-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, XGRu4MbTTLQngY7avuX1rzsZrf/LVhblM1YkKOfZvXF1P3ZTmect30VEVMcJqX0s mmzDnrty2zZTNP/uZsf1dA== 0000898430-95-000343.txt : 19950616 0000898430-95-000343.hdr.sgml : 19950616 ACCESSION NUMBER: 0000898430-95-000343 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950321 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MGM GRAND INC CENTRAL INDEX KEY: 0000789570 STANDARD INDUSTRIAL CLASSIFICATION: AIR TRANSPORTATION, NONSCHEDULED [4522] IRS NUMBER: 880215232 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-10362 FILM NUMBER: 95522006 BUSINESS ADDRESS: STREET 1: 3799 LAS VEGAS BLVD S CITY: LAS VEGAS STATE: NV ZIP: 89109 BUSINESS PHONE: 7028913333 MAIL ADDRESS: STREET 1: PO BOX 98655 CITY: LAS VEGAS STATE: NV ZIP: 89193-8655 FORMER COMPANY: FORMER CONFORMED NAME: GRAND NAME CO DATE OF NAME CHANGE: 19870713 10-K 1 FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994. OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from to ------------------------- ------------------- COMMISSION FILE NUMBER 0-16760 MGM GRAND, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 88-0215232 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 3799 LAS VEGAS BOULEVARD SOUTH LAS VEGAS, NEVADA 89109 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE) (702) 891-3333 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) Securities registered pursuant to Section 12(b) of the Act: NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED ------------------- --------------------- Common Stock, $.01 Par Value New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None 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. Yes X No ---- ---- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K ((S)229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of Registrant's Common Stock held by non- affiliates (based on the closing price on the New York Stock Exchange-- Composite Transactions on March 15, 1995) was approximately $298.8 billion. As of March 15, 1995, 47,941,010 shares of Registrant's Common Stock, $.01 par value, were outstanding. Portions of the Annual Report to Stockholders for the fiscal year ended December 31, 1994 are incorporated by reference into Part II of this Form 10-K. Portions of the Registrant's Proxy Statement dated March 30, 1995 are incorporated by reference into Part III of this Form 10-K. PART 1 ITEM 1. BUSINESS GENERAL MGM Grand, Inc. (the "Company") was organized as a Delaware corporation on January 29, 1986. Through its wholly-owned subsidiary, MGM Grand Hotel, Inc. ("MGM Grand Hotel"), the Company commenced operations on December 18, 1993 of the MGM Grand Hotel and Casino, a large-scale integrated hotel/casino entertainment complex. The resort is located on approximately 112 acres on Las Vegas Boulevard South (the "Strip") in Las Vegas, Nevada, across the street from Excalibur and the Tropicana Hotel/Casino. MGM Grand Hotel Finance Corp. ("MGM Finance"), a wholly-owned subsidiary of the Company, was formed to issue First Mortgage Notes to the public, to incur bank debt (the "Bank Loan"), and to lend the aggregate proceeds thereof to MGM Grand Hotel to finance the construction and opening of the MGM Grand Hotel and Casino. In December 1993, the Company entered into an agreement with Bally's for the joint development and operation of an elevated monorail linking the MGM Grand Hotel and Casino with the corner of Flamingo Road and the Las Vegas Strip. The project is a one-mile, high-capacity, transit-grade system with an estimated cost of $25 million. The project costs are shared equally with Bally's. The system is scheduled to be operational by June 1995. On December 28, 1994, the Company and Primadonna Resorts, Inc. ("Primadonna") executed the definitive agreement for their joint development of a $350 million themed hotel casino called NEW YORK-NEW YORK. The project, which will be owned equally by the Company and Primadonna, will be located on the northwest corner of Tropicana Avenue and Las Vegas Boulevard, across from the MGM Grand Hotel. The preliminary plans for NEW YORK-NEW YORK call for the destination resort to include a 2,200-room hotel and casino, themed entertainment attractions and restaurant/retail outlets. The Company and Primadonna will jointly own, develop and operate NEW YORK-NEW YORK, which is expected to break ground during the first quarter of 1995. The 18-acre site, located on the busiest intersection in Nevada, was contributed to the venture by the Company during January 1995, and in February 1, 1995, the venture acquired an adjacent two acre parcel. The Company operated MGM Grand Air, a scheduled and charter airline service, through its wholly-owned subsidiary, MGM Grand Air, Inc., from September 1987 until December 31, 1994, when MGM Grand Air was sold. For certain information about the Company's industry segments, see Note 18 to the Company's Consolidated Financial Statements. The Company's principal executive offices are located at 3799 Las Vegas Boulevard South, Las Vegas, Nevada 89109. The Company's telephone number is (702) 891-3333. HOTELS AND GAMING MGM Grand Hotel and Casino MGM Grand Hotel opened the MGM Grand Hotel and Casino on December 18, 1993. The new resort is located on approximately 112 acres on the Strip in Las Vegas Nevada, across the street from Excalibur and the Tropicana Hotel/Casino. MGM Grand Hotel and Casino is a multi-themed destination resort which management believes is a "must see" attraction for visitors to Las Vegas. The resort has over 350 feet of frontage on the Strip and 1,450 feet on Tropicana Avenue. The complex is easily accessible from McCarran International Airport and from Interstate 15 via Tropicana Avenue. 1 MGM Grand Hotel creates an exciting and unique gaming and entertainment experience which is intended to appeal to all segments of the Las Vegas market. The entrance to the hotel and casino on the Strip is highlighted by a seven story lion through which visitors proceed to a 70 foot high reproduction of the Emerald City, inspired by "The Wizard of Oz". The casino is approximately 171,500 square feet in size, and is one of the largest casinos in the world. The casino has 3,500 slot machines and 155 table games, a state of the art baccarat pit, a poker room, a race and sports book, and a keno lounge. The casino features four separate themed areas which enhance the entertainment experience of the casino patron: Emerald City, Hollywood, Monte Carlo, and Sports. The hotel, which management believes is the largest in the world, has 5,005 rooms, including approximately 4,254 typical guest rooms decorated in five different themes: Deep South, Hollywood, Monte Carlo, Emerald, and Casablanca. The hotel also has 751 luxury suites, more than any other Las Vegas hotel. These suites range in size from 675 to 6,040 square feet. The hotel provides guests with a state of the art health spa, a swimming pool, and four lighted tennis courts. MGM Grand Hotel has Las Vegas' only full scale theme park. Situated on 33 acres, the park has 12 rides and attractions, extensive food and beverage outlets, ten retail shops, and a large craft area where visitors can view handcrafts being made. Other entertainment facilities include: a 31,000 square foot Midway containing 30 carnival games of skill; an extensive video arcade including virtual reality simulators; a 600 seat showroom providing celebrity entertainment; a 1,700 seat showroom specifically designed for the EFX production show, the Company's original grand spectacle special effects stage production; eight restaurants and a food court; and a 15,200 seat special events center, providing a venue for great entertainers such as Barbra Streisand and Luther Vandross, as well as sporting events. MGM Grand Hotel uses the unique characteristics of the property to target the following segments of the Las Vegas market: (i) free and independent travelers; (ii) tour and travel; (iii) special events/conventions; (iv) high end gaming; and (v) local. Las Vegas Market The MGM Grand Hotel and Casino operates in the Las Vegas market, and is located on the Strip. Las Vegas is the largest city in Nevada, with a metropolitan area population in excess of approximately 1,000,000, and one of the largest resort destinations in the world. Gaming has continued to be a strong and growing business in Las Vegas. Since 1984, Las Vegas Strip gaming revenues have increased at a compound annual growth rate of 9.8% from $1.4 billion in 1984 to $3.5 billion in 1994. The hotel industry in Las Vegas is highly competitive. In 1993 two other major themed resort hotels opened on the Strip; the Luxor with 2,500 rooms and 100,000 square feet of gaming space, and Treasure Island with 3,000 rooms and 90,000 square feet of gaming space. Several additional competing projects are in various stages of development. While all of the large themed resorts pose direct competition with the MGM Grand Hotel and Casino, Las Vegas Convention and Visitors Authority ("LVCVA") statistics show that tourism growth more than offset the increased capacity, as visitor volume for 1994 increased 19% over 1993 levels. Total visitors for 1994 topped 28 million. MGM Grand Hotel competes with gaming and resort facilities in their respective markets as well as gaming and resort facilities elsewhere in the world. To some extent, state lotteries and state-authorized card rooms, such as those operating in California, compete with the Company. Gambling, with various limitations and conditions, is now legal in numerous locations throughout the United States. The proliferation of such gaming facilities on riverboats and elsewhere is increasing. Also, as a result of certain legislative and court decisions, casino-type operations are being established 2 at various Native American reservations throughout the country. The development of fully operating casinos in California would likely have a negative effect on MGM Grand Hotel's operations in Nevada. Insurance The MGM Grand Hotel carries insurance of the type customary in the hotel and casino industry and in amounts deemed adequate by management to protect the properties. The policies provide customary business and commercial coverages, including workers' compensation, third party liability, property damage, boiler and machinery and business interruption. Government Regulation The ownership and operation of casino gaming facilities in Nevada are subject to: (i) the Nevada Gaming Control Act and the regulations promulgated thereunder (collectively, the "Nevada Act"); and (ii) various local regulation. The Company's gaming operations are subject to the licensing and regulatory control of the Nevada Gaming Commission (the "Nevada Commission"), the Nevada State Gaming Control Board (the "Nevada Board"), and the Clark County Liquor and Gaming Licensing Board (the "CCLGLB"). The Nevada Commission, the Nevada Board, and the CCLGLB are collectively referred to as the "Nevada Gaming Authorities." The laws, regulations and supervisory procedures of the Nevada Gaming Authorities are based upon declarations of public policy that are concerned with, among other things: (i) the prevention of unsavory or unsuitable persons from having a direct or indirect involvement with gaming at any time or in any capacity; (ii) the establishment and maintenance of responsible accounting practices and procedures; (iii) the maintenance of effective controls over the financial practices of licensees, including the establishment of minimum procedures for internal fiscal affairs and the safeguarding of assets and revenues, providing reliable record keeping and requiring the filing of periodic reports with the Nevada Gaming Authorities; (iv) the prevention of cheating and fraudulent practices; and (v) to provide a source of state and local revenues through taxation and licensing fees. Change in such laws, regulations and procedures could have an adverse effect on the Company's gaming operations. MGM Grand Hotel operates the casino and is required to be licensed by the Nevada Gaming Authorities. The gaming license requires the periodic payment of fees and taxes and is not transferable. MGM Grand Hotel is also licensed as a manufacturer and distributor of gaming devices. Another wholly-owned subsidiary of the Company, MGM Dist., Inc. ("MGM Dist."), is also licensed by the Nevada Gaming Authorities as a manufacturer and distributor of gaming devices, subject to certain conditions and limitations imposed by the Nevada Commission. The Company is required to be registered by the Nevada Commission as a publicly traded corporation ("Registered Corporation") and as such, it is required periodically to submit detailed financial and operating reports to the Nevada Commission and furnish any other information that the Nevada Commission may require. No person may become a stockholder of, or receive any percentage of profits from, MGM Grand Hotel or MGM Dist. without first obtaining licenses and approvals from the Nevada Gaming Authorities. The Company, MGM Grand Hotel and MGM Dist. have obtained from the Nevada Gaming Authorities the various registrations, approvals, permits and licenses required in order to engage in gaming activities in Nevada. The Nevada Gaming Authorities may investigate any individual who has a material relationship to, or material involvement with, the Company, MGM Grand Hotel or MGM Dist. in order to determine whether such individual is suitable or should be licensed as a business associate of a gaming licensee. Officers, directors and certain key employees of MGM Grand Hotel and MGM Dist. must file applications with the Nevada Gaming Authorities and may be required to be licensed or found suitable by the Nevada Gaming Authorities. Officers, directors and key employees of the Company who are actively and directly involved in the gaming activities of MGM Grand Hotel or MGM Dist. may be required to be licensed or 3 found suitable by the Nevada Gaming Authorities. The Nevada Gaming Authorities may deny an application for licensing for any cause they deem reasonable. A finding of suitability is comparable to licensing, and both require submission of detailed personal and financial information followed by a thorough investigation. The applicant for licensing or a finding of suitability or the gaming license by whom the applicant is employed or for whom the applicant serves must pay all the costs of the investigation. Changes in licensed positions must be reported to the Nevada Gaming Authorities and in addition to their authority to deny an application for a finding of suitability or licensure, the Nevada Gaming Authorities have jurisdiction to disapprove a change in a corporate position. If the Nevada Gaming Authorities were to find an officer, director or key employee unsuitable for licensing or unsuitable to continue having a relationship with the Company, MGM Grand Hotel or MGM Dist., the companies involved would have to sever all relationships with such person. In addition, the Nevada Commission may require the Company, MGM Grand Hotel or MGM Dist. to terminate the employment of any person who refuses to file appropriate applications. Determinations of suitability or of questions pertaining to licensing are not subject to judicial review in Nevada. The Company, MGM Grand Hotel and MGM Dist. are required to submit detailed financial and operating reports to the Nevada Commission. Substantially all material loans, leases, sales of securities and similar financing transactions by MGM Grand Hotel and MGM Dist., must be reported to or approved by the Nevada Commission. If it was determined that the Nevada Act was violated by MGM Grand Hotel or MGM Dist., the gaming licenses they hold could be limited, conditioned, suspended or revoked, subject to compliance with certain statutory and regulatory procedures. In addition, MGM Grand Hotel, MGM Dist., the Company and the persons involved could be subject to substantial fines for each separate violation of the Nevada Act at the discretion of the Nevada Commission. Further, a supervisor could be appointed by the Nevada Commission to operate the Company's gaming property and, under certain circumstances, earnings generated during the supervisor's appointment (except for the reasonable rental value of the Company's gaming property) could be forfeited to the State of Nevada. Limitation, conditioning or suspension of any gaming license or the appointment of a supervisor could (and revocation of any gaming license would) materially adversely affect the Company's gaming operations. Any beneficial holder of the Company's voting securities, regardless of the number of shares owned, may be required to file an application, be investigated, and have his suitability as a beneficial holder of the Company's voting securities determined if the Nevada Commission has reason to believe that such ownership would otherwise be inconsistent with the declared policies of the State of Nevada. The applicant must pay all costs of investigation incurred by the Nevada Gaming Authorities in conducting any such investigation. The Nevada Act requires any person who acquires more than 5% of the Company's voting securities to report the acquisition to the Nevada Commission. The Nevada Act requires that beneficial owners of more than 10% of the Company's voting securities apply to the Nevada Commission for a finding of suitability within thirty days after the Chairman of the Nevada Board mails a written notice requiring such filing. Under certain circumstances, an "institutional investor," as defined in the Nevada Act, which acquires more than 10% but not more than 15% of the Company's voting securities, may apply to the Nevada Commission for a Waiver of such finding of suitability if such institutional investor holds the voting securities for investment purposes only. An institutional investor shall not be deemed to hold voting securities for investment purposes unless the voting securities were acquired and are held in the ordinary course of business as an institutional investor and not for the purpose of causing, directly or indirectly, the election of a majority of the members of the board of directors of the Company, any change in the Company's corporate charter, bylaws, management, policies or operations of the Company or any of its gaming affiliates, or any other action which the Nevada Commission finds to be inconsistent with holding the Company's voting securities for investment purposes only. Activities that 4 are not deemed to be inconsistent with holding voting securities for investment purposes only include: (i) voting on all matters voted on by stockholders; (ii) making financial and other inquiries of management of the type normally made by securities analysts for informational purposes and not to cause a change in its management, policies or operations; and (iii) such other activities as the Nevada Commission may determine to be consistent with such investment intent. If the beneficial holder of voting securities who must be found suitable is a corporation, partnership or trust, it must submit detailed business and financial information including a list of beneficial owners. The applicant is required to pay all costs of investigation. Any person who fails or refuses to apply for a finding of suitability or a license within thirty days after being ordered to do so by the Nevada Commission or the Chairman of the Nevada Board, may be found unsuitable. The same restrictions apply to a record owner if the record owner, after request, fails to identify the beneficial owner. Any stockholder found unsuitable and who holds, directly or indirectly, any beneficial ownership of the common stock of a Registered Corporation beyond such period of time as may be prescribed by the Nevada Commission may be guilty of a criminal offense. The Company is subject to disciplinary action if, after it receives notice that a person is unsuitable to be a stockholder or to have any other relationship with the Company, MGM Grand Hotel or MGM Dist., the Company (i) pays that person any dividend or interest upon voting securities of the Company, (ii) allows that person to exercise, directly or indirectly, any voting right conferred through securities held by that person, (iii) pays remuneration in any form to that person for services rendered or otherwise, or (iv) fails to pursue all lawful efforts to require such unsuitable person to relinquish his voting securities for cash at fair market value. Additionally, the CCLGLB has taken the position that it has the authority to approve all persons owning or controlling the stock of any corporation controlling a gaming license. The Nevada Commission may, in its discretion, require the holder of any debt security of a Registered Corporation to file applications, be investigated and be found suitable to own the debt security of a Registered Corporation. If the Nevada Commission determines that a person is unsuitable to own such security, then pursuant to the Nevada Act, the Registered Corporation can be sanctioned, including the loss of its approvals, if without the prior approval of the Nevada Commission, it: (i) pays to the unsuitable person any dividend, interest, or any distribution whatsoever; (ii) recognizes any voting right by such unsuitable person in connection with such securities; (iii) pays the unsuitable person remuneration in any form; or (iv) makes any payment to the unsuitable person by way of principal, redemption, conversion, exchange, liquidation, or similar transaction. The Company is required to maintain a current stock ledger in Nevada that may be examined by the Nevada Gaming Authorities at any time. If any securities are held in trust by an agent or by a nominee, the record holder may be required to disclose the identity of the beneficial owner to the Nevada Gaming Authorities. A failure to make such disclosure may be grounds for finding the record holder unsuitable. The Company is also required to render maximum assistance in determining the identity of the beneficial owner. The Nevada Commission has the power to require the Company's stock certificates to bear a legend indicating that such securities are subject to the Nevada Act. However, to date, the Nevada Commission has not imposed such a requirement on the Company. The Company may not make a public offering of any securities without the prior approval of the Nevada Commission if the securities or the proceeds therefrom are intended to be used to construct, acquire or finance gaming facilities in Nevada, or to retire or extend obligations incurred for such purposes. Such approval, if given, does not constitute a finding, recommendation or approval by the Nevada Commission or the Nevada Board as to the accuracy or adequacy of the prospectus or the investment merits of the securities. Any representation to the contrary is unlawful. On July 28, 1994, the Nevada Commission granted the Company prior approval to make public offerings for a period of one year, subject to certain conditions (the "Shelf Approval"). However, the Shelf Approval may be rescinded for good cause without prior notice upon the issuance of an 5 interlocutory stop order by the Chairman of the Nevada Board. The Shelf Approval does not constitute a finding, recommendation or approval by the Nevada Commission or the Nevada Board as to the accuracy or adequacy of the prospectus or the investment merits of the securities offered. Any representation to the contrary is unlawful. Changes in control of the Company through merger, consolidation, stock or asset acquisitions, management or consulting agreements, or any act or conduct by a person whereby he obtains control, may not occur without the prior approval of the Nevada Commission. Entities seeking to acquire control of a Registered Corporation must satisfy the Nevada Board and the Nevada Commission concerning a variety of stringent standards prior to assuming control of such Registered Corporation. The Nevada Commission may also require controlling stockholders, officers, directors and other persons having a material relationship or involvement with the entity proposing to acquire control, to be investigated and licensed as part of the approval process of the transaction. The Nevada legislature has declared that some corporate acquisitions opposed by management, repurchases of voting securities and corporate defense tactics affecting Nevada gaming licensees, and Registered Corporations that are affiliated with those operations, may be injurious to stable and productive corporate gaming. The Nevada Commission has established a regulatory scheme to ameliorate the potentially adverse effects of these business practices upon Nevada's gaming industry and to further Nevada's policy to: (i) assure the financial stability of corporate gaming operators and their affiliates; (ii) preserve the beneficial aspects of conducting business in the corporate form; and(iii) promote a neutral environment for the orderly governance of corporate affairs. Approvals are, in certain circumstances, required from the Nevada Commission before the Company can make exceptional repurchases of voting securities above the current market price thereof and before a corporate acquisition opposed by management can be consummated. The Nevada Act also requires prior approval of a plan of recapitalization proposed by the Company's board of directors in response to a tender offer made directly to the Registered Corporation's stockholders for the purposes of acquiring control of the Registered Corporation. License fees and taxes, computed in various ways depending on the type of gaming or activity involved, are payable to the State of Nevada and to Clark County, Nevada. Depending upon the particular fee or tax involved, these fees and taxes are payable either monthly, quarterly or annually and are based upon either: (i) a percentage of the gross revenues received; (ii) the number of gaming devices operated; or (iii) the number of table games operated. A casino entertainment tax is also paid by MGM Grand Hotel where entertainment is furnished in connection with the selling of food or refreshments. Nevada licensees that hold a license as an operator of a slot machine route, a manufacturer or a distributor, such as MGM Grand Hotel and MGM Dist., also pay certain fees and taxes to the State of Nevada. Any person who is licensed, required to be licensed, registered, required to be registered, or is under common control with such persons (collectively, "Licensees"), and who proposes to become involved in a gaming venture outside of Nevada, is required to deposit with the Nevada Board, and thereafter maintain, a revolving fund in the amount of $10,000 to pay the expenses of investigation of the Nevada Board of their participation in such foreign gaming. The revolving fund is subject to increase or decrease in the discretion of the Nevada Commission. Thereafter, Licensees are also required to comply with certain reporting requirements imposed by the Nevada Act. Licensees are also subject to disciplinary action by the Nevada Commission if they knowingly violate any laws of the foreign jurisdiction pertaining to the foreign gaming operation, fail to conduct the foreign gaming operation in accordance with the standards of honesty and integrity required of Nevada gaming operations, engage in activities that are harmful to the State of Nevada or its ability to collect gaming taxes and fees, or employ a person in the foreign operation who has been denied a license or a finding of suitability in Nevada on the ground of personal unsuitability. 6 The sale of alcoholic beverages by MGM Grand Hotel is subject to licensing, control and regulation by the applicable local authorities. All licenses are revocable and are not transferable. The agencies involved have full power to limit, condition, suspend or revoke any such license, and any such disciplinary action could (and revocation would) have a material adverse effect upon the operations of MGM Grand Hotel. Pursuant to a 1985 agreement between the State of Nevada and the United States Department of the Treasury (the "Treasury"), the Nevada Commission and the Nevada Board have authority to enforce their own cash transaction reporting laws applicable to casinos which substantially parallel the federal Bank Secrecy Act. Under the Money Laundering Suppression Act of 1994, which was passed by Congress, the Secretary of the Treasury retained the ability to permit states, including Nevada, to continue to enforce their own cash transaction reporting laws applicable to casinos. The Nevada Act requires most gaming licensees to file reports related to cash purchases of chips, cash wagers, cash deposits or cash payment of gaming debts, if any such transactions aggregate more than $10,000 in a 24-hour period. Casinos are required to monitor receipts and disbursements of currency in excess of $10,000 and report them to the Treasury. Although it is not possible to quantify the full impact of these requirements on the Company's business, the changes are believed to have had some adverse effect on results of operations since 1985. On November 28, 1994, the Treasury enacted amendments (effective December 1, 1994) to the federal regulations under the Bank Secrecy Act. The amendments require casinos subject to the Bank Secrecy Act to implement written programs no later than June 1, 1995 to assure and monitor compliance with the Bank Secrecy Act. Such programs must include "know your customer" and suspicious transacting reporting components. It is anticipated that the Nevada Commission will enact amendments to the Nevada Act which will parallel the amendments to the Bank Secrecy Act. As a result, the Company will, in the future, be required to implement such a program. Competition The hotel industry is highly competitive. Hotels located on or near the strip (" Strip Hotels") compete primarily with other Strip Hotels and with a few major hotels in downtown Las Vegas. Strip Hotels offering similar prices compete with each other primarily on the basis of quality of rooms, restaurants and facilities, entertainment offered, complimentary goods and services given, credit limits and quality of personal attention offered to guests and casino customers. The Company's hotel/casino operations also compete with a large number of hotels and motels, and gaming facilities not related to hotels or motels, located in and near Las Vegas. The Theme Park competes with all other forms of entertainment, lodging and recreational activities, including other theme parks, especially those located in southern California. Some of the Company's competitors are larger than the Company and may have greater resources. According to the LVCVA, as of December 31, 1994, there were approximately 86,000 hotel and motel rooms in the Las Vegas area. In addition, the LVCVA reports proposals to construct approximately 37,000 more hotel and motel rooms, including proposals for three themed hotel/casino properties on the Strip between Tropicana and Flamingo Avenues, one of which is the Company's NEW YORK- NEW YORK project. The Company cannot make any prediction as to how many additional rooms will be constructed in Las Vegas. The Company's future operating results could be adversely affected by excess Las Vegas room and gaming capacity. In addition to competing with hotel/casino facilities elsewhere in Nevada (i.e., the Reno/Lake Tahoe area and the rapidly expanding Laughlin area) and in Atlantic City, the Company competes with hotel/casino facilities elsewhere in the world and with state lotteries. Certain states have recently legalized, and several other states are currently considering, legalizing casino gaming in specific geographic areas, including Colorado, Illinois, Iowa, Louisiana, Mississippi, Missouri, Oregon, South 7 Dakota and Tennessee. Legalized casino gambling in other states could adversely affect the Company's activities in Las Vegas, particularly if such legalization were to occur in areas close to Nevada, such as California. Additionally, certain gaming operations are conducted or have been proposed on federal Indian reservations, including those located in the primary market to be served by the MGM Grand Hotel. In addition, with respect to group bookings, the Company's hotel/casino facilities in Las Vegas also compete with hotels and resorts, which do not include casinos, throughout the United States. MGM GRAND AIR On December 31, 1994, in an effort to focus all the Company's efforts on the conduct and expansion of its core entertainment, hotel and gaming business, the Company completed the sale of MGM Grand Air, which it had operated since 1987 as a scheduled and charter airline service. Summary Operating Data for Passenger Service The following table (unaudited) sets forth selected operating data relating to MGM Grand Air's passenger service for the periods indicated.
