AGREEMENT AND PLAN OF MERGER

 

<PAGE>

 

                                                                    EXHIBIT 10.1

 

                          AGREEMENT AND PLAN OF MERGER

 

                                   DATED AS OF

 

                                 MARCH 22, 2005

 

                                       AMONG

 

                              MANDALAY RESORT GROUP

 

                          CIRCUS CIRCUS MICHIGAN, INC.

 

                                 CCM MERGER INC.

 

                                       AND

 

                               CCM MERGER SUB., INC.

 

<PAGE>

 

                          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"

 

                                      -1-

<PAGE>

 

(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.

 

                                      -2-

<PAGE>

 

            "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

 

                                      -3-

<PAGE>

 

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.

 

                                      -4-

<PAGE>

 

            "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 6.1l(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.

 

                                      -5-

<PAGE>

 

            "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).

 

                                      -6-

<PAGE>

 

            "Resolution Period" means the period ending thirty (30) days

following receipt by an Indemnified Patty 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.

 

                                       -7-

<PAGE>

 

                                   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.

 

                                      -8-

<PAGE>

 

 

            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:

 

                                       -9-

<PAGE>

 

            SECTION 4.01. Organization and Qualification. The Parent is a

corporation and Merger Subsidiary is a corporation, in each case duly organized,

validity 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

 

                                      -10-

<PAGE>

 

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.

 

                                      -11-

<PAGE>

 

            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.

 

                                      -12-

<PAGE>

 

            (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.

 

                                      -13-

<PAGE>

 

            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.

 

                                      -14-

<PAGE>

 

            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).

 

                                      -15-

<PAGE>

 

            (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

 

                                       -16-

 

<PAGE>

 

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;

 

            (1) 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.

 

                                      -17-

 

<PAGE>

 

            The Parent and Merger Subsidiary acknowledge that the Company is not

entitled to appoint a majority of the Members of the Management Committee of DE.

Accordingly, DE may take action which is not in the Ordinary Course of Business

even if the Company's designees to the Management Committee vote against such

action. It shall not be a breach of the obligation of MRG and the Company to

cause DE to comply with the restrictions set forth in this Section 6.01 so long

as (i) the Company's designees to the Management Committee do not vote in favor

of such actions or (ii) the Parent's or its Affiliates designees to the

Management Committee vote in fav