-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AHy7YaeUFzQUfa+R3Kjp7oDnE/UnqNznN5Sd8kbU7SmLxfQf6F/H/KZF1J4KpMRM +/UblM+4o8zqRgYiOxBMOA== 0000898430-96-001054.txt : 19960401 0000898430-96-001054.hdr.sgml : 19960401 ACCESSION NUMBER: 0000898430-96-001054 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 16 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960329 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: 96540683 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, 1995. 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. [_] 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 14, 1996) was approximately $509 million. As of March 14, 1996, 49,085,075 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, 1995 are incorporated by reference into Part II of this Form 10- K. Portions of the Registrant's Proxy Statement dated March 29, 1996 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., the Company owns and operates the MGM Grand Hotel and Casino ("MGM Grand Las Vegas"), a hotel/casino entertainment complex offering a full range of destination resort amenities. The resort is located on approximately 112 acres on Las Vegas Boulevard South (the "Strip") in Las Vegas, Nevada, across the street from Excalibur, Tropicana and New York-New York Hotel and Casino, which is currently under construction. 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 MGM Grand Las Vegas. Through its wholly-owned subsidiary, MGM Grand Australia Pty Ltd., the Company owns and operates the MGM Grand Diamond Beach Hotel and Casino ("MGM Grand Australia"), a hotel/casino resort in Darwin, Australia. On September 7, 1995, the Company completed the acquisition of the Diamond Beach Hotel and Casino. MGM Grand Australia is located on 18 acres of beachfront property on the north central coast of Australia. The resort includes a public and private casino, 97 rooms and suites, restaurants, and other facilities. On December 28, 1994, the Company and Primadonna Resorts, Inc. ("Primadonna") executed the definitive agreement for their joint development of a $460 million themed hotel/casino called New York-New York. The project is owned equally by the Company and Primadonna and is located on the northwest corner of Tropicana Avenue and Las Vegas Boulevard, across from MGM Grand Las Vegas. The plans for New York-New York call for the destination resort to include a 2,035 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. Groundbreaking occurred on March 30, 1995. The 18-acre site, located on one of the busiest intersections in Nevada, was contributed to the venture by the Company during January 1995, and in February 1995, the venture acquired an adjacent two acre parcel. The Company and Bally's have developed an elevated monorail linking MGM Grand Las Vegas with the corner of Flamingo Road and the Las Vegas Strip. The project, which began operations in June 1995, is a one-mile, high-capacity, transit-grade system, which cost approximately $25 million. The project costs were shared equally with Bally's. On February 1, 1996, the Company filed an application for a license with the Casino Control Commission in the State of New Jersey, consistent with its strategy to pursue growth opportunities. No specific project has been selected. 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. 1 HOTELS AND GAMING MGM GRAND LAS VEGAS MGM Grand Las Vegas is a multi-themed destination resort, located on approximately 112 acres, which management believes is a "must see" attraction for visitors to Las Vegas. The resort opened on December 18, 1993, and 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. MGM Grand Las Vegas creates an exciting and unique gaming and entertainment experience which is intended to appeal to all segments of the Las Vegas market. The casino is approximately 171,500 square feet in size, and is one of the largest casinos in the world. The casino has 3,516 slot machines and 161 table games, a state of the art baccarat room, including private premium play facilities, a poker room, a race and sports book, and a keno lounge. The casino features four separate themed areas: Emerald City, Hollywood, Monte Carlo, and Sports which enhance the entertainment experience of the casino patron. 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 650 to 6,000 square feet. The hotel provides guests with a state of the art health spa, a swimming pool, and four lighted tennis courts. Other entertainment facilities include: a 33 acre theme park, a 30,000 square foot midway containing 33 carnival games of skill; an extensive video arcade including virtual reality simulators; a 660 seat showroom providing celebrity entertainment; a 1,774 seat showroom specifically designed for the EFX! production show, the Company's original grand spectacle special effects stage production; nine restaurants and a food court; and a special events center, which seats a maximum of 16,766 patrons, providing mega entertainment such as Barbra Streisand, the Rolling Stones, Phil Collins, and Luther Vandross, as well as Mike Tyson boxing and various other sporting events. MGM Grand Las Vegas 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 MGM Grand Las Vegas 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 1,000,000, and is one of the largest resort destinations in the world. Gaming has continued to be a strong and growing business in Las Vegas. Las Vegas Strip gaming revenues have increased at a compound annual growth rate of 9.5% from $1.4 billion in 1985 to $3.6 billion in 1995. The hotel industry in Las Vegas is highly competitive. Currently, several new resorts are under construction. The Company's New York-New York project, Monte Carlo, Bellagio and others are in various stages of construction. While all of the large themed resorts pose direct competition with MGM Grand Las Vegas, the Las Vegas Convention and Visitors Authority ("LVCVA") statistics show that tourism growth is increasing at a rate which appears to be sufficient to absorb the increased room capacity, as visitor volume for 1995 increased 2.8% over 1994. Total visitors for 1995 exceeded 29 million. 2 MGM Grand Las Vegas competes with gaming and resort facilities in Las Vegas 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 casino/hotel. Gambling, with various limitations and conditions, is currently 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 at various Native American reservations throughout the country. The development of full service casinos in California would likely have a negative effect on MGM Grand Las Vegas operations in Nevada. Furthermore, recent news reports indicate that slot machines may be operating illegally in various jurisdictions in California. See "Competition." Insurance MGM Grand Las Vegas 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 business and commercial coverages, including workers' compensation, third party liability, property damage, boiler and machinery and business interruption. Nevada Government Regulation The ownership and operation of casino gaming facilities in Clark County, Nevada are subject to: (i) the Nevada Gaming Control Act and the regulations promulgated thereunder (collectively, the "Nevada Act"); and (ii) various local regulations. 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) providing a source of state and local revenues through taxation and licensing fees. Any change in such laws, regulations and procedures could have an adverse effect on the Company's gaming operations. MGM Grand Las Vegas operates a 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 Las Vegas is also licensed as a manufacturer and distributor of gaming devices. 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 Las Vegas without first obtaining licenses and approvals from the Nevada Gaming Authorities. The Company and MGM Grand Las Vegas have obtained from the Nevada Gaming Authorities the various registrations, approvals, permits and licenses required in order to engage in gaming activities in Nevada. 3 The Nevada Gaming Authorities may investigate any individual who has a material relationship to, or material involvement with, the Company or MGM Grand Las Vegas 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 Las Vegas 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 Las Vegas may be required to be licensed or 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 licensee 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 or MGM Grand Las Vegas, such company or companies would have to sever all relationships with such person. In addition, the Nevada Commission may require the Company or MGM Grand Las Vegas 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 and MGM Grand Las Vegas 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 Las Vegas must be reported to or approved by the Nevada Commission. If it were determined that the Nevada Act was violated by MGM Grand Las Vegas, the gaming licenses it holds could be limited, conditioned, suspended or revoked, subject to compliance with certain statutory and regulatory procedures. In addition, MGM Grand Las Vegas, 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 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 their 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 the 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 4 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 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 or MGM Grand Las Vegas, the Company or MGM Grand Las Vegas (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 through 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. 5 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 27, 1995, 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 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 or she 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 tables games operated. A casino entertainment tax is also paid by MGM Grand Las Vegas where certain entertainment is provided in a cabaret, nightclub, cocktail lounge or casino showroom in connection with the serving or selling of food, refreshments, or merchandise. Nevada licensees that hold a license as a manufacturer or a distributor, such as MGM Grand Las Vegas, 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 6 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 at 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 foreign gaming operation, fail to conduct the foreign gaming operation in accordance with the standards of honesty and integrity required of Nevada gaming operations, engaged 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. The sale of alcoholic beverages by MGM Grand Las Vegas 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 Las Vegas. 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, under regulation 6A of the Nevada Act, 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 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 Nevada Commission and the Nevada Board, who in turn 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 inception. 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. Although Nevada casinos are exempt from Title 31, it is anticipated that the Treasury will request the Nevada Commission to enact amendments to the Nevada Act that will parallel in many respects the amendments to the Bank Secrecy Act. Any amendment to the Nevada Act cannot be predicted, but there is a possibility the Company will, in the future, be required to implement programs of this type. Regulation and Taxes As stated above, the Company is subject to extensive regulation by the Nevada gaming authorities. The Company will also be subject to regulation, which may or may not be similar to that in Nevada, by the appropriate authorities in any other jurisdiction where the Company may conduct gaming activities in the future. Changes in applicable laws or regulations could have an adverse effect on the Company. The gaming industry represents a significant source of tax revenues to the State of Nevada and Clark County. From time to time, federal and state legislators and officials have proposed changes in tax law, or in the administration of such law, affecting the gaming industry. Recent proposals have included a federal gaming tax and increases in state or local gaming taxes. They have also included 7 limitations on the federal income tax deductibility of the cost of furnishing complimentary promotional items to customers, as well as various measures which would require withholding on amounts won by customers or on negotiated discounts provided to customers on amounts owed to gaming companies. It is not possible to determine with certainty the likelihood of possible changes in tax law or in the administration of such law. Such changes, if adopted, could have a material adverse effect on the Company's financial results. 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. Some of the Company's competitors may have greater resources. According to the LVCVA, as of December 31, 1995, there were approximately 90,000 hotel and motel rooms in the Las Vegas area. In addition, the LVCVA reports proposals to construct approximately 12,000 more hotel and motel rooms, including three themed hotel/casino properties currently under construction 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 rooms and gaming capacity. In addition to competing with hotel/casino facilities elsewhere in Nevada (i.e., the Reno/Lake Tahoe areas and the Laughlin area) and in Atlantic City, the Company competes with hotel/casino facilities elsewhere in the world and with state lotteries. Certain states are currently considering legalizing casino gaming in specific geographic areas, and several other states have recently legalized casino gaming, including Colorado, Illinois, Iowa, Indiana, Louisiana, Mississippi, Missouri and South Dakota. Legalized casino gaming 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 MGM Grand Las Vegas. 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. See "Las Vegas Market." MGM GRAND AUSTRALIA On September 7, 1995, the Company, through its wholly-owned subsidiary, MGM Grand Australia Pty Ltd., completed the acquisition of the MGM Grand Australia in Darwin, Northern Territory, Australia. MGM Grand Australia is located on 18 acres of beachfront property next to the Arafura Sea on the north central coast. The resort includes a public and private casino, 97 rooms, restaurants and other facilities. Casino operations include table games, slots ("poker machines") and keno. The success of MGM Grand Australia is based in part upon its strategic location of the South East Asian gaming market. The Darwin International Airport is an average of 5.5 hours away from the major Asian cities. For example, Darwin is within four hours of Indonesia with a population of 183,000,000 people. However, frequency of scheduled air service is a limiting factor. 8 There exist fourteen casinos in Australia competing for the Far East Market. Australian casinos operate under exclusive arrangements, which create a regional monopoly for a fixed term. As such, Australian casinos do not compete among themselves for the regional middle to low end players. However, Far East premium players have become an increasingly important source of revenues; consequently, this market has become very competitive. Competition for the Far East premium player is increasing, as evidenced by the gaming activity in Kuala Lumpur and Macau, the recent growth in the number of casinos operating in Australia, and an increase in the quantity of casino cruise ships. Due to the increasing competition and the limitations on scheduled air service, the desired mixture of premium players has not been attained. As a result, the margins have been negatively impacted and future operating results could be adversely affected if this trend continues. In an effort to attract premium players, the MGM Grand Australia has recently refurbished the private Monte Carlo Room casino and guest suites, and has added the Grand International and private gaming rooms. Only the Grand International gaming room and Monte Carlo gaming room are open 24 hours. Effective January 1996, hotels and clubs will be allowed to operate slots ("poker machines") in the Northern Territory creating a competition in the local market. MGM Grand Australia is remodeling the public gaming floor, restaurant, and retail stores in order to remain competitive and improve the local business. Australia Government Regulation The Northern Territory of Australia, like Nevada, has comprehensive laws and regulations governing the conduct of gaming. MGM Grand Australia's operations are subject to the Gaming Control Act of 1993 and regulations promulgated thereunder (the "Northern Territory Law") and to the licensing and general control of the Minister for Racing and Gaming (the "Minister"). MGM Grand Australia Pty. Ltd. has entered into a Casino Operator's Agreement with the Minister pursuant to which MGM Grand Australia was granted a license (the "License") to conduct casino gaming on an exclusive basis through June 30, 2005 in the northern half of the Northern Territory (which includes Darwin, its largest city, where MGM Grand Australia is located). The License expires on June 30, 2005, although it provides for good faith negotiations to reach agreement on an extension of the License beyond such date. The License provides for a tax payable to the Northern Territory Government on gross profits derived from gaming, including gaming devices. The License is not exclusive with respect to gaming devices, and the Minister may permit such devices to be placed in limited numbers in locations not operated by MGM Grand Australia. However, under the License, a portion of the operators' win on such gaming devices is to be offset against gaming tax otherwise payable by MGM Grand Australia. The License may be terminated if MGM Grand Australia breaches the Casino Operator's Agreement or the Northern Territory Law or fails to operate in accordance with the requirements of the License. The Northern Territory authorities have the right under the Northern Territory Law, the Casino Operator's Agreement and the License to monitor and approve virtually all aspects of the conduct of gaming by MGM Grand Australia. Additionally, under the terms of the License, the Minister has the right to approve the directors and corporate secretary of the Company and its subsidiaries which own or operate MGM Grand Australia, as well as changes in the ownership or corporate structure of such subsidiaries. The Company is required to file with the Northern Territory authorities copies of all documents required to be filed by the Company or any of its subsidiaries with the Nevada Gaming Authorities. In the event of any person becoming the beneficial owner of 10% or more of the outstanding stock of the Company, the Minister must be so notified and may investigate the suitability of such person. If the Minister determines such person to be unsuitable and following such determination such person remains the beneficial owner of 10% or more of the Company's stock, that would constitute a default under the License. 9 EMPLOYEES As of December 31, 1995, the Company and its subsidiaries employed approximately 6,400 full time equivalent employees at MGM Grand Las Vegas and its corporate offices. None of the Company's employees are covered by collective bargaining agreements. As of December 31, 1995, MGM Grand Australia employed approximately 600 full time equivalent employees. Hourly 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 8,800 square feet from MGM Grand Las Vegas. MGM Grand Las Vegas' 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 Las Vegas consisting of approximately 132,000 square feet located in Las Vegas, Nevada, for an annual rent of approximately $489,000. Approximately 5,800 square feet of the leased space is subleased to New York-New York, for an annual rent of approximately $55,500. MGM Grand Las Vegas is located on approximately 112 acres on the Strip in Las Vegas, Nevada. This property is subject to a first priority deed of trust securing $220,000,000 principal amount of 11 3/4% First Mortgage Notes due 1999, $253,000,000 principal amount of 12% First Mortgage Notes due 2002 and a $60,000,000 bank line of credit for MGM Grand Las Vegas. In January 1995, the Company contributed an 18-acre site, located at the intersection of the Strip and Tropicana Avenue to the Company's New York-New York joint venture. (See Item 1. Business.) This property, together with an adjacent two-acre parcel, are subject to a first priority deed of trust securing bank financing of up to $225,000,000, of which $59,000,000 has been drawn down, and which bears interest based on the bank prime rate, federal funds rate or LIBOR rate, and is due December 2001. MGM Grand Australia's principal executive offices are located at Gilruth Avenue, Mindil Beach, Darwin, Northern Territory 0801 Australia. In September 1995, the Company acquired MGM Grand Australia which is located on an 18-acre beach front site on the north central coast of Australia. (See Item 1. Business.) This property is subject to a first priority deed of trust securing bank financing of up to approximately $78,000,000, which bears interest based on the Australian bank reference rate or eurodollar rate and is due December 2000. ITEM 3. LEGAL PROCEEDINGS None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. EXECUTIVE OFFICERS OF THE REGISTRANT J. TERRENCE LANNI (age 53) has served as Chairman of the Company since July 1995, and as a Director, Chairman of the Executive Committee and Chief Executive Officer of the Company since June 1995. He also served as President of the Company from June 1995 to July 1995. Prior thereto, he was President and Chief Operating Officer of Caesars World, Inc. from April 1981 to February 1995. 10 ALEX YEMENIDJIAN (age 40) has served as a Director of the Company since December 1989, as President of the Company since July 1995, as Chief Operating Officer of the Company since June 1995, and as Chief Financial Officer of the Company since May 1994. He also served as Executive Vice President of the Company from June 1992 to July 1995, 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. He has also served as an executive of Tracinda since January 1990. FRED BENNINGER (age 79) has served as a Director of the Company since February 1986, and as Vice Chairman of the Board since April 1995. He was Chairman of the Board from August 1987 to April 1995. He also served as Chief Executive Officer of the Company from August 1987 to January 1991, and as President of the Company from August 1987 to March 1990. SCOTT LANGSNER (age 42) has served as Secretary/Treasurer of the Company since July 1987. KENNETH A. ROSEVEAR (age 46) has served as Senior Vice President-Development of the Company since November 1995. From November 1993 to November 1995, he served as President of Caesars World Gaming Development Corporation. For more than five years prior thereto, he served as Chief Executive of Sun International Group in South Africa. T. PATRICK SMITH (age 47) has served as Vice President-Real Estate of the Company since September 1995. For more than five years prior thereto, he served in a variety of positions with the Irvine Company, most recently as Chief Executive Officer of Irvine Apartment Communities, Inc., a publicly traded real estate investment trust of The Irvine Company. EDWARD J. JENKINS (age 51) has served as Vice President of the Company since October 1995. From July 1992 to October 1995, he served as Vice President, Security, for Caesars World, Inc. He previously was a 30-year veteran of the FBI, holding various management positions at Bureau offices throughout the United States. 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 39 of the Company's 1995 Annual Report to Stockholders, which information is incorporated herein by this reference. As of March 14, 1996, there were approximately 2,500 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 2 of the Company's 1995 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 19 to 21 of the Company's 1995 Annual Report to Stockholders is incorporated herein by this reference. 11 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The consolidated balance sheets as of December 31, 1995 and 1994 and the consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1995 with the Report of Independent Public Accountants contained on pages 22 to 38 of the Company's 1995 Annual Report to Stockholders are herein incorporated by 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." PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) The financial statements and schedule listed in the accompanying Index to Financial Statements at page 15 herein are filed as part of this Form 10-K. (b) Exhibits The exhibits listed in the accompanying Exhibit Index on pages 18-19 are filed as part of this Form 10-K. 12 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. J. Terrence Lanni By: _________________________________ J. Terrence Lanni Chairman and Chief Executive Officer (Principal Executive Officer) Alex Yemenidjian By: _________________________________ Alex Yemenidjian President, Chief Operating Officer and Chief Financial Officer Dated: March 15, 1996 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 --------- ----- ---- J. Terrence Lanni Chairman of the Board and March 15, 1996 - ------------------------------------ Chief Executive Officer J. Terrence Lanni Alex Yemenidjian President, Chief Operating March 15, 1996 - ------------------------------------ Officer, Chief Financial Alex Yemenidjian Officer and Director Fred Benninger Vice-Chairman of the Board March 15, 1996 - ------------------------------------ Fred Benninger James D. Aljian Director March 15, 1996 - ------------------------------------ James D. Aljian Terry N. Christensen Director March 15, 1996 - ------------------------------------ Terry N. Christensen Glenn A. Cramer Director March 15, 1996 - ------------------------------------ Glenn A. Cramer Director March , 1996 - ------------------------------------ Willie D. Davis Director March , 1996 - ------------------------------------ Alexander M. Haig, Jr.
13
SIGNATURE TITLE DATE --------- ----- ---- Director March , 1996 - ------------------------------------ Lee A. Iacocca Director March , 1996 - ------------------------------------ Kirk Kerkorian Walter M. Sharp Director March 15, 1996 - ------------------------------------ Walter M. Sharp Director March , 1996 - ------------------------------------ Jerome B. York
14 INDEX TO FINANCIAL STATEMENTS (ITEM 14(A))
ANNUAL REPORT TO FORM STOCKHOLDERS 10-K PAGE PAGE ------------ ---- Report of Independent Public Accountants...................... 38 Consolidated Statements of Operations--For the years ended December 31, 1995, 1994 and 1993............................. 22 Consolidated Balance Sheets as of December 31, 1995 and 1994.. 23 Consolidated Statements of Cash Flows--For the years ended December 31, 1995, 1994 and 1993............................. 24 Consolidated Statements of Stockholders' Equity--For the years ended December 31, 1995, 1994 and 1993....................... 25 Notes to Consolidated Financial Statements.................... 26 Selected Quarterly Financial Results (unaudited).............. 39 Report of Independent Public Accountants on Supplemental Schedule..................................................... 16 Schedule II--Valuation and Qualifying Accounts................ 17
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. 15 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 January 31, 1996. 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 17 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 January 31, 1996 16 MGM GRAND, INC. AND SUBSIDIARIES SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (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, 1995: Allowances for doubtful accounts...... $17,624 $57,683 $42,235 $33,072 ======= ======= ======= ======= FOR THE YEAR ENDED DECEMBER 31, 1994: Allowances for doubtful accounts...... $ 4,733 $44,181 $31,290 $17,624 ======= ======= ======= ======= FOR THE YEAR ENDED DECEMBER 31, 1993: Allowances for doubtful accounts...... $ 1,531 $ 3,855 $ 653 $ 4,733 ======= ======= ======= =======
17 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 cove- nants, and U.S. Trust Company of California, N.A., a national bank- ing corporation validly organized and existing under the laws of the United States, as Trustee (the "Trustee"), relating to First Mort- gage 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 ref- erence to Exhibit A to the Company's Proxy Statement dated March 30, 1990). 10(2) MGM Grand, Inc. Incentive Stock Option Plan (incorporated by refer- ence to Exhibit B to the Company's Proxy Statement dated March 30, 1990). 10(3) Credit Agreement, as amended, 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 and Exhibit 10(3) to the Company's 1994 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 Agreement, dated July 13, 1995, between the Company and Rob- ert R. Maxey. 10(13) Letter Agreement, dated October 3, 1995, between the Company and K. Eugene Shutler.
18
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 (incorporated by reference to Exhibit 10(16) to the Company's 1994 Form 10-K). 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 (incorporated by reference to the Company's 1994 Form 10-K). 10(18) Construction/Revolving Loan Agreement dated as of September 15, 1995 among New York-New York Hotel, LLC and the Banks named therein. 10(19) Completion Guaranty dated as of September 15, 1995 by the Company and Primadonna Resorts, Inc. 10(20) Keep Well Agreement dated as of September 15, 1995 by the Company and Primadonna Resorts, Inc. 10(21) Agreement for Purchase of Shares between MGM Grand Australia PTY LTD ("MGM Grand Australia"), the Company and the Vendors (as defined therein) dated as of June 30, 1995. 10(22) Loan Agreement between MGM Grand Australia and the Banks named therein dated September 6, 1995. 10(23) MGM Grand, Inc. Continuing Guaranty dated as of September 1, 1995. 10(24) Option Deed dated as of June 30, 1995 between the Shareholders named therein, the Company and the persons named therein. 10(25) Promotion and Ancillary Rights Agreement, dated as of March 15, 1995, as amended, by and among DON KING PRODUCTIONS, INC., MGM GRAND HOTEL, INC. and the Company. 10(26) Letter Agreement dated April 13, 1995 between the Company and J. Terrence Lanni. 13* The Company's 1995 Annual Report to Stockholders. 21 List of Subsidiaries. 23 Consent of Independent Public Accountants 27 Financial Data Schedule
- -------- * 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. 19 EX-10.12 2 LETTER AGREEMENT DATED JULY 13, 1995 [LOGO OF MGM GRAND, INC. APPEARS HERE] EXHIBIT 10(12) ================================================================================ July 13, 1995 Mr. Robert R. Maxey 3799 Las Vegas Blvd. So. Las Vegas, Nevada 89109 Dear Bob: When countersigned by you in the space provided below, this letter represents our agreement with respect to your separation from MGM Grand, Inc. In this letter, the term "Company" means MGM Grand, Inc., its subsidiaries and affiliates, and those companies as to which it is a joint venturer. 1. Resignation. Effective today, you hereby resign from all offices, ----------- directorships and any other positions you hold in the Company. 2. Salary Continuation. We agree that you shall be treated as an employee of ------------------- the Company for a period of up to one year from the date appearing above. Subject to paragraph 3 below, your current salary and those medical benefits provided to senior officers of MGM Grand, Inc. will be continued for that period. Your stock options will continue to vest for the seven months ending February 15, 1996. On February 15, 1996 all unvested stock options will be cancelled and all vested stock options will remain exercisable until October 15, 1996. You will not accrue or be eligible for any bonuses, vacation benefits or other benefits not specifically set forth herein, and this salary continuation is intended to compensate you for any and all other compensation or benefits to which you may have otherwise been entitled. Notwithstanding the above, you will -------- be entitled to receive the compensation payable to you on February 1, 1996 - -------------------------------------------------------------------------- pursuant to the incentive bonus arrangement contained in the letter to you dated February 9, 1993. In the event you obtain other employment as a full time employee, director or otherwise, you agree that the aggregate amount of your salary will be reduced by the amount of compensation received by you in those new positions. Your medical coverage will continue only until it is replaced by the medical plan provided in connection with any full time employment you may obtain, but in no event longer than the employment term hereof, and coverage you elect to obtain (at your own expense) under COBRA. 3. During the term of your salary continuation, you agree that you will not conduct yourself in any manner that adversely affects the Company or its affiliates. In the event you do so, all benefits, including your stock option vesting rights will terminate on notice to you that Mr. Robert Maxey July 12, 1995 Page - 2 such a determination has been made. You will be treated as a terminated employee as of that date for all purposes, including your stock options and obtaining medical benefits under COBRA. 4. You agree to maintain as confidential the terms of this agreement, as well as any other non-public information obtained by you during the course of our employment as an officer and director. You further agree to cooperate fully to the extent required in the event of any litigation, investigation or other proceeding where your assistance is requested by the Company. 5. In consideration for this salary continuation and your continuation as an employee for purposes of the stock option plan, you hereby release any and all claims you may have against the Company arising out of or in connection with your employment to date, including but not limited to, claims arising under federal, state, or local laws prohibiting employment discrimination of any kind, retaliatory or wrongful discharge, and the Age Discrimination in Employment Act, 29 U.S.C. (S)621 et. seq.. You acknowledge that you were given an opportunity to --- ---- consult with an attorney concerning the terms of this agreement. You also acknowledge that you were given a period of twenty-one (21) days within which to consider this agreement and have been notified that you have seven (7) days following the execution of this agreement within which to revoke the agreement. This release is intended to be a general release of any and all claims. If the foregoing is acceptable to you, please execute this letter agreement in the space provided below. Sincerely yours, /s/ K. Eugene Shutler - ------------------------- K. Eugene Shutler Executive Vice President and General Counsel Agreed and Accepted: /s/ Robert R. Maxey - ------------------------- Robert R. Maxey EX-10.13 3 LETTER AGREEMENT DATED OCTOBER 3, 1995 [LOGO OF MGM GRAND, INC APPEARS HERE] EXHIBIT 10(13) ================================================================================ October 3, 1995 K. Eugene Shutler Executive Vice President and General Counsel MGM Grand, Inc. 3799 Las Vegas Blvd. S. Las Vegas, NV 89109 Dear Gene: When countersigned by you in the space provided below, this letter represents our agreement with respect to your separation from MGM Grand, Inc. In this letter, the term "Company" means MGM Grand, Inc., its subsidiaries and affiliates, and those companies as to which it is a joint venturer. 1. Resignation. You have separately provided MGM Grand, Inc. with thirty days' ----------- notice of your resignation from all offices, directorships and any other positions you hold in the Company, and have tendered such resignations effective November 1, 1995. 2. Salary Continuation. We agree that you shall continue as an employee of the ------------------- Company for a period of six months from the effective date of your resignation. Accordingly, your employment will continue until May 1, 1996, and you agree to make yourself available for consultation during the period between November 1, 1995 and May 1, 1996. Subject to paragraph 3 below, your current salary and those medical insurance benefits provided to senior officers of MGM Grand, Inc. will be continued for that period. Your stock options will continue to vest until February 1, 1996 after which time, all unvested stock options will be cancelled. All vested stock options will remain exercisable until August 1, 1996. You will be entitled on February 1, 1996 to receive your incentive bonus from MGM Grand, Inc. pursuant to the letter agreement with you dated February 26, 1993. You will not accrue or be eligible for any other bonuses, vacation benefits (other than those already accrued and accruing to November 1, 1995) or other benefits not specifically set forth herein. This salary continuation, medical and insurance benefits, incentive bonus payment and option vesting are intended to compensate you for any all other compensation or benefits to which you may have otherwise been entitled. K. Eugene Shutler October 3, 1995 Page - 2 In the event you obtain other employment as a full time employee, director or otherwise, it is agreed the aggregate amount of your salary and bonus will not be reduced by the amount of compensation received by you in those new positions. Your medical coverage will continue only until it is replaced by the medical plan provided in connection with any full time employment you may obtain, but in no event longer than the employment term hereof, and coverage you elect to obtain (at your own expense) under COBRA. 3. During the term of your salary continuation, you agree that you will not conduct yourself in any manner that adversely affects the Company or its affiliates. In the event you do so, all benefits, including your stock option vesting rights will terminate on notice to you that such a determination has been made. In that event, you will be treated as a terminated employee as of that date for all purposes, including your stock options and obtaining medical benefits under COBRA. 4. You agree to maintain as confidential the terms of this agreement, as well as any other non-public information obtained by you during the course of our employment as an officer and director except as required by law or required by licensing agencies of gaming jurisdictions. You further agree to cooperate fully to the extent required in the event of any litigation, investigation or other proceeding where your assistance is requested by the Company. 5. In consideration for this salary continuation and your continuation as an employee for purposes of the stock option and incentive bonus plans, you hereby release any and all claims you may have against the Company arising out of or in connection with your employment to date, including but not limited to, claims arising under federal, state, or local laws prohibiting employment discrimination of any kind, retaliatory or wrongful discharge, and the Age Discrimination in Employment Act, 29 U.S.C. (S)621 et. seq.. You acknowledge --- ---- that you were given an opportunity to consult with an attorney concerning the terms of this agreement. You also acknowledge that you were given a period of twenty-one (21) days within which to consider this agreement and have been notified that you have seven (7) days following the execution of this agreement within which to revoke this agreement. This release is intended to be a general release of any and all claims. We accept your decision to resign with great regret, and thank you for your loyal and valuable service to MGM Grand for nearly five years. K. Eugene Shutler October 3, 1995 Page - 3 If the foregoing is acceptable to you, please execute this letter agreement in the space provided below. Sincerely yours, /s/ J. Terrence Lanni J. Terrence Lanni Chairman & Chief Executive Officer Agreed and Accepted: /s/ K. Eugene Shutler - ----------------------------------- K. Eugene Shutler Dated: Oct. 4, 1995 ----------------------------- EX-10.18 4 CONSTRUCTION/REVOLVING LOAN AGREEMENT EXHIBIT 10(18) CONSTRUCTION/REVOLVING LOAN AGREEMENT Dated as of September 15, 1995 among NEW YORK-NEW YORK HOTEL, LLC THE BANKS HEREIN NAMED BANK OF SCOTLAND and SOCIETE GENERALE, as Lead Managers FIRST INTERSTATE BANK OF NEVADA, as Co-Agent and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Managing Agent TABLE OF CONTENTS ----------------- Page Article 1 DEFINITIONS AND ACCOUNTING TERMS............... 1 1.1 Defined Terms.................................. 1 1.2 Use of Defined Terms........................... 36 1.3 Accounting Terms............................... 36 1.4 Rounding....................................... 37 1.5 Exhibits and Schedules......................... 37 1.6 References to "Borrower and its Subsidiaries".. 37 1.7 Miscellaneous Terms............................ 37 Article 2 LOANS AND LETTERS OF CREDIT.................... 38 2.1 Loans-General.................................. 38 2.2 Alternate Base Rate Loans...................... 39 2.3 Eurodollar Rate Loans.......................... 39 2.4 Letters of Credit.............................. 40 2.5 Voluntary Reduction of Commitment.............. 44 2.6 Contingent Reduction of Commitment............. 44 2.7 Automatic Reduction of Commitment.............. 45 2.8 Scheduled Reduction of Commitment.............. 45 2.9 Optional Termination of Commitment............. 45 2.10 Managing Agent's Right to Assume Funds Available for Advances......................... 45 2.11 Swing Line..................................... 46 2.12 Collateral and Guaranty........................ 48 2.13 Senior Indebtedness............................ 48 Article 3 PAYMENTS AND FEES.............................. 49 3.1 Principal and Interest......................... 49 3.2 Arrangement Fee................................ 50 3.3 Upfront Fees................................... 50 3.4 Commitment Fees................................ 51 3.5 Letter of Credit Fees.......................... 51 3.6 Agency Fees.................................... 51 3.7 Increased Commitment Costs..................... 52 3.8 Eurodollar Costs and Related Matters........... 52 3.9 Late Payments.................................. 57 3.10 Computation of Interest and Fees............... 57 3.11 Non-Banking Days............................... 58 3.12 Manner and Treatment of Payments............... 58 3.13 Funding Sources................................ 59 3.14 Failure to Charge Not Subsequent Waiver........ 60 3.15 Managing Agent's Right to Assume Payments Will be Made by Borrower............................ 60 3.16 Fee Determination Detail....................... 60 3.17 Survivability.................................. 60 -i- Article 4 REPRESENTATIONS AND WARRANTIES................. 61 4.1 Existence and Qualification; Power; Compliance With Laws...................................... 61 4.2 Authority; Compliance With Other Agreements and Instruments and Government Regulations..... 61 4.3 No Governmental Approvals Required............. 62 4.4 Subsidiaries................................... 62 4.5 Financial Statements........................... 63 4.6 No Other Liabilities; No Material Adverse Changes........................................ 64 4.7 Title to Property.............................. 64 4.8 Intangible Assets.............................. 64 4.9 Public Utility Holding Company Act............. 64 4.10 Litigation..................................... 64 4.11 Binding Obligations............................ 65 4.12 No Default..................................... 65 4.13 ERISA.......................................... 65 4.14 Regulations G, T, U and X; Investment Company Act............................................ 65 4.15 Disclosure..................................... 66 4.16 Tax Liability.................................. 66 4.17 Projections.................................... 66 4.18 Hazardous Materials............................ 66 4.19 Security Interests............................. 67 Article 5 AFFIRMATIVE COVENANTS (OTHER THAN INFORMATION AND REPORTING REQUIREMENTS).................... 68 5.1 Payment of Taxes and Other Potential Liens..... 68 5.2 Preservation of Existence...................... 68 5.3 Maintenance of Properties...................... 68 5.4 Maintenance of Insurance....................... 69 5.5 Compliance With Laws........................... 69 5.6 Inspection Rights.............................. 69 5.7 Keeping of Records and Books of Account........ 69 5.8 Compliance With Agreements..................... 69 5.9 Use of Proceeds................................ 70 5.10 New Subsidiaries............................... 70 5.11 Hazardous Materials Laws....................... 70 5.12 Change of Name................................. 70 5.13 Gaming Licenses................................ 70 5.14 Prepayment of Equipment Lease.................. 71 Article 6 NEGATIVE COVENANTS............................. 72 6.1 Payment of Subordinated Obligations............ 72 6.2 Disposition of Property........................ 72 6.3 Mergers........................................ 72 6.4 Hostile Acquisitions........................... 72 6.5 Distributions.................................. 72 6.6 ERISA.......................................... 73 -ii- 6.7 Change in Nature of Business................... 73 6.8 Liens and Negative Pledges..................... 73 6.9 Indebtedness and Guaranty Obligations.......... 74 6.10 Transactions with Affiliates................... 74 6.11 Leverage Ratio................................. 75 6.12 Fixed Charge Coverage Ratio.................... 75 6.13 Capital Expenditures........................... 75 6.14 Investments.................................... 76 6.15 Subsidiary Indebtedness........................ 76 6.16 Amendments to Operating Agreement.............. 76 Article 7 CONSTRUCTION PERIOD COVENANTS.................. 78 7.1 Construction of Project........................ 78 7.2 Amendments to Plans and Budgets................ 78 7.3 Timetable...................................... 78 7.4 Construction Requirements...................... 78 7.5 Construction Services Group.................... 78 7.6 Notice of Changes.............................. 78 7.7 Construction Progress Reports.................. 78 7.8 Construction Information....................... 79 7.9 Construction, Permits, Licenses and Approvals.. 79 7.10 Purchase of Materials.......................... 79 7.11 Purchase of Offsite Materials.................. 79 7.12 Site Visits.................................... 79 7.13 Protection Against Lien Claims................. 79 7.14 Completion Certificates........................ 80 7.15 Completion Survey.............................. 80 Article 8 INFORMATION AND REPORTING REQUIREMENTS......... 81 8.1 Financial and Business Information............. 81 8.2 Compliance Certificates........................ 85 Article 9 CONDITIONS..................................... 86 9.1 Initial Advances, Etc.......................... 86 9.2 Advances During Construction Period............ 90 9.3 Any Advance.................................... 90 Article 10 EVENTS OF DEFAULT AND REMEDIES UPON EVENT OF DEFAULT........................................ 92 10.1 Events of Default.............................. 92 10.2 Remedies Upon Event of Default................. 95 Article 11 THE MANAGING AGENT............................. 99 11.1 Appointment and Authorization.................. 99 11.2 Managing Agent and Affiliates.................. 99 11.3 Proportionate Interest in any Collateral....... 99 11.4 Banks' Credit Decisions........................ 100 11.5 Action by Managing Agent....................... 100 -iii- 11.6 Liability of Managing Agent.................... 101 11.7 Indemnification................................ 102 11.8 Successor Managing Agent....................... 103 11.9 Foreclosure on Collateral...................... 104 11.10 No Obligations of Borrower..................... 104 Article 12 MISCELLANEOUS.................................. 105 12.1 Cumulative Remedies; No Waiver................. 105 12.2 Amendments; Consents........................... 105 12.3 Costs, Expenses and Taxes...................... 106 12.4 Nature of Banks' Obligations................... 107 12.5 Survival of Representations and Warranties..... 108 12.6 Notices........................................ 108 12.7 Execution of Loan Documents.................... 108 12.8 Binding Effect; Assignment..................... 109 12.9 Right of Setoff................................ 112 12.10 Sharing of Setoffs............................. 112 12.11 Indemnity by Borrower.......................... 113 12.12 Nonliability of the Banks...................... 114 12.13 No Third Parties Benefited..................... 115 12.14 Confidentiality................................ 115 12.15 Further Assurances............................. 116 12.16 Integration.................................... 116 12.17 Governing Law.................................. 116 12.18 Severability of Provisions..................... 116 12.19 Headings....................................... 117 12.20 Time of the Essence............................ 117 12.21 Foreign Banks and Participants................. 117 12.22 Hazardous Material Indemnity................... 118 12.23 Gaming Boards.................................. 119 12.24 Release of Certain Liens....................... 119 12.25 Other Lien Releases............................ 119 12.26 Termination; Release of Liens.................. 119 12.27 Removal of a Bank.............................. 120 12.28 Waiver of Right to Trial by Jury............... 120 12.29 Purported Oral Amendments...................... 121 Exhibits - -------- A - Architect's Certificate and Consent B - Collateral Assignment C - Commitment Assignment and Acceptance D - Completion Guaranty E - Compliance Certificate F - Contractor's Certificate and Consent G - Deed of Trust H - Engineer's Certificate and Consent I - Equipment Lease Letter J - Keep-Well Agreement K - Note L-1 - Opinion of Counsel L-2 Opinion of Counsel -iv- M - Pledge Agreement N - Pricing Certificate O - Qualified Member Subordinated Debt P - Request for Letter of Credit Q - Request for Loan R - Security Agreement S - Subsidiary Guaranty T - Trademark Collateral Assignment Schedules - --------- 1.1 Bank Commitments 4.3 Governmental Approvals 4.4 Subsidiaries 4.7 Existing Liens, Negative Pledges and Rights of Others 4.8 Trademarks and Trade Names 4.10 Material Litigation 4.18 Environmental Matters 6.9 Existing Indebtedness 6.14 Existing Investments -v- CONSTRUCTION/REVOLVING LOAN AGREEMENT ------------------------------------- Dated as of September 15, 1995 This CONSTRUCTION/REVOLVING LOAN AGREEMENT ("Agreement") is entered into by and among New York-New York Hotel, LLC, a Nevada limited liability company ("Borrower"), each bank whose name is set forth on the signature pages of this Agreement and each lender which may hereafter become a party to this Agreement pursuant to Section 11.8 (collectively, the "Banks" and individually, ---- a "Bank"), Bank of Scotland and Societe Generale, as Lead Managers, First Interstate Bank of Nevada, as Co-Agent, and Bank of America National Trust and Savings Association, as Managing Agent. In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows: DEFINITIONS AND ACCOUNTING TERMS -------------------------------- 1.1 Defined Terms. As used in this Agreement, the following terms ------------- shall have the meanings set forth below: "Adjusted Annualized Borrower EBITDA" means, with respect to any ----------------------------------- fiscal period, Annualized Borrower EBITDA for that fiscal period plus (a) ---- any Pre-Opening Expenses charged against the Net Income of Borrower during that fiscal period plus (b) the Deemed EBITDA portion, if any, of any Cash ---- Equity Contributions made to Borrower during that fiscal period. "Advance" means any advance made or to be made by any Bank to Borrower ------- as provided in Article 2, and includes each Alternate Base Rate Advance and --------- -------- Eurodollar Rate Advance. "Affiliate" means, as to any Person, any other Person which directly --------- or indirectly controls, or is under common control with, or is controlled by, such Person. As used in this definition, "control" (and the correlative terms, "controlled by" and "under common control with") shall mean possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise); provided that, in any event, any Person that owns, directly or -------- indirectly, 10% or more of the securities having ordinary voting power for the election of directors -vi- or other governing body of a corporation that has more than 100 record holders of such securities, or 10% or more of the partnership or other ownership interests of any other Person that has more than 100 record holders of such interests, will be presumed (subject to rebuttal by a preponderance of the evidence) to control such corporation, partnership or other Person. "Aggregate Effective Amount" means, as of any date of determination -------------------------- and with respect to all Letters of Credit then outstanding, the sum of (a) --- the aggregate effective face amounts of all such Letters of Credit not then paid by the Issuing Bank plus (b) the aggregate amounts paid by the Issuing ---- Bank under such Letters of Credit not then reimbursed to the Issuing Bank by Borrower pursuant to Section 2.4(d) and not the subject of Advances made ------ pursuant to Section 2.4(e). ------ "Agreement" means this Construction/Revolving Loan Agreement, either --------- as originally executed or as it may from time to time be supplemented, modified, amended, restated or extended. "Alternate Base Rate" means, as of any date of determination, the rate ------------------- per annum (rounded upwards, if necessary, to the next 1/100 of 1%) equal to the higher of (a) the Reference Rate in effect on such date and (b) the --------- Federal Funds Rate in effect on such date plus 1/2 of 1% (50 basis points). "Alternate Base Rate Advance" means an Advance made hereunder and --------------------------- specified to be an Alternate Base Rate Advance in accordance with Article ------- 2. - "Alternate Base Rate Loan" means a Loan made hereunder and specified ------------------------ to be an Alternate Base Rate Loan in accordance with Article 2. --------- "Annualized Borrower EBITDA" means, as of the last day of each Fiscal -------------------------- Quarter, Borrower EBITDA for the fiscal period consisting of that Fiscal Quarter and the three immediately preceding Fiscal Quarters, adjusted, with -------- respect to any such fiscal period in which the Project is open for business for at least one (1) full Fiscal Quarter but less than four (4) full Fiscal Quarters, by such amount as is necessary to reflect the annualization of Borrower EBITDA using the following conventions: (i) if the Project has been open for business for less than one (1) full Fiscal Quarter, no annualization adjustment shall be made, (ii) if the Project has been open for business for one (1) full Fiscal Quarter, Borrower EBITDA for that Fiscal Quarter shall be multiplied by four, (iii) if the Project has been open for business two (2) -2- full Fiscal Quarters, Borrower EBITDA for those Fiscal Quarters shall be multiplied by two and (iv) if the Project has been open for business for three (3) full Fiscal Quarters, Borrower EBITDA for those Fiscal Quarters shall be multiplied by four thirds (4/3). "Annualized Guarantor EBITDA" means, as of the last day of each Fiscal --------------------------- Quarter and with respect to a Guarantor, Guarantor EBITDA of that Guarantor for the fiscal period consisting of that Fiscal Quarter and the three immediately preceding Fiscal Quarters, adjusted (a) in the case of MGM -------- Grand, Inc., if it or any of its Subsidiaries has a new hotel-casino project which has then been open for business less than four (4) full Fiscal Quarters, by an annualization adjustment with respect to the portion of Guarantor EBITDA attributable thereto using the annualization conventions set forth in the definition of "Annualized Borrower EBITDA" and (b) in the case of Primadonna Resorts, Inc., if it or any of its Subsidiaries has a new hotel-casino project which has then been open for business less than four (4) full Fiscal Quarters, by an annualization adjustment with respect to the portion of Guarantor EBITDA attributable thereto using the annualization conventions set forth in the definition of "Annualized EBITDA" contained in that certain Amended and Restated Reducing Revolving Credit Agreement dated as of July 17, 1995 among Primadonna Resorts, Inc., certain of its Subsidiaries, First Interstate Bank of Nevada, N.A., as Agent, and the lenders party thereto, as the same is in effect on the date of this Agreement. "Applicable Alternate Base Rate Margin" means, for each Pricing ------------------------------------- Period, the interest rate margin set forth below (expressed in basis points per annum) opposite the Applicable Pricing Level for that Pricing Period: Applicable Pricing Level Margin ------------------ ------ I 0 II 25.00 III 50.00 IV 100.00 "Applicable Commitment Fee Rate" means, for each Pricing Period, the ------------------------------ rate set forth below (expressed in basis points per annum) opposite the Applicable Pricing Level for that Pricing Period: -3- Applicable Pricing Level Commitment Fee ------------- -------------- I 31.25 II 37.50 III 37.50 IV 50.00 "Applicable Eurodollar Rate Margin" means, for each Pricing Period, --------------------------------- the interest rate margin set forth below (expressed in basis points per annum) opposite the Applicable Pricing Level for that Pricing Period: Applicable Pricing Level Margin ------------- ------ I 75.00 II 125.00 III 150.00 IV 200.00 "Applicable Pricing Level" means (a) for the Pricing Period from the ------------------------ Closing Date through November 15, 1995, Pricing Level III and (b) for each Pricing Period thereafter, the pricing level set forth below opposite the Guarantor Funded Debt Ratio as of the last day of the Fiscal Quarter most recently ended prior to the commencement of that Pricing Period: Guarantor Funded Pricing Level Debt Ratio ------------- ---------------- I Less than 1.50 to 1.00 II Equal to or greater than 1.50 to 1.00 but less than 2.25 to 1.00 III Equal to or greater than 2.25 to 1.00 but less than 3.00 to 1.00 IV Equal to or greater than 3.00 to 1.00; provided that in the event that Borrower does not deliver a Pricing -------- Certificate pursuant to Section 8.1(d) with respect to any Pricing Period ------ prior to the commencement of such Pricing Period, then until (but only until) such Pricing Certificate so is delivered the Applicable Pricing Level for that Pricing Period shall be Pricing Level IV. -4- "Applicable Standby Letter of Credit Fee" means, for each Pricing --------------------------------------- Period, the per annum rate set forth as the interest rate margin in the definition of "Applicable Eurodollar Rate Margin" opposite the Applicable Pricing Level for that Pricing Period. "Architect" means F. Neal Gaskin & Ilia M. Bezanski Architecture and --------- Engineering Co., or any other architect selected by Borrower and approved by the Managing Agent (which approval shall not be unreasonably withheld). "Architect's Certificate and Consent" means a written certificate and ----------------------------------- consent executed by the Architect substantially in the form of Exhibit A. --------- "Architect Contracts" means the contract between the Architect and ------------------- Borrower dated as of February 14, 1995, and any other contract between the Architect and Borrower approved by the Managing Agent relating to the design and construction of the Project and the preparation of the Construction Plans, together with all amendments thereto. "Arranger" means BA Securities, Inc. -------- "Available Cash Flow" means, as of the last day of any fiscal period, ------------------- Borrower EBITDA for the fiscal period ending on such date minus the sum of ----- ------ (a) Interest Charges of Borrower for that fiscal period, plus (b) the ---- aggregate Capital Expenditures made by Borrower during that fiscal period, plus (c) the aggregate of all Member Tax Distributions made during that ---- fiscal period, plus (d) the aggregate of (i) all principal payments on the ---- Notes during that fiscal period required by Section 3.1(d)(i) and (ii) all --------- voluntary principal prepayments on the Notes to the extent that such prepayment reduced or eliminated the amount of any subsequent principal payment on the Notes which would otherwise be required by Section 3.1(d)(i) --------- during that fiscal period plus (e) the aggregate of any other scheduled ---- payments or mandatory prepayments of Funded Debt of Borrower during that fiscal period. "Average Quarterly Funded Debt" means, as of the last day of each ----------------------------- Fiscal Quarter and with respect to any Person, the average of the principal amounts of all Funded Debt of that Person outstanding on the last day of each of the three calendar months comprising such Fiscal Quarter. "Bank" means each bank whose name is set forth in the signature pages ---- of this Agreement and each lender which may hereafter become a party to this Agreement pursuant to Section 12.8. ---- -5- "Banking Day" means any Monday, Tuesday, Wednesday, Thursday or ----------- Friday, other than a day on which banks are authorized or required to be ---------- closed in California, Nevada or New York. "Bank Disqualification" means, with respect to any Bank,: --------------------- (a) the failure of that Bank timely to file pursuant to applicable Gaming Laws (i) any application requested of the Bank by any Gaming Board in connection with any licensing required of that Bank as a lender to Borrower or (ii) any required application or other papers in connection with determination of the suitability of the Bank as a lender to Borrower; (b) the withdrawal by that Bank (except where requested or ------ permitted by the Gaming Board) of any such application or other required papers; or (c) any final determination by a Gaming Board pursuant to applicable Gaming Laws (i) that the Bank is "unsuitable" as a lender to Borrower, (ii) that the Bank shall be "disqualified" as a lender to Borrower or (iii) denying the issuance to the Bank of any license required under applicable Gaming Laws to be held by all lenders to Borrower. "Banks' Percentage" means the percentage, measured as of the ----------------- Completion Date, that (a) the sum of (i) the aggregate principal amount --- outstanding under the Notes, plus (ii) the Aggregate Effective Amount of ---- all outstanding Letters of Credit plus (iii) the Swing Line Outstandings is ---- of (b) the sum of (i) the amount calculated under clause (a) above plus --- - ---- (ii) the aggregate cost of the Leased Equipment covered by the Equipment Lease. "Borrower" has the meaning set forth in the introduction to this -------- Agreement; provided that prior to the Completion Date, Borrower intends to -------- change its name to "New York-New York Hotel & Casino, LLC." "Borrower EBITDA" means, for any fiscal period, the EBITDA of Borrower --------------- for that fiscal period. "Bridge Notes" means (a) the $5,000,000 demand promissory note dated ------------ August 11, 1995 made by Borrower in favor of MGM Grand, Inc., (b) the $5,000,000 demand promissory note dated August 14, 1995 made by Borrower in favor of Primadonna Resorts, Inc. and (c) any other promissory note or other evidence of Indebtedness owed by -6- Borrower to either Guarantor or any of their Affiliates incurred prior to the Closing Date. "Capital Expenditure" means any expenditure for or related to fixed ------------------- assets or purchased intangibles that is treated as a capital expenditure under Generally Accepted Accounting Principles, including any amount which --------- is required to be treated as an asset subject to a Capital Lease Obligation. "Capital Lease Obligations" means all monetary obligations of a Person ------------------------- under any leasing or similar arrangement which, in accordance with Generally Accepted Accounting Principles, is classified as a capital lease. "Cash" means, when used in connection with any Person, all monetary ---- and non-monetary items owned by that Person that are treated as cash in accordance with Generally Accepted Accounting Principles, consistently applied. "Cash Equity Contributions" means contributions made by Guarantors or ------------------------- either of them to the equity capital of Borrower that (a) are made in the form of Cash or Cash Equivalents, (b) do not bear any specified or determinable dividend rate and (c) are not redeemable prior to the Maturity Date in an amount in excess of the then Distribution Basket Availability. "Cash Equivalents" means, when used in connection with any Person, ---------------- that Person's Investments in: (b) Government Securities due within one year after the date of the making of the Investment; (c) readily marketable direct obligations of any State of the United States of America or any political subdivision of any such State or any public agency or instrumentality thereof given on the date of such Investment a credit rating of at least Aa by Moody's Investors Service, Inc. or AA by Standard & Poor's Rating Group (a division of McGraw-Hill, Inc.) in each case due within one year from the making of the Investment; (d) certificates of deposit issued by, bank deposits in, eurodollar deposits through, bankers' acceptances of, and repurchase agreements covering Government Securities executed by any Bank or by any bank incorporated under the Laws of the United States of America, any State thereof or the District of Columbia and having on the date of such Investment combined capital, surplus and undivided profits of at least $250,000,000, or total assets of at least -7- $5,000,000,000, in each case due within one year after the date of the making of the Investment; (e) certificates of deposit issued by, bank deposits in, eurodollar deposits through, bankers' acceptances of, and repurchase agreements covering Government Securities executed by any branch or office located in the United States of America of a bank incorporated under the Laws of any jurisdiction outside the United States of America having on the date of such Investment combined capital, surplus and undivided profits of at least $500,000,000, or total assets of at least $15,000,000,000, in each case due within one year after the date of the making of the Investment; (f) repurchase agreements covering Government Securities executed by a broker or dealer registered under Section 15(b) of the Securities Exchange Act of 1934, as amended, having on the date of the Investment capital of at least $50,000,000, due within 90 days after the date of the making of the Investment; provided that the maker of the -------- Investment receives written confirmation of the transfer to it of record ownership of the Government Securities on the books of a "primary dealer" in such Government Securities or on the books of such registered broker or dealer, as soon as practicable after the making of the Investment; (g) readily marketable commercial paper or other debt securities issued by corporations doing business in and incorporated under the Laws of the United States of America or any State thereof or of any corporation that is the holding company for a bank described in clause (c) or (d) above given on the date of such Investment a credit rating - - of at least P-1 by Moody's Investors Service, Inc. or A-1 by Standard & Poor's Rating Group (a division of McGraw-Hill, Inc.), in each case due within one year after the date of the making of the Investment; (h) "money market preferred stock" issued by a corporation incorporated under the Laws of the United States of America or any State thereof (i) given on the date of such Investment a credit rating of at least Aa by Moody's Investors Service, Inc. and AA by Standard & Poor's Rating Group (a division of McGraw-Hill, Inc.), in each case having an investment period not exceeding 50 days or (ii) to the extent that investors therein have the benefit of a standby letter of credit issued by a Bank or a bank described in clauses (c) or (d) - - above; -8- (i) a readily redeemable "money market mutual fund" sponsored by a bank described in clause (c) or (d) hereof, or a registered broker - - or dealer described in clause (e) hereof, that has and maintains an - investment policy limiting its investments primarily to instruments of the types described in clauses (a) through (g) hereof and given on the - - date of such Investment a credit rating of at least Aa by Moody's Investors Service, Inc. and AA by Standard & Poor's Rating Group (a division of McGraw-Hill, Inc.); and (j) corporate notes or bonds having an original term to maturity of not more than one year issued by a corporation incorporated under the Laws of the United States of America or any State thereof, or a participation interest therein; provided that any commercial paper -------- issued by such corporation is given on the date of such Investment a credit rating of at least Aa by Moody's Investors Service, Inc. and AA by Standard & Poor's Rating Group (a division of McGraw-Hill, Inc.). "Cash Interest Expense" means Interest Expense that is paid or --------------------- currently payable in Cash. "Certificate of a Responsible Official" means a certificate signed by ------------------------------------- a Responsible Official of the Person providing the certificate. "Change of Ownership" means (a) any transfer of any equity ownership ------------------- interest in Borrower (or the issuance by Borrower of any equity ownership interest in Borrower) to any Person other than (i) a Member, (ii) a Person ---------- that is the sole shareholder of a Member, (iii) a wholly-owned Subsidiary of a Member, (iv) a Person that does not, pursuant to the Operating Agreement, hold any management rights with respect to Borrower or (v) a Person approved in writing by the Requisite Banks or (b) any transaction pursuant to which either Guarantor (or a sole shareholder of that Guarantor) ceases to hold directly, or indirectly through one or more wholly-owned Subsidiaries of that Guarantor, 100% of the equity ownership interest in Borrower owned by that Guarantor on the Closing Date, except a ------ transaction which, if it were structured as a direct transfer or issuance of an equity ownership interest in Borrower, would not constitute a "Change of Ownership" under clause (a) above. "Closing Date" means the time and Banking Day on which the conditions ------------ set forth in Section 9.1 are satisfied or waived. The Managing Agent shall --- notify -9- Borrower and the Banks of the date that is the Closing Date. "Co-Agent" means First Interstate Bank of Nevada. The Co-Agent shall -------- have no rights, duties or responsibilities under the Loan Documents beyond those of a Bank. "Code" means the Internal Revenue Code of 1986, as amended or replaced ---- and as in effect from time to time. "Collateral" means all of the collateral covered by the Collateral ---------- Documents. "Collateral Assignment" means the collateral assignment of the --------------------- Architect Contracts, the Engineer Contracts, the Construction Contracts and the Construction Plans to be executed and delivered by Borrower in the form of Exhibit B, either as originally executed or as it may from time to time --------- be supplemented, modified, amended, extended or supplanted. "Collateral Documents" means, collectively, the Security Agreement, -------------------- the Collateral Assignment, the Trademark Collateral Assignment, the Pledge Agreement, the Deed of Trust and any other security agreement, pledge agreement, deed of trust, mortgage or other collateral security agreement hereafter executed and delivered by Borrower, any of its Subsidiaries or any Guarantor to secure the Obligations. "Commercial Letter of Credit" means each Letter of Credit issued to --------------------------- support the purchase of goods by Borrower which is determined to be a commercial letter of credit by the Issuing Bank. "Commitment" means, subject to Sections 2.5, 2.6, 2.7 and 2.8, ---------- --- --- --- --- $225,000,000.00. As of the Closing Date, the respective Pro Rata Shares of the Banks with respect to the Commitment are set forth in Schedule 1.1. ------------ "Commitment Assignment and Acceptance" means a commitment assignment ------------------------------------ and acceptance substantially in the form of Exhibit C. --------- "Completion Date" means the date upon which the Project is open for --------------- business to the general public with (a) at least 95% of the hotel rooms provided for in the Construction Plans ready for occupancy, (b) at least 95% of the square footage of casino space provided for in the Construction Plans ready for gaming and (c) substantially all other amenities of the Project substantially complete. -10- "Completion Guaranty" means the completion guaranty to be executed and ------------------- delivered by the Guarantors in the form of Exhibit D, either as originally --------- executed or as it may from time to time be supplemented, modified, amended, extended or supplanted. "Compliance Certificate" means a certificate in the form of Exhibit E, ---------------------- --------- properly completed and signed by a Senior Officer of Borrower. "Construction Budget" means the itemized schedule setting forth on a ------------------- line item basis all of the costs (including financing expenses and Pre- --------- Opening Expenses) delivered by Borrower to the Managing Agent on the Closing Date setting forth, to the reasonable satisfaction of the Managing Agent and Banks, the anticipated cost of construction of the Project. "Construction Contracts" means that certain Building Contract dated ---------------------- March 31, 1995 between Borrower and the Contractor and any other contract between the Contractor and Borrower approved by the Managing Agent relating to the construction of the Project, together with all amendments thereto. "Construction Period" means the period commencing on the Closing Date ------------------- and ending on the Completion Date. "Construction Plans" means all drawings, plans and specifications ------------------ prepared by or for the Guarantors or Borrower, as the same may be amended or supplemented from time to time, and, if required, submitted to and approved by the Clark County Building Department, all of which plans and specifications describe and set forth the plans and specifications for the construction of the Project and the labor and materials necessary for the construction thereof. "Construction Timetable" means the detailed timetable for the ---------------------- construction of the Project in accordance with the Construction Plans and Construction Budget. "Contractor" means Marnell Corrao Associates, Inc., and/or any other ---------- general contractor selected by Borrower and approved by the Managing Agent (which approval shall not be unreasonably withheld). "Contractor's Certificate and Consent" means a written certificate and ------------------------------------ consent executed by the Contractor substantially in the form of Exhibit F. --------- "Contractual Obligation" means, as to any Person, any provision of any ---------------------- outstanding security issued by that -11- Person or of any material agreement, instrument or under taking to which that Person is a party or by which it or any of its Property is bound. "CSG" means Bank of America Construction Services Group. --- "Debtor Relief Laws" means the Bankruptcy Code of the United States of ------------------ America, as amended from time to time, and all other applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws from time to time in effect affecting the rights of creditors generally. "Deed of Trust" means the deed of trust to be executed and delivered ------------- by Borrower covering the Project Property, in the form of Exhibit G, either --------- as originally executed or as it may from time to time be supplemented, modified, amended, extended or supplanted. "Deemed EBITDA" means that portion, if any, of Cash Equity ------------- Contributions made pursuant to the Keep-Well Agreement that is attributable to the amount added to the denominator of the Leverage Ratio pursuant to Section 2(a) of the Keep-Well Agreement or the amount added to the numerator of the Fixed Charge Coverage Ratio pursuant to Section 2(b) of the Keep-Well Agreement, whichever is applicable. "Default" means any event that, with the giving of any applicable ------- notice or passage of time specified in Section 10.1, or both, would be an ---- Event of Default. "Default Rate" means the interest rate prescribed in Section 3.9. ------------ --- "Designated Deposit Account" means a deposit account to be maintained -------------------------- by Borrower with Bank of America National Trust and Savings Association, as from time to time designated by Borrower by written notification to the Managing Agent. "Designated Eurodollar Market" means, with respect to any Eurodollar ---------------------------- Rate Loan, (a) the London Eurodollar Market, (b) if prime banks in the London Eurodollar Market are at the relevant time not accepting deposits of Dollars or if the Managing Agent determines in good faith that the London Eurodollar Market does not represent at the relevant time the effective pricing to the Banks for deposits of Dollars in the London Eurodollar Market, the Cayman Islands Eurodollar Market or (c) if prime banks in the Cayman Islands Eurodollar Market are at the relevant -12- time not accepting deposits of Dollars or if the Managing Agent determines in good faith that the Cayman Islands Eurodollar Market does not represent at the relevant time the effective pricing to the Banks for deposits of Dollars in the Cayman Islands Eurodollar Market, such other Euro dollar Market as may from time to time be selected by the Managing Agent with the approval of Borrower and the Requisite Banks. "Disposition" means the voluntary sale, transfer or other disposition ----------- of any asset of Borrower or any of its Subsidiaries other than (a) Cash, ----- ---- Cash Equivalents, Investments (other than Investments in a Subsidiary), ----- ---- inventory or other assets sold, leased or otherwise disposed of in the ordinary course of business of Borrower or any of its Subsidiaries, (b) equipment sold or otherwise disposed of where substantially similar equipment in replacement thereof has theretofore been acquired, or thereafter within 90 days is acquired, by Borrower or any of its Subsidiaries, or where Borrower or the Subsidiary determine in good faith that the failure to replace such equipment will not be detrimental in any material respect to the business of Borrower or any of its Subsidiaries and (c) a disposition to Borrower or any of its Subsidiaries. "Distribution" means, with respect to any shares of capital stock or ------------ any warrant or option to purchase an equity security or other equity security issued by a Person, (a) the retirement, redemption, purchase or other acquisition for Cash or for Property by such Person of any such security, (b) the declaration or (without duplication) payment by such Person of any dividend in Cash or in Property on or with respect to any such security, (c) any Investment by such Person in the holder of 5% or more of any such security if a purpose of such Investment is to avoid characterization of the transaction as a Distribution and (d) any other payment in Cash or Property by such Person constituting a distribution under applicable Laws with respect to such security. "Distribution Basket Availability" means, as of any date of -------------------------------- determination, the amount, if any, by which Net Available Cash Flow for the fiscal period commencing on the Completion Date and ending on the last day of the most recently ended Fiscal Quarter exceeds the sum of (a) the ------ aggregate principal repayments made by Borrower on Qualified Member Subordinated Debt (other than Qualified Member Subordinated Debt incurred ---------- prior to the Closing Date) through such date, plus (b) the aggregate ---- redemptions and repurchases made by Borrower of Cash Equity Contributions through such date plus (c) the aggregate Distributions made by Borrower in ---- reliance on Section 6.5(d) through such date. ------ -13- "Dollars" or "$" means United States dollars. ------- - "Domestic Reference Bank" means Bank of America National Trust and ----------------------- Savings Association. "EBITDA" means, with respect to any fiscal period and with respect to ------ any Person, the sum of (a) Net Income of such Person for that period, plus --- -- ---- (b) any extraordinary loss reflected in such Net Income, minus (c) any ----- extraordinary gain reflected in such Net Income, plus (d) Interest Expense ---- of such Person for that period, plus (e) the aggregate amount of federal ---- and state taxes on or measured by income of such Person for that period (whether or not payable during that period) plus (f) depreciation, ---- amortization and all other non-cash expenses for that period, in each case as determined in accordance with Generally Accepted Accounting Principles. "Eligible Assignee" means (a) another Bank, (b) with respect to any ----------------- Bank, any Affiliate of that Bank, (c) any commercial bank having a combined capital and surplus of $100,000,000 or more, (d) any (i) savings bank, savings and loan association or similar financial institution or (ii) insurance company engaged in the business of writing insurance which, in either case (A) has a net worth of $200,000,000 or more, (B) is engaged in the business of lending money and extending credit under credit facilities substantially similar to those extended under this Agreement and (C) is operationally and procedurally able to meet the obligations of a Bank hereunder to the same degree as a commercial bank and (e) any other financial institution (including a mutual fund or other fund) having total --------- assets of $250,000,000 or more which meets the requirements set forth in subclauses (B) and (C) of clause (d) above; provided that (I) each Eligible -------- Assignee must either (a) be organized under the Laws of the United States of America, any State thereof or the District of Columbia or (b) be organized under the Laws of the Cayman Islands or any country which is a member of the Organization for Economic Cooperation and Development, or a political subdivision of such a country, and (i) act hereunder through a branch, agency or funding office located in the United States of America and (ii) be exempt from withholding of tax on interest and deliver the documents related thereto pursuant to Section 12.21 and (II) to the extent ----- required under applicable Gaming Laws, each Eligible Assignee must be registered with, approved by, or not disapproved by (whichever may be required under applicable Gaming Laws), all applicable Gaming Boards. "Engineer" means F. Neal Gaskin & Ilia M. Bezanski Architecture and -------- Engineering Co. or any other engineer -14- selected by Borrower and approved by the Managing Agent (which approval shall not be unreasonably withheld). "Engineer's Certificate and Consent" means a written certificate and ---------------------------------- consent executed by the Engineer substantially in the form of Exhibit H. --------- "Engineer Contracts" means the contract between the Engineer and ------------------ Borrower dated as of February 14, 1995, and any other contract between the Engineer and Borrower approved by the Managing Agent relating to the engineering and construction of the Project and the preparation of the Construction Plans, together with any amendments thereto. "Equipment Lease" means the equipment lease creating a Capital Lease --------------- Obligation to be entered between Borrower and the Equipment Lessors covering the Leased Equipment; provided that (a) such equipment lease does -------- not contain any maintenance-type financial covenants, (b) such equipment lease does not contain any representation, covenant or event of default that is more onerous to Borrower than those contained in this Agreement and (c) a copy of such equipment lease in draft form is furnished to the Managing Agent at least five (5) Banking Days prior to execution thereof and a copy in executed form is furnished to the Banks promptly following execution thereof. "Equipment Lease Arranger" means BankAmerica Leasing & Capital Group. ------------------------ "Equipment Lease Letter" means the letter from Borrower to the ---------------------- Equipment Lease Arranger, acknowledged by the Equipment Lease Arranger substantially in the form of Exhibit I. --------- "Equipment Lessors" means the lessors under the Equipment Lease ----------------- arranged by the Equipment Lease Arranger. "Equipment Lessors' Percentage" means 100% minus the Banks' ----------------------------- ----- Percentage. "ERISA" means the Employee Retirement Income Security Act of 1974, and ----- any regulations issued pursuant thereto, as amended or replaced and as in effect from time to time. "Eurodollar Banking Day" means any Banking Day on which dealings in ---------------------- Dollar deposits are conducted by and among banks in the Designated Eurodollar Market. -15- "Eurodollar Lending Office" means, as to each Bank, its office or ------------------------- branch so designated by written notice to Borrower and the Managing Agent as its Eurodollar Lending Office. If no Eurodollar Lending Office is designated by a Bank, its Eurodollar Lending Office shall be its office at its address for purposes of notices hereunder. "Eurodollar Market" means a regular established market located outside ----------------- the United States of America by and among banks for the solicitation, offer and acceptance of Dollar deposits in such banks. "Eurodollar Obligations" means eurocurrency liabilities, as defined in ---------------------- Regulation D or any comparable regulation of any Governmental Agency having jurisdiction over any Bank. "Eurodollar Period" means, as to each Eurodollar Rate Loan, the period ----------------- commencing on the date specified by Borrower pursuant to Section 2.1(b) and ------ ending 1, 2, 3 or 6 months (or, with the written consent of all of the Banks, any other period) thereafter, as specified by Borrower in the applicable Request for Loan; provided that: -------- (a) The first day of any Eurodollar Period shall be a Eurodollar Banking Day; (b) Any Eurodollar Period that would otherwise end on a day that is not a Eurodollar Banking Day shall be extended to the next succeeding Eurodollar Banking Day unless such Eurodollar Banking Day falls in another calendar month, in which case such Eurodollar Period shall end on the next preceding Eurodollar Banking Day; (c) Borrower may not specify a Eurodollar Period that extends beyond the next Reduction Date unless the sum of (i) the aggregate --- principal amount of the Eurodollar Loans having a Eurodollar Period ending after such Reduction Date plus (ii) the aggregate maximum ---- amount available for drawing under Letters of Credit for which the expiry date is after such Reduction Date, does not exceed the Commitment (after giving effect to any reduction thereto scheduled to be made on such Reduction Date pursuant to Section 2.6); and --- (d) No Eurodollar Period shall extend beyond the Maturity Date. "Eurodollar Rate" means, with respect to any Eurodollar Rate Loan, --------------- the interest rate per annum (rounded -16- upward, if necessary, to the next 1/100 of 1%) at which deposits in Dollars are offered by the Eurodollar Reference Bank to prime banks in the Designated Eurodollar Market at or about 11:00 a.m. local time in the Designated Eurodollar Market, two (2) Eurodollar Banking Days before the first day of the applicable Eurodollar Period in an aggregate amount approximately equal to the amount of the Advance made by the Eurodollar Reference Bank with respect to such Eurodollar Rate Loan and for a period of time comparable to the number of days in the applicable Eurodollar Period. "Eurodollar Rate Advance" means an Advance made hereunder and ----------------------- specified to be a Eurodollar Rate Advance in accordance with Article 2. --------- "Eurodollar Rate Loan" means a Loan made hereunder and specified to be -------------------- a Eurodollar Rate Loan in accordance with Article 2. --------- "Eurodollar Reference Bank" means Bank of America National Trust and ------------------------- Savings Association. "Event of Default" shall have the meaning provided in Section 10.1. ---------------- ---- "Federal Funds Rate" means, as of any date of determination, the rate ------------------ set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the Federal Reserve Board (including any such successor, "H.15(519)") for such date opposite the caption "Federal Funds (Effective)". If for any relevant date such rate is not yet published in H.15(519), the rate for such date will be the rate set forth in the daily statistical release designated as the Composite 3:30 p.m. Quotations for U.S. Government Securities, or any successor publication, published by the Federal Reserve Bank of New York (including any such successor, the "Composite 3:30 p.m. Quotation") for such date under the caption "Federal Funds Effective Rate". If on any relevant date the appropriate rate for such date is not yet published in either H.15(519) or the Composite 3:30 p.m. Quotations, the rate for such date will be the arithmetic mean of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on that date by each of three leading brokers of Federal funds transactions in New York City selected by the Managing Agent. For purposes of this Agreement, any change in the Alternate Base Rate due to a change in the Federal Funds Rate shall be effective as of the opening of business on the effective date of such change. -17- "FIRREA" means the Financial Institutions Reform, Recovery and ------ Enforcement Act of 1989, as it may be amended from time to time. "Fiscal Quarter" means the fiscal quarter of Borrower or the -------------- Guarantors (as applicable) consisting of the three calendar month periods ending on each March 31, June 30, September 30 and December 31. "Fiscal Year" means the fiscal year of Borrower or the Guarantors (as ----------- applicable) ending on each December 31. "Fixed Charge Coverage Ratio" means, as of the last day of any Fiscal --------------------------- Quarter, the ratio of (a) the sum of (i) Adjusted Annualized Borrower ----- -- --- -- EBITDA for the fiscal period consisting of that Fiscal Quarter and the three immediately preceding Fiscal Quarters, minus (ii) the aggregate ----- Capital Expenditures made by Borrower during that fiscal period minus (iii) ----- the aggregate Member Tax Distributions made by Borrower during that fiscal period to (b) the sum of (i) Interest Charges of Borrower for that fiscal -- --- -- period, plus (ii) the aggregate of (A) all principal payments on the Notes ---- made during that fiscal period required by Section 3.1(d)(i) and (B) all --------- voluntary principal prepayments on the Notes made during such fiscal period to the extent that such prepayment reduced or eliminated the amount of a subsequent principal payment on the Notes which would otherwise be required by Section 3.1(d)(i) during that fiscal period plus (iii) the aggregate of --------- ---- any other scheduled payments or mandatory prepayments of Funded Debt of Borrower during that fiscal period. "Funded Debt" means, as of any date of determination (without ----------- duplication and with respect to any Person), the sum of (a) all principal --- -- Indebtedness of that Person for borrowed money (including debt securities --------- issued by that Person), on that date plus (b) the aggregate amount of the ---- principal portion of all Capital Lease Obligations of that Person on that date. "Gaming Board" means, collectively, (a) the Nevada Gaming Commission, ------------ (b) the Nevada State Gaming Control Board and (c) any other Governmental Agency that holds regulatory, licensing or permit authority over gambling, gaming or casino activities conducted by Borrower and its Subsidiaries within its jurisdiction. "Gaming Laws" means all Laws pursuant to which any Gaming Board ----------- possesses regulatory, licensing or permit authority over gambling, gaming or casino activities conducted by Borrower and its Subsidiaries within its jurisdiction. -18- "Generally Accepted Accounting Principles" means, as of any date of ---------------------------------------- determination, accounting principles (a) set forth as generally accepted in then currently effective Opinions of the Accounting Principles Board of the American Institute of Certified Public Accountants, (b) set forth as generally accepted in then currently effective Statements of the Financial Accounting Standards Board or (c) that are then approved by such other entity as may be approved by a significant segment of the accounting profession in the United States of America. The term "consistently ------------ applied," as used in connection therewith, means that the accounting ------- principles applied are consistent in all material respects with those applied at prior dates or for prior periods. "Government Securities" means readily marketable (a) direct full faith --------------------- and credit obligations of the United States of America or obligations guaranteed by the full faith and credit of the United States of America and (b) obligations of an agency or instrumentality of, or corporation owned, controlled or sponsored by, the United States of America that are generally considered in the securities industry to be implicit obligations of the United States of America. "Governmental Agency" means (a) any international, foreign, federal, ------------------- state, county or municipal government, or political subdivision thereof, (b) any governmental or quasi-governmental agency, authority, board, bureau, commission, department, instrumentality or public body or (c) any court or administrative tribunal of competent jurisdiction. "Guarantors" means, collectively, (a) MGM Grand, Inc., a Delaware ---------- corporation and (b) Primadonna Resorts, Inc., a Nevada corporation. "Guarantor EBITDA" means, with respect to a Guarantor, the EBITDA of ---------------- that Guarantor. "Guarantor Funded Debt Ratio" means, as of the last day of each Fiscal --------------------------- Quarter, the ratio of (a) the Average Quarterly Funded Debt of Guarantors ----- -- as of that date to (b) the Annualized Guarantor EBITDA as of that date. -- The Guarantor Funded Debt Ratio shall be calculated by consolidating the Average Quarterly Funded Debt and Annualized Guarantor EBITDA of each Guarantor with that of its Subsidiaries and then combining the Average Quarterly Funded Debt and Annualized Guarantor EBITDA of both Guarantors; provided that (i) the Average Quarterly Funded Debt of Borrower and -------- Borrower EBITDA shall be excluded (unless clause (iii) below applies) from ------ --- all such -19- calculations for fiscal periods ending prior to the last day of the fourth full Fiscal Quarter ending after the Completion Date, (ii) the Average Quarterly Funded Debt of Borrower and Borrower EBITDA may, at the election of Borrower exercised at any time by written notice to the Managing Agent which shall remain in effect through the Maturity Date, be included in such calculations for any fiscal period ending subsequent to the last day of the fourth full Fiscal Quarter after the Completion Date and (iii) if at the date of such calculation there is a single Guarantor because of a transaction that does not constitute a Change of Ownership, such calculations shall be made on a consolidated basis for that Guarantor and its Subsidiaries, including Borrower. --------- "Guaranty Obligation" means, as to any Person (without duplication), ------------------- any (a) guarantee by that Person of Indebtedness of, or other obligation performable by, any other Person or (b) assurance given by that Person to an obligee of any other Person with respect to the performance of an obligation by, or the financial condition of, such other Person, whether direct, indirect or contingent, including any purchase or repurchase --------- agreement covering such obligation or any collateral security therefor, any agreement to provide funds (by means of loans, capital contributions or otherwise) to such other Person, any agreement to support the solvency or level of any balance sheet or income statement item of such other Person or any "keep-well" or other arrangement of whatever nature given for the purpose of assuring or holding harmless such obligee against loss with respect to any obligation of such other Person; provided, however, that the ----------------- term Guaranty Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guaranty Obligation in respect of Indebtedness shall be deemed to be an amount equal to the stated or determinable amount of the related Indebtedness (unless the Guaranty Obligation is limited by its terms to a lesser amount, in which case to the extent of such amount) or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the Person in good faith. The amount of any other Guaranty Obligation shall be deemed to be zero unless and until the amount thereof has been (or in accordance with Financial Accounting Standards Board Statement No. 5 should be) quantified and reflected or disclosed in the consolidated financial statements (or notes thereto) of Borrower and its Subsidiaries. "Hazardous Materials" means substances defined as "hazardous ------------------- substances" pursuant to the Comprehensive Environmental Response, Compensation and Liability Act of -20- 1980, 42 U.S.C. (S) 9601 et seq., or as "hazardous", "toxic" or "pollutant" substances or as "solid waste" pursuant to 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., or as "friable asbestos" pursuant to the Toxic Substances Control Act, 15 U.S.C. (S) 2601 et seq., in each case as such Laws are amended from time to time . "Hazardous Materials Laws" means all Laws governing the treatment, ------------------------ transportation or disposal of Hazardous Materials applicable to any of the Real Property. "Indebtedness" means, as to any Person (without duplication), (a) ------------ indebtedness of such Person for borrowed money or for the deferred purchase price of Property (excluding trade and other accounts payable in the ordinary course of business in accordance with ordinary trade terms), including any Guaranty Obligation for any such indebtedness, (b) --------- indebtedness of such Person of the nature described in clause (a) that is - non-recourse to the credit of such Person but is secured by assets of such Person, to the extent of the value of such assets, (c) Capital Lease Obligations of such Person, (d) indebtedness of such Person arising under bankers' acceptance facilities or under facilities for the discount of accounts receivable of such Person, (e) any direct or contingent obligations of such Person under letters of credit issued for the account of such Person and (f) any net obligations of such Person under Swap Agreements. "Initial Reduction Date" means the earlier of (a) the last day of the ---------------------- ---------- Fiscal Quarter occurring at least 365 days and not more than 457 days after the Completion Date or (b) September 30, 1998. "Intangible Assets" means assets that are considered intangible assets ----------------- under Generally Accepted Accounting Principles, including customer lists, --------- goodwill, computer software, copyrights, trade names, trademarks and patents. "Interest Charges" means, as of the last day of any fiscal period, the ---------------- sum of (a) Cash Interest Expense for that fiscal period, plus (b) all --- -- ---- interest currently payable in Cash incurred during that fiscal period which is capitalized under Generally Accepted Accounting Principles. "Interest Differential" means, with respect to any prepayment of a --------------------- Eurodollar Rate Loan on a day other than the last day of the applicable Interest Period and with respect to any failure to borrow a Eurodollar Rate Loan on the date or in the amount specified in any Request for -21- Loan, (a) the Eurodollar Rate payable (or, with respect to a failure to borrow, the Eurodollar Rate which would have been payable) with respect to the Eurodollar Rate Loan minus (b) the Eurodollar Rate on, or as near as ----- practicable to, the date of the prepayment or failure to borrow for a Eurodollar Rate Loan with an Interest Period commencing on such date and ending on the last day of the Interest Period of the Eurodollar Rate Loan so prepaid or which would have been borrowed on such date. "Interest Expense" means, as of the last day of any fiscal period, the ---------------- sum of (a) all interest, fees, charges and related expenses paid or payable ------ (without duplication) for that fiscal period by Borrower and its Subsidiaries to a lender in connection with borrowed money (including any --------- obligations for fees, charges and related expenses payable to the issuer of any letter of credit) or the deferred purchase price of assets that are considered "interest expense" under Generally Accepted Accounting Principles, plus (b) the portion of rent paid or payable (without ---- duplication) for that fiscal period by Borrower and its Subsidiaries under Capital Lease Obligations that should be treated as interest in accordance with Financial Accounting Standards Board Statement No. 13. "Interest Period" means, with respect to any Eurodollar Rate Loan, the --------------- related Eurodollar Period. "Investment" means, when used in connection with any Person, any ---------- investment by or of that Person, whether by means of purchase or other acquisition of stock or other securities of any other Person or by means of a loan, advance creating a debt, capital contribution, guaranty or other debt or equity participation or interest in any other Person, including any --------- partnership and joint venture interests of such Person. The amount of any Investment shall be the amount actually invested (minus any return of ----- capital with respect to such Investment which has actually been received in Cash or Cash Equivalents or has been converted into Cash or Cash Equivalents), without adjustment for subsequent increases or decreases in the value of such Investment. "Issuing Bank" means Bank of America National Trust and Savings ------------ Association. "Keep-Well Agreement" means the keep-well agreement to be executed and ------------------- delivered by the Guarantors, in the form of Exhibit J, either as originally --------- executed or as it may from time to time be supplemented, modified, amended, extended or supplanted. -22- "Laws" means, collectively, all international, foreign, federal, state ---- and local statutes, treaties, rules, regulations, ordinances, codes and administrative or judicial precedents. "Lead Managers" means Bank of Scotland and Societe Generale. The Lead ------------- Managers shall have no rights, duties or responsibilities under the Loan Documents beyond those of a Bank. "Leased Equipment" means such items of equipment located on or ---------------- included within the Project as are designated by Borrower and acceptable to the Equipment Lessors; provided that the aggregate cost thereof to the -------- Equipment Lessors does not exceed $60,000,000. "Letters of Credit" means any of the Standby Letters of Credit or ----------------- Commercial Letters of Credit issued by the Issuing Bank under the Commitment pursuant to Section 2.4, either as originally issued or as the --- same may be supplemented, modified, amended, renewed, extended or supplanted. "Leverage Ratio" means, as of the last day of each Fiscal Quarter, the -------------- ratio of (a) Average Quarterly Funded Debt of Borrower as of that date to ----- -- -- (b) Adjusted Annualized Borrower EBITDA as of that date. "License Revocation" means the revocation, failure to renew or ------------------ suspension of, or the appointment of a receiver, supervisor or similar official with respect to, any casino, gambling or gaming license issued by any Gaming Board covering any casino or gaming facility of Borrower. "Lien" means any mortgage, deed of trust, pledge, hypothecation, ---- assignment for security, security interest, encumbrance, lien or charge of any kind, whether voluntarily incurred or arising by operation of Law or other wise, affecting any Property, including any agreement to grant any of --------- the foregoing, any conditional sale or other title retention agreement, any lease in the nature of a security interest, and/or the filing of or agreement to give any financing statement (other than a precautionary ----- ---- financing statement with respect to a lease that is not in the nature of a security interest) under the Uniform Commercial Code or comparable Law of any jurisdiction with respect to any Property. "Loan" means the aggregate of the Advances made at any one time by the ---- Banks pursuant to Article 2. --------- "Loan Documents" means, collectively, this Agreement, the Notes, the -------------- Swing Line Documents, the Collateral -23- Documents, the Completion Guaranty, the Keep-Well Agreement, the Subsidiary Guaranty, any Secured Swap Agreement and any other agreements of any type or nature hereafter executed and delivered by Borrower, any of its Subsidiaries or either Guarantor to the Managing Agent or to any Bank in any way relating to or in furtherance of this Agreement, in each case either as originally executed or as the same may from time to time be supplemented, modified, amended, restated, extended or supplanted. "Managing Agent" means Bank of America National Trust and Savings -------------- Association, when acting in its capacity as the Managing Agent under any of the Loan Documents, or any successor Managing Agent. "Managing Agent's Office" means the Managing Agent's address as set ----------------------- forth on the signature pages of this Agreement, or such other address as the Managing Agent hereafter may designate by written notice to Borrower and the Banks. "Margin Stock" means "margin stock" as such term is defined in ------------ Regulation G or U. "Material Adverse Effect" means any set of circumstances or events ----------------------- which (a) has or could reasonably be expected to have any material adverse effect whatsoever upon the validity or enforceability of any Loan Document, (b) is or could reasonably be expected to be material and adverse to the business or condition (financial or otherwise) of Borrower and its Subsidiaries, taken as a whole or (c) materially impairs or could reasonably be expected to materially impair the ability of Borrower or Guarantors (taken as a whole) to perform the Obligations. "Maturity Date" means the date that is four (4) years after the ------------- Initial Reduction Date. "Members" means, collectively, (a) MGM Grand, Inc., a Delaware ------- corporation, and (b) PRMA Las Vegas, Inc., a Nevada corporation. "Member Change in Control" means (a) any transaction or series of ------------------------ related transactions in which any Unrelated Person or two or more Unrelated Persons acting in concert acquire beneficial ownership (within the meaning of Rule 13d-3(a)(1) under the Securities Exchange Act of 1934, as amended), directly or indirectly, of 25% or more of the outstanding common stock of either Guarantor or (b) during any period of 24 consecutive months, individuals who at the beginning of such period constituted the board of directors of either Guarantor (together with any new or replacement directors whose election by the board of -24- directors, or whose nomination for election, was approved by a vote of at least a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for reelection was previously so approved) cease for any reason to constitute a majority of the directors then in office; provided, however, -------- that no Member Change in Control shall exist with respect to a Guarantor by reason of the foregoing (y) so long as the Person or group of Persons related by family or other relationships (or the executors, administrators, testamentary trustees, heirs, legatees or testamentary trust beneficiaries of any of such Persons) which as of the date of this Agreement is the beneficial owner of 30% or more of the outstanding common stock of that Guarantor continues to be the beneficial owner of 30% or more of such common stock or (z) if that Guarantor does not, pursuant to the Operating Agreement, directly or indirectly hold any management rights with respect to Borrower. For purposes of the foregoing, the term "Unrelated Person" ---------------- means any Person other than (i) with respect to a Guarantor, the other ----- ---- Guarantor, (ii) an Affiliate of either Guarantor, (iii) an employee stock ownership plan or other employee benefit plan covering the employees of either Guarantor and its Subsidiaries or (iv) an Affiliate of any Person or group of related Persons which as of the date of this Agreement is the beneficial owner of 30% or more (in the aggregate) of the outstanding common stock of either Guarantor. "Member Tax Distributions" means Distributions made by Borrower to the ------------------------ Members in an aggregate amount not exceeding the combined federal and any applicable state income tax then payable (including estimated income taxes --------- then payable) under then applicable Laws by the Members with respect to their respective distributive shares of the taxable income of Borrower, assuming that each Member had no other taxable income, loss, deductions or other tax attributes and that any net operating loss carryforward attributable to Borrower if it were a tax-paying entity would be available in such Fiscal Year to such Member, all as set forth in calculations in reasonable detail attached to a letter from one of the six largest public accounting firms in the United States of America (or other independent public accountants of recognized standing selected by Borrower and reasonably satisfactory to the Requisite Banks) furnished to the Managing Agent not later than five (5) days prior to any such Distribution. "Multiemployer Plan" means any employee benefit plan of the type ------------------ described in Section 4001(a)(3) of ERISA to which Borrower or any of its ERISA Affiliates contribute or are obligated to contribute. -25- "Negative Pledge" means a Contractual Obligation that contains a --------------- covenant binding on Borrower that prohibits Liens on any of its or their Property, other than (a) any such covenant contained in a Contractual ----- ---- Obligation granting a Lien permitted under Section 6.8 which affects --- only the Property that is the subject of such permitted Lien and (b) any such covenant that does not apply to Liens securing the Obligations. "Net Available Cash Flow" means, as of any date of determination, the ----------------------- amount (if any) by which Available Cash Flow for the fiscal period commencing on the Completion Date and ending on the last day of the then most recently-ended Fiscal Quarter exceeds the aggregate of all permanent reductions of the Commitment made pursuant to Section 2.6 through that --- date. "Net Income" means, with respect to any fiscal period and with respect ---------- to any Person, the consolidated net income of that Person for that period, determined in accordance with Generally Accepted Accounting Principles, consistently applied. "Note" means the promissory note made by Borrower to a Bank evidencing ---- the Advances under that Bank's Pro Rata Share of the Commitment, substantially in the form of Exhibit K, either as originally executed or as --------- the same may from time to time be supplemented, modified, amended, renewed, extended or supplanted. "Obligations" means all present and future obligations of every kind ----------- or nature of Borrower, the Members or the Guarantors at any time and from time to time owed to the Managing Agent, the Issuing Bank, the Swing Line Bank or the Banks or any one or more of them, under any one or more of the Loan Documents, whether due or to become due, matured or unmatured, liquidated or unliquidated, or contingent or noncontingent, including --------- obligations of performance as well as obligations of payment, and including interest that accrues after the commencement of any proceeding --------- under any Debtor Relief Law by or against Borrower or Affiliate of Borrower, whether or not allowed as a claim in such proceeding. "Operating Agreement" means the Operating Agreement dated as of ------------------- December 26, 1994 between the Members with respect to the operation of Borrower, together with all amendments thereto. "Opinions of Counsel" means the favorable written legal opinions of ------------------- (a) Christensen, White, Miller, Fink & Jacobs, special counsel to Borrower, and (b) McDonald, Carano, Wilson, McKuen, Bergen, Frankovich & Hicks, -26- special Nevada counsel to Borrower, substantially in the form of Exhibits -------- L-1 and L-2, respectively, together with copies of all factual certificates --- --- and legal opinions upon which such counsel has relied. "Party" means any Person other than the Managing Agent, the Issuing ----- Bank, the Swing Line Bank, the Co-Agent and the Banks, which now or hereafter is a party to any of the Loan Documents. "PBGC" means the Pension Benefit Guaranty Corporation or any successor ---- thereof established under ERISA. "Pension Plan" means any "employee pension benefit plan" (as such term ------------ is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, ---------- which is subject to Title IV of ERISA and is maintained by Borrower or any of its Subsidiaries or to which Borrower or any of its Subsidiaries contributes or has an obligation to contribute. "Permitted Encumbrances" means: ---------------------- (e) inchoate Liens incident to construction on or maintenance of Property; or Liens incident to construction on or maintenance of Property now or hereafter filed of record for which adequate reserves have been set aside (or deposits made pursuant to applicable Law) and which are being contested in good faith by appropriate proceedings and have not proceeded to judgment, provided that, by reason of nonpayment -------- of the obligations secured by such Liens, no such Property is subject to a material risk of loss or forfeiture; (f) Liens for taxes and assessments on Property which are not yet past due; or Liens for taxes and assessments on Property for which adequate reserves have been set aside and are being contested in good faith by appropriate proceedings and have not proceeded to judgment, provided that, by reason of nonpayment of the obligations secured by -------- such Liens, no such Property is subject to a material risk of loss or forfeiture; (g) minor defects and irregularities in title to any Property which in the aggregate do not materially impair the fair market value or use of the Property for the purposes for which it is or may reasonably be expected to be held; (h) easements, exceptions, reservations, or other agreements for the purpose of pipelines, conduits, -27- cables, wire communication lines, power lines and substations, streets, trails, walkways, drainage, irrigation, water, and sewerage purposes, dikes, canals, ditches, the removal of oil, gas, coal, or other minerals, and other like purposes affecting Property, facilities, or equipment which in the aggregate do not materially burden or impair the fair market value or use of such Property for the purposes for which it is or may reasonably be expected to be held; (i) easements, exceptions, reservations, or other agreements for the purpose of facilitating the joint or common use of Property in or adjacent to a shopping center or similar project affecting Property which in the aggregate do not materially burden or impair the fair market value or use of such Property for the purposes for which it is or may reasonably be expected to be held; (j) rights reserved to or vested in any Govern mental Agency to control or regulate, or obligations or duties to any Governmental Agency with respect to, the use of any Property; (k) rights reserved to or vested in any Govern mental Agency to control or regulate, or obligations or duties to any Governmental Agency with respect to, any right, power, franchise, grant, license, or permit; (l) present or future zoning laws and ordinances or other laws and ordinances restricting the occupancy, use, or enjoyment of Property; (m) statutory Liens, other than those described in clauses (a) or - (b) above, arising in the ordinary course of business with respect to - obligations which are not delinquent or are being contested in good faith, provided that, if delinquent, adequate reserves have been set -------- aside with respect thereto and, by reason of nonpayment, no Property is subject to a material risk of loss or forfeiture; (n) covenants, conditions, and restrictions affecting the use of Property which in the aggregate do not materially impair the fair market value or use of the Property for the purposes for which it is or may reasonably be expected to be held; (o) rights of tenants under leases and rental agreements covering Property entered into in the ordinary course of business of the Person owning such -28- Property; provided that if such Property is covered by the Deed of -------- Trust, such lease or rental agreement is junior and subordinate to the Deed of Trust by operation of law or contract; (p) Liens consisting of pledges or deposits to secure obligations under workers' compensation laws or similar legislation, including Liens of judgments thereunder which are not currently dischargeable; (q) Liens consisting of pledges or deposits of Property to secure performance in connection with operating leases made in the ordinary course of business to which Borrower or a Subsidiary of Borrower is a party as lessee, provided the aggregate value of all such pledges and -------- deposits in connection with any such lease does not at any time exceed 20% of the annual fixed rentals payable under such lease; (r) Liens consisting of deposits of Property to secure bids made with respect to, or performance of, contracts (other than contracts ----- ---- creating or evidencing an extension of credit to the depositor); (s) Liens consisting of any right of offset, or statutory bankers' lien, on bank deposit accounts maintained in the ordinary course of business so long as such bank deposit accounts are not established or maintained for the purpose of providing such right of offset or bankers' lien; (t) Liens consisting of deposits of Property to secure statutory obligations of Borrower or a Subsidiary of Borrower; (u) Liens consisting of deposits of Property to secure (or in lieu of) surety, appeal or customs bonds in proceedings to which Borrower or a Subsidiary of Borrower is a party; (v) Liens created by or resulting from any litigation or legal proceeding involving Borrower or a Subsidiary of Borrower in the ordinary course of its business which is currently being contested in good faith by appropriate proceedings, provided that such Lien is -------- junior to the Lien of the Collateral Documents, adequate reserves have been set aside and no material Property is subject to a material risk of loss or forfeiture; and (w) other non-consensual Liens incurred in the ordinary course of business but not in connection with an extension of credit, which do not in the -29- aggregate, when taken together with all other Liens, materially impair the value or use of the Property of the Borrower and the Subsidiairies of Borrower, taken as a whole. "Permitted Incremental Expenditure" means the expenditure by Borrower --------------------------------- of up to $15,000,000 for the acquisition of certain real property adjacent to the Project Property; provided that (a) prior to or concurrently with -------- such expenditure, Borrower shall have received Cash Equity Contributions (in addition to any theretofore required by the Completion Guaranty and/or the Keep-Well Agreement) in an amount at least equal to the amount of such expenditure and (b) within ten (10) Banking Days thereafter, Borrower executes and delivers to the Managing Agent a deed of trust (substantially in the form of the Deed of Trust) covering such real property and provides to the Managing Agent such title insurance policy endorsements, environmental reports and other related documents as the Managing Agent may reasonably request. "Permitted Right of Others" means a Right of Others consisting of (a) ------------------------- an interest (other than a legal or equitable co-ownership interest, an option or right to acquire a legal or equitable co-ownership interest and any interest of a ground lessor under a ground lease), that does not materially impair the value or use of Property for the purposes for which it is or may reasonably be expected to be held, (b) an option or right to acquire a Lien that would be a Permitted Encumbrance, (c) the subordination of a lease or sublease in favor of a financing entity, (d) a lease, rental or similar agreement covering Property entered in the ordinary course of business and (e) a license, or similar right, of or to Intangible Assets granted in the ordinary course of business. "Person" means any individual or entity, including a trustee, ------ --------- corporation, limited liability company, general partnership, limited partnership, joint stock company, trust, estate, unincorporated organization, business association, firm, joint venture, Governmental Agency, or other entity. "Pledge Agreement" means the pledge agreement to be executed and ---------------- delivered by the Members in the form of Exhibit M, either as originally --------- executed or as it may from time to time be supplemented, modified, amended, extended or supplanted. "Pledge Collateral" means the certificates evidencing 100% of the ----------------- equity ownership interests of the Members in Borrower. -30- "Pre-Opening Expenses" means, with respect to any fiscal period, the amount -------------------- of expenses (other than Interest Expense) classified as "pre-opening expenses" ----- ---- on the applicable financial statements of Borrower for such period, prepared in accordance with Generally Accepted Accounting Principles consistently applied. "Pricing Certificate" means a certificate in the form of Exhibit N, ------------------- --------- properly completed and signed by a Senior Officer of Borrower. "Pricing Period" means (a) the period commencing on the Closing Date and -------------- ending on November 15, 1995, (b) the period commencing on each November 16 and ending on the next following February 15, (c) the period commencing on each February 16 and ending on the next following May 15, (d) the period commencing on each May 16 and ending on the next following August 15 and (e) the period commencing on each August 16 and ending on the next following November 15. "Project" means the hotel/casino known as the "New York-New York Hotel and ------- Casino" to be constructed on the Project Property, consisting generally of an approximately 2,100 room hotel and an approximately 80,000 to 100,000 square foot casino. "Project Property" means the real property located in Las Vegas, Nevada ---------------- comprised of approximately 20 acres on which the Project is to be constructed, and all existing and future improvements thereto and all related appurtenances. "Projections" means the financial projections contained in the Confidential ----------- Information Memorandum distributed by or on behalf of Borrower to the Banks on or about July 11, 1995. "Property" means any interest in any kind of property or asset, whether -------- real, personal or mixed, or tangible or intangible. "Pro Rata Share" means, with respect to each Bank, the percentage of the -------------- Commitment set forth opposite the name of that Bank on Schedule 1.1, as such ------------ percentage may be increased or decreased pursuant to a Commitment Assignment and Acceptance executed in accordance with Section 12.8. ---- "Qualified Member Subordinated Debt" means Indebtedness of Borrower owed to ---------------------------------- either Member (or an Affiliate of a Member) that (a) either (i) was incurred prior to the -31- Closing Date or (ii) does not provide for any principal or sinking fund payments prior to the Maturity Date in excess of the then Distribution Basket Availability, (b) in the case of Indebtedness described in clause (a)(i), ------ provides for interest at a rate not exceeding the interest rate then payable by that Member (or Affiliate of that Member) for working capital borrowed funds or, in case of Indebtedness described in clause (a)(ii), provides for interest at a ------- rate not exceeding the interest rate then payable under this Agreement, (c) is not secured by any Lien on any Property of Borrower and (d) is evidenced by a subordinated promissory note in the form of Exhibit O or such other form as may --------- be approved by the Requisite Banks. "Qualified Third Party Subordinated Debt" means Indebtedness of Borrower --------------------------------------- owed to a Person (other than a Member or an Affiliate of a Member) that (a) does ----- ---- not provide for any principal or sinking fund payment prior to the date that is one (1) year subsequent to the Maturity Date, (b) is not secured by any Lien on any Property of Borrower and (c) is issued subject to an indenture or other credit agreement containing subordination and interest payment blockage provisions, representations, covenants, events of default and other provisions (other than the rate of interest payable) approved in writing by the Requisite ----- ---- Banks prior to incurrence (which approval shall not be unreasonably, from the perspective of a senior lender, withheld). "Quarterly Payment Date" means each September 30, December 31, March 31 and ---------------------- June 30. "Real Property" means, as of any date of determination, all real Property ------------- then or theretofore owned, leased or occupied by Borrower or any of its Subsidiaries. "Reduction Amount" means, with respect to each Reduction Date, the amount ---------------- set forth below opposite that Reduction Date (subject to the last sentence of Section 2.5): ---
Reduction Date Amount -------------- ------ Initial Reduction Date $20,000,000 Each of the next four (4) Quarterly Payment Dates $ 7,500,000 Each of the next eight (8) Quarterly Payment Dates $ 8,750,000 Each of the next three (3) Quarterly Payment Dates $10,000,000
