<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Confidential, For Use of the
[X] Preliminary proxy statement Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
MIRAGE RESORTS, INCORPORATED
(Name of Registrant as Specified in Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if Other Than Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] No fee required.
[X] Fee computed below per Exchange Act Rules 14a-6(i)(1) and 0-11.
<TABLE>
<C> <S>
(1) Title of each class of securities to which transaction applies:
Common Stock, Par Value $.004 Per Share, of Mirage Resorts,
Incorporated
---------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
190,410,923 shares of Mirage Resorts common stock plus options to
purchase 35,537,037 shares of Mirage Resorts common stock, all as of
March 22, 2000
---------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (Set forth the amount on which the
filing fee is calculated and state how it was determined):
$21.00 per share of Mirage Resorts common stock
$11.17 per share subject to outstanding options, which is $21.00 less
the weighted average exercise price of outstanding options of $9.83
---------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
$4,395,578,086
---------------------------------------------------------------------------
(5) Total fee paid:
$879,116
---------------------------------------------------------------------------
</TABLE>
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
PRELIMINARY COPY
SUBJECT TO COMPLETION, DATED MARCH 24, 2000
[MIRAGE RESORTS, INCORPORATED LOGO]
MIRAGE RESORTS, INCORPORATED
3600 LAS VEGAS BOULEVARD SOUTH
LAS VEGAS, NEVADA 89109
[ ], 2000
TO OUR STOCKHOLDERS:
You are cordially invited to attend a special meeting of stockholders of
Mirage Resorts, Incorporated to be held on [ ], 2000, at [ ] [a.m.][p.m.],
local time, at [Bellagio, 3600 Las Vegas Boulevard South, Las Vegas, Nevada].
At the special meeting you will be asked to consider and vote upon a
proposal to approve a merger between Mirage Resorts and MGM Grand, Inc. If the
merger is completed, Mirage Resorts will become a subsidiary of MGM Grand, and
you will receive $21.00 in cash for each of your shares of Mirage Resorts
common stock.
Your Board of Directors has determined that the merger is fair to and in the
best interests of Mirage Resorts and its stockholders. ACCORDINGLY, YOUR BOARD
HAS APPROVED AND ADOPTED THE MERGER AGREEMENT AND THE MERGER, AND RECOMMENDS
THAT YOU VOTE FOR THE APPROVAL OF THE MERGER AGREEMENT AT THE SPECIAL MEETING.
The accompanying notice of special meeting and proxy statement explain the
proposed merger and provide specific information concerning the special
meeting. Please read these materials carefully.
Your vote is very important. We cannot complete the merger unless holders of
a majority of all of the outstanding shares of Mirage Resorts common stock vote
to approve the merger agreement. Accordingly, failing to vote your shares of
Mirage Resorts common stock will have the same effect as a vote against the
merger. Whether or not you plan to be present at the special meeting, please
sign and return your proxy as soon as possible in the enclosed self-addressed
envelope so that your vote will be recorded. You can also vote your shares of
Mirage Resorts common stock through the Internet or by telephone by following
the instructions on the enclosed proxy card.
Stephen A. Wynn
Chairman of the Board of Directors,
President and Chief Executive
Officer
This proxy statement is dated [ ], 2000, and is first being mailed to
stockholders on or about [ ], 2000.
<PAGE>
MIRAGE RESORTS, INCORPORATED
----------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON [ ], 2000
----------------
To Our Stockholders:
A special meeting of stockholders of Mirage Resorts, Incorporated, a Nevada
corporation, will be held on [ ], 2000, at [ ] [a.m.][p.m.], local time, at
[Bellagio, 3600 Las Vegas Boulevard South, Las Vegas, Nevada] to consider and
vote upon a proposal to approve the Agreement and Plan of Merger, dated as of
March 6, 2000, among Mirage Resorts, MGM Grand, Inc. and a wholly owned
subsidiary of MGM Grand, pursuant to which the subsidiary will be merged into
Mirage Resorts and each share of common stock, par value $.004, of Mirage
Resorts outstanding immediately prior to the merger (other than shares held by
Mirage Resorts, MGM Grand or their respective subsidiaries, which will be
canceled) will be converted into the right to receive $21.00 in cash, without
interest.
The Board of Directors has fixed March 30, 2000 as the record date for the
determination of stockholders entitled to notice of and to vote at the special
meeting or any adjournment of not more than 60 days after the date of the
special meeting.
Whether or not you expect to attend the special meeting in person, please
date and sign the accompanying proxy card and return it promptly in the
envelope enclosed for that purpose. Alternatively, you may vote via toll-free
telephone call or the Internet by following the instructions on the proxy card.
We look forward to seeing you at the special meeting.
By Order of the Board of Directors,
Kenneth R. Wynn
Secretary
Las Vegas, Nevada
[ ], 2000
<PAGE>
SUMMARY TERM SHEET FOR THE MERGER
This summary term sheet for the merger highlights selected information from
this proxy statement regarding the merger and the merger agreement and may not
contain all of the information that is important to you as a Mirage Resorts
stockholder. Accordingly, we encourage you to carefully read this entire
document and the documents to which we have referred you.
THE PROPOSED TRANSACTION
. THE PROPOSAL (PAGE 2). You are being asked to consider and vote upon a
proposal to approve the merger agreement that provides for Mirage Resorts to
be acquired by MGM Grand.
. WHAT YOU WILL RECEIVE (PAGE 22). Upon completion of the merger, you will be
entitled to receive $21.00 in cash for each of your shares of Mirage Resorts
common stock.
. THE ACQUIROR (PAGE 1). MGM Grand is an entertainment, hotel and gaming
company headquartered in Las Vegas, Nevada.
MIRAGE RESORTS' RECOMMENDATION TO STOCKHOLDERS (PAGE 6)
Your board of directors has determined, by the unanimous vote of those
directors voting on the proposal, that the merger is fair to and in the best
interests of Mirage Resorts and its stockholders and has approved and adopted
the merger agreement and the merger. Your board recommends that stockholders
vote FOR approval of the merger agreement at the special meeting.
OPINION OF GOLDMAN SACHS (PAGE 8 AND APPENDIX C)
On March 5, 2000, Goldman, Sachs & Co., our financial advisor, delivered its
oral opinion, which it confirmed in a written opinion dated March 6, 2000, to
the Mirage Resorts board that, as of the date of such opinion, the $21.00 per
share in cash to be received by the Mirage Resorts stockholders was fair from a
financial point of view to such holders.
Goldman Sachs provided its advisory services and its opinion for the
information and assistance of the Mirage Resorts board in connection with its
consideration of the merger. Goldman Sachs' opinion is not a recommendation as
to how any Mirage Resorts stockholder should vote at the special meeting. THE
OPINION IS ATTACHED AS APPENDIX C TO THIS PROXY STATEMENT AND YOU ARE URGED TO
READ THE OPINION IN ITS ENTIRETY.
THE SPECIAL MEETING
. DATE, TIME AND PLACE (PAGE 2). The special meeting will be held on [ ],
2000 at [ ] [a.m.][p.m.], local time at [Bellagio, 3600 Las Vegas Boulevard
South, Las Vegas, Nevada].
. REQUIRED VOTE (PAGE 2). Approval of the merger requires the affirmative vote
of the holders of a majority of the outstanding shares of Mirage Resorts
common stock.
. WHO MAY VOTE (PAGE 2). You are entitled to vote at the special meeting if
you owned shares of Mirage Resorts common stock at the close of business on
March 30, 2000, the record date for the special meeting. [ ] shares of
Mirage Resorts common stock were outstanding as of the record date and are
entitled to be voted at the special meeting.
. PROCEDURE FOR VOTING (PAGE 2). You may vote in any of three ways:
(1) by returning the enclosed proxy card,
(2) by appointing a proxy to vote your shares through the Internet or by
phone as outlined on the enclosed proxy card, or
(3) by appearing at the special meeting.
If you return the enclosed proxy but wish to revoke it, you must either
file with the Secretary of Mirage Resorts a written, later-dated notice of
revocation or send a later-dated proxy relating to the same shares to the
Secretary of Mirage Resorts at or before the special meeting.
-i-
<PAGE>
THE MERGER
. THE STRUCTURE (PAGE 22). Upon the terms and conditions of the merger
agreement, a wholly owned subsidiary of MGM Grand will merge with and into
Mirage Resorts. Mirage Resorts will remain in existence as a wholly owned
subsidiary of MGM Grand. Mirage Resorts stockholders will have no equity
interest in Mirage Resorts or MGM Grand after the merger.
. ACCOUNTING TREATMENT (PAGE 17). The merger will be treated as a "purchase"
for accounting purposes.
. MATERIAL FEDERAL INCOME TAX CONSEQUENCES (PAGE 13). The merger will be a
taxable transaction to you. For United States federal income tax purposes,
you will generally recognize gain or loss in the merger in an amount
determined by the difference between the cash you receive and your tax
basis in Mirage Resorts common stock. Because determining the tax
consequences of the merger can be complicated, you should consult your own
tax advisor in order to understand fully how the merger will affect you.
. ANTITRUST MATTERS (PAGE 14). Under United States federal antitrust law, the
merger may not be completed until MGM Grand and Mirage Resorts have made
filings with the United States Federal Trade Commission and the United
States Department of Justice and the applicable waiting periods have
expired or been terminated. On March 15, 2000, MGM Grand and Mirage Resorts
filed the requisite notification reports with the Federal Trade Commission
and the Department of Justice. The applicable waiting period will expire at
11:59 p.m. on April 14, 2000 unless earlier terminated or extended by a
request for additional information or documentary materials.
. GAMING LAW REGULATORY MATTERS (PAGE 15). As a result of the merger, MGM
Grand will own Mirage Resorts' gaming facilities in Nevada and Mississippi
and will acquire Mirage Resorts' ownership interests in gaming developments
in Nevada and New Jersey. Each of these gaming operations is subject to
various licensing and other regulatory requirements administered by various
governmental entities. Some of these laws and regulations require that the
applicable gaming regulatory authorities approve the merger. MGM Grand and
Mirage Resorts have filed applications with the Nevada gaming authorities,
and MGM Grand has filed applications with the Mississippi gaming
authorities, in connection with the merger.
. DISSENTERS' RIGHTS (PAGE 21). Under Nevada law, Mirage Resorts stockholders
will not have dissenters' rights in the merger.
. MERGER FINANCING (PAGE 17). It is expected that MGM Grand will need
approximately $5.6 billion in order to complete the merger. MGM Grand has
received written commitments from its lenders which would permit MGM Grand
to finance the merger as follows:
-- MGM Grand has received written commitments from Bank of America, N.A.
for $5.0 billion in debt financing, consisting of $4.0 billion in senior
credit facilities and $1.0 billion in bridge financing.
-- MGM Grand would seek to complete a $1.0 billion subordinated bond
offering prior to or concurrently with completion of the merger. The
proceeds from this bond offering will reduce the amount borrowed under
the bridge financing by a corresponding amount.
-- MGM Grand would obtain an additional $600 million in financing from its
existing bank credit facilities, which also are with Bank of America.
Bank of America's financing commitments are subject to customary
conditions. However, MGM Grand's obligation to complete the merger is not
conditioned on the receipt of this or any financing.
The merger agreement permits MGM Grand to amend or replace the financing
described above as long as doing so does not delay the merger or materially
adversely affect the ability of MGM Grand to deliver the economic benefits
that Mirage Resorts stockholders reasonably expect to receive by virtue of
the merger. MGM Grand is now considering other financing as an
-ii-
<PAGE>
alternative to the financing described above. If the alternative financing
were obtained, the merger would be financed as follows:
-- MGM Grand would obtain new senior credit facilities from a syndicate of
banks led by Bank of America that would allow MGM Grand to borrow up to
$4.3 billion.
-- MGM Grand would complete an equity or rights offering for $1.2 billion
or more prior to or concurrently with the completion of the merger.
-- MGM Grand would complete a subordinated bond offering prior to or
concurrently with the completion of the merger and/or obtain a
subordinated bridge credit facility from Bank of America, where the
amount of the bond offering plus the amount that could be borrowed under
the bridge credit facility would be at least as much as the difference
between the $5.6 billion needed to finance the merger and the sum of the
$4.3 billion senior credit facilities and the amount of the equity or
rights offering.
THE MERGER AGREEMENT (PAGE 22 AND APPENDIX A)
. CLOSING OF THE MERGER (PAGE 22). Before we can complete the merger, we must
satisfy a number of conditions. These include:
-- approval of the merger agreement by holders of a majority of the
outstanding shares of Mirage Resorts common stock;
-- expiration or early termination of applicable time periods under United
States federal antitrust laws;
-- absence of any legal prohibitions against the merger;
-- material compliance with our representations and agreements under the
merger agreement; and
-- receipt of material regulatory consents and approvals.
We expect to merge as promptly as practicable after all of the conditions
to the merger have been satisfied or waived.
. TERMINATION OF THE MERGER AGREEMENT (PAGE 30). Mirage Resorts and MGM Grand
may agree in writing to terminate the merger agreement at any time without
completing the merger, even after Mirage Resorts stockholders have approved
it. The merger agreement may also be terminated at any time prior to the
effective time of the merger:
-- by either party if the merger is not completed by December 31, 2000,
which date will be automatically extended to March 31, 2001 if, on
December 31, 2000, all conditions to completion of the merger have been
satisfied except that the merger has not received the necessary
antitrust or gaming authority approvals or that the merger has been
enjoined;
-- by either party if any court or governmental agency issues a final order
preventing the merger;
-- by either party if the other party to the merger agreement materially
breaches its representations or agreements and fails to cure its breach
within 30 days after receiving notice of the breach;
-- by Mirage Resorts after giving MGM Grand at least two days' prior
written notice of its intent to terminate the merger agreement and
paying a termination fee of $135 million if, prior to the Mirage Resorts
stockholder approval of the merger agreement, the Mirage Resorts board
receives and resolves to accept a more favorable proposal that is
reasonably likely to be completed;
-- by MGM Grand if the Mirage Resorts board changes its recommendation of
the merger agreement or approves a more favorable proposal that it
believes is reasonably likely to be completed;
-- by either party if Mirage Resorts stockholders fail to approve the
merger agreement at the special meeting; and
-iii-
<PAGE>
-- by Mirage Resorts if the written commitments for the financing of the
merger are withdrawn and not replaced, or are replaced or amended in a
manner that is reasonably likely to cause a material delay in completing
the merger or a material adverse effect on the ability of MGM Grand to
deliver to the Mirage Resorts stockholders the economic benefits they
are reasonably expected to receive by virtue of the merger, and the
problems with the replacement or amended commitments are not cured
within 30 days.
. TERMINATION FEE IF MERGER IS NOT COMPLETED (PAGE 31). We must pay MGM Grand
a termination fee of $135 million if:
-- the merger agreement is terminated because the Mirage Resorts board
changes its recommendation of the merger or approves a more favorable
proposal that is reasonably likely to be completed; or
-- the following three events occur:
. a third party publicly proposes to acquire Mirage Resorts prior to the
special meeting,
. the merger agreement is terminated because the Mirage Resorts
stockholders fail to approve the merger agreement at the special
meeting, and
. within 12 months following the termination of the merger agreement,
Mirage Resorts is acquired by that third party.
THE STOCK OPTION AGREEMENT (PAGE 33 AND APPENDIX B)
As an inducement to MGM Grand to enter into the merger agreement, Mirage
Resorts granted MGM Grand an option to purchase shares of Mirage Resorts common
stock. This option will become exercisable only if an event giving rise to MGM
Grand's right to receive the $135 million termination fee under the merger
agreement has occurred. The option could discourage other companies from trying
or proposing to combine with Mirage Resorts before we complete the merger.
INTERESTS OF CERTAIN PERSONS IN THE MERGER (PAGE 19)
When the Mirage Resorts board considered the merger and the merger
agreement, the Mirage Resorts board was aware that certain of the officers and
directors of Mirage Resorts have interests and arrangements that may be
different from, or in addition to, your interests as Mirage Resorts
stockholders. Pursuant to change of control employment agreements approved by
the Mirage Resorts board in connection with the merger, seven of Mirage
Resorts' senior executives will receive lump-sum cash payments and other
benefits if their employment is terminated following the merger. In addition,
all unvested Mirage Resorts stock options, including those held by directors
and officers, will become vested and cancelled in exchange for a cash payment
in the merger. In addition, Stephen A. Wynn, Mirage Resorts' chairman,
president and chief executive officer, has been granted certain rights to
acquire certain property of Mirage Resorts, including its art collection, an
aircraft and an apartment, and the right to sell his home to Mirage Resorts.
Under the merger agreement, MGM Grand and Mirage Resorts will indemnify and
provide insurance for directors and officers of Mirage Resorts, among others.
-iv-
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Companies............................................................. 1
Mirage Resorts, Incorporated............................................ 1
MGM Grand, Inc. ........................................................ 1
Merger Subsidiary....................................................... 1
The Special Meeting....................................................... 2
General................................................................. 2
Record Date and Voting.................................................. 2
Required Vote........................................................... 2
Proxies; Revocation..................................................... 2
Adjournments............................................................ 3
The Merger................................................................ 4
Background of the Merger................................................ 4
Mirage Resorts' Reasons for the Merger; Recommendation of the Mirage
Resorts Board.......................................................... 6
Opinion of Goldman Sachs................................................ 8
Material Federal Income Tax Consequences................................ 13
Governmental and Regulatory Approvals................................... 15
Accounting Treatment.................................................... 17
Merger Financing........................................................ 17
Interests of Certain Persons in the Merger.............................. 19
Amendment to Mirage Resorts Rights Agreement............................ 21
No Dissenters' Rights................................................... 21
The Merger Agreement...................................................... 22
Structure and Effective Time............................................ 22
Merger Consideration.................................................... 22
Payment Procedures...................................................... 22
Treatment of Mirage Resorts Options..................................... 22
Directors and Officers.................................................. 22
Representations and Warranties.......................................... 23
Covenants; Conduct of the Business of Mirage Resorts Prior to the
Merger................................................................. 24
No Solicitation of Acquisition Transactions............................. 25
Employee Benefits....................................................... 26
Agreement to Cooperate; Antitrust and Gaming Law Matters................ 27
Indemnification and Insurance........................................... 28
Purchases of Mirage Resorts Equity Securities........................... 28
The Mirage Resorts Board Recommendation................................. 28
Conditions to the Merger................................................ 29
Important Definitions................................................... 30
Termination............................................................. 30
Termination Fee......................................................... 31
Expenses................................................................ 32
Amendment............................................................... 32
The Stock Option Agreement................................................ 33
The Rights Agreement...................................................... 35
Security Ownership of Management.......................................... 36
Security Ownership of Certain Beneficial Owners........................... 37
Market Price of Mirage Common Stock and Dividend Information.............. 38
Forward-Looking Statements................................................ 39
Future Stockholder Proposals.............................................. 39
</TABLE>
-v-
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Where You Can Find More Information........................................ 39
Incorporation of Certain Documents by Reference............................ 40
APPENDICES
Appendix A--Agreement and Plan of Merger, dated as of March 6, 2000........ A-1
Appendix B--Stock Option Agreement, dated as of March 6, 2000.............. B-1
Appendix C--Opinion of Goldman, Sachs & Co., dated March 6, 2000........... C-1
</TABLE>
-vi-
<PAGE>
THE COMPANIES
MIRAGE RESORTS, INCORPORATED
Through our subsidiaries, we own and operate some of the most successful,
well-known casino-based entertainment resorts in the world. These resorts
include:
. Bellagio, a hotel-casino and destination resort on the Las Vegas Strip,
. The Mirage, a hotel-casino and destination resort on the Las Vegas
Strip,
. Beau Rivage, a hotel-casino and beachfront resort in Biloxi,
Mississippi,
. Treasure Island at The Mirage, a hotel-casino and destination resort
adjacent to The Mirage,
. the Golden Nugget, a hotel-casino in downtown Las Vegas, and
. the Golden Nugget-Laughlin, a hotel-casino in Laughlin, Nevada.
We also own a 50% interest in a joint venture that owns and operates the
Monte Carlo Resort & Casino, a hotel-casino and destination resort on the Las
Vegas Strip. On land we own in Atlantic City, New Jersey, we plan to build
(with a 50-50 partner) a major hotel-casino and destination resort and are in
the planning and permitting stage for a wholly owned major hotel-casino and
destination resort. We have also planned a major addition to Bellagio and are
in the very preliminary design phase for a new hotel-casino resort on land that
we own between Monte Carlo and Bellagio on the Las Vegas Strip; however, while
the merger is pending, progress on these projects will be limited and may be
suspended.
We are a Nevada corporation and were incorporated in 1949 as the successor
to a partnership that began business in 1946. Our executive offices are located
at 3600 Las Vegas Boulevard South, Las Vegas, Nevada 89109; telephone (702)
693-7111.
MGM GRAND, INC.
MGM Grand, through its subsidiaries, owns and operates premier hotel-casino
properties and destination resorts in the United States and Australia, which
include the MGM Grand Las Vegas and New York-New York Hotel and Casino in Las
Vegas, Nevada, the Primadonna resort properties in Primm, Nevada, the MGM Grand
Detroit in Detroit, Michigan, and the MGM Grand Australia in Darwin, Australia.
MGM Grand also manages casino properties in the Republic of South Africa. MGM
Grand intends to construct and operate a destination resort, hotel-casino,
entertainment and retail facility in Atlantic City, New Jersey.
MGM Grand is a Delaware corporation that was incorporated in 1986. MGM
Grand's executive offices are located at 3799 Las Vegas Boulevard South, Las
Vegas, Nevada 89109; telephone (702) 891-3333.
MERGER SUBSIDIARY
MGMGMR Acquisition, Inc. ("Merger Sub") is a Nevada corporation formed by
MGM Grand in 2000 solely for the purpose of obtaining financing for the merger
and merging into Mirage Resorts. Merger Sub is a wholly owned subsidiary of New
York-New York Hotel and Casino, LLC, which is itself a wholly owned subsidiary
of MGM Grand. The mailing address of Merger Sub's principal executive offices
is c/o MGM Grand, Inc., 3799 Las Vegas Boulevard South, Las Vegas, Nevada
89109; telephone (702) 891-3333.
1
<PAGE>
THE SPECIAL MEETING
GENERAL
This proxy statement is being furnished to Mirage Resorts stockholders as
part of the solicitation of proxies by the Mirage Resorts board for use at a
special meeting to be held on [ ], 2000, starting at [ ] [a.m.][p.m.],
local time, at [Bellagio, 3600 Las Vegas Boulevard South, Las Vegas, Nevada].
The purpose of the special meeting is for the Mirage Resorts stockholders to
consider and vote upon a proposal to approve the Agreement and Plan of Merger,
dated as of March 6, 2000, among Mirage Resorts, MGM Grand and Merger Sub,
which provides for the merger of Merger Sub with and into Mirage Resorts. A
copy of the merger agreement is attached to this proxy statement as Appendix A.
This proxy statement and the enclosed form of proxy are first being mailed to
Mirage Resorts stockholders on or about [ ], 2000.
RECORD DATE AND VOTING
The holders of record of Mirage Resorts common stock as of the close of
business on the record date, which [was] March 30, 2000, are entitled to
receive notice of, and to vote at, the special meeting. On the record date,
there were [ ] shares of Mirage Resorts common stock outstanding.
The holders of a majority of the outstanding shares of Mirage Resorts common
stock on March 30, 2000, represented in person or by proxy, will constitute a
quorum for purposes of the special meeting. A quorum is necessary to hold the
special meeting. Any shares of Mirage Resorts common stock held in treasury by
Mirage Resorts or by any of its subsidiaries are not considered to be
outstanding for purposes of determining a quorum. Abstentions and properly
executed broker non-votes will be counted as shares present and entitled to
vote for the purposes of determining a quorum. "Broker non-votes" result when,
under the rules of the New York Stock Exchange, brokers are precluded from
exercising their voting discretion with respect to the approval of non-routine
matters such as the merger proposal, and, thus, absent specific instructions
from the beneficial owner of those shares, brokers are not empowered to vote
the shares with respect to the approval of those proposals.
REQUIRED VOTE
Each outstanding share of Mirage Resorts common stock on March 30, 2000
entitles the holder to one vote at the special meeting. Completion of the
merger requires the approval of the merger agreement by the affirmative vote of
the holders of a majority of the outstanding shares of Mirage Resorts common
stock. Because the vote is based on the number of shares outstanding rather
than on the number of votes cast, failure to vote your shares is effectively a
vote against the merger. In addition, although treated as shares that are
present and entitled to vote at the special meeting for purposes of determining
whether a quorum exists, abstentions and properly executed broker non-votes
will have the same effect as votes against approval of the merger proposal. You
may vote your shares in any of three ways:
(1) by returning the enclosed proxy card,
(2) by appointing a proxy to vote your shares through the Internet or by
phone, as outlined on the enclosed proxy card, or
(3) by appearing and voting in person at the special meeting.
As of February 29, 2000, the directors and executive officers of Mirage
Resorts owned, in the aggregate, 15,574,738 outstanding shares of Mirage
Resorts common stock, or approximately 8.2% of the outstanding shares of Mirage
Resorts common stock on that date.
PROXIES; REVOCATION
If you vote your shares of Mirage Resorts common stock by signing a proxy,
your shares will be voted at the special meeting as you indicate on your proxy
card. If no instructions are indicated on your signed proxy card, your shares
of Mirage Resorts common stock will be voted FOR the approval of the merger
agreement. If you vote your shares of Mirage Resorts common stock through the
Internet or by telephone, your shares will be voted at the special meeting as
instructed.
2
<PAGE>
You may revoke your proxy at any time before the proxy is voted at the
special meeting. A proxy may be revoked prior to the vote at the special
meeting in either of two ways:
(1) by submitting a written revocation dated after the date of the proxy
that is being revoked to the Secretary of Mirage Resorts at 3600 Las
Vegas Boulevard South, Las Vegas, Nevada 89109, or
(2) by submitting a new proxy dated after the date of the proxy that is
being revoked.
Mirage Resorts and MGM Grand will share the costs associated with printing
and filing this proxy statement. Mirage Resorts will pay the costs of
soliciting proxies for the special meeting. Officers, directors and employees
of Mirage Resorts may solicit proxies by telephone, mail, the Internet or in
person. However, they will not be paid for soliciting proxies. Mirage Resorts
also will request that individuals and entities holding shares in their names,
or in the names of their nominees, that are beneficially owned by others, send
proxy materials to and obtain proxies from those beneficial owners, and will
reimburse those holders for their reasonable expenses in performing those
services. MacKenzie Partners, Inc. has been retained by Mirage Resorts to
assist it in the solicitation of proxies, using the means referred to above,
and will receive fees of up to $15,000, plus reimbursement of out-of-pocket
expenses.
ADJOURNMENTS
Although it is not expected, the special meeting may be adjourned for the
purpose of soliciting additional proxies to a date not later than 60 days after
the date of the special meeting. Any adjournment may be made without notice,
other than by an announcement made at the special meeting, by the chairman of
Mirage Resorts or by approval of the holders of a majority of the shares of
Mirage Resorts common stock present in person or represented by proxy at the
special meeting, whether or not a quorum exists. Any adjournment of the special
meeting for the purpose of soliciting additional proxies will allow Mirage
Resorts stockholders who have already sent in their proxies to revoke them at
any time prior to their use.
3
<PAGE>
THE MERGER
BACKGROUND OF THE MERGER
On the evening of February 22, 2000, Kirk Kerkorian, who is a director of
MGM Grand and, through Tracinda Corporation, is the majority stockholder of MGM
Grand, telephoned Stephen A. Wynn, the chairman, president and chief executive
officer of Mirage Resorts, to inform him of the contents of a letter which was
to be delivered the following day to Mirage Resorts. Mr. Kerkorian told Mr.
Wynn that the letter contained a $17.00 per share acquisition proposal by MGM
Grand. On Wednesday, February 23, 2000, MGM Grand delivered to Mirage Resorts
and publicly disclosed a letter from J. Terrence Lanni, chairman of MGM Grand,
to Mr. Wynn, containing an unsolicited proposal from MGM Grand to acquire the
outstanding common stock of Mirage Resorts for $17.00 per share, with each
Mirage Resorts stockholder having the option to receive either $17.00 in cash
or a combination of $7.00 in cash and MGM Grand common stock valued at $10.00
based on the closing price of MGM Grand common stock on February 22, 2000. The
letter stated that the proposal would expire on March 8, 2000, and was subject
only to regulatory approvals and negotiation of definitive documentation.
On Monday, February 28, 2000, Mr. Lanni sent a letter to Mr. Wynn
encouraging the Mirage Resorts board to consider MGM's proposal favorably and
clarifying for Mirage Resorts that MGM Grand had secured financing commitments
to fund the proposed transaction.
On Tuesday, February 29, 2000, the Mirage Resorts board met to consider the
MGM Grand proposal. At this meeting, Mr. Wynn and other members of Mirage
Resorts' senior management team reviewed Mirage Resorts' recent operating and
financial history and performance as well as the current environment and trends
in the gaming industry affecting Mirage Resorts' prospects; representatives of
Goldman, Sachs & Co., Mirage Resorts' financial advisor, reviewed current
equity markets trends affecting Mirage Resorts' common stock price and
discussed certain financial aspects of Mirage Resorts' operating and stock
market performance and financial aspects of MGM Grand's proposal; and Mirage
Resorts' outside legal counsel discussed the directors' fiduciary obligations
as well as other matters related to MGM Grand's proposal. In addition, Mirage
Resorts' outside counsel made a presentation to the Mirage Resorts board
concerning the adoption of a preferred share purchase rights agreement and
change of control employment agreements for senior executives of Mirage
Resorts, including Mr. Wynn.
Following further discussion, and based on a number of factors, including
the views of management concerning the proposal, the advice of its financial
and legal advisors and the belief that the timing of MGM Grand's proposal
coincided with an especially low point in the historical valuation of gaming
companies and a low point in the financial markets' recognition of Mirage
Resorts' operations and properties, the Mirage Resorts board determined by the
unanimous vote of all directors except George J. Mason (who had recused himself
from attendance at the meeting because of his long-time friendship with the
majority stockholder of MGM Grand) that MGM Grand's proposal was inadequate and
not in the best interests of Mirage Resorts stockholders. The Mirage Resorts
board also determined that it would be willing to consider a transaction that
would fairly reflect the long-term values inherent in the Mirage Resorts
properties, brand name and goodwill. After the Mirage Resorts board meeting,
Mr. Wynn telephoned Mr. Kerkorian and advised him of the Mirage Resorts board's
conclusions, and Mirage Resorts issued a press release announcing Mirage
Resorts' rejection of the MGM Grand proposal and Mirage Resorts' willingness to
discuss a transaction that would recognize the real value of Mirage Resorts.
At the February 29, 2000 meeting, the Mirage Resorts board also approved
certain amendments to Mirage Resorts' bylaws and approved and adopted the
preferred share purchase rights agreement by declaring a dividend distribution
of one preferred share purchase right on each outstanding share of Mirage
Resorts common stock. For more information concerning the rights agreement, see
"The Rights Agreement." The bylaw amendments provided for Mirage Resorts to opt
out of Sections 78.378 to 78.3793 of the Nevada Revised Statutes, which
comprise Nevada's "acquisition of controlling interest" statute, and made
several technical adjustments designed to harmonize and conform the operation
of existing provisions of certain bylaws that provide that Mirage Resorts
stockholders cannot act by written consent in lieu of a meeting and that
4
<PAGE>
Mirage Resorts stockholders who wish to propose business or nominations at any
meeting of Mirage Resorts stockholders must abide by the advance notice
procedures contained in the bylaws.
On Wednesday, March 1, 2000, Mr. Kerkorian met with Mr. Wynn to discuss
further MGM Grand's interest in acquiring Mirage Resorts. At this meeting, Mr.
Kerkorian expressed his willingness to recommend that MGM Grand increase the
price it would be willing to pay to $19.00 per share in cash, but Mr. Wynn
stated that he would not be willing to recommend that the Mirage Resorts board
approve a transaction with MGM Grand unless the price were at least $21.00 per
share. Messrs. Wynn and Kerkorian agreed that representatives of each company
should meet the following day to discuss valuation issues.
On Thursday, March 2, 2000, Robert Baldwin, Mirage Resorts' chief financial
officer and treasurer, Robert Selwood, Mirage Resorts' director of finance,
Stanley Zax, who was serving as a consultant to Mirage Resorts in connection
with the MGM Grand proposal, and representatives of Goldman Sachs met with Mr.
Lanni, Alex Yemenidjian, a director of MGM Grand, and James J. Murren, MGM
Grand's president and chief financial officer. In connection with this meeting,
Mirage Resorts and MGM Grand entered into a customary confidentiality
agreement. At this meeting the Mirage Resorts representatives presented the MGM
Grand representatives with a number of financial and business rationales for
increasing MGM Grand's offer, including certain financial forecasts for Mirage
Resorts prepared by its management (which are referenced under "--Opinion of
Goldman Sachs" below). The meeting ended without resolution or agreement.
After the close of trading on Friday, March 3, 2000, Mr. Lanni sent another
letter to Mr. Wynn stating that MGM Grand was prepared to acquire Mirage
Resorts at a price of $21.00 per share in cash, that it had obtained firm
commitments for the financing necessary to accomplish a $21.00 per share
transaction, and that it had instructed its legal counsel to prepare and
deliver draft definitive documentation to Mirage Resorts' outside legal counsel
promptly. On Saturday, March 4, 2000, MGM Grand's legal counsel contacted
Mirage Resorts' outside legal counsel to discuss certain aspects of MGM Grand's
proposal, and representatives of MGM Grand and Bank of America, N.A. and Banc
of America Securities LLC, MGM Grand's financing sources, provided to Mirage
Resorts' financial and outside legal advisors information about the financing
commitments that MGM Grand had obtained.
