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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.
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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.
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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.
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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.
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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
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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.
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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
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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
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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.
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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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
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.
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
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
</TABLE>
14
<PAGE>
INDEX TO FINANCIAL STATEMENTS
(ITEM 14(A))
<TABLE>
<CAPTION>
ANNUAL
REPORT TO FORM
STOCKHOLDERS 10-K
PAGE PAGE
------------ ----
<S> <C> <C>
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
</TABLE>
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
<PAGE>
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
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
CHARGED
BALANCE AT TO COSTS AMOUNTS BALANCE
BEGINNING AND WRITTEN AT END OF
DESCRIPTION OF PERIOD EXPENSES OFF PERIOD
----------- ---------- --------- ------- ---------
<S> <C> <C> <C> <C>
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
======= ======= ======= =======
</TABLE>
17
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
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.
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
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
</TABLE>
- --------
* 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
<PAGE>
[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
<PAGE>
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
<PAGE>
[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.
<PAGE>
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.
<PAGE>
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
-----------------------------
<PAGE>
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
<PAGE>
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-
<PAGE>
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-
<PAGE>
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
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<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
"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-
<PAGE>
"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-
<PAGE>
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-
<PAGE>
$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-
<PAGE>
(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-
<PAGE>
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-
<PAGE>
"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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
"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-
<PAGE>
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-
<PAGE>
"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-
<PAGE>
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-
<PAGE>
"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-
<PAGE>
"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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
"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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
"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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
"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-
<PAGE>
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):
---
<TABLE>
<CAPTION>
Reduction Date Amount
-------------- ------
<S> <C>
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
</TABLE>
-32-
<PAGE>
"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-
<PAGE>
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-
<PAGE>
"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.
----
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<PAGE>
"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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
(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-
<PAGE>
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-
<PAGE>
(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-
<PAGE>
(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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
(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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
(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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
(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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
(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.
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<PAGE>
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-
<PAGE>
(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-
<PAGE>
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
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Loans hereunder are fully paid and all Letters of Credit have expired.
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<PAGE>
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;
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<PAGE>
(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.
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<PAGE>
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.
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<PAGE>
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-
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<PAGE>
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
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<PAGE>
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.
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<PAGE>
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
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<PAGE>
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.
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<PAGE>
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
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<PAGE>
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
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<PAGE>
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
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<PAGE>
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.
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<PAGE>
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
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<PAGE>
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
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<PAGE>
(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
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<PAGE>
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:
<TABLE>
<CAPTION>
Fiscal Quarter or Period Ratio
------------------------ -----
<S> <C>
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;
</TABLE>
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.
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<PAGE>
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.
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<PAGE>
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
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<PAGE>
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
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<PAGE>
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).
----------
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<PAGE>
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
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<PAGE>
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
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<PAGE>
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;
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<PAGE>
(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-
<PAGE>
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.
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<PAGE>
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
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<PAGE>
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
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<PAGE>
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;
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<PAGE>
(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.
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<PAGE>
(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
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<PAGE>
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.
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<PAGE>
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-
<PAGE>
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
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<PAGE>
(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
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<PAGE>
(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;
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<PAGE>
(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.
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<PAGE>
(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
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<PAGE>
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.
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<PAGE>
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
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<PAGE>
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
--------
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<PAGE>
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
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<PAGE>
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-
<PAGE>
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.
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<PAGE>
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.
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<PAGE>
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;
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(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
---------
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<PAGE>
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.
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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.
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<PAGE>
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
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<PAGE>
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
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<PAGE>
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).
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<PAGE>
(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
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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
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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
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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
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<PAGE>
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
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<PAGE>
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
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<PAGE>
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
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<PAGE>
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
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<PAGE>
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-
<PAGE>
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
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<PAGE>
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
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<PAGE>
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
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<PAGE>
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
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<PAGE>
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
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<PAGE>
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
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<PAGE>
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
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<PAGE>
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
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<PAGE>
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
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<PAGE>
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
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<PAGE>
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
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<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
(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-
<PAGE>
(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-
<PAGE>
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-
<PAGE>
(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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
(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-
<PAGE>
(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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
(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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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
<PAGE>
i
_____________________________________________________________________________
TABLE OF CONTENTS
_____________________________________________________________________________
<TABLE>
<CAPTION>
<S> <C>
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
</TABLE>
<PAGE>
ii
_________________________________________________________________________
<TABLE>
<S> <C> <C>
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
</TABLE>
<PAGE>
iii
________________________________________________________________________
<TABLE>
<S> <C> <C> <C>
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
</TABLE>
<PAGE>
iv
____________________________________________________________________
<TABLE>
<S> <C> <C> <C>
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
</TABLE>
<PAGE>
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
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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;
<PAGE>
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.