-32- "Reduction Date" means the Initial Reduction Date and each Quarterly -------------- Payment Date thereafter. "Reference Rate" means the rate of interest publicly announced from time to -------------- time by the Domestic Reference Bank in San Francisco, California (or other headquarters city of the Domestic Reference Bank), as its "reference rate." It is a rate set by the Domestic Reference Bank based upon various factors including the Domestic Reference Bank's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate. Any change in the Reference Rate announced by the Domestic Reference Bank shall take effect at the opening of business on the day specified in the public announcement of such change. "Regulation D" means Regulation D, as at any time amended, of the Board of ------------ Governors of the Federal Reserve System, or any other regulation in substance substituted therefor. "Regulations G, T, U, and X" means Regulations G, T, U and X, as at any -------------------------- time amended, of the Board of Governors of the Federal Reserve System, or any other regulations in substance substituted therefor. "Request for Letter of Credit" means a written request for a Letter of ---------------------------- Credit substantially in the form of Exhibit P, signed by a Responsible Official --------- of Borrower, on behalf of Borrower, and properly completed to provide all information required to be included therein. "Request for Loan" means a written request for a Loan substantially in the ---------------- form of Exhibit Q, signed by a Responsible Official of Borrower, on behalf of --------- Borrower, and properly completed to provide all information required to be included therein. "Requirement of Law" means, as to any Person, the articles or certificate ------------------ of incorporation and by-laws or other organizational or governing documents of such Person, and any Law, or judgment, award, decree, writ or determination of a Governmental Agency, in each case applicable to or binding upon such Person or any of its Property or to which such Person or any of its Property is subject. "Requisite Banks" means (a) as of any date of determination if the --------------- Commitment is then in effect, Banks having in the aggregate 66-2/3% or more of the Commitment then in effect and (b) as of any date of determination if the -33- Commitment has then been terminate and there is then any Indebtedness evidenced by the Notes, Banks holding Notes evidencing in the aggregate 66-2/3% or more of the aggregate Indebtedness then evidenced by the Notes. "Responsible Official" means (a) when used with reference to a Person other -------------------- than an individual, any officer or manager of such Person, general partner of such Person, officer of a corporate or limited liability company general partner of such Person, officer of a corporate of limited liability company general partner of a partnership that is a general partner of such Person, or any other responsible official thereof duly acting on behalf thereof, and (b) when used with reference to a Person who is an individual, such Person. The Banks shall be entitled to conclusively rely upon any document or certificate that is signed or executed by a Responsible Official of Borrower or any of its Subsidiaries as having been authorized by all necessary corporate, limited liability company, partnership and/or other action on the part of Borrower or such Subsidiary. "Right of Others" means, as to any Property in which a Person has an --------------- interest, any legal or equitable right, title or interest (other than a Lien) held by any other Person in that Property, and any option or right held by any other Person to acquire any such right, title or interest in that Property, including any option or right to acquire a Lien; provided, however, that (a) - --------- -------- any covenant restricting the use or disposition of Property of such Person contained in any Contractual Obligation of such Person and (b) any provision contained in a contract creating a right of payment or performance in favor of a Person that conditions, limits, restricts, diminishes, transfers or terminates such right, shall not be deemed to constitute a Right of Others. "Secured Swap Agreement" means a Swap Agreement between Borrower and a ---------------------- Bank. "Security Agreement" means the security agreement to be executed and ------------------ delivered by Borrower and each of its Subsidiaries, in the form of Exhibit R, --------- either as originally executed or as it may from time to time be supplemented, modified, amended, extended or supplanted. "Senior Officer" means the (a) chief executive officer or manager, (b) -------------- president, (c) executive vice president, (d) senior vice president, (e) chief financial officer, (f) treasurer or (g) assistant treasurer of Borrower. -34- "Special Eurodollar Circumstance" means the application or adoption ------------------------------- after the Closing Date of any Law or interpretation, or any change therein or thereof, or any change in the interpretation or administration thereof by any Governmental Agency, central bank or comparable authority charged with the interpretation or administration thereof, or compliance by any Bank or its Eurodollar Lending Office with any request or directive (whether or not having the force of Law) of any such Governmental Agency, central bank or comparable authority, or the existence or occurrence of circumstances affecting the Designated Eurodollar Market generally that are beyond the reasonable control of the Banks. "Standby Letter of Credit" means each Letter of Credit that is not a ------------------------ Commercial Letter of Credit. "Subordinated Obligations" means, collectively, any Qualified Third ------------------------ Party Subordinated Debt and any Qualified Member Subordinated Debt. "Subsidiary" means, as of any date of determination and with respect ---------- to any Person, any corporation, limited liability company or partnership (whether or not, in either case, characterized as such or as a "joint venture"), whether now existing or hereafter organized or acquired: (a) in the case of a corporation or limited liability company, of which a majority of the securities having ordinary voting power for the election of directors or other governing body (other than securities having such power only by reason of the happening of a contingency) are at the time beneficially owned by such Person and/or one or more Subsidiaries of such Person, or (b) in the case of a partnership, of which a majority of the partnership or other ownership interests are at the time beneficially owned by such Person and/or one or more of its Subsidiaries. "Subsidiary Guaranty" means the continuing guaranty of the Obligations ------------------- to be executed and delivered by each Subsidiary of Borrower, in the form of Exhibit S, either as originally executed or as it may from time to time be --------- supplemented, modified, amended, extended or supplanted. "Swap Agreement" means a written agreement between Borrower and one or -------------- more financial institutions providing for "swap", "cap", "collar" or other interest rate protection with respect to any Indebtedness. "Swing Line" means the revolving line of credit established by the ---------- Swing Line Bank in favor of Borrower pursuant to Section 2.11. ---- -35- "Swing Line Bank" means Bank of America Nevada. --------------- "Swing Line Documents" means the promissory note and any other -------------------- documents executed by Borrower in favor of the Swing Line Bank in connection with the Swing Line. "Swing Line Loans" means loans made by the Swing Line Bank to Borrower ---------------- pursuant to Section 2.11. ---- "Swing Line Outstandings" means, as of any date of determination, the ----------------------- aggregate principal Indebtedness of Borrower on all Swing Line Loans then outstanding. "Title Company" means Nevada Title Company or such other title ------------- insurance company as is reasonably acceptable to the Managing Agent. "to the best knowledge of" means, when modifying a representation, ------------------------ warranty or other statement of any Person, that the fact or situation described therein is known by the Person (or, in the case of a Person other than a natural Person, known by a Responsible Official of that Person) making the representation, warranty or other statement, or with the exercise of reasonable due diligence under the circumstances (in accordance with the standard of what a reasonable Person in similar circumstances would have done) would have been known by the Person (or, in the case of a Person other than a natural Person, would have been known by a Responsible Official of that Person). "Total Incurred Project Cost" means, as of any date of determination, --------------------------- the total cost of the Project (including the value of all Property --------- contributed by the Members, financing costs and Pre-Opening Expenses) incurred or accrued as of that date based on customary methods used by CSG for estimating percentage completion of construction projects. "Trademark Collateral Assignment" means the trademark collateral ------------------------------- assignment to be executed and delivered by Borrower and its Subsidiaries in the form of Exhibit T, either as originally executed or as it may from time --------- to time be supplemented, modified, amended, extended or supplanted. "type", when used with respect to any Loan or Advance, means the ---- designation of whether such Loan or Advance is an Alternate Base Rate Loan or Advance, or a Eurodollar Rate Loan or Advance. 1.2 Use of Defined Terms. Any defined term used in the plural shall -------------------- refer to all members of the relevant class, -36- and any defined term used in the singular shall refer to any one or more of the members of the relevant class. 1.3 Accounting Terms. All accounting terms not specifically defined ---------------- in this Agreement shall be construed in conformity with, and all financial data required to be submitted by this Agreement shall be prepared in conformity with, Generally Accepted Accounting Principles applied on a consistent basis, except as otherwise specifically prescribed herein. In the event that Generally - ------ Accepted Accounting Principles change during the term of this Agreement such that the covenants contained in Sections 6.11 through 6.13 would then be ---- ---- calculated in a different manner or with different components, (a) Borrower and the Banks agree to amend this Agreement in such respects as are necessary to conform those covenants as criteria for evaluating Borrower's financial condition to substantially the same criteria as were effective prior to such change in Generally Accepted Accounting Principles and (b) Borrower shall be deemed to be in compliance with the covenants contained in the aforesaid Sections if and to the extent that Borrower would have been in compliance therewith under Generally Accepted Accounting Principles as in effect immediately prior to such change, but shall have the obligation to deliver each of the materials described in Article 8 to the Managing Agent and the Banks, on --------- the dates therein specified, with financial data presented in a manner which conforms with Generally Accepted Accounting Principles as in effect immediately prior to such change. 1.4 Rounding. Any financial ratios required to be maintained by -------- Borrower pursuant to this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed in this Agreement and rounding the result up or down to the nearest number (with a round-up if there is no nearest number) to the number of places by which such ratio is expressed in this Agreement. 1.5 Exhibits and Schedules. All Exhibits and Schedules to this ---------------------- Agreement, either as originally existing or as the same may from time to time be supplemented, modified or amended, are incorporated herein by this reference. A matter disclosed on any Schedule shall be deemed disclosed on all Schedules. 1.6 References to "Borrower and its Subsidiaries". Any reference -------------------------------------------- herein to "Borrower and its Subsidiaries" or the like shall refer solely to Borrower during such times, if any, as Borrower shall have no Subsidiaries. 1.7 Miscellaneous Terms. The term "or" is disjunctive; the term ------------------- "and" is conjunctive. The term "shall" -37- is mandatory; the term "may" is permissive. Masculine terms also apply to females; feminine terms also apply to males. The term "including" is by way of example and not limitation. -38- LOANS AND LETTERS OF CREDIT --------------------------- 2.1 Loans-General. ------------- (a) Subject to the terms and conditions set forth in this Agreement, at any time and from time to time from the Closing Date through the Banking Day immediately prior to the Maturity Date, each Bank shall, pro rata according to that Bank's Pro Rata Share of the then applicable Commitment, make Advances to Borrower under the Commitment in such amounts as Borrower may request that do not result in the sum of (i) the aggregate principal ------ amount outstanding under the Notes, plus (ii) the Aggregate Effective ---- Amount of all outstanding Letters of Credit plus (iii) the Swing Line ---- Outstandings exceeding the then applicable Commitment. Prior to the Completion Date, Borrower may borrow, but may not repay and reborrow under the Commitment (provided that this sentence shall not restrict the ability -------- of Borrower prior to the Completion Date to redesignate an outstanding Loan as an Alternate Base Loan or as a Eurodollar Rate Loan with the same or a different Interest Period). Subsequent to the Completion Date, subject to the limitations set forth herein, Borrower may borrow, repay and reborrow under the Commitment without premium or penalty. (b) Subject to the next sentence, each Loan shall be made pursuant to a Request for Loan which shall specify the requested (i) date of such Loan, (ii) type of Loan, (iii) amount of such Loan, and (iv) in the case of a Eurodollar Rate Loan, the Interest Period for such Loan. Unless the Managing Agent has notified, in its sole and absolute discretion, Borrower to the contrary, a Loan may be requested by telephone by a Responsible Official of Borrower, in which case Borrower shall confirm such request by promptly delivering a Request for Loan in person or by telecopier conforming to the preceding sentence to the Managing Agent. Managing Agent shall incur no liability whatsoever hereunder in acting upon any telephonic request for Loan purportedly made by a Responsible Official of Borrower, and Borrower hereby agrees to indemnify the Managing Agent from any loss, cost, expense or liability as a result of so acting. (c) Promptly following receipt of a Request for Loan, the Managing Agent shall notify each Bank by telephone or telecopier (and if by telephone, promptly confirmed by telecopier) of the date and type of the Loan, the applicable Interest Period, and that Bank's Pro Rata Share of the Loan. Not later than 11:00 a.m., California time, on the date specified for any Loan (which must be a Banking -39- Day), each Bank shall make its Pro Rata Share of the Loan in immediately available funds available to the Managing Agent at the Managing Agent's Office. Upon satisfaction or waiver of the applicable conditions set forth in Article 9, all Advances shall be credited on that date in immediately --------- available funds to the Designated Deposit Account. (d) Unless the Requisite Banks otherwise consent, each Loan shall be not less than $5,000,000. (e) The Advances made by each Bank shall be evidenced by that Bank's Note. (f) A Request for Loan shall be irrevocable upon the Managing Agent's first notification thereof. (g) If no Request for Loan (or telephonic request for Loan referred to in the second sentence of Section 2.1(b), if applicable) has been made within ------ the requisite notice periods set forth in Section 2.2 or 2.3 prior to the --- --- end of the Interest Period for any Eurodollar Rate Loan, then on the last day of such Interest Period, such Eurodollar Rate Loan shall be automatically converted into an Alternate Base Rate Loan in the same amount. (h) If a Loan is to be made on the same date that another Loan is due and payable, Borrower or the Banks, as the case may be, shall make available to the Managing Agent the net amount of funds giving effect to both such Loans and the effect for purposes of this Agreement shall be the same as if separate transfers of funds had been made with respect to each such Loan. 2.2 Alternate Base Rate Loans. Each request by Borrower for an ------------------------- Alternate Base Rate Loan shall be made pursuant to a Request for Loan (or telephonic or other request for loan referred to in the second sentence of Section 2.1(b), if applicable) received by the Managing Agent, at the Managing ------ Agent's Office, not later than 9:00 a.m. California time, on the date (which must be a Banking Day) of the requested Alternate Base Rate Loan. All Loans shall constitute Alternate Base Rate Loans unless properly designated as a Eurodollar Rate Loan pursuant to Section 2.3. --- -40- 2.3 Eurodollar Rate Loans. --------------------- (a) Each request by Borrower for a Eurodollar Rate Loan shall be made pursuant to a Request for Loan (or telephonic or other request for Loan referred to in the second sentence of Section 2.1(b), if applicable) ------ received by the Managing Agent, at the Managing Agent's Office, not later than 9:00 a.m., California time, at least three (3) Eurodollar Banking Days before the first day of the applicable Eurodollar Period. (b) On the date which is two (2) Eurodollar Banking Days before the first day of the applicable Eurodollar Period, the Managing Agent shall confirm its determination of the applicable Eurodollar Rate (which determination shall be conclusive in the absence of manifest error) and promptly shall give notice of the same to Borrower and the Banks by telephone or telecopier (and if by telephone, promptly confirmed by telecopier). (c) Unless the Managing Agent and the Requisite Banks otherwise consent, no more than twelve (12) Eurodollar Rate Loans shall be outstanding at any one time. (d) No Eurodollar Rate Loan may be requested during the continuation of a Default or Event of Default. (e) Nothing contained herein shall require any Bank to fund any Eurodollar Rate Advance in the Designated Eurodollar Market. 2.4 Letters of Credit. ----------------- (a) Subject to the terms and conditions hereof, at any time and from time to time from the Closing Date through the Banking Day immediately prior to the Maturity Date, the Issuing Bank shall issue such Letters of Credit under the Commitment as Borrower may request by a Request for Letter of Credit; provided that (i) giving effect to all such Letters of Credit, the -------- sum of (A) the aggregate principal amount outstanding under the Notes, plus --- ---- (B) the Aggregate Effective Amount of all outstanding Letters of Credit plus (C) the Swing Line Outstandings do not exceed the then applicable ---- Commitment and (ii) the Aggregate Effective Amount under all outstanding Letters of Credit shall not exceed $20,000,000. Each Letter of Credit shall be in a form reasonably acceptable to the Issuing Bank. Unless all the Banks otherwise consent in a writing delivered to the Managing Agent, the term of any Letter of Credit shall not exceed one (1) year or extend beyond the Maturity Date. -41- (b) Each Request for Letter of Credit shall be submitted to the Issuing Bank, with a copy to the Managing Agent, at least five (5) Banking Days prior to the date upon which the related Letter of Credit is proposed to be issued. The Managing Agent shall promptly notify the Issuing Bank whether such Request for Letter of Credit, and the issuance of a Letter of Credit pursuant thereto, conforms to the requirements of this Agreement. Upon issuance of a Letter of Credit, the Issuing Bank shall promptly notify the Managing Agent, and the Managing Agent shall promptly notify the Banks, of the amount and terms thereof. (c) Upon the issuance of a Letter of Credit, each Bank shall be deemed to have purchased at par a pro rata participation in such Letter of Credit from the Issuing Bank in an amount equal to that Bank's Pro Rata Share. Without limiting the scope and nature of each Bank's participation in any Letter of Credit, to the extent that the Issuing Bank has not been reimbursed by Borrower for any payment required to be made by the Issuing Bank under any Letter of Credit, each Bank shall, pro rata according to its Pro Rata Share, pay the purchase price for such participation to the Issuing Bank through the Managing Agent promptly upon demand therefor. The obligation of each Bank to so pay the participation purchase price to the Issuing Bank shall be absolute and unconditional and shall not be affected by the occurrence of an Event of Default or any other occurrence or event. Any such payment of the purchase price shall not relieve or otherwise impair the obligation of Borrower to reimburse the Issuing Bank for the amount of any payment made by the Issuing Bank under any Letter of Credit together with interest as hereinafter provided. (d) Borrower agrees to pay to the Issuing Bank through the Managing Agent an amount equal to any payment made by the Issuing Bank with respect to each Letter of Credit within one (1) Banking Day after written demand made by the Issuing Bank therefor, together with interest on such amount from the date of any payment made by the Issuing Bank at the rate applicable to Alternate Base Rate Loans for three Business Days and thereafter at the Default Rate. The principal amount of any such payment shall be used to reimburse the Issuing Bank for the payment made by it under the Letter of Credit and, to the extent that the Banks have not reimbursed the Issuing Bank pursuant to Section 2.4(c), the interest amount of any such ------ payment shall be for the account of the Issuing Bank. Each Bank that has paid the participation purchase price to the Issuing Bank pursuant to Section 2.4(c) shall thereupon acquire a pro rata participation, to ------ the extent of such payment, in the claim of the Issuing Bank against Borrower for reimbursement of principal and interest under this -42- Section 2.4(d) and shall share, in accordance with that pro rata ------ participation, in any principal payment made by Borrower with respect to such claim and in any interest payment made by Borrower (but only with respect to periods subsequent to the date such Bank paid the participation purchase price to the Issuing Bank) with respect to such claim. (e) Borrower may, pursuant to a Request for Loan, request that Advances be made pursuant to Section 2.1(a) to provide funds for the payment required ------ by Section 2.4(d) and, for this purpose, the conditions precedent set forth ------ in Article 9 shall not apply. The proceeds of such Advances shall be paid --------- directly to the Issuing Bank to reimburse it for the payment made by it under the Letter of Credit. (f) If Borrower fails to make the payment required by Section 2.4(d) ------ within the time period therein set forth, in lieu of the payment of the participation purchase price to the Issuing Bank under Section 2.4(c) the ------ Issuing Bank may (but is not required to), without notice to or the consent of Borrower, instruct the Managing Agent to cause Advances to be made by the Banks under the Commitment in an aggregate amount equal to the amount paid by the Issuing Bank with respect to that Letter of Credit and, for this purpose, the conditions precedent set forth in Article 9 shall not --------- apply. The proceeds of such Advances shall be paid directly to the Issuing Bank to reimburse it for the payment made by it under the Letter of Credit. (g) The issuance of any supplement, modification, amendment, renewal, or extension to or of any Letter of Credit shall be treated in all respects the same as the issuance of a new Letter of Credit, except that the Issuing Bank's issuance fees shall be payable as set forth in the letter agreement referred to in Section 3.5. --- (h) The obligation of Borrower to pay to the Issuing Bank the amount of any payment made by the Issuing Bank under any Letter of Credit shall be absolute, unconditional, and irrevocable, subject only to performance by the Issuing Bank of its obligations to Borrower under Uniform Commercial Code Section 5109. Without limiting the foregoing, Borrower's obligations to the Issuing Bank shall not be affected by any of the following circumstances: (i) any lack of validity or enforceability of the Letter of Credit, this Agreement, or any other agreement or instrument relating thereto; -43- (ii) any amendment or waiver of or any consent to departure from the Letter of Credit, this Agreement, or any other agreement or instrument relating thereto, with the consent of Borrower; (iii) the existence of any claim, setoff, defense, or other rights which Borrower may have at any time against the Issuing Bank, the Managing Agent or any Bank, any beneficiary of the Letter of Credit (or any persons or entities for whom any such beneficiary may be acting) or any other Person, whether in connection with the Letter of Credit, this Agreement, or any other agreement or instrument relating thereto, or any unrelated transactions; (iv) any demand, statement, or any other document presented under the Letter of Credit proving to be forged, fraudulent, invalid, or insufficient in any respect or any statement therein being untrue or inaccurate in any respect whatsoever so long as any such document appeared to comply with the terms of the Letter of Credit; (v) payment by the Issuing Bank in good faith under the Letter of Credit against presentation of a draft or any accompanying document which does not strictly comply with the terms of the Letter of Credit; (vi) the existence, character, quality, quantity, condition, packing, value or delivery of any Property purported to be represented by documents presented in connection with any Letter of Credit or any difference between any such Property and the character, quality, quantity, condition, or value of such Property as described in such documents; (vii) the time, place, manner, order or con tents of shipments or deliveries of Property as described in documents presented in connection with any Letter of Credit or the existence, nature and extent of any insurance relative thereto; (viii) the solvency or financial responsibility of any party issuing any documents in connection with a Letter of Credit; -44- (ix) any failure or delay in notice of shipments or arrival of any Property; (x) any error in the transmission of any message relating to a Letter of Credit not caused by the Issuing Bank, or any delay or interruption in any such message; (xi) any error, neglect or default of any correspondent of the Issuing Bank in connection with a Letter of Credit (but without prejudice to any claim by Borrower against such correspondent); (xii) any consequence arising from acts of God, war, insurrection, civil unrest, disturbances, labor disputes, emergency conditions or other causes beyond the control of the Issuing Bank; (xiii) so long as the Issuing Bank in good faith determines that the contract or document appears to comply with the terms of the Letter of Credit, the form, accuracy, genuineness or legal effect of any contract or document referred to in any document submitted to the Issuing Bank in connection with a Letter of Credit; and (xiv) where the Issuing Bank has acted in good faith and observed general banking usage, any other circumstances whatsoever. (i) The Issuing Bank shall be entitled to the protection accorded to the Managing Agent pursuant to Section 11.6, mutatis mutandis. ---- ------- -------- (j) The Uniform Customs and Practice for Documentary Credits, as published in its most current version by the International Chamber of Commerce, shall be deemed a part of this Section and shall apply to all Letters of Credit to the extent not inconsistent with applicable Law. 2.5 Voluntary Reduction of Commitment. Borrower shall have the --------------------------------- right, at any time and from time to time, with out penalty or charge, upon at least three (3) Banking Days' prior written notice by a Responsible Official of Borrower to the Managing Agent, voluntarily to reduce, permanently and irrevocably, in aggregate principal amounts in an integral multiple of $1,000,000 but not less than $5,000,000, or to terminate, all or a portion of the then undisbursed portion of the Commitment; provided that the Commitment -------- may not be so -45- reduced below an amount equal to the sum of (a) the Aggregate Effective Amount --- -- of all outstanding Letters of Credit plus (b) the Swing Line Outstandings. The ---- Managing Agent shall promptly notify the Banks of any reduction or termination of the Commitment under this Section. Any voluntary reduction of the Commitment under this Section shall be applied to reduce such Reduction Amount as may be specified by Borrower or, if no such specification is made, to reduce the Reduction Amount for the most remote Reduction Date (to the extent of such reduction) and thereafter to earlier Reduction Dates (to the extent not previously applied) in the reverse order of their occurrence. 2.6 Contingent Reduction of Commitment. The Commitment shall be ---------------------------------- permanently reduced (a) as of the last day of the fourth full Fiscal Quarter ending after the Completion Date, by an amount equal to Available Cash Flow for the fiscal period consisting of that Fiscal Quarter and the three immediately preceding Fiscal Quarters and (b) as of the last day of any subsequent Fiscal Quarter if the Leverage Ratio is on that date 2.25 to 1.00 or greater, by an amount equal to fifty percent (50%) of Available Cash Flow for that Fiscal Quarter. Any reduction of the Commitment under this Section shall be applied to reduce the Reduction Amount for the most remote Reduction Date (to the extent of such reduction) and thereafter to earlier Reduction Dates (to the extent not previously applied) in the reverse order of their occurrence. 2.7 Automatic Reduction of Commitment. The Commitment shall be --------------------------------- permanently reduced as of the date upon which a Cash Equity Contribution is required to be made under the Keep-Well Agreement by an amount equal to the Banks' Percentage of the portion thereof (if any) attributable to the amount subtracted from the numerator of the Leverage Ratio pursuant to the calculation set forth in Section 2(a) of the Keep-Well Agreement. Any reduction of the ---- Commitment under this Section shall be applied to reduce the Reduction Amount for the most remote Reduction Date (to the extent of such reduction) and thereafter to earlier Reduction Dates (to the extent not previously applied) in the reverse order of their occurrence. 2.8 Scheduled Reduction of Commitment. Subject to the last sentences --------------------------------- of Sections 2.5, 2.6 and 2.7, on each Reduction Date, the Commitment shall --- --- --- automatically be permanently reduced by the applicable Reduction Amount. 2.9 Optional Termination of Commitment. Following the occurrence of ---------------------------------- a Change of Ownership or a Member Change in Control, the Requisite Banks may in their sole and absolute discretion elect, during the thirty (30) day period immediately subsequent to the later of (a) such occurrence or (b) the earlier of -------- ------- (i) receipt of Borrower's written notice to the -46- Managing Agent of such occurrence or (ii) if no such notice has been received by the Managing Agent, the date upon which the Managing Agent has actual knowledge thereof, to terminate the Commitment, in which case the Commitment shall be terminated effective on the date which is thirty (30) days subsequent to written notice from the Managing Agent to Borrower thereof. 2.10 Managing Agent's Right to Assume Funds Available for Advances. ------------------------------------------------------------- Unless the Managing Agent shall have been notified by any Bank no later than 10:00 a.m. on the Banking Day of the proposed funding by the Managing Agent of any Loan that such Bank does not intend to make available to the Managing Agent such Bank's portion of the total amount of such Loan, the Managing Agent may assume that such Bank has made such amount available to the Managing Agent on the date of the Loan and the Managing Agent may, in reliance upon such assumption, make available to Borrower a corresponding amount. If the Managing Agent has made funds available to Borrower based on such assumption and such corresponding amount is not in fact made available to the Managing Agent by such Bank, the Managing Agent shall be entitled to recover such corresponding amount on demand from such Bank. If such Bank does not pay such corresponding amount forthwith upon the Managing Agent's demand therefor, the Managing Agent promptly shall notify Borrower and Borrower shall pay such corresponding amount to the Managing Agent. The Managing Agent also shall be entitled to recover from such Bank interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Managing Agent to Borrower to the date such corresponding amount is recovered by the Managing Agent, at a rate per annum equal to the daily Federal Funds Rate. Nothing herein shall be deemed to relieve any Bank from its obligation to fulfill its share of the Commitment or to prejudice any rights which the Managing Agent or Borrower may have against any Bank as a result of any default by such Bank hereunder. 2.11 Swing Line. (a) The Swing Line Bank shall from time to time ---------- from the Completion Date through the Banking Day immediately prior to the Maturity Date make Swing Line Loans to Borrower in such amounts as Borrower may request, provided that (i) after giving effect to such Swing Line Loan, the -------- Swing Line Outstandings do not exceed $10,000,000, (ii) without the consent of all of the Banks, no Swing Line Loan may be made during the continuation of an Event of Default and (iii) the Swing Line Bank has not given at least twenty- four (24) hours prior notice to Borrower that availability under the Swing Line is suspended or terminated. Borrower may borrow, repay and reborrow under this Section. Unless notified to the contrary by the Swing Line Bank, borrowings under the Swing Line may be made in amounts which are integral multiples of $100,000 upon telephonic request by a Responsible Official of Borrower made to the Managing Agent not later than 1:00 p.m., California -47- time, on the Banking Day of the requested borrowing (which telephonic request shall be promptly confirmed in writing by telecopier). Promptly after receipt of such a request for borrowing, the Managing Agent shall provide telephonic verification to the Swing Line Bank that, after giving effect to such request, availability for Loans will exist under Section 2.1(a) (and such verification ------ shall be promptly confirmed in writing by telecopier). Unless notified to the contrary by the Swing Line Bank, each repayment of a Swing Line Loan shall be in an amount which is an integral multiple of $100,000. If Borrower instructs the Swing Line Bank to debit its demand deposit account at the Swing Line Bank in the amount of any payment with respect to a Swing Line Loan, or the Swing Line Bank otherwise receives repayment, after 3:00 p.m., California time, on a Banking Day, such payment shall be deemed received on the next Banking Day. The Swing Line Bank shall promptly notify the Managing Agent of the Swing Loan Outstandings each time there is a change therein and promptly notify the Managing Agent and the Banks if it suspends or terminates availability under the Swing Line. (a) Swing Line Loans shall bear interest at a fluctuating rate per annum equal to the Alternate Base Rate plus (if applicable) an interest rate ---- equal to the excess of the Applicable Alternate Base Rate Margin over the Applicable Commitment Fee Rate or minus (if applicable) an interest rate equal ----- to the excess of the Applicable Commitment Fee Rate over the Applicable Alternate Base Rate Margin. Interest shall be payable on such dates, not more frequent than monthly, as may be specified by the Swing Line Bank and in any event on the Maturity Date. The Swing Line Bank shall be responsible for invoicing Borrower for such interest. The interest payable on Swing Line Loans is solely for the account of the Swing Line Bank (subject to clause (d) below). (b) The Swing Line Loans shall be payable within five (5) Banking Days after demand made by the Swing Line Bank and in any event on the Maturity Date. (c) Upon the making of a Swing Line Loan in accordance with Section 2.11(a), each Bank shall be deemed to have purchased from the Swing Line Bank a - ------- participation therein in an amount equal to that Bank's Pro Rata Share of the Commitment times the amount of the Swing Line Loan. Upon demand made by the ----- Swing Line Bank, each Bank shall, according to its Pro Rata Share of the Commitment, promptly provide to the Swing Line Bank its purchase price therefor in an amount equal to its participation therein. The obligation of each Bank to so provide its purchase price to the Swing Line Bank shall be absolute and unconditional (except only demand made by the Swing Line Bank) and shall not be affected by the occurrence of a Default or Event of Default; provided that no -------- Bank shall be obligated to purchase its Pro Rata Share of -48- (i) Swing Line Loans to the extent that Swing Line Outstandings are in excess of $10,000,000 or to the extent that the sum of the Indebtedness evidenced by --- the Notes plus the Aggregate Effective Amount of all outstanding Letters of Credit plus the Swing Line Outstandings exceeds the Commitment and (ii) ---- any Swing Line Loan made (absent the consent of all of the Banks) during the continuation of an Event of Default. Each Bank that has provided to the Swing Line Bank the purchase price due for its participation in Swing Line Loans shall thereupon acquire a pro rata participation, to the extent of such payment, in the claim of the Swing Line Bank against Borrower for principal and interest and shall share, in accordance with that pro rata participation, in any principal payment made by Borrower with respect to such claim and in any interest payment made by Borrower (but only with respect to periods subsequent to the date such Bank paid the Swing Line Bank its purchase price) with respect to such claim. (d) In the event that the Swing Line Outstandings are outstanding ten (10) consecutive Banking Days, then on the next Banking Day (unless Borrower has made other arrangements acceptable to the Swing Line Bank to pay the Swing Line Outstandings in full), Borrower shall request a Loan pursuant to Section 2.1(a) ------ sufficient to pay the Swing Line Outstandings in full. In addition, upon any demand for payment of the Swing Line Outstandings by the Swing Line Bank (unless Borrower has made other arrangements acceptable to the Swing Line Bank to reduce the Swing Line Outstandings to $0), Borrower shall request a Loan pursuant to Section 2.1(a) sufficient to repay all Swing Line Outstandings (and, for this ------ purpose, Section 2.1(d) shall not apply). In each case, the Managing Agent ------ shall automatically provide the responsive Advances made by each Bank to the Swing Line Bank (which the Swing Line Bank shall then apply to the Swing Line Outstandings). In the event that Borrower fails to request a Loan within the time specified by Section 2.2 on any such date, the Managing Agent may, but is --- not required to, without notice to or the consent of Borrower, cause Advances to be made by the Banks under the Commitment in amounts which are sufficient to reduce the Swing Line Outstandings as required above. The conditions precedent set forth in Article 9 shall not apply to Advances to be made by the Banks --------- pursuant to the three preceding sentences but the Banks shall not be obligated to make such Advances to the extent that the conditions set forth in Section 2.11(a)(i), (ii) and (iii) were not satisfied as to any Swing Line Loan which is - ---------- ---- ----- part of such Swing Line Outstandings. The proceeds of such Advances shall be paid directly to the Swing Line Bank for application to the Swing Line Outstandings. 2.12 Collateral and Guaranty. The Obligations shall be secured by ----------------------- the Collateral pursuant to the Collateral Documents, be from time to time guaranteed by the Subsidiaries of Borrower (if any) pursuant to the Subsidiary Guaranty and -49- enjoy the benefits of the Completion Guaranty and Keep-Well Agreement. 2.13 Senior Indebtedness. The Obligations shall be "Senior ------------------- Indebtedness" with respect to all Subordinated Obligations and all payments with respect thereto shall be subject to Section 6.1. --- -50- PAYMENTS AND FEES ----------------- 3.1 Principal and Interest. ---------------------- (a) Interest shall be payable on the outstanding daily unpaid principal amount of each Advance from the date thereof until payment in full is made and shall accrue and be payable at the rates set forth or provided for herein before and after Default, before and after maturity, before and after judgment, and before and after the commencement of any proceeding under any Debtor Relief Law, with interest on overdue interest at the Default Rate to the fullest extent permitted by applicable Laws. (b) Interest accrued on each Alternate Base Rate Loan on each Quarterly Payment Date, shall be due and payable on that day. Except as ------ otherwise provided in Section 3.9, the unpaid principal amount of any Alternate Base Rate Loan shall bear interest at a fluctuating rate per annum equal to the Alternate Base Rate plus the Applicable Alternate Base ---- Rate Margin. Each change in the interest rate under this Section 3.1(b) ------ due to a change in the Alternate Base Rate shall take effect simultaneously with the corresponding change in the Alternate Base Rate. (c) Interest accrued on each Eurodollar Rate Loan which is for a term of three months or less shall be due and payable on the last day of the related Eurodollar Period. Interest accrued on each other Eurodollar Rate Loan shall be due and payable on the date which is three months after the date such Eurodollar Rate Loan was made (and, in the event that all of the Banks have approved a Eurodollar Period of longer than six months, every three months thereafter through the last day of the Eurodollar Period) and on the last day of the related Eurodollar Period. Except as otherwise ------ provided in Section 3.9, the unpaid principal amount of any Eurodollar --- Rate Loan shall bear interest at a rate per annum equal to the Eurodollar Rate for that Eurodollar Rate Loan plus the Applicable Eurodollar Rate ---- Margin. (d) If not sooner paid, the principal Indebted ness evidenced by the Notes shall be payable as follows: (i) the amount, if any, by which the sum of --- (A) the principal outstanding Indebtedness evidenced by the Notes, plus (B) the Aggregate Effective Amount of all outstanding Letters of ---- Credit plus (C) the Swing Line Outstandings at any time exceeds the ---- then applicable Commitment, shall be payable immediately; and -51- (ii) the principal Indebtedness evidenced by the Notes shall in any event be payable on the Maturity Date. (e) The Notes may, at any time and from time to time, voluntarily be paid or prepaid in whole or in part without premium or penalty, except that with ------ respect to any voluntary prepayment under this Section (i) any partial prepayment shall be not less than $5,000,000, (ii) the Managing Agent shall have received written notice of any prepayment by 9:00 a.m. California time on the date of prepayment (which must be a Banking Day) in the case of an Alternate Base Rate Loan, and, in the case of a Euro dollar Rate Loan, three (3) Banking Days before the date of prepayment, which notice shall identify the date and amount of the prepayment and the Loan(s) being prepaid, (iii) each prepayment of principal on any Eurodollar Rate Loan shall be accompanied by payment of interest accrued to the date of payment on the amount of principal paid and (iv) any payment or prepayment of all or any part of any Eurodollar Rate Loan on a day other than the last day of the applicable Interest Period shall be subject to Section 3.8(e). ------ Promptly following receipt of a notice of prepayment under clause (ii) above, the Managing Agent shall notify each Bank by telephone or telecopier (and if by telephone, promptly confirmed by telecopier) of the date and amount thereof. 3.2 Arrangement Fee. On the Closing Date, Borrower shall pay to the --------------- Arranger an arrangement fee in the amount heretofore agreed upon by letter agreement between Borrower and the Arranger. Such arrangement fee is for the services of the Arranger in arranging the credit facilities under this Agreement and is fully earned when paid. The arrangement fee paid to the Arranger is solely for its own account and is nonrefundable. 3.3 Upfront Fees. On the Closing Date, Borrower shall pay to the ------------ Managing Agent, for the accounts of the Managing Agent and the Co-Agent, upfront fees in the amounts heretofore agreed upon by letter agreement among Borrower, the Managing Agent and the Arranger. On the Closing Date, Borrower shall further pay to the Managing Agent, for the respective accounts of the Banks (other than the Managing Agent and Co-Agent) pro rata according to their Pro - ------ ---- Rata Share of the Commitment, an upfront fee in an amount equal to .75% (75 basis points) of the amount of the Pro Rata Share of the Commitment of each such Bank. Such upfront fees are for the credit facilities committed by each Bank under this Agreement and are fully earned when paid. The upfront fees paid to each Bank are solely for its own account and are nonrefundable. -52- 3.4 Commitment Fees. From the Closing Date, Borrower shall pay to --------------- the Managing Agent, for the ratable accounts of the Banks pro rata according to their Pro Rata Share of the Commitment, a commitment fee equal to the Applicable Commitment Fee Rate per annum times the average daily amount by which the ----- Commitment exceeds the sum of (a) the aggregate principal amount outstanding ------ under the Notes (but not the Swing Line Outstandings) plus (b) the Aggregate ------- ---- Effective Amount under all outstanding Standby Letters of Credit. The commitment fee shall be payable quarterly in arrears on each Quarterly Payment Date and on the Maturity Date. 3.5 Letter of Credit Fees. With respect to each Letter of Credit, --------------------- Borrower shall pay the following fees: (a) concurrently with the issuance of each Standby Letter of Credit, a letter of credit issuance fee to the Issuing Bank for the sole account of the Issuing Bank, in an amount set forth in a letter agreement between Borrower and the Issuing Bank; (b) concurrently with the issuance of each Standby Letter of Credit, to the Managing Agent for the ratable account of the Banks in accordance with their Pro Rata Share of the Commitment, a standby letter of credit fee in an amount equal to the Applicable Standby Letter of Credit Fee as of the date of such issuance times the face ----- amount of such Standby Letter of Credit through the termination or expiration of such Standby Letter of Credit, which the Managing Agent shall promptly pay to the Banks; and (c) concurrently with each issuance, negotiation, drawing or amendment of each Commercial Letter of Credit, to the Issuing Bank for the sole account of the Issuing Bank, issuance, negotiation, drawing and amendment fees in the amounts set forth from time to time as the Issuing Bank's published scheduled fees for such services. Each of the fees payable with respect to Letters of Credit under this Section is earned when due and is nonrefundable. 3.6 Agency Fees. Borrower shall pay to the Managing Agent an agency ----------- fee in such amounts and at such times as heretofore agreed upon by letter agreement between Borrower and the Managing Agent. The agency fee is for the services to be performed by the Managing Agent in acting as Managing Agent and is fully earned on the date paid. The agency fee paid to the Managing Agent is solely for its own account and is nonrefundable. -53- 3.7 Increased Commitment Costs. If any Bank shall determine in good -------------------------- faith that the introduction after the Closing Date of any applicable law, rule, regulation or guideline regarding capital adequacy, or any change therein or any change in the interpretation or administration thereof by any central bank or other Governmental Agency charged with the interpretation or administration thereof, or compliance by such Bank (or its Eurodollar Lending Office) or any corporation controlling the Bank, with any request, guideline or directive regarding capital adequacy (whether or not having the force of Law) of any such central bank or other authority, affects or would affect the amount of capital required or expected to be main tained by such Bank or any corporation controlling such Bank and (taking into consideration such Bank's or such corporation's policies with respect to capital adequacy and such Bank's desired return on capital) determines in good faith that the amount of such capital is increased, or the rate of return on capital is reduced, as a consequence of its obligations under this Agreement, then, within ten (10) Banking Days after demand of such Bank, Borrower shall pay to such Bank, from time to time as specified in good faith by such Bank, additional amounts sufficient to compensate such Bank in light of such circumstances, to the extent reasonably allocable to such obligations under this Agreement, provided that Borrower shall -------- not be obligated to pay any such amount which arose prior to the date which is ninety (90) days preceding the date of such demand or is attributable to periods prior to the date which is ninety (90) days preceding the date of such demand. Any request for compensation by a Bank under this Section shall set forth the basis upon which it has been determined that such an amount is due from Borrower, a calculation of the amount due, and a certification that the corresponding costs or diminished rate of return on capital have been incurred or sustained by the Bank. If Borrower becomes obligated to pay a material amount under this Section to any Bank, that Bank will be subject to removal in accordance with Section 12.27; provided that Borrower shall have paid such ----- -------- amount to that Bank and that Borrower, within the thirty (30) day period following the date of such payment, shall have notified that Bank in writing of its intent to so remove the Bank. Each Bank's determination of such amounts shall be conclusive in the absence of manifest error. -54- 3.8 Eurodollar Costs and Related Matters. ------------------------------------ (a) In the event that any Governmental Agency imposes on any Bank any reserve or comparable requirement (including any emergency, supplemental or --------- other reserve) with respect to the Eurodollar Obligations of that Bank, Borrower shall pay that Bank within five (5) Banking Days after demand all amounts necessary to compensate such Bank (determined as though such Bank's Eurodollar Lending Office had funded 100% of its Eurodollar Rate Advance in the Designated Eurodollar Market) in respect of the imposition of such reserve requirements. The Bank's determination of such amount shall be conclusive in the absence of manifest error. (b) If, after the date hereof, the existence or occurrence of any Special Eurodollar Circumstance: (1) shall subject any Bank or its Eurodollar Lending Office to any tax, duty or other charge or cost with respect to any Eurodollar Rate Advance, any of its Notes evidencing Eurodollar Rate Loans or its obligation to make Eurodollar Rate Advances, or shall change the basis of taxation of payments to any Bank attributable to the principal of or interest on any Eurodollar Rate Advance or any other amounts due under this Agreement in respect of any Eurodollar Rate Advance, any of its Notes evidencing Eurodollar Rate Loans or its obligation to make Eurodollar Rate Advances, excluding (i) taxes imposed on or measured --------- in whole or in part by its overall net income by (A) any jurisdiction (or political subdivision thereof) in which it is organized or maintains its principal office or Eurodollar Lending Office or (B) any jurisdiction (or political subdivision thereof) in which it is "doing business," and (ii) any withholding taxes or other taxes based on gross income imposed by the United States of America for any period with respect to which it has failed to provide Borrower with the appropriate form or forms required by Section 12.21, to the extent ----- such forms are then available under applicable Laws; (2) shall impose, modify or deem applicable any reserve not applicable or deemed applicable on the date hereof (including any --------- reserve imposed by the Board of Governors of the Federal Reserve System, special deposit, capital or similar requirements against assets of, deposits with or for the account of, or credit extended by, any Bank or its Eurodollar Lending Office); or -55- (3) shall impose on any Bank or its Eurodollar Lending Office or the Designated Eurodollar Market any other condition affecting any Eurodollar Rate Advance, any of its Notes evidencing Eurodollar Rate Loans, its obligation to make Eurodollar Rate Advances or this Agreement, or shall otherwise affect any of the same; and the result of any of the foregoing, as determined in good faith by such Bank, increases the cost to such Bank or its Eurodollar Lending Office of making or maintaining any Eurodollar Rate Advance or in respect of any Eurodollar Rate Advance, any of its Notes evidencing Eurodollar Rate Loans or its obligation to make Eurodollar Rate Advances or reduces the amount of any sum received or receivable by such Bank or its Eurodollar Lending Office with respect to any Eurodollar Rate Advance, any of its Notes evidencing Eurodollar Rate Loans or its obligation to make Eurodollar Rate Advances (assuming such Bank's Eurodollar Lending Office had funded 100% of its Eurodollar Rate Advance in the Designated Eurodollar Market), then, within five (5) Banking Days after demand by such Bank (with a copy to the Managing Agent), Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank for such increased cost or reduction (determined as though such Bank's Eurodollar Lending Office had funded 100% of its Eurodollar Rate Advance in the Designated Eurodollar Market). A statement of any Bank claiming compensation under this subsection and setting forth in reasonable detail the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. (c) If, after the date hereof, the existence or occurrence of any Special Eurodollar Circumstance shall, in the good faith opinion of any Bank, make it unlawful or impossible for such Bank or its Eurodollar Lending Office to make, maintain or fund its portion of any Eurodollar Rate Loan, or materially restrict the authority of such Bank to purchase or sell, or to take deposits of, Dollars in the Designated Eurodollar Market, or to determine or charge interest rates based upon the Eurodollar Rate, and such Bank shall so notify the Managing Agent, then such Bank's obligation to make Eurodollar Rate Advances shall be suspended for the duration of such illegality or impossibility and the Managing Agent forthwith shall give notice thereof to the other Banks and Borrower. Upon receipt of such notice, the outstanding principal amount of such Bank's Eurodollar Rate Advances, together with accrued interest thereon, automatically shall be converted to Alternate Base Rate Advances on either (1) the last day of the Eurodollar Period(s) applicable to such Eurodollar Rate Advances if such Bank may lawfully continue to -56- maintain and fund such Eurodollar Rate Advances to such day(s) or (2) immediately if such Bank may not lawfully continue to fund and maintain such Eurodollar Rate Advances to such day(s), provided that in such event -------- the conversion shall not be to payment of a prepayment fee under clause (e) of this Section. Each Bank agrees to endeavor promptly to notify Borrower of any event of which it has actual knowledge, occurring after the Closing Date, which will cause that Bank to notify the Managing Agent under this Section, and agrees to designate a different Eurodollar Lending Office if such designation will avoid the need for such notice and will not, in the good faith judgment of such Bank, otherwise be materially disadvantageous to such Bank. In the event that any Bank is unable, for the reasons set forth above, to make, maintain or fund its portion of any Eurodollar Rate Loan, such Bank shall fund such amount as an Alternate Base Rate Advance for the same period of time, and such amount shall be treated in all respects as an Alternate Base Rate Advance. Any Bank whose obligation to make Eurodollar Rate Advances has been suspended under this Section shall promptly notify the Managing Agent and Borrower of the cessation of the Special Eurodollar Circumstance which gave rise to such suspension. (d) If, with respect to any proposed Eurodollar Rate Loan: (1) the Managing Agent reasonably determines that, by reason of circumstances affecting the Designated Eurodollar Market generally that are beyond the reasonable control of the Banks, deposits in Dollars (in the applicable amounts) are not being offered to any Bank in the Designated Eurodollar Market for the applicable Eurodollar Period; or (2) the Requisite Banks advise the Managing Agent that the Eurodollar Rate as determined by the Managing Agent (i) does not represent the effective pricing to such Banks for deposits in Dollars in the Designated Eurodollar Market in the relevant amount for the applicable Eurodollar Period, or (ii) will not adequately and fairly reflect the cost to such Banks of making the applicable Eurodollar Rate Advances; then the Managing Agent forthwith shall give notice thereof to Borrower and the Banks, whereupon until the Managing Agent notifies Borrower that the circumstances giving rise to such suspension no longer exist, the obligation of the Banks to make any future Eurodollar Rate Advances shall be suspended unless (but only if clause (2) above is the basis for such ------ --- suspension) Borrower notifies -57- the Managing Agent in writing that it elects to pay the Enhanced Applicable Eurodollar Rate Margin with respect to all Eurodollar Rate Loans made during such period. The Enhanced Applicable Eurodollar Rate Margin shall be the sum of (i) the Applicable Eurodollar Rate Margin plus (ii) such interest rate margin as the Requisite Banks specify is necessary to adjust the Eurodollar Rate to a rate which represents the effective pricing to such Banks for deposits of Dollars in the Designated Eurodollar Market in the relevant amount for the applicable Eurodollar Period and which adequately and fairly reflects the cost to such Banks of making the applicable Eurodollar Rate Advances. (e) Upon payment or prepayment of any Eurodollar Rate Advance (other than ----- ---- as the result of a conversion required under clause (c) of this Section) on a day other than the last day in the applicable Eurodollar Period (whether voluntarily, involuntarily, by reason of acceleration, or otherwise), or upon the failure of Borrower (for a reason other than the failure of a Bank to make an Advance) to borrow on the date or in the amount specified for a Eurodollar Rate Loan in any Request for Loan, or upon the failure of Borrower to prepay a Eurodollar Rate Loan on the date specified in a notice of prepayment delivered to the Managing Agent pursuant to Section 3.1(e), ------ Borrower shall pay to the appropriate Bank within ten (10) Banking Days after demand a prepayment fee, failure to borrow fee or failure to prepay fee, as the case may be (determined as though 100% of the Eurodollar Rate Advance had been funded in the Designated Eurodollar Market), equal to the sum of: --- -- (1) the principal amount of the Eurodollar Rate Advance prepaid or not borrowed or prepaid, as the case may be, times [the number of ----- days from and including the date of prepayment or failure to borrow or prepay, as applicable, to but excluding the last day in the applicable Eurodollar Period], divided by 360, times the applicable Interest ---------- ----- Differential (provided that the product of the foregoing formula must -------- be a positive number); plus ---- (2) all out-of-pocket expenses incurred by the Bank reasonably attributable to such payment, prepayment or failure to borrow. Each Bank's determination of the amount of any prepayment fee, failure to borrow fee or failure to prepay fee payable under this Section shall be conclusive in the absence of manifest error. -58- (f) Each Bank agrees to endeavor promptly to notify Borrower of any event of which it has actual knowledge, occurring after the Closing Date, which will entitle such Bank to compensation pursuant to clause (a) or clause (b) - - of this Section, and agrees to designate a different Eurodollar Lending Office if such designation will avoid the need for or reduce the amount of such compensation and will not, in the good faith judgment of such Bank, otherwise be materially disadvantageous to such Bank. Any request for compensation by a Bank under this Section shall set forth the basis upon which it has been determined that such an amount is due from Borrower, a calculation of the amount due, and a certification that the corresponding costs have been incurred by the Bank. (g) If any Bank claims compensation or is excused from making or continuing Eurodollar Rate Loans under this Section: (i) Borrower may at any time, upon at least four (4) Eurodollar Banking Days' prior notice to the Managing Agent and such Bank and upon payment in full of the amounts provided for in this Section through the date of such payment plus any prepayment fee (subject to clause (c) of this Section) required by clause (e) of this - - Section, pay in full the affected Eurodollar Rate Advances of such Bank or request that such Eurodollar Rate Advances be converted to Alternate Base Rate Advances; and (ii) In the case where Borrower becomes obligated to pay a material amount under this Section 3.8 to any Bank, --- that Bank will be subject to removal in accordance with Section 12.27; provided that Borrower shall have paid such amount ----- -------- to that Bank and that Borrower, within the thirty (30) day period following the date of such payment, shall have notified that Bank in writing of its intent to so remove the Bank. 3.9 Late Payments. If any installment of principal or interest or ------------- any fee or cost or other amount payable under any Loan Document to the Managing Agent or any Bank is not paid when due, it shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to the sum of the ------ Alternate Base Rate plus the Applicable Alternate Base Rate Margin plus 2%, to ---- ---- the fullest extent permitted by applicable Laws. Accrued and unpaid interest on past due amounts (including interest on past due interest) shall be compounded --------- monthly, on the last day of each calendar month, to the fullest extent permitted by applicable Laws. -59- 3.10 Computation of Interest and Fees. Computation of interest on -------------------------------- Alternate Base Rate Loans and all fees under this Agreement shall be calculated on the basis of a year of 365 or 366 days, as the case may be, and the actual number of days elapsed; computation of interest on Eurodollar Rate Loans shall be calculated on the basis of a year of 360 days and the actual number of days elapsed. Borrower acknowledge that such latter calculation method will result in a higher yield to the Banks than a method based on a year of 365 or 366 days. Interest shall accrue on each Loan for the day on which the Loan is made; interest shall not accrue on a Loan, or any portion thereof, for the day on which the Loan or such portion is paid. Any Loan that is repaid on the same day on which it is made shall bear interest for one day. Notwithstanding anything in this Agreement to the contrary, interest in excess of the maximum amount permitted by applicable Laws shall not accrue or be payable hereunder or under the Notes, and any amount paid as interest hereunder or under the Notes which would otherwise be in excess of such maximum permitted amount shall instead be treated as a payment of principal. 3.11 Non-Banking Days. If any payment to be made by Borrower or any ---------------- other Party under any Loan Document shall come due on a day other than a Banking Day, payment shall instead be considered due on the next succeeding Banking Day and the extension of time shall be reflected in computing interest and fees. 3.12 Manner and Treatment of Payments. -------------------------------- (a) Each payment hereunder (except payments pursuant to Sections ------ 2.10, 3.7, 3.8, 12.3, 12.11 and 12.22) or on the Notes or under any other ---- --- --- ---- ----- ----- Loan Document shall be made to the Managing Agent, at the Managing Agent's Office, for the account of each of the Banks or the Managing Agent, as the case may be, in immediately available funds not later than 11:00 a.m. (other than payments with respect to Swing Line Loans, which must be ----- received by 3:00 p.m.), California time, on the day of payment (which must be a Banking Day). All payments received after such time, on any Banking Day, shall be deemed received on the next succeeding Banking Day. The amount of all payments received by the Managing Agent for the account of each Bank shall be immediately paid by the Managing Agent to the applicable Bank in immediately available funds and, if such payment was received by the Managing Agent by 11:00 a.m., California time, on a Banking Day and not so made available to the account of a Bank on that Banking Day, the Managing Agent shall reimburse that Bank for the cost to such Bank of funding the amount of such payment at the Federal Funds Rate. All payments shall be made in lawful money of the United States of America. -60- (b) Each payment or prepayment on account of any Loan shall be applied pro rata according to the outstanding Advances made by each Bank comprising such Loan. (c) Each Bank shall use its best efforts to keep a record (which may be in tangible or electronic or other intangible form) of Advances made by it and payments received by it with respect to each of its Notes and, subject to Section 11.6(g), such record shall, as against Borrower, be presumptive ------- evidence of the amounts owing. Notwithstanding the foregoing sentence, the failure by any Bank to keep such a record shall not affect Borrower's obligation to pay the Obligations. (d) Each payment of any amount payable by Borrower or any other Party under this Agreement or any other Loan Document shall be made free and clear of, and without reduction by reason of, any taxes, assessments or other charges imposed by any Governmental Agency, central bank or comparable authority, excluding (i) taxes imposed on or measured in whole --------- or in part by overall net income, gross income or gross receipts and franchise taxes imposed on any Bank by (A) any jurisdiction (or political subdivision thereof) in which it is organized or maintains its principal office or Eurodollar Lending Office or (B) any jurisdiction (or political subdivision thereof) in which it is "doing business", (ii) any withholding taxes or other taxes based on gross income imposed by the United States of America that are not attributable to any change in any Law or the interpretation or administration of any Law by any Governmental Agency and (iii) any withholding tax or other taxes based on gross income imposed by the United States of America for any period with respect to which it has failed to provide Borrower with the appropriate form or forms required by Section 12.21, to the extent such forms are then available under applicable ----- Laws (all such non-excluded taxes, assessments or other charges being hereinafter referred to as "Taxes"). To the extent that Borrower is obligated by applicable Laws to make any deduction or withholding on account of Taxes from any amount payable to any Bank under this Agreement, Borrower shall (i) make such deduction or withholding and pay the same to the relevant Governmental Agency and (ii) pay such additional amount to that Bank as is necessary to result in that Bank's receiving a net after-Tax amount equal to the amount to which that Bank would have been entitled under this Agreement absent such deduction or withholding. If and when receipt of such payment results in an excess payment or credit to that Bank on account of such Taxes, that Bank shall promptly refund such excess to Borrower. If Borrower becomes obligated to pay a material amount under this Section to any Bank, that Bank will be subject to removal in -61- accordance with Section 12.27; provided that Borrower shall have paid such ----- -------- amount to that Bank and that Borrower, within the thirty (30) day period following the date of such payment, shall have notified that Bank in writing of its intent to so remove the Bank. 3.13 Funding Sources. Nothing in this Agreement shall be deemed to --------------- obligate any Bank to obtain the funds for any Loan or Advance in any particular place or manner or to constitute a representation by any Bank that it has obtained or will obtain the funds for any Loan or Advance in any particular place or manner. 3.14 Failure to Charge Not Subsequent Waiver. Any decision by the --------------------------------------- Managing Agent or any Bank not to require payment of any interest (including --------- interest at the Default Rate), fee, cost or other amount payable under any Loan Document, or to calculate any amount payable by a particular method, on any occasion shall in no way limit or be deemed a waiver of the Managing Agent's or such Bank's right to require full payment of any interest (including interest at --------- the Default Rate), fee, cost or other amount payable under any Loan Document, or to calculate an amount payable by another method that is not inconsistent with this Agreement, on any other or subsequent occasion. 3.15 Managing Agent's Right to Assume Payments Will be Made by --------------------------------------------------------- Borrower. Unless the Managing Agent shall have been notified by Borrower prior - -------- to the date on which any payment to be made by Borrower hereunder is due that Borrower does not intend to remit such payment, the Managing Agent may, in its discretion, assume that Borrower has remitted such payment when so due and the Managing Agent may, in its discretion and in reliance upon such assumption, make available to each Bank on such payment date an amount equal to such Bank's share of such assumed payment. If Borrower has not in fact remitted such payment to the Managing Agent, each Bank shall forthwith on demand repay to the Managing Agent the amount of such assumed payment made available to such Bank, together with interest thereon in respect of each day from and including the date such amount was made available by the Managing Agent to such Bank to the date such amount is repaid to the Managing Agent at the Federal Funds Rate. 3.16 Fee Determination Detail. The Managing Agent, and any Bank, ------------------------ shall provide reasonable detail to Borrower regarding the manner in which the amount of any payment to the Managing Agent and the Banks, or that Bank, under Article 3 has been determined, concurrently with demand for such payment. - --------- 3.17 Survivability. All of Borrower's obligations under Sections 3.7 ------------- --- and 3.8 shall survive for ninety (90) days following the date on which the --- Commitment is terminated, all -62- Loans hereunder are fully paid and all Letters of Credit have expired. -63- REPRESENTATIONS AND WARRANTIES ------------------------------ Borrower represents and warrants to the Banks that: 4.1 Existence and Qualification; Power; Compliance With Laws. -------------------------------------------------------- Borrower is a limited liability company duly formed, validly existing and in good standing under the Laws of Nevada. Each of the Guarantors and each of the Members is a corporation duly formed, validly existing and in good standing under the Laws of their respective States of formation. Borrower, each Member and each Guarantor is duly qualified or registered to transact business and is in good standing in each other jurisdiction in which the conduct of its business or the ownership or leasing of its Properties makes such qualification or registration necessary, except where the failure so to qualify or register and ------ to be in good standing would not constitute a Material Adverse Effect. Borrower and each Guarantor has all requisite corporate or other organizational power and authority to conduct its business, to own and lease its Properties and to execute and deliver each Loan Document to which it is a Party and to perform its Obligations. All outstanding interests in the equity capital of Borrower are duly authorized, validly issued, fully paid and non-assessable, and no holder thereof has any enforceable right of rescission under any applicable state or federal securities Laws. Borrower is in compliance with all Requirements of Laws applicable to its business as at present conducted, has obtained all authorizations, consents, approvals, orders, licenses and permits from, and has accomplished all filings, registrations and qualifications with, or obtained exemptions from any of the foregoing from, any Governmental Agency that are necessary for the transaction of its business as at present conducted, except ------ where the failure so to comply, file, register, qualify or obtain exemptions does not constitute a Material Adverse Effect. The Banks acknowledge that Borrower is not required to hold any licenses under applicable Gaming Laws until the Completion Date and will not apply for such licenses until shortly prior to the Completion Date. 4.2 Authority; Compliance With Other Agreements and Instruments and --------------------------------------------------------------- Government Regulations. The execution, delivery and performance by Borrower, - ---------------------- each Member and each Guarantor of the Loan Documents to which it is a Party have been duly authorized by all necessary corporate or other organizational action, and do not and will not: (a) Require any consent or approval not hereto fore obtained of any member, partner, director, stockholder, security holder or creditor of such Party; -64- (b) Violate or conflict with any provision of such Party's charter, articles of organization or incorporation, operating agreement or bylaws, as applicable; (c) Result in or require the creation or imposition of any Lien or Right of Others upon or with respect to any Property now owned or leased or hereafter acquired by such Party; (d) Violate any Requirement of Law applicable to such Party, subject to obtaining the authorizations from, or filings with, the Governmental Agencies described in Schedule 4.3; ------------ (e) Result in a breach of or constitute a default under, or cause or permit the acceleration of any obligation owed under, any indenture or loan or credit agreement or any other Contractual Obligation to which such Party is a party or by which such Party or any of its Property is bound or affected; and none of Borrower, any Member or any Guarantor is in violation of, or default under, any Requirement of Law or Contractual Obligation, or any indenture, loan or credit agreement described in Section 4.2(e), in any respect that constitutes ------ a Material Adverse Effect. 4.3 No Governmental Approvals Required. Except as set forth in ---------------------------------- ------ Schedule 4.3 or previously obtained or made, no authorization, consent, approval, order, license or permit from, or filing, registration or qualification with, any Governmental Agency is or will be required to authorize or permit under applicable Laws the execution, delivery and performance by Borrower and its Subsidiaries or any Member or Guarantor of the Loan Documents to which it is a Party. All authorizations from, or filings with, any Governmental Agency described in Schedule 4.3 will be accomplished as of the ------------ Closing Date. -65- 4.4 Subsidiaries. ------------ (a) Schedule 4.4 hereto correctly sets forth the names, form of legal ------------ entity, number of shares of capital stock issued and outstanding, number of shares owned by Borrower or a Subsidiary of Borrower (specifying such owner) and jurisdictions of organization of all Subsidiaries of Borrower. Except as described in Schedule 4.4 or Schedule 6.17, Borrower does not own ------------ ------------- any capital stock, equity interest or debt security which is convertible, or exchangeable, for capital stock or equity interests in any Person. Unless otherwise indicated in Schedule 4.4, all of the outstanding shares ------------ of capital stock, or all of the units of equity interest, as the case may be, of each Subsidiary are owned of record and beneficially by Borrower, there are no outstanding options, warrants or other rights to purchase capital stock of any such Subsidiary, and all such shares or equity interests so owned are duly authorized, validly issued, fully paid and non- assessable, and were issued in compliance with all applicable state and federal securities and other Laws, and are free and clear of all Liens and Rights of Others, except for Permitted Encumbrances and Permitted Rights of ------ Others. (b) Each Subsidiary of Borrower is a business entity duly formed, validly existing and in good standing under the Laws of its jurisdiction of organization, is duly qualified to do business as a foreign organization and is in good standing as such in each jurisdiction in which the conduct of its business or the ownership or leasing of its Properties makes such qualification necessary (except where the failure to be so duly qualified ------ and in good standing does not constitute a Material Adverse Effect), and has all requisite power and authority to conduct its business and to own and lease its Properties. (c) Each Subsidiary of Borrower is in compliance with all Requirements of Law applicable to its business and has obtained all authorizations, consents, approvals, orders, licenses, and permits from, and each such Subsidiary has accomplished all filings, registrations, and qualifications with, or obtained exemptions from any of the foregoing from, any Governmental Agency that are necessary for the transaction of its business, except where the failure to be in such compliance, obtain such ------ authorizations, consents, approvals, orders, licenses, and permits, accomplish such filings, registrations, and qualifications, or obtain such exemptions, does not constitute a Material Adverse Effect. -66- 4.5 Financial Statements. Borrower has furnished to the Banks (a) -------------------- the audited consolidated financial statements of each of the Guarantors for the Fiscal Year ended December 31, 1994, (b) the unaudited consolidated financial statements of each of the Guarantors for the Fiscal Quarter June 30, 1995 and (c) the unaudited balance sheet of Borrower as of June 30, 1995. The financial statements described in clauses (a) and (b) fairly present in all material - - respects the financial condition, results of operations and changes in financial position of each of the Guarantors, and the balance sheet described in clause (c), fairly presents the financial condition of Borrower, in each case as of - -- such dates and for such periods in conformity with Generally Accepted Accounting Principles, consistently applied. 4.6 No Other Liabilities; No Material Adverse Changes. Borrower does ------------------------------------------------- not have any material liability or material contingent liability required under Generally Accepted Accounting Principles to be reflected or disclosed and not reflected or disclosed in the balance sheet described in Section 4.5(c), other ----- than liabilities and contingent liabilities arising in the ordinary course of business since the date of such balance sheet. As of the Closing Date, no circumstance or event has occurred that constitutes a Material Adverse Effect since June 30, 1995. As of any date subsequent to the Closing Date, no circumstance or event has occurred that constitutes a Material Adverse Effect since the Closing Date. 4.7 Title to Property. Borrower has valid title to the Property ----------------- reflected in the balance sheet described in Section 4.5(c), other than items of ------ Property or exceptions to title which are in each case immaterial to Borrower, and Property subsequently sold or disposed of in the ordinary course of business, free and clear of all Liens and Rights of Others, other than Permitted ---------- Encumbrances, Permitted Rights of Others and Liens or Rights of Others described in Schedule 4.7 or permitted by Section 6.8. ------------ --- 4.8 Intangible Assets. Borrower owns, or possesses the right to use ----------------- to the extent necessary in its businesses, all material trademarks, trade names, copyrights, patents, patent rights, computer software, licenses and other Intangible Assets that are used in the conduct of its businesses as now operated, and no such Intangible Asset, to the best knowledge of Borrower, conflicts with the valid trademark, trade name, copyright, patent, patent right or Intangible Asset of any other Person to the extent that such conflict constitutes a Material Adverse Effect. Schedule 4.8 sets forth all trademarks, ------------ trade names and trade styles owned by Borrower. 4.9 Public Utility Holding Company Act. Neither any of Borrower nor ---------------------------------- any of its Subsidiaries is a "holding company", or a "subsidiary company" of a "holding company", or an "affil- -67- iate" of a "holding company" or of a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. 4.10 Litigation. Except for (a) any matter fully covered as to ---------- ------ subject matter and amount (subject to applicable deductibles and retentions) by insurance as to which the insurance carrier has been notified and has not asserted lack of subject matter coverage or reserved its right to do so, (b) any matter, or series of related matters, involving a claim against Borrower or any of its Subsidiaries of less than $5,000,000, (c) matters of an administrative nature not involving a claim or charge against Borrower or any of its Subsidiaries and (d) matters set forth in Schedule 4.10, there are no actions, ------------- suits, proceedings or investigations pending as to which Borrower or any of its Subsidiaries have been served or have received notice or, to the best knowledge of Borrower, threatened against or affecting Borrower or any of its Subsidiaries or any Property of any of them before any Govern mental Agency. 4.11 Binding Obligations. Each of the Loan Documents to which ------------------- Borrower, the Members or the Guarantors is a Party will, when executed and delivered by such Party, constitute the legal, valid and binding obligation of such Party, enforceable against such Party in accordance with its terms, except ------ as enforcement may be limited by Debtor Relief Laws, Gaming Laws or equitable principles relating to the granting of specific performance and other equitable remedies as a matter of judicial discretion. 4.12 No Default. No event has occurred and is continuing that is a ---------- Default or Event of Default. 4.13 ERISA. ----- (a) With respect to each Pension Plan: (i) such Pension Plan complies in all material respects with ERISA and any other applicable Laws to the extent that noncompliance could reasonably be expected to have a Material Adverse Effect; (ii) such Pension Plan has not incurred any "accumulated funding deficiency" (as defined in Section 302 of ERISA) that could reasonably be expected to have a Material Adverse Effect; (iii) no "reportable event" (as defined in Section 4043 of ERISA) has -68- occurred that could reasonably be expected to have a Material Adverse Effect; and (iv) neither Borrower nor any of its Subsidiaries has engaged in any non-exempt "prohibited transaction" (as defined in Section 4975 of the Code) that could reasonably be expected to have a Material Adverse Effect. (b) Neither Borrower nor any of its Subsidiaries has incurred or expects to incur any withdrawal liability to any Multiemployer Plan that could reasonably be expected to have a Material Adverse Effect. 4.14 Regulations G, T, U and X; Investment Company Act. No part of ------------------------------------------------- the proceeds of any Loan hereunder will be used to purchase or carry, or to extend credit to others for the purpose of purchasing or carrying, any Margin Stock in violation of Regulations G, T, U and X. Neither any of Borrower nor any of its Subsidiaries is or is required to be registered as an "investment company" under the Investment Company Act of 1940. 4.15 Disclosure. No statement made by a Senior Officer of Borrower ---------- or either Guarantor to the Managing Agent or any Bank in connection with this Agreement, or in connection with any Loan, as of the date thereof contained any untrue statement of a material fact or omitted a material fact necessary to make the statement made not misleading in light of all the circumstances existing at the date the statement was made. 4.16 Tax Liability. Borrower and its Subsidiaries have filed all tax ------------- returns which are required to be filed, and have paid, or made provision for the payment of, all taxes with respect to the periods, Property or transactions covered by said returns, or pursuant to any assessment received by Borrower or its Subsidiaries, except (a) such taxes, if any, as are being contested in good ------ faith by appropriate proceedings and as to which adequate reserves have been established and maintained and (b) immaterial taxes so long as no material Property of Borrower or any of its Subsidiaries is in jeopardy of being seized, levied upon or forfeited. 4.17 Projections. As of the Closing Date, to the best knowledge of ----------- Borrower, the assumptions set forth in the Projections are reasonable and consistent with each other and with all facts known to Borrower, and the Projections are reasonably based on such assumptions. Nothing in this Section 4.17 shall be construed as a representation or covenant that the Projections in - ---- fact will be achieved. -69- 4.18 Hazardous Materials. Except as described in Schedule 4.18, (a) ------------------- ------------- neither Borrower nor any of its Subsidiaries at any time has disposed of, discharged, released or threatened the release of any Hazardous Materials on, from or under the Real Property in violation of any Hazardous Materials Law that would individually or in the aggregate constitute a Material Adverse Effect, (b) to the best knowledge of Borrower, no condition exists that violates any Hazardous Material Law affecting any Real Property except for such violations that would not individually or in the aggregate have a Material Adverse Effect, (c) no Real Property or any portion thereof is or has been utilized by Borrower or any of its Subsidiaries as a site for the manufacture of any Hazardous Materials and (d) to the extent that any Hazardous Materials are used, generated or stored by Borrower or any of its Subsidiaries on any Real Property, or transported to or from such Real Property by Borrower or any of its Subsidiaries, such use, generation, storage and transportation are in compliance in all material respects with all Hazardous Materials Laws. 4.19 Security Interests. Upon the execution and delivery of the ------------------ Security Agreement, the Security Agreement will create a valid first priority security interest in the Collateral described therein securing the Obligations (subject only to Permitted Encumbrances, Permitted Rights of Others, purchase money liens permitted under Section 6.8(h) and matters disclosed in Schedule 4.7 ------ ------------ and to such qualifications and exceptions as are contained in the Uniform Commercial Code with respect to the priority of security interests perfected by means other than the filing of a financing statement or with respect to the creation of security interests in Property to which Article 9 of the Uniform Commercial Code does not apply) and all action necessary to perfect the security interest so created, other than filing of the UCC-1 financing statements ----- ---- delivered to the Managing Agent pursuant to Section 9.1 with the appropriate --- Governmental Agency, have been taken and completed. Upon the execution and delivery of the Collateral Assignment, the Collateral Assignment will create a valid first priority security interest in the Collateral described therein securing the Obligations and all action necessary to perfect the security interest so created, other than filing of the UCC-1 financing statements ----- ---- delivered to the Managing Agent pursuant to Section 9.1 with the appropriate --- Governmental Agency, have been taken and completed. Upon the execution and delivery of the Trademark Collateral Assignment, the Trademark Collateral Assignment will create a valid first priority collateral assignment of the Collateral described therein securing the Obligations and all action necessary to perfect the collateral assignment so created, other than the filing thereof ----- ---- with the United States Patent and Trademark Office, will have been taken and completed. Upon the execution and delivery of the Pledge Agreement, the Pledge Agreement will create a valid first priority security interest in the Pledged -70- Collateral and upon delivery of the Pledged Collateral to the Managing Agent (or its designee) in the State of Nevada all action necessary to perfect the security interest so created has been taken and completed. Upon the execution and delivery of the Deed of Trust, such Deed of Trust will create a valid Lien in the Collateral described therein securing the Obligations, other than those ----- ---- arising under Sections 4.18, 5.11 and 12.22, (subject only to Permitted ---- ---- ----- Encumbrances, Permitted Rights of Others and matters described in Schedule 4.7), ------------ and all action necessary to perfect the Lien so created, other than recordation ----- ---- or filing thereof with the appropriate Governmental Agencies, will have been taken and completed. -71- AFFIRMATIVE COVENANTS --------------------- (OTHER THAN INFORMATION AND -------------------------- REPORTING REQUIREMENTS) ---------------------- So long as any Advance remains unpaid, or any Letter of Credit remains outstanding or any other Obligation remains unpaid, or any portion of the Commitment remains in force, Borrower shall, and shall cause each of its Subsidiaries to, unless the Managing Agent (with the written approval of the Requisite Banks) otherwise consents: 5.1 Payment of Taxes and Other Potential Liens. Pay and discharge ------------------------------------------ promptly all taxes, assessments and governmental charges or levies imposed upon any of them, upon their respective Property or any part thereof and upon their respective income or profits or any part thereof, except that Borrower and its ------ Subsidiaries shall not be required to pay or cause to be paid (a) any tax, assessment, charge or levy that is not yet past due, or is being contested in good faith by appropriate proceedings so long as the relevant entity has established and maintains adequate reserves for the payment of the same or (b) any immaterial tax so long as no material Property of Borrower or any of its Subsidiaries is in jeopardy of being seized, levied upon or forfeited. 5.2 Preservation of Existence. Preserve and maintain their ------------------------- respective existences in the jurisdiction of their formation and all material authorizations, rights, franchises, privileges, consents, approvals, orders, licenses, permits, or registrations from any Governmental Agency that are necessary for the transaction of their respective business except (a) the ------ failure to so preserve and maintain the existence of any Subsidiary of Borrower and such authorizations, rights, franchises, privileges, consents, approvals, orders, licenses, permits, or registrations would not constitute a Material Adverse Effect and (b) that a merger permitted by Section 6.3 shall not --- constitute a violation of this covenant; and qualify and remain qualified to transact business in each jurisdiction in which such qualification is necessary in view of their respective business or the ownership or leasing of their respective Properties except where the failure to so qualify or remain qualified ------ would not constitute a Material Adverse Effect. 5.3 Maintenance of Properties. Maintain, preserve and protect all of ------------------------- their respective Properties in good order and condition, subject to wear and tear in the ordinary course of business, and not permit any waste of their respective Properties, except that the failure to maintain, preserve and protect ------ a particular item of Property that is not of significant value, either intrinsically or to the operations of -72- Borrower and its Subsidiaries, taken as a whole, shall not constitute a violation of this covenant. 5.4 Maintenance of Insurance. Maintain liability, casualty and other ------------------------ insurance (subject to customary deductibles and retentions) with responsible insurance companies in such amounts and against such risks as is carried by responsible companies engaged in similar businesses and owning similar assets in the general areas in which Borrower and its Subsidiaries operate and, in any event, such insurance as is required under the Deed of Trust. 5.5 Compliance With Laws. Comply, within the time period, if any, -------------------- given for such compliance by the relevant Governmental Agency with enforcement authority, with all Requirements of Law noncompliance with which constitutes a Material Adverse Effect, except that Borrower and its Subsidiaries need not ------ comply with a Requirement of Law then being contested by any of them in good faith by appropriate proceedings. 5.6 Inspection Rights. Upon reasonable notice, at any time during ----------------- regular business hours and as often as reasonably requested (but not so as to materially interfere with the business of Borrower or any of its Subsidiaries) permit the Managing Agent or any Bank, or any authorized employee, agent or representative thereof, to examine, audit and make copies and abstracts from the records and books of account of, and to visit and inspect the Properties of, Borrower and its Subsidiaries and to discuss the affairs, finances and accounts of Borrower and its Subsidiaries with any of their officers, managers, key employees or accountants and, upon request, furnish promptly to the Managing Agent or any Bank true copies of all financial information made available to the board of directors or audit committee of the board of directors of Borrower. 5.7 Keeping of Records and Books of Account. Keep adequate records --------------------------------------- and books of account reflecting all financial transactions in conformity with Generally Accepted Accounting Principles, consistently applied, and in material conformity with all applicable requirements of any Governmental Agency having regulatory jurisdiction over Borrower or any of its Subsidiaries. 5.8 Compliance With Agreements. Promptly and fully comply with all -------------------------- Contractual Obligations under all material agreements, indentures, leases and/or instruments to which any one or more of them is a party, whether such material agreements, indentures, leases or instruments are with a Bank or another Person, except for any such Contractual Obligations (a) the performance of which ------ would cause a Default or (b) then being contested by any of them in good faith by appropriate -73- proceedings or if the failure to comply with such agreements, indentures, leases or instruments does not constitute a Material Adverse Effect. 5.9 Use of Proceeds. Use the proceeds of Loans for (a) prior to the --------------- Completion Date, for the construction and furnishing of the Project and (b) subsequent to the Completion Date, for general corporate purposes. 5.10 New Subsidiaries. Cause any Person which hereafter becomes a ---------------- Subsidiary of Borrower to execute and deliver to the Managing Agent the Subsidiary Guaranty and an instrument of joinder of the Security Agreement and the Trademark Collateral Assignment, and (subject to compliance with applicable Gaming Laws) deliver the certificates evidencing all equity interests in such Subsidiary to the Managing Agent in pledge pursuant to a pledge agreement substantially in the form of the Pledge Agreement. 5.11 Hazardous Materials Laws. Keep and maintain all Real Property ------------------------ and each portion thereof in compliance in all material respects with all applicable Hazardous Materials Laws and promptly notify the Managing Agent in writing (attaching a copy of any pertinent written material) of (a) any and all material enforcement, cleanup, removal or other governmental or regulatory actions instituted, completed or threatened in writing by a Governmental Agency pursuant to any applicable Hazardous Materials Laws, (b) any and all material claims made or threatened in writing by any Person against Borrower relating to damage, contribution, cost recovery, compensation, loss or injury resulting from any Hazardous Materials and (c) discovery by any Senior Officer of Borrower of any material occurrence or condition on Property adjoining or in the vicinity of such Real Property that could reasonably be expected to cause such Real Property or any part thereof to be subject to any restrictions on the ownership, occupancy, transferability or use of such Real Property under any applicable Hazardous Materials Laws. 5.12 Change of Name. Notify the Managing Agent in writing of any -------------- change of its name within five (5) Banking Days of such change, and promptly (and in any event within ten (10) Banking Days of the request) execute such amendments to any of the Collateral Documents and take such other actions as may be requested by the Managing Agent to reflect such change of its name. 5.13 Gaming Licenses. File applications with all relevant Gaming --------------- Boards for all licenses, permits and approvals under applicable Gaming Laws necessary to operate the Project at such date as Borrower deems appropriate in the exercise of prudent business judgment to permit the Completion Date to -74- occur as scheduled, and diligently pursue such applications thereafter. 5.14 Prepayment of Equipment Lease. Promptly prepay the Equipment ----------------------------- Lease by an amount equal to the Equipment Lessors' Percentage of the portion (if any) of any Cash Equity Contribution under the Keep-Well Agreement attributable to the amount subtracted from the numerator of the Leverage Ratio pursuant to the calculation set forth in Section 2(a) of the Keep-Well Agreement. -75- NEGATIVE COVENANTS ------------------ So long as any Advance remains unpaid, or any Letter of Credit remains outstanding or any other Obligation remains unpaid, or any portion of the Commitment remains in force, Borrower shall not, and shall not permit any of its Subsidiaries to, unless the Managing Agent (with the written approval of the Requisite Banks or, if required by Section 12.2, of all of the Banks) otherwise ---- consents: 6.1 Payment of Subordinated Obligations. Pay any (a) principal ----------------------------------- (including sinking fund payments) or any other amount (other than scheduled - ---------- ----- ---- interest payments) with respect to any Subordinated Obligation, or purchase or redeem (or offer to purchase or redeem) any Subordinated Obligation, or deposit any monies, securities or other Property with any trustee or other Person to provide assurance that the principal or any portion thereof of any Subordinated Obligation will be paid when due or otherwise to provide for the defeasance of any Subordinated Obligation except, so long as no Default or Event of Default ------ then exists or would result therefrom, (i) payments with respect to Qualified Member Subordinated Debt incurred prior to the Closing Date and (ii) payments with respect to Qualified Member Subordinated Debt incurred after the Closing Date in amounts not exceeding the then Distribution Basket Availability, or (b) scheduled interest on any Subordinated Obligation if a Default or Event of Default then exists or would result therefrom. 6.2 Disposition of Property. Make any Disposition of its Property, ----------------------- whether now owned or hereafter acquired. 6.3 Mergers. Merge or consolidate with or into any Person, except ------- ------ (a) mergers and consolidations of a Subsidiary of Borrower into Borrower and (b) mergers and consolidations with a Person to effect a mere change in the State or form of organization of Borrower, provided that the financial condition of -------- Borrower is not adversely affected thereby and Borrower executes such amendments to the Loan Documents as may be requested by the Managing Agent to reflect such change. 6.4 Hostile Acquisitions. Directly or indirectly use the proceeds of -------------------- any Loan in connection with the acquisition of part or all of a voting interest of five percent (5%) or more in any corporation or other business entity if such acquisition is opposed by the board of directors or management of such corporation or business entity. 6.5 Distributions. Make any Distribution, whether from capital, ------------- income or otherwise, and whether in Cash or other Property, except (a) ------ Distributions by a Subsidiary of Borrower -76- to Borrower, (b) Distributions payable solely in the residual equity ownership interests of Borrower, (c) Member Tax Distributions and (d) other Distributions not more frequently than once in any Fiscal Quarter in amounts not exceeding the then Distribution Basket Availability; provided, in the case of Distributions -------- described in clauses (c) and (d), that no Default or Event of Default then - - exists or would result therefrom. 6.6 ERISA. (a) At any time, permit any Pension Plan to (i) engage in ----- any non-exempt "prohibited transaction" (as defined in Section 4975 of the Code), (ii) fail to comply with ERISA or any other applicable Laws, (iii) incur any material "accumulated funding deficiency" (as defined in Section 302 of ERISA), or (iv) terminate in any manner, which, with respect to each event listed above, could reasonably be expected to result in a Material Adverse Effect, or (b) withdraw, completely or partially, from any Multiemployer Plan if to do so could reasonably be expected to result in a Material Adverse Effect. 6.7 Change in Nature of Business. Make any material change in the ---------------------------- nature of the business of Borrower and its Subsidiaries, taken as a whole. 6.8 Liens and Negative Pledges. Create, incur, assume or suffer to -------------------------- exist any Lien or Negative Pledge of any nature upon or with respect to any of its Properties, or engage in any sale and leaseback transaction with respect to any of its Properties, whether now owned or hereafter acquired, except: ------ (a) Permitted Encumbrances; (b) Liens and Negative Pledges under the Loan Documents; (c) Liens and Negative Pledges existing on the Closing Date and disclosed in Schedule 4.7 and any renewals/extensions or amendments thereof, provided ------------ -------- that the obligations secured or benefited thereby are not increased; (d) Liens on Property acquired by Borrower or any of its Subsidiaries that were in existence at the time of the acquisition of such Property and were not created in contemplation of such acquisition; (e) Liens securing Indebtedness permitted by Sections 6.9(d) and 6.9(e) on ------ ------ and limited to the capital assets acquired, constructed or financed with the proceeds of such Indebtedness or with the proceeds of any Indebtedness directly or indirectly refinanced by such Indebtedness, provided that the -------- obligations secured or benefitted thereby are not increased; and -77- (f) any Lien or Negative Pledge created by an agreement or instrument entered into by Borrower or a Subsidiary of Borrower in the ordinary course of its business which consists of a restriction on the assignability, transfer or hypothecation of such agreement or instrument. 6.9 Indebtedness and Guaranty Obligations. Create, incur or assume ------------------------------------- any Indebtedness or Guaranty Obligation except: ------ (a) Indebtedness and Guaranty Obligations existing on the Closing Date and disclosed in Schedule 6.9, and refinancings, renewals, extensions or ------------- amendments that do not increase the amount thereof; (b) Indebtedness and Guaranty Obligations under the Loan Documents; (c) Indebtedness and Guaranty Obligations owed to Borrower by a Subsidiary of Borrower; (d) Indebtedness consisting of the Equipment Lease; (e) Indebtedness consisting of Capital Lease Obligations, or otherwise incurred to finance the purchase or construction of capital assets (which shall be deemed to exist if the Indebtedness is incurred at or within 90 days before or after the purchase or construction of the capital asset), or to refinance any such Indebtedness, provided that the aggregate principal -------- amount of such Indebtedness outstanding at any time does not exceed $15,000,000; (f) Indebtedness consisting of one or more Swap Agreements; provided, that -------- the aggregate notional amount of Indebtedness covered by all Secured Swap Agreements shall not exceed $150,000,000; (g) Qualified Member Subordinated Debt; (h) Qualified Third Party Subordinated Debt; and (i) Guaranty Obligations in support of the obligations of a Subsidiary of Borrower. 6.10 Transactions with Affiliates. Enter into any transaction of any ---------------------------- kind with any Affiliate of Borrower other than (a) salary, bonus, employee stock ----- ---- option and other compensation arrangements with directors, officers or managers in the ordinary course of business, (b) transactions that are fully disclosed to the board of directors of Borrower and expressly authorized by a resolution of the board of directors of Borrower which is approved by a majority of the directors not having an interest in the transaction, (c) transactions between or among Borrower and its Subsidiaries and (d) transactions on overall terms at least as favorable to -78- Borrower or its Subsidiaries as would be the case in an arm's-length transaction between unrelated parties of equal bargaining power. 6.11 Leverage Ratio. Permit the Leverage Ratio, as of the last day -------------- of any Fiscal Quarter ending after the Completion Date, to be greater than the ratio set forth below opposite such Fiscal Quarter or the period during which such Fiscal Quarter ends:
Fiscal Quarter or Period Ratio ------------------------ ----- First and Second Fiscal Quarters after Completion Date 3.75 to 1.00 Third and Fourth Fiscal Quarters after Completion Date 3.50 to 1.00 Fifth and Sixth Fiscal Quarters after Completion Date 3.00 to 1.00 Seventh and Eighth Fiscal Quarters after Completion Date 2.75 to 1.00 Each Fiscal Quarter thereafter 2.50 to 1.00;
provided that (a) the initial partial Fiscal Quarter shall be disregarded for - -------- this purpose and the First Fiscal Quarter after the Completion Date shall be the first full such Fiscal Quarter and (b) if the Completion Date occurs within the last thirty (30) days of a Fiscal Quarter, Borrower may elect by written notice to the Managing Agent to commence compliance with this Section as of the Second Fiscal Quarter after the Completion Date, rather than the First Fiscal Quarter. 6.12 Fixed Charge Coverage Ratio. Permit the Fixed Charge Coverage --------------------------- Ratio, as of the last day of any Fiscal Quarter ending after the Completion Date, to be less than 1.05 to 1.00; provided that the initial partial Fiscal -------- Quarter after the Completion Date shall be disregarded for this purpose. 6.13 Capital Expenditures. Make, or become legally obligated to -------------------- make, any Capital Expenditure (excluding any Permitted Incremental Expenditure) --------- after the Completion Date if, giving effect thereto, the aggregate Capital Expenditures made by Borrower and its Subsidiaries after the Completion Date would exceed $70,000,000. -79- 6.14 Investments. Make or suffer to exist any Investment, other ----------- ----- than: - ---- (a) Investments in existence on the Closing Date and disclosed on Schedule -------- 6.14; ---- (b) Investments consisting of Cash Equivalents; (c) Investments consisting of advances to officers, managers, directors and employees of Borrower and the Restricted Subsidiaries for travel, entertainment, relocation and analogous ordinary business purposes; (d) Investments in wholly-owned Subsidiaries; (e) Investments consisting of or evidencing the extension of credit to customers or suppliers of Borrower and its Subsidiaries in the ordinary course of business and any Investments received in satisfaction or partial satisfaction thereof; (f) Investments received in connection with the settlement of a bona fide dispute with another Person; (g) Investments representing all or a portion of the sales price of Property sold or services provided to another Person in the ordinary course of business; (h) Investments consisting of Guaranty Obligations permitted by Section 6.9; and --- (i) Investments consisting of 100 shares or less of publicly traded equity securities of Persons engaged in any business in which Borrower is engaged, which Investments do not exceed $100,000 in the aggregate at any time. 6.15 Subsidiary Indebtedness. Permit (whether or not otherwise ----------------------- permitted under Section 6.9) any Subsidiary to create, incur, assume or suffer --- to exist any Indebtedness or Guaranty Obligation, except (a) the Subsidiary ------ Guaranty, (b) Indebtedness owed to Borrower or another Subsidiary of Borrower, (c) Capital Leases and purchase money obligations permitted by Section 6.9 in --- respect of Property used by that Subsidiary and (d) other Indebtedness incurred in the ordinary course of business not in excess, with respect to any Subsidiary, of $500,000. 6.16 Amendments to Operating Agreement. Amend or modify any term or --------------------------------- provision of the Operating Agreement in any respect that will or may adversely affect the interests of the Banks in any material respect. -80- CONSTRUCTION PERIOD COVENANTS ----------------------------- Borrower shall, unless the Managing Agent (with the written approval of the Requisite Banks) otherwise consents, during the Construction Period: 7.1 Construction of Project. Proceed diligently and without ----------------------- interruption (except as may be caused by events outside the control of Borrower) ------ to construct and furnish the Project in accordance in all material respects with the Construction Plans, the Construction Budget and the Construction Timetable, and in any event cause the Completion Date to occur not later than July 31, 1997. 7.2 Amendments to Plans and Budgets. Not make any change to the ------------------------------- Construction Plans or Construction Budget if, giving effect thereto and to all previous changes to the Construction Plans and Construction Budget since the Closing Date, the Construction Budget is increased by more than $25,000,000 (excluding any Permitted Incremental Expenditure) from that set forth therein on - ---------- the Closing Date without the prior written approval of the Requisite Banks. 7.3 Timetable. Not make any change to the Construction Plans, the --------- Construction Budget or the Construction Timetable which would cause the Completion Date to occur after July 31, 1997. 7.4 Construction Requirements. Construct the Project in a good and ------------------------- workmanlike manner in accordance with sound building practices and the Construction Plans, and comply in all material respects with all existing Laws and requirements of all Governmental Agencies having jurisdiction over the Project and with all future Laws and requirements that become applicable to the Project prior to the Completion Date. 7.5 Construction Services Group. Engage CSG, at the expense of --------------------------- Borrower, to monitor the construction of the Project and provide CSG with such information and access to the Project and individuals employed by Borrower, the Architect and the Contractor as it may reasonably request for that purpose. 7.6 Notice of Changes. Promptly provide the Managing Agent and CSG ----------------- with copies of all changes to the Construction Plans, Construction Budget, Construction Timetable, Construction Contracts, Engineer Contracts and Architect Contracts, and with an advance draft copy of any proposed such change that involves more than $2,500,000. 7.7 Construction Progress Reports. Assist and cooperate with CSG in ----------------------------- all respects reasonably requested by CSG -81- in order to permit CSG to provide such periodic construction progress reports to the Managing Agent as may be reasonably requested by the Managing Agent. 7.8 Construction Information. Promptly provide to the Managing Agent ------------------------ and CSG such information and documents respecting the Project as either may reasonably request from time to time, including detailed identification of each --------- subcontractor or supplier to the Project and the nature and dollar amount of the related subcontract or supply contract. 7.9 Construction, Permits, Licenses and Approvals. Properly obtain, --------------------------------------------- comply with and keep in effect all permits, licenses and approvals which are customarily required to be obtained from Governmental Agencies in order to construct and occupy the Project as of the then current stage of construction, and deliver copies of all such permits, licenses and approvals to the Managing Agent promptly following a request therefor. 7.10 Purchase of Materials. Not purchase or contract for any --------------------- materials, equipment, furnishings, fixtures or articles of personal property to be placed or installed on the Project Property under any security agreement or other agreement where the seller reserves or purports to reserve title or the right of removal or repossession, or the right to consider such materials personal property after their incorporation in the work of construction, unless the Managing Agent in each instance has authorized Borrower to do so in writing. 7.11 Purchase of Offsite Materials. Promptly notify the Managing ----------------------------- Agent if it purchases any construction materials for the Project that are not located on the Project Property, or will not be delivered to the Project Property within fifteen (15) days after purchase (describing such construction materials, the purchase price therefor and the location thereof) and, if requested by the Managing Agent, provide to the Managing Agent the written acknowledgement of the Person having custody of such construction materials of the existence of the Banks' Lien on such construction materials and the right of the Managing Agent to have access to and to remove such construction materials at reasonable times. 7.12 Site Visits. Permit the Managing Agent, or any Bank, at any ----------- reasonable time to enter and visit the Project Property for the purposes of performing an appraisal, observing the work of construction and examining all materials, plans, specifications, working drawings and other matters relating to the construction of the Project. 7.13 Protection Against Lien Claims. Promptly pay when due (subject ------------------------------ to applicable retentions) or otherwise discharge all claims and Liens for labor done and materials and -82- services furnished in connection with the construction of the Project, except for claims contested in good faith by appropriate proceedings and without - ------ prejudice to the Construction Timetable, provided that any such claims are -------- covered by such payment bonds or title insurance policy endorsements as may be requested by the Managing Agent. 7.14 Completion Certificates. Upon completion of the Project, ----------------------- provide the Managing Agent with a written certificate executed by the Architect, Engineer and Contractor certifying that the Project has been completed in all material respects in accordance with the Construction Plans and complies in all material respects with all applicable zoning, building and land use Laws and that the Project is ready to be opened for business. 7.15 Completion Survey. As soon as practicable after completion of ----------------- the Project, provide the Managing Agent with an ALTA survey of the Project Property that (a) demon demonstrates compliance of the Project in all material respects with all applicable Laws and requirements of Governmental Agencies, (b) sets forth all easements and licenses burdening the Project Property, (c) reflects no encroachments onto the Project Property and no encroachments by the Project onto adjoining real property and (d) certifies the legal description of the Project Property to be the same as that set forth in the title insurance policies referred to in Section 9.1(a)(17). ---------- -83- INFORMATION AND REPORTING REQUIREMENTS -------------------------------------- 8.1 Financial and Business Information. So long as any Advance ---------------------------------- remains unpaid, or any Letter of Credit remains outstanding or any other Obligation remains unpaid, or any portion of the Commitment remains in force, Borrower shall, unless the Managing Agent (with the written approval of the Requisite Banks) otherwise consents, at Borrower's sole expense, deliver to the Managing Agent for distribution by it to the Banks, a sufficient number of copies for all of the Banks of the following: (a) As soon as practicable, and in any event by the tenth Banking Day in the next following month, a construction progress report as of the last day of the preceding calendar month during the Construction Period in a form reasonably acceptable to the Managing Agent, which report shall compare the status of construction and amounts expended to the Construction Timetable and the Construction Budget; provided that the construction progress -------- reports delivered by CSG pursuant to Section 7.7 shall satisfy the form of --- this requirement unless the Managing Agent notifies Borrower to the contrary; (b) As soon as practicable, and in any event by the fifteenth Banking Day in the next following month, an operating revenue report for the preceding calendar month (commencing with the first full calendar month after the Completion Date) in a form reasonably acceptable to the Managing Agent, together with a written narrative statement discussing any significant trends reflected therein signed by a Senior Officer of Borrower; (c) As soon as practicable, and in any event within 60 days after the end of each Fiscal Quarter (other than the fourth Fiscal Quarter in any ----- ---- Fiscal Year), (i) the consolidated balance sheet of Borrower and its Subsidiaries as at the end of such Fiscal Quarter and the consolidated statement of operations for such Fiscal Quarter, and its statement of cash flows for the portion of the Fiscal Year ended with such Fiscal Quarter and (ii) if applicable and if requested by the Managing Agent, the consolidating balance sheets and statements of operations as at and for the portion of the Fiscal Year ended with such Fiscal Quarter, all in reasonable detail. Such financial statements shall be certified by a Senior Officer of Borrower as fairly presenting the financial condition, results of operations and cash flows of Borrower and its Subsidiaries in accordance with Generally Accepted Accounting Principles (other than ----- ---- footnote disclosures), consistently applied, as at such date and -84- for such periods, subject only to normal year-end accruals and audit adjustments; (d) As soon as practicable, and in any event within 45 days after the end of each Fiscal Quarter, a Pricing Certificate setting forth a preliminary calculation of the Guarantor Funded Debt Ratio as of the last day of such Fiscal Quarter, and providing reasonable detail as to the calculation thereof, which calculations shall be based on the preliminary unaudited financial statements of the Guarantors for such Fiscal Quarter, and as soon as practicable thereafter, in the event of any material variance in the actual calculation of the Guarantor Funded Debt Ratio from such preliminary calculation, a revised Pricing Certificate setting forth the actual calculation thereof; (e) As soon as practicable, and in any event within 105 days after the end of each Fiscal Year, (i) the consolidated balance sheet of Borrower and its Subsidiaries as at the end of such Fiscal Year and the consolidated statements of operations, members' equity and cash flows, in each case of Borrower and its Subsidiaries for such Fiscal Year and (ii) if applicable and if requested by the Managing Agent, consolidating balance sheets and statements of operations, in each case as at the end of and for the Fiscal Year, all in reasonable detail. Such financial statements shall be prepared in accordance with Generally Accepted Accounting Principles, consistently applied, and such consolidated balance sheet and consolidated statements shall be accompanied by a report of one of the six largest public accounting firms in the United States of America or other independent public accountants of recognized standing selected by Borrower and reasonably satisfactory to the Requisite Banks, which report shall be prepared in accordance with generally accepted auditing standards as at such date, and shall not be subject to any qualifications or exceptions as to the scope of the audit nor to any other qualification or exception determined by the Requisite Banks in their good faith business judgment to be adverse to the interests of the Banks. Such accountants' report shall be accompanied by a certificate stating that, in making the examination pursuant to generally accepted auditing standards necessary for the certification of such financial statements and such report, such accountants have obtained no knowledge of any Default or, if, in the opinion of such accountants, any such Default shall exist, stating the nature and status of such Default, and stating that such accountants have reviewed Borrower's financial calculations as at the end of such Fiscal Year (which shall accompany such certificate) under Sections 6.11 through ---- 6.13, have read such Sections (including the definitions of all defined ---- terms used -85- therein) and that nothing has come to the attention of such accountants in the course of such examination that would cause them to believe that the same were not calculated by Borrower in the manner prescribed by this Agreement; (f) As soon as practicable, and in any event within 45 days after the commencement of each Fiscal Year, a budget and projection by Fiscal Quarter for that Fiscal Year and by Fiscal Year for the next four succeeding Fiscal Years, including for the first such Fiscal Year, projected consolidated --------- balance sheets, statements of operations and statements of cash flow and, for the second and third such Fiscal Years, projected consolidated condensed balance sheets and statements of operations and cash flows, of Borrower and its Subsidiaries, all in reasonable detail; (g) Promptly after request by the Managing Agent or any Bank, copies of any detailed audit reports, management letters or recommendations submitted to the board of directors (or the audit committee of the board of directors) of Borrower by independent accountants in connection with the accounts or books of Borrower or any of its Subsidiaries, or any audit of any of them; (h) Concurrently with delivery thereof to the banks under the principal bank credit facility of each of the Guarantors, copies of each report or document furnished to such banks by such Guarantor (or, if there is at any time no such principal bank credit facility for a Guarantor, the reports and documents required to be delivered under the principal bank credit facility of that Guarantor in effect on the Closing Date); provided that -------- the delivery of any such report or document to the agent under such a principal credit facility shall satisfy the requirement of this Section 8.1(h) as to any Bank that is also a bank under that credit facility; ------ (i) Promptly after the same are available, copies of each annual report, proxy or financial statement or other report or communication sent to the stockholders of either of the Guarantors, and copies of all annual, regular, periodic and special reports and registration statements which either of the Guarantors may file or be required to file with the Securities and Exchange Commission under Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, and not otherwise required to be delivered to the Banks pursuant to other provisions of this Section; -86- (j) Promptly after request by the Managing Agent or any Bank, copies of the Nevada "Regulation 6.090 Report" and "6-A Report"; (k) Promptly after request by the Managing Agent or any Bank, copies of any other report or other document that was filed by Borrower or any of its Subsidiaries with any Governmental Agency; (l) As soon as practicable, and in any event within ten (10) Banking Days after a Senior Officer of Borrower becomes aware of the occurrence of any (i) "reportable event" (as such term is defined in Section 4043 of ERISA) or (ii) "prohibited transaction" (as such term is defined in Section 406 of ERISA or Section 4975 of the Code) in connection with any Pension Plan or any trust created thereunder, telephonic notice specifying the nature thereof, and, no more than five (5) Banking Days after such telephonic notice, written notice again specifying the nature thereof and specifying what action Borrower or any of its Subsidiaries is taking or proposes to take with respect thereto, and, when known, any action taken by the Internal Revenue Service with respect thereto; (m) As soon as practicable, and in any event within two (2) Banking Days after a Senior Officer of Borrower becomes aware of the existence of any condition or event which constitutes a Default or Event of Default, telephonic notice specifying the nature and period of existence thereof, and, no more than two (2) Banking Days after such telephonic notice, written notice again specifying the nature and period of existence thereof and specifying what action Borrower or its Subsidiaries are taking or propose to take with respect thereto; (n) Promptly upon a Senior Officer of Borrower becoming aware that (i) any Person has commenced a legal proceeding with respect to a claim against Borrower or any of its Subsidiaries that is $5,000,000 or more in excess of the amount thereof that is fully covered by insurance, (ii) any creditor or lessor under a written credit agreement or material lease has asserted a default thereunder on the part of Borrower or any of its Subsidiaries, (iii) any Person has commenced a legal proceeding with respect to a claim against Borrower or any of its Subsidiaries under a contract that is not a credit agreement or material lease in excess of $5,000,000 or which otherwise may reasonably be expected to result in a Material Adverse Effect, (iv) any labor union has notified Borrower of its intent to strike Borrower or any of its Subsidiaries on a date certain and such strike would involve more than 100 employees of Borrower or its Subsidiaries, or (v) any Gaming Board has indicated its -87- intent to consider or act upon a License Revocation or a fine or penalty of $1,000,000 or more with respect to Borrower or any of its Subsidiaries, a written notice describing the pertinent facts relating thereto and what action Borrower or its Subsidiaries are taking or propose to take with respect thereto; and (o) Such other data and information as from time to time may be reasonably requested by the Managing Agent, any Bank (through the Managing Agent) or the Requisite Banks. 8.2 Compliance Certificates. So long as any Advance remains unpaid, ----------------------- or any Letter of Credit remains outstanding or any other Obligation remains unpaid or unperformed, or any portion of the Commitment remains outstanding, Borrower shall, at Borrower's sole expense, deliver to the Managing Agent for distribution by it to the Banks concurrently with the financial statements required pursuant to Sections 8.1(c) and 8.1(e), Compliance Certificates signed ------ ------ by a Senior Officer of Borrower. -88- CONDITIONS ---------- 9.1 Initial Advances, Etc. The obligation of each Bank to make the ---------------------- initial Advance to be made by it, or the obligation of the Issuing Bank to issue the initial Letter of Credit (as applicable), is subject to the following conditions precedent, each of which shall be satisfied prior to the making of the initial Advances (unless all of the Banks, in their sole and absolute discretion, shall agree otherwise): (a) The Managing Agent shall have received all of the following, each of which shall be originals unless otherwise specified, each properly executed by a Responsible Official of each party thereto, each dated as of the Closing Date and each in form and substance satisfactory to the Managing Agent and its legal counsel (unless otherwise specified or, in the case of the date of any of the following, unless the Managing Agent otherwise agrees or directs): (1) at least one (1) executed counterpart of this Agreement, together with arrangements satisfactory to the Managing Agent for additional executed counterparts, sufficient in number for distribution to the Banks and Borrower; (2) Notes executed by Borrower in favor of each Bank, each in a principal amount equal to that Bank's Pro Rata Share of the Commitment; (3) the Swing Line Documents; (4) the Subsidiary Guaranty executed by each Subsidiary of Borrower (if any are in existence on the Closing Date); (5) the Security Agreement executed by Borrower and each Subsidiary of Borrower (if any are in existence on the Closing Date); (6) the Collateral Assignment executed by Borrower; (7) the Trademark Collateral Assignment executed by Borrower and each Subsidiary of Borrower (if any are in existence on the Closing Date); (8) such financing statements on Form UCC-1 executed by Borrower and each Subsidiary of Borrower (if any are in existence on the Closing Date) with respect to the Security Agreement, Collateral Assignment and -89- Trademark Collateral Assignment as the Managing Agent may request; (9) the Pledge Agreement executed by the Members, together with the Pledged Collateral accompanied by appropriate stock powers endorsed in blank; (10) such financing statements on Form UCC-1 executed by the Members with respect to the Pledge Agreement as the Managing Agent may request; (11) the Completion Guaranty executed by the Guarantors; (12) the Keep-Well Agreement executed by the Guarantors; (13) the Deed of Trust executed by Borrower; (14) with respect to Guarantors, Members, Borrower and each Subsidiary of Borrower (if any are in existence on the Closing Date), such documentation as the Managing Agent may require to establish the due organization, valid existence and good standing of Guarantors, Members, Borrower and each such Subsidiary, its qualification to engage in business in each material jurisdiction in which it is engaged in business or required to be so qualified, its authority to execute, deliver and perform any Loan Documents to which it is a Party, the identity, authority and capacity of each Responsible Official thereof authorized to act on its behalf, including (if --------- applicable) certified copies of articles of incorporation or organization and amendments thereto, bylaws or operating agreements and amendments thereto, certificates of good standing and/or qualification to engage in business, tax clearance certificates, certificates of corporate or other organizational resolutions, incumbency certificates, Certificates of Responsible Officials, and the like; (15) the Opinions of Counsel; (16) a written appraisal by a qualified independent appraiser acceptable to the Managing Agent and complying in all respects with FIRREA of the Project Property that reflects an aggregate fair market value thereof on an as-built stabilized basis of not less than $365,000,000; (17) assurances from the Title Company that it is prepared to issue its "LP-10" ALTA construction lenders title policy (or such other lenders title -90- policy determined by the Managing Agent to be the equivalent thereof) insuring the Lien of the Deed of Trust in an amount not less than the fair market value of the Project Property as determined by the foregoing appraisal (provided, however, that the title insurance -------- amount shall not exceed the Commitment), subject only to such exceptions as are reasonably acceptable to the Managing Agent, with such title policy endorsements as the Managing Agent may reasonably require and with such assurances as the Managing Agent may reasonably require from title re-insurers acceptable to the Managing Agent, together with the written commitment of the Title Company to issue on ------------- or before the Completion Date its replacement ALTA title policy in the same form with such title policy endorsements as the Managing Agent may reasonably require; (18) a "Phase I" environmental report with respect to the Project Property prepared by a qualified independent environmental expert acceptable to the Managing Agent, together with a Certificate of a Senior Officer of Borrower to the effect that no event or circumstance has occurred since the date thereof that would cause such report to be inaccurate in any respect that is materially adverse to the interests of the Banks; (19) a certificate of insurance issued by Borrower's insurance carrier or agent with respect to the insurance required to be maintained pursuant to the Deed of Trust, together with lenders' loss payable endorsements thereof on Form 438BFU or other form acceptable to the Managing Agent; (20) a Certificate of a Senior Officer of Borrower attaching the Construction Plans, the Construction Budget and the Construction Timetable, each of which shall be consistent in all material respects with the representations respecting them previously made to the Managing Agent and the Banks; (21) a letter from CSG stating that it has reviewed the Construction Plans, the Construction Budget and the Construction Timetable and believes them to be reasonable and feasible; (22) the Equipment Lease Letter signed by Borrower and acknowledged by the Equipment Lease Arranger; (23) a Certificate of a Senior Officer of Borrower attaching a copy of the Architect Contracts; -91- (24) the Architect's Certificate and Consent executed by the Architect; (25) a Certificate of a Senior Officer attaching a copy of the Engineer Contracts; (26) the Engineer's Certificate and Consent executed by the Engineer; (27) a certificate of a Senior Officer of Borrower attaching a copy of the Construction Contract; (28) the Contractor's Certificate and Consent executed by the Contractor; (29) a Pricing Certificate as of the last day of the most recently ended Fiscal Quarter; (30) a Certificate of a Senior Officer of Borrower attaching a copy of the Operating Agreement; (31) a Certificate of a Senior Officer of Borrower stating that Borrower has received permanent equity contributions from the Members consisting of (a) in the case of MGM Grand, Inc., the Project Property valued at not less than $41,200,000 and (b) in the case of PRMA Las Vegas, Inc., trade names valued at not less than $1,200,000 and Cash of $40,000,000; (32) a Certificate of a Senior Officer of each Guarantor certifying that performance of the Completion Guaranty and the Keep-Well Agreement will not violate any indenture, credit agreement or other material agreement of such Guarantor; (33) a Certificate of a Senior Officer of Borrower setting forth all permits which it holds from Governmental Agencies with respect to construction of the Project, together with a letter from CSG stating that such permits are those customarily obtained at the then current stage of construction and that, in its opinion, the remaining permits will be obtained in due course without adversely affecting the Construction Timetable; (34) a Certificate signed by a Senior Officer of Borrower certifying that the conditions specified in Sections 9.1(g) and 9.1(h) have been ------ ------ satisfied; and (35) such other assurances, certificates, documents, consents or opinions as the Managing Agent reasonably may require. -92- (b) The arrangement fee payable pursuant to Section 3.2 shall have been --- paid. (c) The upfront fees payable pursuant to Section 3.3 shall have been --- paid. (d) Any agency fees payable on the Closing Date pursuant to Section 3.6 --- shall have been paid. (e) The reasonable costs and expenses of the Managing Agent in connection with the preparation of the Loan Documents payable pursuant to Section 12.3, and invoiced to Borrower prior to the Closing Date, shall have been ---- paid. (f) The Bridge Notes shall be concurrently paid in full. (g) The representations and warranties of Borrower contained in Article 4 shall be true and correct. --------- (h) Borrower and any other Parties shall be in compliance with all the terms and provisions of the Loan Documents, and giving effect to the initial Advance (or initial Letter of Credit, as applicable) no Default or Event of Default shall have occurred and be continuing. (i) All legal matters relating to the Loan Documents shall be satisfactory to Sheppard, Mullin, Richter & Hampton, special counsel to the Managing Agent. (j) The Closing Date shall have occurred on or before September 30, 1995. 