On Saturday, March 4, 2000, the Mirage Resorts board (other than Mr. Mason,
who had recused himself from attendance) met by telephone to discuss MGM
Grand's $21.00 per share offer. At this meeting, Mr. Wynn and Mr. Zax reviewed
for the Mirage Resorts board the meetings between MGM Grand and Mirage Resorts
that had occurred on Wednesday, March 1 and Thursday, March 2, 2000 and the
contents of Mr. Lanni's March 3, 2000 letter. Mr. Wynn also reviewed Mirage
Resorts' recent operating and financial history and performance as well as the
current environment and trends in the gaming industry affecting Mirage Resorts'
prospects. Mr. Zax and representatives of Goldman Sachs discussed other
potential merger partners or acquirors of Mirage Resorts and reasons why they
believed that no other party appeared likely to engage in a transaction at a
value exceeding that offered by MGM Grand's proposal. In this regard, Mr. Wynn
informed the Mirage Resorts board that two potentially interested parties had
been in contact with Mirage Resorts in the last several days, but that neither
had indicated a willingness to consider a transaction at a value equal to or
greater than the $21.00 transaction proposed by MGM Grand. Representatives of
Goldman Sachs again reviewed current equity markets trends affecting Mirage
Resorts common stock price and discussed certain financial aspects of Mirage
Resorts' operating and stock market performance and financial aspects of MGM
Grand's offer, including MGM Grand's financing commitments. Mirage Resorts'
outside legal counsel discussed certain rights proposed to be granted to Mr.
Wynn, including the right to purchase certain assets of Mirage Resorts and the
right to sell his home to Mirage Resorts, as described in "--Interests of
Certain Persons in the Merger." Following further discussion, and based on the
discussions and presentations made at the meeting, the Mirage Resorts board
authorized Mirage Resorts' senior management and financial and outside legal
advisors to seek to negotiate with MGM Grand a merger transaction based on the
$21.00 per share proposal. The Mirage Resorts board also unanimously approved
and authorized change of control employment agreements for seven senior
executives of Mirage Resorts or its subsidiaries, including Mr. Wynn, with Mr.
Wynn and Elaine P. Wynn, a director of Mirage Resorts and the wife of Mr. Wynn,
abstaining as to Mr. Wynn's change of control employment agreement, and Richard
D. Bronson abstaining as to his change of control employment agreement.
5
<PAGE>
Throughout Saturday, March 4 and Sunday, March 5, 2000, MGM Grand's and
Mirage Resorts' respective outside legal counsel drafted and negotiated the
terms of a definitive merger agreement and related documentation, including a
stock option agreement, and, by the evening of Sunday, March 5, 2000, had
reached agreement on all major substantive issues. On Sunday evening, MGM
Grand's outside legal counsel informed Mirage Resorts' outside legal counsel
that the MGM Grand board had approved the transaction and authorized its
management to execute a merger agreement and related documentation
substantially on the terms agreed upon as of Sunday evening, subject to
finalization by the parties' respective outside legal counsel. Later that
evening, the Mirage Resorts board met by telephone to consider the terms of the
merger agreement and stock option agreement and to vote on the proposed
transaction. Mirage Resorts' outside legal counsel described the terms and
effects of the merger agreement and the stock option agreement and provided an
update on the status of negotiations, and Messrs. Wynn, Baldwin and Zax and
representatives of Goldman Sachs commented upon, among other things, the
matters set forth under "--Mirage Resorts' Reasons for the Merger;
Recommendation of the Mirage Resorts Board." In addition, at this meeting,
Goldman Sachs rendered its oral opinion, subsequently confirmed in writing,
that, as of the date of its opinion, the $21.00 per share in cash to be
received by holders of Mirage Resorts common stock in the merger is fair from a
financial point of view to such holders. Following further discussion and
consideration, the Mirage Resorts board, by the unanimous vote of all directors
except Mr. Mason (who had recused himself), approved and authorized the
execution of the merger agreement and stock option agreement on the terms
discussed at the meeting.
Finalization of the definitive merger agreement and stock option agreement
by MGM Grand's and Mirage Resorts' respective legal counsel and senior
management continued in the evening of March 5, 2000 and was completed in the
morning of March 6, 2000. Promptly thereafter, the merger agreement and stock
option agreement were signed and MGM Grand issued a joint press release
announcing the transaction.
MIRAGE RESORTS' REASONS FOR THE MERGER; RECOMMENDATION OF THE MIRAGE RESORTS
BOARD
At a special board meeting on March 5, 2000, the Mirage Resorts board
determined that the merger is fair to and in the best interests of Mirage
Resorts and its stockholders and, by the unanimous vote of all the directors
other than Mr. Mason (who had recused himself from attendance at the meeting
due to his long-time friendship with the majority stockholder of MGM Grand)
approved and adopted the merger agreement, the stock option agreement and the
transactions contemplated by both those agreements. ACCORDINGLY, THE MIRAGE
RESORTS BOARD RECOMMENDS THAT MIRAGE RESORTS STOCKHOLDERS VOTE FOR APPROVAL OF
THE MERGER AGREEMENT AT THE SPECIAL MEETING.
In reaching its decision to approve and adopt the merger agreement, the
stock option agreement and the transactions contemplated by both those
agreements, and to recommend that Mirage Resorts stockholders vote to approve
the merger agreement, the Mirage Resorts board considered the following
material factors:
. the current and historical market prices of Mirage Resorts common stock
relative to those of other industry participants and general market
indices, including the fact that the $21.00 per share price represents a
93.1% premium over the closing price of Mirage Resorts common stock on
the last trading day prior to the public announcement of MGM Grand's
original $17.00 merger proposal and a 53.1% premium over the average
closing price per share of Mirage Resorts common stock for the 90 days
preceding the announcement of the original merger proposal;
. the fact that the merger consideration is all cash, which provides
certainty of value to Mirage Resorts' stockholders compared to a stock
transaction (though the Mirage Resorts board was aware that an all-cash
transaction would be taxable to Mirage Resorts stockholders for United
States federal income tax purposes);
. the history of the negotiations between MGM Grand and Mirage Resorts,
including the 23.5% increase in the price offered by MGM Grand and the
fact that no other party appeared likely to engage in a transaction at a
value that exceeded MGM Grand's $21.00 per share proposal;
6
<PAGE>
. the Mirage Resorts board's familiarity with, and presentations by Mirage
Resorts' management and its financial advisors regarding, the business,
operations, properties and assets, financial condition, competitive
position, business strategy and prospects of Mirage Resorts (as well as
the risks involved in achieving those prospects), the current
environment for the gaming industry in which Mirage Resorts competes,
and current industry, economic and market conditions, both on an
historical and on a prospective basis;
. the presentations by Goldman Sachs on February 29, March 4 and March 5,
2000 and its oral opinion of March 5, 2000, which was confirmed in a
written opinion dated March 6, 2000, that, as of the date of such
opinion, and based on and subject to the matters set forth in that
opinion, the $21.00 per share in cash to be received by holders of
Mirage Resorts common stock pursuant to the merger agreement was fair
from a financial point of view to such holders (see "--Opinion of
Goldman Sachs");
. the views of management and of Mirage Resorts' financial advisors
concerning the potential stockholder value that could be expected to be
generated from remaining independent and continuing to execute Mirage
Resorts' current strategic plans, as well as the value of Mirage
Resorts' non-income-producing assets, such as undeveloped real estate
and its interest in development projects in New Jersey and Nevada;
. the terms of the merger agreement and the stock option agreement, as
reviewed by the Mirage Resorts board with its outside legal advisors,
including the nature and relatively limited number of conditions to the
obligations of MGM Grand to complete the merger (including, in
particular, the absence of a financing condition), which the Mirage
Resorts board believes increases the likelihood that the merger will be
completed if approved by Mirage Resorts stockholders (see "The Merger
Agreement" and "The Stock Option Agreement");
. the terms of the merger agreement and the stock option agreement that
provide that, under certain circumstances, and subject to certain
conditions more fully described under "The Merger Agreement--No
Solicitation of Acquisition Transactions," "--Termination," and "--
Termination Fee" and under "The Stock Option Agreement," Mirage Resorts
can furnish information to and conduct negotiations with a third party,
terminate the merger agreement, and enter into an agreement relating to
a superior proposal for a business combination or acquisition of Mirage
Resorts, as well as the possibility that, notwithstanding those
provisions, the merger agreement and the stock option agreement might
discourage other parties that might have an interest in a business
combination with, or an acquisition of, Mirage Resorts (see "The Merger
Agreement" and "The Stock Option Agreement");
. the terms and conditions of the financing commitments received by MGM
Grand (and the identity of the parties committing to provide the
financing), publicly available information about MGM Grand's financial
condition and capacity to incur the indebtedness contemplated by the
financing commitments it has received, and the results of discussions
among representatives of Mirage Resorts, MGM Grand and Bank of America
with respect to the financing of the transaction; and
. the interests of Mirage Resorts' officers and directors in the merger
described under "--Interests of Certain Persons in the Merger."
The foregoing discussion addresses the material information and factors
considered by the Mirage Resorts board in its consideration of the merger,
including factors that support the merger as well as those that may weigh
against it. In view of the variety of factors and the amount of information
considered, the Mirage Resorts board did not find it practicable to and did not
make specific assessments of, quantify or otherwise assign relative weights to
the specific factors considered in reaching its determination. In addition, the
Mirage Resorts board did not undertake to make any specific determination as to
whether any particular factor, or any aspect of any particular factor, was
favorable or unfavorable to its ultimate determination. The determination to
approve the merger was made after consideration of all of the factors as a
whole. In addition, individual members of the Mirage Resorts board may have
given different weights to different factors.
7
<PAGE>
OPINION OF GOLDMAN SACHS
On March 5, 2000, Goldman Sachs delivered its oral opinion, which it
confirmed in a written opinion dated March 6, 2000, to the Mirage Resorts board
that as of the date of such opinion the $21.00 per share in cash to be received
by the holders of Mirage Resorts common stock pursuant to the merger agreement
was fair from a financial point of view to such holders.
THE FULL TEXT OF THE WRITTEN OPINION OF GOLDMAN SACHS, DATED MARCH 6, 2000,
WHICH SETS FORTH ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE
REVIEW UNDERTAKEN IN CONNECTION WITH THE OPINION, IS ATTACHED TO THIS PROXY
STATEMENT AS APPENDIX C. GOLDMAN SACHS PROVIDED ITS ADVISORY SERVICES AND ITS
OPINION FOR THE INFORMATION AND ASSISTANCE OF THE MIRAGE RESORTS BOARD IN
CONNECTION WITH ITS CONSIDERATION OF THE MERGER. THE GOLDMAN SACHS OPINION IS
NOT A RECOMMENDATION AS TO HOW ANY HOLDER OF MIRAGE RESORTS COMMON STOCK SHOULD
VOTE AT THE SPECIAL MEETING. MIRAGE RESORTS STOCKHOLDERS ARE URGED TO READ THE
OPINION IN ITS ENTIRETY.
In connection with its opinion, Goldman Sachs reviewed, among other things:
. the merger agreement;
. the annual reports to stockholders and annual reports on Form 10-K of
Mirage Resorts for the five years ended December 31, 1998;
. a number of interim reports to stockholders and quarterly reports on
Form 10-Q of Mirage Resorts;
. certain other communications from Mirage Resorts to its stockholders;
and
. internal financial analyses and forecasts for Mirage Resorts prepared by
its management.
Goldman Sachs also held discussions with members of the senior management of
Mirage Resorts regarding its past and current business operations, financial
condition and future prospects. In addition, Goldman Sachs reviewed the
reported price and trading activity for the Mirage Resorts common stock,
compared financial and stock market information for Mirage Resorts with similar
information for certain other companies the securities of which are publicly
traded, and reviewed the financial terms of certain recent business
combinations in the gaming industry specifically and in other industries
generally. Goldman Sachs also performed such other studies and analyses that it
considered appropriate.
Goldman Sachs relied upon the accuracy and completeness of all of the
financial and other information discussed with or reviewed by it and assumed
such accuracy and completeness for purposes of rendering its opinion. In
addition, Goldman Sachs did not make an independent evaluation or appraisal of
the assets and liabilities of Mirage Resorts or any of its subsidiaries. No
evaluation or appraisal of the assets and liabilities of Mirage Resorts or any
of its subsidiaries was furnished to Goldman Sachs.
The following is a summary of the material financial analyses used by
Goldman Sachs in connection with providing its March 6, 2000 written opinion to
the Mirage Resorts board. Some of the summaries of the financial analyses
include information presented in tabular format. In order to more fully
understand the financial analyses used by Goldman Sachs, the tables must be
read together with the full text of each summary. The tables alone are not a
complete description of Goldman Sachs' financial analyses.
Historical Stock Trading Analysis
Goldman Sachs reviewed the historical trading prices and volumes for Mirage
Resorts common stock. In addition, Goldman Sachs analyzed the consideration to
be received by holders of Mirage Resorts common stock pursuant to the merger
agreement in relation to the stock price of Mirage Resorts common stock at
various times. Such analysis indicated that the $21.00 per share in cash to be
paid to Mirage Resorts stockholders pursuant to the merger agreement
represented:
8
<PAGE>
. a premium of 93.1% over the closing price per share of Mirage Resorts
common stock of $10.88 on February 22, 2000, the day prior to the day
MGM Grand first announced its interest in acquiring Mirage Resorts;
. a premium of 60.2% over the average closing price per share of Mirage
Resorts common stock of $13.11 for the 30 days prior to the day MGM
Grand first announced its interest in acquiring Mirage Resorts;
. a premium of 53.1% over the average closing price per share of Mirage
Resorts common stock of $13.72 for the 90 days prior to the day MGM
Grand first announced its interest in acquiring Mirage Resorts;
. a premium of 28.0% over the average closing price per share of Mirage
Resorts common stock of $16.41 for the full year prior to the day MGM
Grand first announced its interest in acquiring Mirage Resorts; and
. a discount of 20.4% to the previous 52-week high sale price per share of
Mirage Resorts common stock of $26.38.
Selected Transactions Analysis
Goldman Sachs analyzed certain information relating to selected business
combination transactions announced since 1994 in the gaming industry. Goldman
Sachs compared the following transactions:
. Park Place Entertainment's transaction with Caesars World announced in
April 1999;
. MGM Grand's transaction with Primadonna Resorts announced in November
1998;
. Harrah's Entertainment's transaction with Rio Hotel and Casino announced
in August 1998;
. Harrah's Entertainment's transaction with Showboat Inc. announced in
December 1997;
. Starwood Lodging's transaction with ITT Corporation announced in October
1997;
. Hilton Hotels Corporation's transaction with Bally Entertainment Corp.
announced in June 1996;
. Circus Circus Enterprises' transaction with Gold Strike Resorts
announced in March 1995; and
. ITT Corporation's transaction with Caesars World announced in December
1994.
Goldman Sachs calculated and compared for each of the selected transactions
the total value of that transaction as a multiple of:
. latest 12 months revenues (based on publicly filed financial information
as close to the date of announcement of the transaction as possible),
. latest 12 months earnings before interest, taxes, depreciation and
amortization, referred to as EBITDA (based on publicly filed financial
information as close to the date of announcement of the transaction as
possible), and
. next 12 months EBITDA (based on research reports issued as close to the
date of announcement of the transaction as possible).
The following table presents the results of this analysis, each as compared to
the corresponding values indicated for the merger based on Mirage Resorts'
management forecasts.
<TABLE>
<CAPTION>
RANGES FOR THE MEDIAN MEAN
SELECTED (EXCLUDING THE (EXCLUDING THE
TRANSACTION VALUE AS A MULTIPLE OF TRANSACTIONS MERGER) MERGER) THE MERGER
- ---------------------------------- -------------- -------------- -------------- ----------
<S> <C> <C> <C> <C>
Latest 12 Months
Revenues............... 1.8x- 4.7x 2.2x 2.6x 2.5x
Latest 12 Months
EBITDA................. 6.9x-15.2x 10.2x 10.9x 11.0x
Next 12 Months EBITDA... 6.6x-12.0x 7.8x 8.3x 9.2x
</TABLE>
9
<PAGE>
Discounted Cash Flow Analysis
Goldman Sachs performed a discounted cash flow analysis to determine the
theoretical enterprise value of Mirage Resorts and the theoretical equity value
per share of Mirage Resorts common stock under the following scenario:
. utilizing Mirage Resorts' management forecasts as of February 2000
discounted to the end of June 2000, and
. assuming net debt of $1,969 million and 190.1 million primary shares
outstanding.
Goldman Sachs applied discount rates ranging from 7.0% to 11.0% and terminal
value multiples of estimated 2005 EBITDA ranging from 6.5x to 9.0x, to derive
theoretical enterprise values ranging from:
. $5,390.2 million to $8,211.4 million.
Goldman Sachs applied the same discount rates and terminal value multiples
of estimated 2005 EBITDA to derive theoretical equity values per share ranging
from:
. $16.70 to $29.19.
Selected Companies Analysis
Goldman Sachs reviewed and compared financial information of Mirage Resorts
to corresponding financial information, ratios and public market multiples for
selected large capitalization gaming companies and for selected mid/small
capitalization gaming companies. Goldman Sachs selected the following companies
for comparison because they are publicly traded companies with certain
operations that for purposes of analysis may be considered similar to certain
operations of Mirage Resorts:
The selected large capitalization publicly traded gaming companies consisted
of:
. Park Place Entertainment (pro forma for the acquisition of Caesars
World),
. Harrah's Entertainment,
. Mandalay Resort Group, and
. MGM Grand.
The selected mid/small capitalization publicly traded gaming companies
consisted of:
. Trump Hotels and Casino Resorts,
. Station Casinos,
. Sun International Hotels,
. Boyd Gaming Corporation (pro forma for the acquisition of Blue Chip
Casino and parking facility),
. Pinnacle Entertainment,
. Aztar Corp.,
. Isle of Capri Casinos,
. Argosy Gaming Co.,
. Ameristar Casinos, and
. Riviera Holdings Corporation.
Goldman Sachs calculated and compared various financial multiples and ratios
for the selected companies based on (1) financial data as of February 22, 2000,
the day prior to the day MGM Grand first announced its
10
<PAGE>
interest in acquiring Mirage Resorts, (2) earnings per share, or EPS, data
primarily provided by Institutional Broker's Estimate System, known as IBES,
except for Ameristar Corporation, which was based on Bear, Stearns & Co.'s
estimates, and (3) EBITDA data primarily based on Goldman Sachs' research,
except for Trump Hotels and Casino Resorts, which was based on estimates from
SouthCoast Capital Corp., Isle of Capri Casinos and Ameristar Casinos, which
were based on estimates from Bear, Stearns & Co., and Argosy Gaming Co., which
was based on estimates from Credit Suisse First Boston Corporation. The
multiples for Mirage Resorts and the selected companies were calculated using
the price per share of each company's common stock as of February 22, 2000, the
day prior to the day MGM Grand first announced its interest in acquiring Mirage
Resorts. With respect to both the selected large capitalization gaming
companies and the selected mid/small capitalization gaming companies, Goldman
Sachs considered:
. closing price per share on February 22, 2000 as a percentage of the 52-
week high price per share,
. total equity market capitalization,
. the ratio of net debt to total capitalization,
. actual 1999 and estimated 2000 EBITDA multiples,
. actual 1999 and estimated 2000 and 2001 price/earnings multiples,
. earnings per share growth from 1998 through estimated calendar year
2000, and
. EBITDA growth from 1998 through estimated calendar year 2000. The
results of these analyses are summarized in the following charts.
<TABLE>
<CAPTION>
TOTAL MARKET NET DEBT/
STOCK PRICE AS % CAPITALIZATION CAPITALIZATION
SELECTED COMPANIES OF 52-WEEK HIGH (IN MILLIONS) RATIO
- ------------------ ---------------- --------------- --------------
<S> <C> <C> <C>
Selected Large Capitalization
Gaming Companies
Mean........................ 68.9% $5,144.6 52.4%
Median...................... 71.8% 4,305.7 54.8%
Range....................... 57.4%-74.5% 3,531.0-8,436.0 35.0%-64.9%
Selected Mid/Small
Capitalization Gaming
Companies
Mean........................ 70.4% $ 953.3 64.0%
Median...................... 74.4% 900.8 58.6%
Range....................... 46.0%-87.3% 211.6-1,796.9 42.6%-93.6%
Mirage Resorts.............. 42.1% $4,035.8 48.8%
</TABLE>
<TABLE>
<CAPTION>
EBITDA MULTIPLE PE MULTIPLE
--------------------- -----------------------------------
1999 2000 1999 2000 2001
SELECTED COMPANIES (ACTUAL) (ESTIMATED) (ACTUAL) (ESTIMATED) (ESTIMATED)
- ------------------ --------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Selected Large
Capitalization Gaming
Companies
Mean.................. 7.2x 6.5x 15.5x 13.1x 11.5x
Median................ 6.9x 6.3x 15.2x 13.6x 12.0x
Range................. 6.3x-8.7x 6.1x-7.1x 13.3x-18.3x 10.0x-15.2x 8.3x-13.9x
Selected Mid/Small
Capitalization Gaming
Companies
Mean.................. 6.1x 5.3x 17.2x 10.5x 8.9x
Median................ 5.8x 5.2x 14.4x 10.2x 8.2x
Range................. 5.1x-7.2x 3.1x-6.7x 7.0x-48.4x 7.1x-16.2x 6.0x-12.7x
Mirage Resorts (based on
management's
forecasts)............. 7.0x 5.9x 12.9x 10.1x 8.7x
Mirage Resorts (based on
Goldman Sachs' research
EBITDA estimates and
IBES EPS projections).. 7.0x 6.7x 12.9x 12.1x 10.3x
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
EPS GROWTH EBITDA GROWTH
1998 (ACTUAL)-2000 1998 (ACTUAL)-2000
SELECTED COMPANIES (ESTIMATED) (ESTIMATED)
- ------------------ ------------------ ------------------
<S> <C> <C>
Selected Large Capitalization Gaming
Companies
Mean................................... 26.1% 37.0%
Median................................. 20.0% 34.8%
Range.................................. 17.8%-46.8% 24.2%-54.2%
Selected Mid/Small Capitalization Gaming
Companies
Mean................................... 59.0% 22.4%
Median................................. 56.5% 13.5%
Range.................................. (33.7)%-155% 7.0%-42.4%
Mirage Resorts (based on management's
forecasts).............................. 19.2% 41.2%
Mirage Resorts (based on Goldman Sachs'
research EBITDA estimates and IBES EPS
projections)............................ 8.8% 32.0%
</TABLE>
Transaction Price Analysis
Based on the transaction price of $21.00 per share of Mirage Resorts common
stock and the number of fully-diluted shares outstanding according to Mirage
Resorts management, Goldman Sachs calculated the equity consideration for the
merger and, based on Mirage Resorts' outstanding net debt according to Mirage
Resorts' management, calculated the levered consideration for the merger. Based
on the levered consideration for the merger and (1) actual 1999 and estimated
2000 and 2001 EBITDA based on Mirage Resorts' management forecasts as of
February 2000, (2) actual 1999 EPS and estimated 2000 and 2001 EPS based on
Mirage Resorts' management forecasts as of February 2000, and (3) estimated
2000 and 2001 EPS based on IBES estimates, Goldman Sachs calculated the EBITDA
and EPS multiples for Mirage Resorts at the transaction price of $21.00 per
share. Goldman Sachs' calculations indicated:
. EBITDA multiples in 1999, estimated 2000, and estimated 2001 based on
Mirage Resorts' management forecasts as of February 2000 of 11.0x, 9.2x,
and 8.8x, respectively,
. EPS multiples in 1999, estimated 2000 and estimated 2001, based on
Mirage Resorts' management forecasts as of February 2000 of 25.0x,
19.4x, and 16.8x, respectively, and
. EPS multiples in estimated 2000 and estimated 2001 based on IBES
estimates of 23.3x and 19.8x, respectively.
General
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analyses as a whole, could create an incomplete view of the processes
underlying Goldman Sachs' opinion. In arriving at its fairness determination,
Goldman Sachs considered the results of each of these analyses in their
totality. No company or transaction used in the above analyses as a comparison
is directly comparable to Mirage Resorts or the merger. The analyses were
prepared solely for purposes of Goldman Sachs' providing its opinion to the
Mirage Resorts board as to the fairness from a financial point of view of the
$21.00 per share in cash to be received by the Mirage Resorts stockholders and
do not purport to be appraisals or necessarily reflect the prices at which
businesses or securities actually may be sold. Analyses based upon forecasts of
future results are not necessarily indicative of actual future results, which
may be significantly more or less favorable than suggested by those analyses.
Because these analyses are inherently subject to uncertainty, being based upon
numerous factors or events beyond the control of the parties or their advisors,
none of Mirage Resorts, Goldman Sachs or any other person assumes
responsibility if future results are materially different from those forecast.
As described above, Goldman Sachs' opinion to the Mirage Resorts board was one
of many factors taken into consideration by the Mirage Resorts board in making
its determination to approve the merger agreement. This summary is not a
complete description of the analysis performed by Goldman Sachs and is
qualified by reference to the written opinion of Goldman Sachs set forth in
Appendix C.
12
<PAGE>
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. Mirage Resorts
selected Goldman Sachs as its financial advisor because it is an
internationally recognized investment banking firm that has substantial
experience in transactions similar to the merger and because of its familiarity
with Mirage Resorts. Goldman Sachs is familiar with Mirage Resorts, having
provided certain investment banking services to Mirage Resorts from time to
time, including having acted as co-manager in Mirage Resorts' public offering
of $100 million of 7.25% debentures due August 1, 2017 and of $200 million of
6.75% notes due August 1, 2007 in August 1997, having acted as lead manager in
Mirage Resorts' public offering of 16.6 million shares of Mirage Resorts common
stock in May 1999, and having acted as its financial advisor in connection
with, and having participated in certain of the negotiations leading to, the
merger agreement. For the services provided to Mirage Resorts in the past two
years, Goldman Sachs has received fees customary for such services. Goldman
Sachs has also provided certain investment banking services to MGM Grand from
time to time, and may provide investment banking services to MGM Grand in the
future.
Pursuant to a letter agreement dated February 29, 1999, Mirage Resorts
engaged Goldman Sachs to act as its financial advisor in connection with the
possible sale of all or a portion of Mirage Resorts. Pursuant to the terms of
the letter agreement, Mirage Resorts has agreed to pay Goldman Sachs a fee in
an amount customary for similar transactions, all of which is contingent upon
completion of the merger or a similar transaction. Mirage Resorts has agreed to
reimburse Goldman Sachs for its reasonable out-of-pocket expenses, including
attorneys' fees, and to indemnify Goldman Sachs against certain liabilities,
including certain liabilities under the United States federal securities laws.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
General
The following is a summary of the material United States federal income tax
consequences of the merger to Mirage Resorts stockholders. This summary is
based upon the provisions of the Internal Revenue Code of 1986, as amended,
applicable current and proposed United States Treasury Regulations, judicial
authority, and administrative rulings and practice. Legislative, judicial or
administrative rules and interpretations are subject to change, possibly on a
retroactive basis, at any time, and, therefore, the following statements and
conclusions could be altered or modified. It is assumed that the shares of
Mirage Resorts common stock are held as capital assets by a United States
person (i.e., a citizen or resident of the United States or a domestic
corporation). This discussion does not address all aspects of United States
federal income taxation that may be relevant to a particular Mirage Resorts
stockholder in light of that Mirage Resorts stockholder's personal investment
circumstances, or those Mirage Resorts stockholders subject to special
treatment under the United States federal income tax laws (for example, life
insurance companies, tax-exempt organizations, financial institutions, United
States expatriates, foreign corporations and nonresident alien individuals),
Mirage Resorts stockholders who hold shares of Mirage Resorts common stock as
part of a hedging, "straddle," conversion or other integrated transaction, or
Mirage Resorts stockholders who acquired their shares of Mirage Resorts common
stock through the exercise of employee stock options or other compensation
arrangements. In addition, the discussion does not address any aspect of
foreign, state or local taxation or estate and gift taxation that may be
applicable to a Mirage Resorts stockholder.
Consequences of the Merger to Mirage Resorts Stockholders
The receipt of the merger consideration in the merger will be a taxable
transaction for United States federal income tax purposes (and also may be a
taxable transaction under applicable state, local and other income tax laws).
In general, for United States federal income tax purposes, a holder of Mirage
Resorts common stock will recognize gain or loss equal to the difference
between such stockholder's adjusted tax basis in Mirage Resorts common stock
converted in the merger, and the amount of cash received. Gain or loss will
13
<PAGE>
be calculated separately for each block of shares converted in the merger
(i.e., shares acquired at the same cost in a single transaction). The gain or
loss will be capital gain or loss, and will be short-term gain or loss if, at
the effective time of the merger, the shares of Mirage Resorts common stock so
converted were held for one year or less. If the shares were held for more than
one year, the gain or loss would be long-term, subject (in the case of
stockholders who are individuals) to tax at a maximum United States federal
income tax rate of 20%.
Backup Tax Withholding
Under the United States federal income tax backup withholding rules, unless
an exemption applies, MGM Grand is required to and will withhold 31% of all
payments to which a Mirage Resorts stockholder or other payee is entitled in
the merger, unless the Mirage Resorts stockholder or other payee provides a tax
identification number (social security number, in the case of an individual, or
employer identification number, in the case of other stockholders), and
certifies under penalties of perjury that that number is correct. Each Mirage
Resorts stockholder and, if applicable, each other payee, should complete and
sign the substitute Form W-9 that will be part of the letter of transmittal to
be returned to the exchange agent (or other agent) in order to provide the
information and certification necessary to avoid backup withholding, unless an
applicable exemption exists and is otherwise proved in a manner satisfactory to
the exchange agent (or other agent). The exemptions provide that certain Mirage
Resorts stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding requirements.
In order for a foreign individual to qualify as an exempt recipient, however,
he or she must submit a signed statement (such as a Certificate of Foreign
Status on Form W-8) attesting to his or her exempt status. Any amounts withheld
will be allowed as a credit against the holder's United States federal income
tax liability for that year.
MIRAGE RESORTS STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS TO
DETERMINE THE UNITED STATES FEDERAL, STATE AND LOCAL AND FOREIGN TAX
CONSEQUENCES OF THE MERGER TO THEM IN VIEW OF THEIR OWN PARTICULAR
CIRCUMSTANCES.
GOVERNMENTAL AND REGULATORY APPROVALS
Antitrust
Transactions such as the merger are reviewed by the United States Department
of Justice and the United States Federal Trade Commission to determine whether
they comply with applicable antitrust laws. Under the provisions of the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and
regulations promulgated thereunder (the "HSR Act") applicable to the merger,
the merger may not be completed until applicable waiting period requirements
have been satisfied. MGM Grand and Mirage Resorts each filed notification
reports with the Department of Justice and Federal Trade Commission under the
HSR Act on March 15, 2000. The waiting period under the HSR Act will expire at
11:59 p.m. on April 14, 2000, unless earlier terminated or extended by a
request for additional information or documentary materials.
The Department of Justice and the Federal Trade Commission frequently
scrutinize the legality under the antitrust laws of transactions such as the
merger. At any time before or after the merger, the Department of Justice or
the Federal Trade Commission could take such action under the antitrust laws as
it deems necessary or desirable in the public interest, including seeking to
enjoin the merger or seeking divestiture of substantial assets of MGM Grand or
Mirage Resorts or their subsidiaries. Private parties and state attorneys
general may also bring an action under the antitrust laws under certain
circumstances. There can be no assurance that a challenge to the merger on
antitrust grounds will not be made or, if such a challenge is made, of the
result. Under the merger agreement, MGM Grand has agreed to offer to take (and
if its offer is accepted, commit to take) all steps that it is capable of
taking to avoid or eliminate impediments under any antitrust laws or gaming
laws that may be asserted by any governmental entity to enable the merger to be
completed by December 31, 2000, or, if permitted under provisions described
under "The Merger Agreement--Termination," March 31, 2001. However, the merger
agreement does not require either MGM Grand or its subsidiaries to divest or
dispose of any property that is material to the business of MGM Grand and its
subsidiaries, taken as a whole. See "The Merger Agreement--Agreement to
Cooperate; Antitrust and Gaming Law Matters."
14
<PAGE>
Gaming Regulation
The following discussion is an abbreviated description of the various gaming
regulatory requirements applicable to the merger. For a more detailed
description of these gaming regulatory requirements generally, please see
"Nevada Government Regulation" and "New Jersey Government Regulation" in Item 1
of the Annual Report on Form 10-K of MGM Grand for the year ended December 31,
1999 and "Regulation and Licensing" in Item 1 of the Annual Report on Form 10-K
of Mirage Resorts for the year ended December 31, 1999.
Nevada Gaming Regulations. The ownership and operation of casino gaming
facilities in Nevada are subject to the Nevada Gaming Control Act and the
regulations of the Nevada Gaming Commission and the Nevada State Gaming Control
Board (collectively, the "Nevada Act") and various local ordinances and
regulations. MGM Grand's and Mirage Resorts' respective gaming operations are
subject to the licensing and regulatory control of the Nevada Gaming
Commission, the Nevada State Gaming Control Board, the Clark County Liquor and
Gaming Licensing Board and the City of Las Vegas (collectively, the "Nevada
Gaming Authorities").