1993 QUARTERS 1994 QUARTERS ----------------------------------- ------------------------------- FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH ------- ------- ------- -------- ------ ------ ------- ------- Operating Revenues (000) $ 4,938 $ 4,719 $ 4,732 $ 6,644 $4,144 $5,841 $ 4,889 $ 6,944 Depreciation and amorti- zation (000) (1) $ 1,596 $ 1,567 $ 1,568 $ 1,641 $ 43 $ 106 $ 210 $ 233 Operating income (loss) (000) (2) $(2,326) $(2,799) $(2,429) $(70,890) $ (280) $ 464 $(2,822) $(2,091) Aircraft block hours flown 1,066 964 813 1,004 703 935 1,190 2,315 Yield per block hour flown (3) $ 4,632 $ 4,895 $ 5,820 $ 6,618 $5,895 $6,247 $ 4,108 $ 3,000
- -------- (1) Excludes 1993 fourth quarter depreciation/amortization adjustment--see also (2). (2) Includes 1993 fourth quarter depreciation/amortization expense adjustment of $68,948,000. (3) The average revenues per block hour flown. EMPLOYEES As of December 31, 1994, the Company employed approximately 7,120 full time equivalent employees at MGM Grand Hotel and its corporate offices. None of the Company's employees are covered by collective bargaining agreements. ITEM 2. PROPERTIES The Company's principal executive offices are located at 3799 Las Vegas Boulevard South, Las Vegas, Nevada 89109, where it rents approximately 7,028 square feet from MGM Grand Hotel. MGM Grand Hotel's principal executive offices are also located at 3799 Las Vegas Boulevard South, Las Vegas, Nevada, 89109. Certain other office and warehouse space is leased by MGM Grand Hotel consisting of approximately 132,000 square feet located in Las Vegas, Nevada, for an annual rent of approximately $374,000. Through the date of sale of MGM Grand Air on December 31, 1994, MGM Grand Air maintained its headquarters at 1500 Rosecrans Avenue, Suite 350, Manhattan Beach, California 90266. The purchaser of MGM Grand Air assumed all lease liabilities, including a lease for approximately 12,300 square feet, 3,100 of which is sublet to an unrelated party. MGM Grand Air's annual aggregate rent payments for its office, terminal and other facilities were approximately $405,000. 8 ITEM 3. LEGAL PROCEEDINGS None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. EXECUTIVE OFFICERS OF THE REGISTRANT FRED BENNINGER (age 78) has served as a Director of the Company since February 1986, and as Chairman of the Board since August 1987. He also served as President of the Company from August 1987 to March 1990. He served as Chairman of the Executive Committee on the Board of Directors of MGM/UA Communications Co. from July 1988 to January 1990. He was President of Tracinda from March 1982 to July 1987 and Chairman of the Executive Committee of MGM Grand Hotels, Inc. from 1971 to April 1986. ROBERT R. MAXEY (age 57) has served as President, Chief Executive Officer and Director of the Company since January 1991. Prior thereto, he was President and Chief Executive Officer of MarCor Resort Properties, Inc. a hotel/casino operator. ALEX YEMENIDJIAN (age 39) has served as Chief Financial Officer of the Company since May 1994, and Executive Vice President of the Company since June 1992, as Chairman of the Executive Committee from January 1991 to June 1992, and as President and Chief Operating Officer of the Company from March 1990 to January 1991. Since January 1990, he has also served as an executive of Tracinda. Chairman of the Executive Committee and Director of MGM/UA Communications Co. from January to November 1990. For more than five years prior thereto, he served as managing partner of Parks, Palmer, Turner and Yemenidjian, a public accounting firm. K. EUGENE SHUTLER (age 56) has served as Executive Vice President and General Counsel and Director of the Company since February 1991. For more than 5 years prior thereto, he was a member of the law firm of Troy and Gould Professional Corporation. SCOTT LANGSNER (age 41) has served as Secretary/Treasurer of the Company since July 1987. 9 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's Common Stock is listed on the New York Stock Exchange. For price information with respect to such Common Stock, see page 42 of the Company's 1994 Annual Report to Stockholders, which information is incorporated herein by this reference. As of March 15, 1995, there were approximately 2,827 record holders of the Company's Common Stock. The Company has not paid any dividends to date on the Common Stock. The declaration of dividends (which is within the discretion of the Company's Board of Directors) will depend on the earnings, financial position and capital requirements of the Company and other relevant factors existing at the time. ITEM 6. SELECTED FINANCIAL DATA The information set forth on page 1 of the Company's 1994 Annual Report to Stockholders is incorporated herein by this reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information set forth on pages 26 to 27 of the Company's 1994 Annual Report to Stockholders is incorporated herein by this reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information set forth on pages 28 to 42 of the Company's 1994 Annual Report to Stockholders is incorporated herein by this reference. ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ITEM 11. EXECUTIVE COMPENSATION ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information called for by PART III (Items 10, 11, 12 and 13) has been omitted, as the Company intends to file with the Securities and Exchange Commission not later than 120 days after the end of its fiscal year a definitive Proxy Statement pursuant to Regulation 14A, except that the information regarding the Company's executive officers called for by Item 10 of PART III has been included in PART I of this Form 10-K under the heading "Executive Officers of the Registrant." 10 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) The financial statements and schedules listed in the accompanying Index to Financial Statements at page 14 herein are filed as part of this Form 10-K. (b) Exhibits The exhibits listed in the accompanying Exhibit Index on pages 17-18 are filed as part of this Form 10-K. 11 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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. MGM GRAND, INC. By: Robert R. Maxey -------------------------------- Robert R. Maxey President and Chief Executive Officer (Principal Executive Officer) By: Alex Yemenidjian -------------------------------- Alex Yemenidjian Executive Vice President and Chief Financial Officer Dated: March 20, 1995 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- Fred Benninger Chairman of the Board March 20, 1995 - ----------------------------------- Fred Benninger Robert R. Maxey President and Chief March 20, 1995 - ----------------------------------- Executive Officer and Robert R. Maxey Director James D. Aljian Director March 20, 1995 - ----------------------------------- James D. Aljian Terry N. Christensen Director March 20, 1995 - ----------------------------------- Terry N. Christensen Director March , 1995 - ----------------------------------- Glenn C. Cramer Director March , 1995 - ----------------------------------- Willie D. Davis Director March , 1995 - ----------------------------------- Alexander M. Haig, Jr. Director March , 1995 - ----------------------------------- Lee A. Iacocca
12
SIGNATURE TITLE DATE --------- ----- ---- Director March , 1995 - ----------------------------------- Kirk Kerkorian Walter M. Sharp Director March 20, 1995 - ----------------------------------- Walter M. Sharp K. Eugene Shutler Executive Vice President and March 20, 1995 - ----------------------------------- Director K. Eugene Shutler Director March , 1995 - ----------------------------------- E. Parry Thomas Alex Yemenidjian Executive Vice President, March 20, 1995 - ----------------------------------- Chief Financial Officer, Alex Yemenidjian and Director
13 INDEX TO FINANCIAL STATEMENTS (ITEM 14(A))
ANNUAL REPORT TO FORM STOCKHOLDERS 10-K PAGE PAGE ------------ ---- Report of Independent Public Accountants...................... 41 Consolidated Statements of Operations--For the years ended December 31, 1994, 1993 and 1992............................. 28 Consolidated Balance Sheets as of December 31, 1994 and 1993.. 29 Consolidated Statements of Cash Flows--For the years ended December 31, 1994, 1993 and 1992............................. 30 Consolidated Statements of Stockholders' Equity--For the years ended December 31, 1994, 1993 and 1992....................... 31 Notes to Consolidated Financial Statements.................... 32 Selected Quarterly Financial Results (unaudited).............. 42 Report of Independent Public Accountants on Supplemental Schedule..................................................... 15 Schedule II--Valuation and Qualifying Accounts................ 16
All other schedules have been omitted either as inapplicable or not required under the instructions contained in Regulation S-X or because the information is included in the financial statements or the notes thereto. 14 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SUPPLEMENTAL SCHEDULE To MGM Grand, Inc.: We have audited in accordance with generally accepted auditing standards, the consolidated financial statements included in MGM Grand, Inc.'s Annual Report to stockholders incorporated by reference in this Form 10-K, and have issued our report thereon dated February 17, 1995. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The supplemental Schedule II as shown on page 16 is the responsibility of the Company's management, is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic consolidated financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic consolidated financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole. Arthur Andersen LLP Las Vegas, Nevada February 17, 1995 15 MGM GRAND, INC. AND SUBSIDIARIES SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992 (IN THOUSANDS)
ADDITIONS CHARGED BALANCE AT TO COSTS AMOUNTS BALANCE BEGINNING AND WRITTEN AT END OF DESCRIPTION OF PERIOD EXPENSES OFF PERIOD ----------- ---------- --------- ------- --------- FOR THE YEAR ENDED DECEMBER 31, 1994: Allowances for doubtful accounts...... $ 4,733 $17,166 $4,275 $17,624 ======= ======= ====== ======= FOR THE YEAR ENDED DECEMBER 31, 1993: Allowances for doubtful accounts...... $ 1,531 $ 3,855 $ 653 $ 4,733 ======= ======= ====== ======= FOR THE YEAR ENDED DECEMBER 31, 1992: Allowances for doubtful accounts...... $10,682 $ 238 $9,389 $ 1,531 ======= ======= ====== =======
16 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION ------- ----------- 3(1) Certificate of Incorporation of Company, as amended (incorporated by reference to Exhibit 3(1) to Registration Statement No. 33-3305). 3(2) Bylaws of Company, as amended (incorporated by reference to Exhibit 3(2) to Registration Statement No. 33-30337). 4 Indenture, dated as of May 1, 1992, among MGM Grand Hotel Finance Corp. ("MGM Finance"), as issuer, the Company, as guarantor, MGM Grand Hotel, Inc. ("MGM Grand Hotel"), as obligor with respect to certain covenants, and U.S. Trust Company of California, N.A., a national banking corporation validly organized and existing under the laws of the United States, as Trustee (the "Trustee"), relating to First Mortgage Notes, including forms of First Mortgage Notes (incorporated by reference to Exhibit (A)(IV) of the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1992). 10(1)* MGM Grand, Inc. Nonqualified Stock Option Plan (incorporated by reference to Exhibit A to Proxy Statement dated March 30, 1990). 10(2)* MGM Grand, Inc. Incentive Stock Option Plan (incorporated by refer- ence to Exhibit B to Proxy Statement dated March 30, 1990). 10(3) Credit Agreement among MGM Finance, MGM Grand Hotel and Bank of America N.T. & S.A. ("Bank Agent") and the banks named therein (the "Banks") (incorporated by reference to Exhibit 10(8) of the Company's 1992 10-K), together with amendments. 10(4) Guaranty executed by the Company in favor of Bank Agent and the Banks (incorporated by reference to Exhibit 10(9) of the Company's 1992 10-K). 10(5) Intercreditor Agreement by and among the Trustee, Bank Agent and Continental Bank, N.A., a national banking association ("Secured Lenders' Agent"), together with the consent thereto of MGM Finance (incorporated by reference to Exhibit 10(10) of the Company's 1992 10-K). 10(6) Collateral Assignment by MGM Finance in favor of Secured Lender's Agent, together with the consent thereto of the Company, MGM Grand Hotel, and MGM Grand Movieworld, Inc., a Nevada corporation ("Movieworld") (incorporated by reference to Exhibit 10(11) of the Company's 1992 10-K). 10(7) Stock Pledge Agreement by and between the Company and Secured Lend- ers' Agent (incorporated by reference to Exhibit 10(12) of the Company's 1992 10-K). 10(8) Loan Agreement between MGM Grand Hotel and MGM Finance (incorporated by reference to Exhibit 10(13) of the Company's 1992 10-K). 10(9) Secured Promissory Note by MGM Grand Hotel in favor of MGM Finance (incorporated by reference to Exhibit 10(14) of the Company's 1992 10-K). 10(10) Deed of Trust, Assignment of Rents and Security Agreement (the "Deed of Trust") by MGM Grand Hotel to Nevada Title Company, a Nevada cor- poration, as trustee, for the benefit of MGM Finance, as beneficiary (incorporated by reference to Exhibit 10(15) of the Company's 1992 10-K). 10(11) Loan Guaranty by the Company in favor of MGM Finance (incorporated by reference to Exhibit 10(16) of the Company's 1992 10-K). 10(12)* Letter Agreements, dated December 21, 1990 and February 9, 1993, between the Company and Robert Maxey (incorporated by reference to Exhibit 10(17) of the Company's 1992 10-K). 10(13)* Letter Agreements, dated December 13, 1990 and February 26, 1993, between the Company and K. Eugene Shutler (incorporated by reference to Exhibit 10(18) of the Company's 1992 10-K).
17
EXHIBIT NUMBER DESCRIPTION - ------ ----------- 10(14)* Letter Agreements, dated January 3, 1991 and February 9, 1993, between the Company and Alex Yemenidjian (incorporated by reference to Exhibit 10(19) of the Company's 1992 10-K). 10(15)* Letter Agreement, dated February 9, 1993, between the Company and Fred Benninger (incorporated by reference to Exhibit 10(20) of the Company's 1992 10-K). 10(16) Operating Agreement of NEW YORK-NEW YORK HOTEL, LLC. by and between MGM Grand, Inc. and PRMA Las Vegas, Inc. dated as of December 26, 1994. 10(17) Contribution Agreement with Joint Escrow Instructions by and among PRMA Las Vegas, Inc. and the Company and NEW YORK-NEW YORK HOTEL, LLC dated as of December 26, 1994. 13** The Company's 1994 Annual Report to Stockholders. 21 List of Subsidiaries. 27 Financial Data Schedule
- -------- * Management contract. ** Except for those portions which are expressly incorporated herein by reference, such Annual Report is furnished for the information of the Securities and Exchange Commission and is not to be deemed "filed" as part of the Report. 18 EX-10.3 2 CREDIT AGREEMENT EXHIBIT 10.3 FIRST AMENDMENT TO CREDIT AGREEMENT ----------------------------------- THIS FIRST AMENDMENT TO CREDIT AGREEMENT (the "First Amendment") is entered into as of October 30, 1992 by and among MGM Grand Hotel Finance Corp. ("MGM Finance"), a Nevada corporation, MGM Grand Hotel, Inc. ("MGM Hotel"), a Nevada corporation, Bank of Scotland ("Scotland") and United States National Bank of Oregon ("USNBO") (collectively, the "New Banks"), and Bank of America National Trust and Savings Association ("BofA"), as a Bank and as agent for the Banks (the "Agent") and amends that certain Credit Agreement dated as of May 13, 1992 among MGM Finance, MGM Hotel and BofA in its capacity as both the Agent and a Bank (the "Agreement"). RECITALS -------- The parties desire to amend certain provisions of the Agreement to, among other things, revise the definition of "Majority Banks" and to add two additional Banks as parties to the Agreement. MGM Finance has also requested the Banks (including the New Banks) and the Agent to waive certain delivery requirements relating to an environmental report required under the Agreement and to make certain other provisions with respect to such environmental report. The parties are willing to make such amendments on the terms and conditions set forth herein. The Banks (including the New Banks) and the Agent are willing to grant such waiver and agree to certain provisions with respect to the aforementioned environmental report on the terms and conditions set forth herein. TERMS AND CONDITIONS -------------------- NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereby agree as follows: 1. Terms. All terms used herein shall have the same meanings as ----- in the Agreement unless otherwise defined herein. All references to the Agreement shall mean the Agreement as hereby amended. 2. Amendments. The parties hereto hereby agree to amend the ---------- Agreement as follows: - 1 - 2.1 The definition of "Majority Banks" in Section 1.01 of the Agreement is hereby amended to read in its entirety as follows: "'Majority Banks'" means: (a) at any time when there are two (2) or fewer Banks party to this Agreement, Banks having at least 66-2/3% of the Commitments, (b) at any time when there are three (3) or more Banks party to this Agreement and one Bank has at least 66-2/3% of the Commitments, Banks having at least 66-2/3% of the Commitments but in no event less than two (2) Banks, and (c) at any other time, Banks having at least 66-2/3% of the Commitments." 2.2 The Agreement is further amended to add each of the New Banks as a Bank under the Agreement and the initial address for notice, the initial Domestic Lending Office, the initial Eurodollar Lending Notice or the initial Lending Office for each such Bank shall be as set forth on the signature pages of this First Amendment. Each New Bank agrees that its Commitment and Revolving Commitment is as set forth on Schedule 2.01 as amended by this First Amendment. Each New Bank agrees to be bound by the Agreement, the Loan Documents and the Intercreditor Agreement. Each New Bank hereby appoints and authorizes the Agent to exercise such powers under the Agreement as are delegated to the Agent by Article X of the Agreement and by the Loan Documents and the Intercreditor Agreement. 2.3 Schedule 2.01 of the Agreement is hereby amended in its entirety to read as set forth in Exhibit A to this First Amendment and the Commitment and the Revolving Commitment of each of the New Banks and of BofA as a Bank shall be as set forth in said amended Schedule 2.01. 3. Waiver and Other Provisions Regarding Environmental Report. Each ---------------------------------------------------------- of the Banks (including the New Banks) and the Agent waive compliance with the provisions of Section 5.02(c) of the Agreement requiring delivery of the environmental assessment described therein no later than July 31, 1992 on the conditions that (a) the final environmental assessment report is substantially unchanged from the preliminary environmental assessment dated August 12, 1992, a copy of which has been received by each of the Banks, and (b) a copy of such final report is delivered to the Agent for delivery to the Banks not later than November 30, 1992 and (c) MGM Hotel performs all recommended monitoring and takes such other action in compliance with the recommendations of such report and such recommendations as may be made from time to time on the basis of the results of such continued monitoring. Furthermore, subject to the foregoing conditions, the Banks, including the New Banks, confirm that such environmental assessment is satisfactory to the Banks for the - 2 - purposes of determining compliance by MGM Finance and MGM Hotel with the provisions of Section 5.02(c). 4. Representations and Warranties of MGM Finance and MGM Hotel. MGM ----------------------------------------------------------- Finance and MGM Hotel, each on its own behalf, and only with respect to itself, represents and warrants to the Agent and to each Bank: 4.1 Authorization. The execution, delivery and performance of ------------- this First Amendment have been duly authorized by all necessary corporate action and has been duly executed and delivered by it. 4.2 Binding Obligation. This First Amendment is the legally ------------------ valid and binding obligation of such party, enforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors rights generally or by equitable principals relating to enforceability. 4.3 No Legal Obstacle to Agreement. Neither the execution of ------------------------------ this First Amendment, the making of any Borrowings under the Agreement, nor the performance of the Agreement has constituted or resulted in or will constitute or result in a breach of the provisions of any contract to which such party is a party, or the violation of any law, judgment, decree or governmental order, rule or regulation applicable to such party, or result in the creation under any agreement or instrument of any security interest, lien, charge, or encumbrance upon any of the assets of such party. No approval or authorization of any governmental authority is required to permit the execution, delivery or performance of this First Amendment, the Agreement, or the transactions contemplated hereby or thereby, or the making of any Borrowing under the Agreement. 4.4 Incorporation of Certain Representations. The ---------------------------------------- representations and warranties set forth in Article VI of the Agreement are true and correct in all respects on and as of the date hereof as though made on and as of the date hereof. 4.5 Default. No Default or Event of Default under the Agreement ------- has occurred and is continuing. 5. Representations and Warranties of BofA. BofA represents and -------------------------------------- warrants to each of the New Banks as follows: 5.1 As of the date hereof, immediately prior to the effectiveness of this First Amendment, BofA, in its capacity as a Bank, holds 100% of the Commitment under the Agreement free and clear of any adverse claim. - 3 - 5.2 As of the date hereof no Loans have been made under the Agreement. 5.3 BofA has full power and authority, and has taken all action necessary, to execute and deliver this First Amendment and to fulfill its obligations under, and to consummate the transactions contemplated by, this First Amendment, and no governmental authorizations or other authorizations are required in connection therewith. 5.4 This First Amendment constitutes the legal, valid and binding obligation of the BofA. BofA makes no representation or warranty and assumes no responsibility with respect to the financial condition of MGM Finance, MGM Hotel or any affiliate of either of them or the performance by MGM Finance, MGM Hotel or any affiliate of either of them of the Obligations, and assumes no responsibility with respect to any statements, warranties or representations made under or in connection with the Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Agreement or any other documents under the Agreement, other than as expressly set forth above. 6. Representations and Warranties of the New Banks. Scotland and ----------------------------------------------- USNBO, each on its own behalf, and only with respect to itself, hereby represents and warrants to BofA in its capacity as the Agent and as a Bank and to each other as follows: 6.1 It has full power and authority, and has taken all action necessary, to execute and deliver this First Amendment and to become party to the Agreement, and any and all other documents required or permitted to be executed or delivered by it in connection with this Agreement and to fulfill its obligations under, and to consummate the transactions contemplated by, this First Amendment, the Agreement, and the other Loan Documents and no governmental authorizations or other authorizations are required in connection therewith. 6.2 This First Amendment constitutes the legal, valid and binding obligation of such New Bank. 6.3 Such New Bank has independently and without reliance upon BofA and based on such information as it has deemed appropriate, made its own credit analysis and decision to enter into this First Amendment and to be bound by the Agreement and other Loan Documents. It will, independently and without reliance upon the Agent or any Bank, and based upon such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Agreement and the Loan Documents. - 4 - 6.4 If such New Bank is organized under the Laws of a jurisdiction outside the United States of America, attached hereto are the forms prescribed by Section 4.01(f) of the Agreement certifying its exemption from United States withholding taxes with respect to all payments to be made to it under the Agreement or any Loan Document. 7. Conditions, Effectiveness. The effectiveness of this First ------------------------- Amendment shall be subject to the delivery of the following to the Agent in form and substance satisfactory to the Agent: 7.1 Corporate Resolution. A copy of a resolution or resolutions -------------------- passed by the Board of Directors of each of MGM Finance and MGM Hotel, certified by the Secretary or an Assistant Secretary of such party as being in full force and effect on the date of this First Amendment, authorizing the amendments to the Agreement herein provided for and the execution, delivery and performance of this First Amendment and any note or other instrument or agreement required hereunder. 7.2 Authorized Signatories. A certificate, signed by the ---------------------- Secretary or an Assistant Secretary of each of MGM Finance and MGM Hotel and dated the date of this First Amendment, as to the incumbency of the person or persons authorized to execute and deliver this First Amendment and any instrument or agreement required hereunder on behalf of such party. 7.3 Reaffirmations. Reaffirmations from each of the Guarantors -------------- in a form acceptable to the Agent and the Banks. 7.4 Other Evidence. Such other evidence with respect to MGM -------------- Finance or MGM Hotel or any other person as the Agent and each Bank may reasonably request to establish the consummation of the transactions contemplated hereby, the taking of all corporate action in connection with this First Amendment and the Agreement and the compliance with the conditions set forth herein. 8. Payments. On the date when all conditions set forth in Section 7 -------- hereof have been satisfied and each New Bank has delivered to the Agent duly executed copies of this First Amendment, BofA shall pay to each New Bank, in immediately available funds, the fees set forth in a letter agreement among BofA, Scotland and USNBO dated of even date herewith. 9. Miscellaneous. ------------- 9.1 Effectiveness of the Agreement. Except as hereby amended, ------------------------------ the Agreement shall remain in full force and effect. - 5 - 9.2 Waivers. This First Amendment is specific in time and in ------- intent and, except as set forth in Section 3 of this First Amendment, does not constitute, nor should it be construed as, a waiver of any other right, power or privilege under the Agreement, or under any agreement, contract, indenture, document or instrument mentioned in the Agreement; nor does it preclude any exercise thereof or the exercise of any other right, power or privilege, nor shall any future waiver of any right, power, privilege or default hereunder, or under any agreement, contract, indenture, document or instrument mentioned in the Agreement, constitute a waiver of any other default of the same or of any other term or provision. 9.3 Counterparts. This First Amendment may be executed in any ------------ number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument. This First Amendment shall become effective as of the date first above written when the conditions set forth in Section 4 of this First Amendment have been satisfied and all the parties hereto shall have signed a copy hereof, whether the same or counterparts and shall have delivered same to the Agent. 9.4 Further Assurances. The parties hereto further agree to ------------------ execute and deliver such other instruments, and take such other action, as the Agent may reasonably request in connection with the transactions contemplated by this First Amendment. 9.5 Jurisdiction. This First Amendment, and any instrument or ------------ agreement required hereunder, shall be governed by and construed under the laws of the State of Nevada. IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be duly executed and delivered as of the date first written above. MGM GRAND HOTEL FINANCE CORP. By: /s/ J.T. Murphy Title: Chief Financial Officer ------------------------- MGM GRAND HOTEL, INC. By: /s/ Larry Woolf ------------------------- Title: PRESIDENT ------------------------- (Signatures continue) - 6 - BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By: /s/ David Price ------------------------- Title: Vice President ------------------------- BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as a Bank By: /s/ Jon Varnell ------------------------- Title: Vice President ------------------------- BANK OF SCOTLAND By: /s/ J. Craig Wilson ------------------------- Title: Vice President ------------------------- Domestic and Eurodollar Lending Office Bank of Scotland Grand Cayman Branch c/o 380 Madison Avenue New York, New York 10017 Telephone: (212) 490-8030 Telecopy: (212) 557-9460 UNITED STATES NATIONAL BANK OF OREGON By: Scott J. Bell ------------------------- Title: Assistant Vice President ------------------------- Domestic and Eurodollar Lending Office United States National Bank of Oregon 309 S.W. 6th Avenue, BB-10 Portland, Oregon 97204 Telephone: (503) 275-6738 Telecopy: (503) 275 5428 - 7 - SECOND AMENDMENT TO CREDIT AGREEMENT THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this "Second Amendment") is made and dated as of September 17, 1993 among MGM Grand Hotel Finance Corp. ("MGM Finance"), a Nevada corporation, MGM Grand Hotel, Inc. ("MGM Hotel"), a Nevada corporation, the several financial institutions parties to this Agreement (collectively, the "Banks"; individually, a "Bank"), and Bank of America National Trust and Savings Association, as agent for the Banks (the "Agent") and amends that certain Credit Agreement dated as of May 13, 1992 among the parties hereto, as amended by a First Amendment to Credit Agreement dated as of October 30, 1992 (as amended, the "Agreement"). RECITAL ------- MGM Hotel desires to enter into one or more lease transactions with various Affiliates. NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereby agree as follows: 1. Terms. All terms used herein shall have the same meanings as in ----- the Agreement unless otherwise defined herein. All references to the Agreement herein, in the Agreement and in the Notes shall mean the Agreement as hereby amended. 2. Amendments to Agreement. MGM Finance, MGM Hotel, the Banks and ----------------------- the Agent hereby agree to amend and restate Section 8.05 of the Agreement in its entirety as follows: "8.05 Lease Obligations. MGM Finance shall not create or suffer ----------------- to exist any obligations for the payment by it of rent for any property under lease or agreement to lease. MGM Hotel shall not, nor shall it permit any Subsidiary to, create or suffer to exist any obligations for the payment by it of rent for any property under lease or agreement to lease, including Sale and Leaseback Transactions, except that MGM Hotel may enter into: (a) Operating leases involving personal property ordinarily and customarily acquired through operating lease transactions; - 1 - (b) Operating leases entered into in the ordinary course of its business in an arm's length transaction with a Person other than an Affiliate; (c) Capital Lease Obligations otherwise permitted under this Agreement; and (d) Lease transactions with an Affiliate if such transaction complies with Section 8.08." 3. Representations and Warranties. MGM Finance and MGM Hotel ------------------------------ represent and warrant to the Banks and Agent: 3.1 Authorization. The execution, delivery and performance of this ------------- Second Amendment have been duly authorized by all necessary corporate action by each of them and has been duly executed and delivered by each of them. 3.2 Binding Obligation. This Second Amendment is the legally valid ------------------ and binding obligation of MGM Finance and MGM Hotel, enforceable in accordance with its terms against each of them respectively. 3.3 No Legal Obstacle to Agreement. Neither the execution of this ------------------------------ Second Amendment, the making by MGM Finance of any Borrowing under the Agreement, nor the performance of the Agreement has constituted or resulted in or will constitute or result in a breach of the provisions of any Contractual Obligation to which MGM Finance or MGM Hotel is a party, or the violation of any Requirement of Law, or result in the creation under any agreement or instrument of any security interest, lien, charge, or encumbrance upon any of the assets of any of them. No approval or authorization of any governmental authority is required to permit the execution, delivery or performance by MGM Finance or MGM Hotel of this Second Amendment, the Agreement, or the transactions contemplated hereby or thereby, or the making of any Borrowing under the Agreement. 3.4 Incorporation of Certain Representations. The representations ---------------------------------------- and warranties set forth in Article VI of the Agreement are true and correct in all material respects on and as of the date hereof as though made on and as of the date hereof. 3.5 Default. No Default or Event of Default under the Agreement has ------- occurred and is continuing. 4. Conditions, Effectiveness. The effectiveness of this Second ------------------------- Amendment shall be subject to the compliance by MGM Finance and MGM Hotel with their respective agreements herein contained, and to the delivery of the following to the Agent in - 2 - form and substance satisfactory to the Agent and the Majority Banks: 4.1 Corporate Resolutions. A copy of a resolution or resolutions --------------------- passed by the Board of Directors of each of MGM Finance and MGM Hotel, certified by the respective Secretary or an Assistant Secretary of such entity, as being in full force and effect on the effective date of this Second Amendment, authorizing the amendments to the Agreement herein provided for and the execution, delivery and performance of this Second Amendment and any note or other instrument or agreement required hereunder. 4.2 Authorized Signatories. A certificate, signed by the Secretary ---------------------- or an Assistant Secretary of each of MGM Finance and MGM Hotel dated the date of this Second Amendment, as to the incumbency of the person or persons authorized to execute and deliver this Second Amendment and any instrument or agreement required hereunder on behalf of such entity. 4.3 Other Evidence. Such other evidence with respect to any MGM -------------- Finance and MGM Hotel or any other person as the Agent or any Bank may reasonably request to establish the consummation of the transactions contemplated hereby, the taking of all corporate action in connection with this Second Amendment and the Agreement and the compliance with the conditions set forth herein. 5. Miscellaneous. ------------- 5.1 Effectiveness of the Agreement. Except as hereby expressly ------------------------------ amended, the Agreement shall remain in full force and effect, and are hereby ratified and confirmed in all respects. 5.2 Waivers. This Second Amendment is specific in time and in intent ------- and does not constitute, nor should it be construed as, a waiver of any other right, power or privilege under the Agreement, or under any agreement, contract, indenture, document or instrument mentioned in the Agreement; nor does it preclude any exercise thereof or the exercise of any other right, power or privilege, nor shall any future waiver of any right, power, privilege or default hereunder, or under any agreement, contract, indenture, document or instrument mentioned in the Agreement, constitute a waiver of any other default of the same or of any other term or provision. 5.3 Counterparts. This Second Amendment may be executed in any ------------ number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument. This Second Amendment shall not become effective until each MGM Finance, MGM Hotel, MGM Grand, the Banks - 3 - and the Agent shall have signed a copy hereof, whether the same or counterparts, and the same shall have been delivered to the Agent. 5.4 Jurisdiction. This Second Amendment, and any instrument or ------------ agreement required hereunder, shall be governed by - 4 - and construed under the laws of the State of Nevada. IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to be duly executed and delivered as of the date first written above. MGM GRAND HOTEL FINANCE CORP. By: /s/ J.T. Murphy ---------------------------- Title: Chief Financial Officer ------------------------- MGM GRAND HOTEL, INC. By: /s/ Larry Woolf ---------------------------- Title: CEO ------------------------- BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By: /s/ David M. Terrance ---------------------------- David M. Terrance Vice President BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By: /s/ John Varnell ---------------------------- John Varnell Vice President BANK OF SCOTLAND By: /s/ Catherine M. Oniffrey ---------------------------- Title: Vice President ------------------------- UNITED STATES NATIONAL BANK OF OREGON By: /s/ Scott J. Bell ---------------------------- Title: Vice President ------------------------- - 5 - CONSENT OF GUARANTOR -------------------- The undersigned, as guarantor under that certain Continuing Guaranty dated as of May 13, 1992, hereby consents to the foregoing Second Amendment to Credit Agreement, dated as of the date hereof, and confirms that its Continuing Guaranty remains in full force and effect. MGM GRAND, INC. By: /s/ K. Eugene Shutler ----------------------------- Title: Executive Vice President -------------------------- - 6 - THIRD AMENDMENT TO CREDIT AGREEMENT THIS THIRD AMENDMENT TO CREDIT AGREEMENT (this "Third Amendment") is made and dated as of March 9, 1994 among MGM Grand Hotel Finance Corp. ("MGM Finance"), a Nevada corporation, MGM Grand Hotel, Inc. ("MGM Hotel"), a Nevada corporation, the several financial institutions parties to this Agreement (collectively, the "Banks"; individually, a "Bank"), and Bank of America National Trust and Savings Association, as agent for the Banks (the "Agent") and amends that certain Credit Agreement dated as of May 13, 1992 among the parties hereto, as amended by a First Amendment to Credit Agreement dated as of October 30, 1992 and a Second Amendment to Credit Agreement dated as of September 17, 1993 (as amended, the "Agreement"). RECITAL ------- MGM Hotel desires to repurchase First Mortgage Notes from time to time, and the Banks and Agent are willing to amend the Agreement on the terms and conditions set forth herein to permit such repurchases. NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereby agree as follows: 1. Terms. All terms used herein shall have the same meanings as in the ----- Agreement unless otherwise defined herein. All references to the Agreement herein, in the Agreement and in the Notes shall mean the Agreement as hereby amended. 2. Amendments to Agreement. MGM Finance, MGM Hotel, the Banks and the ----------------------- Agent hereby agree to amend the Agreement as follows: 2.1 The definition of "Permitted Investments" in Section 1.01 of the Agreement is amended by deleting "or" before clause (f) and inserting the following at the end of such definition before the period: "or, (g) First Mortgage Notes provided that no Default or Event of Default shall have occurred and be continuing or would occur as a consequence of an Investment therein." - 1 - 2.2 Section 8.14 of the Agreement is amended by deleting "and" at the end of subsection (d), inserting "and" at the end of subsection (e) before the period, and inserting a new subsection (f) as follows: "(f) MGM Hotel may repurchase First Mortgage Notes provided that no Default or Event of Default shall have occurred and be continuing or would occur as a consequence of such repurchase." 3. Representations and Warranties. MGM Finance and MGM Hotel represent ------------------------------ and warrant to the Banks and Agent: 3.1 Authorization. The execution, delivery and performance of this Third ------------- Amendment have been duly authorized by all necessary corporate action by each of them and has been duly executed and delivered by each of them. 3.2 Binding Obligation. This Third Amendment is the legally valid and ------------------ binding obligation of MGM Finance and MGM Hotel, enforceable in accordance with its terms against each of them respectively. 