<PAGE>
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).
<PAGE>
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;
<PAGE>
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,
<PAGE>
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
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11
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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
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12
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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
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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.
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14
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(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:
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15
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(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
<PAGE>
16
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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
<PAGE>
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
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18
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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.
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19
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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;
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20
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(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;
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21
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(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
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22
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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.
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23
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(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
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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.
<PAGE>
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.
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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.
<PAGE>
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.
<PAGE>
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;
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
32
_______________________________________________________________________________
shall, forthwith repay or procure repayment to the relevant
Vendors, UD Indemnitors or Havewin Vendors of any amount
equal to
<PAGE>
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.
<PAGE>
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,
<PAGE>
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
<PAGE>
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.
<PAGE>
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:
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38
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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;
<PAGE>
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
<PAGE>
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
<PAGE>
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:
<PAGE>
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.
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<PAGE>
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;
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________________________________________________________________________________
(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
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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.
<PAGE>
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________________________________________________________________________________
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.
<PAGE>
APPENDIX A
<PAGE>
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.
<PAGE>
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.
<PAGE>
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;
<PAGE>
54
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(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
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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,
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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:
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(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.
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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
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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.
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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,
<PAGE>
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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
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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
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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.
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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.
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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
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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.
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ENVIRONMENT
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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.
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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
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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
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104 The Company and each of the Subsidiaries has complied with all its
obligations under the relevant trust deeds, including the payment of all
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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
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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.
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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.
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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.
<PAGE>
APPENDIX B
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APPENDIX B WARRANTIES AND REPRESENTATIONS WITH RESPECT TO
ULTRABRIDGE DARWIN LIMITED
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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
<PAGE>
72
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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.
<PAGE>
73
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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.
<PAGE>
74
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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;
<PAGE>
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(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.
<PAGE>
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:
<PAGE>
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
<PAGE>
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.
<PAGE>
APPENDIX C
<PAGE>
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
<PAGE>
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:
<PAGE>
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;
<PAGE>
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.
<PAGE>
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.
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<PAGE>
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) -------
<PAGE>
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) -------
<PAGE>
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 -------
<PAGE>
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)
<PAGE>
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
-----
<PAGE>
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
________________________________________________________________________________
<PAGE>
________________________________________________________________________
T A B L E O F C O N T E N T S
________________________________________________________________________
<TABLE>
<S> <C>
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
</TABLE>
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<PAGE>
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________________________________________________________________________________
<TABLE>
<S> <C>
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
</TABLE>
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________________________________________________________________________________
<TABLE>
<S> <C>
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
</TABLE>
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<PAGE>
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________________________________________________________________________________
<TABLE>
<S> <C>
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
</TABLE>
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>
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________________________________________________________________________________
<TABLE>
<S> <C> <C> <C>
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
</TABLE>
________________________________________________________________________________
<PAGE>
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________________________________________________________________________________
<TABLE>
<S> <C> <C> <C>
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
</TABLE>
________________________________________________________________________________
<PAGE>
________________________________________________________________________________
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;
________________________________________________________________________________
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(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
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________________________________________________________________________________
(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
________________________________________________________________________________
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________________________________________________________________________________
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
________________________________________________________________________________
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________________________________________________________________________________
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;
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________________________________________________________________________________
(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,
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________________________________________________________________________________
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.
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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;
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(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).
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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.
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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.
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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.
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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.
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(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.
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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
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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.
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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.
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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
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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;
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(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;
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(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.
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(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.
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(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
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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).
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(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.
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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
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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;
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(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:
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(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:
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(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.
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(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
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(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;
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(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).
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(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;
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(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.
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(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
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(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.
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(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
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(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,
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(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;
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(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.
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(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
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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;
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(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
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(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:
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(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
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(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:
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(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.
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(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.
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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;
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(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.
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(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.
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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.
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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,
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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.