Regulations of the Nevada Gaming Commission provide that control of a
registered publicly traded corporation such as Mirage Resorts cannot be
acquired through a tender offer, merger, consolidation, acquisition of assets,
management or consulting agreements or any form of takeover whatsoever without
the prior approval of the Nevada Gaming Commission. MGM Grand has filed
applications seeking the necessary approvals with the Nevada State Gaming
Control Board and the Nevada Gaming Commission on behalf of MGM Grand and New
York-New York Hotel and Casino. Mirage Resorts also has filed an application in
connection with the merger. The Nevada State Gaming Control Board reviews and
investigates applications for approval and makes recommendations on those
applications to the Nevada Gaming Commission for final action. MGM Grand is
currently registered as a publicly traded corporation and has been found
suitable to own the shares of its subsidiaries that have licensed gaming
facilities in Nevada. Accordingly, MGM Grand does not expect significant delays
in obtaining necessary approvals. However, there can be no assurance that these
approvals will be granted or will be granted on a timely basis or without
burdensome conditions. Furthermore, any such approval, if granted, does not
constitute a finding, recommendation or approval by the Nevada State Gaming
Control Board or the Nevada Gaming Commission as to the merits of the merger.
Any representation to the contrary is unlawful.
In seeking approval to acquire control of Mirage Resorts, MGM Grand must
satisfy the Nevada Gaming Commission as to a variety of stringent standards.
The Nevada State Gaming Control Board and the Nevada Gaming Commission will
consider all relevant material facts in determining whether to grant this
approval, and may consider not only the effects of the merger but also any
other facts that are deemed relevant. Such facts may include, among others, (1)
the business history of the applicant, including its record of financial
stability, integrity and success of its operations, as well as its current
business activities, (2) the adequacy of the proposed financing, and (3)
whether the merger will create a significant risk that MGM Grand, Mirage
Resorts or their subsidiaries will not satisfy their financial obligations as
they become due or satisfy all financial and regulatory requirements imposed by
the Nevada Act.
The Nevada State Gaming Control Board and the Nevada Gaming Commission will
also consider whether the acquisition of control of Mirage Resorts by MGM Grand
is in the best interests of the State of Nevada under the multiple licensing
criteria in the Nevada Act. Among other factors set forth in such multiple
licensing criteria, they may consider whether the acquisition would pose
problems or create a monopoly, and what the result of the acquisition of
control will be in respect of the percentage of interest of MGM Grand to
similarly situated competitors on a statewide, countywide and geographical
basis in the following categories: total number of slot machines, total number
of games, total number of tables, gross revenue, percentage tax, casino
entertainment tax, number of rooms available for the public, number of
employees hired and total payroll.
Following receipt of the necessary approvals of the Nevada Gaming Commission
and completion of the merger, Mirage Resorts will be registered by the Nevada
Gaming Commission as a publicly traded intermediary company of MGM Grand.
15
<PAGE>
New York-New York Hotel and Casino has filed an application with the Nevada
State Gaming Control Board and the Nevada Gaming Commission to be registered as
an intermediary company and found suitable as the sole stockholder of Mirage
Resorts at the time of completion of the merger. New York-New York Hotel and
Casino is currently registered as an intermediary company, has been found
suitable as the sole member of a subsidiary that has licensed gaming facilities
in Nevada, and has been licensed to conduct nonrestricted gaming operations in
Nevada. In addition, certain officers, directors and key employees of Mirage
Resorts at the time of completion of the merger who will be actively and
directly involved in Mirage Resorts' gaming activities may also be required to
be found suitable or licensed by the Nevada Gaming Authorities. The Nevada
Gaming Authorities may deny an application for licensing, a finding of
suitability or registration for any cause that they deem reasonable. A finding
of suitability is comparable to licensing, and both require the submission of
detailed personal and financial information followed by a thorough
investigation. All individuals required to file applications for findings of
suitability as officers and directors of Mirage Resorts at the time of
completion of the merger have filed applications with the Nevada State Gaming
Control Board and the Nevada Gaming Commission. There can be no assurances that
these approvals will be granted or will be granted within this time.
Mississippi Gaming Regulations. The ownership and operation of casino gaming
facilities in Mississippi are subject to the Mississippi Gaming Control Act and
various local regulations. Mirage Resorts' gaming operations at Beau Rivage are
subject to the licensing and regulatory control of the Mississippi Gaming
Commission.
Regulations of the Mississippi Gaming Commission provide that control of a
registered publicly traded corporation such as Mirage Resorts cannot be
acquired through a tender offer, merger, consolidation, acquisition of assets,
management or consulting agreements or any form of takeover whatsoever without
the prior approval of the Mississippi Gaming Commission. MGM Grand has filed
applications for the necessary approvals with the Mississippi Gaming
Commission. There can be no assurances that the approvals will be granted at
all or will be granted on a timely basis. Furthermore, any such approval, if
granted, does not constitute a finding, recommendation or approval by the
Mississippi Gaming Commission as to the merits of the merger. Any
representation to the contrary is unlawful.
In seeking approval to acquire control of Mirage Resorts, MGM Grand must
satisfy the Mississippi Gaming Commission as to a variety of stringent
standards. The Mississippi Gaming Commission will consider all relevant
material facts in determining whether to grant the approval, and may consider
not only the effects of the merger but also any other facts that are deemed
relevant. Such facts may include, among others, (1) the business history of the
applicant, including its record of financial stability, integrity and success
of its operations, as well as its current business activities, and (2) whether
the merger will create a significant risk that MGM Grand, Mirage Resorts or
their subsidiaries will not satisfy their financial obligations as they become
due or satisfy all financial and regulatory requirements imposed by the
Mississippi Gaming Control Act.
The Mississippi Gaming Commission must approve New York-New York Hotel and
Casino, New PRMA Las Vegas, Inc., MGM Grand, Tracinda Corporation and Mr.
Kerkorian as controlling stockholders of Mirage Resorts. Following receipt of
the necessary approvals of the Mississippi Gaming Commission and completion of
the merger, Mirage Resorts will be registered by the Mississippi Gaming
Commission as an intermediary company of MGM Grand.
Certain officers, directors and key employees of Mirage Resorts prior to the
merger, or MGM Grand after the merger, who will be actively and directly
involved in Mirage Resorts' gaming activities may also be required to be found
suitable or licensed by the Mississippi Gaming Commission. The Mississippi
Gaming Commission may deny an application for licensing or registration for any
cause that it deems reasonable. A finding of suitability is comparable to
licensing, and both require the submission of detailed personal and financial
information followed by a thorough investigation. All individuals required to
file applications for findings of suitability as officers and directors of
Mirage Resorts at the time of completion of the merger are expected to file
applications with the Mississippi Gaming Commission shortly. There can be no
assurances that these approvals will be granted.
16
<PAGE>
ACCOUNTING TREATMENT
The merger will be accounted for under the purchase method of accounting in
accordance with Accounting Principles Board Opinion No. 16, "Business
Combinations," as amended. Under this method of accounting, the purchase price
will be allocated to assets acquired and liabilities assumed based on their
estimated fair values at the effective time of the merger (with the excess of
the purchase price after such allocations being recorded as goodwill).
MERGER FINANCING
General
It is expected that MGM Grand will need approximately $5.6 billion in order
to complete the merger. This includes payments to be made to Mirage Resorts
stockholders and holders of Mirage Resorts stock options, refinancing of
certain indebtedness of Mirage Resorts and MGM Grand, payment of fees and
expenses in connection with the merger and funds for general corporate purposes
after the merger.
MGM Grand has received commitments from Bank of America for $5.0 billion in
debt financing, consisting of $4.0 billion in senior credit facilities and $1.0
billion in bridge financing. If MGM Grand uses the financing structure outlined
in the written commitments it has received, MGM Grand would seek to complete a
$1.0 billion subordinated bond offering prior to or concurrently with
completion of the merger, with the proceeds from this bond offering reducing
the amount borrowed under the bridge financing by a corresponding amount. In
addition, MGM Grand would obtain an additional $600 million in financing from
its existing bank line facilities, which are also provided by Bank of America.
The bank commitments are subject to certain conditions. However, MGM Grand's
obligations to complete the merger are not subject to its receipt of this or
any financing.
The merger agreement also permits MGM Grand to amend or replace the
financing described above as long as doing so does not delay the merger or
materially adversely affect the ability of MGM Grand to deliver the economic
benefits that Mirage Resorts stockholders are reasonably expected to receive by
virtue of the merger. See "The Merger Agreement--Agreement to Cooperate;
Antitrust and Gaming Law Matters" and "--Termination." MGM Grand is therefore
now considering financing as an alternative to the financing described above.
If the alternative financing were obtained, MGM Grand would obtain new senior
credit facilities from a syndicate of banks led by Bank of America that would
allow MGM Grand to borrow up to $4.3 billion. In addition, MGM Grand would
complete an equity or rights offering of $1.2 billion or more prior to or
concurrently with the completion of the merger. MGM Grand would complete a
subordinated bond offering prior to or concurrently with the completion of the
merger and/or obtain a subordinated bridge credit facility from Bank of
America, where the amount of the bond offering plus the amount that could be
borrowed under the bridge credit facility would be at least as much as the
difference between the $5.6 billion needed to finance the merger and the sum of
the $4.3 billion senior credit facilities and the amount of the equity or
rights offering.
Bank Financing
Bank financing commitments totaling $5.0 billion were received from Bank of
America. The commitments consist of an aggregate of $4.0 billion of senior
revolving credit facilities and a $1.0 billion bridge facility. The senior
revolving credit facilities obtained in the commitments consist of (1) a $2.0
billion five-year senior revolving credit facility maturing five years from the
closing of the merger, and (2) a $1.0 billion 364-day senior revolving credit
facility maturing 364 days from the closing of the merger. The commitments also
include a $1.0 billion 12-month senior term loan maturing 12 months from the
closing of the merger.
The $1.0 billion bridge facility is available to MGM Grand as an alternative
to bond financing. Bank of America has the option to structure the bridge
facility either as a senior debt financing with a 364-day maturity or as a
subordinated bridge facility. In the event that the bridge facility is
structured as a subordinated bridge facility, Bank of America and Banc of
America Securities, the lead arranger and book manager for the Bank of America
credit facilities, are entitled, in consultation with MGM Grand, to determine
the appropriate pricing,
17
<PAGE>
structure and other terms of the bridge facility so as to reflect, in the sole
determination of Back of America and Banc of America Securities, the
appropriate pricing, structure and other terms of subordinated debt financings
of that type under then-current financial and capital market conditions.
As noted above, the merger agreement also permits MGM Grand to obtain
amended or replacement financing under certain limited circumstances. MGM Grand
is considering an alternative to the above financing under which it would
obtain financing commitments totaling $4.3 billion from a syndicate of banks
led by Bank of America. The commitments would consist of an aggregate of $3.0
billion of senior revolving credit facilities and a $1.3 billion term loan
facility. The senior revolving credit facilities would consist of (1) a $2.0
billion five-year senior revolving credit facility maturing five years from the
closing of the merger and (2) a $1.0 billion 364-day senior revolving credit
facility maturing 364 days from the closing of the merger. The $1 billion 12
month senior term loan would mature 12 months from the closing of the merger.
If this alternative financing were employed, MGM Grand would complete an equity
or rights offering of $1.2 billion or more. MGM Grand would also complete a
subordinated bond offering prior to or concurrently with the completion of the
merger and/or obtain a subordinated bridge credit facility from Bank of
America, where the amount of the bond offering plus the amount that could be
borrowed under the bridge credit facility would be at least as much as the
difference between the $5.6 billion needed to finance the merger and the sum of
the $4.3 billion senior credit facilities and the amount of the equity or
rights offering.
Bank of America and Banc of America Securities may, subject to certain
limitations and in consultation with MGM Grand, change the pricing, structure,
amount or other terms of the credit facilities (including structuring the
bridge facility as a subordinated bridge facility) if they determine that these
changes are necessary to ensure a successful syndication, provided that the
total amount of the credit facilities remains sufficient to complete the
merger.
Regardless of which financing alternative is used, the obligations of MGM
Grand and Mirage Resorts (which will be a wholly owned subsidiary of MGM Grand
if the merger is completed) under the senior facilities will be unsecured,
assuming that the holders of MGM Grand's existing bond indebtedness will
release their collateral and both Moody's Investor Service, Inc. and Standard &
Poor's rating service issue an investment-grade rating with respect to the
senior unsecured indebtedness of MGM Grand and Mirage Resorts after the merger.
In any event, MGM Grand will make a negative pledge of all assets of MGM Grand
and its subsidiaries, subject to existing liens and approved purchase money
liens.
Regardless of which financing alternative is used, the senior credit
facilities will contain terms as to fees and pricing customary for financings
of this type. In addition, the documentation will contain representations and
warranties, covenants and events of default customary for financings of this
type and satisfactory to Bank of America and Banc of America Securities.
Existing Credit Facilities
If MGM Grand employs the first financing alternative described under "Bank
Financing," MGM Grand will also obtain an additional $600 million in financing
from its existing bank line facilities. MGM Grand has available to it a credit
facility from a syndicate of banks led by Bank of America. In 1997, MGM Grand
amended this facility to make it a $1.25 billion senior revolving credit
facility which may be increased to $1.5 billion under its existing terms. The
facility has subsequently been amended several times in less significant ways.
This facility is available, among other things, for general corporate purposes,
including qualified investments (such as Mirage Resorts common stock) up to
$750 million. Availability under this facility will decline in quarterly
increments of the greater of $62.5 million or 5% of the commitment amount under
the facility, commencing on December 31, 2001, with the balance due on December
31, 2002. Interest on outstanding balances and commitment fees on unutilized
availabilities under the facility are determined by a formula based either on
MGM Grand's leverage ratio (which is the ratio of total debt to annualized cash
flow) or the facility rating (which is the credit rating then applicable to the
facility), and in the case of interest rates, on the basis of the Eurodollar or
base rate existing at the time of determination. The facility is
unconditionally guaranteed by each of MGM Grand's subsidiaries except for New
York-New York Hotel and Casino, The
18
<PAGE>
Primadonna Company, LLC, PRMA, LLC, New PRMA Las Vegas, Inc., MGM Grand Detroit
II, LLC, MGM Grand-Bally's Monorail Limited Liability Company, MGM Grand
Australia, Inc. and its non-U.S. subsidiaries and their U.S. holding companies
which have no other assets or operations. The MGM Grand subsidiaries which do
not guarantee this facility are called the "nonguarantors" below. The facility
is secured by pledges of substantially all of the assets of MGM Grand and the
guarantors, but not by any interest in any nonguarantor. The facility can
become unsecured, at MGM Grand's option, if it receives investment-grade
ratings as unsecured debt from both Moody's and Standard & Poor's. The facility
contains certain customary events of default and agreements.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
General
Some members of Mirage Resorts management and the Mirage Resorts board have
certain interests in the merger that are different from or in addition to the
interests of Mirage Resorts stockholders generally. These additional interests
relate to provisions in the merger agreement or Mirage Resorts employee benefit
plans, as well as:
. change of control employment agreements and, in the case of Stephen A.
Wynn, certain rights with respect to the fine art and certain other
property of Mirage Resorts and property owned by Mr. Wynn;
. acceleration and payments in respect of outstanding Mirage Resorts stock
options; and
. the indemnification of and provisions for liability insurance for Mirage
Resorts directors and officers.
All of these additional interests, to the extent material, are described
below. The Mirage Resorts board was aware of these interests and considered
them in approving and adopting the merger agreement.
Change of Control Employment Agreements and Related Matters
We have entered into change of control employment agreements, dated as of
February 29, 2000, with Stephen A. Wynn, Robert H. Baldwin, chief financial
officer and treasurer of Mirage Resorts, Bruce A. Levin, vice president,
general counsel and assistant secretary of Mirage Resorts, Kenneth R. Wynn,
vice president-design and construction and secretary of Mirage Resorts, and
three other key executives. The change of control employment agreements have
three-year terms, which are automatically extended for one year upon each
anniversary unless a notice not to extend is given by Mirage Resorts. If a
change of control of Mirage Resorts occurs during the term of a change of
control employment agreement, then the change of control employment agreement
becomes operative for a fixed three-year period.
The change of control employment agreements provide generally that the
executive's terms and conditions of employment (including position, location,
compensation and benefits) will not be adversely changed during the three-year
period after a change of control. If Mirage Resorts terminates the executive's
employment (other than for cause, death or disability) or the executive
terminates employment for good reason during the three-year period, or the
executive terminates employment for any reason during the 30-day period
following the first anniversary of the change of control, the executive is
generally entitled to receive: (1) three times (in the case of Messrs. Stephen
A. Wynn and Baldwin and one other executive) and two times (in the case of
Messrs. Levin and Kenneth R. Wynn and two other executives) (a) the executive's
annual base salary plus (b) the executive's annual bonus (generally based on
the highest annual bonus earned by the executive in the three years prior to
the change of control); (2) accrued but unpaid compensation; (3) welfare
benefits for either three or two years; (4) the additional company matching
contributions to Mirage Resorts' retirement savings plan that would have been
made for the benefit of the executive if he had continued to be employed by
Mirage Resorts for an additional three or two years; and (5) outplacement
benefits. The merger will constitute a change of control under these change of
control employment agreements. If the seven executives of Mirage Resorts who
are parties to change of control employment agreements were all to be
terminated at the effective time of the
19
<PAGE>
merger, the aggregate amount of cash severance payable to the executives upon
the terminations (before required tax withholdings) would be approximately
$[ ]. In addition, each change of control employment agreement provides,
with certain limitations, that Mirage Resorts is obligated to make a payment in
an amount sufficient to make the executive whole for any excise tax on "excess
parachute payments" imposed under the Internal Revenue Code.
In addition, Stephen A. Wynn's change of control employment agreement
provides that, within 10 days following a change of control (including the
merger), he has the right to purchase Mirage Resorts' Gulfstream III aircraft
and/or Mirage Resorts' New York City apartment, each at its appraised fair
market value, and that, during the five-year period following a change of
control (including the merger), he or his estate can require Mirage Resorts to
purchase his house at Shadow Creek golf course in North Las Vegas, Nevada and
its furnishings at his cost. The merger agreement provides that, in connection
with the sale of any fine art owned by Mirage Resorts or its subsidiaries
either before the merger becomes effective (which will require MGM Grand's
prior consent) or for five years thereafter, Stephen A. Wynn will have a right
of first refusal on any such proposed sale. The price at which Mr. Wynn may
purchase the artwork will be equal to the lower of (1) any firm offer for the
artwork that may have been made by any third party that Mirage Resorts or its
subsidiary is prepared to accept, and (2) the higher of the book value of the
artwork or the appraised fair market value of the artwork as determined by
certain internationally-recognized appraisers of artwork. The merger agreement
also provides that MGM Grand and the surviving corporation in the merger will
continue to honor Stephen A. Wynn's lifetime privileges at Shadow Creek golf
course owned by Mirage Resorts in North Las Vegas.
Effect on Stock Options
Each outstanding option to purchase Mirage Resorts common stock, whether
vested or unvested, that was previously granted by Mirage Resorts and its
subsidiaries will automatically be canceled at the effective time of the
merger. MGM Grand will, or will cause the surviving corporation in the merger
to, provide the holder of each Mirage Resorts stock option a lump-sum cash
payment equal to the excess of $21.00 over the per share exercise price of the
Mirage Resorts stock option multiplied by the number of shares of Mirage
Resorts common stock subject to the Mirage Resorts stock option less applicable
withholding taxes. Assuming the effective time of the merger had occurred on
[ ], 2000, Mirage Resorts' 15 directors and executive officers would have
received an aggregate cash payment of $[ ], less applicable withholding
taxes, in respect of the [ ] unvested Mirage Resorts stock options held by
those directors and executive officers.
Indemnification of Officers and Directors
In the merger agreement, MGM Grand has agreed that the surviving corporation
in the merger will, and MGM Grand will cause the surviving corporation to,
indemnify and hold harmless, to the fullest extent permitted under applicable
law, each present and former director and officer, among others, of Mirage
Resorts or any of its subsidiaries for costs, expenses (including attorneys'
fees), damages and liabilities in connection with any claim, action, proceeding
or investigation arising out of, relating to or in connection with (1) any act
or omission occurring before the merger and (2) the merger and the other
transactions contemplated by the merger agreement or arising out of or
pertaining to the transactions contemplated by the merger agreement or the
events and developments between MGM Grand and Mirage Resorts leading up to the
merger agreement. MGM Grand has agreed to indemnify and hold harmless each of
the directors and officers, among others, of Mirage Resorts or any of its
subsidiaries against any costs, expenses (including attorneys' fees), damages
and liabilities arising out of, relating to or in connection with the merger or
the other transactions contemplated by the merger agreement or arising out of
or pertaining to the transactions contemplated by the merger agreement or the
events and developments between MGM Grand and Mirage Resorts leading up to the
merger agreement.
In the merger agreement, MGM Grand has agreed that, for a period of six
years after the effective time of the merger, it will cause to be maintained,
or will cause the surviving corporation to maintain, the current policies of
directors' and officers' liability insurance maintained by Mirage Resorts and
its subsidiaries with respect to matters arising on or before the effective
time of the merger. MGM Grand may substitute policies of
20
<PAGE>
at least the same coverage and amounts containing terms and conditions that are
no less advantageous to the insured parties, and which coverages and amounts
will be no less than the coverages and amounts provided at that time for MGM
Grand's directors and officers. However, MGM Grand and the surviving
corporation in the merger are not required to expend in any year an amount in
excess of 250% of the annual aggregate premiums currently paid by Mirage
Resorts for such coverage. If their aggregate expenditure on coverage exceeds
250%, MGM Grand has agreed that it and the surviving corporation will obtain a
policy with the best coverage available, in the reasonable judgment of the MGM
Grand board, for a cost not exceeding that amount.
The merger agreement also provides that the indemnification provisions in
the articles of incorporation and bylaws of Mirage Resorts in effect at the
effective time of the merger will not be amended or otherwise repealed for six
years after the effective time of the merger in any manner that would adversely
affect the rights of individuals who at the effective time of the merger were
directors or officers of Mirage Resorts, among others.
AMENDMENT TO MIRAGE RESORTS RIGHTS AGREEMENT
Mirage Resorts amended the rights agreement, dated as of March 6, 2000,
between Mirage Resorts and American Stock Transfer & Trust Company, as rights
agent, to provide that neither the merger nor the merger agreement will cause
MGM Grand or any of its subsidiaries or affiliates to become an "acquiring
person" under the rights agreement. See "The Rights Agreement."
NO DISSENTERS' RIGHTS
Under Nevada law, Mirage Resorts stockholders do not have dissenters' rights
in the merger.
21
<PAGE>
THE MERGER AGREEMENT
The following is a summary of all the material terms of the merger
agreement. The summary is qualified in its entirety by reference to the merger
agreement, a copy of which is attached to this proxy statement as Appendix A.
STRUCTURE AND EFFECTIVE TIME
The merger agreement provides for the merger of Merger Sub with and into
Mirage Resorts. Mirage Resorts will survive the merger and continue to exist
after the merger as a wholly owned subsidiary of New York-New York Hotel and
Casino, which is itself a wholly owned subsidiary of MGM Grand. The merger will
become effective at the time the articles of merger are filed with the Nevada
Secretary of State (or at a later time if agreed in writing by the parties and
specified in the articles of merger). The parties will file the articles of
merger on the second business day after the satisfaction or waiver of all
conditions in the merger agreement, or such later date as Mirage Resorts and
MGM Grand may agree. We cannot assure you when, or if, all the conditions to
completion of the merger will be satisfied or waived. See "--Conditions to the
Merger." We intend to complete the merger as promptly as practicable subject to
receipt of the Mirage Resorts stockholder approval and all requisite regulatory
approvals. See "The Merger--Governmental and Regulatory Approvals" and "The
Merger Agreement--Agreement to Cooperate; Antitrust and Gaming Law Matters" and
"--Conditions to the Merger."
MERGER CONSIDERATION
The merger agreement provides that each share of Mirage Resorts common stock
outstanding immediately prior to the effective time of the merger will be
converted at the effective time of the merger into the right to receive $21.00
in cash from MGM Grand, without interest. All shares of Mirage common stock
held in the treasury of Mirage Resorts and shares of Mirage Resorts common
stock owned by Mirage Resorts' subsidiaries, MGM Grand and MGM Grand's
subsidiaries will be canceled at the effective time of the merger, and no
payment will be made for those shares.
PAYMENT PROCEDURES
MGM Grand will appoint an exchange agent that will make payment of the
merger consideration in exchange for certificates representing shares of Mirage
Resorts common stock. MGM Grand will deposit sufficient cash with the exchange
agent prior to or at the effective time of the merger in order to permit the
payment of the merger consideration. Promptly after the effective time of the
merger, the exchange agent will send Mirage Resorts stockholders a letter of
transmittal and instructions explaining how to send their stock certificates to
the exchange agent. The exchange agent will mail checks for the appropriate
merger consideration, minus any withholding taxes required by law, to Mirage
Resorts stockholders promptly following the exchange agent's receipt and
processing of Mirage Resorts stock certificates and properly completed
transmittal documents.
TREATMENT OF MIRAGE RESORTS STOCK OPTIONS
The merger agreement provides that, at the effective time of the merger,
each outstanding Mirage Resorts stock option previously granted by Mirage
Resorts and its subsidiaries, whether or not then vested or exercisable, will
automatically be canceled, and MGM Grand will, or will cause the surviving
corporation to, provide the holder of each canceled Mirage Resorts stock option
a lump-sum cash payment equal to the excess of $21.00 over the exercise price
of the Mirage Resorts stock option multiplied by the number of shares of Mirage
Resorts common stock subject to the canceled Mirage Resorts stock option (less
applicable withholding taxes).
DIRECTORS AND OFFICERS
The merger agreement provides that the directors of Merger Sub immediately
before the effective time of the merger will be the directors of the surviving
corporation in the merger. The officers of Mirage Resorts,
22
<PAGE>
together with the individuals designated by MGM Grand prior to the effective
time of the merger, will be the officers of the surviving corporation in the
merger, subject to the right of the board of directors of the surviving
corporation to appoint or replace officers.
Mirage Resorts has agreed that, before the effective time of the merger, the
Mirage Resorts board will approve, by an affirmative vote of a majority of the
directors present and voting (and not fewer than three directors voting in the
affirmative), the election to the board of directors of the surviving
corporation in the merger of each individual nominated in writing by MGM Grand,
effective as of the effective time of the merger. MGM Grand required this
covenant with the intention of causing the merger not to constitute a change in
control of Mirage Resorts for purposes of Mirage Resorts' public indebtedness.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains representations and warranties made by Mirage
Resorts to MGM Grand and Merger Sub, including representations and warranties
relating to:
. due organization, power and standing, and other corporate matters;
. authorization, execution, delivery and enforceability of the merger
agreement;
. capital structure;
. subsidiaries;
. conflicts under charter documents, violations of any instruments or law,
and required consents and approvals;
. reports and financial statements filed with the Securities and Exchange
Commission and the accuracy of the information in those documents;
. absence of a material adverse effect on Mirage Resorts;
. litigation;
. no violation of law;
. compliance with agreements;
. tax matters;
. retirement and other employee benefit plans;
. labor matters;
. environmental matters;
. title to assets;
. brokers' and finders' fees with respect to the merger; and
. absence of undisclosed liabilities.
The merger agreement also contains representations and warranties made by
MGM Grand and Merger Sub to Mirage Resorts, including representations and
warranties relating to:
. due organization, power and standing, and other corporate matters;
. conflicts under charter documents, violations of any instruments or law,
and required consents and approvals;
. availability of financing;
. brokers' and finders' fees with respect to the merger;
23
<PAGE>
. authorization, execution, delivery and enforceability of the merger
agreement;
. ownership of Mirage Resorts common stock;
. reports and financial statements filed with the SEC and the accuracy of
the information in those documents; and
. absence of undisclosed liabilities.
The representations and warranties of each of the parties to the merger
agreement will expire upon completion of the merger.
COVENANTS; CONDUCT OF THE BUSINESS OF MIRAGE RESORTS PRIOR TO THE MERGER
From the date of the merger agreement through the effective time of the
merger, Mirage Resorts and its subsidiaries are required to comply with certain
restrictions on their conduct and operations. Mirage Resorts has agreed (and
has agreed to cause its subsidiaries) to conduct their business in the ordinary
and usual course of business, consistent with past practice, to use all
reasonable efforts to preserve intact their respective business organizations
and goodwill, keep available the services of their respective present officers
and key employees, and preserve the goodwill and business relationships with
customers and others having business relationships with them.
Mirage Resorts has also agreed that, prior to the effective time of the
merger, except as provided in the merger agreement or with the prior written
consent of MGM Grand, Mirage Resorts will not and will cause its subsidiaries
not to:
(1) amend or propose to amend their articles of incorporation, bylaws or
equivalent organizational documents.
(2) split, combine or reclassify their outstanding capital stock.
(3) issue, sell, pledge or dispose of (a) any shares of their capital
stock, (b) any options, warrants or rights to acquire shares of their
capital stock, or (c) any securities convertible into or exchangeable
for their capital stock, or redeem, purchase or offer to purchase any
securities of the types described in (a)-(c) above or agree to do so.
. Exception: Mirage Resorts is permitted to issue shares upon the
exercise of any Mirage Resorts stock options that are outstanding on
the date of the merger agreement.
(4) declare, set aside or pay any dividends.
(5) incur or become contingently liable with respect to any indebtedness
for borrowed money.
. Exception: Mirage Resorts and its subsidiaries may borrow (a) in the
ordinary course of business, (b) under existing credit facilities up
to the existing borrowing limit on the date of the merger agreement,
or (c) to refinance existing indebtedness on terms reasonably
acceptable to MGM Grand; however, the aggregate indebtedness of
Mirage Resorts and its subsidiaries, net of all cash and cash
equivalents, must not exceed $2.15 billion.
(6) acquire any assets or businesses or agree to do so, except expenditures
for current, fixed or capital assets in the ordinary course of
business. However, Mirage Resorts and its subsidiaries may not acquire
any gaming property within 150 miles of Detroit, Michigan.
24
<PAGE>
(7) sell, pledge, dispose of or encumber any assets or businesses.
. Exceptions: Mirage Resorts and its subsidiaries may:
--sell an aircraft owned by Mirage Resorts in connection with the
existing contract for its sale;
--pledge or encumber assets or businesses pursuant to existing
credit facilities or other permitted borrowings;
--sell or dispose of businesses or assets if MGM Grand consents in
writing or fails to deny consent subject to certain conditions;
--sell real estate, assets or facilities to non-affiliates if the
consideration (including any debt assumed by the buyer) for such
sale is less than $1 million and for all such sales is less than $7
million in the aggregate;
--sell or dispose of assets and businesses as may be required by
applicable law;
--sell or dispose of assets and businesses in the ordinary course;
or
--agree or commit to do any of the above.
(8) enter into, amend, modify or renew any employment, consulting,
severance or similar agreement with any director or officer of Mirage
Resorts or its subsidiaries, or grant any salary, wage or other
increase in compensation or any employee benefit to any such person,
except (a) for changes required by applicable law, (b) to satisfy
obligations existing as of the date of the merger agreement or (c) in
the ordinary course of business consistent with past practice.
(9) enter into, adopt, establish, amend or modify any employee benefit,
incentive or welfare plan or other arrangement in respect of any
directors, officers or employees of Mirage Resorts or its subsidiaries,
except as required (a) by applicable law or (b) by the terms of
contractual obligations existing as of the date of the merger
agreement.
(10) make any expenditures or enter into any binding commitment to make
expenditures.
. Exceptions: Mirage Resorts and its subsidiaries may make, or enter
into a commitment to make:
--expenditures that they are currently committed to make;
--expenditures relating to certain ongoing projects, and other
expenditures not exceeding $3 million individually or $80 million
in the aggregate;
--emergency repairs and other expenditures necessary in light of
circumstances not anticipated as of the date of the merger
agreement that are necessary to avoid significant disruption to
Mirage Resorts' business or operations consistent with past
practice (and if reasonably practicable after consultation with MGM
Grand); or
--repairs and maintenance in the ordinary course of business
consistent with past practice.
(11) make, change or revoke any material tax election unless required by
law. With certain exceptions, Mirage Resorts and its subsidiaries also
may not make any agreement or settlement with any tax authority either
regarding any material amount of taxes or which would reasonably be
expected to materially increase the obligations of Mirage Resorts
(before or after the merger) to pay taxes in the future.
NO SOLICITATION OF ACQUISITION TRANSACTIONS
The merger agreement provides that Mirage Resorts will not, will cause its
subsidiaries not to, and will use all reasonable efforts to cause any officer,
director or employee of Mirage Resorts, or any attorney,
25
<PAGE>
accountant, investment banker, financial advisor or other agent retained by it
or any of its subsidiaries not to, initiate, solicit or encourage, or negotiate
or provide nonpublic information to facilitate, any proposal to acquire all or
any substantial part of the business, properties or capital stock of Mirage
Resorts, whether by merger, tender offer, purchase of assets or otherwise (an
"acquisition transaction").
