Document:

exv10w1

 

Exhibit 10.1

CONFORMED COPY

DATED 19th June 2004

PANSY HO

GRAND PARADISE MACAU LIMITED,

a corporation organized under the laws of the Isle of Man

MGMM MACAU, LTD.,

a corporation organized under the laws of the Isle of Man

MGM MIRAGE MACAU, LTD.,

a corporation organized under the laws of the Isle of Man

MGM MIRAGE, a corporation organized under the laws of the State of Delaware

and

MGM GRAND PARADISE LIMITED, a corporation

organized under the laws of Macau S.A.R.

AMENDED AND RE-STATED 

SUBSCRIPTION AND SHAREHOLDERS AGREEMENT

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	1. INTERPRETATION
	 	 	1	 
	 
	 	 	 	 
	2. OBJECTS OF GAMING COMPANY AND ITS SUBSIDIARIES
	 	 	6	 
	 
	 	 	 	 
	3. CONDITIONS
	 	 	6	 
	 
	 	 	 	 
	4. [NOT USED]
	 	 	9	 
	 
	 	 	 	 
	5. DIRECTORS
	 	 	9	 
	 
	 	 	 	 
	6. SHARE RIGHTS AND SHAREHOLDER MEETINGS
	 	 	10	 
	 
	 	 	 	 
	7. CONDUCT OF GAMING COMPANY’S AFFAIRS
	 	 	11	 
	 
	 	 	 	 
	8. MATTERS REQUIRING CONSENT
	 	 	12	 
	 
	 	 	 	 
	9. BUSINESS PLANS AND BUDGETS
	 	 	15	 
	 
	 	 	 	 
	10. STAFF; COSTS
	 	 	15	 
	 
	 	 	 	 
	11. ADDITIONAL FINANCE
	 	 	16	 
	 
	 	 	 	 
	12. LOAN NOTE REPAYMENT AND SPECIAL DISTRIBUTION
	 	 	16	 
	 
	 	 	 	 
	13. STATEMENT OF CERTAIN BASIC POLICIES
	 	 	17	 
	 
	 	 	 	 
	14. DISPOSAL OR CHARGING OF THE SHARES
	 	 	17	 
	 
	 	 	 	 
	15. ISSUE OF SHARES
	 	 	18	 
	 
	 	 	 	 
	16. TRANSFER OF SHARES AND PHCO SHARES AND PH INCAPACITY
	 	 	18	 
	 
	 	 	 	 
	17. EXERCISE OF VOTING RIGHTS
	 	 	19	 
	 
	 	 	 	 
	18. [NOT USED]
	 	 	20	 
	 
	 	 	 	 
	19. MGM REGULATORY MATTERS
	 	 	20	 
	 
	 	 	 	 
	20. MACAU REGULATOR ISSUE
	 	 	29	 
	 
	 	 	 	 
	21. PH ACQUIRES CONTROL OF SJM
	 	 	34	 
	 
	 	 	 	 
	22. [NOT USED]
	 	 	35	 
	 
	 	 	 	 
	23. MGM BECOMES INVOLVED IN COMPETING ENTERPRISE
	 	 	35	 
	 
	 	 	 	 
	24. MGM GROUP REDUCES CASINO OPERATIONS
	 	 	40	 
	 
	 	 	 	 
	25. ECONOMIC BENEFICIARIES IN PHCO
	 	 	41	 
	 
	 	 	 	 
	26. CASINO OPPORTUNITIES
	 	 	42	 
	 
	 	 	 	 
	27. PROVISION OF INFORMATION
	 	 	42	 

 

 

	 	 	 	 	 
	28. PROJECT FEES
	 	 	42	 
	 
	 	 	 	 
	29. MANAGING DIRECTOR
	 	 	43	 
	 
	 	 	 	 
	30. THIS AGREEMENT NOT TO CONSTITUTE A PARTNERSHIP
	 	 	44	 
	 
	 	 	 	 
	31. COSTS
	 	 	44	 
	 
	 	 	 	 
	32. NON-DISCLOSURE OF INFORMATION
	 	 	44	 
	 
	 	 	 	 
	33. DURATION
	 	 	45	 
	 
	 	 	 	 
	34. ASSIGNMENT
	 	 	46	 
	 
	 	 	 	 
	35. ENGLISH LANGUAGE
	 	 	46	 
	 
	 	 	 	 
	36. SUCCESSORS AND ASSIGNS
	 	 	46	 
	 
	 	 	 	 
	37. WAIVER, FORBEARANCE AND VARIATION
	 	 	46	 
	 
	 	 	 	 
	38. SEVERABILITY
	 	 	46	 
	 
	 	 	 	 
	39. NON-INVOLVEMENT OF CERTAIN PARTIES
	 	 	46	 
	 
	 	 	 	 
	40. ENTIRE AGREEMENT
	 	 	47	 
	 
	 	 	 	 
	41. [NOT USED]
	 	 	47	 
	 
	 	 	 	 
	42. NOTICES
	 	 	47	 
	 
	 	 	 	 
	43. GUARANTEE
	 	 	49	 
	 
	 	 	 	 
	44. GOVERNING LAW
	 	 	50	 
	 
	 	 	 	 
	45. SERVICE AGENTS
	 	 	51	 
	 
	 	 	 	 
	46. MACAU GOVERNMENT AUTHORITY
	 	 	51	 
	 
	 	 	 	 
	47. COUNTERPARTS
	 	 	51	 
	 
	 	 	 	 
	SCHEDULE 1
	 	 	53	 
	 
	 	 	 	 
	SCHEDULE 2
	 	 	54	 

 

 

DOCUMENTS IN AGREED FORM

Loan Notes

MGM Facility Agreement

MGM Trademark License

 

 

THIS AGREEMENT dated 19th June 2004 (the “Effective Date”) is made BETWEEN:-

	(1)  	PANSY HO, an individual, whose address is Penthouse, 39th Floor, West Tower, Shun Tak Centre,
200 Connaught Road, Central, Hong Kong (“PH”);
	 
	(2)  	GRAND PARADISE MACAU LIMITED, a corporation organized under the laws of the Isle of Man and
whose registered office is 15-19 Athol Street, Douglas, Isle of Man IM1 ILB, British Isles
(“PHCO”);
	 
	(3)  	MGMM MACAU, LTD., a corporation organized under the laws of the Isle of Man and whose
registered office is First Floor, Millenium House, Victoria Road, Douglas IM2 4RW, Isle of
Man, British Isles (“MGMMI”), an indirect, wholly owned subsidiary of MGM MIRAGE;
	 
	(4)  	MGM MIRAGE MACAU, LTD., a corporation organized under the laws of the Isle of Man and whose
registered office is First Floor, Millenium House, Victoria Road, Douglas IM2 4RW, Isle of
Man, British Isles (“MGMMII”), an indirect, wholly owned subsidiary of MGM MIRAGE;
	 
	(5)  	MGM MIRAGE, a corporation organized under the laws of Delaware and whose principal office is
3600 Las Vegas Boulevard, South, Las Vegas, Nevada 89109 (“MGM MIRAGE”), whose shares are
listed on the New York Stock Exchange; and
	 
	(6)  	MGM GRAND PARADISE LIMITED, a corporation organized under the laws of Macau S.A.R. and whose
registered office is Avenida da Praia Grande 759, 3/F, Macau S.A.R. (“Gaming Company”).

BACKGROUND

	(A)  	Gaming Company was incorporated under the laws of Macau S.A.R. on or about 17 June 2004, with
an authorized share capital of MOP 1,000,000 divided into 1,000 Ordinary Shares of MOP 1,000
each. With effect from Completion, the share capital of Gaming Company shall be comprised of
MOP 200,000,000 divided into 200,000 Ordinary Shares of MOP 1,000 each.
	 
	(B)  	Gaming Company has never traded nor incurred any liabilities.
	 
	(C)  	PH, PHCO, MGMMI and MGMMII wish to participate as shareholders in Gaming Company for the
purposes of, and on the terms set out in, this Agreement.

NOW THEREFORE, in consideration of the mutual promises, covenants and agreements of the
parties contained herein, IT IS AGREED as follows:-

	1.  	INTERPRETATION

	 	1.1  	In this Agreement the following words have the following meanings:-

	 	 	 
	““A” Director”

	 	a Director appointed by the PH Principal Shareholder
pursuant to clause 5.3;
	 
	 	 
	“Articles”

	 	the articles of association of Gaming Company, in a form
acceptable to PH and MGM;
	 
	 	 
	““B” Director”

	 	a Director appointed by the MGM Principal Shareholder
pursuant to clause 5.4;

1

 

	 	 	 
	“Board”

	 	the board of Directors for the time being of Gaming Company;
	 
	 	 
	“Business”

	 	the business of Gaming Company and its subsidiaries as
described in clause 2.1 and such other business as the
Principal Shareholders may agree from time to time in
writing should be carried on by Gaming Company and its
subsidiaries;
	 
	 	 
	“Business Day”

	 	a day other than a Saturday or Sunday on which banks are
ordinarily open for the transaction of normal banking
business in Hong Kong;
	 
	 	 
	“Casino Opportunity”

	 	(i)   any concession, license, authorisation or other form of
permission offered, granted or extended after the date of
this Agreement by any competent authority in Macau S.A.R.,
for the purposes of allowing any holder of such concession,
license, authorisation or other form of permission to carry
on (directly or indirectly and whether independently or in
collaboration with any other person(s)) casino gaming or
any other form of gaming activity in such jurisdiction;
and/or

	 
	 	 
	

	 	(ii)   any management agreement or operating contract or
other mode of participating (directly or indirectly and
whether independently or in collaboration with any other
person(s)) in casino gaming or any other form of gaming
activity in such jurisdiction;

	 
	 	 
	“Completion”

	 	performance of the various actions specified in clause 3.4;
	 
	 	 
	“Conditions”

	 	the conditions specified in clause 3.1;
	 
	 	 
	“Deed of Adherence”

	 	a deed of adherence in substantially the form set out in
Schedule 1;
	 
	 	 
	“DH”

	 	Daisy Ho;
	 
	 	 
	“Director”

	 	any director for the time being of Gaming Company,
including where applicable any alternate director;
	 
	 	 
	“Encumbrance”

	 	any charge, pledge, lien, equity, third party right,
option, right of pre-emption or any other encumbrance,
priority or security interest of whatsoever nature other
than any such interest arising under the Articles;
	 
	 	 
	“Fee Loans”

	 	the meaning given to that expression in clause 3.3.4;
	 
	 	 
	“Group Company”

	 	in respect of any company, a company which is for the time
being a holding company or a subsidiary of that company or
of any such holding company, but for the avoidance of doubt
neither Gaming Company nor any of its subsidiaries shall be
considered to be a Group Company of MGM or PHCO;
	 
	 	 
	“holding company”

	 	the meaning given to that expression in clause 1.2.9;
	 
	 	 
	“Liabilities”

	 	in relation to any matter, all actions, proceedings, costs,
claims, losses, penalties, fines, awards, expenses and
demands incurred or suffered by or brought or made against
a party in respect of such matter;

2

 

	 	 	 
	“Loan Note Repayment”

	 	the meaning given to that expression in clause 12.1;
	 
	 	 
	“Loan Notes”

	 	the US$0% loan notes, constituted by an instrument, in the
agreed form, of Gaming Company to be dated on or about
Completion;
	 
	 	 
	“Macau S.A.R.”

	 	the Macau Special Administrative Region of the People’s
Republic of China;
	 
	 	 
	“MGM”

	 	unless the context otherwise requires, collectively MGMMI
and MGMMII;
	 
	 	 
	“MGM Group”

	 	MGM and each Group Company of MGM;
	 
	 	 
	“MGM Facility”

	 	the loan facility in the sum of US$100m to be made
available by a member of MGM Group on and after Completion
in relation to the financing for, inter alia, the Nam Van
Casino;
	 
	 	 
	“MGM Facility Agreement”

	 	the agreement, in the agreed form, to be entered into
between a member of MGM Group and Gaming Company in respect
of the provision of the MGM Facility;
	 
	 	 
	“MGM Interests”

	 	the meaning given to that expression in clause 19.3;
	 
	 	 
	“MGM Principal Shareholder”

	 	MGM, so long as MGM (or a member of MGM Group) is the
holder of Shares;
	 
	 	 
	“MGM Project Fees Company”

	 	the company designated by MGM to provide the MGM Project
Services (as defined in clause 28);
	 
	 	 
	“MGM Regulators”

	 	the relevant gaming regulatory bodies in each of the
jurisdictions in which any member of MGM Group is, or
becomes, licensed to carry on gaming activities and to
whose authority MGM Group is, or becomes, subject
(including without limitation, the relevant gaming
regulatory bodies in each of Illinois, Michigan,
Mississippi, Nevada, New Jersey, New York, United Kingdom
and the Northern Territory of Australia);
	 
	 	 
	“MGM Trademark License”

	 	the license, in the agreed form, to be granted by a Group
Company of MGM authorising, inter alia, the use by Gaming
Company and its subsidiaries of the name “MGM Grand” in
connection with the Business;
	 
	 	 
	“MOP”

	 	Macau Patacas, the lawful currency of Macau S.A.R.;
	 
	 	 
	“Nam Van Casino”

	 	the casino and attendant facilities to be operated by
Gaming Company on that part of the Nam Van Casino Complex
Site which is to be the subject of the Nam Van Casino
Lease;
	 
	 	 
	“Nam Van Casino Complex Site”

	 	the property located in Macau S.A.R. described in Part A of
Schedule 2 to be used as the location for the Nam Van
Casino and other facilities;

3

 

	 	 	 
	“Nam Van Casino Complex Site

Land Concession Event”

	 	the occurrence, in respect of the Nam Van Casino Complex
Site, of those elements specified in Part B of Schedule 2;
	 
	 	 
	“Nam Van Casino Lease”

	 	the lease to be granted to Gaming Company of part of the
Nam Van Casino Complex Site for gaming purposes;
	 
	 	 
	“Operating Milestones”

	 	the operating milestones for the Business to be agreed
between PH and MGM pursuant to clause 3.3.3;
	 
	 	 
	“Ordinary Shares”

	 	ordinary shares of MOP 1,000 each in the share capital of
Gaming Company;
	 
	 	 
	“PHCO Group”

	 	PHCO and each Group Company of PHCO;
	 
	 	 
	“PH/PHCO Interests”

	 	the meaning given to that expression in clause 19.10;
	 
	 	 
	“PHCO Shares”

	 	shares in the share capital of PHCO;
	 
	 	 
	“PH Project Fees Company”

	 	the company designated by PH to provide the PH Project
Services (as defined in clause 28);
	 
	 	 
	“PH Principal Shareholder”

	 	PH, so long as PH (or a member of PHCO Group or any company
to which PH is permitted to transfer Shares pursuant to
Clause 16.3) is the holder of Shares;
	 
	 	 
	“Principal Shareholders”

	 	MGM Principal Shareholder and PH Principal Shareholder;
	 
	 	 
	“Shareholders”

	 	PH, PHCO, MGMMI and MGMMII or any person or persons to whom
they properly transfer (whether directly or indirectly
through a Group Company or otherwise) their Shares in
accordance with the provisions of this Agreement and the
Articles;
	 
	 	 
	“Shares”

	 	shares in the share capital of Gaming Company;
	 
	 	 
	“SJM”

	 	Sociedade de Jogos de Macau S.A., a corporation organized
under the laws of Macau S.A.R. and whose registered office
is the 9th Floor Hotel Lisboa, Macau S.A.R.;
	 
	 	 
	“SJM Agreement”

	 	the agreement, dated of even date herewith, between Gaming
Company and SJM in relation to, inter alia, the grant to
Gaming Company of the Subconcession;
	 
	 	 
	“Special Distribution”

	 	has the meaning given to that expression in clause 12.4;
	 
	 	 
	“Subconcession”

	 	the binding trilateral agreement to be entered into by and
between the Macau S.A.R., SJM (as concessionaire for the
operation of casino games of chance and other casino games
in the Macau S.A.R, under the terms of the 28 March 2002
concession contract by and between the Macau S.A.R. and
SJM) and Gaming Company, comprising a set of instruments
from which shall flow an integrated

4

 

	 	 	 
	

	 	web of rights, duties
and obligations by and for all and each of the Macau
S.A.R., SJM and Gaming Company (the nominate administrative
contract known as the subconcession contract for the
operation of casino games of chance and other casino games
in the Macau S.A.R, to be executed by SJM and the Gaming
Company, to be the most significant instrument thereof),
pursuant to the terms of which Gaming Company shall be
entitled to operate casino games of chance and other casino
games in the Macau S.A.R. as an autonomous
subconcessionaire in relation to SJM;
	 
	 	 
	“subsidiary”

	 	the meaning given to that expression in clause 1.2.8;
	 
	 	 
	“US$”

	 	United States dollars.

	1.2  	In this Agreement:-

the masculine gender includes the feminine and neuter and the singular number
includes the plural and vice versa;

references to persons include bodies corporate, unincorporated associations,
partnerships, legal personal representatives and successors in title;

references to clauses and Schedules are to clauses of, and Schedules to, this
Agreement and references to this Agreement include its Schedules;

the headings of clauses are for convenience only and shall be disregarded in
construing this Agreement;

any reference to a statutory provision includes a reference to any modification,
consolidation or re-enactment of the provision for the time being in force (save
to the extent that the liability of any party under this Agreement would thereby
be increased or extended);

a document expressed to be in the “agreed form” means a document in a form which
has been agreed by MGM and PH on or before the execution of this Agreement and
signed or initialled by them or on their behalf, for the purposes of
identification;

the rule known as the ejusdem generis rule shall not apply and all general words
shall not be given a restrictive interpretation by reason of their being
preceded or followed by words indicating a particular class of acts, matters or
things;

a company is deemed to be a subsidiary of another if (but only if):

	 	(a)  	that other either (i) is a member of it and controls
the composition of its board of directors; or (ii) holds more than half in
nominal value of its equity share capital; or
	 
	 	(b)  	the first-mentioned company is a subsidiary of any
company which is that other’s subsidiary;

a company is deemed to be another’s holding company if (but only if) the other
is its subsidiary; and

5

 

whenever there is reference to an approval, consent, appointment, designation or
other similar right to be exercised by MGM, unless the context otherwise
requires, such exercise shall be by MGMMI.

	2.  	OBJECTS OF GAMING COMPANY AND ITS SUBSIDIARIES

	 	2.1  	Subject always to the approval of the government of Macau S.A.R., the business of
Gaming Company shall be to operate the various casino facilities in accordance with the
Subconcession and such other related facilities as may be agreed from time to time with
the government of Macau S.A.R. and the business of its subsidiaries shall be the
development, ownership and operation of hotel/resort and casino properties in Macau
S.A.R., to include the operation of all other facilities (whether themselves or through
the appointment of third party service providers) located outside the casinos (such as,
for example, hotel, retail and resort operations).
	 
	 	2.2  	Subject to the other provisions of this Agreement, the Business shall be conducted on
sound commercial profit making principles so as to: (i) develop and operate the various
casino and hotel/resort properties contemplated by this Agreement (including the Nam Van
Casino and related facilities); (ii) maximise the number of customers attending the
hotel/resort and casino operations and generate and maintain customer loyalty for those
operations; and (iii) generate the maximum achievable maintainable profits available for
distribution.

	3.  	CONDITIONS

	 	3.1  	This Agreement shall take effect immediately upon signing but shall terminate, and
cease to be of effect (with the exception of clauses 1 (Interpretation), 3 (Conditions),
31 (Costs), 32 (Non-disclosure of information), 39 (Non-involvement of Certain Parties),
40 (Entire Agreement), 42 (Notices), 43 (Guarantee), 44 (Governing Law) and 45 (Services
Agents) or in respect of any antecedent breach), in the event that the conditions set out
in clauses 3.1.1 to 3.1.4 below have not been fulfilled or waived in writing by PH and MGM
on or before 30 June, 2005 (or such other date as they shall agree in writing):

the government of Macau S.A.R. being satisfied that all conditions necessary for
the entering into by Gaming Company of the Subconcession have been fulfilled and
having advised PH and MGM in writing to such effect;

the Nam Van Casino Complex Site Land Concession Event having occurred;

the MGM Regulator for Mississippi having approved MGM’s participation in the
venture contemplated by this Agreement; and

no other MGM Regulator having declared its opposition to MGM proceeding with the
Agreement at or prior to the time the Conditions set forth in clauses 3.1.1,
3.1.2 and 3.1.3 have been satisfied.

	 	3.2  	PH, PHCO and MGM shall use all reasonable endeavours to procure satisfaction of the
Conditions as soon as reasonably practicable.
	 
	 	3.3  	During the period between the Effective Date and Completion, PH and MGM shall procure
the following:

	 	3.3.1  	the Shareholders (other than PH) shall, subject to the consent of each
other (such consent not to be unreasonably withheld or delayed), be entitled to
transfer any Shares held by any of them to any of their Group Companies or any other
companies under common control with such Shareholder;

6

 

	 	3.3.2  	the Shareholders shall use all reasonable endeavours to agree any
changes to this Agreement that may be reasonably necessary for the purposes of
accommodating any concerns of the government of Macau S.A.R. regarding its
provisions;
	 
	 	3.3.3  	PH and MGM shall agree the Operating Milestones and the deadlines for
their implementation; and
	 
	 	3.3.4  	MGM and either of PHCO or PH shall each loan to Gaming Company, in
equal portions, such sums as may be reasonably necessary to meet the ongoing fees
of service providers directly involved in the planning and development of the Nam
Van Casino (including architects’ and engineering consultants’ fees) and related
ancillary fees and charges (including filing charges) (the “Fee Loans”) and Gaming
Company shall be entitled to use the Fee Loans to pay such ongoing fees and charges
but for no other purposes whatsoever.