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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
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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>
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>
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
________________________________________________________________________________
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
(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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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
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<PAGE>
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
________________
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
"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
<PAGE>
"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
<PAGE>
"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
<PAGE>
"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
<PAGE>
"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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
(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
<PAGE>
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
<PAGE>
(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
<PAGE>
(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
<PAGE>
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
<PAGE>
(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
<PAGE>
<TABLE>
<CAPTION>
AGGREGATE PERCENTAGE OF MINIMUM PERCENTAGE OF
MGMGA SHARES HELD BY DIRECTORS OF RELEVANT
OPTION HOLDERS BOARD TO BE APPOINTED
OR REMOVED
<S> <C>
20%-22.5% 20%
less than 20% Nil
</TABLE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
SCHEDULE 1
----------
(OPTION HOLDERS)
<TABLE>
<CAPTION>
NAME ADDRESS AND AGREED
- ---- ----------- ------
FACSIMILE NUMBER PROPORTION
---------------- ----------
<S> <C> <C>
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
</TABLE>
44
<PAGE>
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
<PAGE>
(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.
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<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
(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
<PAGE>
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%);
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<PAGE>
(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
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<PAGE>
(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:-
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<PAGE>
(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
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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
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(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.
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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:-
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(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).
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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.
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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.
<PAGE>
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.
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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
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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
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<PAGE>
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
<PAGE>
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
<PAGE>
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,
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<PAGE>
, 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
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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
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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
<PAGE>
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
<PAGE>
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
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(b)
(c)
(d)
13
<PAGE>
(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
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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
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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:
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(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.
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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
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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).
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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
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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
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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
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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.
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<PAGE>
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
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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
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<PAGE>
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
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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
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<PAGE>
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
------------------------
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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
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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
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16.1
16.2
16.3
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<PAGE>
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
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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.
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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.
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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
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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.
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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.
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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
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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
<PAGE>
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
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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
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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
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<PAGE>
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.
<PAGE>
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
<PAGE>
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.
<PAGE>
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;
<PAGE>
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.
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS MGM Grand, Inc. and Subsidiaries
<TABLE>
<CAPTION>
(In thousands, except share data)
For the years ended December 31, 1995 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
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
- -------------------------------------=========================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
22
<PAGE>
CONSOLIDATED BALANCE SHEETS MGM Grand, Inc. and Subsidiaries
<TABLE>
<CAPTION>
(In thousands, except per share data)
As of December 31, 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C>
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
- ----------------------------------------------================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
23
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS MGM Grand, Inc. and Subsidiaries
<TABLE>
<CAPTION>
(In thousands)