3.3 No Legal Obstacle to Agreement. Neither the execution of this Third ------------------------------ Amendment, the making by MGM Finance of any Borrowing under the Agreement, nor the performance of the Agreement has constituted or resulted in or will constitute or result in a breach of the provisions of any Contractual Obligation to which MGM Finance or MGM Hotel is a party, or the violation of any Requirement of Law, or result in the creation under any agreement or instrument of any security interest, lien, charge, or encumbrance upon any of the assets of any of them. No approval or authorization of any governmental authority is required to permit the execution, delivery or performance by MGM Finance or MGM Hotel of this Third Amendment, the Agreement, or the transactions contemplated hereby or thereby, or the making of any Borrowing under the Agreement. 3.4 Incorporation of Certain Representations. The representations and ---------------------------------------- warranties set forth in Article VI of the Agreement are true and correct in all material respects on and as of the date hereof as though made on and as of the date hereof. 3.5 Default. No Default or Event of Default under the Agreement has ------- occurred and is continuing. 4. Conditions, Effectiveness. The effectiveness of this Third Amendment ------------------------- shall be subject to the compliance by MGM Finance and MGM Hotel with their respective agreements herein contained, and to the delivery of the following to the Agent in - 2 - form and substance satisfactory to the Agent and the Majority Banks: 4.1 Corporate Resolutions. A copy of a resolution or resolutions passed --------------------- by the Board of Directors of each of MGM Finance and MGM Hotel, certified by the respective Secretary or an Assistant Secretary of such entity as being in full force and effect on the effective date of this Third Amendment, authorizing the amendments to the Agreement herein provided for and the execution, delivery and performance of this Third Amendment and any note or other instrument or agreement required hereunder. 4.2 Authorized Signatories. A certificate, signed by the Secretary or an ---------------------- Assistant Secretary of each of MGM Finance and MGM Hotel dated the date of this Third Amendment, as to the incumbency of the person or persons authorized to execute and deliver this Third Amendment and any instrument or agreement required hereunder on behalf of such entity. 4.3 Other Evidence. Such other evidence with respect to any MGM Finance -------------- and MGM Hotel or any other person as the Agent or any Bank may reasonably request to establish the consummation of the transactions contemplated hereby, the taking of all corporate action in connection with this Third Amendment and the Agreement and the compliance with the conditions set forth herein. 5. Miscellaneous. ------------- 5.1 Effectiveness of the Agreement. Except as hereby expressly amended, ------------------------------ the Agreement shall remain in full force and effect, and are hereby ratified and confirmed in all respects. 5.2 Waivers. This Third Amendment is specific in time and in intent and ------- does not constitute, nor should it be construed as, a waiver of any other right, power or privilege under the Agreement, or under any agreement, contract, indenture, document or instrument mentioned in the Agreement; nor does it preclude any exercise thereof or the exercise of any other right, power or privilege, nor shall any future waiver of any right, power, privilege or default hereunder, or under any agreement, contract, indenture, document or instrument mentioned in the Agreement, constitute a waiver of any other default of the same or of any other term or provision. 5.3 Counterparts. This Third Amendment may be executed in any number of ------------ counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument. This Third Amendment shall not become effective until each MGM Finance, MGM Hotel, MGM Grand, the Banks and the Agent shall have signed a copy hereof, whether the same -3- or counterparts, and the same shall have been delivered to the Agent. 5.4 Jurisdiction. This Third Amendment, and any instrument or agreement ------------ required hereunder, shall be governed by and construed under the laws of the State of Nevada. IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment to be duly executed and delivered as of the date first written above. MGM GRAND HOTEL FINANCE CORP. By: /s/ J.T. Murphy ----------------------------- Title: CEO -------------------------- MGM GRAND HOTEL, INC. By: /s/ J.T. Murphy ----------------------------- Title: Secretary Treasurer -------------------------- BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By: /s/ Peggy Fujimoto ----------------------------- Peggy Fujimoto Vice President BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By: /s/ Jon Varnell ----------------------------- Jon Varnell Vice President BANK OF SCOTLAND By: /s/ Catherine M. Oniffrey ----------------------------- Title: -------------------------- (Signatures continue) - 4 - UNITED STATES NATIONAL BANK OF OREGON By: /s/ Scott J. Bell ----------------------------- Title: Vice President -------------------------- FIRST SECURITY BANK OF UTAH, N.A. By: /s/ David P. Williams ----------------------------- Title: Vice President -------------------------- BANK OF AMERICA NEVADA By: /s/ Alan F. Gerder ----------------------------- Title: Vice President -------------------------- -5- CONSENT OF GUARANTOR -------------------- The undersigned, as guarantor under that certain Continuing Guaranty dated as of May 13, 1992, hereby consents to the foregoing Third Amendment to Credit Agreement, dated as of March 9, 1994, and confirms that its Continuing Guaranty remains in full force and effect. MGM GRAND, INC. By: /s/ J.T. Murphy ----------------------------- Title: VP -------------------------- - 6 - FOURTH AMENDMENT TO CREDIT AGREEMENT THIS FOURTH AMENDMENT TO CREDIT AGREEMENT (this "Fourth Amendment") is made and dated as of December 30, 1994 among MGM Grand Hotel Finance Corp. ("MGM Finance"), a Nevada corporation, MGM Grand Hotel, Inc. ("MGM Hotel"), a Nevada corporation, the several financial institutions parties to this Agreement (collectively, the "Banks"; individually, a "Bank"), and Bank of America National Trust and Savings Association, as agent for the Banks (the "Agent") and amends that certain Credit Agreement dated as of May 13, 1992 among the parties hereto, as amended by a First Amendment to Credit Agreement dated as of October 30, 1992, a Second Amendment to Credit Agreement dated as of September 17, 1993 and a Third Amendment to Credit Agreement dated as of March 9, 1994 (as so amended, the "Agreement"). RECITAL ------- MGM Hotel and MGM Finance have requested the Banks to make certain amendments to the Agreement, and the Banks and Agent are willing to amend the Agreement on the terms and conditions set forth herein. NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereby agree as follows: 1. Terms. All terms used herein shall have the same meanings as in the ----- Agreement unless otherwise defined herein. All references to the Agreement herein, in the Agreement and in the Notes shall mean the Agreement as hereby amended. 2. Amendments to Agreement. MGM Finance, MGM Hotel, the Banks and the ----------------------- Agent hereby agree to amend the Agreement as follows: 2.1 The definition of "Applicable Margin" in Section 1.01 of the Agreement is amended and restated in its entirety as follows: "'Applicable Margin" means the following rates per annum: ----------------- -1-
- -------------------------------------------------------------------------------------------------------------------------------- Level Consolidated Funded Commitment Eurodollar Alternate Indebtedness to Fee Rate Loans Base Rate EBITDA Ratio Loans - -------------------------------------------------------------------------------------------------------------------------------- 1 less than 1.00:1 0.3500% 0.875% 0.000% - -------------------------------------------------------------------------------------------------------------------------------- 2 greater than or equal to 1.00:1 but less than 1.50:1 0.3750% 1.125% 0.000% - -------------------------------------------------------------------------------------------------------------------------------- 3 greater than or equal to 1.50:1 but less than 2.00:1 0.3750% 1.250% 0.000% - -------------------------------------------------------------------------------------------------------------------------------- 4 greater than or equal to 2.00:1 but less than 2.50:1 0.3750% 1.375% 0.125% - -------------------------------------------------------------------------------------------------------------------------------- 5 greater than or equal to 2.50:1 but less than 3.00:1 0.4375% 1.750% 0.500% - -------------------------------------------------------------------------------------------------------------------------------- 6 greater than or equal to 3.00:1 but less than 3.50:1 0.5000% 2.125% 0.875% - -------------------------------------------------------------------------------------------------------------------------------- 7 greater than or equal to 3.50:1 0.5000% 2.500% 1.250% - --------------------------------------------------------------------------------------------------------------------------------
"The Applicable Margin shall be based on the Consolidated Funded Indebtedness to EBITDA Ratio as set forth in the most recent certificate delivered pursuant to Section 7.02(b), and shall be effective from and including the date the Agent receives such certificate to but excluding the date on which Agent receives the next such certificate. Until the delivery of the first certificate reflecting the Consolidated Funded Indebtedness to EBITDA Ratio, the Applicable Margin shall be Level 4." 2.2 The definition of "EBITDA" in Section 1.01 of the Agreement is amended and restated in its entirety as follows: "'EBITDA' means, for any period, for any Person on a consolidated ------ basis, determined in accordance with GAAP, for the relevant Determination Period, the sum of (a) the net income (or net loss) plus ---- (b) all amounts treated as expenses for depreciation and interest and the amortization of intangibles of any kind to the extent included in the determination of such net income (or loss), plus (c) all accrued ---- taxes on or measured by income to the extent included in the determination of such net income (or loss); provided, however, that -------- ------- net income (or loss) shall be computed for these purposes without giving effect to extraordinary losses or extraordinary gains, plus, ---- the amount of management fees in respect of which a certificate has been delivered pursuant to Section 7.02(b) that such amount of management fees will be deferred to a date after the Termination Date. For purposes of determining "Consolidated Funded Indebtedness to EBITDA Ratio," management fees shall be added back to the extent expensed in the determination of net income." -2- 2.3 The definition of "Termination Date" in Section 1.01 of the Agreement is amended and restated in its entirety as follows: "'Termination Date' means the earliest to occur of ---------------- "(a) December 31, 1999; and "(b) the date on which the Commitments shall terminate in accordance with the provisions of this Agreement. 2.4 Section 1.01 of the Agreement is amended by deleting the definitions of "Determination Period," "Determination Period 1," "Determination Period 2," "Determination Period 3," and "Determination Period 4," and inserting the following new definition in lieu thereof: "'Determination Period' means for any calculation made as of -------------------- September 30, 1994, the relevant calculation for the period of the two fiscal quarters ending on such date, multiplied by two; for any calculation made as of December 31, 1994, the relevant calculation for the period of three fiscal quarters ending on such date, multiplied by 4/3; and for any calculation made as of any date thereafter, the relevant calculation for the period of four fiscal quarters ending on such date." 2.5 Section 1.01 of the Agreement is amended by inserting the following new definitions in proper alphabetical order; "'Consolidated Funded Indebtedness' means, for any Person on a -------------------------------- consolidated basis in accordance with GAAP, an amount equal to the sum of, without duplication, (a) all Indebtedness of such Person for borrowed money, including letters of credit, plus (b) the principal portion of all ---- Capital Lease Obligations of such Person." "'Consolidated Funded Indebtedness to EBITDA Ratio" means, as of any ------------------------------------------------ date of determination, the ratio of (i) Consolidated Funded Indebtedness as of such date to (ii) EBITDA for applicable Determination Period." -- 2.6 Section 3.01(b) of the Agreement is amended by deleting "one-half percent (1/2%) per annum" in the second sentence thereof and inserting "the Applicable Margin" in lieu thereof. -3- 2.7 The last proviso to Section 8.02(c) of the Agreement is amended and restated in its entirety as follows: "provided that, the aggregate principal amount of such FF&E Financings -------- shall not, when aggregated with the principal amount of Indebtedness incurred under Section 8.02(f), exceed $30,000,000 in the aggregate at any time outstanding;" 2.8 Section 8.02(f) of the Agreement is amended and restated in its entirety as follows: "(f) Provided no Event of Default shall have occurred and be continuing at the time of incurrence, Indebtedness incurred for Capital Expenditures in an amount not to exceed $30,000,000 in the aggregate outstanding at any time; and" 2.9 Section 8.10 of the Agreement is amended and restated in its entirety as follows: "8.10 Restricted Payments. MGM Finance may not make any Restricted ------------------- Payment. MGM Hotel may not make, and may not cause or permit any Subsidiary to make (other than to MGM Hotel, any Subsidiary of MGM Hotel or to MGM Finance) directly or indirectly, any Restricted Payment prior to the Termination of Construction Period. Subsequent to the Termination of Construction Period (the "Determining Date"), MGM Hotel may not make, and may not cause or permit any Subsidiary or any Person directly or indirectly controlled by MGM Hotel to make (other than the MGM Hotel, any Subsidiary of MGM Hotel or to MGM Finance), directly or indirectly, any Restricted Payment (including for purposes of this Section 8.10 repurchases of First Mortgage Notes other than pursuant to Sections 8.14(a), (b) or (f)) unless, after giving effect to such Restricted Payment: "(a) no Default or Event of Default shall have occurred and be continuing, or would occur as a consequence thereof; "(b) the Consolidated Adjusted Net Worth of MGM Hotel is greater than $415,000,000 as of the last day of the calendar month ending prior to the date of such Restricted Payment, and after giving effect to such Restricted Payment; "(c) after giving effect to such Restricted Payment the aggregate amount expended (determined as set forth below) for all such Restricted Payments -4- subsequent to the Determining Date shall not exceed the sum of $25,000,000 plus the sum, if positive, of "(i) 50% of the cumulative Consolidated Net Income of MGM Hotel (or if such cumulative Consolidated Net Income shall be a loss, 100% of such loss) accrued on a consolidated basis subsequent to the Determining Date; plus "(ii) the aggregate Net Proceeds in cash received by MGM Hotel from the issue of sale (other than to a Subsidiary), subsequent to the Determining Date, of Capital Stock of MGM Hotel (other than Disqualified Capital Stock) other than in connection with the conversion or exchange of any Indebtedness or Capital Stock; plus "(iii) the aggregate Net Proceeds received by MGM Hotel subsequent to the Determining Date, from the issue or sale (other than to a Subsidiary) of any debt securities or Disqualified Capital Stock of MGM Hotel that have subsequently been converted into or exchanged for Capital Stock of MGM Hotel (other than Disqualified Capital Stock); plus "(iv) the aggregate amount of the Net Proceeds actually received by MGM Hotel pursuant to the disposition of any Investment constituting a Restricted Payment. "(d) For purposes of any calculation pursuant to subsection (c) above which is required to be made within 60 days after the declaration of a dividend by MGM Hotel or any Subsidiary, such dividend shall be deemed to be paid at the date of declaration, and the subsequent payment of such dividend during such 60-day period shall not be treated as an additional Restricted Payment. "(e) For purposes of determining the amount expended for Restricted Payments or aggregate Net Proceeds received by MGM Hotel, cash distributed shall be valued at the face amount thereof and property other than cash shall be valued at its fair market value such fair market value shall be determined in good faith by the Board of Directors as evidenced by a Board Resolution delivered to the Agent; provided, however, that the fair market -------- ------- value of all property distributed in any transaction or series of related transactions shall not exceed $15,000,000 for the purposes of such subsection (c) unless MGM Hotel has received an appraisal from an Independent Financial Advisor - 5 - indicating that such property has a fair market value equal to or greater than the fair market value determined by the Board of Directors. "(f) Notwithstanding the foregoing, the provisions of this Section 8.10 will not prevent (i) the payment of any dividend within 60 days after the date of declaration when the payment complied with the foregoing provisions on the date of declaration, (ii) the retirement of any shares of MGM Hotel's Capital stock by exchange for, or out of the proceeds of the substantially concurrent sale (other than to a Subsidiary) of, other shares of its Capital Stock (other than any Disqualified Capital Stock), or (iii) any distribution or dividends that would otherwise be deemed a Restricted Payment hereunder to the extent such payment is effected by the distribution of an Investment which constituted a Restricted Payment. Notwithstanding anything to the contrary in the foregoing, all of the amounts referred to in clause (i) of this subsection (f) shall be included as Restricted Payments in any computation made under this Section 8.10. "(g) Prior to making any Restricted Payment, MGM Hotel will deliver to the Agent a certificate signed by a Responsible Officer (dated the date of such proposed payment) stating (i) that such proposed payment will be in compliance with this Section 8.10 and (ii) no Default under this Indenture has occurred or will occur as a result of such proposed payment." 2.10 Section 8.13 of the Agreement is amended and restated in its entirety as follows: "8.13 Capital Expenditures. MGM Finance shall not make any Capital -------------------- Expenditures. Commencing with the Availability Date, MGM Hotel shall not make or commit to make Capital Expenditures except: "(a) Capital Expenditures and expenditures to purchase the common stock with respect to Grand Laundry, Inc. not exceeding $10,000,000 in the aggregate; "(b) Capital Expenditures and commitments to make Capital Expenditures with respect to EFXI and the theater not exceeding $44,000,000 in the aggregate; "(c) Capital Expenditures and commitments to make Capital Expenditures for the StarLane Mall not exceeding $12,000,000 in the aggregate; - 6 - "(d) Capital Expenditures and commitments to make Capital Expenditures with respect to the termination of Bank of America operating leases not exceeding $43,000,000 in the aggregate; and "(e) Capital Expenditures or commitments to make Capital Expenditures in addition to those permitted above, not exceeding $15,000,000 in the aggregate in any fiscal year plus an amount equal to the ---- amount of unused availability under this subsection (e) from the prior fiscal year not exceeding an additional $5,000,000." 2.11 Section 8.16, 8.17 and 8.18 of the Agreement are amended and restated in their entirety as follows: "8.16 Leverage Ratio. MGM Hotel will not permit its Leverage Ratio as -------------- determined as of the last day of each of each fiscal quarter to be greater than the ratio set forth below for the applicable Determination Period: "Date Ratio ---- ----- December 31, 1994 4.00 to 1 March 31, 1995 - December 31, 1995 3.40 to 1 March 31, 1996 and thereafter 3.00 to 1" "8.17 Debt Service Coverage Ratio. MGM Hotel shall not permit its --------------------------- ratio of (a) EBITDA to (b) Debt Service determined as of the last day of each fiscal quarter to be less than the ratio set forth below for the applicable Determination Period: "Date Ratio ---- ----- December 31, 1994 2.00 to 1 March 31, 1995 and thereafter 1.15 to 1" "8.18 Interest Coverage Ratio. MGM Hotel shall not permit its ratio ----------------------- of EBITDA to Consolidated Net Interest Expense determined as of the last day of each fiscal quarter to be less than the ratio set forth below for the applicable Determination Period: "Date Ratio ---- ----- December 31, 1994 2.15 to 1 - 7 - March 31, 1995 and thereafter 2.30 to 1" 3. Representations and Warranties. MGM Finance and MGM Hotel ------------------------------ represent and warrant to the Banks and Agent. 3.1 Authorization. The execution, delivery and performance of this ------------- Fourth Amendment have been duly authorized by all necessary corporate action by each of them and has been duly executed and delivered by each of them. 3.2 Binding Obligation. This Fourth Amendment is the legally valid ------------------ and binding obligation of MGM Finance and MGM Hotel, enforceable in accordance with its terms against each of them respectively. 3.3 No Legal Obstacle to Agreement. Neither the execution of this ------------------------------ Fourth Amendment, the making by MGM Finance of any Borrowing under the Agreement, nor the performance of the Agreement has constituted or resulted in or will constitute or result in a breach of the provisions of any Contractual Obligation to which MGM Finance or MGM Hotel is a party, or the violation of any Requirement of Law, or result in the creation under any agreement or instrument of any security interest, lien, charge, or encumbrance upon any of the assets of any of them. No approval or authorization of any governmental authority is required to permit the execution, delivery or performance by MGM Finance or MGM Hotel of this Fourth Amendment, the Agreement, or the transactions contemplated hereby or thereby, or the making of any Borrowing under the Agreement. 3.4 Incorporation of Certain Representations. The representations and ---------------------------------------- warranties set forth in Article VI of the Agreement are true and correct in all material respects on and as of the date hereof as though make on and as of the date hereof. 3.5 Default. No Default or Event of Default under the Agreement has ------- occurred and is continuing. 4. Conditions, Effectiveness. The effectiveness of this Fourth ------------------------- Amendment shall be subject to the compliance by MGM Finance and MGM Hotel with their respective agreements herein contained, and to the delivery of the following to the Agent in form and substance satisfactory to the Agent and the Majority Banks: 4.1 Corporate Resolutions. A copy of a resolution or resolutions --------------------- passed by the Board of Directors of each of MGM Finance and MGM Hotel, certified by the respective Secretary or an Assistant Secretary of such entity as being in full force and effect on the effective date of this Fourth Amendment. - 8 - authorizing the amendments to the Agreement herein provided for and the execution, delivery and performance of this Fourth Amendment and any note or other instrument or agreement required hereunder. 4.2 Authorized Signatories. A certificate, signed by a Responsible ---------------------- Officer of each of MGM Finance and MGM Hotel dated the date of this Fourth Amendment, as to the incumbency of the person or persons authorized to execute and deliver this Fourth Amendment and any instrument or agreement required hereunder on behalf of such entity. 4.3 Title Insurance Endorsement. A title insurance company --------------------------- acceptable to the Collateral Agent and the Banks shall have issued or committed to issue endorsements to the ALTA Lender's coverage policy of title insurance issued in connection with the Deed of Trust as requested by the Agent to reflect this Fourth Amendment. 4.4 Amendment Fee. An amendment fee equal to 0.50% of the Aggregate ------------- Revolving Commitments for the ratable benefit of the Banks. 4.5 Other Evidence. Such other evidence with respect to any MGM -------------- Finance and MGM Hotel or any other person as the Agent or any Bank may reasonably request to establish the consummation of the transactions contemplated hereby, the taking of all corporate action in connection with this Fourth Amendment and the Agreement and the compliance with the conditions set forth herein. 5. Miscellaneous. ------------- 5.1 Effectiveness of the Agreement. Except as hereby expressly ------------------------------ amended, the Agreement shall remain in full force and effect, and are hereby ratified and confirmed in all respects. 5.2 Waivers. This Fourth Amendment is specific in time and in intent -------- and does not constitute, nor should it be construed as, a waiver of any other right, power or privilege under the Agreement, or under any agreement, contract, indenture, document or instrument mentioned in the Agreement; nor does it preclude any exercise thereof or the exercise of any other right, power or privilege, nor shall any future waiver of any right, power, privilege or default hereunder, or under any agreement, contract, indenture, document or instrument mentioned in the Agreement, constitute a waiver of any other default of the same or of any other term or provision. 5.3 Counterparts. This Fourth Amendment may be executed in any number ------------ of counterparts and all of such counterparts taken together shall be deemed to constitute one and - 9 - the same instrument. This Fourth Amendment shall not become effective until each MGM Finance, MGM Hotel, MGM Grand, the Banks and the Agent shall have signed a copy hereof, whether the same or counterparts, and the same shall have been delivered to the Agent. 5.4 Jurisdiction. This Fourth Amendment, and any instrument or ------------ agreement required hereunder, shall be governed by and construed under the laws of the state of Nevada. IN WITNESS WHEREOF, the parties hereto have caused this Fourth Amendment to be duly executed and delivered as of the date first written above. MGM GRAND HOTEL FINANCE CORP. By: /s/ J.T. Murphy --------------------------- Title: CFO ------------------------ MGM GRAND HOTEL, INC. By: /s/ J.T. Murphy --------------------------- Title: Sr. VP ------------------------ BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By: -------------------------- Peggy Fujimoto Vice President (Signatures continue) - 10 - BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By: ------------------------- Jon Varnell Vice President BANK OF SCOTLAND By: ------------------------- Title: ---------------------- UNITED STATES NATIONAL BANK OF OREGON By: ------------------------- Title: ---------------------- FIRST SECURITY BANK OF UTAH, N.A. By: ------------------------- Title: ---------------------- BANK OF AMERICA NEVADA By: ------------------------- Title: ---------------------- - 11 - CONSENT OF GUARANTOR -------------------- The undersigned, as guarantor under that certain Continuing Guaranty dated as of May 13, 1992, hereby consents to the foregoing Fourth Amendment to Credit Agreement, dated as of December 30, 1994, and confirms that its Continuing Guaranty remains in full force and effect. MGM GRAND, INC. By: /s/ Alejandro Yemenidjian -------------------------- Title: CFO ---------------------- - 12 - EX-10.16 3 OPERATING AGREEMENT EXHIBIT 10.16 - -------------------------------------------------------------------------------- OPERATING AGREEMENT OF NEW YORK - NEW YORK HOTEL, LLC By and Between MGM GRAND, INC. and PRMA LAS VEGAS, INC. Dated as of December 26, 1994 - -------------------------------------------------------------------------------- TABLE OF CONTENTS ARTICLE I ORGANIZATION OF THE COMPANY........................ 1 1.1 Formation............................................................. 1 1.2 Name.................................................................. 1 1.3 Purpose............................................................... 1 1.4 Intent................................................................ 2 1.5 Term.................................................................. 2 1.6 Title to Property..................................................... 2 1.7 Payments of Individual Obligations.................................... 2 1.8 Independent Activities................................................ 2 1.9 Transactions with Affiliates.......................................... 3 1.10 Expenses of Members................................................... 3 1.11 Guarantee by PRMA..................................................... 3 1.12 Registered Office and Agent for Service of Process.................... 3 1.13 Definitions........................................................... 4 ARTICLE II OWNERSHIP AND CAPITAL CONTRIBUTIONS.................... 4 2.1 Membership and Percentage Interests................................... 4 2.2 Initial Capital Contributions......................................... 4 2.3 Third Party Financing................................................. 4 2.4 Additional Capital Contributions...................................... 5 2.5 Other Matters......................................................... 5 ARTICLE III ALLOCATIONS................................ 5 3.1 Profits............................................................... 5 3.2 Losses................................................................ 5 3.3 Special Allocations................................................... 5 3.4 Curative Allocations.................................................. 7 3.5 Other Allocation Rules................................................ 7 3.6 Tax Allocations: Code Section 704(c)................................. 8 i ARTICLE IV DISTRIBUTIONS............................... 8 4.1 Net Cash Flow......................................................... 8 4.2 Tax Distributions..................................................... 8 ARTICLE V MANAGEMENT................................ 9 5.1 Board of Directors.................................................... 9 5.2 Managers............................................................. 13 5.3 Warranted Reliance by Directors and Managers on Others............... 14 5.4 Business Plan........................................................ 14 5.5 Insurance............................................................ 16 5.6 Unanimous Consent.................................................... 17 5.7 Pre-development Matters.............................................. 17 5.8 Agreements Regarding Advent Lease and Related PRMA Loans............. 19 ARTICLE VI INDEMNIFICATION............................ 20 6.1 Indemnification: Company Actions, Suits and Proceedings other than by Company........................................................... 20 6.2 Indemnification: Actions, Suits and Proceedings by Company........... 21 6.3 Indemnifications: Scope and Authorization............................ 21 6.4 Maintenance of Insurance or Other Financial Arrangements............. 22 ARTICLE VII REPRESENTATIONS AND WARRANTIES..................... 22 7.1 In General........................................................... 22 7.2 Representations and Warranties....................................... 22 ARTICLE VIII ACCOUNTING, BOOKS AND RECORDS...................... 24 8.1 Accounting, Books and Records........................................ 24 8.2 Reports.............................................................. 25 8.3 Tax Returns; Information............................................. 25 8.4 Special Basis Adjustment............................................. 25 8.5 Tax Matters Member................................................... 25 ii ARTICLE IX TRANSFERS OF INTERESTS......................... 26 9.1 Restrictions on Transfers............................................ 26 9.2 Permitted Transfers.................................................. 26 9.3 Distribution Among Members........................................... 28 ARTICLE X WITHDRAWALS; ACTION FOR PARTITION.................... 28 10.1 Waiver of Partition.................................................. 28 10.2 Covenant Not to Withdraw or Dissolve................................. 28 ARTICLE XI BUY-SELL................................ 29 11.1 Buy-Sell Offering Notice............................................. 29 11.2 Exercise of Buy-Sell................................................. 29 11.3 Closing.............................................................. 29 11.4 Tax Returns.......................................................... 31 ARTICLE XII DISSOLUTION AND WINDING UP...................... 31 12.1 Liquidating Events................................................... 31 12.2 Winding Up........................................................... 32 12.3 Deemed Distribution and Recontribution............................... 33 12.4 Rights of Members.................................................... 33 12.5 Notices of Dissolution............................................... 33 ARTICLE XIII MISCELLANEOUS.............................. 34 13.1 Notices.............................................................. 34 13.2 Binding Effect....................................................... 34 13.3 Construction......................................................... 34 13.4 Time................................................................. 34 13.5 Titles and Captions.................................................. 34 13.6 Severability......................................................... 34 13.7 Incorporation by Reference........................................... 35 13.8 Further Assurance.................................................... 35 13.9 Pronouns and Plurals................................................. 35 13.10 Governing Law........................................................ 35 iii 13.11 Counterpart Execution................................................ 35 13.12 Loans................................................................ 35 13.13 No Third Party Rights................................................ 35 13.14 Estoppel Certificates................................................ 35 13.15 Usury................................................................ 36 13.16 Certain Terminology.................................................. 36 13.17 Business Days........................................................ 36 13.18 Proposing and Adopting Amendments.................................... 36 EXHIBITS - -------- A - Description of Project iv OPERATING AGREEMENT OF NEW YORK - NEW YORK HOTEL, LLC ______________________________________________________________________________ This OPERATING AGREEMENT (this "Agreement") is entered into and shall be effective as of the ____ day of December, 1994, by and among MGM Grand, Inc., a Delaware corporation, ("MGM") as a Member, and PRMA Las Vegas, Inc., a Nevada corporation ("PRMA-LV") as a Member. PRMA-LV is a wholly-owned subsidiary of Primadonna Resorts, Inc., a Nevada corporation ("PRMA"). ARTICLE I ORGANIZATION OF THE COMPANY 1.1 Formation. MGM and PRMA-LV hereby intend to form and operate a limited liability company (the "Company") pursuant to the provisions of Chapter 86 of the Nevada Revised Statutes (the "Act") and in accordance with, the terms and conditions of this Agreement and the Company's Articles of Organization. The Company shall exist under and be governed by, and this Agreement shall be construed in accordance with the laws of the State of Nevada including the Nevada Gaming Control Act embodied at Chapter 463 of the Nevada Revised Statutes (the "Gaming Act"). The Members shall promptly make, execute and deliver all filings, disclosures, and other documentation that are required by law (including the Gaming Act, and the regulations promulgated thereunder, and the Act) to enable the Company to comply with all requirements for its continued operation. 1.2 Name. The name of the Company shall be "New York - New York Hotel, LLC" and all business of the Company shall be conducted in such name or such other name as the Members, from time to time, shall select. Notwithstanding the foregoing, the Members agree that such name shall be changed to "New York - New York Hotel and Casino, LLC" promptly after the Company (and the Members, as applicable) shall have received all approvals and licenses required under the Gaming Act and the regulations promulgated thereunder for the conduct by the Company of gaming at the Property. 1.3 Purpose. The purpose of the Company is to acquire, own, develop, mortgage, encumber, hypothecate, lease, sell, maintain, improve, alter, remodel, expand, manage, and otherwise operate and deal with part or all of the Project, including obtaining financing and refinancing for the above purposes, selling, exchanging, transferring, or otherwise disposing of all or any part of the Project and investing and reinvesting any undistributed Company funds pursuant to the terms of this Agreement. The Company shall be operated only for the purpose specified in this Section 1.3. Except as otherwise provided ----------- in this Agreement, the Company shall not engage in any other activity or business and no Member shall have any authority to hold itself out as an agent of another Member in any other business or activity. 1.4 Intent. It is the intent of the Members that the Company be operated in a manner consistent with its treatment as a "partnership" for federal and state income tax purposes. It is also the intent of the Members that the Company not be operated or treated as a "partnership" for purposes of Section 303 of the Federal Bankruptcy Code. No Member shall take any action inconsistent with the express intent of the parties hereto as set forth in this Section 1.4. - ----------- 1.5 Term. The term of the Company shall commence upon the filing of the Articles of Organization for the Company with the Nevada Secretary of State's Office and shall continue until the earlier of (a) the thirtieth anniversary of such filing, and (b) the date a statement of intent to dissolve the Company is filed in such office. The Company shall dissolve and its affairs shall be wound up in accordance with Section 12 hereof. ---------- 1.6 Title to Property. All real and personal property owned by the Company shall be owned by the Company as an entity and no Member shall have any ownership interest in such property in its individual name or right, and each Member's interest in the Company shall be personal property for all purposes. Except as otherwise provided in this Agreement, the Company shall hold all of its real and personal property in the name of the Company and not in the name of any Member. 1.7 Payments of Individual Obligations. The Company's credit and assets shall be used solely for the benefit of the Company, and no asset of the Company shall be transferred or encumbered for, or in payment of, any individual obligation of a Member. 1.8 Independent Activities. Each Member shall be required to devote only such time to the affairs of the Company as may be necessary for the proper performance of such Member's duties hereunder. Except to the extent expressly provided to the contrary in this Agreement, neither the Company's Articles of Organization nor this Agreement shall: (a) limit the rights of each Member and its Affiliates, and such Member's and Affiliate's respective officers, directors, employees and stockholders ("Related Persons") to serve other Persons in any capacity, to own interests in other businesses and undertakings, to pursue and engage in other investments, opportunities and activities, and to derive and enjoy profits, compensation and other consideration in respect thereof, whether or not such services, interests, businesses, undertakings, investments, opportunities and activities (collectively, "Other Interests") are similar to or competitive with the business or assets of the Company, (b) afford any Member any right to share in the profits, compensation and other consideration derived from the Other Interests of the other Member or the other Member's Related Persons, or to participate in the Other Interests of the other Member or the other Member's Related Persons, (c) require any Member to disclose to the other Member or the 2 Company the existence or nature of any such Other Interest, or (d) obligate any Member to first offer any such Other Interest to the other Member or the Company, or allow the other Member or the Company to participate therein. 