	 	3.4  	On the date on which all of the Conditions are fulfilled or waived in writing by PH
and MGM or on such other date as PH and MGM may agree in writing all (but not part only
unless PH and MGM so agree) of the following business shall be transacted (to the extent
not already transacted):

the adoption by Gaming Company of the Articles;

the appointment of PH and DH as “A” Directors of Gaming Company (they and their
successors to be appointed, subject to approval of the government of Macau
S.A.R., by the PH Principal Shareholder);

the appointment of Gary N. Jacobs, J. Terrence Lanni and Kenneth A. Roservear as
“B” Directors of Gaming Company (they and their successors to be appointed
subject to approval of the government of Macau S.A.R., by the MGM Principal
Shareholder);

(if not already appointed) the appointment of PH as Managing Director of Gaming
Company (PH being, for the avoidance of doubt, approved by the MGM Principal
Shareholder for the purposes of clause 5.8);

the appointment of J. Terrence Lanni as Chairman of the Board of Gaming Company
(J. Terrence Lanni being, for the avoidance of doubt, approved by the PH
Principal Shareholder for the purposes of clause 5.8);

the resignation of all (other than those that are to continue as referred to
above) directors and the secretary of Gaming Company holding office prior to the
Effective Date and delivery of written confirmation under seal by each person so
resigning that he has no claim or right of action against Gaming Company and
that Gaming Company is not in any way obligated or indebted to him;

the appointment of auditors of Gaming Company at a fee to be agreed (being
auditors acceptable to PH and MGM);

7

 

the adoption of 31 December in each year as the accounting reference date of
Gaming Company;

the subscription (including capital and premium) by PH, PHCO, MGMMI and MGMMII
and the payment for Shares as follows:

	 	 	 
	PH:

	 	20,000 Ordinary Shares (constituting 10% of
the entire issued share capital of Gaming Company on Completion) at a
subscription price of MOP 20,000,000 as capital and MOP nil as
premium;
	

	 	 
	PHCO:

	 	80,000 Ordinary Shares (constituting 40% of
the entire issued share capital of Gaming Company on Completion) at a
subscription price of MOP 80,000,000 as capital and MOP nil as
premium;
	

	 	 
	MGMMI:

	 	20,000 Ordinary Shares (constituting 10% of the entire issued share
capital of Gaming Company on Completion) at a subscription price of
MOP 20,000,000 as capital and MOP nil as premium;
	

	 	 
	MGMMII:

	 	80,000 Ordinary Shares (constituting 40% of the entire issued share
capital of Gaming Company on Completion) at a subscription price of
MOP 80,000,000 as capital and US$100 million as premium,

provided that account will be taken of any initial subscriber shares
already in issue;

Gaming Company shall allot and issue to the applicable Shareholder the Shares
referred to in clause 3.4.9 above against payment therefor in full in cash;

Gaming Company shall issue Loan Notes as follows:

	 	(a)  	Loan Notes in the sum of (US$16 million — MOP 20
million) to PH in return for the payment to Gaming Company in cash of such
sum;
	 
	 	(b)  	Loan Notes in the sum of (US$64 million — MOP 80
million) to PHCO in return for the payment to Gaming Company in cash of
such sum;
	 
	 	(c)  	Loan Notes in the sum of (US$80 million — MOP 100
million) to MGMMII in return for the payment to Gaming Company in cash of
such sum;

Gaming Company and the relevant Group Company of MGM shall each enter into the
MGM Facility Agreement;

Gaming Company and its relevant subsidiaries shall, and MGM shall procure that
the relevant Group Company of MGM shall, enter into the MGM Trademark License;

Gaming Company shall repay the Fee Loans;

the appointment of a sole auditor of Gaming Company (being a sole auditor
acceptable to PH and MGM);

8

 

the entering into by Gaming Company of the Subconcession pursuant to the SJM
Agreement.

	 	3.5  	Unless all the steps set out in clause 3.4 above take place on or prior to the date
on which all of the Conditions are fulfilled or waived, or on such later date as PH and
MGM may agree in
writing, none of them shall be treated as having taken place, and unless PH and MGM
agree to postpone completion of those matters until another date mutually acceptable to
both of them, this Agreement shall immediately terminate and cease to be of effect (save
in respect of any antecedent breach of this Agreement and the provisions listed in
clause 3.1).

	4.  	[NOT USED]
	 
	5.  	DIRECTORS
	 
	   	The Shareholders acknowledge and agree that all appointments of any Directors shall be subject
to the prior approval of the government of Macau S.A.R. and the other applicable requirements
of Macau law. In addition, where any reference is made to a Principal Shareholder removing a
Director appointed by it, it is acknowledged that such removal can only be effected through the
general assembly of shareholders and, accordingly, the Shareholders hereby agree to exercise
all voting rights necessary to effect such removal in the event that it is requested by the
relevant appointing Principal Shareholder.

	 	5.1  	The Shareholders shall procure, and shall procure that proper resolutions are taken
in shareholder meetings for such purpose, that the following provisions of this clause 5
shall apply in relation to the constitution and operation of the Board with effect from
Completion.
	 
	 	5.2  	The minimum number of Directors holding office at any time shall be three and the
maximum number of Directors holding office at any time shall be seven unless otherwise
expressly agreed in writing by the Principal Shareholders (but subject to there always
being an odd number of Directors). The Shareholders shall procure that at all times
following Completion there shall be two (and, following the appointment of 2 additional
“A” directors by the PH Principal Shareholder, four) persons appointed by the PH Principal
Shareholder and three persons appointed by the MGM Principal Shareholder and maintained in
office as Directors of Gaming Company.
	 
	 	5.3  	The PH Principal Shareholder shall be entitled to appoint and maintain in office four
Directors, each such person being subject to approval by the government of Macau S.A.R.
(the first such two Directors being those named in clause 3.4.2 above) and at any time to
remove or substitute (by notice in writing to that effect to the Gaming Company secretary)
any Director so appointed by it. The Directors so appointed by the PH Principal
Shareholder shall be designated as “A” Directors.
	 
	 	5.4  	The MGM Principal Shareholder shall be entitled to appoint and maintain in office
three Directors, each such person being subject to approval by the government of Macau
S.A.R. (the first such Directors being those named in clause 3.4.3 above) and at any time
to remove or substitute (by notice in writing to that effect to the Gaming Company
secretary) any Director so appointed by it. The Directors so appointed by the MGM
Principal Shareholder shall be designated as “B” Directors.
	 
	 	5.5  	The MGM Principal Shareholder shall have the right, subject to clause 5.8, of
nominating one of the “B” Directors to be the Chairman of Gaming Company and such Chairman
shall hold office until removed by the MGM Principal Shareholder. If such Chairman is
unable to attend

9

 

	 	   	any meeting of the Board, then the Board shall select another “B”
Director to act as Chairman in his place at such meeting.
	 
	 	5.6  	The PH Principal Shareholder shall have the right, subject to clause 5.8, of
nominating one of the “A” Directors to be the Managing Director of Gaming Company and such
Managing Director shall hold office until removed by the PH Principal Shareholder.
	 
	 	5.7  	No resolution of the Board shall be effective unless carried by a majority of the
votes of the Directors present. Regardless of the number of Directors attending a Board
meeting (in person and/or by telephone), the “A” Directors in attendance shall have,
collectively, three votes and the “B” Directors in attendance shall have, collectively,
three votes. In the case of an equality of votes at any meeting of the Board, the Chairman
shall not be entitled to a second or casting vote.
	 
	 	5.8  	Subject to clauses 3.4.4 and 3.4.5, the selection of each Chairman and Managing
Director shall be subject to the approval, such approval not to be unreasonably withheld
or delayed, of (in the case of the Chairman) the PH Principal Shareholder and (in the case
of the Managing Director) the MGM Principal Shareholder. PH and DH are hereby approved by
the MGM Principal Shareholder to occupy the position of Managing Director and J. Terrence
Lanni, Kenneth A. Rosevear and Gary N. Jacobs are hereby approved by the PH Principal
Shareholder to occupy the position of Chairman.
	 
	 	5.9  	The members of the Board shall not be entitled to any remuneration in their capacity
as Directors of Gaming Company.
	 
	 	5.10  	If the PH Principal Shareholder removes an “A” Director from his or her office as an
“A” Director, the PH Principal Shareholder shall be responsible for and shall indemnify
MGM and Gaming Company from and against all Liabilities that either may suffer or incur as
a result of any claim by such Director for unfair or wrongful dismissal arising out of
such removal. The provisions of this clause 5.10 shall apply mutatis mutandis in respect
of any removal of a “B” Director by the MGM Principal Shareholder.
	 
	 	5.11  	Board meetings shall be convened in person or telephonically, at regular intervals
not exceeding three months, by (except in the case of emergency) not less than seven days’
notice in writing accompanied by an agenda specifying the business to be transacted.
	 
	 	5.12  	The quorum for the transaction of business at any Board meeting shall be two “A”
Directors and two “B” Directors, present in person or by proxy save where only one “B”
Director has been appointed in which case the quorum shall be two “A” Directors and one
“B” Director, present in person or by proxy. The Principal Shareholders shall use all
reasonable endeavours to ensure that their respective appointees as Directors (or their
alternates) shall attend each meeting of the Board and to procure that a quorum is present
throughout such meeting.
	 
	 	5.13  	A resolution in writing signed by all the Directors entitled to receive notice of a
meeting of the Directors shall be as valid and effectual as if it had been passed at a
meeting of Directors duly convened and held and may consist of several documents in the
like form each signed by one or more Directors.

	6.  	SHARE RIGHTS AND SHAREHOLDER MEETINGS

	 	6.1  	The Shareholders shall procure that the following provisions of this clause 6 shall
apply in relation to the rights attaching to different classes of Shares and to any
shareholder meetings of Gaming Company with effect from Completion.

10

 

	 	6.2  	There shall in each year be an annual general meeting (the “AGM”) of the shareholders
of Gaming Company. The Shareholders shall take such action as may be necessary to procure
that Gaming Company’s AGM is held not later than three months after the end of the
relevant financial year and that at such meeting:

audited accounts in respect of the preceding financial year are laid before the
shareholders of Gaming Company; and

such other ordinary business is dealt with as is customary for such a meeting or
otherwise required under the law of Macau S.A.R.

	 	6.3  	Notice of general meetings of the shareholders of Gaming Company shall be given in
accordance with the Articles. At any general meeting of the shareholders of Gaming
Company, the quorum shall be two holders of Ordinary Shares holding between them not less
than fifty one percent of the issued Ordinary Shares. No business shall be transacted at
any meeting of the shareholders of Gaming Company unless a quorum is present at the
commencement of business and also when such business is voted upon.
	 
	 	6.4  	The Chairman or, in his absence, his nominee shall preside over general meetings of
the shareholders of Gaming Company but shall not be entitled to a second or casting vote
thereat.

	7.  	CONDUCT OF GAMING COMPANY’S AFFAIRS
	 
	   	Except as the Principal Shareholders may otherwise agree in writing or save as expressly
provided in this Agreement, the Shareholders shall exercise all voting rights and other powers
of control available to them in relation to Gaming Company so as to procure (insofar as they
are able by the exercise of such rights and powers) that at all times during the term of this
Agreement:

	 	7.1  	the business of Gaming Company and each of its subsidiaries consists exclusively of
that aspect of the Business applicable to it;
	 
	 	7.2  	the Principal Shareholders (and each of their duly appointed agents and
representatives (including legal and accounting advisers)) shall each be entitled to
examine the separate books and accounts to be kept by Gaming Company and its subsidiaries
and to be supplied with all relative information in such form as they may reasonably
require to keep each of them properly informed about the Business of Gaming Company and
its subsidiaries and generally to protect their interests;
	 
	 	7.3  	Gaming Company shall prepare and provide (at the cost of Gaming Company), in English
as well as such other languages as may be required by the government of Macau S.A.R., to
all Directors (or their designees) concurrently:

(within 2 days of the day to which it relates) daily revenue reports of Gaming
Company and each of its subsidiaries;

(within 10 days of the end of the period to which they relate) monthly
management accounts of Gaming Company and each of its subsidiaries for such
period;

(within 25 days of the end of the relevant financial year) draft accounts of
Gaming Company and each of its subsidiaries for such year;

(within 40 days of the end of the financial year) audited accounts of Gaming
Company and each of its subsidiaries for such year;

11

 

	 	7.4  	Gaming Company and each of its subsidiaries shall comply with the provisions of its
memorandum and articles of association.

	   	Any information and documentation supplied by Gaming Company to the Directors (or their
designees) pursuant to clause 7.3 above may be provided by such Directors to the Shareholders.
	 
	8.  	MATTERS REQUIRING CONSENT 
	 
	   	The Shareholders shall exercise all voting rights and other powers of control available to them
in relation to Gaming Company so as to procure (insofar as they are able by the exercise of
such rights and powers), and the organisational documents of Gaming Company shall provide (or
be deemed to provide), that Gaming Company shall not without the prior written consents of the
Principal Shareholders or a majority of each of the “A” Directors and “B” Directors of Gaming
Company:

	 	8.1  	make or approve any material change, variation or alteration to, or approve or permit
any deviation from, the Operating Milestones;
	 
	 	8.2  	submit (whether directly or through any other party) any applications in relation to
any of the proposed casino properties (including the Nam Van Casino Complex Site);
	 
	 	8.3  	borrow any sum;
	 
	 	8.4  	create any fixed or floating charge, lien (other than a lien arising by operation of
law) or other Encumbrance over the whole or any part of the undertaking, property or
assets of Gaming Company;
	 
	 	8.5  	make any loan or advance or give any credit (other than normal trade credit);
	 
	 	8.6  	give any guarantee or indemnity or other undertaking to secure the liabilities or
obligations of any person;
	 
	 	8.7  	sell, transfer, lease, assign or otherwise dispose of a material part of the
undertaking, property and/or assets of Gaming Company (or any interest therein), or
contract so to do;
	 
	 	8.8  	enter into any contract, arrangement or commitment involving expenditure on capital
account or the realisation of capital assets, and for the purpose of this paragraph the
aggregate amount payable under any agreement for hire, hire purchase or purchase on credit
sale or conditional sale terms shall be deemed to be capital expenditure incurred in the
year in which such agreement is entered into;
	 
	 	8.9  	engage any new employee at remuneration which could exceed the rate of US$100,000 per
annum;
	 
	 	8.10  	increase the remuneration of any employee to a rate which would exceed the rate of
US$100,000 per annum or increase the remuneration of any employee whose existing
remuneration would then exceed such a rate;
	 
	 	8.11  	take or agree to take any leasehold interest in, license over, or other form of
occupation right in respect of, any land or premises;
	 
	 	8.12  	issue any unissued Shares or create any new Shares;
	 
	 	8.13  	alter any rights attaching to any class of Share;

12

 

	 	8.14  	consolidate, sub-divide or convert any of its share capital or in any way alter the
rights attaching thereto;
	 
	 	8.15  	appoint new auditors or bankers or alter its accounting reference date or registered
office;
	 
	 	8.16  	issue renounceable allotment letters or permit any person entitled to receive an
allotment of Shares to nominate another person to receive such allotment;
	 
	 	8.17  	create, acquire or dispose of any of its subsidiaries or of any shares in any such
subsidiary;
	 
	 	8.18  	enter into any partnership, joint venture or profit sharing agreement with any
person;
	 
	 	8.19  	do or permit or suffer to be done any act or thing whereby it may be wound up
(whether voluntarily or compulsorily);
	 
	 	8.20  	issue any debenture or other securities convertible into Shares or debentures of
Gaming Company or the relevant subsidiary or any share warrants or any options in respect
of Shares;
	 
	 	8.21  	enter into any contract or transaction except in the ordinary and proper course of
its Business on arm’s length terms;
	 
	 	8.22  	acquire, purchase or subscribe for any shares, debentures, mortgages or securities
(or any interest therein) in any company, trust or other body;
	 
	 	8.23  	appoint or dismiss any Director (but without prejudice to the rights conferred on
each of the Principal Shareholders pursuant to clause 5 and to the Articles to appoint and
remove Directors);
	 
	 	8.24  	enter or purport to enter into any contract or obligation with any Shareholder or
Director or any person related to or affiliated with any Shareholder or Director
(including any renewal thereof or any variation in the terms of any existing contract or
obligation);
	 
	 	8.25  	appoint any committee of the Directors or any local board or delegate any of the
powers of the Directors to such committee or local board or approve the establishment of
any operational committees (including audit and remuneration committees) or approve the
adoption or amendment of any rules applying to the same or approve the appointment of any
members of any such committees;
	 
	 	8.26  	hold any meeting of Shareholders or purport to transact any business at any such
meeting of Shareholders unless there shall be present the necessary quorum;
	 
	 	8.27  	admit the whole or any part of its share capital to the board of any recognised stock
exchange;
	 
	 	8.28  	adopt or approve any business plan (including operating and capital budgets and
forecasts or any of them) or any changes to the same;
	 
	 	8.29  	appoint or dismiss, or amend the service terms of any members of, the senior
operational management of the Gaming Company (including, without limitation and howsoever
called, the General Manager — Chief Operating Officer, Chief Financial Officer, Chief
Compliance Officer, Chief Legal Officer and Chief Technology Officer) and any person whose
annual compensation is in excess of US$100,000 and any person (other than secretarial and
clerical) who is a direct report to any such person;
	 
	 	8.30  	acquire, or take any option over, any real property;

13

 

	 	8.31  	repay any indebtedness prior to the stipulated contractual date for repayment or
alter the terms of repayment of any indebtedness;
	 
	 	8.32  	compromise or settle any claim by or against it having a value in excess of
US$250,000 (subject to adjustment for inflation throughout the term of this Agreement) or
commence or defend any legal proceedings (otherwise than in the ordinary course of
business);
	 
	 	8.33  	cancel or lapse any material insurance policy;
	 
	 	8.34  	approve or adopt any development or design plans for any of the casinos and/or
hotels/resorts contemplated by this Agreement (including, without limitation, budget,
design and phasing aspects) or approve any changes to the same;
	 
	 	8.35  	implement any systems (including ICOPS, IT or security systems) or approve or adopt
any manuals or standards for operation of any of the casinos and/or hotels/resorts
contemplated by this Agreement (including, without limitation, internal operating controls
and procedures and credit policies and betting limits) or approve any changes to the same;
	 
	 	8.36  	approve or adopt any amendment to its memorandum or articles of association;
	 
	 	8.37  	admit any person (whether by subscription or transfer) as a Shareholder (other than
the Shareholders in respect of their initial investment or any transferees permitted under
clauses 14, 16, 19, 20 and 23);
	 
	 	8.38  	adopt or approve any standardized employment terms (or approve any variation of the
same);
	 
	 	8.39  	adopt or approve any material change to its accounting policies except as required by
law or to satisfy generally accepted accounting standards;
	 
	 	8.40  	make any claim, disclaimer, surrender, election or consent of a material nature for
tax purposes;
	 
	 	8.41  	approve or agree any recharge to it of any employee costs of a Shareholder;
	 
	 	8.42  	engage any commission-based employee or agent (including the terms and conditions of
any such engagement) whose total annual compensation is anticipated to be in excess of
US$100,000;
	 
	 	8.43  	approve the terms, conditions and form of the Nam Van Casino Lease and/or enter into
the same;
	 
	 	8.44  	appoint or dismiss any member of the General Assembly or the sole auditor of Gaming
Company.

	   	The above provisions of this clause 8 shall apply mutatis mutandis to any subsidiaries of
Gaming Company.
	 
	   	The general principle articulated by this clause 8 is that all determinations, decisions or
actions by Gaming Company and each of its subsidiaries shall be determined by consensus and
agreement between the Principal Shareholders or a majority of each of the “A” Directors and the
“B” Directors of Gaming Company. For the avoidance of doubt, no dispute resolution procedure is
provided for in this Agreement as the parties are of the view that they should resolve any such
disagreement or dispute reasonably and through good faith discussions.

14

 

	9.  	BUSINESS PLANS AND BUDGETS

	 	9.1  	The Shareholders shall procure the preparation by the General Manager — Chief
Operating Officer (or equivalent howsoever called) of a proposed business plan for Gaming
Company and each of its subsidiaries for each successive financial year of such companies,
each such proposed business plan to be prepared and circulated to the Board for approval
no less than 30 days prior to the beginning of the financial year to which it relates.
	 
	 	9.2  	If the Board fails to approve any proposed business plan or any part of the proposed
business plan within 15 days of the commencement of the financial year to which such
business plan relates (the “Relevant Financial Year”) the financial information in the
most recent approved business plan shall be deemed for the purposes of this Agreement to
have been approved for the Relevant Financial Year Provided that if any part or parts of
the proposed business plan has been approved for the Relevant Financial Year, any
modification to the previously approved business plan in such part or parts shall be used
for the Relevant Financial Year.
	 
	 	9.3  	The Shareholders shall procure the preparation by the General Manager — Chief
Operating Officer (or equivalent howsoever called) of Gaming Company of proposed:

annual operating and capital budgets in respect of each successive financial
year of Gaming Company and each of its subsidiaries, each such budget to be
prepared and circulated to the Board for approval no less than 30 days prior to
the beginning of the financial year to which it relates; and

six-monthly forecasts for Gaming Company and each of its subsidiaries, each such
forecast to be submitted to the Board for approval no less than 30 days prior to
the beginning of the period to which it relates.

	 	9.4  	If the Board fails to approve any proposed budget or draft six-monthly forecast or
any part of either within 15 days of the commencement of the period to which such proposed
budget or draft six-monthly forecast relates (the “Relevant Period”) the information in
the most recent approved budget or six-monthly forecast shall be deemed for the purposes
of this Agreement to have been approved for the Relevant Period provided that if any part
or parts of the proposed budget or proposed six-monthly forecast has been approved for the
Relevant Period, any modification to the previously approved budget or six-monthly
forecast in such part or parts shall be used for the Relevant Period.

	10.  	STAFF; COSTS

	 	10.1  	Gaming Company and each of its subsidiaries shall recruit and employ such staff as
the Board shall from time to time consider necessary for the proper conduct of its
Business, with such authority as shall be delegated by the Board.
	 
	 	10.2  	The costs of any employees of any Shareholder and any other direct or indirect costs incurred by
any Shareholder involved or incurred directly in the development or operation of any part of the
Business may be recharged by that Shareholder to Gaming Company or the applicable subsidiary, as
the case may be, subject always to the prior written approval of the Board or the Principal
Shareholders.

