AGREEMENT AND PLAN OF MERGER

 

This Agreement and Plan of Merger (this “ Agreement ”) is made and entered into as of March 22, 2005 by and among Mandalay Resort Group, a Nevada corporation (“ MRG ”), Circus Circus Michigan, Inc., a Michigan corporation (the “ Company ”), CCM Merger Inc., a Michigan corporation (“ Parent ”), CCM Merger Sub., Inc., a Michigan corporation (“ Merger Subsidiary ”) and MGM MIRAGE, a Delaware Corporation (“MGM MIRAGE”).

 

WHEREAS, the Company, a wholly owned subsidiary of MRG, is a member of Detroit Entertainment, L.L.C., a Michigan limited liability company (“DE”), which owns the assets and business of the MotorCity Casino (“ MotorCity ”).

 

WHEREAS, an Affiliate of the Parent is also a holder of an indirect interest in DE through Atwater Casino Group, L.L.C., a Michigan limited liability company (“ACG”).

 

WHEREAS, MRG and MGM MIRAGE are parties to the MGM MIRAGE/MRG Merger Agreement pursuant to which MGM MIRAGE will acquire MRG as a wholly-owned subsidiary.

 

WHEREAS, MGM MIRAGE holds an indirect interest in MGM Grand Detroit, LLC, a Delaware limited liability company doing business as the MGM Grand Detroit Casino.

 

WHEREAS, the Michigan Gaming Control and Revenue Act prohibits any person from owning more than a 10% interest in more than one casino in Detroit, Michigan.

 

WHEREAS, the Parent desires to acquire the Company through a merger (the “ Merger ”) of Merger Subsidiary with and into the Company, which merger shall take place immediately prior to the consummation of MGM MIRAGE’s acquisition of MRG.

 

NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein, the parties hereto hereby agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

“ ACG ” shall have the meaning set forth in the recitals.

 

“ Additional Tax Liability ” shall have the meaning set forth in Section 6.08(d).

 

“ Affiliate ” means, with respect to any specified Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person.  For purposes of this definition, “control”

 

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(including the terms “controlled by” and “under common control with”) with respect to the relationship between or among two or more Persons, means the possession, directly or indirectly or as a trustee or executor, of the power to direct or cause the direction of the management and policies of a Person whether through the ownership of voting securities, as trustee or executor, by Contract or otherwise, including the ownership, directly or indirectly, of securities having the power to elect a majority of the board of directors or similar body governing the management and policies of such Person; provided, however, that notwithstanding the foregoing, in no event shall the term Affiliate, when used in the context of MGM MIRAGE, include any entities owned or controlled by or under common control with, the majority stockholder of MGM MIRAGE, other than MGM MIRAGE and each Subsidiary of MGM MIRAGE or entity controlled by MGM MIRAGE.

 

“ Agreement ” shall have the meaning set forth in the preamble.

 

“ Allocation Statement ” shall have the meaning set forth in Section 6.08(b).

 

“ Antitrust Division ” shall have the meaning set forth in Section 6.06(b).

 

“ Articles of Merger ” shall have the meaning set forth in Section 2.02.

 

“ Board of Arbitration ” shall have the meaning set forth in Section 8.03(c).

 

“business day” shall mean any Monday, Tuesday, Wednesday, Thursday or Friday which banks located in Detroit, Michigan are not authorized to close.

 

“City ” shall have the meaning set forth in Section 6.04(a).

 

“ Claim Notice ” means written notification pursuant to Section 8.03(a) of a Third Party Claim as to which indemnity under Section 8.02 is sought by an Indemnified Party, enclosing a copy of all papers served, if any, and specifying the nature of and basis for such Third Party Claim and for the Indemnified Party’s claim against the Indemnifying Party under Section 8.02, together with the amount or, if not then reasonably determinable, the estimated amount, determined in good faith, of the Loss arising from such Third Party Claim.

 

“ Closing ” shall have the meaning set forth in Section 2.05.

 

“ Closing Date ” shall have the meaning set forth in Section 2.05.

 

“ Code ” means the Internal Revenue Code of 1986, as amended from time to time, including the rules and regulations promulgated thereunder.

 

“ Company ” shall have the meaning set forth in the preamble.

 

“ Company Common Stock ” shall have the meaning set forth in Section 2.04(a).

 

“ Company Disclosure Schedule ” shall have the meaning set forth in Article V.

 

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“ Company Group ” means any combined, unitary, consolidated or other affiliated group within the meaning of Section 1504 of the Code or otherwise, of which the Company or any Subsidiary is or has been a member for federal, state, local or foreign tax purposes.

 

“ Company Material Adverse Effect ” means any event, change, circumstance or effect that is or is reasonably likely to be materially adverse to (i) the business, assets, operations, financial condition or results of operations of the Company or (ii) the ability of the Company to consummate the transactions contemplated by this Agreement.

 

“ Company Required Statutory Approvals ” shall have the meaning set forth in Section 5.09.

 

“ Contract ” shall have the meaning set forth in Section 4.02(b).

 

“ DE ” shall have the meaning set forth in the recitals.

 

“ Development Agreement ” shall have the meaning set forth in Section 6.04(a).

 

“ Dispute Period ” means the period ending thirty (30) days following receipt by an Indemnifying Party of either a Claim Notice or an Indemnity Notice.

