprised of $33.5 million of call premiums to be incurred in connection with the Refinancing Transactions and the write-off of $19.8 million related to the write-off of unamortized debt offering costs and unamortized original issue discount. 8 Notes to Financial Statements (Continued) Note 4. Long-Term Debt (Continued) The Company also commenced a cash tender offer on May 6, 2002 to purchase any and all of the Notes (the "Tender Offer"). The purchase price (including consent fees) is $1,061.25 per $1,000 principal amount for the Mortgage Notes and $1,071.25 per $1,000 principal amount for the Senior Subordinated Notes, in each case, plus accrued but unpaid interest. In conjunction with the Tender Offer, the Company is soliciting consents to eliminate substantially all of the restrictive covenants of the indentures governing the Notes and make certain other amendments. Adoption of the proposed amendments requires the consent of holders of not less than a majority of the aggregate principal amount of each issue of Notes. Holders who tender their Notes will be required to consent to the proposed amendments. The Tender Offer and the Refinancing Transactions are subject to a number of conditions, including entering into definitive agreements for the Refinancing Transactions. No assurance can be given that the Tender Offer or the Refinancing Transactions will be completed, or that a refinancing will be on terms that will be favorable to the Company. Assuming that the Company is successful in refinancing all or a substantial portion of its outstanding indebtedness, for the next twelve months the Company expects to fund Casino Resort operations, capital expenditures and debt service requirements from existing cash balances, operating cash flow, borrowings under a revolver to the extent that funds are available and distributions of excess cash from the owner of the Mall to the extent permitted under the terms of the Company's indebtedness. Note 5. Redeemable Preferred Interest in Venetian Casino Resort, LLC During 1997, Interface Holding contributed $77.1 million in cash to Venetian in exchange for a Series A preferred interest (the "Series A Preferred Interest") in Venetian. By its terms, the Series A Preferred Interest was convertible at any time into a Series B preferred interest in Venetian (the "Series B Preferred Interest"). In August 1998, the Series A Preferred Interest was converted into the Series B Preferred Interest. The rights of the Series B Preferred Interest include the accrual of a preferred return of 12% from the date of contribution in respect of the Series A Preferred Interest. Until the indebtedness under the Bank Credit Facility is repaid and cash payments are permitted under the restricted payment covenants of the indentures entered into in connection with the Notes (the "Indentures"), the preferred return on the Series B Preferred Interest will accrue and will not be paid in cash. Commencing in November 2009, distributions must be made to the extent of the positive capital account of the holder. During the second and third quarters of 1999, Interface Holding contributed $37.3 million and $7.1 million, respectively, in cash in exchange for an additional Series B Preferred Interest. During the three month periods ended March 31, 2002 and March 31, 2001, $5.7 million and $5.0 million, respectively, were accrued on the Series B Preferred Interest related to the contributions made. Since 1997, no distributions of preferred interest or preferred return have been paid on the Series B Preferred Interest. Note 6. Commitments and Contingencies The Company is party to litigation matters and claims related to its operations and construction of the Casino Resort that could have a material adverse effect on the financial position, results of operations or cash flows of the Company to the extent such litigation is not covered by the Insurance Policy (as defined below). The construction of the principal components of the Casino Resort was undertaken by Lehrer McGovern Bovis, Inc. (the "Construction Manager") pursuant to a construction management agreement and certain amendments thereto (as so amended, the "Construction Management Contract"). The Construction Management Contract established a final guaranteed maximum price (the "Final GMP") of $645.0 million, so that, subject to certain exceptions (including an exception for cost overruns due to "scope changes"), the Construction Manager was responsible for any costs of the work covered by the Construction Management Contract in excess of the Final GMP. The obligations of the Construction Manager under the Construction Management Contract are guaranteed by Bovis, Inc. ("Bovis" and such guaranty, the "Bovis Guaranty"), the Construction Manager's direct parent at the time the Construction Management Contract was entered into. Bovis' obligations under the Bovis Guaranty are guaranteed by The Peninsular and Oriental Steam Navigation Company ("P&O"), a British public company and the Construction Manager's ultimate parent at the time the Construction Management Contract was entered into (such guaranty, the "P&O Guaranty"). 9 Notes to Financial Statements (Continued) Note 6. Commitments and Contingencies (Continued) On July 30, 1999, Venetian filed a complaint against the Construction Manager and Bovis in United States District Court for the District of Nevada. The action alleges breach of contract by the Construction Manager of its obligations under the Construction Management Contract and a breach of contract by Bovis of its obligations under the Bovis Guaranty, including failure to fully pay trade contractors and vendors and failure to meet the April 21, 1999 guaranteed completion date. The Company amended this complaint on November 23, 1999 to add P&O as an additional defendant. The suit is intended to ask the courts, among other remedies, to require the Construction Manager and its guarantors to pay its contractors, to compensate Venetian for the Construction Manager's failure to perform its duties under the Construction Management Contract and to pay the Company the agreed upon liquidated damages penalty for failure to meet the guaranteed substantial completion date. Venetian seeks total damages in excess of $100.0 million. The Construction Manager subsequently filed motions to dismiss the Company's complaint on various grounds, which the Company opposed. The Construction Manager's motions were either denied by the court or voluntarily withdrawn. In response to Venetian's breach of contract claims against the Construction Manager, Bovis and P&O, the Construction Manager filed a complaint on August 3, 1999 against Venetian in the District Court of Clark County, Nevada. The action alleges a breach of contract and quantum meruit claims under the Construction Management Contract and also alleges that Venetian defrauded the Construction Manager in connection with the construction of the Casino Resort. The Construction Manager seeks damages, attorney's fees and costs and punitive damages. In the lawsuit, the Construction Manager claims that it is owed approximately $90.0 million from Venetian and its affiliates. This complaint was subsequently amended by the Construction Manager, which also filed an additional complaint against the Company relating to work done and funds advanced with respect to the contemplated development of the Phase II Resort. Based upon its review of the complaints, the fact that the Construction Manager has not provided Venetian with reasonable documentation to support such claims, and the Company's belief that the Construction Manager has materially breached its agreements with the Company, the Company believes that the Construction Manager's claims are without merit and intends to vigorously defend itself and pursue its claims against the Construction Manager in any litigation. In connection with these disputes, as of December 31, 1999 the Construction Manager and its subcontractors filed mechanics liens against the Casino Resort for $145.6 million and $182.2 million, respectively. The Company believes that a major reason these lien amounts exceed the Construction Manager's claims of $90.0 million is based upon a duplication of liens through the inclusion of lower-tier claims by subcontractors in the liens of higher-tier contractors, including the lien of the Construction Manager. As of December 31, 1999, the Company had purchased surety bonds for virtually all of the claims underlying these liens (other than approximately $15.0 million of claims with respect to which the Construction Manager purchased bonds). As a result, there can be no foreclosure of the Casino Resort in connection with the claims of the Construction Manager and its subcontractors. However, the Company will be required to pay or immediately reimburse the bonding company if and to the extent that the underlying claims are judicially determined to be valid. If such claims are not settled, it is likely to take a significant amount of time for their validity to be judicially determined. The Company believes that these claims are, in general, unsubstantiated, without merit, overstated, and/or duplicative. The Construction Manager itself has publicly acknowledged that at least some of the claims of its subcontractors are without merit. In addition, the Company believes that pursuant to the Construction Management Contract and the Final GMP, the Construction Manager is responsible for payment of any subcontractors' claims to the extent they are determined to be valid. The Company may also have a variety of other defenses to the liens that have been filed, including, for example, the fact that the Construction Manager and its subcontractors previously waived or released their rights to file liens against the Casino Resort. The Company intends to vigorously defend itself in any lien proceedings. On August 9, 1999, the Company notified the insurance companies providing coverage under its liquidated damages insurance policy (the "LD Policy") that it has a claim under the LD Policy. The LD Policy provides insurance coverage for the failure of the Construction Manager to achieve substantial completion of the portions of the Casino Resort covered by the Construction Management Contract within 30 days of the April 21, 1999 deadline, with a maximum liability under the LD Policy of approximately $24.1 million and with coverage being provided, on a per-day basis, for days 31-120 of the delay in the achievement of substantial completion. Because the Company believes that substantial completion was not achieved until November 12, 1999, the Company's claim under the LD Policy is likely to be for the above-described maximum liability of $24.1 million. The Company expects the LD Policy insurers to assert many of the same claims and defenses that the Construction Manager has asserted or will assert in the above-described litigations. Liability under the LD Policy may ultimately be determined by binding arbitration. 10 Notes to Financial Statements (Continued) Note 6. Commitments and Contingencies (Continued) In June 2000, the Company purchased an insurance policy (the "Insurance Policy") for loss coverage in connection with all litigation relating to the construction of the Casino Resort (the "Construction Litigation"). Under the Insurance Policy, the Company will self-insure the first $45.0 million and the insurer will insure up to the next $80.0 million of any possible covered losses. The Insurance Policy provides coverage for any amounts determined in the Construction Litigation to be owed to the Construction Manager or its subcontractors relating to claimed delays, inefficiencies, disruptions, lack of productivity/unauthorized overtime or schedule impact, allegedly caused by the Company during construction of the Casino Resort, as well as any defense costs. The insurance is in addition to, and does not affect, any scope change guarantees provided by the Principal Stockholder pursuant to the Completion Guaranty. All of the pending litigation described above is in preliminary stages and it is not yet possible to determine a range of loss or its ultimate outcome. If any litigation or other lien proceedings concerning the claims of the Construction Manager or its subcontractors were decided adversely to the Company, such litigation or other lien proceedings could have a material adverse effect on the financial position, results of operations or cash flows of the Company to the extent such litigation or lien proceedings are not covered by the Insurance Policy. Note 7. Summarized Financial Information Venetian and LVSI are co-obligors of the Notes and certain other indebtedness related to construction of the Casino Resort and are jointly and severally liable for such indebtedness (including the Notes). Venetian, Mall Intermediate, Mall Construction and Lido Intermediate (collectively, the "Subsidiary Guarantors") are wholly-owned subsidiaries of LVSI. The Subsidiary Guarantors have jointly and severally guaranteed (or are co-obligors of) such debt on a full and unconditional basis. No other subsidiary of LVSI is an obligor or guarantor of any of the Casino Resort financing. Because the New Mall Subsidiary is not a guarantor of any indebtedness of the Company (other than the Mall Take-out Financing), creditors of the Company's entities comprising the Company other than the New Mall Subsidiary (including the holders of the Notes but excluding creditors of the New Mall Subsidiary) do not have a direct claim against the Mall Assets. As a result, indebtedness of the entities comprising the Company other than the New Mall Subsidiary (including the Notes) is, with respect to the Mall Assets, effectively subordinated to indebtedness of the New Mall Subsidiary. The New Mall Subsidiary is not restricted by any of the debt instruments of LVSI, Venetian or the Company's other subsidiary guarantors (including the indentures governing the Notes) from incurring any indebtedness. The terms of the Tranche A Take-out Loan prohibit the New Mall Subsidiary from paying dividends or making distributions to any of the other entities comprising the Company unless payments under the Tranche A Take-out Loan are current, and, with certain limited exceptions, prohibit the New Mall Subsidiary from making any loans to such entities. Any additional indebtedness incurred by the New Mall Subsidiary may include additional restrictions on the ability of the New Mall Subsidiary to pay any such dividends and make any such distributions or loans. Prior to October 1998, Venetian owned approximately 44 acres of land on or near the Las Vegas Strip (the "Strip"), on the site of the former Sands. Such property includes the site on which the Casino Resort was constructed. Approximately 14 acres of such land was transferred to the Phase II Subsidiary in October 1998. On December 31, 1999, an additional 1.75 acres of land was contributed indirectly by the Principal Stockholder to the Phase II Subsidiary. The Phase II Resort is planned to be constructed adjacent to the Casino Resort. Because the Phase II Subsidiary will not be a guarantor of the Company's indebtedness, creditors of the Company (including the holders of the Notes) will not have a direct claim against the assets of the Phase II Subsidiary. As a result, the indebtedness of the Company (including the Notes) will, with respect to these assets, be effectively subordinated to indebtedness of the Phase II Subsidiary. The Phase II Subsidiary is not subject to any of the restrictive covenants of the debt instruments of the Company (including the Notes). Any indebtedness incurred by the Phase II Subsidiary in addition to the Phase II Subsidiary Credit Facility may include material restrictions on the ability of the Phase II Subsidiary to pay dividends or make distributions or loans to the Company and its subsidiaries. Separate financial statements and other disclosures concerning each of Venetian and the Subsidiary Guarantors are not presented below because management believes that they are not material to investors. Summarized financial information of LVSI, Venetian, the Subsidiary Guarantors and the non-guarantor subsidiaries on a combined basis as of March 31, 2002 and December 31, 2001 and for the three month periods ended March 31, 2002 and March 31, 2001 is as follows (in thousands): 11 LAS VEGAS SANDS, INC. Notes to Financial Statements (continued) Note 7. Summarized Financial Information (continued)
CONDENSED BALANCE SHEETS March 31, 2002 GUARANTOR SUBSIDIARIES -------------------------------- Lido Mall Venetian Intermediate Intermediate Las Vegas Casino Holding Holding Sands, Inc. Resort LLC Company LLC Company LLC -------------- --------------- -------------- -------------- Cash and cash equivalents ................................... $ 25,538 $ 7,025 $ 4 $ 4 Restricted cash and investments ............................. -- -- -- -- Intercompany receivable ..................................... 75,811 -- -- -- Accounts receivable, net .................................... 35,274 27,936 -- -- Inventories ................................................. -- 4,465 -- -- Prepaid expenses ............................................ 507 3,080 -- -- -------------- --------------- -------------- -------------- Total current assets ...................................... 137,130 42,506 4 4 Property and equipment, net ................................. -- 875,662 -- -- Investment in Subsidiaries .................................. 830,052 -- -- -- Deferred offering costs, net ................................ -- 14,657 -- -- Other assets, net ........................................... 3,366 24,937 -- -- -------------- --------------- -------------- -------------- $ 970,548 $ 957,762 $ 4 $ 4 ============== =============== ============== ============== Accounts payable ............................................ $ 1,816 $ 22,205 $ -- $ -- Construction payable ........................................ -- 6,560 -- -- Construction payable-contested .............................. -- 7,232 -- -- Intercompany payables ....................................... -- 55,694 -- -- Accrued interest payable .................................... -- 26,615 -- -- Other accrued liabilities ................................... 17,590 49,862 -- -- Current maturities of long-term debt (3) .................... 97,869 97,869 -- -- -------------- --------------- -------------- -------------- Total current liabilities ................................. 117,275 266,037 -- -- Other long-term liabilities ................................. -- 1,359 -- -- Long-term debt (3) .......................................... 651,428 651,428 -- -- Long-term subordinated loans payable to Principal Stockholder ..................................... -- 31,123 -- -- Accumulated losses of subsidiaries in excess of investment .. 207,748 -- -- -- -------------- --------------- -------------- -------------- 976,451 949,947 -- -- -------------- --------------- -------------- -------------- Redeemable Preferred interest in Venetian ................... -- 194,441 -- -- -------------- --------------- -------------- -------------- Stockholders' equity (deficit) .............................. (5,903) (186,626) 4 4 -------------- --------------- -------------- -------------- $ 970,548 $ 957,762 $ 4 $ 4 ============== =============== ============== ============== - ---------------- (1) The assets and liabilities of Mall Construction, a guarantor, were transferred to the Mall Subsidiary, a non-guarantor subsidiary, upon substantial completion of the Casino Resort on November 12, 1999, and subsequently transferred to the New Mall Subsidiary on December 20, 1999. As a result, Mall Construction had no assets or liabilities as of March 31, 2002. (2) Land with a historical cost basis of $29.2 million was transferred from Venetian, a co-obligor of the Notes, to the Phase II Subsidiary, a non-guarantor subsidiary, in October 1998 and land with a value of $11.8 million was indirectly contributed by the Principal Stockholder during December 1999. (3) As more fully described in Note 4, Las Vegas Sands, Inc. and Venetian Casino Resort LLC are co-obligors of certain of the Company's indebtedness. Accordingly, such indebtedness has been presented as an obligation of both entities in the above balance sheets.
12 LAS VEGAS SANDS, INC. Notes to Financial Statements (continued) Note 7. Summarized Financial Information (continued)
CONDENSED BALANCE SHEETS (continued) March 31, 2002 NON-GUARANTOR SUBSIDIARIES -------------------------------- Grand Canal Shops Mall Other Non- Consolidating/ Subsidiary Guarantor Eliminating LLC (1) Subsidiaries (2) Entries Total -------------- --------------- --------------- -------------- Cash and cash equivalents ................................... $ 2,357 $ 437 $ -- $ 35,365 Restricted cash and investments ............................. 435 -- -- 435 Intercompany receivable ..................................... -- 2,496 (78,307) -- Accounts receivable, net .................................... 1,052 -- -- 64,262 Inventories ................................................. -- -- -- 4,465 Prepaid expenses ............................................ 330 -- -- 3,917 -------------- --------------- -------------- -------------- Total current assets ...................................... 4,174 2,933 (78,307) 108,444 Property and equipment, net ................................. 135,003 82,952 -- 1,093,617 Investment in Subsidiaries .................................. -- -- (830,052) -- Deferred offering costs, net ................................ 1,384 639 -- 16,680 Other assets, net ........................................... 3,623 -- -- 31,926 -------------- --------------- -------------- -------------- $ 144,184 $ 86,524 $ (908,359) $ 1,250,667 ============== =============== ============== ============== Accounts payable ............................................ $ 273 $ -- $ -- $ 24,294 Construction payable ........................................ -- 3,186 -- 9,746 Construction payable-contested .............................. -- -- -- 7,232 Intercompany payables ....................................... 22,613 -- (78,307) -- Accrued interest payable .................................... 907 2 -- 27,524 Other accrued liabilities ................................... 1,509 68 -- 69,029 Current maturities of long-term debt (3) .................... 105,000 1,092 (97,869) 203,961 -------------- --------------- -------------- -------------- Total current liabilities ................................. 130,302 4,348 (176,176) 341,786 Other long-term liabilities ................................. -- -- -- 1,359 Long-term debt (3) .......................................... -- 1,433 (651,428) 652,861 Long-term subordinated loans payable to Principal Stockholder ..................................... 35,000 -- -- 66,123 Accumulated losses of subsidiaries in excess of investment .. -- -- (207,748) -- -------------- --------------- -------------- -------------- 165,302 5,781 (1,035,352) 1,062,129 -------------- --------------- -------------- -------------- Redeemable Preferred interest in Venetian ................... -- -- -- 194,441 -------------- --------------- -------------- -------------- Stockholders' equity (deficit) .............................. (21,118) 80,743 126,993 (5,903) -------------- --------------- -------------- -------------- $ 144,184 $ 86,524 $ (908,359) $ 1,250,667 ============== =============== ============== ============== - ---------------- (1) The assets and liabilities of Mall Construction, a guarantor, were transferred to the Mall Subsidiary, a non-guarantor subsidiary, upon substantial completion of the Casino Resort on November 12, 1999, and subsequently transferred to the New Mall Subsidiary on December 20, 1999. As a result, Mall Construction had no assets or liabilities as of March 31, 2002. (2) Land with a historical cost basis of $29.2 million was transferred from Venetian, a co-obligor of the Notes, to the Phase II Subsidiary, a non-guarantor subsidiary, in October 1998 and land with a value of $11.8 million was indirectly contributed by the Principal Stockholder during December 1999. (3) As more fully described in Note 4, Las Vegas Sands, Inc. and Venetian Casino Resort LLC are co-obligors of certain of the Company's indebtedness. Accordingly, such indebtedness has been presented as an obligation of both entities in the above balance sheets.
13 LAS VEGAS SANDS, INC. Notes to Financial Statements (continued) Note 7. Summarized Financial Information (continued)
CONDENSED BALANCE SHEETS December 31, 2001 GUARANTOR SUBSIDIARIES ------------------------------- Lido Mall Venetian Intermediate Intermediate Las Vegas Casino Resort Holding Holding Sands, Inc. LLC Company LLC Company LLC -------------- -------------- -------------- -------------- Cash and cash equivalents ................................... $ 37,367 $ 7,806 $ 4 $ 4 Restricted cash and investments ............................. -- 1,528 -- -- Intercompany receivable ..................................... 60,882 -- -- -- Accounts receivable, net .................................... 37,416 18,240 -- -- Inventories ................................................. -- 4,747 -- -- Prepaid expenses ............................................ 546 2,953 -- -- -------------- --------------- -------------- -------------- Total current assets ...................................... 136,211 35,274 4 4 Property and equipment, net ................................. -- 878,239 -- -- Investment in Subsidiaries .................................. 843,935 -- -- -- Deferred offering costs, net ................................ -- 16,250 -- -- Other assets, net ........................................... 3,771 25,691 -- -- -------------- --------------- -------------- -------------- $ 983,917 $ 955,454 $ 4 $ 4 ============== =============== ============== ============== Accounts payable ............................................ $ 2,880 $ 33,105 $ -- $ -- Construction payable ........................................ -- 22,955 -- -- Construction payable-contested .............................. -- 7,232 -- -- Intercompany payables ....................................... -- 39,455 -- -- Accrued interest payable .................................... -- 9,125 -- -- Other accrued liabilities ................................... 21,249 47,074 -- -- Current maturities of long-term debt (3) .................... 23,021 23,021 -- -- -------------- --------------- -------------- -------------- Total current liabilities ................................. 47,150 181,967 -- -- Other long-term liabilities ................................. -- 3,274 -- -- Long-term debt (3) .......................................... 741,813 741,813 -- -- Long-term subordinated loans payable to Principal Stockholder ..................................... -- 31,123 -- -- Accumulated losses of subsidiaries in excess of investment .. 205,945 -- -- -- -------------- --------------- -------------- -------------- 994,908 958,177 -- -- -------------- --------------- -------------- -------------- Redeemable Preferred interest in Venetian ................... -- 188,778 -- -- -------------- --------------- -------------- -------------- Stockholders' equity (deficit) .............................. (10,991) (191,501) 4 4 -------------- --------------- -------------- -------------- $ 983,917 $ 955,454 $ 4 $ 4 ============== =============== ============== ============== - ---------------- (1) The assets and liabilities of Mall Construction, a guarantor, were transferred to the Mall Subsidiary, a non-guarantor subsidiary, upon substantial completion of the Casino Resort on November 12, 1999, and subsequently transferred to the New Mall Subsidiary on December 20, 1999. As a result, Mall Construction had no assets or liabilities as of December 31, 2001. (2) Land with a historical cost basis of $29.2 million was transferred from Venetian, a co-obligor of the Notes, to the Phase II Subsidiary, a non-guarantor subsidiary, in October 1998 and land with a value of $11.8 million was indirectly contributed by the Principal Stockholder during December 1999. (3) As more fully described in Note 4, Las Vegas Sands, Inc. and Venetian Casino Resort LLC are co-obligors of certain of the Company's indebtedness. Accordingly, such indebtedness has been presented as an obligation of both entities in the above balance sheets.
14 LAS VEGAS SANDS, INC. Notes to Financial Statements (continued) Note 7. Summarized Financial Information (continued)
CONDENSED BALANCE SHEETS (continued) December 31, 2001 NON-GUARANTOR SUBSIDIARIES -------------------------------- Grand Canal Shops Mall Other Non- Consolidating/ Subsidiary Guarantor Eliminating LLC (1) Subsidiaries (2) Entries Total -------------- --------------- --------------- -------------- Cash and cash equivalents ................................... $ 6,650 $ 3,105 $ -- $ 54,936 Restricted cash and investments ............................. 1,118 -- -- 2,646 Intercompany receivable ..................................... -- 1,508 (62,390) -- Accounts receivable, net .................................... 1,436 -- -- 57,092 Inventories ................................................. -- -- -- 4,747 Prepaid expenses ............................................ 363 -- -- 3,862 -------------- --------------- -------------- -------------- Total current assets ...................................... 9,567 4,613 (62,390) 123,283 Property and equipment, net ................................. 136,167 81,901 -- 1,096,307 Investment in Subsidiaries .................................. -- -- (843,935) -- Deferred offering costs, net ................................ 1,903 836 -- 18,989 Other assets, net ........................................... 3,745 -- -- 33,207 -------------- --------------- -------------- -------------- $ 151,382 $ 87,350 $ (906,325) $ 1,271,786 ============== =============== ============== ============== Accounts payable ............................................ $ 368 $ -- $ -- $ 36,353 Construction payable ........................................ -- 3,160 -- 26,115 Construction payable-contested .............................. -- -- -- 7,232 Intercompany payables ....................................... 22,935 -- (62,390) -- Accrued interest payable .................................... 872 11 -- 10,008 Other accrued liabilities ................................... 1,647 65 -- 70,035 Current maturities of long-term debt (3) .................... 105,000 1,092 (23,021) 129,113 -------------- --------------- -------------- -------------- Total current liabilities ................................. 130,822 4,328 (85,411) 278,856 Other long-term liabilities ................................. -- -- -- 3,274 Long-term debt (3) .......................................... -- 3,933 (741,813) 745,746 Long-term subordinated loans payable to Principal Stockholder ..................................... 35,000 -- -- 66,123 Accumulated losses of subsidiaries in excess of investment .. -- -- (205,945) -- -------------- --------------- -------------- -------------- 165,822 8,261 (1,033,169) 1,093,999 -------------- --------------- -------------- -------------- Redeemable Preferred interest in Venetian ................... -- -- -- 188,778 -------------- --------------- -------------- -------------- Stockholders' equity (deficit) .............................. (14,440) 79,089 126,844 (10,991) -------------- --------------- -------------- -------------- $ 151,382 $ 87,350 $ (906,325) $ 1,271,786 ============== =============== ============== ============== - ---------------- (1) The assets and liabilities of Mall Construction, a guarantor, were transferred to the Mall Subsidiary, a non-guarantor subsidiary, upon substantial completion of the Casino Resort on November 12, 1999, and subsequently transferred to the New Mall Subsidiary on December 20, 1999. As a result, Mall Construction had no assets or liabilities as of December 31, 2001. (2) Land with a historical cost basis of $29.2 million was transferred from Venetian, a co-obligor of the Notes, to the Phase II Subsidiary, a non-guarantor subsidiary, in October 1998 and land with a value of $11.8 million was indirectly contributed by the Principal Stockholder during December 1999. (3) As more fully described in Note 4, Las Vegas Sands, Inc. and Venetian Casino Resort LLC are co-obligors of certain of the Company's indebtedness. Accordingly, such indebtedness has been presented as an obligation of both entities in the above balance sheets.
15 LAS VEGAS SANDS, INC. Notes to Financial Statements (continued) Note 7. Summarized Financial Information (continued)
CONDENSED STATEMENT OF OPERATIONS For the three months ended March 31, 2002 GUARANTOR SUBSIDIARIES ------------------------------- Lido Mall Venetian Intermediate Intermediate Las Vegas Casino Resort Holding Holding Sands, Inc. LLC Company LLC Company LLC -------------- -------------- -------------- -------------- Revenue: Casino .................................................... $ 50,473 $ -- $ -- $ -- Room ...................................................... -- 56,378 -- -- Food and beverage ......................................... -- 21,879 -- -- Retail and other .......................................... 150 19,911 -- -------------- -------------- -------------- -------------- Total revenue ............................................. 50,623 98,168 -- Less promotional allowance .................................. -- (9,058) -- -- -------------- -------------- -------------- -------------- Net revenues .............................................. 50,623 89,110 -- -------------- -------------- -------------- -------------- Operating expenses: Casino .................................................... 41,258 -- -- Rooms ..................................................... -- 13,034 -- -- Food and beverage ......................................... -- 9,971 -- -- Retail and other .......................................... -- 4,324 -- -- Provision for doubtful accounts ........................... 2,285 1,050 -- -- General and administrative ................................ 748 20,352 -- -- Corporate expense ......................................... 999 910 -- -- Rental expense ............................................ 212 2,954 -- -- Pre-opening and developmental expense ..................... -- 665 -- -- Depreciation and amortization ............................. -- 9,811 -- -- -------------- -------------- -------------- -------------- 45,502 63,071 -- -------------- -------------- -------------- -------------- Operating income ............................................ 5,121 26,039 -- -- -------------- -------------- -------------- -------------- Other income (expense): Interest income ......................................... 116 48 -- -- Interest expense, net of amounts capitalized ............ -- (22,110) -- -- Interest expense on indebtedness to Principal Stockholder ................................... -- (1,109) -- -- Other income (expense) .................................. -- 670 -- -- Income (loss) from equity investment in subsidiaries .... (149) -- -- -- -------------- -------------- -------------- -------------- Income before preferred return .............................. 5,088 3,538 -- -- Preferred return on Redeemable Preferred Interest in Venetian ................................... -- (5,663) -- -- -------------- -------------- -------------- -------------- Net income (loss) ........................................... $ 5,088 $ (2,125) $ -- $ -- ============== ============== ============== ============== - ---------------- (1) The assets and liabilities of Mall Construction, a guarantor, were transferred to the Mall Subsidiary, a non-guarantor subsidiary, upon substantial completion of the Casino Resort on November 12, 1999, and subsequently transferred to the New Mall Subsidiary on December 20, 1999. As a result, Mall Construction had no revenues or expenses as of March 31, 2002.