9.2 Advances During Construction Period. The obligation of each Bank ----------------------------------- to make any Advance during the Construction Period, and the obligation of the Issuing Bank to issue any Letter of Credit during the Construction Period, is subject to the condition precedent (unless the Requisite Banks, in their sole and absolute discretion, shall otherwise agree) that, giving effect to such Advance or such Letter of Credit, the Banks will not have funded pursuant to this Agreement more than seventy-five percent (75%) of the Total Incurred Project Cost as of such date, and the Managing Agent shall have received a written certification to that effect from CSG. 9.3 Any Advance. The obligation of each Bank to make any Advance, ----------- and the obligation of the Issuing Bank to issue a Letter of Credit, is subject to the following conditions precedent (unless the Requisite Banks, in their sole and absolute discretion, shall agree otherwise): (a) except (i) for representations and warranties which expressly speak as ------ of a particular date or are no longer -93- true and correct as a result of a change which is permitted by this Agreement or (ii) as disclosed by Borrower and approved in writing by the Requisite Banks, the representations and warranties contained in Article 4 --------- (other than Sections 4.4(a), 4.6 (first sentence), 4.10, 4.17 and 4.18 (but ---------- ------ --- ---- ---- ---- only if Borrower is diligently engaged in measures that will result in compliance with all Hazardous Materials Laws)) shall be true and correct on and as of the date of the Advance as though made on that date; (b) other than matters described in Schedule 4.10 or not required as ------------- of the Closing Date to be therein described, there shall not be then pending or threatened any action, suit, proceeding or investigation against or affecting Borrower or any of its Subsidiaries or any Property of any of them before any Governmental Agency that constitutes a Material Adverse Effect; (c) the Managing Agent shall have timely received a Request for Loan in compliance with Article 2 (or telephonic or other request for Loan --------- referred to in the second sentence of Section 2.1(b), if applicable) or the ------ Issuing Bank shall have received a Request for Letter of Credit, as the case may be, in compliance with Article 2; and --------- (d) the Managing Agent shall have received, in form and substance satisfactory to the Managing Agent, such other assurances, certificates, documents or consents related to the foregoing as the Managing Agent or Requisite Banks reasonably may require. -94- EVENTS OF DEFAULT AND REMEDIES UPON EVENT OF DEFAULT ---------------------------------------------------- 10.1 Events of Default. The existence or occurrence of any one or ----------------- more of the following events, whatever the reason therefor and under any circumstances whatsoever, shall constitute an Event of Default so long as such event is continuous and has not been waived in accordance with Section 12.2: - ---- (a) Borrower fails to pay any principal on any of the Notes, or any portion thereof, on the date when due; or (b) Borrower fails to pay any interest on any of the Notes, or any fees under Sections 3.4, 3.5 or 3.6, or any portion thereof, within five --- --- --- (5) Banking Days after the date when due; or fails to pay any other fee or amount payable to the Banks under any Loan Document, or any portion thereof, within five (5) Banking Days after demand therefor; or (c) Borrower fails to comply with any of the covenants contained in Section 5.4, Article 6 (other than Sections 6.1 (but only with respect to --- --------- ----- ---- --- Qualified Member Subordinated Debt), 6.5, 6.6, 6.7, 6.10, 6.11, 6.12, 6.14 --- --- --- ---- ---- ---- ---- and 6.16) or in Article 7 (other than Sections 7.6, 7.7, 7.8, 7.9, 7.10, ---- --------- ----- ---- --- --- --- --- ---- 7.11, 7.14 and 7.15); or ---- ---- ---- (d) Borrower fails to comply with Section 6.11 or 6.12 and the ---- ---- Guarantors do not make the Cash Equity Contribution required by the Keep- Well Agreement within the time required by the Keep-Well Agreement; or (e) Borrower fails to comply with Section 8.1(m) in any respect that ------ is materially adverse to the interests of the Banks; or (f) Borrower, any of its Subsidiaries or any other Party fails to perform or observe any other covenant or agreement (not specified in clause (a), (b), (c), (d) or (e) above) contained in any Loan Document on its part - - - - - to be performed or observed within (i) ten (10) Banking Days after the giving of notice by the Managing Agent on behalf of the Requisite Banks of such Default or (ii) if the nature of the covenant or agreement is such that the violation can be cured, thirty (30) Banking Days after the giving of such notice so long as Borrower diligently pursues in good faith the cure or correction of such violation continuously during such period; or (g) Any representation or warranty of Borrower or any of its Subsidiaries or any other Party made in any Loan Document, or in any certificate or other writing delivered -95- by Borrower or such Subsidiary or Party pursuant to any Loan Document, proves to have been incorrect when made or reaffirmed in any respect that is materially adverse to the interests of the Banks; or (h) Borrower or any of its Subsidiaries (i) fails to pay the principal, or any principal installment, of any present or future Indebtedness of $5,000,000 or more, or any guaranty of present or future Indebtedness of $5,000,000 or more, on its part to be paid, when due (or within any stated grace period), whether at the stated maturity, upon acceleration, by reason of required prepayment or otherwise or (ii) fails to perform or observe any other term, covenant or agreement on its part to be performed or observed, or suffers any event of default to occur, in connection with any present or future Indebtedness of $5,000,000 or more, or of any guaranty of present or future Indebtedness of $5,000,000 or more, if as a result of such failure or sufferance any holder or holders thereof (or an agent or trustee on its or their behalf) has the right to declare such Indebtedness due before the date on which it other wise would become due or the right to require Borrower or any of its Subsidiaries to redeem or purchase, or offer to redeem or purchase, all or any portion of such Indebtedness; or (i) Both Guarantors (or, if during a period when there is a single Guarantor as a result of the acquisition by one Member of the equity ownership interest in Borrower of the other Member, that single Guarantor) (i) fail to pay the principal, or any principal installment, of any present or future Indebtedness of each Guarantor of $15,000,000 or more, on their part to be paid, when due (or within any stated grace period), whether at the stated maturity, upon acceleration, by reason of required prepayment or otherwise or (ii) fail to perform or observe any financial covenant providing for the maintenance of specified maximum leverage ratios, fixed charge coverage ratios or minimum net worth in connection with any present or future Indebtedness of each Guarantor of $15,000,000 or more, or of any guaranty of present or future Indebtedness of each Guarantor of $15,000,000 or more, if as a result of such failure or sufferance any holder or holders thereof (or an agent or trustee on its or their behalf) has the right to declare such Indebtedness due before the date on which it otherwise would become due or the right to require Guarantors to redeem or purchase, or offer to redeem or purchase, all or any portion of such Indebtedness (provided, that for purposes of this clause (i), Indebtedness of MGM Grand Hotel Finance Corp. shall also be deemed to be Indebtedness of MGM Grand, Inc.); or -96- (j) Any event occurs which gives the holder or holders of any Subordinated Obligation (or an agent or trustee on its or their behalf) the right to declare such Subordinated Obligation due before the date on which it otherwise would become due, or the right to require the issuer thereof to redeem or purchase, or offer to redeem or purchase, all or any portion of any Subordinated Obligation; or (k) Any Loan Document, at any time after its execution and delivery and for any reason other than the agreement or action (or omission to act) ----- ---- of the Managing Agent or any of the Banks or satisfaction in full of all the Obligations ceases to be in full force and effect or is declared by a court of competent jurisdiction to be null and void, invalid or unenforceable in any respect which, in any such event in the reasonable opinion of the Requisite Banks, is materially adverse to the interests of the Banks; or any Party thereto denies in writing that it has any or further liability or obligation under any Loan Document, or purports to revoke, terminate or rescind same; or (l) A final judgment against Borrower or any of its Subsidiaries is entered for the payment of money in excess of $1,000,000 and, absent procurement of a stay of execution, such judgment remains unsatisfied for thirty (30) calendar days after the date of entry of judgment, or in any event later than five (5) days prior to the date of any proposed sale thereunder; or any writ or warrant of attachment or execution or similar process is issued or levied against all or any material part of the Property of any such Person and is not released, vacated or fully bonded within thirty (30) calendar days after its issue or levy; or (m) Borrower or any of its Subsidiaries institutes or consents to the institution of any proceeding under a Debtor Relief Law relating to it or to all or any material part of its Property, or is unable or admits in writing its inability to pay its debts as they mature, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or for all or any material part of its Property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed without the application or consent of that Person and the appointment continues undischarged or unstayed for ninety (90) calendar days; or any proceeding under a Debtor Relief Law relating to any such Person or to all or any part of its Property is instituted without the consent of that Person and continues undismissed or unstayed for ninety (90) calendar days; or -97- (n) The occurrence of an Event of Default (as such term is or may hereafter be specifically defined in any other Loan Document) under any other Loan Document; or (o) A final unstayed judgment is entered by a court of competent jurisdiction that any Subordinated Obligation is not subordinated in accordance with its terms to the Obligations; or (p) The occurrence of an Event of Default (as such term or analogous term is or may hereafter be specifically defined in the Equipment Lease) under the Equipment Lease, or the occurrence of any other event that causes or permits the termination of the Equipment Lease prior to its scheduled expiration (other than the satisfaction by Borrower of its obligations ----- ---- thereunder); or (q) Any Pension Plan maintained by Borrower or any of its Subsidiaries is determined to have a material "accumulated funding deficiency" as that term is defined in Section 302 of ERISA and the result is a Material Adverse Effect; or (r) The occurrence of a License Revocation that continues for seven (7) consecutive calendar days. 10.2 Remedies Upon Event of Default. Without limiting any other ------------------------------ rights or remedies of the Managing Agent or the Banks provided for elsewhere in this Agreement, or the other Loan Documents, or by applicable Law, or in equity, or otherwise: (a) Upon the occurrence, and during the continuance, of any Event of Default other than an Event of Default described in Section 10.1(m): ----- ---- ------- (1) the Commitment to make Advances, the obligation of the Issuing Bank to issue Letters of Credit and all other obligations of the Managing Agent or the Banks and all rights of Borrower and any other Parties under the Loan Documents shall be suspended without notice to or demand upon Borrower, which are expressly waived by Borrower, except that all of the Banks or the Requisite Banks (as the ------ case may be, in accordance with Section 12.2) may waive an Event of ---- Default or, without waiving, determine, upon terms and conditions satisfactory to the Banks or Requisite Banks, as the case may be, to reinstate the Commitment and such other obligations and rights and make further Advances, and cause the Issuing Bank to issue further Letters of Credit which waiver or determination shall apply equally to, and shall be binding upon, all the Banks; -98- (2) the Issuing Bank may, with the approval of the Managing Agent on behalf of the Requisite Banks, demand immediate payment by Borrower of an amount equal to the aggregate amount of all outstanding Letters of Credit to be held by the Issuing Bank in an interest- bearing cash collateral account as collateral hereunder; and (3) the Requisite Banks may request the Managing Agent to, and the Managing Agent thereupon shall, terminate the Commitment and/or declare all or any part of the unpaid principal of all Notes, all interest accrued and unpaid thereon and all other amounts payable under the Loan Documents to be forthwith due and payable, whereupon the same shall become and be forthwith due and payable, without protest, presentment, notice of dishonor, demand or further notice of any kind, all of which are expressly waived by Borrower. (b) Upon the occurrence, and during the continuance, of any Event of Default described in Section 10.1(m): ------- (1) the Commitment to make Advances, the obligation of the Issuing Bank to issue Letters of Credit and all other obligations of the Managing Agent or the Banks and all rights of Borrower and any other Parties under the Loan Documents shall terminate without notice to or demand upon Borrower, which are expressly waived by Borrower, except that all of the Banks may waive the Event of Default or, ------ without waiving, determine, upon terms and conditions satisfactory to all the Banks, to reinstate the Commitment and such other obligations and rights and make further Advances and to cause the Issuing Bank to issue further Letters of Credit, which determination shall apply equally to, and shall be binding upon, all the Banks; (2) an amount equal to the aggregate amount of all outstanding Letters of Credit shall be immediately due and payable to the Issuing Bank without notice to or demand upon Borrower, which are expressly waived by Borrower, to be held by the Issuing Bank in an interest- bearing cash collateral account as collateral hereunder; and (3) the unpaid principal of all Notes, all interest accrued and unpaid thereon and all other amounts payable under the Loan Documents shall be forthwith due and payable, without protest, presentment, notice of dishonor, demand or further notice of any kind, all of which are expressly waived by Borrower. -99- (c) Upon the occurrence, and during the continuance, of any Event of Default, the Banks and the Managing Agent, or any of them, without notice to (except as expressly provided for in any Loan Document) or demand upon ------ Borrower, which are expressly waived by Borrower (except as to notices ------ expressly provided for in any Loan Document), may proceed (but only with the consent of the Requisite Banks) to protect, exercise and enforce their rights and remedies under the Loan Documents against Borrower and any other Party and such other rights and remedies as are provided by Law or equity. (d) In addition to any other rights and remedies, if an Event of Default occurs prior to the Completion Date, the Managing Agent and the Banks shall have the right to take possession of the Project, whether in person or through a designee or receiver, and take such steps as the Managing Agent and the Banks reasonably deem necessary or appropriate to complete construction of the Project, including making any changes to the --------- Construction Plans, Construction Budget or Construction Timetable and/or terminating or amending any of the Architects Contracts, Engineer Contracts, Construction Contracts or any other contract or arrangement related to the Project; provided, however, that the Managing Agent shall be -------- responsible for any breach of contract resulting from any such change, termination or amendment. Any such action shall not be construed as an assumption of responsibility by the Managing Agent or the Banks to complete the Project, and such steps may be discontinued at any time. Any such action shall not be construed to make the Managing Agent or the Banks a partner or joint venturer with Borrower. All amounts expended by the Managing Agent and the Banks for the completion of the Project shall be deemed additional Advances and shall be secured by the Collateral Documents. (e) The order and manner in which the Banks' rights and remedies are to be exercised shall be determined by the Requisite Banks in their sole discretion, and all payments received by the Managing Agent and the Banks, or any of them, shall be applied first to the costs and expenses (including reasonable attorneys' fees and disbursements and the reasonably allocated costs of attorneys employed by the Managing Agent or by any Bank) of the Managing Agent and of the Banks, and thereafter paid pro rata to the Banks in the same proportions that the aggregate Obligations owed to each Bank under the Loan Documents bear to the aggregate Obligations owed under the Loan Documents to all the Banks, without priority or preference among the Banks. Regardless of how each Bank may treat payments for the purpose of its own accounting, for the -100- purpose of computing Borrower' Obligations here under and under the Notes, payments shall be applied first, to the costs and expenses of the Managing ----- Agent and the Banks, as set forth above, second, to the payment of accrued ------ and unpaid interest due under any Loan Documents to and including the date of such application (ratably, and without duplication, according to the accrued and unpaid interest due under each of the Loan Documents), and third, to the payment of all other amounts (including principal and fees) ----- then owing to the Managing Agent or the Banks under the Loan Documents. Amounts due to a Bank under a Secured Swap Agreement shall be considered a principal amount for purposes of the preceding sentence. No application of payments will cure any Event of Default, or prevent acceleration, or continued acceleration, of amounts payable under the Loan Documents, or prevent the exercise, or continued exercise, of rights or remedies of the Banks hereunder or thereunder or at Law or in equity. -101- THE MANAGING AGENT ------------------ 11.1 Appointment and Authorization. Subject to Section 11.8, each ----------------------------- ---- Bank hereby irrevocably appoints and authorizes the Managing Agent to take such action as agent on its behalf and to exercise such powers under the Loan Documents as are delegated to the Managing Agent by the terms thereof or are reasonably incidental, as determined by the Managing Agent, thereto. This appointment and authorization is intended solely for the purpose of facilitating the servicing of the Loans and does not constitute appointment of the Managing Agent as trustee for any Bank or as representative of any Bank for any other purpose and, except as specifically set forth in the Loan Documents to the ------ contrary, the Managing Agent shall take such action and exercise such powers only in an administrative and ministerial capacity. 11.2 Managing Agent and Affiliates. Bank of America National Trust ----------------------------- and Savings Association (and each successor Managing Agent) has the same rights and powers under the Loan Documents as any other Bank and may exercise the same as though it were not the Managing Agent, and the term "Bank" or "Banks" includes Bank of America National Trust and Savings Association in its individual capacity. Bank of America National Trust and Savings Association (and each successor Managing Agent) and its Affiliates may accept deposits from, lend money to and generally engage in any kind of banking, trust or other business with Borrower, any Subsidiary thereof, or any Affiliate of Borrower or any Subsidiary thereof, as if it were not the Managing Agent and without any duty to account therefor to the Banks. Bank of America National Trust and Savings Association (and each successor Managing Agent) need not account to any other Bank for any monies received by it for reimbursement of its costs and expenses as Managing Agent hereunder, or for any monies received by it in its capacity as a Bank hereunder. The Managing Agent shall not be deemed to hold a fiduciary relationship with any Bank and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist against the Managing Agent. 11.3 Proportionate Interest in any Collateral. The Managing Agent, ---------------------------------------- on behalf of all the Banks, shall hold in accordance with the Loan Documents all items of any collateral or interests therein received or held by the Managing Agent. Subject to the Managing Agent's and the Banks' rights to reimbursement for their costs and expenses hereunder (including reasonable attorneys' fees and --------- disbursements and other professional services and the reasonably allocated costs of attorneys employed by the Managing Agent or a Bank) and subject to the application of payments in accordance with Section -102- 10.2(d), each Bank shall have an interest in the Banks' interest in the - ------- Collateral or interests therein in the same proportions that the aggregate Obligations owed such Bank under the Loan Documents bear to the aggregate Obligations owed under the Loan Documents to all the Banks, without priority or preference among the Banks, except that Obligations owed to any Bank under a ------ Secured Swap Agreement shall be secured on a pari passu basis with all other ---- ----- Obligations up to an amount equal to the Managing Agent's then customary credit risk factor for Swap Agreements times the notional amount of Indebtedness covered by such Secured Swap Agreement and shall be secured on a subordinate basis as to amounts in excess of such amount. 11.4 Banks' Credit Decisions. Each Bank agrees that it has, ----------------------- independently and without reliance upon the Managing Agent, any other Bank or the directors, officers, agents, employees or attorneys of the Managing Agent or of any other Bank, and instead in reliance upon information supplied to it by or on behalf of Borrower and upon such other information as it has deemed appropriate, made its own independent credit analysis and decision to enter into this Agreement. Each Bank also agrees that it shall, independently and without reliance upon the Managing Agent, any other Bank or the directors, officers, agents, employees or attorneys of the Managing Agent or of any other Bank, continue to make its own independent credit analyses and decisions in acting or not acting under the Loan Documents. 11.5 Action by Managing Agent. ------------------------ (a) Absent actual knowledge of the Managing Agent of the existence of a Default, the Managing Agent may assume that no Default has occurred and is continuing, unless the Managing Agent (or the Bank that is then the Managing Agent) has received notice from Borrower stating the nature of the Default or has received notice from a Bank stating the nature of the Default and that such Bank considers the Default to have occurred and to be continuing. (b) The Managing Agent has only those obligations under the Loan Documents as are expressly set forth therein. (c) Except for any obligation expressly set forth in the Loan Documents ------ and as long as the Managing Agent may assume that no Event of Default has occurred and is continuing, the Managing Agent may, but shall not be required to, exercise its discretion to act or not act, except that ------ the Managing Agent shall be required to act or not act upon the instructions of the Requisite Banks (or of all the Banks, to the extent required by Section 12.2) and those instructions shall be binding upon the ---- Managing Agent and all the Banks, provided that the Managing Agent -------- -103- shall not be required to act or not act if to do so would be contrary to any Loan Document or to applicable Law or would result, in the reasonable judgment of the Managing Agent, in substantial risk of liability to the Managing Agent. (d) If the Managing Agent has received a notice specified in clause (a), the Managing Agent shall immediately give notice thereof to the Banks - and shall act or not act upon the instructions of the Requisite Banks (or of all the Banks, to the extent required by Section 12.2), provided that ---- -------- the Managing Agent shall not be required to act or not act if to do so would be contrary to any Loan Document or to applicable Law or would result, in the reasonable judgment of the Managing Agent, in substantial risk of liability to the Managing Agent, and except that if the Requisite ------ Banks (or all the Banks, if required under Section 12.2) fail, for five (5) ---- Banking Days after the receipt of notice from the Managing Agent, to instruct the Managing Agent, then the Managing Agent, in its sole discretion, may act or not act as it deems advisable for the protection of the interests of the Banks. (e) The Managing Agent shall have no liability to any Bank for acting, or not acting, as instructed by the Requisite Banks (or all the Banks, if required under Section 12.2), notwithstanding any other provision hereof. ---- 11.6 Liability of Managing Agent. Neither the Managing Agent nor any --------------------------- of its directors, officers, agents or employees shall be liable for any action taken or not taken by them under or in connection with the Loan Documents, except for their own gross negligence or willful misconduct. Without limitation - ------ on the foregoing, the Managing Agent and its directors, officers, agents and employees: (a) May treat the payee of any Note as the holder thereof until the Managing Agent receives notice of the assignment or transfer thereof, in form satisfactory to the Managing Agent, signed by the payee, and may treat each Bank as the owner of that Bank's interest in the Obligations for all purposes of this Agreement until the Managing Agent receives notice of the assignment or transfer thereof, in form satisfactory to the Managing Agent, signed by that Bank; (b) May consult with legal counsel (including in-house legal --------- counsel), accountants (including in-house accountants) and other --------- professionals or experts selected by it, or with legal counsel, accountants or other professionals or experts for Borrower and/or their Subsidiaries or the Banks, and shall not be liable for any action taken or not taken by it in good faith in accordance with any -104- advice of such legal counsel, accountants or other professionals or experts; (c) Shall not be responsible to any Bank for any statement, warranty or representation made in any of the Loan Documents or in any notice, certificate, report, request or other statement (written or oral) given or made in connection with any of the Loan Documents; (d) Except to the extent expressly set forth in the Loan Documents, ------ shall have no duty to ask or inquire as to the performance or observance by Borrower or its Subsidiaries of any of the terms, conditions or covenants of any of the Loan Documents or to inspect any Collateral or the Property, books or records of Borrower or their Subsidiaries; (e) Will not be responsible to any Bank for the due execution, legality, validity, enforceability, genuineness, effectiveness, sufficiency or value of any Loan Document, any other instrument or writing furnished pursuant thereto or in connection therewith, or any Collateral; (f) Will not incur any liability by acting or not acting in reliance upon any Loan Document, notice, consent, certificate, statement, request or other instrument or writing believed in good faith by it to be genuine and signed or sent by the proper party or parties; and (g) Will not incur any liability for any arithmetical error in computing any amount paid or payable by the Borrower or any Subsidiary or Affiliate thereof or paid or payable to or received or receivable from any Bank under any Loan Document, including, principal, interest, commitment fees, --------- Advances and other amounts; provided that, promptly upon discovery of such -------- an error in computation, the Managing Agent, the Banks and (to the extent applicable) Borrower and/or its Subsidiaries or Affiliates shall make such adjustments as are necessary to correct such error and to restore the parties to the position that they would have occupied had the error not occurred. 11.7 Indemnification. Each Bank shall, ratably in accordance with --------------- its Pro Rata Share of the Commitment (if the Commitment is then in effect) or in accordance with its proportion of the aggregate Indebtedness then evidenced by the Notes (if the Commitment has then been terminated), indemnify and hold the Managing Agent and its directors, officers, agents, employees and attorneys harmless against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind -105- or nature whatsoever (including, without limitation, attorneys' fees and --------- disbursements and allocated costs of attorneys employed by the Managing Agent) that may be imposed on, incurred by or asserted against it or them in such capacity in any way relating to or arising out of the Loan Documents (other than losses incurred by reason of the failure of Borrower to pay the Indebtedness represented by the Notes) or any action taken or not taken by it as Managing Agent thereunder, except such as result from its own gross negligence or willful ------ misconduct. Without limitation on the foregoing, each Bank shall reimburse the Managing Agent upon demand for that Bank's Pro Rata Share of any out-of-pocket cost or expense incurred by the Managing Agent in connection with the negotiation, preparation, execution, delivery, amendment, waiver, restructuring, reorganization (including a bankruptcy reorganization), --------- enforcement or attempted enforcement of the Loan Documents, to the extent that Borrower or any other Party is required by Section 12.3 to pay that cost or ---- expense but fails to do so upon demand. Nothing in this Section 11.7 shall ---- entitle the Managing Agent to recover any amount from the Banks if and to the extent that such amount has theretofore been recovered from Borrower or any other Party. To the extent that the Managing Agent is later reimbursed such cost or expense by Borrower or any other Party, it shall return the amounts paid to it by the Banks in respect of such cost or expense. 11.8 Successor Managing Agent. The Managing Agent may, and at the ------------------------ request of the Requisite Banks shall, resign as Managing Agent upon thirty (30) days' notice to the Banks and Borrower. If the Managing Agent shall resign as Managing Agent under this Agreement, the Requisite Banks shall appoint from among the Banks a successor Managing Agent for the Banks, which successor Managing Agent shall be approved by Borrower (and such approval shall not be unreasonably withheld or delayed). If no successor Managing Agent is appointed prior to the effective date of the resignation of the Managing Agent, the Managing Agent may appoint, after consulting with the Banks and the Borrower, a successor Managing Agent from among the Banks. Upon the acceptance of its appointment as successor Managing Agent hereunder, such successor Managing Agent shall succeed to all the rights, powers and duties of the retiring Managing Agent and the term "Managing Agent" shall mean such successor Managing Agent and the retiring Managing Agent's appointment, powers and duties as Managing Agent shall be terminated. After any retiring Managing Agent's resignation hereunder as Managing Agent, the provisions of this Article 11, and Sections 12.3, 12.11 ---------- ---- ----- and 12.22, shall inure to its benefit as to any actions taken or omitted to be ----- taken by it while it was Managing Agent under this Agreement. If (a) the Managing Agent has not been paid its agency fees under Section 3.6 or has not --- been reimbursed for any expense reimbursable to it under Section 12.3, in either ---- case for a period of at least one (1) year and (b) no successor Managing Agent has accepted appointment as Managing. -106- Agent by the date which is thirty (30) days following a retiring Managing Agent's notice of resignation, the retiring Managing Agent's resignation shall nevertheless thereupon become effective and the Banks shall perform all of the duties of the Managing Agent hereunder until such time, if any, as the Requisite Banks appoint a successor Managing Agent as provided for above. 11.9 Foreclosure on Collateral. In the event of foreclosure or ------------------------- enforcement of the Lien created by any of the Collateral Documents, title to the Collateral covered thereby shall be taken and held by the Managing Agent (or an Affiliate or designee thereof) pro rata for the benefit of the Banks in accordance with the Obligations outstanding to each of them and shall be administered in accordance with the standard form of collateral holding participation agreement used by the Managing Agent in comparable syndicated credit facilities. 11.10 No Obligations of Borrower. Nothing contained in this Article -------------------------- 11 shall be deemed to impose upon Borrower any obligation in respect of the due and punctual performance by the Managing Agent of its obligations to the Banks under any provision of this Agreement, and Borrower shall have no liability the Managing Agent or any of the Banks in respect of any failure by the Managing Agent or any Bank to perform any of its obligations to the Managing Agent or the Banks under this Agreement. Without limiting the generality of the foregoing, where any provision of this Agreement relating to the payment of any amounts due and owing under the Loan Documents provides that such payments shall be made by Borrower to the Managing Agent for the account of the Banks, Borrower's obligations to the Banks in respect of such payments shall be deemed to be satisfied upon the making of such payments to the Managing Agent in the manner provided by this Agreement. -107- MISCELLANEOUS ------------- 12.1 Cumulative Remedies; No Waiver. The rights, powers, privileges ------------------------------ and remedies of the Managing Agent and the Banks provided herein or in any Note or other Loan Document are cumulative and not exclusive of any right, power, privilege or remedy provided by Law or equity. No failure or delay on the part of the Managing Agent or any Bank in exercising any right, power, privilege or remedy may be, or may be deemed to be, a waiver thereof; nor may any single or partial exercise of any right, power, privilege or remedy preclude any other or further exercise of the same or any other right, power, privilege or remedy. The terms and conditions of Article 9 hereof are inserted for the sole benefit --------- of the Managing Agent and the Banks; the same may be waived in whole or in part, with or without terms or conditions, in respect of any Loan or Letter of Credit without prejudicing the Managing Agent's or the Banks' rights to assert them in whole or in part in respect of any other Loan. 12.2 Amendments; Consents. No amendment, modification, supplement, -------------------- extension, termination or waiver of any provision of this Agreement or any other Loan Document, no approval or consent thereunder, and no consent to any departure by the Borrower or any other Party therefrom, may in any event be effective unless in writing signed by the Managing Agent with the approval of Requisite Banks (and, in the case of any amendment, modification or supplement of or to any Loan Document to which any of the Borrower or any of its Subsidiaries is a Party, signed by each such Party, and, in the case of any amendment, modification or supplement to Article 11, signed by the Managing ---------- Agent), and then only in the specific instance and for the specific purpose given; and, without the approval in writing of all the Banks, no amendment, modification, supplement, termination, waiver or consent may be effective: (a) To amend or modify the principal of, or the amount of principal, principal prepayments or the rate of interest payable on, any Note, or the amount of the Commitment or the Pro Rata Share of any Bank or the amount of any commitment fee payable to any Bank, or any other fee or amount payable to any Bank under the Loan Documents or to waive an Event of Default consisting of the failure of Borrower to pay when due principal, interest or any commitment fee; (b) To postpone any date fixed for any payment of principal of, prepayment of principal of or any installment of interest on, any Note or any installment of any commitment fee, or to extend the term of the Commitment; -108- (c) To permit the term of any Letter of Credit to exceed one (1) year or extend beyond the Maturity Date; (d) To release the Subsidiary Guaranty, the Completion Guaranty or the Keep-Well Agreement or any material portion of the Collateral, except ------ in each case as otherwise may be expressly provided for in any Loan Document; (e) To amend the provisions of the definition of "Reduction Amount", ---------------- "Reduction Date", Requisite Banks" or "Maturity Date"; -------------- --------------- ------------- (f) To amend or waive Article 9, Section 6.4 or this Section 12.2; or --------- --- ---- (g) To amend any provision of this Agreement that expressly requires the consent or approval of all the Banks. Any amendment, modification, supplement, termination, waiver or consent pursuant to this Section 12.2 shall apply equally to, and shall be binding upon, all the ---- Banks and the Managing Agent. 12.3 Costs, Expenses and Taxes. Borrower shall pay within five (5) ------------------------- Banking Days after demand, accompanied by an invoice therefor, the reasonable costs and expenses of the Managing Agent in connection with the negotiation, preparation, syndication, execution and delivery of the Loan Documents and any amendment thereto or waiver thereof. Borrower shall also pay on demand, accompanied by an invoice therefor, the reasonable costs and expenses of the Managing Agent and the Banks in connection with the refinancing, restructuring, reorganization (including a bankruptcy reorganization) and enforcement or --------- attempted enforcement of the Loan Documents, and any matter related thereto. The foregoing costs and expenses shall include filing fees, recording fees, title insurance fees, appraisal fees, search fees, and other out-of-pocket expenses and the reasonable fees and out-of-pocket expenses of any legal counsel (including reasonably allocated costs of legal counsel employed by the Managing --------- Agent or any Bank), independent public accountants and other outside experts retained by the Managing Agent or any Bank, whether or not such costs and expenses are incurred or suffered by the Managing Agent or any Bank in connection with or during the course of any bankruptcy or insolvency proceedings of Borrower or any Subsidiary thereof. Such costs and expenses shall also include, in the case of any amendment or waiver of any Loan Document requested by Borrower, the administrative costs of the Managing Agent reasonably attributable thereto. Borrower shall pay any and all documentary and other taxes, excluding (i) taxes imposed on or --------- -109- measured in whole or in part by overall net income, gross income or gross receipts and franchise taxes imposed on any Bank by (A) any jurisdiction (or political subdivision thereof) in which it is organized or maintains its principal office or Eurodollar Lending Office or (B) any jurisdiction (or political subdivision thereof) in which it is "doing business", (ii) any withholding taxes or other taxes based on gross income imposed by the United States of America that are not attributable to any change in any Law or the interpretation or administration of any Law by any Governmental Agency and (iii) any withholding tax or other taxes based on gross income imposed by the United States of America for any period with respect to which it has failed to provide Borrower with the appropriate form or forms required by Section 12.21, to the ----- extent such forms are then required by applicable Laws, and all costs, expenses, fees and charges payable or determined to be payable in connection with the filing or recording of this Agreement, any other Loan Document or any other instrument or writing to be delivered hereunder or thereunder, or in connection with any transaction pursuant hereto or thereto, and shall reimburse, hold harmless and indemnify on the terms set forth in 12.11 the Managing Agent and ----- the Banks from and against any and all loss, liability or legal or other expense with respect to or resulting from any delay in paying or failure to pay any such tax, cost, expense, fee or charge or that any of them may suffer or incur by reason of the failure of any Party to perform any of its Obligations. Any amount payable to the Managing Agent or any Bank under this Section shall bear interest from the second Banking Day following the date of demand for payment at the Default Rate. 12.4 Nature of Banks' Obligations. The obligations of the Banks ---------------------------- hereunder are several and not joint or joint and several. Nothing contained in this Agreement or any other Loan Document and no action taken by the Managing Agent or the Banks or any of them pursuant hereto or thereto may, or may be deemed to, make the Banks a partnership, an association, a joint venture or other entity, either among themselves or with the Borrower or any Affiliate of any of Borrower. Each Bank's obligation to make any Advance pursuant hereto is several and not joint or joint and several, and in the case of the initial Advance only is conditioned upon the performance by all other Banks of their obligations to make initial Advances. A default by any Bank will not increase the Pro Rata Share of the Commitment attributable to any other Bank. Any Bank not in default may, if it desires, assume in such proportion as the non- defaulting Banks agree the obligations of any Bank in default, but is not obligated to do so. The Managing Agent agrees that it will use its best efforts either to induce the other Banks to assume the obligations of a Bank in default or to obtain another Bank, reasonably satisfactory to Borrower, to replace such a Bank in default. -110- 12.5 Survival of Representations and Warranties. All representations ------------------------------------------ and warranties contained herein or in any other Loan Document, or in any certificate or other writing delivered by or on behalf of any one or more of the Parties to any Loan Document, will survive the making of the Loans here under and the execution and delivery of the Notes, and have been or will be relied upon by the Managing Agent and each Bank, notwithstanding any investigation made by the Managing Agent or any Bank or on their behalf. 12.6 Notices. Except as otherwise expressly provided in the Loan ------- ------ Documents, all notices, requests, demands, directions and other communications provided for hereunder or under any other Loan Document must be in writing and must be mailed, telegraphed, telecopied, dispatched by commercial courier or delivered to the appropriate party at the address set forth on the signature pages of this Agreement or other applicable Loan Document or, as to any party to any Loan Document, at any other address as may be designated by it in a written notice sent to all other parties to such Loan Document in accordance with this Section. Except as otherwise expressly provided in any Loan Document, if any ------ notice, request, demand, direction or other communication required or permitted by any Loan Document is given by mail it will be effective on the earlier of receipt or the fourth Banking Day after deposit in the United States mail with first class or airmail postage prepaid; if given by telegraph or cable, when delivered to the telegraph company with charges prepaid; if given by telecopier, when sent; if dispatched by commercial courier, on the scheduled delivery date; or if given by personal delivery, when delivered. 12.7 Execution of Loan Documents. Unless the Managing Agent --------------------------- otherwise specifies with respect to any Loan Document, (a) this Agreement and any other Loan Document may be executed in any number of counterparts and any party hereto or thereto may execute any counterpart, each of which when executed and delivered will be deemed to be an original and all of which counterparts of this Agreement or any other Loan Document, as the case may be, when taken together will be deemed to be but one and the same instrument and (b) execution of any such counterpart may be evidenced by a telecopier transmission of the signature of such party. The execution of this Agreement or any other Loan Document by any party hereto or thereto will not become effective until counterparts hereof or thereof, as the case may be, have been executed by all the parties hereto or thereto. -111- 12.8 Binding Effect; Assignment. -------------------------- (a) This Agreement and the other Loan Documents to which Borrower are a Party will be binding upon and inure to the benefit of Borrower, the Managing Agent, each of the Banks, and their respective successors and assigns, except that Borrower may not assign its rights hereunder or ------ thereunder or any interest herein or therein without the prior written consent of all the Banks. Each Bank represents that it is not acquiring its Note with a view to the distribution thereof within the meaning of the Securities Act of 1933, as amended (subject to any requirement that disposition of such Note must be within the control of such Bank). Any Bank may at any time pledge its Note or any other instrument evidencing its rights as a Bank under this Agreement to a Federal Reserve Bank, but no such pledge shall release that Bank from its obligations hereunder or grant to such Federal Reserve Bank the rights of a Bank hereunder absent foreclosure of such pledge. (b) From time to time following the Closing Date, each Bank may assign to one or more Eligible Assignees all or any portion of its Pro Rata Share of the Commitment; provided that (i) such Eligible Assignee, if not then a -------- Bank or an Affiliate of the assigning Bank, shall be approved by each of the Managing Agent and (if no Event of Default then exists) Borrower (neither of which approvals shall be unreasonably withheld or delayed), (ii) such assignment shall be evidenced by a Commitment Assignment and Acceptance, a copy of which shall be furnished to the Managing Agent as hereinbelow provided, (iii) except in the case of an assignment to an ------ Affiliate of the assigning Bank, to another Bank or of the entire remaining Commitment of the assigning Bank, the assign ment shall not assign a Pro Rata Share of the Commitment that is equivalent to less than $10,000,000, and (iv) the effective date of any such assignment shall be as specified in the Commitment Assignment and Acceptance, but not earlier than the date which is five (5) Banking Days after the date the Managing Agent has received the Commitment Assignment and Acceptance. Upon the effective date of such Commitment Assignment and Acceptance, the Eligible Assignee named therein shall be a Bank for all purposes of this Agreement, with the Pro Rata Share of the Commitment therein set forth and, to the extent of such Pro Rata Share, the assigning Bank shall be released from its further obligations under this Agreement. Borrower agrees that it shall execute and deliver (against delivery by the assigning Bank to Borrower of its Note) to such assignee Bank, a Note evidencing that assignee Bank's Pro Rata Share of the Commitment, and to the assigning Bank, a -112- Note evidencing the remaining balance Pro Rata Share retained by the assigning Bank. (c) By executing and delivering a Commitment Assignment and Acceptance, the Eligible Assignee thereunder acknowledges and agrees that: (i) other than the representation and warranty that it is the legal and beneficial owner of the Pro Rata Share of the Commitment being assigned thereby free and clear of any adverse claim, the assigning Bank has made no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness or sufficiency of this Agreement or any other Loan Document; (ii) the assigning Bank has made no representation or warranty and assumes no responsibility with respect to the financial condition of Borrower or the performance by Borrower of the Obligations; (iii) it has received a copy of this Agreement, together with copies of the most recent financial statements delivered pursuant to Section 8.1 and such other documents and --- information as it has deemed appropriate to make its own credit analysis and decision to enter into such Commitment Assignment and Acceptance; (iv) it will, independently and without reliance upon the Managing Agent or any Bank and based on 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 this Agreement; (v) it appoints and authorizes the Managing Agent to take such action and to exercise such powers under this Agreement as are delegated to the Managing Agent by this Agreement; and (vi) it will perform in accordance with their terms all of the obligations which by the terms of this Agreement are required to be performed by it as a Bank. (d) The Managing Agent shall maintain at the Managing Agent's Office a copy of each Commitment Assignment and Acceptance delivered to it and a register (the "Register") of the names and address of each of the Banks and the Pro Rata Share of the Commitment held by each Bank, giving effect to each Commitment Assignment and Acceptance. The Register shall be available during normal business hours for inspection by Borrower or any Bank upon reasonable prior notice to the Managing Agent. After receipt of a completed Commitment Assignment and Acceptance executed by any Bank and an Eligible Assignee, and receipt of an assignment fee of $2,500 from such Bank or Eligible Assignee, the Managing Agent shall, promptly following the effective date thereof, provide to Borrower and the Banks a revised Schedule 1.1 giving effect there to. Borrower, the Managing Agent and the ------------ Banks shall deem and treat the Persons listed as Banks in the Register as the holders and -113- owners of the Pro Rata Share of the Commitment listed therein for all purposes hereof, and no assignment or transfer of any such Pro Rata Share of the Commitment shall be effective, in each case unless and until a Commitment Assignment and Acceptance effecting the assignment or transfer thereof shall have been accepted by the Managing Agent and recorded in the Register as provided above. Prior to such recordation, all amounts owed with respect to the applicable Pro Rata Share of the Commitment shall be owed to the Bank listed in the Register as the owner thereof, and any request, authority or consent of any Person who, at the time of making such request or giving such authority or consent, is listed in the Register as a Bank shall be conclusive and binding on any subsequent holder, assignee or transferee of the corresponding Pro Rata Share of the Commitment. (e) Each Bank may from time to time grant participations to one or more banks or other financial institutions (including another Bank) in a --------- portion of its Pro Rata Share of the Commitment; provided, however, that -------- ------- (i) such Bank's obligations under this Agreement shall remain unchanged, (ii) such Bank shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the participating banks or other financial institutions shall not be a Bank hereunder for any purpose except, if the participation agreement so provides, for the purposes of ------ Sections 3.7, 3.8, 12.11 and 12.22 but only to the extent that the cost of --- --- ----- ----- such benefits to Borrower does not exceed the cost which Borrower would have incurred in respect of such Bank absent the participation, (iv) Borrower, the Managing Agent and the other Banks shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement, (v) the participation interest shall be expressed as a percentage of the granting Bank's Pro Rata Share of the Commitment as it then exists and shall not restrict an increase in the Commitment, or in the granting Bank's Pro Rata Share of the Commitment, so long as the amount of the participation interest is not affected thereby, and (vi) the consent of the holder of such participation interest shall not be required for amendments or waivers of provisions of the Loan Documents other than those which (A) extend the Initial Reduction Date, the Maturity ---------- Date or any other date upon which any payment of money is due to the Banks, (B) reduce the rate of interest on the Notes, any fee or any other monetary amount payable to the Banks, (C) reduce the amount of any installment of principal due under the Notes, or (D) release any material portion of the Collateral (except as may be otherwise expressly provided for in any Loan Document). -114- (f) Notwithstanding anything in this Section to the contrary, the rights of the Banks to make assignments of, and grant participations in, their Pro Rata Shares of the Commitment shall be subject to the approval of any Gaming Board, to the extent required by applicable Gaming Laws, and to compliance with applicable securities laws. 12.9 Right of Setoff. If an Event of Default has occurred and is --------------- continuing, the Managing Agent or any Bank (but in each case only with the consent of the Requisite Banks) may exercise its rights under Article 9 of the Uniform Commercial Code and other applicable Laws and, to the extent permitted by applicable Laws, apply any funds in any deposit account maintained with it by Borrower and/or any Property of Borrower in its possession against the Obligations. 12.10 Sharing of Setoffs. Each Bank severally agrees that if it, ------------------ through the exercise of any right of setoff, banker's lien or counterclaim against Borrower, or otherwise, receives payment of the Obligations held by it that is ratably more than any other Bank, through any means, receives in pay ment of the Obligations held by that Bank, then, subject to applicable Laws: (a) the Bank exercising the right of setoff, banker's lien or counterclaim or otherwise receiving such payment shall purchase, and shall be deemed to have simultaneously purchased, from the other Bank a participation in the Obligations held by the other Bank and shall pay to the other Bank a purchase price in an amount so that the share of the Obligations held by each Bank after the exercise of the right of setoff, banker's lien or counterclaim or receipt of payment shall be in the same proportion that existed prior to the exercise of the right of setoff, banker's lien or counterclaim or receipt of payment; and (b) such other adjustments and purchases of participations shall be made from time to time as shall be equitable to ensure that all of the Banks share any payment obtained in respect of the Obligations ratably in accordance with each Bank's share of the Obligations immediately prior to, and without taking into account, the payment; provided that, if all or any portion of a disproportionate -------- payment obtained as a result of the exercise of the right of setoff, banker's lien, counterclaim or otherwise is thereafter recovered from the purchasing Bank by Borrower or any Person claiming through or succeeding to the rights of Borrower, the purchase of a participation shall be rescinded and the purchase price thereof shall be restored to the extent of the recovery, but without interest. Each Bank that purchases a participation in the Obligations pursuant to this Section shall from and after the purchase have the right to give all notices, requests, demands, directions and other communications under this Agreement with respect to the portion of the Obligations purchased to the same extent as though the purchasing Bank were the original owner of the Obligations purchased. Borrower expressly consent to the foregoing arrangements and agree that -115- any Bank holding a participation in an Obligation so purchased may exercise any and all rights of setoff, banker's lien or counterclaim with respect to the participation as fully as if the Bank were the original owner of the Obligation purchased. 12.11 Indemnity by Borrower. Borrower agrees to indemnify, save and --------------------- hold harmless the Managing Agent and each Bank and their directors, officers, agents, attorneys and employees (collectively the "Indemnitees") from and ----------- against: (a) any and all claims, demands, actions or causes of action (except a ------ claim, demand, action, or cause of action for any amount excluded from the definition of "Taxes" in Section 3.12(d)) if the claim, demand, action or cause ------- of action arises out of or relates to any act or omission (or alleged act or omission) of Borrower, their Affiliates or any of their officers, directors or stockholders relating to the Commitment, the use or contemplated use of proceeds of any Loan, or the relationship of Borrower and the Banks under this Agreement; (b) any administrative or investigative proceeding by any Governmental Agency arising out of or related to a claim, demand, action or cause of action described in clause (a) above; and (c) any and all liabilities, losses, costs or - expenses (including reasonable attorneys' fees and the reasonably allocated --------- costs of attorneys employed by any Indemnitee and disbursements of such attorneys and other professional services) that any Indemnitee suffers or incurs as a result of the assertion of any foregoing claim, demand, action or cause of action; provided that no Indemnitee shall be entitled to indemnification for any -------- loss caused by its own gross negligence or willful misconduct or for any loss asserted against it by another Indemnitee. If any claim, demand, action or cause of action is asserted against any Indemnitee, such Indemnitee shall promptly notify Borrower, but the failure to so promptly notify Borrower shall not affect Borrower' obligations under this Section unless such failure materially prejudices Borrower's right to participate in the contest of such claim, demand, action or cause of action, as hereinafter provided. Such Indemnitee may (and shall, if requested by Borrower in writing) contest the validity, applicability and amount of such claim, demand, action or cause of action and shall permit Borrower to participate in such contest. Any Indemnitee that proposes to settle or compromise any claim or proceeding for which Borrower may be liable for payment of indemnity hereunder shall give Borrower written notice of the terms of such proposed settlement or compromise reasonably in advance of settling or compromising such claim or proceeding and shall obtain Borrower' prior consent (which shall not be unreasonably withheld or delayed). In connection with any claim, demand, action or cause of action covered by this Section against more than one Indemnitee, all such Indemnitees shall be represented by the same legal counsel (which may be a law firm engaged by the Indemnitees or attorneys employed by an Indemnitee or a combination of the foregoing) selected by the -116- Indemnitees and reasonably acceptable to Borrower; provided, that if such legal -------- counsel determines in good faith that representing all such Indemnitees would or could result in a conflict of interest under Laws or ethical principles applicable to such legal counsel or that a defense or counterclaim is available to an Indemnitee that is not available to all such Indemnitees, then to the extent reasonably necessary to avoid such a conflict of interest or to permit unqualified assertion of such a defense or counterclaim, each Indemnitee shall be entitled to separate representation by legal counsel selected by that Indemnitee and reasonably acceptable to Borrower, with all such legal counsel using reasonable efforts to avoid unnecessary duplication of effort by counsel for all Indemnitees; and further provided that the Managing Agent (as an ------- -------- Indemnitee) shall at all times be entitled to representation by separate legal counsel (which may be a law firm or attorneys employed by the Managing Agent or a combination of the foregoing). Any obligation or liability of Borrower to any Indemnitee under this Section shall survive the expiration or termination of this Agreement, the repayment of all Loans, the expiration or termination of all Letters of Credit and the payment and performance of all other Obligations owed to the Banks. 12.12 Nonliability of the Banks. Borrower acknowledges and agrees ------------------------- that: (a) Any inspections of any Property of Borrower made by or through the Managing Agent or the Banks are for purposes of administration of the Loan only and Borrower is not entitled to rely upon the same (whether or not such inspections are at the expense of Borrower); (b) By accepting or approving anything required to be observed, performed, fulfilled or given to the Managing Agent or the Banks pursuant to the Loan Documents neither the Managing Agent nor the Banks shall be deemed to have warranted or represented the sufficiency, legality, effectiveness or legal effect of the same, or of any term, provision or condition thereof, and such acceptance or approval thereof shall not constitute a warranty or representation to anyone with respect thereto by the Managing Agent or the Banks; (c) The relationship between Borrower and the Managing Agent and the Banks is, and shall at all times remain, solely that of borrower and lenders; neither the Managing Agent nor the Banks shall under any circumstance be construed to be partners or joint venturers of Borrower or its Affiliates; neither the Managing Agent nor the Banks shall under any circumstance be deemed to be in a relationship of confidence or trust or a fiduciary or other "special" relationship with Borrower or its -117- Affiliates, or to owe any fiduciary duty to Borrower or its Affiliates; neither the Managing Agent nor the Banks undertake or assume any responsibility or duty to Borrower or its Affiliates to select, review, inspect, supervise, pass judgment upon or inform Borrower or its Affiliates of any matter in connection with their Property or the operations of Borrower or its Affiliates; Borrower and its Affiliates shall rely entirely upon their own judgment with respect to such matters; and any review, inspection, supervision, exercise of judgment or supply of information undertaken or assumed by the Managing Agent or the Banks in connection with such matters is solely for the protection of the Managing Agent and the Banks and neither Borrower nor any other Person is entitled to rely thereon; and (d) The Managing Agent and the Banks shall not be responsible or liable to any Person for any loss, damage, liability or claim of any kind relating to injury or death to Persons or damage to Property caused by the actions, inaction or negligence of Borrower and/or its Affiliates and Borrower hereby indemnifies and hold the Managing Agent and the Banks harmless on the terms set forth in Section 12.11 from any such loss, ----- damage, liability or claim. 12.13 No Third Parties Benefited. This Agreement is made for the -------------------------- purpose of defining and setting forth certain obligations, rights and duties of Borrower, the Managing Agent and the Banks in connection with the Loans, and is made for the sole benefit of Borrower, the Managing Agent and the Banks, and the Managing Agent's and the Banks' successors and assigns. Except as provided in ------ Sections 12.8 and 12.11, no other Person shall have any rights of any nature ---- ----- hereunder or by reason hereof. 12.14 Confidentiality. Each Bank agrees to hold any confidential --------------- information that it may receive from Borrower pursuant to this Agreement in confidence, except for disclosure: (a) to other Banks; (b) to legal counsel ------ and accountants for Borrower or any Bank; (c) to other professional advisors to Borrower or any Bank, provided that the recipient has accepted such information subject to a confidentiality agreement sub stantially similar to this Section; (d) to regulatory officials having jurisdiction over that Bank; (e) to any Gaming Board having regulatory jurisdiction over Borrower or its Subsidiaries, provided that each Bank agrees to use its best efforts to notify Borrower of any such disclosure unless prohibited by applicable Laws; (f) as required by Law or legal process or in connection with any legal proceeding to which that Bank and Borrower are adverse parties; and (g) to another financial institution in connection with a disposition or proposed disposition to that financial institution of all or part of that -118- Bank's interests hereunder or a participation interest in its Note, provided that the recipient has accepted such informa tion subject to a confidentiality agreement substantially similar to this Section. For purposes of the foregoing, "confidential information" shall mean any information respecting Borrower or its Subsidiaries reasonably considered by Borrower to be confidential, other than ---------- (i) information previously filed with any Governmental Agency and available to the public, (ii) information previously published in any public medium from a source other than, directly or indirectly, that Bank, and (iii) information previously disclosed by Borrower to any Person not associated with Borrower without a confidentiality agreement or obligation substantially similar to this Section. Nothing in this Section shall be construed to create or give rise to any fiduciary duty on the part of the Managing Agent or the Banks to Borrower. 12.15 Further Assurances. Borrower and its Subsidiaries shall, at ------------------ their expense and without expense to the Banks or the Managing Agent, do, execute and deliver such further acts and documents as the Requisite Banks or the Managing Agent from time to time reasonably require for the assuring and confirming unto the Banks or the Managing Agent of the rights hereby created or intended now or hereafter so to be, or for carrying out the intention or facilitating the performance of the terms of any Loan Document. 12.16 Integration. This Agreement, together with the other Loan ----------- Documents and the letter agreements referred to in Sections 3.2, 3.3 and 3.5, --- --- --- comprises the complete and integrated agreement of the parties on the subject matter hereof and supersedes all prior agreements, written or oral, on the subject matter hereof. In the event of any conflict between the provisions of this Agreement and those of any other Loan Document, the provisions of this Agreement shall control and govern; provided that the inclusion of supplemental -------- rights or remedies in favor of the Managing Agent or the Banks in any other Loan Document shall not be deemed a conflict with this Agreement. Each Loan Document was drafted with the joint participation of the respective parties thereto and shall be construed neither against nor in favor of any party, but rather in accordance with the fair meaning thereof. 12.17 Governing Law. Except to the extent otherwise provided ------------- ------ therein, each Loan Document shall be governed by, and construed and enforced in accordance with, the local Laws of Nevada. 12.18 Severability of Provisions. Any provision in any Loan Document -------------------------- that is held to be inoperative, unenforceable or invalid as to any party or in any jurisdiction shall, as to that party or jurisdiction, be inoperative, unenforceable or invalid without affecting the remaining provisions or the -119- operation, enforceability or validity of that provision as to any other party or in any other jurisdiction, and to this end the provisions of all Loan Documents are declared to be severable. 12.19 Headings. Article and Section headings in this Agreement and -------- the other Loan Documents are included for convenience of reference only and are not part of this Agreement or the other Loan Documents for any other purpose. 12.20 Time of the Essence. Time is of the essence of the Loan ------------------- Documents. 12.21 Foreign Banks and Participants. Each Bank that is incorporated ------------------------------ or otherwise organized under the Laws of a jurisdiction other than the United States of America or any State thereof or the District of Columbia shall deliver to Borrower (with a copy to the Managing Agent), within twenty (20) days after the Closing Date (or after accepting an assignment or receiving a participation interest herein pursuant to Section 12.8, if applicable) two duly completed ---- copies, signed by a Responsible Official, of either Form 1001 (relating to such Bank and entitling it to a complete exemption from withholding on all payments to be made to such Bank by Borrower pursuant to this Agreement) or Form 4224 (relating to all payments to be made to such Bank by Borrower pursuant to this Agreement) of the United States Internal Revenue Service or such other evidence (including, if reasonably necessary, Form W-9) satisfactory to Borrower and the --------- Managing Agent that no withholding under the federal income tax laws is required with respect to such Bank. Thereafter and from time to time, each such Bank shall upon request by Borrower (a) promptly submit to Borrower (with a copy to the Managing Agent), such additional duly completed and signed copies of one of such forms (or such successor forms as shall be adopted from time to time by the relevant United States taxing authorities) as may then be available under then current United States laws and regulations to avoid, or such evidence as is satisfactory to Borrower and the Managing Agent of any available exemption from, United States withholding taxes in respect of all payments to be made to such Bank by Borrower pursuant to this Agreement and (b) take such steps as shall not be materially disadvantageous to it, in the reasonable judgment of such Bank, and as may be reasonably necessary (including the re-designation of its Eurodollar Lending Office, if any) to avoid any requirement of applicable Laws that Borrower make any deduction or withholding for taxes from amounts payable to such Bank. In the event that Borrower or the Managing Agent become aware that a participation has been granted pursuant to Section 12.8(e) to a financial ------- institution that is incorporated or otherwise organized under the Laws of a jurisdiction other than the United States of America, any State thereof or the District of Columbia, then, upon request made by Borrower or -120- the Managing Agent to the Bank which granted such participation, such Bank shall cause such participant financial institution to deliver the same documents and information to Borrower and the Managing Agent as would be required under this Section if such financial institution were a Bank. 12.22 Hazardous Material Indemnity. Borrower hereby agrees to ---------------------------- indemnify, hold harmless and defend (by counsel reasonably satisfactory to the Managing Agent) the Managing Agent and each of the Banks (and any successor to a Bank) and their respective directors, officers, employees and agents from and against any and all claims, losses, damages, liabilities, fines, penalties, charges, administrative and judicial proceedings and orders, judgments, remedial action requirements, enforcement actions of any kind, and all costs and expenses incurred in connection therewith (including reasonable attorneys' fees --------- and the reasonably allocated costs of attorneys employed by the Managing Agent or any Bank, and expenses to the extent that the defense of any such action has not been assumed by Borrower), arising directly or indirectly out of (i) the presence on, in, under or about any Real Property of any Hazardous Materials, or any releases or discharges of any Hazardous Materials on, under or from any Real Property and (ii) any activity carried on or undertaken on or off any Real Property by Borrower or any of its predecessors in title, whether prior to or during the term of this Agreement, and whether by Borrower or any predecessor in title or any employees, agents, contractors or subcontractors of Borrower or any predecessor in title, or any third persons at any time occupying or present on any Real Property (other than a Bank or a representative of a Bank), in ----- ---- connection with the handling, treatment, removal, storage, decontamination, clean-up, transport or disposal of any Hazardous Materials at any time located or present on, in, under or about any Real Property. The foregoing indemnity shall further apply to any residual contamination on, in, under or about any Real Property, or affecting any natural resources, and to any contamination of any Property or natural resources arising in connection with the generation, use, handling, storage, transport or disposal of any such Hazardous Materials, and irrespective of whether any of such activities were or will be undertaken in accordance with applicable Laws, but the foregoing indemnity shall not apply to Hazardous Materials on any Real Property, the presence of which is caused by the Managing Agent or the Banks. Borrower hereby acknowledges and agrees that, notwithstanding any other provision of this Agreement or any of the other Loan Documents to the contrary, the obligations of Borrower under this Section (and under Sections 4.18 and 5.11) shall be unlimited corporate obligations of ---- ---- Borrower and shall not be secured by any deed of trust on any Real Property. --- Any obligation or liability of Borrower to any Indemnitee under this Section shall survive the expiration or termination of this Agreement, the repayment of all Loans, the expiration or -121- termination of all Letters of Credit and the payment and performance of all other Obligations owed to the Banks. 12.23 Gaming Boards. The Managing Agent and each of the Banks agree ------------- to cooperate with all Gaming Boards in connection with the administration of their regulatory jurisdiction over Borrower and its Subsidiaries, including the --------- provision of such documents or other information as may be requested by any such Gaming Board relating to Borrower or any of its Subsidiaries or to the Loan Documents. 12.24 Release of Certain Liens. The Managing Agent shall release the ------------------------ Liens created by the Collateral Documents in the Leased Equipment concurrently with the execution and delivery of the Equipment Lease. 12.25 Other Lien Releases. The Managing Agent shall release any Lien ------------------- granted to or held by the Managing Agent on any Collateral (i) sold, transferred or otherwise disposed of in connection with any transaction not prohibited by the Loan Documents, (ii) constituting Property leased to Borrower or its Subsidiaries under a lease which has expired or been terminated in a transaction not prohibited by the Loan Documents or which will concurrently expire and which has not been, and is not intended by Borrower or the relevant Subsidiary to be, renewed or extended, (iii) consisting of an instrument, if the Indebtedness evidenced by such instrument has been finally repaid in full and (iv) if approved or consented to by those of the Banks required by Section 12.2. If the ---- Collateral so released consists of capital stock of a Subsidiary, then the Managing Agent shall concurrently also release such Subsidiary from its obligations under the Subsidiary Guaranty. Upon the request of the Managing Agent, each Bank shall promptly provide written confirmation of the authority of the Managing Agent to release such Liens upon any one or more items of Collateral under this Section. 12.26 Termination; Release of Liens. Upon (a) the expiration or ----------------------------- termination of the Commitment, (b) the full and final payment in Cash of the Loans, all interest and fees with respect thereto, (c) the reimbursement of all draws under Letters of Credit and the payment of all fees with respect thereto, (d) the expiration of all Letters of Credit or the deposit of Cash collateral with the Issuing Bank in the effective face amount thereof, (e) the payment of all amounts then demanded by any Bank or indemnitee under Sections 3.8, 3.9, --- --- 12.1 and 12.22 and (f) the payment of all other amounts then due under the Loan - ---- ----- Documents, the Managing Agent is hereby authorized by the Banks to, and the Managing Agent shall, upon the request of Borrower, execute and deliver to Borrower discharges from further compliance with the covenants contained in Articles 5, 6, 7 and 8 and releases of the Liens created by the Collateral - - - - Documents, and shall return any Property pledged -122- to the Managing Agent as Collateral for the Obligations, notwithstanding the survival of any provisions of this Agreement herein provided for. 12.27 Removal of a Bank. Borrowers shall have the right to remove a ----------------- Bank as a party to this Agreement in accordance with this Section (a) under the circumstances set forth in Sections 3.7, 3.8(g) and 3.12(d) and (b) if such Bank --- ------ ------- is the subject of a Bank Disqualification. If Borrower is so entitled to remove a Bank pursuant to this Section either: ------ (x) Upon notice from Borrower, the Bank being removed shall execute and deliver a Commitment Assignment and Acceptance covering that Bank's Pro Rata Share of the Commitment in favor of one or more Eligible Assignees designated by Borrower (and acceptable to the Managing Agent, which acceptance shall not be unreasonably delayed or withheld), subject to (i) payment of a purchase price by such Eligible Assignee equal to all principal and accrued interest, fees and other amounts payable to such Bank under this Agreement through the date of assignment and (ii) the written release of the Issuing Bank and the Swing Line Bank of such Bank's obligations under Sections 2.4(c) and ------ 2.11(d) or delivery by such Eligible Assignee of such appropriate ------- assurances and indemnities (which may include letters of credit) as such Bank may reasonably require with respect to its participation interest in any Letters of Credit then outstanding or any Swing Line Outstandings; or (y) Borrower may reduce the Commitment pursuant to Section 2.5 --- (and, for this purpose, the numerical requirements of such Section shall not apply) by an amount equal to that Bank's Pro Rata Share of the Commitment, pay and provide to such Bank the amounts, assurances and indemnities described in subclauses (i) and (ii) of clause (x) above and release such Bank from its Pro Rata Share of the Commitment. In the event that the Commitment is reduced pursuant to this clause (y), subsequent Reduction Amounts shall be reduced by a proportional amount. 12.28 Waiver of Right to Trial by Jury. EACH PARTY TO THIS AGREEMENT -------------------------------- HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTY HERETO OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT -123- TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. 12.29 Purported Oral Amendments. BORROWER EXPRESSLY ACKNOWLEDGES ------------------------- THAT THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS MAY ONLY BE AMENDED OR MODIFIED, OR THE PROVISIONS HEREOF OR THEREOF WAIVED OR SUPPLEMENTED, BY AN INSTRUMENT IN WRITING THAT COMPLIES WITH SECTION 12.2. BORROWER AGREES THAT IT ---- WILL NOT RELY ON ANY COURSE OF DEALING, COURSE OF PERFORMANCE, OR ORAL OR WRITTEN STATEMENTS BY ANY REPRESENTATIVE OF THE MANAGING AGENT OR ANY BANK THAT DOES NOT COMPLY WITH SECTION 12.2 TO EFFECT AN AMENDMENT, MODIFICATION, WAIVER ---- OR SUPPLEMENT TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. NEW YORK-NEW YORK HOTEL, LLC By: /s/ William J. Sherlock ------------------------------ William J. Sherlock President and Chief Executive Officer Address: New York-New York Hotel, LLC 3155 West Harmon Avenue Las Vegas, Nevada 89103 Attn: William J. Sherlock President and Chief Executive Officer Telecopier: (702) 895-9282 Telephone: (702) 895-9292 With a copy to: MGM Grand, Inc. 3799 Las Vegas Boulevard South Las Vegas, Nevada 89109 Attn: Alex Yemenidjian President -124- Primadonna Resorts, Inc. P. O. Box 95997 Las Vegas, Nevada 89193-5997 and Interstate 15 California-Nevada Border Jean, Nevada 89109 Attn: Craig Sullivan Chief Financial Officer Gary N. Jacobs, Esq. Christensen, White, Miller, Fink & Jacobs 2121 Avenue of the Stars, 18th Floor Los Angeles, California 90067 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Managing Agent By: /s/ L. Chenevert, Jr. --------------------------- L. Chenevert, Jr. Vice President Address: Bank of America National Trust and Savings Association Agency Management Services #5596 1455 Market Street, 12th Floor San Francisco, California 94103 Attn: Peggy A. Fujimoto Vice President Telecopier: (415) 622-4894 Telephone: (415) 622-4835 -125- BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as a Bank By: /s/ Jon Varnell ------------------------------------- Jon Varnell, Managing Director Address: Bank of America National Trust and Savings Association 555 South Flower Street, #3283 Los Angeles, California 90071 Attn: Jon Varnell, Managing Director Telecopier: (213) 228-2641 Telephone: (213) 228-6181 With a copy to: Bank of America National Trust and Savings Association 555 South Flower Street (LA-5777) Los Angeles, California 90071 Attn: William Newby Managing Director Telecopier: (213) 228-3145 Telephone: (213) 228-2438 FIRST INTERSTATE BANK OF NEVADA, N.A., as Co-Agent and a Bank By: /s/ Brad Peterson ----------------------------------- Brad Peterson Vice President Address: First Interstate Bank of Nevada, N.A. 3800 Howard Hughes Parkway Las Vegas, Nevada 89109 Attn: Brad Peterson Vice President Telecopier: (702) 791-6248 Telephone: (702) 791-6328 -126- BANK OF SCOTLAND, as a Lead Manager and a Bank By: /s/ Catherine M. Oniffrey ------------------------------------ Catherine M. Oniffrey Vice President Address: Bank of Scotland 565 Fifth Avenue New York, New York 10017 Attn: Catherine M. Oniffrey Vice President Telecopier: (212) 557-9460 Telephone: (212) 450-0872 SOCIETE GENERALE, as a Lead Manager and a Bank By: /s/ J. Blaine Shaum ---------------------------------- J. Blaine Shaum Vice President Address: Societe Generale 2029 Century Park East, Suite 2900 Los Angeles, California 90067 Attn: Donald L. Schubert Vice President Telecopier: (310) 551-1537 Telephone: (310) 788-7104 -127- THE LONG-TERM CREDIT BANK OF JAPAN, LTD., LOS ANGELES AGENCY, as a Bank By: /s/ Motokazu Uematsu -------------------------------------- Motokazu Uematsu Deputy General Manager Address: The Long-Term Credit Bank of Japan, Ltd., Los Angeles Agency 444 South Flower Street, Suite 3700 Los Angeles, California 90071 Attn: Joanne Chou Vice President Telecopier: (213) 622-6908 Telephone: (213) 689-6327 THE FIRST NATIONAL BANK OF BOSTON, as a Bank By: /s/ Reginald Dawson -------------------------------------- Reginald Dawson Director Address: The First National Bank of Boston 100 Federal Street, 8th floor Mail Stop 01-08-08 Boston, Massachusetts 02110 Attn: Reginald Dawson Director Telecopier: (617) 434-3401 Telephone: (617) 434-0788 -128- BANKERS TRUST COMPANY, as a Bank By: /s/ Christopher Kinslow -------------------------------------- Christopher Kinslow Vice President Address: Bankers Trust Company 1 Bankers Trust Plaza 130 Liberty Street New York, New York 10006 Attn: Chris Kinslow Vice President Telecopier: (212) 250-7200 Telephone: (213) 250-7671 With a copy to: Bankers Trust Company 300 South Grand Avenue, 41st Floor Los Angeles, California 90071 Attn: Edward Schweitzer Managing Director Telecopier: (213) 620-8484 Telephone: (213) 620-8280 -129- THE INDUSTRIAL BANK OF JAPAN, LIMITED, LOS ANGELES AGENCY, as a Bank By: /s/ Masatake Yashiro -------------------------------------- Masatake Yashiro General Manager Address: The Industrial Bank of Japan, Limited, Los Angeles Agency 350 South Grand Avenue, Suite 1500 Los Angeles, California 90071 Attn: Vicente Timiraos Senior Vice President Telecopier: (213) 488-9840 Telephone: (213) 893-6442 MIDLANTIC BANK, N.A., as a Bank By: /s/ Denise D. Killen -------------------------------------- Denise D. Killen Vice President Address: Midlantic Bank, N.A. 6000 Midlantic Drive Mount Laurel, New Jersey 08054 Attn: Denise D. Killen Vice President Telecopier: (609) 778-2673 Telephone: (609) 778-2683 -130- THE MITSUBISHI TRUST AND BANKING CORP., LOS ANGELES AGENCY, as a Bank By: /s/ Hiroaki Koseki -------------------------------------- Hiroaki Koseki Chief Manager Address: The Mitsubishi Trust and Banking Corp., Los Angeles Agency 801 South Figueroa Street, 24th Floor Los Angeles, California 90071 Attn: Frank Herrera First Vice President Telecopier: (213) 687-4631 Telephone: (213) 896-4658 THE NIPPON CREDIT BANK, LTD., LOS ANGELES AGENCY, as a Bank By: /s/ Bernardo E. Correa-Henschke -------------------------------------- Bernardo E. Correa-Henschke Vice President and Manager Address: The Nippon Credit Bank, Ltd., Los Angeles Agency 550 South Hope Street, Suite 2500 Los Angeles, California 90071 Attn: Jay Schwartz Vice President Telecopier: (213) 892-0111 Telephone: (213) 243-5722 -131- BANK OF AMERICA NEVADA, as a Bank By: /s/ Herb Steege -------------------------------------- Herb Steege Vice President Address: Bank of America Nevada Commercial Banking Division - CBD 2006 300 South Fourth Street, Suite 200 Las Vegas, Nevada 89101 Attn: Herb Steege Vice President Telecopier: (702) 654-7158 Telephone: (702) 654-7142 ABN AMRO BANK N.V., San Francisco International Branch, as a Bank By: /s/ Jeffrey A. French -------------------------------------- Jeffrey A. French Vice President By: /s/ L. T. Osborne -------------------------------------- L. T. Osborne Group Vice President Address: ABN AMRO Bank N.V. San Francisco International Branch 101 California Street, Suite 4550 San Francisco, California 94111-5812 Attn: Jeffrey A. French Vice President Telecopier: (415) 362-3524 Telephone: (415) 984-3703 -132- FIRST SECURITY BANK OF IDAHO, N.A., as a Bank By: /s/ Brian W. Cook -------------------------------------- Brian W. Cook Vice President Address: First Security Bank of Idaho, N.A. 119 North 9th Street Boise, Idaho 83702 Attn: Brian W. Cook Vice President Telecopier: (208) 393-2472 Telephone: (208) 393-2162 FIRST SECURITY BANK OF UTAH, N.A., as a Bank By: /s/ David P. Williams -------------------------------------- David P. Williams Vice President Address: First Security Bank of Utah, N.A. Commercial Banking Division 15 East 100 South, 2nd Floor Salt Lake City, UT 84111 Attn: David P. Williams Vice President Telecopier: (801) 246-5532 Telephone: (801) 246-5540 -133- UNITED STATES NATIONAL BANK OF OREGON, as a Bank By: /s/ Jonathan Horton -------------------------------------- Jonathan Horton Assistant Vice President Address: United States National Bank of Oregon 555 S.W. Oak Street, Suite 400 Portland, Oregon 97204 Attn: Jonathan Horton Assistant Vice President Telecopier: (503) 275-5428 Telephone: (503) 275-4809 -134- EX-10.19 5 COMPLETION GUARANTY DATED SEPTEMBER 15, 1995 EXHIBIT 10(19) COMPLETION GUARANTY ------------------- This Completion Guaranty ("Guaranty") is made as of September 15, 1995, by MGM Grand, Inc., a Delaware corporation and Primadonna Resorts, Inc., a Nevada corporation (each a "Guarantor" and collectively, "Guarantors"), jointly and severally, in favor of Bank of America National Trust and Savings Association, as Managing Agent, in favor of the Banks under the Loan Agreement described below and in favor of the Equipment Lessors under the Equipment Lease defined in the Loan Agreement. Capitalized terms used but not defined herein shall have the meanings defined for those terms in the Loan Agreement described below. RECITALS -------- A. Pursuant to the Construction/Revolving Loan Agreement of even date herewith by and among New York-New York Hotel, LLC, a Nevada limited liability company ("Borrower"), the lenders from time to time party thereto (collectively, the "Banks" and individually, a "Bank"), First Interstate Bank of Nevada, as Co-Agent, and Bank of America National Trust and Savings Association, as Managing Agent (as such agreement may from time to time be extended, modified, renewed, restated, supplemented or amended, the "Loan Agreement"), the Banks have agreed to extend certain credit facilities to Borrower. B. The Loan Agreement provides, as a condition precedent to the Banks' obligation to extend credit facilities to Borrower, that Guarantors shall enter into this Guaranty, and shall guaranty completion of the Project, all under the terms and conditions set forth in this Guaranty. C. The Loan Agreement contemplates that a portion of the financing for the construction of the Project will be in the form of the Equipment Lease covering the Leased Equipment. Guarantors and the Banks agree that the Equipment Lessors shall also have the benefit of this Guaranty on a proportional basis with the Banks. D. Guarantors expect to realize direct and indirect benefits as a result of the availability of the aforementioned credit facilities. E. This Guaranty is one of the Loan Documents described in the Loan Agreement. -1- AGREEMENT --------- NOW, THEREFORE, in order to induce the Banks to extend credit facilities to Borrower under the Loan Agreement, and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, Guarantors hereby agree as follows: 2. Completion Guaranty and Agreement. --------------------------------- Guarantors, jointly and severally, hereby irrevocably and unconditionally guarantee that: (a) Guarantors shall complete or cause to be completed the construction of the Project in conformity in all material respects with the Construction Plans, the Construction Budget, the Construction Timetable and the Loan Agreement, free and clear of material defects and, except for Permitted Encumbrances, Liens or claims for Liens for material supplied or labor or services performed in connection therewith. (b) If the Construction Budget is insufficient to complete the Project in accordance with the Construction Plans, the Guarantors shall promptly make or cause to be made Cash Equity Contributions to Borrower sufficient to permit such completion . (c) If the Completion Date does not occur on or before September 15, 1997, the Guarantors shall promptly make or cause to be made Cash Equity Contributions to Borrower in an amount equal to $250,000 multiplied by the number of days between July 31, 1997 and the Completion Date. 3. Payment Provisions in the Event of Bankruptcy. --------------------------------------------- In the event, prior to the Completion Date, that the Borrower becomes insolvent or subject to an Insolvency Proceeding as defined below, notwithstanding Section 1, but subject to confirmation by the Managing Agent --------- that any undisbursed Loans will be made pursuant to the Loan Agreement and confirmation by the Equipment Lessors that any undisbursed equipment purchase prices will be made pursuant to the Equipment Lease, in each case subject to the terms and conditions thereof (excluding such Insolvency Proceeding), Guarantors --------- guarantee and agree that: (a) To the extent the Construction Budget is insufficient to complete the Project in accordance with the Construction Plans, the Guarantors shall make or cause to -2- be made Cash payments into an interest-bearing deposit account designated and controlled exclusively by the Managing Agent (the "Deposit Account") in which the Managing Agent is hereby granted a security interest for the benefit of the Banks as to the Banks' Percentage and for the benefit of the Equipment Lessors as to the Equipment Lessors Percentage. The Deposit Account is intended to be a "deposit account" for the purposes of Nevada Revised Statutes ("NRS") 40.430.4(g). Such funds in the Deposit Account shall only be available for and used to complete construction of the Project. (b) If the Completion Date does not occur on or before September 15, 1997, the Guarantors shall make or cause to be made a Cash payment into the Deposit Account in the amount required under Section 1(c). Such funds shall ------------ be held in the Deposit Account as additional collateral for the Obligations under the Loan Agreement as to the Banks' Percentage and for the benefit of the Equipment Lessors as to the Equipment Lessors Percentage; provided -------- that, if requested by Borrower, such funds (i) shall applied to payment of the Obligations as to the Banks' Percentage and to prepayment of the Equipment Lease as to the Equipment Lessors' Percentage and/or (ii) shall be applied, with the approval of the Requisite Banks (which shall not be unreasonably withheld) to payment of such other obligations of Borrower incurred in the ordinary course for the acquisition of goods or services which have enhanced or maintained the value of the Collateral covered by the Collateral Documents. (c) The Cash payments into the Deposit Account and the funds therein shall be free and clear of any third party claims thereto, including any claims by Borrower as a third party beneficiary under this Guaranty. The Guarantors and the Managing Agent on behalf of the Banks specifically agree that Borrower is not an intended third party beneficiary to this Guaranty and that Borrower has no rights under this Guaranty. (d) If, notwithstanding Section 2(a) or 2(b) above, Borrower asserts in an -------------------- Insolvency Proceeding that it holds the right under this Guaranty to have Cash Equity Contributions made to it directly or that funds in the Deposit Account deposited pursuant to Section 2(a) shall or may be used for any ------------ purposes other than completion of the Project or that funds in the Deposit Account deposited pursuant to Section 2(b) are not collateral solely for ------------ the Obligations under the Loan Agreement, then this Guaranty shall automatically become a continuing unconditional guaranty by the Guarantors of the full and timely payment when due of the Obligations under the Loan Agreement to -3- the extent and in the amount of the Banks' Percentage of the Cash Equity Contributions that have been made and are required to be made pursuant to this Guaranty and of the obligations under the Equipment Lease to the extent and in the amount of the Equipment Lessors' Percentage of such Cash Equity Contributions. (e) the term "Insolvency Proceeding" means any case or proceeding, voluntary or involuntary, under the Bankruptcy Code, or any similar existing or future law of any jurisdiction, state or federal, relating to bankruptcy, insolvency reorganization or relief of debtors. 4. Performance of Guaranty. In fulfilling their obligations ----------------------- hereunder, Guarantors hereby jointly and severally, irrevocably and unconditionally guarantee, promise and agree to perform and comply (or cause Borrower to perform and comply) with all provisions and conditions of the Loan Agreement relating to (a) the construction of the Project within the time and in the manner set forth in Construction Plans and the Construction Timetable, (b) the payment of all costs and expenses thereof, (c) the payment, satisfaction or discharge of all Liens (other than Permitted Encumbrances) that are or may be imposed upon or asserted against Borrower, the Project or the Project Property in connection with the construction of the Project, and (d) the defense and indemnification of the Managing Agent and the Banks against all such Liens (other then Permitted Encumbrances), whether arising from the furnishing of labor, materials, supplies or equipment, from taxes, assessments, fees or other charges, from injuries or damage to Persons or property, or otherwise in connection with the construction of the Project. Without limiting the generality of the foregoing, Guarantors agree (w) to cause any and all costs of constructing and completing the Project, including, without limitation, the costs of all labor, materials, supplies and equipment related thereto, to be paid and satisfied as the same shall become due, subject to Guarantors' right to remove any Liens arising therefrom by securing bond(s) therefor, (x) to cause the net amount of cost overruns to be directly or indirectly funded, paid and satisfied from Guarantors' own resources, (y) directly or indirectly to cause the completion of the Project in a timely, good, workmanlike and Lien-free manner (except for Permitted Encumbrances), in accordance in all material respects with the terms of the Construction Plans, the Construction Budget and the Construction Timetable and (z) to cause all pre-operating and carrying costs of the Project, including, without limitation the payment of taxes, assessments, utilities, insurance and maintenance expenses, to be funded, paid and satisfied as the same shall become due throughout the term of this Guaranty. -4- 5. Procedures for Completion. ------------------------- 5.1 In the event that Borrower fails to perform all of its Obligations under the Loan Agreement relating to construction of the Project, then in any such event or at any time thereafter, the Managing Agent may give written notice to Guarantors of the occurrence of such event. 5.2 Within ten (10) days after the date on which the Managing Agent gives any such notice to Guarantors, but subject to confirmation by the Managing Agent that any undisbursed Loans will be made pursuant to the Loan Agreement subject to the terms and conditions thereof, Guarantors, at their sole cost (exclusive of undisbursed Loans), shall commence to complete the construction of the Project and diligently prosecute such construction to completion within the time and in the manner specified in the Construction Timetable, free of Liens (other than Permitted Encumbrances) and fully paid for, ----- ---- and shall defend, indemnify and hold the Managing Agent and/or the Banks harmless from all losses, costs, liabilities and expenses, including attorneys' fees, incurred in connection with such completion. If at the date of such notice, there are no undisbursed Loans allocated to construction of the Project, the Guarantors' obligations under this Section shall be absolute. If on such date there are any such undisbursed Loans, the obligations of the Guarantors under this Section shall be that percentage of the remaining costs to complete the Project equal to 100% minus the percentage thereof represented by the undisbursed Loans. 5.3 If Guarantors fail to commence to complete the construction of the Project or diligently to prosecute such construction to timely completion as provided in Section 4.2 above, then in addition to all other rights and ----------- remedies that may be available to the Managing Agent under the Loan Agreement and the other Loan Documents, at law or in equity, the Managing Agent may proceed as follows: (a) Managing Agent may, at the Managing Agent's option, enter the Project Property to complete construction of the Project (either itself or through any agent, contractor or subcontractor of its selection), which option of the Managing Agent shall be exercisable whether or not the Managing Agent elects to proceed judicially or non-judicially to foreclose on all or any portion of the Collateral. (b) The Managing Agent, at its option and in accordance with the Loan Agreement and the other Loan Documents, shall have the right, but shall have no obligation, to proceed judicially or non-judicially to foreclose on all -5- or any portion of the Collateral, exercisable whether or not the Managing Agent elects to undertake to complete the construction of the Project. (c) If the Managing Agent elects to undertake to complete the construction of the Project, and whether or not the Managing Agent elects to proceed judicially or non-judicially to foreclose on all or any portion of the Collateral, the Managing Agent shall have the right to recover damages from Guarantors' in an amount equal to the sum of: (i) the costs reasonably incurred or reasonably estimated to be incurred by the Managing Agent to complete the construction of the Project as set forth in Paragraph 2 hereof minus any undisbursed Loans allocated to construction of the Project (the "Cost to Complete"), provided -------- that with respect to damages recovered for costs estimated to be incurred by the Managing Agent, such funds shall be used for no purpose other than the construction of the Project and provided -------- further that should the total actual costs incurred by the ------- Managing Agent to complete the construction of the Project be less than the Cost to Complete, the amount by which the Cost to Complete recovered by the Managing Agent exceeds such actual construction costs shall be remitted to Guarantors; plus (ii) All unreimbursed costs and expenses, including attorneys' fees, reasonably incurred by the Managing Agent in protecting and preserving the Project and enforcing or defending the interests of the Banks under this Guaranty (the "Unreimbursed Expenses"). (d) In any action or proceeding by the Managing Agent to recover damages from Guarantors, the Managing Agent may exercise any and all remedies available under applicable Law. 5.4 The remedy of specific performance, the recovery of damages and all other rights and remedies under this Guaranty, under the Loan Agreement and the other Loan Documents, at law or in equity are intended to be non- exclusive and cumulative. The parties recognize that the choice of remedies by the Managing Agent will necessarily and properly be a matter of business judgment, which the passage of time and events may or may not prove to have been the best choice to -6- maximize recovery by the Managing Agent at the lowest cost to either the Borrower or the Guarantors. Nevertheless, the choice of alternatives by the Managing Agent shall not be subject to question or challenge by Guarantors or any other Person, nor shall any such choice be asserted as a defense, set-off or basis for any claim of failure to mitigate damages in any action or proceeding arising from this Guaranty. 6. Commencement of Lawsuit by Managing Agent; Measure of Damages. ------------------------------------------------------------- At any time after the occurrence of an Event of Default under this Guaranty, Managing Agent, on behalf of the Banks, may commence a lawsuit against Guarantors to compel Guarantors to perform their obligations under this Guaranty and/or to recover damages under this Guaranty. The Banks' damages under this Guaranty shall include: (a) the costs of completing the Project and/or correcting any construction defects, minus any undisbursed Loans allocated to ----- construction of the Project , (b) damages arising from any delay in completing the Project, including interest, taxes and insurance premiums, and (c) Banks' attorneys' fees and costs. Managing Agent need not perform any work on the Project before commencing such a lawsuit. GUARANTORS EXPRESSLY ACKNOWLEDGE THAT THE MEASURE OF THE BANKS' DAMAGES FOR BREACH OF THIS GUARANTY SHALL BE BASED ON THE COSTS OF COMPLETING THE PROJECT, NOT THE EXTENT TO WHICH COMPLETING THE PROJECT WOULD INCREASE THE VALUE OF THE PROJECT PROPERTY. 7. Rights of the Managing Agent. Each Guarantor authorizes the ---------------------------- Managing Agent and the Banks to perform any or all of the following acts at any time in their sole discretion, all without notice to Guarantors and without affecting Guarantors' obligations under this Guaranty: (a) The Managing Agent and the Banks may alter any terms of the Loan Documents to which Guarantors are not a party, including renewing, compromising, extending or accelerating, or otherwise changing the time for payment of, or increasing or decreasing the rate of interest on, the Loans or any part of them. (b) The Managing Agent and the Banks may take and hold security for the Loans or this Guaranty, accept additional or substituted security for either, and subordinate, exchange, enforce, waive, release, compromise, fail to perfect and sell or otherwise dispose of any such security. (c) The Managing Agent and the Banks may direct the order and manner of any sale of all or any part of any security now or later to be held for the Loans or this Guaranty, and may also bid at any such sale. -7- (d) The Managing Agent and the Banks may apply any payments or recoveries from Borrower, any Guarantor or any other source, and any proceeds of any security, to Borrower's obligations under the Loan Documents in such manner, order and priority as they may elect, whether or not those obligations are guarantied by this Guaranty or secured at the time of the application. (e) The Managing Agent and the Banks may release Borrower of its liability for the Loans or any portion thereof. (f) The Managing Agent and the Banks may substitute, add or release any one or more guarantors or endorsers. (g) In addition to the Loans, the Managing Agent and the Banks may extend other credit to Borrower, and may take and hold security for the credit so extended, all without affecting Guarantors' liability under this Guaranty. (h) The Managing Agent and the Banks may approve modifications to the Construction Contracts, Construction Budget and/or the Construction Timetable. (i) The Managing Agent and the Banks may change the terms or conditions of disbursement of the Loans. (j) The Managing Agent and the Banks may advance additional funds to Borrower for purposes related to those of the Loan Documents. 8. Guaranty to be Absolute. Guarantors expressly agree that until ----------------------- the Project is fully completed in all material respects in accordance with the Construction Plans, the Construction Budget and the Construction Timetable and each and every term, covenant and condition of this Guaranty is fully performed, Guarantors shall not be released by or because of: (a) Any act or event which might otherwise discharge, reduce, limit or modify Guarantors' obligations under this Guaranty; (b) Any waiver, extension, modification, forbearance, delay or other act or omission of the Managing Agent or the Banks, or any failure to proceed promptly or otherwise as against Borrower, any Guarantor or any security; (c) Any action, omission or circumstance which might increase the likelihood that Guarantors may be called upon to perform under this Guaranty or which might affect the rights or remedies of Guarantors as against Borrower; or -8- (d) Any dealings occurring at any time between Borrower, the Managing Agent or any Bank, whether relating to the Loans or otherwise. Guarantors hereby expressly waive and surrender any defense to their liability under this Guaranty based upon any of the foregoing acts, omissions, agreements, waivers or matters. It is the purpose and intent of this Guaranty that the obligations of Guarantors under it shall be absolute and unconditional under any and all circumstances. 9. Guarantors' Waivers. Guarantors waive: ------------------- (a) All statutes of limitations as a defense to any action or proceeding brought against Guarantors by the Managing Agent or any Bank, to the fullest extent permitted by Law; (b) Any right they may have to require the Managing Agent or the Banks to proceed against Borrower, proceed against or exhaust any security held from Borrower, or pursue any other remedy in their power to pursue; (c) Any defense based on any claim that Guarantors' obligations exceed or are more burdensome than those of Borrower; (d) Any defense based on: (i) any legal disability of Borrower, (ii) any release, discharge, modification, impairment or limitation of the liability of Borrower under the Loan Documents from any cause, whether consented to by the Managing Agent or any Bank or arising by operation of Law or from any Insolvency Proceeding, (iii) any rejection or disaffirmance of the Loans or any security held for the Loans, in any Insolvency Proceeding and (iv) Guarantors' rights under NRS 104.3605, Guarantors specifically agreeing that this clause (iv) shall constitute a waiver of discharge under NRS 104.3605; (e) Any defense based on any action taken or omitted by the Managing Agent or any Bank in any Insolvency Proceeding involving Borrower, including any election to have a claim allowed as being secured, partially secured or unsecured, any extension of credit by the Managing Agent or any Bank to Borrower in any Insolvency Proceeding, and the taking and holding by the Managing Agent or any Bank of any security for any such extension of credit; (f) All presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor, notices of acceptance of this Guaranty and of -9- the existence, creation, or incurring of new or additional indebtedness, and demands and notices of every kind except for any demand or notice expressly provided for in Section 1; --------- (g) Any defense based on or arising out of any defense that Borrower may have to the payment or performance of the Loans or any portion of the Loans; and (h) Any defense or benefit based on NRS 40.430 and judicial decisions relating thereto and NRS 40.451 et seq. and judicial decisions relating -- --- thereto, Guarantors agreeing that the waiver in this paragraph (h) is intended to take advantage of the two (2) waivers permitted by NRS 40.495 (1) and (2) to the maximum extent permitted. 10. Waivers of Subrogation and Other Rights. --------------------------------------- (a) Upon the occurrence of any Event of Default, the Managing Agent in its sole discretion, without prior notice to or consent of Guarantors, may elect to: (i) foreclose either judicially or nonjudicially against any real or personal property security for the Loans, (ii) accept a transfer of any such security in lieu of foreclosure, (iii) compromise or adjust the Loans or any part thereof or make any other accommodation with Borrower or any other guarantor, or (iv) exercise any other remedy against Borrower or any security. No such action by the Managing Agent or any Bank shall release or limit the liability of Guarantors, who shall remain liable under this Guaranty after the action, even if the effect of the action is to deprive Guarantors of any subrogation rights, rights of indemnity, or other rights to collect reimbursement from Borrower for any sums paid to the Managing Agent or the Banks, whether contractual or arising by operation of Law or otherwise. Guarantors expressly waive any defenses or benefits that may be derived from NRS Section 40.430 and judicial decisions relating thereto and NRS 40.451, et seq. and judicial decisions relating thereto, or comparable -- --- provisions of Nevada Law which are comparable to California Civil Procedure (S)(S) 580a, 580b, 580d, or 726 or comparable provisions of the Laws of any other jurisdiction, and all other suretyship defenses they otherwise might or would have under Nevada Law or other applicable Law. Guarantors expressly agree that under no circumstances shall they be deemed to have any right, title, interest or claim in or to any real or personal property to be held by the Managing Agent or any Bank or any third party after any foreclosure or transfer in lieu of foreclosure of any security for the Loans. -10- (b) Regardless of whether Guarantors may have made any payments to the Managing Agent or any Bank, Guarantors hereby waive: (i) all rights of subrogation, all rights of indemnity, and any other rights to collect reimbursement from Borrower for any sums paid to the Managing Agent or any Bank, whether contractual or arising by operation of Law (including the United States Bankruptcy Code or any successor or similar statute) or otherwise, (ii) all rights to enforce any remedy that the Managing Agent or any Bank may have against Borrower, and (iii) all rights to participate in any security now or later to be held by the Managing Agent or any Bank for the Loans. The waivers given in this subsection 9(b) shall be effective --------------- until the Loans and all other Obligations have been paid and performed in full and all Commitments have been terminated. (c) Guarantors understand and acknowledge that if the Managing Agent or any Bank forecloses judicially or nonjudicially against any real property security for the Loans, that foreclosure could impair or destroy any ability that Guarantors may have to seek reimbursement, contribution or indemnification from Borrower or others based on any right Guarantors may have of subrogation, reimbursement, contribution or indemnification for any amounts paid by Guarantors under this Guaranty. Guarantors further understand and acknowledge that in the absence of this Section 9, such --------- potential impairment or destruction of Guarantors' rights, if any, may entitle Guarantors to assert a defense to this Guaranty. By executing this Guaranty, Guarantors freely, irrevocably and unconditionally: (i) waive and relinquish that defense and agree that Guarantors will be fully liable under this Guaranty even though the Managing Agent or the Banks may foreclose judicially or nonjudicially against any real property security for the Loans; (ii) agree that Guarantors will not assert that defense in any action or proceeding which the Managing Agent or the Banks may commence to enforce this Guaranty; and (iii) acknowledge and agree that the Managing Agent and the Banks are relying on this waiver in making the Loans, and that this waiver is a material part of the consideration which they are receiving for making the Loans. 11. Revival and Reinstatement. If the Banks are required to pay, ------------------------- return or restore to Borrower or any other person any amounts previously paid on the Loans because of any Insolvency Proceeding of Borrower, any stop notice or any other reason, to the extent that the source of such payment was a Cash Equity Contribution from Guarantors pursuant to this Guaranty, the obligations of Guarantors shall be reinstated and revived and the rights of the Managing Agent and the Banks -11- shall continue with regard to such amounts, all as though they had never been paid. 12. Information Regarding Borrower and the Property. Before signing ----------------------------------------------- this Guaranty, Guarantors investigated the financial condition and business operations of Borrower, the present and former condition, uses and ownership of the Property, and such other matters as Guarantors deemed appropri ate to assure themselves of Borrower's ability to discharge its obligations under the Loan Documents. Guarantors assume full responsibility for that due diligence, as well as for keeping informed of all matters which may affect Borrower's ability to pay and perform its obligations to the Managing Agent and the Banks. The Managing Agent and the Banks have no duty to disclose to Guarantors any information which they may have or receive about Borrower's financial condition or business operations, the condition or uses of the Property, or any other circumstances bearing on Borrower's ability to perform. 13. Subordination. Any rights of Guarantors, whether now existing ------------- or later arising, to receive payment on account of any indebtedness (including interest) owed to them by Borrower or any subsequent owner of the Property, or to withdraw capital invested by them in Borrower, or to receive Distributions from Borrower, shall at all times be subordinate as to lien and time of payment and in all other respects to the full and prior repayment to the Managing Agent and the Banks of the Loans and the other Obligations, except to the extent that ------ such payments or Distributions are expressly contemplated by the Loan Agreement. Guarantors shall not be entitled to enforce or receive payment of any sums hereby subordinated until the Loans and all other Obligations have been paid and performed in full and all Commitments have been terminated and any such sums received in violation of this Guaranty shall be received by Guarantors in trust for the Banks. 14. Financial Information. Guarantors shall keep true and correct --------------------- financial books and records, using generally accepted accounting principles consistently applied. Guarantors shall provide to the Banks such financial statements and other information respecting Guarantors as is required under Section 8.1(g) of the Loan Agreement and such other information concerning their - -------------- affairs and properties as the Managing Agent or any Bank may reasonably request. Any confidential information of Guarantors so furnished shall be subject to the provisions of Section 12.14 of the Loan Agreement. ------------- -12- 15. Guarantors' Representations and Warranties. Each Guarantor ------------------------------------------ represents and warrants that: (a) All financial statements and other financial information furnished or to be furnished to the Managing Agent or the Banks by such Guarantor are or will be true and correct and do or will fairly represent the financial condition of such Guarantor as of the dates and for the periods covered thereby; (b) All such financial statements were or will be prepared in accordance with Generally Accepted Accounting Principles, consistently applied; (c) There has been no material adverse change in such Guarantor's financial condition since the dates of the statements most recently furnished to the Banks; and (d) The performance of this Guaranty will not violate any indenture, credit agreement or other material agreement to which such Guarantor is a party. 16. Events of Default. The Managing Agent may declare Guarantors ----------------- to be in default under this Guaranty upon the occurrence of any of the following events ("Events of Default"): (a) Either of the Guarantors fail to perform any of their obligations under this Guaranty; or (b) Either of the Guarantors revoke this Guaranty or dispute the validity or coverage thereof or this Guaranty becomes ineffective for any reason; or (c) Any representation or warranty made or given by a Guarantor in any Loan Document proves to be false or misleading in any material respect; or (d) Any Guarantor becomes insolvent or the subject of any case or proceeding, voluntary or involuntary, under the Bankruptcy Code, or any similar existing or future law of any jurisdiction, state or federal, relating to bankruptcy, insolvency, reorganization or relief of debtors and, in the case of an involuntary case or proceeding, the same continues undismissed or unstayed for ninety (90) calendar days; or (e) Any Guarantor dissolves or liquidates. 17. Authorization; No Violation. Guarantors are authorized to --------------------------- execute, deliver and perform under this Guaranty, -13- which is a valid and binding obligation of each Guarantor enforceable against each Guarantor in accordance with its terms, except as enforcement may be limited by Debtor Relief Laws, Gaming Laws or equitable principles relating to the granting of specific performance and other equitable remedies as a matter of judicial discretion. No provision or obligation of Guarantors contained in this Guaranty violates any Requirement of Law applicable to such Guarantor. No such provision or obligation conflicts with, or constitutes a breach or default under, any agreement to which any Guarantor is a party. 18. Additional and Independent Obligations. Guarantors' obligations -------------------------------------- under this Guaranty are in addition to their obligations under any other existing or future guaranties given in connection with the Loan Agreement, and they shall remain in full force and effect until they are expressly modified or released in a writing signed by the Managing Agent on behalf the Requisite Banks (or, if required by the terms of the Loan Agreement, all of the Banks). Guarantors' obligations under this Guaranty are independent of those of Borrower under the other Loan Documents. The Managing Agent may bring a separate action, or commence a separate reference or arbitration proceeding against any Guarantor without first proceeding against Borrower or any other Guarantor, any other person or any security that the Managing Agent or the Banks may hold, and without pursuing any other remedy. The rights under this Guaranty shall not be exhausted by any action by the Managing Agent or any Bank until the Loans have been paid and performed in full. 19. No Waiver; Consents; Cumulative Remedies. Each waiver by the ---------------------------------------- Managing Agent and the Banks must be in writing, and no waiver shall be construed as a continuing waiver. No waiver shall be implied from the Managing Agent's or any Bank's delay in exercising or failure to exercise any right or remedy against Borrower, Guarantors or any security. Consent by the Managing Agent or any Bank to any act or omission by Borrower or Guarantors shall not be construed as a consent to any other or subsequent act or omission, or as a waiver of the requirement for their consent to be obtained in any future or other instance. All remedies of the Managing Agent and the Banks against Borrower and Guarantors are cumulative. 20. Release. This Guaranty shall automatically terminate upon ------- satisfaction of the Obligations. Absent such termination, Guarantors shall not be released from their obligations under this Guaranty except by a writing signed by the Managing Agent with the consent of all the Banks or upon delivery and acceptance by the Managing Agent and CSG of the Completion Certificates specified in Section 7.14 of the Loan Agreement on or before the Completion ------------ Date. -14- 21. Successors and Assigns; Participations. The terms of this -------------------------------------- Guaranty shall bind and benefit the legal representatives, successors and assigns of the Managing Agent, the Banks and the Guarantors; provided, however, that Guarantors may not assign this Guaranty, or assign or delegate any of their rights or obligations under this Guaranty, without the prior written consent of the Managing Agent in each instance. The Banks may sell or assign participations or other interests in the Loans and this Guaranty, in accordance with Section ------- 12.8 of the Loan Agreement. Also without notice to or the consent of Guarantors, the Managing Agent and the Banks may disclose any and all information in their possession concerning Guarantors, this Guaranty and any security for this Guaranty to any actual or prospective purchaser of any securities issued or to be issued by Banks, and to any actual or prospective purchaser or assignee of any participation or other interest in the Loan Documents, all in accordance with Section 12.14 of the Loan Agreement. ------------- 22. Governing Law. This Guaranty shall be governed by, and ------------- construed in accordance with, the local Laws of the State of Nevada. 23. Costs and Expenses. If any lawsuit, reference or arbitration ------------------ is commenced which arises out of, or which relates to this Guaranty, the prevailing party shall be entitled to recover from each other party such sums as the court, referee or arbitrator may adjudge to be reasonable attorneys' fees (including reasonably allocated costs for services of in-house counsel) in the action or proceeding, in addition to costs and expenses otherwise allowed by Law. In all other situations, including any Insolvency Proceeding, Guarantors agree to pay all of the Managing Agent's and the Banks' reasonable costs and expenses, including attorneys' fees (including reasonably allocated costs for services of their respective in-house counsel) which may be incurred in any effort to collect or enforce this Guaranty. From the time(s) incurred until paid in full, all sums shall bear interest at the Default Rate. 24. Integration; Modifications. This Guaranty (a) integrates all -------------------------- the terms and conditions mentioned in or incidental to this Guaranty, (b) supersedes all oral negotiations and prior writings with respect to its subject matter, and (c) is intended by Guarantors, the Managing Agent and the Banks as the final expression of the agreement with respect to the terms and conditions set forth in this Guaranty and as the complete and exclusive statement of the terms agreed to by Guarantors, the Managing Agent and the Banks. No representation, understanding, promise or condition shall be -15- enforceable against any party unless it is contained in this Guaranty. 25. Waiver of Right to Trial by Jury. EACH PARTY TO THIS GUARANTY -------------------------------- HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTY HERETO OR ANY OF THEM WITH RESPECT TO THIS GUARANTY, THE LOAN AGREEMENT AND ANY OTHER LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS GUARANTY MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. 26. Notices. Notices hereunder shall be in writing and shall be ------- delivered in the manner prescribed for notices in the Loan Agreement. 27. Miscellaneous. The illegality or unenforceability of one or ------------- more provisions of this Guaranty shall not affect any other provision. 28. Equipment Lessors' Rights. Any reference in Paragraph 3 and ------------------------- following of this Guaranty to the Obligations, the Loans, the Loan Agreement and analogous terms shall be deemed to be qualified, where the context requires, by limiting the same to the Banks' Percentage thereof and shall be deemed to be amended, where the context requires, by adding a reference to the Equipment Lessors' Percentage of the obligations under the Equipment Lease. The Managing Agent shall be entitled, as respects the Equipment Lessors, to all of the rights and protections set forth in Article 11 of the Loan Agreement; provided that the -------- Equipment Lessors shall not be entitled to any rights under this Guaranty if they do not confirm in writing promptly following request by the Managing Agent therefor their acceptance of the indemnification provisions contained in Section 11.7 of the Loan Agreement as to the Equipment Lessors' Percentage of any occurrence covered thereby. -16- IN WITNESS WHEREOF, Guarantors have executed this Guaranty as of the date first written above by their respective duly authorized officers. MGM GRAND, INC., a Delaware corporation By: /s/ K. Eugene Shutler ------------------------------------ Title: Executive Vice President --------------------------------- PRIMADONNA RESORTS, INC., a Nevada corporation By: /s/ Craig F. Sullivan ----------------------------------- Title: Chief Financial Officer -------------------------------- Accepted: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Managing Agent By: /s/ L. Chenevert, Jr. -------------------------- Title: Vice President ----------------------- -17- EX-10.20 6 KEEP WELL AGREEMENT DATED SEPTEMBER 15, 1995 EXHIBIT 10(20) KEEP-WELL AGREEMENT ------------------- This Keep-Well Agreement ("Agreement") is made as of September 15, 1995, by MGM Grand, Inc., a Delaware corporation and Primadonna Resorts, Inc., a Nevada corporation (each a "Maintaining Party" and collectively, "Maintaining Parties"), jointly and severally, in favor of Bank of America National Trust and Savings Association, as Managing Agent, in favor of the Banks under the Loan Agreement described below and in favor of the Equipment Lessors under the Equipment Lease defined in the Loan Agreement. RECITALS -------- A. Pursuant to the Construction/Revolving Loan Agreement of even date herewith by and among New York-New York Hotel, LLC, a Nevada limited liability company ("Borrower"), the lenders from time to time party thereto (collectively, the "Banks" and individually, a "Bank"), First Interstate Bank of Nevada, as Co- Agent, and Bank of America National Trust and Savings Association, as Managing Agent (as such agreement may from time to time be extended, modified, renewed, restated, supplemented or amended, the "Loan Agreement"), the Banks have agreed to extend certain credit facilities to Borrower. B. The Loan Agreement provides, as a condition precedent to the Banks' obligation to extend credit facilities to Borrower, that Maintaining Parties shall enter into this Agreement, and shall make or cause to be made Cash Equity Contributions to the Borrower in the amounts and under the terms and conditions set forth herein. C. The Loan Agreement contemplates that a portion of the financing for the construction of the Project will be in the form of the Equipment Lease covering the Leased Equipment. Maintaining Parties and the Banks agree that the Equipment Lessors shall also have the benefit of this Agreement on a proportional basis with the Banks. D. Maintaining Parties expect to realize direct and indirect benefits as a result of the availability of the aforementioned credit facilities. -1- AGREEMENT --------- NOW, THEREFORE, in order to induce the Banks to extend credit facilities to Borrower under the Loan Agreement, and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, Maintaining Parties hereby agree as follows: 1. Definitions. This Agreement is the Keep-Well Agreement referred ----------- to in the Loan Agreement. Terms defined in the Loan Agreement and not otherwise defined in this Agreement shall have the meanings defined for those terms in the Loan Agreement. As used in this Agreement, the following terms shall have the meanings respectively set forth after each: "Bankruptcy Code" shall mean Title 11 of the United States Code as --------------- amended from time to time. "Insolvency Proceeding" shall mean any case or proceeding, voluntary --------------------- or involuntary, under the Bankruptcy Code, or any similar existing or future law of any jurisdiction, state or federal, relating to bankruptcy, insolvency, reorganization or relief of debtors. 2. Keep-Well Agreement. For as long as the Loan Agreement remains ------------------- in effect or any of the Obligations under the Loan Agreement remain outstanding, whether before or after the commencement of an Insolvency Proceeding, if Borrower fails to be in compliance with either of the financial ratio covenants set forth in Section 6.11 of the Loan Agreement (the "Leverage Ratio") or ------------ Section 6.12 of the Loan Agreement (the "Fixed Charge Coverage Ratio"), the - ------------ Maintaining Parties shall make or cause to be made Cash Equity Contributions to Borrower in an amount determined in accordance with the following: (a) With respect to the Leverage Ratio, $2 shall be subtracted from the numerator and $1 shall be added to the denominator of such financial ratio until the resulting hypothetical financial ratio is in compliance with Section 6.11 of the Loan Agreement. The amount of the required Cash Equity ------------ Contribution shall be the sum of (i) the absolute value of the amounts subtracted from the numerator and (ii) the amounts added to the denominator. (b) With respect to the Fixed Charge Coverage Ratio, the amount of the required Cash Equity Contribution shall be the amount which, when added to the numerator of such financial ratio, will result in a hypothetical financial ratio in compliance with Section 6.12 of the Loan ------------ Agreement. -2- (c) If the failure to comply with any such financial ratio occurs during the first four fiscal quarters following the Completion Date, the calculations under (a) and (b) shall be made using actual Borrower EBITDA for the Fiscal Quarters that have been completed and proforma Borrower EBITDA for future Fiscal Quarters computed on the basis of each such Fiscal Quarter contributing twenty five percent (25%) of the level of the Borrower EBITDA as would be sufficient to avoid the Maintaining Parties from having to make or cause to be made Cash Equity Contributions under this Agreement. (d) If Borrower is not in compliance with either of the financial ratio covenants, then the required Acceptable Cash Equity contribution shall be based on whichever (but not both) covenant calculation requires the greater contribution. (e) Maintaining Parties shall make the Cash Equity Contributions required hereby not later than five (5) Banking Days following the earlier of the date on which Borrower delivers the quarterly or annual financial statements of Borrower and its Subsidiaries to Managing Agent pursuant to Section 8.1 of the Loan Agreement or the date such statements are required ----------- to be delivered pursuant to said Section 8.1. ----------- (f) Upon the making of such Cash Equity Contribution, Borrower shall be deemed to be in compliance with Sections 6.11 and 6.12 of the Loan ------------- ---- Agreement as of the date of non-compliance. In addition, the amount thereof attributable to the amounts added to the denominator of the Leverage Ratio or the amount added to the numerator of the Fixed Charge Coverage Ratio, as applicable, shall be "Deemed EBITDA" for the applicable fiscal quarter for purposes of determining future compliance with both such financial ratio covenants (but not for determining the Applicable Pricing Level). (g) Cash Equity Contributions made under the Completion Guaranty will not count for purposes of this Agreement, and vice versa. The obligations of the Maintaining Parties under this Section 2 and --------- under Section 3 below are joint and several. --------- 3. Payment Provisions in the Event of Bankruptcy. In the event that --------------------------------------------- the Borrower becomes subject to an Insolvency Proceeding, notwithstanding Section 2, Maintaining Parties guarantee and agree that so long as Borrower - --------- remains subject to such Insolvency Proceeding: -3- (a) If Borrower fails to be in compliance with the Leverage Ratio or the Fixed Charge Ratio, the Maintaining Parties shall make Cash payments in the amounts calculated under Section 2 into an interest-bearing deposit --------- account designated and controlled exclusively by the Managing Agent (the "Deposit Account") in which the Managing Agent is hereby granted a security interest for the benefit of the Banks as to the Banks' Percentage and for the benefit of the Equipment Lessors as to the Equipment Lessors' Percentage. The Deposit Account is intended to be a "deposit account" for the purposes of Nevada Revised Statutes ("NRS") 40.430.4(g). Such funds shall be held in the Deposit Account as additional Collateral for the Obligations under the Loan Agreement as to the Banks' Percentage and for the benefit of the Equipment Lessors as to the Equipment Lessors' Percentage; provided that, if requested by Borrower, such funds (i) shall -------- be applied to payment of the Obligations as to the Banks' Percentage and to prepayment of the obligations under the Equipment Lease as to the Equipment Lessors' Percentage and/or (ii) shall be applied, with the approval of the Requisite Banks (which shall not be unreasonably withheld) to payment of such other obligations of Borrower incurred in the ordinary course for the acquisition of goods or services which have enhanced or maintained the value of the Collateral covered by the Collateral Documents. (b) The Cash payments into the Deposit Account and the funds therein shall be free and clear of any third party claims thereto, including any claims by Borrower as a third party beneficiary under this Agreement. The Maintaining Parties and the Managing Agent on behalf of the Banks specifically agree that Borrower is not an intended third party beneficiary to this Agreement and that Borrower has no rights under this Agreement. (c) If, notwithstanding Section 3(a) or 3(b) above, Borrower ------------ ---- asserts in an Insolvency Proceeding that it holds the right under this Agreement to have Cash Equity Contributions made to it directly or that funds in the Deposit Account deposited pursuant to Section 3(a) are not ------------ collateral solely for the Obligations under the Loan Agreement, then this Agreement shall automatically become a continuing unconditional guaranty by the Maintaining Parties of the full and timely payment when due of the Obligations under the Loan Agreement to the extent and in the amount of the Banks' Percentage of the Cash Equity Contributions that have been made and are required to be made pursuant to this Agreement and of the obligations under the Equipment Lease to the extent and in the amount of the Equipment Lessors' Percentage of such Cash Equity Contributions. -4- 4. Proof of Damages. If the Maintaining Parties shall at any time ---------------- and from time to time fail to perform or comply with any of their obligations contained herein and if for any reason the Banks have failed to receive when due and payable (whether at stated maturity, by acceleration, or otherwise) the payment of all or any part of principal or interest or any other amount payable by Borrower under the Loan Agreement, then in each such case (i) it shall be assumed conclusively without necessity of proof that such failure by the Maintaining Parties was the sole and direct cause of the Banks failing to receive such payment when due (to the extent of the failure of the Maintaining Parties to perform their obligations contained herein) irrespective of any other contributing or intervening cause whatsoever, and (ii) the Maintaining Parties further irrevocably waive to the fullest extent permitted by Law any right or defense the Maintaining Parties may have to cause the Banks to prove the cause or amount of such damages or to mitigate the same. 5. Rights of the Managing Agent. Each Maintaining Party authorizes ---------------------------- the Managing Agent and the Banks to perform any or all of the following acts at any time in their sole discretion, all without notice to Maintaining Party and without affecting Maintaining Parties' obligations under this Agreement: (a) The Managing Agent and the Banks may alter any terms of the Loan Documents to which Maintaining Parties are not a party, including renewing, compromising, extending or accelerating, or otherwise changing the time for payment of, or increasing or decreasing the rate of interest on, the Loans or any part of them. (b) The Managing Agent and the Banks may take and hold security for the Loans or this Agreement, accept additional or substituted security for either, and subordinate, exchange, enforce, waive, release, compromise, fail to perfect and sell or otherwise dispose of any such security. (c) The Managing Agent and the Banks may direct the order and manner of any sale of all or any part of any security now or later to be held for the Loans or this Agreement, and may also bid at any such sale. (d) The Managing Agent and the Banks may apply any payments or recoveries from Borrower, any Maintaining Party or any other source, and any proceeds of any security, to Borrower's obligations under the Loan Documents in such manner, order and priority as they may -5- elect, whether or not those obligations are guarantied by this Agreement or secured at the time of the application. (e) The Managing Agent and the Banks may release Borrower of its liability for the Loans or any portion thereof. (f) The Managing Agent and the Banks may substitute, add or release any one or more guarantors or endorsers. (g) In addition to the Loans, the Managing Agent and the Banks may extend other credit to Borrower, and may take and hold security for the credit so extended, all without affecting Maintaining Parties' liability under this Agreement. (h) The Managing Agent and the Banks may change the terms or conditions of disbursement of the Loans. (i) The Managing Agent and the Banks may advance additional funds to Borrower for purposes related to those of the Loan Documents. 