 

“ EDC ” shall have the meaning set forth in Section 6.04(a).

 

“ Effective Time ” shall have the meaning set forth in Section 2.02.

 

“ Elections ” shall have the meaning set forth in Section 6.08(a).

 

“Employees” shall have the meaning set forth in Section 6.15.

 

“ Encumbrance ” means any security interest, pledge, mortgage, option, lien (including environmental and Tax liens), assessment, lease, charge, encumbrance, adverse claim, preferential arrangement, equitable interest, right of first refusal or restriction of any kind, including any restriction on the use, voting, transfer, receipt of income or other exercise of any attributes of ownership.

 

“ Excess Cash ” shall mean $8,000,000, which is inclusive of all distributions, including tax distributions.

 

“ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended.

 

“ FTC ” shall have the meaning set forth in Section 6.06(b).

 

“ GAAP ” means United States generally accepted accounting principles and practices as in effect from time to time and applied consistently throughout the periods involved.

 

“ Gaming Authorities ” means, collectively, (a) the Nevada Gaming Commission, (b) the Nevada Gaming Control Board, (c) the New Jersey Division of Gaming Enforcement, (d) the New Jersey Casino Control Commission, (e) the Mississippi Gaming Commission, (f) the Michigan Gaming Control Board, (g) the Illinois Gaming Board and (h) any other Governmental

 

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Entity that holds regulatory, licensing or permit authority over gambling, gaming or casino activities conducted by MRG, the Parent, MGM MIRAGE, MotorCity or their respective Affiliates within its jurisdiction.

 

“ Gaming Laws ” shall mean the federal, state, local or foreign statutes, ordinances, rules, regulations, permits, consents, approvals, licenses, judgments, orders, decrees, injunctions and other authorizations governing or relating to the current or contemplated casino and gaming operations and activities of MRG, MGM MIRAGE and their respective Affiliates, the Parent and Merger Subsidiary.

 

“ Governmental Entity ” means any (a) nation, principality, state, commonwealth, province, territory, county, municipality, district or other jurisdiction of any nature, (b) governmental or quasi-governmental entity of any nature, including any governmental division, subdivision, department, agency, bureau, branch, office, commission, council, board, instrumentality, officer, official, representative, organization, taxing authority or unit and any court or other tribunal (foreign, federal, state or local), or (c) Person or body exercising, or entitled to exercise, any executive, legislative, judicial, administrative, regulatory, police, military or taxing authority or power of any nature, including the Gaming Authorities.

 

“ Governmental Order ” means any order, writ, judgment, injunction, decree, stipulation, determination, or award entered by or with any Governmental Entity.

 

“ Guaranty ” shall have the meaning set forth in Section 6.04(a).

 

“ HSR Act ” shall have the meaning set forth in Section 4.02(c).

 

“ Indemnified Party ” means a Parent Indemnified Party or a MRG Indemnified Party, as the case may be.

 

“ Indemnifying Party ” means the MRG Indemnifying Party, the MGM MIRAGE Indemnifying Party or the Parent Indemnifying Parties, as the case may be.

 

“ Indemnity Notice ” means written notification pursuant to Section 8.03(b) of a claim for indemnity under Article VIII by an Indemnified Party, specifying the nature of and basis for such claim, together with the amount or, if not then reasonably determinable, the estimated amount, determined in good faith, of the Loss arising from such claim.

 

“Intercompany Account Settlement” shall have the meaning set forth in Section 6.13.

 

“ IRS ” means the Internal Revenue Service.

 

“ Laws ” means all laws, statutes, rules, regulations, ordinances and other pronouncements having the effect of law of the United States, any foreign country or any domestic or foreign state, county, city or other political subdivision or of any Governmental Entity, including all Gaming Laws.

 

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“ Liabilities ” means all debts, obligations and other liabilities of a Person (whether absolute, accrued, contingent, fixed or otherwise, or whether due or to become due), including those arising under any Law, action, investigation, inquiry or order and those arising under any Contract.

 

“ Loss ” means any action, cost, damage, Liability, loss, injury, penalty, or obligation of any kind or nature, including interest, penalties, fines, legal, accounting, and other professional fees and expenses incurred in the investigation, collection, prosecution, determination and defense thereof and amounts paid in settlement payable to third parties that may be imposed on or otherwise incurred or suffered and which give rise to a valid claim for indemnification under Article VIII.  In addition, (a) if the Parent shall breach its obligation to consummate the Merger or (b) if Ms. Ilitch shall breach her obligation to cause the Merger Consideration to be delivered as provided in Section 6.07, Loss shall include (i) the difference between the Merger Consideration and any lesser amount received by MRG from the disposition of the Company and (ii) all other actual and reasonable costs and expenses (including fees and expenses of investment bankers and attorneys) incurred by MRG in connection with such disposition of the Company; provided that in the case of either clause (a) or (b), the amount of Loss shall not exceed $300 million.

 

“ Material Contract ” shall mean any Contract providing for aggregate payments of at least $250,000 over the term of the Contract.

 

“ MCL ” means Sections 450.1701-450.1774 of the Michigan Compiled Law.

 

“ Merger ” shall have the meaning set forth in the recitals.

 

“ Merger Consideration ” shall mean Five Hundred Twenty-Five Million Dollars ($525,000,000).