16 LAS VEGAS SANDS, INC. Notes to Financial Statements (continued) Note 7. Summarized Financial Information (continued)
CONDENSED STATEMENT OF OPERATIONS (continued) For the three months ended March 31, 2002 NON-GUARANTOR SUBSIDIARIES -------------------------------- Grand Canal Shops Mall Other Non- Consolidating/ Subsidiary Guarantor Eliminating LLC (1) Subsidiaries Entries Total -------------- --------------- --------------- -------------- Revenue: Casino .................................................... $ -- $ -- $ -- $ 50,473 Room ...................................................... -- -- -- 56,378 Food and beverage ......................................... -- -- -- 21,879 Retail and other .......................................... 8,594 2,000 (13,894) 16,761 -------------- -------------- -------------- -------------- Total revenue ............................................. 8,594 2,000 (13,894) 145,491 Less promotional allowance .................................. -- -- -- (9,058) -------------- -------------- -------------- -------------- Net revenues .............................................. 8,594 2,000 (13,894) 136,433 -------------- -------------- -------------- -------------- Operating expenses: Casino .................................................... -- -- (11,563) 29,695 Rooms ..................................................... -- -- -- 13,034 Food and beverage ......................................... -- -- -- 9,971 Retail and other .......................................... 3,109 -- (331) 7,102 Provision for doubtful accounts ........................... -- -- -- 3,335 General and administrative ................................ 367 -- -- 21,467 Corporate expense ......................................... -- -- -- 1,909 Rental expense ............................................ 488 -- (2,000) 1,654 Pre-opening and developmental expense ..................... -- -- -- 665 Depreciation and amortization ............................. 1,174 -- -- 10,985 -------------- -------------- -------------- -------------- 5,138 -- (13,894) 99,817 -------------- -------------- -------------- -------------- Operating income ............................................ 3,456 2,000 -- 36,616 -------------- -------------- -------------- -------------- Other income (expense): Interest income ......................................... 17 -- -- 181 Interest expense, net of amounts capitalized ............ (1,926) (346) -- (24,382) Interest expense on indebtedness to Principal Stockholder ................................... (1,225) -- -- (2,334) Other income (expense) .................................. -- -- -- 670 Income (loss) from equity investment in subsidiaries .... -- -- 149 -- -------------- -------------- -------------- -------------- Income before preferred return .............................. 322 1,654 149 10,751 Preferred return on Redeemable Preferred Interest in Venetian ................................... -- -- -- (5,663) -------------- -------------- -------------- -------------- Net income (loss) ........................................... $ 322 $ 1,654 $ 149 $ 5,088 ============== ============== ============== ============== - ---------------- (1) The assets and liabilities of Mall Construction, a guarantor, were transferred to the Mall Subsidiary, a non-guarantor subsidiary, upon substantial completion of the Casino Resort on November 12, 1999, and subsequently transferred to the New Mall Subsidiary on December 20, 1999. As a result, Mall Construction had no revenues or expenses as of March 31, 2002.
17 LAS VEGAS SANDS, INC. Notes to Financial Statements (continued) Note 7. Summarized Financial Information (continued)
CONDENSED STATEMENT OF OPERATIONS For the three months ended March 31, 2001 GUARANTOR SUBSIDIARIES ------------------------------- Lido Mall Venetian Intermediate Intermediate Las Vegas Casino Resort Holding Holding Sands, Inc. LLC Company LLC Company LLC -------------- -------------- -------------- -------------- Revenues: Casino .................................................... $ 58,477 $ -- $ -- $ -- Room ...................................................... -- 59,586 -- -- Food and beverage ......................................... -- 18,829 -- -- Retail and other .......................................... 289 20,602 -- -------------- -------------- -------------- -------------- Total revenue ............................................. 58,766 99,017 -- -------------- -------------- -------------- -------------- Less promotional allowance .................................. -- (12,286) -- -- Net revenues .............................................. 58,766 86,731 -- -------------- -------------- -------------- -------------- Operating expenses: Casino .................................................... 51,358 -- -- Rooms ..................................................... -- 13,171 -- -- Food and beverage ......................................... -- 8,307 -- -- Retail and other .......................................... -- 4,734 -- -- Provision for doubtful accounts ........................... 3,718 -- -- -- General and administrative ................................ 982 20,659 -- -- Corporate expense ......................................... 1,025 863 -- -- Rental expense ............................................ 193 1,452 -- -- Depreciation and amortization ............................. -- 8,910 -- -- -------------- -------------- -------------- -------------- 57,276 58,096 -- -- Operating income ............................................ 1,490 28,635 -- -- -------------- -------------- -------------- -------------- Other income (expense): Interest income ......................................... 211 171 -- -- Interest expense, net of amounts capitalized ............ -- (23,782) -- -- Interest expense on indebtedness to Principal Stockholder ................................. -- (964) -- -- Income (loss) from equity investment in subsidiaries .... (2,062) -- -- -- -------------- -------------- -------------- -------------- Income (loss) before preferred return ....................... (361) 4,060 -- -- Preferred return on Redeemable Preferred Interest in Venetian ................................... -- (5,040) -- -- -------------- -------------- -------------- -------------- Net income (loss) ........................................... $ (361) $ (980) $ -- $ -- ============== ============== ============== ============== - ---------------- (1) The assets and liabilities of Mall Construction, a guarantor, were transferred to the Mall Subsidiary, a non-guarantor subsidiary, upon substantial completion of the Casino Resort on November 12, 1999, and subsequently transferred to the New Mall Subsidiary on December 20, 1999. As a result, Mall Construction had no revenues or expenses as of March 31, 2001.
18 LAS VEGAS SANDS, INC. Notes to Financial Statements (continued) Note 7. Summarized Financial Information (continued)
CONDENSED STATEMENT OF OPERATIONS (continued) For the three months ended March 31, 2001 NON-GUARANTOR SUBSIDIARIES -------------------------------- Grand Canal Shops Mall Other Non- Consolidating/ Subsidiary Guarantor Eliminating LLC (1) Subsidiaries Entries Total -------------- --------------- --------------- -------------- Revenue: Casino .................................................... $ -- $ -- $ -- $ 58,477 Room ...................................................... -- -- -- 59,586 Food and beverage ......................................... -- -- -- 18,829 Retail and other .......................................... 8,034 -- (11,641) 17,284 -------------- --------------- --------------- ------------- Total revenue ............................................. 8,034 -- (11,641) 154,176 Less promotional allowance .................................. -- -- -- (12,286) -------------- --------------- --------------- ------------- Net revenues .............................................. 8,034 -- (11,641) 141,890 -------------- --------------- --------------- ------------- Operating expenses: Casino .................................................... -- -- (11,359) 39,999 Rooms ..................................................... -- -- -- 13,171 Food and beverage ......................................... -- -- -- 8,307 Retail and other .......................................... 2,746 -- (282) 7,198 Provision for doubtful accounts ........................... -- -- -- 3,718 General and administrative ................................ 370 -- -- 22,011 Corporate expense ......................................... -- -- -- 1,888 Rental expense ............................................ 546 -- -- 2,191 Depreciation and amortization ............................. 1,296 -- -- 10,206 -------------- --------------- --------------- ------------- 4,958 -- (11,641) 108,689 -------------- --------------- --------------- ------------- -- Operating income ............................................ 3,076 -- 33,201 -------------- --------------- --------------- ------------- Other income (expense): Interest income ......................................... 36 -- -- 418 Interest expense, net of amounts capitalized ............ (2,969) -- -- (26,751) Interest expense on indebtedness to Principal Stockholder ................................. (1,225) -- -- (2,189) Income (loss) from equity investment in subsidiaries .... -- -- 2,062 -- -------------- --------------- --------------- ------------- Income (loss) before preferred return ....................... (1,082) -- 2,062 4,679 Preferred return on Redeemable Preferred Interest in Venetian ................................... -- -- -- (5,040) -------------- --------------- --------------- ------------- Net income (loss) ........................................... $ (1,082) $ -- $ 2,062 $ (361) ============== ============== =============== ============= - ---------------- (1) The assets and liabilities of Mall Construction, a guarantor, were transferred to the Mall Subsidiary, a non-guarantor subsidiary, upon substantial completion of the Casino Resort on November 12, 1999, and subsequently transferred to the New Mall Subsidiary on December 20, 1999. As a result, Mall Construction had no revenues or expenses as of March 31, 2001.
19 LAS VEGAS SANDS, INC. Notes to Financial Statements (continued) Note 7. Summarized Financial Information (continued)
CONDENSED STATEMENTS OF CASH FLOWS For the three months ended March 31, 2002 GUARANTOR SUBSIDIARIES ------------------------------- Lido Mall Venetian Intermediate Intermediate Las Vegas Casino Resort Holding Holding Sands, Inc. LLC Company LLC Company LLC -------------- -------------- -------------- -------------- Net cash provided by operating activities ................... $ 3,100 $ 13,973 $ -- $ -- -------------- -------------- -------------- -------------- Cash flows from investing activities: Decrease in restricted cash ............................... -- 1,528 -- -- Capital expenditures ...................................... -- (23,629) -- -- -------------- -------------- -------------- -------------- Net cash used in investing activities ....................... -- (22,101) -- -- -------------- -------------- -------------- -------------- Cash flows from financing activities: Dividend from Grand Canal Shops Mall Subsidiary,LLC ....... 7,000 -- -- -- Capital contribution to Venetian Casino Resort, LLC ....... (7,000) 7,000 -- -- Repayments on bank credit facility-term ................... -- (382) -- -- Repayments on bank credit facility-revolver ............... -- (15,000) -- -- Proceeds from bank credit facility-revolver ............... -- 5,000 -- -- Repayments on FF&E credit facility ........................ -- (5,374) -- -- Repayments on Phase II Subidiary credit facility .......... -- -- -- -- Payments of deferred offering costs ....................... -- (136) -- -- Net increase(decrease) in intercompany accounts ........... (14,929) 16,239 -- -- -------------- -------------- -------------- -------------- Net cash provided by (used in) financing activities ......... (14,929) 7,347 -- -- -------------- -------------- -------------- -------------- Decrease in cash and cash equivalents ....................... (11,829) (781) -- -- Cash and cash equivalents at beginning of period............. 37,367 7,806 4 4 -------------- -------------- -------------- -------------- Cash and cash equivalents at end of period................... $ 25,538 $ 7,025 $ 4 $ 4 ============== ============== ============== ============== - ---------------- (1) The assets and liabilities of Mall Construction, a guarantor, were transferred to the Mall Subsidiary, a non-guarantor subsidiary, upon substantial completion of the Casino Resort on November 12, 1999, and subsequently transferred to the New Mall Subsidiary on December 20, 1999. As a result, Mall Construction had no cash flows as of March 31, 2002.
20 LAS VEGAS SANDS, INC. Notes to Financial Statements (continued) Note 7. Summarized Financial Information (continued)
CONDENSED STATEMENTS OF CASH FLOWS For the three months ended March 31, 2002 NON-GUARANTOR SUBSIDIARIES -------------------------------- Grand Canal Shops Mall Other Non- Consolidating/ Subsidiary Guarantor Eliminating LLC (1) Subsidiaries Entries Total -------------- --------------- --------------- -------------- Net cash provided by operating activities ................... $ 2,356 $ 1,845 $ -- $ 21,274 -------------- --------------- --------------- -------------- Cash flows from investing activities: Decrease in restricted cash ............................... 683 -- -- 2,211 Capital expenditures ...................................... (10) (1,025) -- (24,664) -------------- --------------- --------------- -------------- Net cash used in investing activities ....................... 673 (1,025) -- (22,453) -------------- --------------- --------------- -------------- Cash flows from financing activities: Dividend from Grand Canal Shops Mall Subsidiary,LLC ....... (7,000) -- -- -- Capital contribution to Venetian Casino Resort, LLC ....... -- -- -- -- Repayments on bank credit facility-term ................... -- -- -- (382) Repayments on bank credit facility-revolver ............... -- -- -- (15,000) Proceeds from bank credit facility-revolver ............... -- -- -- 5,000 Repayments on FF&E credit facility ........................ -- -- -- (5,374) Repayments on Phase II Subidiary credit facility .......... -- (2,500) -- (2,500) Payments of deferred offering costs ....................... -- -- -- (136) Net increase(decrease) in intercompany accounts ........... (322) (988) -- -- -------------- --------------- --------------- -------------- Net cash provided by (used in) financing activities ......... (7,322) (3,488) -- (18,392) -------------- --------------- --------------- -------------- Decrease in cash and cash equivalents ....................... (4,293) (2,668) -- (19,571) Cash and cash equivalents at beginning of period ............ 6,650 3,105 -- 54,936 -------------- --------------- --------------- -------------- Cash and cash equivalents at end of period .................. $ 2,357 $ 437 $ -- $ 35,365 ============== ============== ============== ============== - ---------------- (1) The assets and liabilities of Mall Construction, a guarantor, were transferred to the Mall Subsidiary, a non-guarantor subsidiary, upon substantial completion of the Casino Resort on November 12, 1999, and subsequently transferred to the New Mall Subsidiary on December 20, 1999. As a result, Mall Construction had no cash flows as of March 31, 2002.
21 LAS VEGAS SANDS, INC. Notes to Financial Statements (continued) Note 7. Summarized Financial Information (continued)
CONDENSED STATEMENTS OF CASH FLOWS For the three months ended March 31, 2001 GUARANTOR SUBSIDIARIES ------------------------------- Lido Mall Venetian Intermediate Intermediate Las Vegas Casino Resort Holding Holding Sands, Inc. LLC Company LLC Company LLC -------------- -------------- -------------- -------------- Net cash provided by (used in) operating activities ................................................ $ (7,032) $ 20,779 $ -- $ -- -------------- -------------- -------------- -------------- Cash flows from investing activities: Increase in restricted cash ............................... -- (10) -- -- Capital expenditures ...................................... -- (9,021) -- -- -------------- -------------- -------------- -------------- Net cash used in investing activities ....................... -- (9,031) -- -- -------------- -------------- -------------- -------------- Cash flows from financing activities: Repayments on bank credit facility-tranche B term loan .... -- (125) -- -- Repayments on FF&E credit facility ........................ -- (5,374) -- -- Proceeds from Phase II Subsidiary unsecured bank loan ..... -- -- -- -- Payments of deferred offering costs ....................... -- (177) -- -- Net increase(decrease) in intercompany accounts ........... 798 (539) -- -- -------------- -------------- -------------- -------------- Net cash provided by (used in) financing activities ......... 798 (6,215) -- -- -------------- -------------- -------------- -------------- Increase (decrease) in cash and cash equivalents ............ (6,234) 5,533 -- -- Cash and cash equivalents at beginning of period............. 35,332 4,260 4 4 -------------- -------------- -------------- -------------- Cash and cash equivalents at end of period .................. $ 29,098 $ 9,793 $ 4 $ 4 ============== ============== ============== ============== - ---------------- (1) The assets and liabilities of Mall Construction, a guarantor, were transferred to the Mall Subsidiary, a non-guarantor subsidiary, upon substantial completion of the Casino Resort on November 12, 1999, and subsequently transferred to the New Mall Subsidiary on December 20, 1999. As a result, Mall Construction had no cash flows as of March 31, 2001.
22 LAS VEGAS SANDS, INC. Notes to Financial Statements (continued) Note 7. Summarized Financial Information (continued)
CONDENSED STATEMENTS OF CASH FLOWS (continued) For the three months ended March 31, 2001 NON-GUARANTOR SUBSIDIARIES -------------------------------- Grand Canal Shops Mall Other Non- Consolidating/ Subsidiary Guarantor Eliminating LLC (1) Subsidiaries Entries Total -------------- --------------- --------------- -------------- Net cash provided by (used in) operating activities ................................................ $ 179 $ 10 $ -- $ 13,936 -------------- --------------- --------------- -------------- Cash flows from investing activities: Increase in restricted cash ............................... (15) -- -- (25) Capital expenditures ...................................... (87) (458) -- (9,566) -------------- --------------- --------------- -------------- Net cash used in investing activities ....................... (102) (458) -- (9,591) -------------- --------------- --------------- -------------- Cash flows from financing activities: Repayments on bank credit facility-tranche B term loan .... -- -- -- (125) Repayments on FF&E credit facility ........................ -- -- -- (5,374) Proceeds from Phase II Subsidiary unsecured bank loan ..... -- 792 -- 792 Payments of deferred offering costs ....................... -- (300) -- (477) Net increase(decrease) in intercompany accounts ........... (259) -- -- -- -------------- --------------- --------------- -------------- Net cash provided by (used in) financing activities ......... (259) 492 -- (5,184) -------------- --------------- --------------- -------------- Increase (decrease) in cash and cash equivalents ............ (182) 44 -- (839) Cash and cash equivalents at beginning of period ............ 2,972 34 -- 42,606 -------------- --------------- --------------- -------------- Cash and cash equivalents at end of period .................. $ 2,790 $ 78 $ -- $ 41,767 ============== =============== =============== ============== - ---------------- (1) The assets and liabilities of Mall Construction, a guarantor, were transferred to the Mall Subsidiary, a non-guarantor subsidiary, upon substantial completion of the Casino Resort on November 12, 1999, and subsequently transferred to the New Mall Subsidiary on December 20, 1999. As a result, Mall Construction had no cash flows as of March 31, 2001.
23 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with, and is qualified in its entirety by, the consolidated financial statements and the notes thereto and other financial information included in the Company's Annual Report on Form 10-K for the year ended December 31, 2001. Certain statements in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" are forward-looking statements. See "-Special Note Regarding Forward-Looking Statements." General - ------- The Company owns and operates the Casino Resort, a large-scale Venetian-themed hotel, casino, retail, meeting and entertainment complex in Las Vegas, Nevada. The Casino Resort includes the first and only all-suites hotel on the Strip with 3,036 suites; a gaming facility of approximately 116,000 square feet; an enclosed retail, dining and entertainment complex of approximately 445,000 net leasable square feet; and a meeting and conference facility of approximately 500,000 square feet. The Company is party to litigation matters and claims related to its operations and construction of the Casino Resort that could have a material adverse effect on the financial position, results of operations or cash flows of the Company to the extent such litigation is not covered by the Insurance Policy. See "Part II- Item 1 - Legal Proceedings." The Company was significantly impacted by a decline in tourism following the terrorist attacks of September 11, 2001, as well as an unusually low table games win percentage. Consolidated net revenues for the three months ended March 31, 2002 were $136.4 million, representing a decrease of $5.5 million of consolidated net revenues as compared to $141.9 million for the quarter ended March 31, 2001. Despite the impact of the terrorist attacks, the Company's financial position continues to improve, due in large part to: (1) forward hotel room and meeting space bookings from conventions and trade shows at the Expo Center and Casino Resort; (2) increases in average daily room rates in all major segments of the Casino Resort's hotel rooms business since September 11; (3) a stable recurring revenue stream from the Mall; and (4) successful cost cutting initiatives. Although the Company continues to recover, the extent to which the events of September 11th will continue to directly or indirectly impact operating results in the future cannot be predicted, nor can the Company predict the extent to which future security alerts and/or additional terrorist attacks may impact operations. The Company opened additional attractions at the Casino Resort on October 7, 2001, including the Guggenheim Las Vegas Museum and the Guggenheim Hermitage Museum (the "Guggenheim Museum Projects"). During 2001, the Company also began designing, planning, permitting and constructing: (1) an approximately 1,000-room hotel tower on top of the Casino Resort's existing parking garage; (2) an approximately 1,000-parking space expansion to the parking garage; and (3) approximately 150,000 square feet of additional convention center space on the Phase II Land (collectively, the "Phase IA Addition"). To date, the Company has completed the design of, and has substantially completed the foundation and support systems for, the 1,000-room hotel tower on top of the existing parking garage. Due to the travel disruption to Las Vegas during the fourth quarter of 2001, the Company decided to suspend construction of the Phase IA Addition at that time. Certain designing, planning and permitting of the Phase IA Addition is, however, continuing. The Company is currently exploring financing alternatives to complete construction of the Phase IA Addition, which it estimates will cost approximately $235.0 million to complete. The Company has also recently announced its intention (with joint venture partners) to seek a license to operate casinos in Macau, is pursuing the possibility of developing an Internet gaming site and is currently exploring other business opportunities for expansion. Critical Accounting Policies and Estimates - ------------------------------------------ Management has identified the following critical accounting policies that affect the Company's more significant judgments and estimates used in the preparation of the Company's consolidated financial statements. The preparation of the Company's financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company's management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an on-going basis, management evaluates those estimates, including those related to asset impairment, accruals for slot marketing points, self-insurance, compensation and related benefits, revenue recognition, allowance for doubtful accounts, contingencies and litigation. The Company states these accounting policies in the notes to the consolidated financial statements and in relevant sections in this discussion and analysis. These estimates are based on the information that is currently available to the Company and on various other assumptions that management believes to be reasonable under the circumstances. Actual results could vary from those estimates. 24 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) The Company believes that the following critical accounting policies affect significant judgments and estimates used in the preparation of its consolidated financial statements: The Company recognizes revenue upon occupancy of hotel rooms, as net wins and losses occur in the casino and upon delivery of food, beverage and other services. Cancellation fees for hotel and food and beverage services are recognized as revenue when collection is probable and upon cancellation by the customer as defined by a written contract entered into with the customer. Minimum rental revenues in the Mall and Casino Resort are recognized on a straight-line basis over the terms of the related lease. Percentage rents are recognized in the period in which the tenants exceed their respective percentage rent thresholds. Recoveries from tenants for real estate taxes, insurance and other shopping center operating expenses are recognized as revenues in the period billed, which approximates the period in which the applicable costs are incurred. The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments, which results in bad debt expense. Management determines the adequacy of this allowance by continually evaluating individual customer receivables, considering the customer's financial condition, credit history and current economic conditions. If the financial condition of customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. The Company maintains accruals for health and workers compensation self-insurance, slot club point redemption and group sales commissions, which are classified in other accrued liabilities in the consolidated balance sheets. Management determines the adequacy of these accruals by periodically evaluating the historical experience and projected trends related to these accruals. If such information indicates that the accruals are overstated or understated, the Company will adjust the assumptions utilized in the methodologies and reduce or provide for additional accruals as appropriate. The Company is subject to various claims and legal actions including our lawsuits with the Construction Manager for the original construction of the Casino Resort. Some of these matters relate to personal injuries to customers and damage to customers' personal assets. Management estimates guest claims expense and accrues for such liability based upon historical experience in the other accrued liability category in its consolidated balance sheet. Operating Results - ----------------- First Quarter Ended March 31, 2002 compared to First Quarter Ended March 31,2001 ------- Operating Revenues ------------------ Consolidated net revenues for the first quarter of 2002 were $136.4 million, representing a decrease of $5.5 million when compared with $141.9 million of consolidated net revenues during the first quarter of 2001. The decrease in net revenues was due primarily to a decline of casino and hotel revenue at the Casino Resort, which was partially offset by an increase in food and beverage revenue. The Casino Resort's casino revenues were $50.5 million in the first quarter of 2002, a decrease of $8.0 million when compared to $58.5 million during the first quarter of 2001. The decrease was attributable to the continuing impact of the September 11th terrorist attacks and an increased selectivity of casino customers to reduce variable marketing and incentive costs. Table games drop (volume) decreased to $217.5 million in the first quarter of 2002 from $308.4 million during the first quarter of 2001. Slot revenue in the first quarter of 2002 decreased to $25.1 million from $27.0 million reported during the first quarter of 2001, or a decrease of 7.0%. The Casino Resort achieved room revenues during the first quarter of 2002 of $56.4 million, compared to $59.6 million during the first quarter of 2001. The Casino Resort's average daily room rate was $211 in the first quarter of 2002 compared to $220 during the first quarter of 2001. The occupancy of available guestrooms was 98.0% during the first quarter of 2002 compared to 99.6% during the first quarter of 2001. Food and beverage, retail and other revenues were $38.6 million during the first quarter of 2002 compared to $36.1 million during the first quarter of 2001. The increase was primarily attributable to increased banquet business associated with the Company's group room business. 25 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) The Mall generated rental and related revenues of $8.3 million during the first quarter of 2002 compared to $7.8 million during the first quarter of 2001. The increase was attributable to additional tenants and increased proceeds from rents calculated on tenant gross revenues. Operating Expenses ------------------ Consolidated operating expenses were $99.8 million in the first quarter of 2002, compared with $108.7 million during the first quarter of 2001. Corporate expenses totaled $1.9 million during each of the first quarter of 2002 and 2001. Casino expenses were $29.7 million in the first quarter of 2002 compared to $40.0 million during the first quarter of 2001, a decrease of $10.3 million. The decrease is attributable to a reduction in table games marketing and incentive costs during the first quarter. The decrease in marketing and incentive costs resulted from heightened selectivity of table games customers to improve casino operating margins. Food and beverage expenses during the first quarter of 2002 were $10.0 million as compared to $8.3 million during the first quarter of 2001. The increase was associated with an increase in food and beverage revenue during the first quarter of 2002 as compared to the first quarter of 2001. Rental expenses, primarily related to the Casino Resort's heating, ventilation and air conditioning plant and rental gaming devices, were $1.7 million for the first quarter of 2002. Rental expenses were $2.2 million in the first quarter of 2001. The decline in rental expenses during the first quarter of 2002 was the result of additional charges of related costs to Casino Resort tenants as compared to the first quarter of 2001. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) The Mall incurred operating expenses of $5.1 million during the first quarter of 2002 compared to $5.0 million during the first quarter of 2001. The increase in Mall operating expenses was attributed to increases in advertising, property taxes and utility cost during the first quarter of 2002. Interest Income (Expense) ------------------------- Interest expense was $26.7 million in the first quarter of 2002, compared to $28.9 million in the same period of 2001. Of the $26.7 million incurred during the first quarter of 2002, $23.2 million was related to the Casino Resort (excluding the Mall), $3.2 million was related to the Mall and $0.3 million was related to the Phase II Subsidiary. The decrease in interest expense was attributed to decreases in interest rates associated with the companies variable rate debt and scheduled repayment of debt. Interest income for the quarter ended March 31, 2002 was $0.2 million compared to $0.4 million in the same period in 2001. The Company had other income of $0.7 million during the quarter ended March 31, 2002 resulting from a change in market value of interest rate cap and floor agreements. Other Factors Affecting Earnings - -------------------------------- The provision for doubtful accounts was $3.3 million during the quarter ended March 31, 2002 as compared to $3.7 million during the first quarter of 2001. The decrease was a result of lower table games revenue and the associated credit during the first quarter of 2002 as compared to the prior year's first quarter. Depreciation expense for the quarter ended March 31, 2002 was $11.0 million as compared to $10.2 million in the first quarter of 2001. The increase was attributable to placing into service during the fourth quarter of 2001 various capital improvement projects, including the Guggenheim Museum Projects. During early 2000, the Company modified its business strategy as it relates to premium casino customers and marketing to foreign premium casino customers. The Company has generally raised its betting limits for table games to be competitive with other premium resorts on the Strip. There are additional risks associated with this change in strategy, including risk of bad debts, risks to profitability margins in a highly competitive market and the need for additional working capital to accommodate possible higher levels of trade receivables and foreign currency fluctuations associated with collection of trade receivables in other countries. The Company has opened domestic and foreign marketing offices as well as bank collection accounts in several foreign countries to accommodate this change in business strategy, thereby increasing marketing costs. The Company continually evaluates its costs associated with marketing to the various segments of the premium casino customer market and has recently increased selectivity of casino customers to reduce variable marketing and incentive costs. 26 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Liquidity and Capital Resources - ------------------------------- Cash Flow and Capital Expenditures ---------------------------------- As of March 31, 2002 and December 31, 2001, the Company held cash and cash equivalents of $35.8 million and $57.6 million (including restricted cash of $0.4 million and $2.6 million), respectively. Net cash provided by operating activities for the quarter ended March 31, 2002 was $21.3 million, compared with $13.9 million for the quarter ended March 31, 2001. Net trade receivables were $64.3 million as of March 31, 2002 and $57.1 million as of December 31, 2001. Capital expenditures during the quarter ended March 31, 2002 were $24.7 million, primarily attributable to liquidating construction payables relating to the Guggenheim Museum Projects and the Phase IA Addition. Capital expenditures for the first quarter of 2001 were $9.6 million. Aggregate Indebtedness and Fixed Payment Obligations to the HVAC Provider ------------------------------------------------------------------------- The Company's total long-term indebtedness and fixed payment obligations to Atlantic Pacific Las Vegas, LLC, the provider of heating and air conditioning to the Casino Resort and the Expo Center (the "HVAC Provider"), are summarized below for the twelve month periods ended March 31:
2003 2004 2005 2006 Thereafter ------- ------- ------- ------- ---------- Long-Term Indebtedness - ---------------------- Mortgage Notes -- -- 425,000 -- -- Subordinated Notes -- -- -- 94,332 -- Bank Credit Facility 76,375 105,229 -- -- -- FF&E Credit Facility 21,494 21,494 5,373 -- -- Tranche A Take-out Loan 105,000 -- -- -- -- Tranche B Take-out Loan -- -- 35,000 -- -- Completion Guaranty Loan -- -- -- 31,123 -- Phase II Subsidiary Credit Facility -- 1,433 -- -- -- Phase II Unsecured Bank Loan 1,092 -- -- -- -- Fixed Payment Obligations To The HVAC Provider - -------------------- HVAC Provider fixed payments 7,657 7,657 7,657 7,657 24,885 ------- ------- ------- ------- ------ Total indebtedness and HVAC fixed payment obligations 211,618 135,813 473,030 133,112 24,885 ======= ======= ======= ======= ======
During the quarter ended March 31, 2002, the Company made principal payments of $0.4 million and $5.4 million on the Bank Credit Facility and the FF&E Credit Facility, respectively. Under the terms of its existing indebtedness, the Company has debt service payments due aggregating $204.0 million during the next twelve months, including principal payments on: (1) the Bank Credit Facility of $76.4 million; (2) the FF&E Credit Facility of $21.5 million; (3) the Phase II Unsecured Bank Loan of $1.1 million; and (4) Tranche A Take-out Loan of $105.0 million. Based on current interest rates under the Bank Credit Facility, the FF&E Credit Facility and the Tranche A Take-out Loan, the Company has estimated total interest payments (excluding noncash amortization of debt offering costs) of: (1) approximately $78.7 million during the next twelve months for indebtedness secured by the Casino Resort; and (2) approximately $9.6 million during the next twelve months for indebtedness secured by the Mall. 27 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) The Company also has fixed payments obligations due during the next twelve months of $7.7 million under its energy service agreements with the HVAC Provider. The total remaining payment obligation under this arrangement is $55.5 million, payable in equal monthly installments during the period of April 1, 2002 through July 1, 2009. On October 19, 2001, the Phase II Subsidiary entered into the Phase II Subsidiary Credit Facility, which is secured by the Phase II Land as well as the Phase II Subsidiary's interest in the Phase II Lease. There was $1.4 million outstanding under the Phase II Credit Facility as of March 31, 2002. The undrawn portion of the Phase II Subsidiary Credit Facility of $16.1 million, as well as proceeds from rental payments of $8.0 million per year from Venetian to the Phase II Subsidiary under the Phase II Lease, are each available for any Phase II Resort pre-development expenses or may be loaned or distributed by the Phase II Subsidiary to the Company for other liquidity needs. On May 6, 2002, the Company announced its intention to offer approximately $850 million in aggregate principal amount of mortgage notes in a Rule 144A offering, and to enter into a new senior secured credit facility and Mall loan facility, in an aggregate amount of approximately $480 million, during the second quarter of 2002. The Company intends to use the proceeds of the Refinancing Transactions to repay, redeem or repurchase all of its outstanding indebtedness (including the Notes, the Bank Credit Facility, the FF&E Facility, the Mall Take-out Financing, the Completion Guaranty, the Phase II Subsidiary Credit Facility and the Phase II Unsecured Bank Loan), to finance the construction and development of the Phase IA Addition (which the Company currently estimates will cost $235.0 million to complete) and to pay all fees and expenses associated with the Refinancing Transactions. In connection with the Refinancing Transactions, the Company expects to incur an extraordinary loss on early retirement of indebtedness of $53.3 million which will be comprised of $33.5 million of call premiums to be incurred in connection with the Refinancing Transactions and the write-off of $19.8 million related to the write-off of unamortized debt offering costs and unamortized original issue discount. The Company also commenced a cash tender offer on May 6, 2002 to purchase any and all of the Notes (the "Tender Offer"). The purchase price (including consent fees) is $1,061.25 per $1,000 principal amount for the Mortgage Notes and $1,071.25 per $1,000 principal amount for the Senior Subordinated Notes, in each case, plus accrued but unpaid interest. In conjunction with the Tender Offer, the Company is soliciting consents to eliminate substantially all of the restrictive covenants of the indentures governing the Notes and make certain other amendments. Adoption of the proposed amendments requires the consent of holders of not less than a majority of the aggregate principal amount of each issue of Notes. Holders who tender their Notes will be required to consent to the proposed amendments. The Tender Offer and the Refinancing Transactions are subject to a number of conditions, including entering into definitive agreements for the Refinancing Transactions. No assurance can be given that the Tender Offer or the Refinancing Transactions will be completed, or that a refinancing will be on terms that will be favorable to the Company. Assuming that the Company is successful in refinancing all or a substantial portion of its outstanding indebtedness, for the next twelve months the Company expects to fund Casino Resort operations, capital expenditures and debt service requirements from existing cash balances, operating cash flow, borrowings under a revolver to the extent that funds are available and distributions of excess cash from the owner of the Mall to the extent permitted under the terms of the Company's indebtedness. The Company's existing debt instruments contain certain restrictions that, among other things, limit the ability of the Company and/or certain subsidiaries to incur additional indebtedness, issue disqualified stock or equity interests, pay dividends or make other distributions, repurchase equity interests or certain indebtedness, create certain liens, enter into certain transactions with affiliates, enter into certain mergers or consolidations or sell assets of the Company without prior approval of the lenders or noteholders. Financial covenants included in the Bank Credit Facility and the FF&E Credit Facility include a minimum fixed charge ratio, maximum leverage ratio, minimum consolidated adjusted EBITDA standard, minimum equity standard and maximum capital expenditures standard. The financial covenants in the Bank Credit 28 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Facility and the FF&E Credit Facility involving EBITDA are applied on a rolling four quarter basis, and the Company's compliance with financial covenants can be temporarily affected if the Company experiences a decline in hotel occupancy or room rates, or an unusually low win percentage in a particular quarter, which is not offset in subsequent quarters or by other results of operations. As a result of these fluctuations, no assurance can be given that the Company will be in compliance with its existing financial covenants. See "Item 1 - Financial Statements and Supplementary Data - Notes to Financial Statements - Note 4 Long-Term Debt." The Company was challenged to meet these covenant tests in the first quarter of 2002 during the rolling four quarter measurement period due to an extremely low win percentage during certain quarters and reduced travel to Las Vegas during the fourth quarter of 2001 because of the September 11th terrorist attacks. These covenants allow the Principal Stockholder to increase EBITDA for measurement purposes by issuing a standby letter of credit to the Company's lenders. The covenants also allow the New Mall Subsidiary and the Phase II Subsidiary, subject to certain limitations, to make distributions to LVSI which would increase EBITDA for debt covenant measurement purposes. During the first quarter of 2002, the Company entered into a limited waiver amendment to the Bank Credit Facility and FF&E Credit Facility to obtain a waiver with respect to the minimum consolidated adjusted EBITDA requirement. Also during the first quarter of 2002, the New Mall Subsidiary paid a $7.0 million distribution to Venetian. If the Company is required to pay certain significant contested construction costs, or if the Company is unable to meet its debt service requirements, the Company will seek, if necessary and to the extent permitted under its indentures and the terms of the Bank Credit Facility and the FF&E Credit Facility or any other debt instruments then outstanding, additional financing through bank borrowings or debt or equity financings. Also, there can be no assurance that new business developments or unforeseen events will not occur resulting in the need to raise additional funds. There also can be no assurance that additional or replacement financing, if needed, will be available to the Company, and, if available, that the financing will be on terms favorable to the Company, or that the Principal Stockholder or any of his affiliates will provide any such financing. Litigation Contingencies and Available Resources ------------------------------------------------ The Company is a party to certain litigation matters and claims related to the construction of the Casino Resort. If the Company is required to pay any of the Construction Manager's contested construction costs (the "Contested Construction Costs") which are not covered by the Insurance Policy, the Company may use cash received from the following sources to fund such costs: (i) the LD Policy; (ii) the Construction Manager, Bovis and P&O pursuant to the Construction Management Contract, the Bovis Guaranty and the P&O Guaranty, respectively; (iii) third parties, pursuant to their liability to the Company under their agreements with the Company; (iv) amounts received from the Phase II Subsidiary for shared facilities designed and constructed to accommodate the operations of the Casino Resort and the Phase II Resort; (v) the Principal Stockholder, pursuant to his liability under the Completion Guaranty; (vi) borrowings under the Revolver; (vii) additional debt or equity financings; and (viii) operating cash flow. The Principal Stockholder has remaining liability of approximately $5.0 million under the Completion Guaranty to fund excess construction costs (which liability is collateralized with cash and cash equivalents), provided that there is no cap on the Principal Stockholder's liability for excess construction costs due to scope changes. If the Company were required to pay substantial Contested Construction Costs, and if it were unable to raise or obtain the funds from the sources described above, there could be a material adverse effect on the Company's financial position, results of operations or cash flows. New Mall Subsidiary and Transfer of Mall Assets and Related Assets ------------------------------------------------------------------ On November 12, 1999, Mall Construction transferred the Mall Assets to its subsidiary, the Mall Subsidiary. Upon such transfer, the Mall Assets were released as security to the holders of the Mortgage Notes and for the indebtedness under the Bank Credit Facility, the indebtedness under a $140.0 million mall construction loan facility (the "Mall Construction Loan Facility") was assumed by the Mall Subsidiary and all entities comprising the Company, other than the Mall Subsidiary, were released from all obligations under the Mall Construction Loan Facility. 29 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) On December 20, 1999, the Mall Construction Loan Facility was paid off in full with the proceeds of the Mall Take-out Financing. The Mall Take-out Financing is secured by a $20.0 million guaranty made by the Principal Stockholder (the "Mall Take-out Guaranty"). The annual interest rate on the Tranche A Take-out Loan is 350 basis points over 30 day LIBOR. The Tranche A Take-out Loan is due in full on December 20, 2002 and no principal payments are due thereunder until such date. The Company currently plans to refinance the Tranche A Take-out Loan prior to its due date, however, no assurance can be given that refinancing for such indebtedness will be available to the Company prior to this date. The Tranche B Take-out Loan bears interest at 14% per annum. The initial maturity date is December 20, 2004 with a right of extension to December 20, 2007. No principal payments are due until maturity. Also on December 20, 1999, the Mall Assets were transferred from the Mall Subsidiary to the New Mall Subsidiary, the obligor under the Mall Take-out Financing. Because the New Mall Subsidiary is not a guarantor of any indebtedness of the Company (other than the Mall Take-out Financing), creditors of the Company (including the holders of the Notes but excluding creditors of the New Mall Subsidiary) do not have a direct claim against the Mall Assets. As a result, indebtedness of the entities comprising the Company other than the New Mall Subsidiary (including the Notes) is now, with respect to the Mall Assets, effectively subordinated to indebtedness of the New Mall Subsidiary. The New Mall Subsidiary is not restricted by any of the debt instruments of LVSI, Venetian or the Company's other subsidiary guarantors (including its indentures) from incurring any indebtedness. The terms of the Tranche A Take-out Loan prohibit the New Mall Subsidiary from paying dividends or making distributions to any of the other entities comprising the Company unless payments under the Tranche A Take-out Loan are current, and, with certain limited exceptions, prohibit the New Mall Subsidiary from making any loans to such entities. Any additional indebtedness incurred by the New Mall Subsidiary may include additional restrictions on the ability of the New Mall Subsidiary to pay any such dividends and make any such distributions or loans. Phase II Resort and Transfer of Phase II Land --------------------------------------------- If the Phase II Subsidiary determines to construct the Phase II Resort, the Phase II Subsidiary will be required to raise substantial debt and/or equity financings. Currently, there are no commitments to fund the hard construction costs of the Phase II Resort. Approximately 14-acres of the Phase II Land was transferred to the Phase II Subsidiary in 1998. On December 31, 1999, an additional 1.75 acres of land were contributed indirectly by the Principal Stockholder to the Phase II Subsidiary. The development of the Phase II Resort may require obtaining additional regulatory approvals. The Company has not yet set a date to begin construction of the Phase II Resort. The Phase II Subsidiary has outstanding project payables in the amount of $3.2 million to be funded from future equity contributions or borrowings by the Phase II Subsidiary. During the first quarter of 2001, the Phase II Subsidiary borrowed $1.1 million under the Phase II Unsecured Bank Loan, which is due and payable on July 15, 2002. The proceeds were used to fund payments of Phase II Subsidiary operating costs. The Phase II Subsidiary also owed $1.4 million under the Phase II Subsidiary Credit Facility as of March 31, 2002. Because the Phase II Subsidiary is not a guarantor of the Company's indebtedness, creditors of the Company (including the holders of the Notes) do not have a direct claim against the assets of the Phase II Subsidiary. As a result, the existing indebtedness of the Company (including the Notes) is, with respect to these assets, effectively subordinated to indebtedness of the Phase II Subsidiary. The Phase II Subsidiary is not subject to any of the restrictive covenants of the debt instruments of the Company (including, without limitation, the covenants with respect to the limitations on indebtedness and restrictions on the ability to pay dividends or to make distributions or loans to the Company and its subsidiaries). Any indebtedness to be incurred by the Phase II Subsidiary in addition to the Phase II Subsidiary Credit Facility may include material restrictions on the ability of the Phase II Subsidiary to pay dividends or make distributions or loans to the Company and its subsidiaries. The debt instruments of the Company limit the ability of LVSI, Venetian or any of their subsidiaries to guarantee or otherwise become liable for any indebtedness of the Phase II Subsidiary. Such debt instruments also restrict the sale or other disposition by the Company and its subsidiaries of capital stock of the Phase II Subsidiary, including the sale of any such capital stock to the Principal Stockholder or any affiliate of the Principal Stockholder. In addition, prior to commencement of construction of the Phase II Resort, Venetian has the right to approve the plans and specifications for the Phase II Resort. 30 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Risk Related to the Subordination Structure of the Mortgage Notes - ----------------------------------------------------------------- The Mortgage Notes represent senior secured debt obligations of LVSI and Venetian, secured by second priority liens on the collateral securing the Mortgage Notes (the "Note Collateral"). However, the guarantees of the Mortgage Notes by its subsidiaries, Mall Intermediate Holding Company, LLC and Lido Intermediate Holding Company, LLC, each a special purpose entity which is a wholly-owned subsidiary of LVSI and Venetian (collectively, the "Subordinated Guarantors"), are unsecured, subordinated debt obligations of such guarantors. The structure of these guarantees present certain risks for holders of the Mortgage Notes. For example, if the Note Collateral were insufficient to pay the debt secured by such liens, or such liens were found to be invalid, then holders of the Mortgage Notes would have a senior claim against any remaining assets of LVSI and Venetian. In contrast, because of the subordination provision with respect to the Subordinated Guarantors, holders of the Mortgage Notes will always be fully subordinated to the claims of holders of senior indebtedness of the Subordinated Guarantors. Recent Accounting Pronouncements - -------------------------------- Effective in the fourth quarter of 2000 and the first quarter of 2001, the Company adopted Emerging Issues Task Force Issue 00-14 ("EITF 00-14") and Emerging Issues Task Force Issue 00-22 ("EITF 00-22"), respectively. EITF 00-14 and EITF 00-22 require that cash discounts and other cash incentives related to gaming play be recorded as a reduction of gross casino revenues. EITF 00-14 and EITF 00-22 also require that prior periods be restated to conform to this presentation. The Company previously recorded such discounts as an operating expense and has reclassified prior period amounts, which has no effect on previously reported net income. In July 2001, the Financial Accounting Standards Board issued Statement No. 141 ("SFAS 141"), entitled "Business Combination," and Statement No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets". SFAS 141 provides as follows: (a) use of the pooling-of-interests method is prohibited for business combinations initiated after June 30, 2001; and (b) the provisions of SFAS 141 also apply to all business combinations accounted for by the purchase method that are completed after June 30, 2001. There are also transition provisions that apply to business combinations completed before July 1, 2001 that were accounted for by the purchase method. SFAS 142 is effective for fiscal years beginning after December 15, 2001 and applies to all goodwill and other intangible assets recognized in an entity's statement of financial position at that date, regardless of when those assets were initially recognized. In August 2001, the Financial Accounting Standards Board issued Statement No. 143 ("SFAS 143"), "Accounting for Obligations Associated with the Retirement of Long-Lived Assets". The objective of SFAS 143 is to establish accounting standards for the recognition and measurement of an asset retirement obligation and its associated asset retirement cost. SFAS 143 is effective for fiscal years beginning after June 15, 2002. In October 2001, the Financial Accounting Standards Board issued Statement No. 144 ("SFAS 144"), "Accounting for the Impairment or Disposal of Long-Lived Assets". SFAS 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS 144 is effective for fiscal years beginning after December 15, 2001 and, generally, is to be applied prospectively. The adoptions of SFAS 141, SFAS 142 and SFAS 144 had no impact on the Company's financial position or results of operations. We do not expect the impact of the adoption of SFAS 143 to be material to our financial position, results of operations or cash flows. Special Note Regarding Forward-Looking Statements - ------------------------------------------------- Certain statements in this section and elsewhere in this Quarterly Report on Form 10-Q (as well as information included in oral statements or other written statements made or to be made by the Company) constitute "forward-looking statements." Such forward-looking statements include the discussions of the business strategies of the Company and expectations concerning future operations, margins, profitability, liquidity and capital resources. In addition, in certain portions of this Form 10-Q, the words: "anticipates", "believes", "estimates", "seeks", "expects", "plans", "intends" and similar expressions, as they relate to the Company or its management, are intended to identify forward-looking statements. Although the Company believes that such forward-looking statements are reasonable, it can give no assurance that any forward-looking statements will prove to be correct. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the risks associated with entering into new 31 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) construction and new ventures, including the Phase IA Addition and the Macau joint venture, increased competition and other planned construction in Las Vegas, including the opening of a new casino resort on the site of the former Desert Inn and upcoming increases in meeting and convention space, the completion of infrastructure projects in Las Vegas, government regulation of the casino industry, including gaming license approvals and regulation in foreign jurisdictions, the legalization of gaming in certain jurisdictions, such as Native American reservations in the States of California and New York and regulation of gaming on the Internet, leverage and debt service (including sensitivity to fluctuations in interest rates and other capital markets trends), uncertainty of casino spending and vacationing at casino resorts in Las Vegas, disruptions or reductions in travel to Las Vegas, the September 11, 2001 attacks and any future terrorist incidents, fluctuations in occupancy rates and average daily room rates in Las Vegas, demand for all-suites rooms, the popularity of Las Vegas as a convention and trade show destination, insurance risks (including the risk that the Company will not be able to obtain coverage against acts of terrorism or will only be able to obtain such coverage at significantly increased rates), litigation risks, including the outcome of the pending disputes with the Construction Manager and its subcontractors, and general economic and business conditions which may impact levels of disposable income, consumer spending and pricing of hotel rooms. Item 3. Quantitative And Qualitative Disclosures About Market Risk Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. The Company's primary exposure to market risk is interest rate risk associated with its long-term debt. The Company attempts to manage its interest rate risk by managing the mix of its long-term fixed-rate borrowings and variable rate borrowings, and by use of interest rate cap and floor agreements. The ability to enter into interest rate cap and floor agreements allows the Company to manage its interest rate risk associated with its variable rate debt. The Company does not hold or issue financial instruments for trading purposes and does not enter into deliverable transactions that would be considered speculative positions. The Company's derivative financial instruments consist exclusively of interest rate cap and floor agreements, which do not quality for hedge accounting. Interest differentials resulting from these agreements are recorded on an accrual basis as an adjustment to interest expense. To manage exposure to counterparty credit risk in interest rate cap and floor agreements, the Company enters into agreements with highly-rated institutions that can be expected to fully perform under the terms of such agreements. Frequently, these institutions are also members of the bank group providing the Company's credit facility, which management believes further minimizes the risk of nonperformance. The table below provides information about the Company's financial instruments that are sensitive to changes in interest rates. For debt obligations, the table presents notional amounts and weighted average interest rates by contractual maturity dates for the twelve month periods ended March 31:
FAIR 2003 2004 2005 2006 TOTAL VALUE(1) ------- ------- ------- ------- ------- ------- (Dollars In Millions) LIABILITIES Short-term debt Variable rate ............. $204.0 -- -- -- $204.0 $204.0 Average interest rate (2) 5.0% -- -- -- 5.0% -- Long-term debt Fixed rate ................ -- -- $460.0 $125.4 $585.4 $617.1 Average interest rate (2) -- -- 13.1% 14.3% 13.7% -- Variable rate ............. -- $128.1 $ 5.4 -- $133.5 $133.5 Average interest rate (2) -- 5.7% 5.8% -- 5.8% -- - ---------- (1) The fair values are based on the borrowing rates currently available for debt instruments with similar terms and maturities and market quotes of the Company's publicly traded debt. (2) Based upon contractual interest rates for fixed rate indebtedness or current LIBOR rates for variable rate indebtedness.
32 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Foreign currency translation gains and losses were not material to the Company's results of operations for the quarter ended March 31, 2002. See also "Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources" and " Item 1 - Financial Statements and Supplementary Data - Notes to Financial Statements - Note 4 Long-Term Debt." 33 Part II OTHER INFORMATION Item 1. Legal Proceedings The Company is party to litigation matters and claims related to its operations and the construction of the Casino Resort. For more information, see the Company's Annual Report on Form 10-K for the year ended December 31, 2001 and "Part I, Item 1 - Financial Statements - Notes to Financial Statements Note 6 Commitments and Contingencies." Item 2. Changes in Securities and Use of Proceeds In the first quarter of 2002, the Company granted options to purchase an aggregate of 49,900 shares of common stock to certain key employees of the Company at an exercise price of $271 per share. Immediately thereafter, the Principal Stockholder assumed the obligations of the Company under the stock option plan. The issuances were exempt from registration by virtue of Section 4(2) of the Securities Act of 1933, as amended, as transactions not involving a public offering. Items 3 through 5 of Part II are not applicable. Item 6. Exhibits and Reports on Form 8-K (a) List of Exhibits
Exhibit No. Description of Document ----------- ----------------------- 10.1 Stock Option Agreement, dated as of January 2, 2002, between Las Vegas Sands, Inc., Sheldon G. Adelson and William P. Weidner. (1) 10.2 Stock Option Agreement, dated as of January 2, 2002, between Las Vegas Sands, Inc., Sheldon G. Adelson and Bradley H. Stone. (1) 10.3 Stock Option Agreement, dated as of January 2, 2002, between Las Vegas Sands, Inc., Sheldon G. Adelson and Robert G. Goldstein. (1) 10.4 Stock Option Agreement, dated as of January 2, 2002, between Las Vegas Sands, Inc., Sheldon G. Adelson and David Friedman. (1) 10.5 Assumption Agreement, dated as of January 2, 2002, by Sheldon G. Adelson. (1) 10.6 Stockholders' Agreement, dated as of January 2, 2002, among Las Vegas Sands, Inc., Sheldon G. Adelson, William P. Weidner, Bradley H. Stone, Robert G. Goldstein and David Friedman. (1) 10.7 Limited Waiver under Term Loan and Security Agreement, dated as of March 31, 2002, by and among LVSI and Venetian, as borrowers, General Electric Capital Corporation, as Administrative Agent, and the lender parties thereto. (1) 10.8 Limited Waiver Regarding Credit Agreement, dated as of March 31, 2002, by and among LVSI and Venetian, as borrowers, Scotiabank, as Lead Arranger and Administrative Agent, and the lender parties thereto. (1) 10.9 Limited Waiver Regarding Credit Agreement, dated as of March 31, 2002, by and among Lido Casino Resort, LLC, as borrower, Scotiabank, as Administrative Agent, and the other lender parties thereto. (1) - ---------- (1) Filed herewith.