1.9 Transactions with Affiliates. To the extent permitted by applicable law and except as otherwise provided in this Agreement (including Section 5.1(c) hereof), the Chief Executive Officer, when acting on behalf of - -------------- the Company, is hereby authorized to purchase property and services from, sell property and services to, or otherwise deal with any Member, acting on its own behalf, or any Affiliate of any Member, provided that any such purchase, sale, or other transaction shall be made on terms and conditions which are no less favorable to the Company (including as to price, quality and payment terms) than if the sale, purchase, or other transaction had been entered into with an independent third party. It is anticipated that each Member (or Affiliate of such Member) may possess products, services, or technology which is equal to or better than comparable products, services, or technology available from third parties. In the event the Company acquires such products, services or technology from a Member (or Affiliate of such Member), the price and terms at which the same are supplied shall not be less favorable to the Company in the aggregate than the price and terms available from third parties for similar products, services or technology (even though the Member's (or Affiliate's) products, services or technology is or are superior). 1.10 Expenses of Members. Except as specifically provided in this Agreement, no Member (or Affiliate of a Member) shall be paid for services rendered to the Company by such Member or such an Affiliate. However, each Member (or Affiliate of a Member) shall be entitled to reimbursement from the Company for actual "out of pocket" expenses reasonably incurred by such Member (or Affiliate) in the furtherance of the Company's business to the extent such expenses are approved by the Board, or were contemplated by a budget approved by the Board, in each case upon the presentation of reasonable supporting documentation of the amount and purpose of such expenses. The legal, accounting, due diligence and investigative fees and expenses relating to the negotiation of this Agreement and gaming licensure fees and costs associated with each Member's individual licensure investigation shall be borne by such Member and not by the Company. 1.11 Guarantee by PRMA. The obligations of PRMA-LV hereunder are guaranteed by PRMA pursuant to the Unconditional Guaranty executed and delivered concurrently herewith. 1.12 Registered Office and Agent for Service of Process. The address of the registered office and the principal place of business of the Company, and the name and address of the Company's initial agent for service of process, are as set forth in the Articles of Organization. Such office address and agent may be changed from time to time by the Board. Notwithstanding the foregoing, upon the opening of the completed Project for 3 business, or upon such earlier date as the Board may determine, such address shall be changed to the Project's street address, and the location of such office (and all records that are required to be kept at such office pursuant to the Articles of Organization or the Act) shall be at the Project. The Board shall cause an appropriate certificate of amendment to the Articles of Organization to be duly filed upon any such change of office address or agent. 1.13 Definitions. Attached to this Agreement immediately following the signature page is a glossary of defined terms (the "Glossary of Defined Terms"). Each capitalized term used in this Agreement either is defined in the Glossary of Defined Terms, or the location of its definition is cross-referenced in the Glossary of Defined Terms. ARTICLE II OWNERSHIP AND CAPITAL CONTRIBUTIONS 2.1 Membership and Percentage Interests. The names, addresses, and Percentage Interests of the Members are as follows: NAME AND ADDRESS PERCENTAGE INTEREST ----------------- ------------------- MGM Grand, Inc. 3799 Las Vegas Boulevard South 50% Las Vegas, Nevada 89109 Telecopier No.: (702) 891-3334 PRMA Las Vegas, Inc. P.O. Box 95997 50% Las Vegas, Nevada 89193-5997 Telecopier No.: (702) 874-1554 2.2 Initial Capital Contributions. The initial Capital Contributions of the Members shall be made in accordance with, and subject to, the terms and conditions set forth in the Contribution Agreement being executed and delivered concurrently herewith. 2.3 Third Party Financing. Except as otherwise provided herein to the contrary, the Company will obtain, on its own behalf, all additional money and funds necessary, at anytime, to develop, construct, acquire and operate the Property (including the Project). The initial financing for the development and construction of the Project is contemplated to be without recourse to any Member or Related Person of a Member, in an amount not less than Two Hundred and Twenty Million Dollars ($220,000,000.00), and secured solely by the assets of the Company. No Member or Affiliate of a Member shall 4 be required to guaranty or make any other financial commitment with respect to any debt or other obligation of the Company. 2.4 Additional Capital Contributions. Additional capital contributions may be called for by the Board (but only by the unanimous vote or approval of all Directors), by written demand upon the Members from time to time ("Additional Capital Contributions"). Such Additional Capital Contributions shall be payable in proportion to the Percentage Interests of the Members. 2.5 Other Matters. (a) Except as otherwise provided in this Agreement, no Member shall demand or receive a return of his Capital Contributions or withdraw from the Company without the consent of all Members. Under circumstances requiring a return of any Capital Contributions, no Member shall have the right to receive property other than cash except as may be specifically provided herein. (b) No Member shall receive any interest, salary, or draw with respect to its Capital Contributions or its Capital Account or for services rendered on behalf of the Company or otherwise in its capacity as Member, except as otherwise provided in this Agreement. ARTICLE III ALLOCATIONS 3.1 Profits. After giving effect to the special allocations set forth in Sections 3.3 and 3.4 hereof, Profits for any Fiscal Year shall be -------------------- allocated among the Members in proportion to their Percentage Interests. 3.2 Losses. After giving effect to the special allocations set forth in Sections 3.3 and 3.4 hereof, Losses for any Fiscal Year shall be allocated -------------------- among the Members in proportion to their Percentage Interests. 3.3 Special Allocations. The following special allocations shall be made for income tax purposes in the following order: (a) Minimum Gain Chargeback. Except as otherwise provided in Section 1.704-2(f) of the Regulations, notwithstanding any other provision of this Article III, if there is a net decrease in Company Minimum Gain during any Fiscal Year, each Member shall be specially allocated items of Company income and gain for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount equal to such Member's share of the net decrease in Company Minimum Gain, determined in accordance with Regulations Section 5 1.704-2(g). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Member pursuant thereto. The items to be so allocated shall be determined in accordance with Sections 1.704-2(f)(6) and 1.704-2(j)(2) of the Regulations. This Section 3.3(a) is intended to comply with the minimum gain chargeback -------------- requirements in the Regulations and shall be interpreted consistently therewith. (b) Member Minimum Gain Chargeback. Except as otherwise provided in Section 1.704-2(i)(4) of the Regulations, notwithstanding any other provision of this Article III, if there is a net decrease in Member Nonrecourse Debt Minimum Gain attributable to a Member Nonrecourse Debt during any Fiscal Year, each Member who has a share of the Member Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse Debt, determined in accordance with Section 1.704- 2(i)(5) of the Regulations, shall be specially allocated items of Company income and gain for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount equal to such Member's share of the net decrease in Member Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)(4) and 1.704-2(g)(2). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Member pursuant thereto. The items to be so allocated shall be determined in accordance with Sections 1.704-2(i)(4) and 1.704-2(j)(2) of the Regulations. This Section 3.3(b) is -------------- intended to comply with the minimum gain chargeback requirements in the Regulations and shall be interpreted consistently therewith. (c) Nonrecourse Deductions. Nonrecourse Deductions for any Fiscal Year shall be specially allocated among the Members in proportion to their Percentage Interests. (d) Member Nonrecourse Deductions. Any Member Nonrecourse Deductions for any Fiscal Year shall be specially allocated to the Member who bears the economic risk of loss with respect to the Member Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable in accordance with Regulations Section 1.704-2(i)(1). (e) Code Section 754 Adjustment. To the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Code Section 734(b) or Code Section 743(b) is required, pursuant to Regulations Section 1.704- 1(b)(2)(iv)(m)(2) or Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be taken - - - - into account in determining Capital Accounts as the result of a distribution to a Member in complete liquidation of his interest in the Company, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) and such gain or loss shall be specially allocated to the Members in accordance with their interests in the Company in the event Regulations Section 6 1.704-1(b)(2)(iv)(m)(2) applies, or to the Members to whom such distribution was - - made in the event Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies. - - (f) Qualified Income Offset. In the event any Member unexpectedly receives any adjustment, allocation or distribution described in Treasury Regulation paragraph (4), (5) or (6) of Section 1.704-1(b)(2)(ii)(d), items of Company income and gain shall be specially allocated to the Members in an amount and manner sufficient to eliminate, to the extent required by the Treasury Regulations, the Adjusted Capital Account Deficit of that Member as quickly as possible. 3.4 Curative Allocations. The allocations set forth in Sections -------- 3.3(a), 3.3(b), 3.3(c), 3.3(d) and 3.3(e) hereof (the "Regulatory Allocations") - ----------------------------------------- are intended to comply with certain requirements of the Regulations. It is the intent of the Members that, to the extent possible, all Regulatory Allocations shall be offset either with other Regulatory Allocations or with special allocations of other items of Company income, gain, loss, or deduction pursuant to this Section 3.4. Therefore, notwithstanding any other provision of this ----------- Article III (other than the Regulatory Allocations), the Chief Financial Officer shall make such offsetting special allocations of Company income, gain, loss or deduction in whatever manner such officer reasonably determines appropriate so that, after such offsetting allocations are made, each Member's Capital Account balance is, to the extent possible, equal to the Capital Account balance such Member would have had if the Regulatory Allocations were not part of the Agreement and all Company items were allocated pursuant to Sections 3.1 and 3.2 -------------------- hereof. In exercising his reasonable judgment and discretion under this Section ------- 3.4, the Chief Financial Officer shall take into account future Regulatory - --- Allocations under Sections 3.3(a) and 3.3(b) that, although not yet made, are -------------------------- likely to offset other Regulatory Allocations previously made under Sections -------- 3.3(c) and 3.3(d). - ----------------- 3.5 Other Allocation Rules. (a) The Members are aware of the income tax and economic consequences of the allocations made by this Article III and hereby agree to be bound by the ----------- provisions of this Article III in reporting their shares of Company income and ----------- loss for income tax purposes. (b) For purposes of determining the Profits, Losses, or any other items allocable to any period, Profits, Losses, and any such other items shall be determined on a daily, monthly, or other basis, as determined by the Members using any permissible method under Code Section 706 and the Regulations thereunder. 7 (c) Solely for purposes of determining a Member's proportionate share of the "excess nonrecourse liabilities" of the Company, within the meaning of Regulations Section 1.752-3(a)(3), the Members' interests in Company profits are in proportion to their Percentage Interests. (d) To the extent permitted by Section 1.704-2(h)(3) of the Regulations, the Chief Financial Officer shall endeavor not to treat distributions of Net Cash Flow as having been made from the proceeds of a Nonrecourse Liability or a Member Nonrecourse Debt. 3.6 Tax Allocations: Code Section 704(c). In accordance with Code Section 704(c) and the Regulations thereunder, income, gain, loss, and deduction with respect to any property contributed to the capital of the Company shall, solely for tax purposes, be allocated among the Members so as to take account of any variation between the adjusted basis of such property to the Company for federal income tax purposes and its initial Gross Asset Value. In the event the Gross Asset Value of any Company asset is adjusted pursuant to the definition of Gross Asset Value contained in the Glossary of Defined Terms, subsequent allocations of income, gain, loss, and deduction with respect to such asset shall take account of any variation between the adjusted basis of such asset for federal income tax purposes and its Gross Asset Value in the same manner as under Code Section 704(c) and the Regulations thereunder. Any elections or other decisions relating to such allocations shall be made by the Members in any manner that reasonably reflects the purpose and intention of this Agreement. Allocations pursuant to this Section 3.6 are ----------- solely for purposes of federal, state, and local taxes and shall not affect, or in any way be taken into account in computing, any Person's Capital Account or share of Profits, Losses, other items, or distributions pursuant to any provisions of this Agreement. ARTICLE IV DISTRIBUTIONS 4.1 Net Cash Flow. Except as provided in Section 12.2 hereof, the ------------ Chief Financial Officer shall cause all Net Cash Flow, if any, to be distributed to the Members, in proportion to their respective Percentage Interests, not later than the thirtieth (30th) day after the end of each fiscal quarter. 4.2 Tax Distributions. Within ninety (90) days after the conclusion of each Fiscal Year, the Chief Financial Officer shall determine and provide written notice to the Members of the amount (the "Tax Liability Shortfall Amount"), if any, by which (a) the 8 aggregate federal and Nevada state tax liability (if any) incurred by the Members with respect to the net income of the Company for such preceding Fiscal Year (which tax liability shall be determined by applying the highest effective corporate tax rates then in effect for the Fiscal Year in question), exceeds (b) ------- the aggregate cash distributions made by the Company with respect to such Fiscal Year (including any distributions made to the Members with respect to the final fiscal quarter of such Fiscal Year). Unless otherwise instructed by the Board, the Chief Financial Officer shall use all reasonable efforts to obtain all required lender's consents, or to cause the Company to borrow sufficient funds, to enable the Company to distribute the Tax Liability Shortfall Amount to the Members. Each such distribution shall be made to the Members in accordance with their respective Percentage Interests as soon as practicable after such funds have been obtained. Notwithstanding anything contained herein to the contrary, in no event shall any such borrowing or distribution be obtained or made without the approval of the Board if such action would cause a breach of or an adverse change under any contract or undertaking by which the Company is bound, or to which any of its Property is subject. It is the objective of the Members that while the Tax Liability Shortfall Amount will be determined at the end of each Fiscal Year, to the extent possible and subject to the foregoing, distributions will be made in respect thereof on a quarterly basis to facilitate the Members' ability to make quarterly estimated tax payments with respect to their net income from the Company. At the end of each Fiscal Year as contemplated above, final adjustments shall be made to reflect the actual results of such Fiscal Year, and if required by any lender to the Company, each Member shall immediately repay any excess amounts distributed to it with respect to the Tax Liability Shortfall Amount for such Fiscal Year based on such final adjustment. ARTICLE V MANAGEMENT 5.1 Board of Directors. The Company shall at all times have a board of directors (the "Board") composed of individuals ("Directors") selected by the Members who shall vote on Major Decisions and elect, and oversee the performance of, the Managers. (a) Membership and Voting. (i) Membership. The Board will consist of four (4) Directors with two (2) Directors appointed by MGM, and two (2) Directors appointed by PRMA-LV. One of the Directors shall be designated as the "Chairman of the Board." Each Member shall cause its appointed Directors to comply with the terms of this Agreement to be performed by such Directors. Each Member may, at any time, appoint alternate Directors by prior written notice to the other Directors and such alternates will have all the powers of a regular Director in the absence or inability of a regular Director to serve. Each Member will have the power to remove any Director or alternate Director of the Board appointed by it. Vacancies on the Board will be filled by appointment by the Member which 9 appointed the Director previously holding the position which is then vacant. Each Member shall notify the other Member in writing of its initial appointments to the Board within five (5) business days of the execution of this Agreement. The Members may agree to increase or decrease the size of the Board proportionately, from time to time. (ii) Voting. Each Director shall have one vote on any decision of the Board. A Director may give his written proxy to another Director to vote on his behalf in his absence. Except as expressly provided to the contrary in this Agreement, all actions of the Board must be approved, directly or by proxy, by a majority of the Directors (whether or not present at the meeting at which such vote occurs). (b) Meetings of the Board; Time and Place. Unless otherwise agreed by the Board, regular meetings of the Board shall be held monthly at such time and at such place as the Board shall determine. At such regular meetings, the Managers shall report on the financial performance and condition of the Company on a year-to-date basis (including cash flows, reserves, outstanding loans, and compliance efforts), progress reports on capital projects, including the construction of the Project, and the Business Plan, material contracts entered into, material litigation, marketing efforts and such other matters relevant to the operation of the Company. Special meetings of the Board shall be held on the call of any Director; provided that at least three (3) business days' notice is given to all Directors (unless written waiver of this requirement by all Directors is obtained). A quorum for any Board meeting shall consist of not less than three (3) Directors present either in person or by proxy. The Board may make use of telephones and other electronic devices to hold meetings, provided that each Director simultaneously participates with all of the other Directors with respect to all discussions and votes of the Board. The Board may act without a meeting if the action taken is reduced to writing and approved by the Board in accordance with the other voting provisions of this Agreement. Written minutes shall be taken at each meeting of the Board. However, any action taken or matter agreed upon by the Board shall be deemed final, whether or not written minutes are ever prepared or finalized. Without limitation on the voting and approval requirements set forth in this Article V, the Chairman --------- of the Board shall be entitled to consult with and advise the Managers, from time to time, and shall not be required to call a meeting of the Board to do so. (c) Major Decisions. No action shall be taken, sum expended, decision made or obligation incurred by any Manager or Member on behalf of the Company with respect to any matter within the scope of any of the Major Decisions enumerated below, unless approved by the Board. The "Major Decisions" shall mean and consist of the following: (i) The approval of each Business Plan and each revision or amendment thereto; 10 (ii) The approval of the architectural and engineering plans for the Project and any material modifications thereof; (iii) The selection of a firm of independent certified public accountants to perform an annual audit and issue an opinion letter with respect to the financial statements of the Company; (iv) Granting to any individual other than a Manager the authority to open and draw checks on bank accounts in the name of the Company, or endorse checks for deposit to such accounts; (v) The purchase, sale, lease or other disposition of Company Property, other than as contemplated in the Business Plan, and other than in the ordinary course of the Company's business; (vi) Approving all capital expenditures, other than those contemplated in the Business Plan; (vii) The incurrence of any indebtedness for borrowed money by, or the refinancing of any indebtedness of, the Company, or the granting of any mortgage, lien or other encumbrance on any of the Company's Property, the giving of any Company guaranty, other than construction guarantees, indemnities and surety bonds given in furtherance of the construction or improvement of the Project; (viii) Approving transactions between the Company and a Member or Related Person of a Member, other than those contemplated in the Business Plan; (ix) Selecting and removing any Manager; (x) Entering into employment agreements with and determining the compensation of the Managers; (xi) Filing for bankruptcy protection or similar proceedings; (xii) Selecting any underwriter, broker, consultant or legal counsel for the Company; (xiii) Each other decision or action under this Agreement or the Articles of Organization that requires the approval, consent, determination or agreement of the Board; provided, however, that a transaction of the type described in clause (v), (vi), - -------- ------- (vii), (viii) or (xii) above (other than real property leases covering Company Property, which shall always 11 constitute Major Decisions) shall not be a Major Decision if the Chief Executive Officer reasonably anticipates that such transaction will involve an aggregate payment or liability of $300,000 or less; moreover the Chief Executive Officer shall notify the Board if any transaction described in clause (v) is reasonably anticipated to exceed $150,000. In addition, any action by the Company to materially amend, modify, or supplement any document, instrument, transaction or other matter described above as a Major Decision shall require the approval of the Board if the same as so amended, modified or supplemented, would be inconsistent with the terms previously approved with respect thereto by the Board. Notwithstanding the above, the Chief Executive Officer shall have the right and authority to take such actions as he or she, in his or her reasonable judgment, deems necessary for the protection of life or health or the preservation of Company assets if, under the circumstances, in the good faith estimation of the Chief Executive Officer, there is insufficient time to allow the Chief Executive Officer to obtain the approval of the Board to such action and any delay would materially increase the risk to life or health or preservation of assets. The Chief Executive Officer shall notify the Board of each such action contemporaneously therewith or as soon as reasonably practicable thereafter. Such authority shall lapse and terminate upon reduction of such risk to life or health or preservation of assets or upon receipt by the Chief Executive Officer of telephone, facsimile, or written notice from any director on the Board of its disapproval of any or all of the proposed actions. As used herein, "Buy-Sell Major Decision" shall mean any Major Decision of the type described in one or more of clauses (i), (ii), (v), (vi), (vii), (viii), (ix), (x) and (xi). (d) Deadlock Resolution. In the event the Board is deadlocked over a Major Decision that is not a Buy-Sell Major Decision, the Members shall promptly select a mutually acceptable unrelated and independent individual who shall, after good faith discussions with the Board with the objective of arriving at a consensus on the issue in question that is acceptable to a majority of the Directors, resolve the deadlocked matter (including, if necessary, by casting his or her vote in favor of a proposed resolution in the event no such consensus can be reached upon the conclusion of such discussions). In the event the Members cannot agree on the selection of such individual, any Director shall be entitled to request that an official of the local office of the American Arbitration Association ("AAA") appoint such individual, and such Director shall promptly give written notice to the other Directors that such request has been made (whereupon no other Director shall be entitled to make a duplicative request to the AAA). In such event, the official of the AAA shall be instructed to use his or her best efforts to appoint an individual who (i) is of good reputation and possesses a minimum of five (5) years of experience in Las Vegas, Nevada as a senior executive of a gaming company, and (ii) has no prior relationship with or to either Member or the Company. Notwithstanding the foregoing, the Members agree that either of Mr. Thomas Hartley or Mr. Donald McGhie shall be a mutually acceptable individual hereunder. Such appointed individual shall, after good faith discussions with the Board with the objective of arriving at a consensus on the issue in question that is acceptable to a majority of the Directors, resolve the deadlocked matter (including, if necessary, by casting his or her vote in favor of a proposed resolution in the event no such consensus can be reached upon the conclusion of such discussions). The 12 Company shall indemnify and hold harmless any individual selected or appointed in accordance with the foregoing to the same extent that such Person would be indemnified under Article VI hereof if such Person were a Director of the ---------- Company. In no event, however, shall any such individual be designated or construed to be a Director of the Company. The provisions of this Section 5.1 ------- --- shall be deemed automatically deleted, without the need for approval of any further action to be taken by the Members, upon the date occurring six (6) months after the opening of the Project (the "Deadlock Resolution Flip Date"). 5.2 Managers. (a) Management by Managers. The day-to-day management of the Company shall be vested in two (2) or more Managers who shall be elected solely by the Board. No debt may be contracted or liability incurred by or on behalf of the Company, except by one or more of the Managers, subject to the restrictions on its or their authority set forth in Section 5.1. No Director or Member, unless ----------- also appointed as a Manager, shall participate in the day to day operation of the business affairs of the Company, and if so appointed, shall participate only within the scope of authority of such position as defined in this Agreement. (b) Election of Managers by Board. The Company shall have two (2) or more Managers, one of which shall be designated as General Manager and Chief Executive Officer (the "Chief Executive Officer"), and another of which shall be designated as Manager and Chief Financial Officer (the "Chief Financial Officer"). The initial Managers are designated in the Articles of Organization. Each Manager shall be selected by the Board and shall serve at the pleasure of the Board. Any Manager may be removed by the Board at any time with or without cause. Without limitation on the Board's right to select or remove a Manager at any time, the Managers shall be elected at least annually by the Board. Directors who are Managers or candidates to be Manager shall be entitled to vote with respect to each such election, including their own. Each Manager shall serve for a term expiring at the earlier of (i) the Board's determination to terminate such Manager, (ii) the anniversary of such Manager's election, or (iii) the date on which he or she resigns or becomes disabled and unable to serve. The Members anticipate that the Board will select Managers to render full-time and exclusive services to the Company within a reasonable time prior to the opening of the Project. Until such time, the initial Managers designated in the Articles of Organization shall serve on an interim and non-exclusive basis as "Interim Managers" hereunder. Except for the Interim Managers, (A) Managers shall be compensated solely by the Company, but may retain previously granted stock options or other emoluments from either Member or its respective Affiliates, in such Member's sole and absolute discretion; (B) the Managers, while serving as Managers, shall not be eligible to receive new stock options or other emoluments from either Member or its respective Affiliates; and (C) the Managers are expected to render full-time, exclusive services to the Company, subject only to such exceptions as the Board may approve in its discretion on a 13 case by case basis. A Manager shall perform his duties as a Manager in good faith, in a manner he reasonably believes to be in the best interest of Company, and with such care as an ordinarily prudent person in a like position would use under similar circumstances. A person who so performs his or her duties shall not have any liability by reason or being or having been a Manager of the Company. (c) Duties of the Chief Executive Officer. The Chief Executive Officer shall be generally responsible for overseeing and managing the business and operations of the Company. (d) Duties of the Chief Financial Officer. The Chief Financial Officer shall have fiduciary responsibility for the safekeeping and use of all funds and assets of the Company, whether or not in his immediate possession or control. The funds of the Company shall not be commingled with the funds of any other Person and the Chief Financial Officer shall not employ, or permit any other Person to employ, such funds in any manner except for the benefit of the Company. The bank accounts of the Company shall be maintained in such banking institutions as are approved by the Board and withdrawals shall be made only in the regular course of Company business and as otherwise authorized in this Agreement on such signature or signatures as the Board may determine. All funds of the Company shall be invested in accordance with the then applicable Business Plan. The Chief Financial Officer shall also have the duties described in Article VIII of this Agreement. - ------------ 5.3 Warranted Reliance by Directors and Managers on Others. In exercising their authority and performing their duties under this Agreement, the Directors and the Managers shall be entitled to rely on information, opinions, reports, or statements of the following persons or groups unless they have actual knowledge concerning the matter in question that would cause such reliance to be unwarranted: (i) one or more employees or other agents of the Company whom the Director or Manager, as the case may be, reasonably believes to be reliable and competent in the matters presented; and (ii) any attorney, public accountant, or other person as to matters which the Director or Manager, as the case may be, reasonably believes to be within such person's professional or expert competence. 5.4 Business Plan. (a) Preparation and Approval. Not later than forty-five (45) days prior to the end of the then current Fiscal Year, the Managers shall prepare for the approval of the Board a business plan (the "Business Plan") for the next Fiscal Year. Within sixty (60) days of the date hereof, the Managers shall prepare a Business Plan for the Company for Fiscal 14 Year 1995. No material changes or departures from any item in an approved Business Plan shall be made by the Managers without the prior approval of the Board. Each Business Plan shall include the following: (i) A narrative description of any activities proposed to be undertaken including the physical development of the Project; (ii) A projected annual income statement (accrual basis) on a quarter-by-quarter basis for the upcoming Fiscal Year and the subsequent Fiscal Year; (iii) A projected balance sheet as of the end of the upcoming Fiscal Year and subsequent Fiscal Year; (iv) A capital budget and an operating budget for the Project, including the establishment and amount of working capital, capital improvement, and contingency reserves; (v) A schedule of projected operating cash flow (including itemized operating revenues, Project costs, and Project expenses) for such Fiscal Year on a quarter-by-quarter basis, including a schedule of projected operating deficits and capital calls for Additional Capital Contributions, if any; (vi) A marketing plan indicating the nature, type, timing and cost of advertising, public relations, complementaries, and promotions contemplated (e.g. print,television, food/beverage, billboard, signage, and other media), contemplated distribution and amounts payable to contractors; (vii) A personnel plan indicating executive and key employee staff, organizational charts, employee census, hiring estimates, turnover, payroll, schedule of benefits, and labor relations agreements; (viii) An entertainment plan indicating the nature, type and cost of entertainment to be conducted as part of the Project including special events, and to the extent ascertainable, scheduled dates and entertainers; (ix) A description of any material proposed construction, capital expenditures, installations including projected dates for commencement and completion of the foregoing; (x) A development schedule identifying the projected development periods as well as the times for completion of the various stages of the Project and the costs attributable to each such stage; 15 (xi) A narrative description of the proposed investment of any funds of the Company which are (or are expected to become) available for investment; (xii) Such other information, plans, maps, descriptions of contracts, or other materials necessary in order to inform the Board of all matters relevant to the development, operation, management, and maintenance of the Project, or to enable the Board to make an informed decision with respect to its approval of such Business Plan or as may be desired by the Board; (xiii) A schedule identifying proposed property (real or personal) acquisitions and dispositions with a cost or sales price, as the case may be, in excess of $250,000.00, the aggregate cost of all such acquisitions and the aggregate sales price of all such dispositions; and (xiv) A five year strategic plan for the further strategic development, diversification and positioning of the Company so it remains competitive in a dynamic marketplace. (b) Implementation of Business Plan by Managers. The Managers shall, subject to the limitations contained herein and the availability of operating revenues and other funds, use all reasonable efforts to conduct the Company's business in material compliance with the then applicable Business Plan. 5.5 Insurance. (a) Coverage. The Chief Executive Officer shall procure and maintain, or cause to be procured and maintained, insurance sufficient to enable the Company to comply with applicable laws, regulations, and contractual requirements (including the requirements of Persons providing financing to the Company), including as a minimum and without limitation, the following: (i) Comprehensive general liability insurance in the amounts and upon terms customary for businesses and assets comparable to the Project; (ii) With respect to completed improvements, fire and extended coverage insurance (including earthquake coverage), and, whenever construction of any improvement is taking place, builders' risk insurance, in each case, on a replacement cost basis of not less than one hundred percent (100%) of the full replacement cost of such improvements; (iii) Worker's compensation insurance as required by law including employer's liability; 16 (iv) Fidelity insurance in an amount to protect against losses due to employee dishonesty, theft by a property manager or any other third parties, and mysterious disappearances; an d (v) Such additional insurance against other risks of loss to the Project as, from time to time, may be required by any lender making a loan to the Company or which may be required by law. The Chief Executive Officer shall furnish the Board, no less frequently than annually, a schedule of such insurance and copies of certificates evidencing the same. All Members must consent to the establishment or modification of any self insurance or deductibles which exposes the Company to uninsured liability. Each Director, Manager and Member shall be named as an additional insured to the Company's comprehensive general liability insurance policies. 5.6 Unanimous Consent. Notwithstanding anything to the contrary in this Agreement, the Company may take any action contemplated under this Agreement if approved by the unanimous consent of the Members, such consent to be provided in the manner required by Section 13 hereof. Any Manager may ---------- require response to any request for approval within a specified time period, but not less than ten (10) Business Days, which approval shall be deemed given by a Member upon the expiration of such time period (but only if the applicable request for approval specifically advised such Member that its failure to respond within the specified time period would result in such deemed approval) unless written notice to the requesting Manager has been earlier given indicating such Member's approval or disapproval. 