Mirage Resorts may, prior to receipt of the Mirage Resorts stockholders'
approval of the merger, furnish nonpublic information to and negotiate with any
person who makes an unsolicited bona fide written proposal or offer with
respect to an acquisition transaction (an "acquisition proposal") that the
Mirage Resorts board determines in good faith, after consultation with its
independent financial advisor, would reasonably be expected, if completed, to
result in an acquisition more favorable to Mirage Resorts stockholders than the
merger with MGM Grand (a "qualifying proposal"). In order to provide
information to a person making a qualifying proposal, however, that person must
enter into a confidentiality agreement substantially similar to the
confidentiality provisions in the confidentiality agreement to which Mirage
Resorts and MGM are presently parties.
If the Mirage Resorts board, in good faith, has determined that a qualifying
proposal is reasonably likely to be completed (a "superior proposal"), the
Mirage Resorts board may resolve to accept or recommend or, upon termination of
the merger agreement after at least two days' prior written notice to MGM Grand
and payment to MGM Grand of a termination fee of $135 million, enter into
agreements relating to, the superior proposal.
The merger agreement requires Mirage Resorts to promptly notify MGM Grand
after receipt of any acquisition proposal, indication of interest or request
for non-public information relating to Mirage Resorts or its subsidiaries in
connection with an acquisition proposal, or for access to the properties, books
or records of Mirage Resorts or any subsidiary by any person or entity that
informs the Mirage Resorts board or such subsidiary that it is considering
making, or has made, an acquisition proposal. The merger agreement also
requires MGM Grand to notify Mirage Resorts after receipt of any proposal or
offer to acquire all or any substantial part of the business, properties or
capital stock of MGM Grand.
EMPLOYEE BENEFITS
Mirage Resorts and MGM Grand have agreed that, after the merger, the
benefits to be provided to employees of Mirage Resorts and its subsidiaries
will be either the current benefit plans and programs of Mirage Resorts and its
subsidiaries or the benefit plans and programs provided to similarly situated
employees of MGM Grand. Mirage employees' prior service to Mirage Resorts will
count as prior service to MGM Grand for purposes of eligibility, vesting,
levels of benefits and benefits accruals under MGM Grand's benefit plans (but
not for purposes of benefit accruals under any defined benefit pension plan),
except to the extent such treatment would result in the duplication of
benefits. From and after the merger, MGM Grand will cause any pre-existing
conditions or limitations and eligibility waiting periods under any group
health plans of MGM Grand or its subsidiaries to be waived with respect to the
employees of Mirage Resorts and its subsidiaries and their eligible dependents.
In addition, from and after the merger, MGM Grand will give each employee of
Mirage Resorts and its subsidiaries credit for the plan year in which the
effective time of the merger occurs towards applicable deductibles and annual
out-of-pocket limits for expenses incurred prior to the effective time of the
merger. However, employees of Mirage Resorts and its subsidiaries who are
covered under a collective bargaining agreement will be provided the benefits
that are required by the collective bargaining agreement from time to time.
The merger agreement provides that MGM Grand will cause the surviving
corporation to honor in accordance with their terms all benefits and
obligations under the employee benefit plans and agreements of Mirage Resorts
and its subsidiaries, including any rights or benefits arising as a result of
the transactions contemplated by the merger agreement (either alone or in
combination with any other event). For purposes of all of these plans and
agreements, the transactions contemplated by the merger agreement are, or will
be deemed to be, a change of control.
26
<PAGE>
AGREEMENT TO COOPERATE; ANTITRUST AND GAMING LAW MATTERS
MGM Grand and Mirage Resorts have agreed to use reasonable best efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations
(including the HSR Act and any applicable gaming laws) to complete and make
effective the merger. This includes the use of reasonable best efforts:
. by all parties to obtain all necessary or appropriate waivers, consents
or approvals of third parties required in order to preserve material
contractual relationships of MGM Grand and Mirage Resorts and their
respective subsidiaries;
. by all parties to obtain all necessary or appropriate waivers, consents
and approvals to effect all necessary registrations, filings, and
submissions and to lift any injunction or other legal bar to the merger
(and, in such case, to proceed with the merger as expeditiously as
possible); and
. by MGM Grand to cause the satisfaction of the conditions to the receipt
of funds pursuant to the financing commitments relating to the merger.
In addition, subject to the fiduciary duties of the respective boards of
directors of Mirage Resorts and MGM Grand, MGM Grand and Mirage Resorts agreed
that none of the parties to the merger agreement will knowingly take or cause
to be taken any action which would reasonably be expected to materially delay
or prevent completion of the merger.
The merger agreement requires MGM Grand to offer to take (and if the offer
is accepted, commit to take) all steps that it is capable of taking to avoid or
eliminate impediments under any antitrust, competition or trade regulation law
or any applicable gaming laws that may be asserted by the Federal Trade
Commission, the Department of Justice, any state attorney general or any other
governmental entity with respect to the merger so as to enable the effective
time of the merger to occur prior to December 31, 2000 or, if permitted by the
provisions described under "--Termination," March 31, 2001, and to defend
through litigation on the merits any claim asserted in any court by any party,
including appeals.
MGM Grand has agreed that it will propose, negotiate, offer to commit and
effect (and, if the offer is accepted, commit to and effect), by consent
decree, hold separate order, or otherwise, the sale, divestiture, or
disposition of such assets or businesses of MGM Grand or, effective as of the
effective time of the merger, the surviving corporation in the merger, or their
respective subsidiaries or otherwise offer to take or offer to commit to take
any action that it is capable of taking and, if the offer is accepted, take or
commit to take such action that limits its freedom of action with respect to,
or its ability to retain, any of the businesses, services or assets of MGM
Grand, the surviving corporation in the merger or their respective
subsidiaries, in order to avoid the entry of, or to effect the dissolution of,
any injunction, temporary restraining order or other order in any suit or
proceeding, which would otherwise have the effect of preventing or delaying the
effective time of the merger beyond December 31, 2000, or, if permitted by the
provisions described under "--Termination," March 31, 2001. However, the merger
agreement does not require either MGM Grand or its subsidiaries to divest or
dispose of any property that is material to the business of MGM Grand and its
subsidiaries, taken as a whole.
Mirage Resorts has agreed that, at the request of MGM Grand, it will agree
to divest, hold separate or otherwise take or commit to take any action that
limits its freedom of action with respect to, or its ability to retain, any of
the businesses, services, or assets of Mirage Resorts or any of its
subsidiaries, provided that any such action may be conditioned upon the
completion of the merger.
MGM Grand has agreed that it will use its reasonable best efforts to
complete the financing of the merger pursuant to the written commitments for
financing that it obtained before signing the merger agreement or alternative
commitments that are not reasonably likely to cause a material delay in the
completion of the merger or have a material adverse effect of the ability of
MGM Grand to deliver to Mirage Resorts stockholders the economic benefits they
are reasonably expected to receive by virtue of the merger.
27
<PAGE>
INDEMNIFICATION AND INSURANCE
MGM Grand has agreed that the indemnification provisions of the articles of
incorporation and bylaws of Mirage Resorts as in effect at the effective time
of the merger will not be amended, repealed or otherwise modified for a period
of six years from the effective time of the merger in any manner that would
adversely affect the rights of individuals who at the effective time of the
merger were directors, officers, employees or agents of Mirage Resorts.
MGM Grand has agreed that, to the fullest extent permitted under applicable
law, the surviving corporation in the merger will, and MGM Grand will cause it
to, indemnify and hold harmless each present and former director, officer,
employee, and agent of Mirage Resorts or any of its subsidiaries ("indemnified
parties") against any costs, expenses (including attorneys' fees), damages and
liabilities in connection with any actual or threatened claim or investigation
arising out of, relating to or in connection with (1) any action or omission
occurring or alleged to have occurred prior to the effective time of the merger
or (2) the merger and the other transactions contemplated by the merger
agreement or arising out of or pertaining to the transactions contemplated by
the merger agreement or the events and developments between MGM Grand and
Mirage Resorts leading up to the merger agreement. MGM Grand has agreed to
indemnify and hold harmless each of the indemnified parties against any costs,
expenses (including attorneys' fees), damages and liabilities arising out of,
relating to or in connection with the merger or the other transactions
contemplated by the merger agreement or arising out of or pertaining to the
transactions contemplated by the merger agreement or the events and
developments between MGM Grand and Mirage Resorts leading up to the merger
agreement.
MGM Grand has agreed that, for a period of six years after the effective
time of the merger, it will cause to be maintained, or will cause the surviving
corporation to maintain, in effect the current policies of directors' and
officers' liability insurance maintained by Mirage Resorts and its subsidiaries
(provided that MGM Grand may substitute policies of at least the same coverage
and amounts containing terms and conditions that are no less advantageous to
the indemnified parties, and which coverages and amounts will be no less than
the coverages and amounts provided at that time for MGM Grand's directors and
officers) with respect to matters arising on or before the effective time of
the merger. However, MGM Grand and the surviving corporation are not required
to expend in any year an amount in excess of 250% of the annual aggregate
premiums currently paid by Mirage Resorts for such coverage. If their aggregate
expenditure on coverage exceeds that amount, MGM Grand has agreed that it and
the surviving corporation will obtain a policy with the best coverage
available, in the reasonable judgment of the MGM Grand board, for a cost not
exceeding that amount.
The merger agreement specifically provides that neither Tracinda Corporation
(which is MGM Grand's majority stockholder) nor Tracinda Corporation's sole
stockholder is a party to or responsible under the merger agreement, including
with respect to any indemnity obligation.
PURCHASES OF MIRAGE RESORTS EQUITY SECURITIES
MGM Grand has agreed that, until the merger becomes effective, neither it
nor its subsidiaries will acquire or agree to acquire any rights in any equity
securities of Mirage Resorts other than pursuant to the merger.
THE MIRAGE RESORTS BOARD RECOMMENDATION
The merger agreement provides that the Mirage Resorts board will recommend
that the Mirage Resorts stockholders approve the merger agreement. However, MGM
Grand has agreed that the Mirage Resorts board may change its recommendation in
any manner if its recommendation of the merger would be reasonably likely to be
inconsistent with the Mirage Resorts board's fiduciary duties under applicable
law, as determined by the Mirage Resorts board in good faith after consultation
with its financial and legal advisors.
28
<PAGE>
CONDITIONS TO THE MERGER
The obligations of Mirage Resorts, MGM Grand and Merger Sub to complete the
merger are subject to the satisfaction of each of the following conditions:
(1) The merger agreement has been approved by the holders of a majority of
the outstanding shares of Mirage Resorts common stock.
(2) None of the parties to the merger agreement is subject to any order or
injunction of any governmental authority of competent jurisdiction that
prohibits the completion of the merger. In the event any such order or
injunction is issued, each party has agreed to use its reasonable best
efforts to have that order overturned or the injunction lifted.
(3) The waiting period applicable to completion of the merger under the HSR
Act has expired or been terminated.
Unless waived by Mirage Resorts, the obligation of Mirage Resorts to
complete the merger is subject to the satisfaction of both of the following
additional conditions:
(1) MGM Grand and Merger Sub have performed in all material respects their
agreements contained in the merger agreement required to be performed
on or prior to the effective time of the merger, and the
representations and warranties of MGM Grand and Merger Sub contained in
the merger agreement are true and correct on and as of the effective
time of the merger (except to the extent that the representations and
warranties speak as of an earlier date), except for failures to perform
or to be true and correct that would not reasonably be expected to have
a material adverse effect on MGM Grand.
(2) All statutory approvals required to be obtained in order to permit
completion of the merger under applicable law have been obtained,
except for approvals the failure of which to obtain would not, singly
or in the aggregate, reasonably be expected to:
. have a material adverse effect on Mirage Resorts after the effective
time of the merger; or
. result in Mirage Resorts or its subsidiaries failing to meet the
standards for licensing, suitability or character under any gaming
laws relating to the conduct of business of MGM Grand or Mirage
Resorts which (after taking into account the anticipated impact of
that failure to so meet those standards on other authorities) would
reasonably be expected to have a material adverse effect on Mirage
Resorts after giving effect to the merger.
Unless waived by MGM Grand and Merger Sub, the obligations of MGM Grand and
Merger Sub to complete the merger are subject to the satisfaction of both of
the following additional conditions:
(1) Mirage Resorts has performed in all material respects its agreements
contained in the merger agreement required to be performed on or prior
to the effective time of the merger, and the representations and
warranties of Mirage Resorts contained in the merger agreement are true
and correct on and as of the effective time of the merger (except to
the extent that the representations and warranties speak as of an
earlier date), except for failures to perform and to be true and
correct that would not reasonably be expected to have a material
adverse effect on Mirage Resorts.
(2) All statutory approvals required to be obtained in order to permit
completion of the merger under applicable law have been obtained,
except for approvals the failure of which to obtain would not, singly
or in the aggregate, reasonably be expected to:
. have a material adverse effect on MGM Grand; or
. result in MGM Grand or its subsidiaries failing to meet the
standards for licensing, suitability or character under any gaming
laws relating to the conduct of business of MGM Grand or Mirage
Resorts which (after taking into account the anticipated impact of
that failure to so meet those
29
<PAGE>
standards on other authorities) would reasonably be expected to have a
material adverse effect on MGM Grand after giving effect to the merger.
IMPORTANT DEFINITIONS
In the merger agreement, the phrase "material adverse effect on MGM Grand"
means an effect that is materially adverse to:
(1) the business, financial condition or ongoing operations of MGM Grand
and its subsidiaries, taken as a whole, or
(2) the ability of MGM Grand or any of its subsidiaries to obtain financing
for or to complete any of the transactions contemplated by the merger
agreement.
In the merger agreement, the phrase "material adverse effect on Mirage
Resorts" means an effect or effects that, individually or in the aggregate:
(1) have an adverse economic effect of more than $200 million to the
business, financial condition or ongoing operations of Mirage Resorts
and its subsidiaries, taken as a whole, or
(2) have a materially adverse effect on the ability of Mirage Resorts to
complete the merger or the ability of the parties to the merger
agreement to retain any material gaming license.
However, any effect arising out of or resulting from changes in or affecting
the travel, hospitality or gaming industries generally or in the states of
Nevada, New Jersey or Mississippi and any effect resulting from the entering
into or the public announcement or disclosure of the merger agreement and the
transactions contemplated thereby are excluded from the determination of
whether there has been a material adverse effect with respect to Mirage
Resorts.
TERMINATION
The merger agreement may be terminated and the merger may be abandoned at
any time prior to the effective time of the merger (notwithstanding any
approval by Mirage Resorts stockholders):
(1) by mutual written consent of Mirage Resorts and MGM Grand;
(2) by either Mirage Resorts or MGM Grand if the merger has not been
completed by December 31, 2000, except that date will automatically be
extended until March 31, 2001 if, on December 31, 2000, all of the
conditions to the closing of the merger have been satisfied (other than
conditions with respect to actions the parties will take at the
closing) except that:
. the waiting period under the HSR Act has not expired or been
terminated;
. any material approval or consent under any gaming law has not been
received; or
. any injunction, order or decree prohibits or restrains completion of
the merger;
however, the right to terminate the merger agreement under this clause
is not available to any party whose failure to fulfill any of its
obligations under the merger agreement has been the cause of or
resulted in the failure to complete the merger;
(3) by either Mirage Resorts or MGM Grand if any judgment, injunction,
order or decree of a court or governmental agency or authority of
competent jurisdiction restrains or prohibits the completion of the
merger, and that judgment, injunction, order or decree has become final
and nonappealable and was not entered at the request of the terminating
party;
(4) by either Mirage Resorts or MGM Grand if there has been a breach by the
other party of any representation, warranty, covenant, or agreement set
forth in the merger agreement which would reasonably be expected to
have a material adverse effect on MGM Grand or Mirage Resorts, and
30
<PAGE>
which breach has not been cured in all material respects within 30 days
after written notice of the breach by the terminating party;
(5) by Mirage Resorts, after giving MGM Grand at least two days' prior
written notice of its intention to terminate the merger agreement and
paying a termination fee of $135 million, if, prior to receipt of the
Mirage Resorts stockholders approval of the merger agreement, Mirage
Resorts receives a superior proposal that it resolves to accept;
(6) by MGM Grand if the Mirage Resorts board has:
. failed to recommend, or has withdrawn, modified or amended in any
material respect its approval or recommendation of the merger or has
resolved to do any of the foregoing, or
. recommended another acquisition proposal or resolved to accept a
superior proposal or recommended to Mirage Resorts stockholders that
they tender their shares in a tender or an exchange offer commenced
by a third party;
(7) by MGM Grand or Mirage Resorts if the stockholders of Mirage Resorts
fail to approve the merger agreement at the special meeting, including
any adjournment or postponement thereof; or
(8) by Mirage Resorts if the written commitments for financing to complete
the merger and pay all associated costs and expenses previously entered
into by MGM Grand have been:
. amended in a manner that is reasonably likely to cause a material
delay in completing the merger or a material adverse effect on the
ability of MGM Grand to deliver to the Mirage Resorts stockholders
the economic benefits they are reasonably expected to receive by
virtue of the merger, and the problems with that amendment are not
fixed within 30 days, or
. withdrawn and not replaced by alternate arrangements that are not
reasonably likely to cause a material delay in completing the merger
or a material adverse effect on the ability of MGM Grand to deliver
to the Mirage Resorts stockholders the economic benefits they are
reasonably expected to receive by virtue of the merger, and the
problems with that withdrawal are not fixed within 30 days.
TERMINATION FEE
The merger agreement obligates Mirage Resorts to pay a fee to MGM Grand
equal to $135 million if:
(1) Mirage Resorts terminates the merger agreement for the reasons
described in paragraph (5) of "--Termination";
(2) MGM Grand terminates the merger agreement for the reasons described in
paragraph (6) of "--Termination"; or
(3) the merger agreement is terminated for any reason at a time at which
MGM Grand was not in material breach of its representations and
covenants contained in the merger agreement and was entitled to
terminate the merger agreement because Mirage Resorts stockholders had
not approved the merger agreement and
. prior to the time of the special meeting, an acquisition proposal
had been publicly proposed or publicly announced, and
. on or prior to the 12-month anniversary of the termination of the
merger agreement, Mirage Resorts or any of its subsidiaries or
affiliates enters into an agreement or letter of intent (or resolves
or announces an intention to do so) with respect to an acquisition
transaction involving a person or group that made an acquisition
proposal on or after March 6, 2000 and prior to the special meeting,
and that acquisition transaction is completed.
31
<PAGE>
EXPENSES
The merger agreement provides that all costs and expenses incurred in
connection with the merger agreement and the transactions contemplated thereby
will be paid by the party incurring the expenses, except that those expenses
incurred in connection with printing and filing this proxy statement will be
shared equally by MGM Grand and Mirage Resorts.
AMENDMENT
Provisions of the merger agreement may be amended or waived prior to the
effective time of the merger if the amendment or waiver is signed by the
respective parties to the merger agreement (and approved by their respective
boards of directors) in the case of an amendment, or by the party against whom
the waiver is to be effective in the case of a waiver.
32
<PAGE>
THE STOCK OPTION AGREEMENT
The following is a summary of all the material terms of the stock option
agreement. The summary is qualified in its entirety by reference to the stock
option agreement, a copy of which is attached to this proxy statement as
Appendix B.
As an inducement to MGM Grand to enter into the merger agreement, Mirage
Resorts and MGM Grand entered into a stock option agreement, dated as of March
6, 2000, pursuant to which Mirage Resorts granted to MGM Grand an irrevocable
option to purchase 22,841,091 authorized but unissued shares of Mirage Resorts
common stock at an exercise price of $21.00 per share. The option becomes
exercisable by MGM Grand pursuant to the terms and conditions of the stock
option agreement if an event giving rise to the obligation to pay the
termination fee under the merger agreement has occurred (an "exercise event").
See "The Merger Agreement--Termination Fee." The shares of Mirage Resorts
common stock subject to the option represent approximately 12% of the
outstanding shares of Mirage Resorts common stock (before giving effect to the
issuance of those shares).
The option will expire upon the earliest of (1) the effective time of the
merger, (2) one year after receipt by MGM Grand of notice from Mirage Resorts
that an exercise event has occurred and (3) termination of the merger agreement
other than a termination as a result of an exercise event.
The number and type of securities subject to the option and the exercise
price of $21.00 per share will be adjusted to preserve the economic benefit of
the option if there is any change in the shares of Mirage Resorts common stock
by reason of a stock dividend, split-up, combination, recapitalization,
exchange of shares or similar transaction or if additional shares are issued
after the date of the stock option agreement.
The stock option agreement provides that, at any time after an exercise
event and prior to 120 days after the expiration of the term of the option, MGM
Grand may put to Mirage Resorts the option and any shares of Mirage Resorts
common stock purchased pursuant to the option and still owned by MGM Grand for
aggregate consideration equal to:
(1) the aggregate exercise price paid by MGM Grand for any shares of Mirage
Resorts common stock owned by MGM Grand and purchased pursuant to the
option in respect of which MGM Grand is exercising the put right; and
(2) the number of shares of Mirage Resorts common stock in respect of which
the put right is being exercised (whether or not those shares of Mirage
Resorts common stock (a) are purchased pursuant to the option and still
owned by MGM Grand, or (b) remain subject to the option) multiplied by
the difference between the exercise price and the highest of:
. the highest purchase price per share paid pursuant to a third
party's tender or exchange offer prior to the date the put right is
exercised;
. the price per share to be paid by any third person for shares of
Mirage Resorts common stock pursuant to a business combination
transaction involving Mirage Resorts entered into on or prior to the
date the put right is exercised; and
. the average closing price of the shares of Mirage Resorts common
stock as reported on the New York Stock Exchange during the 10
consecutive trading days prior to exercise of the put right.
The stock option agreement further provides that, to the extent the put
right has not been exercised, following the 10th day after the purchase by MGM
Grand of any shares of Mirage Resorts common stock pursuant to the option and
for a period of 120 days after expiration of the option, Mirage Resorts may
repurchase from MGM Grand all (but not less than all) of the shares of Mirage
Resorts common stock purchased by MGM Grand pursuant to the option and then
owned by MGM Grand for a price per share equal
33
<PAGE>
to the greater of (1) the average closing price of the shares of Mirage Resorts
common stock as reported on the NYSE during the 10 consecutive trading days
prior to the exercise of the right and (2) the exercise price.
The stock option agreement provides that MGM Grand's total profit from the
stock option agreement (including amounts payable pursuant to the put right and
the call right) and from the termination fee described under "The Merger
Agreement--Termination Fee" cannot exceed a "profit cap" of $140 million in the
aggregate.
The stock option agreement further provides that, for a period of two years
following the first exercise of the option by MGM Grand, MGM Grand will have
certain registration rights in respect of the option shares of Mirage Resorts
common stock.
The stock option agreement is expected to increase the likelihood that the
merger will be completed and to compensate MGM Grand in certain circumstances
if the merger is not completed. Certain aspects of the stock option agreement
would have the effect of precluding any alternative business combination from
being accounted for as a "pooling of interests," and may discourage persons
who, before the effective time of the merger, might have been interested in
acquiring all of or a significant interest in Mirage Resorts from considering
or proposing such an acquisition, even if those persons were prepared to offer
higher consideration per share for Mirage Resorts common stock than that
offered by MGM Grand.
34
<PAGE>
THE RIGHTS AGREEMENT
On February 29, 2000, the Mirage Resorts board declared a dividend of one
preferred share purchase right for each outstanding share of Mirage Resorts
common stock. The dividend was paid on March 20, 2000 to the stockholders of
record on March 20, 2000. The rights are subject to the terms of a rights
agreement, dated as of March 6, 2000, as amended by the first amendment thereto
dated as of March 6, 2000, between Mirage Resorts and American Stock Transfer &
Trust Company, as the rights agent.
The Mirage Resorts board adopted the rights agreement and issued the rights
to protect Mirage Resorts stockholders from coercive or otherwise unfair
takeover tactics. In general terms, it works by imposing a significant penalty
upon any person or group that acquires 10% or more of the outstanding Mirage
Resorts common stock without the approval of the Mirage Resorts board.
In connection with approval of the merger agreement, the Mirage Resorts
board also approved an amendment to the rights agreement to allow the merger to
occur without triggering any distribution or adverse event under the rights
agreement.
For those interested in the specific terms of the rights agreement, a
summary of the amended rights agreement, as well as complete copies of both the
rights agreement and the first amendment thereto, are included with the
Registration Statement on Form 8-A filed by Mirage Resorts with the SEC on
March 10, 2000.
35
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of February 29, 2000, the amount of
Mirage Resorts common stock beneficially owned by each of its directors, its
five most highly compensated executive officers during fiscal year 1999, and
all directors and executive officers as a group:
<TABLE>
<CAPTION>
APPROXIMATE PERCENTAGE OF
NUMBER OF SHARES OUTSTANDING MIRAGE
NAME BENEFICIALLY OWNED RESORTS COMMON STOCK
- ---- ------------------ -------------------------
<S> <C> <C>
Stephen A. Wynn.................. 23,877,987(1) 11.7%
Melvin B. Wolzinger.............. 3,168,901(2) 1.7%
Daniel B. Wayson................. 533,873(3) *
Elaine P. Wynn................... 260,123(4) *
George J. Mason.................. 193,623(5) *
Richard D. Bronson............... 1,100,000(6) *
Ronald M. Popeil................. 82,464(7) *
Robert H. Baldwin................ 1,286,645(8) *
Barry A. Shier................... 1,506,290(9) *
Bruce A. Levin................... 67,500(10) *
Kenneth R. Wynn.................. 1,200,456(11) *
All Executive Officers and
Directors as a Group (15
persons)........................ 33,766,533(12) 16.2%
</TABLE>
- --------
(1) Includes 13,215,823 shares subject to Mirage Resorts stock options that
are currently exercisable or become exercisable within 60 days of February
29, 2000. Does not include shares beneficially owned by Elaine P. Wynn,
Mr. Wynn's wife, as separate property, as to which shares Mr. Wynn
disclaims beneficial ownership.
(2) Includes 2,599,084 shares held by a family trust of which Mr. Wolzinger
and his wife serve as trustees and 476,664 shares held by limited
partnerships of which the trust is the general partner and a limited
partner. Mr. Wolzinger disclaims beneficial ownership of the shares held
by the limited partnerships, except to the extent of his pecuniary
interest in the shares. Also includes 38,030 shares held by a trust of
which Mr. Wolzinger serves as a trustee but does not have any pecuniary
interest, as to which shares Mr. Wolzinger disclaims beneficial ownership.
Also includes 55,123 shares subject to Mirage Resorts stock options that
are currently exercisable or become exercisable within 60 days of February
29, 2000.
(3) Includes 55,123 shares subject to Mirage Resorts stock options that are
currently exercisable or become exercisable within 60 days of February 29,
2000.
(4) Includes 55,123 shares subject to Mirage Resorts stock options that are
currently exercisable or become exercisable within 60 days of February 29,
2000. Does not include shares reported as beneficially owned by Stephen A.
Wynn, Mrs. Wynn's husband.
(5) Includes 71,000 shares held by a family trust of which Mr. Mason and his
wife serve as trustees and 55,123 shares subject to Mirage Resorts stock
options that are currently exercisable or become exercisable within 60
days of February 29, 2000.
(6) Represents shares subject to Mirage Resorts stock options that are
currently exercisable or become exercisable within 60 days of February 29,
2000.
(7) Includes 550 shares held by Mr. Popeil's wife as separate property and
4,791 shares held by Mr. Popeil as custodian for his minor daughter and
grandchildren who do not share his household. Mr. Popeil disclaims
beneficial ownership of the shares held by his wife and as custodian. Also
includes 25,123 shares subject to Mirage Resorts stock options that are
currently exercisable or become exercisable within 60 days of February 29,
2000.
(8) Includes 11,600 shares held by Mr. Baldwin as custodian for his minor son
and 24,970 shares held by a revocable trust of which Mr. Baldwin serves as
trustee. Also includes 1,250,000 shares subject to Mirage Resorts stock
options that are currently exercisable or become exercisable within 60
days of February 29, 2000.
36
<PAGE>
(9) Includes 1,500,000 shares subject to Mirage Resorts stock options that are
currently exercisable or become exercisable within 60 days of February 29,
2000 and 240 shares held by Mr. Shier as custodian for his minor children.
(10) Includes 37,500 shares subject to Mirage Resorts stock options that are
currently exercisable or become exercisable within 60 days of February 29,
2000.
(11) Includes 14,000 shares held by trusts of which Kenneth R. Wynn serves as
trustee and 366,456 shares subject to Mirage Resorts stock options that
are currently exercisable or become exercisable within 60 days of February
29, 2000. Mr. Wynn disclaims beneficial ownership of the shares held by
the trusts.
(12) Includes 18,191,795 shares subject to Mirage Resorts stock options that
are currently exercisable or become exercisable within 60 days of February
29, 2000.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information concerning each person
known by Mirage Resorts to own beneficially more than 5% of the outstanding
shares of Mirage Resorts common stock as of December 31, 1999, unless otherwise
indicated and giving effect to a Schedule 13G/A filed on March 9, 2000 by a
former beneficial owner.
<TABLE>
<CAPTION>
APPROXIMATE PERCENTAGE
NUMBER OF SHARES OF OUTSTANDING MIRAGE
NAME AND ADDRESS BENEFICIALLY OWNED RESORTS COMMON STOCK
- ---------------- ------------------ ----------------------
<S> <C> <C>
Stephen A. Wynn....................... 23,877,987(1) 11.7%
P.O. Box 7700
Las Vegas, Nevada 89177
The TCW Group, Inc.................... 14,971,586(2) 7.9%
865 South Figueroa Street
Los Angeles, CA 90017
FMR Corp.............................. 12,253,670(3) 6.4%
82 Devonshire Street
Boston, MA 02109
Baron Capital Group, Inc.............. 9,908,850(4) 5.2%
767 Fifth Avenue
New York, NY 10153
</TABLE>
- --------
(1) As of February 29, 2000. This number includes 13,215,823 shares subject to
Mirage Resorts stock options that are currently exercisable or become
exercisable within 60 days of February 29, 2000. Does not include shares
beneficially owned by Elaine P. Wynn, Mr. Wynn's wife, as separate
property, as to which shares Mr. Wynn disclaims beneficial ownership.
(2) Based on a Schedule 13G/A, dated February 11, 2000, filed with the SEC. The
Schedule 13G/A states that certain subsidiaries and affiliates of The TCW
Group have shared dispositive and voting power as to all of these shares.
(3) Based on Schedule 13G, dated February 14, 2000, filed with the SEC. The
Schedule 13G states that FMR and certain related persons have sole
dispositive power as to all of these shares and sole voting power as to
337,270 of these shares.
(4) Based on a Schedule 13G, dated January 26, 2000, filed with the SEC. The
Schedule 13G states that Baron Capital Group and its controlling
stockholder have sole dispositive and voting power as to 220,000 and
229,000 of these shares, respectively, and that they have shared
dispositive and voting power as to 9,679,850 of these shares.
37
<PAGE>
MARKET PRICE OF MIRAGE COMMON STOCK AND DIVIDEND INFORMATION
Mirage Resorts common stock is traded on the NYSE and the Pacific Exchange.
The table below sets forth by quarter, since the beginning of Mirage Resorts'
fiscal year ended December 31, 1998, the high and low sale prices of Mirage
Resorts common stock on the NYSE Composite Transactions Tape, as reported in
The Wall Street Journal.
<TABLE>
<CAPTION>
MARKET
PRICES
--------------
HIGH LOW
---- ----
<S> <C> <C>
FISCAL YEAR 1998
First Quarter......................................... $26 3/4 $20 13/16
Second Quarter........................................ 25 1/8 20
Third Quarter......................................... 22 1/4 13 1/4
Fourth Quarter........................................ 18 15/16 13 3/16
FISCAL YEAR 1999
First Quarter......................................... $22 5/8 $13 3/16
Second Quarter........................................ 26 3/8 16 5/16
Third Quarter......................................... 17 3/8 11 3/4
Fourth Quarter........................................ 15 15/16 11 1/2
FISCAL YEAR 2000
First Quarter (through March 23, 2000)................ $19 3/16 $10 5/8
</TABLE>
On February 22, 2000, the last full trading day prior to the public
announcement of MGM Grand's interest in acquiring Mirage Resorts, the high and
low sale prices of Mirage Resorts common stock as reported on the NYSE
Composite Transactions Tape were $11 1/2 and $10 13/16, respectively. On March
3, 2000, the last full trading day prior to the public announcement of the
merger agreement, the high and low sale prices of Mirage Resorts common stock
as reported on the NYSE Composite Transactions Tape were $16 1/4 and $15 11/16,
respectively. On [ ], 2000, the last full trading day prior to the date of
this proxy statement, the closing price of Mirage Resorts common stock as
reported on the NYSE Composite Transactions Tape was $[ ].
Mirage Resorts stockholders are encouraged to obtain current market
quotations for Mirage Resorts common stock.
Mirage Resorts paid no cash dividends in 1998, 1999 or the first quarter of
2000.
38
<PAGE>
FORWARD-LOOKING STATEMENTS
This proxy statement includes and incorporates by reference statements that
are not historical facts. These statements are "forward-looking statements" (as
defined in the Private Securities Litigation Reform Act of 1995) based, among
other things, on our current plans and expectations relating to analyses of
value and expectations of anticipated growth in the future and future success
under various circumstances, and, as such, these forward-looking statements
involve uncertainty and risk. These forward-looking statements are contained in
the sections entitled "Summary Term Sheet for the Merger" and "The Merger," and
other sections of this proxy statement. These forward-looking statements should
be read in conjunction with the section entitled "Factors that May Affect Our
Future Results" in Item 1 of our Annual Report on Form 10-K for the year ended
December 31, 1999, which describes many of the external factors that could
cause our actual results to differ materially from our expectations. Our Form
10-K is on file with the SEC, and a copy is available without charge upon
written request to: Robert H. Baldwin, Chief Financial Officer, Mirage Resorts,
Incorporated, P.O. Box 7700, Las Vegas, Nevada 89177-7700. The Form 10-K is
also available via the Internet at www.sec.gov. In addition, actual results
could differ materially from the forward-looking statements contained in this
proxy statement because of many factors, such as competition within the gaming
industry, the cyclicality of the gaming business, the completion and impact of
the merger on operating results and capital resources, the impact on
profitability of economic and market conditions, and the impact on cash
requirements and liquidity.