15

 

	11.  	ADDITIONAL FINANCE 

	 	11.1  	The Shareholders shall use all reasonable endeavours to procure that the requirements
of Gaming Company and each of its subsidiaries for construction financing and working
capital to finance its Business are met as far as practicable by borrowings from banks and
other similar sources on the most favourable terms reasonably obtainable as to interest,
repayment and security, but without allowing any prospective lender a right to participate
(whether by way of security or otherwise) in the equity share capital of Gaming Company or
any of its subsidiaries or to require PH or any member of MGM Group or PHCO Group to
guarantee or provide financial support as a condition of any loan.
	 
	 	11.2  	Any repayments due from time to time under any third party financing obtained by
Gaming Company and any of its subsidiaries shall rank in priority to, and be paid before
(i) any repayments due under the MGM Facility Agreement (including interest); (ii) the
Loan Note Repayment; and (iii) the Special Distribution.
	 
	 	11.3  	No member of PHCO Group or MGM Group nor PH shall have any obligation to provide
financing to Gaming Company or any of its subsidiaries in excess of the amounts committed
to in this Agreement, provided always that if the Principal Shareholders jointly determine
that additional financing, which cannot be obtained on acceptable terms from third
parties, is required and the Principal Shareholders both agree to provide such additional
financing, they shall provide such financing on a pari passu basis.

	12.  	LOAN NOTE REPAYMENT AND SPECIAL DISTRIBUTION

	 	12.1  	Gaming Company will, and the Shareholders agree to procure that Gaming Company will,
with effect from the opening of the Nam Van Casino to the public (whether fully or partly)
repay the Loan Notes, on a monthly basis, in an aggregate amount (the “Loan Note
Repayment”) of US$30 million per annum (to be split pro rata according to the amount of
Loan Notes held by each holder). The Loan Note Repayment shall be increased to US$50
million per annum with effect from the repayment in full of the MGM Facility. The Loan
Note Repayment shall be payable in accordance with, and subject to, the following
provisions of clauses 12.2 and 12.3.
	 
	 	12.2  	The Loan Note Repayment shall only be paid to the extent permitted by third party
financing and after, and shall be subordinated to (i) any repayments due in respect of any
third party financing of Gaming Company and any of its subsidiaries; and (ii) any interest
due on any sums drawn down under the MGM Facility from time to time, but shall be paid
before, and in priority to, any repayments due in respect of any financing of Gaming
Company and any of its subsidiaries (other than the Loan Notes) from PH, PHCO Group and
MGM Group (including, for the avoidance of doubt, any capital repayments due under the MGM
Facility Agreement).
	 
	 	12.3  	The Loan Note Repayment shall be paid in equal monthly instalments until the Loan
Notes have been redeemed in full. The Loan Note Repayment shall be made out of available
cash (taking into account the projected revenue and cash requirements of Gaming Company
and its subsidiaries as reflected in the current budget and operating results). Any
shortfall shall be made up as soon as practicable thereafter.
	 
	 	12.4  	Gaming Company will, and the Shareholders agree to procure, by means of a proper
resolution taken in accordance with applicable law and the Articles, that Gaming Company
will, with effect from the repayment in full of the Loan Notes, pay to the Shareholders
(or, as applicable, each of their respective successors), on a monthly basis, an aggregate
advance

16

 

	 	   	dividend amount (the “Special Distribution”) of US$30 million per annum (to be split
between the Shareholders according to their respective percentage shareholdings in
Gaming Company). The Special Distribution shall be increased to US$50 million per annum
with effect from the repayment in full of the MGM Facility. The Special Distribution
shall be payable in accordance with, and subject to, the following provisions of clauses
12.5 and 12.6 (inclusive).

	 	12.5  	The Special Distribution shall only be paid to the extent permitted by third party
financing and after, and shall be subordinated to (i) any repayments due in respect of any
third party financing of Gaming Company and any of its subsidiaries; and (ii) any interest
due on any sums drawn down under the MGM Facility from time to time, but shall be paid
before, and in priority to, any repayments due in respect of any financing of Gaming
Company and any of its subsidiaries from PH, PHCO Group and MGM Group (including, for the
avoidance of doubt, any capital repayments due under the MGM Facility Agreement).
	 
	 	12.6  	The Special Distribution shall, subject to available profits and available cash
(taking into account the projected revenue and cash requirements of Gaming Company and its
subsidiaries as reflected in the current budget and operating results), be paid in equal
monthly instalments, with any shortfall to be made up (again subject to available profits
and available cash) as soon as practicable thereafter.

	13.  	STATEMENT OF CERTAIN BASIC POLICIES

	 	13.1  	It is the policy of the Shareholders and each Company that Gaming Company will pay to
its Shareholders the maximum permissible dividends after taking into account restrictions,
if any, imposed by applicable law, and/or lenders and the reasonable capital requirements
of the Business, as determined by the Board.
	 
	 	13.2  	All agreements between Gaming Company, or any of its subsidiaries, and any parties
that are related to or affiliated with any Shareholder shall be at arms length, on
commercially reasonable terms, and subject to the approval of the Board.

	14.  	DISPOSAL OR CHARGING OF THE SHARES

	 	14.1  	Subject to clause 14.2 below, the Shareholders covenant with each other that they
shall not, except with the prior written consents of the Principal Shareholders and in
accordance with Macau law and the terms of the Subconcession, create or permit to subsist
any Encumbrance on or over, or dispose of any interest in, all or any of the Shares held
by them (otherwise than by a transfer of such Shares in accordance with this Agreement and
the provisions of the Articles), and shall procure that Gaming Company and its
subsidiaries shall not, except with the prior written consents of the Principal
Shareholders, create or permit to subsist any Encumbrance on or over, or dispose of any
interest in, all or any shares in any subsidiary company (otherwise than by a transfer of
such shares in accordance with this Agreement and the provisions of the relevant company’s
articles of association).
	 
	 	14.2  	Without prejudice to any restrictions that may be imposed by the government of Macau
S.A.R. or under the terms of the Subconcession, nothing in this clause 14 or in clause 16
shall operate to restrict or prevent any of the Shareholders from pledging their Shares
(as to the Ordinary Shares, in whole but not in part only) to any third party bank or
financial institution, provided that in the event that such pledged Shares are Ordinary
Shares and such third party bank or financial institution takes ownership of such Ordinary
Shares pursuant to enforcement of such pledge then such Ordinary Shares shall immediately
cease to have any voting rights the relevant third party bank or financial institution
shall in addition have no

17

 

	 	   	greater rights as a shareholder than those that would be vested in PH or MGM following
implementation of clause 21.3 or 24.3, as the case may be, and and further provided that
at such time as ownership of such Ordinary Shares is returned to the Shareholder which
is the pledgor, such Ordinary Shares shall immediately rank pari passu with the other
Ordinary Shares (including as to voting rights) as if the original change of ownership
of the Ordinary Shares had not occurred.

	15.  	ISSUE OF SHARES
	 
	   	If the Principal Shareholders, or a majority of each of the “A” Directors and “B” Directors,
agree that Gaming Company shall issue any Shares in accordance with clause 8.12, such an issue
shall be regulated in accordance with the provisions set out in the Articles.
	 
	16.  	TRANSFER OF SHARES AND PHCO SHARES AND PH INCAPACITY

	 	16.1  	Subject to the provisions of clauses 14.2, 16.2, 16.3 and 16.7 below, each
Shareholder covenants with the others that it will not (without the written consents of
the Principal Shareholders and the government of Macau S.A.R.) transfer, assign or deal
with Shares otherwise than in accordance with this Agreement and the Articles. Any
purported transfer of Shares in contravention of this clause 16 shall be void and of no
force or effect and Gaming Company shall have no obligation whatsoever to register or
recognize any such purported transfer.
	 
	 	16.2  	PHCO may, with the written consent of MGM (such consent not to be unreasonably
withheld or delayed) and the government of Macau S.A.R., transfer its Shares to any member
of PHCO Group and MGM may, with the written consent of PH (such consent not to be
unreasonably withheld or delayed) and the government of Macau S.A.R., transfer its Shares
to any member of MGM Group, provided in each case that:

	 	   	such transferee of Shares shall have signed a Deed of Adherence; and
	 
	 	   	if a transferee of Shares under this clause 16.2 ceases to be a Group Company of
MGM or PHCO, as the case may be, the relevant transferor shall notify the
Directors in writing that such event has occurred and (unless the relevant
Shares are thereupon transferred, with the written consent of the government of
Macau S.A.R., to another Group Company of MGM or PHCO, as the case may be) shall
procure the immediate transfer of the relevant Shares back to MGM or PHCO, as
the case may be.

	 	16.3  	PH may, with the written consent of MGM (such consent not to be unreasonably withheld
or delayed) and the government of Macau S.A.R., transfer her Shares to any company
controlled by PH provided that:

	 	   	such transferee of Shares shall have signed a Deed of Adherence; and
	 
	 	   	if a transferee of Shares under this clause 16.3 ceases to be controlled by PH,
PH shall notify the Directors in writing that such event has occurred and
(unless the Shares are transferred, with the written consent of the government
of Macau S.A.R., to another company controlled by PH) shall procure the
immediate transfer of the relevant Shares back to PH.

	 	16.4  	MGM shall procure that, throughout the duration of this Agreement, any holder of
Shares originally issued to MGM and any holder of Shares subsequently issued to any MGM
Group

18

 

	 	   	Member is a direct or indirect subsidiary of MGM MIRAGE and that MGM MIRAGE shall at all
times, and whether or not through subsidiary companies, also retain management control
over each holder of such Shares.

	 	16.5  	Any disposal or transfer of any interest in any company holding any Shares shall be
subject to the applicable provisions of this clause 16, the prior written approval of the
government of Macau S.A.R. and the provisions of clause 25.
	 
	 	16.6  	PHCO shall procure that, throughout the duration of this Agreement:

	 	   	MGM shall be entitled, on reasonable notice in writing, to require PHCO to
disclose to it the names of all beneficial owners of PHCO Shares;
	 
	 	   	PHCO Shares are not sold, transferred or otherwise disposed of to any party that
is not either a relative, whether by affinity or consanguinity, of PH or a
trustee, acting in his capacity as such, of a trust of which PH and/or any such
relative is a beneficiary or, in the case of a discretionary trust, is a
discretionary object.

	 	16.7  	In the event of the death or permanent incapacity of PH, the Shares held by PH shall,
within 30 days of the occurrence of such event, be transferred to the nominated successor
of PH previously approved in writing by MGM for such purpose or, in the event that no such
successor has been so nominated and approved, the following provisions of this clause 16.7
shall apply:

	 	   	the Shares shall, subject to the prior written approval of the government of
Macau S.A.R., be transferred to the “A” Director who is the closest relative of
PH;
	 
	 	   	if the person specified in clause 16.7.1 above refuses to accept the
Shares or is not approved by the government of Macau S.A.R., such Shares shall,
subject to the prior written approval of the government of Macau S.A.R., be
transferred to either of the remaining “A” Directors (as PH’s estate may elect)
pending direction of onward transfer to a person or entity that is acceptable to
MGM and the government of Macau S.A.R. and not objected to by any MGM Regulator
as a holder of Shares;
	 
	 	   	in the event that no “A” Director accepts a transfer of such Shares then
management control of Gaming Company shall revert entirely to MGM pending the
transfer of such Shares to a party that is acceptable to MGM and the government
of Macau S.A.R. and not objected to by any MGM Regulator as a holder of such
Shares.

	17.  	EXERCISE OF VOTING RIGHTS
	 
	   	Each of the Shareholders undertakes with the others to exercise all voting rights and powers of
control available to them in relation to Gaming Company so as to:

	 	17.1  	give full effect to the terms and conditions of this Agreement; and
	 
	 	17.2  	promote the Business and the interests of Gaming Company and each of its subsidiaries
in the exercise of such Shareholder’s business judgment, provided however that in
exercising its voting rights and powers of control, such Shareholder shall be entitled to
take into account its own interests which may be separate and distinct from, or
potentially in conflict with, those of Gaming Company or any of its subsidiaries.

19

 

	18.  	[NOT USED]
	 
	19.  	MGM REGULATORY MATTERS
	 
	   	The Shareholders acknowledge and agree that each of the provisions set out below is subject to
compliance with the provisions of Macau law and to the ultimate discretion of the government of
Macau S.A.R. and that the Shareholders will at all times adhere to the requirements of the
government of Macau S.A.R. in relation to the application and implementation of any of the
following provisions of this clause 19.

	 	19.1  	Each Shareholder acknowledges that MGM Group is engaged in businesses that are or may
be subject to, and exist because of, privileged licenses issued by MGM Regulators. If:

	 	   	any member of MGM Group is directed in writing by any MGM Regulator (an “MGM
Sale Direction”) to sell its Shares; or
	 
	 	   	any member of MGM Group receives notice in writing from any MGM Regulator (an
“MGM Regulatory Warning”) that (i) any officer, director or employee of Gaming
Company or any Group Company of Gaming Company, or (ii) any member of PHCO
Group, or (iii) any shareholder of any such member (including PHCO), or (iv)
any officer, director or key employee of any such member or shareholder, or (v)
any “A” Director is (a) a person who is deemed by such MGM Regulator to be an
unsuitable person for any member of MGM Group to maintain a continuing business
relationship with; or (b) engaged in, or is about to be engaged in, any activity
which such MGM Regulator considers would, if continued or undertaken by such
party, as the case may be, result in the issue of an MGM Sale Direction by such
MGM Regulator,

	 	   	then the following provisions of this clause 19 will apply.
	 
	 	19.2  	As soon as practicable (and in any event within 3 Business Days) following the
receipt by any member of MGM Group of an MGM Sale Direction or MGM Regulatory Warning, MGM
shall notify the government of Macau S.A.R., PH and PHCO of such receipt and provide each
of the government of Macau S.A.R., PH and PHCO with a copy of the relevant MGM Sale
Direction or MGM Regulatory Warning, as the case may be.
	 
	 	19.3  	Subject to clauses 19.5 and 19.34 below, if:

	 	   	the MGM Sale Direction is issued as a direct result of a deliberate and wilful
act on the part of PH, any “A” Director or any member of PHCO Group, or any
officer, director or shareholder of PHCO or any member of PHCO Group, in the
knowledge that such act would be likely to give rise to the relevant MGM Sale
Direction; or
	 
	 	   	the relevant party identified in the MGM Regulatory Warning (a) is deemed
unsuitable on the terms outlined in clause 19.1.2(a) above and that party
continues his or her association with Gaming Company, PH or any member of the
PHCO Group; or (b) nonetheless continues or engages in, as the case may be, the
activity which is the subject of the MGM Regulatory Warning and, as a result,
the relevant MGM Regulator issues an MGM Sale Direction,

	 	   	then MGM shall have the right to sell all of its Shares (but not some only) and entire
(but not part only) interest in Gaming Company and each of its subsidiaries (including
any Loan Notes, loans or financing provided to Gaming Company and each of its
subsidiaries)

20

 

	 	   	(together the “MGM Interests”) in accordance with, and subject always to, the provisions
of clauses 19.4 to 19.17.

	 	19.4  	During the period of 90 days, or such longer period as the government of Macau S.A.R.
may specify, following the delivery to the government of Macau S.A.R. and PH of the
relevant MGM Sale Direction or MGM Regulatory Warning, each of MGM, PH and PHCO shall
co-operate with the government of Macau S.A.R. (including providing information and copies
of documents relating to the background to, and reasons for, the issue of the relevant MGM
Sale Direction or MGM Regulatory Warning) to the extent reasonably necessary to enable the
government of Macau S.A.R. to understand the background to, and reasons for, the issue of
the relevant MGM Sale Direction or MGM Regulatory Warning.
	 
	 	19.5  	MGM, PH and PHCO shall use all reasonable endeavours to procure the withdrawal by the
relevant MGM Regulator of the MGM Sale Direction or MGM Regulatory Warning, as the case
may be, within the period of 90 days from the end of the period referred to in clause 19.4
above (the “Notice Period”). The government of Macau S.A.R. will be consulted on, and kept
informed with respect to, any and all communications with, and representations to, the
relevant MGM Regulator. During the Notice Period, if so requested by the relevant MGM
Regulator, PH shall, to the extent she is able by the exercise of the powers available to
her, (a) procure the removal of the relevant officer, director (other than PH and DH) or
key employee of any such PHCO Group member or any shareholder of any such member, or (b)
any such “A” Director (other than PH and DH), or (c) if such person is an officer,
director or employee of Gaming Company or any Group Company of Gaming Company, shall join
with MGM to remove such person (other than PH and DH) from such capacity, as the case may
be.
	 
	 	19.6  	In the event that the relevant MGM Regulator fails to withdraw the MGM Sale Direction
or MGM Regulatory Warning, as the case may be, within the Notice Period, MGM shall, within
the period of 30 days from the expiry of the Notice Period, notify the government of Macau
S.A.R., PH and PHCO in writing (the “Sale Election Notice”) as to whether or not it elects
to dispose of the MGM Interests. If MGM elects in the Sale Election Notice to dispose of
the MGM Interests, the following provisions of clauses 19.7 to 19.17 shall apply.
	 
	 	19.7  	During the period of 90 days following the receipt by the government of Macau S.A.R.
and PH of the Sale Election Notice (the “Selection Period”), MGM and PH shall co-operate,
together with the government of Macau S.A.R., in identifying not less than three (3)
potential purchasers (the “Potential Purchasers”) of the MGM Interests. The Potential
Purchasers must be acceptable to, and meet all criteria specified by, the government of
Macau S.A.R. During the Selection Period, MGM and PH shall also seek to agree on the
identity of a financial adviser (being (i) an investment bank of international repute;
(ii) independent of both MGM and PH; and (iii) acceptable to the government of Macau
S.A.R.) (the “Financial Adviser”) to advise on the sale of the MGM Interests through an
auction process involving the Potential Purchasers, such appointment and process to be in
accordance with the following provisions of this clause 19.7:

	 	   	the Financial Adviser will be appointed by MGM on terms reasonably acceptable to
PH;
	 
	 	   	the structure of the auction process (including as to the number of bid or offer
rounds with Potential Purchasers, the required terms of the bids or offers to be
submitted by Potential Purchasers and the operation of any form of data room,
general information access and timing generally) shall be on terms reasonably
acceptable to PH and the government of Macau S.A.R.;

21

 

	 	   	copies of all material written communications (including the terms of any
information memorandum or similar document) issued generally to any Potential
Purchasers as part of the auction process shall be made available to PH and the
government of Macau S.A.R.;
	 
	 	   	PH and the government of Macau S.A.R. shall be fully involved and informed at
all stages of the auction process;
	 
	 	   	copies of all bids, submissions and other material correspondence received by or
on behalf of MGM or the Financial Adviser from any of the Potential Purchasers
shall be delivered to PH and the government of Macau S.A.R. as soon as
practicable following their receipt.

	 	19.8  	Within 30 days of completion of the auction process agreed pursuant to clause 19.7.2
above, MGM shall notify PH and the government of Macau S.A.R. in writing of the identity
of its preferred Potential Purchaser (the “Preferred Purchaser”) and the cash price at,
and other material terms upon, which MGM would be willing to dispose of to the Preferred
Purchaser, and the Preferred Purchaser willing to purchase from MGM, the MGM Interests
(the “Withdrawal Notice”).
	 
	 	19.9  	PH shall be entitled, for the period of 60 days from the date of receipt by PH and
the government of Macau S.A.R. of the Withdrawal Notice (the “Election Notice Period”), to
notify MGM in writing (the “Election Notice”) of PH’s intention to have PH’s nominated
party (being a party approved by the government of Macau S.A.R. as a holder of Shares)
acquire the MGM Interests (in place of the Preferred Purchaser) on the same terms, mutatis
mutandis, as those disclosed in the Withdrawal Notice and, in which event, MGM shall
procure that such election is fulfilled and complied with and that the full legal title
to, and beneficial ownership of, the MGM Interests is duly transferred to PH’s nominated
party on the same terms, mutatis mutandis, as those disclosed in the Withdrawal Notice
(except that MGM shall not be required to give any warranties or indemnities except as to
title to the MGM Interests and capacity to sell) and, if not already specified in the
Withdrawal Notice, free from all Encumbrances, within 90 days of the receipt by MGM of the
Election Notice.
	 
	 	19.10  	In the event that PH fails to deliver the Election Notice to MGM within the Election
Notice Period, MGM shall be entitled to enter into and consummate an agreement to sell all
(but not some only) of the MGM Interests to the party disclosed as the Preferred Purchaser
in the Withdrawal Notice and on the terms contained therein provided always that the
Preferred Purchaser:

	 	   	executes a Deed of Adherence;
	 
	 	   	acquires the MGM Interests within 90 days from the date of expiry of the
Election Notice Period (or such longer period, not exceeding 180 days in total,
as may be reasonably required in order to obtain any necessary regulatory
approvals);and
	 
	 	   	(before such disposal is effected) makes a written offer (a “Tag Along Offer”)
to PH and PHCO to purchase all of their respective Shares (but not some only)
and entire (but not part only) interests in Gaming Company and each of its
subsidiaries (including any loans or financing provided to Gaming Company and
any of its subsidiaries) (together the “PH/PHCO Interests”) for the same price
and otherwise on the same terms and conditions (subject to clause 19.14 below)
as those applying to the sale by MGM of the MGM Interests.

22

 

	 	19.11  	Any Tag Along Offer shall specify:

	 	   	the price for the PH/PHCO Interests and other principal terms and conditions of
the offer;
	 
	 	   	the period (being not less than 60 days) for acceptance by PH and PHCO.

	 	19.12  	PH shall be free to either accept or reject a Tag Along Offer. If, within the period
specified in a Tag Along Offer, PH accepts the offer in writing then the sale of the
PH/PHCO Interests shall proceed at the same time as the sale of the MGM Interests.
	 