6. Agreement to be Absolute. Maintaining Parties expressly agree ------------------------ that for as long as the Loan Agreement remains in effect or any of the Obligations under the Loan Agreement remain outstanding, Maintaining Parties shall not be released from their obligations hereunder by or because of: (a) Any act or event which might otherwise discharge, reduce, limit or modify Maintaining Parties' obligations under this Agreement; (b) Any waiver, extension, modification, forbearance, delay or other act or omission of the Managing Agent or the Banks, or any failure to proceed promptly or otherwise as against Borrower, any Maintaining Party or any security; (c) Any action, omission or circumstance which might increase the likelihood that Maintaining Parties may be called upon to perform under this Agreement or which might affect the rights or remedies of Maintaining Parties as against Borrower; or (d) Any dealings occurring at any time between Borrower, the Managing Agent or any Bank, whether relating to the Loans or otherwise. Maintaining Parties hereby expressly waive and surrender any defense to their liability under this Agreement based upon any of the foregoing acts, omissions, agreements, waivers or matters. It is the purpose and intent of this -6- Agreement that the obligations of Maintaining Parties under it shall be absolute and unconditional under any and all circumstances. 7. Maintaining Parties' Waivers. Maintaining Parties waive: ---------------------------- (a) All statutes of limitations as a defense to any action or proceeding brought against Maintaining Parties by the Managing Agent or any Bank, to the fullest extent permitted by Law; (b) Any right they may have to require the Managing Agent or the Banks to proceed against Borrower, proceed against or exhaust any security held from Borrower, or pursue any other remedy in their power to pursue; (c) Any defense based on any claim that Maintaining Parties' obligations exceed or are more burdensome than those of Borrower; (d) Any defense based on: (i) any legal disability of Borrower, (ii) any release, discharge, modification, impairment or limitation of the liability of Borrower under the Loan Documents from any cause, whether consented to by the Managing Agent or any Bank or arising by operation of Law or from any Insolvency Proceeding, (iii) any rejection or disaffirmance of the Loans or any security held for the Loans, in any Insolvency Proceeding and (iv) Maintaining Parties' rights under NRS 104.3605, Maintaining Parties specifically agreeing that this clause (iv) shall constitute a waiver of discharge under NRS 104.3605; (e) Any defense based on any action taken or omitted by the Managing Agent or any Bank in any Insolvency Proceeding involving Borrower, including any election to have a claim allowed as being secured, partially secured or unsecured, any extension of credit by the Managing Agent or any Bank to Borrower in any Insolvency Proceeding, and the taking and holding by the Managing Agent or any Bank of any security for any such extension of credit; (f) All presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor, notices of acceptance of this Agreement and of the existence, creation, or incurring of new or additional indebtedness, and demands and notices of every kind except for any demand or notice expressly provided for in Section 1; --------- -7- (g) Any defense based on or arising out of any defense that Borrower may have to the payment or performance of the Loans or any portion of the Loans; and (h) Any defense or benefit based on NRS 40.430 and judicial decisions relating thereto and NRS 40.451 et seq. and judicial decisions relating -- --- thereto, Maintaining Parties agreeing that the waiver in this paragraph (h) is intended to take advantage of the two (2) waivers permitted by NRS 40.495 (1) and (2) to the maximum extent permitted. 8. Waivers of Subrogation and Other Rights. --------------------------------------- (a) Upon the occurrence of any Event of Default, the Managing Agent in its sole discretion, without prior notice to or consent of Maintaining Parties, may elect to: (i) foreclose either judicially or nonjudicially against any real or personal property security for the Loans, (ii) accept a transfer of any such security in lieu of foreclosure, (iii) compromise or adjust the Loans or any part thereof or make any other accommodation with Borrower or any other guarantor, or (iv) exercise any other remedy against Borrower or any security. No such action by the Managing Agent or any Bank shall release or limit the liability of Maintaining Parties, who shall remain liable under this Agreement after the action, even if the effect of the action is to deprive Maintaining Parties of any subrogation rights, rights of indemnity, or other rights to collect reimburse ment from Borrower for any sums paid to the Managing Agent or the Banks, whether contractual or arising by operation of Law or otherwise. Maintaining Parties expressly waive any defenses or benefits that may be derived from NRS Section 40.430 and judicial decisions relating thereto and NRS 40.451, et seq. and -- --- judicial decisions relating thereto, or comparable provisions of Nevada Law which are comparable to California Civil Procedure (S)(S) 580a, 580b, 580d, or 726 or comparable provisions of the Laws of any other jurisdiction, and all other suretyship defenses they otherwise might or would have under Nevada Law or other applicable Law. Maintaining Parties expressly agree that under no circumstances shall they be deemed to have any right, title, interest or claim in or to any real or personal property to be held by the Managing Agent or any Bank or any third party after any foreclosure or transfer in lieu of foreclosure of any security for the Loans. (b) Regardless of whether Maintaining Parties may have made any payments to the Managing Agent or any Bank, Maintaining Parties hereby waive: (i) all rights of subrogation, all rights of indemnity, and any other rights -8- to collect reimbursement from Borrower for any sums paid to the Managing Agent or any Bank, whether contractual or arising by operation of Law (including the United States Bankruptcy Code or any successor or similar statute) or otherwise, (ii) all rights to enforce any remedy that the Managing Agent or any Bank may have against Borrower, and (iii) all rights to participate in any security now or later to be held by the Managing Agent or any Bank for the Loans. The waivers given in this subsection 8(b) --------------- shall be effective until the Loans and all other Obligations have been paid and performed in full and all Commitments have been terminated. (c) Maintaining Parties understand and acknowledge that if the Managing Agent or any Bank forecloses judicially or nonjudicially against any real property security for the Loans, that foreclosure could impair or destroy any ability that Maintaining Parties may have to seek reimbursement, contribution or indemnification from Borrower or others based on any right Maintaining Parties may have of subrogation, reimbursement, contribution or indemnification for any amounts paid by Maintaining Parties under this Agreement. Maintaining Parties further understand and acknowledge that in the absence of this Section 8, such potential impairment or destruction of --------- Maintaining Parties' rights, if any, may entitle Maintaining Parties to assert a defense to this Agreement. By executing this Agreement, Maintaining Parties freely, irrevocably and unconditionally: (i) waive and relinquish that defense and agree that Maintaining Parties will be fully liable under this Agreement even though the Managing Agent or the Banks may foreclose judicially or nonjudicially against any real property security for the Loans; (ii) agree that Maintaining Parties will not assert that defense in any action or proceeding which the Managing Agent or the Banks may commence to enforce this Agreement; and (iii) acknowledge and agree that the Managing Agent and the Banks are relying on this waiver in making the Loans, and that this waiver is a material part of the consideration which they are receiving for making the Loans. 9. Revival and Reinstatement. If the Banks are required to pay, ------------------------- return or restore to Borrower or any other person any amounts previously paid on the Loans because of any Insolvency Proceeding of Borrower, any stop notice or any other reason, to the extent that the source of such payment was a Cash Equity Contribution from Maintaining Parties pursuant to this Agreement, the obligations of Maintaining Parties shall be reinstated and revived and the rights of the Managing Agent and the Banks shall continue with regard to such amounts, all as though they had never been paid. -9- 10. Information Regarding Borrower and the Property. Before signing ----------------------------------------------- this Agreement, Maintaining Parties investigated the financial condition and business operations of Borrower, the present and former condition, uses and ownership of the Property, and such other matters as Maintaining Parties deemed appropriate to assure themselves of Borrower's ability to discharge its obligations under the Loan Documents. Maintaining Parties assume full responsibility for that due diligence, as well as for keeping informed of all matters which may affect Borrower's ability to pay and perform its obligations to the Managing Agent and the Banks. The Managing Agent and the Banks have no duty to disclose to Maintaining Parties any information which they may have or receive about Borrower's financial condition or business operations, the condition or uses of the Property, or any other circumstances bearing on Borrower's ability to perform. 11. Subordination. Any rights of Maintaining Parties, whether now ------------- existing or later arising, to receive payment on account of any indebtedness (including interest) owed to them by Borrower or any subsequent owner of the Property, or to withdraw capital invested by them in Borrower, or to receive Distributions from Borrower, shall at all times be subordinate as to lien and time of payment and in all other respects to the full and prior repayment to the Managing Agent and the Banks of the Loans and the other Obligations, except to ------ the extent that such payments or Distributions are expressly contemplated by the Loan Agreement. Maintaining Parties shall not be entitled to enforce or receive payment of any sums hereby subordinated until the Loans and all other Obligations have been paid and performed in full and all Commitments have been terminated and any such sums received in violation of this Agreement shall be received by Maintaining Parties in trust for the Banks. 12. Financial Information. Maintaining Parties shall keep true and --------------------- correct financial books and records, using generally accepted accounting principles consistently applied. Maintaining Parties shall provide to the Banks such financial statements and other information regarding Maintaining Parties as is required under Section 8.1(g) of the Loan Agreement and such other -------------- information concerning their affairs and properties as the Managing Agent or any Bank may reasonably request. Any confidential information of Maintaining Parties so furnished shall be subject to the provisions of Section 12.14 of the ------------- Loan Agreement. -10- 13. Maintaining Parties' Representations and Warranties. Each --------------------------------------------------- Maintaining Parties represents and warrants that: (a) All financial statements and other financial information furnished or to be furnished to the Managing Agent or the Banks by such Maintaining Party are or will be true and correct and do or will fairly represent the financial condition of such Maintaining Party as of the dates and for the periods covered thereby; (b) All such financial statements were or will be prepared in accordance with Generally Accepted Accounting Principles, consistently applied; (c) There has been no material adverse change in such Maintaining Party's financial condition since the dates of the statements most recently furnished to the Banks; and (d) The performance of this Agreement will not violate any indenture, credit agreement or other material agreement to which such Maintaining Party is a party. 14. Events of Default. The Managing Agent may declare Maintaining ----------------- Parties to be in default under this Agreement upon the occurrence of any of the following events ("Events of Default"): (a) Either of the Maintaining Parties fail to perform any of their obligations under this Agreement; or (b) Either of the Maintaining Parties revoke this Agreement or dispute the validity or coverage thereof or this Agreement becomes ineffective for any reason; or (c) Any representation or warranty made or given by a Maintaining Party in any Loan Document proves to be false or misleading in any material respect; or (d) Any Maintaining Party becomes insolvent or the subject of any Insolvency Proceeding and, in the case of an involuntary case, the same continues undismissed or unstayed for ninety (90) calendar days; or (e) Any Maintaining Party dissolves or liquidates. -11- 15. Authorization; No Violation. Maintaining Parties are authorized --------------------------- to execute, deliver and perform under this Agreement, which is a valid and binding obligation of each Maintaining Party enforceable against each Maintaining Party in accordance with its terms, except as enforcement may be limited by Debtor Relief Laws, Gaming Laws or equitable principles relating to the granting of specific performance and other equitable remedies as a matter of judicial discretion. No provision or obligation of Maintaining Parties contained in this Agreement violates any Requirement of Law applicable to such Maintaining Party. No such provision or obligation conflicts with, or constitutes a breach or default under, any agreement to which any Maintaining Party is a party. 16. Additional and Independent Obligations. Maintaining Parties' -------------------------------------- obligations under this Agreement are in addition to their obligations under any other existing or future guaranties given in connection with the Loan Agreement, and shall remain in full force and effect until they are expressly modified or released in a writing signed by the Managing Agent on behalf the Requisite Banks (or, if required by the terms of the Loan Agreement, all of the Banks). Maintaining Parties' obligations under this Agreement are independent of those of Borrower under the other Loan Documents. The Managing Agent may bring a separate action, or commence a separate reference or arbitration proceeding against any Maintaining Party without first proceeding against Borrower or any other Maintaining Party, any other person or any security that the Managing Agent or the Banks may hold, and without pursuing any other remedy. The rights under this Agreement shall not be exhausted by any action by the Managing Agent or any Bank until the Loans have been paid and performed in full. 17. No Waiver; Consents; Cumulative Remedies. Each waiver by the ---------------------------------------- Managing Agent and the Banks must be in writing, and no waiver shall be construed as a continuing waiver. No waiver shall be implied from the Managing Agent's or any Bank's delay in exercising or failure to exercise any right or remedy against Borrower, Maintaining Parties or any security. Consent by the Managing Agent or any Bank to any act or omission by Borrower or Maintaining Parties shall not be construed as a consent to any other or subsequent act or omission, or as a waiver of the requirement for their consent to be obtained in any future or other instance. All remedies of the Managing Agent and the Banks against Borrower and Maintaining Parties are cumulative. 18. Release. This Agreement shall automatically terminate upon (a) ------- satisfaction of the Obligations or (b) foreclosure (or a deed in lieu thereof) of the Lien created by -12- the Collateral Documents. Absent such termination, Maintaining Parties shall not be released from their obligations under this Agreement except by a writing signed by the Managing Agent with the consent of all of the Banks. 19. Successors and Assigns; Participations. The terms of this -------------------------------------- Agreement shall bind and benefit the legal representatives, successors and assigns of the Managing Agent, the Banks and the Maintaining Parties; provided, however, that Maintaining Parties may not assign this Agreement, or assign or delegate any of their rights or obligations under this Agreement, without the prior written consent of the Managing Agent in each instance. The Banks may sell or assign participations or other interests in the Loans and this Agreement in accordance with Section 12.8 of the Loan Agreement. Also without notice to ------------ or the consent of Maintaining Parties, the Managing Agent and the Banks may disclose any and all information in their possession concerning Maintaining Parties, this Agreement and any security for this Agreement to any actual or prospective purchaser of any securities issued or to be issued by Banks, and to any actual or prospective purchaser or assignee of any participation or other interest in the Loan Documents in accordance with Section 12.14 of the Loan ------------- Agreement. 20. Governing Law. This Agreement shall be governed by, and ------------- construed in accordance with, the local Laws of the State of Nevada. 21. Costs and Expenses. If any lawsuit, reference or arbitration is ------------------ commenced which arises out of, or which relates to this Agreement, the prevailing party shall be entitled to recover from each other party such sums as the court, referee or arbitrator may adjudge to be reasonable attorneys' fees (including reasonably allocated costs for services of in-house counsel) in the action or proceeding, in addition to costs and expenses otherwise allowed by Law. In all other situations, including any Insolvency Proceeding, Maintaining Parties agree to pay all of the Managing Agent's and the Banks' reasonable costs and expenses, including attorneys' fees (including reasonably allocated costs for services of their respective in-house counsel) which may be incurred in any effort to collect or enforce this Agreement. From the time(s) incurred until paid in full, all sums shall bear interest at the Default Rate. 22. Integration; Modifications. This Agreement (a) integrates all -------------------------- the terms and conditions mentioned in or incidental to this Agreement, (b) supersedes all oral negotiations and prior writings with respect to its subject matter, and (c) is intended by Maintaining Parties, the Managing Agent and the Banks as the final expression of the -13- agreement with respect to the terms and conditions set forth in this Agreement and as the complete and exclusive statement of the terms agreed to by Maintaining Parties, the Managing Agent and the Banks. No representation, understanding, promise or condition shall be enforceable against any party unless it is contained in this Agreement. 23. Waiver of Right to Trial by Jury. EACH PARTY TO THIS AGREEMENT -------------------------------- HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTY HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT, THE LOAN AGREEMENT AND ANY OTHER LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. 24. Notices. Notices hereunder shall be in writing and shall be ------- delivered in the manner prescribed for notices in the Loan Agreement. 25. Miscellaneous. The illegality or unenforceability of one or more ------------- provisions of this Agreement shall not affect any other provision. 26. Equipment Lessors' Rights. Any reference in Paragraph 4 and ------------------------- following of this Agreement to Obligations, the Loans, the Loan Agreement and analogous terms shall be deemed to be qualified, where the context requires, by limiting the same to the Banks' Percentage thereof and shall be deemed to be amended, where the context requires, by adding a reference to the Equipment Lessors' Percentage of the obligations under the Equipment Lease. The Managing Agent shall be entitled, as respects the Equipment Lessors, to all of the rights and protections set forth in Article 11 of the Loan Agreement; provided that the -------- Equipment Lessors shall not be entitled to any rights under this Agreement if they do not confirm in writing promptly following request by the Managing Agent therefor their acceptance of the indemnification provisions contained in Section 11.7 of the Loan Agreement as to the Equipment Lessors' Percentage of any occurrence covered thereby. -14- IN WITNESS WHEREOF, Maintaining Parties have executed this Agreement as of the date first written above by their respective duly authorized officers. MGM GRAND, INC., a Delaware corporation By: /s/ K. Eugene Shutler ----------------------------------- Title: Executive Vice President --------------------------------- PRIMADONNA RESORTS, INC., a Nevada corporation By: /s/ Craig F. Sullivan ----------------------------------- Title: Chief Financial Officer -------------------------------- Accepted: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Managing Agent By: /s/ L. Chenevert, Jr. ---------------------------- Title: Vice President ------------------------- -15- EX-10.21 7 AGREEMENT FOR PURCHASE OF SHARES EXHIBIT 10(21) _____________________________ Dated: As of June 30, 1995 AGREEMENT FOR PURCHASE OF SHARES (Ultrabridge Darwin Limited; Havewin Trading Limited; Diamond Darwin Pty Limited) EXECUTION COPY i _____________________________________________________________________________ TABLE OF CONTENTS _____________________________________________________________________________
RECITALS.................................................................. 1 OPERATIVE PROVISIONS...................................................... 3 1 INTERPRETATION.................................................. 3 2 SALE AND PURCHASE OF SHARES..................................... 9 3 PURCHASE PRICE.................................................. 10 4 CONDITIONS PRECEDENT............................................ 11 5 COMPLETION AND COMPLETION ACCOUNTS.............................. 14 6 PAYMENT OF THE PURCHASE PRICE................................... 19 7 CONDUCT OF BUSINESS PENDING COMPLETION.......................... 19 8 RISK AND INSURANCE.............................................. 23 9 ACCESS TO RECORDS............................................... 24 10 SUPERANNUATION.................................................. 25 11 WARRANTIES REPRESENTATIONS AND INDEMNITIES...................... 25 12 ADJUSTMENT FOR TAX LIABILITY.................................... 33 13 DEFAULT BY VENDORS.............................................. 44 14 RESTRAINT....................................................... 44 15 COSTS AND STAMP DUTY............................................ 46 16 POWER OF ATTORNEY............................................... 47 17 NOTICES......................................................... 47 18 ASSIGNMENT...................................................... 48 19 MISCELLANEOUS................................................... 48 20 GOVERNING LAW JURISDICTION AND SERVICE OF PROCESS............... 49 APPENDIX A WARRANTIES AND REPRESENTATIONS WITH RESPECT TO THE COMPANY AND SUBSIDIARIES............................ 51 VENDORS' QUALIFICATIONS.............................................. 51 THE COMPANY AND THE SUBSIDIARIES..................................... 52 SHARES............................................................... 52 FINANCIAL STATEMENTS................................................. 53 BUSINESS............................................................. 54 BUSINESS PREMISES.................................................... 57 PLANT AND EQUIPMENT.................................................. 59 INVENTORY............................................................ 60 INTELLECTUAL PROPERTY RIGHTS......................................... 60 CONTRACTS............................................................ 62 INSURANCE............................................................ 63 TAXATION............................................................. 63 RECORDS.............................................................. 64 LITIGATION........................................................... 65 ENVIRONMENT.......................................................... 66
ii _________________________________________________________________________ EMPLOYEES........................................................ 67 SUPERANNUATION................................................... 67 CHANGES SINCE THE LAST BALANCE DATE.............................. 68 BROKERAGE........................................................ 69 INFORMATION...................................................... 69 APPENDIX B WARRANTIES AND REPRESENTATIONS WITH RESPECT TO ULTRABRIDGE DARWIN LIMITED............................. 71 VENDORS' QUALIFICATIONS.......................................... 71 ULTRABRIDGE...................................................... 71 THE SHARES....................................................... 71 FINANCIAL STATEMENTS............................................. 72 BUSINESS......................................................... 73 INSURANCE........................................................ 75 TAXATION......................................................... 75 RECORDS.......................................................... 76 LITIGATION....................................................... 76 CHANGES SINCE THE DATE OF THE LAST ULTRABRIDGE ACCOUNTS.......... 76 INFORMATION...................................................... 77 APPENDIX C WARRANTIES AND REPRESENTATIONS WITH RESPECT TO HAVEWIN TRADING LIMITED................................ 79 VENDORS' QUALIFICATIONS.......................................... 79 HAVEWIN.......................................................... 79 THE SHARES....................................................... 79 FINANCIAL STATEMENTS............................................. 80 BUSINESS......................................................... 81 INSURANCE........................................................ 83 TAXATION......................................................... 83 RECORDS.......................................................... 84 LITIGATION....................................................... 84 CHANGES SINCE THE DATE OF THE LAST HAVEWIN ACCOUNTS.............. 84 INFORMATION...................................................... 85 SCHEDULES SCHEDULE 1A ULTRABRIDGE VENDORS AND SHAREHOLDING (ULTRABRIDGE DARWIN LIMITED SHARES)............... 87 SCHEDULE 1B HAVEWIN VENDORS AND SHAREHOLDING (HAVEWIN TRADING LIMITED SHARES).................. 89 SCHEDULE 1B(b) HAVEWIN VENDORS AND SHAREHOLDER LOANS............. 90 SCHEDULE 1C VENDORS AND SHAREHOLDING TRUST SHARES (DIAMOND DARWIN PTY LIMITED SHARES)............... 91
iii ________________________________________________________________________ SCHEDULE 2 SUBSIDIARIES.................................... 92 SCHEDULE 3 MORTGAGES AND OTHER ENCUMBRANCES OVER THE COMPANY AND EACH SUBSIDIARY............ 93 SCHEDULE 4 BANK ACCOUNTS AND SIGNATORIES................... 94 SCHEDULE 5 CONTRACTS WITH THE VENDORS...................... 95 SCHEDULE 6 BUSINESS PREMISES............................... 96 SCHEDULE 7 PARTICULARS OF PROPERTY LEASES.................. 97 SCHEDULE 8 LIST OF PLANT AND EQUIPMENT..................... 98 SCHEDULE 9 PARTICULARS OF EQUIPMENT LEASES................. 99 SCHEDULE 10 PARTICULARS OF REGISTERED AND UNREGISTERED...... 100 SCHEDULE 11 MATERIAL CONTRACTS.............................. 101 SCHEDULE 12 BANKING FACILITIES.............................. 102 SCHEDULE 13 CONTRACTS OF INSURANCE.......................... 103 SCHEDULE 14 LITIGATION...................................... 106 SCHEDULE 15 EMPLOYEE BENEFIT PLANS.......................... 107 SCHEDULE 16 NOTICE PROVISIONS............................... 108 SCHEDULE B1 BANK ACCOUNTS AND SIGNATORIES................... 111 SCHEDULE B2 CONTRACTS OF INSURANCE.......................... 112 SCHEDULE C1 BANK ACCOUNTS AND SIGNATORIES................... 113 SCHEDULE C2 CONTRACTS OF INSURANCE.......................... 114 SIGNATURES..................................................... 115 ANNEXURES ANNEXURE A LAST ACCOUNTS................................... 120 ANNEXURE B INTERIM ACCOUNTS................................ 121
iv ____________________________________________________________________ ANNEXURE C DISCLOSURE LETTER ......................... 122 ANNEXURE A-1 LAST HAVEWIN ACCOUNTS ..................... 123 ANNEXURE A-2 LAST ULTRABRIDGE ACCOUNTS ................. 124 EXHIBITS EXHIBIT 1 ULTRABRIDGE LIQUIDATION PROCEDURES EXHIBIT 2 HAVEWIN LIQUIDATION PROCEDURES
1 ________________________________________________________________________________ AGREEMENT FOR PURCHASE OF SHARES This Agreement for Purchase of Shares (this "Agreement") is made as of June 30, 1995 Between: THE PERSONS whose names and addresses are set out in column 1 of Schedule 1 (collectively "Vendors" and individually "Vendor") And: MGM GRAND AUSTRALIA PTY LTD (A.C.N. 069 214 473), which is a company incorporated in the Northern Territory, Australia and has its registered office at 3rd Floor, Diamond Beach Casino, Gilruth Avenue, Darwin City, NT 0800 ("Purchaser"). And: MGM GRAND, INC., which is a company incorporated in the State of Delaware, United States, with its principal office in Las Vegas, Nevada ("MGM Grand"). RECITALS: A. Diamond Darwin Pty Limited (A.C.N. 009 641 089) is a company incorporated in the Northern Territory, Australia and has its registered office at 3rd Floor, Diamond Beach Casino, Gilruth Avenue, Darwin City, Northern Territory, Australia ("Company"). B. Ultrabridge Darwin Limited is a company incorporated in the Cayman Islands and has its registered office at P.O. Box 309, Ugland House, South Church Street, Grand Cayman, Cayman Islands, British West Indies ("Ultrabridge"). C. Havewin Trading Limited is a company incorporated in Hong Kong and has its registered office at Rooms 705-8, Asia Pacific Finance Tower, Citibank Plaza, 3 Garden Road, Hong Kong ("Havewin"). D. The Company has an authorised share capital of Aus$20,000,000 divided into 4,250,000 A Class shares, 4,250,000,000 B Class shares, 10,000,000 C Class shares and 1,500,000 D Class shares of AUS$1.00 par value each, of which 4,250,000 A Class shares, 4,250,000 B Class shares and 1,500,000 D Class shares have been issued, credited as fully paid. E. Ultrabridge has an authorized ordinary share capital of US $900,000 divided into 1,000 ordinary voting shares and 899,000 ordinary non-voting shares, with a nominal value of US $1.00 each, of which 1,000 voting shares and 100,000 non-voting shares have been issued, credited as fully paid, and an authorised preference share capital of 2 ________________________________________________________________________________ US $4,500,000, of which 4,356,138 7% preference shares, with a nominal value of US $1.00 each, have been issued, credited as fully paid. F. Havewin has an authorized share capital of HK $10,000 consisting of 10,000 ordinary shares with a nominal value of shares of HK$1.00 each, of which two shares have been issued, credited as fully paid, provided, however, that at Completion Havewin will have an authorized share capital of HK$37,163,212, consisting of 37,163,212 ordinary shares with a nominal value of shares of HK$1.00 each, of which 37,163,212 shares will have been issued, credited as fully paid. G. The persons whose names and addresses are set out in column 1 of Schedule 1A (collectively "Ultrabridge Vendors" and individually "Ultrabridge Vendor") registered and beneficial owners of all issued shares in the capital of Ultrabridge ("Ultrabridge Shares") as set out in columns 2,3, and 4 of Schedule 1A opposite the name of each Ultrabridge Vendor. Ultrabridge is the registered and beneficial owner of 4,250,000 A Class shares of the Company (the "Class A Shares"). H. The persons whose names and addresses are set out in column 1 of Schedule 1B (collectively "Havewin Vendors" and individually "Havewin Vendor") are registered and beneficial owners of all issued shares in the capital of Havewin ("Havewin Shares") as set out in columns 2, 3, and 4 of Schedule 1B opposite the name of each Havewin Vendor. Havewin is the registered and beneficial owner of 4,250,000 B Class shares of the Company (the "Class B Shares"). I. As reflected on Schedule 1C, Cortust Aktiengesellschaft fur Treuhandsschaften and Dr. Lambert Grasern are the trustees of the Osborne Family Trust (the "Trust") which is the registered and beneficial owner of 1,500,000 D Class Shares of the Company (the "Class D Shares"). J. The Class A Shares, Class B Shares and Class D Shares (collectively, the "Shares"), owned by Ultrabridge, Havewin and the Trust, respectively, constitute all of the issued shares in the capital of the Company. K. The Ultrabridge Vendors have agreed to sell and the Purchaser has agreed to purchase the Ultrabridge Shares, the Havewin Vendors have agreed to sell and the Purchaser has agreed to purchase the Havewin Shares and the Trust has agreed to sell and the Purchaser has agreed to purchase the Class D Shares, all on the following terms, as a result of which the Purchaser would beneficially own (either directly or indirectly through its ownership of Ultrabridge and Havewin) all of the Shares. 3 ________________________________________________________________________________ L. It is specifically acknowledged that the Purchase Price has been negotiated on an aggregate basis amongst the parties and reflects the aggregate amount which the Purchaser is prepared to pay in order to acquire the direct or indirect beneficial ownership of all of the Shares, which amount has been allocated amongst the various Vendors through arms length negotiations. OPERATIVE PROVISIONS: 1 INTERPRETATION ________________________________________________________________________________ 1.1 The following words have these meanings in this Agreement unless the contrary intention appears. ACCOUNTING STANDARDS means the Australian Accounting Standards from time to time and if and to the extent that any matter is not covered by Australian Accounting Standards means generally accepted accounting principles applied from time to time in Australia for a company similar to the Company; provided that in the case of Ultrabridge, Accounting Standards means International Accounting Standards and in the case of Havewin, Accounting Standards means Hong Kong Accounting Standards, in each case subject to the same qualifications mutatis mutandis. BUSINESS DAY means a day on which trading banks are open for general business in Northern Territory. BUSINESS PREMISES means all the land and buildings owned or leased or occupied by the Company or any Subsidiary. COMPANY COMPLETION ACCOUNTS means the audited balance sheet of the Company and the Subsidiaries reflecting the assets and liabilities of the Company and the Subsidiaries as at 4:00 a.m. Darwin Time on the Completion Date and the audited profit and loss account of the Company and the Subsidiaries for the period from the Last Accounts ending on that date and time to be prepared in accordance with Clause 5. COMPLETION means settlement of the sale and purchase of the Ultrabridge Shares, the Havewin Shares and the Class D Shares in accordance with Clause 5 and Complete has a corresponding meaning. COMPLETION ACCOUNTS means the Company Completion Accounts, the Ultrabridge Completion Accounts and the Havewin Completion Accounts. 4 ________________________________________________________________________________ COMPLETION DATE means that date which is the fifth (5th) Business Day following satisfaction or waiver of the conditions to Purchaser's obligations set forth in Clause 4, but not later than December 31, 1995, or any other date agreed by the Vendors and the Purchaser; provided that in the event conditions to the Purchaser's obligations set forth in Clause 4 have not been satisfied by such date, then such date shall automatically be extended to five (5) Business Days after the final condition is satisfied or waived, so long as the Purchaser is diligently seeking the approvals and consents set forth in Clause 4. CONFIDENTIAL INFORMATION means all trade secrets and all financial, marketing and technical information, concepts, know- how, technology, processes and knowledge which is confidential or of a sensitive nature, but excludes that which is in the public domain. CONTAMINANT means a solid, liquid, gas, odour, heat, sound, vibration, radiation or substance which makes or may make the Business Premises or the surrounding Environment: (a) unsafe or unfit for habitation or occupation by persons or animals; (b) degraded in its capacity to support plant life; or (c) otherwise environmentally degraded. CORPORATIONS LAW means the Corporations Law of the Commonwealth of Australia. DIAMOND DARWIN CONSOLIDATED means the Company and its Subsidiaries, including Diamond Leisure Pty Limited (A.C.N. 009 624 417), a company incorporated in the Northern Territory, Australia ("Diamond Leisure"), Fernbank Pty ltd. (A.C.N. 009 622 262), a company incorporated in the Northern Territory, Australia ("Fernbank"), and the Territory Property Trust established under the trust deed made on 28 September 1984 (the "Territory Trust"). DISCLOSURE LETTER means the letter of even date herewith from the Vendors to the Purchaser disclosing exceptions to the Warranties (a true and correct copy of which is attached hereto as Annexure C). ENVIRONMENT means the physical factors of the surroundings of persons including the land, waters, atmosphere, climate, sound, odours, taste, the biological factors of animals and plants and the social factor of aesthetics. 5 ________________________________________________________________________________ ENVIRONMENTAL LAW means a law regulating or otherwise relating to the Environment, including but not limited to any law relating to land use planning, pollution of air or water, soil or ground water contamination, chemicals, waste, use of dangerous goods or to any other aspect of protection of the environment. EQUIPMENT LEASES means leases of, and agreements to hire, equipment and other personal property (including motor vehicles) to the Company or any Subsidiary. FUTURE INCOME TAX BENEFIT means the estimated amount of future saving in income tax likely to arise as a result of: (a) the reversal of Timing Differences; and (b) the recoupment of carried forward tax losses (which for the purposes of Australian Accounting Standard ASAB 1020 are dealt with separately from other timing differences). HAVEWIN COMPLETION ACCOUNTS means the audited balance sheet of Havewin reflecting the assets and liabilities of Havewin as at the close of business Hong Kong time on the day immediately preceding the Completion Date and the audited profit and loss account of Havewin for the period from the Last Havewin Accounts ending on that date and time, to be prepared in accordance with Clause 5. HIT SHAREHOLDERS means Rizona (Hong Kong) Limited and Leroy Singapore Pte. Limited. INDEPENDENT AUDITOR means Price Waterhouse, Adelaide, the Company's auditor. INTELLECTUAL PROPERTY LICENCES means all agreements under which the Company or any Subsidiary obtains the right to use, but not ownership of, any of the Intellectual Property Rights referred to in paragraphs (a) to (d) of the definition of that term. INTELLECTUAL PROPERTY RIGHTS means: (a) the business names owned or used at any time prior to Completion by the Company or any Subsidiary; (b) all trade marks owned or used at any time by the Company or any Subsidiary prior to completion; (c) all Confidential Information owned or used at any time prior to Completion by the Company or any Subsidiary; 6 _______________________________________________________________________________ (d) all patents, patent applications, discoveries, inventions, registered and unregistered designs, copyright and similar rights owned or used at any time prior to Completion by the Company or any Subsidiary; and (e) the Intellectual Property Licences. INTERIM ACCOUNTS means the balance sheet of the Company and the Subsidiaries as at 24 March 1995 and the profit and loss account of the Company and the Subsidiaries for the period of 83 days ending on 24 March 1995, which are unaudited but which have been reviewed by the Independent Auditor and copies of which are attached hereto as Annexure B. INVENTORY means all stock-in-trade in use or intended for use in connection with the business of the Company or any Subsidiary as at the Completion Date, including items owned by the Company or any Subsidiary which are in transit to the Company or any Subsidiary. LAST ACCOUNTS means the audited balance sheet of the Company and the Subsidiaries as at the Last Balance Date and the audited profit and loss account of the Company and the Subsidiaries for the period of twelve (12) months ending on the Last Balance Date, copies of which are attached as Annexure A. LAST BALANCE DATE means 30 September, 1994. LAST HAVEWIN ACCOUNTS means the audited balance sheet of Havewin as at 31 March, 1995 and the audited profit and loss account of Havewin for the period of twelve (12) months ending on said date, copies of which are attached as Annexure A-1. LAST ULTRABRIDGE ACCOUNT means the audited balance sheet of Ultrabridge as at 31 December 1994 and the audited profit and loss account of Ultrabridge for the period of fifteen (15) months ending on said date, copies of which are attached as Annexure A- 2. LEASED PLANT AND EQUIPMENT means the subject matter of the Equipment Leases. PLANT AND EQUIPMENT means all plant, equipment, motor vehicles, machinery, furniture, fixtures and fittings and other personal property owned and used by the Company or any Subsidiary. PROPERTY LEASES means the leases to the Company or any Subsidiary of real property. 7 ________________________________________________________________________________ PURCHASE PRICE means the aggregate consideration payable for the Ultrabridge Shares, the Havewin Shares and the Class D Shares calculated in accordance with Clause 3 and adjusted, where applicable, in accordance with Clause 11.8 and Clause 12.4. RECORDS means originals and copies, in machine readable or printed form, of all books, files, reports, records, correspondence, documents and other material of or relating to or used in connection with the Company or any Subsidiary including: (a) minute books, statutory books and registers, books of account and copies of taxation returns; (b) sales literature, market research reports, brochures and other promotional material (including printing blocks, negatives, sound tracks and associated material); (c) all sales and purchasing records; (d) all trading and financial records; and (e) lists of all regular suppliers and customers. RELATED BODY CORPORATE of a body corporate means another body corporate which is related to the first within the meaning of section 50 of the Corporations Law. SUBSIDIARIES means all of the bodies corporate and trust described in Schedule 2, and Subsidiary means any one of those bodies corporate or trusts. TAX where used in this Agreement has the same meaning as that ascribed to it in Clause 12. TIMING DIFFERENCES means differences between pre-tax accounting profit or loss and taxable income or tax loss for a given financial period which arise because the financial period in which some items of revenue and expense are included in the determination of the pre-tax accounting profit or loss does not coincide with the financial period in which they are included in the determination of taxable income or tax loss. UD INDEMNITORS means Ultrabridge Securities Limited (Cayman Islands), John Victor Aspinall and James Francis Osborne (all more particularly described in Schedule 1A). 8 ________________________________________________________________________________ UD SHAREHOLDERS means Ultrabridge Securities Limited, John Victor Aspinall, HPLF Investments (II) Limited, James Francis Osborne, the Trustees of the Howletts and Port Lympne Foundation (the "Foundation") and Enderbury Limited. ULTRABRIDGE COMPLETION ACCOUNTS means the audited balance sheet of Ultrabridge reflecting the assets and liabilities of Ultrabridge as at the close of business Cayman Islands time on the day immediately preceding the Completion Date and the audited profit and loss account of Ultrabridge for the period from the Last Utrabridge Accounts ending on that date and time, to be prepared in accordance with Clause 5. WARRANTIES means the warranties, representations and indemnities in this Agreement, including Clause 11. 1.2 In this Agreement unless the contrary intention appears: (a) a reference to a Clause, schedule, annexure or appendix is a reference to a Clause of or schedule, annexure or appendix to this Agreement and references to this Agreement include any recital, schedule, annexure or appendix; (b) a reference to this Agreement or another instrument includes any variation or replacement of either of them; (c) a reference to a statute, ordinance, code or other law includes regulations and other instruments under it and consolidations, amendments, re-enactments or replacements of any of them; (d) the singular includes the plural and vice versa; (e) the word person includes a firm, a body corporate, an unincorporated association or an authority; (f) a reference to a person includes a reference to the person's executors, administrators, successors, substitutes (including, but not limited to, person taking by novation) and assigns; (g) an agreement, representation or warranty in favour of two or more persons is for the benefit of them jointly and severally; (h) an agreement, representation or warranty on the part of two or more persons binds them jointly and severally; 9 ________________________________________________________________________________ (i) if a period of time is specified and dates from a given day or the day of an act or event, it is to be calculated exclusive of that day; and (j) a reference to a day is to be interpreted as the period of time commencing at midnight and ending 24 hours later. 1.3 Headings are inserted for convenience and do not affect the interpretation of this Agreement. 2 SALE AND PURCHASE OF SHARES ________________________________________________________________________________ 2.1 Each Ultrabridge Vendor agrees to sell and transfer to the Purchaser and the Purchaser agrees to purchase from that Ultrabridge Vendor, on the terms and conditions of this Agreement, the number of Ultrabridge Shares held by that Ultrabridge Vendor set out in column 2 of Schedule 1A. Each Havewin Vendor agrees to sell and transfer to the Purchaser and Purchaser agrees to purchase from that Havewin Vendor, on the terms and conditions of this Agreement, the number of Havewin Shares held by that Havewin Vendor set out in column 2 of Schedule 1B. The Trust agrees to sell and transfer to the Purchaser and Purchaser agrees to purchase from the Trust, on the terms and conditions of this Agreement, the number of Class D Shares held by the Trust set out in column 2 of Schedule 1C. 2.2 The Ultrabridge Shares, the Havewin Shares and the Class D Shares must be transferred free from any mortgage, charge, lien, pledge or other encumbrance and, except as otherwise specifically provided for in this Agreement, with all rights, including dividend rights, attached or accruing to them on and from February 23, 1995. The Purchase Price is inclusive of all shareholder loans from Ultrabridge and Havewin, and all such loans to the extent outstanding shall be satisfied on Completion from the Purchase Price. 2.3 The Purchaser is not obliged to Complete unless each Vendor is ready, willing and able to Complete simultaneously. 2.4 Each Ultrabridge Vendor and Havewin Vendor waives in favour of the Purchaser any pre-emptive or other rights which that Vendor has now or might otherwise have in respect of any of the Ultrabridge Shares or Havewin Shares held by each other Ultrabridge Vendor and/or Havewin Vendor, as the case may be. Subject to Completion, the Trust waives, and each Ultrabridge Vendor and each Havewin Vendor shall procure that Ultrabridge and Havewin, respectively, waive any pre-emptive or other rights which the Trust, Ultrabridge or Havewin, respectively, has now or might otherwise have in respect of shares of the Company. Without limiting the foregoing, effective at Completion, 10 ________________________________________________________________________________ the shareholders agreement dated 19 April 1988 among Ultrabridge, Havewin, Sir James Goldsmith and Messrs. Ong and Ong (referred to in the Articles of Association of the Company) and the Shareholders Deed between Ultrabridge, Havewin, State Bank of South Australia, the Company, Diamond Leisure and Fernbank dated 9 September 1993 will have been terminated. 3. PURCHASE PRICE _______________________________________________________________________________ 3.1 The Purchase Price is Aus$75,806,250 less the amount of Aus$4,000,000 representing indebtedness owing by the Company to Ultrabridge or Havewin as at 23 February 1995 and less any indebtedness in excess of Aus$4,000,000 owing by Diamond Darwin Consolidated to Ultrabridge, Havewin, any Vendor or any party related or affiliated thereto immediately prior to Completion, which the Purchaser shall procure is repaid on Completion, which Purchase Price shall be further adjusted as provided below. Ultrabridge and Havewin will each be owed immediately prior to Completion Aus$2,000,000 by the Company which, as provided above, on Completion the Purchaser shall procure is repaid by the Company, and on Completion Ultrabridge and Havewin will then have the right to pay the proceeds of such indebtedness to the Ultrabridge Vendors and the Havewin Vendors on Completion as they each shall direct. The Purchase Price shall be adjusted upwards or downwards by an amount equal to 100% of the consolidated net profits/losses after tax earned/incurred after utilization of available tax losses and after charging minority interest by Diamond Darwin Consolidated (the "Net Profits") for the period between January 1, 1995 and March 24, 1995 (both dates inclusive) (the "Interim Period") and 50% of the Net Profits for the period between March 24, 1995 and the date of Completion (both dates exclusive), and shall be adjusted downwards to the extent (a) that on Completion the aggregate of external bank term loans (excluding shareholders loans which are to be repaid as provided above) and other Non-Current liabilities of Diamond Darwin Consolidated shall exceed Aus$19 million principal and (b) of any distributions or dividends made by the Company since September 30, 1994 (collectively, the "Adjustments"). The Interim Accounts state that the Net Profits for the Interim Period were Aus$1,715,050. In reliance on the accuracy of the Interim Accounts, on Completion the Purchaser will pay an amount of Aus$77,521,300 on account of the Purchase Price and repayment of the aforesaid shareholders' loans, and the final purchase price shall be determined by the Independent Auditor by reference to the Company Completion Accounts. The balance of the Purchase Price shall be paid by the Purchaser or repaid by the Vendors, as applicable, together with an amount equal to interest thereon at 2% over State Bank of South Australia's Bank Bill Rate for the applicable period from Completion to the actual date of payment within seven 11 ________________________________________________________________________________ days of the Independent Auditor's certificate of the final Purchase Price. All payments made with respect to the Purchase Price shall be made to a single bank account in the name of Hammond Suddards, in trust for Vendors, as their respective interests may appear, which will distribute the payments in accordance with written instructions from the Vendors. The amounts to be paid to the Ultrabridge Vendors, the Havewin Vendors and the Trust are set forth on Schedules 1A, 1B and 1C, respectively; provided, however, the benefit or burden as the -------- ------- case may be, of the Adjustments, shall be borne 42.5% for the account of the Ultrabridge Vendors, 15% for the account of the Trust, and 42.5% for the account of the Havewin Vendors. 3.2 For the purpose of Clause 3.1: (a) a reference to "consolidated net profits/losses" shall exclude any reduction in profits or the incurring of a loss as a result of the exclusion as an asset of any Future Income Tax Benefit in the Last Accounts which adjustment is made in accordance with the principles for preparation of the Company Completion Accounts in Clause 5.4; and (b) a reference to Non-Current Liabilities shall include a provision for long-service leave and leasing of plant and equipment, the installments for which are not payable within twelve (12) months of the balance sheet date. 3.3 On Completion, Havewin and Ultrabridge shall have no liabilities of any kind except for liabilities which are satisfied from the Purchase Price or are otherwise cancelled or discharged at no cost to Ultrabridge or Havewin, as applicable, or to Purchaser. 4 CONDITIONS PRECEDENT ________________________________________________________________________________ 4.1 Completion is conditional on: (a) the Treasurer of the Commonwealth of Australia consenting, under the Foreign Acquisitions and Takeovers Act 1975, to the proposed acquisition by the Purchaser of Diamond Darwin Consolidated through its acquisition of the Ultrabridge Shares, the Havewin Shares (and subsequent liquidation of Ultrabridge and Havewin) and the Class D Shares, and the Treasurer is to be deemed to have so consented: (i) if the Purchaser receives written advice from the Treasurer or on his behalf, without any term or condition which the Purchaser considers unacceptable, to 12 ________________________________________________________________________________ the effect that the acquisition of the Ultrabridge Shares, the Havewin Shares and the Trust Shares is not objected to under the Foreign Acquisitions and Takeovers Act 1975; or (ii) if 10 days have elapsed from the day the Treasurer ceased to be empowered to make any order under Part II of the Foreign Acquisitions and Takeovers Act in relation to the proposed acquisition because of lapse of time, notice of the proposed acquisition of the Ultrabridge Shares, the Havewin Shares and the Trust Shares having been given to the Treasurer under the Foreign Acquisitions and Takeovers Act 1975; (b) the Purchaser and the Vendors receiving all relevant consents and approvals required from the Government or relevant Minister of the Northern Territory of Australia in relation to the change of control of Diamond Darwin Consolidated, in connection with the gaming and liquor licenses on terms no less favorable than the following: (i) the gaming license of Diamond Leisure shall be granted on an "evergreen" basis, subject to the continued good behavior of the licensee and its controllers; (ii) table game exclusivity enjoyed by Diamond Leisure shall be extended through no earlier than June 30, 2005 at the current 8% gaming tax on gross gaming profit; (iii) in the event community poker machines are introduced in the Northern Division of the Northern Territory and as a consequence the Company and the Subsidiaries cease to enjoy exclusivity in poker machines: x. through at least June 30, 2003, the Northern Territory Government shall collect and remit to Diamond Leisure an amount equal to not less than 22% of the gross gaming profit of the community machines located in the Northern Division; and y. commencing with the community machines becoming operational, the gaming tax on Diamond Leisure's poker machines may be increased in stages from the present 8% of gross gaming profit to a rate not in excess of 12.5% of gross gaming profit in the first year, 15% of 13 ________________________________________________________________________________ gross gaming profit in the second year, 17.5% of gross gaming profit in the third and fourth years, 20% in the fifth year, 22.5% in the sixth year, and 25% in the seventh and subsequent years, in each case measured from the date of introduction of the community poker machines in the Northern Division of the Northern Territory; and (iv) confirmation satisfactory to the Purchaser that Diamond Leisure's gaming and liquor licenses would extend to operations at additional sites in the Northern Division of the Northern Territory; (c) as elected by Purchaser: (i) the agreement of the State Bank of South Australia having been received to the change of control of the Company (and any other events or transactions contemplated by this Agreement) under that certain Facility Agreement dated as of 2 August 1993 and related agreements (the "State Bank Loan Agreements") without imposing any adverse changes in such State Bank Loan Agreements, or (ii) provision satisfactory to Purchaser having been made with respect to the refinancing and discharge of the State Bank Loan Agreements; (b) the approval by all appropriate Nevada regulatory authorities to the extent required of the transactions contemplated by this Agreement. 4.2 (a) MGM Grand and the Purchaser shall use their best endeavours (other than by incurring substantial liabilities, substantial obligations (including any divestment and restrictions on business operations) or monetary obligations and other than by consenting to any substantial alteration to the terms of this Agreement) to satisfy any request for information or condition or conditions specified by or on behalf of the Treasurer of the Commonwealth of Australia under the Foreign Acquisitions and Takeovers Act 1975 as referred to in Clause 4.1(a). (b) Each of the parties shall use all reasonable endeavours to obtain the fulfillment of the conditions in Clause 4.1(b) to (d) inclusive in an expeditious manner. 14 ________________________________________________________________________________ (c) The Vendors and Purchaser, as applicable, shall give the other prompt notice in writing upon it becoming aware whether or not any of the conditions precedent referred to in Clause 4.1 has been satisfied. 4.3 If: (a) any of the conditions in Clause 4.1 are not fulfilled by the Completion Date; or (b) any consent, approval or agreement required under any of those conditions is not granted on terms acceptable to the Purchaser, acting reasonably, then the Purchaser may at any time before Completion, subject to the Purchaser having complied with Clause 4.2, terminate this Agreement by notice given to the Vendors. 4.4 If this Agreement is terminated under Clause 4.3 then, in addition to any other rights, powers or remedies provided by law: (a) each party is released from its obligations to further perform the Agreement except those imposing on it obligations of confidentiality; (b) each party retains the rights it has against any other party in respect of any past breach; (c) the Purchaser must return to the Vendors any Records given to it under Clause 9 except in the event of breach by any of the Vendors (in which event such Records may be retained only to the extent relevant to the exercise of Purchaser's rights, powers and remedies provided by law). 5. COMPLETION AND COMPLETION ACCOUNTS ________________________________________________________________________________ 5.1 Completion of the sale and purchase of the Ultrabridge Shares, the Havewin Shares and the Class D Shares will take place at 9:00 a.m. on the Completion Date at the offices of MGM Grand, 3799 Las Vegas Boulevard South, Las Vegas, Nevada 89109, USA, or such other time and place as the Vendors and the Purchaser may agree. 5.2 The Vendors agree to do the following on Completion: (a) deliver to the Purchaser or its solicitors: 15 ________________________________________________________________________________ (i) executed transfers in favour of the Purchaser of all the Ultrabridge Shares, the Havewin Shares and the Class D Shares, except one share in each case to be delivered and transferred to such nominees as Purchaser shall designate prior to the Completion Date, together with the share certificates for the aforesaid shares and consents that the Purchaser reasonably requires; (ii) share certificates representing the Class A Shares and Class B Shares, to be held by Purchaser or its solicitors in connection with the liquidation following Completion of Ultrabridge and Havewin; and (iii) share certificates and unit certificates for the Subsidiaries (including the Territory Property Trust) representing all such shares or units owned by the Company or any Subsidiaries and true and correct copies of the title deeds for the land owned by the Company, the Subsidiaries and/or the Territory Property Trust (the originals of which are held by or on behalf of the State Bank of South Australia pursuant to the State Bank Loan Agreements); and (b) cause: (i) the board of directors of Ultrabridge, Havewin and the Company to direct that, subject to the payment of stamp duty, if any, the transfers of the respective shares are registered; (ii) the delivery to the Purchaser or its nominee of the Records within the possession or control of the Vendors, Havewin, Ultrabridge, Diamond Darwin Consolidated or any of their respective affiliates and the common seal and any other company seals of Ultrabridge, Havewin, the Company and the Subsidiaries; (iii) the delivery to the Purchaser or its nominee of duly completed bank authorities authorised by the board of directors of Ultrabridge, Havewin and the Company and each of the Subsidiaries directed to that company's bankers authorising the operation of each of its bank accounts by nominees of the Purchaser; and (iv) the appointment to the board of directors of Ultrabridge, Havewin, the Company and each of the Subsidiaries of the Purchaser's nominees and the resignation from those 16 ________________________________________________________________________________ boards, on terms approved by the Purchaser, of all the existing directors but so that a properly constituted board of directors is in existence at all times. 5.3 The Purchaser agrees to make payment on Completion in accordance with Clause 6.1 if the Vendors comply with Clause 5.2. 5.4 The Vendors and the Purchaser agree to cause the Company, promptly after the Completion Date, to prepare the Company Completion Accounts in accordance with the Accounting Standards save for compliance with the Australian Approved Accounting Standard AASB 1020 in respect of Future Income Tax Benefit, and have those accounts audited (with an unqualified audit report) by the Independent Auditor. The Ultrabridge Vendors agree to cause Ultrabridge (with the cooperation of the Purchaser), promptly after the Completion Date, to prepare the Ultrabridge Completion Accounts in accordance with the Accounting Standards applicable to Ultrabridge and have those accounts audited (with an unqualified audit report) by Price Waterhouse, Cayman Islands. The Havewin Vendors agree to cause Havewin (with the cooperation of the Purchaser), promptly after the Completion Date, to prepare the Havewin Completion Accounts, in accordance with the Accounting Standards applicable to Havewin and have those accounts audited (with an unqualified audit report) by Charles Mar Fan & Co., Hong Kong. The Company Completion Accounts, Ultrabridge Completion Accounts, and Havewin Completion Accounts shall each be prepared in consultation with Purchaser's auditor who shall be consulted in connection with the respective audit plan (including approach and audit scope), and who shall have the opportunity to review and comment upon such respective auditors' working paper files and results, and to meet and confer with such auditors to resolve any differences prior to the respective Completion Accounts being certified and presented to the parties. The respective Completion Accounts must: (a) subject to paragraph (c) below, disclose a true and fair view of the state of the affairs, financial position and assets and liabilities of the Company and the Subsidiaries in the case of the Company Completion Accounts, Ultrabridge in the case of the Ultrabridge Completion Accounts (except that Ultrabridge will not comply with the equity accounting provisions of International Accounting Standards 28 in respect of its investment in the Company) and Havewin in the case of the Havewin Completion Accounts as at Havewin Completion Accounts as at the Completion Date and the income, expenses and results of operations of the Company and the Subsidiaries in the case of the Company Completion Accounts, Ultrabridge in the case of the Ultrabridge Completion 17 ________________________________________________________________________________ Accounts and Havewin in the case of the Havewin Completion Accounts for the financial period ending on that date; (b) subject to paragraph (c) below, include in the balance sheet all such reserves and provisions for taxation as are materially necessary to cover all tax liabilities, whether or not assessed, of the Company and the Subsidiaries in the case of the Company Completion Accounts, Ultrabridge in the case of the Ultrabridge Completion Accounts and Havewin in the case of the Havewin Completion Accounts up to the Completion Date; (c) in the case of the Company Completion Accounts: (i) include no opening balance, no closing balance and no item of profit or loss, each in respect of Future Income Tax Benefit and (ii) in order to facilitate the determination of the Purchase Price, separately state the Net Profits for the period between January 1, 1995 and March 24, 1995 (both dates inclusive) and the period between March 24, 1995 and the date of Completion (both dates exclusive); and (d) not include in the balance sheet provision for auditors fees for auditing the Completion Accounts, it being agreed that: in the case of the Company Completion Accounts, Purchaser will be responsible for 50% of such fees and Vendors will be responsible for 50% of such fees; in the case of Ultrabridge, the Ultrabridge Vendors will be responsible for 100% of such fees; and in the case of Havewin, the Havewin Vendors will be responsible for 100% of such fees; (e) be prepared: (i) subject to paragraph 5.4(c) above, in accordance with the requirements of the Corporations Law and in the case of Ultrabridge and Havewin, the corresponding applicable laws; (ii) subject to paragraph 5.4(c) above, in accordance with the relevant Accounting Standards; (iii) in the manner described in the notes to them and the accompanying auditor's opinion; (iv) on a consistent basis with the Last Accounts for the prior financial period except that they shall not include in the case of the Company Completion Accounts as an asset any Future Income Tax Benefit, and it being understood that no warranty shall be given as to the Company's 18 ________________________________________________________________________________ ability to utilize any Future Income Tax Benefit which, had the Company Completion Accounts been prepared on a consistent basis with the Last Accounts, would have been included in the Company Completion Accounts; (v) without revaluing upwards any assets in the period which is the subject of the Completion Accounts; The Company Completion Accounts must immediately be delivered upon availability by the Company to the Vendors and the Purchaser. The Ultrabridge Completion Accounts must immediately be delivered upon availability by Ultrabridge to the Ultrabridge Vendors and the Purchaser. The Havewin Completion Accounts must immediately be delivered upon availability by Havewin to the Havewin Vendors and the Purchaser. Purchaser and Vendors each agree to cooperate fully in order that the respective Completion Accounts be prepared and delivered as promptly as practicable. 5.5 If the Purchaser and the Vendors in the case of the Company Completion Accounts, the Ultrabridge Vendors in the case of the Ultrabridge Accounts and the Havewin Vendors in the case of the Havewin Accounts cannot agree on any item in connection with the preparation of the respective Completion Accounts, then either such Vendors or the Purchaser may refer the disagreement to the Independent Auditor, in the case of the Company, to Price, Waterhouse, Cayman Islands in the case of Ultrabridge and Charles Mar Fan & Co. in the case of Havewin, with the request that such auditor make a decision on the disagreement as soon as practicable after receiving any submissions from the respective Vendors and the Purchaser and after meeting and conferring with Purchaser's auditor in an effort to resolve such differences. The decision of the Independent Auditor, Price Waterhouse, Cayman Islands, and Charles Mar Fan & Co., as applicable is, in the absence of manifest error, to be conclusive and binding on the parties for the purpose of determining the Purchase Price under this Agreement. The auditor will be appointed as an expert and not as an arbitrator. In the event Purchaser's auditor expresses the written opinion that manifest error exists, the disputed matter shall be referred to one of the 4 largest internationally recognized accounting firms (not including Price Waterhouse or Arthur Andersen), as the Purchaser and Vendors may agree, to resolve such matter as it shall decide in its absolute discretion. Purchaser and Vendors shall each be responsible for half of the fees and costs of such accounting firm in resolving the matter. 19 ________________________________________________________________________________ 6 PAYMENT OF THE PURCHASE PRICE ________________________________________________________________________________ 6.1 The Purchaser agrees to pay to the Vendors at Completion and thereafter the amounts set forth in Clause 3. 6.2 Each payment referred to in Clause 6 must be made by bank cheque or bank telegraphic transfer to the account of Hammond Suddards as provided in Clause 3 pursuant to written instructions given by the Vendors prior to Completion (which instructions shall remain operative until changed in compliance with the procedures set forth in Clause 17). 6.3 MGM Grand guarantees the due and punctual performance by Purchaser of all of Purchaser's obligations under or arising from this Agreement and shall indemnify and keep indemnified the Vendors and each of them for any loss, damage, cost or expenses which may be suffered or incurred by them as a result of the non-performance of the obligations of the Purchaser hereunder. Without limiting the generality of the foregoing, MGM Grand shall pay on demand any amounts due for payment by the Purchaser hereunder if the Purchaser has not made such payment to the person entitled thereto within five (5) Business Days of the date such payment was due for payment. 7 CONDUCT OF BUSINESS PENDING COMPLETION ________________________________________________________________________________ 7.1 From the date hereof until Completion the Vendors must (and since February 23, 1995 through the date hereof the Vendors have), unless the Purchaser otherwise agrees in writing or as otherwise specifically provided in this Agreement, procure or procured, as applicable, that the Company and each of the Subsidiaries: (a) carries on its business in a normal, proper and efficient manner and only in the ordinary course of business and regularly consults with the Purchaser on material aspects in the manner of conduct of its business; (b) submits to the Purchaser for its approval (such approval not to be unreasonably withheld) any changes in its business, including without limitation (x) any contracts which may not be cancelled by the Company or the Subsidiary in question without penalty on 60 or fewer days' notice, and (y) any capital expenditures in excess of Aus$100,000 for any single capital expenditure or Aus$500,000 in the aggregate, provided however that the foregoing shall not apply to recurring capital expenditures consistent with prior practice for replacements and refurbishment; 20 ________________________________________________________________________________ (c) uses all reasonable endeavours to preserve the goodwill of its business; (d) maintains its assets at normal levels; and (e) carries out repairs and maintenance to the Plant and Equipment, the Leased Plant and Equipment and the Business Premises in accordance with good commercial practice and standards of maintenance so as to maintain said property in the same condition as it was on February 23, 1995 and as required under the Equipment Leases and the Property Leases, fair wear and tear excepted. 7.2 From the date hereof until Completion the Vendors must (and since February 23, 1995 through the date hereof the Vendors have), unless the Purchaser otherwise agrees in writing, procure or procured, as applicable, that the Company and each of the Subsidiaries do not: (a) increase, reduce or otherwise alter its share capital or grant any options for the issue of shares or other securities; (b) declare or pay a dividend or make any distribution of any kind to any Vendor or any relative, associate or affiliate of a Vendor or body corporate associated (as that term is defined in the Corporations Law) with a Vendor; (c) make a distribution or revaluation of assets; (d) buy back its shares; (e) enter into any abnormal or unusual transaction which relates to or adversely affects its business; (f) enter into any contract involving total expenditure in excess of Aus$100,000 for the Company and the Subsidiaries taken as a whole, respectively; (g) purchase any asset (other than Inventory) for more than Aus$100,00 or total assets (other than Inventory) costing more than Aus$100,000 in the case of the Company and the Subsidiaries taken as a whole; (h) allow the total amount owing to trade creditors to exceed the monthly average for the previous six months; (i) mortgage, pledge or encumber any asset; 21 ________________________________________________________________________________ (j) sell or transfer any asset except in the ordinary course of business consistent with prior practice; (k) cancel, terminate or modify any contractual right except in the ordinary course of business consistent with prior practice; (l) waive any right of substantial value; (m) enter into advancement booking arrangements for hotel rooms or other facilities except in the ordinary course of business consistent with prior practice; (n) renew or extend any leases other than as required by leases in effect prior to February 23, 1995; (o) adopt or amend any bonus, profit sharing, compensation, stock option, pension, retirement, deferred compensation, employment or other employee benefit plan, agreement, trust, plan, fund or other arrangement for the benefit or welfare of any employee or increase in any manner the compensation or fringe benefits of any employee or pay an benefit not required by an existing plan, current practice or arrangement; or 7.3 The Vendors agree that they will not enter any discussions with any potential purchaser of the Company, any of its Subsidiaries, Ultrabridge or Havewin, or any significant asset of any of the foregoing and will not furnish any information regarding any of the foregoing to any such potential purchaser. 7.4 The Ultrabridge Vendors, on the one hand, and Havewin Vendors, on the other hand, shall take all steps necessary within their respective powers to enable the Purchaser to implement the liquidation of Ultrabridge and Havewin respectively by the distribution in specie of the underlying shares in Diamond Darwin owned by each company. It shall be the responsibility of Purchaser to place such companies into liquidation by passing the relevant shareholder resolutions and complete the implementation of such liquidations as soon as practicable following Completion, including the timely making of all tax filings, provided that the indemnity given by the UD Indemnitors and the Havewin Vendors in respect of Australian Tax as provided in Clause 12.12 shall not relate to any value attributed to the Ultrabridge Shares and the Havewin Shares or the underlying 'A' Shares and 'B' Shares in the Company owned by each of Ultrabridge and Havewin in excess of the Purchase Price attributable to the Ultrabridge Shares and Havewin Shares hereunder, and shall only be operative if the Purchaser implements such liquidations in accordance with the applicable requirements of the respective company's constituent documents and in 22 ________________________________________________________________________________ accordance with the description of the material steps for each of Ultrabridge and Havewin referred to in Clause 7.6 within the timescale after Completion where specified in such detailed description of material steps. 7.5 In furtherance of the transactions provided for in this Agreement, including without limitation Clause 7.4, the Ultrabridge Vendors and the Havewin Vendors, respectively, shall take all steps necessary to procure that Ultrabridge and Havewin: (a) On Completion and, subject to Clause 7.6(b), at any time thereafter, have no liabilities of any kind (including tax liabilities), except for liabilities approved in writing by Purchaser and for which there is corresponding cash equivalent asset equal to or in excess of such liability and shall have no issued capital or any obligations to issue share capital other than the share capital relating exclusively to the Ultrabridge Shares and Havewin Shares to be acquired by Purchaser on Completion and which represent the entirety of the outstanding share capital of Ultrabridge and Havewin, as the case may be; (b) on Completion, own, free and clear of all liens, charges and claims (other than the rights of Purchaser) the Shares of Diamond Darwin set out in Schedule 1A (in the case of Ultrabridge) and Schedule 1B (in the case of Havewin); (c) do not enter into any transactions or make any commitments for which Ultrabridge or Havewin will have any liability or responsibility from and after Completion, except as specifically provided for in this Agreement; and (d) maintain their respective corporate existence and good standing and conduct their respective affairs in conformity with all applicable laws and regulations. 7.6 (a) Exhibited to this Agreement and marker Exhibit 1 and 2 respectively are the detailed descriptions of the material steps and timetable to be taken and pro forma completed copies of the documents to be executed in order to implement the respective liquidations of Ultrabridge and Havewin, including details of appropriate forms to be filed and resolutions and other documents to be executed. The UD Indemnitors warrant that the steps and timetable outlined in Exhibit 1 comply with all applicable requirements of applicable law and the Havewin Vendors warrant likewise in respect of Exhibit 2. 23 ________________________________________________________________________________ (b) The Purchaser will complete and lodge, where appropriate, the forms and associated documents referred to in Exhibits 1 and 2 in the form of those contained in the said Exhibits and in an expeditious manner consistent with the timetable contained in those Exhibits. 8 RISK AND INSURANCE ________________________________________________________________________________ 8.1 The Vendors must procure that the Company and each of the Subsidiaries, and to the extent relevant, Ultrabridge and Havewin maintains at least until Completion insurance of such company's assets covering such risks and for such amounts as is currently maintained by such company. Upon reasonable request by Purchaser, the Ultrabridge Vendors must procure that Ultrabridge, and the Havewin Vendors must procure that Havewin, take out and maintain until Completion insurance of the company's assets covering such risks and for such amounts as would be maintained in accordance with prudent business practice. 8.2 If any of the assets of the Company or any Subsidiary are damaged, destroyed or otherwise affected before Completion to a degree that in the Purchaser's reasonable judgment may materially and adversely affect the conduct or profitability of the business of the Company or any of the Subsidiaries, the Purchaser may terminate this Agreement by notice to the Vendors. If the Purchaser does not elect to terminate this Agreement and the Company or such Subsidiary is not, in the reasonable opinion of the Purchaser, adequately insured under the contracts of insurance referred to in Clause 8.1, including loss of profits, then an appropriate adjustment will be made to the Purchase Price as agreed between the Vendors and the Purchaser. If the Vendors and the Purchaser are unable to agree on the adjustment within 21 days of the Completion Date, then either the Vendors or the Purchaser may refer the disagreement to an independent valuer with the request that the independent valuer make a decision in respect of the disagreement as soon as practicable after receiving the reference and any submissions from the Vendors and the Purchaser. If the Vendors or Purchaser cannot agree on the independent valuer within seven days of one requesting appointment then the independent valuer is to be the person nominated by the President of the Australian Institute of Chartered Accountants (New South Wales Branch) at the request of the Vendors or the Purchaser. The decision of the independent valuer is to be conclusive and binding on the parties in the absence of manifest error. The Vendors (collectively) and the Purchaser agree to each pay one half of the independent valuer's costs and expenses in connection with the reference. The independent valuer will be appointed as an expert and not as an arbitrator. The 24 ________________________________________________________________________________ procedures for determination are to be decided by the independent valuer in its absolute discretion. 8.3 If this Agreement is terminated under Clause 8.2 then Clause 4.4 applies with the necessary changes. 9 ACCESS TO RECORDS ________________________________________________________________________________ The Vendors agree to ensure that the Purchaser and its representatives are allowed full and free access to the premises and Records of the Company and the Subsidiaries and Ultrabridge and Havewin at all reasonable times before the Completion Date to enable the Purchaser to become familiar with the affairs of the Company and the Subsidiaries and Ultrabridge and Havewin and investigate the accuracy of the Warranties. The Vendors must also provide the information, assistance and facilities that the Purchaser reasonably requires for those purposes. If for any reason the Purchaser does not proceed with the purchase of the Ultrabridge Shares, the Havewin Shares and the Class D Shares, it may not, at any time after termination of this Agreement, disclosure or use, or permit the disclosure or use of, any Confidential Information of the Company or any Subsidiary or Ultrabridge or Havewin except: (a) if required to make such disclosure by any court of competent jurisdiction or in order to enforce any rights under this Agreement; (b) pursuant to any court order; (c) pursuant to any law or regulation having the force of law or the requirements of any governmental authority such as the Commonwealth of Australia, the Northern Territory, the United States of America, or State of Nevada, or any agency or instrumentality thereof; (d) pursuant to the requirements of any recognised stock exchange or securities regulatory agency such as the United States Securities and Exchange Commission; (e) in circumstances where the information has come within the public domain otherwise than by reason of a breach by one of the parties of the provisions of this Clause; (f) to professional advisers; and. (g) in connection with legal proceedings arising from or in connection with such termination. 25 ________________________________________________________________________________ 10 SUPERANNUATION ________________________________________________________________________________ 10.1 In this Clause 10 and Warranties 105 to 108 inclusive in Appendix A to this Agreement the following words have these meanings: Fund means: (a) Host-Plus Superannuation Fund established by a Declaration of Trust dated 8 February 1988; and (b) Diamond Leisure Special No. 2 Superannuation Master Plan, the trustee of which is AMP Superannuation Limited (ACN 008 414 104). Trust Deed means the trust deed that established the applicable Fund, as amended. 10.1 The Vendors agree to ensure that both before and after the Completion Date the Purchaser and any actuary appointed by it are provided with all records and information which they may require (including detailed information about each of the members and their participation in the Fund) in order to verify the correctness of any calculations or values to be ascertained for the purposes of this Agreement (including the Warranties). This obligation extends to any records, information or systems which are recorded, maintained or otherwise dependent on any computerised or similar system or service. 11 WARRANTIES REPRESENTATIONS AND INDEMNITIES ________________________________________________________________________________ 11.1 Except as set forth in the Disclosure Letter, each of the Vendors represents and warrants to the Purchaser that each of the statements set out in Appendix A to this Agreement is accurate as at the date hereof and will be accurate on Completion. Each of the statements is to be treated as a separate representation and warranty and the interpretation of any statement made may not be restricted by reference to or inference from any other statement. 11.2 Except as set forth in the Disclosure Letter, each of the Ultrabridge Vendors represents and warrants to the Purchaser that each of the statements set out in Appendix B to this Agreement is accurate as at the date hereof and will be accurate on Completion. Each of the statements is to be treated as a separate representation and warranty and the interpretation of any statement made may not be restricted by reference to or inference from any other statement. 26 ________________________________________________________________________________ 11.3 Except as set forth in the Disclosure Letter, each of the Havewin Vendors represents and warrants to the Purchaser that each of the statements set out in Appendix C to this Agreement is accurate as at the date hereof and will be accurate on Completion. Each of the statements is to be treated as a separate representation and warranty and the interpretation of any statement made may not be restricted by reference to or inference from any other statement. 11.4 Subject to the following provisions of this Clause 11.4, the Warranties are not extinguished or affected by any investigation made by or on behalf of the Purchaser into the affairs of the Company or any Subsidiary or Ultrabridge or Havewin or by any other event or matter unless: (a) the Purchaser has given a specific written waiver or release; or (b) the claim relates to a thing done or not done after the date of this Agreement at the written request or with the written approval of the Purchaser. 11.5 (a) Each of the Vendors acknowledges that it has made and given its respective Warranties with the intention of inducing the Purchaser and MGM Grand to enter into this Agreement and that the Purchaser and MGM Grand have entered into this Agreement in full reliance on such Warranties. (b) The Purchaser hereby warrants that no reliance has been placed nor will at any time hereafter be placed by the Purchaser on any representation or warranty (whether express or implied and whether written or oral) relating to the Company or any Subsidiary or Ultrabridge or Havewin other than the Warranties and accordingly all representations and warranties (whether express or implied, statutory or otherwise) on the part of the Vendors other than the Warranties are hereby excluded to the full extent permissible by law. (c) The Purchaser acknowledges that it has made and given the warranty in Clause 11.5(b) above with the intention of inducing the Vendors to enter into this Agreement and the Vendors have entered into this Agreement in full reliance of that warranty. 11.6 Each of the Vendors represents, warrants and undertakes to the Purchaser that each of the Warranties made by it is true and correct on the date of this Agreement and will be at the Completion Date as if made on and as at each of those dates. 27 ________________________________________________________________________________ 11.7 Subject to Clause 11.11 through 11.21, each of the Vendors indemnifies the Purchaser against all liability or loss arising directly or indirectly from, and any costs, charges and expenses incurred in connection with ("Losses"), any inaccuracy in or breach of any of the Warranties made by it. (a) With respect to any inaccuracy in or breach of any of the Warranties (other than those in Appendix B and Appendix C), the UD Indemnitors shall be jointly and severally liable for 57 1/2% of the Losses and the Havewin Vendors shall be jointly and severally liable for 42 1/2% of the Losses, provided however that the Purchaser may recover 100% of such Losses from the UD Indemnitors under Clause 11.21, in which event the UD Indemnitors will have a claim for contribution against the Havewin Vendors for any amounts paid by the UD Indemnitors in excess of their 57 1/2% share. (b) With respect to any inaccuracy in or breach of any of the Warranties made in Appendix B, the UD Indemnitors shall be jointly and severally liable for 100% of the Losses. (c) With respect to any inaccuracy in or breach of any of the Warranties made in Appendix C, the Havewin Vendors shall be jointly and severally liable for 100% of the Losses. 11.8 If a payment is made for a breach of any of the Warranties, the payment is to be treated as a reduction in the Purchase Price and if the payment is made pursuant to Clause 11.7(a) it shall be borne as to 57 1/2% by the UD Indemnitors in respect of their Ultrabridge Shares only and as to 42 1/2% by the Havewin Vendors in respect of their Havewin Shares only, provided always that to the extent the UD Indemnitors pay 100% of the relevant Losses pursuant to Clause 11.21 or if the breach of Warranty relates to Clause 11.7(b) the payment shall be treated as a reduction in the Purchase Price in relation to the Ultrabridge Shares of the UD Indemnitors only and if the breach of Warranty related to Clause 11.7(c) the payment shall be treated as a reduction in the Purchase Price in relation to the Havewin Shares of the Havewin Vendors only. 11.9 Subject to Clause 8.2, the sole remedy of the Purchaser for breach or non-compliance of any Warranty is damages in accordance with this Clause 11 and in no event shall Purchaser be entitled to rescind this Agreement, provided, however, that if such breach or non-compliance becomes apparent before Completion, Purchaser shall be entitled to withhold from the Purchase Price such amount as Purchaser reasonably deems appropriate with respect to such breach or non-compliance. 28 ________________________________________________________________________________ 11.10 The Purchaser may not claim for any breach of the Warranties unless notice in writing of the claim, setting forth with reasonable particularity the basis thereof, is made to the Vendors within two years from the Completion Date except with respect to Warranties 74 to 82 inclusive in Appendix A to this Agreement, Warranties 28 to 35 inclusive in Appendix B to this Agreement, Warranties 28 to 35 inclusive in Appendix C to this Agreement, and Clause 12, in which event the period for the Company, any Subsidiary, Ultrabridge or Havewin shall be four years from the earliest due date of filing by such entity of the first income tax return following Completion in which such entity is required to pay any income tax. 11.11 Except for claims for breach of Warranties 74 to 82 inclusive in Appendix A and Clause 12, which shall be recoverable in full regardless of amount, the Purchaser may not claim for breach of the Warranties if the total of all claims for breach of the Warranties is less than Aus$375,000; provided if such sustainable claims exceed Aus$375,000 in the aggregate they shall be recoverable in full. The maximum aggregate claims which can be recovered shall be equal to the Purchase Price. 11.12 The Purchaser shall not be entitled to make any claim under or pursuant to the Warranties or in relation to: (a) any matter to the extent it is properly reserved, provided for, noted or otherwise properly taken into account, in the Last Accounts and such Last Accounts with respect to such item were prepared in accordance with the relevant Warranties relating to such Last Accounts; (b) any matter where the claim arises as a result of, or would not have arisen but for, legislation not in force at the date of this Agreement, or any change in legislation with retrospective effect after the date of this Agreement (including without limitation any increase in rates of Tax or changes in legislation relating to Tax with retrospective effect) or any change in the interpretation of the law after the date of this Agreement; (c) any matter where the facts or circumstances giving rise to such claim have been fully and fairly disclosed to the Purchaser in the Disclosure Letter or the documents annexed or referred to in the Disclosure Letter; (d) any claim to the extent it has been made good or is compensated for otherwise than by the Company any of its Subsidiaries, Ultrabridge, Havewin or the Purchaser; 29 ________________________________________________________________________________ (e) any claim which would not have arisen but for a voluntary act or omission performed or allowed to occur by the Purchaser or the Company or any of its Subsidiaries, Ultrabridge or Havewin after Completion otherwise than in the ordinary and proper course of business; and (f) any matter or thing done or omitted to be done after the date of this Agreement at the request or instigation of the Purchaser. 11.13 Following Completion the remedies of the Purchaser in respect of any breach of any of the Warranties shall be limited to a claim for damages and shall not extend to rescission of this Agreement or the right to claim that any such breach constitutes repudiation of this Agreement. 11.14 Following Completion the Purchaser shall not be entitled to make any claim under or pursuant to the Warranties for indemnification against liability or potential liability to a third party (an "Indemnification Claim") unless: (a) within thirty (30) days after the circumstances have come to the notice of the Purchaser or the Company or any of its Subsidiaries, which will, or are likely to, or may give rise to an Indemnification Claim the Purchaser gives to the UD Indemnitors (or in the case of a Warranty relating to Appendix C, to the Havewin Vendors) written notice of such Indemnification Claim, provided that the failure or delay to give such notice shall not vitiate Purchaser's right to make a claim under the warranties with respect to the Indemnification Claim in the absence of demonstrable material prejudice to the UD Indemnitors or Havewin Vendors, as applicable. No such Indemnification Claim shall be settled or compromised without the prior written consent of the UD Indemnitors or the Havewin Vendors except where the breach of Warranty relates solely to Clause 11.7(b) or 11.7(c), in which event the consent must be given by the UD Indemnitors in relation to Clause 11.7(b) and the Havewin Vendors in relation to Clause 11.7(c) (as applicable, the "Relevant Party") such consent not to be unreasonably withheld or delayed; (b) if requested by the Relevant Party, the Purchaser has taken or procured that the Company or the relevant Subsidiary has taken all reasonable steps to avoid, resist, or compromise any Indemnification Claim and any proceedings in respect thereof and has taken or procured that the Company or the relevant Subsidiary has taken all necessary proceedings or other action in connection therewith, subject in each case to the Relevant Party indemnifying and securing the Purchaser and/or the 30 ________________________________________________________________________________ Company or the relevant Subsidiary to the reasonable satisfaction of the Purchaser against all reasonable costs, liabilities, charges and expenses which it may reasonably incur thereby; (c) the Purchaser has at all times allowed the Relevant Party and their professional advisers and other agents access to and to inspect and take copies of, all necessary books and files and records of the Company and any Subsidiary for the purpose of assessing and dealing with any such Indemnification Claim; and (d) nothing herein shall apply to any claim by Purchaser under the Warranties which is not an Indemnification Claim. 11.15 Without prejudice to the generality of Clause 11.14(b), the Purchaser shall permit the Relevant Party upon its or their providing an indemnity reasonably satisfactory to the Purchaser for all losses, claims, demands and reasonable expenses which may be thereby reasonably incurred, to control (subject to good faith consultation with Purchaser) the conduct of all proceedings against third parties relating to the claim (including the appointment of solicitors or other professional advisers) and making any settlement or compromise thereof provided that: (a) if the Purchaser shall in writing so require, the Relevant Party shall procure that the Purchaser is promptly sent copies of all communications and other documents, written or otherwise, pertaining thereto transmitted to the other party thereto or their agents or professional advisers (including pleadings and any opinion of Counsel relating to the proceedings against third parties); and (b) the Relevant Party shall make no settlement or compromise of such claim without the prior approval of the Purchaser (such approval not to be unreasonably withheld or delayed, it being understood it shall be reasonable for Purchaser to disapprove any settlement which adversely impacts the ongoing business or reputation of Purchaser, the Company or any Subsidiary for reasons to be stated in writing by the Purchaser). 11.16 In calculating the loss to the Purchaser and/or the Company or any Subsidiary arising or alleged to arise out of any liability of the Vendors in respect of any breach of the Warranties there shall be (i) deducted: (a) the net amount by which any Tax for which the Company or any Subsidiary is or may at any time be liable to be assessed or 31 ________________________________________________________________________________ accountable is reduced or extinguished as a result of any such liability after giving effect to payment under the Warranty; (b) the amount of any realized tax benefit attributable to losses or other allowable sums available for offset against Tax and created as a result of any such liability after giving effect to payment under the Warranty or (where appropriate) the amount by which any such losses or other allowable sum are increased as a result of such liability after giving effect to payment under the Warranty; and (ii) added:- (a) the amount by which any Tax for the Purchaser, Company or any Subsidiary is or may at any time be liable to be assessed or for which it may be accountable is increased as a result of such liability after giving effect to payment under the Warranty; and (b) the amount by which any tax benefit attributable to such losses or other allowable sums may be decreased as result of such liability after giving effect to payment under the Warranty. 11.17 If the Purchaser or the Company or any Subsidiary is entitled to recover (whether by payment, discount, credit, set-off or otherwise) from any person other than the Vendors any sum in respect of any matters giving rise to a liability of the Vendors, the UD Indemnitors or the Havewin Vendors under the Warranties, and provided the Relevant Party has paid or made adequate provision to pay the Purchaser in full under the Warranty, the Purchaser shall and shall procure that the Company and the relevant Subsidiary shall, give all reasonable assistance (including access to documents)if required by the Relevant Party and at the expense of the UD Indemnitors (or the Havewin Vendors, as the case may be) shall take, or procure the taking of, all appropriate steps to enforce such recovery (keeping the Relevant Party fully informed of the progress of any action taken) and, in the case of the Purchaser shall forthwith account to the Company or the relevant Subsidiary for any amount so recovered less all reasonable expenses of recovery thereof of, if less, any amount paid or payable by the Vendors, the UD Indemnitors or the Havewin Vendors in respect of the claim. 11.18 If any payment is made by any of the Vendors, the UD Indemnitors or the Havewin Vendors in full settlement of any claim under the Warranties and the Purchaser or the Company or any of its Subsidiaries subsequently recovers or procures the recovery from a third party of an amount which is referable to that claim the Purchaser shall, or shall procure that the Company or the relevant Subsidiary 32 _______________________________________________________________________________ shall, forthwith repay or procure repayment to the relevant Vendors, UD Indemnitors or Havewin Vendors of any amount equal to 33 ________________________________________________________________________________ (ii) acquiescence, delay, acts, omissions or mistakes on the part of the purchaser; (iii) any novation of a right of the Purchaser; (iv) any variation of this Agreement or any Agreement entered into in performance of this Agreement; and (v) the invalidity or unenforceability of an obligation or liability of a person other than the UD Indemnitors; (c) none of the UD Indemnitors may, without the consent of the purchaser, raise a set-off or counterclaim available to it or any of the UD Indemnitors against the Purchaser in reduction of its liability under this guarantee and indemnity or make a claim or enforce a right against the Havewin Vendors or their property or prove in competition with the Purchaser if a liquidator, receiver, or trustee in bankruptcy is appointed in respect of the Havewin Vendors until all money payable to the Purchaser in connection with this Clause is paid; (d) if a claim that a payment in connection with Clause 11.7(a) is void or voidable is upheld, conceded or compromised, then the Purchaser is entitled immediately as against each UD Idemnitor to the rights to which it would have been entitled under this guarantee and indemnity if a payment had not occurred; and (e) each UD Indemnitor agrees to pay or reimburse the Purchaser on demand for: (i) its costs, charges and expenses in making, enforcing and doing anything in connection with this guarantee and indemnity including, but not limited to, legal costs and expenses on a full indemnity basis; and (ii) all fees, taxes and charges which are payable in connection with this guarantee and indemnity or a payment, receipt or other transaction contemplated by it. 12 ADJUSTMENT FOR TAX LIABILITY ________________________________________________________________________________ 12.1 In this Clause 12 the following words have these meanings: Authority means any governmental authority or instrumentality responsible for Tax, wherever situated. 34 ________________________________________________________________________________ CLAIM AMOUNT MEANS: (a) the amount the Company, any Subsidiary, Ultrabridge or Havewin is required to pay in Tax to an Authority as a result of a Tax Claim; or (b) the amount of any credit, rebate or refund of Tax lost by the Company, any Subsidiary, Ultrabridge or Havewin as a result of a Tax Claim. DEFERRED PROVISION means the sum of the provision for deferred Tax liability in the Last Accounts, the Last Ultrabridge Accounts or the Last Havewin Accounts, as the case may be, and any Future Income Tax Benefit which has been offset in the calculation of that provision. TAX means taxes (including fringe benefits taxes), levies, imposts, deductions, charges, withholdings and duties (excluding stamp duties), together with any related interest, penalties, fines and other statutory charges whether accruing before or after Completion. TAX CLAIM means a deemed assessment, an assessment notice (including a notice of adjustment of loss claimed by a company in a manner adversely affecting the company), demand or other document issued or action taken by or on behalf of an Authority, whether before or after the date of this deed, as a result of which the Company, any Subsidiary, Ultrabridge or Havewin is liable to make a payment for Tax or is deprived of any credit, rebate, refund, or relief, allowance, deduction, or loss carried forward. TAX PROVISION means, in respect of the Company, the Subsidiaries, Ultrabridge or Havewin, at any time, respectively, the sum of: (a) the provision for current Tax in the Last Accounts, the Last Ultrabridge Accounts or the Last Havewin Accounts, as the case may be; (b) the relevant Deferred Provision; and (c) all amounts already paid or agreed to be paid by the Vendors, the Ultrabridge Vendors, or the Havewin Vendors as the case may be, under this Clause 12 at that time, less all Tax paid or payable in respect of those payments to a maximum of the amount of those payments. 12.2 Each of the UD Indemnitors and Havewin Vendors agree that if at any time the Company or any Subsidiary receives or suffers a Tax Claim that relates to an act or omission of, or occurrence affecting, 35 ________________________________________________________________________________ that company before the close of business on the Completion Date, then the UD Indemnitors and Havewin Vendors must pay to the Purchaser the amount by which the sum of: (a) the Claim Amount for that Tax Claim; and (b) all other Claim Amounts for Tax Claims that relate to an act or omission of, or occurrence affecting the Company or any Subsidiary before the close of business on the Completion Date, other than Tax Claims referred to in Clause 12.6, exceeds the Tax Provision. Without limiting the scope or effectiveness of Clause 3.3, which shall govern, each of the UD Indemnitors agree that if at any time Ultrabridge receives or suffers a Tax Claim that relates to an act or omission of, or occurrence affecting, that company before the close of business on the Completion Date, then the UD Indemnitors must pay to the Purchaser the amount by which the sum of: (a) the Claim Amount for that Tax Claim; and (b) all other Claim Amounts for Tax Claims that relate to an act or omission of, or occurrence affecting Ultrabridge before the close of business on the Completion Date, other than Tax Claims referred to in Clause 12.6, exceeds the Tax Provision. Without limiting the scope or effectiveness of Clause 3.3, which shall govern, each of the Havewin Vendors agree that if at any time Havewin receives or suffers a Tax Claim that relates to an act or omission of, or occurrence affecting, that company before the close of business on the Completion Date, then the Havewin Vendors must pay to the Purchaser the amount by which the sum of: (a) the Claim Amount for that Tax Claim; and (b) all other Claim Amounts for Tax Claims that relate to an act or omission of, or occurrence affecting Havewin before the close of business on the Completion Date, other than Tax Claims referred to in Clause 12.6, exceeds the Tax Provision. 12.3 Each of the UD Indemnitors and Havewin Vendors agrees that if at any time it becomes apparent that the Deferred Provision for the 36 ________________________________________________________________________________ Company and the Subsidiaries is understated, calculating the proper Deferred Provision: (a) in accordance with the requirements of other applicable laws at the time of preparation of the Last Accounts; (b) in accordance with the Accounting Standards at the time of preparation of the Last Accounts; and (c) on a consistent basis with the Last Accounts, then the UD Indemnitors and Havewin Vendors must pay to the Purchaser the amount of the understatement. Each of the Ultrabridge Vendors agrees that if at any time it becomes apparent that the Deferred Provision for Ultrabridge is understated, calculating the proper Deferred Provision: (a) in accordance with the requirements of applicable laws at the time of preparation of the Last Ultrabridge Accounts; (b) in accordance with the Accounting Standards at the time of preparation of the Last Ultrabridge Accounts; and (c) on a consistent basis with the Last Ultrabridge Accounts, then the Ultrabridge Vendors must pay to the Purchaser the amount of the understatement. Each of the Havewin Vendors agrees that if at any time it becomes apparent that the Deferred Provision for Havewin is understated, calculating the proper Deferred Provision: (a) in accordance with the requirements of applicable laws at the time of preparation of the Last Havewin Accounts; (b) in accordance with the Accounting Standards at the time of preparation of the Last Havewin Accounts; and (c) on a consistent basis with the Last Havewin Accounts, then the Havewin Vendors must pay to the Purchaser the amount of the understatement. 37 ________________________________________________________________________________ For the purpose of this Clause the Deferred Provision in the Last Accounts, the Last Ultrabridge Accounts or the Last Havewin Accounts, as the case may be, but not the proper Deferred Provision, is to be reduced by the Claim Amount of a Tax Claim which would, but for the inclusion of the Deferred Provision in the Tax Provision, have resulted in a payment under Clause 12.2. 12.4 Any payment under Clause 12.2 or 12.3 shall be borne and paid as to 57 1/2% by the UD Indemnitors (jointly and severally) in respect of their Ultrabridge Shares only and as to 42 1/2% by the Havewin Vendors (jointly and severally) as a reduction in the Purchase Price in respect of their Havewin Shares only, provided -------- that to the extent, pursuant to Clause 11.21, the UD Indemnitors pay 100% of the relevant payment under clause 12.2 or 12.3, the payment shall be treated as a reduction in the Purchase Price in relation to the Ultrabridge Shares of the UD Indemnitors only, and further provided always that if the payment relates solely to ---------------- Ultrabridge, such payment shall be treated as a reduction in the Purchase Price in relation to the Ultrabridge Shares of the UD Indemnitors only and if the payment relates solely to Havewin, such payment shall be treated as a reduction in the Purchase Price in relation to the Havewin Shares of the Havewin Vendors only. 12.5 The obligations of the Vendors under Clauses 12.2 or 12.3 do not apply in respect of a Tax Claim or understatement of the Deferred Provision: (a) to the extent that the Tax Claim or understatement of the Deferred Provision represents the disallowance of any deduction for carried forward losses, and the disallowance results from: (i) the Company or any Subsidiary not carrying on at all times after Completion the same business as it carried on immediately before Completion; or (ii) the Company or Subsidiary, after Completion, deriving income from a business of a kind that it did not carry on or from a transaction of a kind that it had not entered into in the course of its business operations before Completion; (b) to the extent that the Tax Claim or understatement of the Deferred Provision arises from the failure by Ultrabridge, Havewin, the Company or any Subsidiary after Completion, in a timely manner, to: 38 ________________________________________________________________________________ Havewin, the Company or any Subsidiary after Completion, in a timely manner, to: (i) lodge any return; notice, objection or other document in relation to the Tax Claim; (ii) claim all or any portion of any relief, allowance, deduction, credit, rebate or right to repayment; (iii) disclose or correctly describe in any return, notice, objection or other document relating to the Tax Claim any fact, matter or thing to the extent that it was or might reasonably be expected to have been within the knowledge of either the Purchaser or the company; or (iv) take any other action which the company in question is required to take under this Clause or any laws relating to Tax. (c) to the extent that the Tax Claim or understatement of the Deferred Provision relates to any income, profit or gain earned, accrued or received by reason of an act or omission of, or occurrence affecting, Ultrabridge, Havewin or the Company or any Subsidiary in the ordinary course of its business and which for Tax purposes is taken to be derived between the Accounts date of the Last Accounts or Last Havewin Accounts, as applicable and the date of Completion; (d) to the extent that the Tax Claim or understatement of the Deferred Provisions results from or is increased by a change to or introduction of any legislation, regulation, order or rule (whether having the force of law or not and whether the change or introduction is retrospective or not) relating to Tax (including without limitation increases in rates of Tax) after Completion; (e) to the extent that any Tax Claim or understatement of the Deferred Provisions relates to any act or omission by MGM Grand or the Purchaser before or after Completion, or by the Company or any Subsidiary after Completion, other than in the ordinary and proper course of business; (f) as a direct or indirect result of the assignment of any rights conferred on MGM Grand or the Purchaser by this Agreement on or after the date of this Agreement or the issue or transfer of any shares in the Purchaser, Company or any new Subsidiary (excluding any transfer of shares in relation to the liquidation of Ultrabridge and Havewin) after Completion; 39 ________________________________________________________________________________ (g) to the extent MGM Grand or any Subsidiary becomes entitled to any foreign tax credit in any jurisdiction as a result of paying the Tax claim; (h) in the case only of the Company and the subsidiaries, to the extent that any payments otherwise arising under Clause 12.2 or 12.3 are not, in aggregate, greater than the amount of Available Future Income Tax Benefit (as defined). The Available Future Income Tax Benefit represents the Future Income Tax Benefit which would be included in the Company Completion Accounts, if the Company Completion Accounts were to be drawn up in the light of all information at the date of calculation of the amount which, subject to this paragraph, is payable under Clause 12.2 or 12.3 and in accordance with the Accounting Standards, rather than as set out in Clause 5.4, after application and utilization of such Future Income Tax Benefit against the income of the Company and the Subsidiaries for the period from 4:00 a.m Darwin time on the Completion Date to 30 September 1995, the income of this period and utilization of Future Income Tax Benefit against it being determined in accordance with the Accounting Standards. For avoidance of doubt, it is acknowledged that Available Future Income Tax Benefits are to be determined after application and utilization of Future Income Tax Benefits against the income of the Company and Subsidiaries for the fiscal year ending 30 September, 1995; (i) where the Tax Claim or understatement of the Deferred Provision will give rise also to a future saving in Tax as a result of any relief, allowance, deduction, credit, rebate or right to repayment, then only to the extent of (i) the present value of such saving in Tax, and (ii) in the event such saving in Tax is subsequently disallowed or not realized, the obligations of the Vendors shall be reinstated to the extent of such disallowance or non-realization. To the extent that sub-paragraph (h) and (i) are applicable to the same item then sub-paragraph (h) shall be applied in priority to sub-paragraph (i). Additionally, if there is a dispute between the parties as to the present value of a saving in Tax then the dispute shall be referred to the auditor of the Company for resolution. 12.6 Payments under Clause 12.2 or 12.3 must be made to the Purchaser as follows: (a) if Ultrabridge, Havewin, any Subsidiary or the Company must make a payment of Tax in respect of a Tax Claim to which Clause 12.2 applies - seven days before the latest date on which 40 ________________________________________________________________________________ that payment may lawfully be made without incurring any penalty or additional tax for late payment; (b) if Ultrabridge, Havewin, any Subsidiary or the Company is deprived of any credit, rebate, refund, relief, allowance, deduction, loss carried forward - seven days before the latest date on which Tax becomes payable by the company without incurring any penalty or additional tax for late payment, being Tax which would not have been payable were it not for the Tax Claim; and (c) if an amount is payable under Clause 12.3 - seven days after the Purchaser advises the Vendors of the understatement. 12.7 The UD Indemnitors and Havewin Vendors (collectively) must pay interest to the Purchaser on any moneys due under this Clause 12 but unpaid, from the date payment is due until paid in full, at a rate equal to 2% over State Bank of South Australia's Bank Bill Rate. 12.8 If for any reason an amount received by the Purchaser under Clause 12.2 or 12.3 is treated as assessable income of the Purchaser under any law relating to Tax, the UD Indemnitors and Havewin Vendors (collectively) agree to pay to the Purchaser an increased amount so that, after deducting from that amount all Tax paid or payable in respect of the receipt, and reducing that amount further by an amount equal to the Australian Dollar equivalent of any foreign tax credit received by MGM Grand or any of MGM Grand's subsidiaries under the applicable tax treaty, the balance remaining is equal to the amount due under the relevant Clause. 12.9 If the Purchaser or the Company any Subsidiary, Ultrabridge or Havewin becomes aware of a Tax Claim or any request or demand by an Authority to conduct an audit or other investigation or obtain any information ("Audit") that might, in the opinion of Purchaser, lead to a Tax Claim, the Purchaser must give written notice of it to all of the Vendors who are potentially liable in respect of that Tax Claim ("Relevant Vendors") within thirty (30) business days of becoming so aware provided that a delay in such notice shall not vitiate Relevant Vendors' responsibility in the absence of a demonstration of material prejudice resulting from such delay. The Purchaser must ensure the Relevant Vendors and their professional advisers have reasonable access to the personnel of the Purchaser and the Subsidiaries and the Company and to any relevant premises, assets and Records within the custody, power, possession or control of those companies to enable the Relevant Vendors and their professional advisers to consider the Tax Claim or participate in the Audit (as the 41 ________________________________________________________________________________ case may be) and to take copies or photographs of any documents relating to the Tax Claim or Audit or of the Records at the expense of the Relevant Vendors, provided the Relevant Vendors and their professional advisers give to the Purchaser or the Subsidiaries and the Company such undertakings as to confidentiality as the Purchaser may reasonably require. Provided always that the Relevant Vendors act in a timely manner, the Purchaser must ensure that neither the Company, nor any Subsidiary, nor Ultrabridge nor Havewin enters into any communication or correspondence with the Authority until the Relevant Vendors have been given a reasonable opportunity to advise the Purchaser what action they request be taken in accordance with this Clause 12.9 or have advised the Purchaser that they have no such request. The Purchaser must ensure that the Company or any Subsidiary or Ultrabridge or Havewin takes any proper and reasonable action that the Relevant Vendors (collectively) request in compliance with this Clause 12.9: (a) in response to any request for documents, information or explanations made by an Authority in connection with an Audit; (b) in response to any interpretation of facts or law put forward by an Authority in connection with an Audit; (c) in response to any preliminary conclusions or proposed Tax Claim put forward by an Authority in connection with an Audit; (d) To avoid, resist, compromise or defend a demand or notice issued by an Authority which gives rise to the Tax Claim. The Relevant Vendors may only request an action under this Clause 12.9 if, concurrently with the mailing of such request, they provide Purchaser with written indemnification in form and substance satisfactory to Purchaser in the exercise of reasonable judgment fully indemnifying Purchaser and the Subsidiaries against any liability or loss which may be suffered or costs, damages or expenses which may be incurred as a result of compliance with their request, and; (a) in respect of an Audit, if, should the Purchaser so require, they provide the Purchaser with an opinion that the requested action does not contravene the requirements of law and taking account of: 42 ________________________________________________________________________________ . the magnitude of any Tax Claim that might possibly result from the matter that the requested action is in response to, . the nature, extent and content of the action requested, it is a proper and reasonable action for the Relevant Vendors to request; (b) in respect of a Tax Claim, if they provide the Purchaser with an opinion that there is a real prospect that the requested action will result in the demand or notice issued by the Authority being avoided, resisted, compromised or defended. In either instance, the opinion provided to the Purchaser must be that of a partner specializing in tax of a major law firm or accounting firm in the jurisdiction competent to properly advise upon the matter which gives rise to the Relevant Vendors' request for action. The action that the Relevant Vendors may request be taken by the Purchaser or the Company or any Subsidiary or Ultrabridge or Havewin includes: (a) In respect of an Audit, the provision to the Authority of only the particular documents, information, explanations, comments, responses, submissions or proposals which the Relevant Vendors nominate or agree to be provided, unless otherwise required by law, (b) in respect of an Audit, the lodging of any request or notice that any preliminary conclusions or proposed Tax Claim notified by the Authority in connection with the Audit be subject to such review procedures as might be available prior to the raising of a Tax Claim, (c) in respect of a Tax Claim, the making of appeals and objections, provided that all other avenues of review have been exhausted. Where the Relevant Vendors have made a request for action that is valid under this Clause 12.9, the Purchaser must ensure that, except as may be required by applicable law, neither the Company nor any Subsidiary nor Ultrabridge nor Havewin undertakes any action, or omits taking any action, which act or omission is inconsistent with the request of the Relevant Vendors. 43 ________________________________________________________________________________ Any action required under this Clause 12.9 must be taken in a timely manner. Notwithstanding anything to the contrary contained herein, Purchaser shall not be obliged to comply with any request which it reasonably believes would be in contravention of applicable law. 12.10 If, following the making of a payment under Clause 12.2 for a Tax Claim, all or part of the Claim Amount is refunded either in cash or by credit to Ultrabridge, Havewin, any of the Subsidiaries or the Company (including, but not limited to, any amount or credit received following a successful objection or appeal), the Purchaser must immediately pay to the Relevant Vendors the lesser of the refund and the amount of the payment paid under Clause 12.2. Any payment under Clause 12.10 is to be treated in a manner consistent with Clause 12.4. 12.11 If the Relevant Vendors and the Purchaser cannot agree on any amount to be paid under this Clause 12 within 21 days of a dispute arising, then either the Relevant Vendors or the Purchaser may refer the disagreement to an expert with the request that the expert make a decision on the disagreement as soon as practicable after receiving any submissions from the Relevant Vendors and the Purchaser. The expert is to be a person with over ten years experience in Tax agreed by the Relevant Vendors and the Purchaser, or if they do not agree on the person to be appointed within seven days of one party requesting appointment, a person with the same expertise appointed by the President of the Australian Institute of Chartered Accountants at the request of either the Relevant Vendors or the Purchaser. The decision of the expert is to be conclusive and binding on the parties in the absence of manifest error. The Relevant Vendors and the Purchaser agree to each pay one half of the expert's costs and expenses in connection with the reference. The expert is appointed as an expert and not as an arbitrator. The procedures for determination are to be decided by the expert in its absolute discretion. 12.12 Without limiting the scope of the indemnity given under Clause 12, the Ultrabridge Vendors will indemnify the Purchaser for the full amount of any Cayman Islands taxation, and the Havewin Vendors will indemnify Purchaser for the full amount of any Hong Kong taxation, or pay direct to the relevant authority the amount of that taxation (other than Hong Kong transfer stamp duty on the transfer of the Havewin shares), that may become payable by the Purchaser, Ultrabridge, Havewin, the Company or any Subsidiary except in respect of an amount of taxation arising from an event or matter described in such Clauses 12.5(b) to (f) inclusive, provided, however, in the case of Subclause 12.5(c), to the extent the claim under this 44 ________________________________________________________________________________ Clause 12.12 arises from the liquidation of Ultrabridge or Havewin in accordance with Exhibits 1 and 2, as applicable, in which event the indemnification shall be applicable. 12.13 In the event the Purchaser elects to assign its rights of purchase under this Agreement to any subsidiary as provided in Clause 18, then for all purposes of this Clause 12 the term the "Purchaser" shall also be deemed to refer to such subsidiary. 13 DEFAULT BY VENDORS ________________________________________________________________________________ If the Vendors or any of them do not Complete, other than as a result of default by the Purchaser, the Purchaser may give the Vendors notice requiring them to Complete within 7 days of receipt of the notice. If the Vendors do not Complete within that period, the Purchaser may elect to proceed for specific performance or terminate this Agreement. In either case the Purchaser may seek damages for the default. If this Agreement is so terminated then Clause 4.4 will apply with the necessary changes. This termination does not affect any other rights the Purchaser has against the Vendors at law or in equity. 14 RESTRAINT ________________________________________________________________________________ 14.1 Subject to any other agreement entered into concurrently herewith or hereafter between any of the Vendors and their affiliates, on the one hand, and MGM Grand and any of its Subsidiaries, on the other hand, each of the Ultrabridge Vendors (in the case of Clause 14.1(a)) and each of the Vendors (in the case of Clauses 14.1(b) and 14.1(c)) undertakes to the Purchaser that it and its affiliates will not without the prior consent of Purchaser: (a) for five years from the Completion Date, be engaged or involved in any capacity in any business or activity which is the same as or similar to the business of the Company or any Subsidiary or any material part of it. For the purposes of this Clause "engaged or involved in" includes direct or indirect involvement as a principal, agent, partner, employee, shareholder, unitholder, director, trustee, beneficiary, manager, consultant, adviser or financier. This restriction applies throughout the Northern Territory of Australia; (b) for five years from the Completion Date: (i) solicit the custom of anyone who was a customer of the Company or any Subsidiary at any time within two years before the Completion Date, except in relation to any 45 ________________________________________________________________________________ business outside Australia and without limitation including the existing casinos in London, Le Touquet and New Zealand in which the Ultrabridge Vendors have an interest; or (ii) entice away or endeavour to entice away from the Company or any Subsidiary any employee or anyone who was at any time during the two years before the Completion Date, a director, agent, representative, associate or adviser of or to the Company or any Subsidiary; or (c) at any time after the Completion Date: (i) use or disclose any Confidential Information of Ultrabridge, Havewin, the Company or any Subsidiary to anyone other than the Purchaser, except: (a) if required to make such disclosure by any court of competent jurisdiction or in order to enforce any rights under this Agreement; (b) pursuant to any court order; (c) pursuant to any law or regulation having the force of law or the requirements of any governmental authority such as the Commonwealth of Australia, the Northern Territory, the United States of America, or State of Nevada, or agency or instrumentality thereof; (d) pursuant to the requirements of any recognised stock exchange or securities regulatory agency such as the United States Securities and Exchange Commission; (e) in circumstances where the information has come within the public domain otherwise than by reason of a breach by one of the parties of the provisions of this Clause; and (f) to professional advisers. (ii) use a logo, symbol, trade mark or business name substantially identical or deceptively similar to a trade 46 ________________________________________________________________________________ mark or business name owned or used by the Company or any Subsidiary. 14.2 If any of the prohibitions or restrictions contained in Clause 14.1 is judged to go beyond what is reasonable in the circumstances and necessary to protect the goodwill of the Company or any Subsidiary, but would be judged reasonable and necessary if any activity were deleted or a period or area were reduced, then the prohibitions or restrictions apply with that activity deleted or period or area reduced by the minimum amount necessary. 14.3 Each of the prohibitions and restrictions in Clause 14.1 has effect as a separate and severable prohibition or restriction and is to be enforced accordingly. 14.4 Notwithstanding Clause 14.1(a) the Ultrabridge Vendors (collectively) may hold in aggregate up to 5% of the shares in any public company the shares of which are quoted on Australian Stock Exchange Limited, even though that company carries on any of the activities referred to in Clause 14.1(a) or such higher aggregate interest with the prior written consent of the Purchaser. 14.5 Each of the Vendors acknowledges that all the prohibitions and restrictions contained in Clause 14 are reasonable in the circumstances and necessary to protect the goodwill of the Company and the Subsidiaries. 15 COSTS AND STAMP DUTY ________________________________________________________________________________ 15.1 The Vendors and the Purchaser agree to bear their own legal and other costs and expenses in connection with the preparation, execution and completion of this Agreement and of other related documentation, except for stamp duty. 15.2 The Purchaser agrees to bear all stamp duty payable or assessed in connection with this Agreement, any permitted assignment of its rights or the rights of MGM Grand hereunder, the transfer of the Ultrabridge Shares, the Havewin Shares and the Class D Shares to the Purchaser. 15.3 The Ultrabridge Vendors and the Havewin Vendors, as the case may be, agree to bear all stamp duty payable or assessed in connection with the liquidation of Ultrabridge and Havewin, respectively. 47 ________________________________________________________________________________ 16 POWER OF ATTORNEY ________________________________________________________________________________ 16.1 Each Vendor appoints the Purchaser to be its attorney from the Completion Date until the Ultrabridge Shares, the Havewin Shares and the Class D Shares, as the case may be, are registered in the name of the Purchaser. 16.2 The Purchaser may do in the name of each Vendor and on its behalf everything necessary or expedient, in the Purchaser's sole discretion, to: (a) transfer the Ultrabridge Shares, the Havewin Shares and the Class D Shares; (b) exercise any rights, including rights to appoint a proxy or representative and voting rights, attaching to the Ultrabridge Shares, the Havewin Shares and the Class D Shares; (c) receive any dividend or other entitlement paid or credited to the Vendors in respect of the Ultrabridge Shares, the Havewin Shares and the Class D Shares; and (d) do any other act or thing in respect of the Ultrabridge Shares, the Havewin Shares and the Class D Shares or Ultrabridge, Havewin, the Company or any Subsidiary. 16.3 Each Vendor declares that all acts and things done by the Purchaser in exercising powers under this power of attorney will be as good and valid as if they had been done by the Vendor and agrees to ratify and confirm whatever the Purchaser does in exercising powers under this power of attorney. 16.4 Each Vendor declares that this power of attorney of the Purchaser is given for valuable consideration and is irrevocable from the date of this Agreement until the Ultrabridge Shares, the Havewin Shares and the Class D Shares are registered in the name of the Purchaser. 