For the years ended December 31, 1995 1994 1993
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
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
- --------------------------------------------------------====================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
24
<PAGE>
CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY MGM Grand, Inc. and Subsidiaries
<TABLE>
<CAPTION>
(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
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
25
<PAGE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
(In thousands) 1995 1994 1993
- ----------------------------------------------------
<S> <C> <C> <C>
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
- ----------------------------========================
</TABLE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
(In thousands) 1995 1994 1993
- --------------------------------------------------------------
<S> <C> <C> <C>
Cash payments made for:
Interest, net of amounts capitalized $55,750 $58,975 $3,535
- --------------------------------------========================
State and federal taxes $ 620 $ 755 $ 203
- --------------------------------------========================
</TABLE>
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:
<TABLE>
<CAPTION>
At December 31,
------------------
(In thousands) 1995 1994
- --------------------------------------
<S> <C> <C>
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
- --------------------==================
</TABLE>
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
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MGM Grand, Inc. and Subsidiaries
NOTE 5. PROPERTY AND EQUIPMENT
- --------------------------------------------------------------------------------
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
At December 31,
------------------
(In thousands) 1995 1994
- --------------------------------------------------
<S> <C> <C>
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
- --------------------------------==================
</TABLE>
NOTE 6. INVESTMENTS IN UNCONSOLIDATED AFFILIATES
- --------------------------------------------------------------------------------
Investments in unconsolidated affiliates consisted of the following:
<TABLE>
<CAPTION>
At December 31,
-----------------
(In thousands) 1995 1994
- ---------------------------------------------------
<S> <C> <C>
New York-New York Hotel, LLC $40,938 $ 1,455
MGM Grand-Bally's Monorail, LLC 12,673 9,500
- ---------------------------------------------------
$53,611 $10,955
- ----------------------------------=================
</TABLE>
NOTE 7. OTHER ACCRUED LIABILITIES
- --------------------------------------------------------------------------------
Other accrued liabilities consisted of the following:
<TABLE>
<CAPTION>
At December 31,
-----------------
(In thousands) 1995 1994
- ---------------------------------------------------
<S> <C> <C>
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
- ----------------------------------=================
</TABLE>
29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MGM Grand, Inc. and Subsidiaries
NOTE 8. LONG TERM DEBT
- --------------------------------------------------------------------------------
Long term debt consisted of the following:
<TABLE>
<CAPTION>
At December 31,
------------------
(In thousands) 1995 1994
- -------------------------------------------------
<S> <C> <C>
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
- -------------------------------==================
</TABLE>
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:
<TABLE>
<CAPTION>
Year Ending December 31, (In thousands)
- ----------------------------------------
<S> <C>
1996 $ -
1997 67,087
1998 67,087
1999 125,806
2000 101,370
Thereafter 189,749
- ----------------------------------------
$551,099
- --------------------------------========
</TABLE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
(In thousands) Operating Capital
Year Ending December 31, Leases Leases
- -------------------------------------------------
<S> <C> <C>
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
- ------------------------------------------=======
</TABLE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------
(In thousands) 1995 1994 1993
- --------------------------------------------------
<S> <C> <C> <C>
Current -- Federal $ 2,034 $ 575 $ --
Deferred -- Federal (2,034) (575) --
- --------------------------------------------------
Total $ -- $ -- $ --
- -----------------------===========================
</TABLE>
Reconciliation of the Federal income tax rate and the Company's effective rate
is as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------
(In thousands) 1995 1994 1993
- -------------------------------------------------------
<S> <C> <C> <C>
Federal income tax rate 35% 35% 35%
Changes in valuation
allowance (35) (35) --
Net operating loss --
no benefit recorded -- -- (35)
- ----------------------------==========================
Effective tax rate --% --% --%
- ------------------------------------------------------
</TABLE>
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:
<TABLE>
<CAPTION>
As of December 31,
---------------------
(In thousands) 1995 1994
- -----------------------------------------------------------
<S> <C> <C>
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)
- --------------------------------------=====================
</TABLE>
34
<PAGE>
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:
<TABLE>
<CAPTION>
Net Operating Loss
Carryward
Year of Expiration (In thousands)
- -----------------------------------------
<S> <C>
2006 $ 14,500
2007 9,900
2008 28,100
2009 22,800
2010 55,700
- -----------------------------------------
$131,000
- ---------------------------------========
</TABLE>
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:
<TABLE>
<CAPTION>
(In thousands)
- -------------------------------------------------
<S> <C>
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
- ------------------------------------------=======
</TABLE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
For the years ended December 31, 1994 1993
- -------------------------------------------------------------
<S> <C> <C>
Revenues $19,535,000 $20,784,000
Reduction in aircraft
carrying value $ - $68,948,000
Operating loss $ 7,012,000 $78,691,000
</TABLE>
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
<PAGE>
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.
<TABLE>
<CAPTION>
(In thousands)
For the years Ended December 31, 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
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
- -------------------------------------------------------------------------------
</TABLE>
37
<PAGE>
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
<PAGE>
SELECTED QUARTERLY FINANCIAL RESULTS MGM Grand, Inc. and Subsidiaries
<TABLE>
<CAPTION>
(In thousands, except per share data)
For the years ended December 31, 1995 and 1994 Quarter
(Unaudited) --------------------------------------------
1995 First Second Third Fourth Total
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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
- --------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1995 1994
Common Stock Prices ------------------ ------------------
For the year ended December 31, High Low High Low
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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
</TABLE>
The Company's Common Stock is listed on the New York Stock Exchange. The symbol
is MGG.
39
<PAGE>
CORPORATE INFORMATION MGM Grand, Inc. and Subsidiaries
<TABLE>
<CAPTION>
DIRECTORS AND OFFICERS
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
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
</TABLE>
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]
<PAGE>
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
<PAGE>
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
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
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.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 110,017
<SECURITIES> 0
<RECEIVABLES> 111,633
<ALLOWANCES> (33,074)
<INVENTORY> 10,982
<CURRENT-ASSETS> 212,744
<PP&E> 996,968
<DEPRECIATION> (93,062)
<TOTAL-ASSETS> 1,282,222
<CURRENT-LIABILITIES> 119,430
<BONDS> 0
0
0
<COMMON> 488
<OTHER-SE> 584,060
<TOTAL-LIABILITY-AND-EQUITY> 584,548
<SALES> 721,843
<TOTAL-REVENUES> 721,843
<CGS> 0
<TOTAL-COSTS> 618,020
<OTHER-EXPENSES> 825
<LOSS-PROVISION> 57,683
<INTEREST-EXPENSE> 59,329
<INCOME-PRETAX> 46,565
<INCOME-TAX> 0
<INCOME-CONTINUING> 46,565
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 46,565
<EPS-PRIMARY> .96
<EPS-DILUTED> 0
</TABLE>
