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Participation Agreement

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PARTICIPATION AGREEMENT


Dated as of November 9, 1993


Entered Into Among


MGM Grand Hotel, Inc., as Sublessee


Grand Equipment, Inc., as Lessee


MGM Grand, Inc., as Guarantor


The Certificate Purchasers
Listed on Schedule I hereto


and


Norwest Bank Minnesota, National Association
not individually, except as expressly
set forth herein, but as Trustee


TABLE OF CONTENTS
-----------------


Page
---- ARTICLE I DEFINITIONS.............................. 2


ARTICLE II CLOSING


Section 2.1 Transactions............................. 2
Section 2.2 Conditions for Participants.............. 3
Section 2.3 Failure to Close......................... 8


ARTICLE III EQUIPMENT AND RELEASE


Section 3.1 Equipment Deliveries..................... 9
Section 3.2 Release of Pledge........................ 9


ARTICLE IV GENERAL PROVISIONS


Section 4.1 Nature of Transaction.................... 10
Section 4.2 Amounts Due Under Master Lease and
Sublease................................. 10
Section 4.3 Replacement of Equipment................. 11
Section 4.4 Failure to Deliver Certificates of
Acceptance............................... 12
Section 4.5 Substitution for Letter of Credit........ 12


ARTICLE V REPRESENTATIONS AND WARRANTIES


Section 5.1 Representations and Warranties of
Lessee, Sublessee and Guarantor.......... 12
Section 5.2 Representations and Warranties of
Certificate Purchasers................... 20
Section 5.3 Representations and Warranties of
Trustee.................................. 20


ARTICLE VI COVENANTS


Section 6.1 Covenants of Lessee...................... 22
Section 6.2 Covenants of Sublessee................... 25
Section 6.3 Covenants of Guarantor................... 27
Section 6.4 Covenants of Trustee..................... 30


ARTICLE VII GENERAL INDEMNITY


Section 7.1 Indemnity................................ 30
Section 7.2 Excessive Use Indemnity.................. 31
Section 7.3 WAIVER OF SECTION 1542................... 32


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Page
----
Section 7.4 Indemnification of First Security Bank
of Utah, N.A.............................. 32
Section 7.5 Swap Agreement Indemnity.................. 33


ARTICLE VIII GENERAL TAX INDEMNITY


Section 8.1 General Tax Indemnity..................... 33
Section 8.2 Contest................................... 34
Section 8.3 Gross Up.................................. 36
Section 8.4 Tax Returns............................... 36
Section 8.5 Tax Character of Transaction.............. 37


ARTICLE IX LIMITATIONS


Section 9.1 Limitation of Liability of Trustee........ 37
Section 9.2 Payments from Trust Estate................ 38


ARTICLE X MISCELLANEOUS


Section 10.1 Survival of Covenants..................... 38
Section 10.2 APPLICABLE LAW............................ 38
Section 10.3 Effect and Modification of Participation
Agreement................................. 38
Section 10.4 Notices................................... 39
Section 10.5 Transaction Costs......................... 40
Section 10.6 Counterparts.............................. 41
Section 10.7 Severability.............................. 41
Section 10.8 Successors and Assigns.................... 41
Section 10.9 Brokers................................... 41
Section 10.10 JURY TRIAL................................ 41
Section 10.11 Captions; Table of Contents............... 41
Section 10.12 FINAL AGREEMENT........................... 42
Section 10.13 No Third-Party Beneficiaries.............. 42
Section 10.14 Further Assurances........................ 42
Section 10.15 Reproduction of Documents................. 42
Section 10.16 Consideration for Consents to Waivers
and Amendments............................ 43
Section 10.17 Submission to Jurisdiction................ 43


Schedule I -- Commitments Schedule II -- Equipment Maintenance Agreements Schedule III -- Plans Schedule IV -- Purchase Money Security Interests Schedule V -- Nevada Gaming Regulation Schedule X -- Definitions Exhibit A -- Form of Trust Agreement Exhibit B -- Form of Lease