 

“ Merger Subsidiary ” shall have the meaning set forth in the preamble.

 

“ MGM MIRAGE ” shall have the meaning set forth in the preamble.

 

“MGM MIRAGE Indemnifying Party” means MGM MIRAGE.

 

“ MGM MIRAGE/MRG Merger Agreement ” shall mean that certain Agreement and Plan of Merger dated as of June 15, 2004 among MGM MIRAGE, MGM MIRAGE Acquisition Co #61 and MRG.

 

“MotorCity Customer Data” shall have the meaning set forth in Section 6.11(c).

 

“ MotorCity ” shall have the meaning set forth in the recitals.

 

“ MRG Indemnified Parties ” means MRG and MGM MIRAGE and their respective officers, directors, employees, shareholders, agents and representatives, successors and assigns.

 

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“ MRG Indemnifying Parties ” shall mean MGM MIRAGE and, after the Merger, shall include MRG.

 

“ MRG ” shall have the meaning set forth in the preamble.

 

“ Ms. Ilitch ” shall mean Marian Ilitch.

 

“ Operating Agreement ” means the Operating Agreement of Detroit Entertainment, L.L.C. dated as of October 7, 1997, as amended through the date hereof and as may be further amended from time to time.

 

“ Ordinary Course of Business ” means an action taken by a Person if (a) such action is consistent with the past practices of such Person and is taken in the normal day-to-day operations of such Person and (b) such action is not required to be authorized by the board of directors (or management committee) of such Person (or by any Person or group of Persons exercising similar authority) and is not required to be specifically authorized by the parent company (if any) of such Person, including actions that are consistent with approvals previously received from the Board of Directors of the Company (or the Management Committee of DE).

 

“ Parent ” shall have the meaning set forth in the preamble.

 

“ Parent Disclosure Schedule ” shall have the meaning set forth in Article IV.

 

“ Parent Indemnified Parties ” means Ms. Ilitch, the Parent, Merger Subsidiary and, after the Merger, the Surviving Corporation, and their respective directors, managers, officers, employees, agents, shareholders, representatives, successors and assigns.

 

“ Parent Indemnifying Parties ” means the Parent and, after the Merger, the Surviving Corporation.

 

“ Parent Material Adverse Effect ” means any event, change, circumstance or effect that is or is reasonably likely to be materially adverse to (i) the business, assets, operations, financial condition or results of operations of the Parent and its Subsidiaries taken as a whole, or (ii) the ability of the Parent to consummate the transactions contemplated by this Agreement.

 

“ Parent Required Statutory Approvals ” shall have the meaning set forth in Section 4.02(c).

 

“ Person ” means an individual, corporation, partnership, limited liability company, joint stock company, joint venture, association, trust or other entity or organization, including a Governmental Entity.

 

“ Pre-Closing Period ” shall have the meaning set forth in Section 9.01.

 

“ Pre-Closing Period Tax Return ” shall have the meaning set forth in Section 9.02(a).

 

“ Recipient ” shall have the meaning set forth in Section 9.04(a).

 

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“ Resolution Period ” means the period ending thirty (30) days following receipt by an Indemnified Party of a written notice from an Indemnifying Party stating that it disputes all or any portion of a claim set forth in an Indemnity Notice.

 

“ SEC ” shall mean the Securities and Exchange Commission.

 

“ Straddle Period ” shall have the meaning set forth in Section 9.01(a).

 

“ Straddle Period Tax Returns ” shall have the meaning set forth in Section 9.02(b)

 

“ Subsidiary ” means, with respect to any specified Person any other person of which more than 50% of the total voting power of shares of capital stock or other equity interests entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers, trustees or other governing body thereof is at the time owned or controlled, directly or indirectly, by such Person and/or one or more of the other subsidiaries of such Person.

 

“ Surviving Corporation ” shall have the meaning set forth in Section 2.01.

 

“ Tax Claim ” shall have the meaning set forth in Section 9.04(a).

 

“ Taxes ” means any and all taxes, charges, customs, fees, levies, duties, Liabilities, impositions or other assessments, including income, gross receipts, profits, excise, real or personal property, environmental, recapture, sales, use, value-added, withholding, social security, retirement, employment, unemployment, occupation, service, license, net worth, payroll, franchise, capital gains, stamp, transfer and recording taxes, general or special assessments, fees and charges, imposed by the IRS or any other taxing authority (whether domestic or foreign including any state, county, local or foreign government or any subdivision or taxing agency thereof (including a United States possession)), and all taxes, fees and other charges assessed under the Gaming Laws (excluding any and all fees, charges, costs and expenses assessed against Parent or any of its principals by the Gaming Authorities in connection with the filing, investigation and/or processing of the applications of Parent and any of its principals to obtain all Governmental Approvals necessary to own and operate the Company and MotorCity and its facilities and related amenities), whether computed on a separate, consolidated, unitary, combined or any other basis; and any interest, fines, penalties, additions to tax, or additional amounts attributable to, or imposed upon, or with respect to, any such taxes, charges, customs, fees, levies, duties, Liabilities, impositions or other assessments.

 

“ Tax Returns ” means all information or filing required to be supplied to any taxing authority or jurisdiction (foreign or domestic) with respect to Taxes, including attachments thereto, declarations, disclosures, schedules, estimates and elections and amendments thereof, including information returns.