16.5 The Purchaser is expressly authorised to do any act as a result of which a benefit is conferred on it. 17 NOTICES ________________________________________________________________________________ 17.1 A notice, approval, consent or other communication in connection with this Agreement: (a) must be in writing; 48 ________________________________________________________________________________ (b) must be left at the address of the addressee, or sent by prepaid ordinary post (airmail if posted to or from a place outside Australia) to the address of the addressee or sent by facsimile to the facsimile number of the addressee which is specified in this Clause or if the addressee notifies another address or facsimile number then to that address or facsimile number. The address, facsimile number and reference party of each party is set forth on Schedule 16: 17.2 A notice, approval, consent or other communication takes effect from the time it is received unless a later time is specified in it. 17.3 A letter or facsimile is taken to be received: (a) in the case of a posted letter, on the third (seventh, if posted to or from a place outside Australia) day after posting; and (b) in the case of facsimile, on production of a transmission report by the machine from which the facsimile was sent which indicates that the facsimile was sent in its entirety to the facsimile number of the recipient. 18 ASSIGNMENT ________________________________________________________________________________ Except as hereinafter provided, a party may not assign its rights under this Agreement without the consent of the other party. Notwithstanding the foregoing, the Purchaser may assign its rights under this Agreement to any of MGM Grand's direct or indirect United States, Australian or offshore subsidiaries, provided that the Purchaser and MGM Grand remain fully liable thereunder. 19 MISCELLANEOUS _______________________________________________________________________________ 19.1 A party may exercise a right, power, or remedy at its discretion, and separately or concurrently with another right, power or remedy. A single or partial exercise of a right, power or remedy by a party does not prevent a further exercise of that or of any other right, power or remedy. Failure by a party to exercise or delay in exercising a right, power or remedy does not prevent its exercise. 19.1 A provision of or a right created under this Agreement may not be: (a) waived except in writing signed by the party granting the waiver; or 49 _______________________________________________________________________________ (b) varied except in writing signed by the parties. 19.3 A party may give conditionally or unconditionally or withhold its approval or consent in its absolute discretion unless this Agreement expressly provides otherwise. 19.4 The rights, powers and remedies provided in this Agreement are cumulative with and not exclusive of the rights, powers or remedies provided by law independently of this Agreement. 19.5 The Warranties in this Agreement do not merge on Completion. 19.6 Each indemnity in this Agreement is a continuing obligation, separate and independent from the other obligations of the parties and survives termination of this Agreement. 19.7 It is not necessary for a party to incur expense or make payment before enforcing a right of indemnity conferred by this Agreement. 19.8 Each party agrees, at its own expense, on the request of any other party, to do everything reasonably necessary to give effect to this Agreement and the transactions contemplated by it (including the execution of documents) and to use all reasonable endeavours to cause relevant third parties to do likewise. 19.9 A party may not make press or other announcements or releases relating to this Agreement and the transactions the subject of this Agreement without the approval of the other parties to the form and manner of the announcement or release unless that announcement or release is required to be made law or by a stock exchange. 19.10 This Agreement constitutes the entire Agreement of the parties about its subject matter and any previous Agreements, understandings and negotiations on that subject matter case to have any effect. 19.11 This Agreement may be executed in counterparts, and all such counterparts shall collectively constitute one Agreement. 19.12 This Agreement shall be deemed effective and delivered as at 30 June 1995 notwithstanding that it was signed after 30 June 1995 provided all parties hereto sign a counterpart of this Agreement. 20 GOVERNING LAW JURISDICTION AND SERVICE OF PROCESS _______________________________________________________________________________ 20.1 This Agreement and the transactions contemplated by this Agreement are governed by the law in force in the Northern Territory. 50 ________________________________________________________________________________ 20.2 Each party irrevocably and unconditionally submits to the non-exclusive jurisdiction of the courts of the Northern Territory and courts of appeal from them for determining any dispute concerning this Agreement or the transactions contemplated by this Agreement. Each party waives any right it has to object to any action being brought in those courts, to claim that the action has been brought in an inconvenient forum, or to claim that those courts do not have jurisdiction. 20.3 Without preventing any other mode of service, any document in an action (including, but not limited to, any writ of summons or other originating process or any third or other party notice) may be served on any party by being delivered to or left for that party at its address for service of notices under Clauses 17. EXECUTED as an Agreement. APPENDIX A 51 - -------------------------------------------------------------------------------- APPENDIX A WARRANTIES AND REPRESENTATIONS WITH RESPECT TO THE COMPANY AND SUBSIDIARIES - -------------------------------------------------------------------------------- VENDORS' QUALIFICATIONS - -------------------------------------------------------------------------------- 1 The vendors are the registered holders and beneficial owners of the Ultrabridge Shares, the Havewin Shares and the Class D Shares as set out in Schedules 1A, 1B and 1C, respectively. Ultrabridge and Havewin are the registered holders and beneficial owners of the Class A Shares and Class B Shares of Company as set out in Schedules 1A and 1B, respectively. 2 There are no mortgages, charges, pledges, liens, encumbrances or other security interests over or affecting the Ultrabridge Shares, the Havewin Shares, the Shares, or, except pursuant to the State Bank Loan Agreements, the shares of Diamond Leisure, Fernbank, or the 24,000,000 units of the Territory Trust owned by the Company. 3 Each of the Vendors has the power to enter into and perform this Agreement and has obtained all necessary consents to enable it to do so. 4 The entry into and performance of this Agreement by the Vendors does not constitute a breach of any obligation (including any statutory, contractual or fiduciary obligation), or default under any Agreement or undertaking, by which any of the Vendors, Ultrabridge, Havewin, the Company or any Subsidiary is bound. 5 No meeting has been convened or resolution proposed, or petition presented, and no order has been made, for the winding-up of any corporate Vendor. No petition has been presented and no order has been made for the bankruptcy of any personal Vendor. No voluntary arrangement has been proposed or reached with any creditors of any Vendor. Each Vendor is able to pay its debts as and when they fall due. 6 No consent or approval (other than those listed in Clause 4) of any governmental authority or private party (other than United States governmental authorities) is required in connection with the transactions contemplated by this Agreement. 7 This Agreement is valid, binding and enforceable against the Vendors. 52 - ------------------------------------------------------------------------------- THE COMPANY AND THE SUBSIDIARIES - ------------------------------------------------------------------------------- 8 The Company and each of the Subsidiaries: (a) is accurately described in Recitals A and D and Schedule 2 (as appropriate); (b) has full corporate power to own its properties, assets and business and to carry on its business as now conducted; and (c) has done everything necessary to do business lawfully in all jurisdictions in which its business is carried on. 9 No meeting has been convened or resolution proposed, or petition presented, and no order has been made, for the winding-up of the Company or any Subsidiary. No distress, execution or other similar order or process has been levied on any of the property or assets of the Company or any Subsidiary. No voluntary arrangement has been proposed or reached with any creditors of the Company or any Subsidiary. No receiver, receiver and manager, provisional liquidator, liquidator or other officer of the court has been appointed in relation to the Company or any Subsidiary. The Company and each of the Subsidiaries is able to pay its debts as and when they fall due. SHARES - ------------------------------------------------------------------------------- 10 The Shares of the Company held by Ultrabridge, Havewin and the Trust comprise the whole of the issued ordinary share capital of the Company, and are fully paid. All of the shares of Diamond Leisure and Fernbank are owned by the Company. The Territory Trust consists of 28,000,000 units, of which the company owns 24,000,000 units and Kumagai Gumi Co. Ltd. owns 4,000,000 units. 11 There are no commitments in place under which the Company or any Subsidiary is obligated at any time to issue any shares or other securities of the company in question. 12 Other than with respect to satisfaction of the conditions set forth in Clause 4.1, there is no restriction on the Vendors for the sale or transfer of the Shares to the Purchaser except for the consent of the directors of the Company to the registration of the transfers of the Shares. 53 - -------------------------------------------------------------------------------- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 13 No forecasts and projections relating to the Company and/or the Subsidiaries have been given to the Purchaser or its professional advisers by or on behalf of any Vendors. No such forecasts or projections have been prepared by or on behalf of the Company, any of its Subsidiaries or any of the Vendors relating to periods subsequent to 31 December 1994. In the event any such forecasts or projections are prepared, they will be promptly provided to Purchaser. 14 The Last Accounts and the Interim Accounts each disclose a true and fair view of the state of the affairs, financial position and assets and liabilities of the Company and the Subsidiaries as at the Last Balance Date and 24 March 1995, respectively, and the income, expenses and results of operations of the Company and the Subsidiaries for the respective financial periods ending on said dates. 15 The Last Accounts and Interim Accounts each were prepared: (a) in accordance with the requirements of the applicable Companies Code or Corporations Law and any other applicable laws; (b) in accordance with the Accounting Standards; (c) in the manner described in the notes to them and the accompanying auditor's opinion (in the case of the Last Accounts) and auditor's report (in the case of the Interim Accounts); (d) on a consistent basis with the audited accounts for the prior financial year; and (e) without revaluing upwards any assets during the period which is the subject of the Last Accounts. 16 Subject to Clause 5.4, the Completion Accounts will disclose a true and fair view of the state of the affairs, financial position and assets and liabilities of the Company and the Subsidiaries as at the Completion Date, and the income, expenses and results of operations of the Company and the Subsidiaries for the financial period ending on that date. 17 Subject to Clause 5.4, the Completion Accounts will be prepared; 54 - -------------------------------------------------------------------------------- (a) in accordance with the requirements of the Corporations Law and any other applicable laws; (b) in accordance with the Accounting Standards; (c) in the manner described in the notes to them and the accompanying auditor's opinion; (d) on a consistent basis with the Last Accounts; and (e) without revaluing upwards any assets during the period which is the subject of the Completion Accounts. 18 The Company as at the Last Balance Date was not and as at the date hereof is not directly or indirectly obliged in any way to guarantee, assume or provide funds to satisfy any obligation of any person, other than a Subsidiary, and all of such obligations with respect to any Subsidiary is adequately reflected in the Last Accounts. No Subsidiary as at the Last Balance Date was nor as at the date hereof is directly or indirectly obliged in any way to guarantee, assume or provide funds to satisfy any obligations of any person, other than the Company and any other Subsidiary and all such obligations as at the Last Balance Date with respect to the Company or any Subsidiary are adequately reflected in the Last Accounts. 19 No letter of comfort has been given by the Company or any Subsidiary. BUSINESS - -------------------------------------------------------------------------------- 20 The Company and each of the Subsidiaries is the legal and beneficial owner and has good and marketable title to of all its property (both real and personnel) and assets. There are no mortgages, pledges, liens, encumbrances, charges or other security interest over or affecting any property or assets except as set out in Schedule 3. 21 The Company and each of the Subsidiaries: (a) holds all statutory licenses, consents, authorizations and permits necessary for the proper carrying on of the business in the manner in which it has been carried on and the use of the Business Premises; (b) have provided the Purchaser with copies of all of the licenses, consent, authorizations and permits (including without limitation, all necessary licenses and consents under the Gaming 55 - -------------------------------------------------------------------------------- Control Act, 1993 of the Northern Territory of Australia, liquor licenses and boarding house registrations) ("Licenses") for the proper carrying on of the business and the use of the Business Premises; (c) warrants the Licenses are all current and to the best knowledge of Vendors after reasonable inquiry there is no fact or matter that might prejudice the continuance, renewal or cause a variation of the Licenses other than as specifically contemplated in Clause 4.1(b). There are no: (i) defaults under the Licenses or any applicable laws, regulations, licenses or agreements; (ii) fees outstanding for the Licenses; (iii) prosecutions or proceedings pending concerning any alleged breach of the Licenses or any conditions attached to the Licenses. 22 The business of the Company and each of the Subsidiaries is conducted in accordance with all applicable laws, regulations, licenses and agreements, does not contravene any laws, regulations, licenses or agreements and no allegation of any contravention of any applicable laws, regulations, licenses or agreements is known to the Company or any Subsidiary or any of the Vendors. 23 The assets of the Company and the Subsidiaries are sufficient to enable the effective conduct of the business of the Company after Completion as it is carried on at the date of this Agreement, and has been carried on since the Last Balance Date. 24 There has not been any breach of or default by the Company or any Subsidiary (and in the case of the Territory Trust, any unitholder) of any term or provision of: (a) it memorandum and articles of association (and in the case of the Territory Trust, its deed), as amended or supplemented from time to time; (b) any instrument to which it is a party or by which it is bound which is material to its business or financial condition; or (c) any judgment, order or injunction of any court, commission, board or other administrative or governmental authority, 56 - -------------------------------------------------------------------------------- and to the knowledge of any Vendor there has not occurred any event which, with the passage of time or giving of notice, would constitute a breach or default of that kind. 25 The transfer of the Ultrabridge Shares, the Havewin Shares and the Class D Shares in accordance with this Agreement does not and will not constitute a breach of any obligation (including any statutory, contractual or fiduciary obligation) or default under any agreement or undertaking by which the Company or any Subsidiary is bound. 26 As far as the Company and each of the Subsidiaries and each of the Vendors are aware, there is no existing customer or supplier of the Company or any Subsidiary who will or is likely to: (a) cease trading with the Company or any Subsidiary; or (b) materially reduce its trading with the Company or any Subsidiary. 27 No person has given or entered into any guarantee, indemnity or letter of comfort in respect of the Company or any Subsidiary. 28 There are no powers of attorney given by the Company or any Subsidiary in force except the power of attorney in Clause 16 and powers of attorney which have been disclosed to Purchaser and are contained in any financial facility or security documentation or other use given in the ordinary course of business. 29 The names and locations of all banks in which the Company and each of the Subsidiaries has an account and the names of all persons authorised to sign on the accounts are listed in Schedule 4. 30 Except as disclosed in schedule 5 neither Ultrabridge, Havewin, any Vendor or relative, affiliate or associate of a Vendor or body corporate associated (as that term is defined in the Corporations Law) with a Vendor is a party to any contract or arrangement with the Company or any Subsidiary or has been such a party since January 1, 1992. 31 At no time since January 1, 1992 has the Company or any Subsidiary had a direct or indirect interest in any contract or arrangement containing terms which were not of an entirely arm's length nature, nor have the profits or financial position of the Company or any Subsidiary during that period been affected by any contract or arrangement with terms of that nature. 32 The Company: 57 - -------------------------------------------------------------------------------- (a) does not hold any shares in the capital of any company other than the Subsidiaries; (b) is not a member of any partnership or other unincorporated association; (c) is not a trustee of any trust estate or fund; and (d) does not have a permanent establishment (as that expression is defined in any relevant double taxation Agreement) outside Australia. The same is true of each Subsidiary, except that Fernbank is the Trustee of the Territory Trust. 33 Since February 23, 1995, the Company and the Subsidiaries have complied with the provisions of Clauses 7.1, 7.2 and 7.3. BUSINESS PREMISES - ------------------------------------------------------------------------------- 34 Schedule 6 accurately describes all the Business Premises owned, leased or occupied by the Company and each of its Subsidiaries. It includes details of the nature of the Company or the Subsidiaries' interest in the Business Premises. For the freehold property comprised in the Business Premises, the Company or the Subsidiaries is the beneficial owner of the Land. For the leasehold property comprised in the Business Premises, the Company or the Subsidiaries are entitled to quiet enjoyment and possession of the leasehold property. The Company or the Subsidiaries hold appurtenant to the Business Premises all easements, rights, interests and privileges necessary or appropriate for the conduct of the business at the Business Premises, including without limitation with respect to the car park adjacent to the Business Premises. The Company has taken all requisite steps to assure the continued availability to the Company of such car park on a long term basis. 35 The Company or relevant Subsidiary has exclusive rights to occupy the Business Premises free from all encumbrances or third party rights including without limitation any rights obtained by adverse possession except as set out in Certificate of Title Volume 112 Folio 148 and Schedule 6. No other party has any right to occupy any part of the Business Premises except with the consent of the Company or the relevant Subsidiary or as set out in Schedule 7. The land which is occupied by the Business Premises complies with all laws applicable to land and the requirements of all public statutory authorities including the provisions of any planning scheme, planning permit or interim development order affecting the Business Premises. 58 - -------------------------------------------------------------------------------- 36 The Company or relevant Subsidiary has properly performed and observed all material covenants affecting the Business Premises. 37 There are no restrictions, stipulations or outgoings affecting the Business Premises which in the reasonable opinion of Vendors are of an onerous or unusual nature or conflict with the present use. The use of the Business Premises by the Company or relevant Subsidiary does not constitute a breach of any of the Property Leases or any applicable law. 38 Schedule 7 accurately describes all of the leases and licenses of real property to the Company or any Subsidiary including the car park license granted by the Darwin City Council. The Company or relevant Subsidiary has made all payments required by and has otherwise complied with the terms of each of the Property Leases. Nothing has occurred which may be used as grounds for termination of any of the Property leases. 39 No development, alterations or works have been carried out in relation to the Business Premises which would require any permission or consent under any statute or regulation which has not been obtained and all conditions attaching or any such permission or consent have been fully complied with. Vendors are aware that the Business Premises may be developed by the Purchaser and they are not aware of any features on or under the Business Premises (including, without limitation, drains, sewers or electricity easements or the registration of any part of the Business Premises with the Aboriginal Areas Protection Authority) or any latent defects affecting any part of the Business Premises which may prejudicially affect any proposed development or use or, in their reasonable opinion, the value of the Business Premises to any material extent. Vendors have advised Purchaser of any such matters of which they are aware which may in their reasonable opinion prejudicially affect the value of the Business Premises to any extent, whether or not material. 40. As far as the Company and each of the Subsidiaries and each of the Vendors are aware, there are no proposals by any competent authority or other person which would adversely affect the Business Premises including: (a) a proposal of any competent authority of an intention to resume or compulsorily acquire the whole or any part of the Business Premises; (b) requiring the carrying out of any alterations, works, improvements or maintenance or other action in relation to the Business Premises involving any substantial expenditure, and 59 - -------------------------------------------------------------------------------- there are no circumstances likely to result in the service of any such notices. 41 Each of the buildings and other erections on the Business Premises: (a) is in such condition and repair as to be substantially fit for the purpose for which it is presently used; and (b) is approved and otherwise complies with applicable laws and industrial health and safety regulations. 42 The connections to power, water and waste disposal services existing in the buildings and other erections on the Business Premises are approved and otherwise comply with applicable laws and are sufficient for the conduct of the Company's and the Subsidiaries' businesses. None of the Company or any Subsidiary or any of the Vendors are aware of any imminent or likely interruption of those services. 43 There are no current disputes relating to any of the Business Premises or their use. PLANT AND EQUIPMENT - -------------------------------------------------------------------------------- 44 Schedule 8 is a complete list of all items of Plant and Equipment owned by the Company and each of the Subsidiaries with a written down value in excess of Aus$5,000 as at the Last Balance Date. Schedule 9 accurately describes all of the Equipment Leases. 45 The rate of depreciation applied in the Last Accounts for each item of Plant and Equipment has been applied over previous accounting periods of the Company or relevant Subsidiary and is adequate to write down its value to nil realisable value at the end of its useful working life. 46 Each item of Plant and Equipment and Leased Plant and Equipment: (a) is in good repair taking into account normal wear and tear; (b) is in satisfactory working condition and capable of doing the work for which it is designed; and (c) has been maintained in a manner that does not prejudice any rights under any maintenance contract in connection with any of that plant and equipment. 60 - -------------------------------------------------------------------------------- 47 There is no claim outstanding against any supplier of the Plant and Equipment or Leased Plant and Equipment or of maintenance services for that plant and equipment in connection with any defect in that plant and equipment. 48 Each item of Plant and Equipment and Leased Plant and Equipment is in the physical possession of the Company or relevant Subsidiary. 49 Each item of Plant and Equipment and Leased Plant and Equipment is erected or positioned in accordance with all applicable laws and is operated by the Company or relevant Subsidiary without contravening any laws or industrial health and safety regulations. 50 The Company or relevant Subsidiary has made all payments required by and has otherwise complied with the terms of each of the Equipment Leases. INVENTORY - -------------------------------------------------------------------------------- 51 The level of Inventory (including spare parts) is sufficient to meet the requirements for the business of the Company or relevant Subsidiary and is not materially surplus to the requirements of that business. 52 The level of Inventory which is obsolete or slow moving does not exceed that at the Last Balance Date. 53 All the Inventory is in the physical possession of the Company or relevant Subsidiary. 54 To the best of Vendors' knowledge and belief, after reasonable inquiry, none of the Inventory has been sold to the Company or any Subsidiary on a term to the effect that the seller retains title in the relevant goods until payment in full for the goods. INTELLECTUAL PROPERTY RIGHTS - -------------------------------------------------------------------------------- 55 Schedule 10 is a complete and accurate list of: (a) all registered and unregistered business names and trade marks; (b) all registered patents and designs; and (c) all applications for registration of patents and designs, 61 - -------------------------------------------------------------------------------- owned or used at any time by the Company or any Subsidiary in connection with its business and contains full details of the Intellectual Property Licenses. 56 The Company or relevant Subsidiary owns all right, title and interest in Australia in and to the Intellectual Property Rights except that the right to use the Aspinall name is limited to the Northern Territory. The Company or relevant Subsidiary has not licensed any of the Intellectual Property Rights and has not assigned or in any way disposed of any right, title or interest in the Intellectual Property Rights. 57 The Company has not disclosed any of the Confidential Information except properly in the ordinary course of its business. 58 The Intellectual Property Rights are to the best knowledge and belief of Vendors, after reasonable inquiry, valid and enforceable in Australia. The Company or relevant Subsidiary has taken all necessary steps to obtain and maintain appropriate registrations for the Intellectual Property Rights and to protect and defend the Intellectual Property Rights. 59 To the knowledge and belief of the Vendors, after reasonable inquiry, neither the carrying on of its business by the Company or relevant Subsidiary nor the use of the Intellectual Property Rights: (a) infringes, or is alleged to infringe, the intellectual property rights (including business names, trade marks, patents, designs, copyright and rights to confidential information) of any third party; or (b) is, or is alleged to be, in breach of any obligation of confidence owed to any third party. 60 To the best knowledge and belief of Vendors, after reasonable inquiry, there has not been: (a) any infringement of any of the Intellectual Property Rights; (b) any misuse or unauthorized disclosure of the Confidential Information; or (c) any other act which may affect the validity or enforceability of the Intellectual Property Rights. 61 Except with respect to the use of the Aspinall name outside of the Northern Territory, none of the Company or any Subsidiary or any of the Vendors are aware of any use by any other person of any of the 62 - -------------------------------------------------------------------------------- business names or the trade marks owned or used by the Company or relevant Subsidiary. 62 To the best knowledge and belief of Vendors, after reasonable inquiry, each of the Intellectual Property Licenses is valid, binding and enforceable against the parties to it. The Company or relevant Subsidiary has complied at all times with the terms of the Intellectual Property Licenses and no licensor has any right to terminate an Intellectual Property License. CONTRACTS - -------------------------------------------------------------------------------- 63 Schedule 11 is a complete list of all material contracts (i.e., contracts entered into by the Company or any Subsidiary which individually require aggregate consideration in excess of Aus$100,000 or which cannot be terminated on 60 days notice or less). Full details of all material contracts entered into by the Company or any Subsidiary have been duly disclosed to the Purchaser in writing. Schedule 12 is a complete list of all banking facilities available to the Company or any Subsidiary. 64 The Company or relevant Subsidiary has complied at all times with its obligations under all material contracts entered into by it. 65 Each of the material contracts entered into by the Company or any Subsidiary is valid, binding and enforceable against the parties to it and there is no party in breach of, or in default under, any such contract. 66 None of the material contracts entered into by the Company or any Subsidiary contain in the reasonable opinion of Vendors any onerous, unusual or other provision material for disclosure to a prudent intending purchaser of the Shares. 67 None of the material contracts entered into by the Company or any Subsidiary is known to the Company or any Subsidiary or any of the Vendors to be likely to result in a loss for that company. 68 The Company has not made any offers, tenders or quotations which are still outstanding and capable of giving rise to a contract by the unilateral act of a third party, other than in the ordinary course of business and on customary terms. The same is true of each Subsidiary. 69 Except to the extent of the provision for doubtful debts in the Interim Accounts, the Vendors have no reason to believe that all accounts receivable of and other debts owed to the Company or any of the 63 - -------------------------------------------------------------------------------- Subsidiaries will not be good and collectable in the ordinary course of business and in any event not later than 3 months after the Completion Date. 70 The total amount borrowed by the Company and each of the Subsidiaries from its bankers does not exceed its overdraft accommodation and the total amount borrowed or raised by the Company and each of the Subsidiaries from any source does not exceed any limitation in its articles of association or in any deed or Agreement executed by it. INSURANCE - -------------------------------------------------------------------------------- 71 Schedule 13 comprises a complete list of all contracts of insurance and indemnity in force in respect of the business and the property and assets. 72 Each of the contracts of insurance is in force and there is no fact or circumstance known to the Company or any Subsidiary or any of the Vendors which would lead to any of them being prejudiced. None of the contracts of insurance will be terminated or cease to have effect as a consequence of the change in ownership of the Shares. 73 All of the property and assets of the Company and the Subsidiaries of an insurable nature are insured in amounts representing their full replacement or reinstatement value against fire and other risks normally insured against. All risks, whether in relation to damage to property, personal injury, product liability or otherwise are adequately insured for such amounts as would be maintained in accordance with prudent business practice. TAXATION - -------------------------------------------------------------------------------- 74 All tax and duty returns required by law (including, but not limited to, all laws imposing or relating to income tax, fringe benefits tax, sales tax, payroll tax, group tax, land tax, water and municipal rates and stamp and customs duty) to be lodged or filed by the Company or any Subsidiary have been lodged or filed. 75 No tax or duty return referred to in warranty 74 contains a statement that is false or misleading in any material particular or omits to refer to any matter which is required to be included or without which the statement is false or misleading. 64 - -------------------------------------------------------------------------------- 76 All records relating to tax or duty returns referred to in warranty 74 or to the preparation of those returns required by law to be maintained by the Company or any Subsidiary have been duly maintained. 77 All taxes, levies, assessments, contributions, fees, rates, duties, and other governmental or municipal charges or impositions (other than those which may be still paid without penalty or interest) for which the Company or any Subsidiary is liable, including any penalty or interest, have been paid. 78 There is no current dispute between the Company or any Subsidiary and the Commissioner of Taxation of the Commonwealth of Australia or any other federal, state, territorial or municipal body or authority responsible for the collection of tax or duty. 79 All amounts of income tax required by law to be deducted by the Company or any Subsidiary from the salary or wages of employees have been duly deducted and, where appropriate, duly paid. 80 No dividend has been paid by the Company or any Subsidiary: (a) in respect of which the required franking amount (as provided for in section 160AQE of the Income Tax Assessment Act ("Tax Act") has exceeded the franked amount (as defined in section 160APA of the Tax Act) of the dividend; or (b) which has been franked in excess of the required franking amount, which would result in that company being liable to pay franking deficit tax under section 160AQJ of the Tax Act or additional tax under section 160ARX of the Tax Act. 81 All documents entered into by the Company or any Subsidiary, if required, have been duly stamped. 82 All stamp duty payable on any transfer of the Shares or shares in any Subsidiary before the Completion Date has been duly paid. 65 - -------------------------------------------------------------------------------- RECORDS - -------------------------------------------------------------------------------- 83 The Records: (a) are complete, true and accurate in all material respects; (b) give a true and fair view of the trading transactions, financial and contractual position of the Company and each of the Subsidiaries and of its assets and liabilities and those of the Subsidiaries; (c) as far as is relevant, have been prepared in accordance with the applicable Companies Code or Corporations Law and the Accounting Standards; and (d) are in the possession of the Company, the relevant Subsidiary or their professional advisors in their original form where applicable. 84 The Company and each of the Subsidiaries has filed all annual returns and other forms as and where required to be filed or registered under the Companies Code or Corporations Law (as applicable) and neither the Company nor any of the Subsidiaries is liable to be struck off the register of companies. LITIGATION - -------------------------------------------------------------------------------- 85 Except as disclosed on Schedule 14, the Company is not involved in any litigation or arbitration proceedings and there are no facts likely to give rise to any such proceedings. The same is true of each Subsidiary. The matters referred to on Schedule 14 will not, individually or in the aggregate, have a material and adverse effect on the Company or any Subsidiary. 86 No claim has been made against the Company or any Subsidiary in connection with any defective product or services supplied by it in the course of carrying on its business. The Company has not breached the provisions of the Trade Practices Act or any equivalent state or territory enactments or the requirements of consumer product safety standard or consumer product information standard prescribed by law. The same is true of each Subsidiary. 87 None of the operations of the Company or any Subsidiary are subject to any unsatisfied judgment or any order, award or decision handed down in any litigation or arbitration proceedings. 66 - -------------------------------------------------------------------------------- ENVIRONMENT - -------------------------------------------------------------------------------- 88 There is no Contaminant present in, on, under or above the Business Premises and there is nothing which may become or give rise to such a Contaminant in the future. 89 The Business Premises are and have been operated in material compliance with all applicable Environmental Laws and other laws and regulations pertaining to health and safety and occupational hazards or conditions, including without limitation with respect to passive smoking. Except as may be adequately covered by insurance, neither the Company nor any Subsidiary has any liability, contingent or otherwise, with respect to such matters. 90 The Company in the conduct of its business or the occupation and use of the Business Premises, has not harmed the Environment in a manner not permitted by any Environmental Law. The same is true of each Subsidiary. 91 All authorisations and approvals required under any Environmental Law relating to the business of the Company and each of the Subsidiaries are in full force and effect and will not be terminated or cease to have effect as a consequence of the change in ownership of the Shares. 92 No authorisations or approvals under any Environmental Law relating to the business of the Company or any Subsidiary are subject to a right of appeal by any person. 93 The Company and each of the Subsidiaries has at all times complied with all the terms of any authorisations and approvals under any Environmental Law relating to the business of the Company or relevant Subsidiary. 94 There is no proposal to revoke, suspend modify or not renew any authorisation or approval under any Environmental Law relating to the business of the Company or any Subsidiary. 95 There is no actual or contingent obligation to pay money or carry out any work in relation to the Business Premises or any other assets of the Company or any Subsidiary to comply with an Environmental Law. The Company is not subject to any liability under any Environmental Law or under the common law arising from the carrying on of its business at any time. The same is true of each Subsidiary. 67 - -------------------------------------------------------------------------------- 96 The carrying on of its business by the Company and each of the Subsidiaries has not been negligent and has not resulted in or caused any public or private nuisance or contravention of the rule known as the Rule in Rylands v Fletcher (1868) LR3 (HL) 330. 97 The carrying on of its business by the Company and each of the Subsidiaries, including proposed expansion plans, is in conformity with all applicable laws, rules and regulations pertaining to aboriginal land claims, including with respect to "sacred sites." EMPLOYEES - -------------------------------------------------------------------------------- 98 All contracts of service or for services and letters of appointment in respect of any employees of, or consultants to, the Company or any Subsidiary, being employees or consultants with an annual remuneration of in excess of Aus$30,000 or required to be given at least three (3) months notice of termination, have been fully disclosed to the Purchaser in writing. Each of the contracts entered into with employees or consultants are enforceable against the parties to it and there is no party in breach of, or in default under, any such contract. 99 No loans or other advances have been made to any directors or employees of the Company or any Subsidiary. 100 The Company and each of the Subsidiaries has made all payments in respect of occupational superannuation required under any contract or award in respect of each of its employees. 101 The Company is not involved in any industrial or trade dispute or any dispute regarding any claim with any of its employees or with any trade union and there are no facts or circumstances which are likely to result in such a dispute. 102 Since the Last Accounts Date there has not been any material change in the remuneration or emoluments or benefits of any executives who are employees. 103 Schedule 15 sets forth a list of all employee benefit plans, including but not limited to pension plans, health plans and life insurance plans. SUPERANNUATION - -------------------------------------------------------------------------------- 104 The Company and each of the Subsidiaries has complied with all its obligations under the relevant trust deeds, including the payment of all 68 - -------------------------------------------------------------------------------- contributions and expenses to the applicable Fund required to be made under the relevant trust deeds. 105 Full disclosure has been made to the Purchaser in writing of all material facts relating to contributions and benefit arrangements in connection with the Fund including the current levels of contributions and benefits, the basis upon which they are calculated and whether contributions are paid in advance or arrears and there are no superannuation or other benefit schemes, other than the Fund, to which the Company or any Subsidiary is contributing or has entered into a commitment which could involve future contributions, or under which any of the employees of that company receives or is entitled to receive or reasonably expects to receive any benefits. 106 Neither the Company nor any Subsidiary has received notice of any claim or dispute in relation to the Fund. 107 The transfer of the Shares will not cause any increase in the obligations of the Company or any Subsidiary to make contributions to the Fund. 108 Neither the Company nor any Subsidiary has misrepresented to any person the benefits which are or may be available in respect of the Fund. CHANGES SINCE THE LAST BALANCE DATE - -------------------------------------------------------------------------------- 109 Since the Last Balance Date: (a) the business of the Company and each of the Subsidiaries has been carried on in the ordinary and usual course and no contracts or commitments differing from those ordinarily necessitated by the nature of that business have been entered into or incurred; (b) there has been no change in the assets, the liabilities or the financial position or profits of the Company and the Subsidiaries from that set out in the Last Accounts except changes in the ordinary course of business, none of which individually or in the aggregate is materially adverse to the company; and (c) the business or financial position of the Company or any Subsidiary has not been materially and adversely affected by any matter, either financial or otherwise and whether covered by insurance or not. 69 - -------------------------------------------------------------------------------- 110 Since the Last Balance Date: (a) no distributions of cash or specific assets by way of dividend or otherwise on the share capital of the Company or any Subsidiary have been made and no securities of the Company or any Subsidiary have been purchased by any of them; (b) no shares in or debentures of the Company or any Subsidiary have been issued or agreed to be issued or put under option; (c) no alteration has been made to the rights attached to any existing shares in the Company or any Subsidiary; (d) no alteration has been made to the memorandum or articles of association of the Company or any Subsidiary; (e) no alteration has been made to the capital structure of the Company or any Subsidiary; (f) no additional directors have been appointed to the Company or any Subsidiary. BROKERAGE - -------------------------------------------------------------------------------- 111 No person is entitled to recover from the Company or any Subsidiary any fee or commission in connection with the purchase or sale of the Shares. INFORMATION - -------------------------------------------------------------------------------- 112 All written information given by the Company or any Subsidiary or any of the Vendors or the Vendors' professional advisers to the Purchaser or to the Purchaser's professional advisers in the course of negotiations leading to this Agreement and Completion are true and accurate in all respects. None of that written information is misleading in any material particular, whether by omission or otherwise. 113 There are no facts or circumstances which might reasonably be expected materially and adversely to affect the financial position, operations, or prospects of the Company or any Subsidiary other than facts and circumstances which have been fully disclosed to Purchaser or affecting as a whole the industry in which the business of the Company and the Subsidiaries is carried on. 70 - -------------------------------------------------------------------------------- 114 None of the written information supplied to the Purchaser prior to or after the date of this Agreement contains or will contain an untrue statement of a material fact or omits or will omit to state a material fact required to be stated in order to make such statements, in light of the circumstances under which they were made, not misleading. APPENDIX B 71 - -------------------------------------------------------------------------------- APPENDIX B WARRANTIES AND REPRESENTATIONS WITH RESPECT TO ULTRABRIDGE DARWIN LIMITED - -------------------------------------------------------------------------------- VENDORS' QUALIFICATIONS - -------------------------------------------------------------------------------- 1 The Ultrabridge Vendors are the registered holders and beneficial owners of the Ultrabridge Shares as set out in Schedule 1. 2 There are no mortgages, charges, pledges, liens, encumbrances or other security interests over or affecting the Ultrabridge Shares. ULTRABRIDGE - -------------------------------------------------------------------------------- 3 Ultrabridge: (a) is accurately described in Recitals B and E; (b) has full corporate power to own its properties, assets and business and to carry on its business as now conducted; and (c) has done everything necessary to do business lawfully in all jurisdictions in which its business is carried on. 4 No meeting has been convened or resolutions proposed, or petition presented, and no order has been made, for the winding-up of Ultrabridge. No distress, execution or other similar order or process has been levied on any of the property or assets of Ultrabridge. No voluntary arrangement has been proposed or reached with any creditors of Ultrabridge. No receiver, receiver and manager, provisional liquidator, liquidator or other officer of the court has been appointed in relation to Ultrabridge. Ultrabridge is able to pay its debts as and when they fall due. THE SHARES - -------------------------------------------------------------------------------- 5 The Ultrabridge Shares comprise the whole of the issued share capital, whether ordinary or preference, of Ultrabridge, and are fully paid. 6 There are no commitments in place under which Ultrabridge is obliged at any time to issue any shares or other securities of the Company. 7 There is no restriction on Ultrabridge or the Ultrabridge Vendors with respect to the sale or transfer of the Ultrabridge Shares to the 72 - -------------------------------------------------------------------------------- Purchaser except for the consent of the directors of Ultrabridge to the registration of the transfers of the Ultrabridge Shares. FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 8 No forecasts and projections relating to Ultrabridge have been given to the Purchaser or its professional advisers by or on behalf of any Ultrabridge Vendor no such forecasts or projections have been prepared by or on behalf of Ultrabridge Vendors relating to periods subsequent to 31 December, 1994. In the event any such forecasts or projections are prepared, they will be promptly provided to Purchaser. 9 The Last Ultrabridge Accounts disclose a true and fair view of the state of the affairs, financial position and assets and liabilities of Ultrabridge as at the Last Balance Date, and the income, expenses and results of operations of Ultrabridge for the financial period ending on that date. 10 The Last Ultrabridge Accounts were prepared: (a) in accordance with the requirements of the applicable Companies Code or Corporations Law and any other applicable laws; (b) in accordance with the Accounting Standards (except that Ultrabridge will not comply with the equity accounting provisions of International Accounting Standards 28 in respect of its investment in the Company); (c) in the manner described in the notes to them and the accompanying auditor's opinion; (d) on a consistent basis with the audited accounts for the prior financial year; and (e) without revaluing upwards any assets during the period which is the subject of the Last Ultrabridge Accounts. 11 The Ultrabridge Completion Accounts will disclose a true and fair view of the state of the affairs, financial position and assets and liabilities of Ultrabridge as at the Completion Date, and the income, expenses and results of operations of Ultrabridge for the financial period ending on that date. The Ultrabridge Completion Accounts will not reflect any indebtedness, liability or obligation of any nature (contingent or otherwise) except as specifically provided for by this Agreement. 73 - -------------------------------------------------------------------------------- 12 The Ultrabridge Completion Accounts will be prepared: (a) in accordance with the requirements of the Companies Code or Corporations Law and any other applicable laws of the Cayman Islands or any other jurisdiction; (b) in accordance with the Accounting Standards; (c) in the manner described in the notes to them and the accompanying auditor's opinion; (d) on a consistent basis with the Last Ultrabridge Accounts; and (e) without revaluing upwards any assets during the period which is the subject of the Ultrabridge Completion Accounts. 13 Ultrabridge is not directly or indirectly obliged in any way to guarantee, assume or provide funds to satisfy any obligation of any person. No Subsidiary is directly or indirectly obliged in any way to guarantee, assume or provide funds to satisfy any obligations of any person, including the Company and any other Subsidiary. 14 No letter of comfort has been given by Ultrabridge. BUSINESS - -------------------------------------------------------------------------------- 15 Ultrabridge is the legal and beneficial owner of all its property and assets, including the shares of the Company reflected on Schedule 1A. At Completion there will be no mortgages, pledges, liens, encumbrances, charges or other security interests over or affecting such shares. 16 Ultrabridge holds all statutory licenses, consents and authorisations necessary, if any, for the carrying on of its business. Copies of any such licenses, consents and authorizations have been provided to the Purchaser. There is no fact or matter that might prejudice the continuance or renewal of those licenses, consents or authorisations. 17 The business of Ultrabridge is conducted in accordance with all applicable laws, regulations, licenses and agreements, does not contravene any laws, regulations, licenses or agreements and no allegation of any contravention of any applicable laws, regulations, licenses or agreements is known to Ultrabridge or any of the Ultrabridge Vendors. 74 - -------------------------------------------------------------------------------- 18 There has not been any breach of or default by Ultrabridge of any term or provision of: (a) its memorandum and articles of association; (b) any instrument to which it is a party or by which it is bound which is material to its business or financial condition; or (c) any judgment, order or injunction of any court, commission, board or other administrative or governmental authority, and there has not occurred any event which, with the passage of time or giving of notice, would constitute a breach or default of that kind. 19 The transfer of the Ultrabridge Shares in accordance with this Agreement does not and will not constitute a breach of any obligation (including any statutory, contractual of fiduciary obligation) or default under any agreement or undertaking by which Ultrabridge is bound. 20 On Completion no guarantee, indemnity or letter of comfort in respect of Ultrabridge given by any person will be outstanding. 21 There are no powers of attorney given by Ultrabridge in force except the power of attorney in Clause 16. 22 The names and locations of all banks in which Ultrabridge has an account and the names of all persons authorised to sign on the accounts are listed in Schedule B1. 23 Since incorporation, the sole activity of Ultrabridge has been the holding of shares in the Company and loans related thereto and Ultrabridge has conducted no business or entered into any agreements or other arrangements. Except for matters as referred to in Clause 7.5, Ultrabridge does not have any indebtedness, liability or obligation of any nature (contingent or otherwise), so that Ultrabridge can be put into voluntary members liquidation and its assets distributed to Purchaser. Ultrabridge has no employees and does not own or rent any property (other than the shares of the Company). 24 Ultrabridge: (a) does not hold any shares in the capital of any company other than the Company; (b) is not a member of any partnership or other unincorporated association; 75 - -------------------------------------------------------------------------------- (c) is not a trustee of any trust estate or fund; and (d) does not have a permanent establishment (as that expression is defined in any relevant double taxation Agreement) outside the Cayman Islands. 25 Since February 23, 1995, Ultrabridge has complied with the provisions of Clauses 7.1, 7.2 and 7.3. INSURANCE - -------------------------------------------------------------------------------- 26 Schedule B2 comprises a complete a complete list of all contracts of insurance and indemnity, if any, in force in respect of the business and the property and assets of Ultrabridge. 27 Each of the contracts of insurance is in force and there is no fact or circumstances known to Ultrabridge or any of the Vendors which would lead to any of them being prejudiced. None of the contracts of insurance will be terminated or cease to have effect as a consequence of the change in ownership of the Ultrabridge Shares. TAXATION - -------------------------------------------------------------------------------- 28 All tax and duty returns required by law (including, but not limited to, all laws imposing or relating to income tax, fringe benefits tax, sales tax, payroll tax, group tax, land tax, water and municipal rates and stamp and customs duty) to be lodged or filed or filed by Ultrabridge have been lodged or filed. 29 No tax or duty returns referred to in Ultrabridge warranty 28 contains a statement that is false or misleading in any material particular or omits to refer to any matter which is required to be included or without which the statement is false or misleading. 30 All records relating to tax or duty returns referred to in Ultrabridge warranty 28 or to the preparation of those returns required by law to be maintained by Ultrabridge have been duly maintained. 31 All taxes, levies, assessments, contributions, fees, rates, duties, and other governmental or municipal charges or impositions (other than those which may be still paid without penalty or interest) for which Ultrabridge is liable, including any penalty or interest, have been paid. 32 There is no current dispute between Ultrabridge and any authority responsible for the collection of tax or duty. 76 - -------------------------------------------------------------------------------- 33 No dividend has been paid by Ultrabridge. 34 All documents entered into by Ultrabridge, if required, have been duly stamped. 35 All stamp duty payable on any transfer of the Ultrabridge Shares before the Completion Date has been duly paid. RECORD - -------------------------------------------------------------------------------- 36 The Records relating to Ultrabridge: (a) are complete, true and accurate in all material respects; (b) give a true and fair view of the trading transactions, financial and contractual position of Ultrabridge and of its assets and liabilities; (c) as far as is relevant, have been prepared in accordance with the applicable Companies Code or Corporations Law and the Accounting Standards; and (d) are in the possession of Ultrabridge or its professional advisers in their original form where applicable. 37 Ultrabridge has filed all annual returns and other forms as and where required to be filed or registered under the Companies Code or Corporations Law (as applicable) and Ultrabridge is not liable to be struck off the register of companies. LITIGATION - -------------------------------------------------------------------------------- 38 Ultrabridge is not involved in any litigation or arbitration proceedings and there are no facts which could give rise to any such proceedings. 39 None of the operations of Ultrabridge are subject to any unsatisfied judgment or any order, award or decision handed down in any litigation or arbitration proceedings. CHANGES SINCE THE DATE OF THE LAST ULTRABRIDGE ACCOUNTS - -------------------------------------------------------------------------------- 40 Since the date of the Last Ultrabridge Accounts: 77 - -------------------------------------------------------------------------------- (a) the business of Ultrabridge has been carried on in the ordinary and usual course and no contracts or commitments have been entered into or incurred; (b) there has been no change in the assets, the liabilities or the financial position or profits of Ultrabridge from that set out in the Last Accounts except changes in the ordinary course of business, none of which individually or in the aggregate is materially adverse to Ultrabridge; and (c) the business or financial position of Ultrabridge has not been materially and adversely affected by any manner, either financial or otherwise and whether covered by insurance or not. 41 Since the date of the Last Ultrabridge Accounts: (a) no distributions of cash or specific assets by way of dividend or otherwise on the share capital of Ultrabridge have been made and no securities of Ultrabridge have been purchased; (b) no shares in or debentures of Ultrabridge have been issued or agreed to be issued or put under option; (c) no alteration has been made to the rights attached to any existing shares in Ultrabridge; (d) no alteration has been made to the memorandum or articles of association of Ultrabridge; (e) no alteration has been made to the capital structure of Ultrabridge; (f) no additional directors have been appointed to Ultrabridge. INFORMATION - -------------------------------------------------------------------------------- 42 All written information given by Ultrabridge or any of the Ultrabridge Vendors or the Ultrabridge Vendors' professional advisers to the Purchaser or to the Purchaser's professional advisers in the course of negotiations leading to this Agreement and Completion are true and accurate in all respects. None of that written information is misleading in any material particular, whether by omission or otherwise. 43 There are no facts or circumstances which might reasonably be expected materially and adversely to affect the financial position, operations, or prospects of Ultrabridge other than facts and 78 - -------------------------------------------------------------------------------- circumstances which have been fully disclosed to Purchaser or affecting as a whole the industry in which the business of Ultrabridge, the Company and the Subsidiaries is carrried on. 44 None of the written information supplied to the Purchaser prior to or after the date of this Agreement contains or will contain an untrue statement of a material fact or omits or will omit to state a material fact required to be stated therein or in connection therewith or necessary to be stated in order to make such statements, in light of the circumstances under which they were made, not misleading. APPENDIX C 79 - -------------------------------------------------------------------------------- APPENDIX C WARRANTIES AND REPRESENTATIONS WITH RESPECT TO HAVEWIN TRADING LIMITED - -------------------------------------------------------------------------------- VENDORS' QUALIFICATIONS - -------------------------------------------------------------------------------- 1 The Havewin Vendors are the registered holders and beneficial owners of the Havewin Shares as set out in Schedule 1. 2 There are no mortgages, charges, pledges, liens, encumbrances or other security interests over or affecting the Havewin Shares. HAVEWIN - -------------------------------------------------------------------------------- 3 Havewin: (a) is accurately described in Recitals C and F; (b) has full corporate power to own its properties, assets and business and to carry on its business as now conducted; and (c) has done everything necessary to do business lawfully in all jurisdictions in which its business is carried on. 4 No meeting has been convened or resolution proposed, or petition presented, and no order has been made, for the winding-up of Havewin. No distress, execution or other similar order or process has been levied on any of the property or assets of Havewin. No voluntary arrangement has been proposed or reached with any creditors of Havewin. No receiver, receiver and manager, provisional liquidator, liquidator or other officer of the court has been appointed in relation to Havewin. Havewin is able to pay its debts as and when they fall due. THE SHARES - -------------------------------------------------------------------------------- 5 The Havewin Shares comprise the whole of the issued share capital of Havewin, whether ordinary or preference, and are fully paid. 6 There are no commitments in place under which Havewin is obliged at any time to issue any shares or other securities of the Company. 7 There is no restriction on Havewin or the Havewin Vendors with respect to the sale or transfer of the Havewin Shares to the Purchaser 80 - -------------------------------------------------------------------------------- except for the consent of the directors of Havewin to the registration of the transfers of the Havewin Shares. FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 8 No forecasts and projects relating to Havewin have been given to the Purchaser or its professional advisers by or on behalf of any Havewin Vendor. No such forecasts or projections have been prepared by or on behalf of Havewin or any of the Havewin Vendors relating to periods subsequent to 31 December 1994. In the event any such forecasts or projections are prepared, they will be promptly provided to Purchaser. 9 The Last Havewin Accounts disclose a true and fair view of the state of the affairs, financial position and assets and liabilities of Havewin as at the Last Balance Date, and the income, expenses and results of operations of Havewin for the financial period ending on that date. 10 The Last Havewin Accounts were prepared: (a) in accordance with the requirements of the applicable Companies Code or Corporations Law and any other applicable laws; (b) in accordance with the Accounting Standards; (c) in the manner described in the notes to them and the accompanying auditor's opinion; (d) on a consistent basis with the audited accounts for the prior financial year; and (e) without revaluing upwards any assets during the period which is the subject of the Last Havewin Accounts 11 The Havewin Completion Accounts will disclose a true and fair view of the state of the affairs, financial position and assets and liabilities of Havewin as at the Completion Date, and the income, expenses and results of operations of Havewin for the financial period ending on that date. The Havewin Completion Accounts will not reflect any indebtedness, liability or obligation of any nature (contingent or otherwise except as specifically provided for by this Agreement). 12 The Havewin Completion Accounts will be prepared: 81 - -------------------------------------------------------------------------------- (a) in accordance with the requirements of the Companies Code or Corporations Law and any other applicable laws of Hong Kong or any other jurisdiction; (b) in accordance with the Accounting Standards; (c) in the manner described in the notes to them and the accompanying auditor's opinion; (d) on a consistent basis with the Last Havewin Accounts; and (e) without revaluing upwards any assets during the period which is the subject of the Havewin Completion Accounts. 13 Havewin is not directly or indirectly obliged in any way to guarantee, assume or provide funds to satisfy any obligation of any person. No Subsidiary is directly or indirectly obliged in any way to guarantee, assume or provide funds to satisfy any obligations of any person, including the Company and any other Subsidiary. 14 No letter of comfort has been given by Havewin. BUSINESS - -------------------------------------------------------------------------------- 15 Havewin is the legal and beneficial owner of all its property and assets, including the shares of the Company reflected on Schedule 1B. At Completion there will be no mortgages, pledges, liens, encumbrances, charges or other security interests over or affecting such shares. 16 Havewin holds all statutory licences, consents and authorisations necessary, if any, for the carrying on of its business. Copies of any such licences, consents and authorizations have been provided to the Purchaser. There is no fact or matter that might prejudice the continuance or renewal of those licences, consents or authorisations. 17 The business of Havewin is conducted in accordance with all applicable laws, regulations, licenses and agreements, does not contravene any laws, regulations, licenses or agreements and no allegation of any contravention of any applicable laws, regulations, licenses or agreements is known to Havewin or any of the Havewin Vendors. 18 There has not been any breach of or default by Havewin of any term or provision of: (a) its memorandum and articles of association; 82 - -------------------------------------------------------------------------------- (b) any instrument to which it is a party or by which it is bound which is material to its business or financial condition; or (c) any judgment, order or injunction of any court, commission, board or other administrative or governmental authority, and there has not occurred any event which, with the passage of time or giving of notice, would constitute a breach or default of that kind. 19 The transfer of the Havewin Shares in accordance with this Agreement does not and will not constitute a breach of any obligation (including any statutory, contractual or fiduciary obligation) or default under any agreement or undertaking by which Havewin is bound. 20 On Completion no guarantee, indemnity or letter of comfort in respect of Havewin given by any person will be outstanding. 21 There are no powers of attorney given by Havewin in force except the power of attorney in Clause 16. 22 The names and locations of all banks in which Havewin has an account and the names of all persons authorised to sign on the accounts are listed in Schedule C1. 23 Since incorporation, the sole activity of Havewin has been the holding of shares in the Company and loans related thereto and Havewin has conducted no business or entered into any agreements or other arrangements. Except for matters as referred to in Clause 7.5, Havewin does not have any indebtedness, liability or obligation or any nature (contingent or otherwise), so that Havewin can be put into voluntary members liquidation and its assets distributed to Purchaser. Havewin has no employees and does not own or rent any property (other than the shares of the Company). 24 Havewin: (a) does not hold any shares in the capital of any company other than the Company; (b) is not a member of any partnership or other unincorporated association; (c) is not a trustee of any trust estate or fund; and (d) does not have a permanent establishment (as that expression is defined in any relevant double taxation Agreement) outside Hong Kong. 83 - -------------------------------------------------------------------------------- 25 Since February 23, 1995, Havewin has complied with the provisions of Clauses 7.1, 7.2 and 7.3. INSURANCE - -------------------------------------------------------------------------------- 26 Schedule C2 comprises a complete list of all contracts of insurance and indemnity, if any, in force in respect of the business and the property and assets. 27 Each of the contracts of insurance is in force and there is no fact or circumstance known to Havewin or any of the Vendors which would lead to any of them being prejudiced. None of the contracts of insurance will be terminated or cease to have effect as a consequence of the change in ownership of the Havewin Shares. TAXATION - -------------------------------------------------------------------------------- 28 All tax and duty returns required by law (including, but not limited to, all laws imposing or relating to income tax, fringe benefits tax, sales tax, payroll tax, group tax, land tax, water and municipal rates and stamp and customs duty) to be lodged or filed by Havewin have been lodged or filed. 29 No tax or duty return referred to in Havewin warranty 28 contains a statement that is false or misleading in any material particular or omits to refer to any matter which is required to be included or without which the statement is false or misleading. 30 All records relating to tax or duty returns referred to in Havewin warranty 28 or to the preparation of those returns required by law to be maintained by Havewin have been duly maintained. 31 All taxes, levies, assessments, contributions, fees, rates, duties, and other governmental or municipal charges or impositions (other than those which may be still paid without penalty or interest) for which Havewin is liable, including any penalty or interest, have been paid. 32 There is no current dispute between Havewin and any authority responsible for the collection of tax or duty. 33 No dividend has been paid by Havewin. 34 All documents entered into by Havewin, if required, have been duly stamped. 84 - -------------------------------------------------------------------------------- 35 All stamp duty payable on any transfer of the Havewin Shares before the Completion Date has been duly paid. RECORDS - -------------------------------------------------------------------------------- 36 The Records relating to Havewin: (a) are complete, true and accurate in all material respects; (b) give a true and fair view of the trading transactions, financial and contractual position of Havewin and of its assets and liabilities; (c) as far as is relevant, have been prepared in accordance with the applicable Companies Code or Corporations Law and the Accounting Standards; and (d) are in the possession of Havewin or its professional advisers in their original form where applicable. 37 Havewin has filed all annual returns and other forms as and where required to be filed or registered under the Companies Code or Corporations Law (as applicable) and Havewin is not liable to be struck off the register of companies. LITIGATION - -------------------------------------------------------------------------------- 38 Havewin is not involved in any litigation or arbitration proceedings and there are no facts which could give rise to any such proceedings. 39 None of the operations of Havewin are subject to any unsatisfied judgment or any order, award or decision handed down in any litigation or arbitration proceedings. CHANGES SINCE THE DATE OF THE LAST HAVEWIN ACCOUNTS - -------------------------------------------------------------------------------- 40 Since the date of the Last Havewin Accounts: (a) the business of Havewin has been carried on in the ordinary and usual course and no contracts or commitments have been entered into or incurred; (b) there has been no change in the assets, the liabilities or the financial position or profits of Havewin from that set out in the 85 - -------------------------------------------------------------------------------- Last Accounts except changes in the ordinary course of business, none of which individually or in the aggregate is materially adverse to Havewin; and (c) the business or financial position of Havewin has not been materially and adversely affected by any matter, either financial or otherwise and whether covered by insurance or not. 41 Since the date of the Last Havewin Accounts: (a) no distributions of cash or specific assets by way of dividend or otherwise on the share capital of Havewin have been made and no securities of Havewin have been purchased; (b) no shares in or debentures of Havewin have been issued or agreed to be issued or put under option; (c) no alteration has been made to the rights attached to any existing shares in Havewin; (d) no alteration has been made to the memorandum or articles of association of Havewin; (e) no alteration has been made to the capital structure of Havewin; (f) no additional directors have been appointed to Havewin. INFORMATION - -------------------------------------------------------------------------------- 42 All written information given by Havewin or any of the Havewin Vendors or the Havewin Vendors' professional advisers to the Purchaser or to the Purchaser's professional advisers in the course of negotiations leading to this Agreement and Completion are true and accurate in all respects. None of that written information is misleading in any material particular, whether by omission or otherwise. 43 There are no facts or circumstances which might reasonably be expected materially and adversely to affect the financial position, operations, or prospects of Havewin other than facts and circumstances which have been fully disclosed to Purchaser or affecting as a whole the industry in which the business of Havewin, the Company and the Subsidiaries is carried on. 44 None of the written information supplied to the Purchaser prior to or after the date of this Agreement contains or will contain an untrue statement of a material fact or omits or will omit to state a material 86 - -------------------------------------------------------------------------------- fact required to be stated therein or in connection therewith or necessary to be stated in order to make such statements, in light of the circumstances under which they were made, not misleading. 115 - -------------------------------------------------------------------------------- Executed as a Deed with effect from 30 June 1995 for and on behalf of MGM Grand, Inc. in accordance with its articles of incorporation in the presence of: /s/ K. Eugene Shutler - ------------------------------ Signature of authorized person Executive Vice President & General Counsel /s/ Marcia Sarver - ---------------------------------- ----------------------------------- Office held Witness K. Eugene Shutler - -------------------------------- Name of authorized person (block letters) Date: July 24, 1995 ------- Executed as a Deed with effect from 30 June 1995 for and on behalf of MGM Grand Australia Pty Ltd in accordance with its articles of incorporation in the presence of: /s/ Alejandro Yemenidjian - --------------------------------- Signature of authorized person Director /s/ K. Eugene Shutler - --------------------------------- ------------------------------------ Office held Witness Alex Yemenidjian - --------------------------------- Name of authorized person Date: July 21, 1995 (block letters) ------- 116 - -------------------------------------------------------------------------------- Executed as a Deed with effect from 30 June 1995 for and on behalf of Ultrabridge Securities Limited in accordance with its articles of incorporation in the presence of: /s/ G. McIntosh /s/ C. Papadimitrou - ------------------------------------------- Signature of authorized person Director Director /s/ P. Marchetti - ------------------------------------------- ---------------------------------- Office held Witness G. McIntosh C. Papadimitrou - ------------------------------------------- Name of authorized person Date: July 26, 1995 (block letters) ------- Executed as a Deed with effect from 30 June 1995 for and on behalf of Enderbury Limited in accordance with its articles of incorporation in the presence of: /s/ G. McIntosh /s/ C. Papadimitrou - ------------------------------------------- Signature of authorised person Director Director - ------------------------------------------- Office held /s/ P. Marchetti ------------------------------- Witness G. McIntosh C. Papadimitrou - ------------------------------------------- Name of authorised person Date: July 26, 1995 (block letters) ------- 117 - -------------------------------------------------------------------------------- Executed as a Deed with effect from 30 June 1995 for and on behalf of HPLF Investments (II) Limited in accordance with its articles of incorporation in the presence of: /s/ James Osborne - ----------------------------------- Signature of authorized person Director /s/ M. Kennedy - ----------------------------------- ----------------------------------- Office held Witness J. F. Osborne - ----------------------------------- Name of authorized person Dated: 21 July, 1995 (block letters) ------- SIGNED with effect from 30 June 1995 by John Victor Aspinall in the presence of: /s/ M. Kennedy ----------------------------------- Witness /s/ John Victor Aspinall - ----------------------------------- Dated: 20 July, 1995 Signature ------- SIGNED with effect from 30 June 1995 by James Francis Osborne in the presence of: /s/ M. Kennedy ---------------------------------- Witness /s/ James Osborne - ----------------------------------- Dated: 20 July, 1995 Signature ------- 118 - -------------------------------------------------------------------------------- Signed by Sir Brian Jenks and Michael Russell Leathers, for the Trustees of Howletts and Port Lympne Foundation with effect from 30 June 1995, in accordance with its trust deed in the presence of: /s/ Brian Jenks /s/ M. R. Leathers - ----------------------------------- ---------------------------------- Signature of authorized person Signature of authorized person Office held: Administrative Office held: Trustee Secretary to the Trustees SIR BRIAN JENKS MICHAEL RUSSELL LEATHERS - ----------------------------------- ---------------------------------- Name of authorized person Name of authorized person (block letters) (block letters) /s/ /s/ Andrew Duncan - ----------------------------------- ---------------------------------- Witness Witness Dated: ______________, 1995 Executed as a Deed with effect from 30 June 1995 for and on behalf of Rizona (Hong Kong) Limited in accordance with its articles of association in the presence of: /s/ Ong Beng Seng - ----------------------------------- Signature of authorised person Director /s/ - ----------------------------------- ---------------------------------- Office held Witness Ong Beng Seng - ----------------------------------- Dated: 28 July, 1995 Name of authorised person (block letters) 119 - -------------------------------------------------------------------------------- Executed as a Deed with effect from 30 June 1995 for and on behalf of Leroy Singapore Pte. Limited in accordance with its articles of association in the presence of: /s/ JOPIE ONG HIE KOAN - ----------------------------------- Signature of authorized person Director - ----------------------------------- /s/ Office held ---------------------------------- Witness JOPIE ONG HIE KOAN - ----------------------------------- Name of authorized person (block letters) Dated: 28 July, 1995 ------- Executed as a Deed with effect from 30 June 1995 for and on behalf of Cortrust Aktiengesellschaft fur Treuhandschaften and Dr. Lambert Grasern, Trustees of the J. Osborne Family Trust in accordance with its trust deed in the presence of: /s/ ANDREW BAKER /s/ DR. LAMBERT GRASERN - ------------------------------------------ Signature of authorised person /s/ Dr. LAMBERT GRASERN ---------------------------------- - --------------------------------------- Signature of authorized person Office held: Trustee ---------------------------------- ANDREW BAKER Dr. LAMBERT GRASERN Office held: Trustee - ------------------------------------------ Name of authorised person (block letters) DR. LAMBERT GRASERN ---------------------------------- Name of authorized person - ------------------------------------- (block letters) Witness /s/ ANDREW BAKER ---------------------------------- Dated: 28.07, 1995 Witness Andrew Baker ----- Soliciter Dated: 28.07, 1995 ----- EX-10.22 8 LOAN AGREEMENT EXHIBIT 10(22) ALLENS ARTHUR ROBINSON ALLEN ALLEN & HEMSLEY GROUP ________________________________________________________________________________ MGM GRAND AUSTRALIA PTY LTD (Borrower) EACH BANK OR FINANCIAL INSTITUTION NAMED IN SCHEDULE 1 (each a Participant) DIAMOND BEACH CASINO ACQUISITION ______________________ LOAN AGREEMENT ______________________ SYNDICATED A$105,000,000 REVOLVING CASH ADVANCE FACILITY Arranged by BANK OF AMERICA AUSTRALIA LIMITED (C) Allen Allen & Hemsley Sydney REF: DJL 1101494 PXY ________________________________________________________________________________ ________________________________________________________________________ T A B L E O F C O N T E N T S ________________________________________________________________________ 1. DEFINITIONS AND INTERPRETATION ...........................................1 1.1 Definitions ........................................................1 1.2 Interpretation ....................................................11 1.3 Determination, statement and certificate ..........................11 1.4 Document or agreement .............................................12 1.5 Listing requirements included as law ..............................12 1.6 Obligations several ...............................................12 1.7 Failure to notify .................................................12 1.8 Current accounting practice and accounting terms ..................12 2. PURPOSE .................................................................12 3. FACILITY ................................................................13 3.1 Advance of Loan ...................................................13 3.2 Allocation among Participants .....................................13 3.3 Repayment of each Loan ............................................13 4. DRAWDOWN NOTICES ........................................................13 4.1 When notice to be given ...........................................13 4.2 Notification of Participants ......................................13 5. PRINCIPAL AMOUNT OF LOANS ...............................................13 5.1 Principal amount of Loans .........................................13 6. SELECTION OF FUNDING PERIODS ............................................13 7. INTEREST ................................................................14 8. RELIQUEFICATION BILLS ...................................................14 8.1 Preparation of Reliquefication Bills ..............................14 8.2 Requirements of Reliquefication Bills .............................14 8.3 Dealing with Reliquefication Bills ................................14 8.4 Indemnity .........................................................15 8.5 Stamp duty on Reliquefication Bills ...............................15 9. FEES ....................................................................15 9.1 Commitment Fee ....................................................15 9.2 Establishment fee .................................................15 10. EARLY CANCELLATION OF COMMITMENT ........................................15 10.1 Voluntary Cancellation ............................................15 10.2 Allocation among Participants .....................................15 10.3 Application against instalments ...................................15 11. CANCELLATION AND REPAYMENT INSTALMENTS ..................................15
________________________________________________________________________ Page (ii) ________________________________________________________________________________ 11.1 Reduction of Commitment in instalments ............................16 11.2 Repayment .........................................................16 11.3 Allocation among Participants .....................................16 12. PREPAYMENTS .............................................................16 12.1 Compulsory prepayment if conditions subsequent not met ............16 12.2 Voluntary prepayments .............................................16 12.3 Interest ..........................................................16 12.4 Limitation on prepayments .........................................16 12.5 Apportionment .....................................................16 13. PAYMENTS ................................................................17 13.1 Manner ............................................................17 13.2 Payment to be made on Business Day ................................17 13.3 Distribution by Agent .............................................17 13.4 Appropriation where insufficient moneys available .................17 13.5 Unanticipated default .............................................17 13.6 Rounding ..........................................................18 14. CHANGES IN LAW ..........................................................18 14.1 Additional payments ...............................................18 14.2 Minimisation ......................................................19 14.3 Survival ..........................................................19 15. CONDITIONS PRECEDENT ....................................................19 15.1 Conditions Precedent to Drawdown Notice ...........................19 15.2 Condition Precedent to first Loan .................................20 15.3 Conditions subsequent to first Loan ...............................20 15.4 Conditions precedent to each Loan .................................21 16. REPRESENTATIONS AND WARRANTIES ..........................................21 16.1 Representations and warranties ....................................21 16.2 Reliance on representations and warranties ........................25 16.3 Trustee representations and warranties ............................25 17. UNDERTAKINGS ............................................................26 17.1 General undertakings ..............................................26 17.2 Undertakings relating to Mortgaged Property .......................33 17.3 Terms of Undertakings .............................................37 17.4 Undertakings relating to Trust ....................................37 18. EVENTS OF DEFAULT .......................................................38 18.1 Events of Default .................................................38 18.2 Consequences ......................................................42 18.3 Technical default in payment ......................................42 19. GUARANTEE ...............................................................43 19.1 Guarantee .........................................................43
________________________________________________________________________________ Page (iii) ________________________________________________________________________________ 19.2 Payment ...........................................................43 19.3 Unconditional nature of obligation ................................43 19.4 Principal and independent obligation ..............................44 19.5 No marshalling ....................................................44 19.6 No competition ....................................................44 19.7 Suspense account ..................................................45 19.8 Rescission of payment .............................................45 19.9 Indemnity .........................................................45 19.10 Continuing guarantee and indemnity ................................46 19.11 Variations ........................................................46 19.12 Judgment ..........................................................46 19.13 Conditions precedent ..............................................46 20. INTEREST ON OVERDUE AMOUNTS .............................................46 20.1 Accrual ...........................................................46 20.2 Payment ...........................................................47 21. INDEMNITIES .............................................................47 21.1 Indemnities .......................................................47 21.2 Currency Indemnity ................................................47 21.3 Reimbursement in another currency .................................48 22. EXPENSES ................................................................48 23. STAMP DUTIES ............................................................48 24. CONTROL ACCOUNTS ........................................................49 25. SET-OFF .................................................................49 26. WAIVERS, REMEDIES CUMULATIVE ............................................49 27. SEVERABILITY OF PROVISIONS ..............................................49 28. SURVIVAL OF REPRESENTATIONS AND INDEMNITIES .............................49 29. MORATORIUM LEGISLATION ..................................................50 30. CONSENTS AND OPINIONS ...................................................50 31. ASSIGNMENTS .............................................................50 31.1 Assignment by Borrower and Guarantor ..............................50 31.2 Assignment by Participants ........................................50 31.3 Substitution certificates .........................................50 31.4 Disclosure ........................................................51 31.5 No increased costs ................................................51 32. RELATIONSHIP OF PARTICIPANTS TO AGENT ...................................51 32.1 Authority .........................................................51 32.2 Instructions; extent of discretion ................................51 32.3 No obligation to investigate authority ............................52 32.4 Agent not a fiduciary .............................................52
________________________________________________________________________________ Page (iv) ________________________________________________________________________________ 32.5 Exoneration ...................................................... 52 32.6 Delegation ....................................................... 52 32.7 Reliance on documents and experts ................................ 52 32.8 Notice of transfer ............................................... 53 32.9 Notice of default ................................................ 53 32.10 Agent as Participant and banker .................................. 53 32.11 Indemnity to Agent ............................................... 53 32.12 Independent investigation of credit .............................. 53 32.13 No monitoring .................................................... 53 32.14 Information ...................................................... 54 32.15 Replacement of Agent ............................................. 54 32.16 Amendment of Transaction Documents ............................... 54 33. PROPORTIONATE SHARING .................................................. 55 33.1 Sharing .......................................................... 55 33.2 Refusal to join in action ........................................ 55 34. AGENT DEALINGS ......................................................... 56 35. ADDITION OF GUARANTORS ................................................. 56 36. TAXATION ............................................................... 56 36.1 Additional payments .............................................. 56 36.2 Survival of obligations .......................................... 57 36.3 Acceleration on non-payment of Tax ............................... 57 37. NOTICES ................................................................ 57 38. AUTHORISED OFFICERS .................................................... 57 39. GOVERNING LAW AND JURISDICTION ......................................... 58 40. COUNTERPARTS ........................................................... 58 41. ACKNOWLEDGEMENT BY BORROWER AND GUARANTORS ............................. 58
SCHEDULE 1 - PARTICIPANTS SCHEDULE 2 - GUARANTORS SCHEDULE 3 - REPAYMENT/REDUCTION SCHEDULE SCHEDULE 4 - MARGIN AND COMMITMENT FEE SCHEDULE ANNEXURE A - DRAWDOWN NOTICE ANNEXURE B - VERIFICATION CERTIFICATE ANNEXURE C - GUARANTOR ACCESSION DEED ANNEXURE D - FORM OF SUBSTITUTION CERTIFICATE ANNEXURE E - FORM OF S206(6) CERTIFICATE _______________________________________________________________________________ Page (iii) ________________________________________________________________________________ 19.2 Payment......................................................... 43 19.3 Unconditional nature of obligation.............................. 43 19.4 Principal and independent obligation............................ 44 19.5 No marshalling.................................................. 44 19.6 No competition.................................................. 44 19.7 Suspense account................................................ 45 19.8 Rescission of payment........................................... 45 19.9 Indemnity....................................................... 45 19.10 Continuing guarantee and indemnity.............................. 46 19.11 Variations...................................................... 46 19.12 Judgment........................................................ 46 19.13 Conditions precedent............................................ 46 20. INTEREST ON OVERDUE AMOUNTS............................................ 46 20.1 Actual.......................................................... 46 20.2 Payment......................................................... 47 21. INDEMNITIES............................................................ 47 21.1 Indemnities..................................................... 47 21.2 Currency Indemnity.............................................. 47 21.3 Reimbursement in another currency............................... 48 22. EXPENSES............................................................... 48 23. STAMP DUTIES........................................................... 48 24. CONTROL ACCOUNTS....................................................... 49 25. SET-OFF................................................................ 49 26. WAIVERS, REMEDIES CUMULATIVE........................................... 49 27. SEVERABILITY OF PROVISIONS............................................. 49 28. SURVIVAL OF REPRESENTATIONS AND INDEMNITIES............................ 49 29. MORATORIUM LEGISLATION................................................. 50 30. CONSENTS AND OPINIONS.................................................. 50 31. ASSIGNMENTS............................................................ 50 31.1 Assignment by Borrower and Guarantor............................ 50 31.2 Assignment by Participants...................................... 50 31.3 Substitution certificates....................................... 50 31.4 Disclosure...................................................... 51 31.5 No increased costs.............................................. 51 32. RELATIONSHIP OF PARTICIPANTS TO AGENT.................................. 51 32.1 Authority....................................................... 51 32.2 Instructions; extent of discretion.............................. 51 32.3 No obligation to investigate authority.......................... 52 32.4 Agent not a fiduciary........................................... 52
________________________________________________________________________________ Page (iv) ________________________________________________________________________________ 32.5 Exoneration...................................................... 52 32.6 Delegation....................................................... 52 32.7 Reliance on documents and experts................................ 52 32.8 Notice of transfer............................................... 53 32.9 Notice of Default................................................ 53 32.10 Agent as Participant and banker.................................. 53 32.11 Indemnity to Agent............................................... 53 32.12 Independent investigation of credit.............................. 53 32.13 No monitoring.................................................... 53 32.14 Information...................................................... 54 32.15 Replacement of Agent............................................. 54 32.16 Amendment of Transaction Documents............................... 54 33. PROPORTIONATE SHARING................................................... 55 33.1 Sharing.......................................................... 55 33.2 Refusal to join in action........................................ 55 34. AGENT DEALINGS.......................................................... 56 35. ADDITION OF GUARANTORS.................................................. 56 36. TAXATION................................................................ 56 36.1 Additional payments.............................................. 56 36.2 Survival of obligations.......................................... 57 36.3 Acceleration on non-payment of Tax............................... 57 37. NOTICES................................................................. 57 38. AUTHORISED OFFICERS..................................................... 57 39. GOVERNING LAW AND JURISDICTION.......................................... 58 40. COUNTERPARTS............................................................ 58 41. ACKNOWLEDGEMENT BY BORROWER AND GUARANTORS.............................. 58 SCHEDULE 1 - PARTICIPANTS SCHEDULE 2 - GUARANTORS SCHEDULE 3 - REPAYMENT/REDUCTION SCHEDULE SCHEDULE 4 - MARGIN AND COMMITMENT FEE SCHEDULE ANNEXURE A - DRAWDOWN NOTICE ANNEXURE B - VERIFICATION CERTIFICATE ANNEXURE C - GUARANTOR ACCESSION DEED ANNEXURE D - FORM OF SUBSTITUTION CERTIFICATE ANNEXURE E - FORM OF S206(6) CERTIFICATE
________________________________________________________________________________ ________________________________________________________________________________ LOAN AGREEMENT ________________________________________________________________________________ AGREEMENT dated 6 September 1995 between: 1. MGM GRAND AUSTRALIA PTY LTD (ACN 069 214 473) incorporated in the Northern Territory of Level 3, Diamond Beach Casino, Gilruth Avenue, Darwin City (the BORROWER); 2. EACH COMPANY which has executed a Guarantor Accession Deed; (each GUARANTOR); 3. EACH BANK OR FINANCIAL INSTITUTION named in Schedule 1 (each, a PARTICIPANT); and 4. BANK OF AMERICA AUSTRALIA LIMITED (ACN 004 617 341) incorporated in Victoria of Level 18, Bank of America Centre, 135 King Street, Sydney, New South Wales (the AGENT). RECITAL The Borrower has requested the Participants to provide the Borrower with a facility under which cash advances of up to a maximum amount of A$105,000,000 may be made available to the Borrower. IT IS AGREED as follows, 1. DEFINITIONS AND INTERPRETATION 1.1 DEFINITIONS The following definitions apply unless the context requires otherwise. ACCOUNTS means profit and loss accounts, balance sheets and cash flow statements together with any statements, reports (including, without limitation, any directors' and auditors' reports) and notes attached to or intended to be read with any of them. ASSOCIATE in relation to an entity means: (a) a Related Corporation of that entity; (b) an entity, or the trustee or manager of a trust, which has a Controlling Interest in that entity, the Trust, or the manager or trustee of the Trust or a Related Corporation of that entity; (c) a Related Corporation of an entity included in paragraph (b) or (c); (d) a director of that entity or of an entity included in paragraph (a), (b) or (c) or of the manager or of the trustee of any trust included in paragraph (a), (b) or (c) or a spouse, child, parent or sibling of that director; (e) a corporation, or the trustee or manager of a trust, in which one or more entity or person mentioned in paragraph (a), (b), (c), (d), (e),(f) or (g) alone or together has a Controlling Interest; ________________________________________________________________________________ Page 2 ________________________________________________________________________________ (f) the trustee of a discretionary trust of which an entity or person included in paragraph (a), (b), (c), (d), (e) or (g) is a beneficiary (whether or not through one or more other discretionary trusts); or (g) an entity of which ?an? director of that entity or a Related Corporation of that entity is also a director. For the purposes of this definition: (i) where a person is a beneficiary of a discretionary trust, that person shall be taken to own, and control, all the assets of that trust; (ii) DIRECTOR has the meaning given in the Corporations Law; and (iii) a person has a CONTROLLING INTEREST in a corporation or trust if: (A) the corporation or its directors, or the trustee or manager of the trust or its directors, are accustomed, or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of that person or of that person in concert with others; or (B) the person has a relevant interest (as defined in the Corporations Law) in more than 20% of the issued or voting shares, units or other interests in the corporation or trust (in number, voting power or value), or would have that relevant interest if any rights were exercised to subscribe for, or acquire or convert into, shares, units or other interests which are issued or unissued. The definition of relevant interest applies as if units or other interest were shares. AUDITORS means the auditors for the time being of the Borrower and Guarantors. They will, in respect of the financial year ending 31 December, be Arthur Anderson and, in respect of any subsequent financial year, be Arthur Anderson or any firm selected by the Borrower and not disapproved by the Agent. AUSTRALIAN WITHHOLDING TAX means Tax levied or imposed by a Governmental Agency of or within the Commonwealth of Australia which is required to be withheld or deducted from any payment. AUTHORISATION includes: (a) any consent, authorisation, registration, filing, lodgement, agreement, notarization, certificate, permission, licence, approval, authority or exemption from, by or with a Governmental Agency; or (b) in relation to anything which will be fully or partly prohibited or restricted by law if a Governmental Agency intervenes or acts in any way within a specified period after lodgement, filing, registration or notification, the expiry of that period without intervention or action. AUTHORISED OFFICER means: (a) in respect of the Borrower or each Guarantor,any director or secretary, or any person from time to time nominated as an Authorised Officer by the Borrower or the relevant Guarantor by a notice to the Agent accompanied by certified copies of signatures of all new persons so appointed; and ________________________________________________________________________________ Page 3 ________________________________________________________________________________ (b) in respect of the Agent or a Participant, any person whose title or acting title includes the word Manager or President or cognate expressions, or any secretary or director. AVAILABILITY PERIOD means the period commencing on the date of this Agreement and expiring on the final Repayment date or, if earlier, the date on which the Commitment is cancelled. BANK BILL RATE in relation to a Funding Period means the rate determined by the Agent to be its buying rate as at approximately 10 am (Sydney time) on the first day of the Funding Period for bills of exchange which are accepted by the Bank of America Australia Limited and which have a term equivalent to the Funding Period. That buying rate will be expressed as a yield percent per annum to maturity. If there are no buying rates the rate will be the rate determined by the Agent to be its cost of funds. BSA means Bank of South Australia, Limited or its successor. BILL means a Bill of Exchange as defined in the Bills of Exchange Act 1909. BORROWER CHARGE means the deed between the Borrower and the Agent. BUSINESS DAY means a weekday on which banks are open for business in Sydney. CALCULATION REFERENCE DATE means the last day of the relevant quarter of the financial year of a Relevant Company. CASINO LICENCE means the Casino Licence granted in favour of the Operator under the Casino Operations Agreement. CASINO OPERATOR'S AGREEMENT means the agreement dated on or about the date of this Agreement between the Minister, Diamond Leisure Pty Limited and MGM Grand Australia Pty Limited under which the Casino Licence is granted. CHARGE means the Borrower Charge or the Guarantor Charge. CHARGING GROUP MEMBER means: (a) the Borrower or any Guarantor; or (b) a Related Corporation of the Borrower or any Guarantor which has granted a Satisfactory Charge. COLLATERAL SECURITY means any Security Interest, Guarantee or other document or agreement at any time created or entered into as security for any Secured Moneys other than the Borrower Charge and the Guarantor Charge. It includes the Share Mortgage, The MGM Guarantee, the Site Mortgage and the Site Lease Mortgage. COMMITMENT in relation to a Participant means the amount against its name in Column 3 of Schedule 1 as reduced or cancelled under this Agreement. COMMITMENT FEE means: (a) from the date of this Agreement, until receipt by the Agent of the first certificate under Clause 17.1(a)(v), 0.4375% p.a.; and (b) from the receipt by the Agent of each certificate under Clause 17.1(a)(v) until receipt of the next such certificate, the percentage determined as specified in Schedule 4 ________________________________________________________________________________ Page 4 ________________________________________________________________________________ according to the ratio of Total Debt of MGM to EBITDA of MGM as shown in the earlier certificate, on the daily amount of the Undrawn Commitment (if any) of each Participant from the date of this Agreement. COMPLETION has the meaning given to it in the Purchase of Shares Agreement. DIAMOND BEACH CASINO means the casino located on the Site. DRAWDOWN DATE means the date on which any accommodation under this Agreement is or is to be drawn. DRAWDOWN NOTICE means a notice under Clause 4. EARNINGS means in respect of any period the total amount of consolidated pre-tax profit plus Interest Expense of a Relevant Company shown by the Latest Accounts for that period. EBITDA means for the relevant period in relation to any Relevant Company on a consolidated basis, determined in accordance with the current accounting practice in force, on the relevant Calculation Reference Date, the sum of: (a) net income (or net loss); (b) all amounts treated as expenses for depreciation and interest, the amortisation of Intangible Assets of any kind to the extent included in the determination of such net income (or loss); and (c) all accrued Taxes on or measured by net income to the extent included in the determination of such net income (or loss), but without including any extraordinary loss or extraordinary gain. ENVIRONMENTAL LAW means a provision of a law or a law, which relates to an aspect of the environment or health. EVENT OF DEFAULT means any of the events specified in Clause 18.1 EXCLUDED TAX means (a) a Tax imposed by a jurisdiction on the net income of a Indemnified Party as a consequence of that Indemnified Party being a resident of or organised or doing business in that jurisdiction; or (b) Australian Withholding Tax required to be deducted or withheld from interest on any payment under the Transaction Documents; but not a Tax: (c) which is, without including any Tax referred to in paragraph (b) above, calculated by reference to the gross amount of a payment derived by a Indemnified Party under a Transaction Document or another document referred to in a Transaction Document (without the allowance of a deduction); or (d) which is imposed as a result of a Indemnified Party being considered a resident of that jurisdiction or organized or doing business in that jurisdiction solely as a result ________________________________________________________________________________ Page 5 ________________________________________________________________________________ of it being a party to a Transaction Document or a transaction contemplated by a Transaction Document. FERNBANK means Fernbank Pty Limited (ACN 009 622 262) incorporated in the Northern Territory of 3rd Floor, Diamond Beach Casino, Gilruth Avenue, Darwin City. FINANCIAL INDEBTEDNESS means, without double counting, any indebtedness, present or future, actual or contingent in respect of moneys borrowed or raised or any financial accommodation whatever. Without limitation, it includes, without double counting, indebtedness under or in respect of a negotiable or other financial instrument, a Guaranteed, an interest, commodity or currency exchange, swap, option, hedge or arrangement of any kind, redeemable share, share the subject of a Guarantee, discounting arrangement, finance or capital Lease, hire purchase, deferred purchase price (for more than 90 days) of an asset or service or an obligation to deliver goods or other property or provide services paid for in advance by a financier or in relation to another other financing transaction. FIXED CHARGES means for the relevant period in relation to a Relevant Company on a consolidated basis, the sum of (a) Interest Expense paid (excluding Interest Expense accrued but not paid) in that period; (b) Tax paid in that period; (c) capital expenditures in that period; and --- (d) any principal repayment required to be made under Clause 11 in that period. FIXED CHARGE COVERAGE RATIO means for a period the ratio of: A - B where: A is the EBITDA of the Borrower for that period B is the Fixed Charges in relation to the Borrower for that period. FUNDING PERIOD means a period for the fixing of interest rates for, and the funding of, a Loan. That period commences on the Drawdown Date of that Loan and has a duration specified in the Drawndown Notice in respect of that Loan. GOVERNMENTAL AGENCY means any government or any governmental, semi-governmental or judicial entity or authority. It also includes any self-regulatory organisation established under statute or any stock exchange. GROUP means MGM, The Borrower, each Guarantor and their respective Subsidiaries. GUARANTEE means any guarantee, indemnify, letter of credit, legally binding letter of comfort or suretyship, or any other obligation or irrevocable offer (whatever called and of whatever nature): (a) to pay or to purchase; (b) to provide funds (whether by the advance of money, the purchase of or subscription for shares or other securities, the purchase of assets, rights or services, or otherwise) for the payment or discharge of; ________________________________________________________________________________ Page 6 ________________________________________________________________________________ (c) to indemnify against the consequences of default in the payment of; or (d) to be responsible otherwise for, an obligation or indebtedness of another person, a dividend, distribution, capital or premium on shares, stock or other interests, or the insolvency or financial condition of another person. GUARANTOR CHARGE means the deed between Diamond Darwin Pty Ltd, Fernbank Pty Ltd, Diamond Leisure Pty Limited and the Agent under which the Mortgagors charge the Mortgage Property to secure Moneys. GUARANTOR ACCESSION DEED means a deed substantially in the form of Annexure C. HAVEWIN means Havewin Trading Limited, a company incorporated in Hong Kong, with its registered office at Rooms 705-8, Asia Pacific Finance Tower, Citibank Plaza, 3 Garden Road, Hong Kong. INDEMNIFIED PARTY means the Agent or a Participant. INTANGIBLE ASSETS means all assets and items which according to current accounting practice in force are regarded as intangible assets, including goodwill, patents, trademarks, design rights, franchises, mastheads, future Tax benefits and underwriting and formation expenses. INTELLECTUAL PROPERTY means any intellectual or industrial property including without limitation: (a) a patent, trade mark or service mark, copyright, registered design, trade secret, or confidential information; or (b) a license or other right to use or to grant the use of any of the above or to be the registered proprietor or user of any of the above. INTEREST EXPENSE means all interest and amounts in the nature of interest or of similar effect to interest (including amounts other than principal payable under this Agreement) paid or payable by a Relevant Company or any of its Subsidiaries shown by the Latest Accounts including: (a) any dividend or distribution payable on any Marketable Security included as Financial Indebtedness; (b) rentals in respect of capitalised Lease obligations other than payments on account of principal; (c) the face amount of bills of exchange or other financial instruments (but not reliquefication bills drawn under this Agreement) drawn, issued, endorsed or accepted by the Relevant Company or any of its Subsidiaries less their net proceeds after discount or issue and payment of any acceptance, endorsement, underwriting or similar fee; and (d) all line, facility, letter or credit, guarantee and similar fees and all fees and other amounts of a regular or recurring nature payable in relation to Financial Indebtedness but not: (i) unused line fees; and (ii) establishment, arrangement and other fees payable once only on the initial provision of financial accommodation, ________________________________________________________________________________ Page 7 ________________________________________________________________________________ but excluding all transactions between any two of the Borrower and its Subsidiaries. LATEST ACCOUNTS means at any time the latest audited or unaudited consolidated annual or quarterly Accounts of a Relevant Company and its Subsidiaries or if appropriate for the relevant determination other accounts prepared in the manner approved by the Agent on the instructions of all Participants prepared and provided to the Agent in accordance with this Agreement. LEASE means: (a) any lease, charter, hire purchase or hiring arrangement of any property (including, without limitation, a right to use Intellectual Property or a franchise); (b) an agreement under which property is or may be used or operated by a person other than the owner; or (c) an agreement or arrangement under which property is or may be managed or operated by a person other than the owner, and the operator or manager or its Related Corporation or Associate (whether in the same or another agreement or arrangement) is required to make or assure minimum, fixed and/or floating rate payments of a periodic nature. LICENCE AGREEMENT means the agreement dated 30 June 1995 between John Victor Aspinall and the Borrower. LIQUIDATION includes receivership, compromise with creditors generally, arrangement, amalgamation, administration, reconstruction, winding up, dissolution, assignment for the benefit of creditors, bankruptcy or death. LOAN means each loan lent or to be lent under this Agreement which has the same Funding Period. MAJORITY PARTICIPANTS means Participants whose Commitments are more than 60% of the sum of the Commitments. MARGIN means: (a) from the date of this Agreement, until receipt by the Agent of the first Certificate under Clause 17.1(a)(v), 1.875% pa; (b) from receipt by the Agent of each certificate under Clause 17.1(a)(v) until receipt of the next such Certificate, the percentage determined as specific in Schedule 4 according to the ratio of Total Debt of MGM to EBITDA of MGM as shown in the earlier certificate. MARKETABLE SECURITY has the meaning given in the Corporations Law, but also includes: (a) a unit or other interest in the Trust; (b) a right or an option in respect of a Marketable Security, whether issued or unissued, including, without limitation, any of the above. MATERIAL ADVERSE EFFECT means a material adverse effect on the ability of a Relevant Company to perform its obligations under a Relevant Document or on the Security Interests of the Indemnified Parties. ________________________________________________________________________________ Page 8 ________________________________________________________________________________ MATERIAL DOCUMENT means: (a) Purchase of Shares Agreement; (b) Option Deed; (c) Site Lease; (d) Casino Operator's Agreement; (e) Casino Licence; (f) Licence Agreement; (g) any licence or Lease of Intellectual Property; or (h) another document or agreement which is material to the business of the Borrower, the Mortgaged Property or the security of the Agent and the Indemnified Parties, or which is reasonably specified by the Agent as being so after consultation with the Borrower. MGM means MGM Grand, Inc., a company incorporated in the State of Delaware, United States, with its principal office in Las Vegas, Nevada. MGM GRAND DIAMOND means MGM Grand Diamond, Inc. incorporated in the State of Nevada, United States of America, with its principal office in Las Vegas, Nevada. MGM GUARANTEE means the guarantee dated on or about the date of this Agreement by MGM in favour of the Agent on behalf of the Indemnified Parties. MINISTER means Barry Francis Coulter in his capacity as minister responsible for the Gaming Control Act 1993 (Northern Territory) or his successors in office. MORTGAGED PROPERTY means the property mortgaged or charged by the Borrower Charge, the Guarantor Charge or any Collateral Security. OPERATOR means Diamond Leisure Pty Limited whose particulars are specified in Schedule 2. OPTION DEED means the deed dated 30 June 1995 between MGM Grand Diamond, the Borrower, MGM and the Option Holders (as defined in that Deed). POTENTIAL EVENT OF DEFAULT means anything which with the giving of notice or passage of time or both would become an Event of Default. PRINCIPAL OUTSTANDING means total principal amount of all outstanding Loans. PURCHASE OF SHARES AGREEMENT means the Agreement for Purchase of Shares dated 30 June 1995 between the Vendors, the Borrower and MGM. RELATED CORPORATION has the meaning given to RELATED BODY CORPORATE in the Corporations Law, but on the basis that SUBSIDIARY has the meaning given in this Agreement and that BODY CORPORATE includes any entity or a trust. RELEVANT COMPANY means; (a) the Borrower, any Guarantor or any of their respective Subsidiaries; ________________________________________________________________________________ Page 9 ________________________________________________________________________________ (b) MGM Grand Diamond; (c) a corporation or trust in which the Borrower, each Guarantor or their respective Subsidiary are beneficially entitled (directly or indirectly) to more than 20% of the voting shares and any Subsidiary of that corporation or trust; or (d) another person who gives or creates a Guarantee or Security Interest which secures and Secured Moneys. RELEVANT DOCUMENT means a Transaction Document or a Material Document. RELIQUEFICATION BILL means a Bill drawn under Clause 8. REPAYMENT DATE means each of the dates in Column 1 of Schedule 3. RESTRICTED PAYMENT means any payment, financial assistance, distribution or investment: (a) described in Clause 17.1(r) and (s); or (b) under any dealing with an Associate which is not at arm's length in the ordinary course of business and for valuable consideration of business. SATISFACTORY CHARGE means a first charge over all assets to secure the Secured Moneys where the Agent has received documents or evidence in connection with that charge satisfactory to the Agent acting reasonably without undue delay (including, where requested, opinions). SATISFACTORY GUARANTEE means a Guarantee in respect of the Secured Moneys where the Agent has received documents or evidence in connection with the Guarantee satisfactory to the Agent acting reasonably without undue delay (including, where requested, opinions). SECURED MONEYS means all money which the Borrower or any Guarantor (whether alone or with another person) is or at any time may become actually or contingently liable to pay to or for the account of an Indemnified Party (whether alone or with another person) for any reason whatever under or in connection with a Transaction Document. It includes, without limitation, money by way of principal, interest, fees, costs, indemnities, charges, duties or expenses or payment of liquidated or unliquidated damages under or in connection with a Transaction Document, or as a result of a breach of or default under or in connection with a Transaction Document. Where the Borrower or a Guarantor would have been liable but for its Liquidation, it will be taken still to be liable. SECURITY INTEREST includes any mortgage, pledge, lien or charge or any security or preferential interest or arrangement of any kind or any other right of, or arrangement with, any creditor to have its claims satisfied in priority to other creditors with, or from the proceeds of, any asset. Without Limitation it includes retention of title other than in the ordinary course of day-to-day trading and a deposit of money by way of security but it excludes a charge or lien arising in favour of a Governmental Agency by operation of statute unless there is default in payment of moneys secured by that charge or lien. SHARE of a Participant, in respect of a Loan, means the Proportion of that Participant's participation in that Loan to the amount of the Loan (such proportion to be determined under Clause 3.2). ________________________________________________________________________________ Page 10 ________________________________________________________________________________ SHARE MORTGAGE means the mortgage in favour of the Agent by MGM Grand Diamond of all the shares issued by the Borrower (except those issued or transferred under the Option Deed). SITE means the land in Lot 5244 of Town Darwin as shown on Plan S79/12 and comprised in Certificate of Title Volume 112 Folio 148. SITE LEASE means the lease between Fernbank Pty Limited and Diamond Leisure Pty limited dated 19 December 1984. SITE MORTGAGE means the mortgage dated on or about the date of this Agreement between Fernbank Pty Ltd as Mortgagor and the Agent as Mortgagee. SITE LEASE MORTGAGE means the mortgage dated on or about the date of this Agreement between Diamond Leisure Pty Limited as Mortgagor and the Agent as Mortgagee. SUBSIDIARY has the meaning given in the Corporations Law but so that: (a) an entity will also be deemed to be a Subsidiary of a company if it is controlled by that company (expressions used in this paragraph have the meanings given for the purposes of Parts 3.6 and 3.7 of the Corporations Law); (b) a trust may be a Subsidiary, for the purposes of which a unit or other beneficial interest will be regarded as a share; and (c) a corporation or trust may be a Subsidiary of a trust of it would have been a Subsidiary if that trust were a corporation. TAX includes any tax, levy, impost, deduction, charge, rate, duty, compulsory loan or withholding which is levied or imposed by a Governmental Agency, and any related interest, penalty, charge, fee or other amount. TOTAL DEBT in relation to a Relevant Company means the total Financial Indebtedness of it and its subsidiaries on a consolidated basis. TRANSACTION DOCUMENT means this Agreement, the Uncommitted Standby Cash Advance Facility Letter, the Borrower Charge, the Guarantor Charge, the Site Mortgage, the Site lease Mortgage, the Share Mortgage, the MGM Guarantee any Guarantor Accession Deed, any other Collateral Security or a document or agreement entered into or provided under or in connection with, or for the purpose of amending or novating, any of the above. It includes, without limitation, an undertaking by or to a party or its lawyers under or in relation to any of the above. TRUST means the trust entitled THE TERRITORY PROPERTY TRUST established under the Trust Deed. TRUST DEED means the trust deed in relation to the Trust between Abington Pty Limited as Manager and Fernbank Pty Ltd as Trustee dated 28 September 1984 as amended from time to time. ULTRABRIDGE means Ultrabridge Darwin Limited, a company incorporated in the Cayman Islands and has its registered office at P.O. Box 309, Ugland House, South Church Street, Grand Cayman, Cayman Islands, British West Indies. UNCOMMITTED STANDBY CASH ADVANCE FACILITY LETTER means the letter from Bank of America Australia Limited to the Borrower dated on or about the date of this Agreement in relation to an uncommitted standby cash advance facility. UNDRAWN COMMITMENT means a Participant's Commitment less the total principal amount of its Share of all outstanding Loans. _______________________________________________________________________________ Page 11 ________________________________________________________________________________ 1.2 INTERPRETATION Headings are for convenience only and do not affect Interpretation. The following rules apply unless the context requires otherwise. (a) The singular includes the plural and the converse. (b) A gender includes all genders. (c) Where a word or phrase is defined, its other grammatical forms have a corresponding meaning. (d) A reference to a person, corporation, trust, partnership, unincorporated body or other entity includes any of the foregoing. (e) A reference to a Clause, Annexure or Schedule is a reference to a clause of, or annexure or schedule to, this Agreement. (f) A reference to a party to this Agreement or another agreement or document includes the party's successors and permitted substitutes or assigns. (g) A reference to an agreement or document is to the agreement or document as amended, novated, supplemented or replaced from time to time, except to the extent prohibited by this Agreement. (h) A reference to legislation or to a provision of legislation includes a modification or re-enactment of it, a legislative provision substituted for it and a regulation or statutory instrument issued under it. (i) A reference to WRITING includes a facsimile transmission and any means of reproducing words in a tangible and permanently visible form. (j) A reference to CONDUCT includes, without limitation, an omission, statement or undertaking, whether or not in writing. (k) An Event of Default SUBSISTS until (i) it has been waived in writing by the Agent acting on the instructions of the Majority Participants; or (ii) in the case of an Event of Default other than a non-payment default under Clause 18.1(a), the Borrower demonstrates to the satisfaction of the Agent (acting reasonably without undue delay) that it has been remedied. (l) A reference to an amount for which a person is contingently liable includes, without limitation, an amount which that person may become actually or contingently liable to pay if a contingency occurs, whether or not that liability will actually arise. 1.3 DETERMINATION, STATEMENT AND CERTIFICATE Except where otherwise provided in this Agreement any determination, statement or certificate by the Agent or an Authorised Officer of the Agent or the Auditors provided for in this Agreement is sufficient evidence unless the contrary is proved. ________________________________________________________________________________ Page 12 ________________________________________________________________________________ 1.4 DOCUMENT OR AGREEMENT A reference to an AGREEMENT includes a Security Interest, Guarantee, undertaking, deed, agreement or legally enforceable arrangement whether or not in writing. A reference to a DOCUMENT includes an agreement (as so defined) in writing or a certificate, notice, instrument or document. 1.5 LISTING REQUIREMENTS INCLUDED AS LAW Where applicable, a listing rule or business rule of a stock exchange (as defined in section 603 of the Corporations Law) will be regarded as a LAW. 1.6 OBLIGATIONS SEVERAL The obligations and rights of each Participant under this Agreement are several and: (a) failure of a Participant to carry out its obligations shall not relieve any other Participant of its obligations; (b) no Participant shall be responsible for the obligations of any other Participant or the Agent; and (c) subject to the provisions of the Transaction Documents each Participant may separately enforce its rights under any Transaction Document. 1.7 FAILURE TO NOTIFY Unless otherwise provided in this Agreement, failure by the Agent to give any notice of anything to the Borrower or any Participant will not affect the obligations of the Borrower or the Participants in any way. 1.8 CURRENT ACCOUNTING PRACTICE AND ACCOUNTING TERMS A reference to CURRENT ACCOUNTING PRACTICE is to accounting principles and practices applying by law or otherwise generally accepted in Australia or in the case of MGM, the U.S. Generally Accepted Accounting Principles, consistently applied. Unless otherwise defined, accounting terms should be interpreted in accordance with current accounting practice in force at the relevant time. 2. PURPOSE The Borrower shall use the net proceeds of all Loans for the following purposes: (a) to finance the direct and indirect acquisition of the shares in Diamond Darwin Pty Limited; (b) to refinance the existing outstanding facilities and leases provided by BSA; (c) for general corporate, working capital and capital refurbishment purposes; (d) the acquisition of units held by Kumagai Gumi in the Trust. ________________________________________________________________________________ Page 13 ________________________________________________________________________________ 3. FACILITY 3.1 ADVANCE OF LOAN (a) Subject to this Agreement, whenever the Borrower requests a Loan in a Drawdown Notice, each Participant shall provide its Share of that Loan to the Agent in immediately available funds by 11 am (Sydney time) on the relevant Drawdown Date for the account of the Borrower. (b) On receipt the Agent shall pay it to the relevant account specified in the Drawdown Notice. (c) A Participant is not obliged to make available a Loan if as a result its participation in all outstanding Loans would exceed its Commitment. 3.2 ALLOCATION AMONG PARTICIPANTS The Participants will participate in each Loan ratably according in their respective Commitments. 3.3 REPAYMENT OF EACH LOAN Subject to Claus 11 and Clause 12.1, (a) the Borrower shall repay each Loan on the last day of its Funding Period except to the extent it is redrawn on that day; and (b) if all or part of a Loan is to be redrawn on the last day of its Funding Period, then on that day the Borrower and the Participants will not be obliged to repay or make available the amount of the Loan which is being redrawn. 4. DRAWDOWN NOTICES 4.1 WHEN NOTICE TO BE GIVEN Whenever the Borrower wishes to make a drawing it shall give to the Agent an irrevocable Drawdown Notice substantially in the form of Annexure A. That Drawdown Notice must be received by the Agent by 11 am (Sydney time) two Business Days before the proposed Drawdown Date (which must be a Business Day). 4.2 NOTIFICATION OF PARTICIPANTS The Agent shall notify each Participant promptly of the contents of each Drawdown Notice and the amount of each Participant's Share of each Loan requested. 5. PRINCIPAL AMOUNT OF LOANS 5.1 PRINCIPAL AMOUNT OF LOANS The Borrower shall ensure that each Loan is a minimum of A$5,000,000 and a whole multiple of A$500,000, or the sum of the Undrawn Commitments. 6. SELECTION OF FUNDING PERIODS (a) Subject to this clause, the Borrower may only select Funding Periods of 30, 60, 90, 120 or 180 days. ________________________________________________________________________________ Page 14 ________________________________________________________________________________ (b) The Borrower may select any other period agreed by the Agent subject to the consent of the Majority Participants. (c) Should a Funding Period end on a day which is not a Business Day, that Funding Period will be extended to the next Business Day in the same calendar month or, if none, the preceding Business Day. (d) No Funding Period may extend beyond the final Repayment Date. The Borrower shall select Funding Periods so as to ensure that each Repayment Date coincides with the last day of Funding Periods of outstanding Loans not less than the principal amount to be repaid that day. (e) If the Borrower fails to select Funding Periods, the Agent may vary any Drawdown Notice to ensure compliance but in the absence of it doing so, the Borrower will be taken to having selected a Funding Period of 30 days. 7. INTEREST (a) Interest accrues from day to day on the outstanding principal amount of each Loan at the rate determined by the Agent to be the sum of the Margin and the Bank Bill Rate for the relevant Funding Period. (b) The Borrower shall pay accrued interest in arrears on the last day of each calendar month. 