(b) Reports on Form 8-K No report on Form 8-K was filed during the quarter ended March 31, 2002. 34 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. LAS VEGAS SANDS, INC. May 8, 2002 By: /s/ Sheldon G. Adelson ------------------------------------ Sheldon G. Adelson Chairman of the Board, Chief Executive Officer and Director May 8, 2002 By: /s/ Harry D. Miltenberger ------------------------------------ Harry D. Miltenberger Vice President-Finance (principal financial and accounting officer) 35 EX-10 3 exhibit10-1.txt STOCK OPTION AGREEMENT - WEIDNER LAS VEGAS SANDS, INC. STOCK OPTION AGREEMENT THIS AGREEMENT (the "Agreement"), dated January 2, 2002 is made effective as of November 30, 1997 (the "Date of Grant"), between Las Vegas Sands, Inc., a Nevada corporation (the "Company"), Sheldon G. Adelson ("Adelson") and William P. Weidner (the "Participant") is entered into to clarify and set forth in a single instrument all of the understandings and commitments with respect to the options to acquire shares of the Company's Common Stock (the "Shares") promised by the Company to the Participant under an Employment Agreement. Recitals - -------- WHEREAS, the Company has adopted the Las Vegas Sands, Inc. 1997 Fixed Stock Option Plan (the "Plan"), which Plan is incorporated herein by reference and made a part of this Agreement. Capitalized terms not otherwise defined herein shall have the same meanings as in the Plan; WHEREAS, the Company's Board of Directors (the "Board") has determined that it would be in the best interests of the Company and its stockholders to grant the option provided for herein (the "Option") to the Participant pursuant to the Plan and the terms set forth herein; NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties hereto agree as follows: 1. Grant of the Option. Subject to compliance with applicable Nevada Gaming Laws, including the receipt of all necessary approvals from the Nevada Gaming Commission and the State Gaming Control Board ("Nevada Gaming Authorities") prior to the execution of this Agreement, the Company hereby grants to the Participant the right and Option to purchase, on the terms and conditions hereinafter set forth the number of Shares set forth on Exhibit A attached hereto, subject to adjustment as set forth in the Plan. The price of the Shares subject to the Option shall be as determined by the provisions of Section 3 of this Agreement. The Option is intended to be a non-qualified stock option, and is not intended to be treated as an option that complies with Section 422 of the Internal Revenue Code of 1986, as amended. 2. Vesting and Exercisability. The Option shall be fully vested and immediately exercisable on the Date of Grant. 3. Exercise of Option. (a) Exercise Price. The Exercise Price for the Shares to be acquired upon the exercise of the Option (the "Exercise Price") shall be the amount set forth on Exhibit A. (b) Period of Exercise. Subject to the provisions of the Plan and this Agreement, the Participant may exercise the Option in whole but not in part at any time after receiving all necessary licenses and approvals from the Nevada Gaming Authorities and prior to the earliest to occur of the following (the "Option Expiration Dates"): (i) the tenth anniversary of the Date of Grant; (ii) the date three days prior to a Change in Control Acceleration Event; (iii) the date three days prior to a Public Offering Acceleration Event; and (iv) the date of the Participant's termination of employment for Cause (as defined below). If the Option is not exercised as of the Option Expiration Date, it shall immediately terminate and expire, provided, however, that no Option shall expire pursuant to Section 3(b)(ii) or (iii) unless the Company has given the Participant notice of the Accelerated Exercise Period promptly upon learning of the time (or approximate time) when the Accelerated Exercise Period will occur but in no event shall such notice be given later than ten (10) days prior to the Change of Control Acceleration Event or the Public Offering Acceleration Event. (c) Method of Exercise. (i) Subject to Section 3(b), the Option may be exercised by delivering to the Company at its principal office the Exercise Notice attached hereto as Exhibit B, together with proof that the Participant has obtained from the Nevada Gaming Authorities all licenses or approvals necessary to exercise the Option and to hold the Shares. Within five (5) business days of the delivery of such notice to the Company, the Participant shall deliver to the Company at its principal office payment in full of the Exercise Price if he wishes to exercise the Option. Upon receipt by the Company of the Exercise Price the Option will be deemed exercised. The payment of the Exercise Price may be made-- 1 (A) in cash, or its equivalent; or (B) if there shall be a public market for the Shares, by exchanging Shares owned by the Participant (which are not the subject of any pledge or other security interest and which have been owned by the Participant for at least 6 months), subject to receipt of any necessary licenses or approvals from the Nevada Gaming Authorities and subject to such rules as may be established by the Company, through delivery of irrevocable instructions to a broker to sell the Shares otherwise deliverable upon the exercise of the Option and to deliver promptly to the Company an amount equal to the aggregate exercise price; or (C) by the delivery of a promissory note and pledge agreement of the Participant in the form attached hereto as Exhibits C (the "Note") and D (the "Pledge Agreement") providing for payment, with interest on the unpaid balance accruing at a fair market rate as of the date of redemption, which the parties understand shall mean the "Applicable Federal Rate" as such term is used in Code section 7872 unless, based upon the financial position and credit worthiness of the Participant, a higher rate is appropriate, upon the earlier of: (I) 90 days after a demand for repayment; or (II) the later of: (x) a Public Offering Acceleration Event, or (y) the expiration of any applicable "lock up" period,but in no event longer than six months following the Public Offering Acceleration Event, and upon such other terms and conditions (including the security, if any therefor) as the Company may determine,or by a combination of the foregoing, provided that the combined value of all cash and cash equivalents and the Fair Market Value of any such Shares so tendered to the Company as of the date of such tender plus the principal amount of any Note is at least equal to such aggregate Exercise Price; provided, further, that if -- (D) the Participant's employment with the Company is terminated for any reason; (E) the Participant continues to own the Shares; and (F) the Note remains outstanding, then the interest rate on the Note shall increase, upon such termination, to the greater of the Company's weighted average cost of capital or the rate established pursuant to Section 3(c)(i)(C) above. (i) Notwithstanding any other provision of the Plan or this Agreement to the contrary, the Option may not be exercised prior to the completion of any registration or qualification of the Option or the Shares under applicable state and federal securities or other laws, or under any ruling or regulation of any governmental body or national securities exchange that the Board shall in its sole discretion determine to be necessary or advisable. In addition, the Participant may not acquire any interest in an Option under this Agreement until such time as the Nevada Gaming Authorities approve the granting of such Option. In the event that any Nevada Gaming Authority denies the granting of the Option, the Participant shall not be entitled to receive the Option or any other compensation or remuneration under this Agreement in lieu of such Option. (iii) Upon the Company's determination that the Option has been validly exercised as to any of the Shares, the Company shall issue or transfer certificates in the Participant's name for such Shares. However, the Company shall not be liable to the Participant for damages relating to any delays in issuing or transferring the certificates to him, any loss of the certificates, or any mistakes or errors in the issuance or transfer of the certificates or in the certificates themselves. 4. Restrictions. All Shares issued pursuant to the exercise of this Option shall be subject to the restrictions set forth in the Stockholders Agreement to be executed in connection with the exercise, among the Company and the stockholders named therein in substantially the form attached hereto as Exhibit E (the "Stockholders Agreement"). 5. Redemption. (a) Redemption Rights. Some or all of the Shares issued pursuant to the exercise of the Option and held by the Participant for a period of at least six months following exercise of the Option, shall, at the written 2 request of the Participant (or his personal representative), be redeemed by the Company as follows: (i) in the case of a (A) a termination of the Participant's employment with the Company due to death or Disability (as defined below); (B) a voluntary termination by the Participant of his employment with the Company; (C) a termination of the Participant's employment by the Company other than for Cause; or (D) a redemption request made by the Participant while still employed by the Company, the Company shall pay to the Participant an amount equal to the Fair Market Value on the date of redemption of the Shares being redeemed, which price shall: (E) to the extent the Participant paid for the Exercise Price of the Option using a Note in accordance with Section 3(c)(i)(C) above, be applied to the amounts of principal and interest which are due and remain unpaid as of the date of redemption as follows: (I) upon redemption of all or any portion of the first 25% of the Shares subject to the Pledge Agreement; only the accrued interest on the Note shall be paid; (II) upon redemption of all or any portion of the second 25% of the Shares subject to the Pledge Agreement, all of the redemption proceeds shall be applied to the Note interest and principal; (III) upon the redemption of any portion of the third 25% of the Shares subject to the Pledge Agreement, one-half of the redemption proceeds shall be applied to the Note interest and principal unless one-half of the portion of the third 25% retained by the Participant, when valued at the then prevailing redemption price, shall be less than the remaining interest and principal due on the Note, in which event a greater portion of the redemption proceeds shall be applied to the Note so that one-half of the portion of the third 25% retained by the Participant, when valued at the then prevailing redemption price, shall be equal to or greater than the remaining interest and principal due on the Note; and (IV) upon the redemption of all or any portion of the fourth 25% of the Shares subject to the Pledge Agreement, if there shall then be any balance of interest or principal remaining due on the Note, such portion of the redemption proceeds shall be applied to the Note as necessary to fully pay the balance thereof; and (F) to the extent the redemption price exceeds the amount remaining unpaid on the Note or if no Note is outstanding, such redemption price (or portion thereof) shall be payable by the Company, with interest on the unpaid balance accruing at a fair market rate as of the date of redemption, which the parties understand shall mean the "Applicable Federal Rate" as such term is used in Code section 7872 unless, based upon the financial position and credit worthiness of the Company, a higher rate is appropriate, in thirty-six (36) equal consecutive monthly installments, commencing ninety (90) days following the date on which the Fair Market Value is established; and (i) in the case of a termination for Cause (as defined below) or a termination as a result of the failure of the Nevada Gaming Authorities to grant the Participant a casino key employee and equity holder license, Participants shall be deemed to have elected redemption as of his termination of employment or six months after share exercise was completed, whichever is later, and the Company shall pay to the Participant an amount equal to the lesser of the exercise price for such Shares or the Fair Market Value on the date of redemption, which price shall-- (A) to the extent the Participant paid for the Exercise Price of the Option using a Note in accordance with Section 3(c)(i)(C) above, be used to offset any amounts of principal and interest which are due and unpaid as of the date of redemption; and (B) to the extent the redemption price exceeds the amount remaining unpaid on the Note or if no Note is outstanding, such redemption price shall be payable, with interest on the unpaid balance accruing at a fair market rate as of the date of 3 redemption, which the parties understand shall mean the "Applicable Federal Rate" as such term is used in Code section 7872 unless, based upon the financial position and credit worthiness of the Company, a higher rate is appropriate, in thirty-six (36) equal consecutive monthly installments commencing ninety (90) days following the date on which Fair Market Value is established. (b) Definitions. For purposes of this Agreement: "Cause" shall mean: (i) conviction of a felony, misappropriation of any material funds or property of the Company, commission of fraud or embezzlement with respect to the Company, or any material act or acts of dishonesty relating to the Participant's employment by the Company resulting or intended to result in direct or indirect personal gain or enrichment at the expense of the Company; (ii) use of alcohol or drugs that renders the Participant materially unable to perform the functions of his or her job or carry out his or her duties to the Company; (iii) materially failing to fulfill his duties and responsibilities; (iv) committing any act or acts of serious and willful misconduct (including disclosure of confidential information) that is likely to cause a material adverse effect on the business of the Company or to subject the Company to possible disciplinary action by the Nevada Gaming Authorities; or (v) loss or failure to obtain a license, work card, or other approval from the Nevada Gaming Authorities that is necessary or for which the Company deems advisable relating to the Participant's employment by the Company or the holding or exercise of an Option hereunder. "Disability" shall mean that the Participant is unable to perform the duties of his employment for a continuous period of three months due to severe illness or accident or other grave mental or physical incapacity. "Fair Market Value" of a Share shall mean: (i) If there is no public market for the Shares, the fair market value agreed to by the Company and the Participant or, in the absence of such agreement, the fair market value determined and agreed to by two national investment banking firms (the "Appraisers"), one chosen by the Company and one chosen by the Participant. In the absence of agreement of the Appraisers, Fair Market Value shall be determined by a third independent appraiser mutually chosen by the Appraisers. Such determination shall be final and binding on all parties. The costs and expenses of the appraisers shall be shared equally by the Company and the Participant, and (ii) If there is a public market for the Shares, then the mean between the high and low sales price of the Shares as reported on the composite tape for securities traded on the New York Stock Exchange for such date (or if not then trading on the New York Stock Exchange, the mean between the high and low sales price of the Shares on the stock exchange or over-the-counter market on which the Shares are principally trading on such date) or, if there were no sales on such date, on the closest preceding date on which there were sales of Shares. (b) Redemption Procedure. Any redemption of Shares provided for in this Section shall take place-- (i) within thirty (30) days following termination for Cause or a termination as a result of the failure of the Nevada Gaming Authorities to grant the Participant a casino key employee and equity holder license; (ii) in the case of a termination by reason of the Participant's death or Disability, upon such date set out by the Participant, or his estate, as the case may be, in a written notice to the Company specifying all or any portion of the Shares to be redeemed, given at least thirty (30) days in advance of the applicable redemption date; or (iii) within thirty (30) days following written notice to the Company of the intent to redeem all or any portion of the Shares in the case of any other termination of the Participant's employment with the Company or if Participant is currently employed with the Company.. 4 The Participant (or his personal representative), upon redemption of all or any portion of his Shares shall surrender to the Company the certificates for his Shares and only such portion as has been surrendered shall thereupon be canceled; provided, however, that if the Participant is redeeming Shares in accordance with clause (i) above, then upon such redemption the Participant shall surrender to the Company all certificates for Shares and whether so surrendered or not, such Shares shall thereupon be canceled. The Company shall then, upon receipt of the Shares and determination of the Fair Market Value, deliver to the Participant (or his personal representative) a promissory note for the sum payable in accordance with the terms of Section 5(a)(ii) above. Such note shall be, in all respects, subject to the limitations and restrictions, if any, imposed by any note, credit facility, indenture, mortgage, line of credit or similar contractual arrangement with an institutional or similar lender by which the Company may become bound ("Lender Restrictions"), whether in the form of financial covenants or otherwise and whether arising prior to or after execution and delivery of the note. No failure of the Company to pay sums due on the note on account of the Lender Restrictions shall result in a default and all such payments to the extent (and only to the extent) prohibited by the Lender Restrictions, shall be deferred and accrue until such time as they may be paid without violating the Lender Restrictions. (d) Redemption Provisions Void. Whenever (and for so long as) the Shares are publicly traded, either on a registered securities exchange or in the over-the-counter market, all provisions regarding the redemption of Shares by the Company shall be void. 6. No Right to Continued Employment. Neither the Plan nor this Agreement shall be construed as giving the Participant the right to be retained in the employ of, or in any consulting relationship to, the Company or any Affiliate. If, the Company or an Affiliate at any time dismisses Participant or discontinues any consulting relationship, such discontinuance or dismissal may be made, free from any liability or any claim under the Plan or this Agreement, except as otherwise expressly provided herein. 7. Legend on Certificates. (a) The certificates representing the Shares purchased by exercise of the Option shall, in addition to the restrictions set forth in Sections 3, 4 and 5 hereof, be subject to such stop transfer orders or the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which such Shares are listed, any applicable Federal or state laws, the Company's Articles of Incorporation or Bylaws and the Stockholders Agreement, and the Company may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. (b) All certificates for shares or other securities of the Company or any Affiliate delivered under the Plan pursuant to any Option or the exercise thereof shall be subject to Nevada Gaming Laws and all local gaming laws and the Board may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. 8. Transferability. The Option and, prior to a Public Offering Acceleration Event, the Shares may not be assigned, alienated, pledged to anyone other than the Company, attached, sold or otherwise transferred or encumbered by the Participant otherwise than by will or by the laws of descent and distribution after receipt of all necessary licenses and approvals from the Nevada Gaming Authorities, and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or any Affiliate; provided that the designation of a beneficiary shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance and provided further that Shares acquired upon the exercise of an Option may be pledged to the Company or, to a financial institution to secure a loan the proceeds of which are used to pay the Company the Exercise Price of the Option or the taxes payable in connection with such exercise provided the holder first obtains all necessary licenses and approvals from the Nevada Gaming Authorities. No such permitted transfer of the Option or the Shares to heirs or legatees of the Participant shall be effective to bind the Company unless the Company shall have been furnished with written notice thereof and a copy of such evidence as the Company may deem necessary to establish the validity of the transfer, the acceptance by the transferee or transferees of the terms and conditions hereof and receipt of all necessary approvals from the Nevada Gaming Authorities. During the Participant's lifetime, the Option is exercisable only by the Participant. 9. Withholding. (a) The Participant may be required to pay to the Company or any Affiliate, and the Company or any Affiliate shall have the right and is hereby authorized to withhold from any payment due or transfer made under the Option or under the Plan or from any compensation or other amount owing to a Participant, the amount (in cash, Shares, other securities, other Awards or other property) of any applicable withholding taxes in respect of the Option, its exercise, or any payment or transfer under the Option or under the Plan and to take such other action as may be necessary in the 5 opinion of the Company to satisfy all obligations for the payment of such taxes. (b) Without limiting the generality of clause (a) above, the Participant may, in the reasonable discretion of the Company, satisfy, in whole or in part, the foregoing withholding liability by delivery of Shares owned by the Participant (which are not subject to any pledge or other security interest and which have been owned by the Participant for at least 6 months) with a Fair Market Value equal to such withholding liability or by having the Company withhold from the number of Shares otherwise issuable pursuant to the exercise of the Option a number of Shares with a Fair Market Value equal to such withholding liability. 10. Securities Laws. Upon the acquisition of any Shares pursuant to the exercise of the Option, the Participant will make or enter into such written representations, warranties and agreements as the Company may reasonably request in order to comply with applicable securities laws or with this Agreement. 11. Notices. Any notice necessary under this Agreement shall be addressed to the Company at its principal executive office and to the Participant at the address appearing in the personnel records of the Company for the Participant or to either party at such other address as either party hereto may hereafter designate in writing to the other. Any such notice shall be deemed effective upon receipt thereof by the addressee. 12. Choice of Law. THE INTERPRETATION, PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEVADA AND THE NEVADA GAMING LAWS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. 13. Option Subject to Plan. By entering into this Agreement the Participant agrees and acknowledges that the Participant has received and read a copy of the Plan. The Option is subject to the Plan. The terms and provisions of the Plan, as it may be amended from time to time, are hereby incorporated herein by reference. In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail. 14. Full Satisfaction. By entering into this Agreement, the Participant agrees and acknowledges that the grant of this Option is in full satisfaction of the Company's (and its Affiliates') obligations with respect to the Option grant contemplated by the Participant's Employment Agreement or contract, whichever is applicable. 15. Assumption by Adelson. Adelson has the right, in his sole discretion, to assume the obligations of the Company, and to succeed to the rights of the Company, herein, to grant the Option and to administer the Plan as provided for in the Plan, such assumption and succession to be evidenced by the execution of an instrument solely by Adelson. In the absence of such an assumption, Adelson shall have no obligations under this Agreement or the Plan. 16. Signature in Counterparts. This Agreement may be signed in counterparts, each of which shall be deemed an original, and all of which, collectively, shall be considered one and the same instrument. 6 IN WITNESS WHEREOF, the parties hereto have executed this Agreement. LAS VEGAS SANDS, INC. By: -------------------------- /s/William P. Weidner -------------------------- WILLIAM P. WEIDNER /s/Sheldon G. Adelson ---------------------------- SHELDON G. ADELSON 7 LIST OF EXHIBITS A - Employee Participant Data B - Exercise Notice C - Note D - Pledge Agreement E - Stockholders Agreement 8
EXHIBIT A Per Share Name of Employee Number of Shares Exercise Price Exercise Price - ------------------- --------------------------- -------------- -------------- William P. Weidner 19,960 (represents 1.9960% $271.04 $5,409,958 of the equity (on a diluted basis) based on 1,000,000 shares outstanding)
9 EX-10 4 exhibit10-2.txt STOCK OPTION AGREEMENT - STONE LAS VEGAS SANDS, INC. STOCK OPTION AGREEMENT THIS AGREEMENT (the "Agreement"), dated January 2, 2002 is made effective as of November 30, 1997 (the "Date of Grant"), between Las Vegas Sands, Inc., a Nevada corporation (the "Company"), Sheldon G. Adelson ("Adelson") and Bradley H. Stone (the "Participant") is entered into to clarify and set forth in a single instrument all of the understandings and commitments with respect to the options to acquire shares of the Company's Common Stock (the "Shares") promised by the Company to the Participant under an Employment Agreement. Recitals - -------- WHEREAS, the Company has adopted the Las Vegas Sands, Inc. 1997 Fixed Stock Option Plan (the "Plan"), which Plan is incorporated herein by reference and made a part of this Agreement. Capitalized terms not otherwise defined herein shall have the same meanings as in the Plan; WHEREAS, the Company's Board of Directors (the "Board") has determined that it would be in the best interests of the Company and its stockholders to grant the option provided for herein (the "Option") to the Participant pursuant to the Plan and the terms set forth herein; NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties hereto agree as follows: 1. Grant of the Option. Subject to compliance with applicable Nevada Gaming Laws, including the receipt of all necessary approvals from the Nevada Gaming Commission and the State Gaming Control Board ("Nevada Gaming Authorities") prior to the execution of this Agreement, the Company hereby grants to the Participant the right and Option to purchase, on the terms and conditions hereinafter set forth the number of Shares set forth on Exhibit A attached hereto, subject to adjustment as set forth in the Plan. The price of the Shares subject to the Option shall be as determined by the provisions of Section 3 of this Agreement. The Option is intended to be a non-qualified stock option, and is not intended to be treated as an option that complies with Section 422 of the Internal Revenue Code of 1986, as amended. 2. Vesting and Exercisability. The Option shall be fully vested and immediately exercisable on the Date of Grant. 3. Exercise of Option. (a) Exercise Price. The Exercise Price for the Shares to be acquired upon the exercise of the Option (the "Exercise Price") shall be the amount set forth on Exhibit A. (b) Period of Exercise. Subject to the provisions of the Plan and this Agreement, the Participant may exercise the Option in whole but not in part at any time after receiving all necessary licenses and approvals from the Nevada Gaming Authorities and prior to the earliest to occur of the following (the "Option Expiration Dates"): (i) the tenth anniversary of the Date of Grant; (ii) the date three days prior to a Change in Control Acceleration Event; (iii) the date three days prior to a Public Offering Acceleration Event; and (iv) the date of the Participant's termination of employment for Cause (as defined below). If the Option is not exercised as of the Option Expiration Date, it shall immediately terminate and expire, provided, however, that no Option shall expire pursuant to Section 3(b)(ii) or (iii) unless the Company has given the Participant notice of the Accelerated Exercise Period promptly upon learning of the time (or approximate time) when the Accelerated Exercise Period will occur but in no event shall such notice be given later than ten (10) days prior to the Change of Control Acceleration Event or the Public Offering Acceleration Event. (c) Method of Exercise. (i) Subject to Section 3(b), the Option may be exercised by delivering to the Company at its principal office the Exercise Notice attached hereto as Exhibit B, together with proof that the Participant has obtained from the Nevada Gaming Authorities all licenses or approvals necessary to exercise the Option and to hold the Shares. Within five (5) business days of the delivery of such notice to the Company, the Participant shall deliver to the Company at its principal office payment in full of the Exercise Price if he wishes to exercise the Option. Upon receipt by the Company of the Exercise Price the 1 Option will be deemed exercised. The payment of the Exercise Price may be made-- (A) in cash, or its equivalent; or (B) if there shall be a public market for the Shares, by exchanging Shares owned by the Participant (which are not the subject of any pledge or other security interest and which have been owned by the Participant for at least 6 months), subject to receipt of any necessary licenses or approvals from the Nevada Gaming Authorities and subject to such rules as may be established by the Company, through delivery of irrevocable instructions to a broker to sell the Shares otherwise deliverable upon the exercise of the Option and to deliver promptly to the Company an amount equal to the aggregate exercise price; or (C) by the delivery of a promissory note and pledge agreement of the Participant in the form attached hereto as Exhibits C (the "Note") and D (the "Pledge Agreement") providing for payment, with interest on the unpaid balance accruing at a fair market rate as of the date of exercise, which the parties understand shall mean the "Applicable Federal Rate" as such term is used in Code section 7872 unless, based upon the financial position and credit worthiness of the Participant, a higher rate is appropriate, upon the earlier of: (I) 90 days after a demand for repayment; or (II) the later of: (x) a Public Offering Acceleration Event, or (y) the expiration of any applicable "lock up" period, but in no event longer than six months following the Public Offering Acceleration Event, and upon such other terms and conditions (including the security, if any therefor) as the Company may determine, or by a combination of the foregoing, provided that the combined value of all cash and cash equivalents and the Fair Market Value of any such Shares so tendered to the Company as of the date of such tender plus the principal amount of any Note is at least equal to such aggregate Exercise Price; provided, further, that if -- (D) the Participant's employment with the Company is terminated for any reason; (E) the Participant continues to own the Shares; and (F) the Note remains outstanding,then the interest rate on the Note shall increase, upon such termination, to the greater of the Company's weighted average cost of capital or the rate established pursuant to Section 3(c)(i)(C) above.. (ii) Notwithstanding any other provision of the Plan or this Agreement to the contrary, the Option may not be exercised prior to the completion of any registration or qualification of the Option or the Shares under applicable state and federal securities or other laws, or under any ruling or regulation of any governmental body or national securities exchange that the Board shall in its sole discretion determine to be necessary or advisable. In addition, the Participant may not acquire any interest in an Option under this Agreement until such time as the Nevada Gaming Authorities approve the granting of such Option. In the event that any Nevada Gaming Authority denies the granting of the Option, the Participant shall not be entitled to receive the Option or any other compensation or remuneration under this Agreement in lieu of such Option. (iii) Upon the Company's determination that the Option has been validly exercised as to any of the Shares, the Company shall issue or transfer certificates in the Participant's name for such Shares. However, the Company shall not be liable to the Participant for damages relating to any delays in issuing or transferring the certificates to him, any loss of the certificates, or any mistakes or errors in the issuance or transfer of the certificates or in the certificates themselves. 4. Restrictions. All Shares issued pursuant to the exercise of this Option shall be subject to the restrictions set forth in the Stockholders Agreement to be executed in connection with the exercise, among the Company and the stockholders named therein in substantially the form attached hereto as Exhibit E (the "Stockholders Agreement"). 2 5. Redemption. (a) Redemption Rights. Some or all of the Shares issued pursuant to the exercise of the Option and held by the Participant for a period of at least six months following exercise of the Option, shall, at the written request of the Participant (or his personal representative), be redeemed by the Company as follows: (i) in the case of (A) a termination of Participant's employment with the Company due to death or Disability (as defined below); (B) a voluntary termination by the Participant of his employment with the Company; (C) a termination of Participant's employment by the Company other than for Cause; or (D) a redemption request made by the Participant while still employed by the Company, the Company shall pay to the Participant an amount equal to the Fair Market Value on the date of redemption of the Shares being redeemed, which price shall: (E) to the extent the Participant paid for the Exercise Price of the Option using a Note in accordance with Section 3(c)(i)(C) above, be applied to the amounts of principal and interest which are due and remain unpaid as of the date of redemption as follows: (I) upon redemption of all or any portion of the first 25% of the Shares subject to the Pledge Agreement; only the accrued interest on the Note shall be paid; (II) upon redemption of all or any portion of the second 25% of the Shares subject to the Pledge Agreement, all of the redemption proceeds shall be applied to the Note interest and principal; (III) upon the redemption of any portion of the third 25% of the Shares subject to the Pledge Agreement, one-half of the redemption proceeds shall be applied to the Note interest and principal unless one-half of the portion of the third 25% retained by the Participant, when valued at the then prevailing redemption price, shall be less than the remaining interest and principal due on the Note, in which event a greater portion of the redemption proceeds shall be applied to the Note so that one-half of the portion of the third 25% retained by the Participant, when valued at the then prevailing redemption price, shall be equal to or greater than the remaining interest and principal due on the Note; and (IV) upon the redemption of all or any portion of the fourth 25% of the Shares subject to the Pledge Agreement, if there shall then be any balance of interest or principal remaining due on the Note, such portion of the redemption proceeds shall be applied to the Note as necessary to fully pay the balance thereof; and (F) to the extent the redemption price exceeds the amount remaining unpaid on the Note or if no Note is outstanding, such redemption price (or portion thereof) shall be payable by the Company, with interest on the unpaid balance accruing at a fair market rate as of the date of redemption, which the parties understand shall mean the "Applicable Federal Rate" as such term is used in Code section 7872 unless, based upon the financial position and credit worthiness of the Company, a higher rate is appropriate, in thirty-six (36) equal consecutive monthly installments, commencing ninety (90) days following the date on which the Fair Market Value is established; and (i) in the case of a termination for Cause (as defined below) or a termination as a result of the failure of the Nevada Gaming Authorities to grant the Participant a casino key employee and equity holder license, Participants shall be deemed to have elected redemption as of his termination of employment or six months after share exercise was completed, whichever is later, and the Company shall pay to the Participant an amount equal to the lesser of the exercise price for such Shares or the Fair Market Value on the date of redemption, which price shall-- (A) to the extent the Participant paid for the Exercise Price of the Option using a Note in accordance with Section 3(c)(i)(C) above, be used to offset any amounts of principal and interest which are due and unpaid as of the date of redemption; and 3 (B) to the extent the redemption price exceeds the amount remaining unpaid on the Note or if no Note is outstanding, such redemption price shall be payable, with interest on the unpaid balance accruing at a fair market rate as of the date of redemption, which the parties understand shall mean the "Applicable Federal Rate" as such term is used in Code section 7872 unless, based upon the financial position and credit worthiness of the Company, a higher rate is appropriate, in thirty-six (36) equal consecutive monthly installments commencing ninety (90) days following the date on which Fair Market Value is established. (b) Definitions. For purposes of this Agreement: "Cause" shall mean: (i) conviction of a felony, misappropriation of any material funds or property of the Company, commission of fraud or embezzlement with respect to the Company, or any material act or acts of dishonesty relating to the Participant's employment by the Company resulting or intended to result in direct or indirect personal gain or enrichment at the expense of the Company; (ii) use of alcohol or drugs that renders the Participant materially unable to perform the functions of his or her job or carry out his or her duties to the Company; (iii) materially failing to fulfill his duties and responsibilities; (iv) committing any act or acts of serious and willful misconduct (including disclosure of confidential information) that is likely to cause a material adverse effect on the business of the Company or to subject the Company to possible disciplinary action by the Nevada Gaming Authorities; or (v) loss or failure to obtain a license, work card, or other approval from the Nevada Gaming Authorities that is necessary or for which the Company deems advisable relating to the Participant's employment by the Company or the holding or exercise of an Option hereunder. "Disability" shall mean that the Participant is unable to perform the duties of his employment for a continuous period of three months due to severe illness or accident or other grave mental or physical incapacity. "Fair Market Value" of a Share shall mean: (i) If there is no public market for the Shares, the fair market value agreed to by the Company and the Participant or, in the absence of such agreement, the fair market value determined and agreed to by two national investment banking firms (the "Appraisers"), one chosen by the Company and one chosen by the Participant. In the absence of agreement of the Appraisers, Fair Market Value shall be determined by a third independent appraiser mutually chosen by the Appraisers. Such determination shall be final and binding on all parties. The costs and expenses of the appraisers shall be shared equally by the Company and the Participant, and (ii) If there is a public market for the Shares, then the mean between the high and low sales price of the Shares as reported on the composite tape for securities traded on the New York Stock Exchange for such date (or if not then trading on the New York Stock Exchange, the mean between the high and low sales price of the Shares on the stock exchange or over-the-counter market on which the Shares are principally trading on such date) or, if there were no sales on such date, on the closest preceding date on which there were sales of Shares. (c) Redemption Procedure. Any redemption of Shares provided for in this Section shall take place-- (i) within thirty (30) days following termination for Cause or a termination as a result of the failure of the Nevada Gaming Authorities to grant the Participant a casino key employee and equity holder license; (ii) in the case of a termination by reason of the Participant's death or Disability, upon such date set out by the Participant, or his estate, as the case may be, in a written notice to the Company specifying all or any portion of the Shares to be redeemed, given at least thirty (30) days in advance of the applicable redemption date; or (iii) within thirty (30) days following written notice to the Company of the intent to redeem all or any portion of the Shares in 4 the case of any other termination of the Participant's employment with the Company or if Participant is currently employed with the Company. The Participant (or his personal representative), upon redemption of all or any portion of his Shares shall surrender to the Company the certificates for his Shares and only such portion as has been surrendered shall thereupon be canceled; provided, however, that if the Participant is redeeming Shares in accordance with clause (i) above, then upon such redemption the Participant shall surrender to the Company all certificates for Shares and whether so surrendered or not, such Shares shall thereupon be canceled. The Company shall then, upon receipt of the Shares and determination of the Fair Market Value, deliver to the Participant (or his personal representative) a promissory note for the sum payable in accordance with the terms of Section 5(a)(ii) above. Such note shall be, in all respects, subject to the limitations and restrictions, if any, imposed by any note, credit facility, indenture, mortgage, line of credit or similar contractual arrangement with an institutional or similar lender by which the Company may become bound ("Lender Restrictions"), whether in the form of financial covenants or otherwise and whether arising prior to or after execution and delivery of the note. No failure of the Company to pay sums due on the note on account of the Lender Restrictions shall result in a default and all such payments to the extent (and only to the extent) prohibited by the Lender Restrictions, shall be deferred and accrue until such time as they may be paid without violating the Lender Restrictions. (d) Redemption Provisions Void. Whenever (and for so long as) the Shares are publicly traded, either on a registered securities exchange or in the over-the-counter market, all provisions regarding the redemption of Shares by the Company shall be void. 6. No Right to Continued Employment. Neither the Plan nor this Agreement shall be construed as giving the Participant the right to be retained in the employ of, or in any consulting relationship to, the Company or any Affiliate. If, the Company or an Affiliate at any time dismisses Participant or discontinues any consulting relationship, such discontinuance or dismissal may be made, free from any liability or any claim under the Plan or this Agreement, except as otherwise expressly provided herein. 