	 	19.13  	Any acceptance by PH of a Tag Along Offer shall be deemed to be acceptance by PHCO
also and PHCO hereby appoints PH as its lawful attorney for the purposes of agreeing to
and/or signing any document that may be necessary for the purposes of effecting a sale of
any of the PH/PHCO Interests pursuant to a Tag Along Offer. Any such acceptance by PH
shall be irrevocable. If the sale of the PH/PHCO Interests precedes the sale of any of the
MGM Interests then no sale of any of the PH/PHCO Interests pursuant to the acceptance of a
Tag Along Offer shall take place unless and until the sale of the MGM Interests is
completed.
	 
	 	19.14  	Under no circumstances shall PH or PHCO be required to give any warranties or
indemnities upon a sale of any of the PH/PHCO Interests except as to title to the PH/PHCO
Interests, capacity to sell and that the PH/PHCO Interests will, at the time of sale, be
free from all Encumbrances.
	 
	 	19.15  	PH shall be entitled, prior to the expiry of the period specified in a Tag Along
Offer, to notify MGM and the Preferred Purchaser of PH’s intention to sell part only of
the PH/PHCO Interests (the “Partial Sale Notice”) and in which event the Tag Along Offer
shall apply to only that part of the PH/PHCO Interests specified in the Partial Sale
Notice and the following provisions shall apply:

	 	   	the purchase price payable by the Preferred Purchaser for that part of the
PH/PHCO Interests being sold shall be equal to the purchase price being paid for
the MGM Interests multiplied by the percentage of the total number of Shares
held by PH and PHCO that are being sold; and
	 
	 	   	in the event that, as a result of any sale of part of the PH/PHCO Interests, PH
and PHCO would between them hold less than 30% of the entire issued share
capital of Gaming Company, PH shall agree to have no greater or more favourable
rights as a shareholder in Gaming Company than those that would be vested in PH
following implementation of the provisions of clauses 21.3.1 to 21.3.3
(inclusive).

	 	19.16  	In the event that MGM disposes of the MGM Interests as a result of the application
of clause 19.3 then, unless PH and PHCO have also disposed of all of the PH/PHCO Interests
pursuant to a Tag Along Offer, the provisions of this clause 19.16 shall apply to restrict
the carrying on of gaming activities by MGM Group in Macau S.A.R.:

	 	   	MGM shall not, and shall procure that every other member of MGM Group shall not,
directly or indirectly, for a period of two (2) years from the date of the
disposal by MGM of the MGM Interests (the “Restriction Period”) carry on or be
engaged in or be otherwise interested in (including through a management
contract or similar arrangement) any form of casino gaming activity or other
gaming type activity in Macau S.A.R.;

23

 

	 	   	MGM shall not, and shall procure that every other member of MGM Group shall not,
for a period of two (2) years from the date of the disposal by MGM of the MGM
Interests solicit or entice away, or endeavour to solicit or entice away, from
Gaming Company or any of its subsidiaries any person employed or retained by any
of such companies, at the time of disposal of the MGM Interests, in any senior
executive, technical, operational or sales capacity (other than any such persons
who were at such time employees of the MGM Group and seconded to any of such
companies);
	 
	 	   	MGM shall not, and shall procure that every other member of MGM Group shall not,
for a period of two (2) years from the date of the disposal by MGM of the MGM
Interests employ or retain on any form of consultancy or similar arrangement any
person employed or retained by Gaming Company or any of its subsidiaries, at the
time of disposal of the MGM Interests, in any senior executive, technical,
operational or sales capacity (other than any such persons who were at such time
employees of the MGM Group and seconded to any of such companies) provided
always that this clause 19.16.3 shall not restrict any member of MGM Group from
employing or retaining any such person if that person has been dismissed by
Gaming Company during such period and PH consents (such consent not to be
unreasonably withheld or delayed);
	 
	 	   	the provisions of clause 19.16 above shall not (a) apply to prevent MGM or any
member of MGM Group from acquiring a then existing gaming operation in Macau
S.A.R. within the Restriction Period if, prior to disposing of the MGM
Interests, MGM Group has publicly challenged the issue by the MGM Regulator of
the relevant MGM Sale Direction or MGM Regulatory Warning, as the case may be,
including pursuing court proceedings and the relevant MGM Regulator has
nevertheless failed to withdraw the MGM Sale Direction or MGM Regulatory
Warning, as the case may be; or (b) require MGM or any member of the MGM Group
to dispose of any other interest or participation in a Macau S.A.R. casino
gaming activity or other gaming type activity that it is permitted to hold or
engage in pursuant to the terms of this Agreement; or (c) restrict MGM or any
member of MGM Group from conducting customary marketing activities for its
operations outside of Macau S.A.R..

	 	19.17  	MGM agrees that the restrictions contained in clause 19.16 above are reasonable for
the protection of the value of the Business. Each of sub-clauses 19.16.1 to 19.16.4
(inclusive) shall constitute a separate and independent provision of this Agreement for
the purposes of clause 38.
	 
	 	19.18  	Subject to clause 19.34 below, if the MGM Sale Direction is issued otherwise than in
the circumstances contemplated by clause 19.3 above, then MGM shall have the right to
sell, and PH shall have the right to purchase, the MGM Interests in accordance with, and
subject always to, the provisions of clauses 19.19 to 19.33.
	 
	 	19.19  	During the period of 90 days, or such longer period as the government of Macau
S.A.R. may specify, following the delivery to the government of Macau S.A.R. and PH of the
relevant MGM Sale Direction or MGM Regulatory Warning, each of MGM, PH and PHCO shall
co-operate with the government of Macau S.A.R. (including providing information and copies
of documents relating to the background to, and reasons for, the issue of the relevant MGM
Sale Direction or MGM Regulatory Warning) to the extent reasonably necessary to enable the
government of Macau S.A.R. to understand the background to, and reasons for, the issue of
the relevant MGM Sale Direction or MGM Regulatory Warning.

24

 

	 	19.20  	MGM, PH and PHCO shall use all reasonable endeavours to procure the withdrawal by
the relevant MGM Regulator of the MGM Sale Direction or MGM Regulatory Warning, as the
case may be, within the period of 90 days from the end of the period referred to in clause
19.19 above (the “Notice Period”). The government of Macau S.A.R. will be consulted on,
and kept informed with respect to, any and all communications with, and representations
to, the relevant MGM Regulator.
	 
	 	19.21  	In the event that the relevant MGM Regulator fails to withdraw the MGM Sale
Direction or MGM Regulatory Warning, as the case may be, within the Notice Period, MGM
shall, within the period of 30 days from the expiry of the Notice Period, notify the
government of Macau S.A.R., PH and PHCO in writing (the “Sale Election Notice”) as to
whether or not it elects to dispose of the MGM Interests. If MGM elects to dispose of the
MGM Interests, the following provisions of clauses 19.22 to 19.33 shall apply.
	 
	 	19.22  	During the period of 90 days following the receipt by the government of Macau S.A.R.
and PH of the Sale Election Notice (the “Selection Period”), MGM and PH shall co-operate,
together with the government of Macau S.A.R., in identifying not less than three (3)
potential purchasers (the “Potential Purchasers”) of the MGM Interests. The Potential
Purchasers must be acceptable to PH and the government of Macau S.A.R., and must meet all
criteria specified by the government of Macau S.A.R. During the Selection Period, MGM and
PH shall also seek to agree on the identity of a financial adviser (being (i) an
investment bank of international repute; (ii) independent of both MGM and PH; and (iii)
acceptable to the government of Macau S.A.R.) (the “Financial Adviser”) to advise on the
sale of the MGM Interests through an auction process involving the Potential Purchasers,
such appointment and process to be in accordance with the following provisions of this
clause 19.22:

	 	   	the Financial Adviser will be appointed by MGM on terms reasonably acceptable to
PH;
	 
	 	   	the Potential Purchasers will be required to agree in writing (on terms
reasonably acceptable to PH), and the auction will be marketed on such basis
(including explicitly in any information memorandum or similar materials issued
to Potential Purchasers), that it will have no greater or more favourable rights
as a shareholder in Gaming Company than those that would be vested in MGM
following implementation of the provisions of clauses 24.3.1 to 24.3.3
(inclusive);
	 
	 	   	the Potential Purchasers will be invited to confirm if they would prefer to
purchase all, or part only (as contemplated by clause 19.31), of the MGM
Interests;
	 
	 	   	the structure of the auction process (including as to the number of bid or offer
rounds by Potential Purchasers, the required terms of the bids or offers to be
submitted with Potential Purchasers and the operation of any form of data room,
general information access and timing generally) shall be on terms reasonably
acceptable to PH and the government of Macau S.A.R.;
	 
	 	   	all material communications (including the terms of any information memorandum
or similar document) issued to any Potential Purchasers as part of the auction
process shall be in a form that is reasonably acceptable to PH and the
government of Macau S.A.R.;
	 
	 	   	PH and the government of Macau S.A.R. shall be fully involved at all stages of
the auction process and shall be kept informed with respect to all discussions
and

25

 

	 	   	meetings between MGM or the Financial Adviser and any of the Potential
Purchasers or any of their respective representative or advisers;

	 	   	copies of all bids, submissions and other material correspondence received by or
on behalf of MGM or the Financial Adviser from any of the Potential Purchasers
shall be delivered to PH and the government of Macau S.A.R. as soon as
practicable following their receipt.

	 	19.23  	Within 30 days of completion of the auction process agreed pursuant to clause
19.22.4 above, MGM shall notify PH and the government of Macau S.A.R. in writing of the
identity of its preferred Potential Purchaser (the “Preferred Purchaser”) and the cash
price at, and other material terms upon, which MGM would be willing to dispose of to the
Preferred Purchaser, and the Preferred Purchaser willing to purchase from MGM, the MGM
Interests (or relevant part in event that clause 19.31 applies) (the “Withdrawal Notice”).
	 
	 	19.24  	PH shall be entitled, for the period of 60 days from the date of receipt by PH and
the government of Macau S.A.R. of the Withdrawal Notice (the “Election Notice Period”), to
notify MGM in writing (the “Election Notice”) of PH’s intention to have PH’s nominated
party (being a party approved by the government of Macau S.A.R. as a holder of Shares)
acquire all of the MGM Interests (in place of the Preferred Purchaser) on the same terms,
mutatis mutandis, as those disclosed in the Withdrawal Notice and, in which event, MGM
shall procure that such election is fulfilled and complied with and that the full legal
title to, and beneficial ownership of, all of the MGM Interests is duly transferred to
PH’s nominated party on the same terms, mutatis mutandis, as those disclosed in the
Withdrawal Notice (except that MGM shall not be required to give any warranties or
indemnities except as to title to the MGM Interests, capacity to sell and that the MGM
Interests will, at the time of sale, be free from Encumbrances) and, if not already
specified in the Withdrawal Notice, free from all Encumbrances, within 90 days of the
receipt by MGM of the Election Notice.
	 
	 	19.25  	In the event that PH fails to deliver the Election Notice to MGM within the Election
Notice Period, MGM shall be entitled to enter into and consummate an agreement to sell all
(but not, subject to clause 19.31, some only) of the MGM Interests to the party disclosed
as the Preferred Purchaser in the Withdrawal Notice and on the terms contained therein
provided always that the Preferred Purchaser:

	 	   	executes a Deed of Adherence;
	 
	 	   	acquires the MGM Interests within 90 days from the date of expiry of the
Election Notice Period (or such longer period, not exceeding 180 days in total,
as may be reasonably required in order to obtain any necessary regulatory
approvals); and
	 
	 	   	(before such disposal is effected) the proposed purchaser makes a written offer
(a “Tag Along Offer”) to PH and PHCO to purchase the PH/PHCO Interests for the
same price and otherwise on the same terms and conditions (subject to clause
19.29 below) as those applying to the sale by MGM of the MGM Interests.

	 	19.26  	Any Tag Along Offer shall specify:

	 	   	the price for the PH/PHCO Interests and other principal terms and conditions of
the offer;
	 
	 	   	the period (being not less than 60 days) for acceptance by PH and PHCO.

26

 

	 	19.27  	PH shall be free to either accept or reject a Tag Along Offer. If, within the period
specified in a Tag Along Offer, PH accepts the offer in writing then the sale of the
PH/PHCO Interests shall proceed at the same time as the sale of the MGM Interests.
	 
	 	19.28  	Any acceptance by PH of a Tag Along Offer shall be deemed to be acceptance by PHCO
also and PHCO hereby appoints PH as its lawful attorney for the purposes of agreeing
and/or signing any document that may be necessary for the purposes of effecting a sale of
any of the PH/PHCO Interests pursuant to a Tag Along Offer. Any such acceptance by PH
shall be irrevocable. If the sale of any of the PH/PHCO Interests precedes the sale of the
MGM Interests then no sale of any of the PH/PHCO Interests pursuant to the acceptance of a
Tag Along Offer shall take place unless and until the sale of the MGM Interests is
completed.
	 
	 	19.29  	Under no circumstances shall PH or PHCO be required to give any warranties or
indemnities upon a sale of any of the PH/PHCO Interests except as to title to the PH/PHCO
Interests, capacity to sell and that the PH/PHCO Interests will, at the time of sale, be
free from all Encumbrances.
	 
	 	19.30  	PH shall be entitled, prior to the expiry of the period specified in a Tag Along
Offer, to notify MGM and the Preferred Purchaser of PH’s intention to sell part only of
the PH/PHCO Interests (the “Partial Sale Notice”) and in which event the Tag Along Offer
shall apply to only that part of the PH/PHCO Interests specified in the Partial Sale
Notice and the following provisions shall apply:

	 	   	the purchase price payable by the Preferred Purchaser for that part of the
PH/PHCO Interests being sold shall be equal to the purchase price being paid for
the MGM Interests multiplied by the percentage of the total number of Shares
held by PH and PHCO that are being sold; and
	 
	 	   	in the event that, as a result of any sale of part of the PH/PHCO Interests, PH
and PHCO would between them hold less than 30% of the entire issued share
capital of Gaming Company, PH shall agree to have no greater or more favourable
rights as a shareholder in Gaming Company than those that would be vested in PH
following implementation of the provisions of clauses 21.3.1 to 21.3.3
(inclusive).

	 	19.31  	In the event that:

	 	   	PH fails to accept a Tag Along Offer (in whole or in part) within the period
specified in clause 19.26.2; and
	 
	 	   	the Preferred Purchaser notifies MGM and PH in writing (the “Part Purchase
Notice”), within 14 days from the expiry of the period specified in clause
19.26.2, that it would prefer to purchase part only of the MGM Interests,
	 
	 	   	then MGM shall be entitled to require PH, by notice in writing to that effect
(the “Remaining Interest Notice”) within 14 days of the receipt by MGM and PH of
the Part Purchase Notice, to procure the purchase of that portion of the MGM
Interests that the Preferred Purchaser is unwilling to purchase (the “Remaining
Interest”) subject always to the following conditions:

	 	(a)  	the Preferred Purchaser must purchase at least such
portion of the MGM Interests as shall result in the Preferred Purchaser
holding not less than 30% of the entire issued share capital of Gaming
Company following such purchase;

27

 

	 	(b)  	the government of Macau S.A.R. must approve the party
procured by PH to purchase the Remaining Interest;
	 
	 	(c)  	the purchase price payable for the Remaining Interest
shall be calculated on an identical basis to that used to calculate the
purchase price for the portion of the MGM Interests to be purchased by the
Preferred Purchaser;
	 
	 	(d)  	the proportion of debt comprised in the Remaining
Interest and that portion of the MGM Interests to be purchased by the
Preferred Purchaser shall be pro rated according to the percentage of
Shares comprised in each;
	 
	 	(e)  	MGM shall be required to give equivalent contractual
protections to the purchaser of the Remaining Interest as it shall have
agreed in respect of the sale of that portion of the MGM Interests to be
acquired by the Preferred Purchaser;
	 
	 	(f)  	PH shall not be required to procure the purchase of the
Remaining Interest unless and until the purchase by the Preferred Purchaser
has been completed in all respects;
	 
	 	(g)  	the purchase of the Remaining Interest shall be
completed within 90 days of the delivery to PH of the Remaining Interest
Notice (or such longer period, not exceeding 180 days in total, as may be
reasonably required in order to obtain any necessary regulatory approvals).

	 	19.32  	In the event that MGM disposes of the MGM Interests as a result of the application
of clause 19.18 then, unless PH and PHCO have also disposed of all of the PH/PHCO
Interests pursuant to a Tag Along Offer, the provisions of this clause 19.32 shall apply
to restrict the carrying on of gaming activities by MGM Group in Macau S.A.R.:

	 	   	MGM shall not, and shall procure that every other member of MGM Group shall not,
for a period of four (4) years from the date of the disposal by MGM of the MGM
Interests carry on or be engaged in or be otherwise interested in (including
through a management contract or similar arrangement) any form of casino gaming
activity or other gaming type activity in Macau S.A.R.;
	 
	 	   	MGM shall not, and shall procure that every other member of MGM Group shall not,
for a period of two (2) years from the date of the disposal by MGM of the MGM
Interests take any steps to apply for or otherwise procure or seek the benefit
of any Casino Opportunity in Macau S.A.R.;
	 
	 	   	MGM shall not, and shall procure that every other member of MGM Group shall not,
for a period of four (4) years from the date of the disposal by MGM of the MGM
Interests solicit or entice away, or endeavour to solicit or entice away, from
Gaming Company or any of its subsidiaries any person employed or retained by any
of such companies, at the time of disposal of the MGM Interests, in any senior
executive, technical, operational or sales capacity (other than any such persons
who were at such time employees of the MGM Group and seconded to any of such
companies);
	 
	 	   	MGM shall not, and shall procure that every other member of MGM Group shall not,
for a period of four (4) years from the date of the disposal by MGM of the

28

 

	 	   	MGM Interests employ or retain on any form of consultancy or similar arrangement
any person employed or retained by Gaming Company or any of its subsidiaries, at
the time of disposal of the MGM Interests, in any senior executive, technical,
operational or sales capacity (other than any such persons who were at such time
employees of the MGM Group and seconded to any of such companies) provided
always that this clause 19.32.4 shall not restrict any member of MGM Group from
employing or retaining any such person if that person has been dismissed by
Gaming Company during such period and PH consents (such consent not to be
unreasonably withheld or delayed);

	 	   	the provisions of clause 19.32 above shall not (a) require MGM or any member of
the MGM Group to dispose of any other interest or participation in a Macau
S.A.R. casino gaming activity or other gaming type activity that it is permitted
to hold or engage in pursuant to the terms of this Agreement; or (b) restrict
MGM or any member of MGM Group from conducting customary marketing activities
for its operations outside of Macau S.A.R..

	 	19.33  	MGM agrees that the restrictions contained in clause 19.32 above are reasonable for
the protection of the value of the Business. Each of sub-clauses 19.32.1 to 19.32.5
(inclusive) shall constitute a separate and independent provision of this Agreement for
the purposes of clause 38.
	 
	 	19.34  	Notwithstanding the provisions of clauses 19.1 to 19.33 above, if the reason for the
issue of the MGM Sale Direction or MGM Regulatory Warning is PH acquiring, directly or
indirectly, control of SJM as contemplated by clause 21 then the parties agree that the
provisions of clause 21 shall apply to determine the resolution of the matter concerned
and the provisions of clauses 19.1 to 19.33 above shall not apply.
	 
	 	19.35  	In the event that a sale of the MGM Interests is effected pursuant to clause 19.18
and, at the time of such sale, clause 21.3 has already been invoked then concurrently with
completion of such sale PH shall (and the Shares held by her shall) immediately have all
rights and benefits accrued and applying under this Agreement immediately prior to such
clause having been invoked.

	20.  	MACAU REGULATOR ISSUE 
	 
	   	The Shareholders acknowledge and agree that each of the provisions outlined below is subject to
compliance with the provisions of Macau law and to the ultimate discretion of the government of
Macau S.A.R. and that the Shareholders will at all times adhere to the requirements of the
government of Macau S.A.R. in relation to the application and implementation of any of the
following provisions of this clause 20.

	 	20.1  	Each Shareholder acknowledges that the Subconcession is issued with the express
consent of the government of Macau S.A.R. If any member of MGM Group is directed in
writing by the government of Macau S.A.R. (a “Macau Sale Direction”) to sell its Shares
then the following provisions of clauses 20.2 to 20.15 shall apply.
	 
	 	20.2  	MGM, PH and PHCO shall use all reasonable endeavours to procure the withdrawal by the
government of Macau S.A.R. of the Macau Sale Direction within the period of 90 days from
the date of receipt by PH and PHCO of the same from MGM (the “Notice Period”).
	 
	 	20.3  	In the event that the government of Macau S.A.R. fails to withdraw the Macau Sale
Direction within the Notice Period, MGM shall, within the period of 30 days from the
expiry of the

29

 

	 	   	Notice Period, notify the government of Macau S.A.R., PH and PHCO in writing (the “Sale
Election Notice”) as to whether or not it elects to dispose of the MGM Interests. If MGM
elects to dispose of the MGM Interests, the following provisions of clauses 20.4 to
20.15 shall apply.

	 	20.4  	During the period of 90 days following the receipt by the government of Macau S.A.R.
and PH of the Sale Election Notice (the “Selection Period”), MGM and PH shall co-operate,
together with the government of Macau S.A.R., in identifying not less than three (3)
potential purchasers (the “Potential Purchasers”) of the MGM Interests. The Potential
Purchasers must be acceptable to PH and the government of Macau S.A.R., and must meet all
criteria specified by the government of Macau S.A.R. During the Selection Period, MGM and
PH shall also seek to agree on the identity of a financial adviser (being (i) an
investment bank of international repute; (ii) independent of both MGM and PH; and (iii)
acceptable to the government of Macau S.A.R.) (the “Financial Adviser”) to advise on the
sale of the MGM Interests through an auction process involving the Potential Purchasers,
such appointment and process to be in accordance with the following provisions of this
clause 20.4:

	 	   	the Financial Adviser will be appointed by MGM on terms reasonably acceptable to
PH;
	 
	 	   	the Potential Purchasers will be required to agree in writing (on terms
reasonably acceptable to PH), and the auction will be marketed on such basis
(including explicitly in any information memorandum or similar materials issued
to Potential Purchasers), that it will have no greater or more favourable rights
as a shareholder in Gaming Company than those that would be vested in MGM
following implementation of the provisions of clauses 24.3.1 to 24.3.3
(inclusive);
	 
	 	   	the Potential Purchasers will be invited to confirm if they would prefer to
purchase all, or part only (as contemplated by clause 20.13), of the MGM
Interests;
	 
	 	   	the structure of the auction process (including as to the number of bid or offer
rounds with Potential Purchasers, the required terms of the bids or offers to be
submitted by Potential Purchasers and the operation of any form of data room,
general information access and timing generally) shall be on terms reasonably
acceptable to PH and the government of Macau S.A.R.;
	 
	 	   	all material communications (including the terms of any information memorandum
or similar document) issued to any Potential Purchasers as part of the auction
process shall be in a form that is reasonably acceptable to PH and the
government of Macau S.A.R.;
	 
	 	   	PH and the government of Macau S.A.R. shall be fully involved at all stages of
the auction process and shall be kept informed with respect to all discussions
and meetings between MGM or the Financial Adviser and any of the Potential
Purchasers or any of their respective representatives or advisers;
	 
	 	   	copies of all bids, submissions and other material correspondence received by or
on behalf of MGM or the Financial Adviser from any of the Potential Purchasers
shall be delivered to PH and the government of Macau S.A.R. as soon as
practicable following their receipt.