Other factors and assumptions not identified above could also cause the
actual results to differ materially from those set forth in any forward-looking
statement. We do not undertake any obligation to update the forward-looking
statements contained or incorporated in this proxy statement to reflect actual
results, changes in assumptions, or changes in other factors affecting these
forward-looking statements.
All information contained in this proxy statement with respect to MGM Grand,
Merger Sub and the financing for the merger has been supplied by and is the
responsibility of MGM Grand.
FUTURE STOCKHOLDER PROPOSALS
Mirage Resorts intends to hold an annual meeting in 2001 only if the merger
is not completed. Any Mirage Resorts stockholder intending to submit a proposal
for inclusion in the proxy statement and form of proxy for our 2001 annual
meeting of stockholders, in the event that it is held, must submit the proposal
to the attention of our General Counsel at our principal executive office
sufficiently far in advance so that it is received by us not later than
November 2, 2000. Our bylaws provide that, if we do not receive notice of a
stockholder proposal or nomination for director by that date, the proposal or
nomination will not be considered at the 2001 annual meeting.
WHERE YOU CAN FIND MORE INFORMATION
Each of Mirage Resorts and MGM Grand is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended. Each company
files reports, proxy statements and other information with the SEC. You may
read and copy these reports, proxy statements and other information at the
SEC's Public Reference Section at 450 Fifth Street, N.W., Washington, D.C.
20549. You may obtain information on the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet
website, located at www.sec.gov, that contains reports, proxy statements and
other information regarding companies and individuals that file electronically
with the SEC.
You may also read reports, proxy statements and other information relating
to Mirage Resorts and MGM Grand at the offices of the NYSE at 20 Broad Street,
New York, New York 10005. You may also read reports, proxy statements and other
information relating to Mirage Resorts at the offices of the Pacific Exchange
at 310 Pine Street, San Francisco, California 94104.
39
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Mirage Resorts incorporates by reference into this proxy statement the
following documents that MGM Grand has filed with the SEC (File No. 1-10362):
(1) Annual Report on Form 10-K for the year ended December 31, 1999, (2)
Information Statement filed on January 12, 2000, and (3) Current Reports on
Form 8-K, as amended, filed on February 23, 2000, February 28, 2000 and March
14, 2000.
All documents and reports filed by MGM Grand pursuant to Section 13(a),
13(c), 14, or 15(d) of the Exchange Act after the date of this proxy statement
and on or prior to the date of the special meeting are deemed to be
incorporated by reference in this proxy statement from the date of filing of
those documents or reports. Any statement contained in a document incorporated
or deemed to be incorporated by reference in this proxy statement will be
deemed to be modified or superseded for purposes of this proxy statement to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference in this
proxy statement modifies or supersedes that statement. Any statement so
modified or superseded will not be deemed, except as so modified or superseded,
to constitute a part of this proxy statement.
Any person receiving a copy of this proxy statement may obtain, without
charge, upon written or oral request, a copy of any of the documents
incorporated by reference except for the exhibits to such documents (other than
the exhibits expressly incorporated in those documents by reference). Requests
should be directed to: Scott Langsner, Secretary, MGM Grand, Inc., 3799 Las
Vegas Boulevard South, Las Vegas, Nevada 89109; telephone number: (702) 891-
3333. A copy will be provided by first class mail or other equally prompt means
within one business day after receipt of your request.
WE HAVE AUTHORIZED NO ONE TO GIVE YOU ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ABOUT THE MERGER OR OUR COMPANY THAT DIFFERS FROM OR ADDS TO THE
INFORMATION CONTAINED IN THIS PROXY STATEMENT OR IN THE DOCUMENTS WE HAVE
PUBLICLY FILED WITH THE SEC. THEREFORE, IF ANYONE SHOULD GIVE YOU ANY DIFFERENT
OR ADDITIONAL INFORMATION, YOU SHOULD NOT RELY ON IT.
THE INFORMATION CONTAINED IN THIS PROXY STATEMENT SPEAKS ONLY AS OF THE DATE
INDICATED ON THE COVER OF THIS PROXY STATEMENT UNLESS THE INFORMATION
SPECIFICALLY INDICATES THAT ANOTHER DATE APPLIES.
40
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
DATED AS OF
MARCH 6, 2000
AMONG
MIRAGE RESORTS, INCORPORATED,
MGM GRAND, INC.
AND
A WHOLLY-OWNED SUBSIDIARY OF MGM GRAND, INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
ARTICLE I
The Merger; Closing
<C> <S> <C>
Section 1.01. The Merger................................................. A-1
Section 1.02. Effective Time............................................. A-1
Section 1.03. Effects of the Merger...................................... A-1
Section 1.04. Conversion of Shares....................................... A-1
Section 1.05. Payment of Shares.......................................... A-2
Section 1.06. Stock Options.............................................. A-3
Section 1.07. The Closing................................................ A-3
ARTICLE II
The Surviving Corporation; Directors and Officers
Section 2.01. Articles of Incorporation.................................. A-3
Section 2.02. Bylaws..................................................... A-4
Section 2.03. Directors and Officers..................................... A-4
ARTICLE III
Representations and Warranties of Parent and Merger Subsidiary
Section 3.01. Organization and Qualification............................. A-4
Section 3.02. Authority; Non-Contravention; Approvals.................... A-4
Section 3.03. Proxy Statement............................................ A-5
Section 3.04. Ownership of Company Common Stock.......................... A-6
Section 3.05. Financing.................................................. A-6
Section 3.06. Reports, Financial Statements, etc. ....................... A-6
Section 3.07. Brokers and Finders........................................ A-6
ARTICLE IV
Representations and Warranties of the Company
Section 4.01. Organization and Qualification............................. A-7
Section 4.02. Capitalization............................................. A-7
Section 4.03. Subsidiaries............................................... A-8
Section 4.04. Authority; Non-Contravention; Approvals.................... A-8
Section 4.05. Reports and Financial Statements........................... A-9
Section 4.06. Absence of Undisclosed Liabilities......................... A-9
Section 4.07. Absence of Certain Changes or Events....................... A-10
Section 4.08. Litigation................................................. A-10
Section 4.09. Proxy Statement............................................ A-10
Section 4.10. No Violation of Law........................................ A-10
Section 4.11. Compliance with Agreements................................. A-10
Section 4.12. Taxes...................................................... A-11
Section 4.13. Employee Benefit Plans; ERISA.............................. A-11
Section 4.14. Labor Controversies........................................ A-12
Section 4.15. Environmental Matters...................................... A-12
Section 4.16. Title to Assets............................................ A-13
Section 4.17. Company Stockholders' Approval............................. A-14
Section 4.18. Brokers and Finders........................................ A-14
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
ARTICLE V
Covenants
<C> <S> <C>
Section 5.01. Conduct of Business by the Company Pending the Merger...... A-14
Section 5.02. Control of the Company's Operations........................ A-15
Section 5.03. Acquisition Transactions................................... A-16
Section 5.04. Access to Information...................................... A-16
Section 5.05. Notices of Certain Events.................................. A-17
Section 5.06. Merger Subsidiary.......................................... A-18
Section 5.07. Employee Benefits.......................................... A-18
Section 5.08. Meeting of the Company's Stockholders...................... A-18
Section 5.09. Proxy Statement............................................ A-18
Section 5.10. Public Announcements....................................... A-19
Section 5.11. Expenses and Fees.......................................... A-19
Section 5.12. Agreement to Cooperate..................................... A-19
Section 5.13. Directors' and Officers' Indemnification................... A-21
Section 5.14. Company Securities......................................... A-22
Section 5.15. Continuing Directors....................................... A-22
ARTICLE VI
Conditions to the Merger
Section 6.01. Conditions to the Obligations of Each Party................ A-22
Section 6.02. Conditions to Obligation of the Company to Effect the
Merger..................................................... A-22
Section 6.03. Conditions to Obligations of Parent and Subsidiary to
Effect the Merger.......................................... A-23
ARTICLE VII
Termination
Section 7.01. Termination................................................ A-23
ARTICLE VIII
Miscellaneous
Section 8.01. Effect of Termination...................................... A-24
Section 8.02. Non-Survival of Representations and Warranties............. A-25
Section 8.03. Notices.................................................... A-25
Section 8.04. Interpretation............................................. A-25
Section 8.05. Miscellaneous.............................................. A-26
Section 8.06. Counterparts............................................... A-26
Section 8.07. Amendments; No Waivers..................................... A-26
Section 8.08. Entire Agreement........................................... A-26
Section 8.09. Severability............................................... A-26
Section 8.10. Specific Performance....................................... A-26
Section 8.11. Non-Involvement of Tracinda................................ A-26
</TABLE>
ii
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered into as of March
6, 2000 by and among MGM Grand, Inc., a Delaware corporation ("Parent"), and
Mirage Resorts, Incorporated, a Nevada corporation (the "Company"). Promptly
after the date hereof, Parent shall cause one of its direct or indirect wholly
owned subsidiaries organized under the laws of Nevada ("Merger Subsidiary") to
enter into this Agreement. Parent and the Company and, upon its execution of
this Agreement, Merger Subsidiary, are referred to collectively herein as the
"Parties."
WHEREAS, the respective Boards of Directors of Parent and the Company have
each approved the merger of Merger Subsidiary with and into the Company on the
terms and subject to the conditions set forth in this Agreement (the "Merger");
and
WHEREAS, as a condition to Parent's willingness to enter into the
transactions contemplated by this Agreement, Parent and the Company have
entered into a Stock Option Agreement which is dated the date hereof.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
The Merger; Closing
Section 1.01. The Merger. Upon the terms and subject to the conditions of
this Agreement, and in accordance with the NRS, Merger Subsidiary shall be
merged with and into the Company at the Effective Time (as defined in Section
1.02). Following the Merger, the separate existence of Merger Subsidiary shall
cease and the Company shall continue as the surviving corporation (the
"Surviving Corporation") and a direct or indirect wholly-owned subsidiary of
Parent, and shall succeed to and assume all the rights and obligations of
Merger Subsidiary in accordance with the NRS. The term "NRS" means Chapters 78,
92A and, if Merger Subsidiary is organized under Chapter 86, Chapter 86 of the
Nevada Revised Statutes.
Section 1.02. Effective Time. The Merger shall become effective when
Articles of Merger (the "Articles of Merger"), executed in accordance with the
relevant provisions of the NRS, are filed with the Secretary of State of the
State of Nevada; provided, however, that, upon mutual consent of the
constituent corporations to the Merger, the Articles of Merger may provide for
a later date of effectiveness of the Merger not more than 30 days after the
date the Articles of Merger are filed. When used in this Agreement, the term
"Effective Time" shall mean the date and time at which the Articles of Merger
are accepted for record or such later time established by the Articles of
Merger. The filing of the Articles of Merger shall be made on the date of the
Closing (as defined in Section 1.07).
Section 1.03. Effects of the Merger. The Merger shall have the effects set
forth in Section 92A.250 of the NRS.
Section 1.04. Conversion of Shares. At the Effective Time, by virtue of the
Merger and without any action on the part of Parent, Merger Subsidiary, the
Company or the holders of any of the following securities:
(a) each issued and outstanding share of the Company's common stock, par
value $.004 per share (together with the associated Rights, "Company Common
Stock") held by the Company as treasury stock and each issued and
outstanding share of Company Common Stock owned by any subsidiary of the
Company, Parent, Merger Subsidiary or any other subsidiary of Parent shall
be cancelled and retired and shall cease to exist, and no payment or
consideration shall be made with respect thereto;
(b) each issued and outstanding share of Company Common Stock, other
than shares of Company Common Stock referred to in paragraph (a) above
shall be converted into the right to receive an amount in
<PAGE>
cash, without interest, equal to $21.00 (the "Merger Consideration"). At
the Effective Time, all such shares of Company Common Stock shall no longer
be outstanding and shall automatically be cancelled and retired and shall
cease to exist, and each holder of a certificate representing any such
shares of Company Common Stock shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration, without
interest; and
(c) each issued and outstanding share of capital stock or ownership
interest of Merger Subsidiary shall be converted into one fully paid and
nonassessable share of common stock, par value $.004, of the Surviving
Corporation.
Section 1.05. Payment of Shares. (a) Prior to the Effective Time, Parent
shall appoint a bank or trust company reasonably satisfactory to the Company to
act as disbursing agent (the "Disbursing Agent") for the payment of Merger
Consideration upon surrender of certificates representing the shares of Company
Common Stock. Parent will enter into a disbursing agent agreement with the
Disbursing Agent, in form and substance reasonably acceptable to the Company.
At or prior to the Effective Time, Parent shall deposit or cause to be
deposited with the Disbursing Agent in trust for the benefit of the Company's
stockholders cash in an aggregate amount necessary to make the payments
pursuant to Section 1.04 to holders of shares of Company Common Stock (such
amounts being hereinafter referred to as the "Exchange Fund"). The Disbursing
Agent shall invest the Exchange Fund, as the Surviving Corporation directs, in
direct obligations of the United States of America, obligations for which the
full faith and credit of the United States of America is pledged to provide for
the payment of all principal and interest or commercial paper obligations
receiving the highest rating from either Moody's Investors Service, Inc. or
Standard & Poor's, a division of The McGraw Hill Companies, or a combination
thereof, provided that, in any such case, no such instrument shall have a
maturity exceeding three months. Any net profit resulting from, or interest or
income produced by, such investments shall be payable to the Surviving
Corporation. The Exchange Fund shall not be used for any other purpose except
as provided in this Agreement.
(b) Promptly after the Effective Time, the Surviving Corporation shall cause
the Disbursing Agent to mail to each person who was a record holder as of the
Effective Time of an outstanding certificate or certificates which immediately
prior to the Effective Time represented shares of Company Common Stock (the
"Certificates"), and whose shares were converted into the right to receive
Merger Consideration pursuant to Section 1.04, a form of letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Disbursing Agent) and instructions for use in effecting the
surrender of the Certificates in exchange for payment of the Merger
Consideration. Upon surrender to the Disbursing Agent of a Certificate,
together with such letter of transmittal duly executed and such other documents
as may be reasonably required by the Disbursing Agent, the holder of such
Certificate shall be paid promptly in exchange therefor cash in an amount equal
to the product of the number of shares of Company Common Stock represented by
such Certificate multiplied by the Merger Consideration, and such Certificate
shall forthwith be canceled. No interest will be paid or accrued on the cash
payable upon the surrender of the Certificates. If payment is to be made to a
person other than the person in whose name the Certificate surrendered is
registered, it shall be a condition of payment that the Certificate so
surrendered be properly endorsed or otherwise be in proper form for transfer
and that the person requesting such payment pay any transfer or other taxes
required by reason of the payment to a person other than the registered holder
of the Certificate surrendered or establish to the satisfaction of the
Surviving Corporation that such tax has been paid or is not applicable. Until
surrendered in accordance with the provisions of this Section 1.05, each
Certificate (other than Certificates representing shares of Company Common
Stock owned by any subsidiary of the Company, Parent, Merger Subsidiary or any
other subsidiary of Parent and shares of Company Common Stock held in the
treasury of the Company, which have been canceled) shall represent for all
purposes only the right to receive the Merger Consideration in cash multiplied
by the number of shares of Company Common Stock evidenced by such Certificate,
without any interest thereon.
(c) From and after the Effective Time, there shall be no registration of
transfers of shares of Company Common Stock which were outstanding immediately
prior to the Effective Time on the stock transfer books of
A-2
<PAGE>
the Surviving Corporation. From and after the Effective Time, the holders of
shares of Company Common Stock outstanding immediately prior to the Effective
Time shall cease to have any rights with respect to such shares of Company
Common Stock except as otherwise provided in this Agreement or by applicable
law. All cash paid upon the surrender of Certificates in accordance with the
terms of this Article I shall be deemed to have been paid in full satisfaction
of all rights pertaining to the shares of Company Common Stock previously
represented by such Certificates. If, after the Effective Time, Certificates
are presented to the Surviving Corporation for any reason, such Certificates
shall be cancelled and exchanged for cash as provided in this Article I. At the
close of business on the day of the Effective Time the stock ledger of the
Company shall be closed.
(d) At any time more than six months after the Effective Time, the Surviving
Corporation shall be entitled to require the Disbursing Agent to deliver to it
any funds which had been made available to the Disbursing Agent and not
disbursed in exchange for Certificates (including, without limitation, all
interest and other income received by the Disbursing Agent in respect of all
such funds). Thereafter, holders of shares of Company Common Stock shall look
only to Parent (subject to the terms of this Agreement, abandoned property,
escheat and other similar laws) as general creditors thereof with respect to
any Merger Consideration that may be payable, without interest, upon due
surrender of the Certificates held by them. If any Certificates shall not have
been surrendered prior to five years after the Effective Time (or immediately
prior to such time on which any payment in respect hereof would otherwise
escheat or become the property of any governmental unit or agency), the payment
in respect of such Certificates shall, to the extent permitted by applicable
law, become the property of the Surviving Corporation, free and clear of all
claims or interest of any person previously entitled thereto. Notwithstanding
the foregoing, none of Parent, the Company, the Surviving Corporation nor the
Disbursing Agent shall be liable to any holder of a share of Company Common
Stock for any Merger Consideration delivered in respect of such share of
Company Common Stock to a public official pursuant to any abandoned property,
escheat or other similar law.
Section 1.06. Stock Options. At the Effective Time, each unexercised option,
whether or not then vested or exercisable in accordance with its terms, to
purchase shares of Company Common Stock (the "Options") previously granted by
the Company or its subsidiaries shall be canceled automatically and the Parent
shall or shall cause the Surviving Corporation to provide the holder thereof
with a lump sum cash payment equal to the product of (i) the total number of
shares of Company Common Stock subject to such Option immediately prior to the
Effective Time and (ii) the excess of the Merger Consideration over the
exercise price per share of Company Common Stock subject to such Option.
Section 1.07. The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the executive offices of
Parent in Las Vegas, Nevada, commencing at 9:00 a.m. local time on the second
business day following the satisfaction or waiver of all conditions to the
obligations of the Parties to consummate the transactions contemplated hereby
(other than conditions with respect to actions the respective parties will take
at the Closing itself) or such other place and date as the Parties may mutually
determine (the "Closing Date").
ARTICLE II
The Surviving Corporation; Directors and Officers
Section 2.01. Articles of Incorporation. The Restated Articles of
Incorporation of the Company in effect at the Effective Time shall be the
articles of incorporation of the Surviving Corporation until amended in
accordance with applicable law and the terms of this Agreement; provided,
however, that at the Effective Time, such articles shall be amended by virtue
of this Agreement as follows:
(i) Article Fourth shall be amended by deleting the existing language in
its entirety and replacing it with the following:
A-3
<PAGE>
The total number of shares of capital stock which the Corporation
shall be authorized to issue shall be 1,000 shares, $.004 par value, of
common stock.
(ii) Article Fifth shall be amended by deleting the existing language in
its entirety and replacing it with the following: "The members of the
governing board shall be styled directors and their number shall be not
less than 3 and not more than 9, and each member shall be elected each year
to hold office for a one-year term."
(iii) The text of Articles Thirteenth and Fourteenth shall be deleted
and replaced with the following "[Reserved]".
Section 2.02. Bylaws. The bylaws of Merger Subsidiary in effect at the
Effective Time shall be the bylaws of the Surviving Corporation, it being
agreed that such bylaws shall include the provisions set forth in Article V of
the Company's bylaws until amended in accordance with applicable law and the
terms of this Agreement.
Section 2.03. Directors and Officers. The directors of Merger Subsidiary
immediately prior to the Effective Time shall be the directors of the Surviving
Corporation as of the Effective Time. The officers of the Company (together
with the persons designated by Parent and notified to the Company in writing at
least two business days prior to the Effective Time) shall be the officers of
the Surviving Corporation as of the Effective Time subject to the right of the
Board of Directors of the Surviving Corporation to appoint or replace officers.
ARTICLE III
Representations and Warranties of Parent and Merger Subsidiary
Parent and Merger Subsidiary jointly and severally represent and warrant to
the Company that, except as set forth in the Disclosure Schedule dated as of
the date hereof and signed by an authorized officer of Parent (the "Parent
Disclosure Schedule"), it being agreed that disclosure of any item on the
Parent Disclosure Schedule shall be deemed disclosure with respect to all
Sections of this Agreement if the relevance of such item is reasonably apparent
from the face of the Parent Disclosure Schedule:
Section 3.01. Organization and Qualification. Parent is a corporation and
Merger Subsidiary is a corporation or limited liability company, in each case
duly organized, validly existing and in good standing under the laws of the
state of its incorporation and has the requisite corporate power and authority
to own, lease and operate its assets and properties and to carry on its
business as it is now being conducted. Each of Parent and Merger Subsidiary is
qualified to transact business and is in good standing in each jurisdiction in
which the properties owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary, except where the
failure to be so qualified and in good standing would not reasonably be
expected to have Parent Material Adverse Effect. In this Agreement, the term
"Parent Material Adverse Effect" means an effect that is materially adverse to
(i) the business, financial condition or ongoing operations of Parent and its
subsidiaries, taken as a whole or (ii) the ability of Parent or any of its
subsidiaries to obtain financing for or to consummate any of the transactions
contemplated by this Agreement.
Section 3.02. Authority; Non-Contravention; Approvals. (a) Parent and Merger
Subsidiary each have full corporate or similar power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby,
including without limitation, the consummation of the financing of the Merger
pursuant to the Financing Commitment (as defined in Section 3.05) (the
"Financing"). This Agreement and the Merger have been approved and adopted by
the Boards of Directors of Parent and Merger Subsidiary and the sole
stockholder or member of Merger Subsidiary, and no other corporate or similar
proceedings on the part of Parent or Merger Subsidiary are necessary to
authorize the execution and delivery of this Agreement or the consummation by
Parent and Merger Subsidiary of the transactions contemplated hereby, including
without limitation, the Financing. This Agreement has been duly executed and
delivered by each of Parent and Merger Subsidiary and, assuming the due
authorization, execution and delivery hereof by the Company, constitutes a
A-4
<PAGE>
valid and legally binding agreement of each of Parent and Merger Subsidiary
enforceable against each of them in accordance with its terms, except that such
enforcement may be subject to (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting or relating to enforcement of
creditors' rights generally and (ii) general equitable principles.
(b) The execution, delivery and performance of this Agreement by each of
Parent and Merger Subsidiary and the consummation of the Merger and the
transactions contemplated hereby, including without limitation the Financing,
do not and will not violate, conflict with or result in a breach of any
provision of, or constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result in a right
of termination or acceleration under, or, other than in the case of the
Financing, result in the creation of any lien, security interest or encumbrance
upon any of the properties or assets of Parent or any of its subsidiaries under
any of the terms, conditions or provisions of (i) the respective certificates
of incorporation or bylaws of Parent or any of its subsidiaries, (ii) any
statute, law, ordinance, rule, regulation, judgment, decree, order, injunction,
writ, permit or license of any court or governmental authority applicable to
Parent or any of its subsidiaries or any of their respective properties or
assets, subject, in the case of consummation, to obtaining (prior to the
Effective Time) the Parent Required Statutory Approvals (as defined in Section
3.02(c)), or (iii) any note, bond, mortgage, indenture, deed of trust, license,
franchise, permit, concession, contract, lease or other instrument, obligation
or agreement of any kind (each a "Contract" and collectively "Contracts") to
which Parent or any of its subsidiaries is now a party or by which Parent or
any of its subsidiaries or any of their respective properties or assets may be
bound or affected. Excluded from the foregoing sentence of this paragraph (b),
insofar as it applies to the terms, conditions or provisions described in
clauses (ii) and (iii) of this paragraph (b), are such violations, conflicts,
breaches, defaults, terminations, accelerations or creations of liens, security
interests or encumbrances that would not reasonably be expected to have a
Parent Material Adverse Effect and would not materially delay the consummation
of the Merger.
(c) Except for (i) the filings by Parent required by the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (ii) applicable
filings, if any, with the Securities and Exchange Commission (the "SEC")
pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), (iii) filing of Articles of Merger with the Secretary of State of the
State of Nevada in connection with the Merger, and (iv) filings with and
approvals by any regulatory authority with jurisdiction over the Company's
gaming operations required under any Federal, state, local or foreign statute,
ordinance, rule, regulation, permit, consent, approval, license, judgment,
order, decree, injunction or other authorization governing or relating to the
current or contemplated casino and gaming activities and operations of the
Company, including the Nevada Gaming Control Act and the rules and regulations
promulgated thereunder, the New Jersey Casino Control Act and the rules and
regulations promulgated thereunder, the Mississippi Gaming Control Act and the
rules and regulations promulgated thereunder, and the Michigan Gaming Control
Act and the rules and regulations promulgated thereunder (collectively, the
"Gaming Laws") (the filings and approvals referred to in clauses (i) through
(iv) are collectively referred to as the "Parent Required Statutory
Approvals"), no declaration, filing or registration with, or notice to, or
authorization, consent or approval of, any governmental or regulatory body or
authority is necessary for the execution and delivery of this Agreement by
Parent or Merger Subsidiary, or the consummation by Parent or Merger Subsidiary
of the transactions contemplated hereby, including without limitation, the
Financing, other than such declarations, filings, registrations, notices,
authorizations, consents or approvals which, if not made or obtained, as the
case may be, would not reasonably be expected to have a Parent Material Adverse
Effect and would not materially delay the consummation of the Merger.
Section 3.03. Proxy Statement. None of the information to be supplied by
Parent or its subsidiaries for inclusion in any proxy statement to be
distributed in connection with the Company's meeting of stockholders to vote
upon this Agreement and the transactions contemplated hereby (the "Proxy
Statement") will, at the time of the mailing of the Proxy Statement and any
amendments or supplements thereto, and at the time of the meeting of
stockholders of the Company to be held in connection with the transactions
contemplated by this Agreement, contain any untrue statement of a material fact
or omit to state any material fact required to be
A-5
<PAGE>
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not misleading.
Section 3.04. Ownership of Company Common Stock. Neither Parent nor any of
its subsidiaries beneficially owns any shares of Company Common Stock as of the
date hereof.
Section 3.05. Financing. (a) At the Effective Time, Parent shall have on
hand and available for deposit with the Disbursing Agent in accordance with
Section 1.05 cash in the amount of $4,410,000,000.
(b) Parent has obtained written commitments (the "Financing Commitment") for
the financing necessary to consummate the Merger and to pay all associated
costs and expenses (including any refinancing of indebtedness of Parent or the
Company required in connection therewith). The Financing Commitment has not
been amended, modified, withdrawn, terminated or replaced, except that they may
be amended or replaced in a manner which (i) does not adversely affect the
ability of Parent to consummate the Merger or (ii) is not reasonably likely to
cause a material delay in the consummation of the Merger. Parent has provided
true, accurate and complete copies of such commitments (and any amendment or
replacement thereof) to the Company.
Section 3.06. Reports, Financial Statements, etc. Since January 1, 1997,
Parent has filed with the SEC all material forms, statements, reports and
documents (including all exhibits, post-effective amendments and supplements
thereto) (the "Parent SEC Reports") required to be filed by it under each of
the Securities Act of 1933, as amended (the "Securities Act"), the Exchange Act
and the respective rules and regulations thereunder, all of which, as amended
if applicable, complied when filed in all material respects with all applicable
requirements of the appropriate act and the rules and regulations thereunder.
As of their respective dates, the Parent SEC Reports did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The audited
consolidated financial statements and unaudited financial statements of Parent
included in Parent's Annual Report on Form 10-K for the twelve months ended
December 31, 1998 and Parent's Quarterly Reports on Form 10-Q for the quarterly
periods ended March 31, June 30 and September 30, 1999 (collectively, the
"Parent Financial Statements") have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis (except as may be
indicated therein or in the notes thereto) and fairly present in all material
respects the financial position of Parent and its subsidiaries as of the dates
thereof and the results of their operations and changes in financial position
for the periods then ended (subject, in the case of any unaudited interim
financial statements, to normal year-end adjustments).
Since the date of the most recent Parent SEC Report that contains
consolidated financial statements of Parent filed prior to the date of this
Agreement, there has not been any Parent Material Adverse Effect.
Section 3.07. Brokers and Finders. Except as disclosed in the Parent
Disclosure Schedule, Parent has not entered into any contract, arrangement or
understanding with any person or firm which may result in the obligation of the
Company to pay any investment banking fees, finder's fees or brokerage fees in
connection with the transactions contemplated hereby.
ARTICLE IV
Representations and Warranties of the Company
The Company represents and warrants to Parent and Merger Subsidiary that,
except as set forth in the disclosure schedule dated as of the date hereof and
signed by an authorized officer of the Company (the "Company Disclosure
Schedule"), it being agreed that disclosure of any item on the Company
Disclosure Schedule shall be deemed disclosure with respect to all Sections of
this Agreement if the relevance of such item is reasonably apparent from the
face of the Company Disclosure Schedule:
A-6
<PAGE>
Section 4.01. Organization and Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Nevada and has the requisite corporate power and authority to own,
lease and operate its assets and properties and to carry on its business as it
is now being conducted. The Company is qualified to transact business and is in
good standing in each jurisdiction in which the properties owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification necessary, except where the failure to be so qualified and in
good standing would not reasonably be expected to have a Company Material
Adverse Effect. In this Agreement, the term "Company Material Adverse Effect"
means an effect or effects (other than an effect or effects arising out of or
resulting from changes in or affecting the travel, hospitality or gaming
industries generally or in the states of Nevada, New Jersey or Mississippi and
other than any effect resulting from the entering into or the public
announcement or disclosure of this Agreement and the transactions contemplated
hereby) that, individually or in the aggregate, (i) have an adverse economic
effect of more than $200,000,000 to the business, financial condition or
ongoing operations of the Company and its subsidiaries, taken as a whole or
(ii) have a materially adverse effect on the ability of the Company to
consummate the Merger or the ability of the Parties hereto to retain any
Material Gaming License. True, accurate and complete copies of the Company's
Restated Articles of Incorporation and bylaws, in each case as in effect on the
date hereof, including all amendments thereto, have heretofore been delivered
to Parent. A "Material Gaming License" is a license or similar authorization
under any Gaming Law without which Parent or the Company, as the case may be,
would be prohibited from operating any one of its major gaming/hotel properties
in the state in which such property is located.
Section 4.02. Capitalization. (a) The authorized capital stock of the
Company consists of (1) 1,125,000,000 shares of Company Common Stock and (2)
5,000,000 shares of preferred stock, par value $.10 per share ("Company
Preferred Stock"). As of March 5, 2000, (i) 190,342,423 shares of Company
Common Stock, including the associated Rights (as defined in Section 4.02(b)),
were issued and outstanding, all of which shares of Company Common Stock were
validly issued and are fully paid, nonassessable and free of preemptive rights,
and no shares of Company Preferred Stock were issued and outstanding, (ii)
44,805,227 shares of Company Common Stock and no shares of Company Preferred
Stock were held in the treasury of the Company, (iii) 35,613,037 shares of
Company Common Stock were reserved for issuance upon exercise of Options issued
and outstanding, and (iv) 400,000 shares of Company Preferred Stock to be
designated as Series A Junior Participating Preferred Stock reserved for
issuance under the Rights Agreement (as defined in Section 4.02(b)). Assuming
the exercise of all outstanding Options, as of March 5, 2000, there would be
225,955,460 shares of Company Common Stock issued and outstanding. Since March
5, 2000, except as permitted by this Agreement, (i) no shares of capital stock
of the Company have been issued except in connection with the exercise of the
instruments referred to in the second sentence of this Section 4.02(a) and (ii)
no options, warrants, securities convertible into, or commitments with respect
to the issuance of shares of capital stock of the Company have been issued,
granted or made, except Rights in accordance with the terms of the Rights
Agreement.
(b) Except for the Preferred Stock Purchase Rights (the "Rights") issued
pursuant to the Rights Agreement (the "Rights Agreement"), to be dated as of or
about March 6, 2000 between the Company and American Stock Transfer & Trust
Company (the "Rights Agent"), or as set forth in Section 4.02(a), as of the
date hereof and as of March 5, there are no outstanding subscriptions, options,
calls, contracts, commitments, understandings, restrictions, arrangements,
rights or warrants, including any right of conversion or exchange under any
outstanding security, instrument or other agreement and also including any
rights plan or other anti-takeover agreement, obligating the Company or any
subsidiary of the Company to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of the capital stock of the Company or
obligating the Company or any subsidiary of the Company to grant, extend or
enter into any such agreement or commitment. There are no outstanding stock
appreciation rights or similar derivative securities or rights of the Company
or any of its subsidiaries. Except as disclosed in the Company SEC Reports or
as otherwise contemplated by this Agreement, there are no voting trusts,
irrevocable proxies or other agreements or understandings to which the Company
or any subsidiary of the Company is a party or is bound with respect to the
voting of any shares of capital stock of the Company. The Board of Directors of
the Company has taken all action to amend the Rights
A-7
<PAGE>
Agreement (subject only to the execution of such amendment by the Rights Agent,
which execution the Company shall cause to take place as promptly as reasonably
practicable following the date of this Agreement) to provide that (i) none of
the Parent and its subsidiaries shall become an "Acquiring Person" as a result
of the execution, delivery and performance of this Agreement and the
consummation of the Merger, and (ii) no "Distribution Date" shall occur as a
result of the announcement of or the execution of this Agreement or any of the
transactions contemplated hereby. Upon execution of the Rights Agreement by the
Rights Agent, the amendment to the Rights Agreement shall become effective and
shall remain in full force and effect until immediately following the
termination of this Agreement in accordance with its terms.