5.7 Pre-development Matters. (a) Entitlements. The Managers shall promptly commence, and with due diligence proceed, to use all reasonable efforts to obtain the issuance or approval of each of the following (collectively, the "Entitlements"), to the extent necessary for the development and construction of the Project, in compliance with all applicable laws: environmental impact reports or negative declarations, master plan/guide changes, Paradise Town specific plan changes, zoning changes, variances, special or conditional use permits, acceptable conditions to variance and to special use permits, all flood control approvals, building permits, F.A.A. and McCarran Airport height approvals and "determinations of no hazard," subdivision or parcel maps, dedications, special assessment districts, and all similar items or arrangements (other than state and local gaming licensure matters). Each Member shall diligently and in good faith cooperate with the Managers in the Managers' efforts to 17 obtain, on behalf of the Company, the Entitlements. The Company shall pay and be solely responsible for any and all costs and expenses ("Entitlements Costs") incurred with respect to the performance of the undertakings described in this subsection (a) above. - -------------- (b) Liquor and Gaming Approvals. The Managers shall promptly commence and with due diligence proceed to use all reasonable efforts to obtain, on behalf of the Company, all liquor and gaming licenses and approvals (the "Liquor and Gaming Approvals") necessary for the contemplated use and operation of the Project, including the execution, delivery and processing of all necessary or appropriate applications, agreements, documents and other instruments. Each Member shall diligently and in good faith cooperate with the Managers in the Managers' efforts to obtain, on behalf of the Company, the Liquor and Gaming Approvals. Any and all costs and expenses (including reasonable attorneys' fees and costs) incurred by any Manager or Member in connection with obtaining the Liquor and Gaming Approvals (the "Liquor and Gaming Costs") shall be paid by the Company, except that each Member shall bear the costs and expenses incurred in connection with its obtaining a gaming license and approval in its capacity as a Member in the Company. (c) Reimbursement of Shared Costs. As contemplated by that certain Due Diligence and Cost-Sharing Agreement, dated October 13, 1994, by and among the Members and PRMA (the "Cost-Sharing Agreement"), the Chief Financial Officer shall promptly cause the Company to reimburse each Member for any and all "Shared Costs" (as defined in the Cost-Sharing Agreement) that have been borne by such Member upon the Chief Financial Officer's receipt of supporting documentation evidencing that such costs have been paid and calculating such Member's share thereof. All such Shared Costs that have accrued but remain unpaid as of the date hereof shall be assumed and paid by the Company when due. (d) Unwind Conditions and Procedures. At any time during the thirty (30) day period following May 1, 1995, as such date may be extended from time to time by the Board (the "Outside Date"), either Member, acting through its respective Directors at a meeting of the Board, shall have the unilateral right to cause the dissolution of the Company if all of the following conditions precedent have not been satisfied by such Outside Date: (i) The Company shall have received a written loan commitment for construction financing for the Project, in an amount not less than $220,000,000.00, which shall be without recourse to any Member or any Member's assets and secured solely by the assets of the Company, and which shall contain such other terms and conditions acceptable to each Member in each such party's reasonable business judgement. 18 (ii) Each Member shall be satisfied, in each such party's reasonable business judgement, that the necessary Liquor and Gaming Approvals and the Entitlements are obtainable by the Company. If the Company is not dissolved in accordance with the foregoing during such thirty day period, each Member shall be deemed to have waived its rights under this Section 5.7, and thereafter the Company may be dissolved only ----------- upon the other dissolution events described in Section 12.1. If the Company is ------------ dissolved in accordance with this Section 5.7, the business of the Company shall ----------- be wound up and liquidated, provided that, notwithstanding anything contained in Section 12.2 to the contrary, the following liquidating distributions and - ------------ payments shall be made after the payment and discharge of all of the Company's debts and liabilities to creditors: (A) the "MGM Contribution Property" (as defined in the Contribution Agreement) component of the Company's Property shall be distributed solely to MGM, (B) the "Theme Rights" (as defined in the Contribution Agreement) shall be reconveyed and assigned to PRMA-LV, (C) all other components of the Company's Property shall be sold and reduced to cash, (D) all of the Company's cash (including such cash that are generated by the sales referred to in clause (C) above) shall be distributed solely to PRMA-LV, and (E) MGM shall make a cash payment to PRMA-LV in an amount equal to one half of the difference between (x) $40,000,000, and (y) the aggregate amount of cash distributed to PRMA-LV pursuant to clause (D) above (which cash payment, for income tax purposes only, shall be deemed to have been contributed to the Company and then distributed to PRMA-LV), within fifteen (15) business days after such aggregate amount is determined by the Chief Financial Officer. 5.8 Agreements Regarding Advent Lease and Related PRMA Loans. Prior to the Close of Escrow (as defined in the Contribution Agreement), the Company will receive an assignment of all of PRMA's right, title and interest in and to the Advent Option Agreement, and will assume all of PRMA's obligations thereunder (excluding, however, PRMA's obligations set forth in Paragraph 2(f) thereof). PRMA has heretofore advanced a loan to Advent, and may hereafter provide certain additional financing to Advent and/or guarantee certain additional third party financing that may be obtained by Advent in connection with the build-out, furnishing and fixturing of the Advent Lease Premises (collectively, the "Advent/PRMA Obligations"). In the event of the termination of the Advent Lease, the Company shall concurrently therewith purchase from PRMA the Advent/PRMA Obligations for a purchase price equal to the PRMA Recoupment Amount, provided that the entire purchase price shall be evidenced by an unsecured promissory note given by the Company in favor of PRMA that shall be repayable solely out of the Company receipts and revenues derived from its ownership, operation and use of the Advent Premises. In the event that PRMA forecloses on its collateral for the Advent/PRMA Obligations, or accepts a deed and assignment in lieu of such foreclosure, the Company shall promptly thereafter purchase PRMA's entire right, title and interest in and to such collateral for a purchase price equal to the PRMA Recoupment Amount, provided that the entire purchase price shall be evidenced by an unsecured promissory note given by the Company in favor 19 of PRMA that shall be repayable solely out of the Company receipts and revenues derived from its ownership, operation and use of the Advent Premises. As used herein, "PRMA Recoupment Amount" shall mean an amount, calculated on an after- tax basis to PRMA (assuming the highest corporate rate of state, if any, and federal taxation), equal to the amount PRMA would have received under the Advent/PRMA Obligations at the time of such termination, foreclosure, or deed and assignment in lieu of foreclosure (as the case may be) if the Advent/PRMA Obligations had been satisfied in full; such amount shall accrue interest at a per annum rate equal to the reference rate announced from time to time by Bank of America, Nevada, which interest shall cumulate and compound monthly until the entire PRMA Recoupment Amount has been repaid in full. ARTICLE VI INDEMNIFICATION 6.1 Indemnification: Actions, Suits and Proceedings other than by Company. The Company shall, to the extent of its existing capital, its assets and, if insured for such purposes, its insurance coverage for such purposes, indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action, suit or proceeding by or in the right of the Company, by reason of the fact that such person is or was a Director, Manager, Member, employee or agent of the Company, or by reason of the fact that such person at the request of the Company is or was serving as a manager, director, officer, employee or agent of another limited-liability company, corporation, partnership, joint venture, trust or other enterprise, against all expenses, including, without limitation, attorneys' fees, judgments, fines and amounts paid in settlement, actually and reasonably incurred by such Person in connection with such action, suit or proceeding if such Person in relation to the facts, events and circumstances on which such action, suit or proceeding is based (i) acted in good faith and in a manner that such Person reasonably believed to be in or not opposed to the best interests of the Company and (ii) with respect to a criminal action or proceeding had no reasonable cause to believe that such Person's conduct was unlawful. The Company shall pay for or reimburse the reasonable expenses incurred by a Director, Manager, Member, employee or agent of the Company who is a party to such an action, suit or proceeding in advance of its final disposition if (a) such Person furnishes the Company with a written affirmation of such Person's good faith belief that in relation to the facts, events and circumstances on which such action, suit or proceeding is based such Person satisfied all applicable standards of conduct described in this Agreement, (b) such Person furnishes the Company with a written undertaking, executed personally or on such Person's behalf, to repay in full to the Company all amounts so advanced upon the ultimate determination by a court of competent jurisdiction that in relation to the facts, events and circumstances on which such action, suit 20 or proceeding is based such Person failed to satisfy all applicable standards of conduct described in this Agreement and therefore is not entitled to be indemnified by the Company pursuant hereto and (c) a determination is made by the Board that it knows of no fact or circumstance that would preclude indemnification of such Person under applicable law and this Agreement. The provisions of the immediately-preceding sentence hereof shall not affect any other right to advancement of expenses to which personnel of the Company may be entitled under any contract or otherwise by law. The termination of any action, suit or proceeding by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, does not and shall not, of itself, create a presumption that in relation to the facts, events and circumstances on which such action, suit or proceeding was or is based (1) such Person did not act in good faith and in a manner that such Person reasonably believed to be in or not opposed to the best interests of the Company or (2) with respect to any criminal action or proceeding, such Person had reasonable cause to believe that such Person's conduct was unlawful. 6.2 Indemnification: Actions, Suits and Proceedings by Company. The Company may indemnify any Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding by or in the right of the Company to procure a judgment in its favor by reason of the fact that such Person is or was a Director, Manager, Member, employee or agent of the Company, or is or was serving at the request of the Company as a manager, director, officer, employee or agent of another limited-liability company, corporation, partnership, joint venture, trust or other enterprise, against expenses, including amounts paid in settlement and attorneys' fees, actually and reasonably incurred by such Person in connection with the defense or settlement of such action, suit or proceeding if such Person, in relation to the facts, events and circumstances on which such action, suit or proceeding is based, acted in good faith and in a manner in which such Person reasonably believed to be in or not opposed to the best interests of the Company. Notwithstanding the immediately foregoing, the Company shall not provide indemnification for any claim, issue or matter as to which such a Person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the Company or for amounts paid in settlement to the Company, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all of the circumstances of the case such Person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper. 6.3 Indemnifications: Scope and Authorization. To the extent that a Director, Manager, Member, employee or agent of the Company has been successful on the merits or otherwise in the defense of any action, suit or proceeding described in this Article VI, or in the defense of any claim, issue or matter ---------- therein, the Company shall indemnify such Person against all expenses, including attorneys' fees, actually and reasonably incurred in connection with such defense. Any indemnification pursuant to this Article VI, unless ordered by a ---------- court of competent jurisdiction, shall be made by the Company only as 21 authorized in the specific case upon a determination by the Board that indemnification of the Director, Manager, Member, employee or agent of the Company is proper in the circumstances. Notwithstanding anything to the contrary provided in this Agreement or the Articles of Organization, the Company's indemnity obligations hereunder shall be limited to the Company's capital and assets and insurance existing as of the date on which the Company receives a demand for indemnity. In furtherance of such indemnity obligations, no Member shall be required to contribute any additional capital to the Company or otherwise to fund the Company's indemnity obligations under this Article VI. ---------- 6.4 Maintenance of Insurance or Other Financial Arrangements. In compliance with applicable law, the Company (acting with the approval of its Board) may purchase and maintain insurance or make other financial arrangements on behalf of any Person who is or was a Director, Manager, Member, employee or agent of the Company, or at the request of the Company is or was serving as a manager, director, officer, employee or agent of another limited-liability company, corporation, partnership, joint venture, trust or other enterprise, for any liability asserted against such Person and liability and expenses incurred by such Person in such Person's capacity as a Director, Manager, Member, employee or agent, or arising out of such Person's status as such, whether or not the Company has the authority to indemnify such Person against such liability and expenses. The decision of the Company as to the propriety of the terms and conditions of any insurance or other financial arrangement made pursuant to the immediately-preceding sentence hereof and the Company's choice of Person to provide such insurance or other financial arrangement is and shall be conclusive, and such insurance or other financial arrangement is not and shall not be void or voidable and does not and shall not subject any Director, Manager or Member of the Company approving such insurance or other financial arrangement to personal liability for such Person's action, even if such Person approving such insurance or other financial arrangement is a beneficiary of such approved insurance or other financial arrangement. ARTICLE VII REPRESENTATIONS AND WARRANTIES 7.1 In General. As of the date hereof, each of the Members hereby makes each of the representations and warranties applicable to such Member as set forth in Section 7.2 hereof, and such warranties and representations shall ----------- survive the execution of this Agreement. 7.2 Representations and Warranties. Each Member hereby represents and warrants that: (a) Due Incorporation or Formation; Authorization of Agreement. It is a corporation, duly organized, validly existing, and in good standing under the laws of the 22 jurisdiction of its incorporation or formation and has the corporate power and authority to own its property and carry on its business as owned and carried on at the date hereof and as contemplated hereby. Such Member is duly licensed or qualified to do business and in good standing in each of the jurisdictions in which the failure to be so licensed or qualified would have a material adverse effect on its financial condition or its ability to perform its obligations hereunder. Such Member has the corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder and, the execution, delivery, and performance of this Agreement has been duly authorized by all necessary corporate action. This Agreement has been duly executed and delivered by such Member and constitutes the legal, valid, and binding obligation of such Member enforceable in accordance with its terms. (b) No Conflict with Restrictions; No Default. Neither the execution, delivery, and performance of this Agreement nor the consummation by such Member of the transactions contemplated hereby (i) will conflict with, violate, or result in a breach of any of the terms, conditions, or provisions of any law, regulation, order, writ, injunction, decree, determination, or award of any court, any governmental department, board, agency, or instrumentality, domestic or foreign, or any arbitrator, applicable to such Member or any of its Affiliates, (ii) will conflict with, violate, result in a breach of, or constitute a default under any of the terms, conditions, or provisions of the articles of incorporation, or bylaws of such Member or any of its Affiliates, or any material agreement or instrument to which such Member or any of its Affiliates is a party or by which such Member or any of its Affiliates is or may be bound or to which any of its material properties or assets is subject, (iii) will conflict with, violate, result in a breach of, constitute a default under (whether with notice or lapse of time or both), accelerate or permit the acceleration of the performance required by, give to others any material interests or rights, or require any consent, authorization or approval under, any indenture, mortgage, lease agreement, or instrument to which such Member or any of its Affiliates is a party or by which such Member or any of its Affiliates is or may be bound, or (iv) will result in the creation or imposition of any lien upon any of the material properties or assets of such Member or any of its Affiliates. (c) Governmental Authorizations. Any registration, declaration or filing with, or consent, approval, license, permit or other authorization or order by, any governmental or regulatory authority, domestic or foreign, that is required in connection with the valid execution, delivery and acceptance by such Member under this Agreement has been completed, made or obtained on or before the effective date of this Agreement. Each Member, at its own cost and expense, shall apply for and obtain any equity licenses necessary to non-restricted gaming by the Company. (d) Litigation. There are no actions, suits, proceedings or investigations pending or, to the knowledge of such Member, threatened against or affecting such Member or any of its Affiliates or any of their properties, assets, or businesses in any court or before or by any governmental department, board, agency, or instrumentality, domestic or foreign, 23 or any arbitrator which could, if adversely determined (or, in the case of an investigation could lead to any action, suit, or proceeding, which if adversely determined could) reasonably be expected to materially impair such Member's ability to perform its obligations under this Agreement or to have a material adverse effect on the consolidated financial condition of such Member; and such Member or any of its Affiliates has not received any currently effective notice of any default, and such Member or any of its Affiliates is not in default, under any applicable order, writ, injunction, decree, permit, determination, or award of any court, any governmental department, board, agency or instrumentality, domestic or foreign, or any arbitrator which could reasonably be expected to materially impair such Member's ability to perform its obligations under this Agreement or to have a material adverse effect on the consolidated financial condition of such Member. (e) Investment Company Act; Public Utility Holding Company Act. Neither such Member nor any of its Affiliates is, nor will the Company as a result of such Member holding an Interest be, an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940. Neither such Member nor any of its Affiliates is, nor will the Company as a result of such Member holding an interest in the Company be, a "holding company," "an affiliate of a holding company," or a "subsidiary of a holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935. (f) Investigation. Such Member is acquiring its Interest based upon its own investigation, and the exercise by such Member of its rights and the performance of its obligations under this Agreement will be based upon its own investigation, analysis and expertise. Such Member's acquisition of its Interest is being made for its own account for investment, and not with a view to the sale or distribution thereof. ARTICLE VIII ACCOUNTING, BOOKS AND RECORDS 8.1 Accounting, Books and Records. The Company shall maintain at its principal place of business separate books of account for the Company which shall show a true and accurate record of all costs and expenses incurred, all charges made, all credits made and received, and all income derived in connection with the operation of the Company business in accordance with generally accepted accounting principles and casino industry guidelines consistently applied and, to the extent inconsistent therewith, in accordance with this Agreement. The Company shall use the accrual method of accounting in preparation of its annual reports and for tax purposes and shall keep its book accordingly. Each Member shall, at its sole expense, have the right, at any time, without notice to any other Member, to examine, copy, and audit the Company's books and records during normal business hours. 24 8.2 Reports. (a) In General. The Chief Financial Officer shall be responsible for the preparation of financial reports of the Company and the coordination of financial matters of the Company with the Company's accountants. (b) Reports. Within sixty (60) days after the end of each Fiscal Year and within thirty (30) days after the end of each of the first three (3) fiscal quarters, and within twenty (20) days after the end of each calendar month, the Chief Financial Officer shall cause each Member and each Board member to be furnished with a copy of the balance sheet of the Company as of the last day of the applicable period, a statement of income or loss for the Company for such period, and a statement of the Company's cash flow for such period. Annual statements shall also include a statement of the Members' Capital Accounts and changes therein for such Fiscal Year. Annual statements shall be audited by the Company's accountants, and shall be in such form as shall enable the Members to comply with all reporting requirements applicable to either of them or their Affiliates under the Securities Exchange Act of 1934, as amended. 8.3 Tax Returns; Information. The Chief Financial Officer shall arrange for the preparation and timely filing of all income and other tax returns of the Company. Within sixty (60) days after the end of each Fiscal Year, the Chief Financial Officer shall cause the Company's accountants to prepare and submit to the Board for its review and approval the Company's tax returns. The Chief Financial Officer shall furnish to each Member a copy of each approved return, together with any schedules or other information which each Member may require in connection with such Member's own tax affairs. 8.4 Special Basis Adjustment. In connection with any Permitted Transfer of a Company interest, the Chief Financial Officer shall cause the Company, at the written request of the transferor or the transferee, on behalf of the Company and at the time and in the manner provided in Regulations Section 1.754-1(b), to make an election to adjust the basis of the Company's property in the manner provided in Sections 734(b) and 743(b) of the Code, and such transferee shall pay all costs incurred by the Company in connection therewith, including, without limitation, reasonable attorneys' and accountants' fees. 8.5 Tax Matters Member. PRMA-LV is specially authorized and appointed to act as the "Tax Matters Partner" under the Code and in any similar capacity under state or local law. 25 ARTICLE IX TRANSFERS OF INTERESTS 9.1 Restrictions on Transfers. Except as expressly permitted or required by this Agreement, no Member shall Transfer all or any portion of its Interest without the unanimous prior written consent of the Members, which consent may be withheld by a Member in its sole and absolute discretion. Any Transfer or attempted Transfer by any Member in violation of the preceding sentence shall be null and void and of no force or effect whatever. Each Member hereby acknowledges the reasonableness of the restrictions on Transfer imposed by this Agreement in view of the Company purposes and the relationship of the Members. Accordingly, the restrictions on Transfer contained herein shall be specifically enforceable. Each Member hereby further agrees to hold the Company and each Member wholly and completely harmless from any cost, liability, or damage (including liabilities for income taxes and costs of enforcing this indemnity) incurred by any of such indemnified Persons as a result of a Transfer or an attempted Transfer in violation of this Agreement. 9.2 Permitted Transfers. (a) General. Subject to the conditions and restrictions set forth in this Section 9.2, a Member shall have the right to Transfer all (but not less ----------- than all) of its Interest by means of a Permitted Transfer. (b) Definition of Permitted Transfer; Permitted Transferees. (i) A "Permitted Transfer" is any Transfer by a Member of all of its Interest to a Permitted Transferee, provided that such Transfer otherwise complies with the conditions and restrictions of this Section 9.2. ----------- (ii) A "Permitted Transferee" of a Member is any Person who is sole shareholder of such Member, or a wholly owned subsidiary of such Member, or any Person approved as a Permitted Transferee by the unanimous consent of the Members. (c) Conditions to Permitted Transfers. A Transfer otherwise permitted under this Section 9.2 shall not be a Permitted Transfer and any attempted ----------- Transfer of a Member's Interest to a Permitted Transferee shall be null and void and of no force or effect whatever unless and until the following conditions are satisfied: (i) The transferor and transferee shall execute such documents and instruments of conveyance and assumption as may be necessary or appropriate in the opinion of counsel to the Company and counsel to the non-transferring Member to effect such Transfer and to confirm the Permitted Transferee's agreement to be bound by the 26 provisions of this Article IX and assumption of all obligations of the ---------- transferor Member with respect to the Interest being transferred. (ii) The Company shall receive, prior to such Transfer, an opinion of counsel satisfactory to the Company and the non-transferring Member confirming that such Transfer will not terminate the Company for federal income tax purposes. (iii) The transferor and transferee shall furnish the Company and the non-transferring Member with the transferee's taxpayer identification number, sufficient information to determine the transferee's initial tax basis in the Interest transferred, and any other information reasonably necessary to permit the Company to file all required federal and state tax returns and other legally required information statements or returns. Without limiting the generality of the foregoing, the Company shall not be required to make any distribution otherwise provided for in this Agreement with respect to any transferred Interest until it has received such information. (iv) The Transfer and Permitted Transferee have been approved by the Nevada Gaming Commission to the extent such approval is required under applicable law or regulations. (v) A Member making a Permitted Transfer and the Permitted Transferee shall pay all reasonable costs and expenses incurred by the Company in connection with such Transfer. (vi) A Member making a Permitted Transfer to a Permitted Transferee that is a wholly owned Affiliate shall guarantee for the benefit of the Company and the other Member all of such Permitted Transferee's contractual undertakings hereunder pursuant to a guaranty in form reasonably satisfactory to such other Member. (d) Admission of Permitted Transferee as a Member. A Permitted Transferee of an Interest shall be admitted as a Member in the Company only upon the unanimous written consent of the Members. The rights of a Permitted Transferee who is not admitted as a Member shall be limited to the right to receive allocations and distributions from the Company with respect to the Interest transferred, as provided by this Agreement. The transferor of such Interest shall not be a Member with respect to such Interest, and, without limiting the foregoing, shall not have the right to inspect the Company's books, act for or bind the Company, or otherwise interfere in its operations unless and until it is admitted as a Member in accordance with this Agreement. (e) Effect of Permitted Transfer on Company. The Members intend that the Permitted Transfer of an interest in the Company shall not cause the dissolution of the Company. 27 9.3 Distribution Among Members. Upon the occurrence of a Permitted Transfer of an Interest during any Fiscal Year, Profits, Losses, each item thereof, and all other items attributable to such interest for such Fiscal Year shall be divided and allocated between the transferor and the transferee by taking into account their varying interests during the Fiscal Year in accordance with Code Section 706(d), using any conventions permitted by law and selected by the Chief Financial Officer. All distributions on or before the date of a Permitted Transfer shall be made to the transferor, and all distributions thereafter shall be made to the transferee. Solely for purposes of making such allocations and distributions, the Company shall recognize a Permitted Transfer upon the Chief Financial Officer's receipt of written notice stating the date such Interest was transferred and such other information as the Chief Financial Officer may reasonably require. The Chief Financial Officer and the Company shall incur no liability for making allocations and distributions in accordance with the provisions of this Section 9.3, whether or not the Chief Financial ----------- Officer or the Company has knowledge of any Transfer of ownership of any interest in the Company. ARTICLE X WITHDRAWALS; ACTION FOR PARTITION 10.1 Waiver of Partition. No Member shall, either directly or indirectly, take any action to require partition of any Company property, and notwithstanding any provisions of applicable law to the contrary, each Member hereby irrevocably waives any and all rights it may have to maintain any action for partition or to compel any sale with respect to its Company interest, or with respect to any assets or properties of the Company, except as expressly provided in this Agreement. 10.2 Covenant Not to Withdraw or Dissolve. Each Member hereby covenants and agrees that the Members have entered into this Agreement based on their mutual expectation that all Members will continue as Members and carry out the duties and obligations undertaken by them hereunder and that, except as otherwise expressly required or permitted hereby, each Member hereby covenants and agrees not to (a) take any action to file a certificate of dissolution or its equivalent with respect to itself, (b) take any action that would cause a Bankruptcy of such Member, (c) withdraw or attempt to withdraw from the Company, (d) exercise any power under the Act to dissolve the Company, (e) Transfer all or any portion of its interest in the Company (other than to a Permitted Transferee), (f) petition for judicial dissolution of the Company, or (g) demand a return of such Member's contributions or profits (or a bond or other security for the return of such contributions or profits) without the unanimous consent of the Members, or except as otherwise specifically allowed under this Agreement. 28 ARTICLE XI BUY-SELL 11.1 Buy-Sell Offering Notice. Either Member may exercise its rights under this Article XI at the following times: (a) prior to the Deadlock ---------- Resolution Flip Date, at any time after a deadlock over a Buy-Sell Major Decision that is not resolved within thirty (30) days after the Board meeting at which the same is voted upon, and (b) after the Deadlock Resolution Flip Date, at any time during the Term as a Member shall desire to exercise such rights in its sole and absolute discretion. At any time during the Term, either Member (the "Initiating Member") may give written notice (the "Offering Notice") to the other (the "Responding Member") of its intent to purchase all, but not less than all, of the Responding Member's Interest. In such event, the provisions set forth in this Article XI shall apply. The Initiating Member shall specify in ---------- its Offering Notice the all cash purchase price ("Purchase Price") at which the Initiating Member would be willing to purchase all of the Responding Member's Interest as of the date the Offering Notice is given ("Date of Value"). Once given, an Offering Notice may not be revoked or withdrawn by an Initiating Member without the written consent of the Responding Member, which consent may be withheld in its sole and absolute discretion. 11.2 Exercise of Buy-Sell. Upon receipt of the Offering Notice, the Responding Member shall then be obligated either: (a) To sell to the Initiating Member its Interest for the Purchase Price; or (b) To purchase the Interest of the Initiating Member for the Purchase Price. The Responding Member shall notify the Initiating Member of its election within thirty (30) days after the Date of Value. Failure to give notice within the required time period shall be deemed an election to sell. For purposes of this Section 11 the term "Purchasing Member" shall mean the Member who is obligated - ---------- to purchase the other Member's Interest pursuant to either Section 11.2(a) or --------------- Section 11.2(b) (whether such Member is the Initiating Member or the Responding - --------------- Member) and the term "Selling Member" shall mean the Member who is obligated to sell its Interest to the Purchasing Member. 11.3 Closing. (a) The Members shall meet and exchange documents and pay any amounts due, and otherwise do all things necessary to conclude the transaction set forth herein at the closing of such purchase (the "Closing"). The Closing shall occur at the office of the Purchasing Member's legal counsel at 9:00 a.m., on the first Wednesday after the ninetieth (90th) day after the Date of Value unless that day is a national or state holiday 29 and, in that event, on the next business day. At the Closing, the Selling Member shall deliver to the Purchasing Member a duly executed assignment of its Interest and all Repayment Rights (as defined), if any, and shall also, upon the request of the Purchasing Member, concurrently therewith (or at any time and from time to time thereafter) execute and deliver such other documents and records as the Purchasing Member determines are reasonably necessary or desirable to conclude the Closing and to otherwise allow the Purchasing Member to complete the Project or otherwise develop, use, sell, rent or dispose of the Property. The Purchasing Member shall deliver to the Selling Member cash for the full amount of the Purchase Price, and shall also, upon the request of the Selling Member, concurrently therewith (or at any time and from time to time thereafter) execute and deliver such other documents and records as the Selling Member determines are reasonably necessary or desirable to conclude the Closing. Further, on the Closing, the Selling Member and/or its Affiliates shall be released from its liability under any third party loans to the Company and any guarantees made in connection therewith. If a Company creditor refuses to so release the Selling Member and/or its Affiliates, the Purchasing Member shall indemnify the Selling Member and/or its Affiliates from liability under such loans and guarantees. In addition, any and all outstanding loans, fees and reimbursements owed by the Company or the Purchasing Member to the Selling Member or any of its Affiliates ("Repayment Rights") shall be satisfied in full by the Purchasing Member out of its own funds at Closing, and the satisfaction of all Repayment Rights, if any, shall be a condition precedent to the Selling Member's obligation to close hereunder. Without limitation on the foregoing, if PRMA-LV is the Selling Member, upon the Closing the Purchasing Member shall purchase the Advent/PRMA Obligations from PRMA, for an all cash purchase equal to the outstanding balance thereof (together with all accrued and unpaid interest and all other documents due thereunder), and PRMA shall be released from its liability under any and all guarantees and loan documents relating thereto (and if any party refuses to so release PRMA, the Purchasing Member shall indemnify PRMA from liability under such guarantees and loan documents). If the Selling Member's Interest is subject to any lien, claim or encumbrance, the same shall constitute a default and the Purchasing Member may elect (a) to cause the purchase price (or a portion thereof) to be applied to discharge such lien, claim or encumbrance, (b) to take the Interest subject to such lien, claim or encumbrance and to reduce the purchase price otherwise payable to the Purchasing Member to the Selling Member by the amount of such lien, claim or encumbrance, or (c) to terminate the buy-sell proceedings under this Article XI ---------- because of the existence of such lien, claim or encumbrance and in such event pursue any and all remedies available at law and equity. Notwithstanding anything in this Agreement to the contrary, (i) the Purchasing Member shall be entitled to designate any Affiliate or third party to be the transferee of such interest or obtain financing from any third party with respect to such purchase, provided that the foregoing shall not delay the closing of any such transaction and (ii) the Selling Member's appointments to the Board shall be automatically terminated effective as of the Closing. The reasonable costs of the Closing shall be divided equally between the Selling Member and the Purchasing Member, provided that each such Member shall bear its own attorneys' fees and costs. 30 (b) If for any reason the Purchasing Member fails to close as aforesaid, in addition to any other remedies available under this Agreement or at law or in equity by reason thereof, the Selling Member shall have the right, exercisable by written notice to the Purchasing Member given within thirty (30) days of the date set for the Closing, to purchase under this Section 11.3 the ------------ Interest of the Purchasing Member. If the Selling Member exercises such option, the Purchase Price used for the purposes of this Section 11.3 shall be ninety ------------ percent (90%) of the Purchase Price then established by the Offering Notice previously given. (c) The Members acknowledge and agree that each Member's Interest is extraordinary and unique, and the provisions of this Article XI shall be ---------- specifically enforceable. 11.4 Tax Returns. The Company's accountants shall deliver to the Members prepared as of the date of Closing, all necessary state and federal tax returns. The Purchasing Member shall execute (on behalf of the Company) and file all such state and federal tax returns. The Selling Member shall continue, after the Closing, to have access during normal business hours, to the books and records of the Company to the extent reasonably necessary in connection with the preparation, review or audit of the Selling Member's state and federal returns. ARTICLE XII DISSOLUTION AND WINDING UP 12.1 Liquidating Events. The Company shall dissolve and commence winding up and liquidating upon the first to occur of the following ("Liquidating Events"): (a) The thirtieth (30th) anniversary of the date of the filing of the Articles of Organization; (b) The sale of all or substantially all of the Property; (c) The unanimous written agreement of all Members to dissolve, wind up, and liquidate the Company; (d) The death, retirement, resignation, expulsion, bankruptcy or dissolution of a Member or the occurrence of any other event which terminates a Member's continued membership in the Company, unless the business of the Company is continued by the remaining Member under a right to do so stated in the Articles of Organization; (e) The election of a Member made in accordance with Section 5.7; and ----------- 31 (f) The happening of any other event that makes it unlawful or impossible to carry on the business of the Company. The Members hereby agree that the Company shall not dissolve prior to the occurrence of a Liquidating Event. If it is determined, by a court of competent jurisdiction, that the Company has dissolved prior to the occurrence of a Liquidating Event, the Members hereby agree to continue the business of the Company without a winding up or liquidation. 