	 	20.5  	Within 30 days of completion of the auction process agreed pursuant to clause 20.4.4
above, MGM shall notify PH and the government of Macau S.A.R. in writing of the identity
of its

30

 

	 	   	preferred Potential Purchaser (the “Preferred Purchaser”) and the cash price at, and
other material terms upon, which MGM would be willing to dispose of to the Preferred
Purchaser, and the Preferred Purchaser willing to purchase from MGM, the MGM Interests
(or relevant part in the event that clause 20.13 applies) (the “Withdrawal Notice”).

	 	20.6  	PH shall be entitled, for the period of 60 days from the date of receipt by PH and
the government of Macau S.A.R. of the Withdrawal Notice (the “Election Notice Period”), to
notify MGM in writing (the “Election Notice”) of PH’s intention to have PH’s nominated
party (being a party approved by the government of Macau S.A.R. as a holder of Shares)
acquire all of the MGM Interests (in place of the Preferred Purchaser) on the same terms,
mutatis mutandis, as those disclosed in the Withdrawal Notice and, in which event, MGM
shall procure that such election is fulfilled and complied with and that the full legal
title to, and beneficial ownership of, all of the MGM Interests is duly transferred to
PH’s nominated party on the same terms, mutatis mutandis, as those disclosed in the
Withdrawal Notice (except that MGM shall not be required to give any warranties or
indemnities except as to title to the MGM interests, capacity to sell and that the MGM
Interests will, at the time of sale, be free from all Encumbrances) and, if not already
specified in the Withdrawal Notice, free from all Encumbrances, within 90 days of the
receipt by MGM of the Election Notice.
	 
	 	20.7  	In the event that PH fails to deliver the Election Notice to MGM within the Election
Notice Period, MGM shall be entitled to enter into and consummate an agreement to sell all
(but not, subject to clause 20.13, some only) of the MGM Interests to the party disclosed
as the Preferred Purchaser in the Withdrawal Notice and on the terms contained therein
provided always that the Preferred Purchaser:

	 	   	executes a Deed of Adherence;
	 
	 	   	acquires the MGM Interests within 90 days from the date of expiry of the
Election Notice Period (or such longer period, not exceeding 180 days in total,
as may be reasonably required in order to obtain any necessary regulatory
approvals); and
	 
	 	   	(before such disposal is effected) makes a written offer (a “Tag Along Offer”)
to PH and PHCO to purchase the PH/PHCO Interests for the same price and
otherwise on the same terms and conditions (subject to clause 20.11 below) as
those applying to the sale by MGM of the MGM Interests.

	 	20.8  	Any Tag Along Offer shall specify:

	 	   	the price for the PH/PHCO Interests and other principal terms and conditions of
the offer;
	 
	 	   	the period (being not less than 60 days) for acceptance by PH and PHCO.

	 	20.9  	PH shall be free to either accept or reject a Tag Along Offer. If, within the period
specified in a Tag Along Offer, PH accepts the offer in writing then the sale of the
PH/PHCO Interests shall proceed at the same time as the sale of the MGM Interests.
	 
	 	20.10  	Any acceptance by PH of a Tag Along Offer shall be deemed to be acceptance by PHCO
also and PHCO hereby appoints PH as its lawful attorney for the purposes of agreeing
and/or signing any document that may be necessary for the purposes of effecting a sale of
any of the PH/PHCO Interests pursuant to a Tag Along Offer. Any such acceptance by PH
shall be irrevocable. If the sale of any of the PH/PHCO Interests precedes the sale of the
MGM

31

 

	 	   	Interests then no sale of any of the PH/PHCO Interests pursuant to the acceptance of a
Tag Along Offer shall take place unless and until the sale of the MGM Interests is
completed.

	 	20.11  	Under no circumstances shall PH or PHCO be required to give any warranties or
indemnities upon a sale of any of the PH/PHCO Interests except as to title to the PH/PHCO
Interests, capacity to sell and that the PH/PHCO Interests will, at the time of sale, be
free from all Encumbrances.
	 
	 	20.12  	PH shall be entitled, prior to the expiry of the period specified in a Tag Along
Offer, to notify MGM and the Preferred Purchaser of PH’s intention to sell part only of
the PH/PHCO Interests (the “Partial Sale Notice”) and in which event the Tag Along Offer
shall apply to only that part of the PH/PHCO Interests specified in the Partial Sale
Notice and the following provisions shall apply:

	 	   	the purchase price payable by the Preferred Purchaser for that part of the
PH/PHCO Interests being sold shall be equal to the purchase price being paid for
the MGM Interests multiplied by the percentage of the total number of Shares
held by PH and PHCO that are being sold; and
	 
	 	   	in the event that, as a result of any sale of part of the PH/PHCO Interests, PH
and PHCO would between them hold less than 30% of the entire issued share
capital of Gaming Company, PH shall agree to have no greater or more favourable
rights as a shareholder in Gaming Company than those that would be vested in PH
following implementation of the provisions of clauses 21.3.1 to 21.3.3
(inclusive).

	 	20.13  	In the event that:

	 	   	PH fails to accept a Tag Along Offer (in whole or in part) within the period
specified in clause 20.8.2; and
	 
	 	   	the Preferred Purchaser notifies MGM and PH in writing (the “Part Purchase
Notice”), within 14 days from the expiry of the period specified in clause
20.8.2, that it would prefer to purchase part only of the MGM Interests,
	 
	 	   	then MGM shall be entitled to require PH, by notice in writing to that effect
(the “Remaining Interest Notice”) within 14 days of the receipt by MGM and PH of
the Part Purchase Notice, to procure the purchase of that portion of the MGM
Interests that the Preferred Purchaser is unwilling to purchase (the “Remaining
Interest”) subject always to the following conditions:

	 	(a)  	the Preferred Purchaser must purchase at least such
portion of the MGM Interests as shall result in the Preferred Purchaser
holding not less than 30% of the entire issued share capital of Gaming
Company following such purchase;
	 
	 	(b)  	the government of Macau S.A.R. must approve the party
procured by PH to purchase the Remaining Interest;
	 
	 	(c)  	the purchase price payable for the Remaining Interest
shall be calculated on an identical basis to that used to calculate the
purchase price for the portion of the MGM Interests to be purchased by the
Preferred Purchaser;

32

 

	 	(d)  	the proportion of debt comprised in the Remaining
Interest and that portion of the MGM Interests to be purchased by the
Preferred Purchaser shall be pro rated according to the percentage of
Shares comprised in each;
	 
	 	(e)  	MGM shall be required to give equivalent contractual
protections to the purchaser of the Remaining Interest as it shall have
agreed in respect of the sale of that portion of the MGM Interests to be
acquired by the Preferred Purchaser;
	 
	 	(f)  	PH shall not be required to procure the purchase of the
Remaining Interest unless and until the purchase by the Preferred Purchaser
has been completed in all respects;
	 
	 	(g)  	the purchase of the Remaining Interest shall be
completed within 90 days of the delivery to PH of the Remaining Interest
Notice (or such longer period, not exceeding 180 days in total, as may be
reasonably required in order to obtain any necessary regulatory approvals).

	 	20.14  	In the event that MGM disposes of the MGM Interests as a result of the application
of clause 20.1 then, unless PH and PHCO have also disposed of all of the PH/PHCO Interests
pursuant to a Tag Along Offer, the provisions of this clause 20.14 shall apply to restrict
the carrying on of gaming activities by MGM Group in Macau S.A.R.:

	 	   	MGM shall not, and shall procure that every other member of MGM Group shall not,
for a period of four (4) years from the date of the disposal by MGM of the MGM
Interests carry on or be engaged in or be otherwise interested in (including
through a management contract or similar arrangement) any form of casino gaming
activity or other gaming type activity in Macau S.A.R.;
	 
	 	   	MGM shall not, and shall procure that every other member of MGM Group shall not,
for a period of two (2) years from the date of the disposal by MGM of the MGM
Interests take any steps to apply for or otherwise procure or seek the benefit
of any Casino Opportunity in Macau S.A.R.;
	 
	 	   	MGM shall not, and shall procure that every other member of MGM Group shall not,
for a period of four (4) years from the date of the disposal by MGM of the MGM
Interests solicit or entice away, or endeavour to solicit or entice away, from
Gaming Company or any of its subsidiaries any person employed or retained by any
of such companies, at the time of disposal of the MGM Interests, in any senior
executive, technical, operational or sales capacity (other than any such persons
who were at such time employees of the MGM Group and seconded to any of such
companies);
	 
	 	   	MGM shall not, and shall procure that every other member of MGM Group shall not,
for a period of four (4) years from the date of the disposal by MGM of the MGM
Interests employ or retain on any form of consultancy or similar arrangement any
person employed or retained by Gaming Company or any of its subsidiaries, at the
time of disposal of the MGM Interests, in any senior executive, technical,
operational or sales capacity (other than any such persons who were at such time
employees of the MGM Group and seconded to any of such companies) provided
always that this clause 20.14.4 shall not restrict any member of MGM Group from
employing or retaining any such person if that person has been dismissed by

33

 

	 	   	Gaming Company during such period and PH consents (such consent not to be
unreasonably withheld or delayed);

	 	   	the provisions of clause 20.14 above shall not (a) require MGM or any member of
the MGM Group to dispose of any other interest or participation in a Macau
S.A.R. casino gaming activity or other gaming type activity that it is permitted
to hold or engage in pursuant to the terms of this Agreement; or (b) restrict
MGM or any member of MGM Group from conducting customary marketing activities
for its operations outside of Macau S.A.R.

	 	20.15  	MGM agrees that the restrictions contained in clause 20.14 are reasonable for the
protection of the value of the Business. Each of sub-clauses 20.14.1 to 20.14.5
(inclusive) shall constitute a separate and independent provision of this Agreement for
the purposes of clause 38.
	 
	 	20.16  	The provisions of clause 20 above shall apply mutatis mutandis to PH in the event
that PH is directed in writing by the government of Macau S.A.R. to sell her Shares.
	 
	 	20.17  	In the event that a sale of the MGM Interests is effected pursuant to clause 20 and,
at the time of such sale, clause 21.3 has already been invoked then concurrently with
completion of such sale PH shall (and the Shares held by her shall) immediately have all
rights and benefits accrued and applying under this Agreement immediately prior to such
clause having been invoked.

	21.  	PH ACQUIRES CONTROL OF SJM

	 	21.1  	If, at any time throughout the duration of this Agreement, PH acquires control of SJM
(a “PH Control Event”), then the following provisions of clauses 21.2 and 21.3 shall
apply. “Control” for the purposes of this clause 21 shall mean any of the following: (a)
holding, directly or indirectly (through companies, or any subsidiaries of such companies,
in which PH holds, directly or indirectly, in excess of 50% of the issued shares, or in
excess of 30% of the total voting rights attached to all issued shares (including
interests held through trusts established for the benefit of PH)), in excess of 30% of the
total voting rights attaching to all issued shares of SJM and being the single largest
shareholder; or (b) PH assuming the position of Managing Director of SJM; or (c) the
government of Macau S.A.R. having notified Gaming Company that it is in breach of that
Article of the Subconcession that is equivalent to Article 20 of the SJM Concession as a
result of PH occupying any position in SJM.
	 
	 	21.2  	As soon as practicable (and in any event within 3 Business Days) following the
occurrence of a PH Control Event, PH shall notify MGM in writing (a “PH Control Notice”)
of the same.
	 
	 	21.3  	MGM shall be entitled by notice in writing to PH (a “PH Surrender Notice”), within
the period of 30 days following the receipt by MGM of the PH Control Notice, to require PH
to have minority voting rights in Gaming Company and in which event the following shall
occur within the period of 90 days following the receipt by PH of the PH Surrender Notice:

	 	   	PH shall procure that each of the “A” Directors resigns from the Board and no
new “A” Directors be appointed in their stead and that each of the directors
appointed by PH to the boards of any subsidiaries of Gaming Company duly resign
and no new directors be appointed by PH in their stead;

34

 

	 	   	PH shall thereafter vote one in every three Ordinary Shares held by her in
accordance with the directions of MGM; and
	 
	 	   	the following amendments to this Agreement will automatically apply and these
changes will be reflected in the operation and governance of any subsidiaries of
Gaming Company:

	 	(a)  	the provisions of clause 5 shall not apply and MGM
shall operate the Board as it sees fit (subject to compliance with law and
any other applicable provisions of this Agreement);
	 
	 	(b)  	the provisions of clause 7.2 shall not apply;
	 
	 	(c)  	only those matters specified in clauses 8.7, 8.12,
8.13, 8.14, 8.17, 8.19, 8.20, 8.24, 8.27, 8.36, 8.37 and 8.39 shall require
the prior written consent of PH and clause 8 shall be deemed amended
accordingly;
	 
	 	(d)  	the reference to “A” Directors and “B” Directors in
clause 15 shall be deemed deleted and clause 15 deemed amended accordingly;
and
	 
	 	(e)  	the provisions of clauses 9, 24, 26 and 29 shall not
apply.

	22.  	[NOT USED]
	 
	23.  	MGM BECOMES INVOLVED IN COMPETING ENTERPRISE

	 	23.1  	If, at any time throughout the duration of this Agreement, any member of MGM Group
acquires, directly or indirectly, an interest (whether in the form of a shareholding
interest or otherwise) (a “Competing Interest”) in any casino gaming operator operating
(directly or indirectly) any form of casino gaming in Macau S.A.R. or enters into an
agreement to effect any of the foregoing (a “Competing Interest Event”), then the
provisions of clauses 23.2 to 23.9 shall apply.
	 
	 	23.2  	MGM shall, as soon as practicable following the occurrence of a Competing Interest
Event (and in any event within 3 Business Days), notify PH in writing (a “Competing Event
Notice”) of the nature of the Competing Interest Event and the Competing Interest and the
parties involved.
	 
	 	23.3  	MGM shall be entitled, within the period of 90 days following the receipt by PH of a
Competing Event Notice, to dispose, or procure the disposal, (in whole but not in part) of
the Competing Interest to an independent third party that is not associated to, or
otherwise affiliated or connected with, any MGM Group member.
	 
	 	23.4  	In the event that MGM fails, within the 90 day period referred to in clause 23.3
above, to dispose, or procure the disposal, of the Competing Interest, then within 90 days
of the end of such 90 day period (the “Competing Event Election Period”), PH shall be
required to notify MGM in writing (a “Competing Event Election Notice”) as to which of the
following events shall apply:

	 	   	(subject to the approval of the government of Macau S.A.R.) the relevant MGM
Group member transfers the Competing Interest to Gaming Company; or
	 
	 	   	(subject to the approval of the government of Macau S.A.R.) the Competing
Interest and Gaming Company are merged; or

35

 

(only if PH has not already surrendered management participation in Gaming
Company pursuant to the provisions of clause 21.3) MGM has minority voting
rights in Gaming Company; or

(only if PH has already surrendered management participation in Gaming Company
pursuant to the provisions of clause 21.3 and subject to the approval of the
government of Macau S.A.R.) a written bid process apply for the acquisition by
PH/PHCO or MGM, as the case may be, of the other party’s interests in Gaming
Company.

	 	23.5  	In the event that PH elects in the Competing Event Election Notice that the relevant
MGM Group member transfer the Competing Interest to Gaming Company then the following
shall apply:

MGM shall procure that the full legal title to, and beneficial ownership of, the
Competing Interest is duly transferred to Gaming Company on the following terms:

	 	(a)  	Gaming Company shall, and the Shareholders shall
procure that Gaming Company shall, pay to the relevant MGM Group member a
sum equal to the amount originally paid by such MGM Group member to acquire
the Competing Interest plus carrying costs and additional MGM capital
investment but minus all sums distributed or otherwise made over to any
member of MGM Group (all as evidenced to the reasonable satisfaction of
PH);

	 	(b)  	the Competing Interest shall be transferred free from
all Encumbrances;

	 	(c)  	the relevant MGM Group member shall not be required to
give any warranties or indemnities upon a transfer of the Competing
Interest except as to title to the Competing Interest, capacity to sell and
that the MGM Interests will, at the time of sale, be free from all
Encumbrances;

	 	(d)  	(subject to applicable legal and regulatory
requirements) the transfer shall be effected within 30 days from the expiry
of the Competing Event Election Period.

	 	23.6  	In the event that PH elects in the Competing Event Election Notice for the Competing
Interest and Gaming Company to be merged (the “Merger”) then the following shall apply:

MGM and PH shall use all reasonable endeavours to agree the percentage level of
shareholding to be owned by PH and PHCO in the newly merged entity (the “Merged
Entity”) that would fairly represent the value of the existing holdings of PH
and PHCO in Gaming Company within the Merged Entity (the “PH/PHCO Percentage”)
and, failing such agreement within the period of 30 days from the date of
delivery to MGM of the Competing Event Election Notice, such question shall be
referred to such independent firm of accountants (being one of the big four)
(the “Independent Accountants”) as PH and MGM may agree or, failing agreement,
as may be nominated on the application of either party by the Chairman for the
time being of the Hong Kong Society of Accountants and in which case each of PH
and MGM shall cooperate with the Independent Accountants (including providing
relevant information to them) to the extent reasonably necessary to enable the
Independent Accountants to determine the PH/PHCO Percentage within the period of
60 days from the date of delivery to MGM of the Competing Event Election Notice.
In making their determination, the Independent Accountants shall be acting

36

 

as experts and not as arbitrators and their determination shall be final and
binding on PH, PHCO and MGM (save in the case of manifest error);

(subject to applicable legal and regulatory requirements) the Merger shall be
effected within 60 days from the date of determination of the PH/PHCO
Percentage;

contemporaneously with completion of the Merger, the shares in the Merged Entity
representing the PH/PHCO Percentage shall be transferred or issued, as the case
may be, to PH and PHCO in the same proportions as the Shares held by them free
from all Encumbrances;

PH and PHCO shall not be required to give any warranties or indemnities on a
transfer of their Shares except as to title to the Shares held by them, capacity
to sell and that the Shares will, at the time of sale, be free from all
Encumbrances;

in the event that the PH/PHCO Percentage is less than 30% then MGM and PH shall
use all reasonable endeavours to agree such amendments or alterations to the
respective rights of PH and MGM in the management of Gaming Company as may be
reasonable in the circumstances, duly taking into account their respective
percentages of ownership of the Merged Entity;

where the PH/PHCO Percentage is less than 50%, PH and PHCO shall be entitled,
and MGM shall procure the fulfilment of any exercise of such entitlement, to
subscribe for such number of additional shares (ranking pari passu with the
            shares in the Merged Entity to be held by MGM Group) in the Merged Entity as
shall be sufficient to procure that PH and PHCO between them hold 50% of the
entire issued share capital of the Merged Entity provided that (i) the purchase
price for such additional shares shall be at the same valuation per share as is
utilized for the purposes of clause 23.6.1 above; (ii) written notice of the
exercise of such right shall have been given by PH to MGM and Gaming Company no
later than thirty (30) days following determination of the PH/PHCO Percentage;
and (iii) the subscription and payment for the shares shall be completed
concurrently with completion of the Merger.

	 	23.7  	In the event that PH elects in the Competing Event Election Notice that MGM has
minority voting rights in Gaming Company then the following shall occur within the period
of 30 days from the date of receipt by MGM of the Competing Event Election Notice:

MGM will procure that each of the “B” Directors resigns from the Board and no
new “B” Directors be appointed in their stead and that each of the directors
appointed by MGM to the boards of any subsidiaries of Gaming Company duly resign
and no new directors be appointed by MGM in their stead;

MGM shall thereafter vote one in every three Ordinary Shares held by it in
accordance with the directions of PH; and

the following amendments to this Agreement will automatically apply and these
changes will be reflected in the operation and governance of any subsidiaries of
Gaming Company:

	 	(a)  	the provisions of clause 5 shall not apply and PH shall
operate the Board as she sees fit (subject to compliance with law and any
other applicable provisions of this Agreement);

37

 

	 	(b)  	the provisions of clause 7.2 shall not apply;
	 
	 	(c)  	only those matters specified in clauses 8.7, 8.12,
8.13, 8.14, 8.17, 8.19, 8.20, 8.24, 8.27, 8.36, 8.37 and 8.39 shall require
the prior written consent of MGM and clause 8 shall be deemed amended
accordingly;
	 
	 	(d)  	the reference to “A” Directors and “B” Directors in
clause 15 shall be deemed deleted and clause 15 deemed amended accordingly;
and
	 
	 	(e)  	the provisions of clauses 9, 24, 26 and 29 shall not
apply.