 

“ Third Party Claim ” shall have the meaning set forth in Section 8.03(a).

 

“ Transfer Taxes ” shall have the meaning set forth in Section 9.05.

 

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ARTICLE II

 

THE MERGER; CLOSING

 

SECTION 2.01.   Merger .

 

Upon the terms and subject to the conditions of this Agreement, and in accordance with the MCL, Merger Subsidiary shall be merged with and into Company at the Effective Time.  Following the Merger, the separate existence of Merger Subsidiary shall cease and the Company shall continue as the surviving corporation (the “ Surviving Corporation ”) and a direct or indirect wholly-owned subsidiary of the Parent, and shall succeed to and assume all the rights and obligations of Merger Subsidiary in accordance with the MCL.

 

SECTION 2.02.   Effective Time . The Merger shall become effective when a Certificate of Merger (the “ Articles of Merger ”), executed in accordance with the relevant provisions of the MCL, is filed with the Michigan Department of Labor & Economic Growth.  When used in this Agreement, the term “Effective Time” shall mean the date and time at which the Articles of Merger are accepted for record or such later time established by the Articles of Merger.  The filing of the Articles of Merger shall be made on the Closing Date.

 

SECTION 2.03.   Effects of the Merger . The Merger shall have the effects set forth in the applicable provisions of the MCL.

 

SECTION 2.04.   Conversion of Shares . At the Effective Time, by virtue of the Merger and without any action on the part of MRG, the Company, the Parent or Merger Subsidiary:

 

(a)            each issued and outstanding share of the Company’s common stock, no par value per share (“ Company Common Stock ”), held by the Company as treasury stock, if any, shall cease to exist, and no payment or consideration shall be made with respect thereto.

 

(b)            all the issued and outstanding shares of Company Common Stock, other than shares of Company Common Stock referred to in paragraph (a) above, shall be converted into the right to receive an aggregate amount in cash, without interest, equal to the Merger Consideration.  At the Effective Time, all such shares of Company Common Stock shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist, and the holder of the certificate(s) representing shares of Company Common Stock shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration, without interest; and

 

(c)            each issued and outstanding share of capital stock or ownership interest of Merger Subsidiary shall be converted into one fully paid and nonassessable share of common stock, no par value per share, of the Surviving Corporation.

 

(d)            pursuant to this transaction, the Surviving Corporation, an entity wholly owned and controlled by Ms. Ilitch, succeeds to substantially all the assets of the Company by operation of law.

 

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SECTION 2.05.   The Closing . The closing of the transactions contemplated by this Agreement (the “ Closing ”) shall take place at the executive offices of MGM MIRAGE, 3600 Las Vegas Blvd. South, Las Vegas, NV 89109, immediately prior to the consummation of the merger of MRG with and into MGM MIRAGE Acquisition Co. #61 as provided in the MGM MIRAGE/MRG Merger Agreement (the “ Closing Date ”).  On the Closing Date, the Parent shall cause the Merger Consideration to be paid to MRG by wire transfer of immediately available funds to an account designated by MRG.  Immediately prior to the Closing the Company shall distribute to MRG all cash held by it, such that the Company shall not hold any cash as of the Effective Time.  In addition, within 15 days following the Closing Date the Parent shall pay the Excess Cash to the MRG.  At the Effective Time the Merger Consideration shall be paid to MRG and certificates representing the shares of Company Common Stock shall be delivered to the Parent.

 

SECTION 2.06.   No Prejudice of Rights . The parties acknowledge that (i) nothing contained in Section 2.05 shall in any way prejudice the rights of the other member of DE under the Operating Agreement and (ii) the Operating Agreement, including, without limitation, Articles VI and VIII thereof, remains in full force and effect.

 

ARTICLE III

 

THE SURVIVING CORPORATION; DIRECTORS AND OFFICERS

 

SECTION 3.01.   Articles of Incorporation . The Articles of Incorporation of the Company in effect at the Effective Time shall be the articles of incorporation of the Surviving Corporation until amended in accordance with applicable Law and the terms of this Agreement.

 

SECTION 3.02.   Bylaws . The bylaws of the Company in effect at the Effective Time shall be the bylaws of the Surviving Corporation, until amended, altered or repealed in accordance with applicable Law.

 

SECTION 3.03.   Directors and Officers . The directors of Merger Subsidiary immediately prior to the Effective Time shall be the directors of the Surviving Corporation as of the Effective Time.  The officers of Merger Subsidiary shall be the officers of the Surviving Corporation as of the Effective Time.

 

ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES OF THE PARENT AND MERGER SUBSIDIARY

 

The Parent and Merger Subsidiary jointly and severally represent and warrant to MRG that, except as set forth in the Disclosure Schedule of the Parent dated as of the date hereof (the “ Parent Disclosure Schedule ”), it being agreed that disclosure of any item on the Parent Disclosure Schedule shall be deemed disclosure with respect to all Sections of this Agreement if the relevance of such item is reasonably apparent from the face of the Parent Disclosure Schedule:

 

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SECTION 4.01.   Organization and Qualification . The Parent is a corporation and Merger Subsidiary is a corporation, in each case duly organized, validly existing and in good standing under the laws of the state of its incorporation or formation and has the requisite corporate or other organizational power and authority to own, lease and operate its assets and properties and to carry on its business as it is now being conducted.  Each of the Parent and Merger Subsidiary is duly qualified and licensed to transact business and is in good standing in each jurisdiction in which the properties owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary, except where the failure to be so organized, existing, qualified, licensed and in good standing would not reasonably be expected to have a Parent Material Adverse Effect.