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Exhibit C -- Form of Sublease Exhibit D -- Form of Guaranty Exhibit E -- Form of Pledge Agreement Exhibit F -- Form of Letter of Credit Schedule I -- Form of Letter of Credit Schedule II -- Form of Letter of Credit Exhibit G 2.2(b)(i) -- Form of Purchase Order Assignment Schedule I -- List of Purchase Agreements Exhibit G 2.2(b)(iii) -- Form of Certificate of Conveyance Schedule I -- Equipment List Exhibit G 2.2(b)(iv) -- Form of Certificate of Acceptance Exhibit G 2.2(b)(v) -- Form of Certificate of Possession Exhibit G 2.2(b)(vi) -- Form of Sublease Assignment Schedule I -- Form of Consent and Agreement of Sublessee Exhibit G 2.2(b)(vii) -- Form of Intercreditor Agreement Exhibit G 2.2(e)(ii) -- Form of Trustee's Opinion of Counsel


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PARTICIPATION AGREEMENT
(MGM EQUIPMENT TRUST 1993-1)


This PARTICIPATION AGREEMENT, dated as of November 9, 1993, is entered into among: (a) MGM Grand Hotel, Inc., a Nevada corporation, (b) Grand Equipment, Inc., a Delaware corporation, (c) MGM Grand Inc., a Delaware corporation, (d) the Persons named on Schedule I hereto, and (e) Norwest Bank Minnesota, a national association, not in its individual capacity, except as otherwise expressly provided herein, but solely as trustee under the Trust Agreement substantially in the form of Exhibit A hereto.


WHEREAS, immediately preceding the execution hereof, the Lessee and the Trustee entered into the Trust Agreement;


AND WHEREAS, on the Effective Date, the Sublessee will convey to the Lessee its interests in the items of Equipment identified on Schedule I to the Trust Agreement and the Lessee shall lease such Equipment to the Sublessee pursuant to the Sublease substantially in the form of Exhibit C hereto;


AND WHEREAS, the Lessee will contribute to the Trustee its interest in the items of Equipment identified on Schedule I to the Trust Agreement and the Trustee will issue to the Sublessee the Certificates for the account of the Lessee;


AND WHEREAS, upon receiving such Equipment, the Trustee will lease such items of Equipment to the Lessee pursuant to the Master Lease substantially in the form of Exhibit B hereto and simultaneously therewith the Sublease shall be considered restated as a sublease subject and subordinate to the terms and conditions of the Master Lease;


AND WHEREAS, on the Effective Date, the Guarantor will enter into the Guaranty substantially in the form of Exhibit D hereto guaranteeing to the Trustee for the benefit of the Certificate Holders the payment and performance of all Obligations of the Lessee and Sublessee pursuant to the Operative Agreements;


AND WHEREAS, on the Effective Date, the Guarantor will enter into the Pledge Agreement substantially in the form of Exhibit E hereto pledging to the Trustee for the benefit of the Certificate Holders, certain Certificates of Deposit to secure the Obligations;


AND WHEREAS, on the Effective Date, the Guarantor will provide to the Trustee for the benefit of certain of the Certificate Holders a Letter of Credit issued by BofA, a national banking association, substantially in the form of Exhibit F


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hereto partially securing the performance of the Guarantor pursuant to the Guaranty;


AND WHEREAS, on the Effective Date the Certificate Purchasers will purchase the Certificates from the Sublessee;


NOW THEREFORE, in consideration of the mutual terms and conditions herein contained, the parties hereto agree as follows:


ARTICLE I


DEFINITIONS


Capitalized terms used but not defined herein (including those used in the foregoing recitals) shall have the meanings specified in Schedule X hereto
---------- unless the context otherwise requires, which Schedule X shall for all purposes
---------- constitute a part of this Participation Agreement.