	 	23.8  	In the event that PH elects in the Competing Event Election Notice that PH and MGM
implement a written bid process for the acquisition of the other’s interests in Gaming
Company then the following shall apply:

within the period of 30 days from the date of receipt by MGM of the Competing
Event Election Notice, PH and MGM shall appoint such independent firm of
accountants (being one of the big four) (the “Independent Accountants”) as PH
and MGM may agree or, failing agreement, as may be nominated on the application
of either party by the Chairman for the time being of the Hong Kong Society of
Accountants. The Independent Accountants shall be appointed to act as
adjudicators in respect of the bidding process to be undertaken in accordance
with this clause 23.8. In making their determination of the Winning Bid (as
defined below), the Independent Accountants shall be acting as experts and not
as arbitrators and their determination of the Winning Bid shall be final and
binding on PH, PHCO and MGM (save in the case of manifest error);

the Independent Accountants shall notify each of PH and MGM of a time (being
during normal office hours) and date, being a Business Day occurring within 60
days from the date of receipt by MGM of the Competing Event Election Notice (the
“Designated Time”), by which each of PH and MGM shall deliver to the Independent
Accountants (at an address specified by them in Hong Kong) a written bid setting
out the price that each would be prepared to pay to acquire (in the case of PH)
the MGM Interests (such bid and each successive bid being the “PH Bid”) and (in
the case of MGM) the PH/PHCO Interests (such bid and each successive bid being
the “MGM Bid”);

the PH Bid shall state the cash price (in US$) that PH is prepared to pay to
acquire the MGM Interests and the MGM Bid shall state the cash price (in US$)
that MGM is prepared to pay to acquire the PH Interests;

the Independent Accountants shall open each bid at the Designated Time in the
presence of a representative of each of PH and MGM and shall declare which of
the PH Bid and the MGM Bid is the highest and shall confirm the same in writing
to each of PH and MGM. Each of the representatives of PH and MGM shall be
entitled to inspect, and take copies of each and every bid;

the process referred to in clauses 23.8.2 to 23.8.4 shall then be repeated on
successive dates (being not less than 7 and not more than 14 days following the
date of the last bid submission), and at successive times (being in normal
business hours), specified by the Independent Accountants in writing to PH and
MGM until the earlier of (i) either of PH or MGM notifies the Independent
Accountants in

38

 

writing that it is not prepared to increase its bid further and (ii) completion
of a fourth round of bidding;

the winning bid (the “Winning Bid”) shall be whichever of the highest PH Bid and
the highest MGM Bid states the higher cash price. In the event that the cash
prices stated in the highest PH Bid and the highest MGM Bid are the same then
the process shall be repeated on the same terms, mutatis mutandis, until the
highest PH Bid or the highest MGM Bid, as the case may be, states a higher cash
price than the other;

following completion of the bidding process pursuant to clause 23.8.5 above, the
Independent Accountants shall confirm in writing to each of PH and MGM which of
the highest PH Bid and the highest MGM Bid is the Winning Bid and the date of
such written confirmation shall be the date of determination of the Winning Bid
for the purposes of this clause 23.8;

in the event that the highest PH Bid is declared the Winning Bid then the
following shall apply:

	 	(a)  	MGM shall procure that the full legal title to, and
beneficial ownership of, the MGM Interests is duly transferred to PH on the
following terms:

	 	(i)  	PH shall pay, or procure the payment to, MGM
a sum equal to the cash price stated in the Winning Bid;
	 
	 	(ii)  	the MGM Interests shall be transferred free
from all Encumbrances;
	 
	 	(iii)  	MGM shall not give any warranties or
indemnities upon a transfer of the MGM Interests except as to title to
the MGM Interests, capacity to sell and that the MGM Interests will,
at the time of sale, be free from all Encumbrances;
	 
	 	(iv)  	(subject to applicable legal and regulatory
requirements) the transfer shall be effected within 30 days of the
date of determination of the Winning Bid;

in the event that the highest MGM Bid is declared the Winning Bid then the
following shall apply:

	 	(b)  	PH and PHCO shall procure that the full legal title to,
and beneficial ownership of, the PH/PHCO Interests is duly transferred to
MGM on the following terms:

	 	(i)  	MGM shall pay, or procure the payment to, PH
a sum equal to the cash price stated in the Winning Bid;
	 
	 	(ii)  	the PH/PHCO Interests shall be transferred
free from all Encumbrances;
	 
	 	(iii)  	PH and PHCO shall not give any warranties or
indemnities upon a transfer of the PH/PHCO Interests except as to
title to the PH/PHCO Interests, capacity to sell and that the PH/PHCO
Interests will, at the time of sale, be free from all Encumbrances;
	 
	 	(iv)  	(subject to applicable legal and regulatory
requirements) the transfer shall be effected within 30 days of the
date of determination of the Winning Bid.

39

 

	 	23.9  	For the avoidance of doubt, a Competing Interest Event shall not include:

MGM participating in the casino gaming joint venture with PH and PHCO as
contemplated by this Agreement; or

MGM Group, though any one or more members of MGM Group, holding or acquiring in
aggregate up to 30% of the entire issued share capital of any casino gaming
operator operating (directly or indirectly) any form of casino gaming in Macau
S.A.R. or any controller of any such operator,

provided always that, in the case of 23.9.2 above, (a) where such shareholding interest
exceeds 20% of the entire issued share capital it does not constitute the single largest
shareholding in the relevant company; and (b) MGM Group does not, directly or indirectly
(and whether through one or more members of MGM Group), become involved in, whether in
any formal or informal capacity, the management of the relevant gaming operator or
gaming operator controller, as the case may be.

	24.  	MGM GROUP REDUCES CASINO OPERATIONS

	 	24.1  	If, at any time throughout the duration of this Agreement, the gross gaming revenues
(excluding those of Gaming Company and its subsidiaries) of MGM Group total less than US$1
billion in any MGM Group fiscal year (an “MGM Disposal Event”) then the following
provisions of clauses 24.2 and 24.3 shall apply. In the event that, in any subsequent MGM
Group fiscal year, such gross gaming revenues revert to being in excess of US$1 billion
then MGM shall (and the Shares held by it shall) immediately have all rights and benefits
that it would then have had under this Agreement if clause 24.3 had not been invoked
provided always that the provisions of this clause 24 shall still continue to apply
thereafter.
	 
	 	24.2  	As soon as practicable (and in any event within 3 Business Days) following the
occurrence of an MGM Disposal Event, MGM shall notify PH in writing (an “MGM Disposal
Notice”) of the same.
	 
	 	24.3  	PH shall be entitled by notice in writing to MGM (an “MGM Surrender Notice”), within
the period of 30 days following the receipt by PH of the MGM Disposal Notice, to require
MGM to surrender management participation in Gaming Company and each of its subsidiaries
and in which event the following shall occur within the period of 30 days following the
receipt by MGM of the MGM Surrender Notice:

MGM will procure that each of the “B” Directors resigns from the Board and no
new “B” Directors be appointed in their stead and that each of the directors
appointed by MGM to the boards of any subsidiaries of Gaming Company duly resign
and no new directors be appointed by MGM in their stead;

MGM shall thereafter vote one in every three Ordinary Shares held by it in
accordance with the directions of PH; and

the following amendments to this Agreement will automatically apply and these
changes will be reflected in the operation and governance of any subsidiaries of
Gaming Company:

	 	(a)  	the provisions of clause 5 shall not apply and PH shall
operate the Board as she sees fit (subject to compliance with law and any
other applicable provisions of this Agreement);

40

 

	 	(b)  	the provisions of clause 7.2 shall not apply;
	 
	 	(c)  	only those matters specified in clauses 8.7, 8.12,
8.13, 8.14, 8.17, 8.19, 8.20, 8.24, 8.27, 8.36, 8.37 and 8.39 shall require
the prior written consent of MGM and clause 8 shall be deemed amended
accordingly;
	 
	 	(d)  	the reference to “A” Directors and “B” Directors in
clause 15 shall be deemed deleted and clause 15 deemed amended accordingly;
and
	 
	 	(e)  	the provisions of clauses 9, 24, 26 and 29 shall not
apply.

	25.  	ECONOMIC BENEFICIARIES IN PHCO

	 	25.1  	PH acknowledges that one or more of the MGM Regulators may require the name from time
to time of any individual holding, directly or indirectly (including through any form of
trust or similar arrangement), any PHCO Shares (a “PHCO Beneficiary”) for the purposes of
assessing the impact, if any, on the privileged licenses issued to MGM Group by such MGM
Regulators. PH and PHCO agree, to the extent that either of them has such information, to
provide the same to the MGM Regulators and otherwise to use all reasonable endeavours to
cause such PHCO Beneficiaries to supply such information.
	 
	 	25.2  	In the event that any MGM Regulator directs any member of MGM Group in writing (a
“PHCO Beneficiary Divestment Notice”) that the holding of PHCO Shares by any PHCO
Beneficiary (excluding, for the avoidance of doubt, any of PH and DH) or the continued
receipt by any PHCO Beneficiary (excluding, for the avoidance of doubt, any of PH and DH)
of any direct or indirect economic benefit from any such direct or indirect shareholding
in PHCO would, if continued, result in the issue by such MGM Regulator of an MGM Sale
Direction then the following provisions of clauses 25.3 and 25.4 shall apply.
	 
	 	25.3  	As soon as practicable (and in any event within 3 Business Days) following the
receipt by any member of MGM Group of a PHCO Beneficiary Divestment Notice, MGM shall
notify PH of such receipt and provide PH with a copy of the relevant PHCO Beneficiary
Divestment Notice.
	 
	 	25.4  	PH and PHCO shall be required, within the period of 90 days following the receipt by
PH of the PHCO Beneficiary Divestment Notice from MGM to exercise all powers reasonably
available to them so as to:

(in the case of an objection to any PHCO Beneficiary continuing to hold PHCO
Shares) procure the transfer to PH of the PHCO Shares held by such PHCO
Beneficiary or, if PH so elects, through the exercise, along with MGM, of all
voting and other powers in relation to Gaming Company, procure the transfer to
Gaming Company of the PHCO Shares held by such PHCO Beneficiary; or

(in the case of an objection to any PHCO Beneficiary continuing to receive any
direct or indirect economic benefit) procure the divestment by the relevant PHCO
Beneficiary of all direct and indirect economic benefit deriving from any direct
or indirect shareholding interest in PHCO and provide reasonable evidence of the
same to the relevant MGM Regulator.

41

 

	26.  	CASINO OPPORTUNITIES

	 	26.1  	Each of MGM (for itself and on behalf of each of its Group Companies), PHCO (for
itself and on behalf of each of its Group Companies) and PH agrees that, throughout the
duration of this Agreement, the following provisions of this clause 26 shall apply to any
involvement or participation by any of them (directly or indirectly) in any Casino
Opportunity.
	 
	 	26.2  	In the event that MGM or PHCO, or any of their respective Group Companies, or PH
becomes aware of any Casino Opportunity in which any of them may participate or otherwise
become involved (directly or indirectly), MGM or PH, as the case may be, shall, within
three (3) days of becoming aware of the existence of such Casino Opportunity, notify PH or
MGM, as the case may be (the “Recipient”), in writing (the “Casino Opportunity Notice”) of
such Casino Opportunity setting out in reasonable detail (to the extent that they are
aware of the same) the nature, duration and expected application of such Casino
Opportunity.
	 
	 	26.3  	Upon delivery of the Casino Opportunity Notice to the Recipient, PH and MGM shall
thereafter use all reasonable endeavours to procure the joint benefit of such Casino
Opportunity.
	 
	 	26.4  	In the event that PH and MGM are unable, within the period of ninety (90) days from
the date of delivery to the Recipient of the Casino Opportunity Notice, to agree a basis
upon which they might participate equally in such Casino Opportunity or, at any time
during such ninety (90) day period, either of PH or MGM notifies the other that it is no
longer interested in pursuing such Casino Opportunity then MGM and PHCO and each of their
respective Group Companies shall not, and PH shall not, be entitled (directly or
indirectly) to participate in or otherwise take any steps to apply for or otherwise
procure or seek the benefit of such Casino Opportunity.

	27.  	PROVISION OF INFORMATION

	 	27.1  	Each of PH, PHCO and MGM shall, and PHCO and MGM shall procure that each of their
respective Group Companies shall:

(to the extent that the information is reasonably available to such party)
promptly comply with all reasonable requests for information made of any of them
by any MGM Regulator or the government of Macau S.A.R. or any applicable
governmental or regulatory body of competent jurisdiction (including without
limitation, the United States Securities Exchange Commission, the New York Stock
Exchange and The Stock Exchange of Hong Kong Limited) in connection with this
Agreement or the business relationships contemplated by this Agreement; and

refrain from taking any action that is intended to frustrate or impede any
investigation undertaken by any MGM Regulator or the government of Macau S.A.R.
or any applicable governmental or regulatory body of competent jurisdiction
(including without limitation, the United States Securities Exchange Commission,
the New York Stock Exchange and The Stock Exchange of Hong Kong Limited) in
connection with this Agreement or the business relationships contemplated by
this Agreement.

	28.  	PROJECT FEES

	 	28.1  	It is acknowledged that MGM Project Fees Company will provide certain development
support services in connection with the design and development of the Nam Van Casino (the

42

 

	 	   	“MGM Project Services”). In consideration for the provision by MGM Project Fees Company
of the MGM Project Services, Gaming Company shall pay to MGM Project Fees Company a fee
(the “MGM Project Services Fee”) equal to 1.75% of the total cost of the project (such
cost comprising cost of construction, fixtures and fittings and equipment, signage,
gaming and other supplies and equipment and other pre-opening, which pre-opening
comprises cost of marketing, payroll, travel, training and theatre production and
development, if any) (but excluding costs in respect of the acquisition of the
applicable land and the Subconcession) (as evidenced by appropriate invoices and
receipts).

	 	28.2  	It is acknowledged that PH Project Services Company will provide certain development
support services in connection with the design and development of the Nam Van Casino (the
“PH Project Services”). In consideration for the provision by PH Project Services Company
of the PH Project Services, Gaming Company shall pay to PH Project Services Company a fee
(the “PH Project Services Fee”) equal to 0.875% of the total cost of the project (such
cost comprising cost of construction, fixtures and fittings and equipment, signage, gaming
and other supplies and equipment and other pre-opening, which pre-opening comprises cost
of marketing, payroll, travel, training and theatre production and development, if any)
(but excluding costs in respect of the acquisition of the applicable land and the
Subconcession) (as evidenced by appropriate invoices and receipts).

	29.  	MANAGING DIRECTOR

	 	29.1  	(Without prejudice to the application of the provisions of clause 8 above) the
Shareholders hereby acknowledge the special responsibilities attaching to the position of
Managing Director (Administrator — Delegado) under the laws of Macau S.A.R. and
accordingly hereby agree to exercise all votes, authorities and powers conferred on them
in relation to Gaming Company and each of its subsidiaries so as to procure that,
throughout the duration of this Agreement:

(without prejudice to their reporting obligations, and ultimate accountability,
to the Board) upon the opening of the Nam Van Casino to the public the senior
operational management of Gaming Company and each of its subsidiaries shall
report to, and shall be accountable to, the Managing Director in respect of all
aspects of their work and the performance of their duties and shall not take any
action that may be reasonably likely to jeopardise or threaten the continued
approval by the government of Macau S.A.R of PH (or such other relevant
appointee of PH) as the Managing Director (Administrator — Delegado) of Gaming
Company;

upon the opening of the Nam Van Casino to the public the senior operational
management of Gaming Company and each of its subsidiaries shall provide to the
Managing Director on a monthly basis a written report (in such form as the
Managing Director may, from time to time, specify) of all material operational
and development issues concerning the operation of each of the casinos and
hotels/resorts contemplated by this Agreement (and all other matters falling
within the scope of their duties);

the General Manager — Chief Operating Officer (or equivalent howsoever called)
of Gaming Company shall meet with the Managing Director on a monthly basis to
discuss the written reports referred to in clause 29.1.2 and any other matters
that the Managing Director may consider appropriate and shall provide such
additional reports and such additional information concerning such matters as
the Managing Director may, from time to time, reasonably require (including,
without limitation, the provision of proposed operational procedures for the
casinos and/or

43

 

hotels/resorts, proposed credit policies, details of proposed staffing
arrangements, proposed casino plans and lay-out proposals, gaming equipment
purchase proposals and design proposals); and

all material correspondence on behalf of Gaming Company and each of its
subsidiaries with the government of Macau S.A.R. shall be first approved by the
Managing Director or (in the Managing Director’s absence) a representative
(being an “A” Director) nominated for such purpose by the Managing Director and
the Managing Director shall operate as the primary representative of Gaming
Company and each of its subsidiaries in relation to any dealings and/or
negotiations by any such companies with the government of Macau S.A.R.

	 	29.2  	MGM shall be entitled, throughout the duration of this Agreement, to nominate a
representative (being a “B” Director) to attend the monthly meetings contemplated by
clause 29.1.3 above and shall be provided with copies of all reports and other information
supplied to the Managing Director by the senior operational management of Gaming Company
and each of its subsidiaries pursuant to clause 29.1 above concurrently with delivery of
such reports to the Managing Director.

	30.  	THIS AGREEMENT NOT TO CONSTITUTE A PARTNERSHIP
	 
	   	None of the provisions of this Agreement shall be deemed to constitute a partnership among the
parties nor constitute any party the agent of any other party for any purpose.

	31.  	COSTS

	 	31.1  	Each party shall bear its own costs, legal fees and other expenses incurred in the
preparation, negotiation and execution of this Agreement.
	 
	 	31.2  	All costs, legal fees, registration fees, capital duty and other expenses incurred in
the formation of Gaming Company and each of its subsidiaries shall be borne and paid by
Gaming Company.
	 
	 	31.3  	All costs, legal fees, consultants fees and other expenses connected to the
application for and process of seeking necessary approvals for the Business will be borne
and paid for by Gaming Company.

	32.  	NON-DISCLOSURE OF INFORMATION

	 	32.1  	Subject to the provisions of clauses 27 and 32.2 below, none of the Shareholders
shall divulge or communicate to any person (other than their employees, agents and
representatives who reasonably require to know the same solely for the purposes of
assisting or furthering the Business and on the basis that the Shareholder shall procure
that such persons adhere to the provisions of this clause 32 as if they were a Shareholder
or to legal, accounting and other advisers as may be necessary in connection with any
matters or proceedings arising out of or relating to this Agreement) or use or exploit for
any purpose whatever any of the trade secrets or confidential knowledge or information or
any financial or trading information relating to the other Shareholders and/or Gaming
Company and/or Gaming Company’s subsidiaries which the relevant Shareholder may receive or
obtain as a result of entering into this Agreement. This restriction shall continue to
apply after the expiration or sooner termination of this Agreement without limit in point
of time, but shall cease to apply to information or knowledge which may properly come into
the public domain through no fault of such Shareholder.

44

 

	 	32.2  	Nothing in this clause 32 shall prohibit any of the Shareholders from disclosing
information if, but only to the extent, so required by law or by any regulatory body of
competent jurisdiction (including without limitation, the United States Securities
Exchange Commission or any MGM Regulators or the government of Macau S.A.R.) or by virtue
of the regulations of the New York Stock Exchange, The Stock Exchange of Hong Kong Limited
or any other recognised investment exchange provided that any Shareholder required to make
any such disclosure shall, to the maximum extent reasonably practicable, consult with the
other Shareholders with a view to such disclosure, so far as possible, being limited to
matters, and otherwise made in a form, acceptable to the other Shareholders.

	 	32.3  	Subject to clause 32.4 below, no press or public announcements, circulars or
communications relating to this Agreement or the subject matter of it shall be made or
sent by any of the Shareholders without the prior written consent of the Principal
Shareholders, such approval not to be unreasonably withheld or delayed.

	 	32.4  	Any Shareholder may make press or public announcements or issue a circular or
communication concerning this Agreement or the subject matter of it if such announcement
is required by law or by any regulatory body of competent jurisdiction (including without
limitation, the United States Securities Exchange Commission or any MGM Regulators or the
government of Macau S.A.R.) or by virtue of the regulations of the New York Stock
Exchange, The Stock Exchange of Hong Kong Limited or any other recognised investment
exchange provided that any Shareholder required to make any such announcement shall, to
the maximum extent reasonably practicable, consult with PH or MGM, as applicable, with a
view to such announcement, so far as possible, being limited to matters, and otherwise
made in a form, acceptable to PH or MGM, as applicable.

	33.  	DURATION

	 	33.1  	This Agreement shall continue in full force and effect until the date of commencement
of Gaming Company’s winding up provided that the terms of this Agreement shall
nevertheless continue to bind the parties thereafter to such extent and for so long as may
be necessary to give effect to the rights and obligations embodied herein.
	 
	 	33.2  	In the event that, as a result of any proposed transfer in accordance with this
Agreement and the Articles, PH or either of MGM Group or PHCO Group would cease to hold
any Shares (any such Group being referred to in this clause 33 as the “Departing
Shareholder’s Group”), then on or prior to completion of the relevant transfer:

the relevant departing Shareholder shall, and shall where applicable procure
that every other member of the Departing Shareholder’s Group shall, repay all
loans, loan capital, borrowings and indebtedness in the nature of borrowings
outstanding to Gaming Company and any of its subsidiaries from the departing
Shareholder and where applicable any such member (together with any accrued
interest thereon);

the relevant departing Shareholder shall procure the removal of any directors or
secretary of Gaming Company, or any of its subsidiaries, appointed by it or
where applicable any other member of the Departing Shareholder’s Group; and

(other than in respect of (i) any liability which may accrue in respect of any
act or omission occurring prior to such cessation; and (ii) any provision of
this Agreement which is expressed or intended to continue beyond such cessation
(including clauses 19 (MGM Regulatory Matters), 20 (Macau Regulatory Issue), 32
(Non-disclosure of Information), 39 (Non-involvement of Certain Parties) and 43
(Guarantee)) the

45

 

departing Shareholder and where applicable each other member of the Departing
Shareholder’s Group shall be released from all obligations and liabilities under
this Agreement.

	34.  	ASSIGNMENT
	 
	   	Save as expressly permitted by this Agreement, no party may assign, transfer, charge or dispose
of, or purport to do any of the same, any of its rights, beneficial interests or obligations
hereunder to any person without the prior written consent of the other parties.
	 