 

SECTION 4.02.   Authority; Non-Contravention; Approvals .

 

(a)            The Parent and Merger Subsidiary each have full corporate or organizational power and authority to enter into this Agreement and to consummate the transactions contemplated hereby.  This Agreement and the Merger have been approved and adopted by the Boards of Directors of the Parent and Merger Subsidiary and the sole stockholder of Merger Subsidiary, and no other corporate or similar proceedings on the part of the Parent or Merger Subsidiary are necessary to authorize the execution and delivery of this Agreement or the consummation by the Parent and Merger Subsidiary of the transactions contemplated hereby.  This Agreement has been duly executed and delivered by each of Parent and Merger Subsidiary and, assuming the due authorization, execution and delivery hereof by MRG and the Company, constitutes a valid and legally binding agreement of each of Parent and Merger Subsidiary enforceable against each of them in accordance with its terms, except that such enforcement may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting or relating to enforcement of creditors’ rights generally and (ii) general equitable principles.

 

(b)            The execution, delivery and performance of this Agreement by each of Parent and Merger Subsidiary and the consummation of the Merger and the transactions contemplated hereby do not and will not violate, conflict with or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration under, or result in the creation of any lien, security interest or encumbrance upon any of the properties or assets of Parent or any of its Subsidiaries under any of the terms, conditions or provisions of (i) the respective certificates or articles of incorporation, articles of organization, bylaws or operating agreements of Parent or any of its Subsidiaries, (ii) any statute, law, ordinance, rule, regulation, judgment, decree, order, injunction, writ, permit or license of any court or governmental authority applicable to Parent or any of its Subsidiaries or any of their respective properties or assets subject, in the case of consummation, to obtaining prior to the Effective Time the Parent Required Statutory Approvals or (iii) any note, bond, mortgage, indenture, deed of trust, license, franchise, permit, concession, contract, lease or other instrument, obligation or agreement of any kind (each a “ Contract ” and collectively “ Contracts ”) to which Parent or any of its Subsidiaries is now a party or by which Parent or any of its Subsidiaries or any of their respective properties or assets may be bound or affected.  Excluded from the foregoing sentence of this paragraph (b), insofar as it applies to the terms, conditions or provisions described in clauses (ii) and (iii) of this paragraph (b), are such

 

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violations, conflicts, breaches, defaults, terminations, accelerations or creations of liens, security interests or encumbrances that would not reasonably be expected to have a Parent Material Adverse Effect and would not delay or hinder the consummation of the Merger.

 

(c)            Except for (i) the filings by the Parent required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “ HSR Act ”), (ii) applicable filings, if any, with the SEC pursuant to the Exchange Act, if applicable, (iii) filing of the Articles of Merger with the Secretary of State of the State of Michigan in connection with the Merger (the filings and approvals referred to in clauses (i) through (iii) are collectively referred to as the “ Parent Required Statutory Approvals ”) and (iv) notices, filings and approvals required by Gaming Laws and Gaming Authorities, no declaration, filing or registration with, or notice to, or authorization, consent or approval of, any governmental or regulatory body or authority is necessary for the execution and delivery of this Agreement by Parent and Merger Subsidiary or the consummation by Parent and Merger Subsidiary of the transactions contemplated hereby, other than such declarations, filings, registrations, notices, authorizations, consents or approvals which, if not made or obtained, as the case may be, would not reasonably be expected to have a Parent Material Adverse Effect and would not delay the consummation of the Merger.

 

SECTION 4.03.   Funding of Merger Consideration . The Parent has obtained a commitment from Deutsche Bank and Merrill Lynch to provide all financing required by the Parent to consummate the Merger.  True, correct and complete copies of such commitments have been provided to MGM MIRAGE.

 

SECTION 4.04.   Licensing . The Parent and Merger Subsidiary know of no reason why either would be denied any required licenses or approvals from any Gaming Authority with jurisdiction over the transactions contemplated hereby, and Parent and Merger Subsidiary reasonably expect that all licenses and approvals required under Gaming Laws will be obtained from all such Gaming Authorities prior to or following the Closing in accordance with applicable Gaming Laws.

 

SECTION 4.05.   Litigation . Except as set forth on Schedule 4.05, there is no action, suit or proceeding, claim, arbitration or investigation, including indemnification matters, against Parent or its Affiliates or any of their respective properties or assets, pending or, to the knowledge of Parent, threatened against Parent or its Affiliates or any of their respective properties or assets, before any Governmental Entity or arbitration body, the adverse determination of which would reasonably be expected to have a Parent Material Adverse Effect or delay the Merger and there is no Governmental Order or arbitration award outstanding against Parent or its Affiliates or any of their respective properties or assets which would reasonably be expected to have a Parent Material Adverse Effect or delay the Merger.

 

SECTION 4.06.   Access to Information . The Parent and Merger Subsidiary acknowledge that Marian Ilitch, the President of the Parent and Merger Subsidiary, is a member of the Management Committee of DE.  In such capacity Ms. Ilitch has had access to such information concerning DE and MotorCity as she determined to be necessary in connection with the execution and delivery of this Agreement.  Accordingly, except as expressly provided otherwise, MRG and the Company are not making any representations or warranties concerning DE or MotorCity.