ARTICLE II


CLOSING


Section 2.1 Transactions. Subject to the terms and conditions hereof, the
------------ following transactions shall occur and be closed at the offices of Lionel Sawyer & Collins, 1700 Valley Bank Plaza, 300 South Fourth Street, Las Vegas, Nevada 89101, Las Vegas, Nevada time, on the date not later than November 30, 1993 set by the Lessee and Sublessee with at least four Business Days prior notice to the other Participants hereunder (the "Effective Date"), which transactions shall be
-------------- deemed to have occurred simultaneously:


(a) The Sublessee shall convey to the Lessee all of the Sublessee's right, title and interest in and to the items of Equipment identified on Schedule I to the Trust Agreement and the Lessee shall contribute
---------- to the Trustee, subject to the Sublease all of the Lessee's right, title and interest in and to such items of Equipment, each in consideration for the Certificates;


(b) (i) Each Certificate Purchaser shall purchase from the Sublessee at 100% of the principal amount thereof, the Certificates set forth opposite the name of such Certificate Purchaser on Schedule I hereto (x) with an
---------- amortization schedule consistent with the description of such Certificate contained in Schedule I to the reasonable satisfaction of the subject
---------- Certificate Purchaser and (y) with an interest rate or yield set at the spread specified in a letter agreement between Sublessee and each subject Certificate Purchaser over the interpolated


2


interest rate of United States Treasury securities with the same average life or final maturity, as the case may be, as the Certificate being acquired to the reasonable satisfaction of the subject Certificate Purchaser four Business Days prior to the Effective Date; (ii) the Certificates to be purchased by such Certificate Purchaser shall be registered in the name of such Certificate Purchaser; and (iii) all of such Certificates shall be issued under the Trust Agreement pursuant to Article IV thereof, provided, however that the obligations
---------- -------- ------- of the Certificate Purchasers shall be several and not joint;


(c) The Lessee and the Sublessee shall enter into the Sublease, the Trustee and the Lessee shall enter into the Master Lease, and the Lessee shall assign its interest in the Sublease to the Trustee;


(d) The Guarantor shall enter into the Guaranty guaranteeing to the Trustee for the benefit of the Certificate Holders the payment and performance of the Lessee and the Sublessee of all of the Obligations pursuant to the Operative Agreements and the Guarantor shall enter into the Pledge Agreement to further secure such Obligations;


(e) The Guarantor shall provide to the Trustee for the benefit of the Certificate Holders the Letter of Credit; and


(f) The Sublessee shall pay the Transaction Costs then payable to the persons entitled thereto.


All payments described above in this Section 2.1 shall be made by wire transfer
----------- of immediately available funds to the account specified for the recipient by written notice from the recipient to the payor no less than 2 Business Days prior to the Effective Date.


Section 2.2 Conditions for Participants. The obligation of each
--------------------------- Participant to perform its obligations under Section 2.1 shall be subject to the
----------- fulfillment to the satisfaction of (including, with respect to writings, such writings being in form and substance reasonably satisfactory to the addressee or beneficiary thereof), or the waiver in writing by, such Participant of the following conditions precedent on or prior to the Effective Date (except that the obligation of any party hereto shall not be subject to such party's own performance or compliance):


(a) Each of the parties hereto shall have made the payments and executed and delivered the documents, instruments, and certificates that such party is required to make, execute or deliver pursuant to Section 2.1
----------- hereof or this Section 2.2;
-----------


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(b) (i) The Lessee and the Sublessee shall have executed and delivered
to the Trustee a Purchase Order Assignment substantially in the form of
Exhibit G 2.2(b)(i) hereto with respect to items of Equipment which have
-------------------
not been delivered, are subject to an installation agreement or are subject
to a retainage and financing statements with respect to all the items of
Equipment identified in Schedule I to the Trust Agreement. Such financing
----------
statements shall have been filed for recording in all appropriate offices
of all relevant jurisdictions;


(ii) a fully executed release of lien ("Release of Lien") in
---------------
recordable form shall have been delivered to Trustee by Continental Bank,
N.A., as beneficiary under the Deed of Trust, together with executed copies
of Form UCC-2 release statements sufficient to release the items of
Equipment, purchase orders and purchase agreements identified in Schedule I
----------
to the Trust Agreement and evidence such release, respectively from the
lien of such Deed of Trust;