	35.  	ENGLISH LANGUAGE
	 
	   	All reports, accounts and other information and documentation issued or provided to any of the
Shareholders or Directors (including Board papers, accounts, operational updates, planning
submissions and operational manuals) shall be in English or, if not in English, accompanied by
a certified English translation and, in which case, the English translation will prevail unless
the document is a constitutional, statutory or other official document.
	 
	36.  	SUCCESSORS AND ASSIGNS
	 
	   	This Agreement shall endure for the benefit of and be binding on the respective successors in
title and permitted assigns of each party.
	 
	37.  	WAIVER, FORBEARANCE AND VARIATION

	 	37.1  	The rights of any party shall not be prejudiced or restricted by any indulgence or
forbearance extended to any other party and no waiver by any party in respect of any
breach shall operate as a waiver in respect of any subsequent breach.
	 
	 	37.2  	This Agreement shall not be varied or cancelled, unless such variation or
cancellation shall be expressly agreed in writing by each party.

	38.  	SEVERABILITY

	 	38.1  	If any of the provisions of this Agreement is found by a court or other competent
authority to be void or unenforceable, such provision shall be deemed to be deleted from
this Agreement and the remaining provisions of this Agreement shall continue in full force
and effect. Notwithstanding the foregoing the parties shall thereupon negotiate in good
faith in order to agree the terms of a mutually satisfactory provision to be substituted
for the provision so found to be void or unenforceable.
	 
	 	38.2  	All provisions of this Agreement shall, so far as they are capable of being performed
or observed, continue in full force and effect notwithstanding Completion except in
respect of those matters then already performed and Completion shall not constitute a
waiver of any party’s rights in relation to this Agreement. All rights and remedies
conferred on any party under this Agreement are cumulative and are additional to, and not
exclusive of, any rights or remedies provided by law or otherwise available at any time to
any party.

	39.  	NON-INVOLVEMENT OF CERTAIN PARTIES
	 
	   	PH and PHCO agree that in the event there is any default or alleged default by MGM under the
arrangements contemplated by this Agreement, or PH or any member of the PH Group has any claim
arising from the arrangements contemplated by this Agreement, neither PH nor PHCO nor any other

46

 

	   	member of PHCO Group shall seek to impose any liability directly against Kirk Kerkorian or
Tracinda Corporation.

	40.  	ENTIRE AGREEMENT
	 
	   	This Agreement (together with the documents referred to in it) supersedes any previous
agreement between the parties and represents the entire understanding between the parties in
relation to the subject matter of this Agreement and those documents.
	 
	41.  	[NOT USED]
	 
	42.  	NOTICES

	 	42.1  	Any notice to be given under this Agreement shall be in writing in the English
language and shall either be delivered personally or sent by first class post pre-paid (or
airmail if overseas) or by facsimile transmission, to each of the parties due to receive
the notice, at the address or fax number set out below:

	 	 	 	 	 
	Pansy Ho
	 	 	 	 
	 
	 	 	 	 
	Address

	 	:
	 	Penthouse, 39th Floor, West Tower,
	

	 	 	 	Shun Tak Centre, 20 Connaught Road,
	

	 	 	 	Central, Hong Kong
	 
	 	 	 	 
	For the attention of

	 	:
	 	Pansy Ho
	Fax number

	 	 	 	+852 2857 4377
	 
	 	 	 	 
	Grand Paradise Macau Limited	 	 
	 
	 	 	 	 
	Address

	 	:
	 	15-19 Athol Street
	

	 	 	 	Douglas
	

	 	 	 	Isle of Man IM1 1LB
	

	 	 	 	British Isles
	 
	 	 	 	 
	For the attention of

	 	:
	 	Pansy Ho
	Fax number

	 	:
	 	+852 2857 4377
	 
	 	 	 	 
	MGMM Macau, Ltd.	 	 
	 
	 	 	 	 
	Address

	 	:
	 	First Floor
	

	 	 	 	Millenium House

47

 

	 	 	 	 	 
	

	 	 	 	Victoria Road
	

	 	 	 	Douglas IM2 4RW
	

	 	 	 	Isle of Man, British Isles
	 
	 	 	 	 
	For the attention of

	 	:
	 	Gary N. Jacobs and Kenneth A. Rosevear
	Fax number

	 	:
	 	+702 693 7628
	 
	 	 	 	 
	MGM MIRAGE Macau, Ltd.	 	 
	 
	 	 	 	 
	Address

	 	:
	 	First Floor
	

	 	 	 	Millenium House
	

	 	 	 	Victoria Road
	

	 	 	 	Douglas IM2 4RW
	

	 	 	 	Isle of Man, British Isles
	 
	 	 	 	 
	For the attention of

	 	:
	 	Gary N. Jacobs and Kenneth A. Rosevear
	Fax number

	 	:
	 	+702 693 7628
	 
	 	 	 	 
	MGM MIRAGE	 	 
	 
	 	 	 	 
	Address

	 	:
	 	3600 Las Vegas Boulevard,
	

	 	 	 	South, Las Vegas, Nevada 89109,
	

	 	 	 	United States
	 
	 	 	 	 
	For the attention of

	 	:
	 	Gary N. Jacobs and Kenneth A. Rosevear
	Fax number

	 	:
	 	+702 693 7628
	 
	 	 	 	 
	MGM Grand Paradise Limited	 	 
	 
	 	 	 	 
	Address

	 	:
	 	Avenida da Praia Grande 759
	

	 	 	 	3/F

48

 

	 	 	 	 	 
	

	 	 	 	Macau S.A.R.
	 
	 	 	 	 
	For the attention of

	 	:
	 	the Directors
	Fax number

	 	:
	 	+853 553 098

	 	   	or to such other address, number or addressee as one party may by notice advise from
time to time to the other parties, but without prejudice to the effectiveness of any
notice already given in accordance with this clause 42.
	 
	 	42.2  	Any notice given in accordance with clause 42.1 shall be deemed to have been served
as follows:-

if personally delivered, at the time of delivery;

if posted, after the expiration of two Business Days or (in the case of airmail)
six Business Days after the envelope containing the same was delivered into the
custody of the postal authorities; and

if sent by fax, on completion of its transmission,

	 	   	provided that if, under the above provisions, any such notice would otherwise be deemed
to be given after 5pm (local time) on a Business Day, such notice shall be deemed to be
given at 9am (local time) on the next Business Day.
	 
	 	42.3  	In proving such service it shall be sufficient to prove that personal delivery was
made, or that if mailed, confirmation of receipt has been obtained, or if by fax that the
fax was sent in full to the relevant number and confirmation of transmission is obtained.

	43.  	GUARANTEE

	 	43.1  	In consideration of them entering into this Agreement, MGM MIRAGE hereby
unconditionally and irrevocably guarantees to the other parties the due and punctual
performance of all the obligations and liabilities of MGM (which, for the purposes of this
clause 43, shall include any member of MGM Group to whom MGM transfers any interest in any
Shares) under or otherwise arising out of or in connection with this Agreement (as any of
such obligations and liabilities may from time to time be varied, extended, increased or
replaced) and undertakes to keep the other parties fully indemnified against all
liabilities, losses, proceedings, claims, damages, costs and expenses of whatever nature
which any of them may suffer or incur as a result of any failure or delay by MGM in the
performance of any such obligations and liabilities.

	 	43.2  	If any obligation or liability of MGM expressed to be the subject of the guarantee
contained in this clause 43 (the “Guarantee”) is not or ceases to be enforceable against
MGM (in whole or in part) on any ground whatsoever (including, but not limited to, any
defect in or want of powers of MGM or irregular exercise thereof or any lack of authority
on the part of any person purporting to act on behalf of MGM or any legal or other
limitation, disability or incapacity, or any change in the constitution of, or any
amalgamation or reconstruction of, or the liquidation, administration or insolvency of,
MGM), MGM MIRAGE shall nevertheless be liable to the other parties in respect of that
purported obligation or liability as if the same were fully valid and enforceable and MGM
MIRAGE were the principal debtor in respect thereof.

49

 

	 	43.3  	The liability of MGM MIRAGE under the Guarantee shall not be discharged or affected
in any way by:

PH or PHCO compounding or entering into any compromise, settlement or
arrangement with MGM or any other person; or

any variation, extension, increase, renewal, determination, release or
replacement of this Agreement, whether or not made with the consent or knowledge
of MGM MIRAGE; or

PH or PHCO granting any time, indulgence, concession, relief, discharge or
release to MGM or any other person or realising, giving up, agreeing to any
variation, renewal or replacement of, releasing, abstaining from or delaying in
taking advantage of or otherwise dealing with any rights which it may have
against MGM or any other person; or

any other matter or thing which, but for this provision, might exonerate or
affect the liability of MGM MIRAGE.

	 	43.4  	The Guarantee is in addition to any other security or right now or hereafter
available to PH and PHCO and is a continuing security notwithstanding any liquidation,
administration, insolvency or other incapacity of MGM or MGM MIRAGE or any change in the
ownership of either of them.

	 	43.5  	Until the full and final discharge of all obligations and liabilities which are the
subject of the Guarantee, MGM MIRAGE:

waives all of its rights of subrogation, reimbursement and indemnity against MGM
and all rights of contribution against any co-guarantor and agrees not to demand
or accept any security from MGM or any co-guarantor in respect of any such
rights and not to prove in competition with PH or PHCO in the bankruptcy,
liquidation or insolvency of MGM or any such co-guarantor; and

agrees that it will not claim or enforce payment (whether directly or by
set-off, counterclaim or otherwise) of any amount which may be or has become due
to MGM MIRAGE by MGM, any co-guarantor or any other person liable to PH and/or
PHCO in respect of the obligations and liabilities hereby guaranteed if and so
long as MGM is in default under this Agreement.

	 	43.6  	Any moneys received by PH or PHCO under the Guarantee may be placed to the credit of
a suspense account with a view to preserving the rights of PH or PHCO, as the case may be,
to prove for the whole of its claims against MGM or any other person.

	 	43.7  	If the Guarantee shall be discharged or released in consequence of any performance by
MGM of the guaranteed obligations or liabilities which is set aside for any reason, the
Guarantee shall be automatically reinstated in respect of the relevant obligations or
liabilities.

	44.  	GOVERNING LAW

	 	44.1  	This Agreement shall be governed in all respects by, and construed in accordance
with, the laws of Macau S.A.R.

	 	44.2  	If any party has a claim against another party arising out of or in connection with
this Agreement such claim shall be referred to the courts of Macau S.A.R., to the
jurisdiction of

50

 

	 	   	which each of the parties to this Agreement irrevocably submits. The jurisdiction of the
courts of Macau S.A.R. over such claim shall be an exclusive jurisdiction and no courts
outside Macau S.A.R. shall have any jurisdiction to hear and determine such claim.

	 	44.3  	Each party hereby waives its right to commence any legal proceedings in any court
outside Macau S.A.R. in relation to any claim, dispute, difference or matter arising from
or relating to this Agreement or the subject matter hereof.

	45.  	SERVICE AGENTS

	 	45.1  	Each of PH and PHCO hereby appoints C&C Advogados of Avenida da Praia Grande 759,
Macau S.A.R. as its agent to accept service of all process under this Agreement and
service on C&C Advogados (for the attention of PH or the Directors, as applicable) at
Avenida da Praia Grande 759, Macau S.A.R. will be deemed to be service on PH or PHCO, as
applicable.
	 
	 	45.2  	Each of MGMMI, MGMMII and MGM MIRAGE hereby appoints Goncalves Pereira, Rato, Ling,
Vong & Cunha of Avenida Amizade, Macau Landmark, Office Tower, 23-2301/2302, Macau S.A.R.
as its agent to accept service of all process under this Agreement and service on
Goncalves Pereira, Rato, Ling, Vong & Cunha (for the attention of Gary N. Jacobs and
Kenneth A. Rosevear) at Goncalves Pereira, Rato, Ling, Vong & Cunha of Avenida Amizade,
Macau Landmark, Office Tower, 23-2301/2302 will be deemed to be service on MGMMI, MGMMII
or MGM MIRAGE, as applicable.

	46.  	MACAU GOVERNMENT AUTHORITY
	 
	   	The Shareholders hereby acknowledge and agree that all of the provisions of this Agreement are
subject to compliance at all times with the applicable provisions of Macau S.A.R. law in force
from time to time and to the ultimate discretion of the government of Macau S.A.R. and that, in
particular, any purported transfer of any interest in any Share or any proposed imposition of
any Encumbrance on any Share shall at all times be subject to compliance with the applicable
provisions of Macau S.A.R. law and to the approval of the government of Macau S.A.R..
	 
	47.  	COUNTERPARTS
	 
	   	This Agreement may be executed in any number of counterparts all of which taken together shall
constitute one and the same document, and any party may execute this Agreement by signing any
one or more of such counterparts.
	 
	   	IN WITNESS of which this Agreement has been entered into on the date first above written

	 	 	 	 	 	 	 
	MGM MIRAGE	 	MGMM MACAU, LTD.
	 
	 	 	 	 	 	 
	By:

	 	Gary N. Jacobs
	 	By:
	 	Gary N. Jacobs
	Its:

	 	Authorised Signatory
	 	Its:
	 	Authorised Signatory

51

 

	 	 	 	 	 	 	 
	GRAND PARADISE MACAU LIMITED	 	PANSY HO
	 
	 	 	 	 	 	 
	By:

	 	Pansy Ho
	 	By:
	 	Pansy Ho
	Its:

	 	Authorised Signatory	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	MGM GRAND PARADISE LIMITED	 	MGM MIRAGE MACAU, LTD.
	 
	 	 	 	 	 	 
	

	 	 	 	By:
	 	Gary N. Jacobs
	

	 	 	 	Its:
	 	Authorised Signatory
	By:

	 	Gary N. Jacobs	 	 	 	 
	Its:

	 	Director	 	 	 	 
	and
	 	 	 	 	 	 
	By:

	 	Pansy Ho	 	 	 	 
	Its:

	 	Director	 	 	 	 
	and
	 	 	 	 	 	 
	By:

	 	Daisy Ho	 	 	 	 
	Its:

	 	Director	 	 	 	 

52

 

SCHEDULE 1

Deed of Adherence

THIS DEED OF ADHERENCE is made on                    20 ·

BY:

[insert name of New Shareholder] of [insert address of New Shareholder] (the “New Shareholder”) and
is supplemental to the Shareholders Agreement dated · between (1) Pansy Ho, (2) Grand
Paradise Macau Limited; (3) MGMM Macau, Ltd.; (4) MGM MIRAGE Macau, Ltd.; (5) MGM MIRAGE and (6)
MGM Grand Paradise Limited (the “Agreement”) and is made in favour of the persons whose names are
set out in the schedule to this deed and any other person who after the date of this Deed adheres
to the Agreement by way of Deed of Adherence.

THE NEW SHAREHOLDER UNDERTAKES AS FOLLOWS:

the New Shareholder confirms that it has read a copy of the Agreement and covenants to and
undertakes with each person named in the schedule to this Deed and any other person who after the
date of this Deed adheres to the Agreement by way of Deed of Adherence to adhere to, perform and be
bound by all the terms of the Agreement as from the date hereof as if the New Shareholder were a
Shareholder and named in the Agreement as a party thereto;

IN WITNESS whereof this deed has been executed by the New Shareholder and is intended to be and is
hereby delivered on the date first above written.

	 	 	 	 	 	 	 
	Executed by

	 	 	)	 	 	

	[name of company] acting

	 	 	)	 	 	Director
	by [a director and the secretary/

	 	 	)	 	 	 
	two directors]

	 	 	)	 	 	

	

	 	 	 	 	 	Director/Secretary

[Note: schedule to Deed to include all Parties (including by way of earlier Deeds of
Adherence) to the Agreement]

53

 

SCHEDULE 2

Part A

Nam Van Casino Complex Site

The legal description of the Nam Van Casino Complex Site is as follows:

A site of 43,129 square metres (effective area to be adjusted upon granting of the lease by the
government of Macau S.A.R.), to be granted under lease from the government of Macau S.A.R. for
casino and related purposes to be located at Zone B of the Nam Van (NAPE West), to be partially
reclaimed and with the following boundaries South — Avenida Dr. Sun Yat Sen; East — Avenida 24
de Julho; West — adjoining Site B and North — existing Rua Cidade do Porto (as per the plan
attached to this schedule).

The site has not been allocated a specific registration number at the Macau Land Registry (for
that purpose, it will be necessary to amalgamate several registration numbers and the waiver to
public areas). Being a plot for development, it is not subject to registration with the Tax
Department.

Part B

Nam Van Casino Complex Site Land Concession Event

1. a draft land concession contract having been issued to Gaming Company by the government of
Macau S.A.R. and such draft contract providing for gross floor area of 2 million square feet;

2. the government of Macau S.A.R. having delivered to Gaming Company a form of comfort letter or
other written confirmation, on terms reasonably acceptable to MGM and PH, regarding the intended
grant of a land concession in respect of the Nam Van Casino Complex Site and the ability of
Gaming Company to commence initial construction and development works.

54Exhibit 10.1

EXHIBIT
10.1

Wayne
R. Weidner - Prepared Remarks

Annual
Meeting of Shareholders

April
25, 2005

I. Disclaimer

	 	
      ·
	
      While
      proxies are being examined and the ballots counted, I’d like to make my
      comments.

	 	
      ·
	
      I
      should point out that our remarks regarding the outlook for the current
      year and beyond, including our anticipated earnings and asset growth and
      any planned new investments, will contain forward-looking
      information.

	 	
      ·
	
      Actual
      results may vary from any forecasted results that we discuss due to
      various risks and uncertainties, including those that we detailed in our
      report on Form 10-K for 2004, filed with the SEC and sent to you with our
      proxy statement. 

II. Record
earnings

A.  2004
was a year of growth and profitability for National Penn.

	 	
      1.
	
      We
      achieved record high earnings of $47.91 million, a 10.5 % increase over
      2003.

	 	
      2.
	
      This
      represents our 27th
      year of record net income. In 2004, we reached a combined total of 50
      years of higher earnings per share and cash
dividends.

	 	
      3.
	
      For
      this achievement we were named to The Staton Institute’s Super 50 Team,
      which comprises only 18 public U.S.
companies.

	 	
      ·
	
      These
      are companies with a combined total of at least 50 years of higher
      earnings and dividends per share.

 

	 	
      B.
	
      Glenn
      Moyer, our President, will provide expanded details on our activities in
      2004.

	 	
      C.
	
      Stock
      Performance

	 	
      ·
	
      Compared
      to last December 31st,
      our stock price is down today. However, this decline is part of a general
      decline in the Stock Market and, more specifically, in the prices of
      regional financial service companies. I would call your attention to the
      graph that we are now displaying.

	 	
      ·
	
      For
      long-term investing, our stock price has achieved a high rate of growth
      over the years. 20 years ago, if a person had purchased 100 shares of our
      stock, which would have cost $3,150, and then reinvested all dividends in
      additional shares over the 20 year period, the investment would have grown
      to a total value over $80,000 today. 

 

	 	
      ·
	
      We
      remain committed to increasing Shareholder value on a total return basis
      over the longer term.

 

III. Fraud

	 	
      A.
	
      Despite
      record earnings for 2004, in January 2005 National Penn identified loan
      and deposit irregularities that appeared to be the result of intentional
      misconduct.

	 	
      1.
	
      These
      were identified as the result of our ongoing operating controls and
      procedures.

	 	
      B.
	
      This
      was a very serious matter and we acted
quickly.

 

	 	
      C.
	
      We
      immediately engaged experienced, outside counsel and deployed a nationally
      recognized team of forensic accountants and auditors to investigate the
      irregularities.

	 	
      D.
	
      The
      investigation determined that approximately $6.7 million of bank funds,
      pretax, were stolen through a sophisticated pyramid-style fraud scheme
      involving identity theft in various loan
accounts.

	 	
      E.
	
      This
      occurred in the loan portfolio managed by one former employee who was a
      mid-level lender in the Private Banking area in
    Philadelphia.

	 	
      1.
	
      The
      accounts were manipulated to avoid detection by ongoing internal bank
      audits and controls.

	 	
      F.
	
      No
      customer funds were lost, but a small group of customer credit reports
      were affected.

	 	
      G.
	
      We
      moved immediately to address and resolve those
issues.

	 	
      H.
	
      After
      an exhaustive investigation lasting over 3 1⁄2 months, on April 18, we filed
      a lawsuit against a former loan officer and others, including certain
      customers and two additional
employees.

	 	
      I.
	
      The
      lawsuit seeks to recover all losses, costs, and expenses arising out of
      the transactions examined during the
investigation.

	 	
      J.
	
      We
      also are vigorously pursuing all other available avenues to recover these
      sums, including insurance, and cooperating with the FBI and the federal
      prosecutor’s office in their
investigation.

	 	
      K.
	
      Throughout
      these events, our customers and shareholders have continued to express
      confidence in our company. And for that, we thank you.

IV. Corporate
Governance

	 	
      A.
	
      Corporate
      governance is an important and timely topic, so I would like to make some
      comments about corporate governance here at National Penn. For us,
      corporate governance efforts have always been important - we continue to
      be proactive, not reactive.

1. Our
Corporate Governance Guidelines are on our Web site. 

	 	
      B.
	
      A
      key to corporate governance is the role of independent
      directors.

	 	
      C.
	
      Under
      NASDAQ rules, a majority of the board of directors must be independent
      directors.

	 	
      1.
	
      “Independent”
      means not having any relationship that would interfere with the ability to
      exercise independent judgment in carrying out the responsibilities of a
      director.

 

	 	
      2.
	
      Non-independent
      directors of a company include, for example, directors who are employees,
      or have  been
      employed by that company in the last three
years.

        

	 	
      3.
	
      If
      a director, directly or indirectly, sells goods or services to a company
      in excess of $60,000 during any period of 12 consecutive months, that
      makes the director not independent on that company’s
  board.

	 	
      D.
	
      A
      majority of our directors - 9 out of 13 - are independent directors. They
      meet periodically in executive sessions without management
      present.

	 	
      E.
	
      In
      addition, only independent directors make up three important Board
      committees:

 

	 	
      ·
	
      Nominating/corporate
      governance - This committee identifies and recommends nominees for
      election to the board.

	 	
      ·
	
      Audit
      - This committee is responsible for oversight of our financial statements
      and outside auditors.