 

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SECTION 4.07.   Brokers and Finders . The Parent has not entered into any contract, arrangement or understanding with any person or firm which may result in the obligation of MRG or MGM MIRAGE to pay any investment banking fees, finder’s fees or brokerage fees in connection with the transactions contemplated hereby.

 

ARTICLE V

 

REPRESENTATIONS AND WARRANTIES OF MRG AND THE COMPANY AND
WARRANTIES OF MGM MIRAGE

 

With respect to Sections 5.01 to 5.04, MRG and the Company jointly and severally represent and warrant to the Parent and Merger Subsidiary that, except as set forth in the Disclosure Schedule of Company dated as of the date hereof (the “ Company Disclosure Schedule ”), it being agreed that disclosure of any item on the Company Disclosure Schedule shall be deemed disclosure with respect to all Sections of this Agreement if the relevance of such item is reasonably apparent from the face of the Company Disclosure Schedule:

 

SECTION 5.01.   Organization and Qualification . MRG and the Company are each corporations, duly organized, validly existing and in good standing under the state of their respective incorporation and each has the requisite corporate power and authority to own, lease and operate its assets and properties and to carry on its business as it is now being conducted, except where, in either instance, the failure to be so organized or formed, existing, qualified, licensed and in good standing would not reasonably be expected to have a Company Material Adverse Effect.  Copies of the Company’s Articles of Incorporation, as in effect on the date hereof, including all amendments thereto certified as true, correct and complete by the Secretary of State of the State of Michigan, have heretofore been delivered to the Parent.

 

SECTION 5.02.   Capitalization .

 

(a)            The authorized capital stock of the Company consists of 60,000 shares of Company Common Stock.  As of the date hereof, 100 shares of Company Common Stock are issued and outstanding.  Each such share is validly issued, fully paid, nonassessable and free of preemptive rights.  MRG is the record and beneficial owner of 100% of the outstanding shares of Company Common Stock.  The Company Common Stock is owned free and clear of all Encumbrances, excepting only restrictions on the subsequent transfer as may be imposed under applicable Laws (including Gaming Laws).  There are no bonds, debentures, notes or other indebtedness of the Company having voting rights (or convertible into securities having voting rights).  There are no other equity interests or securities of the Company reserved for issuance or any outstanding subscriptions, options, warrants, rights, “phantom” stock rights, convertible or exchangeable securities, stock appreciation rights, commitments, agreements, arrangements or undertakings of any kind, or other Contracts (other than this Agreement) granting to any Person any interest in or right to acquire at any time, or upon the happening of any stated event, any securities of the Company, or any interest in, exchangeable for, or convertible into, a security of the Company or pursuant to which any Person is or may be entitled to receive any payment or other value based on the revenues, earnings or financial performance, stock price performance or other attribute of the Company.

 

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(b)            The Company is a member of DE and, as such, has the rights set forth in the Operating Agreement.  The Company’s membership interest in DE is owned by the Company free and clear of all Encumbrances, excepting only restriction on the subsequent transfer by the Surviving Corporation as may be imposed under applicable Laws or under the Operating Agreement.  Other than its membership interests in DE, the Company does not own directly or indirectly, of record or beneficially, or have the right to acquire under any Contract, any capital stock or equity interests or any securities convertible, exchangeable, redeemable or exercisable into capital stock or equity interests of any other Person.

 

SECTION 5.03.   Authority; Non-Contravention; Approvals .

 

(a)            MRG and the Company each has full corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby.  This Agreement and the Merger have been approved and adopted by the Board of Directors of Company and by the sole shareholder of Company.  No other corporate proceedings on the part of MRG or the Company are necessary to authorize the execution and delivery of this Agreement or the consummation by the Company of the transactions contemplated hereby.  This Agreement has been duly executed and delivered by MRG and the Company, and, assuming the due authorization, execution and delivery hereof by the Parent and Merger Subsidiary, constitutes a valid and legally binding agreement of MRG and the Company enforceable against MRG and the Company in accordance with its terms, except that such enforcement may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting or relating to enforcement of creditors’ rights generally and (ii) general equitable principles.

 

(b)            The execution, delivery and performance of this Agreement by MRG and the Company and the consummation of the Merger and the transactions contemplated hereby do not and will not violate, conflict with or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration under, or result in the creation of any lien, security interest or encumbrance upon any of the properties or assets of MRG and the Company or any of their Subsidiaries under any of the terms, conditions or provisions of (i) the respective articles of incorporation, bylaws or other organizational documents of MRG and the Company or any of their Subsidiaries, (ii) any statute, law, ordinance, rule, regulation, judgment, decree, order, injunction, writ, permit or license of any court or governmental authority applicable to MRG and the Company or any of their Subsidiaries or any of their respective properties or assets, subject, in the case of consummation, to obtaining (prior to the Effective Time) the Company Required Statutory Approvals, or (iii) any Contract to which MRG and the Company or any of their Subsidiaries is now a party or by which MRG and the Company or any of their Subsidiaries or any of their properties or assets may be bound or affected; provided that no representation or warranty is being made by MRG, the Company or MGM MIRAGE with respect to the Operating Agreement.  Excluded from the foregoing sentence of this paragraph (b), insofar as it applies to the terms, conditions or provisions described in clauses (ii) and (iii) of this paragraph (b), are such violations, conflicts, breaches, defaults, terminations, accelerations or creations of liens, security interests or encumbrances that would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect and would not prevent or materially delay the consummation of the Merger.