7. Legend on Certificates. (a) The certificates representing the Shares purchased by exercise of the Option shall, in addition to the restrictions set forth in Sections 3, 4 and 5 hereof, be subject to such stop transfer orders or the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which such Shares are listed, any applicable Federal or state laws, the Company's Articles of Incorporation or Bylaws and the Stockholders Agreement, and the Company may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. (b) All certificates for shares or other securities of the Company or any Affiliate delivered under the Plan pursuant to any Option or the exercise thereof shall be subject to Nevada Gaming Laws and all local gaming laws and the Board may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. 8. Transferability. The Option and, prior to a Public Offering Acceleration Event, the Shares may not be assigned, alienated, pledged to anyone other than the Company, attached, sold or otherwise transferred or encumbered by the Participant otherwise than by will or by the laws of descent and distribution after receipt of all necessary licenses and approvals from the Nevada Gaming Authorities, and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or any Affiliate; provided that the designation of a beneficiary shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance and provided further that Shares acquired upon the exercise of an Option may be pledged to the Company or, to a financial institution to secure a loan the proceeds of which are used to pay the Company the Exercise Price of the Option or the taxes payable in connection with such exercise provided the holder first obtains all necessary licenses and approvals from the Nevada Gaming Authorities. No such permitted transfer of the Option or the Shares to heirs or legatees of the Participant shall be effective to bind the Company unless the Company shall have been furnished with written notice thereof and a copy of such evidence as the Company may deem necessary to establish the validity of the transfer, the acceptance by the transferee or transferees of the terms and conditions hereof and receipt of all necessary approvals from the Nevada Gaming Authorities. During the Participant's lifetime, the Option is exercisable only by the Participant. 9. Withholding. (a) The Participant may be required to pay to the Company or any Affiliate, and the Company or any Affiliate shall have the right and is hereby authorized to withhold from any payment due or transfer made under the Option or under the Plan or from any compensation or other amount owing to a Participant, the amount (in cash, Shares, other securities, other 5 Awards or other property) of any applicable withholding taxes in respect of the Option, its exercise, or any payment or transfer under the Option or under the Plan and to take such other action as may be necessary in the opinion of the Company to satisfy all obligations for the payment of such taxes. (b) Without limiting the generality of clause (a) above, the Participant may, in the reasonable discretion of the Company, satisfy, in whole or in part, the foregoing withholding liability by delivery of Shares owned by the Participant (which are not subject to any pledge or other security interest and which have been owned by the Participant for at least 6 months) with a Fair Market Value equal to such withholding liability or by having the Company withhold from the number of Shares otherwise issuable pursuant to the exercise of the Option a number of Shares with a Fair Market Value equal to such withholding liability. 10. Securities Laws. Upon the acquisition of any Shares pursuant to the exercise of the Option, the Participant will make or enter into such written representations, warranties and agreements as the Company may reasonably request in order to comply with applicable securities laws or with this Agreement. 11. Notices. Any notice necessary under this Agreement shall be addressed to the Company at its principal executive office and to the Participant at the address appearing in the personnel records of the Company for the Participant or to either party at such other address as either party hereto may hereafter designate in writing to the other. Any such notice shall be deemed effective upon receipt thereof by the addressee. 12. Choice of Law. THE INTERPRETATION, PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEVADA AND THE NEVADA GAMING LAWS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. 13. Option Subject to Plan. By entering into this Agreement the Participant agrees and acknowledges that the Participant has received and read a copy of the Plan. The Option is subject to the Plan. The terms and provisions of the Plan as it may be amended from time to time are hereby incorporated herein by reference. In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail. 14. Full Satisfaction. By entering into this Agreement, the Participant agrees and acknowledges that the grant of this Option is in full satisfaction of the Company's (and its Affiliates') obligations with respect to the Option grant contemplated by the Participant's Employment Agreement or contract, whichever is applicable. 15. Assumption by Adelson. Adelson has the right, in his sole discretion, to assume the obligations of the Company, and to succeed to the rights of the Company, herein, to grant the Option and to administer the Plan as provided for in the Plan, such assumption and succession to be evidenced by the execution of an instrument solely by Adelson. In the absence of such an assumption, Adelson shall have no obligations under this Agreement or the Plan. 16. Signature in Counterparts. This Agreement may be signed in counterparts, each of which shall be deemed an original, and all of which, collectively, shall be considered one and the same instrument. 6 IN WITNESS WHEREOF, the parties hereto have executed this Agreement. LAS VEGAS SANDS, INC. By: -------------------------- /s/BRADLEY H. STONE -------------------------- BRADLEY H. STONE /S/SHELDON G. ADELSON ---------------------------- SHELDON G. ADELSON 7 LIST OF EXHIBITS A - Employee Participant Data B - Exercise Notice C - Note D - Pledge Agreement E - Stockholders Agreement 8
EXHIBIT A Per Share Name of Employee Number of Shares Exercise Price Exercise Price - ------------------ --------------------------- -------------- -------------- Bradley H. Stone 14,970 (represents 1.4970% $271.04 $4,057,469 of the equity (on a diluted basis) based on 1,000,000 shares outstanding)
9 EX-10 5 exhibit10-3.txt STOCK OPTION AGREEMENT - GOLDSTEIN LAS VEGAS SANDS, INC. STOCK OPTION AGREEMENT THIS AGREEMENT (the "Agreement"), dated January 2, 2002 is made effective as of November 30, 1997 (the "Date of Grant"), between Las Vegas Sands, Inc., a Nevada corporation (the "Company"), Sheldon G. Adelson ("Adelson") and Robert G. Goldstein (the "Participant") is entered into to clarify and set forth in a single instrument all of the understandings and commitments with respect to the options to acquire shares of the Company's Common Stock (the "Shares") promised by the Company to the Participant under an Employment Agreement. Recitals - -------- WHEREAS, the Company has adopted the Las Vegas Sands, Inc. 1997 Fixed Stock Option Plan (the "Plan"), which Plan is incorporated herein by reference and made a part of this Agreement. Capitalized terms not otherwise defined herein shall have the same meanings as in the Plan; WHEREAS, the Company's Board of Directors (the "Board") has determined that it would be in the best interests of the Company and its stockholders to grant the option provided for herein (the "Option") to the Participant pursuant to the Plan and the terms set forth herein; NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties hereto agree as follows: 1. Grant of the Option. Subject to compliance with applicable Nevada Gaming Laws, including the receipt of all necessary approvals from the Nevada Gaming Commission and the State Gaming Control Board ("Nevada Gaming Authorities") prior to the execution of this Agreement, the Company hereby grants to the Participant the right and Option to purchase, on the terms and conditions hereinafter set forth the number of Shares set forth on Exhibit A attached hereto, subject to adjustment as set forth in the Plan. The price of the Shares subject to the Option shall be as determined by the provisions of Section 3 of this Agreement. The Option is intended to be a non-qualified stock option, and is not intended to be treated as an option that complies with Section 422 of the Internal Revenue Code of 1986, as amended. 2. Vesting and Exercisability. The Option shall be fully vested and immediately exercisable on the Date of Grant. 3. Exercise of Option. (a) Exercise Price. The Exercise Price for the Shares to be acquired upon the exercise of the Option (the "Exercise Price") shall be the amount set forth on Exhibit A. (b) Period of Exercise. Subject to the provisions of the Plan and this Agreement, the Participant may exercise the Option in whole but not in part at any time after receiving all necessary licenses and approvals from the Nevada Gaming Authorities and prior to the earliest to occur of the following (the "Option Expiration Dates"): (i) the tenth anniversary of the Date of Grant; (ii) the date three days prior to a Change in Control Acceleration Event; (iii) the date three days prior to a Public Offering Acceleration Event; and (iv) the date of the Participant's termination of employment for Cause (as defined below). If the Option is not exercised as of the Option Expiration Date, it shall immediately terminate and expire, provided, however, that no Option shall expire pursuant to Section 3(b)(ii) or (iii) unless the Company has given the Participant notice of the Accelerated Exercise Period promptly upon learning of the time (or approximate time) when the Accelerated Exercise Period will occur but in no event shall such notice be given later than ten (10) days prior to the Change of Control Acceleration Event or the Public Offering Acceleration Event. (c) Method of Exercise. (i) Subject to Section 3(b), the Option may be exercised by delivering to the Company at its principal office the Exercise Notice attached hereto as Exhibit B, together with proof that the Participant has obtained from the Nevada Gaming Authorities all licenses or approvals necessary to exercise the Option and to hold the Shares. Within five (5) business days of the delivery of such notice to the Company, the Participant shall deliver to the Company at its principal office payment in full of the Exercise Price if he wishes to exercise the Option. Upon receipt by the Company of the Exercise Price the 1 Option will be deemed exercised. The payment of the Exercise Price may be made-- (A) in cash, or its equivalent; or (B) if there shall be a public market for the Shares, by exchanging Shares owned by the Participant (which are not the subject of any pledge or other security interest and which have been owned by the Participant for at least 6 months), subject to receipt of any necessary licenses or approvals from the Nevada Gaming Authorities and subject to such rules as may be established by the Company, through delivery of irrevocable instructions to a broker to sell the Shares otherwise deliverable upon the exercise of the Option and to deliver promptly to the Company an amount equal to the aggregate exercise price; or (C) by the delivery of a promissory note and pledge agreement of the Participant in the form attached hereto as Exhibits C (the "Note") and D (the "Pledge Agreement") providing for payment, with interest on the unpaid balance accruing at a fair market rate as of the date of exercise, which the parties understand shall mean the "Applicable Federal Rate" as such term is used in Code section 7872 unless, based upon the financial position and credit worthiness of the Participant, a higher rate is appropriate, upon the earlier of: (I) 90 days after a demand for repayment; or (II) the later of: (x) a Public Offering Acceleration Event, or (y) the expiration of any applicable "lock up" period, but in no event longer than six months following the Public Offering Acceleration Event, and upon such other terms and conditions (including the security, if any therefor) as the Company may determine, or by a combination of the foregoing, provided that the combined value of all cash and cash equivalents and the Fair Market Value of any such Shares so tendered to the Company as of the date of such tender plus the principal amount of any Note is at least equal to such aggregate Exercise Price; provided, further, that if -- (D) the Participant's employment with the Company is terminated for any reason; (E) the Participant continues to own the Shares; and (F) the Note remains outstanding, then the interest rate on the Note shall increase, upon such termination, to the greater of the Company's weighted average cost of capital or the rate established pursuant to Section 3(c)(i)(C) above. (ii) Notwithstanding any other provision of the Plan or this Agreement to the contrary, the Option may not be exercised prior to the completion of any registration or qualification of the Option or the Shares under applicable state and federal securities or other laws, or under any ruling or regulation of any governmental body or national securities exchange that the Board shall in its sole discretion determine to be necessary or advisable. In addition, the Participant may not acquire any interest in an Option under this Agreement until such time as the Nevada Gaming Authorities approve the granting of such Option. In the event that any Nevada Gaming Authority denies the granting of the Option, the Participant shall not be entitled to receive the Option or any other compensation or remuneration under this Agreement in lieu of such Option. (iii) Upon the Company's determination that the Option has been validly exercised as to any of the Shares, the Company shall issue or transfer certificates in the Participant's name for such Shares. However, the Company shall not be liable to the Participant for damages relating to any delays in issuing or transferring the certificates to him, any loss of the certificates, or any mistakes or errors in the issuance or transfer of the certificates or in the certificates themselves. 4. Restrictions. All Shares issued pursuant to the exercise of this Option shall be subject to the restrictions set forth in the Stockholders Agreement to be executed in connection with the exercise, among the Company and the stockholders named therein in substantially the form attached hereto as Exhibit E (the "Stockholders Agreement"). 2 5. Redemption. (a) Redemption Rights. Some or all of the Shares issued pursuant to the exercise of the Option and held by the Participant for a period of at least six months following exercise of the Option, shall, at the written request of the Participant (or his personal representative), be redeemed by the Company as follows: (i) in the case of (A) a termination of Participant's employment with the Company due to death or Disability (as defined below); (B) a voluntary termination by the Participant of his employment with the Company; (C) a termination of Participant's employment by the Company other than for Cause; or (D) a redemption request made by the Participant while still employed by the Company, the Company shall pay to the Participant an amount equal to the Fair Market Value on the date of redemption of the Shares being redeemed, which price shall: (E) to the extent the Participant paid for the Exercise Price of the Option using a Note in accordance with Section 3(c)(i)(C) above, be applied to the amounts of principal and interest which are due and remain unpaid as of the date of redemption as follows: (I) upon redemption of all or any portion of the first 25% of the Shares subject to the Pledge Agreement; only the accrued interest on the Note shall be paid; (II) upon redemption of all or any portion of the second 25% of the Shares subject to the Pledge Agreement, all of the redemption proceeds shall be applied to the Note interest and principal; (III) upon the redemption of any portion of the third 25% of the Shares subject to the Pledge Agreement, one-half of the redemption proceeds shall be applied to the Note interest and principal unless one-half of the portion of the third 25% retained by the Participant, when valued at the then prevailing redemption price, shall be less than the remaining interest and principal due on the Note, in which event a greater portion of the redemption proceeds shall be applied to the Note so that one-half of the portion of the third 25% retained by the Participant, when valued at the then prevailing redemption price, shall be equal to or greater than the remaining interest and principal due on the Note; and (IV) upon the redemption of all or any portion of the fourth 25% of the Shares subject to the Pledge Agreement, if there shall then be any balance of interest or principal remaining due on the Note, such portion of the redemption proceeds shall be applied to the Note as necessary to fully pay the balance thereof; and (F) to the extent the redemption price exceeds the amount remaining unpaid on the Note or if no Note is outstanding, such redemption price (or portion thereof) shall be payable by the Company, with interest on the unpaid balance accruing at a fair market rate as of the date of redemption, which the parties understand shall mean the "Applicable Federal Rate" as such term is used in Code section 7872 unless, based upon the financial position and credit worthiness of the Company, a higher rate is appropriate, in thirty-six (36) equal consecutive monthly installments, commencing ninety (90) days following the date on which the Fair Market Value is established; and (i) in the case of a termination for Cause (as defined below) or a termination as a result of the failure of the Nevada Gaming Authorities to grant the Participant a casino key employee and equity holder license, Participants shall be deemed to have elected redemption as of his termination of employment or six months after share exercise was completed, whichever is later, and the Company shall pay to the Participant an amount equal to the lesser of the exercise price for such Shares or the Fair Market Value on the date of redemption, which price shall-- 3 (A) to the extent the Participant paid for the Exercise Price of the Option using a Note in accordance with Section 3(c)(i)(C) above, be used to offset any amounts of principal and interest which are due and unpaid as of the date of redemption; and (B) to the extent the redemption price exceeds the amount remaining unpaid on the Note or if no Note is outstanding, such redemption price shall be payable, with interest on the unpaid balance accruing at a fair market rate as of the date of redemption, which the parties understand shall mean the "Applicable Federal Rate" as such term is used in Code section 7872 unless, based upon the financial position and credit worthiness of the Company, a higher rate is appropriate, in thirty-six (36) equal consecutive monthly installments commencing ninety (90) days following the date on which Fair Market Value is established. (b) Definitions. For purposes of this Agreement: "Cause" shall mean: (i) conviction of a felony, misappropriation of any material funds or property of the Company, commission of fraud or embezzlement with respect to the Company, or any material act or acts of dishonesty relating to the Participant's employment by the Company resulting or intended to result in direct or indirect personal gain or enrichment at the expense of the Company; (ii) use of alcohol or drugs that renders the Participant materially unable to perform the functions of his or her job or carry out his or her duties to the Company; (iii) materially failing to fulfill his duties and responsibilities; (iv) committing any act or acts of serious and willful misconduct (including disclosure of confidential information) that is likely to cause a material adverse effect on the business of the Company or to subject the Company to possible disciplinary action by the Nevada Gaming Authorities; or (v) loss or failure to obtain a license, work card, or other approval from the Nevada Gaming Authorities that is necessary or for which the Company deems advisable relating to the Participant's employment by the Company or the holding or exercise of an Option hereunder. "Disability" shall mean that the Participant is unable to perform the duties of his employment for a continuous period of three months due to severe illness or accident or other grave mental or physical incapacity. "Fair Market Value" of a Share shall mean: (i) If there is no public market for the Shares, the fair market value agreed to by the Company and the Participant or, in the absence of such agreement, the fair market value determined and agreed to by two national investment banking firms (the "Appraisers"), one chosen by the Company and one chosen by the Participant. In the absence of agreement of the Appraisers, Fair Market Value shall be determined by a third independent appraiser mutually chosen by the Appraisers. Such determination shall be final and binding on all parties. The costs and expenses of the appraisers shall be shared equally by the Company and the Participant, and (ii) If there is a public market for the Shares, then the mean between the high and low sales price of the Shares as reported on the composite tape for securities traded on the New York Stock Exchange for such date (or if not then trading on the New York Stock Exchange, the mean between the high and low sales price of the Shares on the stock exchange or over-the-counter market on which the Shares are principally trading on such date) or, if there were no sales on such date, on the closest preceding date on which there were sales of Shares. (c) Redemption Procedure. Any redemption of Shares provided for in this Section shall take place-- (i) within thirty (30) days following termination for Cause or a termination as a result of the failure of the Nevada Gaming Authorities to grant the Participant a casino key employee and equity holder license; 4 (ii) in the case of a termination by reason of the Participant's death or Disability, upon such date set out by the Participant, or his estate, as the case may be, in a written notice to the Company specifying all or any portion of the Shares to be redeemed, given at least thirty (30) days in advance of the applicable redemption date; or (iii) within thirty (30) days following written notice to the Company of the intent to redeem all or any portion of the Shares in the case of any other termination of the Participant's employment with the Company or if Participant is currently employed with the Company. The Participant (or his personal representative), upon redemption of all or any portion of his Shares shall surrender to the Company the certificates for his Shares and only such portion as has been surrendered shall thereupon be canceled; provided, however, that if the Participant is redeeming Shares in accordance with clause (i) above, then upon such redemption the Participant shall surrender to the Company all certificates for Shares and whether so surrendered or not, such Shares shall thereupon be canceled. The Company shall then, upon receipt of the Shares and determination of the Fair Market Value, deliver to the Participant (or his personal representative) a promissory note for the sum payable in accordance with the terms of Section 5(a)(ii) above. Such note shall be, in all respects, subject to the limitations and restrictions, if any, imposed by any note, credit facility, indenture, mortgage, line of credit or similar contractual arrangement with an institutional or similar lender by which the Company may become bound ("Lender Restrictions"), whether in the form of financial covenants or otherwise and whether arising prior to or after execution and delivery of the note. No failure of the Company to pay sums due on the note on account of the Lender Restrictions shall result in a default and all such payments to the extent (and only to the extent) prohibited by the Lender Restrictions, shall be deferred and accrue until such time as they may be paid without violating the Lender Restrictions. (d) Redemption Provisions Void. Whenever (and for so long as) the Shares are publicly traded, either on a registered securities exchange or in the over-the-counter market, all provisions regarding the redemption of Shares by the Company shall be void. 6. No Right to Continued Employment. Neither the Plan nor this Agreement shall be construed as giving the Participant the right to be retained in the employ of, or in any consulting relationship to, the Company or any Affiliate. If, the Company or an Affiliate at any time dismisses Participant or discontinues any consulting relationship, such discontinuance or dismissal may be made, free from any liability or any claim under the Plan or this Agreement, except as otherwise expressly provided herein. 7. Legend on Certificates. (a) The certificates representing the Shares purchased by exercise of the Option shall, in addition to the restrictions set forth in Sections 3, 4 and 5 hereof, be subject to such stop transfer orders or the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which such Shares are listed, any applicable Federal or state laws, the Company's Articles of Incorporation or Bylaws and the Stockholders Agreement, and the Company may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. (b) All certificates for shares or other securities of the Company or any Affiliate delivered under the Plan pursuant to any Option or the exercise thereof shall be subject to Nevada Gaming Laws and all local gaming laws and the Board may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. 8. Transferability. The Option and, prior to a Public Offering Acceleration Event, the Shares may not be assigned, alienated, pledged to anyone other than the Company, attached, sold or otherwise transferred or encumbered by the Participant otherwise than by will or by the laws of descent and distribution after receipt of all necessary licenses and approvals from the Nevada Gaming Authorities, and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or any Affiliate; provided that the designation of a beneficiary shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance and provided further that Shares acquired upon the exercise of an Option may be pledged to the Company or, to a financial institution to secure a loan the proceeds of which are used to pay the Company the Exercise Price of the Option or the taxes payable in connection with such exercise provided the holder first obtains all necessary licenses and approvals from the Nevada Gaming Authorities. No such permitted transfer of the Option or the Shares to heirs or legatees of the Participant shall be effective to bind the Company unless the Company shall have been furnished with written notice thereof and a copy of such evidence as the Company may deem necessary to establish the validity of the 5 transfer, the acceptance by the transferee or transferees of the terms and conditions hereof and receipt of all necessary approvals from the Nevada Gaming Authorities. During the Participant's lifetime, the Option is exercisable only by the Participant. 9. Withholding. (a) The Participant may be required to pay to the Company or any Affiliate, and the Company or any Affiliate shall have the right and is hereby authorized to withhold from any payment due or transfer made under the Option or under the Plan or from any compensation or other amount owing to a Participant, the amount (in cash, Shares, other securities, other Awards or other property) of any applicable withholding taxes in respect of the Option, its exercise, or any payment or transfer under the Option or under the Plan and to take such other action as may be necessary in the opinion of the Company to satisfy all obligations for the payment of such taxes. (b) Without limiting the generality of clause (a) above, the Participant may, in the reasonable discretion of the Company, satisfy, in whole or in part, the foregoing withholding liability by delivery of Shares owned by the Participant (which are not subject to any pledge or other security interest and which have been owned by the Participant for at least 6 months) with a Fair Market Value equal to such withholding liability or by having the Company withhold from the number of Shares otherwise issuable pursuant to the exercise of the Option a number of Shares with a Fair Market Value equal to such withholding liability. 10. Securities Laws. Upon the acquisition of any Shares pursuant to the exercise of the Option, the Participant will make or enter into such written representations, warranties and agreements as the Company may reasonably request in order to comply with applicable securities laws or with this Agreement. 11. Notices. Any notice necessary under this Agreement shall be addressed to the Company at its principal executive office and to the Participant at the address appearing in the personnel records of the Company for the Participant or to either party at such other address as either party hereto may hereafter designate in writing to the other. Any such notice shall be deemed effective upon receipt thereof by the addressee. 12. Choice of Law. THE INTERPRETATION, PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEVADA AND THE NEVADA GAMING LAWS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. 13. Option Subject to Plan. By entering into this Agreement the Participant agrees and acknowledges that the Participant has received and read a copy of the Plan. The Option is subject to the Plan. The terms and provisions of the Plan as it may be amended from time to time are hereby incorporated herein by reference. In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail. 14. Full Satisfaction. By entering into this Agreement, the Participant agrees and acknowledges that the grant of this Option is in full satisfaction of the Company's (and its Affiliates') obligations with respect to the Option grant contemplated by the Participant's Employment Agreement or contract, whichever is applicable. 15. Assumption by Adelson. Adelson has the right, in his sole discretion, to assume the obligations of the Company, and to succeed to the rights of the Company, herein, to grant the Option and to administer the Plan as provided for in the Plan, such assumption and succession to be evidenced by the execution of an instrument solely by Adelson. In the absence of such an assumption, Adelson shall have no obligations under this Agreement or the Plan. 16. Signature in Counterparts. This Agreement may be signed in counterparts, each of which shall be deemed an original, and all of which, collectively, shall be considered one and the same instrument. 6 IN WITNESS WHEREOF, the parties hereto have executed this Agreement. LAS VEGAS SANDS, INC. By: -------------------------- /s/Robert G. Goldstein -------------------------- ROBERT G. GOLDSTEIN /s/Sheldon G. Adelson -------------------------- SHELDON G. ADELSON 7 LIST OF EXHIBITS A - Employee Participant Data B - Exercise Notice C - Note D - Pledge Agreement E - Stockholders Agreement 8
EXHIBIT A Per Share Name of Employee Number of Shares Exercise Price Exercise Price - ------------------- --------------------------- -------------- -------------- Robert G. Goldstein 9,980 (represents .9980% $271.04 $2,704,979 of the equity (on a diluted basis) based on 1,000,000 shares outstanding)