Section 4.03. Subsidiaries. Each direct and indirect subsidiary of the
Company is duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and has the requisite power and authority
to own, lease and operate its assets and properties and to carry on its
business as it is now being conducted and each subsidiary of the Company is
qualified to transact business, and is in good standing, in each jurisdiction
in which the properties owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary; except, in all
cases, where the failure to be so organized, existing, qualified and in good
standing would not reasonably be expected to have a Company Material Adverse
Effect. All of the outstanding shares of capital stock of each subsidiary of
the Company are validly issued, fully paid, nonassessable and free of
preemptive rights. There are no subscriptions, options, warrants, rights,
calls, contracts or other commitments, understandings, restrictions or
arrangements relating to the issuance or sale with respect to any shares of
capital stock of any subsidiary of the Company, including any right of
conversion or exchange under any outstanding security, instrument or agreement.
For purposes of this Agreement, the term "subsidiary" means, with respect to
any specified person (the "Owner") any other person of which more than 50% of
the total voting power of shares of capital stock or other equity interests
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers, trustees or other governing body thereof is at
the time owned or controlled, directly or indirectly, by such Owner and/or one
or more of the other subsidiaries of such Owner.
Section 4.04. Authority; Non-Contravention; Approvals. (a) The Company has
full corporate power and authority to enter into this Agreement and, subject to
the Company Stockholders' Approval (as defined in Section 6.01(a)) with respect
solely to the Merger, to consummate the transactions contemplated hereby. This
Agreement and the Merger have been approved and adopted by the Board of
Directors of the Company, and no other corporate proceedings on the part of the
Company are necessary to authorize the execution and delivery of this Agreement
or, except for the Company Stockholders' Approval with respect solely to the
Merger, the consummation by the Company of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by the Company,
and, assuming the due authorization, execution and delivery hereof by Parent
and Merger Subsidiary, constitutes a valid and legally binding agreement of the
Company, enforceable against the Company in accordance with its terms, except
that such enforcement may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting or relating to
enforcement of creditors' rights generally and (ii) general equitable
principles.
(b) The execution, delivery and performance of this Agreement by the Company
and the consummation of the Merger and the transactions contemplated hereby do
not and will not violate, conflict with or result in a breach of any provision
of, or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, contractually require any offer to purchase or any
prepayment of any debt, or result in the creation of any lien, security
interest or encumbrance upon any of the properties or assets of the Company or
any of its subsidiaries under any of the terms, conditions or provisions of (i)
the respective certificates of incorporation or bylaws of the Company or any of
its Material Subsidiaries, (ii) any statute, law, ordinance, rule, regulation,
judgment, decree, order, injunction, writ, permit or license of any court or
governmental authority applicable to the Company or any of its subsidiaries or
any of their respective properties or assets, subject, in the case of
consummation, to obtaining (prior to the Effective Time) the Company Required
Statutory Approvals (as defined in Section 4.04(c)) and the Company
Stockholders'
A-8
<PAGE>
Approval, or (iii) any Contract to which the Company or any of its subsidiaries
is now a party or by which the Company or any of its subsidiaries or any of
their respective properties or assets may be bound or affected, subject, in the
case of consummation, to obtaining (prior to the Effective Time) consents
required from commercial lenders, lessors or other third parties as specified
in Section 4.04(b) of the Company Disclosure Schedule. Excluded from the
foregoing sentence of this paragraph (b), insofar as it applies to the terms,
conditions or provisions described in clauses (ii) and (iii) of this paragraph
(b), are such violations, conflicts, breaches, defaults, terminations,
accelerations or creations of liens, security interests or encumbrances that
would not reasonably be expected, individually or in the aggregate, to have a
Company Material Adverse Effect and would not prevent or materially delay the
consummation of the Merger.
(c) Except for (i) the filings by the Company required by the HSR Act, (ii)
the filing of the Proxy Statement with the SEC pursuant to the Exchange Act,
(iii) the filing of Articles of Merger with the Secretary of State of the State
of Nevada in connection with the Merger, (iv) any filings with or approvals
from authorities required solely by virtue of the jurisdictions in which Parent
or its subsidiaries conduct any business or own any assets, and (v) filings
with and approvals in respect of Gaming Laws (the filings and approvals
referred to in clauses (i) through (v) and those disclosed in Section 4.04(c)
of the Company Disclosure Schedule are collectively referred to as the "Company
Required Statutory Approvals"), no declaration, filing or registration with, or
notice to, or authorization, consent or approval of, any governmental or
regulatory body or authority is necessary for the execution and delivery of
this Agreement by the Company or the consummation by the Company of the
transactions contemplated hereby, other than such declarations, filings,
registrations, notices, authorizations, consents or approvals which, if not
made or obtained, as the case may be, would not reasonably be expected,
individually or in the aggregate, to have a Company Material Adverse Effect and
would not prevent or materially delay the consummation of the Merger.
Section 4.05. Reports and Financial Statements. Since January 1, 1997, the
Company has filed with the SEC all material forms, statements, reports and
documents (including all exhibits, post-effective amendments and supplements
thereto) (the "Company SEC Reports") required to be filed by it under each of
the Securities Act, the Exchange Act and the respective rules and regulations
thereunder, all of which, as amended if applicable, complied when filed in all
material respects with all applicable requirements of the appropriate act and
the rules and regulations thereunder. As of their respective dates, the Company
SEC Reports did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The audited consolidated financial statements of the
Company included as an exhibit to the Company's proxy statement relating to its
2000 annual meeting of stockholders (and which is a Company SEC Report) (the
"Company Financial Statements") have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis (except as may be
indicated therein or in the notes thereto) and fairly present in all material
respects the financial position of the Company and its subsidiaries as of the
dates thereof and the results of their operations and changes in financial
position for the periods then ended.
Section 4.06. Absence of Undisclosed Liabilities. Except as disclosed in the
Company SEC Reports or the Company Disclosure Schedule, neither the Company nor
any of its subsidiaries had at December 31, 1999, or has incurred since that
date and as of the date hereof, any liabilities or obligations (whether
absolute, accrued, contingent or otherwise) of any nature, except (a)
liabilities, obligations or contingencies (i) which are accrued or reserved
against in the Company Financial Statements or reflected in the notes thereto
or (ii) which were incurred after December 31, 1999 in the ordinary course of
business and consistent with past practices, (b) liabilities, obligations or
contingencies which (i) would not reasonably be expected, individually or in
the aggregate, to have a Company Material Adverse Effect, or (ii) have been
discharged or paid in full prior to the date hereof in the ordinary course of
business, and (c) liabilities, obligations and contingencies which are of a
nature not required to be reflected in the consolidated financial statements of
the Company and its subsidiaries prepared in accordance with generally accepted
accounting principles consistently applied.
A-9
<PAGE>
Section 4.07. Absence of Certain Changes or Events. Since the date of the
most recent Company SEC Report filed prior to the date of this Agreement that
contains consolidated financial statements of the Company, there has not been
any Company Material Adverse Effect.
Section 4.08. Litigation. Except as referred to in the Company SEC Reports,
there are no claims, suits, actions or proceedings pending or, to the knowledge
of the Company, threatened against, relating to or affecting the Company or any
of its subsidiaries, before any court, governmental department, commission,
agency, instrumentality or authority, or any arbitrator that would reasonably
be expected, individually or in the aggregate, to have a Company Material
Adverse Effect. Except as referred to in the Company SEC Reports or as may be
entered into with Parent's prior written consent in connection with Section
5.12(b), neither the Company nor any of its subsidiaries is subject to any
judgment, decree, injunction, rule or order of any court, governmental
department, commission, agency, instrumentality or authority, or any arbitrator
which prohibits the consummation of the transactions contemplated hereby or
would reasonably be expected, individually or in the aggregate, to have a
Company Material Adverse Effect.
Section 4.09. Proxy Statement. None of the information to be supplied by the
Company or its subsidiaries for inclusion in the Proxy Statement will, at the
time of the mailing thereof and any amendments or supplements thereto, and at
the time of the meeting of stockholders of the Company to be held in connection
with the transactions contemplated by this Agreement, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not misleading. The Proxy
Statement will comply, as of its mailing date, as to form in all material
respects with all applicable laws, including the provisions of the Exchange Act
and the rules and regulations promulgated thereunder, except that no
representation is made by the Company with respect to information supplied by
Parent, Merger Subsidiary or any stockholder of Parent for inclusion therein.
Section 4.10. No Violation of Law. Except as disclosed in the Company SEC
Reports filed prior to the date of this Agreement, neither the Company nor any
of its subsidiaries is in violation of or has been given written (or, to the
knowledge of the Company's executive officers, oral) notice of any violation
of, any law, statute, order, rule, regulation, ordinance or judgment
(including, without limitation, any applicable environmental law, ordinance or
regulation) of any governmental or regulatory body or authority, except for
violations which would not reasonably be expected, individually or in the
aggregate, to have a Company Material Adverse Effect. Except as disclosed in
the Company SEC Reports filed prior to the date of this Agreement, to the
knowledge of the Company, no investigation or review by any governmental or
regulatory body or authority is pending or threatened, nor has any governmental
or regulatory body or authority indicated an intention to conduct the same,
other than, in each case, those the outcome of which, as far as reasonably can
be foreseen, would not reasonably be expected, individually or in the
aggregate, to have a Company Material Adverse Effect. The Company and its
subsidiaries are not in violation of the terms of any permits, licenses,
franchises, variances, exemptions, orders and other governmental
authorizations, consents and approvals necessary to conduct their businesses as
presently conducted (collectively, the "Company Permits"), except for delays in
filing reports or violations which would not reasonably be expected,
individually or in the aggregate, to have a Company Material Adverse Effect.
Section 4.11. Compliance with Agreements. Except as disclosed in the Company
SEC Reports, the Company and each of its subsidiaries are not in breach or
violation of or in default in the performance or observance of any term or
provision of, and no event has occurred which, with lapse of time or action by
a third party, would result in a default under, any Contract to which the
Company or any of its subsidiaries is a party or by which any of them is bound
or to which any of their property is subject, other than breaches, violations
and defaults which would not reasonably be expected, individually or in the
aggregate, to have a Company Material Adverse Effect. To the knowledge of the
Company's executive officers, the Company's insurance policies relating to
directors' and officers' liability are in full force and effect.
A-10
<PAGE>
Section 4.12. Taxes. (a) The Company and its subsidiaries have (i) duly
filed with the appropriate governmental authorities all Tax Returns required to
be filed by them, and such Tax Returns are true, correct and complete, and (ii)
duly paid in full or reserved in accordance with generally accepted accounting
principles on the Company Financial Statements all Taxes required to be paid,
except, in the case of (i) and (ii), as would not, individually or in the
aggregate, have a Company Material Adverse Effect. Except as would not,
individually or in the aggregate, have a Company Material Adverse Effect, there
are no liens for Taxes upon any property or asset of the Company or any
subsidiary thereof, other than liens for Taxes not yet due or Taxes contested
in good faith and reserved against in accordance with generally accepted
accounting principles. There are no unresolved issues of law or fact arising
out of a notice of deficiency, proposed deficiency or assessment from the
Internal Revenue Service (the "IRS") or any other governmental taxing authority
with respect to Taxes of the Company or any of its subsidiaries which would
reasonably be expected to have a Company Material Adverse Effect. Except as
would not, individually or in the aggregate, have a Company Material Adverse
Effect, neither the Company nor its subsidiaries has agreed to an extension of
time with respect to a Tax deficiency, other than extensions which are no
longer in effect. Except as would not, individually or in the aggregate, have a
Company Material Adverse Effect, neither the Company nor any of its
subsidiaries is a party to any agreement providing for the allocation or
sharing of Taxes with any entity that is not, directly or indirectly, a wholly-
owned subsidiary of the Company, other than agreements the consequences of
which are fully and adequately reserved for in the Company Financial
Statements.
(b) Except as would not, individually or in the aggregate, have a Company
Material Adverse Effect, the Company and each of its subsidiaries have withheld
or collected and have paid over to the appropriate governmental entities (or
are properly holding for such payment) all material Taxes required to be
collected or withheld.
(c) For purposes of this Agreement, "Tax" (including, with correlative
meaning, the terms "Taxes") means all federal, state, local and foreign income,
profits, franchise, gross receipts, environmental, customs duty, capital stock,
communications services, severance, stamp, payroll, sales, employment,
unemployment, disability, use, property, withholding, excise, production, value
added, occupancy and other taxes, duties or assessments of any nature
whatsoever, together with all interest, penalties and additions imposed with
respect to such amounts and any interest in respect of such penalties and
additions, and includes any liability for Taxes of another person by contract,
as a transferee or successor, under Treas. Reg. 1.1502-6 or analogous state,
local or foreign law provision or otherwise, and "Tax Return" means any return,
report or similar statement (including attached schedules) required to be filed
with respect to any Tax, including without limitation, any information return,
claim for refund, amended return or declaration of estimated Tax.
Section 4.13. Employee Benefit Plans; ERISA. (a) The Company SEC Reports and
the Company Disclosure Letter set forth each material employee or director
benefit plan, arrangement or agreement, including without limitation any
employee welfare benefit plan within the meaning of Section 3(1) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), any
employee pension benefit plan within the meaning of Section 3(2) of ERISA
(whether or not such plan is subject to ERISA) and any bonus, incentive,
deferred compensation, vacation, stock purchase, stock option, severance,
employment, change of control or fringe benefit plan, program or agreement
(excluding any multi-employer plans as defined in Section 3(37) of ERISA (a
"Multi-employer Plan") and any multiple employer plan within the meaning of
Section 413(c) of the Code) that is sponsored, maintained or contributed to by
the Company or any of its subsidiaries or by any trade or business, whether or
not incorporated, all of which together with the Company would be deemed a
"single employer" within the meaning of Section 4001 of ERISA (the "Company
Plans").
(b) Except as disclosed in the Company SEC Reports or in the Company
Disclosure Schedule, (i) there have been no prohibited transactions within the
meaning of Section 406 or 407 of ERISA or Section 4975 of the Code with respect
to any of the Company Plans that could result in penalties, taxes or
liabilities which would reasonably be expected to have a Company Material
Adverse Effect, (ii) no Company Plan is subject to Title IV of ERISA, (iii)
each of the Company Plans has been operated and administered in accordance with
applicable laws during the period of time covered by the applicable statute of
limitations, except for failures to
A-11
<PAGE>
comply which would not reasonably be expected, individually or in the
aggregate, to have a Company Material Adverse Effect, (iv) each of the Company
Plans which is intended to be "qualified" within the meaning of Section 401(a)
of the Code has been determined by the IRS to be so qualified and such
determination has not been revoked by failure to satisfy any condition thereof
or by a subsequent amendment thereto or a failure to amend, except that it may
be necessary to make additional amendments retroactively to maintain the
"qualified" status of such Company Plans, and the period for making any such
necessary retroactive amendments has not expired, (v) to the knowledge of the
Company and its subsidiaries, there are no pending, threatened or anticipated
claims involving any of the Company Plans other than claims for benefits in the
ordinary course or claims which would not reasonably be expected, individually
or in the aggregate, to have a Company Material Adverse Effect, (vi) no Company
Plan provides post-retirement medical benefits to employees or directors of the
Company or its subsidiaries beyond their retirement or other termination of
service, other than coverage mandated by applicable law, (vii) all material
contributions or other amounts payable by the Company or its subsidiaries as of
the date hereof with respect to each Company Plan in respect of current or
prior plan years have been paid or accrued in accordance with generally
accepted accounting principles, (viii) with respect to each Multi-employer Plan
contributed to by the Company, to the knowledge of the Company and its
subsidiaries, as of the date hereof, none of the Company or its subsidiaries
has received any notification that any such Multi-employer Plan is in
reorganization, has been terminated or is insolvent, (ix) the Company and its
subsidiaries has complied in all respects with the Worker Adjustment and
Retraining Notification Act, except for failures which would not reasonably be
expected, individually or in the aggregate, to have a Company Material Adverse
Effect, and (x) no act, omission or transaction has occurred with respect to
any Company Plan that has resulted or could result in any liability of the
Company or any subsidiary under Sections 409 or 502(c)(1) or (l) of ERISA or
Chapter 43 of Subtitle (A) of the Code, except for liabilities which would not
reasonably be expected, individually or in the aggregate, to have a Company
Material Adverse Effect.
(c) Except as set forth in the Company Disclosure Schedule, and excluding
payments in respect of outstanding Options, neither the execution and delivery
of this Agreement nor the consummation of the transactions contemplated hereby
will (i) result in any material payment (including, without limitation,
severance or "excess parachute payment" (within the meaning of Section 280G of
the Code)) becoming due to any director or employee of the Company or any of
its subsidiaries under any Company Plan, (ii) materially increase any benefits
otherwise payable under any Company Plan or (iii) result in any acceleration of
the time of payment or vesting of any such benefits. For purposes of this
paragraph (c) only, "material" shall mean in excess of $10 million.
Section 4.14. Labor Controversies. Except as disclosed in the Company SEC
Reports, (a) there are no significant controversies pending or, to the
knowledge of the Company, threatened between the Company or its subsidiaries
and any representatives (including unions) of any of their employees, and (b)
to the knowledge of the Company, there are no material organizational efforts
presently being made involving any of the presently unorganized employees of
the Company or its subsidiaries, except for such controversies and
organizational efforts which would not reasonably be expected, individually or
in the aggregate, to have a Company Material Adverse Effect.
Section 4.15. Environmental Matters. (a) Except as disclosed in the Company
SEC Reports, (i) the Company and its subsidiaries have conducted their
respective businesses in compliance with all applicable Environmental Laws,
including, without limitation, having all permits, licenses and other approvals
and authorizations necessary for the operation of their respective businesses
as presently conducted, (ii) none of the properties owned by the Company or any
of its subsidiaries contain any Hazardous Substance as a result of any activity
of the Company or any of its subsidiaries in amounts exceeding the levels
permitted by applicable Environmental Laws, (iii) since January 1, 1998,
neither the Company nor any of its subsidiaries has received any notices,
demand letters or requests for information from any Federal, state, local or
foreign governmental entity indicating that the Company or any of its
subsidiaries may be in violation of, or liable under, any Environmental Law in
connection with the ownership or operation of their businesses, (iv) there are
no civil,
A-12
<PAGE>
criminal or administrative actions, suits, demands, claims, hearings,
investigations or proceedings pending or threatened, against the Company or any
of its subsidiaries relating to any violation, or alleged violation, of any
Environmental Law, (v) no Hazardous Substance has been disposed of, released or
transported in violation of any applicable Environmental Law from any
properties owned by the Company or any of its subsidiaries as a result of any
activity of the Company or any of its subsidiaries during the time such
properties were owned, leased or operated by the Company or any of its
subsidiaries, and (vi) neither the Company, its subsidiaries nor any of their
respective properties are subject to any material liabilities or expenditures
(fixed or contingent) relating to any suit, settlement, court order,
administrative order, regulatory requirement, judgment or claim asserted or
arising under any Environmental Law, except for violations of the foregoing
clauses (i) through (vi) that would not reasonably be expected, individually or
in the aggregate, to have a Company Material Adverse Effect.
(b) As used herein, "Environmental Law" means any federal, state, local or
foreign law, statute, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent, legal doctrine, order, judgment, decree,
injunction, requirement or agreement with any governmental entity relating to
(x) the protection, preservation or restoration of the environment (including,
without limitation, air, water vapor, surface water, groundwater, drinking
water supply, surface land, subsurface land, plant and animal life or any other
natural resource) or to human health or safety, or (y) the exposure to, or the
use, storage, recycling, treatment, generation, transportation, processing,
handling, labeling, production, release or disposal of Hazardous Substances, in
each case as amended and as in effect at the Effective Time. The term
"Environmental Law" includes, without limitation, (i) the Federal Comprehensive
Environmental Response Compensation and Liability Act of 1980, the Superfund
Amendments and Reauthorization Act, the Federal Water Pollution Control Act of
1972, the Federal Clean Air Act, the Federal Clean Water Act, the Federal
Resource Conservation and Recovery Act of 1976 (including the Hazardous and
Solid Waste Amendments thereto), the Federal Solid Waste Disposal Act and the
Federal Toxic Substances Control Act, the Federal Insecticide, Fungicide and
Rodenticide Act, and the Federal Occupational Safety and Health Act of 1970,
each as amended and as in effect at the Effective Time, and (ii) any common law
or equitable doctrine (including, without limitation, injunctive relief and
tort doctrines such as negligence, nuisance, trespass and strict liability)
that may impose liability or obligations for injuries or damages due to, or
threatened as a result of, the presence of, effects of or exposure to any
Hazardous Substance.
(c) As used herein, "Hazardous Substance" means any substance presently or
hereafter listed, defined, designated or classified as hazardous, toxic,
radioactive, or dangerous, or otherwise regulated, under any Environmental Law.
Hazardous Substance includes any substance to which exposure is regulated by
any government authority or any Environmental Law including, without
limitation, any toxic waste, pollutant, contaminant, hazardous substance, toxic
substance, hazardous waste, special waste, industrial substance or petroleum or
any derivative or by-product thereof, radon, radioactive material, asbestos, or
asbestos containing material, urea formaldehyde foam insulation, lead or
polychlorinated biphenyls.
Section 4.16. Title to Assets. The Company and each of its subsidiaries has
good and valid title in fee simple to all its real property and good title to
all its leasehold interests and other properties, as reflected in the most
recent balance sheet included in the Company Financial Statements, except for
properties and assets that have been disposed of in the ordinary course of
business since the date of such balance sheet, free and clear of all mortgages,
liens, pledges, charges or encumbrances of any nature whatsoever, except (i)
the lien for current taxes, payments of which are not yet delinquent, (ii) such
imperfections in title and easements and encumbrances, if any, as are not
substantial in character, amount or extent and do not materially detract from
the value, or interfere with the present use of the property subject thereto or
affected thereby, or otherwise materially impair the Company's business
operations (in the manner presently carried on by the Company), or (iii) as
disclosed in the Company SEC Reports, and except for such matters which would
not reasonably be expected, individually or in the aggregate, to have a Company
Material Adverse Effect. All leases under which the Company or any of its
subsidiaries leases any real or personal property are in good standing, valid
and effective in accordance with their respective terms, and there is not,
under any of such leases, any existing
A-13
<PAGE>
default or event which with notice or lapse of time or both would become a
default other than failures to be in good standing, valid and effective and
defaults under such leases which would not reasonably be expected, individually
or in the aggregate, to have a Company Material Adverse Effect.
Section 4.17. Company Stockholders' Approval. Assuming that Section 3.04 is
and remains true and correct in all respects, the affirmative vote of
stockholders of the Company required for approval and adoption of this
Agreement and the Merger is a majority of the outstanding shares of Company
Common Stock entitled to vote thereon.
Section 4.18. Brokers and Finders. The Company has not entered into any
contract, arrangement or understanding with any person or firm which may result
in the obligation of the Company to pay any investment banking fees, finder's
fees or brokerage fees in connection with the transactions contemplated hereby,
other than fees payable to Goldman, Sachs & Company (the "Company Financial
Advisor"), or as disclosed in Section 4.18 of the Company Disclosure Schedule.
An accurate copy of any fee agreement with the Company Financial Advisor has
been made available to Parent.
ARTICLE V
Covenants
Section 5.01. Conduct of Business by the Company Pending the Merger. Except
as otherwise contemplated by this Agreement or disclosed in Section 5.01 of the
Company Disclosure Schedule, after the date hereof and prior to the Effective
Time or earlier termination of this Agreement, unless Parent shall otherwise
agree in writing, the Company shall, and shall cause its subsidiaries to:
(a) conduct their respective businesses in the ordinary and usual course
of business and consistent with past practice, including with respect to
casino credit policies;
(b) not (i) amend or propose to amend their respective certificates of
incorporation or bylaws or equivalent constitutional documents, (ii) split,
combine or reclassify their outstanding capital stock or (iii) declare, set
aside or pay any dividend or distribution payable in cash, stock, property
or otherwise, except for the payment of dividends or distributions to the
Company or a wholly-owned subsidiary of the Company by a direct or indirect
wholly-owned subsidiary of the Company;
(c) not issue, sell, pledge or dispose of, or agree to issue, sell,
pledge or dispose of, any additional shares of, or any options, warrants or
rights of any kind to acquire any shares of their capital stock of any
class or any debt or equity securities convertible into or exchangeable for
such capital stock, except that the Company may issue shares upon the
exercise of Options outstanding on the date hereof;
(d) not (i) incur or become contingently liable with respect to any
indebtedness for borrowed money other than (A) borrowings in the ordinary
course of business or borrowings under the existing credit facilities of
the Company or any of its subsidiaries up to the existing borrowing limit
on the date hereof, and (B) borrowings to refinance existing indebtedness
on terms which are reasonably acceptable to Parent; provided that in no
event shall aggregate indebtedness of the Company and its subsidiaries, net
of all cash and cash equivalents, exceed $2.15 billion, (ii) redeem,
purchase, acquire or offer to purchase or acquire any shares of its capital
stock or any options, warrants or rights to acquire any of its capital
stock or any security convertible into or exchangeable for its capital
stock other than in connection with the exercise of outstanding Options
pursuant to the terms of the Company Option Plans, (iii) make any
acquisition of any assets or businesses other than expenditures for current
assets in the ordinary course of business and expenditures for fixed or
capital assets in the ordinary course of business, (iv) without Parent's
consent, acquire any gaming property within 150 miles of Detroit, Michigan,
(v) sell, pledge, dispose of or encumber any assets or businesses other
than (A) sales of businesses or assets disclosed in Section 5.01 of the
Company Disclosure Schedule, (B) pledges or encumbrances pursuant to
Existing Credit Facilities or other permitted borrowings, (C) sales or
dispositions of businesses or assets consented to in writing by Parent
(which consent shall not be unreasonably withheld) or for which consent is
not denied within 72
A-14
<PAGE>
hours after the Company notifies Parent (such notice to be delivered during
business hours on a business day) in writing that it desires to effect such
sale or disposition, (D) sales of real estate, assets or facilities for
cash consideration (including any debt assumed by the buyer of such real
estate, assets or facilities) to non-affiliates of the Company of less than
$1,000,000 in each such case and $7,000,000 in the aggregate, (E) sales or
dispositions of businesses or assets as may be required by applicable law,
and (F) sales or dispositions of assets in the ordinary course or (vi)
except as contemplated by the following proviso, enter into any binding
contract, agreement, commitment or arrangement with respect to any of the
foregoing;
(e) use all reasonable efforts to preserve intact their respective
business organizations and goodwill, keep available the services of their
respective present officers and key employees, and preserve the goodwill
and business relationships with customers and others having business
relationships with them other than as expressly permitted by the terms of
this Agreement;
(f) not enter into, amend, modify or renew any employment, consulting,
severance or similar agreements with, or grant any salary, wage or other
increase in compensation or increase in any employee benefit to, any
directors or officers of the Company or its subsidiaries, except (i) for
changes that are required by applicable law, (ii) to satisfy obligations
existing as of the date hereof, or (iii) in the ordinary course of business
consistent with past practice;
(g) not enter into, establish, adopt, amend or modify any pension,
retirement, stock purchase, savings, profit sharing, deferred compensation,
consulting, bonus, group insurance or other employee benefit, incentive or
welfare plan, agreement, program or arrangement, in respect of any
directors, officers or employees of the Company or its subsidiaries,
except, in each such case, as may be required by applicable law or by the
terms of contractual obligations existing as of the date hereof , including
any collective bargaining agreement;
(h) not make expenditures, including, but not limited to, capital
expenditures, or enter into any binding commitment or contract to make
expenditures, except (i) expenditures which the Company or its subsidiaries
are currently committed to make, (ii) (A) expenditures relating to the
Company's Le Jardin project and Danny Gans Theatre, meeting, convention and
exhibit space project, in each case in accordance with current plans, (B)
expenditures not exceeding $1,000,000 in connection with the Bellagio Spa
Tower project, and (C) other expenditures not exceeding $3,000,000
individually or $80,000,000 in the aggregate, (iii) for emergency repairs
and other expenditures necessary in light of circumstances not anticipated
as of the date of this Agreement which are necessary to avoid significant
disruption to the Company's business or operations consistent with past
practice (and, if reasonably practicable, after consultation with Parent),
or (iv) for repairs and maintenance in the ordinary course of business
consistent with past practice. With respect to the subject matter of this
paragraph (h), if the Company requests approval of Parent to exceed the
limits set forth herein, Parent shall respond to such request and grant or
withhold approval promptly following receipt of such request;
(i) not make, change or revoke any material Tax election unless required
by law or make any agreement or settlement with any taxing authority
regarding any material amount of Taxes or which would reasonably be
expected to materially increase the obligations of the Company or the
Surviving Corporation to pay Taxes in the future.
Section 5.02. Control of the Company's Operations. (a) Nothing contained in
this Agreement shall give to Parent, directly or indirectly, rights to control
or direct the Company's operations prior to the Effective Time. Prior to the
Effective Time, the Company shall exercise, consistent with the terms and
conditions of this Agreement, complete control and supervision of its
operations.
(b) Anything in this Article V to the contrary notwithstanding, nothing
herein shall prohibit or limit the Company or any of its subsidiaries from
selling or disposing of any artwork owned by the Company or any such subsidiary
provided that Parent shall have consented to such disposition or sale. In
connection with any sale or disposal of any such artwork with Parent's consent
during the period ending at the Effective Time and for five years thereafter,
Stephen A. Wynn shall have a right of first refusal on any such proposed sale
or disposition. Specifically, if the Company or any of its subsidiaries
determines to sell or dispose of any artwork
A-15
<PAGE>
owned by the Company or any of its subsidiaries, prior to the completion of
such sale or disposition the Company or relevant subsidiary shall offer Mr.
Wynn the opportunity to purchase such artwork at a price equal to the lower of
(A) if a firm offer has been made by any third party which the Company or a
subsidiary is prepared to accept, the amount of such firm offer and (B) the
higher of (1) the book value of such work of art and (2) the appraised fair
market value of the work of art as determined by Sotheby's Inc. or Christie's
International Plc. (or their respective affiliates).
Section 5.03. Acquisition Transactions. (a) After the date hereof and prior
to the Effective Time or earlier termination of this Agreement, the Company
shall not, and shall not permit any of its subsidiaries to, initiate, solicit,
negotiate, encourage or provide confidential information to facilitate, and the
Company shall use all reasonable efforts to cause any officer, director or
employee of the Company, or any attorney, accountant, investment banker,
financial advisor or other agent retained by it or any of its subsidiaries, not
to initiate, solicit, negotiate, encourage or provide non-public or
confidential information to facilitate, any proposal or offer to acquire all or
any substantial part of the business, properties or capital stock of the
Company, whether by merger, purchase of assets, tender offer or otherwise,
whether for cash, securities or any other consideration or combination thereof
(any such transactions being referred to herein as an "Acquisition
Transaction").
(b) Notwithstanding the provisions of paragraph (a) above, (i) the Company
may, prior to receipt of the Company Stockholders' Approval, in response to an
unsolicited bona fide written offer or proposal with respect to a potential or
proposed Acquisition Transaction ("Acquisition Proposal") from a corporation,
partnership, person or other entity or group (a "Potential Acquirer") which the
Company's Board of Directors determines, in good faith and after consultation
with its independent financial advisor, would reasonably be expected to result
(if consummated pursuant to its terms) in an Acquisition Transaction more
favorable to the Company's stockholders than the Merger (a "Qualifying
Proposal"), furnish (subject to the execution of a confidentiality agreement
substantially similar to the confidentiality provisions of the Confidentiality
Agreement (as defined in Section 5.04)) confidential or non-public information
to, and negotiate with, such Potential Acquirer, may resolve to accept, or
recommend, and, upon termination of this Agreement in accordance with Section
7.01(v) and after payment to Parent of the fee pursuant to Section 5.11(b),
enter into agreements relating to, a Qualifying Proposal as to which the
Company's Board of Directors, in good faith, has determined is reasonably
likely to be consummated (such Qualifying Proposal being a "Superior Proposal")
and (ii) the Company's Board of Directors may take and disclose to the
Company's stockholders a position contemplated by Rule 14e-2 under the Exchange
Act or otherwise make disclosure required by the federal securities laws. It is
understood and agreed that negotiations and other activities conducted in
accordance with this paragraph (b) shall not constitute a violation of
paragraph (a) of this Section 5.03.
(c) The Company shall promptly notify Parent after receipt of any
Acquisition Proposal, indication of interest or request for non-public
information relating to the Company or its subsidiaries in connection with an
Acquisition Proposal or for access to the properties, books or records of the
Company or any subsidiary by any person or entity that informs the Board of
Directors of the Company or such subsidiary that it is considering making, or
has made, an Acquisition Proposal. Such notice to Parent shall be made orally
and in writing and shall indicate in reasonable detail the identity of the
offeror and the material terms and conditions of such proposal, inquiry or
contact.