 

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SECTION 5.04.   Brokers and Finders . The Company has not entered into any contract, arrangement or understanding with any person or firm which may result in the obligation of the Parent, the Surviving Corporation or MotorCity to pay any investment banking fees, finder’s fees or brokerage fees in connection with the transactions contemplated hereby.

 

With respect to Sections 5.05 through 5.11, MGM MIRAGE warrants to the Parent and Merger Subsidiary that, except as set forth in the Company Disclosure Schedule, it being agreed that disclosure of any item on the Company Disclosure Schedule shall be deemed disclosure with respect to all Sections in the Agreement if the relevance of such item is reasonably apparent from the face of the Company Disclosure Schedule:

 

SECTION 5.05.   Operations of the Company . The Company is not, and since its formation has not, engaged in any business not related to MotorCity or the Company’s ownership interest therein.  The Company is not a party to any Contract, other than this Agreement, the Operating Agreement and other agreements arising from or relating to MotorCity or the Company’s ownership interest therein.

 

SECTION 5.06.   Real Property . The Company does not own or lease and has never owned or leased any real property.

 

SECTION 5.07.   Employees . The Company does not have any employees except as set forth on Schedule 5.07.

 

SECTION 5.08.   Litigation . Except as set forth on Schedule 5.08, there are no suits, actions, claims, arbitrations, proceedings or investigations pending or, to the knowledge of the Company, threatened, against or affecting the Company or any Subsidiary of the Company which, individually or in the aggregate, would reasonably be expected to have a Company Material Adverse Effect, nor are there any judgments, decrees, injunctions, rules or orders of any Governmental Entity or arbitrator outstanding against the Company or any Subsidiary of the Company which, individually or in the aggregate, would reasonably be expected to have a Company Material Adverse Effect.

 

SECTION 5.09.   Statutory Approvals . Except for (i) the filings by MRG and the Company required by the HSR Act, (ii) applicable filings, if any, with the SEC pursuant to the Exchange Act, (iii) the filing of the Articles of Merger with the Department of Labor and Economic Growth in connection with the Merger, and (iv) any filings with or approvals from authorities required solely by virtue of the jurisdictions in which MRG and the Company or their respective Subsidiaries conduct any business or own any assets (the filings and approvals referred to in clauses (i) through (iv) are collectively referred to as the “Company Required Statutory Approvals”), no declaration, filing or registration with, or notice to, or authorization, consent or approval of, any governmental or regulatory body or authority is necessary for the execution and delivery of this Agreement by MRG and the Company or the consummation by MRG and the Company of the transactions contemplated hereby, other than such declarations, filings, registrations, notices, authorizations, consents or approvals which, if not made or obtained, as the case may be, would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect and would not prevent or materially delay the consummation of the Merger.

 

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SECTION 5.10.   No Undisclosed Liabilities . Except for any Liabilities arising under the Operating Agreement or otherwise related to MotorCity or the Company’s ownership interest therein, the Company does not have any Liabilities.

 

SECTION 5.11.   Taxes .

 

(a)            The Company and each Company Group (i) has timely filed (taking into account all valid extensions of time for filing) with the appropriate taxing authorities all material federal, state and local Tax Returns required by applicable Law to be filed by the Company, or any Company Group, as the case may be, and (ii) will timely file any such returns required by Law to be filed (taking into account all valid extensions of time for filing) on or prior to the Closing Date.  Such Tax Returns are (and, to the extent they will be filed prior to the Closing Date, will be) complete and accurate in all material respects.  All Taxes of the Company and each Company Group shown due on any Tax Return or otherwise owed have been, or in the case of Taxes due after the date of this Agreement and prior to the Closing Date, will be, timely paid.  The Company does do not have pending any request for an extension of time within which to file Tax Returns.

 

(b)            No federal, state, local or foreign audits or other administrative proceedings or court proceedings are presently pending with regard to any Taxes or Tax Returns of the Company or any Company Group.  The Company has not received notice of any such pending audits or proceedings.  There are no outstanding waivers extending the statutory period of limitation relating to the payment of Taxes due from the Company.

 

(c)            Neither the IRS nor any other taxing authority (whether domestic or foreign) has asserted, against the Company or any Company Group any material deficiency or material claim for Taxes.

 

(d)            There are no Encumbrances for Taxes upon any property or assets of the Company, except for Encumbrances for Taxes not yet due and payable.

 

(e)            The Company has no obligation under any Tax sharing agreement or similar arrangement.

 

(f)             The Company has not received a written ruling from any taxing authority.

 

(g)            No jurisdiction where the Company or any Company Group does business has made a claim that any of such entities is required to file a Tax Return in such jurisdiction.

 

(h)            The Company has complied in all respects with all applicable laws relating to the payment and withholding of Taxes (including withholding of Taxes pursuant to Sections 1441, 1442, 3121 and 3402 of the Code or any comparable provision of any state, local or foreign laws) and has, within the time and in the manner prescribed by applicable law, withheld from and paid over to the proper Taxing Authorities all amounts required to be so withheld and paid over under such laws.