12.2 Winding Up. Unless the business of the Company is continued pursuant to Section 12.1, the provisions of this Section 12.2 shall apply upon ------------ ------------ the occurrence of a Liquidating Event (except as provided in Section 5.7 above). ----------- The Company shall continue solely for the purpose of winding up its affairs in an orderly manner, liquidating its assets, and satisfying the claims of its creditors and Members, and no Member shall take any action that is inconsistent with, or not necessary to or appropriate for, winding up the Company's business and affairs. To the extent consistent with this Article XII, all covenants and ----------- obligations in this Agreement (including those relating to the control, management and operation of the Company) shall continue in full force and effect until such time as the Property has been distributed pursuant to this Section ------- 12.2 and the Company has terminated. The Chief Executive Officer shall be - ---- responsible for overseeing the winding up and liquidation of the Company, shall take full account of the Company's liabilities and Property, shall cause the Property to be liquidated as promptly as is consistent with obtaining the fair market value thereof. The Chief Executive Officer shall apply and distribute as soon as practicable all Net Cash Flow and all other Company cash on hand in the following order of priority, unless otherwise required by applicable law: (a) First, to the payment and discharge of all of the Company's debts and liabilities to creditors, in the order of priority as provided by law, except to the Members in respect of their respective Percentage Interests; and (b) The balance, if any, to the Members in accordance with their respective Percentage Interests. The Managers shall not receive any additional compensation for any services performed pursuant to this Section 12. Each Member understands and ---------- agrees that by accepting the provisions of this Section 12.2 setting forth the ------------ priority of the distribution of the assets of the Company to be made upon its liquidation, such Member expressly waives any right which it, as a creditor of the Company, might otherwise have under the Act to receive distributions of assets pari passu with the other creditors of the Company in connection with a ---- ----- distribution of assets of the Company in satisfaction of any liability of the Company, and hereby subordinates to said creditors any such right. 32 In the discretion of the Chief Executive Officer, a pro rata portion of the distributions that would otherwise be made to the Members pursuant to Section 12.2(b) hereof may be: - --------------- (a) distributed to a trust established for the benefit of the Members for the purposes of liquidating Company assets, collecting amounts owed to the Company, and paying any contingent or unforeseen liabilities or obligations of the Company or of the Members arising out of or in connection with the Company. The assets of any such trust shall be distributed to the Members from time to time, in the reasonable discretion of the Chief Executive Officer, in the same proportions as the amount distributed to such trust by the Company would otherwise have been distributed to the Members pursuant to Section 12.2 hereof; ------------ or (b) withheld to provide a reasonable reserve for Company liabilities (contingent or otherwise) provided that such withheld amounts shall be distributed to the Members as soon as practicable. 12.3 Deemed Distribution and Recontribution. Notwithstanding any other provisions of this Section 12, in the event the Company is liquidated ---------- within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g) but no - Liquidating Event has occurred, the Property shall not be liquidated, the Company's liabilities shall not be paid or discharged, and the Company's affairs shall not be wound up. Instead, the Company shall be deemed to have distributed the Property in kind to the Members, who shall be deemed to have assumed and taken subject to all Company liabilities, all in accordance with their respective Capital Accounts. Immediately thereafter, the Members shall be deemed to have recontributed the Property in kind to the Company, which shall be deemed to have assumed and taken subject to all such liabilities. 12.4 Rights of Members. Except as otherwise provided in this Agreement, (a) each Member shall look solely to the assets of the Company for the return of its Capital Contributions, and (b) no Member shall have priority over any other Member as to the return of its Capital Contributions, distributions, or allocations. 12.5 Notices of Dissolution. In the event a Liquidating Event occurs or an event occurs that would, but for provisions of Section 12.1 hereof, result ------------ in a dissolution of the Company, the Chief Executive Officer shall, within thirty (30) days thereafter, (a) provide written notice thereof to each of the Members and to all other parties with whom the Company regularly conducts business (as determined in the discretion of the Chief Executive Officer), and (b) comply, in a timely manner, with all filing and notice requirements under the Act, the Gaming Act, or any other applicable law. 12.6 Reasonable Time for Winding Up. A reasonable time shall be allowed for the orderly winding up of the business and affairs of the Company and the liquidation 33 of its assets in order to minimize any losses that might otherwise result from such winding up. ARTICLE XIII MISCELLANEOUS 13.1 Notices. Notices may be delivered either by private messenger service, by mail, or facsimile transmission. Any notice or document required or permitted hereunder to a Member shall be in writing and shall be deemed to be given on the date received by the Member; provided, however, that all notices and documents mailed to a Member in the United States Mail, postage prepaid, certified mail, return receipt requested, addressed to the Member at its respective address as shown in the records of the Company, shall be deemed to have been received five (5) days after mailing and provided further, that the sender of any such notice or document by facsimile transmission shall bear the burden of proof as to proper transmission and date of transmission of such facsimile. The address and the telecopier number of each of the Members shall for all purposes be as set forth at Section 2.1 hereof unless otherwise changed ----------- by the applicable Member by notice to the other as provided herein. 13.2 Binding Effect. Except as otherwise provided in this Agreement, every covenant, term, and provision of this Agreement shall be binding upon and inure to the benefit of the Members and their respective successors, transferees, and assigns. 13.3 Construction. Every covenant, term, and provision of this Agreement shall be construed simply according to its fair meaning and not strictly for or against any Member. 13.4 Time. Time is of the essence in the performance of each and every obligation herein imposed. 13.5 Titles and Captions. Section, and paragraph titles and captions contained in this Agreement are for reference purposes only and are not intended to describe, interpret, define, or limit the scope, extent, or intent of this Agreement or any provision hereof. 13.6 Severability. Every provision of this Agreement is intended to be severable. If any term or provision hereof is illegal or invalid for any reason whatsoever, such illegality or invalidity shall not affect the validity or legality of the remainder of this Agreement. 34 13.7 Incorporation by Reference. The Glossary of Defined Terms and every exhibit, schedule, and other appendix attached to this Agreement and referred to herein is incorporated in this Agreement by reference. 13.8 Further Assurance. Each Member agrees to perform all further acts and execute, acknowledge, and deliver any documents which are or may become necessary, appropriate, or desirable to effectuate and to carry on the business contemplated by this Agreement. 13.9 Pronouns and Plurals. All pronouns and any variations thereof shall be deemed to refer to masculine, feminine, or neuter, singular or plural, as the identity of the Person(s) may require. 13.10 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Nevada. 13.11 Counterpart Execution. This Agreement may be executed in any number of counterparts with the same effect as if all of the Members had signed the same document. All counterparts shall be construed together and shall constitute one agreement. 13.12 Loans. Any Member may, with the approval of the Board or as otherwise provided by this Agreement, lend or advance money to the Company. If any Member shall make any loan or loans to the Company, the amount of any such loan or advance shall not be treated as a contribution to the capital of the Company but shall be a debt due from the Company. Except as otherwise provided herein, no Member shall be obligated to make any loan or advance to the Company. 13.13 No Third Party Rights. This Agreement is intended to create enforceable rights between the parties hereto only, and creates no rights in, or obligations to, any other Persons whatsoever. Without limiting the generality of the foregoing, as to any third party, a deficit capital account of a Member shall not be deemed to be a liability of such Member nor an asset or property of the Company. 13.14 Estoppel Certificates. Upon the written request of a Member, the other Member shall, within fifteen (15) days of its receipt of such request, execute and deliver a written statement certifying: (a) that this Agreement is unmodified and in full force and effect (or, if modified, that this Agreement is in full force and effect as modified and, stating any and all modifications), (b) that such Member is not in default hereunder and, to its actual knowledge, the requesting Member is not in default hereunder, in each case except as specified in such statement and, (c) that to its actual knowledge, no event has occurred which with the passage of time or the giving of notice, or both, would ripen into a default hereunder, except as specified in such statement. 35 13.15 Usury. If any return, interest payment, or other charge payable under this Agreement shall at any time exceed the maximum amount chargeable by applicable law, then the applicable rate of return or interest shall be the maximum rate permitted by applicable law. 13.16 Certain Terminology. Whenever the words "including", "include" or "includes" are used in this Agreement, they should be interpreted in a non- exclusive manner as though the words "but [is] not limited to" immediately followed the same. 13.17 Business Days. Any reference in this Agreement to "business days" shall mean all calendar days except Saturday, Sundays, and Nevada or federal legal holidays. 13.18 Proposing and Adopting Amendments. Amendments to this Agreement or the Articles of Organization may be proposed by any Director by his or her submitting to the Board a verbatim statement of the proposed amendment, and such Director shall include in any such submission a recommendation as to the proposed amendment. A proposed amendment shall be adopted and be effective as an amendment hereto or to the Articles of Organization, as the case may be, upon the approval of the Board. IN WITNESS WHEREOF, the parties have entered into this Agreement as of the day first above set forth. MGM Grand, Inc., PRMA Las Vegas, Inc., a Delaware corporation a Nevada corporation By: /s/ Robert R. Maxey By: /s/ Gary Primm --------------------------------- ----------------------------- Its: President/CEO Its: --------------------------------- ----------------------------- 36 Accepted and Agreed to as to Section 5.8. - ----------- PRIMADONNA RESORTS, INC., a Nevada corporation By: /s/ Gary Primm ---------------------------------- Its: --------------------------------- GLOSSARY OF DEFINED TERMS (a) "Act" means Chapter 86 of the Nevada Revised Statutes, as amended from time to time (or any corresponding provisions of succeeding law). (b) "Additional Capital Contribution" is defined in Section 2.4. ----------- (c) "Adjusted Capital Account Deficit" means, the deficit balance, if any, in a Member's Capital Account as of the end of the taxable year, after giving effect to the following adjustments: (i) credit to such Capital Account any amount which such Member is obligated to restore under Treasury Regulation Section 1.704-1(b)(2)(ii)(c) or is deemed obligated to restore pursuant to the penultimate sentences of Treasury Regulation Sections 1.704-2(g)(1) or 1.704-2(i)(5); and (ii) debit to such Capital Account the items described in Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6) of the Treasury Regulations. (d) "Advent" means The Advent Group, LLC, a Nevada limited-liability company. (e) "Advent Lease" means the lease to be executed by and between the Company and Advent subject to the conditions and pursuant to the terms set forth in the Advent Option Agreement. (f) "Advent Leased Premises" means the premises covered by the Advent Lease from time to time. (g) "Advent Option Agreement" means that certain Option Agreement, dated as of December 15, 1994, by and between PRMA and Advent. (h) "Advent/PRMA Obligations" is defined in Section 5.8. ----------- (i) "Affiliate" means, with respect to any Person, (i) any Person directly or indirectly controlling, controlled by or under common control with such Person, (ii) any Person owning or controlling ten percent (10%) or more of the outstanding voting interests of such Person, (iii) any officer, director, or general partner of such Person, or (iv) any Person who is an officer, director, general partner, trustee, or holder of ten percent (10%) or more of the voting interests of any Person described in clauses (i) through (iii) of this sentence. In no event, however, shall the term "Affiliate" refer to the Company. For purposes of this definition, the term "controls," "is controlled by," or "is under common 1 control with" shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person or entity, whether through the ownership of voting securities, by contract or otherwise. (j) "Agreement" means this operating agreement of the Company, as amended from time to time. Words such as "herein", "hereinafter", "hereof", "hereto", and "hereunder" refer to this Agreement as a whole, unless the context otherwise requires. (k) "Articles of Organization" means the articles of organization filed with the Nevada Secretary of State for the purpose of forming the Company pursuant to the Act, as amended from time to time in accordance with this Agreement and the Act. (l) "Bankruptcy" means, with respect to any Person, the inability of such Person generally to pay its debts as such debts become due, or an admission in writing by such Person of its inability to pay its debts generally or a general assignment by such Person for the benefit of creditors; the filing of any petition or answer by such Person seeking to adjudicate it a bankrupt or insolvent, or seeking for itself any liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of such Person or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking, consenting to, or acquiescing in the entry of an order for relief or the appointment of a receiver, trustee, custodian, or other similar official for such Person or for any substantial part of its property; or corporate action taken by such Person to authorize any of the actions set forth above. (m) "Board" is defined in Section 5.1. ----------- (n) "Business Day" is defined in Section 13.17. ------------- (o) "Business Plan" is defined in Section 5.5. ----------- (p) Buy-Sell Major Decision" is defined in Section 5.1(c). -------------- (q) "Capital Account" means, with respect to any Member, the Capital Account maintained for such Member in accordance with the following provisions: (i) To each Member's Capital Account there shall be credited such Member's Capital Contributions, such Member's distributive share of Profits and any items in the nature of income or gain which are specially allocated pursuant to Section 3.3 or Section 3.4 hereof, and the amount of any Company liabilities ----------- ----------- assumed by such Member or which are secured by any Property distributed to such Member. (ii) To each Member's Capital Account there shall be debited the amount of cash and the Gross Asset Value of any Property distributed to such Member 2 pursuant to any provision of this Agreement, such Member's distributive share of Losses and any items in the nature of expenses or losses which are specially allocated pursuant to Section 3.3 or Section 3.4 hereof, and the amount of any ----------- ----------- liabilities of such Member assumed by the Company or which are secured by any property contributed by such Member to the Company. (iii) In the event any interest in the Company is transferred in accordance with the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent it relates to the transferred interest. (iv) In determining the amount of any liability for purposes of this definition, there shall be taken into account Code Section 752(c) and any other applicable provisions of the Code and Regulations. The foregoing provisions and the other provisions of the Agreement relating to the maintenance of Capital Accounts are intended to comply with Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner consistent with such Regulations. In the event the Chief Executive Officer shall determine that it is prudent to modify the manner in which the Capital Accounts, or any debits or credits thereto (including, without limitation, debits or credits relating to liabilities which are secured by contributed or distributed property or which are assumed by the Company or the Members), are computed in order to comply with such Regulations, the Chief Executive Officer may make such modification, provided that is not likely to have a material effect on the amounts distributable to any Member pursuant to Section 12 hereof ---------- upon the dissolution of the Company. The Chief Executive Officer also shall (i) make any adjustments that are necessary or appropriate to maintain equality between the Capital Accounts of the Members and the amount of Company capital reflected on the Company's balance sheet, as computed for book purposes in accordance with Regulations Section 1.704-1(b)(2)(iv)(g), and (ii) make any - appropriate modifications in the event unanticipated events might otherwise cause this Agreement not to comply with Regulations Section 1.704-1(b). (r) "Capital Contributions" means, with respect to any Member, the amount of money and the initial Gross Asset Value of any property (other than money) contributed to the Company with respect to the Company interest held by such Member pursuant to the terms of this Agreement. (s) "Chief Executive Officer" is defined in Section 5.2. ----------- (t) "Chief Financial Officer" is defined in Section 5.2. ----------- (u) "Closing" is defined in Section 11.3. ------------ 3 (v) "Code" means the Internal Revenue Code of 1986, as amended from time to time (or any corresponding provisions of succeeding law.) (w) "Company" means the limited liability company formed by this Agreement and the company continuing the business of this Company in the event of dissolution as herein provided. (x) "Company Minimum Gain" has the meaning or "partnership minimum gain" set forth in Regulations Sections 1.704-2(b)(2) and 1.704-2(d). (y) Contribution Agreement" means that certain agreement being executed and delivered concurrently herewith, by and among the Members and PRMA, providing for the terms and conditions upon which the initial Capital Contributions will be made. (z) "Date of Value" is defined in Section 11.1. ------------ (aa) "Deadlock Resolution Flip Date" is defined in Section 5.1(d). --------------- (ab) "Depreciation" means, for each Fiscal Year, an amount equal to the depreciation, amortization, or other cost recovery deduction allowable with respect to an asset for such Fiscal Year, except that if the Gross Asset Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such Fiscal Year, Depreciation shall be an amount which bears the same ratio to such beginning Gross Asset Value as the federal income tax depreciation, amortization, or other cost recovery deduction for such Fiscal Year bears to such beginning adjusted tax basis; provided, however, that if the adjusted basis for federal income tax purposes of an asset at the beginning of such Fiscal Year is zero, Depreciation shall be determined with reference to such beginning Gross Asset Value using any reasonable method selected by the Chief Financial Officer. (ac) "Directors" is defined in Section 5.1. ----------- (ad) "Fiscal Year" means (i) the period commencing on the effective date of this Agreement and ending on December 31st, (ii) any subsequent twelve (12) month period commencing on January 1st and ending on December 31st, or (iii) any portion of the period described in clause (ii) for which the Company is required to allocate Profits, Losses and other items of Company income, gain, loss or deduction pursuant to Article III hereof. ----------- (ae) "Gross Asset Value" means, with respect to any asset, the asset's adjusted basis for federal income tax purposes, except as follows: (i) The initial Gross Asset Value of any asset contributed by a Member to the Company shall be the gross fair market value of such asset, as determined by the Members; 4 (ii) The Gross Asset Values of all Company assets shall be adjusted to equal their respective gross fair market values, as reasonably determined by the Chief Financial Officer, as of the following times: (a) the acquisition of an additional interest in the Company by any new or existing Member in exchange for more than a de minimis Capital Contribution; (b) the ---------- distribution by the Company to a Member of more than a de minimis amount of ---------- Property as consideration for an interest in the Company; and (c) the liquidation of the Company within the meaning of Regulations Section 1.704- 1(b)(2)(ii)(g); provided, however, that adjustments pursuant to clauses (a) and - (b) above shall be made only if the Chief Financial Officer reasonably determines that such adjustments are necessary or appropriate to reflect the relative economic interests of the Members in the Company; (iii) The Gross Asset Value of any Company asset distributed to any Member shall be adjusted to equal the gross fair market value of such asset on the date of distribution as determined by the distributee and the Chief Financial Officer, provided that if the distributee is the Chief Financial Officer, the determination of the fair market value of the distributed asset shall require the consent of a majority of the other Members; and (iv) The Gross Asset Values of Company assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m) and subsections (vi) in the - ---------------- definition of "Profits" and "Losses" below and Section 3.3(e) hereof; provided, -------------- however, that Gross Asset Values shall not be adjusted pursuant to this subsection to the extent the Chief Financial Officer reasonably determines that an adjustment pursuant to subsection (ii) of this definition is necessary or --------------- appropriate in connection with a transaction that would otherwise result in an adjustment pursuant to this subsection (iv). --------------- If the Gross Asset Value of an asset has been determined or adjusted pursuant to subsections(i),(ii), or (iv) of this definition of Gross Asset ---------------------------- Value, such Gross Asset Value shall thereafter be adjusted by the Depreciation taken into account with respect to such asset for purposes of computing Profits and Losses. (af) "Initiating Member" is defined in Section 11.1. ------------ (ag) "Interest" shall mean the entire interest of a Member in the Company, including all of such Member's rights, powers and privileges under this Agreement and the Act. (ah) "Liquidating Event" is defined in Section 12.1. ------------ (ai) "Major Decisions" is defined in Section 5.1. ----------- 5 (aj) "Managers" means the managers of the Company elected pursuant to Section 5.2. - ----------- (ak) "Member Nonrecourse Debt" has the meaning of "partner nonrecourse debt" set forth in Section 1.704-2(b)(4) of the Regulations. (al) "Member Nonrecourse Debt Minimum Gain" means an amount, with respect to each Member Nonrecourse Debt, equal to the Company Minimum Gain that would result if such Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Section 1.704-2(i)(3) of the Regulations. (am) "Member Nonrecourse Deductions" has the meaning of "partner nonrecourse deductions" set forth in Sections 1.704-2(i)(1) and 1.704-2(i)(2) of the Regulations. (an) "Members" means those entities executing this Agreement as Members. (ao) "Net Cash Flow" means with respect to any period, the excess, if ------ any, of (a) all cash revenues and funds received by the Company from any and all sources during such period, including reductions of Company reserves established in accordance with this Agreement, but excluding security deposit and other refundable deposits unless and until earned or applied, over (b) the sum ---- (without duplication) of all operating or other cash expenditures of the Company paid during such period, plus all payments of principal, interest, fees and related costs with respect to Company indebtedness made during such period, plus all additions to Company reserves established in accordance with this Agreement. "Net Cash Flow" shall not be reduced by depreciation, amortization, cost recovery deductions, or similar non-cash allowances. (ap) "Nonrecourse Deductions" has the meaning set forth in Section 1.704-2(b)(1) of the Regulations. (aq) "Nonrecourse Liability" has the meaning set forth in Section 1.704-2(b)(3) of the Regulations. (ar) "Percentage Interest" means, with respect to any Member, the percentage interest set forth opposite such Member's name in Section 2.1. In ----------- the event any Company interest is transferred in accordance with the provisions of this Agreement, the transferee of such interest shall succeed to the Percentage Interest of his transferor to the extent it relates to the transferred interest. (as) "Permitted Transfer" is defined in Section 9.2(b)(i) hereof. ----------------- (at) "Permitted Transferee" is defined in Section 9.2(b)(ii) hereof. ------------------ 6 (au) "Person" means any individual, company (general or limited), limited liability company, corporation, trust, or other entity. (av) "PRMA Recoupment Amount" is defined in Section 5.8. ----------- (aw) "Profits" and "Losses" means, for each Fiscal Year, an amount equal to the Company's taxable income or loss for such Fiscal Year, determined in accordance with Code Section 703(a) (for this purposes, all items of income, gain, loss, or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss), with the following adjustments: (i) Any income of the Company that is exempt from federal income tax and not otherwise taken into account in computing Profits or Losses pursuant to this definition shall be added to such taxable income or loss; (ii) Any expenditures of the Company described in Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Profits or Losses pursuant to this definition shall be subtracted from such taxable income or loss; (iii) In the event the Gross Asset Value of any Company asset is adjusted pursuant to subsection (ii) or (iii) of the definition of Gross Asset --------------- ----- Value above, the amount of such adjustment shall be taken into account as gain or loss from the disposition of such asset for purposes of computing Profits or Losses; (iv) Gain or loss resulting from any disposition of Property with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Gross Asset Value of the Property disposed of, notwithstanding that the adjusted tax basis of such Property differs from its Gross Asset Value; (v) In lieu of the depreciation, amortization, and other cost recovery deductions taken into account in computing such taxable income or loss, there shall be taken into account Depreciation for such Fiscal Year; (vi) To the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Code Section 734(b) or Code Section 743(b) is required pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be taken into account - - in determining Capital Accounts as a result of a distribution other than in liquidation of a Member's interest in the Company, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases the basis of the asset) from the disposition of the asset and shall be taken into account for purposes of computing Profits or Losses; and 7 (vii) Notwithstanding any other provision of this definition, any items which are specially allocated pursuant to Sections 3.3 and 3.4 hereof -------------------- shall not be taken into account in computing Profits or Losses. The amounts of the items of Company income, gain, loss or deduction available to be specially allocated pursuant to Sections 3.3 and 3.4 hereof -------------------- shall be determined by applying rules analogous to those set forth in subsection ---------- (i) through (vi) of this definition above. - --- ---- (ax) "Project" means the real property, development and business activities described on Exhibit "A" attached hereto and incorporated by ----------- reference herein. (ay) "Property" means all real and personal property owned by the Company from time to time, and shall include both tangible and intangible property. (az) "Purchase Price" is defined in Section 11.1. ------------ (ba) "Purchasing Member" is defined in Section 11.2. ------------ (bb) "Regulations" means the Income Tax Regulations, including Temporary Regulations, promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations). (bc) "Regulatory Allocations" has the meaning set forth in Section 3.4 ----------- hereof. (bd) "Related Person" is defined in Section 1.8. ----------- (be) "Repayment Rights" is defined in Section 11.3. ------------ (bf) "Responding Member is defined in Section 11.1. ------------ (bg) "Selling Member" is defined in Section 11.2. ------------ (bh) "Tax Liability Shortfall Amount" is defined in Section 4.3. ----------- (bi) "Transfer" means, as a noun, any voluntary or involuntary transfer, sale, other disposition or hypothecation, and, as a verb, voluntarily or involuntarily to transfer, sell, otherwise dispose of or hypothecate. The term Transfer shall also include any voluntary or involuntary transfer, sale, other disposition or hypothecation of any kind, or any other transaction regardless of its form or structure, whereby MGM's or PRMA-LV's, as the case may be, Interest ceases to be a 50% interest in the Company. 8 Exhibit "A" DESCRIPTION OF PROJECT ---------------------- An approximately 2000 room casino-hotel at the intersection of Tropicana Avenue and Las Vegas Boulevard South. Exhibit A-1 EX-10.17 4 CONTRIBUTION AGREEMENT EXHIBIT 10.17 CONTRIBUTION AGREEMENT WITH JOINT ESCROW INSTRUCTIONS by and among PRMA LAS VEGAS, INC., a Nevada corporation and MGM GRAND, INC., a Delaware corporation and NEW YORK - NEW YORK HOTEL, LLC, a Nevada limited liability company Dated as of December 26, 1994 CONTRIBUTION AGREEMENT INDEX ----- Page ---- 1. IDENTIFICATION OF PARTIES............................................ 1 ------------------------- 2. DESCRIPTION OF CONTRIBUTION PROPERTY................................. 1 ------------------------------------ 3. INTENTIONALLY DELETED................................................ 2 --------------------- 4. REPRESENTATIONS AND WARRANTIES....................................... 2 ------------------------------ 5. COVENANTS............................................................ 5 --------- 6. CONDITIONS PRECEDENT................................................. 7 -------------------- 7. PRORATIONS AND ADJUSTMENTS........................................... 8 -------------------------- 8. CLOSING.............................................................. 9 ------- 9. TRANSACTION COSTS.................................................... 9 ----------------- 10. DEFAULT.............................................................. 10 ------- 11. INDEMNIFICATION...................................................... 10 --------------- 12. ESCROW............................................................... 11 ------ 13. INTENTIONALLY OMITTED................................................ 13 --------------------- 14. MISCELLANEOUS........................................................ 13 ------------- SIGNATURE PAGE............................................................ 17 Exhibits - -------- Exhibit A - Legal Description of the Real Property Schedules - --------- Schedule 4(i) - Non-Compliance Matters Schedule 4(ii) - Schedule of Contracts i CONTRIBUTION AGREEMENT WITH JOINT ESCROW INSTRUCTIONS 1. IDENTIFICATION OF PARTIES ------------------------- THIS CONTRIBUTION AGREEMENT WITH JOINT ESCROW INSTRUCTIONS (this "Agreement") is entered into as of December 26, 1994, by and among PRMA LAS VEGAS, INC., a Nevada corporation ("PRMA-LV"), MGM GRAND, INC., a Delaware corporation ("MGM"), and NEW YORK - NEW YORK HOTEL, LLC, a Nevada limited liability company (the "Company"). PRMA-LV and MGM are the sole Members of the Company. Initially capitalized terms that are not otherwise defined in this Agreement shall have the meanings ascribed to such terms in the operating agreement (the "Operating Agreement") of the Company being executed concurrently with this Agreement. 2. DESCRIPTION OF CONTRIBUTION PROPERTY ------------------------------------ In consideration of the mutual undertakings of the parties set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, PRMA-LV and MGM agree to make the following contributions to the Company, and the Company agrees to accept such contributions from PRMA-LV and MGM, all upon the terms and conditions hereinafter set forth in this Agreement: (a) MGM Contribution Property. MGM shall contribute and convey, or cause to be conveyed, to the Company upon the Close of Escrow: (i) That certain real property located in Las Vegas, Nevada consisting of approximately 17.6 acres of land, and more particularly described on Exhibit A attached hereto and incorporated herein by this --------- reference, together with all rights, privileges, easements and appurtenances thereto, if any, including all mineral and water rights and all easements, rights-of-way, and other appurtenances used or connected with the beneficial use or enjoyment of said real property (collectively, the "Real Property"); and (ii) All of MGM's right, title and interest in and to, and MGM's controlling shareholder's right, title and interest in and to, all contract rights, licenses, approvals, certificates, permits, warranties, indemnities, equipment, supplies, fixtures and other items of tangible or intangible personal property used in connection with the Real Property to the extent transferable and all of MGM's right, title and interest under that certain letter agreement (the "Rodeway Agreement"), dated November 22, 1994, by and between Maria Brannon and Patricia L. Goldman, individually and as trustees, as "Seller," and MGM as "Buyer" (collectively, the "Personal Property"). 1 The Real Property and the Personal Property are hereinafter referred to collectively as the "MGM Contribution Property". PRMA-LV and MGM have determined, as the Members of the Company, that the fair market value of the MGM Contribution Property will be on the Closing Date Forty-One Million Two Hundred Thousand Dollars ($41,200,000), and PRMA-LV and MGM agree that MGM's Capital Account in the Company shall be credited by such amount, without regard to any prorations or closing adjustments made pursuant to this Agreement. (b) PRMA-LV Contribution Property. Upon the Close of Escrow, PRMA-LV shall contribute and convey to the Company the following property (the "PRMA-LV Contribution Property"): (i) By wire transfer of immediately available funds, cash in the amount of Forty Million Dollars ($40,000,000); and (ii) Certain rights (the "Theme Rights") to be conveyed pursuant to the "Theme Rights Assignment" (as hereinafter defined). PRMA-LV and MGM have determined, as the Members of the Company, that the fair market value of the Theme Rights on the Closing Date will be One Million Two Hundred Thousand Dollars ($1,200,000). PRMA-LV and MGM agree that PRMA-LV's Capital Account in the Company shall be credited by an amount equal to Forty-One Million Two Hundred Thousand Dollars ($41,200,000) as of the Closing Date, without regard to any prorations or closing adjustments made pursuant to this Agreement. 3. INTENTIONALLY DELETED --------------------- 4. REPRESENTATIONS AND WARRANTIES ------------------------------ (a) Representations and Warranties of MGM. As a material inducement to PRMA-LV to execute this Agreement and make its contributions to the Company contemplated hereby, MGM represents and warrants to PRMA-LV that the following matters are true and correct as of the date of this Agreement: (i) To the best knowledge of MGM, except as disclosed on Schedule 4(a)(i), the MGM Contribution Property is in compliance with all local, state and federal laws and regulations applicable to the MGM Contribution Property in its present state of development. Neither MGM nor MGM's controlling shareholder has received any notice from any governmental authority advising it of a violation of any such laws or regulations. (ii) Schedule 4(a)(ii) is a true, correct and complete schedule of all of the leases, contracts and other agreements (including traffic or 2 pedestrian overpass participation agreements) known to MGM, whether written or oral, with any third parties (other than PRMA or any of its affiliates) (including governmental agencies and prior owners) affecting the MGM Contribution Property, or the use or the development thereof (the "Contracts"). To the best knowledge of MGM, the Contracts are in full force and effect, and there has been no breach or default or event which, with the giving of notice or the passage of time or both, would constitute a breach or default by any party thereunder. (iii) To the best knowledge of MGM, all of the documents and information provided to PRMA-LV by or on behalf of MGM are true, correct and complete in all material respects. (iv) There are no actions, suits or proceedings pending or threatened against or affecting MGM that could impair MGM's ability to perform its obligations under this Agreement. (v) MGM is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and neither MGM nor any subsidiary or controlling shareholder of MGM is insolvent or bankrupt under any applicable law. This Agreement and all of the documents that are being executed by MGM or its controlling shareholder, as the case may be, in connection with the transactions contemplated hereunder (1) have been duly authorized, executed, and delivered by such party, (2) are legal, valid, and binding obligations of such party enforceable against it in accordance with their respective terms (except to the extent that such enforcement may be limited by applicable bankruptcy, insolvency, moratorium and other principles relating to or limiting the rights of contracting parties generally), (3) are sufficient to convey title (if they purport to do so), and (4) do not violate any law, or any provision of any agreement to which such party is a party or to which it is subject. (vi) Except as disclosed in any environmental audit or report heretofore obtained by or delivered to PRMA-LV, to the best of MGM's knowledge: (1) no Hazardous Material has been generated, used, manufactured, treated, released, or disposed of by any other party, or presently exist, at, on or beneath the Real Property in violation of any Environmental Law, and (2) the Real Property is in compliance with all Environmental Laws. Neither MGM nor the controlling shareholder of MGM has been notified by any governmental authority there is any liability or claim relating to Hazardous Materials affecting the Real Property. For the purposes of this Agreement, "Hazardous Material" shall mean any chemical, compound, material, mixture or substance that is now defined or listed in any Environmental Laws as a "hazardous substance," "hazardous material," or "toxic substance", or the like, or any oil, petroleum or petroleum derived 3 substance, or any underground storage tank. For the purposes of this Agreement, "Environmental Laws" shall mean the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. (S) 9601, et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. (S) 1801, et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. (S) 6901, et seq.; and any similar federal, state or local laws, ordinances, rules or regulations, including the regulations and amendments adopted and the publications promulgated pursuant to the statutes listed above. (vii) Neither MGM nor its controlling shareholder is a "foreign person" within the meaning of Section 1445(f)(3) of the Internal Revenue Code of 1986, as amended (the "Code"). (viii) No brokerage commission, finder's fee or other similar compensation is due or payable by reason of MGM's or its controlling shareholder's actions in connection with the transactions contemplated hereby, except for the Rodeway Agreement as disclosed therein, the payment of which compensation shall be the responsibility of the Company. (ix) The Rodeway Agreement is in full force and effect and has not been amended or supplemented, and, to MGM's best knowledge, there has been no breach or default or event which, with the giving of notice or the passage of time, or both, would constitute a default by any party thereunder. MGM has deposited $250,000 (the "Rodeway Earnest Money") in escrow in accordance with the Rodeway Agreement, which amount shall be a Shared Cost pursuant ot Section 9(c). (b) Representations and Warranties of PRMA-LV. As a material inducement to MGM to execute this Agreement and make its contributions to the Company contemplated hereby, PRMA-LV represents and warrants to MGM that the following matters are true and correct as of the date of this Agreement and will also be true and correct as of the Close of Escrow: (i) PRMA-LV is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada, and neither PRMA-LV nor Primadonna Resorts, Inc. ("PRMA"), a Nevada corporation and the sole shareholder of PRMA-LV, is insolvent or bankrupt under any applicable law. (ii) This Agreement and all of the documents that are being executed by PRMA-LV in connection with the transactions contemplated hereunder (1) have been duly authorized, executed, and delivered by PRMA- LV, (2) are legal, valid, and binding obligations of PRMA-LV 4 enforceable against PRMA-LV in accordance with their respective terms (except to the extent that such enforcement may be limited by applicable bankruptcy, insolvency, moratorium and other principles relating to or limiting the rights of contracting parties generally), (3) are sufficient to convey title (if they purport to do so), and (4) do not violate law, or any provision of any agreement to which PRMA-LV is a party or to which it is subject. (iii) There are no actions, suits or proceedings pending or threatened against or affecting PRMA-LV that could impair PRMA-LV's ability to perform its obligations under this Agreement. (iv) No brokerage commission, finder's fee or other similar compensation is due or payable by reason of PRMA-LV's actions in the transaction contemplated hereby. (v) The "Advent Option Agreement" (as defined in the Operating Agreement) is in full force and effect and has not been amended or supplemented, and, to PRMA-LV's best knowledge, there has been no breach or default or event which, with the giving of notice or the passage of time, or both, would constitute a default by any party thereunder. (c) Survival and other Limitations re Representations and Warranties. In the event of the termination of this Agreement, all representations and warranties made hereunder survive such termination for a period of one (1) year from the date of such termination. In the event the Close of Escrow occurs hereunder, all representations and warranties made hereunder shall survive the Close of Escrow for a period of five (5) years. Whenever a representation or warranty is made in this Agreement to the "best knowledge" of MGM, such representation and warranty shall be limited to (A) facts and circumstances within the actual and present knowledge of any senior officer of MGM or of the controlling stockholder of MGM, and (B) facts and circumstances that were disclosed in any written notice at any time received by MGM or the controlling stockholder of MGM. Notwithstanding anything to the contrary herein, the parties hereto acknowledge and agree that each party may have non-contractual statutory and common law rights and remedies against the other parties for non- disclosure or non-compliance with certain matters which are also the subject matter of the representations and warranties contained in this Agreement and the limited representations and warranties and limited survival periods set forth herein shall not be deemed or construed as limiting, waiving or relinquishing any such non-contractual statutory or common law right or remedy. 