(d) After the date hereof and prior to the Effective Time or earlier
termination of this Agreement, the Parent shall promptly notify the Company
after receipt of any proposal or offer to acquire all or any substantial part
of the business, properties or capital stock of Parent, whether by merger,
purchase of assets, tender offer or otherwise, whether for cash, securities or
any other consideration or combination thereof and shall indicate in reasonable
detail the identity of the offeror or person and the material terms and
conditions of such proposal or offer and the financing arrangements, if any,
relating thereto.
Section 5.04. Access to Information. Subject to applicable law, the Company
and its subsidiaries shall afford to Parent and Merger Subsidiary and their
respective accountants, counsel, financial advisors, sources of financing and
other representatives (the "Parent Representatives") reasonable access during
normal business
A-16
<PAGE>
hours with reasonable notice throughout the period prior to the Effective Time
to all of their respective properties, books, contracts, commitments and
records (including, but not limited to, Tax Returns) and, during such period,
shall furnish promptly (i) a copy of each report, schedule and other document
filed or received by any of them pursuant to the requirements of federal or
state securities laws or filed by any of them with the SEC in connection with
the transactions contemplated by this Agreement, and (ii) such other
information concerning its businesses, properties and personnel as Parent or
Merger Subsidiary shall reasonably request and will use reasonable efforts to
obtain the reasonable cooperation of the Company's officers, employees,
counsel, accountants, consultants and financial advisors in connection with the
investigation of the Company by Parent and the Parent Representatives. All
nonpublic information provided to, or obtained by, Parent in connection with
the transactions contemplated hereby shall be "Information" for purposes of the
Confidentiality Agreement dated March 2, 2000 between Parent and the Company
(the "Confidentiality Agreement"), provided that Parent, Merger Subsidiary and
the Company may disclose such information as may be necessary in connection
with seeking the Parent Required Statutory Approvals, the Company Required
Statutory Approvals and the Company Stockholders' Approval. Notwithstanding the
foregoing, the Company shall not be required to provide any information which
it reasonably believes it may not provide to Parent by reason of applicable
law, rules or regulations, which constitutes information protected by
attorney/client privilege, or which the Company or any subsidiary is required
to keep confidential by reason of contract, agreement or understanding with
third parties.
Section 5.05. Notices of Certain Events. (a) The Company shall promptly as
reasonably practicable after executive officers of the Company acquire
knowledge thereof, notify Parent of: (i) any notice or other communication from
any person alleging that the consent of such person (or another person) is or
may be required in connection with the transactions contemplated by this
Agreement which consent relates to a material Contract to which the Company or
any of its subsidiaries is a party or the failure of which to obtain would
materially delay consummation of the Merger; (ii) any notice or other
communication from any governmental or regulatory agency or authority in
connection with the transactions contemplated by this Agreement; and (iii) any
actions, suits, claims, investigations or proceedings commenced or, to the best
of its knowledge threatened against, relating to or involving or otherwise
affecting the Company or any of its subsidiaries that, if pending on the date
of this Agreement, would have been required to have been disclosed pursuant to
Sections 4.08 or 4.10 or which relate to the consummation of the transactions
contemplated by this Agreement.
(b) Each of Parent and Merger Subsidiary shall promptly as reasonably
practicable after executive officers of the Parent acquire knowledge thereof,
notify the Company of: (i) any notice or other communication from any person
alleging that the consent of such person (or other person) is or may be
required in connection with the transactions contemplated by this Agreement
which consent relates to a material Contract to which Parent or its
subsidiaries are a party or the failure of which to obtain would materially
delay the Merger, (ii) any notice or other communication from any governmental
or regulatory agency or authority in connection with the transactions
contemplated by this Agreement, and (iii) any actions, suits, claims,
investigations or proceedings commenced or, to the best of its knowledge
threatened, against Parent or Merger Subsidiary, which relate to consummation
of the transactions contemplated by this Agreement.
(c) Subject to the provisions of Section 5.03, each of the Company, Parent
and Merger Subsidiary agrees to give prompt notice to each other of, and to use
commercially reasonable efforts to remedy, (i) the occurrence or failure to
occur of any event which occurrence or failure to occur would be likely to
cause any of its representations or warranties in this Agreement to be untrue
or inaccurate at the Effective Time unless such failure or occurrence would not
have a Company Material Adverse Effect or a Parent Material Adverse Effect, as
the case may be, and (ii) any failure on its part to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder unless such failure or occurrence would not have a Company Material
Adverse Effect or a Parent Material Adverse Effect, as the case may be;
provided, however, that the delivery of any notice pursuant to this Section
5.05(c) shall not limit or otherwise affect the remedies available hereunder to
the party receiving such notice.
A-17
<PAGE>
Section 5.06. Merger Subsidiary. Parent will take all action necessary (a)
to cause Merger Subsidiary to be formed and organized as promptly as
practicable, (b) to cause the board of directors or managing directors to
approve this Agreement and the Merger Agreement as promptly as practicable, (c)
to cause Merger Subsidiary to execute this Agreement as promptly as
practicable, and (d) to cause Merger Subsidiary to perform its obligations
under this Agreement and to consummate the Merger on the terms and conditions
set forth in this Agreement.
Section 5.07. Employee Benefits. (a) From and after the Effective Time, the
benefits to be provided to employees of the Company and its subsidiaries as of
the Effective Time ("Company Employees") shall be either the Company Plans or
the benefit plans and programs provided to similarly situated employees of
Parent. For purposes of all plans, programs or arrangements maintained,
sponsored or contributed to by Parent or the Surviving Corporation in which the
Company Employees shall be eligible to participate, Parent shall cause each
such plan, program or arrangement to treat the prior service of each Company
Employee with the Company or its subsidiaries as service rendered to Parent or
the Surviving Corporation for purposes of eligibility, vesting, levels of
benefits and benefits accruals (but not for purposes of benefit accruals under
any defined benefit pension plan), except to the extent such treatment would
result in the duplication of benefits with respect to the same period of
service. From and after the Effective Time, Parent shall (i) cause any pre-
existing conditions or limitations and eligibility waiting periods under any
group health plans of Parent or its subsidiaries to be waived with respect to
the Company Employees and their eligible dependents and (ii) give each Company
Employee credit for the plan year in which the Effective Time (or the
transition from the Company Plans to Parent's or the Surviving Corporation's
plans) occurs towards applicable deductibles and annual out-of-pocket limits
for expenses incurred prior to the Effective Time (or such later transition
date).
Notwithstanding the foregoing, Company Employees who are covered under a
collective bargaining agreement shall be provided the benefits that are
required by such collective bargaining agreement from time to time.
(b) Notwithstanding anything contained herein to the contrary, Parent shall
cause the Surviving Corporation to honor in accordance with their terms all
benefits and obligations under the employee benefit plans and agreements of the
Company and its subsidiaries, including, without limitation, any rights or
benefits arising as a result of the transactions contemplated by this Agreement
(either alone or in combination with any other event), as well as those set
forth on Section 5.07 of the Company Disclosure Schedule; it being understood
that for purposes of all such plans and agreements, the transactions
contemplated by this Agreement are, or will be deemed to be, a "change of
control."
(c) Nothing in this Section 5.07 shall be interpreted as preventing Parent
or the Surviving Corporation from amending, modifying or terminating any
Company Plan, in accordance with its terms and applicable law.
Section 5.08. Meeting of the Company's Stockholders. The Company shall as
promptly as practicable after the date of this Agreement take all action
necessary in accordance with the NRS and its Restated Articles of Incorporation
and bylaws to convene a meeting of the Company's stockholders (the "Company
Stockholders' Meeting") to act on this Agreement. The Board of Directors of the
Company shall recommend that the Company's stockholders vote to approve the
Merger and adopt this Agreement; provided, however, that the Company may change
its recommendation in any manner if its recommendation of the Merger would be
reasonably likely to be inconsistent with the board of directors' fiduciary
duties under applicable law, as concluded by the board of directors in good
faith after consultation with its financial and legal advisors.
Section 5.09. Proxy Statement. As promptly as practicable after execution of
this Agreement, the Company shall prepare the Proxy Statement, file it with the
SEC under the Exchange Act, and use all reasonable efforts to have the Proxy
Statement cleared by the SEC. Parent, Merger Subsidiary and the Company shall
cooperate with each other in the preparation of the Proxy Statement, and the
Company shall notify Parent of the receipt of any comments of the SEC with
respect to the Proxy Statement and of any requests by the SEC for any amendment
or supplement thereto or for additional information and shall provide
A-18
<PAGE>
to Parent promptly copies of all correspondence between the Company or any
representative of the Company and the SEC. The Company shall give Parent and
its counsel the opportunity to review the Proxy Statement prior to its being
filed with the SEC and shall give Parent and its counsel the opportunity to
review all amendments and supplements to the Proxy Statement and all responses
to requests for additional information and replies to comments prior to their
being filed with, or sent to, the SEC. Each of the Company, Parent and Merger
Subsidiary agrees to use its reasonable best efforts, after consultation with
the other parties hereto to respond promptly to all such comments of and
requests by the SEC. As promptly as practicable after the Proxy Statement has
been cleared by the SEC, the Company shall mail the Proxy Statement to the
stockholders of the Company. Prior to the date of approval of the Merger by the
Company's stockholders, each of the Company, Parent and Merger Subsidiary shall
correct promptly any information provided by it to be used specifically in the
Proxy Statement that shall have become false or misleading in any material
respect and the Company shall take all steps necessary to file with the SEC and
cleared by the SEC any amendment or supplement to the Proxy Statement so as to
correct the same and to cause the Proxy Statement as so corrected to be
disseminated to the stockholders of the Company, in each case to the extent
required by applicable law.
Section 5.10. Public Announcements. Parent and the Company will consult with
each other before issuing any press release or making any public statement with
respect to this Agreement and the transactions contemplated hereby and, except
as may be required by applicable law or any listing agreement with the NYSE,
will not issue any such press release or make any such public statement prior
to such consultation.
Section 5.11. Expenses and Fees. (a) All costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such expenses, except that those expenses
incurred in connection with printing and filing the Proxy Statement shall be
shared equally by Parent and the Company.
(b) The Company agrees to pay to Parent a fee equal to $135 million if:
(i) the Company terminates this Agreement pursuant to clause (v) of
Section 7.01;
(ii) Parent terminates this Agreement pursuant to clause (vii) of
Section 7.01, which fee shall be payable within two business days of such
termination;
(iii) this Agreement is terminated for any reason at a time at which
Parent was not in material breach of its representations, warranties,
covenants and agreements contained in this Agreement and was entitled to
terminate this Agreement pursuant to clause (viii) of Section 7.01, and (A)
prior to the time of the Company Stockholders' Meeting a proposal by a
third party relating to an Acquisition Transaction had been publicly
proposed or publicly announced, and (B) on or prior to the 12 month
anniversary of the termination of this Agreement the Company or any of its
subsidiaries or affiliates enters into an agreement or letter of intent (or
resolves or announces an intention to do) with respect to an Acquisition
Transaction involving a person, entity or group if such person, entity,
group (or any member of such group, or any affiliate of any of the
foregoing) made a proposal with respect to an Acquisition Transaction on or
after the date hereof and prior to the Company Stockholders' Meeting and
such Acquisition Transaction is consummated.
Section 5.12. Agreement to Cooperate. (a) Subject to the terms and
conditions of this Agreement, including Section 5.03, each of the parties
hereto shall use all reasonable best efforts to take, or cause to be taken, all
action and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations (including the HSR Act and the
Gaming Laws) to consummate and make effective the transactions contemplated by
this Agreement, including using its reasonable best efforts to obtain all
necessary or appropriate waivers, consents or approvals of third parties
required in order to preserve material contractual relationships of Parent and
the Company and their respective subsidiaries, all necessary or appropriate
waivers, consents and approvals to effect all necessary registrations, filings
and submissions and to lift any injunction or other legal bar to the Merger
(and, in such case, to proceed with the Merger as expeditiously as possible).
In addition, subject to the terms and conditions herein provided and subject to
the fiduciary duties of the respective boards of directors of the Company and
Parent, none of the parties hereto shall knowingly take or
A-19
<PAGE>
cause to be taken any action (including, but not limited to, in the case of
Parent, (x) the incurrence of material debt financing, other than the financing
in connection with the Merger and related transactions and other than debt
financing incurred in the ordinary course of business, and (y) the acquisition
of businesses or assets) which would reasonably be expected to materially delay
or prevent consummation of the Merger. Parent shall use its reasonable best
efforts to cause the satisfaction of the conditions to the receipt of funds
pursuant to the Financing Commitment.
(b) Without limitation of the foregoing, each of Parent and the Company
undertakes and agrees to file as soon as practicable a Notification and Report
Form under the HSR Act with the United States Federal Trade Commission (the
"FTC") and the Antitrust Division of the United States Department of Justice
(the "Antitrust Division") and to make such filings and apply for such
approvals and consents as are required under the Gaming Laws. Each of Parent
and the Company shall (i) respond as promptly as practicable to any inquiries
received from the FTC or the Antitrust Division or any authority enforcing
applicable Gaming Laws for additional information or documentation and to all
inquiries and requests received from any State Attorney General or other
governmental authority in connection with antitrust matters or Gaming Laws, and
(ii) not extend any waiting period under the HSR Act or enter into any
agreement with the FTC or the Antitrust Division not to consummate the
transactions contemplated by this Agreement, except with the prior written
consent of the other parties hereto. Parent shall offer to take (and if such
offer is accepted, commit to take) all steps which it is capable of taking to
avoid or eliminate impediments under any antitrust, competition, or trade
regulation law or Gaming Laws that may be asserted by the FTC, the Antitrust
Division, any State Attorney General or any other governmental entity with
respect to the Merger so as to enable the Effective Time to occur prior to the
Outside Date and shall defend through litigation on the merits any claim
asserted in any court by any party, including appeals. Without limiting the
foregoing, Parent shall propose, negotiate, offer to commit and effect (and if
such offer is accepted, commit to and effect), by consent decree, hold separate
order, or otherwise, the sale, divestiture or disposition of such assets or
businesses of Parent or, effective as of the Effective Time, the Surviving
Corporation, or their respective subsidiaries or otherwise offer to take or
offer to commit to take any action which it is capable of taking and if the
offer is accepted, take or commit to take such action that limits its freedom
of action with respect to, or its ability to retain, any of the businesses,
services or assets of Parent, the Surviving Corporation or their respective
subsidiaries, in order to avoid the entry of, or to effect the dissolution of,
any injunction, temporary restraining order or other order in any suit or
proceeding, which would otherwise have the effect of preventing or delaying the
Effective Time beyond the Outside Date; provided; however, that anything to the
contrary in this Agreement notwithstanding, neither Parent nor any of its
subsidiaries shall be required to divest or dispose of any property that is
material to the business of Parent and its subsidiaries, taken as a whole. At
the request of Parent, the Company shall agree to divest, hold separate or
otherwise take or commit to take any action that limits its freedom of action
with respect to, or its ability to retain, any of the businesses, services, or
assets of the Company or any of its subsidiaries, provided that any such action
may be conditioned upon the consummation of the Merger and the transactions
contemplated hereby. Each party shall (i) promptly notify the other party of
any written communication to that party from the FTC, the Antitrust Division,
any State Attorney General or any other governmental entity and, subject to
applicable law, permit the other party to review in advance any proposed
written communication to any of the foregoing; (ii) not agree to participate in
any substantive meeting or discussion with any governmental authority in
respect of any filings, investigation or inquiry concerning this Agreement or
the Merger unless it consults with the other party in advance and, to the
extent permitted by such governmental authority, gives the other party the
opportunity to attend and participate thereat; and (iii) furnish the other
party with copies of all correspondence, filings, and communications (and
memoranda setting forth the substance thereof) between them and their
affiliates and their respective representatives on the one hand, and any
government or regulatory authority or members or their respective staffs on the
other hand, with respect to this Agreement and the Merger.
(c) Parent agrees to use its reasonable best efforts to obtain the Financing
in accordance with the Financing Commitment or alternate commitments or
arrangements that are not reasonably likely to cause a material delay in the
consummation of the Merger or have a material adverse effect on the ability of
Parent to
A-20
<PAGE>
deliver to the Company's stockholders the economic benefits they are reasonably
expected to receive by virtue of the Merger.
Section 5.13. Directors' and Officers' Indemnification. (a) The
indemnification provisions of the articles of incorporation and bylaws of the
Company as in effect at the Effective Time shall not be amended, repealed or
otherwise modified for a period of six years from the Effective Time in any
manner that would adversely affect the rights thereunder of individuals who at
the Effective Time were directors, officers, employees or agents of the
Company.
(b) Without limiting Section 5.13(a), after the Effective Time, the
Surviving Corporation shall, and Parent shall cause the Surviving Corporation
to, to the fullest extent permitted under applicable law, indemnify and hold
harmless, each present and former director, officer, employee and agent of the
Company or any of its subsidiaries (each, together with such person's heirs,
executors or administrators, an "Indemnified Party" and collectively, the
"Indemnified Parties") against any costs or expenses (including attorneys'
fees), judgments, fines, losses, claims, damages, liabilities and amounts paid
in settlement in connection with any actual or threatened claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative (collectively, "Costs and Expenses"), arising out of, relating to
or in connection with (i) any action or omission occurring or alleged to occur
prior to the Effective Time (including, without limitation, acts or omissions
in connection with such persons serving as an officer, director or other
fiduciary in any entity if such service was at the request or for the benefit
of the Company) and (ii) the Merger and the other transactions contemplated by
this Agreement or arising out of or pertaining to the transactions contemplated
by this Agreement or the events and developments between Parent and the Company
leading up to this Agreement. In addition, Parent shall indemnify and hold
harmless each of the Indemnified Parties against any Costs and Expenses arising
out of, relating to or in connection with the matters referred to in clause
(ii) of the preceding sentence. In the event of any actual or threatened claim,
action, suit, proceeding or investigation (whether arising before or after the
Effective Time), (i) the Company or Parent and the Surviving Corporation, as
the case may be, shall pay the reasonable fees and expenses of counsel selected
by the Indemnified Parties, which counsel shall be reasonably satisfactory to
the Parent and the Surviving Corporation, promptly after statements therefor
are received and shall pay all other reasonable expenses in advance of the
final disposition of such action, (ii) the Parent and the Surviving Corporation
will cooperate and use all reasonable efforts to assist in the vigorous defense
of any such matter, and (iii) to the extent any determination is required to be
made with respect to whether an Indemnified Party's conduct complies with the
standards set forth under the NRS and the Parent's or the Surviving
Corporation's respective articles of incorporation or bylaws, such
determination shall be made by independent legal counsel acceptable to the
Parent or the Surviving Corporation, as the case may be, and the Indemnified
Party; provided, however, that neither Parent nor the Surviving Corporation
shall be liable for any settlement effected without its written consent (which
consent shall not be unreasonably withheld) and, provided further, that if
Parent or the Surviving Corporation advances or pays any amount to any person
under this paragraph (b) and if it shall thereafter be finally determined by a
court of competent jurisdiction that such person was not entitled to be
indemnified hereunder for all or any portion of such amount, to the extent
required by law, such person shall repay such amount or such portion thereof,
as the case may be, to Parent or the Surviving Corporation, as the case may be.
The Indemnified Parties as a group may not retain more than one law firm to
represent them with respect to each matter unless there is, under applicable
standards of professional conduct, a conflict on any significant issue between
the positions of any two or more Indemnified Parties.
(c) In the event the Surviving Corporation or Parent or any of their
successors or assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger, or (ii) transfers all or substantially all of its
properties and assets to any person, then and in each such case, proper
provisions shall be made so that the successors and assigns of the Surviving
Corporation or Parent shall assume the obligations of the Surviving Corporation
or the Parent, as the case may be, set forth in this Section 5.13.
A-21
<PAGE>
(d) For a period of six years after the Effective Time, Parent shall cause
to be maintained or shall cause the Surviving Corporation to maintain in effect
the current policies of directors' and officers' liability insurance maintained
by the Company and its subsidiaries (provided that Parent may substitute
therefor policies of at least the same coverage and amounts containing terms
and conditions that are no less advantageous to the Indemnified Parties, and
which coverages and amounts shall be no less than the coverages and amounts
provided at that time for Parent's directors and officers) with respect to
matters arising on or before the Effective Time; provided, however, that Parent
and the Surviving Corporation shall not be required to expend in any year an
amount in excess of 250% of the annual aggregate premiums currently paid by the
Company for such insurance; and provided, further, that if the annual premiums
of such insurance coverage exceed such amount, Parent and the Surviving
Corporation shall be obligated to obtain a policy with the best coverage
available, in the reasonable judgment of the Parent's board of directors, for a
cost not exceeding such amount.
(e) Parent shall pay all reasonable expenses, including reasonable
attorneys' fees, that may be incurred by any Indemnified Party in enforcing the
indemnity and other obligations provided in this Section 5.13.
(f) The rights of each Indemnified Party hereunder shall be in addition to,
and not in limitation of, any other rights such Indemnified Party may have
under the charter or bylaws of the Company, any indemnification agreement,
under the NRS or otherwise. The provisions of this Section 5.13 shall survive
the consummation of the Merger and expressly are intended to benefit each of
the Indemnified Parties.
Section 5.14. Company Securities. Between the date hereof and the Effective
Time, neither Parent nor any of its subsidiaries shall acquire, or agree to
acquire, whether in the open market or otherwise, any rights in any equity
securities of the Company other than pursuant to the Merger.
Section 5.15. Continuing Directors. Prior to the Effective Time, but to take
effect as of the Effective Time, the Board of Directors of the Company shall
approve by the affirmative vote of a majority of the directors present and
voting (and not fewer than three directors voting in the affirmative) the
election to the board of directors of the Surviving Corporation of each and any
person nominated or designated by Parent in writing.
ARTICLE VI
Conditions to the Merger
Section 6.01. Conditions to the Obligations of Each Party. The obligations
of the Company, Parent and Merger Subsidiary to consummate the Merger are
subject to the satisfaction of the following conditions:
(a) this Agreement and the Merger shall have been adopted by the
requisite vote of the stockholders of the Company in accordance with NRS
(the "Company Stockholders' Approval");
(b) none of the parties hereto shall be subject to any order or
injunction of any governmental authority of competent jurisdiction that
prohibits the consummation of the Merger. In the event any such order or
injunction shall have been issued, each party agrees to use its reasonable
best efforts to have any such order overturned or injunction lifted; and
(c) the waiting period applicable to consummation of the Merger under
the HSR Act shall have expired or been terminated.
Section 6.02. Conditions to Obligation of the Company to Effect the
Merger. Unless waived by the Company, the obligation of the Company to effect
the Merger shall be subject to the fulfillment at or prior to the Effective
Time of the following additional conditions:
(a) Parent and Merger Subsidiary shall have performed in all material
respects their agreements contained in this Agreement required to be
performed on or prior to the Effective Time and the representations and
warranties of Parent and Merger Subsidiary contained in this Agreement
shall be true
A-22
<PAGE>
and correct on and as of the Effective Time as if made at and as of such
date (except to the extent that such representations and warranties speak
as of an earlier date), except for such failures to perform or to be true
and correct that would not reasonably be expected to have a Parent Material
Adverse Effect, and the Company shall have received a certificate of the
chief executive officer or the chief financial officer of Parent to that
effect; and
(b) all Parent Statutory Approvals and Company Statutory Approvals
required to be obtained in order to permit consummation of the Merger under
applicable law shall have been obtained, except for any such Parent
Statutory Approvals or Company Statutory Approvals the failure of which to
obtain would not, singly or in the aggregate, reasonably be expected to (i)
have a Company Material Adverse Effect after the Effective Time, or (ii)
result in the Company or its subsidiaries failing to meet the standards for
licensing, suitability or character under any Gaming Laws relating to the
conduct of Parent's or the Company's business which (after taking into
account the anticipated impact of such failure to so meet such standards on
other authorities) would reasonably be expected to have a Company Material
Adverse Effect (after giving effect to the Merger).
Section 6.03. Conditions to Obligations of Parent and Subsidiary to Effect
the Merger. Unless waived by Parent and Merger Subsidiary, the obligations of
Parent and Merger Subsidiary to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Time of the additional following
conditions:
(a) the Company shall have performed in all material respects its
agreements contained in this Agreement required to be performed on or prior
to the Effective Time and the representations and warranties of the Company
contained in this Agreement shall be true and correct on and as of the
Effective Time as if made at and as of such date (except to the extent that
such representations and warranties speak as of an earlier date), except
for such failures to perform and to be true and correct that would not
reasonably be expected to have a Company Material Adverse Effect or, in the
case of Section 4.02(a), shall be true and correct when made except for
immaterial exceptions thereto, and Parent shall have received a certificate
of the chief executive officer or the chief financial officer of the
Company to that effect; and
(b) all Parent Statutory Approvals and Company Statutory Approvals
required to be obtained in order to permit consummation of the Merger under
applicable law shall have been obtained, except for any such Parent
Statutory Approvals or Company Statutory Approvals the failure of which to
obtain would not reasonably be expected to (i) have a Parent Material
Adverse Effect, or (ii) result in Parent or its subsidiaries failing to
meet the standards for licensing, suitability or character under any Gaming
Laws relating to the conduct of Parent's or the Company's business which
(after taking into account the anticipated impact of such failure to so
meet such standards on other authorities) would reasonably be expected to
have a Parent Material Adverse Effect (after giving effect to the Merger).
ARTICLE VII
Termination
Section 7.01. Termination. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time (notwithstanding any
approval of this Agreement by the stockholders of the Company):
(i) by mutual written consent of the Company and Parent;
(ii) by either the Company or Parent, if the Merger has not been
consummated by December 31, 2000 (the "Outside Date"), provided that such
date shall automatically be extended until March 31, 2001 if, on December
31, 2000, all of the conditions to the Closing set forth in Article VI
shall then be satisfied (other than conditions with respect to actions the
respective parties will take at the Closing itself) except that (1) the
waiting period under the HSR Act has not expired or been terminated, (2)
any approval or consent under any Gaming Law, the absence of which would
cause a failure of a condition set forth in
A-23
<PAGE>
Section 6.02 or 6.03 has not been received, or (3) any injunction, order or
decree shall prohibit or restrain consummation of the Merger and provided
further that the right to terminate this Agreement under this clause (ii)
shall not be available to any party whose failure to fulfill any of its
obligations under this Agreement has been the cause of or resulted in the
failure to consummate the Merger by such date;
(iii) by either the Company or Parent if any judgment, injunction, order
or decree of a court or governmental agency or authority of competent
jurisdiction shall restrain or prohibit the consummation of the Merger, and
such judgment, injunction, order or decree shall become final and
nonappealable and was not entered at the request of the terminating party;
(iv) by either the Company or Parent, if (x) there has been a breach by
the other party of any representation or warranty contained in this
Agreement which would reasonably be expected to have a Company Material
Adverse Effect or a Parent Material Adverse Effect, as the case may be, or
prevent or delay the consummation of the Merger beyond the Outside Date,
and which has not been cured in all material respects within 30 days after
written notice of such breach by the terminating party, or (y) there has
been a breach of any of the covenants or agreements set forth in this
Agreement on the part of the other party, which would reasonably be
expected to have a Parent Material Adverse Effect or a Company Material
Adverse Effect, as the case may be, or prevent or delay the consummation of
the Merger beyond the Outside Date, and which breach is not curable or, if
curable, is not cured within 30 days after written notice of such breach is
given by the terminating party to the other party;
(v) by the Company if, prior to receipt of the Company Stockholders'
Approval, the Company receives a Superior Proposal, resolves to accept such
Superior Proposal, and shall have given Parent two days' prior written
notice of its intention to terminate pursuant to this provision; provided,
however, that such termination shall not be effective until such time as
the payment required by Section 5.11(b) shall have been received by Parent;
(vi) [Reserved];
(vii) by the Parent, if the Board of Directors of the Company shall have
failed to recommend, or shall have withdrawn, modified or amended in any
material respects its approval or recommendation of the Merger or shall
have resolved to do any of the foregoing, or shall have recommended another
Acquisition Proposal or if the Board of Directors of the Company shall have
resolved to accept a Superior Proposal or shall have recommended to the
stockholders of the Company that they tender their shares in a tender or an
exchange offer commenced by a third party (excluding any affiliate of
Parent or any group of which any affiliate of Parent is a member);
(viii) by Parent or the Company if the stockholders of the Company fail
to approve the Merger at a duly held meeting of stockholders called for
such purpose (including any adjournment or postponement thereof); or
(ix) by the Company if the Financing Commitment has been (1) amended or
modified in a manner that is reasonably likely to cause a material delay in
the consummation of the Merger or have a material adverse effect on the
ability of Parent to deliver to the Company's stockholders the economic
benefits they are reasonably expected to receive by virtue of the Merger or
(2) withdrawn or revoked and not replaced by alternate commitments or
arrangements that are not reasonably likely to cause a material delay in
the consummation of the Merger or have a material adverse effect on the
ability of Parent to deliver to the Company's stockholders the economic
benefits they are reasonably expected to receive by virtue of the Merger,
and, in the case of either of clause (1) or (2), the withdrawal,
revocation, amendment or modification (as the case may be) shall not have
been cured within 30 days.
ARTICLE VIII
Miscellaneous
Section 8.01. Effect of Termination. In the event of termination of this
Agreement by either Parent or the Company pursuant to the provisions of Section
7.01, this Agreement shall forthwith become void and there
A-24
<PAGE>
shall be no liability or further obligation on the part of the Company, Parent,
Merger Subsidiary or their respective officers or directors (except as set
forth in this Section 8.01, in the second sentence of Section 5.04 and in
Section 5.11, all of which shall survive the termination). Nothing in this
Section 8.01 shall relieve any party from liability for any breach of any
covenant or agreement of such party contained in this Agreement.
Section 8.02. Non-Survival of Representations and Warranties. No
representations, warranties or agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Merger, and
after effectiveness of the Merger neither the Company, Parent, Merger
Subsidiary nor their respective officers or directors shall have any further
obligation with respect thereto except for the agreements contained in Articles
I, II and VIII and Sections 5.07 and 5.13.
Section 8.03. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, mailed by
registered or certified mail (return receipt requested) or sent via facsimile
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
If to the Company:
Mirage Resorts, Incorporated
3600 Las Vegas Boulevard South
Las Vegas, NV 89109
Fax: (702) 693-7628
Attention: Bruce Levin, Esq.
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Fax: (212) 403-2000
Attention: Daniel A. Neff, Esq.
If to Parent or Merger Subsidiary:
MGM Grand, Inc.
3799 Las Vegas Boulevard
South Las Vegas, Nevada 89109
Attention: General Counsel
Fax: (702) 891-1114
with a copy to:
Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP
2121 Avenue of the Stars
Eighteenth Floor
Los Angeles, California 90067-5010
Fax: (310) 556-2920
Attention: Gary N. Jacobs, Esq.
Section 8.04. Interpretation. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. In this Agreement, unless a contrary
intention appears, (i) the words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision, (ii) "knowledge" shall mean
actual knowledge of the executive officers of the Company or Parent, as the
case may
A-25
<PAGE>
be, and (iii) reference to any Article or Section means such Article or Section
hereof. No provision of this Agreement shall be interpreted or construed
against any party hereto solely because such party or its legal representative
drafted such provision. For purposes of determining whether any fact or
circumstance involves a material adverse effect on the ongoing operations of a
party, any special transaction charges incurred by such party as a result of
the consummation of transactions contemplated by this Agreement shall not be
considered.
Section 8.05. Miscellaneous. This Agreement (including the documents and
instruments referred to herein): shall not be assigned by operation of law or
otherwise except that Merger Subsidiary may assign its obligations under this
Agreement to any other wholly-owned subsidiary of Parent subject to the terms
of this Agreement, in which case such assignee shall become the "Merger
Subsidiary" for all purposes of this Agreement. THIS AGREEMENT SHALL BE
GOVERNED IN ALL RESPECTS, INCLUDING VALIDITY, INTERPRETATION AND EFFECT, BY THE
LAWS OF THE STATE OF NEVADA APPLICABLE TO CONTRACTS EXECUTED AND TO BE
PERFORMED WHOLLY WITHIN SUCH STATE.
Section 8.06. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
Section 8.07. Amendments; No Waivers. (a) Any provision of this Agreement
may be amended or waived prior to the Effective Time if, and only if, such
amendment or waiver is in writing and signed, in the case of an amendment, by
the Company, Parent and Merger Subsidiary or, in the case of a waiver, by the
party against whom the waiver is to be effective; provided that any waiver or
amendment shall be effective against a party only if the board of directors of
such party approves such waiver or amendment.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
Section 8.08. Entire Agreement. This Agreement and the Confidentiality
Agreement constitute the entire agreement between the parties with respect to
the subject matter hereof and supersede all prior agreements, understandings
and negotiations, both written and oral, between the parties with respect to
the subject matter of this Agreement. No representation, inducement, promise,
understanding, condition or warranty not set forth herein has been made or
relied upon by either party hereto. Neither this Agreement nor any provision
hereof is intended to confer upon any person other than the parties hereto any
rights or remedies hereunder except for the provisions of Section 5.13, which
are intended for the benefit of the Company's former and present officers,
directors, employees and agents, the provisions of Articles I and II, which are
intended for the benefit of the Company's stockholders, including holders of
Options, the provisions of Section 5.07, which are intended for the benefit of
the parties to the agreements or participants in the plans referred to therein,
the provisions of Section 5.02(b), which are for the benefit of Stephen A.