8. RELIQUEFICATION BILLS 8.1 PREPARATION OF RELIQUEFICATION BILLS The Borrower irrevocably and for valuable consideration authorises each Participant (at the option of the Participant) from time to time: (a) to prepare Reliquefication Bills in relation to a Loan; and (b) by its Authorised Officer, to sign them as drawer, endorser and/or acceptor in the name and on behalf of the Borrower. 8.2 REQUIREMENTS OF RELIQUEFICATION BILLS (a) The total face amount of Reliquefication Bills prepared by any Participant and outstanding in relation to any Loan must not at any time exceed: (i) that Participant's Share of the principal amount of that Loan; plus (ii) the total interest which has accrued or will accrue on that Share during the relevant Funding Period. (b) Reliquefication Bills must mature on or before the last day of the relevant Funding Period. 8.3 DEALING WITH RELIQUEFICATION BILLS Each Participant may realise or deal with any Reliquefication Bill as it thinks fit. ________________________________________________________________________________ Page 15 ________________________________________________________________________________ 8.4 INDEMNITY (a) Each Participant shall indemnify the Borrower on demand against all liabilities, costs and expenses incurred by the Borrower because it is a party to a Reliquefication Bill prepared by that Participant. (b) Paragraph (a) does not affect any obligation of the Borrower under this Agreement. In particular the obligation of the Borrower to pay any principal, interest or other moneys under this Agreement is absolute and unconditional. It is not in any way affected by any liability of a Participant, contingent or otherwise, under this indemnity. (c) If a Reliquefication Bill is presented to the Borrower and the Borrower discharges it by payment, the amount of that payment will be deemed to have been applied against the moneys outstanding under this Agreement to that Participant. 8.5 STAMP DUTY ON RELIQUEFICATION BILLS Each Participant shall pay any stamp duty on Reliquefication Bills prepared by it. 9. FEES 9.1 COMMITMENT FEE (a) The Commitment Fee is calculated on the actual number of days elapsed and on the basis of a year of 365 days. (b) The Borrower shall pay accrued Commitment Fee in arrears on the last Business Day of each calendar quarter and at the end of the Availability Period. 9.2 ESTABLISHMENT FEE On the first Drawdown Date the Borrower shall pay to the Agent an establishment fee specified in the letter dated 27 June 1995 from the Agent to the Borrower. 10. EARLY CANCELLATION OF COMMITMENT 10.1 VOLUNTARY CANCELLATION On giving not less than thirty Business Days irrevocable notice to the Agent the Borrower may cancel all or part of the Undrawn Commitments during the Availability Period. A partial cancellation must be in a minimum of A$5,000,000 and in a whole multiple of A$500,000. 10.2 ALLOCATION AMONG PARTICIPANTS Any partial cancellation will be applied ratably against the Undrawn Commitment of each Participant. The Agent shall promptly notify each Participant of any notice received under this clause and the amount of that Participant's Commitment which is cancelled. 10.3 APPLICATION AGAINST INSTALMENTS Early cancellation of Commitment will be applied against repayment installments as selected by the Borrower. 11. CANCELLATION AND REPAYMENT INSTALLMENTS ________________________________________________________________________________ Page 16 ________________________________________________________________________________ 11.1 REDUCTION OF COMMITMENT IN INSTALLMENTS (a) On each Repayment Date the Commitments will be reduced by installments on the Repayment Dates. (b) Each installment equal to the amount specified in Column 2 of Schedule 3. (c) The final installment will be the Commitments as at the final Repayment Date. 11.2 REPAYMENT The Borrower shall repay the Principal Outstanding on the Repayment Dates to the extent necessary to ensure so that the Principal Outstanding does not exceed the Commitments as reduced. 11.3 ALLOCATION AMONG PARTICIPANTS Repayment and reductions will be applied ratably among the Participants according to their participations in the Principal Outstanding. 12. PREPAYMENTS 12.1 COMPULSORY PREPAYMENT IF CONDITIONS SUBSEQUENT NOT MET The Borrower shall repay the Principal Outstanding on the thirty-first day following the first Drawdown Date and all Commitments are cancelled as of that day if the conditions subsequent in Clause 15.3 are not satisfied. 12.2 VOLUNTARY PREPAYMENTS (a) Subject to this clause, if it gives at least 30 days' prior notice to the Agent (who shall promptly notify the Participants) the Borrower may prepay all or part of the Principal Outstanding. That notice is irrevocable. The Borrower shall prepay in accordance with it. (b) Unless the Agent agrees otherwise, prepayment of part only of a Loan may only be made in a minimum of A$5,000,000 and a whole multiple of A$5,000,000. 12.3 INTEREST When the Borrower prepays any amount it shall pay any interest accrued on that amount and any other amount payable under Clause 21.1(e) 12.4 LIMITATION ON PREPAYMENTS The Borrower may not prepay all or any part of the Principal Outstanding except in accordance with this Agreement. 12.5 APPORTIONMENT Prepayments under Clause 12.2 will be applied ratably in reduction of the respective participations of all the Participants in the Principal Outstanding and ratably amongst their respective Commitments. ________________________________________________________________________________ Page 17 ________________________________________________________________________________ 13. PAYMENTS 13.1 MANNER The Borrower and each Guarantor shall make all payments under any Transaction Document: (a) by bank cheque delivered to the Agent at its address for service of notices or by transfer of immediately available funds to the account specified by the Agent from time to time, in either case by 11 am (local time) on the due date; and (b) without set-off or counterclaim and without any deduction, except any compulsory deduction with respect to Taxation. 13.2 PAYMENT TO BE MADE ON BUSINESS DAY If any payment is due on a day which is not a Business Day, the due date will be the next Business Day in the same calendar month or, if none, the preceding Business Day. 13.3 DISTRIBUTION BY AGENT Unless any Transaction Document expressly provides otherwise, the Agent shall promptly distribute amounts received under any Transaction Document for the account of the Participants ratably among them. 13.4 APPROPRIATION WHERE INSUFFICIENT MONEYS AVAILABLE Amounts received by the Agent will be appropriated as between principal, interest and other amounts then payable as the Agent determines. This appropriation will override any appropriation made by the Borrower or a Guarantor. Without limitation the Agent may appropriate amounts first in payment of amounts payable to it by way of indemnity or reimbursement. 13.5 UNANTICIPATED DEFAULT (a) (ASSUMPTION AS TO PAYMENT) The Agent may assume that a party (the PAYER) due to make a payment for the account of another party (the RECIPIENT) makes that payment when due unless the Payer notifies the Agent at least one Business Day before the due date that the Payer will not be making the payment. (b) (RELIANCE ON ASSUMPTION) In reliance on that assumption, the Agent may make available to the Recipient on the due date an amount equal to the assumed payment. (c) (RECOUPMENT) If the Payer does not in fact make the assumed payment, the Recipient shall repay the Agent the amount on demand. The Payer will still remain liable to make the assumed payment, but until the Recipient does repay the amount, the Payer's liability will be to the Agent in the Agent's own right. (d) (INTEREST) If the Payer is the Borrower or a Guarantor any interest on the amount of the assumed payment accruing before recovery will belong to the Agent. If the Payer is a Participant that Participant shall pay interest on the amount of the assumed payment at the rate determined by the Agent, in line with its usual practice, for advances of similar duration to financial institutions of the standing of the Participant. ________________________________________________________________________________ Page 18 ________________________________________________________________________________ 13.6 ROUNDING In making any allocation or appropriation under any Transaction Document the Agent may round amounts to the nearest Australian dollar. 14. CHANGES IN LAW 14.1 ADDITIONAL PAYMENTS Whenever any Indemnified Party determines that: (a) the effective cost to the Indemnified Party of making, funding or maintaining any Loan or the Commitment is increased in any way; (b) any amount paid or payable to the Indemnified Party or received or receivable by the Indemnified Party, or the effective return to the Indemnified Party or any of its holding companies, under or in respect of any Transaction Document is reduced in any way; (c) the return of the Indemnified Party or any of its holding companies on the capital which is or becomes directly or indirectly allocated by the Indemnified Party or the holding company to any Loan or its Commitment is reduced in any way; or (d) to the extent any relevant law, official directive or request relates to or affects its Commitment, any Loan or the Transaction Documents, the overall return on capital of the Indemnified Party or any of its holding companies is reduced in any way, as a result of any change in, any making of, or any change in the interpretation or application by any Governmental Agency of, or compliance with, any law, official directive or request, then: (e) that Indemnified Party shall promptly notify the Borrower; and (f) if the negotiations referred to in Clause 14.2(b) do not result in a satisfactory agreement between the Agent, the Borrower and the relevant Participant, the Borrower may prepay all or part of the Principal Outstanding in accordance with Clause 12; and (g) on demand from time to time the Borrower shall pay for the account of that Indemnified Party the amount certified by an Authorised Officer of the Indemnified Party to be necessary to compensate the Indemnified Party or the relevant holding company (as the case may be) for the increased cost or the reduction. Without limiting the above in any way, this clause applies: (h) to any law, official directive or request with respect to Taxation except an Excluded Tax or reserve, liquidity, capital adequacy, special deposit or similar requirements: (i) to official directives or requests which do not have the force of law where it is the practice of responsible bankers or financial institutions in the country concerned to comply with them; and (j) where the increased cost or the reduction arises because the relevant Indemnified Party or any of its holding companies is restricted in its capacity to enter other transactions, is required to make a payment, or forgoes or earns reduced interest or other return on any capital or on any sum calculated by reference in any way to the amount of any Loan, its Commitment or to any other amount paid or payable or ________________________________________________________________________________ Page 19 ________________________________________________________________________________ received or receivable under any Transaction Document or allocates capital to any such sum. 14.2 MINIMISATION (a) (NO DEFENCE) If the relevant Indemnified Party and (if applicable) its holding company has acted in good faith it will not be a defence that any cost, reduction or payment referred to in this clause could have been avoided. (b) (NEGOTIATION) At the request of the Borrower the Agent and any relevant Participant shall negotiate in good faith with the Borrower with a view to finding a way of minimising any cost, reduction or payment referred to in Clause 14.1. 14.3 SURVIVAL This clause survives the repayment of any relevant Loan and the termination of this Agreement. 15. CONDITIONS PRECEDENT 15.1 CONDITIONS PRECEDENT TO DRAWDOWN NOTICE The right of the Borrower to give a Drawdown Notice and the obligations of each Participant under this Agreement are subject to the condition precedent that the Agent receives all of the following in form and substance satisfactory to the Agent: (a) (VERIFICATION CERTIFICATE) a certificate in relation to the Borrower given by a director of the Borrower substantially in the form of Annexure B with the attachments referred to and dated not earlier than 14 days before the first Drawdown Date; (b) (PURCHASE OF SHARES AGREEMENT) evidence that: (i) all requirements under clause 4 (conditions precedent) of the Purchase of Shares Agreement are satisfied; and (ii) within five days of Completion of the Purchase of Shares Agreement, the Borrower will be the sole beneficial owner of the Shares (as defined in the Purchase of Shares Agreement) in and Financial Indebtedness owed by Diamond Darwin Pty Limited (other than Financial Indebtedness disclosed in the letter dated 4 September 1995); (c) (COPIES OF AUTHORISATIONS AND CONDITIONS PRECEDENT) certified copies of all relevant Authorisations and other conditions precedent referred to in clause 4 of the Purchase of Shares Agreement; (d) (CASINO OPERATOR'S AGREEMENT) evidence that: (i) the Casino Operator's Agreement has been duly executed by all parties and is in full force and effect; and (ii) the Casino Licence has been granted and is in full force and effect. (e) (SITE LEASE MORTGAGE AND SITE MORTGAGE) evidence that the written consents of the Treasurer, Northern Territory to the creation of the Site Lease Mortgage have been obtained; ________________________________________________________________________________ Page 20 ________________________________________________________________________________ (f) (TRANSACTION DOCUMENTS) duly executed counterparts of this Agreement, the Borrower Charge, the MGM Guarantee and the Share Mortgage; (g) (REGISTRATION) evidence that the Borrower Charge has been registered by the Australian Securities Commission or delivered to the Agent in registrable form with any necessary executed ASC Forms 309 and 350; (h) (MATERIAL DOCUMENTS) executed counterparts of each Material Document and evidence of any appropriate stamping arrangement; (i) (MORTGAGE PROPERTY) results of searches, enquiries and requisitions in relation to the Mortgaged Property; (j) (LEGAL OPINIONS) (i) an opinion of Mallesons Stephen Jaques, Australian legal advisers to the Borrower as to the Material Documents; and (ii) opinions from Lionel, Sawyer & Collins, and Christensen, White, Miller, Fink & Jacobs, US legal advisers to MGM as to the MGM Guarantee and the Share Mortgage, in the forms agreed with the Agent on or before the date of this Agreement. (k) (BANKS' LAWYERS' OPINION) an opinion of Allen Allen & Hemsley, Australian legal advisers to the Agent on behalf of the Participants substantially in the form initialled by the Agent on or before the date of this Agreement. 15.2 CONDITION PRECEDENT TO FIRST LOAN To obligation of each Participant to make available the first Loan is subject to the further condition precedent that before or simultaneously with a making of that Loan the Agent receives in form and substance satisfactory to it all of the following: (a) (PURCHASE OF SHARES AGREEMENT) evidence that all requirements under Clause 5.2 of the Purchase of Share Agreement are satisfied; (b) (TITLE DOCUMENTS) all documents and evidence of title to the Mortgaged Property by way of custody; (c) (ESTABLISHMENT FEE) the Agent has received the establishment fee. (d) (DISCHARGES) discharges of all Security Interest given to BSA by the Guarantors and evidence that all finance leases all operating leases with a financier entered into by the Guarantors have expired or have been terminated. 15.3 CONDITIONS SUBSEQUENT TO FIRST LOAN The obligations of each Participant under this Agreement subsequent to the first Drawdown Date are subject to the condition subsequent that the Agent receives within 30 days of the first Drawdown Date all of the following in form and substance satisfactory to the Agent: (a) (VERIFICATION CERTIFICATE) a certificate in relation to each of the Guarantors given by a director of the Guarantor respectively substantially in the form of Annexure B with the attachments referred to and dated not earlier than 14 days before the first Drawdown Date; ________________________________________________________________________________ Page 21 ________________________________________________________________________________ (b) (PURCHASE OF SHARES AGREEMENT) evidence that the Borrower is the sole beneficial owner of the Shares in and Financial Indebtedness of Diamond Darwin Pty Limited; (c) (TRANSACTION DOCUMENTS) executed and stamped counterparts of the Guarantor Accession Deeds (between each of the companies in Schedule 2 respectively and the Agent), the Guarantor Charge, the Site Mortgage and the Site Lease Mortgage and evidence of their due execution by each party to them; (d) (REGISTRATION) evidence that: (i) the Guarantor Charge has been registered by the Australian Securities Commission or delivered to the Agent in registrable form together with any necessary executed ASC Forms 309 and 350; and (ii) the Site Mortgage and the Site Lease Mortgage have been registered with the relevant Governmental Agency or delivered to the Agent in registrable form; free from all prior Security Interests and third party rights and interests; (e) (CONSENT OF SHAREHOLDERS) a consent signed by each shareholder of a Guarantor consenting to that Guarantor entering into the Transaction Documents even though it might constitute a breach of the directors duties; (f) (CONSENT BY UNITHOLDERS) a consent signed by each unitholder in the Trust for Fernbank Pty Limited as trustee to enter the Transaction Documents even though it might constitute of breach of trust; and (g) (CERTIFICATE OF COMPLIANCE) a certificate by a director and secretary of each Guarantor under s.206(6) of the Corporations Law substantially in the form of Annexure E; 15.4 CONDITIONS PRECEDENT TO EACH LOAN The obligation of each Participant to make available each Loan is subject to the further conditions precedent that: (a) (REPRESENTATIONS TRUE) the representations and warranties by the Borrower and each Guarantor in the Transaction Documents are true in all material respects as at the date of the relevant Drawdown Notice and the relevant Drawdown Date as though they had been made at that date in respect of the facts and circumstances then subsisting; and (b) (NO DEFAULT) no Event of Default or Potential Event of Default is subsisting at the date of the relevant Drawdown Notice and the relevant Drawdown Date or will result from the provision of the Loan. 16. REPRESENTATIONS AND WARRANTIES 16.1 REPRESENTATIONS AND WARRANTIES Each of the Borrower and Guarantors makes the following representations and warranties in favour of the Indemnified Parties. (a) (STATUS) It is a corporation validly existing under the laws of the place of its incorporation specified in this Agreement. ________________________________________________________________________________ Page 22 ________________________________________________________________________________ (b) (POWER) It has the power to enter into and perform its obligations under the Relevant Documents to which it is expressed to be a party, to carry out the transactions contemplated by those documents and to carry on its business as now conducted or contemplated. (c) (CORPORATE AUTHORISATIONS) It has taken all necessary corporate action to authorise the entry into and performance of the Relevant Documents to which it is expressed to be a party, and to carry out the transactions contemplated by those documents. (d) (DOCUMENTS BINDING) Each Relevant Document to which it is expressed to be a party is its valid and binding obligation enforceable in accordance with its terms, subject to any necessary stamping and registration. Each of the Borrower Charge, the Guarantor Charge and any Collateral Security is effective security over the Mortgaged Property with the priority stated subject to insolvency, administration and other moratorium, reconstruction, equitable remedies and the laws affecting creditors' rights generally and the laws of limitation affecting obligations. (e) (TRANSACTIONS PERMITTED) The execution and performance by it of the Relevant Documents to which it is expressed to be a party and each transaction contemplated under those documents did not and will not violate in any respect a provision of: (i) a law or treaty or judgement, ruling, order or decree of a Governmental Agency binding on it; (ii) its memorandum or articles of association or other constituent documents; or (iii) any other document or agreement which is binding on it or its assets, and, except as provided by the Transaction Documents, did not and will not: (iv) create or impose a Security Interest on any of its assets; or (v) allow a person to accelerate or cancel an obligation with respect to Financial Indebtedness (excluding the BSA loans repaid on the first Drawdown Date), or constitute an event of default, cancellation event, prepayment event or similar event (whatever called) under an agreement relating to Financial Indebtedness, whether immediately or after notice or lapse of time or both. (f) (ACCOUNTS) (i) Its most recent consolidated and unconsolidated audited Accounts give a true and fair view of the matters with which they deal. (ii) There has been no subsequent change in its and its Subsidiaries' and the Trust's state of affairs which may have a Material Adverse Effect. (iii) Those Accounts comply with current accounting practice except to the extent disclosed in them and with all applicable laws. (iv) All material Financial Indebtedness and other material contingent liabilities are disclosed in those Accounts. (g) (NO LITIGATION) No litigation, arbitration, Tax claim, dispute or administrative or other proceeding is current or pending or, to its knowledge, threatened, which may have a Material Adverse Effect. ________________________________________________________________________________ Page 23 ________________________________________________________________________________ (h) (NO DEFAULT) (i) No Relevant Company is in default under a document or agreement (including an Authorisation) binding on it or its assets which relates to material Financial Indebtedness or may have a Material Adverse Effect. (ii) Nothing has occurred which constitutes an event of default, cancellation event, prepayment event or similar event (whatever called) under those documents or agreements, whether immediately or after notice or lapse of time or both. (i) (AUTHORISATIONS) Each material Authorisation which is required in relation to: (i) the execution, delivery and performance by it of the Relevant Documents to which it is expressed to be a party and the transactions contemplated by those documents; (ii) the validity and enforceability of those documents and the effectiveness or priority of the Borrower Charge, the Guarantor Charge or any Collateral Security; and (iii) its business as now conducted or contemplated and which is material (including, without limitation, under Environmental Law), has been obtained or effected. Each is in full force and effect. It has complied with each of them. It has paid all applicable fees for each of them. (j) (NO MISREPRESENTATION) All information provided by it to the Agent and the Participants is true in all material respects at the date of this Agreement or, if later, when provided. Neither that information nor its conduct and the conduct of anyone on its behalf in relation to the transactions contemplated by the Relevant Documents, was or is misleading in a material respect, by omission or otherwise. (k) (AGREEMENTS DISCLOSED) Each document or agreement which is material to the Relevant Documents or which has the effect of varying a Relevant Document has been disclosed to the Agent in writing. (l) (COPIES OF DOCUMENTS) All copies of documents (including its latest audited accounts and all Authorisations) given by it or on its behalf to the Agent are true and complete copies. Unless otherwise indicated in writing before execution of this Agreement, those documents are in full force and effect. (m) (TITLE) (i) On or within five Business Days of the first Drawdown Date, the Borrower and each Guarantor are the beneficial owners of the Mortgaged Property purported to be charged or mortgaged by each of them and all material assets included in their respective latest audited Accounts free of any other third party right or interest whatever other than as permitted by Clauses 17.1(f), (g), (h) and (u). (ii) None of its or its Subsidiaries' assets is subject to a Security Interest which is not permitted by Clause 17.1(f). (iii) On the first Loan being made, Havewin, the Borrower and Ultrabridge will be the only beneficial owners of Shares (as defined in the Purchase of ________________________________________________________________________________ Page 24 ________________________________________________________________________________ Shares Agreement) in Diamond Darwin Pty Limited and all Financial Indebtedness of Diamond Darwin Pty Limited and its subsidiaries (except under the Transaction Documents) free from any Security Interest except under the Transaction Documents or as permitted under Clause 17.1(f). (iv) On or within five Business Days of the first Loan being made the Borrower will be the only beneficial owners of shares in Havewin and Ultrabridge and all Financial Indebtedness of Havewin and Ultrabridge free from any Security Interest except under the Transaction Documents. (v) On or within five Business Days of the first Drawdown Date, the Borrower will be the sole beneficial owner of all Shares (as defined in the Purchase of Shares Agreement) in and all Financial Indebtedness of Diamond Darwin Pty Limited and its Subsidiaries (except under the Transaction Documents) free from any Security Interest except as permitted under Clause 17.1(f). (n) (LAW) (i) It and each of its Subsidiaries has complied with all laws (including any Environmental Law) binding on it where breach may have a Material Adverse Effect. (ii) The Operator has complied with laws relating to the operation of the casino where failure to do so may have a Material Adverse Effect. (o) (ENVIRONMENT LAW) No act or omission has occurred and there is no circumstance relating to the Mortgaged Property or its business or the assets or business of any of its Subsidiaries which has given rise or may give rise to: (i) a substantial claim against it or any of its Subsidiaries; (ii) a requirement of substantial expenditure by it or any of its Subsidiaries; or (iii) a requirement that it or any of its Subsidiaries ceases or substantially alters an activity, under Environmental Law (except as disclosed in writing in the Mallesons Stephen Jaques's due diligence report dated 18 August 1995 as to Aboriginal sacred sites and passive smoking which may have a Material Adverse Effect). Without limitation none of its assets is contaminated in excess of legally acceptable levels in force as at the date of this Agreement, all material assets are within applicable environmental standards and all emissions and discharges are within standards or limits imposed by all relevant laws and Authorisations. (p) (TRUST) Except Fernbank Pty Limited, it does not hold any assets as the trustee of any trust. (q) (CORPORATE TREE) MGM Grand Diamond, a wholly owned Subsidiary of MGM, is the sole beneficial owner of all shares in the Borrower. (r) (SUBSIDIARIES) (i) None of its Subsidiaries has financial Indebtedness other than a Subsidiary which has given a Satisfactory Charge as a Relevant Company except as permitted under Clause 17.1(u). ________________________________________________________________________________ Page 25 ________________________________________________________________________________ (ii) Sub-paragraph (a) to (p) inclusive are correct with respect to each Subsidiary and each company that will on the first loan being made become its Subsidiary as if references to it were to the Subsidiary. 16.2 RELIANCE ON REPRESENTATIONS AND WARRANTIES Each of the Borrower and the Guarantors acknowledges that the Indemnified Parties have entered the Transaction Documents in reliance on the representations and warranties in this clause. 16.3 TRUSTEE REPRESENTATIONS AND WARRANTIES Fernbank (subject to Clause 35) makes the following representations and warranties to each Indemnified Party. (a) (TRUST POWER) Fernbank is empowered by the Trust Deed: (i) to enter into and perform the Transaction Documents to which it is expressed to be a party and to carry on the transactions contemplated by those documents; and (ii) to carry on its business as now conducted or contemplated and to own its assets, in its capacity as trustee of the Trust. There is no restriction on or condition of its doing so. (b) (TRUST AUTHORISATIONS) All necessary resolutions have been duly passed and all consents, approvals and other procedural matters have been obtained or attended to as required by the Trust Deed for Fernbank to enter into and perform the Transaction Documents to which it is expressed to be a party. (c) (SOLE TRUSTEE) Fernbank is the sole trustee of the Trust. (d) (NO RESETTLEMENT) No property of the Trust has been re-settled or set aside or transferred to any other trust. (e) (NO TERMINATION) The Trust has not been terminated, nor has any event for the vesting of the assets of the Trust occurred. (f) (RIGHT OF INDEMNITY) Fernbank's right of indemnity out of, and lien over, the assets of the Trust have not been limited in any way. Without limitation, it has no liability which may be set off against that right of indemnity. (g) (COMPLIANCE WITH LAW) The Trust Deed complies with all applicable laws. (h) (COMPLIANCE WITH TRUST DEED) Fernbank has complied with its obligations and duties under the Trust Deed and at law. No one has alleged that it has not so complied. ________________________________________________________________________________ Page 26 ________________________________________________________________________________ 17. UNDERTAKINGS 17.1 GENERAL UNDERTAKINGS Each of the Borrower and the Guarantors undertakes to each Indemnified Party as follows, except to the extent that the Agent acting on the instructions of the Majority Participants consents. (a) (CORPORATE REPORTING AND INFORMATION) It will provide to the Agent in sufficient copies for the Participants: (i) (ANNUAL ACCOUNTS) as soon as practicable (but within 90 days) after the close of each of its financial years copies of its consolidated and unconsolidated, unqualified audited Accounts in respect of that financial year; (ii) (QUARTERLY ACCOUNTS) as soon as practicable (but within 60 days) after the end of each quarter of its financial years copies of its unaudited Accounts in respect of that quarter; (iii) (MGM ANNUAL ACCOUNTS) as soon as practicable (but within 90 days) after the close of each of MGM's financial years copies of MGM's 10K consolidated and unconsolidated, audited Accounts in respect of that financial year; (iv) (MGM QUARTERLY ACCOUNTS) as soon as practicable (but within 60 days) after the close of each quarter of MGM's financial years copies of MGM's consolidated Accounts 10Q in respect of that quarter; and (v) (PRICING CERTIFICATE) a pricing certificate setting out the terms of MGM's Total Debt and EBITDA calculations at the time the Borrower provides the MGM's Accounts referred to in (iii) and (iv); (vi) (RATIOS) at the time it provides the Accounts referred to in sub-paragraphs (i), (ii), (iii) and (iv) certificates signed by a director of the Borrower which certify whether in his or her opinion the Borrower, MGM and their respective Subsidiaries have complied with financial undertakings in Clause 17.1(aa) and (ab) and which sets out in reasonable details: (A) the figures and calculations supporting the certificate; and (B) any past breaches of those undertakings not already notified and, if applicable, how they were remedied, the certificate to be given in relation to the Borrower must also state that the Accounts comply with current accounting practice then in force except as disclosed in them. (vii) (DOCUMENTS ISSUED TO SHAREHOLDERS) promptly, all documents which applicable law requires it to issue to its shareholders, debenture holders or holders of other Marketable Securities issued by it (including units in the Trust): (viii) (LITIGATION) promptly, written particulars of any litigation, arbitration, Tax claim, dispute or administrative or other proceeding in relation to the Mortgage Property or it or its Subsidiaries or the Trust involving a claim ________________________________________________________________________________ Page 27 ________________________________________________________________________________ exceeding A$1,000,000 or its equivalent other than a claim for worker's compensation; (ix) (Governmental Agency) promptly, any notice, order, direction or material correspondence from or with a Governmental Agency (A) relating to the: (I) Mortgaged Property or its use; or (II) its Subsidiaries' business or assets, which may have a Material Adverse Effect; or (B) alleging a breach of the Casino Operations Agreement or the Casino Licence or otherwise indicating anything which may have a Material Adverse Effect on the Casino Licence. (x) (OTHER INFORMATION) promptly, any other information in relation to the Mortgaged Property or its Subsidiaries' financial condition of business which the Agent may reasonably request. (b) (ACCOUNTING PRINCIPLES) it will ensure that the Accounts provided to the Agent under paragraph (a): (i) comply with current accounting practice then in force except to the extent disclosed in them and with all applicable laws; and (ii) in the case of the Charging Group Members, give a true and fair view of the matters with which they deal; and (iii) in the case of MGM, are correct and present fairly the matters which they deal with; (c) (AUTHORISATIONS) It will ensure that each Authorisation required for: (i) the execution, delivery and performance by it of the Relevant Documents to which it is expressed to be a party and the transactions contemplated by those documents; (ii) the validity and enforceability of those documents and the effectiveness and priority of the Borrower Charge, the Guarantor Charge or any Collateral Security; and (iii) the carrying on by it and its Subsidiaries of its and their business as now conducted or contemplated (including under Environmental Law), (including the Casino Licence) is obtained and promptly renewed and maintained in full force and effect. It will pay all applicable fees for them. It will provide copies promptly to the Agent when they are obtained or renewed. Without limitation it will not do or allow anything which may prejudice the Casino Licence and will promptly inform the Agent of anything which do so. (d) (NOTICE TO AGENT) It will notify the Agent as soon as it becomes aware of: (i) any Event of Default or Potential Event of Default; ________________________________________________________________________________ Page 28 _______________________________________________________________________________ (ii) any proposal by a Governmental Agency to acquire compulsorily any of the Mortgaged Property or the whole or a substantial part of its or any of its Subsidiaries' assets or business; (iii) any substantial dispute between it or any of its Subsidiaries and a Governmental Agency; and (iv) any change in its Authorised Officers, giving specimen signatures of any new Authorised Officer appointed, and, where requested by the Agent, evidence satisfactory to the Agent of the authority of any Authorised Officer. (e) (DISPOSAL OF ASSETS) It will not sell or otherwise dispose of, part with possession of, or create an interest in, any of the Mortgaged Property or all or a substantial part of its assets or agree or attempt to do so (whether in one or more related or unrelated transactions) except (and in the case of the Mortgaged Property, subject to the Borrower Charge, the Guarantor Charge and any Collateral Security): (i) as permitted by paragraph (i); (ii) disposals in the ordinary course of day to day trading at arm's length; (iii) shares issued or transferred under the Option Deed; (iv) disposal of assets the value of which does not exceed $100,000 or $500,000 in aggregate each year; (v) disposals of obsolete assets which have outlasted their useful life and which are no longer required for the efficient operation of the business of the Borrower or any Guarantor; (vi) disposals of assets (other than real property) to the extent that the proceeds of such disposal are applied in the purchase of other assets of a similar type and value; (vii) expenditure of cash and money in transactions which do not breach this Agreement; (viii) disposals of assets between the Charging Group Members for so long as such assets remain, upon transfer, subject to first security granted in favour of the Indemnified Parties; and (ix) an other disposal consented to by the Agent with the approval of the Majority Participants. Where a Subsidiary issues shares and its holding company does not acquire the beneficial estate in all those shares, or (as the case may be) a ratable portion of those shares according to its then shareholding, the holding company will be taken to have disposed of the shares it does not acquire. (f) (NEGATIVE PLEDGE) It will not create or allow to exist a Security Interest over its assets other than; (i) the Borrower Charge, the Guarantor Charge or any Collateral Security: ________________________________________________________________________________ Page 29 ________________________________________________________________________________ (ii) a lien arising by operation of law in the ordinary course of business and not securing Financial Indebtedness where it duly pays the indebtedness secured by that lien other than indebtedness contested in good faith; and (iii) a margin deposit under a foreign exchange and interest rate hedging arrangement, entered into in good faith on normal commercial terms at arm's length for hedging purposes in the ordinary course of day to day business; (iv) Security Interests created (if any) by contractual set-off or netting arrangements with any bank or financial institution entered for netting group credit and debit deposit or current account balances of the Charging Group Members maintained with the bank or financial institution solely for day to day cash management purposes; and (v) any other Security Interest consented to by the Agent acting on the instructions of the Majority Participants. (g) (SECURITY DEPOSIT) It will not: (i) deposit or lend money on terms that it will not be repaid until its or another person's obligations or indebtedness are performed or discharged; or (ii) deposit money with or lend money to a person (other than an Indemnified Party) to whom it is, or is likely to become, actually or contingently indebted, but it may do so with a Charging Group Member. Deposit for this paragraph does not include a deposit on normal commercial terms of part of the purchase price under a purchase contract (h) (TITLE RETENTION) It will not enter into an agreement with respect to the acquisition of assets on title retention terms except an agreement for the supply of goods at arm's length in the ordinary course of day to day business where payment for the goods is due less than 90 days after delivery and which agreement is not entered into for the purpose of or in connection with financing the transactions. (i) (SALE AND LEASE BACK) It will not sell or otherwise dispose of any of its assets to a person where, under the terms of that sale or disposal, or under a related transaction, that assets is or may be Leased to a Relevant Company or its Associate. (j) (PARTNERSHIP AND JOINT VENTURES) It will not enter into partnerships or joint ventures except where the aggregate investment does not exceed A$500,000. (k) (CORPORATE EXISTENCE) It will do everything necessary to maintain its corporate existence in good standing. It will not transfer its jurisdiction of incorporation or enter any merger or consolidation. (l) (COMPLIANCE WITH LAW) It will comply fully with all laws binding on it, where failure to do so may have a Material Adverse Effect. (m) (PAY TAXES) It will pay all Taxes payable by it when due, but: ________________________________________________________________________________ Page 30 ________________________________________________________________________________ (i) it need not pay Taxes for which it has set aside sufficient reserves and which are being contested in good faith, except where failure to pay those Taxes may have a Material Adverse Effect; and (ii) it will pay contested Taxes which it is liable to pay on the final determination or settlement of the contest. (n) (COMPLIANCE AND ENFORCEMENT OF MATERIAL DOCUMENTS) It will: (i) comply in all material respects with its obligations under the Material Documents; (ii) enforce each Material Document to which it is a party and exercise its rights, authorities and discretion under those documents prudently (and, while an Event of Default or Potential Event of Default subsists, in accordance with the directions (if any) of the Agent); and (iii) use its best endeavours to keep the Material Documents valid and enforceable. (o) (VARIATION OF MATERIAL DOCUMENTS) Following Completion, it will not: (i) amend or vary, or consent to any material amendment or material variation of; (ii) avoid, release, surrender, terminate, rescind, discharge (other than by performance) or accept the repudiation of all or a material part of; (iii) expressly or impliedly waive, or extend or grant time or indulgence in respect of, any material provision of or material obligation under; or (iv) do or permit anything which is likely to enable or give grounds to another party to do anything referred to in sub-paragraphs (i), (ii) or (iii) in relation to, a Material Document. (p) (RESTRICTED PAYMENT) The Borrower will only be permitted to make a Restricted Payment if: (i) the ratio under paragraph (aa) when last calculated was at or below 2.75 and will remain at or below 2.75 immediately before and after the making of that Restricted Payment (treating the Restricted Payment as an expense); and (ii) no Event of Default or Potential Event of Default is subsisting. (q) (COMMERCIAL DEALINGS) (i) It will not deal in any way with any person except: (A) at arms' length in the ordinary course of business for valuable commercial consideration; or (B) with a person who is a Charging Group Member. _______________________________________________________________________________ Page 31 ________________________________________________________________________________ (ii) It may only deal with an Associate who is not a Charging Group Member (except in the case of the payment of marketing fees and reimbursements) if the Auditor verifies the adequacy of the consideration or otherwise verifies compliance with sub-paragraph (i). (r) (FINANCIAL ASSISTANCE) The Borrower will not: (i) advance money or make available financial accommodation to or for the benefit of; or (ii) give a Guarantee or Security Interest in connection with an obligation or liability of, any person (other than a Charging Group Member), but it may: (iii) deposit funds with a bank in the ordinary course of its business unless it owes Financial Indebtedness to that bank and the bank is not an Indemnified Party; (iv) allow its customers to acquire goods and services on extended terms in the ordinary course of trading; (v) enter into foreign exchange and interest rate hedging arrangements in good faith on normal commercial terms at arm's length in the ordinary course of business and meet margin requirements under those arrangements; and (vi) provide financial accommodation or give a Guarantee or Security Interest which is permitted under paragraph (p) above. (s) (DISTRIBUTIONS) It will not pay or distribute any money or other asset (including by management or other fee, interest, dividend, loan, return of capital, repayment or redemption) to or for the benefit of a shareholder in that capacity or to an Associate except: (i) dividends in the ordinary course of business paid out of trading profits (which excludes, for this purpose, extraordinary items, sales of fixed assets and revaluations) when no Event of Default subsists; (ii) reasonable directors' fees and salaries and other emoluments; (iii) payments under dealings permitted under paragraph (p); and (iv) payments to a Charging Group Member. (t) (CHANGE OF BUSINESS) It will not cease or materially change its business carried on in connection with any Mortgaged Property. It will not, and will ensure that each Relevant Company will not, take action whether by acquisition or otherwise which alone or in aggregate would materially alter the nature of the business of the Relevant Companies and its Subsidiaries taken as a whole. (u) (FINANCIAL INDEBTEDNESS) It will not incur any Financial Indebtedness except: (i) under the Transaction Documents; (ii) between Charging Group Members; (iii) to the Borrower or any person who has given a Satisfactory Charge; or ________________________________________________________________________________ Page 32 ________________________________________________________________________________ (iv) in relation to the Borrower and its Subsidiaries on a consolidated basis, finance Leases the capital amount of which (determined under current accounting practice in force at the relevant time) in aggregate does not exceed A$10,000,000 at any time. (v) (SUBSIDIARIES) (i) It will not create or acquire a Subsidiary unless at the time of becoming a Subsidiary the Subsidiary gives a Satisfactory Charge. (ii) It will ensure that each of its Subsidiaries complies with paragraphs (e) to (z) inclusive as if binding on each of them and as if references to it were to the Subsidiary. (w) (RATIFICATION) As shareholder of any Relevant Company, it ratifies and confirms the execution, delivery and performance by each Relevant Company of each Transaction Document. It will be taken to have ratified and confirmed the execution, delivery and performance of each Satisfactory Charge to which any entity of which it is a shareholder is at any time expressed to be party. (x) (ACQUISITION) It will not acquire or establish any new business or acquire any shares in any person other than a Charging Group Member. (y) (CAPITAL EXPENDITURE) The Borrower and its Subsidiaries on a consolidated basis will not incur capital expenditure in excess of: (i) A$10,000,000 in the financial year ending 31 December 1996; and (ii) A$5,000,000 in the financial year ending 31 December 1997 and each subsequent financial year, except that unused amounts of the above limits for capital expenditure in any financial year may be carried over to add to the limits of subsequent financial years. (z) (INSPECTION) The Agent or persons authorised by it may at any time on reasonable notice inspect and require the provision of copies of the records, and inspect the premises, of the Borrower and the Guarantors and inspect the Mortgaged Property. However if there is no Event of Default and the Agent inspects more than once a year, the Agent shall bear the costs and expenses in relation to those inspections subsequent to the first inspection. The Borrower and each Guarantor will do everything in its power to assist that inspection and provide those copies and will ensure that its employees and officers do the same. (aa) (LEVERAGE RATIO) The Borrower will ensure that the ratio of its Total Debt determined as at each Calculation Reference Date to its EBITDA in respect of the four quarters immediately preceding that Calculation Reference Date, does not exceed; (i) in respect of the period from the quarter ending on 30 June 1996 to the quarter ending on 31 December 1997, 4.0; ________________________________________________________________________________ Page 33 ________________________________________________________________________________ (ii) in respect of the period from the quarter ending on 31 March 1998 to the quarter ending 31 December 1998, 3.0; and (iii) in respect of the period from the quarter ending on 31 March 1999 and subsequently, 2.5, except that in respect of 30 June 1996 and 30 September 1996, the respective EBITDA amount to be used in the ratio will be: (i) in the case of 30 June 1996, EBITDA for the six months immediately preceding that date multiplied by two; and (ii) in the case of 30 September 1996, EBITDA for the nine months immediately preceding that date multiplied by four and divided by three. (ab) (FIXED CHARGE COVERAGE RATIO) The Borrower will ensure that Fixed Charge Coverage Ratio determined as at each Calculation Reference Date in respect of the four quarters immediately preceding that Calculation Reference Date for the period form June 30 1996 to 31 December 2000, does not exceed 1.05. In respect of 30 June 1996 and 30 September 1996, the respective EBITDA amount to be used in the ratio will be: (i) in the case of 30 June 1996, EBITDA for the six months immediately preceding that date multiplied by two; and (ii) in the case of 30 September 1996, EBITDA for the nine months immediately preceding that date multiplied by four and divided by three. 17.2 UNDERTAKINGS RELATING TO MORTGAGED PROPERTY Each of the Borrower and Guarantors undertakes to each Indemnified Party as follows, except to the extent that the Agent acting on the instructions of the Majority Participants consents otherwise. (a) (PAY OUTGOINGS) (i) Subject to sub-paragraph (ii), it will promptly pay all outgoings payable by it in respect of the Mortgaged Property (including rent and Taxes). (ii) It need not pay outgoings which are being contested in good faith except where failure to pay may have a Material Adverse Effect. (iii) It will pay contested outgoings which it is liable to pay on the final determination or settlement of the contest. (iv) On request by the Agent it will immediately provide to the Agent evidence of every payment covered by this undertaking. (b) (MAINTENANCE) (i) It will maintain the Mortgaged Property in a good state of repair and in good working order and condition. (ii) On being required to do so by the Agent (acting reasonably) it will immediately amend every defect in the repair and condition of the Mortgaged Property (fair wear and tear excepted). ________________________________________________________________________________ Page 34 ________________________________________________________________________________ (c) (INSURANCE) (i) (GENERAL OBLIGATION) In its name and in the name of the Agent on behalf of the Participants it will: (A) insure and keep insured the Mortgaged Property which is of an insurable nature to the full replacement or re-instatement value; and (B) take out and keep in force other insurance with respect to the Mortgaged Property and each business in which the Mortgaged Property is used (including any insurance reasonably requested by the Agent and public risk including risks associated with passive smoking, worker's compensation, business interruption insurance, natural disasters (including storm surge)), in the manner and to the extent: (C) which the Agent acting on the advice of reputable brokers determines reasonable and customary for a business enterprise engaged in a similar business and in a similar locality, and for property of the nature of the Mortgaged Property; or (D) for so long as the Agent has made no determination or request under this sub- paragraph (i), which a business enterprise holding similar property, and engaged in a business in a similar locality, would prudently insure against (ii) (PAYMENT OF PREMIUMS) It will pay when due all premiums, commissions, levies, stamp duties, charges and other expenses necessary for taking out those insurance policies and keeping them in force. (iii) (INSURERS) It will take out each insurance policy with independent and reputable insurers approved by the Agent located in jurisdictions approved by the Agent. The Agent will not unreasonably withhold or delay any such approval. (iv) (INFORMATION) On request it will provide to the Agent certificates of currency in respect of all insurance policies, and other details on the insurance policies which the Agent requires. (v) (ANNUAL REPORT) On or about each anniversary of the date of this Agreement it will provide to the Agent a report on those insurance policies at the date of the report and on claims and other material events with respect to those insurances during the previous twelve months. (vi) (NO PREJUDICIAL ACTION) It will not do, permit, or omit to do, anything which may prejudice an insurance policy. (vii) (CONTENTS OF POLICY) Without limiting sub-paragraph (i), it will ensure that each insurance policy is on terms and conditions reasonably satisfactory to the Agent acting on the advice of reputable brokers and, without limitation, provides that: (A) the Agent (on behalf of the Participants) is named as loss payee; ________________________________________________________________________________ Page 35 ________________________________________________________________________________ (B) the proceeds resulting from a claim under the policy will be paid to the Agent other than claims for less than A$500,000 or its equivalent and claims under a public liability policy and a business interruption policy in each case made before the Agent notifies the insurer that the Borrower Charge and the Guarantor Charge have become enforceable; (C) the amount of any excess or deductible payable by the insured in respect of a claim will not exceed the amount which the Agent determines is customary for similar policies acting on the advice or reputable brokers; (D) the insurer waives its right to set off or counter claim or to make any other deduction or withholding against the Agent and each person claiming under the Agent; (E) all claims for insurance premiums, levies, stamp duties, charges or commissions against the Agent and each person claiming under the Agent are waived; (F) the insurer will not terminate the policy unless the relevant default or breach remains unremedied for at least 14 days after notice by the insurer to the Agent specifying the default or breach; (G) to the extent that the policy covers the interest of the Agent and the Participants the insurer will not refuse or reduce a claim or cancel or avoid the policy except where the right to do so results from the fraud of the Agent or a Participant; (H) a claim for replacement or re-instatement value will be paid even though the relevant asset is not replaced or re-instated; and (I) there is no averaging provision. (viii)(REMEDY OF DEFAULT) If: (A) it fails to take out or to keep in force an insurance policy; (B) the Agent determines that the insurer may become entitled to cancel or avoid and insurance policy; or (C) the Agent determines that the insurer under a policy may not be capable of meeting a claim, the Agent acting on the instructions of the Majority Participants may do anything which it determines is advisable or necessary to take out or keep in force that policy or to take out a new policy complying with this clause at the cost of the Borrower and or in the name of the Borrower or the Agent or both. The Agent is not obliged to do anything under this sub-paragraph. (ix) (ENFORCEMENT BY AGENT) It will do everything (including providing documents, evidence and information) necessary or desirable in the opinion of the Agent acting on the instructions of the Majority Participants to enable the Agent to claim, and to collect or recover money due, under or in respect of, and insurance policy. ________________________________________________________________________________ Page 36 ________________________________________________________________________________ (x) (NOTICE OF CLAIMS) As soon as possible it will notify: (A) (I) the Agent; and (II) (when it is required or it is advisable to do so) the relevant insurer, of any event which does or is likely to give rise to a claim of A$250,000 or its equivalent or more under an insurance policy; and (B) the Agent of: (I) a cancellation, change or reduction in an insurance policy; (II) an insurance policy becoming void or voidable; or (III) any other material circumstance or correspondence relating to an insurance policy. (xi) (USE OF INSURANCE PROCEEDS) It will use the proceeds of all insurance policies received by it as follows: (A) while an Event of Default subsists: (I) for a purpose described in sub-paragraph (B); or (II) towards payment of the Secured Moneys, at the option of the Agent acting on the instructions of the Majority Participants; or (B) if no Event of Default subsists: (I) to the extent necessary towards replacement, repair or reimbursement of the Mortgaged Property; (II) to discharge the relevant liability or to make good the relevant loss covered by the insurance policy; and (III) any surplus proceed shall be paid to the Borrower or Guarantor concerned. The Agent will make available all proceeds received by the Agent as and when the proceeds are actually required. (d) (PRESERVATION AND PROTECTION OF SECURITY) (i) It will promptly do everything necessary or reasonably required by the Agent: (A) to preserve and protect the value of the Mortgaged Property; and ________________________________________________________________________________ Page 37 ________________________________________________________________________________ (B) to protect and enforce its title and the title of the Agent and the Participants as mortgagee to the Mortgaged Property. (ii) Without limiting the generality of sub-paragraph (i), it will not permit lodgement of a caveat forbidding the recording of an interest of it or the Agent or a Participant in the Mortgaged Property. (iii) If a caveat is lodged (other than a caveat lodged by the Agent on behalf of the Participants) it will promptly do everything in its power to remove it. (e) (OTHER SECURITY INTERESTS) It will comply fully with all Security Interest affecting the Mortgaged Property and the obligations secured by those Security Interests. (f) (ENVIRONMENTAL LAW) It will maintain procedures which in the opinion of the Agent are adequate to monitor: (i) its compliance with Environmental Law and Authorisations; and (ii) circumstances which may give rise to a claim or to a requirement of substantial expenditure by it or of cessation or material alteration of its activity. (g) (ACQUISITION OF ASSETS) It will immediately notify the Agent if it: (i) enters into an agreement to purchase, or otherwise acquire, an estate or interest in land (other than a Lease for a term (including all renewal options) of less than three years); or (ii) creates or acquires a Subsidiary, 17.3 TERMS OF UNDERTAKINGS Each undertaking in this clause continues from the date of this Agreement until the Secured Moneys are fully and finally repaid. 17.4 UNDERTAKINGS RELATING TO TRUST The Borrower undertakes to each Indemnified Party that it will ensure the following. Fernbank, as trustee of the Trust, and in its own right, undertakes to each indemnified Party as follows except to the extent that the Agent acting on the instructions of the Majority Participants consents, (a) (AMENDMENT TO TRUST DEED) Fernbank will ensure that the Trust Deed is not amended or revoked. (b) (RESETTLEMENT) Fernbank will ensure that there is no resettlement, setting aside or transfer of any asset of the Trust other than a transfer which complies with both the Trust Deed and the Transaction Documents except in a solvent reconstruction approved by the Agent. (c) (OBLIGATIONS) Fernbank will comply fully with its obligations under the Trust Deed and at law. ________________________________________________________________________________ Page 38 ________________________________________________________________________________ (d) (NO ADDITIONAL TRUSTEE) Fernbank will ensure that no other person is appointed trustee of the Trust. (e) (NOT RETIRE) Fernbank will not do anything which would cause or enable its removal, nor will it retire, as trustee of the Trust except in a solvent reconstruction approved by the Agent. (f) (NO VESTING) Fernbank will ensure that the vesting date is not determined, and will not otherwise alter, shorten or fix the vesting date under the Trust Deed except in a solvent reconstruction approved by the Agent. (g) (RIGHT OF SUBROGATION AND INDEMNITY) Fernbank will ensure that: (i) there is no restriction or limitation on or derogation from its right of subrogation or indemnity (whether or not arising under the Trust Deed); and (ii) its lien over any property of the Trust will have priority over the rights of the beneficiaries of the Trust. (h) (NO DISTRIBUTION) Fernbank will not distribute any capital or income of the Trust other than: (i) as required under the Trust Deed when no Event of Default or Potential Event of Default subsists; or (ii) under a solvent reconstruction approved by the Trustee. This sub-clause does not limit Clause 17.1(s) (DISTRIBUTIONS) (i) (NOTICES) Fernbank will promptly give the Agent copies of all documents and notices received by it from any beneficiary or manager of the Trust or which it gives to a beneficiary or manager of the Trust. 18. EVENTS OF DEFAULT 18.1 EVENTS OF DEFAULT Each of the following is an Event of Default (whether or not it is in the control of any Relevant Company). (a) (OBLIGATIONS UNDER TRANSACTION DOCUMENTS) A Relevant Company fails: (i) subject to Clause 18.3, to pay a principal amount payable by it under a Transaction Document when due; (ii) to comply with any of its other obligations under a Transaction Document and, if in the opinion of the Agent that failure can be remedied within 30 days, does not remedy the failure within that period; (iii) to satisfy within the time stipulated anything which the Agent made a condition of its waiving compliance with a condition precedent or undertaking in a Transaction Document; or ________________________________________________________________________________ Page 39 ________________________________________________________________________________ (iv) to pay any fee or other amount (other than principal) payable under a Transaction Document and that amount remains unpaid for five days from the due date. (b) (MISREPRESENTATION) A representation, warranty or statement by or on behalf of a Relevant Company in a Transaction Document, or in a document provided under or in connection with a Transaction Document, is not true in a material respect or is misleading in a material respect when made or repeated. (c) (CROSS DEFAULT) (i) Financial Indebtedness of not less than $1,000,000 a Relevant Company: (A) is not paid when due (or within an applicable grace period); or (B) becomes due and payable or capable of being declared due and payable before its stated maturity or expiry; (ii) a facility or obligation granted or owed by a person to a Relevant Company to provide financial accommodation or to acquire or underwrite Financial Indebtedness is prematurely terminated; or (iii) an event of default as defined in another Transaction Document occurs. For the purpose of this paragraph: (i) if a person is required to provide cash cover for Financial Indebtedness as a result of an actual, likely or threatened default or an event of default or termination, cancellation, special prepayment or similar event, whatever called, that Financial Indebtedness will be taken to be due and payable; and (ii) sub-paragraphs (i)(B) and (ii) will not apply if a Relevant Company exercises an optional right of prepayment or termination in the absence of an actual, likely or threatened default or event of default or termination, cancellation, special prepayment or similar event, whatever called. (d) (ADMINISTRATION, WINDING UP, ARRANGEMENTS, INSOLVENCY ETC.) (i) An administrator of a Relevant Company is appointed other than by the Agent. (ii) Except for the purpose of a solvent reconstruction or amalgamation previously approved by the Agent: (A) an application or an order is made, proceedings are commenced, a resolution is passed or proposed in a notice of meeting, an application to a court or other steps are taken for: (1) the winding up, dissolution or administration of a Relevant Company; or (2) a Relevant Company entering into an arrangement, compromise or composition with or assignment for the benefit of its creditors or a class of them, ________________________________________________________________________________ Page 40 ________________________________________________________________________________ (other than frivolous or vexatious applications, proceedings, notices and steps); or (B) a Relevant Company ceases, suspends or threatens to cease or suspend the conduct of all or a substantial part of its business or disposes of or threatens to dispose of a substantial part of its assets; or (iii) a Relevant Company: (A) is, or under legislation is presumed or taken to be, insolvent (other than as the result of a failure to pay a debt or claim the subject of a good faith dispute); or (B) stops or suspends or threatens to stop or suspend payment of all of a class of its debts (e) (ENFORCEMENT AGAINST ASSETS) (i) A receiver, receiver and manager or similar officer is appointed to; (ii) a Security Interest becomes enforceable or is enforced over; or (iii) a distress, attachment or other execution is levied or enforced or applied for over, all or any of the assets and undertaking of a Relevant Company. (f) (REDUCTION OF CAPITAL) Without the prior consent of the Agent, a Relevant Company: (i) reduces its capital (including, without limitation, a purchase of its shares but excluding a redemption of redeemable shares); (ii) passes a resolution to reduce its capital or to authorise it to purchase its shares or a resolution under section 188(2) or 205(10) of the Corporations Law or an equivalent provision, or calls a meeting to consider such a resolution; or (iii) applies to a court to call any such meeting or to sanction any such resolution or reduction. (g) (INVESTIGATION) An investigation into all or part of the affairs of any Relevant Company commences under companies legislation in circumstances material to its financial condition. (h) (ANALOGOUS PROCESS) Anything analogous to anything referred to in paragraphs (d) to (g) inclusive, or having substantially similar effect, occurs with respect to any Relevant Company under any overseas law or any law which commences or is amended after the date of this Agreement. (i) (VITIATION OF DOCUMENTS) (i) All or any material part (in the opinion of the Agent) of a Relevant Document is terminated or is or becomes void, illegal, invalid, unenforceable or of limited force and effect; ________________________________________________________________________________ Page 41 ________________________________________________________________________________ (ii) a party becomes entitled to terminate, rescind or avoid all or a material part (in the opinion of the Agent) of a Relevant Document; or (iii) a party other than the Agent or a Participant alleges or claims that an event described in sub-paragraph (i) has occurred or that it is entitled as described in sub-paragraph (ii). (j) (AMENDMENT OF ARTICLES) The memorandum or articles of association or other constituent documents of the Borrower or a Guarantor are amended in a material respect without the prior consent of the Agent (which will not be withheld or delayed unreasonably). (k) (REVOCATION OF AUTHORISATION) The Casino Licence or Authorisation which is material to the performance by any Relevant Company of a Relevant Document, or to the validity and enforceability of a Relevant Document or to the security of the Agent and the Participants, is repealed, revoked or terminated or expires, or is materially (in the opinion of the Agent) modified or amended or material conditions (in the opinion of the Agent) are attached to it in a manner unacceptable to the Agent, and is not replaced by another Authorisation acceptable to the Agent. (l) (MATERIAL ADVERSE CHANGE) Any other event or series of events, whether related or not, occurs (including, without limitation, a material adverse change in the business, assets or financial condition of any Relevant Company or the value of the Mortgaged Property), which may have a Material Adverse Effect. (m) (CONTROL OF BORROWER AND GUARANTORS) Without the prior consent of the Agent: (i) the Borrower or a Guarantor becomes a Subsidiary of another person; or (ii) except as permitted under the Option Deed or in the opinion of the Agent there is a material change in the ownership, management or control of the Borrower or a Guarantor. (n) (TRUST) (i) A new or additional trustee of the Trust is appointed: (ii) the unit holders resolve to wind up the Trust, or the Borrower is required to wind up the Trust under the Trust Deed or applicable law, or the winding up of the Trust commences; or (iii) the Trust is held or is conceded by the Borrower not to have been constituted or to have been imperfectly constituted; (o) (COMPULSORY ACQUISITION) (i) All or any part of the assets of a Relevant Company is compulsorily acquired by or by order of a Governmental Agency or under law; (ii) a Governmental Agency orders the sale, vesting or divesting of all or any part of the assets of a Relevant Company; or (iii) a Governmental Agency takes a step for the purpose of any of the above or proposes or threatens to do any of the above. _______________________________________________________________________________ Page 42 ________________________________________________________________________________ (p) (GOVERNMENTAL INTERFERENCE) A law or anything done by a Governmental Agency wholly or partially renders illegal, prevents or restricts the performance or effectiveness of a Transaction Document or otherwise has a Material Adverse Effect. (q) (ENVIRONMENTAL EVENT) (i) (A) Any person takes action; (B) there is a claim; or (C) there is a requirement of expenditure or of cessation or alteration of activity, under Environmental Law, which may have a Material Adverse Effect and which is not rectified or cured within 30 Business Days of the Borrower becoming aware of the sum; or (ii) a circumstance arises which may give rise to an action, claim or requirement within sub-paragraph (i) and which is not rectified or cured within 30 Business Days of the Borrower becoming aware of the sum. (r) (MGM GUARANTEE) An Event of Default under (and as defined in) the MGM Guarantee occurs. 18.2 CONSEQUENCES In addition to any other rights provided by law or any Transaction Document, at any time while an Event of Default subsists the Agent may and shall if the Majority Participants direct do all or any of the following: (a) by notice to the Borrower declare all sums actually or contingently owing under this Agreement immediately due and payable, and the Borrower shall immediately pay the Principal Outstanding together with accrued interest and fees and all other sums; (b) by notice to the Borrower cancel the Commitment; (c) at the cost of the Borrower, appoint a firm of independent accountants or other experts to review and report to the Agent and the Participants on the affairs, financial condition and business of any Relevant Company. Each Relevant Company will do everything in its power to ensure the review and report can be carried out promptly, completely and accurately. Without limitation, it will co-operate fully with the review and ensure that the accountants and experts are given access to all premises and records of each Relevant Company and are given all information concerning any Relevant Company which they require from time to time. It will ensure that all officers and employees of each Relevant Company do the same. 18.3 TECHNICAL DEFAULT IN PAYMENT Failure by the Borrower to pay an amount due will not constitute an Event of Default under clause 18.1(a)(i) (NON-PAYMENT DEFAULT EVENT) if: (a) before the exercise of the Agent's powers under clause 18.2 (CONSEQUENCES) the Borrower demonstrates to the satisfaction of the Agent that it had sufficient available funds with its bankers and had given appropriate instructions to those bankers to ________________________________________________________________________________ Page 48 ________________________________________________________________________________ make that payment and that the payment would have been made but for temporary technical or administrative difficulties outside the control of the Borrower; and (b) payment is received in the manner required within three Business Days of the due date. The Agent need not wait for a demonstration under paragraph (a) before exercising its powers under clause 18.2 (CONSEQUENCES). 19. GUARANTEE 19.1 GUARANTEE The Guarantors jointly and severally unconditionally and irrevocably guarantee the due and punctual payment of the Secured Moneys. Each Guarantor enters into this Agreement in accordance with Clause 35 for valuable consideration which includes, without limitation, the Indemnified Parties continuing to provide financial accommodation to the Borrower under this Agreement. 19.2 PAYMENT On demand from time to time each Guarantor shall pay an amount equal to the Secured Moneys then due and payable in the same manner and currency which the Borrower is required to pay the Secured Moneys under the relevant Transaction Document (or would have been but for its Liquidation). 19.3 UNCONDITIONAL NATURE OF OBLIGATION Neither this Agreement nor the obligations of any Guarantor under this Agreement will be affected by anything which but for this provision might operate to release, prejudicially affect or discharge them or in any way relieve any Guarantor from any obligation including, without limitation: (a) the grant to any person of any time, waiver or other indulgence, or the discharge or release of any person; (b) any transaction or arrangement that may take place between any Indemnified Party and any person; (c) the Liquidation of any person; (d) any Indemnified Party becoming a party to or bound by any compromise, moratorium, assignment of property, scheme of arrangement, composition of debts or scheme of reconstruction by or relating to any person; (e) any Indemnified Party exercising or delaying or refraining from exercising or enforcing any document or agreement or any right, power or remedy conferred on it by law or by any Transaction Document or by any other document or agreement with any person; (f) the amendment, variation, novation, replacement, rescission, invalidity, extinguishment, repudiation, avoidance, unenforceability, frustration, failure, expiry, termination, loss, release, discharge, abandonment, assignment or transfer, in whole or in part and with or without consideration, of any Transaction Document or of any other document or agreement held by any Indemnified Party at any time or of any right, obligation, power or remedy; ________________________________________________________________________________ Page 44 ________________________________________________________________________________ (g) the taking or perfection of or failure to take or perfect a document or agreement; (h) the failure by any person or any Indemnified Party to notify any Guarantor of any default by any person under any Transaction Document or any other document or agreement; (i) any indemnified Party obtaining a judgement against any person for the payment of any Secured Moneys; (j) any legal limitation, disability, incapacity or other circumstance relating to any person; (k) any change in any circumstance (including, without limitation, in the members or constitution of a person); (l) this Agreement or any other document or agreement not being valid or executed by, or binding on, any person; or (m) any increase in the Scured Moneys for any reason (including, without limitation, as a result of anything referred to above), whether with or without the consent of the Guarantors. Without limitation, this Agreement binds a Guarantor even if it is, or has become, the only Guarantor bound. None of the above paragraphs limits the generality of any other. A reference to any person includes, without limitation, any other Guarantor and the Borrower. 19.4 PRINCIPAL AND INDEPENDENT OBLIGATION This clause is a principal and independent obligation. Except for stamp duty purposes, it is not ancillary or collateral to another document, agreement, right or obligation. 19.5 NO MARSHALLING No Indemnified Party is obliged to marshal or appropriate in favour of any Guarantor or to exercise, apply or recover: (a) any Security Interest, Guarantee, document or agreement (including, without limitation, any Transaction Document) held by an Indemnified Party at any time; or (b) any of the funds or assets that an Indemnified Party may be entitled to receive or have a claim on. 19.6 NO COMPETITION Until the Secured Moneys have been irrevocably paid and discharged in full no Guarantor is entitled to,and no Guarantor shall: (a) be subrogated to any Indemnified Party or claim the benefit of any Security Interest or Guarantee held by any indemnified Party at any time; (b) either directly or indirectly prove in, claim or receive the benefit of, any distribution, dividend or payment arising out of or relating to the liquidation of the Borrower, any other Guarantor or any other person who gives a Guarantee or Security Interest in respect of any Secured Moneys; or _______________________________________________________________________________ Page 45 ________________________________________________________________________________ (c) have or claim any right of contribution or indemnity from the Borrower, any other Guarantor or any other person who gives a Guarantee or Security Interest in respect of any Secured Moneys. The receipt of any distribution, dividend or other payment by any Indemnified Party out of or relating to any Liquidation will not prejudice the right of any Indemnified Party to recover the Secured Moneys by enforcement of this Agreement. 19.7 SUSPENSE ACCOUNT In the event of the Liquidation of the Borrower or any other person (including, without limitation, any Guarantor) each Guarantor authorises each Indemnified Party: (a) to prove for all moneys which the Guarantors have paid that Indemnified Party under this Agreement; and (b) (i) to retain and carry to a suspense account; and (ii) to appropriate at the discretion of the Agent, any dividend received in the Liquidation of the Borrower or any other person and any other money received in respect of the Secured Moneys, until each Indemnified Party has been paid the Secured Moneys in full. 19.8 RESCISSION OF PAYMENT Whenever for any reason (including without limitation under any law relating to Liquidation, fiduciary obligations or the protection of creditors): (a) all or part of any transaction of any nature (including, without limitation, any payment or transfer) made during the term of this Agreement which affects or relates in any way to the Secured Moneys is void, set aside or voidable; (b) any claim that anything contemplated by paragraph (a) is so is upheld, conceded or compromised; or (c) any Indemnified Party is required to return or repay any money or asset received by it under any such transaction or the equivalent in value of that money or asset, each Indemnified Party will immediately become entitled against each Guarantor to all rights in respect of the Secured Moneys and the Mortgaged Property which it would have had if all or the relevant part of the transaction or receipt had not taken place. Each Guarantor shall indemnify each Indemnified Party on demand against any resulting loss, cost or expense. This clause continues after this Agreement is discharged. 19.9 INDEMNITY If any Secured Moneys (including moneys which would have been Secured Moneys if they were recoverable) are not recoverable from the Borrower for any reason (including, without limitation, any legal limitation, disability, incapacity or thing affecting the Borrower) each Guarantor shall indemnify each Indemnified Party on demand and shall pay those moneys to the relevant Indemnified Party on demand. This applies whether or not: ________________________________________________________________________________ Page 46 ________________________________________________________________________________ (a) any transaction relating to the Secured Moneys was void or illegal or has been subsequently avoided; or (b) any matter or fact relating to that transaction was or ought to have been within the knowledge of any Indemnified Party. 19.10 CONTINUING GUARANTEE AND INDEMNITY This clause: (a) is a continuing guarantee and indemnity; (b) will not be taken to be wholly or partially discharged by the payment at any time of any Secured Moneys or by any settlement of account or other matter or thing; and (c) remains in full force until the Secured Moneys have been paid in full and the Guarantors have completely performed their obligations under this Agreement. 19.11 VARIATIONS This clause covers the Secured Moneys as varied from time to time including, without limitation, as a result of: (a) any amendment to, or waiver under, any Transaction Document; or (b) the provision of further accommodation to the Borrower, and whether or not with the consent of or notice to the Guarantors. This does not limit any other provision. 19.12 JUDGMENT A judgment obtained against the Borrower will be conclusive against each Guarantor. 19.13 CONDITIONS PRECEDENT Any condition or condition precedent to the provision of financial accommodation, is for the benefit of the Indemnified Parties and not the Guarantors. Any waiver of or failure to satisfy such a condition or condition precedent will be disregarded in determining whether an amount is part of the Secured Moneys. 20. INTEREST ON OVERDUE AMOUNTS 20.1 ACCRUAL Interest accrues on each unpaid amount which is due and payable by the Borrower or a Guarantor under or in respect of any Transaction Document (including interest payable under this clause): (a) on a daily basis up to the date of actual payment from (and including) the due date or, in the case of an amount payable by way of reimbursement or indemnity, the date of disbursement or loss, if earlier; (b) both before and after judgment (as a separate and independent obligation); and ________________________________________________________________________________ Page 47 ________________________________________________________________________________ (c) at the rate determined by the Agent to be the sum of 2% per annum plus the higher of: (i) the rate (if any) applicable to the unpaid amount immediately before the due date; and (ii) the Westpac Banking Corporation's reference lending rate from time to time, plus the Margin. 20.2 PAYMENT Each of the Borrower and the Guarantors shall pay interest accrued under this clause on demand by the Agent and on the last Business Day of each calendar quarter. That interest is payable in the currency of the unpaid amount on which it accrues. 21. INDEMNITIES 21.1 INDEMNITIES On demand the Borrower shall indemnify each Indemnified Party against any loss, cost, charge, liability or expense the Indemnified Party (or any officer or employee of the Indemnified Party) may sustain or incur as a direct or indirect consequence of: (a) the occurrence of any Event of Default or Potential Event of Default; (b) any exercise or attempted exercise of any right, power or remedy under any Transaction Document or any failure to exercise any right, power or remedy; (c) any statement in, conduct relying on or omission or alleged omission from: (i) any information memorandum or loan proposal; or (ii) any document or information prepared or authorised by it, or any claim in respect of any of the above (including legal costs on a full indemnity basis); (d) a Loan requested in a Drawdown Notice not being provided for any reason (including, without limitation, failure to fulfil any condition precedent but excluding any default by the Indemnified Party which is claiming under this clause); or (e) a Participant receiving payments of principal in respect of any Loan before the last day of its Funding Period for any reason, including, without limitation, prepayment under this Agreement, but excluding default by the Agent. Without limitation the indemnity will cover any amount determined by the relevant Participant to be incurred by reason of the liquidation or re-employment of deposits or other funds acquired or contracted for by the relevant Participant to fund or maintain any Loan or amount (including loss of margin) and by reason of the reversing or termination of any agreement or arrangement entered into by the relevant Participant to hedge, fix or limit its effective cost of funding or maintaining any Loan or amount. 21.2 CURRENCY INDEMNITY The Borrower or each Guarantor, as the case may be, shall indemnify each Indemnified Party against any deficiency which arises whenever for any reason (including as a result of a judgment or order or Liquidation: ________________________________________________________________________________ Page 48 ________________________________________________________________________________ (a) an Indemnified Party receives or recovers an amount in one currency (the PAYMENT CURRENCY) in respect of an amount denominated under a Transaction Document in another currency (the DUE CURRENCY); and (b) the amount actually received or recovered by an Indemnified Party in accordance with its normal practice when it converts the Payment Currency into the Due Currency is less than the relevant amount of the Due Currency. 21.3 REIMBURSEMENT IN ANOTHER CURRENCY Where an amount to be reimbursed or indemnified against under a Transaction Document is denominated in a currency other than Australian dollars, if a Indemnified Party so requests, the Borrower shall reimburse or indemnify it against the amount of Australian dollars which that Indemnified Party certifies that it used to buy the relevant amount of the other currency in accordance with its normal procedures. If that Indemnified Party does not so request, the Borrower shall reimburse or indemnify it in that other currency. 22. EXPENSES On demand the Borrower shall reimburse: (a) the Agent for its reasonable and proper expenses in relation to the preparation, execution and completion of the Transaction Documents and any subsequent consent, agreement, approval, waiver or amendment; and (b) each Indemnified Party for its expenses in relation to: (i) any actual or contemplated enforcement of the Transaction Documents, or actual or contemplated exercise, preservation or consideration of any rights, powers or remedies under the Transaction Documents or in relation to the Mortgaged Property; and (ii) any enquiry by a Governmental Agency concerning any Relevant Company or the Mortgaged Property or a transaction or activity the subject of the Transaction Documents, or in connection with which, financial accommodation or funds raised under a Transaction Document are used or provided. This includes, without limitation, legal costs and expenses (including in- house lawyers charged at their usual rates) on a full indemnity basis and travelling and out of pocket expenses, any expenses incurred in any review or environmental audit or in retaining consultants to evaluate matters of material concern to the Participants, and administrative costs including time of its executives (their time and costs are to be charged at reasonable rates). 23. STAMP DUTIES (a) The Borrower shall pay all stamp, transaction, registration and similar Taxes (including fines and penalties) which may be payable in relation to the execution, delivery, performance or enforcement of any Transaction Document or any payment or receipt or any other transaction contemplated by any Transaction Document. (b) Those Taxes include financial institutions duly, debits tax or other Taxes payable by return and Taxes passed on to any Indemnified Party by a bank or financial institution. _______________________________________________________________________________ Page 49 ________________________________________________________________________________ (c) On demand the Borrower shall indemnify each Indemnified Party against any liability resulting from delay or omission to pay those Taxes except to the extent the liability results from failure by the Indemnified Party to pay any Tax after having been put in funds to do so by the Borrower. 24. CONTROL ACCOUNTS The accounts kept by the Agent constitute sufficient evidence, unless proven wrong, of the amount at any time due from the Borrower under this Agreement. 25. SET-OFF (a) Each of the Borrower and the Guarantors severally irrevocably authorises each Indemnified Party if an Event of Default is subsisting to apply any credit balance in any currency (whether or not matured) in any of its accounts with that Indemnified Party towards satisfaction of any sum at any time due and payable by it to that Indemnified Party under or in relation to any Transaction Document. No Indemnified Party is obliged to make the application. (b) Any Indemnified Party may effect currency exchanges appropriate to implement that application. 26. WAIVERS, REMEDIES CUMULATIVE (a) No failure to exercise and no delay in exercising any right, power or remedy under any Transaction Document operates as a waiver. Nor does any single or partial exercise of any right, power or remedy preclude any other or further exercise of that or any other right, power or remedy. (b) The rights, powers and remedies provided to the Indemnified Parties in the Transaction Documents are in addition to, and do not exclude or limit, any right, power or remedy provided by law. 27. SEVERABILITY OF PROVISIONS Any provision of any Transaction Document which is prohibited or unenforceable in any jurisdiction is ineffective as to that jurisdiction to the extent of the prohibition or unenforceability. That does not invalidate the remaining provisions of that Transaction Document nor affect the validity or enforceability of that provision in any other jurisdiction. 28. SURVIVAL OF REPRESENTATIONS AND INDEMNITIES (a) All representations and warranties in any Transaction Document survive the execution and delivery of the Transaction Documents and the provision of advances and accommodation. (b) Each indemnity in any Transaction Document: (i) is a continuing obligation; (ii) is a separate and independent obligation; and (iii) survives termination or discharge of the relevant Transaction Document. ________________________________________________________________________________ Page 50 ________________________________________________________________________________ 29. MORATORIUM LEGISLATION To the full extent permitted by law all legislation which at any time directly or indirectly: (a) lessens, varies or affects in favour of the Borrower or a Guarantor any obligation under a Transaction Document; or (b) delays, prevents or prejudicially affects the exercise by any Indemnified Party of any right, power or remedy conferred by any Transaction Document, is excluded from the Transaction Documents. 30. CONSENTS AND OPINIONS Except where expressly stated any Indemnified Party may give or withhold, or give conditionally, approvals and consents, may be satisfied or unsatisfied, may form opinions and may exercise its rights, powers and remedies at its absolute discretion. 31. ASSIGNMENTS 31.1 ASSIGNMENT BY BORROWER AND GUARANTOR Neither the Borrower nor any Guarantor may assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the Agent acting on the instructions of all Participants. 31.2 ASSIGNMENT BY PARTICIPANTS A Participant may assign or transfer all or any of its rights or obligations under the Transaction Documents at any time if: (a) any necessary prior Authorisation is obtained; (b) unless the transferee or assignee is a Related Corporation of the Participant, the Borrower has given its prior consent, which: (i) it shall not withhold unreasonably; and (ii) will be taken to have been given if no response is received within 15 days of the request for consent; and (c) in the case of a transfer of obligations, the transfer is effected by a substitution in accordance with Clause 31.3 (SUBSTITUTION CERTIFICATES). 31.3 SUBSTITUTION CERTIFICATES (a) If a Participant wishes to substitute a new bank or financial institution for all or part of its participation under this Agreement, it and the substitute shall in the Australian Capital Territory, the Northern Territory or outside Australia execute and deliver to the Agent four counterparts of a certificate substantially in the form of Annexure D. (b) On receipt of the certificate, if the Agent is satisfied that the substitution complies with Clause 31.2 (ASSIGNMENT BY PARTICIPANTS), it shall promptly: (i) notify the Borrower; ________________________________________________________________________________ Page 51 ________________________________________________________________________________ (ii) countersign the counterparts on behalf of all other parties to this Agreement; (iii) enter the substitution in a register kept by it (which will be conclusive); and (iv) retain one counterpart and deliver the others to the retiring Participant, the substitute Participant and the Borrower. (c) When the certificate is countersigned by the Agent the retiring Participant will be relieved of its obligations to the extent specified in the certificate and the substitute Participant will be bound by the Transaction Documents as stated in the certificate. (d) Each other party to this Agreement irrevocably authorises the Agent to sign each certificate on its behalf. (e) Unless the Agent otherwise agrees, no substitution may be made while any Drawdown Notice or selection Notice is current. 31.4 DISCLOSURE A Participant may disclose to a proposed assignee, transferee or sub- participant information which relates to any Relevant Company or was furnished in connection with the Transaction Documents if it first obtains the consent of the Borrower (who shall not unreasonably withhold or delay that consent). 31.5 NO INCREASED COSTS Despite anything to the contrary in this Agreement, if a Participant assigns its rights under this Agreement, the Borrower will not be required to pay any net increase in the total amount of costs, Taxes, fees or charges which is a direct consequence of the assignment and of which the Participant or its assignee was aware or ought reasonably to have been aware on the date of the assignment. For this purpose only a substitution under Clause 31.3 (SUBSTITUTION CERTIFICATES) will be regarded as an assignment. 32. RELATIONSHIP OF PARTICIPANTS TO AGENT 32.1 AUTHORITY (a) Subject to Clause 32.15 (REPLACEMENT OF AGENT) each Participant irrevocably appoints the Agent to act as its agent under the Transaction Documents. The Agent has all powers expressly delegated to it by the Transaction Documents together with all other powers reasonably incidental to those powers. (b) The Agent will have no duties or responsibilities except those expressly set out in the Transaction Documents. 32.2 INSTRUCTIONS; EXTENT OF DISCRETION (a) In the exercise of all its rights, powers and discretions under the Transaction Documents the Agent shall act in accordance with the instructions (if any) of the Majority Participants or (where so specified) of all Participants. (b) In the absence of those instructions, the Agent need not act but may act as it sees fit in the best interests of the Participants. ________________________________________________________________________________ Page 52 ________________________________________________________________________________ (c) Any action taken by the Agent under the Transaction Documents binds all the Participants. (d) The Agent is not obliged to consult with the Participants before giving any consent, approval or agreement or making any determination under the Transaction Documents except where this Agreement expressly provides otherwise. 32.3 NO OBLIGATION TO INVESTIGATE AUTHORITY (a) Neither the Borrower nor a Guarantor need enquire whether any instructions have been given to the Agent by all Participants or the Majority Participants or as to the terms of those instructions. (b) As between the Borrower and the Guarantors on the one hand and the Agent and the Participants on the other, all action taken by the Agent under the Transaction Documents will be taken to be authorised. 32.4 AGENT NOT A FIDUCIARY The Agent will not be taken to owe any fiduciary duty to any Participant, any Relevant Company or any other person except as expressly provided in a Transaction Document. 32.5 EXONERATION Neither the Agent nor any of its respective directors, officers, employees, agents, attorneys, Related Corporations or successors is responsible to the Participants for, or will be liable (whether in negligence or on any other ground whatever) in respect of: (a) any conduct relating to, contained in or relying on, any loan proposal or information memorandum, any Transaction Document or any document or agreement referred to in or received under any Transaction Document; (b) the value, validity, effectiveness, genuineness, enforceability or sufficiency of any loan proposal or information memorandum, any Transaction Document or any other document or agreement; (c) any failure by any Relevant Company to perform its obligations; or (d) any action taken or omitted to be taken by it or them under any Transaction Document except in the case of its or their own wilful misconduct. 32.6 DELEGATION The Agent may employ agents and attorneys. 32.7 RELIANCE ON DOCUMENTS AND EXPERTS The Agent may rely on: (a) any document (including any facsimile transmission, telegram or telex) believed by it to be genuine and correct; and (b) advice and statements of lawyers, independent accountants and other experts selected by the Agent. ________________________________________________________________________________ Page 53 ________________________________________________________________________________ 32.8 NOTICE OF TRANSFER The Agent may treat each Participant as the holder of the Participant's rights under the Transaction Documents until the Agent has received either a substitution certificate under this Agreement or a notice of assignment satisfactory to the Agent. 32.9 NOTICE OF DEFAULT (a) The Agent will be taken not to have notice or knowledge of the occurrence of an Event of Default or Potential Event of Default unless the Agent has received notice from a Participant or Relevant Company stating that an Event of Default or Potential Event of Default has occurred and describing it. (b) If the Agent receives notice that an Event of Default has occurred, the Agent shall notify the Participants, subject to Clause 32.14(c). 32.10 AGENT AS PARTICIPANT AND BANKER (a) The Agent in its capacity as a Participant has the same rights and powers under the Transaction Documents as any other Participant. It may exercise them as if it were not acting as the Agent. (b) The Agent may engage in any kind of business with any Relevant Company as if it were not the Agent. It may receive consideration for services in connection with any Transaction Document and otherwise without having to account to the Participants. 32.11 INDEMNITY TO AGENT (a) The Participants shall indemnify the Agent on demand (to the extent not reimbursed by any Relevant Company under any Transaction Document) ratably in accordance with their respective Commitments against any loss, cost, liability, expense or damage the Agent may sustain or incur directly or indirectly under or in relation to the Transaction Documents. (b) No Participant is liable under this sub-clause for any of the above to the extent that they arise from the Agent's wilful misconduct or gross negligence. (c) The Borrower shall indemnify each Participant on demand against any amount paid under paragraph (a). This does not limit its liability under any other provision. 32.12 INDEPENDENT INVESTIGATION OF CREDIT Each Participant confirms that it has made and will continue to make, independently and without reliance on the Agent or any other Participant: (a) its own investigations into the affairs of the Relevant Companies; and (b) its own analyses and decisions whether to take or not take action under any Transaction Document. 32.13 NO MONITORING The Agent is not required to keep itself informed as to the compliance by any Relevant Company with any Transaction Document or any other document or agreement or to inspect any property or book of any Relevant Company. ________________________________________________________________________________ Page 54 ________________________________________________________________________________ 32.14 INFORMATION (a) The Agent shall provide to each Participant a copy of each notice, report and other document which is provided to the Agent in sufficient copies for the Participants under the Transaction Documents. (b) The Borrower and each Guarantor authorises the Agent to provide any Participant with any information concerning any Relevant Company's affairs which may come into the possession of the Agent. The Agent is not obliged to do so. (c) The Agent is not obliged to disclose any information relating to any Relevant Company if in the opinion of the Agent (on the basis of the advice of its legal advisers) disclosure would or might breach a law or a duty of secrecy or confidence. 32.15 REPLACEMENT OF AGENT (a) Subject to the appointment of a successor Agent as provided in this clause: (i) the Agent may resign at any time by giving not less than 30 days notice to the Participants and to the Borrower; and (ii) the Majority Participants may remove the Agent from office by giving not less than 30 days notice to the Borrower and the Agent. (b) Upon notice of resignation or removal the Majority Participants have the right to appoint a successor Agent approved by the Borrower and who accepts the appointment. (c) If no successor Agent is appointed within 30 days after notice, the retiring Agent may on behalf of the Participants appoint a successor Agent who accepts the appointment. (d) On its appointment the successor Agent will have all the rights, powers and obligations of the retiring Agent. The retiring Agent will be discharged from its rights, powers and obligations. (e) The retiring Agent shall execute and deliver all documents or agreements which are necessary or in its opinion desirable to transfer to the successor Agent each Security Interest and Guarantee held by the retiring Agent in relation to the Secured Moneys or to effect the appointment of the successor Agent. (f) After any retiring Agent's resignation or removal, this clause will continue in effect in respect of anything done or omitted to be done by it while it was acting as Agent. (g) The Borrower shall not unreasonably withhold its approval of any proposed successor Agent. It shall respond as soon as practicable to any request for approval. (h) The Borrower need not pay the cost of the appointment of a successor Agent under this clause. 32.16 AMENDMENT OF TRANSACTION DOCUMENTS Each Participant authorises the Agent to agree with the other parties to any Transaction Document to amend any Transaction Document if: (a) the amendment will not increase the Commitments or other obligations of the Participants, change the dates or amounts of payment of any of the Secured Moneys, ________________________________________________________________________________ Page 55 ________________________________________________________________________________ release any of the Mortgaged Property or amend this sub-clause or any provision under which the agreement or instructions of all Participants of the Majority Participants are required; and (b) (i) the Agent is satisfied that the amendment is made to correct a manifest error or an error of a minor nature or that the amendment is of a formal or technical nature only; or (ii) the Majority Participants have, upon request by the Agent, notified the Agent of their agreement to the amendment. Each Participant will be bound by any amendment so agreed to by the Agent as if it were party to the relevant amendment agreement. 33. PROPORTIONATE SHARING 33.1 SHARING Whenever any Participant receives or recovers any money in respect of any sum due from a Relevant Company under a Transaction Document in any way (including without limitation by set-off) except through distribution by the Agent under this Agreement: (a) the Participant shall immediately notify the Agent; (b) the Participant shall immediately pay that money to the Agent (unless the Agent directs otherwise); (c) the Agent shall treat the payment as if it were a payment by the Relevant Company on account of all sums then payable to the Indemnified Parties; and (d) (i) the payment or recovery will be taken to have been a payment for the account of the Agent and not to the Participant for its own account, and to that extent the liability of the Relevant Company to the Participant will not be reduced by the recovery or payment, other than to the extent of any distribution received by the Participant under paragraph (c); and (ii) (without limiting sub-paragraph (i)) immediately on the Participant making or becoming liable to make a payment under paragraph (b), the Borrower or the relevant Guarantor, as the case may be, shall indemnify the Participant against the payment to the extent that (despite sub-paragraph (i)) its liability has been discharged by the recovery or payment. If the Participant is required to disgorge or unwind all or part of the relevant recovery or payment then the other Participants shall repay to the Agent for the account of the Participant the amount necessary to ensure that all the Participants share ratably in the amount of the recovery or payment retained. Paragraphs (c) and (d) above apply only to the retained amount. 33.2 REFUSAL TO JOIN IN ACTION A Participant who does not accept an invitation, to join an action against any Relevant Company or does not share in the costs of the action (in each case having been given a reasonable opportunity to do so) is not entitled to share in any amount so recovered. ________________________________________________________________________________ Page 56 ________________________________________________________________________________ 34. AGENT DEALINGS Except where expressly provided otherwise: (a) all correspondence under or in relation to the Transaction Documents between a Participant on the one hand, and the Borrower or a Guarantor on the other, will be addressed to the Agent; and (b) the Participants and the Borrower and the Guarantors severally agree to deal with and through the Agent in accordance with this Agreement. 35. ADDITION OF GUARANTORS (a) (NEW GUARANTOR): The Borrower shall ensure that each of the companies in Schedule 2 shall become a Guarantor (the NEW GUARANTOR) for the purposes of this Agreement by entering into a Guarantor Accession Deed within 30 days of the first Drawdown Date. (b) (ACCESSION DEED): Upon execution of a Guarantor Accession Deed by the New Guarantor and the Agent, the New Guarantor shall be taken to be a Guarantor for the purposes of this Agreement with all the rights and obligations as if it were an original party to this Agreement and to have made the representations and warranties in Clause 16.1 and/or Clause 16.3 on the date of such execution. (c) (CONDITIONS PRECEDENT): The Borrower shall ensure that before the New Guarantor becomes a Guarantor, the Agent has received the following in form and substance satisfactory to it: (i) (CONFIRMATION OF WARRANTIES): a certificate signed by a director of the Borrower confirming that upon execution of the Guarantor Accession Deed the representations and warranties set out in Clause 16.1 and 16.3 will be correct in relation to the New Guarantor; (ii) (VERIFICATION CERTIFICATE): a certificate in relation to the New Guarantor given by a director of the New Guarantor substantially in the form of Annexure B with the attachments referred to and dated not earlier than 14 days before its execution of the Guarantor Accession Deed. 36. TAXATION 36.1 ADDITIONAL PAYMENTS Whenever the Borrower or a Guarantor is obliged to make a deduction in respect of Tax from any payment under any Transaction Document: (a) it shall promptly pay the amount deducted to the appropriate Governmental Agency; (b) within 30 days of the end of the month in which the deduction is made, it shall deliver to the Agent official receipts or other documentation acceptable to the relevant Indemnified Party evidencing payment of that amount; and (c) unless the Tax is an Excluded Tax, it shall pay the relevant Indemnified Party on the due date of the payment any additional amounts necessary (as determined by the relevant Indemnified Party) to ensure that the relevant Indemnified Party receives when due a net amount (after payment of any Taxes and Australian Withholding Tax) in respect of those additional amounts) in the relevant currency equal to the full amount which it would have received had a deduction not been made, and it shall ________________________________________________________________________________ Page 57 ________________________________________________________________________________ indemnify the relevant Indemnified Party against the Tax and any amounts recoverable from the relevant Indemnified Party in respect of the Tax. The Borrower and each Guarantor waive any statutory right to recover from any Indemnified Party any amount paid under this clause. 36.2 SURVIVAL OF OBLIGATIONS The obligations of the Borrower and each Guarantor under this clause survive the repayment of the Principal Outstanding and the termination of this Agreement. 36.3 ACCELERATION ON NON-PAYMENT OF TAX (a) If at any time the Borrower or a Guarantor fails to perform this Clause as set out in this Agreement then even if all or part of the Clause may be void or unenforceable the Agent may and shall if instructed by the Majority Participants (after the expiry of applicable grace periods set out in Clause 18.1(a)(ii)) terminate the Commitments by notice to the Borrower. (b) Upon that notice the Borrower shall immediately prepay the Principal Outstanding together with accrued interest and all other moneys payable under the Transaction Documents. 37. NOTICES All notices, requests, demands, consents, approvals, agreements or other communications to or by a party to this Agreement: (a) must be in writing; (b) must be signed by an Authorised Officer of the sender; and (c) will be taken to be duly given or made: (i) (in the case of delivery in person or by post or facsimile transmission) when delivered, received or left at the address of the recipient shown in this Agreement or to any other address which it may have notified the sender; or (ii) (in the case of a telex) on receipt by the sender of the answerback code of the recipient at the end of transmission, but if delivery or receipt is on a day which business is not generally carried on in the place to which the communication is sent or is later than 4 pm (local time), it will be taken to have been duly given or made at the commencement of business on the next day on which business is generally carried on in that place. 38. AUTHORISED OFFICERS Each of the Borrower and the Guarantors irrevocably authorises each Indemnified Party to rely on a certificate by any person purporting to be its director or secretary as to the identity and signatures of its Authorised Officer. Each of the Borrower and the Guarantors warrants that those persons have been authorised to give notices and communications under or in connection with the Transaction Documents. Each Guarantor warrants that each Authorised Officer of the Borrower is authorised to sign Drawdown Notices on behalf of each Guarantor. ________________________________________________________________________________ Page 58 ________________________________________________________________________________ 39. GOVERNING LAW AND JURISDICTION This Agreement is governed by the laws of New South Wales. Each of the Borrower and the Guarantors submits to the non-exclusive jurisdiction of courts exercising jurisdiction there. 40. COUNTERPARTS This Agreement may be executed in any number of counterparts. All counterparts together will be taken to constitute one instrument. 41. ACKNOWLEDGEMENT BY BORROWER AND GUARANTORS Each of the Borrower and the Guarantors confirms that: (a) it has not entered into this Agreement in reliance on, or as a result of, any conduct of any kind of or on behalf of any Indemnified Party or any Related Corporation of any Indemnified Party (including, without limitation, any advice, warranty, representation or undertaking); and (b) neither any Indemnified Party nor any Related Corporation of any Indemnified Party is obliged to do anything (including, without limitation, disclose anything or give advice), except as expressly set out in the Transaction Documents or in writing duly signed by or on behalf of any Indemnified Party or Related Corporation. EXECUTED in Sydney. Each attorney executing this Agreement states that he has no notice of revocation or suspension of his power of attorney. THE BORROWER SIGNED on behalf of ) MGM GRAND AUSTRALIA PTY LTD ) by its attorney ) /s/ Michael Herring in the presence of; ) ---------------------------------------- Signature /s/ D. N. Perry Michael Herring - ------------------------------- ---------------------------------------- Witness Print name D. N. Perry - ------------------------------- Print name ________________________________________________________________________________ Page 59 ________________________________________________________________________________ THE AGENT SIGNED on behalf of ) BANK OF AMERICA AUSTRALIA ) LIMITED ) by its attorney ) /s/ John W. Sutherland in the presence of: ) ---------------------------------------- Signature /s/ Peter Yam JOHN W. SUTHERLAND - ------------------------------- ---------------------------------------- Witness Print name Peter Yam - ------------------------------- Print name THE PARTICIPANTS SIGNED on behalf of ) BANK OF AMERICA NATIONAL TRUST ) AND SAVINGS ASSOCIATION ) by its attorney ) /s/ John W. Sutherland in the presence of: ) ---------------------------------------- Signature /s/ Peter Yam JOHN W. SUTHERLAND - --------------------------------- ---------------------------------------- Witness Print name Peter Yam - --------------------------------- Print name ________________________________________________________________________________ EX-10.23 9 MGM GRAND, INC. CONTINUING GUARANTY EXHIBIT 10(23) MGM GRAND, INC. --------------- CONTINUING GUARANTY ------------------- This Continuing Guaranty ("Guaranty") is made as of September 1, 1995 by the undersigned ("Guarantor"), to and for the benefit of Bank of America Australia Limited (ACN 004 617 341), as agent ("Agent"), and the Banks (as hereinafter defined) party to that certain Credit Agreement dated as of September 1, 1995 among MGM Grand Australia Pty Limited (ACN 069 214 473), a Northern Territory incorporated company ("Borrower"), the Guarantors named in that agreement, the Agent and the Participants party thereto (collectively, together with any successor or assign, the "Banks") (as amended, modified or waived from time to time, the "Credit Agreement"). All terms used herein and not otherwise defined in this Guaranty are used as defined in the Credit Agreement. RECITALS -------- A. Financial accommodations extended by the Banks and the Agent (each, a "Guaranteed Party" and collectively, the "Guaranteed Parties") to Borrower will benefit Guarantor directly and indirectly. B. The Guaranteed Parties are willing to extend such financial accommodations to Borrower on the condition that such accommodations be guaranteed by Guarantor. NOW, THEREFORE, based upon the foregoing and other good and valuable consideration, the receipt and sufficiency of which is hereby agreed and acknowledged, Guarantor hereby agrees as follows: 1. Guarantor hereby irrevocably and unconditionally guaranties and promises to pay and perform on demand all Indebtedness (as hereafter defined) including, without limitation, all amendments, modifications, supplements, - --------- renewals or extensions of any of them, whether such amendments modifications, supplements, renewals or extensions are evidenced by new or additional instruments, documents or agreements or change the rate of interest on any Guarantied Obligation (as hereinafter defined) or the security therefor, or otherwise. If any or all Indebtedness of Borrower to any Guaranteed Party becomes due and payable, Guarantor unconditionally promises to pay such Indebtedness to such Guaranteed Party, or order, on demand. -1- 2. "Indebtedness" as used herein shall mean all principal, interest, fees, charges, penalties, expenses, payments, and all other amounts due from Borrower to the Guaranteed Parties or any of them from time to time under the Credit Agreement, any other Transaction Document, whether now existing or hereafter arising, whether by reason of amendment or otherwise, whether due or to become due, absolute or contingent, liquidated or unliquidated, or whether Borrower may be liable individually or jointly with others, whether recovery upon such indebtedness may be or hereafter becomes barred by any statute of limitations, or whether such indebtedness may be or hereafter become unenforceable, including interest that accrues after the commencement of any bankruptcy or insolvency proceeding against Borrower or any other Person. 3. The liability of Guarantor under this Guaranty shall be absolute and unconditional, and shall not be affected or released in any way, irrespective of: (a) any lack of legality, validity, enforceability or binding effect of the Credit Agreement, any other Transaction Document or other agreement or instrument relating thereto; (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Indebtedness or of any of the Transaction Documents, or any other amendment or waiver of or any consent to any departure from the Credit Agreement or any other Transaction Document including, without limitation, any increase in the Indebtedness or other obligations under the Transaction Documents resulting from the extension of additional credit to Borrower or otherwise; (c) any enforcement of any Transaction Document, including the taking, holding or sale of any Mortgaged Property or any termination or release of any Mortgaged Property from the Security Interest created by any Transaction Document, or the non-perfection of any Security Interest created by any Transaction Document; (d) any release or termination of any other guaranty or suretyship arrangement; or (e) any change, restructuring or termination of the corporate or other structure or existence of Borrower. This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Indebtedness is rescinded or must otherwise be returned by any Guaranteed Party or any other Person upon the insolvency, bankruptcy or reorganization of Borrower, Guarantor or otherwise, all as though such payment had not been made. -2- 4. This is a continuing Guaranty relating to any Indebtedness, including Indebtedness arising under successive transactions which shall either continue the Indebtedness or from time to time renew any portion of it after satisfaction. Any payment by Guarantor shall not reduce its obligations hereunder, unless written notice to that effect be actually received by the Agent at or prior to the time of such payment. 5. The obligations hereunder are independent of the obligations of Borrower, and a separate action or actions may be brought and prosecuted against Guarantor whether action is brought against Borrower or any other guarantor, surety or other obligor, or whether Borrower or any other guarantor, surety or other obligor be joined in any such action or actions; and Guarantor waives the benefit of any statute of limitations affecting its liability hereunder. 6. Guarantor authorizes each of the Guaranteed Parties, without notice or demand and without affecting its liability hereunder, from time to time, either before or after revocation hereof, to (a) renew, compromise, extend, accelerate or otherwise change the time for payment of, or otherwise change the terms of the Indebtedness or any part thereof, including increase or decrease of the principal amount of such Indebtedness or the rate of interest thereon; (b) take and hold security for the payment of this Guaranty or the Indebtedness guaranteed, and exchange, enforce, waive, release, fail to perfect, sell, or otherwise dispose of any such security; (c) apply such security and direct the order or manner of sale thereof; and (d) release or substitute any one or more of the endorsers, guarantors, sureties or other obligors. 7. Guarantor hereby waives, to the extent permitted by applicable law: (a) any requirement that the Agent, any Guaranteed Party or any other Person protect, secure or insure any Security Interest or any collateral or other property subject thereto or exhaust any right or take any action against Borrower or any other Person or any Security Interest included in the Transaction Documents or the Mortgaged Property; (b) any defense arising by reason of any claim or defense based upon an election of remedies by the Agent or any other Guaranteed Party which in any manner impairs, reduces, releases or otherwise adversely affects its subrogation, contribution or reimbursement rights or other rights to proceed against Borrower or any other Person or any Security Interest included in the Transaction Documents or the Mortgaged Property; (c) any duty on the part of the Agent or any other Guaranteed Party to disclose to Guarantor any matter, fact or thing relating to the business, operation or condition of Borrower or any other party to any of the Transaction Documents and its assets now known or hereafter known by the Agent or any other Guaranteed Party; (d) all promptness, diligence, notice of acceptance and any other notice with respect to any of the -3- Indebtedness or any other obligations under the Transaction Documents or this Guaranty, presentments, demands for performance, notices of nonperformance, protests, notices of protests, notices of dishonor, and notices of acceptance of this Guaranty and of the existence, creation, or incurrence of new or additional Indebtedness; and (f) any right to require the Agent or any Bank to marshall assets in favor of Borrower, Guarantor or any other Person; (g) pursuant to Section 40.495 of the Nevada Revised Statutes ("NRS"), Guarantor hereby waives and relinquishes all rights and remedies to which Guarantor might otherwise be entitled pursuant to NRS 40.430 or other applicable law; and (h) Guarantor specifically waives its rights under NRS 104.3605, and agrees that the foregoing shall constitute a waiver of discharge under NRS 104.3605(9). 8. Except as may otherwise be required by NRS Sections 40.475 and 40.485 concerning full and partial satisfaction of indebtedness, which may only be waived after default pursuant to NRS Section 40.495(1), Guarantor hereby irrevocably waives any claim or other rights which it now has or may hereafter acquire against Borrower, whether due or to become due, voluntary or involuntary, absolute or contingent, liquidated or unliquidated, determined or undetermined, for reimbursement, exoneration, contribution, indemnification, or any right to participate in any claim or remedy of any Guaranteed Party against Borrower or any Security Interest which any Guaranteed Party now has or hereafter acquires, whether or not such claim, remedy or right arises in equity, or under contract, statute or common law, including without limitation, the right to take or receive from Borrower, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim or other rights. If any amount or security shall be paid or delivered to Guarantor or in violation of security shall be paid or delivered to Guarantor in violation of the preceding sentence and the Indebtedness shall not have been paid in full, such amount shall be deemed to have been paid to Guarantor for the benefit of, and held in trust for the benefit of, the Guaranteed Parties and shall forthwith be paid to the Agent for the benefit of the Guaranteed Parties to be credited and applied to the Indebtedness, whether matured or unmatured. 9. Guarantor agrees that, to the extent that Borrower makes a payment or payments to any Guaranteed Party or any Guaranteed Party receives any proceeds of any Security Interest or the Mortgaged Property, which payment or payments or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or otherwise required to be repaid to Borrower, the estate, trustee, receiver or either of them, or any other party, including, without limitation, in equity, or under contract, statute or common law, then to the extent of such payment or repayment, the obligation or part thereof which has been paid, reduced or satisfied by such amount shall be reinstated and continued in full force and effect as of the date -4- such initial payment, reduction or satisfaction occurred. Guarantor shall protect, defend and indemnify and hold harmless each Guaranteed Party from and against any claim or loss under this Section 9 (including reasonable attorneys' fees and expenses) in the defense of any such action or suit. 10. Guarantor acknowledges and agrees that is shall have the sole responsibility for obtaining from Borrower such information concerning its financial condition or business operation, as Guarantor may require, and that no Guaranteed Party has any duty at any time to disclose to Guarantor any information relating to the business operation or financial condition of Borrower. 11. In the event that all or any part of the Indebtedness at any time is secured by any one or more deeds of trust or mortgages or other instruments creating or granting liens on any interests in real property, Guarantor authorizes the Guaranteed Parties, upon the occurrence of and during the continuance of any Event of Default, without notice or demand and without affecting any guaranteed obligations of Guarantor hereunder or the enforceability of any Security Interest included in the Transaction Documents or the Mortgaged Property, to enforce in any manner any or all of such Security Interest, including without limitation by transfer or by judicial or nonjudicial sale. Guarantor expressly waives any defenses or benefits that may be derived from NRS Section 40.430 and any other statute or principle of law providing that there shall be but one form of action in connection with the collection of any debt or enforcement of any right secured by a lien on real property, and all other guarantor, suretyship and other defenses it otherwise might or would have under Nevada law or other applicable law. Guarantor expressly waives any right to receive notice of any judicial or nonjudicial enforcement (including without limitation sale or foreclosure) of any real property or interest therein subject to any such deeds of trust or mortgages or other instruments and Guarantor's or any other Person's failure to receive any such notice shall not impair or affect Guarantor's obligations hereunder or the enforceability of this Guaranty or any rights of the Guaranteed Parties created or granted hereby. Guarantor understands that if the Guaranteed Parties enforce against any property securing the Indebtedness, that enforcement may impair or destroy any ability that Guarantor may have to seek reimbursement, contribution or indemnification from Borrower or others based on any right guarantor may have of subrogation, reimbursement, contribution or indemnification for any amount paid by Guarantor under this Guaranty. By executing this Guaranty, Guarantor (i) waives and relinquishes any defense based on the foregoing and agrees that Guarantor will be fully liable under this Guaranty even though the Guaranteed Parties enforce against any property security for the Indebtedness; and (ii) agrees that Guarantor will not asset any such defense in any -5- action or proceeding which any of the Guaranteed Parties may commence to enforce this Guaranty. Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by the Credit Agreement and that the waivers set forth in this Section and in Sections 7 and 8 are knowingly made in contemplation of such benefits and that such waivers are a material part of the consideration the Guaranteed Parties are receiving for extending financial accommodations to Borrower. 12. Any obligations of Borrower to Guarantor, now or hereafter existing are hereby subordinated to the Indebtedness. Such obligations of Borrower to Guarantor if the Agent so requests after the occurrence and during the continuance of any Event of Default shall be enforced and performance received by Guarantor as trustee for each of the Guaranteed Parties and the proceeds thereof shall be paid over to the Agent on account of the Indebtedness, but without reducing or affecting in any manner the maximum liability of Guarantor under the other provisions of this Guaranty. 13. This Guaranty may not be revoked at any time by Guarantor. If Guarantor seeks to revoke, return, or cancel its obligations under this Guaranty, and subsequently any payment or transfer of any interest in property by Borrower to any Guaranteed Party is rescinded or must be returned by such Guaranteed party to Borrower, this Guaranty by Guarantor shall be reinstated with respected to any such payment or transfer, regardless of any such prior revocation, return, or cancellation. 14. Guarantor hereby represents and warrants as follows: (a) Corporate Existence and Power. It is a corporation duly organized ----------------------------- or formed, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated or formed, has all requisite power and authority, including, without limitation, all licenses, permits, franchises, patents, copyrights, trademarks, trade names, consents and approvals, to own its property and assets and to carry on its business as presently conducted and is duly qualified and is in good standing as a foreign corporation and is authorized to do business in each jurisdiction where such qualification or authorization is required, except where the failure to so qualify, to be authorized or to be in good standing would not result in a material adverse effect upon the business, operations, assets or financial or other condition of Guarantor. It has the corporate power to execute, deliver and perform its obligations under this Guaranty. (b) Corporate Authorization; No Contravention. The execution, ----------------------------------------- delivery and performance by it of this Guaranty (i) have been duly authorized by all requisite corporate and, if -6- required, stockholder or other action, and (ii) will not (A) violate (1) any Requirement of Law or its certificate or articles of incorporation or other constitutive documents or its by-laws or regulations, (2) any order of any court, or any rule, regulation or order of any other agency of government bringing upon it, or (3) any provisions of any indenture, agreement or other instrument to which it is a party, or by which it or any of its properties or assets is or may be bound, which violation would be likely to result in a material adverse effect upon its business assets or financial or other condition, (B) be in conflict with, result in a breach of or constitute (alone or with notice or lapse of time or both) a default under any indenture, agreement or other instrument referred to in (ii)(A)(3) above which violation would be likely to result in a material adverse effect upon its business assets or financial or other condition, or (iii) result in the creation or imposition of any Security Interest, charge or encumbrance of any nature whatsoever upon any of its property or assets other than as contemplated by this Guaranty. (c) Governmental Authorization. All consents and approvals of, -------------------------- applications, filings and registrations with, and other actions in respect of, all governmental agencies, authorities or instrumentalities and under any Gaming Laws which are or will be required by it in connection with the execution, delivery and performance of this Guaranty have been or will be, obtained, given, filed or taken and are in full force and effect, other than any which the failure to obtain, give, file or take would not have a material adverse effect upon the legality, validity, binding effect or enforceability of our its ability to perform under this Guaranty or to perform timely its obligations under or in connection with this Guaranty. (d) Binding Effect. This Guaranty constitutes the legal, valid and -------------- binding obligations of Guarantor, enforceable in accordance with its terms (subject, as to the enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium and similar laws affecting creditors' rights generally and to general principles of equity). (e) Litigation. There are no actions, suits, proceedings, claims or ---------- disputes pending, at law, in equity, in arbitration or before any Governmental Agency, against it or its Subsidiaries or any of their respective properties (or to its best knowledge, threatened or contemplated by any Governmental Agency against it or its subsidiaries or any of their respective properties) which: (i) purport to affect or pertain to this Guaranty or any Transaction Document, or any of the transactions contemplated hereby or thereby; or -7- (ii) is reasonably likely to have a material adverse effect upon (A) the consummation of the transactions contemplated by the Credit Agreement, (B) the legality, validity or enforceability of this Guaranty or any other Transaction Document to which it is a party, or (C) its business, operations, assets or financial or other condition. No injunction, writ, temporary restraining order or any order of any nature has been issued by any court or other Governmental Agency purporting to enjoin or restrain the execution, delivery and performance of this Guaranty or any other Transaction Document to which it is a party. (f) Conditions Precedent. There are no conditions precedent to the -------------------- effectiveness of this Guaranty that have not been satisfied or waived. (g) No Reliance. It has, independently and without reliance upon any ----------- Guaranteed Party and based on such documents and information as it has deemed appropriate and obtained on its own, made its own credit analysis and decision to enter into this Guaranty. 