9 EX-10 6 exhibit10-4.txt STOCK OPTION AGREEMENT - FRIEDMAN LAS VEGAS SANDS, INC. STOCK OPTION AGREEMENT THIS AGREEMENT (the "Agreement"), dated January 2, 2002 is made effective as of November 30, 1997 (the "Date of Grant"), between Las Vegas Sands, Inc., a Nevada corporation (the "Company"), Sheldon G. Adelson ("Adelson") and David Friedman (the "Participant") is entered into to clarify and set forth in a single instrument all of the understandings and commitments with respect to the options to acquire shares of the Company's Common Stock (the "Shares") promised by the Company to the Participant. Recitals - -------- WHEREAS, the Company has adopted the Las Vegas Sands, Inc. 1997 Fixed Stock Option Plan (the "Plan"), which Plan is incorporated herein by reference and made a part of this Agreement. Capitalized terms not otherwise defined herein shall have the same meanings as in the Plan; WHEREAS, the Company's Board of Directors (the "Board") has determined that it would be in the best interests of the Company and its stockholders to grant the option provided for herein (the "Option") to the Participant pursuant to the Plan and the terms set forth herein; NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties hereto agree as follows: 1. Grant of the Option. Subject to compliance with applicable Nevada Gaming Laws, including the receipt of all necessary approvals from the Nevada Gaming Commission and the State Gaming Control Board ("Nevada Gaming Authorities") prior to the execution of this Agreement, the Company hereby grants to the Participant the right and Option to purchase, on the terms and conditions hereinafter set forth the number of Shares set forth on Exhibit A attached hereto, subject to adjustment as set forth in the Plan. The price of the Shares subject to the Option shall be as determined by the provisions of Section 3 of this Agreement. The Option is intended to be a non-qualified stock option, and is not intended to be treated as an option that complies with Section 422 of the Internal Revenue Code of 1986, as amended. 2. Vesting and Exercisability. The Option shall be fully vested and immediately exercisable on the Date of Grant. 3. Exercise of Option. (a) Exercise Price. The Exercise Price for the Shares to be acquired upon the exercise of the Option (the "Exercise Price") shall be the amount set forth on Exhibit A. (b) Period of Exercise. Subject to the provisions of the Plan and this Agreement, the Participant may exercise the Option in whole but not in part at any time after receiving all necessary licenses and approvals from the Nevada Gaming Authorities and prior to the earliest to occur of the following (the "Option Expiration Dates"): (i) the tenth anniversary of the Date of Grant; (ii) the date three days prior to a Change in Control Acceleration Event; (iii) the date three days prior to a Public Offering Acceleration Event; and (iv) the date of the Participant's termination of employment for Cause (as defined below). If the Option is not exercised as of the Option Expiration Date, it shall immediately terminate and expire, provided, however, that no Option shall expire pursuant to Section 3(b)(ii) or (iii) unless the Company has given the Participant notice of the Accelerated Exercise Period promptly upon learning of the time (or approximate time) when the Accelerated Exercise Period will occur but in no event shall such notice be given later than ten (10) days prior to the Change of Control Acceleration Event or the Public Offering Acceleration Event. (c) Method of Exercise. (i) Subject to Section 3(b), the Option may be exercised by delivering to the Company at its principal office the Exercise Notice attached hereto as Exhibit B, together with proof that the Participant has obtained from the Nevada Gaming Authorities all licenses or approvals necessary to exercise the Option and to hold the Shares. Within five (5) business days of the delivery of such notice to the Company, the Participant shall deliver to the Company at its principal office payment in full of the Exercise Price if he wishes to exercise the Option. Upon receipt by the Company of the Exercise Price the Option will be deemed exercised. The payment of the Exercise Price may be made-- 1 (A) in cash, or its equivalent; or (B) if there shall be a public market for the Shares, by exchanging Shares owned by the Participant (which are not the subject of any pledge or other security interest and which have been owned by the Participant for at least 6 months), subject to receipt of any necessary licenses or approvals from the Nevada Gaming Authorities and subject to such rules as may be established by the Company, through delivery of irrevocable instructions to a broker to sell the Shares otherwise deliverable upon the exercise of the Option and to deliver promptly to the Company an amount equal to the aggregate exercise price; or (C) by the delivery of a promissory note and pledge agreement of the Participant in the form attached hereto as Exhibits C (the "Note") and D (the "Pledge Agreement") providing for payment, with interest on the unpaid balance accruing at a fair market rate as of the date of exercise, which the parties understand shall mean the "Applicable Federal Rate" as such term is used in Code section 7872 unless, based upon the financial position and credit worthiness of the Participant, a higher rate is appropriate, upon the earlier of: (I) 90 days after a demand for repayment; or (II) the later of: (x) a Public Offering Acceleration Event, or (y) the expiration of any applicable "lock up" period,but in no event longer than six months following the Public Offering Acceleration Event, and upon such other terms and conditions (including the security, if any therefor) as the Company may determine, or by a combination of the foregoing, provided that the combined value of all cash and cash equivalents and the Fair Market Value of any such Shares so tendered to the Company as of the date of such tender plus the principal amount of any Note is at least equal to such aggregate Exercise Price; provided, further, that if -- (D) the Participant's employment with the Company is terminated for any reason; (E) the Participant continues to own the Shares; and (F) the Note remains outstanding, then the interest rate on the Note shall increase, upon such termination, to the greater of the Company's weighted average cost of capital or the rate established pursuant to Section 3(c)(i)(C) above. (ii) Notwithstanding any other provision of the Plan or this Agreement to the contrary, the Option may not be exercised prior to the completion of any registration or qualification of the Option or the Shares under applicable state and federal securities or other laws, or under any ruling or regulation of any governmental body or national securities exchange that the Board shall in its sole discretion determine to be necessary or advisable. In addition, the Participant may not acquire any interest in an Option under this Agreement until such time as the Nevada Gaming Authorities approve the granting of such Option. In the event that any Nevada Gaming Authority denies the granting of the Option, the Participant shall not be entitled to receive the Option or any other compensation or remuneration under this Agreement in lieu of such Option. (iii) Upon the Company's determination that the Option has been validly exercised as to any of the Shares, the Company shall issue or transfer certificates in the Participant's name for such Shares. However, the Company shall not be liable to the Participant for damages relating to any delays in issuing or transferring the certificates to him, any loss of the certificates, or any mistakes or errors in the issuance or transfer of the certificates or in the certificates themselves. 4. Restrictions. All Shares issued pursuant to the exercise of this Option shall be subject to the restrictions set forth in the Stockholders Agreement to be executed in connection with the exercise, among the Company and the stockholders named therein in substantially the form attached hereto as Exhibit E (the "Stockholders Agreement"). 2 5. Redemption. (a) Redemption Rights. Some or all of the Shares issued pursuant to the exercise of the Option and held by the Participant for a period of at least six months following exercise of the Option, shall, at the written request of the Participant (or his personal representative), be redeemed by the Company as follows: (i) in the case of (A) a termination of Participant's employment with the Company due to death or Disability (as defined below); (B) a voluntary terminaion by the Participant of his employment with the Company; (C) a termination of Participant's employment by the Company other than for Cause; or (D) a redemption request made by the Participant while still employed by the Company, the Company shall pay to the Participant an amount equal to the Fair Market Value on the date of redemption of the Shares being redeemed, which price shall: (E) to the extent the Participant paid for the Exercise Price of the Option using a Note in accordance with Section 3(c)(i)(C) above, be applied to the amounts of principal and interest which are due and remain unpaid as of the date of redemption as follows: (I) upon redemption of all or any portion of the first 25% of the Shares subject to the Pledge Agreement; only the accrued interest on the Note shall be paid; (II) upon redemption of all or any portion of the second 25% of the Shares subject to the Pledge Agreement, all of the redemption proceeds shall be applied to the Note interest and principal; (III) upon the redemption of any portion of the third 25% of the Shares subject to the Pledge Agreement, one-half of the redemption proceeds shall be applied to the Note interest and principal unless one-half of the portion of the third 25% retained by the Participant, when valued at the then prevailing redemption price, shall be less than the remaining interest and principal due on the Note, in which event a greater portion of the redemption proceeds shall be applied to the Note so that one-half of the portion of the third 25% retained by the Participant, when valued at the then prevailing redemption price, shall be equal to or greater than the remaining interest and principal due on the Note; and (IV) upon the redemption of all or any portion of the fourth 25% of the Shares subject to the Pledge Agreement, if there shall then be any balance of interest or principal remaining due on the Note, such portion of the redemption proceeds shall be applied to the Note as necessary to fully pay the balance thereof; and (F) to the extent the redemption price exceeds the amount remaining unpaid on the Note or if no Note is outstanding, such redemption price (or portion thereof) shall be payable by the Company, with interest on the unpaid balance accruing at a fair market rate as of the date of redemption, which the parties understand shall mean the "Applicable Federal Rate" as such term is used in Code section 7872 unless, based upon the financial position and credit worthiness of the Company, a higher rate is appropriate, in thirty-six (36) equal consecutive monthly installments, commencing ninety (90) days following the date on which the Fair Market Value is established;and (ii) in the case of a termination for Cause (as defined below) or a termination as a result of the failure of the Nevada Gaming Authorities to grant the Participant a casino key employee and equity holder license, Participants shall be deemed to have elected redemption as of his termination of employment or six months after share exercise was completed, whichever is later, and the Company shall pay to the Participant an amount equal to the lesser of the exercise price for such Shares or the Fair Market Value on the date of redemption, which price shall-- (A) to the extent the Participant paid for the Exercise Price of the Option using a Note in accordance with Section 3(c)(i)(C) above, be used to offset any amounts of principal and interest which are due and unpaid as of the date of redemption; and 3 (B) to the extent the redemption price exceeds the amount remaining unpaid on the Note or if no Note is outstanding, such redemption price shall be payable, with interest on the unpaid balance accruing at a fair market rate as of the date of redemption, which the parties understand shall mean the "Applicable Federal Rate" as such term is used in Code section 7872 unless, based upon the financial position and credit worthiness of the Company, a higher rate is appropriate, in thirty-six (36) equal consecutive monthly installments commencing ninety (90) days following the date on which Fair Market Value is established. (b) Definitions. For purposes of this Agreement: "Cause" shall mean: (i) conviction of a felony, misappropriation of any material funds or property of the Company, commission of fraud or embezzlement with respect to the Company, or any material act or acts of dishonesty relating to the Participant's employment by the Company resulting or intended to result in direct or indirect personal gain or enrichment at the expense of the Company; (ii) use of alcohol or drugs that renders the Participant materially unable to perform the functions of his or her job or carry out his or her duties to the Company; (iii) materially failing to fulfill his duties and responsibilities; (iv) committing any act or acts of serious and willful misconduct (including disclosure of confidential information) that is likely to cause a material adverse effect on the business of the Company or to subject the Company to possible disciplinary action by the Nevada Gaming Authorities; or (v) loss or failure to obtain a license, work card, or other approval from the Nevada Gaming Authorities that is necessary or for which the Company deems advisable relating to the Participant's employment by the Company or the holding or exercise of an Option hereunder. "Disability" shall mean that the Participant is unable to perform the duties of his employment for a continuous period of three months due to severe illness or accident or other grave mental or physical incapacity. "Fair Market Value" of a Share shall mean: (i) If there is no public market for the Shares, the fair market value agreed to by the Company and the Participant or, in the absence of such agreement, the fair market value determined and agreed to by two national investment banking firms (the "Appraisers"), one chosen by the Company and one chosen by the Participant. In the absence of agreement of the Appraisers, Fair Market Value shall be determined by a third independent appraiser mutually chosen by the Appraisers. Such determination shall be final and binding on all parties. The costs and expenses of the appraisers shall be shared equally by the Company and the Participant, and (ii) If there is a public market for the Shares, then the mean between the high and low sales price of the Shares as reported on the composite tape for securities traded on the New York Stock Exchange for such date (or if not then trading on the New York Stock Exchange, the mean between the high and low sales price of the Shares on the stock exchange or over-the-counter market on which the Shares are principally trading on such date) or, if there were no sales on such date, on the closest preceding date on which there were sales of Shares. (c) Redemption Procedure. Any redemption of Shares provided for in this Section shall take place-- (i) within thirty (30) days following termination for Cause or a termination as a result of the failure of the Nevada Gaming Authorities to grant the Participant a casino key employee and equity holder license; (ii) in the case of a termination by reason of the Participant's death or Disability, upon such date set out by the Participant, or his estate, as the case may be, in a written notice to the Company specifying all or any portion of the Shares to be redeemed, given at least thirty (30) days in advance of the applicable redemption date; or 4 (iii) within thirty (30) days following written notice to the Company of the intent to redeem all or any portion of the Shares in the case of any other termination of the Participant's employment with the Company or if Participant is currently employed with the Company. The Participant (or his personal representative), upon redemption of all or any portion of his Shares shall surrender to the Company the certificates for his Shares and only such portion as has been surrendered shall thereupon be canceled; provided, however, that if the Participant is redeeming Shares in accordance with clause (i) above, then upon such redemption the Participant shall surrender to the Company all certificates for Shares and whether so surrendered or not, such Shares shall thereupon be canceled. The Company shall then, upon receipt of the Shares and determination of the Fair Market Value, deliver to the Participant (or his personal representative) a promissory note for the sum payable in accordance with the terms of Section 5(a)(ii) above. Such note shall be, in all respects, subject to the limitations and restrictions, if any, imposed by any note, credit facility, indenture, mortgage, line of credit or similar contractual arrangement with an institutional or similar lender by which the Company may become bound ("Lender Restrictions"), whether in the form of financial covenants or otherwise and whether arising prior to or after execution and delivery of the note. No failure of the Company to pay sums due on the note on account of the Lender Restrictions shall result in a default and all such payments to the extent (and only to the extent) prohibited by the Lender Restrictions, shall be deferred and accrue until such time as they may be paid without violating the Lender Restrictions. (d) Redemption Provisions Void. Whenever (and for so long as) the Shares are publicly traded, either on a registered securities exchange or in the over-the-counter market, all provisions regarding the redemption of Shares by the Company shall be void. 6. No Right to Continued Employment. Neither the Plan nor this Agreement shall be construed as giving the Participant the right to be retained in the employ of, or in any consulting relationship to, the Company or any Affiliate. If, the Company or an Affiliate at any time dismisses Participant or discontinues any consulting relationship, such discontinuance or dismissal may be made, free from any liability or any claim under the Plan or this Agreement, except as otherwise expressly provided herein. 7. Legend on Certificates. (a) The certificates representing the Shares purchased by exercise of the Option shall, in addition to the restrictions set forth in Sections 3, 4 and 5 hereof, be subject to such stop transfer orders or the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which such Shares are listed, any applicable Federal or state laws, the Company's Articles of Incorporation or Bylaws and the Stockholders Agreement, and the Company may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. (b) All certificates for shares or other securities of the Company or any Affiliate delivered under the Plan pursuant to any Option or the exercise thereof shall be subject to Nevada Gaming Laws and all local gaming laws and the Board may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. 8. Transferability. The Option and, prior to a Public Offering Acceleration Event, the Shares may not be assigned, alienated, pledged to anyone other than the Company, attached, sold or otherwise transferred or encumbered by the Participant otherwise than by will or by the laws of descent and distribution after receipt of all necessary licenses and approvals from the Nevada Gaming Authorities, and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or any Affiliate; provided that the designation of a beneficiary shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance and provided further that Shares acquired upon the exercise of an Option may be pledged to the Company or, to a financial institution to secure a loan the proceeds of which are used to pay the Company the Exercise Price of the Option or the taxes payable in connection with such exercise provided the holder first obtains all necessary licenses and approvals from the Nevada Gaming Authorities. No such permitted transfer of the Option or the Shares to heirs or legatees of the Participant shall be effective to bind the Company unless the Company shall have been furnished with written notice thereof and a copy of such evidence as the Company may deem necessary to establish the validity of the transfer, the acceptance by the transferee or transferees of the terms and conditions hereof and receipt of all necessary approvals from the Nevada Gaming Authorities. During the Participant's lifetime, the Option is exercisable only by the Participant. 5 9. Withholding. (a) The Participant may be required to pay to the Company or any Affiliate, and the Company or any Affiliate shall have the right and is hereby authorized to withhold from any payment due or transfer made under the Option or under the Plan or from any compensation or other amount owing to a Participant, the amount (in cash, Shares, other securities, other Awards or other property) of any applicable withholding taxes in respect of the Option, its exercise, or any payment or transfer under the Option or under the Plan and to take such other action as may be necessary in the opinion of the Company to satisfy all obligations for the payment of such taxes. (b) Without limiting the generality of clause (a) above, the Participant may, in the reasonable discretion of the Company, satisfy, in whole or in part, the foregoing withholding liability by delivery of Shares owned by the Participant (which are not subject to any pledge or other security interest and which have been owned by the Participant for at least 6 months) with a Fair Market Value equal to such withholding liability or by having the Company withhold from the number of Shares otherwise issuable pursuant to the exercise of the Option a number of Shares with a Fair Market Value equal to such withholding liability. 10. Securities Laws. Upon the acquisition of any Shares pursuant to the exercise of the Option, the Participant will make or enter into such written representations, warranties and agreements as the Company may reasonably request in order to comply with applicable securities laws or with this Agreement. 11. Notices. Any notice necessary under this Agreement shall be addressed to the Company at its principal executive office and to the Participant at the address appearing in the personnel records of the Company for the Participant or to either party at such other address as either party hereto may hereafter designate in writing to the other. Any such notice shall be deemed effective upon receipt thereof by the addressee. 12. Choice of Law. THE INTERPRETATION, PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEVADA AND THE NEVADA GAMING LAWS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. 13. Option Subject to Plan. By entering into this Agreement the Participant agrees and acknowledges that the Participant has received and read a copy of the Plan. The Option is subject to the Plan. The terms and provisions of the Plan as it may be amended from time to time are hereby incorporated herein by reference. In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail. 14. Full Satisfaction. By entering into this Agreement, the Participant agrees and acknowledges that the grant of this Option is in full satisfaction of the Company's (and its Affiliates') obligations with respect to the Option grant contemplated by the Participant's Employment Agreement or contract, whichever is applicable. 15. Assumption by Adelson. Adelson has the right, in his sole discretion, to assume the obligations of the Company, and to succeed to the rights of the Company, herein, to grant the Option and to administer the Plan as provided for in the Plan, such assumption and succession to be evidenced by the execution of an instrument solely by Adelson. In the absence of such an assumption, Adelson shall have no obligations under this Agreement or the Plan. 16. Signature in Counterparts. This Agreement may be signed in counterparts, each of which shall be deemed an original, and all of which, collectively, shall be considered one and the same instrument. 6 IN WITNESS WHEREOF, the parties hereto have executed this Agreement. LAS VEGAS SANDS, INC. By: -------------------------- -------------------------- DAVID FRIEDMAN -------------------------- SHELDON G. ADELSON 7 LIST OF EXHIBITS A - Employee Participant Data B - Exercise Notice C - Note D - Pledge Agreement E - Stockholders Agreement 8
EXHIBIT A Per Share Name of Employee Number of Shares Exercise Price Exercise Price - ------------------- --------------------------- -------------- -------------- David Friedman 4,990 (represents .4990% $271.04 $1,352,490 of the equity (on a diluted basis) based on 1,000,000 shares outstanding)
9 EX-10 7 exhibit10-5.txt ASSUMPTION AGREEMENT ASSUMPTION AGREEMENT THIS ASSUMPTION AGREEMENT is made on January 2, 2002 by Sheldon G. Adelson ("Adelson") with respect to that certain 1997 Fixed Stock Option Plan, as amended and restated ("the Plan") of Las Vegas Sands, Inc. ("the Company"). WHEREAS the Plan, in Section 9(b) thereof, permits Adelson, being the sole stockholder of the Company, to assume some or all of the obligations of the Company under the Plan and to become the Administrator of the Plan and the issuer of the Options, and to have all rights, powers and responsibilities granted to the Company or to the Board under the Plan (all such capitalized terms being understood as defined in the Plan); and WHEREAS, Adelson now wishes to make such assumption, including all referenced rights and obligations, NOW, THEREFORE, this instrument attests as follows: Adelson hereby assumes all of the rights, powers, obligations, responsibilities and liabilities of the Company assigned to or otherwise set forth in the Plan and undertakes to perform the same from and after the date hereof, including all rights and obligations of the Company under Stock Option Agreements executed and to be executed by the Company, and, pursuant to the provisions of the Plan, Adelson shall administer the Plan, grant Options, issue Shares, redeem Shares and do any and all other acts or things authorized or reserved to the Company or to the Board thereunder; provided, however, that nothing contained herein shall constitute a waiver or release of any right of indemnification to which Adelson may be entitled under the Company's Certificate of Incorporation or By Laws, either in connection with his administration of the Plan or otherwise; and provided further that Adelson shall not assume and the Company shall retain any and all obligations and liabilities with respect to any income withholdings obligations arising under the Plan. EXECUTED as a sealed instrument at Las Vegas, Nevada. /s/Sheldon G. Adelson - ------------------------------------ Sheldon G. Adelson Acknowledged and Confirmed: Las Vegas Sands, Inc. By: ------------------------------------ EX-10 8 exhibit10-6.txt STOCKHOLDERS AGREEMENT STOCKHOLDERS' AGREEMENT THIS STOCKHOLDERS' AGREEMENT, is made on January 2, 2002 (the "Agreement"), among LAS VEGAS SANDS, INC., a Nevada corporation (the "Company"), SHELDON G. ADELSON, an individual (the "Principal Stockholder"), and the persons listed on Schedule I hereto (the "Additional Stockholders") and any Permitted Transferees thereof. Recitals - -------- WHEREAS, as of the date hereof, the Principal Stockholder owns 100% of the issued and outstanding shares of Common Stock, par value $0.10 per share, of the Company (the "Common Stock"); WHEREAS, the Company is entering into Stock Option Agreements (the "Stock Option Agreements") with the Additional Stockholders, pursuant to which the Company shall grant to such Additional Stockholders rights and options to purchase shares of Common Stock; WHEREAS, it is intended that the Additional Stockholders to whom such options to purchase shares of Common Stock are issued pursuant to a Stock Option Agreement may immediately exercise such options and become stockholders of the Company and parties hereto as Additional Stockholders; WHEREAS, as of the date hereof, each Additional Stockholder has an option to purchase the number of shares of Common Stock set forth next to his name on Schedule A hereto; and WHEREAS, the parties hereto wish to restrict the transfer of the shares of Common Stock which such Additional Stockholder may receive upon exercise of such options and to provide for tag-along rights, incidental registration rights and preemptive rights with respect to all such shares of Common Stock. NOW, THEREFORE, in consideration of the mutual promises and agreements set forth herein, the adequacy of which are hereby acknowledged, the parties hereto agree as follows: 1. Definitions. As used in this Agreement, the following terms shall have the meanings set forth below: "Additional Stockholder Exercise Period" has the meaning assigned to such term in Section 5.2.1. "Additional Stockholders" has the meaning assigned to such term in the first paragraph of this Agreement. "Affiliate" means, as to any Person, any other Person directly or indirectly controlling, controlled by or under direct or indirect common control with such Person. For the purposes of this definition, "control," when used with respect to any Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise. The terms "controlling" and "controlled" have meanings correlative to the foregoing. "After-Acquired Stock" has the meaning assigned to such term in Section 7. "Agreement" has the meaning assigned to such term in the first paragraph of this Agreement. "Board of Directors" means the Board of Directors of the Company. "Code" means the Internal Revenue Code of 1986, as amended. "Commission" means the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act. "Common Stock" has the meaning assigned to such term in the first Whereas clause of this Agreement. "Company" has the meaning assigned to such term in the first paragraph of this Agreement. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and any rules or regulations promulgated thereunder. "Gross Cash Proceeds" shall mean, with respect to any Initial Public Offering, the gross proceeds received by the Company, before brokerage commissions or underwriting fees or any other fees and expenses relating to such Initial Public Offering. 1 "Initial Public Offering" shall mean the sale in any underwritten offering by the Company of its Common Stock pursuant to a registration statement on Form S-1 (or any successor or similar forms then in effect) under the Securities Act with Gross Cash Proceeds in excess of $50 million. "Liens" has the meaning assigned to such term in Section 3.4 "Losses" has the meaning assigned to such term in Section 4.6(f). "Maximum Sale Amount" has the meaning assigned to such term in Section 3.2. "Nevada Gaming Authorities" means, collectively, the Nevada Gaming Commission, the Nevada State Gaming Control Board and the Clark County Liquor and Gaming Licensing Board. "New Issuance Notice" has the meaning assigned to such term in Section 5.1. "New Securities" has the meaning assigned to such term in Section 5.1. "Offering Notice" has the meaning assigned to such term in Section 3.1. "Options" means the options granted pursuant to the Stock Option Agreements. "Permitted Transferee" means, with respect to any Stockholder, such Stockholder's parents, spouse, former spouse, siblings, children (including sons-in-law, daughters-in law, stepchildren and adopted children)or grandchildren or other issue or any Affiliate of such Stockholder or a trust created for the benefit of such Stockholder or Permitted Transferee. "Person" means any individual, corporation, limited liability company or partnership, partnership, trust, incorporated or unincorporated association, joint venture, joint stock company, government of any nation, state, city, locality or other political subdivision or entity thereof, or other entity of any kind, and shall include any successor (by merger or otherwise) of any such entity. "Principal Stockholder" has the meaning assigned to such term in the first paragraph of this Agreement. "Proposed Price" has the meaning assigned to such term in Section 5.1. "Registrable Securities" means (i) all shares of Common Stock underlying the Options and issued to the Additional Stockholders pursuant to the Stock Option Agreements, (ii) all shares of Common Stock purchased pursuant to a stock purchase agreement and (iii) any securities of the Company issued or issuable with respect to any of such shares of Common Stock by way of a dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise. As to any particular Registrable Securities, once issued, such securities shall cease to be Registrable Securities when (I) a registration statement with respect to the sale of such Registrable Securities has become effective under the Securities Act and such Registrable Securities have been disposed of in accordance with such registration statement, (II) such Registrable Securities are permitted to be sold under Rule 144 (or any successor provision) of the Securities Act, (III) such Registrable Securities have been otherwise transferred, new certificates for them not bearing a legend restricting further transfer have been delivered by the Company and subsequent public distribution of them does not require registration of such distribution under the Securities Act or (IV) such Registrable Securities have ceased to be outstanding. "Registration Expenses" means all expenses incident to the Company's performance of or compliance with Section 4, including, without limitation, all registration and filing fees, all fees of the New York Stock Exchange, Inc., other national securities exchanges or the National Association of Securities Dealers, Inc., all fees and expenses of complying with securities or blue sky laws, all word processing, duplicating and printing expenses, messenger and delivery expenses, the fees and disbursements of counsel for the Company and of its independent public accountants, including the expenses of "comfort" letters required by or incident to such performance and compliance, any fees and disbursements of underwriters customarily paid by issuers or sellers of securities (excluding any underwriting discounts or commissions with respect to the shares of Common Stock registered). "Requesting Stockholder" has the meaning assigned to such term in Section 4.1. "S Corporation" has the meaning assigned to such term in Section 2.2. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder. "Stock Option Agreements" has the meaning assigned to such term in the second Whereas clause of this Agreement. 2 "Stockholders" means, collectively, the Principal Stockholder, the Additional Stockholders and any Permitted Transferee who has agreed to be bound by the terms and conditions of this Agreement in accordance with Section 2.5. "Tag-Along Acceptance" has the meaning assigned to such term in Section 3.3. "Tag-Along Closing Date" has the meaning assigned to such term in Section 3.4. "Tag-Along Right" has the meaning assigned to such term in Section 3.1. "Tag-Along Shares" has the meaning assigned to such term in Section 3.4. "Third Party Transferee" means any Person (other than a Permitted Transferee) who is not a party to this Agreement and proposes to acquire shares of Common Stock from a Stockholder. "transfer" has the meaning assigned to such term in Section 2.1. 2. Restrictions on Transfer. ------------------------------ 2.1 Limitation on Transfer. No Additional Stockholder shall sell, give, assign, hypothecate, pledge, encumber, grant a security interest in or otherwise dispose of (whether by operation of law or otherwise) any shares of Common Stock or any right, title or interest therein (each a "transfer"), except in accordance with the provisions of this Agreement, provided, however, that shares acquired pursuant to a Stock Option Agreement may be pledged to secure any note delivered to the Company (or other grantor) to pay the exercise price or any note the proceeds of which are used to pay such note to the Company or other grantor. Any attempt to transfer any shares of Common Stock or any rights, title or interest therein in violation of this Agreement shall be null and void ab initio and the Company shall refuse to register any such transfer. 2.2 Transfers in Compliance with Law; Substitution of Transferee. Notwithstanding any other provision of this Agreement, an Additional Stockholder shall not transfer any shares of Common Stock or any right, title or interest therein unless (a) the transfer complies in all respects with the applicable provisions of this Agreement and applicable federal, state and foreign securities laws, including, without limitation, the Securities Act, (b) all necessary licenses or approvals are received from the Nevada Gaming Authorities, (c) the transfer complies in all respects with federal laws, rules and regulations relating to corporations taxed under subchapter S of the Code (an "S Corporation"), such that the transfer would not cause the Company to cease qualifying as such a corporation, (d) the transfer does not require the Company to register under the Exchange Act and (e) if requested by the Company in its sole judgment, the transferring Additional Stockholder provides, at its own expense, an opinion of counsel, in a form and from counsel reasonably acceptable to the Company, to the effect that such transfer complies with (a), (b) and (c) above. In addition to the foregoing, without the prior consent of the Company (which may be granted or withheld in its sole discretion), an Additional Stockholder shall not transfer any shares of Common Stock or any right, title or interest therein, if, for purposes of determining the Company's status as an S Corporation, the number of stockholders would be increased as a result of the transfer. In connection with any transfer by a Stockholder, such Stockholder agrees to provide the Company with such representations, warranties and opinions of counsel concerning the transfer, the transferee and transferor as the Company may reasonably require to demonstrate compliance with the restrictions in this Section 2 (including, without limitation, a representation and warranty by the Third Party Transferee that such Third Party Transferee is an individual who qualifies as a "United States Person" under Section 7701(a)(30) of the Code). 2.3 Permitted Transfer Procedures. If any Additional Stockholder desires to transfer its shares of Common Stock or any right, title or interest therein to a Permitted Transferee, it shall give notice to the Company and to the Nevada Gaming Authorities of its intention to make such transfer not less than thirty (30) days prior to effecting such transfer, which notice shall state the name and address of the Permitted Transferee, the relationship between such Additional Stockholder and the Permitted Transferee and the number of shares of Common Stock proposed to be transferred (or describing any rights or interests therein to be transferred), and any other information required by law to be provided to the Nevada Gaming Authorities. 2.4 Additional Stockholders to Execute Consents. Each Additional Stockholder agrees to execute and file, in a timely fashion, all consents and other instruments that may be deemed necessary or advisable by counsel to the Company with respect to the Company's election to be an S Corporation. 2.5 Transferee to Become Party to this Agreement. Except for any transfer to any Third Party Transferee under Section 3 hereof, prior to any transfer of Common Stock or any right, title or interest therein, any transferee must agree in writing to be bound by the terms and conditions of this Agreement 3 in the same manner as its transferor of Common Stock (or any interest therein). A Third Party Transferee under Section 3 hereof may agree in writing to be bound by the terms and conditions of this Agreement. Following any transfer made in accordance with Section 2.1, 2.2 and 2.3 and this Section 2.5, the transferee who has agreed to be bound by the terms and conditions of this Agreement shall be substituted for, and shall enjoy the same rights and be subject to the same obligations as its predecessor hereunder. 2.6 Termination of S Corporation Provisions. The transfer restrictions set forth in Section 2.2(c) and the last sentence of Section 2.2 shall be terminated (i) at any time at the option of the Company upon written notice to the Stockholders and (ii) at any time after the Company has ceased to be an S Corporation and the Board of Directors has approved such action. 3. Tag-Along Right. --------------------- 3.1 Transfer by Principal Stockholder. Until such time as an Initial Public Offering has occurred, if at any time the Principal Stockholder desires to transfer all or any portion of his shares of Common Stock to any Third Party Transferee and such transfer would result in the transfer of 20% or more of the outstanding shares of Common Stock determined as of the date of such proposed transfer, the Principal Stockholder shall send written notice of his intention to the Additional Stockholders (the "Offering Notice") not less than 15 days prior to the proposed consummation of such transfer, and each Additional Stockholder shall have the opportunity to participate in such transfer upon the same terms and conditions as the Principal Stockholder (the "Tag-Along Right"). 3.2 Offering Notice. The Offering Notice shall include the name of the Third Party Transferee, the number of shares of Common Stock proposed to be transferred, the proposed amount and form of consideration, the terms and conditions of payment offered by the Third Party Transferee and the maximum number of shares of Common Stock of each Additional Stockholder that may be sold to the Third Party Transferee (the "Maximum Sale Amount"). The Maximum Sale Amount of each Additional Stockholder shall equal the product of (a) the number of shares of Common Stock proposed to be transferred, multiplied by (b) a fraction having a numerator equal to the total number of shares of Common Stock then owned by such Additional Stockholder and a denominator equal to the total number of shares of Common Stock then owned by the Principal Stockholder and the Additional Stockholders and any other stockholders of the Company entitled to participate in such sale as a result of any tag-along rights granted to such stockholders. 