Wynn, and Section 8.11, which is intended for the benefit of the person and
entity named therein.
Section 8.09. Severability. If any term or other provision of this Agreement
is invalid, illegal or unenforceable, all other provisions of this Agreement
shall remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party.
Section 8.10. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any of the provisions of this
Agreement were not to be performed in accordance with the terms hereof and that
the parties shall be entitled to specific performance of the terms hereof in
addition to any other remedies at law or in equity.
Section 8.11. Non-Involvement of Tracinda. The Parties acknowledge that
neither Kirk Kerkorian nor Tracinda Corporation, individually or collectively,
is a party to this Agreement or any exhibit or agreement
A-26
<PAGE>
provided for herein. Accordingly, the Parties hereby agree that in the event
(i) there is any alleged breach or default by any Party under this Agreement or
any exhibit or agreement provided for herein, or (ii) any Party has any claim
arising from or relating to any such agreement, no Party, nor any party
claiming through it (to the extent permitted by applicable law), shall commence
any proceedings or otherwise seek to impose any liability whatsoever against
Mr. Kerkorian or Tracinda Corporation by reason of such alleged breach, default
or claim.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
MGM Grand, Inc.
/s/ James J. Murren
_____________________________________
Name: James J. Murren
Title: President and Chief Financial
Officer
Mirage Resorts, Incorporated
/s/ Stephen A. Wynn
_____________________________________
Name: Stephen A. Wynn
Title: Chairman, President and Chief
Executive Officer
Merger Subsidiary:
MGMGMR Acquisition, Inc.
/s/ Scott Langsner
_____________________________________
Name: Scott Langsner
Title: President
A-27
<PAGE>
APPENDIX B
Conformed Copy
STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT dated as of March 6, 2000 is by and between
Mirage Resorts, Incorporated, a Nevada corporation (the "Company"), and MGM
Grand, Inc., a Delaware corporation (the "Grantee").
RECITALS
The Grantee, the Company and Merger Subsidiary propose to enter into the
Merger Agreement.
As a condition and inducement to the Grantee's willingness to enter into the
Merger Agreement, the Grantee has requested that the Company agree, and the
Company has agreed, to grant the Grantee the Option.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Merger Agreement, the Company and the Grantee agree as follows:
1. Capitalized Terms. Certain capitalized terms used in this Agreement
are defined in Annex A hereto and are used herein with the meanings therein
ascribed. Those capitalized terms used but not defined herein (including in
Annex A hereto) that are defined in the Merger Agreement are used herein
with the same meanings as ascribed to them therein; provided, however,
that, as used in this Agreement, "Person" shall have the meaning specified
in Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
2. The Option.
(a) Grant of Option. Subject to the terms and conditions set forth
herein, the Company hereby grants to the Grantee an irrevocable option to
purchase, out of the authorized but unissued Shares, 22,841,091 Shares (as
adjusted as set forth herein) (the "Option Shares"), at the Exercise Price.
(b) Exercise Price. The exercise price (the "Exercise Price") of the
Option shall be $21.00 per Option Share.
Term. The Option shall be exercisable at any time and from time to time
following the occurrence of an Exercise Event and shall remain in full
force and effect until the earliest to occur of (i) the Effective Time,
(ii) the first anniversary of the receipt by Grantee of written notice from
the Company of the occurrence of an Exercise Event and (iii) termination of
the Merger Agreement in accordance with its terms other than a termination
with respect to which an Exercise Event shall occur (the "Option Term"). If
the Option is not theretofore exercised, the rights and obligations set
forth in this Agreement shall terminate at the expiration of the Option
Term. "Exercise Event" shall mean any of the events giving rise to the
obligation of the Company to pay the Termination Fee under Section 5.11 of
the Merger Agreement.
(c) Exercise of Option.
(i) The Grantee may exercise the Option, in whole or in part, at any
time and from time to time during the Option Term. Notwithstanding the
expiration of the Option Term, the Grantee shall be entitled to
purchase those Option Shares with respect to which it has exercised the
Option in accordance with the terms hereof prior to the expiration of
the Option Term.
(ii) If the Grantee wishes to exercise the Option, it shall send a
written notice (an "Exercise Notice") (the date of which being herein
referred to as the "Notice Date") to the Company specifying (i) the
total number of Option Shares it intends to purchase pursuant to such
exercise and
<PAGE>
(ii) a place and a date (the "Closing Date") not earlier than three
Business Days nor later than 15 Business Days from the Notice Date for
the closing of the purchase and sale pursuant to the Option (the
"Closing").
(iii) If the Closing cannot be effected by reason of the application
of any Law, Regulation or Order, the Closing Date shall be extended to
the tenth Business Day following the expiration or termination of the
restriction imposed by such Law, Regulation or Order. Without limiting
the foregoing, if prior notification to, or Authorization of, any
Governmental Entity is required in connection with the purchase of such
Option Shares by virtue of the application of such Law, Regulation or
Order, the Grantee and, if applicable, the Company shall promptly file
the required notice or application for Authorization and the Grantee,
with the cooperation of the Company, shall expeditiously process the
same.
(iv) Notwithstanding Section 2(c)(iii) if the Closing Date shall not
have occurred within nine months after the related Notice Date as a
result of one or more restrictions imposed by the application of any
Law, Regulation or Order, the exercise of the Option effected on the
Notice Date shall be deemed to have expired.
(d) Payment and Delivery of Certificates.
(i) At each Closing, the Grantee shall pay to the Company in
immediately available funds by wire transfer to a bank account
designated by the Company an amount equal to the Exercise Price
multiplied by the number of Option Shares to be purchased on such
Closing Date.
(ii) At each Closing, simultaneously with the delivery of
immediately available funds as provided above, the Company shall
deliver to the Grantee a certificate or certificates representing the
Option Shares to be purchased at such Closing, which Option Shares
shall be duly authorized, validly issued, fully paid and nonassessable
and free and clear of all Liens, and the Grantee shall deliver to the
Company its written agreement that the Grantee will not offer to sell
or otherwise dispose of such Option Shares in violation of applicable
Law or the provisions of this Agreement.
(e) Certificates. Certificates for the Option Shares delivered at each
Closing shall be endorsed with a restrictive legend that shall read
substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT
TO RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF MARCH
6, 2000. A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF
WITHOUT CHARGE UPON RECEIPT BY THE COMPANY OF A WRITTEN REQUEST
THEREFOR.
A new certificate or certificates evidencing the same number of Shares
will be issued to the Grantee in lieu of the certificate bearing the above
legend, and such new certificate shall not bear such legend, insofar as it
applies to the Securities Act, if the Grantee shall have delivered to the
Company a copy of a letter from the staff of the Securities and Exchange
Commission, or an opinion of counsel in form and substance reasonably
satisfactory to the Company and its counsel, to the effect that such legend
is not required for purposes of the Securities Act.
(f) If at the time of issuance of any Common Shares pursuant to any
exercise of the Option, the Company shall have issued any share purchase
rights or similar securities to holders of Common Shares, then each Option
Share purchased pursuant to the Option shall also include rights with terms
substantially the same as and at least as favorable to the Grantee as those
issued to other holders of Common Shares.
3. Adjustment Upon Changes in Capitalization, Etc.
(a) In the event of any change in the Shares by reason of a stock
dividend, split-up, combination, recapitalization, exchange of shares or
similar transaction, the type and number of shares or securities subject to
the Option, and the Exercise Price therefor, shall be adjusted
appropriately, and proper provision shall be made in the agreements
governing such transaction, so that the Grantee shall receive upon
B-2
<PAGE>
exercise of the Option the same class and number of outstanding shares or
other securities or property that Grantee would have received in respect of
the Shares if the Option had been exercised immediately prior to such
event, or the record date therefor, as applicable.
(b) If any additional Shares are issued after the date of this Agreement
(other than pursuant to an event described in Section 3(a) above), the
number of Shares then remaining subject to the Option shall be adjusted so
that, after such issuance of additional Shares, such number of Shares then
remaining subject to the Option, together with shares theretofore issued
pursuant to the Option, equals 12% of the number of Shares then issued and
outstanding.
(c) To the extent any of the provisions of this Agreement apply to the
Exercise Price, they shall be deemed to refer to the Exercise Price as
adjusted pursuant to this Section 3.
4. Repurchase at the Option of Grantee.
(a) At the request of the Grantee made at any time and from time to time
after the occurrence of an Exercise Event and prior to 120 days after the
expiration of the Option Term (the "Put Period"), the Company (or any
successor thereto) shall, at the election of the Grantee (the "Put Right"),
repurchase from the Grantee (i) that portion of the Option relating to all
or any part of the Unexercised Option Shares (or as to which the Option has
been exercised but the Closing has not occurred) and (ii) all or any
portion of the Shares purchased by the Grantee pursuant hereto and with
respect to which the Grantee then has ownership. The date on which the
Grantee exercises its rights under this Section 4 is referred to as the
"Put Date." Such repurchase shall be at an aggregate price (the "Put
Consideration") equal to the sum of:
(i) the aggregate Exercise Price paid by the Grantee for any Option
Shares which the Grantee owns and as to which the Grantee is exercising
the Put Right;
(ii) the excess, if any, of the Applicable Price over the Exercise
Price paid by the Grantee for each Option Share as to which the Grantee
is exercising the Put Right multiplied by the number of such shares;
and
(iii) the excess, if any, of (x) the Applicable Price per Share over
(y) the Exercise Price multiplied by the number of Unexercised Option
Shares and Option Shares which have been exercised but with respect to
which the Closing has not yet occurred.
(b) If the Grantee exercises its rights under this Section 4, the
Company shall, within ten Business Days after the Put Date, pay the Put
Consideration in immediately available funds to an account specified by the
Grantee, and the Grantee shall promptly thereupon surrender to the Company
the Option or portion of the Option and the certificates evidencing the
Shares purchased thereunder. The Grantee shall warrant to the Company that,
immediately prior to the repurchase thereof pursuant to this Section 4, the
Grantee had sole record and Beneficial Ownership of the Option or such
shares, or both, as the case may be, and that the Option or such shares, or
both, as the case may be, were then held free and clear of all Liens.
(c) If the Option has been exercised, in whole or in part, as to any
Option Shares subject to the Put Right but the Closing thereunder has not
occurred, the payment of the Put Consideration shall, to that extent,
render such exercise null and void.
(d) Notwithstanding any provision to the contrary in this Agreement the
Grantee may not exercise its rights pursuant to this Section 4 in a manner
that would result in Total Profit of more than the Profit Cap; provided,
however, that nothing in this sentence shall limit the Grantee's ability to
exercise the Option in accordance with its terms.
5. Repurchase at the Option of the Company.
(a) To the extent the Grantee shall not have previously exercised its
rights under Section 4, at the request of the Company made at any time
after the tenth day following the closing of the purchase and sale of any
Option Shares pursuant to Section 2 hereof and for a period ending 120-days
after the expiration of Option Term (the "Call Period"), the Company may
repurchase from the Grantee, and the Grantee shall sell, or cause to be
sold, to the Company, all (but not less than all) of the Shares acquired by
the Grantee pursuant hereto and with respect to which the Grantee has
ownership at the time of such
B-3
<PAGE>
repurchase at a price per share equal to the greater of (A) the Current
Market Price and (B) the Exercise Price per share in respect of the shares
so acquired (such price per share multiplied by the number of Shares to be
repurchased pursuant to this Section 5 being herein called the "Call
Consideration"). The date on which the Company exercises its rights under
this Section 5 is referred to as the "Call Date."
(b) If the Company exercises its rights under this Section 5, the
Company shall, within ten Business Days pay the Call Consideration in
immediately available funds, and the Grantee shall surrender to the Company
certificates evidencing the Shares purchased hereunder, and the Grantee
shall warrant to the Company that, immediately prior to the repurchase
thereof pursuant to this Section 5, the Grantee had sole record and
Beneficial Ownership of such shares and that such shares were then held
free and clear of all Liens.
(c) To the extent that the Grantee shall exercise the Option, the
Grantee shall, unless the Grantee shall exercise the Put Right or the
Company shall exercise the Call Right, retain sole ownership of the Shares
so acquired through the end of the Call Period.
(d) Notwithstanding any provision to the contrary in this Agreement, the
aggregate of the Call Consideration paid for all Option Shares shall not
exceed the Profit Cap.
6. Registration Rights.
(a) The Company shall, if requested by the Grantee at any time and from
time to time during the Registration Period, as expeditiously as
practicable, prepare, file and cause to be made effective up to two
registration statements under the Securities Act if such registration is
required in order to permit the offering, sale and delivery of any or all
Shares or other securities that have been acquired by or are issuable to
the Grantee upon exercise of the Option in accordance with the intended
method of sale or other disposition stated by the Grantee, including, at
the sole discretion of the Company, a "shelf" registration statement under
Rule 415 under the Securities Act or any successor provision, and the
Company shall use all reasonable efforts to qualify such shares or other
securities under any applicable state securities laws. The Company shall
use all reasonable efforts to cause each such registration statement to
become effective, to obtain all consents or waivers of other parties that
are required therefor and to keep such registration statement effective for
such period not in excess of 180 days from the day such registration
statement first becomes effective as may be reasonably necessary to effect
such sale or other disposition. The obligations of the Company hereunder to
file a registration statement and to maintain its effectiveness may be
suspended for one or more periods of time not exceeding 60 days in the
aggregate if the Board of Directors of the Company shall have determined in
good faith that the filing of such registration or the maintenance of its
effectiveness would require disclosure of nonpublic information that would
materially and adversely affect the Company. For purposes of determining
whether two requests have been made under this Section 6, only requests
relating to a registration statement that has become effective under the
Securities Act and pursuant to which the Grantee has disposed of all shares
covered thereby in the manner contemplated therein shall be counted.
Notwithstanding any other provision of this Section 6, any request for
registration shall permit the Company, upon notice given within 20 days of
the request for registration, to repurchase from the Grantee any shares as
to which the Grantee requests registration at a price per share equal to
the Current Market Price at the date the Company notifies the Grantee of
its decision to so repurchase. The Registration Expenses shall be for the
account of the Company.
(b) The Grantee shall provide all information reasonably requested by
the Company for inclusion in any registration statement to be filed
hereunder. Grantee shall choose the managing underwriter in any
registration contemplated by this Section 6. If during the Registration
Period the Company shall propose to register under the Securities Act the
offering, sale and delivery of Shares for cash for its own account or for
any other stockholder of the Company pursuant to a firm underwriting, it
shall, in addition to the Company's other obligations under this Section 6,
allow the Grantee the right to participate in such registration provided
that the Grantee participates in the underwriting; provided, however, that,
if the managing underwriter of such offering advises the Company in writing
that in its opinion the number of Shares requested to be included in such
registration exceeds the number that can be sold in such offering,
B-4
<PAGE>
the Company shall, after fully including therein all securities to be sold
by the Company, include the shares requested to be included therein by
Grantee pro rata (based on the number of Shares intended to be included
therein) with the shares intended to be included therein by Persons other
than the Company.
(c) In connection with any offering, sale and delivery of Shares
pursuant to a registration statement effected pursuant to this Section 6,
the Company and the Grantee shall provide each other and each underwriter
of the offering with customary representations, warranties and covenants,
including covenants of indemnification and contribution and, with respect
to an underwritten offering, enter into an underwriting agreement and other
documents in form and substance customary for transactions of such type.
7. Profit Limitation.
(a) Notwithstanding any other provision of this Agreement in no event
shall the Grantee's Total Profit exceed the Profit Cap and, if it otherwise
would exceed such amount, (A) in connection with the Put Right or any sale
to a third party, the Grantee, at its sole election, shall either (i)
deliver to the Company for cancellation Option Shares previously purchased
by Grantee, (ii) pay cash or other consideration to the Company, (iii)
reduce the amount of the fee payable to Grantee under Section 5.11 of the
Merger Agreement or (iv) undertake any combination thereof, and (B) in
connection with the Call Right, Grantee shall deliver to the Company for
cancellation Option Shares (or other securities into which such Option
Shares are converted or exchanged), in either case, so that the Grantee's
Total Profit shall not exceed the Profit Cap after taking into account the
foregoing actions.
(b) Notwithstanding any other provision of this Agreement, this Stock
Option may not be exercised for a number of Option Shares that would, as of
the Notice Date, result in a Notional Total Profit of more than the Profit
Cap, and, if exercise of the Option otherwise would exceed the Profit Cap,
the Grantee, at its sole option, may reduce the number of Option Shares as
to which this Option is being exercised, increase the Exercise Price for
that number of Option Shares set forth in the Exercise Notice so that the
Notional Total Profit shall not exceed the Profit Cap; provided, however,
that nothing in this sentence shall restrict any exercise of the Option
otherwise permitted by this Section 7(b) on any subsequent date at the
Exercise Price set forth in Section 2(b) if such exercise would not then be
restricted under this Section 7(b).
(c) If an Exercise Event shall occur, the Grantee may elect, in lieu of
receiving any portion of the Termination Fee, to exercise a portion of the
Option.
8. Listing. If the Shares or any other securities then subject to the
Option are then listed on the NYSE, the Company, upon the occurrence of an
Exercise Event, will promptly file an application to list on the NYSE the
Shares or other securities then subject to the Option and will use all
reasonable efforts to cause such listing application to be approved as
promptly as practicable.
9. Replacement of Agreement. Upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation
of this Agreement, and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnification, and upon surrender and
cancellation of this Agreement, if mutilated, the Company will execute and
deliver a new Agreement of like tenor and date.
10. Miscellaneous.
(a) Expenses. Except as otherwise provided in the Merger Agreement or as
otherwise expressly provided herein, each of the parties hereto shall bear
and pay all costs and expenses incurred by it or on its behalf in
connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants
and counsel.
(b) Waiver and Amendment. Any provision of this Agreement may be waived
at any time by the party that is entitled to the benefits of such
provision. This Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a written agreement
executed by the parties hereto.
B-5
<PAGE>
(c) Entire Agreement; No Third Party Beneficiary; Severability. Except
as otherwise set forth in the Merger Agreement, this Agreement (including
the Merger Agreement and the other documents and instruments referred to
herein and therein) (i) constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral, between the
parties with respect to the subject matter hereof and (ii) is not intended
to confer upon any Person other than the parties hereto any rights or
remedies hereunder.
(d) Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in
any manner materially adverse to any party. Upon such determination that
any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that transactions contemplated
hereby are fulfilled to the extent possible.
(e) Governing Law. This Agreement shall be governed by, and construed in
accordance with, the Laws of the State of Nevada, regardless of the Laws
that might otherwise govern under applicable principles of conflicts of
law.
(f) Descriptive Headings. The descriptive headings contained herein are
for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
(g) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation) or mailed by registered or certified mail (return receipt
requested) to the parties at the following addresses or sent by electronic
transmission to the telecopier number specified below:
If to the Company to:
Mirage Resorts, Incorporated
3600 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Telecopy: (702) 693-8626
Attention: Bruce Levin, Esq.
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Telecopy: (212) 403-2000
Attention: Daniel A. Neff, Esq.
If to Grantee to:
MGM Grand, Inc.
3799 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Telecopy: (702) 891-1114
Attention: Scott Langsner
with a copy to:
Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP
2121 Avenue of the Stars
Eighteenth Floor
Los Angeles, California 90067-5010
Telecopy: (310) 556-2920
Attention: Gary N. Jacobs, Esq.
B-6
<PAGE>
(h) Counterparts. This Agreement and any amendments hereto may be
executed in counterparts, each of which shall be deemed an original and all
of which taken together shall constitute but a single document.
(i) Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder or under the Option shall be sold, assigned or
otherwise disposed of or transferred by either of the parties hereto
(whether by operation of law or otherwise) without the prior written
consent of the other party, except that the Grantee may assign this
Agreement to a wholly owned Subsidiary of the Grantee; provided, however,
that no such assignment shall have the effect of releasing the Grantee from
its obligations hereunder. Subject to the preceding sentence, this
Agreement shall be binding upon, inure to the benefit of and be enforceable
by the parties and their respective successors and assigns.
(j) Further Assurances. In the event of any exercise of the Option by
the Grantee, the Company and the Grantee shall execute and deliver all
other documents and instruments and take all other action that may be
reasonably necessary in order to consummate the transactions provided for
by such exercise.
(k) Specific Performance. The parties hereto hereby acknowledge and
agree that the failure of any party to this Agreement to perform its
agreements and covenants hereunder will cause irreparable injury to the
other party to this Agreement for which damages, even if available, will
not be an adequate remedy. Accordingly, each of the parties hereto hereby
consents to the granting of equitable relief (including specific
performance and injunctive relief) by any court of competent jurisdiction
to enforce any party's obligations hereunder. The parties further agree to
waive any requirement for the securing or posting of any bond in connection
with the obtaining of any such equitable relief and that this provision is
without prejudice to any other rights that the parties hereto may have for
any failure to perform this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
MGM Grand, Inc.
/s/ James J. Murren
_____________________________________
Name: James J. Murren
Title: President and Chief Financial
Officer
Mirage Resorts, Incorporated
/s/ Stephen A. Wynn
_____________________________________
Name: Stephen A. Wynn
Title: Chairman, President and Chief
Executive Officer
B-7
<PAGE>
ANNEX A TO THE STOCK OPTION AGREEMENT
SCHEDULE OF DEFINED TERMS
The following terms when used in the Stock Option Agreement shall have the
meanings set forth below unless the context shall otherwise require:
"Agreement" shall mean this Stock Option Agreement.
"Applicable Price" means the highest of (i) the highest purchase price
per share paid pursuant to a third party's tender or exchange offer made
for Shares after the date hereof and on or prior to the Put Date, (ii) the
price per share to be paid by any third Person for Shares pursuant to an
agreement for a Business Combination Transaction entered into on or prior
to the Put Date, and (iii) the Current Market Price. If the consideration
to be offered, paid or received pursuant to either of the foregoing clauses
(i) or (ii) shall be other than in cash, the value of such consideration
shall be determined in good faith by an independent nationally recognized
investment banking firm jointly selected by the Grantee and the Company,
which determination shall be conclusive for all purposes of this Agreement.
"Authorization" shall mean any and all permits, licenses,
authorizations, orders certificates, registrations or other approvals
granted by any Governmental Entity.
"Beneficial Ownership," "Beneficial Owner" and "Beneficially Own" shall
have the meanings ascribed to them in Rule 13d-3 under the Exchange Act.
"Business Combination Transaction" shall mean (i) a consolidation,
exchange of shares or merger of the Company with any Person, other than the
Grantee or one of its subsidiaries, and, in the case of a merger, in which
the Company shall not be the continuing or surviving corporation, (ii) a
merger of the Company with a Person, other than the Grantee or one of its
Subsidiaries, in which the Company shall be the continuing or surviving
corporation but the then outstanding Shares shall be changed into or
exchanged for stock or other securities of the Company or any other Person
or cash or any other property or the shares of Company Common Stock
outstanding immediately before such merger shall after such merger
represent less than 70% of the common shares and common share equivalents
of the Company outstanding immediately after the merger or (iii) a sale,
lease or other transfer of all or substantially all the assets of the
Company to any Person, other than the Grantee or one of its Subsidiaries.
"Business Day" shall mean a day other than Saturday, Sunday or a federal
holiday.
"Call Consideration" shall have the meaning ascribed to such term in
Section 5 herein.
"Call Date" shall have the meaning ascribed to such term in Section 5
herein.
"Call Period" shall have the meaning ascribed to such term in Section 5
herein.
"Closing" shall have the meaning ascribed to such term in Section 2
herein.
"Closing Date" shall have the meaning ascribed to such term in Section 2
herein.
"Current Market Price" shall mean, as of any date, the average of the
closing prices (or, if such securities should not trade on any trading day,
the average of the bid and asked prices therefor on such day) of the Shares
as reported on the New York Stock Exchange Composite Tape during the ten
consecutive trading days ending on (and including) the trading day
immediately prior to such date or, if the Shares are not quoted thereon, on
The Nasdaq Stock Market or, if the Shares are not quoted thereon, on the
principal trading market (as defined in Regulation M under the Exchange
Act) on which such shares are traded as reported by a recognized source
during such ten Business Day period.
"Exercise Event" shall have the meaning ascribed to such term in Section
2(c).
"Exercise Notice" shall have the meaning ascribed to such term in
Section 2(d) herein.
"Exercise Price" shall have the meaning ascribed to such term in Section
2 herein.
B-8
<PAGE>
"Law" shall mean all laws, statutes and ordinances of the United States,
any state of the United States, any foreign country, any foreign state and
any political subdivision thereof, including all decisions of Governmental
Entities having the effect of law in each such jurisdiction.
"Lien" shall mean any mortgage, pledge, security interest, adverse
claim, encumbrance, lien or charge of any kind (including any agreement to
give any of the foregoing), any conditional sale or other title retention
agreement, any lease in the nature thereof or the filing of or agreement to
give any financing statement under the Laws of any jurisdiction.
"Merger Agreement" shall mean that certain Agreement and Plan of Merger
dated as of the date hereof among the Company, Grantee and Merger
Subsidiary.
"Notice Date" shall have the meaning ascribed to such term in Section 2
herein.
"Notional Total Profit" shall mean, with respect to any number of Option
Shares as to which the Grantee may propose to exercise the Option, the
Total Profit determined as of the date of the Exercise Notice assuming that
the Option were exercised on such date for such number of Option Shares and
assuming such Option Shares, together with all other Option Shares held by
the Grantee and its Affiliates as of such date, were sold for cash at the
closing market price for the Shares as of the close of business on the
preceding trading day (less customary brokerage commissions) and including
all amounts theretofore received or concurrently being paid to the Grantee
pursuant to clauses (i), (ii) and (iii) of the definition of Total Profit.
"Option" shall mean the option granted by the Company to Grantee
pursuant to Section 2 herein.
"Option Shares" shall have the meaning ascribed to such term in Section
2 herein.
"Option Term" shall have the meaning ascribed to such term in Section 2
herein.
"Order" shall mean any judgment, order or decree of any Governmental
Entity.
"Profit Cap" shall mean $140 million.
"Put Consideration" shall have the meaning ascribed to such term in
Section 4 herein.
"Put Date" shall have the meaning ascribed to such term in Section 4
herein.
"Put Period" shall have the meaning ascribed to such term in Section 4
herein.
"Put Right" shall have the meaning ascribed to such term in Section 4
herein.
"Registration Expenses" shall mean the expenses associated with the
preparation and filing of any registration statement pursuant to Section 6
herein and any sale covered thereby (including any fees related to blue sky
qualifications and filing fees in respect of the National Association of
Securities Dealers, Inc.), but excluding underwriting discounts or
commissions or brokers' fees in respect to shares to be sold by the Grantee
and the fees and disbursements of the Grantee's counsel.
"Registration Period" shall mean the period of two years following the
first exercise of the Option by the Grantee.
"Regulation" shall mean any rule or regulation of any Governmental
Entity having the effect of Law or of any rule or regulation of any self-
regulatory organization, such as the NYSE.
"Total Profit" shall mean the aggregate (before income taxes) of the
following: (i) all amounts to be received by the Grantee or concurrently
being paid to the Grantee pursuant to Section 4 for the repurchase of all
or part of the unexercised portion of the Option, (ii) (A) the amounts to
be received by the Grantee or concurrently being paid to the Grantee
pursuant to the sale of Option Shares (or any other securities into which
such Option Shares are converted or exchanged), including sales made
pursuant to a registration statement under the Securities Act or any
exemption therefrom, less (B) aggregate Exercise Price paid by the Grantee
for such Option Shares and (iii) all amounts received by the Grantee from
the Company or concurrently being paid to the Grantee pursuant to Section
5.11 of the Merger Agreement.
"Unexercised Option Shares" shall mean, from and after the Exercise Date
until the expiration of the Option Term, those Option Shares as to which
the Option remains unexercised from time to time.
B-9
<PAGE>
APPENDIX C
Goldman, Sachs & Co. [Goldman Sachs Logo]
85 Broad Street
New York, New York 10004
Tel: 212-902-1000
PERSONAL AND CONFIDENTIAL
March 6, 2000
Board of Directors
Mirage Resorts, Incorporated
3400 Las Vegas Boulevard South
Las Vegas, NV 89109
Gentlemen and Madame:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding shares of Common Stock, par value $0.004
per share (the "Shares"), of Mirage Resorts, Incorporated (the "Company") of
the $21.00 per Share in cash to be received by such holders pursuant to the
Agreement and Plan of Merger, dated as of March 6, 2000, by and among MGM
Grand, Inc. ("Buyer") and the Company (the "Agreement").
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We are
familiar with the Company having provided certain investment banking services
to the Company from time to time, including having acted as co-manager in the
Company's public offering of $100.0 million of 7.25% Debentures due August 1,
2017 and of $200.0 million of 6.75% Notes due August 1, 2007 in August 1997,
having acted as lead manager in the Company's public offering of 16.6 million
Shares in May 1999, and having acted as its financial advisor in connection
with, and having participated in certain of the negotiations leading to, the
Agreement. We also have provided certain investment banking services to Buyer
from time to time and may provide investment banking services to Buyer in the
future. Goldman, Sachs & Co. provides a full range of financial advisory and
securities services and, in the course of its normal trading activities, may
from time to time effect transactions and hold securities, including derivative
securities, of the Company or Buyer for its own account and for the accounts of
customers.
In connection with this opinion, we have reviewed, among other things, the
Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of
the Company for the five years ended December 31, 1998; certain interim reports
to stockholders and Quarterly Reports on Form 10-Q of the Company; certain
other communications from the Company to its stockholders; and certain internal
financial analyses and forecasts for the Company prepared by its management. We
also have held discussions with members of the senior management of the Company
regarding its past and current business operations, financial condition and
future prospects. In addition, we have reviewed the reported price and trading
activity for the Shares, compared certain financial and stock market
information for the Company with similar information for certain other
companies the securities of which are publicly traded, reviewed the financial
terms of certain recent business combinations in the gaming industry
specifically and in other industries generally and performed such other studies
and analyses as we considered appropriate.
We have relied upon the accuracy and completeness of all of the financial
and other information discussed with or reviewed by us and have assumed such
accuracy and completeness for purposes of rendering this opinion. In addition,
we have not made an independent evaluation or appraisal of the assets and
liabilities of
<PAGE>
the Company or any of its subsidiaries and we have not been furnished with any
such evaluation or appraisal. Our advisory services and the opinion expressed
herein are provided for the information and assistance of the Board of
Directors of the Company in connection with its consideration of the
transaction contemplated by the Agreement and such opinion does not constitute
a recommendation as to how any holder of Shares should vote with respect to
such transaction.
Based upon and subject to the foregoing and based upon such other matters as
we consider relevant, it is our opinion that as of the date hereof the $21.00
per Share in cash to be received by the holders of Shares pursuant to the
Agreement is fair from a financial point of view to such holders.
Very truly yours,
/s/ Goldman, Sachs & Co.
_____________________________________
(GOLDMAN, SACHS & CO.)
C-2
<PAGE>
MIRAGE RESORTS, INCORPORATED
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints Ronald M. Popeil and Kenneth R. Wynn, and each of them,
as Proxies, each with the power to appoint his substitute, and authorizes each
of them to represent and to vote, as designated on the reverse, all the shares
of Common Stock of Mirage Resorts, Incorporated held of record by the
undersigned on March 30, 2000, at the special meeting of stockholders to
be held on [ ], 2000 or any adjournment thereof of no more than 60 days after
the date of the special meeting of stockholders.
(CHANGE OF ADDRESS/COMMENTS)
----------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICE BY MARKING THE APPROPRIATE BOX (SEE
REVERSE SIDE), BUT YOU NEED NOT MARK ANY BOX IF YOU WISH TO VOTE IN ACCORDANCE
WITH THE BOARD OF DIRECTORS' RECOMMENDATION.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
<PAGE>
PLEASE MARK YOUR
[X] VOTES AS IN THIS DO NOT PRINT IN
EXAMPLE USING THIS AREA
DARK INK ONLY
- -----------------------------------------------------------
SPECIAL MEETING OF STOCKHOLDERS
OF
MIRAGE RESORTS, INCORPORATED
[ ], 2000
PROXY VOTING INSTRUCTIONS
- -----------------------------------------------------------
DO NOT PRINT
IN THIS AREA
- -----------------------------------------------------------
YOUR CONTROL NUMBER IS - [ ]
TO VOTE BY MAIL
Please date, sign and mail your proxy card in the envelope
provided as soon as possible.
TO VOTE BY TELEPHONE (TOUCH-TONE PHONE ONLY)
Please call toll-free 1-800-PROXIES and follow the instructions. Have your
control number and the proxy card available when you call.
TO VOTE BY INTERNET
Please access the web page at "www.voteproxy.com" and follow the on-screen
instructions. Have your control number when you call.
Proposal to approve the Agreement and Plan of Merger, dated as of March 6, 2000,
among Mirage Resorts, Incorporated, MGM Grand, Inc. and a wholly owned
subsidiary of MGM Grand, pursuant to which the subsidiary will be merged into
Mirage Resorts and each share of common stock, par value $.004, of Mirage
Resorts outstanding immediately prior to the merger (other than shares held by
Mirage Resorts, MGM Grand or their respective subsidiaries, which will be
canceled) will be converted into the right to receive $21.00 in cash, without
interest.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Date: , 2000 Date: , 2000
- -------------------- ------- ------------------- -------
SIGNATURE SIGNATURE IF HELD JOINTLY
Note: Please sign exactly as name appears herein. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such. If a corporation, partnership or other entity, please
sign in full entity name by authorized person.