(iii) the Trustee shall have received a fully executed Certificate of
Conveyance substantially in the form of Exhibit G 2.2(b)(iii) with respect
---------------------
to the items of Equipment identified on Schedule I to the Trust Agreement
----------
and which are not subject to a Purchase Order Assignment;


(iv) a fully executed Certificate of Acceptance substantially in the
form of Exhibit G 2.2.(b)(iv) with respect to the items of Equipment
---------------------
identified on Schedule I to the Trust Agreement which have been delivered
----------
and become operational shall have been delivered to Trustee;


(v) a fully executed Sublease Assignment substantially in the form of

Exhibit G 2.2.(b)(vi) shall have been delivered to the Trustee;
---------------------


(vi) a fully executed Certificate of Possession substantially in the
form of Exhibit G 2.2(b)(v) with respect to the items of Equipment on
-------------------
Schedule I to the Trust Agreement which are then located at the Hotel but
for which a Certificate of Acceptance is not delivered shall have been
delivered to the Trustee;


(vii) a fully executed Officer's Certificate of Lessee and Sublessee
shall have been delivered to the Trustee and the Certificate Purchasers in
form acceptable to each Certificate Purchaser, setting forth (A) the total
contract price of each purchase agreement or purchase order (as adjusted);
(B) the total amount of payments made to Manufacturers of Equipment as of a
date immediately


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preceding the Effective Date; and (C) the total amount of payments to be
paid to Manufacturers after the Effective Date (assuming all work and
services to be performed under such agreements is conforming) and the
payment date (or estimated date) of each such payment, in each case by
purchase agreement or purchase order;


(viii) Certificates of Deposit subject to the Pledge Agreement shall
have been delivered to the Trustee in an aggregate principal amount at
least equal to the greater of: (A) the amount by which the principal
amount of the Certificates exceeds payments certified as having been
received by vendors of the Equipment and Charges; and (B) the amount
necessary to pay all amounts still owing to the vendors of the Equipment as
shown in the most recent monthly progress payment requests from vendors;
and


(ix) a fully executed Intercreditor Agreement in the form of Exhibit
-------
G 2.2(b)(vii) shall have been delivered to the Trustee.
-------------


(c) The Certificate Purchasers shall have received a report from the Appraiser to their satisfaction opining:


(i) That the fair market value of the Equipment from time to time is
reasonably expected to be as follows:


Date Value
---- -----

Sum of the Fair Market $48,000,000
Value of Equipment to
be Delivered on the
Effective Date and the
Delivery Dates
End of Master Lease Term $27,256,350
End of First Renewal Term $18,809,380
End of Second Renewal Term $ 9,732,580


(ii) that the remaining economic useful life of each item of the
Equipment as of December 31, 1993 is at least seven years; and


(iii) that it is commercially feasible for a Person other than the
Sublessee to use the Equipment at the end of the Master Lease Term and each
Renewal Term;


(d) The representations and warranties of each of the parties hereto contained in this Participation Agreement or in any of the other Operative Agreements shall be true and correct in all material respects on the Effective Date with the same effect as though made on and as of the Effective Date, and an


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Officer's Certificate, dated the Effective Date, of each of such parties (other than the Certificate Purchasers) to that effect shall have been delivered to such Participant, and in the case of any Certificate Purchaser, the purchase of the Certificates to be purchased by it pursuant to Section 2.1 shall be deemed
----------- to constitute a confirmation by it that its representations and warranties contained herein are true and correct in all material respects on the Effective Date and an Officer's Certificate, dated the Effective Date, of the Guarantor stating that the representations and warranties of the Lessee and Sublessee contained in any of the Operative Agreements are true and correct in all material respects as of such date shall have been delivered to each of Trustee and the Certificate Purchasers;


(e) On the Effective Date, each Participant and the Trustee shall have received the opinions of: (i) Christensen, White, Miller, Fink & Jacobs as counsel to Lessee, Sublessee and Guarantor, the form and substance of which shall be satisfactory to all Participants; and (ii) Dorsey & Whitney as counsel to Trustee substantially in the form of Exhibit G 2.2(e)(ii). The legal opinion
-------------------- of Christensen, White, Miller, Fink & Jacobs may rely upon opinions of Nevada counsel as to matters of Nevada law;