15. Guarantor hereby covenants and agrees that it will comply with all of the obligations, requirements and restrictions in the covenants contained in Clause 17 of the Credit Agreement to the extent (if any) that they are applicable to Guarantor. Guarantor further covenants and agrees that it will cause each of its Subsidiaries to comply with all terms of the Credit Agreement and each other Transaction Document, to the extent they are applicable to such Subsidiaries. Guarantor further covenants and agrees that, except as otherwise permitted by the Credit Agreement, it will: (a) Unless otherwise delivered by Borrower, deliver to each Guaranteed Party in form and detail satisfactory to the Banks: (i) the documents referred to in Clause 17.1(a) of the Credit Agreement; (ii) promptly, from time to time, such other information regarding the affairs, operations or condition (financial or otherwise) of Guarantor and its Subsidiaries as any Bank may reasonably request and which is capable of being obtained, produced or generated by Guarantor or any of its Subsidiaries or of which any of them has knowledge; (iii) promptly after occurrence, notice of the occurrence of any Potential Event of Default -8- or Event of Default and of the occurrence or existence of any event or circumstance that foreseeably will become a Default or Event of Default, specifying the nature and extent thereof and the action (if any) which is proposed to be taken with respect thereto; (b) At any time that any Event of Default under the Credit Agreement has occurred and is continuing: (i) not incur, create, assume or permit to exist any Financial Indebtedness (as defined in the Credit Agreement) except Financial Indebtedness (as defined in the Credit Agreement) hereunder, and Financial Indebtedness (as defined in the Credit Agreement) hereunder, and Financial Indebtedness (as defined in the Credit Agreement) in existence at the time of occurrence of such Event of Default; (ii) not incur, crate, assume or permit to exist any Security Interests on any of its property or assets (including stock) now owned or hereafter acquired except Security Interests included in the Transaction Documents and the Mortgaged Property and Security Interests in existence at the time such Event of Default occurs; and (iii) not declare or pay any dividend or make any distribution on its capital stock, or purchase, redeem or otherwise acquire or retire for value any equity interests, or repay any Financial Indebtedness (as defined in the Credit Agreement) owed to any Associate other than Borrower except for Security Interests in existence at the time such Event of Default occurs. 16. The occurrence and continuance of any one or more of the following events shall constitute an "Event of Default" under this Guaranty: (a) Any representation or warranty by Guarantor herein or which is contained in any certificate, document or financial or other statement furnished at any time hereunder, shall prove to have been incorrect in any material respect on or as of the date made or deemed made; or (b) Guarantor shall fail in any material respect to perform or observe any term, covenant or agreement in this Guaranty and such failure is not remedied within 30 days; or this Guaranty shall for any reason be revoked or invalidated, or otherwise cease to be in full force and effect, or Guarantor or any other Person shall contest in any manner the validity or enforceability hereof or deny that it has any further liability or obligation hereunder; or (c) The occurrence and continuance of an Event of Default as such term is defined in that certain Credit Agreement dated as of May 13, 1992, among MGM Grand Hotel Finance Corp., a Nevada corporation, MGM Grand Hotel, Inc., a Nevada corporation, the several financial institutions parties thereto and Bank of America National Trust and Savings -9- Association, as agent for such banks, as amended, supplemented, restated or otherwise modified from time to time (the "Finance Credit Agreement"); provided, -------- however, that if the Finance Credit Agreement is terminated, cancelled or - ------- otherwise fails to be in full force and effect at any time, or if Guarantor ceases at any time to be a guarantor under the Credit Agreement, the reference to Finance Credit Agreement in this section shall be to the Finance Credit Agreement as in effect immediately prior to such termination, cancellation, failure or cessation; THEN, any and all of Guarantor's obligations under this Guaranty shall become due, payable and enforceable against Guarantor whether or not the Indebtedness is then due and payable, without presentment, demand, protest or other requirements of any kind, all of which are hereby expressly waived by Guarantor. 17. Each payment made by Guarantor and indefeasibly received by the Guarantied Parties under this Guaranty will offset and satisfy an equivalent payment otherwise due and payable to the Guarantied Parties under the Credit Agreement or any other guaranty of the Indebtedness. 18. Each Guaranteed Party may, without notice to Guarantor and without affecting Guarantor's obligations hereunder, assign or transfer the Indebtedness and this Guaranty, in whole or in part in accordance with the provisions of the Credit Agreement. Guarantor agrees that each Guaranteed Party may, subject to Clause 31 of the Credit Agreement, disclose to any prospective purchaser or transferee and any purchaser or transferee of all or part of the Indebtedness any and all information in such Guaranteed Party's possession concerning Guarantor, this Guaranty and any security for this Guaranty. Any person who becomes a participant under Clause 31.2 of Clause 31.3 of the Credit Agreement will be a Bank and entitled to the benefit of this Guaranty. 19. Guarantor agrees to pay all reasonable attorneys' fees, the allocated costs of the Agent's in-house counsel, and all other costs and expenses which may be incurred by any Guaranteed Party in the enforcement of this Guaranty. 20. If any provision of this Guaranty is determined by court of competent jurisdiction to be invalid, illegal or unenforceable, that portion shall be deemed severed from this Guaranty, and all remaining parts shall continue in full force as though the invalid, illegal or unenforceable portion had never been part of this Guaranty. -10- 21. This Guaranty shall be governed by and construed according to the laws of the State of Nevada. EXECUTED AS OF THE DATE FIRST ABOVE WRITTEN. GUARANTOR: MGM GRAND, INC., a Delaware corporation By: /s/ Scott Langsner ------------------------------- Title: Secretary/Treasurer ---------------------------- By: /s/ K. Eugene Shutler ------------------------------- Title: Executive V. P. ---------------------------- Address: MGM Grand, Inc. 3799 Las Vegas Boulevard Las Vegas, NV 89109 -11- EX-10.24 10 OPTION DEED EXHIBIT 10(24) DATED as of 30 June 1995 (1) THE PERSONS NAMED IN SCHEDULE 1 (2) MGM GRAND DIAMOND INC. (3) MGM GRAND AUSTRALIA PTY LTD (4) MGM GRAND, INC ___________________________________ OPTION DEED MGM GRAND AUSTRALIA PTY LTD ___________________________________ ________________ HAMMOND SUDDARDS ________________ SOLICITORS ________________ TABLE OF CONTENTS Clause No. Heading Page No. - ---------- ------- -------- 1. DEFINITIONS AND INTERPRETATION 1 1.1 Definitions 1 1.2 Interpretation 6 2. BUSINESS REFERRALS 7 2.1 REFERRALS 7 2.2 Nature of Recommendation 7 2.3 Restrictions and Exceptions 8 3. CALL OPTIONS 8 3.1 Grant of Call Option 8 3.2 Appointment of Nominee 8 3.3 Option Exercisable in Full Only 9 3.4 Exercise Notice 9 3.5 Withdrawal of Notice 9 3.6 Contract for Sale and Purchase 9 3.7 No Encumbrance 11 3.8 Consideration 11 3.9 Venue and Completion Date 11 3.10 Acquisition Financing 11 3.11 Completion 13 3.12 Stamping and Registration of Transfers 14 4. EXCLUSIVE OPTION 14 5. REPRESENTATIONS AND WARRANTIES 16 5.1 Warranties by All Parties 16 5.2 Warranties by MGM Grand Diamond 16 5.3 Warranties by Option Holders 17 5.4 No Merger 17 6. UNDERTAKINGS 17 6.1 Duration 17 6.2 Funding of MGM Grand Australia 18 6.3 Gaming Activities in Northern Territory 19 6.4 Nominee Directors 20 6.5 Consultancy Services of Mr Osborne 23 6.6 Related Party Transactions 23 6.7 Final Shareholders Agreement 24 6.8 Exercise of Voting and Other Rights 24 i 7. PROPOSED LISTING OF MGM GRAND AUSTRALIA 25 7.1 Listing 25 7.2 Commitment of Shareholders 25 7.3 No Obligation to List 26 8. PUT OPTION 26 8.1 Condition Precedent 26 8.2 Grant of Put Option 26 8.3 Option Exercisable only Jointly 26 8.4 Exercise Notice 27 8.5 No Withdrawal of Notice 27 8.6 Contract for Sale and Purchase 27 8.7 No Encumbrances 28 8.8 Consideration 28 8.9 Venue and Completion Date 29 8.10 Completion 29 8.11 Warranties by Option Holder 30 8.12 Partial Completion 30 9. DISPUTE RESOLUTION 31 9.1 Resolution By Auditor 31 9.2 General Dispute Resolution 31 10. INFORMATION 32 10.1 Reporting to Option Holders 32 10.2 Access By Option Holders 33 10.3 Disclosure by Nominee Director 33 10.4 Information Period 33 11. SHARE CERTIFICATE ENDORSEMENT 33 12. DEFAULT 34 12.1 Events of Default 34 12.2 General Indemnity 34 13. TERM 34 14. COSTS AND EXPENSES 34 ii 15. CONFIDENTIALITY AND ANNOUNCEMENTS 35 15.1 Confidentiality 35 15.2 Announcements 36 16. MISCELLANEOUS PROVISIONS 36 16.1 No Partnership 36 16.2 Assignment 36 16.3 Deed of Adherence 36 16.4 Waiver 37 16.5 Entire Agreement 37 16.6 Notices 37 16.7 Counterparts 38 16.8 Variations 38 16.9 Jurisdiction 38 16.10 Law 39 16.11 Consent of Option Holders 40 16.12 Guarantee by MGM Grand, Inc. 40 16.13 Effective Date 40 SCHEDULE 1 (Option Holders) 44 SCHEDULE 2 (Call Option Consideration) 45 SCHEDULE 3 (Put Option Consideration) 47 SCHEDULE 4 (Shareholder Covenants) 50 iii DEED made as of 30 June 1995. BETWEEN: (1) THE PERSONS whose names and addresses are set out in Schedule 1 ("Option ----------- Holders"). (2) MGM GRAND DIAMOND. INC. a corporation organised and existing under the laws ----------------------- of the State of Nevada with its principal place of business at 3799 Las Vegas Boulevard South, Las Vegas, Nevada 89109, United States of America ("MGM Grand Diamond"), and a wholly owned subsidiary of MGM Grand. Inc. (3) MGM GRAND AUSTRALIA PTY LTD (A.C.N. 069 214 473) which is a company ------------------------------------------------ incorporated in the Northern Territory, Australia and has its registered office at 3rd Floor, Diamond Beach Casino, Gilruth Avenue, Darwin City, Northern Territory 0800, Australia ("MGM Grand Australia"). (4) MGM GRAND, INC. a corporation organised and existing under the laws of the --------------- State of Delaware with its principal place of business at 3799 Las Vegas Boulevard South, Las Vegas, Nevada 89109, United States OF America ("MGMG"). BACKGROUND - ---------- A. MGM Grand Australia has an authorised share capital of Five hundred million dollars ($500,000,000) divided into Five hundred million (500,000,000) Ordinary Shares of One dollar ($1.00) per share of which Two (2) shares have been issued at par and as fully paid. MGMG is the registered owner of One (1) of the issued shares and MGM Grand Diamond is the registered owner of the other issued share and the beneficial owner of both of the issued shares in MGM Grand Australia. B. MGM Grand Diamond has agreed with the Option Holders that options over certain of the issued capital of MGM Grand Australia shall be granted to the Option Holders on the terms and conditions hereinafter appearing. C. It is proposed and acknowledged by the other parties that after the date hereof a wholly owned Australian subsidiary may be interposed between MGM Grand Diamond and MGM Grand Australia, subject to compliance with the terms of this instrument. D. MGMG has guaranteed the performance by MGM Grand Diamond of its obligations hereunder. IT IS AGREED as follows: 1. DEFINITIONS AND INTERPRETATION ------------------------------ 1.1 DEFINITIONS ----------- In this Deed and the Schedules unless the context otherwise requires the following expressions shall have the following respective meanings: 1 "ACQUISITION FINANCE" means any and all Debt Financing Facilities or arrangements to which MGM Grand Australia is a party but only to the extent the proceeds of which are used to satisfy the "Purchase Price" as defined in the Casino Sale Agreement or any other obligation of MGMG or MGM Grand Australia pursuant to the Casino Sale Agreement, the repayment of any indebtedness owned to Ultrabridge Darwin Limited or Havewin Trading Limited pursuant to the Casino Sale Agreement, any and all costs and expenses incurred or payable by any member of the MGM Grand Australia Group in relation to or arising from the Casino Sale Agreement or any ancillary or related document (including without limitation this Deed). It is anticipated that such facilities are to be made available pursuant to the term sheet annexed hereto and marked with the letter "A" ("Term Sheet"). For the avoidance of doubt, it is acknowledged that the Term Sheet provides for facilities in excess of the Acquisition Finance and that such excess facilities shall not be included in the definition of "Acquisition Finance." "ASSOCIATE" has the same meaning as that ascribed to it in Section 26AAB(14) of the Income Tax Assessment Act 1936 except that references to "taxpayer" shall deemed to be references to the party to this Deed in relation to which the associate relationship is sought to be determined: "AGREED PROPORTION" means:- (a) in relation to the Call Option Shares, the pro rata entitlement (expressed as a fraction) of each of the Option Holders set out opposite their names in Schedule 1 and as adjusted in accordance with Clause 3.2(a) or in the case of a person nominated by an Option Holder pursuant to Clause 3.2(b), opposite the name of the Option Holder who nominates such person; and (b) in relation to the Put Option Shares; the pro rata number of MGMGA Shares held by each of the Option Holders, expressed as a percentage of all MGMGA Shares held by the Option Holders at the time any such calculation is made. "BUSINESS DAY" means: (a) for the purposes of Clause 16.6(c) a day on which banks are open for business in the place of receipt of the notice or communication given under that clause; and (b) otherwise, a day on which banks are opened for business in Las Vegas, Nevada; "CALL OPTION" the rights granted by MGM Grand Diamond to the Option Holders pursuant to Clause 3 for the Option Holders to require MGM Grand Diamond to sell the Call Option Shares to the Option Holders (or to the respective Option Holder's Nominee as such term is defined in Clause 3.2(b)) in the Agreed Proportions; 2 "CALL OPTION CONSIDERATION" means the total amount payable for all of the Call Option Shares and determined in accordance with the formula contained in Schedule 2; "CALL OPTION EXERCISE DATE" the date on which the Call Option is exercised in accordance with Clause 3; "CALL OPTION PERIOD" means the period commencing on the second anniversary of the Casino Sale Completion and ending on the forth anniversary of the Casino Sale Completion, inclusive of those dates; "CALL OPTION SHARES" means that number of MGMGA Shares which on the Call Option Exercise Date and on Call Option Completion represent Twenty two and one half percent (22.5%) of the Fully Diluted Capital of MGM Grand Australia rounded up or down to the nearest whole number; "CASINO" means the Diamond Beach Hotel Casino, Darwin, Australia and associated hotel complex, which is currently situate predominately on the land more particularly described as Lot 5244 in the Town of Darwin, being the land comprised in Grant in Fee Simple Volume 112 Folio 148; "CASINO LICENCE" means the casino licence as amended from time to time granted to Diamond Darwin Pty Ltd (A.C.N. 009 641 089) pursuant to the terms of the Casino Licensing and Control Act 1984 of the Northern Territory of Australia; "CASINO SALE AGREEMENT" means the agreement of even date between MGMG, MGM Grand Australia, the shareholders of Ultrabridge Darwin, the shareholders of Havewin and the Trustees of the Osborne Family Trust, relating, amongst other things, to the sale and purchase of all of the issued capital of Ultrabridge Darwin and Havewin and the Fifteen per cent (15%) direct interest in Diamond Darwin Pty Ltd; "CASINO SHARE SALE CONSIDERATION" means the "Purchase Price" as defined in the Casino Sale Agreement; "CASINO SALE COMPLETION" means "Completion" as defined in the Casino Sale Agreement; "COMPLETION" means the completion of each relevant sale and purchase of MGMGA Shares pursuant to Clauses 3.11 and 3.12 in the case of the Call Option and Clauses 8.9, 8.10 and 8.12 in the case of the Put Options; "DEBT FINANCING FACILITIES" means any financial accommodation or facility other than an instalment sale contract, hire purchase or chattel leasing accommodation or facility; "ENCUMBRANCE" means any mortgage, pledge, lien, charge, assignment, hypothecation, or other agreement or arrangement which has the same or a similar effect to the granting of security; 3 "EQUITY SECURITIES" means any shares or stock of a company whether ordinary, deferred, preference or otherwise and whether voting or non- voting and any rights convertible into or exercisable for any such shares or stock including without limitation options, warrants and subscription rights; "FULLY DILUTED CAPITAL" means the issued share capital of MGM Grand Australia after adjusting for the effect of the exercise of any option over or rights convertible into Equity Securities of MGM Grand Australia whether or not such option or rights of conversion are exercisable at the time the determination is made; "HAVEWIN" means Havewin Trading Limited a company incorporated in Hong Kong and having its principal place of business at c/o 50 Cuscaden Road, #08-01 HPL House, Singapore 1024; "INSOLVENCY EVENT" in relation to a party means:- (a) an order is made by a court of competent jurisdiction, or a resolution is passed, for the winding-up, dissolution or administration of that party (otherwise than in the course of a reorganisation or restructure previously approved in writing by the other parties); (b) any step is taken (and not withdrawn within ninety (90) days) to appoint a manager, receiver, administrative receiver, administrator, trustee or other similar officer in respect of that party and any assets of that party which include the MGMGA Shares; (c) that party convenes a general meeting of its creditors or makes or proposes any arrangement or composition with, or any assignment for the benefit of its creditors; or (d) any party becomes unable to pay its debts as and when they fall due; "LIBOR" means the rate at which National Westminister Bank Plc offers deposits in Australian dollars for an amount comparable to the amount in relation to which the determination is required for a term of Ninety (90) days to prime banks in the London Interbank Market at or about 11:00 a.m. on the date the calculation is required to be made; "LISTING" means the admission of MGM Grand Australia to the main board of a recognised and reputable stock exchange, being the principal stock exchange in the relevant jurisdiction, and the quotation of MGMGA Shares on such stock exchange; "MGM GROUP" means MGMG and any Subsidiary of MGMG; 4 "MGM GRAND AUSTRALIA GROUP" means MGM Grand Australia and any Subsidiary and the Territory Property Trust; "MGMGA SHARES" means the ordinary MGMGA Shares of One Australian dollar ($1.00) each in the capital of MGM Grand Australia; "NOMINATED OPTION HOLDER" means Ultrabridge Securities Limited or such other person as the Option Holders may nominate and communicate to MGM Grand Diamond from time to time; "OPTION HOLDERS" means the persons named in Schedule 1 and where applicable such other person or persons as any Option Holder may nominate and be approved by MGM Grand Diamond pursuant to Clause 3.2(b); "OPTION HOLDERS' SOLICITORS" means Hammond Suddards of Moor House, 119 London Wall, London, EC2Y SET or such other solicitors as may be nominated by the Option Holders and communicated to MGM Grand Diamond; "PUT OPTION" means the right granted by MGM Grand Diamond to each of the Option Holders pursuant to Clause 8.2 for the Option Holders to require MGM Grand Diamond or its nominee to purchase the put Option Shares from the Option Holders; "PUT OPTION EXERCISE DATE" means the date on which the Put Option shall be exercised by the Option Holders; "PUT OPTION PERIOD" means the period commencing on the day following the first anniversary of the day of Call Option Completion and ending on the third anniversary of the day of Call Option Completion, inclusive of those days; "PUT OPTION SHARES" means all of the Equity Securities of MGM Grand Australia held by the relevant Option Holders on the Put Option Exercise Date; "PUT OPTION CONSIDERATION" means the amount payable for the Put Option Shares held by the relevant Option Holder and determined in accordance with the provisions of Schedule 3; "REBATE" means the amount payable by MGM Grand Diamond to the Option Holders if the calculation of the call Option Consideration results in a negative amount; "RELATED BODY CORPORATE" of a body corporate means another body corporate which is related to the first within the meaning of Section 50 of the Corporations Law; "SECURITIES" has the same meaning as that ascribed to it in Section 92 of the Corporations Law; 5 "SHAREHOLDER" means a shareholder of MGM Grand Australia including MGMG, MGM Grand Diamond or, if applicable, their respective relevant Subsidiaries which are shareholders of MGM Grand Australia, and an Option Holder as and from Call Option Completion; "SUBSIDIARY" means: (a) in the case of a body corporate, a subsidiary as defined in Section 46 of the Corporations Law; (b) in the case of trust estate of which any member of the MGM Grand Australia Group or any of its directors are trustees (whether solely or jointly) and acting in that capacity as nominee of any member of the MGM Grand Australia Group or in relation to which any member of the MGM Group is entitled to participate in more than 50% of the income or capital of such trust estate in any relevant accounting period; (c) in the case of an unlimited partnership, a partnership in which any member of the MGM Group has an interest or has the right to acquire an interest in at least 50% of the distributable profits or 50% of the net assets available on a dissolution; and (d) in the case of a limited partnership, a limited in which a member of the MGM Group is a general partner, or has the right to acquire at least 50% of the distributable profits or 50% of the net assets available on a dissolution; "TERRITORY PROPERTY TRUST" means the unit trust established by deed on 28 September 1984 and entered into between Fernbank Pty Ltd as trustee and Investnorth Management Pty Ltd as manager; and "ULTRABRIDGE DARWIN" means Ultrabridge Darwin Limited a company incorporated in the Cayman Islands, British West Indies and having a registered office there at P.O. Box 309, Grand Cayman, Cayman Islands, British West Indies. 1.2 INTERPRETATION -------------- In this Deed, except where the context otherwise requires:- (a) headings shall be for ease of reference only and shall not affect construction; (b) references to any gender or the neuter shall include references to any other gender and the neuter and reference to the singular include references to the plural; (c) references to "parties" or a "party" refers to parties or a party to this Deed including a person that has agreed to-be bound by the terms of the 6 Deed by executing such documents as may be required by the other parties pursuant to Clause 16.3; (d) references to any statutory provision shall include a reference to that provision as amended, extented or re- enacted and to any statutory replacement thereof either before or after the date hereof and to any former statutory provision replaced (with or without modification) by the provision referred to. References to statutory provisions are references to statutory provisions of the Commonwealth of Australia unless otherwise stated; (e) references to a person include a reference to a firm, body corporate, unincorporated association or to a person's executors or administrators; (f) references to writing shall include any mode of reproducting words in a non-transitory form; (g) references to Clauses, Sub-clauses and Schedules shall, unless otherwise specified be to Clauses, Sub-clauses and Schedules of this Deed; and (h) reference to "$" or "Dollar" are references to the lawful currency of the Commonwealth of Australia. 2. BUSINESS REFERRALS ------------------ 2.1 REFERRALS --------- Subject to Clause 2.3, MGMG (for its own part and on behalf of the MGM Group) and the Option Holders (for their own part and on behalf of every casino owned, controlled or operated by them or any of them, from time to time including, without limitation, Aspinalls Club, London, Aspinall's Casino S.A., Christchurch Casino, New Zealand and any casino that has been licensed to use the name "Aspinalls" by any entities owned or controlled by them or any of them); (collectively with the Option Holders, the "Option Holder Group") each agree, with each other, that where appropriate, they shall recommend to suitable clients (being of high net worth):- (a) the casino and gaming activities of any of the MGM Group or Option Holder Group; and (b) the casino and gaming activities of any person in which the other parties have a material interest and such interest is known to the party proposing to make the recommendation. 2.2 NATURE OF RECOMMENDATION ------------------------ Recommendations pursuant to Clause 2.1 may be made verbally or in such other manner as a party, in its absolute discretion, thinks fit. 7 2.3 RESTRICTIONS AND EXCEPTIONS --------------------------- Nothing in Clause 2.1 shall require a party to make any such recommendation if to do so would:- (a) breach any law, regulation, licensing condition or other statutory or regulatory provision or internal code of practice, and without limiting the generality of the foregoing including any anti-trust, gaming, privacy or data protection provisions; (b) in the sole and absolute discretion of such party, be contrary to the commercial interests or contractual obligations of that party which may exist from time to time; or (c) other than as expressly provided in this Deed, imply a restriction on the parties to compete with each other or place themselves in potential conflict with each other. 3. CALL OPTIONS ------------ 3.1 GRANT OF CALL OPTION -------------------- In consideration of the mutual covenants herein provided and in consideration of the Option Holders paying to MGM Grand Diamond, in aggregate, in the Agreed Proportions the sum of Three hundred dollars ($300.00) now delivered by bankers draft by the Option Holders to MGM (receipt of which is hereby acknowledged), MGM Grand Diamond hereby grants to the Option Holders in the Agreed Proportions, the Call Option on the terms and conditions contained in this Deed. 3.2 APPOINTMENT OF NOMINEE ---------------------- At any time before the exercise of the Call Option any of the Option Holders may either:- (a) transfer to any other Option Holder, with the consent of MGM Grand Diamond, such consent not to be unreasonably withheld, either in whole or in part, their Agreed Proportion of the Call Option in which case the Agreed Proportions shall be adjusted to reflect such transfer; or (b) with the consent of MGM Grand Diamond to be granted or withheld in its sole discretion, nominate a person in their place to have the right to exercise that Option Holder's Agreed Proportion of the Call Option provided that such person ("Option Holder's Nominee") has executed an instrument in a form approved by MGM Grand Diamond and the other parties to become bound by the relevant provisions of this Deed pursuant to Clause 16.3(a). 8 3.3 OPTION EXERCISABLE IN FULL ONLY ------------------------------- The Call Option shall only be capable of being exercised during the Call Option Period, and to the extent that it is not so exercised it shall lapse and be incapable of further or subsequent exercise. The Call Option shall be capable of being exercised only in respect of all of the Call Option Shares. 3.4 EXERCISE NOTICE --------------- The Call Option shall be exercised by notice in writing by all of the Option Holders to MGM Grand Diamond. Where MGM Grand Diamond receives separate notices from one or more of the Option Holders respectively exercising that Option Holder's right in full for its Agreed Proportion, then each such notice shall be read together as one and the same notice but no one notice shall be effective or deemed properly given to MGM Grand Diamond unless and until the last such notice is received by MGM Grand Diamond. The date of receipt of that last notice shall be the Call Option Exercise Date. 3.5 WITHDRAWAL OF NOTICE -------------------- (a) Subject to (b) below, an Option Holder shall not be entitled to withdraw a notice served pursuant to Clause 3.4, once it has been duly served. (b) The Option Holders shall be entitled to withdraw a notice served pursuant to Clause 3.4 at any time prior to the Call Option Completion should there be a breach of Clause 4 or should any matter, event or circumstance warranted by MGM Grand Diamond to an Option Holder pursuant to Clause 5 be in an Option Holder's reasonable opinion untrue or inaccurate, in any material respect. Any such withdrawal of notice shall be in respect of all of the Call Option Shares, and shall terminate the contract referred to in Clause 3.6. Without prejudice to the rights of an Option Holder which may arise in respect of a breach of Clause 4 or 5, the Option Holders may at any time thereafter, during the Call Option Period, re-exercise their rights to acquire the Call Option Shares in accordance with this Clause 3. 3.6 CONTRACT FOR SALE AND PURCHASE ------------------------------ (a) Subject to Clause 3.6(b), upon receipt by MGM Grand Diamond of a notice from the Option Holders, given in accordance with this Clause 3, a contract for the sale and purchase of the Call Option Shares between MGM Grand Diamond as vendor and the Option Holders as purchasers shall be created as at the Call Option Exercise Date; (b) It shall be a condition to Completion of the sale and purchase of the Call Option Shares that: (i) the Treasurer of the Commonwealth of Australia consents under the Foreign Acquisitions and Takeovers Act 1975, to the 9 proposed acquisition by Option Holders of the Call Option Shares, and the Treasurer is to be deemed to have so consented: (A) if the Option Holders receive written advice from the Treasurer or on his behalf, without any term or condition which the Option Holders considers unacceptable, to the effect that the acquisition of the Call Option Shares is not objected to under the Foreign Acquisitions and Takeovers Act 1976; or (B) if 10 days have elapsed from the day the Treasurer ceased to be empowered to make any order under Part II of the Foreign Acquisitions and Takeovers Act in relation to the proposed acquisition because of lapse of time, notice of the proposed acquisition of the Call Option Shares having been given to the Treasurer under the Foreign Acquisitions and Takeovers Act 1975; (ii) the Option Holders and MGM Grand Diamond receiving not later than 6 months after the Call Option Exercise Date, on an unconditional basis, all relevant consents and approvals required, if any, from any governmental authority including the Government or relevant Minister of the Northern Territory of Australia (including with respect to probity of the Option Holders, to the extent required) in relation to any change of interest in MGM Grand Australia; and (iii) Casino Sale Completion shall have occurred. (c) MGMG, MGM Grand Diamond and the Option Holders shall use their best endeavours (other than by incurring substantial liabilities, substantial obligations (including any divestment and restrictions on business operations) or monetary obligations and other than by consenting to any substantial alteration to the terms of this Deed) to satisfy any request for information or condition or conditions specified by or on behalf of the Treasurer of the Commonwealth of Australia under the Foreign Acquisitions and Takeovers Act 1975 as referred to in Clause 3.6(b). Each of the parties shall use their best endeavours to obtain the fulfilment of the conditions in Clause 3.6(b) (i) and (ii) in an expeditious manner, and shall give the others prompt notice in writing upon it becoming aware whether or not any of the conditions precedent referred to in Clause 3.6(b) (i) and (ii) has been satisfied. (d) The conditions to Completion set forth in Clause 3.6(b)(i) and (ii) above shall be deemed not to have been satisfied if any of the advice, consents or approvals referred to in Clause 3.6(b)(i) and (ii) would have the effect of imposing substantial liabilities, obligations or restrictions on the business operations of the MGM Group. In the event of a dispute between the parties as to whether or not a liability, obligation or 10 restriction is substantial such dispute shall be referred to the Auditor pursuant to Clause 9.1. 3.7 NO ENCUMBRANCE -------------- The Call Option Shares shall be sold by MGM Grand Diamond as beneficial owner free from all Encumbrances and adverse claims (other than those granted in favour of MGM Grand Diamond pursuant to this Deed including the legend contained in Clause 11), together with all rights attaching thereto, as at the date of the Call Option Completion, including all dividends declared or payable distributions made or proposed on or after the Call Option Exercise Date. 3.8 CONSIDERATION ------------- The total amount payable by the Option Holders to MGM Grand Diamond for the sale and purchase of the Call Option Shares shall be the Call Option Consideration, if it is a positive amount. Each Option Holder shall be jointly and severally liable for the Call Option Consideration, which shall be payable on the date of the Call Option Completion. 3.9 VENUE AND COMPLETION DATE ------------------------- Completion of the sale and purchase of the Call Option Shares shall take place between the hours of 9.00am and 3.00pm Las Vegas time on the 5th Business Day after the latter of the satisfaction of the conditions precedent referred to in Clause 3.6 and determination of the Call Option Consideration or on such other date as the parties may agree in writing at the office of MGM Grand Diamond or at such other place as MGM Grand Diamond and the Option Holders may agree. 3.10 ACQUISITION FINANCING --------------------- (a) On or before Call Option Completion MGM Grand Diamond shall procure:- (i) that the Acquisition Financing is repaid in full from the proceeds of an equity subscription made by MGM Grand Diamond, or any wholly owned Subsidiary of MGM Grand Diamond, to MGM Grand Australia as contemplated by Clause 4.1 and that any and all Encumbrances provided by any member of the MGM Grand Australia Group in relation to the Acquisition Financing is unconditionally released; or (ii) the rights and obligations (including contingent obligations) of MGM Grand Australia pursuant to or arising from the Acquisition Financing are assigned or novated in full, without recourse to any member of the MGM Grand Australia Group and any and all Encumbrances provided by any member of the MGM Grand Australia Group in-relation to the Acquisition 11 Financing is unconditionally released. However, if MGM Grand Diamond is unable, after using its best endeavours, to procure the assignment or novation of the Acquisition Finance, without recourse, and the unconditional release of all of the Encumbrances to the extent they relate to or secure any of the Acquisition Finance then MGMG covenants for the benefit of the Option Holders and separately for the benefit of the MGM Grand Australia Group to indemnify and hold harmless the MGM Grand Australia Group from and against all such claims, damages, liabilities and costs arising therefrom. For the avoidance of doubt this indemnity shall apply notwithstanding that MGM Grand Diamond contrary to its obligations under this Clause has not used its best endeavours to procure the necessary event to occur. (b) Without limitation to the obligations of MGM Grand Diamond pursuant to Clause 3.10(a), as and from Call Option Exercise Date, MGMG and MGM Grand Diamond shall indemnify and keep indemnified, the Option Holders notwithstanding Call Option Completion, for any loss, damage, cost or expenses incurred or suffered by any of them as a direct or indirect result of the obligations of MGM Grand Diamond pursuant to Clause 3.10(a) not being satisfied in full to the reasonable satisfaction of the Nominated Option Holder at or before Call Option Completion. Without limiting the generality of the aforegoing it is expressly agreed that the loss of the Option Holders will include:- (i) 22.5% of the amount (after all related tax benefits to the MGM Grand Australia Group, properly claimed in respect of and arising from the Acquisition Finance) by which the assets of the MGM Grand Australia Group have been reduced by payments made (whether before or after Call Option Completion) pursuant to the Acquisition Financing or any Encumbrance granted by any member of the MGM Grand Australia Group in connection with the Acquisition Financing, which payments have not been taken into account in the calculation of the Call Option Consideration or which have not been reimbursed to the MGM Grand Australia Group PROVIDED HOWEVER to the extent such payment is made to the Option Holders, MGM Grand Diamond shall be released from its obligation pursuant to Clause 3.10(a) for that part of the Acquisition Finance to which the payment relates; and (ii) 22.5% of the additional borrowing costs, if any, in relation to other Debt Financing Facilities due to the gearing of the MGM Grand Australia Group or the unavailability of collateral in either case as a consequence of the Acquisition Finance has been taken into account in calculation of the Call Option Consideration. 12 3.11 COMPLETION ---------- At Completion:- (a) MGM Grand Diamond shall deliver to (or make available to the satisfaction of) each of the Option Holders: (i) definitive certificates for the relevant MGMGA Shares together with transfers thereof duly executed by the registered holders thereof, (or if such certificate has been lost or destroyed the necessary declaration has been made as required by the Articles of Association of MGM Grand Australia or the Corporations Law for the issue of replacement certificates), in favour of the Option Holders, in the Agreed Proportions; (ii) such consents or documents (if any) as may be required to give evidence of title to the MGMGA Shares and to sell, transfer or vest such title in the Option Holders free from Encumbrance and to ensure that the change of shareholders of MGM Grand Australia will not cause MGM Grand Australia or any of its Subsidiaries to be in breach of any material contract or licence entered into by MGM Grand Australia or any of its Subsidiaries (other than the Casino Licence); and (iii) duly executed proxy forms in the form set out in the Articles of Association of MGM Grand Australia, appointing each Option Holder, in respect of its Agreed Proportion of the Call Option Shares, as proxy to exercise the right to vote attached to those Call Option Shares in respect of all general meetings of MGM Grand Australia, after Call Option Completion pending registration of the transfer referred to in (i) above; and (b) Subject to MGM Grand Diamond complying with its obligations above and the Option Holders being satisfied that there is no breach by MGM Grand Diamond of a representation or warranty referred to in Clause 4 or 5, each of the Option Holders shall pay their Agreed Proportion of the Call Option Consideration assuming it is a positive amount, to MGM Grand Diamond, as specified in writing by MGM Grand Diamond, by bank cheque, cashiers cheque or by direct debit or telegraphic transfer to a bank account nominated in writing by MGM Grand Diamond. If the Call Option Consideration is a negative amount then on Completion MGM Grand Diamond shall pay to the Option Holders the Rebate in the Agreed Proportions, as specified in writing by the Nominated Option Holder by bank cheque, cashier's cheque or by direct debit or telegraphic transfer to a bank account nominated in writing by the Nominated Option Holder. 13 3.12 STAMPING AND REGISTRATION OF TRANSFERS -------------------------------------- (a) MGM Grand Diamond shall (so far as it is able) procure that upon presentation to MGM Grand Australia of the stamped transfers and relative share certificates for the transfer of the Call Option Shares to the Option Holders, such transfers shall be approved and the Option Holders shall be registered as the holders of their respective entitlement to the Call Option Shares. (b) The Option Holders shall pay all stamp duty payable in relation to the purchase of the Call Option Shares by them pursuant to the exercise of the Call Option including any fine or penalty for late payment. 4. EXCLUSIVE OPTION ---------------- 4.1 The Call Option is an exclusive Option. Subject to Clause 4.2 but without prejudice to any other provision contained in this Deed, including Clause 5 unless MGM Grand Diamond or MGM Grand Australia (as the case may be) provides full particulars to the Nominated Option Holder and obtains the prior consent in writing of the Nominated Option Holder, MGMG, MGM Grand Diamond and MGM Grand Australia shall not, and MGM Grand Diamond shall procure that MGM Grand Australia shall not) do any of the following from the date hereof until the later of the expiry of the Call Option Period and Call Option Completion, (if later):- (a) permit any other person to acquire any Call Option Shares or options over or rights convertible into Call Option Shares, (other than to a member of the MGM Group provided such member has signed a deed of adherence pursuant to Clause 16.3(c) expressly recongnising, amongst other things, the Call Option rights conferred on the Option Holders pursuant to Clauses 3.1 to 3.12 inclusive); (b) permit the allotment of any Equity Securities of MGM Grand Australia (other than an allotment of MGMGA Shares to MGM Grand Diamond or to any member of the MGM Group pursuant to Clause 6.2(b)(iii) or, subject to Clause 4.1(f), to a third party provided such member (other than MGM Grand Diamond) or third party, as applicable, has first signed a deed of adherence pursuant to Clause 16.3(c); (c) grant any other person an option to acquire Equity Securities or issue any right that is convertible into Equity Securities in MGM Grand Australia (other than to a member of the MGM Group or, subject to Clause 4.1(f), to a third party) provided such member (other than MGM Grand Diamond) or third party, as applicable, has signed a deed of adherence pursuant to Clause 16.3(c)); (d) vary the rights attaching to any Equity Securities, create any new classes of Equity Securities, repurchase any Equity Securities, or in any other manner vary or alter the share capital of MGM Grand Australia; 14 (e) (i) except in relation to the proposed financing with Bank of American (which financing includes the Acquisition Finance), in the case of MGM Grand Diamond sell, transfer, assign, create or permit the creation of any Encumbrance over, declare itself trustee of or part with possession of, any Call Option Shares or otherwise create any interest therein except as expressly permitted by this Deed; and (ii) in the case of MGM Grand Australia, register any transfer or recognise or give effect to any matter referred to in Clause 4.1(e)(i); (f) permit any act that would cause (i) MGM Grand Diamond or MGM Grand Australia to cease to be a Subsidiary of MGMG; or (ii) a Subsidiary of MGM Grand Australia, whether such Subsidiaries exists at or after the date of this Deed, to cease to be a Subsidiary of MGM Grand Australia; provided that nothing herein shall preclude the liquidation and/or reorganisation of a Subsidiary as long as MGM Grand Australia retains the direct or indirect beneficial ownership or control of all of the material assets and business thereof; (g) permit any act to occur which would result in the MGM Grand Australia Group not being entitled to at least Eighty five per cent (85%) of the beneficial interest in the Territory Property Trust and the underlying property currently held by the Territory Property Trust; or (h) change the auditor of MGM Grand Australia if the new auditor is not one of the 6 largest internationally recognised accounting firms. 4.2 In the event that MGM Grand Diamond proposes to enter into a transaction prior to Call Option Completion, which if entered into after Call Option Completion, would bring into operation Part 10 or Part 11 of Schedule 4, MGM Grand Diamond and the Option Holders shall have the rights provided for in such Parts notwithstanding that Call Option Completion has not occurred. Additionally, to the extent the exercise of such rights would require a payment by MGM Grand Diamond or a third party to the Option Holders in connection with the acquisition of the Option Holders' rights to acquire the Call Option Shares, such payment shall be determined as if the Call Option Shares were outstanding but there shall be deducted from the consideration payable to the Option Holders an amount equal to its relevant proportion of the Call Option Consideration, which such amount shall be retained by MGM Grand Diamond or paid to MGM Grand Diamond by such third party, as the case may be. However, if the Call Option Consideration is a negative amount then MGM Grand Diamond shall pay to the Option Holders their relevant proportion of the Rebate. 15 5. REPRESENTATIONS AND WARRANTIES ------------------------------ 5.1 WARRANTIES BY ALL PARTIES ------------------------- Each party hereby represents and warrants to the other that it has power to enter into and perform its obligations under this Deed and it has taken all necessary action to authorise, and has obtained all necessary authorisations, approvals and consents in connection with, the execution and performance of this Deed. 5.2 WARRANTIES BY MGM GRAND DIAMOND ------------------------------- MGM Grand Diamond represents and warrants to the Option Holders at Casino Sale Completion, at the Call Option Exercise Date and Completion that:- (a) Subject to Clause 4.1, MGM Grand Diamond will be the beneficial owner and in possession of the Call Option Shares (including all evidence of title) and the Call Option Shares are not the subject of any Encumbrance; (b) the copy of the Memorandum and Articles of Association of MGM Grand Australia exhibited to this Deed is a full and true copy of the current Memorandum and Articles of Association of MGM Grand Australia, and that there will be no amendment to the Memorandum and Articles of Association of MGM Grand Australia (except as may be required to comply with applicable law), which was not the subject of the prior written consent of the Option Holders if any such amendment would adversely affect the rights of the Option Holders pursuant to this Deed; (c) the only issued Equity Securities of MGM Grand Australia are MGMGA Shares; (d) the Call Option Shares are fully paid and carry no rights and are subject to no terms of issue other than as set out in the Articles of Association of MGM Grand Australia; (e) MGM Grand Diamond is entitled and competent to sell and transfer the Call Option Shares subject to the Articles of Association of MGM Grand Australia; (f) any dividends, bonuses or other distributions declared made or paid in relation to any of the Call Option Shares after the exercise of the Call Option will be for the sole benefit of the Option Holders and, if paid to MGM Grand Diamond, will be forthwith paid to the Option Holders in their Agreed Proportion by MGM Grand Diamond, by bank cheque; 16 (g) MGM Grand Diamond is not engaged in any proceedings, litigation, arbitration or prosecution (whether as plaintiff or defendant or otherwise) concerning or affecting the Call Option Shares and that no legal or other proceedings are threatened or envisaged by or against MGM Grand Diamond concerning the Call Option Shares and that to the best knowledge, information and belief of MGM Grand Diamond there are no circumstances likely to lead thereto; (h) to the best knowledge, information and belief of MGM Grand Diamond and MGM Grand Australia, other than routine matters for which no material and adverse result is anticipated, no governmental or official investigation or enquiry concerning the MGMGA Shares or the ownership of any such shares by MGM Grand Diamond is in progress or pending and there are no circumstances which are likely to give rise to any proceedings, investigation or enquiry; (i) no Insolvency Event has occurred or been threatened or is envisaged by or against MGM Grand Diamond; and (j) any Related Party Transactions determined in Clause 6.6 and in existence at the date of this Deed satisfy the requirements of Clause 6.6. 5.3 WARRANTIES BY OPTION HOLDERS ---------------------------- Subject to Clause 3.6(b), the Option Holders represent and warrant to MGM Grand Diamond at Call Option Exercise Date and Call Option Completion that no governmental approval, licence or consent is required to be obtained by any Option Holder in connection with the grant of the Call Option, the exercise of the Call Option or Completion, as applicable, except for such as have been obtained by the relevant Option Holder and which do not and will not subject the MGM Group or MGM Grand Australia Group to any new or additional governmental restriction or limitation. 5.4 NO MERGER --------- The representation and warranties in this Clause 5 shall not merge on exercise of the Call Option or transfer of the Call Option Shares and shall enure for the benefit of the party in whose favor it is given. 6. UNDERTAKINGS ------------ 6.1 DURATION -------- During the period commencing on the date hereof and expiring at the end of the Call Option Period and, if the Call Option has been exercised, thereafter until either:- (a) a Listing of any Equity Securities of MGM Grand Australia has occurred; or 17 (b) MGM Grand shall have acquired or the Option Holders have disposed of all of the Put Option Shares, the provisions of Clauses 6.2 - 6.8 inclusive shall apply. However, in the case of paragraph (a) the provisions of Clauses 6.2, 6.5, 6.6 and 6.7 shall cease to apply immediately prior to the official consent to such Listing being obtained from the relevant stock exchange and in the case of Clauses 6.3, 6.4 and 6.8 shall cease to apply to the extent only that any of the provisions contained in Clauses 6.3, 6.4 or 6.8 are incompatible with such Listing or any applicable laws, rules or regulations applying to MGM Grand Australia as a consequence of such Listing. For the avoidance of doubt such provision shall not be incompatible by reason only of their inability to be included in the articles of association of MGM Grand Australia as and from Listing. 6.2 FUNDING OF MGM GRAND AUSTRALIA ------------------------------ (a) (i) Subject to Clause 6.2(a)(ii), MGM Grand Diamond shall ensure that all members of MGM Grand Australia Group have sufficient funding to meet, as and when due. (A) all gaming losses and other deficiencies in working capital of the Casino; and (B) capital required for the expansion, improvement or refurbishment of the Casino. (ii) Nothing in this Clause 6.2 shall limit or restrict in any way the ability of MGM Grand Australia or MGM Grand Australia Group to cease trading or enter into voluntary liquidation. (b) The funding to be provided to or procured by the MGM Grand Australia Group, shall be limited to:- (i) (SHAREHOLDER LOANS) loans made by MGM Grand Diamond or an Associate of MGM Grand Diamond to MGM Grand Australia Group which are unsecured and subordinated to the claims of all other creditors of the MGM Grand Australia Group. MGM Grand Diamond or its Associate (as the case may be) shall be entitled to receive interest on such loans to the extent only that such interest reflects its actual external cost of the funds ("Actually External Cost") without regard to whether or not MGM Grand Diamond or its Associate actually borrows funds specifically for this purpose. Administrative costs within the MGM Grand Group and the application of any withholding taxes in Australia shall not be an Actual External Cost of MGM Grand Diamond for the purpose of this Clause. Prior to making any advance to MGM Grand Australia Group, MGM Grand Diamond and the Nominated Option Holder shall use good faith efforts to agree upon the Actual External Cost to MGM Grand Diamond of such funds, which in any event shall not be less than 18 the aggregate of One per cent (1%) plus LIBOR for loans of comparable maturities. MGM Grand Diamond shall provide to the Nominated Option Holder sufficient information to enable it to verify by independent calculation the Actual External Cost. If MGM Grand Diamond and the Nominated Option Holder can not agree as to the Actual External Cost within 15 Business Days of the Nominated Option Holders first being notified of the proposed advance then the Actual External Cost shall be the cost certified by an independent expert appointed pursuant to Clause 9.1. Until such time as the independent expert has certified, the Actual External Cost. MGM Grand Diamond or its Associate may advance the funds to MGM Grand Australia Group at the interest rate MGM Grand Diamond believes reflects the Actual External Cost but subject to an adjustment being made up or down to principal and/or interest (at the election of the relevant member of MGM Grand Australia Group) in the event that the independent expert certifies a figure more than Fifty (50) basis points higher or lower than the rate then being imposed by MGM Grand Diamond; (ii) (BANKS) by external third party lenders on the best terms then available, which terms shall reflect that MGMG and/or MGM Grand Diamond is prepared to provide a guarantee for any such advances made direct to a member of the MGM Grand Australia Group, where necessary; (iii) (EQUITY) from equity subscriptions by MGM Grand Diamond or any member of the MGM Group or any Related Body Corporate for MGMGA Shares, with the prior written consent of the Nominated Option Holder, which shall not be unreasonably withheld if such equity subscription shall not dilute or adversely affect the legal and commercial benefit of the Call Options. 6.3 GAMING ACTIVITIES IN NORTHERN TERRITORY --------------------------------------- (a) MGMG (for its own part and on behalf of the MGM Group) and each of the Option Holders (for their own part and on behalf of the Option Holder Group) covenant with each other that during the period referred to in Clause 6.3(b), all gaming and related hotel activities conducted or controlled by any one or more of:- (i) the MGM Group on the one hand, and (ii) the Option Holder Group on the other hand, as the case may be, in the Northern Territory of Australia, shall be conducted solely through the MGM Grand Australia Group. 19 (b) The undertakings contained in Clause 6.3(a) shall only apply until the earlier of:- (i) the expiry of the Call Option Period, or if the Call Option has been exercised, until such time as the Option Holder disposes of its MGMGA Shares; and (ii) no member of the MGM Grand Australia Group holds an exclusive licence for table gambling in the Northern Division of the Northern Territory of Australia pursuant to the Gaming Control Act 1993 of the Northern Territory of Australia or any other statute regulating gaming in the Northern Territory of Australia. 6.4 NOMINEE DIRECTORS ----------------- (a) (i) Prior to Call Option Completion, the Option Holders collectively shall be entitled to appoint and remove at least Twenty per cent (20%) in number of the directors ("Nominee Director's") comprising the board of directors of MGM Grand Australia or the board of directors or governing body of each and every Subsidiary of MGM Grand Australia ("Relevant Boards") and to remove and replace such appointee(s), and where that percentage will result in a fraction, rounded up to the next whole number. For the avoidance of doubt the Option Holders collectively shall be entitled to appoint at least one director on each board and to remove and replace such appointee. Where there is more than one Option Holder, from time to time, the right to appoint and remove directors shall be exercised by the Nominated Option Holder in writing. (b) (i) As and from Call Option Completion the Option Holders shall have the right, so long as any of them hold MGMGA Shares, to appoint and remove directors on each and every Relevant Board. The number of directors that may be appointed and removed shall be determined by reference to the aggregate percentage of MGMGA Shares held by the Option Holders in accordance with the formula contained in Clause 6.4(b)(ii). Where there is more than one Option Holder, from time to time, the right to appoint and remove directors shall be exercised in writing by the Nominated Option Holder. (ii) Subject to Clause 6.4(b)(iii) the minimum number of Nominee Directors that may be appointed and removed by the Option Holders, from time to time, shall be determined by applying the percentage in the right hand column shown opposite the relevant aggregate holding of the Option Holders in the left hand column, to the total number of directors of the Relevant Board. 20
AGGREGATE PERCENTAGE OF MINIMUM PERCENTAGE OF MGMGA SHARES HELD BY DIRECTORS OF RELEVANT OPTION HOLDERS BOARD TO BE APPOINTED OR REMOVED 20%-22.5% 20% less than 20% Nil
Where the calculation results in a fraction, then it shall be rounded up to the next whole number. For the avoidance of doubt the Option Holders shall be entitled to appoint and remove at least one director and remove such director so long as they collectively own at least Twenty per cent 20% of the issued MGMGA Shares. (iii) If the Option Holders cease collectively to hold a minimum of Twenty per cent (20%) of the issued MGMGA Shares other than by reason of transfer by any of the Option Holders of any of their MGMGA Shares then for the purposes of Clause 6.4(b)(ii) the aggregate percentage of MGMGA Shares held by the Option Holders shall be determined as if no MGMGA Shares were issued after Call Option Completion. (c) Any Nominee Director appointed by the Option Holders shall be deemed to be the nominee of the Option Holders. The appointment and removal of such director or directors (as the case may be) shall take effect immediately upon receipt of the relevant notices from the Nominated Option Holder (subject to a consent to act as director from the proposed Nominee Directors being attached to the notice). Any proposed new appointment shall be communicated by the Option Holders to MGM Grand Australia or the relevant body where possible, at least Fourteen (14) days in advance. Any such director shall not be appointed unless he or she demonstrates to the reasonable satisfaction of MGM Grand Australia that he or she satisfies all applicable requirements concerning governmental approvals, licences and good standing. If in the opinion of MGM Grand Australia the Nominee Director may cause or contribute to any Government or Minister including without limitation the Government or relevant Minister of the Northern Territory adversely varying, revoking, cancelling or not renewing the Casino Licence, then such Nominee Director shall be removed forthwith by the Option Holders. (d) A Nominee Director shall be entitled to appoint and remove an alternate from time to time. A Nominee Director shall also be entitled to the same level of remuneration payable to other non-executive directors and reimbursement, in full, for all travelling, hotel and associated 21 expenses reasonably incurred by him in attending board meetings or in relation to the business of the relevant company, it being understood that in order to minimise the incurring of such expenses, it is anticipated that non- resident directors will, for the most part, participate in board meetings by telephone, closed circuit television or other electronic means of video or audio-visual communication. (e) All directors of a Relevant Board shall have one vote, unless they are also the alternate for another director. For the avoidance of doubt the Chairman of the Relevant Board shall not have a casting vote in addition to his deliberative vote. (f) It is expressly agreed and acknowledged that it may be in the best interests of all the relevant members of MGM Grand Australia Group for such director to take into account and act in such manner as he believes best protects the interests of the Option Holders pursuant to this Deed. However, nothing in this Clause shall in any way fetter the discretion of any director to act in any manner he deems fit, including in a manner which may not be in the best interests of the Option Holders, it being acknowledged that all directors, however selected, are subject to fiduciary obligations under applicable law. (g) In respect of each member of the MGM Grand Australia Group, to which he has been appointed, each Nominee Director shall be provided with adequate notice of all meetings of directors and be supplied with proper and full agendas and supporting papers. Notwithstanding anything contained in the constituent documents of each member of the MGM Grand Australia Group, no director's meeting shall be quorate unless:- (i) at least one Nominee Director or his alternate attends, (ii) all of the Nominee Directors waive their right to attend; or (iii) having been given at least Five (5) Business Days prior proper notice no Nominee Director is present but a majority of directors entitled to receive notice of such meeting are present. (h) Meetings may be in person or by contemporaneous link up by telephone closed circuit television or other electronic means of audio or audio visual communication, or any combination thereof. No business shall be discussed at a meeting of the Relevant Board, without the consent of the Nominee Directors unless it has been adequately included in the agenda that accompanied the notice of meeting. (i) Subject to Clause 10 and Clause 15 of the Deed: (i) each member of the MGM Grand Australia Group will prepare and provide management information and reports to its directors 22 sufficient for the efficient operation of the relevant member of the MGM Grand Australia Group; and (ii) Nominee Directors shall have the right to visit and inspect any of the property of the MGM Grand Australia Group, to inspect and take copies of all documents relating to the MGM Grand Australia Group, including without limiting the generality of the foregoing its books of account, and to discuss its affairs, finances and accounts with any of the officers of the MGM Grand Australia Group or its auditors, at all reasonable times and as often as such person may reasonably request. (j) Subject to Clause 10 and Clause 15 of the Deed each Nominee Director is entitled to communicate any information (and provide copies of such information) received by that director in relation to any member of MGM Grand Australia Group to an Option Holder. To the extent that the Nominee Director requires specific confirmation, consent, or ratification for any such disclosure from his fellow directors or in general meeting, then the parties shall do all things in their lawful power to assist in or procure such confirmation, consent or ratification. 6.5 CONSULTANCY SERVICES OF MR OSBORNE ---------------------------------- Mr James Osborne shall at the request of MGM Grand Diamond provide consultancy services to MGM Grand Australia periodically, but in aggregate for a period of no more than four weeks during each calendar year, until the earlier of the Call Option Exercise Date or the expiry of the Call Option Period. The consultancy services shall be provided at no remuneration (except for reimbursement for travelling, hotel and associated expenses). The manner and timetable pursuant to which such consulatancy services are to be rendered shall be determined having regard to Mr Osborne's other activities. Mr Osborne shall be a signatory to this Deed solely to confirm his adherence to this Clause 6.5. 6.6 RELATED PARTY TRANSACTIONS -------------------------- (a) Any contract, arrangement or transaction of whatsoever nature between any member of the MGM Group or between any Associate of the MGM Group and any member of MGM Grand Australia Group ("Related Party Transaction") shall be entered into on the basis: (i) the relevant member or members of MGM Grand Australia Group pays consideration no higher than would be reasonable, prudent and appropriate for such member of MGM Grand Australia Group to pay to an independent party providing a comparable service or benefit; and (ii) the relevant member or members of the MGM Grand Australia Group received consideration no lower than would be reasonable, prudent and appropriate for such member to receive 23 from an independent party receiving a comparable service or benefit. (b) Any Related Party Transactions shall be approved by the Relevant Board of MGM Grand Australia Group on the basis that its terms are arms length, bona fide and reasonable, with all board members being entitled to participate in such determination. With respect to any Related Party Transaction pursuant to which MGM Grand Australia Group would incur a cost or grant a benefit to the MGM Group in excess of Two hundred thousand dollars ($200,000) in respect of any one transaction or if any independent series of transactions exceeds Five hundred thousand dollars ($500,000) in any twelve month period, if the Nominee Director disputes the bona fide's or reasonableness of such Related Party Transaction then the expert appointed under Clause 9.1 shall determine whether or not the Related Party Transaction satisfies the pre-conditions contained in this Clause 6.6. 6.7 FINAL SHAREHOLDERS AGREEMENT ---------------------------- (a) On or as soon as practicable after the Call Option Completion the Option Holders, MGM Grand Diamond and MGM Grand Australia shall execute a Final Shareholders' Agreement ("Final Shareholders' Agreement") embodying all of the provisions of this Deed which remain to be performed or are capable of application and the covenants and condition and ancillary provisions reasonable or desirable to give full effect to the provisions contained in Schedule 4. MGM Grand Diamond, MGM Grand Australia and the Option Holders shall procure that any Subsidiary of MGM Grand Australia, and any member of the MGM Group of whom any Equity Securities in MGM Grand Australia or any Subsidiary have been issued as permitted by this Deed, shall become a party to such Final Shareholders' Agreement to the extent that it is lawfully possible for such person to be a party to the Final Shareholders' Agreement. The parties shall act in good faith to conclude the Final Shareholders' Agreement within a reasonable period which shall not exceed 3 months from the date negotiations to prepare a Final Shareholders' Agreement begin. (b) As from the Call Option Completion and until the Final Shareholders Agreement is executed by all of the then existing parties to this Deed and such other members of the MGM Group as may be necessary, the provisions contained in Schedule 4 are intended and shall be construed to act as covenants between all of the parties hereto to protect the minority interest of the Option Holders and shall apply notwithstanding anything to the contrary in the constituent documents of any member of the MGM Grand Australia Group. 6.8 EXERCISE OF VOTING AND OTHER RIGHTS ----------------------------------- (a) MGM Grand Diamond agrees to exercise its voting and other rights attaching to its MGMGA Shares or arising from its control of the 24 MGM Grand Australia Group to procure, so far as it lawfully can, that each member of MGM Grand Australia Group and its directors give effect to the terms and conditions of this Deed. (b) The Option Holders agree as and from Call Option Completion (assuming the Call Option has been exercised) to exercise their voting and other rights attaching to their MGMGA Shares to procure, so far as they lawfully can, that their Nominee Directors give effect to the terms and conditions of this Deed. (c) If in the option of the Option Holders and the MGM Grand Diamond, each acting reasonably, it is necessary or desirable to amend the articles of association of MGM Grand Australia or any Subsidiary in order to comply with applicable law or to give effect to the rights of the Option Holders pursuant to this Deed (including Schedule 4), then all parties shall exercise their voting and other right attaching to or arising for the MGMGA Shares to attempt to implement such changes. 7. PROPOSED LISTING OF MGM GRAND AUSTRALIA --------------------------------------- 7.1 LISTING ------- MGM Grand Diamond recognises and acknowledges that one of the preferred exit mechanisms for the Option Holders would be the Listing of all the ordinary share capital of MGM Grand Australia. If the Option Holder shall issue a notice to MGM Grand Diamond that they wish MGM Grand Australia to obtain such a Listing within twelve months from the date of the notice, then (subject to any restriction imposed by law on MGM Grand Diamond, MGM Grand Australia or the MGM Grand Australia Group member holding the Casino Licence); MGM Grand Diamond shall give due consideration to such request, including without limitation, to the extent it deems it desirable to do so appoint an independent consultant of appropriate experience to advise on the merits of obtaining a Listing. 7.2 COMMITMENT OF SHAREHOLDERS -------------------------- Nothing in Clause 7 shall oblige MGM Grand Diamond to sell any of the MGMGA Shares held by it or to require MGM Grand Australia to issue any new MGMGA Shares. However, if MGM Grand Diamond and the Option Holders (assuming the Call Option has been exercised) agree to seek to obtain a Listing, then the Option Holders agree to all of their MGMGA Shares being quoted on the relevant Stock Exchange and to offer by way of sale all or such portions of their shareholding in MGM Grand Australia as MGM Grand Diamond may request, provided that MGM Grand Australia and/or MGM Grand Diamond sell in such offering the aggregate of not less than Ten percent (10%) of the issued MGMGA Shares prior to any such offering. 25 7.3 NO OBLIGATION TO LIST --------------------- (a) For the avoidance of doubt neither MGM Grand Diamond nor the Option Holders will be under any obligation to consent to a Listing, such consent to be given or withheld in their sole and absolute discretion, but the merits of such Listing shall be considered in good faith once the request has been made by the Option Holders upon MGM Grand Diamond pursuant to Clause 7.1. (b) Notwithstanding that a party has consented to a Listing such consent may be withdrawn anytime prior to Listing, subject to any third party contractual obligations, if any party so elects as a result of an adverse movement in the proposed issue price of a share on Listing or the imposition of unreasonable conditions. 8. PUT OPTION ---------- 8.1 CONDITION PRECEDENT ------------------- If by the first anniversary of the Call Option Exercise Date:- (a) no Listing of the ordinary share capital of MGM Grand Australia has occurred or is not considered desirable by the Option Holders and MGM Grand Diamond; or (b) if the Listing has been obtained but the Listing is on a market which has insufficient liquidity based on bona fide estimates, to absorb a sale of all of the Call Option Shares then held by the Option Holders, within a period of six months after such Listing; then the following provisions of this Clause 8 will apply. Any dispute concerning the aforegoing shall be resolved in accordance with Clause 9.1. 8.2 GRANT OF PUT OPTION ------------------- MGM Grand Diamond hereby grants to the Option Holders, collectively an option to sell the Put Option Shares, for the Put Option Consideration, free from all Encumbrances (other than those that may be contained in this Deed). 8.3 OPTION EXERCISABLE ONLY JOINTLY ------------------------------- The Put Option shall only be capable of being exercised: (a) during the Put Option Period, or (b) if an Event of Default (as defined in Clause 12) has occurred prior to the commencement of the Put Option Period, at any time after the occurrence of the Event of Default and so long as such Event of Default is continuing, but in no event after the expiration of the Put Option Period. 26 To the extent that the Put Option is not so exercised it shall lapse and be incapable of further or subsequent exercise. The Put Options shall be capable of being exercised by the Option Holders only collectively in respect of the whole of the Put Option Shares and only during the Put Option Period. 8.4 EXERCISE NOTICE --------------- The Put Option shall be exercised collectively by notice in writing by the Option Holders to MGM Grand Diamond. 8.5 NO WITHDRAWAL OF NOTICE ----------------------- An Option Holder shall not be entitled to withdraw a notice served pursuant to Clause 8.4, once it has been duly served. 8.6 CONTRACT FOR SALE AND PURCHASE ------------------------------ (a) Upon receipt by MGM Grand Diamond of a notice from the Option Holders, given in accordance with Clause 8.4, a contract for the sale and purchase of the Put Option Shares between MGM Grand Diamond or subject to Clause 8.6(b)(iii) its nominee ("MGM Nominee") as purchaser and the Option Holders as vendors shall be created as at the date of receipt of that notice. If MGM Grand Diamond nominates a person to be the MGM Nominee to acquire the Put Option Shares under this Clause 8.6 (details of the nominee are communicated to the Option Holders at least five Business Days before the Put Option Completion), MGM Grand Diamond shall be responsible as the primary obligor and not as surety for the payment of the Put Option Consideration. (b) It shall be a condition to Completion of the sale and purchase of the Put Option that (i) the Treasurer of the Commonwealth of Australia consents, under the Foreign Acquisitions and Takeovers Act 1975, to the proposed acquisition by MGM Grand Diamond (or subject to Clause 8.6(b)(iii) MGM Nominee) of the Put Option Shares and the Treasurer is to be deemed to have so consented: (A) if MGM Grand Diamond (or subject to Clause 8.6(b)(iii) MGM Nominee) receives written advice from the Treasurer on his behalf, without any term or condition which MGM Grand Diamond (or MGM Nominee) considers unacceptable, to the effect that the acquisition of the Put Option Shares is not objected to under the Foreign Acquisitions and Takeovers Act 1976; or (B) if 10 days have elapsed from the day the Treasurer ceased to be empowered to make any order under Part II of the Foreign Acquisitions and Takeovers Act in 27 relation to the proposed acquisition because of lapse of time, notice of the proposed acquisition of the Put Option Shares having been given to the Treasurer under the Foreign Acquisitions and Takeovers Act 1975; and (ii) the Option Holders and MGM Grand Diamond receiving not later than six months after the Put Option Exercise Date on an unconditional basis all relevant consents and approvals required, if any, from any governmental authority including the Government or relevant Minister of the Northern Territory of Australia in relation to any change of interest in MGM Grand Australia; and (iii) where the conditions referred to in the preceding sub- paragraphs (b)(i) and (b)(ii) have not been satisfied within 3 months of the Put Option Exercise Date but are likely to be satisfied within a period of 3 months if the purchaser of the Put Option Shares is MGM Grand Diamond and not MGM Nominee, then notwithstanding Clause 8.6(a), the purchaser of the Put Option Shares shall be MGM Grand Diamond and no other person. (c) MGM. MGM Grand Diamond (for itself and on behalf of any MGM Nominee) and the Option Holders shall use their best endeavours (other than by incurring substantial liabilities, substantial obligations (including any divestment or restrictions on business operations) or monetary obligations and other than by consenting to any substantial alteration to the terms of this Agreement) to satisfy any request for information or condition or conditions specified by or on behalf of the Treasurer of the Commonwealth of Australia under the Foreign Acquisitions and Takeovers Act 1975 as referred to in Clause 8.6(b). Each of the parties shall use all their best endeavours to obtain the fulfilment of the conditions in Clause 8.6(b) in an expeditious manner, and shall give the others prompt notice in writing upon it becoming aware whether or not any of the condition precedents referred to in Clause 8.6(b) has been satisfied. 8.7 NO ENCUMBRANCES --------------- The Put Option Shares shall be sold by the Option Holders as beneficial owners free from all Encumbrances and adverse claims, together with all rights attaching thereto, as at the date of the Put Option Completion including all dividends declared or payable or distributions made or proposed on or after the Put Option Exercise Date. 8.8 CONSIDERATION ------------- The total consideration payable for the purchase of the Put Option Shares shall be the Put Option Consideration. 28 8.9 VENUE AND COMPLETION DATE ------------------------- Completion of the sale and purchase of the Put Option Shares shall take place between the hours of 9.00am and 3.00pm (Las Vegas, Nevada time) on the fifth (5th) Business Day after the latter of the satisfaction of the conditions precedent referred to in Clause 8.6 and determination of the Put Option Consideration in accordance with Schedule 3 or such other date as the relevant Option Holder and MGM Grand Diamond may agree in writing, at the office of MGM Grand Diamond or at such other place as MGM Grand Diamond and the Option Holder may agree. 8.10 COMPLETION ---------- On Completion: (a) the Option Holders shall deliver to (or make available to the satisfaction of) MGM Grand Diamond or MGM Nominee (as the case may be): (i) definitive certificates for the relevant Put Option Shares (or if such certificate has been lost or destroyed the necessary declarations have been made as required by the Articles of Association of MGM Grand Australia or the Corporations Law for the issue of replacement certificates) together with transfers thereof duly executed by the registered holders thereof, in favour of MGM Grand Diamond or MGM Nominee (as the case may be); (ii) such consents or documents (if any) as may be required to give evidence of title to the relevant Put Option Shares and to sell, transfer or vest such title in MGM Grand Diamond or MGM Nominee (as the case may be) free from Encumbrance; and (iii) duly executed proxy forms in the form set out in the Articles of Association of MGM Grand Australia appointing MGM Grand Diamond or MGM Nominee (as the case may be), as proxy to exercise the right to vote attached to the relevant Put Option Shares in respect of all general meetings of holders of Equity Securities of MGM Grand Australia after the date of Completion pending registration of the transfers referred to in sub-paragraph (i) above; (b) MGM Grand Diamond shall pay the Put Option Consideration to the Option Holders as specified in writing by the Nominated Option Holder by bank cheques, cashiers cheques, or by direct debits or telegraphic transfers to the bank accounts nominated in writing by the Nominated Option Holder; and (c) MGM Grand Diamond shall procure that any loan made by any of the Option Holders to any member of the MGM Grand Australia Group is 29 repaid in full together with all interest accrued thereon to the date of Put Option Completion. 8.11 WARRANTIES BY OPTION HOLDER -------------------------- The Option Holder exercising the Put Option shall in respect of the Put Option Shares registered in its name ("Relevant Put Option Shares"), represent and warrant to MGM Grand Diamond or MGM Nominee that on the day of Put Option Completion:- (a) the Option Holder is the beneficial owner and in possession of the Relevant Put Option Shares (including all evidence of title) and such Relevant Put Option Shares will not at Put Option Completion be the subject of any Encumbrance; (b) the Option Holder is entitled and competent to sell and transfer the Relevant Put Option Shares subject to the Articles of Association of MGM Grand Australia; (c) any dividends, bonuses or other distributions declared made or paid in relation to any of the Relevant Put Option Shares held by the Option Holder after the exercise of the Put Option will be for the sole benefit of MGM Grand Diamond or MGM Nominee (as the case may be) and, if paid to the Option Holder, will be forthwith paid to MGM Grand Diamond or MGM Nominee (as the case may be) or by the Option Holder, by bank cheque; (d) the Option Holder is not engaged in any proceedings, litigation, arbitration or prosecution (whether as plaintiff or defendant or otherwise) concerning or affecting the Relevant Put Option Shares held by it and that no legal or other proceedings are threatened or envisaged by or against the Option Holder concerning the Relevant Put Option Shares and that to the best knowledge, information and belief of the Option Holder there are no circumstances likely to lead thereto; and (e) no Insolvency Event has occurred in relation to the Option Holder. 8.12 PARTIAL COMPLETION ------------------ (a) MGM Grand Diamond or MGM Nominee (as the case may be) shall not be obliged to complete the purchase of the Put Option Shares if an Option Holder is in breach of any of its obligations pursuant to Clause 8.10 or any representation or warranty given by it pursuant to Clause 8.11 unless and until such breach has been cured (if capable of remedy) within 30 days of MGM Grand Diamond or MGM Nominee giving notice to the defaulting party of such breach. (b) MGM Grand Diamond or MGM Nominee (as the case may be) may, at its option, pending the curing of the breach of obligation referred to in Clause 8.12(a), elect to proceed to Completion of the remainder of the 30 Put Option Shares held by the other Option Holders notwithstanding Clause 8.12(a). (c) Nothing contained in this Clause 8.12 shall limit or otherwise restrict the rights and remedies, including without limitation equitable remedies, which may be available to MGM Grand Diamond or MGM Nominee (as the case may be) by reason of the matters referred to in Clause 8.12(a). 9. DISPUTE RESOLUTION ------------------ 9.1 RESOLUTION BY AUDITOR --------------------- In the event that the Option Holders and MGM Grand Diamond are unable to agree in relation to the matter referred to in Clauses 3.6(d), 3.10, 6.2(b)(i), 6.6, 8.1 or Schedules 2 or 3, then the auditors for the time being of MGM Grand Australia shall as experts and not as arbitrators make a determination in relation to the subject matter in dispute, which in the absence of manifest error shall be final binding. Any of the parties may make a submission to the auditor in relation to the subject matter of his proposed determination and the auditor shall be given access to such information as he reasonably requires to make a proper and full determination. The costs of the auditor shall be borne as to one half by MGM Grand Diamond and, as to the other half by the Option Holders. For the avoidance of doubt, MGM Grand Diamond and the Option Holders intend that no such resolution by MGM Grand Australia's auditor shall prevent such auditor from continuing in the capacity of MGM Grand Australia's independent auditor and in the event, in the opinion of such auditor, it may not resolve such dispute and continue in such capacity it shall designate an auditor of comparable standing to resolve such dispute. 9.2 GENERAL DISPUTE RESOLUTION -------------------------- (a) Unless a party has complied with Sub-Clauses 9.2(a) to (f), that party may not commence court proceedings or arbitration relating to any dispute arising from this instrument except where that party seeks urgent interlocutory relief in which case that party need not comply with this Clause when seeking such relief. Where a party fails to comply with Sub- Clauses 9.2(a) to (d) inclusive, any other party in dispute with the party so failing to comply need not comply with this Clause before referring the dispute to arbitration or commencing court proceedings relating to that dispute or defending or otherwise participating in any such arbitration or court proceedings commenced by the party so failing to comply. (b) Any party claiming that a dispute has arisen under this instrument between any of the parties shall give written notice to the other party or parties in dispute designating its representatives in negotiations relating to the dispute and a person with authority to settle the dispute and each other party given written notice shall promptly give notice in writing to the parties in dispute designating as its representatives in negotiations 31 relating to the dispute and a person with similar authority to settle disputes. (c) The designated persons shall, within ten days of the last designation required by Sub-Clause 9.2(b), following whatever investigations each deems appropriate, seek to resolve the dispute. (d) If the dispute is not resolved within the following ten days (or within such further period as the representatives may agree is appropriate) the parties in dispute shall within a further ten days (or within such further period as the representatives may agree is appropriate) seek to resolve the whole or part of the dispute through the means of mediation and shall agree on: (i) the procedure and timetable for any exchange of documents and other information relating to the dispute; (ii) procedural rules and a timetable for the conduct of the mediation; (iii) a procedure for selection and compensation of any neutral person who may be employed by the parties in dispute; and (iv) whether the parties should seek the assistance of a dispute resolution organisation. (e) The parties acknowledge that the purposes of any exchange of information or documents or the making of any offer of settlement pursuant to this Clause 9.2 is to attempt to settle the dispute between the parties and without prejudice to their rights in any arbitration or court proceedings. No party may use any information or documents obtained through the dispute resolution process established by this Clause for any purpose other than in an attempt to settle a dispute between that party and other parties to this Deed. (f) After the expiration of the time established by or agreed under Sub-Clause 9.2(a) for agreement of the matters referred to in Sub-Clause 9.2(d)(i) to (iv) inclusive, any party which has complied with the provisions of Clause 9.2(a) to (d) inclusive may in writing terminate the dispute resolution process provided for in those Clauses and may then defer the dispute to arbitration or commence court proceedings relating to the dispute. 10. INFORMATION ----------- 10.1 REPORTING TO OPTION HOLDERS --------------------------- Subject to any express third party confidentiality restrictions or as required by applicable law, MGM Grand Diamond and MGM Grand Australia shall, during the period referred to in Clause 6.1 procure that the Option Holders are kept 32 regularly informed regarding the business and affairs of MGM Grand Australia Group (including the Casino). Any such information, subject to Clause 15.1, shall be treated as strictly confidential unless MGM Grand Australia shall otherwise direct. 10.2 ACCESS BY OPTION HOLDERS ------------------------ Subject to any express third party confidentiality restrictions or as required by applicable law, MGM Grand Diamond shall, during the period referred to in Clause 6.l give the Option Holders such information relating to the MGM Grand Australia Group as any of the Option Holders may reasonably require and shall afford to an Option Holder such facilities in relation thereto as it may reasonably require. Subject to Clause 15.1 any such information shall be treated strictly confidential unless MGM Grand Diamond shall otherwise direct. 10.3 DISCLOSURE BY NOMINEE DIRECTOR ------------------------------ Subject to any express third party confidentiality restrictions or as required by applicable law, during the period referred to in Clause 6.1 a Nominee Director appointed by the Option Holders pursuant to Clause 6.4 may, and shall on the request of an Option Holder, provide such information to the Option Holder as he considers appropriate or as may be reasonably requested by an Option Holder from time to time. Subject to Clause 15.1 any such information shall be treated as strictly confidential unless MGM Grand Australia shall otherwise direct. To the extent that the Nominee Director requires specific confirmation, consent, or ratification for any such disclosure from his fellow directors or in general meeting, then the parties shall do all things in their lawful power to assist in or procure such confirmation, consent or ratification. 10.4 INFORMATION PERIOD ------------------ The provisions contained in Clauses 10.1 to 10.3 inclusive shall apply from the date of the Deed until the expiry of the Call Option Period, or if the Call Option is exercised until such time as the Option Holders have disposed all of the Equity Securities of MGM Grand Australia held by the Option Holders. 11. SHARE CERTIFICATE ENDORSEMENT ----------------------------- Immediately following: Casino Sale Completion and until Listing, MGM Grand Australia and MGM Grand Diamond shall ensure that all certificates in respect of all Equity Securities of MGM Grand Australia issued before or after the date of this Deed are endorsed with the following notice: "The securities comprised in this certificate are the subject of, inter alia, a Deed dated [ ] 1995 and made between [Ultrabridge Securities Limited, Cashew Nut Holdings Limited, the Trustees of the Osborne Family Trust, MGM Grand Diamond Inc., MGM Grand Australia Pty Ltd and MGM Grand Inc.]" 33 MGM Grand Diamond shall thereafter procure that, so long as the Call Options shall remain exercisable by the Option Holders, any replacement certificates issued to it in respect of the Equity Securities shall be similarly endorsed. 12. DEFAULT ------- 12.1 EVENTS OF DEFAULT ----------------- It shall be an event of default in relation to a party (an "Event of Default") if any party commits a material breach of this Deed and (if capable of remedy) fails to remedy the same (or establish plans to remedy the same in a manner satisfactory to the non-defaulting parties) within thirty (30) days of notice to do so being given by any other party (and in which such other party expresses its intention to exercise its rights under this Clause). 12.2 GENERAL INDEMNITY ----------------- A party in respect of which an Event of Default occurs (a "Defaulting Party") shall on demand from any other party, indemnify such other party against any loss, cost, claim, damage or expense (including but not limited to legal fees) suffered or incurred:- (a) as a result of any default by the Defaulting Party in the performance of any of the obligations expressed to be performed by it under this Deed or as the result of an occurrence of an Event of Default which has occurred in relation to such Defaulting Party; and/or (b) in connection with the enforcement, preservation or protection of any rights against the Defaulting Party under this Deed. 13. TERM ---- This Deed shall, remain in full force and effect until the earlier of: (i) the end of the Call Option Period if the Call Options is not exercised during such period; (ii) following Call Option Completion, until replaced by the Final Shareholders Agreements; or (iii) such time as the Option Holders dispose of all their MGMGA Shares. 14. COSTS AND EXPENSES ------------------ Each party shall bear its own costs and expenses in relation to the negotiation, preparation and execution of this Deed and any other documents referred to in this Deed or ancillary or incidental to it. The Option Holders agree to bear all stamp duty payable or assessable in connection with this Deed. 34 15. CONFIDENTIALITY AND ANNOUNCEMENTS --------------------------------- 15.1 CONFIDENTIALITY --------------- Each party must keep: (a) all information which it obtains concerning the business, affairs or assets of MGM Grand Australia Group; and (b) the terms of this Deed or the Final Shareholders Agreement; and (c) all information relating to this Deed or the Final Shareholders Agreement; strictly confidential and must not, and must procure that their respective professional advisers, officers, employees, agents and auditors do not, without the prior written consent of the other parties, disclose any of the above information to any third party except: (d) if required to make such disclosure by any court of competent jurisdiction or in order to enforce any rights under this Deed or the Final Shareholders Agreement in any proceedings; (e) pursuant to any court order; (f) pursuant to any law or regulation having the force of law including without limitation laws, regulations of the government or relevant minister of the Northern Territory of the Commonwealth of Australia or any agency thereof; (g) pursuant to the requirements of any recognised stock exchange or securities regulatory body, such as the United States Securities Exchange Commission; (h) in circumstances where the information has come within the public domain otherwise than by reason of a breach by one of the parties of the provisions of this Clause; (i) to a bona fide intending purchaser of any of the MGMGA Shares or to a bona fide intending director of a company in the MGM Grand Australia Group subject to that purchaser or intending director entering into a confidentiality undertaking in favour of all the parties in terms similar to this Clause; (j) to professional advisers, and (k) by a director to his appointor. 35 15.2 ANNOUNCEMENTS ------------- Subject to Clause 15.2 (d)-(h) inclusive no public announcement or communication relating to the negotiations of the parties or the subject matter or terms of this Deed or any other related agreement will be made or authorised by or on behalf of any party without the prior written consent of the other parties. 16. MISCELLANEOUS PROVISIONS ------------------------ 16.1 NO PARTNERSHIP -------------- Nothing in this Deed or in any document referred to in it shall constitute any of the parties a partner of any other, nor shall the execution, completion and implementation of this Deed confer on any party any power to bind or impose any obligations to any third parties on any other party or to pledge the credit of any other party. 16.2 ASSIGNMENT ---------- None of the parties may assign any of their respective rights or obligations under this Deed nor any of the documents referred to in this Deed (including the Final Shareholders Agreement) in whole or in part except in the case of a Shareholder to a transferee of Equity Securities described in Part 9 of Schedule 4 to this Deed who has satisfied the conditions contained in that Part 9 "Permitted Transferee" and otherwise with the consent of the other parties. However, a Permitted Transferee's right to appoint Nominee Directors pursuant to Clause 6.4 or its counterpart in the Final Shareholders Agreement shall be restricted so as to require any candidate for a position of Nominee Director to be approved by the remaining Shareholders prior to such appointment (such approval not to be unreasonably withheld). 16.3 DEED OF ADHERENCE ----------------- (a) The Option Holders shall not appoint any other person as an Option Holder Nominee pursuant to Clause 3.2(b) unless and until such person has entered into a deed of adherence in relation to the terms of this Deed in a form satisfactory to MGM Grand Diamond. (b) MGM Grand Diamond shall not nominate an MGM Nominee pursuant to Clause 8 unless and until such person has entered into a deed of adherence in relation to the terms of this Deed, in a form satisfactory to the Option Holders, if any, who have not exercised the Put Option. (c) MGM Grand Diamond shall not transfer and MGM Grand Australia shall not enter into any transactions described and permitted by in Clause 4.1 (a), (b) or (c) except upon compliance with the applicable requirement concerning entry into a deed of adherence in relation to the terms of this Deed, (including for the avoidance of doubt Schedule 4) in 36 a form satisfactory to the Option Holders in the exercise of reasonable judgement. 16.4 WAIVER ------ No delay by or omission of any party in exercising any right, power, privilege or remedy under this Deed shall operate to impair such right, power, privilege or remedy or be construed as a waiver thereof. Any single or partial exercise of any such right, power, privilege or remedy shall not preclude any other or future exercise thereof or the exercise of any other right, power, privilege or remedy. The rights and remedies provided in this Deed are cumulative and not exclusive of any rights and remedies provided by law. 16.5 ENTIRE AGREEMENT ---------------- This Deed and other documents referred to in this Deed contain the entire agreement between the parties with respect to the subject matter hereof. 16.6 NOTICES ------- (a) Any notice or other communication to be given by one party to another under, or in connection with, the matters contemplated by this Deed shall be addressed to the recipient and sent to the address or facsimile number, if any, of the recipient given in this Deed for that purpose and marked for the attention of the person so given or such other address, facsimile number and/or marked for such other attention as the recipient may from time to time specify by notice given in accordance with this Clause to the party giving the relevant notice or communication to it. In the case of each Option Holder, the relevant details as at the date of this Deed are set out in Schedule 1. In the case of MGM Grand Diamond, MGM Grand Inc, or MGM Grand Australia such details are: Address: 3799 Las Vegas Boulevard South, Las Vegas, Nevada 89109, USA Facsimile Number: (702) 891 3334 For the attention of: K. Eugene Shutler Esq with a copy to: Address: Christensen, White, Miller, Fink & Jacobs. 2121 Avenue of the Stars, 18th Floor, Los Angeles, California 90067, USA Facsimile Number: (310) 556 2920 For the Attention of: Gary N. Jacobs Esq (b) Subject to (c) below, any notice or other communication to be given by any party to any other party under, or in connection with, the matters contemplated by this Deed shall be in writing and shall be given by letter delivered by hand or sent by first class prepaid post (airmail if 37 overseas) or telex or facsimile, and shall be deemed to have been received:- (i) in the case of delivery by hand, when delivered; (ii) in the case of first class prepaid post, on the fifth Business Day following the day of posting; or (iii) in the case of facsimile, on acknowledgement of the addressee's facsimile receiving equipment. (c) Any notice or other communication not received on a Business Day or received after 5.00 pm local time on any Business Day in the place of receipt shall be deemed to be received on the next following Business Day. A notice shall not be invalid by reason only that a copy of such notice has not been served on any person nominated to receive copies of notices. 16.7 COUNTERPARTS ------------ This Deed may be executed in any number of counterparts and by the different parties on separate counterparts (which may be facsimile copies), each of which when executed and delivered shall constitute an original, but all the counterparts shall together constitute but one and the same instrument. 16.8 VARIATIONS ---------- No variation to this Deed shall be effective unless made in writing and signed by or on behalf of the parties. 16.9 JURISDICTION ------------ (a) All the parties irrevocably agree that the courts of the Northern Territory of Australia are to have non-exclusive jurisdiction to settle any disputes which may arise out of or in connection with this Deed and that accordingly subject to Clause 16.9(c) any suit, action or proceeding (together in this Clause referred to as "Proceedings") arising out of or in connection with this Deed may be brought in such courts. (b) Each party irrevocably waives any objection which it may have now or hereafter to the laying of the venue of any Proceedings in any such court as is referred to in this Clause 16.9(a) and any claim that any such Proceedings have been brought in an inconvenient forum and further irrevocably agrees that a judgement in any Proceedings brought in the courts of the Northern Territory of Australia shall be conclusive and binding upon such party and may be enforced in the courts of any other jurisdiction. (c) Nothing contained in this Clause 16.9 shall limit the right of any party to take Proceedings against any other party in any other court of 38 competent jurisdiction, nor shall the taking of Proceedings in one or more jurisdiction preclude the taking of Proceedings in any other jurisdiction, whether concurrently or not. (d) Promptly after service of any process the party filing such process shall dispatch a copy thereof to the other parties by registered mail, postage prepaid, but failure of the other parties to receive such copy shall not invalidate the service of such process. (e) The Parties to this Deed shall at all times maintain agents for service of process in Australia. Such agents shall in the case of the Option Holders be: Address: Freehill Hollingdale & Page MLC Centre 20 Martin Place Sydney NSW 2000 Australia Attn: Bruce K. Cutler Telephone: (02) 225 5000 Fax: (02) 322 4000 and in the case of MGM Grand Diamond, MGM Grand Australia or MGMG be: Address: 3rd Floor, Diamond Beach Casino, Gilruth Avenue, Darwin City, Darwin, Northern Territory 0800, Australia Telephone: (61) 89-46 2666 Fax: (61) 89-81 7553 Any writ, judgement or other notice of legal process shall be sufficiently served on a party if delivered to such agents at its address for the time being. Each party undertakes not to revoke the authority of the above agents and if for any reason any such agent no longer serves as agent of a party to receive service of process, that it shall promptly appoint another such agent and advise the other parties thereof. 16.10 LAW --- This Deed shall be governed by, and construed in all respects in accordance with, the laws applicable in the Northern Territory of Australia. 39 16.11 CONSENT OF OPTION HOLDERS ------------------------- Where there is a reference in this Deed to the consent or agreement of the Option Holders such consent or agreement shall be deemed to have been given by all of the Option Holders if the Nominated Option Holder so agrees or consents. 16.12 GUARANTEE BY MGM GRAND, INC. ---------------------------- MGM Grand guarantees the due and punctual performance by MGM Grand Diamond or MGM Grand Australia of all of their respective obligations under this Deed and shall indemnify and keep indemnified any of the other parties for any loss, damage, cost or expenses which may be suffered or incurred by them as a result of the non-performance of the obligations of MGM Grand Diamond and MGM Grand Australia hereunder. Without limiting the generality of the aforegoing MGM Grand shall pay on demand any amounts due for payment by MGM Grand Diamond pursuant to this Deed if MGM Grand Diamond shall not have made such payment to the person entitled within Five (5)Business Days of the date such payment was due for payment. 16.13 EFFECTIVE DATE -------------- This Deed shall be deemed to be effective and delivered as at 30 June 1995 notwithstanding that it was signed after 30 June 1995 provided all parties hereto sign a counterpart of this Deed. 40 EXECUTED AS A DEED SIGNED for and on behalf ) of ULTRABRIDGE SECURITIES ) LIMITED as a Deed with effect ) from 30 June 1995 by: ) /s/ P. Marchetti /s/ G. McIntosh /s/ C. Papadimitrou - --------------------------------- ----------------------------------- Signature of Witness Signature P. Marchetti G. McIntosh C. Papadimitrou - --------------------------------- ----------------------------------- Name of Witness Name Director Director ----------------------------------- Capacity SIGNED for and on behalf ) of CASHEW NUT HOLDINGS ) LIMITED as a Deed with effect ) from 30 June 1995 by: ) /s/ /s/ Andrew Duncan - ------------------------------ ------------------------------ Signature of Witness Signature Andrew Duncan - ------------------------------ ------------------------------ Name of Witness Name Director ------------------------------ Capacity SIGNED for and on behalf ) of CORTRUST AKTIENGESELLSCHAFT ) FUR TREUHANDSCHAFTEN AND DR ) LAMBERT GRASERN AS TRUSTEE OF ) [LOGO] THE OSBORNE FAMILY TRUST as a ) Deed with effect from 30 June ) 1995 by: ) /s/ Andrew Baker /s/ Andrew Baker - ----------------------------- ----------------------------- Signature of Witness Signature /s/ Dr. Lambert Grasern /s/ Dr. Lambert Grasern _____________________________ _____________________________ Signature of Witness Signature _____________________________ Capacity 41 SIGNED for and on behalf ) of MGM GRAND DIAMOND, INC. ) as a Deed with effect from 30 ) June 1995 by: ) /s/ K. Eugene Shutler /s/ Alex Yemenidiian - --------------------------- ------------------------------ SIGNATURE OF WITNESS SIGNATURE K. Eugene Shutler Alex Yemenidiian - --------------------------- ------------------------------ NAME OF WITNESS NAME Vice President ------------------------------ CAPACITY THE COMMON SEAL ) of MGM GRAND AUSTRALIA PTY LTD ) was hereunto affixed by the authority ) of its directors and in the presence of) with effect from 30 June 1995: ) /s/ Alex Yemenidiian /s/ K. Eugene Shutler - --------------------------- ------------------------------ SIGNATURE SIGNATURE Alex Yemenidiian K. Eugene Shutler - --------------------------- ------------------------------ NAME NAME Director Director - ------------------------------ ------------------------------ CAPACITY CAPACITY SIGNED for and on behalf ) of MGM GRAND INC. ) as a Deed with effect from 30 ) June 1995 by: ) /s/ K. Eugene Shutler /s/ Alex Yemenidiian - --------------------------- ------------------------------ SIGNATURE OF WITNESS SIGNATURE K. Eugene Shutler Alex Yemenidiian - --------------------------- ------------------------------ NAME OF WITNESS NAME President ------------------------------ CAPACITY 42 SIGNED for and on behalf of ) of JAMES OSBORNE ) to reflect his adherence to ) Clause 6.5 of this Deed ) with effect form 30 June ) 1995 by: ) /s/ M. Kennedy /s/ James Osborne - ------------------------ ------------------------- Signature of Witness James Osborne /s/ M. Kennedy - ------------------------ Name of Witness 43 SCHEDULE 1 ---------- (OPTION HOLDERS)
NAME ADDRESS AND AGREED - ---- ----------- ------ FACSIMILE NUMBER PROPORTION ---------------- ---------- 1. Ultrabridge Securities Limited P O Box 309 1/3 (One third) Grand Cayman Cayman Islands British West Indies 2. Cashew Nut Holdings Limited Queens House 1/3 (One third) Don Road St. Helier Jersey SE4 0TH Channel Islands 3. CorTrust Aktiengesellschaft fur Pflugstrasse 10, 1/3 (One third) Treuhandschaften and Dr Lambert Postfach 1136 Grasern as trustees of the Osborne FL-9490 VADUZ Family Trust Furstentum Liechtenstein
44 SCHEDULE 2 ---------- (CALL OPTION CONSIDERATION) --------------------------- 1. The Call Option Consideration shall be an amount expressed in Australian Dollars equal to the amount calculated in accordance with the following formula: C=0.225 x (SSC + SSC(P X I) - D -AFC) ----- 360 where C is the aggregate Call Option Consideration payable on exercise of the Call Option; SSC is $83,000,000, subject to the "Adjustments" as such term is defined in the third sentence of Clause 3.1 of the Casino Sale Agreement to reflect operations, certain balance sheet items, dividends and distributions specified therein; I is the average of One per cent (1%) plus LIBOR as at the Casino Sale Completion and at the expiry of each 90 day period thereafter, expressed as a decimal and pro-rated for periods of less than 90 days; P is the number of days from the Casino Sale Completion until the Call Option Completion; and D is the aggregate amount of all distributions (whether in cash or in specie), dividends (whether final, interim or bonus) and return of capital to the shareholders of MGM Grand Australia made or agreed to be made or paid or otherwise declared during the period referred to in P above (except to the extent of distributions made after the Call Option Exercise Date, to which Clause 5.2(e) of the Option Deed is applicable). AFC is: (a) the aggregate amount of all repayments or prepayments of principal under or pursuant to the Acquisition Financing; (b) the aggregate amount of all interest payments made by MGM Grand Australia under the Acquisition Financing; (c) any other costs, expenses or payments made by MGM Grand Australia or any Subsidiary of MGM Grand Australia in relation to the Acquisition Financing or any Encumbrance granted in connection with the Acquisition Financing; and 45 (d) the aggregate outstanding balance of the Acquisition Financing to the extent it is not discharged or assumed pursuant to Clause 3.10(a): in respect of paragraphs (a)-(c) made on or before the Call Option Exercise Date, and in respect of paragraph (d) as at Call Option Exercise Date, and in each case after deducting the benefit to the MGM Grand Australia Group of any resulting Australian tax deduction, tax credit or other tax properly claimed or claimable in respect of such payment. However, if an amount that was claimable as at the date of Call Option Completion is later determined by MGM Grand Australia or the relevant tax authorities not to be properly claimable or to be disallowed then the Call Option Consideration shall be adjusted and the additional consideration shall be paid to the Option Holders within Five (5) Business Days of a determination referred to above. 2. Where the calculation of the Call Option Consideration results in a positive number then the Call Option Consideration required to be paid by each of the Option Holders shall be its Agreed Proportion of the positive number. However, where the calculation of the Call Option Consideration results in a negative amount then MGM Grand Diamond shall pay an aggregate amount equal to that negative amount ("Rebate") to the Option Holders in the Agreed Proportions and no monetary payment will be required to be made by the Option Holders to MGM Grand Diamond in respect of the exercise of the Call Option. 3. If there is a bona fide dispute as to the calculation of I or D then Completion of the Call Option shall nevertheless take place at the time and place provided in this instrument and the aggregate Call Option Consideration shall be Twenty two and one half per cent (22.5%) of SSC, which shall be adjusted upward or downward as the case may be by the payment or refund of monies within Five (5) Business Days of settlement of the dispute as to interpretation or I or D. Any dispute shall be referred to the expert appointed under Clause 9.1 to resolve. 46 SCHEDULE 3 ---------- (PUT OPTION CONSIDERATION) -------------------------- 1. The Put Option Consideration shall be the consideration payable to the Option Holders on the exercise of its Put Option. For each MGMGA Share held by an Option Holder such person shall be entitled to be paid an amount determined in accordance with the following formula:- (D X I) FMV + FMV(-----) ( 360 ) PPS=---------------- NS where PPS is the price per MGMGA Share payable to an Option Holder on exercise of the Put Option. FMV is the "Fair Market Value" of MGM Grand Australia as at the Put Option Exercise Date determined in accordance with the following provisions of this Schedule 3; NS is the number of issued MGMGA Shares of MGM Grand Australia as at the Put Option Exercise Date; I is the average of One per cent (1%) plus LIBOR (as at the Put Option Exercise Date and at the expiry of each 90 day period thereafter, expressed as a decimal and pro rated for period of less than 90 days; and D is the number of days from the relevant Put Option Exercise Date to relevant Put Option Completion. 2. Subject to paragraph 7, the Fair Market Value of MGM Grand Australia as at the Put Option Exercise Date shall be calculated by taking the numerical average of the valuations determined by two separate investment banks experienced in the valuation of companies in Australia, one to be appointed by the Option Holders and the other by MGM Grand Diamond ("Valuation Experts"). The Option Holders and MGM Grand Diamond any also agree in the place of one or more of the investment banks to use another suitable professional firm or organisation. In either case all costs of such valuations shall be for the account of the appointor. 3. Each Valuation Expert shall be provided with copies of all submissions and letters of instruction (which documents should fairly represent the brief given to the Valuation Expert) given to the other Valuation Expert. Copies shall also be given to the Option Holder or MGM Grand Diamond if they do not already possess such documents. Additionally, each Valuation Expert may request such other reasonable information to 47 assist it in making its determination and the parties shall procure as far as they are legally able that MGM Grand Australia Group provides the necessary information. 4. The Valuation Experts shall each be instructed to provide a single amount as the Fair Market Value of MGM Grand Australia as a complete entity without regard to minority shareholdings, special rights conferred under the Articles of Association or otherwise and any premium for control. If contrary to its instructions the Valuation Expert does not express a single amount as a Fair Market Value but express a range of values, then for the purposes of determining the average of the valuations of each Valuation Expert referred to in paragraph 2 of this Schedule 3, the median of such range shall be used. The Option Holder and MGM Grand Diamond shall instruct their respective Valuation Experts within Ten (10) Business Days of the Put Option Exercise Date and instruct such Valuation Expert to provide a draft valuation report within Twenty (20) Business Days. A copy of the draft valuation report shall be served on the Option Holder and MGM Grand Diamond and each of those parties shall have the right, to be exercised within Ten (10) Business Days after receipt of the draft valuation report, to respond in writing only, to the Valuation Expert providing the draft valuation report with its comments and observations in relation to the draft valuation report. The Valuation Expert shall be further instructed to complete and finalise its draft valuation report no less than Fifteen (15) Business Days after it has served on the Option Holder and MGM Grand Diamond a copy of the draft valuation report. 5. If contrary to Clause 3.10(a) MGM Grand Diamond has not satisfied its obligations thereunder as at Put Option Exercise Date then the Fair Market Valuation of MGM Grand Australia shall be made on the basis that such obligations under Clause 3.10(a) were deemed to be satisfied as at Call Exercise Date. 6. Copies of the final valuation reports should be furnished to all parties and if there is a dispute as to average valuation this shall be resolved by the expert appointed pursuant to Clause 9.1. 7. If the Fair Market Values determined by each of the Valuation Experts differ by more than 10% then the Option Holders and MGM Grand Diamond shall appoint a new Valuation Expert to finally and conclusively determine the Fiar Market Value. The new Valuation Expert will be given copies of the parties prior submissions and be instructed to determine the Fair Market Value in accordance with this Schedule. If the Option Holders and MGM Grand Diamond are unable to agree on the identity of the new Valuation Expert then such Valuation Expert shall be nominated by the expert appointed pursuant to Clause 9.1 of the Deed. 8. The Option Holder and MGM Grand Diamond agree that any information received by them pursuant to the above provisions from one or other Valuation Expert shall be treated as confidential and used solely for the purpose of determining the Fair Market Value and shall not be given to any third party. The parties agree to co-operate with the reasonable requests of the Valuation Experts. 9. Subject to paragraph 5 above, the parties may agree from time to time the basis on which the valuation of the Fair Market Value is to be determined by the Valuation 48 Expert. However, in the absence of agreement, prior to referral to the Valuation Experts, each Valuation Expert shall make its own determination of the proper basis for valuation. 49 SCHEDULE 4 ---------- (SHAREHOLDER COVENANTS) PART 1 STATUS 1.1 The terms, conditions and covenants contained in this Schedule 4 shall, as and from Call Option Completion, apply to each of the then existing parties to this Deed in accordance with Clause 6.7(b) of this Deed. 1.2 To the extent of any conflict or inconsistency between any of the preceding terms of this Deed and the provisions of this Schedule 4, the provisions of the Deed shall prevail. 1.3 In the event of the Listing of any Equity Securities of MGM Grand Australia, as contemplated in the Deed, the terms, conditions and covenants contained in this Schedule 4 shall thereupon lapse and be of no further force or effect. PART 2 INTERPRETATION 2.1 Terms defined in Clause 1.1 of the Deed shall have the same meanings when used in this Schedule 4. 2.2 In this Schedule 4, the following additional expressions have the following meanings:- "Accounting Firms" means any of Arthur Andersen & Co, Ernst & Young, Coopers & Lybrand, Deloitte Ross Tohmatsu, KPMG Peat Marwick, Price Waterhouse and any successor of them or such other accounting firm as the Shareholders shall unanimously approve; "Annual Accounts" means the accounts approved in accordance with Clause 4(b), audited in accordance with Clause 4(b)(ii) and approved by the Relevant Board; "Board" means the Board of Directors of a company; "Financial Year" means a period beginning on 1 January of one year and ending on 31 December in such year; and "Third Party" means a person other than a Shareholder or an Associate of a Shareholder. 2.3 Reference in this Schedule 4 to Clauses are references to Clauses of this Schedule 4 unless otherwise stated. 50 PART 3 SCOPE 3.1 Notwithstanding the generality of the corporate objectives enumerated in the Memorandum and Articles of Association, the initial scope of MGM Grand Australia shall be the ownership, management and operation of the Casino and other gaming and related activities in the Northern Territory. PART 4 POSITIVE COVENANTS 4.1 The parties shall use their best endeavors to ensure that:- (a) each member of the MGM Grand Australia Group will prepare and provide management information and reports to its directors sufficient for the efficient operation of each member of the MGM Grand Australia Group; (b) each member of the MGM Grand Australia Group shall make available to the Shareholders all information concerning the business and operations of each member of the MGM Grand Australia Group including, but not limited to, the following reports which shall be furnished to the Shareholders:- (i) as soon as practicable after the end of each calendar quarter and in any event within Forty five (45) days thereafter an unaudited profit and loss statement and a monthly cash flow statement (with projections for the following Six (6) months) of each member of the MGM Grand Australia Group as at the end of the last preceding calendar quarter and for the current Financial Year to date, prepared in accordance with previous financial statements, all in reasonable detail and so certified by the principal financial or accounting officer of each member of the MGM Grand Australia Group; (ii) as soon as practicable after the end of each Financial Year an audited consolidated profit and loss account and audited consolidated balance sheet for the MGM Grand Australia Group prepared in accordance with previous financial statements, all in reasonable detail and so certified by the principal financial or accounting officer of each member of the MGM Grand Australia Group; (iii) as soon as practicable after the end of each calendar quarter and in any event within 45 days thereafter, an unaudited balance sheet of each member of the MGM Grand Australia Group as at the end of that quarter prepared in accordance with previous financial statements all in reasonable detail and so certified by the principal financial or accounting officer of each member of the MGM Grand Australia Group; and (iv) before the end of each Financial Year an annual budget for the next succeeding Financial Year on a monthly basis for each member of the MGM Grand Australia Group approved by the Relevant Board. 51 (c) each member of the MGM Australian Group shall incorporate into its articles regulations to the effect: (i) that meetings of the Board may be held by telephone or other contemporaneous link up referred to in Clause 6.4(h) of the Deed and that resolutions passed at such meetings shall be valid and effective; and (ii) on the written request of a Nominee Director a board meeting shall be convened in accordance with the preceding paragraph within 10 Business Days of such request. PART 5 BOARD POLICY MATTERS Notwithstanding any other provision of this Schedule 4 or the Articles of Association of any member of the MGM Grand Australia Group, the following events, matters or things shall be considered and determined by a duly convened meeting of the Relevant Board and not by any individual director nor committee of directors of a member of the MGM Grand Australia Group:- (a) the sale, disposal or grant of an Encumbrance, by that member of or over any assets, or group of assets, having a value of more than One million dollars $1,000,000 (other than a bona fide arms length sale of trading stock in the ordinary course of business); (b) any loan or series of loans totalling to more than One million dollars $1,000,000 being made to or by that member or the repayment of any such loan to or by that member of the MGM Grand Australia Group other than on terms previously agreed by the Board; (c) any formation, acquisition or disposition of any subsidiary by that member; (d) the adoption by that member of any budget; (e) the incurring by that member of any one item of capital expenditure or leasing expenditure of more than One million dollars $1,000,000 if provision for such expenditure is not made in the budget referred to in Clause 5(d) hereof or the incurring by that member of the MGM Grand Australia Group of a series of related items of capital expenditure or leasing expenditure, in an aggregate amount of more than Three million dollars ($3,000,000) if provision for such expenditure is not made in the budget referred to in Clause 5(d) hereof; (f) any merger with or takeover of any other business or entity by that member; (g) any increase in the fees due to any director of the Board; (h) subject to Clause 6.6 of the Deed, any contract, arrangement or transaction of whatsoever nature having a value in excess of One hundred thousand dollars $1,000,000 between that member and any member of the MGM Group or any 52 Associate of the MGM Group or any Nominee Director or Associate of a Nominee Director; (i) subject to Clause 12, the declaration or payment of any dividend by MGM Grand Australia (whether in cash, shares, in specie or otherwise) and the level to which any dividend is to be franked; (j) the creation or increase of any bonus, profit sharing or share or stock option scheme by MGM Grand Australia; (k) the approval of the Annual Accounts and; (l) a change of auditor. PART 6 MEMBERS' POLICY MATTERS Notwithstanding any other provision of this Schedule 4 or the Articles of Association of MGM Grand Australia, the parties jointly and severally covenant with each other that without approval of the Nominated Option Holder, they shall not:- (a) except as may be required to comply with any mandatory provision of applicable law, permit any alteration to the Articles of Association, the Memorandum or the constituent documents of any member of MGM Grand Australia, which approval shall not be unreasonably withheld if the effect of such alteration does not, in the opinion of the Option Holders reasonably formed, adversely affect their rights under those documents or this Deed or arising from their MGMGA Shares; (b) except as may be required to comply with a mandatory provision of applicable law, permit any variation of the rights attaching to any Equity Securities in the capital of MGM Grand Australia; (c) fail to use commercially reasonably efforts to procure that MGM Grand Australia either directly or through a wholly owned Subsidiary continues to beneficially own at least Eighty five per cent (85%) of the Territory Property Trust or the underlying property held as at the date of the Deed and to operate directly or through a Subsidiary Undertaking the business conducted at the Casino; (d) permit the cancellation of any issued capital of any member of the MGM Grand Australia Group; (e) permit the sale or transfer by MGM Grand Australia of any Equity Securities in any Subsidiary which would result in that Subsidiary ceasing to be a Subsidiary and in the case of the Territory Property Trust ceasing to be beneficially owned by the MGM Grand Australia Group at a level of at least Eighty five per cent (85%); 53 (f) permit a Subsidiary to cease to be a Subsidiary or in the case of the Territory Property Trust ceasing to be beneficially owned by the MGM Grand Australia Group at a level of at least Eighty five per cent (85%); and (g) permit the offer or allotment of any Equity Securities or rights or options convertible into Equity Securities in MGM Grand Australia, except if:- (i) an offer is made pro rata to all Shareholders and on identical terms; (ii) the Shareholders have a minimum of 60 days to accept for their proportion of the offer and to tender the subscription amount; and (iii) the proceeds of the proposed offer or allotment are not to be used to retire, repay or prepay, either in whole or in part, any indebtedness of MGM Grand Australia or any Subsidiary funded or required to be funded pursuant to Clause 6.2(a)(i) of the Deed. (h) permit the purchase by MGM Grand Australia of any of its share capital unless:- (i) it is part of the Put Option and MGM Grand Australia is the MGM Nominee; or (ii) an offer is made pro rata to all Shareholders and on identical terms. PART 7 ACCOUNTS Not later than four months after the end of each Financial Year, the Annual Accounts of each member of the MGM Grand Australia Group must be audited, by one of the Accounting Firms and approved by its Board. PART 8 TRANSFEREES BOUND Any permitted transfer or issue of any Equity Securities of MGM Grand Australia other than in relation to a Listing shall, subject to this Schedule 4, be conditional upon:- (a) compliance with the Articles of Association of MGM Grand Australia; (b) in the case of any transfer to a person who is not a party to the Deed, such transferee first entering into an agreement with the parties to the Deed pursuant to which such transferee agrees to be bound by the surviving provisions of the Deed (including this Schedule 4) provided that the transferee shall not have the benefit of Clauses 8.1 to 8.12 inclusive of the Deed and undertakes to perform, observe and enjoy all the transferring person's obligations and rights under the Deed (including without limitation this Schedule 4 and the obligation to act through the Nominated Option Holder) so far as the same remain to be performed and observed; and 54 (c) in the case of any issue of Equity Securities the allottee of such Equity Securities first entering into a binding agreement with the parties to the Deed in a form acceptable to those persons and substantially similar to the surviving provisions of the Deed (including this Schedule 4). PART 9 RESTRICTIONS ON SALE OF MGMGA SHARES 9.1 The Shareholders agree that, without the prior written consent of all of the Shareholders, they are not entitled to exercise their right to sell or transfer their Equity Securities in MGM Grand Australia, or any interest in them, except pursuant to the following Clauses 10 and 11 and additionally in the case of the Option Holders, except pursuant to Clause 8 of the Deed. For the avoidance of doubt the Option Holders may exercise their rights pursuant to Clause 8 of the Deed without having to comply with any of the provisions of this Schedule 4. PART 10 SALE WHERE WILLING PURCHASER IDENTIFIED 10.1 Any Shareholder ("Offeror Member") who desires to sell all (but not some only) of its Equity Securities (the "Vendor Shares") to a person who is not a Shareholder shall:- (a) first obtain from a party desiring to acquire the Vendor Shares (the "Proposed Purchaser") bona fide firm written offers containing all the terms and conditions on and subject to which such offers are made and each valid for a period of at least 60 Business Days after the date of receipt of the notice given under paragraph (b) of which:- (i) the first shall be an offer to purchase the Vendor Shares (the "Partial Offer"); and (ii) the second shall be an offer directed to the Offeror Member and to all other Shareholders to purchase all the Equity Securities held by the Offeror Member and the other Shareholders (the "Full OFfer") on the same terms as are contained in the Partial Offer and at least the same price per share but capable of acceptance with respect to each class of Equity Security and each Equity Security within that class; (b) promptly submit to the other Shareholders full details of the Partial Offer, the Full Offer and the Identity of the Proposed Purchaser and written notice of the Offeror Member's desire to sell; and (c) for the avoidance of doubt, the sale of less than all of the Shareholder's Equity Securities without the consent of all of the Shareholders shall not be permitted. 10.2 The other Shareholders shall each have the option, exercisable by written notice to the Offeror Member and MGM Grand Australia within Ten (10) Business Days after receipt of the offer documents referred to in Clause 10.1(b), either:- 55 (a) to direct the Offeror Member in respect of the holding of Equity Securities of that other Shareholder to accept the Full Offer on behalf of the Shareholder ("Notice of Direction"): or (b) for those other Shareholders who do not give a Notice of Direction in accordance with paragraph (a) ("Remaining Shareholders"), to acquire pro rata to their existing holding of each class of Equity Securities the Equity Securities held by the Offeror Member and of all Remaining Shareholders ("Willing Vendors") who give a Notice of Direction in accordance with paragraph (a) (jointly the "Sale Shares") at a price and on terms and conditions set forth in the Full Offer. (c) For the avoidance of doubt, a shareholder is not obliged to exercise any of the options described in Clause 10.2(a) or (b). 10.3 (a) Subject to Clause 10.4, if the Remaining Shareholders exercise the options granted pursuant to Clause 10.2(b) within the period provided therein in respect of all of the Sale Shares, then the Offeror Member and the Willing Vendors shall (5) Five Business Days after satisfaction of last of the conditions precedent contained in Clause 10.3(c) ("Sale Shares Completion Date") transfer the relevant Sale Shares to the Remaining Shareholders. If the Offeror Member or any Willing Vendor defaults in transferring the relevant Sale Shares pursuant to Clause 10.2(b) the Offeror Member and the Willing Vendor shall be deemed to have irrevocably appointed each director or secretary and MGM Grand Australia, as its agent to execute a transfer of those shares to the purchaser of them. The directors of MGM Grand Australia may register a transfer of those Equity Securities notwithstanding that the share certificates relating to those Equity Securities may not have been delivered to MGM Grand Australia, may issue new share certificates to the relevant transferees, and the receipt by any such director or secretary of the net proceeds of transfer shall be a full and effective discharge in favour of the transferee. (b) Completion of the sale and purchase of the Sale Shares shall take place between the hours of 9.00 a.m. and 3.00 p.m. Darwin time on the Sale Shares Completion Date or on such other date, if any, that the parties to this Deed may agree, at the registered office of MGM Grand Australia. (c) (i) The transfer of the Sale Shares is subject to:- (A) any requisite consent being granted or deemed to have been granted pursuant to the terms of the Foreign Acquisitions and Takeovers Act 1975 of the Commonwealth of Australia; and (B) the proposed transferees and MGM Grand Australia receiving on an unconditional basis within Six (6) months of the receipt of the offer documents referred to in Clause 10.1(b) all necessary consents and approvals required, if any, from any governmental authority including the Government or relevant Minister of the Northern Territory of Australia (including with respect to the 56 probity of the purchaser to the extent required) in relation to any change of interest in MGM Grand Australia. (ii) (ii) MGMG, MGM Grand Diamond. MGM Grand Australia and the Shareholders shall use their best endeavours (other than incurring substantial liabilities, substantial obligations (including any divestment and restrictions on business operations) or monetary obligations and other than by consenting to any substantial alteration to the terms of this Schedule) to satisfy any request for information or condition or conditions specified by or on behalf of the Treasurer of the Commonwealth of Australia under the Foreign Acquisitions and Takeovers Act 1975 as referred to in Clause 10.3(c)(i). Each of the parties shall use their best endeavours to obtain the fulfilment of the conditions in Clause 10.3(c)(i) in an expeditious manner, and shall give the others prompt notice in writing upon it becoming aware whether or not any of the condition precedents referred to in Clause 10.3(c)(i) has been satisfied. (d) On Completion: (i) there shall be delivered or made available to the Remaining Shareholders, pro rata to the number of Sale Shares in relation to which they have exercised an option ("Relevant Proportion") free from Encumbrance, definitive certificates for the Sale Shares together with transfers thereof duly executed by the Offeror Member and Willing Vendors in favour of the Remaining Shareholders in the Relevant Proportions; and (ii) the Remaining Shareholders shall pay to the Offeror Member and Willing Vendors, in the Relevant Proportions, the aggregate price for the Sale Shares set forth in the Full Offer, as directed in writing by the Offeror Member or Willing Vendors, as the case may be, by bank cheque or by direct credit or telegraphic transfer to a bank account nominated by the Offeror Member or Willing Vendors, as the case may be. 10.4 If the option granted pursuant to Clause 10.2(b) is not exercised within the period provided therein in respect of all the Sale Shares, no exercise of any option under that Clause will be valid and the provisions of Clause 10.5 will apply. 