 

(i)             The Company is not a party to any “listed transaction” as defined in Treasury Regulation
Section 1.6011-4(b)(2).

 

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(j)             MRG is not “foreign person” within the meaning of Section 1445 of the Code.

 

(k)            The Company has never (i) made an election under Section 1362 of the Code to be treated as an S corporation for Federal Income Tax purposes or (ii) made any similar election under any comparable provision of any state, local or foreign tax law.

 

ARTICLE VI

 

COVENANTS

 

SECTION 6.01.   Conduct of Business by Company and DE Pending the Closing Date .  Except as otherwise contemplated by this Agreement or disclosed in Section 6.01 of the Company Disclosure Schedule, after the date hereof and prior to the Closing Date or earlier termination of this Agreement, unless the Parent shall otherwise agree in writing, whether such agreement is made pursuant to this Agreement or the Operating Agreement (and, if made pursuant to this Agreement, which agreement shall not be unreasonably withheld or delayed), MRG shall cause the Company, and to the extent MRG is able to do so or is required to do so under the relevant constituent documents respecting DE, shall cause DE, taking into account any fiduciary duties it may owe to persons having direct or indirect interests in DE, to:

 

(a)            conduct their respective businesses in the Ordinary Course of Business;

 

(b)            not amend the articles of incorporation or bylaws of the Company or the Operating Agreement of DE;

 

(c)            not split, combine or reclassify their outstanding capital stock or equity interests;

 

(d)            not issue, sell, pledge or dispose of, or agree to issue, sell, pledge or dispose of, any additional shares or equity interests of, or any options, warrants or rights of any kind to acquire any shares of, or equity interests in the Company or DE or any debt or equity securities convertible into or exchangeable for such equity interests;

 

(e)            with respect to the Company, not (i) incur or become contingently liable with respect to any indebtedness for borrowed money, (ii) make any acquisition of any assets or businesses, (iii) sell, pledge, dispose of or encumber any assets or businesses or (iv) enter into any binding contract, agreement, commitment or arrangement with respect to any of the foregoing;

 

(f)             with respect to MotorCity, not (i) incur or become contingently liable with respect to any indebtedness for borrowed money other than (A) borrowings in the Ordinary Course of Business, and (B) borrowings to refinance existing outstanding indebtedness, (ii) make any acquisition of any assets or businesses other than expenditures for current assets in the Ordinary Course of Business and for fixed or capital assets in the Ordinary Course of Business, (iii) sell, pledge, dispose of or encumber any assets or businesses other than (A) sales or dispositions of businesses or assets as may be required by applicable Law, and (B) sales or

 

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dispositions of assets in the Ordinary Course of Business or (iv) enter into any binding contract, agreement, commitment or arrangement with respect to any of the foregoing;

 

(g)            not execute, modify or amend in any material respect or terminate any Material Contract or waive, release or assign any material rights or claims under any Material Contract, except, in each such case, in the Ordinary Course of Business;

 

(h)            use reasonable efforts to preserve intact their respective business organizations and goodwill, keep available the services of their respective present officers and key employees, and preserve the goodwill and business relationships with customers and others having business relationships with them, other than as expressly permitted by the terms of this Agreement;

 

(i)             not enter into, amend, modify or renew any employment, consulting, severance or similar agreements with, pay any bonus or grant any increase in salary, wage or other compensation or any increase in any employee benefit to, any directors, officers or employees of the Company or DE, except in each such case (i) as may be required by applicable Law, (ii) to satisfy obligations existing as of the date hereof, (iii) to extend the term of any existing employment agreements to a date not later than the day following the Closing Date; or (iv) in the Ordinary Course of Business;

 

(j)             not enter into, establish, adopt, amend or modify any pension, retirement, stock purchase, savings, profit sharing, deferred compensation, consulting, bonus, group insurance or other employee benefit, incentive or welfare plan, agreement, program or arrangement, in respect of any directors, officers or employees of the Company or DE, except, in each such case (i) as may be required by applicable Law or pursuant to the terms of this Agreement, (ii) to satisfy obligations existing as of the date hereof, including pursuant to any collective bargaining agreement or (iii) in the Ordinary Course of Business;

 

(k)            not make any material change with respect to financial accounting methods, policies or procedures, unless required by GAAP or made in the Ordinary Course of Business;

 

(l)             not make capital expenditures or enter into any binding commitment or contract to make capital expenditures, except (i) capital expenditures which DE is currently committed to make, (ii) capital expenditures consistent with DE’s capital spending budget, (iii) capital expenditures for emergency repairs and other capital expenditures necessary in light of circumstances not anticipated as of the date of this Agreement which are necessary to avoid significant disruption to DE’s business or operations consistent with past practice, or (iv) repairs and maintenance in the Ordinary Course of Business; and

 

(m)           except as provided in Section 6.08, not make, change or revoke any material Tax election unless required by Law or make any agreement or settlement with any taxing authority regarding any material amount of Taxes or which would reasonably be expected to increase the obligations of the Surviving Corporation or DE to pay Taxes in the future.

 

For avoidance of doubt, until the Effective Time, the Company and DE shall continue to make distributions in the Ordinary Course of Business.