5. COVENANTS --------- (a) MGM Covenants. MGM hereby covenants for the benefit of each of PRMA-LV and the Company as follows: 5 (i) At all times prior to the Close of Escrow, the MGM Contribution Property shall be owned and maintained in a clean, safe and orderly condition, and in accordance with all material laws, ordinances, rules and regulations applicable to such property. (ii) Subject to Section 9(c), MGM shall pay in full prior to the ------------ Close of Escrow all bills and invoices for labor, goods, materials and services of any kind related to the MGM Contribution Property. (iii) Upon PRMA-LV's request, for a period extending one year after the Close of Escrow, MGM shall make all of its records with respect to the MGM Contribution Property available to PRMA-LV or the Company for inspection, and MGM shall cause its controlling stockholder to make all of its records with respect to the MGM Contribution Property available to PRMA-LV or the Company, for inspection, copying and audit by PRMA-LV's or the Company's respective designated accountants. (iv) MGM shall promptly after becoming aware of any fact or circumstance that makes any representation or warranty under this Agreement materially untrue or misleading, or any covenant or condition precedent under this Agreement unlikely to be performed or satisfied, deliver written notice of such fact or circumstance to PRMA-LV. (v) Neither MGM nor its controlling stockholder shall market or solicit any offers for the purchase, optioning, leasing or development of the MGM Contribution Property so long as this Agreement is in full force and effect. (vi) Except as otherwise required by law and except for public announcements or disclosures mutually approved by PRMA-LV and MGM, MGM shall use all reasonable efforts to keep all due diligence materials received herein, and all business and economic terms of the transactions contemplated hereunder, confidential and will not disclose or discuss any such due diligence information or materials or the details of such transactions to any third parties, other than MGM's accountants, legal counsel and other such parties who are involved from time to time in the transactions contemplated in this Agreement. (b) PRMA-LV Covenants. PRMA-LV hereby covenants for the benefit of each of MGM and the Company as follows: (i) PRMA-LV shall promptly after becoming aware of any fact or circumstance that makes any representation or warranty under this Agreement materially untrue or misleading, or any covenant or condition 6 precedent under this Agreement unlikely to be performed or satisfied, deliver written notice of such fact or circumstance to MGM. (ii) Except as otherwise required by law and except for public announcements or disclosures mutually approved by MGM and PRMA-LV, PRMA-LV shall use all reasonable efforts to keep all due diligence materials received herein, and all business and economic terms of the transactions contemplated hereunder, confidential and will not disclose or discuss any such due diligence information or materials or the details of such transactions to any third parties, other than PRMA-LV's accountants, legal counsel and other such parties who are involved from time to time in the transactions contemplated in this Agreement. 6. CONDITIONS PRECEDENT -------------------- (a) MGM Conditions Precedent. The following shall be conditions precedent to MGM's obligation to consummate the transactions contemplated under this Agreement: (i) PRMA-LV shall have deposited into Escrow the items that it is required to deposit pursuant to Section 12. ---------- (b) PRMA-LV Conditions Precedent. The following shall be conditions precedent to PRMA-LV's obligation to consummate the transactions contemplated under this Agreement: (i) Nevada Title Company ("Title Company") shall be prepared to issue its binder for an extended coverage ALTA owner's policy of title insurance, in the form previously agreed to by the Members, subject only to the exceptions previously approved by PRMA-LV in writing ("Permitted Encumbrances"), together with such title endorsements as have been heretofore requested by PRMA-LV (the "Title Policy"); and (ii) MGM shall have deposited in Escrow the items that it is required to deposit pursuant to Section 12. ---------- (c) Failure of Condition Precedent. In the event any condition precedent set forth above in this Section 6 is not satisfied prior to the --------- Outside Date (as defined in Section 8), any party whose obligation to consummate --------- the transactions contemplated in this Agreement is conditioned upon the satisfaction of such condition precedent may elect, in its sole and absolute discretion, by giving written notice to the other party and to Escrow Holder, to either (i) waive such condition precedent and consummate the transactions contemplated hereby in accordance with the terms and provisions of this Agreement, or (ii) terminate this Agreement by giving written notice to the other parties of such termination and pursue any rights 7 and remedies that such party may have at law or in equity as a result of any then existing breach of this Agreement (it being acknowledged and agreed that the failure of a condition precedent hereunder through no fault or breach of any party shall not constitute a breach of this Agreement). In the event any party elects to terminate this Agreement in accordance with the foregoing, the provisions of the final sentence of Section 8 shall apply. --------- 7. PRORATIONS AND ADJUSTMENTS -------------------------- (a) All real and personal property and ad valorem taxes, and all other expenses relating to the MGM Contribution Property) shall be allocated and prorated upon the Close of Escrow on the basis that MGM shall be responsible for all such taxes and expenses accruing on or prior to the Closing Date, and the Company shall be responsible for all such taxes and expenses accruing after the Closing Date. If the amount of any installment of real property taxes is not known as of the Close of Escrow, then a proration shall be made by the parties based on a reasonable estimate of the real property taxes applicable to the Real Property and the parties shall adjust the proration when the actual amount becomes known upon the written request of either party made to the other. (b) Subject to Section 9(c), all capital and other improvements ------------ (including labor and material) which have been performed or contracted for, by or on behalf of MGM or its affiliates on or prior to the Closing Date shall be paid by MGM and shall be subject to the indemnification provisions of Section ------- 11. Subject to Section 9(c), the Company shall furnish to MGM for payment any - -- ------------ bills for such period received after the Closing Date, and the Company shall have no further obligation with respect thereto. (c) Subject to Section 9(c), MGM shall be responsible for all ------------ outstanding debt service payments, payroll expenses and insurance premiums and costs, and there will be no proration for such items. (d) Such other items that are customarily prorated in transactions of this nature shall be ratably prorated. (e) For purposes of calculating prorations, MGM shall be deemed to be in title to the MGM Contribution Property, and, therefore, entitled to the income therefrom and responsible for the taxes and expenses thereof, for the entire Closing Date. All such prorations shall be made on the basis of the actual number of days of the month which shall have elapsed as of the Closing Date. Except as set forth in this Section 7, and subject to Section 9(c), all --------- ------------ items of income and expense with respect to the MGM Contribution Property for the period on and prior to the Closing Date will be for the account of MGM, and all items of income and expense for the period after the Closing Date will be for the account of the Company, all as determined by the accrual method of accounting. Subject to Section 9(c), bills ------------ 8 received after the Closing Date which relate to expenses incurred, services performed or other amounts allocable to the period on or prior to the Closing Date shall be paid by MGM. In the event any allocation or computation made under or in connection with this Section 7 shall prove to be incorrect or inconsistent --------- with the intent of this Section 7 for any reason, then any party shall be --------- entitled to a prompt adjustment to correct the same by providing written demand on the one from whom it is entitled to such adjustment within one (1) year after the Closing Date. No such adjustments may be requested or demanded after such one year period has expired. 8. CLOSING ------- As used herein, the term "Close of Escrow" shall refer to the consummation of the contribution and conveyances of the MGM Contribution Property and the PRMA-LV Contribution Property contemplated herein, and the term "Closing Date" shall mean the date that the Deed is recorded in the Official Records of Clark County, Nevada. The Close of Escrow shall occur through an escrow (the "Escrow") with Title Company, as escrow agent in accordance with Section 12 and the general provisions of the usual form of escrow agreement used - ---------- by Title Company in similar transactions to the extent consistent herewith. The parties shall use all reasonable efforts to cause the Close of Escrow to occur as soon as practicable after the satisfaction of all conditions precedent thereto, on a business day mutually acceptable to MGM and PRMA-LV. In addition to the other termination rights and remedies afforded the parties under this Agreement, if the Close of Escrow does not occur on or before the date that is five (5) business days after the date hereof (the "Outside Date") by the reason of the failure of any condition precedent hereunder, then at any time thereafter either party shall have the right to terminate this Agreement by giving written notice of such termination to the other parties, in which event this Agreement shall become null and void with no further obligation on the part of either party (other than for or with respect to any then-existing breach of this Agreement) except that (i) any money or documents in Escrow shall be returned to the party depositing the same, (ii) PRMA-LV and MGM each shall be responsible for one-half of any title or escrow cancellation fee, and (iii) each provision that this Agreement expressly provides shall survive the termination hereof shall survive and remain in full force and effect, subject to any applicable period set forth in this Agreement for its survival. 9. TRANSACTION COSTS ----------------- (a) MGM Costs. MGM shall pay and be solely responsible for MGM's attorney's fees and costs incurred in connection with the preparation and negotiation of this Agreement and the consummation of the transactions contemplated by this Agreement. (b) PRMA-LV Costs. PRMA-LV shall pay and be solely responsible for PRMA-LV's attorney's fees and costs incurred in connection with the preparation 9 and negotiation of this Agreement and the consummation of the transactions contemplated by this Agreement. (c) Shared Costs. Upon the Close of Escrow the Company shall (i) pay all "Shared Costs," as defined in the Due Diligence and Cost-Sharing Agreement, dated October 13, 1994, by and among MGM, PRMA-LV and PRMA (the "Due Diligence and Cost-Sharing Agreement"), that are due and payable, and shall assume and be solely responsible for all other Shared Costs, (ii) reimburse each of PRMA-LV and MGM for all Shared Costs that were borne by it prior to the Close of Escrow, and (iii) pay any other closing costs not expressly provided for above or in the Due Diligence and Cost-Sharing Agreement, all in accordance with a settlement statement approved by PRMA-LV and MGM and delivered to Title Company. (d) Survival of Termination. The provisions of this Section 9 shall --------- survive any termination of this Agreement. 10. DEFAULT ------- If either MGM or PRMA-LV breaches this Agreement, the nonbreaching party shall be entitled to terminate the Escrow, by delivering written notice to Title Company and the other party, and/or pursue all rights and remedies available to it at law or in equity. No termination of the Escrow by MGM or PRMA-LV following the breach by the other party shall be deemed to waive such breach or any remedy otherwise available to the nonbreaching party. Upon any such termination, Title Company shall return all funds and documents to the party that deposited the same, and the breaching party shall bear all of Title Company's escrow cancellation fees and costs. 11. INDEMNIFICATION --------------- (a) Subject to Section 9(c), MGM shall hold harmless, indemnify and ------------ defend PRMA-LV, PRMA and the Company (with counsel acceptable to PRMA-LV in the exercise of its reasonable judgment), from and against any and all obligations, liabilities, claims, liens, losses, damages, costs and expenses (including reasonable attorneys' fees and costs) which (i) are related to the ownership or operation of the MGM Contribution Property and accrue on or before the Closing Date, or (ii) arise from any breach of any representation, warranty or covenant of MGM under this Agreement, or under any other document delivered by MGM pursuant to Section 12(b). ------------- (b) Subject to Section 9(c), PRMA-LV shall hold harmless, indemnify ------------ and defend MGM and the Company (with counsel acceptable to MGM in the exercise of its reasonable judgment), from and against any and all obligations, liabilities, claims, liens, losses, damages, costs and expenses (including reasonable 10 attorneys' fees and costs) which arise from any breach of any representation, warranty or covenant of PRMA-LV under this Agreement, or under any other document delivered by PRMA-LV pursuant to Section 12(c). ------------- (c) The Company shall hold harmless, indemnify and defend MGM, PRMA and PRMA-LV, from and against any and all obligations, liabilities, claims, liens, losses, damages, costs and expenses (including reasonable attorneys' fees and costs) which are related to the ownership or operation of the MGM Contribution Property or the PRMA-LV Contribution Property and accrue after the Closing Date, except for obligations, liabilities, claims, liens, losses, damages, costs and expenses that are covered by the indemnification set forth in Sections 11(a) or (b) above. - --------------------- 12. ESCROW ------ (a) Escrow Instructions. On the date hereof, the parties have fully executed three (3) originals of this Agreement and on the next day shall deliver them to Title Company. Title Company shall execute all such originals of this Agreement, and deliver one copy each to MGM and PRMA-LV, to evidence Title Company's agreement to act as escrow agent ("Escrow Agent") hereunder and its acceptance of this Agreement as its escrow instructions. This Agreement, together with the general provisions of the usual form of escrow agreement used by Title Company in similar transactions to the extent consistent herewith and such further instructions, if any, as the parties shall provide to Title Company by mutual written agreement, shall constitute the escrow instructions. In the event of any inconsistencies between the terms and provisions of this Agreement and the terms and provisions of any escrow agreement used by the Company, the terms and provisions of this Agreement shall control. (b) MGM's Closing Deposits into Escrow. Prior to the Close of Escrow, MGM shall deliver or cause to be delivered to Title Company the following: (i) A Grant, Bargain and Sale Deed (the "Deed"), in recordable form, executed by MGM's controlling shareholder, conveying the Real Property to the Company free and clear of all claims, liens and encumbrances except the Permitted Encumbrances, in form heretofore mutually approved by MGM and PRMA-LV. (ii) Two fully executed copies of a Bill of Sale and Assignment and Assumption of Contracts (the "Bill of Sale and Assignment and Assumption of Contracts") by and among MGM and MGM's controlling shareholder, collectively as transferor, and the Company, as transferee, in form heretofore mutually approved by MGM and PRMA-LV. 11 (iii) Two fully executed copies of an affidavit certifying that neither MGM not MGM's controlling shareholder is a "foreign person" within the meaning of Section 1445(f)(3) of the Internal Revenue Code (the "FIRPTA Affidavit"). (iv) The additional amount of cash, if any, necessary to pay MGM's share under this Agreement of the prorations. (v) Reasonable proof of the authority of MGM's signatories. Prior to the Close of Escrow, MGM shall deliver or cause to be delivered any other documents, instruments or agreements reasonably necessary to close the transaction as contemplated by this Agreement. (c) PRMA-LV's Closing Deposits into Escrow. Prior to the Close of Escrow, PRMA-LV shall deliver or cause to be delivered to Title Company the following: (i) PRMA-LV's cash contribution described in Section 2(b) above, ------------ by wire transfer of immediately available funds. (ii) Two fully executed copies of an assignment of the Theme Rights, by PRMA-LV, as transferor, to the Company, as transferee, in form heretofore mutually approved by MGM and PRMA-LV (the "Theme Rights Assignment"). (iii) Two fully executed copies of an unconditional guaranty, executed by PRMA, as guarantor, in favor of MGM, as guaranteed party, in form heretofore mutually approved by MGM and PRMA-LV (the "Guaranty"). (iv) Two fully executed copies of an Assignment and Assumption of Advent Option Agreement (the "Assignment and Assumption of Advent Option Agreement") by and among PRMA-LV, as transferor, and the Company, as transferee, in form heretofore mutually approved by MGM and PRMA-LV. (v) Reasonable proof of the authority of PRMA-LV's signatories. Prior to the Close of Escrow, PRMA-LV shall deliver or cause to be delivered any other documents, instruments or agreements reasonably necessary to close the transaction as contemplated by this Agreement. 12 (d) Close of Escrow. Provided that Title Company shall not have received written notice from MGM or PRMA-LV of the termination of this Agreement and Escrow in accordance with this Agreement above, and only if and when MGM and PRMA-LV have deposited into Escrow the items required above, and Title Company is irrevocably and unconditionally prepared to issue the Title Policy, Title Company is authorized to and shall promptly: (i) Cause the Deed to be recorded in the Official Records of Clark County, Nevada. (ii) Deliver to each of MGM and PRMA-LV, by personal delivery or mail, one conformed copy of the Deed, and one fully executed original of each of the Bill of Sale and Assignment and Assumption of Contracts, the FIRPTA Affidavit, the Theme Rights Assignment, the Assignment and Assumption of Advent Option Agreement, and the Guaranty, together with copies of all other documents deposited in Escrow by the parties. (iii) Disburse to the Company PRMA-LV's cash contribution described in Section 2(b) above by wire transfer of immediately available ------------ funds, less the Company's share, if any, of any closing costs and net ---- proration credits due contributing Members pursuant to Section 7. --------- Notwithstanding the foregoing, in the event that MGM and PRMA-LV instruct Escrow Agent to pay any of the Shared Costs referred to in Section 9(c) ------------ above out of such amounts otherwise distributable to the Company, Escrow Agent shall pay such Shared Costs to the parties entitled thereto as directed in writing by MGM and PRMA-LV. (iv) Deliver to each party any funds deposited by such party, and any interest earned thereon, in excess of the amount required to be paid by such party hereunder. (v) Deliver the Title Policy to the Company. 13. INTENTIONALLY DELETED --------------------- 14. MISCELLANEOUS ------------- (a) Except as expressly provided to the contrary in this Agreement, the representations, warranties, indemnities and covenants of the parties made in this Agreement shall not be merged into any instrument or conveyance at the Close of Escrow and shall survive the Closing Date. (b) This Agreement is the entire Agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements 13 between the parties with respect to the matters contained in this Agreement, provided that the Operating Agreement and the Due Diligence and Cost-Sharing Agreement shall remain in full force and effect enforceable in accordance with their respective terms. Any waiver, modification or consent with respect to any provision of this Agreement shall be set forth in writing and duly executed by the party to be bound thereby. No waiver by any party of any breach hereunder shall be deemed a waiver of any other or subsequent breach. It is acknowledged that the controlling stockholder of MGM is not a party to this Agreement and shall have no liability or other obligation to any of the parties to this Agreement arising from or in connection with this Agreement or the transactions contemplated herein. (c) Time is of the essence in the performance of and compliance with each of the provisions and conditions of this Agreement. (d) Any communication, notice or demand of any kind whatsoever which either party may be required or may desire to give to or serve upon the other shall be in writing and delivered by personal service (including express or courier service), by electronic communication, whether by telex, telegram or telecopying (if confirmed in writing sent by registered or certified mail, postage prepaid, return receipt requested), or by registered or certified mail, postage prepaid, return receipt requested, addressed as follows: MGM: MGM Grand, Inc. 3799 Las Vegas Boulevard South Las Vegas, Nevada 89109 Attn: Mr. Robert R. Maxey Telefax No.: (702) 891-1114 With a copy to: MGM Grand, Inc. 3799 Las Vegas Boulevard South Las Vegas, Nevada 89109 Attn: K. Eugene Shutler, Esq. Telefax No.: (702) 891-1114 With a copy to: Christensen, White, Miller, Fink & Jacobs 2121 Avenue of the Stars 18th Floor Los Angeles, California 90067 Attn: Gary N. Jacobs, Esq. Telefax No.: (310) 556-2920 14 PRMA-LV: PRMA Las Vegas, Inc. c/o Primadonna Resorts, Inc. P.O. Box 95997 Las Vegas, Nevada 89193-5997 Attn: Gregory Jensen, Esq. Telefax No.: (702) 874-1554 With a copy to: O'Melveny & Myers 1999 Avenue of the Stars, Suite 700 Los Angeles, California 90067-6035 Attn: Peter C. Kelley, Esq. Telefax No.: (310) 246-6779 Company: c/o Primadonna Resorts, Inc. P.O. Box 95997 Las Vegas, Nevada 89193-5997 Attn: Gregory Jensen, Esq. Telefax No.: (702) 874-1554 With a copy to: MGM Grand, Inc. 3799 Las Vegas Boulevard South Las Vegas, Nevada 89109 Attn: K. Eugene Shutler, Esq. Telefax No.: (702) 891-1114 Title Company: Nevada Title Company 3320 W. Sahara, Suite 200 Las Vegas, Nevada 89102 Attn: Ms. Robbie D. Graham Telefax No.: (702) 876-6108 Any party may change its address for notice by written notice given to the other in the manner provided in this Section. Any such communication, notice or demand shall be deemed to have been duly given or served (i) on the date personally served, if by personal service, (ii) one (1) day after the date of confirmed dispatch, if by electronic communication, or (iii) on the date shown on the return receipt or other evidence of delivery, if mailed. (e) The parties agree to execute such instructions to Title Company and such other instruments and to do such further acts as may be reasonably necessary to carry out the provisions of this Agreement. 15 (f) The making, execution and delivery of this Agreement by the parties hereto has been induced by no representations, statements, warranties or agreements other than those expressly set forth herein. (g) Wherever possible, each provision of this Agreement shall be interpreted in such a manner as to be valid under applicable law, but, if any provision of this Agreement shall be invalid or prohibited thereunder, such invalidity or prohibition shall be construed as if such invalid or prohibited provision had not been inserted herein and shall not affect the remainder of such provision or the remaining provisions of this Agreement. (h) The language in all parts of this Agreement shall be in all cases construed simply according to its fair meaning and not strictly for or against any of the parties hereto. Section and Paragraph headings of this Agreement are solely for convenience of reference and shall not govern the interpretation of any of the provisions of this Agreement. Whenever the words "including", "include" or "includes" are used in this Agreement, they should be interpreted in a non-exclusive manner as though the words "without limitation" immediately followed the same. (i) This Agreement shall be governed by and construed in accordance with the laws of the State of Nevada. (j) If any action is brought by either party against the other party, the prevailing party shall be entitled to recover from the other party reasonable attorneys' fees, costs and expenses incurred in connection with the prosecution or defense of such action. For purposes of this Agreement, the term "attorneys' fees" or "attorneys' fees and costs" shall mean the fees and expenses of counsel to the parties hereto, which may include printing, photostating, duplicating and other expenses, air freight charges, and fees billed for law clerks, paralegals and other persons not admitted to the bar but performing services under the supervision of an attorney. (k) This Agreement shall not be transferred or assigned by either party. (l) All Exhibits or Schedules attached hereto are incorporated by this reference. 16 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the date first above written. "MGM" MGM GRAND, INC., a Delaware corporation By: /s/ Robert R. Maxey ---------------------------- Its: PRESIDENT/CEO ----------------------- "PRMA-LV" PRMA LAS VEGAS, INC. a Nevada corporation By: /s/ Gary Primm ---------------------------- Its: ----------------------- "THE COMPANY" NEW YORK - NEW YORK HOTEL, LLC, a Nevada limited liability company By: /s/ Gary Primm ---------------------------- Its: ----------------------- The undersigned escrow agent accepts the foregoing Contribution Agreement with Joint Escrow Instructions and agrees to act as escrow agent under the Agreement in strict accordance with its terms. Nevada Title Company, a Nevada corporation By: ____________________________ Its: ___________________________ Date: ______________________ EX-13 5 ANNUAL REPORT EXHIBIT 13 MGM Grand, Inc and Subsidiaries MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources As of December 31, 1994 and 1993, the Company held cash and cash equivalents of $75,859,000 and $211,305,000, respectively. Cash provided by operating activities for 1994 was $94,461,000 versus cash used of $37,596,000 for 1993. In May 1992, MGM Grand Hotel Finance Corp. completed a public offering of $220,000,000 of seven year 11 3/4% First Mortgage Notes and $253,000,000 of ten year 12% First Mortgage Notes, realizing net cash proceeds of approximately $454,000,000 after underwriting and other related offering costs. Also in May 1992, MGM Grand Hotel Finance Corp. obtained a $60,000,000 bank line of credit for the MGM Grand Hotel. In October 1992, the Company completed a rights offering of common stock. Total common stock sold was 5,785,918 shares at $17.50 per share, resulting in net proceeds of approximately $100,000,000. In June 1993, Grand Laundry, Inc., a wholly-owned subsidiary of MGM Grand Hotel, obtained a $10 million loan from a financial institution for a laundry facility constructed in North Las Vegas, Nevada. The facility was completed in December 1993, and provides the laundry and dry cleaning services for the MGM Grand Hotel. The loan was paid off on December 27, 1994. In August 1993, the Company completed a public offering of common stock. Total common stock sold was 1,955,000 shares at $37.75 per share, resulting in net proceeds of approximately $70,600,000. During 1993, the Company completed equipment lease financings for MGM Grand Hotel equipment. In December 1994 and January 1995, the Company terminated certain leases and purchased the equipment for approximately $42,000,000 (see Note 13). During 1994, the Company completed equipment lease financings for the production show. Capital expenditures in 1994 were $65,976,000, consisting of $59,967,000 for expenditures related to the MGM Grand Hotel, $5,552,000 for refurbishment of aircraft and spare parts, $119,000 related to other hotel/casino activities, and $338,000 related to furniture, fixtures and equipment. Capital expenditures in 1993 were $480,054,000, consisting of $474,454,000 for expenditures related to the MGM Grand Hotel, $5,568,000 for refurbishment of aircraft and spare parts, and $32,000 related to furniture, fixtures and equipment. In addition to final construction expenditures of $4,104,000 accrued at December 31, 1994, expenditures for 1995 are expected to be $18,000,000, consisting of $15,000,000 at the MGM Grand Hotel for general property improvements, and $3,000,000 for completion of construction of the MGM Grand- Bally's monorail project. In addition, the Company acquired land for approximately $36,500,000 (see Notes 1 and 17). The Company and Primadonna Resorts, Inc. have entered into a limited liability company, in which the Company has a 50% interest, to construct, own and operate NEW YORK-NEW YORK, a New York themed hotel and casino resort facility to be located across the Las Vegas Strip from MGM Grand Hotel. Ownership in the venture will be equal between the two parties. During January 1995, the Company contributed land, as noted above, to the limited liability company. Further project funding is expected to be obtained by the limited liability company from banks and financial institutions. Planning and design of the monorail linking the MGM Grand Hotel and Bally's Las Vegas is complete, and construction began during July 1994. The project is a one-mile, high-capacity, transit-grade system with an estimated cost of $25,000,000. The project costs are shared equally with Bally's Las Vegas. As of December 31, 1994, each partner has contributed $9,500,000 to the joint project. The system is scheduled to be operational by June 1995. The Company expects to finance operations and capital expenditures through cash flow from operations, cash on hand, and the bank line of credit. Results of Operations The Company operates in the Hotel/Casino industry segment through the operations of the MGM Grand Hotel commencing on December 18, 1993. 26 1994 Compared to 1993 Net revenues for the year ended December 31, 1994 were $742,195,000 compared to $37,016,000 for the year ended December 31, 1993. Casino revenue for the year ended December 31, 1994 was $434,297,000 compared to $26,702,000 for the 14 day period ended December 31, 1993. Room revenue for the 1994 year was $145,196,000 on an occupancy of 91.6%, compared to the fourteen day period ended December 31, 1993 of $4,505,000 on an occupancy of 58%. In order to open the MGM Grand Hotel three months ahead of schedule, the occupancy rates were affected by the partial availability of hotel rooms during December 1993 and January 1994. Entertainment, Retail, Food and Beverage and Other Revenue was $214,324,000 in 1994 compared to $8,862,000 in the prior year. Operating income for 1994 was $129,715,000 compared to an operating loss of $44,546,000 in 1993 which included a non-recurring charge of $45,130,000 for hotel pre-opening costs. Pre-opening costs included direct project salaries, advertising and other pre-opening services incurred during the pre-opening period of the MGM Grand Hotel. MGM Grand Air revenues for the year ended December 31, 1994, which have been reclassified to Discontinued Operations due to the sale of the airline on December 31, 1994, were $19,535,000 compared to $20,784,000 for the year ended December 31, 1993. The operating loss for 1994 was $7,012,000 compared to $78,691,000 in 1993. The operating loss in 1993 included an adjustment of $68,948,000 resulting from the revaluation of the carrying value of aircraft and related equipment. Interest and other income. Interest and other income was $5,752,000 for the year ended 1994 versus $12,247,000 for the year ended 1993. Interest was higher during the 1993 period as a result of short term investment of construction funds. Interest expense. Interest incurred was $61,927,000 for the year ended 1994, compared to $59,472,000 for the year ended 1993. Capitalized interest was $52,876,000 in 1993. 1993 Compared to 1992 MGM Grand Hotel commenced operations on December 18, 1993. Net revenues for the year ended December 31, 1993 were $37,016,000. Casino revenue for the 14-day period ended December 31, 1993 was $26,702,000. Room revenue for the period was $4,505,000 on an occupancy of 58%. In order to open the MGM Grand Hotel three months ahead of schedule, only 3,500 rooms were available for rent. Entertainment, Retail, Food and Beverage and Other Revenue was $8,862,000 for the period. The operating loss of $44,546,000 in 1993 included a non-recurring charge of $45,130,000 for pre-opening costs. Pre-opening costs included direct project salaries, advertising and other pre-opening services incurred during the pre-opening period of the MGM Grand Hotel. MGM Grand Air revenues for the year ended December 31, 1993, which have been reclassified to Discontinued Operations as a result of the sale of the airline on December 31, 1994, were $20,784,000 compared to $50,005,000 for the year ended December 31, 1992, representing a decrease of $29,221,000 (58%). The 1992 period included $29,488,000 of revenue from MGM Grand Air's scheduled service which was terminated on December 31, 1992. Charter and other revenue increased $514,000 (3%) due to the use of equipment from scheduled service for the charter. Operating expenses (before non-recurring adjustments) decreased $28,562,000 (48%) due to the termination of scheduled service offset by a $241,000 (6% per gallon) increase in the cost of fuel. The 1992 operating expenses included a $4,646,000 charge related to the termination of scheduled service and the bankruptcy of a charter customer. The operating loss in 1993 included an adjustment of $68,948,000 resulting from the revaluation of the carrying value of aircraft and related equipment. Interest and other income. Interest and other income was $12,247,000 for the year ended 1993 versus $16,455,000 for the year ended 1992. Interest was higher during the 1992 period as a result of short term investment of net proceeds from the issuance of the First Mortgage Notes and the rights offerings. Invested fund balances decreased during 1993 due to construction requirements. Interest expense. Interest incurred was $59,472,000 for the year ended 1993, compared to $37,733,000 for the year ended 1992. Capitalized interest was $52,876,000 in 1993 and $19,811,000 in 1992. The increased interest expense resulted from a full year of interest on the First Mortgage Notes during 1993. 27 MGM Grand, Inc and Subsidiaries CONSOLIDATED STATEMENTS OF OPERATIONS
[In thousands, except share data] For the years ended December 31, 1994 1993 1992 ................................................................................................................ Revenues: Casino $ 434,297 $ 26,702 $ -- Rooms 145,196 4,505 -- Food and beverage 91,566 3,696 -- Entertainment, retail and other 122,758 5,166 -- ---------- ---------- ---------- 793,817 40,069 -- Less: Promotional Allowances 51,622 3,053 -- ---------- ---------- ---------- 742,195 37,016 -- ---------- ---------- ---------- Expenses: Casino 183,514 9,341 -- Rooms 45,303 1,016 -- Food and beverage 65,043 2,529 -- Entertainment, retail and other 115,443 6,180 -- Provision for doubtful accounts and discounts 44,181 3,855 -- General and administrative 106,884 6,378 -- Depreciation and amortization 44,433 1,647 -- Hotel preopening expenses -- 45,130 -- ---------- ---------- ---------- 604,801 76,076 -- ---------- ---------- ---------- Operating Profit (Loss) Before Corporate Expense 137,394 (39,060) -- Corporate expense 7,679 5,486 4,873 ---------- ---------- ---------- Operating Income (Loss) 129,715 (44,546) (4,873) ---------- ---------- ---------- Nonoperating Income (Expense): Interest income 5,544 12,231 16,549 Interest expense, net of amounts capitalized (61,927) (6,596) (17,922) Other, net 208 16 (94) ---------- ---------- ---------- (56,175) 5,651 (1,467) ---------- ---------- ---------- Income (Loss) Before Discontinued Operations 73,540 (38,895) (6,340) ---------- ---------- ---------- Discontinued Operations: Income (loss) from discontinued operations (7,012) (78,691) (13,732) Gain (loss) on disposal of discontinued operations 8,048 -- -- ---------- ---------- ---------- 1,036 (78,691) (13,732) ---------- ---------- ---------- Income (Loss) Before Provision (Benefit) for Income Taxes 74,576 (117,586) (20,072) Provision (benefit) for income taxes -- -- -- ---------- ---------- ---------- Net Income (Loss) $ 74,576 $ (117,586) $ (20,072) ---------- ---------- ---------- Per Share of Common Stock: Income (loss) before discontinued operations $ 1.50 $ (.82) $ (.15) Discontinued operations .02 (1.65) (.33) ---------- ---------- ---------- Net Income (Loss) $ 1.52 $ (2.47) $ (.48) ---------- ---------- ---------- Weighted Average Shares Outstanding 48,988,000 47,587,000 42,254,000 ---------- ---------- ----------