	 	
      ·
	
      Compensation
      - This committee reviews and approves executive compensation and related
      programs and plans. 

V. Compensation

	 	
      A.
	
      Regarding
      compensation of executive officers, the key decisions are made by our
      independent directors.

	 	
      B.
	
      Likewise,
      decisions on director compensation are made by our independent
      directors.

	 	
      C.
	
      The
      goal is to assure that executives and directors are compensated fairly,
      that they are incentivized to succeed, and that their interests are
      aligned with those of shareholders.

 

	 	
      D.
	
      That
      is why we have used stock options as incentive compensation over the
      years.

	 	
      E.
	
      We
      encourage directors and officers to retain a meaningful amount of stock
      through our stock ownership guidelines.

	 	
      F.
	
      Non-employee
      directors can elect to receive directors’ fees in cash or National Penn
      common shares.

	 	
      G.
	
      Our
      new long-term incentive compensation plan voted upon today by
      shareholders, will continue our efforts to compensate executive officers
      and directors at least partially with equity in our Company. This is
      important for
      the attracting and retaining of high quality Directors and Officers that
      can lead National Penn’s continued
growth.

VI. Audit
Committee/SOX Section 404

	 	
      A.
	
      Now,
      I would like to provide some specific comments about the role of our audit
      committee in the past year.

	 	
      B.
	
      The
      committee has a key oversight responsibility on behalf of all shareholders
      for financial reporting.

	 	
      1.
	
      They
      oversee the hiring of our external accountants, approve services and fees,
      and monitor the preparation of our quarterly and

annual
reports and financial statements.

	 	
      C.
	
      In
      all this, they play an important role in interacting with executives,
      officers, internal audit and the external accountants.

	 	
      D.
	
      Their
      role was especially crucial in 2004 -the first year of Sarbanes-Oxley, or
      SOX, Section 404. SOX is a new federal statute that requires a company,
      and its external auditors, to assess publicly the effectiveness of the
      company’s internal controls over financial
reporting.

	 	
      E.
	
      A
      National Penn team worked for more than a year to review our internal
      controls under the new regulations.

	 	
      F.
	
      At
      the conclusion of this long and exhaustive process, National Penn
      determined that we had a “material weakness” in our internal
      controls.

	 	
      G.
	
      When
      management completed its assessment of our internal controls, it was the
      audit committee that reviewed management’s
conclusions.

	 	
      H.
	
      When
      management finalizes its plans to address the problem areas, it will be
      the Audit Committee that provides an independent review, on behalf of all
      shareholders, as to the adequacy of those plans.

 

	 	
      I.
	
      Do
      the benefits of SOX 404 outweigh the costs?

 

	 	
      1.
	
      The
      costs are very real.

 

	 	
      2.
	
      In
      2004, the fees were paid to our external auditors increased to $611,000
      from $319,000 in 2003.

	 	
      3.
	
      In
      addition, we devoted thousands of hours of management time to these tasks.
      

	 	
      J.
	
      The
      SEC is now attempting to determine the answer to this question by
      conducting a series of public roundtables - now that most submissions
      under Sarbanes-Oxley Section 404 have been
made.

	 	
      1.
	
      We
      were pleased to participate in this opportunity to provide feedback on the
      costs versus the benefits of these rigorous
  requirements.

	 	
      K.
	
      Our
      expectation is that these requirements will continue, with some minor
      changes.

	 	
      L.
	
      Our
      hope is that this will make us a stronger company.

VIII. 22nd
Anniversary on NASDAQ

(show
footage of April 19 event)

	 	
      A.
	
      Finally,
      we were pleased to be invited to New York City on April 19th
      by the Nasdaq Stock Market.

	 	
      B.
	
      This
      was to recognize the 22nd
      anniversary of our stock being listed for trading on the Nasdaq Stock
      Market.

	 	
      C.
	
      Your
      executive management team went to New York and participated in the opening
      of the Nasdaq Stock Market for trading on April 19th.

	 	
      D.
	
      We
      would like to show you some highlights of that
visit...

	
      IX.
	
      Now,
      I’d like to introduce Glenn Moyer, President of National Penn Bancshares
      and President and CEO of National Penn
Bank...

Glenn
E. Moyer - Prepared Remarks

Annual
Meeting of Shareholders

April
25, 2005

I. Thank
you Wayne. 

	 	
      ·
	
      I’d
      like to extend a welcome to each of you, especially any shareholders who
      are joining us today for the first time.

	 	
      ·
	
      We
      had over 830 shareholders make reservations to be with us today. We always
      hope for a great turn-out, and we are never
  disappointed!

NOTE:
CD “Special Offer to Shareholders”

 

	 	
      ·
	
      9-Month
      CD with an APY of 3.25%

	 	
      ·
	
      36-month
      “Step-Up” CD with an APY of 4.00%

	 	
      ·
	
      I
      would like to call your attention to the flyer each of you has at your
      seat announcing
      two special, limited time CD offers and a free checking/ free gift
      promotion. You can stop by any of our community office locations to redeem
      these special offers--just be sure to bring along the flyer. We not only
      thank you for being shareholders of our corporation-but if you're not
      already a customer, we invite you to become
one!

	 	
      ·
	
      Coupon
      for your use at your seat - be sure to take it along and use it soon! We
      appreciate your business!

II. Introductions
  

	 	
      ·
	
      We
      would like to briefly introduce some folks who are all very important to
      our success!

	A.	First,
      our Affiliate and Advisory Board Directors - we count
      heavily on these folks to share their business experience
      with us and to provide new business
referrals!

Ask
them to rise and be recognized as a group!

	B.	Next,
      our Senior Managers of our various affiliates in
attendance:

 

Ask
them to rise and be recognized as a group!

1. National
Penn Investors Trust Company 

	 	
      ·
	
        
      (Our Trust & Asset Management
Company)

- Don
Worthington

2. National
Penn Mortgage Company 

	 	
      ·
	
        
      (Our Residential
      Mortgage Company)

- Jorge
Leon

3. National
Penn Leasing Company 

	 	
      ·
	
        
      (Our Commercial
      Equipment Leasing Company)

- Roger
Bennett

4.National
Penn Insurance Agency, Inc. 

	 	
      ·
	
          (Our
      Full Service Insurance
Agency)

- Mark
Swartley

	 	
      C.
	
      Finally,
      our Group Executive Vice Presidents - this is the group of seven
      executives that Wayne, I and the Board rely on most
    directly.

Ask
to stand and be recognized as a group

	 	
      1.
	
      Bruce
      Kilroy 

	 	
      2.
	
      Garry
      Koch 

	 	
      3.
	
      Paul
      McGloin 

	 	
      4.
	
      Mike
      Reinhard 

	 	
      5.
	
      Gary
      Rhoads 

	 	
      6.
	
      Sandy
      Spayd 

	 	
      7.
	
      Sharon
      Weaver 

III. We’d
like to take a brief look back at 2004 Financial Highlights

	 	
      ·
	
      We
      would call your attention to the comments and data included in our 2004
      Annual Report and Form 10-K, which you received in the
    mail.

	 	
      A.
	
      For
      the Year 2004 -

	 	
      1.
	
      We
      were pleased to report our 27th
      consecutive year of increased profits and cash
  dividends.

	 	
      2.
	
      We
      achieved Record profits of $47.9 million, which were up 10.5% from
      2003.

	 	
      3.
	
      On
      a diluted basis, we earned $1.44 per share, a 1.4% increase over
      2003.

	 	
      4.
	
      Our
      return on Average Assets was 1.20% vs. 1.34% for
2003.

	 	
      5.
	
      Our
      return on Average Shareholders Equity was 13.2% vs. 16.2% in
      2003.

	 	
      6.
	
      All
      of these financial accomplishments were achieved despite the fact that we
      absorbed $3.37 million, net of taxes and related adjustments, related to
      our previously discussed former employee loan
fraud.

	 	
      D.
	
      1st
      Quarter 2005 - We’re happy to report that our momentum has carried over
      from 2nd
      half of 2004 into the 1st
      Quarter of 2005! 

	 	
      1.
	
      Currently
      we hold $4.55 billion in total assets.

	 	
      2.
	
      Our
      deposits are $2.97 billion, and our loans are $2.93
    billion.

	 	
      3.
	
      Shareholder
      equity is $426.5 million, and
      we are considered a well-capitalized financial institution by all
      regulatory measurements.

	 	
      4.
	
      We
      again reported record 1st
      quarter net income of $14.01 million, up 23.2% from last year’s first
      quarter.

	 	
      5.
	
      Our
      return on Average Assets was 1.26%.

	 	
      6.
	
      Our
      return on Average Shareholders Equity was
13.08%.

 

	
      
	
      
	
      7.
	
      1st
      Quarter results were positively impacted by the Peoples
      First, Inc., D.E. Love, and Krombolz Agency
      acquisitions, none of which were included in
      1st
      quarter 2004 financial information.

	 	
      8.
	
      So
      we are off to a solid start but will need to work hard
      to achieve our performance goals for the full year.

IV. Our
company significantly expanded by acquisition

and
mergers in 2004

A. Peoples
First, Inc. - The Peoples Bank of Oxford

	 	
      ·
	
      At
      the time of last year’s Annual Meeting, we had signed a definitive
      agreement to purchase People’s First, Inc., a successful bank holding
      company for The Peoples Bank of Oxford. 

	 	
      ·
	
      On
      June 10th
      we completed that purchase and quickly moved to the systems consolidation
      phase.

	 	
      ·
	
      The
      Peoples Bank of Oxford now operates as a division of National Penn
      Bank.

	 	
      ·
	
      The
      addition of Peoples brought us 8 community offices in Chester and
      Lancaster counties and 1 community office in Cecil County,
      Maryland.

 

	 	
      ·
	
      The
      acquisition also moved us to number 3 position in deposits in Chester
      County, one of the most  desirable
      banking areas in Pennsylvania.

 

	 	
      ·
	
      With
      this acquisition, we became the seventh largest bank holding company
      headquartered in Pennsylvania. 

 

Our
other bank divisions, FirstService Bank in Bucks County and HomeTowne Heritage
Bank in Lancaster County, both acquired in 2003, continue to bring us new
opportunities for growth in their respective areas. 

B. National
Penn Insurance Agency, Inc.

	 	
      ·
	
      2004
      was also the year National Penn Insurance Agency, Inc. significantly
      expanded our insurance services and product offerings through the
      acquisition of three quality insurance agencies.

	 	
      ·
	
      Pennsurance,
      Inc., headquartered in Oley, Berks County was acquired on July
      1st.
      

	 	
      ·
	
      D.E.
      Love Associates, Inc., headquartered in Yardley, Bucks County was acquired
      December 1st.

	 	
      ·
	
      And
      on January 3, 2005, we completed the acquisition of Krombolz Agency, Inc.,
      based in West Chester, Chester County.

	 	
      ·
	
      We
      welcome all the team members of these three agencies to National
      Penn!

	 	
      ·
	
      These
      agencies have an excellent reputation and customer base in their markets.
      Bringing them into the National Penn family supports our strategy to be
      more competitive and customer focused by offering services that complement
      and enhance our traditional banking
relationships.

	 	
      ·
	
      In
      addition, insurance agencies provide a steady stream of fee income. We
      intend to look for additional insurance partners throughout our primary
      marketplace.

V. Let
me comment briefly on Activities in our other Affiliates:

	 	
      A.
	
      In
      2004 Penn
      1st
      Financial Services
      began doing business as National Penn Mortgage Company, in order to more
      closely align with National Penn and gain better marketing and referral
      opportunities. Jorge Leon was
      named president of National Penn Mortgage and is working hard with his
      team members to transition our residential mortgage company from a period
      of unusually high level of refinances to a more historical mix of retail
      mortgages.

	 	
      B.
	
      We
      also began laying the groundwork for reorganizing our investment
      and asset management companies under
      one subsidiary and transferring its charter from the Pennsylvania
      State Department of Banking to the  Office of the Comptroller of the
      Currency.

When
this transfer is complete next month, the group will change their current names
to National Penn Investors Trust Company and will operate as a subsidiary of
National Penn Bank. The change will allow us to leverage the National Penn name
to potential customers, streamline referrals between all parts of our
organization, and channel customers to the right entity. 

VI. Organizational
Structure

	 	
      ·
	
      To
      support our strategic plan, last year we announced a revised
      organizational structure.

	 	
      ·
	
      It
      includes the creation of two new important groups - Retail
      Market Management and
      Corporate
      Market Management
      - which are responsible for strategically coordinating the development and
      delivery of products to their respective market segments.
  

	 	
      ·
	
      This
      reorganization is designed to provide improved accountability, clearer
      communication and a better structure to help us become more client
      intimate. 

VII. Middle
Market Group

	 	
      ·
	
      In
      the second half of last year, we introduced a Middle Market Corporate
      Banking Group, which is designed to provide value to business customers
      with annual revenues of more than $25
million.

	 	
      ·
	
      Bruce
      Smith joined the company to head this group and since then has been
      developing key relationships with customers and prospects. He is building
      a strong team that understands the needs of larger borrowers and the more
      complex financial management tools that assist their continued
      success.

 

VIII. Manufacturing
Group

	 	
      ·
	
      An
      excellent ongoing example of our focus on client intimacy and niche groups
      is our Manufacturing Group, headed by Scott Gruber.

 

	 	
      ·
	
      In
      2004, this group exceeded $130 million in outstanding loans with growing
      manufacturing companies in Southeastern
Pennsylvania.

	 	
      ·
	
      All
      of our Manufacturing Group relationship managers have been trained
      and
      certified in Lean Manufacturing techniques, which gives them an excellent
      understanding of the problems manufacturers face and a significant edge
      over our competition. 

IX. Community
Offices / Operations Facilities

	 	
      ·
	
      During
      2004 the number of our community offices grew to 73 and included these
      changes:

	 	
      ·
	
      The
      CrownPointe Community Office, located in Bethlehem, opened in August. It
      is our 8th
      office in the Lehigh Valley.

	 	
      ·
	
      In
      the fall, our Bally Community Office in Berks County was renovated and
      celebrated its 50th
      anniversary with an exhibit of historical items from the local business
      community.

	 	
      ·
	
      On
      November 15th
      we opened our new Coventry Community office on Rt. 100 in Northern Chester
      County. The office was relocated from its former Suburbia
      location.

	 	
      ·
	
      Expansion
      and renovations of our Community Offices is a sign of our growth and
      confidence in our marketplace. This growth and confidence has also caused
      us to outgrow many of our operations and administrative locations in the
      Boyertown / Pottstown area. Our facilities management team, headed by
      Sandy Spayd, has been professionally evaluating our options to support
      future growth.

Currently
we believe that we are best served by planning for a new, highly efficient
Operations Center where we can consolidate operations and administrative
functions that are currently housed in 5 - 6 older, less efficient facilities.
To this end, we are in the process of purchasing land to build such a
consolidated facility in the Douglassville area of Berks County. While nothing
is finalized in this regard, we are excited about this development and will keep
you posted as we move forward.

X. Recognition
Highlights

It’s
always nice to have others recognize your successes. During
2004, we once again were fortunate enough to receive
several recognitions that I’d like to mention.

	 	
      A.
	
      For
      the seventh consecutive year, National Penn was named one of America’s
      Finest Companies by the Staton
      Institute,
      an organization that publishes an investment directory of all
      publicly-traded United States companies with at least 10 consecutive years
      of higher earnings per share and cash
dividends.

	 	
      ·
	
      This
      achievement placed us in the top 2 percent of the 19,000 public U.S.
      companies. And, as Wayne mentioned, for the first time we were named to
      Staton’s “Super 50 Team” for achieving 50 years of combined, consecutive
      higher earnings per share and cash dividends. Only 18 public companies
      achieved this distinction!

	 	
      B.
	
      For
      our service to our communities, National Penn was one of only four
      Pennsylvania financial institutions to receive a “Pillars of the
      Community” award from the Federal Home Loan Bank of Pittsburgh. We feel a
      strong sense of dedication to the communities we serve, and we back it up
      with action. During 2004, we donated more than half a million Dollars, and
      our employees volunteered more than 10,000 hours to organizations where
      they live and work.

	 	
      C.
	
      We
      were also very proud to learn that National Penn was named as one of the
      Best Places to Work in Pennsylvania for the third year in a row. Even
      better, in our category of the top 50 large
      businesses, we rose to 20th
      place from 39th
      place last year. The Best Places to Work program is a state-level
      public/private partnership that recognizes the best places of employment
      based on independent research and
      confidential feedback from randomly selected
employees.

	 	
      D.
	
      In
      December, we proudly announced that Wayne Weidner was elected to the board
      of the Federal Reserve Bank of Philadelphia for a three-year term. What a
      terrific career recognition for Wayne and what a terrific recognition for
      National Penn and its importance among the entire 3rd
      District of the Federal Reserve!

XI. Trends
in Market Area

 

	
      
          
      ·

	
      
      We always
      like to spend just a moment or two on the demographics of our 10 County
      primary marketplace.

 

	 	
      1.
	
      Our
      area is strong and still growing - this, despite a difficult and slowly
      expanding overall economy.

	 	
      2.
	
      We
      enjoy a diversified marketplace - not concentrated on any one business or
      retail segment.

We have
to acknowledge, however, the continuing shift from traditional heavy
manufacturing to the service segment jobs.

	 	
      3.
	
      This
      bodes well for further investment as National Penn “fills in” and
      capitalizes on these strong
demographics.

 

	 	
      4.
	
      One
      of our primary focuses throughout 2005 and 2006 will be to further
      evaluate and refocus our combined resources on a common branding process
      that is supportive of the client intimate focus of our Strategic
      Plan!

XII. Trends
in Financial Services Industry

	 	
      A.
	
      
	
      Our
      overall Financial Services Industry continues to be very challenging - we
      are still in a consolidating industry!

	 	
      1.
	
      Consolidation
      provides opportunities to grow due to merger
  disruptions.

	 	
      2.
	
      Across
      our primary marketplace, we continue to experience a very competitive
      pricing environment, on both loan and deposit
products.

	 	
      3.
	
      And
      we know that strong performance is key to our
      ongoing independence The #1 principle guiding National Penn’s growth
      strategy is “We must earn the right every day to remain independent”. We
      take that challenge seriously!

XIII. Overall
Economic Conditions warrant a comment as well

 

	 	
      ·
	
      Our
      regional and national economy seems to be showing a reasonable level of
      sustainable growth.

 

	 	
      ·
	
      
      The
      uncertainty and stress caused by our overall war on terrorism has caused
      our customers to be concerned about the
    future.

 

	 	
      ·
	
      
      
      All
      of us are concerned about the increased energy costs - a trip to the gas
      pumps is a pretty scary
    experience.

 

	 	
      ·
	
      
      
      Hopefully,
      with progress in the war on terrorism and
      all of us acclimating to the challenges
      of life in the 21st
      century, confidence will hold steady and sustain this growth
      that we have seen over the past 18-24
      months.

 

XIV. Loan
Growth/Asset Quality

 

	 	
      ·
	
      Last
      year at this time, we reported good improvement in our overall Credit
      Quality
      when looking back to 2003.  We’re
      happy to say that these positive trends continued throughout 2004 and 2005
      remains strong.

 

	 	
      ·
	
      We
      believe our loan growth for the year may be in the high single digits - we
      may even see low double digits for the first time in several years,
      especially in the business segment.

	 	
      ·
	
      We
      continue to work aggressively to maintain our relatively low level of
      delinquencies while keeping our level of Non-performing assets and our
      level of Charge-offs as low as
possible.

 

 

	 	
      ·
	
      The
      Good news is - the continued strength of our Reserve for Loan and Lease
      Losses.

 

	 	
       
	
      
      ·    Stood at
      1.97% of total Loans at March 31, 2005 - well above our
      peers!

XIV. Strategic
Positioning

	 	
      ·
	
      Proactive
      strategic planning and positioning remain a high priority for our Board of
      Directors and our Senior Management Team. We regularly work on the
      Planning process and keep it dynamic. The Plan does not become a “dust
      collector” on a shelf.

	 	
      ·
	
      We
      also believe in candid and self-critical discussions and feedback. It’s
      the only way we will improve and take well-thought-out risks going
      forward. Doing whatever we can to further empower our folks across the
      company to provide better financial solutions to our clients and prospects
      is our constant challenge to ourselves.

	 	
      ·
	
      With
      this increased authority comes increased accountability. Our people are
      welcoming the changes to our culture and that’s very encouraging to our
      Senior Managers and Board Members!

	 	
      XVI.
	
      Wrap-up
      comments

With
that said, let me wrap-up

	·	 With
      a “Thank you” to you, our shareholders, our directors, employees and our
      customers.

	 	
      ·
	
      Teamwork,
      on behalf of our customers, is the key to our
success!

	 	
      ·
	
      As
      our team succeeds, we will continue to serve you, our shareholders,
      well.

	 	
      ·
	
      We
      recognize that it is our prospects for growth - especially earnings growth
      - that primarily drives our stock price.

	 	
      ·
	
      Sustainable
      growth in profitability allows us to provide a superior rate of return for
      our shareholders - through increased cash and stock dividends and,
      hopefully, increases in our stock price.

	 	
      ·
	
      For
      27 years we have achieved increased earnings and dividends each
      year.

	 	
      ·
	
      As
      we look into the future, our intention is to continue to grow our
      franchise, earnings, and total return to
shareholders.

 

	·	
      On
      a personal note, I want to add a simple “thank you” to all of you,
      including my co-workers, for the tremendous amount of support and
      encouragement that Wayne and I have felt day in and day out as we’ve
      worked through the loan fraud discovery, investigation and resolution that
      began early in January. This has been a very stressful,
      disappointing and frustrating matter to deal with. But from the initial
      discovery, we all committed to a thorough and honest investigation and
      review, we created a terrific team of professionals to work through this
      matter, and we committed to quickly getting back to “business as usual”
      for our wonderful customers that count on us each and every day. We
      appreciate your outpouring of support and are motivated by it. National
      Penn has a bright future - my pride in our terrific team has never been
      stronger!

	 	
      ·
	
      Thank
      you!

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