3.3 Exercise of Tag-Along Right. The Tag-Along Right shall be exercisable by the Additional Stockholder by delivering written notice to the Principal Stockholder no later than 10 days following receipt of the Offering Notice stating such Additional Stockholder's intention to exercise its Tag-Along Right and the number of shares of Common Stock such Additional Stockholder wishes to transfer (up to the Maximum Sale Amount) (the "Tag-Along Acceptance"). The failure of any Additional Stockholder to respond within such period shall be regarded as an election not to exercise its Tag-Along Right. To the extent that such Additional Stockholder exercises its Tag-Along Right by delivering its Tag-Along Acceptance, the number of shares of Common Stock proposed to be sold to the Third Party Transferee by the Principal Stockholder shall be reduced proportionately. 3.4 Closing of Tag-Along Right. The closing of any sale under this Section 3 shall be held within 90 days following the date on which the Principal Stockholder received the last of the Tag-Along Acceptances from the Additional Stockholders (the "Tag-Along Closing Date") or at such other time and place as the parties to the transaction may agree. At such closing, each Additional Stockholder that is selling Common Stock under this Section 3 shall deliver to the Third Party Transferee certificates, if applicable, or other instruments or documents representing the number of shares of Common Stock (the "Tag-Along Shares") being sold under this Section 3, and such Tag-Along Shares shall be free and clear of any liens, claims, options, charges, encumbrances or rights ("Liens") (other than those arising hereunder), including, without limitation, any Lien arising through the action or inaction of such Additional Stockholder, and such Additional Stockholder shall so represent and warrant, and shall further represent and warrant that it is the beneficial owner of such Tag-Along Shares. The Third Party Transferee shall deliver to each Additional Stockholder at the closing payment in full in immediately available funds (and/or other consideration in respect of such shares) for such Tag-Along Shares of such Additional Stockholder. At such closing, all of the parties to the transaction shall execute such additional documents as are otherwise necessary or appropriate. 4. Registration Rights. ------------------------- 4.1 "Piggy-Back" Right to Include Registrable Securities in Registration. If the Company at any time after the completion of an Initial Public Offering proposes to register any of its shares of Common Stock or any other class of Registrable Securities or other securities convertible into or exchangeable for shares of its Common Stock or any other class of Registrable Securities under the Securities Act other than in a rights offering or on Forms S-4 or S-8 (or any successor forms), whether or not for sale for its own 4 account, it will each such time give written notice at least 10 days prior to such proposed registration to all registered holders of Registrable Securities of its intention to register and of such holders' rights under this Section 4. Upon the written request of any such holder (a "Requesting Stockholder") made within five (5) days after receipt of any such notice, the Company shall use its reasonable best efforts to effect the registration under the Securities Act of all Registrable Securities which the Company has been so requested to register by the Requesting Stockholder; provided, that prior to the effective date of the registration statement filed in connection with such registration, immediately upon notification to the Company from the managing underwriter of the price at which such shares of Common Stock are to be sold, if such price is below the price which any Requesting Stockholder finds acceptable, such Requesting Stockholder shall then have the right, by written notice to the Company, to withdraw its request to have its Registrable Securities included in such registration statement; provided further, however, that if, at any time after giving written notice of its intention to register any securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to register or to delay registration of such securities, the Company may, at its election, give written notice of such determination to each Requesting Stockholder and (x) in the case of a determination not to register, shall be relieved of its obligation to register any Registrable Securities in connection with such registration (but not from any obligation of the Company to pay the Registration Expenses in connection therewith), and (y) in the case of a determination to delay registering, shall be permitted to delay registering any Registrable Securities, for the same period as the delay in registering such other securities. 4.2 Priority in Incidental Registrations. If the managing underwriter of any underwritten offering shall inform the Company in writing of its opinion that the number of shares or kind of Registrable Securities requested to be included in such registration would materially adversely affect such offering, and the Company has so advised the Requesting Stockholders, then the Company will include in such registration, to the extent of the number and kind which the Company is so advised can be sold in (or during the time of) such offering, the following: (a) first, all securities of the Company to be sold for its own account; (b) second, such registrable securities requested by any stockholder of the Company who holds demand registration rights (other than the Principal Stockholder) and has requested that such shares be included in such registration, pro rata (based on the number of registrable securities owned by all such stockholders); and (c) third, such registrable securities requested to be included in such registration by any stockholder of the Company (including, without limitation, the Additional Stockholders and the Principal Stockholder) pro rata (based on the number of registrable securities owned by such stockholders). 4.3 Expenses. The Company will pay all Registration Expenses in connection with any registration contemplated pursuant to this Section 4. Each Additional Stockholder participating in a registration under Section 4.1 shall pay (or reimburse the Company for its payment of) all applicable filing fees and underwriting discounts and commissions of the Additional Stockholders and taxes payable by the Additional Stockholders in respect of the shares of Common Stock being sold by them in the applicable registration statement and all fees and expenses of their counsel. In the event that the Company shall determine, in accordance with this Section 4, not to register any securities with respect to which it had given written notice of its intention to so register to the Additional Stockholders, all of the filing fees incurred by the Additional Stockholders in connection with such registration shall be paid by the Company. 4.4 Registration Procedures. If and whenever the Company is required to use its reasonable best efforts to effect the registration of any Registrable Securities under the Securities Act as provided in Section 4.1, the Company shall, as expeditiously as possible: (a) prepare and file with the Commission the requisite registration statement to effect such registration and thereafter use its reasonable best efforts to cause such registration statement to become effective; provided, however, that the Company may discontinue any registration at any time prior to the effective date of the registration statement relating thereto; (b) furnish to each Stockholder, such number of conformed copies of such registration statement (including all amendments, supplements and exhibit thereto) and such other documents, as such Stockholder may reasonably request; (c) use its reasonable best efforts (x) to register or qualify all Registrable Securities and other securities covered by such registration statement under such other securities or blue sky laws of such states of the United States of America in such jurisdictions as determined by the managing underwriters in the offering (or, if there are none, then as determined by the Company), (y) to keep such registration or qualification in effect for so long as such registration statement remains in effect and (z) to take any other action which may be reasonably necessary or advisable to enable such Stockholders to consummate the disposition in such jurisdictions, except that the Company shall not for any such purpose be required to qualify generally to 5 do business as a foreign corporation or become subject to taxation in any jurisdiction wherein it would not but for the requirements of this clause (c) be obligated to be so qualified or to consent to general service of process in any such jurisdiction; (d) use its reasonable best efforts to cause all Registrable Securities covered by such registration statement to be registered with or approved by the Nevada Gaming Authorities and such other federal or state governmental agencies or authorities (other than as described in clauses (a) and (c) above) as may be necessary in the reasonable opinion of counsel to the Company and counsel to the Stockholders to enable the Stockholders to consummate the disposition of such Registrable Securities; (e) if there is no managing underwriter for the offering, furnish at the effective date of such registration statement to each Stockholder a signed counterpart of: (i) an opinion of counsel for the Company, and (ii) to the extent that such a letter may be furnished by an independent public accountant under applicable guidelines, a "comfort" letter signed by the independent public accountants who have certified the Company's financial statements included or incorporated by reference in such registration statement, covering substantially the same matters with respect to such registration statement and, in the case of the comfort letter, with respect to events subsequent to the date of such financial statements, as are customarily covered in opinions of issuer's counsel and in comfort letters delivered to the underwriters in underwritten public offerings of securities; (f) notify each Stockholder at any time when a prospectus relating thereto required to be delivered under the Securities Act, upon discovery that, or upon the happening of any event as a result of which, the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading, in the light of the circumstances under which they were made, and at the request of any such Stockholder, promptly prepare and furnish to it a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made; (g) otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the Commission, and make available to the Stockholders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months beginning with the first day of the first full fiscal quarter of the Company after the effective date of such registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 promulgated thereunder; (h) provide and cause to be maintained a transfer agent and registrar (which, in each case, may be the Company) for all Registrable Securities covered by such registration statement from and after a date not later than the effective date of such registration; and (i) use its reasonable best efforts to list all Registrable Securities covered by such registration statement on any national securities exchange on which securities of the Company are then listed. The Company may require each Stockholder to furnish the Company such information regarding such seller and the distribution of such securities as the Company may from time to time reasonably request in writing and, if requested by the Company, an executed custody agreement and power of attorney in form and substance reasonably satisfactory to the Company with respect to the Registrable Securities to be registered pursuant to this Agreement. If a Stockholder does not promptly comply with the terms of the preceding sentence or Section 4.5, the Company may elect to exclude the Registrable Securities of such Requesting Stockholder from the registration statement under Section 4.1. Each Requesting Stockholder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in clause (f) of this Section 4.4, such Requesting Stockholder will forthwith discontinue such holder's disposition of Registrable Securities pursuant to the registration statement relating to such Registrable Securities until such holder's receipt of the copies of the supplemented or amended prospectus contemplated by clause (f) of this Section 4.4 and, if so directed by the Company, will deliver to the Company (at the Company's expense) all copies, other than permanent file copies, then in such holder's possession of the prospectus relating to such Registrable Securities current at the time of receipt of such notice. 6 If any registration statement under Section 4.1 provides for an offering under Rule 415 under the Securities Act (or any successor provision), each Requesting Stockholder agrees that, upon receipt of any written notice from the Company of the happening of a material acquisition by the Company or other material transaction of the Company, it shall, and shall cause all Persons acting on its behalf to, cease all selling efforts of the Registrable Securities of the Requesting Stockholder for a period of up to 90 days from the date of such notice (as determined by the Company). 4.5 Underwritten Offerings. If the Company proposes to register any of its securities under the Securities Act as contemplated by Section 4.1 and such securities are to be distributed by or through one or more underwriters, the Company will, if requested by any Requesting Stockholder, use its reasonable best efforts to arrange for such underwriters to include all Registrable Securities to be offered and sold by such Requesting Stockholder among the securities of the Company to be distributed by such underwriters, subject to the provisions of Section 4.2. The Requesting Stockholders of Registrable Securities to be distributed by such underwriters shall become parties to an underwriting agreement between the Company and such underwriters containing customary terms and provisions. 4.6 Indemnification and Contribution. (a) In the event of any registration of any securities under the Securities Act pursuant to Section 4.1, the Company will, and it hereby agrees to, indemnify and hold harmless, to the extent permitted by law, each seller of any Registrable Securities covered by such registration statement, its directors, officers, employees and agents, each Person who participates as an underwriter in the offering or sale of such securities and each other Person, if any, who controls such seller or underwriter within the meaning of the Securities Act, as follows: (i) against any and all loss, liability, claim, damage or expense whatsoever arising out of or based upon an untrue statement or alleged untrue statement of a material fact contained in any registration statement (including all documents incorporated therein by reference) pursuant to which any Registrable Securities are registered or any preliminary prospectus, final prospectus, summary prospectus or term sheet included therein (or any amendment or supplement thereto) or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary in order to make the statements therein not misleading; (ii) against any and all loss, liability, claim, damage and expense whatsoever to the extent of the aggregate amount paid in settlement of any litigation, or investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, if such settlement is effected with the written consent of the Company; and (iii) against any and all expense reasonably incurred by them in connection with investigating, preparing or defending against any litigation, or investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under clauses (i) or (ii) above; provided, however, that this indemnity does not apply to any loss, liability, claim, damage or expense to the extent arising out of an untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with written information furnished to the Company by or on behalf of any such seller or underwriter expressly for use in the preparation of any registration statement (or any amendment thereto) or any preliminary prospectus or prospectus (or any amendment or supplement thereto); and provided, further, that the Company will not be liable to any Person who participates as an underwriter or seller in the offering or sale of Registrable Securities or any other Person, if any, who controls such underwriter or seller within the meaning of the Securities Act, under the indemnity agreement in this Section 4.6(a) with respect to any preliminary prospectus or final prospectus or final prospectus as amended or supplemented, as the case may be, to the extent that any such loss, claim, damage or liability of such underwriter or controlling Person results from the fact that such underwriter or seller sold Registrable Securities to a Person to whom there was not sent or given, at or prior to the written confirmation of such sale, a copy of the final prospectus or of the final prospectus as then amended or supplemented, whichever is most recent, if the Company has previously furnished copies thereof to such underwriter or seller. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such seller, director, officer, employee, agent, underwriter or controlling Person, and shall survive the transfer of such securities by such seller. (b) The Company may require, as a condition to including any Registrable Securities in any registration statement filed in accordance with Section 4.1 hereof, that the Company shall have received an undertaking reasonably satisfactory to it from the prospective seller of such Registrable Securities or any underwriter, to indemnify and hold harmless (in the same manner and to the same extent as set forth in Section 4.6(a) hereof) the Company and its directors and officers and each other Person, if any, who controls the Company within the meaning of the Securities Act, with respect to any statement or alleged statement in or omission or alleged omission from such registration statement, any preliminary, final or summary prospectus contained therein, or any such amendment or supplement, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by or on behalf of such seller or 7 underwriter specifically stating that it is for use in the preparation of such registration statement, preliminary, final or summary prospectus or amendment or supplement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Company or any such director, officer or controlling Person and shall survive the transfer of such securities by such seller. In that event, the obligations of the Company and such sellers pursuant to this Section 4.6 are to be several and not joint. (c) Promptly after receipt by an indemnified party hereunder of written notice of the commencement of any action or proceeding involving a claim referred to in this Section 4.6, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to such indemnifying party of the commencement of such action; provided, however, that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under this Section 4.6, except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim (in which case the indemnifying party shall not be liable for the fees and expenses of more than one counsel for the sellers of Registrable Securities or for more than one counsel for the underwriters in connection with any one action or separate but similar or related actions), the indemnifying party will be entitled to participate in and to assume the defense thereof, jointly with any other indemnifying party similarly notified, to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof. No indemnifying party shall be liable for any settlement of any proceeding effected without its prior written consent. (d) The Company and each seller of Registrable Securities shall provide for the foregoing indemnity (with appropriate modifications) in any underwriting agreement with respect to any required registration or other qualification of securities under any federal or state law or regulation of any governmental authority. (e) Notwithstanding anything herein to the contrary, the rights and obligations contained in this Section 4.6 shall survive any termination of this Agreement. (f) In order to provide for just and equitable contribution in circumstances under which the indemnity contemplated by Section 4.6(a) and (b) hereof is for any reason not available, the parties required to indemnify by the terms thereof shall contribute to the aggregate losses, liabilities, claims, damages and expenses of the nature contemplated by such indemnity agreement (collectively, "Losses") incurred by the Company, any seller of Registrable Securities and one or more of the underwriters, except to the extent that contribution is not permitted under Section 11(f) of the Securities Act. In determining the amounts which the respective parties shall contribute, there shall be considered the relative fault of the indemnifying party on the one hand and the indemnified party on the other hand in connection with statements or omissions which resulted in such Losses, as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, the parties' relative knowledge and access to information concerning the matter with respect to which the claim was asserted, the opportunity to correct and prevent any statement or omission and any other equitable considerations appropriate under the circumstances. The Company and each Person selling securities agree with each other that no seller of Registrable Securities shall be required to contribute any amount in excess of the amount such seller would have been required to pay to an indemnified party if the indemnity under Section 4.6(a) and (b) hereof were available. The Company and each such seller agree with each other and the underwriters of the Registrable Securities, if requested by such underwriters, that it would not be equitable if the amount of such contribution were determined by pro rata or per capita allocation (even if the underwriters were treated as one entity for such purpose) or for the underwriters' portion of such contribution to exceed the percentage that the underwriting discount bears to the initial public offering price of the Registrable Securities. For purposes of this Section 4.6, each Person, if any, who controls an underwriter within the meaning of the Securities Act shall have the same rights to contribution as such underwriter, and each director and each officer of the Company who signed the registration statement, and each Person, if any, who controls the Company or a seller of Registrable Securities, shall have the same rights to contribution as the Company or a seller of Registrable Securities, as the case may be. Notwithstanding anything herein the contrary, the rights and obligations contained in this Section 4.6 shall survive any termination of this Agreement. 5. Future Issuance of Shares; Preemptive Rights. -------------------------------------------------- 8 5.1 Offering Notice. Except for (a) options, warrants or Common Stock of the Company which may be issued to employees, consultants or directors of the Company pursuant to a stock option plan or other employee benefit arrangement issued or in consideration for services to any Person, in each case approved by the Board of Directors, (b) a subdivision of the outstanding shares of Common Stock into a larger number of shares of Common Stock (or any stock dividend), (c) Common Stock issued upon exercise, conversion or exchange of any security or obligation which is by its terms convertible into shares of Common Stock (or any stock dividend payable in shares of Common Stock or securities convertible, exchangeable or exercisable into Common Stock), or (d) Common Stock or other capital stock of the Company issued in consideration of an acquisition, approved by the Board of Directors, by the Company of assets or another Person, if the Company wishes to issue any shares of Common Stock or any other securities convertible into or exchangeable for Common Stock of the Company (collectively, "New Securities") prior to an Initial Public Offering, then the Company shall offer such New Securities to the Additional Stockholders by sending written notice (the "New Issuance Notice") to the Additional Stockholders, which New Issuance Notice shall state (a) the number of New Securities proposed to be issued and (b) the proposed purchase price per share of the New Securities that the Company is willing to accept (the "Proposed Price"). Upon delivery of the New Issuance Notice, such offer shall be irrevocable unless and until the rights provided for in Section 5.2 shall have been waived or shall have expired. 5.2 Preemptive Rights; Exercise. --------------------------------- 5.2.1 Exercise Periods. For a period of 10 days after the giving of the New Issuance Notice pursuant to Section 5.1 (the "Additional Stockholder Exercise Period"), the Additional Stockholders who are then employed by the Company shall have the right to purchase the New Securities at a purchase price equal to the Proposed Price and upon the terms and conditions set forth in the New Issuance Notice. Each Additional Stockholder shall have the right to purchase that percentage of the New Securities determined by dividing (x) the total number of Shares then owned by such Additional Stockholder by (y) the total number of shares of outstanding Common Stock on a fully diluted basis. 5.2.2 Notices. The right of the Additional Stockholders to purchase the New Securities under subsection 5.2.1 above shall be exercisable by delivering written notice of the exercise thereof, prior to the expiration of the Additional Stockholder Exercise Period, to the Company, which notice shall state the amount of New Securities that such Additional Stockholder elects to purchase pursuant to Section 5.2.1. The failure of an Additional Stockholder to respond within the time periods specified above shall be deemed to be a waiver of such Additional Stockholder's rights under Section 5.2.1. 5.3 Closing. The closing of the purchase of New Securities subscribed for by the Additional Stockholders under Section 5.2 shall be held at the executive office of the Company on (a) the later to occur of (i) the 30th day after the giving of the New Issuance Notice pursuant to Section 5.1 or (ii) two (2) days after the receipt of all approvals required or (b) at such other time and place as the parties to the transaction may agree. At such closing, the Company shall deliver certificates representing the New Securities, and such New Securities shall be issued free and clear of all Liens and the Company shall so represent and warrant, and further represent and warrant that such New Securities shall be, upon issuance thereof to the Additional Stockholders and after payment therefor, duly authorized, validly issued, fully paid and nonassessable. The Additional Stockholders purchasing the New Securities shall deliver at the closing payment in full in immediately available funds for the New Securities purchased by him or her. At such closing, all of the parties to the transaction shall execute such additional documents as are otherwise necessary or appropriate. 5.4 Permitted Sale. Unless all of the New Securities are elected to be purchased pursuant to Section 5.2, the Company may at any time after the Additional Stockholder Exercise Period sell to any Person (including, without limitation, the Principal Stockholder) all of the New Securities not elected to be purchased by the Additional Stockholders pursuant to Section 5.2 on terms and conditions that are no more favorable than those set forth in the New Issuance Notice. 6. Lock-up Agreement. Each Additional Stockholder hereby agrees, to the extent not inconsistent with applicable law, that during the period of duration (not to exceed 180 days) specified by the Company and only if required by the Company's investment banker(s) in connection with a public offering of Common Stock (or other securities convertible into or exchangeable into Common Stock), following the effective date of a registration statement of the Company filed under the Securities Act relating to such public offering, it shall not, to the extent requested by the Company and such managing underwriter, (i) directly or indirectly sell, offer to sell, contract to sell (including, without limitation, any short sale), grant any option to purchase or otherwise transfer or dispose of any securities of the Company held by it at any time during such period (except securities of such Additional Stockholder included in such registration) and (ii) engage in any hedging or other transaction which is designed to or reasonably expects to lead to or result in a disposition of such shares of Common Stock, even if such shares would be disposed of by someone other than the Additional Stockholder. Such prohibited hedging or other transaction would include, without limitation, any short sale or any purchase, sale or grant of any right (including, without limitation, any put or call option with respect to any such shares or with respect to any security that includes, relates to or derives any significant part of its value from the shares). 7. After-Acquired Stock. Whenever any additional Stockholder acquires any additional shares of Common Stock or securities of the Company that are convertible into or exchangeable for Common Stock ("After-Acquired Stock") (including, without limitation, upon stock dividends or stock splits or the exercise of any options or warrants), such After-Acquired Stock shall be subject 9 to all of the terms and conditions of this Agreement; provided, however, that such After-Acquired Stock shall not be subject to, nor receive the benefit of, Section 4 except to the extent that such After-Acquired Stock is a Registrable Security. All calculation of the percentages and number of shares of Common Stock under this Agreement shall be done on a fully diluted basis. 8. Stock Certificate Legend. A copy of this Agreement shall be filed with the Secretary of the Company and kept with the records of the Company. Each certificate representing shares of Common Stock (or other securities convertible or exchangeable into Common Stock) now held or hereafter acquired by any Stockholder shall, for as long as this Agreement is effective, bear legends substantially in the following forms: THE SALE, ASSIGNMENT, HYPOTHECATION, PLEDGE, ENCUMBRANCE OR OTHER DISPOSITION OF THIS SECURITY OR ANY INTEREST HEREIN (EACH A "TRANSFER") IS RESTRICTED BY THE TERMS OF THE STOCKHOLDERS' AGREEMENT, DATED JANUARY 2, 2002, AMONG THE COMPANY AND THE STOCKHOLDERS NAMED THEREIN, A COPY OF WHICH MAY BE INSPECTED AT THE COMPANY'S PRINCIPAL OFFICE. THE COMPANY WILL NOT REGISTER THE TRANSFER OF SUCH SECURITIES ON THE BOOKS OF THE COMPANY UNLESS AND UNTIL THE TRANSFER HAS BEEN MADE IN COMPLIANCE WITH THE TERMS OF SUCH STOCKHOLDERS' AGREEMENT. THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE. SUCH SECURITIES MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO NEVADA GAMING LAWS AND ALL LOCAL GAMING LAWS AND MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO SUCH LAWS. 9. Specific Performance. The parties hereto intend that each of them have the right to seek damages or specific performance in the event that any other party hereto fails to perform such other party's obligations hereunder. Therefore, if any party shall institute any action or proceeding to enforce the provisions hereof, any party against whom such action or proceeding is brought hereby waives any claim or defense therein that the plaintiff party has an adequate remedy at law. 10. Miscellaneous. ------------------ 10.1 Notices. All notices, demands and other communications provided for or permitted hereunder shall be in writing and shall be by registered or certified first-class mail, return receipt requested, telecopier, courier service or personal delivery: (a) if to the Company: 3355 Las Vegas Boulevard South Las Vegas, Nevada 89109 Telecopier No.: (702) 733-5620 Attention: Sheldon G. Adelson, Chairman of the Board with a copy to: Paul G. Roberts, Esq. 300 First Avenue Needham, MA 02494 Telecopier No. (781) 449-6500 (b) if to any Stockholder, at his address as it appears on the record books of the Company. All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; when delivered by courier, if delivered by commercial overnight courier service; five business days after being deposited in the mail, postage prepaid, if mailed; and when receipt is acknowledged, if delivered by telecopier. 10.2 Amendment and Waiver. ------------------------------- (a) No failure or delay on the part of any party hereto in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to the parties hereto at law, in equity or otherwise. (b) Except as provided in Section 10.2(c), any amendment, supplement or modification of or to any provision of this Agreement, any waiver of any provision of this Agreement, and any consent to any departure by any party hereto from the terms of any provision of this Agreement, shall be 10 effective (i) only if it is made or given in writing and signed by the Principal Stockholder and the holders of a majority of the shares of Common Stock held by the Additional Stockholders and (ii) only in the specific instance and for the specific purpose for which made or given. Notwithstanding the foregoing, the observance of any terms of this Agreement which benefit only the Principal Stockholder may be waived by the Principal Stockholder. (c) Without the consent of the Principal Stockholder and the Additional Stockholders, this Agreement may be amended by the Company from time to time to permit additional stockholders of the Company, who have entered into Stock Option Agreements or stock purchase agreements with the approval of the Board of Directors and who desire to become Additional Stockholders, to become Additional Stockholders under this Agreement. Any such amendment may be effected by the Company by adding a signature page executed by the new Additional Stockholder and a revised Schedule I to this Agreement. 10.3 Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 10.4 Severability. If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired, unless the provisions held invalid, illegal or unenforceable shall substantially impair the benefits of the remaining provisions hereof. 10.5 Entire Agreement. This Agreement, together with the exhibits hereto, is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein or therein. This Agreement, together with the exhibits hereto, supersedes all prior agreements and understandings on the subject matter hereof. 10.6 Term of Agreement. This Agreement shall become effective upon the execution hereof and shall continue in effect until the termination of this Agreement by written agreement of the Principal Stockholder and the holders of a majority of the shares of Common Stock held by the Additional Stockholders; provided, however, that Sections 3, 4 and 10.2(c) shall only continue in effect until the earlier to occur (a) the closing of an Initial Public Offering and (b) the termination of this Agreement by written agreement of the Principal Stockholder and the holders of a majority of the shares of Common Stock held by the Additional Stockholders. 10.7 Variations in Pronouns. All pronouns and any variations thereof refer to the masculine, feminine or neuter, singular or plural, as the context may require. 10.8 Rules of Construction. Unless the context otherwise requires, "or" is not exclusive, and references to sections or subsections refer to sections or subsections of this Agreement. 10.9 Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of Nevada applicable to agreements made and to be performed entirely within such State. 10.10 Further Assurances. Each of the parties shall, and shall cause their respective Affiliates to, execute such documents and perform such further acts as may be reasonably required or desirable to carry out or to perform the provisions of this Agreement. 10.11 Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of the parties hereto (including, without limitation, in the case of any party hereto that is an individual, the heirs, estate and personal representatives of such party). This Agreement is not assignable except to permitted transferees of the Common Stock of a Stockholder under Section 2 (including, without limitation, any Third Party Transferee under Section 3 hereof) or with the written consent of the Principal Stockholder and the Company. 10.12 Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 11 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered as of the date first written above. LAS VEGAS SANDS, INC. By: --------------------------- Name: Title: /s/Sheldon G. Adelson ----------------------------------- Sheldon G. Adelson /s/William P. Weidner ----------------------------------- William P. Weidner /s/Bradley H. Stone ----------------------------------- Bradley H. Stone /s/Robert G. Goldstein ----------------------------------- Robert G. Goldstein /s/David Friedman ----------------------------------- David Friedman 12 SCHEDULE A ADDITIONAL STOCKHOLDERS
No. of Shares of Common Name of Stockholder Stock underlying Option - ------------------- ----------------------- William P. Weidner 19,960 Bradley H. Stone 14,970 Robert G. Goldstein 9,980 David Friedman 4,990
TABLE OF CONTENTS Page 1. Definitions. ...........................................................1 2. Restrictions on Transfer................................................5 2.1 Limitation on Transfer. ......................................5 2.2 Transfers in Compliance with Law; Substitution of Transferee...5 2.3 Permitted Transfer Procedures. ...............................6 2.4 Additional Stockholders to Execute Consents. .................6 2.5 Transferee to Become Party to this Agreement. ................6 2.6 Termination of S Corporation Provisions. ......................6 3. Tag-Along Right.........................................................6 3.1 Transfer by Principal Stockholder. ...........................6 3.2 Offering Notice. ..............................................7 3.3 Exercise of Tag-Along Right. .................................7 3.4 Closing of Tag-Along Right. ..................................7 4. Registration Rights.....................................................8 4.1 Right to Include Registrable Securities in Registration........8 4.2 Priority in Incidental Registrations. ........................8 4.3 Expenses. ....................................................9 4.4 Registration Procedures........................................9 4.5 Underwritten Offerings. .....................................12 4.6 Indemnification and Contribution. ...........................12 5. Future Issuance of Shares; Preemptive Rights...........................15 5.1 Offering Notice. .............................................15 5.2 Preemptive Rights; Exercise...................................16 5.3 Closing.......................................................16 5.4 Permitted Sale. .............................................16 6. Lock-up Agreement. ...................................................16 7. After-Acquired Stock...................................................17 8. Stock Certificate Legend. ............................................17 9. Specific Performance. ................................................18 10. Miscellaneous..........................................................18 10.1 Notices. ....................................................18 10.2 Amendment and Waiver..........................................19 10.3 Headings. ....................................................19 10.4 Severability..................................................19 10.5 Entire Agreement. ...........................................20 10.6 Term of Agreement. ..........................................20 10.7 Variations in Pronouns. ......................................20 10.8 Rules of Construction. ......................................20 10.9 Governing Law. ..............................................20 10.10 Further Assurances. .........................................20 10.11 Successors and Assigns. .....................................20 10.12 Counterparts. ...............................................21