10.5 (a) If the Remaining Shareholders fail or neglect to exercise all of the options granted pursuant to Clause 10.2 within the period provided therein, the Offeror Member and the Willing Vendors may transfer all (but not some only) of the Sale Shares to the Proposed Purchaser at any time within three calendar months at the price per Sale Share contained in the Full Offer after the earlier of either:- (i) the expiration of the period within which the option may be exercised pursuant to Clause 10.2(b); or 57 (ii) receipt of written notice from the Remaining Shareholders that they do not intend to exercise that option. (b) The conditions precedent referred to in Clause 10.3(c) shall apply equally to the Proposed Purchaser as to any other proposed transferee and the Offeror Member and Willing Vendors shall procure that the conditions precedent are satisfied before the expiry of the three calendar month period referred to in Clause 10.5(a). If the conditions precedent are not so satisfied within the said three calendar month period then no transfer of the Sale Shares to the Proposed Purchaser shall occur unless all of the other shareholders so consent. PART II TAKE-OVER OFFER BY THIRD PARTY 11.1 Subject to Clause 11.4, if a "Third Party makes an offer to purchase all of the Equity Securities of MGM Grand Australia (a "Third Party Offer") to MGM Grand or to any Shareholder (who shall deliver such Third Party Offer to the Secretary of MGM Grand Australia), then the following conditions shall apply:- (a) the Secretary shall, by written notice, advise the Shareholders of the identity of the Third Party, the price and the other terms and conditions applicable to the Third Party Offer; and (b) the Secretary shall, within Ten (10) Business Days of the date of receipt of the Shareholder's notice, convene a meeting of Shareholders at which the Third Party Offer will be considered and put to the vote by the Shareholders. 11.2 If Shareholders, in aggregate representing more than seventy-five per cent (75%) per cent of the then issued MGMGA Shares, are willing to accept the Third Party Offer ("the Offerors"), then the following provisions shall apply:- (a) the Offerors shall, with effect from the first Business Day after the Shareholders' meeting, be deemed to have granted an option to each of the Shareholders who are unwilling to accept the Third Party Offer ("the Offerees") exercisable within Ten (10) Business Days of the date of the meeting to purchase the Offerors' Equity Securities in MGM Grand Australia in the proportion which each Offeree's Equity securities in MGM Grand Australia bears to the total number of issued Equity Securities in MGM Grand Australia, inter se, at the same price per share and otherwise on the same terms and conditions as are set out in the Third Party Offer; (b) any Offeree willing to exercise its option must do so in writing and deliver such notice to the Offerors prior to the Ten (10) Business Days period referred to in paragraph (a); and (c) if the option is not exercised for the number of equities equal to the Offerors' Equity Securities in MGM Grand Australia, then, and in such event, no sale of the Offerors' Equity Securities in MGM Grand Australia shall take place to any accepting Offeree and the provisions of Clause 11.3 shall thereafter apply. 58 11.3 Where no sale of the Offerors' Equity Securities in MGM Grand Australia takes place in terms of Clause 11.2, then the Offerors shall be entitled to accept the Third Party's Offer to purchase all of the issued Equity Securities of MGM Grand Australia on behalf of all Shareholders and in order to give effect to the acceptance of the Third Party Offer, the Offereees hereby nominate and irrevocably appoint the Offerors as their attorney and agents in order to sell the all of the Equity Securities of MGM Grand Australia (including the Offeree's Equity Securities) to the Third Party at the price and on terms and conditions which are no less favourable than those set out in the Third Party Offer. Without limiting the generality of the foregoing, the Offerees empower and authorise the Offerors to cause the necessary documentation to be prepared and to sign such documentation on behalf of the Offerees for the sale of all of the Equity Securities of MGM Grand Australia to the Third Party, to receive on their behalf their proportion of the net proceeds of sale and to ratify and confirm anything done by their aforesaid agents and attorneys pursuant to this Clause. 11.4 No Shareholder shall accept any offer from a Third Party pursuant to Clause 11.1 unless it procures that the Third Party provides an unconditional, enforceable representation for the benefit of the Shareholders that such Third Party: (a) is not an Associate of any of the Shareholders at the date of the offer; (b) neither it nor any of its Associates shall be or have the option to become Associates of any of the Shareholders or any of their Associates during the Twelve (12) months following completion of the sale of the Equity Securities; and (c) neither before the date of the offer nor during the period referred to in Clause 11.4 (b) has or will the Third Party or any of its Associates enter into any agreement, arrangement or understanding with any Shareholder or any Associate of a Shareholder on terms which are not bona fide arms length terms and which confer a direct or indirect benefit on such Shareholder or its Associate attributable in whole or part to the relevant entity being a holder or former holder of Equity Securities of MGM Grand Australia. 11.5 Any Shareholder described in Clauses 11.4(a) to (c) shall respectively indemnify and keep indemnified at all times after completion of the sale of the Equity Securities all other Shareholders for all loss, damages, and costs arising from the breach of the respective representations of the Third Party made or required to be made pursuant to Clause 11.4. PART 12 DIVIDENDS Subject to compliance with applicable law and third party contractual obligations to which the MGM Grand Australia Group may be subject, the Shareholders shall use their best endeavours to ensure that at least Fifty per cent 50% of the annual consolidated profits of MGM Grand Australia Group are distributed to the Shareholders by way of dividends. Without limiting the generality of the foregoing:- 59 (a) all and every preliminary matter required by law, this Schedule 4 or the Articles of Association of any member of MGM Australia Group to be done by any Shareholder or any member of the MGM Grand Australia Group to procure the availability of such profits for declaration and distribution by MGM Grand Australia shall be done; (b) all dividends shall be paid as far as practicable as fully franked dividends; (c) all final dividends shall be declared no later than 5 months after the end of the relevant Financial Year and paid no later than 6 months after the end of that Financial Year; and (d) where a third party contractual obligation has restricted the amount of any dividends which maybe declared or paid in any year, to an amount less than 50% of the annual consolidated profits of MGM Grand Australia Group then as soon as practicable after such contractual obligation ceases to apply the Shareholders shall seek to ensure that MGM Grand Australia shall declare and pay such level of dividends as it is legally permitted to do to recoup such shortfall in an expeditious manner. For the purposes of this Clause the shortfall is the amount that would otherwise have been paid pursuant to this Clause if the contractual obligation had not existed. It is acknowledged that to recoup such dividends expeditiously the level of dividends may exceed 50% of annual consolidated profits of the MGM Grand Australia Group in any one accounting period until the average payment of dividends for the period from the date this Schedule becomes effective until the date such obligation ceases to apply is equal to or in excess of 50% of the cumulative annual consolidated profits of the MGM Grand Australia Group. PART 13 AGREEMENT TO PREVAIL 13.1 The parties acknowledge that this Deed creates rights and obligations which are in addition to the rights and obligations created or to be created in the Articles of Association of MGM Grand Australia and the parties hereto hereby confirm that such rights and obligations are to be exercised and observed concurrently and not in substitution one for another. The parties agree that to the extent any conflict between any of those respective rights and obligations arises at any time, the rights and obligations created by this Deed (including this Schedule 4) shall be exercised or observed to the exclusion of any right or obligation created by the Articles of Association of any member of the MGM Grand Australia Group so far as it permitted by law and is necessary to resolve the conflict. 13.2 Each Shareholder agrees that it will vote and act at all times as a member of MGM Grand Australia and will procure that to the extent permitted by law any director of MGM Grand Australia which it has appointed or who represents any of them will vote and act at all times as a director of MGM Grand Australia and in all respects shall use its best endeavours to take all such steps as may reasonably be within its powers so as to cause any Subsidiary to act in the manner contemplated by the provisions of this Deed (including this Schedule 4) and so as to implement to their full extent the provisions of this Deed (including this Schedule 4). 60 13.3 The Shareholder shall procure that MGM Grand Australia agrees that it will vote and act at all times and will procure that to the extent permitted by law any director of a Subsidiary will vote and act at all times as a director of the Subsidiary and in all respects shall use their best endeavours to take all such steps as may reasonably be within their powers so as to cause any Subsidiary to act in the manner contemplated by the provisions of this Deed (including this Schedule 4) and so as to implement to their full extent the provisions of this Deed (including this Schedule 4). PART 14 TERM OF AGREEMENT 14.1 A Shareholder will cease to be bound by the terms of this Schedule 4 if it ceases to hold any Equity Securities and all Shareholders will cease to be bound by the terms of this Schedule 4 if MGM Grand Australia is the subject of a Listing. If any person ceases to be bound by the terms of this Schedule 4 as aforesaid, the person's liabilities and obligations hereunder shall thenceforth be at an end of all purposes, excepting any rights that the Shareholder may have under the terms of this Schedule 4 prior to the person's rights and obligations being at an end. 61 EX-10.25 11 PROMOTION AND ANCILLARY RIGHTS AGREEMENT EXHIBIT 10(25) PROMOTION AND ANCILLARY RIGHTS AGREEMENT AGREEMENT made as of March 15, 1995, and executed May 24, 1995, by and among DON KING PRODUCTIONS, INC. a New York corporation with offices at 871 West Oakland Park Boulevard, Oakland Park, Florida, 33311, ("Promoter"), MGM GRAND HOTEL, INC., a Nevada corporation with offices at 3799 Las Vegas Boulevard South, Las Vegas, Nevada, 89109, ("Subsidiary") and MGM Grand, Inc., a Delaware Corporation with offices at 3799 Las Vegas Boulevard South, Las Vegas, Nevada, 89109 ("Parent"). SECTION 1 THE EVENTS AND DEFINITIONS -------------------------- 1.1 Promoter represents and warrants that it has entered into a binding written agreement for the services of Mike Tyson ("Tyson") for Promoter's boxing events that are the subject of this Agreement (the "Tyson Events"). Promoter grants to Subsidiary the exclusive right to stage the next six (6) Tyson bouts following the date of this Agreement, at least one of which, by the fifth (5th) bout, shall be a Title Fight, as defined in Section 1.2 hereof, at the MGM Grand Garden Special Events Center ("Grand Garden") or other site as selected by Subsidiary. The Tyson Events shall be held on dates mutually selected by Promoter and Subsidiary and shall include Tyson and quality opponents (each fight separately known as "Main Event") and quality undercard boxing matches selected by Promoter. 1.2 Promoter will stage six (6) Tyson Events prior to September 25, 1997, at least one of which shall be a World Heavyweight Championship title fight (IBF, WBO, WBA, WBC) ("Title Fight"). 1.3 The undercard matches for Tyson Events shall consist of quality bouts selected by the Promoter, and shall be sufficient in number to present a program of approximately three (3) hours, inclusive of the Main Event. Names of the boxers and their records shall be provided by the Promoter to Subsidiary as soon as possible prior to each event. 1.4 On all Tyson Event and Non-Tyson Event fight cards, Subsidiary shall have the option to select one of the Fighter Participants for one bout of its choice, which shall not be the first bout nor the walk-out bout, and Promoter and Subsidiary shall mutually agree on the opponent for the designated fighter participant and the amount of the purses for the bout, which shall be paid by Subsidiary. 1.5 Each Tyson Event shall be open to the public ticket holders at approximately 3:00 p.m., with the first bout commencing at approximately 4:00 p.m. The Main Event shall commence no earlier than 6:00 p.m. and no later than 7:00 p.m. All times are local Las Vegas time. 1.6 The Main Event Boxers and undercard boxers shall collectively be known as "Fighter Participants." 1.7 Promoter shall assure that neither Main Event opponent shall participate in a boxing match or exhibition within sixty (60) days prior to the Event. 2 1.8 Neither party shall make a public announcement or issue a press release relating to this Agreement or any Tyson Event covered by this Agreement, without the prior reasonable approval of the other party. It is the intention of Subsidiary and Promoter to coordinate the time for all public announcements concerning these Events. 1.9 Over the term of the Agreement, Subsidiary will use its best efforts to stage up to separate events presenting fighters other than Tyson, ("Non-Tyson Events), selected by Promoter at the Grand Garden or other site as selected by Subsidiary. Tyson and Non-Tyson Events shall be referred to collectively as ("Events"). Promoter may offer Subsidiary pay-per-view Non-Tyson Events that Subsidiary in its sole discretion, has the option to accept or reject. If one of the eleven Non-Tyson Events is a pay-per-view Non-Tyson Event ("Pay-Per-View Non-Tyson Event") which Subsidiary accepts, Subsidiary shall pay an additional in advertising expense but shall not be entitled to complimentary tickets notwithstanding anything to the contrary in Section 6 hereof. 1.10 The above terms pertaining to event start times, dates, length of programs, press releases, public announcements and Fighter Participants for Tyson Events shall apply to Non-Tyson Events and the optional Pay-Per-View Non-Tyson Events. 3 SECTION 2 COVENANTS OF PROMOTER --------------------- For the Events, Promoter agrees at its sole cost and expense to provide and be fully responsible for: 2.1 The service and participation in the Events and related activities as stated in this Agreement of all Fighter Participants. 2.2 All purse and expense payments due to Fighter Participants. 2.3 Round trip transportation to and from Las Vegas, Nevada, for all Fighter Participants. 2.4 Insurance for all Fighter Participants and other ring personnel as may be required by the Nevada State Athletic Commission, which shall name Subsidiary as additional insured. 2.5 All official fees, costs and expenses, including travel, of officials, referees, timekeepers, judges, attending physicians and Nevada State Athletic Commission representatives. 2.6 All fees and expenses of a ring announcer who is licensed in the State of Nevada, selected by Promoter and acceptable to Subsidiary. 2.7 Boxing licenses or permits as may be required by federal, state and municipal authorities pursuant to Section 12 of this Agreement or otherwise. 2.8 Any and all other fees required by the Nevada State Athletic Commission. Promoter shall indemnify and hold harmless Subsidiary from any injury to any fighter 4 or official arising out of the conduct of any boxing match in the Events unless the injury is caused by the sole negligence of Subsidiary. 2.9 Supplying Subsidiary with biographies, "tales of the tape", fight-by-fight records, general press releases pertaining to the Events and all Fighter Participants, and such other appropriate press kit materials for local and national distribution. 2.10 Obtaining, maintaining and paying for all required boxing organization sanctions and approvals for the Events. 2.11 Any costs or expenses arising from requirements of the Nevada State Athletic Commission, including Fighter ambulance service, or other expenses relating to the performance of this Agreement unless otherwise agreed to in writing by Subsidiary. 2.12 An artist to sing the National Anthem. Selection of such artist will be mutually determined by Promoter and Subsidiary, with every effort being made by Promoter to showcase performers at Subsidiary. 2.13 Promoter shall use its best efforts and shall take such steps necessary (including removal from property) to ensure that Fighter Participants and their entourage conduct themselves in conformity with public conventions, morals and standards of decency and do not do or commit any act or thing that will tend to degrade themselves or Subsidiary or subject any of them to public hatred, contempt, scorn, ridicule or disrepute, or to shock or offend the patrons or employees of Subsidiary, or to prejudice Subsidiary's standing in the community or subject Subsidiary to liability. 5 SECTION 3 COVENANTS OF SUBSIDIARY ----------------------- For the Events, Subsidiary shall provide to Promoter the following: 3.1 Reasonable use of the Grand Garden Arena for the purpose of preparing for and conducting the Events. Use of the Grand Garden shall terminate no later than 2:00 a.m. the day following the date of the Events. Notwithstanding the above, it is agreed by Promoter that no Event arrangements will interfere with Subsidiary's set-up for other scheduled Subsidiary programs or events. 3.2 A boxing ring approved by the Nevada State Athletic Commission and Promote with inside dimensions of not less than twenty (20) feet by twenty (20) feet as well as supplemental seats for members of the working press and broadcast media. 3.3 The following complimentary rooms, suites and food and beverage allowances apply to Promoter under this Agreement and will be capped as set forth below with all excess costs being the responsibility of Promoter: (1) For Tyson Events, each. (2) For Pay-Per-View Non-Tyson events, each. (3) For Showtime Non-Tyson Events, each. 6 Each person who is to be the recipient of benefits under this paragraph shall be identified in writing by Promoter prior to each Event. All incidental charges including, but not limited to, local and long distance telephone calls, gratuities, alcoholic beverages, entertainment, and gift shop items shall be billed to the occupants of the rooms/suites (which includes Promoter) and are payable upon check-out for the rooms and suites occupied by or at the request of Promoter. All occupants of the rooms/suites upon registration shall provide a valid credit card or cash deposit for the purpose of payment of all incidental charges in excess of the allowances permitted by this Section 3 and not paid at check- out by the occupants of the rooms and suites. Subsidiary may refuse to admit persons who do not comply with these requirements. Promoter will designate an individual with whom representatives of Subsidiary will meet following the Event to review and settle such charges. 3.4 Round cards and round card girls selected by Subsidiary for each Event. 3.5 Provide at Subsidiary or other site as mutually agreed upon between the parties for the time period 30 days prior to an Event, a mobile office to be utilized as office space for Promoter for the promotion of the Events including, but not limited to, telephones with adequate independent local and WATS line capability, 7 , it being understood that Promoter shall be solely responsible for providing the personnel it deems necessary to operate the office and equipment. The cost of leasing the mobile office shall be paid by Subsidiary. The cost of leasing the equipment, and all costs and charges attributable to personnel, telephone calls, operations and for maintenance, repair, or replacement of any equipment shall be paid by Promoter. Subsidiary shall be responsible for changing the locks on the doors of such office space prior to Promoter's arrival and for assuring that only Subsidiary's Director of Security, Promoter, and its approved personnel receive keys to such office space. 3.6 A press room for a minimum of one week prior to the date of the Event set up for handling the press during the Event. 3.7 Dressing rooms for all Fighter Participants. 3.8 Providing check cashing privileges to Promoter for checks written on Promoter's checking account. SECTION 4 RING MAT AND BANNERS FOR THE EVENT ---------------------------------- 4.1 Promoter shall provide, at its cost and expense, a ring mat which shall be installed by Subsidiary, and which shall be returned to Promoter after the Event. 4.2 Subsidiary shall have the right to place upon the ring bumper facing the primary camera its name, logo, merchandise information, or identification mark. Subsidiary shall have and choice of ring posts. Additionally, the MGM 8 Grand name shall appear on the towels and the turnbuckle covers supplied by Subsidiary, if such covers are not sold by Promoter. Promoter reserves the right to place or to sell other names, logos or identification marks on any remaining ring bumpers and ring posts, and the center of the mat ("Advertising Locations"). Promoter's right to place or sell the right to place other names, logos or identification marks at Advertising Locations shall be subject to the reasonable approval of the Subsidiary. The size of the logo or identification marks displayed by Promoter shall be reasonable. Subsidiary shall permit Promoter to place its name, symbol, and/or logo in the Grand Garden, training area, dressing rooms and weigh-in site, subject to the reasonable approval of Subsidiary. 4.3 Subsidiary shall permit the television network ("Network") which is broadcasting the Event to display banners with the Network's logo in the Grand Garden. Additionally, one banner is allowed for one primary sponsor, such sponsor to have been previously approved by Subsidiary under Section 4.2. 4.4 Subsidiary shall retain the right to display its name, symbol and/or logo in all areas of the hotel including, but not limited to, all areas of the Grand Garden and all training areas, and on press conference and weigh-in area backdrops. 4.5 If Promoter does not obtain a sponsor for all of its Advertising Locations, then Subsidiary may use such available Advertising Locations for its name, symbol and/or logo. 9 SECTION 5 ADVANCE TO PROMOTER, NON-PERFORMANCE BY TYSON, ---------------------------------------------- PURCHASE OF STOCK BY PROMOTER, AND TICKET PROCEEDS -------------------------------------------------- 5.1 (a) Subsidiary has made a $15,000,000 loan (the "Advance") to Promoter. The Advance was made in two payments, (1) one payment of $10,000,000 was advanced on March 25, 1995 and (2) another payment of $5,000,000 was advanced on March 30, 1995. The Advance shall be evidenced by a note (the "Advance Note") signed by Promoter substantially in the form attached hereto as Exhibit A) and, except as provided herein and in the Advance Note, shall be repaid on September 25, 1997 (the "Maturity Date"). The proceeds of the Advance shall be used to pay certain costs for the benefit of Tyson and to pay certain costs for the Tyson Events and no such proceeds shall be used to satisfy Promoter's obligation under the Stock Note (as defined herein). Concurrently herewith, Promoter shall deliver to Subsidiary a duly completed Federal Reserve Form G-3 consistent with the foregoing. (b) Parent hereby sells and Promoter hereby purchases 618,557 treasury shares of Parent common stock (the "MGM Shares") for $15,000,000 (the "Stock Purchase Amount"). Except as provided in the Stock Note, the Stock Purchase Amount shall be payable in three equal installments of $5,000,000 which shall be payable not later 10 than five business Days after the conclusion of the first, second and third Tyson Events, respectively, provided, however, that if the "net gate" for any of such Tyson Events is less than $5,000,000, Promoter shall have five business days following the applicable Settlement Date (as defined in the Stock Note, as hereinafter defined) to pay the balance of such installment. Promoter shall execute a note, substantially in the form attached hereto as Exhibit B (the "Stock Note"), as evidence of its indebtedness for the Stock Purchase Amount. Concurrently herewith, Promoter shall deliver to Parent a duly completed Federal Reserve Form G-3 with respect to its incurrence of the Stock Note. (c) To secure the payment of the Advance Note and the Stock Note, Promoter, Parent and Subsidiary shall enter into the Advance Note Security Agreement and the Stock Note Security Agreement, substantially in the form attached hereto as Exhibits C and D, respectively. (d) Parent guarantees (the "Guarantee") to Promoter that the Market Value (as defined below) of the MGM Shares on the Maturity Date shall equal or exceed $30,000,000. The "Market Value" on any date, shall be equal to the average of the closing prices for the MGM Shares on the New York Stock Exchange, as reported in The Wall Street Journal, for a period of twenty consecutive trading ----------------------- day ending on the trading day preceding such date. Subject to Section 5.2, in the event the Market Value of the MGM Shares is less than $30,000,000 on the Maturity Date, Parent shall pay on the Maturity Date the difference between the Market Value of the MGM Shares on such Date and $30,000,000 to, at its option, either (a) Promoter by wire transfer 11 to accounts designated by Promoter in same day fed funds, or (b) Subsidiary as payment of all or a portion of the unpaid balance of the Advance Note. (e) Promoter, Parent and Subsidiary shall enter into a Registration Rights Agreement substantially in the form attached hereto as Exhibit E. (f) With respect to the income taxation of (i) the purchase by Promoter of the MGM Shares for the Stock Note and (ii) the Guarantee each of Promoter, Parent and Subsidiary covenants that it will not (and none of its respective affiliates will) report the principal amount of the Stock Note or any payment on it as income, gain, loss, credit or deduction on its federal, state or local income tax returns for the taxable year in which the purchase by Promoter of the MGM Shares occurs with respect to such items. The parties understand and agree that the purpose of this Section 5.1 (f) is to impose consistent income tax treatment on the parties hereto with respect to such items. 5.2 12 (b) (c) (d) 13 (e) On any termination of this Agreement pursuant to Section 5.2 or otherwise, neither Promoter nor Subsidiary shall have any further obligation to stage any Tyson Events or Non-Tyson Events. (f) The provisions of this Section 5.2 are in no way intended as a limitation of the parties respective rights and remedies in the event of a breach of this Agreement. 5.3 Notwithstanding any other provision of this Agreement, in the event of a willful breach of this Agreement by Promoter, Parent or Subsidiary, the other parties shall have whatever remedies are available to them at law or in equity. 5.4 14 5.5 Promoter makes the following representations and warranties to Parent and acknowledges that Parent will be relying upon the accuracy and completeness of such representations and warranties in selling the MGM Shares to Promoter pursuant to this Agreement: (a) Investment Purposes. Except as contemplated by Section 21, Promoter is acquiring the MGM Shares solely for its own beneficial account, for investment purposes, and not with a view to, or for resale in connection with, any distribution of the MGM Shares in violation of the Act or any other applicable state or federal securities laws, any applicable rules of any exchange on which the Common Stock may be listed and any applicable rules of the National Association of Securities Dealers, Inc. (collectively, the "Securities Laws"). (b) Limitations on Transfer. Promoter agrees that it will not sell, assign, pledge, transfer, or otherwise dispose of the MGM Shares or any interest therein, or make any offer or attempt to do any of the foregoing, in violation of any of the provisions of this Agreement or the Securities Laws. The Company shall not be required to give effect to any purported transfer of any of the MGM Shares except upon compliance with the provisions of this Agreement. (c) Accredited Investors. Promoter, either alone or with its advisors (if any), has such knowledge, skill and experience in business, financial and investment matters so that it is capable of evaluating the merits and risks of an investment in the 15 MGM Shares. To the extent that Promoter has deemed it appropriate to do so, Promoter has retained at its own expense, and relied upon, appropriate professional advice regarding the investment, tax and legal merits and consequences of this Agreement and owning the MGM Shares. Promoter is an "accredited investor" as that term is defined under Rule 501 of Regulation D of the Act. (d) Unregistered Shares; Legend Condition. Promoter acknowledges that the MGM Shares have not been registered under the Act and that the certificates representing the MGM Shares will be subject to a legend or legends reflecting the unregistered status of the MGM Shares and the restrictions on transfer imposed by the Securities Laws and/or this Agreement. (e) Disclosure. This Agreement and the other agreements entered into pursuant to this Agreement do not contain any untrue statement of a material fact concerning Promoter or Tyson, or omit a material fact concerning Promoter or Tyson necessary to make the statements contained herein or therein not misleading. None of the statements, documents, certificates or other items prepared or supplied by Promoter with respect to the transactions contemplated hereby contains an untrue statement of a material fact or omits a material fact necessary to make the statements made therein not misleading. 5.6 Parent makes the following representations and warranties to Promote and acknowledges that Promoter will be relying upon the accuracy and completeness of such representations and warranties in purchasing the MGM Shares from Parent pursuant to this Agreement: 16 (a) MGM Shares. Upon the issuance of MGM Shares pursuant to Section 5, each of the MGM Shares so issued shall be (i) validly authorized, validly issued, fully paid and nonassessable, with no personal liability attaching to the ownership thereof and (ii) free and clear of any lien, claim, charge, restriction or encumbrance (except as provided by this Agreement or for liens pursuant to the Advance Note Security Agreement and the Stock Note Security Agreement). Except pursuant to this Agreement, the issuance or transfer of the MGM Shares to Promoter is not subject to preemptive right, right of first refusal or other similar right. The foregoing shall be true in all material respects on any date any MGM Shares are issued to Promoter pursuant to the terms of this Agreement or released from the liens pursuant to the Advance Note Security Agreement and the Stock Note Security Agreement. (b) Disclosure. This Agreement and the other agreements entered into pursuant to this Agreement do not contain any untrue statement of material fact, concerning Parent or Subsidiary or omit a material fact, concerning Parent or Subsidiary necessary to make the statements contained herein or therein not misleading. None of the statements, documents, certificates or other items prepared or supplied by Parent with respect to the transactions contemplated hereby contains an untrue statement of material fact or omits a material fact necessary to make the statements contained therein not misleading. 17 SECTION 6 TICKETS ------- 6.1 6.2 6.3 Tickets designated for Promoter shall not be resold or given to personnel at other hotel/casinos. SECTION 7 WORKOUTS -------- Promoter and Subsidiary will negotiate on site training facilities if they agree this will enhance the overall fight promotion. Mutual agreement will be necessary to consummate this section of the Agreement. Promoter shall not under any circumstances contract with, or schedule at, other Las Vegas Hotel Casino sites for Event training 18 SECTION 8 INSURANCE --------- 8.1 Should either Promoter or Subsidiary wish to obtain non-appearance insurance, to protect against the death or disability of Mike Tyson, the other party shall furnish such information and cooperation as may be reasonably required to put in place such insurance, which shall be at the expense, and for the exclusive benefit of, the insuring party. Notwithstanding the foregoing, for each of the first three Tyson Events, should Promoter purchase non-appearance insurance, Subsidiary shall be named as loss payee to the extent of its Five Million Dollar ($5,000,000) interest in each Event. 8.2 Promoter agrees to obtain and maintain, for the scheduled Events, at its sole expense, insurance issued by an insurance carrier authorized to do business in the State of Nevada, which insurance shall be maintained until thirty (30) days after completion of each Event and removal of all television crews and equipment from the premises of hotel and shall cover the Events, and all pre-fight and post-fight activities, including, without limitation, television equipment installation and removal, under this Agreement. Such insurance coverage shall at a minimum include: 8.2.1 With respect to Promoter's employees and agents, Workers Compensation and occupational disease, if required by federal or state law. 8.2.2 Employee liability (including occupation and disease coverage of Five Hundred Thousand Dollars ($500,000). 19 8.2.3 Comprehensive General Liability, including personal injury, property damage, automobile liability for owned and non-owned vehicles, occurrence basis with a minimum Three Million Dollars ($3,000,000) combined single limit for bodily injury and property damage and not having a deductible or self-insured retention in excess of Ten Thousand Dollars ($10,000) for the Events and all pre and post-fight press conferences, publicity activities and parties. 8.2.4 Accident insurance coverage on all Fighter Participants, if required by Nevada law or order. 8.2.5 All general liability insurance policies carried in accordance with this section and any non-appearance insurance purchased by Promoter shall provide (i) that if the insurers seek to cancel such insurance for any reason whatsoever, or any substantial change is made in the coverage which affects the interests of the Subsidiary, or the same is to lapse for non-payment of premium or such insurance coverage is to be reduced, such cancellation, change, lapse or reduction shall not be effective as to the Subsidiary until after thirty (30) days following receipt by the Subsidiary of written notice from such insurers of such cancellation, change, lapse or reduction; (ii) that as to the interest of the Subsidiary in such policies, the insurance shall not be invalidated by any action or omission by Promoter or any other person or entity and shall insure the subsidiary regardless of any breach or violation of any warranties, declarations or conditions contained in such policy by Promoter or any other person or entity, (iii) that such insurance shall be primary without right of contribution from any other insurance carried by the Subsidiary, and (iv) that all the 20 provisions thereof, except the limits of liability, shall operate in the same manner as if there were a separate policy covering each additional insured. In the event Promoter fails to obtain such general liability insurance or the coverage amount is insufficient to cover any claims otherwise covered by the policy, Promoter hereby agrees to reimburse Subsidiary for any and all amounts paid by Subsidiary on account of or on behalf of Promoter to obtain such insurance or cover such claims. 8.2.6 With respect to 8.2.1, 8.2.2 and 8.2.3 above, a Certificate of Insurance with an endorsement designating MGM Grand Hotel, Inc., its parent, subsidiaries and affiliated companies and their respective officers and directors as named insureds thereof in the form and substance reasonably satisfactory to Subsidiary shall be delivered to Subsidiary within two (2) weeks after the signing of this Agreement. 8.2.7 Failure to provide and maintain any insurance required by this Section 8.2 shall be deemed a material breach of this Agreement. SECTION 9 TELEVISION PRODUCTION --------------------- 9.1 Subsidiary shall arrange for sufficient access to, and space in, and adjacent to the Grand Garden for Network or Promoter's television production equipment, personnel and talent, as well as sufficient access for Network or Promoter's television facilities, including Network or Promoter's mobile trucks, as may be necessary to carry out the purposes of this Agreement. Any equipment or personnel in such locations shall be solely at the risk of Promoter or Network and 21 neither Subsidiary nor Parent shall have any liability or responsibility for the protection of Network or Promoter's equipment or personnel. 9.2 Promoter shall cause the Events to be televised live in the United States commencing at about 4:00 p.m. Las Vegas time with the Main Event commencing no earlier than 6:00 p.m. and no later than 7:00 p.m. Las Vegas time. Promoter shall pay or cause to be paid all television production, set and strike, talent and transmission costs and shall hold Subsidiary harmless therefrom. Subsidiary shall provide for unimpeded access of working television crews and equipment. Subsidiary shall not be responsible for providing auxiliary power and/or lighting or any special scaffolding, additional equipment or installation or removal for television, nor for the hook-up of power distribution or for the cost of electricity consumed for auxiliary lighting, these items being responsibility of Promoter. 9.3 Promoter shall provide the television contracts to the Nevada State Athletic Commission as required by Nevada law. 9.4 9.4.1 22 9.5 Subsidiary shall have the reasonable right of approval of camera placement for the Events, so as to minimize the sight restrictions for ticket holders, and Subsidiary will not unreasonably withhold approval. The television production crew will do an on-site survey which shall be provided to Subsidiary prior to Event tickets going on sale to assist in determining sight restrictions. 9.6 Promoter agrees to allow Subsidiary access to program and iso-camera feeds from the sports trucks to in-house Subsidiary television. 9.7 Except as set forth in Section 16, Promoter shall cause the live broadcast of each of the Events to be blacked-out in the Las Vegas, Nevada metropolitan area and the Laughlin, Nevada, metropolitan area. 9.8 Promoter shall cause the Events not to be broadcast on a delayed basis in the Las Vegas, Nevada, metropolitan area and the Laughlin, Nevada, metropolitan area with twenty-four (24) hours of the conclusion of the Events. Any delayed broadcast shall not be announced, advertised or acknowledged by Promoter or any broadcaster prior to the post-fight press conference. 9.9 Promoter shall cause each broadcaster engaging in satellite transmission of any of the Events to cause all such satellite transmissions to be encrypted, regardless of the satellite used, to ensure that television receiver only satellite antennas will not be capable of receiving any such transmission without the use of a decoder. 23 9.10 Promoter will use its best efforts to prevent the unauthorized or illegal public display of a live broadcast of the Events. Promoter shall promptly investigate and respond to any potential unauthorized or illegal public display of a live broadcast of the Events which are brought to Promoter's attention and promptly advise Subsidiary of such matters. SECTION 10 ANCILLARY RIGHTS ---------------- 10.1 Subsidiary shall have the right (and may grant others the right subject in all cases of assignment to the prior written approval of Promoter, such approval not to be unreasonably withheld), to reproduce, print, publish or disseminate in any medium, the portrait, picture, likeness, and voice and biographical material concerning Promoter and the Fighter Participants, for the purpose of merchandising, advertising and/or promoting each Event and for institutional advertising purposes including, but not limited to, the right to permit members of the media to attend the training sessions of the Main Event Boxers and to interview, photograph and film any of the Fighter Participants. Subsidiary will not use the above individuals' names or likenesses in endorsements without Promoter's prior approval and such approval shall not be unreasonably withheld. Promoter warrants and represents that it has the legal right and authority to grant the right to use the likenesses of persons as set forth in this paragraph and agrees to provide, if requested, documentation of such rights and 24 indemnify and hold harmless Subsidiary and Parent against any and all claims whatsoever arising from such licensed use. 10.2 With respect to Promoter's television rights to these Events, Promoter, Network and its licensees shall have the right to reproduce, print, publish or disseminate in any medium, the name and logo of MGM Grand, as news or information and for advertising and promotional purposes solely in connection with these Events. Such approval and use of the name and logo shall be deemed a license or privilege only, which confers no property rights on Promoter, Network and licensees, which may be revoked by Subsidiary at any time. Neither such approval of name and use of logo nor anything herein shall be deemed to abridge the right of Subsidiary to grant or license the use of the words "MGM" or "MGM Grand" to any other person at any time. Subsidiary shall maintain approval rights on any use of the name and logo of MGM Grand granted in the above license. Promoter shall submit to Subsidiary any intended use, prior to such use, and Subsidiary shall have three (3) days to provide approval or require changes. After three (3) days, the proposed use shall be deemed approved. SECTION 11 ADVERTISING PRESS CONFERENCES, LOCAL PUBLICITY AND APPEARANCE ------------------------------------------------------------- RESTRICTIONS ------------ 11.1 Subsidiary shall incur Dollars ($ ) in advertising costs for each Tyson Event. In addition, Subsidiary shall establish a 25 Dollar ($ ) advertising pool, to be spent on the Non-Tyson Events at Promoter's discretion, subject to consultation with Subsidiary. The advertising expenditures for each Non-Tyson Event shall not exceed Dollars ($ ). Subsidiary shall maintain disbursement over all advertising costs. Such costs shall be verifiable media buys, include certifiable ratings and circulations, and disclose rates and commissions by the buyer. Such costs shall include media placements, media production costs, promotional materials, media credentials, billboards, press conferences, press expenses, posters, video, buttons and banners. The site of the Event shall be mentioned in all advertising. Any use of Subsidiary's logo shall be subject to approval of Subsidiary. 11.2 Subsidiary and Promoter agree to jointly hold at least press conferences related to each Tyson Event. of the press conferences are to be held at mutually agreeable locations on mutually agreeable dates in at the MGM Grand Hotel and one other mutually determined site. 11.3 Promoter agrees to cause each of the Main Event Boxers to fully cooperate and assist in the promotion, advertising and publicity of each Event. Promoter agrees that each Main Event Boxer will appear and participate in press conferences, media events and interviews via satellite or from the MGM Grand at reasonable times and places as reasonably requested by Subsidiary. 11.4 26 11.5 In addition to the advertising funds above, Subsidiary may, at its discretion and at its sole cost and expense, promote and publicize Events in the relevant market as determined by Subsidiary. Promoter shall assist Subsidiary in its advertising and promotional campaign for the Events and shall supply information, photographs (both color and black & white) and materials for use in their promotion of the bouts and shall cause the Main Event Boxers to reasonably cooperate in such promotion, advertising and publicity. SECTION 12 LICENSE AND COMPLIANCE ---------------------- 12.1 Promoter shall obtain and pay for any necessary Promoter's license, boxing licenses or permits, business licenses and any other license, permit or fee that may be required by the Nevada State Athletic Commission or other governmental agencies having jurisdiction for the Events and agrees to comply, and to cause its agents and employees and the Fighter Participants and their agents and employees to comply, with the terms of all applicable federal, state and municipal laws including, but not limited to, the Nevada State Athletic Commission, and any regulations promulgated thereunder and shall indemnify and hold harmless Subsidiary and Parent from any penalties,fines, costs, expenses or damages resulting from the failure to do 27 so by any such person. Promoter shall require each Fighter Participant to pay all sanctioning fees due with respect to such Fighter Participant's services related to the Events. Subsidiary shall have no responsibility to pay any sanctioning fees with regard to the Events. 12.2 Each bout which is being sanctioned by a boxing organization, shall be conducted in accordance with the rules and regulations of the recognized boxing organization involved in the Events. SECTION 13 FIGHTER CONTRACT AND BOUT CONDUCT --------------------------------- Promoter shall cause all Fighter Participants to execute such contracts as may be required to be filed with the Nevada State Athletic Commission. These Events shall be conducted in accordance with the rules and regulations of the Nevada State Athletic Commission and any regulatory body having jurisdiction. SECTION 14 ------------------------ 28 SECTION 15 MERCHANDISING AND CONCESSIONS ----------------------------- 15.1 Promoter hereby licenses to Subsidiary the sole and exclusive right to produce and manufacture promotional merchandise including, but not limited to souvenirs, hats, t-shirts, banners and the like. Promoter shall be entitled to produce the programs for these Events. Gross net proceeds from the sale of Event programs and merchandise shall be . Gross net proceeds are defined as the cash proceeds, less (i) the direct costs to Subsidiary for 29 the manufacture of merchandise (or to Promoter for the manufacture of the program) and labor costs, and (ii) less any taxes associated with said sale. 15.2 No complimentary programs or merchandise are permitted for any party to this Agreement. 15.3 Promoter acknowledges Subsidiary's exclusive right, title and interest in and to Subsidiary's logos and trademark ("Trademark"), and Promoter will not, at any time, do or cause to be done any act or thing contesting or in any way impairing or tending to impair any part of such right, title and interest. Promoter shall not in any manner represent that it has any ownership in the Trademarks or any registration thereof, and Promoter acknowledges that use of the Trademarks shall not create in Promoter's favor any right, title or interest in or to the Trademarks, but all uses of the Trademarks by the Promoter shall enure to the benefit of Subsidiary. Promoter will at no time adopt or use any word or mark similar to, or likely to be confused with, the Trademarks. 15.4 Subsidiary shall have the sole and exclusive right to operate or license a third party to operate concessions for the sale of food and beverages before, during and after the live Event and retain all proceeds therefrom. SECTION 16 OTHER REVENUES -------------- 30 16.1 16.2 16.3 31 SECTION 17 POSTPONEMENT OR CANCELLATION ---------------------------- 17.1 In the event: (a) a physician licensed by the Nevada State Athletic Commission certifies that Tyson or his opponent is temporarily mentally or physically disabled to such an extent that he cannot participate in any Event as scheduled, (b) any Event is delayed or temporarily prevented from occurring on the scheduled date by reason of an Act of God, fire, flood, storm, war, public disaster, or any governmental or regulatory or boxing or athletic commission or association enactment, determination or action, regulation or order ("Force Majeure Event"), or (c) the Grand Garden is materially damaged by a Force Majeure Event, or Subsidiary's performance of this Agreement is prevented or materially frustrated by a Force Majeure Event or any other cause beyond Subsidiary's reasonable control, (d) if any Fighter Participant shall fail or refuse to participate in the Event for any reason (other than a breach of this Agreement or in the case of Tyson, death or insurable permanent mental or physical disability), or (e) the live telecast of the Event shall be prevented for any reason beyond the reasonable control of Promoter, then Promoter shall reschedule the Event to a date and time reasonably acceptable to Subsidiary within sixty (60) days and, this Agreement shall apply to the rescheduled Event. Any postponement under this Section shall extend the Maturity Date for a like period of time. 17.2 If any Event shall not be conducted on the scheduled date (or rescheduled date under Section 17.1), by reason of the breach of this Agreement by Subsidiary or Promoter, then the injured party shall have available all of the remedies allowed by 32 law or equity. Subsidiary and Promoter acknowledge that the rights granted under this Agreement are personal, valuable and unique, such that a breach of any of the material provisions of this Agreement will cause irreparable harm which cannot be adequately compensated merely by monetary damages. The injured party shall be entitled to equitable relief, including specific performance of this Agreement and preliminary and permanent injunction relief. SECTION 18 CREDENTIALS ----------- Subsidiary and Promoter will mutually control all seats and credentials issued to members of the news media and other persons in the "Ringside Press Section" and will work with Promoter in the proper placement and approval of said persons, with priority placement going to broadcasters for the scheduled Events. Promoter and Subsidiary agree to hire Magna Media to assist in the handling of credentials, (the cost of which will be considered an "advertising expense"). The parties hereto specifically agree that these seats shall not be provided to other parties in lieu of manifested tickets to the Events and further, that parties involved with any of the fighters or participants on the card who are not members of recognized media outlets shall not be permitted in said "Ringside Press Section." The total number of access credentials shall be determined and limited prior to each Event. 33 SECTION 19 ADVERTISING IDENTIFICATION -------------------------- 19.1 All advertising, promotions and press releases for this Event by the parties shall read substantially as follows: "DON KING PRODUCTIONS, INC. in association with MGM GRAND HOTEL." 19.2 Promoter agrees to have included in all press releases, print ads, television and radio commercials, announcements, promos and stuffer inserts for the Events (and Pay-Per-View, cable, closed circuit and delayed broadcasts of the Events), the fact that the MGM Grand is the site of the Event. 19.3 Promoter will use best efforts to have Main Event Boxers sign ( ) autographed Event posters for the scheduled Event for Subsidiary priority clientele. SECTION 20 INDEMNITY --------- Each party agrees to indemnify and hold the other harmless from any and all claims, demands, actions, liability, loss, judgments, costs, expenses, including attorneys fees ("Covered Claims") arising out of, or by reason of, any injury, damage or death to persons or property resulting from any act, omission or negligence of the indemnifying party, its officers, directors, agents or employees. 34 SECTION 21 ASSIGNMENT ---------- This Agreement shall not be assignable by the Promoter without the prior written consent of Subsidiary, which shall not be unreasonably withheld. In the absence of a written agreement to the contrary, no assignment shall act as a release of Promoter from any terms, conditions or covenants hereunder. Notwithstanding the preceding sentence, Promoter shall have the right, without the consent of Subsidiary, to assign any of its rights under this Agreement or any other agreement entered into pursuant to this Agreement to and , who then shall also each be jointly and severally liable for all terms, conditions, covenants and obligations hereunder. The parties further understand and agree that Promoter may act as and agent, with respect to the receipt of any rights or benefits on or behalf under this Agreement or any other agreement entered into pursuant to this Agreement. SECTION 22 CAPTIONS -------- The captions appearing at the commencement of the sections hereof are descriptive only and for convenience in reference to this Agreement and in no way 35 whatsoever define, limit or describe the scope or intent of this Agreement, nor in any way affect this Agreement. SECTION 23 GOVERNING LAW AND FORUM ----------------------- The laws of the State of Nevada applicable to contracts made and wholly performed therein shall govern the validity, construction, performance and effect of this Agreement. Any lawsuit to interpret or enforce the terms of this Agreement or decide any dispute arising out of or related to it shall be brought only in a court of competent jurisdiction in the State of Nevada. Notwithstanding anything to the contrary elsewhere in this Agreement, neither Parent nor Subsidiary shall be obligated to do anything that is prohibited by any governmental body whose approval would be necessary to Subsidiary or Parent, or to any other subsidiary or company in which Parent holds an interest, doing business within the jurisdiction of such body. SECTION 24 BINDING EFFECT -------------- This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and assigns. Except as specifically provided in this Agreement, this Agreement is not intended to, and shall not, create any rights in any person or entity whatsoever except Subsidiary, Parent and Promoter. 36 SECTION 25 ENTIRE AGREEMENT ---------------- This Agreement and the Agreements attached hereto as Exhibits contain the entire agreement between the parties and all prior understandings or agreements are merged into this Agreement and the Agreements attached hereto. This Agreement and the Agreements attached hereto may only be modified in writing signed by Promoter and a duly authorized officer of Subsidiary and Parent. No officer, director, employee or representative of Subsidiary has any authority to make any representations or promises not contained in this Agreement or the Agreements attached hereto and Promoter expressly agrees that it has not executed this Agreement or the Agreements attached hereto in reliance on any such representation or promise. SECTION 26 NO IMPROPER INDUCEMENTS ----------------------- Promoter represents and warrants that neither Promoter nor any of its officers, directors, employees or agents have given or agreed to give any sums, gifts, gratuities or thing of value to any officer, director, employee or agent of Subsidiary or Parent to secure or maintain the business relationship contemplated by this Agreement. 37 SECTION 27 NOTICES ------- 27.1 Any and all notices and demand by or from any party required or desired to be given hereunder shall be in writing and shall be validly given or made if served personally, sent by a nationally recognized overnight courier, or by telecopier with a confirmation copy sent by United States mail, certified or registered, postage prepaid, return receipt requested. Such notice or demand shall be conclusively deemed given upon receipt or attempted delivery, whichever is sooner. 27.2 Any notice or demand to Subsidiary shall be addressed to: Dennis Finfrock Vice President/Special Events MGM Grand, Inc. 3799 Las Vegas Boulevard South Las Vegas, Nevada 89109 WITH A COPY TO: Thomas A. Peterman Vice President and General Counsel MGM Grand Hotel, Inc. 3799 Las Vegas Boulevard South Las Vegas, Nevada 89109 27.3 Any notice or demand to Parent shall be addressed to: Eugene Shutler Executive Vice President/General Counsel MGM Grand, Inc. 3799 Las Vegas Boulevard South Las Vegas, Nevada 89109 27.4 Any notice or demand to Promoter shall be addressed to: Don King, President Don King Productions, Inc. 871 West Oakland Park Boulevard Oakland Park, Florida 33311 38 WITH A COPY TO: Charles E. Lomax, Esq. c/o Don King Productions, Inc. 871 West Oakland Park Boulevard Oakland Park, Florida 33311 WITH A COPY TO: William C. Golden, Esq. Sidney & Austin One First National Plaza Chicago, Illinois 60603 27.5 Any party hereto may change his or its address for the purpose of receiving notices or demands as herein provided by a written notice given in the manner aforesaid to the other party hereto, which notice of change of address shall not become effective, however, until the actual receipt thereof by the other party. SECTION 28 ATTORNEY'S FEES --------------- In any action or proceeding to enforce the terms of this Agreement, the prevailing party shall be entitled to reasonable attorney's fees and costs incurred, whether or not the action is reduced to judgment. SECTION 29 CONSTRUCTION ------------ The terms and conditions of this Agreement shall be construed as a whole according to its fair meaning and not strictly for or against either Subsidiary, Parent 39 or Promoter. The parties acknowledge that each of them has reviewed this Agreement and has had the opportunity to have it reviewed by their attorneys and that any rule or construction to the effect that ambiguities are to be resolved against the drafting party shall not apply in the interpretation of this Agreement, or any amendment. SECTION 30 PARTIAL INVALIDITY ------------------ If any term, provision, covenant or condition of this Agreement or any application thereof, should be held by a court of competent jurisdiction to be invalid, void or unenforceable, all provisions, covenants and conditions of this Agreement, and all applications thereof, not held invalid, void or unenforceable, shall continue in full force and effect and shall in no way be affected, impaired or invalidated thereby. 40 SECTION 31 NO AGENCY --------- Nothing herein shall cause the parties to be deemed the agent, representative, partner or joint venturer of the other and neither party shall be authorized to bind the other in any manner nor shall either party represent itself to others to have such authority. AGREED and ACCEPTED DON KING PRODUCTIONS, INC MGM GRAND HOTEL, INC. By: /s/ Don King By: /s/ Larry J. Woolf ----------------------------- ------------------------------ DON KING LARRY J. WOOLF Chairman/President Chairman/President/CEO Date: 5/24/95 Date: 5/24/95 --------------------------- ---------------------------- MGM GRAND, INC. By: /s/ Alex Yemenijian Date: 5/24/95 ----------------------------- ---------------------------- ALEX YEMENIDJIAN Executive VP & CFO I acknowledge reviewing the attached Promotion and Ancillary Rights Agreement dated as of March 15, 1995 by and among DON KING PRODUCTIONS, INC., MGM GRAND HOTEL, INC. and MGM GRAND, INC. (the "Agreement") and the Exhibit Agreements referred to therein. In order to induce MGM Grand Hotel, Inc. to enter into such Agreements, I agree to perform the services contemplated of me, as provided in such Agreements. Furthermore, I hereby represent to MGM Grand, Inc. and Don King Productions, Inc. that: (i) any MGM Shares I am acquiring through Don King Productions, Inc. as my agent as contemplated by Section 21 of the Agreement are being acquired for my own account and not with a view to reselling or distributing 41 the MGM Shares, (ii) I have such knowledge and experience in financial and business matters that I am capable of evaluating the merits and risks of my investment in the MGM Shares, (iii) I am able to bear the complete loss of my investment in the MGM Shares, (iv) I have had the opportunity to ask questions of, and receive answers from MGM Grand, Inc. concerning the terms and conditions of the offering of the MGM Shares and to obtain additional information about MGM Grand, Inc., and to discuss all aspects of the transactions described in such Agreements and the risks thereof for me, with independent counsel of my choice; (v) I am an "accredited investor" as defined in Rule 501 promulgated under the Securities Act of 1933, as amended and (vi) I acknowledge the MGM Shares that I am acquiring through Don King Productions, Inc., are subject to the Advance Note Security Agreement and the Stock Note Security Agreement. By: /s/ Mike Tyson ------------------------------------ MIKE TYSON Date: 5/24/95 ---------------------------------- I acknowledge reviewing the attached Promotion and Ancillary Rights Agreement dated as of March 15, 1995 between DON KING PRODUCTIONS, INC., MGM GRAND HOTEL, INC. and MGM GRAND, INC. (the "Agreement") and the Exhibit Agreements referred to therein. I have approved, as Mike Tyson's manager, his obligations as provided in such Agreements. Furthermore, I hereby represent to MGM Grand, Inc. and Don King Productions, Inc. that: (i) any MGM Shares I am acquiring through Don King Productions, Inc. as my agent as contemplated by Section 21 of the Agreement are being acquired for my own account and not with a view to reselling or distributing the MGM Shares, (ii) I have such knowledge and experience in financial and business matters that I am capable of evaluating the merits and risks of my 42 investment in the MGM Shares, (iii) I am able to bear the complete loss of my investment in the MGM Shares, (iv) I have had the opportunity to ask questions of, and receive answers from MGM Grand, Inc. concerning the terms and conditions of the offering of the MGM Shares and to obtain additional information about MGM Grand, Inc., and to discuss all aspects of the transactions described in such Agreements and the risks thereof for me, with independent counsel of my choice; (v) I am an "accredited investor" as defined in Rule 501 promulgated under the Securities Act of 1933, as amended and (vi) I acknowledge the MGM Shares that I am acquiring through Don King Productions, Inc., are subject to the Advance Note Security Agreement and the Stock Note Security Agreement. By: /s/ John Horne By: /s/ Rory Holloway ------------------------------ ----------------------------- JOHN HORNE RORY HOLLOWAY Date: 5/24/95 Date: 5/24/95 ---------------------------- --------------------------- I acknowledge reviewing the attached Promotion and Ancillary Rights Agreement dated as of March 15, 1995 between DON KING PRODUCTIONS, INC., MGM GRAND HOTEL, INC. and MGM GRAND, INC. (the "Agreement") and the Exhibit Agreements referred to therein. I hereby represent to MGM Grand, Inc. and Don King Productions, Inc. that: (i) any MGM Shares I am acquiring through Don King Productions, Inc. as my agent as contemplated by Section 21 of the Agreement are being acquired for my own account and not with a view to reselling or distributing the MGM Shares, (ii) I have such knowledge and experience in financial and business matters that I am capable of evaluating the merits and risks of my investment in the MGM Shares, (iii) I am able to bear the complete loss of my investment in the MGM Shares, (iv) I have had the opportunity to ask questions of, and receive answers from MGM Grand, Inc. concerning the terms and conditions of the offering of the MGM 43 Shares and to obtain additional information about MGM Grand, Inc., and to discuss all aspects of the transactions described in such Agreements and the risks thereof for me, with independent counsel of my choice; (v) I am an "accredited investor" as defined in Rule 501 promulgated under the Securities Act of 1933, as amended and (vi) I acknowledge the MGM Shares that I am acquiring through Don King Productions, Inc., are subject to the Advance Note Security Agreement and the Stock Note Security Agreement. By: /s/ Don King By: /s/ Henrietta King -------------------------------- -------------------------------- DON KING HENRIETTA KING Date: 5/30/95 Date: 5/30/95 ------------------------------ ----------------------------- 44 November 27, 1995 Alex Yemenidjian President MGM Grand, Inc. 3799 Las Vegas Boulevard South Las Vegas, Nevada 89109 Dear Mr. Yemenidjian, This letter agreement will confirm the principal terms and conditions of the Agreement by and among Don King Productions, Inc. ("DKP"), MGM Grand Hotel, Inc. ("Subsidiary") and MGM Grand, Inc. ("Parent") with respect to a professional boxing match between Mike Tyson ("Tyson") and Buster Mathis (or another comparable non-champion opponent) hereinafter called the "Tyson Interim Bout") to occur in December of 1995 or January of 1996. The Tyson Interim Bout shall take place before his next scheduled Bout under the Agreement. It is hereby agreed by and among each of the parties as follows: 1. The Tyson Interim Bout shall not be deemed a "Tyson Event" as defined in the Promotion and Ancillary Rights Agreement dated as of March 5, 1995 (the "MGM Agreement") by and among DKP and Subsidiary and Parent for any purposes, which means inter alia, there are five (5) remaining Tyson Events to be held at Grand Garden or other site as selected by Subsidiary. 2. Sections 1.2 and 5.1(a) of the MGM Agreement, and the second paragraphs of each of the Advance Note and the Stock Note (as defined in the MGM Agreement) are each hereby amended by substituting the date "January 25, 1998" for the date "September 25, 1997" and Section 2.1 of the Registration Rights Agreement (as defined in the MGM Agreement) is hereby amended by substituting the date "August 15, 1997" for the date "April 15, 1997." 3. DKP hereby grants to Subsidiary a credit of to be used by Subsidiary, at its election, either (i) to purchase tickets to Tyson Events as provided by Section 6.2 of the MGM Agreement, (ii) to reduce Subsidiary's obligation under Section 11.1 of the MGM Agreement to incur of advertising costs for Tyson Events, or (iii) any combination of clauses (i) and (ii). 4. The parties will cooperate with each other (each at their respective expense) to prepare and execute such documents as may be reasonably required or desirable to carry out the provisions of this letter agreement. As a result, and without limiting the generality of the foregoing: (i) Subsidiary shall not be obligated to provide to Promoter, the Grand Garden Arena, a boxing ring, complimentary rooms, suites and food and beverages, or any of the other obligations of Subsidiary as provided in the MGM Agreement. (ii) DKP shall have the sole right and authority to stage the Tyson Interim Bout, provided that DKP agrees that the Tyson Interim Bout______ . (iii) All aspects of the Tyson Interim Bout (including without limitation, production, distribution and transmission responsibilities) shall be the sole responsibility of DKP, and with respect to all of the foregoing, neither Parent nor Subsidiary assumes any liability or duties nor shall they be liable to any third party. (iv) All costs and expenses incurred in connection with the Tyson Interim Bout (including without limitation, all purses, staging, production, distribution and transmission costs and expenses) shall be the sole responsibility of DKP, and with respect to all of the foregoing costs and expenses, neither Parent nor Subsidiary assumes any liabilities or duties and neither Parent nor Subsidiary shall be liable to any third person. (v) With regard to subparagraphs 4(iii) and (iv), DKP shall indemnify and hold harmless MGM with respect to any third party claim arising out of the Tyson Interim Bout. 5. The terms of this agreement shall remain in full force and effect regardless of whether the Tyson Interim Bout is held, and DKP agrees and will include necessary language in the contract it enters into with any third party to stage the Tyson Interim Bout that the Tyson Interim Bout, including any postponements, must be held no later than January 15, 1996. In the event of any inconsistency between this letter agreement and any other agreement between the parties, this letter agreement shall be deemed to be controlling with respect to the subject matter hereof. Please sign where indicated below to confirm your agreement with the foregoing, and upon our counter-signature, this letter agreement shall become a binding agreement among the parties. /s/ /s/ - ------------------------------------- ------------------------------------- Don King Productions, Inc. MGM Grand, Inc. /s/ ------------------------------------- MGM Grand Hotel, Inc. EX-10.26 12 LETTER AGREEMENT DATED APRIL 1995 EXHIBIT 10(26) April 13, 1995 Mr. J. Terrence Lanni c/o Troy & Gould 1801 Century Park East 16th Floor Los Angeles, CA 90067 Dear Terry: This letter will memorialize the agreement between yourself and MGM Grand, Inc. ("MGMG"): 1. Commencement Date: As soon as practicable, but not later than June 1, 1995. 2. Positions/Titles: A. President and Chief Executive Officer B. Member of the Board of Directors C. Member of the Executive Committee 3. Compensation A. Base: $1,000,000 per year, subject to possible increase following annual ---- review on the employment anniversary date at the sole discretion of MGMG's Compensation Committee. B. Stock Options: 1,000,000 shares of MGMG common stock and subject to the ------------- following vesting schedule: End of Employment Percentage of Year Options Vesting ----------------- --------------- 1 0 2 0 3 20 4 20 5 20 6 40 Mr. J. Terrence Lanni April 13, 1995 Page 2 The options will be granted pursuant to an amendment to MGMG's existing Nonqualified Stock Option Plan or pursuant to a new Nonqualified Stock Option Plan, and will be subject to stockholder approval. C. Acceleration of Stock Options: If there is a change in control of MGMG ------------------------------ as the result of stockholders disposing of their shares through sale or exchange to a third party or cash merger (as distinguished from a change of control resulting from the issuance of treasury shares or from any other transaction) before the stock options are fully vested, all unvested stock options shall become fully vested as of the date of such sale, exchange or cash merger. 4. Duties and Responsibilities: Those consistent with Positions/Titles. 5. Exclusivity: You agree to devote your full business time to MGMG and to render your services solely and exclusively for MGMG, provided that the Executive Committee may in its sole discretion grant exceptions to such exclusivity, which exceptions may be withdrawn in the sole discretion of such Committee. Subject to the above-referenced discretion of the Executive Committee, it is understood that you will continue to serve as Chairman of the Board of Trustees of Loyola Marymount University and as a director of Santa Anita Operating Company and of Santa Anita Realty Enterprises. 6. Representations and Warranties: You represent and warrant that: A. You can and will be unconditionally licensed by all applicable Gaming Authorities, and other authorities, including authorities to which MGMG may become subject in the future. Notwithstanding the foregoing, this provision shall not be deemed to have been violated if the sole reason you are not licensed by any future authority is your failure to comply with any licensing requirement that you become a resident of such jurisdiction. B. There are no currently existing conditions which may impair your ability to perform your duties hereunder. C. You have the full right to enter into this agreement, and your entering into this agreement will not violate or conflict with any arrangements you have with anyone. Mr. J. Terrence Lanni April 13, 1995 Page 3 7. Termination Right: Except as otherwise provided in Paragraph 8 below, either party shall have the right to terminate this agreement and your employment hereunder on thirty (30) days notice without any further obligations to each other, including without limitation any obligations under Paragraph 3 above. 8. Termination Without Cause: If your employment is terminated without cause at any time during the first five years of the agreement: A. You shall be entitled to continue receiving your base compensation set forth in Paragraph 3A on a monthly basis for the number of months shown in the following schedule, less any earned income and employee benefits received by you by virtue of your employment elsewhere during such payout period: If Termination Without Number of Months Base Cause Occurs in Year: Compensation ---------------------- (payout period) --------------------- 1 18 months 2 18 months 3 12 months 4 6 months 5 6 months B. For purposes of this agreement, the term "cause" shall mean: (1) Misconduct or negligence in the performance of your material duties hereunder, or refusal to perform such duties; (2) Any breach of your representations, warranties and covenants contained in this agreement; (3) Failure by you to promptly obtain or retain any permits, licenses, or approvals which shall be required by any State or local authorities for the conduct of any business activities of MGMG, provided however that "cause" shall not be deemed to exist if the sole reason you fail to obtain or retain any such permits, licenses or approvals is your non-residence in a jurisdiction other than Nevada; Mr. J. Terrence Lanni April 13, 1995 Page 4 (4) Your death, or your disability for a consecutive period of six (6) months; (5) Your indictment for or conviction of a crime, except for minor traffic violations and similar matters, it being acknowledged that inasmuch as the activities of MGMG and its subsidiaries are subject to a high degree of regulation and require MGMG to maintain the highest standards of integrity, any such indictments or convictions would be material and adverse to the interests of MGMG; or (6) The Board of Directors shall, after reasonable inquiry, have reasonably concluded that you have engaged in conduct which is materially adverse to MGMG or its business reputation. 9. Employee Benefits: You shall be entitled to all employee benefits that are in place as of the Commencement Date of this agreement, subject to change from time to time at the discretion of the Executive Committee or Compensation Committee. It is understood and acknowledged that MGMG is not committing to maintain any particular level of benefits or benefits program, provided however, that your level of participation in such programs shall be at the same level as those afforded to the group of senior executives of MGMG. 10. Relocation Expenses: MGMG will pay the cost of your relocation from Los Angeles to Las Vegas in accordance with MGMG's standard "Los Angeles/Las Vegas Relocation Policy - Officers", of which you have been supplied a copy. 11. Confidentiality: The terms of this agreement shall be kept confidential, subject to MGMG's compliance with applicable federal and state laws and regulations which may require public disclosure of the agreement or its terms. Mr. J. Terrence Lanni April 13, 1995 Page 5 12. Public Announcement: MGMG shall have the right to issue a press release concerning your engagement by MGMG, provided the text of such press release shall be subject to your approval, not to be unreasonably withheld. You and MGMG each covenant not to, or to permit your respective agents or representative to, leak word of this agreement prior to issuance of the press release. Sincerely, MGM Grand, Inc. By: /s/ Robert R. Maxey -------------------------------- Robert R. Maxey, Chairman AGREED TO AND ACKNOWLEDGED: /s/ J. TERRENCE LANNI April 14, 1995 - ----------------------------------- ---------------- J. Terrence Lanni Date /s/ ALEX YEMENIDJIAN April 14, 1995 - ----------------------------------- ---------------- Alex Yemenidjian Date EX-13 13 MANAGEMENT'S DISCUSSION AND ANALYSIS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS MGM Grand, Inc. and Subsidiaries RESULTS OF OPERATIONS - -------------------------------------------------------------------------------- The Company, through its wholly-owned subsidiaries, owns and operates the MGM Grand Hotel/Casino in Las Vegas, Nevada ("MGM Grand Las Vegas"), which commenced operations on December 18, 1993, and the MGM Grand Diamond Beach Hotel/Casino ("MGM Grand Australia"), which was acquired on September 7, 1995 (see Notes 1 and 15). Airline operations have been reclassified for the years presented to Discontinued Operations as a result of the sale of the airline on December 31, 1994 (see Note 16). 1995 COMPARED WITH 1994 - -------------------------------------------------------------------------------- Net revenues for the year ended December 31, 1995, were $721,843,000, compared with $742,195,000 for the year ended December 31, 1994. Casino revenue for the twelve months ended 1995 was $404,742,000, compared with $434,297,000 for the twelve months ended 1994. Room revenue for the 1995 year was $160,470,000 on an occupancy of 89.5%, compared with the 1994 year of $145,196,000 on an occupancy of 91.6%. Entertainment, Retail, Food and Beverage and Other revenue was $212,606,000 in 1995, compared with $214,324,000 in the prior year. The decrease in casino revenue is the result of an unusually high win percentage in baccarat during 1994. The increase in room revenue was primarily due to the increase in the average daily room rate, partially offset by a slightly lower occupancy percentage, reflecting less marketing emphasis on the tour and travel business segment. In addition, promotional allowances increased to $55,975,000, compared with $51,622,000 in the prior year due to increased marketing efforts to attract national customers. Net revenues for MGM Grand Australia totaled $9,654,000 for the period since acquisition on September 7, 1995. For the period ended December 31, 1995, casino revenue was $7,293,000, room revenue as $614,000 and food and beverage revenue was $2,084,000. Data for the period prior to acquisition is not applicable. Operating income for 1995 was $103,823,000 compared with an operating income of $129,715,000 in 1994. In addition to the change in revenues noted above, the lower results were primarily attributable to an increase in reserves for casino receivables, an increase in casino marketing efforts, an increase in depreciation reflecting the asset additions for MGM Grand Australia, MGM Grand Las Vegas, and EFX show equipment. Also contributing to the lower results were the costs of various non-recurring marketing programs, and a $5,942,000 restructuring charge during the Company's third quarter (see Note 13). These costs were offset by a reduction in operating expenses as a result of continuing cost containment efforts. INTEREST AND OTHER INCOME. Interest and other income was $2,071,000 for the year ended 1995 versus $5,752,000 for the year ended 1994. Interest was higher during the 1994 period as a result of the short term investment of undisbursed construction funds. INTEREST EXPENSE. Interest incurred was $63,646,000 for the year ended 1995, compared with $61,927,000 for the year ended 1994. In 1995 interest expense included $2,307,000 related to MGM Grand Australia. Capitalized interest was $4,317,000 in 1995. INCOME TAXES. The Company has not recorded a provision for income taxes, due to utilization of tax benefits not realized in prior years, which have offset any provision for the current period. Management anticipates that it will utilize the remaining tax benefits in 1996 and, as a result, the Company may record a tax provision during 1996. 19 1994 COMPARED WITH 1993 - -------------------------------------------------------------------------------- Net revenues for the year ended December 31, 1994, were $742,195,000, compared with $37,016,000 for the 14-day period ended December 31, 1993. Casino revenue for the year ended December 31, 1994, was $434,297,000, compared with $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 with the 14-day period ended December 31, 1993, of $4,505,000 on an occupancy of 58%. In order to open MGM Grand Las Vegas three months ahead of schedule, the occupancy rates were affected by the partial availability of hotel rooms during December 1993 and the first quarter of 1994. Entertainment, Retain, Food and Beverage and Other Revenue was $214,324,000 in 1994, compared with $8,862,000 in the prior year's 14-day period. Operating income for 1994 was $129,715,000, compared with an operating loss of $44,546,000 in 1993 which included a non-recurring charge of $45,130,000 for hotel preopening costs. Preopening costs included direct project salaries, advertising and other services incurred during the period prior to commencement of operations of MGM Grand Las Vegas. 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 with $20,784,000 for the year ended December 31, 1993. The operating loss for 1994 was $7,012,000, compared with $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 1993 period as a result of short term investment of undisbursed construction funds. INTEREST EXPENSE. Interest incurred was $61,927,000 for the year ended 1994, compared with $59,472,000 for the year ended 1993. Capitalized interest was $52,876,000 in 1993. INCOME TAXES. The Company has not recorded a provision for income taxes, due to utilization of tax benefits not realized in prior years which have offset any provision for the current period. LIQUIDITY AND CAPITAL RESOURCES - -------------------------------------------------------------------------------- At December 31, 1995 and 1994, the Company held cash and cash equivalents of $110,017,000 and $75,859,000, respectively. Cash provided by operating activities for 1995 was $114,544,000, compared with $94,461,000 for 1994. Capital expenditures in 1995 were $37,447,000, consisting of $30,441,000 for expenditures related to MGM Grand Las Vegas for general property improvements and construction of the Star Lane Shops, $6,881,000 at MGM Grand Australia for upgraded accommodations, new gaming facilities and other improvements, and $125,000 related to furniture, fixtures and equipment. Also during 1995, the Company expended $3,050,000 on the MGM Grand-Bally's monorail project, $36,500,000 on the New York-New York project and $79,745,000 for the acquisition of MGM Grand Australia (see Note 15). During 1995, MGM Grand Las Vegas also expended $11,409,000 on the EFX production show. Capital expenditures for 1996 are expected to be approximately $51,200,000 MGM Grand Las Vegas expenditures for 1996 are expected to be approximately $40,000,000 for general property improvements, and MGM Grand Australia plans to expend approximately $7,900,000 to complete the facility renovation and enhancement program, as well as approximately $3,300,000 for general property and equipment improvements. In addition, MGM Grand Las Vegas is designing a multi-year master construction plan for additional themed retail, food and beverage outlets, expanded convention facilities and other aesthetic and functional enhancements to the property, for which costs have not been finalized. 20 In June 1995, the Company and Bally's Las Vegas completed their joint development of the elevated monorail linking MGM Grand Las Vegas with the corner of Flamingo Road and the Las Vegas Strip. The monorail is a one-mile, high-capacity, transit grade system which cost approximately $25,000,000. The costs were shared equally with Bally's Las Vegas, and each partner has contributed approximately $12,500,000 to the joint venture. Capital expenditures in 1994 were $65,976,000, consisting of $59,967,000 for expenditures related to MGM Grand Las Vegas, $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. On December 28, 1994, the Company and Primadonna Resorts, Inc. ("Primadonna") executed definitive agreements for the development of New York-New York Hotel/Casino. The plans for New York-New York call for the destination resort to include approximately 2,035 hotel rooms, themed entertainment attractions, restaurants and retail outlets with an approximate cost of $460,000,000. The Company and Primadonna will jointly own, develop and operate New York-New York, which broke ground on March 30, 1995. The 18-acre site, located on one of the busiest intersections in Las Vegas, was contributed to the venture by the Company during January 1995 in exchange for a 50% interest in the joint venture, and on February 1, 1995, New York-New York acquired an adjacent two acre parcel. Completion is scheduled for late 1996. Bank financing of up to $225,000,000 was completed by New York-New York Hotel, LLC, and as of December 31, 1995, $59,000,000 had been drawn down under the facility. Capital lease financing of up to $75,000,000 is anticipated during 1996, and the Company may contribute additional equity for its 50% share of the amount necessary to complete the project. As a lender requirement for the project financing, both the Company and Primadonna were required to enter into a joint and several unlimited Keep-Well Agreement (see Note 8). During 1993, the Company completed equipment lease financings for MGM Grand Las Vegas equipment. In December 1994 and in January 1995, the Company terminated certain leases and purchased the equipment for approximately $42,000,000 (see Note 9). During 1994, the Company completed equipment lease financing of $5,000,000 for the EFX production show. 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. In June 1993, Grand Laundry, Inc., a wholly-owned subsidiary of MGM Grand Hotel, Inc. obtained a $10,000,000 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 MGM Grand Las Vegas. The loan was paid off on December 27, 1994. The Company expects to finance operations and capital expenditures through cash flow from operations, cash on hand, and the bank line of credit. 21 CONSOLIDATED STATEMENTS OF OPERATIONS MGM Grand, Inc. and Subsidiaries
(In thousands, except share data) For the years ended December 31, 1995 1994 1993 - ------------------------------------------------------------------------------ Revenues: Casino $404,742 $434,297 $ 26,702 Rooms 160,470 145,196 4,505 Food and beverage 89,299 91,566 3,696 Entertainment, retail and other 123,307 122,758 5,166 - ------------------------------------------------------------------------------ 777,818 793,817 40,069 Less: Promotional allowances 55,975 51,622 3,053 - ------------------------------------------------------------------------------ 721,843 742,195 37,016 - ------------------------------------------------------------------------------ Expenses: Casino 195,140 183,514 9,341 Rooms 44,195 45,303 1,016 Food and beverage 57,293 65,043 2,529 Entertainment, retail and other 92,667 115,443 6,180 Provision for doubtful accounts and discounts 57,683 44,181 3,855 General and administrative 99,086 106,884 6,378 Restructuring costs 5,942 - - Depreciation and amortization 55,419 44,433 1,647 Hotel preopening expenses - - 45,130 - ------------------------------------------------------------------------------ 607,425 604,801 76,076 - ------------------------------------------------------------------------------ Operating Profit (Loss) Before Corporate Expense 114,418 137,394 (39,060) Corporate expense 10,595 7,679 5,486 - ------------------------------------------------------------------------------ Operating Income (Loss) 103,823 129,715 (44,546) - ------------------------------------------------------------------------------ Nonoperating Income (Expense): Interest income 2,896 5,544 12,231 Interest expense, net of amounts capitalized (59,329) (61,927) (6,596) Other, net (825) 208 16 - ------------------------------------------------------------------------------ (57,258) (56,175) 5,651 - ------------------------------------------------------------------------------ Income (Loss) Before Discontinued Operations 46,565 73,540 (38,895) - ------------------------------------------------------------------------------ Discontinued Operations: Income (loss) from discontinued operations - (7,012) (78,691) Gain on disposal of discontinued operations - 8,048 - - ------------------------------------------------------------------------------ - 1,036 (78,691) - ------------------------------------------------------------------------------ Income (Loss) Before Provision (Benefit) for Income Taxes 46,565 74,576 (117,586) Provision (benefit) for income taxes - - - - ------------------------------------------------------------------------------ Net Income (Loss) $ 46,565 $ 74,576 $(117,586) - -------------------------------------========================================= Per Share of Common Stock: Income (loss) before discontinued operations $ 0.96 $ 1.50 $ (0.82) Discontinued operations - 0.02 (1.65) - ------------------------------------------------------------------------------ Net Income (Loss) $ 0.96 $ 1.52 $ (2.47) - -------------------------------------========================================= Weighted Average Shares Outstanding 48,544,000 48,988,000 47,587,000 - -------------------------------------=========================================
The accompanying notes are an integral part of these consolidated financial statements. 22 CONSOLIDATED BALANCE SHEETS MGM Grand, Inc. and Subsidiaries
(In thousands, except per share data) As of December 31, 1995 1994 - ------------------------------------------------------------------------------ ASSETS Current Assets: Cash and cash equivalents $ 110,017 $ 75,859 Accounts receivable, net 78,559 95,432 Prepaid expenses 12,657 13,431 Inventories 10,982 9,641 Notes receivable 529 14,325 - ------------------------------------------------------------------------------ Total current assets 212,744 208,688 - ------------------------------------------------------------------------------ Property and Equipment, net 903,906 880,023 - ------------------------------------------------------------------------------ Other Assets: Investment in unconsolidated affiliates 53,611 10,955 Deposits 16,340 2,434 Excess of purchase price over fair market value of net assets acquired, net 40,662 - Other assets, net 54,959 51,411 - ------------------------------------------------------------------------------ Total other assets 165,572 64,800 - ------------------------------------------------------------------------------ $1,282,222 $1,153,511 - ----------------------------------------------================================ LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 20,746 $ 29,306 Current obligation, capital leases 2,170 2,145 Accrued interest on long term debt 9,368 9,429 Other accrued liabilities 87,146 83,251 - ------------------------------------------------------------------------------ Total current liabilities 119,430 124,131 - ------------------------------------------------------------------------------ Deferred Revenues 8,568 8,505 Deferred Income Taxes 8,134 5,942 Long Term Obligation, Capital Leases 10,443 12,554 Commitments and Contingencies 551,099 473,000 Stockholders' Equity: Common Stock ($.01 par value, 75,000,000 shares authorized, 48,774,856 and 50,651,016 shares issued) 488 507 Capital in excess of par value 623,489 663,186 Note receivable stock sale (10,000) - Common stock in treasury (2,726,506 shares at December 31, 1994) - (57,264) Retained earnings (deficit) (30,485) (77,050) Currency translation adjustment 1,056 - - ------------------------------------------------------------------------------ Total stockholders' equity 584,548 529,379 - ------------------------------------------------------------------------------ $1,282,222 $1,153,511 - ----------------------------------------------================================
The accompanying notes are an integral part of these consolidated financial statements. 23 CONSOLIDATED STATEMENTS OF CASH FLOWS MGM Grand, Inc. and Subsidiaries
(In thousands) For the years ended December 31, 1995 1994 1993 - -------------------------------------------------------------------------------------------- Cash Flows From Operating Activities: Net income (loss) $ 46,565 $ 74,576 $(117,586) 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 3,308 3,858 1,312 Depreciation and amortization 55,419 44,433 8,018 Aircraft overhaul amortization - - 1,993 Provision for doubtful accounts 57,683 44,181 3,855 Change in assets and liabilities: Accounts receivable (40,395) (93,311) (33,724) Inventories (3,784) (4,574) (12,508) Prepaid expenses 2,589 (1,677) (10,536) Deferred income taxes (2,034) - - Accounts payable, accrued liabilities and other (5,863) 35,023 52,632 Currency translation adjustment 1,056 - - - -------------------------------------------------------------------------------------------- Net cash from operating activities 114,544 94,461 (37,596) - -------------------------------------------------------------------------------------------- Cash Flows From Investing Activities: Purchases of property and equipment, net (37,447) (65,976) (480,054) Acquisition of MGM Grand Australia (71,942) - - Dispositions of property and equipment, net 488 691 684 Change in construction payables (3,915) (92,740) 64,548 Notes receivable 13,796 - - Deposits and other assets (67,014) (34,930) 2,141 - -------------------------------------------------------------------------------------------- Net cash from investing activities (166,034) (192,955) (412,681) - -------------------------------------------------------------------------------------------- Cash Flows From Financing Activities: Borrowings from (repayments to) banks and others 78,099 (10,000) 10,000 Borrowings under line of credit 15,000 - - Repayment of line of credit (15,000) - - Issuance of common stock 7,549 822 71,619 Repurchase of common stock - (27,774) - - -------------------------------------------------------------------------------------------- Net cash from financing activities 85,648 (36,952) 81,619 - -------------------------------------------------------------------------------------------- Net Increase (Decrease) In Cash And Cash Equivalents 34,158 (135,446) (368,658) Cash And Cash Equivalents At Beginning Of Year 75,859 211,305 579,963 - -------------------------------------------------------------------------------------------- Cash And Equivalents At End Of Year $110,017 $ 75,859 $ 211,305 - --------------------------------------------------------====================================
The accompanying notes are an integral part of these consolidated financial statements. 24 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY MGM Grand, Inc. and Subsidiaries
(Dollar amounts in thousands) Common Capital in Note Retained Currency Total For the years ended December 31, Stock Common Excess of Receivable Treasury Earnings Translation Stockholders' 1995, 1994 and 1993 Outstanding Stock Par Value Stock Sale Stock (Deficit) Adjustment Equity - --------------------------------------------------------------------------------------------------------------------------------- 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 Adjustments to net sale 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 Issuance of common stock for note receivable 618,557 - - (15,000) 15,000 - - - Payment received from note receivable - - - 5,000 - - - 5,000 Issuance of common stock pursuant to employee stock options 231,789 2 2,546 - - - - 2,548 Retirement of treasury stock - (21) (42,243) - 42,264 - - - Net income - - - - - 46,565 - 46,565 Currency translation adjustment - - - - - - 1,056 1,056 - --------------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1995 48,774,856 $488 $623,489 $(10,000) $ - $ (30,485) $1,056 $ 584,548 - ---------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial statements. 25 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MGM Grand, Inc. and Subsidiaries NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION - -------------------------------------------------------------------------------- MGM Grand, Inc. (the "Company") is a Delaware corporation incorporated on January 29, 1986. As of December 31, 1995, approximately 74% of the outstanding shares of the Company's common stock was 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. ("MGM Grand Hotel"), the Company owns and operates the MGM Grand Hotel/Casino ("MGM Grand Las Vegas"), a fully integrated hotel/casino and entertainment complex in Las Vegas, Nevada. MGM Grand Las Vegas commenced operations on December 18, 1993. Through its wholly-owned subsidiary, MGM Grand Australia Pty Ltd., the Company owns and operates the MGM Grand Diamond Beach Hotel/Casino in Darwin, Australia ("MGM Grand Australia"), a hotel/casino resort. The results of operations of MGM Grand Australia are included from September 7, 1995, the date of acquisition (see Note 15). On December 28, 1994, the Company and Primadonna Resorts, Inc. ("Primadonna") executed definitive agreements for the formation of New York-New York Hotel, LLC ("NYNY Hotel"), a 50% joint venture between the Company and Primadonna. The Company and Primadonna will jointly and equally own, develop and operate NYNY Hotel, a themed hotel/casino, with an approximate cost of $460,000,000, including construction costs, preopening costs and capitalized interest. The project is located on the northwest corner of Tropicana Avenue and Las Vegas Boulevard, across from MGM Grand Las Vegas. Groundbreaking occurred on March 30, 1995. The plans for NYNY Hotel call for the destination resort to include approximately 2,035 hotel rooms, a casino, themed entertainment attractions, restaurants and retail outlets. The Company and Bally's Las Vegas completed their joint development of the elevated monorail linking MGM Grand Las Vegas with the corner of Flamingo Road and the Las Vegas Strip. The monorail is a one-mile, high-capacity, transit-grade system which cost approximately $25,000,000. The project costs were shared equally with Bally's. The system began operations on June 14, 1995. 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 16). NOTE 2. SIGNIFICANT ACCOUNTING POLICIES - -------------------------------------------------------------------------------- a. PRINCIPLES OF CONSOLIDATION -- The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Investments in unconsolidated affiliates which are 50% or less owned are accounted for under the equity method. Significant intercompany accounts are eliminated in consolidation. b. MANAGEMENT'S USE OF ESTIMATES -- The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. c. CASH AND CASH EQUIVALENTS -- Cash and 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 approximate market value. d. RECEIVABLES -- Receivables are due within one year and are recorded net of amounts estimated to be uncollectible. e. INVENTORIES -- Inventories are stated at the lower of cost or market, which is determined generally by the FIFO method. 26 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MGM Grand, Inc. and Subsidiaries f. 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 MGM Grand Las Vegas was under construction, as well as during periods for other major construction projects. 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 g. EXCESS OF PURCHASE PRICE OVER FAIR MARKET VALUE OF NET ASSETS ACQUIRED -- The excess of purchase price over fair market value of net assets acquired are amortized on a straight-line basis over 40 years. 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. 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 related to the debt offering and bank financing are being deferred and amortized over the debt repayment periods. Organizational costs are amortized on a straight-line basis over 60 months. i. REVENUE RECOGNITION -- Casino revenue is the aggregate of 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 are included in other accrued liabilities. 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 $55,975,000, $51,622,000 and $3,053,000 for the years ended December 31, 1995, 1994 and 1993, respect5ively. The estimated cost of providing such promotional allowances was included in casino expenses as follows:
Years Ended December 31, ------------------------ (In thousands) 1995 1994 1993 - ---------------------------------------------------- Rooms $ 8,512 $ 7,809 $ 659 Food and beverage 23,588 24,115 1,170 Other 3,804 5,176 84 - ---------------------------------------------------- $35,904 $37,100 $1,913 - ----------------------------========================
k. HOTEL PREOPENING EXPENSES -- Hotel preopening expenses include direct salaries and other costs incurred during the period prior to commencement of operations of MGM Grand Las Vegas. Such costs were expensed in 1993 upon opening of the facility. l. INCOME TAXES -- The Company adopted statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" effective January 1, 1993 (see Note 14). m. CURRENCY TRANSLATION -- Assets and liabilities denominated in Australia dollars are translated into U.S. dollars at year end exchange rates, and related gains and losses, net of applicable deferred income taxes, are reflected in stockholders' equity. 27 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MGM Grand, Inc. and Subsidiaries 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 (48,544,000 in 1995, 48,988,000 in 1994, and 47,587,000 in 1993). 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) 1995 1994 1993 - -------------------------------------------------------------- Cash payments made for: Interest, net of amounts capitalized $55,750 $58,975 $3,535 - --------------------------------------======================== State and federal taxes $ 620 $ 755 $ 203 - --------------------------------------========================
On June 5, 1995, the Company retired all remaining shares of common stock held in Treasury, which thereupon resumed the status of authorized unissued shares, in a non-cash transaction in the amount of $42,264,000. In 1993, the Company acquired property and equipment with capital leases totalling $15,423,000. During the same year, 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 addition, $940,000 was credited in 1993 to Capital in Excess of Par Value in connection with the 1991 sale of the Desert Inn Hotel/Casino. NOTE 4. ACCOUNTS RECEIVABLE - ------------------------------------------------------------------------------- Components of receivables were as follows:
At December 31, ------------------ (In thousands) 1995 1994 - -------------------------------------- Casino $ 98,878 $ 97,254 Hotel 12,504 14,194 Other 246 1,608 - -------------------------------------- 111,633 113,056 Less: Allowance for doubtful accounts and discounts (33,074) (17,624) - -------------------------------------- $ 78,559 $ 95,432 - --------------------==================
Credit is issued in exchange for gaming chips at MGM Grand Las Vegas as permitted by the regulations of the Nevada Gaming Commission and the Nevada State Gaming Control Board. The Company extends credit to certain casino patrons, a substantial portion of whom reside in countries other than the United States, following evaluation of credit worthiness. The Company maintains an allowance for doubtful accounts and discounts which is based on management's estimate of the amount expected to be uncollectible considering historical experience and the information management obtains regarding the credit worthiness of the customer. The collectibility of these receivables could be affected by future business or economic trends or other significant events in the countries in which such customers reside. Although management believes the allowance is adequate, it is possible that the estimated amount of cash collections with respect to the casino accounts receivable could change. 28 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MGM Grand, Inc. and Subsidiaries NOTE 5. PROPERTY AND EQUIPMENT - -------------------------------------------------------------------------------- Property and equipment consisted of the following:
At December 31, ------------------ (In thousands) 1995 1994 - -------------------------------------------------- Land $ 99,625 $ 90,567 Buildings and improvements 669,227 621,835 Equipment, furniture, fixtures and leasehold improvements 202,508 194,756 Equipment under capital lease 17,836 17,793 Construction in progress 7,772 615 - -------------------------------------------------- 996,968 925,566 Less: Accumulated depreciation and amortization (93,062) (45,543) - -------------------------------------------------- $903,906 $880,023 - --------------------------------==================
NOTE 6. INVESTMENTS IN UNCONSOLIDATED AFFILIATES - -------------------------------------------------------------------------------- Investments in unconsolidated affiliates consisted of the following:
At December 31, ----------------- (In thousands) 1995 1994 - --------------------------------------------------- New York-New York Hotel, LLC $40,938 $ 1,455 MGM Grand-Bally's Monorail, LLC 12,673 9,500 - --------------------------------------------------- $53,611 $10,955 - ----------------------------------=================
NOTE 7. OTHER ACCRUED LIABILITIES - -------------------------------------------------------------------------------- Other accrued liabilities consisted of the following:
At December 31, ----------------- (In thousands) 1995 1994 - --------------------------------------------------- Accrued salaries and related $29,856 $28,740 Casino front money 21,279 28,010 Casino chip liability 5,831 3,943 Advance deposits 5,113 3,521 Accrued gaming taxes 4,168 2,339 Other liabilities 20,899 16,698 - --------------------------------------------------- $87,146 $83,251 - ----------------------------------=================
29 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MGM Grand, Inc. and Subsidiaries NOTE 8. LONG TERM DEBT - -------------------------------------------------------------------------------- Long term debt consisted of the following:
At December 31, ------------------ (In thousands) 1995 1994 - ------------------------------------------------- 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 Australian Hotel/Casino Loan due December 1, 2000 78,099 - - ------------------------------------------------- 551,099 473,000 Less: Current Maturities - - - ------------------------------------------------- $551,099 $473,000 - -------------------------------==================
Total interest incurred during 1995, 1994, and 1993 was $63,646,000, $61,927,000, and $59,472,000, respectively, of which $4,317,000 and $52,876,000 was capitalized in 1995 and 1993, respectively. In 1994, the Company did not capitalize any interest. The First Mortgage Notes Indenture contains 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, 1995 and 1994, the fair value of the First Mortgage Notes was $512,999,000 and $513,081,000, respectively. On September 7, 1995, the Company completed the acquisition of the Diamond Beach Hotel/Casino in Darwin, Australia (see Note 15). The acquisition cost was financed by an Australian bank facility which provides a total availability of approximately $78,099,000 and includes funding for general corporate purposes. Interest on the facility is based on the bank reference rate or Eurodollar rate. The loan agreement contains various restrictive covenants on MGM Grand Australia and the Company, including the maintenance of certain financial ratios and limitations on additional debt, dividends, and disposition of assets. It also restricts acquisitions and similar transactions. The facility matures in December 2000. The indebtedness has been wholly guaranteed by the Company. Maturities of the Company's long term debt are as follows:
Year Ending December 31, (In thousands) - ---------------------------------------- 1996 $ - 1997 67,087 1998 67,087 1999 125,806 2000 101,370 Thereafter 189,749 - ---------------------------------------- $551,099 - --------------------------------========
On September 20, 1995, NYNY Hotel (see Note 1) completed its bank financing for up to $225,000,000. The non-revolving construction line of credit converts to a reducing revolver upon completion of construction and commencement of operations. The Company and Primadonna have guaranteed completion of the project as a condition to facility availability, and have executed a joint and several unlimited Keep-Well Agreement which provides that in the event of insufficient bank loan ratios by NYNY Hotel, the partners will make cash infusions which are sufficient to bring NYNY Hotel into compliance with covenants. 30 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MGM Grand, Inc. and Subsidiaries On June 16, 1993, Grand Laundry, Inc., a wholly-owned subsidiary of MGM Grand Hotel, Inc. obtained a $10,000,000 loan from a financial institution for a laundry facility. The loan was paid off on December 27, 1994. On May 14, 1992, the Company secured a commitment from several banks for a $60,000,000 line of credit for MGM Grand Las Vegas. The facility became available on November 18, 1993, and expires on December 31, 1999. The Company incurs a commitment fee ranging up to .5% for the unused portion of the line of credit. No amounts were outstanding under the line of credit during 1994. During 1995, the Company borrowed and repaid $15,000,000 under the bank line of credit, and as of December 31, 1995, no amounts were outstanding under the facility. NOTE 9. COMMITMENTS AND CONTINGENCIES - -------------------------------------------------------------------------------- The Company and its subsidiaries leased buildings and equipment under non-cancelable operating lease agreements which expire through the year 2000. The leases generally provide that the Company pay taxes, insurance and maintenance expense related to the leased assets. At December 31, 1995, the Company was obligated under non-cancelable operating leases and capital leases to make future minimum lease payments as follows:
(In thousands) Operating Capital Year Ending December 31, Leases Leases - ------------------------------------------------- 1996 $ 3,512 $ 3,194 1997 3,163 3,465 1998 5,588 2,836 1999 1,403 2,872 2000 1,926 1,549 Thereafter 15,518 1,500 - ------------------------------------------------- Total Minimum Lease Payment $13,110 15,416 - --------------------------------=======---------- Amount Representing Interest (2,803) - ------------------------------------------------- Total Obligation Under Capital Leases 12,613 Less: Amount due within one year (2,170) - ------------------------------------------------- Amount due after one year $10,443 - ------------------------------------------=======
Rental expense on the above noted non-cancelable operating leases was $3,552,000, $12,225,000 and $1,152,000 for the years ended December 31, 1995, 1994 and 1993, respectively. Through the date of sale of the airline on December 31, 1994 (see Note 16), 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. 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 for approximately $42,000,000. In addition, during 1993, the Company entered into capital leases for hotel/casino and theme park equipment in the amount of $15,423,000. 31 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MGM Grand, Inc. and Subsidiaries NOTE 10. STOCKHOLDERS' EQUITY - -------------------------------------------------------------------------------- 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. On May 24, 1995, and as amended on November 27, 1995, the Company and MGM Grand Hotel, Inc. entered into a Promotion Agreement with Don King Productions, Inc. ("DKP"), pursuant to which, among other things: (i) MGM Grand Hotel, Inc. has the exclusive right to present six of Mike Tyson's first seven fights; (ii) MGM Grand Hotel, Inc. made a non-interest bearing working capital advance of $15,000,000 to DKP, to be repaid on January 25, 1998; (iii) the Company sold DKP 618,557 treasury shares of the Company's Common Stock for $15,000,000, evidenced by a non-interest bearing promissory note to be repaid in three $5,000,000 installments out of the proceeds of each of the first three Tyson fights which occur in the MGM Grand Garden or at another site selected by MGM Grand Hotel, Inc.; (iv) the Company guaranteed to DKP that the market value of the shares will equal or exceed $30,000,000 ($48.50 per share) as of January 25, 1998; and (v) the Company and DKP entered into security agreements and a registration rights agreement with respect thereto. Through December 31, 1995, one fight had occurred pursuant to the agreement, and accordingly, the Company expensed approximately $2,600,000, representing the accumulated "per fight" amortization of the difference between the guaranteed share price and the market price of $23.00 at December 31, 1995. The remaining balance outstanding of $10,000,000 on the non-interest bearing promissory note is reflected as note receivable stock sale and is included as a reduction to stockholders' equity. As of December 31, 1993, the Company had 1,734,706 shares of its common stock held in treasury. On March 9, 1994, the Company announced that it intended to acquire in open market purchases as many as 1,000,000 shares of its common stock. Through December 31, 1994, the Company had acquired 991,800 shares of its common stock. No further purchases of shares have been made or anticipated. On June 5, 1995, the Company retired all of the remaining 2,107,949 shares of common stock held in treasury, which thereupon resumed the status of authorized but unissued shares. NOTE 11. 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 5,000,000 shares. In 1995, 1,985,250 options were granted at exercise prices ranging from $24.00 to $30.25 pursuant to the nonqualified plan. During 1995, 231,789 nonqualified stock options were exercised at prices ranging from $10.75 to $12.00. At December 31, 1995, 3,106,232 options at exercise prices ranging from $10.25 to $30.25 were outstanding of which 448,769 were exercisable. During the year, certain stock options were amended to reduce the per share exercise prices to $26.00 (the market price on the date of amendment) from exercise prices ranging from $26.25 to $32.50. 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 1,975,000, of which 1,500,000 options become immediately exercisable, and the remaining 475,000 options become exercisable if employment status is diminished within twelve months following a change in control. 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% 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. The Financial Accounting Standards Board issued its Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," which is effective for fiscal years beginning after December 15, 1995. This statement recommends that the Company account for its stock option plans by recognizing the fair value of stock options granted over the vesting period 32 of the option. If the Company does not change its accounting policy, the statement requires, at a minimum, that the Company disclose the pro forma impact on net income and earnings per share as though the recommended accounting method had been used. The Company has determined that it will not change from its current method of accounting for stock options, but it will make the required disclosures in the future. NOTE 12. EMPLOYEE PENSION AND SAVINGS PLANS - -------------------------------------------------------------------------------- Effective February 1993, MGM Grand Hotel, Inc. adopted 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. MGM Grand Hotel, Inc. matches 25% of employee contributions up to a maximum of 1% of a participating employee's eligible gross wages. Additionally, MGM Grand Hotel, Inc. makes contributions to the employees' savings plan based on length of service which vest over a five year period. For the periods ended December 31, 1995 and 1994, MGM Grand Hotel, Inc. contributions under this arrangement were $3,189,000 and $3,361,000, respectively. Effective November 1994, the Company and MGM Grand Hotel, Inc. adopted a Nonqualified Deferred Retirement Plan for 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 MGM Grand Hotel, Inc. 401(k) 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. Effective with the September 1995 acquisition of the Diamond Beach Hotel and Casino by MGM Grand Australia Pty Ltd., (see Notes 1 and 15), an Australian employee retirement fund was acquired. The fund is subject to the Superannuation Industry (Supervision) Act of 1993, imposing a legal obligation on MGM Grand Australia to contribute to all employees. MGM Grand Australia maintains two categories for the plan, depending on employment status: category (A) for executive employees and category (B) for staff. Death and Disablement benefits are provided for all members; however, category (A) members receive increased coverages under both benefits. MGM Grand Australia contributes 6% of salary to satisfy the Superannuation Guarantee Legislation, and allows participants to defer, on a pretax basis, a portion of their salary (minimum 3%) and accumulate tax deferred earnings as a retirement fund. The Full amount vested in members' retirement accounts is payable to the member following termination of employment, or normal retirement. For the period since acquisition on September 7, 1995, to December 31, 1995, MGM Grand Australia contributions under these arrangements were $64,000 and $221,000 for the executive employees and staff, respectively. 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 deer, on a pretax basis, a portion of their salary and accumulate tax deferred earnings as a retirement fund. Administration of the savings plan was assumed by the purchaser of the airline. NOTE 13. COMPANY RESTRUCTURING PLAN - -------------------------------------------------------------------------------- On August 1, 1995, the Company announced details of a comprehensive restructuring plan designed to reduce costs and improve efficiency of operations at MGM Grand Las Vegas. This restructuring resulted in a one-time charge against earnings in the third quarter of 1995 totalling $5,942,000, primarily related to employee severance payments. NOTE 14. INCOME TAXES - -------------------------------------------------------------------------------- The Company adopted Statement of Financial Accounting Standards 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. 33 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MGM Grand, Inc. and Subsidiaries 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, 1995, the Company determined that $18,013,000 of tax benefits did not satisfy the recognition criteria set forth in the standard. Accordingly, a valuation allowance was recorded for the applicable deferred tax assets. The provision (benefit) for income taxes for the years ended December 31, 1995, 1994 and 1993, is as follows:
Years Ended December 31, -------------------------- (In thousands) 1995 1994 1993 - -------------------------------------------------- Current -- Federal $ 2,034 $ 575 $ -- Deferred -- Federal (2,034) (575) -- - -------------------------------------------------- Total $ -- $ -- $ -- - -----------------------===========================
Reconciliation of the Federal income tax rate and the Company's effective rate is as follows:
Years Ended December 31, -------------------------- (In thousands) 1995 1994 1993 - ------------------------------------------------------- Federal income tax rate 35% 35% 35% Changes in valuation allowance (35) (35) -- Net operating loss -- no benefit recorded -- -- (35) - ----------------------------========================== Effective tax rate --% --% --% - ------------------------------------------------------
As of December 31, 1995, after having given effect to SFAS 109, the major tax effected components of the Company's net deferred tax liability are as follows:
As of December 31, --------------------- (In thousands) 1995 1994 - ----------------------------------------------------------- Deferred Tax Asset Net operating loss carryforward $ 45,871 $ 45,559 Bad debt reserve 8,034 6,302 Hotel preopening expenses 8,860 12,448 Accruals, reserves and other 3,479 1,924 Tax credit carryforwards 5,606 1,410 - ----------------------------------------------------------- 71,850 67,643 Less: Valuation allowance (18,013) (32,150) - ----------------------------------------------------------- 53,837 35,493 - ----------------------------------------------------------- Deferred Tax Liability Depreciation and amortization (58,499) (37,963) Capitalized interest (3,472) (3,472) - ----------------------------------------------------------- Total deferred tax liability (61,971) (41,435) - ----------------------------------------------------------- Net Deferred Tax Liability $ (8,134) $ (5,942) - --------------------------------------=====================
34 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MGM Grand, Inc. and Subsidiaries At December 31, 1995, the Company had a tax return net operating loss carryforward of approximately $131,000,000 which will expire as follows:
Net Operating Loss Carryward Year of Expiration (In thousands) - ----------------------------------------- 2006 $ 14,500 2007 9,900 2008 28,100 2009 22,800 2010 55,700 - ----------------------------------------- $131,000 - ---------------------------------========
In addition, the Company has an alternative tax credit carryforward of $3,400,000 which does not expire, and a general business tax credit carryforward of $2,206,000 which expires in different periods through 2010. NOTE 15. AUSTRALIAN CASINO ACQUISITION - -------------------------------------------------------------------------------- On September 7, 1995, the Company, through its wholly owned subsidiary, MGM Grand Australia, Pty Ltd., completed the acquisition of the Diamond Beach Hotel/Casino in Darwin, Australia, for approximately U.S. $75,971,000, subject to certain adjustments. The acquisition costs include $59,972,000 for the purchase of stock and $14,200,000 of debt assumption, and debt and organization costs of $1,799,000. In addition, on October 24, 1995, the Company expended approximately $3,774,000 to acquire the remaining 14.3% interest not already owned in the Territory Property Trust, which owns the land and buildings of MGM Grand Australia. MGM Grand Australia is located on 18 acres of beachfront property on the north central coast of Australia. The resort includes a public and private casino, 97 rooms and suites, restaurants, and other facilities. The Company financed the acquisition through an Australian bank facility (see Note 8). The acquisition was accounted for using the purchase method, whereby the assets acquired were recorded at their fair market values. The purchase price allocation is as follows:
(In thousands) - ------------------------------------------------- Cash $ 7,803 Property, plant and equipment 36,088 Excess of purchase price over fair market value of net assets acquired 40,980 Deferred income taxes (4,226) Net liabilities (900) - ------------------------------------------------- $79,745 - ------------------------------------------=======
Concurrent with the closing of the transaction on September 7, 1995, the Company granted to certain of the sellers an option to acquire 22.5% of the stock of the Company's Australian subsidiary. The option, which was granted for a nominal consideration, is exercisable at any time during the third and fourth years following the closing, at an exercise price of approximately $14,400,000 subject to certain adjustments. The option holders also granted to the Company a two-year option to purchase 25% interests in each of Aspinall's Club in London, U.K., and Aspinall Casino SA in Le Touquet, France, with an exercise price in each case based on the amount of the owners' respective investments in such casinos. 35 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MGM Grand, Inc. and Subsidiaries NOTE 16. DISCONTINUED OPERATIONS/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. As of December 31, 1995, the principal on the Note had been reduced to approximately $432,000. Prior year operating results of MGM Grand Air have been accounted for as discontinued operations, and such financial statements have been restated. Summary operating results of discontinued operations, excluding the above noted gain, are as follows:
For the years ended December 31, 1994 1993 - ------------------------------------------------------------- Revenues $19,535,000 $20,784,000 Reduction in aircraft carrying value $ - $68,948,000 Operating loss $ 7,012,000 $78,691,000
NOTE 17. RELATED-PARTY TRANSACTIONS - -------------------------------------------------------------------------------- In conjunction with the Company's 50% interest in the MGM Grand-Bally's monorail joint venture, the Company, through its wholly-owned subsidiary, MGM Grand Hotel, Inc., contributed approximately $750,000 to the joint venture as part of its operating contributions during 1995. In August 1995, the Company made a $5,000,000 working capital advance to NYNY Hotel. The $5,000,000 advance, together with interest, was repaid during September 1995. The Company and NYNY Hotel has entered into various other transactions and arrangements which, individually and in the aggregate, are not material. During 1995, MGM Grand Las Vegas leased a Boeing 727 aircraft and a Challenger aircraft from Tracinda, which total lease payments of $147,000 and $63,000, respectively. MGM Grand Las Vegas also leased Tracinda's Challenger aircraft through a third party operator for $243,000 during 1995. 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 MGM Grand Las Vegas. 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. On January 6, 1995, the Company contributed the property to NYNY Hotel (see Notes 1 and 6), as its share of the capital contribution to the hotel/casino construction project. In November 1993, MGM Grand Hotel, Inc. 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. During the period from October 10, 1992, through January 20, 1993, MGM Grand Air, Inc. leased a Boeing 757 aircraft from Tracinda, with lease and related payments totalling $479,000. Also during 1993, payments by The Stars' Desert Inn to MGM Grand Air for the charter of aircraft amounted to $67,000. In August 1992, MGM Grand Las Vegas 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 Las Vegas also agreed to use The Stars' Desert Inn casino to test certain gaming equipment from July to September 1993. MGM Grand Las Vegas 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. 36 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MGM Grand, Inc. and Subsidiaries During the years ended December 31, 1995, 1994 and 1993, the Company and Tracinda have entered into various other transactions and arrangements which, individually and in the aggregate, are not material. NOTE 18. INDUSTRY SEGMENTS - -------------------------------------------------------------------------------- The Company operates in the Hotel/Casino industry segment through the operations of the MGM Grand Las Vegas, which commenced operations on December 18, 1993, and MGM Grand Australia, which was acquired on September 7, 1995 (see Note 15). Airline operations have been reclassified for the years presented to Discontinued Operations as a result of the sale of the airline (see Note 16). Sales between industry segments are immaterial and generally at prices approximately equal to those charged to unaffiliated customers.
(In thousands) For the years Ended December 31, 1995 1994 1993 - ------------------------------------------------------------------------------- Net revenues: Hotel/Casino $ 721,843 $ 742,195 $ 37,016 - ------------------------------------------------------------------------------- Operating income (loss): Hotel/Casino $ 120,360 $ 137,394 $ 6,070 Corporate expenses (10,595) (7,679) (5,486) Hotel preopening expenses - - (45,130) Restructuring costs (5,942) - - - ------------------------------------------------------------------------------- $ 103,823 $ 129,715 $ (44,546) - ------------------------------------------------------------------------------- Identifiable assets: Hotel/Casino $1,250,771 $1,088,767 $1,071,612 Discontinued operations - airline - 2,618 2,501 Corporate 31,451 62,126 86,010 - ------------------------------------------------------------------------------- $1,282,222 $1,153,511 $1,160,123 - ------------------------------------------------------------------------------- Capital expenditures: Hotel/Casino $ 37,371 $ 60,086 $ 474,454 Discontinued operations - airline - 5,552 5,568 Corporate 76 338 32 - ------------------------------------------------------------------------------- $ 37,447 $ 65,976 $ 480,054 - ------------------------------------------------------------------------------- Depreciation and amortization: Hotel/Casino $ 55,315 $ 44,346 $ 1,593 Corporate expenses 104 87 54 - ------------------------------------------------------------------------------- $ 55,419 $ 44,433 $ 1,647 - -------------------------------------------------------------------------------
37 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS MGM Grand, Inc. and Subsidiaries 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, 1995 and 1994, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1995. 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, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. /s/ Arthur Andersen LLP ARTHUR ANDERSEN LLP Las Vegas, Nevada January 31, 1996 SELECTED QUARTERLY FINANCIAL RESULTS MGM Grand, Inc. and Subsidiaries
(In thousands, except per share data) For the years ended December 31, 1995 and 1994 Quarter (Unaudited) -------------------------------------------- 1995 First Second Third Fourth Total - -------------------------------------------------------------------------------------------------------- Net revenues $161,885 $168,397 $198,281 $193,280 $721,843 Operating income 20,306 8,680 28,940 45,897 103,823 Net income (loss) 5,525 (6,637) 15,870 31,807 46,565 Per share of common stock: Income (loss) before discontinued operations $ 0.11 $ (0.14) $ 0.33 $ 0.66 $ 0.96 - -------------------------------------------------------------------------------------------------------- Net income (loss) per share $ 0.11 $ (0.14) $ 0.33 $ 0.66 $ 0.96 - -------------------------------------------------------------------------------------------------------- 1994 - -------------------------------------------------------------------------------------------------------- Net revenues $174,958 $186,846 $208,558 $171,833 $742,195 Operating income 18,201 34,426 49,437 27,651 129,715 Income before discontinued operations 3,876 20,258 35,399 14,007 73,540 Net income 3,354 20,195 31,785 19,242 74,576 Per share of common stock: Income before discontinued operations $ 0.08 $ 0.41 $ 0.72 $ 0.29 $ 1.50 Discontinued operations (0.01) - (0.07) 0.11 0.02 - -------------------------------------------------------------------------------------------------------- Net income per share $ 0.07 $ 0.41 $ 0.65 $ 0.40 $ 1.52 - --------------------------------------------------------------------------------------------------------
1995 1994 Common Stock Prices ------------------ ------------------ For the year ended December 31, High Low High Low - -------------------------------------------------------------------------- First quarter $30 3/4 $23 3/4 $39 3/8 $27 3/4 Second quarter 32 1/4 26 3/4 29 3/4 23 1/4 Third quarter 28 23 3/4 32 24 1/4 Fourth quarter 26 23 32 1/4 24 1/8
The Company's Common Stock is listed on the New York Stock Exchange. The symbol is MGG. 39 CORPORATE INFORMATION MGM Grand, Inc. and Subsidiaries
DIRECTORS AND OFFICERS - --------------------------------------------------------------------------------------------------------------------------------- J. Terrence Lanni Terry N. Christensen Alexander M. Haig, Jr. Jerome B. York Director Director Director Director Chairman of the Board Partner, Christensen, White Chairman Vice Chairman Chief Executive Officer Miller, Fink, Jacobs, Glaser Worldwide Associates, Inc. Tracinda Corporation & Shapiro, LLP Alex Yemenidjian Lee A. Iacocca Kenneth A. Rosevear Director Glenn A. Cramer Director Senior Vice President President Director Chairman Development Chief Operating Officer Former Chairman, Iacocca Capital Group Chief Financial Officer Transamerica Airlines Edward J. Jenkins Retired Kirk Kerkorian Vice President Fred Benninger Director Director Willie D. Davis President and T. Patrick Smith Vice Chairman Director Chief Executive Officer, Vice President President and Director, Tracinda Corporation Real Estate Operations James D. Aljian All-Pro Broadcasting, Inc. Director Walter M. Sharp Scott Langsner Executive, Tracinda Director Secretary/Treasurer Corporation President, Walter M. Sharp Company MGM GRAND HOTEL SENIOR OFFICERS - --------------------------------------------------------------------------------------------------------------------------------- Daniel M. Wade Cynthia Kiser Murphey Greg W. Saunders Richard A. Sturm President Senior Vice President Senior Vice President Senior Vice President Chief Operating Officer Human Resources and Hotel Operations Marketing and Entertainment Administration Lyn H. Baxter Daniel H. Scott Senior Vice President Tom Peterman Senior Vice President Operations Senior Vice President Chief Financial Officer General Counsel DESTRON, INC. MGM GRAND MERCHANDISING, INC. - --------------------------------------------------------------------------------------------------------------------------------- Robert V. Moon Bob Bowman President President MGM GRAND AUSTRALIA - --------------------------------------------------------------------------------------------------------------------------------- Patricia Johnson Gordon McIntosh General Manager Senior Vice President Chief Financial Officer Casino Operations TRANSFER AGENT AND INDEPENDENT PUBLIC REGISTRAR FOR COMMON STOCK ACCOUNTANTS - --------------------------------------------------------------------------------------------------------------------------------- Chemical Mellon Arthur Andersen LLP Shareholder Services 3320 W. Sahara Avenue 85 Challenger Road Las Vegas, Nevada 89102 Ridgefield Park, NJ 07660
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. 40 [CAPTION] EX-21 14 LIST OF SUBSIDIARIES EXHIBIT 21 MGM GRAND, INC. LIST OF SUBSIDIARIES DECEMBER 31, 1995 STATE OF NAME INCORPORATION -------------------------- ------------- PARENT MGM Grand, Inc. Delaware SUBSIDIARIES: MGM Grand Hotel, Inc. Nevada MGM Grand Hotel Finance Corp. Nevada Destron, Inc. Nevada MGM Grand Australia Pty, Ltd. Australia MGM Grand Merchandising, Inc. Nevada EX-23 15 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports dated January 31, 1996, included (or incorporated by reference) in this Form 10-K into the Company's previously filed Registration Statements File Nos. 33-35023, 33-38616, and 333-00187. /S/ ARTHUR ANDERSEN LLP ------------------------------ ARTHUR ANDERSEN LLP Las Vegas, Nevada March 21, 1996 EX-27 16 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MGM GRAND, INC. 1995 FORM 10K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS DEC-31-1995 JAN-01-1995 DEC-31-1995 110,017 0 111,633 (33,074) 10,982 212,744 996,968 (93,062) 1,282,222 119,430 0 0 0 488 584,060 584,548 721,843 721,843 0 618,020 825 57,683 59,329 46,565 0 46,565 0 0 0 46,565 .96 0
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