The accompanying notes are an integral part of these consolidated financial statements. 28 MGM Grand, Inc and Subsidiaries CONSOLIDATED BALANCE SHEETS
[In thousands, except share data] As of December 31, 1994 1993 ................................................................................ ASSETS Current Assets: Cash and cash equivalents $ 75,859 $ 211,305 Accounts receivable, net 82,674 30,516 Prepaid expenses 13,431 11,755 Inventories 17,236 12,662 Note receivable 14,325 -- ---------- ---------- Total current assets 203,525 266,238 ---------- ---------- Property and Equipment, net 880,023 867,284 ---------- ---------- Other Assets: Deposits 2,434 1,330 Licensed rights and trademarks, net 1,120 1,154 Deferred organizational costs, net 1,375 1,985 Other assets, net 52,276 22,132 ---------- ---------- Total other assets 57,205 26,601 ---------- ---------- $1,140,753 $1,160,123 ---------- ---------- LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 25,202 $ 14,507 Accrued salaries and related 28,740 8,194 Current obligation, capital leases 2,145 1,830 Current maturities, long term debt -- 1,573 Accrued interest on long term debt 9,429 9,472 Construction payables 4,104 96,844 Other accrued liabilities 41,753 33,176 ---------- ---------- Total current liabilities 111,373 165,596 ---------- ---------- Deferred Revenues 8,505 10,784 Deferred Income Taxes 5,942 6,517 Long Term Obligation, Capital Leases 12,554 14,044 Long Term Debt, Net of Current Maturities 473,000 481,427 Commitments Stockholders' Equity: Common stock ($.01 par value, 75,000,000 shares authorized, 50,651,016 and 50,579,537 shares issued) 507 506 Capital in excess of par value 663,186 662,365 Common stock in treasury (2,726,506 and 1,734,706 shares) (57,264) (29,490) Retained earnings (deficit) (77,050) (151,626) ---------- ---------- Total stockholders' equity 529,379 481,755 ---------- ---------- $1,140,753 $1,160,123 ---------- ----------
The accompanying notes are an integral part of these consolidated financial statements. 29 MGM Grand, Inc and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) For the years ended December 31, 1994 1993 1992 .................................................................................... Cash Flows From Operating Activities: Net income (loss) $ 74,576 $(117,586) $ (20,072) Adjustments to reconcile net income (loss) to net cash from operating activities: Gain on sale of airline (8,048) -- -- Aircraft carrying value adjustment -- 68,948 -- Amortization of debt offering costs 3,858 1,312 1,863 Depreciation and amortization 44,433 8,018 7,356 Aircraft overhaul amortization -- 1,993 2,423 Provision for doubtful accounts and discounts 44,181 3,855 238 Change in assets and liabilities: Accounts receivable (93,311) (33,724) 10,653 Inventories (4,574) (12,508) 583 Prepaid expenses (1,677) (10,536) (80) Accounts payable, accrued liabilities, and other 35,023 52,632 9,287 --------- --------- --------- Net cash from operating activities 94,461 (37,596) 12,251 --------- --------- --------- Cash Flows From Investing Activities: Purchases of property and equipment, net (65,976) (480,054) (222,229) Dispositions of property and equipment, net 691 684 1,206 Change in construction payables (92,740) 64,548 28,239 Deposits and other assets (34,930) 2,141 (5,156) --------- --------- --------- Net cash from investing activities (192,955) (412,681) (197,940) --------- --------- --------- Cash Flows From Financing Activities: Borrowings from (repayments to) banks and others (10,000) 10,000 -- Issuance of long term debt, net -- -- 455,906 Issuance of common stock 822 71,619 99,952 Repurchase of common stock (27,774) -- -- --------- --------- --------- Net cash from financing activities (36,952) 81,619 555,858 --------- --------- --------- Net Increase (Decrease) In Cash And Cash Equivalents (135,446) (368,658) 370,169 Cash And Cash Equivalents At Beginning Of Year 211,305 579,963 209,794 --------- --------- --------- Cash And Cash Equivalents At End Of Year $ 75,859 $ 211,305 $ 579,963 --------- --------- ---------
The accompanying notes are an integral part of these consolidated financial statements. 30 MGM Grand, Inc and Subsidiaries CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the years ended December 31, 1994, 1993, and 1992 (Dollar amounts in Capital in Retained Total thousands, except Common Common Excess of Treasury Earnings Stockholders' share data) Stock Outstanding Stock Par Value Stock (Deficit) Equity ................................................................................................. Balance at December 31, 1991 41,017,353 $428 $489,933 $(29,490) $ (13,968) $ 446,903 Issuance of common stock 5,785,918 57 99,894 -- -- 99,951 Net loss -- -- -- -- (20,072) (20,072) ---------- ---- -------- -------- --------- --------- Balance at December 31, 1992 46,803,271 485 589,827 (29,490) (34,040) 526,782 Issuance of common stock 1,955,000 20 70,604 -- -- 70,624 Issuance of common stock pursuant to employee stock options 86,560 1 994 -- -- 995 Adjustment to net sales proceeds in excess of Desert Inn assets sold -- -- 940 -- -- 940 Net loss -- -- -- -- (117,586) (117,586) ---------- ---- -------- -------- --------- --------- Balance at December 31, 1993 48,844,831 506 662,365 (29,490) (151,626) 481,755 Issuance of common stock pursuant to employee stock options 71,479 1 821 -- -- 822 Repurchase of common stock (991,800) -- -- (27,774) -- (27,774) Net income -- -- -- -- 74,576 74,576 ---------- ---- -------- -------- --------- --------- Balance at December 31, 1994 47,924,510 $507 $663,186 $(57,264) $ (77,050) $ 529,379 ---------- ---- -------- -------- --------- ---------
The accompanying notes are an integral part of these consolidated financial statements. 31 MGM Grand, Inc and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1. Organization and Basis of Presentation ................................................................................ MGM Grand, Inc. (the "Company") is a Delaware corporation incorporated January 29, 1986. As of December 31, 1994, approximately 74.3% of the outstanding shares of the Company's common stock were owned by Kirk Kerkorian and Tracinda Corporation ("Tracinda"), a Nevada corporation wholly-owned by Kirk Kerkorian. Through its wholly-owned subsidiary, MGM Grand Hotel, Inc., the Company owns and operates the MGM Grand Hotel, a hotel/casino and entertainment complex in Las Vegas. The MGM Grand Hotel commenced operations on December 18, 1993. In December 1993, the Company entered into an agreement with Bally's for the joint development and operation of an elevated monorail linking the MGM Grand Hotel with the corner of Flamingo Road and the Las Vegas Strip. The project is a one-mile, high-capacity, transit-grade system with an estimated cost of $25 million. The project costs are shared equally with Bally's. The system is scheduled to be operational by June 1995. On December 28, 1994, the Company and Primadonna Resorts, Inc. executed the definitive agreement for the development of a $350 million themed hotel/casino called NEW YORK-NEW YORK. The project will be located on the northwest corner of Tropicana Avenue and Las Vegas Boulevard, across from the MGM Grand Hotel. The preliminary plans for NEW YORK-NEW YORK call for the destination resort to include a 2,200-room hotel and casino, themed entertainment attractions and restaurant/retail outlets. The Company and Primadonna Resorts will jointly own, develop and operate NEW YORK-NEW YORK, which is expected to break ground during the first quarter of 1995. The 18-acre site was contributed to the venture by the Company during January 1995, and NEW YORK-NEW YORK acquired an adjacent two-acre site in February 1995. Ownership of NEW YORK-NEW YORK is equal between the Company and Primadonna Resorts. The Company operated MGM Grand Air, a scheduled and charter airline service, through its wholly-owned subsidiary, MGM Grand Air, Inc., from September 1987 until December 31, 1994, when MGM Grand Air was sold. (See Note 4). Note 2. Significant Accounting Policies ................................................................................ a. Principles of Consolidation--The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Significant intercompany accounts are eliminated in consolidation. b. Cash Equivalents--Cash equivalents consist of investments in bank certificates of deposit and other interest bearing instruments with original maturities of 90 days or less. Such investments are carried at cost, which approximates market value. c. Inventories--Inventories are stated at the lower of cost or market, which is determined generally by the FIFO method. d. Property and Equipment--Property and equipment are stated at cost. Maintenance, repairs and renewals that neither materially add to the value of the property nor appreciably prolong its life are charged to expense as incurred. The Company capitalized interest during the period that the hotel/casino and entertainment complex was under construction. Gains or losses on dispositions of property and equipment are included in the determination of income. Depreciation and amortization are provided on a straight-line basis over the estimated useful lives of the assets, as follows: Buildings................................................... 15 to 40 years Furniture, fixtures and equipment........................... 3 to 7 years Land improvements........................................... 10 years Leasehold improvements...................................... 5 to 20 years
e. Debt and Equity Offering Costs--Direct costs incurred related to the sale of common stock to the public were charged against common stock proceeds at the time of the sale. Direct costs 32 MGM Grand, Inc and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) related to the debt offering are being deferred and amortized over the debt repayment period. f. Licensed Rights and Trademarks--Licensed rights and trademarks are amortized on a straight-line basis over periods not exceeding 40 years. g. Deferred Organizational Costs--Organizational costs are amortized on a straight-line basis over periods not exceeding 60 months. h. Other Assets--The estimated cost of normal hotel operating quantities (base- stock) of china, silverware, glassware, linen and utensils is recorded as an asset and is not depreciated. Costs of base-stock replacements are expensed as incurred. i. Revenue Recognition--Casino revenue is recorded as gaming wins less losses. Through the date of sale of MGM Grand Air on December 31, 1994, passenger ticket sales and aircraft charter sales were recognized as revenue when the transportation was rendered. Tickets sold but not used are refundable and included in other accrued liabilities.(See Note 4). j. Promotional Allowances--The retail value of accommodations, food, beverages, and other services furnished to hotel/casino guests without charge is included in gross revenue and then deducted as promotional allowances. The estimated retail value of these promotional allowances was $51,622,000 and $3,053,000 for the years ended December 31, 1994 and 1993, respectively. The estimated cost of providing such promotional allowances was included in casino expenses as follows:
Years Ended December 31, ------------------------------- (In thousands) 1994 1993 1992 ----------------------------------------------------------------------- Rooms $ 7,809 $ 659 $ -- Food and beverage 24,115 1,170 -- Other 5,176 84 -- ------- ------ ------ $37,100 $1,913 $ -- ------- ------ ------
k. Hotel Preopening Expenses--Hotel preopening expenses include direct project salaries, advertising, and other pre-opening services incurred during the preopening period of the MGM Grand Hotel. Such costs were expensed in 1993 upon opening of the facility. l. Aircraft Valuation Adjustment--The Company reduced the book value of its aircraft and related equipment to their expected recoverable values, and recognized an aircraft carrying value adjustment. (See Notes 4 and 11). m. Income Taxes--The Company adopted statement of Financial Accounting Standard No. 109, "Accounting for Income Taxes" effective January 1, 1993. (See Note 14). Prior to 1993, the Company accounted for income taxes in accordance with Accounting Principles Board Opinion No. 11. n. Net Income (Loss) per Common Share--Net income (loss) per common share has been computed based upon the weighted average number of shares of common stock and common stock equivalents, if dilutive, outstanding during each year (48,988,000 in 1994, 47,587,000 in 1993, and 42,254,000 in 1992). o. Reclassifications--Certain reclassifications have been made to conform the prior year with the current year presentation. Note 3. Statements of Cash Flows ................................................................................ The following supplemental disclosures are provided for the Consolidated Statements of Cash Flows:
Years Ended December 31, -------------------------------- (In thousands) 1994 1993 1992 ----------------------------------------------------------------------- Cash payments made for: Interest, net of amounts capitalized $58,975 $3,535 $8,346 ------- ------ ------ State and federal taxes $ 755 $ 203 $ 350 ------- ------ ------
33 MGM Grand, Inc and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) In 1993, the Company acquired property and equipment with capital leases totalling $15,423,000. In 1993, amortization of deferred bond offering costs of $1,705,000 was capitalized to property and equipment as a component of the total capitalized interest. In 1993, $940,000 was credited to Capital in Excess of Par Value in connection with the 1991 sale of the Desert Inn Hotel and Casino. Note 4. Sale of MGM Grand Air ................................................................................ On December 31, 1994, MGM Grand, Inc. completed the sale of MGM Grand Air for a note receivable totalling approximately $14,325,000, realizing a pretax gain of $8,048,000. The operating results of MGM Grand Air have been accounted for as discontinued operations, and prior years financial statements have been restated. Summary operating results of discontinued operations, excluding the above noted gain, are as follows:
1994 1993 1992 ----------------------------------- Revenues $19,535,000 $20,784,000 $50,005,000 Reduction in aircraft carrying value $ -- $68,948,000 $ -- Operating loss $ 7,012,000 $78,691,000 $13,732,000
Note 5. Rights Offering ................................................................................ On October 15, 1992, the Company completed a common stock rights offering. Total common stock issued at completion of the offering was 5,785,918 shares at a subscription price of $17.50 per share, resulting in net proceeds of approximately $100,000,000. The Company utilized the net proceeds to provide partial financing for the Company's MGM Grand Hotel. Note 6. Stock Offering ................................................................................ On August 17, 1993, the Company completed a common stock public offering. Total common stock issued at completion of the offering was 1,955,000 shares at a price of $37.75 per share, resulting in net proceeds of approximately $70,600,000. The Company allocated such funds for general corporate purposes including additions to property, plant and equipment, and the exploration of other expansion opportunities. Note 7. Treasury Stock ................................................................................ On March 9, 1994, the Company announced that it intended to acquire in open market purchases, from time to time, as many as 1,000,000 shares of its common stock. During the year ended December 31, 1994, the Company acquired 991,800 shares. Note 8. Issuance of First Mortgage Notes ................................................................................ On May 14, 1992, MGM Grand Hotel Finance Corp. completed its public offering of $220,000,000 of seven year 11 3/4% First Mortgage Notes and $253,000,000 of ten year 12% First Mortgage Notes, realizing net cash proceeds of approximately $454,000,000 after underwriting and other related offering costs. The Company utilized the net proceeds to provide partial financing for the Company's MGM Grand Hotel. 34 MGM Grand, Inc and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) Note 9. Accounts Receivable ................................................................................ Components of receivables were as follows:
At December 31, --------------------- (In thousands) 1994 1993 --------------------------------------------------------------------- Casino $ 84,496 $27,095 Hotel 14,194 6,732 Airline 1,608 1,422 -------- ------- 100,298 35,249 Less: Allowance for doubtful accounts and discounts (17,624) (4,733) -------- ------- $ 82,674 $30,516 -------- -------
Credit is issued in exchange for gaming chips as permitted by the regulations of the Nevada Gaming Commission and the Nevada State Gaming Control Board at the MGM Grand Hotel. Note 10. Other Accrued Liabilities ................................................................................ Other accrued liabilities consisted of the following:
At December 31, ------------------- (In thousands) 1994 1993 ---------------------------------------------------------------------- Casino front money $15,252 $ 7,445 Casino chip liability 3,943 3,267 Advance deposits 3,521 10,549 Accrued gaming taxes 2,339 1,636 Other liabilities 16,698 10,279 ------- ------- $41,753 $33,176 ------- -------
Note 11. Property and Equipment ................................................................................ Property and equipment consisted of the following:
At December 31, --------------------- (In thousands) 1994 1993 --------------------------------------------------------------------- Land $ 90,567 $ 90,837 Buildings and improvements 621,835 660,612 Airframes, engines and other flight equipment -- 81,842 Equipment, furniture, fixtures and leasehold improvements 194,756 103,518 Equipment under capital lease 17,793 16,987 Construction in progress 615 -- -------- -------- 925,566 953,796 Less: Accumulated depreciation and amortization (45,543) (86,512) -------- -------- $880,023 $867,284 -------- --------
The accumulated depreciation and amortization at December 31, 1993 included the $68,948,000 reduction in the carrying value of aircraft and related equipment. Such assets were included in the sale of MGM Grand Air on December 31, 1994 (See Note 4). 35 MGM Grand, Inc and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) Note 12. Long Term Debt ................................................................................ Long term debt consisted of the following:
At December 31, --------------------- (In thousands) 1994 1993 ----------------------------------------------------------------- 11 3/4% First Mortgage Notes due May 1, 1999 $220,000 $220,000 12% First Mortgage Notes due May 1, 2002 253,000 253,000 Laundry Facility Loan -- 10,000 -------- -------- 473,000 483,000 Less: Current Maturities -- (1,573) -------- -------- $473,000 $481,427 -------- --------
The First Mortgage Notes contain various restrictive covenants including the maintenance of certain financial ratios and limitations on additional debt, dividends, stock repurchases, disposition of assets, mergers and similar transactions. Based on the quoted market value of the First Mortgage Notes at December 31, 1994, the fair value of the First Mortgage Notes was $513,081,000. Maturities of the Company's long term debt are as follows:
Year Ending December 31, (In thousands) ---------------------------------------------------------------- 1995 $ -- 1996 -- 1997 55,000 1998 55,000 1999 110,000 Thereafter 253,000 -------- $473,000 --------
On May 14, 1992, the Company secured a commitment from several banks for a $60,000,000 line of credit for the MGM Grand Hotel. The facility became available on November 18, 1993. The Company incurs a commitment fee for the unused portion of the line of credit. No amounts were outstanding under the line of credit during 1994. On June 16, 1993, Grand Laundry, Inc., a wholly-owned subsidiary of MGM Grand Hotel, obtained a $10,000,000 loan from a financial institution for a laundry facility in North Las Vegas, Nevada. As of December 31, 1993, $10,000,000 had been drawn down under the loan, and construction of the facility was completed. The loan was paid off on December 27, 1994. The facility provides the laundry and dry cleaning services for the MGM Grand Hotel. On April 1, 1994, MGM Dist., Inc., a wholly-owned subsidiary of the Company, obtained a $4,000,000 loan from a financial institution for the acquisition of certain signage equipment. The loan was repaid on December 30, 1994. Total interest incurred during 1994, 1993, and 1992 was $61,927,000, $59,472,000, and $37,733,000, respectively, of which $52,876,000 and $19,811,000 were capitalized in 1993 and 1992, respectively. Note 13. Lease Commitments ................................................................................ The Company and its subsidiaries lease buildings and equipment under non- cancelable operating lease agreements which expire at various dates through the year 2000. The leases generally provide that the Company pay taxes, insurance and maintenance expense related to leased assets. In 1993, the Company entered into a three year operating lease for hotel/casino and theme park equipment in the amount of $48,000,000, with quarterly lease payments of approximately $2,500,000. In December 1994 and January 1995, the Company terminated the lease and purchased the equipment in the approximate amount of $42,000,000. In addition, during 1993, the Company entered into capital leases for hotel/casino and theme park equipment in the amount of $15,400,000. In December 1994, the Company entered into an operating lease for production show equipment in the amount of $5,000,000. 36 MGM Grand, Inc and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) Through the date of sale of the airline on December 31, 1994 (see Note 4), MGM Grand Air had a lease with the City of Los Angeles Department of Airports covering terminal facilities at Los Angeles International Airport. The lease was transferred with the sale of the airline. At December 31, 1994, the Company was obligated under non-cancellable operating leases and capital leases to make future minimum lease payments as follows:
Operating Capital Year Ending December 31, (in thousands) Leases Leases ---------------------------------------------------------------- 1995 $ 2,598 $ 3,316 1996 2,573 3,151 1997 2,577 3,445 1998 4,697 3,010 1999 743 2,687 Thereafter 16,163 3,049 ------- ------- Total Minimum Lease Payment $29,351 18,658 ------- Amount Representing Interest (3,959) ------- Total Obligation Under Capital Leases 14,699 Less: Amount due within one year (2,145) ------- Amount due after one year $12,554 -------
Rental expense on the above noted non-cancellable operating leases was $12,225,000 for the year ending December 31, 1994. Note 14. Income Taxes ................................................................................ The Company adopted Statement of Financial Accounting Standard No. 109, "Accounting for Income Taxes" ("SFAS 109") for the year ended December 31, 1993. The impact of adopting this new standard was not material to the consolidated financial statements of the Company for 1993. Prior to 1993, the Company accounted for income taxes in accordance with Accounting Principles Board Opinion No. 11. SFAS 109 requires the recognition of deferred tax assets, net of applicable reserves, related to net operating loss carryforwards and certain temporary differences. The standard requires recognition of a future tax benefit to the extent that realization of such benefit is more likely than not. Otherwise, a valuation allowance is applied. At December 31, 1994, the Company determined that $32,150,000 of tax benefits did not satisfy the recognition criteria set forth in the standard because of the Company's history of prior operating results. Accordingly, a valuation allowance was recorded to reserve the applicable deferred tax assets. The provision (benefit) for income taxes for the years ended December 31, 1994, 1993 and 1992 is as follows:
Year Ended December 31, ------------------------------- 1994 1993 1992 --------------------------------------------------------------- (in thousands) Current--Federal $ 575 $ -- $ -- Deferred--Federal (575) -- -- ----- ----- ----- Total $ -- $ -- $ -- ----- ----- -----
Reconciliation of the Federal income tax rate and the Company's effective tax rate is as follows:
1994 1993 1992 ------------------------------------------------------------------ Federal income tax rate 35% 35% 34% Change in Valuation Allowance (35) -- -- Net operating loss--no benefit recorded -- (35) (34) --- --- --- Effective tax rate -- % -- % -- % --- --- ---
As of December 31, 1994, after having given effect to SFAS 109, the major tax effected components of the Company's net deferred tax liability are as follows: 37 MGM Grand, Inc and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(In thousands) - ---------------------------------------------------------------------- Deferred Tax Asset 1994 1993 -------- -------- Net operating loss carryforward $ 45,559 $ 22,490 Bad debt reserve 6,302 2,707 Aircraft carying value adjustment -- 24,132 Hotel preopening expenses 12,448 15,483 Accruals, reserves and other 1,924 4,496 Alternative minimum tax credit carryforward 1,410 827 -------- -------- 67,643 70,135 Less: Valuation allowance (32,150) (51,235) -------- -------- Total deferred tax asset 35,493 18,900 -------- -------- Deferred Tax Liability Depreciation and amortization (37,963) (17,315) Capitalized interest (3,472) (8,102) -------- -------- Total deferred tax liability (41,435) (25,417) -------- -------- Net Deferred Tax Liability $ (5,942) $ (6,517) -------- --------
At December 31, 1994, the Company had a tax return net operating loss carryforward of approximately $130,200,000 which will expire as follows:
Net Operating Loss Carryforward Year of Expiration (In thousands) ------------------------------------------------------------------ 2005 $ 18,400 2006 9,900 2007 28,200 2008 23,500 2009 50,200 -------- $130,200 --------
In addition, the Company has an alternative minimum tax credit carryforward of $1,410,000 which does not expire. Note 15. Stock Option Plan ................................................................................ The Company has adopted a nonqualified stock option plan and an incentive stock plan which provides for the granting of stock options pursuant to applicable provisions of the Internal Revenue Code and regulations. The aggregate options available under the plans are 2,500,000 shares. In 1994, 273,750 options were granted at exercise prices ranging from $24.25 to $32.50 pursuant to the nonqualified plan. During 1994, 71,479 nonqualified stock options were exercised at $11.50 each. At December 31, 1994, 1,875,850 options at exercise prices ranging from $10.25 to $32.50 were outstanding of which 435,901 were exercisable. The Company has agreements with eight executives which provide that, upon a change of control, any unvested stock options covered by such agreements become exercisable. The total number of stock options subject to such agreements is 760,000. The plans are administered by a compensation and stock option committee of the Company's board of directors. Salaried officers and other key employees of the Company and its subsidiaries are eligible to receive options. The exercise price in each instance is 100 percent of the fair market value of the Company's common stock on the date of grant. The options generally have ten-year terms and are exercisable in four annual installments. Note 16. Employee Pension and Savings Plans ................................................................................ MGM Grand Hotel has a 401(k) employee savings plan for all full time employees not a part of a bargaining unit. The savings plan allows participants to defer, on a pretax basis, a portion of their salary and accumulate tax deferred earnings as a retirement fund. The Company matches employee contributions up to a maximum of 1% of participating employee's gross wages. Additionally, the Company makes contributions to employee's savings plans based on length of service which vest over a five year period. Through December 31, 1994, the Company contributions under this arrangement were $3,300,000. Effective November 1994, the Company, and MGM Grand Hotel adopted a Nonqualified Deferred Retirement Plan for 38 MGM Grand, Inc and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) certain key employees not a part of a collective bargaining unit. The Nonqualified Deferred Retirement Plan allows participants to defer, on a pretax basis, a portion of their salary and accumulate tax deferred earnings, plus interest, as a retirement fund. These deferrals are in addition to those allowed under the Hotel Savings Plan. All deferred amounts vest immediately. There are no employer matching contributions made under this plan. The full amount vested in a participant's account will be distributed to a participant following termination of employment, normal retirement or in the event of disability or death. Through the date of sale of the airline on December 31, 1994, MGM Grand Air maintained a noncontributory 401(k) employee savings plan for employees not a part of a bargaining unit. This savings plan allowed participants to defer, on a pretax basis, a portion of their salary and accumulate tax deferred earnings as a retirement fund. Maintenance of the savings plan was assumed by the purchaser of the airline. Note 17. Related-Party Transactions ................................................................................ In May 1992, Tracinda acquired $30,000,000 of the Company's First Mortgage Notes (see Note 8) through an open market purchase. The terms of the First Mortgage Notes (see Note 8) required that the Company's obligation to obtain an additional $100,000,000 in equity be assured by the issuance of an irrevocable bank letter of credit in that amount provided by the Company's principal shareholder, Tracinda. The letter of credit was outstanding from May to October 1992, when the rights offering was completed. Fees to the bank issuer of the letter of credit were paid by the Company. In August 1992, MGM Grand Hotel installed and commenced testing of a property management computer software system at The Stars' Desert Inn which was then owned by Tracinda. The system was used at The Stars' Desert Inn until September 1993. MGM Grand Hotel also agreed to use The Stars' Desert Inn casino to test certain gaming equipment from July to September 1993. MGM Grand Hotel reimbursed The Stars' Desert Inn for its estimated costs, which were approximately $13,000 in 1993, and $229,000 in 1994. The Stars' Desert Inn did not exercise an option to retain the computer software system. The Stars' Desert Inn retained all revenues generated by the gaming equipment. During the period from October 10, 1992 through January 20, 1993, MGM Grand Air, Inc. leased a Boeing 757 aircraft from Tracinda. The lease and related payments were $479,000. Also during 1992 and 1993, payments by The Stars' Desert Inn to MGM Grand Air for the charter of aircraft, amounted to $221,000 and $67,000, respectively. In November 1992, the Company was granted a no-cost two-year option from Tracinda to purchase approximately 18 acres of undeveloped land across the Las Vegas Strip from the MGM Grand Hotel. Effective September 1, 1994, the option was extended to September 1, 1995. The option, which gave the Company the right to acquire the property at Tracinda's purchase cost of $31,500,000, together with its actual costs incurred in connection with the ownership of the property, plus interest, was exercised on January 5, 1995, for a total cost of approximately $36,500,000. In November 1993, MGM Grand Hotel agreed to sell to Tracinda two unused parcels of land (approximately .56 acres total) for $272,950. The Company, based upon appraisals it received, believes that this sale was on terms comparable to what it could have obtained for the land on an arms length basis in an equivalent transaction with a third party. The acquisition was completed on March 1, 1994. The Company and Tracinda have entered into various other transactions and arrangements which, individually and in the aggregate, are not material. 39 MGM Grand, Inc and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) Note 18. Industry Segments ................................................................................ The Company operates in the Hotel/Casino industry segment through the operations of the MGM Grand Hotel since December 18, 1993. Airline operations have been reclassified for the years presented to Discontinued Operations as a result of the sale of the airline (see Note 4). Sales between industry segments are immaterial and generally at prices approximately equal to those charged to unaffiliated customers. Revenues and assets of operations outside the United States are not significant.
Years ended December 31, -------------------------------------- (In thousands) 1994 1993 1992 - ---------------------------------------------------------------------- Net revenues: Hotel/Casino $ 742,195 $ 37,016 $ -- ---------- ---------- ---------- $ 742,195 $ 37,016 $ -- ---------- ---------- ---------- Operating income (loss): Hotel/Casino $ 137,394 $ 6,070 $ -- Corporate expenses (7,679) (5,486) (4,873) Hotel preopening expenses -- (45,130) -- ---------- ---------- ---------- $ 129,715 $ (44,546) $ (4,873) ---------- ---------- ---------- Identifiable assets: Hotel/Casino $1,076,009 $1,071,612 $ 961,761 Discontinued operations--airline 2,618 2,501 73,773 Corporate 62,126 86,010 27,952 ---------- ---------- ---------- $1,140,753 $1,160,123 $1,063,486 ---------- ---------- ---------- Capital expenditures: Hotel/Casino $ 60,086 $ 474,454 $ 217,207 Discontinued operations--airline 5,552 5,568 4,669 Corporate 338 32 353 ---------- ---------- ---------- $ 65,976 $ 480,054 $ 222,229 ---------- ---------- ---------- Depreciation and amortization: Hotel/Casino $ 44,346 $ 1,593 $ -- Corporate 87 54 -- ---------- ---------- ---------- $ 44,433 $ 1,647 $ -- ---------- ---------- ----------
40 MGM Grand, Inc and Subsidiaries REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors and Stockholders of MGM Grand, Inc.: We have audited the accompanying consolidated balance sheets of MGM Grand, Inc. (a Delaware corporation) and subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of MGM Grand, Inc. and subsidiaries as of December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1994 in conformity with generally accepted accounting principles. Arthur Andersen LLP Las Vegas, Nevada February 17, 1995 41 MGM Grand, Inc and Subsidiaries SELECTED QUARTERLY FINANCIAL RESULTS
For the years ended December 31, 1994 and 1993 (Unaudited) (In thousands except share data) Quarter -------------------------------------- 1994 First Second Third Fourth Total ................................................................................ Net Revenues $174,958 $186,846 $208,558 $171,833 $ 742,195 Operating income (loss) 18,201 34,426 49,437 27,651 129,715 Income (loss) before discontinued operations 3,876 20,258 35,399 14,007 73,540 Net income (loss) 3,354 20,195 31,785 19,242 74,576 Per share of common stock: Income (loss) before discontinued operations $ .08 $ .41 $ .72 $ .29 $ 1.50 Discontinued operations (.01) -- (.07) .11 .02 -------- -------- -------- -------- --------- Net income (loss) $ .07 $ .41 $ .65 $ .40 $ 1.52 ======== ======== ======== ======== ========= 1993 ................................................................................ Net Revenues $ -- $ -- $ -- $ 37,016 $ 37,016 Operating income (loss) (1,184) (1,534) (4,601) (37,227) (44,546) Income (loss) before discontinued operations (416) 743 (2,093) (37,129) (38,895) Net income (loss) (2,742) (2,056) (4,522) (108,266) (117,586) Per share of common stock: Income (loss) before discontinued operations $ (.01) $ .02 $ (.04) $ (.76) $ ( .82) Discontinued operations (.05) (.06) (.05) (1.46) (1.65) -------- -------- -------- -------- --------- Net income (loss) $ (.06) $ (.04) $ (.09) $ (2.22) $ (2.47) ======== ======== ======== ======== =========
1994 1993 ------------------- -------------------- Common Stock Prices High Low High Low ............................................................................. For the year ended December 31, First quarter $ 39 3/8 $ 27 3/4 $ 28 5/8 $ 19 1/8 Second quarter 29 3/4 23 1/4 36 3/8 26 5/8 Third quarter 32 24 1/4 48 3/4 28 1/4 Fourth quarter 32 1/4 24 1/8 48 7/8 36
The Company's Common Stock is listed on the New York Stock Exchange. Its symbol is MGG. 42 MGM Grand, Inc and Subsidiaries CORPORATE INFORMATION Directors and Officers ................................................................................ Fred Benninger Chairman Robert R. Maxey President and Chief Executive Officer James D. Aljian Executive, Tracinda Corporation Las Vegas, Nevada Terry N. Christensen Partner, Christensen, White, Miller, Fink & Jacobs Los Angeles, California Glenn A. Cramer Willie D. Davis President and Director, All-Pro Broadcasting, Inc. Los Angeles, California Alexander M. Haig, Jr. Chairman Worldwide Associates, Inc. Washington, D.C. Lee A. Iacocca Chairman Iacocca Capital Group Southfield, Michigan Kirk Kerkorian President and Chief Executive Officer, Tracinda Corporation Las Vegas, Nevada Walter M. Sharp President, Walter M. Sharp Company Beverly Hills, California K. Eugene Shutler Executive Vice President and General Counsel E. Parry Thomas Consultant to Bank of America--Nevada Las Vegas, Nevada Alex Yemenidjian Executive Vice President and Chief Financial Officer ................... Scott Langsner Secretary/Treasurer MGM Grand Hotel Senior Officers ................................................................................ Larry J. Woolf Chairman, President and Chief Executive Officer Daniel M. Wade Executive Vice President and Chief Operating Officer Robert V. Moon Senior Vice President Casino Marketing Richard A. Sturm Senior Vice President Marketing and Entertainment Joseph T. Murphy Senior Vice President and Chief Financial Officer Addresses ................................................................................ MGM Grand, Inc. 3799 Las Vegas Boulevard South Las Vegas, Nevada 89109 MGM Grand Hotel, Inc. 3799 Las Vegas Boulevard South Las Vegas, Nevada 89109 Transfer Agent and Registrar For Common Stock Mellon Bank 85 Challenger Road Ridgefield Park, NJ 07660 Independent Public Accountants Arthur Andersen LLP 3320 W. Sahara Avenue Las Vegas, Nevada 89102 Form 10-K ................................................................................ A copy of the Company's annual report on Form 10-K, as filed with the Securities and Exchange Commission, will be furnished without charge to any stockholder upon written request to: Mr. Scott Langsner, MGM Grand, Inc., 3799 Las Vegas Boulevard South, Las Vegas, Nevada 89109. 43 EX-21 6 LIST OF SUBSIDIARIES EXHIBIT 21 MGM GRAND, INC. LIST OF SUBSIDIARIES DECEMBER 31, 1994 STATE OF NAME INCORPORATION ----------------------------- ------------- PARENT MGM Grand, Inc. Delaware SUBSIDIARIES: MGM Grand Hotel, Inc. Nevada MGM Grand Hotel Finance Corp. Nevada MGM Grand Air, Inc. Delaware EX-27 7 ARTICLE 5 FDS DATED 12/31/94
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MGM GRAND, INC. 1994 FORM 10K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS DEC-31-1994 JAN-01-1994 DEC-31-1994 75,859 0 100,298 (17,624) 17,236 203,525 925,566 (45,543) 1,140,753 111,373 473,000 507 0 0 528,872 1,140,753 793,817 793,817 0 (51,622) (568,299) (44,181) (61,927) 74,576 0 73,540 1,036 0 0 74,576 1.52 0
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