SCHEDULES A Additional Stockholders STOCKHOLDERS' AGREEMENT among LAS VEGAS SANDS, INC. and THE STOCKHOLDERS NAMED HEREIN ---------- January 2, 2002 ---------- EX-10 9 exhibit10-7.txt LIMITED WAIVER UNDER TERM LOAN - LVSI/VCR LAS VEGAS SANDS, INC. AND VENETIAN CASINO RESORT, LLC LIMITED WAIVER UNDER TERM LOAN AND SECURITY AGREEMENT This LIMITED WAIVER UNDER TERM LOAN AND SECURITY AGREEMENT (this "Waiver") is dated as of on March 31, 2002 and entered into by and among LAS VEGAS SANDS, INC. ("LVSI"), a Nevada corporation, and on VENETIAN CASINO RESORT, LLC ("VCR"), a Nevada limited liability company, as joint and several obligors (each of LVSI and VCR, a "Borrower" and, collectively, the "Borrowers"), GENERAL ELECTRIC CAPITAL CORPORATION, as on administrative agent (in such capacity, the "Administrative Agent") for the financial institutions party to on the Equipment Loan Agreement hereinafter referred to (the "Lenders"), and the Lenders listed on the signature pages hereto and executing a counterpart hereof and is made with reference to that certain Term Loan and on Security Agreement, dated as of December 22, 1997, by and among the Borrowers, the Lenders, the on Administrative Agent and BancBoston Leasing Inc., as Co-Agent, as amended by a Limited Waiver and First on Amendment to Term Loan and Security Agreement, dated as of November 12, 1999, a Limited Waiver and Second on Amendment to Term Loan and Security Agreement, dated June 13, 2000, a Limited Waiver, Consent and Third on Amendment to Term Loan and Security Agreement, dated as of June 29, 2001 and a Fourth Amendment to Term Loan and Security Agreement (the "Fourth Amendment"), dated as of September 28, 2001 (as so amended, the on "Equipment Loan Agreement"). Capitalized terms used herein which are defined in the Equipment Loan Agreement and not otherwise defined herein are used herein with the meanings ascribed to them in the Equipment Loan on Agreement. WHEREAS, the Borrowers have advised the Lenders that they may not be in compliance with the minimum consolidated adjusted EBITDA covenant (section 6.9(c)) contained in the Equipment Loan Agreement for the Fiscal Quarter ending March 31, 2002 and the Borrowers have requested that the Lenders agree to waive on compliance with such covenant for such Fiscal Quarter only; NOW, THEREFORE, in consideration of the premises and the agreements, provisions and on covenants herein contained, the parties hereto agree as follows: Section 1. LIMITED WAIVER A. Subject to the terms and conditions set forth herein and in reliance on the on representations and warranties of the Borrowers herein contained, the Lenders hereby waive, for the Fiscal on Quarter period ending March 31, 2002, compliance with the provisions of subsection 6.9(c) of the Equipment on Loan Agreement. B. Without limiting the generality of the provisions of section 11.3 of the Equipment Loan Agreement, the waiver set forth herein shall be limited precisely as written and such waiver relates on solely to the noncompliance of the Borrowers with the provisions of subsection 6.9(c) of the Equipment Loan on Agreement in the manner and to the extent described above, and nothing in this Waiver shall be deemed to (a) constitute a waiver of compliance by the Borrowers with respect to (i) subsection 6.9(c) of the Equipment on Loan Agreement in any other instance or for any other Fiscal Quarter or (ii) any other term, provision or on condition of the Equipment Loan Agreement or any other instrument or agreement referred to therein (whether on in connection with this waiver of subsection 6.9(c) of the Equipment Loan Agreement or otherwise) or (b) on prejudice any right or remedy that the Administrative Agent or any Lender may now have (except to the extent such right or remedy was based upon existing defaults that will not exist after giving effect to this Waiver) or may have in the future under or in connection with the Equipment Loan Agreement or any other instrument or agreement referred to therein. Except as expressly set forth herein, the terms, provisions and conditions of the Equipment Loan Agreement and the other Loan Documents shall remain in full force and effect and in all on other respects are hereby ratified and confirmed. Section 2. CONDITIONS TO EFFECTIVENESS Section 1 of this Waiver shall become effective only upon the satisfaction of all of the on following conditions precedent (or waiver of any or all of the conditions precedent by the Administrative on Agent in its sole discretion) (the date of satisfaction or wavier of such conditions being referred to herein as the "Waiver Effective Date"): A. On or before the Waiver Effective Date, the Borrowers shall deliver to the Lenders (or to the Administrative Agent for the Lenders with sufficient originally executed copies, where on appropriate, for each Lender and its counsel) the following, each, unless otherwise noted, dated the Waiver on Effective Date: 1 1. Copies of the organizational documents of each Borrower, certified by the Secretary of State of its jurisdiction of organization or in lieu thereof a certificate, dated the on Waiver Effective Date, of the secretary or an assistant secretary of LVSI, acting in its own right on and as managing member of VCR, to the effect that such organizational documents have not been on amended, modified or rescinded since the date of the Fourth Amendment and remain in full force and on effect; 2. Signature and incumbency certificates of officers of LVSI, on behalf of on LVSI and as managing member of VCR. B. The Administrative Agent shall have received for the account of each of the on Lenders executing a counterpart of this Waiver, a one-time non-refundable fee in an amount equal to one on twentieth of one percent (0.05%) of the outstanding principal balance of the Basic Loan of such Lender as of the Waiver Effective Date. C. The Administrative Agent shall have received from the Borrowers a copy of a duly on executed waiver of the covenant contained in the Section 7.6C of the Bank Credit Agreement for the Fiscal on Quarter period ending March 31, 2002, duly executed by the Requisite Lenders (as such term is defined in the Bank Credit Agreement) and otherwise in form and substance reasonably satisfactory to the Administrative on Agent. D. No Event of Default or Default under (and as defined in) the Equipment Loan on Agreement shall have occurred and be continuing. E. On or before the Waiver Effective Date, all corporate and other proceedings taken or to be taken in connection with the transactions contemplated hereby and all documents incidental thereto on not previously found acceptable by the Administrative Agent, acting on behalf of the Lenders, and its counsel shall be reasonably satisfactory in form and substance to the Administrative Agent and such counsel, and the Administrative Agent and such counsel shall have received all such counterpart originals or certified copies of such documents as the Administrative Agent may reasonably request. Section 3. BORROWERS' REPRESENTATIONS AND WARRANTIES In order to induce the Lenders to enter into this Waiver, the Borrowers represent and on warrant to each Lender that the following statements are true, correct and complete: A. Corporate Power and Authority. The Borrowers have all requisite corporate power on and authority to enter into this Waiver. B. Authorization of Agreements. The execution and delivery of this Waiver have been on duly authorized by all necessary corporate action on the part of the Borrowers. C. No Conflict. The execution and delivery by the Borrowers of this Waiver do not on and will not (i) violate any provision of any law or any governmental rule or regulation applicable to the on Borrowers or any of their Subsidiaries, the organizational documents of the Borrowers or any of their on Subsidiaries or any order, judgment or decree of any court or other agency of government binding on the on Borrowers or any of their Subsidiaries, (ii) conflict with, result in a breach of or constitute (with due on notice or lapse of time or both) a default under any Material Contract of the Borrowers or any of their on Subsidiaries, (iii) result in or require the creation or imposition of any Lien upon any of the properties or assets of the Borrowers or any of their Subsidiaries, or (iv) require any approval of stockholders or any on approval or consent of any Person under any Material Contract of the Borrowers or any of their Subsidiaries on except for such violations, conflicts, approvals and consents the failure of which to obtain could not on reasonably be expected to have a Material Adverse Effect. D. Governmental Consents. The execution and delivery by the Borrowers of this Waiver do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any federal, state or other governmental authority or regulatory body. E. Binding Obligation. This Waiver has been duly executed and delivered by the on Borrowers and is the legally valid and binding obligation of the Borrowers, enforceable against the Borrowers in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting creditors' rights generally or by general equitable principles on relating to enforceability. F. Incorporation of Representations and Warranties From Equipment Loan Agreement. on The representations and warranties contained in Section 3 of the Equipment Loan Agreement are and will be on true, correct and complete in all material respects on and as of the Waiver Effective Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case they were true, correct and complete in all material respects on and as of such earlier date. 2 Section 4. MISCELLANEOUS A. Fees and Expenses. The Borrowers acknowledge that all costs, fees and expenses as described in subsection 11.4 of the Equipment Loan Agreement incurred by the Agents and their respective on counsel with respect to this Waiver and the documents and transactions contemplated hereby shall be for the on account of the Borrowers. B. Headings. Section and subsection headings in this Waiver are included herein for on convenience of reference only and shall not constitute a part of this Waiver for any other purpose or be on given any substantive effect. C. Applicable Law. THIS WAIVER AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES on HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE on STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. D. Counterparts; Effectiveness. This Waiver may be executed in any number of on counterparts and by different parties hereto in separate counterparts, each of which when so executed and on delivered shall be deemed an original, but all such counterparts together shall constitute but one and the on same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. This Waiver (other than the provisions of Section 1 hereof, the effectiveness of which is governed by Section 2 hereof) shall become effective upon the execution of a counterpart hereof by each of the Borrowers, the Administrative Agent and on the Requisite Lenders and the receipt by the Borrowers and the Administrative Agent of written or telephonic notification of such execution and authorization of delivery thereof. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 3 IN WITNESS WHEREOF, the parties hereto have caused this Waiver to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above. BORROWERS: LAS VEGAS SANDS, INC. By: /s/David Friedman -------------------------------------- Name: David Friedman Title: Assistant to the Chairman of the Board and Secretary VENETIAN CASINO RESORT, LLC By: Las Vegas Sands, Inc., its managing member By: /s/David Friedman -------------------------------------- Name: David Friedman Title: Assistant to the Chairman of the Board and Secretary LENDERS: GENERAL ELECTRIC CAPITAL CORPORATION, as a Lender and as Administrative Agent By: /s/Ann Naegele -------------------------------------- Name: Ann Naegele Title: Vice President FLEET CAPITAL CORPORATION, as a Lender By: -------------------------------------- Name: Title: [SIGNATURES CONCLUDED ON THE FOLLOWING PAGE] S-1 GMAC COMMERCIAL MORTGAGE CORPORATION, as a Lender By: /s/John E. Patton -------------------------------------- Name: John E. Patton Title: Vice President S-2 EX-10 10 exhibit10-8.txt LIMITED WAIVER REGARDING CREDIT AGRMT - LVSI/VCR LAS VEGAS SANDS, INC. AND VENETIAN CASINO RESORT, LLC LIMITED WAIVER REGARDING CREDIT AGREEMENT This LIMITED WAIVER REGARDING CREDIT AGREEMENT (this "Waiver") is dated as of March 31, 2002 and entered into by and among LAS VEGAS SANDS, INC. ("LVSI"), a Nevada corporation, and VENETIAN CASINO RESORT, LLC ("Venetian"), a Nevada limited liability company, as joint and several obligors (each of LVSI and Venetian, a "Borrower" and, collectively, the "Borrowers"), the financial institutions listed on the signature pages hereof ("Lenders"), THE BANK OF NOVA SCOTIA ("Scotiabank"), as Lead Arranger (in such capacity the "Arranger"), and Scotiabank as administrative agent for Lenders (in such capacity, the "Administrative Agent"), and is made with reference to that certain Amended and Restated Credit Agreement dated as of September 17, 2001, by and among Borrowers, Lenders, Administrative Agent, and the Arranger (the "Credit Agreement"). Capitalized terms used herein without definition shall have the same meanings herein as set forth in the Credit Agreement. RECITALS WHEREAS, Borrowers have advised Lenders that they may not be in compliance with the Minimum Consolidated Adjusted EBITDA covenant as of the Fiscal Quarter ending March 31, 2002; WHEREAS, Borrowers have further advised Lenders that they expect to obtain a waiver from the FF&E Lenders under the FF&E Facilities Agreement of compliance with the Minimum Consolidated Adjusted EBITDA covenant in such agreement for the Fiscal Quarter ending March 31, 2002; and WHEREAS, Borrowers have requested that Lenders agree to waive compliance with the Minimum Consolidated Adjusted EBITDA covenant for the Quarter ending March 31, 2002. NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows: Section 1. LIMITED WAIVER 1.1 Waiver of Compliance with Minimum Consolidated Adjusted EBITDA Covenant --------------- A. Subject to the terms and conditions set forth herein and in reliance on the representations and warranties of Borrowers herein contained, Lenders hereby waive, for the Fiscal Quarter ending March 31, 2002, compliance with the provisions of subsection 7.6C of the Credit Agreement. B. Without limiting the generality of the provisions of subsection 10.6 of the Credit Agreement, the waiver set forth herein shall be limited precisely as written and such waiver relates solely to the noncompliance by Borrowers with the provisions of subsection 7.6C of the Credit Agreement in the manner and to the extent described above, and nothing in this Waiver shall be deemed to (a) constitute a waiver of compliance by Borrowers with respect to (i) subsection 7.6C of the Credit Agreement in any other instance or (ii) any other term, provision or condition of the Credit Agreement or any other instrument or agreement referred to therein (whether in connection with this waiver of subsection 7.6C of the Credit Agreement or otherwise) or (b) prejudice any right or remedy that Administrative Agent or any Lender may now have (except to the extent such right or remedy was based upon existing defaults that will not exist after giving effect to this Waiver) or may have in the future under or in connection with the Credit Agreement or any other instrument or agreement referred to therein. Except as expressly set forth herein, the terms, provisions and conditions of the Credit Agreement and the other Loan Documents shall remain in full force and effect and in all other respects are hereby ratified and confirmed. Section 2. INTENTIONALLY OMITTED Section 3. CONDITIONS TO EFFECTIVENESS This Waiver shall become effective only upon the satisfaction of all of the following conditions precedent (or waiver of any or all of the conditions precedent by the Administrative Agent in its sole discretion) (the date of satisfaction or waiver of such conditions being referred to herein as the "Waiver Effective Date"): A. On or before the Waiver Effective Date, Borrowers shall deliver to Lenders (or to Administrative Agent for Lenders with sufficient originally executed copies, where appropriate, for each Lender and its counsel) the following, each, unless otherwise noted, dated the Waiver Effective Date: 1 1. Resolutions of the Board of Directors of LVSI approving and authorizing the execution, delivery and performance of this Waiver, certified as of the Waiver Effective Date by the corporate secretary or an assistant secretary of LVSI as being in full force and effect without modification or amendment; 2. Signature and incumbency certificates of the officers of LVSI executing this Waiver; 3. Executed copies of this Waiver by all parties hereto; and 4. Payment of all costs and expenses due under the Credit Agreement. B. Administrative Agent shall have received from Borrowers a duly executed waiver regarding the FF&E Facility Agreement in form and substance reasonably satisfactory to Administrative Agent. C. No Event of Default or Potential Event of Default under (and as defined in) the Credit Agreement shall have occurred and be continuing or would result from the effectiveness of this Waiver. D. On or before the Waiver Effective Date, all corporate and other proceedings taken or to be taken in connection with the transactions contemplated hereby and all documents incidental thereto not previously found acceptable by Administrative Agent, acting on behalf of Lenders, and its counsel shall be reasonably satisfactory in form and substance to Administrative Agent and such counsel, and Administrative Agent and such counsel shall have received all such counterpart originals or certified copies of such documents as Administrative Agent may reasonably request. Section 4. BORROWERS' REPRESENTATIONS AND WARRANTIES In order to induce Lenders to enter into this Waiver, Borrowers represent and warrant to each Lender that the following statements are true, correct and complete: A. Corporate Power and Authority. Borrowers have all requisite corporate power and authority to enter into this Waiver. B. Authorization of Agreements. The execution and delivery of this Waiver has been duly authorized by all necessary corporate action on the part of Borrowers. C. No Conflict. The execution and delivery by Borrowers of this Waiver does not and will not (i) violate any provision of any law or any governmental rule or regulation applicable to Borrowers or any of their Subsidiaries, the Certificate or Articles of Incorporation or Bylaws of Borrowers or any of their Subsidiaries or any order, judgment or decree of any court or other agency of government binding on Borrowers or any of their Subsidiaries, (ii) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any Contractual Obligation of Borrowers or any of their Subsidiaries, (iii) result in or require the creation or imposition of any Lien upon any of the properties or assets of Borrowers or any of their Subsidiaries, or (iv) require any approval of stockholders or any approval or consent of any Person under any Contractual Obligation of Borrowers or any of their Subsidiaries except for such violations, conflicts, approvals and consents the failure of which to obtain could not reasonably be expected to have a Material Adverse Effect. D. Governmental Consents. The execution and delivery by Borrowers of this Waiver does not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any federal, state or other governmental authority or regulatory body. E. Binding Obligation. This Waiver has been duly executed and delivered by Borrowers and when executed and delivered, will be the legally valid and binding obligations of Borrowers, enforceable against Borrowers in accordance with their respective terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability. F. Incorporation of Representations and Warranties From Credit Agreement. The representations and warranties contained in Section 5 of the Credit Agreement are and will be true, correct and complete in all material respects on and as of the Waiver Effective Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case they were true, correct and complete in all material respects on and as of such earlier date. 2 Section 5. MISCELLANEOUS A. Effect on the Credit Agreement and the Other Loan Documents. (i) Except as specifically amended by this Waiver, the Credit Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed. (ii) The execution, delivery and performance of this Waiver shall not, except as expressly provided herein, constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of Administrative Agent or any Lender under, the Credit Agreement or any of the other Loan Documents. B. Fees and Expenses. Borrowers acknowledge that all costs, fees and expenses as described in subsection 10.2 of the Credit Agreement incurred by Administrative Agent and its counsel with respect to this Waiver and the documents and transactions contemplated hereby shall be for the account of Borrowers. C. Headings. Section and subsection headings in this Waiver are included herein for convenience of reference only and shall not constitute a part of this Waiver for any other purpose or be given any substantive effect. D. Applicable Law. THIS WAIVER AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. E. Counterparts; Effectiveness. This Waiver may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. This Waiver shall become effective upon the execution of a counterpart hereof by Borrowers, Requisite Lenders and each of the Loan Parties and receipt by the Company and Administrative Agent of written or telephonic notification of such execution and authorization of delivery thereof, and satisfaction of the conditions in Section 2 hereof. 3 IN WITNESS WHEREOF, the parties hereto have caused this Waiver to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above. BORROWERS: LAS VEGAS SANDS, INC. By: /s/David Friedman -------------------------- Name: David Friedman Title: Assistant to the Chairman of the Board and Secretary VENETIAN CASINO RESORT, LLC By: Las Vegas Sands, Inc., its managing member By: /s/David Friedman -------------------------- Name: David Friedman Title: Assistant to the Chairman of the Board and Secretary S-1 LENDERS: THE BANK OF NOVA SCOTIA, individually and as a Lender, Lead Arranger and Administrative Agent By: /s/ Jed Richardson -------------------------- Name: Jed Richardson Title: Director S-2 AIMCO CDO SERIES 2000-A By: -------------------------- Name: Title: Notice Address: Allstate Investments, LLC 3075 Sanders Road, Suite G5D Northbrook, IL 60062-7127 Attention: Telefax: S-3 ALLSTATE LIFE INSURANCE COMPANY By: -------------------------- Name: Title: Notice Address: Allstate Investments, LLC 3075 Sanders Road, Suite G5D Northbrook, IL 60062-7127 Attention: Telefax: S-4 AMMC CDO I, LIMITED By: American Money Management Corp., as Collateral Manager By: /s/ David P. Meyer -------------------------- Name: David P. Meyer Title: Vice President Notice Address: American Money Management Corp. One East Fourth Street, 3rd Floor Cincinnati, OH 45202 Attention: Telefax: AMMC CDO II, LIMITED By: American Money Management Corp., as Collateral Manager By: /s/David P. Meyer -------------------------- Name: David P. Meyer Title: Vice President Notice Address: American Money Management Corp. One East Fourth Street, 3rd Floor Cincinnati, OH 45202 Attention: Telefax: S-5 BEAR STEARNS INVESTMENT PRODUCTS INC. By: /s/Gregory Hanley -------------------------- Name: Gregory Hanley Title: Vice President Notice Address: Bear Stearns Investment Products Inc. 245 Park Avenue New York, New York 10167 Attention: Telefax: S-6 BLACK DIAMOND CLO 1998-1 LTD. By: /s/Alan Corkish -------------------------- Name: Alan Corkish Title: Director Notice Address: Black Diamond Capital Management, L.L.C. 100 Field Drive, Suite 140 Lake Forest, IL 60045 Attention: Telefax: BLACK DIAMOND CLO 2000-1 LTD. By: /s/ Alan Corkish -------------------------- Name: Alan Corkish Title: Director Notice Address: Black Diamond Capital Management, L.L.C. 100 Field Drive, Suite 140 Lake Forest, IL 60045 Attention: Telefax: S-7 BLUE SQUARE FUNDING LIMITED SERIES 3 By: Bankers Trust Company, as Trustee By: -------------------------- Name: Title: Notice Address: Blue Square Funding Limited Series 3 c/o Bankers Trust Company, as Trustee 1761 E. Saint Andrew Place Santa Ana, CA 92705 Attention: Telefax: S-8 BLACK DIAMOND CAPITAL MANAGEMENT, LLC By: CANADIAN IMPERIAL BANK OF COMMERCE By: /s/ Stephanie DeVane -------------------------- Name: Stephanie DeVane Title: Authorized Signatory Notice Address: Canadian Imperial Bank of Commerce 425 Lexington Avenue New York, NY 10017 Attention: Telefax: S-9 CSAM FUNDING I By: -------------------------- Name: Title: Notice Address: CSAM Funding I 466 Lexington Avenue, 14th Floor New York, NY 10017 Attention: Judith Drummond Telefax: (713) 216-3572 S-10 FOOTHILL INCOME TRUST, L.P. By: /s/ R. Michael Bohannon -------------------------- Name: R. Michael Bohannon Title: Managing Member Notice Address: Foothill Income Trust, L.P. 2450 Colorado Avenue, Suite 3000 West Santa Monica, California 90404 Attention: Telefax: FOOTHILL INCOME TRUST II, L.P. By: /s/ R. Michael Bohannon -------------------------- Name: R. Michael Bohannon Title: Managing Member Notice Address: Foothill Income Trust, L.P. 2450 Colorado Avenue, Suite 3000 West Santa Monica, California 90404 Attention: Telefax: S-11 GLENEAGLES TRADING LLC By: /s/ Diana L. Mushill -------------------------- Name: Diana L. Mushill Title: Asst. Vice President Notice Address: Bank of America, N.A. 101 North Tryon Street, NC1-001-15-01 Charlotte, NC 28273 Attention: Telefax: S-12 HIGHLAND LEGACY LIMITED By: Highland Capital Management, L.P., As Collateral Manager By: /s/ Louis Koven -------------------------- Name: Louis Koven Title: Executive Vice President-CFO Notice Address: Highland Capital Management, L.P. 13455 Noel Road, Suite 1300 Dallas, TX 74250 Attention: Telefax: S-13 THE INTERNATIONAL COMMERCIAL BANK OF CHINA, NEW YORK AGENCY By: /s/ Wen-Hui Wang -------------------------- Name: Wen-Hui Wang Title: Assistant Vice President & Deputy General Manager Notice Address: International Commercial Bank of China New York Agency 65 Liberty Street New York, NY 10005 Attention: Telefax: S-14 KZH HIGHLAND-2 LLC By: /s/ Anthony Iarrobino -------------------------- Name: Anthony Iarrobino Title: Authorized Agent Notice Address: KZH Highland-2 LLC 140 E. 45th Street, 11th Floor New York, NY 10017 Attention: Telefax: S-15 LONG LANE MASTER TRUST IV By: /s/ Renee Nader -------------------------- Name: Renee Nader Title: Notice Address: Attention: Telefax: NATIONAL WESTMINSTER BANK PLC By: NatWest Capital Markets Limited, its Agent By: Greenwich Capital Markets, Inc., its Agent By: /s/ Harry Paschalidis -------------------------- Name: Harry Paschalidis Title: Vice President Notice Address: National Westminster Bank PLC One East Fourth Street, 3rd Floor Cincinnati, OH 45202 Attention: Telefax: S-16 PAM CAPITAL FUNDING LP By: Highland Capital Management, L.P., As Collateral Manager By: /s/ Louis Koven -------------------------- Name: Louis Koven Title: Executive Vice President-CFO Notice Address: Highland Capital Management, L.P. 13455 Noel Road, Suite 1300 Dallas, TX 75240 Attention: Telefax: PINEHURST TRADING, INC. By: /s/ Diana L. Mushill -------------------------- Name: Diana L. Mushill Title: Asst. Vice President Notice Address: Bank of America, N.A. 101 North Tryon Street, NC1-001-15-01 Charlotte, NC 28273 Attention: Telefax: S-17 TRANSAMERICA LIFE INSURANCE COMPANY By: /s/John Bailey -------------------------- Name: John Bailey Title: Vice President Notice Address: Transamerica Life Insurance Company 4333 Edgewood Road NE Cedar Rapids, Iowa 52499 Attention: Telefax: S-18 TRS1 LLC By: /s/ Rosemary F. Dunne -------------------------- Name: Rosemary F. Dunne Title: Attorney-in-Fact Notice Address: Attention: Telefax: S-19 EX-10 11 exhibit10-9.txt LIMITED WAIVER REGARDING CREDIT AGREEMENT - LIDO LIDO CASINO RESORT, LLC LIMITED WAIVER REGARDING CREDIT AGREEMENT This LIMITED WAIVER REGARDING CREDIT AGREEMENT (this "Waiver") is dated as of March 31, 2002 and entered into by and among LIDO CASINO RESORT, LLC, a Nevada limited liability company ("Borrower"), the financial institutions listed on the signature pages hereof ("Lenders") and THE BANK OF NOVA SCOTIA ("Scotiabank"), as administrative agent for Lenders (in such capacity, the "Administrative Agent"), and is made with reference to that certain Credit Agreement, dated as of October 19, 2001, by and among Borrower, Lenders and Administrative Agent (the "Credit Agreement"). Capitalized terms used herein without definition shall have the same meanings herein as set forth in the Credit Agreement. RECITALS WHEREAS, Borrower has advised Lenders that LVSI and Venetian may not be in compliance with the Minimum Consolidated Adjusted EBITDA covenant in the LVSI/Venetian Credit Agreement (the "EBITDA Covenant") as of the Fiscal Quarter ending March 31, 2002; WHEREAS, Borrower has further advised Lenders that LVSI and Venetian expect to obtain a waiver from the lenders under the LVSI/Venetian Credit Agreement of compliance with the Minimum Consolidated Adjusted EBITDA covenant in such agreement for the Fiscal Quarter ending March 31, 2002; WHEREAS, Borrower has requested that Lenders agree to waive any Event of Default under the Credit Agreement insofar as it arises from the failure of LVSI and Venetian to comply with the EBITDA Covenant; NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows: Section 1. LIMITED WAIVER 1.1 Waiver of Event of Default Regarding the EBITDA Covenant ------------------------------------------------------------ A. Subject to the terms and conditions set forth herein and in reliance on the representations and warranties of Borrower herein contained, Lenders hereby waive any Event of Default under Subsection 8.2(iii) of the Credit Agreement which arises solely from a breach by LVSI and Venetian of the EBITDA Covenant for the Fiscal Quarter ending March 31, 2002. B. Without limiting the generality of the provisions of subsection 10.6 of the Credit Agreement, the waiver set forth herein shall be limited precisely as written to the extent such waiver relates solely to the noncompliance by LVSI and Venetian with the provisions of the EBITDA Covenant for the Fiscal Quarter ending March 31, 2002, in the manner and to the extent described above, and nothing in this Waiver shall be deemed to (a) constitute a waiver of compliance by LVSI or Venetian under subsection 7.6C of the LVSI/Venetian Credit Agreement or otherwise or (b) prejudice any right or remedy that Administrative Agent or any Lender may now have (except to the extent such right or remedy was based upon existing defaults that will not exist after giving effect to this Waiver) or may have in the future under or in connection with the Credit Agreement or any other instrument or agreement referred to therein. Except as expressly set forth herein, the terms, provisions and conditions of the Credit Agreement and the other Loan Documents shall remain in full force and effect and in all other respects are hereby ratified and confirmed. Section 2. CONDITIONS TO EFFECTIVENESS This Waiver shall become effective only upon the satisfaction of all of the following conditions precedent (or waiver of any or all of the conditions precedent by the Administrative Agent in its sole discretion) (the date of satisfaction or waiver of such conditions being referred to herein as the "Waiver Effective Date"): A. On or before the Waiver Effective Date, Borrower shall deliver to Lenders (or to Administrative Agent for Lenders with sufficient originally executed copies, where appropriate, for each Lender and its counsel) the following, each, unless otherwise noted, dated the Waiver Effective Date: 1. Resolutions of the Board of Directors of LVSI approving and authorizing the execution, delivery and performance of this Waiver, certified as of the Waiver Effective Date by the corporate secretary or an assistant secretary of LVSI as being in full force and effect without modification or amendment; 2. Signature and incumbency certificates of the officers of LVSI executing this Waiver; 3. Executed copies of this Waiver by all parties hereto; and 1 4. Payment of a waiver fee of one-eighth of one percent (0.125%) of the Commitments and all others costs and expenses due under the Credit Agreement. B. Administrative Agent shall have received from Borrower a duly executed waiver regarding the LVSI/Venetian Credit Agreement in form and substance reasonably satisfactory to Administrative Agent. C. No Event of Default or Potential Event of Default under (and as defined in) the Credit Agreement shall have occurred and be continuing or would result from the effectiveness of this Waiver. D. On or before the Waiver Effective Date, all corporate and other proceedings taken or to be taken in connection with the transactions contemplated hereby and all documents incidental thereto not previously found acceptable by Administrative Agent, acting on behalf of Lenders, and its counsel shall be reasonably satisfactory in form and substance to Administrative Agent and such counsel, and Administrative Agent and such counsel shall have received all such counterpart originals or certified copies of such documents as Administrative Agent may reasonably request. Section 3. BORROWER'S REPRESENTATIONS AND WARRANTIES In order to induce Lenders to enter into this Waiver, Borrower represents and warrants to each Lender that the following statements are true, correct and complete: A. Corporate Power and Authority. Borrower has all requisite corporate power and authority to enter into this Waiver. B. Authorization of Agreements. The execution and delivery of this Waiver has been duly authorized by all necessary corporate action on the part of Borrower. C. No Conflict. The execution and delivery by Borrower of this Waiver does not and will not (i) violate any provision of any law or any governmental rule or regulation applicable to Borrower or any of its Subsidiaries, the Certificate or Articles of Incorporation or Bylaws of Borrower or any of its Subsidiaries or any order, judgment or decree of any court or other agency of government binding on Borrower or any of its Subsidiaries, (ii) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any Contractual Obligation of Borrower or any of its Subsidiaries, (iii) result in or require the creation or imposition of any Lien upon any of the properties or assets of Borrower or any of its Subsidiaries, or (iv) require any approval of stockholders or any approval or consent of any Person under any Contractual Obligation of Borrower or any of its Subsidiaries except for such violations, conflicts, approvals and consents the failure of which to obtain could not reasonably be expected to have a Material Adverse Effect. D. Governmental Consents. The execution and delivery by Borrower of this Waiver does not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any federal, state or other governmental authority or regulatory body. E. Binding Obligation. This Waiver has been duly executed and delivered by Borrower and when executed and delivered, will be the legally valid and binding obligation of Borrower, enforceable against Borrower in accordance with its respective terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability. F. Incorporation of Representations and Warranties From Credit Agreement. The representations and warranties contained in Section 5 of the Credit Agreement are and will be true, correct and complete in all material respects on and as of the Waiver Effective Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case they were true, correct and complete in all material respects on and as of such earlier date. Section 4. MISCELLANEOUS A. Effect on the Credit Agreement and the Other Loan Documents. (i) Except as specifically amended by this Waiver, the Credit Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed. (ii) The execution, delivery and performance of this Waiver shall not, except as expressly provided herein, constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of Administrative Agent or any Lender under, the Credit Agreement or any of the other Loan Documents. 2 B. Fees and Expenses. Borrowers acknowledge that all costs, fees and expenses as described in subsection 10.2 of the Credit Agreement incurred by Administrative Agent and its counsel with respect to this Waiver and the documents and transactions contemplated hereby shall be for the account of Borrower. C. Headings. Section and subsection headings in this Waiver are included herein for convenience of reference only and shall not constitute a part of this Waiver for any other purpose or be given any substantive effect. D. Applicable Law. THIS WAIVER AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. E. Counterparts; Effectiveness. This Waiver may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. This Waiver shall become effective upon the execution of a counterpart hereof by Borrower, Requisite Lenders and each of the Loan Parties and receipt by the Company and Administrative Agent of written or telephonic notification of such execution and authorization of delivery thereof, and satisfaction of the conditions in Section 2 hereof. 3 IN WITNESS WHEREOF, the parties hereto have caused this Waiver to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above. BORROWER: LIDO CASINO RESORT, LLC, By: Lido Casino Resort Holding Company, LLC, as managing member By: Lido Intermediate Holding Company, LLC as managing member By: Venetian Casino Resort, LLC, as sole member By: Las Vegas Sands, Inc., its managing member By: /s/David Friedman ------------------------------ Name: David Friedman Title: Assistant to the Chairman of the Board and Secretary Notice Address: 3355 Las Vegas Boulevard, South, Room 1A Las Vegas, Nevada 89109 Attention: General Counsel Telefax: (702) 733-5499 4 LENDERS: THE BANK OF NOVA SCOTIA, individually and as a Lender and as Administrative Agent By: /s/ Jed Richardson ------------------------------ Name: Jed Richardson Title: Director Notice Address: The Bank of Nova Scotia 580 California Street, Suite 2100 San Francisco, California 94104 Attention: Alan Pendergast Telefax: (415) 397-0791 With a copy to: The Bank of Nova Scotia 600 Peachtree Street, N.E. Atlanta, Georgia 30308 Attention: Craig Subryan Telefax: (404) 888-8998 5 -----END PRIVACY-ENHANCED MESSAGE-----