(f) Each Certificate Purchaser and the Trustee shall have received: (i) Copies of each of the Lessee's, the Sub-lessee's and the Guarantor's certificate of incorporation, certified by the Secretary of State of the States of their incorporation no earlier than the 15th day prior to the Effective Date, and by-laws, accompanied by an Officer's Certificate, dated the Effective Date, of such corporation, stating that such documents are in full force and effect and have not been amended since the respective dates thereof; (ii) certificates of existence and good standing from the Secretary of State of the States of their incorporation and the Secretary of State of the State of Nevada, respectively, dated no earlier than the 15th day prior to the Effective Date, with respect to each of the Lessee, Sublessee and Guarantor; (iii) a copy of resolutions of each of the Lessee's, Sublessee's and Guarantor's board of directors authorizing the execution, delivery and performance by such corporation of each of the Operative Agreements to which it is or will be a party, accompanied by an Officer's Certificate, dated the Effective Date, of such corporation, stating that such resolution is in full force and effect and has not been amended since the date of its adoption; and (iv) an incumbency certificate, dated the Effective Date, of each of the Lessee, Sublessee and Guarantor;


(g) Each Participant shall have received: (i) A copy of the articles of association and by-laws of the Trustee accompanied by an Officer's Certificate, dated the Effective Date, of the Trustee stating that such documents are in full


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force and effect and have not been amended since the respective dates thereof; (ii) a certificate of existence from the Comptroller of the Currency of the United States of America, dated no earlier than the 60th day prior to the Effective Date, with respect to the Trustee; and (iii) an incumbency certificate, dated the Effective Date, of the Trustee;


(h) All Impositions other than Charges payable on or prior to the Effective Date in connection with the execution, delivery, recording or filing of any of the Operative Agreements, in connection with the filing of any of the financing statements, in connection with the issuance and sale of any of the Certificates or in connection with the consummation of any other transactions contemplated hereby or by any of the other Operative Agreements, shall have been paid in full by or for the account of the Lessee;


(i) (i) Acceptable reports as to each of the Lessee, Sublessee and Guarantor by the office of the Secretary of State of the State of Nevada dated as close to the Effective Date as practicable, in respect of a search of the Uniform Commercial Code files maintained by such offices; and (ii) acceptable


(j) The Trustee shall have received (and each Purchaser shall have received a copy of): (i) Current certificates to the effect that insurance complying with Section 7.1 of the Master Lease is in full force and effect; and
----------- (ii) the certificate of a satisfactory insurance consultant as required by such Section 7.2 of the Master Lease; - -----------


(k) Each Certificate Purchaser and the Trustee shall have received: (i) A report or reports, in form and substance reasonably satisfactory to them, from a satisfactory environmental consultant, as to the compliance of the Equipment and the Site with all applicable Environmental Laws and as to such other matters as shall be reasonably requested by such Participant; and (ii) a written agreement from such environmental consultant that such Participant and the Trustee may rely upon such report or reports to the same extent as the Person that engaged such firm to provide such report or reports;


(l) [intentionally left blank]


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(m) The Certificate Purchasers and Trustee shall have received satisfactory evidence that the principal amount of the Certificates does not exceed the contract cost for the items of Equipment identified on Schedule I to
---------- the Trust Agreement plus the Charges properly attributable thereto;


(n) All proceedings taken in connection with the Closing and all documents relating thereto shall be reasonably satisfactory to each Participant and its counsel, and each Participant and its counsel shall have received copies of such documents as such Participant or its counsel may reasonably request in connection therewith or as a basis for such counsel's opinions to be delivered in connection with the Closing, all in form and substance reasonably satisfactory to such Participant and its counsel;


(o) No Event of Default or an event which with the giving of notice and/or lapse of time could become an Event of Default shall have occurred and be continuing;


(p) The Trustee and Certificate Purchasers shall have received such other documents as they may reasonably request and which are consistent with the terms hereof in
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